HomeMy WebLinkAbout03-10-10 Regular Meeting of the La Porte Area Water Authority
LA PORTE AREA WATER AUTHORITY
MINUTES
MARCH 10,2010
1. The meeting was called to order at 6:03 PM by Vice President David Janda.
Members Present: Vice President David Janda, Secretary Kenneth Schlather,
Member Steve Valerius.
Members Absent: President Dennis Steger
Others Present: General Manager Ron Bottoms, Director of Public Works Steve
Gillett, Director of Finance Michael Dolby and Ryan O'Hara of RBC Capital
Markets.
2. The minutes from the meeting held February 3, 2010 were reviewed. Motion by
Steve Valerius, second by Kenneth Schlather to approve the minutes as presented.
Motion was unanimous.
Ryan O'Hara of RBC Capital Markets discussed the reason for the proposed
refunding of bonds, the current state of the municipal bond market and reviewed
the potential savings. He discussed the schedule of events to refund the bonds
and answered questions from the Board. He stated that the market is fairly stable,
but the refunding could be delayed or called off if the rates moved up
significantly. Standard and Poor will rerate the bonds. The Board will need to
meet again in early April to approve the sale. After discussion, April 13, 2010
was identified as a date that all could attend. Steve Gillett will confirm the date
with all members.
3. There was no General Manager's report.
There were no Board comments.
4. There being no further business, the meeting adjourned at 6:11 PM.
~~~
Sec ary
PASSED AND APPROVED
ON THIS: :Ps-
~ --
President
HOU:3003369.!
RESOLUTION AUTHORIZING ISSUANCE AND SALE OF
LA PORTE AREA WATER AUTHORITY
CONTRACT REVENUE REFUNDING BONDS,
SERIES 2010
Dated April 14,2010
TABLE OF CONTENTS
Article One DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION ......1
SECTION 1.1. Definitions.......... .............. ...... ........ ............................................ ............. .... .... 1
SECTION 1.2. Notices to Bondholders; Waiver. .................................................................... 7
SECTION 1.3. Effect of Headings and Table of Contents. ..................................................... 7
SECTION 1.4. Resolution a Contract; Amendments. ............................................................. 7
SECTION 1.5. Benefits of Resolution.. ................... ................................. .......... .......... ........... 8
SECTION 1.6. Repealer. ........ ........................................ ............. ...................... .............. ........ 8
SECTION 1.7. Governing Law. ............. ............................ ....................... ........ ............... ....... 8
SECTION 1.8. Severability. ........ .................... ........ ............................ ............... ...... ............ .., 9
SECTION 1.9. Limitations on Liability. ........ ............................ ..... ................. ......... ........ ...... 9
Article Two THE BONDS ............. .............. ................................ ................... ................ ........... ..... 9
SECTION 2.1. Purpose, Title, Denomination, Amounts, and Terms of Bonds. ..................... 9
SECTION 2.2. Redemption. . ...................... .......................... .................... .......... ............ ....... 10
SECTION 2.3. Payment of Interest; Interest Rights Preserved. ............................................ 10
SECTION 2.4. Execution, Authentication, Delivery, and Dating. ........................................ 11
SECTION 2.5. Registration, Transfer, and Exchange. .......................................................... 11
SECTION 2.6. Mutilated, Destroyed, Lost, and Stolen Bonds. ............................................ 12
SECTION 2.7. Persons Deemed Owners. ............................................................................. 12
SECTION 2.8. Securities Depository, Appointment ofDTC................................................ 13
Article Three FORM OF BONDS.. .............. .................................. ................. ............... .......... .... 16
SECTION 3 .1. Form of Bonds. .... ....................................... .............. ..................... ......... ...... 16
Article Four REVENUES AND FUNDS ..................................................................................... 17
SECTION 4.1. Creation of Funds. ............... ..................... ............................... ....... .......... ..... 17
SECTION 4.2. Revenue Fund. ............ .......................... ........................... .......... ........... ........ 17
SECTION 4.3. Bond Fund. ........... .......................... ......................... ..... ................ ................. 17
SECTION 4.4. Reserve Fund. ........... ..................................... ................. ............... ............... 17
SECTION 4.5. Deficiencies................... ........................... ................................... .............. .... 18
SECTION 4.6. Surplus Money. ........... ......... ......... ............................................. ........... ........ 18
SECTION 4.7. Investments; Security for Deposits. .............................................................. 18
SECTION 4.8. Priority of Deposits and Payments from Revenue Fund............................... 18
Article Five CONCERNING THE PAYING AGENTIREGISTRAR ......................................... 19
SECTION 5.1. Acceptance. ................................................................................................... 19
SECTION 5.2. Trust Funds. .................................................................................................. 19
SECTION 5.3. Bonds Presented...... ............ .......... ................................... ....... ............. ......... 19
SECTION 5.4. Unclaimed Funds Held by the Paying Agent/Registrar. ............................... 19
SECTION 5.5. Paying Agent/Registrar May Own Bonds..................................................... 20
SECTION 5.6. Successor Paying Agents/Registrars. ............ ................... ............... .............. 20
Article Six................... ............. ............. .......................... ........ ................. .................... ........ ......... 20
COVENANTS .............................................................................................................................. 20
SECTION 6.1. General Covenants. .......................... ............................. ................. ........ ....... 20
SECTION 6.2. Covenants to Maintain Tax Exempt Status................................................... 23
Article Seven PLEDGE OF PLEDGED REVENUES; PARITY BONDS ..................................28
SECTION 7.1. Pledge of Pledged Revenues. ........................................................................ 28
SECTION 7.2. Issuance of Additional Bonds. ...................................................................... 28
Article Eight DEFEASANCE....................................................................................................... 32
HOU:3003369.1
SECTION 8.1. Defeasance. ..... ......................... ....... ....................... .......................... ............. 32
Article Nine SALE AND ISSUANCE OF BONDS; OTHER COVENANTS ............................32
SECTION 9.1. Sale of the Bonds. ......................................................................................... 32
SECTION 9.2. Official Statement. ...................... .......................... ............................. ........... 33
SECTION 9.3. Control and Custody of the Bonds................................................................ 33
SECTION 9.4. Application of Proceeds of Bonds. ............................................................... 33
SECTION 9.5. Bond Insurance. ...................................... ...................................................... 34
SECTION 9.6. Continuing Disclosure Undertaking. ............................................................ 34
SECTION 9.7. Redemption Prior to Maturity of Refunded Bonds....................................... 37
SECTION 9.8. Legal Holidays. .................................................................................... ......... 37
SECTION 9.9. No Recourse Against Authority Officials..................................................... 37
SECTION 9.1 O. Further Proceedings. ....................... ..... ..................... ........................ .......... 37
SECTION 9.11. Power to Revise Form of Documents. ........................................................ 38
SECTION 9.12. Incorporation of Findings and Determinations. .......................................... 38
SECTION 9.13. Severability. ................................................................................................ 38
SECTION 9.14. Public Meeting. ....... ......................... ....................... ............ .............. .......... 38
SECTION 9.15. Effective Date. ............................................................................................ 38
Exhibit A - Form of Bond
Exhibit B - Payment Agent/Registrar Agreement
Exhibit C - Winning Bid
Exhibit 0 - Description of Annual Financial Information and Operating Data
Exhibit E - Financial Guaranty Agreement
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RESOLUTION AUTHORIZING THE ISSUANCE AND SALE OF LA PORTE
AREA WATER AUTHORITY CONTRACT REVENUE REFUNDING
BONDS, SERIES 2010; AND AUTHORIZING CERTAIN OTHER MATTERS
INCIDENTAL THERETO
WHEREAS, the La Porte Area Water Authority (herein referred to as the "Authority")
was organized pursuant to the provisions of Section 59 of Article XVI of the Constitution of the
State of Texas and by special act Chapter 729, page 2,678 et seq. of the 6ih Legislature of
Texas, Regular Session, 1981 (the "Act"), and operates under the Act and Chapters 49 and 54 of
the Texas Water Code, as amended; and
WHEREAS, the Act authorizes the Authority, with the approval of the City Council of
the City of La Porte, Texas (the "Authority"), to issue its revenue bonds, which bonds may be
secured by and payable from revenues received by the Authority pursuant to one or more
contracts; and
WHEREAS, the Board of Directors (the "Board') of the Authority has previously issued
and there remain outstanding its Contract Revenue Refunding Bonds, Series 1999 (the
"Refunded Bonds"); and
WHEREAS, the Authority is empowered by the Act and Chapter 1207, Texas
Government Code, as amended, to issue its refunding bonds and to deposit the proceeds from the
sale thereof, and any other available funds, directly with the paying agent for the Refunded
Bonds for the discharge and final payment thereof; now, therefore,
BE IT RESOLVED BY THE BOARD OF DIRECTORS OF THE LA PORTE AREA
WATER AUTHORITY THAT:
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 1.1. Definitions.
For all purposes of this Resolution, except as otherwise expressly provided or unless the
context otherwise requires:
A. The terms defined in this Section have the meanings assigned to them in this
Section. If appropriate in the context of this Resolution, words of the singular number shall be
considered to include the plural, words of the plural number shall be considered to include the
singular, and words of the masculine, feminine or neuter gender shall be considered to include
the other genders.
B. All references in this Resolution to designated "Articles," "Sections," "Exhibits,"
and other subdivisions are to the designated Articles, Sections, Exhibits, and other subdivisions
of this Resolution as originally passed and adopted.
HOU:3003369.1
C. The words "herein," "hereof' and "hereunder" and other words of similar import
refer to this Resolution as a whole and not to any particular Article, Section, Exhibit, or other
subdivision.
D. All accounting terms not otherwise defined herein have the meanings assigned to
them, and all computations herein provided for shall be made, in accordance with generally
accepted accounting principles applied on a consistent basis.
"Accountant" means an independent certified public accountant, or an independent firm
of certified public accountants, in either case with demonstrative experience and competence in
public accounting, appointed from time to time by the Board.
"Act" means Chapter 729, page 2,678 et seq. of the 6ih of the Legislature of Texas,
Regular Session, 1981.
"Additional Bonds" means the additional parity bonds which the Authority expressly
reserves the right to issue in Section 7.2 of this Resolution which may be issued in the future.
When used in the proper context, Additional Bonds may include refunding bonds.
"Amortization Installment" means, with respect to Parity Bonds, the amount of money
which is required for mandatory redemption of such Parity Bonds (whether at maturity or by
mandatory redemption calls and including redemption premium, if any), provided that the total
amortization installments for such Parity Bonds shall be sufficient to provide for retirement of
the aggregate principal amount of such Parity Bonds and redemption premium, if any.
"Authority" means the La Porte Area Water Authority and any other public entity
succeeding to the powers, rights, privileges and functions of the Authority and, when
appropriate, the Board of Directors of the Authority.
"A verage Annual Principal and Interest Requirements" means that amount equal to the
average annual principal and interest requirements (including Amortization Installments) of all
Parity Bonds outstanding. With respect to Additional Bonds that bear interest at a rate which is
not established at the time of issuance at a single numerical rate, Average Annual Principal and
Interest Requirements shall be calculated assuming (i) that the interest rate for every 12-month
period on such bonds is equal to the rate of interest reported in the most recently published
edition of The Bond Buyer (or its successor) at the time of calculation as the "Revenue Bonds
Index" or, if such Revenue Bond Index is no longer being maintained by The Bond Buyer (or its
successor) at the time of calculation, such interest rate shall be assumed to be 80% of the rate of
interest then being paid on United States Treasury obligations of like maturity and (ii) that the
principal of such bonds is amortized such that annual debt service is substantially level over the
remaining stated life of such bonds.
"Board of Directors" or "Board" means the governing body of the Authority.
"Bond" or "Bonds" means any Bond or all Bonds, as the case may be, of the Authority's
Contract Revenue Refunding Bonds, Series 2010, dated as of May 1, 2010, authorized and issued
pursuant to this Resolution.
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HOU3003369.1
"Bond Fund" means the Authority's interest and sinking fund established by Section 4.3
of this Resolution.
"Bond Insurer" means [Assured Guaranty Corp.], or any successor thereto or assignee
thereof.
"Bondholder" means the Holder of a Bond.
"Bond Register" has the meaning stated in Section 2.5 hereof.
"Capital Acquisition" means the acquisition of any existing waterworks system.
"Capital Additions" means a water reservoir or an interest therein, a water storage
facility, a water treatment plan or an interest therein, regional oversized pipelines or an interest
therein, and associated transmission facilities with respect to each, and any combination thereof,
which shall become a part of the System.
"Capital Improvements" means any extensions, improvements, and additions to the
System other than Capital Additions and Capital Acquisitions.
"City" means the Authority of La Porte, Texas.
"Defaulted Interest" means interest which is payable on, but is not punctually paid or
duly provided for on or within 30 days after, any Interest Payment Date.
"Defeasance Obligations" means (i) direct noncallable obligations of the United States of
America, including obligations that are unconditionally guaranteed by the United States, (ii)
noncallable obligations of an agency or instrumentality of the United States, including
obligations that are unconditionally guaranteed or insured by the agency or instrumentality and
that are rated as to investment quality by a Rating Agency not less than AAA or its equivalent,
and (iii) noncallable obligations of a state or an agency or a county, municipality, or other
political subdivision of such an entity that have been refunded and that are rated as to investment
quality by a Rating Agency not less than AAA or its equivalent.
"Definitive Bonds" means the Bonds issued in exchange for the Initial Bond.
"Distribution System" means those facilities used to transport treated surface water from
the termination of the Transmission System to each Participant's take point.
"Engineer of Record" means the independent engineer or firm at the time employed by
the Board to perform and carry out the duties imposed on such engineer or firm by this
Resolution and having a favorable reputation nationally for skill and experience in the
engineering of waterworks systems of comparable size and character as those forming parts of
the System.
"Gross Revenues" means all revenues and income of every nature derived or received by
the Authority from the operation and ownership of the System, including all income, fees, and
charges received by the Authority from the Participants pursuant to the Water Sales Contracts;
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HOU:3003369.1
the interest income from the investment or deposit of money in any Fund created by this
Resolution to the extent described in this Resolution; and revenues derived from the ownership
or operation of other enterprises which the Authority may lawfully own or operation in the
future.
"Holder" when used with respect to any Bond means the Person in whose name such
Bond is registered in the Bond Register.
"Houston Contract" means that certain Amendment to Cost Sharing Agreement Southeast
Water Purification Plant (Restated and Amended), by and between the Authority of Houston,
Texas, the Participants and certain other entities named therein, as amended from time to time.
"Initial Bond" means the Bond initially delivered to the Purchaser.
"Interest Payment Date" means the Stated Maturity of an installment of interest on the
Bonds.
"Maturity," when used with respect to any Parity Bond, means the date on which the
principal of such Parity Bond becomes due and payable as therein or herein provided, whether at
the Stated Maturity or call for redemption.
"Net Revenues" means Gross Revenues less Operating Expenses.
"Operating Expenses" means the necessary and reasonable expenses of operation and
maintenance of the System, including all costs incurred by the Authority in providing potable
water to the Participants under the Water Sales Contracts; all operation and maintenance costs
billed to the Authority by the Authority of Houston, Texas; all operating and maintenance costs
incurred by the Authority related to the System; all administrative costs incurred by the
Authority; the cost of all insurance maintained by the Authority; and all salaries, labor, materials,
and payments under contracts for facilities shared with other entities; provided, however, that
repairs and extensions, as in the judgment of the Board, reasonable and fairly exercised, that are
necessary to keep the System in operation and render adequate service to the Authority 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 considered Operating Expenses.
Depreciation and payments into and out of the Bond Fund and the Reserve Fund shall never be
considered as expenses of operation and maintenance.
"Outstanding," when used with respect to Parity Bonds, means, as of the date of
determination, all Parity Bonds theretofore authenticated and delivered under this Resolution or
any resolution authorizing the issuance of Additional Bonds, except, without duplication:
(1) Parity Bonds theretofore cancelled or delivered to the Authority or any
paying agent therefor for cancellation;
(2) Parity Bonds for whose payment or redemption money in the necessary
amount has been theretofore deposited with any paying agent therefor in trust for the
registered owners of such Parity Bonds, provided that, if such Parity Bonds are to be
redeemed, notice of such redemption has been duly given pursuant to the resolution
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authorizing such Parity Bond, irrevocably provided for to the satisfaction of the paying
agent therefor, or waived;
(3) Parity Bonds in exchange for or in lieu of which other Parity Bonds have
been authenticated and delivered under the resolution by which they are authorized;
(4) Parity Bonds alleged to have been destroyed, lost, or stolen which have
been paid as provided in Section 2.6 hereof or any comparable provision in the resolution
by which they are authorized; and
(5) Parity Bonds the payment of the principal of (and premium, if any) and
interest on which money or Defeasance Securities or both are held by the paying agent
therefor with the effect specified in Section 8.1 hereof or any comparable provision in the
resolution by which they are authorized;
provided that, when used with respect to the Parity Bonds secured by the pledge granted hereby,
"Outstanding" Parity Bonds shall include all Parity Bonds, if any, alleged to have been
destroyed, lost, or stolen which have been replaced or paid as provided in Section 2.6 hereof or
any comparable provision in the resolution by which they are authorized but whose ownership
and enforceability by the registered owner thereof have been established by a court of competent
jurisdiction or other competent tribunal or otherwise established to the satisfaction of the
Authority.
"Parity Bonds" means, collectively, the Bonds and any Additional Bonds.
"Parity Bonds Resolutions" means, collectively, this Resolution and any resolution
authorizing Additional Bonds.
"Participants" means (a) the City, the City of Morgan's Point, Texas, and the City of
Shoreacres, Texas, all of which are located entirely within Harris County, Texas, and each of
which has executed a Water Sales Contract with the Authority, and (b) any future customer that
executes a Water Sales Contract with the Authority from and after the date of such contract.
"Paying Agent/Registrar" means The Bank of New York Mellon Trust Company,
National Association.
"Person" means any individual, corporation, partnership, joint venture, association, joint-
stock company, trust, unincorporated organization, or government or any agency or political
subdivision thereof.
"Pledged Revenues" means the Net Revenues and any other revenues or assets
specifically pledged by the Board, in its sole discretion, to the payment of the Parity Bonds.
"Purchaser" means the entity or entities awarded the sale of the Bonds and identified in
Section 9.1 hereof.
"Refunded Bonds" means the Authority's outstanding Contract Revenue Refunding
Bonds, Series 1999, described on Schedule I hereto.
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"Regular Record Date" for the interest payable on any Interest Payment Date means the
first day (whether or not a business day) of the month in which each Interest Payment Date
occurs.
"Reserve Fund" means the fund of the Authority so defined in Section 4.4 hereof.
"Reserve Requirement" means the least of (i) the Average Annual Principal and Interest
Requirements on the outstanding Parity Bonds, (ii) 10% of the face amount of the Parity Bonds,
and (iii) 100% of the maximum annual debt service for the Parity Bonds.
"Revenue Fund" means the fund or account created pursuant to Section 4.2 hereof and to
be maintained pursuant to Section 4.2 hereof so long as the Parity Bonds are outstanding.
"Southeast Plant" means the project described in the Houston Contract generally, and
specifically described in Exhibit B to the Houston Contract.
"Special Facilities Bonds" means special revenue obligations of the Authority which are
not payable from or secured by any Net Revenues, but which are secured by and payable from
liens on and pledges of any other revenues, sources, or payments, including, but not limited to,
special contract revenues, sources, or payments which shall not be considered as or constitute
Gross Revenues, unless and to the extent otherwise provided in any resolution authorizing the
issuance of such Special Facilities Bonds.
"Special Record Date" for the payment of Defaulted Interest means the date fixed by the
Paying Agent/Registrar pursuant to Section 2.3 hereof.
"Stated Maturity," when used with respect to any Bond or any installment of interest
thereon, means the date specified in such Parity Bond as the fixed date on which the principal of
such Bond or such installment of interest is due and payable.
"System" means (i) the Authority's entire existing waterworks system, including its
ownership interest in the Southeast Plant, the Transmission System and the Distribution System,
together with all future Capital Acquisitions, Capital Additions and Capital Improvements, all
replacements thereof, and the Authority's interest in any shared facility and water supply source,
and (ii) any other related facilities, all or any part of the revenues or income from which may, in
the future, at the option of the Board, and in accordance with law, become Pledged Revenues;
provided, however, that notwithstanding the foregoing , and to the extent now or hereafter
authorized or permitted by law, the term System shall not mean any water or other facilities of
any kind which are declared by the Board not to be a part of the System, and which are acquired
or constructed by the Authority with proceeds from the issuance of Special Facilities Bonds.
"Transmission System" means those facilities, including pipelines, easements, pumping,
and other devices to deliver treated surface water from the take point of the Southeast Plant to
the points at which the water is delivered to the Distribution System, which includes necessary
storage and pumping facilities to deliver water to each Participant.
"Water Sales Contracts" means the contracts between the Authority and each of the
Participants, each dated as of November 23, 1987, amended from time to time.
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"Year" or "fiscal year" means the regular fiscal year used by the Authority in connection
with the operation of the System, which may be any 12 consecutive month period established by
the Board, presently October 1 to September 30.
SECTION 1.2. Notices to Bondholders; Waiver.
Wherever this Resolution provides for notice to Bondholders of any event, such notice
shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed,
first-class postage prepaid, to each Bondholder at the address of such Bondholder as it appears in
the Bond Register. Neither the failure to mail such notice, nor any defect in any notice so
mailed, to any particular Bondholder shall affect the sufficiency of such notice with respect to all
other Bondholders. Wherever this Resolution provides for notice to a Bondholder in any
manner, such notice may be waived in writing by such Bondholder, either before or after the
event with respect to which such notice is given, and such waiver shall be the equivalent of such
notice. Waivers of notice by Bondholders shall be filed with the Authority, but such filing shall
not be a condition precedent to the validity of any action taken in reliance upon such waiver.
SECTION 1.3. Effect of Headings and Table of Contents.
The Article and Section headings herein and in the Table of Contents are for convenience
only and shall not affect the construction hereof.
SECTION 1.4. Resolution a Contract; Amendments.
This Resolution shall constitute a contract with the Holders of the Bonds from time to
time accepted by the initial purchase of Bonds, shall be binding on the Authority, and shall not
be amended or repealed by the Authority so long as any Bond remains Outstanding except as
permitted in this Section.
The Authority, may, without the consent of or notice to any Bondholders, from time to
time and at any time amend this Resolution with notice to the Bond Insurer:
A. to correct or amplify the description of any revenues at any time subject to the
lien and pledge granted hereby, or better to assure, pledge, and confirm any property subject or
required to be subjected to such lien and pledge, or to subject to such lien and pledge additional
property; or
B. to add to the conditions, limitations, and restrictions on the authorized amount,
terms, or purposes of issue, authentication, and delivery of Parity Bonds, as herein set forth,
additional conditions, limitations, and restrictions thereafter to be observed; or
C. to add to the covenants of the Authority for the benefit of the Holders of the
Bonds or to surrender any right or power herein conferred upon the Authority; or
D. to cure any ambiguity, to correct or supplement any provision herein which may
be inconsistent with any other provision herein, or to make any other provisions, with respect to
matters or questions arising under this Resolution, which shall not be inconsistent with the
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provisions of this Resolution, provided such action shall not adversely affect the interests of the
Holders of the Bonds.
In addition, the Authority may, with the written consent of the Bond Insurer and the
Holders of a majority in aggregate principal amount of the Bonds then Outstanding affected
thereby, amend, add to, or rescind any of the provisions of this Resolution; provided that,
without the consent of the Holders of all affected Outstanding Bonds, no such amendment,
addition, or rescission shall (1) change the Stated Maturity of the Bonds or any installment of
interest thereon, reduce the principal amount thereof, the Redemption Price therefor, or the rate
of interest thereon, change the place or places at, or the coin or currency in, which any Bond or
the interest thereon is payable, or in any other way modify the terms of payment of the principal
of or interest on the Bonds, (2) give any preference to any Bond over any other Bond, (3) reduce
the percentage in principal amount of the Outstanding Bonds the consent of the Holders of which
is required for any such amendment, addition, or rescission, or the consent of Holders of which is
required for any waiver provided for in this Resolution of compliance with certain provisions of
this Resolution or certain defaults hereunder and their consequences, (4) modify or alter the
provisions of the proviso to the definition of the term "Outstanding," (5) modify any of the
provisions of this Section, except to increase any percentage provided hereby or to provide that
certain other provisions of this Resolution cannot be modified or waived without the consent of
the Holder of each Bond affected thereby, or (6) permit the creation of any lien ranking prior to
or on a parity with the pledge granted hereby, or on or of the Gross Revenues, or deprive the
Holder of any Bond of the security afforded by such pledge. It shall not be necessary for any
consent of Bondholders except for the Bond Insurer under this Section to approve the particular
form of any proposed amendment, addition, or rescission, but it shall be sufficient if such
consent shall approve the substance thereof.
SECTION 1.5. Benefits of Resolution.
Nothing in this Resolution, expressed or implied, is intended or shall be construed to
confer upon any Person other than the Authority, the Paying Agent, the Bond Insurer, and the
Bondholders any right, remedy, or claim, legal or equitable, under or by reason of this
Resolution or any provision hereof, this Resolution and all its provisions being intended to be
and being for the sole and exclusive benefit of the Authority, the Paying Agent/Registrar, the
Bond Insurer, and the Bondholders.
SECTION 1.6. Repealer.
All resolutions, or parts thereof, which are in conflict or inconsistent with any provision
of this Resolution are hereby repealed and declared to be inapplicable to the extent of such
conflict, and the provisions of this Resolution shall be and remain controlling as to the matters
contained herein.
SECTION 1.7. Governing Law.
This Resolution shall be construed in accordance with and governed by the laws of the
State of Texas and the United States of America.
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SECTION 1.8. Severability.
If any provision of this Resolution or the application thereof to any Person or
circumstance shall be held to be invalid, the remainder of this Resolution and the application
thereof to other Persons and circumstances shall nevertheless be valid, and the Board hereby
declares that this Resolution would have been enacted without such invalid provision.
SECTION 1.9. Limitations on Liability.
The Bonds and all other covenants and obligations of the Authority created hereby are
special, limited obligations of the Authority payable and performable solely from and to the
extent of the Pledged Revenues. Neither the Bondholders nor the Bond Insurer shall ever have
the right to demand payment of the Bonds or such other obligations out of funds raised or to be
raised by taxation or otherwise have any recourse against the Authority in respect thereof except
as to such Pledged Revenues. The Authority has no taxing power.
ARTICLE TWO
THE BONDS
SECTION 2.1. Purpose, Title, Denomination, Amounts, and Terms of Bonds.
Revenue bonds of the Authority, bearing the terms herein provided, shall be and are
hereby authorized to be issued in the aggregate principal amount of $[4,070,000], for the
purposes of (1) refunding and defeasing the Refunded Bonds, and (2) paying the costs of issuing
the Bonds and refunding the Refunded Bonds.
The title of the Bonds shall be "La Porte Area Water Authority Contract Revenue
Refunding Bonds, Series 2010."
The Bonds shall be in the denominations of $5,000 and any integral multiple thereof.
The Stated Maturities of the Bonds shall be March 15 of the years and in the principal
amounts set forth below, the Dated Date of the Bonds shall be May 1, 2010, and interest on the
Bonds shall accrue from the Dated Date or the most recent Interest Payment Date to which
interest has been paid or duly provided for, until such Bonds have been paid or due provision
therefor is made at the Maturity thereof, at the following rates, payable semiannually on each
March 15 and September 15 until maturity, commencing September 15, 2010:
Year of
Stated
Maturity
2011
2012
2013
2014
2015
2016
2017
HOU3003369. ]
Principal
Amount
$570,000
590,000
620,000
640,000
660,000
690,000
300,000
Interest
Rate
9
The principal of and, subject to Section 2.3 hereof, interest on the Bonds shall be payable
at the principal office of the Paying Agent/Registrar in Dallas, Texas.
SECTION 2.2. Redemption.
The Bonds are not subject to optional or mandatory redemption prior to Stated Maturity.
SECTION 2.3. Payment of Interest; Interest Rights Preserved.
Interest on any Bond which is payable on any Interest Payment Date, unless Defaulted
Interest, shall be paid to the Person in whose name that Bond is registered at the close of
business on the Regular Record Date for such interest.
Defaulted Interest shall cease to be payable to the registered Holder on the relevant
Regular Record Date by virtue of having been such Holder, but shall be paid to the Person in
whose name the Bonds are registered at the close of business on a Special Record Date for the
payment of such Defaulted Interest, which shall be fixed in the following manner. The Authority
shall notify the Paying Agent/Registrar in writing of the amount of Defaulted Interest proposed
to be paid on each Bond and the date of the proposed payment and shall simultaneously deposit
with the Paying Agent/Registrar an amount of money equal to the aggregate amount proposed to
be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the
Paying Agent/Registrar for such deposit prior to the date of the proposed payment, such money
when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted
Interest as in this Section provided. Thereupon the Paying Agent/Registrar shall fix a Special
Record Date for the payment of such Defaulted Interest which shall be not more than 15 nor less
than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt
by the Paying Agent/Registrar of the notice of the proposed payment. The Paying
Agent/Registrar shall promptly notify the Authority of such Special Record Date and, in the
name and at the expense of the Authority, shall cause notice of the proposed payment of such
Defaulted Interest and the Special Record Date therefor to be mailed to each Bondholder not less
than 10 days prior to such Special Record Date. Notice of the proposed payment of such
Defaulted Interest and the Special Record Date therefor having been mailed as aforesaid, such
Defaulted Interest shall be paid to the Persons in whose names the Bonds are registered on such
Special Record Date.
All payments of interest on the Bonds shall be paid by check or draft mailed by the
Paying Agent/Registrar to the Person entitled to such payment, first-class postage prepaid, at the
address of such Person as it appears in the Bond Register, or by such other customary banking
arrangements to which such Person and the Paying Agent/Registrar may agree.
Subject to the foregoing provisions of this Section, each Bond delivered hereunder upon
transfer or in lieu of or in exchange for any other Bond shall carry all the rights to interest
accrued and unpaid, and to accrue, which were carried by such other Bond, and each such Bond
shall bear interest from such date, that neither gain nor loss in interest shall result from such
transfer, exchange, or substitution.
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HOU3003369. ]
SECTION 2.4. Execution, Authentication, Delivery, and Dating.
The Bonds shall be executed on behalf of the Authority by the President under its seal
reproduced or impressed thereon and countersigned by the Secretary. The signature of either or
both such officers on the Bonds may be manual or facsimile. Bonds bearing the manual or
facsimile signatures of individuals who were at the time of execution the proper officers of the
Authority shall bind the Authority, notwithstanding that such individuals or either of them shall
cease to hold such offices prior to the delivery thereof.
All Bonds authenticated and delivered by the Paying Agent/Registrar hereunder shall be
dated the date of their authentication.
No Bond shall be entitled to any right or benefit under this Resolution, or be valid or
obligatory for any purpose, unless there appears on such Bond either a certificate of registration
substantially in the form provided in Exhibit A hereto, manually executed by the Comptroller of
Public Accounts of the State of Texas or his duly authorized agent, or a certificate of
authentication substantially in the form provided in Exhibit A hereto, executed by the Paying
Agent/Registrar by manual signature, and either such certificate upon any Bond shall be
conclusive evidence, and the only evidence, that such Bond has been duly certified or
authenticated and delivered.
SECTION 2.5. Registration, Transfer, and Exchange.
The Authority shall cause to be kept at the principal office of the Paying Agent/Registrar
a register (herein referred to as the "Bond Register") in which, subject to such reasonable
regulations as it may prescribe, registration of the Bonds and of transfers of the Bonds shall be
made as provided herein.
Upon surrender for transfer of any Bond at the principal office of the Paying
Agent/Registrar, the Authority shall execute and the Paying Agent/Registrar shall authenticate
and deliver, in the name of the designated transferee or transferees, one or more new Bonds of
the same Stated Maturity, of authorized denominations, and of a like aggregate principal amount.
At the option of the Holder, Bonds may be exchanged for other Bonds of the same Stated
Maturity, of authorized denominations, and of like aggregate principal amount, upon surrender
of the Bonds to be exchanged at the principal office of the Paying Agent/Registrar. Whenever
any Bonds are so surrendered for exchange, the Authority shall execute and the Paying
Agent/Registrar shall authenticate and deliver the Bonds which the Holder making the exchange
is entitled to receive.
All Bonds issued upon any transfer or exchange of Bonds shall be valid obligations of the
Authority evidencing the same obligation, and entitled to the same benefits under this
Resolution, as the Bonds surrendered in such transfer or exchange.
All registrations, transfers, and exchanges of Bonds pursuant to this Section shall be
made without expense or service charge to the Bondholder, but the Paying Agent/Registrar shall
require payment by the Bondholder requesting such transfer or exchange of any tax or other
governmental charge required to be paid with respect to such transfer or exchange.
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HOU:3003369.1
Every Bond presented or surrendered for transfer or exchange shall be duly endorsed, or
be accompanied by a written instrument of transfer in form satisfactory to the Paying
Agent/Registrar duly executed by the Holder thereof or his attorney duly authorized in writing.
SECTION 2.6. Mutilated, Destroyed, Lost, and Stolen Bonds.
If (l) any mutilated Bond is surrendered to the Paying Agent/Registrar, or the Authority
and the Paying Agent/Registrar receive evidence to their satisfaction of the destruction, loss, or
theft of any Bond, and (2) there is delivered to the Authority and the Paying Agent/Registrar
such security or indemnity as may be required by them to save each of them harmless, then, in
the absence of notice to the Authority or the Paying Agent/Registrar that such Bond has been
acquired by a bona fide purchaser, the Authority shall execute and upon its request the Paying
Agent/Registrar shall authenticate and deliver, in exchange for or in lieu of any such mutilated,
destroyed, lost, or stolen Bond, a new Bond of the same Stated Maturity and of like tenor and
principal amount, bearing a number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost, or stolen Bond has become or is about to
become due and payable, the Authority in its discretion may, instead of issuing a new Bond, pay
such Bond.
As a condition to the issuance of any new Bond or payment in lieu thereof under this
Section, the Bondholder shall pay to the Authority a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other expenses or charges
(including attorney's fees and the fees and expenses of the Paying Agent/Registrar) connected
therewith.
Every new Bond issued pursuant to this Section in lieu of any mutilated, destroyed, lost,
or stolen Bond shall constitute an original additional contractual obligation of the Authority,
whether or not the mutilated, destroyed, lost, or stolen Bond shall be at any time enforceable by
anyone, and shall be entitled to all the benefits of this Resolution and the lien and pledge granted
hereby equally and ratably with all other Outstanding Bonds.
The provisions of this Section are exclusive and shall preclude (to the extent lawful) all
other rights and remedies with respect to the replacement and payment of mutilated, destroyed,
lost, or stolen Bonds.
SECTION 2.7. Persons Deemed Owners.
The Authority, the Paying Agent/Registrar, and any agent of either of them may treat the
Person in whose name any Bond is registered as the owner of such Bond for the purpose of
receiving payment of the principal of and (subject to Section 2.3 hereof) interest on such Bond
and for all other purposes whatsoever, whether or not such Bond be overdue, and to the extent
permitted by law none of the Authority, the Paying Agent/Registrar, and any agent of either of
them shall be affected by notice to the contrary.
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HOU3003369.1
SECTION 2.8. Securities Depository, Appointment of DTC.
A. The Bonds may be registered under a Book Entry System maintained by a
Securities Depository. Notwithstanding any inconsistent provisions of this Resolution to the
contrary, the provisions of this section shall govern with respect to the Bonds at any time such
Bonds are issued and Outstanding in Book Entry Form. When used in this Section 2.8, the
following terms shall have the following meanings:
"Book Entry Form" or "Book Entry System" shall mean a form or system, as
applicable, under which (1) the ownership of beneficial interests in the Bonds may be
transferred only through a book entry and (2) physical bond certificates in fully registered
form are registered only in the name of a Securities Depository or its nominee as
registered Owner, with the physical bond certificates held in the custody of the Securities
Depository .
"Securities Depository" shall mean any securities depository that (1) is a "clearing
corporation" within the meaning of the New York Uniform Commercial Code and a
"clearing agency" registered pursuant to the provisions of Section 17 A of the Securities
Exchange Act of 1934, as amended, operating and maintaining, with its participants or
otherwise, a Book Entry System of record ownership of beneficial interests in the Bonds
and (2) effects transfers of the Bonds, in Book Entry Form.
B. Under the Book Entry System, the Bonds shall be issued in the form of a single,
fully registered, and immobilized bond certificate for each Stated Maturity of principal of the
Bonds, the aggregate principal amount of which equals the aggregate principal amount of the
Bonds. Upon adoption of the Book Entry System, the ownership of the Bonds shall be registered
in the Bond Register in the name of any nominee of the Securities Depository and shall be held
in the custody of the Securities Depository. The Bonds shall be issued under the Book Entry
System, with the initial Bond registered in the name of the initial purchaser thereof and
thereafter, except as provided herein, the ownership of the Bonds shall be registered in the Bond
Register in the name of Cede & Co., as nominee of The Depository Trust Company, New York,
New York, which shall serve as the initial Securities Depository for the Bonds. Ownership of
beneficial interests in the Bonds shall be shown by book entry on the system maintained and
operated by the Securities Depository and its participants and indirect participants (such
participants and indirect participants being collectively referred to as the "Participants"), and
transfers of ownership of beneficial interests shall be made only by the Securities Depository and
its Participants by book entry, and the Authority and the Paying Agent shall have no
responsibility therefor. The Securities Depository will be required to maintain records of the
positions of Participants in the Bonds, and the Participants and persons acting through
Participants will be required to maintain records of the purchasers of beneficial interests in the
Bonds (the "Beneficial Owners"). Except as provided in paragraph (I) of this section, the Bonds
as such shall not be transferable or exchangeable, except for transfer to another Securities
Depository or to another nominee of a Securities Depository. No person other than the Securities
Depository or its nominee shall be entitled to receive from the Authority or the Paying
Agent/Registrar any bond certificate or other evidence of ownership of the Bonds, or any
payment in respect thereof, unless the initial Securities Depository or its nominee (or a successor
Securities Depository or its nominee) shall transfer record ownership of all or any portion of the
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HOU:3003369.1
Bonds on the Bond Register in connection with discontinuing the Book Entry System as
provided in Subsection (I) of this section or otherwise.
C. With respect to Bonds registered in the Bond Register in the name of the
Securities Depository or its nominee, the Authority and the Paying Agent/Registrar shall have no
responsibility or obligation to any Participant or to any Beneficial Owner for whom a Participant
acquires an interest in the Bonds. NEITHER THE AUTHORITY NOR THE PAYING
AGENT/REGISTRAR SHALL HAVE ANY RESPONSIBILITY OR OBLIGATION TO THE
PARTICIPANTS OR THE BENEFICIAL OWNERS OF THE BONDS WITH RESPECT TO
(i) THE ACCURACY OF ANY RECORDS MAINTAINED BY THE SECURITIES
DEPOSITORY OR ANY PARTICIPANT; (ii) THE PAYMENT BY THE SECURITIES
DEPOSITORY OR ANY PARTICIPANT OF ANY AMOUNT DUE TO ANY BENEFICIAL
OWNER IN RESPECT OF THE PAYMENT OF PRINCIPAL OF AND INTEREST ON THE
BONDS; (iii) THE DELIVERY BY THE SECURITIES DEPOSITORY OR ANY
PARTICIPANT OF ANY NOTICE TO ANY BENEFICIAL OWNER THAT IS REQUIRED OR
PERMITTED TO BE GIVEN TO REGISTERED OWNERS UNDER THE TERMS OF THIS
ORDINANCE; (iv) THE SELECTION OF THE BENEFICIAL OWNERS TO RECEIVE
PAYMENT IN THE EVENT OF ANY PARTIAL REDEMPTION OF THE BONDS; OR
(v) ANY CONSENT GIVEN OR OTHER ACTION TAKEN BY THE SECURITIES
DEPOSITORY AS HOLDER OF THE BONDS. NEITHER THE CITY NOR THE PAYING
AGENT HAS ANY DIRECT OBLIGATION OR RESPONSIBILITY TO PARTICIPANTS OR
BENEFICIAL OWNERS.
D. So long as the Bonds or any portions thereof are registered in the name of a
Securities Depository or any nominee thereof, all payments of principal of and interest on or
redemption price of or the purchase price of such Bonds shall be made only to or upon the order
of such Securities Depository on the dates and at the times provided for such payment under this
Resolution and at the address indicated for such Securities Depository in the Bond Register kept
by the Paying Agent/Registrar by transfer of immediately available funds; provided that the
Paying Agent/Registrar has received sufficient funds from the sources described in the
Resolution to make such payment. Each such payment to the Securities Depository or its
nominee shall be valid and effective to fully satisfy and discharge all liability of the Authority or
the Paying Agent/Registrar with respect to the payment of principal of and interest on, and the
purchase price of, and the redemption price of the Bonds so registered, to the extent of the sum
or sums so paid. In the event of the redemption of less than all of the Bonds outstanding, the
Paying Agent/Registrar shall not require surrender by the Securities Depository or its nominee of
the Bonds so redeemed and the Securities Depository may retain such Bonds. In the event of
partial redemptions of the Bonds, the Securities Depository shall make an appropriate notation
on the Bonds as to the amount of such partial redemption; provided that the Securities
Depository shall deliver to the Paying Agent/Registrar, upon request, a written confirmation of
such partial redemption and thereafter the records maintained by the Paying Agent/Registrar
shall be conclusive as to the amount of the Bonds which have been redeemed. The Authority and
the Paying Agent/Registrar shall not be liable for the failure of the Securities Depository to
properly indicate on the Bonds the payment of such principal or redemption price.
E. All transfers of beneficial ownership interests in the Bonds when issued in Book
Entry Form shall be effected by procedures promulgated by the Securities Depository with its
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HOU:3003369.!
Participants for recording and transferring the ownership of beneficial interest in each of such
Bonds.
F. The Authority and the Paying Agent/Registrar may treat the Securities Depository
(or its nominee) as the sole and exclusive registered owner of the Bonds registered in its name
for the purposes of payment of the principal of and interest on the Bonds, selecting the Bonds or
portions thereof to be redeemed, giving any notice permitted or required to be given to
Registered Owners under this Resolution, registering the transfer of Bonds, obtaining any
consent or other action to be taken by Registered Owners and for all other purposes whatsoever;
and the Authority and the Paying Agent/Registrar shall not be affected by any notice to the
contrary.
G. So long as the Bonds or any portion thereof are registered in the name of the
Securities Depository or any nominee thereof, all notices required or permitted to be given to the
Registered Owners of such Bonds under this Resolution shall be given to the Securities
Depository. In connection with any notice or other communication to be provided to Registered
Owners pursuant to this Resolution by the Authority and the Paying Agent/Registrar with respect
to any consent or other action to be taken by Registered Owners, the Securities Depository shall
consider the date of receipt of notice requesting such consent or other action as the record date
for such consent or other action, provided that the Authority or the Paying Agent/Registrar may
establish a Special Record Date for such consent or other action. The Authority or the Paying
Agent/Registrar shall give the Securities Depository notice of such Special Record Date not less
than 15 calendar days in advance of such Special Record Date to the extent possible.
H. Any successor Paying Agent/Registrar, in its written acceptance of its duties
under this Resolution, shall agree to take any actions necessary from time to time to comply with
the requirements of such Securities Depository.
I. The Authority may elect to replace The Depository Trust Company as the
Securities Depository. The Securities Depository may determine to discontinue providing its
services with respect to the Bonds at any time by giving reasonable written notice to the Paying
Agent/Registrar and the Authority and discharging its responsibilities with respect thereto under
applicable law. Under such circumstances (if there is not a successor Securities Depository),
bond certificates will be delivered to the Beneficial Owners as described in this Resolution and
the provisions of this Resolution with regard to issuance, transfer, and exchange of bond
certificates shall apply. The Authority in its sole discretion and without the consent of any other
person, may terminate the services of the Securities Depository with respect to the Bonds if the
Authority determines that: (1) the Securities Depository is unable to discharge its responsibilities
with respect to the Bonds; or (2) a continuation of the requirement that all of the Bonds be
registered in the Bond Register in the name of the Securities Depository (or its nominee) is not in
the best interest of the Beneficial Owners. In the event that no substitute Securities Depository is
found by the Authority or restricted registration is no longer in effect, bond certificates will be
delivered, and the transfer and exchange thereof shall be governed, as described in this
Resolution. Upon the termination of the services of the Securities Depository with respect to the
Bonds pursuant to this Subparagraph (I), after which no successor Securities Depository willing
to undertake in the functions of the Securities Depository hereunder can be found which, in the
opinion of the Authority, is willing and able to undertake such functions upon reasonable and
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HOU:3003369.1
customary terms, the Bonds shall no longer be restricted to being registered in the Bond Register
in the name of the Securities Depository (or its nominee), but may be registered in the name or
names and in such maturities and principal amounts as the Securities Depository (directly or
through any Participant) shall designate in writing to the Paying Agent/Registrar in accordance
with the provisions of this Resolution, but without any liability on the part of the Authority or the
Paying Agent/Registrar for the accuracy of such designation. Upon the termination of the
services of the Securities Depository with respect to the Bonds for any reason and the
appointment of a successor Securities Depository, all references in this Resolution to the
Securities Depository shall refer to such successor Securities Depository. Whenever the
Securities Depository requests the Authority and the Paying Agent/Registrar to do so, the
Authority and the Paying Agent/Registrar shall cooperate with the Securities Depository in
taking appropriate action after reasonable notice to arrange for another Securities Depository to
maintain custody of certificates evidencing the Bonds.
J. So long as any of the Bonds are registered in the name of the Securities
Depository (or its nominee), a legend prescribed by the Securities Depository to that effect may
be printed on such bond certificate.
ARTICLE THREE
FORM OF BONDS
SECTION 3.1. Form of Bonds.
The Bonds, the Registration Certificate of the Comptroller of Public Accounts of the
State of Texas to be reproduced on the initial Bond, the Certificate of Authentication to be
reproduced on Bonds subsequently delivered, and the form of Assignment to be reproduced on
each of the Bonds shall be substantially in the forms set forth in Exhibit A hereto, with such
appropriate insertions, omissions, substitutions, and other variations as are permitted or required
by this Resolution and may have such letters, numbers, or other marks of identification
(including identifying numbers and letters of the Committee on Uniform Securities Identification
Procedures of the American Bankers Association) and such legends and endorsements (including
any reproduction of an opinion of counselor notice of insurance) thereon as may, consistently
herewith, be established by the Authority or determined by the officers executing such Bonds as
evidenced by their execution thereof. Any portion of the text of any Bonds may be set forth on
the reverse thereof, with an appropriate reference thereto on the face of the Bond. A Statement
of Insurance or other appropriate language provided by the Bond Insurer may also be reproduced
on the Bonds.
The definitive Bonds shall be numbered consecutively from R-l and upward and shall be
printed, lithographed, typewritten, photocopied, or engraved, produced by any combination of
these methods, or produced in any other similar manner, all as determined by the officers
executing such Bonds as evidenced by their execution thereof. The initial Bond submitted to the
Attorney General of Texas shall be numbered T-l and may be typewritten or photocopied or
otherwise reproduced.
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HOU:3003369. ]
ARTICLE FOUR
REVENUES AND FUNDS
SECTION 4.1. Creation of Funds.
All Pledged Revenues shall be kept separate and apart from all other funds of the
Authority, and the special funds described in this Article Four shall be established and
maintained in an official depository bank or depository banks of the Authority so long as any of
the Parity Bonds, or interest thereon, are outstanding and unpaid.
SECTION 4.2. Revenue Fund.
All Pledged Revenues are and shall be credited to the Revenue Fund immediately upon
receipt. Payments from the Revenue Fund shall be made in the priority specified in Section 4.8
hereof.
SECTION 4.3. Bond Fund.
The Bond Fund is created for the sole purpose of paying the principal of, redemption
premium, if any, and interest on the Parity Bonds, as the same come due. Payments into the
Bond Fund shall be made in substantially equal monthly payments (commencing with respect to
the Bonds and any Additional Bonds on the date of delivery to the initial purchaser thereof)
during each year in which any of the Parity Bonds are outstanding in an aggregate amount equal
to the amounts required to meet the interest and principal payments falling due on or before the
next maturity date or mandatory redemption date of the Parity Bonds. The Authority shall, at
least five days prior to September 15, 2010, and each March 15 and September 15 thereafter,
deposit into the Bond Fund any additional Pledged Revenues available in the Revenue Fund
which may be necessary to pay in full the interest on and principal, if any, coming due on such
March 15 or September 15. In no event shall any amount in excess of the amounts stated above
be retained in the Bond Fund, and any such excess amount may be withdrawn by the Authority
and replaced in the Revenue Fund.
SECTION 4.4. Reserve Fund.
The Reserve Fund shall be used to pay the principal of and interest on the Parity Bonds
when and to the extent the amounts in the Bond Fund available for such payment are insufficient
for such purpose, and may be used for the purpose of finally retiring the last of the Bonds. Funds
for the Reserve Fund are hereby appropriated from the reserve fund for the Refunded Bonds and
shall be deposited in the Reserve Fund. Notwithstanding any provision hereof to the contrary, no
deposits shall be made into the Reserve Fund at any time when there is a deficiency in the
amount on deposit in to the Bond 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, the
Authority shall, from the first available and unallocated Pledged 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 from the Revenue Fund; provided, however, that in any event
amounts on deposit in the Reserve Fund shall be restored to the Reserve Requirement within
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HOU:3003369.!
twenty four months of such reduction. If at the end of any fiscal year surplus funds remain in the
Reserve Fund resulting from any reduction of the Reserve Requirement or otherwise, they shall
be promptly transferred from the Reserve Fund into the Bond Fund and payments into the Bond
Fund from the Revenue Fund shall be reduced accordingly.
SECTION 4.5. Deficiencies.
If in any month the Authority shall fail to deposit into any fund provided for by this
Resolution the full amounts required, amounts equivalent to such deficiencies shall be set apart
and paid into said funds from the first available and unallocated Pledged Revenues of the
following month or months, and such payment shall be in addition to the amounts otherwise
required to be paid into said funds during such month or months. To the extent necessary, the
Authority shall increase the rates and charges for its services to make up for any such
deficiencies.
SECTION 4.6. Surplus Money.
Notwithstanding the provisions of Section 7.1 hereof, Pledged Revenues in excess of
those necessary to establish and maintain the funds required in this Resolution may be used for
any purpose now or hereafter authorized by law.
SECTION 4.7. Investments; Security for Deposits.
Money held for the credit of any fund established pursuant to this Resolution may, at the
option of the Authority, be invested as permitted by the Texas Public Funds Investment Act,
Chapter 2256, Texas Government Code, as amended.
All money held for the credit of any fund created by this Resolution shall, to the extent
not invested, be secured in the manner and to the fullest extent required by the laws of the State
of Texas for the security of public funds.
SECTION 4.8. Priority of Deposits and Payments from Revenue Fund.
The Board shall make the deposits and payments from Pledged Revenues in the Revenue
Fund when and as required by any Parity Bonds Resolution or any resolution authorizing
subordinate lien bonds, and, after payment of Operating Expenses, such deposits shall be made
in the following order and with the following irrevocable priorities, respectively:
First: to the Bond Fund, when and in the amounts required by any Parity Bonds
Resolution;
Second:to the Reserve Fund, when and in the amounts required by any Parity
Bonds Resolution;
Third: to the payment of principal, interest and reserve fund requirements for
any obligations which may be issued by the Board from time to time that
are payable from and secured by a lien on and pledge of the Pledged
Revenues which is subordinate to the liens of the Parity Bonds, when and
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HOU:3003369.1
in the amounts required by any resolution authorizing the issuance of
such subordinate lien obligations; and
Fourth: for any lawful purpose.
ARTICLE FIVE
CONCERNING THE PAYING AGENTfREGISTRAR
SECTION 5.1. Acceptance.
The Bank of New York Mellon Trust Company, National Association, Dallas, Texas, is
hereby appointed as the initial Paying Agent/Registrar for the Bonds pursuant to the terms and
provisions of the Paying Agent/Registrar Agreement by and between the City and the Paying
Agent/Registrar. The Paying Agent/Registrar Agreement shall be substantially in the form
attached hereto as Exhibit B, the terms and provisions of which are hereby approved, and the
Mayor is hereby authorized to execute and deliver such Paying Agent/Registrar Agreement on
behalf of the City in multiple counterparts and the City Secretary is hereby authorized to attest
thereto and affix the City's seal. Such initial Paying Agent/Registrar and any successor Paying
Agent/Registrar, by undertaking the performance of the duties of the Paying Agent/Registrar
hereunder, and in consideration of the payment of any fees pursuant to the terms of any contract
between the Paying Agent/Registrar and the City and/or the deposits of money pursuant to this
Ordinance, shall be deemed to accept and agree to abide by the terms of this Ordinance.
SECTION 5.2. Trust Funds.
All money transferred to the Paying Agent/Registrar in its capacity as Paying
Agent/Registrar for the Bonds under this Ordinance (except any sums representing Paying
Agent/Registrar's fees) shall be held in trust for the benefit of the City, shall be the property of
the City and shall be disbursed in accordance with this Ordinance.
SECTION 5.3. Bonds Presented.
Subject to the provisions of Section 5.4, all matured Bonds presented to the Paying
Agent/Registrar for payment shall be paid without the necessity of further instructions from the
City. Such Bonds shall be canceled as provided herein.
SECTION 5.4. Unclaimed Funds Held by the Paying Agent/Registrar.
Funds held by the Paying Agent/Registrar that represent principal of and interest on the
Bonds remaining unclaimed by the registered Holder thereof after the expiration of three years
from the date such funds have become due and payable (a) shall be reported and disposed of by
the Paying Agent/Registrar in accordance with the provisions of Title 6 of the Texas Property
Code, as amended, to the extent such provisions are applicable to such funds, or (b) to the extent
such provisions do not apply to the funds, such funds shall be paid by the Paying Agent/Registrar
to the Authority upon receipt by the Paying Agent/Registrar of a written request therefor from
the Authority.
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The Paying Agent/Registrar shall have no liability to the Registered Owners of the Bonds
by virtue of actions taken in compliance with this Section.
SECTION 5.5. Paying Agent/Registrar May Own Bonds.
The Paying Agent/Registrar in its individual or any other capacity, may become the
owner or pledgee of Bonds with the same rights it would have if it were not the Paying
Agent/Registrar.
SECTION 5.6. Successor Paying Agents/Registrars.
The Authority covenants that at all times while any Bonds are Outstanding it will provide
a legally qualified bank, trust company, financial institution or other agency to act as Paying
Agent/Registrar for the Bonds. The Authority reserves the right to change the Paying
Agent/Registrar for the Bonds on not less than sixty (60) days' written notice to the Paying
Agent/Registrar, as long as any such notice is effective not less than 60 days prior to the next
succeeding principal or interest payment date on the Bonds. Promptly upon the appointment of
any successor Paying Agent/Registrar, the previous Paying Agent/Registrar shall deliver the
Bond Register or a copy thereof to the new Paying Agent/Registrar, and the new Paying
Agent/Registrar shall notify each registered Holder, by United States mail, first class, postage
prepaid, of such change and of the address of the new Paying Agent/Registrar. Each Paying
Agent/Registrar hereunder, by acting in that capacity, shall be deemed to have agreed to the
provisions of this Resolution.
ARTICLE SIX
COVENANTS
SECTION 6.1. General Covenants.
The Authority covenants, warrants and agrees that, in accordance with and to the extent
required or permitted by law while the Parity Bonds are Outstanding:
A. Rates. The Authority will (a) subject to any restrictions in the Water Sales
Contracts, fix and maintain rates and collect charges for the facilities and services afforded by
the System which will provide revenues sufficient at all times (i) to pay all Operating Expenses;
(ii) to establish and maintain the Bond Fund; and (iii) 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 Pledged Revenues into the Revenue Fund.
B. Performance. The Authority will faithfully perform at all times any and all
covenants, undertakings, stipulations, and provisions contained in each Parity Bonds Resolution,
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 Resolutions. It will, at the times and in the manner prescribed, deposit or cause to be
deposited the amounts required to be deposited into the Bond Fund and the Reserve Fund. Any
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Holder of a Parity Bond may require the Authority, its officials and employees to carry out,
respect, or enforce the covenants and obligations of the Parity Bonds Resolutions 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 Authority, its officials and
employees.
C. Legal Authority. The Authority is a duly created and eXIstmg political
subdivision of the State of Texas and is duly authorized under the laws of the State of Texas to
create and issue the Parity Bonds. It has the lawful power to pledge the Pledge Revenues
supporting the Bonds and has lawfully exercised said power under the Constitution and laws of
the State of Texas, including powers existing under the Act. The Bonds issued hereunder shall be
ratably secured by Pledged Revenues, in such manner that one Bond shall have no preference
over any other Bond. All action on the part of the Authority for the creation and issuance of the
Bonds has been duly and effectively taken. Bonds in the hands of the Holders thereof are and
will be valid and enforceable special obligations of the Authority in accordance with their terms.
D. Title. The Authority has or will obtain lawful title to the lands, buildings,
structures and facilities constituting the System. It will defend the title to all of the aforesaid
lands, buildings, structures and facilities, and every part thereof, for the benefit of the Holders of
the Parity Bonds, against the claims and demands of all Persons.
E. Liens. The Authority 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. It will not create or
suffer to be created any mechanic's, laborer's, materialman's or other lien or charge with 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 Authority.
F. Operation of System: No Free Service. The Authority 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
Authority 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 such Person out of funds from sources other than the Pledged
Revenues of the System, unless made from surplus Net Revenues.
G. Further Encumbrance. The rents, revenues and income of the system have not in
any manner been pledged to the payment of any debt or obligations of the Authority or of the
System and it shall not sell or encumber the Pledged Revenues in any manner, except as
permitted in the Parity Bonds Resolutions in connection with Additional Bonds, unless said
encumbrance is made junior and subordinate in all respects to the liens, pledges, covenants and
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agreements of the Parity Bonds Resolutions. The right of the Authority to issue revenue bonds
payable from a subordinate lien on the surplus Net Revenues is specifically recognized and
retained.
H. Insurance. The Board shall cause to be insured for such parts of the System as
would usually be insured by corporations operating like properties, with a responsible insurance
company or companies, against risks, accidents or casualties against which and to the extent
insurance is usually carried by corporations operating like properties, including, to the extent
reasonably attainable, fire and extended coverage insurance, insurance against damage by floods,
and use and occupancy insurance. Public liability and property damage insurance shall also be
carried unless legal counsel for the Board gives a written opinion to the effect that the Authority
and the Board are not liable for claims which would be protected by such insurance. All
insurance premiums shall be paid as an Operating Expense. At any time while any contractor
engaged in construction work shall be fully responsible therefore, the Board shall not be required
to carry insurance on the work being constructed if the contractor is required to carry appropriate
insurance. All such policies shall be open to the inspection of the Bondholders and their
representatives at all reasonable times. Upon the happening of any loss or damage covered by
insurance from one or more of said causes, the Board shall make due proof of loss and shall do
all things necessary or desirable to cause the insurance companies to make payment in fully
directly to the Board. The proceeds of insurance covering such property, together with any other
funds necessary and available for such purpose, shall be used forthwith by the Board for
repairing the property damaged or replacing the property destroyed; provided, however, that if
said insurance proceeds and other funds are insufficient for such purpose, then said insurance
proceeds pertaining to the System shall be deposited in a special and separate trust fund, at an
official depository of the Authority, to be designated the Insurance Account. The Insurance
Account shall be held until such time as other funds become available which, together with the
funds on deposit in the Insurance Account, will be sufficient to make the repairs or replacements
originally required.
The annual audit hereinafter required may contain a section commenting on whether or
not the Board has complied with the requirements of this Section with respect to the maintenance
of insurance, and shall state whether or not all insurance premiums upon the insurance policies to
which reference is made have been paid.
1. Records. The Board shall keep proper books of record and account in which full,
true, proper and correct entries will be made of all dealings, activities and transactions relating to
the System, the Pledged Revenues, and the funds created pursuant to this Resolution, and all
books, documents and vouchers relating thereto shall at all reasonable times be made available
for inspection upon request of any Bondholder or customer of the Authority. To the extent
consistent with the provisions of this Resolution, the Board shall keep its books and records in a
manner conforming to standard accounting practices usually would be followed by private
corporations owning and operating a system similar to the System, with appropriate recognition
being given to essential differences between municipal and corporate accounting practices.
1. Audits. After the close of each fiscal year, an audit shall be made of the books
and accounts relating to the System and the Pledged Revenues by an Accountant. The audit shall
include a schedule of the deposits made to the various funds created by this Resolution. The
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HOU3003369.!
annual audit reports shall be open to the inspection of the Bondholders and their agents and
representatives at all reasonable times.
K. Governmental Agencies. The Authority will comply with all of the terms and
conditions of any and all franchises, permits and authorizations applicable to or necessary with
respect to the System and which have been obtained from any governmental agency. The Board
has or will obtain and keep in full force and effect all franchises, permits authorizations and other
requirements applicable to or necessary with respect to the acquisition, construction, equipment,
operation and maintenance of the System.
L. No Competition. The Authority will not operate, or grant any franchise or permit
for 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 Authority wi11 prohibit any such
competing facilities.
SECTION 6.2. Covenants to Maintain Tax Exempt Status.
The Authority intends that the interest on the Bonds shall be excludable from gross
income of the owners thereof for federal income tax purposes pursuant to Sections 103 and 141
through 150 of the Internal Revenue Code of 1986, as amended, (the "Code") and all applicable
temporary, proposed and final regulations (the "Regulations") and procedures promulgated
thereunder and applicable to the Bonds. For this purpose, the Authority covenants that it wi11
monitor and control the receipt, investment, expenditure and use of all gross proceeds of the
Bonds (including all property, the acquisition, construction or improvement of which is to be
financed directly or indirectly with the proceeds of the Bonds) and take or omit to take such
other and further actions as may be required by Sections 103 and 141 through 150 of the Code
and the Regulations to cause the interest on the Bonds to be and remain excludable from the
gross income, as defined in Section 61 of the Code, of the owners of the Bonds for federal
income tax purposes. Without limiting the generality of the foregoing, the Authority shall
comply with each of the following covenants:
A. The Authority shall not use, permit the use of or omit to use Gross Proceeds or
any other amounts (or any property the acquisition, construction or improvement of which is to
be financed directly or indirectly with Gross Proceeds) in a manner which, if made or omitted,
respectively, would cause the interest on any Bond to become includable in the gross income, as
defined in Section 61 of the Code, of the owner thereof for federal income tax purposes. Without
limiting the generality of the foregoing, unless and until the Authority shall have received a
written opinion of counsel nationally recognized in the field of municipal bond law to the effect
that failure to comply with such covenant wi11 not adversely affect the exemption from federal
income tax of the interest on any Bond, the Authority shall comply with each of the specific
covenants in this Section.
B. Except as permitted by Section 141 of the Code and the regulations and rulings
thereunder, the Authority shall, at all times prior to the last stated maturity of the Bonds,
(1) exclusively own, operate, and possess all property the acquisition,
construction, or improvement of which is to be financed directly or indirectly with Gross
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Proceeds of such series of the Bonds (including property financed with Gross Proceeds of
the Refunded Bonds or notes or bonds refunded by the Refunded Bonds and not use or
permit the use of such Gross Proceeds or any property acquired, constructed, or improved
with such Gross Proceeds in any activity carried on by any person or entity other than a
state or local government, unless such use is solely as a member of the general public, or
(2) not directly or indirectly impose or accept any charge or other payment for
use of Gross Proceeds of such series of the Bonds or any property the acquisition,
construction or improvement of which is to be financed directly or indirectly with such
Gross Proceeds (including property financed with Gross Proceeds of the Refunded Bonds
or notes or bonds refunded by the Refunded Bonds other than taxes of general application
and interest earned on investments acquired with such Gross Proceeds pending
application for their intended purposes.
C. Except to the extent permitted by Section 141 of the Code and the regulations and
rulings thereunder, the Authority shall not use Gross Proceeds of the Bonds to make or finance
loans to any person or entity other than a state or local government. For purposes of the
foregoing covenant, Gross Proceeds are considered to be "loaned" to a person or entity if (1)
property acquired, constructed or improved with Gross Proceeds (including property financed
with Gross Proceeds of the Refunded Bonds or notes or bonds refunded by the Refunded Bonds
is sold or leased to such person or entity in a transaction which creates a debt for federal income
tax purposes, (2) capacity in or service from such property is committed to such person or entity
under a take-or-pay, output, or similar contract or arrangement, or (3) indirect benefits, or
burdens and benefits of ownership, of such Gross Proceeds or such property are otherwise
transferred in a transaction which is the economic equivalent of a loan.
D. Except to the extent permitted by Section 148 of the Code and the regulations and
rulings thereunder, the Authority shall not, at any time prior to the earlier of the final stated
maturity or final payment of the Refunded Obligations, directly or indirectly invest Gross
Proceeds of such Bonds in any Investment (or use such Gross Proceeds to replace money so
invested), if as a result of such investment the Yield of all Investments allocated to such Gross
Proceeds whether then held or previously disposed of, exceeds the Yield on the Refunded Bonds.
E. Based on all of the facts and estimates now known or reasonably expected to be in
existence on the date the Bonds are delivered, the Authority reasonably expects that the proceeds
of the Bonds and the Refunded Bonds (to the extent any of such proceeds remain unexpended)
will not be used in a manner that would cause the Bonds or the Refunded Bonds or any portion
thereof to be "arbitrage bonds" within the meaning of Section 148 of the Code.
F. At all times while the Bonds are outstanding, the Authority will identify and
properly account for all amounts constituting gross proceeds of the Bonds in accordance with the
Regulations. The Authority will monitor the yield on the investments of the proceeds of the
Bonds and, to the extent required by the Code and the Regulations, will restrict the yield on such
investments to a yield which is not materially higher than the yield on the Bonds. To the extent
necessary to prevent the Bonds from constituting "arbitrage bonds," the Authority will make
such payments as are necessary to cause the yield on all yield-restricted nonpurpose investments
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HOU:3003369.1
allocable to the Bonds to be less than the yield that is materially higher than the yield on the
Bonds;
G. The Authority will not take any action or knowingly omit to take any action, if
taken or omitted, would cause the Bonds to be treated as "federally guaranteed" obligations for
purposes of Section 149(b) of the Code;
H. The Authority represents that not more than fifty percent (50%) of the proceeds of
any new money portion of the Bonds or any new money issue refunded by the Refunded Bonds
was invested in nonpurpose investments (as defined in Section 148(f)(b )(A) of the Code) having
a substantially guaranteed yield for four years or more within the meaning of Section
149(g)(3)(A)(ii) of the Code, and the Authority reasonably expected at the time each issue of the
Refunded Bonds was issued that at least eighty-five percent (85%) of the spendable proceeds of
the Bonds or the Refunded Bonds would be used to carry out the governmental purpose of such
Bonds within the corresponding three-year period beginning on the respective dates of the Bonds
or the Refunded Bonds.
I. The Authority will take all necessary steps to comply with the requirement that
certain amounts earned by the Authority on the investment of the gross proceeds of the Bonds, if
any, be rebated to the federal government. Specifically, the Authority will (i) maintain records
regarding the receipt, investment and expenditure of the gross proceeds of the Bonds as may be
required to calculate such excess arbitrage profits separately from records of amounts on deposit
in the funds and accounts of the Authority allocable to other obligations of the Authority or
moneys which do not represent gross proceeds of any obligations of the Authority and retain
such records for at least six years after the day on which the last outstanding Bond is discharged,
(ii) account for all gross proceeds under a reasonable, consistently applied method of accounting,
not employed as an artifice or device to avoid, in whole or in part, the requirements of Section
148 of the Code, including any specified method of accounting required by applicable
Regulations to be used for all or a portion of the gross proceeds, (iii) calculate, at such times as
are required by applicable Regulations, the amount of excess arbitrage profits, if any, earned
from the investment of the gross proceeds of the Bonds and (iv) timely pay, as required by
applicable Regulations, all amounts required to be rebated to the federal government. In addition,
the Authority will exercise reasonable diligence to assure that no errors are made in the
calculations required by the preceding sentence and, if such an error is made, to discover and
promptly correct such error within a reasonable amount of time thereafter, including payment to
the federal government of any delinquent amounts owed to it, including interest thereon and
penalty.
J. The Authority will not indirectly pay any amount otherwise payable to the federal
government pursuant to the foregoing requirements to any person other than the federal
government by entering into any investment arrangement with respect to the gross proceeds of
the Bonds that might result in a reduction in the amount required to be paid to the federal
government because such arrangement results in smaller profit or a larger loss than would have
resulted if such arrangement had been at arm's length and had the yield on the issue not been
relevant to either party
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K. The Authority will timely file or cause to be filed with the Secretary of the
Treasury of the United States the information required by Section 149( e) of the Code with
respect to the Bonds on such form and in such place as the Secretary may prescribe.
L. The Authority will not issue or use the Bonds as part of an "abusive arbitrage
device" (as defined in Section 1.148-10(a) of the Regulations). Without limiting the foregoing,
the Bonds are not and will not be a part of a transaction or series of transactions that attempts to
circumvent the provisions of Section 148 of the Code and the Regulations, by (i) enabling the
Authority to exploit the difference between tax-exempt and taxable interest rates to gain a
material financial advantage, or (ii) increasing the burden on the market for tax-exempt
obligations.
M. Proper officers of the Authority charged with the responsibility for issuing the
Bonds are hereby directed to make, execute and deliver certifications as to facts, estimates or
circumstances in existence as of the Issue Date and stating whether there are facts, estimates or
circumstances that would materially change the Authority's expectations. On or after the Issue
Date, the Authority will take such actions as are necessary and appropriate to assure the
continuous accuracy of the representations contained in such certificates.
N. The covenants and representations made or required by this Section are for the
benefit of the Bond holders and any subsequent Bond holder, and may be relied upon by the
Bond holder and any subsequent Bond holder and bond counsel to the Authority.
O. When used in this Section, the following terms have the following
meanmgs:
"Code" means the Internal Revenue Code of 1986, as amended by all legislation,
if any, enacted on or before the Issue Date.
"Computation Date" has the meaning stated m section 1.148-1 (b) of the
Regulations.
"Gross Proceeds" has the meaning stated in section 1.148-1 (b) of the Regulations.
"Investment" has the meaning stated in section 1.148-1 (b) of the
Regulations.
"Issue Date" for each series or sub-series of the Bonds or other obligations
of the Authority is the respective date on which such series or sub-series of the Bonds or other
obligations of the Authority is delivered against payment therefor.
"Net Sale Proceeds" has the meaning stated in section 1.148-1(b) of the
Regulations.
"N onpurpose Investment" has the meaning stated m section 1.148-1 (b) of the
Regulations.
"Proceeds" has the meaning stated in section 1.148-1 (b) of the Regulations.
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"Rebate Amount" has the meaning stated in section 1.148-3 of the Regulations.
"Regulations" means the temporary or final Income Tax Regulations applicable to
the Bonds issued pursuant to sections 141 through 150 of the Code. Any reference to a section of
the Regulations shall also refer to any successor provision to such section hereafter promulgated
by the Internal Revenue Service pursuant to sections 141 through 150 of the Code and applicable
to the Bonds.
"Yield" of
(1) any Investment shall be computed in accordance with section 1.148-5 of
the Regulations, and
(2) Bonds shall be computed In accordance with section 1.148-4 of the
Regulations.
In complying with the foregoing covenants, the Authority may rely upon an unqualified
opinion issued to the Authority by nationally recognized bond counsel that any action by the
Authority or reliance upon any interpretation of the Code or Regulations contained in such
opinion will not cause interest on the Bonds to be includable in gross income for federal income
tax purposes under existing law.
Notwithstanding any other provision of this Resolution, the Authority's representations
and obligations under the covenants and provisions of this Section 6.2 shall survive the
defeasance and discharge of the Bonds for as long as such matters are relevant to the exclusion
of interest on the Bonds from the gross income of the owners for federal income tax purposes.
SECTION 6.3. Qualified Tax-Exempt Obligations.
The Authority hereby designates the Bonds as "qualified tax-exempt obligations" as
defined in Section 265(b )(3) of the Code. With respect to such designation, the Authority
represents the following: (a) that during the calendar year 2010, the Authority (including all
entities which issue obligations on behalf of the Authority) has not designated nor will designate
obligations, which when aggregated with the Bonds, will result in more than $30,000,000 of
"qualified tax-exempt obligations" being issued and (b) that the Authority has examined its
financing needs for the calendar year 2010 and reasonably anticipates that the amount of bonds,
leases, loans or other obligations, together with the Bonds and any other tax-exempt obligations
heretofore issued by the Authority (plus those of all entities which issue obligations on behalf of
the Authority) during the calendar year 2010, when the higher of the face amount or the issue
price of each such tax-exempt obligation issued for the calendar year 2010 by the Authority is
taken into account, will not exceed $30,000,000.
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HOU3003369. ]
ARTICLE SEVEN
PLEDGE OF PLEDGED REVENUES; PARITY BONDS
SECTION 7.1. Pledge of Pledged Revenues.
In consideration of the purchase of the Bonds by the Bondholders, the sufficiency of
which is hereby acknowledged, the Authority does hereby pledge the Pledged Revenues and all
money and investments held for the credit of the Bond Fund and the Reserve Fund to the
payment of and security for the principal of (and premium, if any) and interest on the Bonds and
such other Parity Bonds as hereafter may be issued and the deposits to the Bond Fund and
Reserve Fund required hereby and by the Parity Bonds Resolutions, without priority of any
Parity Bond over any other Parity Bond, provided that the Authority reserves the right to make
such further inferior and subordinate pledges of the Net Revenues from time to time as it shall
elect. The pledge granted hereby shall constitute a lien on the Pledged Revenues and be valid
and binding without any physical delivery of such Pledged Revenues or further act by the
Authority, and the lien created hereby on the Pledged Revenues for the payment and security of
the Parity Bonds shall be prior in right and claim as to any other indebtedness, liability, or
obligation of the Authority or the System, except as provided in this Section.
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 Holders 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 by the Authority, the Participants, the State of Texas, or any
subdivision of any of them, or from any source whatsoever other than the Pledged Revenues.
The Authority has no taxing power. This Resolution shall not be construed as requiring the
Authority 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 Authority from doing so.
SECTION 7.2. Issuance of Additional Bonds.
In addition to inferior lien bonds permitted to be issued hereunder, the Authority
expressly reserves the right hereafter to issue Additional Bonds, and the Additional Bonds, when
issued, may be secured by and payable from a lien on and pledge of the Pledged Revenues in the
same manner and to the same extent as the outstanding Parity Bonds but subject to the remaining
provisions hereof, and the Bonds and the Additional Bonds may be in all respects of equal
dignity. The Additional Bonds may be issued to provide funds for Capital Acquisitions, Capital
Additions and Capital Improvements and for any lawful purpose. It is provided, however, that
no Additional Bonds shall be issued unless such Additional Bonds are made to mature on March
15 in each of the years in which they are scheduled to mature and the following requirements are
met:
A. General. The officer of the Authority then having primary responsibility for the
financial affairs of the Authority shall have executed a certificate stating that (1) to the best of his
knowledge and belief, the Authority is not then in default as to any covenant, obligation, or
agreement contained in any proceeding relating to any obligations of the Authority payable from
and secured by a lien on and pledge of the Pledged Revenues and (2) all payments into all funds
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HOU:3003369.!
or accounts created and established for the payment and security of all outstanding obligations
payable from and secured by a pledge of the Pledged Revenues have been made in full and that
the amounts on deposit in such funds are the amounts then required to be on deposit therein.
Such certificate shall be dated as of the date of such Additional Bonds.
B. Capital Acquisitions, Capital Improvements and any Lawful Purpose except
Capital Additions or refunding. No Additional Bonds will be issued for the purpose of financing
Capital Acquisitions, Capital Improvements or any other lawful purpose (except for Capital
Additional or for refunding, which are to be issued in accordance with the provisions of
paragraph C, D or E) unless and until the conditions precedent in paragraph A have been satisfied
and, in addition thereto, the Authority has secured a certificate or opinion of an Accountant to the
effect that, according to the books and records of the Authority, the Pledged Revenues for the
preceding fiscal year or any consecutive 12 month period ending within 120 days of the date of
such certificate or opinion equals or exceeds 125% of the Average Annual Principal and Interest
Requirements for the outstanding Parity Bonds and for the proposed Additional Bonds. In
making a determination of the Pledged Revenues, the Accountant may (i) take into consideration
a change in the rates and charged for services and facilities afforded by the System that became
effective at least 60 days prior to the last day of the period for which Pledged Revenues are
determined, and (ii) for purposes of satisfying the above Pledged Revenue test, make a pro forma
determination of the Pledged Revenues for the period of time covered by the certification or
opinion based on such change in rates and charges being in effect for the entire period covered
by the certificate or opinion. In addition, the revenues and expenses of any Capital Acquisition
may be added to the Pledged Revenues of the Authority for determinations made under this
paragraph.
C. Capital Additions - Initial Issue. Additional Bonds shall be issued for the purpose
of financing Capital Additions unless the conditions in paragraphs A and B above have been
satisfied or, in the alternative, the Authority shall have obtained:
(1) from the Engineer of Record a comprehensive report for each Capital
Addition to be financed, which report shall (a) contain (I) detailed estimates of the cost of
acquiring and constructing the Capital Addition, (II) the estimated date the acquisition
and construction of the Capital Addition will be completed and commercially operative,
and (III) a detailed analysis of the impact of the Capital Addition on the financial
operations of the System during the construction thereof and for at least five Years after
the date the Capital Addition becomes commercially operative, and (b) conclude that (I)
the Capital Addition will substantially increase the capacity, or is needed to replace
existing facilities, to meet current and projected demands for the service or product to be
provided thereby, and (II) the estimated cost of providing the service or product from the
Capital Addition will be reasonable in comparison with projected costs for furnishing
such service or product from other reasonably available sources; and
(2) a certificate of the Engineer of Record to the effect that, based on the
report prepared for each Capital Addition, the projected Pledged Revenues for each of the
five Years subsequent to the date the Capital Addition becomes commercially operative
(as estimated in such report) will be equal to at least 125% of the Average Annual
Principal and Interest Requirements for Parity Bonds then outstanding or incurred and all
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HOUJ003369.]
Parity Bonds estimated to be issued, if any, for all Capital Acquisitions, Capital
Improvements and Capital Additions then in progress or then being initiated during the
period from the date the first series of obligations for the Capital Additions is to be
delivered through the fifth Year subsequent to the date the Capital Addition is estimated
to become commercially operative.
The Board covenants that it will adopt on or before the closing date for the proposed Additional
Bonds and enforce any periodic rate increases described in the report of the Engineer of Record;
provided, however, that if such rate increases are not actually needed for any Year, the Board
may by subsequent resolution delay such increase until it becomes actually necessary to comply
with its covenants in this Section.
D. Capital Additions - Subsequent Issues. Once the initial Parity Bonds have been
delivered for a Capital Addition pursuant to paragraph C, the Authority may issue Additional
Bonds to finance the remaining costs of such Capital Addition in such amounts as may be
necessary to complete the acquisition and construction thereof and make the same commercially
operative without satisfaction of any condition precedent under paragraph B or C, but subject to
satisfaction of the following conditions precedent:
(1) The Board makes a forecast (the "Forecast") of the operations of the
System demonstrating the System's ability to pay all obligations payable from Pledged
Revenues to be outstanding after the issuance of the Parity Bonds then being issued for
the period (the "Forecast Period") of each ensuing Year through the fifth Year subsequent
to the latest estimated date such Capital Addition is expected to be commercially
operative; and
(2) The Engineer of Record reviews the Forecast and executes a certificate to
the effect that the Forecast is reasonable, and that based thereon (and such other factors
deemed to be relevant), the Pledged Revenues will be adequate for the Forecast Period to
pay all the obligations payable from the Pledged Revenues to be outstanding after the
issuance of the Parity Bonds then being issued.
E. Refunding Bonds. The Authority may issued refunding bonds to refund all or any
part of the outstanding Parity Bonds (pursuant to any law then available), upon such terms and
conditions as the Board may deem to be in the best interest of the Authority and its inhabitants,
and if less than all such outstanding Parity Bonds are refunded, the conditions precedent for the
issuance of Additional Bonds in paragraphs A and B shall be satisfied and the Accountant's
certificate or opinion required by paragraph B shall give effect to the issuance of the proposed
refunding bonds and shall not give effect to the obligations being refunded following their
cancellation or provision being made for their payment. No Accountant's certificate otherwise
required by paragraph B will be required for refunding bonds if, after giving effect to such
proposed refunding, there is no increase in debt service for any Year in which there will be debt
service on Parity Bonds outstanding both before and after such refunding and any such refunding
bond does not have a lien on Pledged Revenues superior to the obligation which it refunds.
F. Determination of Average Annual Principal and Interest Requirements. With
respect to Additional Bonds anticipated and estimated to be issued or incurred, the Average
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Annual Principal and Interest Requirements therefor shall be those reasonably estimated and
computed by the officer of the Authority then having the primary responsibility for the financial
affairs of the Authority. In the preparation of the report required by paragraph C(l) above, the
Engineer of Record may rely on other experts or professionals, including those in the
employment of the Authority, provided such reports disclose the extent of such reliance and
conclude that it is reasonably to so rely. In connection with the issuance of Additional Bonds for
Capital Additions, the certificate of the Authority's officer and the Engineer of Record, together
with the appropriate report for the initial issue and the Forecast for a subsequent issue, shall be
conclusive evidence and the only evidence required to show compliance with the provisions and
requirements of this Section.
G. Combined Issues. Parity Bonds for Capital Additions may be combined in a
single issue with Parity Bonds for Capital Acquisitions or Capital Improvements, or for any
lawful purpose, provided the conditions precedent set fort in paragraphs B through E are
complied with as the same relate to the appropriate purpose.
H. Reserve Fund. The Authority shall increase the Reserve Fund for such Additional
Bonds by (a) providing cash from the proceeds of the sale of the Additional Bonds or any other
lawfully available source, (b) a surety bond in lieu thereof, (c) a combination of cash and a surety
bond, or (d) making equal monthly installment payments to the Reserve Fund over the 24-month
period following the issuance of such Additional Bonds, all as the Authority deems reasonable
and appropriate; provided, however, that (I) the sum of the amount of any such cash, surety bond
and monthly installment payments shall be not less than the Reserve Requirement; (II) any such
surety bond provided in lieu of cash shall be issued by an insurance company or association of
companies whose insured obligations are rated by a nationally recognized rating agency in its
highest rating category; and (III) any such surety bond may be written or amended to provide
coverage no only for such Additional Bonds, but also pro rata for the Parity Bonds then
outstanding, provided any cash 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
Authority'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.
I. Subordinate Obligations. The Authority may, at any time and from time to time,
for any lawful purpose, issue obligations the principal of and redemption premium, if any, and
interest on which are payable from and secured by a pledge of and lien on the Pledged Revenues
junior and subordinate to the lien and pledge created hereby for the security of the Parity Bonds,
the payments required to be made hereunder into the Interest and Sinking Fund and the Reserve
Fund; provided, however, that any such pledge and lien securing such subordinate obligations
shall be, and shall be expressed to be, subordinate in all respects to the pledge of and lien on the
Pledged Revenues as security for the Parity Bonds.
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ARTICLE EIGHT
DEFEASANCE
SECTION 8.1. Defeasance.
The Authority may defease the provisions of this Resolution and discharge its obligations
to the Holders of any or all of the Bonds to pay the principal of and interest thereon in any
manner now or hereafter permitted by law, including by depositing with the Paying
Agent/Registrar or with the Comptroller of Public Accounts of the State of Texas either:
A. cash in an amount equal to the principal amount of such Bonds plus interest
thereon to the date of maturity; or
B. pursuant to an escrow or trust agreement, cash and/or Defeasance Obligations,
which may be in book-entry form, and the principal of and interest on which will, when due or
redeemable at the option of the holder, without further investment or reinvestment of either the
principal amount thereof or the interest earnings thereon, provide money in an amount which,
together with other moneys, if any, held in such escrow at the same time and available for such
purpose, shall be sufficient to provide for the timely payment of the principal of and interest
thereon to the date of maturity.
Upon such deposit, such Bonds shall no longer be regarded to be Outstanding or unpaid. Any
surplus amounts not required to accomplish such defeasance shall be returned to the Authority.
ARTICLE NINE
SALE AND ISSUANCE OF BONDS; OTHER COVENANTS
SECTION 9.1. Sale of the Bonds.
The sale of the Bonds to (the "Purchaser") at a price of the par value
thereof, plus a cash premium of $ plus accrued interest on the Bonds, is hereby
approved, and delivery of the Bonds to the Purchaser shall be made upon payment therefor in
accordance with the terms of sale and the terms and conditions of the Purchaser's bid, attached
hereto as Exhibit C. It is hereby officially found, determined and declared that the Purchaser is
the highest bidder for the Bonds as a result of invitations for competitive bids. It is further
officially found, determined and declared that the Bonds have been sold at public sale to the
bidder offering the lowest interest cost, which is hereby determined to be a net effective interest
rate of %, after receiving sealed bids pursuant to an Official Notice of Sale and
Preliminary Official Statement prepared and distributed in connection with the sale of the Bonds.
The President, Vice President and Secretary of the Authority, or any of them, are hereby
authorized and directed to furnish such information, execute such instruments, and take such
action as is necessary to comply with the terms, conditions, and agreements specified in the
Official Notice of Sale or the Purchaser's Bid or to effect issuance of the Bonds.
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SECTION 9.2. Official Statement.
The Authority hereby ratifies distribution and use of the Preliminary Official Statement,
dated March _, 2010, and the Official Notice of Sale relating to the Bonds, in the form
submitted at the meeting at which this Resolution is adopted in all respects for the purposes
intended.
The Authority hereby approves and authorizes distribution of the Official Statement,
dated the date hereof, substantially in the form of such Preliminary Official Statement, but
completed and modified to reflect the terms of sale of the Bonds and such other changes as the
President shall approve. The President and Secretary are authorized and directed to execute and
deliver for and on behalf of the Authority sufficient copies of such Official Statement in final
form. Such Official Statement in the form and content manually executed by said officials of the
Authority shall be deemed approved by the Board and constitute the Official Statement duly
authorized for distribution.
SECTION 9.3. Control and Custody of the Bonds.
Initially one Bond in the aggregate principal amount of the Bonds in the name of the
Purchaser or their designee shall be executed and submitted to the Attorney General of Texas for
approval and thereupon certified by the Comptroller of Public Accounts of the State of Texas by
manual signature of a Bond Clerk in such office. At any time thereafter the Authority may
deliver such Bond to the Paying AgentlRegistrar for transfer or exchange, accompanied by
instructions from the Purchaser or their designee designating the Persons, maturities, and
principal amounts to and in which such Bonds are to be transferred and the addresses of such
Persons, and the Paying Agent/Registrar shall thereupon, within not more than three business
days, authenticate and deliver such Bonds upon authorization of the Authority as provided in
such instructions.
The President shall be and is hereby authorized to take and have charge of all necessary
orders and records pending investigation by the Attorney General of the State of Texas, and shall
take and have charge and control of the Bonds pending their approval by the Attorney General,
their registration by the Comptroller of Public Accounts, and their registration with and initial
exchange or transfer by the Paying Agent/Registrar.
The President, Vice President and the Secretary of the Authority, or any of them, are
hereby authorized and directed to furnish and execute such documents relating to the Authority
and its financial affairs as may be necessary for the issuance of the Bonds, their approval by the
Attorney General, and their registration by the Comptroller of Public Accounts and, together
with the financial advisor and bond counsel to the Authority and the Paying Agent/Registrar,
make the necessary arrangements for the initial delivery of the initial Bond and the initial
exchange thereof for the Definitive Bonds.
SECTION 9.4. Application of Proceeds of Bonds.
Proceeds from the sale of the Bonds shall be applied as follows:
A. Accrued interest shall be deposited into the Bond Fund;
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B. A portion of the proceeds shall be deposited with the paying agent for the
Refunded Bonds for the purpose of refunding and defeasing the Refunded Bonds;
C. A portion of the proceeds shall be applied to pay expenses arising in connection
with the issuance of the Bonds and the refunding of the Refunded Bonds; and
D. Any proceeds remaining after making all such deposits and payments shall be
deposited to the Bond Fund.
SECTION 9.5. Bond Insurance.
The Authority hereby acknowledges that the Purchaser's bid is contingent upon the
issuance of a policy of a bond insurance policy from the Bond Insurer insuring the timely
payment of principal of and interest on the Bonds. The terms and conditions of the bond
insurance policy, as set out in Exhibit E hereto, are incorporated herein for all purposes for so
long as such policy remains in effect. Such bond insurance policy is to be obtained at the
Purchaser's expense. The appropriate officials and representatives of the Authority are hereby
authorized and directed to execute such documents and certificates and to do any and all things
necessary or desirable to obtain such insurance, and the printing on the Bonds of an appropriate
legend or statement regarding such insurance, as provided by the Bond Insurer, is hereby
approved.
SECTION 9.6. Continuing Disclosure Undertaking.
A. Annual Reports. The Authority shall enter into a continuing disclosure agreement
with each of the Participants. The Authority also covenants to provide annually to the MSRB,
within six months after the end of each fiscal year, annual financial statements, being the
financial statements of the Authority included in Appendix B of the Official Statement, but for
the most recently concluded fiscal year of the Authority, and financial information and operating
data with respect to the Authority of the general type included in the final Official Statement
authorized by Section 8.2 hereof, being the information described in Exhibit 0 hereto. Any
financial statements so to be provided shall be (1) prepared in accordance with the accounting
principles described in Appendix B thereto and (2) audited, if the Authority commissions an
audit of such statements and the audit is completed within the period during which they must be
provided. If audited financial statements are not so provided, then the Authority shall provide
audited financial statements for the applicable fiscal year to the MSRB, when and if audited
financial statements become available but if such audited financial statements are unavailable,
the Authority will provide such financial statements on an unaudited basis within the above-
described six-month period.
If the Authority changes its fiscal year, it will notify the MSRB of the change (and ofthe
date of the new fiscal year end) prior to the next date by which the Authority otherwise would be
required to provide financial information and operating data pursuant to this Section.
The financial information and operating data to be provided pursuant to this Section may
be set forth in full in one or more documents or may be included by specific reference to any
document (including an official statement or other offering document, if it is available from the
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MSRB) that theretofore has been provided to the MSRB or filed with the SEC, or may be
provided in any other manner consistent with the Rule.
B. Material Event Notices. The Authority shall notify the MSRB, in a timely
manner, of any of the following events with respect to the Bonds, if such event is material within
the meaning of the federal securities laws:
(1) Principal and interest payment delinquencies;
(2) Non-payment related defaults;
(3) Unscheduled draws on debt servIce reserves reflecting financial
difficulties;
(4) Unscheduled draws on credit enhancements reflecting financial
difficulties;
(5) Substitution of credit or liquidity providers, or their failure to perform;
(6) Adverse tax opinions or events affecting the tax-exempt status of the
Bonds;
(7) Modifications to rights of holders of the Bonds;
(8) Bond calls;
(9) Defeasances;
(10) Release, substitution, or sale of property securing repayment ofthe Bonds;
and
(11) Rating changes.
The Authority shall notify the MSRB, in a timely manner, of any failure by the Authority
to provide financial information or operating data in accordance with this Section by the time
required by such Section.
C. Limitations Disclaimers and Amendments. The Authority shall be obligated to
observe and perform the covenants specified in this Section for so long as, but only for so long
as, the Authority remains an "obligated person" with respect to the Bonds within the meaning of
the Rule, except that the Authority in any event will give the notice required by this Section of
any Bond calls and defeasance that cause the Authority to be no longer such an "obligated
person."
The provisions of this Section are for the sole benefit of the registered Holders of the
Bonds, and nothing in this Section, express or implied, shall give any benefit or any legal or
equitable right, remedy, or claim hereunder to any other person. The Authority undertakes to
provide only the financial information, operating data, financial statements, and notices which it
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has expressly agreed to provide pursuant to this Section and does not hereby undertake to
provide any other information that may be relevant or material to a complete presentation of the
Authority's financial results, condition, or prospects or hereby undertake to update any
information provided in accordance with this Section or otherwise, except as expressly provided
herein. The Authority does not make any representation or warranty concerning such
information or its usefulness to a decision to invest in or sell Bonds at any future date.
UNDER NO CIRCUMSTANCES SHALL THE CITY BE LIABLE TO THE OWNER
OR BENEFICIAL OWNER OF ANY BOND OR ANY OTHER PERSON, IN CONTRACT OR
TORT, FOR DAMAGES RESULTING IN WHOLE OR IN PART FROM ANY BREACH BY
THE CITY, WHETHER NEGLIGENT OR WITHOUT FAULT ON ITS PART, OF ANY
COVENANT SPECIFIED IN THIS SECTION, BUT EVERY RIGHT AND REMEDY OF
ANY SUCH PERSON, IN CONTRACT OR TORT, FOR OR ON ACCOUNT OF ANY SUCH
BREACH SHALL BE LIMITED TO AN ACTION FOR MANDAMUS OR SPECIFIC
PERFORMANCE.
No default by the Authority in observing or performing its obligations under this Section
shall constitute a breach of or default under this Resolution for purposes of any other provision
of this Resolution.
Nothing in this Section is intended or shall act to disclaim, waive, or otherwise limit the
duties of the Authority under federal and state securities laws.
The provisions of this Section may be amended by the Authority from time to time to
adapt to changed circumstances that arise from a change in legal requirements, a change in law,
or a change in the identity, nature, status, or type of operations of the Authority, but only if (i)
the provisions of this Section, as so amended, would have permitted an underwriter to purchase
or sell Bonds in the primary offering of the Bonds in compliance with the Rule, taking into
account any amendments or interpretations of the Rule to the date of such amendment, as well as
such changed circumstances, and (ii) either (A) the registered Holders of a majority in aggregate
principal amount (or any greater amount required by any other provision of this Resolution that
authorizes such an amendment) of the Outstanding Bonds consent to such amendment or (B) a
person or entity that is unaffiliated with the Authority (such as nationally recognized bond
counsel) determines that such amendment will not materially impair the interests of the
registered Holders of the Bonds. If the Authority so amends the provisions of this Section, it
shall include with any amended financial information or operating data next provided in
accordance with this Section an explanation, in narrative form, of the reasons for the amendment
and of the impact of any change in the type of financial information or operating data so
provided. The Authority may also amend or repeal the provisions of this Section if the SEC
amends or repeals the applicable provisions of the Rule or a court of final jurisdiction enters
judgment that such provisions of the Rule are invalid, and the Authority also may amend the
provisions of this Section in its discretion in any other manner or circumstance, but in either case
only if and to the extent that the provisions of this sentence would not have prevented an
underwriter from lawfully purchasing or selling Bonds in the primary offering of the Bonds,
giving effect to (a) such provisions as so amended and (b) any amendments or interpretations of
the Rule.
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D. Definitions.
As used in this Section, the following terms have the meanings ascribed to such terms
below:
"MSRB" means the Municipal Securities Rulemaking Board.
"Rule" means SEC Rule 15c2-12, as amended from time to time.
"SEC' means the United States Securities and Exchange Commission.
SECTION 9.7.
Redemption Prior to Maturity of Refunded Bonds.
To minimize the Authority's costs of refunding, the Authority hereby authorizes and
directs that the Refunded Bonds shall be called for redemption prior to maturity in the amounts,
at the dates and at the redemption prices set forth in Schedule I hereto, and the President, Vice
President and Secretary of the Authority are hereby authorized and directed to take all necessary
and appropriate action to give or cause to be given a notice of redemption and/or a notice of
defeasance to the holders or paying agents, as appropriate, of the Refunded Bonds and, if
required, to publish such notices, all in the manner required by the resolution authorizing the
issuance of the Refunded Bonds.
SECTION 9.8. Legal Holidays.
In any case where the date interest accrues and becomes payable on the Bonds or
principal of the Bonds matures shall be in the City of Dallas, Texas, a Saturday, Sunday, legal
holiday or a day on which banking institutions are authorized by law to close, then payment of
interest or principal need not be made on such date, but payment may be made on the next
succeeding day which is not in the City of Dallas, Texas, a Saturday, Sunday, legal holiday or a
day on which banking institutions are authorized by law to close with the same force and effect
as if made on the date of Stated Maturity and no interest shall accrue for the period from the date
of Stated Maturity to the date of actual payment.
SECTION 9.9. No Recourse Against Authority Officials.
No recourse shall be had for the payment of principal of or interest on any Bonds or for
any claim based thereon or on this Resolution against any official of the Authority or any person
executing any Bonds.
SECTION 9.10. Further Proceedings.
The President, Vice President and Secretary and other appropriate officials of the
Authority are hereby authorized and directed to do any and all things necessary and/or
convenient to carry out the terms of this Resolution. The President, Vice President and Secretary
and other appropriate officials of the Authority are each hereby authorized to execute, attest and
impress the Authority's seal to such other agreements, assignments, bonds, certificates, contracts,
documents, licenses, instruments, releases, financing statements, letters of instruction, notices of
acceptance, notices of final payment, written requests and other documents, and to take all
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HOU:3003369.1
actions and to do all things whether or not mentioned herein, as may be necessary or convenient
to carry out or assist in carrying out the purposes of this Resolution and the Bonds.
SECTION 9.11. Power to Revise Form of Documents.
Notwithstanding any other provision of this Resolution, the President, Vice President and
Secretary and other appropriate officials of the Authority are each hereby authorized to make or
approve such revisions, additions, deletions and variations in the form of the documents attached
hereto as exhibits as, in the judgment of the President, Vice President and Secretary and other
appropriate officials of the Authority, and in the opinion of Bond Counsel to the Authority, as
may be necessary or convenient to carry out or assist in carrying out the purposes of this
Resolution, the Preliminary Official Statement, and the final Official Statement; provided,
however, that any changes to such documents resulting in substantive amendments to the terms
and conditions of the Bonds or such documents shall be subject to the prior approval of the
Board.
SECTION 9.12. Incorporation of Findings and Determinations.
The findings and determinations of the Board contained in the preamble hereof are
hereby incorporated by reference and made a part of this Resolution for all purposes as if the
same were restated in full in this Section.
SECTION 9.13. Severability.
If any provision of this Resolution or the application thereof to any circumstance shall be
held to be invalid, the remainder of this Resolution and the application thereof to other
circumstances shall nevertheless be valid, and the Board hereby declares that this Resolution
would have been enacted without such invalid provision.
SECTION 9.14. Public Meeting.
It is officially found, determined, and declared that the meeting at which this Resolution
is adopted was open to the public and public notice of the time, place, and subject matter of the
public business to be considered at such meeting, including this Resolution, was given, all as
required by, the Texas Government Code, Chapter 551, as amended.
SECTION 9.15. Effective Date.
This Resolution shall be in force and effect from and after its passage on the date shown
below.
SECTION 9.16. Engagement of Bond Counsel.
The engagement letter of Andrews Kurth LLP, Bond Counsel, attached hereto as
Exhibit F, is hereby approved.
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HOU:3003369. ]
PASSED AND ADOPTED this 14th day of April, 2010.
LA PORTE AREA WATER AUTHORITY
ATTEST:
President
Secretary
(Authority Seal)
EXHIBITS:
A - Form of Bond
B - Paying AgentlRegistrar Agreement
C - Winning Bid
D - Description of Annual Financial Information and Operating Data
E - Financial Guaranty Agreement
F - Engagement Letter of Bond Counsel
S-1
HOU:3003369. ]
SCHEDULE I
REFUNDED BONDS
Maturity Redemption
Series (March 15) Principal Amount Date Price
Contract Revenue 2011 $550,000 05/17/2010 100%
Refunding Bonds, 2012 580,000 05/17/2010 100
Series 1998 2013 615,000 05/17/2010 100
2014 640,000 05/17/2010 100
2015 670,000 05/17/2010 100
2016 705,000 05/17/2010 100
2017 320,000 05/17/2010 100
S-l
HOU3003369.1
EXHIBIT A
FORM OF BOND
NUMBER
R_1
REGISTERED
PRINCIPAL AMOUNT
$
REGISTERED
UNITED STATES OF AMERICA
STATE OF TEXAS
INTEREST RA TE:2
LA PORTE AREA WATER AUTHORITY
CONTRACT REVENUE REFUNDING BOND
SERIES 2010
MATURITYDATE:2 CUSIPNO.:2
DATED DATE:
May 1,2010
REGISTERED OWNER:
PRINCIPAL AMOUNT:
THE LA PORTE AREA WATER AUTHORITY, a conservation and reclamation district
of the State of Texas (the "Authority"), for value received, hereby promises to pay to the
Registered Owner identified above or its registered assigns, on the maturity date specified above,
upon presentation and surrender of this Bond at the principal corporate trust office of The Bank
of New York Mellon Trust Company, National Association, Dallas, Texas, or its successor (the
"Paying Agent/Registrar"), the principal amount identified above, payable in any coin or
currency of the United States of America which on the date of payment of such principal is legal
tender for the payment of debts due to the United States of America, and to pay interest thereon
at the rate shown above, calculated on a basis of a 360-day year composed of twelve 30-day
months, from the later of the Dated Date identified above or the most recent interest payment
date to which interest has been paid or duly provided for.3
1 Initial Bond shall be numbered T-l.
2 To be omitted from initial Bond.
3 The first sentence of the initial Bond shall read as follows:
"THE LA PORTE AREA WATER AUTHORITY, a conservation and reclamation district of the
State of Texas (the "Authority"), for value received, hereby promises to pay to the Registered Owner
identified above or its registered assigns, on March 15 of each of the years and in the principal amounts set
forth in the following schedule: [Insert information regarding years of maturity, principal amounts and
interest rates from Section 2.1 of the Resolution] upon presentation and surrender of this Bond at the
principal corporate trust office of The Bank of New York Mellon Trust Company, National Association,
Dallas, Texas, or its successor (the "Paying AgentlRegistrar"), payable in any coin or currency of the
United States of America which on the date of payment of such principal is legal tender for the payment of
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HOU 3003369.1
The principal of this Bond is payable at corporate trust office of the Paying
Agent/Registrar, upon presentation and surrender of this Bond. Interest on this Bond is payable
on September 15,2010, and each March 15 and September 15 thereafter until maturity (each an
"Interest Payment Date") of this Bond, by check sent by United States mail, first class, postage
prepaid, by the Paying Agent/Registrar to the Person in whose name this Bond is registered at
the close of business on the Regular Record Date, which shall be the first day (whether or not a
business day) of the calendar month in which such Interest Payment Date occurs. Any accrued
interest payable at maturity shall be paid upon presentation and surrender of this Bond at the
office of the Paying Agent/Registrar.
Any such interest not so punctually paid or duly provided for shall forthwith cease to be
payable to the Registered Owner on such Regular Record Date, and shall be paid to the Person in
whose name this Bond is registered at the close of business on a Special Record Date for the
payment of such Defaulted Interest to be fixed by the Paying Agent/Registrar, notice whereof
being given to Bondholders not less than 10 days prior to such Special Record Date. All such
interest shall be payable at the principal office of the Paying AgentlRegistrar, and shall be paid
by check or draft mailed to such Registered Owner at the address of such Registered Owner as
the same appears on the Bond Register of the Authority kept by the Paying Agent/Registrar or in
accordance with other customary arrangements acceptable to the Paying Agent/Registrar made
by the Registered Owner. All payments hereon shall be made in such coin or currency of the
United States of America as at the time of payment is legal tender for payment of public and
private debts.
In any case where the date interest accrues and becomes payable on the Bonds or
principal of the Bonds matures shall be in the City of Dallas, Texas, a Saturday, Sunday, legal
holiday or a day on which banking institutions are authorized by law to close, then payment of
interest or principal need not be made on such date, but payment may be made on the next
succeeding day which is not in the City of Dallas, Texas, a Saturday, Sunday, legal holiday or a
day on which banking institutions are authorized by law to close with the same force and effect
as if made on the due date and no interest shall accrue for the period from such due date to the
date of actual payment.
This Bond is one of the series specified in its title issued in the aggregate principal
amount of $[4,070,000] (herein referred to as the "Bonds") pursuant to a Resolution adopted by
the Board of Directors of the Authority on April 14, 2010 (herein referred to as the
"Resolution"), for the purposes of providing funds for the refunding and defeasance of certin of
the Authority's outstanding obligations (the "Refunded Bonds"), and paying costs of issuing the
Bonds and refunding the Refunded bonds, under and in strict conformity with the Constitution
and laws of the State of Texas, including particularly (but not by way of limitation)
Chapter 1207, Texas Government Code, as amended.
This Bond is not subject to optional or mandatory redemption prior to maturity.
debts due to the United States of America, and to pay interest thereon at the rates shown above, calculated
on a basis ofa 360-day year composed of twelve 30-day months, from the later of the Dated Date identified
above or the most recent interest payment date to which interest has been paid or duly provided for."
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HOU:3003369.1
The Bonds are special, limited obligations of the Authority, payable solely from and to
the extent of, and equally and ratably secured (together with such other parity revenue
obligations as are now outstanding or hereafter may be issued by the Authority in accordance
with the provisions of the Resolution) by a pledge of the Pledged Revenues (as defined in the
Resolution) of the waterworks system (the "System") of the Authority. The Bonds do not
constitute a legal or equitable pledge of, charge against, or lien or encumbrance upon the System
or any other property of the Authority, except the Pledged Revenues. The Holder hereof shall
never have the right to demand payment of this obligation out of any funds raised or to be raised
by taxation or otherwise have any recourse against the Authority in respect thereof except as to
such Pledged Revenues. Notwithstanding any other provision hereof to the contrary, the limited
obligation of the Authority to make money available to pay this Bond may be defeased by the
deposit of money and/or certain debt obligations sufficient for such purpose as provided in the
Resolution.
Reference is hereby made to the Resolution, a copy of which is on file in the principal
office of the Paying Agent/Registrar, for a description of the Pledged Revenues thereby pledged
and the nature and extent of the security for the Bonds, the terms and conditions for the issuance
of parity revenue obligations, and the respective rights thereunder of the Holders of the Bonds,
the Authority, and the Paying Agent/Registrar.
The Resolution permits, with certain exceptions as therein provided, the amendment
thereof and the modification of the rights and obligations of the Authority and the rights of the
Holders of the Bonds under the Resolution at any time by the Authority with the written consent
of [Assured Guaranty Corp.] and the consent of the Holders of a majority in aggregate principal
amount of the Bonds at the time Outstanding (as defined in the Resolution) affected by such
modification. Any such consent by the Holder of this Bond shall be conclusive and binding
upon such Holder and all future Holders of this Bond and of any Bond issued upon the transfer
hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent is made
upon this Bond.
As provided in the Resolution and subject to certain limitations therein set forth, this
Bond is transferable on the Bond Register of the Authority, upon surrender of this Bond for
transfer at the principal office of the Paying Agent/Registrar in Dallas, Texas, duly endorsed by,
or accompanied by a written instrument of transfer in form satisfactory to the Paying
Agent/Registrar duly executed by the registered Holder hereof or his attorney duly authorized in
writing, and thereupon one or more new fully registered Bonds of the same Stated Maturity, of
authorized denominations, and for the same aggregate principal amount will be issued to the
designated transferee or transferees.
The Bonds are issuable only as fully registered Bonds without coupons in the
denominations of $5,000 and any integral multiple thereof. Upon surrender of this Bond for
exchange at the principal office of the Paying Agent/Registrar in Dallas, Texas, and subject to
certain limitations set forth in the Resolution, one or more new fully registered Bonds of the
same Stated Maturity, of designated authorized denominations, and for the same aggregate
principal amount will be issued to the registered Holder of this Bond.
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HOU:3003369.1
No service charge shall be made for any transfer or exchange hereinabove referred to, but
the Paying Agent shall require payment of a sum sufficient to cover any tax or governmental
charge payable in connection therewith.
The Authority, the Paying Agent/Registrar, and any agent of either of them may treat the
Person in whose name this Bond is registered as the owner hereof for the purpose of receiving
payment as herein provided and for all other purposes, whether or not this Bond be overdue, and
none of the Authority, the Paying Agent/Registrar and any such agent shall be affected by notice
to the contrary.
It is hereby certified, recited, represented, and covenanted that the Authority is a duly
organized and legally existing conservation and reclamation district under and by virtue of the
Constitution and laws of the State of Texas; that the issuance of the Bonds is duly authorized by
law; that all acts, conditions, and things required to exist and be done precedent to and in the
issuance of the Bonds to render the same lawful and valid obligations of the Authority have been
properly done, have happened, and have been performed in regular and due time, form, and
manner as required by the Constitution and laws of the State of Texas and the Resolution; that
the Bonds do not exceed any constitutional or statutory limitation; and that due provision has
been made for the payment of the principal of and interest on the Bonds by a pledge of the
Pledged Revenues as aforestated. In case any provision in this Bond or any application thereof
to any Person or circumstance shall nevertheless be held to be invalid, the remaining provisions
of this Bond and the application thereof to other Persons and circumstances shall not in any way
be affected or impaired thereby. The terms and provisions of this Bond and the Resolution shall
be construed in accordance with and governed by the laws of the State of Texas and the United
States of America.
THIS BOND shall not be valid or obligatory for any purpose or be entitled to any benefit
under the Resolution unless this Bond is authenticated by the Paying Agent/Registrar by due
execution of the authentication certificate endorsed hereon.4
IN WITNESS WHEREOF, the Authority has caused this Bond to be duly executed under
its official seal.
4 In the initial Bond, this paragraph shall read:
"THIS BOND shall not be valid or obligatory for any purpose or be entitled to any benefit under the
Resolution unless this Bond is registered by the Comptroller of Public Accounts of the State of Texas by due
execution of the registration certificate endorsed hereon."
A-4
HOU:3003369.\
LA PORTE AREA WATER AUTHORITY
By
President
COUNTERSIGNED:
Secretary
(SEAL)
* * * *
A-S
HOU3003369.1
[Form of Registration Certificate of Comptroller of Public Accounts)
REGISTRA TION CERTIFICATE OF
COMPTROLLER OF PUBLIC ACCOUNTS
OFFICE OF THE COMPTROLLER S
OF PUBLIC ACCOUNTS S
S
THE STATE OF TEXAS S
REGISTER NO.
I HEREBY CERTIFY THAT there is on file and of record in my office a certificate to
the effect that the Attorney General of the State of Texas has examined and finds that this Bond
has been issued in conformity with the Constitution and laws of the State of Texas and is a valid
and binding special, limited obligation of the Authority of Pasadena, Texas, and further that this
Bond has been registered this day, by me.
WITNESS my signature and seal of office this
Comptroller of Public Accounts
of the State of Texas
(SEAL)
* * * *
[Form of Certificate of Authentication)
CERTIFICATE OF AUTHENTICATION
This is one of the Bonds referred to in the within-mentioned Resolution, a Predecessor
Bond for which has been approved by the Attorney General of the State of Texas and registered
by the Comptroller of Public Accounts of the State of Texas.
[Name of Paying Agent)
as Paying Agent
By
Authorized Signature
Date:
* * * *
A-6
HOU:3003369.1
[Form of Assignment]
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns, and transfers unto (Print
or typewrite name, address, and zip code of transferee:)
(Social Security or other identifying number:
)
the within Bond and all rights thereunder, and hereby irrevocably constitutes and appoints _
attorney to transfer the within Bond on the books kept for
registration thereof, with full power of substitution in the premises.
Dated:
Signature Guaranteed:
NOTICE: The signature(s) on this assignment
must correspond with the name(s) of the
registered owner(s) appearing on the face of
the within Bond in every particular.
The following abbreviations, when used in the inscription on the face of the within Bond
or above Assignment, 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 GIFT MIN ACT
Custodian
(Cust.) (Minor)
under Uniform Gifts to Minors Act
State
Additional abbreviations may also be used though not in the above list.
* * * *
[Form of Statement of Insurance]
[TO COME]
A-7
HOU:30033691
EXHIBIT B
PAYING AGENT/REGISTRAR AGREEMENT
HOU:3003369.\
EXHIBIT C
WINNING BID
HOU:3003369.1
EXHIBIT D
DESCRIPTION OF ANNUAL FINANCIAL INFORMATION AND OPERATING DATA
The following information is referred to in Section 9.6 of this Resolution.
Annual Financial Statements and Operating Data
The financial information and operating data with respect to the Authority to be
provided annually in accordance with such Section are as specified (and included in the
Appendix or under the headings of the Official Statement referred to) below:
1. The audited financial statements of the Authority, but for the most recently
concluded fiscal year, and, to the extent that such statements are not completed and
available, unaudited financial statements for such fiscal year.
2. The quantitative and financial information and operating data with respect
to the Authority of the general type included under the headings "INVESTMENT
AUTHORITY AND OBJECTIVES OF THE AUTHORITY - Current Investments,"
"THE AUTHORITY," "DEBT SERVICE SCHEDULE" and "SELECTED FINANCIAL
DA T A" and in Appendix B.
Accounting Principles
The accounting principles referred to in such Section are the accounting principles
described in the notes to the financial statements referred to in paragraph I above.
D-l
HOU :3003369.]
EXHIBIT E
FINANCIAL GUARANTY AGREEMENT
HOU:3003369. ]
EXHIBIT F
ENGAGEMENT LETTER OF BOND COUNSEL
HOU:3003369. ]
PAYING AGENT/REGISTRAR AGREEMENT
THIS PAYING AGENT/REGISTRAR AGREEMENT dated as of May 1,2010 (together
with any amendments or supplements hereto, the "Agreement"), is entered into by and between
the LA PORTE AREA WATER AUTHORITY (the "Issuer") and THE BANK OF NEW YORK
MELLON TRUST COMPANY, NATIONAL ASSOCIATION, as paying agent/registrar
(together with any successor in such capacity, the "Bank").
WITNESSETH:
WHEREAS, the Issuer has duly authorized and provided for the issuance of a series of
bonds entitled "La Porte Area Water Authority Contract Revenue Refunding Bonds, Series
2010" (the "Bonds"), to be issued as fully registered Bonds;
WHEREAS, all things necessary to make the Bonds the valid Bonds of the Issuer, in
accordance with their terms, will be done upon the issuance and delivery thereof;
WHEREAS, the Issuer and the Bank wish to provide the terms under which the Bank will
act as Paying Agent to pay the principal of and interest on the Bonds, in accordance with the
terms thereof, and under which the Bank will act as Registrar for the Bonds; and
WHEREAS, the Issuer and the Bank have duly authorized the execution and delivery of
this Agreement; and all things necessary to make this Agreement the valid agreement of the
parties, in accordance with its terms, have been done.
NOW, THEREFORE, it is mutually agreed as follows:
ARTICLE ONE
APPOINTMENT OF BANK AS
PA YING AGENT AND REGISTRAR
Section 1.1.
Appointment.
The Issuer hereby appoints the Bank to act as Paying Agent with respect to the Bonds, to
pay to the Registered Owners of the Bonds, in accordance with the terms and provisions of this
Agreement and the Resolution (defined herein), the principal of and interest on all or any of the
Bonds.
The Issuer hereby appoints the Bank as Registrar with respect to the Bonds. As Registrar
for the Bonds, the Bank shall keep and maintain for and on behalf of the Issuer books and
records as to the ownership of said Bonds and with respect to the transfer and exchange thereof
as provided herein and in the Resolution.
The Bank hereby accepts its appointment, and agrees to act as Paying Agent and
Registrar with respect to the Bonds.
HOU3010040.1
Section 1.2.
Compensation.
As compensation for the Bank's services as Paying agent/Registrar, the Issuer hereby
agrees to pay the Bank the fees and amounts set forth in Schedule A attached hereto. The Bank
reserves the right to amend the fee schedule at any time, provided the Bank shall have furnished
the Issuer with a written copy of such amended fee schedule at least 60 days prior to the date that
the new fees are to become effective.
ARTICLE TWO
DEFINITIONS
Section 2.1.
Definitions.
For all purposes of this Agreement, except as otherwise expressly provided or unless the
context otherwise requires:
"Bank" means The Bank of New York Mellon Trust Company, National Association, a
national banking association duly organized and existing under the laws of the United States of
America, and any successor thereto pursuant to Section 4.06 hereof.
"Bond" or "Bonds" means anyone or all of the "La Porte Area Water Authority Contract
Revenue Refunding Bonds, Series 2010" authorized by the Resolution.
"Issuer" means the La Porte Area Water Authority, a conservation and reclamation
district created and operating under the laws of the State of Texas.
"Resolution" means the resolution of the Issuer approved by its governing body on April
14, 2010, pursuant to which the Bonds are issued.
"Paying Agent" means the Bank when it is performing the function of paying agent.
"Person" means any individual, corporation, partnership, joint venture, associations, joint
stock company, trust, unincorporated organization or government or any agency or political
subdivision of a government or any entity whatsoever.
"Registered Owner" means the Person in whose name any Bond is registered in the books
of registration maintained by the Bank under this Agreement.
"Registrar" means the Bank when it is performing the function of registrar.
All other capitalized terms shall have the meanings assigned to them in the Resolution or
the recital paragraphs of this Agreement.
2
HOU3010040.1
ARTICLE THREE
DUTIES OF THE BANK
Section 3.1.
Initial Delivery of the Bonds.
The Bonds will be initially registered and delivered by the Bank to the purchaser
designated by the Issuer as set forth in the Resolution. If such purchaser delivers a written
request to the Bank not later than five business days prior to the date of initial delivery, the Bank
will, on the date of initial delivery, exchange the Bonds initially delivered for Bonds of
authorized denominations, registered in accordance with the instructions in such request and the
Resolution.
Section 3.2.
Duties of Paving Agent.
As Paying Agent, the Bank shall, provided adequate funds have been provided to it for
such purpose by or on behalf of the Issuer, timely pay on behalf of the Issuer the principal of and
interest on each Bond in accordance with the provisions of the Resolution.
Since the issue will be Depository Trust Company (DTC) eligible, the Paying Agent shall
comply with all eligibility requirements as outlined and agreed upon in the eligibility
questionnaire.
Section 3.3.
Duties of Registrar.
The Bank shall provide for the proper registration of the Bonds and the timely exchange,
replacement and registration of transfer of the Bonds in accordance with the provisions of the
Resolution. Any changes to Registered Owners for such exchange, replacement and registration
shall be made by the Bank only in accordance with the Resolution. The Bank will maintain the
books of registration in accordance with the Bank's general practices and procedures in effect
from time to time; provided, however, that the Bank agrees to comply with the terms of
SS 1203.021, 1203.022, and 1203.023 of the Texas Government Code, as amended.
Section 3.4.
Unauthenticated Bonds.
The Issuer shall provide an adequate inventory of unauthenticated Bonds to facilitate
transfers. The Bank covenants that it will maintain such unauthenticated Bonds in safekeeping
and will use reasonable care in maintaining such Bonds in safekeeping, which shall be not less
than the care it maintains for debt securities of other government entities or corporations for
which it serves as registrar, or which it maintains for its own bonds.
Section 3.5.
Reports.
Upon request of the Issuer, the Bank will provide to the Issuer reports, which will
describe in reasonable detail all transactions pertaining to the Bonds and the books of registration
for the period of time specified by the Issuer. The Issuer may also inspect and make copies of
3
HOU3010040.1
the information in the books of registration and such other documents related to the Bonds and in
the Bank's possession at any time the Bank is customarily open for business, provided that
reasonable time is allowed the Bank to provide an up-to-date listing or to convert the information
into written form.
The Bank will not release or disclose the content of the books of registration to any
person other than to, or at the written request of, an authorized officer or employee of the Issuer,
except upon receipt of a subpoena, court order or as otherwise required by law. Upon receipt of
a subpoena, court order or other lawful request, the Bank will notity the Issuer immediately so
that the Issuer may contest the subpoena, court order or other request if it so chooses.
Section 3.6.
Canceled Bonds.
All Bonds surrendered for payment, redemption, transfer, exchange or replacement, if
surrendered to the Bank, shall be promptly cancelled by it and, if surrendered to the Issuer, shall
be delivered to the Bank and, if not already cancelled, shall be promptly cancelled by the Bank.
The Issuer may at any time deliver to the Bank for cancellation any Bonds previously
authenticated and delivered which the Issuer may have acquired in any manner whatsoever. The
Bonds shall be treated in accordance with the Bank's retention policy.
Section 3.7.
Reliance on Documents, Etc.
(a) The Bank may conclusively rely, as to the truth of the statements and correctness
of the opinions expressed therein, on certificates or opinions furnished to the Bank by the Issuer.
(b) The Bank shall not be liable to the Issuer for actions taken under this Agreement
as long as it acts in good faith and exercises due diligence, reasonableness and care, as prescribed
by law, with regard to its duties hereunder.
(c) This Agreement is not intended to require the Bank to expend its own funds for
performance of any of its duties hereunder.
(d) The Bank may exercise any of the powers hereunder and perform any duties
hereunder either directly or by or through agents or attorneys.
Section 3.8.
Money Held by Bank.
Money held by the Bank hereunder shall be held in trust for the benefit of the Registered
Owners of the Bonds and the Bank shall have a fiduciary responsibility as to such funds.
The Bank shall be under no obligation to pay interest on any money received by it
hereunder.
All money deposited with the Bank hereunder shall be secured in the manner and to the
fullest extent required by law for the security of funds of the Issuer.
Any money deposited with the Bank for the payment of the principal of or interest on any
Bonds and remaining unclaimed by the Registered Owner after the expiration of three years from
4
HOU:3010040.1
the date such funds have become due and payable shall be reported and disposed of by the Bank
in accordance with the provisions of Texas law including, to the extent applicable, Title 6 of the
Texas Property Code, as amended. To the extent such provisions of the Property Code do not
apply to the funds, such funds shall be paid by the Bank to the Issuer upon receipt of a written
request therefor from the Issuer. The Bank shall have no liability to the Registered Owners of
the Bonds by virtue of actions taken in compliance with the foregoing provision.
Section 3.9.
Transfer of Funds at Closing.
The Bank is authorized to transfer funds relating to the closing and initial delivery of the
Bonds in the manner described in the closing memorandum or letter approved by the Issuer, as
prepared by the Issuer's financial advisor or other agent. The Bank may act on a facsimile
transmission of the closing memorandum or letter to be followed by an original of the closing
memorandum or letter signed by the financial advisor or the Issuer.
ARTICLE FOUR
MISCELLANEOUS PROVISIONS
Section 4.1.
May Own Bonds.
The Bank, in its individual or any other capacity, may become the owner or pledgee of
Bonds with the same rights it would have if it were not the Paying Agent and Registrar for the
Bonds.
Section 4.2.
Amendment.
This Agreement may be amended only by an agreement in writing signed by both of the
parties hereof.
Section 4.3.
Assignment.
This Agreement may not be assigned by either party without the prior written consent of
the other.
Section 4.4.
Notices.
Any request, demand, authorization, direction, notice, consent, waiver or other document
provided or permitted hereby to be given or furnished to the Issuer or the Bank shall be mailed or
delivered to the Issuer or the Bank, respectively, at the addresses shown herein, or such other
address as may have been given by one party to the other by 15 days' written notice.
Section 4.5.
Effect of Headings.
The Article and Section headings herein are for convenience only and shall not affect the
construction hereof.
5
HOU:3010040. ]
Section 4.6.
Successors and Assigns.
All covenants and agreements herein by the Issuer and the Bank shall bind their
successors and assigns, whether so expressed or not. This Agreement shall not be assigned by
the Bank without the prior written consent of the Issuer.
Any company into which the Bank may be merged or converted or with which it may be
consolidated or any company resulting from any merger, conversion or consolidation to which it
shall be a party or any company to which the Bank may sell or transfer all or substantially all of
its corporate trust business, provided such company shall be a national banking association or a
bank or trust company duly organized under the laws of any state of the United States and shall
be authorized by law to perform all the duties imposed upon it by this Agreement, shall be the
successor to the Bank without the execution or filing of any paper or the performance of any
further act. In case any Bond shall have been registered, but not delivered, by the Bank then in
office, any successor by merger, conversion, or consolidation to such authenticating Bank may
adopt such registration and deliver the Bond so registered with the same effect as if such
successor Bank had itself registered such Bonds.
Section 4.7.
Severability.
If any provision of this Agreement shall be invalid or unenforceable, the validity and
enforceability of the remaining provisions hereof shall not in any way be affected or impaired.
Section 4.8.
Benefits of Agreement.
Nothing herein, express or implied, shall give to any Person, other than the parties hereto
and their successors hereunder, any benefit or any legal or equitable right, remedy or claim
hereunder.
Section 4.9.
Resolution Govern Conflicts.
This Agreement and the Resolution constitute the entire agreement between the parties
hereto relative to the Bank acting as Paying Agent and Registrar and if any conflict exists
between this Agreement and the Resolution, the Resolution shall govern. The Bank agrees to be
bound by the terms of the Resolution with respect to the Bonds.
Section 4.10.
Term and Termination.
This Agreement shall be effective from and after its date and may be terminated for any
reason by the Issuer or the Bank at any time upon 60 days' written notice; provided, however,
that no such termination shall be effective until a successor has been appointed and has accepted
the duties of the Bank hereunder. In the event of early termination, regardless of circumstances,
the Bank shall deliver to the Issuer or its designee all funds, Bonds and all books and records
pertaining to the Bank's role as Paying Agent and Registrar with respect to the Bonds, including,
but not limited to, the books of registration.
6
HOU :30 1 0040.1
Section 4.11.
Governing Law.
This Agreement shall be construed in accordance with and shall be governed by the laws
of the State of Texas.
Section 4.12.
Interpleader.
The Issuer and the Bank agree that the Bank may seek adjudication of any adverse claim,
demand, or controversy over its person as well as funds on deposit hereunder, in either the
District Court of Harris County, Texas or the United States Federal District Court for the
Southern District of Texas, waive personal service of any process, and agree that service of
process by certified or registered mail, return receipt requested, to the address set forth herein
shall constitute adequate service. The Issuer and the Bank further agree that the Bank has the
right to file a Bill of Interpleader in any Texas court of competent jurisdiction, at the expense of
the Issuer, to determine the rights of any person claiming any interest hereunder.
Section 4.13.
Electronic Transmittals.
The Bank agrees to accept and act upon instructions or directions pursuant to this
Agreement sent by unsecured e-mail, facsimile transmission or other similar unsecured
electronic methods, provided, however, that the Authority shall provide to the Bank an
incumbency certificate listing designated persons authorized to provide such instructions, which
incumbency certificate shall be amended whenever a person is to be added or deleted from the
listing. If the Authority elects to give the Bank e-mail or facsimile instructions (or instructions by
a similar electronic method) and the Bank in its discretion elects to act upon such instructions,
the Bank's understanding of such instructions shall be deemed controlling. The Bank shall not be
liable for any losses, costs or expenses arising directly or indirectly from the Bank's reliance
upon and compliance with such instructions notwithstanding such instructions conflict or are
inconsistent with a subsequent written instruction. The Authority agrees to assume all risks
arising out of the use of such electronic methods to submit instructions and directions to the
Bank, including without limitation the risk of the Bank acting on unauthorized instructions, and
the risk or interception and misuse by third parties.
Section 4.14. Indemnification. To the extent permitted by law, the Issuer agrees to
indemnify the Bank for, and hold it harmless against, any loss, liability or expense incurred by
the Bank without negligence or bad faith on the Bank's part, arising out of or in connection with
its acceptance or administration of the Bank's duties hereunder, including the cost and expense
(including the Bank's counsel fees) of defending against any claim or liability in connection with
the exercise or performance of any of the Bank's power or duties under this
Agreement.
[Signature pages follow.)
7
HOU3010040.]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day
and year first above written.
LA PORTE AREA WATER AUTHORITY
By:
President, Board of Directors
ADDRESS: 604 West Fairmont Pkwy.
La Porte TX 77572
ATTEST:
Secretary, Board of Directors
(AUTHORITY SEAL)
S-l
HOU:3010040.1
THE BANK OF NEW YORK MELLON TRUST
COMPANY, NATIONAL ASSOCIATION
By:
Title:
ADDRESS: 2001 Bryan Street, 8th Floor
Dallas, Texas 75201
Attention: Corporate Trust Department
S-2
HOU:3010040.\
SCHEDULE A
FEE SCHEDULE
HOU:3010040.1
April 14, 2010
Board of Directors
La Porte Area Water Authority
604 West Fairmont Parkway
La Porte, Texas 77571
Re: Bonds Counsel Services
Dear Board of Directors:
Weare pleased to submit to you a proposed agreement for Andrews Kurth LLP
("Andrews Kurth") to serve as Bond Counsel with respect to bonds and other debt obligations
that the La Porte Area Water Authority (the "Authority") intends to issue. (Such bonds, notes
and obligations are collectively referred to in this letter as the "Bonds".) When approved by you,
this letter will become effective and will evidence an agreement between the Authority and
Andrews Kurth LLP, Houston, Texas.
Basic Services: As Bond Counsel, Andrews Kurth will prepare all required legal
proceedings and will perform certain other necessary legal work in connection with the
Authority's authorization, issuance and sale of each series of the Bonds. Our services as Bond
Counsel would include the following Basic Services, which we would carry out directly or in
concert with officials and staff of the Authority:
(1) Assistance, in consultation with Authority officials and staff and the Authority's
financial advisor, in the evaluation of legal matters related to financing innovations and
opportunities that may arise from time to time;
(2) Preparation of necessary resolutions, notices, Department of Justice submissions
and other legal documents necessary to call and conduct an election to authorize issuance of the
Bonds, if necessary;
(3) Preparation of the resolution authorizing issuance of each series of the Bonds (the
"Bond Resolution") and all other instruments which comprise the transcript of legal proceedings
pertaining to the authorization, issuance and sale of each such series;
(4) Assistance in the preparation of specified sections of the Preliminary Official
Statement and the Official Statement for each series of the Bonds, but only to the extent that such
portions (a) describe such series, the security therefor and their federal income tax status, (b)
summarize the Resolution authorizing their issuance and (c) outline our opinion, with the
understanding that Andrews Kurth will not be expected to independently verify other financial
data contained in the Official Statement;
HOU:3010050.1
Board of Directors
La Porte Area Water Authority
April 14, 2010
Page 2 of 4
(5) Attendance at meetings, to the extent required or requested by the Authority or the
Authority's financial advisor, to discuss the sizing, timing or sale of each series of the Bonds;
(6) Preparation and submission of transcripts of legal proceedings pertaining to the
issuance of each series of the Bonds to the Attorney General to obtain an approving opinion and
to obtain the registration of the Bonds by the Comptroller of Public Accounts;
(7) Review of certified proceedings and performance of such additional duties as are
necessary for the delivery, at the closing of each series of the Bonds, of an approving opinion,
based on facts and law existing as of its date, generally to the effect that such series has been
duly issued, executed and delivered in accordance with the Constitution and laws of the State of
Texas, that the Bonds of each series constitute valid and legally binding obligations of the
District as described in the Bond Resolution (subject to bankruptcy, insolvency, reorganization,
moratorium and other similar laws in effect from time to time relating to or affecting the
enforcement of rights of creditors of political subdivisions) and that interest on such series of the
Bonds is excludable from the gross income of the owners thereof for federal income tax purposes
under then existing law;
(8) Supervision of the printing of each series of the Bonds and the delivery thereof to
the purchasers;
(9) Prior to and in connection with the closing of each series of the Bonds, giving
advice to the Authority to enable appropriate officials to comply with the arbitrage requirements
of the Internal Revenue Code of 1986 as they affect the Bonds, including yield restrictions and
rebate requirements;
(10) Attendance at bond sale, signing, closing and all other meetings and conferences
as deemed necessary by the Board of Directors or General Manager;
(11) Preparation of Federal Tax Certificate and Federal Income Tax Form 8038-G; and
(12) At the closing of each series of the Bonds, delivery of an opinion regarding the
applicability of federal and Texas state securities laws to such series, the eligibility of the Bonds
for investment by various fiduciaries and other regulated investors in Texas and the validity and
enforceability of security agreements, indentures and other documents related to the Bonds and
the security therefor.
Additional Services: In addition to the foregoing Basic Services, as Bond Counsel,
Andrews Kurth is prepared to undertake the following Additional Services, as directed by the
Authority:
(1) Disclosure work or similar services (other than the preparation of certain sections
of the offering documents for the Bonds as described in paragraph (4) under Basic Services
HOU3010050.1
Board of Directors
La Porte Area Water Authority
April 14, 2010
Page 3 of 4
above) to assist the Authority in the preparation of such offering documents, on such basis and to
such extent as shall be directed by the Authority;
(2) Preparation of the "Blue Sky" surveys or securities registration services;
(3) In the case of a series of Bonds, or a portion thereof, that is issued to refund prior
bonds of the Authority, providing advice regarding federal income tax and other issues unique to
refunding transactions;
(4) Any other special services not ordinarily required in connection with the issuance
of obligations of the nature of the Bonds, including services rendered in connection with special
federal income tax issues, unusual issues arising in connection with the Authority's financial
reports or audits, any documentation or related services for credit or liquidity facilities or
enhancements or other special structuring techniques or devices to be employed in connection
with the issuance of any series of the Bonds;
(5) Attendance at rating agency presentations, investor meetings or other
presentations relating to the marketing of the Bonds and consultation with Authority officials,
staff and advisors and the Authority's financial advisor to develop such presentations;
(6) Any other service necessary to the planning, authorization, issuance, sale and
delivery of the Bonds, as may be appropriate; and
(7) After the closing of any series of the Bonds and upon specific request of the
Authority, providing assistance to the Authority concerning questions and issues that may arise
prior to the maturity of the Bonds.
Fees. Unless otherwise agreed to by the Authority and Andrews Kurth, for the Basic
Services performed hereunder in connection with the issuance and sale of Bonds, Andrews Kurth
will be paid a fee calculated on the basis of Andrews Kurth's then current standard rates for such
serVIces.
The fee for any Additional Services provided by Andrews Kurth, including such services
in connection with variable or adjustable rate financings, will be determined on an hourly rate
basis, applying rates then charged by this firm for the same or similar services performed by
attorneys and paralegals of similar experience for other clients and taking into consideration the
difficulty and complexity of the tasks involved and the time constraints imposed by the
Authority. The total fee for Additional Services prior to and in connection with the closing of
any series of Bonds will not exceed the amount that is agreed to in writing by the Authority.
Payment of all fees for services as Bond Counsel will be made after the issuance and
delivery of the series of the Bonds in connection with which such services are performed and
within 30 days after receipt by the Authority of an approved invoice therefor. Andrews Kurth
HOU:3010050.!
Board of Directors
La Porte Area Water Authority
April 14, 2010
Page 4 of 4
will be reimbursed for its reasonable and actual out-of-pocket expenses, such as the cost of
reproduction of documents, out of town travel, long-distance telephone, telegraph, telex and
similar expenses, deliveries, filing fees and all items paid for by Andrews Kurth on behalf of the
Authority, incurred in connection with the performance of all services hereunder.
Andrews Kurth represents many other governmental entities, companies and individuals.
It is possible that during the time that we are representing you, some of our present or future
clients will have disputes or transactions with you. You agree that we may continue to represent
or may undertake in the future to represent existing or new clients in any matter that is not
substantially related to our work for you even if the interests of such clients in those other
matters are directly adverse. We agree, however, that your prospective consent to conflicting
representation contained in the preceding sentence shall not apply in any instance where, as a
result of our representation of you, we have obtained proprietary or other confidential
information of a nonpublic nature, that, if known to such other client, could be used in any other
such other matter by such client to your material disadvantage.
Nothing herein shall be construed as creating any personal liability on the part of any
officer of the Authority, and subject to the foregoing paragraph this agreement may be
terminated by the Authority by giving 30 days' written notice to Andrews Kurth.
The term of this engagement shall be for a period of three years, commencing as of
January 1, 2010, and shall continue for two additional successive three year periods (for a
maximum possible engagement period of nine years), unless either party provides the other party
with written notification at least 30 days prior to the end of the then current term of this
engagement of that party's intention to terminate this engagement.
If this proposed agreement for the services of Andrews Kurth as Bond Counsel is
satisfactory, please evidence your acceptance and approval by executing three copies in the space
provided below.
Very truly yours,
James Hernandez
APPROVED:
LA PORTE AREA WATER AUTHORITY
By:
President, Board of Directors
HOU3010050.1