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HomeMy WebLinkAbout021873 RES - 02/22/1994AN RESOLUTION APPROVING ALL DOCUMENTS AND FISCAL ARRANGEMENTS REQUIRED FOR THE PROPOSED SALE OF WATER SUPPLY REVENUE REFUNDING BONDS BY THE NUECES RIVER AUTHORITY, INCLUDING THE RESOLUTION, OFFICIAL STATEMENT, NOTICE OF REDEMPTION, AND BOND PURCHASE AGREEMENT, AS PROPOSED, SUBSTANTIAL COPIES OF WHICH ARE ATTACHED HERETO AND MADE A PART HEREOF AS EXHIBIT A; AUTHORIZING THE CITY MANAGER, DIRECTOR OF FINANCE, AND THE CITY ATTORNEY TO REVIEW EACH OF SAID INSTRUMENTS UPON FINAL EXECUTION BY THE NUECES RIVER AUTHORITY; AND DECLARING AN EMERGENCY. WHEREAS, the City of Corpus Christi (the "City") entered into a contract dated May 27, 1976, as supplemented on August 24, 1978, and March 29, 1979, (the "Contract") with Nueces River Authority (the "Authority") concerning construction of Nueces River Reclamation Project, Texas (Choke Canyon Reservoir Project) (the "Project"); and WHEREAS, under the terms of said Contract the Authority and the City have joint control of all fiscal arrangements in connection with the sale of revenue bonds for the Project, including interest rates and maturities and said Contract requires that each resolution authorizing such revenue bonds and each Official Statement relating to such revenue bonds shall be approved by the City; and WHEREAS, the Nueces River Authority issued its Water Supply Revenue Bonds, Series 1979 (City of Corpus Christi Project) in the aggregate principal amount of $13,000,000 to finance certain costs of the Project (the "Series 1979 Bonds"); and WHEREAS, pursuant to the Contract the City acquired the right to the water made available by the Project; and WHEREAS, under the Contract, the Series 1979 Bonds and any bonds issued to refund such bonds are payable from amounts paid by the City; and WHEREAS, the City's staff and Financial Advisor have recommended that $7,450,000 in aggregate principal amount of the Series 1979 Bonds be refunded to realize a debt service saving which would result in lowering the City's payments under the Contract: NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF CORPUS CHRISTI, TEXAS: SECTION 1. That the form of the bond resolution, official statement, and Bond Purchase Agreement, as proposed, substantial copies of which are attached hereto and made a part hereof as Exhibit A are hereby approved and that each of said instruments as executed and finally approved by the Nueces River 183 \ord\94011.skp Authority, together with all of the final financial information shall be considered approved by the City Council of the City of Corpus Christi upon formal review by the Director of Finance, City Manager, and City Attorney for the City of Corpus Christi, Texas, and a determination by them that the final forms of said instruments comply with the aforesaid contract and any supplements thereto and applicable State law. A certified copy of each of said instruments as finally approved by the Nueces River Authority and reviewed by each of said officials on behalf of the City shall be attached to this ordinance and made a part hereof. SECTION 2. That the City Council hereby approves the Notice of Redemption for the Series 1979 Bonds to be refunded and redeemed on April 1, 1994, attached as part of Exhibit A and incorporated herein, and agrees to pay the costs associated with publishing such notice and the costs associated with publishing or otherwise giving any notices required to revoke such redemption in the event the refunding of the Series 1979 Bonds is not accomplished by the redemption date, all as contemplated by the contract, in any event not to exceed the customary changes associated with giving such notice. ATTEST: Cit 2 Secretary APPROVED: 0az. DAY OF JAMES R. BRAY JR., CITY ATTORNEY By \ord\94011. skp Q 1"� 08- 2 MAYOR THE CI CORPUS CHRISTI 19n_ RESOLUTION AUTHORIZING THE ISSUANCE OF BONDS, AUTHORIZING THE EXECUTION OF A BOND PURCHASE AGREEMENT, APPROVING AN OFFICIAL STATEMENT AND AUTHC)RjZjNt5 OTHER ACTIONS IN CONNECTION THEREWITH STATE OF TEXAS NUECES RIVER AUTHORITY WHEREAS, under authority of Article XVI, Section 59 of the Texas Constitution, the Nueces River Authority was created as a conservation and reclamation district, a governmental agency, body politic and corporate, by Acts 1935, 44th Legislature, First Called Session, Chapter 427, as last amended by Acts 1985, 69th Legislature, Chapter 665 (the latter being herein referred to as the "Act"); and WHEREAS, pursuant to the authority granted in the Act, the Authority has entered into a contract by and among the United States of America, the City of Corpus Christi, Texas (herein defined as the "City"), and the Authority, dated June 30, 1976 (herein defined as the "Federal Contract"), providing for the construction and operation and maintenance of the Nueces River Reclamation Project, Texas authorized by the Reclamation Development Act of 1974 approved October 27, 1974 (Public Law 93-493), such project _ knn.vn ev: die l.xiv P (`on•(ir, Ite$erVlJ/, Y70jCct (herein L1Cfinr ' .•_ •t.- "Dh..:.. _.�.�. and _.. _.a,,,.. �, WHEREAS, under the te:n+s of: ,e rederat Contract, the Authority and the City and the United States provided, within the limitations therein contained, monies for the construction of the Project including acquisition of land therefor; and WHEREAS, pursuant to the Federal Contract, the Authority and the City agreed to advance to the United States part of the monies for such purposes; and WHEREAS, pursuant to a contract by and between the Authority and City dated the 27th day of May, 1976 as supplemented on August 24, 1978 and March 29, 1979 (herein defined as the "Contract"), the Authority and the City delineated their respective responsibilities under the Federal Contract and established their rights in the use of water available from the Project, and resolved other matters germane to the Project as the same affects the relationship between the Authority and the City; and WHEREAS, in accordance with the terms of the Contract the City has assumed responsibility for the care, operation and maintenance of the Project unless such responsibility is transferred to the Authority by amendment to the Contract and such care, operation and maintenance of the Project shall be carried out in compliance with the applicable requirements of the United States and the Texas Water Commission (now the Texas Natural Resources Conservation Commission) and in compliance with the requirements of the Federal Contract and the Contract; and 2ndDraft/2/18/94 WHEREAS, pursuant to the Contract the Authority issued its Nueces River Authority Water Supply Revenue Bonds, Series 1979, (City of Corpus Christi Project) in the aggregate principal amount of $13,000,000 (the "Series 1979 Bonds") pursuant to a resolution adopted by the Board of Directors of the Authority on April 4, 1979 (the "Series 1979 Resolution") to make the advance payments to the United States; and WHEREAS, pursuant to the Contract such Series 1979 Bonds and any bonds issued on a parity therewith are to be secured by a pledge of the payments to be made to the Authority by the City pursuant to the Contract and such payments are to be made from the revenues of the City's waterworks system, as an operating expense of such system; and WHEREAS, by resolution adopted on February 22, 1994, by the City Council of the City approved the form of this Resolution and the draft Preliminary Official Statement relating to the bonds herein authorized, authorized the City Manager to approve the final form of this Resolution, the Bond Purchase Agreement and the Final Official Statement relating to the bonds, and requested that the Authority refund $7,450,000 in aggregate principal amount of the Series 1979 Bonds (the "Refunded Bonds") and redeem said Refunded Bonds on April 1, 1994; and WHEREAS, it is hereby found and determined necessary and proper for the Authority to issue revenue bonds to refund the Refunded Bonds with such refunding bonds ¢s, Ix issued 4-. "Additional Roads" nursuant to the provision of the Serie, 1973 ^c;iolutioa and to bt .carred, all in accordance with the terms of the Federal Contract and tae Contract; anti. WHEREAS, as it is hereby found and determined that the refunding of the Refunded Bonds will result in a gross debt service savings of $ and a net present value savings of $ , the Authority hereby finds and determines that it is necessary and proper to issue the herein authorized bonds; NOW, THEREFORE, BE IT RESOLVED BY THE BOARD OF DIRECTORS OF THE NUECES RIVER AUTHORITY: ARTICLE DEFINITIONS Section 1.1. TERMS. The terms defined in this section for all purposes of this Resolution, except where the context by clear implication shall otherwise require, shall have the respective meanings as follows, to -wit: "Act" - The Act as defined in the recitals to this Resolution. 2ndDraft2/18/94 2 "Additional Bonds" - Bonds issued on a parity with the Series 1979 Bonds and the Series 1994 Bonds pursuant to the terms of this Resolution. "Authority" - Nueces River Authority and any other public b:;dy or agency at any time succeeding to the property rights, powers and obligations thereof. "Board" or "Board of Directors" - the duly appointed and acting Board of Directors of the Authority. "Bond" or "Bonds" - One or more of the Series 1979 Bonds, the Series 1994 Bonds and the Additional Bonds, as the case may be, authorized by the Resolution. "Bond Resolution" - The Series 1979 Resolution, this Resolution and any other Resolution of the Board authorizing the Additional Bonds. "City" - The City of Corpus Christi, Texas. "City Manager" - The duly appointed and acting City Manager of the City. "Construction Fund" - The fund by that name crated by Section 6.1 of the Series 1979 Resolution. "Consulting Engineer? - The independent engineer or engh tcri.ng fit,. cn :;urporation employed by the Authority in accordance with Article VIII of the Series 1979 Resolution. "Contract" - The contract between the Authority and the City dated the 27th day of May, 1976, as supplemented on August 24, 1978 and March 29, 1979 and as hereafter supplemented or amended. "Contract Payment Fund" - Nueces River Authority Contract Payments for Debt Service Fund created by Section 5.2 of the Series 1979 Resolution. "Contract Payments for Debt Service" - The payments made by the City to the Authority pursuant to the Contract as are necessary to pay the principal of and/or interest on the Bonds and to make deposits in the Reserve Fund or other Funds as may be required by the Bond Resolution. "DTC' - The Depository Trust Company, New York, New York, or any successor securities depository. "DTC Participant" - Securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations on whose behalf DTC was created to hold securities to facilitate the clearance and settlement of securities transactions among DTC Participants. 2ndDraft)2/18/94 3 "Executive Director" - The duly appointed and acting Executive Director of the Authority. "redo; al Contract" Th rnptraet 1'v and among the T Tnites-i States of America, the City and the Authntity, dated June 30, 1976, providing for the construction, operation and maintenance of the Project and entitled "Contract Among the United States of America, City of Corpus Christi, Texas, and the Nueces River Authority, Nueces River Reclamation Project, Texas". - year. "Financial Advisor" - First Southwest Company, San Antonio, Texas, or its successor. "Fiscal Year" - The twelve month period beginning September 1 of each calendar "Interest and Sinking Fund" - Nueces River Authority Water Supply Revenue Bonds Interest and Sinking Fund created by 5.2 of the Series 1979 Resolution. "Investment Securities" -Direct obligations of, or obligations the principal of and the interest on which are unconditionally guaranteed by, the United States Government, Federal Intermediate Credit Banks, Federal Land Banks, Federal National Mortgage Association, Federal Hume I..ian 13 n s Lr FlaaLc. fo: C 2cpc; t;:z6. Yw 'Paying hgent/Rc ,is..ed" - Texas Commerce Bank National Association, Houston, Tcxas, or its successors. "Project" - All features comprising the Nueces River Reclamation Project, Texas, authorized by the Act of Congress approved October 27, 1974 (Public Law 93-493), and constructed or provided under the terms of the Federal Contract; also known as the Choke Canyon Reservoir Project. "Reserve Fund" - Nueces River Authority Water Supply Revenue Bonds Reserve Fund created by Section 5.2 of the Series 1979 Resolution. 'Resolution" - This resolution, as from time to time it may be amended. "Series 1979 Bonds" - Nueces River Authority Water Supply Revenue Bonds, Series 1979 (City of Corpus Christi Project) authorized by the Series 1979 Resolution. "Series 1994 Bonds" - Nueces River Authority Water Supply Revenue Refunding Bonds, Series 1994 (City of Corpus Christi Project) authorized by this Resolution. 'Trustee" - Texas Commerce Bank National Association, a national banking association organized and existing under the laws of the United States, with its principal office in Houston, Texas, or its successor. "United States" - The United States of America. 2ndDraft/2/18/94 4 Section 1.2. CONSTRUCTION. This Resolution, except where the context by clear implication shall otherwise require, shall be construed and applied in a manner that the singular and plural both include the other, and pronouns include both singular and plural attd ii.c!ude all rndnr^ ARTICLE TWO GENERAL TERMS. PROVISIONS AND CHARACTERISTICS OF THE SERIES 1994 BONDS Section 2.1. GENERAL TERMS. The principal of and interest on the Bonds shall be payable in lawful money of the United States of America, without exchange or collection charges upon presentation and surrender at the principal corporate trust offices of Texas Commerce Bank National Associatoin in Austin, Texas. The Bonds shall be special obligations of the Authority and the principal thereof, premium, if any, and the interest thereon shall be secured by a first lien on and shall be payable only out of the revenues herein pledged. Section 2.2. SERIES 1994 BONDS ARE ADDITIONAL BONDS. The Bonds shall be Additional Bonds to the Series 1979 Bonds and as such shall be on a parity without nrinrity as to the security of any Bond over any other Bond by reason of series, date of issue° tc ter• �W_.• �... i.c.. of m.:.'__ lky, :....::, iV: ::uvGly ul h..j ;;;,..-,i characteri,.ec whatsoever. Section 2.3. CHARACTERISTICS OF THE BONDS. Registration. l'rr nsfe, Conversion and Exchange: Authentication: Rook -Entry Only System. (a) The Authority shall keep or cause to be kept at the principal corporate trust office of the Paying Agent/Registrar in Austin, Texas books or records for the registration of the transfer, conversion and exchange of the Bonds (the "Registration Books"), and the Authority hereby appoints the Paying Agent/Registrar as its registrar and transfer agent to keep such books or records and make such registrations of transfers, conversions and exchanges under such reasonable regulations as the Authority and Paying Agent/Registrar may prescribe; and the Paying Agent/Registrar shall make such registrations, transfers, conversions and exchanges as herein provided. The Paying Agent/Registrar shall obtain and record in the Registration Books the address of the registered owner of each Bond to which payments with respect to the Bonds shall be mailed, as herein provided; but it shall be the duty of each registered owner to notify the Paying Agent/Registrar in writing of the address to which payments shall be mailed, and such interest payments shall not be mailed unless such notice has been given. To the extent possible and under reasonable circumstances, all transfers of Bonds shall be made within three business days after request and presentation thereof. The Authority shall have the right to inspect the Registration Books during regular business hours of the Paying Agent/Registrar, but otherwise the Paying Agent/Registrar shall keep the Registration Books confidential and, unless otherwise required by law, shall not permit their inspection by any other entity. The Paying Agent/Registrar's standard or customary fees and charges for making such registration, transfer, conversion, exchange and delivery of a substitute Bond or Bonds shall be paid as provided in the FORM OF BOND set forth in this Resolution. Registration of assignments, transfers, conversions and exchanges of Bonds shall be made in the manner provided and with the effect stated in the FORM OF BOND set forth in this 2ndDraft/2/18/94 5 Resolution. Each substitute Bond shall bear a letter and/or number to distinguish it from each other Bond. An authorized represe..tative, o t a pay rg Aoent'Registrar shall, before the delivery of any such Bond, date and manually sign the Paying Agent/Registrar's Authentication Certificate, and no such Bond shall be deemed to be issued or outstanding unless such Certificate is so executed. The Paying Agent/Registrar promptly shall cancel all paid Bonds and Bonds surrendered for conversion and exchange. No additional ordinances, orders, or resolutions need be passed or adopted by the governing body of the Authority or any other body or person so as to accomplish the foregoing conversion and exchange of any Bond or portion thereof, and the Paying Agent/Registrar shall provide for the printing, execution, and delivery of the substitute Bonds in the manner prescribed herein. Pursuant to Vemon's Ann. Tex. Civ. St. Art. 717k-6, and particularly Section 6 thereof, the duty of conversion and exchange of Bonds as aforesaid is hereby imposed upon the Paying Agent/Registrar, and, upon the execution of said Certificate, the converted and exchanged Bond shall be valid, incontestable, and enforceable in the same manner and with the same effect as the Bonds which initially were issued and delivered pursuant to this Resolution, approved by the Attorney General, and registered by the Comptroller of Public Accounts. (b) Payment of Bonds and Interest. The Authority hereby further appoints the Paying Agent/Registrar to act as the paving agent for paying the principal of and interest on the L2z±, a;; as provided in this Resolution. 7-ke ayi ."T r. -n' - ha!I .. , J" �-b"-"���l.tya.. G. ..w. �:..:.p proper records of all payments made by the Authority and the Day;ng Agent/Registrar with respect. to the Bond:, and of ail conversions and exchanges of Bonds, and all replacements of Bonds, as provided iz this Resolution. However, in the event of a nonpayment of interest on a scheduled payment date, and for thirty (30) days thereafter, a new record date for such interest payment (a "Special Record Date") will be established by the Paying Agent/Reg- istrar, if and when funds for the payment of such interest have been received from the Authority. Notice of the Special Record Date and of the scheduled payment date of the past due interest (which shall be 15 days after the Special Record Date) shall be sent at least five (5) business days prior to the Special Record Date by United States mail, first-class postage prepaid, to the address of each registered owner appearing on the Registration Books at the close of business on the last business day next preceding the date of mailing of such notice. (c) In General. The Bonds (i) shall be issued in fully registered form, without interest coupons, with the principal of and interest on such Bonds to be payable only to the registered owners thereof, (ii) may be redeemed prior to their scheduled maturities (notice of which shall be given to the Paying Agent/Registrar by the Authority at least 40 days prior to any such redemption date), (iii) may be transferred and assigned, (iv) may be converted and exchanged for other Bonds, (v) shall have the characteristics, (vi) shall be signed, sealed, executed and authenticated, (vii) the principal of and interest on the Bonds shall be payable, and (viii) shall be administered and the Paying Agent/Registrar and the Authority shall have certain duties and responsibilities with respect to the Bonds, all as provided, and in the manner and to the effect as required or indicated, in the FORM OF BOND set forth in this Resolution. The Bonds initially issued and delivered pursuant to this Resolution are not required to be, and shall not be, authenticated by the Paying Agent/Registrar, but on each 2ndDraft/2/18/94 6 substitute Bond issued in conversion of and exchange for any Bond or Bonds issued under this Resolution the Paying Agent/Registrar shall execute the PAYING AGENT/REGIS- TRAR'S AUTHENTICATION CERTIFICATE, in the form set forth in the FORM OF PO u. (a) Substitc.c Paying Agent/Registrar. The Authonty covenants with the registered owners of the Bonds that at all times while the Bonds are outstanding the Authority will provide a competent and legally qualified bank, trust company, financial institution, or other agency to act as and perform the services of Paying Agent/Registrar for the Bonds under this Resolution, and that the Paying Agent/Registrar will be one such entity. The Authority reserves the right to, and may, at its option, change the Paying Agent/Registrar upon not less than 120 days written notice to the Paying Agent/Registrar, to be effective not later than 60 days prior to the next principal or interest payment date after such notice. In the event that the entity at any time acting as Paying Agent/Registrar (or its successor by merger, acquisi- tion, or other method) should resign or otherwise cease to act as such, the Authority covenants that promptly it will appoint a competent and legally qualified bank, trust company, financial institution, or other agency to act as Paying Agent/Registrar under this Resolution. Upon any change in the Paying Agent/Registrar, the previous Paying Agent/Registrar promptly shall transfer and deliver the Registration Books (or a copy thereof), along with all other pertinent books and records relating to the Bonds, to the new Paying Agent/Registrar designated and appointed by the Authority. Upon any change in the Fayfrr t ge t,Registra,, the Authority nrmmrth• w ll ecruse a wri: cn xu.t:c thfr:c. to be seta; by the : ew Thying Agent/Rcgistrar to each registered owner of the Bonds, by Ut itec' Stites mail, iirst-class postage prepaid, which notice also shall give the address of the new Paying AgeniReglstrar. By accepting the position and performing as sua, ea;11 raying Agent/Registrar shall be deemed to have agreed to the provisions of this Resolution, and a certified copy of this Resolution shall be delivered to each Paying Agent/Registrar. (e) Book -Entry Only System Generally. The Bonds issued in exchange for the Bonds initially issued and delivered under this Resolution shall be issued in the form of a separate single fully registered Bond for each of the maturities thereof registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York ('DTC'), and except as provided in subsection (b) hereof, all of the Bonds shall be registered in the name of Cede & Co., as nominee of DTC. With respect to Bonds registered in the name of Cede & Co., as nominee of DTC, the Authority and the Paying Agent/Registrar shall have no responsibility or obligation to any DTC Participant or to any person on behalf of whom such a DTC Participant holds an interest on the Bonds. Without limiting the immediately preceding sentence, the Authority and the Paying Agent/Registrar shall have no responsibility or obligation with respect to (i) the accuracy of the records of DTC, Cede & Co. or any DTC Participant with respect to any ownership interest in the Bonds, (ii) the delivery to any DTC Participant or any other person, other than the Bondholder, as shown on the Registration Books, of any notice with respect to the Bonds, including any notice of redemption, or (iii) the payment to any DTC Participant or any other person, other than a Bondholder, as shown in the Registration Books, of any amount with respect to principal of, premium, if any, and interest on, or Compounded Amount of, the Bonds. Notwithstanding any other provision of this Resolution 2ndDraft/2/18/94 7 to the contrary but to the extent permitted by law, the Authority and the Paying Agent/Registrar shall be entitled to treat and consider the person in whose name each Bond is registered in the Registration Books as the absolute owner of such Bond for the purpose of payment of principal, premium, if anyand 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/Registrar shall pay all principal of, premium, if any, and interest on, the Bonds only to or upon the order of the respective owners, as shown in the Registration Books as provided in this Resolution, or their respective attorneys duly authorized in writing, and all such payments shall be valid and effective to fully satisfy and discharge the Authority's obligations with respect to payment of principal of, premium, if any, and interest on, the Bonds to the extent of the sum or sums so paid. No person other than an owner, as shown in the Registration Books, shall receive a Bond certificate evidencing the obligation of the Authority to make payments of principal, premium, if any, and interest, or Compounded Amount, as the case may be, pursuant to this Resolution. Upon delivery by DTC to the Paying Agent/Registrar 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 this Resolution with respect to interest checks being mailed to the registered owner at the close of business on the Record Date, the word "Cede & Co.," in this Resolution shall refer to such new nominee of DTC. (4) >uccescr SAc,,.:ties Deposltury: "Lunsfers Outside B2^k-F_ tw v.M cr !i the event that the Authority determines tL discontinue the use of the.. Book Entry Only System througi: DTC or DTC determines to discontinue prcviaing its services with respect to the Bonds, the Authority shah (9 appoint a successor securities depository, qualified to act as such under Section 17A of the Securities and Exchange Act of 1934, as amended, notify DTC and DTC Participants of the appointment of such successor securities depository and transfer one or more separate Bonds to such successor securities depository or (ii) notify DTC and DTC Participants of the availability through DTC of Bonds and transfer one or more separate Bonds to DTC Participants having Bonds credited to their DTC accounts. In such event, the Bonds shall no longer be restricted to being registered in the Registration Books in the name of Cede & Co., as nominee of DTC, but may be registered in the name of the successor securities depository, or its nominee, or in whatever name or names Bondholders transferring or exchanging Bonds shall designate in accordance with the provisions of this Resolution. (g) Payment to Cede & Co. Notwithstanding any other provision of this Resolution to the contrary, so long as any Bond is registered in the name of Cede & Co., as nominee of DTC, all payments with respect to principal of, premium, if any, and interest on such Bond and all notices with respect to such Bond shall be made and given, respectively, in the manner provided in the representation letter of the Authority to DTC. (h) Notice of Redemption. (i) In addition to the Notice of Redemption set forth in the FORM OF BOND, the Paying Agent/Registrar shall give notice of redemption of the Bonds by mail first-class postage prepaid at least thirty (30) days prior to a redemption date 2ndDratt/2/18/94 8 to each registered securities depository and to any national information service that disseminates redemption notices. In addition, in the event of a redemption caused by an advance refunding of the Bonds, the Paying Agent/Registrar shall send a second a@hMC of redemption rG ale persons specified in the immediately preceding sentence at Least thirty (30) days but not more than ninety .(90) days prior to the actual redemption date. Any notice sent to the registered securities depositories or such national information services shall be sent so that they are received at least two (2) days prior to the general mailing or publication date of such notice. The Paying Agent/Registrar shall also send a notice of prepayment or redemption to the registered owner of any Bond who has not sent the Bonds in for redemption sixty (60) days after the redemption date. (ii) Each Notice of Redemption, whether required in the FORM OF BOND or in this Section, shall contain a description of the Bonds to be redeemed including the complete name of the Bonds, the Series, the date of issue, the interest rate, the maturity date, the CUSIP number, the certificate numbers, the amounts called of each certificate, the publications and mailing date for the notice, the date of redemption, the redemption price, the name of the Paying Agent/Registrar and the address at which the Bonds may be redeemed, including a contact person and telephone number. (iu) All redemption p ;^nen': .:z by t±;s Paying !roc i/Registrar ; ;1.. . Bondholders shall include a CUSH' number relating to each amount paid to sue) registered owner. (i) In case any person who shall have signed or signed and sealed any Bond as an officer of the Authority shall have ceased to be such officer before the Bonds so signed or signed and sealed shall have been actually delivered, such Bonds, nevertheless, may delivered and issued as though the person who signed or signed and sealed such Bond had not ceased to be such officer of the Authority. Any Bonds issuable hereunder may be signed and sealed on behalf of the Authority by such persons as at the actual date of the execution of such Bonds shall be proper officers of the Authority although at the date of such Bonds any such person shall not have been an officer of the Authority. The Bonds to be attached to the Bonds shall be executed by the manual or facsimile signatures of the President and the Secretary of the Authority, and the Authority may adopt or use for that purpose the facsimile signature of any persons who shall have been such officers notwithstanding the fact that they may have ceased to be such officers at the time when such Bonds are actually authenticated and delivered. The official seal of said Authority shall be impressed, or printed, or lithographed on each of the Bonds. Section 2.4. FORM OF BOND. The form of the Bonds, including the form of Paying Agent/Registrar's Authentication Certificate, the form of Assignment and the form of Registration Certificate of the Comptroller of Public Accounts of the State of Texas to be attached only to the Bonds initially issued and delivered pursuant to this Resolution, shall be, respectively, substantially as follows, with such appropriate variations, omissions, or insertions as are permitted or required by this Resolution: 2ndDraft/2/1&94 9 FORM OF BOND UNITED STATES OF AMERICA STATE OF TEXAS XA.: NUECES RIVER AUTHORITY WAFER SUPPLY REVENUE REFUNDING BONDS, SERIES 1994 (CITY OF CORPUS CHRISTI PROJECT) R-1 PRINCIPAL AMOUNT INTEREST RATE DATE OF BONDS MATURITY DATE CUSIP NO. % March 1, 1994 April 1, REGISTERED OWNER: PRINCIPAL AMOUNT: DOLLARS !)N TWE MATE MATURITY . • JF.CESRIIER.AUT HOPTTY _ ,.x.21 x DATE _ _rv�..L�l.ii dUU'YL:, the 1+ _ (the "Authority"), being a political subdivision of the State of Texas, hereby proaaris's to pay to the REGISTERED OWNER specified above (hereinafter called the "registered owner") the principal amount specified above end t:, pay interest thereon from March 1, 1994, on October 1, 1994, and semiannually on each April 1 and October 1 thereafter to the maturity date specified above, at the interest rate per annum specified above; except that if this Bond is required to be authenticated and the date of its authentication is later than the first Record Date (hereinafter defined), such principal amount shall bear interest from the interest payment date next preceding the date of authentication, unless such date of authentication is after any Record Date but on or before the next following interest payment date, in which case such principal amount shall bear interest from such next following interest payment date; provided, however, that if on the date of authentication hereof the interest on the Bond or Bonds, if any, for which this Bond is being exchanged or converted from is due but has not been paid, then this Bond shall bear interest from the date to which such interest has been paid in full. THE PRINCIPAL OF AND INTEREST ON this Bond are payable in lawful money of the United States of America, without exchange or collection charges solely from funds of the Authority required by the Bond Resolution to be on deposit with the Paying Agent/Registrar for such purpose as hereinafter provided. The principal of this Bond shall be paid to the registered owner hereof upon presentation and surrender of this Bond at maturity at the principal corporate trust office of Texas Commerce Bank National Association in Austin, Texas, which is the "Paying Agent/Registrar" for this Bond. The payment of interest on this Bond shall be made by the Paying Agent/Registrar to the registered owner hereof on each interest payment date by check dated as of such interest payment date, and such check shall be sent by the Paying Agent/Registrar by United States 2ndDraft/2/18/94 10 mail, first class postage prepaid, on each such interest payment date, to the registered owner hereof, at its address as it appeared on the fifteenth day of the month next preceding each such date (the 'Record Date") on the Registration Books kept by the Paying Agent/Registrar, as hereinafter daaat "aid. L^, uadition, interest payments may be made by such other methods, acceptable to the Paying Agent/Registrar, requested by and at the risk anti expense of the registered owner. Any accrued interest due at maturity shall oe para to the registered owner upon presentation and surrender of this Bond for payment at the principal corporate trust office of the Paying Agent/Registrar. The Authority covenants with the registered owner of this Bond that on or before each principal payment date and interest payment date for this Bond it will make available to the Paying Agent/Registrar, from the "Interest and Sinking Fund" as provided by the Bond Resolution (hereinafter defined), the amounts required to provide for the payment, in immediately available funds, of all principal of and interest on the Bonds, when due. IF THE DATE for any payment due on this Bond shall be a Saturday, Sunday, a legal holiday, or a day on which banking institutions in the city where the principal corporate trust office of the Paying Agent/Registrar is located are authorized by law or executive order to close, or the United States Postal Service is not open for business, then the date for such payment shall be the next succeeding day which is not such a Saturday, Sunday, legal holiday, or day on which banking institutions are authorized to close, or the United States Postal Service is not open for business; and payment on such date shall have the same force and effect as L` y de nn the &ate payinent was -due. TIES BOND is one of a Series of Bonds dat4.dr. of March 1, 1994, authorized by Resolution adopted by the Board of Directors of the Authority on march 3, 1994 (the "Bond Resolution") in accordance with the Constitution and laws of the State of Texas in the principal amount of $ (the 'Bonds") for the purpose of refunding $7,450,000 in aggregate principal amount of the outstanding Nueces River Authority Water Supply Revenue Bonds, Series 1979 (City of Corpus Christi Project). ON APRIL 1, or any date thereafter, the outstanding Bonds of this Series may be redeemed prior to their scheduled maturities, at the option of the Authority, with funds derived from any available and lawful source, as a whole, or in part, (provided that a portion of a Bond may be redeemed only in an integral multiple of $5,000) at the redemption price of the principal amount of Bonds called for redemption, plus accrued interest thereon to the date fixed for redemption. If less than all of the Bonds are to be redeemed, the Authority shall determine the maturity or maturities and the amounts thereof to be redeemed and shall direct the Paying Agent/Registrar to call by lot Bonds, or portions thereof, within such maturity or maturities and in such principal amounts, for redemption; provided that during any period in which ownership of the Bonds is determined by a book entry at a securities depository for the Bonds, if fewer than all of the Bonds of the same maturity and bearing the same interest rate are to be redeemed, the particular Bonds of such maturity and bearing such interest rate shall be selected in accordance with the arrangements between the Authority and the securities depository. 2ndDraft/2/18/94 11 AT LEAST 30 days prior to the date fixed for any redemption of Bonds or portions thereof prior to maturity, a written notice of such redemption shall be sent by the Paying Agent/Registrar by United States mail, first-class postage prepaid, to the registered owner of each Bond to be redeemed at its address as it anoeared en tnc day uck noti ,c of redemption is mailed; provided, however, that the failure to send. mail or receive such not:�e, or any detect therein or in the sending or mailing thereof, shall not affect the validity or effectiveness of the proceedings for the redemption of any Bond. By the date fixed for any such redemption, due provision shall be made with the Paying Agent/Registrar for the payment of the required redemption price for the Bonds or portions thereof which are to be so redeemed. If such notice of redemption is given and if due provision for such payment is made, all as provided above, the Bonds or portions thereof which are to be so redeemed thereby automatically shall be treated as redeemed prior to their scheduled maturities, and they shall not bear interest after the date fixed for redemption, and they shall not be regarded as being outstanding except for the right of the registered owner to receive the redemption price from the Paying Agent/Registrar out of the funds provided for such payment. If a portion of any Bond shall be redeemed, a substitute Bond or Bonds having the same maturity date, bearing interest at the same rate, in any denomination or denominations in any integral multiple of $5,000, at the written request of the registered owner, and in an aggregate principal amount equal to the unredeemed portion thereof, will be issued to the registered owner upon the surrender thereof for cancellation, at the expense of the Authority, all as provided in the Bond Resolution. AlAll..01,IDS OF THIS SERIES are issuable solely as fully registered Bosuds, t - short Int -.1 est coupons, m the uenomination of ai,,' integral multiple of $5,000. As prordeC Bond Resolution, this Bond may, at the request of the registered owner or the assignee or assignees hereof, be assigned, transferred, converted into and exchanged for a like aggregate amount of fully registered Bonds, without interest coupons, payable to the appropriate registered owner, assignee or assignees, as the case may be, having any authorized denomination or denominations as requested in writing by the appropriate registered owner, assignee or assignees, as the case may be, upon surrender of this Bond to the Paying Agent/Registrar for cancellation, all in accordance with the form and procedures set forth in the Bond Resolution. Among other requirements for such assignment and transfer, this Bond must be presented and surrendered to the Paying Agent/Registrar, together with proper instruments of assignment, in form and with guarantee of signatures satisfactory to the Paying Agent/Registrar, evidencing assignment of this Bond or any portion or portions hereof in any authorized denomination to the assignee or assignees in whose name or names this Bond or any such portion or portions hereof is or are to be registered. The Form of Assignment printed or endorsed on this Bond may be executed by the registered owner to evidence the assignment hereof, but such method is not exclusive, and other instruments of assignment satisfactory to the Paying Agent/Registrar may be used to evidence the assignment of this Bond or any portion or portions hereof from time to time by the registered owner. The Authority shall pay the Paying Agent/Registrar's reasonable standard or customary fees and charges for transferring and exchanging any Bond or portion thereof. Any taxes or governmental charges required to be paid with respect thereto shall be paid by the one requesting such assignment, transfer, conversion or exchange, as a condition precedent to the exercise of such privilege. The Paying Agent/Registrar shall not be required to make any such transfer or exchange with respect to any Bond or any portion 2ndDraft/2/18I94 12 thereof called for redemption prior to maturity, within 45 days prior to its redemption date; provided, however, such limitation of transfer shall not be applicable to an exchange by the Registered Owner of an unredeemed balance of a Bond called for redemption in part. IN THE EVENT any Paying Agent/Registrar for the Bonds is changed by the Authority, resigns, or otherwise ceases to act as such, the Authority has covenanted in the Bond Resolution that it promptly will appoint a competent and legally qualified substitute therefor, and cause written notice thereof to be mailed to the registered owners of the Bonds. IT IS HEREBY certified, recited, and covenanted that this Bond has been duly and validly authorized, issued, and delivered; that all acts, conditions, and things required or proper to be performed, exist, and be done precedent to or in the authorization, issuance, and delivery of this Bond have been performed, existed, and been done in accordance with law; that this Bond is a special obligation of the Authority, and that the principal of and interest on this Bond, together with the Nueces River Authority Water Supply Revenue Bonds, Series 1979 (City of Corpus Christi Project) are payable from, and secured by a first lien on and pledge of certain payments to be made by the City of Corpus Christi, Texas to the Authority pursuant to a contract dated the 27th day of May, 1976, as supplemented and amended. E ATT) A.'nhurity has : c r cci the right, subject to the restric:knt s 32nd, az-1 by reference, in the Bond Resolution authorzitng this series of Bonds, to is 'z tddit onai parity revenue bonds which also may be made payable from and secured by a first lien on and pledge of the aforesaid payment.; securing this series of Bonds. THE HOLDER HEREOF shall never have the right to demand payment of this obligation out of any funds raised or to be raised by taxation. BY BECOMING the registered owner of this Bond, the registered owner thereby acknowledges all of the terms and provisions of the Bond Resolution, agrees to be bound by such terms and provisions, acknowledges that the Bond Resolution is duly recorded and available for inspection in the official minutes and records of the governing body of the Authority, and agrees that the terms and provisions of this Bond and the Bond Resolution constitute a contract between each registered owner hereof and the Authority. IN WITNESS WHEREOF, the Authority has caused this Bond to be signed with the manusl or facsimile signature of the Chairman of the Authority and countersigned with the manusi or facsimile signature of the Secretary of the Authority, and has caused the official seal of the Authority to be duly impressed, or placed in facsimile, on this Bond. Secretary, Board of Directors (SEAL) 2ndDraft/2/18I94 13 Chairman, Board of Directors FORM OF PAYING AGENT/REGISTRAR'S AUTHENTICATION CERTIFICATE PAYING AGENT/REGISTRAR'S AUTHENTICATION CERTIFICATE (To be executed if this Bond is not accompanied by an executed Registration Certificate of the Comptroller at Public Accounts of the State of Texas) It is hereby certified that this Bond has been issued under the provisions of the Bond Resolution described in the text of this Bond; and that this Bond has been issued in exchange for a bond or bonds, or a portion of a bond or bonds of a series which originally was approved by the Attorney General of the State of Texas and registered by the Comptroller of Public Accounts of the State of Texas. Dated: Paying Agent/Registrar By Authorized Representative FORM OF ASSIGNMENT: ASSIGNMENT FOR VALUE RECEIVED, the undersigned sells, assigns and transfers unto Please insert Social Security or Other Identifying Number of Transferee Please print or typewrite name and address, including zip code of Transferee) the within Bond and all rights thereunder, and hereby irrevocably constitutes and appoints attorney, to register the transfer of the within Bond on the books kept for registration thereof, with full power of substitution in the premises. Dated: 2ndDraft/2/18/94 14 Signature Guaranteed: NOTICE: Signature(s) must be guaranteed by a member firm of the New York Stock Exchange or a commercial bank or trust company. NOTICE. The signatnre above must correspond with the name of the Registered Owner as it appears upon the front of this Bond in every particular, without alteration or enlargement or any change whatever. FORM OF REGISTRATION CERTIFICATE OF THE COMPTROLLER OF PUBLIC ACCOUNTS: COMPTROLLER'S REGISTRATION CERTIFICATE: REGISTER NO. I hereby certify that this Bond has been examined, certified as to validity, and approved by the Attorney General of the State of Texas, and that this Bond has been registered by the Comptroller of Public Accounts of the State of Texas. \Uitne,c _r' Si at,ire and seal t iz Comptroller of Public Accounts of the State of Texas (COMPTROLLER'S SEAL) [INSURANCE LEGEND] ARTICLE THREE AUTHORIZATION AND ISSUANCE OF BONDS Section 3.1. DESIGNATION. The Bonds of Nueces River Authority to be entitled "Nueces River Authority Water Supply Revenue Refunding Bonds, Series 1994 (City of Corpus Christi Project) (the "Series 1994 Bonds")" shall be issued in the maximum aggregate principal amount of $8,000,000 in accordance with the provisions of the Constitution and Statutes of the State of Texas, including Article 16, Section 59 of the Texas Constitution and the Act for the purpose of refunding the Refunded Bonds in the aggregate principal amount of $7,450,000. Section 3.2. DATE, DENOMINATIONS, NUMBERS, MATURITIES OF BONDS AND INTEREST. The Series 1994 Bonds shall be dated March 1, 1994, shall be numbered consecutively from R-1 upward, shall be in the denomination of $5,000 or any integral multiple thereof, and shall mature and become due and payable serially on April 1 in each of the years and amounts to be set forth in the Bond Purchase Agreement. The Series 1994 2ndDraft/2/18/94 15 Bonds shall bear interest at the per annum rates set forth in the Bond Purchase Agreement. Said interest shall be payable on October 1, 1994 and semiannually thereafter on April 1 and October 1 until paid. Sert,gn 3 3 UNDER WRTI'hR AND. BOND PURCHASE AGREEMENT (a) M. E. Allison & Co., inc. is nereby designated the senior managing underwriter (the "Underwriter") for the Series 1994 Bonds. (b) As authorized by Article 717q, as amended, the General Manager of the Authority is hereby authorized to act on behalf of the Authority in selling and delivering the Series 1994 Bonds and carrying out the other procedures specified in this Resolution relating to the issuance of the Series 1994 Bonds, to the extent not provided by this Resolution, including determining and fixing the price at which the Series 1994 Bonds will be sold, the years in which the Series 1994 Bonds will mature, the principal amount to mature in each of such years, the aggregate principal amount of the Series 1994 Bonds, the rate of interest to be borne by each such maturity, the dates, price and terms upon and at which the Series 1994 Bonds shall be subject to redemption prior to maturity at the option of the Authority, as well as any mandatory sinking fund redemption provisions, and all other matters relating to the issuance, sale, and delivery of the Series 1994 Bonds and the refunding of the Refunded Bonds all as specified in the Bond Purchase Agreement. In establishing the aggregate principal amount of the Series 1994 Bonds, the General Manager shall establish an amount not to er:ce d the amou,st Scetion. 3.1, hi an amount sufncient to provide for the r:.• of the Ref ::__c_' Bonds and which will result in OK- ina imnr—. reduction in debt ServLc is to the Authority, based on bond markt conditions and available interest rates for the Series 1994 Bonds on the date of execution of tiie Bond Purchase Agreement, all as determined by the General Manager. The General Manager is authorized to complete, execute, and deliver a Bond Purchase Agreement in substantially the form presented to the Board at the meeting at which this Resolution is adopted, with such modifications as are deemed necessary by the General Manager, provided that the price to be paid for the Series 1994 Bonds shall be not less than 90% of the aggregate principal amount thereof plus accrued interest thereon from its date to its delivery, and no maturity shall bear interest at a rate greater than 10% per annum. The General Manager is further authorized, for and on behalf of the Authority to approve the Official Statement, and any supplements thereto, relating to the Series 1994 Bonds. It is further provided, however, that, notwithstanding the foregoing provisions, the Series 1994 Bonds shall not be delivered unless (1) the refunding of the Refunded Bonds will result in a reduction in the aggregate amount of principal and interest which otherwise would be payable with respect to the Refunded Bonds, both on an actual and a present value basis of at least 3%, and (2) prior to delivery, the Series 1994 Bonds have been rated by a nationally recognized rating agency for municipal securities in one of the four highest rating categories for long term obligations, as required by Vernon's Ann. Tex. Civ. St. Article 717q, as amended. Section 3.4. ADDITIONAL BONDS. One or more series of Bonds, on a parity with and in addition to the Series 1979 Bonds and the Series 1994 Bonds may be issued, 2ndDraft/2/18,94 16 authenticated and delivered under the conditions, for the purposes and pursuant to the provisions of Sections 3.4 and 3.5 of the Series 1979 Resolution. ARTICLE FOUR REDEMPTION OF SERIES 1994 BONDS Section 4.1. GENERAL Any redemption of all or any part of the Series 1994 Bonds issued under the provisions of this Resolution or in accordance therewith which are subject to redemption shall be made in the manner provided in this Article. Section 4.2. PARTIAL REDEMPTION. In case of the redemption of less than all the Series 1994 Bonds outstanding, except as otherwise provided herein or in the resolution or resolution authorizing such Series 1994 Bonds, the particular Series 1994 Bonds to be redeemed shall be selected from all the outstanding Series 1994 Bonds as provided in the Form of Bonds. Section 4.3. OPTIONAL REDEMPTION. All Series 1994 Bonds scheduled to mature on and after April 1, shall be optional for redemption prior to their scheduled maturities, in whole, or in part, at the option of the Authority, on any date at redemption prices (expressed as a percentage of principal amount) plus accrued interest to the reI exion jzta a. follnwv. =:aclesnption Date Redemption Price At least 30 days prior to the date fixed for any redemption of Series 1994 Bonds or portions thereof prior to maturity, a written notice of such redemption shall be sent by the Paying Agent/Registrar by United States mail, first-class postage prepaid, to the registered owner of each Series 1994 Bond to be redeemed at its address as it appeared on the day such notice of redemption is mailed; provided, however, that the failure to send, mail or receive such notice, or any defect therein or in the sending or mailing thereof, shall not affect the validity or effectiveness of the proceedings for the redemption of any Series 1994 Bond. By the date fixed for any such redemption, due provision shall be made with the Paying Agent/Registrar for the payment of the required redemption price for the Bonds or portions thereof which are to be so redeemed. If such notice of redemption is given and if due provision for such payment is made, all as provided above, the Series 1994 Bonds or portions thereof which are to be so redeemed thereby automatically shall be treated as redeemed prior to their scheduled maturities, and they shall not bear interest after the date fixed for redemption, and they shall not be regarded as being outstanding except for the right of the registered owner to receive the redemption price from the Paying Agent/Registrar out of the funds provided for such payment. 2ndDraft/2/18/94 17 Section 4.4. REDEMPTION OF ADDITIONAL BONDS. Additional Bonds shall be subject to redemption prior to their stated maturities as may be provided in the resolution or resolutions authorizing their issuance. ARTICLE FIVE PLEDGE AND FUNDS Section 5.1. PLEDGE. The principal of and interest on the Bonds shall be paid and secured by a first lien on and pledge of the Contract Payments for Debt Service, and said lien and pledge are hereby irrevocably confirmed, and the holders of the Bonds shall never have the right to demand payment thereof out of any funds of the Authority. Section 5.2. FUNDS. (a) The following special funds of the Authority created with the Trustee by the Series 1979 Resolution are hereby confirmed, to wit: (i) the "Nueces River Authority Contract Payments for Debt Service Fund" (the "Contract Payment Fund"); (ii) the "Nueces River Authority Water Supply Revenue Bonds Interest and Sinking Fund (the "Interest and Sinking Fund"); (iii) the "Nueces River Authority Water Supply Revenue Bonds Resent Fund' (the 'Re -rve (b) All moneys in said Funds are pledged to the purposes expressed herein and in the Series 1979 Resolution. (c) Pursuant to the Series 1979 Resolution all of said Funds created by this Section shall be kept with the Trustee. Section 5.3. CONTRACT PAYMENT FUND. All Contract Payments for Debt Service shall be received by the Trustee from the Authority and shall be deposited by the Trustee as received into the Contract Payment Fund. Section 5.4. FLOW OF FUNDS. Moneys on deposit in the Contract Payment Fund shall be transferred by the Trustee in the following sequence and order of priority and on the following dates, to -wit: (a) The Trustee shall transfer to the Interest and Sinking Fund - (i) on or before each March 25 and September 25 such amounts as will be sufficient, together with other funds therein, to pay the interest on the Bonds on the next succeeding interest payment date thereof; and 2ndDraftf2/18/94 18 (ii) on or before each March 25 and September 25 through March 25, _ one-half of such amounts as will be sufficient, together with other funds, therein, to pay the principal of the Bonds maturing on the next succeeding April 1. (b) So long as the amount on deposit in the Reserve Fund equals or exceeds a sum equal to the amount requued to pay the interest on and principal of the Bonds outstanding during the Fiscal Year such payments are the greatest, no transfers into the Reserve Fund shall be required under this paragraph (b). However, should the amount on deposit in said Fund ever be less than a sum equal to the amount required to pay the interest on and principal of the Bonds outstanding during the Fiscal Year such payments are the greatest, the Trustee shall replace any deficiency therein in not more than ten (10) equal installments by making transfers in the necessary amounts into said Fund from the Contract Payment Fund on or before each March 25 and September 25 beginning with the March 25 of the Fiscal Year following the Fiscal Year in which the deficiency occurred. The Authority shall make payments to the Trustee for the credit of the Contract Payment Fund at the times and in the amounts required to permit the timely transfers required by this Section to be made from the Contract Payment Fund to the Reserve Fund. Section 5.5. USE OF INTEREST AND SINKING FUND. Monies on deposit in the Interest and Sinking Fund each year shall be used solely and exclusively first for the purpose of paying the interest on and principal of the Bonds as such interest comes due and the pzintripai tbrreof mat1ares; nr for the purpose of rallinv ar! ,L.,fze1ling Rctd; pik-tz maturity rt the applicable redemption price and/or for the purpose of purcc?,asirg Bonds its the open market for rerirnmeut for prices not greater than ine par vake plus ccruec iineresi of any Bonds thus purchased or if redeemable prior to states ma:nrity, not greater than the redemption price on the next succeeding redemption date. No purchases shall be made of Bonds with monies in the Interest and Sinking Fund which would result in not having sufficient monies therein to pay Bonds at their stated maturities. The Trustee timely shall make available the funds on deposit therein to the Paying Agents for such purposes. At such time as the monies and investments in the Interest and Sinking Fund and the Reserve Fund shall equal the aggregate principal amount of the Bonds outstanding and interest thereon to stated maturity dates of such Bonds, or, if any of such Bonds shall be redeemable prior to stated maturity, the interest thereon to such redemption dates and any applicable premium, no further transfers shall be made to the Interest and Sinking Fund. Section 5.6. USE OF RESERVE FUND. For so long as any of the Bond shall be outstanding the Reserve Fund shall be held as a reserve for the payment of principal of and interest on the Bonds when and if monies on deposit in the Interest and Sinking Fund shall not be sufficient for such purpose. If such deficiencies occur, the Trustee shall transfer money on deposit in the Reserve Fund to the Interest and Sinking Fund for the uses specified for that Fund. The monies in the Reserve Fund shall be used to pay the last of the Bonds outstanding. Section 5.7. SECURITY AND INVESTMENT OF FUNDS. The trustee will secure and keep secured, in the manner required by law, all cash funds on deposit with it, and will cause the Paying Agents to secure all funds deposited with them as other trust funds are secured. The Trustee shall invest the monies in the Interest and Sinking Fund, the Reserve 2ndDraft2/18/94 19 Fund, and the Contract Payment Fund fully and continuously in Investment Securities or Certificates of Deposit of State and National Banks which shall be lawfully insured or secured by Investment Securities, all in accordance with resolutions from time to time adopted by the Board, approved by t!'e City and delivered to the Trustee. Such investments shah be converted to cash only at the times monies are needed for payments required by this t &a;utlun. Ali interest aild income on s:.cn mvzstmcuts as reaiizcx shall te deposited m w the Contract Payment Fund. ARTICLE SIX BOND PROCEEDS AND REDEMPTION OF THE REFUNDED BONDS Section 6.1. BOND PROCEEDS. Promptly after the delivery of the Bonds, the proceeds received from the sale thereof together with the legally available funds on hand, including the amounts to be released from the funds securing the Refunded Bonds upon the defeasance of the Refunded Bonds shall be deposited and disbursed as follows: (a) To the Interest and Sinking Fund, an amount representing the accrued interest received from the Purchasers. (b) To the Authority's General Fund from Bond proceeds, an amount equal to the estimated expense. in connection with the issuance and sale of the Bonds. (d) To the he Into*e , :u''ylriling Fund. the bale.;;:;., of the Yiocccc:;, received from the ale of the Rod's and the. i.:nda released from the Reserve Fund, being an amount which will be sufficient to timely pay the principal of, interest on and redemption premium due on the Refunded Bonds on April 1, 1994, the redemption date. In the event that the Bond proceeds deposited in the Authority's General Fund to pay the expenses in connection with the issuance and sale of the Bonds are in excess of the amount needed for such purpose, such excess shall be removed from the General Fund and deposited into the Interest and Sinking Fund to be used to pay interest on the Bonds. Section 6.2. REDEMPTION OF REFUNDED BONDS. The Refunded Bonds are hereby called for redemption prior to maturity on April 1, 1994 at a redemption price equal to 102.5% of the principal amount of such redeemed bonds plus accrued interest to the redemption date. The form of Notice of Redemption attached to this Resolution is hereby approved and the General Manager is authorized and directed to take such actions as are necessary to assure the redemption of the Refunded Bonds. The General Manager is further authorized and directed to take such actions and give such notices as are necessary to revoke the redemption of the Refunded Bonds in the event the Series 1994 Bonds are not delivered by the redemption date for the Refunded Bonds. In addition to the notice of redemption given in accordance with the resolution authorizing the Refunded Bonds, the notice of redemption shall also be given by United States mail, first-class, postage prepaid to each registered securities depository and to any 2ndDraft/2/18/94 20 national information service that disseminates redemption notices. Any notice sent to the registered securities depositories or such national information services shall be sent as soon as possible after the sale of the Series 1994 Bonds. ARTICLE SEVEN GENERAL COVENANTS Section 7.1. RECORDS. (a) The Authority will keep or cause to be kept proper books of record and account in which full, true and correct entries will be made of all income, expenses and transactions of and in relation to the Project and each and every part thereof in accordance with accounting practices recommended by the National Committee on Governmental Accounting and within ninety (90) days after the close of each Fiscal Year the Authority will furnish to the City, the Municipal Advisory Council of Texas, the Financial Advisor, and any holder of any Bonds who may so request a signed or certified copy of a report by a Certified Public Accountant covering the preceding Fiscal Year. (b) The holder or holders of any Bonds or any duly authorized agent or agents of such holders, shall have the right at all reasonable times to inspect all such records, accounts and data relating to the Authority and the Project, and to inspect the Project and all properties comprising same. Section. 7.7. COMPLLet CE WITH CONTRACT. To the end that thy: Contrnct Payments for Debi Setvice :ill be trade hi accordance Wt.n the Contract and the same Le sufficient it, pay the tSonds and the interest thereon as they become due, the Autimunty will comply with the terms of the Contract and keep the same in effect, and will enforce the terms of the Contract. The Authority will not consent to any amendment to the Contract which would extend the time of the payment of any amounts due thereunder or which would in any manner impair or adversely affect the rights of the holders of the Bonds from time to time. Section 7.3. COMPLIANCE WITH FEDERAL CONTRACT. To the end that the Project will be properly maintained and the rights of the Authority and the holders of the Bonds will be preserved and protected, the Authority will comply with the terms of the Federal Contract and will enforce the terms of the Federal Contract. Section 7.4. CORPORATE EXISTENCE OF AUTHORITY. The Authority represents that it is a conservation and reclamation district, and a governmental agency and body politic and corporate, duly created, organized and existing under the Constitution and laws of the State of Texas and has proper authority from all other public bodies and authorities, if any, having jurisdiction thereof to operate, maintain, repair, renew and replace the Project or any interest therein. The Authority will at all times maintain its corporate existence and maintain a lawful Board of Directors, and at all times function and act in the best interest of the Project and the bondholders. The Authority hereby further covenants that it has the lawful power to pledge the revenues supporting the Bonds; that all corporate action on its part to that end has been duly and validly taken; and that the Bonds issued 2ndDraft/2/18,94 21 hereunder shall be ratably secured under said pledge in such manner that one Bond shall have no preference over any other Bond of said issue. Section 7.5. FURTHER ENCUMBRANCES. The Ar°"nrity covenants that in no event wnile any of the bonds or interest thereon remains outstanding and unpaid, shall the /Autitority sell, mut gage, tease or otherwise dispose of its interest m the Project, or any substantial part thereof, nor shall the Authority further encumber the Contract Payments for Debt Service in any manner except in accordance with this Resolution, or unless such encumbrance shall be made junior and subordinate in all respects to the lien and pledge herein created for the benefit of the Bonds and the interest thereon. Section 7.6. INSURANCE. (a) The Authority will, or will cause the City at all times to keep insured with a responsible insurance company or companies, such of the plants, structures, buildings, stations, machinery and equipment of the Project against risk of accidents or casualties against which insurance is usually carried by similar governmental entities operating like properties, to maintain insurance against public liability and property damage in a reasonable amount, provided such insurance can be procured at reasonable cost, and to maintain workmen's compensation insurance with a responsible insurance company or companies or a State -approved workmen's compensation plan or program. However, at any time while any contractor engaged in the construction shall be fully responsible therefor, the Authority shall not be required to carry or cause to be carried any of the foregoing insurance. (b) in Me even: u,f any Loss or damage and proceeds from such i T:;urance policies are available the Authority wili apply or cansc to be applied proceeds of insurance policies covering such loss or damage solely for that purpose. The Authority will use its best efforts to have the work of reconstruction or repair begun promptly after such Loss or damage shall occur and have the same continued and properly completed as expeditiously as possible. If engineering assistance is not available from the United States, the Authority will procure or cause to be procured the advice and recommendation in writing of Consulting Engineers concerning such reconstruction before it is undertaken. (c) Any amounts remaining after the completion of and payment for any such reconstruction or repair shall be deposited to the credit of the Contract Payment Fund. Section 7.7. MAINTENANCE, REVIEW AND INSPECTION. The Authority recognizes that the Federal Contract provides that a representative of the United States with a representative of the Authority and the City may, from time to time, review the maintenance of the Project being operated by the Authority and the City to determine the condition of the Project and adequacy of the maintenance program. A report of the review including recommendations, if any, will be prepared by the United States and copies will be furnished to the Authority and the City. If deemed necessary by the United States or the Authority and the City, special inspections of the Project and the books and records being maintained will be made by the United States to ascertain, in the event of any operation and maintenance deficiency remedial measures required for correction to assist the Authority and City in solving specific problems. Any such inspection or audit shall, except in the case of emergency, be made in written notice to the Authority and the City, and the actual cost 2ndDraft/2/18i94 22 thereof shall be paid by the Authority and the City to the United States. Should this arrangement for reviews and inspections be terminated for any reason, while any of the Bonds is outstanding, the Authority will employ or cause to be employed, a Consulting Engineer to give all necessary a de.irable 1d ce arra recommendations to the end that the Project shall be operated and maintained in the most efficient and satisfactory manner. Further, the Authority shall cause the Consult:.,g Engineer to make in writing a review and report on the physical condition of the Project works once every three years, including their recommendations as to (1) the proper maintenance, repair and operation of the Project, including their findings as to whether or not properties have been maintained in good repair and sound operating condition; and (2) the improvements, renewals and replacements which should be made. A copy of such report and review shall be filed with the City and the Authority. Section 7.8. CONTINUING EFFECT OF AUTHORITY'S STATUTORY RIGHTS. No provision contained in this Resolution shall in any way affect the statutory right of the Authority to issue bonds except bonds on a parity with the Bonds which shall be issued in accordance with the Series 1979 Resolution and this Resolution. ARTICLE EIGHT TRUSTEE Section 8.1. TRUSTEE ACCEPTT/1NC' . By the execution of the Acceptance Clause at the e.:d hereof, the Trustee does hereby affirm thI ;acceptance of the trust imposed by the Series i973 P,eaobltion anti tiiia resolution and agrees to comply with the terms thereof. Section 8.2. NO LIABILITY. The Trustee shall not be liable for any act done or step taken or omitted by it, including losses incurred in buying and selling investments, or any mistake of fact or law or for anything which it may do or refrain from doing, except for its negligence and/or its willful misconduct in the performance of any obligation imposed upon it hereunder. The Trustee shall not be responsible in any manner whatsoever for the recitals or statements contained in the Bonds or any proceedings taken in connection therewith or statements of the Authority contained in this Resolution. Section 8.3. NO RESPONSIBILITY. The Trustee shall have no responsibility to any persons in connection herewith except those specifically provided herein and shall not be responsible for anything done or omitted to be done by it except for its own negligence and/or willful misconduct. The Authority covenants that it will not commence any action against the Trustee, in equity or otherwise as a result of any action taken or thing done by the Trustee pursuant to this Resolution or pursuant to any written demand or authorization for which provision is herein made. Section 8.4. TRUST AND OTHER AGREEMENTS. The Trustee, except as herein indicated and as a Paying Agent/Registrar and a Trustee with respect to certain of the Authority's bond issues, is not a party to any other agreement or undertaking between the Authority and the Trustee nor is it bound by nor need it give consideration to the terms or provisions of any agreement or undertaking between the Authority and other persons, and 2ndDraftf2/18, 94 23 the Trustee assents to and is to give consideration only to the terms and provisions of this Resolution. Unless it is specifically provided, the Trustee has no duty to determine or inquire into the happening or occurrence of any event or contingency or the performance or failure of performance of the A*.aiwriiy with respect to arrangements or contracts with others, the Trustee's sole duty hereunder being to deposit monies and to dispose of and deliver the same in accordance with instructions nerein. Section 8.5. OBLIGATION TO USE REASONABLE CARE AND DILIGENCE. If, however, the Trustee be called upon by the terms of this Resolution to determine the occurrence of any event or contingency, Trustee shall be obligated, in making such determination, only to exercise reasonable care and diligence, and in event of error in making such determination Trustee shall be liable only for its own willful misconduct and/or negligence in the light of all the circumstances, taking into consideration the time and facilities available to Trustee in the ordinary conduct of its business. In determining the occurrence of any such event or contingency Trustee may request from the Authority or any other person such reasonable additional evidence as Trustee in its discretion may deem necessary to determine any fact relating to the occurrence of such event or contingency, an in this connection may inquire and consult, among others, with the Authority at any time and Trustee shall not be liable for any damages resulting from its delay in acting hereunder pending its examination of the additional evidence requested by it. Sectits'. 8.6. TRI.TCTEE RELIAIIC;t . ON AU'l HO.RTTY The Tnuree by the Authority to rely upon the -epresertations, both actual and implied, of the Authority and all other persons connected with this Resolution 2.,d the deposited property as to authority to execute this Rrolution, notifications, receipts or instructions hereunder, and relationships among persons, including persons authorized to receive delivery hereunder, and Trustee shall not be liable to any person in any manner for such reliance. Section 8.7. GOOD FAITH RELIANCE BY TRUSTEE. The Trustee may act upon any written notice, request, waiver, consent, certificate, receipt, authorization, power of attorney, or other instrument or document which Trustee in good faith believes to be genuine and to be what it purports to be. Section 8.8. TRUSTEE RELATIONSHIP WITH AUTHORITY AND CITY. The Trustee or any company of which it is a subsidiary or in which it may be interested, or any officer, stockholder or director of the Trustee or of any such company, in its or his individual or fiduciary capacity, may acquire, hold or dispose of Bonds or coupons, or may engage in or be interested in any financial or other transaction with the City or the Authority or any corporation in which the City or the Authority may be interested, and the Trustee may act as depository, trustee or agent for the City or the Authority or for any committee or body of holders of Bonds, whether or not secured hereby, all with the same rights as though the Trustee were not Trustee hereunder. Section 8.9. USE OF TRUSTEE FUNDS. Nothing in this Resolution shall require the Trustee to expend or risk its own funds or incur financial liability in the performance or exercise of any of its rights, powers or duties if it does not have reasonable grounds to 2ndDraft/2/18/94 24 believe that the funds will be repaid or that it will be adequately indemnified as to risk and liability. Section 8.1O. REMOVAL ANT? RESIGNATION. (a) The Trustee and any successor hereafter appointed may at any time resign from the trust hereby created by giving 90 days' written notice to the Authority and such resignation shall take effect upon the appointment of a successor Trustee by the bondholders or by the Authority. Such notice may be served personally or sent by registered mail. (b) The Trustee at any time acting hereunder may be removed at any time by an instrument or concurrent instruments in writing delivered to the Trustee and to the Authority and the City or instruments or concurrent instruments in writing delivered by the Authority and the City to the Trustee and signed by the holders a majority in amount of the Bonds. (c) In case the Trustee hereunder shall resign or be removed, or be dissolved, or shall be in course of dissolution or liquidation or otherwise become incapable of acting hereunder, or in case the Trustee shall be taken under control of any public officer or officers or of a receiver appointed by a court, a successor may be appointed by the holders of a majority in principal amount of the Bonds hereby secured and then outstanding, by an instrument or concurrent instruments in writing signed by such holders, or by their attorneys in fart duly au iiterleo; ptuvided, ne,erthclase thstt in rqg< ^f et:h varrnn^v the At.i crit-- byan instilment execu ,:d by =.f.o;u:rati of the Bn rd, and signed by its President, and attested by its Secretary under its corpora e seal, may appoint a temporary 'I"rustee to illi such vacancy until a successor shall be appointed by the bondholders in the manner abo:c provided; and any such temporary Trustee so appointed by the Authority shall immediately and without further act be superseded by the Trustee so appointed by such bondholders. Every such temporary Trustee so appointed by the Authority shall be a trust company or bank or bank and trust company located in a Federal Reserve City in the State of Texas, in good standing, having a cumulative capital, surplus and undivided profits and reserves of not less than twenty-five million dollars ($25,000,000), if there be such an institution willing, qualified and able to accept the trust upon reasonable and customary terms. Section 8.11. FEES. The Authority will pay or cause to be paid to the Trustee its reasonable fees for its services as Trustee and Paying Agent/Registrar as set forth in the Paying Agent/Registrar Agreement presented to the Board. Section 8.12. NOTICE. Any notice, authorization, request or demand required or permitted to be given hereunder shall be in writing and shall be deemed to have been duly given when mailed by registered or certified mail, postage prepaid addressed as follows: Executive Director Nueces River Authority P.O. Box 349 Uvalde, Texas 78801 2ndDraft2/18/94 25 City Manager City of Corpus Christi P.O. Box 9277 Corpus Christi, Texas 78408 Lorpus Christi National Bank P.O. Box 301 Corpus Christi, Texas 78403 The United States Post Office registered or certified mail receipt showing delivery of the aforesaid shall be conclusive evidence of the date and fact of delivery. Either party may change the address to which notices are to be delivered by giving to the other party not Tess than ten (10) days prior notice thereof. Section 8.13. COMPLETION. Upon the taking of all the actions as described herein by Trustee the Trustee shall have no further obligations or responsibilities to any of the parties hereto or to any other person or persons in connection with this Resolution ARTICLE NINE DEFEASANCE Section 9.1. DEFEASANCE. Any Bond shall be deemed to be paid and no longer outstanding when payment of the principal of, redemption premium, if any, on such Bond, plus interest thereon to the due date thereof (whether such due date be by reason of maturity, upon redemption, or otherwise), either (a) shall have been made or caused to be made in accordance with the terms thereof, or (b) shall have been provided by irrevocably depositing with a Paying Agent, in trust and irrevocably set aside exclusively for such payment (1) money sufficient to make such payment or (2) Federal Securities, as defined hereinafter in this Article, certified by an independent public accounting firm of national reputation to mature as to principal and interest in such amount and at such times as will insure the availability without reinvestment, of sufficient money to make such payment, and all necessary and proper fees, compensation, and expenses of the Paying Agents for the Bonds pertaining to the Bond with respect to which such deposit is made shall have been paid or the payment thereof provided for. At such time as a Bond shall be deemed to be paid hereunder, as aforesaid, it shall no longer be secured by or entitled to the benefits of this Resolution, except for the purposes of any such payment from such money or Federal Securities. Section 9.2. DEFEASANCE BY INVESTMENT IN FEDERAL SECURITIES. The deposit under clause (b) of Section 9.1 shall be deemed a payment of a Bond as aforesaid when proper notice of redemption of such Bond shall have been given in accordance with this Resolution or irrevocable provisions have Ween made for the giving of such notice. Any money so deposited with a Paying Agent/Registrar as provided in this Article may at the 2ndDraft/2/18/94 26 direction of the Authority also be invested in Federal Securities, maturing in the amounts and times as hereinbefore set forth, and all income from all Federal Securities in the hands of a Paying Agent/Registrar pursuant to this Article which is not required for the payment of the DOT.?., the -cdernntinr premium, if any, and interest thereon, with respect to which such money has been so deposited, shall be turned over to the Authority. Section 9.3. FEDERAL SECURITIES. For the purpose of this Article, the term "Federal Securities" shall mean direct obligations of the United States of America, including obligations which are unconditionally guaranteed by the United States of America, and which are noncallable and which at the time of investment are legal investments under the laws of the State of Texas for the money proposed to be invested therein. Section 9.4. USE OF FEDERAL SECURITIES. Notwithstanding any provision of any other Article of this Resolution which may be contrary to the provisions of this Article, all money or Federal Securities set aside and held in trust pursuant to the provisions of this Article for the payment of Bonds, the redemption premium, if any, and interest thereon, shall be applied to and used solely for the payment of the particular Bonds, the redemption premium, if any, and interest thereon, with respect to which such money or Federal Securities have been so set aside in trust. Section 9.5. AMENDMENT AFTER PURCHASE OF FEDERAL SECURITIES. Nctt.'t! ctani:.-' anwt i.;g else-rbere in this Resolution cortaitat.d, :f money or :'Cdera; Se.:rities have ':•ce tlept-r:A:7t5. or set acide with a Paying Agent/Registrar pursua t to this A,;Sc,c for tete payment; of l�ot;ds and such Rosins snall not have in tart been actually paid foil, tit, amendment to the provisions of this Article shall be made without the of the owner of each Bond affected thereby. ARTICLE TEN COVENANTS REGARDING TAX -EXEMPTION Section 10.1. COVENANTS REGARDING TAX -EXEMPTION. The Authority covenants to refrain from any action which would adversely affect, or to take such action to ensure, the treatment of the Bonds as obligations described in section 103 of the Code, the interest on which is not includable in the "gross income" of the holder for purposes of federal income taxation. In furtherance thereof, the Authority covenants as follows: (a) to take any action to assure that no more than 10 percent of the proceeds of the Bonds or the projects financed therewith (less amounts deposited to a reserve fund, if any) are used for any "private business use," as defined in section 141(b)(6) of the Code or, if more than 10 percent of the proceeds or the projects financed therewith are so used, such amounts, whether or not received by the Authority, with respect to such private business use, do not, under the terms of this Order or any underlying arrangement, directly or indirectly, secure or provide for the payment of more than 10 percent of the debt service on the Bonds, in contravention of section 141(b)(2) of the Code; 2ndDraft/2/18/94 27 (b) to take any action to assure that in the event that the "private business use" described in subsection (a) hereof exceeds 5 percent of the proceeds of the Bonds or the projects financed therewith (less amounts deposited into a reserve fund, if any) then the amount in excc.b 5 perc..l: used for a "private business use" which is "related" and not "disproportionate," within the meaning of section 141(b)(3) of me Code, to the governmental use; (c) to take any action to assure that no amount which is greater than the lesser of $5,000,000, or 5 percent of the proceeds of the Bonds (less amounts deposited into a reserve fund, if any) is directly or indirectly used to finance loans to persons, other than state or local governmental units, in contravention of section 141(c) of the Code; (d) to refrain from taking any action which would otherwise result in the Bonds being treated as "private activity bonds" within the meaning of section 141(b) of the Code; (e) to refrain from taking any action that would result in the Bonds being "federally guaranteed" within the meaning of section 149(b) of the Code; (0 to refrain from using any portion of the proceeds of the Bonds, directly or ind_lectlj, to acrn+ire of to icpinee Iamis which were ed,. tli-'rtly or in'iireatly. to acquire investment properi (as defined in c.ec€o,1 14°(b)(2) of the Code) which produces a materially higher ::t:id over the tern cf + e Boads, other than iuvesrment property acquintd with (1) proceeds of the Bonds invested for a reasonable temporary period of 3 years or less or, in the case of a refunding bond, for a period of 30 days or less until such proceeds are needed for the purpose for which the bonds are issued, (2) amounts invested in a bona fide debt service fund, within the meaning of section 1.148-1(b) of the Treasury Regulations, and (3) amounts deposited in any reasonably required reserve or replacement fund to the extent such amounts do not exceed 10 percent of the proceeds of the Bonds; (g) to otherwise restrict the use of the proceeds of the Bonds or amounts treated as proceeds of the Bonds, as may be necessary, so that the Bonds do not otherwise contravene the requirements of section 148 of the Code (relating to arbitrage) and, to the extent applicable, section 149(d) of the Code (relating to advance refundings); (h) to pay to the United States of America at least once during each five-year period (beginning on the date of delivery of the Bonds) an amount that is at least equal to 90 percent of the "Excess Earnings," within the meaning of section 148(0 of 2ndDraft/2/18H4 28 the Code and to pay to the United States of America, not later than 60 days after the Bonds have been paid in full, 100 percent of the amount then required to be paid as a result of Excess Earnings under section 148(f) of the Code; and (i) to maintain such records as will enable the Authority to fulfill its responsibilities under this se zzion and section 148 of the Code and to retain such records for at least six years following the final payment of principal and interest on the Bonds. For purposes of the foregoing, the Authority understands that in the case of a refunding bond, the term proceeds includes transferred proceeds and, for purposes of (a) and (b) above, proceeds of the refunded bonds expended prior to the date of issuance of the Bonds. It is the understanding of the Authority that the covenants contained herein are intended to assure compliance with the Code and any regulations or rulings promulgated by the U.S. Department of the Treasury pursuant thereto. In the event that regulations or rulings are hereafter promulgated which modify or expand provisions of the Code, as applicable to the Bonds, the Authority will not be required to comply with any covenant contained herein to the extent that such failure to comply, in the opinion of nationally -recognized bond counsel, will not adversely affect the exemption from federal income taxation of interest on the Bonds under section 103 of the Code. In the event that regulations or rulings are hereafter promulgated which impose additional requirements which are applicable to the Bonds, the Authority wrens to comply th the adeitiona' reouir.ments to the. Pxtent necessary, ' . *hp opinion of nationally -recd ;, xi bone coup ei, to preserve the exemption from federal income taxation of interest on the Bon'ie Unnc, section 10a o. the Cone. In furtherance of such intention, t..: Authority hereby authorizes and directs the Director of Finance to execute any documents, certificates or reports required by the Code and in make such elections, on behalf of the Authority, which may be permitted by the Code as are consistent with the purpose for the issuance of the Bonds. In order to facilitate compliance with the above covenants (h) and (i), a 'Rebate Fund" is hereby established by the Authority for the sole benefit of the United States of America, and such fund shall not be subject to the claim of any other person, including without limitation the bondholders. The Rebate Fund is established for the additional purpose of compliance with section 148 of the Code. ARTICLE XI MISCELLANEOUS Section 11.1. AMENDMENTS NOT REQUIRING NOTICE OR CONSENT. Without any prior action by or notice to the holders of the Bonds, the Authority may, from time to time, and at any time, amend this Resolution: (1) to add to the covenants and undertakings of the Authority contained in this Resolution such additional covenants and undertakings as may be authorized or permitted by laws; or 2ndDraft/2/18,94 29 (2) to cure any ambiguity, defective or inconsistent provisions of this Resolution and to accomplish any other purposes not inconsistent with the provisions of this Resolution and which shall not impair the security afforded hereby. section 11.2. U'1 HER AMENDMENT PROCEDURES. (a) The holders of Bonds aggregating in principal amount of three-fourths of the aggiegate principal arnc;:nt of iionds and Additional Bonds at the time outstanding (not including in any case any such bonds which may then be held or owned by or for the account of the Authority) shall have the right from time to time to approve an amendment of this Resolution which may be deemed necessary or desirable by the Authority, provided, however, that without the consent of the holders of all of the outstanding Bonds, nothing herein contained shall permit or be construed to permit the amendment of the terms and conditions contained in this Resolution or in the Bonds so as to: (1) Make any change in the maturity of the outstanding Bonds or Additional Bonds; (2) Reduce the rate of interest borne by any of the outstanding Bonds or Additional Bonds; (3) Reduce the amount of the principal payable on the outstanding Bonds or Additional Bowls; (4) Modify the terms of payment of princ pal of or interest on the outstanding Bonds or Additional Bnndc of any of theist, or impose any conditions with respect to such payment; (5) Affect the rights of the holders of less than all of the Bonds or Additional Bonds then outstanding; (6) Change the minimum percentage of the principal amount of Bonds necessary for consent to such amendment. (b) If at any time the Authority shall desire to amend the Resolution under this Section, the Authority shall cause notice of the proposed amendment to be published in a financial newspaper or journal published in the State of Texas, once during each calendar week for at least four successive calendar weeks. Such notice shall briefly set forth the nature of the proposed amendment and shall state that a copy thereof is on file at the places of payment for inspection by all holders of Bonds and Additional Bonds. Such publication is not required, however, if notice in writing is given to each holder of Bonds and Additional Bonds. (c) Whenever at any time not less than thirty days and within one year from the date of the first publication of said notice or other service of written notice the Authority shall receive an instrument or instruments executed by the holders of at least three-fourths in aggregate principal amount of Bonds and Additional Bonds then outstanding, which instrument or instruments shall refer to the proposed amendment described in said notice 2ndDraft/2/18 94 30 and which specifically consent to and approve such amendment in substantially the form of the copy thereof on file with the places of payment, the Authority may adopt the amendatory resolution in substantially the same form. (d) Upon the adoption of any amendatory resolution pursuant to the provisions hereof, the Resolution shall be deemed to be mutat-red in accordance with such amendatory resolution, and the respective rights, duties and obligations under the Resolution of the Authority and all the holders of outstanding Bonds and Additional Bonds shall thereafter be determined, exercised and enforced hereunder, subject in all respects to such amendments. (e) Any consent given by the holder of a Bond pursuant to the provisions of this Section shall be irrevocable for a period of six months from the date of the first publication of the notice provided for in this Section, and shall be conclusive and binding upon all future holders of the same Bond during such period. Such consent may be revoked at any time after six months from the date of the first publication of such notice by the holder who gave such consent, or by a successor in title, by filing notice thereof with the places of payment and the Authority, but such revocation shall not be effective if the holders of three-fourths aggregate principal amount of the Bonds and Additional Bonds outstanding prior to the attempted revocation, consented to and approved the amendment. (f Fnr the pt'rosr- t1:1S Scction, the font of Me hnidino nF_ Bc'zd. by bondholder and the amount and ::umber„ of such Bonds, and the d9te of his holding same may be piov.ided by the affidavit of the person claiming to b:, such holder, or by a certificate executed by any i. st cnrmpaay, oank, oanxer, or any other depository, wherever situated, showing that at the date therein mentioned such person had on deposit with such trust company, bank, banker or other depository, the Bonds described in such certificate. The Authority may conclusively assume that such ownership continues until written notice to the contrary is served upon the Authority. Section 11.3. DAMAGED, MUTILATED, LOST, STOLEN, OR DESTROYED BONDS. (a) Replacement Bonds. In the event any outstanding Bond is damaged, mutilated, lost, stolen, or destroyed, the Paying Agent/Registrar shall cause to be printed, executed, and delivered, a new bond of the same principal amount, maturity, and interest rate, as the damaged, mutilated, lost, stolen, or destroyed Bond, in replacement for such Bond in the manner hereinafter provided. (b) Application for Replacement Bonds. Application for replacement of damaged, mutilated, lost, stolen, or destroyed Bonds shall be made by the registered owner thereof to the Paying Agent/Registrar. In every case of loss, theft, or destruction of a Bond, the registered owner applying for a replacement bond shall furnish to the Authority and to the Paying Agent/Registrar such security or indemnity as may be required by them to save each of them harmless from any loss or damage with respect thereto. Also, in every case of loss, theft, or destruction of a Bond, the registered owner shall furnish to the Authority and to the Paying Agent/Registrar evidence to their satisfaction of the loss, theft, or destruction of such Bond. In every case of damage or mutilation of a Bond, the registered owner shall surrender to the Paying Agent/Registrar for cancellation the Bond so damaged or mutilated. 2ndDraft/2/18/94 31 (c) No Default Occurred. Notwithstanding the foregoing provisions of this Section, in the event any such Bond shall have matured, and no default has occurred which is then continuing in the payment of the principal of, redemption premium, if any, or interest on the Bond. the Authority may authorize the payment of the same (without surrender therccf except in the case of a damaged or mutilated Bond) instead of issuing a replacement Bond, provided security or indemnity is furnished as above provided in this Section. (d) Charge for Issuing Replacement Bonds. Prior to the issuance of any replacement bond, the Paying Agent/Registrar shall charge the registered owner of such Bond with all legal, printing, and other expenses in connection therewith. Every replacement bond issued pursuant to the provisions of this Section by virtue of the fact that any Bond is lost, stolen, or destroyed shall constitute a contractual obligation of the Authority whether or not the lost, stolen, or destroyed Bond shall be found at any time, or be enforceable by anyone, and shall be entitled to all the benefits of this Order equally and proportionately with any and all other Bonds duly issued under this Order. (e) Authority for Issuing Replacement Bonds. In accordance with Section 6 of Vernon's Ann. Tex. Civ. St. Art. 717k-6, this Section 9 of this Order shall constitute authority for the issuance of any such replacement bond without necessity of further action by the governing body of the Authority or any other body or person, and the duty of the replacement of such bonds is hereby authorized and imposed upon the Paying Attend!? and the. Paving Agent/R-gistrnr shall 4'�thc iticaic and deliver such ands ' J v the form and manne5and w^th the effect, as provided in Section 4(a) of this Orde: fel Bawd^ issued in conveisiou and exchange Lot other Bonds. Section 11.4. DIRECTOR AND OFFICER LIABILITY. No recourse under or upon any obligation, covenant or agreement contained in this Resolution, or in any Bond hereby secured, or under any judgment obtained against the Authority, or by the enforcement of any assessment or by any legal or equitable proceeding by virtue of any constitution or statute or otherwise, or under any circumstances, under or independent of this Resolution, shall be had against any director or officer, as such, past, present or future, of the Authority, nor either directly or through the Authority, or through a receiver or trustee in bankruptcy, or otherwise, for the payment for or to the Authority or any receiver thereof, or for or to the holder of any Bond issued hereunder or otherwise, of any sum that may be due and unpaid by the Authority upon any such Bond. Any and all personal liability of every nature, whether at common law or in equity, or by statute or by constitution or otherwise, of any such director or officer, individually or in his official capacity, to respond by reason of an act or omission on his part or otherwise, or for any sum that may remain due and unpaid upon the Bonds hereby secured or any of them, is hereby expressly waived and released by the purchasers and holders of the Bonds as a condition of and consideration for the issuance and sale of such Bonds. Section 11.5. CUSTODY, APPROVAL, AND REGISTRATION OF BONDS; BOND COUNSEL'S OPINION, CUSIP NUMBERS AND CONTINGENT INSURANCE PROVISION, IF OBTAINED. The President of the Board of Directors of the Authority is hereby authorized to have control of the Bonds initially issued and delivered hereunder and all necessary records and proceedings pertaining to the Bonds pending their delivery and 2ndDraft/2/18/94 32 their investigation, examination, and approval by the Attorney General of the State of Texas, and their registration by the Comptroller of Public Accounts of the State of Texas. Upon registration of the Bonds said Comptroller of Public Accounts (or a deputy designated in writing to act for said Cor'ptrollrr) than manuallysign t'.te Comptroller's Registration Certificate attached to such Bonds. and the seal of said Comptroller shall be impressed, or placed in facsimile, on such Certificate. The approving legal opinion of the Authority's Bond Counsel and the assigned CUSIP numbers may, at the option of the Authority, be printed on the Bonds issued and delivered under this Resolution, but neither shall have any legal effect, and shall be solely for the convenience and information of the registered owners of the Bonds. The appropriate schedules from Exhibit A attached hereto may be printed on the Bonds, but errors or omissions in the printing thereof or the numbers therein shall have no effect on the validity of such Bonds. In addition, if bond insurance is obtained, the Bonds may bear an appropriate legend as provided by the insurer. Section 11.6. FURTHER PROCEDURES. The President or Vice President and Secretary of the Board of Directors and the General Manager of the Authority, and all other officers, employees and agents of the Authority, and each of them, shall be and they are hereby expressly authorized, empowered and directed from time to time and at any time to do and perform all such acts and things and to execute, acknowledge and deliver in the name and under the corporate seal and on behalf of the Authority the Letter of Representation with DTC regarding the Book -Entry Only System, the Paying A nn..•t/Ft:r:ernr !gr. emen, thz Paying Agcnt/Regl t,sar and all at; ._.., 7.:s, whetter or not herein mentioned, as may be necessary or d:sirable in order to ea--,-; cur the terms and provisions of thiz Resolution, the fetter of Representation, the Bonds, the sale of the Bonds pursuant to the Land rurchase Agreement and the Official Statement. Notwithstanding anything to the contrary contained herein, while the Bonds are subject to DTC's Book -Entry Only System and to the extent permitted by law, the Letter of Representation is hereby incorporated herein and its provisions shall prevail over any other provisions of this Resolution in the event of conflict. In case any officer whose signature shall appear on any Bond shall cease to be such officer before the delivery of such Bond, such signature shall nevertheless be valid and sufficient for all purposes the same as if such officer had remained in office until such delivery. Section 11.7. PRELIMINARY OFFICIAL STATEMENT. The Preliminary Official Statement dated -, 1994, relating to the Series 1994 Bonds and its distribution by the Underwriters is hereby approved. Section 11.8. DTC LETTER OF REPRESENTATION. The General Manager of the Authority is hereby authorized and directed to enter into a Letter of Representation with DTC with respect to the Bonds to implement the Book -Entry -Only System. The Letter of Representation shall be in substantially the form and substance submitted to the Board at the meeting at which this Resolution is adopted. Section 11.9. PAYING AGENT/REGISTRAR AGREEMENT. The Paying Agent/Registrar Agreement by and between the Authority and the Paying Agent/Registrar, in substantially the form and substance submitted to the Board at the meeting at which this Resolution is adopted is hereby approved and the General Manager of the Authority is 2ndDraft/2/18/94 33 hereby authorized to complete, amend, modify, and execute the Paying Agent/Registrar Agreement. Section /1.10 R} .SC'TSSJON (W TNrflNSLSTE. !'r' B(121 RD ACTIONS. Al! resolutions, orders or other actior° of the Board heretofore adopted, passed or taken inconsistent with this Resolution are hereby rescinded. 2ndDraftt2/18/94 34 PRELIMINARY OFFICIAL STATEMENT DATED FEBRUARY 22, 1994 NEW ISSUE - BOOK -ENTRY -ONLY SYSTEM Ratings: Moody's: " " In the opinion of McCall, Parkhurst & Horton L.L.P., Bond Counsel, interest on the Bonds is, except as set forth under "Tax Matters" herein, excludable from gross income for federal income tax purposes under existing statutes, regulations, published rulings and court decisions on the date of delivery, thereof. See "Tax Matters" for a discussion of collateral federal tax consequences, including a description of alternative minimum tax consequences for corporations. THE AUTHORITY WILL DESIGNATE THE BONDS AS "QUALIFIED TAX-EXEMPT OBLIGATIONS" FOR FINANCIAL INSTITUTIONS $7,800,000 NUECES RIVER AUTHORITY WATER SUPPLY REVENUE CURRENT REFUNDING BONDS, (CITY OF CORPUS CHRISTI, TEXAS PROJECT), SERIES 1994 Dated: February 15, 1994 Due: April 1, as shown below The "Nueces River Authority Water Supply Revenue Current Refunding Bonds (City of Corpus Christi, Texas Project), Series 1994" (the "Bonds") are special obligations of the Nueces River Authority (the "Authority"), a political subdivision of the State of Texas, payable as to principal and interest solely from, and secured solely by, a pledge of and lien on, certain payments (the "Payments Under the Contract") to be made by the City of Corpus Christi, Texas (the "City") pursuant to the Contract between Nueces River Authority and City of Corpus Christi on Nueces River Reclamation Project, Texas (Choke Canyon Reservoir Project), as amended (the "Contract"), between the Authority and the City. The Bonds are also secured by a pledge of the money in all Funds created by the Bond Resolution. Such pledged Payments Under the Contract and money in the Funds are herein referred to as the "Pledged Security." The Bonds are secured on a parity with respect to the Pledged Security with the Authority's currently outstanding revenue bonds issued for the benefit of the City and any revenue bonds hereafter issued by the Authority. The Bonds are payable for the Gross Revenues of the City's Utility Systems and as such are prior and superior to the lien on and pledge of the Net Revenues of the Systems securing the payment of the City's currently outstanding revenue bond indebtedness. The Bonds do not constitute a legal or equitable pledge, charge, lien or encumbrance upon any property of the Authority, except with respect to the Pledged Security, and the owner of a Bond shall never have the right to demand payment of the Bonds from any other sources or properties of the Authority, the City, or the State of Texas (see "Security for the Bonds"). The Authority has no taxing power. Interest on the Bonds will accrue from the dated date as shown above and will be payable on April 1 and October 1 each year, commencing October 1, 1994, and will be calculated on the basis of a 360 -day year of twelve 30 -day months. Interest on the Bonds is payable by check mailed on each interest payment date to the registered owners thereof at their respective addresses as they appear on the books of the paying agent/registrar (the "Paying Agent/Registrar"), initially The Frost National Bank, Corpus Christi, Texas, on the "Record Date" (see "Bond Information"). The principal of all the Bonds shall be payable, upon 009279202 presentation and surrender, at the principal corporate trust office of the Paying Agent/Registrar. The definitive Bonds will be issued only as fully registered obligations in the denomination of $6,000 or any integral multiple thereof. MATURITY SCHEDULE Amount Stated Yield/ Rate Maturity Price $55,000 . % 1995 . % 535,000 _. % 1996 . . % 560,000 _. % 1998 . % 550,000 _.%a 1999 % 590,000 _. % 2000 —. % 630,000 . % 2001 %a 670,000 __ % 2002 _. % 660,000 _% 2003 %a 700,000 _. % 2004 —% 740,000 _. % 2005 —. % 775,000 . % 2006 . —% 815,000 _._% 2007 . % (Accrued Interest from February 15, 1994 to be added.) The Authority reserves the right, at its option, to redeem the Bonds, having stated maturities on and after April 1, 2005, in whole or in part in principal &mounts of $5,000 or any integral multiple thereof, on April 1, 2004, or any date thereafter, at the par value thereof plus accrued interest to the date fixed for redemption. If less than all of a maturity is to be redeemed, the Paying Agent/Registrar shall determine by lot the Bonds, or portions thereof, within such maturity to be redeemed. The Bonds are offered for delivery when, as and if issued and received by the Underwriter, subject to the opinions of the Attorney General of the State of Texas, and McCall, Parkhurst & Horton L.L.P., Dallas, Texas, Bond Counsel for the Authority, as to the validity of the issuance of the Bonds under the Constitution and laws of the State of Texas. Certain matters will be passed upon for the Underwriter by its counsel, Fulbright & Jaworski L.L.P., San Antonio, Texas. Certain legal matters relating to the legality, validity and enforceability of the Contract will be passed upon by the Authority's General Counsel and the City Attorney. It is expected that the Bonds will be available for delivery in definitive form through the services of The Depository Trust Company, New York, New York on or about March _, 1994. M.E. ALLISON & CO., INC. TEXAS COMMERCE BANK NATIONAL ASSOCIATION, as selling agent 0092792.02 -11- For purposes of compliance with Rule 15c2-12 of the Securities Exchange Commission, this document constitutes an official statement of the Authority and the City with respect to the Bonds that has been deemed "final" by the Authority and the City as of its date except for the omission of no more than the information permitted by Rule 15c2-12. No dealer, salesman or any person has been authorized by the Authority, the City, or the Underwriter to give any information or to make any representations, other than the information and representations contained herein, in connection with the offering of the Bonds, and if given or made, such information or representations must not be relied upon as having been authorized by the Authority, the City or the Underwriter. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of, any of the Bonds by any person in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale. Certain information set forth in this Official Statement has been furnished by the Authority and the City 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 by, the Authority, the City, or the Underwriter. The information and expressions of opinion contained 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 any implication that there has been no change in the affairs of the Authority or the City since the date hereof. THE BONDS ARE EXEMPT FROM REGISTRATION WITH THE SECURITIES AND EXCHANGE COMMISSION AND CONSEQUENTLY HAVE NOT BEEN REGISTERED THEREWITH. THE REGISTRATION, QUALIFICATION, OR EXEMPTION OF THE BONDS IN ACCORDANCE WITH APPLICABLE SECURITIES LAW PROVISIONS OF THE JURISDICTIONS IN WHICH THESE SECURITIES HAVE BEEN REGISTERED, QUALIFIED, OR EXEMPTED SHOULD NOT BE REGARDED AS A RECOMMENDATION FOR THE PURCHASE THEREOF. IN CONNECTION WITH THE OFFERING OF THE BONDS, THE UNDERWRITER MAY OVERALLOT OR EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF SUCH BONDS AT A LEVEL ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. 008274202 TABLE OF CONTENTS CITY ADMINISTRATION SELECTED DATA FROM THE OFFICIAL STATEMENT wii- ii INTRODUCTION -1- PLAN OF FINANCING 2 DESCRIPTION OF THE BONDS 4 BOOK -ENTRY -ONLY SYSTEM -7 NUECES RIVER AUTHORITY -9 - CHOKE CANYON PROJECT 10 AUTHORITY'S FINANCIAL STATEMENTS -11- ESTIMATED DEBT SERVICE REQUIREMENTS -12- SUMMARY OF CERTAIN CONTRACTS -13- CONTRACT AMONG UNITED STATES OF AMERICA, CITY OF CORPUS CHRISTI AND NUECES RIVER AUTHORITY (THE FEDERAL CONTRACT) -15- SUMMARY OF CERTAIN PROVISIONS OF THE BOND RESOLUTION 16- ADDITIONAL BONDS - 18 PLEDGE AND FUNDS -19- BOND PROCEEDS AND THE CONSTRUCTION FUND -21- CERTAIN GENERAL COVENANTS -22- AMENDMENT OF RESOLUTION 25 - SYSTEMS INDEBTEDNESS -27- 1994-98 CAPITAL IMPROVEMENTS PROGRAM -28- SYSTEMS FINANCIAL INFORMATION -28- SYSTEM STATISTICS 32- THE COMBINED SYSTEM - 38 SYSTEM RATES SYSTEM CAPITAL IMPROVEMENT PLAN -5 LEGAL MATTERS -511- - LITIGATION -52- LITIGATION AND REGULATION RELATING TO THE CITY -52 -53- TAX MATTERS REGISTRATION AND QUALIFICATION OF BONDS FOR SALE -58- THE BONDS AS LEGAL INVESTMENTS IN TEXAS -58 RATINGS -58- GENERAL INFORMATION -59- UNDERWRITING -59- OTHER MATTERS -59- CERTIFICATION OF THE OFFICIAL STATEMENT -60- USE OF INFORMATION IN OFFICIAL STATEMENT -60- FINANCIAL ADVISOR -60- MISCELLANEOUS -60- -61- CONTRACT BETWEEN CORPUS CHRISTI AND NUECES RIVER AUTHORITY .... Appendix A CERTAIN AUDITED FINANCIAL STATEMENT Appendix B CITY OF CORPUS CHRISTI DEMOGRAPHIC AND ECONOMIC DATA Appendix C FORM OF OPINION OF BOND COUNSEL Appendix D 0092742.02 -iv- 0092742.02 -r City of Corpus Christi, Texas 1201 Leopard Corpus Christi, Texas 78401 (512) 880-3200 CITY ADMINISTRATION ELECTED OFFICIALS Mayor Mary Rhodes Council Members Betty Jean Longoria, District 1 Cezar Galindo, District 2 David Noyola, District 3 Dr. David McNichols, District 4 Melody Cooper, District 5 Edward A. Martin, At Large Clif Moss, At Large Dr. Jack Best, At Large CERTAIN APPOINTED OFFICIALS Name Position Juan Garza Bill Hennings Vacant W. Thomas Utter Jorge G. Garza, CPA Rosie G. Vela, CPA James Bray Armando Chapa Bond Counsel Paying Agent Financial Advisors City Manager Deputy City Manager Group Manager, Public Works and Utilities Group Manager, Development Services Group Manager, Administrative Services Director of Finance City Attorney City Secretary CONSULTANTS AND ADVISORS McCall, Parkhurst & Horton L.L.P, Dallas, Texas The Frost National Bank Corpus Christi, Texas M. E. Allison & Co., Inc., San Antonio, Texas -v- SELECTED DATA FROM THE OFFICIAL STATEMENT The selected data on this page is subject in all respects to the more complete information and definitions contained or incorporated in this Official Statement. The offering of the Bonds to potential investors is made only by means of this entire Official Statement. No person is authorized to detach this data page from this Official Statement or to otherwise use it without the entire Official Statement. This data page was prepared to present the purchasers of the Bonds information concerning the Bonds, the revenues pledged to payment of the Bonds, the description of the revenue base and other pertinent data, all as more fully described herein. The Issuer... The Nueces River Authority (the "Authority") is a conservation and reclamation district, a body politic and corporate and a governmental agency of the State of Texas, created in 1935 and existing under the Texas Constitution and laws of the State of Texas including, particularly, Article XVI, Section 59, of the Texas Constitution and Texas Revised Civil Statutes Annotated Article 8280-115, as amended. The Authority has the power and the responsibility to develop and conserve the water resources of the Nueces River Basin, consisting of 22 counties which lie wholly or partially within the basin, a total of approximately 16,000 square miles. The Authority is governed by a board of twenty-one directors appointed by the Governor of the State of Texas with the advice and consent of the Texas Senate. Members serve for a term of six years and until a successor is appointed and qualified. The City... The City of Corpus Christi, Texas (the "City") is a political subdivision located in Nueces County operating as a home -rule city under the laws of the State of Texas and a charter approved by the voters in January, 19 The City operates under the Council/Manager form of government. The Council formulates operating policies for the City while the City Manager is the Chief Administrative Officer. The Bonds... Security for the Bonds... 0092742.02 The Bonds are being issued in the principal amount of $7,800,000 pursuant to the authority set forth in Texas Revised Civil Statutes Annotated Article 717k, as amended, and a resolution to be adopted by the Board of Directors of the Authority. (See "Description of the Bonds"). The Bonds constitute special obligations of the Authority payable solely from certain payments (the "Payments Under the Contract") to be made by the City of Corpus Christi, Texas pursuant to the Contract between the Nueces River Authority and City of Corpus -vi- Christi on Nueces River Reclamation Project, Texas (Choke Canyon Reservoir Project), as amended (the "Contract"), between the Authority and the City. The Bonds are also secured by a pledge of the money in all Funds created by the Bond Resolution. Such pledged payments under the Contract and money in the funds are herein referred to as the "Pledged Security." (See "Security For The Bonds"). Optional Redemption... The Authority reserves the right, at its option, to redeem the Bonds, having stated maturities on and after April 1, 2005, in whole or in part in principal amounts of $5,000 or any integral multiple thereof, on April 1, 2004, or any date thereafter, at the par value thereof plus accrued interest to the date fixed for redemption. (See "Description of The Bonds - Optional Redemption".) Tax Exemption... In the opinion of Bond Counsel, the interest will be excludable from gross income for federal income tax purposes under existing law, subject to matters described under "Tax Matters" herein, including the alternative minimum tax on corporations. Qualified Tax -Exempt Obligations... The Authority will designate the Bonds as "Qualified Tax -Exempt Obligations" for financial institutions. (See "Tax Matters - Qualified Tax -Exempt Obligations".) Future Bond Sales... Except as described in this Official Statement, neither the Authority nor the City anticipate the issuance of additional debt during the next six months. Use of Bond Delivery... Payment Record... 0092742.02 7- Proceeds from the sale of the Bonds will be used to advance refund for savings certain maturities of the currently outstanding Series 1979 Bonds and to pay the costs of issuance of the Bonds. (See "Plan of Financing --Purpose"). When issued, anticipated on or about March , 1994. Neither the Authority nor the City has ever defaulted on the payment of their bonded indebtedness. -vii- [This page intentionally left blank] 0092742.02 OFFICIAL STATEMENT $7,800,000 NUECES RIVER AUTHORITY WATER SUPPLY REVENUE CURRENT REFUNDING BONDS, (City of Corpus Christi, Texas Project) SERIES 1994 INTRODUCTION The purpose of this Official Statement, which includes the cover page and appendices hereto, is to set forth information concerning the Nueces River Authority (the "Authority"), the City of Corpus Christi, Texas (the "City"), and the Authority's Water Supply Revenue Current Refunding Bonds (City of Corpus Christi, Texas Project), Series 1994 (the "Bonds"). The Bonds are being issued pursuant to a resolution (the "Resolution") to be adopted by the Board of Directors of the Authority (the "Board of Directors") pursuant to the authority set forth in Texas Revised Civil Statutes Annotated Article 717k, as amended. Capitalized terms not defined elsewhere and used herein have the meanings assigned to such terms in the Resolution which are set forth herein and incorporated by reference for all purposes. There follows in this Official Statement brief descriptions of the Bonds, the Authority, the City, the Contract between Nueces River Authority and City of Corpus Christi on Nueces River Reclamation Project, Texas (Choke Canyon Reservoir Project), as amended (the "Contract"), the Resolution and the Authority's Utility Systems (the "Systems"). All descriptions of documents contained herein are only summaries and are qualified in their entirety by reference to each such document. Copies of such documents may be obtained from the Authority's Financial Advisor, First Southwest Company, 1850 One Riverwalk Place, San Antonio, Texas 78205, upon payment of reasonable copying, handling, and delivery charges. This Official Statement speaks only as to its date, and the information contained herein is subject to change. Copies of the Final Official Statement and Escrow Agreement will be deposited with the Municipal Securities Rulemaking Board, 1818 N. Street, Northwest, Suite 800, Washington, D.C. 20036-2491. 0092742.02 -I- PLAN OF FINANCING Purpose The Authority and the City initially entered into the Contract as of May 27, 1976 pursuant to which the Authority issued $13,000,000 of obligations designated as "Nueces River Authority Water Supply Revenue Bonds, Series 1979 (City of Corpus Christi, Texas Project)" (the "Series 1979 Bonds") for the purpose of constructing the Choke Canyon Project. See "Choke Canyon Project" herein. The Bonds are being issued as additional parity bonds with the Series 1979 Bonds which will remain outstanding after the refunding is accomplished by the Bonds. As used herein, the term "Bonds" shall mean collectively (after the issuance of the Bonds) the outstanding Series 1979 Bonds and the Bonds. The Bonds are being issued to refund, in advance of their maturity, those Series 1979 Bonds which mature on April 1 in the years 1996 through 2007, which are presently outstanding in the principal amount of $7,450,000. The bonds being refunded in advance of their maturity are collectively known as the "Refunded Bonds." The refunding of the Refunded Bonds produces a present value debt service savings. Refunded Bonds The Resolution will provide that, net of financing expenses, underwriting discount and accrued interest, the proceeds from the sale of the Bonds win be held pursuant to the terms of an Escrow Agreement (die "Escrow Agent") by and between the Authority and the Corpus Christi National Bank, Corpus Christi, Texas (the "Escrow Agent"), in an escrow account (the "Escrow Fund") and used to purchase direct obligations of the United States of America (the "Federal Securities"). In accordance with the terms of the Escrow Agreement, the Escrow Fund is irrevocably pledged to the payment of the principal of and interest on the Refunded Bonds. By the deposit of the Federal Securities with the Escrow Agent pursuant to the Escrow Agreement, the Authority will have effected the defeasance of the Refunded Bonds. The Refunded Bonds will cease to be payable from the Payments Under the Contract (hereinafter defined) but will be payable solely from the principal of and interest on the Federal Securities and cash held for such purpose by the Escrow Agent, and the Refunded Bonds will not be included in or considered to be outstanding obligations of the Authority for any purpose. Simultaneously with the issuance of the Bonds, the Authority will give irrevocable instructions to provide notice to the owners of the Refunded Bonds that the Refunded Bonds will be redeemed prior to stated maturity on the first optional redemption date, on which date money will be made available to redeem the Refunded Bonds from money held under the Escrow Agreement. 0092792.02 -2- Sources and Uses of Funds The proceeds from the sale of the Bonds, together with Funds provided by the Authority, will be applied approximately as follows: Sources of Funds: Principal Amount of the Bonds $ Less: Original Issue Discount Accrued Interest Authority Contribution Total Available Funds Uses of Funds: Deposit to the Escrow Fund Costs of Issuance Underwriter's Discount Bond Insurance Deposit to Interest and Sinking Fund Total Application of Funds [The remainder of this page intentionally left blank] 0092742.02 -3- r DESCRIPTION OF THE BONDS General The Bonds are dated February 15, 1994. Interest on the Bonds will be calculated on the basis of a 360 -day year composed of twelve 30 -day months, will accrue from February 15, 1994, and is payable semiannually on April 1 and October 1 of each year commencing October 1, 1994. Principal is payable upon presentation and surrender at the principal corporate trust office of the Paying Agent/Registrar (hereinafter defined). The Bonds are stated to mature on April 1 in the years and in the principal amounts set forth on the cover page hereof. Interest on the Bonds is payable by check mailed on or before each Interest Payment Date by the Paying Agent/Registrar to the registered owner at the last known address as it appears on the Paying Agent/Registrar's books on the record date (the "Record Date") which, for the interest payable on any Interest Payment Date, is the fifteenth day of the month next preceding such Interest Payment Date. The Bonds are issued only as fully registered obligations in the denomination of $5,000 or any integral multiple thereof. If interest on any bond is not paid on any Interest Payment Date and continues unpaid for thirty days thereafter, the Paying Agent/Registrar shall establish a new record date for the payment of such interest, to be known as a Special Record Date, when funds to make such interest payment are received from or on behalf of the Authority. Such Special Record Date shall be fifteen days prior to the date fixed for payment of such past due interest, and notice of the date of payment and the Special Record Date shall be sent by United States mad, first class, postage prepaid, not later than five days prior to the Special Record Date, to each Owner of an affected bond. If the date for the payment of the principal of or interest on the Bonds shall not be a "Business Day," i.e., a Saturday, Sunday, a legal holiday or a day on which the Paying Agent/Registrar is authorized by law or executive order to remain closed, then the date for such payment shall be the next succeeding Business Day, and payment on such date shall have the same force and effect as if made on the original date payment was due. Security The principal of and interest on the Bonds shall be paid from and secured by a first lien on and pledge of the Payments Under the Contract and the holders of the Bonds shall never have the right to demand payment out of any funds of the Authority. The City is unconditionally required to pay the Trustee for the account of the Authority amounts sufficient to pay the principal of and interest on the Bonds and all other payments required of the City by the Resolution regardless of whether or not the Authority actually provides such water supply or whether or not the City actually receives and uses such water. (See Summary of Certain Contracts). Holders of the Bonds are entitled to rely on this regardless of any other contracts or agreements between the 0092742.02 -4- City and the Authority or any other party. The payments by the City to the Trustee will be made by the City solely from the Gross Revenues of the City's Systems as an maintenance and operating expense of such Systems. Accordingly, the payment of the Debt Service on the Bonds is prior and superior to the lien on and pledge of the Net Revenues of the Systems securing the payment of the City's currently outstanding revenue bond indebtedness. The Bonds will be special revenue obligations of the Authority payable solely from payments received from the City, and the Authority shall never have the right to demand payment of the amounts due from the City from funds raised or to be raised from taxation by the City. Reserve Fund From the proceeds of the Bonds, if any, and from the proceeds of any Additional Bonds, there shall be deposited into the Reserve Fund an amount equal to the maximum amount required to pay the interest on and the principal of all outstanding Bonds as such interest becomes due and the principal thereof matures in any future Fiscal Year. Should the amount on deposit in said Fund ever be less than required, the Authority shall replace any deficiency therein in not more than ten (10) equal installments by making transfers in the necessary amounts into said Fund on or before each March 25th and September 25th of the Fiscal Year following the Fiscal Year in which the deficiency occurred. Money in the Reserve Fund shall be used to pay the last of the Bonds outstanding. Initial and Successor Paying Agent/Registrar In the Resolution, the Authority has appointed the Corpus Christi National Bank, Corpus Christi, Texas, to be the initial paying agent/registrar (the "Paying Agent/Registrar") for the Bonds. Provision is made in the Resolution for replacement of the Paying Agent/Registrar. If the Paying Agent/Registrar is replaced by the Authority, the new Paying Agent/Registrar shall accept the previous Paying Agent/Registrar's records and act in the same capacity as the previous Paying Agent/Registrar. Any Paying Agent/Registrar selected by the Authority shall be a legally qualified bank, trust company, financial institution or other agency which may act as Paying Agent/Registrar. Successor Paying Agent/Registrars, if any, shall be determined by the Authority. Registration, Transfer and Exchange of the Bonds The Bonds may be transferred, registered and assigned only on the regis&Mon books of the Paying Agent/Registrar, and such registration and transfer shall be without expense or service charge to the owner, except for any tax or other governmental charges required to be paid with respect to such registration and transfer. A bond may be assigned by the execution of an assignment form on the Bonds or by other instrument of transfer and assignment acceptable to the Paying Agent/Registrar. A Bond or Bonds will be delivered by the Paying Agent/Registrar in lieu of the bond being 0092792.02 -5- transferred or exchanged at the principal corporate trust office of the Paying Agent/Registrar. To the extent possible, new Bonds issued in an exchange or transfer of the Bonds will be delivered to the registered owner or assignee of the owner in not more than three business days after the receipt of the Bonds to be canceled in the exchange or transfer and the written instrument of transfer or request for exchange duly executed by the owner or his duly authorized agent, in form satisfactory to the Paying Agent/Registrar. New Bonds registered and delivered in an exchange or transfer shall be in denominations of $5,000 or any integral multiple thereof for any one maturity, shall specify the same maturity date and be for a like aggregate principal amount as the Bond or Bonds surrendered for exchange or transfer. Replacement Bonds In case any Bond shall be mutilated, lost or stolen, the Paying Agent/Registrar may authenticate and deliver a replacement bond of like maturity date, interest rate and principal amount and bearing a number not contemporaneously outstanding, in exchange and substitution for such mutilated Bond, or in lieu of and in substitution for such destroyed, lost or stolen Bond, only upon (i) the filing by the Owner thereof with the Authority and the Paying Agent/Registrar of satisfactory evidence of the destruction, loss or diet of such Bond and (ii) the furnishing of indemnification in an amount satisfactory to the Authority and the Paying Agent/Registrar to hold them harmless. AH expenses and charges associated with such indemnity and with the preparation, execution and delivery of a replacement Bond (including any tax or other governmental charge imposed) shall be borne by the Owner of the mutilated, lost or stolen Bond. Optional Redemption The Authority reserves the right, at its option, to redeem the Bonds maturing in the years 2005 through 2007 in whole or in part in principal amounts of $5,000 or any integral multiple thereof, on April 1, 2004, or any date thereafter, at the par value thereof plus accrued interest to the date fixed for redemption. If less then all of the Bonds are to be redeemed, the Authority shall determine the maturity or maturities to be redeemed, and if less than all Bonds of a particular maturity are to be redeemed, the Bonds within such maturity shall be selected by the Paying Agent/Registrar at random and by lot. If a Bond (or any portion of the principal sum thereof) shall have been called for redemption and notice of such redemption shall have been given, such Bond (or the principal amount thereof to be redeemed) shall become due and payable on such redemption date and interest thereon sham cease to accrue from and after the redemption date provided funds for the payment of the redemption price and accrued interest thereon are held by the Paying Agent/Registrar on the redemption date. Notice of redemption shall be given by the Paying Agent/Registrar at least thirty days prior to the date fixed for redemption by sending written notice by first class mail to the Owner of each Bond to be redeemed at the address shown on the books of the Paying Agent/Registrar. When the Bonds have been catted for redemption and due 0092742.02 -6- provision has been made to redeem the Bonds, then they shall no longer be regarded as outstanding except for the purpose of receiving payment from the funds so provided for redemption, and no additional interest shall accrue on the Bonds after the redemption date. Remedies in the Event of Default The Resolution provides that in the event of default in the payment of the Bonds, the Owners of the Bonds shall be entitled to a writ of mandamus compelling the Authority and its officers to observe and perform the covenants and obligations of the Authority under the Resolution, but provides no other security for the payment of the Bonds, provides no express remedies, other than civil suit or mandamus, in the event of default, makes no provision for acceleration of maturity of the Bonds in the event of default, and does not provide for a trustee to protect the lights of the bondholders. Although an Owner could presumably obtain a judgment against the Authority in the event there should be a default in the payment of principal or interest on the Bonds, such judgment could not be satisfied by execution against any property of the Authority other than the revenues pledged to the payment of the Bonds. An Owner could, in the event of default, seek relief through a mandamus, but such remedy may have to be enforced on a periodic basis. The enforcement of a claim for payment of principal of or interest on the Bonds would be subject to the applicable provisions of the federal bankruptcy laws and to any other similar laws affecting the rights of creditors of political subdivisions generally. BOOK -ENTRY -ONLY SYSTEM The following information has been provided by DTC for use in disclosure documents: The Depository Trust Company ("DTC"), New York, New York, will act as securities depository for the Bonds. The Bonds will be issued as fully -registered securities registered in the name of Cede & Co. (DTC's partnership nominee). One fully -registered certificate will be issued for each maturity of the Bonds in the aggregate principal amount of such maturity or maturity amount, 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 "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds securities that its participants ("Direct Participants") deposit with DTC. DTC also facilitates the settlement among Direct Participants of securities transactions, such as transfers and pledges, in deposited securities through electronic computerized book -entry changes in Direct Participants' accounts, thereby eliminating the need for 0092742.02 -7- physical movement of securities certificates. Direct Participants include securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is owned by a number of its Direct Participants and by the New York Stock Exchange, Inc., the American Stock Exchange, Inc., 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 ("Indirect Participants"). The Rules applicable to DTC and its participants are on file with the Securities and Exchange Commission. Purchases of Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC's records. The ownership interest of each actual purchaser of the Bonds ("Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase, but Beneficial Owners are expected to receive written confirmations 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 interest in the Bonds are to be accomplished by entries made on the books of Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the Bonds, except in the event that use of the book -entry system for the Bonds is discontinued. To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co. The deposit of Bonds with DTC and their registration in the name of Cede & Co. effect no change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC's records reflect only the identity of the Direct Participants to whose accounts such 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 shall be sent to Cede & Co. If less than all of the Bonds within an issue are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. Neither DTC nor Cede & Co. will consent or vote with respect to the 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 0092742.02 -8- voting rights to those Direct Participants to whose accounts the Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Principal and interest payments on the Bonds will be made to DTC. DTC's practice is to credit Direct Participants' accounts on payable date in accordance with their respective holdings shown on DTC's records unless DTC has reason to believe that it will not receive payment on payable date. Payments by Direct or Indirect Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Direct or Indirect Participant and not of DTC, the Paying Agent/Registrar or the City, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal and interest to DTC is the responsibility of the City, disbursement of such payments to Direct Participants shall be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners shall be the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as securities depository with respect to the Bonds at any time by giving reasonable notice to the City. Under such circumstances, in the event that a successor securities depository is not obtained, Bonds are required to be printed and delivered. The City may decide to discontinue use of the system of book -entry transfers through DTC (or a successor securities depository). In that event, Bonds will be printed and delivered. Information concerning DTC and the Book -Entry -Only System has been obtained from DTC and is not guaranteed as to accuracy or completeness by, and is not to be construed as a representation by the City or the Underwriters. Use of Certain Terms in Other Sections of this Official Statement. In reading this Official Statement it should be understood that while the Bonds are in the Book - Entry -Only System, references in other sections of this Official Statement to registered owners should be read to include the person for which the Direct or Indirect Participant acquires an interest in the Bonds, but (i) all rights of ownership must be exercised through DTC and the Book -Entry -Only System, and (ii) except as described above, notices that are to be given to registered owners under the Order will be given only to DTC. NUECES RIVER AUTHORITY The Authority is a conservation and reclamation district, a body politic and corporate and a governmental agency of the State of Texas, created in 1935 and existing under the Texas Constitution and laws of the State of Texas including, particularly, Article XVI, Section 59, of the Texas Constitution and the Nueces River Authority Act 0092742.02 -9- (formerly complied as Article 8280-115, Texas Revised Civil Statutes, as amended). The Authority is governed by a board of twenty-one directors appointed by the Governor of the State of Texas. Each director serves a six-year term and until a successor is appointed and qualified. The members' terms are staggered, with one-third of the directors taking office on February 1st of each odd -numbered year. The present directors, titles, and terms are listed below: Name Joseph E. Gardner, Jr., CPA Robert Wagner Dudley Q. Braly, D.D.S. Bruce T. Foster George A. Finley, III Mary B. Autry Madge Elizabeth Belcher Margaret Bowman Cleo Bustamante, Jr. Lucinda J. Garcia Susan C. Griffith Robert D. Johanson Ted Jones Bob Mullen Mary Melissa Ramos Alvaro Saenz, CPA Celina Solis Patricia H. Sugarek Paula S. Waddle Janna Whatley Williams Alfredo Zamora, Jr. Con Mims Position President First Vice President Second Vice President Secretary -Treasurer Executive Committee Member -at -Large Director Director Director Director Director Director Director Director Director Director Director Director Director Director Director Director Executive Director Residence Corpus Christi, Texas Crystal City, Texas Beeville, Texas Hondo, Texas Corpus Christi, Texas Pipe Creek, Texas Brackettville, Texas Spofford, Texas Carrizo Springs, Texas Alice, Texas Uvalde, Texas Three Rivers, Texas Ingleside, Texas Alice, Texas Floresville, Texas Corpus Christi, Texas San Diego, Texas Skidmore, Texas Corpus Christi, Texas Odem, Texas Cotulla, Texas Uvalde, Texas The Authority was established to develop, conserve and protect the water resources within its service area, to aid in the prevention of damage to persons or property by the and their tributaries, to maintain a water quality program to protect such from serious degradation, and to aid in the prevent of flooding within Counties. 0092742.02 CHOKE CANYON PROJECT [to be added] -10- 0092742.02 AUTHORITY'S FINANCIAL STATEMENTS [to be added] -11- ESTIMATED DEBT SERVICE REQUIREMENTS The Bonds Year Ending Outstanding Grand Total 7-31 Debt prvice Principal Interest Total Debt Service 1994 $1,011,075 $0 $0 $233,000 $1,010,788 1995 985,075 55,000 367,093 422,093 940,593 1996 1,009,075 535,000 337,315 872,315 964,815 1997 979,825 520,000 319,660 839,660 932,160 1998 1,000,575 560,000 300,940 860,940 953,440 1999 968,075 550,000 279,660 829,660 922,160 2000 985,575 590,000 257,660 847,660 940,160 2001 1,000,650 630,000 232,880 862,880 955,380 2002 1,014,650 670,000 205,475 875,476 967,975 2003 975,000 660,000 175,660 835,660 928,160 2004 984,700 700,000 145,630 845,630 938,130 2005 991,300 740,000 113,080 853,080 945,580 2006 994,800 775,000 77,930 852,930 945,430 2007 995,200 815,000 40,343 855,343 947,843 2008 992,500 0 0 0 992,500 2009 997,500 0 0 0 997,500 Total $4,396,287 $7,800,000 $2,853,325 $10,886,325 $15,282,613 Excludes the Refunded Bonds. 0092742.02 -12- SUMMARY OF CERTAIN CONTRACTS NUECES RIVER AUTHORITY AND CITY OF CORPUS CHRISTI. On May 27, 1976, the Authority and the City entered into a contract, which among other things, provided that the Authority and the City (Local Sponsors) would enter into a contract with the United States of America acting through the Bureau of Reclamation to construct the Project. The contract with the Bureau (The Federal Contract) was executed on June 30, 1976 and, as supplemented, among other things, provides that the City is obligated to furnish part of the funds required for advance payments for construction of the Municipal and Industrial Water Supply portion of the Project, and the Authority will issue its Revenue Bonds to provide the additional funds for the balance of the required advance payments. The City is obligated to pay the Trustee for the account of the Authority amounts sufficient to pay the principal of and interest on the Bonds, and all other payments required by the Bond Resolution. Payments by the City to the Trustee are to be made regardless of whether or not the Authority actually provides such water, or whether or not the City actually uses and receives such water. Holders of the Bonds are entitled to rely on this regardless of any other contracts or agreements by the Authority and the City, or any other parties. The payments by the City to the Trustee shall be made by the City from the revenues of the City's Waterworks System as an Operating Expense of such System. Parties to the contract agree that as between themselves water permits related to the Project, including the right to impound water in the Project's reservoir and the uses therefrom for any purpose, shall be owned in perpetuity by the City and the Authority as tenants in common, with the City owning and holding an undivided 80% interest therein and the Authority owning and holding an undivided 20%. For services rendered and to be rendered by the Authority during the preoperating phase, the City will pay the Authority the following amounts: 1976 $25,000, 1977 $25,000, 1978 $35,000, 1979 $35,000, 1980 $40,000, increasing $5,000 per year until the end of the preoperating period. Amounts in excess of $40,000 per annum will only be due if they are specifically requested by the Authority's Board of Directors and if the Board certifies that the amount in excess of $40,000 is necessary for operating expenditures of the Authority, but such total payment shall not exceed $100,000. 1. SUPPORTING SERVICES (a) The contract recognizes that the Authority has heretofore rendered special services and will continue to do so during the life of the Project in water resource and water quality planning for the entire Nueces River Basin, and also in assisting in financing the Project, all of which are of direct benefit to the City, its inhabitants and water customers. (b) In consideration for such services and for the Authority's 20% undivided interest in the Project water, the City agrees to pay the Authority during the operating phase the greater of the following: 0092742.02 -13- L., (1) The sum of $100,000 per calendar year without any escalation for cost of living or otherwise, or; (2) $1.00 per million gallons of water for all raw water sold or used each calendar year for municipal and industrial purposes from the Project and Lake Corpus Christi including raw water used by the City but excluding any water released for the bays and estuaries and any other water released to the stream but not sold; the rate of $1.00 per million gallons of water shall be adjusted each calendar year by an amount equal in percentage to the percentage rise in the U. S. Consumer Price Index (or the cost -of -living index which in the future may replace or supersede the U. S. Consumer Price Index) in the calendar year in question, with the Consumer Price Index for 1976 being the Index on which said adjustments shall be based. The Authority may use the income from such payments for any lawful purpose as the Authority may determine, including without limitation the general operating and administrative expenses of the Authority. 2. OPERATION OF PROJECT The City shall be responsible for the care, operation, and maintenance of the Project and any additional facilities unless responsibility therefor is transferred to the Authority by amendment to this Contract. The care, operation, and maintenance of the Project and additional facilities shall be carried out in compliance with the applicable requirements of the United States, the Commission, and other governmental agencies having jurisdiction, and in compliance with the requirements of the Federal Contract and this Contract. The timing and rate of diverting, releasing or taking Project Water for any purpose shall be controlled and directed by the City. (The City operates and maintains the Wesley Seale Dam.) 3. WATER SALES For the life of the Project, the City shall have the right to dispose of all of the water produced by the Project whether operated as an individual unit or in system with Lake Corpus Christi. All water sales shall be contracted by the City; provided, however, if future circumstances warrant, the parties may, by separate mutual agreement, establish conditions and procedures under which the Authority may contract for the sale of water. 4. RATES The City covenants it will fix, charge and collect rates for sale of water in such amounts as will produce revenues sufficient to provide (1) for making all payments 0092742.02 -14- required to be made by the City under the contract and (2) for making payment of other costs of operating and maintaining the waterworks system, and (3) for making payment of principal and interest on all bonds heretofore or hereafter issued by the City and payable from the net revenues of such system. CONTRACT AMONG UNITED STATES OF AMERICA, CITY OF CORPUS CHRISTI AND NUECES RIVER AUTHORITY (THE FEDERAL CONTRACT) The Reclamation Development Act of 1974 (Public Law 93-493, Sections 1001-1005), 88 Stat. 1486, 1496-1497 (1974), authorized construction, operation and maintenance of Nueces River Project, also known as Choke Canyon Project. Construction of the Project will be financed jointly between United States, the City of Corpus Christi, and Nueces River Authority. The City of Corpus Christi and Nueces River Authority are the Local Sponsors. Advances for part of the reimbursable costs are payable to United States during the construction period. The City of Corpus Christi has heretofore paid $6,737,000 and will pay $4,542,517 more from funds on hand. Under the contract between the Authority and the City of Corpus Christi, the Authority will issue its revenue bonds (The Bonds) to provide funds for the payment of the remainder of such advance costs: The City agrees to pay the remaining reimbursable project construction costs, and the principal of and interest on the Authority's bonds. The payments due under provisions of this contract shall be secured by a pledge of: (1) The revenues of the City's waterworks system remaining after paying all expenses of 0 & M of said system, including payments made to the Authority by the City under terms of agreement between Contractors executed May 27, 1976, as amended, all debt service, reserve, and other requirements in connection with the City's Waterworks System's revenue bonds now or hereafter outstanding; however, the City shall not be required to raise funds through taxation to meet its obligations under this contract; and (2) The net revenues, if any, from the sale of Project water by the parties hereto outside the City's waterworks system. The payment of all charges becoming due hereunder to the United States is a condition precedent to receiving benefits under this contract. No water will be made available through Project facilities during any period in which arrearages exist in the advance payment of any 0 & M charges due the United States or payments are in arrears for more than 12 months on any construction charges due the United States. 0092742.02 -15- The remaining reimbursable costs are approximately 65.30% of total Project costs (excluding $657,000 for Archeology), allocated as follows: Municipal and Industrial Water Supply Allocation 69.195%, Recreation Allocation 27.553%, and Fish and Wildlife Allocation 3.252%. Reimbursable costs for the Recreation allocation and the Fish & Wildlife allocation are to be made in fifty annual payments commencing on the first year after the year in which such Project works are, as announced by the Contracting Officer, sufficiently completed to permit use of the Project facilities, and water is available, if such notice is given prior to August 1st; otherwise to commence the second year after such notice is given. Repayment of the Recreation allocation and the Fish & Wildlife allocation may be derived entirely from gross revenues received from entrance and user fees or charges collected for the use of such Recreation and Fish & Wildlife facilities of the Project. As an alternative to making payments from entrance and user fees, the Local Sponsors may apply water revenues or any other funds available to meet the scheduled payments. Reimbursable costs for the Municipal and Industrial water supply allocation shall be paid in forty annual installments, the first of which shall become due on August 1st of the year after the year in which the Project works are, as announced by the Contracting Officer, sufficiently complete to permit the use of the Project facilities and water is available, if such notice is given prior to August 1st; otherwise to commence in the second year after such notice is given. SUMMARY OF CERTAIN PROVISIONS OF THE BOND RESOLUTION Definitions "Additional Bonds" - Bonds issued on a parity with the Bonds pursuant to the terms of this Resolution. "Authority" - Nueces River Authority and any other public body or agency at any time succeeding to the property rights, powers and obligations thereof. "Board" or "Board of Directors" - The duly appointed and acting Board of Directors of the Authority. "Bond" or "Bonds" - One or more of the Bonds, as the case may be, authorized by the Resolution. "City" - The City of Corpus Christi, Texas. "City Manager" - The duly appointed and acting City Manager of the City. "Construction Fund" - The fund by that name. 0092742.02 -16- "Contract" - The contract between the Authority and the City dated the 27th day of May, 1976, as heretofore or hereafter supplemented or amended. "Contract Payment Fund" - Nueces River Authority Contract Payments for Debt Service Fund. "Contract Payments for Debt Service" - The payments made by the City to the Authority pursuant to the Contract as are necessary to pay the principal and/or interest on the Bonds, make deposits in the Reserve Fund or other Funds as may be required by the Bond Resolution. "Consulting Engineers" - The independent engineer or engineering firm or corporation employed by the Authority. "Costs of the Project" - Payments to be made by the Authority as advances to the United States pursuant to the Federal Contract. "Executive Director" - The duly appointed and acting Executive Director of the Authority. "Federal Contract" The contract by and among the United States of America, the City and the Authority, dated June 30, 1976, providing for the construction, operation and maintenance of the Project and entitled "Contract Among the United States of America, the City of Corpus Christi, Texas, and the Nueces River Authority, Nueces River Reclamation Project, Texas". "Financial Advisor" - M. E. Allison & Co., Inc., San Antonio, Texas, or its successor. "Fiscal Year" - The twelve month period beginning September I of each calendar year. "Interest and Sinking Fund" - Nueces River Authority Water Supply Revenue Bonds Interest and Sinking Fund. "Investment Securities" - Direct obligations of, or obligations the principal of and the interest on which are unconditionally guaranteed by, the United States Government, Federal Intermediate Credit Banks, Federal Land Banks, Federal National Mortgage Association, Federal Home Loan Banks or Banks for Cooperatives. "Paying Agent", 'Paying Agents" - As the case may be, Corpus Christi National Bank, Corpus Christi, Texas, and/or Mercantile National Bank at Dallas, Dallas, Texas, or their successors. "Project" - All features comprising the Nueces River Reclamation Project, Texas, authorized by the act of Congress approved October 27, 1974 (Public Law 93-493), and constructed or provided under the terms of the Federal Contract; also known as the Choke Canyon Reservoir Project. 0092742.02 -17- "Reserve Fund" - Nueces River Authority Water Supply Revenue Bonds Reserve Fund. "Resolution" - This resolution, as may be amended. "Trustee" - Corpus Christi National Bank, Corpus Christi, Texas, a national banking association organized and existing under the laws of the United States, with its principal office in Corpus Christi, Texas, or its successor. "United States" - The United States of America. ADDITIONAL BONDS One or more series of Bonds, on a parity with and in addition to the Series 1979 Revenue Bonds, may be authenticated and delivered for the purpose of providing additional funds to complete the payment of the Costs of the Project. After the original authentication and delivery of the aggregate authorized principal amount of the Bonds of any such series no additional Bonds shall be authenticated and delivered under such series designation. The Bonds of each series shall be authorized by a resolution or resolutions of the Board of Directors, which shall specify: (1) The authorized principal amount of such series, the designation thereof, and the directions for delivery of the Bonds to or upon the order of the purchasers therein named upon payment of the purchase price therein set forth; (2) The purpose or purposes for which such series of the Bonds is being issued; (3) The date of such series and maturity dates of the Bonds thereof, provided that every maturity date shall fall on April 1; (4) The interest rate or rates of such Bonds, and the interest payment dates therefor, provided that the interest rate shall be identical for all Bonds of like maturity and the interest payment dates shall be semi-annual and shall be identical for all Bonds of a series; (5) The redemption terms, if any, for such Bonds; and (6) Any other matters deemed inconsistent with the provisions of this Re Such Bonds may be authenticated, delivered than the total authorized principal amount of Authority may direct. 0092742.02 T -18- appropriate or necessary and not solution. and paid for in installments of less a series from time to time as the PLEDGE AND FUNDS Pledge. The principal of and interest on the Bonds shall be paid and secured by a first lien on and pledge of the Contract Payments for Debt Service, and said lien and pledge are hereby irrevocably created, and the holders of the Bonds shall never have the right to demand payment thereof out of any other funds of the Authority. Funds. (a) The following special funds of the Authority are hereby created with the Trustee, to -wit: (i) the "Nueces River Authority Contract Payments for Debt Service Fund" (the "Contract Payment Fund"); (ii) the "Nueces River Authority Water Supply Revenue Bonds Interest and Sinking Fund (the "Interest and Sinking Fund"); (iii) the "Nueces River Authority Water Supply Revenue Bonds Reserve Fund" (the "Reserve Fund"). (b) All monies in said Funds are pledged to the purposes expressed herein. (c) All of said Funds created, continued or re-established shall be kept with the Trustee. Contract Payment Fund. All Contract Payments for Debt Service shall be deposited by the Trustee as received into the Contract Payment Fund. Flow of Funds. Monies on deposit in the Contract Payment Fund shall be transferred by the Trustee in the following sequence and order of priority and on the following dates, to -wit: (a) The Trustee shall transfer to the Interest and Sinking Fund - (i) beginning on or before September 25, 1979, and on or before each March 25 and September 25 thereafter such amounts as will be sufficient to pay the interest on the Bonds on the next interest payment date thereof; and (ii) beginning on or before September 25, 1980, and on or before each March 25 and September 25 thereafter through March 25, 2009, one-half of such amounts as will be sufficient to pay the principal of the Bonds maturing on the next April 1. (b) So long as the amount on deposit in the Reserve Fund equals or exceeds a sum equal to the amount required to pay the interest on and principal of the Bonds outstanding during the Fiscal Year such payments are the greatest, no transfers into 0092742.02 -19- the Reserve Fund shall be required under this paragraph (b). However, should the amount on deposit in said Fund ever be less than a sum equal to the amount required. to pay the interest on and principal of the Bonds outstanding during the Fiscal Year such payments are the greatest, the Authority shall replace any deficiency therein in not more than ten (10) equal installments by making transfers in the necessary amounts into said Fund on or before each March 25 and September 25 beginning with the March 25 of the Fiscal Year following the Fiscal Year in which the deficiency occurred. Use of Interest and Sinking Fund. Monies on deposit in the Interest and Sinking Fund each year shall be used solely and exclusively first for the purpose of paying the interest on and principal of the Bonds as such interest comes due and the principal thereof matures; or for the purpose of calling and redeeming Bonds prior to maturity at the applicable redemption price and/or for the purpose of purchasing Bonds in the open market for retirement for prices not greater than the par value plus accrued interest of any Bonds thus purchased or if redeemable prior to stated maturity, not greater than the redemption price on the next succeeding redemption date. No purchases shall be made of the Bonds with monies in the Interest and Sinking Fund which would result in not having sufficient monies therein to pay the Bonds at their stated maturities. The Trustee timely shall make available the funds on deposit therein to the Paying Agents for such purposes. At such time as the monies and investments in the Interest and Sinking Fund and the Reserve Fund shall equal the aggregate principal, amount of the Bonds outstanding and interest thereon to stated maturity dates of such Bonds, or if any of such Bonds shall be redeemable prior to stated maturity, the interest thereon to such redemption dates and any applicable premium, no further transfers shall be made to the Interest and Sinking Fund. Use of Reserve Fund. For so long as any of the Bonds shall be outstanding the Reserve Fund shall be held as a reserve for the payment of principal of and interest on the Bonds when and if monies on deposit in the Interest and Sinking Fund shall not be sufficient for such purpose. If such deficiencies occur, the Trustee shall transfer money on deposit in the Reserve Fund to the Interest and Sinking Fund for the uses specified for that Fund. The monies in the Reserve Fund shall be used to pay the last of the Bonds outstanding. Security and Investment Funds. The Trustee will secure and keep secured, in the manner required by law, all cash funds on deposit with it, and will cause the Paying Agents to secure all funds deposited with them as other trust funds are secured. So long as the Trustee and the Paying Agents are national banks, their compliance with Section 9.10 of Regulation 9 of the Comptroller of the Currency of the United States Treasury shall constitute compliance with this Section. The Trustee shall invest the monies in the Interest and Sinking Fund, the Reserve Fund, and the Contract Payment Fund fully and continuously in Investment Securities or Certificates of Deposit of State and National Banks which shall be lawfully insured or secured by Investment Securities, all in accordance with resolutions from time to time adopted by the Board, approved by the City and delivered to the Trustee. Such investments shall be converted 0092742.02 -20- to cash only at the times monies are needed for payments required by this Resolution. All interest and income on such investments as realized shall be deposited into the Contract Payment Fund. BOND PROCEEDS AND THE CONSTRUCTION FUND Construction Fund. A special fund is hereby established with the Trustee to be entitled the "Construction Fund". Bond Proceeds. The proceeds of the Bonds shall be received by the Trustee, and shall be deposited or paid out as follows: (1) to the credit of the Interest and Sinking Fund, the interest accrued, if any, on the Bonds to date of delivery to the purchasers thereof, (2) to the Reserve Fund, an amount equal to the maximum amount to pay the interest on and principal of all outstanding Bonds in any Fiscal Year, (3) to the Authority for payment of the costs of issuance of the Series 1979 Bonds, and (4) to the Construction Fund, the balance. Use of Monies. (a) The Authority shall apply monies in the Construction Fund to the Costs of the Project. All payments from the Construction Fund shall be subject to the provisions and restrictions set forth herein, and the Trustee shall not cause or permit to be paid from the Construction Fund any sums except in accordance with such provisions and restrictions. (b) The Trustee shall invest funds held in the Construction Fund in Investment Securities unless otherwise directed by the Board. Such obligations together with the interest thereon, shall be held in and shall at all times be a part of the Construction Fund. Any income derived from and any profit or loss on any such investment of monies on deposit in the Construction Fund shall be credited or debited, as the case may be, to the Construction Fund. Payment on Bonds. Notwithstanding any other provisions herein, to the extent that other monies are not available therefor, amounts in the Construction Fund shall be applied to the payment of principal and interest on the Bonds when due. Disbursements From Construction Fund. Before any monies shall be withdrawn or any payments shall be made from the Construction Fund which directly relate to the physical construction and equipment thereof there shall be filed with and approved by the Trustee - (a) A voucher which may contain any number of items signed by the Executive Director and the City Manager stating in respect of each item to be paid - (1) the item number of the payment; (2) the amount or amounts to be paid; and 0092742.02 -21- (3) the purpose for which the obligation is to be paid; and (b) A certificate signed by the Executive Director and the City Manager and attached to the voucher certifying that the obligations in the stated amounts are owed by the Authority as advances to the United States pursuant to the Federal Contract and that each item thereof is a proper charge against the Construction Fund and has not been paid. If the Trustee shall deter -mine that such voucher and certificate are in the form and contain the information required herein, it shall be authorized to make payment thereof. Completion of the Project. When the Project shall have been completed in accordance with the plans and specifications, and when all amounts due shall have been paid, the Executive Director and the City Manager shall file with the Trustee a certificate so stating, and thereupon the Trustee shall cause the transfer of all monies remaining in the Construction Fund, if any, to the Interest and Sinking Fund. CERTAIN GENERAL COVENANTS Insurance: The Authority will or will cause the City at all times to keep insured with a responsible insurance company or companies, such of the plants, structures, buildings, stations, machinery and equipment of the Project against risks of accidents or casualties against which insurance is usually carried by similar governmental entities operating like properties, and will also maintain or cause the City to maintain insurance against public liability and property damage in a reasonable amount, provided such insurance can be procured at reasonable cost, and maintain workmen's compensation insurance with a responsible insurance company or companies or a state approved workmen's compensation plan or program. However, at any time while any contractor engaged in the construction shall be fully responsible therefore, the Authority shall not be required to carry or cause to be carried any of the foregoing insurance. Review and Inspection of Project Works for Determining Adequacy of Maintenance: The Authority recognizes that the Federal Contract provides that a representative of the United States with a representative of the Authority and the City may, from time to time, review the maintenance of the Project being operated by the Authority and the City to determine the condition of the Project and adequacy of the maintenance program. A report of the review including recommendations, if any, will be prepared by the United States and copies will be furnished to the Authority and the City. If deemed necessary by the United States or the Authority and the City, special inspections of the Project and the books and records being maintained will be made by the United States to ascertain, in the event of any operation and maintenance deficiency, remedial measures required for correction or to assist the Authority and the City in solving specific problems. Any such inspection or audit shall, except in the case of emergency, be made after written notice to the Authority and the City, and the 0092742.02 r -22- actual cost thereof shall be paid by the Authority and the City to the United States. Should this arrangement for reviews and inspections be terminated for any reason, while any of the Bonds is outstanding, the Authority will employ or cause to be employed, a Consulting Engineer to give all necessary or desirable advice and recommendations to the end that the Project shall be operated and maintained in the most efficient and satisfactory manner. Further, the Authority shall cause the Consulting Engineer to make in writing a review and report on the physical condition of the Project works once every three years, including their recommendations as to (1) the proper maintenance, repair and operation of the Project, including their findings as to whether or not properties have been maintained in good repair and sound operating condition; and (2) the improvements, renewals and replacements which should be made. A copy of such report and review shall be filed with the City and the Authority. Books & Records: The Authority will keep or cause to be kept proper books of record and account in which full, true and correct entries will be made of all income, expenses and transactions of and in relation to the Project and each and every part thereof in accordance with accounting practices recommended by the National Committee on Governmental Accounting and within ninety (90) days after the close of each Fiscal Year the Authority will furnish to the City, the Municipal Advisory Council of Texas, the Financial Advisor, and any holder of the Bonds who may so request a signed or certified copy of a report by a Certified Public Accountant covering the preceding Fiscal Year. Inspection: That the holder or holders of any Bonds or Additional Bonds or any duly authorized agent or agents of such holders, shall have the right at all reasonable times to inspect all such records, accounts and data relating to the Authority and the Project, and to inspect the Project and all properties comprising same. Legal Authority: The Authority represents that it is a conservation and reclamation district, and a governmental agency and body politic and corporate, duly created, organized and existing under the Constitution and laws of the State of Texas and has proper authority from all other public bodies and authorities, if any, having jurisdiction thereof to construct, acquire, operate, maintain, repair, renew and replace the Project; that it will at all times maintain its corporate existence and maintain a lawful power to pledge the revenues supporting the Bonds; that all corporate action on its part to that end has been duly and validly taken; and that the Bonds issued hereunder shall be ratably secured under said pledge in such manner that one Bond shall have no preference over any other Bond of said issue. No Sale or Encumbrance: The Authority covenants that in no event while any of the Bonds or interest thereon remains outstanding and unpaid, shall the Authority sell, mortgage, lease or otherwise dispose of its interest in the Project, or any substantial part thereof, nor shall the Authority further encumber the Contract Payments for Debt Service in any manner except in accordance with this Section, or unless such X4.02 -23- encumbrance shall be made junior and subordinate in all respects to the lien and pledge herein created for the benefit of the Bonds and the interest thereon. No Arbitrage: The Authority covenants to and with the purchaser of the Bonds that it will make no use of the proceeds of the Bonds at any time throughout the term of this issue of the Bonds which, if such use had been reasonably expected on the date of delivery of the Bonds to and payment for the Bonds by the purchasers, would have caused the Bonds to be arbitrage bonds within the meaning of Section 103 (c) of the Internal Revenue Code of 1954, as amended, or any regulations or rulings pertaining thereto; and by this covenant the Authority is obligated to comply with the requirements of the aforesaid Section 103 (c) and all applicable and pertinent Department of the Treasury regulations relating to arbitrage Bonds. The Authority further covenants that the proceeds of the Bonds will not otherwise be used directly or indirectly so as to cause all or any part of the Bonds to be or become arbitrage Bonds within the meaning of the aforesaid Section 103 (c), or any regulations or rulings pertaining thereto. Defeasance: Any bond shall be deemed to be paid and no longer outstanding when payment of the principal of, redemption premium, if any, on such Bond, plus interest thereon to the due date thereof (whether such due date be by reason of maturity, upon redemption, or otherwise), either (a) shall have been made or caused to be made in accordance with the terms thereof, or (b) shall have been provided by irrevocably depositing with a Paying Agent, in trust and irrevocably set aside exclusively for such payment (1) money sufficient to make such payment or (2) Federal Securities, as defined hereinafter in this Article, certified by an independent public accounting firm of national reputation to mature as to principal and interest in such amount and at such times as will insure the availability without reinvestment, of sufficient money to make such payment, and all necessary and proper fees, compensation, and expenses of the Paying Agents for the Bonds pertaining to the Bond with respect to which such deposit is made shall have been paid or the payment thereof provided for. At such time as a Bond shall be deemed to be paid hereunder, as aforesaid, it shall no longer be secured by or entitled to the benefits of this Resolution, except for the purposes of any such payment from such money or Federal Securities. The deposit under clause (b) of Section 9.1 shall be deemed a payment of a Bond as aforesaid when proper notice of redemption of such Bond shall have been given, in accordance with this Resolution. Any money so deposited with a Paying Agent as provided in this Article may at the direction of the Authority also be invested in Federal Securities, maturing in the amounts and times as hereinbefore set forth, and all income from all Federal Securities in the hands of a Paying Agent pursuant to this Article which is not required for the payment of the Bond, the redemption premium, if any, and interest thereon, with respect to which such money has been so deposited, shall be turned over to the Authority. For the purpose of this Article, the term "Federal Securities" shall mean direct obligations of the United States of America, including obligations the principal of and 0092742.02 -24- interest on which are unconditionally guaranteed by the United States of America, and which are noncallable and which at the time of investment are legal investments under the laws of the State of Texas for the money proposed to be invested therein. Notwithstanding any provision of any other Article of this Resolution which may be contrary to the provisions of this Article, all money or Federal Securities set aside and held in trust pursuant to the provisions of this Article for the payment of the Bonds, the redemption premium, if any, and interest thereon, shall be applied to and used solely for the payment of the particular Bonds, the redemption premium, if any, and interest thereon, with respect to which such money or Federal Securities have been so set aside in trust. Notwithstanding anything elsewhere in this Resolution contained, if money or Federal Securities have been deposited or set aside with a Paying Agent pursuant to this Article for the payment of the Bonds and such Bonds shall not have in fact been actually paid in full, no amendment to the provisions of this Article shall be made without the consent of the owner of each Bond affected thereby. AMENDMENT OF RESOLUTION The holders of the Bonds aggregating in principal amount of three-fourths of the aggregate principal amount of the Bonds and Additional Bonds at the time outstanding (not including in any case any such bonds which may then be held or owned by or for the account of the Authority) shall have the right from time to time to approve an amendment of this Resolution which may be deemed necessary or desirable by the Authority, provided, however, that without the consent of the holders of all of the outstanding Bonds, nothing herein contained shall permit or be construed to permit the amendment of the terms and conditions contained in this Resolution or in the Bonds so as to: 0092742.02 (1) Make any change in the maturity of the outstanding Bonds or Additional Bonds; (2) Reduce the rate of interest borne by any of the outstanding Bonds or Additional Bonds; (3) Reduce the amount of the principal payable on the outstanding Bonds or Additional Bonds; (4) Modify the terms of payment of principal of or interest on the outstanding Bonds or Additional Bonds or any of them, or impose any conditions with respect to such payment; (5) Affect the rights of the holders of less than all of the Bonds or Additional Bonds then outstanding; -25- (6) Change the minimum percentage of the principal amount of the Bonds necessary for consent to such amendment. If at any time the Authority shall desire to amend the Resolution under this Section, the Authority shall cause notice of the proposed amendment to be published in a financial newspaper or journal published in the State of Texas, once during each calendar week for at least four successive calendar weeks. Such notice shall briefly set forth the nature of the proposed amendment and shall state that a copy thereof is on file at the places of payment for inspection by all holders of the Bonds and Additional Bonds. Such publication is not required, however, if notice in writing is given to each holder of the Bonds and Additional Bonds. Whenever at any time not less than thirty days and within one year from the date of the first publication of said notice or other service of written notice the Authority shall receive an instrument or instruments executed by the holders of at least three-fourths in aggregate principal amount of the Bonds and Additional Bonds then outstanding, which instrument or instruments shall refer to the proposed amendment described in said notice and which specifically consent to and approve such amendment in substantially the form of the copy thereof on file with the places of payment, the Authority may adopt the amendatory resolution in substantially the same form. Upon the adoption of any amendatory resolution pursuant to the provisions hereof, the Resolution shall be deemed to be amended in accordance with such amendatory resolution, and the respective rights, duties and obligations under the Resolution of the Authority and all the holders of outstanding Bonds and Additional Bonds shall thereafter be determined, exercised and enforced hereunder, subject in all respects to such amendments. Any consent given by the holder of a Bond pursuant to the provisions of this Section shall be irrevocable for a period of six months from the date of the first publication of the notice provided for in this Section, and shall be conclusive and binding upon all future holders of the same Bond during such period. Such consent may be revoked at any time after six months from the date of the first publication of such notice by the holder who gave such consent, or by a successor in title, by filing notice thereof with the places of payment and the Authority, but such revocation shall not be effective if the holders of three-fourths aggregate principal amount of the Bonds and Additional Bonds outstanding prior to the attempted revocation, consented to and approved the amendment. For the purpose of this Section, the fact of the holding of the Bonds by any bondholder and the amount and numbers of such Bonds, and the date of his holding same may be proved by the affidavit of the person claiming to be such holder, or by a certificate executed by any trust company bank, banker, or any other depositary, wherever situated, showing that at the date therein mentioned such person had on deposit with such trust company, bank, banker or other depositary, the Bonds described in such 0092742.02 -26- certificate. The Authority may conclusively assume that such ownership continues until written notice to the contrary is served upon the Authority. SYSTEMS INDEBTEDNESS In 1990, the City established by ordinance (the "1990 Ordinance") a unified water, wastewater, and gas utility system (the "System"). Pursuant to the term of the 1990 Ordinance, the City issued its Utility System Revenue Refunding Bonds, Series 1990 (the "Series 1990 Bonds"), of which there is outstanding $60,035,000 in principal amount. Previously each system was operated as a separate enterprise fund. The City has recently adopted a five year Capital Improvement Program. The following table sets forth the projects and proposed funding sources: [The remainder of this page intentionally left blank] 0092742.02 1 -27- 1994-98 CAPITAL IMPROVEMENTS PROGRAM FY 1993-94 FY 1994-95 FY 1995-96 FY 1996-97 FY 1997-98 TOTAL Water Projects 117,387,033 $1,950,000 $7,145,000 $11,935,000 $1,375,000 $39,792,033 Water Supply 0 0 14,000,000 0 94,000,000 108,000,000 Wastewater Projects 9,504,780 48,050,000 10,970,000 15,000,000 16,130,000 99,654,780 Storm Water Projects 1,445,000 2,130,000 516,000 2,480,000 1,990,000 8,561,000 $28,336,813 $52,130,000 $32,631,000 $29,415,000 $113,495,000 $256,007,813 PROPOSED FUNDING SOURCES: Construction Reserves $2,926,813 $0 10 $0 $0 $2,926,813 Wesley Seale Maint 5,750,000 0 0 0 0 5,750,000 Reserves Stormwater Revenue 0 $2,130,000 516,000 2,480,000 1,990,000 7,116,000 Bonds Water Revenue Bonds 11,140,000 1,950,000 7,145,000 11,935,000 1,375,000 33,545,000 Wastewater Revenue 8,520,000 48,050,000 10,970,000 15,000,000 16,130,000 98,670,000 Bonds Revenue Bonds/Water 0 0 14,000,000 0 94,000,000 108,000,000 Supply TOTAL PROGRAM $28,336,813 $52,130,000 $32,631,000 $29,415,000 $113,495,000 $256,007,813 To finance the 1993-94 program of $28,336,813, the City will use $8,676,813 of reserve fund cash on hand and will sell in the public market $11,140,000 Utility System Revenue Bonds, Series 1994 (the "Bonds") for that portion relating to water projects. The City will also place privately with the Texas Water Development Board $8,520,000 Utility System Revenue Bonds, Series 1994-A (the "Series 1994-A Bonds") for that portion relating to wastewater projects. Both the Bonds offered for sale under this Official Statement and the Series 1994-A Bonds to be placed privately with the Texas Water Development Board constitute parity obligations are on a parity with the outstanding Series 1990 Bonds. SYSTEMS FINANCIAL INFORMATION Pledged Revenues of the System The following schedule sets forth the Pledged Revenues of the combined System for the Years ended July 31, 1989 through 1993. Pledged Revenues are calculated pursuant to the terms of the Ordinance without regard to depreciation, certain capital outlays and certain accruals. See "SECURITY FOR THE BONDS - Pledge of Pledged Revenues." Because the City's Financial Statements contained in Appendix C are prepared in accordance with generally accepted accounting principles, on an accrual basis, they do not contain calculations of Pledged Revenues. The figures for each of the Years 1989 and 1990 were calculated by combining the calculations of Net Revenues for the City's water system, wastewater system and gas system, which were derived from the City's Comprehensive Annual Financial Reports for each Year. FISCAL YEAR ENDING JULY 31 1993 1992 1991 1990 1989 Operating Revenues: Water System $30,657,165 $27,192,367 $28,502,116 $29,473,231 $28,889,425 Wastewater System 18,262,428 17,105,382 17,725,246 16,840,090 14,117,961 Gas System 23,532,324 22,035,772 21,359,498 23 198,797 21 395,410 0092142.02 -28- Total Revenues 372,451,917 $66,333,521 $67,586,860 169.512,118 164,402,796 °pending Ripeness Water System $17,558,277 $16,028,911 $17,411,890 $14,540,672 $14,038,173 Wastewater System 13,911,396 13,532,519 15,281,333 12,020,403 9,212,776 Gas System 23,066,493 21.285.144 20,853.976 22.017.710 20.271.791 Total Expenses 154,536.166 350,846.574 553.547.199 $48,578,785 $43,522,740 Combined Operating Income $17,915,751 $15,486,947 514,039,661 $20,933,333 $20,880,056 Combined Non -Operating Revenue (Expense) 36,541,965 36,016,483 510.604,604 54,414,478 53.544.328 Net Revenues Available for Debt Service $24.457,716 321,503.430 $24,644,265 525,347.811 324,424,384, 0097742.02 [The remainder of this page intentionally left blank] -29- The following calculation sets forth the coverage of the average annual debt service requirements on the Bonds by the System Net Revenues for Fiscal Year 1993. Average Annual Debt Service on the Bonds $ Pro Forma Coverage by 1993 Net Revenues times Obligations Payable from System Revenues The following sets forth, as of February 28, 1994, the total outstanding revenue obligations payable from System revenues, adjusted to reflect the issuance of the Bonds and Concurrent Bonds: Contract Revenue Bonds (Palyable as an Operating Expense): Nueces River Authority " $10,100,000 Priority Bonds: Series 1990 Bonds $60,035,000 Series 1994 Bonds 11,140,000 Series 1994-A Bonds 8.520.000 $79,695,000 Subordinated Obligations: U.S. Dept. of the Interior Choke Canyon Agreement `2' $73.810.900 Total -- All Obligations Payable from System Revenues $163,605.900 1' Under a 1976 agreement, as supplemented, the City agreed to pay, as on Operating Expense of the System, amounts calculated to be sufficient to cover debt service on the $10,100,000 Nueces River Authority Water Supply Revenue Bonds, Series 1979, issued to finance a portion of the cost of the Choke Canyon project. 2' Under an agreement with the U.S. Department of the Interior (Bureau of Reclamation), the City has agreed to pay, out of surplus water revenues, such amount, with interest at 5.116%, subject to certain deferrals, in installments through 2039. (See "SYSTEM FINANCIAL INFORMATION - Subordinated Debt Service Requirements" and Note 16 in Appendix D.) Subordinated Obligations Debt Service Requirements As of July 31, 1993, the amount owed to the United States Department of the Interior (Bureau of Reclamation) for the City's remaining share of the costs of the Choke Canyon Project is $73,810,900 (of which $59,273,876 are allocable to water supply construction costs, $14,516,257 to recreation costs and $20,767 to fish and wildlife costs). Such amounts for water supply are payable over a term of 40 years to 2024 and amounts for recreation and fish and wildlife over a term of 50 years to 2039, in each case with interest at 5.116% per annum. See "System Debt Service Requirements" and Note 16 in Appendix D for the repayment schedule. As of July 31, 1993, the City had accumulated out of surplus System revenues $22,279,355 as a reserve for this contract obligation. 0092742.02 -30- System Debt Service Requirements 0092742.02 [To Come] [The remainder of this page intentionally left blank] - 3 1 - SYSTEM STATISTICS WATER SYSTEM STATISTICS Water Sales (in Million Gallons) Fiscal Year Ended July 31 1993 1992 1991 1990 1989 TREATED WATER Inside City Residential "' 5,855 5,703 6,443 7,045 6,932 Commercial 12' 4,125 3,969 4,213 4,288 4,174 Industrial 2,234 2,016 2,174 1,991 1,888 Other 131 1 089 1 046 1 326 1 361 1 136 Subtotal 13,303 12,734 14,156 14,685 14,130 Outside City Residential (1) 10 8 9 11 12 Commercial `�) 236 244 214 215 200 Industrial 9,569 8,566 8,061 8,141 8,238 Other'31 1 1 1 1 1 Subtotal 9,816 8,819 8,285 8,368 8,451 Outside City Wholesale 2 248 22071 22070 2.442 2.265 Total Treated Water 25,367 23,624 24,511 25,495 24,846 UNTREATED WATER 9,331 8,079 9,081 9,420 9,400 TOTAL 34 698 31 703 33 592 34 915 34 246 `D Includes one and two family residences. i2) Includes multifamily over two family residential. 13' Includes hospitals, schools, churches, municipal and other governmental use. In some cases, individual governmental entities may have multiple accounts as a result of multiple facilities. 009274202 -32- TREATED WATER Inside City Residential )1) $10,110,958 $9,287,123 $10,482,929 $11,330,822 $11,104,221 Commercial (2) 5,205,676 4,830,383 5,103,051 5,156,947 4,997,671 Industrial 1,743,318 1,485,836 1,575,175 1,426,651 1,363,535 Other X3) 1,402,639 1,281.725 1,518.486 1,548.387 1.351.390 Subtotal 18,462,591 16,885,067 18,679,641 19,462,807 18,816,817 Outside City Residential (I) 35,000 26,000 29,000 35,000 36,000 Commercial (2) 423,000 407,000 384,000 383,000 367,000 Industrial 9,161,000 7,777,000 7,297,000 7,317,000 7,300,000 Other {) 4.000 4,000 3.000 3.000 3.000 Subtotal 9,623,000 8,214,000 7,713,000 7,738,000 7,706,000 Outside City Wholesale 1.478,000 1 284 000 1 319 000 1 521 000 1 479 000 Total Treated Water 29,563,591 26,383,067 27,711,641 28,721,807 28,001,817 UNTREATED WATER 1,326.000 993 000 997 000 1 012 000 1 067 000 TOTAL30889591 $27.376,067 $28.708,641, $29,733.807 $29,068,817 Water Sales (in $) `4) Fiscal Year Ended July 31 1993 1992 1991 1990 1989 n) 12) (3) 4) Includes one and two family residences. Includes multifamily over two family residential. Includes hospitals, schools, churches, municipal and other governmental use. In some cases, individual governmental entities may have multiple accounts as a result of multiple facilities. Prepared from System records on a cash basis and therefore will not agree with the financial statements in Appendix D which are prepared on an accrual basis. 0092742.02 -33- TREATED WATER Number of Water Customers Fiscal Years Ended July 31 1993 1992 1991 1990 1989 Inside City Residential "' 65,830 65,038 64,415 63,745 63,197 Commercial (2) 6,497 6,504 6,494 6,564 6,589 Industrial 45 44 45 46 48 Other `3' 1.119 1.093 1.070 1.046 1.024 Subtotal 73,491 72,679 72,024 71,401 70,858 Outside City Residential (1) 122 104 104 104 111 Commercial `2' 135 135 135 139 139 Industrial 46 44 45 42 36 Other f37 2 3 3 2 2 Subtotal 305 286 287 287 288 Outside City Wholesale 3 3 3 '3 3 Total Treated Water 73,799 72,968 72,314 71,691 71,149 UNTREATED WATER 8 8 7 7 8 TOTAL 73.807 72.976 72.321 71.698 71.156 "' Includes one and two family residences. 12' Includes multifamily over two family residential and commercial. `31 Includes hospitals, schools, churches, municipal and other governmental use. In some cases, individual governmental entities may have multiple accounts as a result of multiple facilities. 0092742.02 (The remainder of this page intentionally left blank] -34- Largest Water Customers (Based on Revenues) (Fiscal Years ended July 31) 1993 1992 Treated Water Corn Products $1,780,228 $1,378,180 Corpus Christi Petrochemical 1,730,349 1,415,780 Koch Refining 1,337,790 1,052,020 Champlin Refining 1,241,871 1,308,010 Central Power & Light 927,900 477,400 Southwestern Refinery 880,074 725,520 Coastal Corp. 685,271 633,440 American Chrome & Chemical 355,389 279,540 Howell Refining 332,240 325,200 Celanese Corp. 11 284,837 231,330 Total $9,555.949 17.826,420 In fiscal year 1991-92 Celanese Corp was not one of the top ten customers. Wholesale Treated Water San Patricio Municipal Water District $1,001,000 $867,719 Nueces County Water Control & Imp. Dist. No. 4 185,288 188,000 South Texas Water Authority 291.000 230.000 Total 11,477,000 11,285,000 Wholesale Untreated Water San Patricio Municipal Water District $631,000 $457,000 Alice Water District 156,000 97,000 City of Mathis 100,000 72,000 Beeville Water Supply District 33,000 56,000 Various Industrial Customers 405.000 303,000 Total 0092742.02 11,3250009E 85.000 -35- Water Operating Statistics (in millions of gallons) 1993 1992 1991 1990 1989 Rainfall (inches) m 42.50 52.23 29.58 22.48 22.50 Water Supply System Firm Yield in acre feet 168,155 168,155 168,155 168,155 168,155 System Demand in acre feet 119,797 112,957 118,926 125,904 122,835 Water Production Rated Capacity in Million Gallons per Day 144 144 144 144 144 Maximum Daily Demand in Million 115.86 116.78 112.5 125.79 116.11 Gallons per Day Water Distribution Unaccounted for Percentage (%) 12.21 15.63 15.42 17.37 15.67 Per Capita Consumption in Gallons Per Day 149.62 145.50 160.73 174.45 168.42 `1) Rainfall measured at Corpus Christi International Airport. This measurement does not reflect rainfall elsewhere in the Nueces River Basin Watershed. 0092742.02 WASTEWATER SYSTEM STATISTICS Ten Largest Wastewater Customers (Fiscal Years ended July 31) 1993 1992 Sam Kang Beef Processors, Inc. $496,359 $303,705 Hygeia 179,205 123,869 Southwestern Delivery 91,358 60,059 CC Housing Authority 85,254 87,702 Borden 60,579 63,723 Hoechst Celanese 50,983 47,543 Memorial Hospital 45,672 39,801 Glenwillow Apartments 35,235 30,989 Holiday Inn 34,658 32,075 Willowick Apartments 33,630 33,440 TOTAL $1,085,933 $822,906 11"- -36- Number of Wastewater Customers Fiscal Years Ended July 31 1993 1992 1991 1990 1989 Inside City Residential 65,384 63,701 62,985 62,231 61,211 Commercial's) 6,454 6,490 6,429 6,432 6,380 Outside City Residential Commercial °1 TOTAL 5 3 3 2 4 20 21 21 18 16 70,8637700 69.438a. 68 683 67 611 (1) Includes multifamily residential (over two family residential), commercial, industrial and public agencies. Plant 0092742.02 Wastewater Treatment (millions of gallons) Fiscal Years Ended July 31 1993 1992 1991 1990 1989 Broadway 2,341 2,372 2,115 2,144 2,152 Oso 5,095 ' 5,451 4,832 4,899 4,462 Westside 1,060 1,149 1,137 1,049 1,076 Allison 907 998 929 995 874 Laguna Shores 0 0 24 51 32 Laguna Madre 680 831 542 531 551 Whitecap 311 287 267 230 195 Total 10,394 11,087 99.846 9 899 99,341 Daily Average 28.4 30.3 26.9 27.1 25.6 GAS SYSTEM STATISTICS Annual Gas Purchases and Sales (12 months ended July 31, 1993) Average Day 11,446 Mcf Maximum Day 34,936 Mcf Purchases 4,189,053 Mcf Sales 4,153,154 Mcf Lost & Unaccounted-for Gas 35,899 Mcf (.85%) -37- r Gas Connections (As of December 31, 1993) 53,134 Residential 2,944 Commercial 443 Hospitals, Schools, & Churches 32 Industrial Customers 56,553 Active Customers Ten Larzest Gas Customers (Fiscal Year Ended July 31) 1993 1992 Naval Air Station $1,309,699 $1,311,034 Coastal Staten Crude Gathering Co. 420,365 71,033 Spohn Hospital 316,585 299,408 Driscoll Hospital 212,404 184,243 Memorial Hospital 189,206 180,802 H.E. Butt Grocery 185,276 159,213 Del Mar College183,214 H.E. Butt Bake161,956 132,943 Corpus Christi Linen Supply 125,937 108,901 Corpus Christi Housing Authority 115,127 111,123 Total $3,212,122 $2.741,914 THE COMBINED SYSTEM The System was established by the 1990 Ordinance as a combined utility system which includes the City's existing water system, wastewater system and gas system. The following is a description of the three components of the System. Description of Water System Service Area. The water system serves not only the City of Corpus Christi, but also provides water to several municipalities and industries within a 70 mile radius of the City. The service area is a relatively dry region of South Texas bordering on the Gulf of Mexico, with heaviest rainfall and stream flow in the Spring and Fall. Water Supply. The water supply is drawn from the Nueces River Basin which has three principal rivers: the Atascosa River, the Frio River and the Nueces River. The Atascosa and Frio Rivers join the Nueces River above Lake Corpus Christi below Choke Canyon Reservoir. For planning purposes, the Nueces Basin is treated as a single hydrologic unit. The Nueces River Basin covers 16,950 square miles. The City of Corpus Christi is the largest water right holder in the Nueces River Basin and the largest user of water from the Lake Corpus Christi/Choke Canyon Reservoir water supply system. 0092742.02 -38- Lake Corpus Christi was completed in 1958 with a surface area of 19,251 acres and a storage capacity of 241,241 acre-feet at 94 feet MSL (mean sea level). Lake Corpus Christ is fed by the tows of the Nueces River, the Atascosa River and the Frio River. Water from the Frio River passes through Choke Canyon Reservoir. Choke Canyon Reservoir was completed in 1982 with a surface area of 25,733 acres and a storage capacity of 691,130 acre-feet at 220.5 feet MSL (mean sea level). Choke Canyon Reservoir is fed by the Frio River and San Miguel Creek. The combined firm yield of the supply system which consists of Lake Corpus Christi, Choke Canyon and the Nueces, Atascosa and the Frio Rivers is 168,155 acre-feet. The firm yield incorporates the Operation Plan mandated in the Texas Water Commission's (now the Texas Natural Resource Conservation Commission) Interim Operating Order of March 1992. This firm yield of 168,155 acre-feet is estimated to meet the Municipal and Industrial Demand of the service area until approximately 2003. To augment current surface water supplies, the City of Corpus Christi has in place a supplemental ground water supply program of 17 wells with a turn -on capacity of 25+MGD. In December 1993 the City entered into a contract with the Lavaca-Navidad River Authority (LNRA) to purchase 41,840 acre-feet of water per annum from Lake Texana for municipal and industrial purposes. The primary term is for 42 years with an option to renew for an additional 50 years. The purchase is on a take -or -pay basis. In addition to the LNRA contract the City is negotiating with the Garwood Irrigation Company for additional water from the Colorado River. Water Treatment and Distribution. "Raw" water is processed at the O. N. Stevens Water Plant located in the western end of Corpus Christi. The Plant currently has a rated capacity of 144 MGD, but with proposed renovations of 12 of the 22 filters the Plant may be re -rated to 196 MGD. The City has five ground storage reservoir pump stations and four elevated storage tanks with a total distribution system storage of 42.85 MG. The elevated storage tanks are used to provide emergency storage and to absorb peak demand loads. The water distribution system has approximately 1,400 miles of pipe ranging in size from 2" to 54". Water Customers. The City of Corpus Christi is a regional water supplier in that in addition to the "raw" water used by the City for its own customers, the City sells "raw" water and "treated" water on a wholesale basis. The City sells "raw" water to the Alice Water Authority (City of Alice), the Beeville Water Supply District (City of Beeville), the City of Mathis, Choke Canyon Water System (Federal Bureau of Prisons), Koch Refinery and Hoechst -Celanese Chemical. The City sells "treated" water to the South Texas Water Authority (Cities of Kingsville, Bishop, Agua Dulce, Banquete, Driscoll and Ricardo), Nueces County Water Control & Improvement District No. 4 (City of Port Aransas) and the Violet Water Supply Corporation. 0092742.02 -39- The City sells "raw" and "treated" water to the San Patricio Municipal Water District (Cities of Odem, Taft, Gregory, Portland, Ingleside, Rockport, etc). Such "treated" and "raw" wholesale water sales are generally pursuant to long term contracts for "treated" water and perpetual contracts for "raw" water. Choke Canyon Reservoir Contracts. The Choke Canyon Dam was constructed by the United States Department of the Interior (Bureau of Reclamation) pursuant to a joint sponsorship contract with the City and Nueces River Authority. Unites its joint agreement with the Bureau, the City agreed to fund a portion of the costs of the Choke Canyon Project and to pay the project's operating expenses. To finance its share of such costs, the City has (i) previously issued $15 million of water revenue bonds the unpaid and refinanced balance of which are being refunded by the Bonds, (ii) agreed to pay (as an Operating Expense of the System) the debt service on Nueces River Authority Water Supply Revenue Bonds, Series 1979 (of which $10,100,00 are presently outstanding), and (iii) agreed to make certain contractual payments to the United States Department of the Interior which, together with certain deferrals and interest calculated at 5.116%, are scheduled to be payable through 2039 in annual payments. See "SYSTEM FINANCIAL INFORMATION -Subordinated Obligation Debt Service Requirements." All payment obligations to the United States Department of the Interior are on a subordinated basis to the Bonds. The Department of the Interior has granted to the System in perpetuity 80% of the yield of Choke Canyon and the remaining 20% to the Nueces River Authority, which has assigned its 20% to the System in consideration for the System paying the Authority $100,000 per year, subject to certain escalations. Description of Wastewater System Service Area. The wastewater system service area is primarily within the City. Wastewater Treatment and Collection System . The City owns and operates six wastewater treatment plants with combined treatment capacity of 41.0 MGD. Wastewater is collected and brought to the wastewater treatment plants through approximately 1, 160 miles of sanitary sewer pipes and 91 lift stations throughout the City and its service area. Wastewater Customers. Currently, the wastewater system has approximately 71,300 metered customers. In August 1993 Wastewater customers began paying for Wastewater service based on their average winter consumption. This winter average will be used for one full year with the next year's changes being adjusted to reflect the prior winter's average water consumption. Environmental Requirements. In FY 92-93, the average aggregate daily flow at the System's wastewater treatment plant averaged 28.4 MGD, which is approximately 69% of the aggregate permitted capacity of all the plants. of the plants (including the largest, the 16.2 MGD Oso Plant) have regularly exceeded 75% of their capacity (which triggers a requirement by the Texas Natural Resource Conservation Commission (TNRCC) to start designing an expansion to increase the treatment capacity of such plant). To comply with the TNRCC's requirements, the City recently completed a project to divert about 1.0 MGD from the Oso system to the Westside Plant. Also, the City has already awarded a contract for the design of Whitecap plant expansion. This plant will be expanded to treat 2.5 MGD of domestic wastewater. 0092742.02 -40- The other major projects which the City will commence in the near future and will impact the environment are (i) the expansion and upgrade of the Westside Treatment Plant which will increase the treatment capacity from 6.0 MGD to 8.0 MGD and will further improve the quality of effluent discharged to the Oso Creek. (ii) the rehabilitation of some of the major trunk mains and the force mains. This would reduce the chances of bypassing untreated sewage and contaminating the waters of the United States. (iii) the upgrade of the Allison plant for tertiary treatment to improve the quality of effluent. This will further reduce the organic loading of the Nueces River. (iv) the odor abatement at the treatment plants which will reduce the emission of hydrogen sulfide and other toxic gases into the atmosphere. All these projects are recommended for funding through the 1994-98 Capital Improvement Program. Description of Gas System Service Area. The gas system serves the City and some areas outside of the City limits near existing gas lines. The Largest customer is the Corpus Christi Naval Air Station. Gas Supply. The gas distribution system currently purchases its gas supply from Reata Industrial Gas, L.P., a subsidiary of Valero Transmission, L.P. The City is obligated to only pay for gas delivered at a cost under a contractual formula based each month on the Houston Ship Channel market price. The Gas Division will be soliciting bids during 1999 for a natural gas supply for the next four and a half (4 1/2) years with the contract commencing on January 1, 1995. Gas Distribution. The City gas system distributes gas to its customers through a gas distribution system of approximately 1,158 miles. The gas distribution system also includes three major purchase points, 16 smaller purchase points, and 97 regulator stations. Gas Customers. As of December 31, 1993, the gas system had 56,533 customers. The City's rate structure for all gas customers allows the City to pass through to its customers all costs of gas purchased by adding the cost of gas to the cost of service. System Management and Employees Management. The Water Division, Wastewater Division and Gas Division are all divisions of the City's Public Utilities Department, and are under the supervision of the Group Manager of Public Work and Utilities who reports to the Deputy City Manager. Victor S. Medina, P.E. - Water Superintendent Mr. Medina holds a B.S. degree in Civil Engineering and is a graduate of the University of Texas at Austin. He has worked for the City since 1972. In 1982, he was named Superintendent of the Gas Division and served as Director of Engineering Services from 1986 to 1988. In January 1992 Mr. Medina was appointed Water Superintendent. 00E12742.02 4l_ Wayne R. Cockroft, P.E. - Wastewater Superintendent Mr. Cockroft holds a Bachelor of Science degree in Civil Engineering from the University of Texas at Austin and is a Registered Professional Engineer. Mr. Cockroft has worked for the City for 22 years, after previously working for the Texas Highway Department. After serving in various capacities in the Water Department, he was appointed Wastewater Superintendent in 1988. Lloyd C. Lindeburg - Gas Superintendent Mr. Lindeburg is a graduate of the University of Corpus Christi with a Bachelor of Science degree in Petroleum Engineering. Mr. Lindeburg began his career with the City of Corpus Christi -Gas Division in 1958 as a Gas Engineer. In March, 1985, he became Assistant Gas Superintendent and in October, 1986, was promoted to Gas Superintendent. James A. Dodson - Regional Water Director Mr. Dodson holds a Bachelor of Science degree in Marine Science from Texas A & M University at Galveston. He also received a masters degree in Public Administration from the Lyndon B. Johnson School of Public Affairs at the University of Texas at Austin. Mr. Dodson has worked for the City since 1989 as Administrative Assistant and Stormwater Superintendent. He was appointed to his present post in May 1992. Employees. As of July 31, 1993 the number of employees of the Water Division, Wastewater Division and Gas Division were as follows: Water Division Wastewater Division Gas Division 243 employees (1) 208 employees 139 employees SYSTEM RATES Ratemaking The City Council has the power to establish and increase rates for service provided by the System, subject to some contractual limitations and subject to the limited regulatory jurisdiction discussed below. In setting water, wastewater and gas rates, the City is bound by the legal requirement that such rates must be reasonable, equal, and uniform and that no free service may be allowed, except at the discretion of the City Council for certain public buildings and facilities operated by the City. By law, the City must charge and collect rates sufficient to pay all operating, maintenance, depreciation, replacement, betterment, and interest charges of the System and to maintain an interest and sinking fund sufficient to pay any bonds or notes issued to purchase, construct, or improve the System or any outstanding indebtedness of the System. Rates for sales of water to other political subdivisions on a wholesale basis, and certain appeals of rates for outside -City customers, are subject to the jurisdiction of the Texas Water Commission ("TWC") now know as the Texas National Resource and Conservation Commission ("TNRCC"). By law, however, the TWC may not fix a rate which is less than the amount 0092742.02 -42- required to meet the debt service and bond coverage requirements of the Water Facilities. Certain disputes as to sales of surface water may also be subject to the jurisdiction of the TWC. Gas rates are subject to appeal to the Texas Railroad Commission. In setting rates, the City Council must consider, among other things, the current federal guidelines regarding user charges and certain charges required of federal construction grant recipients under the Clean Water Act. Usage of the Sewer Facilities is not metered for rate purposes. Instead, sewer rates are based upon water usage during the winter months and are adjusted each year based on water consumption the previous winter. The magnitude and frequency of rate increases will depend upon factors such as the rate at which Operating Expenses increase in the future, the interest rate on System revenue bonds sold to meet the System's future capital requirements, the extent to which System revenue bonds are used to meet those capital requirements, the volume of water and gas sold and future changes in environmental requirements. Charter Amendment Regarding Rates On January 19, 1991, the residents of the City voted to approve an amendment to the City Charter of the City, the effect of which would be to limit the amount of rate increase for each utility service operated by the City in any fiscal year to six percent over the rate charged the preceding year. The amendment further provides that a higher rate may be adopted on a temporary basis for the next fiscal year if all members of the City Council declare an emergency. Since the adoption of the Charter amendment, the City Council has not increased rates, nor had the need to increase rates, for any utility service operated by the City above the six percent per year limitation. The City has been advised by bond counsel that under current Texas law, the imposition of a cap on utility rates through charter amendment would be inconsistent with the Constitution and laws of the State of Texas, and the City could legally raise rates in a fiscal year in excess of the six percent limitation. The City makes no representation as to whether future City Councils will abide by or seek changes in the Charter amendment, nor does it make any representations as to the future effect on the operation of the system if rate increases are restricted to the six percent per year limit. Prior Rate Studies In November, 1989, the City engaged the firms of CH2M Hill, Urban Engineering and Collier, Johnson and Woods to perform cost -of -service rate studies for its water, wastewater and gas utility divisions. Those studies, which were completed in August, 1990, were based upon a series of assumptions that the City believes no longer to be accurate in view of the issuance of the Bonds, the creation of the combined utility system and proposed modifications in the System's capital improvement program. The studies propose a change in methodology of establishing rates for the separate divisions and forecast the need for a series of rate increases that range from being relatively insubstantial for the water division to increases ranging up to 17% per annum in 1992 for the wastewater division. However, in view of the consolidation of the System, change in financing plan, proposed changes in the capital improvement plan and other matters, the City believes such studies now overstate the required rate increases necessary for the operation of the System. The City has indicated that it intends to request 0092742.02 -43- such cost of service studies be revised and updated in light of the changed circumstances more fully described in this Official Statement (see "PURPOSE AND PLAN OF FINANCING" and "SYSTEM CAPITAL IMPROVEMENT PLAN"). The City is of the opinion that, notwithstanding the aforesaid studies, the System could be adequately operated, maintained and expanded as needed to provide service to its service area without requirement of increasing System -wide rates in excess of 6% per annum (see "RATES - Charter Amendment Regarding Rates"). Water Rates Rate Increases. The City Council authorized an increase in rates for water on the average of approximately 6% effective January 1, 1994. Prior water rate increases were approved in 1990, 1988, 1983, 1982 and 1981 and rates were restructured in 1984. Current Rates. Water rates are composed of a fixed minimum charge based on meter size and an additional charge based on consumption above a minimum volume. The categories of rates are set forth in the following table: 0092742.02 [The remainder of this page intentionally left blank] -44- Treated Water Minimum Monthly Charge Meter Size (inches) 5/8 x 3/4 (Residential) 5/8 x 3/4 (Commercial) 1 1 1/2 2 3 4 6 8 and larger Monthly Water Consumption Charge Residential Gallons Used First 2,000 gallons Next 4,000 gallons Next 9,000 gallons Next 15,000 gallons Next 20,000 gallons Over 50,000 gallons First Next Next Next Next Over Commercial Gallons Used 2,000 gallons 13,000 gallons 85,000 gallons 900,000 gallons 9,000,000 gallons 10,000,000 gallons Capacity - Commodity Charges (1) (Minimum Commercial Charge) Rate per month per 1000 gallons per day of maximum day capacity requirement - Regular Rate Inside Outside City Limits City Limits $4.269 $8.539 5.955 11.921 9.225 18.438 15.180 30.359 23.359 46.707 82.606 165.203 94.179 188.359 141.270 282.551 211.955 423.922 Coster per 1000 Gallons 1000 Gallons Minimum Minimum $1.550 $2.989 1.663 2.989 2.090 2.989 2.505 2.989 2.989 2.989 CostCoat er per er 1000 Gallons 1000 Gallons Minimum Minimum $1.550 $3.101 1.404 2.809 1.123 2.235 0.932 1.326 0.696 0.910 Inside Outside City Limits City Limits $10.461 $11.629 Rate per month per 1000 gallons 0.898 1.460 per day of excess hourly capacity requirement (in excess of maximum day capacity requirement) Commodity charge for all water 0.313 0.403 per 1000 gallons m Applicable only to a limited class of major customers (currently Champlin Refinery and Nueces County Water Control and Improvement District No. 4) 0092742.02 -45- Public Agency for Resale Rates Treated water purchased at the treatment plant site by a public agency for resale. 0092742.02 Rate Monthly Consumption 1000 Gallons First 2,000 gallons Minimum Next 13,000 gallons $ 1.505 Next 85,000 gallons 1.370 Next 900,000 gallons 1.089 Next 9,000,000 gallons 0.909 Over 10,000,000 gallons 0.674 -46- Raw Water Rates Pursuant to its City Charter, all of the City's "raw" water supply contracts with other public and private entities must provide that all water be sold at published rates or at the average cost of water taking into account all bond service requirements, maintenance, depreciation and operating expenses, prorated as to the portion of the water system making such service available and that the purchasers shall be entitled to no more than a proportionate share of the City's water supply based on population. The following table reflects rates for untreated water for industrial, municipal, and domestic accounts: Untreated Water - Industrial, Municipal and Domestic Commodity Charge For all Water Consumed Minimum Charges Industrial -Monthly Municipal -Monthly Municipal -Annual Domestic -Monthly Domestic -Annual The Commodity Charge for all water *Annual Calculated Basic Cost* $170.225 By Contract By Contract $5.674 $56.741 1.059998 1.059966 1.059985 sold under a wholesale contract shall be as follows: $0.169/1,000 Gallons Published Rate Koch Refinery Hoechst -Celanese Choke Canyon Water System Composite Cost Alice Water Authority Beeville Water Supply District City of Mathis San Patricio Municipal Water District Wastewater Rates $0.168/1,000 Gallons Rate Increases. Rates for wastewater treatment service were increased approximately 6% effective January 1, 1994. Additional rate increases will take effect August 1, 1994, 1995, 1996, 1997 and 1998. Prior rate increases were approved in 1992, 1990, 1989, 1988, 1986, 1985, 1984, 1983, 1982, 1981 and 1980. Current Rates. Wastewater rates, which are based upon water consumption during the winter months, are summarized in the following table (for customers with 250 parts per million or less of biochemical oxygen demand, and 250 parts per million or less of suspended solids): 0092742.02 -47- Class Minimum One family maximum Commercial minimum Inside City Limits Outside City Limits $ 8.245 For first 2,000 Gal. $46.56 Up to 15,000 Gal. $12.798 For first 2,000 Gal. $16.490 For first 2,000 Gal. $93.12 Up to 15,000 Gal. $25.596 For first 2,000 Gal. The charges in addition to the above minimums, as well as the charge for all other sewer users, will be computed as dollars per one thousand (1,000) gallons of water used as follows: Inside City Limits One Family Residential (per 1,000 gallons of water) Commercial (per 1,000 gallons of water Outside City Limits One Family Residential) (per 1,000 gallons of water) Commercial (per 1,000 gallons of water) Dollars per 1.000 Gallons of Water Used $1.666 $1.366 $3.332 $2.732 Additional charges for customers with 250 parts per million or more of biochemical oxygen demand or 250 parts per million or more of total suspended solids are $0.1477 per pound and $0.1061 per pound, respectively. Gas Rates Rate Increases. Gas rates were increased 2% effective with the billing cycle commencing on or about February 1, 1994 for January service. Prior rate increases were approved on 1992, 1990, 1985, 1983, and 1982. In addition, the City passes through to customers the cost of gas purchases. 0092742.02 -48- Current Rates. Gas rates are based on usage consumed in thousand cubic feet. Gas rates are summarized in the following table: Residential Customer Rate Winter (November through April) First 1 Mcf per month or less Next 2 Mcf per month Next 7 Mcf per month Next 40 Mcf per month All over 50 Mcf Minimum Monthly Bill Summer (April throuzh November) First 1 Mcf per month or less Next 2 Mcf per month Next 5 Mcf per month Next 30 Mcf per month All over 38 Mcf Minimum Monthly Bill Part Year Customers First 1 Mcf per month or less Next 2 Mcf per month Next 7 Mcf per month Next 30 Mcf per month All over 40 Mcf Minimum Monthly Bill 0092742.02 Seasonal Rates -49- Inside Outside City Limits City Limits $4.943 $6.100 2.775 3.112 1.605 1.774 1.516 1.673 1.078 1.168 4.943 6.100 $4.943 2.775 1.605 0.808 0.718 4.943 $6.100 3.112 1.774 0.887 0.763 6.100 Inside Outside City Limits City Limits $8.212 $9.864 7.426 8.483 3.527 3.999 1.516 1.673 1.078 1.168 8 212 9.864 General Customer Rates First 1 Mcf per month or Tess Next 2 Mcf per month Next 7 Mcf per month Next 40 Mcf per month Next 50 Mcf per month Next 100 Mcf per month Next 100 Mcf per month Next 700 Mcf per month Next 1000 Mcf per month Next 13000 Mcf per month All over 15000 Mcf Minimum Monthly Bill Inside Outside City Limits City Limits $4.943 $6.100 2.775 3.112 2.594 2.921 2.494 2.809 1.078 1.168 0.898 0.965 0.786 0.842 0.752 0.797 0.650 0.650 0.584 0.584 0.561 0.561 4.943 6.100 Incentive Air Conditioning Summer Rate (The incentive summer rate is limited to customers using an annual average of less than 15,000 cubic feet per month. These customers have gas operated air cooling and/or air conditioning equipment and their average consumption in the seven summer months exceeds the average use consumption in the five winter months.) COST OF SERVICE PER MCF Inside Outside City Limits City Limits First 1 Mcf per month or less $4.943 $6.100 Next 2 Mcf per month 2.775 3.112 Next 7 Mcf per month 2.594 2.962 Next 40 Mcf per month 1.898 2.134 Next 150 Mcf per month 0.808 .887 Next 300 Mcf per month 0.752 .797 Next 500 Mcf per month 0.650 .684 Next 14000 Mcf per month 0.584 .606 All over 15,000 0.561 .561 Minimum Monthly Bill 4.943 6.100 Purchased Gas Adjustment Gas rates are subject to gas cost adjustments as follows: Rates will be adjusted monthly by the City following the receipt of notice of cost of gas from the supplier to pass on to the consumer the full amount of such cost adjusted for pressure base and gas lost and unaccounted-for factors. All General customers who consume over 15,000 cubic feet in one month and who receive gas from the City's distribution system at the same pressure which the City receives from its supplier, which purchases at a pressure base of 14.65 psi, shall be billed 2.05% less per Mcf for purchased gas adjustment. 0092742.02 -50- Interruptions Deliveries of gas to commercial and industrial customers may be interrupted or curtailed in the event of shortage in order to conserve gas for residential and other human need customers. Billing and Collection Users are billed monthly based on metered water and gas consumption. A bill is payable 10 days after the date on which the statement of account was mailed, and late payments incur a $5 penalty if paid after the next billing. If a user fails to make payment on or before the 30th day, the City sends a second written notice to the customer restating the amount owed and setting forth the procedure by which the user can discuss any dispute over the propriety of the charge with a customer service representative. Approximately one week after the second written notice, a City field representative is dispatched to the user's address to collect the past -due billing or to cut off water and/or gas service. Service is continued if payment is received at that time. If payment of past -due billings plus applicable penalties is made after termination of service, then a reconnect fee of $10 is also applicable. A user may be required to post a cash deposit, or in some cases, a surety bond or a letter of credit may be used in lieu of a cash deposit for continued service if the user demonstrates a history of delinquency. The deposit is based on an average of two months consumption. If a user liable for System charges leaves the premises to which such charges are applicable, the user will not be furnished service by the System at new premises occupied by such user until all charges are paid. SYSTEM CAPITAL IMPROVEMENT PLAN Capital Improvement Plan. In order to meet the future utility needs and to comply with applicable governmental and environmental regulations, the City periodically evaluates System capabilities and makes plans and forecasts to accommodate future requirements in a timely manner. As part of the annual budgetary process, in January, 1994 the City Council approved a 5 -year capital improvement plan for the water, wastewater and stormwater systems which totaled approximately $256 million, of which approximately $40 million is for water improvements, $108 million for water supply projects, $97 million for wastewater projects and $9 million for storm water projects. It is anticipated that such improvements will be financed primarily with revenue bonds. The current 1993-94 capital improvement plan includes an estimated need for approximately $28 million of capital expenditures for the water and wastewater and stormwater systems, approximately $19.6 million of which would be financed with revenue bonds. In the capital improvement plan, no major capital improvements are anticipated to be needed for the gas system. The City's ability to finance future capital improvements may depend upon its ability to increase rates sufficiently to support the issuance of Additional Priority Bonds and generate 0092792.02 -51- surplus System revenues necessary to finance such improvements. See "RATES --Charter Amendment Regarding Rates." LEGAL MATTERS When the Bonds are issued, the Attorney General of Texas will issue an opinion to the effect that the Bonds are valid and legally binding special obligations of Authority and will approve the Bonds, and, based upon an examination of a transcript of proceedings incident to the issuance of the Bonds, McCall, Parkhurst & Horton L.L.P., Bond Counsel, will deliver their legal opinion to the effect that the Bonds are valid, legally binding, and enforceable special obligations of the Authority and are payable from and secured solely by a lien on and pledge of the Gross Revenues of the Systems, except to the extent that the enforceability of the Bonds may be affected by bankruptcy, insolvency, reorganization, moratorium, or other similar laws affecting creditors' rights or the exercise of judicial discretion in accordance with general principles of equity. The form of Bond Counsel's anticipated opinion is reproduced as Appendix D hereto. In its capacity as Bond Counsel, McCall, Parkhurst & Horton L.L.P., Dallas, Texas has reviewed the information under the captions " in the Official Statement and such firm is of the opinion that the information relating to the Bonds and the Resolution contained under such captions is a fair and accurate summary of the information purported to be shown and that the information and descriptions contained under such captions relating to the provisions of applicable state and federal laws are correct as to matters of law. Neither the Attorney General nor Bond Counsel has been engaged to investigate or verify, and accordingly neither will express any opinion concerning, the financial condition or capabilities of the Authority, the content of this Official Statement (except as stated in the previous paragraph), or the sufficiency of the security for or the value or marketability of the Bonds. The fees to be paid to Bond Counsel are contingent upon sale and delivery of the Bonds. Fulbright & Jaworski L.L.P., San Antonio, Texas, will pass upon certain legal matters for the Underwriters. LITIGATION On the date of delivery of the Bonds to the Underwriter, the Authority will execute and deliver to the Underwriter a certificate to the effect that, except as disclosed herein, no litigation of any nature has been filed or is pending, as of that date, to restrain or enjoin the issuance or delivery of the Bonds or which would affect the provisions made for their payment or security or in any manner question the validity of the Bonds. The Authority is not a party to any litigation or other proceeding pending or to its knowledge, threatened, in any court, agency or other administrative body (either state or federal) which, if decided adversely to the Authority, would have a material adverse effect on the financial condition of the Authority. 0092742.02 -52- LITIGATION AND REGULATION RELATING TO THE CITY System Claims and Litigation The City is a defendant in various tort claims and lawsuits with respect to the System involving general liability, automobile liability, civil rights actions, and various contractual matters. In the opinion of the City's management and the City Attorney's office, the outcome of the pending litigation will not have a material effect on the System's financial position or operations. Environmental Regulations The City is subject to the environmental regulations of the State of Texas and the United States in the operation of its water, wastewater and gas system activities. These regulations are subject to change, and the City may be required to expend substantial funds to meet the requirements of such regulatory authorities. Safe Drinking Water Act. The federal Safe Drinking Water Act Amendments were signed into law in June 1986. These amendments require the U.S. Environmental Protection Agency (EPA) to regulate a wide variety of contaminants that may be present in drinking water, including volatile organic chemicals, other synthetic organic chemicals, inorganic chemicals, microbiological contaminants, and radionuclide contaminants. The list of contaminants to be regulated is so lengthy that the amendments require EPA to establish a schedule for developing regulations regarding the contaminants. There are several phases in EPA's regulatory timetable that are to be undertaken over the next few years. The initial impact of the amendments to the water system has been minimal as the City has been able to comply with the regulations promulgated to date. The full impact would be difficult to project at this time, and would be dependent upon what maximum contaminate levels may be set for some future parameters. Many of these parameters, such as radionuclides and disinfection by-products contaminants, may require treatment changes that have not as yet been es- tablished by EPA. Changes in the maximum amount of permitted levels of drinking water contaminants or other treatment standards may substantially increase the cost of the maintenance and operation of the System drinking water treatment facilities and require substantially increased capital expenditures, which may be financed by the issuance of additional System bonds. Federal and State Regulation of the Wastewater Facilities. The Wastewater System's operations are regulated by the Clean Water Act and the Texas Water Code. All discharges of pollutants into the nation's navigable waters must comply with the Clean Water Act. The Clean Water Act allows municipal wastewater treatment plants to discharge treated effluent to the extend allowed in permits issued by the EPA pursuant to the National Pollutant Discharge Elimination System (the "NPDES") program, a national program established by the Clean Water Act for issuing, revoking, monitoring, and enforcing wastewater discharge permits. The Clean Water Act authorizes the EPA to delegate the EPA's NPDES permit responsibility to state or interstate agencies after certain prerequisites have been met by the relevant agencies. The Texas Natural Resource Conservation Commission (TNRCC) has requested delegation of the NPDES program, but the EPA has not yet delegated its NPDES authority to the State. Until the NPDES program is delegated to TNRCC, all wastewater discharges must obtain a duplicative wastewater discharge permit from TNRCC. TNRCC's wastewater discharge permits frequently contain different provisions from EPA's NPDES permits. 0092742.02 -53- r NPDES permits set limits on the type and quantity of discharge, in accordance with state and federal laws and regulations. The Clean Water Act requires municipal wastewater treatment plants to meet secondary treatment effluent limitations (as defined in EPA regulations). The Clean Water Act also requires that municipal plants meet any effluent limitations established by state or federal laws or regulations which are more stringent than secondary treatment. Under the Clean Water Act, states must identify any bodies of water for which more stringent effluent standards are needed to achieve water quality standards. For each body of water, the state is to establish the maximum allowable daily load of certain pollutants identified by the EPA. The Clean Water Act allows municipalities to apply for extensions of applicable deadlines for secondary or additional treatment. TNRCC wastewater discharge permits establish effluent limitations which may be different from the effluent limitations contained in NPDES permits for the same facilities. The TNRCC's wastewater discharge permits are issued under authority granted to the agency by the Texas Water Code. Potential Penalties for the System's Violations. The failure by the City to achieve compliance with the Clean Water Act could result in either a private plaintiff or the EPA instituting a civil action for injunctive relief and civil penalties of up to $25,000 per day. In addition, the EPA has the power to issue administrative orders compelling compliance with its regulations and the applicable permits. The EPA can also bring criminal actions for recovery of penalties of up to $50,000 per day for willful or negligent violations of permit conditions or discharge without a permit. Violations of permits or administrative orders may result in the disqualification of a municipality from eligibility for federal assistance to finance capital improvements pursuant to the Clean Water Act. Under State law, penalties for violation of State wastewater discharge permits or orders of the TNRCC can be a maximum of $10,000 per day per violation. The Executive Director of the TNRCC also has authority to levy administrative penalties of up to $10,000 per day for violation of rules, orders or permits issued by the TNRCC. Any administrative penalty is subject to judicial review. An injunctive order resulting from a civil action could require the imposition of additional user or service charges or the issuance of additional bonds to finance the improvements required to ameliorate a condition that may have caused the violation of a TNRCC permit. Status of Permits for Citv's Treatment Plants. All of the System's wastewater treatment plants have been issued NPDES permits by EPA and discharge permits by TNRCC. All the TNRCC permits were renewed within the last year. On the other hand, the first of NPDES permits will come up for renewal by the end of 1995. An occasional upset may cause permit violations but generally all six plants are in compliance with their respective discharge permits. AdministrativeO d d P 1 a policy of aggressive enforcement of Director has publicly stated that the municipal wastewater discharges that regulations. Since September 1, 1985, number of Texas cities including the C Order an Penalties Resulting Therefrom. The TNRCC has announced environmental laws and regulations. The Executive TNRCC will emphasize enforcement efforts against are operating in violation of their permits or other administrative penalties have been assessed against a ity. The City of Corpus Christi was issued a TNRCC administrative order on October 6, 1993 for overflows in the Oso Treatment Plant collection system due to heavy rains during 1991-92. 0092742.02 -54- The Agreed Order had several penalties and technical requirements. Among the penalty requirements of the Agreed Order are the following: 1. The City paid a $28,000 administrative penalty and agreed to spend $20,000 toward the development and implementation of a Non -Point Source Pollution Education Program. 2. Effective on the issuance date of the order, the City shall pay a stipulated penalty of $2,500 per day for each day a bypass occurs in the Oso service area. The stipulated penalty requirements of the Order have expired as of December 16, 1993 and the City did not pay any additional penalties. 3. The City shall submit monthly progress reports to TNRCC which summarize actions during the month toward the Technical Requirements. The Technical Requirements included items such as a Infiltration/Inflow (I/1) study within two targeted areas of the Oso service area, complete the Home Road Lift Station Force Main Project to direct flows toward the Westside Treatment Plant collection system (completed December 16, 1993); do a targeted study area for the City's Water Conservation Plan, and do a Non -Point Source Pollution Education Program. The Agreed Order shall expire upon written notification from the Executive Director of the TNRCC and not sooner than the City's completion and submittal of the I/I study results as indicated in the Technical Requirements and provided the City of Corpus Christi has complied with all terms and conditions set forth in the order to the satisfaction of the Executive Director. However, the Agreed Order does not bar future legal action for violations of State or Federal water pollution laws. TAX MATTERS Opinion On the date of initial delivery of the Bonds, McCall, Parkhurst & Horton L.L.P., Dallas, Texas, Bond Counsel, will render their opinion that, in accordance with statutes, regulations, published rulings and court decisions existing on the date thereof (1) interest on the Bonds for federal income tax purposes will be excludable from the "gross income" of the holders thereof and (2) the Bonds will not be treated as "private activity bonds" the interest on which would be included as an alternative minimum tax preference item under section 57(a)(5) of the Internal Revenue Code of 1986 (the "Code"). Except as stated above, Bond Counsel will express no opinion as to any other federal, state or local tax consequences of the purchase, ownership or disposition of the Bonds. See Appendix D - Form of Bond Counsel's Opinion. In rendering their opinion, Bond Counsel will rely upon (a) the Authority's no -arbitrage certificate and (b) covenants of the Authority with respect to arbitrage, the application of the proceeds to be received from the issuance and sale of the Bonds and certain other matters. Failure of the Authority to comply with these representations or covenants could cause the interest on the Bonds to become includable in gross income retroactively to the date of issuance of the Bonds. The law upon which Bond Counsel have based their opinion is subject to change by the Congress and to subsequent judicial and administrative interpretation by the courts and the 0092742.02 -55- Department of the Treasury. There can be no assurance that such law or the interpretation thereof will not be changed in a manner which would adversely affect the tax treatment of the purchase, ownership or disposition of the Bonds. Federal Income Tax Accounting Treatment of Original Issue Discount The Underwriter has represented that the initial public offering price to be paid for one or more maturities of the Bonds (the "Original Issue Discount Bonds") is less than the principal amount or the maturity amount thereof. The difference between (i) the principal amount or the maturity amount, as the case may be, of each Original Issue Discount Bond, and (ii) the initial offering price to the public of such Original Issue Discount Bond constitutes original issue discount with respect to such Original Issue Discount Bond in the hands of any owner who has purchased such Original Issue Discount Bond in the initial public offering of the Bonds. Under existing law, such initial owner is entitled to exclude from gross income (as defined in section 61 of the Code) an amount of income with respect to such Original Issue Discount Bond equal to that portion of the amount of such original issue discount allocable to the period that such Original Issue Discount Bond continues to be owned by such owner. For a discussion of certain collateral federal tax consequences, see discussion set forth below. In the event of the redemption, sale or other taxable disposition of such Original Issue Discount Bond prior to stated maturity, however, the amount realized by such owner in excess of the basis of such Original Issue Discount Bond in the hands of such owner (adjusted upward by the portion of the original issue discount allocable to the period for which such Original Issue Discount Bond was held by such initial owner) is includable in gross income. Under existing law, the original issue discount on each Original Issue Discount Bond is accrued daily to the stated maturity thereof (in amounts calculated as described below for each six-month period ending on the date before the semiannual anniversary dates of the date of the Bonds and ratably within each such six-month period) and the accrued amount is added to an initial owner's basis for such Original Issue Discount Bond for purposes of determining the amount of gain or loss recognized by such owner upon the redemption, sale or other disposition thereof. The amount to be added to basis for each accrual period is equal to (a) the sum of the issue price and the amount of original issue discount accrued in prior periods multiplied by the yield to stated maturity (determined on the basis of compounding at the close of each accrual period and properly adjusted for the length of the accrual period) less (b) the amounts payable as current interest during such accrual period on such Bond. The federal income tax consequences of the purchase, ownership, redemption, sale or other disposition of Original Issue Discount Bonds which are not purchased in the initial offering at the initial offering price may be determined according to rules which differ from those described above. All owners of Original Issue Discount Bonds should consult their own tax advisors with respect to the determination for federal, state and local income tax purposes of interest accrued upon redemption, sale or other disposition of such Original Issue Discount Bonds and with respect to the federal, state, local and foreign tax consequences of the purchase, ownership, redemption, sale or other disposition of such Original Issue Discount Bonds. Collateral Federal Income Tax Consequences The following discussion is a summary of certain collateral federal income tax consequences resulting from the purchase, ownership or disposition of the Bonds. This 0092792.02 -56- discussion is based on existing statutes, regulations, published rulings and court decisions, all of which are subject to change or modification, retroactively. The following discussion is applicable to investors, other than those who are subject to special provisions of the Code, such as financial institutions, property and casualty insurance companies, life insurance companies, individual recipients of Social Security or Railroad Retirement benefits, certain S corporations with Subchapter C earnings and profits and taxpayers who may be deemed to have incurred or continued indebtedness to purchase tax- exempt obligations. INVESTORS, INCLUDING THOSE WHO ARE SUBJECT TO SPECIAL PROVISIONS OF THE CODE, SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE TAX TREATMENT WHICH MAY BE ANTICIPATED TO RESULT FROM THE PURCHASE, OWNERSHIP AND DISPOSITION OF TAX-EXEMPT OBLIGATIONS BEFORE DETERMINING WHETHER TO PURCHASE THE BONDS. Interest on the Bonds will be includable as an adjustment for "adjusted earnings and profits" to calculate the alternative minimum tax imposed on corporations by section 55 of the Code. Section 55 of the Code imposes a tax equal to 20 percent for corporations, or 26 percent for noncorporate taxpayers (28 percent for taxable income exceeding $175,000), of the taxpayer's "alternative minimum taxable income," if the amount of such alternative minimum tax is greater than the taxpayer's regular income tax for the taxable year. Interest on the Bonds is includable in the "alternative minimum taxable income" of a corporation (other than a regulated investment company or a real estate investment trust) for purposes of determining the environmental tax imposed by section 59A of the Code. Section 59A of the Code imposes on a corporation an environmental tax, in addition to any other income tax imposed by the Code, equal to 0.12 percent of the excess of the modified alternative minimum taxable income of such corporation for the taxable year over $2,000,000. Interest on the Bonds may be subject to the "branch profits tax" imposed on the effectively -connected earnings and profits of a foreign corporation doing business in the United States. Under Section 6012 of the Code, holders of tax-exempt obligations, such as the Bonds, may be required to disclose interest received or accrued during each taxable year on their returns of federal income taxation. Section 1276 of the Code provides for ordinary income tax treatment of gain recognized upon the disposition of a tax-exempt obligation, such as the Bonds, if such obligation was acquired at a "market discount" and if the fixed maturity of such obligation is equal to, or exceeds, one year from the date of issue. Such treatment applies to "market discount bonds" to the extent such gain does not exceed the accrued market discount of such bonds; although for this purpose, a de minimis amount of market discount is ignored. A "market discount bond" is one which is acquired by the holder at a purchase price which is less than the stated redemption price at maturity or, in the case of a bond issued at an original issue discount, the "revised issue price" (i.e., the issue price plus accrued original issue discount). The "accrued market discount" is the amount which bears the same ratio to the market discount as the number of days during which the holder holds the obligation bears to the number of days between the acquisition date and the final maturity date. 0092742.02 -57- Qualified Tax -Exempt Obligations Section 265(a) of the Code provides, in pertinent part, that interest paid or incurred by a taxpayer, including a "financial institution", on indebtedness incurred or continued to purchase or carry tax-exempt obligations is not deductible by such taxpayer in determining taxable income. Section 265(b) of the Code provides an exception to the disallowance of such deduction for any interest expense paid or incurred on indebtedness of a taxpayer which is a "financial institution" allocable to tax-exempt obligations, other than "private activity bonds", which are designated by an issuer as "qualified tax-exempt obligations". Section 265(b)(5) of the Code defines the term "financial institution" as referring to any corporation described in section 585(a)(2) of the Code, or any person accepting deposits from the public in the ordinary course of such person's trade or business which is subject to federal or state supervision as a financial institution. The Authority expects to designate the Bonds as "qualified tax-exempt obligations" within the meaning of section 265(b) of the Code. In furtherance of that designation, the Authority will covenant to take such action which would assure or to refrain from such action which would adversely affect the treatment of the Bonds as "qualified tax-exempt obligations". State. Local and Foreign Taxes Investors should consult their own tax advisors concerning the tax implications of the purchase, ownership or disposition of the Bonds under applicable state or local laws. Foreign investors should also consult their own tax advisors regarding the tax consequences unique to investors who are not United States persons. REGISTRATION AND QUALIFICATION OF BONDS FOR SALE The sale of the Bonds has not been registered under the Federal Securities Act of 1933, as amended, in reliance upon the exemption provided thereunder by Section 3(a)(2); and the Bonds have not been qualified under the Securities Act of Texas in reliance upon various exemptions contained therein; nor have the Bonds been qualified under the securities acts of any jurisdiction. The Authority assumes no responsibility for qualification of the Bonds under the securities laws of any jurisdiction in which the Bonds may be sold, assigned, pledged, hypothecated or otherwise transferred. This disclaimer of responsibility for qualification for sale or other disposition of the Bonds shall not be construed as an interpretation of any kind with regard to the availability of any exemption from securities registration provisions. THE BONDS AS LEGAL INVESTMENTS IN TEXAS Section 9 of the Bond Procedures Act of 1981, as amended, provides that obligations, such as the Bonds, are legal and authorized investments for banks, savings banks, trust companies, building and loan associations, savings and loan associations, insurance companies, fiduciaries and trustees, and for the sinking funds of cities, towns, villages, school districts and other political subdivisions or public agencies of the State of Texas. If the Bonds have and maintain a current rating as to investment quality of not Less than "A" or its equivalent by a nationally recognized rating agency, they are eligible to secure deposits of any public fund of the State or any political subdivision or public agency of the State, and are lawful and sufficient security for the deposits to the extent of their market value. See "Rating" herein. 0097742.02 -58- The Authority has made no investigation of other laws, rules, regulations or investment criteria which might apply to such institutions or entities or which might limit the suitability of the Bonds for any of the foregoing purposes or limit the authority of such institutions or entities to purchase or invest in the Bonds for such purposes. The Authority has made no review of laws in other states to determine whether the Bonds are legal investments for various institutions in those states. RATINGS Moody's Investors Service, Inc. and Standard & Poor's Corporation have assigned municipal bond ratings of "" and " ", respectively, to the Bonds. An explanation of the significance of such ratings may be obtained from the company furnishing the rating. The ratings reflect only the respective views of such organizations and the Authority and the City make no representation as to the appropriateness of the ratings. There is no assurance that such ratings will continue for any given period of time or that they will not be revised downward or withdrawn entirely if in the judgment of either or both companies, circumstances so warrant. Any such downward revision or withdrawal of such ratings, or either of them, may have an adverse effect on the market price of the Bonds. GENERAL INFORMATION The descriptions herein do not purport to be complete and all such descriptions or references are qualified in their entirety by reference to the complete form of the Resolution or other documents or source they summarize. Statements made herein involving estimates or projections, whether or not expressly identified as such, should not be construed to be statements of fact or as representations that such estimates or projections will ever be attained or will approximate actual results. Any summaries or excerpts of constitutional provisions, statutes, resolutions, or other documents do not purport to be complete statements of same and are made subject to all of the provisions thereof. Reference should be made to such original sources in all respects. For additional information with respect to the financial condition of the City, a copy of the July 31, 1993 Comprehensive Annual Financial Report of the City of Corpus Christi, Texas is available upon written request addressed to the Office of the Director of Finance, City of Corpus Christi, Corpus Christi, Texas 78469-9277. The Bonds are payable solely from the Pledged Security as described herein. The inclusion in the Appendices hereto of financial and other information with respect to other funds, assets or resources of the Authority or the City is in no way intended to imply that any other revenues or money of the City or the Authority are pledged to pay the principal of and interest on the Bonds. UNDERWRITING M.E. Allison & Co., Inc. has agreed, subject to certain conditions, to purchase the Bonds from the Authority at a price of $ , plus accrued interest on the Bonds to the date of initial delivery of the Bonds to the Underwriter. The Underwriter's obligation is subject to certain conditions precedent. The Underwriter will be obligated to purchase all of the Bonds if any Bonds are purchased. The Bonds may be offered and sold to certain dealers and others 0092742.02 -59- at prices lower than such public offering prices, and such public prices may be changed, from time to time, by the Underwriters. OTHER MATTERS All information contained in this Official Statement is subject, in all respects, to the complete body of information contained in the original sources thereof and no guaranty, warranty or other representation is made concerning the accuracy or completeness of the information herein. In particular, no opinion or representation is rendered as to whether any projection will approximate actual results, and all opinions, estimates and assumptions, whether or not expressly identified as such, should not be considered statements of fact. CERTIFICATION OF THE OFFICIAL STATEMENT At the time of payment for and delivery of the Bonds, the Underwriter will be furnished a certificate, executed by proper officials of the City and the Authority, acting in their official capacity, to the effect that to the best of their knowledge and belief: (a) the descriptions and statements of or pertaining to the Authority and the City contained in their Official Statement, on the date of sale of the Bonds and on the date of the delivery of the Bonds, were and are true and correct in all material respects; (b) insofar as the Authority and the City and their affairs, including its financial affairs, are concerned, such Official Statement did not and does not contain an untrue statement of material fact or omit to state or material fact regarding the Authority or the City or their affairs, including financial affairs, required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; (c) insofar as the descriptions and statements including financial data, of or pertaining to entities, other than the Authority or the City, and their activities contained in such Official Statement are concerned, such statements and data have been obtained from sources which the Authority or the City believes to be reliable and the Authority or the City has no reason to believe that they are untrue in any material respect; and (d) there has been no material adverse change in the financial condition of the Authority or the City, since the date of the last financial statements of the City appearing in the Official Statement. USE OF INFORMATION IN OFFICIAL STATEMENT The Official Statement has been prepared by the Underwriter. No person has been authorized 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 the Authority or the City. This Official Statement does not constitute an offer to sell or solicitation of an offer to buy in any state in which such offer or solicitation is not authorized or in which the person making such offer or solicitation is not qualified to do so or to any person to whom it is unlawful to make such offer of solicitation. FINANCIAL ADVISOR First Southwest Company (the "Financial Advisor") is employed by the Authority in connection with the issuance of the Bonds and in such capacity, has assisted the Authority in 0092742.02 -60- compiling documents related thereto. Although the Financial Advisor assisted in drafting this Official Statement, the Financial Advisor has not independently verified all of the data contained in it or conducted a detailed investigation of the affairs of the Authority to determine the accuracy or completeness of this Official Statement. No person should presume that the limited participation of the Financial Advisor means that the Financial Advisor assumes any responsibility for the accuracy or completeness of any of the information contained in the Official Statement. The fee of the Financial Advisor for services rendered is contingent upon the issuance and sale of the Bonds. MISCELLANEOUS The Resolution authorizing the issuance of the Bonds will also approve the form and content of this Official Statement and any addenda, supplement or amendment thereto and authorize its further use in the reoffering of the Bonds by the Underwriter. [The remainder of this page intentionally left blank] 0092712.02 -61- This Official Statement has been approved by the Board of Directors of the Authority and the City Council of the City for distribution in accordance with the provisions of the Securities and Exchange Commission's rule codified at 17 C.F.R. Section 240.15c2-12. ATTEST: Secretary, Board of Directors Nueces River Authority 0092742.02 President, Board of Directors Nueces River Authority -62- 0092742.02 [This page intentionally left blank] -63- 0092742.02 APPENDIX A CONTRACT BETWEEN CORPUS CHRISTI AND NUECES RIVER AUTHORITY A-1 0092742.02 T [This page intentionally left blank] A-2 0092742.02 APPENDIX B CERTAIN AUDITED FINANCIAL STATEMENT B- I 0092742.02 [This page intentionally left blank] B-2 APPENDIX C The following information has been provided by the City from sources it believes to be reliable. Information contained herein regarding industries and other private institutions in the Corpus Christi area are for general background purposes only. CITY OF CORPUS CHRISTI DEMOGRAPHIC AND ECONOMIC DATA Population and Location Corpus Christi is the eighth largest city in the State of Texas with a population of 257,453 based on the 1990 Census. The geographic location of the City on the Gulf of Mexico and the Intercoastal Waterway gives it one of the most strategic locations in the Southwest and has been important to its economic development. From its early days, Corpus Christi has been a focal point for the marketing, processing, packaging and distribution of agricultural commodities in a twelve - county trade area. The Port of Corpus Christi opened the City to world commerce in 1926 and the North American Free Trade Agreement (NAFTA) will place South Texas in the midst of the world's largest freetrade zone. Area and Topography The area of the City has increased through annexations as the City's population and industry grew. The City has had numerous orderly annexations and now contains approximately 452 square miles, which is broken down to approximately 124 square miles of land and 328 square miles of water. While the area covered by water contains no population and does not require normal city services, it does produce considerable revenues from oil and gas properties located therein. The topography of Corpus Christi is generally flat with rich soils broken by numerous bays. The elevation ranges from sea level to eighty-five feet. Form of Government and Administration The City was incorporated in 1852. It operated as a general law city until 1926 when a Home Rule Charter with a commission form of government was adopted. The Charter was amended in 1945 and the present Council -Manager form of government was adopted. The City Council consists of the mayor and eight Council members, all elected for two year terms. The Mayor and three Council members are elected at large while five are elected from single member districts. These nine Officials are listed on page (ii) of this document. The City Manager is appointed by the City Council and is the Chief Administrative and Executive Officer. The Director of Finance is appointed by the City Manager and is charged with the administration of fiscal affairs The City Council fixes the annual tax rate based on a budget prepared under the direction of the City Manager. 0092 a.02 C-1 The names, years of service, experience and background of certain appointed officials are as follows: Juan Garza - City Manager On March 8, 1988, Juan Garza was appointed City Manager for the City of Corpus Christi. Mr. Garza has worked for the City of Corpus Christi since 1983 and from October, 1986 to March, 1988, served as the Assistant City Manager for Administrative Services. Prior to that time, Mr. Garza was Director of Finance, where he was responsible for the management of the financial affairs of the City, including debt management and long range capital improvement financial planning. Mr. Garza has also worked in the capacity of Deputy Director of Finance. Prior to coming to Corpus Christi, Mr. Garza's experience included Finance Director for the City of Moline, Illinois for 3 years, Assistant to the Finance Director and positions in Planning and Engineering for the City of Evanston, Illinois, for 12 years. Mr. Garza holds a Master's degree in Business Administration and a Bachelor of Science degree -Mathematics from Loyola University of Chicago. Bill Hennings - Deputy City Manager Bill Hennings, Deputy City Manager, has been employed by the City of Corpus Christi since 1971. He served as head of the building inspection, public works, inspections and operations departments. Appointed Assistant City Manager in 1981, he managed the Cultural Services Group until assuming responsibility for Development Services in 1990. He assumed the position of Group Manager of Public Works and Utilities in 1992 and was responsible for overseeing the Utilities, Solid Waste, Street and Maintenance Service Departments. On September 6, 1993, Mr. Hennings was appointed Deputy City Manager. Mr. Hennings has also served as executive vice president of the Corpus Christi Area Oil Spill Control Association since 1976. A graduate of the University of Louisville, Mr. Hennings holds Bachelor's and Master's degrees in engineering from that institution and a Master of Business Administration from Corpus Christi State University. W. Thomas Utter - Group Manager, Development Services W. Thomas Utter, Manager of the Development Services Group, has been employed by the City of Corpus Christi since 1976. He served as Director of Housing and Community Development until 1981 when he was appointed Assistant City Manager for Urban Development. Since 1986, he has served as Assistant City Manager for Economic Development. In November, 1990 Mr. Utter was appointed Director of Public Works. In this position he managed operations of Street, Solid Waste, and Maintenance Service Departments. In 1992, Mr. Utter was appointed to his present post which oversees operations in the Engineering, Planning, Building Inspections and other Development Service Departments. Prior to coming to Corpus Christi, Mr. Utter held Directorship positions in several Urban Renewal and Community Development Agencies in Texas, as well as faculty positions in economics at several Texas universities. Mr. Utter completed his undergraduate studies at Clemson University and graduate studies at Texas Tech University, both in economics. He was a HUD Public 0002742.02 1 C-2 Leadership Fellow at the John F. Kennedy School of Government, Harvard University in 1980 and served as President of the National Community Development Association in 1985. Jorge A. Garza - Group Manager, Administrative Services Jorge A. Garza was appointed as Manager of the Administrative Service Group for the city of Corpus Christi in November, 1990. As such, he oversees the Finance, Human Resources, Municipal Court, Municipal Information Services, Materials Management and Risk Management Departments. Prior to this appointment he was Director of Finance, Assistant Director of Finance and Chief Accountant. Mr. Garza has worked for the City of Corpus Christi since 1984. Before coming to work for the City, Mr. Garza was in the U.S. Army for twenty years, retiring as Major. Mr. Garza holds a Bachelor of Business Administration degree from Corpus Christi State University and is a Certified Public Accountant. Rosie Vela, CPA- Director of Finance Rosie G. Vela was appointed Director of Finance in December 1990. She has worked for the City of Corpus Christi since September, 1985, having served as Chief Accountant, Controller, Assistant Director of Finance, and Director of Management and Budget. Mrs. Vela holds Bachelor's and Master's degrees in Business Administration from Corpus Christi State University, and is a Certified Public Accountant and Certified Government Finance Officer. Certain Govenunent Services Provided by the City Public Safety ... The City provides police protection, fire protection, building inspection, street lighting and traffic signals and civil defense. Law enforcement and civil defense is provided through the Police Department. The City's Fire Department operates 14 fire stations and the Emergency Medical Service throughout the City. Public Services ... In addition to operating its water, wastewater disposal, and gas systems, the City also provides garbage collection and disposal and maintenance of streets and storm drainage areas. Community Enrichment ... The City's main library and four branches are equipped with over 344,848 volumes. The City owns and maintains approximately 231 parks containing over 1,932 acres. The City also owns extensive recreational facilities including 122 playgrounds, a yacht basin and marina with 535 boat Mips, 4 municipal beaches, 2 fishing piers, 2 public golf courses, 9 swimming pools, 43 tennis courts, several baseball and softball diamonds and 11 recreational centers. In addition, the City owns an auditorium, a coliseum, Harbor Playhouse, the Corpus Christi Museum, the South Texas Art Museum, the Multicultural Center, the Water Garden and a Community -Convention facility. Airport and Transit System ... The City owns the Corpus Christi International Airport situated on 2,430 acres. The regional transportation system provides passenger bus service within the area and out-of-town charter services originating in the City. 0092742.02 C-3 Health ... The City maintains preventive health services through health facilities within the community. The City does not have the responsibility of maintaining hospitals, a school system, or a higher education system, and does not expend any funds in providing welfare. CERTAIN ASPECTS OF THE CITY'S FINANCIAL PROCEDURES Audit and Financial Reporting The City Charter requires an annual audit to be made of the books of account, records and transactions of the City by a Certified Public Accountant. The fiscal year of the City begins the first day of August of each year and ends with the thirty-first day of July of the following year. The Government Finance Officers Association of the United States (the "GFOA") first awarded the City its Certificate of Conformance, later termed the Certificate of Achievement for excellence in Financial Reporting, for its annual financial report for 1957. The City was awarded the same recognition for its 1970, 1975, 1978, 1979, 1983 and 1984 through 1992 financial reports. Budget Procedures State laws and the City Charter require the preparation and filing of an annual budget. The City Manager submits a proposed budget to the City Council at least sixty days prior to the beginning of the fiscal year which estimates revenues and expenses for the next year. The proposed expenditures will not exceed estimated revenues. The City Council shall adopt a balanced budget prior to the beginning of the fiscal year. If the Council fails to adopt a budget by the beginning of the fiscal year, the amounts appropriated for current operation for the current fiscal year are deemed the adopted budget for the ensuing fiscal year on a month to month basis, until such time as the Council adopts a budget for the ensuing year. The City received the Distinguished Budget Presentation Award from the Government Finance Officer's Association for fiscal years beginning August 1, 1988 through 1992. Significant Accounting Policies The City prepares its financial statements in accordance with the generally accepted accounting principles for local governmental units as prescribed by the Governmental Accounting Standards Board and the American Institute of Certified Public Accountants. A summary of significant accounting policies of the City are set out in the Notes to Financial Statements for the year ended July 31, 1993 located elsewhere in the financial section of the Official Statement. 0092742.02 [The remainder of this page intentionally left blank] C-4 ECONOMIC AND DEMOGRAPHIC CHARACTERISTICS Population The 1990 U.S. Census population for Corpus Christi was 257,453, which was approximately 11% greater than the population reported in 1980. The table below shows the history of population from 1920 to 1990: Population Percent of Increase Over U. S. Census Fieures for 1920-1990 Precedine Census 1920 10,522 27% 1930 27,741 163% 1940 57,301 106% 1950 108,053 88% 1960 167,690 54% 1970 204,525 21% 1980 232,134 13% 1990 257,453 11% Corpus Christi Standard Metropolitan Statistical Area (SMSA) consists of Nueces and San Patricio Counties and according to the 1990 U.S. Census had a population of 348,353. Trade Area and Location Corpus Christi's central trade area consists of five counties, Nueces, San Patricio, Aransas, Jim Wells, and Kleberg. Each of the Counties maintains solid and diversified economic bases which contribute material support to Corpus Christi, due to its location as a trade center and shipping point. The land is generally flat with strong mineral deposits, rich soil, excellent climate, and a growing season of approximately 300 days. Grain sorghum and cotton are the principal agricultural crops. The region also has a strong supply of livestock including beef, dairy cattle, hogs and poultry. The oil and gas industry is a major factor in the growth and economic stability within the trade area. Mineral values vary depending on world market and demand. This industry also provides a secondary market for petro -by-products and chemicals. The trade area's principal outlet for agricultural and petroleum products is the Port of Corpus Christi, which has served the area since 1926. The rebuilt grain elevator, completed in 1983, adds to the port's capacity to handle various agricultural products. In 1992 the Port handled a record breaking volume of 72.5 million tons of cargo, including 59 million tons of petroleum products. Corpus Christi has one of the most strategic located waterways in the Southwest with deep water transportation to the Gulf of Mexico and barge traffic all along the Texas coast via the Intra -coastal waterway. The nearest other port is in Brownsville, 160 miles to the south; nearest retail and wholesale outlet is San Antonio, 145 miles to the northwest; and the nearest heavy industry competition is Houston, 210 miles to the northeast. 0092742.02 C-5 Industry Corpus Christi industry provides a diversified product market including metal fabrication, chemical processing, farm and ranch equipment, oil field equipment, cement, clothing manufacturing, food processing, electronic and petrochemical products. The diversification is primarily due to the commitment of the Port of Corpus Christi to provide a quality deep water facility. The Port of Corpus Christi opened the area to world markets in 1926. Deeper channels have for decades allowed Corpus Christi to be a competitive port for bulk commodities requiring large, deep draft vessels. It is the terminus of a network of oil and gas pipelines throughout Southwest Texas and extending into West Texas. The port is located in Corpus Christi Bay and extends into the Gulf of Mexico along the South Texas Coast. The inner harbor lies along a 91 mile stretch of dredge inland channel and basins within Corpus Christi Bay. The port has four divisions, including the inner harbor which has a channel depth of 45 feet; Harbor Island, near the entrance of the Gulf of Mexico; Port Ingleside and La Quinta, both of these locations are along the north shore of Corpus Christi Bay. Harbor Island, Port Ingleside, and La Quinta have all been deepened to 45 feet. The Port of Corpus Christi is one of America's deepest inshore gulf ports. The extension of the 45 foot channel across Corpus Christi Bay was completed in 1978 and the final leg of dredging for the Inner Harbor, which deepened the Inner Harbor to 45 feet, was completed in 1989. With completion of the dredging, the project provides the deepest channel on the Gulf Coast for all reaches of the port. This project will enhance the area by expanding the ability of the Port to handle additional bulk commodities. The Port has full service container and heavy lift capability with direct rail from the dock to ports of entry at Laredo, Brownsville and McAllen. The Port is an excellent position to handle growing trade in the international marketplace. Information on ships and barges using the Port's facilities can be obtained from the Port of Corpus Christi office. It is estimated 1,185 ships and 5,339 barges used the Port's facilities in 1989. There are a total of 6,816 linear feet of wharf frontage consisting of 27 public docks, 14 dry docks, 2 bulk terminals, 2 grain elevators (1 private --1 public) and 11 oil docks. In addition, there are 14 private oil docks and 9 dry cargo docks owned and operated by private industries. There is also a public compress with an average capacity to handle 2,500 bales of cotton per eight hour day. During 1981 the City of Corpus Christi established the Corpus Christi Industrial Development Corporation to facilitate business expansion within the City. The corporation offers tax exempt industrial revenue bond funding for various new and expansion projects. The Port of Corpus Christi has also developed a similar non-profit organization to provide tax exempt industrial revenue bond funds to industries within Nueces County. Establishment of Industrial Districts In 1981 several industrial districts had been established upon the voluntary execution of industrial district agreements by the City and industries located in two general areas of the City's extraterritorial jurisdiction. Texas law gives the governing body of any city the right, power, and authority to designate any part of the area located in its extraterritorial jurisdiction as an industrial district. All industrial district agreements were extended for a seven year period effective January 1, 1989. 0097142.02 C-6 The terms of the industrial district agreement provide that the City has no obligation to extend to the industrial districts any City services except fire protection to certain industries who pay for this service, and other City services which are paid for by the industries separate and apart from the annual industrial district in lieu of tax payment. The industrial district agreement and the methods of determining the amount of the annual payment are subject to all provisions of law relating to determination of market value including, but not limited to, laws relating to rendition, assessment, equalization, and appeal. The City received $4,048,920 in 1992-93 from the industrial district in lieu of tax payments. Corpus Christi Naval Air Station In the training of pilots and maintenance of aircraft, the Navy uses more than 1,687 military and more than 1,334 civilian personnel. Corpus Christi Army Depot The Corpus Christi Army Depot has approximately 3,008 civilian and 8 military personnel. CCAD is the Army's facility for complete maintenance, overhaul and repair of Army helicopters. Navel Station Ingleside employs approximately 200 civilians and approximately 2,200 military personnel. Foreign Tiede Zone In 1985 the Department of Commerce approved an application for Grant of Permit to operate a Foreign -Trade Zone. The Corpus Christi Foreign -Trade Zone ("FTZ") is unique in several aspects: It comprises fifteen (15) separate areas made up of two (2) public agency sites, three (3) privately operated storage sites and ten (10) subzones. Some of these subzones will be operated by our petrochemical industry in an effort to better compete in the world oil market. Corpus Christi's Foreign -Trade Zone has become the first FTZ in the continental United States to permit petroleum refiners to operate using full zone privileges. The successful operation of the Foreign -Trade Zone could have very beneficial effects on the economy of Corpus Christi. Users of a Foreign -Trade Zone are permitted to defer customs duty on imports and in some cases avoid duty, tariffs and excise tax on certain exports. Private Utilities Southwestern Bell Telephone Company supplies telephone service to Corpus Christi. Electricity is furnished by Central Power and Light Company (CPL) which has its principal offices in Corpus Christi. CPL supplies electric service to a 44,000 square mile area which reaches into 44 counties of South Texas. Three of CPL's largest power stations are located in Corpus Christi. 009274202 C-7 Banking Sixteen banks are located in the City. The table below sets forth the total deposits as of June 30 for the past ten years: Year Amount 1984 $1,1889,486,199 1985 2,216,545,039 1986 2,250,374,930 1987 2,244,671,785 1988 2,257,245,901 1989 2,144,920,025 1990 2,118,486,199 1991 1,943,500,882 1992 1,824,843,587 1993 1,877,487,176 Transportation The Port of Corpus Christi provides excellent access to the sea lanes of the world. The Corpus Christi International Airport is served by seven airlines and the City is buying additional land for future expansion. Three rail lines serve the City and provide good transit time throughout the United States and Mexico. The City is tied into the Interstate highway network providing an open highway access to the entire nation. Corpus Christi International Airport has 2,430 acres with two fully instrumented runways of 7,500 feet and 6,080 feet. Enplaning and deplaning passengers totaled 1,003,928 for the fiscal year ended July 31, 1993. There are 68 scheduled airline arrivals and departures daily. Education and Hospitals There are five separate school districts within the City limits having ten high schools, seventeen junior high schools and forty-nine elementary schools. Higher education is provided by Texas A&M -Corpus Christi, a two year upper level university which will become a four-year institution in 1994. The September, 1993 enrollment was 4,391. The Corpus Christi Junior College District operates Del Mar College and offers two year college lower level and vocational certificate programs. The September, 1993 enrollment consisted of 11,233 students. The U. S. Geological Survey operates a research facility at the Corpus Christi State University campus conducting geological research on the sea floor of the Gulf of Mexico and the Caribbean Sea. The Blucher Institute is an endowed institute at Corpus Christi State University which provides coastal land surveying and satellite map surveying services. 0092142.02 C-8 The University of Texas Marine Science Institute is located in nearby Port Aransas and provides graduate level work and research opportunities in the broad field of marine sciences. Texas A&M University also operates two branches in the Corpus Christi area; the Texas A&M Experiment Station and the Texas Agricultural Extension Service. The Experiment Station is involved in research in the development of new technologies and the agricultural extension works with the agribusiness sector of the area. There are ten hospitals in the City with a total of over 1,800 beds and several expansion programs underway. Employment The following table indicates the total civilian employment in the Corpus Christi MSA for the period December, 1993 as compared to the prior periods of November, 1993 and December, 1992: 00112742.02 C-9 Civilian Labor Force Unemployment Percent Unemployment Total Employment Prior Periods December November December 1993 1993 1992 169,900 14,400 8.5% 155,500 172,400 171,300 15,500 15,900 9.0% 9.3% 156,900 155,400 The following table shows certain nonagricultural wage and salary employment in the Corpus Christi MSA for December and November, 1993 and December, 1992: Manufacturing Mining Construction Transportation, Commercial and Utilities Trade Financial Insurance and Real Estate Services & Miscellaneous Government Total December November December 1993 1993 1992 13,500 2,700 11,400 6,600 13,500 2,800 11,400 6,800 13,400 3,000 11,400 7,000 32,700 32,600 34,000 6,000 34,700 30.100 138,000 6,000 6,100 34,900 30.200 138,100 34,800 31.300 141,000 Source: Texas Employment Commission, Texas Labor Market Review December, 1993. 0092742.02 [The remainder of this page intentionally left blank] C-10 Construction The table below indicates the amount of construction activity in Corpus Christi: Building Permits Calendar (annually) Year No. of Permits Value 1984 5,110 $237,279,849 1985 4,789 210,156,418 1986 4,357 160,586,764 1987 3,990 142,043,717 1988 4,018 97,030,619 1989 4,530 146,634,691 1990 4,507 90,316,613 1991 5,148 101,609,375 1992 5,723 118,092,107 1993 5,628 100,076,740 Tourist and Convention Business Corpus Christi continues to be a favorite vacation spot for visitors, as reflected by the 1.2% increase in the hotel occupancy rate from fiscal year 1991-92, which itself reflected a 15.6% increase from the prior year. The impact of the increased visitor activity, however is reflect throughout the community through increased spending in restaurants and shops. Additional visitor attractions which have helped to spur this growth include: • Greyhound Race Track; • Texas State Aquarium; • USS Lexington Museum on the Bay; and • Las Caravelas, replicas of the Christopher Columbus ships. The Corpus Christi Area Convention & Visitor's Bureau report indicates 189 conventions with 125,754 delegates spent approximately $69 million in Corpus Christi during 1992-93. A focal point for entertainment and cultural activities in Corpus Christi is the Bayfront Plaza complex, including the Convention Center and the Auditorium, Art Museum of South Texas, Corpus Christi Museum, Harbor Playhouse, Water Garden and Heritage Park. Nearby Mustang Island and Padre Island are easily accessible by a system of highways and causeways and visitors can enjoy bathing and other recreational advantages offered by the Gulf of Mexico. Because of the Gulf breezes, winters are mild and summers are comfortably cool with an annual average mean temperature of 70 degrees. Boating and fishing accommodations are good and Port Aransas on Mustang Island is famous for deep sea fishing. The National Seashore Recreational Area on Padre Island has an 88 mile shoreline and excellent facilities are provided by the National Park Service. 0092742.02 C-11 009274102 [This page intentionally left blank] C-12 0092742.02 APPENDIX D FORM OF OPINION OF BOND COUNSEL D-1 0092742.02 [This page intentionally left blank] D-2 $7,800,000' NUECES RIVER AUTHORITY WATER SUPPLY REVENUE CURRENT REFUNDING BONDS, (CITY OF CORPUS CHRISTI, TEXAS PROJECT) SERIES 1994 PURCHASE CONTRACT March 3, 1994 Chairman and Board of Directors Nueces River Authority First State Bank Building, Suite 206 Uvalde, Texas 78802 Ladies and Gentlemen: The undersigned (the "Underwriters"), acting through the Authorized Representative designated in Section 1 hereof (the "Authorized Representative"), offer to enter into the following agreement (this "Purchase Contract") with the NUECES RIVER AUTHORITY (the "Authority') which, upon your acceptance of this offer, will be binding upon you and upon the Underwriters. This Purchase Contract has also been approved by the City Manager of the City of Corpus Christi, Texas (the "City"). The offer contained herein is made subject to your acceptance of this Purchase Contract on or before 10:00 P.M., Uvalde, Texas time, on the date hereof and, if not so accepted, will be subject to withdrawal by the Underwriters upon notice delivered to the Authority by the Underwriters at any time prior to the acceptance hereof by the Authority. 1. Purchase and Sale of the Bonds. Upon the terms and conditions and upon the basis of the respective representations, warranties, and covenants set forth herein, the Underwriters hereby agree to purchase from the Authority, and the Authority hereby agrees to sell and deliver to the Underwriters, all (but not less than all) of an aggregate of $7,800,000 principal amount of NUECES RIVER AUTHORITY WATER SUPPLY REVENUE CURRENT REFUNDING BONDS, SERIES 1994 (CITY OF 'Preliminary, subject to change 0094427 CORPUS CHRISTI, TEXAS PROJECT) (the "Bonds"). The Bonds shall be dated February 15, 1994 and shall have the stated maturities, be offered at the prices, and bear interest at the rates per annum all as set forth in the Official Statement (hereinafter defined). The purchase price for the Bonds is $ (representing an aggregate principal amount of $7,800,000 of Bonds, less an original issue discount of $ , and less the Underwriter's discount of $ ), together with accrued interest on the Bonds from February 15, 1994 to the date of the Closing. The Bonds are to be issued pursuant to the provisions of Texas Revised Civil Statutes Annotated Article 717k, as amended (the "Act") and are secured under the provisions of a bond resolution authorizing their issuance and sale (the "Bond Resolution") adopted by the Board of Directors of the Authority (the "Board") on March 3, 1994. The Bonds are payable from and secured solely by a lien on and pledge of the Gross Revenues of the City's utility systems (the "System") and by certain funds and accounts created and established under the Bond Resolution and such security for the Bonds is referred to herein as the "Pledged Security". The Bonds are to bear interest, be subject to redemption, and be payable as provided in the Bond Resolution, all as described in the Official Statement referred to below. Capitalized terms not defined herein shall have the meanings ascribed in the Bond Resolution. A portion of the proceeds received by the Authority from the sale of the Bonds pursuant hereto and certain other funds of the Authority, if any, shall be deposited with Corpus Christi National Bank, Corpus Christi, Texas, as escrow agent (the "Escrow Agent"), under and pursuant to the escrow deposit letter (the "Escrow Agreement") referred to in the Bond Resolution for the purpose of safeguarding certain proceeds of the Bonds pending the redemption of the Refunded Bonds. M. E. Allison & Co., Inc. represents that it has been duly authorized to execute this Purchase Contract and has been duly authorized to act hereunder as the Authorized Representative. All actions which may be taken by the Underwriters may be taken by the Authorized Representative alone. 2. Public Offering. The Underwriters agree to make a bona fide public offering of all of the Bonds at a price not to exceed the public offering price set forth in Exhibit A attached hereto and on the cover of the Official Statement and may subsequently change such offering price without any requirement of prior notice. The Underwriters agree, for the purpose of enabling the Authority to comply with its obligations set forth in Section 5(1) of this Purchase Contract, to inform the Authority of the date of expiration of the initial offering period for the Bonds. The Underwriters may offer and sell Bonds to certain dealers (including dealers depositing Bonds into investment trusts) and others at prices lower than the public offering price stated on the cover of the Official Statement. On or before Closing, the Authorized Representative shall execute the certificate attached hereto as Exhibit A verifying the initial offering prices to the public at which a substantial amount of each stated maturity of the Bonds was sold to the public. 0094427 -2- 3. Official Statement. The Bonds are described in a final Official Statement dated the date hereof, a substantially final version of which is attached hereto as Exhibit B. Such final Official Statement, together with the Appendices thereto, as further amended or supplemented only in the manner hereinafter provided, is herein called the "Official Statement". The Authority hereby authorizes and approves the distribution and use by the Underwriters of the Official Statement in connection with the offering and sale of the Bonds. In addition, the Authority hereby ratifies and approves the distribution of the Preliminary Official Statement, dated February 22, 1994, (the "Preliminary Official Statement") and its use by the Underwriters prior to the date hereof in connection with the offering and sale of the Bonds. The Authority will deliver, on the date hereof, to the Underwriters (i) two (2) copies of the Official Statement, executed by the appropriate officials of the Authority, and (ii) two (2) certified copies of the Bond Resolution. The Authority shall within seven days of the date hereof (exclusive of Saturdays, Sundays, and legal holidays) provide additional printed copies of the Official Statement in such form and number as the Underwriters may request in order to enable the Underwriters to comply with its obligations set forth in 17 C.F.R. Section 240.15c2-12 ("Rule 15c2 -1T). In the event that the number of additional copies of the Official Statement supplied to the Underwriters pursuant to the immediately preceding sentence shall prove to be insufficient to enable the Underwriters to comply with its obligations under paragraph (b) of Rule 15c2-12, the Authority agrees to make available from time to time such additional printed or photostatic copies of the Official Statement as may be required to enable the Underwriters to comply with their obligations under Rule 15c2-12. The Board hereby ratifies and approves the execution by the Executive Director of the Authority of a Rule 15c2-12 Certificate pertaining to the distribution of the Preliminary Official Statement. The City Manager of the City will also execute a Rule 15c2-12 Certificate relating to the issuance of the Bonds. 4. Security Deposit. Delivered to the Authority herewith is a corporate check of the Authorized Representative payable to the order of the Authority in the amount of $78,000. The Authority agrees to hold such check uncashed until the Closing to ensure the performance by the Underwriters of their obligation to purchase, accept delivery of, and pay for the Bonds at the Closing. Concurrently with the payment by the Underwriters of the purchase price of the Bonds at the Closing, the Authority shall return such check to the Authorized Representative. Should the Authority fail to deliver the Bonds at the Closing, or should the Authority be unable to satisfy the conditions of the obligations of the Underwriters to purchase, accept delivery of, and pay for the Bonds, as set forth in this Purchase Contract (unless waived by the Authorized Representative), or should such obligations of the Underwriters be terminated for any reason permitted by this Purchase Contract, such check shall immediately be returned to the Authorized Representative. In the event the Underwriters fail (other than for a reason permitted hereunder) to purchase, accept delivery of, and pay for the Bonds at the Closing as herein provided, such check shall be retained by the Authority as and for full liquidated damages for such failure of the Underwriters and for any defaults hereunder on the part of the Underwriters. 0094427 -3- Acceptance of such check by the Authority shall constitute a full release and discharge of all claims and damages for such failure and for any and all such defaults, and neither the Authority nor any other person shall have any further action for damages, specific performance, or any other legal or equitable relief against the Underwriters. The Authorized Representative hereby agrees not to stop or cause payment on said check to be stopped unless the Authority has breached any of the terms of this Purchase Contract. 5. Representations and Warranties. The Authority hereby represents and warrants to the Underwriters as follows: 0094427 (a) The Authority is a political subdivision of the State of Texas and a governmental agency and a body politic and corporate, duly created, organized and existing in good standing under the laws of the State of Texas, created by a special act of the Texas Legislature that is codified at Texas Revised Civil Statutes Annotated Article 8280-115, as amended. (b) The Authority has the power and is authorized under the laws of the State of Texas, including particularly the Act, to (i) issue the Bonds for the purpose for which they are to be issued, and (ii) enter into and perform this Purchase Contract and the Escrow Agreement. (c) The Authority has the requisite right, powers and authority (i) to adopt the Bond Resolution authorizing the issuance of the Bonds and the execution and delivery of this Purchase Contract and the Escrow Agreement, (ii) to execute, deliver, and perform its obligations under this Purchase Contract and the Escrow Agreement, and (iii) to consummate the transactions described in such instruments and in the Official Statement, and the Authority has complied with all provisions of applicable law in all matters relating to such transactions. (d) The information contained in the Official Statement is and, as of the date of Closing, will be correct in all material respects, and such information does not contain and will not contain any untrue statement of a material fact and does not omit and will not omit to state a material fact required to be stated therein or necessary to make the statements in the Official Statement, in light of the circumstances under which they were made, not misleading. (e) The Authority has duly authorized all necessary action to be taken by it for (i) the issuance and sale of the Bonds upon the terms set forth herein and in the Official Statement; (ii) the approval of the Official Statement and the signing of the Official Statement by duly authorized officers; and (iii) the execution, delivery, and performance or receipt, as appropriate, of this Purchase Contract, the Bonds, the Escrow Agreement, and any and all such other agreements and documents as may be required to be executed, delivered, and performed or received by the Authority in order to carry out, give effect to, and -4- 0094427 consummate the transactions described herein, in the Bonds, in the Official Statement, and in the Escrow Agreement. (0 The Bond Resolution is and, on the date of the Closing, will be in full force, and, on the date of Closing, the Escrow Agreement will have been duly executed and delivered by the Authority. The Bond Resolution is and, on the date of the Closing, will be the legal and valid act of the Authority, and, assuming the due authorization, execution, and delivery of such instruments by the other parties thereto and their authority to perform such instruments, this Purchase Contract is, and, on the date of the Closing, this Purchase Contract and the Escrow Agreement will be the legal, valid, and binding agreements of the parties thereto, enforceable in accordance with their respective terms (except to the extent that such enforceability may be limited by bankruptcy, insolvency, reorganization, and similar laws affecting creditors' rights generally and general principles of equity). (g) The Bonds, when issued, delivered, and paid for as herein provided, will have been duly authorized, executed, and issued and will constitute legal, valid, and binding obligations of the Authority entitled to the benefits of the Bond Resolution, the Contract between Nueces River Authority and City of Corpus Christi on Nueces River Reclamation Project, Texas (Choke Canyon Reservoir Project), as amended (the "Contract") between the Authority and the City, and the ordinance (the "Ordinance") which was adopted by the City Council of the City on February 22, 1994. The City is also obligated to make payments to the Authority pursuant to a contract between the City, the Authority, and the United States Government executed on , 197_, as amended (the "Federal Contract"). (h) Except as disclosed in the Official Statement, there is no action, suit, proceeding, inquiry, or investigation at law or in equity or before or by any court, public board, or body pending against the Authority or, to the knowledge of the Authority, threatened against or affecting the Authority (or, to the knowledge of the Authority, any basis therefor) contesting the due organization and valid corporate existence of the Authority or the validity of the Act or wherein an unfavorable decision, ruling, or finding would adversely affect (i) the transactions described herein or in the Official Statement, (ii) the validity or due adoption of the Bond Resolution, or the validity, due authorization, and execution of the Bonds, this Purchase Contract, the Escrow Agreement, or any agreement or instrument, including, but not limited to, the Contract and the Federal Contract to which the Authority is a party and which is to be used in the consummation of the transactions described herein or in the Official Statement, (iii) the ability of the Authority to establish any fees or charges for its authorized purposes, the receipt by the Authority of any funds from the State of Texas or the United States Government or any of their agencies, or the lien on and pledge of the Pledged Security (as defined in the Bond Resolution) to pay the principal of and interest on the Bonds, or (iv) the federal tax-exempt status of the interest -5- 0094427 on the Bonds. Except as described in the Official Statement, the Authority is not a party to any litigation or other proceeding pending or, to its knowledge, threatened, in any court, agency, or other administrative body (either state or federal) which, if decided adversely to the Authority, would have a materially adverse effect on the financial condition of the Authority. (i) The authorization, execution, and delivery by the Authority of the Official Statement, this Purchase Contract, the Bonds, the Contract, the Escrow Agreement, and the other documents described herein and in the Official Statement, the adoption of the Bond Resolution by the Authority, the consummation of the transactions described herein and therein and compliance by the Authority with the provisions of such instruments, do not and will not conflict with or constitute on the part of the Authority a breach of or a default under any provision of the Constitution of the State of Texas or the Act or any other existing law, court or administrative decision, regulation, decree, or order or any agreement, indenture, mortgage, lease, or other instrument by which the Authority or its properties are or, on the date of Closing, will be bound or affected. (j) Other than the opinion of the Attorney General of the State of Texas approving the Bonds as required by law and the registration of the Bonds by the Comptroller of Public Accounts of the State of Texas (which approval and registration shall have been duly obtained or effected on or before the date of the Closing), and other than such permits, consents, licenses, notices, and filings, if any, as may be required under the securities or blue sky laws of any jurisdiction as requested by the Underwriters (all of which shall have been duly made or obtained on or before the date of the Closing, but in no event shall the Authority be required to consent to any general service of process requirements in connection with any such requests by the Underwriters), no permit, consent, license, notice, or filing with governmental authorities is necessary or required (i) to permit the Authority to execute and deliver this Purchase Contract, the Escrow Agreement, or the other instruments and documents described herein or therein, to perform its obligations hereunder and thereunder, or to consummate the transactions described herein or therein, or (ii) to issue and deliver the Bonds as described herein and in the Official Statement, or to perform in accordance with the terms hereof and thereof, or (iii) to adopt and enact the Bond Resolution, or to perform in accordance with the terms thereof, or to issue and sell the Bonds as therein and in the Official Statement provided. (k) The Authority has delivered, or made available, to the Authorized Representative true, correct, complete, and legible copies of all information, applications, reports, or other documents of any nature whatsoever submitted to any rating agency for the purpose of obtaining a rating for the Bonds or the Refunded Bonds, or both, or to any insurance company, bank, corporation or other entity of any nature whatsoever for the purpose of obtaining a credit facility in order to obtain a higher investment grade credit rating for the Bonds -6- or the Refunded Bonds, or both, and, in each instance, true, correct, complete, and legible copies of all correspondence or other communications relating, directly or indirectly, thereto. (1) If at any time after the date of this Purchase Contract but before the first to occur of (i) the date upon which the Underwriters notify the Authority that the period of the initial public offering of the Bonds has expired or (ii) the date that is 180 days after the date hereof, any event shall occur which might or would cause the Official Statement to contain any untrue statement of a material fact or to omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, the Authority shall notify the Underwriters thereof, and, if in the opinion of the Underwriters such event requires the preparation and publication of a supplement or amendment to the Official Statement, the Authority will at its expense (except as set forth below) supplement or amend the Official Statement in a form and in a manner approved by the Underwriters and furnish to the Underwriters the number of copies requested by the Underwriters in order to enable the Underwriters to comply with Rule 15c2-12; provided, however, that the cost of any such supplement or amendment required after 90 days from the date hereof shall be borne by the Underwriters. (m) Between the date of this Purchase Contract and the date of the Closing the Authority shall disclose to, discuss with, and provide any information reasonably requested by the Underwriters in connection with any breach, default, or failure to comply, of whatever nature and of which the Authority has knowledge, regarding any law, loan agreement, indenture, or other agreement to which the Authority is a party or to which the Authority or any of the property or assets of the Authority is otherwise subject. (n) The Authority has not been notified of any listing or proposed listing by the Internal Revenue Service to the effect that the Authority is a bond issuer whose arbitrage certificates may not be relied upon. 6. Delivery of. and Payment for. the Bonds. The consummation of the sale of the Bonds to the Underwriters (the "Closing") shall be held at 10:00 a.m., San Antonio, Texas time, on March _, 1994, at the offices of McCall, Parkhurst & Horton L.L.P., 1225 One Riverwalk Place, 700 North Saint Mary's Street, San Antonio, Texas 78205 or at such other time, location, or date as shall be mutually agreed upon by the Authority and the Authorized Representative. Subject to the conditions stated herein, at the Closing the Authority will deliver, or cause to be delivered, to the Underwriters the Bonds in temporary form, duly executed and registered as hereinafter provided, together with the other documents hereinafter mentioned, and the Underwriters will accept such delivery and pay the purchase price of the Bonds as set forth in Section 1 hereof in immediately available 0094427 -7- funds by check or wire transfer to or for the account of the Authority. The definitive Bonds shall be in fully registered form, bear proper CUSIP numbers, and be in authorized denominations and registered in such names and in such amounts as the Underwriters may request. It is anticipated that the definitive Bonds shall be issued in the form of one typewritten or printed bond for each maturity, registered in the name of Cede & Co., as the registered owner and nominee for The Depository Trust Company, New York, New York ("DTC") in the same aggregate principal amount of the Bonds. Delivery of the Definitive Bonds as aforesaid shall be made at the place in New York, New York, designated by DTC. The Authority will have the opinion of Bond Counsel attached to or printed on the Bonds. The definitive Bonds shall be made available to the Underwriters for checking and packaging not less than 24 hours prior to the Closing. After execution by the Authority, authentication by the paying agent/registrar, and completion of checking and packaging, such Bonds shall be transferred to and held in safe custody by the Underwriters. In lieu of the foregoing, such Bonds shall be held in safe custody by the paying agent/registrar or any authorized agent for the paying agent/registrar. The paying agent/registrar shall release or authorize the release of such Bonds at the Closing from safe custody to the Underwriters upon receipt by the Authority of payment for the Bonds as provided herein. In addition, the Authority and the Underwriters agree that there shall be a preliminary Closing held at such place as the Authority and the Authorized Representative shall mutually agree, commencing at least 24 hours prior to the Closing. Drafts of all documents to be delivered at the Closing shall be prepared and distributed to the parties and their counsel for review at least three business days prior to the Closing. 7. Certain Conditions To Underwriter's Obligations. The obligations of the Underwriters hereunder are subject to the satisfaction on or before the date of the Closing of each of the following conditions (unless waived by the Authorized Representative in writing): (a) The representations and warranties of the Authority and the City contained herein or on any certificate or other document delivered pursuant to the provisions hereof shall be true on and as of the date of the Closing as though such representations and warranties were made on and as of the date of the Closing. (b) The Authority and the City shall have performed and complied with all agreements and conditions required by this Purchase Contract to be performed or complied with by it prior to or on the date of the Closing. (c) At the time of the Closing, the Bond Resolution, the Contract, and the Ordinance shall be in full force and effect, and the Bond Resolution, the Contract, and the Ordinance shall not have been amended, modified, or supplemented, and the Official Statement shall not have been amended, 0094427 -8- 0094427 modified, or supplemented, except as may have been agreed to in writing by the Authorized Representative. (d) At the time of the Closing, all official action of the Authority related to the Bond Resolution shall be in full force and effect and shall not have been amended, modified, or supplemented. (e) The Authority and the City shall not have failed to pay principal or interest when due on any of its outstanding obligations for borrowed money. (0 Except as described in the Official Statement, no suit, action, investigation, or legal or administrative proceeding shall be threatened or pending before any court or governmental agency which is likely to result in the restraint, prohibition, or the obtaining of damages or other relief in connection with the issuance of the Bonds or the consummation of the transactions described herein, or which, in the opinion of the Authorized Representative, would have a materially adverse effect on the transactions described herein. (g) All steps to be taken and all instruments and other documents to be executed, and all other legal matters in connection with the transactions described in this Purchase Contract shall be reasonably satisfactory in legal form and effect to counsel for the Underwriters. (h) At or prior to the Closing, the Underwriters shall have received two (2) executed copies of each of the following documents: (1) the opinion, dated the date of the Closing, of McCall, Parkhurst & Horton L.L.P., as bond counsel ('Bond Counsel"), delivered to the Underwriters, relating to, among other things, the validity of the Bonds, the defeasance of the Refunded Bonds, and the tax-exempt status of the interest on the Bonds for federal income tax purposes, in substantially the form of attached as Appendix D to the Official Statement; (2) the opinion, dated the date of the Closing, of James Bray, the City Attorney of the City, addressed to the City, the Authority, Bond Counsel, the Underwriters, and counsel to the Underwriters in substantially the form of Exhibit D hereto; (3) the opinion, dated the date of the Closing, of Brown & Potts, Austin, Texas, General Counsel to the Authority, addressed to the City, the Authority, Bond Counsel, the Underwriters, and counsel to the Underwriters in substantially the form of Exhibit E hereto; (4) the supplemental opinion, dated the date of the Closing, of Bond Counsel, addressed to the Authority, the City, the Underwriters, and -9- 0094427 the counsel to the Underwriters, in substantially the form of Exhibit F hereto; (5) an opinion, dated the date of the Closing, of Fulbright & Jaworski L.L.P., counsel for the Underwriters, addressed to the Underwriters in substantially the form of Exhibit G hereto; (6) an opinion, dated the date of Closing, of (the "Insurer"), addressed to the Underwriters, counsel to the Underwriters, Bond Counsel, the City, and the Authority in a form satisfactory to Bond Counsel and to the counsel to the Underwriters; (7) a certificate of the Authority, dated the date of the Closing and signed on its behalf by the Chairman of the Board and Executive Director of the Authority acting solely in their official capacity, in form satisfactory to counsel to the Underwriters, to the effect that (a) except to the extent disclosed in the Official Statement, no litigation is pending or, to the knowledge of such persons, threatened, in any court to restrain or enjoin the issuance or delivery of the Bonds, the establishment of the rates, fees, and other charges relating to the authorized purposes of the Authority, the receipt by the Authority of any funds from the State of' Texas or the United States Government or any of their agencies, the lien on and pledge of the Pledged Security pledged to the payment of the principal of and interest on the Bonds, or the pledge thereof, or in any way contesting or affecting the validity of the Bonds, the Bond Resolution, the Ordinance, the Contract, the Federal Contract, the Escrow Agreement, or the Purchase Contract, or contesting the powers of the Authority to issue the Bonds, or contesting the authorization of the Bonds, the Bond Resolution, the Purchase Contract, the Contract, the Federal Contract, the Ordinance, or the Escrow Agreement, or contesting in any way the accuracy, completeness, or fairness of the Preliminary Official Statement (to the extent not modified by the Official Statement) or the Official Statement, or that would otherwise adversely affect in a material manner the financial condition of the Authority; (b) to the best of our knowledge, no event affecting the Authority has occurred since the date of the Official Statement which should be disclosed therein for the purpose for which it is to be used or which it is necessary to be disclosed therein in order to make the statements and information therein not misleading in any respect; (c) the representations and warranties of the Authority contained in the Purchase Contract, or in any certificate or document delivered by the Authority pursuant to the provisions thereof, are true and correct on and as of the date of the Closing as though such representations and warranties were made on and as the date of the Closing; (d) all agreements or conditions to be performed or complied with by the Authority under the Purchase Contract to effect delivery of the Bonds on or prior to the date of Closing have been performed or complied with; and -10- (e) there has not been any materially adverse change in the financial condition of the Authority since August 31, 1993, the latest date to which audited financial information is available; (8) the Official Statement executed on behalf of the Authority by the Chairman and Secretary of the Board; (9) a copy of the Bond Resolution and all other orders, ordinances, or resolutions or other proceedings of the Authority authorizing the issuance and sale of the Bonds and the execution and delivery of this Purchase Contract, the Official Statement, and the Escrow Agreement in each case certified by the Secretary of the Board, as having been duly adopted and being in full force and effect and as being true, accurate, and complete copies thereof; (10) an unqualified opinion, dated on or prior to the date of the Closing, of the Attorney General of the State of Texas (the "Attorney General"), relating to the legality and validity of the Bonds, the defeasance of the Refunded Bonds, and approving the Bonds as required by law; (11) evidence satisfactory to the Underwriters that the Bonds have been registered by the Comptroller of Public Accounts of the State of Texas as required by law; (12) a letter from either Moody's Investors Service indicating a rating for the Bonds which is not lower than " " and a letter from Standard & Poor's Corporation indicating a rating for the Bonds which is not lower than " (13) a policy of bond insurance from the Insurer, which unconditionally and irrevocably guarantees the full, complete, and timely payment of an amount equal to the principal of and interest on the Bonds and the closing certificates of the Insurer; (14) a certificate of the City, dated the date of the Closing, executed by the Mayor and City Manager of the City, acting solely in their official capacity, in form satisfactory to counsel to the Underwriters, to the effect that (i) except to the extent disclosed in the Official Statement, no litigation is pending or, to the knowledge of such persons, threatened, in any court to restrain or enjoin the issuance or delivery of the Bonds, the establishment of the rates, fees, and other charges relating to the System or the other authorized purposes of the City, the lien on and pledge of the Pledged Security pledged to the payment of the principal of and interest on the Bonds, or the pledge thereof, or in any way contesting or affecting the validity of the Bonds, the Bond Resolution, the Contract, the Federal Contract, the Ordinance, the Escrow Agreement, or the 0094427 -11- r 0094427 Purchase Contract, or contesting the powers of the Authority to issue the Bonds, or contesting the authorization of the Bonds, the Bond Resolution; the Purchase Contract, the Contract, the Federal Contract, the Ordinance, or the Escrow Agreement, or contesting in any way the accuracy, completeness, or fairness of the Preliminary Official Statement (to the extent not modified by the Official Statement) or the Official Statement, or that would otherwise adversely affect in a material manner the financial condition of the City; (ii) to the best of our knowledge, no event affecting the City has occurred since the date of the Official Statement which should be disclosed therein for the purpose for which it is to be used or which it is necessary to be disclosed therein in order to make the statements and information therein not misleading in any respect; (iii) the representations and warranties of the City contained in the Purchase Contract, or in any certificate or document delivered by the City pursuant to the provisions thereof, are true and correct on and as of the date of the Closing as though such representations and warranties were made on and as the date of the Closing; (iv) all agreements or conditions to be performed or complied with by the City under the Purchase Contract to effect delivery of the Bonds on or prior to the date of Closing have been performed or complied with; and (v) there has not been any materially adverse change in the financial condition of the City since July 31, 1993, the latest date as of which audited financial information is available; (15) the certificates required by the provisions of Section of the Bond Resolution to issue the Bonds on a parity with the Authority's outstanding indebtedness; (16) a certificate of the Authority, dated the date of the Closing, and signed by the Chairman of the Board and/or the Executive Director of the Authority, in the form approved by Bond Counsel and satisfactory to the Authorized Representative and Underwriter's counsel, with respect to arbitrage matters; (17) an executed copy of the Contract; (18) an executed copy of the Ordinance; and (19) an executed copy of the Federal Contract. (i) The Underwriters shall receive such additional legal opinions, certificates, proceedings, instruments, and other documents as counsel to the Underwriters or Bond Counsel may reasonably request to evidence compliance by the Authority with legal requirements, the truth and accuracy, as of the time of Closing, of the representations and warranties of the Authority contained herein, and the due performance or satisfaction by the Authority and the Escrow -12- Agent at or prior to such time of all agreements then to be performed and all conditions then to be satisfied by the Authority and the Escrow Agent. (j) The Authority shall have returned the corporate check of the Authorized Representative delivered to the Authority pursuant to Section 4 hereof. All such opinions, certificates, letters, agreements, and documents will be in compliance with the provisions hereof only if they are satisfactory in form and substance to the Underwriters and its counsel and to Bond Counsel. The Underwriters shall be entitled to receive such conformed copies or photocopies of such opinions, certificates, letters, agreements, and documents as the Underwriters may reasonably request. 8. Conditions to Obligations of the Authority. The obligations of the Authority hereunder to deliver the Bonds shall be subject to receipt on or before the date of the Closing of the purchase price set forth in Section 1 hereof and the opinion of Bond Counsel described in Section 7(h)(1) hereof. 9. Termination. The Underwriters shall have the right to cancel their obligation to purchase the Bonds if, between the date hereof and the Closing, (i) legislation shall be enacted or recommended to the Congress for passage by the President of the United States, or favorably reported for passage to either House of the Congress by any committee of such House to which such legislation has been referred for consideration, a decision by a court of the United States or the United States Tax Court shall be rendered, or a ruling, regulation, or statement by or on behalf of the Treasury Department of the United States, the Internal Revenue Service or other governmental agency shall be made or proposed, the effect of any or all of which would be to impose directly or indirectly federal income taxation upon interest received on obligations of the general character of the Bonds or upon income of the general character to be derived by the Authority in such a manner as, in the reasonable opinion of the Underwriters, would materially adversely affect the market price of the Bonds, or the market price generally of obligations of the general character of the Bonds, or (ii) there shall exist any event which, in the reasonable judgment of the Underwriters, either (a) makes untrue or incorrect in any material respect any statement or information contained in the Official Statement or (b) is not reflected in the Official Statement but should be reflected therein in order to make the statements and information contained therein not misleading in any material respect, or (iii) there shall have occurred any outbreak of hostilities or any national or international calamity or crisis, including, without limitation, financial crisis, or a financial crisis or a default with respect to the debt obligations of, or the institution of proceedings under the federal or the state bankruptcy laws by or against the State of Texas or any political subdivision, agency, or instrumentality of such State, the effect of which on the financial markets of the United States being such as, in the reasonable judgment of the Underwriters, would make it impracticable for the Underwriters to market the Bonds or to enforce contracts for the sale of the Bonds, or (iv) there shall be in force a general 0094427 -13- suspension of trading on the New York Stock Exchange, or (v) a general banking moratorium shall have been declared by either federal, Texas, or New York authorities, or (vi) there shall have occurred any materially adverse change in the affairs or financial condition of the Authority, except for changes which the Official Statement discloses have occurred or may occur, or (vii) legislation shall be enacted or any action shall be taken by the Securities and Exchange Commission which, in the opinion of counsel for the Underwriters, has the effect of requiring the contemplated distribution of the Bonds to be registered under the Securities Act of 1933, as amended, or requiring the Bonds or the Bond Resolution or any other document relating to the Bonds or transactions described herein to be qualified under the Trust Indenture Act of 1939, as amended, or (viii) a stop order, ruling, regulation, or official statement by or on behalf of the Securities and Exchange Commission shall be issued or made to the effect that the issuance, offering, or sale of the Bonds, or of obligations of the general character of the Bonds, is in violation of any provision of the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, or the Trust Indenture Act of 1939, as amended, or (ix) any state blue sky or securities commission or other governmental agency or body shall have withheld registration, exemption, or clearance of the offering of the Bonds as described herein, or issued a stop order or similar ruling relating thereto, and in the reasonable judgment of the Underwriters, the market for the Bonds would be materially affected thereby, or (x) the Constitution of the State of Texas shall be amended or an amendment shall be proposed, or legislation shall be enacted, or a decision shall have been rendered as to matters of Texas law, or any order, ruling or regulation shall have been rendered as to or on behalf of the State of Texas by an official, agency, or department thereof, affecting the tax status of the Authority, its property, income or the Pledged Security, its bonds (including the Bonds), or the interest thereon, which in the reasonable judgment of the Underwriters would materially affect the market price of the Bonds. If the Authority shall be unable to satisfy the conditions to the obligations of the Underwriters to purchase, to accept delivery of, and to pay for the Bonds contained in this Purchase Contract, or if the obligations of the Underwriters to purchase, to accept delivery of, and to pay for the Bonds shall be terminated for any reason permitted by this Purchase Contract, this Purchase Contract shall terminate and be of no further force or effect, and neither the Underwriters nor the Authority shall be under further obligation hereunder, except that the respective obligations of the Authority and the Underwriters set forth in Sections 11, 12, 13, 14, and 16 hereof shall continue in full force and effect. In addition, the Authority shall promptly return the corporate check of the Authorized Representative delivered to the Authority pursuant to Section 4 hereof. 10. Particular Covenants of the Authority. The Authority covenants and agrees with the Underwriters as follows: 0094427 (a) The Authority shall cooperate with the Underwriters in amending or supplementing the Official Statement whenever requested by the -14- Underwriters if, in the reasonable judgment of the Authorized Representative, such amendment or supplement is required. (b) The Authority shall not revise, amend, or supplement the Official Statement unless such revision, amendment, or supplement has been previously approved by the Authorized Representative. (c) The Authority shall cooperate with the Underwriters and their counsel in any endeavor to qualify the Bonds for offering and sale under the securities or blue sky laws of such jurisdictions of the United States as the Underwriters may request, and the Authority shall use its best efforts to effect such qualifications and to maintain them in effect until the distribution of the Bonds described in the Official Statement shall have been completed; provided, however, the Authority shall not be required with respect to the offer or sale of the Bonds to file a general written consent to suit or to file a general written consent to service of process in any jurisdiction. The Authority consents to the use of the Bond Resolution, Preliminary Official Statement, and the Official Statement by the Underwriters in obtaining such qualifications. (d) Any certificate or other instrument or document signed by an authorized officer or agent of the Authority and delivered to the Underwriters pursuant to the terms and provisions hereof shall be deemed to be a representation and warranty made by the Authority to the Underwriters as to the statements made therein. (e) From and after the date of this Purchase Contract through and including the time of the Closing, the Authority will not, without the prior written consent of the Underwriters, issue any additional bonds, notes, or other obligations for borrowed money payable and secured, in whole or in part, from Pledged Security, and the Authority will not incur any material liabilities, direct or contingent, relating to the Authority. (f) If, at any time prior to the time of the Closing as herein provided, an event occurs affecting the Authority which is materially adverse for the purpose for which the Official Statement is to be used and is not disclosed in the Official Statement, the Authority shall notify the Authorized Representative, and if, in the opinion of the Authority and the Authorized Representative, such event requires a supplement or amendment to the Official Statement, the Authority shall supplement or amend the Official Statement in a form and in a manner approved by the Underwriters and Bond Counsel to the Authority. 11. Survival of Representations. All representations, warranties, and agreements of the Authority hereunder or in any certificate delivered pursuant hereto shall remain operative and in full force and effect, regardless of any investigation made by or on behalf of the Underwriters, and shall survive the delivery of and payment for 0094427 -15- the Bonds and any termination of this Purchase Contract by the Underwriters pursuant to the terms hereof. 12. Payment of Expenses. Costs related to the issuance and sale of the Bonds, including, but not limited to, costs of preparation, printing, and mailing of the Bonds, the Preliminary Official Statement, and the Official Statement, postage, the fees and expenses of First Southwest Company, the financial advisors to the Authority, the cost of obtaining credit ratings on the Bonds, the fees of the Insurer and the Attorney General, the fees and costs of the paying agent/registrar bank, any fees and expenses of any consultants, engineers, attorneys, or other persons retained by the City or Authority relating to the issue of the Bonds, and the fees and disbursements of Bond Counsel to the Authority, shall be paid out of the proceeds of the Bonds or other funds of the Authority. The Underwriters shall pay for their costs related to the purchase of the Bonds, including, without limitation, the appropriate advertising expenses and the fees and expenses of their counsel. 13. No Personal Liability. None of the members of the Board, nor any officer, agent, or employee of the Authority, shall be charged personally by the Underwriters with any liability, or be held liable to the Underwriters under any term or provision of this Purchase Contract, or because of its execution or attempted execution, or because of any breach or attempted or alleged breach, of this Purchase Contract. All representations, warranties, and agreements of the individual representatives of the Authority and the Underwriters shall be deemed to be those of the parties each represents and shall not create any personal liability for such individuals. 14. Indemnification. To the extent it legally may, the Authority assumes liability for, and will indemnify and hold the Underwriters harmless from and against, any liabilities, claims, damages, costs, and expenses (including legal fees and expenses) (the "Liabilities") arising out of or in connection with the issuance and sale of the Bonds, including without limitation, Liabilities arising out of or related to an actual or alleged untrue statement of a material fact contained in the Official Statement or otherwise made in connection with the issuance and sale of the Bonds or an actual or alleged omission of a material fact necessary in order to make any statement contained in the Official Statement or otherwise made in connection with the issuance and sale of the Bonds, in light of the circumstances in which such statements were made, not misleading; provided, however, that the foregoing indemnity shall not extend to any Liabilities to the extent they arise from (i) an untrue statement by the Underwriters of a material fact relating to the Underwriter's sale of the Bonds or an omission by the Underwriters of a material fact relating to the Underwriter's sale of the Bonds necessary in order to make any statement, in light of the circumstances in which such statement was made, not misleading; (ii) the negligence of the Underwriters in the performance or failure to perform their obligations hereunder; or (iii) any causes other than negligent acts or omissions of the Authority; provided, further, that the standard of negligence to be applied hereunder shall be the standard generally applied in the municipal securities industry. 0094427 -16- r� 15. Notices. Any notice or other communication to be given to the Authority under this Purchase Contract may be given by delivering the same in writing at its address set forth above, Attention: Chairman of the Board, and any notice or other communication to be given to the Underwriters under this Purchase Contract may be given by delivering the same in writing to M. E. Allison & Co., Inc., 112 East Pecan, Suite 1200, San Antonio, Texas 78205, Attn: E. James Seal. 16. Parties. This Purchase Contract is made solely for the benefit of the Authority and the Underwriters (including the successors or assigns of the Underwriters), and no other person shall acquire or have any right hereunder or by virtue hereof. 17. Governing Law. This Purchase Contract shall be governed by and construed in accordance with the laws of the State of Texas and the United States of America. 18. General. This Purchase Contract may be executed in several counterparts, each of which shall be regarded as an original and all of which will constitute one and the same instrument. The section headings of this Purchase Contract are for convenience of reference only and shall not affect its interpretation. This Purchase Contract shall become effective upon your acceptance hereof and delivery of a signed copy of this Purchase Contract to the Authorized Representative. [The remainder of this page intentionally left blank.] 0094427 -17- Very truly yours, M. E. ALLISON & CO., INC. By: Title: Senior Vice President Accepted and agreed to as of the date first above written: NUECES RIVER AUTHORITY By: Chairman, Board of Directors 0094427 -18- EXHIBIT A ISSUE PRICE CERTIFICATE The undersigned hereby certifies with respect to the sale of the "Nueces River Authority Water Supply Revenue Current Refunding Revenue Bonds, Series 1994 (City of Corpus Christi, Texas Project)" (the "Bonds"), issued in the aggregate principal amount of $7,800,000, as follows: 1. The undersigned is the underwriter or the manager of the syndicate of underwriters which has purchased the Bonds from the Nueces River Authority (the "Issuer"). 2. The undersigned and/or one or more other members of the underwriting syndicate, if any, have made a bona fide offering to the public of the Bonds of each stated maturity at the respective prices set forth below. 3. The initial offering price (expressed as a percentage of principal amount or yield and exclusive of accrued interest) for the Bonds of each stated maturity at which a substantial amount of the Bonds (at least 10%) of such stated maturity was sold to the public is as set forth below: Principal Amount at Stated Maturity ($) Year of Stated Maturity Offering Price or Yield (%) 55,000 1995 535,000 1996 520,000 1997 560,000 1998 550,000 1999 590,000 2000 630,000 2001 670,000 2002 660,000 2003 700,000 2004 740,000 2005 775,000 2006 815,000 2007 0094427 r- 4. The term 'public", as used herein, means persons other than bondhouses, brokers, dealers, and similar persons or organizations acting in the capacity of underwriters or wholesalers. 5. The offering prices described above reflect current market prices at the time of such sales. 6. The CUSIP number of the Bond with the latest stated maturity is 7. The undersigned [have] [have not] purchased bond insurance on behalf of the Issuer for the Bonds. The bond insurance has been purchased from (the "Insurer") for a premium cost of $ (net of any nonguarantee cost, e.g, rating agency fees). The amount of such cost is set forth in the Insurer's commitment and is separately stated from all other fees or charges payable to the Insurer. The premium does not exceed a reasonable charge for the transfer of credit risk taking into account payments charged by guarantors in comparable transactions (including transactions in which a guarantee has no involvement other than as a guarantor). The present value of the debt service savings expected to be realized as a result of such insurance, discounted at a rate equal to the yield on the Bonds, which results after recovery of the insurance premium, exceeds the present value of the bond insurance premium. 8. The undersigned understands that the statements made herein will be relied upon by the Issuer in its efforts to comply with the conditions imposed by the Internal Revenue Code of 1986, as amended, and by Bond Counsel in rendering their legal opinion concerning the excludability of interest on the Bonds from the gross income of their owners. [The remainder of this page intentionally left blank] 0094427 EXECUTED AND DELIVERED this M. E. ALLISON & CO., INC. By: Title: 0094427 0094427 EXHIBIT B Official Statement EXHIBIT C [Letterhead of the City Attorney] March , 1994 M. E. Allison & Co., Inc. 112 East Pecan, Suite 1200 San Antonio, Texas 78205 Fulbright & Jaworski L.L.P. 300 Convent Street, Suite 2200 San Antonio, Texas 78205 McCall, Parkhurst & Horton L.L.P. 717 North Harwood, Suite 900 Dallas, Texas 75201 Nueces River Authority First State Bank Building Uvalde, Texas 78802 City of Corpus Christi, Texas 1201 Leopard Street Corpus Christi, Texas 78469 First Southwest Company 1850 One Riverwalk Place 700 North Saint Mary's San Antonio, Texas 78205 Ladies and Gentlemen: I serve as the City Attorney to the City of Corpus Christi, Texas (the "City") and have acted as such in connection with the issuance of an aggregate of $2,780,000 principal amount of Nueces River Authority Water Supply Revenue Current Refunding Bonds, Series 1994 (City of Corpus Christi, Texas Project) (the "Bonds") pursuant to the provisions of a resolution duly adopted by the Board of Directors of the Nueces River Authority (the "Authority") on March 3, 1994 (the "Bond Resolution"). Capitalized terms not otherwise defined in this opinion have the meanings assigned in the Purchase Contract dated March 3, 1994, executed between the Authority and M. E. Allison & Co., Inc., as the Authorized Representative of the Underwriters (the "Purchase Contract"). In my capacity as the City Attorney, I have reviewed the following: 1. the Bond Resolution as adopted by the Board of Directors; 2. an executed counterpart of the Purchase Contract; 0094427 3. a copy of the Official Statement dated March 3, 1994; 4. the Contract, the Federal Contract, the Ordinance, and such other agreements, documents, certificates, opinions, letters, and other papers as I have deemed necessary or appropriate in rendering the opinions set forth below; and 5. Texas Revised Civil Statutes Annotated Articles 717k and 8280-115, as amended (the "Acts"), and such other provisions of the Constitution and laws of the State of Texas and the United States of America as I believe necessary to enable me to render the opinions herein contained. In making my review, I have assumed the authenticity of all documents and agreements submitted to me as originals, conformity to the originals of all documents and agreements submitted to me as certified or photostatic copies, the authenticity of the originals of such latter documents and agreements, and the accuracy of the statement contained in such documents. Based upon the foregoing, and subject to the qualifications and exceptions hereinafter set forth, I am of the opinion that under the applicable laws of the United States of America and the State of Texas in force and effect on the date hereof: 1. The City has duly adopted and enacted the Ordinance; the City has full legal right, power, and authority to enter into the Contract, the Federal Contract, and the Ordinance (collectively, the "Agreements"); the City has duly authorized and approved the execution and the delivery of, and the performance by the City of the obligations contained in, the Agreements and the Bond Resolution, and all other transactions contemplated by the Official Statement; the City has complied with, and is in compliance with Texas law in all respects relating to its obligations under the Purchase Contract, the Contract, the Federal Contract, and the Ordinance; and assuming the due authorization, execution, and delivery by the other contracting parties of the Agreements, the Agreements constitute valid, legal, and binding agreements of the City, enforceable in accordance with their respective terms, subject to bankruptcy, insolvency, reorganization or other laws relating to or affecting the rights of creditors generally and general equitable principles; 2. The City is a home rule municipality and a political subdivision of the State of Texas and a body politic and corporate, duly created, organized and existing and in good standing under the laws of the State of Texas and the City's Home Rule Charter; 0094427 3. Except for permits and similar authorizations under the securities or blue sky laws of certain jurisdictions, no consent, waiver or any other action of any person, board or body, public or private, is required as of the date hereof for the City to enter into the Agreements, or to perform its obligations under any of the Purchase Contract and the Agreements other than those which have been duly and validly obtained and are in full force and effect; 4. Based on reasonable inquiry made of the responsible City employees and public officials, the City is not, to the best of my knowledge, in breach of or in default under any applicable law or administrative regulation of the State of Texas or the United States, or any applicable judgment or decree or any trust agreement, loan agreement, bond, note, resolution, ordinance, agreement or other instrument to which the City is party or is otherwise subject and, to the best of my knowledge after due inquiry, no event has occurred and is continuing which, with the passage of time or the giving of notice, or both, would constitute such a default by the City under any of the foregoing; and the execution and delivery of the Agreements and compliance with the provisions of each of such agreements or instruments does not constitute a breach of or default under any applicable law or administrative regulation of the State of Texas or the United States or any applicable judgment or decree or, to the best of my knowledge, any trust agreement, loan agreement, bond, note, resolution, ordinance, agreement or other instrument to which the City is a party or is otherwise subject; and 5. Except as disclosed in the Official Statement, no litigation is pending, or, to my knowledge, threatened, in any court (a) in any way challenging the titles of the Mayor or any of the other members of the City Council to their respective offices, or (b) challenging the establishment of the fees and charges relating to the System or the other authorized purposes of the City, or (c) seeking to restrain or enjoin the issuance or delivery of the Bonds, or the lien on and pledge of the Pledged Security of the System pledged to pay the principal of and interest on the Bonds, or in any way contesting or affecting the validity or enforceability of the Bond Resolution or the Agreements. In addition, without having undertaken to determine independently the accuracy and completeness of the statements contained in the Official Statement, during my participation in the preparation of the Official Statement nothing has come to my attention which would lead me to believe that the Official Statement (excluding therefrom the financial and statistical data and forecasts included therein) contains any untrue statement of a material fact or omits to state a material fact necessary to 0094427 make the statements therein, in the light of the circumstances under which they were made, not misleading. This opinion is furnished solely for your benefit and may be relied upon only by the addressees hereof or anyone to whom specific permission is given in writing by me. Very truly yours, 0094427 CONDITIONAL NOTICE OP REDEMPTION NUECES RIVER AUTHORITY SUBJECT TO THE PROVISIONS OF THE SECOND PARAGRAPH OF THIS NOTICE, NOTICE IS HEREBY GIVEN that the Nueces River Authority (the "Authority") has called for redemption on the date and at the redemption price specified, the below listed outstanding Bonds of the Authority as follows: Nueces River Authority Water Supply Revenue Bonds, Series 1979 (City of Corpus Christi Project), dated April 1, 1979, maturing on April 1 in the years, in the amounts, at a redemption date, at a redemption price of par, plus the redemption premium set forth below, and accrued interest to the date fixed for redemption, at the interest rates, and with cusip numbers as follows: REDEMPTION REDEMPTION INTEREST CUSIP DATE PRICE RATE NO. MATURITY DATE 1996 7 1999 2000 2001 2002 2003 2004 2005 2006 2007 PRINCIPAL AMOUNT 450 n*? 450,001) -2n ,2410 500,000 550,000 61A,000 650,000 650,000 700,000 750,000 800,000 850,000 April 1, 1094 April 1, 1994 April 1, :WI April 1, 1t94 AN_' - 1, i994 April 1, 1994 April 1, 1994 April 1, 1994 April 1, 1994 April 1, 1994 April 1, 1994 April 1, 1994 iM-1(d.'tb 6.0 102.1;: '.-7. 6 50 1m-_1/?°A 6.50% 102-12% 6.35% 102-12% 6.00% 102-12% 6.10% 102-12% 6.20% 102-12% 6.20% 102-12% 6.20% 102-12% 6.20% 102-12% 6.20% 870500AR8 S7C500A.5 o,U)wi•. T 870500AU1 870500AV9 870500AW7 870500AX5 870500AY3 870500AZA 870500BA4 870500BB2 870500BC0 aggregating $7,450,000 in principal amount (the "Refunded Bonds"). The Refunded Bonds shall be redeemed in whole at the Texas Commerce Bank National Association, Dallas, Texas (the successor to Mercantile National Bank at Dallas, and Corpus Christi National Bank) the Paying Agent for the Refunded Bonds. Upon presentation of the Refunded Bonds at the Paying Agent on the aforementioned redemption date, the holder thereof shall be entitled to receive the Redemption Price equal to par and accrued interest to the redemption date, plus a premium of 2-1/2%. THIS CONDITIONAL NOTICE OF REDEMPTION AND THE PAYMENT OF THE REDEMPTION PRICE on the Refunded Bonds on April 1, 1994 is subject to the issuance and delivery of Nueces River Authority Water Supply Revenue Refunding Bonds, Series 1994 (City of Corpus Christi Project) (the "Refunding Bonds") before April 1, 1994 in an amount sufficient to provide funds to pay in full of the Redemption Price of the Refunded Bonds. In the event the Refunding Bonds have not been issued before April 1, Corpus Christi, Texas 22 day of kLYvx✓v1 , 19 q4 The above resolution was passed by the following vote: Mary Rhodes Dr. Jack Best Melody Cooper Cezar Galindo Betty Jean Longoria Edward A. Martin Dr. David McNichols David Noyola Clif Moss \forms\066 01 N° 18'!3