Loading...
HomeMy WebLinkAbout027009 ORD - 09/26/2006CERTIFICATE FOR R INANC THE STATE OF TEXAS COUNTIES OF ACES AND SAN ATRICIO CITY OF CORPUS CHRISTI On this the 26th day of September, 200 6, 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: Henry Garrett Brent Chesney, Melody Cooper, Jerry Garcia, Bill Kelly, Rex A. Kinnison, John Mare z, Jesse Noyola, Mark Scott George K. Noe, Mary Kay Fischer, Cindy O'Brien, Armando Chapa, Mayor Councilmembers City Manager, City Attorney, Director of Financial Services, City Secretary with the following absentees, p 0 p , constituting a quorum, at which time the following among other business was transacted: The City Manager presented for the consideration of the Council an ordinance authorizing the City Manager to effect the sale. of Utility System Revenue Refunding and Improvement Bonds. 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, ABSENT WREN VOTING: None The Mayor announced that the ordinance had been passed. The ordinance is as follows: 027009 i27OO9 ORDINANCE AUTHORIZING THE ISSUANCE AND SALE OF CITY OF CORPUS CHRISTI, TEXAS UTILITY SYSTEM REVENUE REFUNDING AND IMPROVEMENT BONDS, SERIES 2006, Di AN AGGREGATE PRINCIPAL AMOUNT NOT TO EXCEED $95,000,000 THE STATE OF TEXAS COUNTIES OF FECES AND SAN PATRICIO CITY OF CORPUS CHRISTI WHEREAS, the City of Corpus Christi, Texas (the i "City " or the "Issuer"), a "home- rule" city operating under a home -rule charter adopted pursuant to Section 5 of Article XI of the Texas Constitution, with a population according to the latest federal decennial census ofin excess of5 ,00 , has heretofore issued its City of Corpus Christi, Texas Utility System Revenue Refunding Bonds, Series 1990 (the "Series 1990 Bonds"), its Utility System Revenue Bonds, Series 1994 (the "Series 1994 Bonds"), its Utility System Revenue Bonds, Series 1994 -A (the "Series 1994 -A Bonds"), its Utility System Revenue Bonds, Series 1995 (the "Series 1995 Bonds"), its Utility System Revenue Bonds, Series 1995 -A (the "Series 1995 -A Bonds"), its City of Corpus Christi, Texas Utility System Revenue Refunding and Improvement ent Bonds, Series 1999 (the "Series 1999 Bonds"), its City of Corpus Christi, Texas Utility System Revenue Refunding and Improvement Bonds, Series 1999 -A (the "Series 1999 -A Bonds"), its City of Corpus Christi, Texas Utility System Revenue Refunding Bonds, Series 2000 (the "Series 2000 Bonds"), its City of Corpus Christi, Texas Utility System Revenue Refunding Bonds, Series 2000 -A (the "Series 2000 -A Bonds"), its City of Corpus Christi, Texas Utility System Revenue Refunding and Improvement Bonds, Series 2002 (the "Series 2002 Bonds"), its City of Corpus Christi, Texas Utility System Revenue Refunding Bonds, Series 2003 (the "Series 2003 Bonds"), its City of Corpus Christi, Texas Utility System Revenue Refunding and Improvement Bonds, Series 2004 (the "Series 2004 Bonds"), its City of Corpus Christi, Texas Utility System Revenue Refunding Bonds, Series 2005 (the "Series 2005 Bonds"), and its City of Corpus Christi, Texas Utility System Revenue Refunding Bonds, Series 2005A (the "Series 2005A Bonds"); and WHEREAS, the Series 1990 Bonds, the Series 1994 Bonds, the Series 1994 -A Bonds, the Series 1995 Bonds and the Series 1995 -A Bonds are no longer outstanding; and WHEREAS, the Series 1999 Bonds, the Series 1999 -A Bonds, the Series 2000 Bonds, the Series 2000 -A Bonds, the Series 2002 Bonds, the Series 2003 Bonds, the Series 2004 Bonds, the Series 2005 Bonds and the Series 2005A Bonds are sometimes collectively referred to herein as the "Previously Issued Priority Bonds"; and WHEREAS, the City has established an interim financing program pursuant to which the City has authorized the issuance of commercial paper notes designated "City of Corpus Christi, Texas Utility System Commercial Paper Notes, Series B", to be issued from time to time in an aggregate principal amount not to exceed $75,000,000 at any one time outstanding (the "Series B Commercial Paper Notes"), of which $17,000,000 in principal amount currently is outstanding; and WHEREAS, the City deems it appropriate and in its best interest to authorize the issuance of the hereinafter authorized bonds in part for the purpose of refunding up to $17,000,000 in aggregate principal amount of the outstanding Series B Commercial Paper Notes and funding the interest due thereon at maturity; and WHEREAS, in addition, the City Council has determined to authorize the refunding of all or a portion of the Previously Issued Parity Bonds described in Schedule attached to this Ordinance (the "Refundable Bonds") to achieve a debt service savings with respect to the Refundable Bonds; and WHEREAS, in addition, the City deems it appropriate and in its best interest to issue the hereinafter authorized bonds in part for the purpose of extending and improving the City's combined waterworks system, wastewater disposal system and gas system (the "System"); and WHEREAS, in the ordinance authorizing the issuance of the Series 1990 Bonds (the "Base Ordinance"), the City reserved the right to issue revenue bonds on a parity with the Series 1990 Bonds; and WHEREAS, because offluctuating conditions in the municipal bond market, the City Council has determined to delegate to the City Manager the authority to effect the sale of the bonds hereinafter authorized for the purposes set forth in this Ordinance, subject to the parameters hereinafter described; and WHEREAS, the bonds hereinafter authorized are to be issued and delivered pursuant to the laws ofthe State of Texas, including specifically Chapters 1207, 1371 and 1502, Texas Government Code, as amended, and the terms ofthe Base Ordinance and this Ordinance, for the purposes set forth in this Ordinance; and WHEREAS, defined terms used in this Ordinance shall have the meaning given said terms in Section 7 of this Ordinance, unless otherwise indicated herein. NOW, THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL THE CITY OF CORPUS CHRISTI, TEXAS: Section 1. BONDS AUTHORIZED. That there shall be authorized to be issued, sold, and delivered hereunder fully registered bonds, without interest coupons (the "Bonds"), numbered consecutively from R-1 upward, payable to the respective initial registered owners thereof, or to the registered assignee or assignees ofthe Bonds or any portion or portions thereof, in the denomination of $5,000 or any integral multiple thereof an "Authorized Denomination"), maturing not later than July 15, 2041, payable serially or otherwise on the dates, in the years and in the principal amounts, respectively, and dated, all as set forth in the Purchase Agreement. The Bonds are hereby authorized to be issued for the purpose of i refunding outstanding Series B Comr ercial Paper Notes and paying the interest due at maturity, (ii) refunding all or a portion of the Refundable Bonds, (iii) financing improvements and extensions to the System, and (iv) paying the costs ofissuing the Bonds. -2- The Bonds authorized by this Ordinance to be issued, sold and delivered may not be sold in an aggregate principal amount in excess of $95,000,000. Section 2. SALE OF BONDS. (a) Negotiated Sale. That the Bonds will be sold through a negotiated sale pursuant to the procedures set forth herein. Morgan Stanley & Co. Incorporated is hereby designated to be the senior managing underwriter for the Bonds. The City Manager, acting for and on behalf of the City, is authorized to enter into and carry out the Purchase Agreement with the Underwriters, in substantially the form attached hereto and made a part hereof for all purposes, with such changes as may be necessary to effect the sale of the Bonds to the Underwriters. The Bonds shall be sold to the Underwriters at such price, and subject to such terms and conditions, as set forth in the Purchase Agreement, as shall be determined by the City Manager pursuant to subsection (b) below. The authority of the City Manager to execute the Purchase Agreement shall expire if the Purchase Agreement has not been executed by the City and by the Underwriters (acting through their duly designated representative) by 5:00 p.m., Thursday, November 30, 2006. Any finding or determination made by the City Manager relating to the issuance and sale ofthe Bonds and the execution ofthe Purchase Agreement in connection therewith shall have the same force and effect as a finding or determination made by the City Council. (b) Delegation o City Manager. As authorized by Chapter 1371, Texas Government Code, the City Manager is hereby appointed, authorized, and designated to act on behalf of the City in selling and delivering the Bonds and carrying out the other procedures specified in this Ordinance, including determining and fixing the date of the Bonds, the designation or title by which the Bonds shall be known, the aggregate principal amount of the Bonds, the date of delivery ofthe Bonds, the principal amount of the Bonds, if any, to be sold to refund all or a portion of the Refunded Commercial Paper Notes, the principal amount of the Bonds, if any, to be sold to refund all or a portion of the Refundable Bonds, the principal amount of the Bonds, if any, to be sold to fund improvements and extensions to the System, the price at which the Bonds will be sold, the years in which the Bonds will mature, the principal amount of B Inds to mature in each of such years, the rate or rates of interest to be borne by each such maturity, the interest payment periods, the dates, price, and terms upon and at which the Bonds shall be subject to redemption prior to maturity at the option of the City, as well as any mandatory sinking fund redemption provisions, and all other matters relating to the issuance, sale, and delivery ofthe Bonds, and the refunding ofthe Refunded Bonds and the Refunded Commercial Paper Notes, including, without limitation, obtaining a municipal bond insurance policy and a debt service reserve fund surety bond in support of the Bonds, all of which shall be specified in the Purchase Agreement; provided, that (i) the price to be paid for the Bonds shall not less than 95% of the aggregate original principal amount thereof, plus accrued interest thereon from the date of their delivery, and (ii) none of the Bonds shall bear interest at a rate greater than 10% per annum. (c) , f# cial Statement. The City Manager and the Director of Financial Services are authorized and directed to provide for and oversee the preparation of a final official statement in connection with the issuance ofthe Bonds, and to approve such final official statement and deem the preliminary official statement prepared in connection with the sale of the Bonds final in compliance with the Rule and to provide it to the Underwriters of the Bonds in compliance with the Rule. The -3- use ofthe preliminary official statement prepared in connection with the sale ofthe Bonds is hereby approved. Section 3. REDEMPTION OF THE BONDS. (a) Redemption. That to the extent so provided for in the Purchase Agreement, the Bonds may be subject to redemption prior to their scheduled maturities. Should the Purchase Agreement provide for the redemption ofthe Bonds prior to their scheduled maturities at the option ofthe City, ifless than all ofthe Bonds are to be redeemed by the City, the City shall determine the maturity or maturities and the amounts thereof to be redeemed and shall direct the Paying Agent/Registrar to call by lot Bonds, or portions thereof, within such maturity or maturities and in such principal amounts, for redemption; provided, that during any period in which ownership ofthe Bonds is determined only by a book entry at a securities depository for the Bonds, if fewer than all ofthe Bonds of the same maturity and bearing the same interest rate are to be redeemed, the particular Bonds of such maturity and bearing such interest rate shall be selected in accordance with the arrangements between the City and the securities depository. Should the Purchase Agreement provide for the mandatory sinking fund redemption ofBonds, the terms and conditions governing any such mandatory sinking fund redemption and the payment of Amortization Installments relating thereto shall be as set forth in the Purchase Agreement. (b) Notice to Registered Owners. Notice of any such redemption of Bonds shall be given in the following manner: (0 a written notice of such redemption shall be given to the registered owner of each Bond or a portion thereof being called for redemption not more than 60 days nor less than 30 days prior to the date fixed for such redemption by depositing such notice in the United States mail, first -class postage prepaid, addressed to each such registered owner at his address shown on the Registration Books (hereinafter defined) of the Paying Agent/Registrar and (ii) a notice of such redemption shall be published one time, at least 30 days prior to the date fixed for such redemption, in a journal or publication of general circulation in the United States of America or the State ofTexas which carries as a regular feature notices of redemption of municipal bonds; provided, however, that the failure to send, mail, or receive such notice described in clause (i) above, or any defect therein or in the sending or mailing thereof, shall not affect the validity or effectiveness of the proceedings for the redemption of any Bond, as publication of notice as described in clause (ii) above shall be the only notice actually required in connection with or as a prerequisite to the redemption of any Bonds. By the date fixed for any such redemption due provision shall be made by the City with the Paying Agent/Registrar for the payment of the required redemption price for the Bonds or the portions thereof which are to be so redeemed, plus accrued interest thereon to the date fixed for redemption. If such notice of redemption is given, and if due provision for such payment is made, all as provided above, the Bonds, or the portions thereof which are to be so redeemed, thereby automatically shall be redeemed prior to their scheduled maturities, and shall not bear interest after the date fixed for their redemption, and shall not be regarded as being outstanding except for the right ofthe registered owner to receive the redemption price plus accrued interest to the date fixed for redemption from the Paying Agent/Registrar out of the funds provided for such payment. The Paying AgentfRegistrar shall record in the Registration Books all such redemptions of principal ofthe Bonds or any portion thereof. If a portion of any Bond shall be redeemed, a substitute Bond or Bonds having the same maturity date, bearing interest at the same rate, in any Authorized Denomination at the written request of the registered owner, and in an aggregate principal amount equal to the unredeemed portion thereof, will be issued to the registered owner upon the surrender thereof for cancellation, at the expense of the City, all as provided in this Ordinance. The maturities ofBonds to be called for redemption shall be determined by the City. The Bonds or portions to be redeemed within each such maturity shall be selected by lot or other customary random method selected by the Paying Agent/Registrar (provided that a portion of a Bond may be redeemed only in an integral multiple of $5,000). The City shall give written notice to the Paying Agent/Registrar of any such redemption of Bonds at least 60 calendar days (or such shorter period as is acceptable to the Paying Agent/Regis- trar) prior to such redemption. (c) Additional Notice. i In addition to the manner of providing notice of redemption of Bonds as set forth above, the Paying Agent/Registrar shall give notice of redemption of Bonds by either United States mail, first -class postage prepaid, or electronic mail, at least 30 days prior to a redemption date to each NRMSIR R and the SID. In addition, in the event of a redemption caused by an advance refunding of the Bonds, the Paying Agent/Registrar shall send a second notice of redemption to the persons specified in the immediately preceding sentence at least 30 days but not more than 90 days prior to the actual redemption date. Any notice sent to each NRMS1R and the SID shall be sent so that they are received at least two days prior to the general mailing or publication date of such notice. The Paying Agent/Registrar shall also send a notice of prepayment or redemption to the owner of any Bond who has not sent the Bonds in for redemption 60 days after the redemption date. (ii) Each redemption notice, whether required in the FORM OF BOND or otherwise by this Ordinance, shall contain a description of the Bonds to be redeemed including the complete name of the Bonds, the series, the date of issue, the interest rate, the maturity date, the CUSIP number, if any, the amounts called of for redemption, the publication and mailing date for the notice, the date of redemption, the redemption price, the name of the Paying Agent/Registrar and the address at which the Bond may be redeemed including a contact person and telephone number. ii All redemption payments made by the Paying Agent/Registrar to the registered owners of the Bonds shall include a CUSIP number relating to each amount paid to such registered owner. Section 4. INTEREST. That the Bonds shall bear interest calculated on the basis ofa 360- day year composed of twelve 30-day months from the dates specified in the FORM OF BOND to their respective dates of maturity at the rates set forth in the Purchase Agreement. Interest on the Bonds shall be payable on the dates as set forth in the Purchase Agreement, until the maturity or prior redemption of the Bonds. Section 5. CHARACTERISTICS OF THE BONDS. (a) Transfer, Conversion and Exchange; Authentication. That the City shall keep or cause to be kept at the designated trust office in Dallas, Texas (the "Designated Trust Office") of The Bank of Ne w York Trust Company, N.A. (the 'Paying Agent/Registrar") books or records for the registration of the transfer, conversion and exchange of the Bonds (the 'Registration Books"), and the City hereby appoints the Paying AgentlRegistrar as its registrar and transfer agent to keep such books or records and make such registrations of transfers, conversions and exchanges under such reasonable regula- tions as the City and the Paying Agent/Registrar may prescribe; and the Paying Agent/Registrar shall make such registrations, transfers, conversions and exchanges as herein provided. The execution of -5- a "Paying Agent/Registrar Agreement", in substantially the form attached to this Ordinance, is hereby authorized. The Paying Agent/Registrar shall obtain and record in the Registration Books the address of the registered owner of each Bond to which payments with respect to the Bonds shall be mailed, as herein provided; but it shall be the duty of each registered owner to notify the Paying Agent/Registrar in writing of the address to which payments shall be mailed, and such interest payments shall not be mailed unless such notice has been given. The City shall have the right to inspect the Registration Books during regular business hours of the Paying Agent/Registrar, but otherwise the Paying Agent/Registrar shall keep the Registration Books confidential and, unless otherwise required by law, shall not permit their inspection by any other entity. The City shall pay the Paying Agent/Registrar's standard or customary fees and charges for making such registration, transfer, conversion, exchange and delivery of a substitute Bond or Bonds. Registration of assignments, transfers, conversions and exchanges of Bonds shall be made in the manner provided and with the effect stated in the FORM OF BOND. Each substitute Bond shall bear a letter and/or number to distinguish it from each other Bond. Each Bond may be exchanged for fully registered bonds in the manner set forth herein. Each Bond issued and delivered pursuant to this Ordinance, to the extent of the unredeemed principal amount thereof, may, upon surrender thereof at the Designated Trust Office of the Paying Agent/Registrar, together with a written request therefor duly executed by the registered owner or the assignee or assignees thereof, or its or their duly authorized attorneys or representatives, with guarantee of signatures satisfactory to the Paying Agent/Registrar, at the option of the registered owner or such assignee or assignees, as appropriate, be exchanged for fully registered bonds, without interest coupons, in the form prescribed in the FORM OF BOND, in any Authorized Denomination (subject to the requirement hereinafter stated that each substitute bond shall have a single stated maturity date), as requested in writing by such registered owner or such assignee or assignees, in an aggregate principal amount equal to the unredeemed principal amount of any Bond or Bonds so sur- rendered, and payable to the appropriate registered owner, assignee, or assignees, as the case may be. If a portion of any Bond shall be redeemed prior to its scheduled maturity as provided herein, a substitute bond or bonds having the same maturity date, bearing interest at the same rate, in any Authorized Denomination at the request of the registered owner, and in an aggregate principal amount equal to the unredeemed portion thereof, will be issued to the registered owner upon sur- render thereof for cancellation. If any Bond or portion thereofis assigned and transferred, each Bond issued in exchange therefor shall have the same principal maturity date and bear interest at the same rate as the Bond for which it is being exchanged. Each substitute bond shall bear a letter and/or number to distinguish it from each other bond. The Paying Agent/Registrar shall exchange or replace Bonds as provided herein, and each fully registered substitute bond or bonds delivered in exchange for or replacement of any Bond or portion thereof as permitted or required by any provision of this Ordinance shall constitute one of the Bonds for all purposes of this Ordinance, and may again be exchanged or replaced. It is specifically provided, however, that any Bond delivered in exchange for or replacement of another Bond prior to the first scheduled interest payment date on the Bonds (as stated on the face thereof) shall be dated the same date as such Bond, but each substitute bond so delivered on or after such first scheduled interest payment date shall be dated as of the interest payment date preceding the date on which such substitute bond is delivered, unless such substitute bond is delivered on an interest payment date, in which case it shall be dated as of such date of delivery; provided, however, that if at the time of delivery of any substitute bond the interest on the -6- bond for which it is being exchanged has not been paid, then such substitute bond shall be dated as of the date to which such interest has been paid in full. On each substitute bond issued in exchange for or replacement of any Bond or Bonds issued under this Ordinance there shall be printed thereon a Paying Agent Registrar's Authentication Certificate, in the form set forth in the FORM OF ND (the "Authentication Certificate"). An authorized representative ofthe Paying Agent/Registrar shall, before the delivery of any such Bond, date and manually sign the Authentication Certificate, and no such Bond shall be deemed to be issued or outstanding unless the Authentication Certificate is so ex- ecuted. The Paying Agent/Registrar promptly shall cancel all paid Bonds and Bonds surrendered for conversion and exchange. No additional ordinances, orders, or resolutions need be passed or adopted by the governing body of the City or any other body or person so as to accomplish the foregoing conversion and exchange of any Bond or portion thereof, and the Paying Agent/Registrar shall provide for the printing, execution, and delivery of the substitute Bonds in the manner prescribed herein. Pursuant to Chapter 1 206, Texas Government Code, the duty of conversion and exchange of Bonds as aforesaid is hereby imposed upon the Paying Agent/Registrar, and, upon the execution ofthe Authentication Certificate, the converted and exchanged Bond shall be valid, incontestable, and enforceable in the same manner and with the same effect as the Bonds which initially were issued and delivered pursuant to this Ordinance, approved by the Attorney General, and registered by the Comptroller of Public Accounts. (b) Payment f Bonds and Interest. The City hereby further appoints ints the Paying Agent/Registrar to act as the paying agent for paying the principal of, premium, if any, and interest on the Bonds, all as provided in this Ordinance. The Paying Agent/Registrar shall keep proper records of all payments made by the City and the Paying Agent/Registrar with respect to the Bonds. (c). In General. The Bonds i shall be issued in fully registered form, without interest coupons, with the principal of and interest on such Bonds to be payable only to the registered owners thereof, (ii) may be redeemed prior to their scheduled maturities, viii) may be transferred and assigned, iv may be converted and exchanged for other Bonds, (v) shall have the characteristics, (vi) shall be signed, sealed, executed and authenticated, (vii) the principal of and interest on which shall be pay- able, and (viii) shall be administered and the Paying Agent Registrar and the City shall have certain duties and responsibilities with respect to the Bonds, all as provided, and in the manner and to the effect as required or indicated, in the FORM OF BOND. The Bonds initially issued and delivered pursuant to this Ordinance are not required to be, and shall not be, authenticated by the Paying AgntRgistrar, but on each substitute Bond issued in conversion of and exchange for any Bond or Bonds issued under this Ordinance the Paying Agent/Registrar shall execute the Authentication Certificate. (d) Substitute Paying Agent/Registrar. The City covenants with the registered owners of the Bonds that at all times while the Bonds are outstanding a competent and legally qualified entity shall act as and perform the services of Paying Agent Registrar for the Bonds under this Ordinance, and that the Paying Agent/Registrar will be one entity. Such entity may be the City, to the extent permitted by law, or a bank, trust company, financial institution, or other agency, as selected by the City. The City reserves the right to, and may, at its option, change the Paying Agent/Registrar upon not less than 120 days written notice to the Paying Agent Registrar, to be effective not later than 60 days prior to the next principal or interest payment date after such notice. In the event that the entity -7- at any time acting as Paying Agent/Registrar (or its successor by merger, acquisition, or other method) should resign or otherwise cease to act as such, the City covenants that promptly it will appoint a competent and legally qualified entity to act as Paying AgentlRegistrar under this Ordinance. Upon any change in the Paying Agent/Registrar, the previous Paying Agent/Registrar promptly shall transfer and deliver the Registration Books (or a copy thereof), along with all other pertinent books and records relating to the Bonds, to the new Paying Agent/Registrar designated and appointed by the City. Upon any change in the Paying Agent/Registrar, the City promptly will cause a written notice thereofto be sent by the new Paying Agent/Registrar to each registered owner ofthe Bonds, by United States mail, first -class postage prepaid, which notice also shall give the address of the new Paying Agent/Registrar. By accepting the position and performing as such, each Paying Agent/Registrar shall be deemed to have agreed to the provisions of this Ordinance, and a certified copy of this Ordinance shall be delivered to each Paying Agent/Registrar. (e) Book Eny Only System. The Bonds issued in exchange for the Bonds initially issued to the purchaser specified herein shall be initially issued in the form of a separate single fully registered Bond for each ofthe maturities thereof. Upon initial issuance, the ownership of each such Bond shall be registered in the name of Cede & Co., as nominee of The Depository Trust Company ofNew York ("DTC"), and except as provided in subsection (f) hereof, all ofthe outstanding Bonds shall be registered in the name of Cede & Co., as nominee of TC . With respect to Bonds registered in the name of Cede & Co., as nominee of DTC, the Issuer and the Paying Agent/Registrar shall have no responsibility or obligation to any securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations on whose behalf DTC was created ("DTC Participant's) to hold securities to facilitate the clearance and settlement of securities transactions among DTC Participants or to any person on behalf of whom such a DTC Participant holds an interest in the Bonds. Without limiting the immediately preceding sentence, the Issuer and the Paying Agent/Registrar shall have no responsibility or obligation with respect to i the accuracy ofthe records of DTC, Cede & Co. or any DTC Participant with respect to any ownership interest in the Bonds, ii the delivery to any DTC Participant or any other person, other than a registered owner of Bonds, as shown on the Registration Books, of any notice with respect to the Bonds, or (iii) the payment to any DTC Participant or any other person, other than a registered owner of Bonds, as shown in the Registration Books of any amount with respect to principal of or interest on the Bonds. Notwithstanding any other provision of this Ordinance to the contrary, the Issuer and the Paying Agent/Registrar shall be entitled to treat and consider the person in whose name each Bond is registered in the Registration Books as the absolute owner of such Bond for the purpose of payment ofprincipal and interest with respect to such Bond, for the purpose of registering transfers with respect to such Bond, and for all other purposes whatsoever. The Paying Agent/Registrar shall pay all principal of and interest on the Bonds only to or upon the order of the registered owners, as shown in the Registration Books as provided in this Ordinance, or their respective attorneys duly authorized in writing, and all such payments shall be valid and effective to fully satisfy and discharge the Issuer's obligations with respect to payment of principal of and interest on the Bonds to the extent of the sum or sums so paid. No person other than a registered owner, as shown in the Registration Books, shall receive a Bond evidencing the obligation ofthe Issuer to make payments ofprincipal and interest pursuant to this Ordinance. Upon delivery by DTC to the Paying Agent/Registrar of written notice to the effect that DTC has determined to substitute a new nominee in place of Cede & Co., -8- and subject to the provisions in this Ordinance with respect to interest checks being mailed to the registered owner at the close of business on the Record Date, the words "Cede & Co." in this Ordinance shall refer to such new nominee of DTC. (0 Successor Securities Depository. In the event that the Issuer determines that DTC is incapable of discharging its responsibilities described herein and in the representation letter of the Issuer to DTC or that it is in the best interest of the beneficial owners of the Bonds that they be able to obtain certificated Bonds, the Issuer shall i appoint a successor securities depository, qualified to act as such under Section 17(a) of the Securities and Exchange Act of 1934, as amended, notify DTC and DTC Participants of the appointment of such successor securities depository and transfer one or more separate Bonds to such successor securities depository or (ii) notify DTC and DTC Participants of the availability through DTC of Bonds and transfer one or more separate Bonds to DTC Participants having Bonds credited to their DTC accounts. In such event, the Bonds shall no p g longer be restricted to being registered in the Registration Books in the name of Cede & Co., as nominee of DTC, but may be registered in the name of the successor securities depository, or its nominee, or in whatever name or names registered owners transferring or exchanging Bonds shall designate, in accordance with the provisions of this Ordinance. (h) D of ra'. Notwithstanding any other provision of this Ordinance to the contrary, so long as any Bond is registered in the name of Cede & Co., as nominee of DTC, all payments with respect to principal of and interest on such Bond and all notices with respect to such Bond shall be made and given, respectively, in the manner provided in the representation letter of the Issuer to DTC. Section 6. FORM OF BONDS. That the form of all Bonds, including the form of the Authentication Certificate, the form of Assignment, and the form of the Comptroller's Registration Certificate to be attached only to the Bonds initially issued and delivered pursuant to this Ordinance, shall be, respectively, substantially in the form attached hereto as Exhibit A, with such appropriate variations, omissions, or insertions as are permitted or required by this Ordinance. Section 7. DEFINITIONS. That, as used in this Ordinance, the following terms shall have the meanings set forth below, unless the text hereof specifically indicates otherwise: The term "Account" shall mean any account created, established and maintained under the terms of any ordinance authorizing the issuance of Priority Bonds. The term "Accountant" shall mean a nationally recognized independent certified public accountant, or an independent firm of certified public accountants. The term "Additional Pri ity Bonds" shall mean the additional revenue bonds which the City reserves the right to issue in the future on a parity with the Previously Issued Priority Bonds and the Bonds, as provided in this Ordinance. The term. "Amortization Installment" shall mean the amount of money which is required to be deposited into the Mandatory Redemption Account for retirement of Term Bonds (whether at maturity or by mandatory redemption and including redemption premium, if any). -9- The term "Authorized D n m n ion shall mean $5,000 or any integral multiple thereof. The term "Average Annual Principal and Interest Requirements" shall mean that amount equal to the average annual principal and interest requirements (including Amortization Installments) of all Priority Bonds outstanding. With respect to Additional Priority Bonds that bear interest at a rate which is not established at the time of issuance at a single numerical rate for each maturity of such series, Average Annual Principal and Interest Requirements shall be calculated by i assuming that the interest rate for every 12 month period on such bonds is equal to 9.20% or (ii) using the highest numerical rate borne over the preceding 24 month period by such bonds, whichever is greater; provided, that if such bonds have not borne interest at a variable rate for such 24 month period, such rate shall be assumed to be 9.20% until such time as bonds have been outstanding for a 24 month period. In making such determinations, it shall be assumed that the principal of such bonds is amor- tized such that annual debt service is substantially level over the remaining stated life of such bonds. The term "Base Ordinance" shall mean the ordinance authorizing the issuance of the Series 1990 Bonds. The term "Bonds" shall mean the Series 2006 Bonds. The term "Capital Additions" shall mean a reservoir or other water storage facilities, a wastewater treatment plant or an interest therein, a gas distribution system or an interest therein and associated transmission facilities with respect to each and any combination thereof, which shall become a part of the System. The term "Capital Improvements" shall mean any capital extensions, improvements and betterments to the System other than Capital Additions. The term " C p i din eyes u " shall mean the Account by that name which may be created within the Debt Service Fund. The terms "City" and "Issuer" shall mean the City of Corpus Christi, Texas. The term " Code " shall mean the Internal Revenue Code of1986, and any amendments thereto. The term "Construction Fund" shall mean the fund so designated in Section 13 of this Ordinance. The term "Credit FaciliV shall mean a policy of municipal bond insurance, a surety bond or a letter or line of credit issued by a Credit Facility Provider in support of any Priority Bonds or Subordinate Lien Bonds. The terra "Credit Facility Provider " shall mean (i) with respect to any Credit Facility consisting of a policy of muniipal bond insurance or a surety bond, an issuer of licies of insurance insuring the timely payment of debt service on governmental obligations such as the Priority Bonds, 4 _ provided that a Rating Agency having an outstanding rating on the Priority Bonds would rate the Priority Bonds fully insured by a standard policy issued by the issuer in its highest generic rating category for such obligations; and (i.i ) with respect to any Credit Facility consisting of a letter or line of credit, any financial institution, provided that a Rating Agency having an outstanding rating on the Priority Bonds would rate the Priority Bonds in its two highest generic rating categories for such obligations if the letter or line of credit proposed to be issued by such financial institution secured the timely payment ofthe entire principal amount of the series of Priority Bonds and the interest thereon. The term "Debt Service Fund' shall have the meaning given such term in Section 10 of this Ordinance. The term "D TC " shall have the meaning given such term in Section 5 to this Ordinance. The term "Eligible Investments " shall mean those investments in which the City is authorized by law, including, but not limited to, the Public Funds Investment Act of 1987 (Chapter 2256, Texas Government Code), as amended, to purchase, sell and invest its funds and funds under its control; and provided further that Eligible Investments shall specifically include, with respect to the investment of p roeeds of any Priority Bonds, guaranteed investment contracts fully collateralized by Government Obligations. The term "Engineer! of Record' shall mean the independent engineer or firm at the time employed by the City to perform and carry out the duties imposed on such engineer or firm by this Ordinance and having a favorable reputation nationally for skill and experience in the engineering of water, sanitary sewer and/or gas systems of comparable size and character as those forming parts of the System. The term "Escrow Agreement" shall mean the Escrow Agreement between the City and the escrow agent named therein, executed and delivered in connection with the refunding ofthe Refunded Bonds. The term "Fund' shall mean any fund created, established and maintained under the terms of any ordinance authorizing the issuance of Priority Bonds. The term "Government b igatio ns " shall mean direct obligations of the United States of America, including obligations the principal of and interest on which are unconditionally guaranteed by the United States of America. The term " Gr ss Revenues" 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 created by this 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. The term "MAC" shall mean the Municipal Advisory Council of Texas. The term "Mandatory y d mpt n Account" shall mean the Account by that name within the Debt Service Fund and established by an ordinance authorizing the issuance of Priority Bonds. The term "MSS " shall mean the Municipal Securities Rulemaldng Board. The terms "Net Revenues , f the Sys m " and "Net s" shall mean all Gross Revenues less Operating Expenses. The term "NHS." shall mean each person whom the SEC or its staff' has determined to be a nationally recognized municipal securities information repository within the meaning of the Rule from time to time. The term "Operating x er e " shall mean the expenses of operation and maintenance ofthe System, including all salaries, labor, materials, repairs, and extensions necessary to render efficient nt 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 any Priority 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 obtaining and maintaining any 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. The term "Paying Agent/Registrar" shall mean the financial institution specified in Section 5(a) of this Ordinance, or its herein permitted successors and assigns. The term "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 Priority Bonds. The term "Previously Issued Priority Ponds" shall have the meaning given said term in the preamble to this Ordinance. The term ".Prir^ity Bonds" shall mean the Previously Issued Priority Bonds, the Bonds and any Additional Priority Bonds. The term "Prudent Utility Practice" shall mean any of the practices, methods and acts, in the exercise of reasonable judgment, in the light of the facts, including but not limited to the practices, -12- methods and acts engaged in or approved by a significant portion of the public utility industry prior thereto, known at the time the decision was made, would have been expected to accomplish the desired result at the lowest reasonable cost consistent with reliability, safety and expedition. It is recognized that Prudent Utility Practice is not intended to be limited to the optimum practice, method or act at the exclusion of all others, but rather is a spectrum of possible practices, methods or acts which could have been expected to accomplish the desired result at the lowest reasonable cost consistent with reliability, safety and expedition. In the case of any facility included in the System which is owned in common with one or more other entities, the term "Prudent Utility Practice", as applied to such facility, shall have the meaning set forth in the agreement governing the operation of such facility. The term "Purchase Agreement" shall mean the bond purchase contract between the City and the Underwriters pertaining to the purchase of the Bonds by the Underwriters. The term "Ra g y" shall mean any nationally recognized securities rating agency which has assigned a rating to the Priority Bonds. The term "Refundable Bonds " shall mean those bonds identified in Schedule I attached to this Ordinance that are eligible to be refunded in accordance with Section 36(b) of this Ordinance. The term "Refunded Bonds " shall mean those Refundable Bonds selected by the City Manager to be refunded with the proceeds of the Bonds, as identified in the Purchase Agreement. The term "Refunded Commercial Paper Notes" shall mean those Series B Commercial Paper Notes designated by the Director of Financial Services as provided in Section 36(a) ofthis Ordinance. The term "Required Amount " shall have the meaning given such term in Section 11 of this Ordinance. The term "Reserve Fund' shall have the meaning given such term in Section 11 of this Ordinance. The term "Reserve Fund Obligations " shall mean cash, Eligible Investments, any Credit Facility, or any combination of the foregoing. The term "Rule" shall mean SEC Rule 15c2-12, as amended from time to time. The term "SC" shall mean the United States Securities and Exchange Commission. The term "Series 1990 Bonds" shall mean the $64,660,000 City of Corpus Christi, Texas Utility System Revenue Refunding Bonds, Series 1990, authorized by the ordinance adopted by the City on November 15, 1990; the term "Series 1999 Bonds" shall mean the $47,740,000 City of Corpus Christi, Texas Utility System Revenue Refunding and Improvement Bonds Series 1999, authorized by the ordinance adopted by the City on May 11, 1999; the term "Series 1999-A Bonds" -13- shall mean the $15,750,000 City of Corpus Christi, Texas Utility System Revenue Refunding and Improvement Bonds, Series 1999 -A, authorized by the ordinance adopted by the City on April 20, 1999; the term "Series 2000 Bonds" shall mean the $34,740,000 City of Corpu Christi, Texas Utility System Revenue Refunding Bonds, Series 2000, authorized by the ordinance adopted by the City on May 11, 1999; the term "Series 2000-A Bonds " shall mean the $42,520,000 City of Corpus Christi, Texas Utility System Revenue Refunding Bonds, Series 200 0-& authorized by the ordinance adopted by the City on September 19, 2000; the term "Series 2002 Bonds " shall mean the $92,330,000 City of Corpus Christi, Texas Utility System Revenue Refunding and Improvement Bonds, Series 2002, authorized by the ordinance adopted by the City on August 20, 2002; the term "Series 2003 Bonds" shall mean the $28,870,000 City of Corpus Christi, Texas Utility System Revenue Refunding Bonds, Series 200 3, authorized by the ordinance adopted by the City on March 25, 200 3; the term "Series 2004 Bonds." shall mean the $50,000,000 City of Corpus Christi, Texas Utility System Revenue Refunding and Improvement Bonds, Series 2004, authorized by the ordinance adopted by the City on July 13, 2004; the term "Series 2005 Bonds" shall mean the $70,390,000 City of Corpus Christi, Texas Utility System Revenue Refunding Bonds, Series 2005, authorized by the ordinance adopted by the City on December 21, 2004; and the term "Series 2005A Bonds " shall mean the $68,325,000 City of Corpus Christi, Texas Utility System Revenue Bonds, Series 2005A, authorized by the ordinance adopted by the City on August 30, 2005. The term "Series 2006 Bonds" shall mean the bonds authorized to be sold pursuant to the terms of this Ordinance. The term "SID" shall mean any person designated by the State of Texas or an authorized department, officer, or agency thereof as, and determined by the SEC or its staff to be, a state information depository within the meaning of the Rule from time to time. The MAC currently acts as the SID for the State of Texas. The term "S b r d a i i ons " shall mean any bonds, notes, or other obligations issued pursuant to law payable in whole or in part from the Pledged Revenues and subordinate to the Priority Bonds. The term "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 within the waterworks system, 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 ofthe 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 City or 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 ofthe System, unless and to the extent otherwise provided in the ordinance or ordinances authorizing the issuance of such "Special Facilities Bonds ". -14- The term "System Fund' ' shall have the meaning given such term in Section 9 of this Ordinance. The term "Term Bonds " shall mean those Bonds, if any, so designated in the Purchase Agreement and those Additional Priority Bonds designated by the ordinance authorizing the issuance thereof which shall be subject to retirement of the Mandatory Redemption Account The term " r rwri rs " shall mean the investment banking firm or syndicate of investment banking firms which contract to purchase the Bonds in accordance with the terms and conditions of the Purchase Agreement. The term " Value of Investment Securities" and words oflike import shall mean the amortized value thereof, provided, however, that all United States of America, United States Treasuly Obligations—State and Local Government Series shall be valued at par and those obligations which are redeemable at the option of the holder shall be valued at the price at which such obligations are then redeemable. The computations made under this paragraph shall include accrued interest on the investment securities paid as a part ofthe purchase price thereof and not collected. For the purposes ofthis definition "amortized value ", when used with respect to a security purchased at par means the purchase price of such security. The term "Y ear" shall mean the regular fiscal year used by the City in connection with the operation ofthe System, which may be any twelve consecutive months period established by the City. Section 8. PLEDGE. (a) d Remnues. That the Priority Bonds are and shall be secured by and payable from a first lien on and pledge of the Pledged Revenues including such revenues within the System Fund and the Funds hereinafter created in this Ordinance; and the Pledged Revenues are further pledged to the establishment and maintenance ofthe Debt Service Fund and the Reserve Fund as hereinafter provided. The Priority Bonds are and will be secured by and payable only from the Pledged Revenues, and are not secured by or payable from a mortgage or deed of trust on any properties, whether real, personal, or mixed, constituting the System. (b) Security Interest. Chapter 1208, Texas Government Code, applies to the issuance ofthe Bonds and the pledge of the Pledged Revenues granted by the City under subsection (a) of this Section, and such pledge is therefore valid, effective, and perfected. If Texas law is amended at any time while the Bonds are outstanding and unpaid such that the pledge of the Pledged Revenues granted by the City is to be subject to the filing requirements of Chapter 9, Texas Business Commerce Code, then in order to preserve to the registered owners of the Bonds 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. -15- Section 9. SYSTEM FUND: That there has heretofore been created and established and there shall be maintained on the books ofthe City, and accounted for separate and apart from all other funds of the City, a special fund entitled the "City of Corpus Christi Utility System Fund" (the "System Fund"). All Gross Revenues shall be credited to the System Fund immediately upon receipt. All Operating Expenses shall be paid from such Gross Revenues credited to the System Fund as a first charge against same. Section 10. DEBT SERVICE FUND. (a) Debt Service ' d Established, That for the sole purpose of paying the principal amount of, premium, if any, Amortization Installments, if any, and interest on all Priority Bonds, there has heretofore been created and established and there shall be maintained on the books of the City a separate fund entitled the 'City of Corpus Christi Utility System Revenue Bonds Debt Service Fund " (hereinafter called the "Debt Service Fund"). Monies in the Debt Service Fund shall be deposited and maintained in an official depository bank ofthe City. Capitalized Interest 1 ur . That within the Debt Service Fund there may hereafter be established a Capitalized Interest Account. The proceeds of Priority Bonds representing capitalized interest may be deposited into the Capitalized Interest Account. On or before the day next preceding any interest payment date ofbonds or other obligations for which any interest has been capitalized, the City shall use the monies in the Capitalized Interest Account to pay such interest on such bonds or other obligations to the extent of the amounts therein representing such capitalized interest. (c) Mandatory Red pt n Account. That within the Debt Service Fund there has heretofore been established the Mandatory Redemption Account. Amortization Installments shall be deposited to the credit of the Mandatory Redemption Account and be used to retire the principal amount of Term Bonds in the manner described in any ordinance authorizing the issuance of Term Bonds. Section 11. RESERVE FUND. (a) Reserve Fund Established. That there has heretofore been created and established and there shall be maintained on the books ofthe City a separate fund entitled the "City of Corpus Christi Utility System Revenue Bonds Reserve Fund" (hereinafter called the "Reserve Fund". There shall be deposited into the Reserve Fund any Reserve Fund Obligations so designated by the City. Reserve Fund Obligations in the Reserve Fund shall be deposited and maintained in an official depository bank ofthe City. Reserve Fund Obligations in the Reserve Fund shall be used solely for the purpose of retiring the last of any Priority Bonds as they become due or paying principal of and interest on any Priority Bonds when and to the extent the amounts in the Debt Service Fund are insufficient for such purpose. The Reserve Fund shall be maintained in an amount equal to the Average Annual Principal and Interest Requirements of the outstanding Priority Bonds (the "Required Amount"). The City may, at its option, withdraw and transfer to the System Fund, all surplus in the Reserve Fund over the Required Amount. (b) Credit Facility. The City may replace or substitute a Credit Facility for cash or Eligible Investments on deposit in the Reserve Fund or in substitution for or replacement of any existing Credit Facility. Upon such replacement or substitution, cash or Eligible Investments on deposit in the Reserve Fund which, taken together with the face amount of any existing Credit Facilities, are in -16- excess of the Required Amount may be withdrawn by the City, at its option, and transferred to the System Fund; provided that the face amount of any Credit Facility may be reduced at the option of the City in lieu of such transfer. (c) Withdrawals. Ifthe City is required to make a withdrawal from the Reserve Fund for any ofthe purposes described in this Section, the City shall promptly notify any applicable Credit Facility Provider of the necessity for a withdrawal from the Reserve Fund for any such purposes, and shall make such withdrawal FIRST from available moneys or Eligible Investments then on deposit in the Reserve Fund, and NEXT from a drawing under any Credit Facility to the extent of such deficiency. (cI) Deficiencies. In the event ofa deficiency in the Reserve Fund, or in the event that on the date of termination or expiration of any Credit Facility there is not on deposit in the Reserve Fund sufficient Reserve Fund Obligations, all in an aggregate amount at least equal to the Required Axount, then the City shall satisfy the Required Amount by depositing Reserve Fund Obligations into the Reserve Fund in monthly installments of not less than 1/60 of the Required Amount made on or before the 10th day of each month following such termination or expiration. (e) Redetion; , frsa. In the event of the redemption or defeasance of any Priority Bonds, any Reserve Fund Obligations on deposit in the Reserve Fund in excess of the Required Amount may be withdrawn and transferred, at the option of the City, to the System Fund, as a result of (0 the redemption of any Priority Bonds, or (ii) funds for the payment of any Priority Bonds having been deposited irrevocably with the paying agent or place of payment therefor in the manner described in any ordinance authorizing the issuance of Priority Bonds, the result of such deposit being that such Priority Bonds no longer are deemed to be outstanding under the terms of any such ordinance. (f) Reimbursement of Credit Facility Provider. In the event there is a draw upon the Credit Facility, the City shall reimburse the Credit Facility Provider for such draw, in accordance with the terms of any agreement pursuant to which the Credit Facility is issued, from Pledged Revenues, however, such reimbursement from Pledged Revenues shall be subordinate and junior in right of payment to the payment of principal of and premium, if any, and interest on the Priority Bonds. (g) Additional Priority Bonds. s. Upon the issuance of Additional Priority Bonds the monies in the Reserve Fund shall be increased to the newly established Required Amount in accordance with the provisions of Section 20(b) of this Ordinance. Section 12. SUBORDD1ATED OBLIGATIONS FUNDS AND ACCOUNTS. That the City hereafter may create, establish and maintain on the books ofthe City separate funds and accounts from which moneys can be withdrawn to pay the principal of and interest on Subordinated Obligations which hereafter may be issued. Section 13. CONSTRUCTION FUND. That the City hereby creates and establishes and shall maintain on the books of the City a separate fund to be entitled the "Series 2006 Utility System Revenue Bonds Construction Fund" (the "Construction Fund") for use by the City for payment of all -17- lawful costs associated with the acquisition, improvement and extension ofthe System as hereinbefore provided. There shall be deposited to the Construction Fund those proceeds from the sale of the Bonds specified in the letter of instructions described in Section 2 ofthis Ordinance. Upon payment of all such costs, any moneys remaining on deposit in said Fund shall be transferred FIRST to the "Rebate Fund" established pursuant to Section 23 of this Ordinance, to the extent the City is liable to pay rebate amounts to the United States of America pursuant to the terms ofthe Code and NEXT to the Debt Service Fund. Amounts so deposited to the Debt Service Fund shall be used in the manner described in Section 22(p) of this Ordinance. Section 14. INVESTMENTS. That money in any Fund established pursuant to this Ordinance may, at the option ofthe City, be placed or invested in Eligible Investments. Money in the Reserve Fund shall not be invested in securities with an average aggregate weighted maturity of greater than seven years. Ifmonies in a Fund herein established are permitted to be invested the value of any such Fund shall be established by adding the monies therein to the Value of Investment Securities. The value of each such Fund shall be established annually during the last month of each Year and in addition thereto, with respect to the Reserve Fund, value shall be established within thirty days prior to the issuance ofPriority Bonds and at the time or times withdrawals are made therefrom. Such investments shall be sold promptly when necessary to prevent any default in connection with the Priority Bonds. Earnings derived from the investment of moneys on deposit in the various Funds and Accounts created hereunder shall be credited to the Fund or Account from which moneys used to acquire such investment shall have come. Section 15. FUNDS SECURED. That monies in the System Fund and all Funds created by this Ordinance, to the extent not invested, shall be secured in the manner prescribed by law for securing funds of the City. Section 16. FLOW OF FUNDS. That all monies in the System Fund not required for paying Operating Expenses during each month shall be applied by the City, on or before the lOth day of the following month, commencing during the months and in the order of priority with respect to the Funds and Accounts that such applications are hereinafter set forth in this Section. (a) Debt Service Fund - To the credit of the Debt Service Fund, in the following order of priority, to -wit: (1) such amounts, deposited in approximately equal monthly installments, commencing during the month in which the Priority Bonds are delivered, or the month thereafter if delivery is made after the 10th day thereof, as will be sufficient, together with other amounts, if any, in the Debt Service Fund available for such purpose (including specifically moneys on deposit in the Capitalized Interest Account dedicated thereto), to pay the interest scheduled to come due on Priority Bonds on the next succeeding interest payment date; (2) such amounts, deposited in approximately equal monthly installments, commencing during the month which shall be the later to occur of, i the twelfth month before the first maturity date ofPriority Bonds, or (ii) the month in which Priority Bonds are delivered, or the month thereafter if delivery is made after the 10th day thereof, as will be 1 sufficient, together with other amounts, i Section 18. PAYMENT OF BONDS. That on or before the first scheduled interest payment date, and on or before each interest payment date and principal payment date thereafter while any of the Priority Bonds are outstanding and unpaid, the City shall make available to the paying agent therefor, out of the Debt Service Fund (and the other Funds, if necessary, in the order of priority set forth herein) monies sufficient to pay such interest on and such principal amount of the Priority Bonds, as shall become due and mature on such dates, respectively, at maturity or by redemption prior to maturity. The bond registrar for each series of Priority Bonds shall destroy all paid Priority Bonds and furnish the City with an appropriate certificate of cancellation or destruction. Section 19. FINAL DEPOSITS; GOVERNMENT OBLIGATIONS. (a) That any Priority Bond shall be deemed to be paid, retired and no longer outstanding within the meaning ofthis Ordinance when payment ofthe principal amount of redemption premium, if any, on such Priority Bond, plus interest thereon to the due date thereof (whether such due date be by reason of maturity, upon redemption, or otherwise) either i shall have been made in accordance with the terms thereof or (ii) shall have been provided for by irrevocably depositing with, or making available to, a paying agent (or escrow agent) therefor, in trust and irrevocably set aside exclusively for such payment, in accordance with the terms and conditions of an agreement between the City and said paying agent (or escrow agent), (1) money sufficient to make such payment or (2) Government Obligations, certified by an independent public accounting firm of national reputation, to mature as to principal and interest in such amounts and at such times as will insure the availability, without rein - vestment, of sufficient money to make such payment, and all necessary and proper fees, compensation, and expenses of such paying agent pertaining to the Priority Bonds with respect to which such deposit is made shall have been paid or the payment thereof provided for (and irrevocable instructions shall have been given by the City to such paying agent of such bonds to give notice of such redemption in the manner required by the ordinance or ordinances authorizing the issuance of such bonds) to the satisfaction of such paying agent. Such paying agent shall give notice to each registered owner of any Priority Bond that such deposit as described above has been made, in the same manner as described in Section 3(b) of this Ordinance. In addition, in connection with a defeasance, such paying agent shall give notice of redemption, if necessary, to the registered owners of any Priority Bonds in the manner described in such Priority Bonds and as directed in the redemption instructions delivered by the City to such paying agent. At such time as a Priority Bond shall be deemed to be paid hereunder, as aforesaid, it shall no longer be secured by or entitled to the benefit of this Ordinance or a lien on and pledge of the Pledged Revenues, and shall be entitled to payment solely from such money or Government Obligations. Government ia'ns. That any moneys so deposited with a paying agent (or escrow agent) may, at the direction of the City, also be invested in Government Obligations, maturing in the amounts and times as hereinbefore set forth, and all income from all Government Obligations in the hands of the paying agent pursuant to this Section which is not required for the payment of the Priority Bonds, the redemption premium, if any, and interest thereon, with respect to which such money has been so deposited, shall be remitted to the City for deposit into the System Fund. (c) Payment of Priority Bonds. Except as provided in clause (b) of this Section, all money or Government Obligations set aside and held in trust pursuant to the provisions of this Section for the payment of Priority Bonds, the redemption premium, if any, and interest thereon, shall be applied -20- solely to and used solely for the payment of such Priority Bonds, the redemption premium, if any, and interest thereon. Section 20. ISSUANCE OF ADDITIONAL PRIORITY BONDS. (a) Reservation of Right to Issue Additional Priority Bonds. That subject to the provisions hereinafter appearing as conditions precedent which must first be satisfied, the City reserves the right to issue, from time to time as needed, Additional Priority Bonds for any lawful purpose relating to the System. Such Additional Priority Bonds may be issued in such form and manner as now or hereafter authorized by the laws of the State of Texas for the issuance of evidences of indebtedness or other instruments, and should new methods or financing techniques be developed that differ from those now available and in normal use, the City reserves the right to employ the same in its financing arrangements provided only that the same conditions precedent herein required for the authorization and issuance of Additional Priority Bonds are satisfied. (b) Funding Reserve 'und. That the Debt Service Fund and the Reserve Fund established by this Ordinance shall secure and be used to pay all Additional Priority Bonds hereafter issued. Upon the issuance and delivery of Additional Priority Bonds, the additional amount required to be deposited in the Reserve Fund shall be so accumulated by the deposit in the Reserve Fund of all or any part of said required additional amount in cash immediately after the delivery of such Additional Priority Bonds, or, at the option ofthe City, (0 by the deposit of said required additional amount (or any balance of said required additional amount not deposited in cash as permitted above) in approximately equal monthly instalments, made on or before the 10th day of each month following the delivery of such Additional Priority Bonds, of not less than 1/60 of said required additional amount (or 1/60 ofthe balance of said required additional amount not deposited in cash as permitted above) or (ii) by the deposit of a Credit Facility which, in whole or in combination with deposits described in clause (0 above, is sufficient to satisfy the required additional amount to be on deposit in the Reserve Fund. (c) Calculations. That all calculations ofAverage Annual Principal and Interest Requirements made pursuant to this Section shall be made as of and from the date of the Additional Priority Bonds then proposed to be issued. Section 21, FURTHER THER R Q IREMENTS FOR ADDITIONAL PRIORITY BONDS. (a) Conditions pn t, for Issuance of Additional Priority Bonds - General. That as a condition precedent to the issuance of any Additional Priority Bonds, the City Manager (or other officer ofthe City then having the responsibility for the financial affairs ofthe City) shall have executed a certificate stating (i) that the City is not then in default as to any covenant, obligation or agreement contained in any ordinance or other proceeding relating to any obligations ofthe City payable from and secured by a lien on and pledge ofthe Pledged Revenues, and (ii) that the amounts on deposit in all Funds or Accounts created and established for the payment and security of all outstanding obligations payable from and secured by a lien on and pledge of the Pledged Revenues are the amounts then required to be deposited therein. Such certificate shall be dated on or before the date of delivery of such Additional Priority Bonds, but such certificate shall not be dated prior to the date an ordinance is passed authorizing the issuance of such Additional Priority Bonds. (b) Conditions Precedent for Issuance of Additional Priority Bonds - Capital Improvements and for any other lawful purpose except or Capital Additions ori for � ef unding. The City covenants and agrees that Additional Priority Bonds will not be issued for the purpose of financing Capital Improvements, or for any other lawful purpose (except for Capital Additions or for refunding, which are to be issued in accordance wi the construction thereof and for at least five Years after the date the Capital Addition becomes commercially operative, and (B) conclude that (1) the Capital Addition is necessary and will substantially increase the capacity, or is needed to replace existing facilities, to meet current and projected demands for the service or product to be provided thereby, and (2) the estimated cost of providing the service or product from the Capital Addition will be reasonable in comparison with projected costs for furnishing such service or product from other reasonably available sources; and (ii) a certificate of the Engineer of Record to the effect that, based on the Engineering Report prepared for each Capital Addition, the projected Net Earnings for each of the five years subsequent to the date the Capital Addition becomes commercially operative (as estimated in the Engineering Report) will be equal to at least 1.25 times the Average Annual Principal and Interest Requirements for Priority Bonds then outstanding or incurred and all Priority Bonds estimated to be issued, if any, for all Capital Improvements and for all Capital Additions then in progress or then being initiated, during the period from the date the first series of obligations for the Capital Additions is to be delivered through the fifth year subsequent to the date the Capital Addition is estimated to become commercially operative. (d) Completion Issues. Once a Capital Addition has been initiated by meeting the conditions precedent specified in clauses (OW and (c )(ii) above and the initial Priority Bonds issued therefor are delivered, the City reserves the right to issue Additional Priority Bonds to finance the remaining costs of such Capital Addition in such amounts as may be necessary to complete the acquisition and construction thereofand make the same commercially operative without satisfaction of any condition precedent under clauses (OW and (c )(ii) or clause (b) ofthis Section but subject to satisfaction ofthe following conditions precedent: (i) the City makes a forecast (the "Forecast ") of the operations of the System demonstrating the System's ability to pay all obligations, payable from the Pledged Revenues ofthe System to be outstanding after the issuance ofthe Additional Priority Bonds then being issued for the period (the "Forecast Period") of each ensuing year through the fifth year subsequent to the latest estimated date such Capital Addition is expected to be commercially operative; and (ii) the Engineer of Record reviews such Forecast and executes a certificate to the effect that (A) such Forecast is reasonable, and based thereon (and such other factors deemed to be relevant), the Pledged Revenues of the System will be adequate to pay all the obligations, payable from the Pledged Revenues of the System to be outstanding after the issuance of the Additional Priority Bonds then being issued for the Forecast Period and (B) the proceeds from the sale of such Additional Priority Bonds are estimated to be sufficient to complete such acquisition and construction. (e) Refunding Issues. The City reserves the right to issue refunding bonds to refund all or any part ofthe outstanding Priority Bonds (pursuant to any law then available), upon such terms and conditions as the governing body of the City may deem to be in the best interest of the City and its inhabitants, and ifless than all such outstanding Priority Bonds are refunded, the conditions precedent prescribed in clauses (a) and (b) of this Section shall be satisfied and the Accountant's certificate or -23- opinion required by clause (b) shall give effect to the issuance of the proposed refunding bonds (and shall not give effect to the Priority Bonds being refunded following their cancellation or provision being made for their payment). In addition, the City reserves the right to refund all or any part of any other obligations of the System, upon such terms and conditions as the governing body of the City may deem to be in the best interest of the City and its inhabitants, provided that the conditions prescribed in clauses (a) and (b) of this Section shall be satisfied. No Accountant's certificate otherwise required by clause (b) will be required for refunding bonds, after giving effect to such proposed refunding, if there is no increase in debt service for any Year in which there will be debt service on Priority Bonds outstanding both before and after such refunding. (0 Computations; Reports. With reference to Priority Bonds anticipated and estimated to be issued or incurred, the Average Annual Principal and Interest Requirements therefor shall be those reasonably estimated and computed by the City's Director of Financial Services (or other officer of the City then having the primary responsibility for the financial affairs of the City) . In the preparation of the Engineering Report required in clause i above, the Engineer ofRecord may rely on other experts or professionals, including those in the employment of the City, provided such Engineering Report discloses the extent of such reliance and concludes it is reasonable so to rely. In connection with the issuance of Priority Bonds for Capital Additions, the certificate of the City's Director of Financial Services and Engineer of Record, together with the Engineering Report for the initial issue and the Forecast for a subsequent issue, shall be conclusive evidence and the only evidence required to show compliance with the provisions and requirements and this clause of this Section. (g) Combination Issues. Priority Bonds for Capital Additions may be combined in a single issue with Priority Bonds for Capital Improvements or for any lawful purpose provided the conditions precedent set forth in clauses (b) through (e) are complied with as the same relate to the appropriate purpose. (h) Subordinated Obligations. The City may, at any time and from time to time, for any lawful purpose, issue Subordinated Obligations, the principal of and redemption premium, if any, and interest on which is payable from and secured by a pledge of and lien on the Pledged Revenues junior and subordinate to the lien and pledge created hereby for the security of the Priority Bonds and the payments required to be made hereunder into the Debt Service Fund and the Reserve Fund; provided, however, that any such pledge and lien securing the Subordinated Obligations shall be, and shall be expressed to be, subordinate in all respects to the pledge of and lien on the Pledged Revenues as security for the Priority Bonds; and provided further that any default with respect to the issuance of Subordinated Obligations will not be deemed a default with respect to the Priority Bonds. (i) D of Net Earnings. As used in this Section, the term "Net Earnings" shall mean the Gross Revenues of the System after deducting the Operating Expenses of the System, but not expenditures which, under standard accounting practice, should be charged to capital expenditures. Determination of Net Earnings. In making a determination ofNet Earnings for any of the purposes described in this Section, the Accountant may take into consideration a change in the rates and charges for services and facilities afforded by the System that became effective at least days prior to the last day of the period for which Net Earnings are determined and, for purposes of -24- satisfying any of the Net Earnings test described above, make a pro forma determination of the Net Earnings of the System for the period of time covered by the Accountant's certification or opinion based on such change in rates and charges being in effect for the entire period covered by the Accountant's certificate or opinion. Section 22. GENERAL COVENANTS. That the City further covenants and agrees that in accordance with and to the extent required or permitted by law: (a) It will faithfully perform at all times any and all covenants, undertakings, stipulations, and provisions contained in this Ordinance, and each ordinance authorizing the issuance of Additional Priority Bonds; it will promptly pay or cause to be paid the principal amount of and interest on every Priority Bond, on the dates and in the places and manner prescribed in such ordinances and such Priority Bonds; and it will, at the time and in the manner prescribed, deposit or cause to be deposited the amounts required to be deposited into the System Fund and the Funds herein created; and any registered owner of any Priority Bond may require the City, its officials and employees to carry out, respect or enforce the covenants and obligations of this Ordinance, or any ordinance authorizing the issuance of Priority Bonds, by all legal and equitable means, including specifically, but without limitation, the use and filing of mandamus proceedings, in any court of competent jurisdiction, against the City, its officials and employees. (b) City's Legal utrit. It is a duly created and existing home rule city of the State of Texas, and is duly authorized under the laws of the State of Texas to issue the Bonds; that all action on its part for the issuance of the Bonds has been duly and effectively taken, and that the Bonds in the hands of the owners thereof are and will be valid and enforceable special obligations of the City in accordance with their terms. (c) Acquisition and Construction; Operation and Maintenance. (1) It shall use its best efforts in accordance with Prudent Utility Practice to acquire and construct, or cause to be acquired and constructed, any Capital Additions or Capital Improvements, in accordance with the plans and specifications therefor, as modified from time to time with due diligence and in a sound and economical manner; and (2) it shall at all times use its best efforts to operate or cause to be operated the System properly and in an efficient manner, consistent with Prudent Utility Practice, and shall use its best efforts to maintain, preserve, reconstruct and keep the same or cause the same to be so maintained, preserved, reconstructed and kept, with the appurtenances and every part and parcel thereof, in good repair, working order and condition, and shall from time to time make, or use its best efforts to cause to be made, all necessary and proper repairs, replacement and renewals so that at all times the operation of the System may be properly and advantageously conducted. (d) Title. It has or will obtain lawful title, whether such title is in fee or lesser interest, to the lands, buildings, structures and facilities constituting the System, that it warrants that it will defend the title to all the aforesaid lands, buildings, structures and facilities, and every part thereof, for the benefit of the owners of the Priority Bonds, against the claims and demands of all persons whomsoever, that it is lawfully qualified to pledge the Pledged Revenues to the payment of the Priority Bonds in the manner prescribed herein, and has lawfully exercised such rights. -25- (e) Liens. It will from time to time and before the same become delinquent pay and discharge all taxes, assessments and governmental charges, if any, which shall be lawfully imposed upon it, or the System; it will pay all lawful claims for rents, royalties, labor, materials and supplies which if unpaid might by law become a lien or charge thereon, the lien of which would be prior to or interfere with the liens hereof so that the riori of the liens granted hereunder shall b fully preserved in the p ty manner provided herein, and it will not create or suffer to be created any mechanic's, laborer's, materialman's or other lien or charge which might or could be prior to the liens hereof, or do or suffer any matter or thing whereby the liens hereof might or could be impaired; provided however, that no such tax, assessment or charge, and that no such claims which might be used as the basis of a mechanic's, laborer's, materialman's or other lien or charge, shall be required to be paid so long as the validity of the same shall be contested in good faith by the City. 0 No Free Service. Io free service or service otherwise than in accordance with the established rate schedule shall be furnished, directly or indirectly, by the System to any person, firm, corporation or other entity, other than the City. No part of the salary of any official or employee of the City or his replacement shall be paid from Pledged Revenues unless and only to the extent the duties and performances of such official or employee or his replacement appertain directly to the System. To the extent the City receives the services ofthe System, such services shall be accounted for according to the established rate schedule. (g) Further Encumbrance. It will not additionally encumber the Pledged Revenues in any manner, except as permitted in this Ordinance in connection with Priority Bonds, unless said encumbrance is made junior and subordinate in all respects to the liens, pledges, covenants and agreements of this Ordinance; but the right of the City to issue Subordinated Obligations payable in whole or in part from a subordinate lien on the Pledged Revenues is specifically recognized and retained. (h) Sale, Lease or Disposal of Property. No part of the System shall be sold, leased, mortgaged, demolished, removed or otherwise disposed of except as follows: (1) To the extent permitted by law, the City may sell or exchange at any time and from time to time any property or facilities constituting part ofthe System only if (A ) it shall determine such property or facilities are not useful in the operation of the System, or (B) the proceeds of such sale are $250,000 or less, or it shall have received a certificate executed by the Engineer of Record and the City Manager stating, in their opinion, that the fair market value of the property or facilities exchanged is $250,000 or less, or (C) if such proceeds or fair market value exceeds $250,000 it shall have received a certificate executed by the Engineer of Record and the City Manager stating (i) that system within the System of which the property or facilities comprises a part thereof and (ii) in their opinion, that the sale or exchange of such property or facilities will not impair the ability of the City to comply during the current or any future Year with the provisions of clause ofthis Section. The proceeds of any such sale or exchange not used to acquire other property necessary or desirable for the safe or efficient operation of the System shall forthwith, at the option of the City (i) be used to redeem or purchase Priority Bonds, or (ii) otherwise be used to provide for the payment of Priority Bonds. The foregoing notwithstanding, if such property or facilities sold or -26- exchanged 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 Priority Bonds, or with the proceeds of obligations which were refunded in whole or in part with the proceeds ofPriority Bonds, then the City may utilize the proceeds of such sale or exchange for any lawful purpose; (2) To the extent permitted by law, the City may lease or make contracts or grant licenses for the operation of, or make arrangements for the use of or grant easements or other rights with respect to, any part of the System, provided that any such lease, contract, license, arrangement, easement or right does not impede the operation by the City of the System and (B) does not in any manner impair or adversely affect the rights or security of the owners of the Priority Bonds under this Ordinance; and provided, further, that if the depre- ciated cost of the property to be covered by any such lease, contract, license, arrangement, easement or other right is in excess of $500,000, the City shall have received a certificate executed by the Engineer of Record and the City Manager that the action of the City with respect thereto does not result in a breach of the conditions under this clause (2). Any payments received by the City under or in connection with any such lease, contract, license, arrangement, easement or right in respect of the System or any part thereof shall constitute Gross Revenues: i Books, Records and t . It shall keep proper books, records and accounts separate and apart from all other records and accounts, in which complete and correct entries shall be made of all transactions relating to the System and the City shall cause said books and accounts to be audited annually as of the close of each Year by the Accountant. (j) Insurance. 1 Except as otherwise permitted in clause (2) below, it shall cause to be insured such parts of the System as would usually be insured by corporations operating like properties, with a responsible insurance company or companies, against risks, accidents or casualties against which and to the extent insurance is usually carried by corporations operating like properties, including, to the extent reasonably obtainable, fire and extended coverage insurance, insurance against damage by floods, and use and occupancy insurance. Public liability and property damage insurance shall also be carried unless the City Attorney gives a written opinion to the effect that the City is not liable for claims which would be protected by such insurance. At any time while any contractor engaged in construction work shall be fully responsible therefor, the City shall not be required to carry insurance on the work being constructed if the contractor is required to carry appropriate insurance. All such policies shall be open to the inspection of the bondholders and their representatives at all reasonable times. (2) In lieu of obtaining policies for insurance as provided above, the City may self - insure against risks, accidents, claims or casualties described in clause (1) above. The annual audit hereinafter required shall contain a section commenting on whether or not the City has complied with the requirements of this Section with respect to the maintenance of insurance, and listing the areas of insurance for which the City is self - insuring, all policies carried, and -27- whether or not all insurance premiums upon the insurance policies to which reference is hereinbefore made have been paid. Rate Covenant. It will fix, establish, maintain and collect such rates, charges and fees for the use and availability ofthe System at all times as are necessary to produce Gross Revenues and other Pledged Revenues equal to the greater of amounts determined in accordance with clauses (1) or (2) below, to-wit, amounts sufficient (1) to pay all current Operating Expenses ofthe System, and (B) tto produce Net Revenues for each Year at least equal to 1.25 times the Average Annual Principal and Interest Requirements of all then outstanding Priority Bonds; or (2) to pay the sum of (A) all current Operating Expenses, (B) the Average Annual Principal and Interest Requirements on the then outstanding Priority Bonds, (C) required deposits to the Reserve Fund required for the Priority Bonds, and (D) amounts required to pay all other obligations of the System reasonably anticipated to e paid from Gross Revenues during the current Year. The calculation of Average Annual Principal and Interest Requirements on all outstanding Priority Bonds shall be net of capitalized interest for such Priority Bonds only if the moneys in the Capitalized Interest Account received from proceeds of such Priority Bonds are invested in Government Obligations. The foregoing notwithstanding, such rates, charges and fees shall be fixed, established, maintained and collected at a level sufficient to enable the City to pay debt service on Priority Bonds during the current Year. (1) After the close of each year while any Priority Bonds are outstanding, an audit will be made of the books and accounts relating to the System and the Pledged Revenues by the Accountant. As soon as practicable after the close of each such year, and when said audit has been completed and made available to the City, a copy of such audit for the preceding year shall be mailed to any holder of the then outstanding Priority Bonds who shall so request in writing. Such annual audit reports shall be open to the inspection ofthe registered owners ofthe Priority Bonds and their agents and representatives at all reasonable times. (m) Governmental Agencies. It will comply with all of the terms and conditions of any and all franchises, permits and authorizations applicable to or necessary with respect to the System, and which have been obtained from any governmental agency; and the City has or will obtain and keep in full force and effect all franchises, permits, authorization and other requirements applicable to or necessary with respect to the acquisition, construction, equipment, operation and maintenance ofthe System. (n) No Competition. To the extent it legally may, it will not grant any franchise or permit for the acquisition, construction or operation of any competing facilities which might be used as a substitute for the Systems facilities, and, to the extent that it legally may, the City will prohibit any such competing facilities. (0) of Inspection. The Engineer of Record or any registered owner of $1 00,000 in aggregate principal amount of the Priority Bonds then outstanding shall have the right at all reasonable times to inspect the System and all records, accounts and data ofthe City relating thereto, and upon request the City shall furnish to the Engineer of Record or such registered owner, as the case may be, such financial statements, reports and other information relating to the City and the -28- System as the Engineer of Record or such registered owner may from time to time reasonably request. Surplus Bond Proceeds. It shall deposit any surplus proceeds from the Bonds remaining after the acquisition and completion of the System improvements to the credit of the Debt Service Fund, to the extent any such surplus proceeds are not otherwise required to be rebated to the United States of America in accordance with the provisions of Section 23 hereof, to pay debt service on the Bonds. Section 23. COVENANTS REGARDING TAX - EXEMPTION. That the Issuer covenants to refrain from any action which would adversely affect, or to take such action as to ensure, the treatment of the Bonds as obligations described in section 103 of the Code, the interest on which is not includable in the "gross income" of the holder for purposes of federal income taxation. In furtherance thereof, the Issuer covenants as follows (a) to take any action to assure that no more than 10 percent of the proceeds of the Bonds or the projects financed therewith (less amounts deposited to a reserve fund, if any) are used for any "private business use", as defined in section 1 1(b)(6) ofthe Code or, if more than 10 percent of the proceeds are so used, that amounts, whether or not received by the Issuer, 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 ofthe debt service on the Bonds, in contravention of section 141(b)(2) ofthe Code; (b) to take any action to assure that in the event that the "private business user" described in subsection (a) hereof exceeds 5 percent of the proceeds of the Bonds or the projects financed therewith (less amounts deposited into a reserve fund, if any) then the amount in 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) ofthe 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 ofthe proceeds of the Bonds (less amounts deposited into a reserve fund, if any) is directly or indirectly used to finance loans to persons, other than state or local governmental units, in contravention of section 141(c) of the Code; (d) to refrain from taking any action which would otherwise result in the Bonds being treated as "private activity bonds" within the meaning of section 141(a) of the Code; (e) to refrain from taking any action that would result in the Bonds being "federally guaranteed " within the meaning of section 149(b) dale Code; (f) to refrain from using any portion of the proceeds of the Bonds, directly or indirectly, to acquire or to replace funds which were used, directly or indirectly, to acquire -29- investment property (as defined in section 148(b)(2) ofthe Code) which produces a materially higher yield over the term of the Bonds, other than investment property acquired with — (1) proceeds ofthe Bonds invested for a reasonable temporary period until such proceeds are needed for the purpose for which the Bonds are issued, (2) amounts invested in a bona fide debt service fund, within the meaning of section 1.148 -1 of the Treasury Regulations, and (3) amounts deposited in any reasonably required reserve or replacement find to the extent such amounts do not exceed 10 percent of the proceeds of the Bonds; (g) to otherwise restrict the use ofthe proceeds ofthe Bonds or amounts treated as proceeds of the Bonds, as may be necessary, so that the Bonds do not otherwise contravene the requirements of section 148 of the Code (relating to arbitrage) and, to the extent applicable, section 149(d) of the Code (relating to advance refundings); 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 onds ) an amount that is at least equal to 90 percent ofthe "Excess Earnings", within the meaning of section 14 8(0 ofthe Code and to pay to the United States of America, not later than 60 days after the Bonds have been paid in full, 100 percent of the amount then required to be paid as a result of Excess Earnings under section 148(0 of the Code. The Issuer understands that the term "proceeds " includes 'disposition proceeds " as defined in the Treasury Regulations and, in the case of a refunding bond, transferred proceeds (if any) and proceeds ofthe refunded bonds expended prior to the date ofthe issuance ofthe Bonds. It is the understandi shall not be subject to the claim of any other person, including without limitation the registered owners ofthe Bonds. The Rebate Fund is established for the additional purpose of compliance with section 148 of the Code. Section 24. TAXABLE OBLIGATIONS. That the provisions of Section 23 f this Ordinance notwithstanding, the City reserves the ability to issue Additional Priority Bonds in a manner such that such obligations are not obligations described in section 103(a) ofthe Code or are obligations which constitute "private activity bonds " within the meaning of section 141(b) of the Code. Section 25, AMENDMENT OF ORDINANCE. (a) Approval b,y Registered Owners. That the registered owners of a majority in aggregate principal amount of the Priority Bonds then outstanding shall have the right from time to time to approve any amendment to this Ordinance which may be deemed necessary or desirable by the City; provided, however, that without the consent of the registered owners of all of the Priority Bonds at the time outstanding, nothing herein contained shall permit or be construed to permit the amendment of the terms and conditions in this Ordinance or in the Priority Bonds so as to: (1) Make any change in the maturity of any of the outstanding Priority Bonds; (2) Reduce the rate of interest borne by any of the outstanding Priority Bonds; (3) Reduce the amount of the principal parable on the outstanding Priority Bonds; (4) Modify the terms of payment of principal of premium, if any, or interest on the outstanding Priority Bonds or impose any conditions with respect to such payment; Affect the rights of the registered owners of less than all of the Priority Bonds then outstanding; (6) Amend this clause (a) of this Section; or (7) Change the minimum percentage ofthe principal amount ofPriority Bonds necessary for consent to any amendment; unless such amendment or amendments be approved by the registered owners of all of the Priority Bonds then outstanding. (s) (b) Notice. That if at any time the City shall desire to amend the Ordinance under this Section, the City shall cause notice of the proposed amendment to be published in a financial newspaper or journal published in The City of New York, New York, and a newspaper of general circulation in the City, 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 Pai. g AgentRgistrar for inspection by all holders of -31- Priority Bonds. Such publication is not required, however, if notice in writing is given to each registered owner of Priority Bonds. Consent Obtained. That whenever at any time not less than 30 days, and within one year, from the date of the first publication of said notice or other service of written notice the City shall receive an instrument or instruments executed by the registered owners of at least a majority in aggregate principal amount of the Priority Bonds then outstanding, which instrument or instruments shall refer to the proposed amendment described in said notice and which specifically consent to and approve such amendment in substantially the form of the copy thereof on file with the Paying Agent Registrar, the governing body ofthe City may pass the amendatory ordinance in substantially the same form. (d) Amendatory Ordinance. That upon the passage of any amendatory ordinance pursuant to the provisions of this Section, this Ordinance shall be deemed to be amended in accordance with such amendatory ordinance, and the respective rights, duties and obligations under this Ordinance of the City and all the registered owners ofthen outstanding Priority Bonds and all future Priority Bonds shall thereafter be determined, exercised and enforced hereunder, subject in all respects to such amendments. (e) Consent Irrevocable, for Six Months. That any consent given by the registered owner of a Priority Bond pursuant to the provisions of this Section shall be irrevocable for a period of six months from the date of the first publication of the notice provided for in this Section, and shall be conclusive and binding upon all future registered owners of the same Priority Bond during such period. Such consent may be revoked at any time after six months from the date of the first publication of such notice by the registered owner who gave such consent, or by a successor in title, by filing notice thereof with the Paying Agent/Registrar and the City, but such revocation shall not be effective if the registered owners of at least a majority in aggregate principal amount of the then outstanding Priority Bonds as in this Section defined have, prior to the attempted revocation, consented to and approved the amendment. 0) Amendments without Consent. The foregoing provisions ofthis Section notwithstanding, the City by action ofthe City Council may amend this Ordinance for any one or more ofthe 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, grant additional rights or remedies to the registered owners of the Priority Bonds or to urrencer, restrict or limit any right or power herein reserved to or conferred upon the City; (2) To make such provisions for the purpose of curing any ambiguity, or curing, correcting or supplementing any defective provision contained in this Ordinance, or in regard to clarifying matters or questions arising under this Ordinance, as are necessary or desirable and not contrary to or inconsistent with this Ordinance and which shall not adversely affect the interests of the registered owners of the Priority Bonds then outstanding; -32- To modify any ofthe provisions ofthis Ordinance in any other respect whatever, provided that i such modification shall be, and be expressed to be, effective only after all Bonds and each series of Additional Priority Bonds ttandin at the date of the adoption of such modification shall cease to be outstanding, and (ii) such modification shall be specifically referred to in the text of all Priority Bonds issued after the date of the adoption of such modification; To make such amendments to this Ordinance as may be required, in the opinion of nationally recognized bond counsel acceptable to the City, to ensure compliance with sections 103 and 141 through 150 of the Code and the regulations promulgated thereunder and applicable thereto; To make such changes, modifications or amendments as may be necessary or desirable in order to allow the owners of the Priority Bonds to thereafter avail themselves of a book -entry system for payments, transfers and other matters relating to the Priority Bonds, which changes, modifications or amendments are not contrary to or inconsistent with other provisions ofthis Ordinance and which shall not adversely affect the interests ofthe owners of the Priority Bonds; (6) To make such changes, modifications or amendments as are permitted by Section 33v of this Ordinance; To make such changes, modifications or amendments as may be necessary or desirable in order to obtain or maintain the granting of a rating on the Priority Bonds by a Rating Agency or to obtain or maintain a Credit Facility, or to obtain the approval of the Bonds from the Texas Attorney General; and To make such changes, modifications or amendments as may be necessary or desirable, which shall not adversely affect the interests of the owners of the Priority Bonds, in order, to the extent permitted by law, to facilitate the economic and practical utilization of interest rate swap agreements, foreign currency exchange agreements, or similar type of agreements with respect to the Priority Bonds. Notice of any such amendment may be published by the City in the manner described in clause (b) of this Section; provided, however, that the publication of such notice shall not constitute a condition precedent to the adoption of such amendatory ordinance and the failure to publish such notice shall not adversely affect the implementation of such amendment as adopted pursuant to such amendatory ordinance. Section 26. DAMAGED, MUTILATED, LOST, STOLEN, ORDESTROYED BONDS. (a) Substitute Bonds. That in the event any outstanding Bond is damaged, mutilated, lost, stolen, or destroyed, the Paying Agent/Registrar shall cause to be printed, executed, and delivered, a new -33- bond ofthe same principal amount, maturity, and interest rate, as the damaged, mutilated, lost, stolen, or destroyed Bond, in replacement for such Bond in the manner hereinafter provided. (b) Replacement. Application for replacement of damaged, mutilated, lost, stolen, or destroyed Bonds shall be made to the Paying Agent/Registrar. In every case ofloss, theft, or destruction of a Bond, the applicant for a replacement bond shall furnish to the City and to the Paying Agent/Registrar such security or indemnity as may be required by them to save each of them harmless from any loss or damage with respect thereto. Also, in every case of loss, theft, or destruction of a Bond, the applicant shall furnish to the City and to the Paying AgentlRegistrar evidence to their satisfaction of the loss, theft, or destruction of such Bond, as the case may be. In every case of damage or mutilation of a Bond, the applicant shall surrender to the Paying Agent/Registrar for cancellation the Bond so damaged or mutilated. Payment upon Maury. Notwithstanding the foregoing provisions of this Section, in the event any such Bond shall have matured, and no default has occurred which is then continuing in the payment ofthe principal of, redemption premium, if any, or interest on the Bond, the City may authorize the payment of the same (without surrender thereof except in the case of a damaged or mutilated Bond) instead of issuing a replacement Bond, provided security or indetnnity is furnished as above provided in this Section. (d) Cost of mn n. Prior to the issuance of any replacement bond, the Paying Agent/Registrar shall charge the owner of such Bond with all legal, printing, and other expenses in connection therewith. Every replacement bond issued pursuant to the provisions of this Section by virtue of the fact that any Bond is lost, stolen, or destroyed shall constitute a contractual obligation of the City whether or not the lost, stolen, or destroyed Bond shall be found at any time, or be enforceable by anyone, and shall be entitled to all the benefits of this Ordinance equally and proportionately with any and all other Bonds duly issued under this Ordinance. (e)AuthorityforReplacementBonds. In accordance with Chapter 1206, Texas Government Code, this Section of this Ordinance shall constitute authority for the issuance of any such replacement bond without necessity of further action by the governing body ofthe City or any other body or person, and the duty of the replacement of such bonds is hereby authorized and imposed upon the Paying Agent/Registrar, and the Paying Agent/Registrar shall authenticate and deliver such bonds in the form and manner and with the effect, as provided in Section 5(d) of this Ordinance for Bonds issued in exchange for other Bonds. Section 27. APPROVAL AND REGISTRATION OF BONDS. That the City Manager of the City is hereby authorized to have control of the Bonds and all necessary records and proceedings pertaining to the Bonds pending their delivery and their investigation, examination and approval by the Attorney General of the State of Texas, and their registration by the Comptroller of Public Accounts of the State of Texas. Upon registration of the Bonds, said Comptroller of Public Accounts (or a deputy designated in writing to act for said Comptroller) shall manually sign the Comptroller's Registration Certificate accompanying the Bonds, and the seal ofsaid Comptroller shall be impressed, or placed in facsimile, on each such certificate. -34- Section 28. DELIVERY OF BONDS TO THE UNDERWRITERS. That should the City Manager effect the sale ofthe Bonds to the Underwriters by executing the Purchase Agreement, one Bond in the principal amount maturing on each maturity date as set forth in the Purchase Agreement shall be delivered to the Underwriters, and the Underwriters shall have the right to exchange such bonds as provided in Section 5 hereof without cost. Section 29. USE OF PROCEEDS. That the proceeds from the sale of the Bonds shall be used in the manner described in the letter of instructions executed by or on behalf of the City. The foregoing notwithstanding, proceeds representing accrued interest on the Bonds shall be deposited to the credit ofthe Debt Service Fund and proceeds representing premium on the Bonds shall be used in a manner consistent with the provisions of Section 1201 .041 d , Texas Government Code. Section 30. DEFAULT AND REMEDIES. (a) Events of , fault. That each of the following occurrences or events for the purpose ofthis Ordinance is hereby declared to be an "Event of Default": (i) the failure to make payment of the principal of or interest on any of the Bonds when the same becomes due and payable; or (ii) default in the performance or observance of any other covenant, agreement or obligation ofthe City, the failure to perform which materially, adversely affects the rights of the registered owners ofthe Bonds, including, but not limited to, their prospect or ability to be repaid in accordance with this Ordinance, and the continuation thereof for a period of days after notice of such default is given by any registered owner to the City. (h) Remedies for Default. (i) Upon the happening of any Event ofDefault, then and in every case, any registered owner or an authorized representative thereof, including, but not limited to, a trustee or trustees therefor, may proceed against the City, or any official, officer or employee ofthe City in their official capacity, for the purpose of protecting and enforcing the rights of the registered owners under this Ordinance, by mandamus or other suit, action or special proceeding in equity or at law, in any court of competent jurisdiction, for any relief permitted by law, including the specific performance of any covenant or agreement contained herein, or thereby to enjoin any act or thing that may be unlawful or in violation of any right of the registered owners hereunder or any combination of such remedies. (ii) It is provided that all such proceedings shall be instituted and maintained for the equal benefit of all registered owners of Bonds then outstanding. -35- (c) Remedies Not Exclusive. (i) No remedy herein conferred or resented is intended to be exclusive of any other available remedy or remedies, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or under the Bonds or now or hereafter existing at law or in equity; provided, however, that notwithstanding any other provision of this Ordinance, the right to accelerate the debt evidenced by the Bonds shall not be available as a remedy under this Ordinance. (ii) The exercise of any remedy herein conferred or reserved shall not be deemed a waiver of any other available remedy. (iii) By accepting the delivery of a Bond authorized under this Ordinance, such registered owner agrees that the certifications required to effectuate any covenants or representations contained in this Ordinance do not and shall never constitute or give rise to a personal or pecuniary liability or charge against the officers, employees or trustees of the City or the City Council. (iv) None ofthe members ofthe City Council, nor any other official or officer, agent, or employee of the City, shall be charged personally by the registered owners with any liability, or be held personally liable to the registered owners under any term or provision of this Ordinance, or because of any Event of Default or alleged Event of Default under this Ordinance. Section 31. FURTHERPROCEEDINGS. That the Mayor, the City Manager, any Assistant City Manager, the City Secretary, and the Director of Financial Services, and all other officers, employees and agents of the City, and each of them, shall be and they are hereby expressly authorized, empowered and directed from time to time and at any time to do and perform all such acts and things and to execute, acknowledge and deliver in the name and under the corporate seal and on behalf oche City all such instrument s, whether herein mentioned, as may be necessary or desirable in order to carry out the terms and provisions of this Ordinance and the Bonds, including, but not limited to, conforming documents to receive the approval of the Texas Attorney General and to receive ratings from municipal bond rating agencies, the printing of a statement relating to the insuring of the Bonds by a municipal bond insurance company, and, if necessary, executing and delivering a guaranty agreement ofthe type referred to in Section 32 hereof and a "Blanket Letter of Representations" in the form provided by DTC. Section 32. BOND INSURANCE AND DEBT SERVICE RESERVE FUND INSURANCE POLICIES. That the City Manager is authorized, in connection with effecting the sale ofthe Bonds, to obtain from a municipal bond insurance company so designated in the Purchase Agreement (the "Insurer") a municipal bond insurance policy and a debt service reserve fund policy (together, the "Policies") in support of the Bonds. To that end, should the City Manager exercise such authority and commit the City to obtain either a municipal bond insurance policy and a debt service reserve fund policy, or both, for so long as either or both Policies are in effect, the requirements ofthe Insurer relating to the issuance of said policies are incorporated by reference into -36- this Ordinance and made a part hereof for all purposes, notwithstanding any other provision of this Ordinance to the contrary. For purposes of this Ordinance, the Required Amount shall include the debt service on the Bonds as well as the Outstanding Previously Issued Priority Bonds. The City Manager and any Assistant City Manager shall have the authority to execute any documents to effect the issuance of said policies by the Insurer including, without limitation, any agreement to be delivered in connection with either or both of the Policies in substantially the form previously approved by the City Council in connection with Previously Issued Priority Bonds, Section 33. COMPLIANCE WITH RULE 15c2 -12. (a) Annual Reports. i That the City shall provide annually to each NRMSIR and any SID, within six months after the end of each fiscal year as described in an exhibit attached to this Ordinance, financial information and operating data with respect to the City of the general type included in the final Official Statement authorized by Section 2(c) of this Ordinance, being the information described in Exhibit B attached to this Ordinance. Any financial statements to be so provided shall be (1) prepared in accordance with the accounting principles described in Exhibit B attached hereto, or such other accounting principles as the Cit y may be required to employ from time to time thereafter pursuant to state law or regulation, � and (2) audited, if the City commissions an audit of such statements and the audit is completed within the period during which they must be provided. If the audit of such financial statements is not complete within such period, then the City shall provide unaudited financial statements within such period and shall provide audited financial statements for the applicable fiscal year to each NRMSIR and any SID, when and if the audit report on such statements become available. (ii) If the City changes its fiscal year, it will notify each NRMSIR and any SID of the change (and ofthe date ofthe new fiscal year end) prior to the next date by which the City otherwise would be required to provide financial information and operating data pursuant to this Section. The financial information and operating data to be provided pursuant to this Section may be set forth in full in one or more documents or may be included by specific reference to any document (including an official statement or other offering document, if it is available from the MSRB) that theretofore has been provided to each NRMSIR and any SID or filed with the SEC. (b) Material Event Notices, The City shall notify any SID and either each NRMSIR or the MSRB, in a timely manner, of any of the following events with respect to the Bonds, if such event is material within the meaning ofthe federal securities laws: 1. Principal and interest payment delinquencies; 2. Non-payment related defaults; 3. Unscheduled draws on debt service reserves reflecting financial difficulties; 4. Unscheduled draws on credit enhancements reflecting financial difficulties; 5. Substitution of credit or liquidity providers, or their failure to perform; 6. Adverse tax opinions or events affecting the tax - exempt status of the Bonds; 7. Modifications to rights of holders of the Bonds; 8. Bond calls; 9, Defeasances; 10. Release, substitution, or sale of property securing repayment of the Bonds; and 11. Rating changes. -37- The City shall notify any SID and either each NRMSIR or the MSRB, in a timely manner, of any failure by the City to provide financial information or operating data in accordance with subsection (a) of this Section by the time required by such subsection. Any filing under this Section may be made solely by transmitting such filing to the MAC as provided at http :vrr.dislsureusa.rg, unless the SEC has withdrawn the interpretive advice stated in its letter to the MAC dated September 7, 2004. (c) Disclaimers, and Amendments. i The City shall be obligated to observe and perform the covenants specified in this Article for so long as, but only for so long as, the City remains an "obligated person" with respect to the Bonds within the meaning of the Rule, except that the City in any event will give notice of any deposit made in accordance with this Ordinance or applicable law that causes Bonds no longer to be outstanding. (ii) The provisions of this Section are for the sole benefit of the registered owners and beneficial owners of th Bonds, and nothing in this Section, express or implied, shall give any benefit or any legal or equitable right, remedy, or claim hereunder to any other person. The City undertakes to provide only the financial information, operating data, financial statements, and notices which it has expressly agreed to provide pursuant to this Section and does not hereby undertake to provide any other information that may be relevant or material to a complete presentation of the City's financial results, condition, or prospects or hereby undertake to update any information provided in accordance with this Section or otherwise, except as expressly provided herein. The City does not make any representation or warranty concerning such information or its usefulness to a decision to invest in or sell Bonds at any future date. (iii) UNDER NO CIRCUMSTANCES SHALL THE CITY BE LIABLE TO THE REGISTERED OWNER OR BENEFICIAL OWNER OF ANY BOND OR ANY OTHER PERSON, IN CONTRACT OR TORT, FOR DAMAGES 'rES RESULTING IN WHOLE OR IN PART FROM ANY BREACH BY THE CITY, WHETHER NEGLIGENT OR WITHOUT FAULT ON ITS PART, OF ANY COVENANT AI T SPECIFIED IN TBIS ARTICLE, BUT EVERY RIGHT AND REMEDY OF ANY SUCH PERSON, IN CONTRACT OR TORT, FOR OR ON ACCOUNT OF ANY SUCH BREACH SHALL BE LIMITED TO AN ACTION FOR MANDAMUS OR SPECIFIC PERFORMANCE. (iv) No default by the City in observing or performing its obligations under this Section shall comprise a breach of or default under this Ordinance for purposes of any other provision of this Ordinance. Nothing in this Section is intended or shall act to disclaim, waive, or otherwise limit the duties of the City under federal and state securities laws. (v) The provisions ofthis Section may be amended by the City from time to time to adapt to changed circumstances that arise from a change in legal requirements, a change in law, or a change in the identity, nature, status, or type of operations of the City, but only if 1 the provisions of this Section, as so amended, would have permitted an underwriter to purchase or sell Bonds in the primary offering of the Bonds in compliance with the Rule, taking into account any amendments or interpretations of the Rule since such offering as well as such changed circumstances and (2) either (a) the registered owners of a majority in aggregate principal amount (or any greater amount required by any other provision of this Ordinance that authorizes such an amendment) of the outstanding -38- Bonds consent to such amendment orb a person that is unaffiliated with the City (such as nationally recognized bond counsel) determined that such amendment will not materially impair the interest of the registered owners and beneficial owners of the Bonds. If the City so amends the provisions of this Section, it shall include with any amended financial information or operating data next provided in accordance with subsection (a) of this Section an explanation, in narrative form, oft he reason for the amendment and of the impact of any change in the type of financial information or operating data so provided. The City may also amend or repeal the provisions of this continuing disclosure agreement if the SEC amends or repeals the applicable provision of the Rule or a court of final jurisdiction enters judgment that such provisions ofthe Rule are invalid, but only if and to the extent that the provisions of this sentence would not prevent an underwriter from lawfully purchasing or selling Bonds in the primary offering of the Bonds. Section 34. ALLOCATION OF, AND LIMITATION ON, EXPENDITURES FOR THE PROJECT. That the City covenants to account for on its books and records the expenditure of proceeds from the sale of the Bonds and any investment earnings thereon to be used for the improvement and extension of the System (referred to herein and Section 35 hereof as a "Project") by allocating proceeds to expenditures within 18 months of the later of the date that (a) the expenditure on a Project is made or (b) each such Project is completed. The foregoing notwithstanding, the City shall not expend such proceeds or investment earnings more than 60 days after the later of (a) the fifth anniversary ofthe date of delivery ofthe Bonds or (b) the date the Bonds are retired, unless the City obtains an opinion of nationally- recognized bond counsel substantially to the effect that such expenditure will not adversely affect the tax - exempt status of the Bonds. For purposes of this Section, the City shall not be obligated to comply with this covenant if it obtains an opinion of nationally- recognized 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 35. DISPOSITION OF PROJECT. That the City covenants that the property constituting a Project 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 ofnationally- recognized bond counsel substantially to the effect that such sale or other disposition will not adversely affect the tax - exempt status of the Bonds. 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 Issuer shall not be obligated to comply with this covenant if it obtains an opinion of nationally- recognized 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 36. REASONS FOR REFUNDING. (a) Refunded Commercial Paper Notes. That the City hereby finds that the issuance ofthe Bonds for the purpose of refunding the Refunded Commercial Paper Notes is a public purpose. Concurrently with the delivery ofthe Bonds, proceeds in the amount of the principal amount of and interest due at maturity on the Refunded Commercial Paper Notes shall be deposited under the terms of the Escrow Agreement to refund the Refunded Commercial Paper Notes. The Refunded Commercial Paper Notes to be refunded and retired with proceeds of the Bonds shall be designated by the Director of Financial Services. The Series Commercial Paper Notes are being refunded to convert interim financing into long -term fixed rate financing, as contemplated by the City in the operation of the interim financing program for the -39- System. Therefore, the manner in which the refunding of the Series B Commercial Paper Notes is being executed by the City does not make it practicable to make the determinations required by subsection (a) of Section 1207 008, Texas Government Code. (b) Refunded Bonds. That the City hereby finds that the issuance of the Bonds for the purpose of refunding the Refunded Bonds to realize a net present value savings is a public purpose. As a condition to the issuance of the Bonds, the refunding ofthe aggregate principal amount ofthe Refunded Bonds must produce i a net present value savings, calculated in accordance with GASH Statement No. 7, of at least 3.00 %, and (ii) a positive gross savings. The City Manager may elect not to refund any or all ofthe Refundable Bonds listed in Schedule 1, but in no event shall the Bonds be issued for the purpose of refunding Refunded Bonds if the refunding of the aggregate principal amount of the obligations selected for refunding does not result in the minimum savings threshold established in this Section being realized. On or before the date of delivery of the Bonds, the irect r of inan ial Services shall execute and deliver to the City Council a certificate stating that the savings thresholds herein established have been realized. This certificate shall specifically state both the net present value savings and the gross savings realized by the City as a result of refunding the Refunded Bonds. In addition, the City hereby determines that, subject to the execution of the Purchase Agreement wi adopted by the City and any future amendments thereto or successor provisions thereof. Any reference to the payment ofprincipai in this Ordinance shall be deemed to include the payment of any mandatory sinking fund redemption payments as may be described herein. Any reference to FORM OF BOND shall refer to the form attached to this Ordinance as Exhibit A. Inconsistent Provisions. All orders and resolutions, or parts thereof, which are in conflict or inconsistent with any provision of this Ordinance are hereby repealed and declared to be inapplicable, and the provisions of this Ordinance shall be and remain controlling as to the matters prescribed herein. 0) Payment + f Attorney General Fee. The City Council hereby authorizes the payment of the fee of the Office of the Attorney General for the examination of the proceedings relating to the issuance of the Bonds, in the amount determined in accordance with the provisions of Section 1202.004, Texas Government Code. SIGNED AND SEALED THIS 26TH DAY OF SEPTEMBER, 2006. City Secretary Ma City of Cor Christi, Texas APPROVED THI0‘ If' DAY OF SEPTEMBER, 2006: MARY KAY FISCHER, CITY ATTORNEY (SEAL) SCHEDULE 1 CITY OF CORPUS CHRISTI, TEXAS UTILITY SYSTEM REVENUE REFUNDING AND IMPROVEMENT BONDS, SERIES 1999, dated May 1, 1999, bonds maturing on July 15 in each of the years 2010 and 2019, inclusive, in the following principal amounts: 2010 $1,900,000 2019 $5,810,000 aggregating $7,710,000 in principal amount; REDEMPTION DATE: July 15, 2009 EXHIBIT A FORM OF BOND NO. UNITED STATES OF AMERICA STATE OF TEXAS COUNTIES TTIES F NUECES AND SAN PATRICIO CITY OF CORPUS CHRISTI, TEXAS UTILITY SYSTEM REVENUE REFUNDING AND IMPROVEMENT BOND D SERIES 2006 MATURITY INTEREST BOND DATE RATE DATE CUSIP ON THE MATURITY DATE SPECIFIED ABOVE, THE CITY OF CORPUS CHRISTI, IN NUECES AND SAN PATRICIO COUNTIES, TEXAS (the "Issuer"), hereby promises to pay to , or to the registered assignee hereof (either being hereinafter called the "registered owner") the principal amount of DOLLARS and to pay interest thereon from the Bond Date specified above, on January 15, 2007 and semiannu- ally on each July 15 and January 15 thereafter to the maturity date specified above, or the date of redemption prior to maturity, at the interest rate per annum specified above; except that ifthe Paying Agent /Registrar's Authentication Certificate appearing on the face of this Bond is dated later than January 15, 2007, such interest is payable semiannually on each July 15 and January 15 following such date. THE PRINCIPAL OF AND INTEREST ON this Bond are payable in lawful money of the United States of America, without exchange or collection charges. The principal of this Bond shall be paid to the registered owner hereof up n presentation and surrender of this Bond at maturity or upon the date fixed for its redemption prior to maturity, at the designated trust office in Dallas, Texas (the "Designated Trust Office") oof The Bank f New York Trust Company, N.A., which is the "Paying Agent/Registrar" for this Bond. The payment of interest on this Bond shall be made by the Paying AgentlRegitrar to the registered owner hereof on each interest payment date by check or draft, dated as of such interest payment date, drawn by the Paying AgntlRegistrar on, and payable solely fr xr , funds of the Issuer required by the ordinance authorizing the issuance of this Bond (the "Bond Ordinance") to be on deposit with the Paying AgentlRegistrar for such purpose as hereinafter provided; and such check or draft shall be sent by the Paying Agent Registrar by United States mail, first -class postage prepaid, on each such interest payment date, to the registered owner hereof, at its address as it appeared on the last business day of the month next preceding each such date (the "Record Date") on the Registration Books kept by the Paying Agent/Registrar, as hereinafter described. Any accrued interest due at maturity or upon the redemption of this Bond prior to maturity as provided herein shall be paid to the registered owner upon presentation and surrender of this Bond for redemption and payment at the Designated Trust Office ofthe Paying AgentRegistrar. The Issuer covenants with the registered owner ofthis Bond that on or before each principal payment date, interest payment date, and accrued interest payment date for this Bond-it will make available to the Paying AgentlRegistrar, from the "Debt Service Fund" created by the Bond Ordinance, the amounts required to provide for the payment, in immediately available funds, of all principal of and interest on the Bonds, when due. IF THE DATE for the payment ofthe principal of or interest on this Bond shall be a Saturday, Sunday, a legal holiday, or a day on which banking institutions in the City where the Designated Trust Office of the Paying Agent/Registrar is located are authorized by law or executive order to close, or the United States Postal Service is not open for business, then the date for such payment shall be the next succeeding day which is not such a Saturday, Sunday, legal holiday, or day on which banking institutions are authorized to close, or the United States Postal Service is not open for business; and payment on such date shall have the same force and effect as if made on the original date payment was due. THIS BOND is one ofa series ofbonds oflike tenor and effect except as to number, principal amount, interest rate, maturity, and right of prior redemption, dated as of the Bond Date specified above, aggregating -__ _ (herein sometimes called the "Bonds"), issued for the purpose of refunding outstanding Utility System Commercial Paper Notes, Series B, issued by the City initially to finance improvements and extensions to the Utility System (the "System"), refunding the "Refunded Bonds" (as defined in the Bond Ordinance), financing improvements and extensions to the System, and to pay the costs of issuing the Bonds. THE OUTSTANDING BONDS maturing on and after July 15, 201_ may be redeemed prior to their scheduled maturities, at the option of the Issuer, in whole, or in part on July 15, 201_, or on any date thereafter, at the redemption price of par plus accrued interest thereon to the date fixed for redemption. The Bonds or portions thereof redeemed within a maturity shall be selected by lot or other customary random method selected by the Paying Agent Registrar (provided that a portion of a Bond may be redeemed only in an integral multiple of $5,000); provided, that during any period in which ownership of the Bonds is determined only by a book entry at a securities depository for the Bonds, if fewer than all of the Bonds of the same maturity and bearing the same interest rate are to be redeemed, the particular Bonds of such maturity and bearing such interest rate shall be selected in accordance with the arrangements between the Board and the securities depository. THE BONDS are also subject to mandatory redemption in part by lot pursuant to the terms ofthe Ordinance, on July 15 in each ofthe years 20_ through 20 with respect to Bonds maturing July 15, 2 , in the following years and in the following amounts, at a price equal to the principal amount thereof and accrued and unpaid interest to the date of redemption, without premium: Year Principal Amount Final Maturity To the extent, however, that Bonds subject to sinking fund redemption have been previously purchased or called for redemption in part and otherwise than from a sinking fund redemption payment, each annual sinking fund payment for such Bond shall be reduced by the amount obtained py � � by multiplying the principal amount of Bonds so purchased or redeemed by the ratio which each remaining annual sinking fund redemption payment for such Bonds bears to the total remaining sinking fund payments, and by rounding each such payment to the nearest $ ,000 integral; provided, that during any period in which ownership of the Bonds is determined only by a book entry at a securities depository for the Bonds, the particular Bonds to be called for mandatory redemption shall be selected in accordance with the arrangements between the City and the securities depository. NOTICE OF any such redemption of Bonds shall be given in the following manner, to -wit, (i) a written notice of such redemption shall be given to the registered owner of each Bond or a portion thereof being called for redemption not more than 60 days nor less than 30 days prior to the date fixed for such redemption by depositing such notice in the United States mail, first - class, postage prepaid, addressed to each such registered owner at the address thereof shown on the Registration Books ofthe Paying Agent/Registrar and (ii) a notice of such redemption shall be published one time, at least 30 days prior to the date fixed for such redemption, in a journal or publication of general circulation in the United States of America or the State of Texas which carries as a regular feature notices ofredemption ofmunicipal bonds; provided, however, that the failure to send, mail, or receive such notice described in clause (i) above, or any defect therein or in the sending or mailing thereof, shall not affect the validity or effectiveness of the proceedings for the redemption of any Bond, as publication of notice as described in clause (ii) above shall be the only notice actually required in connection with or as a prerequisite to the redemption of any Bonds. By the date fixed for any such redemption due provision shall be made by the Issuer with the Paying Agent/Registrar for the payment of the required redemption price for this Bond or the portion hereof which is to be so re- deemed, plus accrued interest thereon to the date fixed for redemption. If such notice of redemption is given, and if due provision for such payment is made, all as provided above, this Bond, or the portion hereof which is to be so redeemed, thereby automatically shall be redeemed prior to its scheduled maturity, and shall not bear or accrue interest after the date fixed for its redemption, and shall not be regarded as being outstanding except for the right ofthe registered owner to receive the redemption price plus accrued interest to the date fixed for redemption from the Paying Agent/Reg- istrar out of the funds provided for such payment. The Paying Agent/Registrar shall record in the Registration Books all such redemptions of principal amount of this Bond or any portion hereof If a portion of any Bond shall be redeemed a substitute Bond or Bonds having the same maturity date, bearing interest at the same rate, in any Authorized Denomination at the written request of the registered owner, and in an aggregate principal amount equal to the unredeemed portion thereof, will be issued to the registered owner upon the surrender thereof for cancellation, at the expense of the Issuer, all as provided in the Bond Ordinance. ALL BONDS OF THIS SERIES are issuable solely as fully registered bonds, without interest coupons, in an Authorized Denomination (as defined in the Bond Ordinance). As provided in the Bond Ordinance, this Bond may, at the request of the registered owner or the assignee or assignees hereof, be assigned, transferred, converted into and exchanged for a like aggregate amount of fully registered Bonds, without interest coupons, payable to the appropriate registered owner, assignee or assignees, as the case may be, having any authorized denomination or denominations as requested in writing by the appropriate registered owner, assignee or assignees, as the case may be, upon sur- render of this Bond to the Paying Agent/Registrar at its Designated Trust Office for cancellation, all in accordance with the form and procedures set forth in the Bond Ordinance. Among other requirements for such assignment and transfer, this Bond must be presented and surrendered to the Paying Agent/Registrar, together with proper instruments of assignment, in form and with guarantee of signatures satisfactory to the Paying Agent/Registrar, evidencing assignment of this Bond or any portion or portions hereofin any authorized denomination to the assignee or assignees in whose name or names this Bond or any such portion or portions hereof is or are to be registered. The form of Assignment printed or endorsed on this Bond may be executed by the registered owner to evidence the assignment hereof, but such method is not exclusive, and other instruments ofassignment satisfac- tory to the Paying Agent/Registrar may be used to evidence the assignment of this Bond or any portion or portions hereof from time to time by the registered owner. The one requesting such con- version and exchange shall pay the Paying Agent/Registrar's reasonable standard or customary fees and charges for converting and exchanging any Bond or portion thereof. In any circumstance, any taxes or governmental charges required to be paid with respect thereto shall be paid by the one re- questing such assignment, transfer, conversion or exchange, as a condition precedent to the exercise of such privilege. The foregoing notwithstanding, in the case of the conversion and exchange of an assigned and transferred Bond or Bonds or any portion or portions thereof, such fees and charges of the Paying Agent/Registrar will be paid by the Issuer. The Paying Agent/Registrar shall not be required i to make any such transfer, conversion or exchange during the period beginning at the opening of business 30 days before the day of the first mailing of a notice of redemption and ending at the close of business on the day of such mailing, or (ii) to transfer, convert or exchange any Bonds so selected for redemption when such redemption is scheduled to occur within 30 calendar days; provided, however, such limitation oftransfer shall not be applicable to an exchange by the registered owner of an unredeemed balance of a Bond called for redemption in part. WHENEVER the beneficial ownership of this Bond is determined by a book entry at a securities depository for the Bonds, the foregoing requirements of holding, delivering or transferring this Bond shall be modified to require the appropriate person or entity to meet the requirements of the securities depository as to registering or transferring the book entry to produce the same effect. IN THE EVENT any Paying Agent/Registrar for the Bonds is changed by the Issuer, resigns, or otherwise ceases to act as such, the Issuer has covenanted in the Bond Ordinance that it promptly will appoint a competent and legally qualified substitute therefor, whose qualifications substantially are similar to the previous Paying Agent/Registrar it is replacing, and promptly will cause written notice thereof to be mailed to the registered owners of the Bonds. BY BECOMING the registered owner of this Bond, the registered owner thereby acknowledges all of the terms and provisions of the Bond Ordinance, agrees to be bound by such terms and provisions, acknowledges that the Bond Ordinance is duly recorded and available for inspection in the official minutes and records of the Issuer, and agrees that the terms and provisions ofthis Bond and the Bond Ordinance constitute a contract between each registered owner hereof and the Issuer. THE BONDS are special obligations of the Issuer payable solely from and equally secured, together with the currently outstanding Previously Issued Priority Bonds (as such term is defined in the Bond Ordinance), by a first lien on and pledge ofthe "Pledged Revenues" (as such term is defined in the Bond Ordinance) ofthe System. The Issuer has reserved the right, subject to the restrictions stated, and adopted by reference, in the Bond Ordinance, to issue additional parity revenue bonds which also may be made payable from, and secured by a first lien on and pledge of, the aforesaid Pledged Revenues. For a more complete description and identification of the revenues and funds pledged to the payment ofthe Bonds, and other obligations ofthe Issuer secured by and payable from the same source or sources as the Bonds, reference is hereby made to the Bond Ordinance. THE ISSUER has reserved the right, subject to the restrictions stated, and adopted by reference, in the Bond Ordinance, to amend the Bond Ordinance; and under some (but not all) circumstances amendments must be approved by the owners of a majority r in aggregate principal amount of the outstanding Priority Bonds (as defined in the Bond Ordinance). THE REGISTERED W HEREOF shall never have the right to demand payment oft is obligation out of any funds raised or to be raised by taxation. IT IS HEREBY certified and covenanted that this Bond has been duly and validly authorized, issued and delivered; and that all acts, conditions and things required or proper to be performed, exist and be done precedent to or in the authorization, issuance and delivery of this Bond have been performed, existed and been done in accordance with law. IN WITNESS WHEREOF, this Bond has been signed with the imprinted or lithographed facsimile signature of the Mayor of said Issuer, attested by the imprinted or lithographed facsimile signature of the City Secretary, and the official seal of said Issuer has been duly affixed to, printed, lithographed or impressed on this Bond. CITY OF CO ' US CHRISTI, TEXAS By Mayor, City ATTEST: City Secretary, City of Corpus Christi, Texas (SEAL) Corpus Christi, exas FORM OF PANG AGENT/REGISTRAR'S AUTHENTICATION CERTIFICATE: PAYING AGENT/REGISTRAR'S AUTHENTICATION C RTIFICAT To be executed if this Bond is not accompanied by an executed Registration Certificate of the Comptroller of Public Accounts of the State of Texas) It is hereby certified that this Bond has been issued under the provisions of the Bond Ordinance described on the face of this Bond; and that this Bond has been issued in exchange for or replacement of a bond, bonds, or a portion of a bond or bonds of an issue which originally was approved by the Attorney General of the State of Texas and registered by the Comptroller of Public Accounts of the State of Texas. Dated: The Bank of New York Trust Company, T.A., Paying AgentlRgitrar By: Authorized Signatory FORM OF ASSIGNMENT: ASSIGNMENT 1 FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto Please insert Social Security or Taxpayer Identification Number of Transferee (Please print or typewrite name and address, including zip code of Transferee) the within Bond and all rights thereunder, and hereby irrevocably constitutes and appoints attorney to register the transfer of the within Bond on the books kept for registration thereof, with Full power of substitution in the premises. Dated: Signature Guaranteed: NOTICE: Signature(s) must be guaranteed by a member firm of the New York Stock Exchange or a commercial bank or trust company. NOTICE: The signature above must correspond with the name of the Registered Owner as it appears upon the front of this Bond in every particular, without alteration or enlargement or any change whatsoever. FORM OF COMPTROLLER'S 1 E rIST ATI N CERTIFICATE: OFFICE OF COMPTROLLER : REGISTER NO. STATE OF TEXAS . 1 hereby certify that this Bond has been examined, certified as to validity, and approved by the Attorney General of the State of Texas and that this Bond has been registered by the Comptroller of Public Accounts of the State of Texas, Witness my signature and seal this_ Comptroller of Public Accounts of the State of Texas (SEAL) The City hereby authorizes an appropriate statement of insurance furnished by a municipal bond insurance company providing municipal bond insurance, if any, covering all or any part ofthe Bonds, to accompany the Bonds. Exhibit B to Ordinance DESCRIPTION OF ANNUAL FINANCIAL INFORMATION The following information is referred to in Section 33 of this Ordinance. Annual Financial Statements and Operating Data The financial information and operating data with respect to the City to be provided annually in accordance with such Section for each Fiscal Year ending in and after 2006 are as specified (and included in the Appendix or under the headings of the Official Statement referred to) below: Tables 1 through 25 contained in the Official Statement; and The Audited Financial Statement of the City, as set forth in Appendix B to the Official Statement. Accounting Principles The accounting principles referred to in such Section are the accounting principles described in the notes to the financial statements referred to above. TIE STATE OF TEXAS COUNTY OF NUECES CITY Y F CORPUS CHRISTI 1, the undersigned, City Secretary of the City of Corps Christi, Texas, do hereby certify that the above and foregoing is a true, full and correct copy of an Ordinance passed by the City Council of the City of Corpus Christi, Texas (and of the minutes pertaining thereto) on the 26th day of September, 200 6, authorizing the issuance of Utility System ven a Refunding and Improvement Bonds, Series 2006, which ordinance is duly of record in the minutes of said City Council, and said meeting was open to the public, and public notice ofthe time, place and purpose of said meeting was given, all as required by Texas Government Code, Chapter 551. EXECUTED UNDER MY HAND AND SEAL of said City, this the 26th day of September, 2006. City Secretary, City of Corpus Christi, Texas (SEAL)