HomeMy WebLinkAbout1998-084ORDINANCE NO 98-DV
ORDINANCE AUTHORIZING THE ISSUANCE, SALE, AND DELIVERY OF CITY OF
DENTON UTILITY SYSTEM REVENUE BONDS, SERIES 1998, AND APPROVING
AND AUTHORIZING INSTRUMENTS AND PROCEDURES RELATING THERETO,
AND PROVIDING AN EFFECTIVE DATE
THE STATE OF TEXAS
COUNTY OF DENTON
CITY OF DENTON
bonds
WHEREAS, the City of Denton, Texas, heretofore has duly issued the following revenue
City of Denton Utility System Revenue Refunding Bonds, Series 1987, dated January 1, 1987,
City of Denton Utility System Revenue Bonds, Series 1988, dated August 1, 1988,
City of Denton Utility System Revenue Bonds, Series 1989, dated October 1, 1989,
City of Denton Utility System Revenue Bonds, Series 1992, dated March 1, 1992,
City of Denton Utility System Revenue Bonds, Series 1993, dated March 1, 1993,
City of Denton Utility System Revenue Refunding Bonds, Series 1993-A, dated June 1, 1993,
City of Denton Utility System Revenue Refunding Bonds, Taxable Series 1993-B, dated June
1, 1993,
City of Denton Utility System Revenue Bonds, Series 1996, dated May 1, 1996, and
City of Denton Utility System Revenue Refunding Bonds, Series 1996-A, dated May 1, 1996,
WHEREAS, the City Council of the City of Denton deems it necessary and advisable to
authorize, issue, and deliver the additional Utility System Revenue Bonds hereinafter described, and
WHEREAS, the Series 1998 Bonds hereinafter authorized and described are to be issued, sold
and delivered pursuant to Vernon's Ann Tex Cry Arts 2368a and I I I I through 1118, the City's
Home Rule Charter, and other applicable laws, NOW, THEREFORE
THE COUNCIL OF THE CITY OF DENTON HEREBY ORDAINS
Section 1 AMOUNT AND PURPOSE OF THE BONDS The bond or bonds of the City
of Denton, Texas (the "Issuer") are hereby authorized to be issued and delivered in the aggregate
principal amount of $7,175,000, for the purpose of providing for improvements and extensions of the
City of Denton Utility System, which consists of the City's Combined Waterworks, Sewer, and
Electric Light and Power System, and shall be designated "City of Denton Utility System Revenue
Bonds, Series 1998" (the "Series 1998 Bonds")
Section 2 DESCRIPTION OF THE BONDS (a) With respect to the Series 1998 Bonds,
initially there shall be issued, sold, and delivered hereunder a single fully registered bond, without
interest coupons, payable in installments of principal (the "Initial Bond"), but the Initial Bond may
be assigned and transferred and/or converted into and exchanged for a like aggregate principal
amount of fully registered bonds, without interest coupons, having serial maturities, and in the
denomination or denominations of $5,000 or any integral multiple of $5,000, all in the manner herein-
after provided The term "Bonds" as used in this Ordinance shall mean and include collectively the
Initial Bond and all substitute bonds exchanged therefor, as well as all other substitute bonds and
replacement bonds issued pursuant hereto, and the term "Bond" shall mean any of the Bonds
Section 3 INITIAL DATE, DENOMINATION, NUMBER, MATURITIES, INITIAL
REGISTERED OWNER, AND CHARACTERISTICS OF THE INITIAL BOND
(a) The Initial Bond is hereby authorized to be issued, sold, and delivered hereunder as a
single fully registered Bond, without interest coupons, dated MARCH 15, 1998, in the denommation
and aggregate principal amount of $7,175,000, numbered R-1, payable in annual installments of
principal to the initial registered owner thereof, to -wit
DEAN WITTER REYNOLDS
or to the registered assignee or assignees of said Bond or any portion or portions thereof (in each
case, the "registered owner"), with the annual installments of principal of the Initial Bond to be
payable on the dates, respectively, and in the principal amounts, respectively, stated in the FORM OF
INITIAL BOND set forth in this Ordinance
(b) The Initial Bond (i) may and shall be prepaid or redeemed prior to the respective
scheduled due dates of installments of principal thereof, (n) may be assigned and transferred, (in) may
be converted and exchanged for other Bonds, (iv) shall have the characteristics, and (v) shall be
signed and sealed, and the principal of and interest on the Initial Bond shall be payable, all as
provided, and in the manner required or indicated, in the FORM OF INITIAL BOND set forth in this
Ordinance
Section 4 INTEREST The unpaid principal balance of the Initial Bond shall bear interest
from the date of the Initial Bond to the respective scheduled due dates, or to the respective dates of
prepayment or redemption, of the installments of principal of the Initial Bond, and said interest shall
be payable, all in the manner provided and at the rates and on the dates stated in the FORM OF
INITIAL BOND set forth in this Ordinance
Section 5 FORM OF INITIAL BOND The form of the Initial Bond, including the form of
Registration Certificate of the Comptroller of Public Accounts of the State of Texas to be endorsed
on the Initial Bond, shall be substantially as follows
FORM OF INITIAL BOND
NO R-1 $7,175,000
UNITED STATES OF AMERICA
STATE OF TEXAS
COUNTY OF DENTON
CITY OF DENTON UTILITY SYSTEM REVENUE BOND
SERIES 1998
THE CITY OF DENTON, in Denton County, Texas (the "Issuer"), being a political
subdivision of the State of Texas, hereby promises to pay to
DEAN WITTER REYNOLDS
or to the registered assignee or assignees of this Bond or any portion or portions hereof (in each case,
the "registered owner") the aggregate principal amount of
$7,175,000
(SEVEN MILLION ONE HUNDRED SEVENTY FIVE THOUSAND DOLLARS)
in annual installments of principal due and payable on December 1 in each of the years, and in the
respective principal amounts, as set forth in the following schedule
PRINCIPAL
INTEREST
PRINCIPAL
INTEREST
YEAR
AMOUNT
RATE
YEAR
AMOUNT
RATE
1998
$360,000
6 30%
2008
$360,000
450
1999
360,000
630
2009
360,000
460
2000
360,000
630
2010
360,000
470
2001
360,000
630
2011
360,000
480
2002
360,000
630
2012
360,000
500
2003
360,000
575
2013
355,000
500
2004
360,000
430
2014
355,000
Soo
2005
360,000
435
2015
355,000
500
2006
360,000
440
2016
355,000
500
2007
360,000
450
2017
355,000
500
and to pay interest, from the date of this Bond hereinafter stated, on the balance of each such
installment of principal, respectively, from time to time remaining unpaid, at the rates as follows
6 30% per annum on the above installment due in 1998
6 30% per annum on the above installment due in 1999
3
6 30% per annum on the above installment due in 2000
6 30% per annum on the above installment due in 2001
6 30% per annum on the above installment due in 2002
5 75% per annum on the above installment due in 2003
4 30% per annum on the above installment due in 2004
4 35% per annum on the above installment due in 2005
4 40% per annum on the above installment due in 2006
4 50% per annum on the above installment due in 2007
4 50% per annum on the above installment due in 2008
4 60% per annum on the above installment due in 2009
4 70% per annum on the above installment due in 2010
4 80% per annum on the above installment due in 2011
5 00% per annum on the above installment due in 2012
5 00% per annum on the above installment due in 2013
5 00% per annum on the above installment due in 2014
5 00% per annum on the above installment due in 2015
5 00% per annum on the above installment due in 2016
5 00% per annum on the above installment due in 2017
with said interest being first due and payable on December 1, 1998, and semiannually on each June
1 and December I thereafter while this Bond or any portion hereof is outstanding and unpaid Said
interest shall be calculated on the basis of a 360-day year composed of twelve 30-day months
THE INSTALLMENTS OF PRINCIPAL OF AND THE INTEREST ON this Bond are
payable in lawful money of the United States of America, without exchange or collection charges
The installments of principal and the interest on this Bond are payable to the registered owner hereof
through the services of CHASE BANK OF TEXAS, NATIONAL ASSOCIATION, DALLAS,
TEXAS, winch is the "Paying Agent/Registrar" for this Bond Payment of all principal of and interest
on this Bond shall be made by the Paying Agent/Registrar to the registered owner hereof on each
principal and/or interest payment date by check, dated as of such date, drawn by the Paying
Agent/Registrar on, and payable solely from, funds of the Issuer required by the ordinance authorizing
the issuance of this Bond (the 'Bond Ordinance") to be on deposit with the Paying Agent/Registrar
for such purpose as hereinafter provided, and such check shall be sent by the Paying Agent/Registrar
by United States mail, first-class postage prepaid, on each such principal and/or interest payment date,
to the registered owner hereof, at the address of the registered owner, as it appeared on the 15th day
of the month next preceding each such date (the "Record Date") on the Registration Books kept by
the PaymgAgent/Registrar, as hereinafter described The Issuer covenants with the registered owner
of this Bond that on or before each principal and/or interest payment date for this Bond it will make
available to the Paying Agent/Registrar, from the "Interest and Sinking Fund" maintained pursuant
to the Bond Ordinance, the amounts required to provide for the payment, in immediately available
funds, of all principal of and interest on this Bond, when due
IF THE DATE for the payment of the principal of or interest on this Bond shall be a Saturday,
Sunday, a legal holiday, or a day on which banking institutions in the City where the Paying
Agent/Registrar is located are authorized by law or executive order to close, then the date for such
payment shall be the next succeeding day which is not such a Saturday, Sunday, legal holiday, or day
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on which banking institutions are authorized to close, and payment on such date shall have the same
force and effect as if made on the original date payment was due
THIS BOND has been authorized in accordance with the Constitution and laws of the State
of Texas in the principal amount of $7,175,000, for the purpose of providing for improvements and
extensions of the City of Denton Utility System, wluch consists of the City's Combined Waterworks,
Sewer, and Electric Light and Power System
ON DECEMBER 1, 2008, or on any date whatsoever thereafter, the unpaid installments of
principal of this Bond may be prepaid or redeemed prior to their scheduled due dates, at the option
of the Issuer, with funds derived from any available source, as a whole, or in part, and, if in part, the
particular portion of this Bond to be prepaid or redeemed shall be selected and designated by the
Issuer (provided that a portion of tins Bond may be redeemed only in an integral multiple of $5,000),
at the prepayment or redemption price of the par or principal amount thereof, plus accrued interest
to the date fixed for prepayment or redemption
AT LEAST 30 days prior to the date fixed for any such prepayment or redemption a written
notice of such prepayment or redemption shall be marled by the Paying Agent/Registrar to the
registered owner hereof By the date fixed for any such prepayment or redemption due provision
shall be made by the Issuer with the Paying Agent/Registrar for the payment of the required prepay-
ment or redemption price for tlus Bond or the portion hereof wluch is to be so prepaid or redeemed,
plus accrued interest thereon to the date fixed for prepayment or redemption If such written notice
of prepayment or redemption is given, and if due provision for such payment is made, all as provided
above, this Bond, or the portion thereof which is to be so prepaid or redeemed, thereby automatically
shall be treated as prepaid or redeemed prior to its scheduled due date, and shall not bear interest
after the date fixed for its prepayment or redemption, and shall not be regarded as being outstanding
except for the right of the registered owner to receive the prepayment or redemption price plus
accrued interest to the date fixed for prepayment or redemption from the Paying Agent/Registrar out
of the funds provided for such payment The Paying Agent/Registrar shall record in the Registration
Books all such prepayments or redemptions of principal of this Bond or any portion hereof
THIS BOND, to the extent of the unpaid or unredeemed principal balance hereof, or any
unpaid and unredeemed portion hereof in any integral multiple of $5,000, may be assigned by the
initial registered owner hereof and shall be transferred only in the Registration Books of the Issuer
kept by the Paying Agent/Registrar acting in the capacity of registrar for the Bonds, upon the terms
and conditions set forth in the Bond Ordinance Among other requirements for such transfer, this
Bond must be presented and surrendered to the Paying Agent/Registrar for cancellation, together
with proper instruments of assignment, in form and with guarantee of signatures satisfactory to the
Paying Agent/Registrar, evidencing assignment by the initial registered owner of this Bond, or any
portion or portions hereof in any integral multiple of $5,000, to the assignee or assignees in whose
name or names this Bond or any such portion or portions hereof is or are to be transferred and
registered Any instrument or instruments of assignment satisfactory to the Paying Agent/Registrar
may be used to evidence the assignment of this Bond or any such portion or portions hereof by the
initial registered owner hereof A new bond or bonds payable to such assignee or assignees (which
then will be the new registered owner or owners of such new Bond or Bonds) or to the initial
registered owner as to any portion of this Bond which is not being assigned and transferred by the
initial registered owner, shall be delivered by the Paying Agent/Registrar in conversion of and
exchange for this Bond or any portion or portions hereof, but solely in the form and manner as
provided in the next paragraph hereof for the conversion and exchange of this Bond or any portion
hereof The registered owner of this Bond shall be deemed and treated by the Issuer and the Paying
Agent/Registrar as the absolute owner hereof for all purposes, including payment and discharge of
liability upon this Bond to the extent of such payment, and the Issuer and the Paying Agent/Registrar
shall not be affected by any notice to the contrary
AS PROVIDED above and in the Bond Ordinance, this Bond, to the extent of the unpaid or
unredeemed principal balance hereof, may be converted into and exchanged for a like aggregate
principal amount of fully registered bonds, without interest coupons, payable to the assignee or
assignees duly designated in writing by the initial registered owner hereof, or to the initial registered
owner as to any portion of this Bond which is not being assigned and transferred by the initial
registered owner, in any denomination or denominations in any integral multiple of $5,000 (subject
to the requirement hereinafter stated that each substitute bond issued in exchange for any portion of
this Bond shall have a single stated principal maturity date), upon surrender of this Bond to the
Paying Agent/Registrar for cancellation, all in accordance with the form and procedures set forth in
the Bond Ordinance If this Bond or any portion hereof is assigned and transferred or converted each
bond issued in exchange for any portion hereof shall have a single stated principal maturity date
corresponding to the due date of the installment of principal of this Bond or portion hereof for which
the substitute bond is being exchanged, and shall bear interest at the rate applicable to and borne by
such installment of principal or portion thereof Such bonds, respectively, shall be subject to
redemption prior to maturity on the same dates and for the same prices as the corresponding
installment of principal of this Bond or portion hereof for which they are being exchanged No such
bond shall be payable in installments, but shall have only one stated principal maturity date AS
PROVIDED IN THE BOND ORDINANCE, THIS BOND IN ITS PRESENT FORM MAY BE
ASSIGNED AND TRANSFERRED OR CONVERTED ONCE ONLY, and to one or more
assignees, but the bonds issued and delivered in exchange for this Bond or any portion hereof may
be assigned and transferred, and converted, subsequently, as provided in the Bond Ordinance The
Issuer shall pay the Paying Agent/Registrar's standard or customary fees and charges for transferring,
converting, and exchanging this Bond or any portion thereof, but the one requesting such transfer,
conversion, and exchange shall pay any taxes or governmental charges required to be paid with
respect thereto The Paying Agent/Registrar shall not be required to make any such assignment,
conversion, or exchange (i) during the period commencing with the close of business on any Record
Date and ending with the opening of business on the next following principal or interest payment date,
or, (u) with respect to any Bond or portion thereof called for prepayment or redemption prior to
maturity, within 45 days prior to its prepayment or redemption date
IN THE EVENT any Paying Agent/Registrar for this Bond is changed by the Issuer, resigns,
or otherwise ceases to act as such, the Issuer has covenanted in the Bond Ordinance that it promptly
will appoint a competent and legally qualified substitute therefor, and promptly will cause written
notice thereof to be mailed to the registered owner of this Bond
IT IS HEREBY certified, recited, and covenanted that this Bond has been duly and validly
authorized, issued, sold, and delivered, that all acts, conditions, and things required or proper to be
performed, exist, and be done precedent to or in the authorization, issuance, and delivery of tlus
2.
Bond have been performed, existed, and been done in accordance with law, that this Bond is a special
obligation of the Issuer, secured by and payable, together with other bonds, from a first hen on and
pledge of the "Pledged Revenues", which include initially the "Net Revenues of the System" as such
terms are defined in the Bond Ordinance, with the System consisting of the City's entire combined
waterworks, sewer, and electnc light and power system
THE ISSUER has reserved the right, subject to the restnctions stated in the Bond Ordinance,
to issue Additional Bonds payable from and secured by a first hen on and pledge of the "Pledged
Revenues" on a panty with this Bond
THE ISSUER also has reserved the right, subject to the restnctions stated in the Bond
Ordinance, to amend the Bond Ordinance with the approval of the holders or owners of fifty-one
percent in pnnctpal amount of all outstanding bonds which are secured by and payable from a first
lien on and pledge of the Pledged Revenues
THE REGISTERED OWNER hereof shall never have the nght to demand payment of this
Bond or the interest hereon out of any funds raised or to be raised by taxation or from any source
whatsoever other than specified in the Bond Ordinance
BY BECOMING the registered owner of this Bond, the registered owner thereby
acknowledges all of the terms and provisions of the Bond Ordinance, agrees to be bound by such
terms and provisions, acknowledges that the Bond Ordinance is duly recorded and available for
inspection in the official minutes and records of the governing body of the Issuer, and agrees that the
terms and provisions of this Bond and the Bond Ordinance constitute a contract between the
registered owner hereof and the Issuer
IN WITNESS WHEREOF, the Issuer has caused this Bond to be signed with the manual
signature of the Mayor of the Issuer and countersigned and attested with the manual signature of the
City Secretary of the Issuer, has caused the official seal of the Issuer to be duly impressed on this
Bond, and has caused this Bond to be dated March 15, 1998
ATTEST CITY OF DENTON, TEXAS
By By
Jennifer Walters Jack Miller
City Secretary, City of Denton, Texas Mayor, City of Denton, Texas
(CITY SEAL)
(BOND INSURANCE LEGEND, IF ANY)
FORM OF REGISTRATION CERTIFICATE OF THE
COMPTROLLER OF PUBLIC ACCOUNTS
COMPTROLLER'S REGISTRATION CERTIFICATE REGISTER NO
I hereby certify that this Bond has been examined, certified as to validity, and approved by
the Attorney General of the State of Texas, and that this Bond has been registered by the Comptroller
of Public Accounts of the State of Texas
Witness my signature and seal this
Comptroller of Public Accounts
of the State of Texas
(COMPTROLLER'S SEAL)
Section 6 ADDITIONAL CHARACTERISTICS OF THE BONDS Registration and
Transfer (a) The Issuer shall keep or cause to be kept at the principal corporate trust office of
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION, DALLAS, TEXAS (the "Paying
Agent/Registrar") books or records of the registration and transfer of the Bonds (the "Registration
Books"), and the Issuer hereby appomts the Paying Agent/Registrar as its registrar and transfer agent
to keep such books or records and make such transfers and registrations under such reasonable
regulations as the Issuer and Paying Agent/Registrar may prescribe, and the Paying Agent/Registrar
shall make such transfers and registrations as herein provided The Paying Agent/Registrar shall
obtain and record in the Registration Books the address of the registered owner of each Bond to
which payments with respect to the Bonds shall be mailed, as herein provided, but it shall be the duty
of each registered owner to notify the Paying Agent/Registrar in writing of the address to which
payments shall be mailed, and such interest payments shall not be mailed unless such notice has been
given The Issuer shall have the right to inspect the Registration Books during regular business hours
of the Paying Agent/Registrar, but otherwise the Paying Agent/Registrar shall keep the Registration
Books confidential and, unless otherwise required by law, shall not permit their inspection by any
other entity Registration of each Bond may be transferred in the Registration Books only upon
presentation and surrender of such Bond to the Paying Agent/Registrar for transfer of registration
and cancellation, together with proper written instruments of assignment, in form and with guarantee
of signatures satisfactory to the Paying Agent/Registrar, evidencing (i) the assignment of the Bond,
or any portion thereof in any integral multiple of $5,000, to the assignee or assignees thereof, and (u)
the right of such assignee or assignees to have the Bond or any such portion thereof registered in the
name of such assignee or assignees Upon the assignment and transfer of any Bond or any portion
thereof, a new substitute Bond or Bonds shall be issued in conversion and exchange therefor in the
manner herein provided The Initial Bond, to the extent of the unpaid or unredeemed principal
balance thereof, may be assigned and transferred by the initial registered owner thereof once only, and
to one or more assignees designated in writing by the initial registered owner thereof All Bonds
issued and delivered in conversion of and exchange for the Initial Bond shall be in any denommation
or denominations of any integral multiple of $5,000 (subject to the requirement hereinafter stated that
each substitute Bond shall have a single stated principal maturity date), shall be in the form prescribed
in the FORM OF SUBSTITUTE BOND set forth in this Ordinance, and shall have the characteristics,
and may be assigned, transferred, and converted as hereinafter provided If the Initial Bond or any
portion thereof is assigned and transferred or converted the Initial Bond must be surrendered to the
Paying Agent/Registrar for cancellation, and each Bond issued in exchange for any portion of the
Initial Bond shall have a single stated principal maturity date, and shall not be payable in installments,
and each such Bond shall have a principal maturity date corresponding to the due date of the
installment of principal or portion thereof for winch the substitute Bond is being exchanged, and each
such Bond shall bear interest at the single rate applicable to and borne by such installment of principal
or portion thereof for which it is being exchanged If only a portion of the Initial Bond is assigned
and transferred, there shall be delivered to and registered in the name of the initial registered owner
substitute Bonds in exchange for the unassigned balance of the Initial Bond in the same manner as
if the initial registered owner were the assignee thereof If any Bond or portion thereof other than
the Initial Bond is assigned and transferred or converted each Bond issued in exchange therefor shall
have the same principal maturity date and bear interest at the same rate as the Bond for which it is
exchanged A form of assignment shall be printed or endorsed on each Bond, excepting the Initial
Bond, which shall be executed by the registered owner or its duly authorized attorney or
representative to evidence an assignment thereof Upon surrender of any Bonds or any portion or
portions thereof for transfer of registration, an authorized representative of the Paying
Agent/Registrar shall make such transfer in the Registration Books, and shall deliver a new fully
registered substitute Bond or Bonds, having the characteristics herein described, payable to such
assignee or assignees (which then will be the registered owner or owners of such new Bond or
Bonds), or to the previous registered owner in case only a portion of a Bond is being assigned and
transferred, all in conversion of and exchange for said assigned Bond or Bonds or any portion or
portions thereof, in the same form and manner, and with the same effect, as provided in Section 6(d),
below, for the conversion and exchange of Bonds by any registered owner of a Bond The Issuer
shall pay the Paying Agent/Registrar's standard or customary fees and charges for making such trans-
fer and delivery of a substitute Bond or Bonds, but the one requesting such transfer shall pay any
taxes or other governmental charges required to be paid with respect thereto The Paying
Agent/Registrar shall not be required to make transfers of registration of any Bond or any portion
thereof (i) during the period commencing with the close of business on any Record Date and ending
with the opening of business on the next following principal or interest payment date, or, (n) with
respect to any Bond or any portion thereof called for redemption prior to maturity, within 45 days
prior to its redemption date
(b) Ownership of Bonds The entity in whose name any Bond shall be registered in the
Registration Books at any time shall be deemed and treated as the absolute owner thereof for all
purposes of tlus Ordinance, whether or not such Bond shall be overdue, and the Issuer and the Paying
Agent/Registrar shall not be affected by any notice to the contrary, and payment of, or on account
of, the principal of, prenuum, if any, and interest on any such Bond shall be made only to such
registered owner All such payments shall be valid and effectual to satisfy and discharge the liability
upon such Bond to the extent of the sum or sums so paid
(c) Payment of Bonds and Interest The Issuer hereby further appoints the Paying
Agent/Registrar to act as the paying agent for paying the principal of and interest on the Bonds, and
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to act as its agent to convert and exchange or replace Bonds, all as provided in this Ordinance The
Paying Agent/Registrar shall keep proper records of all payments made by the Issuer and the Paying
Agent/Registrar with respect to the Bonds, and of all conversions and exchanges of Bonds, and all
replacements of Bonds, as provided in this Ordinance
(d) Conversion and Exchange or Replacement. Authentication Each Bond issued and
delivered pursuant to this Ordinance, to the extent of the unpaid or unredeemed principal balance or
principal amount thereof, may, upon surrender of such Bond at the principal corporate trust office
of the Paying Agent/Registrar, together with a written request therefor duly executed by the
registered owner or the assignee or assignees thereof, or its or their duly authorized attorneys or
representatives, with guarantee of signatures satisfactory to the Paying Agent/Registrar, may, at the
option of the registered owner or such assignee or assignees, as appropriate, be converted into and
exchanged for fully registered bonds, without interest coupons, in the form prescribed in the FORM
OF SUBSTITUTE BOND set forth in this Ordinance, in the denomination of $5,000, or any integral
multiple of $5,000 (subject to the requirement hereinafter stated that each substitute Bond shall have
a single stated maturity date), as requested in writing by such registered owner or such assignee or
assignees, in an aggregate principal amount equal to the unpaid or unredeemed principal balance or
principal amount of any Bond or Bonds so surrendered, and payable to the appropriate registered
owner, assignee, or assignees, as the case may be If the Initial Bond is assigned and transferred or
converted each substitute Bond issued in exchange for any portion of the Initial Bond shall have a
single stated principal maturity date, and shall not be payable in installments, and each such Bond shall
have a principal maturity date corresponding to the due date of the installment of principal or portion
thereof for which the substitute Bond is being exchanged, and each such Bond shall bear interest at
the single rate applicable to and borne by such installment of principal or portion thereof for which
it is being exchanged If a portion of any Bond (other than the Initial Bond) shall be redeemed prior
to its scheduled maturity as provided herein, a substitute Bond or Bonds having the same maturity
date, bearing interest at the same rate, in the denomination or denominations of any integral multiple
of $5,000 at the request of the registered owner, and in aggregate principal amount equal to the
unredeemed portion thereof, will be issued to the registered owner upon surrender thereof for
cancellation If any Bond or portion thereof (other than the Initial Bond) is assigned and transferred
or converted, each Bond issued in exchange therefor shall have the same principal maturity date and
bear interest at the same rate as the Bond for which it is being exchanged Each substitute Bond shall
bear a letter and/or number to distinguish it from each other Bond The Paying Agent/Registrar shall
convert and exchange or replace Bonds as provided herein, and each fully registered bond delivered
in conversion of and exchange for or replacement of any Bond or portion thereof as permitted or
required by any provision of this Ordinance shall constitute one of the Bonds for all purposes of this
Ordinance, and may again be converted and exchanged or replaced It is specifically provided that
any Bond authenticated in conversion of and exchange for or replacement of another Bond on or
prior to the first scheduled Record Date for the Initial Bond shall bear interest from the date of the
Initial Bond, but each substitute Bond so authenticated after such first scheduled Record Date shall
bear interest from the interest payment date next preceding the date on which such substitute Bond
was so authenticated, unless such Bond is authenticated after any Record Date but on or before the
next following interest payment date, in which case it shall bear interest from such next following
interest payment date, provided, however, that if at the time of delivery of any substitute Bond the
interest on the Bond for which it is being exchanged is due but has not been paid, then such Bond
shall bear interest from the date to which such interest has been paid in full THE INITIAL BOND
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issued and delivered pursuant to this Ordinance is not required to be, and shall not be, authenticated
by the Paying Agent/Registrar, but on each substitute Bond issued in conversion of and exchange for
or replacement of any Bond or Bonds issued under this Ordinance there shall be printed a certificate,
in the form substantially as follows
"PAYING AGENT/REGISTRAR'S AUTHENTICATION CERTIFICATE
It is hereby certified that this Bond has been issued under the provisions of the Bond
Ordinance described in this Bond, and that this Bond has been issued in conversion of and exchange
for or replacement of a bond, bonds, or a portion of a bond or bonds of an issue which originally was
approved by the Attorney General of the State of Texas and registered by the Comptroller of Public
Accounts of the State of Texas
Dated
CHASE BANK OF TEXAS, NATIONAL
ASSOCIATION, DALLAS, TEXAS
Paying Agent/Registrar
By
Authorized Representative"
An authorized representative of the Paying Agent/Registrar shall, before the delivery of any such
Bond, date and manually sign the above Certificate, and no such Bond shall be deemed to be issued
or outstanding unless such Certificate is so executed The Paying Agent/Registrar promptly shall
cancel all Bonds surrendered for conversion and exchange or replacement No additional ordinances,
orders, or resolutions need be passed or adopted by the governing body of the Issuer or any other
body or person so as to accomplish the foregoing conversion and exchange or replacement of any
Bond or portion thereof, and the Paying Agent/Registrar shall provide for the printing, execution, and
delivery of the substitute Bonds in the manner prescribed herein, and said Bonds shall be of type
composition printed on paper with lithographed or steel engraved borders of customary weight and
strength Pursuant to Vernon's Ann Tex Cry St Art 717k-6, and particularly Section 6 thereof,
the duty of conversion and exchange or replacement of Bonds as aforesaid is hereby imposed upon
the Paying Agent/Registrar, and, upon the execution of the above Paying Agent/Registrar's
Authentication Certificate, the converted and exchanged or replaced Bond shall be valid,
incontestable, and enforceable in the same manner and with the same effect as the Initial Bond winch
originally was issued pursuant to this Ordinance, approved by the Attorney General, and registered
by the Comptroller of Public Accounts The Issuer shall pay the Paying Agent/Registrar's standard
or customary fees and charges for transferring, converting, and exchanging any Bond or any portion
thereof, but the one requesting any such transfer, conversion, and exchange shall pay any taxes or
governmental charges required to be paid with respect thereto as a condition precedent to the
exercise of such privilege of conversion and exchange The Paying Agent/Registrar shall not be
required to make any such conversion and exchange or replacement of Bonds or any portion thereof
(i) during the period commencing with the close of business on any Record Date and ending with the
opening of business on the next following principal or interest payment date, or, (u) with respect to
any Bond or portion thereof called for redemption prior to maturity, within 45 days prior to its
redemption date
11
(e) In GeneralAll Bonds issued in conversion and exchange or replacement of any other
Bond or portion thereof, (i) shall be issued in fully registered form, without interest coupons, with
the principal of and interest on such Bonds to be payable only to the registered owners thereof, (n)
may and shall be redeemed prior to their scheduled maturities, (in) may be transferred and assigned,
(iv) may be converted and exchanged for other Bonds, (v) shall have the characteristics, (vi) shall be
signed and sealed, and (vu) the principal of and interest on the Bonds shall be payable, all as provided,
and in the manner required or indicated, in the FORM OF SUBSTITUTE BOND set forth in this
Ordinance
(0 Payment of Fees and Charges The Issuer hereby covenants with the registered owners
of the Bonds that it will (i) pay the standard or customary fees and charges of the Paying
Agent/Registrar for its services with respect to the payment of the principal of and interest on the
Bonds, when due, and (n) pay the fees and charges of the Paying Agent/Registrar for services with
respect to the transfer of registration of Bonds, and with respect to the conversion and exchange of
Bonds solely to the extent above provided in this Ordinance
(g) Substitute PjWng Agent/Re isg tray The Issuer covenants with the registered owners of
the Bonds that at all times while the Bonds are outstanding the Issuer will provide a competent and
legally qualified bank, trust company, financial institution, or other agency to act as and perform the
services of Paying Agent/Registrar for the Bonds under this Ordinance, and that the Paying
Agent/Registrar will be one entity The Issuer reserves the right to, and may, at its option, change
the Paying Agent/Registrar upon not less than 120 days written notice to the Paying Agent/Registrar,
to be effective not later than 60 days prior to the next principal or interest payment date after such
notice In the event that the entity at any time acting as Paying Agent/Registrar (or its successor by
merger, acquisition, or other method) should resign or otherwise cease to act as such, the Issuer
covenants that it will promptly appoint a competent and legally qualified bank, trust company,
financial institution, or other agency to act as Paying Agent/Registrar under this Ordinance Upon
any change in the Paying Agent/Registrar, the previous Paying Agent/Registrar shall promptly
transfer and deliver the Registration Books (or a copy thereof), along with all other pertinent books
and records relating to the Bonds, to the new Paying Agent/Registrar designated and appointed by
the Issuer Upon any change in the Paying Agent/Registrar, the Issuer promptly will cause a written
nonce thereof to be sent by the new Paying Agent/Registrar to each registered owner of the Bonds,
by United States mail, first-class postage prepaid, which notice also shall give the address of the new
Paying Agent/Registrar By accepting the position and performing as such, each Paying Agent/Regis-
trar shall be deemed to have agreed to the provisions of this Ordinance, and a certified copy of this
Ordinance shall be delivered to each Paying Agent/Registrar
Section 7 FORM OF SUBSTITUTE BOND The form of all Bonds issued in conversion
and exchange or replacement of any other Bond or portion thereof, including the form of Paying
Agent/Registrar's Certificate to be printed on each of such Bonds, and the Form of Assignment to be
printed on each of the Bonds, shall be, respectively, substantially as follows, with such appropriate
variations, ormssions, or insertions as are permitted or required by this Ordinance
12
FORM OF SUBSTITUTE BOND
NO UNITED STATES OF AMERICA PRINCIPAL AMOUNT
STATE OF TEXAS $
COUNTY OF DENTON
CITY OF DENTON UTILITY SYSTEM REVENUE BOND
SERIES 1998
INTEREST MATURITY ORIGINAL DATE
RATE DATE OF ISSUE CUSIP NO
% MARCH 15, 1998
ON THE MATURITY DATE specified above the CITY OF DENTON, in Denton County,
Texas (the "Issuer"), being a political subdivision of the State of Texas, hereby promises to pay to
or to the registered
assignee hereof (ether being hereinafter called the "registered owner") the principal amount of
and to pay interest thereon from March 15, 1998, to the maturity date specified above, or the date
of redemption prior to maturity, at the interest rate per annum specified above, with interest being
first due and payable on December 1, 1998, and semiannually on each June 1 and December 1
thereafter, except that if the date of authentication of this Bond is later than the first Record Date
(hereinafter defined), such principal amount shall bear interest from the interest payment date next
preceding the date of authentication, unless such date of authentication is after any Record Date
(hereinafter defined) but on or before the next following interest payment date, in which case such
principal amount shall bear interest from such next following interest payment date Said interest shall
be calculated on the basis of a 360-day year composed of twelve 30-day months
THE PRINCIPAL OF AND INTEREST ON this Bond are payable in lawful money of the
United States of America, without exchange or collection charges The principal of this Bond shall
be paid to the registered owner hereof upon presentation and surrender of this Bond at maturity or
upon the date fixed for its redemption prior to maturity, at the principal corporate trust office of
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION, DALLAS, TEXAS, which is the
"Paying Agent/Registrar" for this Bond The payment of interest on this Bond shall be made by the
Paying Agent/Registrar to the registered owner hereof on each interest payment date by check, dated
as of such interest payment date, drawn by the Paying Agent/Registrar on, and payable solely from,
funds of the Issuer required by the ordinance authorizing the issuance of the Bonds (the "Bond
Ordinance") to be on deposit with the Paying Agent/Registrar for such purpose as hereinafter
provided, and such check shall be sent by the Paying Agent/Registrar by United States mail, first-class
postage prepaid, on each such interest payment date, to the registered owner hereof, at the address
of the registered owner, as it appeared at the close of business on the 15th day of the month next
preceding each such date (the "Record Date") on the Registration Books kept by the Paying
Agent/Registrar, as hereinafter described However, the payment of such interest may be made by
13
any other method acceptable to the Paying Agent/Registrar and requested by, and at the risk and
expense of the registered owner hereof Any accrued interest due upon the redemption of this Bond
prior to maturity as provided herein shall be paid to the registered owner at the principal corporate
trust office of the Paying Agent/Registrar upon presentation and surrender of this Bond for redemp-
tion and payment at the principal corporate trust office of the Paying Agent/Registrar The Issuer
covenants with the registered owner of this Bond that on or before each principal payment date,
interest payment date, and accrued interest payment date for this Bond it will make available to the
Paying Agent/Registrar, from the "Interest and Sinking Fund" created by the Bond Ordinance, the
amounts required to provide for the payment, in immediately available funds, of all principal of and
interest on the Bonds, when due
IF THE DATE for the payment of the principal of or interest on this Bond shall be a Saturday,
Sunday, a legal holiday, or a day on which banking institutions in the City where the Paying
Agent/Registrar is located are authorized by law or executive order to close, then the date for such
payment shall be the next succeeding day which is not such a Saturday, Sunday, legal holiday, or day
on winch banking institutions are authorized to close, and payment on such date shall have the same
force and effect as if made on the original date payment was due
THIS BOND is one of an issue of Bonds initially dated March 15, 1998, authorized in
accordance with the Constitution and laws of the State of Texas in the principal amount of
$7,175,000, for the purpose of providing for improvements and extensions of the City of Denton
Utility System, which consists of the City's Combined Waterworks, Sewer, and Electric Light and
Power System
ON DECEMBER 1, 2008, or on any date whatsoever thereafter, the Bonds of this Series may
be redeemed prior to their scheduled maturities, at the option of the Issuer, with funds derived from
any available and lawful source, as a whole, or in part, and, if in part, the particular Bonds, or
portions thereof, to be redeemed shall be selected and designated by the Issuer (provided that a
portion of a Bond may be redeemed only in an integral multiple of $5,000), at the redemption price
of the par or principal amount thereof, plus accrued interest to the date fixed for redemption
AT LEAST 30 days prior to the date fixed for any redemption of Bonds or portions thereof
prior to maturity a written notice of such redemption shall be published once in a financial publication,
journal, or reporter of general circulation among securities dealers in The City of New York, New
York (including, but not limited to, The Bond Buyer and The Wall Street Journal), or in the State of
Texas (including, but not limited to, The Texas Bond Reporter) Such notice also shall be sent by
the Paying Agent/Registrar by United States mail, first-class postage prepaid, not less than 30 days
prior to the date fixed for any such redemption, to the registered owner of each Bond to be redeemed
at its address as it appeared on the 45th day prior to such redemption date, provided, however, that
the failure to send, mail, or receive such notice, or any defect therein or in the sending or mailing
thereof, shall not affect the validity or effectiveness of the proceedings for the redemption of any
Bond, and it is hereby specifically provided that the publication of such notice as required above shall
be the only notice actually required in connection with or as a prerequisite to the redemption of any
Bonds or portions thereof By the date fixed for any such redemption due provision shall be made
with the Paying Agent/Registrar for the payment of the required redemption price for the Bonds or
portions thereof which are to be so redeemed, plus accrued interest thereon to the date fixed for
14
redemption If such written notice of redemption is published and if due provision for such payment
is made, all as provided above, the Bonds or portions thereof which are to be so redeemed thereby
automatically shall be treated as redeemed prior to their scheduled maturities, and they shall not bear
interest after the date fixed for redemption, and they shall not be regarded as being outstanding except
for the right of the registered owner to receive the redemption price plus accrued interest from the
Paying Agent/ Registrar out of the funds provided for such payment If a portion of any Bond shall
be redeemed a substitute Bond or Bonds having the same maturity date, bearing interest at the same
rate, in any denomination or denominations in any integral multiple of $5,000, at the written request
of the registered owner, and in aggregate principal amount equal to the unredeemed portion thereof,
will be issued to the registered owner upon the surrender thereof for cancellation, at the expense of
the Issuer, all as provided in the Bond Ordinance
THIS BOND OR ANY PORTION OR PORTIONS HEREOF IN ANY INTEGRAL
MULTIPLE OF $5,000 may be assigned and shall be transferred only in the Registration Books of
the Issuer kept by the Paying Agent/Registrar acting in the capacity of registrar for the Bonds, upon
the terms and conditions set forth in the Bond Ordinance Among other requirements for such
assignment, and transfer, this Bond must be presented and surrendered to the Paying Agent/Registrar,
together with proper instruments of assignment, in form and with guarantee of signatures satisfactory
to the Paying Agent/Registrar, evidencing assignment of this Bond or any portion or portions hereof
in any integral multiple of $5,000 to the assignee or _assignees in whose name or names this Bond or
any such portion or portions hereof is or are to be transferred and registered The form of
Assignment printed or endorsed on this Bond shall be executed by the registered owner or its duly
authorized attorney or representative, to evidence the assignment hereof A new Bond or Bonds
payable to such assignee or assignees (winch then will be the new registered owner or owners of such
new Bond or Bonds), or to the previous registered owner in the case of the assignment and transfer
of only a portion of this Bond, may be delivered by the Paying Agent/Registrar in conversion of and
exchange for this Bond, all in the form and manner as provided in the next paragraph hereof for the
conversion and exchange of other Bonds The Issuer shall pay the Paying Agent/Registrar's standard
or customary fees and charges for making such transfer, but the one requesting such transfer shall pay
any taxes or other governmental charges required to be paid with respect thereto The Paying
Agent/Registrar shall not be required to make transfers of registration of this Bond or any portion
hereof (i) during the period commencing with the close of business on any Record Date and ending
with the opening of business on the next following principal or interest payment date, or, (u) with
respect to any Bond or any portion thereof called for redemption prior to maturity, within 45 days
pnor to its redemption date The registered owner of this Bond shall be deemed and treated by the
Issuer and the Paying Agent/Registrar as the absolute owner hereof for all purposes, including
payment and discharge of liability upon this Bond to the extent of such payment, and the Issuer and
the Paying Agent/Registrar shall not be affected by any notice to the contrary
ALL BONDS OF THIS SERIES are issuable solely as fully registered bonds, without interest
coupons, in the denomination of any integral multiple of $5,000 As provided in the Bond
Ordmance, this Bond, or any unredeemed portion hereof, may, at the request of the registered owner
or the assignee or assignees hereof, be converted into and exchanged for a like aggregate principal
amount of fully registered bonds, without interest coupons, payable to the appropriate registered
owner, assignee, or assignees, as the case may be, having the same maturity date, and bearing interest
at the same rate, in any denomination or denommations in any integral multiple of $5,000 as requested
15
in writing by the appropriate registered owner, assignee, or assignees, as the case may be, upon sur-
render of this Bond to the Paying Agent/Registrar for cancellation, all in accordance with the form
and procedures set forth in the Bond Ordnance The Issuer shall pay the Paying Agent/Registrar's
standard or customary fees and charges for transferring, converting, and exchanging any Bond or any
portion thereof, but the one requesting such transfer, conversion, and exchange shall pay any taxes
or governmental charges required to be paid with respect thereto as a condition precedent to the
exercise of such privilege of conversion and exchange The Paying Agent/Registrar shall not be
required to make any such conversion and exchange (j) during the period commencing with the close
of business on any Record Date and ending with the opening of business on the next following
principal or interest payment date, or, (u) with respect to any Bond or portion thereof called for
redemption prior to maturity, within 45 days prior to its redemption date
IN THE EVENT any Paying Agent/Registrar for the Bonds is changed by the Issuer, resigns,
or otherwise ceases to act as such, the Issuer has covenanted in the Bond Ordinance that it promptly
will appoint a competent and legally qualified substitute therefor, and will promptly cause written
notice thereof to be mailed to the registered owners of the Bonds
IT IS HEREBY certified, recited, and covenanted that this Bond has been duly and validly
authorized, issued, sold, and delivered, that all acts, conditions, and things required or proper to be
performed, exist, and be done precedent to or in the authorization, issuance, and delivery of this Bond
have been performed, existed, and been done in accordance with law, that this Bond is a special
obligation of the Issuer, secured by and payable, together with other bonds, from a first lien on and
pledge of the "Pledged Revenues", which include initially the "Net Revenues of the System", as such
terms are defined in the Bond Ordinance, with the System consisting of the City's entire combined
waterworks, sewer, and electric light and power system
THE ISSUER has reserved the right, subject to the restrictions stated in the Bond Ordinance,
to issue Additional Bonds payable from and secured by a first hen on and pledge of the "Pledged
Revenues" on a panty with this Bond and series of which it is a part
THE ISSUER also has reserved the right, subject to the restrictions stated in the Bond
Ordinance, to amend the Bond Ordinance with the approval of the holders or owners of fifty-one
percent in principal amount of all outstanding bonds which are secured by and payable from a first
lien on and pledge of the Pledged Revenues
THE REGISTERED OWNER hereof shall never have the right to demand payment of this
Bond or the interest hereon out of any funds raised or to be raised by taxation or from any source
whatsoever other than specified in the Bond Ordinance
BY BECOMING the registered owner of this Bond, the registered owner thereby
acknowledges all of the terms and provisions of the Bond Ordinance, agrees to be bound by such
terms and provisions, acknowledges that the Bond Ordinance is duly recorded and available for
inspection in the official minutes and records of the governing body of the Issuer, and agrees that the
terms and provisions of this Bond and the Bond Ordinance constitute a contract between each
registered owner hereof and the Issuer
IV
IN WITNESS WHEREOF, the Issuer has caused this Bond to be signed with the manual or
facsimile signature of the Mayor of the Issuer and countersigned and attested with the manual or
facsimile signature of the City Secretary of the Issuer, and has caused the official seal of the Issuer
to be duly impressed, or placed in facsimile, on this Bond
ATTEST
0
Jennifer Walters
City Secretary, City of Denton, Texas
(CITY SEAL)
CITY OF DENTON, TEXAS
0
Jack Miller
Mayor, City of Denton, Texas
FORM OF PAYING AGENT/REGISTRAR'S AUTHENTICATION CERTIFICATE
PAYING AGENT/REGISTRAR'S AUTHENTICATION CERTIFICATE
It is hereby certified that this Bond has been issued under the provisions of the Bond
Ordinance described in this Bond, and that this Bond has been issued in conversion of and exchange
for or replacement of a bond, bonds, or a portion of a bond or bonds of an issue which originally was
approved by the Attorney General of the State of Texas and registered by the Comptroller of Public
Accounts of the State of Texas
Dated
CHASE BANK OF TEXAS, NATIONAL
ASSOCIATION, DALLAS, TEXAS
Paying Agent/Registrar
Authorized Representative
(BOND INSURANCE LEGEND, IF ANY)
17
y8 0
FORM OF ASSIGNMENT
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned registered owner of this Bond, or duly authorized
representative or attorney thereof, hereby assigns this Bond to
(Assignee's Social
Security or Taxpayer
Identification Number)
(print or typewrite Assignee's name and
address, including zip code)
and hereby irrevocably constitutes and appoints
attorney to transfer the registration of this Bond on the Paying Agent/Registrar's Registration Books
with full power of substitution in the premises
Dated
Signature Guaranteed
NOTICE Signature(s) must be
guaranteed by an eligible guarantor
institution participating in a
securities transfer association
recognized signature guarantee
program
Registered Owner
NOTICE This signature must correspond
with the name of the Registered Owner
appearing on the face of this Certificate in
every particular without alteration or
enlargement or any change whatsoever
Section 8 DEFINITIONS As used in this Ordinance the following terms shall have the
meanings set forth below, unless the text hereof specifically indicates otherwise
(a) The terms "City" and "Issuer" shall mean the City of Denton, in Denton County, Texas
(b) The term "City Council" or "Council" shall mean the governing body of the City
(c) The term "Bonds" shall mean collectively the Initial Bond as defined and described in
Section 2 of this Ordinance and all substitute bonds exchanged therefor, and all other substitute bonds
and replacement bonds, issued pursuant to and as provided in this Ordinance
(d) The term "Panty Bonds" shall mean collectively (i) the outstanding City of Denton Utility
System Revenue Refunding Bonds, Series 1987, authorized by ordinance passed on January 27, 1987
(the "Series 1987 Bonds"), (u) the outstanding City of Denton Utility System Revenue Bonds, Series
1988, authorized by ordinance passed on August 2, 1988 (the "Series 1988 Bonds"), (ui) the
f.]
outstanding City of Denton Utility System Revenue Bonds, Series 1989, authorized by ordinance
passed on October 24, 1989 (the "Series 1989 Bonds"), (iv) the outstanding City of Denton Utility
System Revenue Bonds, Series 1992, authorized by ordinance passed on March 3, 1992 (the "Series
1992 Bonds"), (v) the outstanding City of Denton Utility System Revenue Bonds, Series 1993,
authorized by ordinance passed on March 16, 1993 (the "Series 1993 Bonds"), (vi) the outstanding
City of Denton Utility System Revenue Refunding Bonds, Series 1993-A, authorized by ordinance
passed on June 8, 1993 (the "Series 1993-A Bond"), (vii) the outstanding City of Denton Utility
System Revenue Refundmg Bonds, Taxable Series 1993-B, authorized by ordinance passed on June
8, 1993 (the "Series 1993-B Bonds"), (vin) the outstanding City of Denton Utility System Revenue
Bonds, Series 1996, authorized by an ordinance passed on May 7, 1996, (ix) the outstanding City of
Denton Utility System Revenue Refunding Bonds, Series 1996-A, authorized by an ordinance passed
on May 7, 1996 and (x) the Bonds
(e) The term "Additional Bonds" shall mean the additional panty revenue bonds which the
City reserves the right to issue in the future, in accordance with Section 25 of this Ordinance
(f) The term "System" shall mean (1) the City's entire existing waterworks and sewer system
and the City's entire existing electric light and power system, together with all future extensions,
improvements, enlargements, and additions thereto, and all replacements thereof, and (2) any other
related facilities, all or any part of the revenues or income from which do, in the future, at the option
of the City, and in accordance with law, become "Pledged Revenues" as hereinafter defined, provided
that, notwithstanding the foregoing, and to the extent now or hereafter authorized or permitted by
law, the term System shall not mean any water, sewer, electric, or other facilities of any kind which
are declared not to be a part of the System, and which are acquired or constructed by the City with
the proceeds from the issuance of "Special Facilities Bonds", which are hereby defined as being
special revenue obligations of the City which are not payable from or secured by any Pledged
Revenues, but which are secured by and payable from liens on and pledges of any other revenues,
sources, or payments, including, but not limited to, special contract revenues or payments received
from any other legal entity in connection with such facilities, and such revenues, sources, or payments
shall not be considered as or constitute Gross Revenues of the System, unless and to the extent other-
wise provided in the ordinance or ordinances authorizing the issuance of such "Special Facilities
Bonds"
(g) The terms "Gross Revenues of the System" and "Gross Revenues" shall mean all revenues
and income of every nature derived or received by the City from the operation and ownership of the
System, including the interest income from the investment or deposit of money in any Fund created
by this Ordinance
(h) The terms "Net Revenues of the System", and "Net Revenues" shall mean all Gross
Revenues after deducting therefrom an amount equal to the current expenses of operation and mainte-
nance of the System, including all salaries, labor, materials, repairs, and extensions necessary to
render efficient service, provided, however, that only such repairs and extensions, as in the judgment
of the City Council, reasonably and fairly exercised by the adoption of appropriate resolutions, are
necessary to keep the System in operation and render adequate service to said City and the inhabitants
thereof, or such as might be necessary to meet some physical accident or condition which would
otherwise impair the Bonds or Additional Bonds, shall be deducted in determining "Net Revenues"
1e
Payments required to be made by the City for water supply or water facilities, sewer services or sewer
facilities, fuel supply, and for the purchase of electric power, which payments under law constitute
operation and maintenance expenses of any part of the System, shall constitute and be regarded as
expenses of operation and maintenance of the System under this Ordinance Depreciation and
amortization shall not constitute or be regarded as expenses of operation and maintenance of the
System
(i) The term "Pledged Revenues" shall mean
(1) the Net Revenues, plus
(2) any additional revenues, income, or other resources which are expected to be
available to the City on a regular periodic basis, including, without limitation, any grants,
donations, or income received or to be received from the United States Government, or any
other public or private source, whether pursuant to an agreement or otherwise, which in the
future may, at the option of the City, be pledged to the payment of the Panty Bonds or
Additional Bonds
0) The term "year" or "fiscal year" shall mean the fiscal year used by the City in connection
with the operation of the System
(k) The term "Government Obligations" shall mean direct obligations of the United States
of America, including obligations the principal of and interest on which are unconditionally
guaranteed by the United States of America, which may be United States Treasury obligations such
as its State and Local Government Series, and which may be in book -entry form
Section 9 PLEDGE (a) The Bonds are "Additional Bonds" as permitted by Sections 24
and 25 of the ordinance passed on March 10, 1983, authorizing the City of Denton Revenue
Refunding Bonds, Series 1983 (the "Series 1983 Bonds"), and it is hereby determined, declared, and
resolved that all of the Panty Bonds (including the Bonds) are secured and payable equally and
ratably on a panty, and that Sections 8 through 28, of this Ordinance are supplemental to and
cumulative of Sections 7 through 27 of the aforesaid ordinance passed on March 10, 1983, with
Sections 8 through 28 of this Ordinance being applicable to all of the Panty Bonds
(b) The Panty Bonds and any Additional Bonds, and the interest thereon, including any
interest coupons appertaining thereto, are and shall be secured by and payable from a first lien on and
pledge of the Pledged Revenues, and the Pledged Revenues are further pledged to the establishment
and maintenance of the Funds created by this Ordinance, and any Funds created by any ordinance
authorizing the issuance of any Additional Bonds The Panty Bonds and any Additional Bonds are
not and will not be secured by or payable from a mortgage or deed of trust on any real, personal, or
mixed properties constituting the System
Section 10 SYSTEM FUND There heretofore has been and is hereby created and there
shall be established and maintained on the books of the City, and accounted for separate and apart
from all other funds of the City, a special fund to be entitled the "City of Denton Utility System Fund"
(the "System Fund") All Gross Revenues shall be credited to the System Fund immediately upon
20
receipt, unless otherwise provided in this Ordinance All current expenses of operation and
maintenance of the System shall be paid from such Gross Revenues credited to the System Fund as
a first charge against same Before making any deposits hereinafter required to be made from the
System Fund, the City shall retain in the System Fund at all times an amount at least equal to one -
sixth of the amount budgeted for the then current fiscal year for the current operation and
maintenance expenses of the System
Section 11 INTEREST AND SINKING FUND For the sole purpose of paying the
principal of and interest on all Panty Bonds and Additional Bonds, there heretofore has been and is
hereby created and there shall be established and maintained on the books of the City, and accounted
for separate and apart from all other funds of the City, a separate fund to be entitled the "City of
Denton Utility System Revenue Bonds Interest and Sinking Fund" (the "Interest and Sinking Fund")
Section 12 RESERVE FUND There heretofore has been, and is hereby, created, and there
shall be established and maintained at Chase Bank of Texas, National Association, and hereafter, at
the option of the City, established and maintained at any time at any national bank having a capital
and surplus in excess of $25,000,000, a separate fund to be entitled the "City of Denton Utility
System Bonds and Additional Bonds Reserve Fund" (the "Reserve Fund") The Reserve Fund shall
be used to pay the principal of and interest on any Panty Bonds or Additional Bonds when and to the
extent the amounts in the Interest and Sinking Fund available for such payment are insufficient for
such purpose, and may be used for the purpose of finally retiring the last of any Panty Bonds or
Additional Bonds
Section 13 EXTENSION AND IMPROVEMENT FUND There heretofore has been and
is hereby created and there shall be established and maintained on the books of the City, and
accounted for separate and apart from all other funds of the City, a separate fund to be entitled the
"City of Denton Utility System Extension and Improvement Fund" (the "Extension and Improvement
Fund") The Extension and Improvement Fund shall be used for the purpose of paying the costs of
improvements, enlargements, extensions, additions, replacements, or other capital expenditures
related to the System, or for paying the costs of unexpected or extraordinary repairs or replacements
of the System for which System funds are not available, or for paying unexpected or extraordinary
expenses of operation and maintenance of the System for which System funds are not otherwise avail-
able, or for any other lawful purpose
Section 14 EMERGENCY FUND There is hereby created and there shall be established
and maintained on the books of the City, and accounted for separate and apart from all other funds
of the City, a separate fund to be entitled the "City of Denton Utility System Emergency Fund" (the
"Emergency Fund") The Emergency Fund shall be used for the purpose of paying unexpected or
extraordinary expenses of repair, replacement, operation, and maintenance of the System for which
neither System funds nor the moneys in the Extension and Improvement Fund are available There
was deposited in the Emergency Fund simultaneously with the delivery of the Series 1983 Bonds to
the initial purchasers thereof from lawfully available funds of the City the amount of $250,000 All
investment interest income from the Emergency Fund shall be transferred to the System Fund as
received
21
Section 15 DEPOSITS OF PLEDGED REVENUES Pledged Revenues shall be credited
to or deposited in the Interest and Sinking Fund, the Reserve Fund, the Extension and Improvement
Fund, and other funds when and as required by this Ordinance and any ordinance authorizing the
issuance of Additional Bonds
Section 16 INVESTMENTS Money in any Fund established pursuant to this Ordinance
or any ordinance authorizing the issuance of Additional Bonds, may, at the option of the City, be
placed in time deposits or certificates of deposit secured by obligations of the type hereinafter
described, or be invested in Government Obligations (as defined in Section 8 hereof) or 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 obligations of instrumentalities of the United States of America, including, but not limited
to, evidences of indebtedness issued, insured, or guaranteed by such governmental agencies as the
Federal Land Banks, Federal Intermediate Credit Banks, Banks for Cooperatives, Federal Home Loan
Banks, Government National Mortgage Association, United States Postal Service, Farmers Home
Administration, Federal Home Loan Mortgage Association, Small Business Administration, Federal
Housing Association, or Participation Certificates in the Federal Assets Financing Trust, provided that
all such deposits and investments shall be made in such manner as will, in the opinion of the City,
permit the money required to be expended from any Fund to be available at the proper time or times
as expected to be needed Such investments (except United States Treasury Obligations --State and
Local Government Series investments held in book entry form, which shall at all times be valued at
cost) shall be valued in terms of current market value as of the last day of each fiscal year Unless
otherwise set forth herein, all interest and income derived from such deposits and investments
immediately shall be credited to, and any losses debited to, the Fund from which the deposit or
investment was made, and surpluses in any Fund shall or may be disposed of as hereinafter provided
Such investments shall be sold promptly when necessary to prevent any default in connection with
the Panty Bonds or Additional Bonds consistent with the ordinances, respectively, authorizing their
issuance
Section 17 FUNDS SECURED That money in all Funds created by this Ordinance, to the
extent not invested, shall be secured in the manner prescribed by law
Section 18 PRIORITY OF DEPOSITS AND PAYMENTS FROM SYSTEM FUND That
the City shall make the deposits and payments from Pledged Revenues in the System Fund when and
as required by this Ordinance and any ordinance authorizing any Additional Bonds, and such deposits
shall be made in the following manner and with the following irrevocable priorities, respectively
First, to the Interest and Sinking Fund, when and in the amounts required by this
Ordinance and any ordinance authorizing any Additional Bonds,
Second, to the Reserve Fund, when and in the amounts required by this Ordinance and
any ordinance authorizing any Additional Bonds, and
Third, to the Extension and Improvement Fund, when and as required by Section 21
of this Ordinance
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Section 19 INTEREST AND SINKING FUND REQUIREMENTS The City shall cause
to be deposited to the credit of the Interest and Sinking Fund the accrued interest and any premium
received from the sale of the Initial Bond, and on or before the 25th day of each month, the City shall
cause to be deposited to the credit of the Interest and Sinking Fund, in approximately equal monthly
payments, amounts sufficient, together with any other funds on hand therein, to pay all of the interest
or principal and interest coming due, including the principal amount of any Panty Bonds required to
be redeemed prior to maturity pursuant to any mandatory redemption requirements, on the Panty
Bonds and any Additional Bonds on the next succeeding interest payment date Any moneys so
deposited in the Interest and Sinking Fund with respect to a mandatory redemption requirement,
together with other lawfully available funds of the City, may be used by the City, to purchase, in
advance of a mandatory redemption date and at a price not exceeding the principal amount thereof
plus accrued interest thereon to the date of purchase, Panty Bonds which would be subject to being
chosen for mandatory redemption on such mandatory redemption date The Paying Agent shall
cancel any Panty Bonds so purchased
Section 20 RESERVE FUND REQUIREMENTS There is now on hand in the Reserve
Fund an amount of money and Government Obligations which is in excess of $3,000,000 and which
is at least equal to the average annual principal and interest requirements of the outstanding Series
1987 Bonds, the Series 1988 Bonds, the Series 1989 Bonds, the Series 1992 Bonds, the Series 1993
Bonds, the Series 1993-A Bonds, the Taxable Series 1993-B Bonds, the Series 1996 Bonds and the
Series 1996-A Bonds (the current "Required Reserve Amount") Following the issuance and delivery
of the Initial Bonds the Required Reserve Amount shall become and be an amount of money and
investments equal to the average annual principal and interest requirements of all the outstanding
Panty Bonds and Additional Bonds, provided further, however, that the Required Reserve Amount
shall never be less than $3,000,000 if the maximum annual principal and interest requirements on all
outstanding Panty Bonds and Additional Bonds exceeds $3,000,000 Immediately after the issuance
and delivery of the Initial Bond there shall be deposited to the credit of the Reserve Fund, from the
proceeds of the sale of the Initial Bond, money sufficient to cause the Reserve Fund to contain an
aggregate amount of money and investments equal to the Required Reserve Amount for all then out-
standing Parity Bonds After the delivery of any future Additional Bonds the City shall cause the
Reserve Fund to be increased, if and to the extent necessary, so that such Fund will contain an
amount of money and investments equal to the Required Reserve Amount Any increase in the
Required Reserve Amount may be funded from Pledged Revenues, or from proceeds from the sale
of any Additional Bonds, or any other available source or combination of sources All or any part
of the Required Reserve Amount not funded initially and immediately after the delivery of any
installment or issue of Additional Bonds shall be funded, within not more than five years from the date
of such delivery, by deposits of Pledged Revenues in approximately equal monthly installments on
or before the 25th day of each month Principal amounts of the Panty Bonds and any Additional
Bonds wluch must be redeemed pursuant to any applicable mandatory redemption requirements shall
be deemed to be maturing amounts of principal for the purpose of calculating principal and interest
requirements on such bonds When and so long as the amount in the Reserve Fund is not less than
the Required Reserve Amount no deposits shall be made to the credit of the Reserve Fund, but when
and if the Reserve Fund at any time contains less than the Required Reserve Amount, then the City
shall transfer from Pledged Revenues in the System Fund, and deposit to the credit of the Reserve
Fund, monthly on or before the 25th day of each month, a sum equal to 1/60th of the Required
Reserve Amount, until the Reserve Fund is restored to the Required Reserve Amount The City
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specifically covenants that when and so long as the Reserve Fund contains the Required Reserve
Amount, the City shall cause all amounts in excess of the Required Reserve Amount to be deposited
to the credit of the Interest and Sinking Fund
Section 21 EXTENSION AND IMPROVEMENT FUND REQUIREMENTS During each
year, subject and subordinate to making the required deposits to the credit of the Interest and Sinking
Fund and the Reserve Fund, the City shall be required to deposit to the credit of the Extension and
Improvement Fund, from Pledged Revenues in the System Fund, an amount equal to 8% of the
"Adjusted Gross Revenues of the System", which term is hereby defined to mean the following
the Gross Revenues of the System for such year after deducting from such Gross
Revenues an amount equal to the current expenses of operation and maintenance of
the System for such year winch are directly attributable to (i) all fuel costs related to
the production of electric energy by the City and/or (n) the purchase of electric energy
by the City
Additional excess Pledged Revenues may, at the option of the City Council, be deposited to the credit
of the Improvement Fund as permitted by Section 22 (b) hereof, but no such additional deposit is
required All investment interest income from the Extension and Improvement Fund shall be retained
in and remain a part of such Fund
Section 22 DEFICIENCIES, EXCESS PLEDGED REVENUES (a) If on any occasion
there shall not be sufficient Pledged Revenues to make the required deposits into the Interest and
Sinking Fund or the Reserve Fund, such deficiency shall be made up as soon as possible from the next
available Pledged Revenues
(b) Subject to making the required deposits to the credit of the various Funds when and as
required by this Ordinance or any ordinance authorizing the issuance of Additional Bonds, any surplus
Pledged Revenues may be used by the City for any lawful purpose
Section 23 PAYMENT OF PARITY BONDS AND ADDITIONAL BONDS On or before
June 1, 1998, and semiannually on or before each June 1 and December 1 thereafter wlule any of the
Parity Bonds or Additional Bonds are outstanding and unpaid the City shall make available to the
Paying Agents therefor, out of the Interest and Sinking Fund, or if necessary, out of the Reserve
Fund, money sufficient to pay, on each of such dates, the principal of and interest on the Panty Bonds
and Additional Bonds as the same matures and comes due, or to redeem the Panty Bonds or
Additional Bonds prior to maturity, either upon mandatory redemption or at the option of the City
At the direction of the City the Paying Agents shall either deliver paid Panty Bonds and Additional
Bonds, and any interest coupons appertaining thereto, to the City or destroy all paid Panty Bonds and
Additional Bonds, and any coupons appertaining thereto, and funush the City with an appropriate
certificate of cancellation or destruction
Section 24 FINAL DEPOSITS (a) Any Panty Bond or Additional Bond shall be deemed
to be paid, retired, and no longer outstanding within the meaning of this Ordinance when payment
of the principal of, redemption premium, if any, on such Panty Bond or Additional Bond, plus interest
thereon to the due date thereof (whether such due date be by reason of maturity, upon redemption,
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or otherwise) either (i) shall have been made or caused to be made in accordance with the terms
thereof (including the giving of any required notice of redemption or provision for the proper giving
of such nonce having been made), or (n) shall have been provided by irrevocably depositing with or
making available to a Paying Agent therefor, in trust and irrevocably set aside exclusively for such
payment, (1) money sufficient to make such payment or (2) Government Obligations winch mature
as to principal and interest in such amounts and at such times as will insure the availability, without
reinvestment, of sufficient money to make such payment, and all necessary and proper fees,
compensation, and expenses of such Paying Agent pertaining to the Panty Bonds and Additional
Bonds with respect to which such deposit is made shall have been paid or the payment thereof
provided for to the satisfaction of such paying agent At such time as a Bond or Additional Bond
shall be deemed to be paid hereunder, as aforesaid, it shall no longer be secured by or entitled to the
benefits of this Ordinance or a lien on and pledge of the Pledged Revenues, and shall be entitled to
payment solely from such money or Government Obligations
(b) Any moneys so deposited with a paying agent may at the direction of the City also be
invested in Government Obligations, maturing in the amounts and times as herembefore set forth, and
all income from all Government Obligations in the hands of the paying agent pursuant to this Section
which is not required for the payment of the Panty Bonds and Additional Bonds, the redemption
premium, if any, and interest thereon, with respect to wluch such money has been so deposited, shall
be turned over to the City or deposited as directed. by the City
Section 25 ADDITIONAL BONDS (a) The City shall have the right and power at any
time and from time to time, and in one or more series or issues, to authorize, issue, and deliver
additional panty revenue bonds (herein called "Additional Bonds"), in accordance with law, in any
amounts, for any lawful purpose, including the refunding of any Panty Bonds or Additional Bonds,
or other obligations Such Additional Bonds, if and when authorized, issued, and delivered in
accordance with this Ordinance, shall be payable from and secured by an irrevocable first lien on and
pledge of the Pledged Revenues, equally and ratably on a panty in all respects with the Panty Bonds
and any other outstanding Additional Bonds
(b) The principal of all Additional Bonds must be scheduled to be paid or mature on
December 1 of the years in which such principal is scheduled to be paid or mature
Section 26 FURTHER REQUIREMENTS FOR ADDITIONAL BONDS Additional
Bonds shall be issued only in accordance with this Ordinance, and no installment, Series, or issue of
Additional Bonds shall be issued or delivered unless
(a) The Mayor of the City and the City Secretary sign a written certificate to the effect that
the City is not in default as to any covenant, condition, or obligation in connection with all then
outstanding Panty Bonds and Additional Bonds, and the ordinances authorizing same, and that the
Interest and Smking Fund and the Reserve Fund each contains the amount then required to be therein
(b) An independent certified public accountant, or independent firm of certified public
accountants, acting by and through a certified public accountant, signs a written certificate to the
effect that, in ins or its opinion, during either the next preceding fiscal year, or any twelve consecutive
calendar month period out of the 18-month period immediately preceding the month in which the
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ordinance authorizing the issuance of the then proposed Additional Bonds is passed, the Pledged
Revenues were at least (1)125 times an amount equal to the average annual principal and interest
requirements, and (n) 1 10 times an amount equal to the principal and interest requirements during
the fiscal year during which such requirements are scheduled to be the greatest, of all Panty Bonds
and Additional Bonds which are scheduled to be outstanding after the delivery of the then proposed
Additional Bonds It is specifically provided, however, that in calculating the amount of Pledged
Revenues for the purposes of this subsection (b), if there has been any increase in the rates or charges
for services of the System which is then to effect, but which was not in effect during all or any part
of the entire period for which the Pledged Revenues are being calculated (hereinafter referred to as
the "entire period") then the certified public accountant, or in lieu of the certified public accountant
a firm of consulting engineers, shall determine and certify the amount of Pledged Revenues as being
the total of (i) the actual Pledged Revenues for the entire period, plus (n) a sum equal to the
aggregate amount by which the actual billings to customers of the System during the entire period
would have been increased if such increased rates or charges had been in effect during the entire
period
(c) Provision shall be made in the ordinance authorizing their issuance for increasing the
Reserve Fund to the Required Reserve Amount as required by Section 20 hereof
(d) All calculations of average annual principal and interest requirements of any bonds
made in connection with the issuance of any then proposed Additional Bonds shall be made as of the
date of such Additional Bonds, and also to making calculations for such purpose, and for any other
purpose under this Ordinance, principal amounts of any bonds which must be redeemed prior to
maturity pursuant to any applicable mandatory redemption requirements shall be deemed to be
maturing amounts of principal of such bonds
Section 27 GENERAL COVENANTS The City further covenants and agrees that in
accordance with and to the extent required or permitted by law
(a) Performance It will faithfully perform at all times any and all covenants, undertakings,
stipulations, and provisions contained in this Ordinance, and each ordinance authorizing the issuance
of Additional Bonds, and in each and every Panty Bond and Additional Bond, that it will promptly
pay or cause to be paid the principal of and interest on every Panty Bond and Additional Bond, on
the dates and in the places and manner prescribed in such ordinances and Panty Bonds or Additional
Bonds, and that it will, at the times and to the manner prescribed, deposit or cause to be deposited
the amounts required to be deposited into the Interest and Sinking Fund and the Reserve Fund, and
any holder of the Panty Bonds or Additional Bonds may require the City, its officials, and employees,
to carry out, respect, or enforce the covenants and obligations of this Ordinance, or any ordinance
authorizing the issuance of Additional Bonds, by all legal and equitable means, including specifically,
but without limitation, the use and filing of mandamus proceedings, in any court of competent
jurisdiction, against the City, its officials, and employees
(b) s Legal Authority The City is a duly created and existing home rule city of the State
of Texas, and is duly authorized under the laws of the State of Texas to create and issue the Panty
Bonds and Additional Bonds, that all action on its part for the creation and issuance of the said
obligations has been or will be duly and effectively taken, and that said obligations in the hands of the
26
holders and owners thereof are and will be valid and enforceable special obligations of the City in
accordance with their terms
(c) Title The City has or will obtain lawful title to the lands, buildings, structures, and
facilities constituting the System, that it warrants that it will defend the title to all the aforesaid lands,
buildings, structures, and facilities, and every part thereof, for the benefit of the holders and owners
of the Panty Bonds and Additional Bonds, against the claims and demands of all persons whomso-
ever, that it is lawfully qualified to pledge the Pledged Revenues to the payment of the Panty Bonds
and Additional Bonds in the manner prescribed herein, and has lawfully exercised such rights
(d) Liens The City will from time to time and before the same become delinquent pay and
discharge all taxes, assessments, and governmental charges, if any, which shall be lawfully imposed
upon it, or the System, that it will pay all lawful claims for rents, royalties, labor, materials, and
supplies which if unpaid aught by law become a hen or charge thereon, the lien of which would be
prior to or interfere with the hens hereof, so that the priority of the hens granted hereunder shall be
fully preserved in the manner provided herein, and that it will not create or suffer to be created any
mechanic's, laborer's, matenalman's, or other hen or charge which might or could be prior to the liens
hereof, or do or suffer any matter or thing whereby the hens hereof might or could be impaired,
provided, however, that no such tax, assessment, or charge, and that no such claims which right be
used as the basis of a mechanic's, laborer's, matenalman's, or other hen or charge, shall be required
to be paid so long as the validity of the same shall be contested in good faith by the City
(e) gperation of System. No Free Service While the Panty Bonds or any Additional Bonds
are outstanding and unpaid the City shall continuously and efficiently operate the System, and shall
maintain the System in good condition, repair, and working order, all at reasonable cost No free
service of the System shall be allowed, and should the City or any of its agencies, instrumentalities,
lessors, or concessionaires make use of the services and facilities of the System, payment monthly of
the standard retail price of the services provided shall be made by the City or any of its agencies,
instrumentalities, lessors, or concessionaires out of funds from sources other than the revenues of the
System, unless made from surplus Pledged Revenues as permitted by Section 22(b) hereof
(f) Further Encumbrance While the Panty Bonds or any Additional Bonds are outstanding
and unpaid, the City shall not additionally encumber the Pledged Revenues in any manner, except as
permitted in this Ordinance in connection with Additional Bonds, unless said encumbrance is made
junior and subordinate in all respects to the liens, pledges, covenants, and agreements of this
Ordinance and any ordinance authorizing the issuance of Additional Bonds, but the right of the City
to issue revenue bonds payable from a subordinate lien on surplus Pledged Revenues is specifically
recognized and retained, as permitted under Section 22(b) hereof)
(g) Sale or Disposal of Property While the Panty Bonds or any Additional Bonds are
outstanding and unpaid, the City shall not sell, convey, mortgage, encumber, lease, or in any manner
transfer title to, or dedicate to other use, or otherwise dispose of, the System, or any sigmficant or
substantial part thereof, provided that whenever the City deems it necessary to dispose of any
property, machinery, fixtures, or equipment, or dedicate such property to other use, it may do so
either when it has made arrangements to replace the same or provide substitutes therefor, or it is
determined by resolution of the City Council that no such replacement or substitute is necessary
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(h) Insurance (1) The City shall cause to be insured such parts of the System as would
usually be insured by corporations operating like properties, with a responsible insurance company
or companies, against risks, accidents, or casualties against which and to the extent insurance is
usually earned by corporations operating like properties, including, to the extent reasonably
obtainable, fire and extended coverage insurance, insurance against damage by floods, and use and
occupancy insurance Public liability and property damage insurance also shall be earned unless the
City Attorney gives a written opinion to the effect that the City is not liable for claims which would
be protected by such insurance All insurance premiums shall be paid as an expense of operation of
the System At any time while any contractor engaged in construction work shall be fully responsible
therefor, the City shall not be required to carry insurance on the work being constructed if the
contractor is required to carry appropriate insurance All such policies shall be open to the inspection
of the Bondholders and their representatives at all reasonable times Upon the happening of any loss
or damage covered by insurance from one or more of said causes, the City shall make due proof of
loss and shall do all things necessary or desirable to cause the insuring companies to make payment
in full directly to the City The proceeds of insurance covering such property, together with any other
funds necessary and available for such purpose, shall be used forthwith by the City for repairing the
property damaged or replacing the property destroyed, provided, however, that if said insurance
proceeds and other funds are insufficient for such purpose, then said insurance proceeds pertaining
to the System shall be deposited in a special and separate trust fund, at an official depository of the
City, to be designated the Insurance Account The Insurance Account shall be held until such time
as other funds become available winch, together with the Insurance Account, will be sufficient to
make the repairs or replacements originally required
(2) The annual audit hereinafter required may contain a section commenting on whether or
not the City has complied with the requirements of this Section with respect to the maintenance of
insurance, and shall state whether or not all insurance premiums upon the insurance policies to which
reference is made have been paid
(i) Annual Budget and Rate Covenant The City shall prepare, prior to the beginning of each
fiscal year, an annual budget, in accordance with law, reflecting an estimate of cash receipts and
disbursements for the ensuing fiscal year in sufficient detail to indicate the probable Gross Revenues
and Pledged Revenues for such fiscal year The City shall fix, establish, maintain, and collect, such
rates, charges, and fees for the use and availability of the System at all times as are necessary (1) to
produce Gross Revenues sufficient, together with any other Pledged Revenues, to pay all current
operation and maintenance expenses of the System, and (2) to produce an amount of Pledged
Revenues during each fiscal year at least equal to the greater of 125 times the average annual
principal and interest requirements of all then outstanding Panty Bonds and Additional Bonds or 125
times the succeeding fiscal year's principal and interest requirements of all then outstanding Panty
Bonds and Additional Bonds
Q) Records The City shall keep proper books of record and account in which full, true,
proper, and correct entries will be made of all dealings, activities, and transactions relating to the
System, the Pledged Revenues, and the Funds created pursuant to this Ordinance, and all books,
documents, and vouchers relating thereto shall at all reasonable tunes be made available for inspection
upon request of any Bondholder or citizen of the City To the extent consistent with the provisions
of this Ordinance, the City shall keep its books and records in a manner conforming to standard
28
accounting practices as usually would be followed by pnvate corporations owning and operating a
similar System, with appropriate recognition being given to essential differences between municipal
and corporate accounting practices
(k) Audits After the close of each fiscal year while any of the Panty Bonds or any Additional
Bonds are outstanding, an audit will be made of the books and accounts relating to the System and
the Pledged Revenues by an independent certified public accountant or an independent firm of
certified public accountants As soon as practicable after the close of each such year, and when said
audit has been completed and made available to the City, a copy of such audit for the preceding year
shall be mailed to the Municipal Advisory Council of Texas, to each paying agent for any bonds
payable from Pledged Revenues, and to any Bondholders who shall so request in writing The annual
audit reports shall be open to the inspection of the Bondholders and their agents and representatives
at all reasonable times
(1) Governmental Agencies It will comply with all of the terms and conditions of any and
all franchises, permits, and authorizations applicable to or necessary with respect to the System, and
which have been obtained from any governmental agency, and the City has or will obtain and keep
in full force and effect all franchises, perrmts, authorization, and other requirements applicable to or
necessary with respect to the acquisition, construction, equipment, operation, and maintenance of the
System
(m) No Com eti�tion It will not operate, or grant any franchise or, to the extent it legally
may, permit the acquisition, construction, or operation of, any facilities which would be in
competition with the System, and to the extent that it legally may, the City will prohibit any such
competing facilities
(n) No Arbitrage The City covenants to and with the purchasers of the Panty Bonds and
any Additional Bonds that no use will be made of the proceeds of any of such bonds at any time
throughout the term of any of such bonds which, if such use had been reasonably expected on the
date of delivery of any of such bonds to and payment therefor by the purchasers, would have caused
any of such bonds to be arbitrage bonds within the meaning of Section 148 of the Internal Revenue
Code of 1986, as amended (the "Code"), or any regulations or rulings pertaining thereto, and by this
covenant the City is obligated to comply with the requirements of the aforesaid Code and all
applicable and pertinent Department of the Treasury regulations relating to arbitrage bonds The City
further covenants that the proceeds of all such bonds will not otherwise be used directly or indirectly
so as to cause all or any part of such bonds to be or become arbitrage bonds within the meaning of
the aforesaid Code, or any regulations pertaining thereto
Section 28 AMENDMENT OF ORDINANCE (a) The holders or owners of Panty Bonds
and Additional Bonds aggregating in principal amount 51% of the aggregate principal amount of then
outstanding Panty Bonds and Additional Bonds shall have the right from time to time to approve any
amendment to this Ordinance which may be deemed necessary or desirable by the City, provided,
however, that nothing herem contained shall permit or be construed to permit the amendment of the
terms and conditions in this Ordinance or in the Panty Bonds or Additional Bonds so as to
(1) Make any change in the maturity of the outstanding Panty Bonds or Additional Bonds,
KI
(2) Reduce the rate of interest bome by any of the outstanding Panty Bonds or Additional
Bonds,
(3) Reduce the amount of the principal payable on the outstanding Panty Bonds or
Additional Bonds,
(4) Modify the terms of payment of principal of or interest on the outstanding Panty
Bonds or Additional Bonds, or impose any conditions with respect to such payment,
(5) Affect the rights of the holders or owners of less than all of the Panty Bonds and
Additional Bonds then outstanding,
(6) Change the nummum percentage of the principal amount of Panty Bonds and
Additional Bonds necessary for consent to such amendment
(b) If at any time the City shall desire to amend the Ordinance under this Section, the City
shall cause notice of the proposed amendment to be published in a financial publication of general
circulation in The City of New York, New York, once during each calendar week for at least two
successive calendar weeks Such notice shall briefly set forth the nature of the proposed amendment
and shall state that a copy thereof is on file at the principal office of the Paying Agents for inspection
by all holders or owners of Panty Bonds and Additional Bonds Such publication is not required,
however, if notice in writing is given to each holder or owner of Panty Bonds and Additional Bonds
(c) Whenever at any time not less than thirty days, and within one year, from the date of the
first publication of said notice or other service of written notice the City shall receive an instrument
or instruments executed by the holders or owners of at least 51% in aggregate principal amount of all
Panty Bonds and Additional Bonds then outstanding, which instrument or instruments shall refer to
the proposed amendment described in said notice and which specifically consent to and approve such
amendment in substantially the form of the copy thereof on file with the Paying Agents, the City
Council may pass the amendatory ordinance in substantially the same form
(d) Upon the passage of any amendatory ordinance pursuant to the provisions of this Section,
this Ordinance shall be deemed to be amended in accordance with such amendatory ordinance, and
the respective rights, duties, and obligations under this Ordinance of the City, and all the holders or
owners of then outstanding Panty Bonds and Additional Bonds and all future Panty Bonds and
Additional Bonds shall thereafter be determined, exercised, and enforced hereunder, subject in all
respects to such amendments
(e) Any consent given by the holder or owner of a Panty Bond or Additional Bond pursuant
to the provisions of this Section shall be irrevocable for a period of six months from the date of the
first publication of the notice provided for in this Section, and shall be conclusive and binding upon
all future holders or owners of the same Panty Bond or Additional Bond during such period Such
consent may be revoked at any time after six months from the date of the first publication of such
notice by the holder or owner who gave such consent, or by a successor in title, by filing notice
thereof with the paying agents and the City, but such revocation shall not be effective if the holders
or owners of 51% in aggregate principal amount of the then outstanding Panty Bonds and Additional
30
Bonds as in this Section defined have, prior to the attempted revocation, consented to, and approved
the amendment
(f) For the purpose of this Section, the fact of the holding of Panty Bonds or Additional
Bonds which are in bearer, coupon form, by any bondholder and the amount and numbers of such
bearer Parity Bonds or Additional Bonds and the date of their holding same, may be proved by the
affidavit of the person claiming to be such holder or owner, or by a certificate executed by any trust
company, bank, banker, or any other depository wherever situated showing that at the date therein
mentioned such person had on deposit with such trust company, bank, banker, or other depository,
the Panty Bonds and Additional Bonds described in such certificate The City may conclusively
assume that such ownership continues until written notice to the contrary is served upon the City
The ownership of all registered Panty Bonds and Additional Bonds shall be determined from the
registration books kept by the registrar therefor
Section 29 DAMAGED, MUTILATED, LOST, STOLEN, OR DESTROYED BONDS
(a) Rfe lacement Bonds In the event any outstanding Bond is damaged, mutilated, lost, stolen, or
destroyed, the Paying Agent/Registrar shall cause to be printed, executed, and delivered, a new bond
of the same principal amount, maturity, and interest rate, as the damaged, mutilated, lost, stolen, or
destroyed Bond, in replacement for such Bond in the manner hereinafter provided
(b) Application for Replacement Bonds Application for replacement of damaged, mutilated,
lost, stolen, or destroyed Bonds shall be made by the registered owner thereof to the Paying
Agent/Registrar In every case of loss, theft, or destruction of a Bond, the registered owner applying
for a replacement bond shall famish to the Issuer and to the Paying Agent/Registrar such security or
indemnity as may be required by them to save each of them harmless from any loss or damage with
respect thereto Also, in every case of loss, theft, or destruction of a Bond, the registered owner shall
furnish to the Issuer and to the Paying Agent/Registrar evidence to their satisfaction of the loss, theft,
or destruction of such Bond, as the case may be In every case of damage or mutilation of a Bond,
the registered owner shall surrender to the Paying Agent/Registrar for cancellation the Bond so
damaged or mutilated
(c) No Default Occurred Notwithstanding the foregoing provisions of this Section, in the
event any such Bond shall have matured, and no default has occurred which is then continuing in the
payment of the principal of, redemption premium, if any, or interest on the Bond, the Issuer may
authorize the payment of the same (without surrender thereof except in the case of a damaged or
mutilated Bond) instead of issuing a replacement Bond, provided security or indemnity is furnished
as above provided in this Section
(d) Charge for Issuing Replacement Bonds Prior to the issuance of any replacement bond,
the Paying Agent/Registrar shall charge the registered owner of such Bond with all legal, printing,
and other expenses in connection therewith Every replacement bond issued pursuant to the
provisions of this Section by virtue of the fact that any Bond is lost, stolen, or destroyed shall
constitute a contractual obligation of the Issuer whether or not the lost, stolen, or destroyed Bond
shall be found at any tune, or be enforceable by anyone, and shall be entitled to all the benefits of this
Ordinance equally and proportionately with any and all other Bonds duly issued under this Ordinance
31
(e) Authority for Issuing Replacement Bonds In accordance with Section 6 of Vernon's
Ann Tex Civ St Art 717k-6, this Section of this Ordinance shall constitute authority for the
issuance of any such replacement bond without necessity of further action by the governing body of
the Issuer or any other body or person, and the duty of the replacement of such bonds is hereby
authorized and imposed upon the Paying Agent/Registrar, and the Paying Agent/Registrar shall
authenticate and deliver such Bonds in the form and manner and with the effect, as provided in
Section 6(d) of this Ordinance for Bonds issued in conversion and exchange for other Bonds
Section 30 COVENANTS REGARDING TAX -EXEMPTION The Issuer covenants to
refrain from any action which would adversely affect, and to take such action to ensure, the treatment
of the Bonds as obligations described in section 103 of the Code, the interest on which is not
includable in the "gross income" of the holder for purposes of federal income taxation In furtherance
thereof, the Issuer covenants as follows
(a) to take any action to assure that no more than 10 percent of the proceeds of
the Bonds (less amounts deposited to a reserve fund, if any) are used for any "private business
use", as defined in section 141(b)(6) of the Code or, if more than 10 percent of the proceeds
are so used, that amounts, whether or not received by the Issuer, with respect to such private
business use, do not, under the terms of this Ordinance or any underlying arrangement,
directly or indirectly, secure or provide for the payment of more than 10 percent of the debt
service on the Bonds, in contravention of section 141(b)(2) of the Code,
(b) to take any action to assure that in the event that the "private business use"
described in subsection (a) hereof exceeds 5 percent of the proceeds of the Bonds (less
amounts deposited into a reserve fund, if any) then the amount in excess of 5 percent is used
for a "private business use" which is "related" and not "disproportionate", within the meaning
of section 141(b)(3) of the Code, to the governmental use,
(c) to take any action to assure that no amount which is greater than the lesser of
$5,000,000, or 5 percent of the proceeds of the Bonds (less amounts deposited into a reserve
fund, if any) is directly or indirectly used to finance loans to persons, other than state or local
governmental units, in contravention of section 141(c) of the Code,
(d) to refrain from taking any action winch would otherwise result in the Bonds
being treated as "private activity bonds" within the meaning of section 141(b) of the Code,
(e) to refrain from taking any action that would result in the Bonds being
"federally guaranteed" within the meaning of section 149(b) of the Code,
(f) to refrain from using any portion of the proceeds of the Bonds, directly or
indirectly, to acquire or to replace funds which were used, directly or indirectly, to acquire
investment property (as defined in section 148(b)(2) of the Code) which produces a materially
higher yield over the term of the Bonds, other than investment property acquired with --
IPA
(1) proceeds of the Bonds invested for a reasonable temporary period of
3 years or less until such proceeds are needed for the purpose for which the Bonds are
issued,
(2) amounts invested in a bona fide debt service fund, within the meaning
of section 1 148-1(b) of the Treasury Regulations, and
(3) amounts deposited in any reasonably required reserve or replacement
fund to the extent such amounts do not exceed 10 percent of the stated principal
amount (or, in the case of a discount, the issue price) of the Bonds,
(g) to otherwise restrict the use of the proceeds of the Bonds or amounts treated
as proceeds of the Bonds, as may be necessary, so that the Bonds do not otherwise
contravene the requirements of section 148 of the Code (relating to arbitrage), Section 149(g)
of the Code (relating to hedge bonds), and, to the extent applicable, section 149(d) of the
Code (relating to advance refundings), and
(h) to pay to the United States of America at least once during each five-year
period (beginning on the date of delivery of the Bonds) an amount that is at least equal to 90
percent of the "Excess Earnings", within the meaning of section 148(f) of the Code and to pay
to the United States of America, not later that 60 days after the Bonds have been paid in full,
100 percent of the amount then required to be paid as a result of Excess Earnings under
section 148(f) of the Code
The Issuer understands that the term "proceeds" includes "disposition proceeds" as defined
in the Treasury Regulations and, in the case of refunding bonds, transferred proceeds (if any) and
proceeds of the refunded bonds expended prior to the date of issuance of the Bonds It is the
understanding of the Issuer that the covenants contained herein are intended to assure compliance
with the Code and any regulations or rulings promulgated by the U S Department of the Treasury
pursuant thereto In the event that regulations or rulings are hereafter promulgated which modify,
or expand provisions of the Code, as applicable to the Bonds, the Issuer will not be required to
comply with any covenant contained herein to the extent that such failure to comply, in the opinion
of nationally -recognized bond counsel, will not adversely affect the exemption from federal income
taxation of interest on the Bonds under section 103 of the Code In the event that regulations or
rulings are hereafter promulgated which impose additional requirements which are applicable to the
Bonds, the Issuer agrees to comply with the additional requirements to the extent necessary and
reasonably, possible, in the opinion of nationally -recognized bond counsel, to preserve the exemption
from federal income taxation of interest on the Bonds under section 103 of the Code In furtherance
of such intention, the Issuer hereby authorizes and directs the Mayor to execute any documents,
certificates or reports required by the Code and to make such elections, on behalf of the Issuer, which
maybe permitted by the Code as are consistent with the purpose for the issuance of the Bonds The
Issuer covenants to comply with the covenants contained in this section after defeasance of the
Bonds
33
In order to facilitate compliance with the above covenant (h), a "Rebate Fund" is hereby
established by the Issuer for the sole benefit of the United States of America, and such fund shall not
be subject to the claim of any other person, including without limitation, the owners of the
Certificates The Rebate Fund is established for the additional purpose of compliance with Section
148 of the Code
Section 31 ALLOCATION OF, AND LIMITATION ON, EXPENDITURES FOR THE
PROJECT The Issuer covenants to account for the expenditure of sale proceeds and investment
earnings to be used for the purposes described in Section 1 of this Ordinance (the "Project") on its
books and records by allocating proceeds to expenditures within 18 months of the later of the date
that (1) the expenditure is made, or (2) the Project is completed The foregoing notwithstanding, the
Issuer shall not expend sale proceeds or investment earnings thereon more than 60 days after the
earlier of (1) the fifth anniversary of the delivery of the Bonds, or (2) the date the Bonds are retired,
unless the Issuer obtains an opinion of nationally -recognized bond counsel that such expenditure will
not adversely affect the tax-exempt status of the Bonds For purposes hereof, the Issuer shall not be
obligated to comply with this covenant if it obtains an opinion that such failure to comply will not
adversely affect the excludability for federal income tax purposes from gross income of the interest
Section 32 DISPOSITION OF PROJECT The Issuer covenants that the property
constituting the Project will not be sold or otherwise disposed in a transaction resulting in the receipt
by the Issuer of cash or other compensation, unless the Issuer obtains an opinion of nationally -
recognized bond counsel that such sale or other disposition will not adversely affect the tax-exempt
status of the Bonds
Section 33 INTEREST EARNINGS ON BOND PROCEEDS Interest earnings derived
from the investment of proceeds from the sale of the Initial Bond, other than proceeds deposited in
the Interest and Sinking Fund and the Reserve Fund, shall be used along with other available proceeds
for improving the System, provided that after completion of the improvements if any of such interest
earnings remain on hand, such interest earnings shall be deposited in the Interest and Sinking Fund
It is further provided, however, that any interest earrings on bond proceeds which are required to be
rebated to the United States of America pursuant to the Covenants Regarding Tax -Exemption herein
so as to prevent the Bonds from being arbitrage bonds shall be so rebated and not considered as
interest earnings for the purposes of this Ordinance
Section 34 CUSTODY, APPROVAL, AND REGISTRATION OF BONDS, BOND
COUNSEL'S OPINION, CUSIP NUMBERS, PREAMBLE, AND INSURANCE The Mayor of
the Issuer is hereby authorized to have control of each Initial Bond issued hereunder and all necessary
records and proceedings pertaimng to each Initial Bond pending its delivery and its investigation,
examination, and approval by the Attorney General of the State of Texas, and its registration by the
Comptroller of Public Accounts of the State of Texas Upon registration of each Initial Bond said
Comptroller of Public Accounts (or a deputy designated in writing to act for said Comptroller) shall
manually sign the Comptroller's Registration Certificate on such Initial Bond, and the seal of said
Comptroller shall be impressed, or placed in facsimile, on such Initial Bond The approving legal
opinion of the Issuer's Bond Counsel and the assigned CUSIP numbers may, at the option of the
Issuer, be printed on each Initial Bond or on any Bonds issued and delivered in conversion of and
exchange or replacement of any Bond, but neither shall have any legal effect, and shall be solely for
34
the convenience and information of the registered owners of the Bonds The preamble to this
Ordinance is hereby adopted and made a part hereof for all purposes If insurance is obtained on any
of the Bonds, the respective Initial Bond and all other Bonds shall bear an appropriate legend
concerning insurance as provided by the insurer
Section 35 SALE OF INITIAL BONDS The Initial Bond is hereby sold and shall be
delivered to DEAN WITTER REYNOLDS, for cash for the par value thereof and accrued interest
thereon to date of delivery, plus a premium of $-0- It is hereby officially found, determined, and
declared that the Initial Bond has been sold at public sale to the bidder offering the lowest interest
cost, after receiving sealed bids pursuant to an Official Notice of Sale and Bidding Instructions and
Official Statement dated March 10, 1998, prepared and distributed in connection with the sale of the
Initial Bond Said Official Notice of Sale and Bidding Instructions and Official Statement, and any
addenda, supplement, or amendment thereto have been and are hereby approved by the Issuer, and
their use in the offer and sale of the Bonds is hereby approved It is further officially found,
determined, and declared that the statements and representations contained in said Official Notice of
Sale and Official Statement are true and correct in all material respects
Section 36 DTC REGISTRATION The Bonds initially shall be issued and delivered in such
manner that no physical distribution of the Bonds will be made to the public, and The Depository
Trust Company ("DTC"), New York, New York, initially will act as depository for the Bonds DTC
has represented that it is a limited purpose trust company incorporated under the laws of the State
of New York, a member of the Federal Reserve System, a "clearing corporation" within the meaning
of the New York Uniform Commercial Code, and a 'blearing agency" registered under Section 17A
of the federal Securities Exchange Act of 1934, as amended, and the Issuer accepts, but in no way
venfies, such representations The Initial Bond authorized by this Ordinance shall be delivered to and
registered in the name of the Purchaser However, it is a condition of delivery and sale that the
Purchaser, immediately after such delivery, shall cause the Paying Agent/Registrar, as provided for
in this Ordinance, to cancel said Initial Bond and deliver in exchange therefor a substitute Bond for
each maturity of such Initial Bond, with each such substitute Bond to be registered in the name of
CEDE & CO , the nominee of DTC, and it shall be the duty of the Paying Agent/Registrar to take
such action It is expected that DTC will hold the Bonds on behalf of the Purchaser and/or the DTC
Participants, as defined and described in the Official Statement referred to and approved in Section
33 hereof (the 'DTC Participants") So long as each Bond is registered in the name of CEDE & CO,
the Paying Agent/Registrar shall treat and deal with DTC in all respects the same as if it were the
actual and beneficial owner thereof It is expected that DTC will maintain a book entry system which
will identify beneficial ownership of the Bonds by DTC Participants in integral amounts of $5,000,
with transfers of ownership being effected on the records of DTC and the DTC Participants pursuant
to rules and regulations established by them, and that the substitute Bonds initially deposited with
DTC shall be immobilized and not be further exchanged for substitute Bonds except as hereinafter
provided The Issuer is not responsible or liable for any functions of DTC, will not be responsible
for paying any fees or charges with respect to its services, will not be responsible or liable for
maintaining, supervising, or reviewing the records of DTC or the DTC Participants, or protecting any
interests or rights of the beneficial owners of the Bonds It shall be the duty of the Purchaser and the
DTC Participants to make all arrangements with DTC to establish this book -entry system, the
beneficial ownership of the Bonds, and the method of paying the fees and charges of DTC The
Issuer does not represent, nor does it in any way covenant that the initial book -entry system
35
established with DTC will be maintained in the future The Issuer reserves the right and option at any
time in the future, in its sole discretion, to terminate the DTC (CEDE & CO ) book -entry only regis-
tration requirement described above, and to permit the Bonds to be registered in the name of any
owner If the Issuer exercises its tight and option to terminate such requirement, it shall give written
notice of such ternunation to the Paying Agent/Registrar and to DTC, and thereafter the Paying
Agent/Registrar shall, upon presentation and proper request, register any Bond in any name as
provided for in this Ordinance Notwithstanding the initial establishment of the foregoing book -entry
system with DTC, if for any reason any of the originally delivered substitute Bonds is duly filed with
the Paying Agent/Registrar with proper request for transfer and substitution, as provided for in this
Ordinance, substitute Bonds will be duly delivered as provided in tlus Ordinance, and there will be
no assurance or representation that any book -entry system will be maintained for such Bonds
Section 37 COMPLIANCE WITH RULE 15c2-12 (a) Annual Reports (i) The Issuer
shall provide annually to each NRMSIR and any SID, within six months after the end of each fiscal
year ending in or after 1996, financial information and operating data with respect to the Issuer of the
general type included in the final Official Statement authorized by Section 35 of this Ordinance, being
the information described in Exhibit A hereto, which Exhibit is attached to and incorporated in this
Ordinance as if written word for word herem Any financial statements so to be provided shall be (1)
prepared in accordance with the accounting principles described in Exhibit A hereto, or such other
accounting principles as the Issuer may be required to employ from time to time pursuant to state law
or regulation, and (2) audited, if the Issuer comnussions an audit of such statements and the audit is
completed within the period during which they must be provided If the audit of such financial
statements is not complete within such period, then the Issuer shall provide unaudited financial
statements by the required time and will provide audited financial statements for the applicable fiscal
year to each NRMSIR and any SID, when and if the audit report on such statements become
available
(ii) If the Issuer 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 Issuer
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
(b) Material Event Notices The Issuer 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 Bonds, if such event
is material within the meaning of the federal securities laws
Principal and interest payment delinquencies,
Non-payment related defaults,
Unscheduled draws on debt service reserves reflecting financial difficulties,
Unscheduled draws on credit enhancements reflecting financial difficulties,
36
Substitution of credit or liquidity providers, or their failure to perform,
6 Adverse tax opinions or events affecting the tax-exempt status of the Bonds,
7 Modifications to rights of holders of the Bonds,
Bond calls,
Defeasances,
10 Release, substitution, or sale of property securing repayment of the Bonds, and
11 Rating changes
The Issuer shall notify any SID and either each NRMSIR or the MSRB, in a timely manner, of any
failure by the Issuer to provide financial information or operating data in accordance with subsection
(a) of this Section by the time required by such subsection
(c) Limitations. Disclaimers. and Amendments (i) The Issuer shall be obligated to observe
and perform the covenants specified in this Section for so long as, but only for so long as, the Issuer
remains an "obligated person" with respect to the Bonds within the meaning of the Rule, except that
the Issuer in any event will give the notice required by Subsection (b) hereof of any Bond calls and
defeasance that cause the Issuer to no longer be such an "obligated person"
(u) The provisions of this Section are for the sole benefit of the registered owners and
beneficial owners of the Bonds, and nothing in this Section, express or implied, shall give any benefit
or any legal or equitable right, remedy, or claim hereunder to any other person The Issuer
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
Issuer'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
Issuer does not make any representation or warranty concerning such information or its usefulness
to a decision to invest in or sell Bonds at any future date
(ni) UNDER NO CIRCUMSTANCES SHALL THE ISSUER BE LIABLE TO THE
REGISTERED OWNER OR BENEFICIAL OWNER OF ANY BOND OR ANY OTHER
PERSON, IN CONTRACT OR TORT, FOR DAMAGES RESULTING IN WHOLE OR IN PART
FROM ANY BREACH BY THE ISSUER, 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
37
(iv) No default by the Issuer 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 tlus Section is intended or shall act to disclaim, waive, or otherwise lurut the
duties of the Issuer under federal and state securities laws
(v) The provisions of this Section may be amended by the Issuer from time to time to adapt
to changed circumstances that anse from a change in legal requirements, a change in law, or a change
in the identity, nature, status, or type of operations of the Issuer, but only if (1) the provisions of this
Section, as so amended, would have permitted an underwriter to purchase or sell Bonds in the
primary ofrenng of the Bonds in compliance with the Rule, taking into account any amendments or
interpretations of the Rule since such offering as well as such changed circumstances and (2) either
(a) the registered owners 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
Bonds consent to such amendment or (b) a person that is unaffiliated with the Issuer (such as
nationally recognized bond counsel) determined that such amendment will not materially impair the
interest of the registered owners and beneficial owners of the Bonds If the Issuer so amends the
provisions) of this Section, it shall include with any amended financial information or operating data
next provided in accordance with subsection (a) of this Section an explanation, in narrative form, of
the reasonifor the amendment and of the impact of any change in the type of financial information or
operating ,data so provided The Issuer may also amend or repeal the provisions of this continuing
disclosure agreement if the SEC amends or repeals the applicable provision of the Rule or a court of
final jurisdiction enters judgment that such provisions of the Rule are invalid, but only if and to the
extent that the provisions of this sentence would not prevent an underwriter from lawfully purchasing
or selling Bonds in the primary offering of the Bonds
(d) Definitions. As used in this Section, the following terms have the meanings ascribed to
such terms below
"MSRB" means the Municipal Securities Rulemaking Board
"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
Section 38 FURTHER PROCEDURES The Mayor of the Issuer, the City Secretary of the
Issuer, and all other officers, employees, and agents of the Issuer, and each of them, shall be and they
are hereby expressly 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
38
the corporate seal and on behalf of the Issuer 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 Bond Ordi-
nance, the Bonds, the sale of the Bonds, and the Notice of Sale and Official Statement, and the
Assistant City Manager/Finance of the City shall cause the expenses of issuance of the Bonds to be
paid from the proceeds of sale of the Initial Bond or from other lawfully available funds of the Issuer
In case any officer whose signature shall appear on any Bond shall cease to be such officer before the
delivery of such Bond, such signature shall nevertheless be valid and sufficient for all purposes the
same as if such officer had remained in office until such delivery
Section 39 OPEN MEETINGS The City Council has found and determined that the
meeting at which this Ordinance is considered is open to the public and that notice thereof was given
in accordance with the provisions of the Texas Open Meetings, Law, Tex Gov't Code, Chapter 551,
as amended
Section 40 EFFECTIVE DATE This Ordinance shall become effective immediately upon
its passage and approval
PASSED AND APPROVED this the 24th day of March, 1998
ATTEST
fer VIPters, City Secretary
APPROVED AS TO LEGAL FORM
Her`-- r „- ^--- -------
0
�
Ja Iler, Mayor
39
EXHIBIT A
DESCRIPTION OF ANNUAL FINANCIAL INFORMATION
The following information is referred to in Section 37 of tlus Ordinance
Annual Financial Statements and Operating Data
The financial information and operating data with respect to the Issuer to be provided annually
in accordance with such Section are as specified (and included in the Appendix or under the tables
of the Official Statement referred to) below
Tables numbered 1 through 14, inclusive, under the captions "The Utility System", 'Debt
Service Requirements" and "Financial Information" in the Official Statement
Appendix B in the Official Statement
Accounting Principles
The accounting principles referred to in such Section are the accounting principles described
in the notes to the financial statements referred to in the paragraph above
LAW OFFICES
M4CALL PARKHURST a HORTON L. L P
600 CONGRESS AVENUE
1250 ONE AMERICAN CENTER
AUSTIN TEXAS 757013248
TELEPHONE 5124783805
FACSIm1LE 5124720871
Honorable Mayor and Council of
the City of Denton
Denton, Texas
Ladies and Gentlemen
717 NORTH HARWOOD
NINTH FLOOR
DALLAS TEXAS 752016587
TEL ..N [ 21475.9200
FAC61M1LE 21475. 9250
March 24, 1998
City of Denton Utility System Revenue
Bonds Series 1998. $7.175,000
70O N ST MARY S STREET
1225 ONE RIVERWALII PLACE
SAN ANTONIO TEXAS 78205 3503
T[LEV...n 2102252800
FA.s1m1LE 2102252984
In compliance with Section 9 02 and Section 9 04 of the City Charter of the City of Denton, you are
advised that the bids for the captioned issue received by the City pursuant to its Official Statement and Nonce
of Sale and Bidding Instructions dated March 24, 1998, have been tabulated, and that we find, based on
calculations performed by First Southwest Company, as financial advisor, that the bid of a syndicate managed
or headed by the following
DEAN WITTER REYNOLDS
with the bonds to bear interest at the rates therein specified, with such bidder to pay par and accrued interest to
date of delivery for said bonds, plus a premmm of $-0-, is the lowest and best bid received, and we recommend
that it be accepted
We further certify that we have examined the ordinance presently placed before the Mayor and Council
for the purpose of authorizing the issuance of said bonds, and, in our opinion, the said proposed bond ordinance
is legal, and the bonds to be issued thereunder will be special obligations of the City payable from, and secured
by a first hen on and pledge of, the "Pledged Revenues", winch include initially the "Net Revenues of the System"
as such terms are defined in the Bond Ordinance, with the System consisting of the City's entire combined
waterworks, sewer, and electric light and power system
Respectfully,
LAW OFFICES
MCCALL, PARKHURST a HORTON L L P
600 CONGRESS AVENUE
1250 ONE AMERICAN CENTER
AUSTIN TEXAS 787013248
TELEa..rvC 5IR4783805
FACSIMILE 512472A871
Honorable Mayor and Council of
the City of Denton
Denton, Texas
Ladies and Gentlemen
717 NORTH HARWOOD
NINTH FLOOR
DALLAS TEXAS 752016587
TELEPHONE 2147549200
FACSIMILE 2147549250
March 24, 1998
City of Denton Utility System Revenue
Bonds Series 1998 $7,175,000
700 N ST MARY S STREET
1225 ONE RIVERWALK PLACE
SAN ANTONIO TEXAS 78205 3503
TELEPHONE 2102252800
F.C51n1Le 2102252984
In compliance with Section 9 02 and Section 9 04 of the City Charter of the City of Denton, you are
advised that the bids for the captioned issue received by the City pursuant to its Official Statement and Notice
of Sale and Bidding Instructions dated March 24, 1998, have been tabulated, and that we find, based on
calculations performed by First Southwest Company, as financial advisor, that the bid of a syndicate managed
or headed by the following
DEAN WITTERREYNOLDS
with the bonds to bear interest at the rates therein specified, with such bidder to pay par and accrued interest to
date of delivery for said bonds, plus a premium of $-0-, is the lowest and best bid received, and we recommend
that it be accepted
We fiuther certify that we have examined the ordinance presently placed before the Mayor and Council
for the purpose of authorizing the issuance of said bonds, and, in our opinion, the said proposed bond ordinance
is legal, and the bonds to be issued thereunder will be special obligations of the City payable from, and secured
by a fast lien on and pledge of, the "Pledged Revenues", which include initially the "Net Revenues of the System"
as such terms are defined in the Bond Ordinance, with the System consisting of the City's entire combined
waterworks, sewer, and electric light and power system
Respectfully,
i cue i Q �_ � S f%� L c /�