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Ord 056-86 7/1/1986 • CERTIFICATE FOR ORDINANCE THE STATE OF TEXAS COUNTY OF WICHITA • CITY OF WICHITA FALLS We, the undersigned officers of the City Council of said City, hereby certify as follows : 1 . The City Council of said City convened in REGULAR MEETING ON THE 1ST DAY OF JULY, 1986, at the regular designated meeting place, and the roll was called of the duly constituted officers and members of said City Council, to-wit: Charles Harper, Mayor Sandy Goff Charles Thomas, Mayor Pro-Tem Lindsey Walker City Clerk, Wilma J. Thomas Ruth Ann Allred Ronald Buffum Donald Kirkham and all of said persons were present, except the following absentees: Inlq, cc�� thus constituting a quorum. Whereupon, among other business the following was transacted at said Meeting: a written ORDINANCE AUTHORIZING THE ISSUANCE AND SALE OF CITY OF WICHITA FALLS, TEXAS WATER AND SEWER REFUNDING REVENUE BONDS, SERIES 1986 AUTHORIZING THE EXECUTION OF A BOND PURCHASE CONTRACT, APPROVING AN OFFICIAL STATEMENT AND THE EXECUTION OF AN ESCROW AGREEMENT was duly introduced for the consideration of said City Council and read in full. It was then duly moved and seconded that said Resolution be passed; and, after due discussion, said motion, carrying with it the passage of said Resolution, prevailed and carried by the following vote: AYES : All City Council members present above voted "Aye, " except: NOES: ABSTENTIONS: 2. That a true, full, and correct copy of the afore- said Resolution passed at the Meeting described in the above and foregoing paragraph is attached to and follows this Certificate; that said Resolution has been duly recorded in said Board' s minutes of said Meeting; that the above and foregoing paragraph is a true, full, and correct excerpt from said Board' s minutes of said Meeting pertaining to the passage of said Resolution; that the persons named in the above and foregoing paragraph are the duly chosen, qualified, and acting officers and members of said City Council as indicated therein; that each of the officers and members of said City Council was duly and sufficiently notified officially and personally, in advance, of the time, place, and purpose of the aforesaid Meeting, and that said Resolution would be introduced and considered for passage at said Meeting, and each of said officers and members consented, in advance, to the holding of said Meeting for such purpose; and that said Meeting was open to the public, and public notice of the time, place, and purpose of said Meeting was given all as required by Vernon' s Ann. Civ. St. Article 6252-17. SIGNED AND SEALED the 1st d: of July, 1986. . n l if , City Cler r Mayor / (SEAL) ORDINANCE NO.4--4S ORDINANCE AUTHORIZING THE ISSUANCE AND SALE OF CITY OF WICHITA FALLS, TEXAS WATER AND SEWER REFUNDING REVENUE BONDS, SERIES 1986 AUTHORIZING THE EXECUTION OF A BOND PURCHASE CONTRACT, APPROVING AN OFFICIAL STATEMENT AND THE EXECUTION OF AN ESCROW AGREEMENT THE STATE OF TEXAS COUNTY OF WICHITA CITY OF WICHITA FALLS WHEREAS, the City of Wichita Falls, Texas (the "City" ) has outstanding the following utilities system revenue bonds (hereinafter defined as the "Refunded Obligations" ) , to-wit: City of Wichita Falls, Texas Water and Sewer Refunding Revenue Bonds, Series 1984, dated July 1, 1984, currently outstanding in the aggregate principal amount of $19,955, 000; and WHEREAS, Article 717k, V.A.T.C. S. authorizes the Issuer to issue refunding bonds and to deposit the proceeds from the sale thereof together with any other available funds or resources, directly with a place of payment (paying agent) for any of the Refunded Bonds, and such deposit, if made before such payment dates, shall constitute the making of firm banking and finan- cial arrangements for the discharge and final payment of the Refunded Bonds; and WHEREAS, Article 717k, V.A.T.C. S. further authorizes the Issuer to enter into an escrow agreement with any paying agent for the Refunded Bonds with respect to the safekeeping, investment, reinvestment, administration and disposition of any such deposit, upon such terms and conditions as the Issuer and such paying agent may agree, provided that such deposits may be invested and reinvested including obligations the principal of and interest on which are unconditionally guaranteed by the United States of America, and which shall mature and bear interest payable at such times and in such amounts as will be sufficient to provide for the scheduled payment or prepayment of the Refunded Bonds; and WHEREAS, InterFirst Bank Dallas, N.A. , Dallas, Texas, is paying agent for the Refunded Bonds, and the Escrow Agreement hereinafter authorized constitutes an escrow agreement of the kind authorized and permitted by said Article 717k; and WHEREAS, all the Refunded Bonds mature or are subject to redemption prior to maturity within 20 years of the date of the bonds hereinafter authorized; and WHEREAS, the City has determined that it is appropriate and necessary that said bonds be refunded; and WHEREAS, the bonds hereinafter authorized are to be issued and delivered pursuant to Articles 717k, and 1111 through 1118 V.A.T.C. S. for the purpose of refunding the Refunded Obligations and for the purpose of providing money for improvements and extensions to the City' s Water and Sewer System; and BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF WICHITA FALLS, TEXAS: r Section 1. BONDS AUTHORIZED. That the City' s bonds (the "Series 1986 Bonds" ) are hereby authorized to be issued in the aggregate principal amount of $24, 405, 000 for the purpose of refunding all of the outstanding Water and Sewer System revenue bonds of the City and for the purpose of pro- viding $1,500,000 for improvements and extensions of the City' s combined Water and Sewer System. The Series 1986 Bonds shall be designated as the "City of Wichita Falls, Texas Water and Sewer Refunding Revenue Bonds, Series 1986" . That the Series 1986 Bonds shall be issued, shall be pay- able, shall and may be redeemed prior to their scheduled maturities, shall have the characteristics, and shall be signed and executed (and the Series 1986 Bonds shall be sealed) , all as provided, and in the manner indicated, in the FORM OF BOND set forth in Section 6 of this Ordinance. Section 2 . DATE AND MATURITIES. That the Series 1986 Bonds shall be dated July 1, 1986, shall be in the denomi- nation of $5,000, or any integral/multiple thereof, shall be numbered consecutively from one upward, and shall mature on August 1 in each of the years, and in the amounts, respec- tively, unless redeemed prior to maturity as required or permitted in the Form of Bond set forth in Section 6 of this Ordinance, as set forth in the following schedule: • YEARS AMOUNTS YEARS AMOUNTS 1987 $ 395, 000 1997 $1,035,000 1988 575, 000 1998 1, 120, 000 1989 600, 000 1999 1,210, 000 1990 640,000 2000 1, 305, 000 1991 680,000 2001 1, 410,000 1992 725, 000 2002 1, 525, 000 1993 775, 000 2003 1, 650, 000 1994 835, 000 2004 1, 785, 000 1995 895,000 2005 1, 930, 000 1996 960,000 2006 2, 090, 000 2007 2,265,000 Section 3 . RIGHT OF PRIOR REDEMPTION. (a) That the City reserves the right to redeem the Series 1986 Bonds in whole, or in part, on August 1, 1996, or on any interest payment date thereafter, at a redemption price equal to the principal amount of such Series 1986 Bonds called for redemption, plus accrued interest thereon to the date fixed for redemption: (b) At least 30 days prior to the date fixed for any such redemption a written notice of such redemption shall be given to the registered owner of each Series 1986 Bond or a portion thereof being called for redemption by depositing such notice in the United States Mail, postage prepaid, ad- dressed to each such registered owner at his address shown on the Registration Books (hereinafter defined) of the Pay- ing Agent/Registrar (hereinafter defined) . 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 Series 1986 Bonds or the portions thereof which are to be so redeemed, plus ac- crued interest thereon to the date fixed for redemption. If such written notice of redemption is given, and if due pro- vision for such payment is made, all as provided above, the Series 1986 Bonds, or the portions thereof which are to be so redeemed, thereby automatically shall be redeemed prior to their scheduled maturities, and shall not bear interest after the date fixed for their redemption, and shall not be regarded as being outstanding except for the right of the registered owner to receive the redemption price plus ac- crued 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 2 Series 1986 Bonds or any portion thereof. If a portion of any Series 1986 Bond shall be redeemed, a substitute Series 1986 Bond or Series 1986 Bonds having the same maturity date, bearing interest at the same rate, in any denomination or denominations in any integral multiple of $5, 000 at the written request of the registered owner, and in an aggregate principal amount equal to the unredeemed portion thereof, will be issued to the registered owner upon the surrender thereof for cancellation, at the expense of the City, all as provided in this Ordinance. The Series 1986 Bonds or por- tions to be redeemed shall be selected by lot by the Paying Agent/Registrar. The City shall give written notice to the Paying Agent/Registrar of any such redemption of Series 1986 Bonds at least 60 calendar days (or such shorter period as is acceptable to the Paying Agent/Registrar) prior to such redemption. Section 4. INTEREST. That the Series 1986 Bonds scheduled to mature during the years, respectively, set forth below shall bear interest at the following rates per annum: maturities 1987 5.00 maturities 1988 5. 50 maturities 1989 6. 10 maturities 1990 6. 40 maturities 1991 6. 70 maturities 1992 7 .00 1993 7.20 maturities 1994 7 .40 maturities 1995 7 . 60 maturities 1996 7 .80 maturities 1997 7. 90 maturities 1998 8.00 maturities 1999 8.05 maturities 2000 8. 10 maturities 2001 8. 10 maturities 2002 8.20 maturities 2003 8.20 maturities 2004 8.25 maturities 2005 8.25 maturities 2006 8.30 maturities 2007 8. 30 Said interest shall be payable to the registered owner of any such Series 1986 Bond in the manner provided and on the dates stated in the FORM OF BOND set forth in this Ordi- nance. Section 5 . CHARACTERISTICS OF THE BONDS. Registra- tion, Transfer, Conversion and Exchange; Authentication. (a) The City shall keep or cause to be kept at the princi- pal corporate trust office of the InterFirst Bank Dallas N.A. , Dallas, Texas (the "Paying Agent/Registrar" ) books or records for the registration of the transfer, conversion and exchange of the Bonds (the "Registration Books" ) , and the City hereby appoints the Paying 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 Paying Agent/Registrar may prescribe; and the Paying Agent/Registrar shall make such registrations, transfers, conversions and exchanges as herein provided. The Paying Agent/Registrar shall obtain and record in the Registration Books the address of the registered owner of each Bond to which payments with respect to the Bonds shall be mailed, as herein provided; but it shall be the duty of each registered owner to notify the Paying Agent/Registrar in writing of the address to which payments shall be mailed, and such interest payments shall not be mailed unless such notice has been given. The City shall have the right to inspect the Regis- tration Books during regular business hours of the Paying 3 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 set forth in this Ordinance. Each substitute Bond shall bear a letter and/or number to distinguish it from each other Bond. An authorized representative of the Paying Agent/ Registrar shall, before the delivery of any such Bond, date and manually sign said Certificate, and no such Bond shall be deemed to be issued or outstanding unless such Certifi- cate is so executed. The Paying Agent/Registrar promptly shall cancel all paid Bonds and Bonds surrendered for conversion and exchange. No additional ordinances, orders, or resolutions need be passed or adopted by the governing body of the City or any other body or person so as to accomplish the foregoing conversion and exchange of any Bond or portion thereof, and the Paying Agent/ Registrar shall' provide for the printing, execution, and delivery of the substitute Bonds in the manner prescribed herein, and said Bonds shall be of type composition printed on paper with lithographed or steel engraved borders of customary weight and strength. Pursuant to Vernon' s Ann. Tex. Civ. St. Art. 717k-6, and particularly Section 6 thereof, the duty of conversion and exchange of Bonds as aforesaid is hereby imposed upon the Paying Agent/Registrar, and, upon the execution of said Certificate, the converted and exchanged Bond shall be valid, incontestable, and enforceable in the same manner and with the same effect as the Bonds which initially were issued and delivered pursuant to this Ordinance, approved by the Attorney General, and registered by the Comptroller of Public Accounts. (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 and interest on the Bonds, all as provided in this Ordinance. The Paying Agent/ Registrar shall keep proper records of all payments made by the City and the Paying Agent/Registrar with respect to the Bonds. (c) In General. The Bonds (i) shall be issued in ful- ly registered form, without interest coupons, with the prin- cipal 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 the Bonds 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 man- ner and to the effect as required or indicated, in the FORM OF BOND set forth in this Ordinance. The Bonds initially issued and delivered pursuant to this Ordinance are not re- quired to be, and shall not be, authenticated by the Paying Agent/Registrar, but on each substitute Bond issued in con- version of and exchange for any Bond or Bonds issued under this Ordinance the Paying Agent/Registrar shall execute the PAYING AGENT/ REGISTRAR' S AUTHENTICATION CERTIFICATE, in the form set forth in the FORM OF BOND. (d) Substitute Paying Agent/Registrar. The City covenants with the registered owners of the Bonds that at all times while the Bonds are outstanding the City will 4 provide a competent and legally qualified bank, trust company, financial institution, or other agency to act as and perform the services of Paying Agent/Registrar for the Bonds under this Ordinance, and that the Paying Agent/Registrar will be one entity. The City reserves the right to, and may, at its option, change the Paying Agent/Registrar upon not less than 120 days written notice to the Paying Agent/ Registrar, to be effective not later than 60 days prior to the next principal or interest payment date after such notice. In the event that the entity at any time acting as Paying Agent/Registrar (or its successor by merger, acquisition, or other method) should resign or otherwise cease to act as such, the City covenants that promptly it will appoint a competent and legally qualified bank, trust company, financial institution, or other agency to act as Paying Agent/Registrar under this Ordinance. Upon any change in the Paying Agent/Registrar, the previous Paying Agent/Registrar promptly shall transfer and deliver the Registration Books (or a copy thereof) , along with all other pertinent books and records relating to the Bonds, to the new Paying Agent/Registrar designated and appointed by the City. Upon any change in the Paying Agent/Registrar, the City promptly will cause a written notice thereof to be sent by the new Paying Agent/Registrar to each registered' owner of the Bonds, by United States Mail, first-class postage prepaid, which notice also shall give the address of the new Paying Agent/Registrar. By accepting the position and performing as such, each Paying Agent/Registrar shall be deemed to have agreed to the provisions of this Ordinance, and a certified copy of this Ordinance shall be delivered to each Paying Agent/Registrar. Section 6. FORMS OF SERIES 1986 BONDS. That the forms of all Series 1986 Bonds, including the form of the Paying Agent/Registrar' s Certificate, the form of Assignment, and the form of the Comptroller' s Registration Certificate to be attached only to the Series 1986 Bonds initially issued and delivered pursuant to this Ordinance , shall be, res- pectively, substantially as follows, with such appropriate variations, omissions, or insertions as are permitted or required by this Ordinance: FORM OF BOND: NO. $ UNITED STATES OF AMERICA STATE OF TEXAS COUNTY OF WICHITA CITY OF WICHITA FALLS, TEXAS WATER AND SEWER REFUNDING REVENUE BOND SERIES 1986 MATURITY DATE INTEREST RATE CUSIP ON THE MATURITY DATE SPECIFIED ABOVE, THE CITY OF WICH- ITA FALLS, IN WICHITA COUNTY, TEXAS (the "Issuer" ) , hereby promises to pay to , or to the regis- tered assignee hereof (either being hereinafter called the "registered owner" ) the principal amount of and to pay interest thereon from July 1, 1986, on Febru- ary 1, 1987 and semiannually on each February 1 and August 1 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 this Bond is required to be authenticated and the date of its authentication is later than January 15, 1987, such principal amount shall bear interest from the interest payment date next preceding the date of authentication, unless such date of 5 authentication is after any Record Date (hereinafter de- fined) but on or before the next following interest payment date, in which case such principal amount shall bear inter- est from_such next following interest payment date; pro- vided, however, that if on the date of authentication hereof the interest on the Bond or Bonds, if any, for which this Bond is being exchanged or converted from is due but has not been paid, then this Bond shall bear interest from the date to which such interest has been paid in full . THE PRINCIPAL OF AND INTEREST ON this Bond are payable in lawful money of the United States of America, without exchange or collection charges. The principal of this Bond shall be paid to the registered owner hereof upon presenta- tion and surrender of this Bond at maturity or upon the date fixed for its redemption prior to maturity, at the principal corporate trust office of the InterFirst Bank Dallas N.A. , Dallas, Texas, which is the "Paying Agent/Registrar" for this Bond. The payment of interest on this Bond shall be made by the Paying Agent/Registrar to the registered owner hereof on each interest payment date by check 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 pro- vided; 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 regis- tered owner hereof, at its address as it appeared on the fifteenth day of the month next preceding each such date (the "Record Date" ) on the Registration Books kept by the Paying Agent/ Registrar, as hereinafter described. Any ac- crued 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 principal corporate trust office of the Paying Agent/Registrar. The Issuer covenants with 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 Ordinance, the amounts required to provide for the payment, in immediately avail- able funds, of all principal of and interest on the Bonds, when due. IF THE DATE for the payment of the principal of or in- terest on this Bond shall be a Saturday, Sunday, a legal holiday, or a day on which banking institutions in the Issuer where the principal corporate trust office of the Paying Agent/Registrar is located are authorized by law or executive order to close, or the United States Postal Ser- vice is not open for business, then the date for such pay- ment 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, aggregating $24, 405, 000 (herein sometimes called the "Bonds" ) , issued for the purpose of refunding all of the Issuer' s outstanding Water and Sewer System revenue bonds and for the purpose of providing $1, 500, 000 for improvements and extensions to the Issuer' s combined Water and Sewer System. 6 • • THE OUTSTANDING BONDS may be redeemed prior to their scheduled maturities, at the option of the Issuer, in whole, or in part on August 1, 19_, or on any interest payment date thereafter, at a redemption price equal to the princi- - pal amount of the Bonds called for redemption, plus accrued interest thereon to the date fixed for redemption. The years of maturity of the Bonds called for such redemption shall be selected by the Issuer. The Bonds or portions thereof redeemed within a maturity shall be selected by lot by the Paying Agent/Registrar (provided that a portion of a Bond may be redeemed only in an integral multiple of $5,000) . AT LEAST 30 days prior to the date fixed for any such redemption 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, postage prepaid, addressed to each such registered owner at his address shown on the Registration Books of the Paying Agent/Registrar. By the date fixed for any such redemption due provision shall be made by the Issuer with the Paying Agent/Registrar for the payment of the required redemption price for this Bond or the portion hereof which is to be so 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, this Bond,' or the portion hereof which is to be so redeemed, thereby automatically shall be redeemed prior to its scheduled maturity, and shall not bear or accrue interest after the date fixed for its redemption, and shall not be regarded as being outstanding except for the right of the registered owner to receive the redemption price plus accrued interest to the date fixed for redemption from the Paying Agent/Reg- istrar out of the funds provided for such payment. The Paying Agent/Registrar shall record in the Registration Books all such redemptions of principal amount of this Bond or any portion hereof. If a portion of any Bond shall be redeemed a substitute Bond or Bonds having the same maturity date, bearing interest at the same rate, in any 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 Issuer, all as provided in the Ordinance. ALL BONDS OF THIS SERIES are issuable solely as fully registered Bonds, without interest coupons, in the denomina- tion of any integral multiple of $5, 000. As provided in the Bond Order, 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 aggre- gate amount of fully registered Bonds, without interest coupons, payable to the appropriate registered owner, assignee or assignees, as the case may be, having any autho- rized denomination or denominations as requested in writing by the appropriate registered owner, assignee or assignees, as the case may be, upon surrender of this Bond to the Paying Agent/Registrar for cancellation, all in accordance with the form and procedures set forth in the Bond Order. 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 satis- factory 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 7 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 to make any such transfer, conversion or exchange (i ) during the period commencing with the close of business on any Record Date (as defined in the Bond Order) and ending with the opening of business on the next following principal or interest payment date, or (ii) with respect to any Bond or any portion there- of called for redemption prior to maturity, within 45 days prior to its redemption date; provided, however, such limitation of transfer shall not be applicable to an exchange by the Registered Owner of an unredeemed balance of a Bond called for redemption in part. IN THE EVENT any Paying Agent/Registrar for the Bonds is changed by the Issuer, resigns, or otherwise ceases to act as such, the Issuer has covenanted in the 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 replac- ing, 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 reg- istered owner thereby acknowledges all of the terms and pro- visions of the Ordinance, agrees to be bound by such terms and provisions, acknowledges that the Ordinance is duly re- corded 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 Ordinance constitute a con- tract between each registered owner hereof and the Issuer. THE BONDS are special obligations of the Issuer payable solely from and equally secured by a first lien on and pledge of the "Pledged Revenues" (as such term is defined in the Ordinance) of the Issuer' s combined water and sewer Sys- tem. THE ISSUER has reserved the right, subject to the re- strictions stated, and adopted by reference, in the Ordi- nance authorizing the Bonds, to issue additional parity revenue bonds which also may be made payable from, and secured by a first lien on and pledge of, the aforesaid Pledged Revenues and funds. 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 Ordinance. THE REGISTERED OWNER HEREOF shall never have the right to demand payment of this obligation out of any funds raised or to be raised by taxation. IN ADDITION TO ALL OTHER RIGHTS, the holders of this series of Bonds shall be subrogated to all pertinent and necessary rights of the holders of the obligations being refunded hereby. IT IS HEREBY certified and covenanted that this Bond has been duly and validly authorized, issued and delivered; 8 and that all acts, conditions and things required or proper to be performed, exist and be done precedent to or in the authorization, issuance and delivery of this Bond have been performed, existed and been done in accordance with law. IN WITNESS WHEREOF, this Bond has been signed with the imprinted or lithographed facsimile signature of the Mayor of said Issuer, attested by the imprinted or lithographed facsimile signature of the City Clerk, and the official seal of said Issuer has been duly affixed to, printed, lithographed or impressed on this Bond. CITY OF WICHITA FALLS, TEXAS By Mayor ATTEST: City Clerk (SEAL) FORM OF PAYING AGENT/REGISTRAR' S AUTHENTICATION CERTIFICATE PAYING AGENT/REGISTRAR' S AUTHENTICATION CERTIFICATE (To be executed if this Bond is not accompanied by an executed Registration Certificate of the Comptroller of Public Accounts of the State of Texas) It is hereby certified that this Bond has been issued under the provisions of the Ordinance described on the face of this Bond; and that this Bond has been issued in exchange for or replacement of a bond, bonds, or a portion of a bond or bonds of an issue which originally was approved by the Attorney General of the State of Texas and registered by the Comptroller of Public Accounts of the State of Texas. Dated InterFirst Bank Dallas, N.A. , Dallas, Texas Paying Agent/Registrar By Authorized Representative FORM OF ASSIGNMENT: ASSIGNMENT FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto Please insert Social Security or Taxpayer Identification Number of Transferee / / (Please print or typewrite name and address, including zip code of Transferee) the within Bond and all rights thereunder, and hereby irrevocably constitutes and appoints 9 attorney to register the transfer of the within Bond on the books kept for registration thereof, with full power of substitution in the premises. Dated: Signature Guaranteed: NOTICE: Signature(s) must NOTICE: The signature above be guaranteed by a member must correspond with the name firm of the New York Stock of the Registered Owner as it Exchange or a commercial appears upon the front of this bank or trust company. Bond in every particular, without alteration or enlarge- ment or any change whatsoever. FORM OF COMPTROLLER' S REGISTRATION CERTIFICATE OFFICE OF COMPTROLLER . REGISTER NO. 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 that this Bond has been registered by the Comptroller of Public Accounts of the State of Texas. Witness my signature and seal this Comptroller of Public Accounts of the State of Texas (SEAL) • 10 Section 7 . DEFINITIONS. That, as used in this Ordi- nance, the following terms shall have the meanings set forth below, unless the text hereof specifically indicates other- wise: (a) The term "Accountant" shall mean a nationally recognized independent certified public accountant, or an independent firm of certified public acccountants. (b) The term "Additional Priority Bonds" shall mean the additional revenue bonds on a parity with the Series 1986 Bonds which the City reserves the right to issue in the future, as provided in this Ordinance. (c) The term "Average Annual Principal and Interest Requirements" means that amount equal to the average annual principal and interest requirements (including Amortization Installments) of all Series 1986 Bonds, Additional Priority Bonds, and Subordinate Lien Bonds, as the case may be, outstanding. With respect to Additional Priority Bonds or Subordinate Lien Bonds, as the case may be, 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 the rate of interest reported in the most recently published edition of The Bond Buyer (or its successor) at the time of calculation as the Revenue Bond Index or, if such Revenue Bond Index is no longer being maintained by The Bond Buyer (or its successor) at the time of calculation, such interest rate shall be assumed to be 80% of the rate of interest then being paid on United States Treasury Obliga- tions of like maturity, and (ii) that the principal of such bonds is amortized such that annual debt service is substan- tially level over the remaining stated life of the bonds. (d) The term "Capital Additions" shall mean a reser- voir or an interest therein, a water treatment plant or an interest therein and a wastewater treatment plant or an interest therein and associated transmission facilities with respect to each and any combination thereof, which shall become a part of the System. (e) The term "Capital Improvements" shall mean any capital extensions, improvements and additions to the System other than Capital Additions. (f) The term "City" shall mean the City of Wichita Falls, in Wichita County, Texas. (g) The term "Credit Obligation" shall mean, to the extent permitted by law, any obligation of the City under a contract, lease, installment sales agreement, or other instrument, with another entity to make payments out of revenues of the System for power, energy, water or other property, services or commodities for the benefit of the System, on a basis that such must be paid for whether or not the same are made available, furnished or received and whether or not the entity selling such services or commodi- ties is amortizing its capital costs with such payments. (h) 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 and sewer systems of comparable size and character as those forming parts of the System. (i) The term "Gross Revenues" shall mean all revenues, income, and receipts of every nature derived or received by 11 the City from the operation and ownership of the System (other than grants, contributions in aid of construction, and meter deposits and amounts received pursuant to the Water Supply Contract between the City and West Texas Utilities dated January 1, 1977) , including the interest income from the investment or deposit of money in any Fund created by this Ordinance, or maintained by the City in connection with the System. (j ) The term "Net Revenues of the City' s Combined Water and Sewer System" , and "Net Revenues" shall mean all Gross Revenues less Operating Expenses. (k) 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 the Series 1986 Bonds and any Additional Priority Bonds or Subordinate Lien Bonds. Operating Expenses shall include' the purchase of electric power, water and sewer 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 Credit Obligations. Depreciation, and payments from the System Fund to other funds established in this Ordinance, shall never be considered as expenses of operation and maintenance. (1) The term "Paying Agent/Registrar" shall mean the financial institution specified in Section 5(a) hereof, or its herein permitted successors and assigns; (m) The term "Pledged Revenues" shall mean (1) the Net Revenues, plus (2) any additional revenues, income, re- ceipts, 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 Series 1986 Bonds, Additional Priority Bonds and Subordinate Lien Bonds. (n) The term "Priority Bonds" shall mean the Series 1986 Bonds and any Additional Priority Bonds. (o) 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 12 meaning set forth in the agreement governing the operation of such facility. (p) — The term "Refunded Obligations" shall mean the outstanding utilities system revenue bonds refunded with the proceeds from the sale of the Series 1986 Bonds (and other available cash) . (q) The term "Series 1986 Bonds" shall mean the City of Wichita Falls, Texas Water and Sewer Refunding Revenue Bonds, Series 1986, authorized by this Ordinance. (r) The term "Subordinate Lien Bond" shall mean all revenue bonds which from time to time may hereafter be issued and incurred in accordance with the provisions of Section 21 hereof, and secured in whole or in part by a lien on and pledge of the Pledged Revenues subordinate only to the Priority Bonds. (s) 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 and subordinate to the Series 1986 Bonds, Additional Priority. Bonds and Subordinate Lien Bonds. (t) The term "System" shall mean and include the City' s existing combined waterworks system and sewer system, together with all future extensions, improvements, enlargements, and additions thereto, and all replacements thereof; provided that, notwithstanding the foregoing, and to the extent now or hereafter authorized or permitted by law, the term System shall not include any water or sewer facilities which are declared by the City not to be a part of the System and which are hereafter acquired or con- structed by the City with the proceeds from the issuance of "Special Facilities Bonds" , which are hereby defined as being special revenue obligations of the City which are not secured by or payable from the Pledged Revenues, but which are secured by and payable solely from special contract revenues or payments received from the System, any other legal entity, or any combination thereof, in connection with such facilities; and such revenues or payments shall not be considered as or constitute Gross Revenues of the System, unless and to the extent otherwise provided in the ordinance or ordinances authorizing the issuance of such "Special Facilities Bonds" . (u) 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 and when used with respect to a security purchased at a premium above or discount below par, means as of any subsequent date of valuation, the value obtained by dividing the total premium or discount by the number of interest payment dates remaining to maturity on any such security after such purchase and by multiplying the amount as calculated by the number of interest payment dates having passed since the date of purchase and (i) in the case of a security purchased at a premium, by deducting the product thus obtained from the purchase price, and (ii ) in the case of a security purchased at a discount, by adding the product thus obtained to the, purchase price. 13 (v) 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. Section 8. PLEDGE. That the Series 1986 Bonds and any Additional Priority Bonds are and shall be secured by and payable from a first lien on and pledge of the Pledged Reve- nues 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 Series 1986 Bonds and any Addi- tional Priority Bonds are and will be secured by and payable only from the Pledged Revenues, and are not secured by or payable from a mortgage or deed of trust on any properties, whether real, personal, or mixed, constituting the System. Section 9. SYSTEM FUND. That there is hereby created and there shall be established and maintained on the books of the City, and accounted for separate and apart from all other funds of the City, a special fund to be entitled the "City of Wichita Falls Water and Sewer Fund" (the "System Fund" ) . All Gross Revenues shall be credited to the System' Fund immediately upon receipt, unless otherwise provided in this Ordinance. All current expenses of operation and maintenance of the System shall be paid from such Gross Revenues credited to the System Fund as a first charge against same. Before making any deposits hereinafter required to be made from the System Fund, the City shall retain in the System Fund at all times an amount at least equal to one-sixth of the amount budgeted for the then current fiscal year for the current operation and maintenance expenses of the System. Section 10. DEBT SERVICE FUND. (a) That for the sole purpose of paying the principal amount of, premium, if any, and interest on all Series 1986 Bonds, and any Additional Priority Bonds or Subordinate Lien Bonds, as the same come due, there is hereby created and there shall be established and maintained on the books of the City a separate fund to be entitled the "City of Wichita Falls, Texas Water and Sewer Revenue Bonds Debt Service Fund" (hereinafter called the "Debt Service Fund" ) . Monies in said Fund shall be deposited and maintained in an official depository bank of the City. (b) That within the Debt Service Fund there is hereby established the Capitalized Interest Account. The proceeds of Priority Bonds and Subordinate Lien Bonds representing Capitalized Interest may be deposited into the Capitalized Interest Account. On or before the day next preceding any interest payment date of bonds for which any interest has been capitalized, the City shall use the monies in the Capitalized Interest Account to pay such interest to the extent of the amounts therein representing such capitalized interest. Section 11 . RESERVE FUND. That there is hereby created and there shall be established and maintained on the books of the City a separate fund to be entitled the "City of Wichita Falls, Texas Water and Sewer Revenue Bonds Reserve Fund" (hereinafter called the "Reserve Fund" ) . Monies in said Fund shall be used solely for the purpose of retiring the last of any Series 1986 Bonds, Additional Priority Bonds or Subordinate Lien Bonds as they become due or paying principal of and interest on any Series 1986 Bonds, Additional Priority Bonds or Subordinate Lien 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 Prin- cipal and Interest Requirements of the outstanding Series 14 1986 Bonds, Additional Priority Bonds and Subordinate Lien Bonds (the "Required Amount" ) . Concurrently with the delivery of the Series 1986 Bonds to the purchasers thereof the City shall transfer all monies and securities on deposit in the reserve fund established for the Refunded Bonds and deposit such monies and securities to the credit of the Reserve Fund. Such amount being deposited in the Reserve Fund is equal to or in excess of the Required Amount. Upon the issuance of Additional Priority Bonds or Subordinate Lien Bonds the monies in the Reserve Fund shall be increased to the newly established Required Amount in accordance with the provisions of Section 20(b) of this Ordinance. The City may, at its option, withdraw and transfer to the System Fund, all surplus in the Reserve Fund over the Required Amount. Monies in said Fund shall be deposited and maintained in an official depository bank of the City. Section 12 . SUBORDINATE OBLIGATIONS FUND. That there is hereby created and there shall be established and main- tained on the books of the City a separate fund to be entitled the "City of Wichita Falls, Texas Water and Sewer Revenue Bonds Subordinated Obligations Fund" (herein defined as the "Subordinated Obligations Fund" ) . Monies in said Fund shall be maintained in an official depository bank of the City. Monies in the Subordinated Obligations Fund shall be withdrawn to pay the principal of and interest on Sub- ordinated Obligations and shall be paid over to the Paying Agent/Registrar to make the payments required in clauses (a) and (b) of Section 16 in the event that monies are not available in the System Fund for that purpose. Section 13 . INVESTMENTS. That money in any Fund established pursuant to this Ordinance may, at the option of the City, be (A) placed in time deposits or certificates of deposit which (to the extent not insured by the Federal Deposit Insurance Corporation) are secured by obligations of the type described in (B) hereinbelow, or (B) invested, including investments held in book-entry form, in (i) direct obligations of the United States of America, (ii) obligations guaranteed or insured by the United States of America, which, in the opinion of the Attorney General of the United States, are backed by its full faith and credit or represent its general obligations, or, (iii) to the extent permitted by law, evidences of indebtedness and ✓repurchase agreements issued, insured or guaranteed by such governmental agencies as the Federal Land Banks, Federal Intermediate Credit Banks, Banks for Cooperatives, Federal Home Loan Banks, Government National Mortgage Association, United States Postal Service, Farmers Home Administration, Federal Home Loan Mortgage Association; provided that all money required to be expended from any Fund will be avail- able at the proper time or times. Money in the Reserve Fund shall not be invested in securities maturing later than the final maturity of the Priority Bonds and Subordinate Lien Bonds. If monies in a Fund herein established are permitted to be invested the value of any such Fund shall be established by adding the monies therein to the Value of Investment Securities. The value of each such Fund shall be established annually during the last month of each Year and in addition thereto, with respect to the Reserve Fund, value shall be established within thirty days prior to the issuance of Priority Bonds or Additional 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 or Subordinate Lien Bonds. Section 14. FUNDS SECURED. That monies in the System Fund and all Funds created by this Ordinance, to the extent not invested, shall be secured in the manner prescribed by law for securing funds of the City. 15 Section 15. APPLICATION OF SERIES 1986 BOND PROCEEDS. Concurrently with the delivery of the Series 1986 Bonds, the proceeds thereof shall be applied in the various amounts and for the purposes described in a certificate of the City, to be delivered by the City upon delivery of the Series 1986 Bonds. Section 16. FLOW OF FUNDS. That all monies in the System Fund not required for paying Operating Expenses during each month shall be applied by the City, on or before the 25th day of the following month, commencing during the months and in the order of priority with respect to the Funds and Accounts that such applications are hereinafter set forth in this Section. (a) Debt Service Fund - To the credit of the Debt Service Fund without priority among the deposits except that the deposits set forth in (1) , (2) and (3) shall have priority over the other deposits in this paragraph (a) , 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 25th day thereof, as will be sufficient, together with other amounts, if any, in the Debt Service Fund available for such purpose, 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 deliv- ered, or the month thereafter if delivery is made after the 25th 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; (3 ) such amounts, deposited in approximately equal monthly intallments, commencing during the month which the Subordinate Lien Bonds are delivered, or the 'month thereafter if delivery is made after the 25th day thereof, as will be sufficient, together with other amounts, if any, in the Debt Service Fund available for such purpose, to pay the interest scheduled to come due on the Subordinate Lien Bonds on the next succeeding interest payment date; (4) 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 the Subordinate Lien Bonds, or (ii ) the month during which the Subordinate Lien Bonds are delivered, or the month thereafter if delivery is made after the 25th 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 the Subordinate Lien Bonds and any Additional Bonds on the next succeeding principal payment date; and (b) Reserve Fund. When and so long as the sum of money and the Value of Investment Securities 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 16 of Priority Bonds or Subordinate Lien 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. If the Reserve Fund contains less than the Required Amount due to the issuance of Priority Bonds or Subordinate Lien Bonds deposits shall be made to the Reserve Fund commencing during the month and in the amounts required by Section 11. (c) Subordinate Obligations Fund. Commencing during the month Subordinated Obligations are delivered, or the month thereafter if delivery is made after the 25th day thereof, the City shall deposit to the credit of the Subordinated Obligations Fund the amount in cash accruing in such calendar month for payment of the debt service requirements on any Subordinated Obligations. Such payments 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 or Subordinate Lien Bonds. (d) Surplus. The balance of any monies remaining in the System Fund following such transfers shall be used by the City for any lawful purpose. Section 17. DEFICIENCIES. That if on any occasion there shall not be sufficient Pledged Revenues to make the deposits and other applications of monies required by Section 17 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 16) as soon as possible from the next available Pledged Revenues, or from any other sources available for such purpose. Section 18. PAYMENT OF SERIES 1986 BONDS AND ADDI- TIONAL PRIORITY BONDS. That on or before February 1, 1987, and semiannually on or before each August 1 and February 1 thereafter while any of the Series 1986 Bonds or Additional Priority Bonds are outstanding and unpaid, the City shall make available to the Paying Agent/Registrar therefor, out of the Debt Service Fund (and the other funds, if necessary, in the order of priority set forth herein) monies sufficient to pay such interest on and such principal amount of the Series 1986 Bonds and Additional Priority Bonds as shall become due and mature on such dates, respectively, at maturity or by redemption prior to maturity. The Paying Agent/Registrar shall destroy all paid Series 1986 Bonds and Additional Priority Bonds and furnish the City with an appropriate certificate of cancellation or destruction. Section 19. FINAL DEPOSITS; GOVERNMENT OBLIGATIONS. (a) That any Priority Bond shall be deemed to be paid, retired and no longer outstanding within the meaning 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 other- wise) either (i) shall have been made in accordance with the terms thereof or (ii ) shall have been provided for by ir- revocably depositing with, or making available to, a paying agent (or escrow agent) therefor, in trust and irrevocably set aside exclusively for such payment, ( 1) money sufficient to make such payment or (2 ) Government Obligations, as hereinafter defined in this Section, certified by an inde- pendent public accounting firm of national reputation, to mature as to principal and interest in such amounts and at such times as will insure the availability, without rein- vestment, of sufficient money to make such payment, and all necessary and proper fees, compensation, and expenses of such paying agent pertaining to the Priority Bonds with respect to which such deposit is made shall have been paid 17 or the payment thereof provided for and irrevocable instructions shall have been given by the City to such paying agent of such bonds to give notice of such redemption in the manner required by the ordinance or ordinances authorizing the issuance of such bonds) to the satisfaction of such paying agent. Such paying agent shall give notice to each registered owner of any Priority Bond that such deposit as described above has been made, in the same manner as described in Section 3 . 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. (b) That any moneys so deposited with a paying agent (or escrow agent) may, at the direction of the City, also be invested in Government Obligations, maturing in the amounts and times as hereinbefore set forth, and all income from all Government Obligations in the hands of the paying agent pursuant to this Section which is not required for the payment of the Priority Bonds, the redemption premium, if any, and interest thereon, with respect to which such money has been so deposited, shall be remitted to the City for deposit into the System Fund. (c) That the City covenants that no deposit will be made or accepted under clause (a) (ii) of this Section and no use made of any such deposit which would cause the Series 1986 Bonds or any Additional Bonds to be treated as arbitrage bonds within the meaning of Section 103(c) of the Internal Revenue Code of 1954, as amended. (d) That for the purpose of this Section, the term "Government Obligations" shall mean direct obligations of the United States of America, including obligations the principal of and interest on which are unconditionally guaranteed by the United States of America. (e) Except as provided in clause (b) of this Section, all money or Government Obligations set aside and held in trust pursuant to the provisions of this Section for the payment of Priority Bonds, the redemption premium, if any, and interest thereon, shall be applied solely to and used solely for the payment of such Priority Bonds, the redemption premium, if any, and interest thereon. Section 20. ISSUANCE OF PRIORITY AND SUBORDINATE LIEN BONDS. (a) That subject to the provisions hereinafter appearing as conditions precedent which must first be satisfied, the City reserves the right to issue, from time to time as needed, Priority Bonds and Subordinate Lien Bonds, either or both, for any lawful purpose relating to the System. Such Priority Bonds and Subordinate Lien Bonds may be issued in such form and manner as now or hereafter authorized by the laws of the State of Texas for the issu- ance 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 pre- cedent herein required for the authorization and issuance of Priority Bonds and Subordinate Lien Bonds are satisfied. (b) That the Debt Service Fund and the Reserve Fund established by this Ordinance shall secure and be used to pay all Priority Bonds and Subordinate Lien Bonds as well as 18 r the Series 1986 Bonds. Upon the issuance and delivery of Priority Bonds or Subordinate Lien 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 Priority Bonds or Subordinate Lien Bonds, or, at the option of the City, 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 25th day of each month following the delivery of such Priority Bonds or Subordinate Lien Bonds, of not less than 1/60 of said required additional amount (or 1/60 of the balance of said required additional amount not deposited in cash as permitted above) . (c) That 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 Priority Bonds or Subordinate Lien Bonds then proposed to be issued. (d) That the principal of all Priority Bonds or Subordinate Lien Bonds (except such obligations scheduled to mature within twelve months from the date of issuance thereof) must be scheduled to be paid or mature on August 1 of the years in which such principal is scheduled to be paid or mature; and all interest thereon must be payable on February 1 and August 1. Section 21 . FURTHER REQUIREMENTS FOR PRIORITY BONDS OR SUBORDINATE LIEN BONDS. (a) Conditions Precedent for Issuance of Priority Bonds and Subordinate Lien Bonds - General. That as a condition precedent to the issuance of any Priority Bonds or Subordinate Lien 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) all payments into 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 have been made in full and that the amounts on deposit in such funds or accounts are the amounts then required to be deposited therein. Such certificate shall be dated as of the date of delivery of such Priority Bonds or Subordinate Lien Bonds. (b) Conditions Precedent for Issuance of Priority Bonds and Subordinate Lien Bonds - Capital Improvements and for any other lawful purpose except for Capital Additions or for refunding. Except as otherwise provided in clause (c) of this Section, the City covenants and agrees that neither Priority Bonds nor Subordinate Lien Bonds will 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 clauses (d) , (e) or (f) of this Section) unless and until the conditions precedent in clause (a) above have been satisfied and, in addition thereto, the City has secured: (i ) for the issuance of Priority Bonds, a certificate or opinion of the Accountant to the effect that, according to the books and records of the City, the Net Earnings (hereafter defined) for the preceding Year or for 12 con- secutive months out of the 15 months immediately preceding the month the ordinance authorizing the Priority Bonds is adopted are at least equal to the sum of ( 1) 1 . 10 times the Average Annual Principal and Interest Requirements for any 19 P Subordinate Lien Bonds outstanding (except Priority Bonds) that are payable from and secured by a lien on and pledge of the Pledged Revenues of the System, and (2) 1 .25 times the Average Annual Principal and Interest Requirements for all outstanding Priority Bonds after giving effect to the Priority Bonds then proposed. In making a determination of the Net Earnings, 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 sixty (60) days prior to the last day of the period for which Net Earnings are determined and, for purposes of satisfying the above Net Earnings test, make a pro forma determination of the Net Earnings for the period of time covered by his 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; or (ii) for the issuance of Subordinate Lien Bonds, 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 Subordinate Lien Bonds is adopted are at least equal to the sum of ( 1) 1 . 10 times the Average Annual Principal and Interest Requirements for the Subordinate Lien Bonds outstanding (except Priority Bonds) that are payable from and secured by a lien on and pledge of the Pledged Revenues of the System, including Subordinate Lien Bonds then proposed and (2) 1.25 times the Average Annual Principal and Interest Requirements for all outstanding Priority Bonds. In making a determination of the Net Earnings, the Accountant may take into consideration a change in the rates and charges for services and facili- ties afforded by the System that became effective at least sixty (60) days prior to the last day of the period for which Net Earnings are determined and, for purposes of satisfying the above Net Earnings test, make a pro forma determination of the Net Earnings of the System for the period of time covered by his 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. 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. (c) The City covenants and agrees that neither Priority Bonds nor Subordinate Lien Bonds may be issued for the purpose of financing Capital Improvements when other outstanding Priority Bonds or Subordinate Lien Bonds have been issued for Capital Additions and capitalized interest for such other Priority Bonds or Subordinate Lien Bonds has been provided for at least the twelve months subsequent to the date of issuance of the new Priority Bonds or Subordinate Lien Bonds being issued, unless the conditions precedent in clause (a) above have been satisfied and, in addition thereto, the City has either ( 1) complied with the conditions of clause (b) of this Section, or (2 ) has satisfied the conditions precedent in clauses (d) (i) and (d) (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: (i) for the issuance of Priority Bonds, a certificate or opinion of ,the Accountant to the effect that, according to the books and records of the City, the Net Earnings 20 (hereafter defined) for the preceding year or for 12 con- secutive months out of the 15 months immediately preceding the month the ordinance authorizing the Priority Bonds is adopted are at least equal to the sum of (a) 1. 10 times the Average Annual Principal and Interest Requirements for the Subordinate Lien Bonds outstanding other than any Subordinate Lien 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 new Priority Bonds being issued that are payable from and secured by a lien on and pledge of the Pledged Revenues of the System, and (b) 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 new Priority Bonds being issued after giving effect to the Priority Bonds then proposed. In making a determination of the Net Earnings, 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 sixty (60) days prior to the last day of the period for which Net Earnings are determined and, for purposes of satisfying the above Net Earnings test, make a pro forma determination of the Net Earnings for the period of time covered by his 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; or (ii) for the issuance of Subordinate Lien Bonds, 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 Subordinate Lien Bonds is adopted are at least equal to the sum of (a) 1. 10 times the Average Annual Principal and Interest Requirement for the Subordinate Lien Bonds outstanding other than any Subordinate Lien Bonds issued for Capital Additions for which capitalized interest has been provided for at least twelve months subsequent to the date of issuance of the new Subordinate Lien Bonds being issued that are payable from and secured by a lien on and pledge of the Pledged Revenues of the System, including Subordinate Lien Bonds then proposed and (b) 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 twelve months subsequent to the date of the new Subordinate Lien Bonds being issued. In making a determination of the Net Earnings, 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 sixty (60) days prior to the last day of the period for which Net Earnings are determined and, for purposes of satisfying the above Net Earnings test, make a pro forma determination of the Net Earnings of the System for the period of time covered by his 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. (d) Conditions Precedent for Issuance of Priority Bonds or Subordinate Lien Bonds - Capital Additions: Initial Issue. The City covenants and agrees that neither Priority Bonds nor Subordinate Lien Bonds will be issued for the purpose of financing Capital Additions, unless the same conditions precedent specified in clause (a) above have been satisfied and, in addition thereto, the conditions precedent specified in clause (b) above are satisfied or, in the alternative, the City shall have obtained: 21 (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 acquisi- tion 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 substan- tially 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 reason- ably 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 the sum of (A) 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, and (B) 1. 10 times the Average Annual Principal and Interest Requirements for Subordinate Lien Bonds (other than Priority Bonds) payable from the Pledged Revenues, which are then outstanding or incurred and all Subordinate Lien 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 Addition is to be delivered through the fifth year subsequent to the date the . Capital Addition is estimated to become commercially operative. (e) Subsequent Issues. Once a Capital Addition has been initiated by meeting the conditions precedent specified in clauses (d) (i ) and (d) (ii) above and the initial Priority Bonds or Subordinate Lien Bonds delivered therefor, the City reserves the right to issue Priority Bonds and Subordinate Lien Bonds, as the case may be, 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 clauses (d) (i ) and (d) (ii ) or clause (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 Priority Bonds or Subordinate Lien Bonds then being issued for the period (the "Forecast Period" ) of each ensuing year through the fifth year 22 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 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 Priority Bonds or Subordinate Lien Bonds then being issued for the Forecast Period. (f) The City reserves the right to issue refunding bonds to refund all or any part of the outstanding Priority Bonds or Subordinate Lien Bonds (pursuant to any law then available) , upon such terms and conditions as the City Council 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 or Subordinate Lien Bonds are refunded, the conditions precedent prescribed (for the issuance of Priority Bonds or Subordinate Lien Bonds) set forth in clauses (a) and (b) of this Section shall be satisfied and the Accountant' s certificate or opinion required by clause (b) shall give effect to the issuance of the proposed refunding bonds (and shall not give effect to the Priority Bonds or Subordinate Lien Bonds being refunded following their cancellation or provision being made for their payment) . No Accountant' s certificate otherwise required by clause (b) will be required for refunding bonds, after giving effect to such proposed refunding, if there is no increase in debt service for any Year before or including any Year in which there will be debt service on Priority Bonds or Subordinate Lien Bonds outstanding both before and after such refunding and any such refunding bond does not have a lien on Pledged Revenues superior to the obligation which it refunds. (g) With reference to Priority Bonds and Subordinate Lien 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 Finance (or other officer of the City then having the primary responsibility for the financial affairs of the City) . In the preparation of the Engineering Report required in clause (d) (i) above, the Engineer of Record may rely on other experts or profes- sionals, 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 Subordinate Lien Bonds or Priority Bonds -for Capital Additions, the certificate of the City' s Director of Finance 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. (h) Priority Bonds or Subordinate Lien Bonds for Capital Additions may be combined in a single issue with Priority Bonds or Subordinate Lien Bonds, as the case may be, for Capital Improvements or for any lawful purpose provided the conditions precedent set forth in clauses (b) through (f) are complied with as the same relate to the appropriate purpose. (i ) 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 23 pledge created hereby for the security of the Priority Bonds and Subordinate Lien Bonds, the payments required to be made hereunder into the Debt Service Fund, the Reserve Fund and the retained amount of Operating Expenses in accordance with Section 18(c) ; 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 Subordinate Lien Bonds. Section 22 . GENERAL COVENANTS. That the City further covenants and agrees that in accordance with and to the extent required or permitted by law: (a) 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 Priority Bonds or Subordinate Lien Bonds, and in each and every Priority Bond and Subordinate Lien Bond; it will promptly pay or cause to be paid the principal amount of and interest on every Priority Bond and Subordinate Lien Bond, on the dates and in the places and manner prescribed in such ordinances and Priority Bonds or Subordinate Lien 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 or Subordinate Lien 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 or Subordinate Lien Bonds, by all legal and equitable means, including specifically, but without limitation, the use and filing of mandamus proceedings, in any court of competent jurisdiction, against the City, its officials and employees. (b) CITY' S LEGAL 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 Series 1986 Bonds; that all action on its part for the issuance of the Series 1986 Bonds has been duly and effec- tively taken, and that the Series 1986 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) The City 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) the City 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 24 facilities, and every part thereof, for the benefit of the owners of the Priority Bonds and Subordinate Lien 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 and Subordinate Lien 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, assess- ments 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. 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. (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 and Subordinate Lien 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 obligations payable 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 facili- ties 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 of the Engineer of Record and the City Manager stating, in the opinion of the signers, 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 of the Engineer of Record and the City Manager stating, in the opinion of the signers, that the sale or exchange of such property or facilities will not impair the ability of the City to comply during the current or any future year with the provisions of clause ( 1) of this Section. The proceeds of any such sale or exchange not used to 25 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 any Subordinate Lien Bonds, or (ii) otherwise be used to provide for the payment of Priority Bonds or any Subordinate Lien Bonds; 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 (i) does not impede the operation by the City of the System and (ii) does not in any manner impair or adversely affect the rights or security of the owners of the Priority Bonds or any Subordinate Lien Bonds under this Ordinance; and provided, further, that if the depre- ciated cost of the property to be covered by any such lease, contract, license, arrangement, easement or other right is in excess of $500,000, the City shall have received a certificate of 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 re- ceived by the City under or in connection with any such lease, contract, license, arrangement, easement or right in respect of the System or any part thereof shall constitute Gross Revenues. (i) BOOKS, RECORDS AND ACCOUNTS. The City 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 Fiscal Year by the Accountant. (j ) INSURANCE. ( 1) It shall cause to be insured such parts of the System as would usually be insured by corpora- tions operating like properties, with a responsible insur- ance 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 of the City 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 contrac- tor 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 repre- sentatives at all reasonable times. (2) 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 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. The City 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 sufficient (a) (1) 26 to pay all current Operating Expenses of the System, and (2) to produce Net Revenues for each Year at least equal to the sum of (i) 1.25 times the Average Annual Principal and Interest Requirements of all then outstanding Priority Bonds and (ii) 1. 10 times the Average Annual Principal and Interest Requirements of all then outstanding Subordinate Lien Bonds; or (b) to pay the sum of (i) all current Operating Expenses, (ii ) the Average Annual Principal and Interest Requirements on the then outstanding Priority Bonds and Subordinate Lien Bonds, (iii) required deposits to the Reserve Fund required for the Priority Bonds and Subordinate Lien Bonds, and (iv) amounts required to pay all other obligations of the System reasonably anticipated to be paid from Gross Revenues during the current Year. Average Annual Principal and Interest Requirements as used in this clause (4) shall exclude debt service on any Priority Bonds or Subordinate Lien Bonds if capitalized interest for such bonds has been provided for at least the next twelve months. ( 1) AUDITS. After the close of each year while any Priority Bonds or any Subordinate Lien Bonds are outstand- ing, an audit will be made of the books and accounts relat- ing 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 the Municipal Advisory Council of Texas and to any holder of 5% or more in aggre- gate principal amount of the then outstanding Priority Bonds and Subordinate Lien 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 or any Subordinate Lien 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 govern- mental 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, opera- tion 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) TAX COVENANTS. It will make no use of the proceeds of the Series 1986 Bonds at any time throughout the term of this issue of Series 1986 Bonds which, if such use had been reasonably expected on the date of delivery of the Series 1986 Bonds to and payment for the Series 1986 Bonds by the purchasers, would have caused the Series 1986 Bonds to be industrial development bonds within the meaning of Section 103(b) of the Internal Revenue Code of 1954, as amended (the "Code" ) , or arbitrage bonds within the meaning of Section 103 (c) of the Code, or any regulations or rulings pertaining thereto; and by this covenant the City is obli- gated to comply with the requirements of the aforesaid Section 103 (b) or 103 (c) and all applicable and pertinent Department of the Treasury regulations relating to arbitrage bonds. The City further covenants that the proceeds of the Series 1986 Bonds will not otherwise be used directly or indirectly so as to cause all or any part of the Series 1986 Bonds to be or become industrial development bonds or arbitrage bonds within the meaning of the aforesaid Section 103 (b) or 103 (c) , or any regulations pertaining thereto. 27 The Mayor of the City is hereby authorized and directed to execute a No-Arbitrage Certificate substantially in the form attached hereto as Exhibit A with such changes as shall be approved by the City' s Bond Counsel and the Mayor of the City, and the execution by the Mayor of the City of said No-Arbitrage Certificate shall evidence the acceptance of any such changes on behalf of the City. After execution and delivery, the provisions of said Certificate shall consti- tute covenants of the City to the extent set forth therein, and shall evidence the expectations of the City the same as if set forth at this place. (p) RIGHTS OF INSPECTION. The Engineer of Record or any registered owner of $100,000 in aggregate principal amount of the Priority Bonds or Subordinate Lien 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. Section 23 . APPROVAL OF SPECIAL ESCROW FUND. That the proceeds from the sale and delivery of the Series 1986 Bonds to be used to refund the Refunded Obligations, as indicated in the certificate of the City referred to in Section 15, shall be deposited in immediately available funds with InterFirst Bank Dallas, N.A. , Dallas, Texas, which is hereby designated as the bank of delivery for such proceeds, and shall be used for refunding, discharging and retiring all of the Refunded Obligations, and paying the costs and expenses of issuance of the Series 1986 Bonds. The City Council authorizes the execution of an Escrow Agreement (the "Escrow Agreement" ) between the City and InterFirst Bank Dallas, N.A. , Dallas, Texas, in substantially the form attached hereto as Exhibit B. In addition, the Mayor, City Manager or Director of Finance of the City are authorized to execute such subscriptions for the purchase of United States Treasury Securities, State and Local Government Series, as may be necessary for the Escrow Fund established by the Escrow Agreement, and that the Issuer may also purchase from Schneider, Bernet & Hickman for investment in the Escrow Fund such obligations of the United States of America or any of its agencies, or such obligations fully guaranteed by the United States of America that will be appropriate open market investments for such Escrow Fund. In addition, officials of the City are directed, upon delivery of the Bonds, to transfer to InterFirst Bank Dallas, N.A. , Dallas, Texas, as Escrow Agent under the Escrow Agreement from the funds on hand an amount necessary to purchase such open market investments, which amount shall be deposited in the Escrow Fund and used in accordance with the provisions of the Escrow Agreement. Section 24. REASONS FOR REFUNDING. That it is specif- ically found and determined by the City that refunding of the Refunded Obligations in the manner herein provided is expected to reduce for a number of years the portion of the annual Net Revenues of the System which will be required to service the bonded debt of the System. Therefore, it is in the best interest of the City that such refunding be accomp- lished, and the Refunded Obligations be refunded, discharged and retired thereby. Section 25 . AMENDMENT OF ORDINANCE. (a) That the registered owners of Priority Bonds and Subordinate Lien Bonds aggregating in principal amount 51% of the aggregate principal amount of the Priority Bonds and Subordinate Lien Bonds then outstanding shall have the right from time to time to approve any amendment to this Ordinance which may be 28 • deemed necessary or desirable by the City, provided, however, that without the consent of the registered owners of all of the Priority Bonds and Subordinate Lien 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 or Subordinate Lien Bonds so as to: (1) Make any change in the maturity of any of the outstanding Priority Bonds or Subordinate Lien Bonds; (2) Reduce the rate of interest borne by any of the outstanding Priority Bonds or Subordinate Lien Bonds; (3) Reduce the amount of the principal payable on the outstanding Priority Bonds or Subordinate Lien Bonds; (4) Modify the terms of payment of principal of, premium, if any, or interest on the outstanding Priority Bonds or Subordinate Lien Bonds, or impose any conditions with respect to such payment; (5) Affect the rights of the registered owners of less than all of the Priority Bonds and Subordinate Lien Bonds then outstanding; (6) Amend this clause (a) of this Section; or (7) Change the minimum percentage of the principal amount of Priority Bonds and Subordinate Lien Bonds necessary for consent to any amendment; unless such amendment or amendments be approved by the registered owners of all of the Priority Bonds and Subordinate Lien Bonds then outstanding. (b) That if at any time the City shall desire to amend the Ordinance under this Section, the City shall cause notice of the proposed amendment to be published in a financial newspaper or journal published in The City of New York, New York, and a newspapers 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 and Subordinate Lien Bonds. Such publication is not required, however, if notice in writing is given to each registered owner of Priority Bonds and Subordinate Lien Bonds. (c) That whenever at any time not less than thirty days, and within one year, from the date of the first publication of said notice or other service of written notice the City shall receive an instrument or instruments executed by the registered owners of at least 51% in aggregate principal amount of the Priority Bonds and Subordinate Lien 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 City Council may pass the amendatory ordinance in substantially the same form. (d) That upon the passage of any amendatory ordinance pursuant to the provisions of this Section, this Ordinance shall be deemed to be amended in accordance with such 29 r . 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 Subordinate Lien Bonds and all future Subordinate Lien Bonds and Priority Bonds shall thereafter be determined, exercised and enforced hereunder, subject in all respects to such amendments. (e) That any consent given by the registered owner of a Priority Bond or Subordinate Lien 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 or Subordinate Lien 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 51% in aggregate principal amount of the then outstanding Priority Bonds and Subordinate Lien Bonds as in this Section defined have, prior to the attempted revocation, consented to and approved the amendment. (f) The foregoing provisions of this Section notwith- standing, the City by action of the City Council may amend this Ordinance for any one or more of the following pur- poses: ( 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 Subordinate Lien 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 supple- menting any defective provision contained in this Ordinance, or in regard to clarifying matters or questions arising under this Ordinance, as are neces- sary 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 or Subordinate Lien 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 Series 1986 Bonds and each series of Additional Priority Bonds and Subordinate Lien 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 and Subordinate Lien Bonds issued after the date of the adoption of such modification. Section 26. DAMAGED, MUTILATED, LOST, STOLEN, OR DESTROYED BONDS. (a) That in the event any outstanding Series 1986 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 Series 1986 Bond, in replacement for such Series 1986 Bond in the manner hereinafter provided. 30 (b) Application for replacement of damaged, mutilated, lost, stolen, or destroyed Series 1986 Bonds shall be made to the Paying Agent/Registrar. In every case of loss, theft, or destruction of a Series 1986 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 Series 1986 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 Series 1986 Bond, the applicant shall surrender to the Paying Agent/Registrar for cancellation the Series 1986 Bond so damaged or mutilated. (c) Notwithstanding the foregoing provisions of this Section, in the event any such Series 1986 Bond shall have matured, and no default has occurred which is then contin- uing in the payment of the principal of, redemption premium, if any, or interest on the Series 1986 Bond, the City may authorize the payment of the same (without surrender thereof except in the case of a damaged or mutilated Series 1986 Bond) instead vof issuing a replacement Series 1986 Bond, provided security or indemnity is furnished as above pro- vided in this Section. (d) Prior to the issuance of any replacement bond, the Paying Agent/Registrar shall charge the owner of such Series 1986 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 Series 1986 Bond is lost, stolen, or destroyed shall constitute a contractual obligation of the City whether or not the lost, stolen, or destroyed Series 1986 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 Series 1986 Bonds duly issued under this Ordinance. (e) In accordance with Section 6 of Vernon' s Ann. Tex. Civ. St. Art. 717k-6, 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 of the City or any other body or person, and the duty of the replacement of such bonds is hereby authorized and imposed upon the Paying Agent/Registrar, and the Paying Agent/Registrar shall authenticate and deliver such bonds in the form and manner and with the effect, as provided in Section 5(d) of this Ordinance for Series 1986 Bonds issued in exchange for other Series 1986 Bonds. Section 27. APPROVAL AND REGISTRATION OF BONDS. That the Mayor of the City is hereby authorized to have control of the Series 1986 Bonds and all necessary records and proceedings pertaining to the Series 1986 Bonds pending their delivery and their investigation, examination and approval by the Attorney General of the State of Texas, and their registration by the Comptroller of Public Accounts of the State of Texas. Upon registration of the Series 1986 Bonds, said Comptroller of Public Accounts (or a deputy designated in writing to act for said Comptroller) shall manually sign the Comptroller' s Registration Certificate accompanying the Series 1986 Bonds, and the seal of said Comptroller shall be impressed, or placed in facsimile, on each such certificate. Section 28. SALE OF SERIES 1986 BONDS. (a) That the sale of the Series 1986 Bonds, at the price to the under- writers named in the Bond Purchase Contract described below, together with accrued interest on the Series 1986 Bonds to 31 date of delivery, and in accordance with the terms and conditions of the Bond Purchase Contract, between the City and Schneider, Bernet & Hickman, Inc. , dated the date of the adoption of this Ordinance, is hereby authorized, ratified and confirmed. (b) That the Bond Purchase Contract setting forth the terms of the sale of the Series 1986 Bonds to the purchasers thereof referred to in (a) above, is hereby accepted, approved and authorized to be delivered in executed form to said purchasers. The Purchase Contract shall be executed by the Mayor and attested by the City Clerk. Section 29. OFFICIAL STATEMENT. The Official Statement dated July 1, 1986, and any addenda, supplement, or amendment thereto, prepared and distributed in connection with the sale of the Series 1986 Bonds have been and are hereby approved by the City Council, and their use by the aforesaid purchasers in the reoffering of the bonds is hereby approved. It is further officially found, determined, and declared that the statements and representations contained in said Official Statement are true and correct in all material respects, to the best knowledge and belief of the City Council. Section 30. NOTICE OF REDEMPTION. There is attached to this Order as Exhibit C and made a part hereof for all purposes a Notice of Prior Redemption of Bonds for the Refunded Obligations to be redeemed prior to stated maturity and such bonds described in said Notice of Prior Redemption are hereby called for redemption and shall be redeemed prior to maturity on the date, at the place and at the price as set forth therein. Section 31. NOTICE TO PAYING AGENT AND REGISTERED OWNERS AND PUBLICATION. The Refunded Obligations described in Exhibit C attached hereto are so called for redemption and InterFirst Bank Dallas, N.A. , Dallas, Texas, is hereby directed to make appropriate arrangements so that such Refunded Obligations may be redeemed at said bank on the redemption date. A copy of such Notice of Prior Redemption shall be delivered to the paying agent bank so mentioned, and a copy of such Notice of Prior Redemption shall be published in a financial publication published in the City of New York, New York. Section 32 . EMERGENCY. That it is hereby officially found and determined: that a case of emergency or urgent public necessity exists which requires the holding of the meeting at which this Ordinance is passed, such emergency or urgent public necessity being that it is necessary that the bonds be refunded and that the proceeds from the sale of said bonds are required as soon as possible and without delay for necessary and urgently needed public improvements; and that said meeting was open to the public, and public notice of the time, place, and purpose of said meeting was given, all as required by Vernon' s Ann. Civ. St. Article 6252-17 . Section 33 . IMMEDIATE EFFECT. That this Ordinance shall be effective immediately from and after its passage in accordance with the provisions of the Charter of the City, and it is accordingly so ordained. 32 EXHIBIT A (NO-ARBITRAGE CERTIFICATE) 33 r . EXHIBIT B (ESCROW AGREEMENT) 34 EXHIBIT C NOTICE OF PRIOR REDEMPTION CITY OF WICHITA FALLS, TEXAS WATER AND SEWER REFUNDING REVENUE BONDS, SERIES 1984 NOTICE IS HEREBY GIVEN that the City of Wichita Falls, Texas has called for redemption the outstanding Bonds of the City described as follows: City of Wichita Falls, Texas Water and Sewer Refunding Revenue Bonds, Series 1984, maturing on August 1 in the years 1995 through 2004 in the aggregate principal amount of $15,280, 000; call date: August 1, 1994 redeemable at par plus accrued interest at InterFirst Bank Dallas, N.A. , Dallas, Texas. 36 EXHIBIT C NOTICE OF PRIOR REDEMPTION CITY OF WICHITA FALLS, TEXAS WATER AND SEWER REFUNDING REVENUE BONDS, SERIES 1984 NOTICE IS HEREBY GIVEN that the City of Wichita Falls, Texas has called for redemption the outstanding Bonds of the City described as follows: City of Wichita Falls, Texas Water and Sewer Refunding Revenue Bonds, Series 1984, maturing on August 1 in the years 1995 through 2004 in the aggregate principal amount of $15,280,000; call date: August 1, 1994 redeemable at par plus accrued interest at InterFirst Bank Dallas, N.A. , Dallas, Texas. • 35 Ad 166560 ORD'INAtkktib.111, n Affidavit of Publication ORDINANCE AMENDING SEC- TIONS Affidavit Publication 22-14 OF,THE CODE OF ORDINANCES TO INCREASE THE NUMBER.OF MEMBERS"OF`:THE THE STATE OF TEXAS PARK BOARD FROM 9 TO 11 ORDINANCE NO,4945 . ' COUNTY OF WICHITA ORDINANCE WAIVING SEC- TION 24-4,..0k.THE-CODE.CODE.'OF ir�l (IN ORDINANCES TO,ALLOW PO5-r SESSION SAND 22nd CONSUMPTION; Jul y OF BEER INLU4Y PARK FOR.THE; On this , day of OIL BOWL $IJN RUN:.ON AUGUST 2, 1986 I Q ORDINANCdNQ.50-86 A.D. ..�9V . personally appeared before me, the undersigned authority AN ORDINANCE CLOSING,VA-' CATING,AND ABANDONING A BLANKET SEWER EASEMENT ON D a r i C e U. Ming n� , bookkeeper LOTS 1 & 2, BLOCK 1, MIZELL 1 SUBDIVISION, WICHITA FALLS, . TEXAS for the Times Publishing Company of Wichita Falls, publishers of the ORDINANCE NO.51-86 1 AN GAT NG,IANDCABANDONING A Wichita Falls Record News, a newspaper published at Wichita Falls in TWELVE (12) FOOD WIDE, ■NORTH-SOUTH UTILITY EASE- Wichita County. Texas, and upon being duly sworn by me, on oath states 1 MENT IN LOT 1, BLOCK 1, ' j BRODIE BUICK SUBDIVISION ' t d true i ti d d h tt that the aace ,advertisement a rue an correct copy LOTS 1-4, BLOCK 1,CAN- I py Oi advertising NON PARK ADDITION,WICHITA FALLS,TEXAS published in�. one (1) ORDINANCE NO.52-86 p issues thereof or. the following ORDINANCE TO APPROVE MODIFICATION TO WATER dates: PURCHASE'CONTRACT WITH j it 1✓ 18, 1986 SHEPPARD AIR FORCE BASE •ORDINANCE NO.53-86 ORDINANCE CLOSING HEAR- ING AND FINDING CERTAIN `x \'V?j\ BUILDINGS AND/OR STRUC- TURES TO BE DANGEROUS: Bookkeeper for Times Publishingdompany COMMANDING PROPERTY OWNERS TO REPAIR OR. DE- of Wichita Falls MOLISH SAID BUILDINGS AND/OR STRUCTURES;;WITHIN THIRTY(30).DAYSOF THE DATE Subscribed and sworn to before me this the day and year first above OF THIS 'ORDINANCE AND DECLARING AN EMERGENCY p L) written. _ ORDINANCE NO.54-86 II AN ORDINANE" =,^-'st—.-c:i'', j.,..,..4. ING AND REAI'PROIPRtATING iI �`� i d--(21,0,-.±... FEDERAL REVENUE SHARING FUNDS ORDINANCE NO.55-86 AN ORDINANCE TRANS- FERRING FUNDS BETWEEN DE- PARTMENTS WITHIN THE GEN- ERAL FUND FOR PURPOSES OF C--nr.77,1-77 i TS PURCHASING A PUBLIC SAFETY f'* _ 1 COMPUTER SYSTEM AND A MU- C"c al:7 YU 011c, exa,, NICIPAL COURT COMPUTER f/V Cci r i :on B--pir°s -1 7-ZJ 2 SYSTEM F - � —v ORDINANCE NO.56-86 ORDINANCE AUTHORIZING THE • ISSUANCE AND SALE OF CITY OF WICHITA FALLS, TEXAS, WATER AND SEWER REFUND- i . ING REVENUE BONDS, SERIES 1986, AUTHORIZING THE EX- ECUTION OF A BOND PURCHASE CONTRACT, AP- ■ PROVING AN'OFFICAOSTATE- ' MENT AND THE AN ESCROW AGREEMENT'<'i ORDINANNCENO:157-86 ORDINANCE'AUTHORIZING THE ISSUANCE OF GENERAL OBLI- GATION REFUNDING BONDS,- SERIES 1986, AUTHORIZING THE EXECUTION OF A BOND PURCHASE CONTRACT, AP- • PROVING AN OFFICIAL STATE- .. • • 1 MENT AND THE EXECUTION OF AN ESCROW AGREEMENT