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HomeMy WebLinkAbout028512 ORD - 03/09/2010FINAL ORDINANCE AUTHORIZING THE ISSUANCE OF $8,000,000 "CITY OF CORPUS CHRISTI, TEXAS UTILITY SYSTEM REVENUE IMPROVEMENT BONDS, SERIES 2010"; PROVIDING THE TERMS, CONDITIONS, AND SPECIFICATIONS FOR SUCH BONDS, INCLUDING THE APPROVAL OF AN APPLICATION TO THE TEXAS WATER DEVELOPMENT BOARD; MAKING PROVISIONS FOR THE PAYMENT AND SECURITY THEREOF ON A PARITY WITH CERTAIN CURRENTLY OUTSTANDING OBLIGATIONS; STIPULATING THE TERMS AND CONDITIONS FOR THE ISSUANCE OF ADDITIONAL REVENUE BONDS ON A PARITY THEREWITH; AUTHORIZING THE EXECUTION OF A PAYING AGENT/REGISTRAR AGREEMENT AND AN ESCROW AGREEMENT; COMPLYING WITH THE REQUIREMENTS OF THE DEPOSITORY TRUST COMPANY; ENACTING OTHER PROVISIONS INCIDENT AND RELATED TO THE SUBJECT AND PURPOSE OF THIS ORDINANCE; AND PROVIDING AN EFFECTIVE DATE 028512 85454572.5 SECTION 1: SECTION 2: SECTION 3: SECTION 4: SECTION 5: SECTION 6: SECTION 7: SECTION 8: SECTION 9: SECTION 10: SECTION 11: SECTION 12: SECTION 13: SECTION 14: SECTION 15: SECTION 16: SECTION 17: SECTION 18: SECTION 19: SECTION 20: SECTION 21: SECTION 22: SECTION 23: SECTION 24: SECTION 25: SECTION 26: SECTION 27: 85454572.5 TABLE OF CONTENTS Page BONDS AUTHORIZED 2 DATED DATE, DENOMINATION, AND STATED MATURITIES; REDEMPTION OPTION 3 INTEREST 4 CHARACTERISTICS OF THE BONDS 4 FORM OF BONDS 8 DEFINITIONS 9 PLEDGE 15 SYSTEM FUND 16 DEBT SERVICE FUND 16 RESERVE FUND 17 SUBORDINATED OBLIGATIONS FUNDS AND ACCOUNTS 18 CONSTRUCTION FUND 18 INVESTMENTS 18 FUNDS SECURED 18 FLOW OF FUNDS 18 DEFICIENCIES 20 PAYMENT OF BONDS 20 FINAL DEPOSITS; GOVERNMENT OBLIGATIONS 20 ISSUANCE OF ADDITIONAL PRIORITY BONDS 21 FURTHER REQUIREMENTS FOR ADDITIONAL PRIORITY BONDS 22 GENERAL COVENANTS 25 COVENANTS REGARDING TAX -EXEMPTION 29 TAXABLE OBLIGATIONS 33 AMENDMENT OF ORDINANCE 33 DAMAGED, MUTILATED, LOST, STOLEN, OR DESTROYED BONDS 36 CONFIRMATION OF SALE 37 COMPLIANCE WITH PURCHASER'S RULES AND REGULATIONS 37 -1- SECTION 28: SECTION 29: SECTION 30: SECTION 31: SECTION 32: SECTION 33: SECTION 34: SECTION 35: SECTION 36: 85454572.5 TABLE OF CONTENTS (continued) Page APPROVAL AND REGISTRATION OF BONDS 38 USE OF PROCEEDS. PROCEEDS FROM THE SALE OF THE BONDS SHALL BE APPLIED AS FOLLOWS: 38 DEFAULT AND REMEDIES 39 FURTHER PROCEEDINGS 40 AUTHORIZATION OF ESCROW AGREEMENT 40 APPLICATION TO TEXAS WATER DEVELOPMENT BOARD 40 CONTINUING DISCLOSURE UNDERTAKING 40 ALLOCATION OF, AND LIMITATION ON, EXPENDITURES FOR THE PROJECT 43 MISCELLANEOUS PROVISIONS 43 -11- FINAL ORDINANCE AUTHORIZING THE ISSUANCE OF $8,000,000 "CITY OF CORPUS CHRISTI, TEXAS UTILITY SYSTEM REVENUE IMPROVEMENT BONDS, SERIES 2010"; PROVIDING THE TERMS, CONDITIONS, AND SPECIFICATIONS FOR SUCH BONDS, INCLUDING THE APPROVAL OF AN APPLICATION TO THE TEXAS WATER DEVELOPMENT BOARD; MAKING PROVISIONS FOR THE PAYMENT AND SECURITY THEREOF ON A PARITY WITH CERTAIN CURRENTLY OUTSTANDING OBLIGATIONS; STIPULATING THE TERMS AND CONDITIONS FOR THE ISSUANCE OF ADDITIONAL REVENUE BONDS ON A PARITY THEREWITH; AUTHORIZING THE EXECUTION OF A PAYING AGENT/REGISTRAR AGREEMENT AND AN ESCROW AGREEMENT; COMPLYING WITH THE REQUIREMENTS OF THE DEPOSITORY TRUST COMPANY; ENACTING OTHER PROVISIONS INCIDENT AND RELATED TO THE SUBJECT AND PURPOSE OF THIS ORDINANCE; AND PROVIDING AN EFFECTIVE DATE WHEREAS, the City of Corpus Christi, Texas (the "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 of in excess of 50,000, has heretofore issued its City of Corpus Christi, Texas Utility System Revenue Refunding Bonds, Series 1990 (the "Series 1990 Bonds"), its City of Corpus Christi, Texas Utility System Revenue Bonds, Series 1994 (the "Series 1994 Bonds"), its City of Corpus Christi, Texas Utility System Revenue Bonds, Series 1994-A (the "Series 1994-A Bonds"), its City of Corpus Christi, Texas Utility System Revenue Bonds, Series 1995 (the "Series 1995 Bonds"), its City of Corpus Christi, Texas Utility System Revenue Bonds, Series 1995-A (the "Series 1995-A Bonds"), its City of Corpus Christi, Texas Utility System Revenue Refunding and Improvement 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"), its City of Corpus Christi, Texas Utility System Revenue Refunding Bonds, Series 2005A (the "Series 2005A Bonds"), its City of Corpus Christi, Texas Utility System Revenue Refunding and 1` 8 ' 512 85454572.5 Improvement Bonds, Series 2006 (the "Series 2006 Bonds"), and its City of Corpus Christi, Texas Utility System Revenue Improvement Bonds, Series 2009 (the "Series 2009 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 (as hereinafter defined); 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, the Series 2005A Bonds, the Series 2006 Bonds, and the Series 2009 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"), under which there currently exists no Outstanding obligations; and WHEREAS, the City deems it appropriate and in its best interest to issue the hereinafter authorized revenue bonds for the primary purpose of acquiring, purchasing, constructing, improving, repairing, extending, equipping, and renovating the City's combined waterworks system, including storm sewer and drainage (which is a part of a larger utility system that also includes the City's wastewater disposal system and its gas system and is hereinafter described and defined more thoroughly as 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, the revenue bonds hereinafter authorized are to be issued and delivered pursuant to the laws of the State of Texas, including specifically Chapter 1502, Texas Government Code, as amended (the "Act"), and the terms of the Base Ordinance and this Ordinance (as hereinafter defined), for the purposes set forth in this Ordinance; now, therefore, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF CORPUS CHRISTI, TEXAS: SECTION 1: Bonds Authorized. In order to provide funds for the purposes of (i) acquiring, purchasing, constructing, improving, repairing, extending, equipping, and renovating the System as described in the preamble hereof, (ii) funding the increase in the Required Amount (defined herein) attributable to the issuance of the Bonds, and (iii) paying the costs of issuance relating thereto, the City Council (the "Governing Body") of the City, acting pursuant to the laws of the State of Texas, particularly the Act, has determined that there shall be issued and there is hereby ordered to be issued a series of revenue bonds to be designated "City of Corpus Christi, Texas Utility System Revenue Improvement Bonds, Series 2010", in the principal sum of EIGHT MILLION AND NO/100 DOLLARS ($8,000,000) (the "Bonds"). 85454572.5 -2- SECTION 2: Dated Date, Denomination, and Stated Maturities; Redemption Option. The Bonds shall be issued as fully registered obligations, without coupons, totaling $8,000,000 in aggregate principal amount and be dated March 1, 2010. A. Denominations, and Stated Maturities. The Bonds shall be issued in denominations of Five Thousand Dollars ($5,000) or any integral multiple (within a stated maturity) thereof (each, an "Authorized Denomination"), shall be lettered "R" and numbered consecutively from One (1) upward. The Bonds herein authorized to be issued shall bear interest on the unpaid principal amounts from the Interest Commencement Date or from the most recent interest payment date to which interest has been duly paid or provided and principal shall become due and payable on July 15 in each of the years and in amounts in accordance with the following schedule. Said interest shall be payable to the registered owner of any such Bond in the manner provided and on the dates stated in the FORM OF BOND attached to this Ordinance as Exhibit A. Stated Maturities Principal Amounts ($) Interest Rates (%) 2020 730,000 1.591 2021 745,000 1.829 2022 755,000 1.984 2023 770,000 2.097 2024 790,000 2.091 2025 805,000 2.284 2026 820,000 2.371 2027 840,000 2.442 2028 860,000 2.514 2029 885,000 2.597 B. Redemption Provisions. (1) Optional Redemption. The City reserves the right to redeem the Bonds stated to mature on and after July 15, 2021, in whole or in part and in inverse order of Stated Maturity, on July 15, 2020, or on any date thereafter, in such order of stated maturity as the City shall determine and by lot or other customary method within a stated maturity at the redemption price of par plus accrued interest to the date of redemption. (2) Special Mandatory Redemption. In the event that the Purchaser (as hereinafter defined) at such time remains the sole holder of the Bonds and the final accounting delivered by the City to the Purchaser in the form and manner specified in Section 27.0 of this Ordinance evidences that the total cost of the project to be financed with Bond proceeds is less than the amount of Bond proceeds available for paying such costs, then the City shall, as soon as practicable (but in no event later than six months after the Purchaser's acceptance of the aforementioned accounting) redeem Bonds in the amount of such excess to the nearest multiple of the authorized denomination for the Bonds. Bonds redeemed pursuant to this provision shall be redeemable on any date, in inverse order of Stated Maturity, as a whole or in part, in principal amounts of $5,000 or any integral multiple thereof (and if within a Stated Maturity, selected at random and by 85454572.5 -3- lot by the Paying Agent/Registrar), at the redemption price of par plus accrued interest to the date of redemption. (3) Notice of Redemption. At least thirty (30) days prior to the date any such Bonds are to be redeemed, a notice of redemption, authorized by appropriate resolution passed by the Governing Body, shall be given in the manner set forth below. A written notice of such redemption shall be given to the registered owner of each Bond or a portion thereof being called for 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 (as hereinafter defined) kept by the Paying Agent/Registrar. 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 written 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, shall not bear interest after the date fixed for their redemption, and shall not be regarded as being Outstanding except for the right of the 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 Agent/Registrar shall record in the Registration Books all such redemptions of principal of the Bonds or any portion thereof. If a portion of any Bonds shall be redeemed, a substitute Bond or Bonds having the same stated maturity date, bearing interest at the same interest rate, in any denomination or denominations in any integral multiple of $5,000, at the written request of the registered owner, and in an aggregate principal amount equal to the unredeemed portion thereof, will be issued to the registered owner upon the surrender thereof for cancellation, at the expense of the City, all as provided in this Ordinance. SECTION 3: Interest. The Bonds shall bear interest on the unpaid principal amount thereof at the per annum rates shown above in Section 2, computed on the basis of a 360 -day year of twelve 30 -day months, and interest thereon shall be payable semiannually on January 15 and July 15 of each year (the "Interest Payment Date"), commencing January 15, 2020, while the Bonds are Outstanding. Interest on each Bond issued and delivered to a Holder shall accrue from the latest Interest Payment Date that interest on such Bond (or the Bond which it substitutes) has been paid that precedes the registration date appearing on such Bond in the "Registration Certificate of Paying Agent/Registrar" (Section C of Exhibit A hereto), unless the registration date appearing thereon is an Interest Payment Date for which interest is being paid, in which case interest on such Bond shall accrue from the registration date appearing thereon and provided further that with respect to the initial payment of interest on a Bond, such interest shall accrue from the Interest Commencement Date. SECTION 4: Characteristics of the Bonds. A. Registration, Transfer, Conversion and Exchange; Authentication; Initial Bond. The City shall keep or cause to be kept at the designated trust office in Austin, Texas (the "Designated Trust Office") of Wells Fargo Bank, National Association (the "Paying 85454572.5 -4- 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 Agent/Registrar as its registrar and transfer agent to keep such books or records and make such registrations of transfers, conversions and exchanges under such reasonable regulations as the 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 a "Paying Agent/Registrar Agreement", in substantially the form attached to this Ordinance as Exhibit B, 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 surrendered, 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 surrender of such partially redeemed Bond for cancellation. If any Bond or portion thereof is 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 85454572.5 -5- replacement of another Bond prior to the first scheduled Interest Payment Date on the Bonds 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 further, however, that if at the time of delivery of any substitute Bond the interest on the 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 BOND (the "Authentication Certificate"). An authorized representative of the 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 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 1206, as amended, 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 of the 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 (as hereinafter defined), and registered by the Comptroller of Public Accounts (as hereinafter defined). The Bonds shall be issued initially either (i) as a fully registered Bond in the total aggregate principal amount of $8,000,000 with principal installments to become due and payable as provided in Subsection 2.A, and numbered T-1, or (ii) as one (1) fully registered Bond for each year of stated maturity in the applicable principal amount, interest rate, and denomination and to be numbered consecutively from T-1 and upward (the "Initial Bonds") and, in either case, the Initial Bonds shall be registered in the name of the Purchaser or its designee. The Initial Bonds shall be the Bonds submitted to the Attorney General for approval and certified and registered by the Comptroller of Public Accounts. At any time after the delivery of the Initial Bonds to the Purchaser, the Paying Agent/Registrar, upon written instructions from the Purchaser, or its designee, shall cancel the Initial Bonds and exchange therefor definitive Bonds of authorized denominations, stated maturities, principal amounts, and bearing applicable interest rates for transfer and delivery to the registered owners named and at the addresses identified therefor, all in accordance with and pursuant to such written instructions from the Purchaser, or its designee, and such other information and documentation as the Paying Agent/Registrar may reasonably require. B. Payment of Bonds and Interest. The City hereby further appoints 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 85454572.5 -6- 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, (iii) may be transferred and assigned, (iv) may be converted and exchanged for other Bonds, (v) shall have the characteristics, (vi) shall be signed, sealed, executed and authenticated, (vii) the principal of and interest on which shall be payable, 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 Initial Bonds are not required to be, and shall not be, authenticated by the Paying Agent/Registrar, 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 to maintain and provide a Paying Agent/Registrar at all times until the Bonds are paid, and any successor Paying Agent/Registrar shall be a bank, trust company, financial institution, or other entity duly qualified and legally authorized to serve as and perform the duties and services of Paying Agent/Registrar. Upon any change (which shall be at the sole discretion of the City) in the Paying Agent/Registrar for the Bonds, the City agrees to promptly cause a written notice thereof to be sent to each registered owner of the Bonds by United States mail, first class postage prepaid, which notice shall also give the address of the new Paying Agent/Registrar. In addition, 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. 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 Entry Only System. The Bonds issued in exchange for the Initial Bonds shall be initially issued in the form of a separate single fully registered Bond for each Stated Maturity of the Bonds. 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, New York, New York ("DTC"), and except as provided in Subsection F hereof, all of the Outstanding Bonds shall be registered in the name of Cede & Co., as nominee of DTC. With respect to Bonds registered in the name of Cede & Co., as nominee of DTC, the 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") 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 of the records of DTC, Cede & Co. or any DTC Participant with respect to any ownership interest in the Bonds, (ii) the delivery to any DTC Participant or any other person, other than a registered owner of Bonds, as shown on the Registration Books, of any notice with respect to the 85454572.5 -7- 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 of principal, premium, if any, 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, premium, if any, 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, premium, if any, 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 of the Issuer to make payments of principal, premium, if any, 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., 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 (as defined in the FORM OF BOND), the words "Cede & Co." in this Ordinance shall refer to such new nominee of DTC. F. 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 in the form attached hereto as Exhibit C and made a part hereof for all purposes (the "Representation Letter") 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 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. G. DTC Letter of Representations. 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, premium, if any, and interest on such Bond and all notices with respect to such Bond shall be made and given, respectively, in the manner provided in the Representation Letter. SECTION 5: Form of Bonds. 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 Initial Bonds) shall be, respectively, 85454572.5 -8- 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 6: Definitions. For all purposes of this Ordinance, except as otherwise expressly provided or unless the context otherwise require, the terms defined in this Section have the meanings assigned to them in this Section, and certain terms used in Sections 22 and 34 of this Ordinance have the meanings assigned to them in such respective Sections. (1) The term "Account" shall mean any account created, established and maintained under the terms of any ordinance authorizing the issuance of Priority Bonds. (2) The term "Accountant" shall mean a nationally recognized independent certified public accountant, or an independent firm of certified public accountants. (3) The term "Additional Priority 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 the Base Ordinance and this Ordinance. (4) 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). (5) The term "Attorney General" shall mean the Office of the Attorney General of the State of Texas. (6) The term "Authorized Denomination" shall have the meaning given such term in Section 2 of this Ordinance. (7) 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, however, 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 amortized such that annual debt service is substantially level over the remaining stated life of such bonds. (8) The term "Base Ordinance" shall mean the ordinance authorizing the issuance of the Series 1990 Bonds. 85454572.5 -9- (9) The term "Bonds" shall have the meaning given such term in Section 1 of this Ordinance. (10) 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. (11) The term "Capital Improvements" shall mean any capital extensions, improvements and betterments to the System other than Capital Additions. (12) The term "Capitalized Interest Account" shall mean the Account by that name which may be created within the Debt Service Fund. (13) The terms "City" and "Issuer" shall have the meaning given such terms in the preamble of this Ordinance. (14) The term "Closing Date" shall mean the date of physical delivery of the Initial Bonds in exchange for the payment in full by the Purchaser. (15) The term "Comptroller of Public Accounts" shall mean the Office of the Comptroller of Public Accounts of the State of Texas. (16) The term "Construction Fund" shall mean the fund so designated in Section 12 of this Ordinance. (17) The term "Credit Facility" shall mean a policy of municipal bond insurance, a debt service reserve fund policy or surety bond or a letter or line of credit issued by a Credit Facility Provider in support of any Priority Bonds or Subordinated Obligations. (18) The term "Credit Facility Provider" shall mean (i) with respect to any Credit Facility consisting of a policy of municipal bond insurance or a surety bond, an issuer of policies of insurance insuring the timely payment of debt service on governmental obligations such as the Priority Bonds, 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 (ii) 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 of the entire principal amount of the series of Priority Bonds and the interest thereon. (19) The term "Debt Service Fund" shall have the meaning given such term in Section 9 of this Ordinance. 85454572.5 -10- (20) The term "DTC" shall have the meaning given such term in Section 4 to this Ordinance. (21) 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, as amended, Texas Government Code), to purchase, sell and invest its funds and funds under its control, and with respect to the investment of proceeds of any Priority Bonds, guaranteed investment contracts fully collateralized by Government Obligations. (22) 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. (23) The term "Fund" shall mean any fund created, established and maintained under the terms of any ordinance authorizing the issuance of Priority Bonds. (24) The term "Government Obligations" shall mean (i) with respect to any Previously Issued Priority Bonds except the Series 2009 Bonds, 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 and (ii) with respect to the Series 2009 Bonds, the Bonds, and any Additional Priority Bonds hereafter issued by the City, (1) direct noncallable obligations of the United States, including obligations that are unconditionally guaranteed by, the United States of America, or (2) noncallable obligations of an agency or instrumentality of the United States, including obligations that are unconditionally guaranteed or insured by the agency or instrumentality and that, on the date the governing body of the issuer adopts or approves the proceedings authorizing the issuance of refunding bonds, are rated as to investment quality by a nationally recognized investment rating firm not less than "AAA" or its equivalent, or (3) noncallable obligations of a state or an agency or a county, municipality, or other political subdivision of a state that have been refunded and that, on the date the governing body of the issuer adopts or approves the proceedings authorizing the issuance of refunding bonds, are rated as to investment quality by a nationally recognized investment rating firm not less than "AAA" or its equivalent; provided, however, that in the event the term "Government Obligations" shall be used in such a manner other than with respect to the defeasance of Priority Bonds pursuant to Section 18 of this Ordinance, its meaning shall be consistent with that specified in clause (i) above until such time as there are no longer Outstanding any Previously Issued Priority Bonds (except the Series 2009 Bonds, which are excluded from the definition of Previously Issued Priority Bonds for purposes of this clause) and, thereafter, it shall have the meaning ascribed thereto in clause (ii). (25) The term "Gross 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 or confirmed by this Ordinance or maintained by the City in connection with the 85454572.5 -11- System, other than those amounts subject to payment to the United States of America as rebate pursuant to section 148 of the Code. (26) The term "Interest Commencement Date" shall mean July 15, 2019. (27) The term "Mandatory Redemption Account" shall mean the Account by that name within the Debt Service Fund and established, if at all, by an ordinance authorizing the issuance of Priority Bonds. (28) The terms "Net Revenues of the System" and "Net Revenues" shall mean all Gross Revenues less Operating Expenses. (29) The term "Operating Expenses" shall mean the expenses of operation and maintenance of the System, including all salaries, labor, materials, repairs, and extensions necessary to render efficient service; provided, however, that only such repairs and extensions, as in the judgment of the City, reasonably and fairly exercised by the passage of appropriate ordinances, are necessary to render adequate service, or such as might be necessary to meet some physical accident or condition which would otherwise impair 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. (30) The term "Outstanding" shall mean, as of the date of determination, all Priority Bonds theretofore issued and delivered except: 85454572.5 (a) those Priority Bonds theretofore canceled by the respective paying agents for such Priority Bonds or delivered to such paying agents for cancellation; (b) those Priority Bonds for which payment has been duly provided by the City by the irrevocable deposit with the respective paying agents for such Priority Bonds of money in the amount necessary to fully pay principal of, premium, if any, and interest thereon to maturity or redemption, if any, as the case may be, provided that, if such Priority Bonds are to be redeemed, notice of redemption thereof shall have been duly given pursuant to the ordinance authorizing the issuance of such Priority Bonds, irrevocably provided to be given to the satisfaction of such paying agents, or waived; (c) those Priority Bonds that have been mutilated, destroyed, lost, or stolen and for which replacement bonds have been registered and delivered in lieu thereof; and (d) those Priority Bonds for which the payment of principal thereof, premium, if any, and interest thereon to Stated Maturity re redemption has been duly provided for by the City by the deposit in trust of money or Government Obligations, or both. -12- (31) The term "Paying Agent/Registrar" shall mean the financial institution specified in Section 4.A of this Ordinance, or its herein -permitted successors and assigns. (32) The term "Pledged Revenues" shall mean (a) the Net Revenues, plus (b) 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. (33) The term "Previously Issued Priority Bonds" shall have the meaning given said term in the preamble to this Ordinance. (34) The term "Priority Bonds" shall mean the Previously Issued Priority Bonds, the Bonds, and any Additional Priority Bonds. (35) 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, 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. (36) The term "Purchaser" shall have the meaning given such term in Section 26 of this Ordinance. (37) The term "Rating Agency" shall mean any nationally recognized securities rating agency which has assigned a rating to the Priority Bonds. (38) The term "Required Amount" shall have the meaning given such term in Section 10 of this Ordinance. (39) The term "Reserve Fund" shall have the meaning given such term in Section 10 of this Ordinance. (40) The term "Reserve Fund Obligations" shall mean cash, Eligible Investments, any Credit Facility, or any combination of the foregoing. 85454572.5 -13- (41) 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" 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 Corpus Christi, Texas Utility System Revenue Refunding Bonds, Series 2000, authorized by the ordinance adopted by the City on May 11, 1999 (as amended by ordinance adopted on June 15, 1999); the term "Series 2000-A Bonds" shall mean the $42,520,000 City of Corpus Christi, Texas Utility System Revenue Refunding Bonds, Series 2000-A, 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 2003, authorized by the ordinance adopted by the City on March 25, 2003; 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; the term "Series 2005A Bonds" shall mean the $68,325,000 City of Corpus Christi, Texas Utility System Revenue Refunding Bonds, Series 2005A, authorized by the ordinance adopted by the City on August 30, 2005; the term "Series 2006 Bonds" shall mean the $84,415,000 City of Corpus Christi, Texas Utility System Revenue Refunding and Improvement Bonds, Series 2006, authorized by the ordinance adopted by the City on September 26, 2006; and the term "Series 2009 Bonds" shall mean the $96,490,000 City of Corpus Christ, Texas Utility System Revenue Improvement Bonds, Series 2009, authorized by the ordinance adopted by the City on February 24, 2009. (42) The term "Subordinated Obligations" shall mean any bonds, notes, or other obligations issued pursuant to law payable in whole or in part from the Pledged Revenues but subordinate to the Priority Bonds, which includes the Series B Commercial Paper Notes. (43) The term "System" shall mean and include, for so long as the Previously Issued Priority Bonds remain Outstanding or until consents from the Holders thereof permitting an amendment to the applicable authorizing ordinances providing for an earlier date of effectiveness are secured, 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; thereafter, the term "System" shall mean and include the City's existing combined waterworks system, wastewater disposal system and gas system, together with 85454572.5 -14- all future extensions, improvements, enlargements, and additions thereto, including, to the extent permitted by law (and to be added at the sole discretion of the City), storm sewer and drainage within the waterworks system, solid waste disposal system, additional utility (including electricity), telecommunications, technology, and any other similar enterprise services, and all replacements, additions, and improvements to any of the foregoing, within or without the City limits; provided that, notwithstanding the foregoing, and to the extent now or hereafter authorized or permitted by law, the term System shall not include any waterworks, wastewater or gas facilities which are declared by the City not to be a part of the System and which are hereafter acquired or constructed by the City with the proceeds from the issuance of "Special Facilities Bonds", which are hereby defined as being special revenue obligations of the City which are not secured by or payable from the Pledged Revenues, but which are secured by and payable solely from special contract revenues, or payments received from the 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 of the System, unless and to the extent otherwise provided in the ordinance or ordinances authorizing the issuance of such "Special Facilities Bonds". (44) The term "System Fund" shall have the meaning given such term in Section 8 of this Ordinance. (45) The term "Term Bonds" shall have the meaning given such term in Section 2 of this Ordinance. (46) The term "Value of Investment Securities" and words of like import shall mean the amortized value thereof; provided, however, that all United States of America, United States Treasury 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 of the purchase price thereof and not collected. For the purposes of this definition, "amortized value", when used with respect to a security purchased at par, means the purchase price of such security. (47) The term "Year" shall mean the regular fiscal year used by the City in connection with the operation of the System, which may be any twelve consecutive months period established by the City, currently being the period of time beginning on August 1 and ending on July 31. SECTION 7: Pledge. A. Pledged Revenues. 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 of the Debt Service Fund and the Reserve Fund as hereinafter provided. The Priority Bonds are and will be secured by and payable only from the 85454572.5 -15- 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, as amended, Texas Government Code, applies to the issuance of the 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, as amended, 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, as amended, Texas Business & Commerce Code and enable a filing to perfect the security interest in said pledge to occur. SECTION 8: System Fund. There has heretofore been created and established and there shall be maintained on the books of the 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 9: Debt Service Fund. A. Debt Service Fund Established. 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" (the "Debt Service Fund"). Money in the Debt Service Fund shall be deposited and maintained in an official depository bank of the City. B. Capitalized Interest Account. 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 of Priority Bonds or other obligations for which any interest has been capitalized, the City shall use the money in the Capitalized Interest Account to pay such interest on such Priority Bonds or other obligations to the extent of the amounts therein representing such capitalized interest. C. Mandatory Redemption Account. 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, including this Ordinance, authorizing the issuance of Term Bonds. D. Surplus Proceeds. Effective at such time as the Previously Issued Priority Bonds are no longer Outstanding, the City may transfer excess amounts held in the Debt Service Fund to any fund or funds established for the payment of or security for the Priority Bonds (including any 85454572.5 -16- escrow established for the final payment of any such obligations pursuant to Chapter 1207, as amended, Texas Government Code) or use such excess amount for any lawful purpose now or hereafter provided by law; provided, however, to the extent that such excess amount represents bond proceeds, then such amount must remain in the Debt Service Fund. SECTION 10: Reserve Fund. A. Reserve Fund Established. 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 Reserve Fund" (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 of the 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 excess of the Required Amount may be withdrawn by the City, at its option, and transferred to the System Fund; provided, however, that the face amount of any Credit Facility may be reduced at the option of the City in lieu of such transfer. C. Withdrawals. If the City is required to make a withdrawal from the Reserve Fund for any of the 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 money 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. D. Deficiencies. In the event of a 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 Amount, 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. Redemption., Defeasance. 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 (i) 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 85454572.5 -17- 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 a 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; provided, 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. Upon the issuance of Additional Priority Bonds the money in the Reserve Fund shall be increased to the newly -established Required Amount in accordance with the provisions of Section 19.B of this Ordinance. SECTION 11: Subordinated Obligations Funds and Accounts. The City hereafter may create, establish and maintain on the books of the City separate funds and accounts from which money can be withdrawn to pay the principal of and interest on Subordinated Obligations which hereafter may be issued. SECTION 12: Construction Fund. The City hereby creates and establishes and shall maintain on the books of the City a separate fund to be entitled the "City of Corpus Christi, Texas Utility System Revenue Bonds Water Infrastructure Fund Program Construction Fund" (the "Construction Fund") for use by the City in the manner specified in Section 27.B hereof. There shall be deposited to the Construction Fund those proceeds from the sale of the Bonds specified in Section 29 of this Ordinance. SECTION 13: Investments. Money in any Fund established pursuant to this Ordinance may, at the option of the 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. If money in a Fund herein established are permitted to be invested, the value of any such Fund shall be established by adding the money 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 and with respect to the Reserve Fund, value shall be established within thirty days prior to the issuance of Priority 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 money on deposit in the various Funds and Accounts created hereunder shall be credited to the Fund or Account from which money used to acquire such investment shall have come. SECTION 14: Funds Secured. Money 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 15: Flow Of Funds. All money in the System Fund not required for paying Operating Expenses during each month shall be applied by the City, on or before the 10th day of 85454572.5 -18- 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 money on deposit in the Capitalized Interest Account, if any, 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 of Priority 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 sufficient, together with other amounts, if any, in the Debt Service Fund available for such purpose, to pay the principal scheduled to mature on Priority Bonds on the next succeeding principal payment date; and (3) Amortization Installments, in such amounts and on such dates as set forth in any ordinance authorizing a series of Priority Bonds which contain Term Bonds within such series, to pay scheduled principal amounts of Priority Bonds which constitute Term Bonds to be redeemed in accordance with the terms of said ordinance. B. Reserve Fund. To the credit of the Reserve Fund, 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, equal to not less than 1/60 of the Required Amount, until such time as such amounts together with other amounts, if any, in the Reserve Fund, equal the Required Amount. When and so long as the Reserve Fund Obligations in the Reserve Fund are not less than the Required Amount, no deposits need be made to the credit of the Reserve Fund. When and if the Reserve Fund at any time contains less than the Required Amount due to any cause or condition other than the issuance of Additional Priority Bonds then, subject and subordinate to making the required deposits to the credit of the Debt Service Fund, commencing with the month during which such deficiency occurs, such deficiency shall be made up from the next available Pledged Revenues or from any other sources available for such purpose. Reimbursements to a Credit Facility Provider made in accordance with the terms of Subsection 10.F of this Ordinance shall constitute the making up of a deficiency to the extent that such reimbursements result in the reinstatement, in whole or in part, as the case may be, of the amount of the Credit Facility. If the Reserve Fund contains less than the Required Amount due to the issuance of Additional Priority Bonds, deposits shall be made to the Reserve Fund commencing during the month and in the amounts required by Subsection 19.B of this Ordinance, unless a Credit Facility is deposited in the Reserve Fund in an amount necessary to cause the sum of money and the value of Investment Securities and any other Credit Facilities in the Reserve Fund to equal the Required Amount. 85454572.5 -19- C. Surplus. The balance of any money remaining in the System Fund following such transfers may be used by the City for payment of other obligations of the System, including, but not limited to, Subordinated Obligations, and for any other lawful purpose; provided, however, that transfers made for purposes other than for payment of obligations of the System shall be made only at the end of the Year. SECTION 16: Deficiencies. If on any occasion there shall not be sufficient Pledged Revenues to make the deposits and other applications of money required by Section 15 with respect to the various Funds as provided therein, any such deficiencies shall be made up (in the order that each such Fund is provided for in Section 15) as soon as possible from the next available Pledged Revenues, or from any other sources available for such purpose. The foregoing notwithstanding, however, if any deficiency in the Reserve Fund occurs as a result of withdrawals therefrom or decreases in the market value of Eligible Investments on deposit therein, such deficiency will be made up from the next available Pledged Revenues within twelve months from the date of such deficiency is determined, with such deposits to the Reserve Fund to be made in not more than twelve substantially equal monthly payments. SECTION 17: Payment of Bonds. 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) money 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 18: Final Deposits; Government Obligations. A. Defeasance. Any Priority Bond shall be deemed to be paid, retired and no longer Outstanding within the meaning of this Ordinance when payment of the 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 reinvestment, 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 the 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 85454572.5 -20- described in Section 2.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. Notwithstanding any other provision of this Ordinance to the contrary, it is hereby provided that any determination not to redeem defeased Bonds that is made in conjunction with the payment arrangements specified in subsection (i) or (ii) above shall not be irrevocable, provided that: (1) in the proceedings providing for such defeasance, the City expressly reserves the right to call the defeased Bonds for redemption; (2) gives notice of the reservation of that right to the owners of the defeased Bonds immediately following the defeasance; (3) directs that notice of the reservation be included in any redemption notices that it authorizes; and (4) at the time of the redemption, satisfies the conditions of (i) or (ii) above with respect to such defeased debt as though it was being defeased at the time of the exercise of the option to redeem the defeased Bonds, after taking the redemption into account in determining the sufficiency of the provisions made for the payment of the defeased Bonds. B. Government Obligations. Any money 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 (or escrow agent) pursuant to this Section which is not required for the payment of the principal of such Priority Bonds, the redemption premium, if any, therefor, 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 Subsection 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 the principal of such Priority Bonds, the redemption premium, if any, therefor, and interest thereon, shall be applied solely to and used solely for the payment of such Priority Bonds, such redemption premium, if any, and interest thereon. SECTION 19: Issuance of Additional Priority Bonds. A. Reservation of Right to Issue Additional Priority Bonds. 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. 85454572.5 -21- B. Debt Service Fund and Reserve Fund; Funding Reserve Fund. The Debt Service Fund and the Reserve Fund confirmed 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 of the City, (i) 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 installments, made on or before the 10th day of each month following the delivery of such Additional Priority Bonds, of not less than 1/60th of said required additional amount (or 1/60th of the 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 (i) above, is sufficient to satisfy the required additional amount to be on deposit in the Reserve Fund. C. Calculations. All calculations of Average 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 20: Further Requirements for Additional Priority Bonds. A. Conditions Precedent for Issuance of Additional Priority Bonds - General. As a condition precedent to the issuance of any Additional Priority Bonds, the City Manager (or other officer of the City then having the responsibility for the financial affairs of the 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 of the City payable from and secured by a lien on and pledge of the 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 for Capital Additions or for Refunding. 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 with the provisions of Subsection C, D or E of this Section) unless and until the conditions precedent in Subsection A above have been satisfied and, in addition thereto, the City has secured a certificate or opinion of the Accountant to the effect that, according to the books and records of the City, the Net Earnings (as hereinafter defined) for the preceding Year or for 12 consecutive months out of the 15 months immediately preceding the month the ordinance authorizing the Additional Priority Bonds is adopted are at least equal to 1.25 times the Average Annual Principal and Interest Requirements for all Outstanding Priority Bonds after giving effect to the Additional Priority Bonds then proposed. The foregoing notwithstanding, the City covenants and agrees that Additional Priority Bonds 85454572.5 -22- may not be issued for the purpose of financing Capital Improvements when other Outstanding Priority Bonds which have been issued for the purpose of financing Capital Additions and for which capitalized interest for such other Priority Bonds has been provided for at least the twelve months subsequent to the date of issuance of the Additional Priority Bonds then proposed to be issued, unless the conditions precedent in Subsection A above have been satisfied and, in addition thereto, the City has either (1) complied with the relevant conditions in this Subsection as set forth above, or (2) if the relevant conditions of this Subsection B as set forth above cannot be satisfied, the City has satisfied the conditions precedent in Subsection C(i) and (ii) of this Section (but, for purposes of such clauses, the term Capital Improvements shall be substituted for the term Capital Additions where the term Capital Additions appears therein to the extent necessary to give recognition to the fact that Capital Improvements, rather than Capital Additions, are then to be financed) and has secured a certificate or opinion of the Accountant to the effect that, according to the books and records of the City, the Net Earnings for the preceding Year or for 12 consecutive months out of the 15 months immediately preceding the month the ordinance authorizing the Additional Priority Bonds is adopted are at least equal to 1.25 times the Average Annual Principal and Interest Requirements for all Outstanding Priority Bonds (other than any Priority Bonds issued for Capital Additions for which capitalized interest has been provided for at least the twelve months subsequent to the date of issuance of the Additional Priority Bonds proposed to be issued) after giving effect to the Priority Bonds then proposed. C. Conditions Precedent for Issuance of Additional Priority Bonds - Capital Additions: Initial Issue. The City covenants and agrees that Additional Priority Bonds will not be issued for the purpose of financing Capital Additions, unless the same conditions precedent specified in Subsection A above have been satisfied and, in addition thereto, either the relevant conditions precedent specified in Subsection B above are satisfied or, in the alternative, the City shall have obtained: (i) from the Engineer of Record a comprehensive Engineering Report for each Capital Addition to be financed, which report shall (A) contain (1) detailed estimates of the cost of acquiring and constructing the Capital Addition, (2) the estimated date the acquisition and construction of the Capital Addition will be completed and commercially operative, and (3) a detailed analysis of the impact of the Capital Addition on the financial operations of the system for which the Capital Addition is to be integrated and to the System as a whole during 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. 85454572.5 -23- D. Completion Issues. Once a Capital Addition has been initiated by meeting the conditions precedent specified in Subsection C(i) and (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 thereof and make the same commercially operative without satisfaction of any condition precedent under Subsection C(i) and (ii) or Subsection B of this Section but subject to satisfaction of the 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 of the System to be Outstanding after the issuance of the 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 of the 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 if less than all such Outstanding Priority Bonds are refunded, the conditions precedent prescribed in Subsection A and B of this Section shall be satisfied and the Accountant's certificate or opinion required by Subsection 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 Subsection A and B of this Section shall be satisfied. No Accountant's certificate otherwise required by Subsection 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. F. 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 Subsection C(i) above, the Engineer of Record 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. 85454572.5 -24- 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 Subsection 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. Definition 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. J. Determination of Net Earnings. In making a determination of Net 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 60 days prior to the last day of the period for which Net Earnings are determined and, for purposes of 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 21: General Covenants. The City further covenants and agrees that in accordance with and to the extent required or permitted by law: A. Performance. 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. 85454572.5 -25- B. City's Legal Authority. 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. 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 priority of the liens granted hereunder shall be fully preserved in the 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. F. No Free Service. No 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 of the System, such services shall be accounted for according to the established rate schedule. 85454572.5 -26- 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 of the 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 Subsection K of this 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 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 of Priority Bonds, then the City may utilize the proceeds of such sale or exchange for any lawful purpose; and (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 (A) 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 depreciated 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. 85454572.5 -27- I. Books, Records and Accounts. 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. (3) 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 whether or not all insurance premiums upon the insurance policies to which reference is hereinbefore made have been paid. K. Rate Covenant. It will fix, establish, maintain and collect such rates, charges and fees for the use and availability of the 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) (A) to pay all current Operating Expenses of the System, and (B) to 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) 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 be 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 money in a Capitalized Interest Account received from proceeds of such Priority Bonds held in cash or 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. 85454572.5 -28- L. Audits. 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 of the registered owners of the 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 of the 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 System's facilities, and, to the extent that it legally may, the City will prohibit any such competing facilities. O. Rights of Inspection. The Engineer of Record or any registered owner of $100,000 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 of the 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 System as the Engineer of Record or such registered owner may from time to time reasonably request. P. Surplus Bond Proceeds. Any surplus proceeds from the Bonds remaining after the acquisition and completion of the System improvements shall be used to redeem Bonds in the manner specified in Section 2.B(2) hereof, 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 22 hereof, to pay debt service on the Bonds. SECTION 22: Covenants Regarding Tax -Exemption. A. Definitions. When used in this Section, the following terms have the following meanings: "Code" means the Internal Revenue Code of 1986, as amended by all legislation, if any, effective on or before the Closing Date. "Computation Date" has the meaning set forth in section 1.148-1(b) of the Regulations. "Gross Proceeds" means any proceeds as defined in section 1.148-1(b) of the Regulations, and any replacement proceeds as defined in section 1.148-1(c) of the Regulations, of the Bonds. 85454572.5 -29- "Investment" has the meaning set forth in section 1.148-1(b) of the Regulations. "Nonpurpose Investment" means any investment property, as defined in section 148(b) of the Code, in which Gross Proceeds of the Bonds are invested and which is not acquired to carry out the governmental purposes of the Bonds. "Rebate Amount" has the meaning set forth in section 1.148-1(b) of the Regulations. "Regulations" means any proposed, temporary, or final Income Tax Regulations issued pursuant to sections 103 and 141 through 150 of the Code, and 103 of the Internal Revenue Code of 1954, which are applicable to the Bonds. Any reference to any specific Regulation shall also mean, as appropriate, any proposed, temporary or final Income Tax Regulation designed to supplement, amend or replace the specific Regulation referenced. "Yield" of 1) any Investment has the meaning set forth in section 1.148-5 of the Regulations; and 2) the Bonds has the meaning set forth in section 1.148-4 of the Regulations. B. Not to Cause Interest to Become Taxable. The City shall not use, permit the use of, or omit to use Gross Proceeds or any other amounts (or any property the acquisition, construction or improvement of which is to be financed directly or indirectly with Gross Proceeds) in a manner which if made or omitted, respectively, would cause the interest on any Bond to become includable in the "gross income", as defined in section 61 of the Code, of the owner thereof for federal income tax purposes. Without limiting the generality of the foregoing, unless and until the City receives a written opinion of counsel nationally recognized in the field of municipal bond law to the effect that failure to comply with such covenant will not adversely affect the exemption from federal income tax of the interest on any Bond, the City shall comply with each of the specific covenants in this Section. C. No Private Use or Private Payments. Except to the extent that it will not cause the Bonds to become "private activity bonds" within the meaning of section 141 of the Code and the Regulations and rulings thereunder, the City shall at all times prior to the last stated maturity of Bonds: (1) exclusively own, operate and possess all property the acquisition, construction or improvement of which is to be financed or refinanced directly or indirectly with Gross Proceeds of the Bonds, and not use or permit the use of such Gross Proceeds (including all contractual arrangements such as take, take or pay, certain requirements and other similar output contracts or arrangements with terms different than those applicable to the general public) or any property acquired, constructed or improved with such Gross Proceeds in any activity carried on by any person or entity (including the United States or any agency, department and instrumentality thereof) other than a state or local government, unless such use is solely as a member of the general public; and 85454572.5 -30- (2) not directly or indirectly impose or accept any charge or other payment by any person or entity who is treated as using Gross Proceeds of the Bonds or any property the acquisition, construction or improvement of which is to be financed or refinanced directly or indirectly with such Gross Proceeds, other than taxes of general application within the City or interest earned on investments acquired with such Gross Proceeds pending application for their intended purposes. (3) not allow any "nonqualified amount" (as defined in section 141(b)(8) of the Code) of the Bonds to exceed the excess of (i) $15,000,000 over (ii) the aggregate nonqualified amounts with respect to all prior tax-exempt bonds, five percent or more of the proceeds of which are or will be used with respect to any facility financed by the Bonds (or any other facility which is part of the same project as a facility financed by the), all within the meaning of section 141(b)(4) of the Code; and (4) not allow more than the lesser of (i) $5,000,000 or (ii) five percent of the proceeds of the Bonds to acquire nongovernmental output property, as defined in section 141(d)(2) of the Code, except if 95 percent or more of the output from such facility will be consumed in a "qualified service area" (as defined in section 141(d)(3 of the Code) of the City or in a "qualified annexed area" (as defined in section 141(d)(3) of the Code) of the City. D. No Private Loan. Except to the extent that it will not cause the Bonds to become "private activity bonds" within the meaning of section 141 of the Code and the Regulations and rulings thereunder, the City shall not use Gross Proceeds of the Bonds to make or finance loans to any person or entity other than a state or local government. For purposes of the foregoing covenant, such Gross Proceeds are considered to be "loaned" to a person or entity if: (1) property acquired, constructed or improved with such Gross Proceeds is sold or leased to such person or entity in a transaction which creates a debt for federal income tax purposes; (2) capacity in or service from such property is committed to such person or entity under a take -or -pay, output or similar contract or arrangement; or (3) indirect benefits, or burdens and benefits of ownership, of such Gross Proceeds or any property acquired, constructed or improved with such Gross Proceeds are otherwise transferred in a transaction which is the economic equivalent of a loan. E. Not to Invest at Higher Yield. Except to the extent that it will not cause the Bonds to become "arbitrage bonds" within the meaning of section 148 of the Code and the Regulations and rulings thereunder, the City shall not at any time prior to the final stated maturity of the Bonds directly or indirectly invest Gross Proceeds in any Investment, if as a result of such investment the Yield of any Investment acquired with Gross Proceeds, whether then held or previously disposed of, materially exceeds the Yield of the Bonds. F. Not Federally Guaranteed. Except to the extent permitted by section 149(b) of the Code and the Regulations and rulings thereunder, the City shall not take or omit to take any action which would cause the Bonds to be federally guaranteed within the meaning of section 149(b) of the Code and the Regulations and rulings thereunder. 85454572.5 -3 1 - G. Information Report. The City shall timely file the information required by section 149(e) of the Code with the Secretary of the Treasury on Form 8038-G or such other form and in such place as the Secretary may prescribe. H. Rebate of Arbitrage Profits. Except to the extent otherwise provided in section 148(0 of the Code and the Regulations and rulings thereunder: (1) The City shall account for all Gross Proceeds (including all receipts, expenditures and investments thereof) on its books of account separately and apart from all other funds (and receipts, expenditures and investments thereof) and shall retain all records of accounting for at least six years after the day on which the last Outstanding Bond is discharged. However, to the extent permitted by law, the City may commingle Gross Proceeds with other money of the City, provided that the City separately accounts for each receipt and expenditure of Gross Proceeds and the obligations acquired therewith. (2) Not less frequently than each Computation Date, the City shall calculate the Rebate Amount in accordance with rules set forth in section 148(0 of the Code and the Regulations and rulings thereunder. The City shall maintain such calculations with its official transcript of proceedings relating to the issuance of the Bonds until six years after the final Computation Date. (3) As additional consideration for the purchase of the Bonds by the Purchaser and the loan of the money represented thereby and in order to induce such purchase by measures designed to insure the excludability of the interest thereon from the gross income of the owners thereof for federal income tax purposes, the City shall pay to the United States out of the Debt Service Fund or its general fund, as permitted by applicable Texas statute, regulation or opinion of the Attorney General of the State of Texas, any Rebate Amount in the manner and on or before the dates specified in section 148(0 of the Code and the Regulation and rulings thereunder. In all cases, the rebate payments shall be made at the times, in the installments, to the place and in the manner as is or may be required by section 148(0 of the Code and the Regulations and rulings thereunder, and shall be accompanied by Form 8038-T or such other forms and information as is or may be required by section 148(0 of the Code and the Regulations and rulings thereunder. (4) The City shall exercise reasonable diligence to assure that no errors are made in the calculations and payments required by paragraphs (2) and (3), and if an error is made, to discover and promptly correct such error within a reasonable amount of time thereafter (and in all events within one hundred eighty (180) days after discovery of the error), including payment to the United States of any additional Rebate Amount owed to it, interest thereon, and any penalty imposed under section 1.148 3(h) of the Regulations. I. Not to Divert Arbitrage Profits. Except to the extent permitted by section 148 of the Code and the Regulations and rulings thereunder, the City shall not, at any time prior to the earlier of the stated maturity or final payment of the Bonds, enter into any transaction that reduces the amount required to be paid to the United States pursuant to Subsection H of this Section because such transaction results in a smaller profit or a larger loss than would have 85454572.5 -32- resulted if the transaction had been at arm's length and had the Yield of the Bonds not been relevant to either party. J. Bonds Not Hedge Bonds. (1) The City reasonably expects to spend at least 85% of the spendable proceeds of the Bonds within three years after the issue of such Bonds. (2) Not more than 50% of the proceeds of the Bonds will be invested in Nonpurpose Investments having a substantially guaranteed Yield for a period of 4 years or more. K. Temporary Periods. The City will or will not waive temporary periods with respect to the Bonds as provided in the City's Tax Exemption Certificate. L. Elections. The City hereby directs and authorizes the Mayor, Mayor Pro Tem, City Manager, any Assistant City Manager, and the City's Director of Financial Services, either or any combination of the foregoing, to make such elections in the Certificate as to Tax Exemption or similar or other appropriate certificate, form, or document permitted or required pursuant to the provisions of the Code, or Regulations as they deem necessary or appropriate in connection with the Bonds, and other transactions related to any Priority Bonds. Such elections shall be deemed to be made on the Closing Date. SECTION 23: Taxable Obligations. The provisions of Section 22 of 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) of the Code or are obligations which constitute "private activity bonds" within the meaning of section 141 of the Code. SECTION 24: Amendment of Ordinance. A. Approval by Registered Owners. 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 payable 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; 85454572.5 -33- (5) affect the rights of the registered owners of less than all of the Priority Bonds then Outstanding; (6) amend this Subsection A of this Section; or (7) change the minimum percentage of the principal amount of Priority 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. B. Notice. 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 Paying Agent/Registrar for inspection by all holders of Priority Bonds. Such publication is not required, however, if notice in writing is given to each registered owner of Priority Bonds. C. Consent Obtained. 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 may pass the amendatory ordinance in substantially the same form. D. Amendatory Ordinance. 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 of then 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. 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. 85454572.5 -34- F. Amendments without Consent. The foregoing provisions of this Section notwithstanding, the City, by action of the Governing Body may amend this Ordinance for any one or more of the following purposes: (1) to add to the covenants and agreements of the City in this Ordinance contained, other covenants and agreements thereafter to be observed, grant additional rights or remedies to the registered owners of the Priority Bonds or to surrender, 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; (3) to modify any of the provisions of this 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 Outstanding 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; (4) 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; (5) 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 of this Ordinance and which shall not adversely affect the interests of the owners of the Priority Bonds; (6) to make such changes, modifications or amendments as are permitted by Section 34.D of this Ordinance; (7) 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 Attorney General of the State of Texas; and (8) 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. 85454572.5 -35- Notice of any such amendment may be published by the City in the manner described in Subsection 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 25: Damaged, Mutilated, Lost, Stolen, or Destroyed Bonds. A. Substitute Bonds. In the event any Outstanding Bond is damaged, mutilated, lost, stolen, or destroyed, the Paying Agent/Registrar shall cause to be printed, executed, and delivered, a new bond of the same principal amount, maturity, and interest rate, as the damaged, mutilated, lost, stolen, or destroyed Bond, in replacement for such Bond in the manner hereinafter provided. B. Application for Replacement. Application for replacement of damaged, mutilated, lost, stolen, or destroyed Bonds shall be made to the Paying Agent/Registrar. In every case of loss, 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 Agent/Registrar 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. C. Payment upon Maturity. Notwithstanding the foregoing provisions of this Section, in the event any such Bond shall have matured, and no default has occurred which is then continuing in the payment of the principal of, redemption premium, if any, or interest on the Bond, the 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 indemnity is furnished as above provided in this Section. D. Cost of Replacement Bonds. 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. Authority for Replacement Bonds. In accordance with Chapter 1206, as amended, 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 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 Subsection 4.A of this Ordinance for Bonds issued in exchange for other Bonds. 85454572.5 -36- SECTION 26: Confirmation of Sale. The sale of the Bonds to the Texas Water Development Board (the Purchaser) for the purchase price of $8,000,000, which represents a purchase price of par and no accrued interest, pursuant to a loan commitment received from the Purchaser is hereby confirmed. Delivery of the Bonds shall be made to the Purchaser as soon as practicable after the adoption of this Ordinance, upon payment therefor in accordance with the terms of sale. SECTION 27: Compliance with Purchaser's Rules and Regulations. The City will comply with all of the requirements contained in the resolution or resolutions adopted by the Purchaser with respect to the issuance of the Bonds. In addition, in compliance with the Purchaser's Water Infrastructure Fund Program Rules, the City agrees and covenants so long as the Purchaser is the sole Holder of the Bonds: A. to keep and maintain full and complete records and accounts pertaining to the construction of the project financed with the proceeds of sale of the Bonds, including the Construction Fund, in accordance with the standards set forth by the Government Accounting Standard Board; B. to create and establish the Construction Fund in accordance with Section 12 hereof for the receipt and disbursement of all proceeds from the sale of the Bonds and all other funds acquired by the City in connection with the planning and construction of the project or projects financed, in whole or in part, by the Purchaser pursuant to the loan evidenced by the Bonds and all funds deposited to the credit of the Construction Fund shall be disbursed only for the payment of costs and expenses incurred in connection with the planning and building of such projects as approved by the Purchaser and as otherwise allowed by the rules; C. upon completion of the construction of the project or projects financed, in whole or in part, by the loan evidenced by the Bonds, to provide a final accounting to the Purchaser of the total costs of the project or projects. In determining the amount of available funds for building the project or projects, the City agrees to account for all amounts deposited to the credit of the Construction Fund, including all loan funds extended by the Purchaser, all other funds available from the projects as described in the project engineer's or fiscal representative's sufficiency of funds statement and all interest earned by the City on money in the Construction Fund; D. to maintain current, accurate, and complete records and accounts necessary to demonstrate compliance with financial assistance related legal and contractual provisions; E. to comply with any special conditions specified by the Purchaser's water conversation plan as specified in 31 TAC 363.42(a)(2)(F) until all financial obligations to the Purchaser have been discharged; and F. to abide by the Purchaser's rules and relevant state statutes, including, but not limited to, the Purchaser's pre -design funding procedures as specified in 31 TAC §363.1206; G. to not use Bond proceeds to pay for the cost of sampling, testing, removing or disposing of injection well fluids, brine concentration, municipal solid wastes, soils and/or media contaminated by hazardous substances, and for managing and disposing of any other hazardous substances, including (but not limited to) radioactive substances and low-level radioactive 85454572.5 -37- wastes, that may be generated at the project site during planning, design, and construction activities; H. to notify the Executive Administrator of the Purchaser prior to taking any actions to alter the legal status of the City in any manner (such as by conversion to a conservation and reclamation district or a sale -transfer -merger with another retail public utility that results in a change in governance of the System) and to receive approval from the Purchaser of any action to convey the City's obligations to the Purchaser, as the Holder of the Bonds, to another entity; I. to the extent permitted by law, to indemnify, hold harmless, and protect the Purchaser (but not subsequent Holders of the Bonds) from any and all claims, causes of action, or damages to the person or property of third parties arising either directly or indirectly from the sampling, analysis, transport, storage, treatment, and disposition of any hazardous substance, radioactive substance, and/or solid waste, as those terms are defined in the Texas Solid Waste Disposal Act (codified at Chapter 361, as amended, Texas Health and Safety Code) and the Radiation Control Act (codified at Chapter 401, as amended, Texas Health and Safety Code), that may be generated by the City, its contractors, consultants, agents, officials, and employees during the course of the project or projects financed with Bond proceeds; and J. to apply for and obtain all permits, licenses, letter authorizations, notifications of solid waste registration, notices of intent and other regulatory approvals that may be required by those federal, state, regional, and local governmental entities responsible for regulating environmental, health and safety, and transportation -related matters arising from or pertaining to the generation, management, and disposal of all municipal solid wastes, radioactive substances, and low-level radioactive -wastes that may be generated as the result of the planning, design, and construction of the project or projects financed with Bond proceeds, including (but not necessarily limited to) surface water discharge permit(s), stormwater permits, underground injection control permits, solid waste facility registrations, notifications, and/or permits, hazardous waste permits, radioactive materials management licenses, and low-level radioactive waste permits, registrations, and exemptions. SECTION 28: Approval and Registration of Bonds. 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, and their registration by the Comptroller of Public Accounts. Upon registration of the Bonds, the Comptroller of Public Accounts (or a deputy designated in writing to act therefor) shall manually sign the Comptroller's Registration Certificate accompanying the Bonds, and the seal of said Comptroller shall be impressed, or placed in facsimile, on each such certificate. SECTION 29: Use of Proceeds. Proceeds derived from the sale of the Bonds shall be deposited into the Construction Fund to pay the costs of issuance on the Bonds or to pay the construction costs, if any, of the projects to be reimbursed or financed with the proceeds of the Bonds, and such amount may be deposited in the Escrow Agreement authorized by the provisions of Section 32 hereof. Interest earned on the proceeds of the Bonds deposited into the Construction Fund pending payment of costs of issuance or completion of the project or projects financed with such proceeds shall be accounted for, maintained, deposited, and expended as 85454572.5 -38- required by applicable law. Thereafter, such amount shall be immediately expended in accordance with Subsection 26.0 hereof. SECTION 30: Default And Remedies. A. Events of Default. Each of the following occurrences or events for the purpose of this Ordinance is hereby declared to be an "Event of Default": (1) the failure to make payment of the principal of, premium, if any, or interest on any of the Bonds when the same becomes due and payable; or (2) default in the performance or observance of any other covenant, agreement or obligation of the City, the failure to perform which materially, adversely affects the rights of the registered owners of the 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 60 days after notice of such default is given by any registered owner to the City. B. Remedies for Default. (1) Upon the happening of any Event of Default, 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 of the 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. (2) It is provided that all such proceedings shall be instituted and maintained for the equal benefit of all registered owners of Bonds then Outstanding. C. Remedies Not Exclusive. (1) No remedy herein conferred or reserved 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. (2) The exercise of any remedy herein conferred or reserved shall not be deemed a waiver of any other available remedy. (3) By accepting the delivery of a Bond authorized under this Ordinance, such registered owner agrees that the certifications required to effectuate any covenants or 85454572.5 -39- 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 Governing Body. (4) None of the members of the Governing Body, 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: Further Proceedings. 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 of the City all such instruments, 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 a rating from any Rating Agency, the printing of a statement relating to the insuring of the Bonds by a municipal bond insurance company, and the Representation Letter. SECTION 32: Authorization of Escrow Agreement. The City Council of the City hereby finds and determines that it is in the best interest of the City to authorize the execution of an Escrow Agreement to comply with the Purchaser's pre -design funding option rules and regulations. A copy of the Escrow Agreement is attached hereto, in substantially final form, as Exhibit D and is incorporated by reference to the provisions of this Ordinance. The Mayor and/or the City Manager, or their designee is authorized to execute the Escrow Agreement as the act and deed of the City Council. SECTION 33: Application to Texas Water Development Board. The City Council of the City ratifies and confirms its prior approval of the form and content of the Application to the Texas Water Development Board (the "Application") prepared in the sale of the Bonds to the Purchaser and hereby approves the form and content of any addenda, supplement, or amendment thereto. SECTION 34: Continuing Disclosure Undertaking. A. Definitions. As used in this Section, the following terms have the meanings ascribed to such terms below: 85454572.5 (1) "MSRB" means the Municipal Securities Rulemaking Board. (2) "Rule" means SEC Rule 15c2 12, as amended from time to time. (3) "SEC" means the United States Securities and Exchange Commission. -40- B. Annual Reports. The City shall provide annually to the MSRB, within six months after the end of each fiscal year ending in or after 2010, financial information and operating data with respect to the City of the general type included in the final Application authorized by Section 33 of this Ordinance being the information described in Exhibit E hereto. All such information must be filed with MSRB pursuant to its Electronic Municipal Access (EMMA) System. Any financial statements so to be provided shall be (i) prepared in accordance with the accounting principles described in Exhibit E hereto, or such other accounting principles as the City may be required to employ from time to time pursuant to state law or regulation and (ii) 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 statements within such period and audited financial statements for the applicable Year to the MSRB, when and if the audit report on such statements becomes available. If the City changes its Year, it will notify the MSRB of the change (and of the date of the new 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 available to the public on the MSRB's EMMA System Internet Web site or filed with the SEC. C. Material Event Notices. The City shall notify 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 of the 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; 85454572.5 -41- (9) defeasances; (10) release, substitution, or sale of property securing repayment of the Bonds; and (11) rating changes. The City shall notify the MSRB, in a timely manner, of any failure by the City to provide financial information or operating data in accordance with this Section by the time required by this Section. D. Limitations, Disclaimers, and Amendments. The City shall be obligated to observe and perform the covenants specified in this Section 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 the laws of the State of Texas that causes the Bonds to be no longer Outstanding. The provisions of this Section are for the sole benefit of the holders and beneficial owners of the 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. UNDER NO CIRCUMSTANCES SHALL THE CITY BE LIABLE TO THE HOLDER OR BENEFICIAL OWNER OF ANY BOND OR ANY OTHER PERSON, IN CONTRACT OR TORT, FOR DAMAGES RESULTING IN WHOLE OR IN PART FROM ANY BREACH BY THE CITY, WHETHER NEGLIGENT OR WITH OR WITHOUT FAULT ON ITS PART, OF ANY COVENANT SPECIFIED IN THIS SECTION, 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. No default by the City in observing or performing its obligations under this Section shall constitute a breach of or default under the 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. The provisions of this 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 85454572.5 -42- sell Bonds in the primary offering of the Bonds in compliance with the Rule, taking into account any amendments or interpretations of the Rule to the date of such amendment, as well as such changed circumstances, and (2) either (a) the holders 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 Bonds consent to such amendment or (b) a person that is unaffiliated with the City (such as nationally recognized bond counsel) determines that such amendment will not materially impair the interests of the holders and beneficial owners of the Bonds. The City may also repeal or amend the provisions of this Section if the SEC amends or repeals the applicable provisions of the Rule or any court of final jurisdiction enters judgment that such provisions of the Rule are invalid, and the City also may amend the provisions of this Section in its discretion in any other manner or circumstance, but in either case only if and to the extent that the provisions of this sentence would not have prevented an underwriter from lawfully purchasing or selling Bonds in the primary offering of the Bonds, giving effect to (a) such provisions as so amended and (b) any amendments or interpretations of the Rule. If the City so amends the provisions of this Section, the City shall include with any amended financial information or operating data next provided in accordance with this Section an explanation, in narrative form, of the reasons for the amendment and of the impact of any change in the type of financial information or operating data so provided. SECTION 35: Allocation of, and Limitation on, Expenditures for the Project. 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 project or projects financed with Bond proceeds by allocating proceeds to expenditures within 18 months of the later of the date that (a) the expenditure on such project or projects is made or (b) each such project or projects are 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 of the date of delivery of the 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 36: Miscellaneous Provisions. A. Preamble. The preamble to this Ordinance shall be considered an integral part of this Ordinance, and is herein incorporated as part of the body of this Ordinance for all purposes. B. Immediate Effect. This Ordinance shall be effective immediately from and after its passage in accordance with the provisions of Section 1201.028, as amended, Texas Government Code. C. Open Meeting. It is hereby officially found and determined that the meeting at which this Ordinance was passed was open to the public, and public notice of the time, place and purpose of said meeting was given, all as required by Chapter 551, as amended, Texas Government Code. 85454572.5 -43- D. Rules of Construction. The words "herein", "hereof' and "hereunder" and other words of similar import refer to this Ordinance as a whole and not to any particular Section or other subdivision. Except where the context otherwise requires, terms defined in this Ordinance to impart the singular number shall be considered to include the plural number and vice versa. References to any named person means that party and its successors and assigns. References to any constitutional, statutory or regulatory provision means such provision as it exists on the date this Ordinance is adopted by the City and any future amendments thereto or successor provisions thereof. Any reference to the payment of principal in this Ordinance shall be deemed to include the payment of any mandatory sinking fund redemption payments as may be described herein. References to any officer of the City (e.g., City Manager) means the person currently serving in such capacity on a temporary, interim or permanent basis. Any reference to FORM OF BOND shall refer to the form attached to this Ordinance as Exhibit A. E. 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. 85454572.5 [The remainder of this page intentionally left blank.) -44- SIGNED AND SEALED THIS 9th DAY OF MARCH, 2010. CITY OF CORPUS CHRISTI, TEXAS Mayor ATTEST: Ohlr-J2Cazs City Secretary (SEAL) APPROVED THIS 9TH DAY OF March, 2010: R. .ning First sistant City Attorney For City Attorney EXHIBIT A - Form of Bond EXHIBIT B - Form of Paying Agent/Registrar Agreement EXHIBIT C - DTC Letter of Representations EXHIBIT D - Form of Escrow Agreement EXHIBIT E - Description of Annual Financial Information 85454572.5 S-1 gm- day of 742-dAeA , 2010 The above resolution was passed by the following vote: Joe Adame Chris N. Adler Brent Chesney Larry R. Elizondo, Sr. Kevin Kieschnick Priscilla Leal John E. Marez Nelda Martinez Mark Scott 028512 EXHIBIT A A. FORM OF DEFINITIVE BOND. REGISTERED NO. REGISTERED PRINCIPAL AMOUNT United States of America State of Texas Counties of Kleberg, Nueces and San Patricio CITY OF CORPUS CHRISTI, TEXAS UTILITY SYSTEM REVENUE IMPROVEMENT BOND SERIES 2010 Bond Date: Interest Rate: Stated Maturity: March 1, 2010 CUSIP No.: ON THE MATURITY DATE SPECIFIED ABOVE, THE CITY OF CORPUS CHRISTI, IN KLEBERG, NUECES AND SAN PATRICIO COUNTIES, TEXAS (the "Issuer"), hereby promises to pay to Texas Water Development Board, 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 Interest Commencement Date (as defined in the hereinafter -defined Bond Ordinance), on January 15, 2020, and semiannually on each January 15 and July 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 if the Paying Agent/Registrar's Authentication Certificate appearing on the face of this Bond is dated later than July 15, 2020, such interest is payable semiannually on each January 15 and July 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 upon 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 Austin, Texas (the "Designated Trust Office") of Wells Fargo Bank, National Association, which is the "Paying Agent/Registrar" for this Bond. The payment of interest on this Bond shall be made by the Paying Agent/Registrar to the registered owner hereof on each interest payment date by check or draft, dated as of such interest payment date, drawn by the Paying Agent/Registrar on, and payable solely from, funds of the Issuer required by the ordinance authorizing the issuance of this Bond (the "Bond Ordinance") to be on deposit with the Paying Agent/Registrar 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 of the Paying Agent/Registrar. The Issuer covenants with 85454572.5 A-1 the registered owner of this 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 Agent/Registrar, 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. While the Bonds are held by the Purchaser, payment of principal of, premium, if any, and interest on the Bonds shall be made by federal funds wire transfer, at no cost to the Purchaser, to an account at a financial institution located in the United States designated by the Purchaser. IF THE DATE for the payment of the 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 of a series of bonds of like 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 $8,000,000 (herein sometimes called the "Bonds"), issued for the purposes of (i) acquiring, purchasing, constructing, improving, repairing, extending, equipping, and renovating the City's combined waterwork system, wastewater disposal system and gas system (collectively, the "System"), (ii) funding the increase in the Required Amount attributable to the issuance of the Bonds, and (iii) to pay the costs of issuing the Bonds. THE OUTSTANDING BONDS maturing on and after July 15, 2021 may be redeemed prior to their scheduled maturities, at the option of the Issuer and in inverse order of maturity, in whole or in part, on July 15, 2020, 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, further, 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 City and the securities depository. AT LEAST thirty (30) days prior to the date any such Bonds are to be redeemed, a notice of redemption, authorized by appropriate resolution passed by the Governing Body, shall be given in the manner set forth below. A written notice of such redemption shall be given to the registered owner of each Bond or a portion thereof being called for 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 kept by the Paying Agent/Registrar. 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 85454572.5 A-2 date fixed for redemption. If such written 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, shall not bear interest after the date fixed for their redemption, and shall not be regarded as being Outstanding except for the right of the 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 Agent/Registrar shall record in the Registration Books all such redemptions of principal of the Bonds or any portion thereof. If a portion of any Bonds shall be redeemed, a substitute Bond or Bonds having the same stated maturity date, bearing interest at the same interest rate, in any denomination or denominations in any integral multiple of $5,000, at the written request of the registered owner, and in an aggregate principal amount equal to the unredeemed portion thereof, will be issued to the registered owner upon the surrender thereof for cancellation, at the expense of the City, all as provided in the Ordinance. ALL BONDS OF THIS SERIES are issuable solely as fully registered bonds, without interest coupons, in an Authorized Denomination. 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 surrender 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 hereof in any authorized denomination to the assignee or assignees in whose name or names this Bond or any such portion or portions hereof is or are to be registered. The form of Assignment printed or endorsed on this Bond may be executed by the registered owner to evidence the assignment hereof, but such method is not exclusive, and other instruments of assignment satisfactory to the Paying Agent/Registrar may be used to evidence the assignment of this Bond or any portion or portions hereof from time to time by the registered owner. The one requesting such conversion 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 requesting 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 of transfer shall not be applicable to an exchange by the registered owner of an unredeemed balance of a Bond called for redemption in part. 85454572.5 A-3 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 of this 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, by a first lien on and pledge of the Pledged Revenues of the System. The Issuer has reserved the right, subject to the restrictions stated, and adopted by reference, in the Bond Ordinance, to issue Additional Priority Bonds which also may be made payable from, and secured by a first lien on and pledge of, the aforesaid Pledged Revenues, as well as Subordinated Obligations payable from a junior and inferior lien on and pledge of the Pledged Revenues. For a more complete description and identification of the revenues and funds pledged to the payment of the Bonds, and other obligations of the 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 in aggregate principal amount of the Outstanding Priority Bonds. THE REGISTERED OWNER HEREOF shall never have the right to demand payment of this Bond 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. Capitalized terms used in this Bond without definition shall have the respective means ascribed to them in the Bond Ordinance. 85454572.5 A-4 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. ATTEST: City Secretary (SEAL) 85454572.5 CITY OF CORPUS CHRISTI, TEXAS Mayor [The remainder of this page intentionally left blank] A-5 B. FORM OF COMPTROLLER'S REGISTRATION CERTIFICATE TO APPEAR ON INITIAL BONDS ONLY. REGISTRATION CERTIFICATE OF COMPTROLLER OF PUBLIC ACCOUNTS OFFICE OF THE COMPTROLLER OF PUBLIC ACCOUNTS § REGISTER NO. THE STATE OF TEXAS § I HEREBY CERTIFY that this Bond has been examined, certified as to validity and approved by the Attorney General of the State of Texas, and duly registered by the Comptroller of Public Accounts of the State of Texas. WITNESS my signature and seal of office this (SEAL) Comptroller of Public Accounts of the State of Texas C. FORM OF REGISTRATION CERTIFICATE OF PAYING AGENT/REGISTRAR. REGISTRATION CERTIFICATE OF PAYING AGENT/REGISTRAR This Bond has been duly issued and registered under the provisions of the within -mentioned Bond Ordinance; the Bond or Bonds of the above entitled and designated series originally delivered having been approved by the Attorney General of the State of Texas and registered by the Comptroller of Public Accounts, as shown by the records of the Paying Agent/Registrar. Registered this date: WELLS FARGO BANK, NATIONAL ASSOCIATION, as Paying Agent/Registrar 85454572.5 A-6 By: Authorized Signature D. FORM OF ASSIGNMENT. ASSIGNMENT FOR VALUE RECEIVED the undersigned hereby sells, assigns, and transfers unto (Print or typewrite name, address, and zip code of transferee): (Social Security or other identifying number): the within Bond and all rights thereunder, and hereby irrevocably constitutes and appoints attorney to transfer the within Bond on the books kept for registration thereof, with full power of substitution in the premises. DATED: NOTICE: The signature on this assignment must correspond with the name of the registered owner as it appears on the face of the within Bond in every particular. Signature guaranteed: 85454572.5 [The remainder of this page intentionally left blank] A-7 E. FORM OF INITIAL BOND(S). The Initial Bond(s) shall be in the form set forth in paragraph (a) of this Section, except that the form of the single fully registered Initial Bond shall be modified as follows: (i) immediately under the name of the Bond, the headings "Interest Rate " and "Stated Maturity " shall both be completed "as shown below"; and (ii) the first paragraph shall read as follows: ON THE MATURITY DATES SPECIFIED BELOW, THE CITY OF CORPUS CHRISTI, IN KLEBERG, NUECES AND SAN PATRICIO COUNTIES, TEXAS (the "Issuer"), hereby promises to pay to TEXAS WATER DEVELOPMENT BOARD, or the registered assignee hereof (either being hereinafter called the "registered owner") on July 15 of the years and in the Principal Amounts specified below and to pay interest thereon, from the Interest Commencement Date specified below, or from the most recent interest payment date to which interest has been paid or duly provided, at the rates of interest per annum specified in accordance with the following schedule: Stated Maturities Principal Amounts ($) Interest Rates (%) (Information to be inserted from schedules in Section 2.) said interest being payable initially on January 15, 2020, and semiannually thereafter on each July 15 and January 15. F. INSURANCE LEGEND. If bond insurance is obtained by the City for any Bond, the appropriate definitive Bonds and the Initial Bonds shall bear an appropriate legend as provided by the insurer. 85454572.5 [The remainder of this page intentionally left blank. J A-8 85454572 .5 EXHIBIT B PAYING AGENT/REGISTRAR AGREEMENT SEE TAB NO. 3 B-1 85454572.5 EXHIBIT C DTC LETTER OF REPRESENTATIONS SEE TAB NO. 5 C-1 85454572.5 EXHIBIT D ESCROW AGREEMENT SEE TAB NO. 4 D-1 EXHIBIT E DESCRIPTION OF ANNUAL FINANCIAL INFORMATION The following information is referred to in Section 34 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 Year ending in and after 2010 are as specified (and included in the Appendix of the Application referred to below): The City's audited financial statements for the most recently concluded fiscal year or to the extent these audited financial statements are not available, unaudited financial statements of the City for the most recently concluded fiscal year. 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. 85454572.5 E-1