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HomeMy WebLinkAboutO-1990-1728 , . . . . \. , \. ..h.i ORDINANCE NO. 1728 ORDINANCE AUTHORIZING THE ISSUANCE OF $2,100,000 C11Y OF LA PORTE, TEXAS, WATERWORKS AND SEWER SYSTEM REVENUE BONDS, SERIES 1990; EXECUTIONOF AN PAYINGAGENTIREGISTRARAGREEMENT; ANDALL OTHER MATTERS RELATED THERETO, INCLUDING IMMEDIATE EFFECTIVENESS WHEREAS, at an election duly called and held in the City of La Porte, Texas (the "City") on June 15, 1985, more than a majority of the duly qualified resident electors of the City who participated in the election voted in favor of, among other things, the issuance of revenue bonds in the aggregate principal amount of $8,550,000 for the purpose of extending and improving the City's existing sanitary sewer system; and WHEREAS, all of said bonds are to be secured by a pledge of the net revenues from the operation of the City's combined waterworks and sanitary sewer system and are to be on a parity with each other (and any Parity Bonds, hereinafter defined, which are authorized, issued, and delivered); and WHEREAS, the City has heretofore issued "City of La Porte, Texas Waterworks and Sewer System Revenue Bonds, Series 1985" in the original aggregate principal amount of $6,000,000 (the "Previously Issued Parity Bonds"); and WHEREAS, the City Council of the City deems it necessary and desirable to proceed with the issuance of a second installment of such voted bonds in the aggregate principal amount of $2,100,000, leaving $1~250,000 of said authorized bonds to be issued in one or more installments at a later date or dates; . THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF THE CI1Y OF LA. PORTE, TEXAS, THAT; SECl10N 1. BoNDS AUl'HoRIZBD. Pursuant to Article 1111 et. seq., Vernon's Texas Civil Statutes, as amended, and other applicable law, the City's bonds are hereby authorized to be issued to be designated as the "City of La Porte, Texas, Waterworks and Sewer System Revenue Bonds, Series 1990" for the purpose of extending and improving the City's existing sanitary sewer system in the aggregate principal amount of $2,100,000 (the "Bonds"). The Bonds are issued as "Addi- tional Bonds" as such term is defined in the ordinance authorizing the Previously Issued Parity Bonds, and are in all respects on a parity with the Previously Issued Parity Bonds. SECl10N 2 DAms. MA1URITIES. AND INmREsT RA1ES. The Bonds shall be dated September 15, 1990, shall be in the denomination of $5,000 or any integral multiple thereof, shall be numbered consecutively from R-l upward, and shall mature on the maturity date, in each of the years, and in the amounts, respectively, as set forth in the following schedule and shall bear interest at the following rates per annum: . e MATURITY DATE: MARCH 15 INTEREST INTEREST YEAR AMOUNTS RATES YEAR AMOUNTS RATES 1992 $100,000 8.50% 2002 $100,000 7.00% 1993 100,000 8.50% 2003 100,000 7.00% 1994 100,000 8.50% 2004 100,000 7.00% 1995 100,000 8.50% 2005 100,000 7.00% 1996 100,000 8.50% 2006 100,000 7.00% 1997 100,000 8.50% 2007 100,000 7.25% 1998 100,000 8.50% 2008 125,000 7.25% 1999 100,000 8.50% 2009 125,000 7.25% 2000 100,000 7.50% 2010 125,000 7.25% 2001 100,000 7.00% 2011 125,000 7.25% Such interest shall be payable on March 15, 1991, and semiannually thereafter on September 15 and March 15. Said interest shall be payable to the registered owner of any such Bond in the manner provided in the FORM OF BONDS set forth in this Ordinance. SECllON 3. RIGHT OF PRIOR REoBMP110N. The City reserves the right to redeem the Bonds maturing on or after March 15, 2002, in whole or in part in principal amounts of $5,000 or any integral multiple thereof, on March 15, 2001, or any date thereafter, at the par value thereof plus accrued interest to the date fIxed for redemption. If less than all of the Bonds are to be redeemed by the City, the City shall determine the maturity or maturities and the amounts thereof to be redeemed and shall direct the Paying AgentlRegistrar to call by lot Bonds, or portions thereof, within such maturity or maturities and in such principal amounts, for redemption. Notice of such redemption shall be given as provided in the FORM OF BOND in Section 5 hereof. If such notice of redemption is given, and if due provision for such payment is made, the Bonds, or the portions thereof which are to be so redeemed, thereby automatically shall be redeemed prior to their scheduled maturities, and shall not bear interest after the date fIXed for their redemption, and shall not be regarded as being outstanding except for the right of the registered owner to receive the redemption price plus accrued interest to the date fixed for redemption from the Paying Agent/Registrar out of the funds provided for such payment. The Paying AgentlRegistrar shall record in the Registration Books all such redemptions of principal of the Bonds or any portion thereof. By the date fIXed for any such redemption due provision shall be made by the City with the Paying AgentlRegistrar for the payment of the required redemption price for the Bonds or the portions thereof which are to be so redeemed, plus accrued interest thereon to the date fixed for redemption. If such notice of redemption is given, and if due ' provision for such payment is made, all as provided above, the Bonds, or the portions thereof which are to be so redeemed, thereby automatically shall be redeemed prior to their scheduled maturities, and shall not bear interest after the date fixed for their redemption, and shall not be regarded as being outstanding except for the right of the registered owner to receive the redemption price plus accrued interest to the date fIXed for redemption from the Paying AgentlRegistrar out of the funds provided for such payment. The Paying Agent/Registrar shall 2 e . record in the Registration Books all such redemptions of principal of the Bonds or any portion thereof. If a portion of any Bond shall be redeemed a substitute Bond or Bonds having the same maturity date, bearing interest at the same rate, in any 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 unreserved 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. SBCI10N 4. PAYlNO AOENT/RBoIS'IRAR. (a) The City shall keep or cause to be kept at the principal corporate trust office of the Paying AgentlRegistrar herein named, or such other bank, trust company, financial institution, or other entity duly qualified and legally authorized to serve and perform duties of and services of Paying AgentlRegistrar, named in accordance with the pro- visions of (g) of this Section (the "Paying AgentlRegistrar"), books or records of the registration and transfer of the Bonds (the "Registration Books"), and the City hereby appoints the Paying AgentlRegistrar as its registrar and transfer agent to keep such books or records and make such transfers and registrations under such reasonable regulations as the City and Paying AgentlRegistrar may prescribe; and the Paying AgentlRegistrar shall make such transfers and registrations as herein provided. It shall be the duty of the Paying AgentlRegistrar to obtain from the registered owner and record in the Registration Books the address of such registered owner of each Bond to which payments with respect to the Bonds shall be mailed, as herein provided. The City or its designee shall have the right to inspect the Registration Books during regular business hours of the Paying AgentlRegistrar, but otherwise the Paying AgentlRegistrar shall keep the Registration Books confidential and, unless otherwise required by law, shall not permit their inspection by any other entity. Registration of each Bond may be transferred in the Registration Books only upon presentation and surrender of such bond to the Paying AgentlRegistrar for transfer of registration and cancellation, together with proper written instruments of assignment, in form and with guarantee of signatures satisfactory to the Paying AgentlRegistrar, evidencing the assignment of the bond, or any portion thereof in any integral multiple of $5,000, to the assignee or assignees thereof, and the right of such assignee or assignees to have the bond or any such portion thereof registered in the name of such assignee or assignees. Upon the assignment and transfer of any Bond or any portion thereof, a new substitute bond or bonds shall be issued in exchange therefor in the manner herein provided. (b) The entity in whose name any Bond shall be registered in the Registration Books at any time shall be treated as the absolute owner thereof for all purposes of this Ordinance, whether or not such bond shall be overdue, and the City and the Paying AgentlRegistrar shall not be affect- ed by any notice to the contrary unless otherwise required by law; and payment of, or on account of, the principal of, premium, if any, and interest on any such bond shall be made only to such registered owner. All such payments shall be valid and effectual to satisfy and discharge the liability upon such bond to the extent of the sum or sums so paid. (c) The City hereby further appoints the Paying AgentlRegistrar to act as the paying agent for paying the principal of and interest on the Bonds, and to act as its agent to exchange or replace Bonds, all as provided in this Ordinance. The Paying AgentlRegistrar shall keep proper records of all payments made by the City and the Paying AgentlRegistrar with respect to the Bonds, and of all exchanges of such bonds, and all replacements of such bonds, as provided in this Ordinance. 3 e . (d) Each Bond may be exchanged for fully registered bonds in the manner set forth herein. Each bond issued and delivered pursuant to this Ordinance, to the extent of the unpaid or unredeemed principal balance or principal amount thereof, may, upon surrender of such bond at the principal corporate trust office of the Paying AgentlRegistrar, together with a written request therefor duly executed by the registered owner or the assignee or assignees thereof, or its or their duly authorized attorneys or representatives, with guarantee of signatures satisfactory to the Pay- ing AgentlRegistrar, at the option of the registered owner or such assignee or assignees, as appropriate, be exchanged for fully registered bonds, without interest coupons, in the form prescribed in the FORM OF BONDS set forth in this Ordinance, in the denomination of $5,000, or any integral multiple of $5,000 (subject to the requirement hereinafter stated that each substitute Bond shall have a single stated maturity date), as requested in writing by such registered owner or such assignee or assignees, in an aggregate principal amount equal to the unpaid or unredeemed principal amount of any bond or bonds so surrendered, and payable to the appro- priate registered owner, assignee, or assignees, as the case may be. If a portion of any Bond shall be redeemed prior to its scheduled maturity as provided herein, a substitute bond or bonds having the same maturity date, bearing interest at the same rate, in the denomination or denominations of any integral multiple of $5,000 at the request of the registered owner, and in an aggregate principal amount equal to the unredeemed portion thereof, will be issued to the registered owner upon surrender thereof for cancellation. If any Bond or portion thereof is assigned and trans- ferred, each bond issued in exchange therefor shall have the same principal maturity date and bear interest at the same rate as the bond for which it is being exchanged. Each substitute bond shall bear a letter and/or number to distinguish it from each other bond. The Paying AgentlRegistrar shall exchange or replace Bonds as provided herein, and each fully registered bond delivered in exchange for or replacement of any bond or portion thereof as permitted or required by any provision of this Ordinance shall constitute one of the Bonds for all purposes of this Ordinance, and may again be exchanged or replaced. It is specifically provided, however, that any bond delivered in exchange for or replacement of another bond prior to the first scheduled interest pay- ment date on the Bonds (as stated on the face thereof) shall be dated the same date as such bond, but each substitute bond so delivered on or after such first scheduled interest payment date shall be dated as of the interest payment date preceding the date on which such substitute bond is delivered, unless such bond is delivered on an interest payment date, in which case it shall be dated as of such date of delivery; provided, however, that if at the time of delivery of any substitute bond the interest on the bond for which it is being exchanged has not been paid, then such bond shall be dated as of the date to which such interest has been paid in full. On each substitute bond issued in exchange for or replacement of any bond or bonds issued under this Ordinance there shall be printed thereon a Paying AgentlRegistrar's Authentication Certificate, in the form hereinafter set forth. An authorized representative of the Paying Agent/Registrar shall, before the delivery of any such bond, date such by dating the Authentication Certificate in the manner set forth above, and manually sign such Certificate, and no such bond shall be deemed to be issued or outstanding unless such Certificate is so executed. The Paying AgentlRegistrar promptly shall cancel all Bonds surrendered for exchange or replacement. No additional ordinances, orders, or resolutions need be passed or adopted by the City Council or any other body or person so as to accomplish the foregoing exchange or replacement of any Bond or portion thereof, and the Paying AgentlRegistrar 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 4 e . pursuant to Article 717k-6, V.A T.C.S, and particularly Section 6 thereof, the duty of such exchange or replacement of bonds as aforesaid is hereby imposed upon the Paying AgentlRegis- trar, and upon the execution of the aforementioned Paying AgentlRegistrar's Authentication Certificate, the exchanged or replaced Bond shall be valid, incontestable, and enforceable in the same manner and with the same effect as the Bonds which originally were delivered pursuant to this Ordinance, approved by the Attorney General, and registered by the Comptroller of Public Accounts. Neither the City nor the Paying Agent/Registrar shall be required (1) to issue, transfer, or exchange any Bond subject to redemption during a period beginning at the opening of business 15 days before the day of the first mailing of a notice of redemption of Bonds and ending at the close of business on the day of such mailing, or (2) to transfer or exchange any Bond aft.;::r it is selected for redemption, in whole or in part when such redemption is scheduled to occur within 30 calendar days; provided, however, that such limitation shall not be applicable to an exchange by the owner of the uncalled principal balance of a Bond. (e) All Bonds issued in exchange or replacement of any other Bond or portion thereof, (i) shall be issued in fully registered form, without interest coupons, with the principal of and interest on such bonds to be payable only to the registered owners thereof, (ii) may be redeemed prior to their scheduled maturities, (iii) may be transferred and assigned, (iv) may be exchanged for other Bonds, (v) shall have the characteristics, (vi) shall be signed and sealed, and (vii) the principal of and interest on the Bonds shall be payable, all as provided, and in the manner required or indicated, in the FORM OF BONDS set forth in this Ordinance. (1) The City shall pay all of the Paying AgentlRegistrar's reasonable and customary fees and charges for making transfers, conversions, and exchanges of the Bonds in accordance with an agreement between the City and the Paying AgentlRegistrar, but the registered owner of any Bond requesting such transfer shall pay any taxes or other governmental charges required to be paid with respect thereto. In addition, the City hereby covenants with the registered owners of the Bonds that it will pay the reasonable and standard or customary fees and charges of the Paying Agent! Registrar for its services with respect to the payment of the principal of and interest on the Bonds, when due. (g) The City covenants with the registered owners of the Bonds that at all times while the Bonds are outstanding the City will provide a competent and legally qualified bank, trust company, financial institution, or other entity duly qualified and legally authorized to serve as and perform the duties and services of Paying Agent/Registrar, to act as and perform the services of Paying AgentlRegistrar 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 AgentlRegistrar upon not less than 60 days written notice to the Paying AgentlRegistrar. In the event that the entity at any time acting as Paying AgentlRegistrar (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 national or state banking institution which shall be a corporation organized and doing business under the laws of the United States of America or of any state, authorized under such laws to exercise trust powers, subject to supervision or examination by federal or state Authority, and whose qualifications substantially are similar to the previous Paying Agent/Registrar to act as Paying AgentlRegistrar under this Ordinance. Upon any change in the Paying AgentlRegistrar, the previous Paying AgentlRegistrar promptly shall transfer and deliver the Registration Books (or a copy thereo1), along with all other pertinent 5 e e books and records relating to the Bonds, to the new Paying AgentlRegistrar designated and appointed by the City. Upon any change in the Paying AgentlRegistrar, the City promptly will cause a written notice thereof to be sent by the new Paying AgentlRegistrar to each registered owner of the Bonds, by United States Mail, 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. SECIlON 5. FoRMS. The form of the Bonds, including the form of Paying Agent/Registrar's Certificate, the form of Assignment, and the form of the Comptroller's Registration Certificate to accompany the Bonds on the initial delivery thereof, shall be, respectively, substantially as follows, with such appropriate variations, omissions, or insertions as are permitted or required by this Ordinance: FORM OF BONDS: NO. $ United States of America State of Texas CITY OF LA PORTE, TEXAS, WATERWORKS AND SEWER SYSTEM REVENUE BOND, SERIES 1990 MATURITY DATE INTEREST RATE ORIGINAL ISSUE DATE % September 15, 1990 CUSIP ON 11IE MATURrIY DATE, SPECIFIED ABOVE, 11IE CITY OF lA PORTE, TEXAS (the "City"), hereby promises to pay to , or the registered assignee hereof (either being hereinafter called the "registered owner") the principal amount of and to pay interest thereon, from the original issue date of this Bond, specified above, to the date of its scheduled maturity or the date of its redemption prior to scheduled maturity, at the rate of interest per annum, specified above, with said interest being payable on March 15, 1991, and semiannually on each September 15 and March 15 thereafter. 11IE TERMS AND PROVISIONS of this Bond are continued on the reverse side hereof and shall for all purposes have the same effect as though fully set forth at this place. 11IE PRINCIPAL OF AND INTEREST ON this Bond are payable in lawful money of the United States of America, without exchange or collection charges. The principal of this Bond shall be paid to the registered owner hereof upon presentation and surrender of this Bond at maturity or upon the date fixed for its redemption prior to maturity, at the principal corporate trust office of FIRST eI7Y, TEXAS - HOUSTON, N.A., HOUSTON, TEXAS, which is the "Paying Agent/Reg- istrar" for this Bond. The payment of interest on this Bond shall be made by the Paying 6 e e AgentlRegistrar to the registered owner hereof as shown by the Registration Books kept by the Paying AgentlRegistrar at the close of business on the Record Date by check drawn by the Paying AgentlRegistrar on, and payable solely from, funds of the City required to be on deposit with the Paying AgentlRegistrar for such purpose as hereinafter provided; and such check shall be sent by the Paying AgentlRegistrar by United States mail, postage prepaid, on each such interest payment date, to the registered owner hereof at its address as it appears on the Registration Books kept by the Paying Agent/Registrar, as hereinafter described. The record date ("Record Date") for the interest payable on any interest payment date means the first calendar day of the month of a scheduled interest payment. In the event of a non-payment of interest on a scheduled payment date, and for 30 days thereafter, a new record date for such interest payment (a "Special Record Date") will be established by the Paying AgentlRegistrar, if and when funds for the payment of such interest have been received from the City. Notice of the Special Record Date and of the scheduled payment date of the past due interest (the "Special Payment Date", which shall be 15 calendar days after the Special Record Date) shall be sent at least five business days prior to the Special Record Date by United States mail, first class, postage prepaid, to the address of each registered owner of a Bond appearing Gn the books of the Paying AgentlRegistrar at the close of business on the last business day next preceding the date of mailing of such notice. The City covenants with the registered owner of this Bond that no later than each principal payment date and interest payment date for this Bond it will make available to the Paying AgentlRegistrar the amounts required to provide for the payment, in immediately available funds, of all principal of and interest on the Bonds, when due, in the manner set forth in the ordinance authorizing the issuance of the bonds adopted by the City Council of the City on September 27, 1990 (the "Ordinance"). *IF TIlE DATE for the payment of the principal of or interest on this Bond shall be a Saturday, a Sunday, a legal holiday, or a day on which banking institutions in the city where the Paying AgentlRegistrar is located are authorized by law or executive order to close, then the date for such payment shall be the next succeeding day which is not such a Saturday, Sunday, legal holiday, or day on which banking institutions are authorized to close; and payment on such date shall have the same force and effect as if made on the original date payment was due. *TIllS BOND is one of a Series of bonds of like tenor and effect except as to denomination, number, maturity, interest rate and right of prior redemption, issued in the aggregate principal amount of $2,100,000 for the purpose of extending and improving the City's existing sanitary sewer system. *TIIE BONDS of this series scheduled to mature on and after March 15, 2002 may be redeemed prior to their scheduled maturities, in whole, or in part in principal amounts of $5,000 or any integral multiple thereof, at the option of the City, on March 15, 2001, or on any interest payment date thereafter, for the principal amount thereof plus accrued interest to the date fixed for redemption. * AT LEAST 30 days prior to the date fIXed for any such redemption, a notice of such redemption shall be published one time in a financial journal or publication of general circulation in the United States of America carrying as a regular feature notices of municipal bonds called for redemption. Such notice also shall be sent by the Paying AgentlRegistrar by United States mail, first-class postage prepaid, at least 30 days prior to the date fIXed for any such redemption, to the registered owner of each Bond or portion thereof to be redeemed at its address as it appeared on 7 e e the Registration Books on the 45th day prior to such redemption date and to major securities depositories, national bond rating agencies, and bond information services; provided, however, that the failure to send, mail or receive such notice, or any defect therein or in the sending or mailing thereof, shall not affect the validity or effectiveness of the proceedings for the redemption of any Bond, and the publication of notice as described above shall be the only notice actually required in connection with or as a prerequisite to the redemption of any Bonds. By the date fixed for any such redemption due provision shall be made by the City with the Paying AgentlRegistrar 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 notice of redemption is given, and if due provision for such payment is made, all as provided above, this Bond, or the portion thereof which is to be so redeemed, thereby automatically shall be redeemed prior to its scheduled maturity, and shall not bear 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 AgentlRegistrar out of the funds provided for such payment. The Paying AgentlRegistrar shall record in the Registration Books all such redemptions of principal 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 aggregate principal amount equal to the unredeemed portion thereof, will be issued to the registered owner upon the surrender thereof for cancellation, at the expense of the City, all as provided in the Ordinanc~. · AIL BONDS OF TInS SERIES are issuable solely as fully registered bonds, without interest coupons, in the denomination of any integral multiple of $5,000. As provided in the Ordinance, this Bond, or any unredeemed portion hereof, may, at the request of the registered owner or the assignee or assignees hereof, be assigned, transferred, and exchanged for a like aggregate principal amount of fully registered bonds, without interest coupons, payable to the appropriate registered owner, assignee, or assignees, as the case may be, having the same maturity date, and bearing interest at the same rate, in any denomination or denominations in any integral multiple of $5,000 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 AgentlRegistrar for cancellation, all in accordance with the form and procedures set forth in the Ordinance. Among other requirements for such assignment and transfer, this Bond must be presented and surrendered to the Paying AgentlRegistrar, together with proper instruments of assignment, in form and with guarantee of ~ignatures satisfactory to the Paying AgentlRegistrar, evidencing assignment of this Bond or any portion or portions hereof in any integral multiple of $5,000 to the assignee or assignees in whose name or names this Bond or any such portion or portions hereof is or are to be transferred and 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 AgentlRegistrar may be used to evidence the assignment of this Bond or any portion or portions hereof from time to time by the registered owner. The City shall pay the Paying Agent/Registrar's reasonable standard or customary fees and charges for transferring, converting and exchanging any Bond or portion thereof; provided, however, that any taxes or governmental charges required to be paid with respect thereto shall be paid by the one requesting such transfer, conversion and exchange. In any circumstance, neither the City nor the Paying Agent/ Registrar shall be required (1) to make any 8 e e transfer or exchange during a period beginning at the opening of business 15 days before the day of the first mailing of a notice of redemption of bonds and ending at the close of business on the day of such mailing, or (2) to transfer or exchange any Bonds so selected for redemption when such redemption is scheduled to occur within 30 calendar days; provided, however, such limitation shall not be applicable to an exchange by the registered owner of the uncalled principal balance of a Bond. *IN TIlE EVENT any Paying AgentlRegistrar for the Bonds is changed by the City, resigns, or otherwise ceases to act as such, the City has covenanted in the Ordinance that it promptiy will appoint a competent and legally qualified substitute therefor, and promptly will cause written notice thereof to be mailed to the registered owners of the Bonds. *BY BECOMING the registered owner of this Bond, the registered owner thereby acknowledges aU of the terms and provisions of the Ordinance, agrees to be bound by such terms and provisions, acknowledges that the Ordinance is duly recorded and available for inspection in the official minutes and records of the City, and agrees that the terms and provisions of this Bond and the Ordinance constitute a contract between each registered owner hereof and the City. *TIIE CITY has reserved the right, subject to the restrictions stated, and adopted by reference, in the Ordinance, to issue additional parity revenue bonds which also may be made payable from, and secured by, a first lien on and pledge of the "Net Revenues" of the City's combined waterworks and sewer system (as defined and described in the Ordinance). *TIIE 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, or from any source whatsoever other than the aforesaid Net Revenues. IT IS HEREBY certified and covenanted that this Bond has been duly and validly authorized, issued and delivered; 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; that this Bond is a special obligation; and that the principal of and interest on this Bond together with outstanding parity revenue bonds are payable from, and secured by a first lien on and pledge of, the Net Revenues. IN TESTIMONY WHEREOF, the City Council has caused the seal of the City to be duly impressed or placed in facsimile hereon, and this Bond to be signed with the imprinted facsimile signature of the Mayor and countersigned by the facsimile signature of the City Secretary. COUNTERSIGNED: City Secretary, City of La Porte Mayor, City of La Porte (CITY SEAL) 9 e e FORM OF PAYING AGENTIREGISTRAR'S AUTHENTICATION CERTIFICATE PAYING AGENTIREGISTRAR'S AUTHENTICATION CERTIFICATE 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 FIRST CITY, TEXAS - HOUSTON, N.A, HOUSTON, TEXAS Paying AgentlRegistrar By Authorized Representative FORM OF STATEMENT OF INSURANCE .STATEMENT OF INSURANCE Municipal Bond Guaranty Insurance Policy No. (the "Policy") with respect to payments due for principal of and interest on this Bond has been issued by AMBAC Indemnity Corporation (" AMBAC Indemnity"). The Policy has been delivered to the United States Trust Company of New York, New York, New York, as the Insurance Trustee under said Policy and will be held by such Insurance Trustee or any successor insurance trustee. The Policy is on file and available for inspection at the principal office of the Insurance Trustee and a copy thereof may be secured from AMBAC Indemnity or the Insurance Trustee. All payments required to be made under the Policy shall be made in accordance with the provisions thereof. The owner of this Bond acknowledges and consents to the subrogation rights of AMBAC Indemnity as more fully set forth in the Policy. 10 e e FORM OF ASSIGNMENT: * ASSIGNMENT FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers unto Please insert Social Security or Taxpayer Identification Number of Transfer~e I I (Please print or typewrite name and address, including zip code of Transferee) the within Bond and all rights thereunder, and hereby irrevocably constitutes and appoints attorney to register the transfer of the within Bond on the books kept for registration thereof, with full power of substitution in the premises. Dated: Signature Guaranteed: NOTICE: Signature(s) must be guaranteed by a member firm of the New York Stock Exchange or a commercial bank or trust company. NOTICE: The signature above must correspond with the name of the Registered Owner as it appears upon the. front of this Bond in every particular, without alteration or enlarge- ment or any change whatsoever. 11 e . The following abbreviations, when used in the Assignment above or on the face of the within Bond, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM - as tenants in common TEN ENT - as tenants by the entireties JT TEN . as joint tenants with right of survivorship and not as tenants in common UNIF GIFf MIN ACf - Custodian (Cust) (Minor) under Uniform Gifts to Minor Act (State) Additional abbreviations may also be used though not in the list above. FORM OF COMPTROIJ..ER'S CERTIFICATE (pRlNTED ON OR ATIACHED TO TIlE BONDS UPON INITIAL DELIVERY TIlEREOF) OA8CEOFCO~TROLLER 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 (SEAL) xxxxxxx Comptroller of Public Accounts of the State of Texas NOTE TO PRINTER: .~s to be on reverse side of bond SBCTION 6. DEFINITIONS. As used in this Ordinance, the following terms shall have the meanings set forth below, unless the text hereof specifically indicates otherwise: (a) The term "Additional Bonds" shall mean the additional parity obligations which the City reserves the right to issue in the future, as provided in Section 14 of this Ordinance. (b) The term "AMBAC Indemnity" shall mean AMBAC Indemnity Corporation, a Wisconsin-domiciled stock insurance company. (c) The terms "Bond" or "Bonds" shall mean one or more, as the case may be, of the Bonds authorized to be issued by this Ordinance. 12 e e (d) The terms "City" and "Issuer" shall mean the City of La Porte, Texas, or where appropriate the City Council thereof. (e) The term "City Council" shall mean the governing body of the City. (1) The term "Interest and Sinking Fund" means the fund provided for in Section 10 hereof. (g) The term "Municipal Bond Guaranty Insurance Policy" shall mean the municipal bond guaranty insurance policy issued by AMBAC Indemnity insuring the payment when due of the principal of and interest on the Bonds as provided therein. (h) The term "Net Revenues" means all gross revenues of the System after deducting the necessary and reasonable expenses of operation and maintenance of the System, including all salaries, labor, material, repairs, and extensions necessary to renGer efficient service; provided, however, that only such repairs and extensions, as in the judgment of the City Council, reasonably and fairly exercised, 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 Parity Bonds shall be deducted in determining the "Net Revenues". Depreciation and payments into and out of the Interest and Sinking Fund and the Reserve Fund shall never be considered as expenses of operation and maintenance. (i) The term "Parity Bonds" shall mean collectively the Previously Issued Parity Bonds, the Bonds, and any Additional Bonds. G) The term "Parity Bonds Ordinances" shall mean Collectively the ordinances authorizing the Previously Issued Parity Bonds, the Bonds, and any Additional Bonds. (k) The term "Previously Issued Parity Bonds" shall mean the outstanding "City of La Porte, Texas, Waterworks and Sewer System Revenue Bonds, Series 1985" originally issued in the aggregate principal amount of $6,000,000. (I) The term "Reserve Fund" shall mean that fund described in Section 11 hereof. (m) The term "Sys~em" shall mean the City's entire existing waterworks and sanity sewer system, together with all future extensions, enlargements, additions, replacements, and improvements thereto. (n) The "System Fund" shall mean that fund described in Section 9 hereof. (0) The term "Year" or "fiscal year" shall mean the regular fiscal year used by the City in connection with the operation of the System, which may be any 12 consecutive months period established by the City. SECl10N 7. PuIDoB. The Parity Bonds, redemption premium, if any, and any interest payable thereon, are and shall be secured by and payable from a first lien on and pledge of the 13 e e Net Revenues, and the Net Revenues are further pledged irrevocably to the establishment and maintenance of the Funds created by the Parity Bonds Ordinances. The Parity Bonds are not and will not be secured by or payable from a mortgage or deed of trust on any real, personal, or mixed properties constituting the System. The Registered Owner of the Parity Bonds shall never have the right to demand payment of such obligations out of any funds raised or to be raised by taxation, or from any source whatsoever other than the Net Revenues. This Ordinance shall not be construed as requiring the City to expend any funds which are derived from sources other than the operation of the System, but nothing herein shall be construed as preventing the City from doing so. SECflON &. RATBS. The City covenants and agrees with the holders of the Parity Bonds that it will: (a) fIX and maintain rates and collect charges for the. facilities and services afforded by the System which will provide revenues sufficient at all times: (1) To pay all operation, maintenance, depreciation, replacement, and betterment charges of the System; (2) To establish and maintain the Interest and Sinking Fund; (3) To generate in each year Net Revenues equal to one and twenty-five hundredths (1.25) times the maximum annual requirement for the payment of the principal of and interest on the Parity Bonds at the time outstanding (although amounts shall be paid into the Interest and Sinking Fund and the Reserve Fund only in accordance with Sections 9 and 11 hereot); and (4) To pay all indebtedness outstanding against the System, other than the Parity Bonds, as and when the same become due; and (b) deposit as collected all revenues derived from the operation of the System into the System Fund. SECflON 9. SYS'mM FUND. There has been created and established on the books of the City, and accounted for separate and apart from all other funds of the City, a special fund entitled the "Ci.ty of La Porte, Texas, Waterworks and Sewer System Fund" (the "System Fund"). All gross revenues are and shall be credited to the System Fund immediately upon receipt. The necessary and reasonable expenses of operation and maintenance of the System shall first be paid from the System Fund upon approval of the City Council and, from the Net Revenues available in the System Fund, the City shall then make substantially equal monthly payments into the Interest and Sinking Fund (commencing with respect to the Bonds and any Additional Bonds on the date of delivery to the initial purchaser thereot) during each year in which any of the Parity Bonds are outstanding in an aggregate amount equal to 100% of the amounts required to meet the interest and principal payments falling due on or before the next maturity date of the Parity Bonds. The City shall, at least five days prior to March 15, 1991, and each September 15 and March 15 thereafter, deposit into the Interest and Sinking Fund any additional Net Revenues available in the System Fund which may be necessary to pay in full the interest on and principal, if any, coming 14 e e due on such September 15 or March 15. In no event shall any amount in excess of the amounts stated above be placed in the Interest and Sinking Fund for the payment of the interest on or principal of the Parity Bonds, and any amount so placed may be withdrawn by the City and replaced in the System Fund. Any funds remaining in the System Fund, after provision for the necessary and reasonable cost of operating and maintaining the System, and after paying the aforesaid amounts required to be paid into the Interest and Sinking Fund and the Reserve Fund, may be used by the City for any lawful purpose. SEcTION 10. INm.REsT AND SINKING FuND. For the sole purpose of paying the principal of and interest on the Parity Bonds, as the same come due, there has been created and established on the books of the City a separate fund entitled the "City of La Porte, Texas, Waterworks and Sewer System Bonds Interest and Sinking Fund" (the "Interest and Sinking Fund"). SBCTION 11. REsERVE FuND. There has been created and established on the books of the City at the City's depository bank a separate fund entitled the "City of La Porte, Texas, Waterworks and Sewer System Bonds Reserve Fund" (the "Reserve Fund"). The Reserve Fund shall be used to pay the principal of and interest on any Parity Bonds when and to the extent the amounts in the Interest and Sinking Fund available for such payment are insufficient for such purpose, and may be used for the purpose of finally retiring the last of any Parity Bonds. Beginning on November IS, 1990 and ending October IS, 1995, the City shall, from the Net Revenues in the System Fund, deposit into the Reserve Fund an amount of money in equal monthly amounts (the "Monthly Reserve Deposit") to achieve the Reserve Requirement (hereinafter described). Notwithstanding any provision hereof to the contrary, no deposits shall be made into the Reserve Fund at a time when there is a deficiency in the amount on deposit in the Interest and Sinking Fund nor shall any deposits be made into the Reserve Fund at any time it contains an amount equal to or greater than the Reserve Requirement. If and whenever the balance in the Reserve Fund is reduced below the Reserve Requirement, or if the City should fail timely to make any Monthly Reserve Deposit in full, then and in either such event, the City shall, from the first available and unallocated Net Revenues of the following month or months, cause amounts equal in the aggregate to any such deficiency to be set apart and transferred into the Reserve Fund and such transfers shall be in addition to the amounts otherwise required to be deposited into such Fund during such month or months. Surplus funds in the Reserve Fund resulting from any reduction of the Reserve Requirement or otherwise shall be promptly transferred from the Reserve Fund into the Interest and Sinking Fund, and payments into the Interest and Sinking Fund from the System Fund shall be reduced accordingly. As used herein "Reserve Requirement" shall be the lesser of (1) 10% of the face amount of the Parity Bonds, (2) 100% of the maximum annual debt service for the Parity Bonds, or (3) 125% of average annual debt service for the Parity Bonds. SBCTION 12 INvEsn.mNTs. Money in any Fund established by the Parity Bonds Ordinances may, at the option of the City, be placed or invested in "Permitted Investments" as defined and used herein to mean, to the- extent permitted by Texas law: (1) direct obligations of (including obligations issued or held in book entry form on the books of) the Department of Treasury of the United States of America; 15 e e (2) obligations of any of the following federal agencies which obligations represent full faith and credit of the United States of America, including: Export - Import Bank Farmers Home Administration U.S. Maritime Administration Small Business Administration Government National Mortgage Association (GNMA) U.S. Department of Housing and Urban Development (PHA's) Federal Housing Administration; (3) bonds, notes, or other evidences of indebtedness rated "MA" by Standard & Poor's Corporation ("S&P") and "Aaa" by Moody's Investor Services ("Moodys") issued by the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation with remaining maturities not exceeding three years; or (4) U.S. dollar denominated deposit accounts, federal funds, and banker's acceptances with domestic commercial banks which have a rating on their short term certificates of deposit on the date of purchase of "A-I" or "A-l+" by S&P and "P.l" by Moody's and maturing no more than 360 days after the date of purchase. (Ratings on holding companies are not considered as the rating of the bank); Any obligation in which money from the Interest and Sinking Fund or the Reserve Fund are so invested shall be kept and held in the depository bank of the City in escrow and in trust for the benefit of the owners of the Parity Bonds, and shall be promptly sold and the proceeds of sale applied to the making of any payments required to be made from the Interest and Sinking Fund or Reserve Fund, as the case may be. Except as described in Section 22, all such investments shall at all times be a part of the Fund from which the money used to acquire said investments shall have come and all earnings on such investments shall be credited to, and losses thereon charged against, such Fund. Notwithstanding any provision hereof to the contrary, any investment of money in the Interest and Sinking Fund shall be made so as to mature or be subject to redemption at the option of the owner or holder thereof on or prior to the date or dates on which money therefrom will be required. SBCI10N 13. FuNDs SBCURBD. Money in 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. SBCI10N 14. AnDmONAL BoNDS. In addition to inferior lien bonds authorized by Article 11l1a, Vernon's Texas Civil Statutes, as amended, the City expressly reserves the right hereafter to issue additional parity bonds and other evidences of indebtedness now or hereafter authorized by the Legislature of Texas (collectively, the "Additional Bonds"), and-the Additional Bonds, when issued, may be secured by and payable from a first lien on and pledge of the Net Revenues in the same manner and to the same extent as the outstanding Parity Bonds but subject to the remaining provisions hereof, and the Previously Issued Parity Bonds, the Bonds, and the Additional Bonds may be in all respects of equal dignity. It is provided, however, that no Additional Bonds shall be issued unless: 16 e . (a) The Interest and Sinking Fund, the Reserve Fund, and any similar fund or funds created by the ordinance authorizing any Parity Bonds at the time outstanding shall each contain the amount then required to be on deposit therein, and a certificate of such effect shall be executed and delivered by the Mayor and City Secretary. (b) As long as any of the Previously Issued Parity Bonds are outstanding, the "net earnings" (defined below) of the System for the fiscal year next preceding the month in which the ordinance authorizing such Additional Bonds is adopted, were equal to each of the provisions following in items (c) (i) and (ii) below, determined independently and certified by an independent firm of certified public accountants, based upon an annual audit of the books of the System. (c) After the Previously Issued Bonds are not longer outstanding, an independent firm of certified public accountants, based upon an audit of the books of the System, certifies that the net earnings of the System for the previous fiscal year, or for any 12 consecutive month period ending not more than 90 days prior to the date of the adoption of the ordinance authorizing the Additional Bonds, were equal to each of the following determined independently: (i) at least 1.50 times the average annual requirements for the payment of the principal of and interest on the Parity Bonds then outstanding and on such Additional Bonds, when issued, sold, and delivered; and (ii) at least 1.25 times the maximum annual requirement for the payment of the principal of and interest on the Parity Bonds then outstanding and on such Additional Bonds, when issued, sold, and delivered; provided, however, should the certificate of the accountant certify that the net earnings of the System for the period covered thereby were, in either case, less than required above, and a change in the rates and charges for the services afforded by the System became effective at least 60 days prior to the scheduled date of adoption of the ordinance authorizing such Additional Bonds, then such Additional Bonds may nevertheless be issued if an independent engineer or engineering firm having a favorable reputation with respect to such matters certifies that, had such change in rates and charges been effective for the entire period covered by the accountant's certificate, the net earnings for the System for the fiscal year covered by the accountant's certificate would have met the tests specified in (i) and (ii) above. The term "net earnings" as used in this Section shall mean all of the Net Revenues of the System, exclusive of income received specifically for capital items, and operation and maintenance. expenses shall exclude expenditures which under standard accounting practice should be charged to capital expenditures or depreciations. (c) Such Additional Bonds are made to mature on March 15th in each of the years in which they are scheduled to mature. (d) The City shall establish a reserve fund for such Additional Bonds by providing a cash reserve fund therefor, a surety bond in lieu thereof, or a combination of such cash reserve fund and surety bond, all as the City Council deems reasonable and appropriate provided that (i) the amount of any such cash reserve fund or the coverage of any surety bond in lieu thereof or the 17 . e amount of such cash reserve fund and the coverage of such surety bond when added together shall at least equal the maximum annual debt service requirements of such Additional Bonds, not to exceed the maximum permitted by applicable regulations, procedures, or published rulings of the Internal Revenue Service (the "Reserve Minimum"); (ii) if any cash reserve fund is funded by making transfers of Net Revenues in the System Fund, such transfers shall be made each month in an amount reasonably sufficient to reach the Reserve Minimum (or the portion thereof which is to be provided by such cash reserve fund) within a period of not more than five years after such Additional Bonds are sold and delivered; (iii) any such cash reserve fund may be combined with the Reserve Fund herein provided for the Bonds and with the cash reserve fund provided for any Additional Bonds then outstanding in order ratably to secure all Parity Bonds then outstanding and the Additional Bonds then being issued; (iv) any such surety bond provided in lieu ofl a cash reserve fund shall be issued by an insurance company or association of companies whose insured obligations are rated by Moody's Investors Service and by Standard & Poor's Corporation in their highest rating categories; and (v) any such surety bond may be written (or amended) to provide coverage not only for such Additional Bonds but also pro rata for the Parity Bonds then outstanding, provided, any existing cash reserve fund or surety fund in lieu thereof which secures any such outstanding Parity Bonds is extended ratably to secure the Additional Bonds then being issued. It is the City's intention hereby to provide maximum flexibility with respect to the reserve fund to be provided for any Additional Bonds which may be issued hereafter and the foregoing provisions shall be liberally construed in order to achieve that objective without materially prejudicing the rights and interests of the owners of any Parity Bonds at the time outstanding. SBCI10N 15. GENERAL CoVENANTS. The City further covenants, warrants, and agrees that in accordance with and to the extent required or permitted by law while the Parity Bonds are outstanding and unpaid: (a) PERFORMANCE. It will faithfully perform at all times any and all covenants, undertakings, stipulations, and provisions contained in each Parity Bonds Ordinance, and in each and every Parity Bond; it will promptly payor cause to be paid the principal of and interest on every Parity Bond, on the dates and in the places and manner prescribed in the Parity Bonds Ordinances; and it will, at the times and in the manner prescribed, deposit or cause to be depos- ited the amounts required to be deposited into the Interest and Sinking Fund and the Reserve Fund; and any holder of the Parity Bonds may require the City, its officials and employees to carry out, respect, or enforce the covenants and obligations of the Parity Bonds Ordinances 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 create and issue the Parity Bonds; all action on its part for the creation and issuance of said obligations has been duly and effectively taken; and said obligations in the hands of the holders and owners thereof are and will be valid and enforceable special obligations of the City in accordance with their terms. (c) TITLE. It has or will obtain lawful title to the lands, buildings, structures, and facilities constituting the System; it will defend the title to all the aforesaid lands, buildings, structures, and facilities, and every part thereof, for the benefit of the holders and owners of the Parity Bonds, against the claims and demands of all persons whomsoever; it is lawfully qualified to pledge the Net 18 e e Revenues to the payment of the Parity Bonds in the manner prescribed herein; and it has lawfully exercised such rights. (d) LIENS. It will from time to time and before the same become delinquent pay and discharge all taxes, assessments and governmental charges, if any, which shall be lawfully imposed upon it or the System; it will pay all lawful claims for rents, royalties, labor, materials, and supplies which if unpaid might by law become a lien or charge thereon, the lien of which would be prior to or interfere with the liens hereof, so that the priority of the liens granted hereunder shall be fully preserved in the manner provided herein; and it will not create or suffer to be created any mechanic's, laborer's, materialman's or other lien or charge which might or could be prior to the liens hereof, or do or suffer any matter or thing whereby the liens hereof might or could be impaired; provided, however, that no such tax, assessment, or charge, and that no such claims which might be used as the basis of a mechanic's, laborer's, materialman's, or other lien or charge, shall be required to be paid so long as the validity of the same shall be contested in good faith by the City. (e) OPERATION OF SYSTEM; NO FREE SERVICE. It shall continuously" and efficiently operate the System and maintain the System in good condition, repair, and working order, all at reasonable cost. No free service of the System shall be allowed, and should the City or any of its agencies or instrumentalities, lessees, or concessionaires make use of the services and facilities of the System, payment monthly of the standard retail price of the services provided shall be made by the City or any of its agencies or instrumentalities, lessees, or concessionaires out of funds from sources other than the revenues of the System, unless made from surplus Net Revenues. (1) FURTHER ENCUMBRANCE. It shall not additionally encumber the Net Revenues in any manner, except as permitted in the Parity Bonds Ordinances in connection with Additional Bonds, unless said encumbrance is made junior and subordinate in all respects to the liens, pledges, covenants, and agreements of the Parity Bonds Ordinances; but the right of the City to issue revenue bonds payable from a subordinate lien on the surplus Net Revenues is specifically recognized and retained. (g) SALE OR DISPOSAL OF PROPERTY. It shall not sell, convey, mortgage, encumber, lease, or in any manner transfer title to, or dedicate to other use, or otherwise dispose of the System, or any significant or substantial part thereof; provided, however, that whenever the City deems it necessary to dispose of any other property, machinery, fIXtures, or equipment, or dedicate such property to other use, it may do so either when it has made arrangements to replace the same or provide substitutes therefor, or it is determined by resolution of the City Council that no such replacement or substitute is necessary. (h) INSURANCE. It agrees to maintain insurance on the System, for the benefit of the registered owner or owners of the Parity Bon~ of a kind and in an amount which usually would be carried by private companies engaged in a similar type of business in the same area. (i) RECORDS AND AUDITS. It shall keep proper books and records and accounts, separate from all other records and accounts, in which complete and correct entries shall be made of all transactions relating to the System. Upon written request made not more than 60 days 19 e ~ following the close of the fiscal year, the City shall furnish to any holder of any Parity Bonds, complete financial statements of the System in reasonable detail covering such fiscal year, certified by the City's Auditor. Any holders of 25% in principal amount of the Parity Bonds at the time outstanding shall have the right at all reasonable times to inspect the System and all records, accounts, and data of the City relating thereto. G) GOVERNMENTAL AGENCIES. It has or will obtain and keep in full force and effect all franchises, permits, authorization, and other requirements applicable to or necessary with respect to the acquisition, construction, equipment, operation, and maintenance of the System, and 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. (k) NO COMPETITION. It will not operate, or grant any franchise or, to the extent it legally may, permit the acquisition, construction, or operation of, any facilities which would be in competition with the System, and to the extent that it legally may, the City will prohibit any such competing facilities. SECllON 16. AMENDMENT OF ORDINANCE. (a) The holders of the Parity Bonds aggregating in principal amount 51 % of the aggregate principal amount of then outstanding Parity Bonds shall have the right from time to time to approve any amendment to this Ordinance which may be deemed necessary or desirable by the City; provided, however, that without the consent of the holders of all of the Parity 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 Parity Bonds so as to: (1) Make any change in the maturity of the outstanding Parity Bonds; (2) Reduce the rate of interest borne by any of the outstanding Parity Bonds; (3) Reduce the amount of the principal payable on the outstanding Parity Bonds; (4) Modify the terms of payment of principal of or interest on the outstanding Parity Bonds or impose any conditions with respect to such payment; (5) Affect the rights of the holders of less than all of the Parity Bonds then outstanding; (6) Change the minimum percentage of the principal amount of Parity Bonds necessary for consent to such amendment. (b) 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, 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 AgentIRegistrar for inspection by all holders of Parity Bonds. Such publication is not required, however, if notice in writing is given to each holder of the Previously Issued Parity Bonds, Bonds, and Additional Bonds. 20 e e (c) Whenever at any time not less than 30 days, and within one year, from the date of the first publication of said notice or other service of written notice the City shall receive an instrument or instruments executed by the holders of at least 51 % in aggregate principal amount of all Parity 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 AgentlRegistrar, the City Council may pass the amendatory ordinance in substantially the same form. (d) Upon the passage of any amendatory ordinance pursuant to the provisions of this Section, this Ordinance shall be deemed to be amended in accordance with such amendatory ordinance, and the respective rights, duties and obligations under this Ordinance of the City and all the holders of then outstanding Parity Bonds shall thereafter be determined, exercised. and enforced hereunder, subject in all respects to such amendments. (e) Any consent given by the holder of a Parity 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 holders of the same Parity 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 holder who gave such consent, or by a successor in title, by filing notice thereof with the Paying Agent and the City, but such revocation shall not be effective if the holders of 51 % in aggregate principal amount of the then outstanding Parity Bonds as in this Section defined have, prior to the attempted revocation, consented to and approve the amendment. (t) For the purpose of this Section the fact of the holding of Parity Bonds issued in regis- tered form without coupons and the amounts and numbers of such Parity Bonds and the date of their holding same shall be proved by the Registration Books of the Paying AgentlRegistrar. For purposes of this Section, the holder of a Parity Bond shall be the owner thereof as shown on such Registration Books. The City may conclusively assume that such ownership continues until written notice to the contrary is served upon the City. (g) The foregoing provisions of this Section notwithstanding, the City by action of the City Council may amend this Ordinance for anyone or more of the following purposes: .(1) To add to the covenants and agreements of the City in this Ordinance contained, other covenants and agreements thereafter to be observed, grant additional rights or remedies to bondholders, or to surrender, restrict, or limit any right or power herein reserved to or conferred upon the City; (2) To make such provisions for the purpose of curing any ambiguity, or curing, correcting, or supplementing any defective provision contained in this Ordinance, or in regard to clarifying matters or questions arising under this Ordinance, as are necessary or desirable and not contrary to or inconsistent with this Ordinance and which shall not adversely affect the interests of the holders of the Parity Bonds; 21 e e (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 Parity 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 Additional Bonds issued after the date of the adoption of such modification. (h) Any provision of this Ordinance expressly recognizing or granting rights in or to AMBAC Indemnity may not be amended in any manner which affects the rights or AMBAC Indemnity hereunder without the prior written consent of AMBAC Indemnity. AMBAC Indemnity's consent shall be required in addition to the consent of the Owners, when required, for the following purposes: (i) execution and delivery of any supplemental ordinance (except a supplemental ordinance authorizing the issuance of Additional Bonds pursuant to the requirements of Section 14 of this Ordinance); (ii) removal of the Paying AgentlRegistrar for the Bonds and the selection and appointment of any successor Paying AgentlRegistrar for the Bonds; and (iii) initiation or approval of any action not described in (i) or (ii) above which requires the consent of the Owner. SEC110N 17. DAMAGED. MlTlUATED. LosT. STOLEN. OR DESlROYIID BONDs. (a) In the event any outstanding Bond is damaged, mutilated, lost, stolen, or destroyed, the Paying AgentlRegistrar shall cause to be printed, executed, and delivered, a new bond of the same principal amount, maturity, and interest rate, as the damaged, mutilated, lost, stolen, or destroyed Bond, in replacement for such Bond in the manner hereinafter provided. (b) Application for replacement of damaged, mutilated, lost, stolen, or destroyed Bonds shall be made to the Paying AgentlRegistrar. In every case of loss, theft, or destruction of a Bond, the applicant for a replacement bond shall furnish to the City and to the Paying Agent/Registrar such security or indemnity as may be required by them to save each of them harmless from any loss or damage with respect thereto. Also, in every case of loss, theft, or destruction of a Bond, the applicant shall furnish to the City and to the Paying AgentlRegistrar evidence to their satisfaction of the loss, theft, or destruction of such Bond, as the case may be. In every case of damage or mutilation of a Bond, the applicant shall surrender to the Paying AgentlRegistrar for cancellation the Bond so damaged or mutilated. (c) Notwithstanding the foregoing provisions of this Section, in the event any such Bond shall have matured, and no default has occurred which is then continuing in the payment of the principal of, redemption premium, if any, or interest on the Bond, the City may authorize the payment of the same (without surrender thereof expect in the case of a damaged or mutilated Bond) instead of issuing a replacement Bond, provided security or indemnity is furnished as above provided in this Section. (d) Prior to the issuance of any replacement bond, the Paying AgentlRegistrar shall charge the owner of such Bond with all legal, printing, and other expenses in connection therewith. Every replacement bond issued pursuant to the provisions of this Section by virtue of the fact that any Bond is lost, stolen, or destroyed shall constitute a contractual obligation of the City whether or not the lost, stolen or destroyed Bond shall be found at any time, or be enforceable by anyone, and shall be entitled to all the benefits of this Ordinance equally and proportionately with any and all other Bonds duly issued under this Ordinance. 22 . e (e) In accordance with Section 6 of Article 717k-6, V.A T.C.S., 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 AgentlRegistrar, and the Paying AgentlRegistrar shall authenticate and deliver such bonds in the form and manner and with the effect, as provided in Section 4( d) of this Ordinance for Bonds issued in exchange for other Bonds. SECl10N 18. DBFEASANCB OF nIB BoNDs. (a) Any Bond and the interest thereon shall be deemed to be paid, retired, and no longer outstanding (a "Defeased Bonds") within the meaning of this Ordinance, except to the extent provided in subsection (d) of this Section, when payment of the principal of such Bond, plus interest thereon to the due date (whether such due date be by reason of maturity, upon redemption, or otherwise) either (i) shall have been made or caused to be made in accordance with the terms thereof (including the giving of any required notice of redemption), or (ii) shall have been provided for on or before such due date by irrevocably depositing with or making available to the Paying AgentlRegistrar for such payment (1) lawful money of the United States of America sufficient to make such payment or (2) 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, which may be United States Treasury obligations such as its State and Local Government Series, and which may be book entry form (herein "Government Obligations") which mature as to principal and interest in such amounts and at such time as will insure the availability, without reinvestment, of sufficient money to provide for such payment, and when proper arrangements have been made by the City with the Paying AgentlRegistrar for the payment of its services until all Defeased Bonds shall have become due and payable. At such time as a Bond shall be deemed to be a Defeased Bond hereunder, as aforesaid, such Bond and the interest thereon shall no longer be secured by, payable from, or entitled to the benefits of, the revenue herein levied and pledged as provided in this Ordinance, and such principal and interest shall be payable solely from such money or Government Obligations. (b) Any money so deposited with the Paying AgentlRegistrar may at the written direction of the City also be invested as hereinbefore set forth, and all income from such Government Obligations received by the Paying AgentlRegistrar which is not required for the payment of the Bonds and interest thereon, with respect to which such money has been so deposited, shall be turned over to the City, or deposited as directed in writing by the City. (c) Until all Defeased Bonds shall have become due and payable, the Paying AgentlRegistrar shall perform the services of Paying AgentlRegistrar for such Defeased Bonds the same as if they had not been defeased, and the City shall make proper arrangements to provide and pay for such services as required by this Ordinance. (d) In the event that the principal and/or interest due on the Bonds shall be paid by AMBAC Indemnity pursuant to the Municipal Bond Guaranty Insurance Policy, the Bonds shall remain outstanding for all purposes, not be defeased or otherwise satisfied, and not be considered paid by the City, and the assignment and pledge of the proceeds of taxes and all covenants, agreements, and other obligations of the City to the registered owners shall continue to exist and 23 . e shall run to the benefit of AMBAC Indemnity, and AMBAC Indemnity shall be subrogated to the rights of such registered owners. SBCl10N 19. TAX CoVENANTS. The City covenants to take any action to assure, or refrain from any action which would adversely affect, the treatment of the Bonds as obligations described in section 103 of the Code, the interest on which is not includable in the "gross income" of the holder for purposes of federal income taxation. In furtherance thereof, the City covenants as follows: (a) to take any action to assure that no more than 10% of the proceeds of the Bonds (less amounts deposited to a reselVe fund, if any) are used for any "private business use", as defined in section 141(b)(6) of the Code or, if more than 10% of the proceeds are so used, that amounts, whether or not received by the City, with respect to such private business use, do not, under the terms of this Ordinance or any underlying arrangement, directly or indirectly, secure or provide for the payment of more than 10% of the debt service on the Bonds, in contravention of section 141(b)(2) of the Code; (b) to take any action to assure that in the event that the "private business use" described in subsection (a) hereof exceeds 5% of the proceeds of the Bonds (less amounts deposited into a reselVe fund, if any) then the amount in excess of 5% is used for a "private business use" which is "related" and not "disproportionate", within the meaning of section 141(b)(3) of the Code, to the governmental use; (c) to take any action to assure that no amount which is greater than the lesser of $5,000,000, or 5% of the proceeds of the Bonds (less amounts deposited into a reselVe fund, if any) is directly or indirectly used to finance loans to persons, other than state or local governmental units, in contravention of section 141(c) of the Code; (d) to refrain from taking any action which would otherwise result in the Bonds being treated as "private activity bonds" within the meaning of section 141(a) of the Code; (e) to refrain from taking any action that would result in the Bonds being "federally guaranteed" within the meaning of section 149(b) of the Code; (f) to refrain from using any portion of the proceeds of the Bonds, directly or indirectly, to acquire or to replace funds which were used, directly or indirectly, to acquire investment property (as defined in section 148(b)(2) of the Code) which produces a materially higher yield over the term of the Bonds, other than investment property acquired with -- (1) proceeds of the Bonds invested for a reasonable temporary period of three years or less until such proceeds are needed for the purpose for which the bonds are issued, (2) amounts invested in a bona fide debt service fund, within the meaning of section 1.103-13(b)(12) of the Treasury Regulations, and 24 . e (3) amounts deposited in any reasonably required reserve or replacement fund to the extent such amounts do not exceed 10% of the proceeds of the Bonds; (g) to otherwise restrict the use of the proceeds of the Bonds or amounts treated as proceeds of the Bonds, as may be necessary, so that the Bonds do not otherwise contravene the requirements of section 148 of the Code (relating to arbitrage) and, to the extent applicable, section 149(d) of the Code (relating to advance refundings); (h) to pay to the United States of America at least once during each five-year period (beginning on the date of delivery of the Bonds) an amount that is at least equal to 90% of the "Excess Earnings", within the meaning of section 148(1) of the Code and to pay to the United States of America, not later than 60 days after the Bonds have been paid in full, 100% of the amount then required to be paid as a result of Excess Earnings under section 148(1) of the Code; and (i) to maintain such records as will enable the City to fulfill its responsibilities under this section and section 148 of the Code and to retain such records for at least six years following the final payment of principal and interest on the Bonds. It is the understanding of the City that the covenants contained herein are intended to assure compliance with the Code and any regulations or rulings promulgated by the U.S. Department of the Treasury pursuant thereto. In the event that regulations or rulings are hereafter promulgated which modify, or expand provisions of the Code, as applicable to the Bonds, the City will not be required to comply with any covenant contained herein to the extent that such modification or expansion, in the opinion of nationally-recognized bond counsel, will not adversely affect the exemption from federal income taxation of interest on the Bonds under section 103 of the Code. In the event that regulations or rulings are hereafter promulgated which impose additional requirements which are applicable to the Bonds, the City agrees to comply with the additional requirements to the extent necessary, in the opinion of nationally-recognized bond counsel, to preserve the exemption from federal income taxation of interest on the Bonds under section 103 of the Code. SECTION 20. DESIGNATION AS QUALIFIED TAX-ExEMPT BoNDS. The City hereby designates the Bonds as "qualified tax-exempt bonds" as defined in section 265(b)(3) of the Internal Revenue Code of 1986, as amended (the "Code"). In furtherance of such designation, the City represents, covenants, and warrants the following: (a) during the calendar year in which tile Bonds are issued, the City (including any subordinate entities) has not designated nor will designate bonds, which when aggregated with the Bonds, will result in more than $10,000,000 of "qualified tax-exempt bonds" being issued; (b) the City reasonably anticipates that the amount of tax-exempt obligations issued during the calendar year in which the Bonds are issued by the City (or any subordinate entities) will not exceed $10,000,000; and (c) the City will take such action or refrain from such action as necessary in order that the Bonds will not be considered "private activity bonds" within the meaning of section 141 of the Code. SECl10N 21. SAIB OF BoNDS. Public advertisement for the sale of the Bonds and bids to purchase the Bonds having been received pursuant thereto, it is hereby found and declared that the bid submitted by Prudential-Bache Securities is the best bid received; and the sale of the Bonds 25 . e to the named best bidder, at a price equal to the principal amount of the Bonds plus accrued interest thereon from the date thereof to the date of actual delivery, subject to the unqualified approving opinion, as to the legality of the Bonds of the Attorney General of the State of Texas, and the market opinion of McCall, Parkhurst & Horton, bond attorneys, is hereby authorized, ratified, approved, and confirmed. When the Bonds have been approved by the said Attorney General and registered by the Comptroller of Public Accounts of the State of Texas, they shall be delivered to the purchasers upon receipt of the full purchase price. SEC110N 22. PROCEEDS OF SALB. The proceeds of the Bonds, except the accrued interest thereon, shall be deposited into a Construction Account to be established by the City for the purpose for which the Bonds are issued, and the accrued interest shall be deposited to the Interest and Sinking Fund. It is further provided, however, that any interest earnings on bond proceeds which are required to be rebated to the United States of America pursuant to Section 19 hereof in order to prevent the Bonds from being arbitrage bonds shall be so rebated and not considered as interest earnings for the purposes of this Ordinance. SEC110N 23. APPROVAL AND REGISTRATION OF BoNDS. The Mayor of the City is hereby authorized to have control of the Bonds and all necessary records and proceedings pertaining to the Bonds pending their delivery and their investigation, examination, and approval by the Attorney General of the State of Texas, and their registration by the Comptroller of Public Accounts of the State of Texas. Upon registration of the Bonds, said Comptroller of Public Accounts (or a deputy designated in writing to act for said Comptroller) shall manually sign the Comptroller's Registra- tion Certificate. The Bonds thus registered shall remain in the custody of the Mayor (or his designee) until delivered to the purchaser thereof. SEC110N 24. FUR'IHER PROCEDURES. The Mayor, the City Secretary, and all other officers, employees, and agents of the City, and each of them, shall be and they are hereby expressly authorized, empowered, and directed form time to time and at any time to do and perform all such acts and things and to execute, acknowledge, and deliver in the name and under the corporate seal and on behalf of the City all such instruments, whether or not herein mentioned, as may be necessary or desirable in order to carry out the terms and provisions of this Ordinance. The Official Statement, dated September 13, 1990, and other documents used in connection with the sale of the Bonds are hereby approved and the Mayor of the City is hereby directed and authorized to execute on behalf of the City, and the City Secretary is hereby authorized to attest, the Official Statement and other sale documents. SEC110N 25. PAYING AGBNT/REGlsmAR AGREEMENT. The Paying Agent/Registrar Agreement, between the City and First City, Texas - Houston, N.A, Houston, Texas is hereby approved, and the Mayor is authorized to execute and the City Secretary is authorized to attest same. SEC110N 26. SBVBRABILITY. The provisions of this Ordinance are severable; and in case any one or more of the provisions of this Ordinance or the application thereof to any person or circumstance should be held to be invalid, unconstitutional, or ineffective as to any person or circumstance, the remainder of this Ordinance nevertheless shall be valid, and the application of any such invalid provision to persons or circumstances other than those as to which it is held invalid shall not be affected thereby. 26 . e SBCI10N 27. PAYMnNT PROCBDURB PURSUANT TO MUNICIPAL BoND GUARANTY INSURANCB PouCY. As long as the bond guaranty insurance shall be in full force and effect, the City and the Paying AgentlRegistrar agree to comply with the following provisions: (a) If payment of principal or interest due on the Bonds has not been made to the Paying Agent/Registrar in time to pay the registered owners of the Bonds, the Paying AgentlRegistrar or any registered owner to whom such payment is due shall so notify AMBAC Indemnity Corporation, a Wisconsin domiciled stock insurance company ("AMBAC Indemnity") by telephonic or tele- graphic notice, subsequently confirmed in writing, or written notice by registered or certified mail. Such notice shall specify the amount of the anticipated deficiency, the Bonds to which such deficiency is applicable, and whether such Bonds will be deficient as to principal or interest, or both. AMBAC Indemnity, on the later of the date due for payment or within one business day after receipt of notice of nonpayment, will deposit sufficient money with the United States Trust Company of New York, as insurance trustee for AMBAC Indemnity or any successor insurance trustee (the "Insurance Trustee"). (b) The Paying AgentlRegistrar shall, after giving notice to AMBAC Indemnity as provided in (a) above, make available to AMBAC Indemnity and, at AMBAC Indemnity's direction, to the Insurance Trustee, the registration books of the City maintained by the Paying AgentlRegistrar, and all records relating to the Funds and Accounts maintained under this Ordinance. (c) The Paying AgentlRegistrar shall provide AMBAC Indemnity and the Insurance Trustee with a list of registered owners of Bonds entitled to receive principal or interest payments from AMBAC Indemnity under the terms of the municipal bond guaranty insurance policy issued by AMBAC Indemnity insuring the payment when due of the principal of and interest on the Bonds as provided therein (the "Municipal Bond Guaranty Insurance Policy"), and shall make arrangements with the Insurance Trustee (i) to mail checks or drafts to the registered owners of Bonds entitled to receive full or partial interest payments from AMBAC Indemnity and (ii) to pay principal upon Bonds surrendered to the Insurance Trustee by the registered owners of Bonds entitled to receive full or partial principal payments from AMBAC Indemnity. (d) The Paying AgentlRegistrar shall, at the time it provides notice to AMBAC Indemnity pursuant to (a) above, notify registered owners of Bonds entitled to receive the payment of principal or interest thereon from AMBAC Indemnity (i) as to the fact of such entitlement; (ii) that AMBAC Indemnity will remit to them all or a part of the interest payments next coming due; (iii) that should they be entitled to receive full payment of principal from AMBAC Indemnity, they must present and surrender their Bonds together with any appropriate instrument of assignment for payment to the Insurance Trustee, and not the Paying AgentlRegistrar; and (iv) that should they be entitled to receive partial payment of principal from AMBAC Indemnity, they must present and surrender their Bonds for payment thereon first to the Paying AgentlRegistrar, who shall note on such Bonds the portion of the principal paid by the Paying AgentlRegistrar, and then, along with an appropriate instrument of assignment, to the Insurance Trustee, which will then pay the unpaid portion of principal. The Insurance Trustee shall disburse to registered owners of Bonds, or the Paying Agent/Registrar, the payment due less any amount held by the Paying AgentlRegistrar for payment of principal of or interest on Bonds and legally available therefor. 27 . e (e) In the event that the Paying AgentlRegistrar has notice that any payment of principal of or interest on a Bond which has become due for payment and which is made to a registered owner by or on behalf of the City has been deemed a preferential transfer and theretofore recovered from its registered owner pursuant to the United States Bankruptcy Code by a trustee in bankruptcy in accordance with the final, nonappealable order of a court having competent jurisdiction, the Paying AgentlRegistrar shall, at the time AMBAC Indemnity is notified pursuant to (a) above, notify all registered owners that in the event that any registered owner's payment is so recovered, such registered owner will be entitled to payment from AMBAC Indemnity to the extent of such recovery if sufficient funds are not otherwise available, and the Paying AgentlRegistrar shall furnish to AMBAC Indemnity its records evidencing the payments of principal of and interest on the Bonds which have been made by the Paying AgentlRegistrar and subsequently recovered from registered owners and the dates on which such payments were made. (f) In addition to those rights granted AMBAC Indemnity under this Ordinance, AMBAC Indemnity shall, upon remittance and transfer of Bonds or appropriate instruments of assignment, become the owner thereof, and to evidence such ownership (i) in the case of claims for past due interest, the Paying AgentlRegistrar shall note AMBAC Indemnity right's as owner on the Registration Books upon receipt from AMBAC Indemnity of proof of the payment of interest thereon to the registered owners of the Bonds and (ii) in the case of claims for past due principal, the Paying AgentlRegistrar shall note AMBAC Indemnity's rights as owner on the Registration Books upon surrender of the Bonds by the registered owners thereof together with proof of the payment of principal thereof. SBCTION 28. NOTICES TO BB GIVEN TO AMBAC 1NoBMNI1Y. While the Municipal Bond Guaranty Insurance Policy is in effect, the City shall furnish to AMBAC Indemnity: (a) as soon as practicable after the filing thereof, a copy of any financial statement of the City and a copy ,of any audit and annual report of the City; (b) a copy of any notice to be given to the registered owners of the Bonds, including, without limitation, notice of any redemption of or defeasance of Bonds, and any certificate rendered pursuant to this Ordinance relating to the security for the Bonds; and (c) such additional information it may reasonably request. The City will permit AMBAC Indemnity to discuss the affairs, finances, and accounts of the City or any information AMBAC Indemnity may reasonably request regarding the security for the Bonds with appropriate officers of the City. The City will permit AMBAC Indemnity to have access to and to make copies of all books and records relating t? the Bonds at any reasonable time. Notwithstanding any other provision of this Ordinance the Paying AgentlRegistrar shall immediately notify AMBAC Indemnity if at any time there is insufficient money to make any payments of principal and/or interest as required hereunder. 28 . . SECTION 29. IMMEDIATI! EF'FECI'. This Ordinance shall take effect immediately upon its adoption. tJ PASSED AND APPROVED this September 27, 1990. \s\Cherie Black City Secretary, City of La Porte, Texas (CITY SEAL) \s\Norman Malone Mayor, City of La Porte, Texas 29 ;tlli. . . DRAFT 9/12/90 .t. " ORDINANCE NO. rJ..;tb . . ORDINANCE AUTHORIZING THE ISSUANCE OF S2,JOO,()()(} CITY OF LA PORTE, TEXAS, WATERWORKS AND SEWER SYSTEM REVENUE BONDS, SERIES 1990; EXECUTIONOF AN PAYlNGAGENTIREGISTRARAGREEMENT; ANDALL OTHER MATTERS RELATED THERETO, INCLUDING IMMEDIATE EFFECl'WENESS WHEREAS, at an election duly called and held in the City of La Porte, Texas (the "City") on June 15, 1985, more than a majority of the duly qualified resident electors of the City who participated in the election voted in favor of, among other things, the issuance of revenue bonds in the aggregate principal amount of $8,550,000 for the purpose of extending and improving the City's existing sanitary sewer system; and WHEREAS, all of said bonds are to be secured by a pledge of the net revenues from the operation of the City's combined waterworks and sanitary sewer system and are to be on a parity with each other (and any Parity Bonds, hereinafter defined, which are authorized, issued, and delivered); and WHEREAS, the City has heretofore issued "City of La Porte, Texas Waterworks and Sewer System Revenue Bonds, Series 1985" in the original aggregate principal amount of $6,000,000 (the "Previously Issued Parity Bonds"); and WHEREAS, the City Council of the City deems it necessary and desirable to proceed with the issuance of a second installment of such voted bonds in the aggregate principal amount of $2,100,000, leaving $1,250,000 of said authorized bonds to be issued in one or more installments at a later date or dates; THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF LA PORTE, TEXAS, THAT; SECI10N 1. BoNDS AITl1-l0RIZBD. Pursuant to Article 1111 et. seq., Vernon's Texas Civil Statutes, as amended, and other applicable law, the City's bonds are hereby authorized to be issued to be designated as the "City of La Porte, Texas, WateIWorks and Sewer System Revenue Bonds, Series 1990" for the purpose of extending and improving the City's existing sanitary sewer system in the aggregate principal amount of $2,100,000 (the "Bonds"). The Bonds are issued as "Addi- tional Bonds" as such term is defined in the ordinance authorizing the Previously Issued Parity Bonds, and are in all respects on a parity with the Previously Issued Parity Bonds. SECl10N 2. DATES. MA1URmES. AND INTEREST RA-ms. The Bonds shall be dated September 15, 1990, shall be in the denomination of $5,000 or any integral multiple thereof, shall be numbered consecutively from R-1 upward, and shall mature on the maturity date, in each of the years, and in the amounts, respectively, as set forth in the following schedule and shall bear interest at the following rates per annum: . . MATURITY DATE: MARCH 15 INTEREST INTEREST YEAR AMOUNTS RATES YEAR AMOUNTS RATES 1992 $100,000 % 2002 $100,000 % 1993 100,000 2003 100,000 1994 100,000 2004 100,000 1995 100,000 2005 1 00,000 1996 100,000 2006 100,000 1997 100,000 2007 100,000 1998 100,000 2008 125,000 1999 100,000 2009 125,000 2000 100,000 2010 125,000 2001 100,000 2011 125,000 Such interest shall be payable on March 15, 1991, and semiannually thereafter on September 15 and March 15. Said interest shall be payable to the registered owner of any such Bond in the manner provided in the FORM OF BONDS set forth in this Ordinance. SncnON 3. RIm-IT OF PRIOR RBDEMmON. The City reserves the right to redeem the Bonds maturing on or after March 15, 2002, in whole or in part in principal amounts of $5,000 or any integral multiple thereof, on March 15, 2001, or any date thereafter, at the par value thereof plus accrued interest to the date fIXed for redemption. If less than all of the Bonds are to be redeemed by the City, the City shall determine the maturity or maturities and the amounts thereof to be redeemed and shall direct the Paying AgentlRegistrar to call by lot Bonds, or portions thereof, within such maturity or maturities and in such principal amounts, for redemption. Notice of such redemption shall be given as provided in the FORM OF BOND in Section 5 hereof. If such notice of redemption is given, and if due provision for such payment is made, the Bonds, or the portions thereof which are to be so redeemed, thereby automatically shall be redeemed prior to their scheduled maturities, and shall not bear interest after the date fIXed for their redemption, and shall not be regarded as being outstanding except for the right of the registered owner to receive the redemption price plus accrued interest to the date fIXed for redemption from the Paying AgentlRegistrar out of the funds provided for such payment. The Paying Agent/Registrar shall record in the Registration Books all such redemptions of principal of the Bonds or any portion thereof. By the date fIXed for any such redemption due provision shall be made by the City with the Paying AgentlRegistrar for the payment of the required redemption price for the Bonds or the portions thereof which are to be so redeemed, plus accrued interest thereon to the date fIXed for redemption. If such notice of redemption is given, and if due provision for such payment is made, all as provided above, the Bonds, or the portions thereof which are to be so redeemed, thereby automatically shall be redeemed prior to their scheduled maturities, and shall not bear interest after the date fIXed for their redemption, and shall not be regarded as being outstanding except for the right of the registered owner to receive the redemption price plus accrued interest to the date fIXed for redemption from the Paying AgentlRegistrar out of the funds provided for such payment. The Paying AgentlRegistrar shall 2 e . record in the Registration Books all such redemptions of principal of the Bonds or any portion thereof. If a portion of any Bond shall be redeemed a substitute Bond or Bonds having the same maturity date, bearing interest at the same rate, in any 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 unreserved 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. SECl10N 4. PAYING AGRNTIRBGlSTRAR.. (a) The City shall keep or cause to be kept at the principal corporate trust office of the Paying AgentlRegistrar herein named, or such other bank, trust company, financial institution, or other entity duly qualified and legally authorized to serve and perform duties of and services of Paying AgentlRegistrar, named in accordance with the pro- visions of (g) of this Section (the "Paying AgentlRegistrar"), books or records of the registration and transfer of the Bonds (the "Registration Books"), and the City hereby appoints the Paying AgentlRegistrar as its registrar and transfer agent to keep such books or records and make such transfers and registrations under such reasonable regulations as the City and Paying AgentlRegistrar may prescribe; and the Paying AgentlRegistrar shall make such transfers and registrations as herein provided. It shall be the duty of the Paying AgentlRegistrar to obtain from the registered owner and record in the Registration Books the address of such registered owner of each Bond to which payments with respect to the Bonds shall be mailed, as herein provided. The City or its designee shall have the right to inspect the Registration Books during regular business hours of the Paying AgentlRegistrar, but otherwise the Paying Agent/Registrar shall keep the ~egistration Books confidential and, unless otherwise required by law, shall not permit their inspection by any other entity. Registration of each Bond may be transferred in the Registration Books only upon presentation and surrender of such bond to the Paying AgentlRegistrar for transfer of registration and cancellation, together with proper written instruments of assignment, in form and with guarantee of signatures satisfactory to the Paying AgentlRegistrar, evidencing the assignment of the bond, or any portion thereof in any integral multiple of $5,000, to the assignee or assignees thereof, and the right of such assignee or assignees to have the bond or any such portion thereof registered in the name of such assignee or assignees. Upon the assignment and transfer of any Bond or any portion thereof, a new substitute bond or bonds shall be issued in exchange therefor in the manner herein provided. (b) The entity in whose name any Bond shall be registered in the Registration Books at any time shall be treated as the absolute owner thereof for all purposes of this Ordinance, whether or not such bond shall be overdue, and the City and the Paying AgentlRegistrar shall not be affected by any notice to the contrary unless otherwise required by law; and payment of, or on account of, the principal of, premium, if any, and interest on any such bond shall be made only to such registered owner. All such payments shall be valid and effectual to satisfy and discharge the liability upon such bond to the extent of the sum or sums so paid. (c) 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, and to act as its agent to exchange or replace Bonds, all as provided in this Ordinance. The Paying AgentlRegistrar shall keep proper records of all payments made by the City and the Paying AgentlRegistrar with respect to the Bonds, and of all exchanges of such bonds, and all replacements of such bonds, as provided in this Ordinance. 3 e e (d) Each Bond may be exchanged for fully registered bonds in the manner set forth herein. Each bond issued and delivered pursuant to this Ordinance, to the extent of the unpaid or unredeemed principal balance or principal amount thereof, may, upon surrender of such bond at the principal corporate trust office of the Paying AgentlRegistrar, together with a written request therefor duly executed by the registered owner or the assignee or assignees thereof, or its or their duly authorized attorneys or representatives, with guarantee of signatures satisfactory to the Paying AgentlRegistrar, at the option of the registered owner or such assignee or assignees, as appropriate, be exchanged for fully registered bonds, without interest coupons, in the form prescribed in the FORM OF BONDS set forth in this Ordinance, in the denomination of $5,000, or any integral multiple of $5,000 (subject to the requirement hereinafter stated that each substitute Bond shall have a single stated maturity date), as requested in writing by such registered owner or such assignee or assignees, in an aggregate principal amount equal to the unpaid or unredeemed principal amount of any bond or bonds so surrendered, and payable to the appro- priate registered owner, assignee, or assignees, as the case may be. If a portion of any Bond shall be redeemed prior to its scheduled maturity as provided herein, a substitute bond or bonds having the same maturity date, bearing interest at the same rate, in the denomination or denominations of any integral multiple of $5,000 at the request of the registered owner, and in an aggregate principal amount equal to the unredeemed portion thereof, will be issued to the registered owner upon surrender thereof for cancellation. If any Bond or portion thereof is assigned and trans- ferred, each bond issued in exchange therefor shall have the same principal maturity date and bear interest at the same rate as the bond for which it is being exchanged. Each substitute bond shall bear a letter and/or number to distinguish it from each other bond. The Paying AgentlRegistrar shall exchange or replace Bonds as provided herein, and each fully registered bond delivered in exchange for or replacement of any bond or portion thereof as permitted or required by any provision of this Ordinance shall constitute one of the Bonds for all purposes of this Ordinance, and may again be exchanged or replaced. It is specifically provided, however, that any bond delivered in exchange for or replacement of another bond prior to the first scheduled interest pay- ment date on the Bonds (as stated on the face thereof) shall be dated the same date as such bond, but each substitute bond so delivered on or after such first scheduled interest payment date shall be dated as of the interest payment date preceding the date on which such substitute bond is delivered, unless such bond is delivered on an interest payment date, in which case it shall be dated as of such date of delivery; provided, however, that if at the time of delivery of any substitute bond the interest on the bond for which it is being exchanged has not been paid, then such bond shall be dated as of the date to which such interest has been paid in full. On each substitute bond issued in exchange for or replacement of any bond or bonds issued under this Ordinance there shall be printed thereon a Paying AgentlRegistrar's Authentication Certificate, in the form hereinafter set forth. An authorized representative of the Paying Agent/Registrar shall, before the delivery of any such bond, date such by dating the Authentication Certificate in the manner set forth above, and manually sign such Certificate, and no such bond shall be deemed to be issued or outstanding unless such Certificate is so executed. The Paying AgentlRegistrar promptly shall cancel all Bonds surrendered for exchange or replacement. No additional ordinances, orders, or resolutions need be passed or adopted by the City Council or any other body or person so as to accomplish the foregoing exchange or replacement 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 4 e e pursuant to Article 717k-6, V.AT.e.S, and particularly Section 6 thereof, the duty of such exchange or replacement of bonds as aforesaid is hereby imposed upon the Paying Agent/Regis- trar, and upon the execution of the aforementioned Paying AgentlRegistrar's Authentication Certificate, the exchanged or replaced Bond shall be valid, incontestable, and enforceable in the same manner and with the same effect as the Bonds which originally were delivered pursuant to this Ordinance, approved by the Attorney General, and registered by the Comptroller of Public Accounts. Neither the City nor the Paying Agent/Registrar shall be required (1) to issue, transfer, or exchange any Bond subject to redemption during a period beginning at the opening of business 15 days before the day of the first mailing of a notice of redemption of Bonds and ending at the close of business on the day of such mailing, or (2) to transfer or exchange any Bond after it is selected for redemption, in whole or in part when such redemption is scheduled to occur within 30 calendar days; provided, however, that such limitation shall not be applicable to an exchange by the owner of the uncalled principal balance of a Bond. (e) All Bonds issued in exchange or replacement of any other Bond or portion thereof, (i) shall be issued in fully registered form, without interest coupons, with the principal of and interest on such bonds to be payable only to the registered owners thereof, (ii) may be redeemed prior to their scheduled maturities, (iii) may be transferred and assigned, (iv) may be exchanged for other Bonds, (v) shall have the characteristics, (vi) shall be signed and sealed, and (vii) the principal of and interest on the Bonds shall be payable, all as provided, and in the manner required or indicated, in the FORM OF BONDS set forth in this Ordinance. (t) The City shall pay all of the Paying AgentlRegistrar's reasonable and customary fees and charges for making transfers, conversions, and exchanges of the Bonds in accordance with an agreement between the City and the Paying AgentlRegistrar, but the registered owner of any Bond requesting such transfer shall pay any taxes or other governmental charges required to be paid with respect thereto. In addition, the City hereby covenants with the registered owners of the Bonds that it will pay the reasonable and standard or customary fees and charges of the Paying Agentl Registrar for its services with respect to the payment of the principal of and interest on the Bonds, when due. (g) The City covenants with the registered owners of the Bonds that at all times while the Bonds are outstanding the City will provide a competent and legally qualified bank, trust company, financial institution, or other entity duly qualified and legally authorized to serve as and perform the duties and services of Paying AgentlRegistrar, to act as and perform the services of Paying AgentlRegistrar for the Bonds under this Ordinance, and that the Paying AgentlRegistrar will be one entity. The City reserves the right to, and may, at its option, change the Paying AgentlRegistrar upon not less than 60 days written notice to the Paying AgentlRegistrar. In the event that the entity at any time acting as Paying AgentlRegistrar (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 national or state banking institution which shall be a corporation organized and doing business under the laws of the United States of America or of any state, authorized under such laws to exercise trust powers, subject to supervision or examination by federal or state Authority, and whose qualifications substantially are similar to the previous Paying AgentlRegistrar to act as Paying Agent/Registrar under this Ordinance. Upon any change in the Paying AgentlRegistrar, the previous Paying AgentlRegistrar promptly shall transfer and deliver the Registration Books (or a copy thereot), along with all other pertinent 5 . e books and records relating to the Bonds, to the new Paying AgentlRegistrar designated and appointed by the City. Upon any change in the Paying AgentlRegistrar, the City promptly will cause a written notice thereoC to be sent by the new Paying AgentlRegistrar to each registered owner of the Bonds, by United States Mail, postage prepaid, which notice also shall give the address of the new Paying AgentlRegistrar. By accepting the position and performing as such, each Paying AgentlRegistrar 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 AgentlRegistrar. SECTION S. FORMS. The form of the Bonds, including the form of Paying Agent/Registrar's Certificate, the Corm of Assignment, and the form of the Comptroller's Registration Certificate to accompany the Bonds on the initial delivery thereof, shall be, respectively, substantially as follows, with such appropriate variations, omissions, or insertions as are permitted or required by this Ordinance: FORM OF BONDS: NO. $ United States of America State of Texas CITY OF LA PORTE, TEXAS, WATERWORKS AND SEWER SYSTEM REVENUE BOND, SERIES 1990 MATURITY DATE INTEREST RATE ORIGINAL ISSUE DATE % September 15, 1990 CUSIP ON 1lIE MATURITY DATE, SPECIFIED ABOVE, 1HE CITY OF LA PORTE, TEXAS (the "City"), hereby promises to pay to , or the registered assignee hereof (either being hereinafter called the "registered owner") the principal amount of and to pay interest thereon, from the original issue date of this Bond, specified above, to the date of its scheduled maturity or the date of its redemption prior to scheduled maturity, at the rate of interest per annum, specified above, with said interest being payable on March 15, 1991, and semiannually on each September 15 and March 15 thereafter. TIlE TERMS AND PROVISIONS of this Bond are continued on the reverse side hereof and shall for all purposes have the same effect as though fully set forth at this place. 1HE PRINCIPAL OF AND INTERFSf ON this Bond are payable in lawful money of the United States of America, without exchange or collection charges. The principal of this Bond shall be paid to the registered owner hereof upon presentation and surrender of this Bond at maturity or upon the date fIXed for its redemption prior to maturity, at the principal corporate trust office of FIRST Cl1Y, TEXAS - HOUSTON, NA., HOUSTON, TEXAS, which is the "Paying AgentlReg- istrar" for this Bond. The payment of interest on this Bond shall be made by the Paying 6 e e AgcntlRegistrar to the registered owner hereof as shown by the Registration Books kept by the Paying AgentlRegistrar at the close of business on the Record Date by check drawn by the Paying AgentlRegistrar on, and payable solely from, funds of the City required to be on deposit with the Paying AgentlRegistrar for such purpose as hereinafter provided; and such check shall be sent by the Paying AgentlRegistrar by United States mail, postage prepaid, on each such interest payment date, to the registered owner hereof at its address as it appears on the Registration Books kept by the Paying AgentlRegistrar, as hereinafter described. The record date ("Record Date") for the interest payable on any interest payment date means the first calendar day of the month of a scheduled interest payment. In the event of a non-payment of interest on a scheduled payment date, and for 30 days thereafter, a new record date for such interest payment (a "Special Record Date") will be established by the Paying AgentlRegistrar, if and when funds for the payment of such interest have been received from the City. Notice of the Special Record Date and of the scheduled payment date of the past due interest (the "Special Payment Date", which shall be 15 calendar days after the Special Record Date) shall be sent at least five business days prior to the Special Record Date by United States mail, first class, postage prepaid, to the address of each registered owner of a Bond appearing on the books of the Paying AgentlRegistrar at the close of business on the last business day next preceding the date of mailing of such notice. The City covenants with the registered owner of this Bond that no later than each principal payment date and interest payment date for this Bond it will make available to the Paying AgentlRegistrar the amounts required to provide for the payment, in immediately available funds, of all principal of and interest on the Bonds, when due, in the manner set forth in the ordinance authorizing the issuance of the bonds adopted by the City Council of the City on September 27, 1990 (the "Ordinance"). *IF TIlE DATE for the payment of the principal of or interest on this Bond shall be a Saturday, a Sunday, a legal holiday, or a day on which banking institutions in the city where the Paying AgentlRegistrar is located are authorized by law or executive order to close, then the date for such payment shall be the next succeeding day which is not such a Saturday, Sunday, legal holiday, or day on whicb banking institutions are authorized to close; and payment on such date shall have the same force and effect as if made on the original date payment was due. *nns BOND is one of a Series of bonds of like tenor and effect except as to denomination, number, maturity, interest rate and right of prior redemption, issued in the aggregate principal amount of $2,100,000 for the purpose of extending and improving tbe City's existing sanitary sewer system. *TIIE BONDS of this series scheduled to mature on and after March 15, 2002 may be redeemed prior to their scheduled maturities, in whole, or in part in principal amounts of $5,000 or any integral multiple thereof, at the option of the City, on March 15, 2001, or on any interest payment date thereafter, for the principal amount thereof plus accrued interest to the date fixed for redemption. * AT LEAST 30 days prior to the date fIXed for any such redemption, a notice of such redemption shall be published one time in a financial journal or publication of general circulation in the United States of America carrying as a regular feature notices of municipal bonds called for redemption. Such notice also shall be sent by the Paying AgentlRegistrar by United States mail, first-class postage prepaid, at least 30 days prior to the date fIXed for any such redemption, to the registered owner of each Bond or portion thereof to be redeemed at its address as it appeared on 7 e e the Registration Books on the 45th day prior to such redemption date and to major securities depositories, national bond rating agencies, and bond information services; provided, however, that the failure to send, mail or receive such notice, or any defect therein or in the sending or mailing thereof, shall not affect the validity or effectiveness of the proceedings for the redemption of any Bond, and the publication of notice as described above shall be the only notice actually required in connection with or as a prerequisite to the redemption of any Bonds. By the date fIXed for any such redemption due provision shall be made by the City with the Paying Agent/Registrar for the payment of the required redemption price for this Bond or the portion hereof which is to be so redeemed, plus accrued interest thereon to the date fIXed for redemption. If such notice of redemption is given, and if due provision for such payment is made, all as provided above, this Bond, or the portion thereof which is to be so redeemed, thereby automatically shall be redeemed prior to its scheduled maturity, and shall not bear 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 AgentlRegistrar out of the funds provided for such payment. The Paying Agent/Registrar shall record in the Registration Books all such redemptions of principal 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 aggregate principal amount equal to the unredeemed portion thereof, will be issued to the registered owner upon the surrender thereof for cancellation, at the expense of the City, all as provided in the Ordinance. · ALL BONDS OF TInS SERIFS are issuable solely as fully registered bonds, without interest coupons, in the denomination of any integral multiple of $5,000. As provided in the Ordinance, this Bond, or any unredeemed portion hereof, may, at the request of the registered owner or the assignee or assignees hereof, be assigned, transferred, and exchanged for a like aggregate principal amount of fully registered bonds, without interest coupons, payable to the appropriate registered owner, assignee, or assignees, as the case may be, having the same maturity date, and bearing interest at the same rate, in any denomination or denominations in any integral multiple of $5,000 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 AgentlRegistrar for cancellation, all in accordance with the form and procedures set forth in the Ordinance. Among other requirements for such assignment and transfer, this Bond must be presented and surrendered to the Paying AgentlRegistrar, together with proper instruments of assignment, in form and with guarantee of signatures satisfactory to the Paying AgentlRegistrar, evidencing assignment of this BOnd or any portion or portions hereof in any integral multiple of $5,000 to the assignee or assignees in whose name or names this Bond or any such portion or portions hereof is or are to be transferred and 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 AgentlRegistrar may be used to evidence the assignment of this Bond or any portion or portions hereof from time to time by the registered owner. The City shall pay the Paying Agent/Registrar's reasonable standard or customary fees and charges for transferring, converting and exchanging any Bond or portion thereof; provided, however, that any taxes or governmental charges required to be paid witb respect thereto shall be paid by the one requesting such transfer, conversion and exchange. In any circumstance, neither the City nor the Paying Agent/ Registrar shall be required (1) to make any 8 e e transfer or exchange during a period beginning at the opening of business 15 days before the day of the first mailing of a notice of redemption of bonds and ending at the close of business on the day of such mailing, or (2) to transfer or exchange any Bonds so selected for redemption when such redemption is scheduled to occur within 30 calendar days; provided, however, such limitation shall not be applicable to an exchange by the registered owner of the uncalled principal balance of a Bond. *IN TIlE EVENT any Paying AgentlRegistrar for the Bonds is changed by the City, resigns, or otherwise ceases to act as such, the City has covenanted in the Ordinance that it promptly will appoint a competent and legally qualified substitute therefor, and promptly will cause written notice thereof to be mailed to the registered owners of the Bonds. *BY BECOMING the registered owner of this Bond, the registered owner thereby acknowledges all of the terms and provisions of the Ordinance, agrees to be bound by such terms and provisions, acknowledges that the Ordinance is duly recorded and available for inspection in the official minutes and records of the City, and agrees that the terms and provisions of this Bond and the Ordinance constitute a contract between each registered owner hereof and the City. *nm Cl1Y has reserved the right, subject to the restrictions stated, and adopted by reference, in the Ordinance, to issue additional parity revenue bonds which also may be made payable from, and secured by, a first lien on and pledge of the "Net Revenues" of the City's combined waterworks and sewer system (as defined and described in the Ordinance). *nm 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, or from any source whatsoever other than the aforesaid Net Revenues. IT IS HEREBY certified and covenanted that this Bond has been duly and validly authorized, issued and delivered; 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; that this Bond is a special obligation; and that the principal of and interest on this Bond together with outstanding parity revenue bonds are payable from, and secured by a first lien on and pledge of, the Net Revenues. IN TESTIMONY WHEREOF, the City Council has caused the seal of the City to be duly impressed or placed in facsimile hereon, and this Bond to be signed with the imprinted facsimile signature of the Mayor and countersigned by the facsimile signature of the City Secretary. COUNTERSIGNED: City Secretary, City of La Porte Mayor, City of La Porte (CITY SEAL)p 9 e e FORM OF PAYING AGENTIREGISTRAR'S AUTHENTICATION CERTIFICATE PAYING AGENTIREGISTRAR'S AUTHENTICATION CERTIFICATE 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 ARST CITY, TEXAS - HOUSTON, N.A, HOUSTON, TEXAS Paying AgentlRegistrar By Authorized Representative FORM OF STATEMENT OF INSURANCE .STATEMENT OF INSURANCE [TO COME] 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 I I (Please print or typewrite name and address, including zip code of Transferee) the within Bond and all rights thereunder, and hereby irrevocably constitutes and appoints attorney to register the transfer of the within Bond on the books kept for registration thereof, with full power of substitution in the premises. Dated: 10 e . Signature Guaranteed: NOTICE: Signature(s) must be guaranteed by a member firm of the New York Stock Exchange or a commercial bank or trust company. NOTICE: The signature above must correspond with the name of the Registered Owner as it appears upon the front of this Bond in every particular, without alteration or enlarge- ment or any change whatsoever. The following abbreviations, when used in the Assignment above or on the face of the within Bond, shall be construed. as though they were written out in full according to applicable laws or regulations: TEN COM - as tenants in common TEN ENT - as tenants by the entireties JT TEN - as joint tenants with right of survivorship and not as tenants in common UNIF GIFf MIN ACf- Custodian (Cust) (Minor) under Uniform Gifts to Minor Act (State) Additional abbreviations may also be used though not in the list above. FORM OF COMP1ROLLER'S CERTIFICATE (pRINTED ON OR ATIACHED TO TI-IE BONDS UPON INITIAL DELIVERY TIIEREOF) 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 (SEAL) XXXXXXX Comptroller of Public Accounts of the State of Texas NOTE TO PRINTER: *'s to be on reverse side of bond 11 e . SocnON 6. DBFlNrnoNs.. As used in this Ordinance, the following terms shall have the meanings set forth below, unless the text hereof specifically indicates otherwise: (a) The term "Additional Bonds" shall mean the additional parity obligations which the City reserves the right to issue in the future, as provided in Section 14 of this Ordinance. (b) The terms "Bond" or "Bonds" shall mean one or more, as the case may be, of the Bonds authorized to be issued by this Ordinance. (c) The terms "City" and "Issuer" shall mean the City of La Porte, Texas, or where appropriate the City Council thereof. (d) The term "City Council" shall mean the governing body of the City. (e) The term "Interest and Sinking Fund" means the fund provided for in Section 10 hereof. (l) The term "Net Revenues" means all gross revenues of the System after deducting the necessary and reasonable expenses of operation and maintenance of the System, including all salaries, labor, material, repairs, and extensions necessary to render efficient service; provided, however, that only such repairs and extensions, as in the judgment of the City Council, reasonably and fairly exercised, 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 Parity Bonds shall be deducted in determining the "Net Revenues". Depreciation and payments into and out of the Interest and Sinking Fund and the Reserve Fund shall never be considered as expenses of operation and maintenance. (g) The term "Parity Bonds" shall mean collectively the Previously Issued Parity Bonds, the Bonds, and any Additional Bonds. (h) The term "Parity Bonds Ordinances" shall mean collectively the ordinances authorizing the Previously Issued Parity Bonds, the Bonds, and any Additional Bonds. (i) The term "Previously Issued Parity Bonds" shall mean the outstanding "City of La Porte, Texas, Waterworks and Sewer System Revenue Bonds, Series 1985" originally issued in the aggregate principal amount of $6,000,000. (j) The term "Reserve Fund" shall mean that fund described in Section 11 hereof. (k) The term "System" shall mean the City's entire existing waterworks and sanity sewer system, together with all future extensions, enlargements, additions, replacements, and improvements thereto. (I) The "System Fund" shall mean that fund described in Section 9 hereof. 12 . . (m) The term "Year" or "fiscal year" shall mean the regular fiscal year used by the City in connection with the operation of the System, which may be any 12 consecutive months period established by the City. SEC110N 7. PI.,EIXlF... The Parity Bonds, redemption premium, if any, and any interest payable thereon, are and shall be secured by and payable from a first lien on and pledge of the Net Revenues, and the Net Revenues are further pledged irrevocably to the establishment and maintenance of the Funds created by the Parity Bonds Ordinances. The Parity Bonds are not and will not be secured by or payable from a mortgage or deed of trust on any real, personal, or mixed properties constituting the System. The Registered Owner of the Parity Bonds shall never have the right to demand payment of such obligations out of any funds raised or to be raised by taxation, or from any source whatsoever other than the Net Revenues. This Ordinance shall not be construed as requiring the City to expend any funds which are derived from sources other than the operation of the System, but nothing herein shall be construed as preventing the City from doing so. SECl10N 8. RATES. The City covenants and agrees with the holders of the Parity Bonds that it will: (a) fix and maintain rates and collect charges for the facilities and services afforded by the System which will provide revenues sufficient at all times: (1) To pay all operation, maintenance, depreciation, replacement, and betterment charges of the System; (2) To establish and maintain the Interest and Sinking Fund; (3) To generate in each year Net Revenues equal to one and twenty-five hundredths (1-25/100) times the maximum annual requirement for the payment of the principal of and interest on the Parity Bonds at the time outstanding (although amounts shall be paid into the Interest and Sinking Fund and the Reserve Fund only in accordance with Sections 9 and 11 hereof); and (4) To pay all indebtedness outstanding against the System, other than the Parity Bonds, as and when the same become due; and (b) deposit as collected all revenues derived from the operation of the System into the System Fund. SECl10N 9. SYSTEM FUND. There has been created and established on the books of the City, and accounted for separate and apart from all other funds of the City, a special fund entitled the "City of La Porte, Texas, Waterworks and Sewer System Fund" (the "System Fund"). All gross revenues are and shall be credited to the System Fund immediately upon receipt. The necessary and reasonable expenses of operation and maintenance of the System shall first be paid from the System Fund upon approval of the City Council and, from the Net Revenues available in the System Fund, the City shall then make substantially equally monthly payments into the Interest and Sinking Fund (commencing with respect to the Bonds and any Additional Bonds on the date of 13 e e delivery to the initial purchaser thereot) during each year in which any of the Parity Bonds are outstanding in an aggregate amount equal to 100% of the amounts required to meet the interest and principal payments falling due on or before the next maturity date of the Parity Bonds. The City shall, at least five days prior to March 15, 1991, and each September 15 and March 15 thereafter, deposit into the Interest and Sinking Fund any additional Net Revenues available in the System Fund which may be necessary to pay in full the interest on and principal, if any, coming due on such September 15 or March 15. In no event shall any amount in excess of the amounts stated above be placed in the Interest and Sinking Fund for the payment of the interest on or principal of the Parity Bonds, and any amount so placed may be withdrawn by the City and replaced in the System Fund. Any funds remaining in the System Fund, after provision for the necessary and reasonable cost of operating and maintaining the System, and after paying the aforesaid amounts required to be paid into the Interest and Sinking Fund and the Reserve Fund, may be used by the City for any lawful purpose. SocnoN 10. INTEREST AND SINKING FUND. For the sole purpose of paying the principal of and interest on the Parity Bonds, as the same come due, there has been created and established on the books of the City a separate fund entitled the "City of La Porte, Texas, Waterworks and Sewer System Bonds Interest and Sinking Fund" (the "Interest and Sinking Fund"). SncnoN 11. RI!SRRVB FUND. There has been created and established on the books of the City at the City's depository bank a separate fund entitled the "City of La Porte, Texas, Waterworks and Sewer System Bonds Reserve Fund" (the "Reserve Fund"). The Reserve Fund shall be used to pay the principal of and interest on any Parity Bonds when and to the extent the amounts in the Interest and Sinking Fund available for such payment are insufficient for such purpose, and may be used for the purpose of finally retiring the last of any Parity Bonds. Beginning on November 15, 1990 and ending October 15, 1995, the City shall, from the Net Revenues in the System Fund, deposit into the Reserve Fund an amount of money in equal monthly amounts (the "Monthly Reserve Deposit") to achieve the Reserve Requirement (hereinafter described). Notwithstanding any provision hereof to the contrary, no deposits shall be made into the Reserve Fund at a time when there is a deficiency in the amount on deposit in the Interest and Sinking Fund nor shall any deposits be made into the Reserve Fund at any time it contains an amount equal to or greater than the Reserve Requirement. If and whenever the balance in the Reserve Fund is reduced below the Reserve Requirement, or if the City should fail timely to make any Monthly Reserve Deposit in full, then and in either such event, the City shall, from the first available and unallocated Net Revenues of the following month or months, cause amounts equal in the aggregate to any such deficiency to be set apalt and transferred into the Reserve Fund and such transfers shall be in addition to the amounts otherwise required to be deposited into such Fund during such month or months. Surplus funds in the Reserve Fund resulting from any reduction of the Reserve Requirement or otherwise shall be promptly transferred from the Reserve Fund into the Interest and Sinking Fund, and payments into the Interest and Sinking Fund from the System Fund shall be reduced accordingly. As used herein "Reserve Requirement" shall be the lesser of (1) 10% of the face amount of the Parity Bonds, (2) 100% of the maximum annual debt service for the Parity Bonds, or (3) 125% of average annual debt service for the Parity Bonds. SncnON 12 INVESTMfiNTS. Money in any Fund established by the Parity Bonds Ordinances may, at the option of the City, be placed or invested in (a) direct obligations of, or obligations the 14 e e payment of the principal of and interest on which are unconditionally guaranteed by, the United States of America or (b) certificates of deposit or time deposits with any bank or savings institution which is insured by the Federal Deposit Insurance Corporation or the Federal Savings and Loan Insurance Corporation, provided that such certificates of deposit or time deposits, to the extent that they exceed the amounts covered by such insurance, are fully secured in the manner required by law and provided further that each of the aforesaid obligations, certificates, and time deposits shall mature, or be subject to redemption at the option of the owner or holder thereof, within not more than ten years from the date of the making of the investment. Any obligation in which money from the Interest and Sinking Fund or the Reserve Fund are so invested shall be kept and held in the depository bank of the City in escrow and in trust for the benefit of the owners of the Parity Bonds, and shall be promptly sold and the proceeds of sale applied to the making of any payments required to be made from the Interest and Sinking Fund or Reserve Fund, as the case may be. Except as described in Section 21, all such investments shall at all times be a part of the Fund from which the money used to acquire said investments shall have come and all earnings on such investments shall be credited to, and losses thereon charged against, such Fund. Notwithstanding any provision hereof to the contrary, any investment of money in the Interest and Sinking Fund shall be made so as to mature or be subject to redemption at the option of the owner or holder thereof on or prior to the date or dates on which money therefrom will be required. SEC'110N 13. FUNDS SECURED. Money in all Funds created by this Ordinance, to the extent not invested, shall be secured in the manner prescribed by law for securing funds of the City. SECTION 14. ADDmoNAL BoNDS. In addition to inferior lien bonds authorized by Article lIlla, Vernon's Texas Civil Statutes, as amended, the City expressly reserves the right hereafter to issue additional parity bonds and other evidences of indebtedness now or hereafter authorized by the Legislature of Texas (collectively, the "Additional Bonds"), and the Additional Bonds, when issued, may be secured by and payable from a first lien on and pledge of the Net Revenues in the same manner and to the same extent as the outstanding Parity Bonds but subject to the remaining provisions hereof, and the Previously Issued Parity Bonds, the Bonds, and the Additional Bonds may be in all respects of equal dignity. It is provided, however, that no Additional Bonds shall be issued unless: (a) The Interest and Sinking Fund, the Reserve Fund, and any similar fund or funds created by the ordinance authorizing any Parity Bonds at the time outstanding shall each contain the amount then required to be on deposit therein, and a certificate of such effect shall be executed and delivered by the Mayor and City Secretary. (b) As long as any of the Previously Issued Parity Bonds are outstanding, the "net earnings" (defined below) of the System for the fiscal year next preceding the month in which the ordinance authorizing such Additional Bonds is adopted, were equal to each of the provisions following in items (c) (i) and (ii) below, determined independently and certified by an independent firm of certified public accountants, based upon an annual audit of the books of the System. (c) Mter the Previously Issued Bonds are not longer outstanding, an independent firm of certified public accountants, based upon an audit of the books of the System, certifies that the net earnings of the System for the previous fiscal year, or for any 12 consecutive month period 15 . e ending not more than 90 days prior to the date of the adoption of the ordinance authorizing the Additional Bonds, were equal to each of the following determined independently: (i) at least 1.50 times the average annual requirements for the payment of the principal of and interest on the Parity Bonds then outstanding and on such Additional Bonds, when issued, sold, and delivered; and (ii) at least 1.25 times the maximum annual requirement for the payment of the principal of and interest on the Parity Bonds then outstanding and on such Additional Bonds, when issued, sold, and delivered; provided, however, should the certificate of the accountant certify that the net earnings of the System for the period covered thereby were, in either case, less than required above, and a change in the rates and charges for the services afforded by the System became effective at least 60 days prior to the scheduled date of adoption of the ordinance authorizing such Additional Bonds, then such Additional Bonds may nevertheless be issued if an independent engineer or engineering firm having a favorable reputation with respect to such matters certifies that, had such change in rates and charges been effective for the entire period covered by the accountant's certificate, the net earnings for the System for the fiscal year covered by the accountant's certificate would have met the tests specified in (i) and (ii) above. The term "net earnings" as used in this Section shall mean all of the Net Revenues of the System, exclusive of income received specifically for capital items, and operation and maintenance expenses shall exclude expenditures which under standard accounting practice should be charged to capital expenditures or depreciations. (c) Such Additional Bonds are made to mature on March 15th in each of the year in which they are scheduled to mature. (d) The City shall establish a reserve fund for such Additional Bonds by providing a cash reserve fund therefor, a surety bond in lieu thereof, or a combination of such cash reserve fund and surety bond, all as the City Council deems reasonable and appropriate provided that (i) the amount of any such cash reserve fund or the coverage of any surety bond in lieu thereof or the amount of such cash reserve fund and the coverage of such surety bond when added together shall at least equal the maximum annual debt service requirements of such Additional Bonds, not to exceed the maximum permitted by applicable regulations, procedures, or published rulings of the Internal Revenue Service (the "Reserve Minimum"); (ii) if any cash reserve fund is funded by making transfers of Net Revenues in the System Fund, such transfers shall be made each month in an amount reasonably sufficient to reach the Reserve Minimum (or the portion thereof which is to be provided by such cash reserve fund) within a period of not more than five years after such Additional Bonds are sold and delivered; (iii) any such cash reserve fund may be combined with the Reserve Fund herein provided for the Bonds and with the cash reserve fund provided for any Additional Bonds then outstanding in order ratably to secure all Parity Bonds then outstanding and the Additional Bonds then being issued; (iv) any such surety bond provided in lieu of a cash reserve fund shall be issued by an insurance company or association of companies whose insured obligations are rated by Moody's Investors Service and by Standard & Poor's Corporation in their highest rating categories; and (v) any such surety bond may be written (or amended) to provide 16 e e coverage not only for such Additional Bonds but also pro rata for the Parity Bonds then outstanding, provided, any existing cash reserve fund or surety fund in lieu thereof which secures any such outstanding Parity Bonds is extended ratably to secure the Additional Bonds then being issued. It is the City's intention hereby to provide maximum flexibility with respect to the reserve fund to be provided for any Additional Bonds which may be issued hereafter and the foregoing provisions shall be liberally construed in order to achieve that objective without materially prejudicing the rights and interests of the owners of any Parity Bonds at the time outstanding. SecnON 15. Gr~RAL CoVENANTS. The City further covenants, warrants, and agrees that in accordance with and to the extent required or permitted by law while the Parity Bonds are outstanding and unpaid: (a) PERFORMANCE. It wiII faithfully perform at all times any and all covenants, undertakings, stipulations, and provisions contained in each Parity Bonds Ordinance, and in each and every Parity Bond; it wiII promptly payor cause to be paid the principal of and interest on every Parity Bond, on the dates and in the places and manner prescribed in the Parity Bonds Ordinances; and it will, at the times and in the manner prescribed, deposit or cause to be depos- ited the amounts required to be deposited into the Interest and Sinking Fund and the Reserve Fund; and any holder of the Parity Bonds may require the City, its officials and employees to carry out, respect, or enforce the covenants and obligations of the Parity Bonds Ordinances 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 AUTIlORITY. 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 create and issue the Parity Bonds; all action on its part for the creation and issuance of said obligations has been duly and effectively taken; and said obligations in the hands of the holders and owners thereof are and will be valid and enforceable special obligations of the City in accordance with their terms. (c) TITLE. It has or wiII obtain lawful title to the lands, buildings, structures, and facilities constituting the System; it wiII defend the title to all the aforesaid lands, buildings, structures, and facilities, and every part thereof, for the benefit of the holders and owners of the Parity Bonds, against the claims and demands of all persons whomsoever; it is lawfully qualified to pledge the Net Revenues to the payment of the Parity Bonds in the manner prescribed herein; and it has lawfully exercised such rights. (d) LIENS. It will from time to time and before the same become delinquent pay and discharge all taxes, assessments and governmental charges, if any, which shall be lawfully imposed upon it or the System; it will pay all lawful claims for rents, royalties, labor, materials, and supplies which if unpaid might by law become a lien or charge thereon, the lien of which would be prior to or interfere with the liens hereof, so that the priority of the liens granted hereunder shall be fully preserved in the manner provided herein; and it will not create or suffer to be created any mechanic's, laborer's, materialman's or other lien or charge which might or could be prior to the liens hereof, or do or suffer any matter or thing whereby the liens hereof might or could be impaired; provided, however, that no such tax, assessment, or charge, and that no such claims which might be used as the basis of a mechanic's, laborer's, materialman's, or other lien or charge, shall 17 e e be required to be paid so long as the validity of the same shall be contested in good faith by the City. (e) OPERATION OF SYSTEM; NO FREE SERVICE. It shall continuously and efficiently operate the System and maintain the System in good condition, repair, and working order, all at reasonable cost. No free service of the System shall be allowed, and should the City or any of its agencies or instrumentalities, lessees, or concessionaires make use of the services and facilities of the System, payment monthly of the standard retail price of the services provided shall be made by the City or any of its agencies or instrumentalities, lessees, or concessionaires out of funds from sources other than the revenues of the System, unless made from surplus Net Revenues. (f) FURTHER ENCUMBRANCE. It shall not additionally encumber the Net Revenues in any manner, except as permitted in the Parity Bonds Ordinances in connection with Additional Bonds, unless said encumbrance is made junior and subordinate in all respects to the liens, pledges, covenants, and agreements of the Parity Bonds Ordinances; but the right of the City to issue revenue bonds payable from a subordinate lien on the surplus Net Revenues is specifically recognized and retained. (g) SALE OR DISPOSAL OF PROPERTY. It shall not sell, convey, mortgage, encumber, lease, or in any manner transfer title to, or dedicate to other use, or otherwise dispose of the System, or any significant or substantial part thereof; provided, however, that whenever the City deems it necessary to dispose of any other property, machinery, fIXtures, or equipment, or dedicate such property to other use, it may do so either when it has made arrangements to replace the same or provide substitutes therefor, or it is determined by resolution of the City Council that no such replacement or substitute is necessary. (h) INSURANCE, It agrees to maintain insurance on the System, for the benefit of the registered owner or owners of the Parity Bonds of a kind and in an amount which usually would be carried by private companies engaged in a similar type of business in the same area. (i) RECORDS AND AUDITS. It shall keep proper books and records and accounts, separate from all other records and accounts, in which complete and correct entries shall be made of all transactions relating to the System. Upon written request made not more than 60 days following the close of the fiscal year, the City shall furnish to any holder of any Parity Bonds, complete financial statements of the System in reasonable detail covering such fIScal year, certified by the City's Auditor. Any holders of 25% in principal amount of the Parity Bonds at the time outstanding shall have the right at all reasonable times to inspect the System and all records, accounts, and data of the City relating thereto. (j) GOVERNMENTAL AGENCIES. It has or will obtain and keep in full force and effect all franchises, permits, authorization, and other requirements applicable to or necessary with respect to the acquisition, construction, equipment, operation, and maintenance of the System, and 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. 18 e . (k) NO COMPETITION. It will not operate, or grant any franchise or, to the extent it legally may, permit the acquisition, construction, or operation of, any facilities which would be in competition with the System, and to the extent that it legally may, the City will prohibit any such competing facilities. SBCl10N 16. AMBNDMENT OF ORDINANa!. (a) The holders of the Parity Bonds aggregating in principal amount 51% of the aggregate principal amount of then outstanding Parity Bonds shall have the right from time to time to approve any amendment to this Ordinance which may be deemed necessary or desirable by the City; provided, however, that without the consent of the holders of all of the Parity 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 Parity Bonds so as, to: (1) Make any change in the maturity of the outstanding Parity Bonds; (2) Reduce the rate of interest borne by any of the outstanding Parity Bonds; (3) Reduce the amount of the principal payable on the outstanding Parity Bonds; (4) Modify the terms of payment of principal of or interest on the outstanding Parity Bonds or impose any conditions with respect to such payment; (5) Affect the rights of the holders of less than all of the Parity Bonds then outstanding; (6) Change the minimum percentage of the principal amount of Parity Bonds necessary for consent to such amendment. (b) 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, 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 Parity Bonds. Such publication is not required, however, if notice in writing is given to each holder of the Previously Issued Parity Bonds, Bonds, and Additional Bonds. (c) Whenever at any time not less than 30 days, and within one year, from the date of the first publication of said notice or other service of written notice the City shall receive an instrument or instruments executed by the holders of at least 51 % in aggregate principal amount of all Parity 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 AgentlRegistrar, the City Council may pass the amendatory ordinance in substantially the same form. (d) Upon the passage of any amendatory ordinance pursuant to the provisions of this Section, this Ordinance shall be deemed to be amended in accordance with such amendatory ordinance, and the respective rights, duties and obligations under this Ordinance of the City and 19 e e all the holders of then outstanding Parity Bonds shall thereafter be determined, exercised and enforced hereunder, subject in all respects to such amendments. (e) Any consent given by the holder of a Parity 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 holders of the same Parity 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 holder who gave such consent, or by a successor in title, by filing notice thereof with the Paying Agent and the City, but such revocation shall not be effective if the holders of 51 % in aggregate principal amount of the then outstanding Parity Bonds as in this Section defined have, prior to the attempted revocation, consented to and approve the amendment. (t) For the purpose of this Section the fact of the holding of Parity Bonds issued in regis- tered form without coupons and the amounts and numbers of such Parity Bonds and the date of their holding same shall be proved by the Registration Books of the Paying AgeptlRegistrar. For purposes of this Section, the holder of a Parity Bond shall be the owner thereof as shown on such Registration Books. The City may conclusively assume that such ownership continues until written notice to the contrary is served upon the City. (g) The foregoing provisions of this Section notwithstanding, the City by action of the City Council may amend this Ordinance for anyone or more of the following purposes: (1) To add to the covenants and agreements of the City in this Ordinance contained, other covenants and agreements thereafter to be observed, grant additional rights or remedies to bondholders, or to surrender, restrict, or limit any right or power herein reserved to or conferred upon the City; (2) To make such provisions for the purpose of curing any ambiguity, or curing, correcting, or supplementing any defective provision contained in this Ordinance, or in regard to clarifying matters or questions arising under this Ordinance, as are necessary or desirable and not contrary to or inconsistent with this Ordinance and which shall not adversely affect the interests of the holders of the Parity Bonds; (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 Parity 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 Additional Bonds issued after the date of the adoption of such modification. SBCl10N 17. DAMAGED. MlITIlATED. LosT. STOlEN. OR DESmoYPD BoNDS. (a) In the event any outstanding Bond is damaged, mutilated, lost, stolen, or destroyed, the Paying AgentlRegistrar shall cause to be printed, executed, and delivered, a new bond of the same principal amount, maturity, and in.terest rate, as the damaged, mutilated, lost, stolen, or destroyed Bond, in replacement Cor such Bond in the manner hereinafter provided. 20 e e (b) Application for replacement of damaged, mutilated, lost, stolen, or destroyed Bonds shall be made to the Paying AgentIRegistrar. In every case of loss, theft, or destruction of a Bond, the applicant for a replacement bond shall furnish to the City and to the Paying AgentIRegistrar such security or indemnity as may be required by them to save each of them harmless from any loss or damage with respect thereto. Also, in every case of loss, theft, or destruction of a Bond, the applicant shall furnish to the City and to the Paying AgentIRegistrar evidence to their satisfaction of the loss, theft, or destruction of such Bond, as the case may be. In every case of damage or mutilation of a Bond, the applicant shall surrender to the Paying AgentIRegistrar for cancellation the Bond so damaged or mutilated. (c) Notwithstanding the foregoing provisions of this Section, in the event any such Bond shall have matured, and no default has occurred which is then continuing in the payment of the principal of, redemption premium, if any, or interest on the Bond, the City may authorize the payment of the same (without surrender thereof expect in the case of a damaged or mutilated Bond) instead of issuing a replacement Bond, provided security or indemnity is furnished as above provided in this Section. (d) Prior to the issuance of any replacement bond, the Paying AgentIRegistrar shall charge the owner of such Bond with all legal, printing, and other expenses in connection therewith. Every replacement bond issued pursuant to the provisions of this Section by virtue of the fact that any Bond is lost, stolen, or destroyed shall constitute a contractual obligation of the City whether or not the lost, stolen or destroyed Bond shall be found at any time, or be enforceable by anyone, and shall be entitled to all the benefits of this Ordinance equally and proportionately with any and all other Bonds duly issued under this Ordinance. (e) In accordance with Section 6 of Article 717k-6, V.A T.C.S., 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 AgentIRegistrar, and the Paying AgentIRegistrar shall authenticate and deliver such bonds in the form and manner and with the effect, as provided in Section 4( d) of this Ordinance for Bonds issued in exchange for other Bonds. SocnON 18. DI3FF...ASANCE OF THE BoNDs. (a) Any Bond and the interest thereon shall be deemed to be paid, retired, and no longer outstanding (a "Defeased Bonds") within the meaning of this Ordinance, except to the exte~t provided in subsection (d) of this Section, when payment of the principal of such Bond, plus interest thereon to the due date (whether such due date be by reason of maturity, upon redemption, or otherwise) either (i) shall have been made or caused to be made in accordance with the terms thereof (including the giving of any required notice of redemption), or (ii) shall have been provided for on or before such due date by irrevocably depositing with or making available to the Paying AgentIRegistrar for such payment (1) lawful money of the United States of America sufficient to make such payment or (2) 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, which may be United States Treasury obligations such as its State and Local Government Series, and which may be book entry form (herein "Government Obligations") which mature as to principal and interest in such amounts and at such time as will insure the availability, without reinvestment, of sufficient money to provide for 21 e e such payment, and when proper arrangements have been made by the City with the Paying AgentIRegistrar for the payment of its services until all Defeased Bonds shall have become due and payable. At such time as a Bond shall be deemed to be a Defeased Bond hereunder, as aforesaid, such Bond and the interest thereon shall no longer be secured by, payable from, or entitled to the benefits of, the revenue herein levied and pledged as provided in this Ordinance, and such principal and interest shall be payable solely from such money or Government Obligations. (b) Any money so deposited with the Paying AgeniIRegistrar may at the written direction of the City also be invested as hereinbefore set forth, and all income from such Government Obligations received by the Paying AgentIRegistrar which is not required for the payment of the Bonds and interest thereon, with respect to which such money has been so deposited, shall be turned over to the City, or deposited as directed in writing by the City. (c) Until all DeCeased Bonds shall have become due and payable, the Paying AgentIRegistrar shall perform the services of Paying AgentIRegistrar for such Defeased Bonds the same as if they had not been defeased, and the City shaH make proper arrangements to provide and pay for such services as required by this Ordinance. SECI10N 19. TAX CoWNANTS. The City covenants to take any action to assure, or refrain from any action which would adversely affect, the treatment of the Bonds as obligations described in section 103 of the Code, the interest on which is not includable in the "gross income" of the holder for purposes of federal income taxation. In furtherance thereof, the City covenants as follows: (a) to take any action to assure that no more than 10% of the proceeds of the Bonds (less amounts deposited to a reserve fund, if any) are used for any "private business use", as defined in section 141(b)(6) of the Code or, if more than 10% of the proceeds are so used, that amounts, whether or not received by the City, with respect to such private business use, do not, under the terms of this Ordinance or any underlying arrangement, directly or indirectly. secure or provide for the payment of more than 10% of the debt service on the Bonds, in contravention of section 141(b)(2) of the Code; (b) to take any action to assure that in the event that the "private business use" described in subsection (a) hereof exceeds 5% of the proceeds of,the Bonds (less amounts deposited into a reserve fund, if any) then the amount in excess of 5% is used for a "private ~usiness use" which is "related" and not "disproportionate", within the meaning of section 141(b)(3) of the Code, to the governmental use; (c) to take any action to assure that no amount which is greater than the lesser of $5,000,000, or 5% of the proceeds of the Bonds (less amounts deposited into a reserve fund, if any) is directly or indirectly used to finance loans to persons, other than state or local governmental units, in contravention of section 141(c) of the Code; (d) to refrain from taking any action which would otherwise result in the Bonds being treated as "private activity bonds" within the meaning of section 141(a) of the Code; 22 e e (e) to refrain from taking any action that would result in the Bonds being "federally guaranteed" within the meaning of section 149(b) of the Code; (1) to refrain from using any portion of the proceeds of the Bonds, directly or indirectly, to acquire or to replace funds which were used, directly or indirectly, to acquire investment property (as defined in section 148(b)(2) of the Code) which produces a materially higher yield over the term of the Bonds, other than investment property acquired with -- (1) proceeds of the Bonds invested for a reasonable temporary period of three years or less until such proceeds are needed for the purpose for which the bonds are issued, (2) amounts invested in a bona fide debt service fund, within the meaning of section 1.103-13(b)(12) of the Treasury Regulations, and (3) amounts deposited in any reasonably required reserve or replacement fund to the extent such amounts do not exceed 10% of the proceeds of the Bonds; (g) to otherwise restrict the use of the proceeds of the Bonds or amounts treated as proceeds of the Bonds, as may be necessary, so that the Bonds do not otherwise contravene the requirements of section 148 of the Code (relating to arbitrage) and, to the extent applicable, section 149(d) of the Code (relating to advance refundings); (h) to pay to the United States of America at least once during each five-year period (beginning on the date of delivery of the Bonds) an amount that is at least equal to 90% of the "Excess Earnings", within the meaning of section 148(1) of the Code and to pay to the United States of America, not later than 60 days after the Bonds have been paid in full, 100% of the amount then required to be paid as a result of Excess Earnings under section 148(1) of the Code; and (i) to maintain such records as will enable the City to fulfill its responsibilities under this section and section 148 of the Code and to retain such records for at least six years following the final payment of principal and interest on the Bonds. It is the understanding of the City that the covenants contained herein are intended to assure compliance with the Code and any regulations or rulings promulgated by the u.S. Department of the Treasury pursuant thereto. In the event that regulations or rulings are hereafter promulgated which modify, or expand provisions of the Code, as applicable to the Bonds, the City will not be required to comply with any covenant contained herein to the extent that such modification or expansion, in the opinion of nationally-recognized bond counsel, will not adversely affect the exemption from federal income taxation of interest on the Bonds under section 103 of the Code. In the event that regulations or rulings are hereafter promulgated which impose additional requirements which are applicable to the Bonds, the City agrees to comply with the additional requirements to the extent necessary, in the opinion of nationally-recognized bond counsel, to preserve the exemption from federal income taxation of interest on the Bonds under section 103 of the Code. 23 e e v Section 20. D(l.S1 ON AS UAUAED TAX-ExEMPT BoNDS. The City hereby designates the Bonds as "qualified tax-exempt bonds" as defined In section b)(3) of the Internal Revenue Code of 1986, as amended (the "Code"). In furtherance of such designation, the City represents, covenants, and warrants the following: (a) during the calendar year in which the Bonds are issued, the City (including any subordinate entities) has not designated nor will designate bonds, which when aggregated with the Bonds, will result in more than $10,000,000 of "qualified tax-exempt bonds" being issued; (b) the City reasonably anticipates that the amount of tax-exempt obligations issued during the calendar year in which the Bonds are issued by the City (or any subordinate entities) will not exceed $10,000,000; and (c) the City will take such action or refrain from such action as necessary in order that the Bonds will not be considered "private activity bonds" within the meaning of section 141 of the Code. SECI10N 21. SALE OF BONDS. Public advertisement for the sale of the Bonds and bids to purchase the Bonds having been received pursuant thereto, it is hereby found and declared that the bid submitted by is the best bid received; and the sale of the Bonds to the named best bidder, at a price equal to the principal amount of the Bonds plus accrued interest thereon from the date thereof to the date of actual delivery, plus a cash premium of $ , subject to the unqualified approving opinion, as to the legality of the Bonds of the Attorney General of the State of Texas, and the market opinion of McCall, Parkhurst & Horton, bond attorneys, is hereby authorized, ratified, approved, and confirmed. When the Bonds have been approved by the said Attorney General and registered by the Comptroller of Public Accounts of the State of Texas, they shall be delivered to the purchasers upon receipt of the full purchase price. SECI10N 21. PROCnF.DS OF SArA The proceeds of the Bonds, except the accrued interest thereon, shall be deposited into a Construction Account to be established by the City for the purpose for which the Bonds are issued, and the accrued interest shall be deposited to the Interest and Sinking Fund. It is further provided, however, that any interest earnings on bond proceeds which are required to bc rebated to the United States of America pursuant to Section 19 hereof in order to prevent the Bonds from being arbitrage bonds shall be so rebated and not considered as interest earnings for the purposes of this Ordinance. SBCl10N 22. ApPROVAL AND RBGlSTRATION OF BoNDS. The Mayor of the City is hereby authorized to have control of the Bonds and all necessary records and proceedings pertaining to the Bonds pending their delivery and their investigation, examination, and approval by the Attorney General of the State of Texas, and their registration by the Comptroller of Public Accounts of the State of Texas. Upon registration of the Bonds, said Comptroller of Public Accounts (or a deputy designated in writing to act for said Comptroller) shall manually sign the Comptroller's Registra- tion Certificate. The Bonds thus registered shall remain in the custody of the Mayor (or his designee) until dclivered to the purchaser thereof. SBCI10N 23. FUR11-IBR PROCEDURES. The Mayor, the City Secretary, and all other officers, employees, and agents of the City, and each of them, shall be and they are hereby expressly authorized, empowered, and directed form time to time and at any time to do and perform all such acts and things and to execute, acknowledge, and deliver in the name and under the corporate seal and on behalf of the City all such instruments, whether or not herein mentioned, as may be 24 e e necessary or desirable in order to carry out the terms and provisions of this Ordinance. The Official Statement, dated September _, 1990, and other documents used in connection with the sale of the Bonds are hereby approved and the Mayor of the City is hereby directed and authorized to execute on behalf of the City, and the City Secretary is hereby authorized to attest, the Official Statement and other sale documents. SECI10N 24. PAYING AGENTIRBGlS1RAR AGREEMENT. The Paying AgentlRegistrar Agreement, between the City and First City, Texas - Houston, N.A, Houston, Texas is hereby approved, and the Mayor is authorized to execute and the City Secretary is authorized to attest same. SECI10N 25. SrwERAnnJrrv. The provisions of this Ordinance are severable; and in case any one or more of the provisions of this Ordinance or the application thereof to any person or circumstance should be held to be invalid, unconstitutional, or ineffective as to any person or circumstance, the remainder of this Ordinance nevertheless shall be valid, and the application of any such invalid provision to persons or circumstances other than those as to which it is held invalid shall not be affected thereby. SECI10N 26. ORDINANCE A CoNTRACI'; AMmmMENTS. This Ordinance shall constitute a contract with the owners, from time to time, of the Bonds, binding on the Issuer and its successors and assigns, and shall not be amended or repealed by the Issuer as long as any Bond remains outstanding except as permitted in this Section. The Issuer may, without the consent of or notice to any owners, amend, change, or modify this Ordinance as may be required (i) by the provisions hereof, (ii) in connection with the issuance of any additional bonds, (iii) for the purpose of curing any ambiguity, inconsistency, or formal defect or omission herein, or (iv) in connection with any other change which is not to the prejudice of the owners. The Issuer may, with the written consent of the owners of a majority in aggregate principal amount of Bonds then outstanding affected thereby, and the insurer of any Bonds amend, change, modify, or rescind any provisions of this Ordinance; provided that without the consent of all of the owners affected, no such amendment, change, modification, or rescission shall (i) extend the time or times of payment of the principal of and interest on the Bonds, reduce the principal amount thereof to the rate of interest thereon, or in any other way modify the terms of payment of the principal of or interest on additional bonds on a parity with the lien of the Bonds, (ii) give any preference of any Bond over any other Bond, (iii) extend any waiver of default to subsequent defaults, or (iv) reduce the aggregate principal amount of Bonds required for consent to any such amendment, change, modification, or rescission. Whenever the Issuer shall desire to make any amendment or addition to or rescission of this Ordinance requiring consent of the owners, the Issuer shall cause notice of the amendment, addition, or rescission to be given as described above for a notice of redemption. Whenever at any time within one year after the date of the giving of such notice, the Issuer shall receive an instrument or instruments in writing executed by the owners of a majority in aggregate principal amount of the Bonds then outstanding affected by any such amendment, addition, or rescission requiring the consent of owners of Bonds, which instrument or instruments shall refer to the proposed amendment, addition, or rescission described in such notice and shall specifically consent to and approve the adoption thereof in substantially the form of the copy thereof referred to in such notice, thereupon, but not otherwise, the Issuer may adopt such amendment, addition, or rescission in substantially such form, except as herein provided. No owner may thereafter object 25 . . to the adoption of such amendment, addition, or rescission, or to any of the provisions thereof, and such amendment, addition, or rescission shall be fully effective for all purposes. SBCTION 28. IMMEDlATB EFFPLl. This Ordinance shall take effect immediately upon its adoption. PASSED AND APPROVED this September 27,1990. Mayor, City of La Porte, Texas City Secretary, City of La Porte, Texas (SEAL) 26 . . CERTIFICATE FOR ORDINANCE Wo, the undersigned being the duly acting Mayor and City Secretary of the City of La Porte, Texas (the "City"), hereby certify as follows: 1. The City Council of the City (the "Council") convened in regular session, open to the public, on September 27, 1990, at the meeting place designated in the notice (the "Meeting"), and the roll was called of the members, to wit: Norman Malone, Mayor, and the following City Councilmembers: Deotis Gay, B. Don Skelton, Ed Matuszak, Guy Southerland, Alton Porter, Edward G. Clarke, Michael Cooper, and Bob McLaughlin. All members of the Council were present, except Matuszak, Cooper, and McLaughlin , thus constituting a quorum. Whereupon among other business, the following was transacted at the Meeting a written ordinance, entitled: ORDINANCE AUTHORIZING THE ISSUANCE OF $2,100,000 CITY OF LA PORTE, TEXAS, WATERWORKS AND SEWER SYSTEM REVENUE BONDS, SERIES 1990; EXECUTION OF A PAYING AGENTIREGISTRAR AGREEMENT; AND ALL OTHER MATTERS RELATED THERETO, INCLUDING IMMEDIATE EFFECTIVENESS (the "Ordinance") was duly introduced for the consideration of the Council and read in full. It was then duly moved by Councilmember Clarke and seconded by Councilmember Porter that the Ordinance be finally passed and adopted and become immediately effective; and, after due discussion, such motion, carrying with it the adoption of the Ordinance prevailed and carried by the following vote: YES:-L NOES:-1L- ABSTENTIONS:-L. 2. A true, full, and correct copy of the Ordinance adopted at the Meeting is attached to and follows this Certificate; the Ordinance has been duly recorded in the Council's minutes of the Meeting; the above and foregoing paragraph is a true, full, and correct excerpt from the Council's minutes of the Meeting pertaining to the adoption of the Ordinance; the persons named in the above and foregoing paragraph are duly chosen, qualified, and acting officers and members of the Council as indicated therein; each of the officers and members of the Council was duly and sufficiently notified officially and personally, in advance, of the time, place, and purpose of the Meeting, and that the Ordinance would be introduced and considered for adoption at the Meeting . and each of such officers and members consented, in advance, to the holding of the Meeting for such purpose; and the Meeting was open to the public, and public notice of the time, place, purpose of the Meeting was given, all as required by Article 6252-17, Vernon's Texas Civil Statutes, as amended. 3. Cherie Black is the duly appointed and acting City Secretary of the City. SIGNED AND SEALED THIS September 27, 1990. ~~ City Secretary, City of La Porte ffi.mtW/A'~ Mayor, City of La Porte,. Texas (CJTY SEAL)