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88-033 ORD CERTIFICATE FOR ORDINANCE CERTIFICATE FOR ORDINANCE 88-033 , THE STATE OF TEXAS , COUNTY OF LAMAR . CITY OF PARIS We, the undersigned officers of said City, hereby certify as follows: 1, The City Council of said city coa~e~he City pHall~, MEETING ON THE 22ND DAY OF AIIGIIST, constituted officers and and the roll was called of thetou wit• members of said City Council., • Eric S. Clifford, Mayor Mattie Cunningham, City Clerk Rondie L. Williams William E. (Bill) Davidson Marshall H. Kent, Jr. Curtis Fendley E. W. (Bill) Booth Travis Wortham ersons were present, except the following a~~,,all of said p thus constituting a quorum. absentees: ~TH the following was transact- - iiereupon, among other business, ed at said Meeting: a written ORDINANCE AUTHORIZING THE ISSIIANCE OF CITY OF PARIS. TEXAS. WATERWORK'S AND SEWER SYSTEM pRIOR LIEN REVENUE BONDS, SERIES 1988 ity was duly introduced for the consideration °f ~oved Cand Council and read in full. It was then duly seconded that said Ordinance be passed and adopted; and after due discussion, said motion carrying with it the passage and adoption of said Ordinance, prevailed and carried by the following vote: AYES: All tbabovefvosaid ted C ye„~ouncil shown presen NOES: None. 2. That a true, full and correct copy of the afoxesaid described in the Ordinance passed and adopted h ise atMeeting tached to and follows above and foregoing paragrap recorded this Certificate; that said Ordinance has been duly that the in said City Council's minutes of said M fuil and correct above and foregoing paragraph is a true, excerpt from said City Coun a l adoti nteof osaida Ordinanceg pertaining to the passage an P aragraph that the persons named in the above and foregoing p are the duly chosen, qualified and acting officers and members of said City Council as indicated therein; that each of the officers and members of said City Council was duly and sufficiently notified officially and personally, in advance, of the time, place and purpose of the aforesaid Meeting, and that said Ordinance would be introduced and considered for passage and adoption at said Meeting, and each of said officers and members consented, in advance, to the holding of said Meeting for such purpose, and that said Meeting was open to the public and public notice of the time, place and purpose of said meeting was given, all as required by Vernon's Ann. Civ. St. Article 6252-17. 3. That the Mayor of said City has approved and hereby approves the aforesaid Ordinance; that the Mayor and the City Clerk of said City have duly signed said Ordinance; and that the Mayor and the City Clerk of said City hereby declare that their signing of this Certificate shall consti- tute the signing of the attached and following copy of said Ordinance for all purposes. SIGNED AND SEALED the 22nd day u st, 1 88. City Clerk ~ Mayor SEAL ORDINANCE 88-033 AUTHORIZING THE ISSUANCE OF CITY OF PARIS, TEXAS WATERWORKS AND SEWER SYSTEM PRIOR LIEN REVENUE BONDS, SERIES 1988 THE STATE OF TEXAS . COUNTY OF LAMAR . CITY OF PARIS . WHEREAS, the City of Paris, Texas (the "Issuer") has duly issued and there is now outstanding, pursuant to Vernon's Ann. Tex. Civ. St. Article 717k, as amended, and other applicable laws, the following series or issue of revenue bonds which are secured solely by a lien on and pledge of the Net Revenues of the City's Waterworks and Sewer System: 81 Waterworks and Sewer System Revenue Refunding Bonds, Series 1983, dated June 15, 1983, maturing June 15, 1988 through June 15, 2003, outstanding in the princi- pal amount of $2,725,000 (the "Refunding Bonds"); and WHEREAS, Sections 23 and 24 of the Ordinance authoriz- ing the outstanding Refunding Bonds permits the Issuer to authorize and deliver "Additional Bonds" as "Prior Lien Bonds" as said terms are defined and used in said Ordinance; and WHEREAS, the Issuer determines that it will authorize, issue and deliver a series of Prior Lien Bonds; and WHEREAS, notice of intention to issue bonds has been duly published in the Paris News on July 17, 1988 and July 24, 1988, and no petition requesting a referendum election was received; and WHEREAS, the bonds hereinafter authorized are to be issued, sold, and delivered pursuant to Articles lllla, 1112, 1113, 1114, and 1115, Vernon's Annotated Texas Civil Statutes, and other applicable laws. THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF PARIS, TEXAS, THAT: Section 1. AMOUNT AND PURPOSE OF THE BONDS. The bond or bonds of the City of Paris (the "Issuer") are hereby authorized to be issued and delivered in the aggregate principal amount of $5,000,000 for the purpose of providing money for improvements and extensions to the Issuer's Waterworks System and Sewer System. Section 2. DESIGNATION OF THE BONDS. Each bond issued pursuant to this Ordinance shall be designated: "CITY OF PARIS, TEXAS WATERWORKS AND SEWER SYSTEM PRIOR LIEN REVENUE BONDS, SERIES 1988", and initially there shall be issued, sold, and delivered hereunder a single fully registered bond, without interest coupons, payable in installments of principal (the "Initial Bond"), but the Initial Bond may be assigned and transferred and/or converted into and exchanged for a like aggregate principal amount of fully registered bonds, without interest coupons, having serial maturities, and in the denomination or denominations of $5,000 or any integral multiple of $5,000, all in the manner hereinafter provided. The term "Bonds" as used in this Ordinance shall mean and include collectively the Initial Bond and all substitute bonds exchanged therefor, as well as all other substitute bonds and replacement bonds issued pursuant hereto, and the term "Bond" shall mean any of the Bonds. Section 3. INITIAL DATE, DENOMINATION, NUMBER, MATURI- TIES, INITIAL REGISTERED OWNER, AND CHARACTERISTICS OF THE INITIAL BOND. (a) The Initial Bond is hereby authorized to be issued, sold, and delivered hereunder as a single fully registered Bond, without interest coupons, dated September 15, 1988, in the denomination and aggregate principal amount of $5,000,000 numbered R-1, payable in annual installments of principal to the initial registered owner thereof, to-wit: CLAYTON & COMPANY, or to the registered assignee or assignees of said Bond or any portion or portions thereof (in each case, the "registered owner"), with the annual installments of principal of the Initial Bond to be payable on the dates, respectively, and in the principal amounts, respectively, stated in the FORM OF INITIAL BOND set forth in this Ordinance. (b) The Initial Bond (i) may be prepaid or redeemed prior to the respective scheduled due dates of installments of principal thereof, (ii) may be assigned and transferred, (iii) may be converted and exchanged for other Bonds, (iv) shall have the characteristics, and (v) shall be signed and sealed, and the principal of and interest on the Initial Bond shall be payable, all as provided, and in the manner required or indicated, in the FORM OF INITIAL BOND set forth in this Ordinance. Section 4. INTEREST. The unpaid principal balance of the Initial Bond shall bear interest from-the date of the Initial Bond to the respective scheduled due dates, or to the respective dates of prepayment or redemption, of the installments of principal of the Initial Bond, and said interest shall be payable, all in the manner provided and at the rates and on the dates stated in the FORM OF INITIAL BOND set forth in this Ordinance. 2 Section 5. FORM OF INITIAL BOND. The form of the Initial Bond, including the form of Registration Certificate of the Comptroller of Public Accounts of the State of Texas to be endorsed on the Initial Bond, shall be substantially as follows: FORM OF INITIAL BOND NO. R-1 $5,000,000 UNITED STATES OF AMERICA STATE OF TEXAS COUNTY OF LAMAR CITY OF PARIS, TEXAS WATERWORKS AND SEWER SYSTEM PRIOR LIEN REVENUE BOND SERIES 1988 THE CITY OF PARIS, in Lamar County, Texas (the "Issu- er"), being a political subdivision of the State of Texas, hereby promises to pay to CLAYTON & COMPANY or to the registered assignee or assignees of this Bond or any portion or portions hereof (in each case, the "regis- tered owner") the aggregate principal amount of FIVE MILLION DOLLARS in annual installments of principal due and payable on June 15 in each of the years, and in the respective principal amounts, as set forth in the following schedule: YEAR AMOUNT YEAR AMOUNT 1989 $ 75,000 1999 $230,000 1990 90,000 2000 245,000 1991 110,000 2001 260,000 1992 125,000 2002 275,000 1993 140,000 2003 290,000 1994 155,000 2004 400,000 1995 170,000 2005 420,000 1996 185,000 2006 445,000 1997 200,000 2007 470,000 1998 215,000 2008 500,000 and to pay interest, from the date of this Bond hereinafter stated, on the balance of each such installment of princi- pal, respectively, from time to time remaining unpaid, at the rates as follows: 3 maturity 1989, 10.00% maturity 1999, 7.30% maturity 1990, 10.00% maturity 2000, 7.40% maturity 1991, 10.00% maturity 2001, 7.50$ maturity 1992, 10.00$ maturity 2002, 7.60$ maturity 1993, 10.00% maturity 2003, 7.60$ maturity 1994, 10.00$ maturity 2004, 7.70$ maturity 1995, 10.00$ maturity 2005, 7.70$ maturity 1996, 10.00% maturity 2006, 7.80$ maturity 1997, 8.10$ maturity 2007, 7.80$ maturity 1998, 7.20% maturity 2008, 7.00% with said interest being payable on June 15, 1989, and semiannually on each December 15 and June 15 thereafter while this Bond or any portion hereof is outstanding and unpaid. THE INSTALLMENTS OF PRINCIPAL OF AND THE INTEREST ON this bond are payable in lawful money of the United States of America, without exchange or collection charges. The installments of the principal of and the interest on this Bond are payable to the registered owner hereof through the services of NCNB Texas National Bank, Dallas, Texas, which is the "Paying Agent/Registrar" for this Bond. Payment of all principal of and interest on this Bond shall be made by the Paying Agent/Registrar to the registered owner hereof on each principal and/or interest payment date by check or draft, dated as of such date, drawn by the Paying Agent/Reg- istrar on, and payable solely from, funds of the Issuer required by the ordinance authorizing the issuance of this Bond (the "Bond Ordinance") to be on deposit with the Paying Agent/Registrar for such purpose as hereinafter provided; and such ch'"eck or draft shall be sent by the Paying Agent/ Registrar by United States mail, first class postage pre- paid, on each such principal and/or interest payment date, to the registered owner hereof, at the address of the regis- tered owner, as it appeared on the last day of the month next precedinq each such date (the "Record Date") on the Registration Books kept by the Paying Agent/Registrar, as hereinafter described. The Issuer covenants with the regis- tered owner of this Bond that on or before each principal and/or interest payment date for this Bond it will make available to the Paying Agent/Registrar, from the "Interest and Sinking Fund" created by the Bond Ordinance, the amounts required to provide for the payment, in immediately avail- able funds, of all principal of and interest on this Bond, when due. IF THE DATE for the payment of the principal of or interest on this Bond shall be a Saturday, Sunday, a legal holiday, or a day on which banking institutions in the city where the Paying Agent/Registrar is located are authorized by law or executive order to close, then the date for such payment shall be the next succeeding day which is not such a 4 Saturday, Sunday, legal holiday, or day on which banking institutions are authorized to close; and payment on such date shall have the same force and effect as if made on the original date payment was due. THIS BOND has been authorized in accordance with the Constitution and laws of the State of Texas in the aggregate principal amount of $5,000,000 for the purpose of providing money for improvements and extensions to the Issuer's Waterworks System and Sewer System. ON JUNE 15, 1998, or on any interest payment date thereafter, the unpaid installments of principal of this Bond may be prepaid or redeemed prior to their scheduled due dates, at the option of the Issuer, with funds derived from any available source, as a whole, or in part, and, if in part, the Issuer shall select and designate the maturity, or maturities, and the amount that is to be redeemed, and if less than a whole maturity is to be called, the Issuer shall direct the Paying Agent/Registrar to call by lot (provided that a portion of this Bond may be redeemed only in an integral multiple of $5,000), at the prepayment or redemp- tion price of the principal amount thereof, plus accrued interest to the date fixed for prepayment or redemption. At least 30 days prior to the date fixed for any such prepay- ment or redemption a written notice of such prepayment or redemption shall be mailed by the Paying Agent/Registrar to the registered owner hereof. By the date fixed for any such prepayment or redemption due provision shall be made by the Issuer with the Paying Agent/Registrar for the payment of the required prepayment or redemption price for this Bond or the portion hereof which is to be so prepaid or redeemed, plus accrued interest thereon to the date fixed for prepay- ment or redemption. If such written notice of prepayment or redemption is given, and if due provision for such payment is made, all as provided above, this Bond, or the portion thereof which is to be so prepaid or redeemed, thereby auto- matically shall be treated as prepaid or redeemed prior to its scheduled due date, and shall not bear interest after the date fixed for its prepayment or redemption, and shall not be regarded as being outstanding except for the right of the reqistered owner to receive the prepayment or redemption price plus accrued interest to the date fixed for prepayment or redemption from the Paying Agent/Registrar out of the ,funds provided for such payment. The.Paying Agent/Registrar shall record in the Registration Books all such prepayments or redemptions of principal of this Bond or any portion hereof. THIS BOND, to the extent of the unpaid or unredeemed principal balance hereof, or any unpaid and unredeemed portion hereof in any integral multiple of $5,000, may be assigned by the initial registered owner hereof and shall be 5 transferred only in the Registration Books of the Issuer kept by the Paying Agent/Registrar acting in the capacity of registrar for the Bonds, upon the terms and conditions set forth in the Bond Ordinance. Among other requirements for such transfer, this Bond must be presented and surrendered to the Paying Agent/Registrar for cancellation, together with proper instruments of assignment, in form and with guarantee of signatures satisfactory to the Paying Agent/ Registrar, evidencing assignment by the initial registered owner of this Bond, or any portion or portions hereof in any integral multiple of $5,000, to the assignee or assignees in whose name or names this Bond or any such portion or por- tions hereof is or are to be transferred and registered. Any instrument or instruments of assignment satisfactory to the Paying Agent/Registrar may be used to evidence the assignment of this Bond or any such portion or portions hereof by the initial registered owner hereof. A new bond or bonds payable to such assignee or assignees (which then will be the new registered owner or owners of such new Bond or Bonds) or to the initial registered owner as to any portion of this Bond which is not being assigned and trans- ferred by the initial registered owner, shall be delivered by the Paying Agent/Registrar in conversion of and exchange for this Bond or any portion or portions hereof, but solely in the form and manner as provided in the next paragraph hereof for the conversion and exchange of this Bond or any portion hereof. The registered owner of this Bond shall be deemed and treated by the Issuer and the Paying Agent/Regis- trar as the absolute owner hereof for all purposes, includ- ing payment and discharge of liability upon this Bond to the extent of such payment, and the Issuer and the Paying Agent/Registrar shall not be affected by any notice to the contrary. AS PROVIDED above and in the Bond Ordinance, this Bond, to the extent of the unpaid or unredeemed principal balance hereof, may be converted into and exchanged for a like aggregate principal amount of fully registered bonds, without interest coupons, payable to the assignee or as- signees duly designated in writing by the initial registered owner hereof, or to the initial registered owner as to any portion of this Bond which is not being assigned and trans- ferred by the initial registered owner, in any denomination or denominations in any inteqral multiple of $5,000 (subject to the reruirement hereinafter stated that each substitute band issued in exchange for any portion of this Bond shall have a single stated principal maturity date), upon surren- der of this Bond to the Paying Agent/Registrar for cancella- tion, all in accordance with the form and procedures set forth in the Bond Ordinance. If this Bond or any portion hereof is assigned and transferred or converted each bond issued in exchange for any portion hereof shall have a single stated principal maturity date corresponding to the 6 due date of the installment of principal of this Bond or portion hereof for which the substitute bond is being exchanged, and shall bear interest at the rate applicable to and borne by such installment of principal or portion thereof. Such bonds, respectively, shall be subject to redemption prior to maturity on the same dates and for the same prices as the corresponding installment of principal of this Bond or portion hereof for which they are being ex- changed. No such bond shall be payable in installments, but shall have only one stated principal maturity date. AS PROVIDED IN THE BOND ORDINANCE, THIS BOND IN ITS PRESENT FORM MAY BE ASSIGNED AND TRANSFERRED OR CONVERTED ONCE ONLY, and to one or more assignees, but the bonds issued and de- livered in exchange for this Bond or any portion hereof may be assigned and transferred, and converted, subsequently, as provided in the Bond Ordinance. The Issuer shall pay the Paying Agent/Registrar's standard or customary fees and charges for transferring, converting, and exchanging this Bond or any portion thereof, but the one requesting such transfer, conversion, and exchange shall pay any taxes or governmental charges required to be paid with respect thereto. The Paying Agent/Registrar shall not be required to make any such assignment, conversion, or exchange (i) during the period commencing with the close of business on any Record Date and ending with the opening of business on the next following principal or interest payment date, or, (ii) with respect to any Bond or portion thereof called for prepayment or redemption prior to maturity, within 45 days prior to its prepayment or redemption date. IN THE EVENT any Paying Aqent/Registrar for this Bond is changed by the Issuer, resigns, or otherwise ceases to act as such, the Issuer has covenanted in the Bond Ordinance that it promptly will appoint a competent and legally qualified substitute therefor, and promptly will cause written notice thereof to be mailed to the registered owner of this Bond. ZT IS HEREBY certified, recited, and covenanted that this Bond has been duly and validly authorized, issued, sold, and delivered; that all acts, conditions, and things required or proper to be performed, exist, and be done pre- cedent to or in the authorization, issuance, and delivery of this Bond have been performed, existed, and been done in accordance with law; that this Bond is a special obligation; and that the interest on and principal of this Bond, are payable from, and secured by a prior first lien on and pledge of the Pledged Revenues of the Issuer's combined Waterworks and Sewer System, being a pledge of the "Pledged Revenues", as defined in the Bond Ordinance, which Pledged Revenues, include initially the "Net Revenues" of the "System" as such terms are defined in the Bond Ordinance Ordinance with the "System" initially consisting of the 7 Issuer's entire existing Waterworks and Sewer System, provided that the "Pledged Revenues" may in the future at the option of the Issuer, include other revenues, income or resources, which lien and pledge is superior to the lien and pledge securing the outstanding City of Paris, Texas Water- works and Sewer System Revenue Refunding Bonds, Series 1983 and any Additional Bonds on parity thereto. SAID ISSUER has reserved the right, subject to the re- strictions stated, and adopted by reference, in the Ordin- ance authorizing this Series of Bonds, to issue additional parity revenue bonds which also may be made payable from, and secured by a lien on and pledge of 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. BY BECOMING the registered owner of this Bond, the registered owner thereby acknowledges all of the terms and provisions of the Bond Ordinance, agrees to be bound by such terms and provisions, acknowledges that the Bond Ordinance is duly recorded and available for inspection in the offi- cial minutes and records of the governing body of the Issuer, and agrees that the terms and provisions of this Bond and the Bond Ordinance constitute a contract between the registered owner hereof and the Issuer. IN WITNESS WHEREOF, the Issuer has caused this Bond to be signed with the manual signature of the Mayor of the Issuer and countersigned with the manual signature of the Ci#y Scaretary of the Issuer, has caused the official seal of the Issuer to be duly impres n this caused this Bond to be dated Se emb ~ City Secretary , Mayor (CITY SEAL) 8 FORM OF REGISTRATION CERTIFICATE OF THE COMPTROLLER OF PUBLIC ACCOUNTS: COMPTROLLER'S REGISTRATION CERTIFICATE: REGISTER NO. I hereby certify that this Bond has been examined, certified as to validity, and approved by the Attorney General of the State of Texas, and that this Bond has been registered by the Comptroller of Public Accounts of the State of Texas. Witness my signature and seal this xxxxxxxx Comptroller of Public Accounts of the State of Texas (COMPTROLLER'S SEAL) Section 6. ADDITIONAL CHARACTERISTICS OF THE BONDS. Req,istration and Transfer. (a) The Issuer shall keep or cause to be kept at the principal corporate trust office of NCNB Texas National Bank, Dallas, Texas (the "Paying Agent/ Registrar") books or records of the registration and trans- fer of the Bonds (the "Registration Books"), and the Issuer hereby appoints the Paying Agent/Registrar as its registrar and transfer agent to keep such books or records and make such transfers and registrations under such reasonable regulations as the Issuer and Paying Agent/Registrar may prescribe; and the Paying Agent/Registrar shall make such transfers and registrations as herein provided. The Paying Agent/Registrar shall obtain and record in the Registration Books the address of the registered owner of each Bond to which payments with respect to the Bonds shall be mailed, as herein provided; but it shall be the duty of each registered owner to notify the Paying Agent/Registrar in writing of the address to which payments shall be mailed, and such interest payments shall not be mailed unless such notice has been given. The Issuer shall have the right to inspect the Registration Books during regular business hours of the Payinq Agent/Registrar, but otherwise the Paying Agent/Reg- istrar shall keep the Registration Books confidential and, unless otherwise required by law, shall not permit their inspection by any other entity. Registration of each Bond may be transferred in the Registration Books only upon presentation and surrender of such Bond to the Paying Agent/Registrar for transfer of registration and cancella- tion, together with proper written instruments of assign- ment, in form and with guarantee of signatures satisfactory to the Paying Agent/Registrar, (i) evidencing the assignment of the Bond, or any portion thereof in any integral multiple of $5,000, to the assignee or assignees thereof, and (ii) the right of such assignee or assignees to have the Bond or 9 any such portion thereof registered in the name of such assignee or assignees. Upon the assignment and transfer of any Bond or any portion thereof, a new substitute Bond or Bonds shall be issued in conversion and exchange therefor in the manner herein provided. The Initial Bond, to the extent of the unpaid or unredeemed principal balance thereof, may be assigned and transferred by the initial registered owner thereof once only, and to one or more assignees designated in writing by the initial registered owner thereof. All Bonds issued and delivered in conversion of and exchange for the Initial Bond shall be in any denomination or denomina- tions of any integral multiple of $5,000 (subject to the requirement hereinafter stated that each substitute Bond shall have a single stated principal maturity date), shall be in the form prescribed in the FORM OF SUBSTITUTE BOND set forth in this Ordinance, and shall have the characteristics, and may be assigned, transferred, and converted as herein- after provided. If the Initial Bond or any portion thereof is assigned and transferred or converted the Initial Bond must be surrendered to the Paying Agent/Registrar for cancellation, and each Bond issued in exchange for any portion of the Initial Bond shall have a single stated principal maturity date, and shall not be payable in in- stallments; and each such Bond shall have a principal maturity date corresponding to the due date of the install- ment of principal or portion thereof for which the substi- tute Bond is being exchanged; and each such Bond shall bear interest at the single rate applicable to and borne by such installment of principal or portion thereof for which it is being exchanged. If only a portion of the Initial Bond is assigned and transferred, there shall be delivered to and registered in the name of the initial registered owner substitute Bonds in exchange for the unassigned balance of the Initial Bond in the same manner as if the initial registered owner were the assignee thereof. If any Bond or portion thereof other than the Initial Bond is assigned and transferred or converted each Bond issued in exchange therefor shall have the same principal maturity date and bear interest at the same rate as the Bond for which it is exchanged. A form of assignment shall be printed or en- dorsed on each Bond, excepting the Initial Bond, which shall be executed by the registered owner or its duly authorized attorney or representative to evidence an assignment there- of. Upon surrender of any Bonds or any portion or portions thereof for transfer of registration, an suthorized repre- sentative of the Paying Agent/Registrar shall make such transfer in the Registration Books, and shall deliver a new fully registered substitute Bond or Bonds, having the characteristics herein described, payable to such assignee or assignees (which then will be the registered owner or owners of such new Bond or Bonds), or to the previous registered owner in case only a portion of a Bond is being assigned and transferred, all in conversion of and exchange 10 for said assigned Bond or Bonds or any portion or portions thereof, in the same form and manner, and with the same effect, as provided in Section 6(d), below, for the conver- sion and exchange of Bonds by any registered owner of a Bond. The Issuer shall pay the Paying Agent/Registrar's standard or customary fees and charges for making such transfer and delivery of a substitute Bond or Bonds, but the one requesting such transfer shall pay any taxes or other governmental charges required to be paid with respect thereto. The Paying Agent/Registrar shall not be required to make transfers of registration of any Bond or any portion thereof (i) during the period commencing with the close of business on any Record Date and ending with the opening of business on the next following principal or interest payment date, or, (ii) with respect to any Bond or any portion thereof called for redemption prior to maturity, within 45 days prior to its redemption date. (b) Ownership of Bonds. The entity in whose name any Bond shall be registered in the Registration Books at any time shall be deemed and treated as the absolute owner thereof for all purposes of this Ordinance, whether or not such Bond shall be overdue, and the Issuer and the Paying Agent/Registrar shall not be affected by any notice to the contrary; and payment of, or on account of, the principal of, premium, if any, and interest on any such Bond shall be made only to such registered owner. All such payments shall be valid and effectual to satisfy and discharge the liabil- ity upon such Bond to the extent of the sum or sums so paid. (c) Payment of Bonds and Interest. The Issuer hereby further appoints the Paying Agent/Registrar to act as the paying agent for paying the principal of and interest on the Bonds, and to act as its agent to convert and exchange or replace Bonds, all as provided in this Ordinance. The Paying Agent/Registrar shall keep proper records of all payments made by the Issuer and the Paying Agent/Registrar with respect to the Bonds, and of all conversions and exchanges of Bonds, and all replacements of Bonds, as provided in thia Ordinance. However, in the event of a nonpayment of interest on a scheduled payment date, and for thirty (30) days thereafter, a new record date for such interest payment (a "Special Record Date") will be estab- lished by the Paying Agent/Registrar, if and when funds for the payment of such interest have been received from the Issuer. Notice of the past due interest (which shall be 15 days after the Special Record Date) shall be sent at least five (5) business days prior to the Special Record Date by United States mail, first class postage prepaid, to the address of each Bondholder appearing on the Security Regis- ter at the close of business on the last business day next preceding the date of mailing of such notice. 11 (d) Conversion and Exchanae or Replacement; Authenti- cation. Each Bond issued and delivered pursuant to this Ordinance, to the extent of the unpaid or unredeemed princi- pal balance or principal amount thereof, may, upon surrender of such Bond at the principal corporate trust office of the Paying Agent/Registrar, together with a written request therefor duly executed by the registered owner or the assignee or assignees thereof, or its or their duly author- ized attorneys or representatives, with guarantee of signa- tures satisfactory to the Paying Agent/Registrar, may, at the option of the registered owner or such assignee or assignees, as appropriate, be converted into and exchanged for fully registered bonds, without interest coupons, in the form prescribed in the FORM OF SUBSTITUTE BOND set forth in this Ordinance, in the denomination of $5,000, or any integral multiple of $5,000 (subject to the requirement hereinafter stated that each substitute Bond shall have a single stated maturity date), as requested in writing by such registered owner or such assignee or assignees, in an aggregate principal amount equal to the unpaid or unredeemed principal balance or principal amount of any Bond or Bonds so surrendered, and payable to the appropriate registered owner, assignee, or assignees, as the case may be. If the Initial Bond is assigned and transferred or converted each substitute Bond issued in exchange for any portion of the Initial Bond shall have a single stated principal maturity date, and shall not be payable in installments; and each such Bond shall have a principal matuzity date corresponding to the due date of the installment of principal or portion thereof for which the substitute Bond is being exchanged; and each such Bond shall bear interest at the single rate applicable to and borne by such installment of principal or portion thereof for which it is being exchanged. If a portion of any Bond (other than the Initial Bond) shall be redeemed prior to its scheduled maturity as provided herein, a substitute Bond or Bonds havinq the same maturity date, bearing interest at the same rate, in the denomination or denominations of any integral multiple of $5,000 at the request of the registered owner, and in aggregate principal amount equal to the unredeemed portion thereof, will be issued to the registered owner upon surrender thereof for cancellation. If any Bond or portion thereof (other than the Initial Bond) is assigned and transferred or converted, each Bond issued in exchange therefor shall have the same principal maturity date and bear interest at the same rate as the Bond for which it is being exchanged. Each substi- tute Bond shall bear a letter and/or number to distinguish it from each other Bond. The Paying Agent/Registrar shall convert and exchange or replace Bonds as provided herein, and each fully registered bond delivered in conversion of and exchange for or replacement of any Bond or portion thereof as permitted or required by any provision of this Ordinance shall constitute one of the Bands for all purposes 12 of this Ordinance, and may again be converted and exchanged or replaced. It is specifically provided that any Bond authenticated in conversion of and exchange for or replace- ment of another Bond on or prior to the first scheduled Record Date for the Initial Bond shall bear interest from the date of the Initial Bond, but each substitute Bond so authenticated after such first scheduled Record Date shall bear interest from the interest payment date next preceding the date on which such substitute Bond was so authenticated, unless such Bond is authenticated after any Record Date but on or before the next following interest payment date, in which case it shall bear interest from such next following interest payment date; provided, however, that if at the time of delivery of any substitute Bond the interest on the Bond for which it is being exchanged is due but has not been paid, then such Bond shall bear interest from the date to which such interest has been paid in full. THE INITIAL BOND issued and delivered pursuant to this Ordinance is not required to be, and shall not be, authenticated by the Paying Agent/Registrar, but on each substitute Bond issued in conversion of and exchange for or replacement of any Bond or Bonds issued under this Ordinance there shall be printed a certificate, in the form substantially as follows: PAYING AGENT/REGISTRAR'S AUTHENTICATION CERTIFICATE It is hereby certified that this Bond has been issued under the provisions of the Bond Ordinance described on the face of this Bond; and that this Bond has been issued in conversion of and exchange for or replacement of a bond, bonds, or a portion of a bond or bonds of an issue which originally was approved by the Attorney General of the State of Texas and registered by the Comptroller of Public Ac- counts of the State of Texas. NCNB TEXAS NATIONAL BANK Dallas, Texas Paying Agent/Registrar Dated By Authorized Representative An authorized representative of the Paying Agent/Registrar shall, before the delivery of any such Bond, date and manually sign the above Certificate, and no such Bond shall be deemed to be issued or outstanding unless such Certifi- cate is so executed. The Paying Agent/Registrar promptly shall cancel all Bonds surrendered for conversion and exchange or replacement. No additional ordinances, orders, or resolutions need be passed or adopted by the governing body of the Issuer or any other body or person so as to accomplish the foregoing conversion and exchanqe or replace- ment of any Bond or portion thereof, and the Paying Agent/ 13 Registrar shall provide for the printing, execution, and delivery of the substitute Bonds in the manner prescribed herein, and said Bonds shall be of type composition printed on paper with lithographed or steel engraved borders of customary weight and strength. Pursuant to TEX. REV. CIV. STAT. ANN. art. 717k-6 (Vernon, as amended), and particular- ly Section 6 thereof, the duty of conversion and exchange or replacement of Bonds as aforesaid is hereby imposed upon the Paying Agent/Registrar, and, upon the execution of the above Paying Agent/Registrar's Authentication Certificate, the converted and exchanged or replaced Bond shall be valid, incontestable, and enforceable in the same manner and with the same effect as the Initial Bond which originally was issued pursuant to this Ordinance, approved by the Attorney General, and registered by the Comptroller of Public Ac- counts. The Issuer shall pay the Paying Agent/Registrar's standard or customary fees and charges for transferring, converting, and exchanging any Bond or any portion thereof, but the one requesting any such transfer, conversion, and exchange shall pay any taxes or governmental charges re- quired to be paid with respect thereto as a condition precedent to the exercise of such privilege of conversion and exchange. The Paying Agent/Registrar shall not be required to make any such conversion and exchange or re- placement of Bonds or any portion thereof (i) during the period commencing with the close of business on any Record Date and ending with the opening of business on the next following principal or interest payment date, or, (ii) with respect to any Bond or portion thereof called for redemption prior to maturity, within 45 days prior to its redemption date. (e) In General. All Bonds issued in conversion and exchange or replacement of any other Bond or portion there- of, (i) shall be issued in fully registered form, without interest coupons, with the principal of and interest on such Bonds to be payable only to the registered owners thereof, (ii) may be redeemed prior to their scheduled maturities, (iii) may be transferred and assigned, (iv) may be converted and exchanged for other Bonds, (v) shall have the character- istics, (vi) shall be signed and sealed, and (vii) the principal of and interest on the Bonds shall be payable, all as provided, and in the manner required or indicated, in the FORM OF SUBSTITUTE BOND set forth in this Ordinance. (f) Pavment of Fees and Charaes. The Issuer hereby covenants with the reqistered owners of the Bonds that it will (i) pay the standard or customary fees and charges of the Paying Agent/Registrar for its services with respect to the payment of the principal of and interest on the Bonds, when due, and (ii) pay the fees and charges of the Paying Agent/Registrar for services with respect to the transfer of registration of Bonds, and with respect to the conversion 14 and exchange of Bonds solely to the extent above provided in this Ordinance. (g) Substitute PavinQ Agent/Reaistrar. The Issuer covenants with the registered owners of the Bonds that at all times while the Bonds are outstanding the Issuer will provide a competent and legally qualified bank, trust company, financial institution, or other agency to act as and perform the services of Paying Agent/Registrar for the Bonds under this Ordinance, and that the Paying Agent/Regis- trar will be one entity. The Issuer reserves the right to, and may, at its option, change the Paying Agent/Registrar upon not less than 120 days written notice to the Paying Agent/Registrar, to be effective not later than 60 days prior to the next principal or interest payment date after such notice. In the event that the entity at any time acting as Paying Agent/Registrar (or its successor by merger, acquisition, or other method) should resign or otherwise cease to act as such, the Issuer covenants that promptly it will appoint a competent and legally qualified bank, trust company, financial institution, or other agency to act as Paying Agent/Registrar under this Ordinance. Upon any change in the Paying Agent/Registrar, the previous Paying Agent/Registrar promptly shall transfer and deliver the Registration Books (or a copy thereof), along with all other pertinent books and records relating to the Bonds, to the new Paying Agent/Registrar designated and appointed by the Issuer. Upon any change in the Paying Agent/Registrar, the Issuer promptly will cause a written notice thereof to be sent by the new Paying Agent/Registrar to each registered owner of the Bonds, by United States mail, first-class postage prepaid, which notice also shall give the address of the new Paying Agent/Registrar. By accepting the position and performing as such, each Paying Agent/Registrar shall be deemed to have agreed to the provisions of this Ordinance, and a certified copy of this Ordinance shall be delivered to each Paying Agent/Registrar. Section 7. FORM OF SUBSTITUTE BONDS. The form of all Bonds issued in conversion and exchange or replacement of any other Bond or portion thereof, including the form of Payinq Agent/Registrar's Certificate to be printed on each of such Bonds, and the Form of Assignment to be printed on each of the Bonds, shall be, respectively, substantially as follows, with such appropriate variations, omissions, or insertions as are permitted o= required by this Ordinance. 15 FORM OF SUBSTITUTE BOND NO. PRINCIPAL AMOUNT $ UNITED STATES OF AMERICA STATE OF TEXP,S COUNTY OF LAMAR CITY OF PARIS, TEXAS WATERWORKS AND SEWER SYSTEM PRIOR LIEN REVENUE BOND SERIES 1988 DATE OF INTEREST RATE MATURITY DATE ORIGINAL ISSUE CUSIP NO. September 15, 1988 ON THE MATURITY DATE specified above, THE CITY OF PARIS, in Lamar County, Texas (the "Issuer"), being a political subdivision of the State of Texas, hereby promises to pay to or to the registered assignee hereof (either being herein- after called the "registered owner") the principal amount of and to pay interest thereon from September 15, 1988 to the maturity date specified above, or the date of redemption prior to maturity, with interest being payable on June 15, 1989 and semiannually on each December 15 and June 15 thereafter, at the interest rate per annum specified above; except that if the date of authentication of this Bond is later than May 31, 1989, the first scheduled Record Date for the Initial Bond, such principal amount shall bear interest from the interest payment date next preceding the date of authentication, unless such date of authentication is after any Record Date (hereinafter defined) but on or before the next following interest payment date, in which case such principal amount shall bear interest from such next follow- ing interest payment date. THE PRINCIPAL OF AND INTEREST ON this Bond are payable in lawful money of the United States of America, without exchange or collection charges. The principal of this Bond shall be paid to the registered owner hereof upon presenta- tion and surrender of this Bond at maturity or upon the date fixed for its redemption prior to maturity, at the principal corporate trust office of NCNB Texas National Bank, Dallas, Texas, which is the "Paying Agent/Registrar" for this Bond. The payment of interest on this Bond shall be made by the Paying Agent/Registrar to the registered owner hereof on each interest payment date by check or draft, dated as of such interest payment date, drawn by the Paying Agent/Regis- trar on, and payable solely from, funds of the Issuer required by the ordinance authorizing the issuance of the 16 Bonds (the "Bond Ordinance") to be on deposit with the Paying Agent/Registrar for such purpose as hereinafter provided; and such check or draft shall be sent by the Paying Agent/Registrar by United States mail, first class postage prepaid, on each such interest payment date, to the registered owner hereof, at the address of the registered owner, as it appeared on the last day of the month next preceding each such date (the "Record Date") on the Regis- tration Books kept by the Paying Agent/Registrar, as herein- after described. Any accrued interest due upon the redemp- tion of this Bond prior to maturity as provided herein shall be paid to the registered owner at the principal corporate trust office of the Paying Agent/Registrar upon presentation and surrender of this Bond for redemption and payment at the principal corporate trust office of the Paying Agent/Regis- trar. The Issuer covenants with the registered owner of this Bond that on or before each principal payment date, interest payment date, and accrued interest payment date for this Bond it will make available to the Paying Agent/Regis- trar, from the "Interest and Sinking Fund" created by the Bond Ordinance, the amounts required to provide for the pay- ment, in immediately available funds, of all principal of and interest on the Bonds, when due. IF THE DATE for the payment of the principal of or interest on this Bond shall be a Saturday, Sunday, a legal holiday, or a day on which banking institutions in the city where the Paying Agent/Registrar is located are authorized by law or executive order to close, then the date for such payment shall be the next succeeding day which is not such a Saturday, Sunday, legal holiday, or day on which banking institutions are authorized to close; and payment on such date shall have the same force and effect as if made on the original date payment was due. THIS BOND is one of an issue of Bonds initially dated September 15, 1988, authorized in accordance with the Constitution and laws of the State of Texas in the principal amount of $5,000,000 for the purpose of providing money for improvements and extensions of the Issuer's Waterworks System and Sewer System. ON JUNE 15, 1998, or on any interest payment date thereafter, the Bonds of this Series may be redeemed prior to their scheduled maturities, at the option of the Issuer, with funds derived from any available and lawful source, as a whole, or in part, and, if in part, the Issuer shall select and designate the maturity or maturities and the amount that is to be redeemed, and if less than a whole maturity is to be called, the Issuer shall direct the Paying Agent/Registrar to call by lot (provided that a portion of a Bond may be redeemed only in an integral multiple of $5,000), at the redemption price of the principal amount 17 thereof, plus accrued interest to the date fixed for prepay- ment or redemption. At least 30 days prior to the date fixed for any redemption of Bonds or portions thereof prior to maturity a written notice of such redemption shall be published once in a financial publication, journal, or reporter of general circulation among securities dealers in the City of New York, New York (including, but not limited to, The Bond Buyer and The Wall Street Journal), or in the State of Texas (including, but not limited to, The Texas Bond Reporter). Such notice also shall be sent by the Paying Agent/Registrar by United States mail, first class postage prepaid, not less than 30 days prior to the date fixed for any such redemption, to the registered owner of each Bond to be redeemed at its address as it appeared on the 45th day prior to such redemption date; provided, however, that the failure to send, mail, or receive such notice, or any defect therein or in the sending or mailing thereof, shall not affect the validity or effectiveness of the proceedings for the redemption of any Bond, and it is hereby specifically provided that the publication of such notice as required above shall be the only notice actually required in connection with or as a prerequisite to the redemption of any Bonds or portions thereof. By the date fixed for any such redemption due provision shall be made with the Paying Agent/Registrar for the payment of the required redemption price for the Bonds or portions thereof which are to be so redeemed, plus accrued interest thereon to the date fixed for redemption. If such written notice of redemption is published and if due provision for such payment is made, all as provided above, the Bonds or por- tions thereof which are to be so redeemed thereby automatic- ally shall be treated as redeemed prior to their scheduled maturities, and they shall not bear interest after the date fixed for redemption, and they shall not be regarded as being outstanding except for the right of the registered owner to receive the redemption price plus accrued interest from the Payinq Aqent/Registrar out of the funds provided for such payment. If a portion of any Bond shall be re- deemed a substitute Bond or Bonds having the same maturity date, bearing interest at the same rate, in any denomination or denominations in any integral multiple of $5,000, at the written request of the registered owner, and in aggregate principal amount equal to the unredeemed portion thereof, will be issued to the registered owner upon the surrender thereof for cancellation, at the expense of the Issuer, all ag provided in the Bond Ordinance. THIS BOND OR ANY PORTION OR PORTIONS HEREOF IN ANY INTEGRAL MULTIPLE OF $5,000 may be assigned and shall be transferred only in the Registration Books of the Issuer kept by the Paying Agent/Registrar actinq in the capacity of registrar for the Bonds, upon the terms and conditions set forth in the Bond Ordinance. Among other requirements for 18 such assignment and transfer, this Bond must be presented and surrendered to the Paying Agent/Registrar, together with proper instruments of assignment, in form and with guarantee of signatures satisfactory to the Paying Agent/Registrar, evidencing assignment of this Bond or any portion or por- tions hereof in any integral multiple of $5,000 to the assignee or assignees in whose name or names this Bond or any such portion or portions hereof is or are to be trans- ferred and registered. The form of Assignment printed or endorsed on this Bond shall be executed by the registered owner or its duly authorized attorney or representative,to evidence the assignment hereof. A new Bond or Bonds payable to such assignee or assignees (which then will be the new registered owner or owners of such new Bond or Bonds), or to the previous registered owner in the case of the assignment and transfer of only a portion of this Bond, may be de- livered by the Paying Agent/Registrar in conversion of and exchange for this Bond, all in the form and manner as pro- vided in the next paragraph hereof for the conversion and exchange of other Bonds. The Issuer shall pay the Paying Agent/Registrar's standard or customary fees and charges for making such transfer, but the one requesting such transfer shall pay any taxes or other governmental charges required to be paid with respect thereto. The Paying Agent/Registrar shall not be required to make transfers of registration of this Bond or any portion hereof (i) during the period commencing with the close of business on any Record Date and ending with the opening of business on the next following principal or interest payment date, or, (ii) with respect to any Bond or any portion thereof called for redemption prior to maturity, within 45 days prior to its redemption date. The registered owner of this Boncl shall be deemed and treated by the Issuer and the Paying Agent/Registrar as the absolute owner hereof for all purposes, including payment and discharge of liability upon this Bond to the extent of such payment, and the Issuer and the Paying Agent/Registrar shall not be affected by any notice to the contrary. ALL BONDS OF THIS SERIES are issuable solely as fully registered bonds, without interest coupons, in the denomina- tion of any integral multiple of $5,000. As provided in the Bond Ordinance, this Bond, or any unredeemed portion hereof, may, at the request of the registered owner or the assignee or assignees hereof, be converted into and ex- changed for a like aggregate principal amount of fully registered bonds, without interest coupons, payable to the appropriate registered owner, assignee, or assignees, as the case may be, having the same maturity date, and bearing interest at the same rate, in any denomination or denomina- tions in any integral multiple of $5,000 as requested in writing by the appropriate registered owner, assignee, or assignees, as the case may be, upon surrender of this Bond to the Paying Agent/Registrar for cancellation, all in 19 accordance with the form and procedures set forth in the Bond Ordinance. The Issuer shall pay the Paying Agent/Reg- istrar's standard or customary fees and charges for trans- ferring, converting, and exchanging any Bond or any portion thereof, but the one requesting such transfer, conversion, and exchange shall pay any taxes or governmental charges required to be paid with respect thereto as a condition precedent to the exercise of such privilege of conversion and exchange. The Paying Agent/Registrar shall not be required to make any such conversion and exchange (i) during the period commencing with the close of business on any Record Date and ending with the opening of business on the next following principal or interest payment date, or, (ii) with respect to any Bond or portion thereof called for redemption prior to maturity, within 45 days prior to its redemption date. IN THE EVENT any Paying Agent/Registrar for the Bonds is changed by the Issuer, resigns, or otherwise ceases to act as such, the Issuer has covenanted in the Bond Ordinance that it promptly will appoint a competent and legally qualified substitute therefor, and promptly will cause written notice thereof to be mailed to the registered owners of the Bonds. IT IS HEREBY certified, recited, and covenanted that this Bond has been duly and validly authorized, issued, sold, and delivered; that all acts, conditions, and things required or proper to be performed, exist, and be done pre- cedent to or in the authorization, issuance, and delivery of this Bond have been performed, existed, and been done in accordance with law; that this Bond is a special obligation; and that the interest on and principal of this Bond, are payable from, and secured by a prior first lien on and pledge of the Pledged Revenues of the Issuer's combined Waterworks and Sewer System, being a pledge of the "Pledged Revenues , as defined in the Bcnd Ordinance, which Pledged Revenues, include initially the "Net Revenues" of the "System" as such terms are defined in the Bond Ordinance with the "System" initially consisting of the Issuer's entire existing Waterworks and Sewer System, provided that the "Pledged Revenues" may in the future at the option of the Issuer, include the revenues, income or resources, which lien and pledge is superior to the lien and pledge securing the outstanding City of Paris, Texas Waterworks and Sewer System Revenue Refunding Bonds, Series 1983 and any Addi- tional Bonds on parity thereto. SAID ISSUER has reserved the right, subject to the re- strictions stated, and adopted by reference, in the Ordin- ance authorizing this Series of Bonds, to issue additional parity revenue bonds which also may be made payable from, and secured by a lien on and pledge of the Pledged Revenues. 20 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. BY BECOMING the registered owner of this Bond, the reg- istered owner thereby acknowledges all of the terms and pro- visions of the Bond Ordinance, agrees to be bound by such terms and provisions, acknowledges that the Bond Ordinance is duly recorded and available for inspection in the offi- cial minutes and records of the governing body of the Issuer, and agrees that the terms and provisions of this Bond and the Bond Ordinance constitute a contract between each registered owner hereof and the Issuer. IN WITNESS WHEREOF, the Issuer has caused this Bond to be signed with the facsimile signature of the Mayor of the Issuer and countersigned with the facsimile signature of the City Clerk of the Issuer, and has caused the official seal of the Issuer to be duly impressed, or placed in fac- simile, on this Bond. (facsimile signature) (facsimile signature) City Clerk Mayor (CITY SEAL) FORM OF PAYING AGENTIREGISTRAR'S AUTHENTICATION CERTIFICATE PAYING AGENT/REGISTRAR'S AUTHENTICATION CERTIFICATE It is hereby certified that this Bond has been issued under the provisions of the Bond Ordinance described on the face of this Bond; and that this Bond has been issued in conversion of and exchange for or replacement of a bond, bonds, or a portion of a bond or bonds of an issue which originally was approved by the Attorney General of the State of Texas and registered by the Comptroller of Public Ac- counts of the State of Texas. NCNB TEXAS NATIONAL BANK Dallas, Texas Dated Paying Agent/Registrar By Authorized Representative 21 FORM OF ASSIGNMENT: ASSIGNMENT FOR VALUE RECEIVED, the undersigned registered owner of this Bond, or duly authorized representative or attorney thereof, hereby assigns this Bond to (Assignee's Social Security (print or type Assignee's name or Taxpayer ldentification and address, including zip Number) code) and hereby irrevocably constitutes and appoints attorney to transfer the registration of this Bond on the Paying Agent/Registrar's Registration Books with full power of substitution in the premises. Dated Signature Guaranteed: NOTICE: This siqnature must be guaranteed by a member of the New York Stock Exchange or a commercial bank or trust company. Registered Owner NOTICE: This signature must correspond with the name of the Registered owner appearing on the face of this Bond in every particular without alteration or enlargement or any change whatsoever. Section 8. DEFINITIONS. That as used in this Ordinance the following terms shall have the meanings set forth below, unless the text hereof specifically indicates otherwise: (a) The term "City" or "Issuer" shall mean the City of Paris, in Lamar County, Texas. (b) The term "City Council" or "Council" shall mean the governing body of the Issuer. (c) The term "Outstanding Refunding Bunds" shall mean the presently outstanding Waterworks and Sewer System Revenue Refunding Bonds of the Issuer described in the preamble to this Ordinance. (d) The term "Prior Lien Bonds" or "Bonds" shall mean the City of Paris Waterworks and Sewer System Prior Lien Revenue Bonds, Series 1988, authorized by this Ordinance. 22 (e) The term "Additional Parity Revenue Bonds" shall mean the revenue bonds which the City reserves the right to issue in the future, which revenue bonds may be either "Additional Bonds" or "Prior Lien Additional Bonds", all as provided in Sections 23 and 24 of this Ordinance. (f) The term "System" shall mean (1) the Issuer's entire existing waterworks and sewer system, together with all future extensions, improvements, enlargements, and additions thereto, and all replacements thereof, and (2) at the sole option of the Issuer, which may or may not be exercised in the future, the Issuer's entire waterworks and sewer system, which may be added to the initial System, and (3) any other related facilities, all or any part of the revenues or income from which may, in the future, at the option of the Issuer, and in accordance with law, become "Pledged Revenues" as hereinafter defined; provided that, notwithstanding the foregoing, and to the extent now or hereafter authorized or permitted by law, the term System shall not mean any sewer, water, or other facilities of any kind which are declared not to be a part of the System, and which are acquired or constructed by the Issuer with the proceeds from the issuance of "Special Facilities Bonds", which are hereby defined as being special revenue obliga- tions of the Issuer which are not payable from or secured by any Pledged 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 or payments received from any other legal entity in connection with such facilities; and such revenues, sources, or payments shall not be considered as or constitute Gross Revenues of the System unless and to the extent otherwise provided in the ordinance or ordinances authorizing the issuance of such "Special Facilities Bonds". (g) The terms "Gross Revenues of the System" and "Gross Revenues" shall mean all revenues and income of every nature derived or received by the Issuer from the operation and ownership of the System, including the interest income from the investment or deposit of money in any Fund created by this Ordinance. (h) The terms "Net Revenues of the System", and "Net Revenues" shall mean all Gross Revenues after deducting and paying the current expenses of operation and maintenance of the System out of the System Fund, hereinafter created, including all salaries, labor, materials, repairs, and extensions necessary to render efficient service, provided, however, that only such repairs and extensions, as in the judgment of the Issuer Council, reasonably and fairly exer- cised by the adoption of appropriate resolutions, are necessary to keep the System in operation and render 23 adequate service to said Issuer and the inhabitants thereof, or such as might be necessary to meet some physical accident or condition which would otherwise impair the Bonds or Addi- tional Parity Revenue Bonds, shall be deducted in determin- ing "Net Revenuesn. Depreciation and amortization shall not be considered as an expense of operation and maintenance in determining Net Revenues. (i) The term "Pledged Revenues" shall mean the Net Revenues, plus any additional revenues, income, or other resources, including, without limitation, any grants, donations, or income received or to be received from the United States Government, or any other public or private source, whether pursuant to an agreement or otherwise, which in the future may, at the option of the Issuer, be pledged to the payment of the Bonds or Additional Bonds. (j) The term "year" or "fiscal year" shall mean the fiscal year used by the Issuer in connection with the opera- tion of the System. (k) The term "Government Obligations" shall mean direct obligations of the United States of America, includ- ing obligations the principal of and interest on which are unconditionally guaranteed by the United States of America, which may be United States Treasury obligations such as its State and Local Government Series, which may be in book- entry form. Section 8. PLEDGE. (a) That the City of Paris, Texas Waterworks and Sewer System Prior Lien Revenue Bonds, Series 1988 are Prior Lien Additional Bonds issued pursuant to Sections 23 and 24 of the Ordinance authorizing the Outstanding Refunding Bonds; and Sections 8 through 26 of this Bond Ordinance substantially restates and are supple- mented to and cumulative of Section 8 through 26 of the Ordinance authorizing the Refunding Bonds so that Sections 8 throuqh 26 of this Bond Ordinance will be applicable to all of the Bonds and all future Prior Lien Bonds and Additional Prior Lien Bonds (as provided in Sections 23 and 24 hereof). (b) That the Prior Lien Bonds and any Prior Lien Additional Parity Revenue Bonds (as defined in Section 23 hereof), are and shall be secured by and payable from an irrevocable lien on and pledge of the Pledged Revenues, which lien and pledge is superior to the lien and pledge securing the Issuer's outstanding City of Paris Waterworks and Sewer System Revenue Refunding Bonds, Series 1983, and any Additional Bonds on parity thereto, and the Pledged Revenues are further pledged irrevocably to the establish- ment and maintenance of the Funds created by this Ordinance, and any Funds created by any ordinance authorizing the issuance of any Prior Lien Additional Bonds or any 24 Additional Bonds. The Outstanding Refunding Bonds and any Additional Parity Revenue Bonds, the Prior Lien Bonds, and any Prior Lien Additional Bonds (as defined in Section 23 hereof) are and shall be secured by and payable from the Pledged Revenues, in the manner and to the extent provided in the ordinances authorizing their issuance, but they 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. Section 9. SYSTEM FUND. That there has been created and there shall be established and maintained on the books of the Issuer, and accounted for separate and apart from all other funds of the Issuer, a special fund to be entitled the "City of Paris Waterworks and Sewer System Fund" (the "System Fund"). All Gross Revenues shall be credited to the System Fund immediately upon receipt, unless otherwise provided in this Ordinance. All current expenses of opera- tion and maintenance of the System shall be paid from such Gross Revenues credited to the System Fund as a first charge against same. Before making any deposits hereinafter required to be made from the System Fund, the Issuer shall retain in the System Fund at all times an amount at least equal to one-sixth of the amount budgeted for the then current fiscal year for the current operation and mainte- nance expenses of the System. Section 10. INTEREST AND SINKING FUND. That for the sole purpose of paying the principal of and interest on all bonds which are payable from Pledged Revenues, there has been created and there shall be established and maintained on the books of the Issuer, and accounted for separate and apart from all other funds of the Issuer, a separate fund to be entitled the "City of Paris Waterworks and Sewer System Revenue Refunding Bonds Interest and Sinking Fund" (the "Interest and Sinking Fund"). Section il. PRIOR LIEN ADDITIONAL BONDS RESERVE FUND. That there has been created by the Issuer, and shall be established and maintained, at the same bank where the Reserve Fund created pursuant to Section 12 is kept, a separate fund to be entitled the "City of Paris Waterworks and Sewer System Prior Lien Additional Bonds Reserve Fund" (the "Prior Lien Reserve Fund"). The Prior Lien Reserve Fund shall be used to pay the principal of and interest on the Prior Lien Bonds or any Prior Lien Additional Bonds when and to the extent the amounts in the Interest and Sinking Fund are insufficient for such purpose, and may be used for the purpose of finally retiring the last of any Prior Lien Bonds or any Prior Lien Additional Bonds. Section 12. RESERVE FUND. That there has been created and there shall be established and maintained initially at 25 the Issuer's official depository bank, a separate fund to be entitled the "City of Paris Waterworks and Sewer System Bonds and Additional Bonds Reserve Fund" (the "Reserve Fund"). The Reserve Fund shall be used to pay the principal of and interest on any Bonds or Additional Bonds when and to the extent the amounts in the Interest and Sinking Fund available for such payment are insufficient for such pur- pose, and may be used for the purpose of finally retiring the last of any Bonds or Additional Bonds. Section 13. IMPROVEMENT AND CONTINGENCY FUND. That there has been created and there shall be established and maintained on the books of the Issuer, and accounted for separate and apart from all other funds of the Issuer, a separate fund to be entitled the "Issuer of Paris Waterworks and Sewer System Improvement and Contingency Fund" (the "Improvement and Contingency Fund"). The Improvement and Contingency Fund shall be used for the purpose of paying the costs of improvements, enlargements, extensions, additions, replacements, or other capital expenditures related to the System, or for paying the costs of unexpected or extraordi- nary repairs or replacements of the System for which System Funds are not available, or for paying unexpected or ex- traordinary expenses of operation and maintenance of the System for which System funds are not otherwise available, or for any other lawful purpose. Section 14. DEPOSITS OF PLEDGED REVENUES; INVESTMENTS; FUNDS SECURED. (a) That Pledged Revenues shall be credited to or deposited in the Interest and Sinking Fund, the Prior Lien Reserve Fund, the Reserve Fund, the Improvement and Contingency Fund, and other funds when and as required by this Ordinance and any ordinance authorizing the issuance of Additional Parity Revenue Bonds. (b) That money in any Fund established pursuant to this ordinance or any ordinance authorizing the issuance of Additional Parity Revenue Bonds, may, at the option of the Issuer, be placed in time deposits or certificates of deposit secured by obligations of the type hereinafter described, or be invested in direct obligations of the United States of America, obligations guaranteed or insured by the United States of America, which, in the opinion of the Attorney General of the United States, are backed by its full faith and credit or represent its general obligations, ar invested in obligations of instrumentalities of the United States of America, including, but not limited to, evidences of indebtedness issued, insured, or guaranteed by such governmental agencies as the Federal Land Banks, Federal Intermediate Credit Banks, Banks for Cooperatives, Federal Home Loan Banks, Government National Mortgage Association, United States Postal Service, Farnaers Home Administration, Federal Home Loan Mortgage Association, 26 Small Business Administration, Federal Housing Association, or Participation Certificates in the Federal Assets Financ- ing Trust; provided that all such deposits and investments shall be made in such manner that the money required to be expended from any Fund will be available at the proper time or times. Such investments shall be value in terms of current market value as of the last day of each fiscal year. All interest and income derived from such deposits and investments immediately shall be credited to, and any losses debited to, the Fund from which the deposit or investment was made, and surpluses in any Fund shall or may be disposed of as hereinafter provided. Such investments shall be sold promptly when necessary to prevent any default in connection with the Bonds, Additional Bonds, or Prior Lien Additional Bonds, consistent with the ordinances, respectively, author- izing their issuance. (c) That money in all Funds created by this Ordinance, to the extent not invested, shall be secured in the manner prescribed by law. Section 15. PRIORITY OF DEPOSITS AND PAYMENTS FROM SYSTEM FUND. That the Issuer shall make the deposits and payments from Pledged Revenues in the System Fund when and as required by this Ordinance and any ordinance authorizing Additional Parity Revenue Bonds or any other subordinate lien bonds, and such deposits shall be made in the following order and with the following irrevocable priorities, respec- tively: 1. to the Prior Lien Additional Bonds Account in the Interest and Sinking Fund, when and in the amounts required by this Ordinance and any ordinance authori2ing any Prior Lien Additional Bonds; 2, to the Prior Lien Reserve Fund, when and in the amounts required by this Ordinance and any ordi- nance authorizing any Prior Lien Additional Bonds; 3. to the Outstanding Refunding Bonds and Additional Bonds Account in the Interest and Sinking Fund, when and in the amounts required by this Ordinance and any ordinance authorizing the issuance of Additional Bonds; 4. to the Reserve Fund, when and in the amounts required by this Ordinance and any ordinance authorizinq any Additional Bonds; 5. to the payment of principal, interest, and reserve fund requirements for any bonds which hereafter may be issued by the Issuer that are payable from and secured by a lien on and pledge of the Pledged 27 Revenues which is subordinate to the liens of the Outstanding Refunding Bonds, Additional Bonds, Prior Lien Bonds and Prior Lien Additional Bonds, when and in the amounts required by any ordinance authorizing the issuance of such subordinate lien bonds; and 6. to the Improvement and Contingency Fund, when and as required by Section 19 of this Ordinance. Section 16. INTEREST AND SINKING FUND REQUIREMENTS. (a) That there has been created and there shall be established and maintained, a separate account within the Interest and Sinking Fund to be known as the "Prior Lien Additional Bonds Account", for the sole benefit of such bonds including the Prior Lien Bonds authorized by this Ordinance. Deposits shall be made to the credit of said Account monthly, on or before the lOth day of each month while any Prior Lien Bonds or any Prior Lien Additional Bonds are outstanding, in amounts sufficient, together with any other funds on hand therein, to pay all of the interest or principal and interest coming due, or required to be redeemed prior to maturity pursuant to any mandatory redemp- tion requirements, on the next succeeding June 15 or Decem- ber 15, respectively, all as required by any ordinance authorizing any such Prior Lien Additional Bonds. Such deposits shall be made in approximately equal monthly installments to the extent practicable. (b) That there has been created and there shall be established and maintained a separate account within the Interest and Sinking Fund to be known as the "Bonds and Additional Bonds Account", for the sole benefit of such bonds being the Outstanding Refunding Bonds. On or before July 10, 1983, and monthly, on or before the lOth day of each month thereafter, while any Bonds or Additional Bonds are outstandinq, deposits shall be made to the credit of said Account in amounts sufficient, together with any other funds on hand therein, to pay the interest or principal and interest cominq due, or required to be redeemed prior to maturity pursuant to the mandatory redemption requirements for the Outstanding Refunding Bonds, Bonds and Additional Bonds, on the next succeeding June 15 or December 15, respectively, all as required by this Ordinance and any ordinances authorizing any Additional Bonds. It is specifi- cally ordained that such deposits shall be sufficient to provide the funds necessary to redeem prior to maturity the principal amounts of the Bonds, respectively, when required to be redeemed pursuant to the mandatory redemption require- ment set forth on the faces of the Bonds and in the Form of Bonds, if any. Such deposits shall be made in approximately equal monthly installments to the extent practicable. 28 Section 17. PRIOR LIEN RESERVE FUND REQUIREMENTS. That the Issuer shall cause to be deposited in the Prior Lien Reserve Fund commencing December 10, 1988 and on or before June 10 and December 10 thereafter an amount equal to 1/lOth of the average annual principal and interest require- ments of the Prior Lien Bonds until the Prior Lien Reserve Fund contains an amount equal to the average annual princi- pal and interest requirements, for such initial Prior Lien Bonds or Additional Prior Lien Revenue Bonds. After the delivery of any other Prior Lien Additional Bonds the Issuer shall cause the Prior Lien Reserve Fund to be increased, if and to the extent necessary, so that such Fund will contain an amount of money and investments equal in market value to the average annual principal and interest requirements of all Prior Lien Additional Bonds which will be outstanding after such delivery. An amount of money and investments equal in market value to the average annual principal and interest requirements, of all Prior Lien Additional Bonds at any time outstanding is hereby designated as the "Required Prior Lien Reserve Amount". All or any part of the Prior Lien Reserve Fund may be funded from Pledged Revenues, or from proceeds from the sale of any Prior Lien Additional Bonds, or any other available source, or any combination of sources. All or any part of the Prior Lien Reserve Fund not funded initially and immediately after the delivery of any series or issue of Prior Lien Additional Bonds shall be funded, within not more than five years from such date of such delivery, by deposits of Pledqed Revenues in approxi- mately equal semiannual installments, made on or before the lOth day of each June and each December. Principal amounts of any Prior Lien Additional Bonds which must be redeemed pursuant to any applic-able mandatory redemption requirements shall be deemed to be maturing amounts of principal for the purpose of calculating principal and interest requirements of the Prior Lien Additional Bonds. When and so long as the amount in the Prior Lien Reserve Fund is not less than the Required Prior Lien Reserve Amount no deposits shall be made to the credit of the Prior Lien Reserve Fund; but when and if the Prior Lien Reserve Fund at any time contains less than the Required Prior Lien Reserve Amount, then the Issuer shall transfer from Pledged Revenues in the System Fund, semiannually on or before the lOth day of each June and of each December, a sum equal to 1/10th of the Required Prior Lien Reserve Amount, until the Prior Lien Reserve Fund is restored to the Required Prior Lien Reserve Amount. The Issuer specifically covenants that when and so long as the Prior Lien Reserve Fund contains the Required Prior Lien Reserve Amount, the Issuer shall cause all interest and income derived from the deposit or investment of the Prior Lien Reserve Fund to be deposited to the credit of the Prior Lien Additional Bonds Account in the Interest and Sinking Fund. 29 Section 18. RESERVE FUND REQUIREMENTS. That there is on deposit in the Reserve Fund $336,500, which is at least equal to the average annual principal and interest require- ments of the outstanding Refunding Bonds. After the deliv- ery of any Additional Bonds the Issuer shall cause the Reserve Fund to be increased, if and to the extent neces- sary, so that such fund will contain an amount of money and investments equal in market value to the average principal and interest requirements, of all Bonds and Additional Bonds which will be outstanding after such delivery. An amount of money and investments equal in market value to the average annual principal and interest requirements of all Bonds and Additional Bonds at any time outstanding is hereby desig- nated as the "Required Reserve Amount". Any increase in the Required Reserve Amount may be funded from Pledged Revenues, or from proceeds from the sale of any Additional Bonds, or any other available source or combination of sources. All or any part of the Required Reserve Amount not funded initially and immediately after the delivery of any install- ment or issue of Additional Bonds shall be funded, within not more than five years from the date of such delivery, by deposits of Pledged Revenues in approximately equal semi- annual installments on or before the lOth day of each June and each December. Principal amounts of the Bonds and any Additional Bonds which must be redeemed pursuant to any applicable mandatory redemption requirements shall be deemed to be maturing amounts of principal for the purpose of calculating principal and interest requirements on such bonds. When and so long as the amount in the Reserve Fund is not less than the Required Reserve Amount no deposits shall be made to the credit of the Reserve Fund; but when and if the Reserve Fund at any time contains less than the Required Reserve Amount, then the Issuer shall transfer from Pledged Revenues in the System Fund, and deposit to the credit of the Reserve Fund, semiannually on or before the lOth day of each June and of each December, a swa equal to 1/10th of the Required Reserve Amount, until the Reserve Fund is restored to the Required Reserve Amount. The Issuer specifically covenants that when and so long as the Reserve Fund contains the Required Reserve amount, the Issuer shall cause all interest and income derived from the deposit or investment of the Reserve Fund to be deposited to the credit of the Bonds and Additional Bonds Account in the Interest and Sinking Fund. Section 19. IMPROVEMENT AND CONTINGENCY FUND REQUIRE- MENTS. That subject to the priorities and deposits provided for and required under Section 15 of this Ordinance, the Issuer will, at the end of each fiscal year, cause all remaining surplus Pledged Revenues from the System Fund to be transferred and deposited to the credit of the Improve- ment and Contingency Fund, to be used as provided or permit- ted in Section 13 of this Ordinance. 30 Section 20. DEFICIENCIES; EXCESS PLEDGED REVENUES. (a) That if on any occasion there shall not be sufficient Pledged Revenues to make the required deposits into the Interest and Sinking Fund, the Prior Lien Reserve Fund, or the Reserve Fund, then such def iciency shall be made up as soon as possible from the next available Pledged Revenues. (b) That, subject to making the required deposits to the credit of the various Funds when and as required by this Ordinance or any ordinance authorizing the issuance of Addi- tional Parity Revenue Bonds, any surplus Pledged Revenues may be used by the Issuer for any lawful purpose. Section 21. PAYMENT OF BONDS AND ADDITIONAL PARITY REVENUE BONDS. On or before June 10, 1989, and semiannually on or before each December 10 and June 10 thereafter while any of the Prior Lien Bonds, Outstanding Refunding Bonds or Additional Parity Revenue Bonds are outstanding and unpaid the Issuer shall make available to the Paying Agent/Regis- trar therefor, out of the Interest and Sinking Fund, or if necessary, out of the Reserve Fund, or the Prior Lien Reserve Fund, as applicable, money sufficient to pay, on each of such dates, the principal of and interest on the Prior Lien Bonds, Outstanding Refunding Bonds and Additional Parity Revenue Bonds as the same matures and comes due, or to redeem the Prior Lien Bonds, Outstanding Refunding Bonds or Additional Parity Revenue Bonds prior to maturity, either upon mandatory redemption or at the option of the Issuer. The Paying Agent/Registrar shall destroy all paid Prior Lien Bonds, Outstanding Refunding Bonds and Additional Parity Revenue Bonds, and the coupons appertaining thereto, and furnish the Issuer with an appropriate certificate of cancellation or destruction. Section 22. FINAL DEPOSITS. (a) That any Bond or Additional Parity Revenue Bond shall be deemed to be paid, retired, and no longer outstanding within the meaning of this Ordinance when payment of the principal of, redemption premium, if any, on such Bond or Additional Parity Revenue Bond, plus interest thereon to the date thereof to such due date be by reason of maturity, upon redemption or otherwise) either (i) shall have been made or caused to be made in accordance with the terms thereof (including giving of any required notice of redemption), or (ii) shall have been provided by irrevocahly depositing or making available to a Paying Agent therefor, in trust and reasonably set aside exclusively for such payment, (1) money sufficient to make such payment or (2) Government Obligations which mature as to principal and interest in such amounts and at such times as will insure the availability without reinvestment, of sufficient money to make such payment, and all necessary and proper fees, compensation and expenses of such Paying Agent pertaining to the Bonds and Additional Parity Revenue Bonds 31 with respect to which such deposit is made shall have been paid or the payment thereof provided for to the satisfaction of such paying agent. At such time as a Bond or Additional Parity Revenue Bond shall be deemed to be paid hereunder, as aforesaid, it shall no longer be secured by or entitled to the benefits of this Ordinance or a lien on and pledge of the Pledged Revenues, and shall be entitled to payment solely from such money or Government Obligations. (b) That any moneys so deposited with a paying agent may at the direction of the Issuer also be invested in Government Obligations, maturing in the amounts and times as hereinbefore set forth, and all income from all Government Obligations in the hands of the paying agent pursuant to this Section which is not required for the payment of the Bonds and Additional Parity Revenue Bonds, the redemption premium, if any, and interest thereon, with respect to which such money has been so deposited, shall be turned over to the Issuer or deposited as directed by the Issuer. Section 23. ADDITIONAL PARITY REVENUE BONDS. (a) That the Issuer shall have the right and power at any time and from time to time, and in one or more Series or issues, to authorize, issue, and deliver additional parity revenue bonds (herein called "Additional Parity Revenue Bonds"), in accordance with law, in any amounts, for any lawful purpose, including the refunding of any Bonds, Additional Bonds, Prior Lien Additional Bonds, or other obligations. Such Additional Parity Revenue Bonds, if and when authorized, issued, and delivered in accordance with this Ordinance, may be either (1) bonds payable from and secured by an irrevoca- ble first lien on and pledge of the Pledged RPVenues ("Prior Lien Additional Bonds"), or (2) bonds payable from and secured by an irrevocable lien on and pledge of the Pledged Revenues subject and subordinate only to any Prior Lien Additional Bonds then outstanding or thereafter issued ("Additional Bonds") with such Additional Bonds to be on a parity in all respects with the Bonds, all as hereinafter provided. (b) Prior Lien Additional Bonds, if and when author- ized, issued, and delivered in accordance with this Ordi- nance, shall be payable from the Prior Lien Additional Bonds Account in the Interest and Sinking Fund, and shall be payable from and secured by an irrevocable first lien on and pledge of the Pledged Revenues, equally and ratably on a parity with all other Prior Lien Additional Bonds. Also, all Prior Lien Additional Bonds shall be additionally secured equally and ratably by the Prior Lien Reserve Fund, as provided in Sections 11 and 17 hereof. (c) Additional Bonds, if and when authorized, issued, and delivered in accordance with this Ordinance, shall be 32 payable from the Bonds and Additional Bonds Account in the Interest and Sinking Fund and shall be payable from and secured by an irrevocable lien on and pledge of the Pledged Revenues, subject and subordinate only to any Prior Lien Additional Bonds then outstanding or thereafter issued, equally and ratably on a parity with the Bonds and all other outstanding Additional Bonds. Also the Additional Bonds shall be additionally secured equally along with the Bonds by the Reserve Fund, as provided in Sections 12 and 18 hereof. (d) That the principal of and interest on all Addi- tional Parity Revenue Bonds must be scheduled to be paid or mature on June 15 and/or December 15 of the years in which such principal and interest are scheduled to be paid or mature. Section 24. FURTHER REQUIREMENTS FOR ADDITIONAL PARITY REVENUE BONDS. That Additional Parity Revenue Bonds shall be issued only in accordance with this Ordinance, and no installment, Series, or issue of Additional Parity Revenue Bonds shall be issued or delivered unless: (a) The Mayor of the Issuer and the City Secretary sign a written certificate to the effect that the Issuer is not in default as to any covenant, condition, or obligation in connection with all then outstanding Bonds and Additional Parity Revenue Bonds, and the ordinances authorizing same, and that the Interest and Sinking Fund, the Prior Lien Reserve Fund, and the Reserve Fund each contains the amount then required to be therein. (b) An independent certified public accountant, or independent firm of certified public accountants, acting by and through a certified public accountant, signs a written certificate to the effect that, in his or its opinion, during either the next preceding fiscal year, or any twelve consecutive calendar month period ending not more than ninety days prior to the passage of the ordinance authoriz- ing the issuance of the then proposed Additional Parity Revenue Bonds, the Pledged Revenues were: (1) if the then proposed bonds are to be Prior Lien Additional Bonds, at least 1.25 times an amount equal to the average annual nrincipal and interest requirements, of Prior Lien Additional Bonds which are payable from Pledged Revenues and which are scheduled to be outstanding after the delivery of the then proposed Prior Lien Additional Bonds, or (2) if the then proposed bonds are to be Addi- tional Bonds, at least equal to the aggregate of 1.10 times an amount equal to the average annual principal 33 and interest requirements of all then outstanding bonds of any nature or lien which are payable from Pledged Revenues and which are scheduled to be outstanding after the delivery of the then proposed Additional Bonds. It is specifically provided, however, that in calculat- ing the amount of Pledged Revenues for the purposes of this subsection (b), if there has been any increase in the rates or charges for services of the System which is then in effect, but which was not in effect during all or any part of the entire period for which the Pledged Revenues are being calculated (hereinafter referred to as the "entire period") then the certified public accountant shall deter- mine and certify the amount of Pledged Revenues as being the total of (i) the actual Pledged Revenues for the entire period, plus (ii) a sum equal to the aggregate amount by which the actual billings to customers of the System during the entire period would have been increased if such in- creased rates or charges had been in effect during the entire period. (c) If the then proposed bonds are to be Additional Bonds, an independent registered professional engineer of the State of Texas, or an independent firm of engineers acting by and through a registered professional engineer of the State of Texas, signs a written certificate to the effect that, in his or its opinion, during each fiscal year while any Bonds or Additional Bonds are scheduled to be outstanding, beginning with the fiscal year next following the date of the then proposed Additional Bonds, the Pledged Revenues estimated to be received during each of said fiscal years, respectively, will be at least equal to 1.25 times the principal and interest requirements, during each such fiscal year, respectively, of all bonds of any nature or lien which are payable from Pledged Revenues and which are scheduled to be outstanding after the issuance of the then proposed Additional Bonds. In arriving at such opinion there may be taken into consideration any prospective additions to the System or the Pledged Revenues, any sched- uled, projected, or reasonably expected changes in rates and charges, anticipated increases or decreases in Pledged Revenues or maintenance and operation expenses of the System, and any other factor which in his or its opinion would have a material impact on the Pledged Ravenues. (d) If the then proposed bonds are to be Prior Lien Additional Bonds, provision shall be made in the ordinance authorizinq their issuance for funding or increasing the Prior Lien Reserve Fund to the Required Prior Lien Reserve Amount as required by Section 17 hereof. 34 (e) If the then proposed bonds are to be Additional Bonds, provision shall be made in the ordinance authorizing their issuance for increasing the Reserve Fund to the Required Reserve Amount as required by Section 18 hereof. (f) That all calculations of principal and interest requirements of any bonds made in connection with the issuance of any then proposed Additional Parity Revenue Bonds shall be made as of the date of such Additional Parity Revenue Bonds; and also in making calculations for such purpose, and for any other purpose under this Ordinance, principal amounts of any bonds which must be redeemed prior to maturity pursuant to any applicable mandatory redemption requirements shall be deemed to be maturing amounts of principal of such bonds. Section 25. GENERAL COVENANTS. The Issuer further covenants and agrees that in accordance with and to the extent required or permitted by law: (a) Performance. It will faithfully perform at all times any and all covenants, undertakings, stipulations, and provisions contained in this Ordinance, and each ordinance authorizing the issuance of Additional Parity Revenue Bonds, and in each and every Bond and Additional Parity Revenue Bond; that it will promptly pay or cause to be paid the principal of and interest on every Bond and Additional Parity Revenue Bond, on the dates and in the places and manner prescribed in such ordinances and Bonds or additional Parity Revenue Bonds; and that it will, at the times and in the manner prescribed, deposit or cause to be deposited the amounts required to be deposited into the Interest and Sinking Fund, the Prior Lien Reserve Fund, and the Reserve Fund; and any holder of the Bonds or Additional Parity Revenue Bonds may require the Issuer, its officials, and employees, to carry out, respect, or enforce the covenants and obligations of this Ordinance, or any ordinance authob- izing the issuance of Additional Parity Revenue Bonds, y all legal and equitable means, including specifically, but without limitation, the use and filing of mandamus proceed- ings, in any court of competent jurisdiction, against the Issuer, its officials, and employees. (b) IQs'1e1'fS LeQal Authoritv. The Issuer is a duly created and existing home rule city of the State of •Texas, and is duly authorized under the laws of the State of Texas to create and issue the Bonds and Additional Parity Revenue Bonds; that all action on its part for the creation and issuance of the said obligations has been or will be duly and effectively taken, and that said obligations in the hands of the holders and owners thereof are and will be valid and enforceable special obligations of the Issuer in accordance with their terms. 35 (c) Title. The Issuer has or will obtain lawful title to the lands, buildings, structures, and facilities consti- tuting the System, that it warrants that it will defend the title to all the aforesaid lands, buildings, structures, and facilities, and every part thereof, for the benefit of the holders and owners of the Bonds and Additional Parity Revenue Bonds, against the claims and demands of all persons whomsoever, that it is lawfully qualified to pledge the Pledged Revenues to the payment of the Bonds and Additional Parity Revenue Bonds in the manner prescribed herein, and has lawfully exercised such rights. (d) Liens. It will from time to time and before the same become delinquent pay and discharge all taxes, assess- ments, and governmental charges, if any, which shall be lawfully imposed upon it, or the System, that it will pay all lawful claims for rents, royalties, labor, materials, and supplies which if unpaid might by law become a lien or charge thereon, the lien of which would be prior to or interfere with the liens hereof, so that the priority of the liens granted hereunder shall be fully preserved in the manner provided herein, and that it will not create or suffer to be created any mechanic's, laborer's, materialman's, or other lien or charge which might or could be prior to the liens hereof, or do or suffer any matter or thing whereby the liens hereof might or could be impaired; provided, however, that no such tax, assessment, or charge, and that no such claims which might be used as the basis of a mechanic's, laborer's, materialman's, or other lien or charqe, shall be required to be paid so long as the validity of the same shall be contested in good faith by the Issuer. (e) Ooeration of Svstem: No Free Service. While the Bonds or any Additional Parity Bonds are outstanding and unpaid the Issuer shall continuously and efficiently operate the System, and shall 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 Issuer or any of its agencies, instrumentalities, lessors, or concessionaires make use of the services and facilities of the System, payment monthly of the standard retail price of the services provided shall be made by the Issuer or any of its agencies, instrumentalities, lessors, or concessionaires out of funds from from sources other than the revenues of the System. (f) Further Encumbrance. While the Bonds or any Addi- tional Bonds are outstandinq and unpaid, the Issuer shall not additionally encumber the Pledged Revenues in any manner, except as permitted in this Ordinance in connection with Additional Parity Revenue Bonds, and as permitted in Section 25 hereof, unless said encumbrance is made junior and subordinate in all respects to the liens, pledges, 36 covenants, and agreements of this Ordinance and any ordi- nance authorizing the issuance of Additional Parity Revenue Bonds; but the right of the Issuer to issue revenue bonds payable from a subordinate lien on and the Pledged Revenues is specifically recognized and retained. (g) Sale or Disposal of Propertv. While the Bonds or any Additional Parity Revenue Bonds are outstanding and unpaid, the Issuer shall not sell, convey, mortgage, encum- ber, lease, or in any manner transfer title to, or dedicate to other use, or otherwise dispose of the System, or any significant or substantial part thereof; provided that whenever the Issuer deems it necessary to dispose of any property, machinery, fixtures, or equipment, or dedicate such property to other use, it may sell or otherwise dispose of such property, machinery, fixtures or equipment, or dedicate such property to other use, when it has made arrangements to replace the same or provide substitutes therefor, unless it is determined by resolution of the Zssuer Council that no such replacement or substitute is necessary. (h) Insurance. (1) The Issuer 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, includinq, to the extent reasonably obtainable, fire and extended coverage insurance, insurance against damage by floods, and use and occupancy insurance. Public liability and property damage insurance shall also be carried unless the Issuer Attorney gives a written opinion to the effect that the Issuer is not liable for claims which would be protected by such insurance. All insurance premi- ums shall be paid as an expense of operation of the System. At any time while any contractor engaged in construction work shall be fully responsible therefor, the Issuer shall not be required to carry insurance on the work being con- structed if the contractor is required to carry appropriate insurance. All such policies shall be open to the inspec- tion 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 Issuer shall make due proof of loss and shall do all things necessary or desirable to cause the insuring companies to make payment in full directly to the Issuer. The proceeds of insurance covering such property, together with any other funds necessary and available for such purpose, shall be used forthwith by the Issuer 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 37 pertaining to the System shall be deposited in a special and separate trust fund, at an official depository of the Issuer, to be designated the Insurance Account. The Insur- ance Account shall be held until such time as other funds become available which, together with the Insurance Account, will be sufficient to make the repairs or replacements originally required. (2) The annual audit hereinafter required may contain a section commenting on whether or not the Issuer 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. (i) Rate Covenant. The Issuer shall fix, establish, maintain, and collect, such rate, charges, and fees for the use and availability of the System at all times as are necessary to produce Gross Revenues sufficient, together with any other Pledged Revenues, (1) to pay all current operation and maintenance expenses of the System, and (2) produce an amount of Pledged Revenues during each fiscal year at least (i) equal to 1.25 times the principal and interest requirements during such fiscal year of all then outstanding Prior Lien Bonds, if any, and (ii) equal to 1.10 times the principal and interest requirements during each fiscal year of all then outstanding bonds of any nature or lien which are payable from Pledged Revenues. (j) Records. The Issuer 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 Ordinance, and all books, documents, and vouchers relating thereto shall at all reasonable times be made available for inspection upon request of any Bondholder or citizen of the Issuer. To the extent consistent with the provisions of this Ordinance, the Issuer shall keep its books and records in a manner conform- ing to standard accounting practices as usually would be followed by private corporations owning and operating a similar System, with appropriate recognition being given to essential differences between municipal and corporate accounting practices. (k) Audits. After the close of each fiscal year while any of the Bonds or any Additional Parity Revenue Bonds are outstanding, an audit will be made of the books and accounts relating to the System and the Pledged Revenues by an independent certified public accountant or an independent firm of certified public accountants. As soon as practica- ble after the close of each such year, and when said audit has been completed and made available to the Issuer, a copy 38 of such audit for the preceding year shall be mailed to the Municipal Advisory Council of Texas, to each paying agent for any bonds payable from Pledged Revenues, and to any Bondholders who shall so request in writing. The annual audit reports shall be open to the inspection of the Bond- holders and their agents and representatives at all reason- able times. (1) Governmental Aaencies. It will comply with all of the terms and conditions of any and all franchises, permits, and authorizations applicable to or necessary with respect to the System, and which have been obtained from any govern- mental agency; and the Issuer has or will obtain and keep in full force and effect all franchises, permits, authoriza- tion, and other requirements applicable to or necessary with respect to the acquisition, construction, equipment, opera- tion, and maintenance of the System. (m) No Comnetition. It 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 Issuer will prohibit any such competing facilities. (n) No Arbitraae. That the Issuer covenants to and with the purchasers of the Bonds and any Additional Parity Revenue Bonds that no use will be made of the proceeds of any of such bonds at any time throughout the term of any of such bonds which, if such use had been reasonably expected on the date of delivery of any of such bonds to and payment therefor by the purchasers, would have caused any of such bonds to be arbitrage bonds within the meaning of Section 103(c) of the Internal Revenue Code of 1954, as amended, or any regulations or rulings pertaining thereto; and by this covenant the Issuer is obligated to comply with the require- ments of the aforesaid Section 103(c) and all applicable and pertinent Department of the Treasury regulations relating to arbitrage bonds. The Issuer further covenants that the proceeds of all such bonds will not otherwise be used directly or indirectly so as to cause all or any part of such bonds to be or become arbitrage bonds within the meaning of the aforesaid Section 103(c), or any regulations pertaininq thereto. Section 26. AMENDMENT OF ORDINANCE. (a) The holders of Bonds and Additional Parity Revenue Bonds aggregating in principal amount of 51$ of the aggregate principal amount of then outstanding Bonds and Additional Parity Revenue Bonds shall have the right from time to time to approve any amendment to this Ordinance which may be deemed necessary or desirable by the Issuer, provided, however, that nothing herein contained shall permit or be construed to permit the 39 amendment of the terms and conditions in this Ordinance or in the Bonds or Additional Parity Revenue Bonds so as to: (1) Make any change in the maturity of the outstanding Bonds or Additional Parity Revenue Bonds; (2) Reduce the rate of interest borne by any of the outstanding Bonds or Additional Parity Revenue Bonds; (3) Reduce the amount of the principal payable on the outstanding Bonds or Additional Parity Revenue Bonds; (4) Modify the terms of payment of principal of or interest on the outstanding Bonds or Additional Parity Revenue Bonds, or impose any conditions with respect to such payment; (5) Affect the rights of the holders of less than all of the Bonds and Additional Parity Revenue Bonds then outstanding; (6) Change the minimum percentage of the princi- pal amount of Bonds and Additional Parity Revenue Bonds necessary for consent to such amendment. (b) If at any time the Issuer shall desire to amend the Ordinance under this Section, the Issuer shall cause notice of the proposed amendment to be published in a financial newspaper or journal published in the Issuer of New York, New York, once during each calendar week for at least two successive calendar weeks. Such notice shall briefly set forth the nature of the proposed amendment and shall state that a copy thereof is on file at the principal office of the Payinq Agents for inspection by all holders of Bonds and Additional Parity Revenue Bonds. Such publication is not required, however, if notice in writing is given to each holder of Bonds and Additional Parity Revenue Bonds. (c) Whenever at any time not less than thirty days, and within one year, from the date of the first publication of said notice or other service of written notice the Issuer shall receive an instrument or instrwnents executed by the holders of at least 51$ in aggregate principal amount of all Bonds and Additional Parity Revenue Bonds then outstanding, which instrument or instruments shall refer to the proposed amendment described in said notice and which specifically consent to and approve such amendment in substantially the form of the copy thereof on file with the Paying Agents, the Issuer Council may pass the amendatory ordinance in substan- tially the same form. 40 (d) Upon the passage of any amendatory ordinance pursuant to the provisions of this Section, this Ordinance shall be deemed to be amended in accordance with such amendatory ordinance, and the respective rights, duties, and obligations under this Ordinance of the Issuer, and all the holders of then outstanding Bonds and Additional Parity Revenue Bonds and all future Bonds and Additional Parity Revenue Bonds shall thereafter be determined, exercised, and enforced hereunder, subject in all respects to such amend- ments. (e) Any consent given by the holder of a Bond or Addi- tional Parity Revenue Bond pursuant to the provisions of this Section shall be irrevocable for a period of six months from the date of the first publication of the notice provid- ed for in this Section, and shall be conclusive and binding upon all future holders of the same Bond or Additional Parity Revenue Bond during such period. Such consent may be revoked at any time after six months from the date of the first publication of such notice by the holder who gave such consent, or by a successor in title, by filing notice thereof with the paying agents and the Issuer, but such revocation shall not be effective if the holders of 51% in aggregate principal amount of the then outstanding Bonds and Additional Parity Revenue Bonds as in this Section defined have, prior to the attempted revocation, consented to, and approved the amendment. (f) For the purpose of this Section, the fact of the holding of Bonds or Additional Parity Revenue Bonds by any bondholder and the amount and numbers of such Bonds or Addi- tional Parity Revenue Bonds and the date of their holding same, may be proved by the affidavit of the person claiming to be such holder, or by a certificate executed by any trust company, bank, banker, or any other depository wherever situated showing that at the date therein mentioned such person had on deposit with such trust company, bank, banker, or other depository, the Bonds and Additional Parity Revenue Bonds described in such certificate. The Issuer may conclu- sively assume that such ownership continues until written notice to the contrary is served upon the Issuer. Section 27. DEFEASANCE OF BONDS. (a) Any Bond and the interest thereon shall be deemed to be paid, retired, and no longer outstanding (a Defeased Bond") within the meaning of this Ordinance, except to the extent provided in subsection (d) of this Section, when payment of the princi- pal of such Bond, plus interest thereon to the due date (whether such due date be by reason of maturity, upon redemption, or otherwise) either (i) shall have been made or caused to be made in accordance with the terms thereof (including the giving of any required notice of redemption), or (ii) shall have been provided for on or before such due 41 date by irrevocably depositing with or making available to the Paying Agent/Registrar for such payment (1) lawful money of the United States of America sufficient to make such payment or (2) Government Obligations which mature as to principal and interest in such amounts and at such times as will insure the availability, without reinvestment, of sufficient money to provide for such payment, and when proper arrangements have been made by the Issuer with the Paying Agent/Registrar for the payment of its services until all Defeased Bonds shall have become due and payable. At such time as a Bond shall be deemed to be a Defeased Bond hereunder, as aforesaid, such Bond and the interest thereon shall no longer be secured by, payable from, or entitled to the benefits of, the revenues pledged as provided in this Ordinance, and such principal and interest shall be payable solely from such money or Government Obligations. (b) Any moneys so deposited with the Paying Agent/Reg- istrar may at the written direction of the Issuer also be invested in Government Obligations, maturing in the amounts and times as hereinbefore set forth, and all income from such Government Obligations received by the Paying Agent/ Registrar which is not required for the payment of the Bonds and interest thereon, with respect to which such money has been so deposited, shall be turned over to the Issuer, or deposited as directed in writing by the Issuer. (c) The term "Government Obligations" as used in this Section shall mean direct obligations of the United States of America, including obligations the principal of and interest on which are unconditionally guaranteed by the United States of America, which may be United States Treas- ury obligations such as its State and Local Government Series, which may be in book-entry form. (d) Until all Defeased Bonds shall have become due and payable, the Paying Agent/Registrar shall perform the services of Paying Agent/Registrar for such Defeased Bonds the same as if they had not been defeased, and the Issuer shall make proper arrangements to provide and pay for such services as required by this Ordinance. Section 28. DAMAGED, MUTILATED, LOST, STOLEN, OR DE- STROYED BONDS. (a) Replacement Bonds. In the event any outstanding Bond is damaged, mutilated, lost, stolen, or destroyed, the Paying Agent/Registrar shall cause to be printed, executed, and delivered, a new bond of the same principal amount, maturity, and interest rate, as the damaged, mutilated, lost, stolen, or destroyed Bond, in replacement for such Bond in the manner hereinafter pro- vided. 42 (b) Application for Renlacement Bonds. Application for replacement of damaged, mutilated, lost, stolen, or destroyed Bonds shall be made by the registered owner thereof to the Paying Agent/Registrar. In every case of loss, theft, or destruction of a Bond, the registered owner applying for a replacement bond shall furnish to the Issuer and to the Paying Agent/Registrar such security or indemnity as may be required by them to save each of them harmless from any loss or damage with respect thereto. Also, in every case of loss, theft, or destruction of a Bond, the registered owner shall furnish to the Issuer and to the Paying Agent/Registrar evidence to their satisfaction of the loss, theft, or destruction of such Bond, as the case may be. In every case of damage or mutilation of a Bond, the registered owner shall surrender to the Paying Agent/Regis- trar for cancellation the Bond so damaged or mutilated. (c) No Default Occurred. Notwithstanding the fore- going provisions of this Section, in the event any such Bond shall have matured, and no default has occurred which is then continuing in the payment of the principal of, redemp- tion premium, if any, or interest on the Bond, the Issuer may authorize the payment of the same (without surrender thereof except in the case of a damaged or mutilated Bond) instead of issuing a replacement Bond, provided security or indemnity is furnished as above provided in this Section. (d) Charae for Issuina Replacement Bonds. Prior to the issuance of any replacement bond, the Paying Agent/Reg- istrar shall charge the registered owner of such Bond with all legal, printing, and other expenses in connection therewith. Every replacement bond issued pursuant to the provisions of this Section by virtue of the fact that any Bond is lost, stolen, or destroyed shall constitute a contractual obligation of the Issuer whether or not the lost, stolen, or destroyed Bond shall be found at any time, or be enforceable by anyone, and shall be entitled to all the benefits of this Ordinance equally and proportionately with any and all other Bonds duly issued under this Ordin- ance. (e) Authoritv for Zssuina Replacement Bonds. In accordance with Section 6 of TEX. REV. CIV. STAT. ANN• art. 717k-6, as amended, this Section of this Ordinance shall constitute authority for the issuance of any such replace- ment bond without necessity of further action by the govern- ing body of the Issuer or any other body or person, and the duty of the replacement of such bonds is hereby authorized and imposed upon the Paying Agent/Reqistrar, and the Paying/ Agent/Registrar shall authenticate and deliver such Bonds in the form and manner and with the effect, as provided in Section 6(d) of this Ordinance for Bonds issued in conver- sion and exchange for other Bonds. 43 Section 29. CUSTODY, APPROVAL, AND REGISTRATION OF BONDS; BOND COUNSEL'S OPINION; CUSIP NUMBERS AND CONTINGENT INSURANCE PROVISION, IF OBTAINED. The Mayor of the Issuer is hereby authorized to have control of the Initial Bond issued hereunder and all necessary records and proceedings pertaining to the Initial Bond pending its delivery and its investigation, examination, and approval by the Attorney General of the State of Texas, and its registration by the Comptroller of Public Accounts of the State of Texas. Upon registration of the Initial Bond said Comptroller of Public Accounts (or a deputy designated in writing to act for said Comptroller) shall manually sign the Comptroller's Registra- tion Certificate on the Initial Bond, and the seal of said Comptroller shall be impressed, or placed in facsimile, on the Initial Bond. The approving legal opinion of the Issuer's Bond Counsel and the assigned CUSIP numbers may, at the option of the Zssuer, be printed on the Initial Bond or on any Bonds issued and delivered in conversion of and exchange or replacement of any Bond, but neither shall have any legal effect, and shall be solely for the convenience and information of the registered owners of the Bonds. In addition, if bond insurance is obtained, the Bonds may bear an appropriate legend as provided by the insurer. Section 30. COVENANTS REGARDING TAX EXEMPTION. The Issuer covenants to take any action or refrain from any action which would adversely affect the treatment of the Bonds as obligations described in Section 103 of the Inter- nal Revenue Code of 1986, as amended (the "Code"), the interest on which is not includable in the "gross income" of the holder for purposes of federal income taxation. In furtherance thereof, the Issuer covenants as follows: (a) to take any action to assure that no more than lo percent of the proceeds of the Bonds (less amounts deposited to a reserve fund, if any) are used for any "private busi- ness use," as defined in Section 141(b)(6) of the Code or, if more than 10 percent of the proceeds are so used, that amounts, whether or not received by the Issuer, with respect to such private business use, do not, under the terms of this Ordinance, or any underlyinq arrangement, directly or indirectly, secure or provide for the payment of more than 10 percent of the debt service on the Bonds, in contraven- tion of Section 141(b)(2) of the Code; (b) to take any action to assure that in the event that the "private business use" described in subsection (a) hereof exceeds 5 percent of the proceeds of the Bonds (less amounts deposited into a reserve fund, if any) then the amount in excess of 5 percent is used for a"private busi- ness use" which is "related" and not "disproportionate," within the meaning of Section 141(b)(3) of the Code, to the governmental use; 44 (c) to take any action to assure that no amount which is greater than the lesser of $5,000,000, or 5 percent of the proceeds of the Bonds (less amounts deposited into a reserve fund, if any) is directly or indirectly used to finance loans to persons, other than state or local govern- mental units, in contravention of Section 141(c) of the Code; (d) to refrain from taking any action which would otherwise result in the Bonds being treated as "private activity bonds" within the meaning of Section 141(b) of the Code; (e) to refrain from taking any action that would result in the Bonds being "federally guaranteed" within the meaning of Section 149(b) of the Code; (f) to refrain from using any portion of the proceeds of the Bonds, directly or indirectly, to acquire or to replace funds which were used, directly or indirectly, to acquire investment property (as defined in Section 148(b)(2) of the Code) which produces a materially higher yield over the term of the Bonds, other than investment property acquired with (1) proceeds of the Bonds invested for a reason- able temporary period of 3 years or less or, in the case of a refunding bond, for a period of 30 days or less until such proceeds are needed for the purpose for which the bonds are issued, (2) amounts invested in a bona fide debt sQrvice fund, within the meaning of Section 1.103-13(b)(12) of the Treasury Regulations, and (3) amounts deposited in any reasonably required reserve or replacement fund to the extent such amounts do not exceed 10 percent of the proceeds of the Bonds; (q) to otherwise restrict the use of the proceeds of the Bonds or amounts treated as proceeds of the Bonds, as may be necessary, so that the Bonds do not otherwise contra- vene the requirements of Section 148 of the Code (relating to arbitrage) and, to the extent applicable, Section 149(d) of the Code (relating to advance refundings); (h) to pay to the United States of America at least once during each five-year period (beginning on the date of delivery of the Bonds) an amount that is at least equal to 90 percent of the "Excess Earnings," within the meaning of Section 148(f) of the Code and to pay to the United States of America, not later than 60 days after the Bonds have been paid in full, 100 percent of the amount then required to be 45 paid as a result of Excess Earnings under Section 148(f) of the Code; and (i) to maintain such records as will enable the Issuer to fulfill its responsibilities under this Section and Section 148 of the Code and to retain such records for at least six years following the final payment of principal and interest on the Bonds. It is the understanding of the Issuer that the coven- ants contained herein are intended to assure compliance with the Code and any regulations or rulings promulgated by the U.S. Department of the Treasury pursuant thereto. In the event that regulations or rulings are hereafter promulgated which modify, or expand provisions of the Code, as applic- able to the Bonds, the Issuer will not be required to comply with any covenant contained herein to the extent that such modification or expansion, in the opinion of nationally-rec- ognized bond counsel, will not adversely affect the exemp- tion from federal income taxation of interest on the Bonds under Section 103 of the Code. In the event that regula- tions or rulings are hereafter promulgated which impose additional requirements which are applicable to the Bonds, the Issuer agrees to comply with the additional requirements to the extent necessary, in the opinion of nationally-recog- nized bond counsel, to preserve the exemption from federal income taxation of interest on the Bonds under Section 103 of the Code. Section 31. DESIGNATION AS QUALIFIED TAX-EXEMPT BONDS. The Issuer hereby designates the Bonds as "qualified tax-ex- empt bonds" as defined in Section 265(b)(3) of the Code. In furtherance of such designation, the Issuer represents, covenants and warrants the following: (a) that during the calendar year in which the Bonds are issued, the Issuer (including any subordinate entities) has not designated nor will designate bonds, which when aggregated with the Bonds, will result in more than $10,000,000 of "qualified tax- exempt bonds" being issued; and (b) that the Issuer reason- ably anticipates that the amount of tax-exempt obligations issued during the calendar year in which the Bonds are issued, by the Issuer (or any subordinate entities) will not exceed $10,000,000. Section 32. SALE OF INITIAL BOND. The Initial Bond is hereby sold and shall be delivered to CLAYTON BROWN & ASSOCIATES, INC. for the par value thereof and accrued interest thereon to date of delivery plus a premium of $350.65. It is hereby officially found, determined, and declared that the Initial Bond has been sold at public sale to the bidder offering the lowest interest cost, after receiving sealed bids pursuant to an Official Notice of Sale and Bidding Instructions and Official Statement dated July 46 28, 1988, prepared and distributed in connection with the sale of the Initial Bond. Said Official Notice of Sale and Bidding Instructions and Official Statement, and any adden- da, supplement, or amendment thereto have been and are hereby approved by the governing body of the Issuer, and their use in the offer and sale of the Bonds is hereby ap- proved. It is further officially found, determined, and declared that the statements and representations contained in said Official Notice of Sale and Official Statement are true and correct in all material respects, to the best knowledge and belief of the governing body of the Issuer. Section 33. EMERGENCY. It is hereby officially found and determined that a case of emergency or urgent public necessity exists which requires the holding of the meeting at which this Ordinance is passed, such emergency or urgent public necessity being that the proceeds from the sale of the proposed bonds are required as soon as possible and without delay for necessary and urgently needed public improvements; and that said meeting was open to the public, and public notice of the time, place and purpose of said meeting was given, all as required by Vernon's Ann. Civ. St. Article 6252-17. 47