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HomeMy WebLinkAboutOrdinance 1598 ORDINANCE NO. /;)~ 9<9 AN ORDINANCE authorizing the issuance of "CITY OF NORTH RICHLAND HILLS, TEXAS, WATERWORKS AND SEWER SYSTEM IMPROVEMENT AND REFUNDING REVENUE BONDS, SERIES 1989" and "CITY OF NORTH RICHLAND HILLS, TEXAS, WATERWORKS AND SEWER SYSTEM REFUNDING REVENUE BONDS, SERIES 1989-A"; specifying the terms and features of such Bonds; pledging the net revenues of the City's Waterworks and Sewer System to the payment of principal of and interest on such Bonds; enacting other provisions incident and related to the issuance, payment, sale and delivery of such Bonds including the approval and execution of a Purchase Contract and Special Escrow Agreement and the approval and distribution of an Official Statement; and providing an effective date. WHEREAS, the City of North Richland Hills, Texas (the "City") has duly issued and/or incurred certain outstanding obligations that aggregate in amount $10,485,000 and are payable from the Net Revenues of the City's Waterworks and Sewer System (hereinafter referred to as the "System"); such outstanding obligations (hereinafter referred to as the "Defeased ObI iga t ions") being those bonds des ignated "Ci ty of North Richland Hills, Texas, Waterworks and Sewer System Revenue Bonds" and more particularly described as follows: (1) Series 1980. dated September 1. 1980 (the "Series 1980 Bonds"). and now outstanding in the principal amount of $2.050.000 (2) Series 1983. dated June 1. 1983 (the "Series 1983 Bonds"). and now outstanding in the principal amount of 2.685.000 (3) Series 1984. dated August 1, 1984 (the "Series 1984 Bonds"), and now outstanding in the principal amount of 1,845.000 (4) Series 1986. dated June 1. 1986 (the "Series 1986 Bonds'). and now outstanding in the principal amount of 3,905,000 , AND WHEREAS, pursuant to the provisions of Article 717k, V.A.T.C.S., as amended, the City Council is authorized to issue refunding bonds and deposit the proceeds of sale thereof directly with any place of payment for any of the Defeased Obligations, and such deposit, when made in accordance with said statute, shall constitute the making of firm banking and financial arrangements for the discharge and final payment of the Defeased Obligations; and WHEREAS, the City Council has determined and hereby finds that the City's outstanding revenue bonded indebtedness should be restructured and certain onerous revenue coverage requirements for the issuance of additional parity bonds removed to minimize future rate increases in water and sewer rates, and the City will reduce interest costs substantially if such restructuring and elimination of onerous bond requirements is achieved in two (2) refunding transactions separated by thirty-one (31) days which will enable the City to avoid certain Federal tax law provisions governing the issuance of tax exempt obligations for advance refunding purposes that would require calling for early redemption certain outstanding low interest rate obligations of the City to be refunded; and WHEREAS, in addition to the revenue bonds to be issued to refund the Defeased Obligations, a "Notice of Intention to Issue Ci ty of North Richland Hi lls, Texas, Revenue Bonds" ln the principal amount not to exceed $2,000,000, maturing not later than December 31, 2010 and bearing interest at rate not to exceed 10% per annum, for the purpose of constructing improvements and extensions to the City's combined Waterworks and Sanitary Sewer System has been duly posted at the City Hall and published in the Mid Cities Newspaper, a newspaper hereby found and determined to be of general circulation in the City of North Richland Hills, Texas, in its issues dated February 19, 1989 and February 26, 1989, the date of posting and the date of the first publication of such notice being at least fourteen (14) days prior to March 13, 1989, the date stated therein when this Ordinance was scheduled to be considered for passage and adoption by the City Council; and WHEREAS, no petition, signed by 10% or more of the qualified voters of the City, has been submitted or filed with the City Secretary or other official of the City petitioning the City Council to submit to a referendum vote the question as to the issuance of the above revenue bonds for such purposes; and WHEREAS, the City Council hereby finds and determines that all such revenue bonds to be issued for refunding purposes and to finance the improvements and extensions to the City's -2- combined Waterworks and Sewer System should be issued and sold at this time as hereinafter provided and such revenue bonds can and should be issued on a parity with the City's outstanding revenue bonds (hereinafter defined and identified as the "Previously Issued Bonds"), payable from and secured by a first lien on and pledge of the Net Revenues of the City's Waterworks and Sewer System (the "System"), in that (a) the City is not now in default as to any covenant, condition or obligation contained in any of the ordinances authorizing the issuance of the outstanding Previously Issued Bonds, (b) each of the Funds created and established for the payment and security of the Previously Issued Bonds contains the amount of money now required to be deposited therein, (c) the net earnings of the System for the fiscal year next preceding the date of the bonds herein authorized are equal to at least 1.30 times the principal and interest requirements of the outstanding Previously Issued Bonds and the bonds herein authorized for the year when such requirements are the greatest, as shown by a report of a Certified Public Accountant, (d) the bonds herein authorized for issuance wi II mature on September 1 in each year, (e) this ordinance makes provision for the accumulation in the Interest and Sinking Fund of amounts sufficient to pay the principal of and interest on the bonds herein authorized for issuance and (f) this ordinance makes provision for the amount to be accumulated and maintained in the Reserve Fund to be equal to not less than the average annual requirements for the payment of principal of and interest on all bonds to be secured by a first lien on and pledge of the net revenues of the System, after giving effect to the issuance of the bonds herein authorized, and any additional Reserve Fund amount thus required shall be accumulated within not more than five years and one month from the date of passage of this ordinance; and WHEREAS, to preserve rights of the City under current federal income tax laws to advance refund certain of the bonds herein authorized with "tax exempt obligations" at a future date or dates, it is necessary for the City to issue and sell the refunding bonds herein authorized as two separate and distinct series of obligations according to the Defeased Obligations being refunded by such series or issue; now, therefore, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF NORTH RICHLAND HILLS, TEXAS: SECTION 1: Authorization-Designation-Principa1 Amount- Purpose - Date. Revenue bonds of the City, payable solely from the sources and secured in the manner hereinafter provided, to be designated and for the stated purposes, to wit: (i) "CITY OF NORTH RICHLAND HILLS, TEXAS, WATERWORKS AND SEWER SYSTEM IMPROVEMENT AND REFUNDING REVENUE BONDS, SERIES 1989" -3- (hereinafter referred to as the "Series 1989 Bonds") for the purpose of refunding certain outstanding revenue obligations of the City (identified in the preamble as the Series 1980 Bonds, the Series 1983 Bonds and the Series 1984 Bonds and totalling in amount $6,580,000), paying costs of issuance, and to provide funds in the amount of $2,000,000 for making improvements and extensions to the City's combined Waterworks and Sanitary Sewer System and (ii) "CITY OF NORTH RICHLAND HILLS, TEXAS, WATERWORKS AND SEWER SYSTEM REFUNDING REVENUE BONDS, SERIES 1989-A" (hereinafter referred to as the "Series 1989-A" Bonds) for the purpose of refunding certain outstanding revenue obligations of the City (identified in the preamble as the Series 1986 Bonds and totalling in amount $3,905,000) and paying costs of issuance, shall be and are hereby authorized to be issued in accordance wi th the authori ty conferred by the Constitution and laws of the State of Texas, particularly Articles 7l7k, 2368a and 1111 et seq., V.A.T.C.S., as amended, and pursuant to the City Charter. The Series 1989 Bonds and the Series 1989-A Bonds are hereinafter collectively referred to as the "Bonds". The Bonds shall be dated March 1, 1989 (the "Issue Date") and issued as fully registered obligations, without coupons. SECTION 2: Fully Registered Interest Paying/Non-Interest Paying Obligations - Terms. Both the Series 1989 Bonds and the Series 1989-A Bonds shall be issued in part as "Current Interest Bonds" (obligations paying accrued interest to the holders or owners on and at stated intervals prior to maturity or redemption) and in part as "Capital Appreciation Bonds" (obligations paying no accrued interest to the holders or owners prior to maturity). The Current Interest Bonds of each series (other than the Initial Bonds referenced in Section 7 hereof) shall be ln denominations of $5,000 or any integral multiple (within a Stated Maturity) thereof, shall be lettered "R- " and the definitive printed obligations of each series shall be numbered consecutively from One (1) upward. Furthermore, the Current Interest Bonds of each series shall bear interest (calculated on the basis of a 360-day year of twelve 30-day months) on the unpaid principal amounts from the Issue Date at the per annum rate(s) shown in the schedule hereafter appearing, and such interest shall be payable on March 1 and September 1 in each year, commencing September 1, 1989. The Capital Appreciation Bonds be issued in Maturity Amounts hereinafter defined] at maturity) of each series sha II each (the "Accreted Value" [as of $5,000, or any integral -4- multiple thereof within a Stated Maturity (except for the Initial Bonds referenced in Section 7 hereof), shall be lettered "CAB- " and the definitive printed obligations of each series shall be numbered consecutively from One (1) upward. Interest on the Capital Appreciation Bonds of each ser ies sha II accrue f rom the date of de I i very of the Bonds to the initial purchasers (April 18, 1989) and compound semiannually on March 1 and September 1 in each year, commencing September 1, 1989, until the Stated Maturity or earlier redemption thereof. The accrued interest on Capital Appreciation Bonds shall be payable at maturity or earlier redemption as a portion of the Maturity Amount. The term "Accreted Value", as herein used with respect to Capital Appreciation Bonds of each series, shall mean the original principal amount of a Capital Appreciation Bond plus interest thereon compounded semiannually to March 1 or September 1, as the case may be, next preceding the da te of such calculation (or the date of calculation, if such calculation is made on March 1 or September 1), at the respective interest rate(s) stated in the schedules hereinafter appearing therefor and, wi th respect to each $5,000 Accreted Value at maturity, as set forth in the Accreted Value tables appearing for each series in the Official Statement referred to in Section 32 hereof. For any day other than a March 1 or September 1, the Accreted Value of a Capital Appreciation Bond shall be determined by a straight line interpolation between the values for the applicable semiannual compounding dates (based on 30-day months). (a) Series 1989 Bonds: The Series 1989 Bonds shall be issued in the aggregate principal amount of $9,296,800.25 and in part as "Current Interest Bonds" totalling $8,025,000 in principal amount and in part as "Capital Appreciation Bonds" totalling $1,271,800.25 in original principal amount and aggregating in Maturity Amount $4,070,000. (I) Current Interest Bonds: The Current Interest Bonds of the Series 1989 Bonds shall become due and payable on September 1 in each of the years and in principal amounts (the "Stated Maturities") and bear interest at per annum rate(s) in accordance with the following schedule: -5- Stated Maturity Principal Amount Interest Rate(s) 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 $315,000 430,000 460,000 490,000 525,000 560,000 605,000 645,000 690,000 740,000 795,000 855,000 915,000 6.70% 6.75% 6.75% 7.00% 7.00% 7.125% 7.125% 7.25% 7.25% 7.25% 7.375% 7.375% 7.375% (2) Capital Appreciation Bonds. The Capital Appreciation Bonds of the Series 1989 Bonds shall be issued in the original principal amounts, which shall accrete in value on a semiannual basis at the interest rate(s) stated in the table below, and shall become due and payable on September 1 in each of the years (the "Stated Maturities") in the Maturity Amounts set forth in the following table: Stated Year of Original Principal Interest Maturity Maturity Amount Rate Amount 2002 $363,356.65 7.60% $985,000 2003 337,234.45 7.60% 985,000 2004 162,806.80 7.70% 520,000 2005 114,672.45 7.70% 395,000 2006 105,441.30 7.75% 395,000 2007 97,723.00 7.75% 395,000 2008 90,565.60 7.75% 395,000 (b) Series 1989-A Bonds: The Series 1989-A Bonds shall be issued in the aggregate principal amount of $4,041,763.75 and in part as "Current Interest Bonds" totalling $3,500,000 in principal amount and in part as "Capital Appreciation Bonds" totalling $541,763.75 in original principal amount and aggregating in Maturity Amount $1,730,000. (l) Current Interest Bonds: The Current Interest Bonds of the Series 1989-A Bonds shall become due and payable on September 1 in each of the years and in principal amounts (the "Stated Maturities") and bear interest at per annum rate(s) in accordance with the following schedule: -6- Stated Maturity Principal Amount Interest Rate(s) 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 $140,000 190,000 200,000 215,OOO 230,000 245,000 260,000 280,000 300,000 325,000 345,000 370,000 400,000 6.70% 6.75% 6.75% 7.00% 7.00% 7.125% 7.125% 7.25% 7.25% 7.25% 7.375% 7.375% 7.375% (2) Capital Appreciation Bonds. The Capital Appreciation Bonds of the Series 1989-A Bonds shall be issued in the original principal amounts, which shall accrete in value on a semiannual basis at the interest rate(s) stated in the table below, and shall become due and payable on September 1 in each of the yea rs (the "Stated Maturities") in the Maturity Amounts set forth in the following table: Stated Year of Original Principal Interest Maturity Maturity Amount Rate Amount 2002 $156,778.25 7.60% $425,000 2003 145,507.25 7.60% 425,000 2004 68,879.80 7.70% 220,000 2005 47,901.15 7.70% 165,000 2006 44,045.10 7.75% 165,000 2007 40,821.00 7.75% 165,OOO 2008 37,831.20 7.75% 165,OOO SECTION 3: Terms of Payment - Paying Agent/Registrar. The principal of, premium, if any, and the interest on the Bonds, due and payable by reason of maturity, redemption or otherwise, shall be payable only to the registered owners or holders of the Bonds (hereinafter called the "Holders") appearing on the respective registration and transfer books (the "Security Register") for each series of Bonds maintained by the Paying Agent/Registrar and the payment thereof shall be in any coin or currency of the United States of America, which at the time of payment is legal tender for the payment of public and private debts, and shall be without exchange or collection charges to the Holders. -7- The selection and appointment of TEXAS AMERICAN BANK/FORT WORTH, N.A., Fort Worth, Texas to serve as Paying Agent/Registrar for the Bonds is hereby approved and confirmed. The City covenants to maintain and provide a Paying Agent/Registrar at all times until the Bonds are paid and discharged, and any successor Paying Agent/Registrar shall be a bank, trust company, financial institution or other entity qualified and authorized to serve in such capacity and perform the duties and services of Paying Agent/Registrar. Upon any change in the Paying Agent/Registrar for the Series 1989 Bonds or Series 1989-A Bonds, the City agrees to promptly cause a wri tten notice thereof to be sent to each Ho lder by Uni ted States Mail, first class postage prepaid, which notice shall also give the address of the new Paying Agent/Registrar. The Bonds shall be payable at their Stated Maturities or upon their earlier redemption only upon the presentation and surrender to the principal office of the Paying Agent/Registrar. Interest on a Capital Appreciation Bond shall be payable at its Stated Maturity as a portion of the Accreted Value or Maturity Amount. Interest on a Current Interest Bond shall be paid to the Holders whose names appear in the Security Register at the close of business on the Record Date (the 15th day of the month next preceding each interest payment date) and shall be paid by the Paying Agent/Registrar (i) by check sent United States Mail, first class postage prepaid, to the address of the Holder recorded in the Security Register or (ii) by such other method, acceptable to the Paying Agent/Registrar, requested by, and at the risk and expense of, the Holder. If the date for the payment of the Bonds sha II be a Saturday, Sunday, a legal holiday, or a day when 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 when 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. In the event of a non-payment of interest on one or more maturities on a scheduled payment date on the Current Interest Bonds, and for thi rty (30) days thereafter, a new reco rd date for such interest payment for such maturity or maturities (a "Special Record Date") will be established by the Paying Agent/Registrar, if and when funds for the payment of such interest have been received from the City. Notice of the Special Record Date and of the scheduled payment date of the pas t due interes t (which sha 11 be 15 days after the Spec i a 1 Record Date) shall be sent at least five (5) business days prior to the Special Record Date by United States Mail, first -8- class postage prepaid, to the address of each Holder of the Current Interest Bonds appearing on the Security Register at the close of business on the last business day next preceding the date of mailing of such notice. SECTION 4: Redempt ion. (a) Opt iona 1 Redempt ion. ( 1) The Current Interest Bonds of both series having Stated Maturities on and after September 1, 2000, shall be subject to redemption prior to maturity, at the option of the City, in whole or in part in principal amounts of $5,000 or any integral multiple thereof (and if within a Stated Maturity by lot by the Paying Agent/ Registrar), on September 1, 1999 or on any interest payment date thereafter at the redemption price of par, together with accrued interest to the redemption date. (2) The Capital Appreciation Bonds of both series shall also be subject to redemption prior to maturity, at the option of the City, in whole or in part in Maturity Amounts of $5,000 or any integral multiple thereof (and if less than all Capital Appreciation Bonds for a year of maturity are to be redeemed, by lot by the Paying Agent/Registrar), on September I, 1999 or on any March 1 or September 1 thereafter at the redemption price equivalent to the "Accreted Value" as of the date of redemption (such Accreted Value to be calculated in accordance with the Accreted Value table referenced in Section 2 hereof and to appear on the Capital Appreciation Bonds). (b) Exercise of Redemption Option. At least forty-five (45) days prior to a date set for the redemption of Bonds (unless a shorter notification period shall be satisfactory to the Paying Agent/Registrar), the city shall notify the Paying Agent/Registrar of its decision to exercise the right to redeem Bonds, the series of Bonds to be redeemed, the principal amount (wi th respect to Current Interest Bonds) and Maturity Amount (with respect to Capital Appreciation Bonds) of each Stated Maturity to be redeemed, and the date set for the redemption thereof. The decision of the City to exercise the right to redeem Bonds shall be entered in the minutes of the governing body of the City. (c) Select ion of Bonds for Redempt ion. I f less than a II Outstanding Current Interest Bonds or Capital Appreciation Bonds of the same series and same Stated Maturity are to be redeemed on a redemption date, the Paying Agent/Registrar shall treat such Bonds as representing the number of Bonds Outstanding which is obtained by dividing the principal amount (wi th respect to Current Interest Bonds) and Maturi ty Amount (with respect to Capital Appreciation Bonds) by $5,000 and shall select the Current Interest Bonds or Capital Appreciation Bonds of like series, as the case may be, to be redeemed within such Stated Maturity, by lot. -9- (d) Notice of Redemption. Not less than thirty (30) days prior to a redemption date for the Bonds, a notice of redemption shall be sent by United States Mail, first class postage prepaid, in the name of the Ci ty and at the Ci ty' s expense, to each Holder of a Bond to be redeemed in whole or in part at the address of the Holder appearing on the Security Register at the close of business on the last business day next preceding the date of mailing such notice, and any notice of redemption so mailed shall be conclusively presumed to have been duly given irrespective of whether received by the Holder. All not ices of redempt ion sha II ( i) spec i fy the date 0 f redemption for the Bonds, (ii) identify by series and number the Bonds to be redeemed and, in the case of a portion of the principal amount or Maturity Amount, as the case may be, to be redeemed, the principal amount thereof (with respect to Current Interest Bonds) or Maturity Amount (with respect to Capital Appreciation Bonds) to be redeemed, (iii) state the redemption price, (iv) state that the Bonds, or the portion of the principal amount or Maturity Amount, as the case may be, to be redeemed, shall become due and payable on the redemption date specified, and the accruing of interest, or the accretion in value, as the case may be, shall cease from and after the redemption date, and (v) specify that payment of the redemption price for the Bonds, or the principal amount or Maturity Amount, as the case may be, to be redeemed, sha II be made at the principal office of the Paying Agent/ Registrar only upon presentation and surrender of the Bonds to be redeemed, in whole or in part, by the Holder. If a Bond is subject by its terms to prior redemption and has been called for redemption and notice of redemption has been duly given or waived as herein provided, such Bond (or the principal amount or Maturity Amount, as the case may be, to be redeemed) sha 11 become due and payable, and accruing interest thereon and the accretion in va 1ue of such Bonds, or po rt ion thereof, to be redeemed sha 1l cease from and after the redemption date therefor, provided moneys sufficient for the payment of such Bonds (or of the principal amount or Maturity Amount, as the case may be, to be redeemed) at the then applicable redemption price are held for the purpose of such payment by the Paying Agent/Registrar. SECTION 5: Registration - Transfer - Exchange of Bonds Predecessor Bonds. A separate Security Register for the Series 1989 Bonds and for the Series 1989-A Bonds (each Security Register relating to the registration, payment, and transfer or exchange of the bonds of such series) shall at all times be kept and maintained by the City at the principal office of the Paying Agent/Registrar, as provided herein and in accordance with the provisions of an agreement with the Paying Agent/Registrar and such rules and regulations as the Paying -10- Agent/Registrar and the City may prescribe. The Paying Agent/Registrar shall obtain, record, and maintain in the appropriate Security Register the name and address of each registered owner of the Bonds issued under and pursuant to the provisions of this Ordinance. Any Bond may, in accordance with its terms and the terms hereof, be transferred or exchanged for Bonds of the same series, of like kind (Current Interest Bonds or Capital Appreciation Bonds), of other authorized denominations upon the Security Register by the Holder, in person or by his duly authorized agent, upon surrender of such Bond to the Paying Agent/Registrar for cancellation, accompanied by a written instrument of transfer or request for exchange duly executed by the Holder or by his duly authorized agent, in form satisfactory to the Paying Agent/Registrar. Upon surrender for transfer of any Bond at the principal office of the Paying Agent/Registrar, the Paying Agent/Registrar shall register and deliver, in the name of the designated transferee or transferees, one or more new Bonds, executed on behalf of, and furnished by, the City of like series, of authorized denominations and of like Stated Maturity and of a like aggregate principal amount (with respect to Current Interest Bonds) or Maturity Amount (with respect to Capital Appreciation Bonds) as the Bond or Bonds surrendered for transfer. At the option of the Holder, Bonds may be exchanged for other Bonds of the same series, of authorized denominations and having the same Stated Maturity, bearing the same rate of interest and of like aggregate principal amount (with respect to Current Interest Bonds) or Maturity Amount (with respect to Capital Appreciation Bonds) as the Bonds surrendered for exchange, upon surrender of the Bonds to be exchanged at the principal office of the Paying Agent/ Registrar. Whenever any Bonds are surrendered for exchange, the Paying Agent/Registrar shall register and deliver new Bonds, executed on behalf of, and furnished by, the City, to the Holder requesting the exchange. All Bonds issued upon any such transfer or exchange shall be delivered at the principal office of the Paying Agent/Registrar, or sent by United States Mail, first class postage prepaid, to the Holder and, upon the delivery thereof, the same shall be valid obligations of the City, evidencing the same obligation to pay, and entitled to the same benefits under this Ordinance, as the Bonds surrendered in such transfer or exchange. -11- All transfers or exchanges of Bonds pursuant to this Section shall be made without expense or service charge to the Holder, except as otherwise herein provided, and except that the Paying Agent/Registrar shall require payment by the Holder requesting such transfer or exchange of any tax or other governmental charges required to be paid with respect to such transfer or exchange. Bonds cancelled by reason of an exchange or transfer pursuant to the provisions hereof are hereby defined to be "Predecessor Bonds," evidencing all or a portion, as the case may be, of the same obligation to pay evidenced by the Bond or Bonds registered and delivered in the exchange or transfer therefor. Additionally, the term "Predecessor Bonds" shall include any mutilated, lost, destroyed, or stolen Bond for which a replacement Bond has been issued, registered and delivered in lieu thereof pursuant to Section 28 hereof and such new replacement Bond shall be deemed to evidence the same obligation as the mutilated, lost, destroyed, or stolen Bond. Neither the City nor the Paying Agent/Registrar shall be required to transfer or exchange any Bond called for redemption, in whole or in part, within 45 days of the date fixed for redemption of such Bond; provided, however, such limitation on transferability shall not be applicable to an exchange by the Holder of the unredeemed balance of a Bond called for redemption in part. SECTION 6: Execution Registration. The Bonds of each series shall be executed on behalf of the City by the Mayor under its seal reproduced or impressed thereon and countersigned by the Ci ty Secretary. The signature of said officers on the Bonds may be manual or facsimile. Bonds bearing the manual or facsimile signatures of individuals who are or were the proper officers of the City on the Issue Date shall be deemed to be duly executed on behalf of the City, notwithstanding that such individuals or either of them shall cease to hold such offices at the time of delivery of the Bonds to the ini t i a 1 purchaser (s) and wi th respect to Bonds of each series delivered in subsequent exchanges and transfers, all as authorized and provided in the Bond Procedures Act of 1981, as amended. No Bond of either series shall be entitled to any right or benefit under this Ordinance, or be valid or obligatory for any purpose, unless there appears on such Bond either a certificate of registration substantially in the form provided in Section 8C, manually executed by the Comptroller of Public Accounts of the State of Texas or his duly authorized agent, or a certificate of registration substantially in the form -12- provided ln Section 8D, manually executed by officer, employee or representative of the Registrar, and either such certificate upon signed shall be conclusive evidence, and the that such Bond has been duly certified, delivered. an authorized Paying Agent/ any Bond duly only evidence, reg i s tered and SECTION 7: Ini tial Bonds. The Series 1989 Bonds herein authorized shall be initially issued as two (2) fully registered bonds, being (i) a single fully registered Current Interest Bond in the aggregate principal amount shown in Section 2(a) hereof with principal installments to become due and payable as provided in Section 2 (a) (I) hereof and numbered TR-1 and (ii) a single fully registered Capital Appreciation Bond in the aggregate Maturity Amount appearing in Section 2(a) hereof with installments of such Maturity Amount to become due and payable as provided in Section 2(a)(2) hereof and numbered TCAB-I. The Series 1989-A Bonds shall be initially issued as two (2) fully registered bonds, being (i) a single fully registered Current Interest Bond in the aggregate principal amount appearing in Section 2(b) hereof with principal installments to become due and payable as provided in Section 2 (b) (1) hereof and numbered TR-l and (ii) a single fully registered Capital Appreciation Bond in the aggregate Maturity Amount appearing in Section 2(b) hereof with installments of such Maturity Amount to become due and payable as provided in Section 2(b)(2) hereof and numbered TCAB-1. The two (2) initial bonds of each series (hereinafter collectively called the "Initial Bonds") shall be registered in the name of the initial purchaser(s), or the designee thereof. The Initial Bonds shall be the Bonds of each series submitted to the Office of the Attorney General of the State of Texas for approval, certified and registered by the Office of the Comptroller of Public Accounts of the State of Texas and delivered to the initial purchaser(s). Any time after the delivery of the Initial Bonds, the Paying Agent/Registrar, pursuant to written instructions from the initial purchaser(s), or the designee thereof, shall cancel the Initial Bonds delivered hereunder and exchange therefor definitive Bonds of like series, of authorized denominations, Stated Maturities, principal amounts (with respect to Current Interest Bonds) or Maturi ty Amounts (wi th respect to Capi ta 1 Appreciation Bonds) and bearing applicable interest rates for transfer and delivery to the Holders named at the addresses identified therefor; all pursuant to and in accordance with such written instructions from the initial purchaser(s), or the designee thereof, and such other information and documentation as the Paying Agent/Registrar may reasonably require. -13- SECTION 8: Forms. A. Forms Generally. The Bonds, the Registration Certificate of the Comptroller of Public Accounts of the State of Texas, the Certificate of Registration, and the form of Assignment to be printed on each of the Bonds, shall be substantially in the forms set forth in this Section with such appropriate insertions, omissions, substitutions, and other variations as are permitted or required by this Ordinance and may have such letters, numbers, or other marks of identification (including identifying numbers and letters of the Committee on Uniform Securities Identification Procedures of the American Bankers Association) and such legends and endorsements (including insurance legends on insured Bonds and any reproduction of an opinion of counsel) thereon as may, consistently herewith, be established by the City or determined by the officers executing such Bonds as evidenced by their execution thereof. Any portion of the text of any Bonds may be set forth on the reverse thereof, with an appropriate reference thereto on the face of the Bond. The definitive Bonds shall be printed, lithographed, or engraved or produced in any other similar manner, all as determined by the officers executing such Bonds as evidenced by the execution thereof, but the Initial Bonds submitted to the Attorney General of Texas may be typewritten or photocopied or otherwise reproduced. B. Form of Definitive Bond. CURRENT INTEREST BONDS REGISTERED NO. REGISTERED $ UNITED STATES OF AMERICA STATE OF TEXAS CITY OF NORTH RICHLAND HILLS, TEXAS WATERWORKS AND SEWER SYSTEM (1) BOND, SERIES 19-1ll. Issue Date: March 1. 1989 Interest Rate: Stated Maturity: CUSIP NO: Registered Owner: Principal Amount: DOLLARS (1) "Improvement and Refunding Revenue" for the Series 1989 Bonds or "Refunding Revenue" for the Series 1989-A Bonds. (2) 89 or 89-A -14- The City of North Richland Hills (hereinafter referred to as the "Ci ty" ), a body co rpo rate and munic ipa 1 corpor at ion in the County of Tarrant, State of Texas, for value received, hereby promises to pay to the order of the Registered Owner named above, or the registered assigns thereof, solely from the revenues hereinafter identified, on the Stated Maturity date specified above the Principal Amount stated above (or so much thereof as shall not have been paid upon prior redemption) and to pay interest on the unpaid Principal Amount from the Issue Date at the per annum rate of interest specified above computed on the basis of a 360-day year of twelve 30-day months; such interest being payable on March 1 and September I of each year, commencing September 1, 1989. Principal of this Bond is payable at its Stated Maturity or redemption to the registered owner hereof, upon presentation and surrender at the principal office of the Paying Agent/Registrar executing the registration certificate appearing hereon, or its successor. Interest is payable to the registered owner of this Bond (or one or more Predecessor Bonds, as defined in the Ordinance hereinafter referenced) whose name appears on the "Security Register" maintained by the Paying Agent/Registrar at the close of business on the "Record Date", which is the 15th day of the month next preceding each interest payment date, and interest shall be paid by the Paying Agent/Registrar by check sent United states Mail, first class postage prepaid, to the address of the registered owner recorded in the Security Register or by such other method, acceptable to the Paying Agent/Registrar, requested by, and at the risk and expense of, the registered owner. All payments of principal of, premium, if any, and interest on this Bond shall be without exchange or collection charges to the registered owner hereof and in any coin or currency of the United States of America which at the time of payment is legal tender for the payment of public and private debts. SERIES 1989 BONDS ONLY: This Bond lS one of the serIes specified in its title issued in the aggregate principal amount of $9,296,800.25 (herein referred to as the "Bonds") for the purpose of refunding certain outstanding revenue obligations of the City (identified in the Ordinance), paying costs of issuance and to provide funds in the amount of $2,000,000 for making improvements and extensions to the City's combined Waterworks and Sanitary Sewer System, under and in strict conformity with the Constitution and laws of the State of Texas, including Articles 717k, 2368a and III I et seq., V.A.T.C.S., as amended, and pursuant to an Ordinance adopted by the governing body of the City (herein referred to as the "Ordinance"). The Bonds are issued in part as "Current Interest Bonds", which total in principal amount $8,025,000 and pay accrued interest at stated intervals to registered -15- owners and ln part as "Capital Appreciation Bonds", which total in original principal amount of $1,271,800.25 and pay no accrued interest prior to their Stated Maturities. SERIES 1989-A BONDS ONLY: This Bond is one of the series specified in its title issued in the aggregate principal amount of $4,041,763.75 (herein referred to as the "Bonds") for the purpose of refunding certain outstanding revenue obligations of the City (identified in the Ordinance), and paying costs of issuance, under and in strict conformity with the Constitution and laws of the State of Texas, including Article 717k, V.A.T.C.S., as amended, and pursuant to an Ordinance adopted by the governing body of the City (herein referred to as the "Ordinance") . The Bonds are issued in part as "Current Interest Bonds", which total in principal amount $3,500,000 and pay accrued interest at stated intervals to registered owners and in part as "Capital Appreciation Bonds", which total in original principal amount of $541,763.75 and pay no accrued interest prior to their Stated Maturities. The Current Interest Bonds maturing on and after September I, 2000, may be redeemed prior to their Stated Maturities, at the option of the City, in whole or in part in principal amounts of $5,000 or any integral multiple thereof (and if within a Stated Maturity by lot by the Paying Agent/Registrar), on September 1, 1999 or on any interest payment date thereafter at the redemption price of par, together with accrued interest to the redemption date. At least thirty days prior to the date fixed for any redemption of Bonds, the City shall cause a written notice of such redemption to be sent by United States Mail, first class postage prepaid, to the registered owners of each Bond to be redeemed at the address shown on the Security Register and subject to the terms and provisions relating thereto contained in the Ordinance. If this Bond (or any portion of the principal sum hereof) shall have been duly called for redemption and notice of such redemption duly given, then upon such redemption date this Bond (or the portion of the principal sum hereof to be redeemed) sha II become due and payable, and, if moneys for the payment of the redemption price and the interest accrued on the principal amount to be redeemed to the date of redemption are held for the purpose of such payment by the Paying Agent/Registrar, interest shall cease to accrue and be payable from and after the redemption date on the principal amount hereof redeemed. In the event of a partial redemption of the principal amount of this Bond, payment of the redemption price of such principal amount shall be made to the registered owner only -16- upon presentation and surrender of this Bond to the principal office of the Paying Agent/Registrar and, there shall be issued, without charge therefor, to the registered owner hereof, a new Bond or Bonds of like maturity and interest rate in any authorized denominations provided in the Ordinance for the then unredeemed balance of the principal sum hereof. If this Bond is called for redemption, in whole or in part, the City and the Paying Agent/Registrar shall not be required to transfer this Bond to an assignee of the Holder within 45 days of the redemption date therefor; provided, however, such limitation on transferability shall not be applicable to an exchange by the Holder of the unredeemed balance hereof in the event of its redemption in part. The Bonds are special obligations of the City and, together with the outstanding and unpaid Previously Issued Bonds (identified and defined in the Ordinance) and the "Ci ty of North Richland Hills, Texas, Waterworks and Sewer System (I) It (authorized for issuance concurrently with the Bonds), are payable solely from and equally and ratably secured by a first lien on and pledge of the Net Revenues (as defined in the Ordinance) of City's combined Waterworks and Sanitary Sewer System (the "System"). The Bonds do not constitute a legal or equitable pledge, charge, lien or encumbrance upon any property of the Ci ty or the System, except wi th respect to the Net Revenues thereof. 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. Subject to satisfying the terms and conditions prescribed therefor, the City has reserved the right to issue additional revenue obligations payable from and equally and ratably secured by a parity lien on and pledge of the Net Revenues of the System, in the same manner and to the same extent as the Bonds. Reference is hereby made to the Ordinance, a copy of which is on file ln the principal office of the Paying Agent/Registrar, and to all of the provisions of which the Holder by the acceptance hereof hereby assents, for definitions of terms; the description of and the nature and extent of the security for the Bonds; the properties constituting the System; the Net Revenues pledged to the payment of the principal of and interest on the Bonds; the nature and extent and manner of enforcement of the lien and pledge securing the payment of the Bonds; the terms and condi tions for the issuance of addi tional revenue obligations; the terms and conditions relating to the transfer or exchange of this Bond; the conditions upon which ( 1) "Refunding Revenue Bonds, Series 1989-A" 1989 Bonds and It Improvement and Refunding Series 1989" for the Series 1989-A Bonds for the Revenue Series Bonds, -17- the Ordinance may be amended or supplemented; the rights, duties, and obligations of the City and the Paying Agent/Registrar; the terms and provisions upon which the liens, pledges, charges and covenants made therein may be discharged at 0 r pr ior to the matur i ty 0 r redempt ion of thi s Bond, and this Bond deemed to be no longer Outstanding thereunder; and for the other terms and provis ions conta ined therein. Capi talized terms used herein have the same meanings assigned in the Ordinance. This Bond, subject to certain limitations contained in the Ordinance, may be transferred on the Security Register only upon its presentation and surrender at the principal office of the Paying Agent/Registrar, with the Assignment hereon duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Paying Agent/Registrar duly executed by, the registered Qwner hereof, or his duly authorized agent. When a transfer on the Securi ty Register occurs, one or more new fully registered Bonds of the same Stated Maturity, of authorized denominations, bearing the same rate of interest, and of the same aggregate principal amount will be issued by the Paying Agent/Registrar to the designated transferee or transferees. The City and the Paying Agent/Registrar, and any agent of either, may treat the registered owner hereof whose name appears on the Security Register (i) on the Record Date as the owner entitled to payment of interest hereon, (ii) on the date of surrender of this Bond as the owner entitled to payment of principal hereof at its Stated Maturity or its redemption, in whole or in part, and (iii) on any other date as the owner for all other purposes, and neither the City nor the Paying Agent/Registrar, or any agent of either, shall be affected by notice to the contrary. In the event of non-payment of interest on one or more maturities on a scheduled payment date and for thirty (30) days thereafter, a new record date for such interest payment for such maturity or maturities (a "Special Record Date") wi 11 be established by the Paying Agent/Registrar, if and when funds for the payment of such interest have been received from the City. Notice of the Special Record Date and of the scheduled payment date of the past due interest (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 Holder of such maturity or maturities appearing on the Security Register at the close of business on the last business day next preceding the date of mailing of such notice. -lB- It is hereby certified, recited, represented and covenanted that the City is a duly organized and legally existing municipal corporation under and pursuant to the Constitution and laws of the state of Texas; that the issuance of the Bonds is duly authorized by law; that all acts, condi tions and things requi red to exist and be done precedent to and in the issuance of the Bonds to render the same lawful and valid obligations of the City have been properly done, have happened and have been performed in regular and due time, form and manner as required by the Constitution and laws of the State of Texas, and the Ordinance; that the Bonds do not exceed any constitutional or statutory limitation; and that due provision has been made for the payment of the principal of and interest on the Bonds by a pledge of the Net Revenues of the System as aforestated. In case any provision in this Bond or any application thereof shall be invalid, illegal, or unenforceable, the validity, legality, and enforceability of the remaining provisions and applications shall not in any way be affected or impa i red thereby. The terms and provisions of this Bond and the Ordinance shall be construed in accordance .with and shall be governed by the laws of the State of Texas. IN WITNESS WHEREOF, the City Council of the City has caused this Bond to be duly executed under the official seal of the City as of the Issue Date. CITY OF NORTH RICHLAND HILLS, TEXAS COUNTERSIGNED: Mayor City Secretary (SEAL) -19- CAPITAL APPRECIATION BONDS REGISTERED NO. CAB- REGISTERED $ UNITED STATES OF AMERICA STATE OF TEXAS CITY OF NORTH RICHLAND HILLS, TEXAS WATERWORKS AND SEWER SYSTEM (I) BOND, SERIES 19 (2) Issue Date: March 1, 1989 Stated Interest Rate: % Stated Maturity: CUSIP NO: Registered Owner: Maturity Amount: DOLLARS The City of North Richland Hills (hereinafter referred to as the "City"), a body corporate and municipal corporation in the County of Tarrant, State of Texas, for value received, hereby promises to pay to the order of the Registered Owner named above, or the registered assigns thereof, solely from the revenues hereinafter identified, on the Stated Maturity date specified above the Maturity Amount stated above (or so much thereof as shall not have been paid upon prior redemption). The Maturi ty Amount of this Bond represents the accretion of the original principal amount of this Bond from the date of delivery to the initial purchasers (April 18, 1989) to the Stated Maturity and such accretion in value occuring at the above Stated Interest Rate and compounding on September I, 1989, and semiannually thereafter on March 1 and September 1. A table of the "Accreted Values" per $5,000 "Accreted Value" at maturity is printed on the reverse side of this Bond. The term "Accreted Value", as used herein, means the original principal amount of this Bond plus the interest thereon compounded semiannually to March 1 or September 1, as the case may be, next preceding the date of such calculation (or the date of calculation, if such calculation is made on March I or September 1) at the Stated Interest Rate for the Stated Maturity shown above and in the Table of Accreted Values printed hereon. For any date other than March land September 1, the Accreted Value of this Bond shall be determined by a straight line interpolation between the values for the applicable semiannual compounding dates (based on 30-day months) . (1) "Improvement and Refunding Revenue" for the Series 1989 Bonds and "Refunding Revenue" for the Series 1989-A Bonds (2) 89 or 89-A -20- This Bond 1S payable to the registered owner hereof, upon presentation and surrender, to the principal office of the Paying Agent/Registrar executing the registration certificate appearing hereon, or its successor. Payment of this Bond shall be without exchange or collection charges to the owner hereof and in any coin or currency of the United States of America which at the time of payment is legal tender for the payment of public and private debts. SERIES 1989 BONDS ONLY: This Bond is one of the series specified in its title issued in the aggregate principal amount of $9,296,800.25 (herein referred to as the "Bonds") for the purpose of refunding certain outstanding revenue obligations of the City (identified in the Ordinance), paying costs of issuance and to provide funds in the amount of $2,000,000 for making improvements and extensions to the City's combined Waterworks and Sanitary Sewer System, under and in strict conformity with the Constitution and laws of the State of Texas, including Articles 717k, 2368a and llll et seq., V.A.T.C.S., as amended, and pursuant to an Ordinance adopted by the governing body of the City (herein referred to as the "Ordinance"). The Bonds are issued in part as "Current Interest Bonds", which total in principal amount $8,025,000 and pay accrued interest at stated intervals to registered owners and in part as "Capi ta 1 Apprec i at ion Bonds", which tota I in original principal amount of $1,271,800.25 and pay no accrued interest prior to their Stated Maturities. SERIES 1989-A BONDS ONLY: This Bond is one of the series specified in its title issued in the aggregate principal amount of $4,041,763.75 (herein referred to as the "Bonds") for the purpose of refunding certain outstanding revenue obligations of the City (identified in the Ordinance) and paying costs of issuance, under and in strict conformity with the Constitution and laws of the State of Texas, including Article 717k, V.A.T.C.S., as amended, and pursuant to an Ordinance adopted by the governing body of the City (herein referred to as the "Ordinance"). The Bonds are issued in part as "Current Interest Bonds", which total in principal amount $3,500,000 and pay accrued interest at stated intervals to registered owners and in part as "Capital Appreciation Bonds", which total in original principal amount of $541,763.75 and pay no accrued interest prior to their Stated Maturities. The Capital Appreciation Bonds may be redeemed prior to their Stated Maturities, at the option of the City, in whole or in part in Maturity Amounts of $5,000 or any integral multiple thereof (and if within a Stated Maturity by lot by the Paying Agent/Registrar), on September 1, 1999 or on any March 1 or September 1 thereafter at the redemption price equivalent to the "Accreted Value" as of the redemption date, calculated and determined in accordance wi th the Accreted Va lue table appearing hereon. -21- At least thirty days pr10r to any date fixed for the redempt ion of Bonds, the Ci ty sha II cause a wr i t ten notice of such redemption to be sent by United States Mail, first class postage prepaid, to the registered owners of each Bond to be redeemed at the address shown on the Security Register and subj ect to the terms and prov i s ions re la t ing thereto conta ined in the Ordinance. I f a Bond (0 r any po rt ion thereof) sha II have been called for redemption and notice of such redemption duly given, then upon such redemption date such Bond (or the portion thereof to be redeemed) shall become due and payable, and shall cease to accrete in value from and after the redemption date therefor; provided moneys for the payment of the redemption price to the date of redemption are held for the purpose of such payment by the Paying Agent/Registrar. In the event of a partial redemption of the Maturity Amount of this Bond, payment of the redemption price of such Maturity Amount shall be made to the registered owner only upon presentation and surrender of this Bond to the principal office of the Paying Agent/Registrar and, there shall be issued, without charge therefor, to the registered owner hereof, a new Bond or Bonds of like maturity and of authorized amounts provided in the Ordinance for the then unredeemed ba lance of the Maturity Amount hereof. If this Bond is called for redemption, in whole or in part, the City and the Paying Agent/Registrar shall not be required to transfer this Bond to an assignee of the Holder within 45 days of the redemption date therefor; provided, however, such limitation on transferability sha II not be app1 icab1e to an exchange by the Ho lder of the unredeemed ba lance hereof in the event of its redemption in part. The Bonds are special obligations of the City and, together with the outstanding and unpaid Previously Issued Bonds (identified and defined in the Ordinance) and the "City of North Richland Hills, Texas, Waterworks and Sewer System (1) " (authorized for issuance concurrently with the Bonds), are payable solely from and equally and ratably secured by a first lien on and pledge of the Net Revenues (as defined in the Ordinance) of City's combined Waterworks and Sanitary Sewer System (the "System"). The Bonds do not constitute a legal or equitable pledge, charge, lien or encumbrance upon any property of the Ci ty or the System, except wi th respect to the Net Revenues thereof. 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. (1) "Refunding Revenue Bonds, Series 1989-A" 1989 Bonds and "Improvement and Refunding Series 1989" for the Series 1989-A Bonds for the Revenue Series Bonds, -22- Subj ect to sat is fying the te rms and condi t ions prescr i bed therefor, the Ci ty has reserved the right to issue addi t iona 1 revenue obligations payable from and equally and ratably secured by a pari ty lien on and pledge of the Net Revenues of the System, in the same manner and to the same extent as the Bonds. Reference is hereby made to the Ordinance, a copy of which is on file in the principal office of the Paying Agent/Registrar, and to all of the provisions of which the Holder by the acceptance hereof hereby assents, for definitions of terms; the description of and the nature and extent of the security for the Bonds; the properties constituting the System; the Net Revenues pledged to the payment of the principal of and interest on the Bonds; the nature and extent and manner of enforcement of the lien and pledge securing the payment of the Bonds; the terms and conditions for the issuance of additional revenue obligations; the terms and conditions relating to the transfer or exchange of this Bond; the condi tions upon which the Ordinance may be amended or supplemented; the rights, duties, and obligations of the City and the Paying Agent/Registrar; the terms and provisions upon which the liens, pledges, charges and covenants made therein may be discharged at or prior to the maturity or redemption of this Bond, and this Bond deemed to be no longer Outstanding thereunder; and for the other terms and provisions contained therein. Capitalized terms used herein have the same meanings assigned in the Ordinance. This Bond, subject to certain limitations contained in the Ordinance, may be transferred on the Security Register only upon its presentation and surrender at the principal office of the Paying Agent/Registrar, with the Assignment hereon duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Paying Agent/Registrar duly executed by, the registered owner hereof, or his duly authorized agent. When a transfer on the Security Register occurs, one or more new fully registered Bonds of the same Stated Maturity, of authorized denominations, bearing the same rate of interest, and of the same aggregate Maturity Amount will be issued by the Paying Agent/Registrar to the designated transferee or transferees. The City and the Paying Agent/Registrar, and any agent of either, may treat the registered owner hereof whose name appears on the Security Register (i) on the date of surrender of this Bond as the owner entitled to payment of the Maturity Amount hereof at its Stated Maturity or its redemption, in whole or in part, and (ii) on any other date as the owner for -23- all other purposes, and neither the City nor the Paying Agent/Registrar, or any agent of either, shall be affected by notice to the contrary. It is hereby certified, recited, represented and covenanted that the City is a duly organized and legally existing municipal corporation under and pursuant to the Constitution and laws of the State of Texas; that the issuance of the Bonds is duly authorized by law; that all acts, condi tions and things required to exist and be done precedent to and in the issuance of the Bonds to render the same lawful and valid obligations of the City have been properly done, have happened and have been performed in regular and due time, form and manner as required by the Constitution and laws of the State of Texas, and the Ordinance; that the Bonds do not exceed any constitutional or statutory limitation; and that due provision has been made for the payment of the principal of and interest on the Bonds by a pledge of the Net Revenues of the System as aforestated. In case any provision in this Bond or any application thereof shall be invalid, illegal, or unenforceable, the validity, legality, and enforceability of the remaining provisions and applications shall not in any way be affected or impaired thereby. The terms and provisions of this Bond and the Ordinance shall be construed in accordance with and shall be governed by the laws of the State of Texas. IN WITNESS WHEREOF, the City Council of the City has caused this Bond to be duly executed under the official seal of the City as of the Issue Date. CITY OF NORTH RICHLAND HILLS, TEXAS COUNTERSIGNED: Mayor City Secretary (SEAL) NOTE TO PRINTER: Print the appropriate Values" for the Series Series 1989-A Bonds on the appropriate series for in paragraph one. "Table of Accreted 1989 Bonds and the the reverse side of of Bonds as ca lIed -24- C. *Form of Registration Certificate of Comptroller of Public Accounts to Appear on Initial Bonds only. REGISTRATION CERTIFICATE OF COMPTROLLER OF PUBLIC ACCOUNTS OFFICE OF THE COMPTROLLER OF PUBLIC ACCOUNTS ( ) ( ( ) REGISTER NO. THE STATE OF TEXAS I HEREBY CERTIFY that this Bond has been examined, certified as to validity and approved by the Attorney General of the State of Texas, and duly registered by the Comptroller of Public Accounts of the State of Texas. WITNESS my signature and seal of office this (SEAL) Comptroller of Public Accounts of the State of Texas *NOTE TO PRINTER: Do not print on Definitive Bonds D. Form of Certificate of Paying Agent/Registrar to Appear on Definitive Bonds only. REGISTRATION CERTIFICATE OF PAYING AGENT/REGISTRAR This Bond has been duly issued and registered in the name of the Registered Owner shown above under the provisions of the within-mentioned Ordinance; the bond or bonds of the above entitled and designated series originally delivered having been approved by the Attorney General of the State of Texas and registered by the Comptroller of Public Accounts, as shown by the records of the Paying Agent/Registrar. TEXAS AMERICAN BANK/FORT WORTH, N.A., Fort Worth, Texas, Paying Agent/Registrar Registration Date: By Authorized Signature -25- E. Form of Assignment. ASSIGNMENT FOR VALUE RECEIVED the undersigned hereby sells, and transfers unto (Print or typewrite name, address, code of transferee:) ass1gns, and zip (Social Security or other identifying number: ) the within Bond and all rights thereunder, and hereby irrevocably constitutes and appoints attorney to registration premises. transfer thereof, the wi thin with full Bond power on of the books kept substitution in for the DATED: Signature Guaranteed: NOTICE: The signature on this assignment must correspond with the name of the registered owner as it appears on the face of the within Bond in every particular. F. The Initial Bonds shall be in the respective forms set forth in paragraph B of this Section, except as follows: CURRENT INTEREST BONDS Heading and paragraph one shall be amended to read as follows: REGISTERED NO. T-1 REGISTERED $ UNITED STATES OF AMERICA STATE OF TEXAS CITY OF NORTH RICHLAND HILLS, TEXAS WATERWORKS AND SEWER SYSTEM (1) BOND, SERIES 19 (2) Issue Date: March 1, 1989 CUSIP NO: Registered Owner: Principal Amount: DOLLARS (1) "Improvement and Refunding Revenue" for the Series 1989 Bonds and "Refunding Revenue" for the Series 1989-A Bonds (2) 89 or 89-A -26- The City of North Rich1and Hills (hereinafter referred to as the "City"), a body corporate and municipal corporation in the County of Tarrant, State of Texas, for value received, hereby promises to pay to the order of the Registered Owner named above, or the registered assigns thereof, solely from the revenues hereinafter identified, the Principal Amount hereinabove stated on September 1 in each of the years and in principal installments in accordance with the following schedule: YEAR PRINCIPAL INSTALLMENTS INTEREST RATE(S) (Information to be inserted from schedule in Section 2 hereof). (or so much thereof as shall not have been prepaid prior to maturi ty) and to pay interest on the unpaid principal amounts hereof from the Issue Date at the per annum rates of interest specified above computed on the basis of a 360-day year of twelve 3D-day months; such interest being payable on March I and September 1 of each year, commencing September 1, 1989. Principal installments of this Bond are payable in the year of maturity or on a prepayment date to the registered owner hereof, upon presentation and surrender, at the principal offices of Texas American Bank/Fort Worth, N.A., Fort Worth, Texas (the "Paying Agent/Registrar"). Interest is payable to the registered owner of this Bond whose name appears on the "Security Register" maintained by the Paying Agent/ Registrar at the close of business on the "Record Date", which is the 15th day of the month next preceding each interest payment date, and interest shall be paid by the Paying Agent/Registrar by check sent United States Mail, first class postage prepaid, to the address of registered owner recorded in the Security Register or by such other method, acceptable to the Paying Agent/Regist r ar , reques ted by, and a t the risk and expense of, the registered owner. All payments of principal of, premium, if any, and interest on this Bond shall be without exchange or collection charges to the owner or holder hereof and in any coin or currency of the United States of America which at the time of payment is legal tender for the payment of public and private debts. -27- CAPITAL APPRECIATION BONDS: Heading and paragraph one shall be amended to read as follows: REGISTERED NO. TCAB-l REGISTERED $ UNITED STATES OF AMERICA STATE OF TEXAS CITY OF NORTH RICHLAND HILLS, TEXAS, WATERWORKS AND SEWER SYSTEM (I) BOND, SERIES 19 (2) Issue Date: March 1, 1989 CUSIP NO: Registered Owner: Maturity Amount: DOLLARS The City of North Richland Hills (hereinafter referred to as the "City"), a body corporate and municipal corporation in the County of Tarrant, State of Texas, for value received, hereby promises to pay to the order of the Registered Owner named above, or the registered assigns thereof, solely from the revenues hereinafter identified, the Maturity Amount hereinabove stated on September 1 in each of the years and in installments in accordance with the following schedule: Year of Maturi ty Maturity Amount Stated Interest Rate(s) (Information to be inserted from schedule in Section 2 hereof) (or so much thereof as shall not have been paid upon prior redemption). Each Maturity Amount installment shown above represents the accretion in value of the original principal amount from the date of delivery to the initial purchasers (April 18, 1989) to the year of its maturity and such accretion in value occuring at the respective Stated Interest Rate(s) and compounding on September I, 1989, and semiannually thereafter on March 1 and September 1. A table of the "Accreted Values" per $5,000 "Accreted Value" at maturity is printed on the ( 1) "Improvement and Refunding Revenue Bonds" 1989 Bonds and "Refunding Revenue Bonds" 1989-A Bonds for for the the Series Series (2) 89 or 89-A -28- reverse side of this Bond. The term "Accreted Value", as used herein, means the original principal amount of this Bond plus the interest thereon compounded semiannually to March 1 or September I, as the case may be, next preceding the date of such calculation (or the date of calculation, if such calculation is made on March I or September I) at the Stated Interest Rate for the Stated Maturity shown above and in the Table of Accreted Values printed hereon. For any date other than March 1 and September I, the Accreted Value of this Bond shall be determined by a straight line interpolation between the values for the applicable semiannual compounding dates (based on 3D-day months). The installments of the Maturi ty Amounts, or the appropriate redemption prices for such installments, are payable at maturity or redemption, as the case may be, to the registered owner hereof, upon presentation and surrender of this Bond, to the principal offices of Texas American Bank/Fort Worth, N.A., Fort Worth, Texas (the "Paying Agent/Registrar"), and shall be payable without exchange or collection charges to the owner hereof and in any coin or currency of the Uni ted States of America which at the time of payment is legal tender for the payment of public and private debts. SECTION 9: Ordinance and in issuance of the appropriation of are provided: Definitions. For all purposes of this particular for clarity with respect to the Bonds herein authorized and the pledge and revenues therefor, the following definitions (a) The term "System" shall mean the City's combined Waterworks and Sanitary Sewer System, including all present and future additions, extensions, replacements and improvements in anywise appertaining thereto, whether situated within or without the limits of the City. (b) The term "Net Revenues" shall mean the gross revenues of the System less the expense of operation and maintenance, including salaries, labor, materials, repairs and extensions necessary to render efficient service; provided, however, that only such repairs and extensions as in the judgment of the City Council, reasonably and fairly exercised, are necessary to keep the System in operation and render adequate service to the City and the inhabitants thereof, or such as might be necessary to meet some physical accident or condition which would otherwise impair any bonds payable from and secured by a lien on the Net Revenues of the System sha II be deducted in determining "Net Revenues". -29- (c) The term "Bonds" shall mean collectively the "CITY OF NORTH RICHLAND HILLS, TEXAS, WATERWORKS AND SEWER SYSTEM IMPROVEMENT AND REFUNDING REVENUE BONDS, SERIES 1989" and "CITY OF NORTH RICHLAND HILLS, TEXAS, WATERWORKS AND SEWER SYSTEM REFUNDING REVENUE BONDS, SERIES 1989-A" authorized by this Ordinance. (d) The term "Previously Issued Bonds" shall mean the outstanding bonds designated "CITY OF NORTH RICHLAND HILLS, TEXAS, WATERWORKS AND SEWER SYSTEM REVENUE BONDS," further identified as follows: (1) Series 1971, dated September 1, issued in the original principal $5,275,000; 1971, and amount of (2) Series 1978, dated June 1, 1978, in the original principal $3,500,000; and issued amount of (e) The term additional parity reserves the right terms and conditions "Addi t iona I Bonds" sha II mean the revenue bonds which the Ci ty to issue in accordance wi th the prescribed in Section 20 hereof. (f) The term "Bonds Similarly Secured" mean the Bonds, Previously Issued Bonds, Additional Bonds which are payable from a first on and pledge of the Net Revenues of the System. shall and lien (g) The twelve months' year. term "Fiscal period ending Year" shall mean September 30th of the each (h) The term "Outstanding" shall mean with respect to Bonds or Bonds Similarly Secured, as of the date of determination, all Bonds or Bonds Similarly Secured theretofore issued and delivered under their respective authorizing ordinances, except: (1) those Bonds or Bonds Secured theretofore cancelled by Agent/Registrar or delivered to Agent/Registrar for cancellation; Similarly the Paying the Paying -30- (2) those Bonds or Bonds Similarly Secured for which payment has been duly provided by the City in accordance with the provisions of the ordinance governing their issuance and applicable laws by the irrevocable deposit with the Paying Agent/Registrar, or an authorized escrow agent, of money or Government Securities, or both, in the amount necessary to fully pay the principal of, premium, if any, and interest thereon to maturity or redemption, as the case may be, provided that, if such obligations are to be redeemed, notice of redemption thereof shall have been duly given in accordance with applicable provisions or irrevocably provided to be given, or waived; and (3) those Bonds or Bonds Similarly Secured that have been mutilated, destroyed, lost, or stolen and replacement Bonds have been registered and delivered in lieu thereof in accordance wi th applicable terms and provisions. SECTION IO: Pledge. That the City hereby covenants and agrees that all of the Net Revenues of the System, wi th the exception of those in excess of the amounts required to establish and maintain the special Funds created for the payment and security of the Bonds Similarly Secured, are hereby irrevocably pledged, equally and ratably, to the payment of the Previous ly Issued Bonds, the Bonds, and Addi tiona 1 Bonds, if issued, and the interest thereon, as hereinafter provided. It is hereby ordained that the Bonds Similarly Secured, and the interest thereon, shall constitute a first lien on the Net Revenues of the System and be valid and binding wi thout any physical delivery thereof or further act by the City. SECTION 11: Rates and Charges. That the City hereby covenants and agrees that rates and charges for water and sewer services afforded by the System will be established and maintained, on the basis of all available information and experience and wi th due a 110wance for contingencies, that are reasonably expected to provide revenues sufficient at all times to pay: (a) all operating, maintenance, depreciation, replacement, betterment and other costs incurred in the maintenance and operation of the System as set forth in Section 9(b) hereof; -31- (b) the interest on and principal of the Bonds Similarly Secured and the amounts required to be deposited into the special Funds created and established for the payment and security of the Bonds Similarly Secured; and (c) payable secured thereof. any from by a other legally the revenues lien on the incurred indebtedness of the System and/or System or the revenues SECTION 12: Fund Designations. All revenues derived from the operation of the System shall be kept separate from other funds of the City. To that end, the following special Funds heretofore created are hereby reaffirmed: (a) City of North Richland Hills Waterworks and Sewer System Fund, hereinafter called "System Fund". This Fund shall be kept in the City's depository bank. (b) City of North Richland Hills Waterworks and Sewer System Revenue Bond Interest and Sinking Fund, hereinafter called "Interest and Sinking Fund". This Fund shall be deposited with the City's depository bank, as Trustee of the pledged revenues, and sha 11 be used to pay principal of and interest on the Bonds Similarly Secured when and as the same shall become due and payable. (c) City of North Richland Hills Waterworks and Sewer System Revenue Bond Reserve Fund, hereinafter called "Reserve Fund". This Fund shall be deposited with THE TEXAS AMERICAN BANK/FORT WORTH, N. A., Fort Worth, Texas, Trustee, and shall be used to pay principal of and interest on the Bonds Similarly Secured falling due at any time when there is not sufficient money avai lable in the Interest and Sinking Fund. SECTION 13: System Fund. The City hereby covenants and agrees that all revenues and income of every nature derived from the operation of the System shall be deposited from day to day as collected into the System Fund. All revenues deposited in the System Fund shall be pledged and appropriated to the extent required for the following uses and in the order of priority shown: FIRST: To the payment of all necessary and reasonable maintenance and operating expenses of the System as defined herein or required by statute to be a first charge on and claim against the revenues thereof, -32- SECOND: To the payment of the amounts required to be deposited in the Interest and Sinking Fund for the payment of the principal of and interest on the Bonds Similarly Secured as the same becomes due and payable, and THIRD: To the payment of the amounts required to be deposi ted in the Reserve Fund for the accumulation and maintenance of the "Required Reserve" (hereinafter referenced in Section 15). Any Net Revenues remaining in the System Fund after satisfying the foregoing payments, or making adequate and sufficient provision for the payment thereof, may be appropriated and used for any other City purpose now or hereafter permitted by law. SECTION 14: Interest and Sinking Fund. That, in addi tion to the monthly deposi ts requi red to be made to the Interest and Sinking Fund for the payment of principal of and interest on the Previously Issued Bonds, the City hereby agrees and covenants to deposit in said Fund from the Net Revenues of the System in the System Fund an amount equal to One Hundred Per Centum (100%) of the amount required to fully pay the interest on and principal of the Bonds falling due on or before each maturi ty and interest payment date, such payment to be made in substantially equal monthly installments on or before the 15th day of each month beginning on or before the 15th day of the month next following the month the Bonds are delivered to the initial purchaser(s). The monthly deposits to the Interest and Sinking Fund for the payment of principal and interest on the Bonds shall continue to be made as hereinabove provided until such time as (i) the total amount on deposit in the Interest and Sinking Fund and Reserve Fund is equa 1 to the amount requi red to pay all outstanding indebtedness (principal and interest) for which said Funds were created and established (Section 12[b] and Section 12[c]) or (ii) the Bonds are no longer Outstanding. Accrued interest and premium, if any, received from the purchaser of the Bonds, as well as any surplus proceeds of sale of the Bonds, sha 11 be depos i ted to the Interest and Sinking Fund, and may be taken into consideration and reduce the amount of the monthly deposits hereinabove required to be deposited in the Interest and Sinking Fund from the Net Revenues of the System. -33- SECTION 15: Reserve Fund. That the Ci ty hereby reaffirms its covenant to the holders of the Previously Issued Bonds and ag rees wi th the Ho 1ders 0 f the Bonds tha tit wi 11 provide for the accumulation of, and when accumulated, will thereafter continuously maintain in the Reserve Fund an amount equal to not less than the average annual principal and interest requirements of Bonds Similarly Secured. Under the provisions of the ordinances authorizing the issuance of the Previously Issued Bonds, the total amount required to be accumulated in the Reserve Fund is $1,703,407 and there is currently on deposit in said Fund such total amount (the "Current Reserve"). That, by reason of the issuance of the Bonds, the total amount to be accumulated and maintained in the Reserve Fund is hereby increased to an amount equal to not less than $1,735,000 (the "Required Reserve"); and beginning on or before the 15th day of the month following the month the Bonds are delivered to the initial purchasers, and on or before the 15th day of each following month, monthly deposits in an amount equal to not less than l/60th of the difference between the Required Reserve and the Current Reserve shall be made to the Reserve Fund until the amount of cash and investments in said Fund totals not less than Required Reserve. When the total amount now required to be deposited in the Reserve Fund has been fully accumulated, such monthly payments to said Fund may be terminated; provided, however, should the amount on deposit in said Fund be reduced below the Required Reserve, after the same has been accumulated monthly depos i ts in an amount equa I to not less than (i) $19,653.00 or (i i) 1/60th of the Requi red Reserve then requi red to be maintained therein, whichever amount is the greater, shall be resumed and continued to be made on or before the 15th day of each month until the Required Reserve has been fully restored. Money in the Reserve Fund may be, at the option of the City, invested or reinvested from time to time in direct obligations of or obligations the principal and interest of which are guaranteed by the United States of America, or invested in direct obligations of or participation certificates guaranteed by the Federal National Mortgage Association, Federal Home Loan Banks, and in certificates of deposit of any bank or trust company the deposits of which are fully secured by a pledge of the securi ties of any of the kinds hereinabove specified, such obligations or securities to mature in not more than ten years from the date of such investment or not later than the final maturity of the outstanding Bonds Similarly Secured, whichever is shorter. Any obligations in which money is so invested shall be kept in escrow in THE TEXAS AMERICAN BANK/FORT WORTH, N. A., Fort Worth, Texas, and shall be promptly sold and the proceeds of sale applied to the making -34- of payments required to be made from the Reserve Fund whenever such payments are necessary to be made under the provisions of Section 12(c). The deposits into this Fund shall be subordinate to those required to be made into the Interest and Sinking Fund. SECTION 16: Payment of Bonds. Whi le any of the Bonds are Outstanding, the proper officers of the City are hereby authorized to transfer or cause to be transferred to the Paying Agent/Registrar therefor, from funds on deposit in the Interest and Sinking Fund, and, if necessary, the Reserve Fund, amounts sufficient to fully pay and discharge promptly each installment of interest and principal of the Bonds as the same accrue or mature or come due by reason of redemption prior to maturity; such transfer of funds to be made in such manner as will cause immediately available funds to be deposited with the Paying Agent/Registrar for the Bonds at the close of the last business day next preceding the date of payment for the Bonds. SECTION 17: Deficiencies in Funds. If in any month the City shall, for any reason, fail to pay into the Interest and Sinking Fund or the Reserve Fund the full amounts above stipulated, amounts equivalent to such deficiencies shall be set apart and paid into said Fund from the first available and unal10cated Net Revenues in the following month or months and such payments sha II be in addi tion to the amounts hereinabove provided to be otherwise paid into said Fund during such month or months. SECTION 18: Excess Revenues. Any revenues in excess of those required to establish and maintain the special Funds created for the payment and security of the Bonds Similarly Secured may be used for the redemption of Bonds Similarly Secured or may be transferred to the general fund of the City and used for general or special purposes. SECTION 19: Security of Funds. That all moneys on deposit in the special Funds referred to in this Ordinance (except any portions thereof as may be at any time properly invested) shall be secured in the manner and to the fullest extent required by the laws of the State of Texas for the securi ty of publ ic funds, and moneys on depos it in such Funds shall be used only for the purposes permitted by this Ordinance. SECTION 20: I ssuance of Addi t iona I Bonds. Tha t in addition to the right to issue bonds of inferior lien as authorized by the laws of this State, the Ci ty reserves the right hereafter to issue Additional Bonds. The Additional Bonds when issued shall be payable from and secured by a first lien on and pledge of the Net Revenues of the System in the same manner and to the same extent as are the Previously Issued -35- Bonds and the Bonds, and the previously Issued Bonds, the Bonds and the Addi tiona I Bonds sha II in a II respects be of equa 1 dignity. The Additional Bonds may be issued in one or more installments, provided, however, that none shall be issued unless and until the following conditions have been met: (a) The City is not then in default as to any covenant, condition or obligation prescribed in an ordinance authorizing the issuance of the outstanding Bonds Similarly Secured. (b) Each of the Funds created and established for the payment and security of the Bonds Similarly Secured contain the amount of money then required to be on deposit therein. (c) The "net earnings" of the System for (1) any consecutive twelve months out of the fifteen months next preceding the date of the Additional Bonds or (2) the Fiscal Year next preceding the date of the Additional Bonds are equal to at least 1.30 times the principal and interest requirements of all Bonds Similarly Secured (after giving effect to the issuance of the proposed Additional Bonds) for the year when such requirements are the greatest, as such "net earnings" are shown by a report of a Certified Public Accountant. The term "net earnings" as used in this Section 20 shall mean the gross revenues after deducting the expense of operation and maintenance, but not deducting depreciation or expenditures which, under standard accounting practice, should be charged to capital expenditures. (d) The Additional Bonds are made to mature on September I in each of the years in which they are scheduled to mature. (e) The ordinance authorizing the issuance of the Additional Bonds provides for the accumulation in the Interest and Sinking Fund of amounts sufficient to pay the principal of and interest on such Additional Bonds as same mature. (f) The ordinance authorizing the issuance of the Additional Bonds provides that the amount to be accumulated and maintained in the Reserve Fund shall be in an amount not less than the average annual requirement for the payment of principal of and interest on all bonds to be secured by a first lien on and pledge of the Net Revenues of the System after -36- giving effect to the issuance of the proposed Additional Bonds, and provides that any additional Reserve Fund amount which may thus be required shall be accumulated within not more than five years and one month from the date of the passage of the ordinance authorizing the issuance of the proposed Additional Bonds. The Bonds Similarly Secured may be refunded (pursuant to any law then available) upon such terms and conditions as the governing body of the City may deem to the best interest of the City and its inhabitants, and if less than all such outstanding revenue bonds are refunded, the proposed refunding bonds shall be considered as "Additional Bonds" under the provisions of this Section and the report required in subparagraph (c) above shall give effect to the issuance of the proposed refunding bonds (and shall not give effect to the bonds being refunded following their cancellation or provision being made for their payment) . SECTION 21: Maintenance and Operation - Insurance. The City shall maintain the System in good condition and operate the same in an efficient manner and at reasonable cost. So long as any of the Bonds Similarly Secured are Outstanding, the City agrees to maintain insurance for the benefit of the holder or holders of such bonds on the System of a kind and in an amount which usually would be carried by private companies engaged in a similar type of business. Nothing in this Ordinance shall be construed as requiring the City to expend any funds which are derived from sources other than the operation of the System but nothing herein shall be construed as preventing the City from doing so. SECTION 22: Records Accounts Accounting Reports. The City hereby covenants and agrees that so long as any of the Bonds Similarly Secured or any interest thereon, remain Outstanding, it wi II keep and maintain a proper and complete system of records and accounts pertaining to the operation of the System (separate and apart from all other records and accounts) in which complete and correct entries shall be made of all transactions relating to said System, as provided by Article 1113, V.A.T.C.S, and that the holder or holders of any such bonds or any duly authorized agent or agents of such holders, shall have the right at all reasonable times to inspect the System and all properties comprising same. The City further agrees that, within ninety (90) days following the close of each Fiscal Year, it will cause an audit of such books and accounts to be made by an independent firm of Certified Public Accountants. Each such audit, in addition to whatever other matters may be thought proper by the Accountant, sha 11 particularly include the following: -37- (a) A detailed statement of the income and expenditures of the System for such Fiscal Year. (b) A balance sheet as of the end of such Fiscal Year. (c) The Accountant· s comments regarding the manner in which the City has carried out the requirements of this Ordinance and his recommendations for any changes or improvements 1n the operation, records and accounts of the System. (d) A list of the insurance policies in force at the end of the Fiscal Year on the System properties, setting out as to each policy the amount thereof, the risk covered, the name of the insurer, and the policy's expiration date. (e) A list of the securities which have been on deposit as security for the money in the Interest and Sinking Fund throughout the Fiscal Year, a list of the securities, if any, in which the Reserve Fund has been invested, and a statement of the manner in which money in the System Fund has been secured in such Fiscal Year. (f) The number of properties connected with the System. Expenses incurred in making the audits above referred to are to be regarded as maintenance and operating expenses of the System and paid as such. Copies of the aforesaid annual audit shall be immediately furnished to the Executive Director of the Municipal Advisory Council of Texas at his office in Austin, Texas, and, to the original purchasers of the Bonds and any subsequent holder at his request. At the close of the first six months' per iod of each Fi sca 1 Yea r , the Ci ty Secreta ry is hereby di rected to furnish a copy of an operating and income statement in reasonable detail covering such period to any Holder upon his request therefor received not more than thirty (30) days after the close of said six months' period. Any Holder shall have the right to discuss with the Accountant making the annual audi t the contents thereof and to ask for such additional information as he may reasonably require. SECTION 23: Remedies in Event of Default. In addition to all the rights and remedies provided by the laws of the State of Texas, the Ci ty covenants agrees particularly that in the event the City (a) defaults in payments to be made to the Interest and Sinking Fund and Reserve Fund as required by this -38- Ordinance or (b) defaults 1n the observance or performance of any other of the covenants, conditions or obligations set forth in this Ordinance, the holder or holders of any of the Bonds shall be entitled to a writ of mandamus issued by a court of proper jurisdiction compelling and requiring the City Council and other officers of the City to observe and perform any covenant, condition or obligation prescribed in this Ordinance. No delay or omission to exercise any right or power accruing upon any default shall impair any such right or power, or shall be construed to be a waiver of any such default or acquiescence therein, and every such right and power may be exercised from time to time and as often as may be deemed expedient. The specific remedies herein provided shall be cumulative of all other existing remedies and the specification of such remedies shall not be deemed to be exclusive. SECTION 24: Further Covenants. That further covenants and agrees as follows: the Ci ty hereby (a) That it has the lawful power to pledge the Net Revenues securing the payment of Bonds and has lawfully exercised said power under the Constitution and laws of the State of Texas, including said power existing under Articles 1111 et seq. V.A.T.C.S.; that the Bonds Similarly Secured shall be ratably secured under said pledge of income in such manner that one bond shall have no preference over any other bond of said issues. (b) That other than for the payment of the Previous 1y Issued Bonds, the "Defeased Obligations" identified in the preamble hereof (until the lien and pledge securing the payment thereof has been defeased) and the Bonds, the Net Revenues of the System have not in any manner been pledged to the payment of any debt or obligation of the City or of the System. (c) That so long as any Bonds Similarly Secured remain Outstanding, the City will not sell or encumber the System or any substantial part thereof, and that, with the exception of the Additional Bonds expressly permitted by this Ordinance to be issued, it will not encumber the Net Revenues of the System unless such encumbrance is made junior and subordinate to the provisions of this Ordinance; provided, however, the City may dispose of any portion of the System located within the corporate limits of any other municipality or municipalities -39- under the fo llowing condi t ions: (1) the sa Ie price for such po rt ion of the Sys tem (as cert i f ied by a registered professional engineer not employed by the City) is not less than the then appraised value of the port ion being so 1d, and in addi t ion to the sa le price, the purchaser pays or makes provision for the payment of any penalties and added expenses that occur in such acquisition (including the cost of acquiring for redemption Bonds Similarly Secured or other obligations issued by the City to acquire such propert ies) and (2) the amount received by the Ci ty as the sale price is applied (or provision is made to apply) by such City to the payment and cancellation of Bonds Similarly Secured or other obligations issued by the Ci ty to acqui re such properties prior to their regularly scheduled maturity by purchase in the open market or by exercise of the prepayment option, and (3) the governing body of the City finds that portion of the System to be sold is not required for the rendi t ion of ef f ic ient serv ice to the inhabitants of the City. (d) That no free services of the System shall be allowed, and should the City or any of its agents or instrumentalities make use of the services and faci li ties of the System, payment of the reasonable value thereof shall be made by the City out of funds from sources other than the revenues and income of the System; (e) To the extent that it legally may, the City further covenants and agrees that, so long as any of the Bonds Similarly Secured or any interest thereon are Outstanding, no franchise shall be granted for the installation or operation of any waterworks or sewer system other than those owned by the Ci ty, and the operation of any such system by anyone other than this City is hereby prohibited. SECTION 25: Bonds are Special Obligations. That the Bonds are special obligations of the City payable from the pledged Net Revenues of the System and the Holders thereof shall never have the right to demand payment thereof out of funds raised or to be raised by taxation. SECTION 26: Notices to Holders-Waiver. Ordinance provides for notice to Holders of notice shall be sufficiently given (unless expressly provided) if in writing and sent Mail, first class postage prepaid, to the Wherever this any event, such otherwise herein by United States address of each -40- Holder appearing in the Security Register at the close of business on the business day next preceding the mailing of such notice. In any case where notice to Holders 1S given by mail, neither the failure to mail such notice to any particular Holders, nor any defect in any notice so mailed, shall affect the sufficiency of such notice with respect to all other Bonds. Where this Ordinance provides for notice in any manner, such notice may be waived in writing by the Holder entitled to receive such notice, either before or after the event with respect to which such notice is given, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Paying Agent/Registrar, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. SECTION 27: Cancellation. All Bonds surrendered for payment, redemption, transfer, exchange, or replacement, if surrendered to the Paying Agent/Registrar, shall be promptly cancelled by it and, if surrendered to the City, shall be delivered to the Paying Agent/Registrar and, if not already cancelled, shall be promptly cancelled by the Paying Agent/Registrar. The City may at any time deliver to the Paying Agent/Registrar for cancellation any Bonds previously certified or registered and delivered which the City may have acquired in any manner whatsoever, and all Bonds so delivered shall be promptly cancelled by the Paying Agent/ Registrar. All cancelled Bonds held by the Paying Agent/ Registrar shall be returned to the City. SECTION 28: Mutilated-Destroyed-Lost and Stolen Bonds. In case any Bond shall be mutilated, or destroyed, lost or stolen, the Paying Agent/Registrar may execute and deliver a replacement Bond of like form and tenor, and in the same denomination and bearing a number not contemporaneous ly outstanding, in exchange and substitution for such mutilated Bond, or in lieu of and in substitution for such destroyed, lost or stolen Bond, only upon the approval of the City and after (i) the f i ling by the Ho 1der thereof wi th the payi ng Agent/Registrar of evidence satisfactory to the Paying Agent/Registrar of the destruction, loss or theft of such Bond, and of the authenticity of the ownership thereof and (ii) the furnishing to the Paying Agent/Registrar of indemnification in an amount satisfactory to hold the City and the Paying Agent/Registrar harmless. All expenses and charges associated with such indemnity and with the preparation, execution and delivery of a replacement Bond shall be borne by the Holder of the Bond mutilated, or destroyed, lost or stolen. -41- Every replacement Bond issued pursuant to this Section shall be a valid and binding obligation, and shall be entitled to all the benefits of this Ordinance equally and ratably with all other Outstanding Bonds; notwithstanding the enforceability of payment by anyone of the destroyed, lost, or stolen Bonds. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement and payment of mutilated, destroyed, lost or stolen Bonds. SECTION 29: Covenants to Maintain Tax-Exempt Status. The City shall not use, permit the use of, or omit to use Gross Proceeds or any other amounts (or any property the acquisition, construction, or improvement of which is to be financed directly or indirectly with Gross Proceeds) in a manner which, if made or omitted, respectively, would cause the interest on any Bond to become includable in the gross income, as defined in section 61 of the Code, of the owner thereof for federal income tax purposes. Without limiting the generality of the foregoing, unless and until the City shall have received a wr i t ten opinion of counsel na t iona lly recogni zed in the fie ld of municipal bond law to the effect that failure to comply with such covenant will not adversely affect the exemption from federal income tax of the interest on any Bond pursuant to Section 103 of the Code, the City agrees, covenants and represents that: (a) Definitions. When used in this following terms have the following meanings: Section, the "Code" means the Internal Revenue Code of 1986, as amended by all legislation, if any, enacted on or before the Issue Date. "Gross Proceeds" when used wi th respect to the Bonds or any other issue of obligations of the City, means original proceeds, amounts received (including repayments of principal) as a result of investing the original proceeds of the issue, transferred proceeds, sinking fund proceeds, amounts invested in a reasonably required reserve or replacement fund, securities or obligations pledged by the City as security for payment of debt service on the Bonds or such other issue, and any other amounts used to pay debt service on the Bonds or such other issue, together with earnings from the investment of the foregoing. -42- "Investment" means (1) a share of stock in a corporation or a right to subscribe for or to receive such a share, (2) any obligation, including United States Treasury bonds, notes, and bills and bank deposits, whether or not certified or interest bearing, but excluding obligations the interest on which is, in the opinion of counsel na t iona lly recogni zed in the field of municipal bond law, excludable from the gross income of any owner thereof and not included in computing the alternative minimum taxable income of individuals under the Code or the Internal Revenue Code of 1954, as amended to the date of issuance of such obligations, (3) any annuity contract, or any other deferred payment contract acquired to fund an obligation of the City, or (4) any investment. other property held for "Issue Date" means the date on which the Bonds are first authenticated and delivered to the initial purchasers against payment therefor. "Issue Price" of the Ma tur i ty means the agg reg a te of all the Bonds of such public (exclusive of bondhouses, brokers, and organizations acting in the or wholesalers) at which a Bonds of such Stated Maturity including accrued interest to Bonds of each Stated initial offering price Stated Maturity to the underwriters, dealers, similar persons or capacity of underwriters substantial number of are sold to the public, the Issue Date, if any. "Nonpurpose Investment" means any Investment in which Gross Proceeds of the Bonds are invested and which is not acquired to carry out the governmental purpose of the Bonds. Obligations acquired with proceeds of the Bonds that are to be used to discharge the Refunded Bonds are Nonpurpose Investments. "Purchase Price" of any Investment means -43- (1) if a United States obligation acquired directly United States Treasury, the therefor, Treasury from the amount paid (2) if a certificate of deposit issued by a commercial bank, the bona fide bid price quoted by a dealer who maintains an active secondary market in such certificates of deposit, and (3) otherwi se , genera lly the mean of the bid price and the offered price therefor on an established market on the day on which such Investment is purchased or contracted for or, if there are no bid prices and offered prices on such date, on the first day preceding such date for which there are bid prices and offered prices. "Yield" of (1) any Investment means the discount factor which, when used in computing the present value of all scheduled payments of principal of and interest on such Investment on the date such Investment is purchased wi th Gross Proceeds or otherwise a 1located to Gross Proceeds, resu 1 ts in an amount equa 1 to the Purchase Price thereof (but excluding any commissions), compounding semiannually, and (2) the Bonds means the di scount factor which, when used 1n computing the present value on the Issue Date of all scheduled payments of principal of and interest on the Bonds, results in an amount equal to aggregate Issue Prices of the Bonds of each Stated Maturi ty, compounding semiannually. (b) No Private Use or Private Payments. Except as permitted by section 141 of the Code and the regulations and rulings thereunder, the City shall, at all times prior to the last Stated Maturity of Bonds, (1) exclusively own, operate, and possess the System and all properties constituting the System and its components, and all property the acquisition, -44- construction, or improvement of which is to be financed directly or indirectly with Gross Proceeds of the Bonds and not use or permit the use of such Gross Proceeds or the properties constituting the System or any property acquired, constructed, or improved with such Gross Proceeds in any activity carried on by any person or enti ty other than a state or loca 1 government, unless such use is solely as a member of the general public, or (2) not di rect 1y or indi rect ly impose 0 r accept any charge or other payment for use of Gross Proceeds of the Bonds or any property the acquisition, construction, or improvement of which is to be financed directly or indirectly with such Gross Proceeds, other than taxes of general application within the City or interest earned on investments acquired with such Gross Proceeds pending application for their intended purposes. (c) No Private Loan. Except to the extent permitted by section 141 of the Code and the regulations and rulings thereunder, the City shall not use Gross Proceeds of the Bonds to make or finance loans to any person or entity other than a state or local government. For purposes of the foregoing covenant, such Gross Proceeds are considered to be "loaned" to a person or entity if (1) property acquired, constructed, or improved with such Gross Proceeds is sold or leased to such person or entity in a transaction which creates a debt for feder a 1 income tax purposes, (2) capaci ty in or service from such property is commi t ted to such person or enti ty under a take-or-pay, output, or similar contract or arrangement, or (3) indirect benefits, or burdens and benefits of ownership, of such Gross Proceeds or any property acquired, constructed, or improved with such Gross Proceeds are otherwise transferred in a transaction which is the economic equivalent of a loan. (d) Qualified Advance Refunding. The Bonds are issued for the purposes identified in Section 1 hereof, and the portion of the Bonds issued for refunding purposes will be issued more than 90 days before the redemption of the Defeased Obligations. The City represents that: (1) None of the Defeased Obligations are industrial development bonds, as that term is defined in section 103 (b) (2) of the Interna 1 Revenue Code of 1954, as amended to October 22, 1986 (the "1954 Code"), or consumer loan bonds wi thin the meaning of section 103(0)(2)(A) of the 1954 Code. -45- (2) The Bonds are the first advance refunding (within the meaning of section 149(d) (5) of the Code) of the Defeased Obligations. (3) The Defeased Obligations are being called for redemption, and will be redeemed, not later than the earliest date on which each such issue may be redeemed at par or at a premium of 3 percent or less. (4) The initial temporary period under section 148(c) of the Code will end (i) with respect to the proceeds of the Bonds (excluding that portion of the proceeds of the Bonds not used to refund the Defeased Obligations) not later than 30 days after the date of issue of such Bonds and (i i) with respect to proceeds of the Defeased Obligations on the Issue Date if not ended prior thereto. (5) Section 148(e) of the Code did not apply to the Defeased Obligations. On and after the date of issue of the Bonds no proceeds of the Defeased Obligations will be invested in Nonpurpose Investments having a Yield in excess of the Yield on the Defeased Obligations to which any of such proceeds relate. (6) In the issuance of the Bonds for refunding purposes the City has employed no "device" to obtain a material financial advantage (based on arbitrage), within the meaning of section l49(d) (4) of the Code, apart from savIngs attributable to lower interest rates. (e) Not to Inves tat Higher Yie 1d. Except to the extent permitted by section 148 of the Code and the regulations and rulings thereunder, the City shall not, at any time prior to the fina 1 St a ted Ma tur i ty of the Bonds, di rect ly or indi rect ly invest Gross Proceeds of the Bonds in any Investment (or use such Gross Proceeds to replace money so invested), if as a result of such investment the Yield from the Issue Date of all Investments acqui red wi th such Gross Proceeds (or wi th money replaced thereby) whether then held or previously disposed of, exceeds the Yield of the Bonds. (f) Not Federally Guaranteed. Except to the extent permitted by section 149(b) of the Code and the regulations and rulings thereunder, the City shall not take or omit to take any action which would cause the Bonds to be federally guaranteed within the meaning of section 149(b) of the Code and the regulations and rulings thereunder. -46- (g) Information Report. The City shall timely file with the Secretary of the Treasury the information required by section 149(e) of the Code with respect to the Bonds on such form and in such place as such Secretary may prescribe. (h) Rebate of Arbitrage Profits. otherwise provided in section 148(f) regulations and rulings thereunder, Except of the to the extent Code and the (1) The City shall account for all Gross Proceeds of the Bonds (including all receipts, expenditures, and investments thereof) on its books of account separately and apart from all other funds (and receipts, expenditures, and investments thereof) and shall retain all records of such accounting for at least six years after the day on which the last outstanding Bond is discharged. The City may, however, to the extent permitted by law, commingle Gross Proceeds of the Bonds wi th other money of the City, provided that the City separately accounts for each receipt and expendi ture of such Gross Proceeds and the obligations acquired therewith. (2) Not less frequent ly than annua 11y, the Ci ty shall calculate, in accordance with rules set forth in section 148(f) of the Code and the regulations and rulings thereunder, the excess of: (i) the amount earned on all Nonpu rpose Investments (other than Investments attributable to any excess previously calculated pursuant to this paragraph (2» acqui red wi th Gross Proceeds of the Bonds, over (ii) the amount which would have been earned if such Nonpurpose Investments were invested at a rate equal to the Yield on the Bonds, plus any income attributable to any excess previously calculated pursuant to this paragraph (2). In this connection, the City hereby makes the election provided for in section 148(f)(4)(A)(ii) of the Code. (3) As additional consideration for the purchase of the Bonds by the initial purchasers thereof and the loan of the money represented thereby, and in order to induce such purchase by measures designed to insure the excludability of the interest thereon from the -47- gross income of the owners thereof for federal income tax purposes, the Ci ty sha 11 pay to the Uni ted St a tes the amount descr ibed in pa rag r aph (2) above at the times, in the installments, to the place, 1n the manner, and accompanied by such forms or other information as is or may be required by section 148(f) of the Code and the regulations and rulings thereunder. (4) The City shall exercise reasonable diligence to assure that no errors are made in the calculations required by paragraph (2) and, if such error is made, to discover and promptly to correct such error wi thin a reasonable amount of time thereafter, including payment to the United States of any delinquent amounts owed to it, interest thereon, and any assessed penalty. (i) Not to Divert Arbitrage Profits. Except to the extent permi tted by sect ion 148 of the Code and the regu 1 at ions and rulings thereunder, the City shall not, at any time prior to the earlier of the Stated Maturity or final payment of the Bonds enter into any transaction that reduces the amount required to be paid to the United States pursuant to Subsection (g) of this Section because such transaction results in a smaller profit or a larger loss than would have resulted if the transaction had been at arm's length and had the Yield of the Bonds not been relevant to either party. SECTION 30: Satisfaction of Obligation of City. If the City shall payor cause to be paid, or there shall otherwise be paid to the Holders, the principal of, premium, if any, and interest on the Bonds, at the times and in the manner stipulated in this Ordinance, then the pledge of the Net Revenues of the System under this Ordinance and all other obligations of the City to the Holders shall thereupon cease, terminate, and become void and be discharged and satisfied. Bonds or any principal amount (s) (wi th respect to Current Interest Bonds) and Maturi ty Amount (wi th respect to Capi ta 1 Appreciation Bonds) thereof shall be deemed to have been paid within the meaning and with the effect expressed above in this Section when (i) money sufficient to pay in full such Bonds or the principal amount(s) (with respect to Current Interest Bonds) and Maturity Amount (with respect to Capital Appreciation Bonds) thereof at maturity or to the redemption date therefor, together with all interest due thereon, shall have been irrevocably deposited with and held in trust by the Paying Agent/Registrar, or an authorized escrow agent, or (ii) Government Securities shall have been irrevocably deposited in trust with the Paying Agent/ Registrar, or an authorized escrow agent which Government Securi ties have been -48- certified by an independent accounting firm to mature as to principal and interest 1n such amounts and at such times as will insure the availability, without reinvestment, of sufficient money, together with any moneys deposited therewith, if any, to pay when due the principal of and interest on such Bonds, or the principal amount(s) (with respect to Current Interest Bonds) and Maturity Amount (with respect to Capital Appreciation Bonds) thereof, on and prior to the Stated Maturity thereof or (if notice of redemption has been duly given or waived or if irrevocable arrangements therefor acceptable to the Paying Agent/Registrar have been made) the redemption date thereof. The City covenants that no deposit of moneys or Government Securities will be made under this Section and no use made of any such deposit which would cause the Bonds to be treated as "arbitrage bonds" within the meaning of Section 148 of the Internal Revenue Code of 1986, as amended, or regulations adopted pursuant thereto. Any moneys so deposited with the Paying Agent/ Registrar, or an authorized escrow agent, and all income from Government Securi ties held in trust by the Paying Agent/Registrar or an authorized escrow agent, pursuant to this Section which is not required for the payment of the Bonds, or any principal amount(s) (with respect to Current Interest Bonds) and Maturity Amount (with respect to Capital Appreciation Bonds) thereof, or interest accruing thereon or as to the accretion in value, as the case may be, with respect to which such moneys have been so deposited shall be remitted to the City or deposited as directed by the City. Furthermore, any money held by the Paying Agent/Registrar for the payment of the principal of and interest on the Bonds and remaining unclaimed for a period of four (4) years after the Stated Maturity, or applicable redemption date, of the Bonds such moneys were deposited and are held in trust to pay shall, upon the request of the City, be remitted to the City against a written receipt therefor. Notwithstanding the above and foregoing, any remittance of funds from the Paying Agent/Registrar to the City shall be subject to any applicable unclaimed property laws of the State of Texas. The term "Government Securities", as used herein, means di rect ob 1 igat ions of the Uni ted st ates of Amer ica, which are non-callable prior to the respective Stated Maturities of the Bonds and may be United States Treasury Obligations such as the State and Local Government Series and may be in book-entry form. -49- SECTION 31: Ordinance a Contract - Amendments. This Ordinance shall constitute a contract with the Holders from time to time, be binding on the City, and shall not be amended or repealed by the City so long as any Bond remains Outstanding except as permi tted in this Section. The Ci ty, may, wi thout the consent of or notice to any Holders, from time to time and at any time, amend this Ordinance in any manner not detrimental to the interests of the Ho 1ders, inc 1 udi ng the cur ing of any ambiguity, inconsistency, or formal defect or omission herein. In addition, the City may, with the written consent of Holders holding a majority in aggregate principal amount or accreted value, as the case may be, of the Bonds then Outstanding affected thereby, amend, add to, 0 r rescind any of the provisions of this Ordinance; provided that, without the consent of all Holders of Outstanding Bonds, no such amendment, addition, or rescission shall (1) extend the time or times of payment of the principal of, premium, if any, and interest on the Bonds, reduce the principal amount or maturity amount thereof, the redemption price therefor, or the rate of interest thereon, or in any other way modify the terms of payment of the principal of, premium, if any, or interest on the Bonds, (2) give any preference to any Bond over any other Bond, or (3) reduce the aggregate principal amount or accreted value of Bonds required to be held by Holders for consent to any such amendment, addition, or rescission. SECTION 32: Sale of Bonds - Official Statement Approval. The Bonds authorized by this Ordinance are hereby sold by the Ci ty to Di llon, Read & Co., Inc., Unde rwood, Neuhaus & Co., Incorporated and Dean Witter Capital Markets and others (herein referred to collectively as the "Purchasers") in accordance with the Purchase Contract, dated March 20, 1989, attached hereto as Exhibi t A and incorporated herein by reference as a part of this Ordinance for all purposes. The Mayor is hereby authorized and directed to execute said Purchase Contract for and on behalf of the Ci ty and as the act and deed of this Council, and in regard to the approval and execution of the Purchase Contract, the Council hereby finds, determines and declares that the representations, warranties and agreements of the City (contained in paragraph 6 thereof) are true and correct in all material respects and shall be honored and performed by the City. Furthermore, the use of the Preliminary Official Statement, dated March I, 1989, by the Purchasers in connection with the public offering and sale of the Bonds is hereby ratified, confirmed and approved in all respects. The final Official Statement, being a modification and amendment of the Preliminary Official Statement to reflect the terms of sale, attached as Exhibit A to the Purchase Contract (together -50- with such changes approved by the Mayor, City Manager, or Director of Finance, anyone or more of said officials), shall be and is hereby in all respects approved and the Purchasers are hereby authorized to use and distribute said final Official Statement, dated March 20, 1989, in the reoffering, sale and delivery of the Bonds to the public. The Mayor and City Secretary are further authorized and directed to manually execute and deliver for and on behalf of the City copies of said Preliminary Official Statement and Official Statement in final form as may be required by the Purchasers, and such final Official Statement in the form and content manually executed by said officials shall be deemed to be approved by the City Council and constitute the Official Statement authorized for distribution and use by the Purchasers. SECTION 33: Special Escrow Agreement Approval and Execution. The "Special Escrow Agreement" (the "Agreement") by and between the City and TEXAS AMERICAN BANK/FORT WORTH, N.A., Fort Worth, Texas (the "Escrow Agent"), attached hereto as Exhibit B and incorporated herein by reference as a part of this Ordinance for all purposes, is hereby approved as to form and content, and such Agreement in substantially the form and substance attached hereto, together with such changes or revisions as may be necessary to accomplish the refunding or benefit the City, is hereby authorized to be executed by the Mayor and City Secretary for and on behalf of the City and as the act and deed of the Ci ty Counci 1; and such Agreement as executed by said officials shall be deemed approved by the City Council and constitute the Agreement herein approved. Furthermore, the City Manager and Director of Finance, either or both of said officials, ln cooperation with the Escrow Agent are hereby authorized and directed to make the necessary arrangements for the purchase of the Federal Securities referenced in the Agreement and the delivery thereof to the Escrow Agent on the day of delivery of the Bonds to the Purchasers for deposit to the credit of the respective escrow funds created and established pursuant to the provisions of the Agreement, including the execution of the subscription forms for the purchase and issuance of the "Uni ted States Treasury Securities State and Local Government Series"; all as contemplated and provided in Article 717k, V.A.T.C.S., as amended, this Ordinance and the Agreement. SECTION 34: Control and Custody of Bonds. The Mayor of the City shall be and is hereby authorized to take and have charge of all necessary orders and records pending the delivery of the Bonds, and shall take and have charge and control of the Initial Bonds pending the approval thereof by the Attorney General, the registration thereof by the Comptroller of Public Accounts and the delivery thereof to the Purchasers. -5l- Furthermore, the Mayor, Ci ty Secretary, Ci ty Manager and Director of Finance, anyone or more of said officials, are hereby authorized and directed to furnish and execute such documents and certifications relating to the City and the issuance of the Bonds, including a certification as to facts, estimates, circumstances and reasonable expectations pertaining to the use and expendi ture and investment of the proceeds of the Bonds as may be necessary for the approval of the Attorney General, registration by the Comptroller of Public Accounts and delivery of the Bonds to the Purchasers and, together with the City's financial advisor, bond counsel and the Paying Agent/ Registrar, make the necessary arrangements for the delivery of the Initial Bonds to the Purchasers and the initial exchange thereof for definitive Bonds. SECTION 35: Proceeds of Sale. Immediately following the delivery of the Bonds, certain proceeds of sale thereof shall be deposited with the Escrow Agent for application and disbursement in accordance with the provisions of the Agreement. The proceeds of sale of the Bonds not so deposited with the Escrow Agent for the refunding of the Defeased Obligations shall be disbursed for payment of costs of issuance and deposited in the Interest and Sinking Fund and the construction fund, all in accordance with written instructions from the Director of Finance. SECTION 36: Printed Opinion. The Purchaser's obligation to accept delivery of the Bonds is subject to receipt of a final opinion of Fulbright & Jaworski, Attorneys, Dallas, Texas, approving such Bonds as to their validity, said opinion to be dated and delivered as of the date of delivery and payment for the Bonds. Printing of a true and correct reproduction of said opinion on the reverse side of each of the definitive Bonds is hereby approved and authorized. SECTION 37: CUSIP Numbers. CUSIP numbers may be pr inted or typed on the def ini t i ve Bonds. It is express ly provided, however, that the presence or absence of CUSIP numbers on the definitive Bonds shall be of no significance or effect as regards the legality thereof and neither the City nor attorneys approving said Bonds as to legality are to be held responsible for CUSIP numbers incorrectly printed or typed on the definitive Bonds. SECTION 38: Amendments to Ordinance Upon Discharge of Previously Issued Bonds. That, at such time as the Previously Issued Bonds identified in Section 9(d) have been paid or are no longer Outstanding, the following Sections of this Ordinance shall be amended and modified to read as follows: (a) Section 9 shall be amended and modified to read as follows: -52- ~ "SECTION 9: Definitions. For all purposes of this Ordinance and in particular for clarity with respect to the issuance of the Bonds herein authorized and the pledge and appropriation of revenues to the payment of the Bonds, the fo 110wing definitions are provided: (a) "Additional Bonds" - The additional revenue bonds or obligations which the City reserves the right to issue on a parity with the Bonds in accordance with the terms and conditions set forth in Section 20 hereof. (b) "Average Annual Debt Service"- That average amount which, at the time of computation, will be required to pay the Debt Service of obligations when due and derived by dividing the total of such Debt Service by the number of years then remaining before final maturity. Capitalized interest payments provided from proceeds of Bonds Similarly Secured shall be excluded in making the aforementioned computation. (c) "Bonds" - Collectively, the "CITY OF NORTH RICHLAND HILLS, TEXAS, WATERWORKS AND SEWER SYSTEM IMPROVEMENT AND REFUNDING REVENUE BONDS, SERIES 1989" and "CITY OF NORTH RICHLAND HILLS, TEXAS, WATERWORKS AND SEWER SYSTEM REFUNDING REVENUE BONDS, SERIES 1989-A" authorized by this Ordinance. (d) "Bonds Collectively, the Bonds. Similarly Bonds and Secured" - Additional (e) "Debt Service" - As of any particular date of computation, with respect to any obligations and with respect to any period, the aggregate of the amounts to be paid or set aside by the City as of such date or in such period for the payment of the principal of, premium, if any, and interest (to the extent not capitalized) on such obligations; assuming, in the case of Bonds Similarly Secured wi thou t a fixed numerica 1 rate, tha t such obligations bear, or would have borne, -53- interest at the highest rate reached, or that would have applied to such obligations (using the index or method for computing interest applicable to such obligations) during the twenty-four (24) month period next preceding the date of computation; and further assuming in the case of obligations requi red to be redeemed 0 r p repa id as to principal prior to maturity, the principal amounts thereof will be redeemed prior to maturi ty in accordance wi th the mandatory redemption provisions applicable thereto. (f) "Fiscal Year" - The twelve month financial accounting period for the System ending September 30th of each year; provided, however, the Ci ty, by ordinance, may change the Fiscal Year to another period of not less than twelve calendar months. (g) "Government Obligations" - 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, and Uni ted States Treasury obligations such as its State and Local Government Series in book-entry form. (h) "Gross Revenues" - All income and revenues of every nature derived or received from the operation and ownership (excluding refundable meter deposits, gifts and grants in aid of construction, impact fees charged developers and special assessments against landowners) of the System, including earnings and income derived from the investment or deposit of moneys in any special funds or accounts created and established for the payment and security of the Bonds Similarly Secured and other obligations payable solely from and secured only by a lien on and pledge of the Net Revenues. (i) "Operating and Maintenance Expenses" - All current expenses of operating and maintaining the System, including all salaries, labor, materials, repairs and extensions necessary to render efficient service; provided, however, that -54- only such repairs and extensions, as in the judgment of the City Council, reasonably and fairly exercised, are necessary to maintain the operations and render adequate service to the City and the inhabitants thereof, or such as might be necessary to meet some physical accident or condition which would otherwise impair obligations payable from Net Revenues shall be deducted in determining "Net Revenues". Depreciation charges shall not be considered Operating and Maintenance Expenses. Operating and Maintenance Expenses shall include payments under contracts for the purchase of water supply, treatment of sewage or other materials, goods or services for the System to the extent authorized by law and the provisions of such contract. (j) "Net Earnings" - The meaning assigned to such term in Section 20 hereof. (k) "Net Revenues" - Gross Revenues of the System, with respect to any period, after deducting the System's Operating and Maintenance Expenses during such period. (I) "outstanding" - When used in this Ordinance with respect to Bonds or Bonds Similarly Secured means, as of the date of determination, all Bonds or Bonds Similarly Secured theretofore issued and delivered under their respective authorizing ordinances, except: (1) those Bonds Secured cancelled cancellation by the agent therefor; or Bonds Similarly or received for appropriate paying (2) those Bonds or Bonds Similarly Secured paid or deemed to be duly paid by the City in accordance with the provisions of the ordinances governing thei r issuance and applicable laws by the irrevocable deposit with the Paying Agent/Registrar, or an authorized escrow agent, of money or Government Obligations, or both, in the amount necessary to fully pay the principal of, premium, if any, and interest thereon to ma tu r i ty 0 r redempt ion, as the case may -55- be; provided that, if such obligations are to be redeemed, notice of redemption thereof shall have been duly given in accordance with the terms prescribed therefor or irrevocably provided to be gIven, or waived; and (3) those Bonds or Bonds Similarly Secured that have been mutilated, destroyed, lost, or stolen and replacement Bonds have been registered and delivered in lieu thereof in accordance wi th applicable terms and provisions. (m) "Required Reserve" - The amount required to be accumulated and maintained in the Reserve Fund under the provisions of Section 14. (n) "System" - All properties, facilities and plants currently owned, operated and maintained by the City for the supply, treatment, transmission and distribution of potable water and the collection, treatment and disposal of water-carried wastes, together wi th all future extensions, improvements, replacements and additions thereto; provided, however, tha t notwi ths tandi ng the foregoing, and to the extent now or hereafter authorized or permitted by law, the term "System" shall not mean to include facilities of any kind which are declared not to be a part of the System and which are acquired or constructed by or on behalf of the City with the proceeds from the issuance of "Special Facilities Bonds", which are hereby defined as being special revenue obligations of the Ci ty which are not Bonds but which are payable from and secured by other liens on and pledges of any revenues, sources or payments, not pledged to the payment of the Bonds Similarly Secured including, but not limited to, special contract revenues or payments received from any other lega 1 entity in connection with such facilities." -56- (b) follows: Sect ion 11 sha 11 be amended and modi f ied to read as "SECTION II: Rates and Charges. That, for the benefi t of the Holders of the Bonds and in addi tion to all provisions and covenants in the laws of the State of Texas and in this Ordinance, the City hereby expressly stipulates and agrees, while any of the Bonds are Outstanding, to establish and maintain rates and charges for facilities and services afforded by the System that are reasonably expected, on the basis of available information and experience and with due allowance for contingencies, to produce Gross Revenues in each Fiscal Year sufficient: (1) To pay Operating and Maintenance Expenses, depreciation charges and replacement and betterment costs, (2) To produce Net Revenues sufficient to pay the current Debt Service on the Outstanding Bonds Simi lar ly Secured and the amounts required to be deposited in any reserve or contingency fund created for the payment and security of the Bonds Similarly Secured, and other obligations or evidences of indebtedness issued or incurred that are payable only from and secured solely by a lien on and pledge of the Net Revenues of the System, and (3) at least for the Secured." To produce Net Revenues equal to 1.20 times the annual Debt Service then Outstanding Bonds Similarly (4) To pay all payable from the Net secured by a lien on the revenues of the System. other indebtedness Revenues and/or properties or the Any revenues in excess of those required to fully satisfy the priorities and purposes specified above may be transferred to the genearl fund of the City and expended for general or special purposes." -57- (c) Section 12 shall be eliminated and repealed. (d) Section 13 sha 11 be amended, modi f ied and renumbered as Section 12 to read as follows: "SECTION 12: Water and Sewer System Fund. The City hereby covenants and agrees that Gross Revenues of the System (excluding earnings and income derived from investments held in the Interest and Sinking Fund and Reserve Fund) shall be deposited as collected to the credit of a fund maintained at an official depository of City funds and known on the books and records of the City as the "Water and Sewer System Fund" (herein called the "System Fund"), and such revenues of the System shall be kept separate and apart from all other funds of the City. All revenues deposited in the System Fund shall be pledged and appropriated to the extent required for the following uses and in the order of priority shown: (1) To the payment of all necessary and reasonable Operating and Maintenance Expenses as defined herein or required by statute to be a first charge on and claim against the Gross Revenues thereof. (2) To the payment of the amounts requi red to be deposited in the Interest and Sinking Fund established and maintained for the payment of Debt Service on the Bonds Similarly Secured as the same becomes due and payable. (3) To the payment of the amounts requi red to be deposi ted in the Reserve Fund to accumulate and maintain therein the Requi red Reserve in accordance with the provisions of this Ordinance or any other ordinance relating to issuance of Bonds Similarly Secured. Any Net Revenues remaining in the System Fund after satisfying the foregoing payments, or making adequate and sufficient provision for the payment thereof, may be appropriated and used for any other City purpose now or hereafter permitted by law." (e) Section 14 shall be amended, modified and renumbered as Section 13 to read as follows: -58- "SECTION 13: Interest and Sinking Fund. For purposes of providing funds to pay current Debt Service on Bonds Similarly Secured when and as the same shall become due and payable, a separate and special account shall be established and maintained on the books and records of the Ci ty known as the "City of North Rich1and Hills Revenue Bond Interest and Sinking Fund" (the "Interest and Sinking Fund") and all funds deposi ted to the credi t of such Fund shall be kept and maintained in a special banking account or fund maintained at an official depository of the City. In addition to the deposits to the Interest and Sinking Fund for the payment of the Previously Issued Bonds, the City covenants that there shall be deposited into the Interest and Sinking Fund prior to each principal and interest payment date from the Net Revenues an amount equal to one hundred per centum (100%) of the amount required to fully pay the interest on and the principal of the Bonds then falling due and payable by reason of maturity or redemption, and such deposits to pay principal and accrued interest on the Bonds shall be made in substantially equal monthly installments on or before the 25th day of each month, beginning on or before the 25th day of the month next following the delivery of the Bonds to the initial purchaser. If the Net Revenues in any month are then insufficient to make the requ i red payments into the Interest and Sinking Fund, then the amount of any deficiency in the payment sha II be added to the amount otherwise required to be paid into the Interest and Sinking Fund in the next month. "The required monthly deposits to the Interest and Sinking Fund for the payment of principal of and interest on the Bonds shall continue to be made as hereinabove provided until (i) the total amount on deposit in the Interest and Sinking Fund and Reserve Fund is equal to the amount required to fully pay and discharge all Outstanding Bonds Similarly Secured (principal and interest) or (ii) the Bonds are no longer Outstanding. "Accrued interest and premium, if any, received from the purchaser(s) of the Bonds, as well as earnings derived from the investment of moneys in the Interest and Sinking Fund, sha 11 be depos i ted to the credi t of the Interest and Sinking Fund and taken into consideration and reduce the amount of the monthly deposits hereinabove required to be deposited in the Interest and Sinking Fund from the Net Revenues of the System." -59- (f) Section 15 shall be amended, modified and renumbered as Section 14 to read as follows: "SECTION 14: Reserve Fund. For purposes of accumulating and maintaining funds as a reserve for the payment of the Bonds Similarly Secured, the City agrees and covenants to create and maintain on the books and records of the City a separate and special fund or account known as the "Revenue Bond Reserve Fund" (the "Reserve Fund"), and all funds deposited to the credit of such Fund shall be kept and maintained in a special banking account or fund maintained at an official depository of the City. All funds deposited therein (excluding earnings and income derived or received from deposits or investments which may be transferred to the System Fund referred to in Section 12 hereof during such periods as there is on deposit in the Reserve Fund the Required Reserve) shall be used solely for the payment of the principal of and interest on the Bonds Similarly Secured when (whether at maturity, upon a mandatory redemption date or any interest payment date) other funds available for such purposes are insuf f ic ient, and, in addi t ion, may be used to the extent not required to maintain the "Required Reserve", to pay, or provide for the payment of, the final principal amount of a series of Bonds Similarly Secured so that such series of Bonds Similarly Secured is no longer deemed to be "Outstanding" as such term is defined herein. "The City hereby reaffirms that it will accumulate and, when accumulated, continuously maintain in the Reserve Fund an amount equal to the lesser of (i) the Average Annua 1 Debt Service (calculated on a Fiscal Year basis) for all Bonds Simi la r ly Secured then Outstanding, as determined on the date each series of Additional Bonds are delivered or incurred, as the case may be, or (ii) the maximum amount in a reasonably requi red reserve fund that can be invested wi thout restriction as to yield pursuant to Subsection (d) of Section 148 of the Internal Revenue Code of 1986, as amended, and regulations promulgated thereunder the "Required Reserve". By reason of the issuance of the Bonds, the Required Reserve shall be an amount equal to the Average Annual Debt Service (calculated on a Fiscal Year basis) for all Outstanding Bonds Similarly Secured after giving effect to the issuance of the . öo- Bonds and, upon the provisions hereof becoming oper at i ve and ef fect i ve, the Ci ty sha 1l cont inue to make monthly deposits in the Reserve Fund on or before the 25th day of each month in substantially equal amounts so that the Required Reserve shall have been accumulated in the Reserve Fund within 60 months from the date of issuance of the Bonds. "When and so long as the cash and investments in the Reserve Fund tota I not less than the Requi red Reserve, no depos i ts need be made to the credi t of the Reserve Fund; but, if and when the Reserve Fund at any time contains less than the Required Reserve, the City covenants and agrees to cure the deficiency in the Requi red Reserve by resuming monthly depos i ts to said Fund from the Net Revenues of the System; such monthly deposits to be in amounts equal to not less than 1/60th of the then total Required Reserve to be maintained in said Fund and to be made on or before the 25th day of each month until the total Required Reserve then to be maintained in said Fund has been fully restored. The Ci ty further covenants and agrees that, subject only to the payments to be made to the Interest and Sinking Fund, the Net Revenues shall be applied and appropriated and used to establish and maintain the Required Reserve and to cure any deficiency in such amounts as requi red by the terms of this Ordinance and any other ordinance pertaining to the issuance of Additional Bonds. "During such time as the Reserve Fund contains the total Required Reserve, the City may, at its option, wi thdraw a 11 surplus in the Reserve Fund in excess of the Required Reserve and deposit such surplus in the System Fund." (g) Section 15 shall be added and shall read as follows: SECTION 15: Investments. Money deposited to the credi t of any Fund referenced in this Ordinance may, at the option of the City, be invested in funds and obligations authorized and identified in the Public Funds Investment Act of 1987, as enacted or hereafter amended; provided, however, the investment of moneys in the Interest and Sinking Fund and Reserve Fund shall be restricted to time deposits or certificates of deposi t secured (to the extent not insured by the Federal Deposit Insurance Corporation) by obligations of the type hereinafter described, or in Government Obligations; provided that all such -61- deposits and investments shall be made in such a manner that the money required to be expended from any Fund will be available at the proper time or times. Such investments (except State and Local Government Series investments held in book entry form, which shall at all times be valued at cost) shall be valued in terms of current market value within 45 days of the close of each Fiscal Year and, wi th respect to investments held for the account of the Reserve Fund, within 30 days of the date of passage of each ordinance authorizing the issuance of Additional Bonds. All interest and income derived from deposits and investments in the Interest and Sinking Fund immediately shall be credited to, and any losses debited to, the Interest and Sinking Fund. All interest and interest income derived from deposits in and investments of the Reserve Fund shall, subject to the limitations provided in Section 14 hereof, be credited to and deposited in the System Fund. All such investments shall be sold promptly when necessary to prevent any default in connection with the Bonds." (h) follows: Section 20 shall be amended and modified to read as "SECTION 20: Issuance of Additional Parity Obli- gations-Refunding Bonds-Obligations Secured by Inferior Lien. (a) Subject to the provisions hereinafter appearing as to conditions precedent which must be sat i sf ied, the Ci ty reserves the right to issue, from time to time as needed, Additional Bonds for any lawful purpose. Such Addi tional Bonds may be issued in such form and manner as now or hereafter authorized by the laws of the State of Texas for the issuance of evidences of indebtedness or other instruments, and should new methods or financing techniques be developed that differ from those now available and in normal use, the City reserves the right to employ the same in its financing arrangements provided only that the following conditions precedent for the authorization and issuance of the same are satisfied, to wit: (I) The Director of Finance of the City (or other officer of the City then having the primary responsibility for the financial affairs of the City) shall have executed a certificate stating (a) that, to the best of his knowledge and belief, the -62- City is not then in default as to any covenant, obligation or agreement contained in any ordinance or other proceeding relating to any obligations of the City payable from and secured by alien on and pledge of the Net Revenues of the System that would materially affect the security or payment of such obligations and (b) either (i) payments into all special funds or accounts created and established for the payment and security of all outstanding obligations payable from and secured by a lien on and pledge of the Net Revenues of the System have been made and that the amounts on deposit in such special funds or accounts are the amounts then required to be on deposit therein or (ii) the application of the proceeds of sale of such obligations then being issued will cure any such deficiency. (2) The Additional Bonds shall be scheduled to mature or be payable as to principal on March 1 or September 1 (or both) in each year the same are to be outstanding or during the term thereof. (3) The City has secured a certificate or opinion of an independent Certified Public Accountant to the effect that, according to the books and records of the City, the Net Earnings, for the preceding Fiscal Year or for 12 consecutive months out of the 15 months immediately preceding the month the ordinance authorizing the issuance of the Additional Parity Bonds is adopted, are at least equal to 1.25 times the Average Annual Debt Service for all Outstanding Bonds Similarly Secured after giving effect to the issuance of the Addi tiona 1 Bonds then being issued. In making a determination of the Net Earnings, the Accountant may take into consideration a change in the rates and charges for services and facilities afforded by the System that became effective at least sixty (60) days prior to the last day of the period for which Net Earnings are determined and, for purposes of satisfying the above Net Earnings test, make a pro forma determination of the Net Earnings of the System for the period of -63- time covered by his certification or opinion based on such change in rates and charges being 1n effect for the entire period covered by the Accountant's certificate or opinion. "As used 1n this Section, the term "Net Earnings" shall mean the Gross Revenues of the System after deducting the Operating and Maintenance Expenses of the System, but not depreciation charges or expenditures which, under generally accepted accounting principles, should be charged to capital expenditures. (b) The City reserves the right to issue refunding bonds to refund all or any part of the Bonds Similarly Secured (pursuant to any law then available) upon such terms and conditions as the City Council of the City may deem to be in the best interest of the City and its inhabitants, and if less than all such Bonds Similarly Secured then outstanding are refunded, the conditions precedent prescribed (for the issuance of Additional Bonds) set forth in subparagraph (a)(3) of this Section shall be satisfied and the Accountant's certificate or opinion required in subparagraph (a) (3) shall give effect to the Debt Service of the proposed refunding bonds (and shall not give effect to the Debt Service of the Bonds Similarly Secured being refunded following their cancellation or provision being made for their payment) . (c) The City hereby reserves the right to issue obligations payable from and secured by a lien on and pledge of the Net Revenues of the System, junior and subordinate in rank and dignity to the lien and pledge securing the payment of the Bonds Similarly Secured, as may be authorized by the laws of the State of Texas." ( i) follows: Section 21 sha II be amended and modified to read as "SECTION 21: Maintenance and Operation Insurance. The City shall maintain the System in good condition and operate the same in an efficient manner and at reasonable cost. In regard to the operations and properties of the System, the City also agrees to carry and maintain liability and property damage insurance of the kind and in the amounts carried by municipal corporations in -64- . Texas own1ng and operating similar facilities and providing like services; provided, however, the Ci ty in lieu of and/or in combination with carrying such insurance may self-insure against such perils and risks by establishing self-insurance reserves. Annually each year not later than the end of each Fi sca I Yea r , the Ci ty sha II prepa re or cause to be prepared by a person competent and knowledgable 1n such matters a written evaluation of the adequacy of such self-insurance and/or insurance coverage and of any recommended changes in regard to the City's insurance/self-insurance policies, practices and procedures." (j) follows: Section 22 is hereby amended and modified to read as "SECTION 22: Records Accounts Accounting Reports. The Ci ty hereby covenants and agrees that whi Ie any of the Bonds are Outstanding, it wi II keep and maintain separate and complete records and accounts pertaining to the operations of the System in which complete and correct entries shall be made of all transactions relating thereto, as provided by Article 1113, V.A.T.C.S. or other applicable law. The Holders of any Bonds or any duly authorized agent or agents of such Holders shall have the right at all reasonable times to inspect such records, accounts and data relating thereto, and to inspect the System and all properties comprising same. The City further agrees that following the close of each Fiscal Year, it will cause an audit of such books and accounts to be made by an independent firm of Certified Public Accountants. Each such audit, in addition to whatever other matters may be thought prope r by the accountant, sha II pa rt icu I ar ly include the following: (I) A statement of the income and expenses of the System for such Fiscal Year. (2) A balance sheet for the System as of the end of such Fiscal Year. (3 ) regarding carried Ordinance authorizing Bonds and The Accountant's the manner in which the out the requirements and any other the issuance of hi s recommendat ions comments Ci ty has of thi s ordinance Additional fo r any -65- changes or improvements in the operations, records and accounts of the System. "Expenses incurred in making an annual audit of the operations of the System are to be regarded as Operating and Maintenance Expenses. Copies of each annual audit shall be furnished to the Executive Di rector of the Municipa 1 Advisory Counci I of Texas at his office in Austin, Texas, and, upon request, to the initial purchasers of the Bonds and subsequent Holders of any of said Bonds. The audits herein required shall be made within 120 days following the close of each Fiscal Year insofar as is possible." (k) Subparagraph (c) of Section 24 shall be amended and modified to read as follows: "(c) While the Bonds remain Outstanding, the City will not sell or otherwise dispose of the System or, except as authorized below, any substantial portion of the System or its compontent parts; provided, however, to the extent and in the manner authorized by law, the City may sell or dispose of any property, facilities and equipment not necessary or essential to the operations of the System or which is obsolete, damaged or surplus and the proceeds of sale of such property, facilities and equipment, if any, shall be deposited to the credit of the System Fund and provided further that any portion of the System located within the corporate limits of another municipality or municipalities may be sold to the municipality in which such portion of the System is located subject to (i) the sale price for such portion of the System (as certified by a registered professional engineer not employeed by the City) is not less than the then appraised value of such portion being sold and in addition to the sale price, the purchaser pays or makes provision for the payment of pena 1 ties and added expenses tha t occur in such acquisition (including the cost of acquiring for redemption Bonds Similarly Secured or other obligations issued by the City to acquire such properties), (ii) the governing body of the City finds that the po rt ion of the System to be so ld is not required for the rendition of efficient service to the inhabitants of the City and (iii) the proceeds of sale of such portions of the System, net of reasonable and necessary expenses incurred in connection therewith (including attorneys and engineers), shall be deposited in a special escrow -66- account with the City's depository bank and expended only for paying and cancelling Bonds Similarly Secured or other obligations issued by the City to acquire such properties prior to their regularly scheduled maturity by purchasing in the open market or by the exercise of prepayment options or for making capital improvements and extensions to the System, all as shall be determined by the City Council of the City." SECTION 39: CUSIP Numbers. CUSIP numbers may be printed or typed on the definitive Bonds. It is expressly provided, however, that the presence or absence of CUSIP numbers on the definitive Bonds shall be of no significance or effect as regards the legality thereof and neither the City nor attorneys approving sa id Bonds as to leg a 1 i ty a re to be he ld responsible for CUSIP numbers incorrectly printed or typed on the definitive Bonds. SECTION 40: Benefits of Ordinance. Nothing in this Ordinance, expressed or implied, is intended or shall be construed to confer upon any person other than the Ci ty, the Paying Agent/Registrar and the Holders, any right, remedy, or claim, legal or equitable, under or by reason of this Ordinance or any provision hereof, this Ordinance and all its provisions being intended to be and being for the sole and exclusive benefit of the City, the Paying Agent/Registrar and the Holders. SECTION 41: Inconsistent Provisions. All ordinances, orders or resolutions, or parts thereof, which are in conflict or inconsistent with any provision of this Ordinance are hereby repealed to the extent of such conflict and the provisions of this Ordinance shall be and remain controlling as to the matters contained herein. SECTION 42: Governing Law. This Ordinance shall be construed and enforced in accordance with the laws of the State of Texas and the United States of America. SECTION 43: Effect of herein are for convenience construction hereof. Headings. only and The shall Section headings not affect the SECTION 44: Severability. If any provision of this Ordinance or the application thereof to any circumstance shall be held to be invalid, the remainder of this Ordinance and the application thereof to other ci rcumstances shall nevertheless be valid, and the City Council hereby declares that this Ordinance would have been enacted without such invalid provision. -67- - SECTION 45: Incorporation of Findings and Determinations. The findings and determinations of the City Council contained in the preamble hereof are hereby incorporated by reference and made a part of this Ordinance for all purposes as if the same were restated in full in this Section. SECTION 46: Insurance. The Bonds have been offered and sold with the principal of and interest thereon being insured by AMBAC Indemnity Corporation, a Wisconsin domiciled stock insur ance company (hereina fter ca lied "AMBAC"), pursuant to a Municipal Bond Guaranty Insurance Policy. The City Council hereby approves payment of the insurance premium of AMBAC f rom proceeds of sa Ie of the Bonds. In accordance wi th the terms and condi tions applicable to insurance provided by AMBAC, the Ci ty covenants and agrees that, in the event the principal and interest due on the Bonds shall be paid by AMBAC pursuant to the policy referred to this Section, the assignment and pledge of all funds and all covenants, agreements and other obligations of the City to the Holders shall continue to exist and AMBAC shall be subrogated to the rights of such Holders; and furthermore, the City covenants and agrees that: (a) Consent of AMBAC where Holder Consent Required. AMBAC shall be deemed to be the holder of the Bonds insured by AMBAC at all times for the purpose of the execution and delivery of any amendment, change 0 r modi fica t ion of this Ordinance or the initiation by Holders of any action to be taken under this Ordinance at the Ho lder' s request, which under this Ordinance (or under such underlying documents) requires the written approval or consent of or can be initiated by the Holders of a majority (50% percent) in aggregate principal amount of the Bonds at the time Outstanding. (b) Defeasance. In the event that the principal and redemption price, if applicable, and interest due on the Bonds shall be paid by AMBAC pursuant to the policy referred to in this Section, all covenants, agreements and other obligations of the City to the Holders shall continue to exist and AMBAC shall be subrogated to the rights of such Holders. (c) Notices to be Given to AMBAC. While the Municipal Bond Guaranty Insurance POlicy is 1n effect, the City shall furnish to AMBAC: (I) as soon as practicable after the filing thereof, a copy of any financial statement of the System and a copy of any audit and annual report of the System; -68- (2) a copy of any notice to be given to the registered owners of the Bonds, including, without limitation, notice of any redemption or defeasance of Bonds, and any certificate rendered pursuant to this Ordinance relating to the security for the Bonds; and (3) such additional information as it may reasonably request. The City will permit AMBAC to discuss the affairs, finances and accounts of the City, including in particular with respect to the System, or any information AMBAC may reasonably request regarding the security for the Bonds with appropriate officers of the Ci ty. The Ci ty wi 11 permi t AMBAC to have access to the System and have access to and make copies of all books and records relating to the Bonds at any reasonable time. ' (d) Consent of AMBAC. Any provision of this Ordinance expressly recognizing or granting rights in or to AMBAC may not be amended in any manner which affects the rights of AMBAC hereunder without the prior written consent of AMBAC. Furthermore, anything in this Ordinance to the contrary notwi thstanding, upon the occurrence and cont inuance of an event of default, AMBAC shall be entitled to control and direct the enforcement of all rights and remedies granted to the Holders of the Bonds for the benefit of such Holders. (e) Concerning the Bond Insurance Policy. As long as insurance for the Bonds shall be in full force and effect, the City agrees to comply with the following provisions: (I) if five (5) days prior to an interest payment date for the Bonds the City determines that there will be insufficient funds in the Interest and Sinking Fund and Reserve Fund to pay the principal of or interest on the Bonds on such interest payment date, the City shall so notify AMBAC. Such notice shall specify the amount of the anticipated def iciency, the Bonds to which such deficiency is app licab1e and whether such Bonds wi 1l be deficient as to principal or interest, or both. -69- (2) the City shall, after glv1ng notice to AMBAC as provided in (1) above, make available to AMBAC and the United States Trust Company of New York, as insurance trustee for AMBAC, the registration books of the City maintained by the Paying Agent/Registrar, and all records relating to the funds and accounts maintained under this Ordinance. (3) the City shall cause the Paying Agent/Registrar to provide AMBAC and the United States Trust Company of New York with a list of registered owners of Bonds entitled to receive principal or interest payments from AMBAC under the terms of the Municipal Bond Insurance Policy, and shall cause the Paying Agent/Registrar to make arrangements with United States Trust Company of New York (i) to mail checks or drafts to the registered owners of Bonds entitled to receive full or partial interest payments from AMBAC, and (ii) to pay principal upon Bonds surrendered to United States Trust Company of New York by the registered owners of Bonds entitled to receive full or partial principal payments from AMBAC. (4) the City shall cause the Paying Agent/Registrar to notify, at the time it provides notice to AMBAC pursuant to (I) above, the registered owners of Bonds entitled to receive the payment of principal or interest thereon from AMBAC (i) as to the fact of such entitlement, (ii) that AMBAC will remit to them all or a part of the interest payments next coming due, (iii) that should they be entitled to receive full payment of principal from AMBAC they must tender their Bonds (along with a form of transfer of title thereto) for payment to Uni ted States Trust Company of New York, as insurance trustee for AMBAC, and not the Paying Agent/ Registrar, and (iv) that should they be entitled to receive partial payment of principal from AMBAC they must tender their Bonds for payment thereon first to the Paying Agent/Registrar, who shall note on such -70- Bonds the portion of the principal paid by the Paying Agent/Registrar, and then, along with a form of transfer of title thereto, to AMBAC, which wi 11 then pay the unpa id portion of principal. (5) AMBAC shall, to the extent it makes a payment of principal of or interest on Bonds, become subrogated to the rights of the recipients of such payments in accordance wi th the terms of the Municipa 1 Bond Insurance POlicy, and to evidence such subrogation (i) in the case of subrogation as to claims for past due interest, the City shall cause the Paying Agent/Registrar to note AMBAC' s rights as subrogee on the registration books of the City maintained by the Paying Agent/Registrar upon receipt from AMBAC of proof of the payment of interest thereon to the registered owners of the Bonds, and (ii) in the case of subrogation as to claims for past due pr incipa I, the Ci ty sha 11 cause the Paying Agent/Registrar to note AMBAC's rights as subrogee on the registration books of the City maintained by the Paying Agent/ Registrar upon surrender of the Bonds by the registered owners thereof together with proof of the payment of principal thereof. (6) 1n regard to authorized investments held in the Reserve Fund, the City shall limit such investments to the following obligations: (i) direct obligations of (including obligations issued or held in book entry form on the books of) the Department of Treasury of the United States of America, (ii) obligations of any of the following federal agencies which ob 1 igat ions represent fu 11 fa i th and credit of the United States of America, including: Export-Import Bank, Farmers Home Administration, General Services Admini- stration, U. S. Maritime Administration, Small Business Administration, Government National Mortgage Association, U. S. De- partment of Housing and Urban Development and Federal Housing Administration and (iii) U. S. dollar denominated deposit accounts, federal funds and banker's -71- acceptances with domestic commercial banks which have a rating on their short term certificates of deposit on the date of purchase of "A-l" or A-l+" by Standard & Poor's and "P-l" by Moody's Investors Service and maturing no more than 360 days after the date of purchase. SECTION 47: Public Meeting. It is officially found, determined, and declared that the meeting at which this Ordinance is adopted was open to the public and public notice of the time, place, and subject matter of the public business to be considered at such meeting, including this Ordinance, was given; all as required by Article 6252-17, Vernon's Texas Civil Statutes, as amended. SECTION 48: Effective take effect and be in force passage, and it is so ordained. Da te. Tha t thi s Ordinance sha II immediately from and after its PASSED AND ADOPTED, this March 20, 1989. CITY OF NORTH RICHLAND HILLS, TEXAS ~ ~{ ~ \ . "- . -vi. ~r'''-~Î ~~'- May r \ ATTEST: (,--~t'4~//b ¡JL«J~ ¡jfty Secretary TO~ ~ (City Seal) 29095 -72- EXHIBIT A. CI'IY OF NORTH RICHLAND HILLS, TEXAS Waterworks and Sewer System Improvement and Refunding Revenue Bonds $9,296,800.25 Series 1989 Waterworks and Sewer System Refunding Revenue Bonds $4,041,763.75 Series 1989-A PURCHASE CONTRACf March 20, 1989 THE HONORABLE MAYOR AND CI1Y COUNCIL MEMBERS City of North Richland Hills Municipal Building 7301 Northeast Loop 820 North Richland Hills, Texas 76180 Dear Mayor and City Council Members: The undersigned, Dillon, Read & Co. Inc., Underwood, Neuhaus & Co. Incorporated and Dean Witter Reynolds Inc. (the "Underwriters"), offer to enter into this Purchase Contract with the City of North Richland Hills, Texas (the "City"). This offer is made subject to the City's acceptance of this Purchase Contract on or before 8:00 P.M., Central Standard Time on March 20, 1989. 1. Purchase and Sale of ~he Bonds. Upon the terms and conditions and upon the basis of the representations set forth herein, the Underwriters hereby agree to purchase, jointly and severally, from the City, and the City hereby agrees to sell and deliver to the Underwriters $9,296,800.25 principal amount of City of North Rich1and Hills, Texas Waterworks and Sewer System Improvement and Refunding Revenue Bonds, Series 1989, and $4,041,763.75 aggregate principal amount of City of North Richland Hills, Texas Waterworks and Sewer System Refunding Revenue Bonds, Series 1989-A. The Series 1989 Bonds and the Series 1989-A Bonds shall hereinafter be referred to collectively as the "Bonds". The Bonds shall be dated March 1, 1989 and shall have the maturities and, except for the Bonds maturing in the years 2002 through 2008 (the "Capital Appreciation Bonds"), bear interest from their date at the rate or rates per annum as shown on the cover page of the Official Statement (hereinafter defined), such interest being payable on September 1, 1989, and semiannually thereafter on March 1 and September 1 in each year. The Capital Appreciation Bonds shall compound interest from their date of delivery as of September 1, 1989 and each March 1 and September 1 thereafter. The purchase price for the Series 1989 Bonds shall be $9,158,103.69 (representing the principal amount of the Series 1989 Bonds, other than the Capital Appreciation Bonds, of $8,025,000, less an underwriter's discount on such Series 1989 Bonds of $93,892.50 and less the original issue discount with respect to certain maturities aggregating $29,924.00, plus the principal amount of the Capital Appreciation Bonds of $1,271,800.25, less an underwriter's discount on the Capital Appreciation Bonds of $14,880.06) plus interest accrued on the Series 1989 Bonds, other than the Capital Appreciation Bonds, from their date to the date of the payment for and delivery of the Bonds (the "Closing"). The purchase price of the Series 1989-A Bonds shall be $3,981,432.91 (representing the principal amount of the Series 1989-A Bonds other than the Capital Appreciation Bonds, of $3,500,000, less an underwriter's discount thereon of $40,950,000 and less an original issue discount with respect to certain maturities aggregating $13,042.20, plus the principal amount of the Capital Appreciation Bonds of $541,763.75, less an underwriter's discount on the Capital Appreciation Bonds of $6,338.64) plus accrued interest on the Series 1989-A Bonds, other than the Capital Appreciation Bonds, from their date to the date of Closing. The Official Statement, including the cover page and Appendices thereto, as further amended only in the manner hereinafter provided, is hereinafter called the "Official Statement". 2. Ordinance. The Bonds shall be as described in and shall be issued and secured under the provisions of an ordinance adopted by the City on March 20, 1989 (the "Ordinance"). The Bonds shall be subject to redemption and shall be payable as provided in the Ordinance. 3. Public Offering. It shall be a condition of the obligation of the City to sell and deliver the Bonds to the Underwriters, and of the obligation of the Underwriters to purchase and accept delivery of the Bonds, that the entire principal amount of the Bonds authorized by the Ordinance shall be sold and delivered by the City and accepted and paid for by the Underwriters at the Closing. The Underwriters agree to make a bona fide public offering of all of the Bonds, at not in excess of the initial public offering prices, as set forth on the cover page of the Official Statement, plus interest accrued thereon from the date of the Bonds, and confirm in writing to the City, the principal amount (or percentage of principal amount) of each maturity and the corresponding price for each maturity (or the yield from each maturity resulting from such price) at which the Bonds were sold pursuant to such bona fide public offering. 4. Securit;y Deposit;. Delivered to the City herewith is a corporate check of Dillon, Read & Co. Inc. payable to the order of the City in the amount of one percent of the principal amount of the Bonds. The City agrees to hold such check uncashed until the Closing to ensure the performance by the Underwriters of their obligations to purchase, accept delivery of and pay for the Bonds at the Closing. Concurrently with the payment by the Underwriters of the purchase price of the Bonds, the City shall return such check to Dillon, Read & Co. Inc. as provided in Paragraph 7 hereof. Should the City fail to deliver the Bonds at the Closing, or should the City be unable to satisfy the 2 constitute a breach of or default under any existing law, administrative regulation, judgment, decree or any agreement or other instrument to which the City is a party or is otherwise subject; (d) All approvals, consents and orders of any governmental authority or agency having jurisdiction of any matter which would constitute a condition precedent to the performance by the City of its obligations to sell and deliver the Bonds hereunder will have been obtained prior to the Closing; (e) At the time of the City's acceptance hereof and at the time of the Closing, the Official Statement does not and will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; (f) Between the date of this Purchase Contract and Closing, the City will not, without the prior written consent of the Underwriters, issue any additional bonds or other obligations for borrowed money payable in whole or in part from the revenues of the System, and the City will not incur any material liabilities, direct or contingent, relating to, nor will there be any adverse change of a material nature in the financial position of, the City or the System; (g) Except as described in the Official Statement, no litigation is pending or, to the knowledge of the City, threatened in any court affecting the corporate existence of the City, the title of its officers to their respective offices, or seeking to restrain or enjoin the issuance or delivery of the Bonds, or the collection of the revenues of the System pledged or to be pledged to pay the principal of and interest on the Bonds, or in any way contesting or affecting the issuance, execution, delivery, payment, security or validity of the Bonds, or in any way contesting or affecting the validity or enforceability of the Ordinance, the Escrow Agreement or this Purchase Contract, or contesting the powers of the City, or any authority for the Bonds, the Ordinance, the Escrow Agreement, or this Purchase Contract or contesting in any way the completeness, accuracy or fairness of the Preliminary Official Statement or the Official Statement or materially and adversely affecting the financial condition of the City or the System; (h) The City will cooperate with the Underwriters in arranging for the qualification of the Bonds for sale and the determination of their eligibility for investment under the laws of such jurisdictions as the Underwriters designate, and will use their best efforts to continue such qualifications in effect so long as required for distribution of the Bonds; provided, however, that the City will not be required to execute a general consent to service of process or to qualify to do business in connection with any such qualification in any jurisdiction; (i) The descriptions contained in the Official Statement of the Bonds, the Escrow Agreement and the Ordinance accurately reflect the provisions of such instruments, and the Bonds, when validly executed, 4 authenticated and delivered in accordance with the Ordinance and sold to the Underwriters as provided herein, will be validly issued and outstanding obligations of the City entitled to the benefits of, and subject to the limitations contained in, the Ordinance; and (j) If prior to the Closing an event occurs affecting the City which is materially adverse for the purpose for which the Official Statement is to be used and is not disclosed in the Official Statement, the City shall notify the Underwriters, and if in the opinion of the Underwriters such event requires a supplement or amendment to the Official Statement, the City will supplement or amend the Official Statement in a form and in a manner approved by the Underwriters' Counsel. 7. Closing. At 10:00 A.M., Central Daylight Time, on April 18, 1989, the City will deliver the initial bond or bonds (as required by the Ordinance) to the Underwriters and will have available for immediate exchange the Bonds in definitive form, duly executed and authenticated, together with the other documents hereinafter mentioned, and the Underwriters will accept such delivery and pay the respective purchase prices of the Bonds as set forth in Paragraph 1 hereof in immediately available funds. Concurrently with such payment by the Underwriters, the City shall return to Dillon, Read & Co. Inc., the check referred to in Paragraph 4 hereof. Delivery and payment as aforesaid shall be made at the offices of Fulbright & Jaworski, 2800 Texas Commerce Bank Tower, 2200 Ross Avenue, Dallas, Texas 75201, or such other place, as shall have been mutually agreed upon by the City and the Underwriters. The Bonds shall be printed or lithographed; shall be prepared and delivered as fully registered bonds in the denomination or maturity amount of $5,000 or any multiple thereof; shall be registered in the names as shall be requested by the Underwriters at least five days prior to the Closing; and, if the Underwriters shall so request, shall be made available to the Underwriters at least one business day before the Closing for purpose of inspection in New York, New York. 8. Condicions. The Underwriters have entered into this Purchase Contract in reliance upon the representations and warranties of the City contained herein and to be contained in the documents and instruments to be delivered at the Closing, and upon the performance by the City of its obligations hereunder, both as of the date hereof and as of the date of Closing. Accordingly, the Underwriters' obligations under this Purchase Contract to purchase and pay for the Bonds shall be subject to the performance by the City of its obligations to be performed hereunder and under such documents and instruments at or prior to the Closing, and shall also be subject to the following conditions: (a) The representations and warranties of the City contained herein shall be true, complete and correct in all material respects on the date hereof and on and as of the date of Closing, as if made on the date of Closing; (b) At the time of the Closing, the Ordinance and the Escrow Agreement shall be in full force and effect, and the Ordinance and the Escrow Agreement shall not have been amended, or supplemented and the Official Statement shall not have been amended, modified or supplemented, except as may have been agreed to by the Underwriters; 5 - (c) At the time of the Closing, all official action of the City related to the Ordinance and the Escrow Agreement shall be in full force and effect and shall not have been amended, modified or supplemented; (d) The City shall not have failed to pay principal or interest when due on any of its outstanding obligations for borrowed money; (e) The City will purchase the government securities necessary to provide the funds needed to refund the City's outstanding obligations as contemplated by the Escrow Agreement; (f) At or prior to the Closing, the Underwriters shall have received two copies of each of the following documents: (1) The Official Statement of the City executed on behalf of the City by the Mayor and City Secretary of the City; (2) The Ordinance certified by the City Secretary of the City under its seal as having been duly adopted by the City and as being in effect, with such changes or amendments as may have been agreed to by the Underwriters; (3) the da te City, in Official An unqualified opinion as to each Series of Bonds, dated of Closing, of Fulbright & Jaworski, Bond Counsel to the substantially the form and substance of Appendix C to the Statement; (4) Closing, required Accounts Bonds as An opinion or certificate, dated on or prior to the date of of the Attorney General of Texas, approving the Bonds as by law and a certificate of the Comptroller of Public of the State of Texas regarding the registration of the required by law; (5) The supplemental opinion, dated the date of Closing, of Fulbright & Jaworski, Bond Counsel to the City, addressed to the City and the Underwriters, to the effect that (A) in its capacity as Bond Counsel, such firm has reviewed the information in the Official Statement under the captions or sub-captions, "Plan of Financing", "The Bonds", "Selected Provisions of the Bond Ordinance", "Proposed New Covenants", "Tax Exemption", "Tax Accounting Treatment of the Capital Appreciation Bonds" and "Legal Investments and Eligibility to Secure Public Funds in Texas" and such firm is of the opinion that the information relating to the Bonds and the Ordinance contained under such captions in all respects accurately and fairly reflects the provisions thereof and, insofar as such information relates to matters of law, is true and accurate; (B) the Bonds are exempt from registration pursuant to the Securities Act of 1933, as amended, and the Ordinance is exempt from qualification as an indenture pursuant to the Trust Indenture Act of 1939, as amended; (C) in the performance of their duties as Bond Counsel for the City, without having undertaken to determine independently the accuracy and completeness of the statements contained in the Official Statement, nothing has come to the attention of such counsel which would lead 6 them to believe that the Official Statement (excluding the financial statements and other financial and statistical data included therein, all as to which no view need be expressed) contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; (6) The opinion of McCall, Parkhurst & Horton, as Underwriters' Counsel, dated the date of the Closing addressed to the Underwriters to the effect that the Bonds are exempt from registration pursuant to the Securities Act of 1933, as amended, and the Ordinance is exempt from qualification as an indenture pursuant to the Trust Indenture Act of 1939, as amended. The opinion of such Counsel shall also state that, based upon their participation in the preparation of the Official Statement, such Counsel has no reason to believe that the Official Statement (except for the financial statements and other financial and statistical data contained therein, as to which no view need be expressed), as of the date of the Official Statement, contained any untrue statement of a material fact or omitted to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; (7) A certificate, dated the date of Closing, signed by the Mayor and the City Manager of the City, to the effect that (i) the representations and warranties of the City contained herein are true and correct in all material respects on and as of the date of Closing as if made on the date of Closing; (ii) except to the extent disclosed in the Official Statement, no litigation is pending or, to the knowledge of such persons, threatened in any court to restrain or enjoin the issuance or delivery of the Bonds, or the collection of the Net Revenues of the System pledged or to be pledged to pay the principal of and interest on the Bonds, or the pledge thereof, or in any way contesting or affecting the validity of the Bonds, the Ordinance, the Escrow Agreement or this Purchase Contract, or contesting the powers of the City or contesting the authorization of the Bonds or the Ordinance, or contesting in any way the accuracy, completeness or fairness of the Preliminary Official Statement or the Official Statement (but in lieu of or in conjunction with such certificate, the Underwriters may, in their discretion, accept certificates or opinions of the City Attorney that, in his or her opinion, the issues raised in any such pending or threatened litigation are without substance or that the contentions of all plaintiffs therein are without merit); and (iii) to the best of their knowledge, no event affecting the City has occurred since the date of the Official Statement which should be disclosed in the Official Statement for the purpose for which it is to be used or which it is necessary to disclose therein in order to make the statements and information therein not misleading in any respect; (8) A certificate, dated the date of Closing, of the City Manager of the City to the effect that there has not been any material and adverse change in the affairs or financial condition of 7 the City or the System since September 30, 1988, the latest date as to which audited financial information is available; (9) A certificate, dated the date of the Closing, of an appropriate official of the City to the effect that, on the basis of the facts, estimates and circumstances in effect on the date of delivery of the Bonds, it is not expected that the proceeds of the Bonds will be used in a manner that would cause the Bonds to be arbitrage bonds within the meaning of Section 148(a) of the Internal Revenue Code of 1986, as amended; (10) A copy of a special report prepared by the independent Certified Public Accountants named in the Official Statement, addressed to the City, Bond Counsel, the Underwriters and Underwriters' Counsel verifying the arithmetical computations of the adequacy of the maturing principal and interest on the escrowed securities and uninvested cash on hand under the Escrow Agreement to pay, when due, the principal of and interest on the bonds being refunded by the Bonds and the computation of the yield with respect to such securities and the Bonds; (11) A copy of the AMBAC Corporation policy of municipal insurance insuring the payment of the principal of and interest on the Bonds, and evidence of the rating of Moody's Investor's Service of "Aaa" and of Standard & Poor's Corp. of "AM" on the Bonds delivered in a form acceptable to the Underwriters; and (12) Such additional legal opinions, certificates, instruments and other documents as Bond Counselor the Underwriters may reasonably request to evidence the truth, accuracy and completeness, as of the date hereof and as of the date of Closing, of the City's representations and warranties contained herein and of the statements and information contained in the Official Statement and the due performance and satisfaction by the City at or prior to the date of Closing of all agreements then to be performed and all conditions then to be satisfied by the City. All of the opinions, letters, certificates, instruments and other documents mentioned above or elsewhere in this Purchase Contract shall be deemed to be in compliance with the provisions hereof if, but only if, they are satisfactory to the Underwriters. If the City shall be unable to satisfy the conditions to the obligations of the Underwriters to purchase, to accept delivery of and to pay for the Bonds as set forth in this Purchase Contract, or if the obligations of the Underwriters to purchase, to accept delivery of and to pay for the Bonds shall be terminated for any reason permitted by this Purchase Contract, this Purchase Contract shall terminate and neither the Underwriters nor the City shall be under further obligation hereunder, except that: (i) the check referred to in Paragraph 4 hereof shall be immediately returned to Dillon, Read & Co. Inc. by the City, and (ii) the respective obligations of the City and the Underwriters set forth in Paragraphs 10 and 12 hereof shall continue in full force and effect. 8 9. Termination. The Underwriters may terminate their obligation to purchase at any time before the Closing if any of the following should occur: (a) (i) Legislation (including any amendment thereto) shall have been introduced in or adopted by either House of the Congress of the United States, or recommended to the Congress for passage by the President of the United States or favorably reported for passage to either House of the Congress by any Committee of such House, or (ii) a decision shall have been rendered by a court established under Article III of the Constitution of the United States or by the United States Tax Court, or (iii) an order, ruling or regulation shall have been issued or proposed by or on behalf of the Treasury Department of the United States or the Internal Revenue Service or any other agency of the United States, or (iv) a release or official statement shall have been issued by the President of the United States or by the Treasury Department of the United States or by the Internal Revenue Service, the effect of which, in any such case described in clause (i), (ii), (Hi), or (iv), would be to impose, directly or indirectly, federal income taxation upon interest received on obligations of the general character of the Bonds or upon income of the general character to be derived by the City, other than as imposed on the Bonds and income therefrom under the federal tax laws in effect on the date hereof, in such a manner as in the judgment of the Underwriters would materially impair the marketability or materially reduce the market price of obligations of the general character of the Bonds. (b) Any action shall have been taken by the Securities and Exchange Commission or by a court which would require registration of any security under the Securities Act of 1933, as amended, or qualification of any indenture under the Trust Indenture Act of 1939, as amended, in connection with the public offering of the Bonds, or any action shall have been taken by any court or by any governmental authority suspending the use of the Official Statement or any amendment or supplement thereto, or any proceeding for that purpose shall have been initiated or threatened in any such court or by any such authority. (c) (i) The Constitution of the State of Texas shall be amended or an amendment shall be proposed, or (ii) legislation shall be enacted, or (iii) a decision shall have been rendered as to matters of Texas law, or (iv) any order, ruling or regulation shall have been issued or proposed by or on behalf of the State of Texas by an official, agency or department thereof, affecting the tax status of the City, its property or income, its bonds (including the Bonds) or the interest thereon, which in the judgment of the Underwriters would materially affect the market price of the Bonds. (d) (i) A general suspension of trading in securities shall have occurred on the New York Stock Exchange, or (ii) the United States shall have become engaged in hostilities which have resulted in the declaration, on or after the date of this Purchase Contract, of a national emergency or war, the effect of which, in either case described in clause (i) and (ii), is, in the judgment of the Underwriters, so material and adverse as to make it impracticable or inadvisable to proceed with the public offering or the delivery of the Bonds on the terms and in the manner contemplated in this Purchase Contract and the Official Statement. 9 (e) An event described in Paragraph 6(j) hereof occurs which, in the opinion of the Underwriters, requires a supplement or amendment to the Official Statement. (f) A general banking moratorium shall have been declared by authorities of the United States, the State of New York or the State of Texas. (g) A lowering of the ratings of I1Aaa" and "AAA" initially assigned to the Bonds by Moody's Investors Service, Inc. and Standard & Poor's Corporation, respectively, shall occur prior to Closing. (h) Any event occurs which prevents the United States Treasury Department from delivering on the Closing Date the State and Local Government Securities subscribed for by the City in connection with the issuance of the Bonds. 10. Expenses. (a) The Underwriters shall be under no obligation to pay, and the City shall pay, any expenses incident to the performance of the City's obligations hereunder, including but not limited to: (i) the cost of the preparation, printing and distribution of the Official Statement; (ii) the cost of the preparation and printing of the Bonds; (iii) the fees and expenses of Bond Counsel to the City; (iv) the fees and disbursements of the City's accountants, advisors, and of any other experts or consultants retained by the City; and (v) fees and premiums for the policy of municipal bond insurance and for bond ratings and any travel or other expenses incurred incident thereto. (b) The Underwriter shall pay: (i) all advertising expenses of the Underwriters in connection with the offering of the Bonds; (ii) the cost of the preparation and printing of all the underwriting documents, including this Purchase Contract and (iii) all other expenses incurred by them in connection with their offering and distribution of the Bonds, including the fees of Counsel to the Underwriters. 11. No~ices. Any notice or other communication to be given to the City under this Purchase Contract may be given by delivering the same in writing at the address for the City set forth above, and any notice or other communication to be given to the Underwriters under this Purchase Contract may be given by delivering the same in writing to Dillon, Read & Co. Inc., 3810 Trammell Crow Center, 2001 Ross Avenue, Dallas, Texas 75201, Attention: H. Michael Ashford, Managing Director. 12. Par~ies in In~eres~. This Purchase Contract is made solely for the benefit of the City and the Underwriters (including the successors or assigns of any Underwriter) and no other person shall acquire or have any right hereunder or by virtue hereof. The City's representations, warranties and agreements contained in this Purchase Contract shall remain operative and in full force and effect, regardless of (i) any investigations made by or on behalf of the Underwriters and (ii) delivery of any payment for the Bonds hereunder; and the City's representations and warranties contained in Paragraph 6 of this Purchase Contract shall remain operative and in full force and effect, regardless of any termination of this Purchase Contract. 10 13. Effec~ive Da~e. This Purchase Contract shall become effective upon the execution of the acceptance hereof by the Mayor of the City and shall be valid and enforceable as of the time of such acceptance. Very truly yours, DILWN, READ & CO. INC. UNDERWOOD, NEUHAUS & CO. INCORPORATED DEAN WITfER REYNOLDS INC. By: Dillon Read & Co. Inc. Vice President Accepted: This 20th day of March, 1989 By: Mayor, City of North Rich1and Hills, Texas (SEAL) Attest: City Secretary, City of North Richland Hills, Texas 11 Exhibit A Official Statement EXHIBIT B SPECIAL ESCROW AGREEMENT THE STATE OF TEXAS § § § COUNTY OF TARRANT THIS SPECIAL ESCROW AGREEMENT (the "Agreement"), dated and made effective as of April 18, 1989, made by and between the City of North Richland Hills, a duly incorporated municipal corporation in Tarrant County, Texas (the "City") acting by and through the Mayor and City Secretary, and Texas American Bank/Fort Worth, N.A., Fort Worth, Texas (the "Bank"), a banking association organized and existing under the laws of the United States of America, WIT N E SSE T H : WHEREAS, the City has duly issued and/or incurred certain outstanding obligations aggregating in amount $IO, 485,000 (hereinafter collectively referred to as the "Defeased Obligations"), which obligations are identified, described and segregated into two groups (according to the series of refunding bonds hereinafter identified being issued to refund the same) as follows: Defeased Obligations-Group A: (1) Series 1980. dated September 1, 1980 (the "Series 1980 Bonds"), and now outstanding in the principal amount of $2,050,000 (2) Series 1983, dated June 1, 1983 (the "Series 1983 Bonds"), and now outstanding in the principal amount of 2,685,000 (3) Series 1984, dated August 1, 1984 (the "Series 1984 Bonds"). and now outstanding in the principal amount of 1,845,000 Defeased Obligations-Group B: (1) Series 1986, dated June 1, 1986 (the "Series 1986 Bonds'). and now outstanding in the principal amount of 3,905,000 AND WHEREAS, in accordance with the provisions of Article 7l7k, V.A.T.C.S., as amended (the "Act"), the City is authorized to sell refunding bonds in an amount sufficient to provide for the payment of revenue obligations to be refunded, deposit the proceeds of such refunding bonds with any place of payment for the revenue obligations being refunded and enter into an escrow or similar agreement with such place of payment for the safekeeping, investment, reinvestment, administration and disposition of such deposit, upon such terms and conditions as the parties may agree, provided such deposits may be invested only in direct obligations of the United States of America, including obligations the principal of and interest on are unconditionally guaranteed by the United States of America, and which may be in book entry form and which shall mature and/or bear interest payable at such times and in such amounts as will be sufficient to provide for the scheduled payment of such obligations; and WHEREAS, the Defeased Obligations-Group A and the Defeased Obligations-Group B are scheduled to mature, or be redeemed, and interest thereon is payable on the dates and in the manner set forth in Exhibit A attached hereto and incorporated herein by reference as a part of this Agreement for all purposes; and WHEREAS, the City on the 20th day of March, 1989, pursuant to an ordinance (the "Bond Ordinance") duly passed and adopted by the City Council, authorized for issuance and sold "City of North Richland Hills, Texas, Waterworks and Sewer System Improvement and Refunding Bonds, Series 1989" (the "Series 1989 Bonds") to refund the Defeased Obligations-Group A and "City of North Richland Hills, Texas, Waterworks and Sewer System Refunding Revenue Bonds, Series 1989-A" (the "Series 1989-A Bonds") to refund the Defeased Obligations-Group B; and WHEREAS, upon the delivery of the Series 1989 Bonds and the Series 1989-A Bonds (hereinafter collectively referred to as the "Bonds"), the proceeds of sale are to be used to purchase United States Treasury Securities -State and Local Government Series (hereinafter called "SLGS" or "Federal Securities") for deposit and credit to the Escrow Fund and the respective accounts to be maintained and administered in accordance with this Agreement; and WHEREAS, a list and description of the SLGS to be purchased and held for the respective accounts of the Escrow Fund is attached hereto as Exhibit B, which Exhibit is hereby incorporated by reference and made a part of this Agreement for all purposes; and -2- WHEREAS, the SLGS held for each account of the Escrow Fund shall mature and the interest thereon shall be payable at such times to insure the existence of monies sufficient to timely pay the principal and interest evidenced by the respective groups of the Defeased Obligations to be paid therefrom in accordance with the terms of their authorizing ordinances and as set forth in Exhibit A attached hereto; and WHEREAS, the City has completed all arrangements for the purchase of the SLGS and the deposit and credit of the same to the Escrow Fund as provided herein; and WHEREAS, the Bank is a banking association organized and existing under the laws of the United States of America, possessing trust powers and is fully qualified and empowered to enter into this Agreement; and WHEREAS, in Section 33 Council duly approved and Agreement; and of the Bond Ordinance, authorized the execution the Ci ty of this WHEREAS, the Ci ty and the Esc row Agent, as the case may be, shall take all action necessary to call, pay, redeem and retire said Defeased Obligations in accordance with the provisions thereof, including, without limitation, all actions required by the ordinances authorizing their issuance, the Act, and this Agreement; NOW, THEREFORE, in consideration of the mutual agreements herein contained, and to secure the payment of the principal of and the interest on the Defeased Obligations as the same shall become due, the Ci ty and the Bank hereby mutua lly undertake, promise and agree as follows: SECTION 1: Receipt of true and correct copies of the ordinances authorizing the issuance of the Defeased Obligations are hereby acknowledged by the Bank. Reference herein to or citation herein of any provision of said documents shall be deemed an incorporation of such provision as a part hereof in the same manner and with the same effect as if it were fully set forth herein. SECTION 2: There 1S hereby created by the Ci ty wi th the Bank a special segregated and irrevocable trust fund designated "SPECIAL 1989 CITY OF NORTH RICHLAND HILLS, TEXAS REFUNDING REVENUE BOND ESCROW FUND" (hereinafter called the "Escrow Fund") for the benefit of the holders of the Defeased Obligations, and within such Fund there shall be created, established and maintained two separate and distinct accounts for the payment of the Defeased Obligations. Account Number 1 -3- of the Escrow Fund shall be established and maintained solely for the payment of the Defeased Obligations-Group A and immediately following the delivery of the Bonds, the City agrees and covenants to cause to be depos i ted wi th the Bank, the following: $7,036,800.00 for the purchase of in Exhibit B to Account Number I Fund; the SLGS listed be held for of the Escrow $ lOO.OO for deposit in Account Number 1 of the Escrow Fund as a beginning cash balance; and Account Number 2 of the Escrow Fund shall be established and maintained solely for the payment of the Defeased Obligations-Group B and immediately following the delivery of the Bonds, the City agrees and covenants to cause to be deposited with the Bank, the following: $3,930,900.00 for the purchase of in Exhibi t B to Account Number 2 Fund; the SLGS listed be held for of the Escrow $ 100.00 for deposit in Account Number 2 of the Escrow Fund as a beginning cash balance; and The Bank hereby accepts the Escrow Fund and the respective accounts to be maintained and further agrees to receive said moneys, apply the same as set forth herein and to hold the cash and Federal Securities deposited and credited to the respective accounts of the Escrow Fund for application and disbursement for the purposes and in the manner provided in this Agreement. SECTION 3: The Ci ty hereby represents that the cash and SLGS specified in Section 2 hereof, together with the interest to be earned thereon, deposited to the credit of the respective accounts of the Escrow Fund will be sufficient to pay the principal of and interest on the Defeased Obligations to be paid from such respective accounts as the same shall become due and payable, and such Defeased Obligations, and the interest thereon, are to mature and be paid at the times and in the amounts set forth and identified in Exhibit A attached hereto. FURTHERMORE, in Defeased Obligations, of redemption with regard to the redemption of certain the Bank acknowledges receipt of notices respect to such redeemed Defeased -4- Obligations. The Defeased Obligations to be redeemed prior to maturity and the Accounts to be used to accomplish their redemption are further identified as follows: (i) From Account Number 1: (a) the redemption on September 1, 1991 of $1,825,000 of the Series 1980 Bonds at the redemption price of par plus accrued interest and being those bonds numbered 116 through 480, each in the denomination of $5,000 and scheduled to mature on September 1 in each of the years 1992 through 2003; (b) the redemption on September 1, 1993 of $2,165,000 of the Series 1983 Bonds at the redemption price of par plus accrued interest and being those bonds numbered 168 through 600, each in the denomination of $5,000 and scheduled to mature on September 1 in each of the years 1994 through 2003; (c) the redempt ion on Septembe r 1, 1994 of $1,460,000 of the Series 1984 Bonds at the redemption price of par plus accrued interest and being those bonds scheduled to mature on September I in each of the years 1995 through 2004; (i i) From Account Number 2, the redemption on September 1, 1996 of $2,740,000 of the Series 1986 Bonds at the redemption price of par plus accrued interest and being those bonds scheduled to mature on September 1 in each of the years 1997 through 2006. SECTION 4: The Bank agrees that all cash and Federal Securities, together with any income or interest earned thereon, held in the Escrow Fund shall be and is hereby irrevocably pledged to the payment of the principal of and interest on the Defeased Obligations which will mature and become due on and after the date of this Agreement, and such funds initially deposited and to be received from maturing principal and interest on the Federal Securities in the Escrow Fund shall be applied solely in accordance with the provisions of this Agreement. SECTION 5: If, for any reason, the funds on hand in either Account of the Escrow Fund shall be insufficient to make the payments set forth in Exhibit A attached hereto, the City shall make timely deposits to the Escrow Fund, from lawfully -5- available funds, of additional funds in the amounts required to make such payments. Notice of any such insufficiency shall be immediately given by the Bank to the City by the fastest means possible, but the Bank shall in no manner be responsible for the City's failure to make such deposits. SECTION 6: The Bank shall hold said Federal Securities and moneys in the Escrow Fund at all times as a special and separate trust fund for the benefit of the holders of the Defeased Obligations, wholly segregated from other moneys and securities on deposit with the Bank; shall never commingle said Federal Securities and moneys with other moneys or securities of the Bank; and sha II ho ld and di spose of the assets there i n only as set forth herein. Nothing herein contained shall be construed as requiring the Bank to keep the identical moneys, or any part thereof, in said Escrow Fund, if it is impractical, but moneys of an equal amount, except to the extent such are represented by the Federal Securities, shall always be maintained on deposit in the Escrow Fund by the Bank, as trustee; and the special Accounts of the Escrow Fund evidencing such facts shall at all times be maintained on the books of the Bank. SECTION 7: The Bank sha II from time to time co llect and receive the principal of and interest on the Federal Securities as they respectively mature and become due and credit the same to the appropriate Account of the Escrow Fund. On or before each principal and/or interest payment date, and/or redemption payment date, for the Defeased Obligations shown in Exhibi t A attached hereto, the Bank, without further direction from anyone, including the City, shall cause to be withdrawn from the appropriate Account of the Escrow Fund the amount required to pay in full the required payment on such payment date, and the amount withdrawn from the Escrow Fund shall be immediately transmitted and deposited with the paying agent for the Defeased Obligations to be paid wi th such amount. The paying agent/registrars for the Defeased Obligations are identified in Exhibit A attached hereto. All cash required by the provisions hereof to be set aside or held in trust for the payment of the Defeased Obligations, including interest thereon, shall be applied to and used solely for the payment of the Defeased Obligations with respect to which such cash has been so set aside in trust. Subject to the provisions of the last sentence of Section 27 hereof, cash held by the Bank in trust for the payment and discharge of any of the Defeased Obligations which remains unclaimed for a period of four (4) years after the stated maturity dates or redemption date of such Defeased -6- Obligations shall be returned to the City. Notwithstanding the above and foregoing, any remittance of funds from the Bank to the City shall be subject to any applicable unclaimed property laws of the State of Texas. SECTION 8: All Defeased Obligations cancelled on account of payment by the Bank shall be returned to the City. SECTION 9: The escrows created hereby shall be irrevocable. The persons ent i t led to payment wi th respect to the Defeased Obligations-Group A shall have an express lien on all moneys and Federal Securities deposited to the credit of Account Number 1 of the Escrow Fund unti 1 paid out, used and applied in accordance with this Agreement and the persons enti t led to payment wi th respect to the Defeased Obligations-Group B sha II have an express lien on a II moneys and Federal Securities deposited to the credit of Account Number 2 of the Escrow Fund until paid out, used and applied in accordance with this Agreement. Until disbursed in payment of the Defeased Obligations, all funds and the Federal Securities received by the Bank for the account of the City hereunder shall be and remain the property of the Escrow Fund and the City, and the owners of the Defeased Obligations in regard to the respective Accounts shall be entitled to a preferred claim and shall have a first lien upon such funds and Federal Securities enjoyed by a trust beneficiary. The funds and Federal Securities received by the Bank under this Agreement shall not be considered as a banking depos it by the Ci ty and the Bank and the Ci ty sha 11 have no right or title with respect thereto, except as otherwise provided herein. Funds deposited to the credit of the Escrow Fund shall not be subject to checks or drafts drawn by the City. SECTION 10: The Bank sha II have no lien whatsoever upon any of the moneys or Federal Securities in the Escrow Fund for payment of services rendered hereunder, services rendered as paying agent/registrar for the Defeased Obligations, or for any costs or expenses incurred hereunder and reimbursable from the City. SECTION 11: The Bank shall be authorized to (I) initially receive substitute securities for a temporary period or (2) redeem the SLGS and reinvest the proceeds thereof, together with other moneys held in the Escrow Fund, provided such initial and temporary substitution of securities or early redemption is necessary to correct a cash flow deficiency with respect to the payment of the Defeased Obligations in accordance with Exhibit A or to maintain, if possible, the tax exempt status of the interest on the Bonds or the Defeased -7- Obligations pursuant to section 103 of the Internal Revenue Code of 1986, as amended (the "Code"), or regulations thereunder; and provided further that the Bank recei ves the following: (1) an opinion by an independent certified public accountant to the effect that (i) the initial and/or temporary substitution of cash and/or securities for one or more of the SLGS identified in Exhibit B pending the receipt and delivery thereof to the Escrow Agent or (ii) the redemption of one or more of the SLGS and the reinvestment of such funds in one or more substituted securities (which shall be noncallable direct obligations of the United States of America), together with the interest thereon and other available moneys, will, in either case, be sufficient to pay, as the same become due 1n accordance with Exhibit A, the principal of, and interest on, the Defeased Obligations which have not previously been paid, and (2) with respect to an early redemption of SLGS and the reinvestment of the proceeds thereof, an unqua I i f ied opinion of nat iona lly recognized municipal bond counsel to the effect that (a) such investment will not cause the interest on the Bonds or Defeased Obligations to be included 1n gross income for federal income tax purposes, under the Code, and the regulations thereunder in effect on the date of such investment, or otherwise make the interest on the Bonds or the Defeased Obligations subject to Federal income taxation and (b) such reinvestment complies with the Constitution and laws of the State of Texas and with all relevant documents relating to the issuance of the Defeased Obligations and the Bonds. SECTION 12: In addition to the Federal Securities to be acqui red for Account Number 1 listed in Exhibi t B hereto, the Bank shall reinvest cash balances shown in Exhibit C attached hereto in zero (0) interest rate United States Treasury Securities State and Local Government Series to the extent such obligations are available from the Department of the Treasury. To the extent zero (0) interest rate United States Treasury Securities - State and Local Government Series are not available from the Department of the Treasury and no subsequent di rect ion has been fu rni shed by the Ci ty, the cash ba 1 ances shown in Exhibit C hereto shall be held as cash and remain univested. -8- SECTION 13: Except as provided 1n Sections 11 and l2 hereof, moneys 1n the Escrow Fund will be invested only in the Federal Securities listed in Exhibit B and neither the City nor the Bank shall reinvest any moneys deposited in the Escrow Fund except as specifically provided by this Agreement. SECTION 14: I fat any time through redempt ion 0 r cancellation of the Defeased Obligations there exists or will exist excesses of interest on or maturing principal of the Federal Securities in excess of the amounts necessary hereunder for the Defeased Obligations, the Bank may transfer such excess amounts to or on the order of the City, provided that the City delivers to the Bank the following: (I) an opinion by an independent certified public accountant that after the transfer of such excess, the principal amount of securities in the Escrow Fund, together with the interest thereon and other available monies, will be sufficient to pay, as the same become due, in acco rdance wi th Exhi bi t A, the principal of, and interest on, the Defeased Obligations which have not previously been paid, and (2) an unqualified opinion of nationally recognized municipal bond counsel to the effect that (a) such transfer will not cause interest on the Bonds or the Defeased Obligations to be included in gross income for federal income tax purposes under the Code and the regulations thereunder in effect on the date of such transfer, or otherwise make the interest on the Bonds or the Defeased Obligations subject to Federal income taxation, and (b) such transfer complies with the Constitution and laws of the State of Texas and wi th a 11 relevant documents relating to the issuance of the Defeased Obligations or the Bonds. SECTION 15: The Bank shall continuously secure the monies in the Escrow Fund not invested in Federal Securities by a pledge of di rect obligations of the Uni ted States of America, in the par or face amount at least equal to the principal amount of said uninvested monies to the extent such money is not insured by the Federal Deposit Insurance Corporation. SECTION 16: The Bank sha 11 not be li able or for any loss resulting from any investment made in Securities. responsible the Federal -9- SECTION performance anticipated $7,600 and, incurred by hereof, the payment for 17: The City agrees to pay the Bank for the of services hereunder and as reimbursement for expenses to be incurred hereunder the amount of except for reimbursement of costs and expenses the Bank pursuant to Sections 3, ll, 12, 14 and 19 Bank hereby agrees said amount is full and complete the administration of this Agreement. The City also agrees to deposit with the Bank on the effective date of this Agreement, the sum of $11,160 which deposit represents the total charges due for the Defeased Obligations and the Bank acknowledges and agrees that $11,160 is and represents the total amount of compensation due the Bank for services rendered as paying agent for the Defeased Obligations. The Bank hereby agrees to pay, assume and be fully responsible for any additional charges that it may incur in the performance of its duties and responsibilities as paying agent for the Defeased Obligations. The Ci ty acknowledges and agrees that the above amount deposited with the Escrow Agent to cover paying agents' charges and expenses does not include amounts which shall become due and payable for services rendered as registrar and transfer agent for fully registered Defeased Obligations, and the City agrees to pay directly to each "registrar" for the Defeased Obligations all reasonable costs, expenses and charges incurred in connection with the maintenance of the registration books and reco rds and the trans fer of such fu lly reg i s tered obligations as and when such costs, expenses and charges are incurred and against written invoices, statements or bills submitted therefor. SECTION 18: The Bank shall not be responsible for any recital herein, except with respect to its organization and its powers and authori ty. As to the existence or nonexistence of any fact relating to the Ci ty or as to the sufficiency or validity of any instrument, paper or proceedings relating to the City, the Bank shall be entitled to rely upon a certificate signed on behalf of the City by its City Manager or Mayor as sufficient evidence of the facts therein contained. The Bank may accept a certificate of the City Clerk under the City's seal, to the effect that a resolution or other instrument in the form therein set forth has been adopted by the City Council of the City, as conclusive evidence that such resolution or other instrument has been duly adopted and is in full force and effect. The duties and obligations of the Bank shall be determined solely by the express provisions of this Agreement and the Bank shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Agreement, and no implied covenants or obligations shall be read into this Agreement against the Bank. -10- In the absence of bad fa i th on the pa rt of the Bank, the Bank may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificate or opinion furnished to the Bank, conforming to the requirements of this Agreement; but notwithstanding any provision of this Agreement to the contrary, in the case of any such certificate or opinion or any evidence which by any provision hereof is specifically required to be furnished to the Bank, the Bank shall be under a duty to examine the same to determine whether it conforms to the requirements of this Agreement. The Bank sha II not be 1 i able fo r any error of judgment made in good faith by a Responsible Officer or Officers of the Bank unless it shall be proved that the Bank was negligent in ascertaining or acting upon the pertinent facts. The Bank shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the holders of not less than a majority in aggregate principal amount of all said Defeased Obligations at the time outstanding relating to the time, method and place of conducting any proceeding for any remedy available to the Bank not in conflict with the intent and purpose of this Agreement. For the purposes of determining whether the holders of the required principal amount of said Defeased Obligations have concurred in any such direction, Defeased Obligations owned by any obligor upon the Defeased Obligations, or by any person directly or indirectly controlling or controlled by or under direct or indirect common control with such obligor, shall be disregarded, except that for the purposes of determining whether the Bank sha 11 be protected in relying on any such direction only Defeased Obligations which the Bank knows are so owned shall be so disregarded. The term "Responsible Officers" of the Bank, as used in this Agreement, shall mean and include the Chairman of the Board of Di rectors, the Pres ident, any Vice President and any Second Vice President, the Secretary and any Assistant Secretary, the Treasurer and any Assistant Treasurer, and every other officer and assistant officer of the Bank customarily performing functions similar to those performed by the persons who at the time shall be officers, respectively, or to whom any corporate trust matter is referred, because of his knowledge of and familiarity with a particular subject; and the term "Responsible Officer" of the Bank, as used in this Agreement, shall mean and include any of said officers or persons. SECTION 19: The Bank shall not be responsible or liable to any person in any manner whatever for the sufficiency, correctness, genuineness, effectiveness, or validity of the deposits made pursuant to this Agreement, or for the form or -11- execution thereof, or for the identity or authority of any person making or executing such deposits. This Agreement is between the City and the Bank only and in connection therewith the Bank is authorized by the City to rely upon the representations of the City with respect to this Agreement and the deposi ts made pursuant hereto and as to this Ci ty' s right and power to execute and deliver this Agreement, and the Bank shall not be liable in any manner as a result of such reliance. The duty of the Bank hereunder shall only be to the City and the holders of the Defeased Obligations. Except for an assignment hereof by the Bank to a trust company organized and existing under the laws of the state of Texas and performing substantially all trust services for and on behalf of the Bank, neither the City nor the Bank shall assign or attempt to assign or transfer any interest hereunder or any portion of any such interest. Any such assignment or attempted assignment (other than an assignment by the Bank excepted in the precedi ng sentence) sha 11 be in di rect conf 1 ict wi th thi s Agreement and be without effect. SECTION 20: In the event of any disagreement or controversy hereunder or if conflicting demands or notices are made upon Bank growing out of or relating to this Agreement or in the event that the Bank in good faith is in doubt as to what action should be taken hereunder, the City expressly agrees and consents that the Bank shall have the absolute right at its election to: (a) in, and to the received withhold and stop all further proceedings performance of, this Agreement with respect issue in question and of all instructions hereunder in regard to such issue; and (b) Fi le a sui t in interpleader and obtain an order from a court of appropriate jurisdiction requiring all persons involved to interplead and litigate in such court their several claims and rights among themselves. In the event the Bank becomes involved in litigation in connection with this Section, the City, to the extent permitted by law, agrees to indemnify and save the Bank harmless from all loss, cost, damages, expenses and attorney fees suffered or incurred by the Bank as a result thereof. The obligations of the Bank under this Agreement shall be performable at the principal corporate office of the Bank in the City of Fort Worth, Texas. The Bank may advise with legal counsel in the event of any dispute or question as to the construction of any of the provisions hereof or its duties hereunder, and it shall incur no liability and shall be fully protected in acting in accordance with the opinion and instructions of such counsel. -l2- SECTION 21: Prompt 1y af ter Septembe r 30th of each yea r , commenci ng wi th the ca lenda r yea r 1989, so long as the Esc row Fund is maintained under this Agreement, the Bank shall forward to the City, to the attention of the City Manager, or other des igna ted of f ic i a 1 of the Ci ty, a s t a tement in detai 1 of the Federal Securities and monies held, and the current income and maturities thereof, and the withdrawals of money from each Account of the Escrow Fund for the preceding 12 month period ending September 30th of each year. SECTION 22: Any notice, authorization, request or demand required or permitted to be given hereunder shall be in writing and shall be deemed to have been duly given when mailed by registered or certified mail, postage prepaid addressed as follows: CITY OF NORTH RICHLAND HILLS, TEXAS: P. O. Box 18609 North Richland Hills, Texas 76118 Attention: Director of Finance TEXAS AMERICAN BANK/FORT WORTH, N.A. 500 Throckmorton Fort Worth, Texas 76102 Attention: Corporate Trust Department The United States Post Office registered or certified mail receipt showing delivery of the aforesaid shall be conclusive evidence of the date and fact of delivery. Any party hereto may change the address to which notices are to be delivered by giving to the other parties not less than ten (10) days prior notice thereof. SECTION 23: Whenever under the terms of this Agreement the performance date of any provision hereof, including the date of maturity of interest on or principal of the Defeased Obligations, shall be a Sunday or a legal holiday or a day on which the Bank is authorized by law to close, then the performance thereof, including the payment of principal of and interest on the Defeased Obligations, need not be made on such date but may performed or paid, as the case may be, on the next succeeding business day of the Bank wi th the same force and effect as if made on the date of performance or payment and with respect to a payment, no interest shall accrue for the period after such date. -13- SECTION 24: The City covenants that it will faithfully perform at all times any and all covenants, undertakings, stipulations and provisions contained in this Agreement, in any and every said Defeased Obligation as executed, authenticated and delivered and in all proceedings pertaining thereto as said Defeased Obligations shall have been modified as provided in this Agreement. The City covenants that it is duly authorized under the Constitution and laws of the State of Texas to execute and deliver this Agreement, that all actions on its part for the payment of said Defeased Obligations as provided herein and the execution and delivery of this Agreement have been duly and effectively taken and that said Defeased Obligations in the hands of the holders and owners thereof are and will be valid and enforceable obligations of the City according to the import thereof as provided in this Agreement. SECTION 25: If anyone or more of the covenants or agreements provided in this Agreement on the part of the parties to be performed should be determined by a court of competent jurisdiction to be contrary to law, such covenant or agreement shall be deemed and construed to be severable from the remaining covenants and agreements herein contained and shall in no way affect the validity of the remaining provisions of this Agreement. SECTION 26: This Agreement shall terminate when the Defeased Obligations and all interest accrued and payable with respect thereto have been paid and discharged in accordance with the provisions of this Agreement. If any Defeased Obligations are not presented for payment when due and payable at maturity or upon redemption, the nonpayment thereof shall not prevent the termination of this Agreement. Funds for the payment of any nonpresented Defeased Obligations or unknown perons entitled to payment of interest thereon shall upon termination of this Agreement be held by the Bank for such purpose in accordance wi th Section 7 hereof. Any moneys or Federal Securities held in the Escrow Fund at termination and not needed for the payment of the Defeased Obligations shall be paid or transferred to the City. SECTION 27: Time shall be of the essence in the performance of obligations from time to time imposed upon the Bank by this Agreement. SECTION 28: This Agreement shall be binding upon the City and the Bank and their respective successors and legal representatives and shall inure solely to the benefit of the holders of the Defeased Obligations, the Ci ty, the Bank and their respective successors and legal representatives. Furthermore, no alteration, amendment or modification of any -14- provision of this Agreement shall be effective unless (i) prior written consent of such alteration, amendment or modification shall have been obtained from the holders of all Defeased Obligations outstanding at the time of such alteration, amendment or modification and (ii) such alteration, amendment or modification is in writing and signed by the parties hereto; provided, however, the City and the Bank may, without the consent of the holders of the Defeased Obligations, amend or modify the terms and provisions of this Agreement to cure an ambiguity, formal defect or omission in this Agreement. SECTION 29: This Agreement may be executed in several counterparts, all or any of which shall be regarded for all purposes as one original and shall constitute and be but one and the same instrument. This Agreement shall be governed by the laws of the State of Texas. IN WITNESS WHEREOF, the parties hereto have each caused this Agreement to be executed by their duly authorized officers and their corporate seals to be hereunto affixed and attested as of the date first above written. CITY OF NORTH RICHLAND HILLS, TEXAS Mayor ATTEST: City Secretary (City Seal) TEXAS AMERICAN BANK/FORT WORTH, N.A., Fort Worth, Texas as Escrow Agent Trust Officer ATTEST: Authorized Signer (Bank Seal) 2 ') 1 75 -15- CERTIFICATE OF CITY SECRETARY THE STATE OF TEXAS § § COUNTY OF TARRANT § § CITY OF NORTH RICHLAND HILLS § I, the undersigned, City Secretary of the City of North Richland Hills, Texas, DO HEREBY CERTIFY as follows: 1. That on the 20th day of March, 1989, a special meeting of the Ci ty Counci 1 of the Ci ty of North Rich1and Hills, Texas, was held at a meeting place within the City; the duly constituted members of the Council being as follows: TOMMY BROWN MAYOR RICHARD DAVIS LYLE WELCH MACK GARVIN FRANK METTS, JR. VIRGINIA MOODY BRYON SIBBET LINDA SPURLOCK ) ) ) ) ) ) ) MAYOR PRO TEM COUNCILMEMBERS and all of said persons were present at said meeting, except the following: ~h14Qçfq Among other business considere6. at said meeting, the attached ordinance entitled: "AN ORDINANCE authorizing the issuance of 'CITY OF NORTH RICHLAND HILLS, TEXAS, WATERWORKS AND SEWER SYSTEM IMPROVEMENT AND REFUNDING REVENUE BONDS, SERIES 1989' and 'CITY OF NORTH RICHLAND HILLS, TEXAS, WATERWORKS AND SEWER SYSTEM REFUNDING REVENUE BONDS, SERIES 1989-A'; specifying the terms and features of such Bonds; pledging the net revenues of the City's Waterworks and Sewer System to the payment of principal of and interest on such Bonds; enacting other provisions incident and related to the issuance, payment, sale and delivery of such Bonds including the approval and execution of a Purchase Contract and Special Escrow Agreement and the approval and distribution of an Official Statement; and providing an effective date." was int roduced and submi t ted to the Counc i 1 for passage adoption. After presentation and due consideration of ordinance, and upon a motion being made by ¿//J(//f seconded by ~æu/h the ordinance was and the and finally passed and adopted by the Council to be effective immediately by the following vote: 6 voted "For" ~voted "Against" -º-abstained all as shown in the official Minutes of the Council for the meeting held on the aforesaid date. 2. That the attached ordinance is a true and correct copy of the original on file in the official records of the City; the duly qualified and acting members of the City Council of sa id Ci ty on the da te of the a fo res a id meet ing a re those persons shown above and, according to the records of my office, advance notice of the time, place and purpose of the meeting was given to each member of the Council; and that said meeting and the deliberation of the aforesaid public business was open to the public and written notice of said meeting, including the subject of the above entitled ordinance, was posted and given in advance thereof in compliance with the provisions of Article 6252-17, Section 3A, V.A.T.C.S. IN WITNESS WHEREOF, I have hereunto signed my name officially and affixed the seal of said City, this the 20th day of March, 1989. ~'.Lr~~/7U ¿/)~ "ty Secretary, ~ti of orth Rich1and Hills, Texas (City Seal) J 1 1 7 5 -2-