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2003B08-BUDGETORD!NANCE NO. AN ORI)INANCE AUTHORIZING TIlE ISSUANCE OF "CITY OF SCHERTZ, TEXAS COMBINATION TAX AND LIMITED PLEDGE REVENUE CERTIFICATES OF OBLIGATION, SERIES 2003"; PROVIDING FOR THE PAYMENT OF SAID CERTIFICATES BY THE LEVY OF AN AD VALOREM TAX UPON ALL TAXABLE PROPERTY WITHIN THE CITY AND FURTHER SECURING SAID CERTIFICATES BY A LIEN ON AND PLEDGE OF THE PLEDGED REVENUES OF THE SYSTEM; PROVIDING THE TERMS AND CONDITIONS OF SAID CERTIFICATES AND RESOLVING OTHER MATTERS INCIDENT AND RELATING TO THE ISSUANCE, PAYMENT, SECURITY, SALE, AND DELIVERY OF SAID CERTIFICATES, INCL~ING THE APPROV~ AND DISTRIBUTION OF AN OFFICIAL STATEMENT; AUTHORIZING THE EXECUTION OF A PAYING AGENT/REGISTRAR AGREEMENT; COMPLYING WITH THE REQUIREMENTS OF THE LETTER OF REP~SENTATIONS WITH THE DEPOSITORY TRUST COMPANY; AND PROVIDING AN EFFECTIVE DATE ' WHEREAS, the City Council of the City of Schertz, Texas (the City) has caused notice to be given of its intention to issue certificates of obligation in the maximum principal amount of $3,500,000 for the purpose of paying contractual obligations of the City to be incurred for making permanent public improvements and for other public purposes, to-wit: (1) constructing street and sidewalk improvements (including utilities repair, replacement, and relocation) and drainage incidental thereto, (2)constructing drainage improvements, (3) constructing a fire station, (4) constructing improvements to the municipal swimming pool, (5) constructing improvements to the City;s library system; (6) the purchase of vehicles, materials, supplies, equipment, books, land, and rights-of-way for authorized needs and purposes relating to the fire station, public safety, public works, library, and general municipal purposes, and (7) the payment of professional services related to the construction and financing of the aforementioned projects. This notice has been duly published in a newspaper hereby found and determined to be of general circulation in the City, once a week for two (2) consecutive weeks, the date of the first publication of such notice being not less than fifteen (15) days prior to the tentative date stated therein for the passage of the ordinance authorizing the issuance of such certificates of obligation; and WHEREAS, no petition protesting the issuance of the certificates of obligation described in this notice, signed by at least 5% of the qualified electors of the City, has been presented to or filed with the City Secretary prior to the date tentatively set in such notice for the passage of this . ordinance; and WHEREAS, the City Council hereby finds and determines that certificates of obligation in the principal amount of $3,360,000 described in such notice should be issued and sold at this time; now, therefore, 45282447.2 BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF SCHERTZ, TEXAS THAT: SECTION 1. Authorization - Designation - Principal Amount - Purpose. The certificates of obligation of the City shall be and are hereby authorized to be issued in the aggregate principal amount of THREE MILLION THREE HUNDRED SIXTY THOUSAND AND NO/100 DOLLARS ($3,360,000), to be designated and bear the title of "CITY OF SCHERTZ, TEXAS COMBINATION TAX AND LIMITED PLEDGE REVENUE CERTIFICATES OF OBLIGATION, SERIES 2003" (the Certificates), for the purpose of paying contractual obligations of the City to be incurred for making permanent public improvements and for other public purposes, to-wit: (1) constructing street and sidewalk improvements (including utilities repair, replacement, and relocation) and drainage incidental thereto, (2)constructing drainage improvements, (3) constructing a fire station, (4) constructing improvements to the municipal swimming pool, (5) constructing improvements to the City's library system; (6) the purchase of vehicles, materials, supplies, equipment, books, land, and fights-of-way for authorized needs and purposes relating to the fire station, public safety, public works, library, and general municipal purposes, and (7) the payment of professional services related to the construction and financing of the aforementioned projects, pursuant to the authority conferred by and in conformity with the laws of the State of Texas, particularly Chapter 1502, as amended, Texas Government Code, the Certificate of Obligation Act of 1971, as amended, Texas Local Government Code Section 271.041 through Section 271.063, and the City's Home Rule Charter. SECTION 2. Fully Registered Obligations - Authorized Denominations-Sm~ted Maturities - Interest Rates - Date. The Certificates are issuable in fully registered form only; shall be dated March 1, 2003 (the Certificate Date) and shall be in denominations of $5,000 or any integral multiple thereof, and the Certificates shall become due and payable on February 1 in each of the years and in principal amount (the Stated Maturities) and bear interest on the unpaid principal amounts from the Certificate Date, or from the most recent Interest Payment Date (hereinafter defined) to which interest has been paid or duly provided for, to the earlier of redemption or Stated Maturity, at the per annum rates, while Outstanding, in accordance with the following schedule: Year of Principal Stated Maturity Amount ($) 2004 425,000 2005 225,000 2006 250,000 2007 200,000 2008 165,000 2009 170,000 2010 180,000 2011 190,000 Interest Rate (%) 45282447.2 -2- Year of Principal Interest Stated Maturity Amount ($) Rate (%) 2012 200,000 2013 210,000 2014 220,000 2015 225,000 2016 225,000 2017 225,000 2018 250,000 SECTION 3. Payment of Certificates - Paying Agent/Registrar. The principal of, premium, .if any, and interest on the Certificates, due and payable by reason of Stated Maturity, redemption, or otherwise, shall be payable in any coin or currency of the United States of America which at the time of payment is legal tender for the payment of public and private debts, and such payment of principal of and interest on the Certificates shall be without exchange or collection charges to the Holder (as hereinafter defined) of the Certificates. The Certificates shall bear interest at the per annum rates shown above in Section 2, computed on the basis of a 360-day year of twelve 30-day months, and interest thereon shall be payable semiannually on February 1 and August I of each year (the Interest Payment Date) commencing February 1, 2004, while the Certificates are Outstanding. The selection and appointment of Wells Fargo Bank Minnesota, N.A., Minneapolis, Minnesota to serve as the initial Paying Agent/Registrar for the Certificates is hereby approved and confirmed, and the City agrees and covenants to cause to be kept and maintained at the corporate trust office of the Paying Agent/Registrar books and records (the Security Register) for the registration, payment and transfer of the Certificates, all as provided herein, in accordance with the terms and provisions of a Paying Agent/Registrar Agreement, attached, in substantially final form, as Exhibit A hereto, and such reasonable roles and regulations as the Paying Agent~egistrar and City may prescribe. The City covenants to maintain and provide a Paying AgenffRegis~ at all times while the Certificates are Outstanding, and any successor Paying Agent~egistrar shall be (i) a national or state banking institution or (ii) an association or a corporation organized and doing business under the laws of the United States of America or of any state, authorized under such laws to exercise trust powers. Such Paying AgenffRegis~ shall be subject to supervision or examination by federal or state authority and authorized by law to serve as a Paying AgenffRegistrar. The City reserves the fight to appoint a successor Paying Agent/Registrar upon providing the previous Paying Agent/Registrar with a certified copy of a resolution or ordinance terminating such agency. Additionally, the City agrees to promptly cause a written notice of this substitution to be sent to each Holder of the Certificates by United States mail, first-class postage prepaid, which notice shall also give the address of the new Paying Agent~egistrar. -3- 45282447.2 Both principal of, premium, if an3', and interest on the Certificates, due and payable by reason of Stated Maturity, redemption, or otherwise, shall be payable only to the registered owner of the Certificates appearing on the Security Register (the Holder or Holders) maintained on behalf of the City by the Paying Agent/Registrar as hereinafter provided (i) on the Record Date (hereinafter defined) for purposes of payment of interest thereon, and (ii) on the date of surrender of the Certificates for purposes of receiving payment of principal thereof upon redemption of the Certificates or at the Certificates' Stated Maturity. The City and the Paying Agent/Registrar, and any agent of either, shall treat the Holder as the owner of a Certificate for purposes of receiving payment and all other purposes whatsoever, and neither the City nor the Paying Agent~egistrar, or any agent of either, shall be affected by notice to the contrary. Principal of and premium, if any, on the Certificates shall be payable only upon presentation and surrender of the Certificates to the Paying Agent/Registrar at its corporate trust office. Interest on the Certificates shall be paid to the Holder whose name appears in the Security Register at the close of business on the fifteenth day of the month next preceding an Interest Payment Date for the Certificates (the Record Date) and shall be paid (i) by check sent by United States mail, first-class postage prepaid, by the Paying Agent/Registrar, to the address of the Holder appearing in the Security Register or (ii) by such other method, acceptable to the Paying Agent/Registrar, requested in writing by the Holder at the Holder's risk and expense. If the date for the payment of the principal of, premium, if any, or interest on the Certificates shall be a Saturday, Sunday, a legal holiday, or a day on which banking institutions in the city where the Paying Agent/Registrar is located are authorized by law or executive order to close, then the date for such payment shall be the next succeeding day which is not such a day. The payment on such date shall have the same force and effect as if made on the original .date any such payment on the Certificates was due. In the evem of a non-payment of interest on a scheduled payment date, and for thirty (30) days thereafter, a new record date for such imerest payment (a Special Record Date) will be established by the Paying Agent~egistrar, if and when funds for the payment of such imerest have been received from the City. Notice of the Special Record Date and of the scheduled payment date of the past due interest (the Special Payment Date - which shall be fifteen (15) days after the Special Record Date) shall be sent at least five (5) business days prior to the Special Record Date by United States mail, first-class postage prepaid, to the address of each Holder appearing on the Security Register at the close of business on the last business day next preceding the date of mailing of such notice. SECTION 4. Redemption. A. Optional Redemption. The Certificates having Stated Maturities on and after February 1, 2014 shall be subject to redemption prior to Stated Maturity, at the option of the City, on February 1, 2013, or on any date thereafter, as a whole or in part, in principal amounts of $5,000 or any integral multiple thereof (and if within a Stated Maturity selected at random and by lot by the Paying Agent/Registrar), at the redemption price of par plus accrued interest to the date of redemption. 45282447.2 -4- B. Exercise of Redemption Option. At least forty-five (45) days prior to a date set for the redemption of Certificates (unless a shorter notification period shall be satisfactory to the Paying Agent/Registrar), the City shall notify the Paying Agent/Registrar of its decision to exercise the right to redeem Certificates, the principal amount of each Stated Maturity to be redeemed, and the date set for the redemption thereof. The decision of the City to exercise the fight to redeem Certificates shall be entered in the minutes of the governing body of the City. C. Selection of Certificates for Redemption. If less than all Outstanding Certificates of the same Stated Maturity are to be redeemed on a redemption date, the Paying Agent/Registr~ shall select at random and by lot the Certificates to be redeemed, provided that if less than the entire principal amount of a Certificate is to be redeemed, the Paying Agent/Regis~ shall treat such Certificate then subject to redemption as representing the number of Certificates Outstanding which is obtained by dividing the principal amount of such Certificate by $5,000. D. Notice of Redemption. Not less than thirty (30) days prior to a redemption date for the Certificates, a notice of redemption shall be sent by United States mail, first-class postage prepaid, in the name of the City and at the City's expense, by the Paying Agent~egistrax to each Holder of a Certificate to be redeemed, in whole or in part, at the address of the Holder appearing on the Security Register at the close of business on the business day next preceding the date of mailing such notice, and any notice of redemption so mailed shall be conclusively presumed to have been duly given irrespective of whether received by the Holder. All notices of redemption shall (i) specify the date of redemption for the Certificates, (ii) identify the Certificates to be redeemed and, in the case of a portion of the principal mount to be redeemed, the principal amount thereof to be redeemed, (iii) state the redemption price, (iv) state that the Certificates, or the portion of the principal amount thereof to be redeemed, shall become due and payable on the redemption date specified, and the interest thereon, or on the portion of the principal amount thereof to be redeemed, shall cease to accrue fi'om and after the redemption date, and (v) specify that payment of the redemption price for the Certificates, or the principal amount thereof to be redeemed, shall be made at the corporate trust office of the Paying Agent~egistrar only upon presentation and surrender thereof by the Holder. This notice may also be published once in a financial publication, journal, or reporter .of general circulation among securities dealers in the City of New York, New York (including, but not limited to, The Bond Buyer and The Wall Street Joumal), or in the State of Texas (including, but not limited to, The Texas Bond Reporter). Additionally, this notice may also be sent by the City to any registered securities depository and to any national information service that disseminates redemption notices. If a Certificate is subject by its terms to redemption and has been called for redemption and notice of redemption thereof has been duly given or waived as herein provided, such Certificate (or the principal amotmt thereof to be redeemed) so called for redemption shall become due and payable, and if money sufficient for the payment of such Certificates (or of the principal amount thereof to be redeemed) at the then applicable redemption price is held for the purpose of such payment by the Paying Agent/Registrar, then on the redemption date designated 45282447.2 -5- in such notice, interest on said Certificates (or the principal amount thereof to be redeemed) called for redemption shall cease to accrue and such Certificates shall not be deemed to be Outstanding in accordance with the provisions of this Ordinance. E. Transfer/Exchange of Certificates. Neither the City nor the Paying Agent/Registrar shall be required (1) to transfer or exchange any Certificate during a period beginning forty-five (45) days prior to the date fixed for redemption of the Certificates or (2) to transfer or exchange any Certificate selected for redemption, provided, however, such limitation of transfer shall not be applicable to an exchange by the Holder of the unredeemed balance of a Certificate which is subject to redemption in part. SECTION 5. Execution - Registratio.n. The Certificates shall be executed on behalf of the City by its Mayor under its seal reproduced or impressed thereon and attested by its City Secretary. The signature of either of said officers on the Certificates may be manual or facsimile. Certificates beating the manual or facsimile signatures of individuals who were, at the time of the Certificate Date, the proper officers of the City shall bind the City, notwithstanding that such individuals or either of them shall cease to hold such offices prior to the delivery of the Certificates to the Purchasers (hereinafter defined), all as authorized and provided in Chapter 1201, as amended, Texas Govemment Code. No Certificate shall be entitled to any right or benefit under this Ordinance, or be valid or obligatory for any purpose, unless there appears on such Certificate either a certificate of registration substantially in the form provided in Section 8C, executed by the Comptroller of Public Accounts of the State of Texas or his duly authorized agent by manual signature, or a certificate of registration substantially in the form provided in Section SD, executed by the Paying Agent/Registrar by manual signature, and either such certificate upon any Certificate shall be conclusive evidence, and the only evidence, that such Certificate has been duly certified or registered and delivered. SECTION 6. Registration- Transfer - Exchange of Certificates - Predecessor Certificates. The Paying Agent/Registrar shall obtain, record, and maintain in the Security Register the name and address of every owner of the Certificates, or if appropriate, the nominee thereof. Any Certificate may, in accordance with its terms and the terms hereof, be transferred or exchanged for Certificates of other authorized denominations upon the Security Register by the Holder, in person or by his duly authorized agent, upon surrender of such Certificate to the Paying Agent/Registrar for cancellation, accompanied by a written instrument of transfer or request for exchange duly executed by the Holder or by his duly authorized agent, in form satisfactory to the Paying Agent/Registrar. Upon surrender for transfer of any Certificate at the corporate trust office of the Paying Agent~egistrar, the City shall execute and the Paying Agent/Registrar shall register and deliver, in the name of the designated transferee or transferees, one or more new Certificates of authorized denomination and having the same Stated Maturity and of a like interest rate and aggregate principal amount as the Certificate or Certificates surrendered for transfer. 45282447.2 -6- At the option of the Holder, Certificates may be exchanged for other Certificates of authorized denominations and having the same Stated Maturity, bearing the same rate of interest and of like aggregate principal amount as the Certificates surrendered for exchange upon surrender of the Certificates to be exchanged at the corporate trust office of the Paying Agent/Registrar. Whenever any Certificates are so surrendered for exchange, the City shall execute, and the Paying Agent/Regis~ shall register and deliver, the Certificates to the Holder requesting the exchange. All Certificates issued upon any transfer or exchange of Certificates shall be delivered at the corporate trust office of the Paying Agent~egistrar, or be sent by registered mail to the Holder at his request, risk, and expense, and upon the delivery thereof, the same shall be the valid and binding obligations of the City, evidencing the same obligation to pay, and entitled to the same benefits under this Ordinance, as the Certificates surrendered upon such transfer or exchange. All transfers or exchanges of Certificates pursuant to this Section shall be made without expense or service charge to the Holder, except as otherwise herein provided, and except that the Paying AgenffRegistmr shall require payment by the Holder requesting such transfer or exchange of any tax or other governmental charges required to be paid with respect to such transfer or exchange. Certificates canceled by reason of an exchange or transfer pursuant to the provisions hereof are hereby defined to be Predecessor Certificates, evidencing all or a portion, as the case may be, of the same debt evidenced by the new Certificate or Certificates registered and delivered in the exchange or transfer therefor. Additionally, the term Predecessor Certificates shall include any Certificate registered and delivered pursuant to Section 26 in lieu of a mutilated, lost, destroyed, or stolen Certificate which shall be deemed to evidence the same obligation as the mutilated, lost, destroyed, or stolen Certificate. SECTION 7. Initial Certificate(s). The Certificates herein authorized shall be issued initially either (i) as a single fully registered certificate in the total principal amount of $3,360,000 with principal installments to become due and payable as provided in Section 2 and numbered T-1, or (ii) as one (1) fully registered Certificate for each year of Stated Maturity in the applicable principal amount and denomination and to be numbered consecutively from T-1 and upward (the Initial Certificate(s)) and, in either case, the Initial Certificate(s) shall be registered in the name of the Purchasers or the designee thereof. The Initial Certificate(s) shall be the Certificates submitted to the Office of the Attorney General of the State of Texas for approval, certified and registered by the Office of the Comptroller of Public Accounts of the State 'of Texas and delivered to the Purchasers. Any time after the delivery of the Initial Certificate(s), the Paying Agent~egistrar shall cancel the Initial Certificate(s) delivered hereunder and exchange therefor definitive Certificates of authorized denominations, Stated Maturities, principal amounts and bearing applicable interest rates for transfer and delivery to the Holders named at the addresses identified therefor; all pursuant to and in accordance with such written instructions from the 45282447.2 -7- Purchasers, or the designee thereof, and such other information and documentation as the Paying Agent/Registrar may reasonably require. SECTION 8. Forms. A. Forms Generally. The Certificates, the Registration Certificate of the Comptroller of Public Accounts of the State of Texas, the Certificate of Registration, and the form of Assignment to be printed on each of the Certificates shall be substantially in the forms'set forth in this Section with such appropriate insertions, omissions, substitutions, and other variations as are permitted or required by this Ordinance and may have such letters, numbers, or other marks of identification (including insurance legends in the event the Certificates, or any Stated Maturities thereof, are insured and identifying numbers and letters of the Committee on Uniform Securities Identification Procedures of the American Bankers Association) and such legends and endorsements (including any reproduction of an opinion of counsel) thereon as may, consistent herewith, be established by the City or determined by the officers executing the Certificates as evidenced by their execution thereof. Any portion of the text of any Certificate may be set forth on the reverse thereof, with an appropriate reference thereto on the face of the Certificate. The definitive Certificates shall be printed, lithographed, or engraved, produced by any combination of these methods, or produced in any other similar manner, all as determined by the officers executing the Certificates as 'evidenced by their execution thereof, but the Initial Certificate(s) submitted to the Attorney General of Texas may be typewritten or photocopied or otherwise reproduced. [The remainder of this page intentionally left blankJ 45282447.2 -8- B. Form of Definitive Certificate. REGISTERED NO. REGISTERED PRINCIPAL AMOUNT $ United States of America State of Texas Counties of Bexar, Comal and Guadalupe CITY OF SCHERTZ, TEXAS COMBINATION TAX AND LIMITED PLEDGE REVENUE CERTIFICATE OF OBLIGATION, SE~ES 2003 Certificate Date' Interest Rate: Stated Maturity: CUSIP No. March 1, 2003 REGISTERED OWNER: PRINCIPAL AMOUNT: The City of Schertz, Texas (the City), a body corporate and municipal corporation in the Counties of Bexar, Comal and Guadalupe, State of Texas, for value received, acknowledges itself indebted to and hereby promises to pay to the order of the Registered Owner specified above, or the registered assigns thereof, on the Stated Maturity date specified above, the Principal Amount specified above (or so much thereof as shall not have been paid' upon prior redemption) and to pay interest on the unpaid principal amount hereof from the Certificate Date, or from the most recent interest payment date to which interest has been paid or duly provided for until such principal sum has become due and payment thereof has been made or duly provided for, to the earlier of redemption or Stated Maturity, at the per annum rate of interest specified above computed on the basis of a 360-day year of twelve 30-day months; such interest being payable on February 1 and August 1 of each year commencing February 1, 2004. Principal of this Certificate shall be payable to the Registered Owner hereof (the Holder), upon presentation and surrender, at the corporate trust office of the Paying AgentYRegis~ executing the registration certificate appearing hereon or a successor thereof. Interest shall be payable to the Holder of this Certificate (or one or more Predecessor Certificates, as defined in the Ordinance hereinafter referenced) whose name appears on the Security Register maintained by the Paying Agent/Registrar at the close of business on the Record Date, which is the fifteenth day of the month next preceding each interest payment date. All payments of principal of and interest on this Certificate shall be in any coin or currency of the United States of America which at the time of payment is legal tender for the payment of public and private debts. Interest shall be paid by the Paying Agent~egistrar by check sent on the appropriate date of payment by United States mail, first-class postage prepaid, to the Holder hereof at the address appearing in -9- 45282447.2 the Security Register or by such other method, acceptable to the requested by the Holder hereof at the Holder's risk and expense. Paying Agent/Registrar, This Certificate is one of the series specified in its title issued in the aggregate principal amount of $3,360,000 (the Certificates) pursuant to an Ordinance adopted by the governing body of the City (the Ordinance), for the purpose of paying contractual obligations of the City to be incurred for making permanent public improvements and for other public purposes, to-wit: (1) Constructing street and sidewalk improvements (including utilities repair, replacement, and relocation) and drainage incidental thereto, (2) constructing drainage improvements, (3) constructing a fire station, (4) constructing improvements to the municipal swimming pool, (5) constructing improvements to the City's library system; (6) the purchase of vehicles, materials, supplies, equipment, books, land, and fights-of-way for authorized needs and purposes relating to the fire station, public safety, public works, library, and general municipal purposes, and (7) the payment of professional services related to the construction and financing of the aforementioned projects, under and in strict conformity with the laws of the State of Texas, particularly Chapter 1502, as amended, Texas Government Code, the Certificate of Obligation Act of 1971, as amended, Texas Local Government Code, Section 271.041 through 271.063, and the City's HOme Rule Charter. The Certificates stated to mature on and after February 1, 2014 may be redeemed prior to their Stated Maturities, at the option of the City, on February 1, 2013, or on any date thereafter, in whole or in part, in principal amounts of $5,000 or any integral multiple thereof (and if within a Stated Maturity selected at random and by lot by the Paying Agent~egistrar) at the redemption price of par plus accrued interest to the date of redemption; provided, however, that at least thirty (30) days prior written notice shall be sent to the Holder of the Certificates to be redeemed by United States mail, first-class postage prepaid, and subject to the terms and provisions relating thereto contained in the Ordinance. If this Certificate is subject to redemption prior to Stated Maturity and is in a denomination in excess of $5,000, portions of the principal sum hereof in installments of $5,000 or any integral multiple thereof may be redeemed, and, if less than all of the principal sum hereof is to be redeemed, there shall be issued, without charge therefor, to the Holder hereof, upon the surrender of this Certificate to the Paying Agent~egistrar at its corporate trust office, a new Certificate or Certificates of like Stated Maturity and interest rate in any authorized denominations provided in the Ordinance for the then unredeemed balance of the principal sum hereof. If this Certificate (or any portion of the principal sum hereof) shall have been duly called for redemption and notice of such redemption duly given, then upon such redemption date this Certificate (or the portion of the principal sum hereof to be redeemed) shall become due and payable, and, if the money for the payment of the redemption price and the interest accrued on the principal amount to be redeemed to the date of redemption is held for the purpose of such payment by the Paying Agent/Registrar, interest shall cease to accrue and be payable hereon from and after the redemption date on the principal amount hereof to be redeemed. If this Certificate is called for redemption, in whole or in part, the City or the Paying Agent/Registrar shall not be required to issue,- transfer, or exchange this Certificate within forty-five (45) days of 45282447.2 -10- the date fixed for redemption; provided, however, such limitation of transfer shal! not be applicable to an exchange by the Holder of the unredeemed balance hereof in the event of its redemption in part. The Certificates of this series are payable from the proceeds of an ad valorem tax levied upon all taxable property within the City, within the limitations prescribed by law, and are further payable from and secured by a lien on and pledge of the Pledged Revenues (identified and defined in the Ordinance), being a limited amount of the Net Revenues derived from the operation of the City's combined utility system (the System), such lien on and pledge of the limited amount of Net Revenues being subordinate and inferior to the lien on and pledge of such Net Revenues securing payment of the currently outstanding Prior Lien Obligations and Junior Lien Obligations and any Additional Prior Lien Obligations, Additional Junior Lien Obligations or Subordinate Lien Obligations hereafter issued by the City. The City previously authorized the issuance of the Limited Pledge Obligations (identified and defined in the Ordinance) which are payable, in part, from and secured by a lien on and pledge of a limited amount of the Net Revenues of the System in the manner provided in the ordinances authorizing the issuance of the Limited Pledge Obligations. In the Ordinance, the City reserves and retains the fight to issue Additional Prior Lien Obligations, Additional Junior Lien Obligations, Subordinate Lien Obligations and Additional Limited Pledge Obligations (all as identified and defined in the Ordinance), while the Certificates are Outstanding, without limitation as to principal amount but subject to any terms, conditions or restrictions as may be applicable thereto under law or otherwise. Reference is hereby made to the Ordinance, copies of which are on file in the corporate trust office of the Paying Agent/Registrar, and to all of the provisions of which the Holder by his acceptance hereof hereby assents, for definitions of terms; the description of and the nature and extent of the tax levied and the revenues pledged for the payment of the CertificateS; the terms and conditions under which the City may issue Additional Prior Lien Obligations, Additional Junior Lien Obligations, Subordinate Lien Obligations, and Additional Limited Pledge Obligations; the terms and conditions relating to the transfer or exchange of the Certificates; the conditions upon which the Ordinance may be amended or supplemented with or without the consent of the Holder; the fights, duties, and obligations of the City and the Paying Agent/Registrar; the terms and provisions upon which this Certificate may be redeemed or discharged at or prior to the Stated Maturity thereof, and deemed to be no longer Outstanding thereunder; and for the other terms and provisions specified in the Ordinance. Capitalized terms used herein have the same meanings assigned in the Ordinance. This Certificate, subject to certain limitations contained in the Ordinance, may be transferred at the corporate trust office of the Paying ^gent~egistrar, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Paying Agent~egistrar duly executed by the Holder hereof, or his duly authorized agent, and thereupon one or more new fully registered Certificates of the same Stated Maturity, of authorized denominations, bearing the same rate of interest, and of the same aggregate principal amount will be issued to the designated transferee or transferees. -11- 45282447.2 The City and the Paying Agent/Registrar, and any agent of either, shall treat the Holder hereof whose name appears on the Security Register (i) on the Record Date as the owner hereof for purposes of receiving payment of interest hereon, (ii) on the date of surrender of this Certificate as the owner hereof for purposes of receiving payment of principal hereof at its Stated Maturity or its redemption, in whole or in part, and (iii) on any other date as the owner hereof for all other purposes, and neither the City nor the Paying Agent~egistmr, or any such agent of either, shall be affected by notice to the contrary. In the event of a non-payment of interest on a scheduled payment date, and for thirty (30) days thereafter, a new record date for such interest payment (a Special Record Date) will be established by the Paying AgenffRegistrar, if and when funds for the payment of such interest have been received from the City. Notice of the Special Record Date and of the scheduled payment date of the past due interest (the Special Payment Date - which shall be fifteen (15) days after the Special Record Date) shall be sent at least five (5) business days prior to the Special Record Date by United States mail, first-class postage prepaid, to the address of each Holder appearing on the Security Register at the close of business on the last business day next preceding the date of mailing of such notice. It is hereby certified, covenanted, and represented that all acts, conditions, and things required to be performed, exist, and be done precedent to the issuance of this Certificate in order to render the same a legal, valid, and binding obligation of the City have been performed, exist, and have been done, in regular and due time, form, and manner, as required by law, and that issuance of the Certificates does not exceed any constitutional or statutory limitation. In case any provision in this Certificate or any application thereof shall be deemed invalid, illegal, or unenforceable, the validity, legality, and enforceability of the remaining provisions and applications shall not in any way be affected or impaired thereby. The terms and provisions of this Certificate and the Ordinance shall be construed in accordance with and shall be governed by the laws of the State of Texas. [The remainder of this page intentionally left blanlcJ 45282447.2 -12- IN WITNESS WHEREOF, the City has caused this Certificate to be duly executed under its official seal. CITY OF SCHERTZ, TEXAS ATTEST: By Mayor City Secretary (CITY SEAL) [The remainder of this page intentionally left blank. J 45282447.2 -13- C. *Form of Registration Certificate of Cmnptroller of Public Accounts to Appear on initial Certificate(s) Only. REGISTRATION CERTIFICATE OF COMPTROLLER OF PUBLIC ACCOUNTS -OFFICE OF THE COMPTROLLER OF PUBLIC ACCOUNTS THE STATE OF TEXAS , REGISTER NO. I HEREBY CERTIFY that this Certificate has been examined, certified as to validity and approved by the Attorney General of the State of Texas, and duly registered by the Comptroller of Public Accounts of the State of Texas. WITNESS my signature and seal of office this , Comptroller of Public Accounts of the State of Texas (SEAL) *NOTE TO PR1NTER: Not to appear on primed Certificates. D. Form of Certificate Certificates Only. of Paying Agent~egistrar to Appear on Definitive This Certificate has been duly issued under the provisions of the within-mentioned Ordinance; the Certificate or Certificates of the above-entitled and designated series originally delivered having been approved by the Attorney General of the State of Texas and registered by the Comptroller of Public Accounts, as shown by the records of the Paying Agent/Registrar. Registered this date- WELLS FARGO BANK MINNESOTA, N.A. as Paying Agent~egistrar By' Authorized Signature *NOTE TO PRINTER: Print on Definitive Certificates. 45282447.2 -14- Eo Form of Assignment. ASSIGNMENT FOR VALUE RECEIVED the undersigned hereby sells, assigns, and transfers unto (Print or typewrite name, address, and zip code of transferee)' (Social Security or other identifying number)- the within Certificate and all fights thereunder, and hereby irrevocably constitutes and appoints attorney to transfer the within Certificate on the books kept for registration thereof, with full power of substitution in the premises. DATED: Signature guaranteed: NOTICE: The signature on this assignment must correspond with the name of the registered owner as it appears on the face of the within Certificate in every particular. F. The Initial Certificate(s) shall be in the form set forth in paragraph B of this Section, except that the form of a single fully registered Initial Certificate shall be modified as follows: (i) immediately under the name of the Certificate(s) the headings "Stated Maturity shall both be completed "as shown below"; "Interest Rate and (ii) the first two paragraphs shall read as follows: Registered Owner: ..... Principal Amount: The City of Schertz, Texas (the City), a body corporate and municipal corporation in the Counties of Bexar, Comal and Guadalupe, State of Texas, for value received, acknowledges itself indebted to and hereby promises to pay to the order of the Registered Owner named above, or the registered assigns thereof, the Principal Amount specified above stated to mature on the first day of February in each' of the years and in principal amounts and bearing interest at per annum rates in accordance with the following schedule' -15- 45282447.2 Years of Principal Interes~ Stated Maturity Amounts ($) Rates (%) (Information to be inserted from schedule in Section 2 hereof) (or so much thereof as shall not have been paid upon prior redemption) and to pay interest on the unpaid Principal Amounts hereof from the Certificate Date, or from the most recent interest payment date to which interest has been paid or duly provided for, to the earlier of redemption or Stated Maturity, at the per annum rates of interest specified above, computed on the basis of a 360-day year of twelve 30-day months; such interest being payable on February 1 and August 1 of each year, commencing February 1, 2004. Principal of this Certificate shall be payable to the Registered Owner hereof (the Holder), upon its presentation and surrender, at the corporate trust office of Wells Fargo Bank Minnesota, N.A., Minneapolis, Minnesota (the Paying Agent/Registrar). Interest shall be payable to the Holder of this Certificate whose name appears on the Security Register maintained by the Paying Agent/Registrar at the close of business on the Record Date, which is the fifteenth day of the month next preceding each interest payment date. All payments of principal of and interest on this Certificate shall be in any coin or currency of the United States of America which at the time of payment is legal tender for the payment of public and private debts. Interest shall be paid by the Paying Agent~egistrar by check sent on or prior to the appropriate date of payment by United States mail, first-class postage prepaid, to the Holder hereof at the address appearing in the Security Register or by such other method, acceptable to the Paying Agent/Registrar, requested by, and at the risk and expense of, the Holder hereof. G. Insurance Legend. If bond insurance is obtained by the City or the Purchasers for the Certificates, the Definitive Certificates and the Initial Certificate(s) shall bear an appropriate legend as provided by the insurer. SECTION 9. Definitions. For all purposes of this Ordinance (as defined below), except as otherwise expressly provided or unless the context otherwise requires: the terms defined in this Section have the meanings assigned to them in this Section, and certain terms used in Section 27 of this Ordinance have the meanings assigned to them in Section 27 of this Ordinance, and all such terms, include the plural as well as the singular; (ii) all references in this Ordinance to designated "Sections" and other subdivisions are to the designated Sections and other subdivisions of this Ordinance as originally adopted; and (iii) the words "herein", "hereof', and "hereunder" and other words of similar import refer to this Ordinance as a whole and not to any particular Section or other subdivision. A. The term Additional Junior Lien Obligations shall mean (i) any bonds, notes, warrants, certificates of obligation or any similar obligations hereafter issued by the City that are payable wholly or in part from and equally and ratably secured by a junior and inferior lien on and pledge of the Net Revenues of the System, all as further provided in Section 20 of this Ordinance, and (ii) obligations hereafter issued to refund any of the foregoing that are payable · -16- 45282447.2 from and equally and ratably secured by a junior lien on and pledge of the Net Revenues as determined by the City Council in accordance with any applicable law. B. The term Additional Limited Pledge Obligations shall mean (i) any bonds, notes, warrants, certificates of obligation or other evidences of indebtedness hereafter issued by the City payable wholly or in part from a pledge of and lien on Net Revenues of the System which pledge of revenues is limited pursuant to Section 1502.052, as amended, Texas Government Code, all as further provided in Section 20 of this Ordinance, and (ii)any obligations issued to refund the foregoing as determined by the City Council in accordance with any applicable law. C. The term Additional Prior Lien Obligations shall mean (i)any bonds, notes, warrants, certificates of obligation or any similar obligations hereafter issued by the City that are payable wholly or in part from and equally and ratably secured by a prior and first lien on and pledge of the Net Revenues of the System, all as fimher provided in Section20 of this Ordinance, and (ii)any obligations issued to refund the foregoing that are payable from and secured by a prior and first lien on and pledge of the Net Revenues of the System as determined by the City Council in accordance with any applicable law. D. The term Certificates shall mean the $3,360,000 "CITY OF SCHERTZ, TEXAS COMBINATION TAX AND LIMITED PLEDGE REVENUE CERTIFICATES OF OBLIGATION, SERIES 2003" authorized by this Ordinance. E. The term Certificate Fund shall mean the special Fund created and established by the provisions of Section 10 of this Ordinance. F. The term City shall mean the City of Schertz, located in Bexar, Comal and Guadalupe Counties, Texas and, where appropriate, the City Council of the City. G. The term Closing Date shall mean the date of physical delivery of the Initial Certificates in exchange for the payment of the agreed purchase price for the Certificates. H. The term Collection Date shall mean, when reference is being made to the levy and collection of annual ad valorem taxes, the date the annual ad valorem taxes levied each year by the City become delinquent. I. The term Debt Service Requirement shall mean, as of any particular date of computation, with respect to any obligations and with respect to any period, the aggregate of the amounts to be paid or set aside by the City as of such date or in such period for the payment of the principal of, premium, if any, and interest (to the extent not capitalized) on such obligations; assuming, in the case of obligations without a fixed numerical rote, that such obligations bear interest at the maximin rate permitted by the terms thereof and further assuming in the case of obligations required to be redeemed or prepaid as to principal prior to Stated Maturity, the principal amounts thereof will be redeemed prior to Stated Maturity in accordance with the mandatory redemption provis!ons applicable thereto. 45282447.2 -17- J. The term Depository shall mean an official depository bank of the City. K. The term Fiscal Year shall mean the annual financial accounting period for the System now ending on September 30th of each year; provided, however, the City Council may change such annual financial accounting period to end on another date if such change is found and determined to be necessary for accounting purposes or is required by applicable law. L. The term Government Securities, as used herein, shall mean (i) direct noncallable obligations of the United States, including obligations that are unconditionally guaranteed by, the United States of America; (ii) noncallable obligations of an agency or insmnnentality of the United States, including obligations that are unconditionally guaranteed or insured by the agency or instrumentality and that, on the date the governing body of the issuer adopts or approves the proceedings authorizing the issuance of refunding bonds, are rated as to investment quality by a nationally recognized investment rating firm not less than AAA or its equivalent; or (iii) noncallable obligations of a state or an agency or a county, municipality, or other political subdivision of a state that have been refunded and that, on the date the governing body of the issuer adopts or approves the proceedings authorizing the issuance of refunding bonds, are rated as to investment quality by a nationally recognized investment rating firm not less than AAA or its equivalent. M. The term Gross Revenues for any period shall mean all revenue during such period in respect or on account of the operation or ownership of the System, excluding refundable meter deposits, restricted gifts, and grants in aid of construction, but including earnings and income derived from the investment or deposit of money in any special fund or account (except the Certificate Fund) created and established for the payment or security of the Certificates. N. The term Holder or Holders shall mean the registered owner, whose name appears in the Security Register, for any Certificate. O. The term Insurance Policy shall mean the municipal bond insurance policy issued by the Insurer insuring the payment when due of the principal of and interest on the Certificates as provided therein. P. The term Insurer shall mean thereto or assignee thereof. , or any successor Q. The term Interest Payment Date shall mean the date semiannual interest is payable on the Certificates, being February 1 and August 1 of each year, commencing February 1, 2004, while any of the Certificates remain Outstanding. R. The term Junior Lien Obligations shall mean (i) the outstanding and unpaid obligations of the City that are payable, in part, from and equally and secured by a junior and inferior lien on and pledge of the Net'Revenues of the System and designated as follows: 45282447.2 -18- (1) ~City of Schertz, Texas Combination Tax and Junior Lien Revenue Certificates of Obligation, Series 1992", dated December 1, 1992, in the original principal amount of $200,000; and (ii) obligations hereafter issued to refund any of the foregoing that are payable from and equally and ratably secured by a junior and inferior lien on and pledge of the Net Revenues of the System as determined by the City Council in accordance with any applicable law. S. The term Limited Pledge Obligations shall mean (i) the currently outstanding and unpaid certificates of obligation payable from ad valorem taxes and additionally payable from and secured by a lien on and pledge of the Pledged Revenues, more particularly described as- (1) "City of Schertz, Texas Combination Tax and Limited Pledge Revenue Certificates of Obligation, Series 2001, dated August 1, 2001", in the original principal amount of $4,500,000; (ii) obligations hereafter issued to refund the foregoing as determined by the City Council in accordance with any applicable law. T. The term Maintenance and Operating Expenses shall mean all current expenses of operating and maintaining the System not paid from the proceeds of the Certificates, including (1) the cost of all salaries, labor, materials, repairs, and extensions necessary to render efficient service, but only if, in the case of repairs and extensions, they are, in the judgment of the City Council (reasonably and fairly exercised), necessary to maintain operation of the System and render adequate service to the City and the inhabitants thereof, or are necessary to meet some physical accident or condition which would otherwise impair obligations payable from Net Revenues, (2) payments to pension, retirement, health, hospitalization, and other employee benefit funds for employees of the City engaged in the operation or maintenance of the System, (3) payments under contracts for the purchase of water supply, treatment of sewage, or other materials, goods, or services for the System to the extent authorized by law and the provisions of such contract, (4) payments to auditors, attorneys, and other consultants incurred in complying with the obligations of the City hereunder, and (5) any legal liability of the City arising out of the operation, maintenance, or condition of the System, but excluding any allowance for depreciation, property retirement, depletion, obsolescence, and other items not requiting an outlay of cash and any interest on the Certificates or other bonds, notes, warrants, or similar obligations of the City payable from Net Revenues. U. The term Net Revenues for any period shall mean the Gross Revenues of the System less the Maintenance and Operating Expenses of the System. V. The term Ordinance shall mean this ordinance as finally passed and adopted by the City Council of the City. 45282447.2 -19- W. The term ()utxtanding when used ill this Ordinance with respect to Certificates shall mean, as of the date of determination, all Certificates issued and delivered under this Ordinance, except' (1) those Certificates canceled by the Paying Agent/Registrar or delivered to the Paying Agent/Registrar for cancellation; (2) those Certificates for which payment has been duly provided by 'the City in accordance with the provisions of Section 29 of this Ordinance; and (3) those Certificates that have been mutilated, destroyed, lost, or stolen and replacement Certificates have been registered and delivered in lieu thereof as provided in Section 25 of this Ordinance. X. The term Pledged Revenues shall mean, while the Certificates remain Outstanding, an amount of Net Revenues not in excess of $1,000. The Pledged Revenues shall be deposited, allocated, and expended in accordance with Section 10 of this Ordinance. Y. The term Pledged Revenue Amount shall mean the total amount, not to exceed $1,000 while the Certificates are Outstanding, of Net Revenues that may be transferred in whole or in part by the City in any given Fiscal Year (however, any amounts transferred prior to the final maturity date of the Certificates may not exceed the total amount of $1,000) to the Certificate Fund. Z. The term Prior Lien Obligations shall mean (i) the currently outstanding and unpaid obligations of the City that are payable from and equally and ratably secured by a prior and first lien on and pledge of the Net Revenues of the System and designated as follows: (1) "City of Schertz, Texas Utility System Revenue and Refunding Bonds, Series 2001", dated April 1, 2001, in the original principal amount of $5,550,000; (ii) obligations hereafter issued to refund any of the foregoing that are payable from and secured by a prior and fn:st lien on and pledge of the Net Revenues of the System as determined by the City Council in accordance with any applicable law. AA. The term Purchasers shall mean the initial purchaser or purchasers of the Certificates named in Section 26 of this Ordinance. BB. The term Stated Maturity shall mean the annual principal payments of the Certificates payable on February 1 of each year the Certificates are Outstanding as set forth in Section 2 of this Ordinance. CC. The term Subordinate Lien Obligations shall mean (i) any bonds, notes, warrants, certificates of obligation, or any similar obligations hereafter issued by the City that are payable, in whole or in part, from and secured by a lien on and pledge of the Net Revenues of the System, 45282447.2 -20- such pledge being subordinate and inferior to the lien on and pledge of the Net Revenues of the System that is or may be pledged to the payment of the currently outstanding Prior Lien Obligations and Junior Lien Obligations or any Additional Prior Lien Obligations or Additional Junior Lien Obligations hereafter issued by the City, but prior and superior to the lien on and pledge of the Pledged Revenues securing, in part, the payment of the currently outstanding Limited Pledge Obligations, the Certificates, or any Additional Limited Pledge Obligations hereafter issued by the City, all as further provided in Section 20 of this Ordinance and (ii) obligations hereafter issued to refund any of the foregoing that are payable from and equally and ratably secured by a subordinate and inferior lien on and pledge of the Net Revenues as determined by the City Council in accordance with any applicable law. DD. The term System shall mean all properties, facilities, and plants currently owned, operated, and maintained by the City for the supply, treatment, transmission, and distribution of treated potable water and the collection, treatment, and disposal of waterborne wastes together with all future extensions, improvemems, and additions thereto and replacements thereof, excluding from the foregoing, however, to the extent now or hereafter authorized or permitted by law, facilities of any kind which are declared by the City Council, prior to the acquisition or construction thereof by the City, not to be a part of the System and which are not acquired or constructed by or on behalf of the City with Net Revenues of the System or any part thereof or with proceeds from the issuance of obligations of the City which are payable from Net Revenues of the System or any part thereof. SECTION 10. Certificate Fund, Investments. For the purpose of paying the interest on and to provide a sinking fund for the payment, redemption, and retirement of the Certificates, there shall be and is hereby created a special fund to be designated "COMBINATION TAX AND LIMITED PLEDGE REVENUE CERTIFICATES OF OBLIGATION, SERIES 2003, INTEREST AND SINKING FUND" (the Certificate Fund), which fund shall be kept and maintained at the Depository, and money deposited in such fund shall be used for no other purpose and shall be maintained as provided in Section 27. Authorized officials of the City are hereby authorized and directed to make withdrawals from said fund sufficient to pay the principal of and interest on the Certificates as the same become due and payable and shall cause to be transferred to the Paying Agent~egistrar from money on deposit in the Certificate Fund an amount sufficient to pay the amount of principal and/or interest falling due on the Certificates, such transfer of funds to the Paying Agent~egistrar to be made in such manner as will cause immediately available funds to be deposited with the Paying Agent/Registrar on or before the last business day next preceding each interest and principal payment date for the Certificates. The City, at its sole discretion, may deposit the Pledged Revenue Amount to the ' Certificate Fund. The Pledged Revenue Amount, if deposited, shall be expended annually to pay principal of and interest on the Certificates as the same become due and payable. This Pledged Revenue Amount shall be accounted for and transferred to the Paying Agent~egistrar in accordance with the provisions of the previous paragraph of this Section. 45282447.2 -21- Pending the transfer of funds to the l)aying Agent/Registrar, money in any fund established by this Ordinance may, at the option of the City, be placed in time deposits or certificates of deposit, as permitted by the provisions of the Public Funds Investment Act, as amended, Chapter 2256, Texas Government Code, secured (to the extent not insured by the Federal Deposit Insurance Corporation) by obligations of the type hereinafter described, or be invested, as authorized by any law, including investments held in book-entry form, in securities, including, but not limited to, direct obligations of the United States of America, obligations guaranteed or insured by the United States of America, which, in the opinion of the Attorney General of the United States, are backed by its full faith and credit or represent its general obligations, or invested in indirect obligations of the United States of America, including, but not limited to, evidences of indebtedness issued, insured or guaranteed by such governmental agencies as the Federal Land Banks, Federal Intermediate Credit Banks, Banks for Cooperatives, Federal Home Loan Banks, Government National Mortgage Association, Farmers Home Administration, Federal Home Loan Mortgage Association, or Federal Housing Association; provided that all such deposits and investments shall be made in such a manner that the money required to be expended from such fired will be available at the proper time or times. All interest and income derived fi'om deposits and investments in any fund established pursuant to the provisions of this Ordinance shall be credited to, and any losses debited to, such fund. All such investments shall be sold promptly when necessary to prevent any default in connection with the Certificates. SECTION 11. Tax Levy_. To provide for the payment of the Debt Service Requirements on the Certificates being (i) the interest on the Certificates and (ii) a sinking fired for their redemption at Stated Maturity or a sinking fund of 2% (whichever amount shall be the greater), there shall be and there is hereby levied for the current year and each succeeding year thereafter while the Certificates or any interest thereon shall remain Outstanding, a sufficient tax on each one hundred dollars valuation of taxable property in the City, adequate to pay such Debt Service Requirements, full allowance being made for delinquencies and costs of' collection; said tax shall be assessed and collected each year and applied to the payment of the Debt Service Requirements, and the same shall not be diverted to any other purpose. The taxes so levied and collected shall be paid into the Certificate Fund. The City Council hereby declares its purpose and intent to provide and levy a tax legally and fully sufficient to pay the said Debt Service Requirements, it having been determined that the existing and available taxing authority of the City for such purpose is adequate to permit a legally sufficient tax in consideration of all other outstanding indebtedness. The amount of taxes to be provided annually for the payment of the principal of and interest on the Certificates shall be determined and accomplished in the following manner: A. Prior to the date the City Council establishes the annual tax rate and passes an ordinance levying ad valorem taxes each year, the City Council shall determine: 45282447.2 -22- (1) the amount of Debt Service Requirements to become due and payable on the Certificates between the Collection Date for the taxes then to be levied and the Collection Date for the taxes to be levied during the next succeeding calendar year; (2) the mount on deposit in the Certificate Fund after (a) deducting therefrom the total amount of Debt Service Requirements to become due on Certificates prior to the Collection Date for the ad valorem taxes to be levied and (b) adding thereto the amount of the Pledged Revenues, if any, to be appropriated and allocated during such year to pay such Debt Service Requirements, if any, prior to the Collection Date for the ad valorem taxes to be levied; and (3) the amount of Pledged Revenues, if any, to be appropriated and to be set aside for the payment of the Debt Service Requirements on the Certificates between the Collection Date for the taxes then to be levied and the Collection Date for the taxes to be levied during the next succeeding Fiscal Year. B. The mount of taxes to be levied annually each year to pay the Debt Service Requirements on the Certificates shall be the amount established in paragraph (1) above less the sum total of the mounts established in paragraphs (2) and (3), after taking into consideration delinquencies and costs of collecting such annual taxes. SECTION 12. Pledge. of Revenues. The City hereby covenants and agrees that, subject to any prior lien on and pledge of the Net Revenues of the System to the payment and security of (i) the currently outstanding Prior Lien Obligations and Junior Lien Obligations and any Additional Prior Lien Obligations, Additional Junior Lien Obligations or Subordinate Lien Obligations hereafter issued by the City and (ii) the currently outstanding Limited Pledge Obligations, the Pledged Revenues are hereby irrevocably pledged to the payment of the principal of and interest on the Certificates and the pledge of Pledged Revenues herein made for the payment of the Certificates shall constitute a lien on the Pledged Revenues in accordance with the terms and provisions hereof and be valid and binding without any physical delivery thereof or ftmher act by the City. SECTION 13. System Fund. The City hereby covenants and agrees that all Gross Revenues derived from the operation of the System shall be kept separate and apart from all other funds, accoUnts and money of the City and shall be deposited as collected into the "CITY OF SCHERTZ, TEXAS UTILITY SYSTEM FUND" (the System Fund). All money deposited in the System Fund shall be pledged and appropriated to the extent required for the following purposes and in the order of priority shown: First: to the payment of the reasonable and proper Maintenance and Operating Expenses of the System required by statute or ordinances authorizing the issuance of any indebtedness of the City to be a first charge on and claim against the Gross Revenues of the System; 45282447.2 Second: To the payment of the amounts that must be deposited in the special funds and accounts created and established for the payment, security, and benefit -23- of the currently outstanding Prior Lien Obligations and any Additional Prior Lien Obligations hereafter issued by the City; Third: To the payment of the amounts that must be deposited in the special funds and accounts created and established for the payment, security, and benefit of the currently outgtanding Junior Lien Obligationg and any Additional Junior Lien Obligations hereafter issued by the City; Fourth: To the payment of the amounts that must be deposited in the special funds and accounts created and established for the payment, security, and benefit of any Subordinate Lien Obligations hereafter issued by the City; and Fifth: To the payment of the mounts that may be deposited in the special funds and accounts established for the payment of the currently outstanding Limited Pledge Obligations, the Certificates, and any Additional Limited Pledge Obligations hereatter issued by the City. Any Net ReVenues remaining in the System Fund after ~atisfying the foregoing payments, or making adequate and sufficient provision for the payment, security and benefit thereof, may be appropriated and used for any other City purpose now or hereafter permitted by law. SECTION 14. Deposits to Certificate Fund; Excess Certificate Proceeds. The City hereby covenants and agrees to cause to be deposited in the Certificate Fund prior to a principal and interest payment date for the Certificates, from the Pledged Revenues in the System Fund, after the deduction of all payments required to be made to the special funds or accounts created for the payment, security, and benefit of the currently outstanding Prior Lien Obligations and Junior Lien Obligations and any Additional Prior Lien Obligations, Additional Junior Lien Obligations or Subordinate Lien Obligations hereafter issued by the City, any amounts budgeted to be paid therefrom in such Fiscal Year. Accrued interest and premium, if any, received from the Purchasers of the Certificates shall be deposited to the Certificate Fund and ad valorem taxes levied and collected for the benefit of the Certificates shall be deposited to the Certificate Fund. In addition, any surplus proceeds, including investment income therefrom, from the sale of the Certificates not expended for authorized purposes shall be deposited in the Certificate Fund, and such amounts so deposited shall reduce the sums otherwise required to be deposited in said fund from ad valorem taxes. SECTION 15. Security of Funds. All money on deposit in the funds for which this Ordinance makes provision (except any portion thereof as may be at any time properly invested as provided herein) shall be secured in the manner and to the fullest extent required by the laws of Texas for the security of public funds, and money on deposit in such funds shall be used only for the purposes permitted by this Ordinance. 45282447.2 -24- SECTION 16. Maintenan.ce of System - Insurance. The City covenants and agrees that while the Certificates remain Outstanding it will maintain and operate the System with all possible efficiency and maintain casualty and other insurance (including a system of self-insurance) on the properties of the System and its operations of a kind and in such amounts customarily carried by municipal corporations in the State of Texas engaged in a similar type of business and that it will faithfully and punctually perform all duties with reference to the System required by the laws of the State of Texas. All money received from losses under such insurance policies, other than public liability policies, are held for the benefit of the holders of the Certificates until and unless the proceeds are paid out in making good the loss or damage in respect of which such proceeds are received, either by replacing the property destroyed or repairing the property damaged, and adequate provision for making good such loss or damage must be made within ninety (90) days after the date of loss. The payment, of premiums for all insurance policies required under the provisions hereof shall be considered Maimenance and Operating Expenses. Nothing in this Ordinance shall be construed as requiting the City to expend any funds which are derived from sources other than the operation of the System but nothing herein shall be construed as preventing the City from doing so. SECTION 17. Rates and Charges. The City hereby covenants and agrees with the Holders of the Certificates that rates and charges for utility services afforded by the System will be established and maintained to provide Gross Revenues sufficient at all times: A. to pay all operating, maintenance, depreciation, replacement, bettermem, and other costs incurred in the maintenance and operation of the System, including, but not limited to, Maintenance and Operating Expenses; B. to produce Net Revenues sufficient, together with any other lawfully available funds, to pay (i) the interest on and principal of the currently outstanding Prior Lien Obligations and any Additional Prior Lien Obligations hereafter issued by the City as the same becomes due and payable and the amounts required to be deposited in any special fired created and established for the payment, security, and benefit thereof; (ii) the interest on and principal of the currently outstanding Junior Lien Obligations and any Additional Junior Lien Obligations hereafter issued by the City as the same becomes due and payable and the amounts required to be deposited in any special fund created and established for the payment, security, and benefit thereof; and (iii) the interest on and principal of any Subordinate Lien Obligations hereafter issued by the City as the same becomes due and payable and the amounts required to be deposited in any special fund created and established for the payment, security, and benefit thereof, and (iv) the amounts that may be deposited in the special funds established for the payment of the currently outstanding Limited Pledge Obligations, the Certificates, or any Additional Limited Pledge Obligations hereafter issued by the City; and C. to pay other legally incurred indebtedness payable from the Net Revenues of the System and/or secured by a lien on the System or the Net Revenues thereof. SECTION 18. Records and Accounts - Annual Audit. The City further covenants and agrees that so long as any of the Certificates remain Outstanding it will keep and maintain separate and -25- 45282447.2 complete records and accounts pertaining to the operations of the System in which colnplete and correct entries shall be made of all transactions relating thereto, as provided by Chapter 1502, as amended, Texas Government Code, or other applicable law. The Holders of the Certificates or any duly authorized agent or agents of the Holders shall have the right to inspect the System and all properties comprising the same. The City further agrees that, following the close of each Fiscal Year, it will cause an audit of such books and accounts to be made by an independent firm of Certified Public Accountants. Copies of each annual audit shall be furnished to the Executive Director of the Municipal Advisory Council of Texas at his office in Austin, Texas, and, upon written request, to the Purchasers of the Certificates and any subsequent holder thereof. Expenses incurred in making the annual audit of the operations of the System are to be regarded as Maintenance and Operating Expenses. SECTION 19. Remedies in EVent of Default. In addition to all the rights and remedies provided by the laws of the State of Texas, the City covenants and agrees particularly that in the event the City (a) defaults in the payments to be made to the Certificate Fund, or (b) defaults in the observance or performance of any other of the covenants, conditions, or obligations set forth in this Ordinance, the Holders of any of the Certificates shall be entitled to seek a writ of mandamus issued by a court of proper jurisdiction compelling and requiring the governing body of the City and other officers of the City to observe and perform any covenant, condition, or obligation prescribed in this Ordinance. No delay or omission to exercise any right or power accruing upon any default shall impair any such right or power or shall be construed to be a waiver of any such default or acquiescence therein, and every such fight and power may be exercised from time to time and as often as may be deemed expedient. The specific remedies herein provided shall be cumulative of all other existing remedies and the specification of such remedies shall not be deemed to be exclusive. SECTION 20. .l. ssuance of Additional Prior Lien Obligations, Additional Junior I~ien Obligations, Subordinate Lien Obligations, and Additional Limited Pledge Obligations. The City hereby expressly reserves the fight to hereafter issue bonds, notes, warrants, certificates of obligation, or similar obligations, payable, wholly or in part, as appropriate, from and seemed by a pledge of and lien on the Net Revenues of the System with the following priorities, without limitation as to principal amount, but subject to any terms, conditions, or restrictions applicable thereto under existing ordinances, laws, or otherwise: A. Additional Prior Lien Obligations payable from and equally and ratably secured by a first and prior lien on and pledge of the Net Revenues of the System; B. Additional Junior Lien Obligations payable from and equally and ratably secured by a lien on and pledge of the Net Revenues that is junior and inferior to the lien on and pledge thereof securing the payment of the currently Prior Lien Obligations and any Additional Prior Lien Obligations hereafter issued by the City, but prior and superior to the lien on and pledge of the Net Revenues securing, in part, the payment of the currently outstanding Limited Pledge 45282447.2 -26- Obligations, the Certificates, and any Subordinate Lien Obligations or Additional Limited Pledge Obligations hereafter issued by the City; and C. Subordinate Lien Obligations payable from and equally and ratably secured by a lien on and pledge of the Net Revenues that is subordinate and inferior to the lien on and pledge thereof securing the payment of the currently outstanding Prior Lien Obligations and Junior Lien Obligations and any Additional Prior Lien Obligations or Additional Junior Lien Obligations hereafter issued by the City, but prior and superior to the lien on and pledge of the Net Revenues securing, in part, the payment of the currently outstanding Limited Pledge Obligations, the Certificates, and any Additional Limited Pledge Obligations hereafter issued by the City; and D. Additional Limited Pledge Obligations secured by a lien on and pledge of a limited amount of the Net Revenues in accordance with the provisions of the following paragraph. Additional Prior Lien Obligations, Additional Junior Lien Obligations or Subordinate Lien Obligations, if issued, may be payable, in whole or in part, from Net Revenues (without impairment of the obligation of contract with the Holders of the Limited Pledge Obligations or the Certificates) upon such terms and conditions as the City Council may determine. Additional Limited Pledge Obligations, if issued and payable, in whole or in part, from Pledged Revenues (defined in the same or similar terms as provided in Section 9 of this Ordinance or in the ordinance authorizing the issuance of the Limited Pledge Obligations), shall not in any event be construed to be payable from the Pledged Revenues authorized by this Ordinance or in the ordinance authorizing the issuance of the Limited Pledge Obligations to be budgeted and appropriated for the payment of the Certificates or the Limited Pledge Obligations, as appropriate. However, the lien on and pledge of the limited amount of Net Revenues securing, in part, the payment of any Additional Limited Pledge Obligations shall be sub°rdinate and inferior to the pledge of and lien on the Net Revenues securing the payment of the currently outstanding Prior Lien Obligations and Junior Obligations and any Additional Prior Lien Obligations, Additional Junior Lien Obligations, or Subordinate Lien Obligations hereafter issued by the City. SECTION 21. Special Covenants. The City hereby further covenants that: A. it has the lawful power to pledge the Pledged Revenues supporting the Certificates and has lawfi~ly exercised said powers under the laws of the State of Texas, including power existing under Chapter 1502, as amended, Texas Government Code, the Certificate of Obligation Act of 1971, as amended, Texas Local Government Code, Section 271.041 through Section 271.063, and the City's Home Rule Charter; B. other than for the payment of the currently outstanding Prior Lien Obligations, Junior Lien Obligations, Limited Pledge Obligations, and the Certificates, the Net Revenues of the System have not in any manner been pledged to the payment of any debt or obligation of the City or of the System; 45282447.2 -27- C. as long as any Certificates or any interest thereon remain Outstanding, the City will not sell. lease or encumber (except in the manner provided in Section 20 of this Ordinance) the System or any substantial part thereof, provided that this covenant shall not be construed to prohibit the sale of such machinery, or other properties or equipment which has become obsolete or otherwise unsuited to the efficient operation of the System; D. to the extent that it legally may, the City further covenants and agrees that, so long as any of the Certificates, or any interest thereon, are Outstanding, no franchise shall be granted for the installation or operation of any competing utility systems other than those owned by the City, and the operation of any such systems by anyone other than the City is hereby prohibited; and E. no flee service of the System shall be allowed, and should the City or any of its agents or instrumentalities make use of the services and facilities of the System, payment of the reasonable value thereof shall be made by the City out of funds from sources other than the revenues and income of the System. SECTION 22. A licafion of the Covenants and A_gr~ments of the Prior Lien Obli atg_~!Lq_~ ~Junior Lien Obligations, or Subordinate ~ 0-b~gations. ~ ~s the intention of the City Council and accordingly hereby recognized and stipulated that the provisions, agreements, and covenants contained herein bearing upon the management and operations of the System, and the administration and application of Gross Revenues derived from the operation thereof, shall to the extent possible be harmonize~ with like provisions, agreements, and covenants contained in the ordinances authorizing the issuance of the currently outstanding Prior Lien Obligations and Junior Lien Obligations and any Additional Prior Lien Obligations, Additional Junior Lien Obligations, or Subordinate Lien Obligations hereafter issued by the City, and to the extem of any irreconcilable conflict between the provisions contained herein and in the ordinances authorizing the issuance of the currently outstanding Prior Lien Obligations and Junior Lien Obligations, the provisions, agreements and covenants contained therein shall prevail to the extent of such conflict and be applicable to this Ordinance, especially the priority of fights and benefits conferred thereby to the holders of the currently outstanding Prior Lien Obligations and Junior Lien Obligations. It is expressly recognized that prior to the issuance of any Additional Prior Lien Obligations, Additional Junior Lien Obligations or Subordinate Lien Obligations, the City must comply with each of the conditions precedent contained in the ordinances authorizing the issuance of the currently outstanding Prior Lien Obligations and Junior Lien Obligations. SECTION 23. Notices to Holders, Waiver. Wherever this Ordinance provides for notice to Holders of any event, such notice shall be sufficiently given (unless otherwise herein expressly , provided) if in writing and sent by United States mail, first-class postage prepaid, to the address of each Holder as it appears in the Security Register. In any case where notice to Holders is given by mail, neither the failure to mail such notice to any particular Holders, nor any defect in any notice so mailed, shall affect the sufficiency of such notice with respect to all other Holders. Where this Ordinance provides for notice in any manner, such notice may be waived in writing by the Holder entitled to receive -28- 45282447.2 such notice, either belbre or after the event with respect to which such notice is given, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Paying Agent/Registrar, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. SECTION 24. Cancellation. All Certificates surrendered for payment, transfer, exchange, or replacement, if surrendered to the Paying Agent/Registrar, shall be promptly canceled by it and, if surrendered to the City, shall be delivered to the Paying AgenffRegistrar and, if not. already canceled, shall be promptly canceled by the Paying AgenffRegistrar. The City may at any time deliver to the Paying Agent~egistrar for cancellation any Certificates previously certified or registered and delivered which the City may have acquired in any manner whatsoever, and all Certificates so delivered shall be promptly canceled by the Paying Agent/Registrar. All canceled Certificates held by the Paying Agent/Regis~ shall be destroyed as directed by the City. SECTION 25. Mutilated, Destroyed, Lost, and Stolen Certificates. If (1) any mutilated Certificate is surrendered to the Paying AgenffRegistrar, or the City and the Paying Agent/Registrar receive evidence to their satisfaction of the destruction, loss, or theft of any Certificate, and (2) there is delivered to the City and the Paying Agent~egistrar such security or indemnity as may be required to save each of them harmless, then, in the absence of notice to the City or the Paying Agent/Registrar that such Certificate has been acquired by a bona fide purchaser, the City shall execute and, upon its request, the Paying AgentIRegistrar shall register and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost, or stolen Certificate, a new Certificate of the same Stated Maturity and interest rote and of like tenor and principal amount, bearing a number not contemporaneously outstanding. In case any such mutilated, destroyed, lost, or stolen Certificate has become or is about to become due and payable, the City in its discretion may, instead of issuing a new Certificate, pay such Certificate. Upon the issuance of any new Certificate or payment in lieu thereof, under this Section, the City may require payment by the Holder of a sum sufficient to cover any tax or other governmental charge imposed in relation thereto and any other expenses (including attorney's fees and the fees and expenses of the Paying Agent~egistrar) connected therewith. Every new Certificate issued pursuant to this Section in lieu of any mutilated, destroyed, lost, or stolen Certificate shall constitute a replacement of the prior obligation of the City, whether or not the mutilated, destroyed, lost, or stolen Certificate shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Ordinance equally and ratably with all other Outstanding Certificates. The provisions of this Section are exclusive and shall preclude (to the extent lawfifl) all other rights and remedies with respect to the replacement and payment of mutilated, destroyed, lost, or stolen Certificates. 45282447.2 -29- SECTION 26. Sale of the Certificates; Use of Certificate Proceeds. The sale of the Certificates to (the Purchasers and having all the rights, benefits, and obligations of a Holder) at the price of par, plus accrued interest to the date of delivery, is hereby confirmed. The Initial Certificate shall be registered in the name of · The Certificates were awarded to the bidder whose bid produced the lowest net interest cost to the City. Delivery of the Certificates to the Purchasers shall occur as soon as practicable after the adoption of this Ordinance, upon payment therefor in accordance with the terms of sale. Proceeds from the sale of the Certificates shall be applied as follows: Certificate Fund. Accrued interest received from the Purchasers shall be deposited imo the (2) The balance of the proceeds derived from the sale of the Certificates (after paying costs of issuance) shall be deposited into the special construction account or accounts created for the projects to be constructed with the proceeds of the Certificates. This special constmction account shall be established and maintained at the Depository and shall be invested in accordance with the provisions of Section 10 of this Ordinance. Interest earned on the proceeds of the Certificates pending completion of construction of the projects financed with such proceeds shall be accounted for, maintained, deposited, and expended as permitted by the provisions of Chapter 1201, as amended, Texas Government Code, or as required by any other applicable law. Thereafter, such amounts shall be expended in accordance with Section 14 of this OrdNance. SECTION 27. Covenants to Maintain Tax-Exempt Stares. A. Definitions. meanings: When used in this Section, the following terms have the following "Code" means the Internal Revenue Code of 1986, as amended by all legislation, if any, effective on or before the Closing Date. "Computation Date" has the meaning set forth in Section 1.148-1(b) of the Regulations. "Gross Proceeds" means any proceeds as defined in Section 1.148-1Co) of the Regulations, and any replacement proceeds as defined in Section 1.148-1(c) of the Regulations, of the Certificates. "Investment" has the meaning set forth in Section 1.148-1 (b) of the Regulations. "Nonpurpose Investment" means any invesmaent property, as defined in section 148(b) of the Code, in which Gross Proceeds of the Certificates are invested and which is not acquired to can'y out the governmental purposes of the Certificates. 45282447.2 -30- "Rebate Amount" has the meaning set forth in Section 1.148-1(b) of the Regulations. "Regulations" means any proposed, temporary, or final Income Tax Regulations issued pursuant to Sections 103 and 141 through 150 of the Code, and 103 of the Internal Revenue Code of 1954, which are applicable to the Certificates. Any reference to any specific Regulation shall also mean, as appropriate, any proposed, temporary or final Income Tax Regulation designed to supplement, amend or replace the specific Regulation referenced. "YieM" of (1) any Investment has the meaning set forth in Section 1.148-5 of the Regulations; and (2) Regulations. the Certificates has the meaning set forth in Section 1.148-4 of the B. Not to Cause Interest to Become Taxable. The City shall not use, permit the use of, or omit to use Gross Proceeds or any other amounts (or any property the acquisition, construction or improvement of which is to be financed directly or indirectly with Gross Proceeds) in a manner which if made or omitted, respectively, would cause the interest on any Certificate to become includable in the gross income, as defined in section 61 of the Code, of the owner thereof for federal income tax purposes. Without limiting the generality of the foregoing, unless and until the City receives a written opinion of counsel nationally recognized in the field of municipal bond law to the effect that failure to comply with such covenant will not adversely affect the exemption from federal income tax of the interest on any Certificate, the City shall comply with each of the specific covenants in this Section. C. No Private Use or Private Payments. Except to the extent that it will not cause the Certificates to become "private activity bonds" within the meaning of section 141 of the Code and the Regulations and rulings thereunder, the City shall at all times prior to the last Stated Maturity of Certificates' (1) exclusively own, operate and possess all property the acquisition, construction or improvement of which is to be financed or refinanced directly or indirectly with Gross Proceeds of the Certificates, and not use or permit the use of such Gross Proceeds (including all contractual arrangements with terms different than those applicable to the general public) or any property acquired, constructed or improved with such Gross Proceeds in any activity carded on by any person or entity (including the United States or any agency, department and instrumentality thereof) other than a state or local government, unless such use is solely as a member of the general public; and (2) not directly or indirectly impose or accept any charge or other payment by any person or entity who is treated as using Gross Proceeds of the Certificates or any property -31- 45282447.2 the acquisition, construction or improvement of x.vhich is to be financed or refinanced directly or indirectly with such Gross Proceeds, other than taxes of general application within the City or interest earned on investments acquired with such Gross Proceeds pending application for their intended purposes. D. No Private Loan. Except as would not cause the Certificates to become "private activity bonds" within the meaning of section 141 of the Code and the Regulations and rulings thereunder, the City shall not use Gross Proceeds of the Certificates to make or finance loans to any person or entity other than a state or local government. For purposes of the foregoing covenant, such Gross Proceeds are considered to be "loaned" to a person or entity if- (1) property acquired, constructed or improved with such Gross Proceeds is sold or leased to such person or entity in a transaction which creates a debt for federal income tax purposes; (2) capacity in or service from such property is committed to such person or entity under a take-or-pay, output or similar contract or arrangement; or (3) indirect benefits, or burdens and benefits of ownership, of such Gross Proceeds or any property acquired, constructed or improved with such Gross Proceeds are otherwise transferred in a transaction which is the economic equivalent of a loan. E. Not to Invest at Higher Yield. Except as would not cause the Certificates to become "arbitrage bonds" within the meaning of section 148 of the Code and the Regulations and rulings thereunder, the City shall not at any time prior to the final Stated Maturity of the Certificates directly or indirectly invest Gross Proceeds in any Investment, if as a result of such investment the Yield of any Investment acquired with Gross Proceeds, whether then held or previously disposed of, materially exceeds the Yield of the Certificates. F. Not Federally Guaranteed. Except to the extent permitted by section 149(b) of the Code and the Regulations and rulings thereunder, the City shall not take or omit to take any action which would cause the Certificates to be federally guaranteed within the meaning of section 149(b) of the Code and the Regulations and rulings thereunder. G. Information Report. The City shall timely file the information required by section 149(e) of the Code with the Secretary of the Treasury on Form 8038-G or such other form and in such place as the Secretary may prescribe. H. Rebate of Arbitrage Profits. Except to the extent otherwise provided in section 148(f) of the Code and the Regulations and rulings thereunder or except to the extent the City complies with Subsection J of this Section' (1) The City shall account for all Gross Proceeds (including all receipts, expenditures and investments thereof) on its books of account separately and apart from all other ' funds (and receipts, expenditures and investments thereof) and shall retain all records of accounting for at least six years after the day on which the last Outstanding Certificate is discharged. However, to the extent permitted by law, the City may commingle Gross Proceeds of the Certificates with other money of the City, provided that the City separately accounts for each receipt and expenditure of Gross Proceeds and the obligations acquired therewith. 45282447.2 -32- (2) Not less frequently than each Computation Date, the City shall calculate the Rebate Amount in accordance with roles set forth in section 48(f) of the Code and the Regulations and rulings thereunder. The City shall maintain such calculations with its official transcript of proceedings relating to the issuance of the Certificates until six years after the final Computation Date. (3) As additional consideration for the purchase of the Certificates by the Purchasers and the loan of the money represented thereby and in order to induce such purchase by measures designed to insure the excludability of the interest thereon from the gross income of the owners thereof for federal income tax purposes, the City shall pay to the United States out of the Certificate Fund or its general fund, as permitted by applicable Texas statute, regulation or opinion of the Attorney General of the State of Texas, the amount that when added to the future value of previous rebate payments made for the Certificates equals in the case of a Final Computation Date as defined in Section 1. 1483(e)(2) of the Regulations, one hundred percent (100%) of the Rebate Amount on such date; and in the case of any other Computation Date, ninety percent (90%). of the Rebate Amount on such date. In all cases, the rebate payments shall be made at the times, in the installments, to the place and in the manner as is or may be required by section 148(0 of the Code and the Regulations and rulings thereunder, and shall be accompanied by Form $038-T or such other forms and information as is or may be required by Section 148(f) of the Code and the Regulations and rulings thereunder. (4) The City shall exercise reasonable diligence to assure that no errors are made in the calculations and payments required by paragraphs (2) and (3), and if an error is made, to discover and promptly correct such error within a reasonable amount of time thereafter (and in all events within one hundred eighty (180) days after discovery of the error), including payment to the United States of any additional Rebate Amount owed to it, interest thereon, and any penalty imposed under Section 1.148-3(h) of the Regulations. I. Not to Divert Arbitrage Profits. Except to the extent permitted by section 148 of the Code and the Regulations and rulings thereunder, the City shall not, at any time prior to the earlier of the Stated Maturity or final payment of the Certificates, enter into any transaction that reduces the amount required to be paid to the United States pursuant to Subsection H of this Section because such transaction results in a smaller profit or a larger loss than would have resulted if the transaction had been at ann's length and had the Yield of the Certificates not been relevant to either party. J. No Rebate Required. The City need not comply with the covenants and duties imposed by the provisions of Subsection H. of this Section if: (1) the City is a governmental unit with general taxing powers; (2) 95% of the Net Proceeds of the Certificates and all income from the investment thereof will be used for the governmental activities of the City; (3) the aggregate face amount, within the meaning of Section 1.148-8(c)(1) of the Regulations, of all debt obligations (other than private activity bonds) issued or expected to 45282447.2 -33- be issued by thc City or any subordinate entity in the calendar year i~ xvhich the Certificates are issued is not reasona~bly expected to exceed $5,000,000: and (4) the City otherwise satisfies the requirements of paragraph (4)(c) of section 148(0 of the Code and Section 1.148-8 of the Regulations and rulings thereunder. K. Certificates Not Hedge Bonds. (1) The City reasonably expects to spend at least 85% of the sPendable proceeds of the Certificates within three years after such Certificates are issued. (2) Not more than 50% of the proceeds of the Certificates will be invested in Nonpurpose Investments having a substantially guaranteed Yield for a period of 4 years or more. L. Elections. The City hereby directs and authorizes the Mayor, Mayor Pro Tem, City Manager, City Secretary, or City Attorney, either or any combination of them, to make elections permitted or required pursuant to the provisions of the Code or the Regulations, as they deem necessary or appropriate in connection with the Certificates, in the Certificate as to Tax Exemption or similar or other appropriate certificate, form or document. M. Qualified Tax-Exempt Obligations. The City hereby designates the Certificates as qualified tax-exempt obligations for purposes of section 265(b) of the Code. In furtherance of such designation, the City represents, covenants and warrants the following- (a) during the calendar year in which the Certificates are issued, the City (including any subordinate entities) has not designated nor will designate obligations, which when aggregated with the Certificates, will result in more than $10,000,000 of "qualified tax-exempt obligations" being issued; (b) the City reasonably anticipates that the amount of tax-exempt obligations issued during the calendar year 2003 by the City (including any subordinate entities) will not exceed $10,000,000; and the City will take such action or refrain from such action as is necessary in order that the 'Certificates will not be considered "private activity bonds" within the meaning of section 141 of the Code. SECTION 28. Control and Custody of Certificates. The Mayor of the City shall be and is hereby authorized to take and have charge of all necessary orders and records pending investigation by the Attorney General of the State of Texas and shall take and have charge and control of the Certificates pending their approval by the Attorney General, the registration thereof by the Comptroller of Public Accounts and the delivery of the Certificates to the Purchasers. Furthermore, the Mayor, Mayor Pro Tern, City Manager, City Secretary, or City Attorney, either or all, are hereby authorized and directed to fixmish and execute such documents relating to the City and its financial affairs as may be necessary for the issuance of the Certificates, the approval of the Attorney General and their registration by the Comptroller of Public Accounts and, together with the City's financial advisor, bond counsel, and the Paying Agent~egistrar, make the necessary arrangements for the delivery of the Initial Certificate to the Purchasers and the initial exchange thereof for definitive Certificates. SECTION 29. Satisfaction of Obligation of City. If the City shall pay or cause to be paid, or there shall otherwise be paid to the Holders, the principal of, premium, if any, and interest on the 45282447.2 -34- Certificates, at the times and in the manner stipulated in this Ordinance, then the pledge of taxes levied and the lien on and pledge of the Pledged Revenues under this Ordinance and all covenants, agreements, and other obligations of the City to the Holders shall thereupon cease, terminate, and be discharged and satisfied. Certificates, or any principal amount(s) thereof, shall be deemed to have been paid within the meaning and with the effect expressed above in this Section when (i) money sufficient to pay in full such Certificates or the principal amount(s) thereof at Stated Maturity or to the redemption date therefor, together with all interest due thereon, shall have been irrevocably deposited with and held in trust by the Paying Agent/Registrar, or an authorized escrow agent, or (ii) Government Securities shall have been irrevocably deposited in trust with the Paying Agent/Registrar, or an authorized escrow agent, which Government Securities have been certified by an independent accounting firm to mature as to principal and interest in such amounts and at such times as will insure the availability, without reinvestment, of sufficient money, together with any money deposited therewith, if any, to pay when due the principal of and interest on such Certificates, or the principal amount(s) thereof, on and prior to the Stated Maturity thereof or (if notice of redemption has been duly given or waived or if irrevocable arrangements therefor acceptable to the Paying Agent~egistrar have been made) the redemption date thereof. The City covenants that no deposit of money or Government Securities will be made under this Section and no use made of any such deposit which would cause the Certificates to be treated as arbitrage bonds within the meaning of section 148 of the Code (as defined in Section 27 hereof). Any money so deposited with the Paying Agent~egistrar, and all income from Government Securities held in trust by the Paying Agent/Registrar, or an authorized escrow agent, pursuant to this Section which is not required for the payment of the Certificates, or any principal amount(s) thereof, or interest thereon with respect to which such money has been so deposited shall be remitted to the City or deposited as directed by the City. Furthermore, any money held by the Paying Agent~egistrar for the payment of the principal of and interest on the Certificates and remaining unclaimed for a period of four (4) years after the Stated Maturity of the Certificates, or applicable redemption date, such money was deposited and is held in trust to pay shall upon the request of the City be remitted to the City against a written receipt therefor, subject to the unclaimed property laws of the State of Texas. Notwithstanding any other provision of this Ordinance to the contrary, it is hereby provided that any determination not to redeem defeased Certificates that is made in conjunction with the payment arrangements specified in subsection (i) or (ii) above shall not be irrevocable, provided that: (1) in the proceedings providing for such defeasance, the City expressly reserves the fight to call the defeased Certificates for redemption; (2) gives notice of the reservation of that fight to the owners of the defeased Certificates immediately following the defeasance; (3) directs that notice of the reservation be included in .any redemption notices that it authorizes; and (4) at the time of the redemption, satisfies the conditions of (i) or (ii) above with respect to such defeased debt as though it was being defeased at the time of the exercise of the option to 45282447.2 -35- redeem the defeased Certificates, after taking the redemption into account in determining the sufficiency of the provisions made for the payment of the defeased Certificates. SECTION 30. Printed Opinion. The Purchasers' obligation to accept delivery of the Certificates is subject to their being furnished a final opinion of Fulbright & Jaworski L.L.P., Bond Counsel, approving certain legal matters as to the Certificates, said opinion to be dated and delivered as of the date of initial delivery and payment for such Certificates. Printing of a true and correct copy of said opinion on the reverse side of each of said Certificates, with appropriate certificate pertaining thereto executed by facsimile signature of the City Secretary of the City is hereby approved and authorized. SECTION 31. CUSIP Numbers. CUSIP numbers may be printed or typed on the definitive Certificates. It is expressly provided, however, that the presence or absence of CUSIP numbers on the definitive Certificates shall be of no significance or effect as regards the legality thereof, and neither the City nor bond counsel are to be held responsible for CUSIP numbers incorrectly printed or typed on the definitive Certificates. SECTION 32. Effect of Headings. The Section headings herein are for convenience only and shall not affect the construction hereof. SECTION 33. Ordinance a Contract, Amendments - Outstanding Certificates. The City acknowledges that the covenants and obligations of the City herein contained are a material inducement to the purchase of the Certificates. This Ordinance shall constitute a contract with the Holders from time to time, binding on the City and its successors and assigns, and it shall not be amended or repealed by the City so long as any Certificate remains Outstanding except as permitted in this Section. The City may, without the consent of or notice to any Holders, from time to time and at any time, amend this Ordinance in any manner not detrimental to the interests of the Holders, including the curing of any ambiguity, inconsistency, or formal defect or omission herein. In addition, the City may, with the written consent of Holders holding a majority in aggregate principal amount of the Certificates then Outstanding affected thereby, amend, add to, or rescind any of the provisions of this Ordinance; provided that, without the consent of all Holders of Outstanding Certificates, no such amendment, addition, or rescission shall (1) extend the time or times of payment of the principal of and interest on the Certificates, reduce the principal amount thereof or the rate of interest thereon, or in any other way modify the terms of payment of the principal of, the redemption price therefor, or interest on the Certificates, (2) give any preference to any Certificate over any other Certificate, or (3) reduce the aggregate principal amount of Certificates required for consent to any such amendment, addition, or rescission. SECTION 34. Benefits of Ordinance. Nothing in this Ordinance, expressed or implied, is intended or shall be construed to confer upon any person other than the City, Bond Counsel, Paying Agent/Registrar, and the Holders, any right, remedy, or claim, legal or equitable, under or by reason of this Ordinance or any provision hereof, this Ordinance and all its provisions being intended to be and being for the sole and exclusive benefit of the City, Bond Counsel, Paying Agent~egistrar, and the Holders. -36- 45282447.2 SECTION 35. Inconsistent Provisions. All ordinances and resolutions, or parts thereof, which are in conflict or inconsistent with any provisio,~ of this Ordinance are hereby repealed to the extent of such conflict, and the provisions of this Ordinance shall be and remain controlling as to the matters ordained herein. SECTION 36. Governing Law. This Ordinance shall be construed and enforced in accordance with the laws of the State of Texas and the United States of America. SECTION 37. Severability. If any provision of this Ordinance or the application thereof to any person or circumstance shall be held to be invalid, the remainder of this Ordinance and the application of such provision to other persons and circumstances shall nevertheless be valid, and the City Council hereby declares that this Ordinance would have been enacted without such invalid provision. SECTION 38. Construction of Terms. If appropriate in the context of this Ordinance, words of the singular number shall be considered to include the plural, words of the plural number shall be considered to include the singular, and words of the masculine, feminine or neuter gender shall be considered to include the other genders. SECTION 39. Incorporation of Preamble Recitals. The recitals contained in the preamble hereof are hereby found to be tree, and such recitals are hereby made a part of this Ordinance for all purposes and are adopted as a part of the judgment and findings of the City Council of the City. SECTION 40. Authorization of Paying Agent/Registrar Agreement. The City Council of the City hereby finds and determines that it is in the best interest of the City to authorize the execution of a Paying Agent/Registrar Agreement concerning the payment, exchange, and transferability of the Certificates. A copy of the Paying Agent~egistrar Agreement' is attached hereto, in substantially final form, as Exhibit A and is incorporated by reference to the provisions of this Ordinance. SECTION 41. Official Statement. The use and distribution of the Preliminary Official Statement by the Purchasers in connection with the public offering and sale of the Certificates is hereby ratified, confirmed and approved in all respects. The final Official Statement shall be and is hereby in all respects approved and the Purchasers are hereby authorized to use and distribute the final Official Statement, dated March 4, 2003, in the reoffering, sale and delivery of the Certificates to the public. The Mayor and/or City Secretary are fin-ther authorized and directed to manually execute and deliver for and on behalf of the City copies of the Official Statement in final form as may be required by the Purchasers, and such final Official Statement in the form and content manually executed by said officials shall be deemed to be approved by the City Council and constitute the Official Statement authorized for distribution and use by the Purchasers. The proper officials of the City are hereby authorized to execute and deliver a certificate pertaining to such Official Statement as prescribed therein, dated as of the date of payment for and delivery of the Certificates. 45282447.2 -37- SECTION 42. Public Meeting. It is officially found, determined, and declared that the meeting at which this Ordinance is adopted was open to the public and public notice of the time, place, and subject matter of the public business to be considered at such meeting, including this Ordinance, was given, all as required by Chapter 551, as amended, Texas Government Code. SECTION 43. 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 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 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 44. No Recourse Against City Officials. No recourse shall be had for the payment of principal of, premium, if any, or interest on any Certificate or for any claim based thereon or on this Ordinance against any official of the City or any person executing any Certificate. SECTION 45. Continuing Disclosure Undertaking. A. Definitions. As used in this Section, the following terms have the meanings ascribed to such terms below: "MSRB" means the Municipal Securities Rulemaking Board. "NRMSIR" means each person whom the SEC or its staff has determined to be a nationally recognized municipal securities information repository within the meaning of the Rule from time to time. "Rule" means SEC Rule 15c2-12, as amended from time to time. "SEC" means the United States Securities and Exchange Commission. "SID" means any person designated by the State of Texas or an authorized department, officer, or agency thereof as, and determined by the SEC or its staff to be, a state information depository within the meaning of the Rule from time to time. B. Annual Reports. The City shall provide annually to each NRMSIR and any SID, within six months after the end of each fiscal year ending in or after 2002, financial information and operating data with respect to the City of the general type included in the final Official Statement authorized by Section 41 of this Ordinance, being the information described in Exhibit B hereto. Any financial 45282447.2 -38- statements so to be provided shall be (1)prepared in accordance with the accounting principles described in Exhibit B hereto, or such other accounting principles as the City may be required to employ from time to time pursuant to state law or regulation and (2)audited, if the City commissions an audit of such statements and the audit is completed within the period :luring which they must be provided. If the audit of such financial statements is not complete within such period, then the City shall provide unaudited financial statements for the applicable fiscal year to each NRMSIR and any SID, with the financial information and operating data and will file the annual audit report when and if same becomes available. If the City changes its fiscal year, it will notify each NRMSIR and any SID of the change (and of the date of the new fiscal year end) prior to the next date by which the City otherwise would be required to provide financial information and operating data pursuant to this Section. The financial information and operating data to be provided pursuant to this Section may be set forth in full in one or more documents or may be included by specific reference to any document (including an official statement or other offering document, if it is available from the MSRB) that theretofore has been provided to.each NRMSIR and any SID or filed with the SEC. C. Material Event Notices. The City shall notify any SID and either each NRMSIR or the MSRB, in a timely manner, of any of the following events with respect to the Certificates, if such event is material within the meaning of the federal securities laws' (1) Principal and interest payment delinquencies; (2) Non-payment related defaults; · (3) Unscheduled draws on debt service reserves reflecting financial difficulties; difficulties; Certificates; (4) Unscheduled draws on credit enhancements reflecting financial (5) .(6) (7) (8) (9) Certificates; and Substitution of credit or liquidity providers, or their failure to perform; Adverse tax opinions or events affecting the tax-exempt status of the Modifications to rights of holders of the Certificates; Certificate calls; Defeasances; Release, substitution, or sale of property securing repayment of the (11) Rating changes. 45282447.2 -39- The City shall notify any SID and either each NRMSIR or the MSRB. in a timely manner, of any failure by the City to provide financial information or operating data in accordance with this Section by the time required by this Section. Do Limitations, Disclaimers, and Amendments. The City shall be obligated to observe and perform the covenants specified in this Section with respect to the City and the Certificates while, but only while, the City remains an "Obligated person" with respect to the Certificates within the meaning of the Rule, except that the City in any event will give the notice required by subsection (c) hereof of any Certificate calls and defeasance that cause the City to be no longer such an "obligated person". The provisions of this Section are for the sole benefit of the Holders and beneficial owners of the Certificates, and nothing in this Section, express or implied, shall give any benefit or any legal or equitable fight, remedy, or claim hereunder to any other person. The City undertakes to provide only the financial information, operating data, financial statements, and notices which it has expressly agreed to provide pursuant to this Section and does not hereby undertake to provide any other information that may be relevant or material to a complete presentation of the City's financial results, condition, or prospects or hereby undertake to update any information provided in accordance with this Section or otherwise, except as expressly provided herein. The City does not make any representation or warranty concerning such information or its usefulness to a decision to invest in or sell Certificates at any furore date. UNDER NO CIRCUMSTANCES SHALL THE CITY BE LIABLE TO THE HOLDER OR BENEFICIAL OWNER OF ANY CERTIFICATES OR ANY OTHER PERSON, IN CONTRACT OR TORT, FOR DAMAGES RESULTING IN WHOLE OR IN PART FROM ANY BREACH BY THE CITY, WHETHER NEGLIGENT OR WITHOUT FAULT ON ITS PART, OF ANY COVENANT SPECIFIED IN THIS SECTION, BUT EVERY RIGHT AND REMEDY OF ANY SUCH PERSON, IN CONTRACT OR TORT, FOR OR ON ACCOUNT OF ANY SUCH BREACH SHALL BE LIMITED TO AN ACTION FOR MANDAMUS OR SPECIFIC PERFORMANCE. No default by the City in observing or performing its obligations under this Section shall comprise a breach of or default under the Ordinance for purposes of any other provision of this Ordinance. Nothing in this Section is intended or shall act to disclaim, waive, or otherwise limit the duties of the City under federal and state securities laws. The provisions of this Section may be amended by the City from time to time to adapt to changed circumstances that arise from a change in legal requirements, a change in law, or a change in the identity, nature, status, or type of operations of the City, but only if (1)the provisions of this Section, as so amended, would have permitted an underwriter to purchase or sell Certificates in the primal, offering of the Certificates in compliance with the Rule, taking into account any amendments or interpretations of the Rule to the date of such amendment, as -40- 45282447.2 well as such changed circumstances, and (2)either (a)the Holders of a majority in aggregate principal amount (or any greater amount required by any other provision of this Ordinance that authorizes such an amendment) of the Outstanding Certificates consent to such amendment or (b) a Person that is unaffiliated with the City (such as nztionally recognized bond counsel) determines that such amendment will not materially impair the interests of the Holders and beneficial owners of the Certificates. The City may also repeal or amend the provisions of this Section if the SEC amends or repeals the applicable provisions of the Rule or any court of final jurisdiction enters judgment that such provisions of the Rule are invalid, and the City also may amend the provisions of this Section in its discretion in any other manner or circumstance, but in either case only if and to the extent that the provisions of this sentence would not have prevented an underwriter from lawfully purchasing or selling the Certificates in the primary offering of the Certificates, giving effect to (a) such provisions as so amended and (b) any amendments or interpretations of the Rule. If the City so amends the provisions of this Section, it shall include with any amended financial information or operating data next provided in accordance with this Section an explanation, in narrative form, of the reasons for the amendment and of the impact of any change in the type of financial information or operating data so provided. SECTION 46. Book-Entry Only System. It is intended that the Certificates initially be registered so as to participate in a securities depository system (the DTC System) with the Depository Trust Company, New York, New York, or any successor entity thereto (DTC), as set forth herein. Each Stated Maturity of the Certificates shall be issued (following cancellation of the Initial Certificates described in Section 7) in the form of a separate single definitive Certificate. Upon issuance, the ownership of each such Certificate shall be registered in the name of Cede & Co., as the nominee of DTC, and all of the Outstanding Certificates shall be registered in the name of Cede & Co., as the nominee of DTC. The City and the Paying Agent~egistrar are authorized to execute, deliver, and take the actions set forth in such letters to or agreements with DTC as shall be necessary to effectuate the DTC System, including the Letter of Representation attached hereto as Exhibit C (the Representation Letter). With respect to the Certificates registered in the name of Cede & Co., as nominee of DTC, the City and the Paying Agent/Registrar shall have no responsibility or obligation to any broker-dealer, bank, or other financial institution for which DTC holds the Certificates from time to time as securities depository (a Depository Participant) or to any person on behalf of whom such a Depository Participant holds an interest in the Certificates (an Indirect Participant). Without limiting the immediately preceding sentence, the City and the Paying Agent~egistrar shall have no responsibility or obligation with respect to (i) the accuracy of the records of DTC, ' Cede & Co., or any Depository Participant with respect to any ownership interest in the Certificates, or (ii)the delivery to any Depository Participant or any other person, other than a registered owner of the Certificates, as shown on the Security Registrar, of any notice with respect to the Certificates, including any notice of redemption, or (iii)the delivery to any Depository Participant or any Indirect Participant or any other Person, other than a Holder of a Certificate, of any amount With respect to principal of, premium, if any, or interest on the 45282447.2 -41- Certificates. While in the DTC System. no person other than Cede & Co., or any successor thereto, as nominee for DTC, shall receive a Certificate evidencing the obligation of the City to make payments of principal, premium, if any, and interest pursuant to this Ordinance. Upon delivery by DTC to the Paying Agent/Registrar of written notice to the effect that DTC has determined to substitute a new nominee in place of Cede & Co., and subject to the provisions in this Ordinance with respect to interest checks or drafts being mailed to the Holder, the word "Cede & Co." in this Ordinance shall refer to such new nominee of DTC. In the event that (a)the City determines that DTC is incapable of discharging its responsibilities described herein and in the Representation Letter, (b)the Representation Letter shall be terminated for any reason, or (c) DTC or the City determines that it is in the best interest of the beneficial owners of the Certificates that they be able to obtain certificated Certificates, the City shall notify the Paying Agent/Registrar, DTC, and the Depository Participants of the availability within a reasonable period of time through DTC of bond certificates, and the Certificates shall no longer be restricted to being registered in the name of Cede & Co., as nominee of DTC. At that time, the City may determine that the Certificates shall be registered in the name of and deposited with a successor depository operating a securities depository system, as may be acceptable to the City, or such depository's agent or designee, and if the City and the Paying Agent/Regis~ do not select such alternate securities depository system then the Certificates may be registered in whatever name or names the Holders of Certificates transferring or exchanging the Certificates shall designate, in accordance with the provisions hereof. Notwithstanding any other provision of this Ordinance to the conua , so long as any Certificate is registered in the name of Cede & Co., as nominee of DTC, all payments with respect to principal of, premium, if any, and interest on such Certificate and all notices with respect to such Certificate shall be made and given, respectively, in the manner provided in the Representation Letter. SECTION 47. Further Proced.ures. The officers and employees of the City are hereby authorized, empowered and directed from time to time and at any time to do and perform all such acts and things and to execute, acknowledge and deliver in the name and under the corporate seal and on behalf of the City all such instruments, whether or not herein mentioned, as may be necessary or desirable in order to carry out the terms and provisions of this Ordinance, the initial sale and delivery of the Certificates, the Paying Agent~egistrar Agreement, and the Official Statement. In addition, prior to the initial delivery of the Certificates, the Mayor or the City Manager and Bond Counsel are hereby authorized and directed to approve any technical changes or corrections to this Ordinance or to any of the instruments authorized and approved by this Ordinance necessary in order to (i) correct any ambiguity or mistake or properly or more completely document the transactions contemplated and approved by this Ordinance and as described in the Official Statemem, (ii) obtain a rating from any of the national bond rating agencies, or (iii) obtain the approval of the Certificates by the Texas Attorney General's office. In case any officer of the City whose signature shall appear on any certificate shall cease to be such officer before the delivery of such certificate, such signature shall nevertheless be valid and sufficient for all purposes the same as if such officer had remained in office until such delivery. 45282447.2 -42- SECTION 48. Municipal Bond Insurance. The payment of the debt service requirements on the Certificates is insured by the Insurer pursuant to the Insurance Policy. SECTION 49. Effective Dme_. Pursuant to the provisions of Section 1201.028, as amended, Texas Government Code, this Ordinance shall be effective immediately upon adoption, notwithstanding any provision in the City's Home Rule Charter to thc contrary concerning a multiple reading requirement for the adoption of ordinances. [The remainder of this page intentionally left blank.] 45282447.2 -43- t'ASSI_~D AND ADOPTED on the 4th day of March, 2003. CITY OF S RTZ, TEXAS ATTEST: City Secretary (CITY SEAL) EXHIBIT A - paying Agent/Registrar Agreement EXHIBIT B - Description of Annual Financial Information 'EXHIB!T C - DTC Letter of Representations 45282447.2 S-1 EXHIBIT A PAYING AGENT/REGISTRAR AGREEMENT SEE TAB NO. 4528244 7.2 A-1 EXHIBIT B DESCRIPTION OF ANNUAL FINANCIAL INFORMATION The following information is referred to in Section 45 of this Ordinance. Annual Financial Statements and Operating Data The financial information and operating data with respect to the City to be provided annually in accordance with such Section are as specified (and included in the Appendix or under the headings of the Official Statement referred to) below: (1) The City's audited financial statements for the most recently concluded fiscal year or to the extent these audited financial statements are not available, the portions of the unaudited financial statements of the City appended to the Official Statement as Appendix B, but for the most recently concluded fiscal year. (2) Table 1 of the Official Statement and Tables 1 through 15 of Appendix A in the Official Statement. Accounting Principles The accounting principles referred to in such Section are generally accepted accounting principles for governmental units as prescribed by the Government Accounting Standards Board from time to time. 45282447.2 B-1 EXHIBIT C DTC LETTER OF REPRESENTATIONS SEE TAB NO. 45282447.2 C-1 EXHIBIT A 1. RECEIPT.OF BIDS PERTAINING TO THE SALE OF OBLIGATIONS DESIGNATED AS "CITY OF SCHERTZ, TEXAS COMBINATION TAX AND LIMITED PLEDGE REVENUE CERTIFICATES OF OBLIGATION, SERIES 2003"; RECEIPT OF FINANCIAL ADVISOR'S RECOMMENDATION CONCERNING THIS MATTER; AND OTHER MATTERS IN CONNECTION THEREWITH 2. CONSIDERATION AND APPROVAL OF AN ORDINANCE AUTHORIZING THE ISSUANCE OF "CITY OF SCHERTZ, TEXAS COMBINATION TAX AND LIMITED PLEDGE REVENUE CERTIFICATES OF OBLIGATION, SERIES 2003"; PROVIDING FOR THE PAYMENT OF SAID CERTIFICATES BY THE LEVY OF AN AD VALOREM TAX UPON ALL TAXABLE PROPERTY WITHIN THE CITY AND FURTHER SECURING SAID CERTIFICATES BY A LIEN ON AND PLEDGE OF THE PLEDGED REVENUES OF THE SYSTEM; PROVIDING THE TERMS AND CONDITIONS OF SAID CERTIFICATES AND Rt~SOLVING OTHER MATTERS INCIDENT AND RELATING TO THE ISSUANCE, PAYMENT, SECURITY, SALE, AND DELIVERY OF SAID CERTIFICATES, INCLUDING THE APPROVAL AND DISTRIBUTION OF AN OFFICIAL STATEMENT; AUTHORIZING THE EXECUTION OF A PAYING AGENT/REGISTRAR AGREEMENT; COMPLYING WITH THE REQUIREMENTS OF THE LETTER OF REPP~SENTATIONS WITH THE DEPOSITORY TRUST COMPANY; AND PROVIDING AN EFFECTIVE DATE 45285522.1 THE STATE OF TEXAS, PUBLISHER'S AFFIDAVIT County of Guadalupe Before me, the undersigned authority, on this date personally appeared \, _ Tommy Crow , , , . known to me. who. being by me duly sworn, on his oath deposes and says that he is the Publisher of The Seguin Gazette-Enterprise, a newspaper published in said county; that a copy of the within and foregoing notice was published in said newspaper ? time(s) before the return day named therein, such publications being on the following dates' __January 26, 2003 February 2t 2003 and a newspaper copy of which is hereto attached. Sw,~. o and subscribed before me this "~~~-- · , A.D., 20Q~. CAROL ANN AVERY :~ :~ Notay Pubic State oi' Te~s ~ ~ Co~~ E~ir~ 08-31-2004 ~ day of Notary Public, Guadalupe County, Texas .. i-ENTERPRISE '~'::..'..:' :.";:'-:~ ~.:i:~:-;.~:~.:..:.:.~:i:.-~:..'..:? ':-'....,~. ' SEGUIN lION TO ~ID ~slng n TCDP # Sunday~ February 2, 2003 ~r in the ployer. For additional "Specifications", must information contact the be submitted with the Planning and Zoning bid proposals. Contrac- Department at geguin 'tors must be licensed City Hall, RO. Box 591, with the City of Seguin. 205 'N. River St., Se- guin, Texas 78155, The sealed proposals (830)401-2305. must be received at the Office of the City Man-' INVITATION TO ager at Seguin City BID NOTICE OF' ,~l~reated to.the'-consm~- INTENTION '[~O_~' tk)n and anandng of the ISSUE ClTM ~)_~ ~ aforementioned proj- SCHERI'Z~," ects. The certificates of TEXAS..? .~ .. obliga~tion (the. certifi--.~ CERTIRCATES cares) 'will be'. payable OF OBEGATION from the levy of ,an an-. nual ad valorem tax,- NOTICE IS HEREBY within, the'limitati°ns.-= GIVEN that the City prescribed by law,....,Ul~)n., Council of the City of all taxable.' .property ..; . Hall, P.O. Box 591, 205 Schertz, Texas will con- within the city and from: N. River St., Seguin, The 'City of Seguin' is vene at its regular a lien. on and. pledge of, Texas 78155 until accepting ,~aled. bids' meetin~ place ~in tho certain revenues de~.. Wednesday, February on the following items'.' City Hall in Schertz, riVed' bY the .City '~from~", 19, ~ at 2:30 .p.m. until .2:30 p.m., Wed- lexas, at 7:00 o'cloCk the operation 'of the:-.i then publicly opened nesday, February 26, P.M., Schertz, Texas City's utility":-sYstem.'.'.-" and mad at 3:00 p.m. 2003. Bids will be time on March 4, 2(X)3, The Certificates are to- Proposals received af- .oPened and read pub- 'and during ,such meet- be 'issued, and .this no-~.: ter the stated time will lichj at 3:00p.m. lng, the City Council will tice is given, .under and'..-' be retumed unopened, consider the passage of pursuant to the proVi-..-, The C~t o! Soguin will · seguin41u~l~ui~' an ordinane~ or' ordi- ~ of the Cortif~mte - =.~.. ~f Seguin will not accept faxes for County ~ Air nances and take such of Obligation .Act of,: ~parate indi-' submittal of bids or re- Condiaoning Heat other actions as 'may be 1971, as "amended,.. aled bids for quests for information. Pumps. Replacem~t deemed, necessary to Texas Local Govem,;-,.~ ~j Rehabilita-, Bids may not be with- ° Bid Package831 authorize the issuance ment Code . Section~., ' ~es for each drawn for a p~. riod sixty 2003-16 of one or more series of 271.041 through. Sec¥ ~ures loc, at- (60) days after the bid . ~ , ~following ad-' openir,~. The right is re- Bidders may obtain certificateSin an. aggregate°f obligation..pdnci_ tion1502,271.063,as -;amended,ChaPter ' served by the City of. copies of' Specifications pal .amount .not to ex-. "Texas' GoVernment Seguin to accept or re- by contacting the Pur- ceed $3,500,000 for the Code, and, the City's, ject any and all bids chasing Offs, City of purpose, or purposes of Home Rule Chapter. -.'. · without compensation Seguin, P;O. Box 591, paying contractual obli- - to the Bidders and Seguin, Texas 78158 '.or gations ..of the City to be Norma Althouse, aPman Waive any Informality by calling (830) 401- incurred for making per- City Secretary or irregularity in any Bid 2453 or log on to manent public improve- city of Schertz, Texas Street received, www, ci.seguin.tx.us, ments and for other NOTICE OF' ~ Guada publiC purposes, to-wit: PUBEC ' " ~et The City of Seguin sup- Sealed bids" will be re- (1) constructing street ~ell Street ports and' is committed ceived at the. office of and Sidewalk improve- HEARING' '" ~Antonio to including minority the City Manager, City ments (including utilities and woman-owned of SeguirVCity Hall 205 repair, replacement, Guadalupe County . - Commissioners Court~"., iy.Street business participation N. River, Seguin, and relocation) and 'must' comply in this' program, tO the Texas, .78155-Any bids' drainage incidental willheadng.COndUCtregardinga public'~an .." maximum extent possi- arriving in the C~ of- thereto, (2). constructing election by the affected.' ~~tions" ble. fice after the scheduled drainage improve- · ' . - landowners for the re- · ~ce and Gen- bid time-of '2:30 p m, ments,. (3) constructing construction of a .road~- al' Conditions) Ail qualified bidders will will be returned unop- a fire :station, (4) con- ~ included in. receive consideration ened. s~, lng ,improvements knOwn as Skyline ·Ridge' ~acket, Sealed 'for award of contra6t ~ to the-municipal swim- Road, pursuant 'to Arti- · de 6703-2 of the Texas" for the proj- ,without regard 'of race, Contractors are. encour- ming .pool, (5) con- it be. marked .color, creed, sex, -reli- aged to attend a pm-bid· strUcting improvements Civil Statues.. .The meeting will be~ held on: ~tside'of each gion, age, national ori- meeting at-the Seguin-' to the City's library .sys- -TuesdaY, Ma,rch ' 4,, with the ad' ..' gin, mental or physical Guadalupe Public, Li- tem; (6).the purchase of . the structure disability, marital status, -brary Wednesday, Feb, vehicles, materials, 2003',at 9:45 a:m: in the, ,~d the date Of parenthood or age. No ruary 19th.at 9:00 A.M, supplies, equipment, CommissionerS. Court.- , room at the Guadalupe ~pening, other,- Unlawful discrimination books, land, and rights- County Administration y will not be ..will be .made against The City of Seguin re- of-way for authorized Building located at 307 d. .. bidders, ' vendors, or serves the fight to -re- needs and purposes re- West Court ~t, Se- r contractors under its ject any and all bids lating to the fire station, i of Insurance,, TCDP Housing Reha- and to waive informali- public siafety, public guin, TX. ! -bilitation Program. ties. The City Council's works, library, and ge,n- All interested-Citizens' decision will be final, emi municipal purpos- The City of Seguin is an 7'~.' ' es, and (7) the payment are invited, to attend, the Equal= Opportunity Em- City of Seguin. '~'::,, ,;'~i':.--"'" of professiOnal. sewices' public hearing.~.~..:.i~.."' ..' :'~' .' . . , THE STATE OF TEXAS, PUBLISHER'S AFFIDAVIT County of Guadalupe Before me, the undersigned authority, on this date personally appeared Tommy Crow , , , known to me, who, being by me duly sworn, on his oath deposes and says that he is the Publisher of The Seguin Gazette- Enterprise, a newspaper of general circulation, published in said county; that a copy of the within and foregoing notice was published in said newspaper // time(s) before the return day named therein, such publications being on the following dates: and a newspaper copy of which is hereto attached. · _'~a~nd subscribed before me this./7~.-~. day of ~~' , A.D', 2003. · -"", .-CAROL ANN AVERY .~ ':Y ~',~~A~?m~m E~ir~ 08-31[~004 ~ Nota~ Public, Guadalupe Count, Texas ~ '-. ·