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HomeMy WebLinkAbout1978-012ORDINANCE NO ORDINANCE AUTHORIZING THE ISSUANCE OF CITY OF DENTON ELECTRIC SYSTEM REVENUE REFUNDING BONDS SERIES 1978 THE STATE OF TEXAS COUNTY OF DENTON CITY OF DENTON WHEREAS, the City of Denton, Texas (the "City") has duly issued, and there are now outstanding, pursuant to Vernon's Ann Tex Civ St Articles 1111 through 1118 and other appli- cable laws, the following series or issues of Electric Revenue Bonds which are secured solely by a pledge of the Net Revenues of the City's electric light and power system (the "System") City of Denton Electric Revenue Bonds, Series 1954, dated November 1, 1954, now outstanding in the aggregate principal amount of - - - - - $1,385,000 City of Denton Electric Revenue Bonds, Series 1955, dated May 1, 1955, now outstanding in the aggregate principal amount of - - - - - - $ 461,000 City of Denton Electric Revenue Bonds, Series B, 1955, dated November 1, 1955, now outstand- ing in the aggregate principal amount of - - - $ 501,000 City of Denton Electric Revenue Bonds, Series 1961, dated January 1, 1961, now outstanding in the aggregate principal amount of - - - - - $4,060,000 City of Denton Electric Revenue Bonds, Series 1965, dated January 1, 1965, now outstanding in the aggregate principal amount of - - - - - $1,225,000 City of Denton Electric Revenue Bonds, Series 1960, dated February 1, 1968, now outstanding in the aggregate principal amount of - - - - - $ 550,000 City of Denton Electric Revenue Bonds, Series 1970, dated September 1, 1970, now outstanding in the aggregate principal amount of - - - - - $2,520,000 City of Denton Electric Revenue Bonds, Series 1972, dated May 1, 1972, now outstanding in the aggregate principal amount of - - - - - - $4,800,000 City of Denton Electric Revenue Bonds, Series 1974, dated July 1, 1974, now outstanding in the aggregate principal amount of - - - - - - $1,400,000 (collectively the "Outstanding Bonds"), and WHEREAS, the Outstanding Bonds are the only bonds or other obligations secured by or payable from the Net Revenues of the System, and -1- WHEREAS, the City Council of the City is the governing body of the City, and WHEREAS, the refunding bonds hereinafter authorized are to be issued and delivered pursuant to Chapter 642, Acts of the 65th Legislature, Regular Session, 1977 (Vernon's Ann Tex Civ St Article 1118n-12), for the purpose of refunding all of the Outstanding Bonds THEREFORE, THE COUNCIL OF THE CITY OF DENTON HEREBY ORDAINS Section 1 BONDS AUTHORIZED That the City's bonds are hereby authorized to be issued in the principal amount of $19,255,000, FOR THE PURPOSE OF REFUNDING ALL OF THE OUTSTAND- ING CITY OF DENTON ELECTRIC REVENUE BONDS Section 2 BONDS DESIGNATED That said bonds shall be designated as the "CITY OF DENTON ELECTRIC SYSTEM REVENUE REFUNDING BONDS, SERIES 1978 (the "Bonds") Section 3 DATE AND MATURITIES That the Bonds shall be dated MARCH 15, 1978, shall be in the denomination of $5,000 each, shall be numbered consecutively from one upward, and shall mature serially on the maturity date, in each of the years, and in the amounts, respectively, unless redeemed prior to maturity as required or permitted in the FOP14 OF BOND set forth in Section 6 of this Ordinance, as set forth in the follow- ing schedule MATURITY DATE DECEMBER 1 YEARS AMOUNTS YEARS AMOUNTS 1985 $ 855,000 1992 $ 600,000 1986 1,135,000 1993 600,000 1987 1,165,000 1994 600,000 1988 11200,000 1995 600,000 1989 1,200,000 1996 500,000 1990 1,200,000 **** ******* 1991 600,000 2007 9,000,000 Section 4 INTEREST That the Bonds scheduled to mature during the years, respectively, set forth as follows shall bear interest from the date thereof to maturity or redemption at the following rates per annum -2- maturities 1985, 4.60% maturities 1986, 4 70% maturities 1987, 4.80% maturities 1988, 4 90% maturities 1989, 5.00% maturities 1990, 5 05% maturities 1991, 5 10% maturities 1992, 5 15% maturities 1993, 5 20% maturities 1994, 5 20% maturities 1995, 5 25% maturities 1996, 5 25% maturities 2007, 5 85% Said interest shall be evidenced by interest coupons which shall appertain to the Bonds, and which shall be payable in the manner provided and on the dates stated in the FORM OF BOND set forth in Section 6 of this Ordinance Section 5 GENERAL CHARACTERISTICS That the Bonds and interest coupons shall be issued, shall be payable, shall and may be redeemed prior to their scheduled maturity, shall have the characteristics, and shall be signed and executed (and the Bonds shall be sealed), all as provided, and in the manner in- dicated, in the FORM OF BOND set forth in Section 6 of this Ordinance Section 6 FORMS That the form of the Bonds, including the form of Registration Certificate of the Comptroller of Public Accounts of the State of Texas to be printed and en- dorsed on each of the Bonds, and the form of the aforesaid in- terest coupons which shall appertain and be attached initially to each of the Bonds, shall be, respectively, substantially as follows NO FORM OF BOND $5,000 UNITED STATES OF AMERICA STATE OF TEXAS COUNTY OF DENTON CITY OF DENTON ELECTRIC SYSTEM REVENUE REFUNDING BOND SERIES 1978 ON DECEMBER 1, , THE CITY OF DENTON, IN DENTON COUNTY, TEXAS, hereby promises to pay to bearer hereof the principal amount of FIVE THOUSAND DOLLARS and to pay interest thereon at the rate of % per annum from the date of this Bond, evidenced by interest coupons -3- payable DECEMBER 1, 1978, and semiannually on each JLNE 1 and DECEMBER 1 thereafter while this Bond is outstanding THE PRINCIPAL of this Bond and the interest coupons ap- pertaining hereto shall be payable to bearer, in lawful money of the United States of America, without exchange or collec- tion charges to the bearer, upon presentation and surrender of this Bond or proper interest coupon, at the following, which, collectively, shall constitute and be defined as the "Paying Agent" for this Series of Bonds THE FORT WORTH NATIONAL BANK, FORT WORTH, TEXAS, OR, AT THE OPTION OF THE BEARER, AT FIRST STATE BANK OF DENTON, DENTON, TEXAS THIS BOND is one of a Series dated as of MARCH 15, 1978, authorized and issued in the principal amount of $19,253,000, FOR THE PURPOSE OF REFUNDING ALL OF THE OUTSTANDING CITY OF DENTON ELECTRIC REVENUE BONDS ON DECEMBER 1, 1997, and annually on DECEMBER 1 of each year thereafter, the out- standing Bonds of this Series are subject to mandatory re- demption prior to maturity with funds from the "Retirement Fund", hereinafter described, and shall be redeemed in part prior to maturity with funds from said "Retirement Fund", for the principal amount thereof and accrued interest to the date of redemption, and without premium, on DECEMBER 1 of each year, and in the principal amounts, as set forth in the following schedule Year Principal Amount Year Principal Amount 1997 $300,000 2002 $300,000 1998 300,000 2003 300,000 1999 250,000 2004 300,000 2000 275,000 2005 350,000 2001 275,000 2006 350,000 The particular Bonds to be redeemed on each such date shall be chosen at random, by lot or other customary method, by the "Escrow Agent" for the "Retirement Fund", hereinafter describ- ed, provided however that the principal amount of the Bonds -4- required to be redeemed pursuant to the operation of such mandatory sinking fund shall be reduced, at the option of the City, by the principal amount of any Bonds which, at least 45 days prior to the mandatory sinking fund redemption date, (1) shall have been acquired by the City and delivered to the "Escrow Agent" for the "Retirement Fund" for cancellation or (2) shall have been purchased and cancelled by said "Escrow Agent" with funds from the "Retirement Fund", at the request of the City, at a price not exceeding the principal amount of such Bonds plus accrued interest to the date of purchase there- of ON JUNE 1, 1993, or on any interest payment date thereafter, the outstanding Bonds of this Series may be redeemed prior to their scheduled maturity, at the option of said City, with funds derived from any source, in whole, or in part, for the principal amount thereof and accrued interest thereon to the date fixed for re- demption, and without premium AT LEAST thirty days prior to the date fixed for any prior redemption said City (acting either through its own officers or through The Fort Worth National Bank, Fort Worth, Texas, as one of the Paying Agents, and as trustee and "Escrow Agent" for the "Retirement Fund",hereinafter described) shall cause a written notice of such redemption to be published at least once in a financial publication published in The City of New York, New York By the date fixed for any such redemption due provision shall be made for the payment at the "Paying Agent" of the principal amount of the Bonds which are to be so redeem- ed and accrued interest thereon to the date fixed for redemption If such written notice of redemption is published and if due provision for such payment is made, all as provided above, the Bonds which are to be so redeemed thereby automatically shall -5- be 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 bearer to receive the redemption price from the "Paying Agent" out of the funds provided for such payment IT IS HEREBY certified, recited, and covenanted that this Bond has been duly and validly authorized, issued, and deliver- ed pursuant to the applicable laws of the State of Texas, in- cluding particularly Vernon's Ann Civ St of Texas, Article 1118n-12, 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 and the Series of which it is a part have been performed, existed, and been done in accordance with law, that this Bond and the Series of which it is a part constitute special obligations of said City, secured by and payable from an irrevocable first lien on and pledge of the "Pledged Revenues", as defined in the ordi- nance authorizing this Series of Bonds (the "Ordinance"), which include initially the "Net Revenues of the City's Electric Light and Power System", as such term is defined in the Ordi- nance, and which "Pledged Revenues" may, in the future, at the option of the City, include other resources THE BONDS also are secured by and payable from the "City of Denton Electric System Revenue Refunding Bonds, Series 1978 Retirement Fund" (the "Retirement Fund") created for the sole benefit and security of the Bonds pursuant to the Ordinance and established as a special trust fund and sinking fund for the Bonds at The Fort Worth National Bank, Fort Worth, Texas, as trustee and "Escrow Agent" under a "Series 1978 Retirement Trust Agreement" (the "Agreement") The Ordinance and the Agreement provide for semiannual deposits into the Retirement Fund from Pledged Revenues, and for the investment of money in the Re- tirement Fund in Government Obligations, as defined in the Ordinance, so that such deposits, Government Obligations, and ffl! the interest income therefrom will be sufficient to provide for the payment and redemption of the Bonds at maturity or upon redemption prior to maturity, and the payment of the in- terest on the Bonds as it comes due THE CITY has reserved the right, subject to the restric- tions stated in the Ordinance, to issue additional parity revenue bonds which also may be secured by and payable from an irrevocable first lien on and pledge of the aforesaid Pledg- ed Revenues, in the same manner and to the same extent as this Bond and the Series of which it is a part Although the Bonds and any Additional Bonds will be equally and ratably secured by and payable from a first lien on and pledge of the Pledged Revenues, the Retirement Fund has been created for the ex- clusive benefit of the Bonds, but the Bonds will be entitled to such exclusive benefit only after Pledged Revenues actually have been deposited in the Retirement Fund as required by the Ordinance Separate special invested retirement funds (similar to the Retirement Fund) may, or may not, at the option of the City, be established for the exclusive benefit of any Addition- al Bonds THE HOLDER HEREOF shall never have the right to demand payment of this obligation out of any funds raised or to be raised by taxation, or from any source whatsoever other than the Pledged Revenues and other sources described in the Ordinance IN WITNESS WHEREOF, this Bond and the interest coupons appertaining hereto have been signed with the facsimile signa- ture of the Mayor of said City and countersigned with the fac- simile signature of the City Secretary of said City, and the official seal of said City has been duly impressed, or placed in facsimile, on this Bond xxxxxxxx City Secretary, City oT Denton xxxxxxxx Mayor, City of Denton -7- FORM OF REGISTRATION CERTIFICATE COMPTROLLER'S REGISTRATION CERTIFICATE REGISTER NO I hereby certify that this Bond has been examined, cer- tified 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 NO Witness my signature and seal this xxxxxxxx Comptroller of Public Accounts of the State of Texas FORM OF INTEREST COUPON ON 1, , THE CITY OF DENTON, IN DENTON COUNTY, TEXAS, promises to pay to bearer the amount shown on this interest coupon, in lawful money of the United States of America, without exchange or collection charges to the bearer, unless due provision has been made for the redemption prior to maturity of the Bond to which this interest coupon appertains, upon presentation and surrender of this interest coupon, at the THE FORT WORTH NATIONAL BANK, FORT WORTH, TEXAS, OR, AT THE OPTION OF THE BEARER, AT FIRST STATE BANK OF DENTON, DENTON, TEXAS, said amount being interest due that day on the Bond, bearing the number hereinafter designated, of that issue of CITY OF DENTON ELECTRIC SYSTEM REVENUE REFUNDING BONDS, SERIES 1978, DATED MARCH 15, 1978 The holder hereof shall never have the right to demand payment of this obligation out of any funds raised or to be raised by taxation, or from any source what- soever other than the Pledged Revenues and other sources de- scribed in the Bond to which this coupon appertains Bond No xxxxxxxx City Secretary Section 7 DEFINITIONS xxxxxxx Mayor That as used in this Ordinance the following terms shall have the meanings set forth below, unless the text hereof specifically indicates otherwise (a) the term "City" shall mean the City of Denton, in Denton County, Texas (b) The term "Outstanding Bonds" shall mean the present- ly outstanding Electric Revenue Bonds of the City described in the preamble to this Ordinance (c) The term "Bonds" shall mean the City of Denton Electric System Revenue Refunding Bonds, Series 1978, authorized by this Ordinance (d) The term "Additional Bonds" shall mean the addition- al parity revenue bonds which the City reserves the right to issue in the future, as provided in this Ordinance (e) The terms "Electric Light and Power System" and "System" shall mean the City's existing electric light and power system, together with all future extensions, improve ments, enlargements, and additions thereto, and all replace- ments thereof, provided that, notwithstanding the foregoing, and to the extent now or hereafter authorized or permitted by law, the term System shall not mean any electric light and power facilities of any kind (including any electric power gen- erating and transmission facilities) 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 Bonds or Addition- al Bonds secured by and payable from a first lien on and Pledge of the Pledged Revenues, as hereinafter defined, but which are secured by and payable from any other liens on and pledges of any revenues, sources, or payments, including, but not limited to, W special contract revenues or payments received from any other legal entity in connection with such facilities and/or (ii) a lien on and pledge of the Pledged Revenues junior and subor- dinate in all respects to the lien and pledge in favor of the Bonds and Additional Bonds, and such revenues, sources, or pay- ments shall not be considered as or constitute Gross Revenues of the System, unless and to the extent otherwise provided in the ordinance or ordinances authorizing the issuance of such "Special Facilities Bonds" (f) The terms "Gross Revenues of the City's Electric Light and Power System" and "Gross Revenues" shall mean all revenues, income, and receipts of every nature derived or re- ceived 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, ex- cepting only the Retirement Fund (g) The terms "Net Revenues of the City's Electric Light and Power System", and "Net Revenues" shall mean all Gross Revenues after deducting and paying the current expenses of operation and maintenance of the System out of the Revenue Fund, hereinafter created, including all salaries, labor, materials, repairs, and extensions necessary to render efficient service, provided, however, that only such repairs and exten- sions, 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 ade- quate service to said City and the inhabitants thereof, or such as might be necessary to meet some physical accident or con- dition which would otherwise impair the Bonds or Additional Bonds, shall be deducted in determining "Net Revenues" De- preciation shall never be considered as an expense of operation and maintenance Gross Revenues attributable to investment interest income from the Reserve Fund and the Contingency Fund shall be used only to pay current expenses of operation and maintenance of the System and shall never constitute any part of Net Revenues (h) The term "Pledged Revenues" shall mean (1) the Net Revenues, plus (2) any additional revenues, income, re- ceipts, or other resources, including, without limitation, any grants, donations, or income re- ceived 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 Bonds or Additional Bonds (i) The term "year" shall mean the regular fiscal year used by the City in connection with the operation of the System, which may be any twelve consecutive months period established oy the City (j) The term "Government Obligations" shall mean direct obligations of the United States of America, including obli- gations the principal of and interest on which are uncondition- ally guaranteed by the United States of America, which may be United States Treasury obligations such as its State and Local Government Series, which may be in book -entry form Section 8 PLEDGE That the Bonds and any Additional Bonds, and the interest coupons appertaining thereto, are and shall be secured by and payable from an irrevocable first lien on and pledge of the Pledged Revenues, and the Pledged Revenues are further pledged irrevocably to the establishment and maintenance of the Pledged Revenues Fund, the Retirement Fund, any other special invested retirement fund (similar to the Retirement Fund) hereafter created for the payment of any Additional Bonds, the Reserve Fund, the Contingency Fund, and the Improvement Fund, all as hereinafter defined and provided -11- The Bonds and any Additional Bonds are and will be secured by and payable from the Pledged Revenues, and are not secured by or payable from a mortgage or deed of trust on any real, per- sonal, or mixed properties constituting the System Section 9 REVENUE FUND That 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 special fund to be entitled the "City of Denton Electric System Revenue Bonds Revenue Fund" (the "Rev- enue Fund") All Gross Revenues shall be credited to the Rev- enue Fund immediately upon receipt, unless otherwise provided in this Ordinance All current expenses of operation and main- tenance of the System shall be paid from such Gross Revenues credited to the Revenue Fund, as a first charge against same All investment interest income credited to the Revenue Fund shall be expended first for current operation and maintenance expenses of the System, and in all events within five months from the date of any such deposit Section 10 PLEDGED REVENUES FUND That for the purpose of paying the principal of and interest on all Bonds and any Additional Bonds, as the same mature and come due, and provid- ing a source of payment for other deposits required by this Ordinance, there is hereby created and there shall be establish- ed 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 Electric System Rev- enue Bonds Pledged Revenues Fund" (the "Pledged Revenues Fund") Section 11 RESERVE FUND That there is hereby created and there shall be established and maintained initially at The Fort Worth National Bank, Fort Worth, Texas, and there- after, at the option of the City, established and maintained at -12- 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 Electric System Revenue Bonds Reserve Bund" (the "Reserve Fund") The Reserve Fund shall be used solely for the purpose of finally retiring the last of any Bonds or Addi- tional Bonds, or for paying principal of and interest on any Bonds or Additional Bonds when and to the extent the amounts in the Pledged Revenues Fund, the Retirement Fund, any other special fund created for the payment of principal of and in- terest on any Additional Bonds, the Improvement Fund, and the Contingency Fund are insufficient for such purpose Section 12 CONTINGENCY FUND That there is hereby created and there shall be established and maintained initial- ly at The Fort Worth National Bank, Fort Worth, Texas, and thereafter, at the option of the City, established and main- tained at any time at any official depository bank 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 Electric System Revenue Bonds Contingency Fund" (the Contin- gency Fund") The Contingency Fund shall be used solely for the purpose of paying the costs of unexpected or extraordinary re- pairs or replacements of the System for which System funds are not otherwise available, or for paying principal of and inter- est on any Bonds or Additional Bonds, when and to the extent the amount in the Pledged Revenues Fund, the Retirement Fund, any other special fund created for the payment of principal of and interest on any Additional Bonds, and the Improvement Fund are insufficient for such purpose Section 13 IMPROVEMENT FUND That 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 -13- the "City of Denton Electric System Revenue Bonds Improvement Fund" (the "Improvement Fund") The Improvement Fund shall be used solely for the purpose of paying the costs of improvements, enlargements, extensions, additions, or other capital expendi- tures related to the System, or for paying unexpected or ex- traordinary expenses of operation and maintenance of tre System for which System funds are not otherwise available, or for pay- ing principal of and interest on any Bonds or Additional Bonds, when and to the extent the amount in the Pledged Revenues Fund, the Retirement Fund, and any other special fund created for the payment of principal of and interest on any Additional Bonds, are insufficient for such purpose Section 14 SERIES 1978 RETIREMENT FUND That there is hereby created and there shall be established and maintained at The Fort Worth National Bank, Fort Worth, Texas, as trustee and escrow agent, and as a paying agent for the Bonds, and accounted for separate and apart from all other funds of the City, a separate trust and escrow fund to be entitled the "City of Denton Electric System Revenue Refunding Bonds Series 1978 Retirement Fund" (the "Retirement Fund") The Retirement Fund shall be used solely for the purpose of paying the prin- cipal of and interest on the Bonds as the same mature and come due, or on redemption prior to maturity, and shall constitute a special sinking fund for the Bonds Concurrently with, or as soon as practicable after delivery of the Bonds the City shall enter into a trust and escrow agreement with The Fort Worth National Bank (hereinafter called the "Series 1978 Retirement Trust Agreement") which shall provide for the payment of the principal of and interest on the Bonds as the same come due, and the investment in Government Obligations of money deposited to the credit of the Retirement Fund by the City The City shall make deposits to the credit of the Re- tirement Fund as hereinafter provided in this Ordinance If -14- Additional Bonds are hereafter issued, separate special in- vested retirement funds (similar to the Retirement Fund) may or may not be established, at the option of the City, for the special benefit of such Additional Bonds at a paying agent therefor, but the Retirement Fund is created solely for the benefit and security of the Bonds It is provided, however, that all Bonds and Additional Bonds shall be equally and ratably secured by and payable from the Pledged Revenues deposited to the credit of the Pledged Revenues Fund, without preference or priority, and the Bonds are entitled to an exclusive claim on the Retirement Fund only after the deposits have been made therein as provided in this Ordinance Section 15 DEPOSITS OF PLEDGED REVENUES, INVESTMENTS, FUNDS SECURED (a) That Pledged Revenues shall be credited to or deposited in the Pledged Revenues Fund, the Retirement Fund, the Reserve Fund, the Contingency Fund, the Improvement Fund, and other funds when and as required by this Ordinance and any ordinance authorizing the issuance of Additional Bonds (b) That money in any Fund established pursuant to this Ordinance (excepting the Retirement Fund, which shall be in- vested only in Government Obligations and as provided in the Series 1978 Retirement Trust Agreement) may, at the option of the City, be placed in time deposits or certificates of de- posit secured by obligations of the type hereinafter described, or be invested in direct obligations of the United States of America, obligations guaranteed or insured by the United States of America, which, in the opinion of the Attorney General of the United States, are backed by its full faith and credit or represent its general obligations, or invested in indirect obligations of the United States of America, including, but not limited to, evidences of indebtedness issued, insured, or guaranteed by such governmental agencies as the Federal Land Banks, Federal Intermediate Credit Banks, Banks for Cooperatives, -15- Federal Home Loan Banks, Government National Mortgage Asso- ciation, United States Postal Service, Farmers Home Adminis- tration, Federal Home Loan Mortgage Association, Small Busi- ness Administration, Federal Housing Association, or Par- ticipation Certificates in the Federal Assets Financing Trust, provided that all such deposits and investments shall be made in such manner that the money required to be expended from any Fund will be available at the proper time or times Such in- vestments shall be valued in terms of current market value as of the 20th day of November of each year All interest and income derived from such deposits and investments immediately shall be credited to, and any losses debited to, the Fund from which the deposit or investment was made, and surpluses in any Fund shall or may be disposed of as hereinafter provid- ed Such investments shall be sold promptly when necessary to prevent any default in connection with the Bonds or Addi- tional Bonds (c) That money in all Funds created by this Ordinance, to the extent not invested, shall be secured in the manner prescribed by law for securing funds of the City Section 16 DEBT SERVICE REQUIREMENTS (a) That prompt- ly after the delivery of the Bonds the City shall cause to be credited to the Pledged Revenues Fund any accrued interest re- ceived from the sale and delivery of the Bonds (b) That on or before May 25, 1978, and semiannually on or before the 25th day of each November and of each May thereafter, the City shall credit to the Pledged Revenues Fund all available Pledged Revenues (c) On or before June 1, 1978, and semiannually on or before the 1st day of each December and of each June there- after, the City shall deposit to the credit of the Retirement Fund, from Pledged Revenues in the Pledged Revenues Fund, such -16- amounts as then will cause to be on deposit to the credit of the Retirement Fund (1) money and/or (ii) par or principal amount of Government Obli- gations owned by the City, aggregating the amount, respectively, on each date, respect- ively, shown on the following schedule Aggregate Aggregate Aggregate Amount Date Amount Date Amount Date $ 443,000 6/1/78 $8,355,775 6/1/88 $8,166,475 6/1/98 1,877,814 12/1/78 9,555,775 12/1/88 8,466,475 12/1/98 1,705,072 6/1/79 8,326,375 6/1/89 8,157,700 6/l/99 2,617,072 12/1/79 9,526,375 12/1/89 8,407,700 12/1/99 2,701,072 6/l/80 8,296,375 6/l/90 8,150,387 6/l/00 31618,072 12/1/80 9,496,375 12/1/90 8,425,387 12/1/00 3,742,072 6/1/81 8,266,075 6/1/91 8,142,343 6/1/01 4,665,072 12/1/81 8,866,075 12/1/91 8,417,343 12/1/01 4,830,072 6/l/82 8,250,775 6/l/92 8,134,300 6/l/02 5,761,072 12/1/82 8,850,775 12/1/92 8,434,300 12/1/02 5,970,072 6/1/83 8,235,325 6/l/93 8,125,525 6/l/03 6,911,072 12/1/83 8,835,325 12/1/93 8,425,525 12/1/03 7,165,072 6/1/84 8,219,725 6/l/94 8,116,750 6/l/04 8,128,072 12/1/84 8,819,725 12/1/94 8,416,750 12/1/04 8,430,072 6/1/85 8,204,125 6/l/95 8,107,975 6/l/05 9,285,072 12/1/85 8,804,125 12/1/95 8,457,975 12/1/05 8,410,407 6/1/86 8,188,375 6/1/96 8,097,737 6/l/06 9,545,407 12/1/86 8,688,375 12/1/96 8,447,737 12/l/06 8,383,735 6/1/87 8,175,250 6/1/97 8,087,500 6/l/07 9,548,735 12/1/87 8,475,250 12/1/97 6,175,500 12/1/07 Said schedule is intended to set forth the full aggregate amounts which are required to provide for the payment and re- demption of the principal of and interest on the Bonds as the same mature and come due However, it is anticipated that the interest income from the investment of money in the Re- tirement Fund in Government Obligations will reduce the amounts which otherwise would be required to be deposited from the Pledged Revenues Fund in order to cause the Retirement Fund to contain the required aggregate amount on each required date as shown in said schedule The Series 1978 Retirement Crust Agreement provides for the investment of money deposited to the credit of the Retirement Fund in Government Obligations and other matters relating to the payment of the Bonds -17- (d) On or before each June 1 and each December 1, the City shall make such deposits from the Pledged Revenues Fund as are required by this Ordinance, and by each ordinance au- thorizing the issuance of any Additional Bonds for the payment of the principal of, interest on, and redemption premiums, if any, on such Additional Bonds, either to one or more special invested retirement funds (similar to the Retirement Fund) for any Additional Bonds, or directly to any paying agent for any such Additional Bonds for which no special retirement fund is established (e) All investment interest income from the Pledged Revenues Fund shall be retained in and remain a part of such Fund Section 17 RESERVE FUND REQUIREMENTS That promptly after the delivery of the Bonds the City shall cause to be deposited in the Reserve Fund, from proceeds from the sale and delivery of the Bonds, the amount of $2,250,000 When and so long as the money and investments in the Reserve Fund are not less in market value than $2,250,000 (the "Reserve Required Amount") no deposits need be made to the credit of the Reserve Fund, but when and if the Reserve Fund at any time contains less than the Reserve Required Amount, then, subject and sub- ordinate to making the required deposits to the credit of the Retirement Fund, and any deposits or payments hereafter requir- ed by any ordinance authorizing the issuance of Additional Bonds for the retirement or payment thereof and the interest thereon, the City shall transfer from Pledged Revenues in the Pledged Revenues Fund, and deposit to the credit of the Reserve Fund, semiannually on or before the 25th day of each Play and of each November, a sum equal to 1/10th of the Reserve Required Amount, until the Reserve Fund is restored to the Reserve Re- quired Amount The City specifically covenants that it will, between the 20th and 25th days of each May and of each OW-C November of each year, deposit to the credit of the Revenue Fund all surplus in the Reserve Fund over the Reserve Requir- ed Amount, to be used within five months after each such de- posit solely for the payment of current operation and mainte- nance expenses of the System Section 18 CONTINGENCY FUND REQUIREMENTS That prompt- ly after the delivery of the Bonds the City shall cause to be deposited to the credit of the Contingency Fund, from proceeds from the sale and delivery of the Bonds, the sum of $250,000 No deposits are required to be made to the credit of the Con- tingency Fund so long as the amount of money and investments therein are at least equal in market value to $250,000 (the "Contingency Required Amount") If and when the amount in the Contingency Fund is reduced or depleted to less than the Con- tingency Required Amount, then, subject and subordinate to making the required deposits to the credit of the Retirement Fund, any other deposits or payments hereafter required by any ordinance authorizing the issuance of Additional Bonds for the retirement or payment thereof and the interest thereon, and the Reserve Fund, such reduction or depletion shall be restored from Pledged Revenues in the Pledged Revenues Fund which shall be budgeted for such purpose in the City's Annual Budget for the System for the next ensuing fiscal year or years, provided that the City is not required to budget more than an amount equal to $50,000 for such purpose during any one fiscal year The City specifically covenants that it will, between the 20th and 25th days of each May and of each November of each year, deposit to the credit of the Revenue Fund all surplus in the Contingency Fund over the Contingency Required Amount, to be used within five months after each such deposit solely for the payment of current operation and maintenance expenses of the System -19- Section 19 IMPROVEMENT FUND REQUIREMENTS That during each year, subject and subordinate to making the required de- posits to the credit of the Retirement Fund, any other deposits or payments hereafter required by any ordinance authorizing the issuance of Additional Bonds for the retirement or payment thereof and the interest thereon, the Reserve Fund, and the Contingency Fund, the City shall be required to deposit to the credit of the Improvement Fund from Pledged Revenues in the Pledged Revenues 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 which are directly attribut- able to (i) all fuel costs related to the production of electric energy by the City and/or (ii) the pur- chase 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 20 (b) hereof, but no such addi- tional deposit is required All investment interest income from the Improvement Fund shall be retained in and remain a part of such Fund Section 20 DEFICIENCIES, EXCESS PLEDGED REVENUES (a) That if on any occasion there shall not be sufficient Pledged Revenues to make the required deposits into the Retire- ment Fund, any other special fund hereafter created for the retirement and payment of principal of and interest on any Additional Bonds, the Reserve Fund, and the Contingency Fund, then such deficiency shall be made up as soon as possible from the next available Pledged Revenues, or from any other sources available for such purpose -20- (b) That, sub3ect to making the required deposits to the credit of the Retirement Fund, any other special fund hereafter created for the retirement and payment of principal of and interest on any Additional Bonds, the Reserve Fund, the Contingency Fund, and the Improvement Fund, when and as required by this Ordinance, or any ordinance authorizing the issuance of Additional Bonds, the excess Pledged Revenues in the Pledged Revenues Fund may be used by the City for any law- ful purpose Section 21 PAYMENT OF BONDS AND ADDITIONAL BONDS On or before December 1, 1978, and semiannually on or before each Junel and December 1 thereafter while any of the Bonds or Addi- tional Bonds are outstanding and unpaid, the City shall make available to the paying agents therefor, out of the Retirement Fund, any other fund hereafter created for the retirement and payment of principal of and interest on any Additional Bonds, or Pledged Revenues in the Pledged Revenues Fund, or out of the Improvement Fund, the Contingency Fund, or the Reserve Fund, in that order, if necessary, money sufficient to pay, on each of such dates, the principal of and interest on the Bonds and Addi- tional Bonds as the same matures and comes due, or to redeem the Bonds or Additional Bonds prior to maturity, either upon mandatory redemption or at the option of the City as set forth herein The paying agents shall destroy all paid Bonds and Additional Bonds, and the coupons appertaining thereto, and furnish the City with an appropriate certificate of cancellation or destruction Section 22 FINAL DEPOSITS (a) That any Bond or Addi- tional Bond shall be deemed to be paid, retired, and no longer outstanding within the meaning of this Ordinance when payment of the principal of, redemption premium, if any, on such Bond or Additional Bond, plus interest thereon to the due date thereof (whether such due date be by reason of maturity, upon redemption, or otherwise) either W shall have been made or caused to made in accordance with the terms thereof (including -21- the giving of any required notice of redemption), or (ii) 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 which mature as to principal and interest in such amounts and at such times as will insure the availability, without reinvestment, of sufficient money to make such payment, and all necessary and proper fees, compensation, and expenses of such paying agent pertaining to the Bonds and Additional Bonds with respect to which such deposit is made shall have been paid or the payment thereof provided for to the satis- faction of such paying agent At such time as a Bond or Addi- tional 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 Rev- enues, and shall be entitled to payment solely from such money or Government Obligations (b) That any moneys so deposited with a paying agent may at the direction of the City also be invested in Government Obligations, maturing in the amounts and times as hereinbefore set forth, and all income from all Government Obligations in the hands of the paying agent pursuant to this Section which is not required for the payment of the Bonds and Additional Bonds, the redemption premium, if any, and interest thereon, with respect to which such money has been so deposited, shall be turned over to the City or deposited as directed by the City Section 23 ADDITIONAL BONDS (a) That 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 parity revenue bonds (herein called "Addi- tional Bonds"), in accordance with law, in any amounts, for any lawful purpose, including the refunding of any Bonds or Additional Bonds Such Additional Bonds, if and when author- ized, issued, and delivered in accordance with this Ordinance, -22- shall be secured by and made payable equally and ratably on a parity with the Bonds, and all other outstanding Additional Bonds, from an irrevocable first lien on and pledge of the Pledged Revenues (b) That the Pledged Revenues Fund, the Improvement Fund, the Contingency Fund, and the Reserve Fund establish- ed by this Ordinance shall secure and be used to pay all Addi- tional Bonds as well as the Bonds Each ordinance under which Additional Bonds are issued shall provide for the payment of such Additional Bonds and the interest thereon Each such or- dinance may provide for the creation of a special invested re- tirement fund (similar to the Retirement Fund) for such Addi- tional Bonds or for payments directly to the paying agents therefor, as provided in Section 16(d) of this Ordinance Each such ordinance also shall provide and require that the aggregate amount to be accumulated and maintained in the Re- serve Fund shall be increased (if and to the extent necessary) to an amount not less than the aggregate of the following (i) the maximum amount, as then estimated by the senior financial officer of the City, which will be required by this Ordinance to be de- posited to the credit of the Retirement Fund in any future year from Pledged Revenues in the Pledged Revenues Fund, taking into con- sideration the then estimated amounts of Govern- ment Obligations and interest income therefrom to be available in the Retirement Fund in the future, plus (ii) the maximum amount, if any, as then estimated by the senior financial officer of the City, which will be required by any ordinance or or- dinances authorizing the issuance of any Addi- tional Bonds to be deposited to the credit of any special invested retirement fund or funds (similar to the Retirement Fund) for any out- standina Additional Bonds in any future year -23- from Pledged Revenues in the Pledged Revenues Fund, taking into consideration the then esti- mated amounts of Government Obligations and interest income therefrom to be available in the future, plus (iii) the average annual principal and interest re- quirements of all Additional Bonds, if any, to be outstanding following the delivery of the then proposed Additional Bonds, which are pay- able directly from the Pledged Revenues Fund and for which no special invested retirement fund (similar to the Retirement Fund) has been created and established by an ordinance authoriz- ing the issuance of Additional Bonds Such required additional amount shall be so accumulated by the deposit in the Reserve Fund of all or any part of said requir- ed additional amount in cash immediately after the delivery of the then proposed Additional Bonds, or, at the option of the City, by the deposit of said required additional amount (or any balance of said required additional amount not deposited in cash as permitted above) from Pledged Revenues in the Pledg- ed Revenues Fund, in semiannual installments, made on or be- fore the 25th day of each May and of each November following the delivery of the then proposed Additional Bonds, of not less than 1/10th of said required additional amount (or 1/10th of the balance of said required additional amount not deposit- ed in cash as permitted above) (c) That all calculations of average annual principal and interest requirements made pursuant to this Section shall be made as of and from the date of the Additional Bonds then proposed to be issued -24- (d) That 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, and all interest thereon must be payable on May 1 and December 1 Section 24 FURTHER REQUIREMENTS FOR ADDITIONAL BONDS That Additional Bonds shall be issued only in accordance with this Ordinance, but notwithstanding any provisions of this Ordinance to the contrary, no installment, Series, or issue of Additional Bonds shall be issued or delivered unless (a) The Mayor and the City Secretary of the City sign a written certificate to the effect that the City is not in default as to any covenant, condition, or obligation in con- nection with all outstanding Bonds and Additional Bonds, and the ordinances authorizing same, and that the Retirement Fund, any other special invested retirement fund (similar to the Retirement Fund) hereafter created for the retirement and payment of the principal of and interest on any Additional Bonds, and the Reserve Fund each contains the amount then re- quired to be therein (b) An independent certified public accountant, or in- dependent firm of certified public accountants, signs a written certificate to the effect that, during either the next preceding year, or any twelve consecutive calendar month period ending not more than ninety days prior to the passage of the ordinance authorizing the issuance of the then propos- ed Additional Bonds, the Pledged Revenues were, in his or its opinion (1) at least $4,500,000, if the ordinance author- izing the issuance of any Additional Bonds is passed before September 30, 1979, which is the end of the next complete fiscal year of the City, or, if the ordinance authorizing the issuance of any Additional Bonds is passed after September 30, 1979, (2) at least equal to 1 4 times the aggregate of the following amounts W the amount actually deposited, as re- quired by this Ordinance, to the credit of the Retirement Fund from Pledged Revenues in the Pledged Revenues Fund during such year or twelve month period, plus (ii) the amount, if any, actually deposit- ed, as required by any ordinance or ordinances authorizing the issuance of Additional Bonds, to the credit of any other special invested retirement fund or funds (similar to the Re- tirement Fund) for any outstanding Additional Bonds from Pledged Revenues in the Pledged Revenues Fund during such year or twelve month period, plus (iii) the average annual principal and in- terest requirements of all Additional Bonds, if any, to be outstanding after the delivery of the then proposed Additional Bonds, which are payable directly from the Pledged Revenues Fund and for which no special invested retire- ment fund (similar to the Retirement Fund) has been created and established by an ordi- nance authorizing the issuance of Additional Bonds Section 25 GENERAL COVENANTS The City further cove- nants and agrees that in accordance with and to the extent re- quired 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 -26- and every Bond and Additional Bond, that it will promptly pay or cause to be paid the principal of and interest on every Bond and Additional Bond, on the dates and in the places and manner prescribed in such ordinances and Bonds or Additional Bonds, and that it will, at the times and in the manner prescribed, deposit or cause to be deposited the amounts required to be deposited into the Pledged Revenues Fund, the Retirement Fund, any other fund or account established for any Additional Bonds, the Reserve Fund, and the Contingency Fund, and any holder of the Bonds or Additional Bonds may re- quire the City, its officials, and employees, to carry out, respect, or enforce the covenants and obligations of this Or- dinance, or any ordinance authorizing the issuance of Addi- tional 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) CITY'S LEGAL AUTHORITY it is a duly created and existing home rule city of the State of Texas, and is duly au- thorized under the laws of the State of Texas to create and issue the Bonds, that all action on its part for the creation and issuance of the Bonds has been duly and effectively taken, and that the Bonds in the hands of the holders and owners there- of are and will be valid and enforceable special obligations of the City in accordance with their terms (c) TITLE It 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 Bonds and Additional Bonds, against the claims and de- mands of all persons whomsoever, that it is lawfully qualified to pledge the Pledged Revenues to the payment of the Bonds and -27- Additional Bonds in the manner prescribed herein, and has law- fully exercised such rights (d) LIENS It 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 un- paid might by law become a lien or charge thereon, the lien of which would be prior to or interfere with the liens hereof, so that the priority of the liens granted hereunder shall be fully preserved in the manner provided herein, and that it will not create or suffer to be created any mechanic's, laborer's, ma- terialman's, or other lien or charge which might or could be prior to the liens hereof, or do or suffer any matter or thing whereby the liens hereof might or could be impaired, provided, however, that no such tax, assessment, or charge, and that no such claims which might be used as the basis of a mechanic's, laborer's, materialman's, or other lien or 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) OPERATION OF SYSTEM, NO FREE SERVICE While the 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 or instrumentalities make use of the services and facilities of the System, payment of the reasonable value shall be made by the City out of funds from sources other than the revenues of the System, unless made from surplus or excess Pledged Revenues as permitted in Section 20(b) hereof 2a- (f) FURTHER ENCUMBRANCE While the Bonds or any Addi- tional Bonds are outstanding and unpaid, the City shall not additionally encumber a the Pledged Revenues in any manner, ex- cept as permitted in this Ordinance in connectLon with Addi- tional Bonds, unless said encumbrance is made ]unior and sub- ordinate 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 the Pledged Revenues is specifially recognized and retained (g) SALE OR DISPOSAL OF PROPERTY While the 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 otherwise dispose of the System, or any significant or substantial part thereof, provided that whenever the City deems it necessary to dispose of any property, machinery, fixtures, or equipment, it may sell or otherwise dispose of such property, machinery, fixtures, or equipment when it has made arrangements to replace the same or provide substitutes therefor, unless it is determined by resolution of the City Council that no such replacement or substitute is necessary (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 carried by corpora- tions operating like properties, including, to the extent reasonably obtainable, fire and extended coverage insurance, insurance against damage by floods, and use and occupancy in- surance Public liability and property damage insurance shall -29- also be carried unless the City Attorney of the City gives a written opinion to the effect that the City is not liable for claims which would be protected by such insurance 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, how- ever, that if said insurance proceeds and other funds are in- sufficient for such purpose, then said insurance proceeds pertaining to the System shall be used promptly as follows (i) for the redemption prior to maturity of the Bonds and Additional Bonds, ratably in the proportion that the outstanding principal of each Series or issue of Bonds or Additional Bonds bears to the total outstanding prin- cipal of all Bonds and Additional Bonds, provided that if on any such occasion the principal of any such Series or issue is not subject to redemption, it shall not be regarded as outstanding in making the foregoing compu- tation, or (ii) if none of the outstanding Bonds or Additional Bonds is subject to redemption, then for the purchase on the open market and retirement of said Bonds and -30- Additional Bonds in the same proportion as prescribed in the foregoing clause (i), to the extent practicable, provided that the purchase price for any Bond or Addi- tional Bond shall not exceed the redemption price of such Bond or Additional Bond on the first date upon which it becomes subject to redemption, or (iii) to the extent that the foregoing clauses (i) and (ii) cannot be complied with at the time, the in- surance proceeds, or the remainder thereof, shall be de- posited 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 the foregoing clauses (i) and/or (ii) can be complied with, or until other funds become avail- able which, together with the Insurance Account, will be sufficient to make the repairs or replacements originally required, whichever of said events occurs first (2) The annual audit hereinafter required shall contain a section commenting on whether or not the City has complied with the requirements of this Section with respect to the main- tenance of insurance, which comments shall be based upon a certi- ficate of the City Manager or other official designated by the City Council, and listing all policies carried, and whether or not all insurance premiums upon the insurance policies to which reference is hereinbefore made have been paid (1) RATE COVENANT The City Council of the City will fix, establish, maintain, and collect such rates, charges, and fees for the use and availability of the System at all times as are necessary to produce Gross Revenues sufficient, together with any other Pledged Revenues, (1) to pay all current operation and maintenance expenses of the System, and (2) produce an amount of Pledged Revenues each year at least equal to (1) 1 4 times the aggregate of the following amounts -31- (1) the amount required to be deposited by this Ordinance to the credit of the Retirement Fund during such year after giving effect to the anticipated interest income from the investment of the moneys and investments in the Retirement Fund), plus (2) the amount, if any, required to be deposited by any ordinance or ordinances authorizing the issuance of Additional Bonds to the credit of any other special invested retirement fund or funds (similar to the Retirement Fund) for any outstanding Additional Bonds from Pledged Revenues in the Pledged Revenues Fund during such year, plus (3) the average annual principal and interest re- quirements of all then outstanding Additional Bonds, if any, which are payable directly from the Pledged Revenues Fund and for which no special invested retirement fund (similar to the Retirement Fund) has been created and es- tablished by an ordinance authorizing the issu- ance of Additional Bonds, or (ii) amounts sufficient to provide for the deposits required by Sections 18 and 19 hereof to be made to the credit of the Contingency Fund and the Improvement Fund, whichever of (i) or (ii) is the greater (7) RECORDS It will keep proper books of record and account in which full, true, 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 re- lating thereto shall at all reasonable times be made avail- able for inspection upon request of any Bondholder (k) AUDITS After the close of each year while any of the Bonds or any Additional Bonds are outstanding, an audit -32- 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 account- ants 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 and to any bondholders who shall so request in writing Such 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 cf 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, permits, authorization, and other requirements applicable to or necessary with respect to the acquisition, construction, equipment, operation, and mainten- ance of the System (m) NO COMPETITION It will not operate, or grant any franchise or permit for the acquisition, construction, or operation of, any local electric energy distribution facili- ties 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 That the City covenants to and with the purchasers of the Bonds that it will make no use of the proceeds of the Bonds at any time throughout the term of this issue of Bonds which, if such use had been reasonably expect- ed on the date of delivery of the Bonds to and payment for the Bonds by the purchasers, would have caused the Bonds to be arbitrage bonds within the meaning of Section 103(c) of the Internal Revenue Code of 1954, as amended, or any regulations -33- or rulings pertaining thereto, and by this covenant the City is obligated to comply with the requirements of the aforesaid Section 103(c) and all applicable and pertinent Department of the Treasury regulations relating to arbitrage bonds The City further covenants that the proceeds of the Bonds will not otherwise be used directly or indirectly so as to cause all or any part of the Bonds to be or become arbitrage bonds within the meaning of the aforesaid Section 103(c), or any regulations pertaining thereto Section 26 AMENDMENT OF ORDINANCE (a) The holders of Bonds and Additional Bonds aggregating in principal amount 51% of the aggregate principal amount of then outstanding 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 herein contained shall permit or be construed to per- mit the amendment of the terms and conditions in this Ordinance or in the Bonds or Additional Bonds so as to (1) Make any change in the maturity of the outstand- ing Bonds or Additional Bonds, (2) Reduce the rate of interest borne by any of the outstanding Bonds or Additional Bonds, (3) Reduce the amount of the principal payable on the outstanding Bonds or Additional Bonds, (4) Modify the terms of payment of principal of or interest on the outstanding Bonds or Additional Bonds, or impose any conditions with respect to such payment, (5) Affect the rights of the holders of less than all of the Bonds and Additional Bonds then out- standing, (6) Change the minimum percentage of the princi- pal amount of Bonds and Additional Bonds necessary for consent to such amendment -34- (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 news- paper or journal published 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 na- ture 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 of Bonds and Additional Bonds Such publication is not required, however, if notice in writ- ing is given to each holder of 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 re- ceive an instrument or instruments executed by the holders of at least 51% in aggregate principal amount of all Bonds and Additional Bonds then outstanding, which instrument or instru- ments 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 pur- suant 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 of then outstanding Bonds and Additional Bonds and all future Bonds and Additional Bonds shall thereafter be determined, exercised, and enforced hereunder, subject in all respects to such amend- ments (e) Any consent given by the holder of a Bond or Addi- tional Bond pursuant to the provisions of this Section shall -35- 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 of the same 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 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 of 51% in aggregate principal amount of the then outstanding Bonds and Additional Bonds as in this Section defined have, prior to the attempted revocation, consented to and approved the amendment (f) For the purpose of this Section, the fact of the holding of Bonds or Additional Bonds by any bondholder and the amount and numbers of such 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 by a certificate executed by any trust company, bank, banker, or any other de- pository wherever situated showing that at the date therein mentioned such person had on deposit with such trust company, bank, banker, or other depository, the Bonds and Additional 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 Section 27 APPROVAL AND REGISTRATION OF BONDS That the Mayor of the City is hereby authorized to have control of the Bonds and all necessary records and proceedings pertain- ing to the Bonds pending their delivery and their investigation, examination, and approval by the Attorney General of the State of Texas, and their registration by the Comptroller of Public Accounts of the State of Texas Upon registration of the Bonds, said Comptroller of Public Accounts (or a deputy designated in writing to act for said Comptroller) shall manually sign the -36- Comptroller's Registration Certificate printed and endorsed on the Bonds, and the seal of said Comptroller shall be im- pressed, or placed in facsimile, on each of the Bonds Section 28 SALE OF BONDS That the Bonds are hereby sold and shall be delivered to an underwriting syndicate head- ed or managed by Goldman, Sachs & Cc , Dillon, Read & Cc Inc and Stephens, Inc , in accordance with the Underwriting Agree- ment in form and substance approved by resolution of the City Council of even date herewith, and it is hereby found and determined by the City Council that the price and terms specified in such Underwriting Agreement are the most advan- tageous reasonably obtainable by the City Section 29 APPROVAL OF OFFICIAL STATEMENT That an Official Statement dated March 21, 1978, relating to the Bonds, in substantially the form as submitted to this meeting, is hereby approved and authorized to be distributed to pros- pective investors and other interested parties in connection with the underwriting and sale of the Bonds, with such changes therein as shall be approved by the Mayor or the City Manager of the City It is further officially found, determined, anc declared that the statements and representations contained in said Official Statement are true and correct in all material respects, to the best knowledge and belief of the City Council Section 30 PROCEEDS OF SALE That promptly after the delivery of the Bonds all of the proceeds from the sale and delivery of the Bonds shall be deposited with First National Bank in Dallas, Dallas, Texas, which is a place of payment (paying agent) for the Outstanding Bonds, and such proceeds, less accrued interest on the Bonds, which shall ultimately be deposited to the credit of the Pledged Revenues Fund, shall be used for the purpose of refunding, discharging and retiring -37- all of the Outstanding Bonds, initially funding the Reserve Fund and the Contingency Fund as herein required, and paying the costs and expenses of issuance of the bonds By a reso- lution of the City Council of even date herewith the City Council has authorized the execution of a "Special Escrow Fund Agree- ment" between the City and First National Bank in Dallas, Dallas, Texas, which provides for the deposit of all of the fore- going proceeds with said bank, which will use a part of said proceeds to provide for the refunding, discharging and retiring of the Outstanding Bonds The balance of said proceeds will be immediately transferred by the First National Bank in Dallas to the Fort Worth National Bank, Fort Worth, Texas, as trustee under that certain Trustee Agreement between the City and The Fort Worth National Bank, the execution of which was authorized by resolution of the City Council of even date herewith The Trustee Agreement provides for the proper disposition of accrued interest, the investment of part of said proceeds in "Reserve Fund Securities" and "Contingency Fund Securities", as defined therein, the payment of all costs and expenses of issuance of the Bonds, and other matters relating to the transaction Section 31 REASONS FOR REFUNDING That it is specifi- cally found and determined by the City that the underlying ordinances authorizing the Outstanding Bonds contain restric- tive covenants which require the City to provide excess revenues which results in the necessity of charging and collecting rates considerably higher than necessary, thus increasing the cost of electricity to the inhabitants of the City and prevent, because of excessively restrictive covenants, the adequate and economical financing of projects which are ex- pected to be required for the System in the near future, and -38- require unnecessary, cumbersome, and onerous procedures with respect to the operation and maintenance of the System and the issuance of bonds thereunder It is also found that the refunding of the Outstanding Bonds in the manner herein pro- vided is expected to reduce significantly the amount of Net Revenues of the System which will be required for the amorti- zation of the Bonds, thus permitting lower electric rates to the customers of the System Therefore, for the reasons stat- ed in this Section 31, the City and the City Council have found it to be necessary and essential in the best interest of the City that such refunding be accomplished, and the Outstanding Bonds be refunded, discharged, and retired thereby -39- CERTIFICATE FOR ORDINANCE AUTHORIZING THE ISSUANCE OF CITY OF DENTON ELECTRIC SYSTEM REVENUr REFUNDING BONDS, SERIES 1978 THE STATE OF TEXAS COUNTY OF DENTON CITY OF DENTON We, the undersigned officers of said City, hereby certify as follows 1 The City Council of said City convened in REGULAR MEETING O1; THE 21ST DAY OF MARCH, 1978, at the Municipal Building (City Hall), and the roll was called of the duly constituted officers and members of said City Council, to -wit Brooks Holt, City Secretary Elinor Hughes, Mayor Bill Nash Dick Stewart Joe Mitchell Mary Claude Gay and all of said persons were present, except the following absentees 401tiy thus constituting a quorum Whereupon, among other business, the following was transacted at said Meeting a written ORDINANCE AUTHORIZING THE ISSUANCE OF CITY OF DENTON ELECTRIC SYSTEM REVENUE REFUNDING BONDS, SERIES 1978 was duly introduced for the consideration of said City Council and read in full It was then duly moved and seconded that said Ordinance be passed, and, after due discussion, said mo- tion, carrying with it the passage of said Ordinance, prevail- ed and carried by the following vote AYES All members of said City Council shown present above voted "Aye" NOES None 2 That a true, full, and correct copy of the aforesaid Ordinance passed at the Meeting described in the above and fore- going paragraph is attached to and follows this Certificate, that said Ordinance has been duly recordea in said City Council's minutes of said Meeting, that the above and foregoing paragraph is a true, full, and correct excerpt from said City Courcil's minutes of said Meeting pertaining to the passage of said Ordi- nance, that the persons named in the above and foregoing para- graph are the duly chosen, qualified, and acting officers and members of said City Council as indicated therein, that each of the officers and members of said City Council was duly and suffi- ciently notified officially and personally, in advance, of the time, place, and purpose of the aforesaid Meeting, and that said Ordinance would be introduced and considered for passage at said Meeting, and each of said officers and members consented, in ad- vance, to the holding of said Meeting for such purpose, and that said Meeting was open to the public, and public notice of the time, place, and purpose of said meeting was given, all as re- quired by Vernon's Ann Civ St Article 6252-17 3 That the Mayor of said City has approved, and hereby approves, the aforesaid Ordinance, that the Mayor and the City Secretary of said City have duly signed said Ordinance, and that the Mayor and the City Secretary of said City hereby de- clare that their signing of this Certificate shall constitute the signing of the attached and following copy of said Ordinance for all purposes SIGNED AND SEALED t 21st /V -1:i y Secretary (SEAL) - - - - - - - - - - - - day of March, 1978 Mayor C - - - - - - - - - - - - - - We, the undersigned, being respectively the City Attorney and the Bond Attorneys of the City of Denton, Texas, hereby cer- tify that we prepared and approved as to legality the attached and following Ordinance prior to its --passage as aforesaid City Attorney —�" Bond Attorneys