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Ord. 0725 1996-05-13
CITY OF PEARLAND ORDINANCE NO. 725 AN ORDINANCE AUTHORIZING ISSUANCE OF CITY OF PEARLAND, TEXAS, WATER AND SEWER SYSTEM REVENUE REFUNDING BONDS, SERIES 1996A; PRESCRIBING THE TERMS AND CONDITIONS. THEREOF; PROVIDING FOR THE PAYMENT THEREOF; MAKING OTHER PROVISIONS REGARDING SUCH BONDS AND MATTERS INCIDENT THERETO; AWARDING THE SALE OF THE BONDS; AUTHORIZING THE DEFEASANCE, FINAL PAYMENT AND DISCHARGE OF CERTAIN OUTSTANDING BONDS; AUTHORIZING THE EXECUTION AND DELIVERY OF AN ESCROW AGREEMENT TO PROVIDE FOR THE PAYMENT OF SUCH BONDS; AUTHORIZING ENGAGEMENT OF AN ESCROW AGENT AND BOND COUNSEL; AUTHORIZING EXECUTION AND DELIVERY OF A PAYING AGENT/REGISTRAR AGREEMENT; AND DECLARING AN EMERGENCY, AS THE TIMELY ISSUANCE OF WATER AND SEWER SYSTEM REVENUE REFUNDING BONDS BEARS DIRECTLY UPON THE HEALTH, SAFETY, ,AND WELFARE OF THE CITIZENRY. BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF PEARLAND, TEXAS: that: ARTICLE I FINDINGS AND DETERMINATIONS Section 1.1. Findings and Determinations. It is hereby officially found and determined (a) The City desires to refund the Refunded Bonds, as hereinafter defined, in order to (i) modify certain restrictive covenants contained in the ordinance authorizing the issuance of the Refunded Bonds and (ii) achieve a present value debt service savings. (b) The City is authorized by Article 717k, Vernon's Texas Civil Statutes, as amended, to issue revenue refunding bonds for the purpose of refunding the Refunded Bonds in advance of their maturities, and to accomplish such refunding by depositing directly with the paying agent for the Refunded Bonds the proceeds of such refunding bonds, together with other available funds, which may be invested in direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America, which shall mature and/or bear interest payable at such times and in such amounts as will be sufficient to provide for the scheduled payments of the Refunded Bonds, and such deposits shall constitute the maldng of firm banking and financial arrangements for the discharge and final payment of the Refunded Bonds. (c) The City desires to enter into an escrow agreement with Texas Commerce Bank National Association, as escrow agent, as authorized in such Article 717k, pursuant to which proceeds of the revenue refunding bonds herein authorized, and other available funds, will be deposited, invested and applied in a manner independently certified to be sufficient to provide four the full and timely payment of all principal of and interest on the Refunded Bonds. (d) Upon the issuance of the revenue refunding bonds and the creation of the escrow herein authorized, the Refunded Bonds shall no longer be regarded as being outstanding, except for the purpose of being paid pursuant to such escrow agreement, and the pledges, liens, trusts and all other covenants, provisions, terms and conditions of the ordinance authorizing the issuance of the Refunded Bonds shall be discharged, terminated and defeased as to the Refunded Bonds. (e) The conditions precedent to the issuance of additional bonds which are contained in the ordinance authorizing the Refunded Bonds have been met, and the City is authorized to issue the revenue refunding bonds and make the pledges and covenants set forth herein. ARTICLE II DEFINITIONS AND INTERPRETATIONS Section 2.1. Definitions. In this Ordinance, the following terms shall' have the following meanings, unless the context clearly indicates otherwise: "Additional Bonds" shall mean the additional revenue bonds permitted to be issued by the City pursuant to Section 6.1 hereof. "Average Annual Principal and Interest Requirements" shall mean the average annual principal and interest requirements for all Bonds. Upon the issuance of the Series 1996A Bonds and the Series 1996B Bonds, the Average Annual Principal and Interest Requirements are hereby determined to be $779,673.25 and shall be recomputed upon the issuance of each series of Additional Bonds and set forth in each ordinance authorizing the issuance of Additional Bonds. For purposes of calculating the Average Annual Principal and Interest Requirements with respect to any variable rate Additional Bonds, interest on such bonds shall be calculated in accordance with Section 6.1 of this Ordinance. "Bonds" shall mean any or all of the Series 1996A Bonds, the Series 1996B Bonds and any Additional Bonds from time to time hereafter issued, but only to the extent such Bonds remain Outstanding within the meaning of this Ordinance. , 2 "Certificate" shall mean a certificate of Rauscher Pierce Refsnes, Inc., the City's Financial Advisor, with respect to the adequacy of the escrowed securities referred to in the Escrow Agreement to pay, when due, the principal of, interest on, and any call premium requirements on the Refunded Bonds. "City" shall mean the City of Pearland, Texas, and, where appropriate, the City Council thereof and any successor to the City as owner of the System. "Escrow Agent" shall mean Texas Commerce Bank National Association, and its successors in such capacity. "Escrow Agreement" shall mean the agreement between the City and the Escrow Agent, dated as of May 13, 1996, in substantially the form attached hereto as Exhibit A. "Fiscal Year" shall mean the City's fiscal year, which currently runs from October 1 to September 30, but which may be changed from time to time by the City. "Gross Revenues" shall mean all revenues, income and receipts of every nature derived or received by the City from the operation and ownership of the System; the interest income from the investment or deposit of money in the Revenue Fund, the Reserve Fund and the Renewal and ReplacementFund; and any other revenues hereafter pledged to the payment of all Bonds. Gross Revenues shall not include any of (i) grants from, or payments by, any federal, state or local governmental agency or authority or any other entity or person, the use of which is restricted by law or by the terms of the grant or payment to capital expenditures of the System, (ii) capital assets, debt service funds or debt service reserve funds of water districts or other public or private sewer systems annexed, acquired or otherwise assumed by the City or (iii) any interest earned on items (i) or (ii) above. "Interest Payment Date" shall mean March 1 or September 1 of each year as applicable. "Maintenance and Operation Expenses" shall mean the reasonable and necessary expenses of operation and maintenance of the System, including all salaries, labor, materials, repairs and extensions necessary to render efficient service (but only such repairs, and extensions as, in the judgment of the governing body of the City, are necessary to keep the System in operation and render adequate service to the City and the inhabitants thereof, or such as might be necessary to meet some physical accident or conditions which would otherwise impair the Bonds, and all payments (including payments of amounts equal to all or a part of the debt service on bonds issued by other political subdivisions and authorities of the State of Texas) under contracts which are now or hereafter defined as operating expenses by the Legislature of Texas. Depreciation shall never be considered as a Maintenance and Operation, Expense. Maintenance and Operation Expenses shall include, without limitation, all payments under contracts for L. 3 the impoundment, conveyance or treatment of water or otherwise which are now or hereafter defined as operating expenses by the Legislature of Texas and the treatment of such payments as Maintenance and Operation Expense's shall not be affected in any way if, subsequent to the entering into such contracts, the City acquires as a part of the System title to any properties or facilities used to impound, convey or treat water under such contracts, or if the City contracts to acquire title to such properties or facilities as a part of the System upon the final payment of debt service on the bonds issued to finance such properties or facilities. "Net Revenues" shall mean all Gross Revenues remaining after deducting the Maintenance and Operation Expenses. "Ordinance" shall mean this Bond Ordinance and all amendments hereof and supplements hereto. "Outstanding" when used with reference to the Bonds shall mean, as of a particular date, all such bonds theretofore delivered except: (a) any such bond canceled by or on behalf of the City at or before said date; (b) any such bond defeased pursuant to the defeasance provisions of the ordinance authorizing its issuance, or otherwise defeased as permitted by applicable) law; and (c) any such bond in lieu of or in substitution for which another bond shall have been delivered pursuant to the ordinance authorizing the issuance of such bond. "Owner" or Registered Owner" when used with respect to any Bond, shall mean the person or entity in whose name such Bond is registered in the Register. Any reference to a particular percentage or proportion of the Owners of , the Bonds of a particular class or series of Bonds shall mean the Owners at a particular time of the specified percentage or proportion in aggregate principal amount of all Bonds or the Bonds of such class or series then Outstanding. "Paying Agent/Registrar" shall mean Texas Commerce Bank National Association, and its successors in that capacity. "Refunded Bonds" shall mean all of the City of Pearland, Texas Waterworks and Sewer System Revenue Bonds, Series 1978, dated September 1, 1978, currently outstanding in the aggregate principal amount of $1,250,000 and maturing on September 1 in each of the years 1996 through 2002, inclusive. "Register" shall mean the books. of registration kept by the Paying Agent/Registrar in which are maintained the names and addresses of and the principal amounts registered to each Owner of Series 1996A Bonds. "Series 1996A Bonds" shall mean the City of Pearland, Texas, Water and Sewer System Revenue Refunding Bonds, Series 1996A, authorized by this Ordinance. 4 "Series 1996B Bonds" shall mean the City of Pearland, Texas Water and Sewer System Revenue Bonds, Series 1996B, being sold to the Texas Water Development Board pursuant to an ordinance to be approved by City Council on the date of approval by City Council of this Ordinance. "Special Project" shall mean, to the extent permitted by law, any water or sewer system property, improvement or facility declared by the City not to be part of the System, for which the costs of acquisition, construction, and installation are paid from proceeds of a financing transaction other than the issuance of bonds payable from ad valorem taxes or revenues of the System and for which all maintenance and operation expenses are payable from sources other than ad valorem taxes or revenues of the System, but only to the extent that and for so long as all or any part of the revenues or proceeds of which are or will be pledged to secure the payment or repayment of such costs of acquisition, construction, and installation under such financing transaction. "Subordinate Lien Obligations" shall mean the obligations permitted to be issued by the City pursuant to Section 6.2 hereof. "Surety Policy" shall mean and include a bond insurance policy (with the City's payment obligation thereunder being limited ,to the insurer's right of subrogation), provided that the issuer of any Surety Policy shall be rated in the highest rating category at the time of issuance of such Surety Policy by A.M. Best Company, Standard & Poor's Ratings Group, or Moody's Investors Service. A Surety Policy shall insure all Bonds and Additional Bonds on a pro rata. basis. Although not permitted by law in effect at the time of issuance of the Series 1996A Bonds, a Surety Policy may include a letter of credit or other agreement or instrument, including any related reimbursement or financial guaranty agreement, whereby the issuer is obligated to provide funds up to and including the maximum amount, and under the conditions specified in such agreement or instrument, to the extent that changes in the law subsequent to the issuance of the Series 1996A Bonds permit the use of such an agreement or instrument as a Surety Policy and the City obtains an opinion of nationally recognized bond counsel to such effect. "System" shall mean all properties, facilities, improvements, equipment, interests, rights and powers constituting the water and sewer system of the City, and all future extensions, replacements, betterments, additions, improvements, enlargements, acquisitions, purchases and repairs to the System, including without limitation, all those heretofore or hereafter acquired as a result of the annexation and dissolution of water districts or the acquisition of the properties or assets of any other public, private or non- profit entities. The System shall not include any Special Project. Section 2.2. Interpretations. All terms defined herein and all pronouns used in this Ordinance shall be deemed to apply equally to singular and plural and to all genders. The titles and headings of the articles and sections of this Ordinance and the Table of Contents of this Ordinance have been inserted for convenience of reference only and are not to be considered a 5 part hereof and shall not in any way modify or restrict any of the terms or provisions hereof. This Ordinance and all the terms and provisions hereof shall be liberally construed to effectuate the purposes set forth herein and to sustain the validity of the Bonds and the validity of the lien on and pledge of the Net Revenues to secure the payment of the Bonds. ARTICLE III TERMS OF THE SERIES 1996A BONDS Section 3.1. Name. Amount. Purpose. Authorization. The Series 1996A Bonds, to be known and designated as the "CITY OF PEARLAND, TEXAS, WATER AND SEWER SYSTEM REVENUE REFUNDING BONDS, SERIES 1996A," in the original aggregate principal amount of $1,115,000, shall be issued in fully registered form, without coupons. The Series 1996A Bonds are being issued for the purpose of refunding the Refunded Bonds and to pay expenses in connection with the issuance of the Series 1996A Bonds, all under and pursuant to the authority of Articles 717k, Vernon's Texas Civil Statutes, as amended, and all other applicable law. Section 3.2. Numbers. Date. and Denomination. The Series 1996A Bonds shall be numbered separately from R-1 upward, shall be dated as of June 1, 1996, and shall be in the denomination of $100,000 principal amc . or any integral multiple thereof. Section 3.3. Interest Payment Dates. Interest Rates. and Maturities. The Series 1996A Bonds shall bear interest from June 1, 1996 the rate or rates per annum set forth below, calculated on the basis of a 360-day year composed of twelve 30-day months and payable semiannually on. March 1 and September 1 of each year, commencing March 1, 1997, until maturity. The Series 1996A Bonds shall mature and become . payable on the dates and in the respective principal amounts set forth below: Maturity Date Principal Interest (September 1) Amount Rate 1997 $ 155,000 4.55% 1998 180,000 4.75 1999 185,000 4.90 2000 195,000 5.00 2001 200,000 5.10 2002 200,000 5.20 Section 3.4. No Redemption Prior to Maturity. The Series 1996A Bonds are not subject to redemption prior to maturity. 6 Section 3.5.. Manner of Payment. Characteristics. Execution. and Authentication. The Paying Agent/Registrar shall be the paying agent for the Series 1996A Bonds. The Series 1996A Bonds shall be payable, shall have the characteristics, shall be signed and executed, shall be sealed, and .shall be authenticated, all as provided and in the manner indicated in the FORM OF SERIES 1996A BONDS set forth in Article IV of this Ordinance. The Series 1996A Bonds initially delivered shall also have attached or affixed to each such Series 1996A Bond the registration certificate of the Comptroller of Public Accounts of the State of Texas. If any officer of the City whose manual or facsimile signature shall appear on the Series 1996A Bonds, as provided in the FORM OF SERIES 1996A BONDS, shall cease to be such officer before the authentication of the Series 1996A Bonds or before the delivery of the Series 1996A Bonds, such manual or facsimile signature shall nevertheless be valid and sufficient for all purposes as if such officer had remained in such office. 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, engraved, or typewritten or produced by any combination of these methods, or produced in any other manner, all as determined by the officers executing such Bonds as evidenced, by their execution thereof, but the initial Bonds submitted to the Attorney General of Texas may be typewritten, photocopied, or otherwise reproduced. The approving legal opinion of Mayor, Day, Caldwell & Keeton, L.L.P., Houston, Texas, Bond Counsel, may be printed on the back of the Series 1996A Bonds over the certification of the City Secretary of the City which may be executed in facsimile. CUSIP numbers and a statement of insurance, if any, also may be printed on applicable Series 1996A Bonds, but errors or omissions in the printing of the opinion, the numbers, or the statement of insurance shall have no effect on the validity of the Series 1996A Bonds. Section 3.6. Ownership. The City, the Paying Agent/Registrar and any other person may treat the person in whose name any Series 1996A Bond is registered as the absolute owner of such Series 1996A Bond for the purpose of mailing payment of the principal and premium, if any, thereof, and for the further purpose of making payment of interest thereon, for the purpose of giving notice to the Owners of the Series 1996A Bonds, and for all other purposes, whether or not such Series 1996A Bond is overdue, and neither the City nor the Paying Agent/Registrar shall be bound by any notice or knowledge to the contrary. All payments made to the person deemed to be the Owner of any Series 1996A Bond in accordance with this section shall be valid and effectual and shall discharge the liability of the City and the Paying Agent/Registrar upon such Series 1996A Bond to the extent of the sums paid. Section 3.7. Registration, Transfer. and Exchange. So long as any Series 1996A Bonds remain Outstanding, the Paying Agent/Registrar shall keep the Register at its principal corporate trust office and a copy thereof at an office in the State of Texas, in which, subject to such reasonable regulations as it may prescribe, the Paying Agent/Registrar shall provide for the registration and transfer of the Series 1996A Bonds in accordance with the terms of this Ordinance. 7 Each Series 1996A Bond shall be transferable only upon presentation and surrender thereof at the principal corporate trust office of the Paying Agent/Registrar, duly endorsed for transfer, or accompanied by an assignment duly executed by the Registered Owner or his authorized representative in form satisfactory to the Paying Agent/Registrar. Upon due presentation of any Series 1996A Bond for transfer, the Paying Agent/Registrar shall authenticate and deliver in exchange therefor, within 72 hours after such presentation, a new Series 1996A Bond or Series 1996A Bonds, registered in the name of the transferee or transferees, in authorized denominations and of the same maturity and aggregate principal amount or maturity amount, as the case may be, and bearing or accruing interest at the same rate as the Series 1996A Bond or Series 1996A Bonds so presented. Each Series 1996A Bond shall be exchangeable upon presentation and surrender thereof at the principal corporate trust office of the Paying Agent/Registrar for a Series 1996A Bond or Series 1996A Bonds of the same maturity and bearing or accruing interest at the same rate and in any authorized denomination, in an aggregate principal amount or maturity amount, as the case may be, equal to the unpaid principal amount or maturity amount, as the case may be, of the Series 1996A Bond or Series 1996A Bonds presented for exchange. The Paying Agent/Registrar shall be and is hereby authorized to authenticate and deliver exchange Series 1996A Bonds in accordance with the provisions of this Section. Each exchanged or replaced Series 1996A Bond delivered by the Paying Agent/Registrar in accordance with this Section shall be entitled to the benefits and security of this Ordinance to the same extent as the Series 1996A Bond or Series 1996A Bonds in lieu of which such Series 1996A Bond is delivered. The City or the Paying Agent/Registrar may require the. Owner of any Series 1996A Bond to pay a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with the transfer or exchange of such Series 1996A Bond. Any fee or charge of the Paying Agent/Registrar for such transfer or exchangeshall be paid by the City. Section 3.8. Cancellation. All Series 1996A Bonds paid or redeemed in accordance with this Ordinance, and all Series 1996A Bonds in lieu of which exchanged Series 1996A Bonds or replacement Series 1996A Bonds are authenticated and delivered in accordance herewith, shall be canceled and destroyed upon the making of proper records regarding such payment or redemption. The Paying Agent/Registrar shall periodically furnish the City with certificates of destruction of such Series 1996A Bonds. Section 3.9. Replacement Bonds. Upon the presentation and surrender to the Paying Agent/Registrar of a damaged or mutilated Series 1996A Bond, the Paying Agent/Registrar shall authenticate and deliver in exchange therefor a replacement Series 1996A Bond of like maturity, interest rate, and principal amount, bearing a number not contemporaneously outstanding. The City or the Paying Agent/Registrar may require the Owner of such Series 1996A Bond to pay a sum sufficient to cover any tax or other governmental charge that may be imposed in connection therewith and any other expenses connected therewith, including the fees and expenses of the Paying Agent/Registrar. 8 If any Series 1996A Bond is destroyed, lost or stolen, the City, pursuant to the applicable laws of the State of Texas and in the absence of notice or knowledge that such Series 1996A Bond has been acquired by a bona fide purchaser, shall execute and the Paying Agent/Registrar shall authenticate and deliver a replacement Series 1996A Bond of likematurity, interest rate, and principal amount, bearing a number not contemporaneously outstanding, provided that the Owner thereof shall have: (a) Furnished to the City and the Paying Agent/Registrar satisfactory evidence of the ownership of and the circumstances of the loss, destruction or theft of such Series 1996A Bond; (b) Furnished such security or indemnity as may be required by the Paying Agent/Registrar and the City to save them harmless; (c) Paid all expenses and charges in connection therewith, including, but not limited to, printing costs, legal fees, fees of the Paying Agent/Registrar and any tax or other governmental charge that may be imposed; and (d) Met any other reasonable requirements of the City and the Paying Agent/Registrar. If, after the delivery of such replacement Series 1996A Bond, a bona fide purchaser of the original Series 1996A Bond in lieu of which such replacement Series 1996A Bond was issued presents for payment such original Series 1996A Bond, the City and the Paying Agent/Registrar shall be entitled to recover such replacement Series 1996A Bond from the person to whom it was delivered or any person taking therefrom, except a bona fide purchaser, and shall be entitled to recover upon the security or indemnity provided therefor to the extent of any loss, damage, cost, or expense incurred by the City or the Paying Agent/Registrar in connection therewith. If any such damaged, mutilated, destroyed, lost, or stolen Series 1996A Bond has become or is about to become due and payable, the City in its discretion may, instead of issuing a replacement Series 1996A Bond, authorize the Paying, Agent/Registrar to pay such Series 1996A Bond. Each replacement Series 1996A Bond delivered in accordance with this section shall be entitled to the benefits and security 'of this Ordinance to the same extent as the Series 1996A Bond or Series 1996A Bonds in lieu of which such replacement Series 1996A Bond is delivered. 9 ARTICLE IV FORM OF SERIES 1996A BONDS The Series 1996A Bonds shall be in . substantially thefollowing form, with such omissions, insertions and variations as may be permitted or required pursuant to the terms of this Ordinance: [FORM OF SERIES 1996A BOND] UNITED STATES OF AMERICA STATE OF TEXAS CITY OF PEARLAND, TEXAS, WATER AND SEWER SYSTEM REVENUE REFUNDING BOND, SERIES 1996A NUMBER R- REGISTERED INTEREST RATE: ISSUE DATE: June 1, 1996 September 1, Registered Owner: Principal Amount: DENOMINATION REGISTERED MATURITY DATE: CUSIP NO.: DOLLARS The CITY OF PEARLAND, TEXAS, a municipal corporation duly incorporated under the laws of, the State of Texas (herein the "City"), for value received, hereby promises to -pay, to the Registered Owner identified above or registered assigns, solely from certain pledged revenues and funds as hereinafter specified and from no other source, on the Maturity Date specified above, upon presentation and surrender of this bond at the principal corporate trust office of the "Paying Agent/Registrar," initially Texas Commerce Bank National Association, Houston, Texas, in any coin or currency of the United States of America which on the date of payment of such principal is legal tender for the payment of debts due the United States of America, the Principal Amount identified above, and to pay, solely from such pledged revenues and funds, interest thereon at the Interest Rate shown above, calculated on the basis of a 360-day year composed of twelve 30-day months, from the later of the Issue Date identified above or the most recent interest payment date to which interest has been paid or duly provided for. Interest on this bond is payable on each March 1 and September 1, beginning March 1, 1997, until the maturity of this bond or until the City's obligation with respect to this bond has been satisfied. Interest on this bond shall be payable by check mailed by the Paying Agent/Registrar to the 10 Registered Owner of record as of the 15th day of the month next preceding the interest payment date as shown on the books of registration kept by the Paying Agent/Registrar. THIS BOND IS ONE OF A DULY AUTHORIZED SERIES OF BONDS, (herein the "Series 1996A Bonds") in the aggregate principal amount of $1,115,000 issued pursuant to an ordinance adopted by the City Council of the City (herein the "Ordinance") for the purpose of refunding a portion of the City's outstanding water and sewer system bonds, under and pursuant to the authority of Articles 717k, Vernon's Texas Civil Statutes, as amended, and all other applicable law. THIS BOND AND ALL OF THE SERIES 1996A BONDS are special obligations of the City that are equally and ratably payable from and secured by a first lien on the "Net Revenues" collected and received by the City from the operation and ownership of the City's water and sewer system as defined and provided in the Ordinance, which Net Revenues are required to be set aside for and pledged to the payment of the Series 1996A Bonds and all additional bonds issued on a parity therewith, in the interest and sinking fund and the reserve fund required to be maintained for the payment of all such bonds, all as more fully described and provided for in the Ordinance. This bond and the series of which it is a part, together with the interest thereon, are payable solely from such Net Revenues and do not constitute an indebtedness or general obligation of the City. THE CITY HAS RESERVED THE RIGHT TO ISSUE ADDITIONAL WATER AND SEWER SYSTEM REVENUE BONDS, subject to the restrictions contained in the Ordinance, which bonds may be secured by a lien on a parity with, or subordinate and inferior to, the lien on the Net Revenues securing this bond and the series of which it is a part. THE REGISTERED OWNER HEREOF shall never have the right to demand payment out of any funds raised or to be raised by taxation. REFERENCE IS HEREBY MADE TO THE ORDINANCE, a copy of which is on file in the office of the Paying Agent/Registrar, and to all of the provisions of which the Registered Owner of this bond by the acceptance hereof hereby assents, for definitions of terms; the description of and the nature and extent of the security for the Series 1996A Bonds; the priority for the application and use of the income and revenues of the System; the Net Revenues pledged to the payment of the principal of and interest on the Series 1996A Bonds; the nature and extent and manner of enforcement of the lien and pledge securing the payment of the Series 1996A Bonds; the terms and conditions for the issuance of additional revenue obligations, including Additional Bonds; the terms and conditions for amending the Ordinance; the terms and conditions relating to the transfer or exchange of this bond; 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 of this bond, and deemed to be no longer Outstanding thereunder; and for the other terms and provisions thereof. Capitalized' terms used herein, unless otherwise defined, have the same meanings assigned in the Ordinance. 11 IT IS HEREBY DECLARED AND REPRESENTED that this bond has been duly and validly issued and delivered; that all acts, conditions, and things required or proper to be performed, exist, and be done precedent to or in the issuance and delivery of this bond have been performed, existed, and been done in accordance with law; that the Series 1996A Bonds do not exceed any statutory limitation; and that provision has been made for the payment of the principal of and interest on this bond and all of the Series 1996A Bonds by the aforesaid first lien on and pledge of the Net Revenues. THIS BOND shall not be valid or obligatory for any purpose or be entitled to any benefit under the Ordinance unless this bond either (i) is registered by the Comptroller of Public Accounts of the State of Texas or (ii) is authenticated by the Paying Agent/Registrar by due execution of the authentication certificate manually endorsed hereon. Such duly executed certificate of authentication shall be conclusive evidence that this bond was delivered by the Paying Agent/Registrar under the provisions of the Ordinance. IN WITNESS WHEREOF, the City has caused its corporate seal to be impressed or placed in facsimile hereon and has in the Ordinance directed this bond to be signed by the Mayor and countersigned by the City Secretary by their printed facsimile signatures. (SEAL) Mayor City Secretary 12 JFORM OF COMPTROLLER'S REGISTRATION CERTIFICATE! The following form of Comptroller's Registration Certificate shall be attached or affixed to each of the Series 1996A Bonds initially delivered. THE STATE OF TEXAS REGISTER NO. OFFICE OF THE COMPTROLLER OF PUBLIC ACCOUNTS I hereby certify that there is on file and of record _ in my office a certificate of the Attorney General of the State of Texas to the effect that this bond and the proceedings for the issuance hereof have been examined by him as required by law, that he finds that it has been issued in conformity with the Constitution and laws of the State of Texas and that it is a valid and binding special obligation of the City of Pearland, Texas, payable from the revenues and other funds pledged to its payment by and in the proceedings authorizing the same, and I do further certify that this bond has this day been registered by me. WITNESS MY SIGNATURE AND SEAL OF, OFFICE this Comptroller of Public Accounts [SEAL] of .the State of.Texas 13 !FORM OF AUTHENTICATION CERTIFICATEI The following form of Authentication Certificate shall appear on each of the Series 1996A Bonds. AUTHENTICATION CERTIFICATE Registration Date: This bond is one of the Bonds described in and delivered pursuant to the within - mentioned Ordinance; and, except for the Bonds initially delivered, this bond has been issued in conversion of and exchange for or replacement of a bond,bonds or a portion of a bond or bonds of an issue which originally was approved by the Attorney General of the State of Texas and registered by the Comptroller of Public Accounts of the State of Texas. TEXAS COMMERCE BANK NATIONAL ASSOCIATION By: 14 Authorized Signature FFORM OF ASSIGNMENTI The following form of assignment shall appear on each of the Series 1996A Bonds. For value ASSIGNMENT received, the undersigned hereby sells, assigns, and transfers unto (SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER) (Print or type name, address, and zip code of transferee) the within bond and hereby irrevocably constitutes and appoints attorney to transfer said bond on the books kept for registration thereof, with full power of substitution in the premises. DATED: Signature Guaranteed: NOTICE: The signature must be guaranteed by a commercial bank or a member firm of a national securities exchange. Notarized or witnessed signatures are not acceptable. 15 Registered Owner 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, without alteration or enlargement or any change whatever. ARTICLE V SECURITY AND SOURCE OF PAYMENT FOR THE BONDS Section 5.1. Pledge and Source of Payment. The City hereby covenants and agrees that Gross Revenues of the System shall, as collected and received by the City, be deposited and paid into the special funds hereinafter established, and shall be applied in the manner hereinafter set forth, in order to provide for the payment of all Maintenance and Operation Expenses and to provide for the payment of principal of, interest on and any redemption premiums on the Bonds and all expenses of paying same; and to provide for the disposition of the remaining Net Revenues. The Bonds shall constitute special obligations of the City that shall be payable solely from and shall be equally and ratably secured by a first lien on the Net Revenues as collected and received by the City from the operation and ownership of the System, which Net Revenues shall, in the manner herein provided, be set aside for and pledged to the payment of the Bonds in. the Interest and Sinking Fund and the Reserve Fund as hereinafter provided, and the Bonds shall be, in all respects, on a parity with and of equal dignity with one another. The Owners of the Bonds shall never have the right to demand payment of either the principal of, interest on or any redemption premium on the Bonds out of any funds raised or to be raised by taxation. Section 5.2. Rates and Charges. So long as any Bonds remain Outstanding, the City shall fix, charge and collect rates and charges for the use and' services of the System which are calculated to be fully sufficient to produce Net Revenues in each Fiscal Year at least, equal to 115 % of the principal and interest requirements scheduled to occur in such Fiscal Year on all Bonds then Outstanding plus an amount equal to the sum of all deposits required to be made to the Reserve Fund in such Fiscal Year; but in no event shall Net Revenues ever be less than the amount required to establish and maintain the Interest and Sinking Fund and the Reserve Fund as hereinafter provided, and, to the extent that funds for such purpose are not otherwise available, to pay all other outstanding obligations payable from the Net Revenues of the System, including all amounts owed by the City to a provider of a Surety Policy, if any, as and when the same become due. The City will not grant or permit any free service from the System, except for public buildings and institutions operated by the City. In addition, the City will not grant or permit any free service from the System permitted by the previous sentence if to do so would violate any condition or covenant to which the City is bound in connection with any federal grant agreement or otherwise. Section 5.3. Special Funds. The following special Funds shall be established, maintained and accounted for as hereinafter provided so long as any of the Bonds remain Outstanding: (a) Revenue Fund; 16 (b) Interest and Sinking Fund; and (c) Reserve Fund. All of such Funds shall be maintained as separate accounts on the books of the City. The Interest and Sinking Fund and the Reserve Fund shall constitute trust funds which shall be held in trust for the Owners of the Bonds and the proceeds of which shall be pledged to the payment of the Bonds. All of the Funds named above shall be used solely as herein provided so long as any Bonds remain Outstanding. Section 5.4. Flow of Funds. Gross Revenues of the System shall be deposited as collected into the Revenue Fund. Moneys from time to time on deposit to the credit of the Revenue Fund shall be applied in the following manner and in the following order of priority: (a) First, to pay Maintenance and Operation Expenses and to provide .by encumbrance for the payment of all obligations incurred by the City for Maintenance and Operation Expenses and to establish and maintain an operating reserve equal to one month's estimated Maintenance and Operation Expenses; (b) Second, to make all deposits into the Interest and Sinking Fund required by any ordinance authorizing the issuance of Bonds; (c) Third, to make all deposits into the Reserve Fund required by any ordinance authorizing the issuance of Bonds; (d) Fourth, to make all deposits, as may be required by any ordinance of the City authorizing the issuance of certain Subordinate Lien Obligations described in Section 6.2 hereof, in order to provide for the payment of and security for such Subordinate Lien Obligations; and (e) Fifth, for any lawful purpose. r Section 5.5. Interest and Sinking Fund. On or before the last business day of each month so long as any Bonds remain Outstanding, alter making all required payments and provision for payment of Maintenance and Operation Expenses, there shall be transferred into the Interest and Sinking Fund from the Revenue Fund the following amounts: (a) Such amounts, in approximately equal monthly installments, as will be sufficient to accumulate the amount required to pay the interest scheduled to become due on the Bonds on the next Interest Payment Date;_ and (b) Such amounts, in approximately equal monthly installments, as will be sufficient to accumulate the amount required to pay the next maturing principal of the 17 Bonds (i.e., the principal amount payable on the next September 1), including the principal amounts of, and any redemption premiums on, any Bonds payable as a result of the operation or exercise of any mandatory or optional redemption provision contained in any ordinance authorizing the issuance of Bonds. Whenever the total amounts on deposit to the credit of the Interest and Sinking Fund and the Reserve Fund shall be equivalent to the sum of the aggregate principal amount of all Outstanding Bonds plus the aggregate amount of all interest accrued and to accrue thereon, no further payments need be made into the Interest and Sinking Fund or the Reserve Fund, and such Bonds shall not be regarded as being Outstanding except for the purpose of being paid with the moneys on deposit in such Funds. Moneys deposited to the credit of the Interest and Sinking Fund shall be used solely for the purpose of paying principal (at maturity or prior redemption or to purchase Bonds in the open market to be credited against mandatory redemption requirements), interest and redemption premiums on the Bonds, plus all bank charges and other costs and expenses relating to such payment. On or before each date principal becomes due and/or Interest Payment Date on the Bonds, - the City shall transfer from the Interest and Sinking Fund to .the paying agent for the Bonds an amount equal to the principal of, interest on and any redemption premiums payable on the Bonds on such date, together wit'- in amount equal to all bank charges and other costs and expenses relating to such payment. ne paying agent shall totally destroy all paid Bonds and shall provide the City with an appropriate certificate of destruction. Section 5.6. Reserve Fund. On or before the last business day of each month so long as any Bonds remain Outstanding, after making all required payments and provision for payment of Maintenance and Operation Expenses and after making all required transfers into the Interest and, Sinking Fund, there shall be transferred into the Reserve Fund from the Revenue Fund amounts equal to one -sixtieth (1/60th) of the . Average Annual. Principal • and Interest Requirements on the Bonds unless or until there has been accumulated in the Reserve Fund money and investments in an aggregate amount at least equal to the Average Annual Principal and Interest Requirements on the Bonds; provided that additional deposits into the Reserve Fund sufficient to provide for the increased reserve requirements resulting from the issuance of any Additional Bonds shall be made by not later than 60 months from the date of issuance of such Additional Bonds as required by Section 6.1(d) hereof. Such additional deposits into the Reserve Fund in connection with the issuance of any Additional Bonds shall be made each month in amounts equal to one -sixtieth (1/60th) of the Average Annual Principal and Interest Requirements on the Bonds and such Additional Bonds. After such amount has accumulated 'in the Reserve Fund and so long thereafter as such fund contains such amount, no further deposits shall be required to be made into the Reserve Fund, and any excess amounts in the Fund may be transferred to the Revenue Fund. But if and whenever the balance in the Reserve Fund is reduced below such amount, monthly deposits into such Fund shall be resumed and continued in amounts at least equal to one -sixtieth (1/60th) of the Average Annual Principal and Interest 18 Requirements on the Bonds until the Reserve Fund has been restored to such amount. The Reserve Fund shall be used to pay the principal of and interest on the Bonds at any time, when there is not sufficient money available in the Interest and Sinking Fund for such purpose and it may be used finally to pay and retire the last Bonds to mature or be redeemed. The requirements of the immediately preceding paragraph of this Section notwithstanding, the City may, with the written consent of the owners of 100% of the outstanding principal amount of the Series 1996B Bonds, provide a Surety Policy or Policies issued in amounts equal to all or part of the Average Annual Principal and Interest Requirements on the Bonds in lieu of depositing cash into the Reserve Fund; provided, however, that no such Surety Policy may be so substituted unless (i) the ordinance authorizing the substitution of the Surety Policy for all or part of the Average Annual Principal and Interest Requirements on the Bonds contains a finding that such substitution is cost effective and (ii) the City obtains an opinion of nationally recognized bond counsel that such substitution is permitted by applicable Texas law then in effect. In the event a Surety Policy issued to satisfy all or a part of the City's obligation with respect to the Reserve Fund causes the amount then on deposit in the Reserve Fund to exceed the Average Annual Principal and Interest Requirements on all Bonds, the City may transfer such excess amount to any fund or funds established for the payment of or security for Bonds or any Subordinate Lien Obligations (including any escrow established for the final payment of any such obligations pursuant to Article 717k, Vernon's Texas Civil Statutes). Section 5.7. Deficiencies in Funds. If in any month there shall not be deposited into any fund maintained pursuant to this Article the full amounts required hereinabove, amounts equivalent to such deficiency shall be set apart and paid into such Fund or Funds from the first available and unallocated moneys in the Revenue Fund, and such payment shall be in addition to the amounts otherwise required to be paid into such Funds during any succeeding month or months. To the extent necessary, the rates and charges for the System shall be increased to make up for any such deficiencies. Section 5.8. Investment of Funds; Transfer of Investment Income. (a) Money in the Revenue Fund, the Interest and Sinking Fund and the Reserve Fund may, at the option of the City, be invested in, time deposits or certificates of deposit secured in the manner required by law for public funds, or be invested in direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America, in obligations of any agencies or instrumentalities of the United States of America or as otherwise permitted by state law; provided that all such deposits and investments shall be made in such manner (which may include repurchase agreements for such investments with any national bank) that the money required to be expended from any Fund will be available at the proper time or times,and provided further that in no' event shall such deposits or investments of moneys in the Reserve Fund mature later than the final maturity date of 19 the Bonds. A11 such investments shall be valued in terms of current market value no less frequently than the last business day of the City's Fiscal Year, except that any direct obligations of the United States of America - State and Local Government Series shall be continuously valued at their, par value or principal face amount. Any obligation in which money is so invested shall be kept and held in an official depository of the City, except as hereinafter provided. For purposes of maximizing investment returns, money in such funds may be invested; together with money in other funds or with other money of the City, in common investments of the kind described above, or in a common pool of such investments which shall be kept and held at an official depository .of the City, which shall not be deemed to be or constitute a commingling of such money or funds provided that safekeeping receipts or certificates of participation clearly evidencing the investment or investment pool in which such money is invested and the share thereof purchased with such money or owned by such fund are held by or on behalf of each such fund. If necessary, such investments shall be promptly sold to prevent any default. (b) All interest and income derived from such deposits and investments shall be credited monthly to the fund from which such investment was made. Section 5.9. Security for Uninvested Funds. So long as. any Bonds remain Outstanding, all uninvested moneys on deposit in, or credited to, the Revenue Fund, the Interest and Sinking, Fund and the Reserve Fund shall be secured by the pledge of security as provided by law for cities in the State of Texas. ARTICLE VI ADDITIONAL BONDS Section 6.1 Additional Bonds. The City reserves the right to issue, for anylawful purpose, including the refunding of any previously issued Bonds or any other bonds or obligations of the City issued in connection with the System or payable from Net Revenues, one or more series of Additional Bonds on a parity with the Outstanding Bonds and any Additional Bonds then Outstanding, payable from, and secured by a first lien on, the Net Revenues of the System; provided, however, that no Additional Bonds may be issued unless: (a) All Additional Bonds shall mature only on September 1 and interest thereon shall be payable only on March 1 and September 1; (b) The Interest and Sinking Fund and the Reserve Fund each contains the amount of money then required to be on deposit therein; (c) For either the preceding Fiscal Year or any consecutive 12-month period out of the 15-month period immediately preceding the month in which the bond ordinance authorizing such Additional Bonds is adopted (the "Base Period") 'either: 20 (1) Net Revenues are certified by the Director of Finance of the City to. have been equal to at least one hundred and forty percent (140%) of the Average Annual Principal and Interest Requirements on all Bonds, after giving effect to the issuance of the Additional Bonds to be issued; or (2) Net Revenues, adjusted to give effect to any rate increase or annexation of territory placed into effect or consummated prior to the adoption of the ordinance authorizing the Additional Bonds to the same extent as if such rate increase or annexation had been placed into effect or consummated prior to the commencement of the Base Period, would have been equal to at least the amount required in paragraph (1) above, as certified by an independent consulting engineer or independent firm of consulting engineers; provided, however, that this requirement shall not apply to the issuance of any series of Additional Bonds for refunding purposes that will not have the result of increasing the average annual principal and interest requirements on the Bonds; and (d) Provision is made in the bond ordinance authorizing the Additional Bonds then proposed to be issued for (1) additional payments into the Interest and Sinking Fund sufficient to provide for the payment of the increased principal of and interest on the Bonds resulting from the issuance of such Additional Bonds, and (2) additional payments into the Reserve Fund sufficient to provide for the accumulation therein of the increased reserve requirement resulting from the issuance of such Additional Bonds, by not later than 60 months from the 'date of issuance of such Additional Bonds. The provisions of this Section 6.1(a) notwithstanding, the City may issue Additional Bonds that bear interest at a variable rate. Such variable rate bonds may mature on dates other than September 1 and interest thereon may be payable on dates other than March 1 or September 1; provided that the issuance of Additional Bonds as variable rate bonds may not cause the total amount of Outstanding Bonds that are variable rate bonds to exceed 50% of the aggregate principal amount of all Outstanding Bonds • and Subordinate Lien Obligations at the time of such issuance. For purposes of calculating the funding requirements for the Reserve Fund and for the purposes of calculating compliance with the conditions precedent to the issuance of Additional Bonds pursuant to Section 6.1(c) and the rate covenant set forth in Section 5.2, any Bonds that are variable rate bonds shall be assumed jo bear interest at a rate which shall be estimated and certified by the financial advisor to the City as the rate that would be borne by such variable rate bonds if they were at the dateof such certification issued as Bonds bearing a fixed rate of interest to their scheduled maturity or maturities. Section 6.2. Subordinate Lien Obligations. The City reserves the right to issue, for any lawful purpose, bonds, notes or other obligations secured in whole or in part by liens on the Net Revenues that are junior and subordinate to the lien on Net Revenues securing payment of the Bonds.. Such Subordinate Lien Obligations may be further secured by any other source of payment lawfully available for such purposes. In the event that the City should decide to issue 21 such Subordinate Lien Obligations as variable rate bonds, for purposes of calculating the funding requirements for the reserve fund for such Subordinate Lien Obligations, the variable rate bonds shall be assumed to bear interest at the rate of 10 % per annum, and for purposes of calculating compliance with any conditions precedent to the issuance of additional Subordinate Lien Obligations and any rate covenants relating to such Subordinate Lien Obligations, the variable rate bonds shall be assumed to bear interest at the higher of 9% per annum or the highest variable rate over the preceding twenty-four (24) months. Deposits may be made pursuant to Section 5.4(d) of this Ordinance into such funds as may be created and maintained for the payment of and security for Subordinate Lien Obligations described in this Section (including a reserve fund not to exceed the Average Annual Principal and Interest Requirements on such Subordinate Lien Obligations and any provisions for curing deficiencies in such funds), but only to the extent that the aggregate Outstanding principal amount of such Subordinate Lien Obligations does not exceed 50% of the aggregate principal amount of Bonds and Subordinate Lien Obligations Outstanding on the date of such calculation. Section 6.3. Special Project Bonds. The City reserves the right to issue revenue bonds secured by liens on and pledges of revenues and proceeds derived from Special Projects. ARTICLE VII COVENANTS AND PROVISIONS RELATING TO BONDS Section 7.1. Punctual Payment of Bonds. The City covenants that it will punctually pay or cause to be paid the interest on and principal of all Bonds according to the terms thereof and. will faithfully do and perform, and at all times fully observe, any and all covenants, undertakings, stipulations and provisions contained in this Ordinance and in any other ordinance authorizing the issuance of such Bonds. Section 7.2. Power to Own and Operate System: Ratemaking Power. The City covenants that it has all necessary power and authority to own and operate the System as herein described and provided and that it possesses, and shall exercise, all necessary power and authority to establish, fix, increase, impose and collect rates and charges for the use and services of the System in the amounts required to comply with the covenants and provisions contained herein. Section 7.3. Maintenance of System. So long as any Bonds remain Outstanding, the City covenants that it will at all times maintain the System, or within the limits of its authority cause the same to be maintained, in good condition and working order and will operate the same, or cause the same to be operated, in an efficient and economical manner at a reasonable cost and in accordance with sound business principles. In operating and maintaining the System, the. City will comply with all contractual provisions and agreements entered into by it and with 22 all valid rules, regulations, directions or orders of any governmental, administrative or judicial body promulgating same, noncompliance with which would materially and adversely affect the operation of the System. Section 7.4. Sale or Encumbrance of System. So long as any Bonds remain Outstanding, the City covenants that it will not sell, dispose of or, except as permitted in Article VI, further encumber the System; provided, however, that this provision shall not prevent the City from disposing of any portion of the System which is being replaced or is deemed by the City to be obsolete, worn out, surplus or no longer needed for the proper operation of the System. Net proceeds from any such disposition may be deposited in the Revenue Fund and, notwithstanding any other provision contained herein, shall be used only for System purposes. Any agreement pursuant to which the City contracts with a person, corporation, municipal corporation or political subdivision to operate the System or to lease and/or operate all or part of the System shall not be considered as an encumbrance of the System. Section 7,5. Insurance. The City covenants that it will keep the System insured with insurers of good standing against risks, accidents or casualties against which and to the extent customarily insured against by political subdivisions of the State of Texas operating similar properties, to the extent that such insurance is available. All net proceeds of such insurance shall be applied to repair or replace the insured property that is damaged or destroyed, or shall be deposited in the Revenue Fund, or shall- be used to redeem Outstanding Bonds. The cost of all such insurance, together with any additional insurance, shall be a part of the Maintenance and Operation Expenses. Section 7.6. Accounts. Records and Audits. So long as any Bonds remain Outstanding, the City covenants that it will maintain a proper and complete system of records and accounts pertaining to the operation of the System in which full, true and proper entries will be made of all dealings, transactions, business and affairs which in any way affect or pertain to the System or the Gross Revenues or the Net Revenues thereof. The City shall after the close of each Fiscal Year prepare financial statements of the System, and have those financial statements audited by an independent certified public accountant or independent firm of certified public accountants. After the audit, the City shall furnish a copy of these audited financial statements, together with the independent certified public accountant's report thereon, without cost, to the Municipal Advisory Council of Texas, the major municipal rating agencies, and any Owners of Bonds who shall request the same. All expenses incurred in preparing such audits shall be Maintenance and Operation Expenses. Section 7.7. Competition. To the extent it legally may, the City covenants that it will not grant any franchise or permit for the acquisition, construction or operation of any competing facilities which might be used as a substitute for the System and will prohibit the operation of any such competing facilities to the extent that such competing facilities would impair the City's, ability to pay principal of or interest on the Bonds. 23 Section 7.8. Pledge and Encumbrance of Net Revenues. The City covenants that it has the lawful power to create a lien on and to pledge the Net Revenues to secure the payment of the Bonds, and has lawfully exercised such power, under the Constitution and laws of the State of Texas. The City further covenants that, other than to the 'payment of the Bonds, the Net Revenues are not and will not be made subject to any other lien, pledge or encumbrance to secure the payment of any debt or obligation of the City, unless such lien, pledge or encumbrance is junior and subordinate to the lien and pledge securing payment of the Bonds. Section 7.9. Covenants with Respect to Certain Assumed Water District Bonds. So long as any Bonds remain Outstanding, the City covenants as follows: (a) To the extent it legally may, the City will impose, and strictly enforce, the requirement upon all water districts located within the City's extraterritorial jurisdiction that any bonds issued by such water districts which are secured in whole or in part by pledges of or liens on water or sewer revenues shall provide that all such pledges of and liens on water or sewer revenues shall automatically terminate upon the annexation and dissolution of the district by the City; (b) The City shall use its best efforts to redeem, refund or defease all annexed water district bonds assumed by the City which by their own terms are secured in whole or in part by pledges of or liens on water or sewer revenues which do not terminate upon annexation and dissolution by the : ty of such water district, or otherwise to provide for the discharge of such pledges or liens on water or sewer revenues; and (c) Pursuant to Section 43.075, Texas Local Government Code (successor to Article 1182c-1, Vernon's Texas Civil Statutes, as amended), the City shall, unless it has theretofore made adequate provision for theipayment thereof, annually levy and cause to be collected taxes upon all taxable property of the City sufficient to pay principal of and interest, as they respectively become due and payable, on all assumed bonds, warrants and other obligations that were issued by water districts that have been annexed to, and dissolved by, the City, and which are by their own terms secured in whole or in part by a lien on or pledge of water or sewer revenues which did not terminate upon the annexation and dissolution_ by the City of such water district. Section 7.10. Bondholders Rights and Remedies. This Ordinance shall constitute a contract between the City and the Owners of the Series 1996A Bonds from time to time Outstanding and this Ordinance shall be and remain irrepealable until the Series 1996A Bonds and the interest thereon shall be fully paid or discharged or provision therefor shall have been made as provided herein. In the event of a default in the payment of the principal of or interest on any of the Series 1996A Bonds or a default in the performance of any duty or covenant provided by law or in this Ordinance, the Owner or Owners of any of the Series 1996A Bonds may pursue all legal remedies afforded by the Constitution and laws of the State of Texas to compel the City to remedy such default and to prevent further default or defaults. Without in any way limiting the generality of the foregoing, it is expressly provided that any Owner of any 24 of the Series 1996A Bonds may at law or in equity, by suit, action, mandamus, or other proceedings, enforce and compel performance of all duties required to be performed by the City under this Ordinance, including the maldng and collection of reasonable and sufficient rates and charges for the use and services of the System, the deposit of the revenues thereof into the special funds herein provided, and the application of such revenues in the manner required in this Ordinance. So long as a Bond Insurer shall not have defaulted in its payment obligations under its Bond Insurance Policy with the City insuring"a portion of the Series 1996A Bonds, it shall have all the rights granted to the Owners of such Series 1996A Bonds in this Ordinance. Section 7.11. Defeasance. The City may defease the provisions of this Ordinance and discharge its obligation to the Owners of any or all of the Series 1996A Bonds to pay principal, interest and redemption premium, if any, thereon in any manner permitted by law, including by depositing with the Paying Agent/Registrar, or if authorized by Texas law with any national or state bank having trust powers and having combined capital and surplus of at least $50 million or with the State Treasurer of the State of Texas either: (i) cash in an amount equal to the principal amount and redemption premium, if any, of such Series 1996A Bonds plus interest thereon to the date of maturity or redemption, or (ii) pursuant to an escrow or trust agreement, cash and/or direct obligations of, or obligations the principal of and interest on which are guaranteed by or secured by the pledge of direct obligations of the United States of America, in principal amounts and maturities and bearing interest at rates sufficient to provide for the timely payment of the principal amount and redemption premium, if any, of such Series 1996A Bonds plus interest thereon to the date of maturity or redemption; provided, however, that if any of such Series 1996A Bonds are to be redeemed prior to their respective dates of maturity, provision shall have been made for giving notice of redemption as provided in this Ordinance. Upon such deposit, such Series 1996A Bonds shall no longer be regarded to be Outstanding or unpaid. Any surplus amounts not required to accomplish such defeasanceshall be returned to the City. Payments of principal of and interest on any Series 1996A Bonds made by a Bond Insurer under its Bond Insurance Policy with the City insuring a portion of the Series 1996A Bonds shall not be deemed to have been paid hereunder and such Series 1996A Bonds shall continue to be Outstanding until paid by the City. Section 7.12. Legal Holidays. In any case where the date of maturity of interest on or principal of the Series 1996A Bonds or the date fixed for redemption of any Series 1996A Bonds shall be in the City a legal holiday or a day on which the Paying Agent/Registrar for the Series 1996A Bonds is authorized by law to close, then payment of interest or principal need not be made on such date but may be made on the next succeeding day not in the City a legal holiday or a day on which such Paying Agent Registrar is authorized by law to close with the same force and effect as if made on the date of maturity or the date fixed for redemption and no interest shall accrue for the period from the date of maturity or redemption to the date of actual payment. Section 7.13. Unavailability of Authorized Publication. If, because of the temporary or permanent suspension of any newspaper, journal or other publication, or, for any reason, publication of notice cannot be made meeting any requirements herein established, any notice 25 required to be published by the provisions of this Ordinance shall be given in such other manner and at such time or times as in the judgment of the City or of the Paying Agent/Registrar (or paying agent) for the Series 1996A Bonds shall most effectively approximate such required publication and the giving of such notice in such manner shall for all purposes of this Ordinance be deemed to be in compliance with the requirements for publication thereof. Section 7.14. No Recourse Against City Officials. No recourse shall be had for the payment of principal of or interest on any Series 1996A Bonds or for any claim based thereon or on this Ordinance against any official of the City or any person executing any Series 1996A Bonds. Section 7.15. Amendment to Ordinance. The City may, with the consent of Owners; holding a majority in aggregate principal amount of the Bonds then Outstanding affected thereby, amend, add to, or rescind any of the provisions of this Ordinance; provided that, without the consent of all Owners 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 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 of Bonds required to be held by Owners for consent to any such amendment, addition, or rescission. ARTICLE VIII CONCERNING THE PAYING AGENT/REGISTRAR Section 8.1. Acceptance. Texas Commerce Bank National Association is hereby appointed as the initial Paying Agent/Registrar for the Series 1996A Bonds. Such initial Paying Agent/Registrar and any successor Paying Agent/Registrar, by undertaking the performance of the duties of the Paying Agent/Registrar hereunder, and inconsideration of the payment of fees and/or deposits of money pursuant to this Ordinance, shall be deemed to accept and agree to abide by the terms of this Ordinance. Section 8.2. Fiduciary Account. All money transferred to the Paying Agent/Registrar under this Ordinance (except sums representing Paying Agent/Registrar's fees) shall be held in a fiduciary account for the benefit of the City, shall be the property of the City, and shall be disbursed in accordance with this Ordinance. Section 8.3. Bonds Presented. Subject to the provisions of Section 8.4, all matured Series 1996A Bonds presented to the Paying Agent/Registrar for payment shall be paid without the necessity of further instructions from the City. Such Series 1996A Bonds shall be canceled as provided herein. 26 Section 8.4. Series 1996A Bonds Not Timely Presented. The Paying Agent/Registrar shall remit to the City, upon receipt of the certificate provided for herein, a sum equal to the aggregate face amount of all Series 1996A Bonds which have not been presented for payment prior to the date specified in such certificate. Such certificate shall: (a) Specify the Series 1996A Bonds or portions thereof to which it applies and. the amount of each; (b) Specify the date on which the City believes itself to be no longer obligated to pay such Series 1996A Bonds or portions thereof by virtue of the expiration of the applicable statute of limitations under the laws of the State of Texas; and (c) Be signed by the Mayor and attested by the City Secretary. ,Funds held by the Paying Agent/Registrarthat represent principal of and interest on the Series 1996A Bonds remaining unclaimed by any Registered Owner after the expiration of three years from the date such funds have become due and payable (a) shall be reported and disposed of by the Paying Agent/Registrar in accordance with the provisions of Title 6 of the Texas Property Code, as amended, to the extent such provisions are applicable to such funds, or (b) to the extent such provisions do not apply to the funds, such funds shall be paid by the Paying Agent/Registrar to the City upon receipt by the Paying Agent/Registrar of a written request therefor from the City. Tice Paying Agent/Registrar shall have no liability to the Owners of the Series 1996A Bonds by virtue of actions taken in compliance with this Section. Section 8.5. Paying Agent/Registrar May Own Series 1996A Bonds. The Paying Agent/Registrar in its individual or any other capacity, may become the owner or pledgee of Series 1996A Bonds with the same rights it would have if it were not the Paying Agent/Registrar. Section 8.6. ' Successor Paying Agents/Registrars. The City covenants that all times while any Series 1996A Bonds are Outstanding it will provide a legally qualified bank, trust company, financial institution, or other agency to act as Paying Agent/Registrar for the Series 1996A Bonds. If the Paying Agent/Registrar or its successor for any reason no longer acts as Paying' Agent/Registrar hereunder, the City covenants that it will appoint a bank in the same city as the Paying Agent/Registrar initially appointed to perform the duties of Paying Agent/Registrar hereunder. Any successor Paying Agent/Registrar shall be either a national or state banking institution and a corporation organized and doing business under the laws of the United States of America or any state, which is authorized under such laws to exercise trust powers and is subject to supervision or examination by federal or state authority. The' City reserves the right to change the Paying Agent/Registrar for the Series 1996A Bonds on not less than sixty (60) days written notice to the Paying Agent/Registrar, as long as 27 any such notice is effective not less than sixty (60) days prior to the next succeeding principal or interest payment date on the Series 1996A Bonds. Promptly upon the appointment of any successor Paying Agent/Registrar, the previous Paying Agent/Registrar shall deliver the Register or a copy thereof to the new Paying Agent/Registrar and the new Paying Agent/Registrar shall notify each Registered Owner, by first-class mail, postage prepaid, of such change and of the address of the new Paying Agent/Registrar. Each Paying Agent/Registrar hereunder, by acting in that capacity, shall be deemed to have agreed to the provisions of this Ordinance. ARTICLE IX PROVISIONS CONCERNING SALE AND APPLICATION OF PROCEEDS OF SERIES 1996A BONDS Section 9.1. Sale of Series 1996A Bonds. Sale of the Series 1996A Bonds is hereby awarded to Merchants Bank, Houston, Texas, for thesum of $1,115,000, plus accrued interest on the Series 1996A Bonds. It is hereby found and declared that the above price and terms of sale of the Series 1,996A Bonds are the most advantageous,reasonably obtainable by the City. Section 9.2. Approval. Registration and Delivery. The Mayor and the City Secretary are hereby authorized to have control and custody of the Series 1996A Bonds and all necessary records and proceedings pertaining thereto pending their delivery, and the Mayor of the City, the City Secretary of the City, the City Manager of the City and other officersand employees of the City are hereby authorized, directed and instructed to make such certifications and to execute such instruments (including by printed facsimile signature, the Series 1996A Bonds) as may be necessary to accomplish the delivery of the Series 1996A- Bonds and to assure the investigation, examination, and approval thereof by the Attorney General of Texas and the registration of the initial Series 1996A Bonds by the Comptroller of Public Accounts of the State of Texas. Upon registration of the Series 1996A Bonds, the Comptroller of Public Accounts of the State of Texas (or a deputy designated in writing to act for him) shall be requested to sign manually the registration certificate prescribed herein to be attached or affixed to each Series 1996A Bond initially delivered and the seal of the Comptroller of Public Accounts of the State of Texas shall be impressed or printed or lithographed thereon. Delivery of the Series 1996A Bonds is subject to the unqualified approving opinion as to the legality of the Series 1996A Bonds of the Attorney General of Texas and of Mayor, Day, Caldwell & Keeton, L.L.P., Houston, Texas, Bond Counsel. Section 9.3. Application of Proceeds of Series 1996A Bonds. Proceeds from the sale of the Series 1996A Bonds shall, promptly upon receipt by the City, be applied as follows: (a) Accrued interest and premium, if any, shall be deposited into the Interest and Sinking Fund. 28 (b) The remaining proceeds from the sale of the Series 1996A Bonds shall be applied, together with other legally available funds of the City, to establish an Escrow Fund to pay the principal of and accrued interest on the Refunded Bonds on their respective maturity dates, as more fully,provided below, and to pay all expenses arising in connection with the issuance of the. Series 1996A Bonds, the establishment of such Escrow 'Fund and the refunding of the Refunded Bonds. Any proceeds of the Series 1996A Bonds remaining after malting all such deposits and payments shall be deposited into the Interest and Sinking Fund. Section 9.4. Tax Exemption. The City intends that the interest on the Series 1996A Bonds shall be excludable from' gross income of the owners thereof for federal income tax purposes pursuant to Sections 103 and 141 through 150 of the InternalRevenue Code of 1986, as amended, (the "Code") and all applicable temporary, proposed and final regulations (the "Regulations") and procedures promulgated thereunder and applicable to the Series 1996A Bonds. For this purpose, the City covenants that it will monitor and control the receipt, investment, expenditure and use of all gross proceeds of the Series 1996A Bonds (including all property, the acquisition, construction or improvement of which is to be financed directly or indirectly with the proceeds of the Series 1996A Bonds) and take or omit to take such other and further actions as may be required by Sections 103 and 141 through 150 of the Code and the Regulations to cause the interest on the Series 1996A Bonds to be and remain excludable from the gross income, as defined in Section 61 of the Code, of the owners of the Series 1996A Bonds for federal income tax purposes. Without limiting the generality of the foregoing, the City shall comply with each of the following covenants: (a) The City will use all of the proceeds of the Series 1996A Bonds to (i) acquire State and Local Governmental Series (the "Escrowed Securities") sufficient to pay the principal of, premium, if any, and interest on the Refunded Bonds and (ii) to pay the costs of issuing the Series 1996A Bonds except for amounts, if any, described in the Certificate (as defined in the Escrow Agreement) as the rounding amount and the ending cash balance in the Escrow Fund (as defined in the Escrow Agreement); (b) The City will not directly or indirectly take any action or omit to take any action, which action or omission would cause the Series 1996A Bonds or the Refunded Bonds to constitute "private activity bonds" within the meaning of Section 141(a) of the Code. (c) Principal of and interest on the Series 1996A Bonds will be paid solely from Net Revenues collected by the, City, investment earnings on such collections, and as available, proceeds of the Series 1996A Bonds; (d) Based upon all facts and estimates now known or reasonably expected to be in existence on the date the Series 1996A Bonds are delivered, the City reasonably expects that the proceeds of the Series 1996A Bonds and the Refunded Bonds (to the - extent any of such proceeds remain unexpended) will not be used in a manner that would 29 cause the Series 1996A Bonds or the Refunded Bonds or any portion thereof to be "arbitrage bonds" within the meaning of Section 148 of the Code; (e) At all times while the Series 1996A Bonds are outstanding,. the City will identify and properly account for all amounts constituting gross proceeds of the Series 1996A Bonds in accordance with the Regulations. The City will monitor the yield on the investments of the proceeds of the Series 1996A Bonds and, to the extent required by the Code and the Regulations, will restrict the yield on such investments to a yield which is not materially higher than the yield on the Series 1996A Bonds. To the extent necessary to prevent the Series 1996A Bonds from constituting "arbitrage bonds," the City will make such payments as are necessary to cause the yield on all yield -restricted nonpurpose investments allocable to the Series 1996A Bonds to be less than the yield that is materially higher than the yield on the Series 1996A Bonds; (f) The City will not take any action or knowingly omit to take any action, if taken or omitted, would cause the Series 1996A Bonds to be treated as "federally guaranteed" obligations for purposes of Section 149(b) of the Code; (g) The City represents that not more than fifty percent (50%) of the proceeds of any new money portion of, or any new money issue refunded by, the Refunded Bonds was invested in nonpurpose investments (as defined in Section 148(t)(b)(A) of the Code) having a substantially guaranteed - ';eld for four years or more within the meaning of Section 149(g)(3)(A)(ii) of the Co,a,and the City reasonably expected at the time each issue of the Refunded Bonds was issued that at least eighty-five percent (85 %) of the spendable proceeds of such issue of the Refunded Bonds would be used to carry out the governmental purpose of such Refunded Bonds within the corresponding three-year period beginning on the respective dates of such Refunded Bonds. (h) The City will take all necessary steps to comply with the -requirement that certain amounts earned by the City on the investment of the gross proceeds of the Series 1996A Bonds, if any, be rebated to the federal government. Specifically, the City will (i) maintain records regarding the receipt, investment and expenditure of the gross proceeds of the Series 1996A Bonds as may be required to calculate such excess arbitrage profits separately . from records of amounts on deposit in the funds and accounts of the City allocable to other obligations of the City or moneys which do not represent gross proceeds of any obligations of the City and retain such records for at least six years after the day on which the last outstanding Series 1996A Bond is discharged, (ii) account for all gross proceeds under a reasonable, consistently applied method of accounting, not employed as an artifice or device to avoid, in whole or in part, the requirements of Section 148 of the Code, including any specified method of accounting required by applicable Regulations to be used for all or a portion of the gross proceeds, (iii) calculate, at such times as are required by applicable Regulations, the amount of excess arbitrage profits, if any, earned from the investment of the gross proceeds of the Series 1996A Bonds and (iv) timely pay, as required by applicable Regulations, all 30 amounts required to be rebated to the federal government. In addition, the City will exercise reasonable diligence to assure that no errors are made in the calculations required by the preceding sentence and, if such an error is made, to 'discover and promptly correct such error within a reasonable amount of time thereafter, including payment to the federal government of any delinquent amounts owed to it, including interest thereon and penalty. (i) The City will not indirectly pay any amount otherwise payable to the federal government pursuant to the foregoing requirements to any person other than the federal government by entering into any investment arrangement with respect to the gross proceeds of the Series 1996A Bonds that might result in a reduction in the amount required to be paid to the federal government because such arrangement results in smaller profit or a larger loss than would have resulted if such arrangement had been at arm's length and had the yield on the issue not been relevant to either party. (j) The City will timely file or cause to be filed with the Secretary of the Treasury of the United States the information required by Section 149(e) of the Code with respect to the Series 1996A Bonds on such form and in such place as the Secretary may prescribe. (k) The City will not issue or use the Series 1996A Bonds. as part of an "abusive arbitrage device" (as defined in Section 1.148-10(a) of the Regulations).. Without limiting the foregoing, the Series 1996A Bonds are not and will not be a part of a transaction or series of transactions that attempts to circumvent the provisions of Section 148 of the Code and the Regulations, by (i) enabling the City to exploit the difference between tax-exempt and taxable interest rates to gain a material financial advantage, or (ii) increasing the burden on the market for tax-exempt obligations. (1) Proper officers of the City charged with the responsibility for issuing the Series 1996A Bonds are hereby directed to make, execute and deliver certifications as to facts, estimates or circumstances in existence as of the Issue Date and stating whether there are facts, estimates or circumstances that would materially change the City's expectations. On or after the Issue Date, the City will take such actions as are necessary and appropriate to assure the continuous accuracy of the representations contained in such certificates. (m) The covenants and representations made or required by this Section are for the benefit of the Series 1996A Bond holders and any subsequent Series 1996A Bond holder, and may be relied upon by the Series 1996A Bondholder and any subsequent Series 1996A Bondholder and bond counsel to the City. In complying with the foregoing covenants, the City may rely upon an unqualified opinion issued to the City by nationally recognized bond counsel that any action by the City or reliance upon any interpretation of the Code or Regulations contained in such opinion will not 31 cause interest on the Series 1996A Bonds to be includable in gross income for federal income tax purposes under existing law. Notwithstanding any other provision of this Ordinance, the City's representations and obligations under the covenants and provisions of this Section 9.4 shall survive the defeasance and discharge of the Series 1996A Bonds for as long as such matters are relevant to the exclusion of interest on the Series'1996A Bonds from the gross income of the owners for federal income tax purposes. Section 9.5. Qualified Tax -Exempt Obligations. The City hereby designates the Series 1996A Bonds as "qualified tax-exempt obligations" as defined in Section 265(b)(3) of the Code. With respect to such designation, the City represents the following: (a) that during the calendar year 1996, the City (including all entities which issue obligations on behalf of the City), has not designated nor will designate obligations, which when aggregated with the Series 1996A Bonds, will result in more than $10,000,000 of "qualified tax-exempt obligations" being issued and (b) that the City has examined its financing needs for the calendar year 1996 and reasonably anticipates that the amount of bonds, leases, loans orr other obligations, together with the Series 1996A Bonds and any other tax-exempt obligations heretoforeissued by the City (plus those of all entities which issue obligations on behalf of the City) during the calendar year 1996, when the higher of the face amount or the issue price of each such tax-exempt obligation issued for the calendar year 1996 by the City is taken into account, will not exceed $10,000,000. Section 9.6. Escrow Agreement. The discharge and defeasance of the Refunded Bonds shall be effectuated pursuant to the terms and provisions of a Escrow Agreement to be .entered into by and between the City and the Escrow Agent, which shall be substantially in the form of Exhibit A, the terms and provisions of which are hereby approved, subject to such insertions, additions, and modifications as shall be necessary (a) to carry out the program designed for the City by Rauscher Pierce Refsnes, Inc., as financial advisor to the City, (b) to comply with all applicable laws and regulations relating to the refunding of the Refunded Bonds and (c) to carry out the other intents and purposes of this Ordinance, and the Mayor is hereby authorized to execute and deliver such Escrow Agreement on behalf of .the City in multiple counterparts and the City Secretary is hereby authorized to attest thereto and affix the City's seal. Section 9.7. Purchase of United States Treasury Obligations. In order to assure the purchase of the escrowed securities referred to in the Escrow Agreement, the Mayor is hereby authorized to subscribe for, agree to purchase and purchase, such obligations of the United States of America, in such amounts, maturities, and bearing interest at such rates as may be provided for in the Certificate, and the Mayor is authorized to execute, and the City Secretary is authorized to attest and affix the City's seal, as appropriate, to any and all subscriptions, purchase agreements, forward purchase agreements, commitments, letters of authorization and other documents necessary to effectuate the foregoing, and any actions heretofore taken by the Mayor for such, purpose are hereby ratified and approved. • 32 Section 9.8. Paying Agent/Registrar Agreement. The registration of and payment of the principal of, premium, if any, and interest on the Bonds when due shall be effectuated pursuant to the terms of a Paying Agent/Registrar Agreement to be entered into by and between the City and the Paying Agent/Registrar, which shall be substantially in the form attached hereto as Exhibit B, the terms and provisions of which are hereby approved, and the Mayor and/or the Mayor Pro Tem are hereby authorized to execute and deliver such Paying Agent/Registrar Agreement on behalf • of the City in multiple counterparts and the City Secretary is hereby authorized to attest thereto and affix the City's seal. Section 9.9. Redemption of Refunded Bonds. The City hereby irrevocably calls the Refunded Bonds maturing in the years 1997 through 2002, inclusive, for redemption prior to maturity on the dates set forth below, at a price of par plus accrued interest to the date fixed for redemption, and authorizes and directs notice of such redemption to be given in accordance with the ordinance authorizing such bonds. Maturity Date Principal Amount Redemption Date September 1, 1997 $ 160,000 September 1, 1996 September 1, 1998 170,000 September 1, 1996 September 1, 1999 180,000 September 1, 1996 September 1, 2000 190,000 September 1, 1996 September 1, 2001 200,000 September 1, 1996 September 1, 2002 200,000 September 1, 1996 Section 9.10. Bond Counsel. Bond Counsel services in connection with the issuance of the Bonds shall be provided pursuant to the terms of a Engagement Letter to be entered into by and between the City and Mayor, Day, Caldwell & Keeton, L.L.P., Houston, Texas, ("Bond Counsel"), which shall be substantially in the form attached hereto as Exhibit C, the terms and provisions of which are hereby approved, and the Mayor is hereby authorized to execute and deliver such Engagement Letter on behalf of the City in multiple counterparts and the City Secretary is hereby authorized to attest thereto and affix the City's seal. . Section 9.11. Related Matters. In order that the City shall satisfy, in a timely manner all of its obligations under the Ordinance and the Escrow Agreement, the Mayor, the City Secretary and other appropriate officers and agents of the City are hereby authorized and directed to. take all other actions that are reasonably necessary to provide for issuance and delivery of the Series 1996A Bonds and the refunding of the Refunded Bonds, including executing by manual or facsimile signature and delivering on behalf of the City all certificates, consents, receipts,, requests, notices, investment agreements and :other documents as may be reasonably necessary to satisfy the City's obligations under the Escrow Agreement and the Ordinance and to direct the transfer and application of funds of the City consistent with the provisions of such Escrow Agreement and the Ordinance. If requested by the Attorney General of Texas or his representatives, the Mayor may authorize such ministerial changes in the written text of this Ordinance as are necessary to obtain the Attorney General's approval and as he 33 CITY OF PEARLAND Combined D.S. of Refunding Bonds Series 1996A end WW/SS Revenue Bonds Ser. 19968 INTEREST INTEREST PRESENT PRINCIPAL VARIOUS VARIOUS TOTAL TOTAL NEW TOTAL DEBT YEAR ENDING DEBT DUE DUE DUE NEW PRINCIPAL SERVICE 09/30 REQUIREMENT 09/01 03/01 09/01 INTEREST i INTEREST REQUIREMENT 1997 223,772 85,000 274,416 196,011 470,427 555,427 779,199 1998 227,965 165,000 194,779 194,779 389,558 554,558 782,523 1999 224,415 170,000 192,139 192,139 ' 384,278 554,278 778,693 2000 225,350 175,000 189,249 189,249 378,498 553,498 778,848 2001 1 220,600 185,000 186,143 186,143 372,285 557,285 777,885 2002 210,400 210,000 182,720 182,720 365,440 575,440 785,840 2003 420,000 178,730 178,730 357,460 777,460 777,460 2004 440,000 170,540 170,540 341,080 781,080 781,080 2005 455,000 161,740 161,740 323,480 778,480 778,480 2006 475,000 152,413 152,413 304,825 779,825 779,825 2007 495,000 142,438 142,438 284,875 779,875 779,875 2008 515,000 131,795 131,795 263,590 778,590 778,590 2009 540,000 120,465 120,465 240,930 780,930 780,930 2010 560,000 108,315 108,315 ' 216,630 776,630 776,630 2011 590,000 95,435 95,435 190,870 780,870 780,870 2012 615,000 81,570 81,570 163,140 778,140 778,140 2013 645,000 66,964 66,964 133,928 778,928 778,928 2014 675,000 51,484 51,484 102,968 777,968 777,968 2015 710,000 35,284 35,284 70,568 780,568 780,568 2016 745,000 18,066 18,066 36,133 781,133 781,133 $1,332,502 S8,870,000 S2,734,685- S2,656,280 S5,390,963 S14,260,963 $15,593,465 DATED: 6/19/96 DUE: 9/01/97 - 9/01/16 FIRST COUPON: 3/01/97 Prepared By Reuscher Pierce Refsnes, Inc. PEARC95: NEW96SRF NEW96WSR' 05/13/96 8 13:13 Issue Date: 6/01/96 CITY OF PEARLAND - Delivery Date: 6/19/96 Refunding Bonds Series 1996A MATURING COUPON - INTEREST - TOTAL FISCAL YEAR - DATES (Term) AMOUNT PROCEEDS RATE YIELD PRICE AMOUNT DEBT SERVICE DEBT SERVICE 3/01/97 / 41,263.13 41,263.13 9/01/97 155,000.00 155,000.00 4.550 4.550000 100.000000 27,508.75 182,508.75 223,771.88 3/01/98 23,982.50 23,982.50 9/01/98 180,000.00 180,000.00 -4.750 4.750000 100.000000 23,982.50 203,982.50 227,965.00 3/01/99 19,707.50 19,707.50 9/01/99 185,000.00 185,000.00 4.900 4.900000 100.000000 19,707.50 204,707.50 224,415.00 3/01/00 15,175.00 15,175.00 9/01/00 195,000.00 195,000.00 5.000 5.000000 100.000000 15,175.00 210,175.00 225,350.00 3/01/01 10,300.00 10,300.00 9/01/01 200,000.00 200,000.00 5.100 5.100000 100.000000 10,300.00 210,300.00 220,600.00 3/01/02 5,200.00 5,200.00 9/01/02 - 200,000.00 200,000.00 5.200 5.200000 100.000000 5,200.00 205,200.00 210,400.00 Accrued Interest Totals S1,115,000.00 S1,115,000.00 S217,501.88 S1,332,501.88 81,332,501.88 -2,750.88-2,750.88. S1,115,000.00 S1,115,000.00 S214,751.00 S1,329,751.00 TIC (Incl. all expenses) .... 5.75344522X Average Coupon 5.02458862X TIC (Arbitrage TIC) 5.01232233X , •Average Life (yrs) ... 3.88 Bond Years 4,328.75 WAN (yrs) 3.832287 1 r Prepared By Rauscher Pierce Refsnes, Inc. SIC (Vernon's) • 5.024589X (with AdJstmnt of $0.00). IRS Form 8038-G SIC = 5.025766% (with Adjstmnt of $0.00). MIC = 5.024589X (with AdJstmnt of 80.00). PEARC95: NEW96WSR 05/13/96 8 13:07 Issue Dete: 6/19/96 CITY OF PEARLAND Delivery Dete: 6/19/96 WW/SS Revenue Bonds Ser. 19968 DATES (Term) MATURING COUPON INTEREST - TOTAL FISCAL YEAR DEBT SERVICE AMOUNT PROCEEDS RATE ' YIELD PRICE AMOUNT • DEBT SERVICE DEBT SERVICE TO CALL 3/01/97 274,415.75 274,415.75 274,415.75 9/01/97 185,000.00 85,000.00 2.900 2.900000 100.000000 196,011.25 281,011.25 555,427.00 281,011.25 3/01/98 194,778.75 194,778.75 194,778.75 9/01/98 165,000.00 165,000.00. 3.200 3.200000 100.000000 194,778.75 359,778.75 554,557.50 359,778.75 3/01/99 192,138.75 192,138.75 - 192,138.75 9/01/99 170,000.00 170,000.00 3.400 3.400000 100.000000 192,138.75 362,138.75 . 554,277.50 362,138.75 3/01/00 189,248.75 189,248.75 189,248.75 9/01/00 175,000.00 175,000.00 .3.550 3.550000 100.000000 189,248.75 364,248.75 553,497.50 364,248.75 3/01/01 186,142.50 186,142.50 186,142.50 9/01/01 185,000.00 185,000.00 3.700 3.700000 100.000000 186,142.50 371,142.50 557,285.00 -371,142.50 3/01/02 182,720.00 182,720.00 182,720.00 9/01/02 210,000.00 210,000.00 3.800 3.800000 100.000000 182,720.00 392,720.00 575,440.00 392,720.00 3/01/03 178,730.00 178,730.00 178,730.00 9/01/03 420,000.00 420,000.00 3.900 3.900000 100.000000 178,730.00 598,730.00 777,460.00 598,730.00 3/01/04 170,540.00 170,540.00 170,540.00 9/01/04 440,000.00 440,000.00 4.000 4.000000 100.000000 170,540.00 610,540.00 781,080.00 610,540.00 3/01/05 161,740.00 161,740.00 161,740.00 9/01/05 455,000.00 455,000.00 4.100 4.100000 100.000000 161,740.00 616,740.00 778,480.00 7,181,740.00 3/01/06 152,412.50 152,412.50 9/01/06 475,000.00* 475,000.00 4.200 4.200000 100.000000 152,412.50 627,412.50 779,825.00 3/01/07 142,437.50 142,437.50 9/01/07 495,000.00* 495,000.00 4.300 4.300000 100.000000 142,437.50 637,437.50 779,875.00 3/01/08 - - 131,795.00 131,795.00 9/01/08 515,000.00* 515,000.00 4.400 4.400000 100.000000 131,795.00 646,795.00 778,590.00 3/01/09 120,465.00 120,465.00 9/01/09 540,000.00* 540,000.00 4.500 4.500000 100.000000 120,465.00 - 660,465.00 780,930.00 3/01/10 108,315.00 108,315.00 9/01/10 560,000.00* 560,000.00 4.600 4.600000 100.000000 108,315.00 668,315.00 776,630.00 3/01/11 95,435.00 95,435.00 9/01/11 590,000.00* 590,000.00 4.700 4.700000 100.000000 95,435.00 685,435.00 780,870.00 3/01/12 81,570.00 81,570.00 9/01/12 615,000.00* 615,000.00 4.750 4.750000 100.000000 81,570.00 696,570.00 778,140.00 3/01/13 66,963.75 _ 66,963.75 - - 9/01/13 645,000.00* ; 645,000.00 4.800 4.800000 100.000000 66,963.75 711,963.75 778,927.50 3/01/14 - 51,483.75 51,483.75 9/01/14 675,000.00* 675,000.00 4.800 4.800000 100.000000 51,483.75 726,483.75 777,967.50 3/01/15 - .35,283.75 35,283.75 9/01/15 710,000.00* 710,000.00 4.850 4.850000 100.000000 35,283.75 745,283.75 780,567.50 _ 3/01/16 18,066.25 18,066.25 9/01/16 745,000.00* 745,000.00 4.850 4.850000 100.000000 18,066.25 763,066.25 781,132.50 Accrued Interest Totals S8,870,000.00 $8,870,000.00 65,390,959.50 S14,260,959.50 S14,260,959.50 S12,252,504.50 0.00 0.00 $8,870,000.00 $8,870,000.00 $5,390,959.50 $14,260,959.50 * - Bonds callable 8 100.000 on 9/01/05 TIC (Incl. all expenses) 4.55586690X TIC (Arbitrage TIC) 4.55586690X Bond Years 117,569 00 Prepared By Reuscher Pierce Refsnes, Inc. Average Coupon 4.58535796% Average Life (yrs) 13.25 WAN (yrs) 13.254679 NIC (Vernon's) = 4.585358X (with Adjstmnt of $0.00). IRS Form 8038-G NIC = 4.585358X (with Adjstmnt of 80.00). NIC . 4.585358% (with Adjstmnt of 80.00). PEARC95: NEW96SRF 05/13/96 61 13:14 MAYOR, DAY, CALDWELL 8 KEETON, L.L.P. 700 LOUISIANA, SUITE 1900 HOUSTON, TEXAS 77002-2778 (713) 225-7000 TELECOPIER (7131225-7047 RICK A.WITrE PARTNER 225-7165 David Castillo, Director of Finance City of Pearland 3519 Liberty Drive Pearland, Texas 77581 February 24, 1997 100 CONGRESS AVENUE SUITE 1500 AUSTIN, TEXAS 78701-4042 (512) 320-9200 TELECOPIER(5I2) 320-9292 Re: City of Pearland, Texas Water and Sewer System Revenue Refunding Bonds, Series 1996A; City of Pearland, Texas Water and Sewer System Revenue Bonds, Series 1996B Dear Mr. Castillo: Enclosed for your files is the Transcript of Proceedings for each of the referenced - transactions. - Very truly yours,a V Rick A. Witte RAW:ac Enclosures 0367726.01 029724/1505 CITY OF PEARLAND, TEXAS WATER AND SEWER SYSTEM REVENUE REFUNDING BONDS SERIES 1996A TRANSCRIPT OF PROCEEDINGS.. MAYOR, DAY, CALDWELL & KEETON, L.L.P. 700 Louisiana, Suite 1900 Houston, Texas 77002 (713) 225-7000 CITY OF PEARLAND, TEXAS Water and Sewer System Revenue Refunding Bonds Series 1996A Closing Memorandum I. BOND PROCEEDINGS AND DOCUMENTS Ordinance Authorizing Issuance of the Series 1996A Bonds Escrow Agreement (with Certificate of Financial Advisor) Paying Agent/Registrar Agreement • II. CERTIFICATES Signature Identification and No -Litigation Certificate General Certificate No -Arbitrage Certificate and Form. 8038G Closing Certificate III. OPINIONS Approving Opinion of Bond Counsel Opinion of Attorney General of Texas with Certificate of Comptroller of Public Accounts IV. MISCELLANEOUS Receipt and Cross -Receipt Escrow Agent's Receipt 1 2 5 6 7 10 11 12 _1' t Redemption Letter 13 Ordinance Authorizing Issuance of Refunded Bonds 14 Specimen Bond 15 Investor Acknowledgment 16 0302262.01 069623/1845 Ube1L-9b 1L:J1PM IRif{iI RAUSCHER PIERCE PUB, TO MAYOR DAY RAUSCHER PIERCE REFSNES, INC. June 11, 1996 Frank J. IldebrtanJu Senior Vice President Ms. Arla Scott Texas Commerce Bank National Association 600 Travis, Suite 1150 Houston, Texas 77002 Dear Arla: P002/005 Re: $1,115,000 City of Pearland, Texas Waterworks and Sewer System Revenue Refunding Bonds, Series 1996-A The delivery of the above captioned bonds (the "Bonds") is scheduled for Wednesday, June 19, 1996, 10:00 A.M. at your bank. M. Rick Witte of Mayor, Day, Caldwell & Keeton L.L.P., Houston, Texas, Bond Counsel, will handle all legal matters relating to the closing. At or prior to closing: (1) Merchants Bank, Houston, Texas will wire $1,117,750.88 and (2) the City of Pearland (the "City") will wire $188,280.00 in immediately available funds to: Texas Commerce Bank -Houston ABA Routing Symbol 113000609 Trust Clearing Account 7001109635800 Account of City of Pearland, Texas, Series 1996 Bond Proceeds Account No. 1723500 Attention: Arla Scott (3) Texas Commerce Bank will receive from Rauscher Pierce Refsnes, Inc. S1,249,000 U.S. Treasury Notes, 6.25% Due August 31, 1996. JUN 12 '96 I2:30 1001 ter„nin • Sidle 700 e I to,rclon. Tern. 77(1112 • (711) A11.1171I Me nb'rNew Yw* Sroc! Eutaw, Inc. 713 6S13347 PAGE.022 06-12-96 12:31PM FROM RAUSCHER PIERCE PUB. TO MAYOR. DAY P003/005 aJ Ms. Arla Scott June 11, 1996 Page 2 3370. Immediately upon closing, Texas Commerce Bank will disburse funds as follows: (1) $1,274,755.44 to Rauscher Pierce Refsnes, Inc., for the purchase of the United States Treasury Notes. (2) $2,124.75 to Texas Commerce Bank National Association as the beginning cash balance ($249.75) for the Escrow Account and ($1,875.00) for payment of the Escrow Agent Fee and Paying Agent Acceptance Fee. (3) $2,750.88 of Accrued Interest to the City's Debt Service Fund at the Pearland State Bank ABA /113123573, Acct. #743542 Attn: Gracie Losland. (4) $26,399.81 to the City at the Pearland State Bank ABA #113123573 Acct. #743542 to pay the remaining costs of issuance, Attn: Gracie Losland. Any money remaining after 90 days ' 0'I be deposited in the City's Debt Service Fund. If there are any changes that should be made to the above, please contact me at 713/651- Frank J. Ildebrando Senior Vice President cc: City of Pearland - Jim Causey Mayor, Day, Caldwell & Keeton, L.L.P. - Rick Witte Pearland State Bank - Gracie Losland Rauscher Pierce Refsnes, Inc. - Karen Piper, Dallas Rauscher Pierce Refsnes, Inc. - Pamela Wild, Houston Merchants Bank - Richard Chaffcy, Houston JUN 12 'SG 12:31 713 6513347 PAGE.2e3 CERTIFICATE FOR ORDINANCE STATE OF TEXAS § COUNTIES OF BRAZORIA AND HARRIS § CITY OF PEARLAND § We, the undersigned officers of the City of Pearland, Texas (the "City")., hereby certify as follows: 1. The City Council of the City convened in a regular meeting on the 13th day of May, 1996, at the regular meeting place thereof, within the City, and the roll was called of the duly constituted officers and members of the City Council and the City Secretary, to wit: Tom Reid Mayor Randy K. Weber Council Member Richard Tetens Council Member Jerry Richardson Council Member Kevin Cole Council Member Helen Beckman Council Member Paul Grohman City Manager Yolanda Benitez City Secretary and all of such persons were present, thus constituting a quorum. Whereupon, among other business, the following was transacted at such meeting: a written ORDINANCE AUTHORIZING ISSUANCE OF CITY OF PEARLAND, TEXAS, WATER AND SEWER SYSTEM REVENUE REFUNDING BONDS, SERIES 1996A; PRESCRIBING THE TERMS AND CONDITIONS THEREOF; PROVIDING FOR THE PAYMENT THEREOF; MAKING OTHER PROVISIONS REGARDING SUCH BONDS AND MATTERS INCIDENT THERETO; AWARDING THE SALE OF THE BONDS; AUTHORIZING THE DEFEASANCE, FINAL PAYMENT AND DISCHARGE OF CERTAIN OUTSTANDING BONDS; AUTHORIZING THE EXECUTION AND DELIVERY OF AN ESCROW AGREEMENT TO PROVIDE FOR THE PAYMENT OF SUCH BONDS; AUTHORIZING ENGAGEMENT OF AN ESCROW AGENT AND BOND COUNSEL; AUTHORIZING EXECUTION AND DELIVERY OF A PAYING AGENT/REGISTRAR AGREEMENT; AND DECLARING AN EMERGENCY, AS THE TIMELY ISSUANCE OF WATER AND SEWER SYSTEM REVENUE REFUNDING BONDS BEARS DIRECTLY UPON THE HEALTH, SAFETY, AND WELFARE OF THE CITIZENRY. (the "Ordinance") was duly introduced for the consideration of the City Council and read in full. It was then duly moved and seconded that such Ordinance be adopted; and, after due discussion, the motion, carrying with it the adoption of the Ordinance, prevailed and carried by the following vote: AYES NOES 2. That a true, full and correct copy of the aforesaid Ordinance adopted at the meeting described in the above and foregoing paragraph is attached to and follows this certificate; that the Ordinance has been duly recorded in the City Council's minutes of the meeting; that the above and foregoing paragraph is a true, full and correct excerpt from the City Council's minutes of the meeting pertaining to the adoption of the Ordinance; that the persons named in the above and foregoing paragraph are the duly chosen, qualified and acting officers and members of the City Council as indicated therein; that each of the officers and members of the City Council was duly and sufficiently notified officially and personally, in advance, of the date, hour, place and purpose of the aforesaid meeting, and that the Ordinance would be introduced and considered for adoption at the meeting, and each of the officers and members consented, in advance, to the holding of such meeting for such purpose; that the meeting was open to the public as required by law; and that public notice of the date, hour, place and subject of the meeting was given as required by the Open Meetings Law, Chapter 551, Texas Government Code, as amended. SIGNED AND SEALED this City Sr City of Pearland, Texas (SEAL) 0306156.01 059613/1505 Mayor City of Pearland, Texas CITY OF PEARLAND, TEXAS WATER AND SEWER SYSTEM REVENUE REFUNDING BONDS, SERIES 1996A ORDINANCE NO. 725 TABLE OF CONTENTS Page ARTICLE I - FINDINGS AND DETERMINATIONS 1 Section 1.1. Findings and Determinations 1 ARTICLE II - DEFINITIONS AND INTERPRETATIONS 2 Section 2.1. Definitions 2 Section 2.2. Interpretations 5 ARTICLE III - TERMS OF THE SERIES 1996A BONDS 6 Section 3.1. Name, Amount, Purpose,Authorization 6 Section 3.2. Numbers, Date, and Denomination 6 Section 3.3. Interest Payment Dates, Interest Rates, and Maturities , 6 Section 3.4. No Redemption Prior to Maturity 6 Section 3.5. Manner of Payment, Characteristics, Execution, and Authentication 7 Section 3.6. Ownership 7 Section 3.7. Registration, Transfer, and Exchange 7 Section 3.8. Cancellation 8 Section 3.9. ' Replacement Bonds 8 ARTICLE IV - FORM OF SERIES 1996A BONDS 10 ARTICLE V - SECURITY AND SOURCE OF PAYMENT FOR THE BONDS 16 Section 5.1. Pledge and Source of Payment 16 Section 5.2. Rates and Charges 16 Section 5.3. Special Funds 16 Section 5.4. Flow of Funds 17 Section 5.5. Interest and Sinking Fund 17 Section 5.6. Reserve Fund 18 Section 5.7. Deficiencies in Funds - 19 Section 5.8. Investment of Funds; Transfer of Investment Income 19 Section 5.9. Security for Uninvested Funds 20 ARTICLE VI - ADDITIONAL BONDS 20 Section 6.1 Additional Bonds 20 Section 6.2. Subordinate Lien Obligations 21 Section 6.3. Special Project Bonds 22 ARTICLE VII - COVENANTS AND PROVISIONS RELATING TO BONDS 22 Section 7.1. Punctual Payment of Bonds 22 Section 7.2. Power to Own and Operate System; Ratemaldng Power 22 Section 7.3. Maintenance of System 22 Section 7.4. Sale or Encumbrance of System 23 Section 7.5. Insurance 23 Section 7.6. Accounts, Records and Audits 23 Section 7.7. Competition . 23 Section 7.8. Pledge and Encumbrance of Net Revenues 24 Section 7.9. Covenants with Respect to Certain Assumed Water District Bonds 24 Section 7.10. Bondholders Rights and Remedies 24 Section 7.11. Defeasance 25 Section 7.12. Legal Holidays . 25 Section 7.13. Unavailability of Authorized Publication 25 Section 7.14. No Recourse Against City Officials 26 Section 7.15. Amendment to Ordinance 26 ARTICLE VIII - CONCERNING THE PAYING AGENT/REGISTRAR 26 Section 8.1. Acceptance 26 Section 8.2. Fiduciary Account 26 Section 8.3. Bonds Presented 26 Section 8.4. Series 1996A Bonds Not Timely Presented 27 Section 8.5. Paying Agent/Registrar May Own Series 1996A Bonds 27 Section 8.6. Successor Paying Agents/Registrars 27 ARTICLE IX - PROVISIONS CONCERNING SALE AND APPLICATION OF PROCEEDS OF SERIES 1996A BONDS .... 28 Section 9.1. Sale of Series 1996A Bonds 28 Section 9.2. Approval, Registration and Delivery 28 Section 9.3. Application of Proceeds of Series 1996A Bonds 28 Section 9.4. Tax Exemption 29 Section 9.5. Qualified Tax -Exempt Obligations 32 Section 9.6. Escrow Agreement 32 Section 9.7. Purchase of United States Treasury Obligations 32 Section 9.8. Paying Agent/Registrar Agreement 33 Section 9.9. Redemption of Refunded Bonds 33 Section 9.10. Bond Counsel 33 Section 9.11. Related Matters 33 ii ARTICLE X - MISCELLANEOUS 34 Section 10.1. Further Proceeding 34 Section 10.2. Severability 34 Section 10.3. Open Meeting 34 Section 10.4. Declaration of Emergency 34 Section 10.5. Repealer 35 CITY OF PEARLAND ORDINANCE NO. 725 AN ORDINANCE AUTHORIZING ISSUANCE OF CITY OF PEARLAND, TEXAS, WATER AND SEWER SYSTEM REVENUE REFUNDING BONDS, SERIES 1996A; PRESCRIBING THE TERMS AND CONDITIONS THEREOF; PROVIDING FOR THE PAYMENT THEREOF; MAKING OTHER PROVISIONS REGARDING SUCH BONDS AND MATTERS INCIDENT THERETO; AWARDING THE SALE OF THE BONDS; AUTHORIZING THE DEFEASANCE, FINAL PAYMENT AND DISCHARGE OF CERTAIN OUTSTANDING BONDS; AUTHORIZING THE EXECUTION AND DELIVERY OF AN ESCROW AGREEMENT TO PROVIDE FOR THE PAYMENT OF SUCH BONDS; AUTHORIZING ENGAGEMENT OF AN ESCROW AGENT AND BOND COUNSEL; AUTHORIZING EXECUTION AND DELIVERY OF A PAYING AGENT/REGISTRAR AGREEMENT; AND DECLARING AN EMERGENCY, AS THE TIMELY ISSUANCE OF WATER AND SEWER SYSTEM REVENUE REFUNDING BONDS BEARS DIRECTLY UPON THE HEALTH, SAFETY, AND WELFARE OF THE CITIZENRY. BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF PEARLAND, TEXAS: that: ARTICLE I FINDINGS AND DETERMINATIONS Section 1.1. Findings and Determinations. It is hereby officially found and determined (a) The City desires to refund the Refunded Bonds, as hereinafter defined, in order to (i) modify certain restrictive covenants contained in the ordinance authorizing the issuance of the Refunded Bonds and (ii) achieve a present value debt service savings. (b) The City is authorized by Article 717k,, Vernon's Texas Civil Statutes, as amended, to issue revenue refunding bonds for the purpose of refunding the Refunded Bonds in advance of their maturities, and to accomplish such refunding by depositing directly with the paying agent for the Refunded Bonds the proceeds of such refunding bonds, together with other available funds, which may be invested in direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America, which shall mature and/or bear interest payable at such times and in such amounts as will be sufficient to provide for the scheduled payments of the Refunded Bonds, and such deposits shall constitute the making of firm banking and financial arrangements for the discharge and final payment of the Refunded Bonds. (c) The City desires to enter into an escrow agreement with Texas Commerce Bank National Association, as escrow agent, as authorized in such Article 717k, pursuant to which proceeds of the revenue refunding bonds herein authorized, and other available funds, will be deposited, invested and applied in a manner independently certified to be sufficient to provide four the full and timely payment of all principal of and interest on the Refunded Bonds. (d) Upon the issuance of the revenue refunding bonds and the creation of the escrow herein authorized, the Refunded Bonds shall no longer be regarded as being outstanding, except for the purpose of being paid pursuant to such escrow agreement, and the pledges, liens; trusts and all other covenants, provisions, terms and conditions of the ordinance authorizing the issuance of the Refunded Bonds shall be discharged, terminated and defeased as to the Refunded Bonds. (e) The conditions precedent to the issuance of additional bonds which are contained in the ordinance authorizing the Refunded Bonds have been met, and the City is authorizedto issue the revenue refunding bonds and make the pledges and covenants set forth herein. ARTICLE II DEFINITIONS AND INTERPRETATIONS Section 2.1. Definitions. In this Ordinance, the following terms shall have the following meanings, unless the context clearly indicates otherwise: "Additional Bonds" shall mean the additional revenue bonds permitted to be issued by. the City pursuant to Section 6.1 hereof. "Average Annual Principal and Interest Requirements" shall mean the average annual principal and interest requirements for all Bonds. Upon the issuance of the Series 1996A Bonds and the Series 1996B Bonds, the Average Annual Principal and Interest Requirements are hereby determined to be $779,673.25 and shall berecomputed upon the issuance of each series of Additional Bonds and set forth in each ordinance authorizing the issuance of Additional Bonds. For purposes of calculating the Average Annual Principal and Interest Requirements with respect to any variable rate Additional Bonds, interest on such bonds shall be calculated in accordance with Section 6.1 of this Ordinance. "Bonds" shall mean any or all of the Series 1996A Bonds, the Series 1996B Bonds and any Additional Bonds from time to time hereafter issued, but only to the extent such Bonds remain Outstanding within the meaning of this Ordinance. "Certificate" shall mean a certificate of Rauscher Pierce Refsnes, Inc., the City's Financial Advisor, with respect to the adequacy of the escrowed securities referred to in the Escrow Agreement to pay, when due, the principal of, interest on, and any call premium requirements on the Refunded Bonds. "City" shall mean the City of Pearland, Texas, and, where appropriate, the City Council thereof and any successor to the City as owner of the System. "Escrow Agent" shall mean Texas Commerce Bank National Association, and its successors in such capacity. "Escrow Agreement" shall mean the agreement between the City and the Escrow Agent, dated as of May 13, 1996, in substantially the form attached hereto as Exhibit A. "Fiscal Year" shall mean the City's fiscal year, which currently runs from October 1 to September 30, but which may be changed from time to time by the City. "Gross Revenues" shall mean all revenues, income and receipts of every nature derived or received by the City from the operation and ownership of the System; the interest income from the investment or deposit of money in the Revenue Fund, the Reserve Fund and the Renewal and Replacement Fund; and any other revenues hereafter pledged to the payment of all Bonds. Gross Revenues shall not include any of (i) grants from, or payments by, any federal, state or local governmental agency or authority or any other entity or person, the use of which is restricted by law or by the terms of the grant or payment to capital expenditures of the System, (ii) capital assets, debt service funds or debt service reserve funds of water districts or other public or private sewer systems annexed, acquired or otherwise assumed by the City or (iii) any interest earned on items (i) or (ii) above. "Interest Payment Date" shall mean March 1 or September 1 of each year as applicable. "Maintenance and Operation Expenses" shall mean the reasonable and necessary expenses of operation and maintenance of the System, including all salaries, labor, materials, repairs and extensions necessary to render efficient service (but only such repairs , and extensions as, in the judgment of the governing body of the City, are necessary to keep the System in operation and render adequate service to the City and the inhabitants thereof, or such as might be necessary to meet some physical accident or conditions which would otherwise impair the Bonds, and all payments (including payments of amounts equal to all or a part of the debt service on bonds issued by other political subdivisions and authorities of the State of Texas) under contracts which are now or hereafter defined as operating expenses by the Legislature of Texas. Depreciation shall never be considered as a Maintenance and Operation Expense. Maintenance and Operation Expenses shall include, without limitation, all payments under contracts for 3 the impoundment, conveyance or treatment of water or otherwise which are now or hereafter defined as operating expenses by the Legislature of Texas and the treatment of such payments as Maintenance and Operation Expenses shall not be affected in any way if, subsequent to the entering into such contracts, the City acquires asa part of the System title to any properties or facilities used to impound, convey or treat water under such contracts, or if the City contracts to acquire title to such properties or facilities as a part of the System upon the' final payment of debt service on the bonds issued to finance such properties or facilities. "Net Revenues" shall mean all Gross Revenues remaining after deducting the Maintenance and Operation Expenses. "Ordinance" shall mean this Bond Ordinance and all amendments hereof and supplements hereto. "Outstanding" when used with reference to the Bonds shall mean, as of a particular date, all such bonds theretofore delivered except: (a) any such bond canceled by or on behalf of the City at or before said date; (b) any such bond defeased pursuant to the defeasance provisions of the ordinance authorizing its issuance, or otherwise defeased as permitted by applicable law; and (c) any such bond in lieu of or in substitution for which another bond shall have been delivered pursuant to the ordinance authorizing the issuance of such bond. "Owner" or Registered Owner" when used with respect to any Bond, shall mean the person or entity in whose name such Bond is registered in the Register. Any reference to a particular percentage or proportion of the Owners of the Bonds of a particular class or series of Bonds shall mean the Owners at a particular time of the specified percentage or proportion in aggregate principal amount of all Bonds or the Bonds of such class or series then Outstanding. "Paying Agent/Registrar" shall .. mean Texas Commerce Bank National Association, and its successors in that capacity. "Refunded Bonds" shall mean all of the City of Pearland, Texas Waterworks and Sewer System Revenue Bonds, Series 1978, dated September 1, 1978, currently outstanding in the aggregate principal amount of $1,250,000 and . maturing on September 1 in each of the years 1996 through 2002, inclusive. "Register" shall mean the books of registration kept by the Paying Agent/Registrar in which are maintained the names and addresses of and the principal amounts registered to each Owner of Series 1996A Bonds. "Series 1996A Bonds" shall mean the City of Pearland, Texas, Water and Sewer System Revenue Refunding Bonds, Series 1996A, authorized by this Ordinance. 4 "Series 1996B Bonds" shall mean the City of Pearland, Texas Water and Sewer System Revenue Bonds, Series 1996B, being sold to the Texas Water Development Board pursuant to an ordinance to be approved by City Council on the date of approval by City Council of this Ordinance. "Special Project" shall mean, to the extent permitted by law, any water or sewer system property, improvement orfacility declared -by the City not to be part of the System, for which the costs of acquisition, construction, and installation are paid from proceeds of a financing transaction other than the issuance of bonds payable from ad valorem taxes or revenues of the System and for which all maintenance and operation expenses are payable from sources other than ad valorem taxes or revenues of the System, but only to the extent that and for so long as all or any part of the revenues or proceeds of which are or will be pledged to secure the payment or repayment of such costs of acquisition, construction, and installation under such financing transaction. "Subordinate Lien Obligations" shall mean the obligations permitted to be issued by the City pursuant to Section 6.2 hereof. "Surety Policy" shall mean and include a bond insurance policy (with the City's payment obligation thereunder being limited to the insurer's right of subrogation), al provided that the issuer of any Surety Policy shall be rated in the highest rating category at the time of issuance of such Surety Policy by A.M. Best Company, Standard & Poor's Ratings Group, or Moody's Investors Service. A Surety Policy shall insure all Bonds and Additional Bonds on a pro rata basis. Although not permitted by law in effect at the time of issuance of the Series 1996A Bonds, a Surety Policy may include a letter of _A_ credit or other agreement or instrument, including any related reimbursement or financial guaranty agreement, whereby the issuer is obligated to provide funds up to and including the maximum amount and under . the conditions specified in such agreement or instrument, to the extent that changes in the law subsequent to the issuance of the Series 1996A Bonds permit the use of such an agreement or instrument as a Surety Policy and the City obtains an opinion of nationally recognized bond counsel to such effect. "System" shall mean all properties, facilities, improvements, equipment, interests, rights and powers constituting the water and sewer system of the City, and all future extensions, replacements, betterments, additions, improvements, enlargements, acquisitions, purchases and repairs to the System, including without limitation, all those heretofore or hereafter acquired as a result of the annexation and dissolution of water districts or the acquisition of the properties or assets of any other public, private or non- profit entities. The System shall not include any Special Project. Section 2.2. Interpretations. All terms defined herein and all pronouns used in this Ordinance shall be deemed to apply equally to singular and plural and to all genders. The titles and headings of the articles and sections of this Ordinance and the Table of Contents of this Ordinance have been inserted for convenience of reference only and are not to be considered a 5 part hereof and shall not in any way modify or restrict any of the terms or provisions hereof. This Ordinance and all the terms and provisions hereof shall be liberally construed to effectuate the purposes set forth herein and to sustain the validity of the Bonds and the validity of the lien on and pledge of the Net Revenues to secure the payment of the Bonds. ARTICLE III TERMS OF THE SERIES 1996A BONDS Section 3.1. Name. Amount, Purpose. Authorization. The Series 1996A Bonds, to be known and designated as the "CITY OF PEARLAND, TEXAS, WATER AND SEWER SYSTEM REVENUE REFUNDING BONDS, SERIES 1996A," in the original aggregate principal amount of $1,115,000, shall be issued in fully registered form, without coupons. The Series 1996A Bonds are being issued for the purpose of refunding the Refunded Bonds and to pay expenses in connection with the issuance of the Series 1996A Bonds, all under and pursuant to the authority of Articles 717k, Vernon's Texas Civil Statutes, as amended, and all other applicable law. Section 3.2. Numbers, Date, and Denomination. The Series 1996A Bonds shall be numbered separately from R-1 upward, shall be dated as of June 1, 1996, and shall be in the denomination of $100,000 principal amount or any integral multiple thereof. Section 3.3. Interest Payment Dates. Interest Rates. and Maturities. The Series 1996A Bonds shall bear interest from June 1, 1996 the rate or rates per annum set forth below, calculated on the basis of a 360-day year composed of twelve 30-day months and payable semiannually on March 1 and September 1 of each year, commencing March 1, 1997, until maturity. The Series 1996A Bonds shall mature and become payable on the dates and in the respective principal amounts set forth below: Maturity Date Principal Interest (September 11 AmountRate 1997 $ 155,000 4.55% 1998 180,000 4.75 1999 185,000 4.90 2000 195,000 5.00 2001 200,000 5.10 2002 200,000 5.20 Section 3.4. No Redemption Prior to Maturity. The Series 1996A Bonds are not subject to redemption prior to maturity. Section 3.5. Manner of Payment, Characteristics. Execution. and Authentication. The Paying Agent/Registrar shall be the paying agent for the Series 1996A Bonds. The Series 1996A Bonds shall be payable, shall have the characteristics, shall be signed and executed, shall be sealed, and shall be authenticated, all as provided and in the manner indicated in the FORM OF SERIES 1996A BONDS set forth in Article IV of this Ordinance. The Series 1996A Bonds initially delivered shall also have attached or affixed to each such Series 1996A Bond the registration certificate of the Comptroller of Public Accounts of the State of Texas. If any officer of the City whose manual or facsimile signature shall appear on the Series 1996A Bonds, as provided in the FORM OF SERIES 1996A BONDS, shall cease to be such officer before the authentication of the Series 1996A Bonds or before the delivery of the Series 1996A Bonds, such manual or facsimile signature shall nevertheless be valid and sufficient for all purposes as if such officer had remained in such office. 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, engraved, or typewritten or produced by any combination of these methods, or produced in any other manner, all as determined by the officers executing such Bonds as evidenced by their execution thereof, but the initial Bonds submitted to the Attorney General of Texas may be typewritten, photocopied, or otherwise reproduced. The approving legal opinion of Mayor, Day, Caldwell & Keeton, L.L.P., Houston, Texas, Bond Counsel, may be printed on the back of the Series 1996A Bonds over the certification of the City Secretary of the City which may be executed in facsimile. CUSIP numbers and a statement of insurance, if any, also may be printed on applicable Series 1996A Bonds, but errors or omissions in the printing of the opinion, the numbers, or the statement of insurance shall -have no effect on the validity of the Series 1996A Bonds. Section 3.6. Ownership. The City, the Paying Agent/Registrar and any other person may treat the person in whose name any Series 1996A Bond is registered as the absolute owner of such Series 1996A Bond for the purpose of mailing payment of the principal and premium, if any, thereof, and for the further purpose of making payment of interest thereon, for the purpose of giving notice to the Owners of the Series 1996A Bonds, and for all other purposes, whether or not such Series 1996A Bond is overdue, and neither the City nor the Paying Agent/Registrar shall be bound by any notice or knowledge to the contrary. All payments made to the person deemed to be the Owner of any Series 1996A Bond in accordance with this section shall be valid and effectual and shall discharge the liability of the City and the Paying Agent/Registrar upon such Series 1996A Bond to the extent of the sums paid. Section 3.7. Registration. Transfer. and Exchange. So long as any Series 1996A Bonds remain Outstanding, the Paying Agent/Registrar shall keep the Register at its principal corporate trust office and a copy thereof at an office in the State of Texas, in which, subject to such reasonable regulations as it may prescribe, the Paying Agent/Registrar shall provide for the registration and transfer of the Series 1996A Bonds in accordance with the terms of this Ordinance. 7 Each Series 1996A Bond shall be transferable only upon presentation and surrender thereof at the principal corporate trust office of the Paying Agent/Registrar, duly endorsed for transfer, or accompanied by an assignment duly executed by the Registered Owner or his authorized representative in form satisfactory to the Paying Agent/Registrar. Upon due presentation of any Series 1996A Bond for transfer, the Paying Agent/Registrar shall authenticate and deliver in exchange therefor, within 72 hours after such presentation, a new Series 1996A Bond or Series 1996A Bonds, registered in the name of the transferee or transferees, in authorized denominations and of the same maturity and aggregate principal amount or maturity amount, as the case may be, and bearing or accruing interest at the same rate as the Series 1996A Bond or Series 1996A Bonds so presented. Each Series 1996A Bond shall be exchangeable upon presentation and surrender thereof at the principal corporate trust office of the Paying Agent/Registrar for a Series 1996A Bond or Series 1996A Bonds of the same maturity and bearing or accruing interest at the same rate and in any authorized denomination, in an aggregate principal amount or maturity amount, as the case may be, equal to the unpaid principal amount or maturity amount, as the case may be, of the Series 1996A Bond or Series 1996A Bonds presented for exchange. The Paying Agent/Registrar shall be and is hereby authorized to authenticate and deliver exchange Series 1996A Bonds in accordance with the provisions of this Section. Each exchanged or replaced Series 1996A Bond delivered by the Paying Agent/Registrar in accordance with this Section shall be entitled to the benefits and security of this Ordinance to the same extent as the Series 1996A Bond or Series 1996A Bonds in lieu of which such Series 1996A Bond is delivered. The City or the Paying Agent/Registrar may require the Owner of any Series 1996A Bond to pay a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with the transfer or exchange of such Series 1996A Bond. Any fee or charge of the Paying Agent/Registrar for such transfer or exchange shall be paid by the City. Section 3.8. Cancellation. All Series 1996A Bonds paid or redeemed in accordance with this Ordinance, and all Series 1996A, Bonds in lieu of which exchanged Series 1996A Bonds or replacement Series 1996A Bonds are authenticated and delivered in accordance herewith, shall be canceled and destroyed upon the making of proper records regarding such payment or redemption. The Paying Agent/Registrar shall periodically furnish the City with certificates of destruction of such Series 1996A Bonds. Section 3.9. Replacement Bonds. Upon the presentation and surrender to the Paying Agent/Registrar of a damaged or mutilated Series 1996A Bond, the Paying Agent/Registrar shall authenticate and deliver in exchange therefor a replacement Series 1996A Bond of like maturity, interest rate, and principal amount, bearing a number not contemporaneously outstanding. The City or the Paying Agent/Registrar may require the Owner of such Series 1996A Bond to pay a sum sufficient to cover any tax or other governmental charge that may be imposed in connection therewith and any other expenses connected therewith, including the fees and expenses of the Paying Agent/Registrar. 8 If any Series 1996A Bond is destroyed, lost or stolen, the City, pursuant to the applicable laws of the State of Texas and in the absence of notice or knowledge that such Series 1996A Bond has been acquired by a bona fide purchaser, shall execute and the Paying Agent/Registrar shall authenticate and deliver a replacement Series 1996A Bond of like maturity, interest rate, and principal amount, bearing a number not contemporaneously outstanding, provided that the Owner thereof shall have: (a) Furnished to the City and the Paying Agent/Registrar satisfactory evidence of the ownership of and the circumstances of the loss, destruction or theft of such Series 1996A Bond; (b) Furnished such security or indemnity as may be required by the Paying Agent/Registrar -and the City to save them harmless; (c) Paid all expenses and charges in connection therewith, including, but not limited. to, printing costs, legal fees, fees of the Paying Agent/Registrar and any tax or other governmental charge that may be imposed; and • (d) Met any other reasonable requirements of the City and the Paying Agent/Registrar. If, after the delivery of such replacement Series 1996A Bond, a bona fide purchaser of the original Series 1996A Bond in lieu of which such replacement Series 1996A Bond was issued presents for payment such original Series 1996A Bond, the City and the Paying Agent/Registrar shall be entitled to recover such replacement Series 1996A Bond from the person to whom it was delivered or any person taking therefrom, except a bona fide purchaser, and shall be entitled to recover upon the security or indemnity provided therefor to the extent of any loss, damage, cost, or expense incurred by the City or the Paying Agent/Registrar in connection therewith. If any such damaged, mutilated, destroyed, lost, or stolen Series 1996A Bond has become or is about to become due and payable, the City in its discretion may, instead of issuing a replacement Series 1996A Bond, authorize the Paying Agent/Registrar to pay such Series 1996A Bond. Each replacement Series 1996A Bond delivered in accordance with this section shall be entitled to the benefits and security of this Ordinance to the same extent as the Series 1996A Bond or Series 1996A Bonds in lieu of which such replacement Series 1996A Bond is delivered. ARTICLE IV FORM OF SERIES 1996A BONDS The Series 1996A Bonds shall be in substantially the following form, with such omissions, insertions and variations as may be permitted or required pursuant to the terms of this Ordinance: [FORM OF SERIES 1996A BOND] UNITED STATES OF AMERICA STATE OF TEXAS CITY OF PEARLAND, TEXAS, WATER AND SEWER SYSTEM REVENUE REFUNDING BOND, SERIES 1996A NUMBER DENOMINATION R- $ REGISTERED REGISTERED INTEREST RATE: ISSUE DATE: MATURITY DATE: CUSIP NO.: June 1, 1996 September 1, Registered Owner: Principal Amount: DOLLARS The CITY OF PEARLAND, TEXAS, a municipal corporation duly incorporated under the laws of the State of Texas (herein the "City"), for value received, hereby promises to pay, to the Registered Owner identified above or registered assigns, solely from certain pledged revenues and funds as hereinafter specified and from no other source, on the Maturity Date specified above, upon presentation and surrender of this bond at the principal corporate trust office of the "Paying Agent/Registrar," initially Texas Commerce Bank National Association, Houston, Texas, in any coin or currency of the United States .of America which on the date of payment of such principal is legal tender for the payment of debts due the United States of America, the Principal Amount identified above, and to pay, solely from such pledged revenues and funds, interest thereon at the Interest Rate shown above, calculated on the basis of a 360-day year composed of twelve 30-day months, from the later of the Issue Date identified above or the most recent interest payment date to which interest has been paid or duly provided for. Interest on this bond is payable on each March 1 and September 1, beginning March 1, 1997, until the maturity of this bond or until the City's obligation with respect to this bond has been satisfied. Interest on this bond shall be payable by check mailed by the Paying Agent/Registrar to the 10 Registered Owner of record as of the 15th day of the month next preceding the interest payment date as shown on the books of registration kept by the Paying Agent/Registrar. THIS BOND IS ONE OF A DULY AUTHORIZED SERIES OF BONDS (herein the "Series 1996A Bonds") in the aggregate principal amount of $1,115,000 issued pursuant to an ordinance adopted by the City Council of the City (herein the "Ordinance") for the purpose of refunding a portion of the City's outstanding water and sewer system bonds, under and pursuant to the authority of Articles 717k, Vernon's Texas Civil Statutes, as amended, and all other applicable law. THIS BOND AND ALL OF THE SERIES 1996A BONDS are special obligations of the City that are equally and ratably payable from and secured by a first lien on the "Net Revenues" collected and received by the City from the operation and ownership of the City's water and sewer system as defined and provided in the Ordinance, which. Net Revenues are required to be set aside for and pledged to the payment of the Series 1996A Bonds and all additional bonds issued on a parity therewith, in the interest and sinking fund and the reserve fund required to be maintained for the payment of all such bonds, all as more fully described and provided for in the Ordinance. This bond and the series of which it is a part, together with the interest thereon, are payable solely from such Net Revenues and do not constitute an indebtedness or general obligation of the City. THE CITY HAS RESERVED THE RIGHT TO ISSUE ADDITIONAL WATER AND SEWER SYSTEM REVENUE BONDS, subject to the restrictions contained in the Ordinance, which bonds may be secured by a lien on a parity with, or subordinate and inferior to, the lien on the Net Revenues securing this bond and the series of which it is a part. THE REGISTERED OWNER HEREOF shall never have the right to demand payment out of any funds raised or to be raised by taxation. REFERENCE IS HEREBY MADE TO THE ORDINANCE, a copy of which is on file in the office of the Paying Agent/Registrar, and to all of the provisions of which the Registered Owner of this bond by the acceptance hereof hereby assents, for definitions of terms; the description of and the nature and extent of the security for the Series 1996A Bonds; the priority for the application and use of the income and revenues of the System; the Net Revenues pledged to the payment of the principal of and interest on the Series 1996A Bonds; the nature and extent and manner of enforcement of the lien and pledge securing the payment of the Series 1996A Bonds; the terms and conditions for the issuance of additional revenue obligations, including Additional Bonds; the terms and conditions for amending the Ordinance; the terms and conditions relating to the transfer or exchange of this bond; 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 of this bond, and deemed to be no longer Outstanding thereunder; and for the other terms and provisions thereof. Capitalized terms usedherein, unless otherwise defined, have the same meanings assigned in the Ordinance. 11 IT IS HEREBY DECLARED AND REPRESENTED that this bond has been duly and validly issued and delivered; that all . acts, conditions, and things required or proper to be performed, exist, and be done precedent to or in the issuance and delivery of this bond have been performed, existed, and been done in accordance with law; that the Series 1996A Bonds do not exceed any statutory limitation; and that provision has been made for the payment of the principal of and interest on this bond and all of the Series 1996A Bonds by the aforesaid first lien on and pledge of the Net Revenues. THIS BOND shall not be valid or obligatory for any purpose or be entitled to any benefit under the Ordinance unless this bond either (i) is registered by the Comptroller of Public Accounts of the State of Texas or (ii) is authenticated by the Paying Agent/Registrar by due execution of the authentication certificate manually endorsed hereon. Such duly executed certificate of authentication shall be conclusive evidence that this bond was delivered by the Paying Agent/Registrar under the provisions of the Ordinance. IN WITNESS WHEREOF, the City has caused its corporate seal to be impressed or placed in facsimile hereon and has in the Ordinance directed this bond to be signed by the Mayor and countersigned by the City Secretary by their printed facsimile signatures. (SEAL) Mayor City Secretary 12 JFORM OF COMPTROLLER'S REGISTRATION CERTIFICATE The following form of Comptroller's Registration Certificate shall be attached or affixed to each of the Series 1996A Bonds initially delivered. THE STATE OF TEXAS REGISTER NO. OFFICE OF THE COMPTROLLER OF PUBLIC ACCOUNTS I hereby certify that there is on file and of record in my office a certificateof the Attorney General of the State of Texas to the effect that this bond and the proceedings for the issuance hereof have been examined by him as required by law, that he finds , that • it has been issued . in conformity with the Constitution and laws of the State of Texas and that it is a valid and binding special obligation of the City of Pearland, Texas, payable from the revenues and other funds pledged to its payment by and in the proceedings authorizing the same, and I do further certify that this bond has this day been registered by me. WITNESS MY SIGNATURE AND SEAL OF OFFICE this Comptroller of Public Accounts [SEAL] of the State of Texas 13 IFORM OF AUTHENTICATION- CERTIFICATE] The following form of Authentication Certificate shall appear on each of the Series 1996A Bonds. AUTHENTICATION CERTIFICATE - Registration Date: This bond is one of the Bonds described in and delivered pursuant to the within - mentioned Ordinance; and, except for the Bonds initially delivered, this bond has been issued in conversion of and exchange for or replacement of a bond, bonds or a portion of a bond or bonds of an issue which originally was approved by the Attorney General of the State of Texas and registered by the Comptroller of Public Accounts of the State of Texas. TEXAS COMMERCE BANK NATIONAL ASSOCIATION By: Authorized Signature 1 (FORM OF ASSIGNMENTI The following form of assignment shall appear on each of the Series 1996A Bonds. ASSIGNMENT For value received, the undersigned hereby sells, assigns, and transfers unto (SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER) • (Print or type name, address, and zip code of transferee) the within bond and hereby irrevocably constitutes and appoints attorney to transfer said bond on the books kept for registration thereof, with full power of substitution in the premises. DATED: Signature Guaranteed: NOTICE: The signature must be guaranteed by a commercial bank or a member firm of a national securities exchange. Notarized or witnessed signatures are not acceptable. 15 Registered Owner 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, without alteration or enlargement or any change whatever. ARTICLE V SECURITY AND SOURCE OF PAYMENT FOR THE BONDS Section 5.1. Pledge and Source of Payment. The City hereby covenants and agrees that Gross Revenues of the System shall, as collected and received by the City, be deposited and paid into the special funds hereinafter established, and shall be applied in the manner hereinafter set forth, in order to provide for the payment of all Maintenance and Operation Expenses and to provide for the payment of principal of, interest on and any redemption premiums on the Bonds and all expenses of paying same; and to provide for the disposition of the remaining Net Revenues. The Bonds shall constitute special obligations of the City that shall be payable solely from and shall be equally and ratably secured by a first lien on the Net Revenues as collected and received by the City from the operation and ownership of the System, which Net Revenues shall, in the manner herein provided, be set aside for and pledged to the payment of the Bonds in the Interest and Sinking Fund and the Reserve Fund as hereinafter provided, and the Bonds shall be, in all respects, on a parity with and of equal dignity with one another. The Owners of the Bonds shall never have the right to demand payment of either the principal of, interest on or any redemption premium on the Bonds. out of any funds raised or to be raised by taxation. Section 5.2. Rates and Charges. So long as any Bonds remain Outstanding, the City shall fix, charge and collect rates and charges for the use and services of the System which are calculated to be fully sufficient to produce Net Revenues in each Fiscal Year at least equal to 115 % of the principal and interest requirements scheduled to occur' in such Fiscal Year on all Bonds then Outstanding plus an' amount equal to the sum of all deposits required to be made to the Reserve Fund in such Fiscal Year; but in no event shall Net Revenues ever be less than the amount required to establish and maintain the Interest and Sinking Fund and the Reserve Fund as hereinafter provided, and, to the extent that funds for such purpose are not otherwise available, .to pay all other outstanding obligations payable from the Net Revenues of the System, including all amounts owed by the City to a provider of a Surety Policy, if any, as and when the same become due. The City will not grant or permit any free service from the System, except for public buildings and institutions operated by the City. In addition, the City will not grant or permit any free service from the System permitted by the previous sentence if to do so would violate any condition or covenant to which the City is bound in connection with any federal grant agreement or otherwise. Section 5.3. Special Funds. The following special Funds shall be established, maintained and accounted for as hereinafter provided so long as any of the Bonds remain Outstanding: (a) Revenue Fund; 16 (b) Interest and Sinking Fund; and (c) Reserve Fund. All of such Funds shall be maintained as separate accounts on the books of the City. The Interest and Sinking Fund and the Reserve Fund shall constitute trust funds which shall be held in trust for the Owners of the Bonds and the proceeds of which shall be pledged to the payment of the Bonds. All of the Funds named above shall be used solely as herein provided so long as any Bonds remain Outstanding. Section 5.4. Flow of Funds. Gross Revenues of the System shall be deposited as collected into the Revenue Fund. Moneys from time to time on deposit to the credit of the Revenue Fund shall be applied in the following manner and in the following order of priority: (a) First, to pay Maintenance and Operation Expenses and to provide by encumbrance for the payment of all obligations incurred by the City for Maintenance and Operation Expenses and to establish and maintain an operating reserve equal to one month's estimated Maintenance and Operation Expenses; (b) Second, to make all deposits into the Interest and Sinking Fund required by any ordinance authorizing the issuance of Bonds; (c) Third, to make all deposits into the Reserve Fund required by any ordinance authorizing the issuance of Bonds; (d) , Fourth, to make all deposits, as may be required by any ordinance of the City authorizing the issuance of certain Subordinate Lien Obligations described in Section 6.2 hereof, in order to provide for the payment of and security for such Subordinate Lien Obligations; and (e) Fifth, for any lawful purpose. Section 5.5. Interest and Sinking Fund. On or before the last business day of each month so long as any Bonds remain Outstanding, alter making all required payments and provision for payment of Maintenance and Operation Expenses, there shall be transferred into the Interest and Sinldng Fund from the Revenue Fund the following amounts: (a) Such amounts, in approximately equal monthly installments, as will be sufficient to accumulate the amount required to pay the interest scheduled to become due on the Bonds on the next Interest Payment Date; and (b) Such amounts, in approximately equal monthly installments, as will be sufficient to accumulate the amount required to pay the next maturing principal of the 17 Bonds (i.e., the principal amount payable on the next September 1), including the principal amounts of, and any redemption premiums on, any Bonds payable as a result of the operation or exercise of any mandatory or optional redemption provision contained in any ordinance authorizing the issuance of Bonds. Whenever the total amounts on deposit to the credit of the Interest and Sinking Fund and the Reserve Fund shall be equivalent to the sum of the aggregate principal amount of all Outstanding Bonds plus the aggregate amount of all interest accrued and to accrue thereon, no further payments need be made into the Interest and Sinking Fund or the Reserve Fund, and such Bonds shall not be regarded as being Outstanding except for the purpose of being paid with the moneys on deposit in such Funds. Moneys deposited to the credit of the Interest and Sinking Fund shall be used solely for the purpose of paying principal (at maturity or prior redemption or to purchase Bonds in the open market to be credited against mandatory redemption requirements), interest and redemption premiums on the Bonds, plus all bank charges and other costs and expenses relating to such payment. On or before each date principal becomes . due and/or Interest Payment Date on the Bonds, the City shall transfer from the Interest and Sinking Fund to the paying agent for the Bonds an amount equal to the principal of, interest on and any redemption premiums payable on the Bonds on such date, together with an amount equal to all bank charges and other costs and expenses relating to such payment. The paying agent shall totally destroy all paid Bonds and shall provide the City, with an appropriate certificate of destruction. Section 5.6. Reserve Fund. On or before the last business day of each month so long as any Bonds remain Outstanding, after making all required payments and provision for payment of Maintenance and Operation Expenses and after making all required transfers into the Interest and Sinking Fund, there shall be transferred into the Reserve Fund from the Revenue Fund amounts equal to one -sixtieth (1/60th) of the Average Annual Principal and Interest Requirements on the Bonds unless or until there has been accumulated in the Reserve Fund money and investments in an aggregate amount at least equal to the Average Annual Principal and Interest Requirements on the Bonds; provided that additional deposits into the Reserve Fund sufficient to provide for the increased reserve requirements resulting from the issuance of any Additional Bonds shall be made by not later than 60 months from the date of issuance of such Additional Bonds as required by Section 6.1(d) hereof. Such additional deposits into the Reserve Fund in connection with the issuance of any Additional Bonds shall be made each month in amounts equal to one -sixtieth (1/60th) of the Average Annual Principal and Interest Requirements on the Bonds and such Additional Bonds. After such amount has accumulated in the Reserve Fund and so long thereafter as such fund contains such amount, no further deposits shall be required to be made into the Reserve Fund, and any excess amounts in the Fund may be transferred to the Revenue Fund. But if and whenever the balance in the Reserve Fund is reduced below such amount, monthly deposits into such Fund shall be resumed and continued in amounts at least equal to one -sixtieth (1/60th) of the Average Annual Principal and Interest 18 Requirements on the Bonds until the Reserve Fund has been restored to such amount. The Reserve Fund shall be used to pay the principal of and interest on the Bonds at any time when there is not sufficient money available in the Interest and Sinking Fund for such purpose and it may be used finally to pay and retire the last Bonds to mature or be redeemed. The requirements of the immediately preceding paragraph of this Section notwithstanding, the City may, with the written consent of the owners of 100% of the outstanding principal amount of the Series 1996B Bonds, provide a Surety Policy or Policies issued in amounts equal to all or part of the Average Annual Principal and Interest Requirements on the Bonds in lieu of depositing cash into the Reserve Fund; provided, . however, that no such Surety Policy may be so substituted unless (i) the ordinance authorizing the substitution of the Surety Policy for all or part of the Average Annual Principal and Interest Requirements on the Bonds contains a finding that such substitution is cost effective and (ii) the City obtains an opinion of nationally recognized bond counsel that such substitution is permitted by applicable Texas law then in effect. In the event a Surety Policy issued to satisfy all or a part of the City's obligation with respect to the Reserve Fund causes the amount then on deposit in the Reserve Fund to exceed the Average Annual Principal and Interest Requirements . on all Bonds, the City may transfer such excess amount to any fund or funds established for the payment of or security for Bonds or any Subordinate Lien Obligations (including any escrow established for the final payment of any such obligations pursuant to Article 717k, Vernon's Texas Civil Statutes). Section 5.7. Deficiencies in Funds. If in any month there shall not be deposited_ into any fund maintained pursuant to this Article the full amounts required hereinabove, amounts equivalent to such deficiency shall be set apart and paid into such Fund or Funds from the first available and unallocated moneys in the Revenue Fund, and such payment shall be in addition to the amounts otherwise required to be paid into such Funds during any succeeding month or months. To the extent necessary, the rates and charges for the System shall be increased to make up for any such deficiencies. Section 5.8. Investment of Funds; Transfer of Investment Income. (a) Money in the Revenue Fund, the Interest and Sinking Fund and the Reserve Fund may, at the option of the City, be invested in, time deposits or certificates of deposit secured in the manner required by law for public funds, or be invested in direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America, in obligations of any agencies or instrumentalities of the United States of America or as otherwise permitted by state law; provided that all such deposits and investments shall be made in such manner (which may include repurchase agreements for such investments with any national bank) that the money required to be expended from any Fund will be available at the proper time or times, and provided further that in no event shall such deposits or investments of moneys in the Reserve Fund mature later than the final maturity date of 19 t F, the Bonds. All such investments shall be valued in terms of current market value no less frequently than the last business day of the City's Fiscal Year, except that any direct obligations of the United States of America - State and Local Government Series shall be continuously valued at their par value or principal face amount. Any obligation in which money is so invested shall be kept and held in an official depository of the City, except as hereinafter provided. For purposes of maximizing investment returns, money in such funds may be invested, together with money in other funds or with other money of the City, in common investments of the kind described above, or in a common pool of such investments which shall be kept and held at an official depository of the City, which shall not be deemed to be or constitute a commingling of such money or funds provided that safekeeping receipts or certificates of participation clearly evidencing the investment or investment pool in which such money is invested and the share thereof purchased with such money or owned by such fund are held by or on behalf of each such fund. If necessary, such investments shall be promptly sold to prevent any default. (b) All interest and income derived from such deposits and investments shall be credited monthly to the fund from which such investment was made. Section 5.9. Security for Uninvested Funds. So long as any Bonds remain Outstanding, all uninvested moneys on deposit in, or credited to, the Revenue Fund, the Interest and Sinking Fund and the Reserve Fund shall be secured by the pledge of security as provided by law for cities in the State of Texas. ARTICLE VI ADDITIONAL BONDS Section 6.1 Additional Bonds. The City reserves the right to issue, for any lawful purpose, including the refunding of any previously issued Bonds or any other bonds or obligations of the City issued in connection with the System or payable from Net Revenues, one or more series of Additional Bonds on a parity with the Outstanding Bonds and any Additional Bonds then Outstanding, payable from, and secured by a first lien on, the Net Revenues of the System; provided, however, that no Additional Bonds may be issued unless: (a) All Additional Bonds shall mature only on September 1 and interest thereon shall be payable only on March 1 and September 1; (b) The Interest and Sinking Fund and the Reserve Fund each contains the amount of money then required to be on deposit therein; (c) For either the preceding Fiscal Year or any consecutive 12-month period out of the 15-month period immediately preceding the month in which the bond ordinance authorizing such Additional Bonds is adopted (the "Base Period") either: 20 (1) Net Revenues are certified by the Director of Finance of the City to have been equal to at least one hundred and forty percent (140%) of the Average Annual Principal and Interest Requirements on all Bonds, after giving effect to the issuance of the Additional Bonds to be issued; or (2) Net Revenues, adjusted to give effect to any rate increase or annexation of territory placed into effect or consummated prior to the adoption of the ordinance authorizing the Additional Bonds to the same extent as if such rate increase or annexation had been placed into effect or consummated prior to the commencement of the Base Period, would have been equal to at least the amount required in paragraph (1) above, as certified by an independent consulting engineer or independent firm of consulting engineers; provided, however, that this requirement shall not apply to the issuance of any series of. Additional Bonds for refunding purposes that will not have the result of increasing the average annual principal and interest requirements on the Bonds; and (d) Provision is made in the bond ordinance authorizing the Additional Bonds then proposed to be issued for (1) additional payments into the Interest and Sinking Fund sufficient to provide for the payment of the increased principal of and interest on the Bonds resulting from the issuance of such Additional Bonds, and (2) additional payments into the Reserve Fund sufficient to provide for the accumulation therein of the increased reserve requirement resulting from the issuance of such Additional Bonds, by not later than 60 months from the date of issuance of such Additional Bonds. The provisions of this Section 6.1(a) notwithstanding, the City may issue Additional Bonds that bear interest at a variable rate. Such variable rate bonds may mature on dates other than September 1 and interest thereon may be payable on dates other than March 1 or September 1; provided that the issuance of Additional Bonds as variable rate bonds may not cause the total amount of Outstanding Bonds that are variable rate bonds to exceed 50% of the aggregate principal amount of all. Outstanding Bonds and Subordinate Lien Obligations at the time of such issuance. For purposes of calculating the funding requirements for the Reserve Fund and for the purposes of calculating compliance with the conditions precedent to the issuance of Additional Bonds pursuant to Section 6.1(c) and the rate covenant set forth in Section 5.2, any Bonds that are variable rate bonds shall be assumed to bear interest at a rate which shall be estimated and certified by the financial advisor to the City as the rate that would be borne by such variable rate bonds if they were at the date of such certification issued as Bonds bearing a fixed rate of interest to their scheduled maturity or maturities. Section 6.2. Subordinate Lien Obligations. The City reserves the right to issue, for any lawful purpose, bonds, notes or other obligations secured in whole or in part by liens on the Net Revenues that are junior and subordinate to the lien on Net Revenues securing payment of the Bonds. Such Subordinate Lien Obligations may be further secured by any other source of payment lawfully available for such purposes. In the event that the City should decide to issue 21 such Subordinate Lien Obligations as variable rate bonds, for purposes of calculating the funding requirements for the reserve fund for such Subordinate Lien Obligations, the variable rate bonds shall be assumed to bear interest at the rate of 10% per annum, and for purposes of calculating compliance with . any conditions precedent to the issuance' of additional Subordinate Lien Obligations and any rate covenants relating to such Subordinate Lien Obligations, the variable rate bonds shall be assumed to bear interest at the higher of 9% per annum or the highest variable rate over the preceding twenty-four (24) months. Deposits may be made pursuant to Section 5.4(d) of this Ordinance into such funds as may be created and maintained for the payment of and security for Subordinate Lien Obligations described in this Section (including a reserve fund not to exceed the Average Annual Principal and Interest Requirements on such Subordinate Lien Obligations and any provisions for curing deficiencies in such funds), but only to the extent that the aggregate Outstanding principal amount of such Subordinate Lien Obligations does not exceed 50% of the aggregate principal amount of Bonds and Subordinate Lien Obligations Outstanding on the date of such calculation. Section 6.3. Special Project Bonds. The City reserves the right to issue revenue bonds secured by liens on and pledges of revenues and proceeds derived from Special Projects. ARTICLE VII COVENANTS AND PROVISIONS RELATING TO BONDS Section 7.1. Punctual Payment of Bonds. The City covenants that it will punctually pay or cause to be paid the interest on and principal of all Bonds according to the terms thereof and will faithfully do and perform, and at all times fully observe, any and all covenants, undertakings, stipulations and provisions contained in this Ordinance and in any other ordinance authorizing the issuance of such Bonds. Section 7.2. Power to Own and Operate System: Ratemaking Power. The City covenants that it has all necessary power and authority to own and operate the System as herein described and provided and that it possesses, and shall exercise, all necessary power and authority to establish, fix, increase, impose and collect rates and charges for the use and services of the System in the amounts required to comply with the covenants and provisions contained herein. Section 7.3. Maintenance of System. So long as any Bonds remain Outstanding, the City covenants that it will at all times maintain the System, or within the limits of its authority cause the same to be maintained, in good condition and working order and will operate the same, or cause the same to be operated, in an efficient and economical manner at a reasonable cost and in accordance with sound business principles. In operating and maintaining the System, the City will comply with all contractual provisions and agreements entered into by it and with 22 all valid rules, regulations, directions or orders of any governmental, administrative or judicial body promulgating same, noncompliance with which would materially and adversely affect the operation of the System. Section 7.4. Sale or Encumbrance of System. So long as any Bonds remain Outstanding, the City covenants that it will not sell, dispose of or, except as permitted in Article VI, further encumber the System; provided, however, that this provision shall not prevent the City from disposing of any portion of the System which is being replaced or is deemed by the City to be obsolete, worn out, surplus or no longer needed for the proper operation of the System. Net proceeds from any such disposition may be deposited in the Revenue Fund and, notwithstanding any other provision contained herein, shall be used only for System purposes. Any agreement pursuant to which the City contracts with a person, corporation, municipal corporation or political subdivision to operate the System or to lease and/or operate all or part of the System shall not be considered as an encumbrance of the System. Section 7.5. Insurance. The City covenants that it will keep the System insured with insurers of good standing against risks, accidents or casualties against which and to the extent customarily insured against by political subdivisions of the State of Texas operating similar properties, to the extent that such insurance is available. All net proceeds of such insurance shall be applied to repair or replace the insured property that is damaged or destroyed, or shall be deposited in the Revenue Fund, or shall be used to redeem Outstanding Bonds. The cost of all such insurance, together with any additional insurance, shall be a part of the Maintenance and Operation Expenses. Section 7.6. Accounts. Records and Audits. So long as any Bonds remain Outstanding, the City covenants that it will maintain a p °roper and complete system of records and accounts pertaining to the operation of the System in which full, true and proper entries will be made of all dealings, transactions, business and affairs which in any way affect or pertain to the System or the Gross Revenues or the Net Revenues thereof. The City shall after the close of each Fiscal Year prepare financial statements of the System, and have those financial statements audited by an independent certified public accountant or independent firm of certified public accountants. After the audit, the City shall furnish a copy of these audited financial statements, together with the independent certified public accountant's report thereon, without cost, to the Municipal Advisory Council of Texas, the major municipal rating agencies, and any Owners of Bonds who shall request the same. All expenses incurred in preparing such audits shall be Maintenance and Operation Expenses. Section 7.7. Competition. To the extent it legally may, the City covenants that it will not grant any franchise or permit for the acquisition, construction or operation of any competing facilities which might be used as a substitute for the System and will prohibit the operation of any such competing facilities to the extent that such competing facilities would impair the City's ability to pay principal of or interest on the Bonds. 23 Section 7.8. Pledge and Encumbrance of Net Revenues. The City covenants that it has the lawful power to create a lien on and to pledge the Net Revenues to secure the payment of the Bonds, and has lawfully exercised such power under the Constitution and laws of the State of Texas. The City further covenants that, other than to the payment of the Bonds, the Net Revenues are not and will not be made subject to any other lien, pledge or encumbrance to secure the payment of any debt or obligation of the City, unless such lien, pledge or encumbrance is junior and subordinate to the lien and pledge securing payment of the Bonds. Section 7.9. Covenants with Respect to Certain Assumed Water District Bonds. So long as any Bonds remain Outstanding, the City covenants as follows: (a) To the extent it legally may, the City will impose, and strictly enforce, the requirement upon all water districts located within the City's extraterritorial jurisdiction that any bonds issued by such water districts which are secured in whole or in part by pledges of or liens on water or sewer revenues shall provide that all such pledges of and liens on water or sewer revenues shall automatically terminate upon the annexation and dissolution of the district by the City; (b) The City shall use its best efforts to redeem, refund or defease all annexed water district bonds assumed by the City which by their own terms are secured in whole or in part by pledges of or liens on water or sewer revenues which do not terminate upon annexation and dissolution by the City of such water district, or otherwise to provide for the discharge of such pledges or liens on water or sewer revenues; and (c) Pursuant to Section 43.075, Texas Local Government Code (successor to Article 1182c-1, Vernon's Texas Civil Statutes, as amended), the City shall, unless it has theretofore made adequate provision for the payment thereof, annually levy and cause to be collected taxes upon all taxable property of the City sufficient to pay principal of and interest, as they respectively become due and payable, on all assumed bonds, warrants and other obligations that were issued by water districts that have been annexed to, and dissolved by, the City, and which are by their own terms secured in whole or in part by a lien on or pledge of water or sewer revenues which did not terminate upon the annexation and dissolution by the City of such water district. Section 7.10. Bondholders Rights and Remedies. This Ordinance shall constitute a contract between the City and the Owners of the Series 1996A Bonds from. time to time Outstanding and this Ordinance shall be and remain irrepealable until the Series 1996A Bonds and the interest thereon shall be fully paid or discharged or provision therefor shall have been made as provided herein. In the event of a default in the payment of the principal of or interest on any of the Series 1996A Bonds or a default in the performance of any duty or covenant provided by law or in ,this Ordinance, the Owner or Owners of any of the Series 1996A Bonds may pursue all legal remedies afforded by the Constitution and laws of the State of Texas to compel the City to remedy such default and to prevent further default or defaults. Without in any way limiting the generality of the foregoing, it is expressly provided that any Owner of any 24 of the Series 1996A Bonds may at law or in equity, by suit, action, mandamus, or other proceedings, enforce and compel performance of all duties required to be performed by the City under this Ordinance, including the making and collection of reasonable and sufficient rates and charges for the use and services of the System, the deposit of the revenues thereof into the special funds herein provided,and the application of such revenues in the manner required in this Ordinance. So long as a Bond Insurer shall not have defaulted in its payment obligations under its Bond Insurance Policy with the City insuring a portion of the Series 1996A Bonds, it shall have all the rights granted to the Owners of such Series 1996A Bonds in this Ordinance. Section 7.11. Defeasance. The City, may defease the provisions of this Ordinance and discharge its obligation to the Owners of any or all of the Series 1996A Bonds to pay principal, interest and redemption premium, if any, thereon in any manner permitted by law, including by depositing with the Paying Agent/Registrar, or if authorized by Texas law with any national or state bank having trust powers and having combined capital and surplus of at least $50 million or with the State Treasurer of the State of Texas either: (i) cash in an amount equal to the principal amount and redemption premium, if any, of such Series 1996A Bonds plus interest thereon to the date of maturity or redemption, or (ii) pursuant to an escrow or trust agreement, cash and/or direct obligations of, or obligations the principal of and interest on which are guaranteed by or secured by the pledge of direct obligations of the United States of America, in principal amounts and maturities and bearing interest at rates sufficient to provide for the timely payment of the principal amount and redemption premium, if any, of such Series 1996A Bonds plus interest thereon to the date of maturity or redemption; provided, however, that if any of such Series 1996A Bonds are to be redeemed prior to their respective dates of maturity, provision shall have been made for giving notice of redemption as provided in this Ordinance. Upon such deposit, such Series 1996A Bonds shall no longer be regarded to be Outstanding or unpaid. Any surplus amounts not requiredto accomplish such defeasance shall be returned to the City. • Payments of principal of and interest on any Series 1996A Bonds made by a Bond Insurer under its Bond Insurance Policy with the City insuring a portion of the Series 1996A Bonds shall not be deemed to have been paid hereunder and such Series 1996A Bonds shall continue to be Outstanding until paid by the City. Section 7.12. Legal Holidays. In any case where the date of maturity of interest on or principal of the Series 1996A Bonds or the date fixed for redemption of any Series 1996A Bonds shall be in the City a legal holiday or a day on which the Paying Agent/Registrar for the Series 1996A Bonds is authorized by law to close, then payment of interest or principal need not be made on such date but may be made on the next succeeding day not in the City a legal holiday or a day on which such Paying Agent Registrar is authorized by law to close with the same force and effect as if made on the date of maturity .or the date fixed for redemption and no interest shall accrue for the period from the date of maturity or redemption to the date of actual payment. Section 7.13. Unavailability of Authorized Publication. If, because of the temporary or permanent suspension of any newspaper, journal or other publication, or, for any reason, publication of notice cannot be made meeting any requirements herein established, any notice 25 required to be published by the provisions of this Ordinance shall be given in such other manner and at such time or times as in the judgment of the City or of the Paying Agent/Registrar (or paying agent) for the Series 1996A Bonds shall most effectively approximate such required publication and the giving of such notice in such manner shall for all purposes of this Ordinance be deemed to be in compliance with the requirements for publication thereof. Section 7.14. No Recourse Against City Officials. No recourse shall be had for the payment of principal of or interest on any Series 1996A Bonds or for any claim based thereon or on this Ordinance against any official of the City or any person executing any Series 1996A Bonds. Section 7.15. Amendment to Ordinance. The City may, with the consent of Owners holding a majority in aggregate principal amount of the Bonds then Outstanding affected thereby, amend, add to, or rescind any of the provisions of this Ordinance; provided that, without the consent of all Owners 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 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 of Bonds required to be held by Owners for consent to any suchamendment, addition, or rescission. ARTICLE VIII CONCERNING THE PAYING AGENT/REGISTRAR Section 8.1. Acceptance. Texas Commerce Bank National Association is hereby appointed as the initial Paying Agent/Registrar for the Series 1996A Bonds. Such initial Paying Agent/Registrar and any successor Paying Agent/Registrar, by undertaking the performance of the duties of the Paying Agent/Registrar hereunder, and in consideration of the payment of fees and/or deposits of money pursuant to this Ordinance, shall be deemed to accept and agree to abide by the terms of this Ordinance. Section 8.2. Fiduciary Account. All money transferred to the Paying Agent/Registrar under this Ordinance (except sums representing Paying Agent/Registrar's fees) shall be held in a fiduciary account for the benefit of the City, shall be the property of the City, and shall be disbursed in accordance with this Ordinance. Section 8.3. Bonds Presented. Subject to the provisions of Section 8.4, all matured Series 1996A Bonds presented to the Paying Agent/Registrar for payment shall be paid without the necessity of further instructions from the City. Such Series 1996A Bonds shall be canceled as provided herein. 26 Section 8.4. Series 1996A Bonds Not Timely Presented. The Paying Agent/Registrar shall remit to the City, upon receipt of the certificate provided for herein, a sum equal to the aggregate face amount of all Series 1996A Bonds which have not been presented for payment prior to the date specified in such certificate. Such certificate shall: (a) Specify the Series 1996A Bonds or portions thereof to which it applies and J : the amount of each; (b) Specify the date on which the City believes itself to be no longer obligated to pay such Series 1996A Bonds or portions thereof by virtue of the expiration of the applicable statute of limitations under the laws of the State of Texas; and (c) Be signed by the Mayor and attested by the City Secretary. Funds held by the Paying Agent/Registrar that represent principal of and interest on the Series 1996A Bonds remaining unclaimed by any Registered Owner after the expiration of three years from the date such funds have become due and payable (a) shall be reported and disposed of by the Paying Agent/Registrar in accordance with the provisions of Title 6 of the Texas Property Code, as amended, to the extent such provisions are applicable to such funds, or (b) to the extent such provisions do not apply to the funds, such funds shall be paid by the Paying Agent/Registrar to the City upon receipt by the Paying Agent/Registrar of a written request therefor from the City. The Paying Agent/Registrar shall have no liability to the Owners of the Series 1996A Bonds by virtue of actions taken in compliance with this Section. Section 8.5. Paying Agent/Registrar May Own Series 1996A Bonds. The Paying Agent/Registrar in its individual or any other capacity, may become the owner or pledgee of Series 1996A Bonds with the same rights it would have if it were not the Paying Agent/Registrar. Section 8.6. Successor Paying Agents/Registrars. The City covenants that all times while any Series 1996A Bonds are Outstanding it will provide a legally qualified bank, trust company, financial institution, or other agency to act as Paying Agent/Registrar for the Series 1996A Bonds. If the Paying Agent/Registrar or its successor for any reason no longer acts as Paying Agent/Registrar hereunder, the City covenants that it will appoint a bank in the same city as the Paying Agent/Registrar initially appointed to perform the duties of Paying Agent/Registrar hereunder. Any successor Paying Agent/Registrar shall be either a national or state banking institution and a corporation organized and doing business under the laws of the United States of America or any state, which is authorized under such laws to exercise trust powers and is subject to supervision or examination by federal or state authority. The City reserves the right to change the Paying Agent/Registrar for the Series 1996A Bonds on not less than sixty (60) days written notice to the Paying Agent/Registrar, as long as 27 \ '4 any such notice is effective not less than sixty (60) days prior to the next succeeding principal or interest payment date on the Series 1996A Bonds. Promptly upon the appointment of any successor Paying Agent/Registrar, the previous Paying Agent/Registrar shall deliver the Register or a copy thereof to the new Paying Agent/Registrar and the new Paying Agent/Registrar shall notify each Registered Owner, by first-class mail, postage prepaid, of such change and of the address of the new Paying Agent/Registrar. Each Paying Agent/Registrar hereunder, by acting in that capacity, shall be deemed to have agreed to the provisions of this Ordinance. ARTICLE IX PROVISIONS CONCERNING SALE AND APPLICATION OF PROCEEDS OF SERIES 1996A BONDS Section 9.1. Sale of Series 1996A Bonds. Sale of the Series 1996A Bonds is hereby awarded to Merchants Bank, Houston, Texas, for the sum of $1,115,000, plus accrued interest on the Series 1996A Bonds. It is hereby found and declared that the above price and terms of sale of the Series 1996A Bonds are the most advantageous reasonably obtainable by the City. Section 9.2. Approval. Registration and Delivery. The Mayor and the City Secretary are hereby authorized to have control and custody of the Series 1996A Bonds and all necessary records and proceedings pertainingthereto pending their delivery,and the Mayor of the City, y, the City Secretary of the City, the City Manager of the City and other officers and employees of the City are hereby authorized, directed and instructed to make such certifications and to execute such instruments (including by printed facsimile signature, the Series 1996A Bonds) as may be necessary to accomplish the delivery of the Series 1996A Bonds and to assure the investigation, examination, and approval thereof by the Attorney General of Texas and the { registration of the initial Series 1996A Bonds by the Comptroller of Public Accounts of the State of Texas. Upon registration of the Series 1996A Bonds, the Comptroller of Public Accounts of the State of Texas (or a deputy designated in writing to act for him) shall be requested to sign manually the registration certificate prescribed herein to be attached or affixed to each Series 1996A Bond initially delivered and the seal of the Comptroller of Public Accounts of the State of Texas shall be impressed or printed or lithographed thereon. Delivery of the Series 1996A Bonds is subject to the unqualified approving opinion as to the legality of the .Series 1996A Bonds of the Attorney General of Texas and of Mayor, Day, Caldwell & Keeton, L.L.P., Houston, Texas, Bond Counsel. Section 9.3. Application of Proceeds of Series 1996A Bonds. Proceeds from the sale of the Series 1996A Bonds shall, promptly upon receipt by the City, be applied as follows: (a) Accrued interest and premium, if any, shall be deposited into the Interest and Sinking Fund. 28 (b) The remaining proceeds from the sale of the Series 1996A Bonds shall be. applied, together with other legally available funds of the City, to establish an Escrow Fund to pay the principal of and accrued interest on the Refunded Bonds on their respective maturity dates, as more fully provided.below, and to pay all expenses arising in connection with the issuance of the Series 1996A Bonds, the establishment of such Escrow Fund and the refunding of the Refunded Bonds. Any proceeds of the Series 1996A Bonds remaining after making all such deposits and payments shall be deposited into the Interest and Sinking Fund. Section 9.4. Tax Exemption. The City intends that the interest on the Series 1996A Bonds shall be excludable from gross income of the owners thereof for federal income tax purposes pursuant to Sections 103 and 141 through 150 of the Internal Revenue Code of 1986, as amended, (the "Code") and all applicable temporary, proposed and final regulations (the "Regulations") and procedures promulgated thereunder and applicable to the Series. 1996A Bonds. For this purpose, the Citycovenants that it will monitor and control the receipt, investment, expenditure and use of all gross proceeds of the Series 1996A Bonds (including all property, the acquisition, construction or improvement of which is to be financed directly or indirectly with the proceeds of the Series 1996A Bonds) and take or omit to take such other and further actions as may be required by Sections 103 and 141 through 150 of the Code and the Regulations to cause the interest on the Series 1996A Bonds to be and remain excludable from the gross income, as defined in Section 61 of the Code, of the owners of the Series 1996A Bonds for federal income tax purposes. Without limiting the generality of the foregoing, the City shall comply with each of the following covenants: (a) The City will use all of the proceeds of the Series 1996A Bonds to (i) acquire State and Local Governmental Series (the "Escrowed Securities") sufficient to pay the principal of, premium, if any, and interest on the Refunded Bonds and (ii) to pay the costs of issuing the Series 1996A Bonds except for amounts, if any, described in the Certificate (as defined in the Escrow Agreement) as the rounding amount and the ending cash balance in the Escrow Fund (as defined in the Escrow Agreement); (b) The City will not directly or indirectly take any action or omit to take any action, which action or omission would cause the Series 1996A Bonds or the Refunded Bonds to constitute "private activity bonds" within the meaning of Section 141(a) of the Code. - (c) Principal of andinterest on the Series 1996A Bonds will be paid solely from Net Revenues collected by the City, investment earnings on such collections, and as available, proceeds of the Series 1996A Bonds; (d) Based upon all facts and estimates now known or reasonably expected to be in existence on the date the Series 1996A Bonds are delivered, the City reasonably expects that the proceeds of the Series 1996A Bonds and the Refunded Bonds (to the extent any of such proceeds remain unexpended) will not be used in a manner that would 29 cause the Series 1996A Bonds or the Refunded Bonds or any portion thereof to be "arbitrage bonds" within the meaning of Section 148 of the Code; (e) At all times while the Series 1996A Bonds are outstanding, the City will identify and properly account for all amounts constituting gross proceeds of the Series 1996A Bonds in accordance with the Regulations. The City will monitor the yield on the investments of the proceeds of the Series 1996A Bonds and, to the extent required by the Code and the Regulations, will restrict the yield on such investments to a yield which is not materially higher than the yield on the Series 1996A Bonds. To the extent necessary to prevent the Series 1996A Bonds from constituting "arbitrage, bonds," the City will make such payments as are necessary to cause the yield on all yield -restricted nonpurpose investments allocable to the Series 1996A Bonds to be less than the yield that is materially higher than the yield on the Series 1996A Bonds; (f) The City will not take any action or knowingly omit to take any action, if taken or omitted, would cause the Series 1996A Bonds to be treated as "federally guaranteed" obligations for purposes of Section 149(b) of the Code; (g) The City represents that not more than fifty percent (50 %) of the proceeds of any new money portion of, or any new money issue refunded by, the Refunded Bonds was invested in nonpurpose investments (as defined in Section 148(f)(b)(A) of the Code) having a substantially guaranteed yield for four years or more within the meaning of Section 149(g)(3)(A)(ii) of the Code, and the City reasonably expected at the time each issue of the Refunded Bonds was issued that at least eighty-five percent (85%) of the spendable proceeds of such issue of the Refunded Bonds would be used to carry out the governmental purpose of such Refunded Bonds within the corresponding three-year period beginning on the respective dates of such Refunded Bonds. (h) The City will take all necessary steps to comply with the requirement that certain amounts earned by the City on the investment of the gross proceeds of the Series 1996A Bonds, if any, be rebated to the federal government. Specifically, the City will (i) maintain records regarding the receipt, investment and expenditure of the gross proceeds of the Series 1996A Bonds as may be required to calculate such excess arbitrage profits separately from records of amounts on deposit in the funds and accounts of the City allocable to other obligations of the City or moneys which do not represent gross proceeds of any obligations of the City and retain such records for at least six years after the day on which the last outstanding Series 1996A Bond is discharged, (ii) account for all gross proceeds under a reasonable, consistently applied method of accounting, not employed as an artifice or device to avoid, in whole or in part, the requirements of Section 148 of the Code, including any specified method of accounting required by applicable Regulations to be used for all or a portion of the gross proceeds, (iii) calculate, at such times as are required by applicable Regulations, the amount of excess arbitrage profits, if any, earned from the investment of the gross proceeds of the Series 1996A Bonds and (iv) timely pay, as required by applicable Regulations, all 30 amounts required to be rebated to the federal government. In addition, the City will exercise reasonable diligence to assure that no errors are made in the calculations required by the preceding sentence and; if such an error is made, to discover and promptly correct such error within a reasonable amount of time thereafter, including payment to the federal government of any delinquent amounts owed to it, including interest thereon and penalty. (i) The City will not indirectly pay any amount otherwise payable to the federal government pursuant to the foregoing requirements to any person other than the federal government by entering into any investment arrangement with respect to the gross proceeds of the Series 1996A Bonds that might result in a reduction in the amount required to be paid to the federal government because such arrangement results in smaller profit or a larger loss than would have resulted if such arrangement had been at arm's length and had the yield on the issue not been relevant to either party. (j) The City will timely file or cause to be filed with the Secretary of the Treasury of the United States the information required by Section 149(e) of the Code with respect to the Series 1996A Bonds on such form and in such place as the Secretary may prescribe. (k) The City will not issue or use the Series 1996A Bonds as part of an "abusive arbitrage device" (as defined in Section 1.148-10(a) of the Regulations). Without limiting the foregoing, the Series 1996A Bonds are not and will not be a part of a transaction or series of transactions that attempts to circumvent the provisions of Section 148 of the Code and the Regulations, by (i) enabling the City to exploit the difference between tax-exempt and taxable interest rates to gain a material financial advantage, or (ii) increasing the burden on the market for tax-exempt. obligations. (1) Proper officers of the City charged with the responsibility for issuing the Series 1996A Bonds are hereby directed to make, execute and deliver certifications as to facts, estimates or circumstances in existence as of the Issue Date and stating whether there are facts, estimates or circumstances that would materially change the City's expectations. On or after the Issue Date, the City will take such actions as are necessary and appropriate to assure the continuous accuracy of the representations contained in such certificates. (m) The covenants and representations made or required by this Section are for the benefit of the Series 1996A Bond holders and any subsequent Series 1996A Bond holder, and may be relied upon by the Series 1996A Bondholder and any subsequent Series 1996A Bondholder and bond counsel to the City. In complying with the foregoing covenants, the City may rely upon an unqualified opinion issued to the City by nationally recognized bond counsel that any action by the City or reliance upon any interpretation of the Code or Regulations containedin such opinion will not 31 cause interest on the Series 1996A Bonds to be includable in gross income for federal income tax purposes under existing law. Notwithstanding any other provision of this Ordinance, the City's representations and obligations under the covenants and provisions of this Section 9.4 shall survive the defeasance and discharge of the Series 1996A Bonds for as long as suchmatters are relevant to the exclusion of interest on the Series 1996A Bonds from the gross income of the owners for federal income tax purposes. Section 9.5. Qualified Tax -Exempt Obligations. The City hereby designates the Series 1996A Bonds as "qualified tax-exempt obligations" as defined in Section 265(b)(3) of the Code. With respect to such designation, the City represents the following: (a) that during the calendar year 1996, the City (including all entities which issue obligations on behalf of the City), has not designated nor will designate obligations, which when aggregated with the Series 1996A Bonds, will result in more than $10,000,000 of "qualified tax-exempt obligations" being issued and (b) that the City has examined its financing needs for the calendar year 1996 and reasonably anticipates that the amount of bonds, leases, loans or other obligations, together with the Series 1996A Bonds and any other tax-exempt obligations heretofore issued by the City (plus those of all entities which issue obligations on behalf of the City) during the calendar year 1996, when the higher of the face amount or the issue price of each such tax-exempt obligation issued for the calendar year 1996 by the City is taken into account, will not exceed $10,000,000. Section 9.6. Escrow Agreement. The discharge and defeasance of the Refunded Bonds shall be effectuated pursuant to the terms and provisions of a Escrow Agreement to be entered into by and between the City and the Escrow Agent, which shall be substantially in the form of Exhibit A, the terms and provisions of which are hereby approved, subject to such insertions, additions, and modifications as shall be necessary (a) to carry out the program designed for the City by Rauscher Pierce Refsnes, Inc., as financial advisor to the City, (b) to comply with all applicable laws and regulations relating to the refunding of the Refunded Bonds and (c) to carry out the other intents and purposes of this Ordinance, and the Mayor is hereby authorized to execute and deliver such Escrow Agreement on behalf of the City in multiple counterparts and the City Secretary is hereby authorized to attest thereto and affix the City's seal. Section 9.7. Purchase of United States Treasury Obligations. In order to assure the purchase of the escrowed securities referred to in the Escrow Agreement, the Mayor is hereby authorized to subscribe for, agree to purchase and purchase, such obligations of the United States of America, in such amounts, maturities, and bearing interest at such rates as may be provided for in the Certificate, and the Mayor is authorized to execute, and the City Secretary is authorized to attest and affix the City's seal, as appropriate, to any and all subscriptions, purchase agreements, forward purchase agreements, commitments, Letters of authorization and other documents necessary to effectuate the foregoing, and any actions heretofore taken by the Mayor for such purpose are hereby ratified and approved. 32 Section 9.8. Paying Agent/Registrar Agreement. The registration of and payment of the principal of, premium, if any, and interest on the Bonds when due shall be effectuated pursuant to the terms of a Paying Agent/Registrar Agreement to be entered into by and between the City and the Paying Agent/Registrar, which shall be substantially in the form attached hereto as Exhibit B, the terms and provisions of which are hereby approved, and the Mayor and/or the Mayor Pro Tem are hereby authorized to execute and deliver such Paying Agent/Registrar Agreement on behalf of the City in multiple counterparts and the City Secretary is hereby authorized to attest thereto and affix the City's seal. Section 9.9. Redemption of Refunded Bonds. The City hereby irrevocably calls the Refunded Bonds maturing in the years 1997 through 2002, inclusive, for redemption prior to maturity on the dates set forth below, at a price of par plus accrued interest to the date fixed for redemption, and authorizes and directs notice of such redemption to be given in accordance with the ordinance authorizing such bonds. Maturity Date Principal Amount Redemption Date September 1, 1997 $ 160,000 September 1, 1996 September 1, 1998 170,000" September 1, 1996 September 1, 1999 180,000 September 1, 1996 September 1, 2000 190,000 September 1, 1996 September 1, 2001 200,000 September 1, 1996 September 1, 2002 200,000 September 1, 1996 Section 9.10. Bond Counsel. Bond Counsel services in connection with the issuance of the Bonds shall be provided pursuant to the terms of a Engagement Letter to be entered into by and between the City and Mayor, Day, Caldwell & Keeton, L.L.P., Houston, Texas, ("Bond Counsel"), which shall be substantially in the form attached hereto as Exhibit C, the terms and provisions of which are hereby approved, and the Mayor is hereby authorized to execute and deliver such Engagement Letter on behalf of the City in multiple counterparts and the City Secretary is hereby authorized to attest thereto and affix the City's seal. Section 9.11. Related Matters. In order that the City shall satisfy, in a timely manner all of its obligations under the Ordinance and the Escrow Agreement, the Mayor, the City Secretary and other appropriate officers and agents of the City are hereby authorized and directed to take all other actions that are reasonably necessary to provide for issuance and delivery of the Series 1996A Bonds and the refunding of the Refunded Bonds, including executing by manual or facsimile signature and delivering on behalf of the City all certificates, consents, receipts, requests, notices, investment agreements and other documents as may be reasonably necessary to satisfy the City's obligations under the Escrow Agreement and the Ordinance and to direct the transfer and application of funds of. the City consistent with the provisions of such Escrow Agreement and the Ordinance. If requested by the Attorney General of Texas or his representatives, the Mayor may authorize such ministerial changes in the written text of this Ordinance as are necessary to obtain the Attorney General's approval and as he 33 determines are consistent with the intent and purposes of this Ordinance, which determination shall be final. ARTICLE X MISCELLANEOUS Section 10.1. Further Proceeding. The Mayor of the City, the City, Secretary of the City and other appropriate officials' of the City are hereby authorized and directed to do any and all things necessary and/or convenient to carry out the terms of this Ordinance. Section 10.2. Severability. If any Section, paragraph, clause or provision of this Ordinance shall for any reason be held to be invalid or unenforceable, the invalidity or unenforceability of such Section, paragraph, clause or provision shall not affect any of the remaining provisions of this Ordinance. Section 10.3. Open Meeting. It is hereby found, determined and declared that a sufficient written notice of the date, hour, place and subject of the meeting of the City Council at which this Ordinance was adopted was posted at a place convenient and readily accessible at all times to the general public at the City Hall of .the City for the time required by law preceding this meeting, as required by the Open Meetings Act, Chapter 551, Texas Government Code, as amended, and that this meeting has been open to the public as required by law at all times during which this Ordinance and the subject matter thereof has been discussed, considered and formally acted upon. The City Council further ratifies,approves and confirms such written notice and the contents and posting thereof. Section 10.4. Declaration of Emergency. It is hereby officially found and determined that a case of emergency 'affecting life, health, property and the public peace exists which requires the holding of the meeting at which this Ordinance is passed and further requires that this Ordinance be passed finally and take effect immediately on the date of its introduction, such emergency and urgent public necessity being that the proceeds from the sale of the Series 1996A Bonds are required as soon as possible and without delay for the purposes set forth herein. Section 10.5. Repealer. All ordinances, or parts thereof inconsistent herewith, are hereby .repealed to the extent of such inconsistency. PASSED AND APPROVED THIS ATTEST: /, City etary, City of Pearland, Te is (SEAL) Exhibit A Exhibit B Exhibit C 0300210.03 059613/1506 Escrow Agreement Paying Agent/Registrar Agreement Bond Counsel Engagement Letter 35 1996. Mayor, City of Pearland, Texas EXHIBIT A. ESCROW AGREEMENT SEE TAB NUMBER 3 EXHIBIT B PAYING AGENT/REGISTRAR AGREEMENT SEE TAB NUMBER 4 EXHIBIT C BOND COUNSEL ENGAGEMENT LETTER • MAYOR, DAY, CALDWELL 8 KEETON, L.L.P. 700 LOUISIANA, SUITE 1900 HOUSTON, TEXAS 77002-2778 (713) 225 -7000 TE LECOPI ER (713) 225-7047 RICK. A.WITTE ' PARTNER 225-7165 Mayor and City Council City of Pearland, Texas P. O. Box 2068 Pearland, Texas 77588-2068 May 13, 1996 '100 CONGRESS AVENUE SUITE 1500 AUSTIN, TEXAS 78701-4042 (512) 320-9200 TELECOPIER(512) 320-9292 Re: City of Pearland, Texas Water and Sewer System Revenue Refunding Bonds, Series 1996A Dear Mayor and Council Members: We are pleased to submit to you a proposed agreement for Mayor, Day, Caldwell & Keeton, L.L.P. ("MDC&K"), Houston, Texas to serve as Bond Counsel with respect to the authorization, issuance, sale and delivery of the captioned water and sewer system revenue refunding bonds (the "Series 1996A Bonds") and the final discharge of the bonds to be refunded thereby (the "Refunded Bonds"). When approved by you (the "City"), this letter will become effective and will evidence an agreement between the City and MDC&K. As Bond Counsel, we will prepare, or assist the appropriate City officials and staff in the preparation of, all required legal proceedings and will perform certain other necessary legal work in connection with the City's authorization, issuance, sale and delivery of the Series 1996A Bonds. Our services as Bond Counsel will include the following Basic Services, which we will carry out directly or in concert with City officials and staff, as follows: (1) Preparation of the ordinance authorizing the issuance of the Series 1996A Bonds (the "Ordinance") and all other legal instruments which comprise the transcript of legal proceedings pertaining to the authorization, issuance, sale and delivery of the Series 1996A Bonds and the discharge of the Refunded Bonds; (2) Attendance at meetings called by the appropriate City officials and staff, to discuss the sizing, timing or sale of the Series 1996A Bonds; City of Pearland, Texas May 13, 1996 Page 2 (3) Consultation with City officials and staff and the City's financial advisor to review information to be included in the offering documents _ for the Series 1996A Bonds, but only to the extent that such information describes the Series 1996A Bonds, the security therefor, its federal income tax status and our opinion; (4) Preparation and submission of a transcript of legal proceedings pertaining to the issuance of the Series 1996A Bonds to the Attorney General of Texas to obtain an approving opinion and registration of the Series 1996A Bonds by theComptrollerof Public Accounts of Texas; (5) Supervision of the printing of the Series 1996A Bonds and the delivery thereof; (6) At the closing of the Series 1996A Bonds, delivery of an approving opinion, based on facts and law existing as of its date, generally to the effect that the Series 1996A Bonds have been duly issued, executed and delivered in accordance with the Constitution and laws of the State of Texas, that the. Series 1996A Bonds constitute valid and legally binding obligations of the City secured by a lien on and pledge of certain water and sewer system revenues of the City pledged to their payment in the Ordinance (subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws in effect from time to time relating to or affecting the enforcement of rights of creditors of political subdivisions), that the establishment of an escrow fund and the deposit made therein constitute the making of firm banking and financial arrangements for the discharge and final payment of the Refunded. Bonds and that, subject to certain restrictions, interest on the Series 1996A Bonds is excludable from the gross income of the owners thereof for federal income tax purposes under then existing law; provided that, after the closing, we do not undertake, unless specifically engaged by you to do so an Additional Service described below, to provide continuing advice concerning any actions necessary to assure that interest paid on the Series 1996A Bonds will continue to be excludable from gross income for federal income tax purposes; and. (7) Prior to and in connection with the closing of the Series 1996A Bonds, giving advice to the City to enable appropriate. _officials to comply with the arbitrage requirements of the Internal Revenue Code of 1986 as they affect the Series 1996A Bonds, including yield restrictions and rebate requirements. In addition to the foregoing Basic Services, as Bond Counsel, we are prepared to undertake the following. Additional Services, as directed by appropriate City officials; (1) Disclosure work or similar services (other than the limited review of certain sections of the offering documents for the Series 1996A Bonds as described in paragraph (3). under Basic Services above) to assist the. City or its financial advisor in the preparation of such offering documents, on such basis and to such extent as shall be directed by the appropriate City officials and staff; City of Pearland, Texas May 13, 1996 Page 3 (2) Attendance at rating agency presentations, investor meetings or other presentations relating to the marketing of the Series 1996A Bonds and consultation with City officials, staff and advisors to develop such presentations; (3) Preparation of "Blue Sky" surveys or securities registration services; (4) Any other special services not ordinarily required in connection with the issuance of obligations of the nature of the Series 1996A Bonds, including services rendered in connection with special federal income tax issues, unusual issues arising in connection with the City's financial reports or audits, any documentation or related services for credit or liquidity facilities or enhancements or other special structuring techniques or devices to be employed in connection with the issuance of the Series 1996A Bonds; and (5) After the closing of the Series 1996A Bonds, providing assistance to the City concerning questions and issues that may arise prior to the maturity of the Series 1996A Bonds. For the Basic Services performed for the Series 1996A Bonds,, MDC&K will be paid a fee of $7,500. Such fee shall be paid from the proceeds of the sale of the Series 1996A Bonds or from other funds, as the City deems appropriate. Except as otherwise provided below, payment of the fee shall be made after the issuance and delivery, of the Series 1996A Bonds and within thirty (30) days after receipt by the City of an approved invoice therefor. The fee for any Additional Services provided by MDC&K will be determined on an hourly rate basis, using rates customarily charged by MDC&K to other clients for the same or similar services and taking into consideration the time consumed in providing the services, the level of expertise and ability of the attorneys performing the services and the difficulty and complexity of the tasks involved. The total fee for Additional Services prior to and in connection with the closing of the Series 1996A Bonds (other than fees for special services as described in paragraph (4) above under Additional Services) will not exceed such amount as is agreed to in writing by the City. MDC&K will be reimbursed for its reasonable and actual out-of-pocket expenses, such as the cost of reproduction of documents, out-of-town travel, long-distance telephone, telecopy and similar expenses, deliveries, filing fees and all items paid for by MDC&K on behalf of the City, incurred in connection with the performance of any services hereunder. All of such expenses will be reasonable. Nothing herein shall be construed as creating any personal liability on the part of any officer of the City, and this agreement may be terminated by the City by giving 30 days' written notice. City of Pearland, Texas May 13, 1996 Page 4 If this proposed agreement for the services of MDC&K as Bond Counsel is satisfactory, please evidence your acceptance and approval by executing three copies in the space provided below. Very truly yours, W,f/r.,6 jil Rick A. Witte APPROVED: Mayor, City of Pearland ATTEST: City etary, City of Pehrland ' 0304781.01 059608/1233 ESCROW AGREEMENT THIS ESCROW AGREEMENT (this "Escrow Agreement"), dated for convenience as of May 13, 1996, but effective on the Escrow Funding Date as defined herein, is made and entered into by and between the CITY OF PEARLAND, TEXAS, a home rule city of the State of Texas, operating and existing under the Constitution and laws of the State of Texas (the "City"), and TEXAS COMMERCE BANK NATIONAL ASSOCIATION, Houston, Texas, as escrow agent (together with any successor or assign in such capacity, the "Escrow Agent"). EVIT13EaaETH: WHEREAS, the City has heretofore issued and there remain outstanding certain bonds (hereinafter defined as the "Refunded Bonds") that it desires to refund in advance of their maturities; WHEREAS, Article 717k, Vernon's Texas Civil Statutes, as amended, authorizes the City to issue, sell and deliver refunding bonds payable from certain pledged net revenues and to deposit with the place of payment for the Refunded Bonds from the proceeds of such bonds, together with any other available funds, an amount sufficient to provide for the payment or redemption of the Refunded Bonds and to enter into an escrow agreement with the paying agent for the Refunded Bonds, including the Escrow Agent; WHEREAS, the governing body of the City has adopted an ordinance (the "Refunding Bond Ordinance") authorizing the issuance, sale and delivery of the City's Water and Sewer System Revenue Refunding Bonds, Series 1996A, in the aggregate principal amount of $1,115,000 (the "Refunding Bonds"), for the purposes, among other purposes, of (i) modifying certain restrictive covenants contained in the ordinance authorizing the issuance of the Refunded Bonds and (ii) providing the funds necessary to refund the Refunded Bonds in order to produce a present value savings in the City's debt service; WHEREAS, to provide for the payment of the Refunded Bonds, the City has provided for the transfer to the Escrow Agent pursuant to this Escrow Agreement, of proceeds of the Refunding Bonds; and WHEREAS, the governing body of the City has further determined to effectuate the refunding of the Refunded Bonds in advance of their maturities pursuant to this Escrow Agreement, under which provision is made for the safekeeping, investment, reinvestment, administration and disposition of proceeds of the Refunding Bonds and other money available for such purpose so as to provide firm banking and financial arrangements for the discharge and final payment of the Refunded Bonds; NOW, THEREFORE, in consideration of the mutual undertakings, promises and agreements herein contained, and other good and valuable consideration, the receipt and sufficiency of which hereby are acknowledged, and in order to secure the full and timely payment of the principal of, redemption premium, if any, and interest on the Refunded Bonds, the City and the Escrow Agent contract and agree as follows: ARTICLE I DEFINITIONS AND INTERPRETATIONS Section 1.01. Definitions. Unless otherwise expressly provided or unless the context clearly requires otherwise, the following terms shall have the respective meanings specified below for all purposes of this Escrow Agreement: "Certificate" shall mean acertificate of Rauscher Pierce Refsnes, Inc., the City's Financial Advisor, with respect to the adequacy of the Escrowed Securities to pay, when due, the principal of, interest on, and any call premium requirements on the Refunded Bonds. "City" shall mean the City of Pearland, Texas, and any successor to its duties and functions. "Code" shall mean the Internal Revenue Code of 1986, as amended, and the applicable regulations thereunder. "Escrow Agent" shall mean Texas Commerce Bank National Association, Houston, Texas (as successor in interest to First City National Bank of Houston), in its capacity as escrow agent hereunder, and its successors in that capacity. "Escrow Agreement" shall mean this escrow agreement. "Escrow Deposit" shall mean the initial deposit into the Escrow Fund, as more particularly described in Section 2.01. "Escrow Fund" shall mean the fund created in Section 3.01 of this Escrow Agreement to be administered by the Escrow Agent pursuant to the provisions of this Escrow Agreement. "Escrow Funding Date" shall mean the date on which the City deposits with the Escrow Agent the cash and Escrowed Securities described in Section 2.01. "Escrowed Securities" shall mean the Limited Yield Securities. "Limited Yield Securities" shall mean the noncallable United States Treasury Obligations - State and Local Government Series to be purchased with proceeds of the Refunding Bonds, as more fully described in the Certificate attached hereto as Exhibit A. "Open Market Securities" shall mean the United States Treasury securities to be purchased in the open market with cash and the proceeds of the Refunding Bonds, as more fully described in the Certificate, together with all reinvestments of the proceeds thereof as may be directed in Section 4.2 or permitted in Section 4.3(b), or cash or obligations substituted therefor pursuant to Section 4.3(a). "Paying Agent for the Refunded Bonds" shall mean Texas Commerce Bank National Association, Houston, Texas (as successor in interest to First City National Bank of Houston). "Refunded Bond Ordinance" shall mean the bond ordinance authorizing the issuance, sale and delivery of the Refunded Bonds. "Refunded Bonds" shall mean the City's Waterworks and Sewer System Revenue Bonds, Series 1978, dated September 1, 1978, maturing in the years 1996 through 2002, inclusive,' and in the aggregate principal amount. of $1,250,000, which are being: refunded and defeased with the proceeds of the Refunding Bonds and other available funds of the City, if any. "Refunding Bond Ordinance" shall mean the City's Ordinance adopted by the governing body of the City on May 13, 1996, authorizing the issuance, sale and delivery of the Refunding Bonds. "Refunding Bonds" shall mean the City's Water and Sewer System Refunding Revenue Bonds, Series 1996A, dated June 1, 1996, in the initial aggregate principal amount of $1,115,000. Section 1.02. Interpretations. The titles and headings of the articles and sections of this Escrow Agreement have been inserted for convenience of reference only and are not to be considered a part hereof and shall not in any way modify or restrict the terms hereof. This Escrow Agreement and all of the terms and provisions hereof shall be liberally construed to effectuate the purposes set forth herein and to achieve the intended purpose of providing for the refunding of the Refunded Bonds in accordance with .applicable law. ARTICLE II DEPOSIT OF FUNDS AND ESCROWED SECURITIES Section 2.01. Deposits to Escrow Fund. On the Escrow Funding Date, the City shall deposit, or cause to be deposited, into the Escrow Fund the Escrow Deposit, consisting of the following: (a) $249.75 as the beginning cash balance for the Escrow Fund, as shown in the Certificate; (b) the Open Market Securities with a purchase price of $1,274,755.44 (including accrued interest) purchased with the proceeds of the Refunding Bonds . plus $188,280.00 from the interest and sinking fund for the Refunded Bonds; and (c) the initial Limited Yield Securities in the par amount of $ 0 . ARTICLE III CREATION AND OPERATION OF ESCROW FUND Section 3.01. Escrow Fund. On the Escrow Funding Date, the Escrow Agent will create on its books a special trust fund and irrevocable escrow to be known as the "City of Pearland Texas Water and Sewer System Revenue Refunding Bonds, Series 1996A, Escrow Fund" (the "Escrow Fund"). On the Escrow Funding Date, the Escrow Deposit described in Section 2.01 will be deposited to the credit of the Escrow Fund. The Escrow Deposit and all proceeds therefrom shall be the property of the Escrow Fund and shall be applied only in strict conformity with, the terms and conditions hereof. All Escrowed Securities, all proceeds therefrom and all cash balances from 3 time to time on deposit in the Escrow Fund are hereby irrevocably pledged to the payment of the principal of, redemption premium, if any, and interest on the Refunded Bonds, which payment shall be made by timely transfers to the Paying Agent for the Refunded Bonds of such amounts at such times as are provided in Section 3.02. When the final transfers have been made to the Paying Agent for the Refunded Bonds for the payment of such principal of, redemption premium, if any, and interest on the Refunded Bonds, any balance then remaining in the Escrow Fund shall be trans- ferred to the City, and the Escrow Agent shall thereupon be discharged from any further duties hereunder. Section 3.02. Payment of. Principal and Interest. (a) The Escrow Agent is hereby irrevocably instructed to transfer to the Paying Agent for the Refunded Bonds from the cash balance from time to time on deposit in the Escrow Fund the amounts required to pay the principal of, redemption premium, if any, and interest on the Refunded Bonds in the amounts and at the times shown in the Certificate; provided, however, that any funds transferred to the Escrow Fund from the interest and sinking fund for the Refunded Bonds and all investment earnings thereon be used for the payment of the principal of, redemption premium, if any, and interest on the Refunded Bonds prior to the use of proceeds of the Refunding Bonds for such purpose. (b) Except for amounts transferred to the Paying Agent for the Refunded Bonds pursuant to Section 3.02(a), the Escrow Agent agrees that it shall never make any withdrawals, transfers or reinvestments of cash balances in the Escrow Fund (other than as directed herein) or assert any claims, liens or charges against the EscroW Fund. Section 3.03. ,Sufficiency of Escrow Fund. The City represents (based upon the Certificate) that the successive receipts of the principal of and interest on the Escrowed Securities will assure that the cash balance on deposit from time to time in the Escrow Fund will be at all times sufficient to provide money for transfer to the Paying Agent for the Refunded Bonds at the times and in the amounts required to pay the interest on the Refunded Bonds as such interest comes due and to pay the principal or redemption price of the Refunded Bonds as the Refunded Bonds mature or are called for redemption, all as more fully set forth in the Certificate. If, for any reason, at any time, the cash balances on deposit or scheduled to be on deposit in the Escrow Fund shall be insufficient to transfer the amounts required by the Paying Agent for the Refunded Bonds to make the payments set forth in Section 3.02, the City shall timely deposit into the Escrow Fund, from lawfully available funds, additional funds in the amounts required to make such payments. Notice of any such insufficiency shall be given promptly as hereinafter provided, but the Escrow Agent shall not in any manner be responsible for any insufficiency of funds in the Escrow Fund or the City's failure to make additional deposits thereto. Section 3.04. Trust Fund. The Escrow Agent at all times shall hold the Escrow Fund, the Escrowed Securities and all other assets of the Escrow Fund wholly segregated from all other funds and securities on deposit with the Escrow Agent; it shall never allow the Escrowed Securities or any other assets of the Escrow Fund to be commingled with any other funds or securities of the Escrow Agent; and it shall hold and dispose of the assets of the Escrow Fund only as set forth herein. The Escrowed Securities and other assets of the Escrow Fund always shall be maintained by the Escrow Agent as trust funds for the benefit of the holders of the Refunded Bonds; and a special account evidencing such fact shall be maintained at all times ;on the books of the Escrow Agent. The holders of the Refunded Bonds shall be entitled to the same preferred claim and first lien upon the Escrowed Securities, the proceeds thereof and all other assets of the Escrow Fund to which they are entitled as holders of the Refunded Bonds. The amounts received by the Escrow 4 Agent underthis Escrow Agreement shall not be .considered as a banking deposit by the City, and the Escrow Agent shall have no right or title with respect thereto except as escrow agent under the terms hereof. The amounts received by the Escrow Agent hereunder shall not be subject to warrants, drafts or checks drawn by the City or, except to the extent expressly herein provided, by any Paying Agent for the Refunded Bonds. Section 3.05. Security for Cash Balances. Cash balances from time to time on deposit in the Escrow Fund, to the extent not insured by the Federal Deposit Insurance Corporation or its successor, shall be continuously secured by a pledge of direct obligations of, or obligations unconditionally guaranteed by, the United States of America, having a market value at least equal to such cash balances. ARTICLE IV LIMITATION ON INVESTMENTS Section 4.01. General. Except as herein otherwise expressly provided, the Escrow Agent shall not have any power or duty to invest or reinvest any money held hereunder, to make substitutions of the Escrowed Securities or to sell, transfer or otherwise dispose of the Escrowed Securities. Section 4.02. Arbitrage. The City hereby covenants and agrees that it shall never request the Escrow Agent to exercise any power hereunder or permit any part of the money in the Escrow Fund or proceeds from the sale of Escrowed Securities to be used directly or indirectly to acquire any securities or obligations if the exercise of such power or the acquisition of such securities or obligations would cause any Refunding Bonds to be an "arbitrage bond" within the meaning of the Code. ARTICLE V RECORDS AND REPORTS Section 5.01. Records. The Escrow Agent shall keep books of record and account in which complete and correct entries shall be made of all transactions relating to the receipt, disbursement, allocation and application of the money and Escrowed Securities deposited to the Escrow Fund and all proceeds thereof, and such books shall be available for inspection at reasonable hours and under reasonable conditions by the City and the holders of the Refunded Bonds. Section 5.02. Reports. For the period beginning on the Escrow Funding Date and ending on September 1, 1996, the Escrow Agent shall prepare and send to the City within thirty (30) days following the end of such period a written report summarizing all transactions relating to the Escrow Fund during such period, including, without limitation, credits to the Escrow Fund as a result of interest payments on or maturities of the Escrowed Securities and transfers from the Escrow Fund to the Paying Agent for the Refunded Bonds or otherwise, together with a detailed statement of all Escrowed Securities and the cash balance on deposit in the Escrow Fund as of the end of such period. 5 ARTICLE VI CONCERNING THE ESCROW AGENT Section 6.01. Representations of Escrow Agent: Paying Agent Fees. The Escrow Agent hereby represents that it is the Paying Agent for the Refunded Bonds, that it has all necessary power and authority to enter into this Escrow Agreement and undertake the obligations and responsibilities imposed upon it herein and that it will carry out all of its obligations hereunder. The Escrow Agent agrees to continue to serve as the Paying Agent for the Refunded Bonds until final payment thereof, and to limit its remedies for nonpayment of fees under the Paying Agent/Registrar Agreement currently in effect for such bonds, if any, to an action for amounts due and owing thereunder. Section 6.02. Limitation on Liability. The liability of the Escrow Agent to transfer funds to the Paying Agent for the Refunded Bonds for the payments of the, principal of, redemption premium, if any, and . interest on the Refunded Bonds shall be limited to the proceeds of the Escrowed Securities and the cash balances from time to time on deposit in the Escrow Fund. Notwithstanding any provision contained herein to the contrary, the Escrow Agent shall have no liability whatsoever for the insufficiency of funds from timeto time in the Escrow Fund or any failure of the obligors of the Escrowed Securities to make timely payments thereon, except for its obligation to notify the City promptly of any such occurrence. The recitals herein and in the proceedings authorizing the Refunding Bonds shall be taken as the statements of the City and shall not be considered as made by, or imposing any obligation or liability upon, the Escrow Agent. The Escrow Agent is not a party to the Refunding Bond Ordinance or the Refunded Bond Ordinance and in its capacity as Escrow Agent is not responsible for or bound by any of the provisions of either thereof. In its capacity as Escrow Agent, it is agreed that the Escrow Agent need look only to the terms and provisions of this Escrow Agreement. The Escrow Agent makes no representation as to the value, condition or sufficiency of the Escrow Fund, or any part thereof, or as to the title of the City thereto, or as to the security afforded thereby or hereby, and the Escrow Agent shall incur no liability or responsibility with respect to any of such matters. It is the intention of the City and the Escrow Agent that the Escrow Agent shall never be required to use or advance its own funds or otherwise incur personal financial liability in the performance of any of its duties or the exercise of any of its rights and powers *hereunder. The Escrow Agent shall not be liable for any action taken or neglected to be taken by it in good faith in the exercise of reasonable care and believed by it to be within the discretion or power conferredupon it by this Escrow Agreement, nor shall the Escrow Agent be responsible for the consequences of any error of judgment; and the Escrow Agent shall not be answerable except for its own negligence, nor for any loss unless the same shall have been through its negligence or want of good faith. Unless it is specifically provided otherwise herein, the Escrow Agent has no duty to determine or inquire into the happening or occurrence of any event or contingency or the performance or failure of performance of the City with respect to arrangements or contracts with others, with the Escrow Agent's sole duty hereunder being to safeguard the Escrow Fund and to dispose of and deliver the same in accordance with this Escrow Agreement. If, however, the Escrow Agent is called upon by the terms of this Escrow Agreement to determine the occurrence of any event or contingency, the Escrow Agent shall be obligated, in making such determination, only to exercise reasonable care and diligence, and in the event of error in making such determination the Escrow Agent shall be liable only for its own misconduct or its negligence. In determining the occurrence of any such event or contingency the Escrow Agent may request from the City or any other person such reasonable additional evidence as the Escrow Agent in its discretion may deem necessary to determine any fact relating to the occurrence of such event or contingency, and in this connection may make inquiries of, and consult with the City, among others, at any time. Section 6.03. Compensation. On the Escrow Funding Date, the City will pay the Escrow Agent, as a fee for performing the services hereunder and for all expenses incurred or to be incurred by the Escrow Agent in the administration of this Escrow Agreement, the fees set out in Exhibit B hereto, the sufficiency of which is hereby acknowledged by the Escrow Agent. If the Escrow Agent is requested to perform any extraordinary services hereunder, the City hereby agrees to pay reasonable fees to the Escrow Agent for such extraordinary services and to reimburse the Escrow Agent for all expenses incurred by the Escrow Agent in performing such extraordinary services. It is expressly provided that the Escrow Agent shall look only to the City for the payment of such additional fees and reimbursement of such additional expenses. The Escrow Agent hereby agrees that in no event shall it ever assert any claim or lien against the Escrow Fund for any fees for its services, whether regular, additional or extraordinary, as Escrow Agent, orr in any other capacity, or for reimbursement for any of its expenses. Section 6.04. Successor Escrow Agents. If at any time the Escrow Agent or its legal successor or successors should become unable, through operation of law or otherwise, to act as Escrow Agent hereunder, or if its property and affairs shall be taken under the control of any state or federal court or administrative body because of insolvency or bankruptcy or for any other reason, a vacancy shall forthwith exist in the office of Escrow Agent hereunder. In such event the City, by appropriate action, shall promptly appoint an Escrow Agent to fill such vacancy. If no successor Escrow Agent shall have been appointed by the City within sixty (60) days, a successor may be appointed by the holders of a majority in principal amount of the Refunded Bonds then outstanding by an instrument or instruments in writing filed with the City, signed by each of such holders or by each of their duly authorized attorneys. If, in a proper case, no appointment of a successor Escrow Agent shall be made pursuant to the foregoing provisions of this section within three (3) months after a vacancy shall have occurred, the holder of any Refunded Bond then out- standing may apply to any court of competent jurisdiction to appoint a successor Escrow Agent. Such court may thereupon, after such notice, if any, as it may deem proper, prescribe and appoint a successor Escrow Agent. Any successor Escrow Agent shall be (i) a corporation organized and doing business under the laws of the United States or the State of Texas, (ii) authorized under such laws to exercise corporate trust powers, (iii) having a combined capital and surplus of at least $50,000,000, (iv) subject to supervision or examination by federal or state authority; and (v) qualified to act as an Escrow Agent under Article 717k, Texas Revised Civil Statutes, as amended. 7 Any successor Escrow Agent shall execute, acknowledge and deliver to the City and the Escrow Agent an instrument accepting such appointment hereunder, and the Escrow Agent shall execute and deliver an instrument transferring to such successor Escrow Agent, subject to the terms of this Escrow Agreement, all the rights, powers and trusts of the Escrow Agent hereunder. Upon the request of any such successor Escrow Agent, the City shall execute any and all instruments in writing for more fully and certainly vesting in and confirming to such successor Escrow Agent all such rights, powers and duties. The Escrow Agent shall pay over to its successor Escrow Agent a proportional part of the Escrow Agent's fee, not to exceed the fee paid hereunder, such fee having been adjusted to reflect the effects of monetary price inflation from the date of this Escrow Agreement. The Escrow Agent at the time acting hereunder may at any tithe resign and .be discharged from the trust hereby created by giving not less than sixty (60) days' written notice to the City and publishing notice thereof, specifying the date when such resignation will take effect, in a newspaper printed in the English language and with general circulation in New York, New York, such publication to be made at least once a week for three (3) consecutive calendar weeks prior to the date when the resignation is to take effect. No such resignation shall take effect unless a successor Escrow Agent shall have been appointed by the holders of the Refunded Bonds or by -die City as herein provided and such successor Escrow Agent shall have accepted such appointment, in which event such resignation shall take effect immediately upon the appointment and acceptance of a successor Escrow Agent. The Escrow Agent may be removed at any time by an instrument or concurrent instruments in writing delivered to the Escrow Agent and to the City and signed by the holders of a majority in principal amount of the Refunded Bonds then outstanding. ARTICLE VII MISCELLANEOUS Section 7.01. Notices. Any notice, authorization, request or demand required or permitted to be given hereunder shall be made or given in writing and shall be deemed to have been duly given when mailed by registered or certified mail, postage prepaid, addressed as follows: To the Escrow Agent: Texas Commerce Bank National Association P.O. Box 4717 Houston, Texas 77210 Attention: Corporate Trust Administration To the City: City of Pearland 3519 Liberty Drive Pearland, Texas 77581 Attention: Director of Finance 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. Either party hereto may change the address to which notices are to be delivered by giving to the other party, not less than ten (10) days' prior written notice thereof. Section 7.02. Termination of Responsibilities. Upon the taking by the Escrow Agent of all the actions as described herein, the Escrow Agent shall have no further obligations or responsibilities hereunder to the City, the holders of the Refunded Bonds or to any other person or persons in connection with this Escrow Agreement. Section 7.03. Binding Agreement: Amendment. This Escrow Agreement shall be binding upon the City and the Escrow Agent and their respective successors and legal representatives and shall inure solely to the benefit of the holders of the Refunded Bonds, the City, the Escrow Agent and their respective successors and legal representatives. This Escrow Agreement shall not be subject to amendment without the written consent of the holders of all Refunded Bonds then outstanding. Section 7.04. Counterparts. This Escrow Agreement may be executed in several counterparts, each of which shall be regarded as an original and all of which shall constitute one and the same document. Section 7.05. Severability. If any one or more of the provisions contained in this Escrow Agreement shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Escrow Agreement, but this Escrow Agreement shall be construed as if such invalid or illegal or unenforceable provision had never been contained herein. Section 7.06. Governing Law. This Escrow Agreement shall be governed exclusively by the provisions hereof and by the applicable laws of the State of Texas. 9 EXECUTED as of the date first written above, but effective as set forth herein. ATTEST: Cit 'Sgcretary, City of PFearland, Teas (SEAL) ATTEST: Name J. CHERISE SfiORY Title: Vice President Corporate -trust utticer (SEAL) EXHIBIT A: Certificate EXHIBIT B: Fee Schedule 0302775.01 059613/1511 CITY OF PEARLAND, TEXAS Mayor, City of Pearland, Texas TEXAS COMMERCE BANK NATIONAL ASSOCIATION By: Name: Title: 10 GARCI ASSIS lAN 1 VIUE PRESIDENT & CORPOHAIE IRUST OFFICER • EXHIBIT A CERTIFICATE OF FINANCIAL ADVISOR I, FRANK J. ILDEBRANDO of Rauscher Pierce Refsnes, Inc., the City's Financial Advisor, hereby make this certification in connection with the issuance of the City's $1,115,000 Water and Sewer System Revenue Refunding Bonds, Series 1996A (the "Bonds") now in the process of issuance. The Bonds are being issued for the purpose of refunding the outstanding principal of the City's Waterworks and Sewer System Revenue Bonds, Series. 1978 (the "Refunded Bonds") maturing on September 1 in the years and amounts set out in Exhibit A-1 hereto. Capitalized terms used herein and not otherwise defined shall have the meaning ascribed to them in the Escrow Agreement. On the date of delivery of the Bonds, the City will deposit, or cause to be deposited, with the Escrow Agent the noncallable United States Treasury Obligations described on Exhibit A-2 hereto, which shall mature on a date and in a sufficient amount to pay the principal of and interest on the Refunded Bonds on September 1, 1996, the designated redemption date, as shown on the cash flow schedule attached hereto as Exhibit A-3. Witness my signature this 0304732.01 069610/1343 June 10 , 1996. RAUSCHER PIERCE REFSNES, INC. By: Its: cS`. v. .0. EXHIBIT A-1 CITY OF PEARLAND W/SS Revenue Bonc1s Ser 1978 DATES (Term) 9/01/96 3/01/97 9/01/97 3/01/98 9/01/98 3/01/99 9/01/99 3/01/00 9/01/00 3/01/01 9/01/01 3/01/02 9/01/02 Accrued Interest MATURING COUPON INTEREST TOTAL FISCAL YEAR DEBT SERVICE AMOUNT PROCEEDS RATE YIELD PRICE /MOIIIIT DEBT SERVICE DEBT SERVICE TO CALL 150,000.00 160,000.004 170,000.00• 1£0,000.00+ 190,000.00• 200,000.001 200,000.00• 150,000.00 5.900 5.900000 100.000000 38,280.00 188,280.00 33,855.00 33,855.00 160,000.00 6.000 6.000000 100.000000 33,855.00 193,855.00 29,055.00 29,055.00 170,000.00 6.100 6.100000 100.000000 29,055.00 199,055.00 23,870.00 23,870.00 180,000.00 6.200 6.200000 100.000000 23,870.00 203,870.00 18,290.00 18,290.00 190,030.00 6.200 6.200000 100.000000 18,290.00 208,290.00 12,400.00 12,400.00 200,000.00 6.200 6.200000 100.000000 12,400.00 212,400.00 6,200.00 6,200.00 200,000.00 6.200 6.200000 100.000000 6,200.00 206,200.00 $1,250,000.00 S1,250,000.00 188,280.00 227,710.00 228,110.00 227,740.00 226,580.00 224,800.00 212,400.00 1,238,280.00 S285,620.00 S1,535,620.00 S1,535,620.00 11,288,280.00 0.00 0.00 Totals $1,250,000.00 $1,250,000.00 1285,620.00 S1,535,620.00 - Bonds callebte sa 100.000 on 9/01/98 Account Numbe EXHIBIT A-2 Rauscher Pierce Refsnes, Inc. • Member Securities Investor Protection Corporation Member New York Stock Exchange • • • Type Dale of Transaction 2101-2278-3793 CASH 05/14/96 You BOUGHT Quantity 1249000 We confirm the Following Transaction Price 100..176894 Secudly Desertion ' .. U S TREASURY•NOTES CPN.'6.250. DUE DTD 8/31/94 FC '2/28/95 5.250 YIELD TO MATURITY COPY FOR CITY OF PEARLAND 3519 LIBERTY DRIVE • 8/31/96 ATTN JIM CAUSEY PEARLAND• TX GrossArrwiiri:. ComiliWAtandfing Accrued lnterestjDMdend .:: Charge/Mark UplDown NET AMOUNT SETTLEMENT DATE :12.51209r 4i 1274755.44 DUNE 19,1996 5B-1 912827096 Transaction TypdJ 1 7758 AS OF 05/16/96 MAYOR DAY CALDWELL AND KEET.ON LLP ATTN RICK WITTE 700 LOUISIANA SUITE- 1900 HOUSTON TX 77002 Thank You fi -RAUSCHER PIERCE REFSNES, INC. FIRST CITY TOWER : 1001 FANNIN SUITE 700 HOUSTON, 'TX 77002 Telephone CLIENT Copy - TRADES CLEARED AND SETTLED AND ACCOUNTS CARRIED BY REGIONAL OPERATIONS GROUP, INC.. AN AFFIUATE OF RAUSCHER PIERCE REFSNES. INC. AND A MEMBER OF THE NEW YORK STOCK EXCHANGE AND SIPC HCO6 rt ' AbUSTON 713-652-3033 EXHIBIT A-3 A E, CITY OF PEARLAND ' ESCROW COVERAGE ANALYSIS - INVESTMENTS vs CASH REQUIREMENTS Escrow Start Date is 6/19/96 < Escrow > Idle S Days MATURING COUPON (idle *Days Other CASH DRAW FUND DATES • INVESTMENTS INTEREST x Bal/S1,000) Investments REQUIRED BALANCE, 6/19/96 0.00 0.00 18.23 0.00 0.00 249.75 8/31/96 1,249,000.00 39,031.25 1,288.28 0.00 0.00 1,288,281.00 9/01/96 0.00 0.00 0.00 0.00 1,288,280.00 1.00 S1,249,000.00 S39,031.25 S1,306.51 S0.00 S1.,288,280.00 Cost of Securities Purchased for Escrow 1,251,209.41 Accrued Interest of Securities Purchased for Escrow 23,546.03 Ynitial Cash Deposit to Escrow 249.75 Total Cost of Escrow S1,275,005.19 Investment YLD (Based on Proceeds Arrival Dates) 5.24794327X Arbitrage YLD (Final Naty(s) Rolled into 0X SLGs) 5.24794169% Principal Amount of Bonds_Defeased S1,250,000.00 Settlement Date for Investments 6/19/96 EXHIBIT B Fee Schedule Escrow Agency Fee Paid at Closing $1500 0302775.01 069623/1808 12 TEXAS COMMERCE BANK NATIONAL ASSOCIATION SECRETARY'S CERTIFICATE I, Melanie McKittrick, Assistant Secretary of Texas Commerce Bank National Association (the "Bank") hereby certify that on January 10, 1996, at a meeting duly called and convened and at which a quorum was present, the Board of Directors of the Bank adopted the resolutions set forth below, and such •resolutions are presently in full force and effect and have not been modified, revoked or rescinded: RESOLVED, that for the purposes of the following resolutions, the following words shall have these meanings ascribed to them: "Bank" shall mean Texas Commerce Bank National Association. "Officer" shall mean the Chairman of the Board, the President, any Vice Chairman, any Executive Vice President, any Managing Director, any Senior Vice President, any Vice President, any Assistant Vice President, any Officer, the General Counsel, the Chief Financial Officer, the Chief Administrative Officer, the Secretary, the Controller and the Cashier of the Bank, and any Chairman, any President, any Vice Chairman, any Executive Vice President, any Managing Director, any Senior Vice President, any Vice President, any Assistant Vice President and any Officer of any region of the Bank. "Senior Officer" shall mean the Chairman of the Board, the President, any Vice Chairman, any Executive Vice President, any Managing Director, any Senior Vice President, any Vice. President, the General Counsel, the Chief Financial Officer, the Chief Administrative Officer, the Secretary, the Controller and the Cashier of the Bank, and any Chairman, any President, any Vice Chairman, any Executive Vice President, any Managing Director, any Senior Vice President and any Vice President of any region of the Bank. RESOLVED, that the Officers be, and each of them hereby is, authorized to execute and deliver for and on behalf of the Bank agreements (including, but not limited to, agency agreements, transfer agency agreements, paying agency agreements, exchange agreements, escrow agreements and other similar agreements), indentures, mortgages, deeds, releases, conveyances, assignments, transfers, leases, demands, proofs of debt, claims, discharges, satisfactions, settlements, petitions, affidavits, receipts, instruments or documents, powers of attorney, records, bonds, undertakings, proxies, other agency powers, authentication certificates appearing on bonds and debentures, registration certificates appearing on stock, bond or debentures certificates and such other documents and instruments, other than secretary's certificates or officer's certificates, as may be necessary and appropriate to carry out the fiduciary or agency powers of the Bank. RESOLVED, that the Senior Officers and any Assistant Secretary of the Bank be, and each of them hereby is, authorized to countersign, acknowledge or verify accounts, schedules, requisitions, certifications and declarations, other than secretary's certificates . or officer's certificates, in connection with the exercise of the fiduciary or agency powers of the Bank. r. RESOLVED, that the power and authority conferred to any person pursuant to these resolutions shall include, but not be limited to, the power to execute any other documents and to do and perform such other acts and things as may be necessary or appropriate to consummate the transactions so authorized or to carry out the purposes and intent of such resolutions. EXECUTED effective as of the 10th day of April , 1996, at Houston, Texas. Texas Commerce Bank National Association By dcoaLLAadtd. Melanie McKittrick Assistant Secretary CERTIFICATION AS TO CORPORATE AUTHORITY The undersigned , officer of Texas Commerce Bank National Association, a national banking association, serving as Vice President and Trust Officer, under .the resolution authorizing the issuance of $1,115,000 CITY OF PEARLAND, TEXAS WATER AND SEWER SYSTEM REVENUE' REFUNDING BONDS, SERIES 1996A, hereby certifies as follows: - The Agreements were executed on behalf of the Texas Commerce Bank National Association by the persons named below whose offices appear set opposite their names, and said persons were at the time of executing the Agreements, and are now, duly elected, qualified, and acting incumbents of their respective offices; and the signature appearing after each of said person's names is the true and correct specimen of such person's genuine signature. Name Office Signature Yolanda C. Garcia Assistant Vice President and Corporte Trust Officer J. Cherise Story Vice President and 7 �'✓L=' Corporate Trust Officer The foregoing officers of the Texas Commerce Bank National Association by virtue of the authority delegated to them by the Board of Directors of the Texas Commerce Bank National Association pursuant to resolution, a true and correct copy of which is attached hereto as Exhibit A, are authorized to execute and deliver on behalf of the Texas Commerce Bank National Association such other and further documents as may be necessary or incidental to the acceptance and performance of the trusts set forth in the Agreements to attest any of the foregoing, and to apply the seal of the Texas Commerce Bank National Association thereto. IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of the Texas Commerce Bank National Association this 10th day of April , 1996. 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(rluawaaay„ ag) `oiaiaq s)uawaiddns 10 s)uawpuaWE Aug Tim la=pogo)) 9661 `£i All Jo sE PEEP J IIWHH1OV 21V LLSIO 1/111aDV DNIA.Vc1 SILL ,thatuauov livILLSIDMI/JMOv OAIIAVd Section 1.02. Compensation. In consideration of the deposits of funds required to be made with the Bank by the Issuer pursuant to the provisions of the Ordinance, the Bank shall be paid a fee of $600 annually and as per the attached Fee Schedule and agrees to abide by and accept the terms hereof and of the Ordinance relating to the duties of the Paying Agent/Registrar. ARTICLE TWO DEFINITIONS , Section 2.01. Definitions. For all purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires: "Bank" means Texas Commerce Bank National Association, Houston, Texas, a commercial bank which is a national bank duly organized and existing under the laws of the United States of America. "Bond" or "Bonds" means any one or all of the "City of Pearland, Texas Water and Sewer System Revenue Refunding Bonds, Series 1996A" authorized by the Ordinance. "Issuer" means the City of Pearland, Texas. "Ordinance" means the ordinance of the Issuer approved by its City Council on May 13, 1996, pursuant to which the Bonds are issued. "Paying Agent" means the Bank when it is performing the function of paying agent. "Person" means any individual, corporation, partnership, joint venture, associations, joint stock company, trust, unincorporated organization or government or any agency or political subdivision of a government or any entity whatsoever. "Registrar" means the Bank when it is performing the function of registrar. "Registered Owner" means the Person in whose name any Bond is registered in the books of registration maintained by the Bank under this Agreement. All other capitalized terms shall have the meanings assigned to them in the Ordinance. ARTICLE THREE DUTIES OF THE BANK Section 3.01. Initial Delivery of the Bonds. The Bonds will be initially registered and delivered by the Bank to the purchaser designated by the Issuer as set forth in the Ordinance. If such purchaser delivers a written request to the Bank not later than five business days prior to the date of initial delivery, the Bank will, on the date of initial delivery, exchange the Bonds initially delivered for Bonds of authorized denominations, registered in accordance with the instructions in such request and the Ordinance. Section 3.02. Duties of Paying Agent. As Paying Agent, the Bank shall, provided adequate funds have been provided to it for such purpose by or on behalf of the Issuer, timely pay on behalf of the Issuer the principal of and interest on each Bond in accordance with the provisions of the Ordinance. If the issue is to be Depository Trust Company (DTC) eligible, the Paying Agent will comply with all eligibility requirements as outlined and agreed upon in the eligibility questionnaire. Section 3.03. Duties of Registrar. The Bank shall provide for the proper registration of the Bonds and the timely exchange, replacement and registration of transfer of the Bonds in accordance with the provisions of the Ordinance. Any changes to Registered Owners for such exchange, replacement and registration shall bemade by the Bank only in accordance with the Ordinance. The Bank will maintain the books of registration in accordance with the Bank's general practices and procedures in effect from time to time; provided, however, that the Bank agrees to comply with the terms of Tex. Rev. Civ. Stat. Ann. art. 715b, § 4, as amended, and more specifically agrees also to maintain books of registration for the Bonds at the City Secretary's office in City of Pearland, Texas, which books of registration may be a copy of the register which shall be kept current by the Bank. Section 3.04. Unauthenticated Bonds. The Issuer shall provide an adequate inventory of unauthenticated Bonds to facilitate transfers. The Bank covenants that it will maintain such unauthenticated Bonds in safekeeping and will use reasonable care in maintaining such Bonds in safekeeping, which shall be not less than the care it maintains for debt securities of other government entities or corporations for which it serves as registrar, or which it maintains for its own bonds. Section 3.05. Reports. Upon request of the Issuer, the Bank will provide the Issuer reports which will describe in reasonable detail all transactions pertaining to the Bonds and the books of registration for the period of time specified by the Issuer. The Issuermay also inspect and make copies of the information in the books of registration and such other documents related to the Bonds and in the Bank's possession at any time the Bank is customarily . open for business,, provided that reasonable time is allowed the Bank to provide an up-to-date listing or to convert the information into written form. The Bank will not release or disclose the content of the books of registration to any person other than to, or at the written request of, an authorized officer or employee of the Issuer, except upon receipt of a subpoena, court order or as otherwise required by law. Upon receipt of a subpoena, court order or other lawful request, the Bank will notify the Issuer immediately so that the Issuer may contest the subpoena, court order or other request if it so chooses. Section 3.06. Canceled Bonds. All Bonds surrendered for payment, redemption, transfer, exchange or replacement, if surrendered to the Bank, shall be promptly canceled by it and, if surrendered to the Issuer, shall be delivered to the Bank and, if not already canceled, shall be promptly canceled by the Bank. The Issuer may at any time deliver to the Bank for cancellation any Bonds previously authenticated and delivered which the Issuer may have acquired in any manner whatsoever, and all Bonds so delivered shall be promptly canceled by the Bank. All canceled Bonds held by the Bank shall be destroyed and evidence of such destruction shall be furnished to the Issuer. Section 3.07. Reliance on Documents. Etc. (a) The Bank may conclusively rely, as to the truth of the statements.and correctness of the opinions expressed therein, on certificates or opinions furnished to the Bank by the Issuer. (b) The Bank shall not be liable to the Issuer for actions taken under this Agreement as long as it acts in good faith and exercises due diligence, reasonableness and care, as prescribed by law, with regard to its duties hereunder. (c) This Agreement is not intended to require the Bank to expend its own funds for performance of any of its duties hereunder. (d) The Bank may exercise -any of the powers hereunder and perform any duties hereunder either directly or by or through agents or attorneys. 4 Section 3.08. Money Held by Bank. Money held by the Bank hereunder shall be held in trust for the benefit of the Registered Owners of the Bonds. The Bank shall be under no obligation to pay interest on any money received by it hereunder. All money deposited with the Bank hereunder shall be secured in the manner and to the fullest extent required by law for the security of funds of the Issuer. Any money deposited with the Bank for the payment of the principal of or interest on any Bonds and remaining unclaimed by the Registered Owner after the expiration of three years from the date such funds have become due and payable shall be reported and disposed of by the Bank in accordance with the provisions of Texas law including, to the extent applicable, Title 6 of the Texas Property Code, as amended. To the extent such provisions of the Property Code do not apply to the funds, such funds shall be paid by the Bank to the Issuer upon receipt of a written request therefor from the Issuer. The Bank shall have no liability to the Registered Owners of the Bonds by virtue of actions taken in compliance with the foregoing provision. ARTICLE FOUR MISCELLANEOUS PROVISIONS Section 4.01. ' May Own Bonds. The Bank, in its individual or any other capacity, may become the owner or pledgee of Bonds with the same rights it would have if it were not the Paying Agent and Registrar for the Bonds. Section 4.02. Amendment. This Agreement may be amended only by an agreement in writing signed by both of the parties hereof. Section 4.03. Assignment. This Agreement may not be assigned by either party without the prior written consent of the other. Section 4.04. Notices. Any request, demand, authorization, direction, notice, consent, waiver or other document provided or permitted hereby to be given or furnished to the Issuer or the Bank shall be mailed 5 r , or delivered to the Issuer or the Bank, respectively, at the addresses shown herein, or such other address as may have been given by one party to the other by 15 days' written notice. Section 4.05. Effect of Headings. The Article and Section headings herein are for convenience only and shall not affect the construction hereof. Section 4.06. Successors and Assigns. All covenants and agreements herein by the Issuer and the Bank shall bind their successors and assigns, whether so expressed or not. This Agreement shall not be assigned by the Bank without the prior written consent of the Issuer. Section 4.07. Severability. If any provision of this Agreement shall be invalid or unenforceable, the validity and enforceability of the remaining provisions hereof shall not in any way be affected or impaired. Section 4.08. Benefits of Agreement. Nothing herein, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder, any benefit or any legal or equitable right, remedy or claim hereunder. Section 4.09. Ordinance Governs Conflicts. This Agreement and the Ordinance constitute the entire agreement between the parties hereto relative to the Bank acting as Paying Agent and Registrar and if any conflict exists between this Agreement and the Ordinance, the Ordinance shall govern. The Bank agrees to be bound by the terms of the Ordinance with respect to the Bonds. Section 4.10. Term and Termination. This Agreement shall be effective from and after its date and may be terminated for any reason by the Issuer or the Bank at any time upon 60 days' written notice; provided, however, that no such termination shall be effective until a successor has been appointed and has accepted the duties of the Bank hereunder. In the event of early termination, regardless of circumstances, the Bank shall deliver to the Issuer or its designee all funds, Bonds and all books and records pertaining to the Bank's role as Paying Agent and Registrar with respect to the Bonds, including, but not limited to, the books of registration. 6 Section 4.11. Governing Law. This Agreement shall be construed in accordance with and shall be governed by the laws of the State of Texas. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. ATTEST: City ' retary, City of P - . and, Texa (SEAL) ATTEST: By: Title: (SEAL) 0302832.01 059613/1514 ice rest . en &' Corporate Fri ict Officer CITY OF PEARLAND, TEXAS By: Mayor, City of Pearland, Texas ADDRESS: 3519 Liberty Drive Pearland, Texas 77581 TEXAS COMMERCE BANK NATIONAL ASSOCIATION By: Title: �! 'Assistant Dice President i 4GG4- Corporate Trust Officer ADDRESS: 600 Travis Street llth Floor Houston, Texas 77002 FEE SCHEDULE BOND REGISTRAR, TRANSFER AGENT, AND PAYING AGENT Refunding Bond Issue ACCEPTANCE For accepting appointment, execution of documents, attendance at closing, conferring with interested parties and setting up records BOND REGISTRAR Annual Administrative Charge Account Maintenance For each bondholder account maintained, based upon the numberof accounts maintained at the beginning of each billing period, plus all newaccounts added Annual Minimum Bondholder List For each account Minimum per List. Mailing .Services Preparation of labels - per account Minimum per set of labels Inserting enclosures - per enclosure Minimum per job TRANSFER AGENT ACTIVITY For each bond issue. Includes cancellation of surrendered bond(s), and posting to account - Replacement of lost bonds Cancelled bonds will be retained for one year without charge and then returned to the issuer PAYING AGENT ACTIVITY Interest Payment ,. For each check issued including calculation, check register, replacement of checks, and reconcilement Minimum per payable date 375.00 60.0.00 1.00 100.00 0.04 100.00 0.04 100.00 0.04 100.00 3.00 30.00 0.50 100.00 Principal Payment For each bond redeemed at maturity or call 5.00 INCOME TAX REPORTING REQUIREMENTS For preparation of forms required to report income to either state, federal or individuals - per form 2.00 ADDITIONAL FEES AND EXPENSES Bond Calls - 250.00 Account Termination Fee (Minimum) 1,000.00 Audit Confirmations (per issue) 75.00 Out-of-pocket expenses incurred in rendering any service covered by this schedule are in addition to the fees quoted. Expenses for which we are regularly reimbursed include, but are not limited to, counsel fees, travel expenses, publications, printing cost, postage, wire charges, long distance telephonecalls, stationery, and forms. Fees quoted are subject to change. The initial invoice due following closing will include the acceptance fee and a proration of the annual administration fee to the first debtservice cycle date. Subsequent annual invoicing will include the administrative fee and transactional charges. a TEXAS COMMERCE BANK NATIONAL ASSOCIATION SECRETARY'S CERTIFICATE I, Melanie. McKittrick, Assistant Secretary of Texas Commerce Bank. National Association (the ._"Bank") hereby certify thaf on January 10, 1996, at a meeting duly called and convened and at which a quorum was present, the Board of Directors of the Bank adopted the ,resolutions set forth below, and such resolutions are presently in full force and effect and have not been modified, revoked or rescinded: RESOLVED, that for the purposes of the following resolutions, the following words shall have thesemeanings ascribed to them: "Bank" shall mean Texas Commerce Bank National Association. • "Officer" shall mean the Chairman of the Board, the President, any Vice Chairman, any Executive Vice President, any Managing Director, any Senior Vice President, any Vice President, any Assistant Vice President, any Officer, the General Counsel, the Chief Financial Officer, the Chief Administrative Officer, the Secretary, the Controller and the Cashier of the Bank, and any Chairman, any President, any Vice Chairman, any Executive Vice President, any Managing Director, any Senior Vice President, any Vice President, any Assistant Vice President and any Officer of any region of the Bank. "Senior Officer" shall mean the Chairman of the Board, the President, any Vice Chairman, any Executive Vice President, any Managing Director, any Senior Vice President, any Vice President, the General Counsel, - the Chief Financial Officer, the Chief Administrative Officer, the Secretary, the Controller and the Cashier of the Bank, and any Chairman, any President, any Vice Chairman, any Executive Vice President, any Managing Director, any Senior Vice President and any Vice President of any region 'of the Bank. RESOLVED, that the Officers be, and each of them hereby is, authorized to execute and deliver for and on behalf of the Bank agreements (including, but not limited to, agency agreements, transfer agency agreements, paying agency agreements, exchange agreements, escrow agreements and' other similar agreements), indentures, mortgages, deeds, releases, conveyances, assignments, transfers, leases, demands, proofs of debt, claims, discharges, satisfactions, settlements, petitions, affidavits, receipts, instruments or documents, powers of attorney, records, bonds, undertakings, proxies, other agency powers, authentication certificates appearing on bonds and debentures, registration certificates appearing on stock, bond or debentures certificates and such other documents and instruments, other than secretary's certificates or officer's certificates, as may be necessaryand appropriate to carry out the fiduciary or agency powers of the Bank. RESOLVED, that the Senior Officers and any Assistant Secretary of the Bank be, and each of them hereby is, authorized to countersign, acknowledge or verify accounts, schedules, requisitions, certifications and declarations, other ,than secretary's certificates or officer's certificates, in connection with the exercise of the fiduciary or agency powers of the Bank. RESOLVED, that the power and authority conferred to any person pursuant to these resolutions shall include, ,but not be limited to, the power to execute any other documents and to do and perform such other acts and things as may be necessary or appropriate to consummate the transactions so authorized or to carry out the purposes and intent of such resolutions. EXECUTED effective as of the 10th day of April , 1996, at Houston, Texas. Texas Commerce Bank National Association By: Assistant Secretary 9 CERTIFICATION AS TO CORPORATE AUTHORITY The undersigned officer of Texas Commerce Bank National Association, a national banking association, serving as Vice President and Trust Officer, under the resolution authorizing the issuance of $1,115,000 CITY OF PEARLAND, TEXAS WATER AND SEWER SYSTEM REVENUE REFUNDING BONDS, SERIES 1996A, hereby certifies as follows: The Agreements were executed on behalf of the Texas Commerce Bank National Association by the persons named below whose offices appear set opposite their names, and said persons were at the time of executing the Agreements, and are now,. duly elected, qualified, and acting incumbents of their respective offices; and the signature appearing after each of said person's names is the true and correct specimen of such person's genuine signature. Name Office Signature Yolanda C. Garcia Assistant Vice President and Corporte Trust Officer J. Cherise Story Vice President and Corporate Trust Officer The foregoing officers of the Texas Commerce Bank National Association by virtue of the authority delegated to them by the Board of Directors of' the Texas Commerce Bank National Association pursuant to resolution, .a true and correct copy of which is attached hereto as Exhibit A, are authorized to execute and deliver on behalf of the Texas Commerce Bank National Association such other and further documents as may be necessary or incidental to the acceptance and performance of the trusts set forth in the Agreements to attest any of the foregoing, and to apply the seal of the Texas Commerce Bank National Association thereto. IN WITNESS WHEREOF, I have hereunto -.set my hand and affixed the seal of the Texas Commerce Bank National Association this loth day of April , 1996. By alttc.t» �, —n, Relic '1 [SEAL] SIGNATURE IDENTIFICATION AND NO -LITIGATION CERTIFICATE THE STATE OF. TEXAS § COUNTIES OF BRAZORIA AND HARRIS § CITY OF PEARLAND § We, the undersigned officers of the City of Pearland, Texas (the "City"), certify that we officially signed, by our manual or facsimile signatures, on behalf of the City, the following described certificates of obligation, to wit: CITY OF PEARLAND, TEXAS WATER AND SEWER SYSTEM REVENUE REFUNDING BONDS, SERIES 1996A, dated June 1, 1996, and aggregating $1,115,000 (the "Bonds"). That the Bonds have been duly and officially executed by the undersigned with their manual or facsimile signatures in the same manner appearing hereon, and the undersigned hereby adopt and ratify their respective signatures in the manner appearing on each of the Bonds, whether in manual or facsimile form, as the case may be, as their own signatures. That on the date of such signing and on the date hereof, we were and are the duly chosen, qualified and acting officers authorized to execute the Bonds, and holding the official titles set forth below opposite such signatures. We further certify that no litigation is pending or, to our knowledge, threatened in any court to restrain or enjoin the issuance or delivery of the Bonds, or the collection or application of the revenues pledged or to be pledged topay 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 dated May 13, 1996, authorizing the issuance, sale and delivery of the Bonds (the "Ordinance"), or contesting the powers of the City or the authorization of the Bonds or the Ordinance. We further certify that the seal that has been impressed, or placed in facsimile, upon each of the Bonds is the legally adopted, proper and only official seal of the City, such official seal being impressed upon this certificate. We further certify that no petition or other request has been filed with or presented to any official of the City requesting that any of the proceedings authorizing the Bonds be submitted to a referendum or other election. We further certify that Paul Grohman is the. City Manager of the City and that his signature as set folow is ftenuine. City Manager, City. of Pearland, Texas We further certify that the information and data contained in the General Certificate dated _June 19_ , 1996 remain true and correct as of this date. WITNESS OUR HANDS AND THE SEAL OF THE CITY thin June 19 , 1996. SIGNATURES (CITY SEAL) STATE OF TEXAS § COUNTIES OF § BRAZORIA AND HARRIS § TITLE OF OFFICE Mayor, City of Pearland, Texas City Secretary, City of Pearland, Texas Before me, on this day personally appeared the foregoing individuals, known to me to be the persons whose names are subscribed to the foregoing instrument. Given under my hand and seal of office this ( 3J'day of rV\ lA k, 1996. Notary Public, Sta - of Texas Ol% LISA D. JONES _« •• : y NOTARY PUBLIC • STATE OF TEXAS yj$r ,t�`�a MY COMMISSION EXPIRES 'ie nun:`+SEPTEMBER 21,1999 0303534.01 059613/1514 Typed pr. Printed Name: Lt Sa l7. TD nes My Commission xpires: 61 1 GENERAL CERTIFICATE STATE OF TEXAS § COUNTIES OF BRAZORIA AND HARRIS § CITY OF PEARLAND § We, the undersigned officers of the City of Pearland, Texas (the "City"), do hereby make and execute this certificate for the benefit of the Attorney General of the State of Texas and all other persons interested in the City's $1,115,000 CITY OF PEARLAND, TEXAS WATER AND SEWER SYSTEM REVENUE REFUNDING BONDS, SERIES 1996A, dated June 1, 1996 (the "Bonds"), now in the process of issuance, as follows: (1) The City is a duly incorporated Home Rule City, having more than 5,000 inhabitants, operating and existing under the Constitution and laws of the State of Texas and the duly adopted Home Rule Charter of the City. The City's Home Rule Charter has not been changed since the approval by the Attorney General of the State of Texas of the City of Pearland, Texas Combination Tax and Revenue Certificates of Obligation, Series 1995, dated May 1, 1995, which are the last obligations issued by or on behalf of the City. The City has annexed one piece of property since the issuance of such obligations, as shown in Exhibit A hereto. (2) The Bonds are being issued to provide funds (a) to refund the City's outstanding Waterworks and Sewer System Revenue Bonds, Series 1978 (the "Refunded Bonds") and (b) to pay expenses in connection with the issuance of the Bonds. (3) From February 1, 1996, to the date hereof, the following individuals were the duly elected and qualified Mayor and City Council of the City holding the offices opposite their names: Tom Reid Mayor Randy K. Weber Council Member Richard Tetens Council Member Jerry Richardson Council Member Kevin Cole Council Member Helen Beckman Council Member (4) From February 1, 1996, to the date hereof, the following individuals were the duly appointed and qualified officers of the City holding the positions opposite their names: Administration Position Paul Grohman Richard Burdine Jim Causey Yolanda Benitez Ruby Jo Knight Amy McCullough City Manager Assistant City Manager Director of Finance City Secretary Tax Assessor/Collector City Attorney (5) The Bonds were sold at a price equal to $1,117,750.80 (representing the principal amount of the Bonds plus accrued interest) by means of a private placement to Merchants. Bank, Houston, Texas. (6) Attached to this certificate as Exhibit B is a true, full and correct debt service schedule for the Bonds and for all presently outstanding obligations of the City which are payable from Net Revenues (as defined below) of the City's water and sewer system (the "System"), including the City's Water and Sewer System Revenue Bonds, Series 1996B (the "Series 1996B Bonds"), which are being issued concurrently with the Bonds. (7) None of the Refunded Bonds have ever been held in or purchased by the account of any of the interest and sinking funds created and maintained for the payment and security of the Refunded Bonds, and none of the Refunded Bonds are currently owned nor have any of the same ever been purchased or held for any account or fund of the City. (8) The following is a true, full and current schedule of System revenues, remaining after the payment of.all operation and maintenance expenses thereof ("Net Revenues"), for the past three fiscal years: Fiscal Year Ended September 30 1993 1994 1995 $741,126 $1,209,965 $1,705,627 (9) Attached to this certificate as Exhibit C is a true, full and current ordinance establishing the utility rates of the System that are currently in effect. (10) Neither the revenues nor the properties of the System are in any way pledged or hypothecated other than the pledge of the Net Revenues of the System to the Bonds and the Series. 1996B Bonds now in the process of issuance, the City's Combination Tax and Revenue Certificates of Obligation, Series 1995 and the City's Combination Tax and Revenue Certificates of Obligation, Series 1991. (11) The City is not in default as to any covenant, condition or obligation on any prior bonds or other obligations payable from the Net Revenues of the System. 2 SIGNED AND SEALED this , June 19 _ , 1996. City cr: tary, City of Pearl. d, Texas (CITY SEAL) . 0303517.01 059613/1516 CITY OF PEARLAND, TEXAS Mayor, City of Pearland, Texas Exhibit A Annexation Documentation f F.XHIRff p Cn ©E P©©rilI©d 3519 liberty Drive • Peorlond, Texas 77581-5416 (713) 485-2411 • Fox (713) 485-8764 CERTIFICATION THE STATE OF TEXAS COUNTIES OF BRAZORIA & HARRIS I, Yolanda C. Benitez, City Secretary of the City of Pearland, Texas, hereby certify that the attached constitutes a true and correct copy of (5 �' r.�(1Q 4c%� 7o 6oduly passed and approved by the City Council at a regular meeting held on the llth .day of December, 1995. Witness my h nd and sea of the City of Pearland, Texas, this al/...,day of19 -! g, at Pearland, Texas. (SEAL) ORDINANCE NO. 708 AN ORDINANCE EXTENDING THE CITY. LIMITS OF THE CITY. OF PEARLAND, TEXAS, TO INCLUDE ALL LAND AREA WITHIN CERTAIN LIMITS AND BOUNDARIES AND ANNEXING TO THE CITY OF PEARLAND ALL OF THE AREA WITHIN SUCH .LIMITS AND BOUNDARIES; APPROVING A SERVICE PLAN FOR ALL OF THE AREA WITHIN SUCH LIMITS AND BOUNDARIES; CONTAINING OTHER PROVISIONSRELATED TO THE SUBJECT; AND PROVIDING A SAVINGS AND SEVERABILITY CLAUSE. WHEREAS, the City Council of the City of Pearland, Texas, has, following due notice and publication in accordance with the requirements of §43.052, Tex. Local Govt. Code, conducted two (2) public hearings regarding the City's intended annexation of certain territory located contiguous to the City and within the City's extraterritorial jurisdiction; and WHEREAS, public hearings were conducted before the City Council on October 9, 1995, at 6:00 o'clock p.m. and on October 23, 1995, at 6:00 o'clock p.m., at the Pearland City Hall, 3519 Liberty Drive, Pearland, Texas; and 'WHEREAS, the City of Pearland has, in accordance with .§43.051 et seq., Tex. Local Govt. Code, complied with all procedural requirements regarding the annexation of territory, including the preparation of a plan for extension of municipal services into the area annexed to the City; and WHEREAS, the City intends to fulfill those obligations imposed upon it by State law regarding newly annexed areas, including timely provision of municipal services as required by law; and WHEREAS, the City Council finds and determines that the annexation intended by this Ordinance is in the best interests of the City of Pearland and benefits the health, safety, and welfare of the citizens of said City; now, therefore, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITYOF PEARLAND, TEXAS: Section 1. That the boundaries and limits of the City of Pearland, Texas, are hereby extended to embrace and include all of the territory described in Exhibit "A" attached hereto and made a part hereof, and such territory is hereby annexed to and made a part of the City. Section 2. The plan for extension of municipal services into the territory annexed to the City of Pearland by the provisions of this Ordinance is set forth in the "City of Pearland, Texas Service Plan for 588 Acres of Land Located Along FM 518 West of the Present City Limit Line". attached hereto as Exhibit "B" and made a part. hereof for all purposes. Such Municipal Service Plan is hereby approved. Section 3. The City Council officially finds, determines, recites and.declares that sufficient.written notices of the date, hour, place and subject matter of the meetings of the .City Council at which this Ordinance was considered were posted at. a place convenient to the public at the City Hall of the City for the time required by law preceding said meetings, as required by law;.and that said meetings have been open to the public, as required by law, at all times during which this Ordinance and the subject matter thereof has been discussed, considered and formally acted upon. The City Counc:.l further ratifies, approves and confirms such written notices and the contents and posting thereof. Section 4, If any section or part of this Ordinance be held unconstitutional, ilieal or invalid, or the application thereof ineffective or inapplicable. as -to any territory, such unconstitutionality, illegality, invalidity, or ineffectiveness of such section or part shall in no wise affect, impair or invalidate the remaining,portions, the same shall be and remain in full force and effect; and should This .Ordinance for any reason be ineffective as to any part of the area hereby annexed to the City of Pearland, such ineffectiveness of this Ordinance as to any such part or parts of any such areas shall not affect theeffectiveness of the Ordinance as to all of the remainder of such area, and the City Council hereby declares it to be its purpose to annex to the City of Pearland every part of the area described in Exhibit "A", attached hereto; regardless of whether any -other part' of such described area is hereby effectively annexed to the City. Provided, further,. that if there is included in the general description of territory set out in Exhibit "A", attached hereto, 2 any land or area which is already a part of and included within the general limits of the City of Pearland, or which is presently part of and included in the limits of any other city, town or village, or which is not within the City of Pearland's jurisdiction to annex, the same is hereby excluded and excepted from the territory to be annexed as fully as if such excluded and excepted area was specifically described herein. PASSED and APPROVED on first reading th , A. D. 1995. ATTEST: Yol = :d. C. Benitez, Cetary day of Tom Reid, Mayor PAS ED andpAPPROVED on second and final reading this day of , 1 C,ei , A. D., 1995. c-cam% Tom Reid, Mayo ATTEST: APPROVE C. Benitez, ity Secr'tary FORM: y Mo es M Cul oug , City Att ;" ney Exhibit "A" METES AND BOUNDS DESCRIPTION 588 ACRES 588 acres, more or less, situated in the Section 7 of the H.T. & B. RR Co. Survey, Abstract No. 219; Section 8 of the H.T. & B. RR Co. Survey, Abstract No. 504; Section 9 of the H. T. & B. RR Co. Survey, -Abstract No. 234; Section 15 of the H. T. & B. RR Co. Survey, Abstract No. 241; Section 15 of the H. T. & B. RR Co. Survey, Abstract No. 241; Section 17 of the H. T. & B. RR Co. Survey. Abstract No. 242; Section 19 of the H. T. & B. RR Co. Survey, Abstract No. 243; Section 20 of the H. T. & B. RR Co. Survey, Abstract No. 506; Section 21 of the H. T. & B. RR Co. Survey, Abstract No. 309; and H. T. & B. RR Co. Survey, Abstract No. 560 of Brazoria County, Texas, said 588 acres, more or less, being more particularly described by metes and bounds as follows: BEGINNING at the intersection of the north right-of-way line of F.M. 518 (100 foot width) and the west right-of-way line of O'Day road (80 foot width), also being thesoutheast corner of the Garden Acres Subdivision, unrecorded, and being the same tract of land described in Volume 595, Page 63 of the Deed Records of Brazoria County, also lying on the City of Pearland city limits line; THENCE WEST, with said north right-of-way line and said city limits line. 1.358 feet, more or less. to a projected line of the easterly line of that certain 39.2484 acre tract described in Clerk's File No. 94-025671 of said Deed Records, also being a northwesterly corner of said city limits; THENCE SOUTH, passing'through the right-of-way of said F.M. 518, with said easterly line of the 39.2484 acre tract and said city limits line; 2,640 feet, more or less, to the southeast corner of said 39.2484 acre tract, said corner being in the north right-of-way line of Daugherty Road (County Road 91)(60 foot width); THENCE WEST, with the said north right-of-way line of Daugherty Road, and in part with said city limits line, and passing through the right-of-way of Manvel Road (F.M. 1128)(100 foot width), 4,013 feet, more or less, to the southeast corner of that certain 7 1/2 acre tract of land described in Volume 797, Page 488A, said corner also being in the west right-of-way line of said Manvel Road; THENCE NORTH, with said westerly right-of-way line of Manvel Road, 775 feet, more or less, to the northeast corner of a 4.6945 acre tract described in Volume 86288, Page 101, being the southeast corner of West Chester Estates, unrecorded, and the southeast corner of that certain "Tract 2" described in Volume 1700, Page 879; THENCE WEST, with the northerly line of said 4.6945 acre tract, 990 feet, more or less, to the northwest corner of said 4.6945 acre tract, being the southwesterly corner of said West Chester Estates and the southwest corner of that certain "Tract 6" described in Volume 834, Page 392; THENCE NORTH, with the west line of said West Chester Estates, 1,260 feet, more or less, to a point 500 feet south of the centerline of said F.M. 518; THENCE WEST, parallel to said centerline, 1,210 feet, more or less, to the easterly line of that certain 86.8396 acre tract described in Volume 89711, Page 566 and an east line of M.U.D. No. 1; THENCE NORTH, with said easterly line of the 86.8396 acre tract, and said east line of M.U.D. No. 1, 450 feet, more or less, to the northeast corner of said 86.8396 acre tract, being the nonhwest corner of that certain 13.30 acre tract described in Volume 89641, Page 611, also being a northeast corner of said M.U.D. No. 1 and lying on said south right-of-way line of F.M. 518; THENCE WEST, with said south right-of-way line of F.M. 518,-1,059 feet, more or less, to the northeast corner of that certain 1.0 acre tract described in Volume 408, Page 538; THENCE SOUTH, with the east line of said 1.0 acre tract, 209 feet, more or less, to the southeast corner of said 1.0 acre tract; THENCE WEST, with the south line of said 1.0 acre tract, 209 feet, more or less, to the southwest corner of said 1.0 acre tract; THENCE NORTH, with the west line of said 1.0 acre tract, 209 feet, more or less. to the northwest corner of said 1.0 acre tract and said south right-of-way line of said F.M. 518; THENCE WEST, with said south right-of-way line of F.M. 518, 451 feet. more or less. to the northwest corner of that certain 38.2906 acre tract recorded in Voltime 91968. Page 809, said corner also being the northeast corner of that certain 9.2461 acre tract recorded in Volume 1757. Page 665. and a northwest corner of said M.U.D. No. 1; THENCE SOUTH, with the westerly line of said 38.2906 acre tract, and a west line of said M.U.D. No. 1, 671 feet, more or less, to the southeast corner of said 9.2461 acre tract, said corner also being the northeast corner of that certain 10 acre tract as described in Volume 1.757, Page 661; THENCE WEST, in part with a northerly line of said 10 acre tract, 670 feet, more or less, to the westerly line of said 10 acre tract; THENCE NORTH, with said westerly line of the 10 acre tract, 65 feet, more or less. to the southeast corner of a 10.305 acre tract described under Clerk's File No. 93-018201; THENCE WEST, with the south line of said 10.305 acre tract, passing through the right-of-way of Chocolate Bayou Road (County Road 89)(width unknown), 710 feet, more or less, to the westerly right-of-way line of said Chocolate Bayou Road; THENCE NORTH, with said westerly right-of-way line of Chocolate Bayou Road; 160 feet, more or less, to the northeast corner of that certain 9.5144 acre tract described under Clerk's File No. 93- 023854, said corner also being the southeast corner of that certain 5 acre tract described in Volume 889, Page 792; THENCE WEST, with the southerly line of Said 5 acre tract and the southerly line of that certain tract granted to Rafael R. Viada, et ux, described in Clerk's File No. 92-27920. 822 feet. more or less, to the southwest corner of said Viada Tract, said corner also being the southeast corner of that certain 8.243 acre tract described in Volume 85205, Page 931; THENCE WEST, with the southerly line of said 8.243 acre tract, 745 feet, more or less; THENCE NORTH, crossing said 8.243 acre tract, 550.feet, more or less, to the centerline of said F.M. 518; THENCE NORTH, in part with the westerly line of that certain 1.798 acre tract described in Volume 86242, Page 86, 522 feet, more or less, to the northeast corner of that certain 3.50 acre tract described in Volume 822, Page 662, also being the northwest corner of said 1.798. acre tract; THENCE EAST, in part with the northerly line of said 1.798 acre tract and crossing a 15.790 acre tract described in Volume 88553, Page 338, 861 feet, more or less, to the centerline of Cullen Boulevard (60 foot wide); THENCE EAST, in part with the southerly line of Lot 15 and Lot 31, as recorded in Volume 1615, Page 35, 1,578 feet, more or less, to the westerly right-of-way line of a 40 foot wide dedicated road; THENCE NORTH, with said westerly right-of-way line of 40 foot wide road, 524 feet, more or less, to the northeast corner of said Lot 31; THENCE EAST, passing through said 40 foot wide road and with the northerly line of that certain tract described in Volume 88625, Page 214, the northerly line of that certain 9.575 acre tract recorded in Volume 1570, Page 289, and the northerly line of that certain 10 acre tract described in Volurne.1564, Page 73, 1,703 feet, more or less, to the west line of that certain 238.8852 acre tract described in Volume 91983, Page 482, and the west line of Brazoria County Municipal Utility District No. 16 (M.UD. 16); THENCE SOUTH, with the west line of said M.U.D. 16, and the east line of said 40 foot dedicated road, 44.97 feet, to the south boundary line of M.U.D. 16; THENCE EAST, with the south line of said M.U.D. 16, 606.70 feet, to a point for corner, THENCE SOUTH, with said southerly line, 450.00 feet to a point for corner; THENCE EAST, with the south line of said. M.U.D. 16, 1,502.00 feet to a point for corner, said point being located in the east right-of-way line of Max Road (County Road 108); THENCE SOUTH, 80.94 feet along said east right-of-way line to a point for corner; THENCE EAST, in part with the north line of said Lot 32 and the north line of Lot 64 recorded in Volume 2, Page 23, 2,002 feet, more or less, to the east right-of-way line of Roy Road (40 foot -width); THENCE SOUTH, along said east right-of-way of Roy Road, 32 feet, more or less; THENCE EAST, in part with the north line of Lot 23 and the north line of Lot 46 recorded in Volume 2, Page 23, 2,000 feet, more or less, to the westerly right-of-way line of Garden Road (County Road 109)(60 foot width); THENCE NORTH, with said westerly right-of-way line of Garden Road, 1,660 feet, more or less; THENCE EAST, passing through said Garden Road and with the northerly line of Section 1 of said Garden Acres, 2,017 feet, more or less, to the aforementioned west right-of-way line of O'Day Road; THENCE SOUTH, with the said west right-of-way line of said O'Day Road, 2,040 feet, more or less, to the POINT OF BEGINNING, and containing 588 acres, more or less.. DATES (Term) Exhibit B-1 Debt Service Schedule for the Bonds MATURING COUPON INTEREST KOTAL FISCAL YEAR MOUNT RATE AMOUNT DEBT SERVICE DEBT SERVICE 3/01/77 41,263.13 41,263.13 9/01/97 155,000.00 4.550 27,508.75 182,508.75 223,771.88 3/01/96 23,982.50 23,982.50 9/01/98 180,000.00 4.750 23,982.50 203,982.50 ,227,965.00 3/01/59 19,707.50 19,707.50 9/01/99 185,000.00 4.900 19,707.50, 204,707.50 224,415.00 3/01/C0 15,175.00 15,175.00 9/01/00 195,000.00 5.000 15,175.00 210,175.00 225,350.00 3/01/01 10,300.00 10,300.00 9/01/01 . 200,000.00 5.100 10,300.00 210,300.00 220,600.00 3/01/02 5,200.00 5,200.00 9/01/02. 200,000.00 5.200 5,200.00 205,200.00 210,400.00 Accrued Interest S1,115,000.00 $217,501.88 S1,332,501.88 . 31,332,501-88 -2,750.88-2,750.88 $214,751.00 S1,329,751.00 Exhibit B-2 Combined Debt Service Schedule CITY Of PEARLAND Total MW/SS Revea.e Debt MATURING PRINCIPAL 10/01 DATES AMOUNT AMOUNT INTEREST TOTAL fY TOTAL 1997 240.000.00 240,000.00 539,198.88 779,198.88 779,198.88 1998 345,000.00 345,000.00 437,522.50 782,522.50 782,522.50 1999 355,000.00 355,000.00 423,692.50 778,692.50 778,692.50 2000 370,000.00 370,000.00 408,047.50 778,847.50 778,847.50 2001 385,000.00 385,000.00 392,885.00 777,885.00 777,885.00 2002 410,000.00 . 410,000.00 375,840.00 785,840.00 785,840.00 2003 420,000.00 420,000.00 357,460.00 777,460.00 777,460.00 2004 440,000.00 440,000.00 341,080.00 781,080.00 781,080.00 2005 455,000.00 455,000.00 323,480.00 778,480.00 778,480.00 2006 475,000.00 475,000.00 304,825.00 779,825.00 779,825.00 2007 495,000.00 495,000.00 284,875.00 779,875.00 779,875.00 2008 515,000.00 515,000.00 263,590.00 778,590.00 778,590.00 2009 S40,000.00 540,000.00 240,930.00 780,930.00 700,930.00 2010 540,000.00 560,000.00 216,630.00 776,630.00 776,630.00 2011 590,000.00 590,000.00 190,870.00 780,870.00 700,870.00 2012 615,000.00 615,000.00 163,140.00 778,140.00 778,140.00 2013 645,000.00 645,000.00 133,927.50 778,927.50 778,927.50 2014 675,000.00 675,000.00 102,967.50 777,967.50 777,967.50 2015 710,000.00 710,000.00 70,567.50 780,567.50 780,567.50 2016 745,000.00 745,000.00 36,132.50 781,132.50 781,132.50 Totats S9,985,000.00 $9,985,000.00 85,608,461.38 S15,593,441.38 S15,593,461.38 ComponentJae* Amount Principe' AMt Cat/Proceeds WAN Title $EW96YS* 1,115, 000.00 1,115,000. 00 1,115, 000.00 3.832 yrs Refunding Soule Series 1996A ME1196SRf 8,870,000.00 8,870,000.00 8,870,000.00 13.255 yrs 1N/SS Revenue Banda Ser. 19968 Total $9,985,000.00 $9,985,000.00 $9,985,000.00 12.203 yrs Exhibit C Resolution Establishing Utility Rates of the System 0303517.01 069623/1817 EXHIBIT U Cift p@aelland 3519 liberty Drive • Pearland. Texas 77581-5416 (713) 485-2411 • fax (713) 485-8764 CERTIFICATION -THE STATE OF TEXAS § COUNTIES OF BRAZORIA & HARRIS § I, Yolanda C. Benitez, City Secretary of the City of Pearland, Texas, hereby certify that the attached constitutes a true and. correct copy of Ordinance No. 679, duly passed and approved by the City Council at a regular meeting held on the 26th day of September, 1994, at Pearland, Texas. Witness my hand and seal of the City of Pearland, Texas, this 13th day of May, 1996, at Pearland, Texas. (SEAL) Y ` da C. Beni City Secretary • C)pooled on Recycled Paper ORDINANCE NO. 679 AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF PEARLAND, TEXAS, DETERMINING CHARGES FOR WATER AND SEWER SERVICES FURNISHED BY THE CITY, AS PROVIDED IN CHAPTER 30, ARTICLE 11, SECTION 30-38 OF THE CODE OF ORDINANCES; REPEALING PREVIOUS WATER AND SEWER SERVICE RATE SCHEDULES; PROVIDING A SAVINGS CLAUSE, PROVIDING A SEVERABILITY CLAUSE AND PROVIDING AN EFFECTIVE DATE. WHEREAS, Chapter 30, Article I1, Section 30-38 of the Code of Ordinances of the City of Pearland, Texas provides that the rates and charges for the consumption of utility services furnished by the City shall be determined by the City Council from time to time, and the same shall be on file in the office of the City Secretary; NOW THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF PEARLAND, TEXAS, THAT: Section 1. Definitions. Residential Unit - Any structure or part thereof used to fulfill the housing requirements of one or more persons living together as a single family. Commercial Unit - Any other structure or part thereof used to fulfill the housing requirements of not more than one business establishment or of not more than one establishment of any other kind, but a business unit shall not include any kind of multi -family establishment. Multi -Unit Residence or Business - A building consisting of two or more residential or commercial units. User - Any person, firm or corporation connected to the city water system for the purpose of receiving water service. Section 2. Water Rates. All property upon which any building has been or may hereafter be erected having a connection with any mains or pipes presently existing or which may be hereafter constructed and used in connection with the City water system shall pay the following rates each month for water service furnished by the City: Residential Unit or Commercial Unit Consisting of a Single Unit: Up to and including first 2000 gallons All over 2000 gallons Multi -Unit Residence or Business: Up to and including first 2000 gallons All over 2000 gallons $8725 al minimum Si-5-2 WM per 1000 gallons $kg minimum per uni t $t3 SIA per 1000 gallon usage The rate of $&25 gal shall be the minimum monthly rate for all water users including the users for less .than a monthly period. If the user's water meter becomes inoperative and fails to register, the user will be charged at the average monthly consumption as shown by the meter when in order. All water that passes through the meter shall be charged for, whether used or not. Section 3. Sewer Rates. The following rates or charges. for the use and service of the: sewage system of the City of Pearland arc determined as follows: 1. Commercial and Industrial Users HavingCity Water Service: The monthly sewer service charge for all Corrunercial and Industrial Users having City Water Service will be $8.63 Mg minimum for 2000 gallons of water usage or less and $t:lt $ per 1000 gallons for water usage over 2000 gallons. 2. Commercial and Industrial Users Not Having City Water Service: The monthly sewer service charge for all Commercial and Industrial Users having sewer service but not having City Water Service will be $ per 1000 gallons of comparable bill for City Water Service. The City, will install, at its expense, a water meter in the private water suppl and read the meter monthly to determine the amount of water consumption. $8:63 $$; Monthly Minuntun charge. 3. Commercial and Industrial Users Who Have Waste Water Discharge,Split Between the Sanitary Sewer and Other Methods of Discharge: In the event only a portion of the user's waste water is discharged into the Sanitary Sewer, the City Council, upon the user's request, shall estimate what portion of the water usage is discharged into the Sanitary Sewer and his monthly sewer charge will be figured ' ^t accordingly. $8�r3 $ Monthly Minimum Charge. 4. Commercial and Industrial Users Who Use the Water Thatis a Partof Their Product or Production Process and That is Not Discharged into the Sanitary Sewer System: If water is a part of a Commercial or Industrial user's product or is used in his production process in such a manner that there is no discharge into the Sewer System, then, upon the user's request, the City Council will establish the amount of water used for such purpose and his monthly sewer charge will be figured accordingly. $8.63 $ Monthly Minimum Charge. 5. Residential Users Having City Water and Sewer Service: The monthly sewer service charge for all users having City Water will be $8. minimum for 2000 gallons of water usage or less and $1-H- $ ta per 1000 gallons for water usage over 2000 gallons. 6. Residential Users Having City Sewer Service but not having City Water Service: If a residential user is connected to the Sanitary Sewer System but not connected to the Water System, then the private system will be metered at City expense and the sewer rate 'S;:c will be $-i-1-1- $ :y k per 1000 gallons of the comparable bill for City Water Service. $8.fi3 $ Monthly Minimum Charge. 7. Multi -Unit Building, Residence or Business: Each unit of a multi -unit, residence or business which is separately metered will be charged a monthly sewer service charge at the rate of $8.63 so for 2000 gallons of water usage or less and $-1-H- $:1.,. °` per 1000 gallons for water usage over 2000 gallons. 8. Multi -Unit Building With Common Water Meter for All Units: A multi -unit residence or business in which the units are served through a common water meter will be billed at the rate of $7.76 $ minunurn for 2000 gallons of water usage or 'per 1000gallons for water usage over 2000gallons(Multi-unit being and $� :66 $��;;0 g defined as being a building, residence or business consisting of two or more units.) 2 ORDINANCE NO. 679 Section 4. Repealer. All previously adopted water and sewer rate schedules shall be and are hereby repealed. Section 5. Savings. All rights and remedies which have accrued in the -favor of the City under this Ordinance and its amendments thereto shall be and are preserved for the benefit of the City. Section 6. Severability. If any section, subsection, sentence, clause, phrase, or portion of this Ordinance is for any reason held invalid or unconstitutional by any Court of competent jurisdiction, such portion shall be deemed a separate, distinct and independent provision and such holding shall not effect the validity of the remaining portions thereof. Section 7. Effective Date. This ordinance shall become effective on the t993 ° fi° : billing. PASSED and APPROVED on First Reading this /02_, day of A.D.,1994. C. V. Coppine , Mayor ATTEST: Pat Jones, City 'ecretary • PA SED a d APPROVED on Second and Final Reading thiso2. G day of A.D.,1994. C. . Coppinger, or ATTEST: tea Pat Jones, City cretary APPROVED AS TO FORM: NO ARBITRAGE CERTIFICATE City of Pearland, Texas Water and Sewer System Revenue Refunding Bonds, Series 1996A I, the undersigned officer of the City of Pearland, Texas, a political subdivision of the State of Texas located within Galveston and Harris Counties (the "City"), make this certification for the benefit of all persons interested in the exclusion from gross income and certain other treatment for federal income tax purposes of the interest to be paid on the City's Water and Sewer System Revenue Refunding Bonds, Series 1996A (the "Bonds") in the aggregate principal amount of $1,115,000, which are being issued and delivered simultaneously with the delivery of this certificate (the "Certificate"). I do hereby certify as follows: 1. General. I am the duly chosen, qualified and acting officer of the City for the office shown below my signature. In such capacity, I am charged, along with others, with responsibility for issuing the Bonds. I am familiar with the facts, estimates and expectations certified herein, and I am duly authorized to execute and deliver this Certificate. I am familiar with the provisions of the ordinance adopted on May 13, 1996, authorizing the issuance of the Bonds (the "Ordinance"), and particularly the provisions thereof relating to the treatment of the Bonds and the interest thereon for federal income tax purposes. I am aware of the provisions of the Internal Revenue Code of 1986, as amended (the "Code"), including Sections 103 and 141 through 150 thereof, and the Treasury Regulations (the "Regulations") promulgated under the Code. This Certificate is being executed and delivered pursuant to the relevant provisions of the Code and Sections 1.148-0 through 1.148-11, 1.149(d)-1, 1:149(g)-1, 1.150-1 and 1.150-2 of the Regulations. Certain terms used herein have the same meanings as given to those terms in the Code and the Regulations. Capitalized terms used in this Certificate (unless otherwise indicated herein) shall have the meanings ascribed to them in the Ordinance. 2. Reasonable Expectations. As an officer of the City responsible for issuing the Bonds, the undersigned hereby certifies, in good faith, that the City's expectations, as of the Issue Date (as defined herein), regarding the amount and use of the gross proceeds of the Bonds and other matters relevant to the treatment of interest on the Bonds for federal income tax purposes are accurately and completely stated herein, that all of such expectations and estimates stated in this Certificate are accurate, and that there are no facts, estimates or circumstances which would indicate that any of the expectations stated herein are not reasonable. 3. Descriptions of Governmental Purpose. The City is issuing the Bonds pursuant to the Ordinance to provide funds which will be used: (a) to refund and defease on September 1, 1996, the City's Waterworks and Sewer System Revenue Bonds, Series 1978 (the "Prior Bonds") in the aggregate principal amount of $1,250,000, maturing in the years 1996 through 2002 (the "Refunded 1978 Bonds") pursuant to an Escrow Agreement (the "Escrow Agreement") effective as of the Issue Date, between the City and Texas Commerce Bank National Association, Houston, Texas ("Escrow Agent"); and (b) to pay the costs of issuing the Bonds. The Refunded Bonds are being refunded and defeased in order to provide present value debt service savings to the City and to release the City from certain restrictive covenants included in the ordinance adopted by the City approving the issuance of the Refunded Bonds (the "Prior Ordinance"). The Escrow Fund established by the Escrow Agreement for the purpose of refunding and defeasing the Refunded Bonds is referred to as the "Escrow Fund." 4. The Refunded Bonds. (a) Issuance and Purpose. The Prior Bonds were issued by the City in accordance with the provisions of an ordinance adopted by the. City (the "Prior Ordinance"). The proceeds of the Prior Issue were used for construction and equipment of the City's waterworks and sewer system and to pay the costs of issuing the Prior Issue. (b) Not Private Activity Bonds. No bond which is part of the Prior Issue is or was a private activity bond within the meaning of Section 141(a) of the Code or an industrial development bond or private loan bond under Section 103 of the Internal Revenue Code of 1954. None of the facilities financed or refinanced or to be financed or refinanced with proceeds of the Prior Issue has been or is expected to be disposed of, or used in any manner other than as provided in the Prior Ordinance, prior to the final maturity date of the Bonds. (c) No Other Refundings. No portion of the proceeds of the Prior Issue has been or will be used to pay, directly or indirectly, principal of, or interest or redemption premium on, another issue of obligations of which the City or a related party with respect to the City is or was an obligor other than those refunded obligations identified in the Prior Ordinance (d) Not a Conduit Loan. None of the proceeds of the Prior Issue is or was proceeds of an obligation issued by another governmental entity and loaned to the City to carry out the governmental purpose of such other obligation. 5. Unspent Proceeds of the Refunded Bonds. The City has identified all amounts on hand as of the date hereof which constitute proceeds of Refunded Bonds and will identify all amounts, if any, which in the future will constitute proceeds of the Refunded Bonds (such as transferred proceeds, if any, and investment proceeds, if any; collectively, the "Unspent Proceeds"), the funds in which such amounts (to the extent, if any, currently on hand) are held, all investments which are allocable to such amounts, the governmental purposes for which such amounts were originally borrowed and will be expended, and the dates by which such expenditures are expected to be paid. All of the proceeds of the Prior Bonds has been spent prior to the date hereof. Accordingly, as of the date hereof, there are no Unspent Proceeds of the Refunded Bonds and none are expected to arise after the date hereof. 2 6. Replacement Proceeds of the Refunded Bonds. (a) Refunded Debt Service Amount. The City has determined the amount of the Debt Service Balance (as defined below) as of the date hereof and the portion of the Debt Service Balance properly allocable to the Refunded Bonds (the "Refunded Debt Service Amount"). (i) The term "Debt Service Balance" means the sum of: (1) the balances of all debt service funds, interest and sinking funds, reserve funds, replacement funds, and all similar funds and all other amounts and investments on hand and reasonably expected to be used (or to have been used, as if the Bonds had not been issued and the Refunded Bonds had not been refunded), directly or indirectly (such as, by the generation of income to be used), and (2) the balances of all funds and all other amounts and investments that are pledged, directly or indirectly, to pay principal of, or redemption premium or interest on, the indebtedness of City outstanding immediately prior to the issuance of the Bonds and payable from revenues of the City's waterworks and sewer systems, including the Prior Issue. For this purpose, a pledge includes, but is not limited to, any arrangement,. regardless of its form, which provides reasonable assurance .that the amount will be available to pay principal or interest, even if the City encounters financial difficulty. A pledge to a guarantor or an agreement to maintain an amount at a particular level or balance for the direct or indirect benefit of a bondholder or a guarantor would constitute a pledge for this purpose. (ii) The amount of the Refunded Debt Service Amount is not more than $188,280.00, which represents (or, in any event, is not less than) the portion of Debt Service Balance which was reasonably expected to be used to pay debt service on the Refunded Bonds (as if the Refunded Bonds had not been refunded) on a particular date. (iii) The City will deposit the Refunded Debt Service Amount in the amount of $188,280.00, in the Escrow Fund and use it to purchase obligations of the United States Treasury in the open market. (b) No Other Replacement Proceeds of Prior Issues. (i) Other than the Refunded Debt Service Amount, there are no amounts on hand which at any time had a sufficiently direct nexus to. the Prior Issue or to the governmental purpose of the Prior Issue to conclude that such amounts would have been used for that governmental purpose if the proceeds of the Prior Issue had not been or will not be used for that governmental purpose. 3 (ii) Other than the Refunded Debt Service Amount, there are no other funds, amounts, or investments on hand which at any time were pledged, intended or expected to be used to pay debt service on the Refunded Bonds or which otherwise constitute gross proceeds of the Refunded Bonds. ?J� (iii) The term to maturity of the Prior Issue is not longer than reasonably necessary for the respective governmental purposes of the Prior Issue. In each case, the weighted average maturity of the Prior Issue does not exceed 120 percent of the average reasonably expected economic life of the projects and facilities financed by the Prior Issue, determined in the same manner. as provided under Section 147(b) of the Code. For this purpose, any proceeds of the Prior Issue that have been, or will be, used to finance working capital expenditures have been assigned an expected economic life of zero. 7. Proceeds of the Bonds. The sales proceeds from the sale of the Bonds will be $-1,115,000.00 which represents the principal amount of the Bonds. 8. Use of Proceeds of the Bonds. The sales proceeds from the sale of the Bonds will be expended and applied by the City as follows: (a) Proceeds of the Bonds in an amount equal to $1,086,475.44 will be deposited and used on the date hereof (together with the Refunded Debt Service Amount equal to $188,280.00) to purchase direct obligations of the United States Treasury in the open market (the "Escrowed Securities"), the receipt from which (except for an ending cash balance in the Escrow Fund of $1.00) will be used to pay the principal of, redemption premium, if any, and interest on, the Refunded Bonds on September 1, 1996. (b) Proceeds of the Bonds in the amount of $15,610.00 represent a placement fee and will be paid to Rauscher Pierce Refsnes, Inc., the City's financial advisor (the "Financial Advisor"), on the date hereof from the sales proceeds as a cost to the City of issuing the Bonds. (c) Proceeds of the Bonds in the amount of approximately $12,664.81 will be disbursed within one year of the date hereof to pay the costs of issuing the Bonds. (d) Proceeds of the Bonds in the amount of $249.75 will be used as an initial deposit to the Escrow Fund. 9. Pre -Issuance Accrued Interest. In addition to the sale proceeds described in paragraph 8, the City will receive, upon the issuance of the Bonds, the amount of $2,750.88 representing interest on the Bonds accruing during the period from June 1, 1996, to the date hereof. Such amount will be deposited in the City's Interest and Sinking Fund and, along with all investment earnings therefrom, will be disbursed to pay interest on the Bonds on March 1, 1997, the first interest payment date on the. Bonds. Further, because the amount of $2,750.88 represents accrued interest on the Bonds for a period of less than one year and will be spent to pay interest on the Bonds within one year from the Issue Date, such amount constitutes pre- issuance accrued interest on the Bonds and, as such, is not considered proceeds, but will, along with the earnings therefrom, constitute gross proceeds of the Bonds. Further, this amount and the earnings thereon will be received and spent for the payment of, debt service on the Bonds within the same bond year (which begins on the Issue Date), and, consequently, will constitute a part of the Bona Fide Portion of the Interest and Sinking Fund (as described in paragraph 22 below) and will be considered invested for temporary period, during which such amount and the earnings thereon may be invested at a yield materially higher than the yield on the Bonds. 10. Transferred Proceeds. As of the date hereof, all of the amounts representing proceeds of the Refunded Bonds have been spent for the governmental purposes for which the Refunded Bonds were issued. Further, the City does not expect to receive or to have on hand at any time while the Bonds are outstanding any amounts or investments representing proceeds of the Refunded Bonds. Therefore, there will be no proceeds of the Refunded Bonds that will become transferred proceeds of the Bonds. 11. Investment Proceeds of the Bonds. The earnings on the investment of the proceeds of the Bonds described in paragraphs 8(a) and 8(d) will be used in addition to the amounts described in paragraphs 8(a) and 8(d) to pay the costs of refunding the Refunded Bonds. The City will have no investment earnings on the amount described in paragraph 8(b) since such amount will be paid on the date hereof to the Financial Advisor as a cost to the City. of issuing the Bonds Earnings on the amounts described in paragraph 8(c) will be used for the purpose described in paragraph 8(c). 12. Replacement Proceeds of the Bonds. There are no amounts on hand, and there are no amounts expected to be received, other than amounts to be held in the Interest and Sinking Fund (as defined in paragraph 20) for the payment of debt service on the Bonds which have or will have at any time a sufficiently direct nexus to the Bonds or to any governmental purpose of the Bonds to conclude that such amounts would have been used for that governmental purpose if the proceeds of the Bonds were not used or to be used for that governmental purpose. More specifically -- (a) Sinking Funds and Pledged Funds. Other than the Interest and Sinking Fund and the amounts and investments on deposit therein from time to time, there are not now and will not be at any time while the Bonds are outstanding -- (i) any debt service fund, reserve fund, replacement fund, any similar fund or any amount or investment reasonably expected to be used, directly or indirectly (such as, by the generation of income to be used), to pay principal or interest on the Bonds; and (ii) any fund, amount or investment that is directly or indirectly pledged to pay principal or interest on the issue. A pledge includes, but is not limited to, any arrangement, regardless of its form, which provides reasonable assurance that the amount will be available to pay principal or interest, even if the City encounters financial difficulty. A pledge to a guarantor or an agreement 5 to maintain an amount at a particular level or balance for the direct or indirect benefit of bondholder or a guarantor would constitute a pledge for this purpose. (b) No Other Replacement Proceeds. There will be no other replacement proceeds allocable to the Bonds. Based on the reasonable expectations of the City as of the date hereof, the term of the Bondsis not longer than, and the City will not allow the Bonds to remain outstanding longer than, is reasonably necessary for the governmental purposes for which the Bonds are being issued. The weighted average maturity of the Bonds does not exceed 120 percent of the reasonably expected economic life of the capital projects being financed or refinanced by. the Bonds, determined in the same manner as provided under Section 147(b) of the Code. In addition, none of the proceeds of the Bonds will be used to finance working capital expenditures. 13. No Overissuance. Based on the expectations set forth in the preceding paragraphs, the amount of the proceeds from the issuance of the Bonds, plus all investment proceeds to be received with respect to the Bonds, does not exceed by any amount, the amount required for the governmental purposes for which the Bonds are being issued. 14. Temporary Period Requirements for the Bonds. (a) Compliance with Yield Restriction on Proceeds. With respect to all amounts constituting proceeds of the Bonds at any time, the City reasonably expectsthat such amounts will be invested for an allowable temporary period (and, to such extent, may be invested without regard to the yield on the Bonds), will be invested at a yield not materially higher than the yield on the Bonds, or will not be invested pending expenditure or reinvestment at a yield not materially higher than the yield on the Bonds. (b) With respect to the proceeds of the Bonds, the City expects that: (i) The sale proceeds described in paragraphs 8(a) and 8(d), and all investment proceeds therefrom, will be invested in the Escrowed Securities, and as such, will be invested for an allowable temporary period not to exceed 90 days from the date hereof. (ii) The sale proceeds described in paragraph 8(b), which represents the placement fee paid to the financial advisor which will be paid on the date hereof and will not be received or invested by the City. (iii) The sale proceeds described in paragraph 8(c), and all investment proceeds therefrom, will be used to pay costs of issuance associated with the Bonds. To the extent not spent within 30 days from the date hereof, such amounts will be invested at a yield not materially higher than the yield on n the Bonds. (iv) As stated in paragraph 10, all proceeds of the. Refunded Bonds were spent prior to the date hereof. On the dates that proceeds of the Bonds are 6 used to pay principal on the Refunded Bonds, no proceeds of the Refunded Bonds will remain unexpended. There are no other amounts which are expected to be eligible to become transferred proceeds of the Bonds. (v) Other than the sale proceeds and investment proceeds referred to above in this paragraph 14, there are no other amounts which are expected to constitute proceeds of the Bonds. (c) Replacement Proceeds of the Bonds. Based on the expectations set forth in this Certificate, all amounts constituting replacement proceeds of the Bonds are expected to qualify at all times until spent for either the temporary period of 13 months applicable to a bona fide debt service fund or as a reasonably required reserve or replacement fund for the Bonds and, in either case, may be invested, to such extent, without regard to yield restriction. To the extent amounts constitute replacement proceeds of the Bonds that do not qualify for either of such exceptions, such amounts will be invested at a yield not materially higher than the yield on the Bonds. (d) All Amounts in Compliance. Based on the foregoing, the City reasonably expects that all gross proceeds of the Bonds will be invested for an allowable temporary period (and, to such extent, may be invested without regard to the yield on the Bonds), will be invested (or will be treated as invested) at a yield not materially higher than the yield on the Bonds, will not be invested pending expenditure, or will be invested as a reasonably required reserve or replacement fund for the Bonds (and, to such extent, may be invested without regard to the yield on the Bonds). All gross proceeds of the Refunded Bonds will be invested (or will be treated as invested) at a yield not materially higher than the yield on the Prior Issue. To the extent any amounts constituting gross proceeds of the Bonds or of the Refunded Bonds are not received, invested, or expended as described herein, the City will restrict the investment and reinvestment of such amounts to a yield, not materially higher than the yield on the Bonds or on the Prior Issue, as applicable. The City will monitor all receipts, investments, reinvestments, and expenditures while the Bonds are outstanding in order to assure that the foregoing expectations are realized. 15. Flow of Funds. Under the Ordinance,, the City is obligated to assess and collect revenues of its waterworks and sewer system in an amount sufficient to pay debt service on the Bonds. All revenuesassessed and collected by the City for or on account of the Bonds will be deposited into the Interest and Sinking Fund. 16. Issue Price. The Bonds were purchased by Merchants Bank, Houston, Texas (the "Purchaser") for cash and no other economic consideration. The Purchaser is not.a bond house, broker or similar person or organization acting in the capacity of wholesaler or underwriter. The Purchaser purchased. the Bonds for investment on its, own account and not for sale to the general public. The Issue Price of the Bonds are equal to the principal amount of the Bonds and does not exceed the fair market value of the Bonds as of the Sale Date. The term "Sale Date" shall mean 7 the first day on which there was a binding agreement in writing for the issuance of the Bonds by the City on specific terms that were not later modified or adjusted in any material respect. In the case of the Bonds, the Sale Date was May 13, 1996. The term "Issue Date" shall mean the first day on . which there is a physical delivery of the written evidence of the Bonds in exchange for the purchase price and such date shall not be earlier than the first day on which interest begins to accrue on the Bonds for federal income tax purposes. In the case of the Time Warrant, the Issue Date is June 19, 1996. Based on the foregoing and on the Certificate of Financial Advisor attached as Exhibit A and incorporated herein by reference, the Issue Price of the Bonds, exclusive of pre -issuance accrued interest, is $1,115,000.00. 17. Other Issues. The City's Water and Sewer System Revenue Bonds, Series 1996B (the "Series 1996B Bonds") issued by the City on the Date hereof. The Series 1996B Bonds and the Bonds will be treated as a single issue of obligations for federal income tax purposes. Except for the Series 1996B Bonds, there are no other obligations issued by the City or any related party of the City, which (a) were sold at substantially the same time as the Bonds (within 15 days), (b) are or will be payable from the same source of funds as the Bonds and (c) which are or will be sold pursuant to the same plan of financing as the Bonds. 18. . Purchase Price of the Escrowed Securities. The City has purchased the Escrowed Securities from the Financial Advisor in a negotiated sale. The City has deposited with the Escrow Agent on the date hereof pursuant to the City's program to refund the Refunded Bonds certain direct obligations of the United States Treasury in the open market (defined in paragraph 8(a) as the Escrowed Securities), as set forth in Exhibit A: (a) The purchase price paid by the City for each of the Escrowed Securities, as well as the aggregate purchase price of all the Escrowed Securities (including accrued interest to the Issue Date, the "Purchase Price") was — (i) determined in a bona fide arm's length transaction between parties not related or affiliated in any way and not involving any incentive other than to obtain the lowest purchase price for each of the Escrowed Securities for the City; (ii) determined without regard to the yield on the Escrowed Securities; (iii) determined without regard to any other aspect of the transaction of which the refunding or the issuance of the Bonds was a part and without regard to any economic consideration other than the purchase price to be paid for the Escrowed Securities; (iv) not higher than the price at which the City would have purchased such security from a seller other than the Financial Advisor under otherwise similar circumstances, but not involving a refunding of tax-exempt obligations or the investment of amounts constituting proceeds of tax-exempt obligations; and 8 (v) exclusive of all brokerage commissions, administrative expenses, or similar expenses of acquiring or carrying the Escrowed Securities. (b) On the date the City became obligated under a binding contract between the City and the Financial Advisor to purchase each Escrowed Security, each such Escrowed Security was traded on an established market other than one established to provide acquired obligations to the City or other issuers of governmental obligations. (c) The Escrowed Securities were purchased from the Financial Advisor, which acted in such transaction as principal for its own account and not as .an agent for the City. (d) The yield on the Escrowed Securities or any portion thereof has been calculated using, for such Escrowed Securities, an amount determined to be the aggregate of the Purchase Price of each Escrowed Security and the accrued interest to the Issue Date. (e) Based on the foregoing, the Purchase Price (including accrued interest to the Issue Date) of the Escrowed Securities is $1,274,755.44. 19. Yield on the Bonds. For purposes of this Certificate, the term "yield" shall have the meaning ascribed to it in Section 148(h) of the Code and the Regulations in effect thereunder and, when used with respect to the Bonds, shall mean that interest rate which when used as a discount factor to compute the present value as of the Issue Date of all scheduled payments of principal .of and interest on the Bonds produces an amount equal to (i) the present value (using the same discount rate) of the Issue Price of the Bonds, plus (ii) pre -issuance accrued interest on the Bonds as of the Issue Date. The yield on the Bonds shall not take into account or reflect any underwriters' discount or cost of issuance of the Bonds. For purposes hereof, yield is and shall be calculated on the basis of a 360-day year with interest compounded semi-annually. The yield on the Bonds is calculated on the basis of the final maturity date because, the Bonds are not subject to optional or mandatory redemption prior to their stated maturity dates. As stated in paragraph 13, the Series 1996B Bonds and the Bonds (the "Combined Issue") will be treated as a single issue of obligations for federal income tax purposes. Thus, the yield on the Combined Issue, calculated in the manner set forth above and based on the information set forth in the Certificate of Financial Advisor, attached hereto as Exhibit A, is 4.614198 percent. 20. The Interest and Sinking Fund. The proceeds from all revenues assessed and collected for and on account of the Bonds and all investment earnings on amounts in the Interest and Sinking Fund will be deposited promptly into the Interest and Sinking Fund. The Interest and Sinking Fund will be used primarily to achieve a proper matching of revenues and debt service on the Bonds within each bond year. All amounts which will be used to pay principal of and interest on the Bonds with 13 months of the date of deposit in the Interest and Sinking Fund and which will be depleted annually, except for a reasonable carryover amount not to 9 exceed the greater of (i) one year's earnings on the Interest and Sinking Fund or (ii) one -twelfth of the annual debt service on the. Bonds, will constitute a bona fide debt service fund component of the Interest and Sinking Fund (the "Bona Fide Portion"). All amounts on deposit in the Interest and Sinking Fund from time to time in excess of the Bona Fide Portion thereof and all amounts in the Interest and Sinking Fund and not spent within 13 months of the date of deposit therein (the "Reserve Portion") shall be treated separately for purposes of this Certificate. The expenditure of money deposited in the Interest and Sinking Fund shall be accounted for on the basis of such method of accounting as properly adopted and consistently applied by the City for tax purposes. Amounts on deposit from time to time in the Bona Fide Portion and in the Reserve Portion are allocable between the Bonds and any .other obligations of the City the payment of which may be secured by the Interest and Sinking Fund and shall be allocated under such method as properly adopted and consistently applied by the City for tax purposes. So long as any of the Bonds are outstanding, the portion of the Reserve Portion allocable to. the Bonds is not expected to exceed the lesser of (i) ten percent of the Issue Price, (ii) the maximum annual debt service. on the Bonds or (iii) 125 percent of the average annual debt service on the Bonds. If, however, the balance of the Reserve Portion should ever exceed the limitation specified in the preceding, sentence, such excess shall be invested at a yield not in excess of the yield on the Bonds. 21. No Other Sinking Funds. Other than the Interest and Sinking Fund, there are no other funds or accounts comprised of investment property established by and on behalf of the City :(a) which are expected to be used, or expected to generate earnings to be used, to pay debt service on the Bonds, or which are reserved or pledged as collateral for payment of debt service on the Bonds and (b) for which there is reasonable assurance that amounts therein will be available to pay debt service on the Bonds if the City encounters financial difficulties. Use of amounts in the Interest and Sinking Fund are described above. There is no other fund established, or to be created or established, which would be treated 'as a sinking fund with respect to the Bonds. Use of amounts in the Interest and Sinking Fund are described above. There is no other fund established,or to be created or established, which would be treated as a sinking fund with respect to the Bonds. 22. Minor Portion. The City expects that the gross proceeds of the Bonds, including all proceeds received with respect to the Bonds and all investment proceeds received on such amounts, and all other amounts pledged or anticipated to be used to pay principal of and interest on the Bonds, other than amounts representing a portion of the Bona Fide Portion of the Interest and Sinking Fund, will be expended in accordance with paragraphs 14 and 20 above. To the extent that such amounts remain unexpended or are otherwise on hand following the periods set forth in paragraphs 14 and 20 above exceeds the amount specified in paragraph 20, the City will invest such amounts (other than a minor portion not exceeding the lesser of 5 percent of the proceeds of the Bonds or $100,000 in the aggregate) at a yield not materially higher than the yield on the Bonds. 23. Qualified Tax -Exempt Obligations. Section 265 of the Code permits designation of governmental obligations such as the Bonds as "qualified -tax-exempt obligations." The Bonds have been, or are hereby, designated by the City as "qualified tax-exempt obligations" for purposes of Section 265(b)(3) of the Code. The Bonds are not private activity bonds within the 10 meaning of Section 141(a) of the Code. The City (and all entities related to the City) does not reasonably expect to issue, and will not designate, tax-exempt obligations, including the Bonds, in an aggregate amount (based in each case onthe higher of the principal amount or the issue price) in excess of $10,000,000 during the calendar year 1996. 24. Identification of Replacement Proceeds. Notwithstanding the expectations of the City as stated above in paragraph 12 above, the City will (at all times while the Bonds are outstanding) identify all replacement proceeds with respect to the Bonds, including any sinking fund created for repayment of the principal or interest on the Bonds or any other amounts held in any fund of the City reasonably expected by the City to be used to pay principal or interest on the Bonds. If the City identifies any replacement proceeds and determines that a temporary period pursuant to Section 1.148-2(e) of the Regulations is not applicable to such replacement proceeds, the City will limit the yield on .the investment_ of such replacement proceeds to the yield on the Bonds until such proceeds are treated as spent in accordance with the Regulations. The City acknowledges that failure to properly identify replacement proceeds and account for the investment and expenditure thereof as required by the Regulations may result in interest on the Bonds being includable in the gross income of the holders of the Bonds. 25. Compliance with Rebate Requirements. The City has covenanted in the Ordinance that it will take all necessary steps to comply with the requirement that rebatable arbitrage earnings on the investment of the gross proceeds of the Bonds, within the meaning of Section 148(f) of the Code, be rebated to the federal government. Specifically, the City will (i) maintain separate records regarding the amount and timing of disbursements of proceeds of the Bonds, (ii) maintain records regarding the investment of the gross proceeds of the Bonds as may be required to calculate the amount earned on the investment of the gross proceeds of the Bonds which are part of a reasonably required reserve or replacement fund separately from records of amounts in other funds or accounts maintained for the Bonds, amounts on deposit in the funds and accounts of the City allocable to other bond issues of the City or moneys which do not represent gross proceeds of any bonds of the City, (ili) calculate at such times as required by applicable Regulations, the rebatable amount earned from the investment of the gross proceeds of any bonds of the City, (iii) calculate at such times as required by. applicable Regulations, the rebatable amount earned from the investment of the gross proceeds of the Bonds which are part of a reasonably required reserve or replacement fund, and (iv) pay, not less often than every fifth anniversary date of the delivery of the Bonds or on such other dates as permitted or required by applicable Regulations, all amounts required to be rebated and all penalties required to be paid to the federal government. The City acknowledges that for purposes of compliance with Section 148 of the Code, gross proceeds of the Bonds must be accounted for on the basis of a reasonable, consistently applied method of accounting, not employed in whole or in part as an artifice or device. The City will employ accountants or other persons with expertise in performing the rebate calculations as necessary to insure compliance with the Code. The City will employ legal counsel as necessary to resolve any interpretive issues involved in complying with the rebate requirements of the Code. Further, the City will not indirectly pay any amount otherwise payable to the federal government pursuant to the foregoing requirements to any person other than the federal government by entering into any investment arrangement with respect to the gross proceeds of the Bonds. In the event that the City fails to comply with the rebate requirements of the Code, the City agrees to take all steps available under the Code 11 to bring the Bonds into compliance with the Code; such steps include paying any penalty, interest, or other amounts which will allow the City to return to compliance with the rebate requirements of the Code. If the City is required to pay rebate or other amounts, such as penalties and interest, to the United States with respect to the Bonds pursuant to Section 148(f) of the Code in order to prevent the Bonds from constituting arbitrage bonds or being otherwise classified or treated such that interest on the Bonds would not be excludable from the gross income of the holders thereof for federal income tax purposes, the City will timely make such payments from available funds of the City and the City reasonably expects that it will have the ability to make such payments from available funds of the City in the event such payments become necessary. The undersigned reasonably expects that the City will fulfill its covenants and representations in this regard. 26. Not a Refunding of Any Other Bonds. No portion of the proceeds of the Bonds are expected to be used to pay any interest on or principal of any issue of governmental obligations other than the Bonds and the Refunded Bonds. 27. Not a Reimbursement. No portion of the proceeds of the Bonds will be allocated to, or otherwise used to reimburse, any expenditure paid by the City, either actually or constructively, prior to the Issue Date. 28. No Change in Use. The City does not expect to dispose of any portion of any project related to the Bonds, or to change the use of the proceeds of the Bonds while any of the Bonds are outstanding. 29. Not a Hedge Bond. Neither the Bonds nor the Refunded Bonds are "hedge bonds" within the meaning of Section 1.149(g)-1 of the Regulations. 30. No Abusive Arbitrage Device. The Bonds are not and will not be a part of an issue in which an abusive arbitrage device (as defined in Section 1.148-10(a) of the Regulations) is used. Without limiting the foregoing, the Bonds are not and will not be a part of a transaction or series of transactions that attempts to circumvent the provisions of Section 148 of the Code and the Regulations, by (i) enabling the City to exploit the difference between tax-exempt and taxable interest rates to gain a material financial advantage, and (ii) increasing the burden on the market for tax-exempt obligations. In this regard, the City issued the Bonds for the primary purpose of accomplishing the bona fide governmental purposes set forth in paragraph 3 of this Certificate. Based on all the facts and circumstances, the City has not issued the Bonds in an amount higher than is reasonably necessary to accomplish the governmental purposes of the Bonds, the City has not issued the Bonds earlier than is reasonably necessary to accomplish the governmental purposes of the Bonds and the City is not allowing the Bonds to remain outstanding longer than is reasonably necessary to accomplish the governmental purposes of the Bonds. The City would have issued the Bonds regardless of any arbitrage benefit which it may realize in connection with the Bonds. In fact, the City reasonably expects that even if the Bonds were not tax-exempt obligations and if market rates of interest on taxable and tax-exempt obligations were equal to each other and to the rates at which the Bonds are in fact now being issued, the City would have issued the Bonds, notwithstanding the loss of any opportunity to borrow at lower tax-exempt rates and invest at higher taxable rates. 12 (a) No Impermissible Sinking Fund. No portion of the Bonds has a maturity determined primarily for the purpose of creating a sinking fund with respect to the Bonds the yield on which will be blended with the yield on the investment of other proceeds of the Bonds to reduce the negative arbitrage related to such investment. (b) No Window Refunding. No portion of the Bonds has been structured with the purpose of making available released revenues that will allow the City to avoid transferred proceeds, to invest such released revenues at a. yield materially higher than the yield on the Bonds or to pay principal and interest on another issue of obligations of the City. (c) No Sale of a Conduit Loan. No portion of the gross proceeds of the Bonds has been or will be used to acquire, finance or refinance a conduit loan. [This space intentionally left blank.] 13 31. No Arbitrage. On the basis of the foregoing facts, estimates and circumstances, it is expected that the proceeds of the Bonds will not be used in a manner that would cause any of the Bonds to be an "arbitrage bond" within the meaning of Section 148 of the Code and the Regulations. To the best of the knowledge and belief of the undersigned, there are no other facts, estimates or circumstances that would materially change such expectations. WITNESS MY HAND, this 19th day of June, 1996. CITY OF PEARLAND, TEXAS By: Ji Ca sey Dir or of Finance EXHIBIT A -- Certificate of Financial Advisor 14 EXHIBIT A CERTIFICATE OF FINANCIAL ADVISOR The undersigned hereby certifies with respect to the sale of City of Pearland, Texas Water and Sewer System Revenue Refunding Bonds, Series 1996A in the aggregate principal amount of $8,870,000 (the "Bonds"), as follows: 1. The undersigned is a duly authorized representative of Rauscher Pierce Refsnes, Inc., the financial advisor ("Financial Advisor") to the City of Pearland, Texas (the "City") in connection with the sale and delivery of the Bonds. In this capacity, the undersigned is familiar with the facts stated herein. 2. The term "Initial Offering Prices" means the respective initial offering prices (exclusive of accrued interest) for each maturity (stated in term of dollars or as a percent of par) of the Bonds as set forth in the following table. MATURITY PRINCIPAL INTEREST INITIAL DATE AMOUNT RATE OFFERING PRICE 1997 $ 155,000 4.550% $ 155,000 1998 180,000 4.750% 180,000 1999 185,000 4.900% 185,000 2000 195,000 5.000% 195,000 2001 200,000 5.100% 200,000 2002 200,000 5.200% 200.000 Total $1,115,000 $1,115,000 3. The term "Sale Date" means the first day on which there was a binding contract in writing for the issuance of the Bonds by the City to the initial purchaser of the Bonds on specific terms that were not later modified or adjusted in any material respect. In the case of the Bonds, the Sale Date is May 13, 1996. 4. The term "Issue Date" means the first day on which there is physical delivery of the written evidence of the Bonds in exchange for the purchase price (but not earlier than the day interest on the Bonds begins to accrue for federal income tax purposes). In the case of the Bonds, the Issue Date is June 19, 1996. 5. Based on the actual facts and reasonable expectations in existence on the Sale ' Date, the Initial Offering Price for each maturity of the Bonds: (a) Represented the price (payable in cash, with no other economic consideration being included, and exclusive of accrued interest), at which the Time Warrant was sold to the initial purchaser; and (b) Did not exceed what the City believed to be the respective fair market value of each such maturity of the Bonds as of the Sale Date. Page A-1 6. The aggregate of the respective Initial Offering Prices of all the maturities of the Bonds, without adjustment for any costs of issuance and exclusive of pre-issuanceaccrued interest, is $1,115,000.00. 7. The term "yield" shall have the meaning ascribed to it in Section 148(h) of the Internal Revenue Code of 1986, as amended, and the Treasury Regulations in effect thereunder, and, when used with respect to the Bonds, shall mean that interest rate which when used as a discount factor to compute the present value as of the Issue Date of all scheduled payments of principal of and interest on the Bonds produces an amount equal to the present value, using the same discount rate, of the Issue Price of the Bonds. Yield on the Bonds shall not take into account or reflect any underwriters' discount, cost of issuance of the Bonds or costs of carrying or repaying the Bonds. For purposes hereof, yield is and shall be calculated on the basis of a 360-day year with interest compounded semi-annually. The yield is calculated on the basis of the final maturity date of each of the maturities of the Bonds because the Bonds is not subject to prepayment. As stated in paragraph 17 of the No Arbitrage Certificate, the Series 1996B Bonds and the Bonds (the "Combined Issue") will be treated as a single issue of obligations for federal tax purposes. Thus, the yield on the Combined Issue calculated in the manner set forth above, is 4.614198 percent. 8. With respect to the issuance of the Bonds, the representations set . forth in paragraph 30 of the No Arbitrage Certificate are, to the best of our knowledge, true, correct and complete. 9. With respect to the direct obligations of the United States Treasury which the City purchased from the Financial Advisor and deposited in the Escrow Fund on the date hereof (referred to here and in the City's No Arbitrage Certificate as the "Escrowed Securities"). (a) The purchase price, including accrued interest to the delivery date, paid by the City for each of the Escrowed Securities, as well as the aggregate purchase price of all the Escrowed Securities (individually and in the aggregate, as indicated by the context, the "Purchase Price") was -- (i) determinedin a bona fide arm's length transaction between parties not related or affiliated in any way and not involving any incentive other than to obtain the lowest purchase price for each of the Escrowed Securities for the City; (ii) determined without any intent to reduce the yield on the Escrowed Securities and without regard to the yield on the Bonds; (iii) determined without regard to any other aspect of the transaction of which the refunding or the issuance of the Bonds was a part and without regard to any economic consideration other than the purchase price to be paid for the Escrowed Securities; Page A-2 (iv) not higher than the price which the Financial Advisor would have charged any other customer for such security under similar circumstances, without regard to whether or not such sale was made in connection with a transactioninvolving an advance refunding of, tax-exempt obligations or the investment of amounts constituting proceeds of tax-exempt obligations; and (v) exclusive of all brokerage commissions, administrative expenses, or similar expenses of acquiring or carrying the Escrowed Securities, and exclusive of costs and expenses of issuing the Bonds and of refunding the Refunded Bonds. (b) On the date the City became obligated under a binding contract with the Financial Advisor to purchase each of the Escrowed Securities, each such Escrowed Security was traded on an established market other than one established to provide acquired obligations to the City or other issuers of governmental obligations. 10. Based on the foregoing, the Purchase Price of all the Escrowed Securities (including accrued interest) is $1,274,755.44. 11. The Financial Advisor purchased the Escrowed Securities and sold such Escrowed Securities to the City in transactions in which the Financial Advisor acted as principal for its own account and not as the agent of the City. We understand that the City will rely on the above in making certain representations to Mayor, Day, Caldwell & Keeton, L.L.P., Bond Counsel to the City, and in complying with the conditions of the Internal Revenue Code of 1986, as amended, and the Treasury Regulations in effect thereunder, necessary for interest on the Bonds to be and remain excludable from .gross income for federal income tax purposes. Page A-3 EXECUTED and DELIVERED as of and on June 19, 1996. Very truly yours, FINANCIAL ADVISOR RAUSCHER PIERCE REFSNFS, INC. By: 0313725.01 069618/1928 Frank J. Ildebrando Senior Vice President Page A-4 Please Sign Here Font 8038-G (Rev. May 1995) Orrptrrtmd. of Ute Tteawry Iran* Revenue service Information Return for Tax -Exempt Governmental Obligations I. Under Internal Revenue Code section 149(e) ► See separate Instructions. (Note: Use Form 8038-GC if the issue price is under $100.000.) OMB No. 1545-0720 Part I Reporting Authority If Amended Return, check here 0- 1 Issuer's name CITY OF PEARLAND, TEXAS 2 Issuer's employer identification number 74;6028909 3 Number and street (or P.O. box if mail is not delivered to street address) 3519 LIBERTY DRIVE Room/suite 4 Report number G19 96-1 $ City, town, or post office, state, and ZIP code PEARLAND, TEXAS 77581 6 Date of issue JUNE 19, 1996 7 Name of issue CITY OF PEARLAND, TEXAS WATER AND SEWER SYSTEM REVENUE REFUDNING BONDS, SERIES 1996A AND SERIES 1996B 8 CUSIP number NONE , ar ype of Issue (check applicable boxes) and enter the issue price) 9 10 11 12 13 14 15 16 17 18 ❑ Education (attach schedule -see ■ Health and hospital (attach schedule ■ Transportation 0 Public safety ❑ Environment (including sewage 0 Housing ® utilities 0 Other. Describe (see instructions) If obligations are tax or other revenue If obligations are in the form of a lease instructions) -see instructions) bonds) ► 9 , S 10 11 . 12 13 14 15 9,985,000.00 16 anticipation bonds; check box ► or installment sale, check box O. ■ z �3 , .. 0 Part III Description of Obligations. (a) (b) (c) Id) (e) Maturity date Interest rate Issue Stated Stated redemption empt Weighted Net interest price price at maturity averaaje maturity Y cost 19 Final maturity. . 9 / 1 /2016 4.850% 745,000.00 745,000.00 � rt ` x ,� • : < :;;.; 20 Entire issue ... • `: •° . 9,985,000.00 9,985,000.00 12.203years 4.614% 4.600 % Part IV Uses of Proceeds of Bond Issue (including underwriters' discount) 198 616 21 Proceeds used for accrued interest 21 2,750.88 22 Issue price of entire issue (enter amount from line 20, column (c)) 22 9,985,000.00 23 Proceeds used for bond issuance costs (including underwriters' discount) 23 328, 274.81 24 Proceeds used for credit enhancement 24 34, 266.30 Y `7 25 Proceeds allocated to reasonably required reserve or replacement fund 25 _ 0 — 26 Proceeds used to currently refund prior issues 26 — 0. —• 27 Proceeds used to advance refund prior issues 27 1,086,725.19 28 Total (add lines 23 through 27) 28 _1,449,266.30 29 Nonrefundin. • roceeds of the issue subtract line 28 from line 22 and enter amount here) . . . 29 8 ,535 , 7 3 3.7 0 escnption of Refunded Bonds (Complete this part only for refunding bonds.) 30 Enter the remaining weighted average maturity of the bonds to be currently refunded . . . ► 31 Enter the remaining weighted average maturity of the bonds to be advance refunded . . . ► N/A Years 32 Enter the last date on which the refunded bonds will be called . ► 9/1/1996 33 Enter the date(s) the refunded bonds were issued P. Part VI Miscellaneous 3.400 1978 years 34 Enter the amount of the state volume cap allocated to the issue under section 141(b)(5) 34 N/A 35 Enter the amount of the bonds designated by the issuer under section 265(b)(3)(8)(i)(III) (small issuer exception) 35 9,985,000.00 36a Enter the amount of gross proceeds invested or to be invested in a guaranteed investment contract (see instructions) 36a N/A b Enter the final maturity date of the guaranteed investment contract . 10. 37 Pooled financings: a Proceeds of this issue that are to be used to make loans to other governmental units 37a N/A b If this issue is a loan made from the proceeds of another tax-exempt issue, check box ► 0 and enter the name of the issuer ► and the date of the issue ► 38 If the issuer has elected to pay a penalty in lieu of arbitrage rebate, check box . . ► ❑ 39 If the issuer has identified a hedge, check box ► ❑ Under penalties or perjury, I declare that I have examined this retum and accompanying schedules and statements, and to the best of my knowledge and belief.}ttey are true. correct, artd.compiete. Li/l -eZI authorized representative JIM CAUSEY - - 7/24/96 DIRECTOR OF FINANCE Date ' Type or print name and title For Paperwork Reduction Act Notice, see page 1 of the Instructions. Cat. No: 63773S Form 8038-G (Rev. 5-95) CLOSING CERTIFICATE THE STATE OF TEXAS § COUNTIES OF BRAZORIA AND HARRIS § CITY OF PEARLAND § . We, the undersigned, Mayor and City Manager of the City of Pearland, Texas (the "City"), acting solely in our respective official capacities, hereby certify with respect to the $1,115,000 City of Pearland, Texas Water and Sewer System Revenue Refunding Bonds, Series 1996A (the "Bonds"), as follows: 1. We certify that the ordinance of the City Council of the City authorizing the issuance of the Bonds, dated May 13, 1996 (the "Ordinance"), the Escrow Agreement and the Paying Agent/Registrar Agreement have not been amended, modified, supplemented or repealed, except as may have been agreed to by Merchants Bank, Houston, Texas and are in full force and effect. 2. We further certify that: (i) the City has authorized, by all necessary action, the execution and delivery or receipt and due performance of the Ordinance, Escrow Agreement, Paying Agent/Registrar Agreement, Bonds, and any and all such other agreements and documents as may be required to be executed and delivered or received by the City in order to carry out, give effect to and consummate the transactions contemplated hereby and by the Ordinance and the City Council has authorized, by all necessary action, the adoption of the Ordinance; (ii) no litigation is pending or, to the best of our knowledge, threatened in any court to restrain or enjoin the issuance, sale or delivery of the Bonds, or the collection or application of the revenues 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, or the Ordinance, or contesting the powers of the City. or the authorization of the Bonds or the Ordinance; () the adoption of the Ordinance by the City Council and the execution and delivery of the Bonds, and the compliance by the City and the City Council with the provisions thereof will not conflict with or constitute on the part of the City or the City Council a breach of or a default under any existing law, court or 1 administrative regulation, decree or ordinance or any agreement, indenture, mortgage, lease or other instrument to which the City. or the City Council is subject or by which the City, the City Council or any of the City's properties is bound; and (iv) there has not been any material and adverse change in the affairs or financial condition of the City since September 30, 1995, the latest date as to which audited financial information is available EXECUTED ON BEHALF OF THE CITY as of June 19 1996. 0303532.01 059613/1517 CITY OF PEARLAND, TEXAS • = = I WD A Mayor City of Pearland, Texas Cit—Manager City of Pearland, Texas MAYOR, DAY, CALDWELL 8 KEETON, L.L.P. 700 LOUISIANA, SUITE 1900 HOUSTON, TEXAS 77002-2778 (713) 225-7000 TE LECOPIER (713) 225-7047 June 19, 1996 100 CONGRESS AVENUE SUITE 1500 AUSTIN, TEXAS 78701-4042 (5121320-9200 TE LECOPIER (512) 320 -9292 WE HAVE ACTED as Bond Counsel for the City of Pearland, Texas (the "City") in connection with an issue of bonds (the "Bonds") described as follows: CITY OF PEARLAND, TEXAS WATER AND SEWER SYSTEM REVENUE REFUNDING BONDS, SERIES 1996A, dated June 1, 1996, in the aggregate principal amount of $1,115,000 maturing on September 1 in each year from 1997 through and including 2002. The Bonds are issuable in fully registered form only, in denominations of $5,000 or integral multiples thereof, bear interest and may be transferred and exchanged as set out in the Bonds and in the ordinance (the "Ordinance") adopted by the City Council of the City authorizing their issuance. WE HAVE ACTED as Bond Counsel for the sole purpose of rendering an opinion with respect to the legality and validity of the Bonds under the Constitution and laws of the State of Texas and with respect to the exclusion of interest on the Bonds from gross income under federal income tax law. In such capacity we have examined the Constitution and laws of the State of Texas; federal income tax law; and a transcript of certain certified proceedings pertaining to the issuance of the Bonds and the bonds that are being refunded (the "Refunded Bonds") with the proceeds of the Bonds, as described in the Ordinance. The transcript contains certified copies of certain proceedings of the City and Texas Commerce Bank National Association, Houston, Texas (as successor to First City National Bank of Houston) (the "Escrow Agent"); a certificate of Rauscher Pierce Refsnes, Inc., the City's Financial Advisor, certifying as to the sufficiency of the deposits made with the Escrow Agent for the defeasance of the Refunded Bonds; certain certifications and representations and other material facts within the knowledge and control of the City, upon which we rely; and certain other customary documents and instruments authorizing and relating to the issuance of the Bonds and the firm banking and financial arrangements for the discharge and final payment of the Refunded Bonds. We have also examined executed Bond No. R-1 of this issue. WE HAVE NOT BEEN REQUESTED to examine, and have not investigated or verified, any original proceedings, records, data or other material, but have relied upon the transcript of certified proceedings. We have not assumed any responsibility with respect to the financial condition or capabilities of the City or the disclosure thereof in connection with the sale of the Bonds. June 19, 1996 Page 2 BASED ON SUCH EXAMINATION, ;it is our opinion as follows: (1) The transcript of certified proceedings evidences complete legal authority for the issuance of the Bonds in full compliance with the Constitution and laws of the State of Texas presently in effect; the Bonds constitute valid and legally binding obligations of the City enforceable in accordance with the terms and conditions thereof, except to the extent that the rights and remedies of the owners of the Bonds may be limited by laws heretofore or hereafter enacted -relating to bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the rights of creditors of political subdivisions and the exercise of judicial discretion in appropriate cases; and the Bonds have been authorized and delivered in accordance with law; (2) The Bonds are payable solely from and are equally and ratably secured by a first lien on the "Net Revenues" collected and received by the City from the operation of the City's System, as defined in the Ordinance, to be set aside and pledged to the payment of the Bonds and all bonds issued on a parity therewith, in the interest and sinking funds and reserve funds maintained for such purpose pursuant to the Ordinance; and (3) The Escrow Agreement has been duly, executed and delivered and constitutes a binding and enforceable agreement in accordance with its terms; the establishment of the Escrow Fund pursuant to the Escrow Agreement and the deposit made therein constitute the making of firm banking and fmancial arrangements for the discharge and final payment of the Refunded Bonds; in reliance upon the certifications contained in the Certificate, the Refunded Bonds, having been discharged and paid, are no longer outstanding and the lien on and. pledge of revenues as set forth in the ordinance authorizing their issuance has been appropriately and legally defeased; the holders of the Refunded Bonds may obtain payment thereof only out of the funds provided therefor now held in escrow for that purpose by the Escrow Agent pursuant to the terms of the Escrow Agreement; and therefore the Refunded Bonds are deemed to be fully paid and no longer outstanding, except for the purpose of being paid from . the funds provided therefor in such Escrow Agreement. ALSO BASED ON OUR EXAMINATION AS DESCRIBED ABOVE, it is our further opinion that, subject to the restrictions hereinafter described, interest on the Bonds is excludable from gross income of the owners thereof for federal income tax purposes under existing law and is not subject to the alternative minimum tax on individuals or, except as hereinafter described, corporations. The opinion set forth in the first sentence of this paragraph is subject to the condition that the City comply with all requirements of the Internal Revenue Code of 1986, as amended (the "Code"), that must be satisfied subsequent to the issuance of the Bonds in order that interest thereon be, or continue to be, excluded. from gross income for federal income tax June 19, 1996 Page 3 1 purposes. The City has covenanted in the Ordinance to comply with each such requirement. Failure to comply with certain of such requirementsmay cause the inclusion of interest on the Bonds in gross income for federal income tax purposes to be retroactive to the date of issuance of the Bonds. The Code and the existing regulations, rulings and court decisions thereunder, upon which the foregoing opinions of Bond Counsel are based, are subject to change, which could prospectively or retroactively result in the inclusion of the interest on the Bonds in gross income of the owners thereof for federal income tax purposes. INTEREST ON all tax-exempt obligations, including the Bonds, owned by a corporation (other than an S corporation, a regulated investment company, a real estate investment trust (REIT) or a real estate mortgage investment conduit (REMIC)) will be included in such corporation's adjusted current earnings for purposes of calculating such corporation's alternative minimum taxable income. A corporation's alternative minimum taxable income is the basis on which the alternative minimum tax and the environmental tax imposed by the Code are computed. EXCEPT AS DESCRIBED ABOVE, we express no opinion as to any federal, state or local tax consequences resulting from the ownership of, receipt or accrual of interest on, or the acquisition or disposition of, the Bonds. Prospective purchasers of the Bonds should be aware that the ownership of tax-exempt obligations, such as the Bonds, may result in collateral federal income tax consequences to, among others, financial institutions, property and casualty insurance companies, certain foreign corporations doing business in the United States, certain S corporations with Subchapter C earnings and profits, individual recipients of Social Security or Railroad, Retirement benefits, taxpayers who otherwise may qualify for the earned income tax credit and taxpayers who are deemed to have incurred or continued indebtedness to purchase or carry tax-exempt obligations. Such prospective purchasers should consult their tax advisors as. to the consequences of investing in the Bonds. Very truly yours, 71,g-1,) vaay, eee,-/-6,4, 0303634.01 069617/1413 ffice of tfje 21ttornep *tate of Xexao DAN MORALES ATTORNEY GENERAL enerat June 14, 1996 THIS IS TO CERTIFY that the City of Pearland, Texas (the "Issuer"), has submitted to me City of Pearland. Texas. Water and Sewer System Revenue Refunding Bonds, Series 1996A (the "Bonds") in the aggregate principal amount of $1,115,000 for approval. The Bonds are dated June 1, 1996, numbered R-1 through R-6, and. were authorized by Ordinance No. 725 of the Issuer passed on May 13, 1996 (the "Ordinance"). I have examined the law and such certified proceedings and other papers as I deem necessary to render this opinion. As to questions of fact material to my opinion, I have relied upon representations of the Issuer contained in the certified proceedings and other certifications of public officials furnished to me without undertaking to verify the same by independent investigation. I express no opinion relating to the official statement or any other offering material relating to the Bonds. Based on my examination, I am of the opinion, as of the date hereof and under existing law, as follows (capitalized terms, except as herein defined, have the meanings given to them in the Ordinance): (1) The Bonds have been issued in accordance with law and are valid and binding special obligations of the Issuer. (2) In accordance with the provisions of the law, including a Escrow Agreement dated as of May 13, 1996, firm banking arrangements have been made for the discharge and final payment or redemption of the obligations being refunded upon deposit of an amount sufficient to pay said obligations when due. (3) The Bonds are payable from and secured by a first lien on the Net Revenues collected and received by the Issuer from the operation and ownership of the Issuer's water and sewer system. 512/463-2100 pit IN7l:)) c),1' kI:& 7(7.1:1) P.9PhJl P.O. BOX 12548 AUSTIN, TEXAS 78711-2548 AN EQUAL EMPLOYMENT OPPORTUNITY EMPLOYER City of Pearland, Texas, Water and Sewer System Revenue Refunding Bonds, Series 1996A Page Two (4) The owner of the Bonds shall never have the' right to demand payment of the Bonds from any funds raised or to be raised by taxation. Therefore, the Bonds are approved. , The Comptroller is instructed that he may register the Bonds without the cancellation of the underlying securities being refunded thereby. No. 30361 Book No. 96-B sPc tl Attorney neral of the State of Texas I OFFICE OF COMPTROLLER OF THE STATE OF TEXAS 1,, John Sharp, Comptroller of. Public Accounts of the State of Texas, do hereby certify that the attachment is a true and correct copy of the opinion of the Attorney General approving the: City of Pearland. Texas, Water and Sewer System Revenue Refunding Bonds. Series 1996A numbered R-1/R-6, of the denomination of $ various, dated June 1. 1996, as authorized by issuer, interest various percent, under and by authority of which said bonds/certificates were registered electronically in the office of the Comptroller, on the 14th day of June. 1996, under Registration Number 58328. Given under my hand and seal of office, at Austin, Texas, the 14th day of June, 1996. JOHN SHARP Comptroller of Public Accounts of the State of Texas OFFICE OF COMPTROLLER OF THE STATE OF TEXAS I, Melissa Guzman, Bond Clerk NAssistant Bond Clerk in the office of the Comptroller of the State of Texas, do hereby certify that, acting under the direction and authority of the Comptroller on the 14th day of June. 1996, I signed the name of the Comptroller to the certificate of registration endorsed upon the: City of Pearland. Texas. Water and Sewer System Revenue Refunding Bonds. Series 1996A, numbered R-1/R-6, dated June 1, 1996, and that in signing the certificate of registration I used the. following signature: IN WITNESS WHE F I have executed this certificate this the 14th day of June. 1996. 2r711"/L I, John Sharp, Comptroller of Public Accounts of the State of Texas, certify that the person who has signed the above certificate was duly designated and appointed by me under authority vested in me by TEX. REV. CIV. STAT. ANN. art. 4362 (1969), with authority to sign my name to all certificates of registration, and/or cancellation of bonds required by law to be registered and/or 1_, cancelled by me, and was acting as such on the date first mentioned in this certificate, and that the bonds/certificates described in this certificate have been duly registered in the office of the Comptroller, under Registration Number 58328. GIVEN under my hand and seal of office at Austin, Texas, this the 14th day of June, 1996. JOHN SHARP Comptroller of Public Accounts of the State of Texas $1,115,000 CITY OF PEARLAND, TEXAS WATER AND SEWER SYSTEM REVENUE REFUNDING BONDS SERIES 1996A RECEIPT AND CROSS RECEIPT June 19, 1996 I, the undersigned, a duly authorized representative of Texas Commerce Bank National Association, Houston, Texas, hereby acknowledge receipt on behalf of the City of Pearland, Texas (the "City"), of the full purchase price for the City's Water and Sewer System Revenue Refunding Bonds, Series 1996A, in the total amount of $1,117,750.88, representing the par amount of the Bonds of $1,115,000, plus accrued interest of $2,750.88, on the date hereof. TEXAS COMMERCE BANK NATIONAL ASSOCIATION Houston, Texas By: 14fr Name: ARLA SCOTT Title: CORPORATE TRUST OFFICER I, the undersigned, a duly authorized representative of Texas Commerce Bank National Association, Houston, Texas,Custody Agent for Merchants Bank, Houston, Texas, hereby acknowledge receipt from the City of the initial bonds of its Water and Sewer System Revenue Refunding Bonds, Series 1996A, dated June 1, 1996, which have been delivered to the undersigned in proper form on the date hereof. TEXAS COMMERCE BANK NATIONAL ASSOCIATION Houston, Texas By: //L�-1- Nam : %►%` /}, lv ../ Title: ..e ciAVV I P. s s C 0304073.01 069617/1518 1 ESCROW AGENT'S RECEIPT FOR DOCUMENTS, SECURITIES AND FUNDS The undersigned, acting through its duly authorized officer as Escrow Agent (the "Escrow Agent") under the Escrow Agreement, dated as of May .13, 1996 (the "Escrow Agreement"), between it and the City of Pearland, Texas (the "City"), relating to the City's Water and Sewer System Revenue Refunding Bonds, Series 1996 (the "Bonds"), hereby acknowledges the following: 1. Receiptof a copy of the Escrow Agreement with the Certificate (as defined in the Escrow Agreement) attached; and • The following securities and funds which have been deposited to the Escrow Fund as provided in Section 2.01 of the Escrow Agreement as of the date hereof: a. $249.75 as the beginning cash balance; and b. the initial Open Market Securities with the purchase price of. $1,274,755.44. As a result of the receipt of the foregoing items, the Escrow Agreement between the Escrow Agent and the City has become effective as of the date hereof. IN WITNESS WHEREOF, I have hereunto set my hand this June 19, 1996. 0313564.01. 069617/1243 TEXAS COMMERCE BANK NATIONAL ASSOCIATION By: Name: ARLA SCOTT Title: CORPORATE TRUST OFFICER - CITY OF PEARLAND, TEXAS 3519 Liberty Drive Pearland, Texas 77581 June 19, 1996 Texas Commerce Bank National Association P. O. Box 4717 Houston, Texas 77210 Attention: Corporate Trust Department Re: City of Pearland, Texas, Waterworks and Sewer System Revenue Bonds, Series 1978 Ladies and Gentlemen: Pursuant to the provisions of Section 4.01 of the ordinance authorizing the issuance of the captioned Bonds, for which you are the Paying Agent/Registrar (as successor in interest to First City National Bank of Houston), you are hereby notified that the City has exercised its right to redeem the outstanding Bonds of such issue. The redemption date is September 1, 1996, and the principal amounts of each maturity to be redeemed (or paid at maturity in the case of the 1996 maturity) are: 1996 $150,000 1997 160,000 1998 170,000 1999 180,000 2000 190,000 2001 200,000 2002 200,000 As registrar for such Bonds, you are hereby directed to give notice of redemption of such,Bonds in accordance with the provisions of the ordinance authorizing their issuance. Such notice is to Texas Commerce Bank National Association June 19, 1996 Page 2 be given by publication at least thirty days prior to the redemption date in the English language in a journal or publication in New York, New York or in Austin, Texas. The notice of redemption shall (i) (u) state the date of redemption is September 1, 1996; state that the redemption price is par plus accrued interest to September 1, 1996; (iii) state that on the redemption date the redemption price of each of the Bonds to be redeemed will become due and payable and that the interest thereon shall cease to accrue from and after said date; and (iv) state that the Bonds to be redeemed are to be surrendered for payment of the redemption price at the principal corporate trust office of the Bank, and the address of such office. Tom Reid Mayor, City of Pearland, Texas 0304733.01 059613/1429 ti THE STATE OF TEXAS S COUNTIES OF BRAZORIA AND HARRIS § CITY OF PEARLAND § The City Council of the City of Pearland, Texas, convened in regular meeting, open to the public, on the 28th- day of August, 1978, at the City Hall, and the roll was called of the duly constituted officers and members of the City Council and the City Secretary of the City, to -wit: Tom Reid Dennis Frauenberger Harry Farley Fran Coppinger Morris S. Wilson Carlton McComb Dorothy L. Cook and all of said persons were present, sentees: NONE Mayor Councilman Councilman Councilman Councilman Councilman City Secretary except the following ab- thus constituting a quorum. Whereupon, among other business, the following was transacted at said meeting: a written ordi- nance.entitled: ORDINANCE AUTHORIZING THE ISSUANCE OF $2•,750,000 CITY OF PEARLAND, TEXAS, WATERWORKS AND SEWER SYSTEM REVENUE BONDS, SERIES 1978 (the "Ordinance") was duly introduced for the consideration of the City Council and was read and considered by the City Council,. the Ordinance being the same ordinance which was heretofore read, considered. and adopted by the City Council at its regular meeting on August 14, 1978. It was then duly moved and seconded that the Ordinance be passed; and, after due discussion, the motion, carrying with it the passage of the Ordinance, prevailed and carried by the following vote: AYES: All members of the City Council shown present above voted "Aye". NOES: None. The Mayor thereupon announced that the Ordinance had been duly and ],awfully adopted. The Ordinance thus adopted follows: ORDINANCE AUTHORIZING THE ISSUANCE OF $2,750,000 CITY OF PEARLAND, TEXAS, WATERWORKS AND SEWER SYSTEM REVENUE BONDS, SERIES 1978 THE STATE OF TEXAS § CITY OF PEARLAND § BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF PEARLAND: ARTICLE I. STATUTORY AUTHORITY, RECITALS AND FINDINGS Section 1.01 - Creation of City. The City of Pearland; Texas, (the "City") is duly incorporated as a municipal corporation under the laws of the State of Texas and ope-. rates as a home rule city under the laws of the State -of Texas relating to municipal corporations;. particularly Title 28, Vernon's Texas.Civil Statutes, as amended. The City has a home -rule charter which was lastamended'on April 1, 1978. Section 1.02 - Special Findings. It is hereby found, determined and declared that: (a) The bonds herein authorized were approved by a majority vote of qualified voters of the City at an election held in the City_ on May 13, 1978; and (b) The City Council now deems it to be in the best interest of the City to issue,'sell, and deliver such bonds. ARTICLE II. DEFINITIONS AND. INTERPRETATIONS Section 2.01 - Definitions. Unless otherwise expressly provided, or unless the context otherwise requires, the terms defined in this Section shall have the respective meanings specified for all purposes of•this Ordinance except in the form of the bonds and of the interest coupons: Additional Bonds The term !'Additional Bonds" shall mean the' additional parity revenue bonds that the City expressly reserves the right to issue in Article VIII of this Ordinance, which will be payable from and secured by a lien on and pledge of the Net Revenues of the System on a parity with the lien thereon and.pledge thereof to secure the payment of the Bonds herein authorized by this Ordinance. tl Bearer, The term "bearer" means any person who from time to time shall be the bearer of any of the Bonds. Bond. Fund The term "Bond Fund" shall mean the fund created and established in Article VII of this Ordinance. Bond or Bonds The term "Bond" or "Bonds" shall mean any bond or all bonds, as appropriate, of the issue of $2, 750, 000 City of Pearland, Texas, Waterworks and Sewer System Revenue Bonds, Series 1978, authorized and issued pursuant to this Ordi- nance. Fiscal Year - The term "Fiscal Year" shall mean the twelve-month fiscal year of the City which is currently the twelve-month period beginning Oct0ber-1 but which may be changed from time to time. Gross Revenues or Revenues The term "Gross Revenues" or "Revenues" shall mean the gross revenues derived 'from the ownership and operation of the System. Net Revenues The term "Net Revenues" shall mean the Revenues of the. System remaining after payment of all costs and expenses of operating and maintaining the System as provided in this Ordinance. Paying Agent .The term "Paying Agent" shall -mean the First City National Bank of Houston, Houston; Texas. Reserve Fund The term "Reserve Fund" shall mean the fund created and established in Article VII of this Ordinance. Special Project Bonds The term "Special Project. Bonds!' shall mean bonds which the City expressly reserves the right to issue in Section 8.04 of this Ordinance. System • The term'"System" shall mean the City''s waterworks and sanitary.sewer system and all improvements, enlargements, extensions and additions thereto, except for such waterworks and sanitary sewer facilities that the City may purchase or .acquire with the proceeds of the sale of Special Project Bonds, so long as the Special Project Bonds are outstanding, notwithstanding that such facilities may be physically connected with the System. -2- City The term "City" shall mean the City of Pearland,,Texas, and its successors and, where appropriate, the City Council or governing body thereof. Section 2.02 - Interpretations. The titles and,head- ings of the Articles and Sections of this Ordinance have been inserted for convenience of reference only and are not to 'be considered a part hereof and shall. not in any way modify or restrict any of the terms and provisions hereof. This Ordinance .and all the. terms and. provisions hereof shall be liberally construed to effectuate the purposes set forth herein and to sustain the validity of the Bonds herein authorized and the validity of the lien on and pledge of•the Net Revenues from which the Bonds are payable.' ARTICLE III. AUTHORIZATION, DESCRIPTION, OPTION OF PRIOR REDEMPTION AND, EXECUTION OF BONDS Section 3.01 - Name, Amount, Purpose and Authorization. The `serial, negotiable revenue bonds of the City, to be known and designated as "CITY OF PEARLAND, TEXAS, WATERWORKS AND SEWER SYSTEM REVENUE BONDS, SERIES 1978," shall be issued in the aggregate principal amount of -$2,750,000 for the purpose of',constructing improvements and .extensions to the waterworks and sanitary sewer system of the City, under and in strict conformity with the Constitution' and laws of the State of Texas, including particularly Articles 1111 to. 1118, Vernon's Texas Civil Statutes, as amended. Section 3.02 - Date, Numbers, Denomination and Maturi- ties. The Bonds shall be dated September 1, 1978, shall be , numbered consecutively from 1 to 550, both inclusive, shall be in the denomination of $5,000 each, and shall mature serially on September 1,in each of the years, and in the amounts, respectively, as set forth in the following schedule: YEAR AMOUNT YEAR AMOUNT 1979 $ 50,000 1991 $110',000 1980 50,000 1992 120,000 1981 50,000 1993 125,000 1982 60,000 1994 130,000 1983 70,000 1995 140;000 1984 70,000 1996 150,000 1985 75,000 1997 160,000 1986 80,000 1998 170,000 1987 80,000 1999 180,000 1988 90,000 2000 190,000 1,989 100,000 2001 200,000 1990 100,000 2002 200,000 Section 3.03 - Option of Prior Redemption. The Bonds may be redeemed prior to their scheduled maturities, at the option of the City in the manner provided in Section 4.01 of this Ordinance. Section 3.04 - Interest Rates. The Bonds shall bear interest at a rate or rates per annum which shall not exceed -3- A - the maximum permitted by Article 717k-2, V.T.C.S., as amended; such interest rates shall be those proposed in the bid for the purchase of the Bonds which results in the lowest net interest cost to the City and such interest shall be evi- denced by interest coupons which shall appertain to the Bonds and which shall be payable on the dates indicated in the FORM OF BOND set forth in this Ordinance. Section 3.05 - Payment of Principal of, Interest on, Characteristics and Execution of Bonds. The Bonds and the interest coupons appertaining thereto shall be. .payable, shall have the characteristics, and shall be signed and executed (and the Bonds shall be sealed), all as. provided, and in the manner indicated, in Article IV of this Ordinance. Section 3.06 - Mutilated, Lost, Destroyed or Wrongfully Taken Bonds. If the bearer -of any Bond claims that such Bond has been mutilated, lost, destroyed, or wrongfully taken, the City may, under the applicable provisions of Section. 8.405, Texas Business and Commercial Code, and Article 715a, Vernon's Texas Civil.Statutes, as presently existing or as may hereafter be amended, execute a new bond of like tenor and date in exchange and substitution for the mutilated bond or in lieu of and substitution for the bond so lost, destroyed or.wrongfully taken. ARTICLE IV. CHARACTERISTICS AND FORM OF BONDS, INTEREST COUPONS AND ENDORSEMENT FOR REGISTRATION BY COMPTROLLER Section 4.01 - Form of Bonds. The form of the Bonds, shall be substantially as follows, with such omissions, insertions and variations as may be necessary and desirable and consistent with the terms of this.Ordinance: FORM OF BONDS: NO. $5,000 UNITED STATES OF AMERICA STATE OF TEXAS CITY OF PEARLAND, TEXAS, WATERWORKS AND SEWER. SYSTEM REVENUE BONDS 'SERIES 1978 The CITY OF PEARLAND, TEXAS, for value received, hereby acknowledges itself indebted to and promises to pay to bearer, but solely from the sources hereinbelow described, ON THE FIRST DAY OF SEPTEMBER, the principal sum of FIVE THOUSAND DOLLARS ($5,000) and to pay interest thereon, from the date hereof, at the rate of PERCENT PER ANNUM, -4- interest payable on March 1, 1979 and on each September 1 and March 1 thereafter while this bond is outstanding. Both principal of and interest on this bond shall be payable in any coin or currency of the United States of America which, on the respective dates of payment of such principal and interest, is legal tender for the payment of debts due the United States of America, without exchange or collection charges, at the First City National Bank of Houston, Houston, Texas, the Paying.Agent. Interest hereon shall be paid only upon presentation'of the proper interest coupon initially affixed to this bond to the Paying Agent, and. the principal hereof shall be paid only upon presentation and surrender of this bond to the Paying Agent. THE DATE OF THIS BOND, in conformity with the ordinance hereinafter mentioned, IS September 1, 1978. THIS BOND IS ONE OF A SERIES OF BONDS of like tenor and effect, except as to serial number, maturity and option of prior redemption, being numbered consecutively from 1 to 550, both inclusive, in the denomination 'of $5,000 each, aggregating $2,750,000, issued pursuant to an ordinance law- fully adopted by the City Council of the City of Pearland, Texas, and duly recorded in its official minutes (the "Ordi- nance") for the purpose of constructing improvements and extensions to the waterworks and, sanitary sewer system of the City, under and in strict conformity with the Consti- tution and laws of the State of Texas, particularly Articles 1111 to 1118, Vernon's Texas Civil Statutes, as amended, and by authority of an election held within the City on May 13, 1978. THIS BOND SHALL NOT BE DEEMED TO CONSTITUTE A DEBT of the City of Pearland, Texas, or a pledge of its faith and credit, but shall be payable, as to principal and interest, solely from the net revenues derived from the operation of the City's waterworks and sanitary sewer system, as that system is defined in the Ordinance (the "System"), after deduction of the reasonable expenses of maintenance and operation of the System. The bearer or owner hereof shall never have the right to demand payment of this obligation out of any funds raised or to be raised by taxation. ON September 1, 1993, AND ON ANY INTEREST PAYMENT DATE THEREAFTER, the outstanding bonds of this series may be redeemed prior to their scheduled maturities, at the option of the City, in whole, or in part in inverse numerical order, for the principal amount thereof and unpaid accrued interest thereon to the date fixed for any such redemption. If the City elects to redeem all or any part of said bonds on any .such redemption date, notice of the exercise of the option to redeem shall be given in writing to the Paying Agent, and said notice shall be published in the English language in the City of New York, New York, or in the City of Austin, Texas, which notice shall be mailed to the Paying Agent and published in said journal or publication at least thirty (30) days prior to the date fixed for redemption. When said bonds, in whole or in part,=have been called for redemption in the manner prescribed and due provision has been made to pay the principal of the bonds called for redemption and interest thereon to the date fixed for re- demption, the right of the bearers or owners to collect interest which would otherwise accrue after the redemption date on the bonds called for redemption shall terminate on the date fixed for redemption. -5- IN 'ADDITION TO THE RIGHT TO ISSUE BONDS OF INFERIOR LIEN, the City has reserved the right to issue additional bonds which may be secured by a lien on-and:pledge of the net revenues of the System on a parity with the lien on and pledge of such net revenues that secure payment of this bond. The City has also reserved the right to issue special project bonds, as defined in the Ordinance, which are pay- able solely from and secured by the proceeds of a contract or contracts with persons, corporations, municipal corpora- tions, political subdivisions, or other entities. Reference is made to the Ordinance for a complete description of the right of. the City to issue' additional bonds and special project bonds. IT IS FURTHER CERTIFIED AND RECITED that all acts, conditions and things required to be.done precedent to and in the issuance of this bond and this series of. bonds have happened and have been performed in regular and due time, form and manner as required by law; and that provision has been made for the payment of the principal of and interest on this bond and the series of which it is a part by pledg- ing the net revenues specified herein and that the issuance of this series of bonds does•not exceed any Constitutional .or statutory limitation. IN TESTIMONY WHEREOF, the City Council of the -City of Pearland, Texas, has caused the official seal of the City tg be duly impressed, or placed in facimile, hereon, and has caused this bond to be signed by the Mayor of said City and countersigned by the City Secretary by their facsimile signatures. xxxxxxXXxxxxxxxxxxxxxxxxxxXXXXX Mayor, City of Pearland, Texas COUNTERSIGNED: xxxxxxxxxxxxxxxxxxxxxxxxx City Secretary, City of Pearland, Texas (SEAL) Section 4.02 - Form of Interest Coupons. The form of the interest coupons of the Bonds shall be substantially as follows: No. ON FORM OF INTEREST COUPONS: s x the CITY OF PEARLAND, TEXAS, PROMISES TO PAY TO BEARER, without exchange or collection charges, at the First City National. Bank of Houston, Houston, Texas, the amount shown on this interest coupon, in any coin or currency of the United States of America which on such date is legal tender for the payment of debts due the United.States of America, solely from the revenues specified in the bond to which this -6- r coupon appertains, being interest due that date on the bond .bearing the number hereinafter designated, of that issue of City of Pearland, Texas, Waterworks'and Sewer System Revenue Bonds, Series 1978, dated September 1, 1978. The bearer hereof shall never have the right to demand payment of this obligation out of any funds raised.or to be_raised by taxa- tion. Bond No. " xxxxxxxxxxxxxxxxxx Mayor, City of Pearland, Texas xxxxxxxxxxxx City Secretary, City of. Pearland, Texas *(Coupons maturing after September 1, 1993, shall contain the following additional clause: unless the bond to.which this coupon appertains shall have been previously called for redemption and due provision made to redeem same,) Section 4.03 - FormCf Registration Certificate. The Bonds shall be registered by the Comptroller of.Public Accounts of the State of Texas as -provided bylaw, and the resulting registration certificate shall be printed on the back of each of the Bonds in substantially the following form: OFFICE OF THE COMPTROLLER REGISTER NO. THE STATE OF TEXAS I hereby certify that there is on file and of record in my office a certificate' of the Attorney General of the State of Texas to the effect that this bond has been examined by him as required by law, that .he finds that it hasbeen issued in conformity with the Constitution and laws of the State of Texas, and it is a valid and binding special obli- gation of the City of Pearland, Texas, and said bond has .this day been registered by me. WITNESS MY HAND AND SEAL OF,OFFICE at Austin, Texas, Comptroller of Public Accounts of the State of Texas Section 4.04 - CUSIP. Numbers CUSIP Numbers may be printed on the backs of the Bonds, but errors in or omis- sions of such numbers shall have no effect whatever on the validity of such Bonds. -7- ARTICLE V APPLICATION OF'BOND PROCEEDS Section 5.01 - Application. Proceeds from the sale of the Bonds shall be applied in the following order: (a) To pay all expenses incident to the issuance of the Bonds; and (b) To. pay for constructing improvements and exten- sions to the waterworks and sanitary sewer system of the City, as authorized_by this Ordinance, and any and all reasonable costs and expenses incurred by the City in con- • nection therewith. ARTICLE VI SECURITY OF BONDS Section 6.01 - Pledge of Net Revenues. All of the Net Revenues derived from the operation of the System, with the exception of those Net Revenues in excess -of the amounts required to establish and maintain the funds as hereinafter provided, are hereby pledged to the payment of the principal of and interest on the Bonds and any Additional Bonds. The Net Revenues shall immediately be subject to the lien of this pledge without any physical delivery thereof or further act, and the lien of this pledge shall be valid and binding against all parties of any kind having a claim of any kind in tort, contract or otherwise, against the City irrespec- tive of whether such parties have notice thereof. Section 6.02 - Security of Bonds. The Bonds and any Additional Bonds shall be payable solely from and shall be equally ratably secured by a first lien on and pledge of the Net Revenues, and the Bonds and anyAdditional Bonds, when and if issued, will be in all respects on a parity with and of equal dignity with one another. The bearers or owners of the Bonds shall never have the right to demand payment out of any funds raised or to be raised by taxation. Section 6.03 - Maintenance of Income. In order that the Net Revenues of the. City will be sufficient to pay the Bonds and the interest thereon, the City shall fix and maintain rates and collect charges for the facilities and services afforded by the System that will provide Revenues sufficient at all times: (a) to pay all operation and maintenance expenses of the System as provided in Section 7.04(a) of this Ordinance; (b) to establish and maintain the Bond Fund and the Reserve Fund; and (c) to pay all indebtedness from time to time out- standing against the System otherthan the Bonds as and when the same becomes due. Section 6.04 - Maintenance of Net Revenues. The City further covenants that so long as the Bonds remain out- standing it will maintain rates and collect charges for the facilities and services afforded by the System that will provide Net Revenues in each Fiscal Year that are at least -8- P 1.20 times all • principal and interest payments during such Fiscal Year on a-11 Bonds and Additional Bonds then out- standing. ARTICLE VII REVENUES AND APPLICATION THEREOF Section 7.01• Creation of Funds. There shall be created the following funds: (a) the System Fund; i � F (b) the Bond Fund; and (c) the Reserve Fund. Each fund shall be kept separate and apart from all other funds of the City. The System Fund shall be main- tained. at the official depository of the City. The Bond Fund and the Reserve Fund shall constitute trust funds which shall be held in trust by the depository solely for the benefit of the bearers of the Bonds and Additional Bonds. The System Fund shall be used solely as provided in this Ordinance until all.Bonds and Additional Bonds have been retired.as to principal and interest. Section 7.02 - Security of Funds. All bank deposits to the funds and accounts created by this Ordinance, to the extent not insured by the Federal Deposit Insurance Corpora- tion or the Federal Savings and Loan Insurance Corporation, or the successor, of either, shall be secured by a valid pledge of securities eligible under the laws of the State of Texas to secure the funds of cities or towns, having an aggregate market value, exclusive of accrued interest, at all, times not less than the amount of deposits credited.to such funds and accounts, respectively. Section 7.04 - Use of Revenues. The City will deposit, as collected, all Revenues derived from the ownership and operation of the System into a special account (herein called the "System Fund".), which shall be kept separate and apart from' all other funds of the City. The System Fund shall be administered as follows: (a) Maintenance and Operation: From the moneys in the System Fund, the City shall first pay the expenses of opera- tion and maintenance, including all salaries, labor, materi- als, interest and such repairs and extensions, as in the judgment of the governing body of the City, are necessary to keep the System in operation and render adequate service to the City, its inhabitants and other users of the System, or such as might be necessary to meet some physical accident or condition which would otherwise impairthe ability of the System to generate Net Revenues sufficient to pay principal and interest on the' Bonds, Additional Bonds and other in- debtedness against the System. (b) Bond Fund: After the payment of all expenses provided for in the next preceding paragraph, the City shall pay into the Bond Fund during each calendar year, beginning with the year in which any of the Bonds are delivered, an amount which, together 'with other moneys on deposit in the Bond Fund, shall be equal to not less than 100% of the -9- 1 � U amount required to meet the payments of principal and inter- est on the Bonds that will be payable on or before the next January 1, together with such other amounts as may be re- quired in any other ordinance authorizing the issuance of Additional Bonds. The amount required to be paid into the Bond Fund each year shall be made in substantially equal monthly payments from moneys in the System Fund, and such monthly payments shall be made on or before the'15th day of each month beginning with the date the Bonds are delivered to the purchasers thereof. If in any month the City shall, for any reason, fail to pay into said Bond Fund the full amounts above stipulated, amounts equivalent to such.defi- - ciencies shall be set apart and paid into Said Bond Fund . from the first available and unallocated Net Revenues as of the following month or months and shall be in addition to the amounts hereinafter provided to be otherwise paid into said Bond Fund each month. Not later than ten days interest payment date on the the Town Council shall cause Fund to the Paying Agent an principal and/or interest to at such date. . prior to each principal and/or Bonds and any Additional Bonds, to be transferred from the Bond amount sufficient to pay the become due and payable thereon (c) Reserve Fund: There is hereby established the "Reserve Fund." Beginning with the month immediately following the month in which any of the Bonds are delivered, and after payment of all amounts required by Section 7.03(b), there shall be paid during each month'from the System Fund into the Reserve Fund, the sum of $3,6.76, until such time as there is in the Reserve Fund, as a result of such deposits and interest or investment earnings, the sum of $220,560. If in any month the City shall, for any reason, fail to pay into the Reserve Fund the full amount herein provided, amounts equivalent to such deficiencies shall be set apart and put into. the Reserve Fund from the first available and unallocated Net Revenues of the following month or months after payment of all amounts required by Section 7.03(b) and shall be in addition to the monthly deposits herein required to be otherwise paid into the Reserve Fund. Moneys in the Reserve Fund may be used only to prevent a default in the payment of principal and interest on the Bonds and Addi- tional Bonds in the event there are not otherwise sufficient moneys in the Bond Fund to make such payments. So long as the Reserve Fund contains a -balance of not less than $220,560, no further payments need be made into the Reserve Fund. If the balance in the Reserve Fund exceeds $220,560 (due to interest on investments or for any other reason), such excess may be transferred out of the Reserve Fund into the Bond Fund. If, however, any of the moneys in the Re- serve Fund are used to prevent a default in the payment of principal of and interest on the Bonds or Additional Bonds as herein provided, monthly payments into the Reserve Fund shall thereafter be resumed and continued until not less than $220,560 is again on deposit in the Reserve Fund. Moneys in the Reserve Fund may, at the option of the City, be invested as authorized by Section 7.04, and such securi- ties shall be deposited in escrow at the depository bank of the City under an escrow agreement. Section 7.04 - Investments. Moneys deposited into the System Fund, Bond Fund and Reserve Fund may be invested and reinvested in the manner authorized by law. All investments i 1 f 1 1 1 1 and the interest or other investment. earnings thereon shall belong to the fund or account from which the moneys for such investments were taken, except that at any time that the Reserve Fund has a balance of $220,560 or more, all interest and other investment earnings on such balance may be trans- ferred to the Bond Fund. In the event any fund does not have sufficient uninvested funds on hand to meet the obli- gations payable out of such fund, the City shall have the right to have sold in the open market a sufficient amount of the investments to meet its obligations. The moneys resulting from such sale or sales shall belong to the fund from which the moneys for such investment were initially taken. The City shall not be responsible for any loss arising out of, the sale of any investments. Section 7.05 - Surplus Net Revenues. After provision has been made for the reasonable cost of operating and maintaining the System, and after paying all amounts re- quired to be paid into the Bond Fund and Reserve Fund, as above provided in Section 7.03(b) and (c), and after paying all other amounts that may be required by any ordinances pertaining to Additional Bonds, any funds remaining in the System Fund may be used by the City for any other purpose permitted by law. ARTICLE VIII ADDITIONAL BONDS, REFUNDING BONDS AND DISCHARGE BY DEPOSIT Section 8.01 - Additional Bonds. The City reserves the right to issue, from time to time, additional parity bonds in one or more installments, for completion, repair, improve- ment, extension, enlargement, replacement, acquisitions, construction or repair of the City's waterworks system, sanitary sewer system, or both, or for any other lawful purpose (the "Additional Bonds"), and such Additional Bonds, when issued, may be secured by and payable from 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 Bonds, and such Additional Bonds may be, in all respects, of equal dignity with the Bonds; provided, however, that no Additional Bonds shall be issued unless each of the following conditions is met, except in the case of Additional Bonds described Sections 8.02, 8.05 and 8.06, which may be issued as pro- vided therein: (a) The Additional Bonds are made payable on Sep- tember 1 of each year; (7 (b) Provisions is made in the ordinance or ordinances authorizing said Additional Bonds for monthly payments or deposits into the Reserve Fund until a balance is reached (in addition to deposits into the Reserve Account required by other ordinances or proceedings relating thereto and in addition to any balance or balances required by said other ordinances or.proceedings) of not less than the maximum annual principal and interest requirements on the Bonds, Additional Bonds, if any, and such Additional Bonds then proposed to be issued, and such balance is to be reached y within approximately five (5) years from the date of such 'proposed Additional Bonds; (c) A certificate is.executed by the Mayor and City Secretary that each of the funds created by this Ordinance -11- 4 J 1 1 or by any ordinance authorizing any previously issued Addi- tional Bonds contains the amount of moneys then required to be on deposit therein; (d) A certificate is executed by the Mayor and City Secretary.to the effect that the City is -not in default as to any covenant, condition or obligation prescribed by any ordinance authorizing the Bonds or any Additional Bonds; and (e) A certificate is executed by'a certified public`s accountant to the effect that Net_ Revenues for the last completed Fiscal Year or for any consecutive twelve (12) month period within the last consecutive fifteen (15) month period next preceding the adoption of the ordin.v e autho-, rizing the Additional Bonds were not less than 1.50 times the average annual principal and interest requ is on the Bonds, any Additional Bonds then outstanding, and the Additional Bonds then proposed to be issued. Section 8.02 - Inferior Lien Bonds. The City also reserves the right to issue inferior lien bonds and pledge the Net Revenues of the System to the payment thereof, such pledge to be junior and subordinate in all respects to the lien of the Bonds and any Additional Bonds. Section 8.03 - Special Project Bonds. The City further reserves the right to issue bonds in one or more install- ments for the purchase, construction, improvement, exten- sion, replacement, enlargement or repair of water, _sewer and/or drainage facilities necessary under a contract or contracts with persons,' corporations, municipal corpora- tions, political subdivisions, or other entities', such bonds to be payable from and secured solely by the proceeds of such contract or contracts. - The City further reserves the right to refund such bonds. Section 8.04 - Refunding Bonds. The City further reserves the right to issue refunding bonds, either Az Additional Bonds or junior lien bonds, or to -refund any of the Bonds or Additional Bonds in any manner authorized by law. Any refunding bonds so issued may enjoy complete equality of lien with the portion of the -Bonds or Additional Bonds which are not refunded. Before issuing any refunding bonds.as Additional Bonds, the City must satisfy the re- quirements of Sections 8.01(a) and (b)., Section 8.05 = Discharge By Deposit, The City may discharge its remaining obligations to the bearers of the Bonds by depositing with the Paying Agent, money which (together with interest earned on or profits to be realized from investments in Governmental Obligations as described below) will be sufficient to pay principal and interest to maturity or to the date fixed for redemption of the Bonds. Upon such deposit, the Bonds shall no longer be regarded as outstanding and unpaid; provided, however, that provision shall have been made by the City for the publication at least one (1) time in a financial journal or publication published in the City of New York, New York, or in the City of Austin, Texas, of a notice to the bearers of the Bonds. that. such money is so available for such payment. Money held for payment in accordance with'the provisions of this. Section may be invested in Governmental Obligations, which term shall mean for the purposes of this Section any of the following which are non -callable and which at the time of investment are legal investments under any applicable laws -12- for the money proposed be invested therein: direct general obligations of the United States of'America, or any obliga- tions the payment of the principal of. and interest on which are unconditionally guaranteed,by the full faith and credit of the United States of America. -Such investments shall mature in sufficient time, in the judgment of the City, to make available money. needed for the purposes intended. Net interest earned on such investments, or portions thereof, may be. paid to the City if sufficient funds will otherwise be held by the Paying Agent to pay principal. and interest on the` Bonds; otherwise, such interest or ,any part thereof shall be used for payment of principal,and interest on the Bonds. ARTICLE IX. Special Covenants of the City Section 9.01 - Covenants. The. City, by and through this Ordinance, expressly covenants as hereinafter provided in this Article. Section 9.02 _ Punctual Payment of the Bonds. The City will punctually pay or cause to be paid the interest on and .principal of the Bonds according to the terms thereof and will faithfully do and perform, and at all times fully observe, any and all covenants, undertakings, -stipulations and'provisions contained herein or in any Bond executed and delivered hereunder. Section 9.03 - Maintenance of System. 'So long as any of the Bonds remain outstanding, the City covenants that it will at all times maintain the System, or cause the same to be maintained, in good, condition and working order and will operate the same, or cause the same to be operated, in an efficient and economical manner, at a reasonable cost and in accordance with sound business principles. In operating and maintaining the System, the City will comply with all con- tractual provisions and agreements entered into by it and with all valid rules, regulations,.directions,or orders of any governmental, administrative or judicial body promulgat- ing the same. Section 9.04 -. Power to Pledge Revenues. The City has the power to pledge the Net Revenues to the payment of the Bonds and has lawfully exercised such power under the Con- stitution and laws of the State of Texas and. the Constitu- tion of the United States of America. Section 9.05 - System and -Revenues not Encumbered: Neither the System nor the Revenues thereof will be in any way encumbered except as'provided in this Ordinance. Section 9.06 - Sale or Encumbrance of System. So long as any of the Bonds remain outstanding, either as to prin- cipal or interest, the City will not sell, dispose of or encumber any of the improvements, facilities or properties constituting the System; provided, however, that this pro- vision shall not prevent the City from disposing of any portion of the System which has been declared surplus or is no longer needed for the:proper operation of the System. Any moneys received from the sale of surplus property may be used for the replacement of the property sold. Any agree- ment pursuant to which the City contracts with a person, -13- corporation, municipal corporation or political subdivision to operate the System or to lease and operate all or part of the Systemshall.not be considered as an encumbrance of the System. Section 9.07 - Insurance. So long as any -of the Bonds remain outstanding, the City covenants that it will at all times keep insured such parts of the System as are usually insured by municipal corporations operating like properties in similar locations under the same circumstances with a responsible insurance company or companies against risks, accidents or casualties against which' and to the extent insurance is usually carried by such municipal corporations; provided, however, that at any time while any contractor • engaged in construction work shall be fully responsible therefor, the City.shall not be required to carry such insurance. All such policies shall be made available for inspection by the bearers of the Bonds or their representa- tives at all reasonable times. Section 9.0a - Insurance Proceeds. In the event of any loss or damage, the City covenants that it willreconstruct or repair the destroyed or damaged portion of the System and will apply the proceeds of the insurance policies covering such loss or damage solely for that.purpose.- The City .covenants that it will begin such work or reconstruction or. repair promptly after such loss or damage shall occur and will continue and properly complete'the•`same as expeditious- ly as possible and will pay, or cause to be',paid, all costs and expenses in connection therewith out of the insurance 'proceeds so that the same shall be'completed and the proper- ty be free and clear of all mechanic's and other liens or claims. Section 9.09 - Excess Insurance Proceeds. Any insur- ance proceeds remaining after the completion of and payment for any such reconstruction or repairs shall.be-deposited to the credit of the Bond Fund. Section 9.10 - No Free Services. No free service or services of the System shall be allowed, and should the City or any of its agencies or instrumentalities make use of the services and facilities of the System, payment of a reason- able value thereof shall be made by the City outof funds derived from sources other than the revenues and income of the System. .Section 9.11 - No Competing System. To the extent that the City legally may do so, the City further covenants that so long as any of the Bonds or interest thereon are outstanding, no franchise shall be granted for- the construc- tion and operation of any competing system, and the City will prohibit the construction and operation of any system other than the System owned by the City. ARTICLE X. Default Provision Section 10.01 - Remedies in Event of Default. In addition to all, of the rights and remedies provided by the laws of the State of Texas;. the City further covenants and agrees that in the event of default in payment of principal of or interest on any of the Bonds when due, or, in the -14- event it fails to make payments required to be made into the . -Bond Fund or defaults in the' observance or performance of any other of the covenants, conditions or obligations set forth in this Ordinance, the following remedies shall be available: (a)' The bearers of any of the Bonds shall be entitled to a writ of mandamus issued by a court of competent juris- diction compelling and requiring the City and the officials thereof to observe and perform any covenant, obligation or condition prescribed in this Ordinance; and (b) No,delay or.omission to. exercise any right or power accruing upon any delay 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. Section 10.02 - Ordinance is Contract. In consdera- tion of the purchase and acceptance of:the Bonds authorized to be issued hereunder by those who shall hold the same from time to time, the provisions of the Ordinance shall be deemed' to be and shall constitute contracts between the City and the bearers, from time to time of the Bonds; and the covenants and agreements herein set forth to be performed on behalf of the City shall be for the equal benefit, protec-, tion and security of the bearers of any and all of the Bonds, all of which, regardless of the time or times of their issue or maturity,. shall be of equal rank without 'preference, priority or distinction of any of the Bonds over any other thereof, except as expressly provided herein. ARTICLE XI. Accounting and Audits Section 11.01 - Accounts, Records and'Accounting Reports. The City covenants and agrees that it will maintain in conformity with generally accepted accounting principals for municipalities books of records and accounts showing as a separate system the accounts of the System, in which. full, true'and proper entries will be made of all dealings, trans- actions, business and matters which in any way affect or pertain to the operation of the System and the allocation and application of the revenues thereof, and that such books of the System will be available for inspection by the bearers of any of the Bonds' at reasonable hours and under reasonable circumstances.: The City will operate the System on the basis of a Fiscal Year which currently begins October 1 and which may be amended from time to time by the City. Section 11.02 - Audit. After the end of•each Fiscal • Year, the City will have an audit of the System by a certi- fied public accountant for the last Fiscal Year,- which shall be submitted to the City within one -hundred and twenty (120) days after the end of the Fiscal Year.' Section 11.03 - Copies of Audit and Cost. The City shall furnish copies of such audit (without cost) to the Municipal' Advisory Council of Texas, Austin, Texas, to the original purchasers of the Bonds and to any bearer of 10% or more of the outstanding Bonds who may so request in writing. The cost of such audit shall be a proper expense of main- tenance and operation of the System.. -15 ARTICLE XII. Sale, Approval, Registration and Delivery of Bonds Section 12.01 - Sale of Bonds. The Bonds are hereby sold and shall be delivered to that bidder, or bidders, submitting the bid which results in the lowest net interest cost to the City subject to a resolution hereafter to be adopted by the City Council, forthe par value -thereof and accrued interest thereon to date of delivery, plus a premium of $ , subject to the unqualified approving opinions, as to the legality of the Bonds, of the'Attorney General of the State of Texas and of Vinson & Elkins, Houston, Texas, market attorneys. Section 12.02 - Approval, Registration and Delivery of Bonds. The Mayor and City Secretary are hereby authorized and directed to take and have charge.of the records and proceedings of the Bonds, and the Bonds, pending their approval'by the Attorney General of the State of Texas, and their registration by the Comptroller -of Public Accounts of the State of Texas. Upon registration of said Bonds,' the Comptroller of Public Accounts (or a deputy designated in writing to act for the Comptroller) shall manually sign the Comptroller's'certificate of registration described herein to be printed on the back of each Bond, and the seal of the Comptroller shall, be impressed, or placed in facsimile, on each of the Bonds. ARTICLE XIII. Arbitrage - The City Council certifies that based upon all facts, estimates and circumstances now known or reasonably expected to be in existence on the date the Bonds are delivered and paid for, the City Council reasonably expects that the proceeds of the Bonds will not be used in a manner that would cause the. Bonds or any portion of the Bonds to be an "arbitrage bond" under Section 103(c) of the Internal Revenue Code of 1954, as amended, and the regulations prescribed thereunder. Furthermore, all officers, employees and agents of the City are authorized and directed to provide certifi- cations of facts, estimates and circumstances which are material to the reasonable expectations of the City Council as of the date the Bonds are delivered and paid for, and any such certifications may be relied upon by counsel, by the bearers of the Bonds, or by any person interested in the exemption of interest on the Bonds from federal income taxation. Moreover, the City Council covenants that it shall make such use of the proceeds of the Bonds, regulate investments of proceeds of the Bonds; and take such other and further action as may be required so that the Bonds shall not be "arbitrage bonds" under Section '103(c) of the Internal Revenue Code of 1954, as amended, -and regulations prescribed from time to time thereunder. -16- ARTICLE XIV. Miscellaneous Provisions Section 14.01 - City's Successors and Assigns. When- ever in this Ordinance the City is named and referred to, it shall be deemed to include its successors and assigns, and all covenants and agreements in the ordinance contained by and on behalf of the City shall bind and inure to the bene- fit of its successors .and assigns whether or not so expressed. Section 14.02 - No Recourse Against City Officers. No recourseshall be had for the payment of the principal or the interest on the Bonds or for any claim based thereon or• in the ordinance. against any officer of the City or any person executing the Bonds. . Section 14.03 - Paying Agent May Own Bonds. The Paying . Agent, in its individual or any other capacity, may become the owner or pledgee of the Bonds with the same rights it would have if it were not the Paying Agent. Section 14.04 - Legal Holidays. In any case where the date of maturity of interest and principal of the Bonds or the date fixed for redemption of any Bonds shall be in the State of Texas a legal holiday or a day on which banking institutions are authorized by law to close, then payment of interest or principal need not be made on such date but may be made on the next succeeding day not a legal holiday or a day on which banking institutions are authorized by law to close in the State of Texas with the same'force.and effect as if made on the date of maturity or the date fixed for redemption and no interest shall accrue for the period from and after such date. Section 14.05 - Benefits of Ordinance Provision. Nothing in this Ordinance or in the Bonds, expressed or implied, shall give or be construed to give any person, firm or corporation, other than the City, the Paying Agent, and the bearers of the Bonds, any legal or equitable right, remedy or claim under or in respect of this Ordinance, or under any covenant, condition or provision herein contained, all the covenants, conditions and provisions contained in this Ordinance or in the Bonds being for the sole benefit of the City, the Paying Agent and the bearers of the Bonds. Section 14.06 - Unavailability of Authorized,Publica- tion. If, because of the temporary or permanent suspension of any newspaper, journal or other publication, or for any reason, publication of notice cannot be made meeting any requirements herein established, any notice required to be published by the provisions of this ordinance shall be"given in such other manner and at such time or times as in the judgment of the City shall most effectively approximate such required publication and the giving of such notice in such manner shall for all purposes of this Ordinance be deemed to be in compliance with the requirements for publication thereof. Section 14.07 - Severability Clause. If any word, phrase, clause, sentence, paragraph, section, or other part of this Ordinance, or the application thereof to any person or circumstance, shall ever be held to be invalid or uncon- stitutional by any court of competent jurisdiction, the remainder of this Ordinance and the application of such -17- word,.phrase, clause, sentence, paragraph, section or other part of this Ordinance to any other persons or circumstances shall not be affected thereby. Section 14.08 - Further Procedures. The Mayor and City Secretary of the City and other appropriate officials of the City are hereby authorized and directed to'do any and all things necessary. and/or convenient to carry out the terms of this Ordinance. Section 14..09 - Repeal of Resolutions and Ordinances. All resolutions or ordinances heretofore adopted by the City Council in conflict with the provisions of this Ordinance are hereby in all things repealed and shall be of no further force or effect. Section 14.10 Effective Date of Ordinance. This Ordinance shall take effect and be in full force upon and after its having been read, considered and .adopted by the City Council at two regular sessions of the City Council. Section 14.11 - Emergency Meeting. It is hereby offi- cially found and determined that an emergency or urgent public necessity exists which requires the holding of the meeting at which this Ordinance is passed, such emergency or urgent public necessity being that the proceeds from the sale of the Bonds are required as soon as possible for necessary and urgently needed public improvements; and that said meeting was open to the.public, and public notice of .the time, place, and purpose of said meeting was given, all as required by Article 6252-17, Vernon's Texas Civil Statutes, as amended. PASSED AND APPROVED this 28th day of August, 1978. /s/ Tom Reid. Mayor, City of Pearland, Texas ATTEST: /s/ Dorothy L. Cook City Secretary, City of Pearland, Texas (SEAL) CERTIFICATE FOR RESOLUTION FIXING COUPON INTEREST RATES AND NAMING PURCHASER OF $2.,750,000 WATERWORKS AND SEWER SYSTEM REVENUE BONDS, SERIES 1978 THE STATE OF TEXAS § COUNTIES OF BRAZORIA AND HARRIS S CITY OF PEARLAND S We, the undersigned officers of the CITY, OF PEARLAND, TEXAS (the "City"), do hereby certify as follows: 1. That we are the duly chosen, qualified and acting. ,officers of the City for. the 'offices shown below our signatures and that as such we are familiar with the facts herein certified. • 2. That there is attached to and follows this certificate an excerpt of proceedings from the minutes of a meeting of the .City Council of the City .(the "City Council") which is a true, full and complete excerptof all proceedings from the minutes of the City Council pertaining to the adoption of the resolution de- scribed therein; and that the persons named in such excerpt as the officers and members of the City Council or as officers of the City are the duly chosen, qualified and acting officers and members as indicated therein. 3. That a true and complete copy of the resolution (the "Resolution"), as adopted at the. meeting described in such excerpt from the minutes, is attached to and follows such excerpt. 4. That the Resolution has been duly and lawfully adopted by the City Council and that the Mayor of the City has approved, and hereby approves, the Resolution; that the Mayor and the City Secretary of the City have duly signed and attested the Resolution •and each, respectively, hereby declares:that the signing of this certificate shall also constitute the. signing of the Resolution for all purposes; and that the Resolution,'as signed, has been duly recorded in the_ -minutes of the City Council for such meeting. 5. That each of the,. officers and members of the City ,Council was duly and sufficiently notified officially and per- sonally, in advance, of the date, hour, place and subject of such meeting of the"City Council, and that the Resolution would be introduced and considered for passage at such meeting, and each of such officers and members consented, in advance, to the holding of such meeting_to consider and act upon such subject. 6. That written notice of the meeting of the City Council described in the excerpt from the minutes was posted in the`form and manner required by law; and that such meeting was open to the public as required by law at all times during which the Resolution and the subject matter thereof were discussed, considered and formally acted upon, all as required by the. Open Meetings Act, Article 6252-17, Vernon's Texas.Civil Statutes, as amended. SIGNED AND SEALED this 28th day of August, 1978 (SEAL) City Se¢jtc Mayor THE STATE OF TEXAS 5 COUNTIES OF BRAZORIA AND HARRIS § CITY OF PEARLAND § . The City Council of the City of Pearland, Texas, convened in regular meeting, open to the public, on the.28th day of August, 1978, at the City Hall, and the roll- was called of the duly constituted officers and members of the City Council and the City Secretary of the City, to -wit: Tom Reid Mayor Dennis Frauenberger Councilman Harry Farley Councilman Fran Coppinger Councilman Morris S. Wilson Councilman Carlton McComb. . Councilman Dorothy L. Cook City Secretary and all of said persons were present, except the following ab- sentees: None thus constituting a quorum. Whereupon, among- other business, the following was transacted at said meeting: a written reso- lution entitled: RESOLUTION FIXING COUPON INTEREST RATES AND NAMING PURCHASER OF $2,750,000' WATERWORKS AND -SEWER SYSTEM REVENUE BONDS, SERIES 1978 (the "Resolution") was duly introduced for the consideration of the City Council and reviewed in full. It was then duly moved and seconded that the Resolution be passed; and, after due discussion, the motion, carrying with it the passage of the Resolution, prevailed and carried by the following vote: AYES: All members of the City Council shown present above voted "Aye". NOES: None. The Mayor thereupon announced that the Resolution had been duly and lawfully adopted. The Resolution thus adopted follows: RESOLUTION FIXING'COUPON INTEREST RATES AND NAMING PURCHASER. OF $2,750,000 WATERWORKS AND SEWER SYSTEM REVENUE BONDS, SERIES 1978 THE STATE OF TEXAS S COUNTIES OF BRAZORIA AND HARRIS § CITY OF ,PEARLAND .. § WHEREAS, the City Council of the CITY OF PEARLAND, TEXAS (the "City"), has heretofore authorized the issuance of the City's $2,750,000 WATERWORKS AND SEWER SYSTEM REVENUE BONDS, SERIES 1978 (the "Bonds"), by reading, considering, and adopting on August14, 1978, and again on August 28, 1978, respectively, an ordinance authorizing such issuance; and WHEREAS, the City Council deems it advisable to adopt a resolution -fixing coupon interest rates and naming the pur- chaser or purchasers of the Bonds; THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE`CITY- OF PEARLAND THAT: Section 1. The matters and facts recited in the preamble of this resolution are hereby found to be true and correct. Section.2. The Bonds shall bear interest per annum at the following rates, respectively, to -wit: Bonds maturing 1979 through 1988, 6.40 % Bonds maturing 1989 through 19--, 5.60 % Bonds maturing 1990 through 1992, 5.40 % Bonds maturing 1993 through 19--,. 5.60 % Bonds maturing 1994'through 19--, 5.70 % Bonds maturing 1995 through 19--, 5.80 % Bonds maturing 1996 through 19--, 5.90 % Bonds maturing 1997 through 19--, 6.00 % Bonds maturing 1998 through 19--, 6.10 % Bonds maturing 1999 through 2002, 6.20 % r Section 3. The Bonds are hereby sold and shall be de- livered to UNDERWOOD, NEUHAUS & CO., INCORPORATED , for the par value thereof and accrued interest thereon to date of delivery, plus a premium of $ -0- subject to the unqualified approving opinions, as to the legality of the Bonds, of the Attorney • General of the State of Texas and of Vinson & Elkins, Houston, Texas, market attorneys. Section 4. This resolution was read and considered once by the City Council and shall take effect immediately. • Section 5. It is hereby officially found and determined that the need of the City for such financing creates an emer- gency and an urgent public necessity for the holding, at the scheduled time, of the meeting of the City Council at which this resolution is adopted and for the adoption of this resolu- tion; and the NOTICE OF MEETING relating to said meeting and heretofore posted by the City Secretary, and the posting thereof, is hereby authorized, approved, adopted, and ratified. PASSED AND APPROVED this 28th day of August, 1978. /s/ Tom Reid Mayor ATTEST: CITY OF PEARLAND, TEXAS /s/ Dorothy L. Cook City Secretary CITY OF PEARLAND, TEXAS (SEAL) PROJECTION CERTIFICATE OF ENGINEER THE STATE OF TEXAS § COUNTIES OF BRAZORIA AND HARRIS § CITY OF PEARLAND. § I, the undersigned, an independent professional engineer registered under the laws of the State of Texas, do hereby make and execute this certificate for the benefit of the Attorney General of the State of Texas and all other persons interested in the $2,750,000 City of Pearland, Texas, Waterworks and Sewer System Revenue Bonds, Series 1978,.dated September 1, 1978, now in the process of issuance. I hereby certify that, in my opinion, the Net Revenues of the waterworks and sanitary sewer system of the City of Pearland for each of the years 1979 through 2002, at the present water and sewer rates, may be fairly estimated as shown on the attached schedule which I have initialed, which is marked Exhibit "A" and is hereby made a part of this cer- tificate for all purposes. WITNESS MY HAND AND PROFESSIONAL SEAL, this 14th day of September, 1978. a. )V,C�, P. E. No. 9705 Address: Box 1388 Alvin, Texas 77511 (SEAL) EXHIBIT "A" CITY OF PEARLAND, TEXAS ESTIMATED TOTAL ESTIMATED NO. ESTIMATED ESTIMATED • ANNUAL WATERWORKS OF CONNECTIONS NET REVENUE NET REVENUE AND SANITARY SEWER YEAR WATER SEWER WATER SEWER. SYSTEM NET REVENUE 1979 3,788 3,863 $ 166,699 $ 197,041 $ 363,740 1980 4,155 4,205 158,843 202,442 . 361;285 1981 4,535 4,565 152,751 213,235 365,986 1982 4,967 4,992 143,635 230,118 373,753 1983 5,340- 5,360 108,118 225,819 333,937 1984 5,774 5,789 107,502 244,126 351,628 1985 6,194 6,204 102,303 253,928 356,231 1986 6,592 6,600 102,692 264,399 367,091 1987 6,996 7,002 98,375 275,876 374,251 1988 7,430 7,434 107,175 301,953 409,128 1989 7,892 7,894 113,997 315,452 429,449 1990 . 8,382 8,382 120,971 329,065 450,036 1991 8,844 8,844 119,306 332,919 452,225 1992 9,323 9,323 124,552 342,992 467,544 1993 9,796 9,796 102,602 348,579 451,181 1994 10,281 10,281 105,953 360,247 466,200 1995 10,912 10,912 103,163 393.749 496,912 1996 11,428 11,428 86,102 381,610 -• 467,712 1997 11,968 11,968 211,014 394 880 605,894 1998 12,553 12,553 238,918 421 802 660,720 1999 13,175 13,175 252,174 433,448 685,622 2000 13,832 13,832 265,452 432,902 _ 698,354 2001 14,528 14,528 279,860 430,760 710,620 2002 15,253 15,253 292 812 423,974 716,786 Initialed for Identification September 14, 1978 . LAW Ornecs VINSON & ELKINS FIRST CITY NATIONAL BANK BUILCING HOLUSTON. TEXAS 77002 (SEAL) SIGNATURE IDENTIFICATION AND NO - LITIGATION CERTIFICATE THE STATE OF TEXAS COUNTIES OF BRAZORIA AND coutr Y`{®8' HARRIS We, the undersigned officers of City of Pearland, Texas, certify that we officially signed, by our facsimile signatures, on behalf of said City, the following described bonds, to -wit: CITY OF PEARLAND, TEXAS, WATERWORKS AND SEWER SYSTEM REVENUE BONDS, SERIES 1978, dated September 1, 1978, numbered consecu- tively from 1 through 550, in the denomination of $5,000 each, aggregating $2,750,000, and' maturing serially on September 1 in'each of the years 1979 through 2002 being on the date of such signing and on the date hereof the duly chosen, qualified, and acting officers authorized to execute such bonds, and holding the official titles set forth below oppo- site our signatures. We further certify that said facsimile signatures have been affixed to said bonds with our full knowledge and consent, and we hereby respectively adopt the same as our own signatures. We further certify that, to our knowledge, no litigation of any nature is nowpending or threatened, either in the State or Federal courts contesting or attacking said bonds or re- straining or enjoining their issuance, execution or delivery, or restraining or enjoining the levy and/or collection and /or pledge of the funds from' which said bonds are payable, or in any manner questioning the authority or proceedings for the issuance, execution or, delivery of said bonds, or affecting the title of the present officials, and that no proceedings or author- ity for the issuance, execution or delivery of said, bonds have been repealed, rescinded or re- voked. The undersigned officers whose facsimile signatures do appear on each of the coupons attached to said bonds further certify that said facsimile signatures have been so affixed with their full knowledge and consent, and are hereby respectively adopted. We further certify that the seal which- has been impressed, or placed in facsimile, -upon each of said bonds is the legally. adopted, proper and only official seal of the issuer of said bonds. said official seal being impressed on this certificate. We further certify that no petition or other request has been filed with or presented to arty official of the issuer of these bonds requesting that any of the proceedings authorizing said bonds be submitted to a referendum or other election. We further certify that the information and data contained in the General Certificate dated August 28, 1978, is still true andcorrect as of this date. WITNESS OUR HANDS AND SAID SEAL, this X01 day of 6/6 at-c.0 , TITLE OF OFFICE Mayor Tom Reid Dorothy L. The signatures of the -Pearlani,, State tank L.ity_S_ec retar y ove officers are hereby certify. to be genuin (BANK Name of Bank SEAL) ?t:arlari, Texas City Signa•Je of Bank Officer Vic.►'resi.:e^t ; Cashier Title of Bank Officer a. 1 goo OFFICE OF THE ATTORNEY GENERAL OF THE STATE OF TEXAS October 5, 1978 THIS IS TO CERTIFY that the following described bonds, together with authenticated copies of the proceedings relating to and, authorizing the issuance of same; have been submitted to me for examination in accordance with the requirements of the statutes of the State of Texas, to -wit: CITY OF PEARLAND, TEXAS, WATERWORKS AND SEVER SYSTEM REVENUE BONDS, SERIES 1978, issued by virtue of'ordinances dated August 14 and 28, and a resolution dated August 28, 1978, adopted by the City Council of said City, for the purpose of constructing improvements and extensions to the waterworks and sanitary sewer system of the -City; dated September 1, 1978; numbered consecu- tively from 1 to 550, inclusive; in the denomination of Five Thousand Dollars ($5,000) each; aggregating the principal sum of Two Million Seven Hundred Fifty. Thousand Dollars ($2,750,000); maturing serially on September 1 in each of the years as' follows: 1979/1981 1982 1983/1984 1985 1986/1987 1988 1989/1990 1991 1992 $ 50,000 60,000 70,000 75,000 80,000 90,000 100,000 110,000 120,000 1993 1994 . 1995 1996 1997 1998 1999 2000 2001/2002 $125,000 130,000 140,000 150,000 160,000 170,000 180,000 190,000 200,000 bearing interest at the following rates per annum, to -wit: Bonds maturing 1979/1988 6.40% Bonds maturing 1989 5.60% Bonds maturing 1990/1992 5.40% Bonds maturing 1993 5.60% Bonds maturing 1994 5.70% Bonds maturing 1995 5.80% Bonds maturing 1996 5.90% Bonds maturing 1997 6.00% Bonds maturing 1998 6.10% Bonds maturing 1999/2002 6.20% payable on March 1, 1979, and semiannually thereafter on September 1 and March leach year while said bonds are outstanding; both principal and interest payable at the First City National Bank of Houston, Houston, Texas; said bonds being subject to prior re- demption to the extent and in the manner provided in said authoriz- ing ordinances and resolution. From a careful examination of said bonds and proceedings and the Constitution and laws of the State of Texas on the subject of the execution and issuance thereof, I find the following facts, to -wit: Page -2- (1) That the City of Pearland, Texa's'was, at the time of the adoption of the.ordinances,and resolution above referred to, and is, as of this date legally incorporated; (2) That these bonds shall be payable, as°to principal and . interest, solely from the net revenues derived from the operation of the City's waterworks and sanitary sewer system, as that sys- tem is defined in the ordinance (the "System"), after deduction of the reasonable expenses of maintenance and operation of the System; (3) That in addition to the right to issue bonds of inferior: lien, the City has reserved the right to issue additional bonds which may be secured by a lien on and pledge of the net revenues of the System on a_parity with the lien on and pledge of such net revenues that secure payment of these bonds. The City has. also reserved the right to issue special project bonds, as defined in ,the ordinance, which are payable solely from and secured by the proceeds of a contract or contracts with persons, corporations, municipal corporations, 'political subdivisions, or other entities. Reference is made to the_ordinance for a complete description of the right of the City to issue additional bonds and special pro- ject bonds; (4) That the bearers or owners thereof shall never have the right to demand payment of these obligations out of any funds raised or to be raised by taxation; (5) That the ordinances and resolution authorizing the issu- ance of said bonds are in proper form and were legally adopted; (6) That said bonds and interest coupons attached thereto are proper in form and in accordance with the ordinances and resolution authorizing their issuance. IT IS MY JUDGMENT, and I so find, that all of the require— ments of the laws under which said bonds were issued have been met; that said bonds were issued in conformity with the Constitu- tion and laws of the State of Texas; and that said bonds are valid and binding special obligations of said City of Pearland, Texas. WHEREFORE, said bonds are hereby approved. IN TESTIMONY WHEREOF, I have hereunto signed my name offi- cially and caused 2ttie seal of my office to be impressed hereon, in the City of Austin, Texas. . AtZhorney General of the State of Texas #16142 Book #64 r on page 558 44578 OFFICE OF COMPTROLLER OF THE STATE OF TEXAS L Bob Bullock. Comptroller of Public Accounts of the State of Texas, do hereby certify that the foregoing hereof is a true and correct copy of the opinion of the Attorney General approving the City of Tearland, Texas,- Waterworks and Sewer System Revenue Bonds, Series 1978 numbered consecutively from l to 550 of the denomination of S 5,000.00 interest various each. dated September 1 l9 78 due see foregoing percent, under and by authority of which said bonds were registered in this office, on the 6th day of October 19 78 as the same appears of record Bond Register of the Comptroller's Office, Vol. 8r1 Register Number Given under my hand and seal of office, at Austin, Texas, the 6th day of October 19 78 Bob Bullock Comptroller of Public Accounts of the State of Texas VINSON & ELKINS ATTORNEYS AT LAW HOUSTON. TEXAS 77002 TREASURER'S RECEIPT THE STATE OF TEXAS COUNTIES OF BRAZORIA AND EXKINIWOR HARRIS I, the undersigned Treasurer of City of Pearland, Texas, I. That on ing bonds: OCT 17 1978 certify as follows: I delivered to the purchaser thereof the follow - CITY OF PEARLAND, TEXAS, WATERWORKS AND SEWER SYSTEM REVENUE BONDS, SERIES 1978, dated September 1, 1978, numbered consecu- tively .from 1 through 550, in the denomination of $5,000 each, aggregating :52,750,000, and maturing serially on September 1 in each of the years 1979 through 20.02. 2. At the time of such delivery, there were no matured coupons attached to said bonds, and all unmatured coupons were attached to said bonds. 3. At the time of such delivery, I received from said purchaser full payment for said bonds in keeping with the order, ordinance, or resolution authorizing the issuance thereof and the order, ordinance or resolution awarding the sale thereof, said full purchase price being par plus accrued interest from date to delivery, plus a cash premium of $ —0— IN WITNESS WHEREOF, I have hereunto set my hand and the official seal of said City OCT 1 7 1978 (SEAL) Treasurer NO - LITIGATION CERTIFICATE We, the undersigned officers of sairi City of Peat -land , Texas do hereby certify that at the time of delivery of the bonds, as set forth in the Treas- urer's Receipt above, there was not pending and, to our knowledge, there was not threatened, any litigation affecting the validity of said bonds, or the levy and/or collection and/or pledge of funds for the payment thereof, or the organization or boundaries of said City or the title of the officers thereof to their respective offices, and that no additional bonds, war- rants, or other indebtedness have been issued since the date of the statement of indebtedness ur non -encumbrance certificate submitted to the Attorney General of Texas in connection with the approval of said bonds. WITNESS OUR HANDS AND THE OFFICIAL SEAL OF SAID CITY On_ Lir• : • _1 7 'P (SEAL) Piayor. City Secretary: The foregoing signatures of the above Treasurer, riavor , and City Secretary (BANK SEAL) are hereby certified to be genuine. Name of Bank a: ri.:.. , Signat/ of Bank Officer Title of Bank Officer OFFICIAL STATEMENT CERTIFICATE THE STATE OF TEXAS § COUNTIES OF BRAZORIA AND HARRIS § CITY OF PEARLAND § We, the undersigned, Mayor, City, Secretary, and City Manager of the CITY OF PEARLAND, TEXAS (the "City"), acting in our official capacity as such hereby certify with respect to that issue of "City of Pearland, Texas, Waterworks and Sewer System Revenue Bonds, Series 1978", in the principal amount of $2,750,000 (the "Bonds"), as follows: That, to the best of our knowledge and belief: (a) the descriptions. and statements of or pertaining to the City contained in its Preliminary and final Official Statements, on the respective dates of such statements, on the date of sale of the Bonds and the acceptance.of the best bid therefor, and on the date of delivery of the Bonds,, were and are true and correct in all material respects; (b) as of the date of delivery of the Bonds, there have been no material adverse- changes in the City's financial condition and affairs since the date of the final Official Statement; (c) insofar as the City and its affairs, including its financial affairs, are.concerned, such Pre- liminary and final Official Statements did not and do not contain an untrue statement of a material factor 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; and (d) insofar as the descriptions and statements, including financial data, contained in such Pre- liminary and final Official Statements, of or pertaining to entities other than the City and their activities are concerned, such statements and data have been obtained from sources which we believe to be reliable and we have no reason to believe that they are untrue in any material respect. OCT 11.1978 EXECUTED this , the date of payment for and delivery of the Bonds. CITY OF PEARLAND, T S BY:==2) / n (SEAL) Mayor City Manager UNITED STATES OF AMERICA STATE OF TEXAS CITY OF PEARLAND, TEXAS, WATER AND SEWER SYSTEM REVENUE REFUNDING BOND, . SERIES 1996A NUMBER DENOMINATION R-1 $155,000 REGISTERED REGISTERED INTEREST MATURITY RATE: ISSUE DATE: DATE: CUSIP: 4.55% June 1, 1996 September 1, 1997 704883BA4 Registered Owner: Merchants Bank, Houston, Texas Principal Amount: One Hundred Fifty -Five Thousand and No/100 Dollars The CITY OF PEARLAND, TEXAS, a municipal corporation duly incorporated under the laws of the State of Texas (herein the "City"), for value received, hereby promises to pay, to the Registered Owner identified above or registered assigns, solely from certain pledged revenues and funds as hereinafter specified and from no other source, on the Maturity Date specified above, upon presentation and surrender of this bond at the principal corporate trust office of the 'Paying Agent/Registrar," initially Texas Commerce Bank National Association, Houston, Texas, in any coin or currency of the United States of America which on the date of payment of such principal is legal tender for the payment of debts due the United States of America, the Principal Amount identified above, and. to pay, solely from such pledged revenues and funds, interest thereon at the Interest Rate shown above, calculated on the basis of a 360-day year composed of twelve 30-day months, from the later of the Issue Date identified above or the most recent interest payment date to which interest has been paid or duly provided for. Interest on this bond is payable on each March 1 and September 1, beginning March 1, 1997, until the maturity of this bond or until the City's obligation with respect to this bond has been satisfied. Interest on this bond shall be payable by check mailed by the Paying Agent/Registrar to the Registered Owner of record as of the 15th day of the month next preceding the interest payment date as shown on the books of registration kept by the Paying Agent/Registrar. ....� _�. - - - - - --�'-'«.- • �- :�%...n...a. Y�Yr't. _. , f ear.:ii , frS7Ya`. . ••,'(1T�i� - � • ti< i sti ivr ,�✓�� ., cr -y: co THIS BOND IS ONE OF A DULY AUTHORIZED SERIES OF BONDS (herein the "Series 1996A Bonds") in the aggregate principal amount of $1,115,000 issued pursuant to an ordinance adopted by the City Council of the City (herein the "Ordinance") for the purpose of refunding a portion of the City's outstanding water and sewer system bonds, under and pursuant to the authority of Articles 717k, Vernon's. Texas Civil Statutes, as amended, and all other applicable law. THIS BOND AND ALL OF THE SERIES 1996A BONDS are special obligations of the City that are equ2fy and ratably payable from and secured by a first lien on the "Net Revenues" collected and received by the City from the operation and ownership of the City's water and sewer system as defined and provided in the Ordinance, which Net Revenues are required to be set aside for and pledged to the payment of the Series 1996A Bonds and all additional bonds issued on a parity therewith, in the interest and sinking fund and the reserve fund required to be maintained for the payment of all such bonds, all as more fully. described and provided for in the Ordinance. This bond and the series of which it is a part, together with the interest thereon, are payable solely from such Net Revenues and do not constitute an indebtedness or general obligation of the City. THE CITY HAS RESERVED THE RIGHT TO ISSUE ADDITIONAL WATER AND SEWER SYSTEM REVENUE BONDS, subject to the restrictions contained in the Ordinance, which bonds may be secured by a lien on a parity with, or subordinate and inferior to, the lien on the Net Revenues securing this bond and the series of which it is a part. THE REGISTERED OWNER HEREOF shall never have the right to demand payment out of any funds raised or to be raised by taxation. REFERENCE IS HEREBY MADE TO THE ORDINANCE, a copy of which is on file in the office of the Paying Agent/Registrar, and to all of the provisions of which the Registered Owner of this bond by the acceptance hereof hereby assents, for definitions of terms; the description of and the nature and extent of the security for the Series 1996A Bonds; the priority for the application SPECIMEN L,r Page 2 of 6 Pages c ,b is :G.Sti•1ti J' .v1`' _..'v..isti'�r'/""c��� r 7- <'1 a 1 1 1 ti lY..CJ.,L�"<��.1J'_��i -+ �_':�:.\rir 0:�JYlr x .a's .1,. z, .. 4.: �. t 9-'-. and use of the income and revenues of the System; the Net Revenues pledged to the payment of the principal of and interest on the Series 1996A Bonds; the nature and extent and manner of enforcement of the lien and pledge securing the payment of the Series 1996A Bonds; the terms and conditions for the issuance of additional revenue obligations, including Additional Bonds; the terms and conditions foramending the Ordinance; the terms and conditions relating to the transfer or exchange of this bond; 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 of this bond, and deemed to be no longer Outstanding thereunder; and for the other terms and provisions thereof. Capitalized terms used herein, unless otherwise defined, have the same meanings assigned in the Ordinance. IT IS HEREBY DECLARED AND REPRESENTED that this bond has been duly and validly issued and delivered; that all acts, conditions, and things required or proper to be performed, exist, and be done precedent to or in the issuance and delivery of this bond have been performed, existed, and been done in accordance with law; that the Series 1996A Bonds do not exceed any statutory limitation; and that provision has been made for the payment of the principal of and interest on this bond and all of the Series 1996A Bonds by the aforesaid first lien on and pledge of the Net Revenues. THIS BOND shall not be valid or obligatory for any purpose or be entitled to any benefit under the Ordinance unless this bond either (i) is registered by the Comptroller of Public Accounts of the State of Texas or (11) is authenticated by 4 the Paying Agent/Registrar by due execution of the authentication certificate fr manually endorsed hereon. Such duly executed certificate of authentication shall be conclusive evidence that this bond was delivered by the Paying Agent/Registrar under the provisions of the Ordinance. Page 3 of 6 Pages 4' t• l;,£ Tl,:. �i.:i _.i ]aE9•�� `•. :.' �i� .�`.i� '.l `�. ��2,* s- 1. - A2A2A 2.,":- <.:c. l .''"" `8 tl7ttl &i"Ff$ l fr3 R`; n7n R ,ti T A�•n i is R:�; k �nrr : 4 � f IN WITNESS 'WHEREOF, the City has caused its corporate seal to impressed or placed in facsimile hereon and has in the Ordinance directed this bond to be signed by the Mayor and countersigned by the City Secretary by their printed facsimile signatures. Page 4 of 6 Pages 'Noe • • �s> unto s•.. to— .1r1�,: ASSIGNMENT For value received, the undersigned hereby sells, assigns, and transfers (SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER) • (Print or type name, address, and zip code of transferee) the within bond and hereby irrevocably constitutes and appoints attorney to transfer said bond on the books kept for registration thereof, with full power of substitution in the premises. DATED: Signature Guaranteed: y,. NOTICE: The signature must be guaranteed by a commercial bank or a member firm of a national securities exchange. Notarized or witnessed signatures are not acceptable. Registered Owner NOTICE: The signature on this assignor must correspond with the name of Registered Owner as it appears on the fa of the within bond in every partic without alteration or enlargement or an change whatever. S.PECMEI� Page 5 of 6 Pages �.'.•. �' .. w`.Ir� ::lA\lFr .�r�2iG ,r.L/.;:: ••Ifu2�,7. fw .7..1,11rt Zat.tai.1 i2,;a11,!*.7.-.:2er.::, .ifj '<YL`.i1.-i..1 .`1r )�M.�a '. .V �iaM.a i. _ _v)�M.a I. >•�..�a _ _ )aM�a ... ._ >•�..�_a� _ s �— :�_ �• —� , 4•. l 4 • 3 COMPTROLLER'S REGISTRATION CERTIFICATE THE STATE OF TEXAS s REGISTER NO. 2 b OFFICE OF THE COMPTROLLER OF PUBLIC ACCOUNTS I hereby certify that there is on file and of record in my office a certificate of the Attorney General of the State of Texas to the effect that this bond and the proceedings for the issuance hereof have been examined by him as required by law, that ne finds that it has been issued in conformity with the Constitution and laws of the State of Texas and that it is a valid and binding special obligation of the City of Pearland, Texas, payable from the revenues and other funds pledged to its payment by and in the proceedings authorizing the same, and I do further certify that this bond has this day been registered by me. WITNESS MY SIGNATURE AND SEAL OF OFFICE this'''. Comp oiler of Pub 'c Accou [SEAL] of the State of Texas SPECIME Page 6 of 6 Pages in4*.,1aiZki ,ErTl.''.. •!f r -en . -�..r��•.�\r.:: :,'::F1-�i: �:._� r��Y .,�.,�4 n7r�.4:��4.nTn �n•�"4��x4=+�.-.•�:4.1.1r., t*:c+:6 ;. , 4 INVESTOR ACKN WLEDGMENT May \, 1996 To: City of Pearlaad, Texas Mayor, Day, Caldwell & Keeton, L.L.P. Rauscher Pierce Refsnes, Inc. Re: $1,115,000 City of Pearland, Texas Water and Sewer System Revenue Refunding Bonds, Series 1996A (the 'Bonds') The undersigned (the "Bank') has agreed to purchase the referenced Bonds from the City of Pearland, Texas (the "City") in the principal amount of $1,115,000. The Bank hereby acknowledges and confirms that it has been furnished such financial, statistical and other information with respect to the City and the Bonds, including a certified copy of the ordinance of the City adopted on May 13,1996, which authorized the issuance of the Bonds (the 'Ordinance"), as the Bank deems neiteQsary to enable it to make an informed investment decision with respect to the Bonds. The Bank further acknowledges that: 1. The Bonds are a limited obligation of the City, payable solely from and are equally and ratably secured by a first lien on the Net Revenues (as defined in the Ordinance) collected and received by the City from the operation of its water and sewer system. 2. The Bank, as a bank and financial institution, has knowledge and experience in financial and business matters that makes it capable of evaluating the Bonds, the risks of purchasing the Bonds and its ability to bear the economic risks of such an investment. 3. Mayor, Day, Caldwell & Keeton, L.L.P. ("Bond Counsel") has served in the capacity as Bond Counsel in connection with the issuance of the Bonds. A copy of the Ordinance authorizing the issuance of the Bonds, prepared by Bond Counsel, has been provided to the Bank. Bond Counsel has not provided the Bank with any other information. 4. The Bank has purchased the Bonds for the purpose of investment and not for resale. The Bank has satisfied itself that it may lawfully purchase the Bonds. 5. The Bonds (i) are not being registered under the Securities Act of 1933 and are not being registered or otherwise qualified for sale under the "Blue Sky" laws and regulations of any state; (ii) will not be listed on any stock or other securities exchange; and (iii) will not carry any rating from any rating service. 6. The Bank is purchasing the Bonds directly from the City and not through the City's financial advisor. Very truly yours, MERCHANTS BANK Houston, Texas By: Name: Richard Chafe Title: 0304879.01 059613/1415