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HomeMy WebLinkAboutOrd 1688 - waterworks and sewer system revenue bonds 2001B ORDINANCE NO: 2001-1688 AN ORDINANCE OF THE CITY OF WEST UNIVERSITY PLACE, TEXAS, AUTHORIZING THE ISSUANCE AND SALE OF $3,015,000 WATERWORKS AND SEWER SYSTEM REVENUE BONDS, SERIES 2001 B; AND PROVIDING THE DETAILS RELATING THERETO; AND DECLARING AN EMERGENCY BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF WEST UNIVERISTY PLACE, TEXAS: ARTICLE I FINDINGS AND DETERMINATIONS Section 1: Findings and Detenninations~ The bonds hereinafter authorized were duly and favorably voted at an election held in the City of West University Place, Texas (the "CityU) on the 7th day of November, 1995~ The City Council hereby finds that $3,015,000 of the revenue bonds authorized at said election should be issued for the purposes shown in the table below: Purpose Amount Authorized Prior Issues This Issue Unissued Waterworks System Sanitary Sewer System $ 5,200,000 12,800,000 $5,200,000 9,785,000 $ -0- 3,015,000 $ -0- -0- ARTICLE II DEFINITIONS AND INTERPRETATIONS Section 2~ 1: Definitions. In this Ordinance, the following terms shall have the following meanings, unless the context clearly indicates otherwise: !tAct" means Chapter 1502, Texas Government Code, as amended.. "Additional Parity Bondsu mean the additional parity revenue bonds permitted to be issued by the City pursuant to Section 6..1 of this Ordinance. UBondsU mean the City of West University Place, Texas, Waterworks and Sewer System Revenue Bonds, Series 2001 B, authorized by this Ordinance~ UBusiness Day" means any day which is not a Saturday, Sunday, or a day on which the Registrar is authorized by law or executive order to close. nCitylT means the City of West University Place, Texas a home-rule city of the State of Texas, and where appropriate, the City Council thereof and any successor to the City as owner of the System~ "Code" means the Internal Revenue Code of 1986, as amended. "Comptrol1eru means the Comptroller of Public Accounts of the State of Texas. "Construction Fund II means the construction fund established by the City pursuant to Section 7 ~3 of this Ordinance. UDTCn means The Depository Trust Company of New York, New York, or any successor securities depository. "DTC ParticipantU means brokers and dealers, banks, trust companies, clearing corporations and certain other organizations on whose behalfDTC was created to hold securities to facilitate the clearance and settlement of securities transactions among DTC Participants. "Gross Revenuesu mean all revenues, income and receipts of every nature derived or received by the City from the operation and ownership of the System and the interest income from the investment or deposit ofmoney in the Revenue Fund, the Debt Service Fund, and the Reserve Fund. "Initial Bonds" means the Bonds to be initially issued and registered by the Comptroller in accordance with Section 3 ~3 hereof. "Interest Payment Date", when used in connection with any Bond, means February 1, 2002, and each August 1 and February 1 thereafter until maturity or earlier redemption~ "Issuance DateU, with respect to the Bonds initially delivered to TWDB, means the date on which each such Bond is authenticated by the Registrar and delivered to and paid for by TWDB. Bonds delivered on transfer of or in exchange for other Bonds shall bear the same Issuance Date as the Bond or Bonds in lieu of or in exchange for which the new Bond is delivered. "Maintenance and Operation Expensestl mean the reasonable and necessary expenses of operation and maintenance of the System, including all salaries, labor, materials, repairs and extensions necessary to render efficient service (but only such repairs and extensions as, in the judgment of the governing body of the City, are necessary to keep the System in operation and render adequate service to the City and the inhabitants thereof, or such as might be necessary to meet some physical accident or condition which would otherwise impair the System), and all payments under contracts now or hereafter defined as operating expenses by the Legislature of Texas. Depreciation shall never be considered as a Maintenance and Operation Expense. nMSRBn means the Municipal Securities Rulemaking Board. flNet Revenues" mean all Gross Revenues remaining after deducting the Maintenance and Operation Expenses. -2- "NRMSIRtt means each person whom the SEe or its staffhas determined to be a nationally recognized municipal secu~ties information repository within the meaning of the Rule from time to time~ "Ordinance" means this bond ordinance and all amendments hereof and supplements hereto. nOutstanding BondsU means the City's Waterworks and Sewer System Revenue Bonds, Series 1996A, Series 1996B, Series 1998 and Series 2001A~ ffOwnerU, when used with respect to any Bond means the person or entity in whose name such Bond is registered in the Register. Any reference to a particular percentage or proportion of the Owners mean the Owners at a particular time of the specified percentage or proportion in aggregate principal amount of all Bonds then outstanding under this Ordinance, exclusive of Bonds held by the <;:ity. HParity Bonds" mean the Bonds, the Outstanding Bonds, and each series of Additional Parity Bonds from time to time hereafter issued, but only to the extent such Parity Bonds remain outstanding within the meaning of this Ordinance. "Record Date" means, for any Interest Payment Date, the fifteenth day of the month next preceding each Interest Payment Date~ "Registertt means the books of registration kept by the Registrar in which are maintained the names and addresses of, and the principal amounts of the Bonds registered to, each Owner. "Registrar" means Bank One, National Association, and its successors in that capacity. "Reserve Fund Requiremene' means the average armual principal and interest requirements on the Parity Bonds, which may be determined and redetermined each year by the City but in no event less frequently than upon the issuance of each series of Parity Bonds~ UReserve Fund Surety Policy" means an insurance policy or other credit agreement as provided in Section 5~6 of this Ordinance. URuletl means SEe Rule 15c2-12, as amended from time to time.. "SEe If means the United States Securities and Exchange Commission~ "SIDU means the Municipal Advisory Council of Texas, which has been designated by the State of Texas as, and determined by the SEe staff to be, a state information depository within the meaning of the Rule. USpecial Project" means, to the extent permitted by law, any watexworks or sanitary sewer system property, improvement or facility declared by the City not to be part of the System and substantially all of the costs of acquisition, construction, and installation of which is paid from -3- proceeds of a financing transaction other than the issuance of bonds payable from ad valorem taxes or Gross Revenues or Net Revenues of the System, and for which all maintenance and operation expenses are payable from sources other than revenues of the System, but only to the extent that and for so long as all or any part of the revenues or proceeds of which are or will be pledged to secure the payment or repayment of such costs of acquisition, construction and installation under such financing transaction. "System" means all properties, facilities, improvements, equipment, interests, and rights constituting the waterworks and sanitary sewer system of the City, including all future extensions, replacements, bettennents, additions, and improvements to the System. The System shall not include any Special Project. llTWDB" means the Texas Water Development Board~ Section 2..2: Interpretations. All terms defined herein and all pronouns used in this Ordinance shall be deemed to apply equally to singular and plural and to all genders~ The titles and headings of the articles and sections of this Ordinance have been inserted for convenience of reference only and are not to be considered a part hereof and shall not in any way modify or restrict any of the terms or provisions hereof. This Ordinance and all the terms and provisions hereof shall be liberally construed to effectuate the purposes set forth herein and to sustain the validity of the Parity Bonds and the validity of the lien on and pledge of the Net Revenues to secure the payment of the Parity Bonds. ARTICLE III TERMS OF THE BONDS Section 3 ~ 1 : Authorization and Authorized Amount. The Bonds shall be issued, pursuant to the Act, in fully registered form in the principal amount of Three Million Fifteen Thousand Dollars ($3,015,000) for the purpose of constructing improvements to the CityfS sanitary sewer system. Section 3,,2: Designation, Date, and Interest Payment Dates. The Bonds shall be designated as "City of West University Place~ Texas, Waterworks and Sewer System Revenue Bonds, Series 2001 B, II and shall be dated July 1, 2001" The Bonds shall bear interest at the rates set out in Section 3..3 of this Ordinance from the later of the Issuance Date, or the most recent Interest Payment Date to which interest has been paid or duly provided for, calculated on the basis of a 360 day year of twel ve 30 day months, payable on February 1, 2002, and semiannually thereafter on August 1 and Febru8.1)' 1 of each year until maturity or earlier redemption. -4- Section 3 ~3 : Principal Amounts and Interest Rates; Numbers and Denomination~ The Bonds shall be initially issued bearing the numbers, in the principal amounts, and bearing interest at the rates set forth in the following schedule, and may be transferred and exchanged as set out in this Ordinance. The Bonds shall mature, subject to prior redemption in accordance with this Ordinance, on February 1 in each of the years and in the amounts set out in such schedule~ Bonds delivered on transfer of or in exchange for other Bonds shall be numbered in order of their authentication by the Registrar, shall be in the denomination of$5,OOO or integral multiples thereof, and shall mature on the same date and bear interest at the same rate as the Bond or Bonds in lieu of which they are delivered. Bond Principal Year of Interest Number Amount Maturity Rate 1- 1 $ 60,000 2003 2~25% 1- 2 65,000 2004 2~55% 1- 3 70,000 2005 2~75% 1- 4 75,000 2006 2~90% 1- 5 75,000 2007 3.1 0% 1- 6 75,000 2008 3920% 1- 7 80,000 2009 3..350/0 1- 8 85,000 2010 3.450/0 1- 9 100,000 2011 3~55% I~10 100,000 2012 3.650/0 1-11 100,000 2013 3~80% 1-12 100,000 2014 3 ~ 90% 1-13 110,000 2015 49000/0 1-14 120,000 2016 4~ 100/0 1-15 360,000 2017 4~15% 1-16 360,000 2018 4..20% I-I7 360,000 2019 4.25% 1-18 360,000 2020 4.250/0 1-19 360,000 2021 4.300/0 Section 3.4: Execution of Bonds; Seal.. The Bonds shall be signed on behalf of the City by the Mayor and countersigned by the City Secretary, by their manual, lithographed, or facsimile signatures, and the official seal of the City shall be impressed or placed in facsimile thereon~ Such facsimile signatures on the Bonds shall have the same effect as if each of the Bonds had been signed manually and in person by each of said officers, and such facsimile seal on the Bonds shall have the same effect as if the official seal of the City had been manually impressed upon each of the Bonds~ If any officer of the City whose manual or facsimile signature shall appear on the Bonds shall cease to be such officer before the authentication of such Bonds or before the delivery of such Bonds, such manual or facsimile signature shall nevertheless be valid and sufficient for ail purposes as if such officer had remained in such office. -5- Section 3.5: Approval By Attorney General; Registration by Comptroller. The Initial Bonds shall be delivered to the Attorney General of Texas for examination and approval and shall be registered by the Comptroller. The manually executed registration certificate of the Comptroller substantially in the form provided in Article 4 of this Ordinance shall be affixed or attached to the Initial Bonds. Section 3~6: Authentication. Only such Bonds as shall bear thereon a certificate of authentication substantially in the form provided in Article 4 of this Ordinance, manually executed by an authorized representative of the Registrar, shall be entitled to the benefits of this Ordinance or shall be valid or obligatory for any purpose. Such duly executed certificate of authentication shall be conclusive evidence that the Bond so authenticated was delivered by the Registrar hereunder~ The Registrar, when it authenticates a Bond, shall cause the Issuance Date to be stamped, typed or imprinted on such Bond. Bonds issued on transfer of or in exchange for other Bonds shall bear the same Issuance Date as the Bond or Bonds presented for transfer or exchange. Section 3..7: Payment of Principal and Interest The Registrar is hereby appointed as the paying agent and registrar for the Bonds. The principal of the Bonds shall be payable, without exchange or collection charges, in any coin or currency of the United States of America which on the date of payment is legal tender for the payment of debts due the United States of America, upon their presentation and surrender as they respectively become due and payable, whether at maturity or earlier redemption, at the principal payment office of the Registrar ~ The interest on each Bond shall be payable on each Interest Payment Date, by check mailed by the Registrar on or before the Interest Payment Date to the Owner of record as of the Record Date, to the address of such Owner as shown on the Register; provided, however, that for so long as the TWDB is the Owner of the Bonds, all payments of principal and interest will be made in wire transfer form at no cost to the TWDB. If the date for payment of the principal of or interest on any Bond is not a Business Day, then the date for such payment shall be the next succeeding Business Day with the same force and effect as ifmade on the date payment was originally due. Section 3.8: Successor Ref:tistrars. The City covenants that at all times while any Bonds are outstanding it will provide a commercial bank or trust company, organized under the laws of the United States or any state, authorized under such laws to exercise trust powers, and subject to supervision or examination by federal or state authority, to serve as and perform the duties and services of Registrar for the Bonds. The City reselVes the right to change the Registrar on not less than 60 days written notice to the Registrar, so long as any such notice is effective not less than 60 days prior to the next succeeding principal or interest payment date on the Bonds. Promptly upon the appointment of any successor Registrar, the previous Registrar shall deliver the Register or copies thereof to the new Registrar, and the new Registrar shall notify each Owner, by United States mail, first class postage prepaid, of such change and of the address of the new Registrar. Each Registrar hereunder, by acting in that capacity, shall be deemed to have agreed to the provisions of this Section. -6- Section 3~9: Special Record Date. If interest on any Bond is not paid on any Interest Payment Date and continues unpaid for thirty (30) days thereafter, the Registrar shall establish a new record date for the payment of such interest, to be known as a Special Record Date.. The Registrar shall establish a Special Record Date when funds to make such interest payment are received from or on behalfofthe City. Such Special Record Date shall be fifteen (15) days prior to the date fixed for payment of such past due interest, and notice of the date of payment and the Special Record Date shall be sent by United States mail, first class, postage prepaid, not later than five (5) days prior to the Special Record Date, to each affected Owner of record as of the close of business on the day prior to the mailing of such notice. Section 3.10: Ownership; Unclaimed Principal and Interest.. The City, the Registrar and any other person may treat the person in whose name any Bond is registered as the absolute owner of such Bond for the purpose of making and receiving payment of the principal of or interest on such Bond, and for all other purposes, whether or not 'such Bond is overdue, and neither the City nor the Registrar shall be bound by any notice or knowledge to the contrary.. All payments made to the person deemed to be the Owner of any Bond in accordance with this Section shall be valid and effectual and shall discharge the liability of the City and the Registrar upon such Bond to the extent of the sums paid. Amounts held by the Registrar which represent principal of and interest on the Bonds remaining unclaimed by the Owner after the expiration of three years from the date such amounts have become due and payable shall be reported and disposed of by the Registrar in accordance with the applicable provisions of Texas law including, to the extent applicable, Title 6 of the Texas Property Code, as amended.. Section 3 ~ 11 : Registration, Transfer, and Exchange. So long as any Bonds remain outstanding, the Registrar shall keep the Register at its principal payment office and, if such principal payment office is not in the State of Texas, the Registrar shall maintain a copy of the Register within the State of Texas. Subject to such reasonable regulations as it may prescribe, the Registrar shall provide for the registration and transfer of Bonds in accordance with the tenns of this Ordinance. The Issuance Date of each Bond originally delivered to and paid for by TWDB shall be recorded in the Register. Each Bond shall be transferable only upon the presentation and surrender thereof at the principal payment office of the Registrar, duly endorsed for transfer, or accompanied by an assignment duly executed by the registered Owner or his authorized representative in form satisfactory to the Registrar.. Upon due presentation of any Bond in proper form for transfer, the Registrar shall authenticate and deliver in exchange therefor, within three Business Days after such presentation, a new Bond or Bonds, registered in the name of the transferee or transferees, in authorized denominations and of the same maturity and aggregate principal amount, Issuance Date and bearing interest at the same rate as the Bond or Bonds so presented~ All Bonds shall be exchangeable upon presentation and surrender at the principal payment office of the Registrar, for a Bond or Bonds of like maturity, Issuance Date and interest rate and in any authorized denomination, in an aggregate amount equal to the unpaid principal amount of the -7- Bond or Bonds presented for exchange. The Registrar shall be and is hereby authorized to authenticate and deliver exchange Bonds in accordance with the provisions of this Section. Each Bond delivered in accordance with this Section shall be entitled to the benefits and security of this Ordinance to the same extent as the Bond or Bonds in lieu of which such Bond is delivered. The City or the Registrar may require the Owner of any Bond to pay a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with the transfer or exchange of such Bond. Any fee or charge of the Registrar for such transfer or exchange shall be paid by the City. Section 3.12: Mutilated.. Lost, or Stolen Bonds~ Upon the presentation and surrender to the Registrar of a mutilated Bond~ the Registrar shall authenticate and deliver in exchange therefor a replacement Bond of like maturity, Issuance Date, interest rate, and principal amount, bearing a number not contemporaneously outstanding. If any Bond is lost, apparently destroyed, or wrongfully taken, the City, pursuant to the applicable laws of the State of Texas and in the absence of notice or knowledge that such Bond has been acquired by a bona fide purchaser, shall authorize and the Registrar shall authenticate and deliver a replacement Bond of like maturity, Issuance Date, interest rate and principal amount, bearing a number not contemporaneously outstanding. The City or the Registrar may require the Owner of a mutilated Bond to pay a sum sufficient to cover any tax or other governmental charge that may be imposed in connection therewith and any other expenses connected therewith, including the fees and expenses of the Registrar~ The City or the Registrar may require the Owner of a lost, apparently destroyed or wrongfully taken Bond, before any replacement Bond is issued, to: (1) furnish to the City and the Registrar satisfactory evidence of the ownership of and the circumstances of the loss, destruction or theft of such Bond; (2) furnish such security or indemnity as may be required by the Registrar and the City to save them hannless; (3) pay all expenses and charges in connection therewith, including, but not limited to, printing costs, legal fees, fees of the Registrar and any tax or other governmental charge that may be imposed; and (4) meet any other reasonable requirements of the City and the Registrar. If, after the delivery of such replacement Bond) a bona fide purchaser of the original Bond in lieu of which such replacement Bond was issued presents for payment such original Bond, the City and the Registrar shall be entitled to recover such replacement Bond from the person to whom it was delivered or any person taking therefrom, except a bona fide purchaser, and shall be entitled to recover upon the security or indemnity provided therefor to the extent of any loss, damage, cost or expense incurred by the City or the Registrar in connection therewith. -8- ( If any such mutilated, lost, apparently destroyed or wrongfully taken Bond has become or is about to become due and payable, the City in its discretion may, instead of issuing a replacement Bond, authorize the Registrar to pay such Bond~ Each replacement Bond delivered in accordance with this Section shall be entitled to the benefits and security of this Ordinance to the same extent as the Bond or Bonds in lieu ofwhich such replacement Bond is delivered.. Section 3..13: Cancellation ofBonds~ All Bonds paid in accordance with this Ordinance, and all Bonds in lieu of which exchange Bonds or replacement Bonds are authenticated and delivered in accordance herewith, shall be cancelled and destroyed upon the making of proper records regarding such payment. The Registrar shall furnish the City with appropriate certificates of destruction of such Bonds.. Section 3 ~ 14: Book-Entry System~ The Initial Bonds shall be delivered against payment to the Board.. The Board shall be required to promptly surrender the Initial Bonds to the Registrar for exchange1t Bonds issued in exchange shall be registered in the name of Cede & Co., as nominee of DTC, as registered owner of the Bonds, and held in the custody ofDTC~ Unless otherwise requested by DTC, a single certificate will be issued and delivered to DTC for each maturity of the Bonds. Beneficial owners of Bonds will not receive physical delivezy of Bond certificates except as provided hereinafter. For so long as DTC shall continue to serve as securities depository for the bonds as provided herein, all transfers ofbeneficial ownership interest will be made by book-entry only, and no investor or other party purchasing, selling or othenvise transferring beneficial ownership of Bonds is to receive, hold or deliver any Bond certificate. With respect to Bonds registered in the name of Cede & Co., as nominee ofDTC, the City and the Registrar shall have no responsibility or obligation to any DTC participant or any person on whose behalf a DTC participant holds an interest in the Bonds. Without limiting the innnediately preceding sentence, the City and the Registrar shall have no responsibility or obligation with respect to (i) the accuracy of the records ofDTC, Cede & Co.., or any DTC participant with respect to any ownership interest in the Bonds, (ii) the delivery to any DTC participant or any other person, other than a registered owner of the Bonds, as shown on the Register, of any notice with respect to the Bonds, including any notice of redemption, and (iii) the payment of any DTC participant or any other person, other than a registered owner of the Bonds, as shown on the Register, of any amount with respect to principal of or premium, if any, or interest on the Bonds. Replacement Bonds may be issued directly to beneficial owners of Bonds other than DTC, or its nominee, but only in the event that (i) DTe determines not to continue to act as securities depository for the Bonds (which determination shall become effective no less than 90 days after written notice to such effect to the City and the Registrar); or (ii) the City has advised DTC of its determination (which detennination is conclusive as to DTC and the beneficial owners of the Bonds) that the interests of the beneficial owners of the Bonds might be adversely affected if such book- entry only system of transfer is continued~ Upon occurrence of any of the foregoing events, the City shall use its best efforts to attempt to locate another qualified securities depository. If the City fails to locate another qualified securities depository to replace DTC, the City shall cause to be -9- authenticated and delivered replacement Bonds, in certificate form, to the beneficial owners of the Bonds.. In the event that the~City makes the determination noted in (ii) above (provided that the City undertakes no obligation to make any investigation to determine the occurrence of any events that would pennit the City to make any such determination), and has made provisions to notify the beneficial owners of Bonds of such determination by mailing an appropriate notice to DTC, it shall cause to be issued replacement Bonds in certificate form to beneficial owners of the Bonds as shown on the records of DTC provided to the City.. Whenever, during the term of the Bonds, the beneficial ownership thereofis determined by a book entry at DTC, the requirements in this Ordinance of holding, delivering or transferring Bonds shall be deemed modified to require the appropriate person or entity to meet the requirements of DTC as to registering or transfening the book entry to produce the same effect.. If at any time, DTC ceases to hold the Bonds as securities depository, all references herein to DTC shall be of no further force or effect. Section 3 ~ 15 : Discontinuation of Book -Entry-Only System. Before the City can discontinue the book-entry-only system of registration through DTC, notice must be given to the TWDB and prior written consent of the TWDB must be received by the City~ Section 3..16: Redemption~ The City reserves the right to redeem the Bonds scheduled to mature on or after August 1, 2012, prior to maturity, in whole or from time to time in part, in inverse order of maturity, in integral multiples of$5,000, on August 1, 2011, or on any date thereafter at a price of par, plus accrued interest on the Bonds called for redemption to the date fixed for redemption.. Principal amounts may be redeemed only in integral multiples of$5,OOO~ If a Bond subject to redemption is in a denomination larger than $5,000, a portion of such Bond may be redeemed, but only in integral multiples of $5,000.. Upon surrender of any Bond for redemption in part, the Registrar, in accordance with Section 3.11 hereof, shall authenticate and deliver in exchange therefor a Bond or Bonds of like maturity, Issuance Date, and interest rate in an aggregate principal amount equal to the unredeemed portion of the Bond so surrendered.. Unless waived by an Owner, notice of any redemption identifying the Bonds to be redeemed in whole or in part shall be given by the Registrar at least thirty days prior to the date fixed for redemption by sending written notice by first class mail, postage prepaid, to the Owner of each Bond to be redeemed in whole or in part at the address shown on the Register~ Such notices shall state the redemption date, the redemption price, the place at which Bonds are to be surrendered for payment and, ifless than all Bonds outstanding of a particular maturity are to be redeemed, the numbers of the Bonds or portions thereof of such maturity to be redeemed.. Any notice given as provided in this Section shall be conclusively presumed to have been duly given, whether or not the Owner receives such notice.. By the date fixed for redemption, due provision shall be made with the Registrar for payment of the redemption price of the Bonds or portions thereof to be redeemed, plus accrued interest to the date fixed for redemption. When Bonds have been called for redemption in whole or in part and due provision has been made to redeem the same as herein provided, the Bonds or -10- portions thereof so redeemed shall no longer be regarded as outstanding except for the purpose of receiving payment solely from the funds so provided for redemption, and the rights of the Owners to collect interest which would otherwise accrue after the redemption date on any Bond or portion thereof called for redemption shall terminate on the date fixed for redemption. Section 3~ 17: Forms~ The form of the Bonds, including the form of the Registrar's Authentication Certificate, the form of Assignment, and the form of Registration Certificate of the Comptroller, which shall be attached or affixed to the Bonds initially issued, shall be, respectively, substantially as follows, with such additions, deletions and variations as may be necessary or desirable and not prohibited by this Ordinance: (a) Form ofBonds~ UNITEDSTATESOFAME~CA STATE OF TEXAS COUNTY OF HARRIS REGISTERED NUMBER *- REGISTERED DENOMINATION $ CITY OF WEST UNIVERSITY PLACE, TEXAS WATERWORKS AND SEWER SYSTEM REVENUE BOND SERIES 2001B INTEREST RATE: :MATURITY DATE: February 1, 20_ ISSUANCE DATE: CUSIP: REGISTERED OWNER: PRINCIPAL AMOUNT: DOLLARS The City of West University, Texas, a municipal corporation duly incorporated under the laws of the State of Texas (herein the "City") for value received, promises to pay, but solely from certain Net Revenues as hereinafter provided, to the registered owner identified above or registered assigns~ on the maturity date specified above, upon presentation and surrender of this Bond at the principal payment office of Bank One, National Association (the IIRegistrar), the principal amount identified above, in any coin or currency of the United States of America which on the date of payment of such principal is legal tender for the payment of debts due the United States of America, * "I" for Initial Bonds; URn for definitive Bonds issued in exchange for the Initial Bonds. -11- and to pay, solely from such Net Revenues, interest thereon at the rate shown above, calculated on the basis ofa 360 day year of twelve 30 day months, from the later of the Issuance Date, or the most recent interest payment date to which interest has been paid or duly provided for~ The date of this Bond is July 1, 2001, but interest shall accrue on the principal amount hereof from the Issuance Date~ Interest on this Bond is payable by check on February 1 and August 1, beginning on February I, 2002, mailed to the registered owner as shown on the books of registration kept by the Registrar as of the fifteenth day of the month next preceding each interest payment date; provided, however, that for so long as the Texas Water Development Board is the Owner of the Bonds, all payments of principal and interest will be made in wire transfer form at no cost to the Texas Water Development Board.. THIS BOND IS ONE OF A DULY AUTHORIZED SERIES OF BONDS aggregating $3,015~OOO, issued for the purpose of improving the City's waterworks and sanitary sewer system, under and in strict conformity with the Constitution and laws of the State of Texas, particularly Chapter 1502, Texas Government Code, as amended, and pursuant to an ordinance adopted by the City Council (the "Ordinance"), which Ordinance is of record in the Cityls official minutes. THE CITY RESERVES THE RIGHT to redeem the Bonds scheduled to mature on or after August I, 2012, prior to their scheduled maturities, in whole or from time to time in part, in inverse order ofmaturity, in integral multiples of$5,OOO, on August 1,2011, or any date thereafter ata price of par plus accrued interest on the principal amounts called for redemption to the date fixed for redemption.. Reference is made to the Ordinance for complete details concerning the manner of redeeming the Bonds~ NOTICE OF ANY REDEMPTION shall be given at least thirty (30) days prior to the date fixed for redemption by first class mail, addressed to the registered owners of each Bond to be redeemed in whole or in part at the address shown on the books of registration kept by the Registrar. When Bonds or portions thereofhave been called for redemption, and due provision has been made to redeem the same, the principal amounts so redeemed shall be payable solely from the funds provided for redemption, and interest which would othenvise accrue on the amounts called for redemption shall terminate on the date fixed for redemption~ THIS BOND IS TRANSFERABLE only upon presentation and surrender at the principal payment office of the Registrar, duly endorsed for transfer or accompanied by an assignment duly executed by the registered owner or his authorized representative, subject to the tenns and conditions of the Ordinance~ THE BONDS ARE EXCHANGEABLE at the principal payment office of the Registrar, for bonds in the principal amount of $5,000 or any integral multiple thereof, subject to the terms and conditions of the Ordinance.. THIS BOND AND THE SERIES OF WHICH IT IS A PART are special obligations of the City that, along with the City's outstanding Waterworks and Sewer System Revenue Bonds, Series 1996A, Series 1996B, Series 1998 and Series 2001A (the "Outstanding Bonds"), are payable from and are equally and ratably secured by a first lien on the revenues of the Cityls watetWorks and sewer -12- system remaining after deduction of the operation and maintenance expenses of that system (the "Net Revenues"), as defined and provided in the Ordinance, which Net Revenues are required to be set aside and pledged to the payment of the Bonds, the Outstanding Bonds, and all additional bonds issued on a parity therewith, in the Debt Service Fund and the Rese1\le Fund maintained for the payment of all such bonds, all as more fully described and provided for in the Ordinance. This Bond and the series of which it is a part, together with the interest thereon, are payable solely from such Net Revenues and do not constitute an indebtedness or general obligation of the City~ The holder of this obligation is not entitled to demand payment of this obligation out of any money raised by taxation~ THE CITY HAS RESERVED THE RIGHT to issue additional parity revenue bonds, subject to the restrictions contained in the Ordinance, which may be equally and ratably payable from, and secured by a first lien on and pledge of, the Net Revenues in the same manner and to the same extent as this Bond and the series of which it is a part. IT IS HEREBY DECLARED AND REPRESENTED that this Bond has been duly and validly issued and delivered; that all acts, conditions, and things required or proper to be performed, exist, and be done precedent to or in the issuance and delivery of this Bond have been performed, existed, and been done in accordance with law; that the Bonds do not exceed any statutory limitation; and that provision has been made for the payment of the principal of and interest on this Bond and all of the Bonds by the creation of the aforesaid lien on and pledge of the Net Revenues. IN WITNESS WHEREOF, this Bond has been signed with the manual or facsimile signature of the Mayor and countersigned with the manual or facsimile signature of the City Secretary, and the official seal of the City has been duly impressed, or placed in facsimile, on this Bond~ (AUTHENTICA TION CERTIFICA TE) (SEAL) CITY OF WEST UNIVERSITY PLACE, TEXAS Mayor City Secretary (b) Form of Registration Certificate. COMPTROLLER'S REGISTRATION CERTIFICATE: REGISTER NO. I hereby certify that this Bond has been examined, certified as to validity, and approved by the Attorney General of the State of Texas, and that this Bond has been registered by the Comptroller of Public Accounts of the State ofTexas~ WITNESS MY SIGNATURE AND SEAL this -13- (SEAL) Comptroller of Public Accounts of the State of Texas (c) Form of Authentication Certificate~ AUTHENTICATION CERTIFICATE It is hereby certified that this Bond has been delivered pursuant to the Bond Ordinance described in the text of this Bond~ Bank One, National Association By Authorized Signature Date of Authentication (d) Form of Assignment~ ASSIGNMENT For value received, the undersigned hereby sells, assIgns, and transfers unto (Please print or type name, address, and zip code of Transferee) (Please insert Social Security or Taxpayer Identification Number of Transferee) the within Bond and all rights thereunder, and hereby irrevocably constitutes and appoints attorney to transfer said Bond on the books kept for registration thereof, with full power of substitution in the premises~ DATED: Signature Guaranteed: NOTICE: Signature must be guaranteed by a member firm of the New York Stock Exchange or a commercial bank or trust company ~ Registered Owner NOTICE: The signature above must correspond to the name of the registered owner as shown on the face of this Bond in every particular, without any alteration, enlargement or change whatsoever. -14- Section 3.15: Legal ,Opinion; Cusip Numbers; Bond Insurance~ The approving opinion of Vinson & Elkins L~L.P., Houston, Texas, and CUSIP Numbers may be printed on the Bonds, but errors or omissions in the printing of such opinion or such numbers shall have no effect on the validity of the Bonds~ The purchase of and payment of the premium for municipal bond insurance by the City, in accordance with the terms of a commitment for such insurance presented to and hereby approved by the City Council is hereby authorized. All officials and representatives of the City are authorized and directed to execute such documents and to do any and all things necessary or desirable to obtain sllch insurance, and the printing on the Bonds of an appropriate legend regarding such insurance is hereby approved. ARTICLE IV SECURITY AND SOURCE OF PAYMENT FOR ALL PARITY BONDS . Section 4.1 : Pledge and Source of Payment The City hereby covenants and agrees that all Gross Revenues of the System shall be deposited and paid into the special funds established and maintained for Parity Bonds, as provided in this Ordinance, and shall be applied in the manner set out herein, to provide for the payment of all Maintenance and Operation Expenses and to provide for the payment of principal, interest and any redemption premium of the Parity Bonds and all expenses ofpaying, securing and insuring the same. The Parity Bonds shall constitute special obligations of the City that shall be payable solely from, and shall be equally and ratably secured by a frrst lien on, the Net Revenues, as collected and received by the City, from the operation and ownership of the System, which Net Revenues shall, in the maIll1er herein provided, be set aside for and pledged to the payment of the Parity Bonds in the Debt Service Fund and Reserve F1llld as hereinafter provided, and the Parity Bonds shall be in all respects on a parity with and of equal dignity with one another. The owners of the Parity Bonds shall never have the right to demand payment out of any funds raised or to be raised by taxation. Section 4_2: Rates and Charges~ So long as any Parity Bonds remain outstanding, the City shall fix, charge and collect rates and charges for the use and senrices of the System which are fully sufficient to produce Net Revenues in each fiscal year at least equal to 1100/0 of the principal and interest requirements scheduled to occur in such fiscal year on all Parity Bonds then outstanding plus an amount equal to the sum of all deposits required to be made to the Reserve Fund in such fiscal year; but in no event shall Net Revenues ever be less than the amount required to maintain the Debt Service Fund and the Reserve Fund as hereinafter provided, and, to the extent that funds for such purpose are not otherwise available, to pay all other outstanding obligations payable from the Net Revenues of the System, as and when the same become due. The City will not grant or permit any free service from the System except for public buildings and institutions operated by the City. Section 4.3: Special Funds~ The following special Funds created pursuant to the ordinance authorizing the Outstanding Bonds are hereby confrrmed, and such Fllllds shall be maintained and accounted for as hereinafter provided, so long as any Parity Bonds remain outstanding: (a) Waterworks and Sewer System Revenue Fund (the uRevenue Fundfl); (b) Waterworks and Sewer System Revenue Bonds Debt Service Fund (the ttDebt Service Fund"); and -15- (c) Waterworks{and Sewer System Revenue Bonds Reserve Fund (the "Reserve Fund It). The Revenue Fund shall be maintained as a separate account on the books of the City. The Debt Service Fund and the Reserve Fund shall be maintained at an official depository bank of the City separate and apart from all other funds and accounts of the City and shall constitute trust funds which shall be held in trust for the benefit of the Owners of the Parity Bonds and the proceeds of which shall be and are hereby pledged to the payment of the Parity Bonds. All of the Funds named above shall be used solely as provided in this Ordinance so long as any Parity Bonds remain outstanding. Section 4~4: Flow of Funds. All Gross Revenues of the System (except for interest and earnings on investments in the Reserve Fund and the Debt Service Fund) shall be deposited as collected into the Revenue Fund~ Money from time to time on deposit in the Revenue Fund shall be applied as follows in the following order of priority: (a) First, to pay Maintenance and Operation Expenses~ (b) Second, to make all deposits into the Debt Service Fund required by this Ordinance, the ordinance authorizing the issuance of the Outstanding Bonds, and any ordinance authorizing the issuance of Additional Parity Bonds~ ( c) Third, to make all deposits into the Reserve Fund required by this Ordinance, the Ordinance authorizing the issuance of the Outstanding Bonds, and any ordinance authorizing the issuance of Additional Parity Bonds.. (d) Fourth, for any lawful purpose, including transfers to the General Fund as permitted by law. Whenever the total combined amounts on deposit to the credit of the Debt Service Fund and the Reserve Fund shall be equivalent to the sum of the aggregate principal amount of all outstanding Parity Bonds plus the aggregate amount of all interest accrued and to accrue thereon, no further payments need be made into the Debt Service Fund or the Reserve Fund~ Section 41>5: Debt Service Fund. On or before the last Business Day of each month so long as any Parity Bonds remain outstanding, after making all required payments and provision for payment of Maintenance and Operation Expenses, there shall be transferred into the Debt Service Fund from the Revenue Fund: (i) such amounts, in approximately equal monthly installments, as will be sufficient to accumulate the amount required to pay the interest scheduled to become due on the Parity Bonds on the next interest payment date; and -16- (ii) such amounts, in approximately equal monthly installments, as will be sufficient to accumulate the amount required to pay the next maturing principal of the Pari ty Bonds, including the principal amounts ot: and any redemption premium on, any Parity Bonds payable as a result of the exercise or operation of any optional or mandatory redemption provision contained in any ordinance authorizing the issuance of Parity Bonds.. Money deposited to the credit of the Debt Service Fund shall be used solely for the purpose of paying principal (at maturity or prior redemption or to purchase Parity Bonds issued as tenn bonds in the open market to be credited against mandatory redemption requirements), interest and any redemption premium on the Parity Bonds or reimbursing credit providers for amounts advanced for such purpose, plus all bank charges and other costs and expenses relating to such payment The paying agent shall destroy all paid Parity Bonds and shall provide the City with appropriate certificates of destruction. Section 4..6: Reserve Fund. Unless the Reserve Fund is fully funded, on or before the last Business Day of each month so long as any Parity Bonds remain outstanding, after making all required payments and provision for payment of Maintenance and Operation Expenses, and after making the transfers into the Debt Service Fund required in the preceding Section, there shall be transferred into the Reserve Fund from the Revenue Fund an amount at least equal to one-sixtieth (1/60th) of the average annual principal and interest requirements on the Parity Bonds, so that the Reserve Fund shall contain, in no more than 60 months after the issuance of each such issue of Parity Bonds, money and investments in an aggregate amount at least equal to the average annual principal and interest requirements on all Parity Bonds then outstanding. After such amount has accumulated in the Reserve Fund and so long thereafter as such Fund contains such amount, no further deposits shall be required to be made into the Reserve Fund, and any excess amounts may be transferred to the Revenue Fund.. But if and whenever the balance in the Reserve Fund is reduced below such amount, monthly deposits into such Fund shall be resumed and continued in amounts at least equal to one-sixtieth (1/60th) of the average annual principal and interest requirements on the Parity Bonds until the Reserve Fund has been restored to such amount.. The Reserve Fund shall be used to pay the principal of and interest on the Parity Bonds at any time when there is not sufficient money available in the Debt Service Fund for such purpose and it may be used finally to pay and retire the last Parity Bonds to mature or be redeemed. The following provisions shall apply upon final payment or defeasance of the Outstanding Bonds or the adoption of the necessary amendments to the ordinances authorizing the issuance of the Outstanding Bonds which permit the use of a Reserve Fund Surety Policy to satisfy the Reserve Fund Requirement The City expressly reserves the right at any time to satisfy all or any part of the Reserve Fund Requirement by obtaining for the benefit of the Reserve Fund a Reserve Fund Surety Policy (as defined below)~ In the event the City elects to substitute at any time a Reserve Fund Surety Policy .for any funded amounts in the Reserve Fund, it may apply any bond proceeds thereby released, including investment earnings on bond proceeds, to any purposes for which the bonds were issued -17- and any other funds thereby released to any purposes for which such funds may lawfully be used, including the payment of debt service on the Parity Bonds~ A Reserve Fund Surety Policy shall be an insurance policy or other instrument issued pursuant to a credit agreement (as such term is defined by Section 1371.001, Govenunent Code) in a principal amount equal to the portion of the Reserve Fund Requirement to be satisfied and issued by a financial institution or insurance company with a rating for its long tenn unsecured debt or claims paying ability in the highest letter category by two major municipal securities evaluation sources~ A ReselVC Fund Surety Policy shall be for the pro rata benefit of all Parity Bonds.. The premium for any such policy shall be paid from bond proceeds or other funds of the City lawfully available for such purpose. Any Reserve Fund Surety Policy shall be authorized by resolution or ordinance and submitted to the Attorney General for examination and approval. At any time that there are insufficient funds available in the Debt Service Fund to make any required payment of interest on or principal of the Bonds, or to reimburse the credit providers for amounts advanced for such purpose, there shall be transferred from the Reserve Fund to the Debt Senrice Fund such amounts as may be necessary for such purpose. In the event the Resenre Fund contains one or more Reserve Fund Surety Policy or Policies, the City shall not draw on Reserve Fund Surety Policy unless no other cash or investments are otherwise available in the Reserve Fund. If more than one Reserve Fund Surety Policy is held in the Reserve Fund, the City shall draw on such policies on a proportionate basis~ Whenever amounts have been drawn on one or more Reserve Fund Surety Policies, amounts subsequently transferred to the Reserve Fund shall be used to reimburse the provider (or if more than one, to the providers on a proportionate basis) of such Reserve Fund Surety Policies in accordance with the terms thereof: for the amounts advanced, interest thereon and any associated fees. The issuer(s) of such Reserve Fund Surety Policy or Policies shall be secured with respect to such reimbursement obligations by a lien on the Net Revenues, subject and subordinate to the lien securing the Bonds and the required deposits to the Debt Service Fund, and shall further be secured by a lien on amounts from time to time on deposit in and required to be deposited to the Reserve Fund. The City hereby shall authorize the Mayor or the City's Finance Director to enter into a Reserve Fund Surety Policy for the Parity Bonds, such policy being effective through the final maturity of any Parity Bonds, under the tenns of a credit agreement (as such term is defined by Section 1371..001, Government Code) in an amount sufficient to satisfy the Reserve Fund Requirement for the Bonds, taking into account any existing fund balance or Reserve Fund Surety Policy and to execute any instruments in cOlUlection with that transaction~ Section 4.7: Deficiencies in Funds~ If in any month there shall not be deposited into any Fund maintained pursuant to this Article the full amounts required herein, amounts equivalent to such deficiency shall be set apart and paid into such Fund or Funds from the first available and unallocated money in the Revenue Fund, and such payment shall be in addition to the amounts otherwise required to be paid into such Funds during the succeeding month or months~ To the extent necessary, the rates and charges for the System shall be increased to make up for any such deficiencies 4 -18- Section 448: Investment of Funds; Transfer of Investment Income" (a) Money in the Revenue Fund, the Debt Service Fund and the Reserve Fund may, at the option of the City, be invested as permitted by law; provided that all such deposits and investments shall be made in such manner that the money required to be expended from any Fund will be available at the proper time or times, and provided further that in no event shall such deposits or investments of money in the Reserve Fund mature later than the final maturity date of the Parity Bonds. Any obligation in which money is so invested shall be kept and held in the Fund from which the investment was made. All such investments shall be promptly sold when necessary to prevent any default in connection with the Parity Bonds.. (b) All interest and income derived from such deposits and investments shall be credited as received to the Fund from which the investment was made~ ARTICLE V ADDITIONAL BONDS Section 5.1 : Additional Parity Bonds. The City reserves the right to issue, for any lawful purpose (including the refunding of any previously issued Parity Bonds or any other bonds or obligations of the City issued in connection with or payable from the revenues of the System), one or more series of Additional Parity Bonds payable from and secured by a first lien on the Net Revenues of the System on a parity with the Bonds, the Outstanding Bonds, and any previously issued Additional Parity Bonds; provided, however, that no Additional Parity Bonds may be issued unless: (a) The Additional Parity Bonds mature on, and interest is payable on, the same days of the year as the Bonds; and (b) The Debt Service Fund and the Reserve Fund each contains the amount of money then required to be on deposit therein; and (c) For either the preceding fiscal year or a 12 consecutive calendar month period ending no more than 90 days prior to adoption of the ordinance authorizing such Additional Parity Bonds, Net Revenues were equal to at least 1250/0 of the average annual principal and interest requirements on all Parity Bonds that will be outstanding after the issuance of the series of Additional Parity Bonds then proposed to be issued, as certified by the City's Finance Director or by an independent certified public accountant or firm of independent certified public accountants; or -19- (d) If the City C3:ll11ot meet the test described in (c) above, but a change in the rates and charges applicable to the System becomes effective at least sixty (60) days prior to the adoption of the ordinance authorizing Additional Parity Bonds and the CityJs Finance Director certifies that, had such change in rates and charges been effective for the preceding fiscal year or 12 consecutive calendar month period ending no more than 90 days prior to adoption of said ordinance, the Net Revenues for such period would have met the test described in ( c) above. Section 5~2: Subordinate Lien Bonds~ The City reserves the right to issue, for any lawful purpose, bonds, notes or other obligations secured in whole or in part by liens on the Net Revenues that are junior and subordinate to the lien on the Net Revenues securing payment of the Parity Bonds~ Such subordinate lien obligations may be further secured by any other source of payment lawfully available for such purpose~ Section 5..3: Special Proiect Bonds~ The City reserves the right to issue revenue bonds secured by liens on and pledges of revenues and proceeds derived from Special Projects~ ARTICLE VI COVENANTS AND PROVISIONS RELATING TO ALL PARITY BONDS Section 6.1: Punctual Payment of Parity Bonds.. The City will punctually payor cause to be paid the interest on and principal of all Parity Bonds according to the terms thereof and will faithfully do and perform, and at all times fully observe, any and all covenants, undertakings, stipulations and provisions contained in this Ordinance and in any ordinance authorizing the issuance of Additional Parity Bonds~ Section 6.2: Maintenance of System.. So long as any Parity Bonds remain outstanding, the City covenants that it will at all times maintain the System, or within the limits of its authority cause the same to be maintained, in good condition and working order and will operate the same, or cause the same to be operated, in an efficient and economical manner at a reasonable cost and in accordance with sound business principles. In operating and maintaining the System, the City will comply with all contractual provisions and agreements entered into by it and with all valid rules, regulations, directions or orders of any governmental, administrative, or judicial body promulgating same, noncompliance with which would materially and adversely affect the operation of the System. Section 6..3: Sale or Encumbrance of System~ So long as any Parity Bonds remain outstanding, the City will not sell, dispose of or, except as permitted in Article VI, further encumber the System; provided, however, that this provision shall not prevent the City from disposing of any portion of the System which is being replaced or is deemed by the City to be obsolete, worn out, surplus or no longer needed for the proper operation of the System~ Any agreement pursuant to which the City contracts with a person, corporation, mutricipal corporation or political subdivision to -20- operate the System or to lease and/or operate all or part of the System shall not be considered as an encumbrance of the System, Section 6~4: Insurance~ The City further covenants and agrees that it will keep the System insured with insurers of good standing against risks, accidents or casualties against which and to the extent customarily insured against by political subdivisions of the State of Texas operating similar systems) to the extent that such insurance is available. The cost of all such insurance together with any additional insurance, shall be a part of the Maintenance and Operation Expenses~ All net proceeds of such insurance shall be applied to repair or replace the insured property that is damaged or destroyed, or to make other capital improvements to the System~ or to redeem Parity Bonds~ Section 6.5: Accounts, Records, and Audits~ So long as any Parity Bonds remain outstanding, the City covenants and agrees that it will maintain a proper and complete system of records and accounts pertaining to the operation of the System in which full, true and proper entries will be made of all dealings, transactions, business and affairs which in any way affect or pertain to the System or the Gross Revenues or the Net Revenues thereof The City shall after the close of each of its fiscal years cause an audit report of such records and accounts to be prepared by an independent certified public accountant or independent firm of certified public accountants.. Each year promptly after such audit report is prepared, the City shall furnish a copy thereofwithout cost to the Municipal Advisory Council of Texas, the major municipal rating agencies and any Owner of Parity Bonds who shall request same~ All expenses incurred in preparing such audits shall be Maintenance and Operation Expenses. Section 6.6: Competition. To the extent it legally may, the City 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 and will prohibit the operation of any such competing facilities. Section 6~7: Pledge and Encumbrance of Net Revenues~ The City covenants and represents that it has the lawful power to create a lien on and to pledge the Net Revenues to secure the payment of the Parity Bonds and has lawfully exercised such power under the Constitution and laws of the State of Texas. The City further covenants and represents that, other than to the payment of the Parity Bonds, the Net Revenues are not and will not be made subject to any other lien, pledge or encumbrance to secure the payment of any debt or obligation of the City, unless such lien, pledge or encumbrance is junior and subordinate to the lien and pledge securing payment of the Parity Bonds.. Section 6.8: Bondowners'Remedies. This Ordinance shall constitute a contract between the City and the Owners of the Parity Bonds from time to time outstanding (including any bond insurers of Parity Bonds) and shall remain in effect until the Parity Bonds and the interest thereon shall be fully paid or discharged or provision therefor shall have been made as provided herein (including payments of any amounts due to bond insurers of Parity Bonds). In the event of a default in the payment of the principal of or interest on any of the Parity Bonds or a default in the performance of any duty or covenant provided by law or in this Ordinance, the Owner or Owners of any of the Parity Bonds may pursue all legal remedies afforded by the Constitution and laws of the -21- State of Texas to compel the City to remedy such default and to prevent further default or defaults~ Without in any way limiting the generality of the foregoing, it is expressly provided that any Owner of any of the Parity Bonds may at law or in equity, by suit, action, mandamus, or other proceedings, enforce and compel performance of all duties required to be performed by the City under this Ordinance, including the making and collection of reasonable and sufficient rates and charges for the use and services of the System, the deposit of the Gross Revenues into the special funds herein provided, and the application of the Gross Revenues and the Net Revenues in the manner required in this Ordinance. Section 6.9: Discharge by Deposit. Except as provided in Section 7.2(b ) (i), the City may discharge its obligation to the Owners of any or all of the Parity Bonds to pay principal, interest and redemption premium (if any) thereon in any manner then permitted by law, including by depositing with any paying agent for such Parity Bonds or with the State Treasurer of the State of Texas either: (i) cash in an amount equal to the principal amount and redemption premium, if any, of such Parity Bonds plus interest thereon to the date of maturity or redemption) or (ii) pursuant to an escrow or trust agreement, cash and/or securities of any type authorized by law for refunding escrow account, in principal amounts and maturities and bearing interest at rates sufficient to provide for the timely payment of the principal amount and redemption premium, ifany, ofsuch Parity Bonds plus interest thereon to the date of maturity or redemption; provided, however, that if any of such Parity Bonds are to be redeemed prior to their respective dates of maturity, provision shall have been made for giving notice ofredemption as provided in the ordinance authorizing such Parity Bonds. Upon such deposit, such Parity Bonds shall no longer be regarded as outstanding or unpaid. Section 6..10: Paying Agents May Own Parity Bonds. The paying agents for the Parity Bonds, in their individual or any other capacity, may become holders or pledgees of the Parity Bonds with the same rights they would have if they were not paying agents. Section 6.11 : No Recourse A~ainst City Officials. No recourse shall be had for the payment of principal of or interest on any Parity Bonds or for any claim based thereon or on this Ordinance against any official of the City or any person executing any Parity BondsA ARTICLE VII PROVISIONS CONCERNING SALE AND APPLICATION OF PROCEEDS OF BONDS Section 7.1: Sale. The Bonds are hereby sold and shall be delivered to TWDB at a price of par~ less a 1.85 percent loan origination charge to be retained by the TWDB, subject to the approval of the Attorney General of Texas and Vinson & Elkins L_L#P '" bond counsel~ The Mayor and other appropriate officers, agents and representatives of the City are hereby authorized to do any and all things necessary or desirable to provide for the issuance and delivery of the Bonds. Section 7.2: Tax Exemption~ (a) General Tax Covenant. The City intends that the interest on the Bonds shall be excludable from gross income for purposes of federal income taxation pursuant to sections 103 and 141 through 150 of the Code, and applicable regulations. The City -22- covenants and agrees not to take any action, or knowingly omit to take any action within its control, that if taken or omitted, respectively, would cause the interest on the Bonds to be includable in gross income, as defined in section 61 of the Code, of the owners thereof for purposes of federal income taxation.. In particular, the City covenants and agrees to comply with each requirement of this Section; provided, however, that the City shall not be required to comply with any particular requirement of this Section if the City has received an opinion of nationally recognized bond counsel (UCounselJs OpinionU) that such noncompliance will not adversely affect the exclusion from gross income for federal income tax purposes of interest on the Bonds or if the City has received a Counsees Opinion to the effect that compliance with some other requirement set forth in this Section will satisfy the applicable requirements of the Code, in which case compliance with such other requirement specified in such Counsel's Opinion shall constitute compliance with the corresponding requirement specified in this Section. (b) Use of Proceeds. The City covenants and agrees that its use of the Net Proceeds of the Bonds will at all times satisfy the following requirements: (i) The City will limit the amount of original or investment proceeds of the Bonds to be used (other than use as a member of the general public) in the trade or business of any person other than a governmental unit to an amount aggregating no more than ten percent of the Net Proceeds of the Bonds C'private-use proceeds IT). For purposes of this Section, the tenn f'personf' includes any individual, corporation, partnership, unincorporated association, or any other entity capable of canying on a trade or business; and the term "trade or business" means, with respect to any natural person, any activity regularly carried on for profit and, with respect to persons other than natural persons, any activity other than an activity carried on by a governmental unit. Any use of proceeds of the Bonds in any ma.rmer contrary to the guidelines set forth in Revenue Procedure 93-19, including any revisions or amendments thereto, shall constitute the use of such proceeds in the trade or business of one who is not a governmental unit; (ii) The City will not pennit more than five percent of the Net Proceeds of the Bonds and to be used in the trade or business of any person other than a govermnental unit if such use is unrelated to the govenunental purpose of the Bonds. Further, the amount of private-use proceeds of the Bonds in excess of five percent of the Net Proceeds of the Bonds (nexcess private-use proceedsU) did not and will not exceed the proceeds of the Bonds expended for the govermnental purpose of the Bonds to which such excess private-use proceeds relate; (iii) The City will not permit an amount of proceeds of the Bonds exceeding the lesser of (a) $5,000,000 or (b) five percent of the Net Proceeds of the Bonds to be used, directly or indirectly, to finance loans to persons other than governmental units. When used in this Section, the term Net Proceeds of the Bonds shall mean the proceeds from the sale of the Bonds, including investment earnings on such proceeds, less accrued interest -23- (c) No Federal Guaranty~ The City covenants and agrees not to take any action, or knowingly omit to take any ~action within its control, that, if taken or omitted, respectively, would cause the Bonds to be ufederally guaranteedU within the meaning of section 149(b) of the Code and applicable regulations thereunder, except as permitted by section 149(b)(3) of the Code and such regulations~ (d) Bonds Are Not Hedge Bonds. The City covenants and agrees that not more than 50 percent of the proceeds of the Bonds will be invested in nonpurpose investments (as defined in section 148{t)(6)(A) of the Code) having a substantially guaranteed yield for four years or more within the meaning of section 149(g)(3)(A)(ii) of the Code, and the City reasonably expects that at least 85 percent of the spendable proceeds of the Bonds will be used to carry out the governmental . purposes of the Bonds within the three-year period beginning on the date the Bonds are issued~ (e) No-.A.rbitrage Covenant. The City shall certify, through an authorized officer, employee or agent, that based upon all facts and estimates known or reasonably expected to be in existence on the date the Bonds are delivered, the City will reasonably expect that the proceeds of the Bonds will not be used in a manner that would cause the Bonds to be "arbitrage bondsu within the meaning of section 148(a) of the Code and applicable regulations thereunder. Moreover, the City covenants and agrees that it will make such use of the proceeds of the Bonds including interest or other investment income derived from Bond proceeds, regulate investments of proceeds of the Bonds, and take such other and further action as may be required so that the Bonds will not be "arbitrage bonds" within the meaning of section 148(a) of the Code and applicable regulations thereunder.. (t) Arbitrage Rebate. The City will take all necessary steps to comply with the requirement that certain amounts earned by the City on the investment of the Ugross proceedsu of the Bonds (within the meariing of section 148(t)(6)(B) of the Code), be rebated to the federal govermnent Specifically, the City will (i) maintain records regarding the investment of the gross proceeds of the Bonds as may be required to calculate the amount earned on the investment of the gross proceeds of the Bonds separately from records of amounts on deposit in the fimds and accounts of the City allocable to other bond issues of the City or moneys which do not represent gross proceeds of any bonds of the City, (ii) calculate at such times as are required by applicable regulations, the amount earned from the investment of the gross proceeds of the Bonds which is required to be rebated to the federal government, and (iii) pay, not less often than every fifth anniversary date of the Issuance Date of the first Bond delivered to TWDB and within sixty days following retirement of the Bonds, all amounts required to be rebated to the federal govermnent. Further, the City will not indirectly pay any amount otherwise payable to the federal government pursuant to the foregoing requirements to any person other than the federal government by entering into any investment arrangement with respect to the gross proceeds of the Bonds that might result in a reduction in the amount required to be paid to the federal government because such arrangement results in a smaller profit or larger loss than would have resulted if the arrangement had been at arm's length and had the yield on the issue not been relevant to either party. (g) Information Reportin~. The City covenants and agrees to file or cause to be filed with the Secretary of the Treasury, not later than the 15th day of the second calendar month after the close -24- of the calendar quarter in which the Issuance Date of the first Bond delivered to the TWDB occurs, an information statement concerning the Bonds, all under and in accordance with section 149( e) of the Code and applicable regulations thereunder~ Section 7.3: Qualified Tax-Exempt Obligations. The City hereby designates the Bonds as "qualified tax-exempt obligationsU for purposes of section 265(b) of the Code. In connection therewith, the City represents (a) that the aggregate amount of tax-exempt obligations issued by the City during calendar year 2001, including the Bonds, which have been designated as r'qualified tax-exempt obligationslJ under section 265(b)(3) of the Code does not exceed $10,000,000, and (b) that the reasonably anticipated amount of tax-exempt obligations which will be issued by the City during calendar year 2001, including the Bonds, will not exceed $10,000,000. For purposes of this Section, the term Iltax-exempt obligation" does not include "private activity bonds" within the meaning of section 141 of the Code, other than "qualified 501(c)(3) bonds" within the meaning of section 145 of the Code. In addition, for purposes of this Section, the City includes all governmental units which are aggregated with the City under the Code~ Section 7.4: Construction Fund. There is hereby created and established a special fund of the City, to be known as the "City of West University Place, Texas, Waterworks and Sewer System Revenue Bonds, Series 2001B Construction Fund", which shall be established at an official depository of the City and kept separate and apart from other funds of the City.. The proceeds of the Bonds, as received, shall be deposited in Construction Fund. Money on deposit in the Construction Fund shall be used only for the purposes set forth in Section 3.1 of this Ordinance and to pay costs of issuance. Money on deposit in the Construction Fund, may, at the option of the City, be invested as permitted by Texas law, including Chapter 2256, Texas Government Code, as amended; provided that all such deposits and investments shall be made in such manner that the money required to be expended from the Construction Fund will be available at the proper time or times. So long as any Bonds remain outstanding) all monies on deposit in, or credited to, the Construction Fund shall be secured as provided by law for cities in the State of Texas. All interest and income derived from such deposits and investments shall be used for the purposes set forth in Section 3.1 of this Ordinance and to pay the costs of issuing the Bonds; provided, however, that, subject to the provisions of Section 7.5 hereof, the City may transfer such interest and income to the Debt Service Fund. Section 7.5: TWDB Rules.. In compliance with the published rules and regulations of TWDB, the City covenants and agrees that upon final completion of the project to be financed with the proceeds of the Bonds, and if all or any portion of the Bonds shall be held by or on account of TWDB or the State of Texas, the proper officials of the City shall (i) render due and final accounting to T\VDB of the total cost of the project and (ii) provide as-built plans for the facilities financed with the proceeds of the Bonds.. If, following completion of the project, funds remain on hand in the Construction Fund, or if the Development Fund Manager disapproves construction of any portion of the project as not being in accordance with the plans and specifications, the City shall, inunediately after filing the final accounting, return to TWDB the amount of such excess and/or the cost as determined by the Development Fund Manager relating to the parts of the project not constructed in accordance with the plans and specifications, to the nearest multiple of $5,000, and TWDB shall thereupon cancel and deliver to the City, in inverse maturity order, a like amount of Bonds held by -25- TWDB. In the alternative, the City may, at its option, use any such excess funds to pay for additional sewer system improvements within the scope of the approved project, or with the approval of the TWDB, additional improvements not within the scope of the approved project, provided that such improvements are within the scope of Section 3.1 herein.. Any further amounts remaining in the City's Construction Fund thereafter shall be promptly deposited by the City into the Debt Service Fund and applied to the payment of the principal of and interest on the Bonds.. Unless othenvise stated in the loan commitment ofTWDB with respect to the purchase of the Bonds, in determining the amount of available funds for constructing the project to be financed, the City shall account for all monies in the Construction Fund, including all loan funds extended by TWDB, all other funds available from the project as described in the project engineerJs sufficiency of funds statement required for closing TWDBfs loan and all interest earned by the City on money in the Construction Fund. This requirement shall not be interpreted as prohibiting TWDB from enforcing such other rights as it may have under law. Section 7.6: Audit. So long as any of the Bonds are held by TWDB, the City shall provide to TWDB'g Development Fund Manager a copy ofan annual audit of the City's finances within 120 days of the end of the Cityls fiscal year. Section 7.. 7: Rules and Statutes~ The City covenants that so long as any Bonds are held by TWDB it will abide by TWDB's rules and the relevant statutes of the State of Texas, including Chapters 15) 16 and 17, Texas Water Code. Section 7..8: Conservation Program. The City covenants that to the extent required by TWDB, the City will implement any water conservation program adopted by the City and approved by TWDB in connection with the sale of the Bonds to TWDB, together with any amenodments to such program which are so adopted and approved, for so long as any outstanding Bond or Bonds are owned by TWDB.. Section 7 ~9: Environmental Determinations. The City covenants that to the extent required by TWDB, the City will comply with any special conditions specified by TWDBts environmental determination in cormection with the sale of the Bonds to TWDB, for so long as any outstanding Bond or Bonds are owned by the TWDB.. Section 7..10: Compliance with Rules and Statutes.. The City covenants that it will comply with TWDB's rules and relevant state statutes in connection with the sale of the Bonds to TWDB and the use of the proceeds in connection with the construction of improvements and extensions to the City's waterworks and sanitary sewer system project approved by TWDB~ Section 7"011: Escrow Agreement To facilitate the delivery of and payment for the Bonds pending completion of review of plans and specifications, the City Council hereby authorizes an Escrow Agreement to be entered into by and between the City and Bank One, National Association, as Escrow Agent, the terms and conditions of which are hereby approved, subject to such insertions, additions, and modifications as shall be necessary to comply with all applicable laws, regulations, and procedures and to carry out the intent and purposes of this Ordinance. The Mayor or Mayor Pro -26- Tern and the City Secretary are authorized to execute and deliver such Escrow Agreement in multiple counterparts on behalf of the City. AR TI CLE VIII CONTINUING DISCLOSURE Section 8..1: Continuing Disclosure Undertakin~. (a) Annual Reports~ The City shall provide annually to each NRMSIR and the SID, within six months after the end of each fiscal year, financial information and operating data with respect to the City of the general type included in the Cityts audit report The information to be provided shall include the complete financial statements of the City prepared in accordance with the accounting principles the City may be required to employ from time to time pursuant to State law or regulation and shall be audited, if the audit is completed within the period during which they must be pro\~ided.. If the audit of such financial statements is not complete within such period, then the City shall provide unaudited financial statements for the applicable fiscal year to each NRMSIR and the SID within such six month period, and audited financial statements when the audit report on such statements becomes available~ If the City changes its fiscal year, it will notify each NRMSIRand the SID of the change (and of the date of the new fiscal year end) prior to the next date by which the City otherwise would be required to provide financial information and operating data pursuant to this Section~ The financial infonnation and operating data to be provided pursuant to this Section may be set forth in full in one or more documents or may be included by specific reference to any document (including an official statement or other offering document, ifit is available from the MSRB) that theretofore has been provided to each NRMSIR and the SID or filed with the SEC. (b) Material Event Notices.. The City shall notify the SID and either each NRMSIR or the MSRB, in a timely manner, of any of the following events with respect to the Bonds, if such event is material within the meaning of the federal securities laws: A. Principal and interest payment delinquencies; B~ Non-payment related defaults; c~ Unscheduled draws on debt service reserves reflecting financial di ffi cuI ties; D.. Unscheduled draws on credit enhancements reflecting financial difficulties; E.. Substitution of credit or liquidity providers, or their failure to perform; F. Adverse tax opinions or events affecting the tax-exempt status of the Bonds; G. Modifications to rights of holders of the Bonds; H. Bond calls; I~ Defeasances; -27- J. Release, substitution, or sale of property securing repayment of the Bonds; and K. Rating changes. The City shall notify the SID and either each NRMSIR or the MSRB, in a timely manner, of any failure by the City to provide financial information or operating data in accordance with Section 8.1(a) of this Ordinance by the time required by such Section. (c) Limitations, Disclaimers, and Amendments. The City shall be obligated to observe and perform the covenants specified in this Section for so long as, but only for so long as, the City remains an "obligated personn with respect to the Bonds within the meaning of the Rule, except that the City in any event will give notice of any deposit made in accordance with Texas law that causes Bonds no longer to be outstanding. The provisions of this Section are for the sole benefit of the holders and beneficial owners of the Bonds and the beneficial owners of the TWDB's bonds if the City is an obligated person with respect to the TWDB's bonds under the Rule, and nothing in this Section, express or implied, shall give any benefit or any legal or equitable right, remedy, or claim hereunder to any other person. The City undertakes to provide only the financial information, operating data, financial statements, and notices which it has expressly agreed to provide pursuant to this Section and does not hereby undertake to provide any other information that may be relevant or material to a complete presentation of the City's financial results, condition, or prospects or hereby undertake to update any infonnation provided in accordance with this Section or otherwise, except as expressly provided herein. The City does not make any representation or warranty concerning such information or its usefulness to a decision to invest in or sell Bonds at any future date. UNDER NO CIRCUMSTANCES SHALL THE CITY BE LIABLE TO THE HOLDER OR BENEFICIAL OWNER OF ANY BOND OR ANY OTHER PERSON, IN CONTRACT OR TORT, FOR DAMAGES RESULTING IN WHOLE OR IN PART FROM ANY BREACH BY THE CITY, WHETHER NEGLIGENT OR WITHOUT FAU~T ON ITS PART, OF ANY COVENANT SPECIFIED IN THIS SECTION, BUT EVERY RIGHT AND REMEDY OF ANY SUCH PERSON, IN CONTRACT OR TORT, FOR OR ON ACCOUNT OF ANY SUCH BREACH SHALL BE LIMITED TO AN ACTION FOR MANDAMUS OR SPECIFIC PERFORMANCE. No default by the City in observing or performing its obligations under this Section shall comprise a breach of or default under this Ordinance for purposes of any other provision of this Ordinance~ Nothing in this Section is intended or shall act to disclaim, waive, or otherwise limit the duties of the City under federal and state securities laws. The provisions of this Section may be amended by the City from time to time to adapt to changed circumstances that arise from a change in legal requirements, change in law, or change in the identity, nature, status or type of operations of the City, if (i) the agreement, as amended, would have permitted an underwriter to purchase or sell Bonds in the original primary offering in -28- compliance with the Rule, taking into account any amendments or interpretations of the Rule to the date of such amendment, as <"well as such changed circumstances, and (ii) either (a) the holders of a majority in aggregate principal amount of the outstanding Bonds consent to such amendment, or (b) any person unaffiliated with the City (such as nationally recognized bond counsel), determines that the amendment will not materially impair the interests of the holders and beneficial owners of the BondsA If any such amendment is made, the City will include in its next annual update an explanation in narrative form of the reasons for the amendment and its impact on the type of operating data or financial information being provided. ARTICLE IX MISCELLANEOUS Section 9~ 1: Further Proceedings. The Mayor, the Director of Finance, the City Secretary, and other appropriate officials of the City are hereby authorized and directed to do any and all things necessary and/or convenient to carry out the tenns of this Ordinance. Section 9.2: Severability.. If any Section, paragraph, clause or provision of this Ordinance shall for any reason be held to be invalid or unenforceable, the invalidity or unenforceability of such Section, paragraph, clause or provision shall not affect any of the remaining provisions of this Ordinance. Section 9.3: Paying AgentJRegistrar Aw-eement The form of agreement setting forth the duties of the Registrar is hereby approved, and an appropriate official of the City is hereby authorized to execute such agreement for and on behalf of the City. Section 9.4: No Personal Liability. No recourse shall be had for payment of the principal of or interest on any Bonds or for any claim based thereon, or on this Ordinance, against any official or employee of the City or any person executing any Bonds.. Section 9 ~5 : Parties Interested~ Nothing in this Ordinance expressed or implied is intended or shall be construed to confer upon, or to give to, any person or entity, other than the City, the Registrar and the Owners of the Bonds, any right, remedy or claim under or by reason of this Ordinance or any covenant, condition or stipulation hereof, and all covenants, stipulations, promises and agreements in this Ordinance shall be for the sole and exclusive benefit of the City, the Registrar and the Owners of the Bonds. Section 9.6: Repealer. All orders, resolutions and ordinances, or parts thereof, inconsistent herewith are hereby repealed to the extent of such inconsistency. Section 9.7: Open Meeting. It is hereby officially found and determined that the meeting at which this Ordinance was adopted was open to the public, and that public notice of the time, place and purpose of said meeting was given, all as required by the Texas Open Meetings Act -29- . I Section 9.8: Effective Date. This Ordinance shall take effect upon its passage. Section 9.9: Emergency. The public importance of this measure and the requirements of the law create an emergency and an urgent public necessity requiring that this Ordinance be passed and take effect as an emergency measure, and a state of emergency is hereby declared, and this Ordinance is accordingly passed as an emergency measure and shall take effect and be in force immediately from and after its passage and signature. -30- .. F '.. PASSED AND ~PPROVED this 9th day of July, 2001 ~ ~ May City of West University Place, Texas ATTEST: Cit cretary City of West University Place, Texas (SEAL) REVIEWED: City Attorney City of West University Place, Texas I certify that the above and foregoing ordinance complies with a budget appropriation (Account No. / en; ), and that there is or will be enough unencumbered money in that account to meet the obligation when it is due.. .aldht c51~4?W! )._____ Finance Director City of West University Place, Texas -31-