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HomeMy WebLinkAbout025238 ORD - 03/25/2003Approved 3/25/03 ORDINANCE NO. AN ORDINANCE approving and authorizing the issuance of commercial paper notes in an aggregate principal amount not to exceed $75,000,000 to provide interim financing to pay Project Costs for Eligible Projects and to refund obligations issued in connection with an Eligible Project; authorizing the execution and delivery ora loan note, and prescribing the terms, features and characteristics of such instruments; approving and authorizing certain authorized officers and employees to act on behalf of the City in the selling and delivery of such commercial paper notes, within the limitations and procedures specified herein; making certain covenants and agreements in connection therewith; resolving other matters incident and related to the issuance, sale, security and delivery of such commercial paper notes, including the approval of an Issuing and Paying Agent Agreement, a Credit Agreement and a Dealer Agreement; approving the use of an Offering Memorandum in connection with the sale from time to time of such commercial paper notes; and providing an effective date. THE STATE OF TEXAS COUNTIES OF NUECES AND SAN PATRICIO CITY OF CORPUS CHRISTI WHEREAS, the City of Corpus Christi, Texas (the "City" or the "Issuer") is a "Home-Rule City", acting as such under the Constitution and laws of the State of Texas, and has a population in excess of 50,000; and WHEREAS, on November 11, 1997, the City Council of the City adopted an ordinance (the "1997 Ordinance") which authorized the issuance of its short term obligations pursuant to the provisions of Article 717q, V.A T.C S. (subsequently codified as Chapter 137 I, Texas Government Code), to provide interim financing for additions, improvements and extensions to the City's waterworks system, wastewater disposal system and gas system (the "System"); and WHEREAS, the City currently has outstanding revenue bonds (hereinafter defined as the "Outstanding Priority Bonds") payable from and secured by a first lien on and pledge of "Pledged Revenues", which include the net revenues of the System; and WHEREAS, in addition to the Outstanding Priority Bonds, the City has heretofore entered into a contract (hereinafter defined as the "Federal Contract") by and among the United States of America, the City and the Nueces River Authority, with respect to the Nueces River Reclamation Project, more commonly referred to as the Choke Canyon Reservoir Project, pursuant to which the City has pledged the revenues of its waterworks system in support of the payment obligations of the City under the Federal Contract, subordinate to the operating and maintenance expenses of the System and the debt service, reserve, and other requirements in respect to the Outstanding Priority Bonds and revenue bonds issued on a parity therewith; and WHEREAS, by a letter agreement executed by the City, the United States of America and the Nueces River Authority, the parties to the Federal Contract have agreed that a lien on and pledge of the revenues of the System in respect to the issuance of commercial paper notes will be deemed under the terms of the Federal Contract to be the equivalent ora pledge in support of revenue bonds, and thus superior to the lien granted to the United States of America under the Federal Contract; and WHEREAS, the ordinances authorizing the issuance of the Outstanding Priority Bonds reserve to the City the right to issue bonds, notes, or other obligations (such bonds, notes, or other obligations are hereinafter defined as "Subordinated Obligations"), with such bonds, notes, or other obligations payable from and secured by a lien on and pledge of the Pledged Revenues, which include the net revenues of the System, subordinate to the lien on and pledge of the Pledged Revenues securing the Outstanding Priority Bonds; and WHEREAS, the City currently does not have outstanding any obligations under the 1997 Ordinance; and WHEREAS, the City Council hereby finds that the adoption of this Ordinance is necessary to enable the City to (i) to establish a new commercial paper program for the System, (ii) name a new dealer, a new issuing and paying agent and a new credit and/or liquidity provider in connection with the new commercial paper program, and (iii) make such changes as to permit the program authorized hereby to be consistent with the changes in Texas and federal law and the commercial paper public debt market that have occurred since the adoption of the 1997 Ordinance; and WHEREAS, the commercial paper notes authorized to be issued pursuant to this Ordinance constitute bond anticipation notes which the City intends to retire through the issuance of its revenue bonds; and WHEREAS, the City Council hereby finds and determines that the issuance of commercial paper notes and a bank note, subject to the terms, conditions and limitations hereinafter prescribed, should be approved and authorized at this time; NOW, THEREFORE, BE IT ORDAINED BY THE CITY COUNCiL OF THE CITY OF CORPUS CHRISTI, TEXAS: ARTICLE I DEFINITIONS Section 1.01. Definitions. Unless the context shall indicate a contrary meaning or intent, the terms below defined, for all purposes of this ordinance or any ordinance amendatory or supplemental hereto, shall be construed, are used and are intended to have the following meanings, to-wit: "Act" shall mean Chapter 1371 and Chapter 1502 "Authorized Representative" shall mean one or more of the following officers or employees of the City, acting in concert or individually, to-wit: the Mayor, the City Manager, the Deputy City Manager, the Director of Finance, or such other officer or employee of the City designated in writing by the City Manager, and approved by the City Council, to act as an Authorized Representative. "Bank" shall mean WESTLB AG, acting through its New York Branch, any other Lender (as defined in the Credit Agreement) or any subsequent or succeeding party to the Credit Agreement. "Bank Payment Account" shall mean the account so designated in Section 2.13 hereof "Bond Counsel" shall mean McCall, Parkhurst & Horton L.L.P., or any other firm of nationally recognized bond counsel selected by the City. "Bonds" shall mean Priority Bonds and Subordinated Obligations. "Business Day" shall mean any day (a) when banks are not authorized to be closed in the City and (b) when banks or the New York Stock Exchange are not authorized to be closed in New York, New York. "Chapter 551" shall mean Chapter 551, Texas Government Code. "Chapter 1206" shall mean Chapter 1206, Texas Government Code. "Chapter 1208" shall mean Chapter 1208, Texas Government Code. "Chapter 1371" shall mean Chapter 1371, Texas Government Code. "Chapter 1502" shall mean Chapter 1502, Texas Government Code. "City" or "Issuer" shall mean the City of Corpus Christi, Texas. "City Council" shall mean the governing body of the City. "Code" shall mean the Internal Revenue Code of 1986, as amended. 3 "Commercial Paper Note" shall mean a note issued pursuant to the provisions of this Ordinance, having the terms and characteristics specified in Section 2.03 hereof and in the form described in Section 2.05 hereof "Commitment" shall have the same meaning given said term in the Credit Agreement. "Credit Agreement" shall mean the agreement approved and authorized to be entered into by Section 2.16 hereof, as from time to time amended or supplemented, or other credit facility provided in lieu thereof in accordance with the provisions of Section 4.05 hereof "Credit Facility" shall mean a policy of municipal bond insurance, a surety bond or a letter or line of credit issued in support of any Bonds (including specifically, but not by way of limitation, the Commercial Paper Notes), including, without limitation, the Credit Agreement, all in accordance with the terms of the Priority Bond Ordinance or any ordinance authorizing the issuance of Subordinated Obligations, including this Ordinance. "Dealer" shall mean the entity or entities so designated in Section 3.04 hereo£ "Dealer Agreement" shall mean the Dealer Agreement approved and authorized to be entered into by Section 3.04 hereof, as from time to time amended or supplemented. "Defeasance Securities" shall mean (i) direct, noncallable obligations of the United States of America, including obligations that are unconditionally guaranteed by the United States of America, (ii) noncallable obligations of an agency or instrumentality of the United States of America, including obligations that are unconditionally guaranteed or insured by the agency or instrumentality and that, on the date of the purchase thereof are rated as to investment quality by a nationally recognized investment rating firm not less than AAA or its equivalent, and (iii) noncallable obligations ora state or an agency or a county, municipality, or other political subdivision of a state that have been refunded and that, on the date the governing body of the City adopts or approves the proceedings authorizing the financial arrangements are rated as to investment quality by a nationally recognized investment rating firm not less than AAA or its equivalent. "Designated Office" shall mean the corporate trust office of the Issuing and Paying Agent where Commercial Paper Notes must be presented and delivered for receipt of payment of the principal amount thereof. "DTC" shall mean The Depository Trust Company or any substitute securities depository appointed pursuant to this Ordinance, or any nominee thereof. "DTC Participant" shall mean a member of, or the participant in, DTC that will act on behalf of a Holder. "Eligible Investments" shall mean any or all of the authorized investments described in the Public Funds Investment Act of 1987, Chapter 2256, Texas Government Code, in which the City may purchase, sell and invest its funds and funds under its control. "Eligible Project" shall mean the acquisition or construction of improvements, additions or extensions to the System, including capital assets and facilities incident and related to the operation, maintenance and administration thereof, all as provided in the Act or Chapter 1502, Texas Government Code. "Federal Contract" shall mean Contract No. 6-07-01-X0675, by and among the United States of America, the City and the Nueces River Authority, dated June 30, 1976, together with any amendments thereto including, without limitation, the Letter Agreement. "Fiscal Year" shall mean the fiscal year used by the City in connection with the operation of the System. "Gross Revenues" and "Gross Revenues of the System" shall mean all revenues, income, and receipts derived or received by the City from the operation and ownership of the System, including the interest income from the investment or deposit of money in any Fund maintained pursuant to the Priority Bond Ordinance or maintained by the City in connection with the System, other than those amounts subject to payment to the United States of America as rebate pursuant to section 148 of the Code. "Holder" or "Noteholder" shall mean any person, firm, association, or corporation who is in possession of any Note drawn, issued or endorsed to such person, firm, association or corporation or to the order of such person, firm, association or corporation or to bearer or in blank. "Issuing and Paying Agent", "Paying Agent/Registrar" or "Registrar" shall mean the agent appointed pursuant to Section 2.02 hereof, or any successor to such agent. "Issuing and Paying Agent Agreement" shall mean the agreement approved and authorized to be entered into by Section 3.03 hereof, as from time to time amended or supplemented. "Loan" shall mean a loan made under and subject to the conditions set forth in the Credit Agreement. "Loan Note" shall mean a promissory note or notes issued pursuant to the provisions of this Ordinance and the Credit Agreement in evidence of Loans or Term Loans made by the Bank under the Credit Agreement, having the terms and characteristics contained therein and issued in accordance with the terms thereof "Letter Agreement" shall mean the letter agreement among the United States of America, the City and the Nueces River Authority, dated April 12, 2002. 5 "Master Note" shall have the meaning given said term in Section 2.02 hereo£ "Maximum Interest Rate" shall mean 10% per annum. "Maximum Maturity Date" shall mean seven years following the date of passage of this Ordinance. "Net Revenues of the System" and "Net Revenues" shall mean all Gross Revenues less Operating Expenses. "Note" or "Notes" shall mean the evidences of indebtedness authorized to be issued and at any time Outstanding pursuant to this Ordinance and shall include Commercial Paper Notes (including the Master Note), notes in such form or forms as shall be approved by the City Council in an ordinance amending this Ordinance, and the Loan Note, as appropriate. "Operating Expenses" shall mean the expenses of operation and maintenance of the System, including all salaries, labor, materials, repairs, and extensions necessary to render efficient service, provided, however, that only such repairs and extensions, as in the judgment of the City, reasonably and fairly exercised by the passage of appropriate ordinances, are necessary to render adequate service, or such as might be necessary to meet some physical accident or condition which would otherwise impair the Bonds. Operating Expenses shall include the purchase of water, sewer and gas services as received from other entities and the expenses related thereto, and, to the extent permitted by law, Operating Expenses may include payments made on or in respect of a Credit Facility. Depreciation and payments from the System Fund to other funds established in this Ordinance shall never be considered as expenses of operation and maintenance. "Outstanding Priority Bonds" shall mean the outstanding and unpaid bonds of the City issued pursuant to the terms of the Priority Bond Ordinance, currently being the Series 1994 Bonds, the Series 1994-A Bonds, the Series 1995 Bonds, the Series 1995-A Bonds, the Series 1999 Bonds, the Series 1999-A Bonds, the Series 2000 Bonds, the Series 2000-A Bonds and the Series 2002 Bonds. "Pledged Revenues" shall mean (1) the Net Revenues, plus (2) any additional revenues, income, receipts, or other resources, including, without limitation, any grants, donations, or income received or to be received from the United States Government, or any other public or private source, whether pursuant to an agreement or otherwise, which hereafter are pledged to the payment of the Bonds. "Priority Bond Ordinance" shall mean collectively the ordinances authorizing the Outstanding Priority Bonds. "Priority Bonds" shall mean collectively the Outstanding Priority Bonds and any bonds, notes, or similar obligations (other than the Notes or the Credit Agreement (including any Loan Note), but including a Credit Facility the payment of which is secured by Pledged Revenues) issued on a parity therewith in accordance with the terms of the Priority Bond Ordinance. "Project Costs" shall mean all costs and expenses incurred in relation to Eligible Projects, including, without limitation, design, planning, engineering and legal costs, acquisition costs of land, interests in land, rights-of-way and easements, construction costs, costs of machinery, equipment, and other capital assets incident and related to the operation, maintenance, and administration of an Eligible Project, financing costs, including interest during construction and thereafter, underwriter's discount and/or fees for legal, financial, and other professional services, and reimbursement for such Project Costs attributable to Eligible Projects incurred prior to the issuance of any Commercial Paper Notes. "Series B Note Construction Account" shall mean the account so designated in Section 2.12 hereo£ "Series B Note Payment Fund" shall mean the fund so designated in Section 2.09 hereof "Series 1994 Bonds" shall mean the City of Corpus Christi, Texas Utility System Revenue Bonds, Series 1994, or any bonds issued to refund the same. "Series 1994-A Bonds" shall mean the City of Corpus Christi Texas Utility System Revenue Bonds, Series 1994-A, or any bonds issued to refund the same. "Series 1995 Bonds" shall mean the City of Corpus Christi, Texas Utility System Revenue Bonds, Series 1995, or any bonds issued to refund the same. "Series 1995-A Bonds" shall mean the City of Corpus Christi Texas Utility System Revenue Bonds, Series 1995-A, or any bonds issued to refund the same. "Series 1999 Bonds" shall mean the City of Corpus Christi Texas Utility System Revenue Refunding and Improvement Bonds, Series 1999, or any bonds issued to refund the same. "Series 1999-ABonds" shall mean the City of Corpus Christi Texas Utility System Revenue Refunding and Improvement Bonds, Series 1999-A, or any bonds issued to refund the same. "Series 2000 Bonds" shall mean the City of Corpus Christi, Texas Utility System Revenue Refunding Bonds, Series 2000, or any bonds issued to refund same. "Series 2000-A Bonds" shall mean the City of Corpus Christi, Texas Utility System Revenue Refunding Bonds, Series 2000-A, or any bonds issued to refund same. "Series 2002 Bonds" shall mean the City of Corpus Christi, Texas Utility System Revenue Refunding and Improvement Bonds, Series 2002, or any bonds issued to refund same. "Stated Termination Date" shall have the meaning given said term in the Credit Agreement. 7 "Subordinated Obligations" shall mean any bonds, notes, or other obligations issued or contractual obligations incurred pursuant to law payable in whole or in part from the Pledged Revenues and subordinate to the Prior Lien Bonds, including, without limitation, Commercial Paper Notes and the Loan Note, and the payment obligations of the City under the terms of the Federal Contract. "System" shall mean and include the City's existing combined waterworks system, wastewater disposal system and gas system, together with all future extensions, improvements, enlargements, and additions thereto, including, to the extent permitted by law, storm sewer and drainage, and all replacements thereof; provided that, notwithstanding the foregoing, and to the extent now or hereafter authorized or permitted by law, the term System shall not include any waterworks, wastewater or gas facilities which are declared by the City not to be a part of the System and which are hereafter acquired or constructed by the City with the proceeds from the issuance of "Special Facilities Bonds", which are hereby defined as being special revenue obligations of the City which are not secured by or payable from the Pledged Revenues, but which are secured by and payable solely from special contract revenues or payments received from the System, any other legal entity, or any combination thereof, in connection with such facilities; and such revenues or payments shall not be considered as or constitute Gross Revenues of the System, unless and to the extent otherwise provided in the ordinance of ordinances authorizing the issuance of such "Special Facilities Bonds". "Term Loan" shall having the meaning given said term in the Credit Agreement. Section 1.02. Construction of Terms Utilized in this Ordinance. If appropriate in the context of this Ordinance, words of the singular number shall be considered to include the plural, words of the plural number shall be considered to include the singular, and words of the masculine, feminine or neuter gender shall be considered to include the other genders. For all purposes of this Ordinance, unless the context requires otherwise, all references to designated Sections and other subdivisions are to the Sections and other subdivisions of this Ordinance. The words "herein", "hereof' and "hereunder" and other words of similar import refer to this Ordinance as a whole and not to any particular Section or other subdivision. References to any named person means that party and its successors and assigns. References to any constitutional, statutory or regulatory provision means such provision as it exists on the date this Ordinance is adopted by the City and any future amendments thereto or successor provisions thereof All references to time shall refer to New York City time. All references to FORM OF NOTE shall refer to the form of the Commercial Paper Notes attached hereto as Exhibit A. Certain terms not defined herein shall have the meaning given said terms in the Credit Agreement. ARTICLE II AUTHORIZATION OF NOTES Section 2.01. General Authorization, Pursuant to authority conferred by and in accordance with the provisions of the Constitution and laws of the State of Texas, particularly the Act, Commercial Paper Notes shall be and are hereby authorized to be issued in an aggregate principal 8 amount not to exceed SEVENTY-FIVE MILLION DOLLARS ($75,000,000) at any one time outstanding for the purpose of financing Project Costs of Eligible Projects and to refinance, renew or refund Prior Lien Bonds, Notes, and other Subordinated Obligations, including interest thereon, all in accordance with and subject to the terms, conditions, and limitations contained herein; and a Loan Note shall be and is hereby authorized to be issued in the initial aggregate principal amount of EIGHTY MILLION FIVE HUNDRED FORTY-SEVEN THOUSAND NINE HUNDRED FORTY-FIVE DOLLARS AND TWENTY-ONE CENTS ($80,547,945.21) at any one time outstanding for the purpose of evidencing Loans to retire Commercial Paper Notes; all in accordance with and subject to the terms, conditions and limitations contained herein and, with respect to the Loan Note, the Credit Agreement. For purposes of this Section 2.01, any portion of outstanding Notes to be paid from money on deposit in the Series B Note Payment Fund and from the available proceeds of Notes or Bonds on the day of calculation shall not be considered outstanding. The authority to issue Commercial Paper Notes from time to time under the provisions of this Ordinance shall exist until the Maximum Maturity Date, regardless of whether prior to the Maximum Maturity Date there are at any time no Commercial Paper Notes outstanding. Until such time as the Commitment under the Credit Agreement is increased as provided in Section 2.16 hereof, Commercial Paper Notes shall not be issued to exceed at any one time outstanding $75,000,000 in principal amount. Anything to the contrary herein notwithstanding, Commercial Paper Notes may not be issued to refinance or refund Prior Lien Bonds or finance payments due and owing by the City under the Federal Contract without the prior approval of the City Council. In connection with the refinancing or refunding of Notes, Prior Lien Bonds, Subordinated Obligations and any other authorized obligations of the System, including interest thereon, such Notes, Prior Lien Bonds, Subordinated Obligations and any other authorized obligations of the System shall qualify as "obligations", as such term is defined in Chapter 1371 at the time any such refinancing or refunding occurs. Further, any such refunding or refinancing, other than a simultaneous refunding, of Notes, Prior Lien Bonds, Subordinated Obligations and other obligations of the System, to the extent then required by applicable law, shall be by means of a gross defeasance established at the time of the issuance of the refunding Commercial Paper Notes, and the selection of Notes, Prior Lien Bonds, Subordinated Obligations and any other authorized obligations of the System to be so refunded or refinanced shall be made in the manner as determined by the City Council. The foregoing notwithstanding, the City may refinance or refund the payment obligations of the City under the Federal Contract with the proceeds of Commercial Paper Notes should the City receive the approving opinion of the Office of the Attorney General of the State of Texas with respect to such transaction, if such approving opinion is then required by Texas law. Section 2.02. Terms Applicable to Notes - General. Subject to the limitations contained herein, Commercial Paper Notes herein authorized shall be dated as of their date of issuance or prior thereto, but within 30 days of the date of issuance (the "Note Date"), as determined by an Authorized Representative; shall bear no interest or bear interest at such rate or rates (either fixed, variable or floating) per annum computed on the basis of either actual days elapsed or twelve 30-day months whichever is applicable, and on a 365-day or 366-day year (but in no event in any case to exceed the Maximum Interest Rate) as may be determined by an Authorized Representative and all Commercial Paper Notes authorized herein shall mature on or prior to the Maximum Maturity Date. Commercial Paper Notes issued hereunder may contain terms and provisions for the redemption or prepayment thereof prior to maturity, subject to any applicable limitations contained herein, as shall be determined by an Authorized Representative. Subject to applicable terms, limitations and procedures contained herein, Commercial Paper Notes may be sold in such manner at public or private sale and at par or at such discount (within the interest rate and yield restrictions provided herein) as an Authorized Representative shall approve at the time of the sale thereof. The Commercial Paper Notes shall be issued in registered form, without coupons; provided, however, Commercial Paper Notes maturing not more than one year from the Note Date may be registered to bearer. The principal of, premium, if any, and interest on the Commercial Paper Notes shall be payable in lawful money of the United States of America, without exchange or collection charges to the Holder of the Commercial Paper Note; the principal thereof to be payable upon presentation and surrender of the Commercial Paper Note at the Designated Office of the Issuing and Paying Agent and interest thereon to be payable to the registered owner thereof (when registered other than to bearer) either (i) by check sent by United States mail, first class postage prepaid, to the address of the registered owner appearing on the Registration Books of the City maintained by the Registrar or (ii) by such other method, acceptable to the Issuing and Paying Agent, requested by the Holder, but interest on a Commercial Paper Note registered to bearer shall be payable only upon presentation of the Commercial Paper Note at the Designated Office of the Issuing and Paying Agent. The selection and appointment of U.S Bank National Association to serve as Issuing and Paying Agent, Paying Agent/Registrar and Registrar for the Commercial Paper Notes is hereby confirmed and the City covenants and agrees to keep and maintain with the Registrar at its Designated Office books and records (the "Registration Books") for the registration, payment, transfer and exchange of the Commercial Paper Notes, all as provided herein and such reasonable rules and regulations as the Registrar may prescribe. The City covenants to maintain and provide a Registrar at all times while the Commercial Paper Notes are outstanding, which shall be a national or state banking association or corporation or trust company organized and doing business under the laws of the United States of America or of any state and authorized under such laws to exercise trust powers. Should a change in the Paying Agent/Registrar for the Commercial Paper Notes occur, the City agrees to promptly cause a written notice thereof to be (i) sent to each registered owner of the Commercial Paper Notes then outstanding by United States mail, first class postage prepaid and (ii) published in a financial newspaper or journal of general circulation in The City of New York, New York, once during each calendar week for at least two calendar weeks; provided, however, the publication of such notice shall not be required if notice is sent to each Holder of the Commercial Paper Notes. Such notice shall give the address of the successor Paying Agent/Registrar. A successor Paying Agent/Registrar may be appointed by the City without the consent of the Holders. The City and the Paying Agent/Registrar may treat the bearer (in the case of Commercial Paper Notes so registered) or the registered payee thereof as the absolute owner of any Commercial Paper Note for the purpose of receiving payment thereof and for ali purposes, and the City and the Paying Agent/Registrar shall not be affected by any notice or knowledge to the contrary. 10 If an Authorized Representative determines that it is possible and desirable to provide for a book-entry only system of registration with DTC for the Commercial Paper Notes, such Authorized Representative, acting for and on behalf of the City, is hereby authorized to approve, execute, and deliver a Letter of Representations to DTC and to enter into such other agreements and execute such instruments as are necessary to implement such book-entry only system, such approval to be conclusively evidenced by the execution thereof by said Authorized Representative. Under the initial book-entry only system with DTC, (i) no physical Commercial Paper Note certificates will be delivered to DTC and (ii) the City will execute and deliver to the Issuing and Paying Agent, as custodian for DTC, a master note relating to the Commercial Paper Notes (the "Master Note") in substantially the form set forth in Exhibit B. Except as provided herein, the ownership of the Commercial Paper Notes shall be registered in the name of Cede & Co., as nominee of DTC, which will serve as the initial securities depository for the Commercial Paper Notes. Ownership of beneficial interests in the Commercial Paper Notes shall be shown by book-entry on the system maintained and operated by DTC and DTC Participants, and transfers of ownership of beneficial interests shall be made only by DTC and the DTC Participants by book-entry, and the City and the Issuing and Paying Agent shall have no responsibility therefor DTC will be required to maintain records of the positions of the DTC Participants in the Commercial Paper Notes, and the DTC Participants and persons acting through the DTC Participants will be required to maintain records of the purchasers of beneficial interests in the Commercial Paper Notes. Except as provided in clause (i) of this paragraph, the Commercial Paper Notes shall not be transferable or exchangeable, except for transfer to another securities depository or to another nominee of a securities depository. With respect to Commercial Paper Notes registered in the name of DTC or its nominee, neither the City nor the Issuing and Paying Agent shall have any responsibility or obligation to any DTC Participant or to any person on whose behalf a DTC Participant holds an interest in the Commercial Paper Notes. Without limiting the immediately preceding sentence, neither the City nor the Issuing and Paying Agent shall have any responsibility or obligation with respect to (i) the accuracy of the records of DTC or any DTC Participant with respect to any ownership interest in the Commercial Paper Notes, (ii) the delivery to any DTC Participant or any other person, other than a registered owner of the Commercial Paper Notes, as shown on the Registration Books, of any notice with respect to the Commercial Paper Notes, including any notice of redemption, and (iii) the payment to any DTC Participant or any other person, other than a registered owner of the Commercial Paper Notes, as shown in the Registration Books, of any amount with respect to principal of and premium, if any, or interest on the Commercial Paper Notes. Whenever, during the term of the Commercial Paper Notes, the beneficial ownership thereof is determined by a book entry at DTC, the requirements in this Ordinance of holding, registering, delivering, exchanging, or transferring the Commercial Paper Notes shall be deemed modified to require the appropriate person or entity to meet the requirements of DTC as to holding, registering, delivering, exchanging, or transferring the book-entry to produce the same effect. Either the City or DTC may determine to discontinuing the book-entry only system and in such case, unless a new book-entry only system is put in place, physical certificates in the form set forth in Section 2.05 shall be provided to the Beneficial Holders. 11 If at any time, DTC ceases to hold the Commercial Paper Notes, all references herein to DTC shall be of no further force or effect. Whenever the beneficial ownership of the Commercial Paper Notes is determined by a book- entry at DTC, delivery of Commercial Paper Notes for payment at maturity shall be made pursuant to DTC's payment procedures as are in effect from time to time and the DTC Participants shall transmit payment to beneficial owners whose Commercial Paper Notes have matured. The City and each of the Issuing and Paying Agent, the Bank, and the Dealer are not responsible for transfer of payment to the DTC Participants or beneficial owners. Section 2.03. Commercial Paper Notes. Under and pursuant to the authority granted hereby and subject to the limitations contained herein, Commercial Paper Notes to be designated "City of Corpus Christi, Texas Utility System Commercial Paper Notes, Series B" are hereby authorized to be issued and sold and delivered from time to time in such principal amounts as determined by an Authorized Representative in denominations orS 100,000 or in integral multiples orS 1,000 in excess thereof, numbered in ascending consecutive numerical order in the order of their issuance and to mature and become due and payable on such dates as an Authorized Representative shall determine at the time of sale; provided, however, that no Commercial Paper Note shall (i) mature after the Maximum Maturity Date, (ii) have a term in excess of two hundred seventy (270) calendar days or (iii) mature no later than fifteen (15) calendar days prior to the Stated Termination Date. Anything to the contrary herein notwithstanding, the Master Note shall not mature later than the Maximum Maturity Date. Interest, if any, on Commercial Paper Notes shall be payable at maturity with principal. Section 2.04. Loan Note. Under and pursuant to authority granted hereby and subject to the limitations contained herein and in the Credit Agreement, a Loan Note to be designated "City of Corpus Christi, Texas Utility System Credit Agreement Loan Note" (with such other designation as may be determined by the Bank and approved by an Authorized Representative, so as to distinguish among Term Notes, if any) is hereby authorized and approved in accordance with the terms of this ordinance, the Credit Agreement and the form thereof set forth in the Credit Agreement. Section 2.05. Form of Commercial Paper Notes. The Commercial Paper Notes and the Certificate of Authentication to appear on each of the Commercial Paper Notes shall be substantially in the form set forth in Exhibit A, with such appropriate insertions, omissions, substitutions and other variations as are permitted or required by this ordinance and may have such letters, numbers or other marks of identification (including identifying numbers and letters of the Committee on Uniform Securities Identification Procedures of the American Banks Association) and such legends and endorsements thereon as may, consistently herewith, be approved by an Authorized Representative. Any portion of the text of any Commercial Paper Notes may be set forth on the reverse thereof, with an appropriate reference thereto on the face of the Commercial Paper Notes. The Notes shall be printed, lithographed, or engraved or produced in any other similar manner, or typewritten, all as determined and approved by an Authorized Representative. 12 If Commercial Paper Notes are issued in book-entry only form pursuant to Section 2.02, they shall be issued in the form of a Master Note in substantially the form attached hereto as Exhibit B, to which there shall be attached the form of Commercial Paper Note as prescribed above, and it is hereby declared that the provisions of the Commercial Paper Note as prescribed above are incorporated into and shall be a part of the Master Note. It is further provided that this Ordinance and the form of Commercial Paper Note prescribed above shall constitute the "underlining records" referred to in the Master Note. Notwithstanding the provisions of Section 2.06, the Master Note shall be executed on behalf of the City by the manual signature of the City Manager or the Deputy City Manager. Section 2.06. Execution - Authentication. In the exercise of authority granted to the City Council by Section 1371.055, Texas Government Code, the Notes (other than the Master Note) shall be executed on behalf of the City by the City Manager and attested by the City Secretary under its seal reproduced or impressed thereon, all as provided in Section 2.05 hereof. The signature of said officers on the Notes may be manual or facsimile. Commercial Paper Notes bearing the manual or facsimile signatures of individuals who are or were the proper officers of the City on the date of passage of this Ordinance shall be deemed to be duly executed on behalf of the City, notwithstanding that such individuals or either of them shall cease to hold such offices at the time of the initial sale and delivery of Commercial Paper Notes authorized to be issued hereunder or at the time Commercial Paper Notes are delivered in subsequent sales, exchanges and transfers, all as authorized and provided in Chapter 1206. No Commercial Paper Note shall be entitled to any right or benefit under this Ordinance, or be valid or obligatory for any purpose, unless there appears on such Commercial Paper Note a certificate of authentication executed by the Paying Agent/Registrar by manual signature, or, in the case of the Master Note, the Paying Agent/Registrar has executed the Master Note, and the execution of any Commercial Paper Note by the Paying Agent/Registrar shall be conclusive evidence, and the only evidence, that such Commercial Paper Note has been duly certified or registered and delivered. Section 2.07. Notes Mutilated, Lost, Destroyed or Stolen. If any Note shall become mutilated, the City, at the expense of the Holder of said Note, shall execute and deliver a new Note of like tenor and number in exchange and substitution for the Note so mutilated, but only upon surrender to the City of the Note so mutilated. If any Note shall be lost, destroyed or stolen, evidence of such loss, destruction or theft may be submitted to the City and, if such evidence be satisfactory to it and indemnity satisfactory to it shall be given, the City, at the expense of the owner, shall execute and deliver a new Note of like tenor in lieu of and in substitution for the Note so lost, destroyed or stolen. Neither the City nor the Paying Agent/Registrar shall be required to treat both the original Note and any duplicate Note as being outstanding for the purpose of determining the principal amount of Notes which may be issued hereunder, but both the original and the duplicate Note shall be treated as one and the same. Section 2.08. Negotiability, Registration and Exchangeability. The obligations issued hereunder shall be, and shall have all of the qualities and incidents of, a negotiable instrument under 13 the laws of the State of Texas, and each successive holder, in accepting any of the obligations, shall be conclusively deemed to have agreed that such obligations shall be and have all of the qualities and incidents of a negotiable instrument under the laws of the State of Texas. The Registration Books relating to the registration, payment and transfer or exchange of the Commercial Paper Notes shall at all times be kept and maintained by the City at the Designated Office of the Registrar, and the Registrar shall obtain, record and maintain in the Registration Books the name and address of each registered owner of the Commercial Paper Notes, except for Commercial Paper Notes registered to bearer, issued under and pursuant to the provisions of this Ordinance, and the Registrar further shall provide such information to the City as described in Section 2.02 hereo£ Any Commercial Paper Note may, in accordance with its terms and the terms hereof, be transferred or exchanged for Commercial Paper Notes of like tenor and character and of other authorized denominations upon the Registration Books by the Holder in person or by his duly authorized agent, upon surrender of such Commercial Paper Note to the Registrar for cancellation, accompanied by a written instrument of transfer or request for exchange duly executed by the Holder or by his duly authorized agent, in form satisfactory to the Registrar. Upon surrender for transfer of any Commercial Paper Note at the Designated Office of the Registrar, the Registrar shall register and deliver, in the name of the designated transferee or transferees (or to bearer, as appropriate), one or more new Commercial Paper Notes executed on behalf of, and furnished by, the City of like tenor and character and of authorized denominations and having the same maturity, bearing interest at the same rate and ora like aggregate principal amount as the Commercial Paper Note or Commercial Paper Notes surrendered for transfer. Furthermore, Commercial Paper Notes may be exchanged for other Commercial Paper Notes of like tenor and character and of authorized denominations and having the same maturity, beating the same rate of interest and of like aggregate principal amount as the Commercial Paper Notes surrendered for exchange, upon surrender of the Commercial Paper Notes to be exchanged at the Designated Office of the Registrar. Whenever any Commercial Paper Notes are so surrendered for exchange, the Registrar shall register and deliver new Commercial Paper Notes of like tenor and character as the Commercial Paper Notes exchanged, executed on behalf of, and furnished by, the City to the Holder requesting the exchange. The City and the Registrar may charge the Noteholder a sum sufficient to reimburse them for any expenses incurred in making any exchange or transfer after the first such exchange or transfer. The Registrar or the City may also require payment from the Holder ora sum sufficient to cover any tax, fee or other governmental charge that may be imposed in relation thereto. Such charges and expenses shall be paid before any such new Commercial Paper Note shall be delivered. New Commercial Paper Notes delivered upon any transfer or exchange shall be valid special obligations of the City, evidencing the same debt as the Commercial Paper Notes surrendered, shall be secured by this ordinance and shall be entitled to all of the security and benefits hereof to the same extent as the Commercial Paper Notes surrendered 14 The City reserves the right to change the above registration and transferability provisions of the Commercial Paper Notes at any time on or prior to the delivery thereof in order to comply with applicable laws and regulations of the United States in effect at the time of issuance thereo£ Section 2.09. Series B Note Payment Fund. There is created and established with the Issuing and Paying Agent a separate and special fund to be designated as the "City of Corpus Christi, Texas Utility System Series B Note Payment Fund" (the "Series B Note Payment Fund"). Moneys on deposit in the Series B Note Payment Fund shall be used to pay principal of and interest on CommerciaI Paper Notes at the respective interest payment and maturity dates of each issue thereof as provided herein and the repayment of any Loans and Term Loans made pursuant to the Agreement (evidenced by the Loan Note). Amounts remaining in the Series B Note Payment Fund not then necessary for the purposes thereof may be transferred to the Series B Note Construction Account (created pursuant to Section 2.12 hereof) upon request of an Authorized Representative. Additionally all proceeds of Loans shall be deposited into the Series B Note Payment Fund and used to pay the principal of and interest on the Commercial Paper Notes. Moneys held in the Series B Note Payment Fund shall remain uninvested pending their expenditure. Section 2.10. Pledge; Payments. The Notes are special obligations of the City payable from and secured solely by the funds pledged therefor pursuant to this Ordinance. The City agrees to cause payments to be made into the Series B Note Payment Fund at such times and in such amounts as are necessary to provide for the full payment of the principal of and the interest on the Notes when due. To provide security for the payment of the principal of and interest on the Notes and any other amounts due under the Credit Agreement as the same shall become due and payable, there is hereby granted a lien on and pledge off subject only to the provisions of this Ordinance permitting the application thereof for purposes and on the terms and conditions set forth herein, (i) the proceeds from (a) the sale of the Bonds issued for such purpose and (b) the sale of Commercial Paper Notes issued pursuant to this Ordinance for such purpose, (ii) Loans, (iii) the amounts held in the Series B Note Payment Fund until the amounts deposited therein are used for authorized purposes, provided, however, amounts in the Series B Note Payment Fund attributable to and derived from Loans shall be used only to pay, prior to any application to the payment of the Loan Note, the principal of and interest on the Commercial Paper Notes in full, and (iv) the amounts remaining on deposit in the Series B Note Construction Account after the payment of all Project Costs, and it is hereby resolved and declared the principal of and interest on the Notes and any other amounts due under the Credit Agreement shall be and are hereby equally and ratably secured by and payable from a lien on and pledge of the sources hereinabove identified in clauses (i), (ii), (iii) and (iv) subject and subordinate only to the exceptions noted therein. Additionally, to provide security for the payment of the principal of and interest on the Loan Note and other amounts due under the Credit Agreement as the same shall become due and payable, there is hereby granted a lien on and pledge of, subject only to the provisions of this Ordinance permitting the application thereof for purposes and on the terms and conditions set forth herein, such lien on and pledge of Pledged Revenues to the Loan Notes and other amounts due under the Credit Agreement, however, being subordinate only to the lien and pledge of the Pledged Revenues securing the payment of the Priority Bonds and the debt service and reserve 15 funds relating thereto. Unless a Loan Note is paid from the proceeds of Commercial Paper Notes or Bonds issued for such purposes, or amounts available in the Series B Note Payment Fund or the Series B Note Construction Account, all as described above, such payments are to be made from Pledged Revenues on deposit in the Bank Payment Account herein established within the Series B Note Payment Fund. The pledge and lien of Pledged Revenues in favor of the Bank created by this Ordinance shall be valid and binding without any physical delivery thereof or further act by the City. Chapter 1208 applies to the issuance of the Commercial Paper Notes, the execution of the Credit Agreement and the pledge hereinabove described, and such pledge is therefore valid, effective, and perfected. If Texas law is amended at any time while the Commercial Paper Notes are outstanding and unpaid such that the pledge granted to the Bank is to be subject to the filing requirements of Chapter 9, Texas Business & Commerce Code, then in order to preserve to the Bank the perfection of the security interest in said pledge, the City agrees to take such measures as it determines are reasonable and necessary under Texas law to comply with the applicable provisions of Chapter 9, Texas Business & Commerce Code and enable a filing to perfect the security interest in said pledge to occur. Section 2.11. Application of Prior Covenants. The covenants and agreements (to the extent the same are not inconsistent herewith) contained in the Priority Bond Ordinance are hereby incorporated herein and shall be deemed to be for the benefit and protection of the Loan Notes and the Holder thereof in like manner as applicable to the Priority Bonds; provided, however, in the event of any conflict between the terms, covenants and agreements contained herein and the terms, covenants and agreements contained in the Priority Bond Ordinance, the provisions of the Priority Bond Ordinance shall control over the provisions hereof Specifically, consistent with the provisions of the Priority Bond Ordinance, if any property or facilities is sold or exchanged and such property or facilities constituted property or facilities comprising all or a part of a system within the System, the acquisition, improvement or extension of such system having not been financed by the City in any manner with the proceeds of Bonds, or with the proceeds of obligations which were refunded in whole or in part with the proceeds of Bonds, then the City may utilize the proceeds of such sale or exchange for any lawful purpose. Section 2.12. Series B Note Construction Account. There is hereby created and established a separate account hereby designated as the "City of Corpus Christi, Texas Utility System Series B Note Construction Account" (the "Series B Note Construction Account"). The Series B Note Construction Account shall be held at a depository of the City. Moneys deposited in the Series B Note Construction Account shall remain therein until from time to time expended to pay for Project Costs, and to refund obligations issued in connection with Eligible Projects and shall not be used for any other purposes whatsoever, except as otherwise provided below, and pending such expenditure, moneys in the Series B Note Construction Account may be invested at the direction of the Director of Finance or the designee thereof in Eligible Investments. Any income received from such investments (except as otherwise required to be rebated to the United States of America in accordance with the provisions of Section 4.08 hereof) shall be held in the Series B Note Construction Account. Any amounts on deposit in the Series B Note Construction Account designated by an Authorized Representative as eligible to pay interest during construction and thereafter may be 16 transferred from time to time at the direction of an Authorized Representative to the credit of either the Series B Note Payment Fund or the Bank Payment Account for use in accordance with the terms of Sections 2.09 and 2.10 hereof Any amounts remaining in the Series B Note Construction Account after the payment of all Project Costs shall be paid at the direction of an Authorized Representative into either the Series B Note Payment Fund or the Series B Note Bank Repayment Fund and used for the payment of such maturities of the Commercial Paper Notes coming due at such times as may be selected by an Authorized Representative or for the payment of the Loan Notes, as the case may be. In the event no Commercial Paper Notes are outstanding and there are no outstanding Loans, any amounts in the Series B Note Construction Account not anticipated to be needed to pay Project Costs shall be transferred to the Debt Service Fund established by the Priority Bond Ordinance. Section 2.13. Loan Note Account, There is hereby created and there shall be established and maintained within the Series B Note Payment Fund established by this Ordinance a separate account to be known as the "Loan Note Account" for the sole benefit of the Loan Note. After satisfying the requirements of the Priority Bond Ordinance and any other ordinance with respect to the Priority Bonds, with respect to the payment of principal of, and premium, if any, and interest on the Priority Bonds and funding the reserve fund therefor, there shall be deposited by the City to the Loan Note Account the amounts required by Section 2.10 hereof for the payment of the Loan Note. Section 2.14. Cancellation. All Commercial Paper Notes which at maturity are surrendered to the Paying Agent/Registrar for the collection of the principal and interest thereof or are surrendered for transfer or exchange pursuant to the provisions hereof shall, upon payment or issuance of new Commercial Paper Notes, be cancelled by the Paying Agent/Registrar, and the Paying Agent/Registrar forthwith shall transmit to the City a certificate identifying such Commercial Paper Notes and that such Commercial Paper Notes have been duly cancelled and destroyed. Section 2.15. Fiscal and Other Agents. In furtherance of the purposes ofthis Ordinance, the City may from time to time appoint and provide for the payment of such additional fiscal, paying or other agents or trustees as it may deem necessary or appropriate in connection with the Notes. Section 2.16. Credit Agreement, The Credit Agreement, substantially in the form attached hereto as Exhibit C, is hereby approved, and shall be entered into with the Bank. The form of the Loan Note substantially in the form contained in the Credit Agreement is hereby approved with the interest rate to be determined as set forth therein. The City Manager is hereby authorized to execute and deliver any Loan Note, and the City Secretary is authorized to attest and to place the City seal on the Credit Agreement and the Loan Note. The City shall notify the rating agencies listed in Section 6.10 hereof of any change in the Bank, in the manner described in Section 6.10 hereo£ Section 2.17. Funds Secured, That moneys in all such Funds, to the extent not invested as permitted hereunder, shall be secured in the manner prescribed by law for securing funds of the City. 17 ARTICLE IH ISSUE AND SALE OF NOTES Section 3.01. Issuance and Sale of Notes. (a) The Commercial Paper Notes shall be completed and delivered by the Issuing and Paying Agent in accordance with telephonic, computer or written instructions of the Director of Finance or the designee thereof and in the manner specified below and in the Issuing and Paying Agent Agreement. To the extent such instructions are not written, they shall be confirmed in writing by the Director of Finance or the designee thereof within 24 hours. Said instructions shall specify such principal amounts, dates of issue, maturities, rates of discount or interest, or the formula or method of calculating interest and the basis upon which it is to be computed, and other terms and conditions which are hereby authorized and permitted to be fixed by the Director of Finance or the designee thereof at the time of sale of the Commercial Paper Notes. Such instructions shall include the purchase price of the Commercial Paper Notes, and a request that the Issuing and Paying Agent authenticate such Commercial Paper Notes by counter signature of its authorized officer or employee and deliver them to the named purchaser or purchasers thereof upon receipt of payment in accordance with the custom then prevailing in the New York financial market in regard to such Commercial Paper Notes. The rules of the New York Clearinghouse shall apply thereto. Such instructions shall also contain provisions representing that all action on the part of the City necessary for the valid issuance of the Commercial Paper Notes then to be issued has been taken, that all provisions of Texas and federal law necessary for the valid issuance of such Commercial Paper Notes with provision for interest exemption from federal income taxation have been complied with, if applicable, and that such Commercial Paper Notes in the hands of the Holders thereofwiI1 be valid and enforceable obligations of the City according to their terms, subject to the exercise of judicial discretion in accordance with general principles of equity and bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights heretofore or hereafter enacted to the extent constitutionally applicable and that, if applicable, based upon the advice of Bond Counsel, the stated interest on the Commercial Paper Notes is exempt from federal income taxation. Such instructions shall also certify that: (i) no Event of Default under Section 5.01 hereof has occurred and is continuing as of the date of such Certificate; (ii) the City is in compliance with the covenants set forth in Article IV hereof as of the date of such instructions; (iii) the City has been advised by Bond Counsel that the projects to be financed with the proceeds of the Commercial Paper Notes will constitute Eligible Projects, the obligations to be refunded were issued in connection with Eligible Projects and, further, that the proposed expenditure of the proceeds of such Commercial Paper Notes for such projects and refunding will not cause the City to be in violation of its covenants set forth in Section 4.08 hereof, (iv) the sum of the interest payable on such Commercial Paper Note will not exceed a yield (calculated on the principal amount of the Commercial Paper Note on the basis of a 365-day or 366-day, as may be applicable, year and actual number of days elapsed) to 18 the maturity date of such Commercial Paper Note in excess of the Maximum Interest Rate in effect on the date of issuance of such Commercial Paper Note; and (v) after the proposed issuance, the principal amount of Commercial Paper Notes to be Outstanding after such issuance and the interest thereon does not exceed the Commitment available under the terms of the Credit Agreement (b) The Loan Note shall be or has been delivered to the Bank and indebtedness may be incurred thereunder in accordance with the terms of the Credit Agreement, Section 3.02. Proceeds of Sale of Commercial Paper Notes, The proceeds ofthe sale ofany Commercial Paper Notes (net of all expenses and costs of sale and issuance) shall be applied for any or all of the following purposes as directed by an Authorized Representative: (i) Proceeds to be used for the payment and redemption of outstanding Commercial Paper Notes at or before maturity and the repayment of any borrowing (evidenced by any Loan Note) or other amounts due under the Credit Agreement shall be retained in the Series B Note Bank Repayment Fund, and expended therefor; and (ii) Proceeds not retained in the Series B Note Bank Repayment Fund as provided in subparagraph (i) above shall be transferred and deposited to the Series B Note Construction Account and used and applied in accordance with the provisions of Section 2.12 hereo£ Section 3.03. Issuing and Paying Agent Agreement. The Issuing and Paying Agent Agreement by and among the City, the Bank and the Issuing and Paying Agent, relating to the Commercial Paper Notes, in substantially the form attached to this Ordinance as Exhibit D, is hereby approved, and any Authorized Representative is hereby authorized and directed to execute the same for and on behalf of the City and the City Secretary is authorized to attest and place the City seal on such instrument. Any Authorized Representative is hereby authorized to enter into any supplemental agreements with the Issuing and Paying Agent or with any successor Issuing and Paying Agent in order to implement the functions of the Issuing and Paying Agent or Registrar with respect to the Commercial Paper Notes including, without limitation, authorizing the Issuing and Paying Agent to effect draws upon the Credit Facility in such manner as may be provided in the Issuing and Paying Agent Agreement. The City shall notify the rating agencies listed in Section 6.10 hereof of any change in the Issuing and Paying Agent, in the manner described in Section 6.10 hereof Section 3.04. Dealer Agreement. The Dealer Agreement to be entered into with Morgan Stanley & Co, Incorporated (the "Dealer") pertaining to the sale, from time to time, of Commercial Paper Notes or the purchase of Commercial Paper Notes from the City, all for a fee to be set forth in the Dealer Agreement, in substantially the form attached to this Ordinance as Exhibit E, is hereby approved, and any Authorized Representative is hereby authorized and directed to execute the same for and on behalf of the City and the City Secretary is authorized to attest and place the City seal on 19 such instrument. The City shall notify the rating agencies listed in Section 6.10 hereof of any change in the Dealer, in the manner described in Section 6.10 hereof. ARTICLE IV COVENANTS OF THE CITY Section 4.01. Limitation on Issuance. Unless this Ordinance is amended and modified bythe City Council and in accordance with the provisions of Section 6.01 hereof, the City covenants that there will not be issued and outstanding at any time under this ordinance more than $75,000,000 in principal amount of Commercial Paper Notes. For purposes of this Section 4.01 any portion of outstanding Commercial Paper Notes to be paid on a particular day from moneys on deposit in the Series B Note Payment Fund and available proceeds of Notes or Bonds shall not be considered outstanding on such day. Additionally, the City covenants and agrees that the total principal amount of all Commercial Paper Notes outstanding at any one time and the total amount of interest accrued or to accrue thereon shall not exceed the Commitment available under the terms of the Credit Agreement. Section 4.02. Rates and Charges. The City hereby agrees and reaffirms its covenants to the holders of the Priority Bonds and covenants to the Holder of the Loan Note that it will at all times maintain rates and charges for the services furnished, provided, and supplied by the System which shall comply with the provisions of the Priority Bond Ordinance, be reasonable and nondiscriminatory and produce income and revenues sufficient to pay: (a) all maintenance and operating expenses, depreciation, replacement and betterment expenses and other costs as may be required by law (including specifically Section 1502.056, Texas Government Code); (b) the interest on and principal of all Priority Bonds, as and when the same shall become due, and to maintain the Funds and Accounts created and established for the payment and security of the Priority Bonds; (c) to the extent the same are reasonably anticipated to be paid with Pledged Revenues, the interest on and principal of the Loan Notes and other amounts due the Bank under the Credit Agreement, as and when the same shall become due; (d) the payment obligations of the City under the Federal Contract, as and when the same shall become due; and (e) any legal debt or obligation of the System as and when the same shall become due. 2o Section 4.03. System Fund. Pursuant to Section 2.11 hereof, the City hereby reaffirms its covenant to the holders of the Priority Bonds, and hereby covenants with respect to the Holder of the Loan Notes, that all Gross Revenues shall be deposited as received in the "City of Corpus Christi 1Jtility System Fund" (hereinafter referred to as "System Fund"), which is required by the Priority Bond Ordinance, which shall be kept separate and apart from all other funds of the City. Revenues received for the System Fund shall be deposited from time to time as received in such bank or banks as may be selected by the City in accordance with applicable laws relating to the selection of City depositories. Section 4.04. Priority of Deposits and Payments From System Fund. The City shall make the deposits and payments from the Pledged Revenues in the System Fund when and as required by the Priority Bond Ordinance and such deposits shall be made in the order and with the priorities set forth in the Priority Bond Ordinance. After satisfying the requirements of the Priority Bond Ordinance and any ordinance with respect to payment of principal, premium, if any, and interest on the Priority Bonds and the respective debt service and reserve fund requirements therefor, there shall be deposited by the City to the Bank Payment Account the amounts required by Section 2.10 hereof for the payment of the Loan Note. Section 4.05. Maintenance of Available Credit Facilities Requirement. The City agrees and covenants that at all times up to and including the Maximum Maturity Date, unless the Commercial Paper Notes are no longer outstanding it will maintain credit or liquidity facilities with banks in amounts such that, assuming that all then outstanding Commercial Paper Notes were to become due and payable immediately, the amount available for borrowing under such facilities would be sufficient at that time to pay principal and interest of all Commercial Paper Notes. No Commercial Paper Note shall be issued which if, after giving effect to the issuance thereof and, if applicable, the immediate application of the proceeds thereof to retire other Commercial Paper Notes secured by the credit or liquidity facility, the aggregate principal amount of all Commercial Paper Notes secured by or payable from the credit or liquidity facility would exceed the amount of the commitment thereunder. The availability for borrowing of such amounts under such facilities may be subject to reasonable conditions precedent, including but not limited to, bankruptcy of the City. In furtherance of the foregoing covenant, the City agrees that it will not issue any Commercial Paper Notes or make any borrowing which will result in a violation of such covenant, will not amend the Credit Agreement in a manner which will cause a violation of such covenant and, if and to the extent necessary to maintain compliance with such covenant, will arrange for new credit or liquidity facilities prior to, or contemporaneously with, the expiration of the Credit Agreement. Section 4.06. Bonds. The City hereby acknowledges that the Commercial Paper Notes are being issued as bond anticipation notes, and therefore the City in good faith shall endeavor to sell a sufficient principal amount of the Bonds in order to have funds available, together with other moneys available therefor, to pay the Notes and the interest thereon, or any renewals thereof, as the same shall become due, and other amounts due under the Credit Agreement. 21 Section 4.07. Punctual Payment. The City will punctually pay or cause to be paid the principal of and interest, if any, on the Notes (but only from the sources pledged herein), in conformity with the Notes, this Ordinance and the Credit Agreement. Section 4.08. Commercial Paper Notes to Remain Tax Exempt. The City covenants to take any action to assure, or refrain from any action which would adversely affect, the treatment of the Commercial Paper Notes 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 if such Commercial Paper Notes are designated by the City as "tax exempt". In furtherance thereof, the City covenants as follows: (a) to take any action to assure that no more than 10 percent of the proceeds of the Commercial Paper Notes 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 are so used, that amounts, whether or not received by the City, with respect to such private business use, do not, under the terms of this Ordinance or any underlying arrangement, directly or indirectly, secure or provide for the payment of more than 10 percent of the debt service on the Commercial Paper Notes, in contravention of section 141 (b)(2) of the Code; (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 Commercial Paper Notes or the projects financed therewith (less amounts deposited into a reserve fund, if any) then the amount in excess of 5 percent is used for a "private business use" which is "related" and not "disproportionate", within the meaning of section 141(b) (3) of the 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 Commercial Paper Notes (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 Commercial Paper Notes being treated as "specified 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 Commercial Paper Notes being "federally guaranteed" within the meaning of section 149(b) of the Code; (f) to refrain from using any portion of the proceeds of the Commercial Paper Notes, directly or indirectly, to acquire or to replace funds which were used, directly or indirectly, to acquire "investment property" (as defined in section 148(b)(2) of the Code) which produces a materially higher yield over the term of the Commercial Paper Notes, other than investment property acquired with ~- 22 (1) proceeds of the Commercial Paper Notes invested for a reasonable temporary period of 3 years or less until such proceeds are needed for the purpose for which the obligations 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 Commercial Paper Notes; (g) to otherwise restrict the use of the proceeds of the Commercial Paper Notes or amounts treated as proceeds of the Commercial Paper Notes, as may be necessary, so that the Commercial Paper Notes 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); and (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 Commercial Paper Notes) an amount that is at least equal to 90 percent of the "Excess Earnings", within the meaning of section 148(0 of the Code, and to pay to the United States of America, not later than 60 days after the Commercial Paper Notes have been paid in full, 100 percent of the amount then required to be paid as a result of Excess Earnings under section 148(0 of the Code. The City represents and covenants that it will not expend, or permit to be expended, the proceeds of any Commercial Paper Notes in any manner inconsistent with its reasonable expectations as certified in a federal tax certificate to be executed from time to time with respect to the Commercial Paper Notes; provided, however, that the City may expend Commercial Paper Note proceeds in any manner if the City first obtains an unqualified opinion of Bond Counsel that such expenditure will not impair the exemption from federal income taxation of interest paid on the Commercial Paper Notes. The City represents that it has not been notified of any listing or proposed listing by the Internal Revenue Service to the effect that it is an issuer whose arbitrage certifications may not be relied upon. The City understands that the term "proceeds" includes "disposition proceeds" as defined in the Regulations and, in the case of a refunding bond, transferred proceeds (if any) and proceeds of the refunded bonds expended prior to the date of the issuance of the Commercial Paper Notes. It is the understanding of the City 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 modi~, or expand provisions of the Code, as applicable to the Commercial Paper Notes, the City will not be required to comply with any covenant contained herein to the extent that such failure to comply, in the opinion of Bond Counsel, will not adversely affect the exemption from federal income taxation of interest on the Commercial Paper Notes under section 103 of the Code. In the event that 23 regulations or rulings are hereafter promulgated which impose additional requirements which are applicable to the Commercial Paper Notes, the City agrees to comply with the additional requirements to the extent necessary, in the opinion of Bond Counsel, to preserve the exemption from federal income taxation of interest on the Commercial Paper Notes under section 103 of the Code. In furtherance of such intention, the City Council hereby authorizes and directs any Authorized Representative to execute any documents, certificates or reports required by the Code, and to make such elections on behalf of the City which may be permitted by the Code as are consistent with the purpose for the issuance of the Commercial Paper Notes. In order to facilitate compliance with the above clause (h), a "Rebate Fund" is hereby established by the City 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 Noteholders. The Rebate Fund is established for the additional purpose of compliance with section 148 of the Code. Section 4.09. Allocation of, and Limitation on, Expenditures for Eligible Projects. That the City covenants to account for on its books and records the expenditure of proceeds from the sale of the Commercial Paper Notes and any investment earnings thereon to be used for Eligible Projects by allocating proceeds to expenditures within eighteen (18) months of the later of the date that (a) the expenditure on a Eligible Project is made or (b) each Eligible Project is completed; but in no event later than three (3) years after the date on which the expenditure is paid. The foregoing notwithstanding, the City recognizes that in order for proceeds to be expended under the Code, sale proceeds or investment earnings must be expended no more than sixty (60) days after the earlier of (a) the fifth anniversary of the date of delivery of the Commercial Paper Notes or (b) the date the Commercial Paper Notes are retired. The City agrees to obtain the advice of Bond Counsel if such expenditure fails to comply with the foregoing to assure that such expenditure will not adversely affect the tax-exempt status of the Commercial Paper Notes. For purposes of this Section, the City shall not be obligated to comply with this covenant if it obtains an opinion of Bond Counsel to the effect that such failure to comply will not adversely affect the excludability for federal income tax purposes from gross income of the interest. Section 4.10. Disposition of Eligible Projects. That the City covenants that the property constituting an Eligible Project financed with the proceeds of the Commercial Paper Notes will not be sold or otherwise disposed in a transaction resulting in the receipt by the City of cash or other compensation, unless the City obtains an opinion of Bond Counsel substantially to the effect that such sale or other disposition will not adversely affect the tax-exempt status of the Commercial Paper Notes. For purposes of this Section, the portion of the property comprising personal property and disposed of in the ordinary course of business shall not be treated as a transaction resulting in the receipt of cash or other compensation. For purposes of this Section, the City shall not be obligated to comply with this covenant if it obtains an opinion of Bond Counsel to the effect that such failure to comply will not adversely affect the excludability for federal income tax purposes from gross income of the interest. Section 4.11. Taxable Obligations. That the provisions of Section 4.08 of this Ordinance notwithstanding, the City reserves the ability to issue Commercial Paper Notes in a manner such that 24 such obligations are not obligations described in section 103 (a) of the Code or are obligations which constitute "private activity bonds" within the meaning of section 141(b) of the Code. If Commercial Paper Notes are so issued, the Authorized Representative is authorized to designate such Commercial Paper Notes in such a manner as to distinguish such Commercial Paper Notes from those Commercial Paper Notes that are issued as obligations described in section 103(a) of the Code. Section 4.12. Supplemental Ordinances. Other than as permitted herein with respect to the issuance of additional obligations of the City secured by the Net Revenues of the System, the City will not adopt any supplemental ordinances with respect to the Pledged Revenues of the System, pursuant to the Priority Bond Ordinance or otherwise, without the consent of the Bank. Section 4.13. Opinion of Bond Counsel. The City shall cause the legal opinion of Bond Counsel as to the validity of the Notes and as to the exemption of interest on the Commercial Paper Notes from federal income taxation to be furnished to any Noteholder without cost. In addition, a copy of said opinion may be printed on each of the Commercial Paper Notes. In addition, in connection with the annual updating of the Offering Memorandum (as provided in accordance with Section 6.08 hereof) as required by the Dealer Agreement, there shall be provided an annual updated opinion of Bond Counsel, at the cost of the City or the Dealer as agreed to in the Dealer Agreement. Section 4.14. Compliance With Priority Bond Ordinance and Other Documents The City will comply with the terms and provisions of the Priority Bond Ordinance, the Federal Contract, and any other ordinance or contract to which the City is a party, the non-compliance with which would materially adversely affect the ability of the City to make payments on the Notes when due. Section 4.15. Reservation of Right to Issue Priority Bonds and Obligations of Inferior Lien. The City hereby expressly reserves the right to hereafter issue Priority Bonds in accordance with the provisions of the Priority Bond Ordinance, payable from and secured by a lien on and pledge of the Pledged Revenues of the System prior in right and claim to the lien and pledge securing the payment of the Loan Note. The City also retains the right to issue bonds, notes, or other evidences of indebtedness or to incur contractual obligations secured by a lien on and pledge of the Pledged Revenues of the System junior and subordinate to the lien and pledge securing the Loan Note. The payment obligation of the City under the Federal Contract is junior and subordinate to the payment obligations of the City under the Loan Note. Section 4.16. Ongoing Continuing Disclosure Covenant. To the extent required by the provisions of Rule 15c2-12, promulgated by the U.S. Securities and Exchange Commission (the "Rule"), the City agrees to enter into an agreement to file financial information and operating data with respect to the Commercial Paper Notes with such entities as are designated pursuant to the terms of the Rule as nationally recognized municipal securities information repositories and the state information depository in Texas. The City currently anticipates issuing Commercial Paper Notes with stated maturities of 270 days or less, and under the provisions of the Rule, as they exist on the date this Ordinance is adopted, the City is exempted from complying with the undertaking described in the 25 first sentence of this Section 4.16 if the Commercial Paper Notes are so issued with stated maturities of the duration hereinabove described. ARTICLE V EVENTS OF DEFAULT AND REMEDIES OF NOTEHOLDERS Section 5.01. Events of Default. If one or more of the following events shall occur: (a) if default shall be made in the due and punctual payment of any installment of principal of any Commercial Paper Note when and as the same shall become due and payable, whether at maturity as therein expressed, by declaration or otherwise; (b) if the City shall fail to make due and punctual payment of any installment of interest on any Commercial Paper Note when and as such interest installment shall become due and payable and such failure shall continue for five (5) Business Days; (c) if the principal of any Loan Note (and interest accrued thereon) shall become due and payable prior to the maturity thereof under such Loan Note and the Credit Agreement; (d) if default shall be made by the City in the performance or observance of any other of the covenants, agreements or conditions on its part in this ordinance or in the Commercial Paper Notes contained, and such default shall continue for a period of sixty (60) days after written notice thereof; provided, however, if such default cannot be cured within the sixty (60) day period but corrective action to cure such default is commenced and diligently pursued until the default is corrected no such Event of Default shall be deemed to have occurred; (e) if there shall occur the dissolution (without a successor being named to assume the rights and obligations) or liquidation of the City or the filing by the City of a voluntary petition in bankruptcy, or adjudication of the City as a bankrupt, or assignment by the City for the benefit of its creditors, or the entry by the City into an agreement of composition with its creditors, or the approval by a court of competent jurisdiction with its creditors, or the approval by a court of competent jurisdiction of a petition applicable to the City in any proceeding for its reorganization instituted under the provisions of the Bankruptcy Code, as amended, or under any similar act in any jurisdiction which may now be in effect or hereafter enacted; or (f) if an order or decree shall be entered, with the consent or acquiescence of the City, appointing a receiver or receivers of the System, or any part thereof, or of the rents, fees, charges or other revenues therefrom, or if such order or decree, having been entered 26 without the consent or acquiescence of the City shall not be vacated or discharged or stayed within ninety (90) days after the entry thereof; then such event as described above shall constitute an "Event of Default" under this Ordinance. Section 5.02. Suits at Law or in Equity and Mandamus. In case one or more Events of Default shall occur, then and in every such case the Holder of any Note at the time outstanding shall be entitled to proceed to protect and enforce such Holder's rights by such appropriate judicial proceeding as such Holder shall deem most effectual to protect and enforce any such right, either by suit in equity or by action at law, whether for the specific performance of any covenant or agreement contained in this Ordinance, or in aid of the exercise of any power granted in this Ordinance, or to enforce any other legal or equitable right vested in the Holders of Notes by this Ordinance or the Notes or by law. The provisions of this Ordinance shall be a contract with each and every Holder of Notes and the duties of the City shall be enforceable by any Noteholder by mandamus or other appropriate suit, action or proceeding in any court of competent jurisdiction. Section 5.03. Remedies Not Exclusive. No remedy herein conferred upon or reserved to the Holders of Notes is intended to be exclusive of any other remedy, and every such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing, at law or in equity or by statute or otherwise, and may be exercised at any time or from time to time, and as often as may be necessary, by the Holder of any one or more of the Notes. ARTICLE VI MISCELLANEOUS Section 6.01. Amendments or Modifications Without Consent of Holders of Notes. (a) This Ordinance and the rights and obligations of the City and of the Holders of Notes may be modified or amended at any time by a supplemental ordinance, without notice to or the consent of any Noteholders, but only to the extent permitted by law, and, subject to the rights of the holders of the Notes, only for any one or more of the following purposes -- (1) to add to the covenants and agreements of the City in this Ordinance contained, other covenants and agreements thereafter to be observed, or to surrender any right or power herein reserved to or conferred upon the City; (2) to cure any ambiguity or inconsistency, or to cure or correct any defective provision contained in this Ordinance, upon receipt by the City of an approving opinion of Bond Counsel selected by the City, that the same is needed for such purpose, and will more clearly express the intent of this Ordinance; or (3) to supplement the security for the Notes, replace or provide additional credit facilities, make such changes, modifications or amendments as may be necessary or desirable in order to obtain or maintain the granting ora rating on the Bonds by a nationally recognized 27 municipal bond rating service, or change the form of the Notes or make such other changes in the provisions hereof as the City may deem necessary or desirable and which shall not materially adversely affect the interests of the Holders of the Notes; provided, however, that nothing herein contained shall permit or be construed to permit the amendment of the terms and conditions of this ordinance or of the Commercial Paper Notes so as to: (1) Make any change in the maturity of any of the outstanding Commercial Paper Notes; (2) Reduce the rate of interest borne by any of the outstanding Commercial Paper Notes; (3) Reduce the amount of the principal payable on any of the outstanding Commercial Paper Notes; (4) Modify the terms of payment of principal of or interest on the outstanding Commercial Paper Notes, or impose any conditions with respect to such payment; (5) Affect the rights of the Holders of less than all of the outstanding Commercial Paper Notes; or (6) Reduce or restrict the pledge made pursuant to Section 2.10 hereof for payment of the CommerciaI Paper Notes without the consent of the Holders of all Outstanding Commercial Paper Notes; and provided, further, that no change, modification or amendment shall be made in this Ordinance or become valid and effective (i) without the approval of such change, modification or amendment by the Attorney General of the State of Texas, to the extent required by the Act and (ii) without the consent of the Bank, if the Bank is not in default under the terms of the Credit Agreement. (b) If at any time the City shall desire to amend this Ordinance in a manner that requires the consent of the Holders of all Outstanding Commercial Paper Notes under the terms of subsection (a), the City shall cause notice of the proposed amendment to be published in a financial newspaper or journal of general circulation in The City of New York, New York, once during each calendar week for at least two 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 principal office of the Issuing and Paying Agent for inspection by all owners of Commercial Paper Notes issued hereunder. Such publication is not required, however, if the City gives or causes to be given such notice in writing to DTC, if the Commercial Paper Notes are held in a book-entry only system, or to each owner of Commercial Paper Notes. A copy of such Notice shall be provided in writing to (i) the Bank at the address shown in the Credit Agreement as the address to which notices to the Bank are to be sent and (ii) to each national rating agency maintaining a rating on the Commercial Paper Notes. 28 (c) Whenever at any time not less than thirty (30) days, and within one year, from the date of the first publication of said notice or other service of written notice of the proposed amendment the City shall receive an instrument or instruments executed by all of the owners of the Commercial Paper Notes, 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 as aforesaid, the City may adopt the amendatory ordinance in substantially the same form. (d) Upon the adoption by the City of any ordinance to amend this Ordinance pursuant to the provisions of this Section, this Ordinance shall be deemed to be amended in accordance with the amendatory ordinance, and the respective rights, duties, and obligations of the City and all the owners of then Outstanding Commercial Paper Notes and all future Commercial Paper Notes shall thereafter be determined, exercised, and enforced under this Ordinance, as amended. (e) Any consent given by any owner of Commercial Paper Notes pursuant to the provisions of this Section shall be irrevocable for a period of six months from the date of the first publication or other service of the notice provided for in this Section 6.01, and shall be conclusive and binding upon all future owners of the same Commercial Paper Notes 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 owner who gave such consent, or by a successor in title, by filing notice thereof with the Issuing and Paying Agent and the City, but such revocation shall not be effective if the owners of all of the Outstanding Commercial Paper Notes consented to and approved the amendment prior to the attempted revocation. Section 6.02. Additional Actions. (a) The Mayor, the City Secretary, the Authorized Representatives and the other officers of the City are hereby authorized and directed, jointly and severally, to do any and all things and to execute and deliver any and all documents which they may deem necessary or advisable in order to consummate the issuance, sale and delivery of the Notes and otherwise to effectuate the purposes of this Ordinance, the Credit Agreement, the Dealer Agreement, the Offering Memorandum and the Issuing and Paying Agent Agreement. Specifically, by the adoption of this Ordinance, the City Council hereby authorizes the payment of the fees and expenses incurred and to be paid by the City in connection with the issuance, sale and delivery of the Notes and the execution and delivery of the Credit Agreement, the Dealer Agreement and the Issuing and Paying Agent Agreement. (b) In order for the City Council to be kept informed of the general activities and future needs of the System, the City Manager or the designee thereof shall report periodically to the City Council, but no less frequently than once each calendar quarter, and provide the City Council with a summary of recent events relating to the System and actions taken by the City with respect to such events. Such report shall include information relating to (i) the financial condition of the System including the most recent balance sheet and income statement available (or similar financial information prepared by City staff for review by the City Council) and, once each year, a summary of the annual audit prepared for or with respect to the System, (ii) major construction projects in progress or expected to begin during the next six months, (iii) additional major capital projects with respect to 29 the System the City Manager expects the City to undertake in the future, (iv) expectations of the City Manager relating to the need of the City Council to authorize the issuance of additional indebtedness payable from revenues of the System or raising utility rates during the next twelve months, and (v) such other matters as the City Council, acting through the Mayor, may request in writing. Section 6.03. Ordinance to Constitute a Contract; Equal Security. In consideration of the acceptance of the Notes, the issuance of which is authorized hereunder, by those who shall hold the same from time to time, this Ordinance shall be deemed to be and shall constitute a contract between the City and the Holders from time to time of the Notes and the pledge made in this ordinance by the City and the covenants and agreements set forth in this Ordinance to be performed by the City shall be for the equal and proportionate benefit, security and protection of all Holders of the Notes, without preference, priority or distinction as to security or otherwise of any of the Notes authorized hereunder over any of the others by reason of time of issuance, sale or maturity thereof or otherwise for any cause whatsoever, except as expressly provided in or permitted by this Ordinance or, with respect to the Loan Note, the Credit Agreement. Section 6.04. Severability of Invalid Provisions. If any one or more of the covenants, agreements or provisions herein contained shall be held contrary to any express provisions of law or contrary to the policy of express law, though not expressly prohibited, or against public policy, or shall for any reason whatsoever be held invalid, then such covenants, agreements or provisions shall be null and void and shalI be deemed separable from the remaining covenants, agreements or provisions and shall in no way affect the validity of any of the other provisions hereof or of the Notes issued hereunder. Section 6.05. Payment and Performance on Business Days. Whenever under the terms of this Ordinance or the Commercial Paper Notes, the performance date of any provision hereof or thereof, including the payment of principal of or interest on the Commercial Paper Notes, shall occur on a day other than a Business Day, then the performance thereof, including the payment of principal of and interest on the Commercial Paper Notes, need not be made on such day but may be performed or paid, as the case may be, on the next succeeding Business Day with the same force and effect as if made on the date of performance or payment. Section 6.06. Defeasance. If, when all or any portion of the Commercial Paper Notes shall have become due and payable in accordance with their terms or otherwise as provided in this Ordinance, the entire principal and interest so due and payable upon said Commercial Paper Notes shall be paid, or if at or prior to the date said Commercial Paper Notes have become due and payable, sufficient moneys or Defeasance Securities, the principal of and interest on which will provide sufficient moneys for such payment, shall be held in trust by the Issuing and Paying Agent and provision shall also be made for paying all other sums payable hereunder by the City with respect to said Commercial Paper Notes, the pledge herein created with respect to said Commercial Paper Notes shall thereupon cease, terminate and become discharged and said Commercial Paper Notes shall no longer be deemed outstanding for purposes of this Ordinance and all the provisions of this Ordinance relating to the Commercial Paper Notes, including all covenants, agreements, liens and pledges made herein for the benefit thereof, shall be deemed duly discharged, satisfied and released. 30 Section 6.07. Limitation of Benefits with Respect to the Ordinance. With the exemption of the rights or benefits herein expressly conferred, nothing expressed or contained herein or implied from the provisions of this Ordinance or the Notes is intended or should be construted to confer upon or give to any person other than the City, the Holders of the Notes, the Issuing and Paying Agent and the parties to the Dealer Agreement and the Credit Agreement, any legal or equitable right, remedy or claim under or by reason of or in respect to this Ordinance or any covenant, condition, stipulation, promise, agreement or provision herein contained. This Ordinance and all of the covenants, condi- tions, stipulations, promises, agreements and provisions hereof are intended to be and shall be for and inure to the sole and exclusive benefit of the City, the Holders of the Notes, the Issuing and Paying Agent/Registrar and the parties to the Dealer Agreement and the Credit Agreement as herein and therein provided. Section 6.08. Use of Offering Memorandum The use by the Dealer of the Offering Memorandum, prepared by the Dealer in connection with the sale of Commercial Paper Notes, and the distribution of the Offering Memorandum by the Dealer, is approved subject to the approval thereof by an Authorized Representative. Section 6.09. Approval of Attorney General. The Authorized Representative shall submit this Ordinance and a transcript of proceedings related thereto to the Attorney General of the State of Texas for approval, as required by the Act. No Notes herein authorized to be issued shall be sold or delivered by an Authorized Representative until the Attorney General of the State of Texas shall have approved this Ordinance, the Credit Agreement and other agreements and proceedings as may be required in connection therewith, all as required by the Act. Section 6.10. Notice to Rating Agencies and Bondholders. The City agrees to provide written notice to each of Moody's Investors Service and Standard & Poor's Ratings Group, a division of McGraw Hill Corporation, which then rates the Commercial Paper Notes, of any expiration, termination or extension of the Credit Facility, or any amendment or supplement made to either this Ordinance, the Credit Agreement, the Issuing and Paying Agent Agreement or the Dealer Agreement, or any change in the Bank, the Dealer or the Issuing and Paying Agent. Notice of any of the aforementioned events also shall be given to Holders in accordance with and in the manner described in Section 6.01(b) hereof. Section 6.11. Preamble. The preamble to this Ordinance shall be considered an integral part of this Ordinance, and is herein incorporated as part of the body of this Ordinance for all purposes. Section 6.12. Immediate Effect. This Ordinance shall be effective immediately from and after its passage in accordance with the provisions of Section 1201.028, Texas Government Code. Section 6.13. Open Meeting. It is hereby officially found and determined that the meeting at which this Ordinance was passed was open to the public, and public notice of the time, place and purpose of said meeting was given, all as required by Chapter 551. 31 ADOPTED this 25th day of March, 2003. ATTEST: Mayor City S~~ (SEA ) APPROVED AS TO FOKM: City/~tt~r~ Lisa Aguilar l'~. Assistant City Attorne~ For Citv 32 Exhibit A: Form of Commercial Paper Note: UNITED STATES OF AMERICA STATE OF TEXAS CITY OF CORPUS CHRISTI, TEXAS UTILITY SYSTEM COMMERCIAL PAPER NOTE, SERIES B No, ~ Principal Amount: Interest to Maturity: Due at Maturity: Note Date: Maturity Date: Number of Days: Interest Rate (%): Owner: The City of Corpus Christi (the "City"), in Nueces and San Patricio Counties, State of Texas, FOR VALUE RECEIVED, hereby promises to pay, solely from the sources hereinafter identified and as hereinafter stated, to the order of the party specified above on the maturity date specified above, the principal sum specified above and to pay interest, if any, on said principal amount at said maturity date, from the above specified note date to said maturity date at the per annum interest rate shown above (computed on the basis of actual days elapsed and a 365-day or 366-day year, as may be applicable); both principal and interest on this Commercial Paper Note being payable in lawful money of the United States of America at the designated corporate trust office of the Issuing and Paying Agent executing the "Certificate of Authentication" endorsed hereon and appearing below, or its successor. No interest will accrue on the principal amount hereof after said maturity date. Defined terms used herein shall have the same meaning given to said terms in the hereinafter defined Ordinance, unless the context of the use of such term indicates otherwise. The interest rate borne by this Commercial Paper Note shall not exceed the Maximum Interest Rate. This Commercial Paper Note is one of an issue of Commercial Paper Notes which, together with other forms of short term obligations, including the below referenced Loan Note, has been duly authorized and issued in accordance with the provisions of an ordinance (the "Ordinance") passed by the City Council of the City for the purpose of financing Project Costs of Eligible Projects for the System; to refund obligations issued in connection with an Eligible Project; and to refinance, renew or refund Notes, Prior Lien Bonds, and Subordinated Obligations, including interest thereon, in accordance with the provisions of the Ordinance; all in accordance and in strict conformity with the provisions of the Act. This Commercial Paper Note, together with the other Commercial Paper Notes, is payable from and equally secured by a lien on and pledge of (i) the proceeds from (a) the sale of other Commercial Paper Notes issued for such purpose and (b) the sale ora series or issue of Bonds to be issued by the City for such purpose, (ii) Loans under and pursuant to the Credit Agreement between the City and the Bank pursuant to which the Bank has agreed to provide credit to the City under the terms and conditions set forth therein, which Loans are to be evidenced, as provided in the Credit Agreement, by a Loan Note, and (iii) amounts in certain funds established pursuant to the Ordinance. This Commercial Paper Note, together with the other Commercial Paper Notes, is payable solely from the sources hereinabove identified securing the payment thereof, and the Commercial Paper Notes do not constitute a legal or equitable pledge, charge, lien or encumbrance upon any other property of the City or the System. The holder hereof shall never have the right to demand payment of this obligation from any sources or properties of the City except as identified above. It is hereby certified and recited that all acts, conditions and things required by law and the ordinance to exist, to have happened and to have been performed precedent to and in the issuance of this Commercial Paper Note, do exist, have happened and have been performed in regular and in due time, form and manner as required by law and that the issuance of this Commercial Paper Note, together with all other Commercial Paper Notes, is not in excess of the principal amount of Commercial Paper Notes permitted to be issued and at any one time be outstanding under the terms of the Ordinance, This Commercial Paper Note has all the qualities and incidents of a negotiable instrument under the laws of the State of Texas. This Commercial Paper Note shall not be entitled to any benefit under the Ordinance or be valid or become obligatory for any purpose until this Commercial Paper Note shall have been authenticated by the execution by the Issuing and Paying Agent of the Certificate of Authentication hereon. 1N TESTIMONY WHEREOF, the City Council has authorized and caused this Commercial Paper Note to be executed on its behalf by the manual or facsimile signature of the City Manager and countersigned by the manual or facsimile signatures of the City Secretary and its official seal to be impressed or a facsimile thereof to be printed hereon. COUNTERSIGNED: City Secretary, City of Corpus Christi, Texas City Manager, City of Corpus Christi, Texas (SE)dO ISSUING AND PAYING AGENT'S CERTIFICATE OF AUTHENTICATION This Commercial Paper Note is one of the Commercial Paper Notes delivered pursuant to the within mentioned ordinance. U.S. BANK NATIONAL AS SOCIAT1ON, as Issuing and Paying Agent By: Authorized Signatory THE STATE OF TEXAS COUNTIES OF NUECES AND SAN PATR1CIO CITY OF CORPUS CHRISTI I, the undersigned, City Secretary of the City of Corpus Christi, Texas, do hereby certify that 1 have compared the attached and foregoing excerpt from the minutes of the regular meeting of the City Council of the City of Corpus Christi, Texas which was held on March 25, 2003, and of an ordinance which was duly passed at said meeting, and that said copy is a true and correct copy of said excerpt and thewhole of said ordinance. Said meetingwas opento the public, and public noticeof the time, place and purpose of said meeting was given, all in accordance with Chapter 551, Texas Government Code. In testimony whereof, I have set my hand and have hereunto affixed the seal of said City of Corpus Christi, this 25th day of March, 2003. of Corpus Christi, Texas (SEAL) CERTIlgICATE FOR ORDINANCE THE STATE OF TEXAS COUNTIES OF NUECES AND SAN PATRICIO CITY OF CORPUS CHRISTI On this the 25th day of March, 2003, the City Council of the City of Corpus Christi, Texas convened in Regular Meeting, at City Hall, with the following members of said Council present, to- wit: Samuel L. Neal, Jr. Brent Chesney, Javier D. Colmenero, John Longoria, Mark Scott, Rex A. Kinnison, Bill Kelly, Henry Garrett, Jesse Noyola George K. Noe, Jay Reining, Lee Ann Dumbauld, Armando Chapa, with the following absent: other business was transacted: Mayor Councilmembers Acting CityManager, Acting CityAttorney, Director of Finance, City Secretary , constituting a quorum, at which time the following among The Acting City Manager presented for the consideration of the Council an ordinance authorizing the establishment of a Utility System Commercial Paper program, and approving various documents in relation thereto. The ordinance was read by the City Secretary. The motion was carried by the following vote: AYES: All members of the City Council shown present above voted "Aye". NAYS: None The Mayor announced that the ordinance had been passed. The ordinance is as follows: Corpus Christi, Texas The above ordinance was passed by the following vote: Samuel L. Neal, Jr. -,~ Javier Colmenero ~,.~..., Henry Garret[ Bill Kelly Rex A. Kinnison John Longoria Jesse Noyola Mark Scott