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HomeMy WebLinkAbout1976-038ORDINANCE NO 76-38 of AN ORDentonErelating by the OtoyCouncil therclationshIp0Ofythe City of Denton with the Texas Municipal Power Agency, approving the construction of an electric generating facility by the Agency, to be known as Bryan Lignite Number One as well as certain System Development and Re- liability Expenditures and Development Pro- jects and the issuance of bonds bn thePsaid Agency for such purposes app g Sales Contract and providing for its exe- cution on behalf of this City enacting other provisions incident and related to the purpose of the ordinance, and repeal- ing conflicting ordinances or resolutions, and declaring an emergency VX.REAS this governing body has received the request of the Board of Directors of the Texa,(nicthelcPoweruct>on Agency that this governing body approve of an electric generating facility by the Atency, ro be known as Bryan Lignite Number One and (2) certain System Development ind Reliability ExpendTtures and (3) certain Development Projects, and (4) a Power Sales Contract, and WHEREAS thi governing body has and does hereby deter- mine that It Is in the best interest for the. City and its inhabitants to approve the same and the issuance of bond, by the Agency to provide a portion of the funds which will be required T ,w, therefore, BE It ORDAINED BY THE CITY COUNCIL OF THE CITY OF DENTON, TEXAS SECTION 1 That attached hereto (and made a part hereof__for aJT pniposes) is a copy of the Resolution adopted by the Board of Directors of the Texas Municipal Power Agency, which among other things descril s and approves Bryan L11nite Number One as a Project certain System Develop- ment and Reliability Expenditures, Development Projects, and a Power '-,ales (,ontiact S_ECIION 2 1hat this governing body hereby approves (a) Bryan Lignite Number One as a Project and (b) The System Cevelopment and Retiability Expenditures described in the attached Resolution, and e (c) The Deve])pment Projects described in the attached Resolution, and (d) The issuance of Bonds by the Agency in the principal amount of $50,000,000 Such approval Is given irrespective of whether the ultimate ownership int,iest of the Agency in projects financed by the Texas Municipal Power Agency Revenue Bonds, Series 1975, and the Texas Municipal Power Agency Revenue Bonds, Series 1976, is 100% or 60% or some percentage between 60% and 100i, it being understood that no entity other than the Agency, Brazos Electric Power Cooperative, Inc will initially have an ownership interest As negotiations of the Agency with Brazos proceed, the Agency is requested to keep This City advised of progress SrrTION 3 This governing body reserves consideration of San ,.ague iLignite Number One, and the same is not, it this time, approved as a Project SECTION 4 That the form of bond resolution (being des ignat--en as "Proof of 8-23-76") which embodies the su,gested terms � nd conditionunder which $50 000,000 in )rinc2.pal amount of the bonds of the Agency shall be issued (such bonds to be dated September 1, 1976, with interest payable semiannually thereafter on March 1 and September 1 of each year) is hereby approved It is understood that certain final details of tho bonds will be inserted and other blanks completed, but no ibstantial change is to be made in Article III through Article VI nor shall any change be made which would cause the Bond Resolution to be contrary to the Power Sales Contract SECTION 5 That the Power Sales Contract by and between the Texas-Runicipal Power Agency and this City (the same being identical contracts between said Agency Ind the Cities of Bryan, Denton Garland, and Cteenville), being attached hereto, is hereby approved The Mayor of thi. City is hereby authorized to exe,ure said contract as the act and deed of this City and its governing body SEC110N 6 All ordinances or other actions heretofore taken wFEETFEre �r may be contrary to the provisions hereof or the provisions of the Power Sales Contract authorized to be executed are hereby repealed SECTION 7 That the public importance of this measure and tFieF-f—ac-t that it is to the best interest of the City to approve certain documents and the execution of a Power Sales Contract with the Texas Municipal Power Agency at the earliest possible time in order that the joint project of the Cities of Bryan, Denton, Garland and Greenville (to be accomplished through said Agency) may proceed, constitutes and creates an r emergency and urgew public necessity requiring that this ordinance take effcLt and be in full force from and after its passage, and it is so ordained PASSED AND APPROVED this the -9 7 ay of August, 1976 Mayor, city or DentolU Texas ATTEST UII ty Sec ary, City o Denton, Texas (City Seal) E X H I B I T A RESOLUTION by the Board of Directors of the Texas Municipal Power Agency relating to the approval of Bryan Lignite Number One as a Project, approving certain expenses as System Development and Reliability Expenses and Development Projects, making provision for notification of the adoption of this resolution to the governing bodies of the Cities of Bryan, Denton, Garland, and Greenville, approving a Power Sales Contract and providing for its execution, resolving other matters incident and related to the purpose of this resolution, repealing a certain resolution heretofore adopted, and providing an effective date WHEREAS, this governing body has reviewed the necessity for the immediate institution of a program to acquire a new electric generating unit so as to provide the electric power and energy which will be needed to supply the needs of the Cities of Bryan, Denton, Garland and Greenville, and WHEREAS, the Brazos Electric Cooperative, Inc (hereafter called Brazos) has heretofore acquired a 3% undivided ownership interest in the project financed with the proceeds of the "Texas Municipal Power Agency Revenue Bonds, Series 1975", and for a two year period after the retirement of such bonds may give notice of its intent to increase its ownership up to 40% and WHEREAS, the Board of Directors of Brazos has heretofore adopted a resolution (on the 28th day of July, 1976) indicating a possible desire to adjust its percentage ownership in the previous and proposed projects, a copy of such resolution being attached hereto, and WHEREAS, this Board has, in the course of discussions and negotiations, been assured that Brazos is willing to give further consideration to the Agency's acquisition of an ownership interest in or a firm right to purchase power and energy from the San Miguel Unit One plant (up to 25%, which would be one-half of the interest of Brazos) which is now being developed by Brazos in cooperation with the South Texas Electric Cooperative, Inc , and WHEREAS, San Miguel Unit Number One is presently scheduled to be operative in 1980 at approximately 40% of capacity and in 1981 at approximately 80% of capacity, such unit being designed to provide 400 MW, and WHEREAS, the load studies of the electric systems of Brazos and the Cities completed by the Agency indicate there is need for two generating units of the capacity of San Miguel Number One and Brazos Lignite Number One to be placed in service in order to meet the projected load requirements of the Cities and Brazos, but that it would not be necessary for Brazos to increase its ownership interest (and therefore the right to take power and energy in direct proportion to its percentage of ownership in Bryan Lignite Number One) unless the Agency acquires an ownership interest in or firm right to power and energy from San Miguel Unit Number One, and that the foregoing is also the current position of Brazos in the negotiations, and WHEREAS, it appears to this Board that consideration should be given to the suggestion of exploring the possibility of making both the San Miguel Unit Number One and Bryan Lignite Number One joint Projects of the Agency and Brazos, and WHEREAS, at the time of the prior approval of Bryan Lignite Number One by this Board it was contemplated by this Board that the undivided ownership interest of Brazos would be 1% and the Agency 99%, and in the light of the foregoing it is proper for this Board to reconsider Bryan Lignite Number One as a Project, now, therefore, BE IT RESOLVED BY THE BOARD OF DIRECTORS OF THE TEXAS MUNICIPAL POWER AGENCY SECTION 1 That all of the recitals contained in the preamble hereoTre found to be true and are adopted as findings of fact by this Board The resolution of the Board of Directors of Brazos (mentioned in the preamble) shall be attached to this resolution and is made a part hereof for all purposes SECTION 2 That Bryan Lignite Number One is hereby approved as a— Project of the Texas Municipal Power Agency, such Project being described as follows An electric generating plant (including land), steam boiler, steam turbine, electric generator cooling facilities, associated transmission, transformation and switching facilities so as to connect the plant to existing or proposed facilities, a lignite mine, railroad siding, shops warehouses, construction camp, office, dwellings and other structures, fixtures, equipment, supplies or other items which this Board finds are needed or useful in connection with the construction, maintenance, and operation of the plant (and providing fuel for the same) so the electric generating plant shall be placed in service as an operating utility SECTION 3 It is anticipated that such initial generating plant will in-' cu e a steam turbine acting as the prime mover of an electric generator of approximately 400,000 kilowatts (net) The steam boiler, steam turbine and electric generator will be of the outdoor type with all other equipment relating to plant services and control enclosed in appropriate buildings It is planned that plant cooling facilities are to be in the form of a pond supplied from underground water supply or the water purchased from an existing water -storing entity in the area for make-up water or by impounded water The strip mining operation includes equipment for excavation and transportation and the Project includes communication equipment, all necessary permits, licenses, developmental rights, easements, right-of-way, approvals certificates of state and federal agencies where applicable, real estate and interest in properties where necessary That the System Development and Reliability Expenditures include (a) Olinger - Greenville Transmission Line - the estimated balance required to provide survey, right of way, line construction, interconnection and engineering for a new 20 mile 138 KV transmission line from Greenville to Olinger (b) Bryan Capacitors Bank - to prevent Bryan from experiencing severe voltage drop during certain pooling contingencies, 21 6 MVAR of 69 KV capacitor banks are to be placed in service (c) Bryan interconnection - a 20 mile 138 KV line from Hearne to Bryan to provide transmission interconnection and reliable back up for the new 100 MW Dansby unit scheduled for completion in 1978 (d) Garland 345 MVA line (right of way) - to deliver power from Comanche Peak and Bryan Lignite Number One to Garland and Greenville, a 345 KV line, two double circuit 138 KV lines, and a 500 MVA 345/138 KV autotransformer will be required A 345 KV substation is to be located in Northeast Garland Right of way is to be acquired at this time since the completion date is now scheduled as June, 1980 (e) Denton interconnection - improvement program to provide firm transmission supply to over 231 MW of load in Denton and Roanoke area, including the conversion of portions of an existing 69 KV transmission system to 138 KV operation and two new 138 KV interconnections Rights of way and substation site purchases are to proceed immediately (f) Fuel exploration and acquisition program - the search for fuel for projects other than Bryan Lignite Number One (g) Microwave Communication - continuation of the development of a communication system begun with the initial financing of the Agency (h) Economic Dispatch Studies - continuation of studies (begun with proceeds of initial financing by the Agency) operating the most efficient and economical generating units SECTION 4 That it is proposed that bonds of the Agency be issued in the principal amount of $50,000,000, that the bond proceeds be expended for the purposes shown below I Application of Proceeds (Estimated) Construction Fund Capitalized Interest at 7-1/2%) Capitalized Reserve Legal, Fiscal Refunding of Series TOTAL (2 years 1975 Bonds *Plus accrued, unpaid interest thereon II Application of Construction Fund $27,050,855 7 500,000 4,074,145 750,000 0, 625, A Projects - $22,664,000 1 Bryan Lignite B System Development & Reliability $3,386,885 1 Transmission a Greenville/Olinger Line b Bryan Capacitor Bank c Bryan Interconnection d Garland 345 MVA Line (right of way) e Denton Interconnection Other a Fuel exploration and acquisition Program b Microwaive Communications System c Economic Dispatch System Develo ment Pro ects - $1,000,000 Vi age Ben Pisnped Storage 2 Miscellaneous Preliminary Projects That the estimated expenditures are subject to adjustment and finalization as preliminary estimates at such time as the bonds of the Agency are sold and definative construction bids are received A tentative budget shall be prepared when bonds of the Agency are sold and then revised as construction bids are received SECTION 5 Approval is given to Bryan Lignite Number One as a Prole— ct, and the System Development and Reliability Expenditures and Development Projects are also approved, irrespective of whether the ultimate ownership interest of the same by the Agency is 100% or 60% or some percentage between 60% and 100% The Executive Director is authorized to cause representatives of the Agency to work with representatives of Brazos to determine the amount of ownership interest that Brazos is to acquire SECTION 6 That a copy of the preliminary engineering report of R W Beck and Associates has heretofore been supplied to each of the Cities of Bryan, Denton, Garland and Greenville and to Brazos A copy of this resolution shall also be transmitted to each of said Cities with the request that the Project (Bryan Lignite Number One), System Development and Reliability Expendi- tures and the Development Project be approved by them Neither the Agency nor Brazos have approved (at this time) the partici- pation of the Agency in the San Miguel Number One Unit, and the Agency recognizes the same would be submitted to the Cities for consideration as a Project prior to the time a firm agreement with Brazos is possible, assuming determinations are made that the two units should be joint Projects of the Agency and Brazos A copy of this resolution shall also be forwarded to the Exectuive Vice -President and General Manager of Brazos as an indication of the intention of this Board to consider the matters suggested in the attached resolution and endeavor to reach a mutually satisfactory agreement SECTION 7 That the Power Sales Contract by and between thisAgency and each of the Cities of Bryan, Denton, Garland and Greenville, Texas, the same being attached here- to and made a part of this resolution for all purposes is hereby approved The President of the Board of Directors is hereby authorized and empowered to execute the said contract for and on behalf of Texas Municipal Power Agency and as the act and deed of said Agency and this Board of Directors SECTION 8 The resolution of this Board adopted on the 15th _ay o=uly, 1976, being entitled as follows "A RESOLUTION by the Board of Directors of the Texas Municipal Power Agency relating to the approval of Bryan Lignite Number One as a Project approving certain expenses as System Development and Reliability Fxpenses and Development Projects making provision for notification of the adoption of this resolution to the governing bodies of the Cities of Bryan, Denton Garland and Greenville, resolving other matters incident and related to the purpose of this resolution " is hereby repealed SECTION 9 This resolution shall be effective upon adoption PASSED AND APPROVED this 26th day of August, 1976 /s/ C E Duckworth President Board of Directors Texas Municipal Power Agency ATTEST /s/ Jim White Secretary, Board of Directors Texas Municipal Power Agency CERTIFIED COPY OF RESOLUTION AUTHORIZING PARTICIPATION IN TMPA PROJECTS On motion by John Fought and seconded by Brll Parker the following resolution was adopted WHEREAS, the Brazos Electric Power Cooperative, Inc on September 15, 1975 entered into a participation agreement with the Texas Municipal Power Agency for a minimum of 3% participation in joint TMPA - Brazos projects with an option for Brazos to participate up to 40%and with Brazos guaranteeing 25%of the $10 million loan procured by TMPA under the date of October 30, 1975, and WHEREAS, it was the intent of TMPA to obtain additional loan funds within a 12month period of time for further development or the projects initiated with the $10 million loan and to repay 1he $10 million loan with the proceeds of such new loan, and WHERFAS, TMPA in order to accomplish such objective must act before September 15, 1976 and has informed Brazos that its legal counsel reports that unless Brazos participates in such new loan at least to the extent of 1% TMPA will be unable to sell or interchange with Brazos any portion of a generation project which may be developed from such new loan, and WHEREAS, Brazos is desirous of maintaining its position of flexibility to participate in projects Brazos is developing with TMPA, more specifically thr lignite project in the vicinity of Bryan, Texas, and WHEREAS, such flexibility is imperative in the light of current negotiations with TMPA fo its participation in the Brazos - South Texas Electric Cooperative San Miguel project, NOW, THEPEFORE, BE IT RESOLVED that Ross A Segrest Executive Vice Presid-at and Genent Manager of the Brazos Electric Po +er Ccoperative, Inc be and he eby is ou•horized to enter into an agreement with the Texas Municipal PowerAgency which guarantees participation by Braze to the extent of 1% of projects developed under the $50 million bond issue proposed by TMPA and with the provision that Brazos can participate with TMPA in the ownership of generation and transmission projects with such minimum owner- ship being 1% but with an option for Brazos to acquire up to 40io with such agreement beinq subject to the approval of the Brazos Power Committee and the RLrol Electrification Administration, and BE IT FURTHER RESOLVED that the above described agreement will be substituted for and replace the current 30i-, participation agreement with TMPA and relieve Brazos of the obligation for guaranteeing any percentage of the $10 million loan heretofore procured by TMPA or the $50 million loan proposed to be procured by TMPA with the understanding that such funds which Brazos has already paid under the 3% participation agreement be applied toward its obligation under the 1% participation agreement --—————————————————————————————————————— I, Robert H Bunting, Secretary of the Brazos Electric Power Cooperative, Inc do hereby certify that the above and fo egoing is a true and correct copy of a resolution duly passed at a special ineeting of the Board of Directors of said Coopevhve, held at Waco, Texas on the 23m day of July, A D 1076 3iv_n under my hand and seal of said Cooperative, this the 28th day of July 1976 fl, ' I ' '� 1 )1 ' --V L'-"7- Robert H Bunting, Sege ary POWER SALES CONTRACT BETWEEN TEXAS MUNICIPAL POWER AGENCY AND CITY OF BRYAN, TEXAS CITY OF DENTON, TEXAS CITY OF GARLAND, TEXAS CITY OF GREENVILLE, TEXAS Dated September 1 1976 TABLE OF CONTFNTS Page Section I Term of Contract i Section 2 Definitions 1 Section 7 Sale and Purchase of Power and Energy 3 Section 4 Performance of Certain Services 4 Section 5 Delivery of Power and Energy 5 Section 6 Annual System Budget 5 Section 7 Rates and Charges 6 Section 8 Meter Readings and Payment of Bills q Section 9 Meter Testing and Billing Adjustment 7 Section 10 Payments to Constitute Operating Expenses of my System 7 Section 11 City Rate Covenant 7 Section 12 Covenants of the Agency 7 Section 13 Project Approval and Rights of Cities when a Project is not Approved g Section 14 Debt Service Guarantee Operating and Maintenance Expenses 10 Section 15 Remedies in Event of Default 11 Section 16 Re creation of Agency 12 Section 17 Payment Due Dates and Delinquency 12 Section 18 Power Sales Contracts 13 Section 19 Continuation of Services 13 Section 20 City Not to Sell its Electric System 13 Section 21 Assignment of Rights of a City 13 Section 22 Dissolution of the Agency 13 Section 23 Force Majeure 13 Section 24 Insurance 14 Section 25 Reports 14 Section 26 Records and Accounts 14 Section 27 Access 14 Section 28 Governmental Rates Regulations and Laws 14 Section 29 Easements 15 Section 30 Cancellation of Prior Contract 15 Section 31 Notices 15 Section 32 Severabihty 15 Section 33 Contracts to be Separate 15 Exhibit A 17 Schedule B 19 (r) t POWER SALES CONTRACT BETWEEN TEXAS MUNICIPAL POWER AGENCY AND CITY OF BRYAN, TEXAS CITY OF DENTON, TEXAS CITY OF GARLAND, TEXAS CITY OF GREENVILLE, TEXAS This Contract made and entered into as of the 1st day of September 1976 by and between the Texas Municipal Power Agency a municipal corporation and political subdivision of the State of Texas and the City of Bryan the City of Denton the City of Garland and the City of Greenville Texas each of which cities is a municipal corporation of the State of Texas and a home rule city (herein collectively called "Cities or individually called City ) WITNESS E TH WHEREAS, each City has need for an economical reliable source of Power and Energy to meet the growing demands of its customers and has determined to purchase such Power and Energy from the Agency, and WHEREAS the Agency proposes to construct or acquire electric generating plants and transmission lines or to acquire ownership interests therein and to purchase or otherwise obtain Power and Energy for the purpose of supplying Power and Energy to each City and others and WHEREAS each City desires to purchase and the Agency desires to sell Power and Energy on the terms and conditions herein set forth Now THEREFORE in consideration of the mutual undertakings herein contained the Agency and each Pty agree as follows Section 1 Term of Contract This Contract shall become effective upon the delivery to the Agency of the proceeds of the initial series of Bonds Subject to the provisions of Sections 16 and 19 hereof, this Contract shall remain in effect for a period of thirtylive (35) years from the date hereof or until such time as all of the Debts of the Agency shall have been paid (or provision for such payment shall have been made), whichever is later Section 2 Definitions As used herein (a) "Act" shall mean Chapter 166 Acts of the 63rd Legislature Regular Session 1973 as amended by Chapter 143, Acts of the 64th Legislature Regular Session 1975 and all laws amendatory thereof or supplemental thereto (b) "Agency' shall mean the Texas Municipal Power Agency as created and established (pursuant to the Act) by concurrent ordinances adopted by the governing bodies of the Cities, or its successor (c) `Annual System Costs shall mean, with respect to a Contract Year and to the extent not paid or to be paid from the proceeds of Bonds or other funds legally available to the Agency, all costs and expenses of the Agency that are paid or incurred during such Contract Year and are allocable to the System including, but not limited to the payment of the Operating and Maintenance Expenses of the System all costs charges and expenses of replacements and renewals of the System and all taxes, assessments or other governmental charges lawfully imposed on Agency or on the revenues of the System or payments in lieu thereof and the deposit or payment of any and all amounts which the Agency may now and hereafter become obligated to deposit into any fund or pay from revenues of the System by law contract, or any Bond Resolution (d) `Annual System Budget shall mean with respect to a Contract Year the budget of the Agency prepared in accordance with Section 6 hereof for such Contract Year or in the case of an amended Annual System Budget for the remainder of such Contract Year (e) Approved Project shalt mean a Project which has been approved pursuant to Section 13 of this Contract The term does not include Projects which may be approved after the Agency is recreated pursuant to Section 16 of this contract (f) Bonds shall mean all bonds issued by the Agency pursuant to the Bond Resolution (g) Bond Resolution shall mean the resolution authorizing the issuance of the `Texas Municipal Power Agency Revenue Bonds Series 1976 and any resolution subsequently adopted by the Agency which authorizes the issuance of Bonds including refunding Bonds on a parity with the said Series 1976 Bonds Subject to the provisions of paragraphs (e) and (f) of Section 14 in either of the events that (i) a City disapproves a Project (pursuant to Section 13 hereof) and elects Option One or (it) the Agency is recreated pursuant to Section 16 hereof and entities other than all of the Cities of Bryan Denton Garland and Greenville contract with the Agency to provide moneys for the payment of any obligation of the Agency obligations thereafter issued shall not be on a parity with the Series 1976 Bonds and such obligations if any shall not be deemed to have been issued pursuant to the Bond Resolution (h) Contract Year shall mean the fiscal year of the Agency as from time to time determined by the Agency provided however the first Contract Year of the Agency shall begin on the effective date of this Contract and shall end on the last day of the fiscal year of the Agency within which this Contract becomes effective (t) Debts shall mean Bonds and Subordinated Indebtedness as defined in the Bond Resolution together with interest thereon and redemption premiums if any (j) Debt Service or Debt Service Requirements shall mean, with respect to any period the net aggregate of the amounts required to be paid during said period on any Debts outstanding as the same shall become due (k) Development Project shall mean any one or more of the following (i) repairs replacements, or modifications to an existing generating facility owned in whole or in part by the Agency and which are designed to increase or maintain an operating efficiency of the facility or (it) preliminary and developmental work to determine whether any work should be undertaken as a Project or engineering legal, and financial studies in connection with the planning development or utilization of power resources or (in) any purpose for which proceeds of Bonds may be expended under the Act except a Project The Agency may issue Bonds (in a separate series or combined with Bonds being issued for other purposes) to provide funds for a Development Project upon compliance with the provisions for the issuance of Bonds as set forth in the Bond Resolution but the approval of the Cities pursuant to Section 13 hereof shall not be required (1) Energy shall mean kilowatt hours (kwh) (in) Net Energy For Load shall mean a City s net Energy generation plus Energy received from others minus Energy delivered to others at the Points of Delivery during the period under consideration (n) `Operating and Maintenance Expenses shall mean all expenses incurred in the operation and maintenance of the System and the Agency which are properly accounted for such purpose under 2 generally accepted accounting principles Such term does not include depreciation or obsolescence charges or reserves therefor interest charges and charges for the payment of principal, or amortization of Bonds or other indebtedness of the Agency (o) "Points of Delivery shall mean the points on the System of or available to the Agency as set forth in Exhibit A as amended from time to time by the Agency and the City concerned at which Power and Energy are made available to a City pursuant to this Contract (p) "Power shall mean kilowatts (kw) (q) `Project shall mean one or more of the following (i) any power generating facility (or interest therein) to be constructed or acquired by the Agency as well as fuel therefor and any trans mission facility required to connect or interconnect such generating facility with a City or others or (it) any addition or improvement to a power generating facility which is then owned in whole or in part by the Agency or (in) any contract right to purchase or receive a power supply or transmission capacity (a) by the making of a prepayment of capital costs which are associated with the supply or capacity so purchased or (b) the execution of a take or pay contract having a duration of more than 10 years, including any renewals thereof, or (c) the execution of a contract to purchase Power or Energy (either or both) on an all requirements basis The term does not include any facility financed with the proceeds of Special Contract Obligations as permitted under and defined in the Bond Resolution (r) "Rated Capacity' shall mean the maximum load expressed in net kilowatts (kw) that a generating source (as identified in the definition of Project) is capable of supplying under good operating conditions (s) "System' shall mean the Agency s interest in all properties (owned or operated by or on behalf of the Agency) which are financed in whole or in part through the issuance of obligations by the Agency for Approved Projects, System Development and Reliability Expenditures and Development Projects prior to the time one of the Cities disapproves a Project under the provisions of Section 13 and elects Option One under paragraph (d) of Section 19 The term also includes any contract for providing services or Power and Energy, either or both The initial System is hereby designated as System A The term does not include the Agency s interest in any facility financed with the proceeds of (i) Special Contract Obligations issued by the Agency as permitted under and defined in the Bond Resolution or (u) bonds issued to finance any Project which is not approved by all of the Cities if a City or Cities which disapprove a Project elect Option One under Section 13 (t) "System Development and Reliability Expenditures means those expenditures which the Agency determines, under prudent utility practices, should be expended over a given period of time for (i) transmission and related facilities to increase the reliability of the delivery of Power and Energy by the Agency or (n) the exploration for development of or the acquisition of a fuel supply or supplies in order to provide fuel for generating facilities which are not then owned or in the process of construction for and on behalf of the Agency or (in) repairs replacements or modifications to an existing, generating facility (owned in whole or in part by the Agency or under construction by it) which are designed to increase the Rated Capacity of such generating facility Such expenditures which are to be paid from the proceeds of a series of Bonds shall be considered a single Project (uD "Uniform System of Accounts and all other accounting methods and terminology contained or referred to in this Section or elsewhere in this contract means accounting principles, methods and terminology followed and construed as nearly as practicable, in conformity with the Uniform System of Accounts for Class A and Class B Public Utilities and Licensees and accounting rules and regulations thereunder prescribed by the Federal Power Commission for privately owned power companies which are subject to its jurisdiction and engaged in business comparable to the business of the Agency as amended from time to time, or such other system as may be required by any regulatory agency Section 3 Sale and Purchase of Power and Energy (a) Each City during the time this Section is applicable shall (1) Purchase and receive from the Agency all Power and Energy which it shall require for the operation of its electric system in excess of the amount (i) supplied by any generation and 3 transmission facilities owned by it on the effective date of this Contract including generating and transmission facilities under construction on such date, and improvements or extensions of generating facilities which increase the Rated Capacity of same so long as the increase during any period of two successive Contract Years does not exceed 10% of the same s Rated Capacity at the beginning of such period provided the Cities and the Agency may in writing waive such 10% limit and (n) supplied from any generation facility primarily fueled from and the construction and operation of which is incidental to the disposal of solid waste that is hereafter constructed and owned by one or more of the Cities together with any transmission facilities that are necessary for the transmission of Power and Energy therefrom and (2) Binds itself to pay for all Power and Energy purchased or otherwise acquired by it from the Agency pursuant to this Section 3 said payment to be made at the rates and charges established pursuant to Section 7 of this Contract The foregoing provisions of this Subsection (a) shall have no application to the purchase or exchange of Power or Energy (i) on an emergency maintenance or stand by basis or (u) on the basis of economic dispatch between the Cities and Brazos Electric Power Cooperative, Inc (Brazos) or any one or more of such entities or (m) under the existing pooling agreement be tween the Cities and Brazos and future pooling agreements among the foregoing and others, all, or any combination thereof and the Agency (b) In the event that the Agency is not able to supply the Power and Energy required or re quested under its power sales contracts it shall allocate its available Power and Energy monthly among the (1) Cities pro rata in accordance with their respective Net Energy for Load during the corresponding month of the preceding Contract Year unless a governmental agency requires a different allocation and (n) other power purchasers as may be provided by contract The Agency shall devote its best efforts to the acquisition by purchase or otherwise of the Power and Energy required to meet the requirements of its power sales contracts During the period the Agency is unable to supply Power and Energy required or requested under its power sales contracts so that an allocation of Power and Energy is made the Cities shall be permitted (during such period) to purchase only such amounts of Power and Energy as are not supplied by the Agency (c) The provisions of this Section do not apply to any City from and after the effective date a City (i) disapproves a Project under the provisions of Section 13 and (it) elects Option One, nor shall the provisions of this Section apply to a City which disapproves a Project and elects Option Two Section 4 Performance of Certain Services (a) In addition to the delivery of Power and Energy hereunder and the performance of all acts and actions incident thereto the Agency agrees that to the extent not performed pursuant to or as a consequence of any other Section of this Contract it will either perform or cause to be performed, in a prudent and economical manner, the following services concerning the interrelated activities of the Agency the Cities and others as well as various combinations of such parties (1) comprehensive planning for Power and Energy and the transmission thereof to mutually agreed upon load centers, (2) undertake or coordinate and monitor the design construction and operation of joint facilities (3) plan for and undertake or coordinate and monitor the economic dispatching of Power and Energy of the System and the systems of the Cities and other entities (to the extent permitted by contract) to which such systems are interconnected pursuant to subsequent agreement(s) be tween the Cities the Agency and any other entity (4) provide accounting and cost allocation services, and 4 (5) such other services as the Agency and a City from time to time shall determine to be appropriate and necessary (b) City hereby binds itself to pay for the cost of the services that are to be provided by the Agency pursuant to Subsection (a) of this Section 4 such payment to be made at the rates and charges established pursuant to Section 7 of this Contract Section 5 Delivery of Power and Energy (a) The Power and Energy to be furnished under this Contract shall be alternating current sixty (60) hertz three phase, subject to conditions of delivery and measurement as hereinafter provided (b) The Points of Delivery, delivery voltage and other conditions of service shall be in accordance with the service specifications set forth in Exhibit A attached to this Contract as amended by the Agency and the concerned City from time to time (c) The City shall make and pay for all connections between its facilities and the System owned by or available to the Agency at the Points of Delivery The City shall install own and maintain any necessary substation equipment at the Points of Delivery from the System of or available to the Agency and shall install, own and maintain switching and protective equipment of adequate design and sufficient capacity beyond such Points of Delivery to enable the City to take and use the Power and Energy supplied under this Contract without hazard to the System In the event that the Points of Delivery set forth in Exhibit A are not on the City s electric system, the City shall arrange for transmission of Power and Energy sold under this Contract to its system including the installation and maintenance of any facilities required for it to receive such Power and Energy into its system (d) Except as otherwise agreed metering equipment shall be furnished installed and maintained by the Agency at each Point of Delivery to the City at the low voltage side of the transforming equipment located there Loss adjustments for low voltage side or remote metering shall be as specified in said Exhibit A or as otherwise agreed by the parties Section 6 Annual System Budget (a) The Agency shall prepare or cause to be prepared an Annual System Budget at least ninety (90) days prior to the beginning of each Contract Year which shall itemize estimates of Annual System Costs and all revenues income or other funds to be applied to such Annual System Costs for and applicable to such Contract Year Such Annual System Budget shall also utilize and take into account forecasts which shall be furnished by each City to the Agency at least one hundred twenty (120) days pnor to the beginning of such Contract Year of the monthly peak Power and Energy requirements estimated to be obtained from the Agency during such Contract year (b)I After consideration of any comments of the Cities the Agency, not less than thirty (30) days prior to the beginning of such Contract Year shall adopt an Annual System Budget for such Contract Year and the rates and charges for Power and Energy to be furnished and the services to be performed during such Contract Year and shall cause copies of such Annual System Budget and rates and charges to be delivered to the Cities Provided, however the Annual System Budget for the first Contract Year shall be prepared, considered adopted and delivered in the manner which the Agency deems best (c) If, at any time or from time to time after the adoption of the Annual System Budget in accordance with Subsection (b) of this Section 6 the Agency estimates that the Annual System Costs or revenues for the Contract Year or any part thereof for which such Annual System Budget applies will be greater or less than the Annual System Costs or revenues set forth in the Annual System Budget or that the amount of Power and Energy which the Agency expects to deliver during such Contract Year or any part thereof is greater or less than the amount of Power and Energy which the 5 Agency estimated it the time of adoption of the Annual System Budget would have been delivered during such Contract Yuri then the Agency may prepare an amended Annual System Budget The amended Annual System Budget shall be timely adopted by the Agency and transmitted to the Cities (d) In the event a budget for the ensuing Contract Year has not been adopted on or before the first day of the Contract Yeai the total amount budgeted for the preceding Contract Year shall be the tot-1 amount of the temporary budget for such purposes for the ensuing Contract Year The temporary budget shall be effective only until such time as a permanent budget has been finally adopted and approved The chief administrative officer of the Agency shall be responsible for the allocation for expenditure of the total amount of the temporary budget until a permanent budget is adopted and approved Section 7 Rates and Charges (a) the rates and charges of the Agency to the Cities for Power and Energy and for services supplied shall be (1) nondiscriminatory and (2) fair and reasonable and be based upon the cost of providing the Power and Energy or providing the service with respect to which the rate or charge is based and (3) adequate (after taking into consideration other moneys received or anticipated to be received) in each Contract Year to pay or make provision for paying Annual System Costs (b) When the Board of Directors proposes to establish a new rate or charge as determined under Schedule B it shall give each City written notice that it proposes to establish a new rate or charge for Power and Energy or for services (setting forth such charge) on a date certain (which shall not be less than 120 days from the mailing of the notice to each City all such notices to be mailed simultaneously) Except as provided in paragraph (c) hereof no charge or adjustment in any rate or charge made by the Agency shall be effective if any City by resolution or ordinance of its governing body enters an objection to such adjustment in a rate and charge by causing to be filed with the chief administrative officer of the Agency a copy of such resolution or ordinance more than 30 days prior to the suggested effective date of the proposed new rate or charge In the event a City enters an objection to the charge or adjustment in a rate or charge the effective date of the charge or adjustment shall be postponed pending the resolution of the dispute in the following manner (1) The Cities may jointly select an independent consultant or consultants to prepare a rate evaluation and schedule of proposed rates and charges provided if such joint selection is not made within 30 calendar days of the filing of an objection (evidenced by the passage of a resolution or ordinance) such independent consultant shall be appointed by the Board of Directors of the Agency (2) the report of the independent consultant shall be submitted to the Agency and each City for consideration and (3) If the report of the independent consultant is approved by the governing bodies of the Agency and the Cities the same shall be effective as of the date originally suggested by the Agency in its notice If the adjustment is not approved or an agreement reached within 15 days after the receipt of the report of the independent consultant then the Agency and the Cities shall each have all of the rights and remedies at law and in equity except that in no event shall any City be relieved of its obligation to the holders of Bonds under Section 13 or 14 of this Contract 6 (c) The Board of Directors of the Agency may change or adjust any rate or charge for Power and Energy or for services supplied by it to a City if such Board determines that (1) an emergency exists and (i) the emergency adjustment meets the criteria established in paragraph (a) of this Section The emergency adjustment shall be effective for a period of 180 days (unless the notice from the Agency specifies a lesser period) and shall be effective 30 days after the mailing of notice to the Cities (all of which notices shall be mailed simultaneously) Section 8 Meter Readings and Payment of Bills The Agency shall read meters or cause meters to be read and bill the City for Power and Energy furnished under this Contract at monthly intervals It shall also bill each City monthly for services rendered pursuant to Section 4 of this Contract Section 9 Meter Testing and Billing Adjustment The Agency shall test and calibrate meters or cause meters to be tested and calibrated by comparison with accurate standards at intervals of twelve (12) months, or such other intervals as the parties agree The Agency shall also make or cause to be made special meter tests at any time at a City s request The costs of all tests shall be borne by the Agency, provided, however that if any special meter test made at a City s request shall disclose that the meters are recording accurately, the requesting City shall reimburse the Agency for the cost of such test Meters registered not more than lh of 1 % above or below normal shall be deemed to be accurate The readings on any meter which shall have been disclosed by test to be inaccurate shall be cor rected from the beginning of the monthly billing period immediately preceding the billing period during which the tests are made in accordance with the percentage of inaccuracy found by such test provided, that no correction shall be made for a longer period unless the Agency and City involved mutually agree thereto Should any meter fail to register, the Power and Energy delivered during such period of failure shall for billing purposes be estimated by the Agency and the City from the best information available The Agency shall notify the City or cause the City to be notified in advance of the time of any meter reading or test so that the City s representative may be present at such meter reading or test Section 10 Payments to Constitute Operating Expenses of City System Each City s obligation to make the payments under this Contract shall constitute an operating expense of its electric system payable solely from the revenues and receipts of such electric system Each City shall be bound and obligated to make such payments and the obligation to make the payments under Section 14 of this contract shall be unconditional Section 11 City Rate Covenant Each City shall establish maintain and collect rates and charges for the electric service of its electric system which shall produce revenues at least sufficient together with other revenues available to such electric system and available electric system reserves to enable it to pay to the Agency, when due all amounts payable by such City under this Contract Se�tion 12 Covenants of the Agency (a) After first satisfying the Power and Energy requirements of the Cities as such requirements are established from time to time, and the requirements of other power purchasers the Agency shall use its best efforts to market and dispose of any and all surplus Power and Energy available from the System or which the Agency is obligated by contract to purchase or otherwise acquire, and which is in excess of the requirements of all Cities and other power purchasers upon the most economically advantageous terms and conditions obtainable, to the extent that it may legally do so (b) The Agency shall use reasonable diligence to provide a constant and uninterrupted supply of Power and Energy hereunder If the supply of Power and Energy shall fail or be interrupted, or become defective by reason of force majeure as hereinafter provided the Agency shall not be liable therefor or for damages caused thereby 7 (c) The Agency shall diligently enforce and take all reasonable steps actions and proceedings necessary for the enforcement of all terms covenants and provisions of any power sales contracts The Agency shall not amend this Contract without first having secured the pnor written consent of all Cities but no amendment shall be made in Section 14 or Section 16 of this Contract (d) The Agency covenants and agrees that it will operate maintain and manage its System or cause the same to be operlted mamrimed and maniged in an efficient and economical manner con- sistent with sound utility practice and in accordance with standards normally used by utilities owning like properties (e) The Agency covenants that it will not make a change in any Bond Resolution so as to create additional Funds (except those now established by Article V of the resolution authorizing the issuance of the Series 1976 Bonds) without the approval of such changes by the governing body of each City nor shall any change be made in the amounts required to be paid into accumulated in or maintained in the Bond Fund Reserve Fund or the Contingency Fund except as provided m the resolution authorizing the Series 1976 Bonds without such approval Section 13 Project Approval and Rights of Cities when a Project is not Approved (a) Except as to Bryan Lignite Number One (hereby approved as a Project) prior to the issuance and sale of Bonds to provide money for each Project the Agency shall submit a written notice to each City as required by the provisions of paragraph (b) of this Section If a Project has been approved puisuant to paragraph (e) of this Section the Agency may thereafter issue sell and deliver Bonds in order to fully provide funds for such Project, including the design construction and the placing of same in commercial operation or to meet any requirement of law in eluding those of a regulatory agency having jurisdiction or to pay judgments or casualty losses not covered by insurance or to meet a safety or overriding public necessity (b) A written notice of the Agency s intention to provide funds (through the issuance of Bonds) for a Project shall contain a general description of the Project, the projected sources and uses of funds for all aspects of the construction and testing of the Project and a statement to the effect that, in the opinion of the Agency the Project is necessary for the Agency to meet its commitments under power sales contracts and is economically feasible together with an explanation of the Agency s basis for this opinion Within 60 days after receipt of such notice each City shall give the Agency written notice of its approval or disapproval of the Project If a City fads to give the Agency such written notice within such 60 day period, then said City shall be deemed to have approved the Project (c) If all of the Cities (who have approved all previously Approved Projects) approve a Project then the Agency may proceed with the issuance sale and delivery of Bonds to provide such Project If one or more of such Cities should disapprove the Project then the Agency shall give each such City written notice which of the Cities approved the Project and which of the Cities disapproved the Project Any of the Cities who approved the Project may then give the Agency written notice of its or their desire that the design and construction of the Project be commenced and, if the Agency de- termines that the Project is still feasible it may proceed with the issuance, sale and delivery of such Bonds but the City which faded to approve such Project shall be required (within 60 days of being notified by the Agency that it will proceed with the issuance sale and delivery of Bonds for such Project) to elect to limn its responsibilities under this Contract under Option One or Option Two as set forth in paragraph (d) of this Section (d) If any City disapproves a Project then within the time specified in paragraph (c) such City shall, by a resolution or ordinance adopted by its governing body, elect which of the following options shall govern its future responsibilities under this Contract If the City disapproving a Project hereunder fads to timely communicate to the Agency as to the election of an option under the provisions of this Section, it shall be conclusively presumed that Option Two has been elected 8 ti (1) Option One (a) Each City shall be entitled to schedule and receive each month for its own account, the same proportion of the available Power and Energy from the System as its Net Energy for Load relates to the total NLt Energy for Load of all the Cities for the corresponding month of the completed Contract Year next preceedmg the effective date of the option (b) As consideration for such Power and Energy and the right to purchase the same, each City shall each month pay to the Agency its proportionate share of the Annual System Costs equal to the percentage of its Net Energy for Load of the Net Energy for Load of all Cities for the Contract Year next preceedmg the effective date of the option (c) Each City s obligation under Section 14 of this Contract shall be equal to the percentage as calculated under the preceeding sentence (2) Option Two (a) During the balance of the term of this Contract after the effective date of the option the amount of Power and Energy required by the City exercising the option to be purchased under Section 3 of this Contract shall be limited Such City shall, in each cal- endar month take or pay for an amount of Power and Energy equal to the amount of Power and Energy purchased by such City from the Agency during the corresponding month of the 12 consecutive months period preceding the calendar month of the effective date of the exercise of the option or such other amount of Power and Energy as may be from time to time agreed upon by the City the Agency and the other Cities and the Agency shall no longer be required to provide any Power and Energy in excess of such amount, and the City shall be relieved of its obligation to purchase all of its requirements from the Agency The Power and Energy furnished to such City shall be billed by the Agency at rates and charges as from time to time adopted pursuant to Section 7 of this Contract The calculation of the limiting City s obligation under Section 14 of this Contract shall assume such City s Net Energy for Load for the purposes of said calculations is equal to such City s Net Energy for Load in the completed Contract Year next preceding the effective date of the option (e) In the case of each option (1) The effective date of the option shall be the first day of the Contract Year which is more than 90 days after the date a City disapproves a Project as permitted in paragraph (c) of this Section (2) The right to schedule Power and Energy is subject to outages for maintenance and operating emergencies (3) The amount due from a City (which disapproves a Project) [under paragraph (d)(1) or paragraph (d)(2)] shall be due and payable irrespective of whether any Power and Energy is delivered or made available for delivery to such City (This also applies to all Cities after the effective date of the exercise of Option One by any City ) (4) The City which exercises an option pursuant to paragraph (d) shall not thereafter be entitled to approve or disapprove any subsequent Projects �(5) Amounts due from entities other than the Cities shall be taken into account in cal- culating the amount due from the Cities (f) After a City has disapproved a Project under paragraph (c) of this Section it may thereafter revoke st}ch action and approve the Project provided (1) the Agency and each of the Cities approve the revocation and 9 (2) in order to pay 't pro rata part of expenses incurred (including Debt Service) since the Project was disapproved the City agrees to assume or pay such amount as may be determined by the Agency Ind the Cities Section 14 Debt Service Guarantee, Operating and Maintenance Expenses (a) In any instance where the amount of money on deposit in the Bond Fund (created by the Bond Resolution) is not the full amount then required to be on deposit therein without giving consideration to transfers made from other than the Revenue Fund or from Bond proceeds (provided that transfers may be made from the Reserve Fund to the Bond Fund for not more than two (2) consecutive calendar months) each City shall be obligated to make a payment the aggregate amount of which shall be the amounts that are necessary to establish or reestablish the amount then required under the terms of the Bond Resolution to be on deposit in the Bond Fund the Reserve Fund and the Contingency Fund The percentage share of the payment to be made by each City shall initially be as follows City of Bryan Texas 2273% City of Denton Texas 20 34% City of Garland Texas 47 66% City of Greenville Texas 9 27% Except as set forth in Section 13(d) such percentage share of the payment to be made by each City shall be adjusted at the beginning of each Contract Year Such adjustment shall be made by calculating the percentage relationship that each City's Net Energy for Load for the Contract Year immediately preceding the Contract Year in which the adjustment is being made bears to the total aggregate Net Energy for Load of all Cities for such Contract Year and the sum of the adjusted percentage.. shall equal 100% The payments required to be made to said Bond Fund Reserve Fund or Contingency Fund (any one or all of such Funds) shall be paid by the Cities in the percentage shares determined above and such payments shall be made direct to the custodian of the respective Funds as established in the Bond Resolution Fach City unconditionally covenants the payment will be made if required, in the amount and in the manner prescribed The provisions of this covenant are for the benefit and protection of the Agency the Cities and the owners and holders of Bonds it being recognized that the holders of such Bonds shall be third party beneficiaries of this covenant and it is understood by the contracting parties that the purchaser of Bonds has and will agree to the purchase of Bonds conditioned upon this covenant (b) In any instance except that occasioned by the failure of a City or other power purchaser to pay the amount it is required to pay for the purchase of Power and Eneigy in which the funds of the Agency are insufficient to pay Operating and Maintenance expenses or other expenses (except those for which provision is made in paragiaph (a) hereof) payments shall be paid to the Agency by the Cities in the percentage share determined under paragraph (a) of this Section 14 (c) A new power purchaser (with the approval of the Agency and the Cities) may assume primary liability for the obligation to make payments under this Section with respect to Debts of the Agency incurred prior to its becoming a power purchaser but the same shall not discharge the liability of those who were obligated when such Debts were incurred (who shall remain secondarily liable) (d) In the event the Agency is held to be in default under the provisions of the Bond Resolution (by reason of the inadequacy of payments required to be made by the Cities under the provisions of this Contract) the Cities shall cure the default by making payments in the same proportion as provided in paragraph (a) of this Section (e) In the event a City disapproves a Project under Section 13 or if a City elects to with draw from the Agency under Section 16 then each City shall continue to be obligated under para graph (a) of this Section with respect to Bonds theretofore issued and Bonds thereafter issued to fully provide funds for each Project [as contemplated by the second sentence of Section 13(a)] and in 10 addition if a City elects Option One then all of such Cities shall be obligated under paragraph (a) of this Section with respect to Bonds thereafter issued for Development Projects described in clause (i) of the definition of that term If a City elects Option Two then all of such Cities shall also be obligated under paragraph (a) of this Section with respect to Bonds thereafter issued for Development Projects and for System Development and Reliability Expenditures and Bonds issued for Projects thereafter approved' For and in consideration of the payments to be made by the Cities under this Contract (including those under this Section) the Agency agrees to use its best efforts to deliver Power and Energy from Projects to such Cities under the terms of this Contract and such payments by the Cities shall be in consideration for the Agency s agreement to deliver such Power and Energy but the failure of the Agency to comply with such agreement shall not relieve any City of its obligations under paragraph (a) or (d) of this Section which obligations shall be unconditional and absolute (f) In the event the Agency is recreated under Section 16 so the new entity assumes primary liability for a pro rata share of the Debts of the Agency then outstanding [as distinguished from the creation of a new system (not financed under the Bond Resolution) with respect to projects thereafter approved] then the new entity shall thereafter be included in the calculation of the percentage share of the payment to be made under paragraph (a) of this Section for the purpose of determining such primary liability, but in no event shall the Cities of Bryan Denton Greenville and Garland be relieved of the olphgation each has assumed (by the execution hereof) to collectively pay the entire amount (based upon the percentage of Net Energy for Load) required to be paid under paragraph (a) of this Section with respect to all Bonds theretofore or thereafter issued without iegaid to such new entity Sect[on 15 Remedies in Event of Default (a) (1) If any City fads or defaults in meeting the terms conditions and covenants of this contract [other than a default in payment for which provision is made in subsection (b) of this Section] and such default continues for t period of 15 days the Agency shall give notice (m the manner con templated by Section 31 of this Contract) to the Cities The defaulting City shall from the date of the mailing of such notice have a period of 30 days to cure the default (2) If any City fails to make any payment (hereinafter called a default in payment) to the Agency that is r guired to be made under the provisions of this Contract and such default in payment con holies fo a period of fifteen (15) days the Agency shall give notice (m the manner contemplated bl Section 31 of this Contract) to Cities The defaulting City shall from the date of the mailing of such notice have a period of thirty (30) days to pay the full amount then due to the Agency together with interest thereon as hereinafter provided M3 If the City does not cure its default within such period of thirty (30) days then so long as such City remains in default and in addition to anv other rights which the Agency has under this Contract and at l w and in equity the Agency may terminate all service to such City Additionally in the event of default in payment the Agency may charge to and collect from such City each calendar month the amount which the Agency determines to be the difference between what the Agency would have received from such City under this Contract for Power and Energy and services furnished and delivered to such Pity had such City not been in default and the amount if any which the Agency receives from sales of such Power and Energy and services to the other Cities or others either or both Termination of service hereunder shall not reduce or change the obligation of the defaulting Citv under the other provisions of this Contract (b)I If the Agency fads or defaults in meeting the terms conditions and covenants of this Contracts except its covenant to 'use reasonable diligence to provide a constant and uninterrupted supply off Power and Energy contained in Section 12(b) and such default continues for a period of 15 days after a City has given the Agency notice of such default in the manner contemplated in Section 31 of this Contract, then such City shall have all of the rights and remedies provided at law and in equity except that in no event shalt any of the Cities be relieved of its obligation specified in Section 14 The delivery of available Power and Energy as provided in this Contract shall be a ministerial duty of the Agency 11 Section 16 Re creation of Agency Each City and the Agency recognize that pursuant to the Act the concurrent ordinances by which the Cities crvited the Agency reserved the right to the governing body of each of the Cities to loin with the other Cities to provide for the re creation of the Agency by the addition and deletion either or both of a public entity as defined in said Act so long as there is no impairment of obligation of any existing obligations of the Agency Each City covenants and agrees that it will not loin with any of the other entities to recreate the Agency so as to delete one or more entities unless (1) the then outstanding Debts of the Agency hive been paid or provision made for their payment under Article XI of the Bond Resolution or (2) the Holders of at least 60% of the principal amount of the Bonds then outstanding approve the concurrent ordinance proposed for adoption by the Cities or (3) the withdrawing entity contracts and agrees to continue to pay a fixed percentage (as determined by the Board) of the Annual System Costs (including the Debt Service Requirements on the then outstanding Debts of the Agency) during the time such Debts remain outstanding Such percentage shall be fixed by calculating the percentage relationship of the withdrawing entity s Net Energy for Load (during the Contract Year in which such percentage was the highest) bears to the total aggregate Net ]Energy for Load of all Cities (during such Contract Year) The obligation contained in Section 14 as to the entity seeking to withdraw shall remain unaffected until the Bonds permitted to be issued by Section 14(e) have been paid and retired No withdrawal shall be effective until such indebtedness has been paid and at such time this Contract as to such withdrawing entity shall terminate From and after notice is given to the Agency of the intent of an entity to withdraw from the Agency no additional Bonds of the Agency shall be issued for a new Project which involves any additional payments by or guarantee of the Debt Service Requirements by such withdrawing entity Each City covenants and agrees that it will not join with any of the other entities to recreate the Agency so as to add one or more entities unless (1) the then outstanding Debts of the Agency have been paid or provision made for their payment under Article XI of the Bond Resolution or (2) the Holders of at least 60%of the principal amount of the Debts of the Agency then outstanding approve the concurrent ordinance proposed for adoption by the Cities or (3) entity being added expressly either (as approved by the Agency and set forth in the concurrent ordinances) (i) assumes the primary liability for the payment of for a pro rata share of the Debts of the Agency (which shall not discharge the liability of those obligated when such Debts were or are incurred who remain secondiarily liable) as well as the obligation piovided in Section 14(c) and assume thereafter to pay its share of the remainder of the Annual System Costs or (it) agrees it will be obligated only with respect to the payment of annual system costs for projects which are approved after the re creation of the Agency Section 17 Pavment Due Dates and Delinquency (a) In the event that a City fails to make any payment at the time herein specified, interest on such delinquent amount shall accrue at the rate of ten percent (10%) per annum from the date such payment becomes due until paid in full and the Agency may institute a proceeding for a mandatory injunction requiring the payment of the amount due and interest thereon, such action to be instituted in a court of competent jurisdiction (b) All payments required to be made by the Cities under the terms of this Contract shall be due and payable within thirty (30) days following the date the Agency renders the bill and the Cities shall have no right of setoff, recoupment or counterclaim against any payment under Section 14(a) or that part of the Annual System Costs which are attributable to payments to be made into the Bond Fund the Reserve Fund or the Contingency Fund by any Bond Resolution or similar Funds established for the payment and security of Subordinated Indebtedness (as defined in the Bond Resolution), which are unconditional (L) Should a dispute as between any City and the Agency arise as to whether the Agency is in compliance with its covenants as contained herein, each City shall nevertheless be obligated 12 (1) to make the payments provided by paragraph (a) of Section 14 hereof and (2) to pay such amount of the Annual System Costa as may not be in dispute pending the resolution of such dispute provided a City may elect to pay all such Annual System Costs including any disputed amount In the event a disputed amount of Annual System Costs is paid by a City the same shall be placed in escrow in an interest bearing account by the Agency pending resolution of the dispute but only the principal iunount thereof shall be returned to the City If the City elects not to pay the amount in dispute and the dispute is resolved against such City the amount ultimately found to be due plus interest at 10% per imnum (calculated from the date the same was originally due) shall be paid by the City within 15 days of the resolution of the controversy Attorneys fees shall be assessed as court costs Section 18 Power Sales Contracts The Agency may provide Power and Energy and services pursuant tp a power sales contract,, upon such terms as may be approved by the governing body of the Agency and, except as provided by Section 12(a), the Cities section 19 Continuation of Services A City unless it elects an option under Section 13 or withdrawunder Section 16, shalq have the right to the continued performance of services pro- vided under the provisions of this Contract for the useful life of the System by giving written notice to the Agency at least 5 years prior to the scheduled termination of this Contract (as speci- fied in Section 1) provided that if such termination is occasioned by making provision for the payment f the Debts of the Agency, the notice may be given within 90 days of such provision being made Suc�tt City shall be obligated to continue paying its proportionate share of the Annual System Costs Section 20 City Not to Sell its Electric System Each City covenants that during the term of this Contract (or the extensions thereof) it will not sell or otherwise dispose of its electric utility distribution system in whole or substantially as a whole to any entity other than an assignee under Section 21 of this Contract and, in the case of such an assignee only with the written consent of the Agency and all Cities Secti21 Assignment of Rights of a City A City may assign any of its rights under this Contract io another entity if permitted by applicable law but no sale or other disposition shall relieve such City of its obligations under this Contract (including the obligations under Sections 10 11 and 14) so long ai any Bonds are outstanding SectAni 22 Dissolution of thei Agency At such time as the Debts of the Agency have been paid or provisi its made therefor pursuant to Article XI of the Bond Resolution and the Agency is dissolved, each City who has not made an election under Section 13 or withdrawn under Section 16 shall be entitled to an undivided interest in the properties of the Agency in proportion to the amount paid to the Agency wider this Contract Section 23 Force Maleure (a) If for any reason of force maleure any of the parties hereto shall be rendered unable wholly o in part, to carrry out its obligations under this Contract, other than the obligation of the Cities tc make he payments required under the terms of this Contract then if such party shall give notice and the full particulars of such reasons in writing to the other party within a reasonable time after the occurrence of the event or cause relied on the obligation of the party giving such notice so far as it is affected by such "force maleure shall be suspended during the continuance of the inability then claimed but for no longer period, and such party shall endeavor to remove or overcome such inability with all reasonable dispatch The term force maleure" as employed herein shall mean acts of God stakes, lockouts, or other industrial disturbances acts of the public enemy orders or actions of any kindle of the Government of the United States or of the State of Texas or any civil or military authonty� insurrections riots epidemics landslides lightning earthquakes fires hurricanes storms floods washouts droughts arrests restraints of government and people civil disturbances explosions breakage Ior accident to dams, machinery pipelmes, or canals or other structures or machinery on account of any other cause not reasonably within the control of the party claiming such inability It is understood and agreed that the settlement of strikes and lockouts shall be entirely within the discretion of the party having the difficulty, and that the above requirement that any ` force maleure shall be 1 13 remedied with all reasonable dispatch shall not require the settlement of strikes and lockouts by acceding to the demand of the opposing parties when such settlement is unfavorable to it in the judgment of the party having the difficulty (b) No damage shalt be re-overable from the Agency or the Cities by reason of the causes above mentioned Section 24 Insurance GO The Agency shall maintain or cause to be maintained in force for the benefit of the Agency such insurance with respect to the System as shall be reasonably available and as is usually carried by municipal electric utilities constructing and operating generating and transmission facilities but, in the case of nuclear generating facilities not less than will satisfy the requirements of federal and state law and the Nuclear Regulatory Commission regulations and such other insurance as is usually carried by municipal electric utilities owning like properties Provided however, in any event the Agency shall maintain or cause to be maintained in force insurance in such amounts and against such risks as required by the Bond Resolution (b) The Agency will secure and maintain adequate fidelity insurance or bonds on all officers and employees handling or responsible for funds of the Agency (c) The obligation hereunder to procure and maintain insurance with respect to a Joint Project as defined in the Bond Resolution shall be met if the entity acting as the manager of the Joint Project obtains and maintains the insurance required for the benefit of all owners of the Joint Project as their interest may appear (d) The Agency may establish and create a special fund for the purpose of providing a self insurance fund Amounts to be deposited in or credited to such fund in any Contract Year shall be accounted for as Operating Maintenance Expenses To the extent that monies are deposited in such fund if created such monies may be invested in Investment Securities as defined in the Bond Resolu tion To the extent of the amounts held in such fund the face amount of appropriate insurance policies may be reduced Section 25 Reports The Agency will prepare and issue to each City the following reports for each fiscal year (1) financial and operating statement relating to the System (it) status of construction for each facility constituting the System during construction and (in) analysis of operations relating to the System Section 26 Records and Accounts The Agency will keep accurate records and accounts of the System and of the transactions relating to each facility constituting the System as well as of the operations of the Agency in accordance with the Uniform System of Accounts which shall include depreciation Within one hundred twenty (120) days after close of each Contract Year, the Agency shall cause such records and accounts and all transactions of the Agency relating to the System with respect to such Contract Year to be subject to an annual audit by an independent certified public accountant A copy of each such annual audit shall be sent by the Agency to each City Section 27 Access Each City shall at all times have reasonable access to examine any and all books and records of the Agency and to examine any facility of the System The Agency and each City will give the other the right to enter the premises of the other at all reasonable times for the purpose of repairing or removing facilities reading meters and performing work incidental to delivery and receipt of Power and Energy furnished hereunder Section 28 Governmental Rates, Regulations and Laws The Contract shall be subject to all valid rules regulations and laws applicable thereto as promulgated by the United States of America the State of Texas or any other governmental body or agency having lawful jurisdiction or any authorized representative or agency of any of them 14 Section 29 Easements Each City agrees that the Agency or Its agent shall (when permitted by existing easpment) have full access to such easements or over any easements right of way or property held by such City if and to the extent required by the Agency for any and all purposes required for the System or any Project thereof Section 30 Cancellation of Prior Contract In connection with the issuance of $10 625 000 TEXAS MUNICIPAL POWER AGENCY REVENUE BONDS, SERIES 1975 the Cities and the Agency have heretofore entered into a contract which is incorporated in an instrument entitled Contract for Develop- ment of Fuel Resources Planning Electric Generation Facilities and Performing Certain Duties which contract was dated September 15 1975, that such contract provided certain payments would be made by each Ci y to the Agency for the payment of debt service on the aforesaid Series 1975 bonds and main and operating expenses of the Agency The parties agree that upon the effective date of this Contract and the cancellation of said bonds the prior contract shall be cancelled in its entirety and no payments shall continue to be made thereunder for any purpose and this Contract shall supersede such prior contract in every respect Section 31 Notices Any notice, request, demand statement or bill provided for in this Con- tract shall be in writing and shall be considered to have been duly delivered when sent by registered or certified mail addressed as follows unless another address has been designated in writing by the party entitled to receive same Agency Texas Municipal Power Agency 7111 Bosque Boulevard Waco, Texas 76710 Attention Executive Director City of Bryan P O Box 1000 Bryan Texas 77801 Attention City Manager City of Greenville P O Box 1049 Greenville Texas Attention City Manager City of Denton Civic Building Denton Texas 76201 Attention City Manager City of Garland P O Box 401889 Garland Texas 75040 Attention City Manager Section 32 Severabihty The parties hereto agree that if any of the provisions of this Contract should contravene or be held invalid under the laws of the State of Texas such contravention or invalidity shall not invalidate the whole Contract but it shall be construed as though not containing that particular provision and the rights and obligations of the parties shall be construed and in force accordingly Section 33 Contracts to be Separate This instrument embodies four separate contracts between the Agency and each City Termination of one Contract shall not affect the others 15 IN WITNESS WHEREOF the parties hereto have caused this Contract to be executed in their cor- porate names and their corporate seals affixed all by the proper officer duly authorized thereunto as of the day and year first heremabove written TEXAS MUNICIPAL POWER AGENCY (SEAL) ATTEST By 21�LY Seci etary City of Bryan Texas (SEAL) By ATTEST Mayo By ')y� Cuy Se 8tary � City df Denton Texas (SEAL) ATTEST By City Secretary (SEAL) ATTEST By� City Secretary (SEAL) ATTEST By City Clerk 16 By Mayor City of Garland,Texasi By Mayor City of Greenville By � Mayo` r� EXHIBIT A POINTS OF DELIVERY Bryan I Bryan Plant Facilities included are as follows (a) 138 KV lines (b) 200 MVA 138/69 KV autotransformer (c) associated breakers bus work switches etc 2 Nall Substation Facilities included are (a) 138 KV Imes (b) 200 MVA 138/69 autotransformer (c) 450 MVA 345/138 KV autotransformer (d) 345 KV lines (e) associated breakers bus work switches etc 3 South East Bryan Substation Facilities included are as follows (a) 138 KV lines (b) 200 MVA, 138/69 KV autotransformer (c) associated breakers bus work, switches etc Denton 1 Dent n Plant Fa7ihties included are as follows (a) 138 KV lines (b) associated breakers bus work switches, etc 2 North Denton Substation Facilities included are as follows (a) 138 KV lines (b) 450 MVA 345/138 KV autotransformer (c) associated breakers bus work, switches etc Garland I Apollo Substation Facilities included are as follows (a) 138 KV interconnection with TP&L (b) associated breakers bus work, switches, etc 2 Wei Substation Facilities included are as follows (a) 138 KV interconnections with TP&L (b) 450 MVA 345/138 KV autotransformer (c) 345 KV lines (d) associated breakers bus works switches etc 17 3 Ben Davis Substation Facilities included are as follows (a) 450 MVA 145/138 KV autotransformer (b) 345 KV lines (c) associated breakers bus work switches etc 4 McCree Substation Facilities included are as follows (a) 450 MVA 345/138 KV autotransformer (b) 345 KV lines (c) associated breakers, bus work, switches, etc Greenville 1 Steam Plant Facilities included are as follows (a) 138 KV line (b) 75 MVA, 138/69 KV autotransformer (c) associated breakers, bus work, switches, etc 2 Diesel Plant Facilities included are as follows (a) 138 KV line (b) 75 MVA, 138/69 KV autotransformer (c) associated breakers bus work switches, etc 18 SCHEDULE B RATES AND CHARGES (1) RATES FOR POWER AND ENERGY The rates to be charged by the Agency for Power and Energy furnished to the Cities shall consist of a demand charge and energy charge These charges shall be based on cost of service to the degree that is practical The costs used in developing cost of service rates shall be based on accounting entries as outlined in the Federal Power Commissions Uniform System of Accounts The rates for demand charges shall be established to recover costs that are related to Debt Service (including coverage ratios), other ordinarily predictable stable Operating and Maintenance Expenses and such other reasonable fixed costs as these costs relate to plant and transmission capacities utilized The demand charges shall be based on the above listed costs in proportion to total KW that the Agency has available Proper consideration shall be given in the demand charges for such factors or coincident peak demands diversity factors load factors etc of the Cities Energy charges shall be based on fuel costs operating personnel costs variable Operating and Maintenance Expenses postage stamp type transmission losses station service energy, and other such reasonable variable costs as these costs relate to energy provided to Cities The rate making methods used to develop these demand and energy charges shall be consistent with standard utility wholesale rate making procedures These methods shall be applied as appropriate to the System It is recognized that these rates shall be developed in a reasonably equivalent manner as similar wholesale power suppliers State Utility Commission guidelines and FPC rate regulations as applied to like power systems (2) RATES FOR SERVICES PROVIDED TO ALL CITIES Various services shall be provided to all Cities as directed by the Board of Directors and will be paid for by the Cities at a rate per kilowatt hour which shall be established from time to time by the Board of Directors Each City s share of such charges shall be that portion of the total represented by the ratio of his share of the net energy for load to the total net energy for load of all of the Cities Billings will be made in advance on estimates of loads and paid evenly throughout the year (3) RATES FOR SPECIAL SERVICES PROVIDED TO A SPECIFIC CITY Special services may be provided to a member from time to time at the request of a City Reimbursement for these services will be made at cost by the City receiving the services 19 ARTICLE I Definition of Terms SECTION 101 Definitions Unless the context shall indicate a contrary meaning or intent, the terms below defined, for all purposes of any Bond Resolution or any resolution amendatory or supple- mental thereto, shall be construed, are used and are intended to have meanings as follows "Act' — Chapter 166, Acts of the 63rd Legislature, Regular Session, 1973, as amended by Chapter 143, Acts of the 64th Legislature, Regular Session, 1975, and all laws amendatory thereof or supplemental thereto "Additional Bonds" — Bonds authorized to be issued under the provisions of Section 7 01 hereof "Agency" — the Texas Municipal Power Agency, a municipal corporation, a political subdivision of the State of Texas and a body politic and corporate, duly organized and existing under the Act "Annual Budget" — the Annual Budget, as amended or supplemented, adopted or in effect for a particular Fiscal Year as provided in Section 6 18 "Authorized Officer" — the President, Vice President or Secretary of the Board or the Executive Director of the Agency and any other person authorized by resolution of the Board to perform the act or sign the document in question "Average Annual Debt Service" — the annual arithmetic average (Fiscal Year basis) of the principal of and interest on all Outstanding Bonds becoming due from the date of calculation to the earlier of the date of maturity of such Bonds or to the date such Bonds are required to be called for redemption "Board" — the Board of Directors of the Agency "Bond Fund" —the Fund by that name established in Section 5 02 "Bond Resolution'— the resolution authorizing the issuance of the "Texas Municipal Power Agency Revenue Bonds, Series 1976," and any resolution subsequently adopted by the Agency which authorizes the issuance of Bonds, including refunding Bonds, on a panty with the said genes 1976 Bonds "Bonds" — Series 1976 Bonds, Additional Bonds and any refunding Bonds delivered pursuant to the provisions of Section 7 03 hereof "City or Cities" —individually or collectively the Cities of Bryan, Denton, Garland and Greenville, Texas "Collateral Securities" — (I) Investment Securities and (n) obligations issued or guaranteed by any state of the United States or District of Columbia, or any political subdivision of any such state or District, provided such obligations are rated for investment purposes at not less than A (or its equivalent) by a recognized rating service such as Moody s Investors Service, Inc or Standard & Poor's Corporation, and repurchase agreements with solvent banking or other financial institutions with respect to any of the obligations or securities referred to herem "Construction Fund" — the Fund by that name established in Section 5 07 "Contingency Fund" — the Fund by that name established by Section 5 02 "Contingency Fund Requirement" — as of any date of calculation, the sum of $2,000,000 or such greater amount as may be determined by the Agency and the Cities 2 08743-0—Texas Municipal —Proof of 8-23-76—Steck-warhck—Phone (214) 631-3130 `Cost of Acquisition and Construction" — the Agency's costs and expenses attributable to the planning, designing, acquiring, construction, reconstruction, installing and financing of facilities, placing the same in operation, decommissioning and disposal of any generating facilities of the System if financed by the issuance of Bonds, and obtaining all governmental approvals certificates, permits and licenses with respect thereto, and shall include reimbursement to the Agency for any of the above items there- tofore paid by or on behalf of the Agency "Coupon Bonds" — Bonds not in fully registered form "Coupons" — those issued under the Bond Resolution and evidencing interest on the applicable Coupon Bond "Date of Commercial Operation" —the date of completion or acquisition of a Project which has been certified by the Engineer to be ready for commercial operation "Debt Service" — shall mean, with respect to any period, the aggregate amounts required to be paid during said period on Outstanding Bonds, less those amounts on deposit for the payment thereof, as the same shall become due "Depository" — any bank or trust company selected by the Agency as a depository of moneys and securities held under the provisions of the Bond Resolution "Engineer" — at any time the engineer or engineering firm appointed pursuant to Section 6 17 "Financial Newspaper'— a financial journal or newspaper selected by the Board which is of general circulation in New York, New York (which is published at least five days in each week), and a journal or newspaper selected by the Board which is published in the State of Texas "Fiscal Year'— the 12 month period ending September 30 of each calendar year, or such other 12 consecutive month period as may be established as a Fiscal Year by the Board, provided the Fiscal Year may not be changed more than once in any three year period "Fuel Reserve Account" — the Account by that name established as a part of the Revenue Fund by Section 5 02 "Generally Accepted Accounting Principles" and all other accounting methods and terminology contained or referred to in any Bond Resolution — accounting principles, methods and terminology followed and construed, as nearly as practicable, in conformity with the Uniform System of Accounts for Class A and Class B Public Utilities and Licensees and accounting rules and regulations thereunder prescribed by the Federal Power Commission for privately owned power companies which are subject to its jurisdiction and engaged in business comparable to the business of the Agency, as amended from time to time, or such other system as may be required by any regulatory agency 'Gross Revenues" — the entire income and revenue of the Agency derived from the operation of the System or ownership of properties constituting the System The term does not include payments received by the Agency (i) from a City upon its withdrawal from the Agency, or (u) as proceeds of insurance (except business interruption insurance) or emment domain, or (m) as proceeds from Bonds or Subordinated Indebtedness, or (iv) except as provided in Section 7 05, from amounts received from leases, installment sale payments, or other agreements entered into by the Agency in connection with the issuance by the Agency of Special Contract Obligations, or (1v) investment income of the Construction Fund "Holder" or "Boadholder" —when used in conjunction with a Coupon means the person in possession and the apparent owner, and when used in conjunction with a Bond means the person in whose name such Bond is registered on the registry books of the Registrar pertaining to such Bond, or the person in possession and the apparent owner of a Bond which is not registered, when not used in conjunction with a Coupon or Bond such term includes the apparent owner of a Coupon, or a Coupon Bond or the registered owner of a registered Bond 08743-0—Texas Mumcipal—Proof of 8-23-76—Steck-Wancck—Phone (214) 631-3130 "Investment Securities" — any of the following securities, if and to the extent that the same are at the time legal for investment of Agency funds (i) Direct obligations of the United States of America, obligations which in the opinion of the Attorney General of the United States are general obligations of the United States and backed by its full faith and credit, obligations guaranteed by the United States of America, and (u) Evidences of indebtedness of the Federal Land Banks, Federal Intermediate Credit Banks, Banks for Cooperatives, Federal Home Loan Banks, Federal National Mortgage Associ- ation, Federal Financing Bank Participation Certificates in the Federal Assets Financing Trust, New Housing Authority Bond and Project Notes fully subscribed by contracts with the United States of America, or any other Agency or Instrumentality of United States of America, bonds secured by the general credit of the State of Texas, and certificates of deposit of any bank or trust company which are fully secured (to the extent not insured by the Federal Deposit Insurance Corporation) by obligations in which the Agency may invest under the provisions of this definition "Joint Project' — a project undertaken by the Agency in cooperation with any other entity (as such term is defined by the Act) where the Agency and such entity each have an undivided ownership interest therein "Net Revenues" —for any period, the Gross Revenues during such period less the Operating and Maintenance Expenses during such period "Operating and Maintenance Expenses" — all expenses incurred in the operation and mamte- nance of the System and the Agency which are properly accounted for such purpose, under Generally Accepted Accounting Principles Such term does not include depreciation or obsolescence charges or reserves therefor, interest charges and charges for the payment of principal, or amortization, of bond or other indebtedness of the Agency "Outstanding" — as of the date of calculation, all Bonds theretofore executed, issued and delivered by the Agency except — (a) Bonds theretofore cancelled by a Paying Agent or surrendered to the Paying Agent for cancellation, (b) Bonds in lieu of, or in substitution for, which other Bonds shall have been executed, issued and delivered by the Agency pursuant to the terms of Section 3 05 or Section 7 03, (c) Bonds for the payment or redemption of which moneys, equal to the principal amount or Redemption Price thereof, as the case may be, with interest to the date of maturity or redemption date, shall be held under the Bond Resolution and set aside for such payment or redemption (whether at or prior to the maturity or redemption date), provided that if such Bonds are to be redeemed, notice of such redemption shall have been given as in Article IV provided, and (d) Bonds deemed to have been paid as provided in subsection (b) of Section 1101 "Paying Agent" — any bank or trust company and its successor designated as a Paying Agent for the Bonds of any Series "Power Sales Contract" — those certain contracts by and between the Agency and the Cities of Bryan, Denton, Garland and Greenville, winch contracts are dated the 1st day of September, 1976, and any amendments or supplements thereto "Project" — one or more of the following (i) any power generating facility (or interest therein) to be constructed or acquired by the Agency as well as fuel therefor and any transmission facility required to connect or interconnect such generating facility with a City or others, or (u) any addition or improvement to a power generating facility which is then owned, in whole or in part, by the Agency, or (ui) any contract right to purchase or receive a power supply or transmission capacity 4 08743-0—Texas Mumcipal—Proof of 8-23-76—Steck-Wancck—Phone (214) 631-3130 (a) by the making of a prepayment of capital costs which are associated with the supply or capacity so purchased, or (b) by the execution of a take or pay contract having a duration of more than 10 years, including any renewals thereof or (c) by the execution of a contract to purchase power or energy (either or both) on an all requirements basis The term does not include any facilities financed with the proceeds of Special Contract Obligations, as permitted under and defined in Section 7 05 "Redemption Price" — with respect to any Bond, the principal amount thereof, plus the applicable premium, if any, payable upon redemption thereof pursuant to such Bond or any Bond Resolution "Registrar" —the Registrar of a particular Series Bonds named in the Bond Resolution authorizing such Series in conformity with Chapter 431, Acts of the 64th Legislature, Regular Session, 1975, as amended "Reserve Fund" — the Fund by that name established in Section 5 02 "Revenue Fund" — the Fund by that name established in Section 5 02 "Series" — all of the Bonds designated as being of the same Series, and any obligations delivered in hen thereof or in substitution thereof under Section 3 05 "Series 1976 Bonds" — the Texas Municipal Power Agency Revenue Bonds, Series 1976 delivered pursuant to the provisions of Article II hereof 'Subordinated Indebtedness' —any evidence of debt referred to in, and complying with the provisions of, Section 7 04 "System" — the Agency's interest in all properties (owned or operated by or on behalf of the Agency) which are financed, in whole or in part, through the issuance of obligations by the Agency for Approved Projects and Development Projects, prior to the tune one of the Cities disapproves a Project under the provisions of Section 13 of the Power Sales Contract and elects Option One under paragraph (0) of said Section 13 The term also includes any contract for providing services or power and energy, either or both The initial System is hereby designated as System A The term does not include the Agency's interest in any facility financed with the proceeds of (I) Special Contract Obhga- tions issued by the Agency as permitted under and defined in the Bond Resolution or (n) bonds issued to finance any Project which is not approved by all of the Cities if a City or Cities which disapprove a Project elect Option One under Section 13 of the Power Sales Contract "Written Certificate of the Agency," "Written Request of the Agency" and "Written Statement of the Agency" — an instrument in writing signed on behalf of the Agency by an Authorized Officer SECTION 102 Construction of Terms Except where the context otherwise requires, words importing the singular number shall include the plural number and vice versa, and words importing persons shall include firms, associations, trusts, corporations or governments or agencies or political subdivisions thereof SECTION 103 Resolution to Constitute a Contract Bonds on a Parity In consideration of the acceptance of the Bonds, the issuance of which is authorized hereunder, by those who shall hold the same from time to time, each Bond Resolution shall be deemed to be and shall constitute a contract between the Agency and the Holders, and the pledge made in each Bond Resolution by the Agency and the covenants and agreements set forth therein to be performed by the Agency shall be for the equal and proportionate benefit, security and protection of all Holders, without preference, priority or distinction as to security or otherwise of any of the Bonds or Coupons authorized thereunder over any of the others by reason of time of issuance, sale or delivery 08743-0—Texas Municipal —Proof of 8-23-76—Steck-Wancck—Phone (214) 631-3130 ARTICLE II Provisions Relating to the Series 1976 Bonds SECTION 2 01 Limitation of Provisions of this Article The provisions of this article relate only to the Series 1916 Bonds SECTION 2 02 Purpose for Which Series 1976 Bonds are Authorized, Their Date In order to borrow the sum of Fifty Million Dollars ($50,000,000) for the purpose of providing funds with which to discharge certain costs and expenses of the Agency in connection with the acquisition or construction of certain electric facilities to provide engineering, planning and financing expenses, for the purpose of paying off, discharging, cancelling, refunding and in heu of the outstanding "Texas Municipal Power Agency Revenue Bonds, Series 1975," and for the purpose of setting aside certain amounts for payment into the Bond Fund and the Reserve Fund, the Board has determined there shall be issued and there is hereby ordered to be issued a Series of Coupon Bonds in the total principal amount of Fifty Million Dollars ($50o000,000) to be designated "Texas Municipal Power Agency Revenue Bonds, Series 1976 " The Bonds shall be dated September 1,1976 SECTION 2 03 Denomination, Maturity and Redemption of Series 1976 Bonds The Series 1976 Bonds shall each be in denomination of Five Thousand Dollars ($5,000) and be numbered consecutively from 1 upward (numbered from 1 through 10,000) and shall mature and become due on September 1 In each of the years as follows Maturity Amount 087434—Texas Municipal —Proof of 8-23-76--Steck-Wancck—Phone (214) 631-3130 The Series 1976 Bonds shall be subject to redemption at the option of the Agency on or after September 1, as a whole at anytime, on any interest payment date thereafter, at the respective Redemption Prices (expressed as percentages of the principal amount of the Series 1976 Bonds to be redeemed) set forth below, in each case together with accrued interest to the redemption date Period During Which Redeemed Redemption (both dates inclusive) Price The Series 1976 Bonds maturing September 1, 2012 shall be called for redemption prior to maturity on and on each 1 thereafter, at the price of par and accrued interest, as follows 1 Amount In lieu of calling bonds for redemption, the Agency may deliver Series 1976 Bonds to the Paying Agent (prior to the date of publication of the notice of redemption) in the principal amount up to the amount scheduled to be called for redemption in any one year and the principal amount of bonds so delivered shall be credited against the amount of bonds required to be called for redemption in that year SECTION 2 04 Interest on Series 1976 Bonds The Series 1976 Bonds shall bear interest from their date until paid at the rates per annum as follows (i) Bonds maturing in each of the years through at % (u) Bonds maturing in each of the years through at % (in) Bonds maturing in each of the years through at % (iv) Bonds maturing in each of the years through at % (v) Bonds maturing in each of the years through at % (vi) Bonds maturing in each of the years through at % (vu) Bonds maturing in each of the years through at % (vm) Bonds maturing in each of the years through at % (ix) Bonds maturing in each of the years through at %n (x) Bonds maturing in each of the years through at % Such interest shall be evidenced by proper Coupons attached to each of such Bonds and said interest shall be payable on March 1, 1977, and semiannually thereafter on September 1 and March 1 in each year 7 08743-0—Texas Mumcipal—Proof of 8-23-76—Steck-Wancek—Phone (214) 631-3130 SECTION 2 05 Paying Agents The principal of premium, if any and interest on Series 1976 Bonds shall be payable at the office of the Paying Agents Subject to the provisions of Section 3 06, the Paying Agents for the Series 1976 Bonds shall be the Mercantile National Bank at Dallas, Dallas, Texas and the Manufacturers Hanover Trust Co, New York, New York and the Registrar for such Bonds shall be the Mercantile National Bank at Dallas, Dallas Texas SECTION 2 06 Characteristics of Series 1976 Bonds The Series 1976 Bonds shall be issued as Coupon Bonds, subject to registration as to principal only SECTION 2 07 Form of Series 1976 Bonds, Coupons Registration Ledger and the Certificate of the Comptroller of Public Accounts The form of Series 1976 Bonds, Coupons, Registration Ledger and Certificate of the Comptroller of Public Accounts of the State of Texas shall be in substantially the following forms SECTION 2 08 Application of Proceeds from Sale of Series 1976 Bonds The proceeds derived from the sale of the Series 1976 Bonds shall be applied by the Board for the following purposes (a) payment into the Bond Fund of that portion of such proceeds that is allocable to accrued interest, (b) payment into the Bond Fund of such amount as, when added to the amount paid therein pursuant to the provisions of the preceding clause (a), will equal interest accrued and to accrue on the Series 1976 Bonds to September 1, 1978 (c) payment into the Reserve Fund of an amount equal to the Average Annual Debt Service on the Series 1976 Bonds (d) payment of the principal of and interest on Texas Muncipal Power Agency Revenue Bonds, Series 1975, after application of the balance of the Reserve Fund created for the payment and security of the Senes 1975 Bonds (e) payment of the balance of said proceeds into the Construction Fund SECTION 2 09 Execution of Bonds The seal of said Agency may be impressed upon each Bond or in the alternative a facsimile of such seal may be printed thereon Such Bonds and Coupons if any may be executed by the imprinted facsimile signatures of the President and Secretary of the Board, and execution in such manner shall have the same effect as if such Bonds and Coupons had been signed by the President and Secretary in person by their manual signatures Inasmuch as such Bonds are required to be registered by the Comptroller of Public Accounts for the State of Texas, only his signature (or �that of a deputy designated in writing to act for the Comptroller) shall be required to be manually subscribed to such Bonds in connection with his registration certificate to appear thereon, all in accordance with the provisions of Article 717j-1, Revised Civil Statutes of Texas, 1925, as amended In case any officer or officers who shall have executed any of the Bonds or Coupons, if any, shall cease to be such officer or officers of the Agency after delivery of such Bonds, but before the Bonds so executed shall have been actually authenticated and delivered to the purchasers thereof, such Bonds may nevertheless be delivered as though the person or persons who executed and sealed such Bonds had not ceased to be such officer or officers of the Agency upon compliance with Article 716, Revised Civil Statutes of Texas, 1925, as amended 08743-0—Texas Mumcipal—Proof of 8-23-76- Steck-Wancck—Phone (214) 631-3130 SECTION 2 10 CUSIP Numbers CUSIP numbers are to be printed on the Bonds herein authorized It is expressly provided, however, that the presence or absence of CUSIP numbers on the bonds shall be of no sigtuflcance or effect as regards the legality thereof and neither the Agency nor attorneys approving said bonds as to legality are to be held responsible for CUSIP numbers incorrectly printed on the bonds SECTION 2 11 Printed Legal Opinion On Bonds The purchasers' obligation to accept delivery of the Series 1976 Bonds herein authorized is subject to their being furnished a final opinion of Messrs Dumas, Huguenin, Boothman and Morrow, Attorneys, Dallas, Texas, approving such Bonds as to their validity, said opinion to be dated and delivered as of the date of delivery and payment for such Bonds Printing of a true and correct copy of said opinion on the reverse side of each of such Bonds with appropriate certificate pertaining thereto executed by facsimile signature of the Secretary of the Agency is hereby approved and authorized SECTION 2 12 Effect of Mandatory Redemption Provisions The date of mandatory redemption shall be considered a principal payment date 9 08743-0—Texas Municipal —Proof of 8-23-76--Steck-Wancck—Phone (214) 631-3130 ARTICLE III Terms and Provisions of Bonds SECTION 3 01 Terms (a) Additional Bonds may be issued in such Series as may from time to time be established and authorized by the Agency in a Bond Resolution Each Bond shall bear upon its face the designation so determined for the Series to which it belongs (b) The principal of, premium, if any, and interest on the Bonds shall be payable in lawful money of the United States of America at the office of the applicable Paying Agent (o) Additional Bonds of any Series may be issued as Coupon Bonds which may be registrable as to principal only, or in fully registered form without coupons and be numbered and be in such denomination or denominations and contain such other provisions as specified in the Bond Resolution authorizing such Series (d) From and after the Issuance of the Bonds of any Series, the findings and determinations of the Agency respecting that Series shall be conclusive evidence of the existence of the facts so found and determined The recital contained in any of the Bonds that the same are issued pursuant to the Act shall be conclusive evidence of their validity and of the regularity of their issuance As provided in the Act, Bonds shall be incontestable from and after their approval by the Attorney General of Texas SECTION 3 02 Transfer of Coupon Bonds All Coupon Bonds shall be negotiable and transferable by delivery, unless registered as to principal in the manner provided in Section 3 03 The Agency and any Paying Agent may treat the bearer of any Coupon Bond which shall not at the time be registered as to principal, whether or not such Bond shall be overdue, and the bearer of any Coupon, whether of not such Coupon shall be overdue, as the absolute owner of such Bond or Coupon for the purpose of receiving payment thereof and for all other purposes whatsoever, and the Agency and any Paying Agent shall not be affected by any notice to the contrary SECTION 3 03 Registration of Coupon Bonds (a) Upon presentation of any Coupon Bond at the principal office of the Registrar for such purpose by the Holder thereof, the Registrar will register or cause to be registered, on the books required to be kept pursuant to Section 3 04, in the name of such Holder or his nommee, the owner- ship of the principal of such Bond, such registration being noted on the Bond After such registration and notation, no transfer of any such Bond registered otherwise than as to bearer shall be valid, unless made on said books at the request of the registered owner or by his duly authorized attorney and similarly noted on the Bond, but such Bond may be discharged from registration by being in like manner transferred to bearer, and thereupon negotiability and transferability by delivery shall be restored, and such Bond may again and from time to time be registered or transferred to bearer, as before Such registration, however, shall not affect the negotiability of the Coupons, but every such Coupon shall continue to be negotiable and transferable by delivery merely and shall remain payable to bearer, and payment thereof to bearer shall fully discharge the Agency and any Paying Agent in respect of the interest therein mentioned, irrespective of whether the Bond therein mentioned be at the time registered as to principal (b) All transfers, registrations and discharges from registration of Coupon Bonds shall be made under such reasonable regulations as the Registrar may prescribe and shall be without expense to the Holder of the Bonds, except that any taxes or other governmental charges required to be paid with respect to the same shall be paid by such Holder requesting such transfer, registration or discharge from registration as a condition precedent to the exercise of such privilege (c) As to any Coupon Bond registered as to principal, the person in whose name the same shall be registered shall be deemed the owner thereof for all purposes of any Bond Resolution, and payment of or on account of the principal of such bond shall be made only to or upon the order in writing of 10 08743.0—Texas Mumcipal—Proof of 8-23-76—Steck-Wancck—Phone (214) 631-3130 such registered owner, but such registration may be changed as herembefore provided All such pay- ments shall be valid and effectual to satisfy and discharge liability upon such Bond to the extent of the sum or sums so paid SECTioNI 3 04 Bond Registration Books The Registrar will keep or cause to be kept, at its office, sufficient books for the registration and transfer of the Bonds which shall at all times be open to inspection by the Agency, and, upon presentation for such purpose, the Registrar shall, under such reasonable regulations as it may prescribe, register or transfer or cause to be registered or transferred, on said books, Bonds as herembefore provided SECTioN 3 05 Replacement of Damaged, Destroyed, Lost or Stolen Bonds The Agency may issue Bonds to be exchanged for any theretofore lawfully issued and Outstanding damaged or mutilated Bonds and as replacements for any theretofore lawfully issued and Outstanding destroyed, lost or stolen Bonds all in accordance with and under conditions specified or permitted by Article 715a, Revised Civil Statutes of Texas, 1925, as amended, relating to the subject SECTION 3 06 Paying Agents Appointment and Removal The Agency shall appoint a Paying Agent or Paying Agents for the Bonds of each Series in the Bond Resolutions The Agency shall pay or cause to be paid from the Bond Fund to the Paying Agents for all Series of Bonds funds required for the prompt payment of the Bonds The Agency may remove any Paying Agent and any successor thereto, and appoint a successor or successors thereto SECT W 3 07 Fees, Charges and Expenses of the Paying Agents and Registrar The Paying Agents shall be entitled to payment of a fee for paying each Bond and each Coupon, and for acting as Registrar 11 08743-0—Texas Municipal —Proof of 8-23-76—Steck-Wancck—Phone (214) 631-3130 ARTICLE IV Redemption of Bonds SECTION 4 01 Privilege of Redemption of Bonds Any Series of Bonds subject to redemption prior to maturity pursuant to a Bond Resolution shall be redeemable, upon notice being given as provided in tins Article, at such times, at such Redemption Prices and upon such terms (in addition to and consistent with the terms contained in tins article) as may be specified in the Bond Resolution authorizing the issuance of the Bonds of such Series SECTION 4 02 Selection of Bonds for Redemption If less than all of the Bonds of any Series maturing on any single date are called for redemption, the Agency shall select the Bonds to be le - deemed, by lot from the Outstanding Bonds of such Series maturing on that date not previously called for redemption, unless the applicable Bond Resolution makes other provisions In deterrnuung the Series of Bonds to be redeemed (in whole or in part) the Board shall exercise its discretion, which when exercised shall be conclusive SECTION 4 03 Notice of Redemption (a) Notice of redemption (except as provided below) shall be given by publication at least once prior to the redemption date in the Financial Newspaper, such publication to be not less than thirty days before such redemption date If any Bond called for redemption is registered as to principal or is fully registered, notice of redemption thereof shall also be mailed, not less than thirty days prior to the redemption date, to the registered owner thereof, but neither failure to mad such notice nor any defect in any notice so mailed shall affect the sufficiency of the proceedings for the redemption thereof Each notice of redemption shall state the redemption date, the place of redemption, the principal amount and, if less than all, the distinctive numbers of the Bonds to be redeemed, and shall also state that the interest on the Bonds in such notice designated for redemption shall cease to accrue from and after such redemption date and that on said date there will become due and payable on each of said 1 Bonds the Redemption Price thereof plus accrued interest If at the time of giving notice of redemption no Bonds are Outstanding except Bonds registered as to principal or fully registered Bonds, publication of such notice shall be deemed to have been waived if the Registrar executes a certificate to the effect that such notice was mailed to each registered owner of such Bonds at his I address as it appears on the Bond Ledger of the Registrar or at such address as lie may have filed with the Registrar for that purpose (b) Notice of redemption shall also be given in writing to the appropriate Paying Agent (c) Notice of redemption shall be given by an Authorized Officer The Agency shall deposit with, or otherwise make available to, the appropriate Paying Agents the money required for payment of the Redemption Price plus accrued interest to the redemption date on all Bonds then to be called for redemption at least three business days before the date fixed for such redemption SECTION 4 04 Effect of Redemption If notice of redemption has been duly given as aforesaid, then such bonds shall, on the redemption date designated in such notice, become due and payable at the Redemption Price specified in such notice plus accrued interest If sufficient moneys for payment of the Redemption Price plus accrued interest on the bonds so called for redemption is held by the appropriate paying agent, then from and after the date so designated for redemption, interest on the bonds so cared for redemption shall cease to accrue, and Coupons thereon maturing subsequent to the redemption date shall be void and Holders of such Bonds shall have no rights in respect thereof except to receive payment of the Redemption Price thereof plus accrued interest All un- paid interest 'installments represented by Coupons which shall have matured on or pnor to the date of redemption designated in such notice shall continue to be payable to the bearers severally and respectively upon the presentation and surrender of such Coupons SECTION 4 05 Disposition of Redeemed Bonds All Bonds redeemed pursuant to the provisions of tins Article or purchased by the Agency and the appurtenant Coupons, if any, shall be cancelled by the appropriate Paying Agents and shall thereafter be delivered to, or upon the order of, the Agency 12 08743-0—Texas Municipal —Proof of 8-23-76--Steck-Wancck—phone (214) 631-3130 ARTICLE V Pledge —Creation and Administration of Funds SECTION15 01 Pledge The Bonds shall be and are hereby declared to be payable solely from and, subject to the provisions of this Resolution permitting the application thereof for the purposes and on the terms and conditions set forth herem, equally secured by an irrevocable first lien on and pledge of (I) the Net Revenues and (u) all Funds (including the investments therein) established by this Bond Resolution, other than the Revenue Fund SECTION 5 02 The Revenue Fund The Revenue Fund is hereby created and established and shall be held) by a Depository The Gross Revenues of the Agency shall be deposited as received into the Revenue Fund Money on Deposit in the Revenue Fund shall be used in the following order of pnoiIity (1) For the payment of Operation and Maintenance Expenses of the System as the same become due (2)� For deposits into the Bond Fund hereby established and created for the payment of the principal of, premium, if any, and interest on the Bonds as the same become due or are required Ito be called for redemption, as required by Section 5 03, and to the purchase of Bonds as permuted by Section 2 03 That Bond Fund shall be used only for such purposes (3), For deposits into the Reserve Fund hereby established and created for the security and payment of the Bonds when there is a deficiency of money available for such purpose in the Bond Fund, as required by Section 5 04 (4) For deposits into the Contingency Fund hereby established and created to the extent required by Section 5 06 (5)1 To cure a deficiency in the Bond Fund, the Reserve Fund, and the Contingency Fund, in that order (6), For any lawful purpose, including (a) deposits into a Fuel Reserve Account (hereby established as a part of the Revenue Fund) for use in paying the cost of fuel acquisition or replacement or fuel working capital, and uninvested money therein shall be applied only to the cost of acquisition, leasing, reprocessing and replacement and disposal of fuel and fuel resources, assemblies, materials, services and components, and (b) for distribution to the Cities on such basis as the Board may determine would be fair and equitable if the Board determines an amount of money (and investments) will not be required for the purposes mentioned in this Section SECTION 5 03 Bond Fund The Bond Fund shall be held in trust as an account of the Agency by the Mercantile National Bank at Dallas, Dallas, Texas as custodian of said Fund, said Fund to be held in trust for the benefit of the Holders The Agency may remove such bank as custodian and designate another bank (within the State of Texas) as custodian of said Fund In conjunction with the preparation of the annual budget, and immediately following the delivery of a Series of Bonds, the Board shall cause a determination to be made (I) lof the amount then on deposit in the Bond Fund for the purpose of paying and discharging (a) interest on Outstanding Bonds to become due, and (b) the principal to become due, by reason of maturity or mandatory redemption, and 13 08943,0—Texas Municipal —Proof of 8-234"teck-Wancck—Phone (214) 631-3130 (u) the amount required to be deposited each month so as to provide, in equal monthly installments, the full amount required to pay such principal and interest as the same becomes due The Board shall (on or before the 25th day of each month) cause the amount so determined [in clause (n) of the preceding paragraph) to be transferred from the Revenue Fund to the Bond Fund In addition to the amounts provided for bond interest and principal requirements the Agency shall make appropriate arrangements for meeting the fees and charges of the Paying Agents In the event the amount on hand and available in the Revenue Fund for transfer to the Bond Fund is insufficient to permit the required deposit in full in accordance with provisions of this Section, then the amount of any deficiency shall be transferred by the Agency to the Bond Fund from other Funds created and established by this Resolution as herein provided SECTION 5 04 Reserve Fund The Reserve Fund shall be held in trust as an account of the Agency by the Mercantile National Bank at Dallas, Dallas, Texas as custodian of said Fund said Fund to be held in trust for the benefit of the Holders The Agency may remove such bank as custodian and designate another bank (within the State of Texas) as custodian of said Fund The amount to be accumulated and maintained in the Reserve Fund shall be the Average Annual Debt Services of the Bonds Outstanding calculated as of the date of and after giving effect to the last Series of Bonds delivered In the event momes in the Revenue Fund are not adequate to fully make any required transfer to the Bond Fund (as required by Section 5 03) an amount equal to the deficiency shall be transferred to the Bond Fund from the Reserve Fund unless such amount has been transferred to the Bond Fund from the Contingency Fund In the event money in the Reserve Fund is transferred to the Bond Fund monthly deposits into the Reserve Fund shall be made on or before the 25th day of each month (not more than 36 equal monthly installments) Iuntil the amount required to be on deposit in the Reserve Fund has been restored SECTION 5 05 Limitations upon Deposits to the Bond Fund and the Reserve Fund Whenever amounts in the Bond Fund, together with amounts in the Reserve Fund, shall be sufficient to pay the principal of and interest on all Bonds then Outstanding in accordance with their terms, and shall be available for such purposes, then and so long as such amounts shall continue to be available and fully sufficient for such purposes, further transfer of monevs from the Revenue Fund to the Bond Fund or Reserve Fund shall not be required Whenever all Bonds at the time Outstanding shall have been called for redemption and amounts then in the Bond Fund, together with amounts in the Reserve Fund, shall be sufficient to pay the Redemption Price of all such Bonds and interest due thereon to the redemption date, and shall be available for such purpose, then and so long as such amounts shall continue to be available and fully sufficient for such purpose, further transfers of moneys to the Bond Fund or to the Reserve Fund shall not be required Any amounts on deposit in the Reserve Fund which are in excess of the amount required to be on deposit therein shall be transferred to the Bond Fund to make up any deficiency therein, and if there be no such deficiency, may be transferred to the Revenue Fund SECTION 5 06 Contingency Fund The Contingency Fund shall be held by a Depository On or before the Date of Commercial Operation of the initial electric generating facility owned (in whole or in part) or operated by or on behalf of the Agency, the sum of not less than $2,000,000 shall be deposited in the Contingency Fund from proceeds of Bonds or other funds of the Agency legally available therefor The amount to be accumulated and maintained in this Fund may be increased if the same is accomplished in the manner provided in the Power Sales Contract 14 08743-0—Texas Mumcipal—Proof of 8-23-76—Steck-Wancck—Phone (214) 631-3130 In the event the amount on hand in said Fund is less than the Contingency Fund Requirement, monthly deposits shall be made from the Revenue Fund on or before the 25th day of each month (not more than 36 equal monthly installments) until the full amount of the Contingency Fund Require- ment is on deposit therein Any amount on deposit in the Contingency Fund which is in excess of the Contingency Fund Requirement shall be transferred to the Bond Fund or Reserve Fund to make up any deficiency therein, and if there be no such deficiency, shall be transferred to the Revenue Fund Money in the Contingency Fund may be used, if funds are not otherwise available for such purpose, for any one or more of the following purposes (a) to pay the cost of extraordinary renewals, replacements and additions to and extensions of the System which are required for the continuing operation of the System or any part thereof, and (b) to pay the cost of extraordinary operation and maintenance costs, including extraordinary costs of fuel and the cost of preventing or correcting any unusual loss or damage (including major repairs), to the System, or the retirement from service decommissioning or disposal of facilities of the System, and (c) for the security and payment of the Bonds when there is a deficiency of money available for such purpose in the Bond Fund, the Reserve Fund, either or both SECTION 5 07 Construction Fund (a) The Construction Fund is hereby established and created and shall be held by a Depository There shall be paid into the Construction Fund the amounts required to be so paid by the provisions of any Bond Resolution and any moneys from other sources which the Board may elect to deposit therein Amounts in the Construction Fund, except as otherwise provided herein, shall be applied to the payment of the Cost of Acquisition and Construction (b) The Agency may establish within the Construction Fund a separate project account for each project of the Agency but in any event shall provide for accounting controls with respect to the expenditures of amounts from the Construction Fund as to assure application of moneys therein as required by the Bond Resolution and applicable law (c) The proceeds of insurance maintained pursuant to the Bond Resolution against physical loss of or damage to the System, or of contractors' performance bonds with respect thereto, pertaining to the period of construction thereof of any project shall be paid into the Construction Fund (d) Notwithstanding any of the other provisions of this Section, to the extent that other moneys are not available therefor, amounts in the Construction Fund shall be applied to the payment of the principal of, premium, if any, and interest on Bonds when due (e) Amounts in the Construction Fund shall be invested and reinvested to the fullest extent practicable in Investment Securities as directed by the Agency Earnings from such investments shall be retained in the Construction Fund (f) The substantial completion of construction or reconstruction of each project shall be evidenced by certificate of the Authorized Officer, which shall be filed with the Depository of the Construction Fund, stating (i) that such project has been completed substantially in accordance with the plans and speci fications applhcable thereto, (u) the date of such substantial completion and (in) the amounts, if any, required for the payment of any remaining part of Cost of Acquisition and Construction of such project Upon the filing of such certificate, the balance in the Construction Fund allocable to such project in excess of the amount, if any, stated in such certificate shall be deposited in the Bond Fund 1 or Reserve Fund, to the extent of any deficiencies therein, and to the extent there are no such deficiencies, may be deposited in the Bond Fund for use in retiring Bonds in advance of their regularly scheduled maturity or used for other proper expenditures from the Construction Fund as the Agency may direct IS 08743-0—Texas Mumcipal—Proof of 8-23-76—Steck-Wancck—Phone (214) 631-3130 ARTICLE VI Covenants of the Agency SECTION 6 01 Punctual Payment of Bonds The Agency will punctually pay or cause to be paid the principal of, premium if any and interest on the Bonds in strict conformity with the tetras of any Bond Resolution, and according to the true intent and meaning thereof SECTION 6 02 Against Encumbrances Except as permitted by Secuon 6 19 the Agency will not create, and Will use its best efforts to prevent the creation of, any mortgage or lien upon the System or any part thereof or any property essential to the proper operation of the System or to the maintenance of the revenues therefrom The Agency will not create or permit the creation of, any pledge, hen, charge or encumbrance upon the revenues except only as provided in or permitted by a Bond Resolution SECTION 6 03 Against Sale or Other Disposition of Property Except as permitted by Section 6 19, the Agency will not sell or otherwise dispose of any property essential to the proper operation of the System or to the maintenance of the revenues The Agency will not enter into any lease or agreement which impairs or impedes the operation of the System or which impairs or impedes the rights of the Bondholders with respect to the Net Revenues SECTION 6 04 Maintenance and Operation of System The Agency, upon the acquisition or construction of an operaung System, will operate the same continuously, to the extent practicable under conditions as they may from time to time exist, in an efficient and economical manner, and will at all tunes maintain, preserve and keep, or cause to be maintained, preserved and kept, the System, including all parts thereof and appurtenances thereto, in good repair, working order and condition, and in such manner that the operating efficiency thereof will be of high character, and the Agency will from time to time make, or cause to be made, all necessary and proper repairs and replacements so that the business carried on in connection with the System by the Agency may be properly and advantageously conducted in a manner consistent with prudent management, and so that the rights and security of the Holders of the Bonds are fully protected and preserved SECTION 6 05 Maintenance of Revenues, Power Sales Contracts (a) The Agency will at all tunes comply with all terms, covenants and provisions, express and imphed, of all contracts and agreements entered into by it for electric power and energy furnished by or available to the System and all other contracts or agreements affecting or involving the System or the business of the Agency with respect thereto The Agency shall promptly collect all charges due for electric power and energy and services supplied by it as the same become due, and shall at all times maintain and promptly and vigorously enforce its rights against any parry who does not pay such charges when due (b) The Agency shall enforce the provisions of the Power Sales Contracts and duly perform its covenants and agreements thereunder SECTION 6 06 Observance of Laws and Regulations The Agency will well and truly keep, observe and perform all valid and lawful obligations or orders or regulations now or hereafter imposed on it by contract, or prescribed by any law of the United States of America or of the State of Texas, or by any officer, board or commission having jurisdiction or control, as a condition of the continued enjoyment of any and every right, privilege or franchise now owned or hereafter acquired by the Agency, including its right to exist and carry on business, to the end that such rights, privileges and franchises shall be maintained and preserved, and shall not become abandoned, forfeited or in any manner impaired provided however that the Agency shall not be required to comply with any such orders so long as the validity or application thereof shall be contested in good faith SECTION 6 07 Payment of Taxes and Claims The Agency will, from time to time, duly pay and discharge, or cause to be paid and discharged, any taxes, assessments or other governmental 16 08743-0—Texas Municipal —Proof of 8-23-76—Steck-Wancck—Phone (214) 631-3130 charges lawfully imposed on it or Its properties when the same shall become due, and will duly observe and conform to all valid requirements of any governmental authority relative to any such properties The Agency will keep the System and all parts thereof free from all other hens, claims, demands and encumbrances to the end that the priority of the hen of the Bond Resolution on the Net Revenues may at all tunes be maintained and preserved Nothing herem shall be construed as requiring the Agency to pay any tax, claim assessment or governmental charge or comply with any regulation during the time the validity thereof is being ques- tioned by the Agency SECTION 6 08 Insurance Subject in each case to the condition that insurance is obtainable at reasonable rates and upon reasonable terms and conditions (a) The Agency will procure and maintain, or cause to be procured and maintained, at all times while any Bonds shall be Outstanding, insurance on the System in such amounts and against such risks as are usually insurable in connection with similar systems and are usually carried by electric,utihties operating similar systems Such insurance shall be adequate in amount and as to the risks insured against, and shall be maintained with responsible insurers (b) The Agency will procure and maintain, or cause to be procured and maintained so long as any Bonds shall be Outstanding, public liability and property damage insurance as is usually carved by municipal electric utilities operating similar properties (c) The Agency will secure and maintain adequate fidelity insurance or bonds on all officers and employees handling or responsible for funds of the Agency (d) The obligation hereunder to procure and maintain insurance with respect to a Joint Project I shall be met if the entity, acting as the manager of the Joint Project, obtains and maintains the insurance required for the benefit of all owners of the Joint Project as their interest may appear (e) The Agency may establish and create a special fund with and to be held by a Depository for the purpose of providing a self insurance fund and the amount deposited in such fund in any Fiscal Year shall be charged as an Operating and Maintenance Expense Money in such fund, if created, may be invested in Investment Securities, and interest income or increment may be retained therein or transferred to the Revenue Fund as may be determined by the Agency as evidenced by a Written Certificate of the Agency To the extent amounts may be held in such fund, the face amount of appropriate insurance policies may be reduced SECTION 6 09 Books and Records The Agency covenants that proper books of record and account sill be kept in which full, true and correct entries will be made of all income, expenses and transactions of and in relation to the System, and each and every part thereof, in accordance with Generally Accepted Accounting Principles On or before 120 days after the close of each Fiscal Year of the Agency,i beginning with the Fiscal Year ending in 1976, a statement showing the gross operating income and revenues, the operating and maintenance charges and the net operating income of the System for the Fiscal Year then last completed, and a balance sheet of the Agency as of the end of such last Fiscal Year, all certified by an independent Certified Public Accountant will be made available at the office of the Agency The Agency further covenants and agrees that the System, and each and every part thereof, and all books, records, accounts, documents and vouchers relating to the construction, operation, maintenance, repair, improvement and extension thereof, will at all times be open to inspection of the Holders of Bonds and their representatives SECTION 6 10 Rates and Charges The Agency will, at all times while any of the Bonds shall be Outstandmg� establish, fix, prescribe and collect rates and charges for the sale or use of electric power and energy or services produced, transmitted, distributed or furnished by the System which, together with other income, are reasonably expected to yield Net Revenues equal to at least 125 tortes 17 08743-0—Texas Mumcipal—Proof of 8-23-76—Steck Wancck—Phone (214) 631-3130 charges lawfully unposed on it or its properties when the same shall become due, and will duly observe and conform to all valid requirements of any governmental authority relative to any such properties The Agency will keep the System and all parts thereof free from all other liens, claims, demands and encumbrances to the end that the priority of the hen of the Bond Resolution on the Net Revenues may at all tunes be maintained and preserved Nothing herem shall be construed as requiring the Agency to pay any tax, claim assessment or governmental charge or comply with any regulation during the time the validity thereof is being ques- tioned by the Agency SECTION 6 08 Insurance Subject in each case to the condition that insurance is obtainable at reasonable rates and upon reasonable terms and conditions (a) The Agency will procure and maintain, or cause to be procured and maintained, at all times while any Bonds shall be Outstanding, insurance on the System in such amounts and against such risks as are usually insurable in connection with similar systems and are usually carried by electric utilities operating similar systems Such insurance shall be adequate in amount and as to the risks insured against, and shall be maintained with responsible insurers (b) The Agency will procure and maintain, or cause to be procured and maintained so long as any Bonds shall be Outstanding, public liability and property damage insurance as is usually carved by municipal electric utilities operating similar properties (c) The Agency will secure and maintain adequate fidelity insurance or bonds on all officers and employees handling or responsible for funds of the Agency (d) The obligation hereunder to procure and maintain insurance with respect to a Joint Project shall be met if the entity, acting as the manager of the Joint Project, obtains and maintains the insurance required for the benefit of all owners of the Joint Project as their interest may appear (e) The Agency may establish and create a special fund with and to be held by a Depository for the purpose of providing a self insurance fund and the amount deposited in such fund in any Fiscal Year shall be charged as an Operating and Maintenance Expense Money in such fund, if created, may be invested in Investment Securities, and interest income or increment may be retained therein or transferred to the Revenue Fund as may be determined by the Agency as evidenced by a Written Certificate of the Agency To the extent amounts may be held in such fund, the face amount of appropriate insurance policies may be reduced SECTION 6 09 Books and Records The Agency covenants that proper books of record and account will be kept in which full, true and correct entries will be made of all income, expenses and transactions of and in relation to the System, and each and every part thereof, in accordance with Generally Accepted Accounting Principles On or before 120 days after the close of each Fiscal Year of the Agency, beginning with the Fiscal Year ending in 1976 a statement showing the gross operating income and revenues, the operating and maintenance charges and the net operating income of the System for the Fiscal Year then last completed, and a balance sheet of the Agency as of the end of such last Fiscal Year, all certified by an independent Certified Public Accountant will be made available at the office of the Agency The Agency further covenants and agrees that the System, and each and every part thereof, and all books, records, accounts, documents and vouchers relating to the construction, operation, ;maintenance, repair, improvement and extension thereof, will at all tunes be open to inspection of the Holders of Bonds and their representatives SECTION 6 10 Rates and Charges The Agency will, at all tunes while any of the Bonds shall be Outstanding, establish, fix, prescribe and collect rates and charges for the sale or use of electric power and energy or services produced, transmitted, distributed or furnished by the System which, together with other income, are reasonably expected to yield Net Revenues equal to at least 125 times 17 08743 0—Texas Municipal —Proof of 8-23-76--Steck-Wancck—Phone (214) 631-3130 charges lawfµlly imposed on it or its properties when the same shall become due, and will duly observe and (conform to all valid requirements of any governmental authority relative to any such properties The Agency will keep the System and all parts thereof free from all other hens, claims, demands and encumbrances to the end that the priority of the lien of the Bond Resolution on the Net Revenues may at all times be maintained and preserved Nothing herein shall be construed as requuwg the Agency to pay any tax, claim assessment or governmental charge or comply with any regulation during the time the validity thereof is being ques- tioned by the Agency SECTION 608 Insurance Subject in each case to the condition that insurance is obtainable at reasonable rates and upon reasonable terms and conditions (a) The Agency will procure and maintain, or cause to be procured and maintained, at all times while any Bonds shall be Outstanding, insurance on the System in such amounts and against such risks as are usually insurable in connection with similar systems and are usually carved by electric utilities operating smular systems Such insurance shall be adequate in amount and as to the risks insured against, and shall be maintained with responsible insurers (b) The Agency will procure and maintain, or cause to be procured and maintained so long as any Bonds shall be Outstanding, public liability and property damage insurance as is usually carved by municipal electric utilities operating similar properties (c) The Agency will secure and maintain adequate fidelity insurance or bonds on all officers and employees handling or responsible for funds of the Agency (d) The obligation hereunder to procure and maintain insurance with respect to a Joint Project shall be met if the entity, acting as the manager of the Joint Project, obtains and maintains the insurance required for the benefit of all owners of the Joint Project as their interest may appear (e) The Agency may establish and create a special fund with and to be held by a Depository for the Ipurpose of providing a self insurance fund and the amount deposited in such fund in any Fiscal Year shall be charged as an Operating and Maintenance Expense Money in such fund, if created, may be invested in Investment Securities, and interest income or increment may be retained therein or transferred to the Revenue Fund as may be determined by the Agency as evidenced by a Written Certificate of the Agency To the extent amounts may be held in such fund, the face amount of appropriate insurance policies may be reduced SECTr0g 6 09 Books and Records The Agency covenants that proper books of record and account will be kept in which full, true and correct entries will be made of all income, expenses and transactions of and in relation to the System, and each and every part thereof, in accordance with Generally Accepted Accounting Principles On or before 120 days after the close of each Fiscal Year of the Agency, beginning with the Fiscal Year ending in 1976, a statement showing the gross operating income and revenues, the operating and maintenance charges and the net operating income of the System for the Fiscal Year then last completed, and a balance sheet of the Agency as of the end of such last Fiscal Year, all certified by an independent Certified Public Accountant, will be made available at the office of the Agency The Agency further covenants and agrees that the System, and each and every part thereof, and all books, records, accounts, documents and vouchers relating to the construction, operation, ,Maintenance, repair, improvement and extension thereof, will at all umes be open to inspection of the Holders of Bonds and their representatives SECTi0x 6 10 Rates and Charges The Agency will, at all times while any of the Bonds shall be Outstanding, establish, fix, prescribe and collect rates and charges for the sale or use of electric power and energy or services produced, transmitted, distributed or furnished by the System winch, together with other income, are reasonably expected to yield Net Revenues equal to at least 125 times 17 08743-0—Texas Mumcipal—Proof of 8-23-76—Steck-Wancck—Phone (214) 631-3130 the Debt Service of all Outstanding Bonds for the Fiscal Year for which such rates and charges shall apply, (but excluding amounts deposited in the Bond Fund payable as interest in such Fiscal Year which were provided from the proceeds of Bonds) and, promptly upon any material change in the circumstances which were contemplated at the time such rates and charges were most recently reviewed, but not less frequently than once in each Fiscal Year, shall review the rates and charges for electric power and energy and services and shall as necessary revise such rates and charges to comply with the foregoing requirement provided that such rates, charges and income shall in any event produce moneys sufficient to enable the Agency to comply with all its covenants under the Bond Resolution and to pay all obligations of the Agency, including Subordinated Indebtedness SECTION 611 Eminent Domain If all or any part of the System shall be taken by eminent domain proceedings or conveyance in lieu thereof, the net proceeds realized by the Agency therefrom shall be deposited in the Construction Fund SECTION 6 12 Reconstruction of the System Application of Insurance Proceeds If any useful portion of the System shall be damaged or destroyed, the Agency shall, as expeditiously as possible, continuously, and diligently prosecute or cause to be prosecuted the reconstruction or replacement thereof, unless the Agency determines that such reconstruction or replacement is not in the interests of the Agency and the Bondholders The proceeds of any insurance paid on account of such damage or destruction, other than business interruption loss insurance, shall be paid into the Construction Fund and made available for, and to the extent necessary applied to, the cost of such reconstruction or replacement, if any Pending such application, such proceeds may be invested by the Agency in Invest- ment Securities SECTION 6 13 Limitations on Free Use of Facilities None of the net electric power and energy owned controlled or supplied by the Agency or other services shall be furnished or supplied free If the Agency shall sell fuel or water developed or made available by or for the System, a reasonable charge therefor shah be made SECTION 614 Power to Issue Bonds and Pledge Revenues and Other Funds The Agency is duly authorized under all applicable laws to create and issue the Bonds and to adopt this Bond Resolution and to pledge the Net Revenues and other moneys, securities and funds purported to be pledged by this Bond Resolution in the manner and to the extent provided in this Resolution The Bonds and the provisions of all Bond Resolutions are and will be the valid and legally enforceable obligations of the Agency in accordance with their terms and the terms of the such Bond Resolutions The Agencylshall at all tunes, to the extent permitted by law, defend, preserve and protect the pledge of the Net Revenues and other moneys, securities and funds pledged under the Bond Resolutions and all the rights of the Holders under the Bond Resolution against all claims and demand of all persons whomsoever SECTION 6 15 Power to Construct and Operate System and Collect Rates and Fees The Agency has, and will have so long as any Bonds are Outstanding, good right and lawful power to construct, reconstruct, improve, maintain, operate and repair the facilities of the System and to fix and collect rates, fees and other charges in connection with the System, subject to the jurisdiction of any applicable regulatory authority SECTION 616 General (a) The Agency shall do and perform or cause to be done and performed all acts and things required to be done or performed by or on behalf of the Agency under the provisions of the Act and the Bond Resolution (b) Upon the date of delivery of any of the Bonds all acts, conditions and things required by law and the Bond Resolution to exist, to have happened and to have been performed precedent to and 18 08743-0—Texas Municipal —Proof of 8-23-76—Steck-Wancck—Phone (214) 631-3130 in the issuance of such Bonds shall exist, have happened and have been performed in regular and in due time, form and manner as required by law and the Agency will have duly and regularly complied with all applicable provisions of law and will be duly authorized to issue the Bonds under the Act in the manner and upon the terms as in the Bond Resolution provided (c) The Agency may purchase Bonds of any Series from any available funds at public or private sale, as and when and at such prices as the Agency may in its discretion determine, but no purchase shall be made at a price exceeding the then current market price or, in the case of Bonds which by their terms are subject to redemption prior to maturity, the then current or first applicable Redemption � Price SECTION 6 17 Engineer The Agency may retain one or more recognized independent engineers or engineering firms as appropriate for the purpose of providing the Agency with engineering counsel Any engineer employed pursuant to this Section shall be selected with the special reference to his knowledge and experience in the matter for which he is retained SECTION 6 18 Annual Budget Prior to the beginning of the Fiscal Year commencing October 1, 1976, and not less than 30 days prior to the beginning of each Fiscal Year thereafter, the Agency shall adopt an Annual Budget for the ensuing Fiscal Year which shall set forth in reasonable detail the amount of money on hand, estimated Gross Revenues and Operating and Maintenance Expenses and other expenditures of the System for such Fiscal Year and the estimated amount to be de- posited during such Fiscal Year in the Funds established by the Bond Resolution At the end of the sixth month of each Fiscal Year the Agency shall review its estimates of Gross Revenues and Operating and Maintenance Expenses for such Fiscal Year, and in the event such estimates do not substantially correspond with actual Gross Revenues or Operating and Maintenance Expenses, the Agency may adopt an amended Annual Budget for the remainder of such Fiscal Year The Agency may also at any time adopt an amended Annual Budget for the remainder of the then current Fiscal Year SECTION 619 Acquisition and Disposal of Fuel Resources In connection with the acquisition of fuel resources the Agency may from time to time encumber, as a purchase money mortgage, any land or rights in land or fuel resources and execute a deed of trust note as additional security therefor and such note may be made payable as provided in Section 7 04 Fuel may be sold by the Agency, as contemplated by Section 6 13, if the Board determines such sale would be in the best interest of the Agency SECTION 6 20 Covenants as to Power Sales Contracts other Agreements The Agency covenants that it will not do any act or omit to do any act which would cause a breach of contract or cause the Agency to be in default of any covenant, condition or provision of the Power Sales Contract or any agreement with respect to any Joint Project and it will enforce all the terms and conditions of such contracts against the parties thereto SECTION 6 21 Sale of an Ownership Interest in Electric Facilities In the event another entity (as defined in the Act) acquires or increases its ownership interest in a Joint Project (as permitted by the Act) the money received by the Agency shall be placed in a construction fund so as to complete and provide the facilities constituting the Joint Project or other projects which the Agency is empowered to provide In no event shall the Agency permit the acquisition of an ownership interest in electric facilities in, a manner that would cause the interest on Bonds to become subject to federal income taxation SECTION 6 22 Sale of Properties Constituting a Part of the System In the event properties constituting a part of the System are not needed for the efficient operation and maintenance of its electric facilities and the same are sold, the proceeds therefrom may be placed in the Construction Fund for the acquisition of additional properties or may be deposited in the Bond Fund provided that proceeds from the sale of fuel resources shall be deposited in the Fuel Reserve Account 19 08743-0—Texas Mumcipal—Proof of 8-23-76--Steck-Warlick—Phone (214) 631-3130 ARTICLE VII Additional Bonds and Refunding Bonds SECTION 7 01 Additional Bonds Generally (a) Subject to the provisions hereinafter appearing with relation to condinons precedent which must first be met, the Agency reserves the right to issue, from time to time as needed, Additional Bonds for the lawful purposes of the Agency with respect to the System, (including the payment of the prin- cipal of, interest on and redemption premium, if any, on Subordinated Indebtedness issued by the Agency for such purposes pursuant to Section 7 04 hereof) All such Additional Bonds and require- ments ascribed to them shall be payable from the same source and secured in the same manner on a panty and of equal dignity with all other Bonds Additional Bonds shall be made to mature on March 1, or September 1, either or both (b) In, the discretion of the Board, the Additional Bonds may be authorized and issued in such form as shall be lawful and deemed the most advantageous under the circumstances at the time More specifically but without Intending any limitation, they may be (i) in coupon form, without privileges of registration as to principal, (u) in coupon form with privileges of registration as to principal (ni) in registrable form with privileges of conversion to coupon form, (tv) in coupon form with privileges of conversion to registrable form (v) made to mature serially or as 'term" or "sinking fund" Bonds with arrangements for mandatory redemption Should Bonds be issued as "term" or "sinlung fund" Bonds with Provisions for mandatory redemption, the date of mandatory redemption shall be considered a principal payment date (c) It is further provided that should in the future there be developed any characterization for evidence of indebtedness or debt instruments differing from those used hereunder, the Agency shall have the right to employ those characterizations in its financing arrangements and to provide that such evidence of indebtedness or debt instruments may be payable from the same source and secured in the same manner as the Bonds, on a panty therewith, provided that the same conditions precedent herein required for the authorization and issuance of Additional Bonds first be met as conditions precedent to the authorization and issuance of any such other evidence of indebtedness or debt instruments .SECTION 7 02 Additional Conditions for Issuance of Additional Bonds The Additional Bonds may be issued in one or more Series, provided, however that no Additional Bonds shall be issued unless and until the following conditions have been met (a) The Agency, as evidenced by a certificate of an Authorized Officer, is not in default (1) as to any covenant, condition or obligation prescribed by the Bond Resolution authorizing the issuance of the Outstanding Series 1976 Bonds or Additional Bonds or (n) in the payments of Subordinate Indebtedness (b) The laws of the State of Texas effective at the time of the authorization of such Additional Bonds shall permit their issuance, (c) The Bond Resolution authorizing the Additional Bonds (1) reaffirms the provisions of Section 5 03 hereof with respect to deposits being made in the Bond Fund in an amount adequate to pay the Debt Service on the Bonds as the same become due and sets forth the amount of Bond proceeds, if any, to be deposited in any Fund established by this Resolution, and (u) provides that there be deposited in the Reserve Fund (out of the proceeds of the Addi- tional fonds or from other sources of the Agency legally available for such purpose) any addi- tional um required so that the amount then on deposit therein is equal to not less than the Average Annual Debt Service on all Bonds then Outstanding, after giving effect to the issuance of the proposed Additional Bonds, and (d) The Agency shall have (1) obtained a certificate from each City which has executed the Power Sales Contract with the Agency showing a forecast of operating results of its electric system which show the ability of each City to meet its obligations payable from the revenues of such electric system for the period (the "forecast period") of (a) ten ensuing fiscal years of each City or (b) each 20 08743-0—Texas Municipal —Proof of 8-23-76—Steck-Wancek—Phone (214) 631-3130 ensuing fiscal year of each City until the thud fiscal year after the latest estimated completion date of any Project which has been previously approved by the Cities, whichever is later and (2) the Engineer has reviewed such forecasts and executed a certificate stating in effect that in his opinion such forecasts are reasonable and based thereon (and such other factors as he deems prudent) the Agency will have the ability to meet its obligations during each fiscal year for the forecast period (a) The Agency shall have obtained a report from an independent certified public accountant showing that the Net Revenues (i) for the Fiscal Year next preceding the date of the Additional Bonds or (b) for 12 consecutive months out of the 18 months next preceding the date of the Additional Bonds, were equal to at least 125 times the Debt Service (excluding amounts deposited in the Bond Fund for the payment of interest which were provided from the proceeds of Bonds) for such period, provided however, the requirement of this paragraph (e) shall not be applicable to Additional Bonds issued for the purpose of completing the financing of a Project for which a Series of Bonds has been issued SECTION 7 03 Refunding Bonds The Agency shall retain the right to issue refunding Bonds to refund au or any part of its Outstanding Bonds as permitted by and in accordance with any lawful method thereunto appertaining it being provided, however, that no refunding bonds shall be issued which (1) shall enjoy a hen on Net Revenues superior to that possessed by Outstanding Bonds and (n) the Debt Service for the refunding Bonds are in each year less than the Debt Service for the Bonds being refunded or, if less than all Outstanding Bonds are refunded, the proposed refunding Bonds shall be considered as "Additonal Bonds" under the provisions of Section 7 02(e) and meet the requirements thereunder but the report required shall give effect to the issuance of the proposed refunding Bonds (and shall not give effect to the Bonds being refunded following their cancellation or provision being made for their payment) SECTION 7 04 Subordinated Indebtedness The Agency retains the tight to issue evidence of indebtedness secured by a pledge of such amounts in the Revenue Fund as may from time to time be available for the purpose of payment thereof (after the payments required to be made into the Bond Fund, the Reserve Fund, the Contingency Fund or any additional Fund created and established by the Bond Resolution), or which are secured by a vendors hen in the properties acquired, including notes heretofore or hereafter given in connection with the acquisition of land, or rights in land or fuel resources, provided, however, that such indebtedness shall be incurred only for any one or more of the purposes set forth in the Act SECTION 7 05 Special Contract Obligations The Agency retains the tight to issue bonds or other obligations for the purpose of financing the construction or acquisition of electric facilities (as defined in the Act) which are to be initially owned as co -tenants or co -owners by the Agency and another entity, or entities, and such bonds or other obligations, for the purposes of the Bond Resolution, shall be Special Contract Obligations Special Contract Obligations shall not be payable from Gross Revenues, nor shall the expense of operating and maintenance of such electric facilities be an Operating and Maintenance Expense, nor shall the electric facilities so financed be a part of the System as such terms are herein defined Such Obligations shall not be on a panty with the Bonds or be considered as having been issued pursuant to the Bond Resolution Any lease payments, installment sale payments, or other payments or receipts of the Agency which are received by reason of the acquisition or financing of such electric facilities with any proceeds of Special Contract Obligations shall be kept separate and apart from any Funds created or established under the Bond Resolution, provided that any amounts received by the Agency in any Fiscal Year in excess of that required to pay operating and maintenance expenses, the principal of, premium for redemption (if any) and interest on such Special Contract Obligations the amounts required to establish or replenish any fund established for the payment and security of such Obligations, and the fees of the paying agent, registrar, or trustee (any or all), shall be deposited in the Revenue Fund herein created and shall be applied, from that time forward, as Gross Revenues 21 08743-0—Texas Municipal —Proof of 8-23-76—Steck-Wancek—Phone (214) 631-3130 ARTICLE Vill Modification or Amendment of Bond Resolutions SECTIONS 01 Amendments Permitted (a) This Bond Resolution and any Bond Resolution and the rights and obligations of the Agency and of the Holders of the Bonds and the Coupons may be modified or amended at any time or with the written consent, (I) of the Holders of at least sixty per cent in principal amount of the Bonds then Outstanding, and (ii) in case less than all of the several Series of Bonds then Outstanding are affected by the modtficauon or amendment, of the Holders of at least sixty per cent in principal amount of the Bonds of each Series so affected and then Outstanding, and provided, however, that if such modification or amendment will, by its terms, not take effect so long as any Bonds of any specified Series remain Outstanding, the consent of the Holders of Bonds of such Series shall not be required and Bonds of such Series shall not be deemed to be Outstanding for the purpose of any calcula- tion of Outstanding Bonds under this section No such modification or amendment shall (i) extend the maturity of any Bond, or reduce the principal amount or Redemption Price thereof, or reduce the rate or extend the time of payment of interest thereon, without the consent of the Holder of each Bond so affected, or (il) reduce the aforesaid percentage of Bonds required for the of irmative vote or written consent to an amendment or modification of this Bond Resolution or any Bond Resolution with- out the consent of the Holders of all of the Bonds then Outstanding (b) Any Bond Resolution or supplemental resolution and the rights and obhgations of the Agency and of the Holders of the Bonds and the Coupons may also be modified or amended at any time by a supplemental resolution, without the consent of any Bondholders, but only to the extent permitted by law and only for any one or more of the following purposes — (1) to add to the covenants and agreements of the Agency in the Bond Resolution contained, other covenants and agreements thereafter to be observed, or to surrender any right or power herem reserved to or conferred upon the Agency (2) to make such provisions for the purpose of curing any ambigmty, or of curing or correcting any defective provision contained in the Bond Resolution, or in regard to questions arising under the Bond Resolution, as the Agency may deem necessary SECTION 8 02 Amendment by Written Consent The supplemental resolution shall become effec- tive when there shall have been filed with the Agency the written consents of the necessary number of Holders of the Bonds then Outstanding and a notice shall have been published as hereinafter in this Section provided It shall not be necessary for the consent of the Bondholders under this Section to approve the particular form of any proposed supplemental resolution, but it shall be sufficient if such consent shall approve the substance thereof Each such consent shall be effective only if accompanied by proof of ownership of the Bonds for which such consent is given, which proof shall be such as is permitted by Section 12 03 Any such consent shall be binding upon the Holder of the Bonds giving such consent and on any subsequent Holder thereof (whether or not such subsequent Holder has notice thereof) unless such consent is revoked in writing by the Holder of the Bonds giving such consent or a subsequent Holder thereof by filing such revocation with the Agency prior to the date when the notice hereinafter in this Section provided for has been published Notice of the fact of the adoption of such supplemental resolution shall be published at least once in a Financial Newspaper after the date of adoption of such supplemental resolution 22 08743-0—Texas Mumcipal—Proof of 8-23-76—Steck-Wancck—Phone (214) 631-3130 ARTICLE IX Events of Default and Remedies of Holders SECTION 9 01 Events of Default Each of the following occurrences or events shall be and is hereby declared to be an "Event of Default," to wit (a) The failure to make payment of the principal of any of the Bonds when the same shall become due and payable, (b) The failure to pay any installment of interest when the same shall become due and payable, (0) Default in any covenant, undertaking or commitment contained in the Bond Resolution, the failure to perform which materially affects the rights of the holders of the Bonds to be repaid and the continuation thereof for a period of sixty (60) days after nonce of such default by any Holder of any Bonds, (d) If there shall occur the dissolution or liquidation of the Agency or the filing by the Agenc}of a voluntary petition in bankruptcy or the commission by the Agency of any act of bankruptcy, or adjudication of the Agency as a bankrupt or assignment by the Agency for the benefit of its creditors, or the entry by the Agency into an agreement of composition with its creditors, or the approval by a court of competent jurisdiction of a petition applicable to the Agency in a proceeding for its reorganization instituted under the provisions of the general bank- ruptcy act, as amended, or under any similar act in any jurisdiction which may now be in effect or hereafter enacted SECTIO 9 02 Remedies for Default Upon the happening and continuance of any of the Events of Default as provided in Section 9 01 hereof, then and in every case any Holder may proceed against the Agency for the purpose of protecting and enforcing the rights of the Holders of Bonds or Coupons under the Bond Resolution, by mandamus or other suit, action or special proceeding equity or at law, in any courdb in competent jurisdiction; for any relief permitted by law, including the specific performance of any covenant or agreement contained herein, or thereby to enjoin any act or thing which may be unlawful orl in violation of any right of the Holder hereunder or any combination of such remedies Each such fight or privilege shall be in addition to and cumulative of any other right or privilege and the exercise of any right or privilege by or on behalf of any Holders shall not be deemed a waiver of any other right or privilege thereof SECTION 9 03 Priority of Payments If an Event of Default has occurred then moneys of the Agency shq be applied fast to the payment of interest on Bonds that has become due and second to the pro-rata reduction of the principal amount of Bonds Outstanding which have become due 23 08743-0—Texas Municipal —Proof of 8-23-76--Stack-Warhek—Phone (214) 631-3130 ARTICLE X Depositories of Moneys, Security for Deposits and Investment of Funds SECTION 1001 Depositories (a) All moneys held in the Bond Fund and in the Reserve Fund shall be deposited with one or more Depositories in the name of the Agency and shall be held in trust for the benefit of the Holders and I applied only in accordance with the provisions of the Bond Resolution (b) Each Depository shall be a bank or trust company organized under the laws of the State of Texas or a national banking association located wthin this state willing and able to accept the office on reasonable and customary terms and authorized to act in accordance with the provisions of the Bond Resolution SECTION 10 02 Deposits (a) No moneys shall be deposited with any Depository having capital stock and surplus aggre- gating less than $5,000,000 in an amount exceeding 25% of the amount which an officer of such Depository shall certify to the Agency as the capital stock and surplus of such Depository (b) All moneys held by any Depository may be placed on demand or time deposit, if and as directed by the Agency, provided that such deposits shall permit the moneys so held to be available for use at the time when needed No officer or employee of the Agency shall be liable for any loss or depreciation in value resulting from any investment made pursuant to the Bond Resolution Any such deposit may be made in the commercial banking department of any Depository which may honor checks and drafts on such deposit or may be deposited in the banking department on demand or, if and to the extent directed by the Agency on time deposit, provided that such moneys on deposit be avail- able for use at the time the Board estimates it will be needed Such Depositories shall allow and credit on such moneys such interest, if any, as it customarily allows upon similar funds of similar size and under similar condition or as required by law (c) All moneys held under the Bond Resolution by any Depository shall be continuously and fully secured for the benefit of the Agency and the Holders of the Bonds and Coupons (A) with Col- lateral Securities, or (B) in such other manner as may then be required or permitted by applicable laws and regulations of the United States of America or the State of Texas regarding security for, or granting a preference in the case of, the deposit of trust funds (d) All moneys deposited with the Paying Agents and each Depository shall be credited to the particular Fund or Account to which such moneys belong SECTION 10 03 Investment of Certain Funds (a) Moneys held in the Bond Fund and the Reserve Fund shall be invested and reinvested by the custodian thereof to the fullest extent practicable in Investment Securities provided, however, that the custodian thereof shall make such investments only in accordance with instructions received from an Authorized Officer of the Agency Moneys held in the Revenue Fund and the Contingency Fund may be invested and' reinvested by the Agency in Investment Securities (b) Net interest earned on any moneys or investments and any increment in any investment of the Revenue Fund, the Reserve Fund, the Contingency Fund, and the Bond Fund shall remain a part of the respective Fund, but the same may be transferred if permitted by Article V (c) In computing the amount in any Fund created under the provisions of the Bond Resolution, obligations purchased as an investment of moneys therein shall be valued at the amortized cost of such obligations 24 08743.0—Texas Mumcipal—Proof of 8-23-76—Suck-Wancck—Phone (214) 631-3130 ARTICLE XI Alseherge of Indebtedness SECTION 11 01 Discharge of Indebtedness (a) If the Agency shall pay or cause to be paid, or there shall otherwise be paid, to the Holders of all Bonds the principal of, premium, if any, and interest on such Bonds, at the times and in the manner stipulated therein and in the Bond Resolutions, then the pledge of any Net Revenues, and other moneys, securities and funds pledged under the Bond Resolutions and all covenants, agreements and other obliga- tions of the, Agency to the Bondholders shall thereupon cease, terminate and become void and be discharged and satisfied In such event, the Depositories and Paying Agents shall cause an accounting for such period or periods as shall be requested by the Agency to be prepared and filed with the Agency and, upon the request of the Agency shall execute and deliver to the Agency all such instruments as may be desirable to evidence such discharge and satisfaction, and the Depositories and Paying Agents shall pay over or deliver to the Agency all moneys or securities held by them pursuant to the Bond Resolutions winch are not required for the payment of the principal of, premium, if any, or interest on Bonds If the Agency shall pay or cause to be paid, or there shall otherwise be paid, to the Holders of any Outstanding Bonds and the Coupons appertaining thereto the principal of, premium, if any, and interest on such Bonds, at the times and in the manner stipulated therem and in the Bond Resolutions, such Bonds shall cease to be entitled to any hen, benefit or security under the Bond Resolutions, and all covenants, agreements and obligations of the Agency to the Holders thereof shall thereupon cease, terminate and become void and be discharged and satisfied (b) Bonds or Coupons or interest installments for the payment or redemption of which moneys shall have been set aside and shall be held in trust by the Paying Agents (through deposit by the Agency of funds for such payment or redemption or otherwise) at the maturity or redemption date thereof shall be deemed to have been paid within the meaning and with the effect expressed in subsection (a) of this Section All Outstanding Bonds of any Series and all Coupons appertaining to such Bonds shall pnor to the maturity or redemption date thereof be deemed to have been paid within the meaning and with the effect expressed in subsection (a) of this Section if (1) in case any of such Bonds are to be redeemed on any date prior to their maturity, the Agency shall have given notice of redemption as provided in ;Article IV of such Bonds on said date, (2) there shall have been deposited with the Paying Agents either moneys in an amount which shall be sufficient, or Investment Securities (including any Investment Securities issued or held in book -entry form on the books of the Department of the Treasury of the United States of America) the principal of and the interest on which when due will provide moneys which, together with the moneys, if any, deposited with the Paying Agents at the same time, shall be sufficient, to pay when due the principal of, premium, if any, and interest to become due on such Bonds on and prior to the redemption date or maturity date thereof, as the case may be Neither Investment Securities nor moneys deposited with the Paying Agents pursuant to this Section nor principal or interest payments on any such Investment Secunties shall be withdrawn or used for any purpose other than, and shall be held in trust for, the payment of the principal of, premium if any, and interest on such Bonds provided that any cash received from such principal or interest payments on such Investment Securities deposited with the Paying Agents, if not then needed for such purpose, shall, to the extent practicable, ibe reinvested in Investment Securities maturing at fames and in amounts sufficient to pay when due the principal of, premium, if any, and interest on such Bonds on and prior to such redemption date or maturity date thereof, as the case may be, and interest earned from such reinvestments shall be paid over to the Agency, as received by the Paying Agents, free and clear of any trust, lien or pledge Any payment for Investment Securities purchased for the purpose of reinvesting cash as aforesaid shall be made only against delivery of such Investment Securities For the purposes of this Section, Investment Securities shall mean and include only such securities as are described in clause (i) of the definition of "Investment, Securities" in Section 101 winch shall not be subject to redemption prior to them maturity SECTION 1102 Unclaimed Moneys Anything in the Bond Resolutions to the contrary notwith- standing, any moneys held by a Paying Agent in trust for the payment and discharge of any of the 25 08743-0—Texas Mumapal—Proof of 8-23-76— Steck Warlick—Phone (214) 631-3130 the date Bonds or Coupons which remain unclaimed for four years by acts for earner redemption, die same >f such become due and payable, either at their stated maturity moneys were held bya Paying Agent at such yearsafter B Bonds becomes dueit of such and payable,neys if shhell, deposited with the Paying Agentafter the said date when at the Written Request of the Agency, be repaid by the Paying Agent to the Agency, as its absolute prop- erty and free from trust, and the Paying Agent shall thereupon be released and discharged with respect thereto and the Bondholders shall look only to the Agency for the payment of such Bonds and Coupons 26 08743-0—Texas Mumclpal[ —Proof of 8-23-76—Steck-Warllck—Phone (214) 631-3130 ARTICLE XII Miscellaneous SECTION 12 01 Limited Liability of Agency The Agency shall not be required to advance any moneys derived from any source of income other than those pledged (under Section 501) for the payment of the principal of, premium, if any, and interest on the Bonds Nevertheless, the Agency may, but shall not be requtred to, advance for any of the purposes hereof any funds of the Agency which may be available to it for such purposes SECTION 12 02 Successor Is Deemed Included in All References to Predecessor Whenever in the Bond Resolutions either the Agency or any Paying Agent is named or referred to, such reference shall be deemed to include the successors or assigns thereof SECTION 12 03 Execution of Documents by Bondholders Any request, declaration or other mstru- ment which the Bond Resolutions may require or permit to be executed by Bondholders may be in one or more instruments of smular tenor, and shall be executed by Bondholders in person or by their attorneys appointed in venting Except as otherwise expressly provided, the fact and date of the execution by any Bondholder or his attorney of such request, declaration or other instrument, or of such writing appointing such attorney, may be proved by the certificate of any notary public or other officer authorized to take acknowledgments of deeds to be recorded in the state in which he purports to act, that the person signing such request, declaration or other instrument or writing acknowledged to hum the execution thereof, or by an affidavit of a witness of such execution, duly sworn to before such notary public or other officer Any request, declaration or other instrument or writing of the Holder of any Bond shall bind all future Holders of such Bond in respect of anything done or suffered to be done by the Agency or a Paying Agent in good faith and in accordance therewith or in reliance thereon SECTION 12 04 Waiver of Personal Liability No member of the Board and no officer, agent or employee of the Agency shall be individually or personally liable for the payment of the principal of, premium, if any, and interest on the Bonds but nothing herein contained shall relieve any such member, officer, agent or employee from the performance of any official duty provided by law SECTION 12 05 Waiver of Notice Whenever in a Bond Resolution the giving of notice by marl or otherwise is required, the giving of such notice may be waived in writing by the person entitled to receive such notice, and in any such case the giving or receipt of such notice shall not be a condition precedent to the validity of any action taken in reliance upon such waiver SECTION 12 06 Cremation or Destruction of Cancelled Bonds Whenever in a Bond Resolution provision is made for the surrender to the Agency of any Bonds or Coupons which have been paid or canceled pursuant to the provisions of a Bond Resolution, the Agency may, by a Written Request, direct the appropriate Paying Agent to cremate or destroy such Bonds or Coupons and furnish to the Agency a certificate of such cremation or destruction SECTION 12 07 Governing Law This Bond Resolution shall be governed by and construed in accordance with the laws of the State of Texas SECTION 12 08 Article and Section Headings All references herein to "Articles;' "Sections" and other subdivisions are to the corresponding articles, sections or subdivisions of this Bond Resolution, and the words "herein," "hereof;' "hereundeel and other words of similar import refer to this Bond Resolution, as a whole and not to any particular article, section or subdivision hereof The headings or titles of the several articles and sections hereof, and any table of contents appended to copies hereof, shall be solely for convenience of reference and shall not affect the meaning, construction or effect of this Bond Resolution 27 08743-0—Texas Municipal —Proof of 8-23-76--Steck-Wancck—Phone (214) 631-3130 SECTION 12 09 Partial Invalidity If any one or more of the covenants or agreements, or portions thereof, provided in this Bond Resolution on did part of the Agency (or of any Paying Agent) to be performed should be contrary to law, then such covenant or covenants, such agreement or agreements, or such portions thereof, shall be null and void and shall be deemed separable from the remaining covenants and agreements or portions thereof and shall in no way affect the validity of this Bond Resolution or of the Bonds but the Holders shall retain all the rights and benefits accorded to them under the Act or any other applicable provisions of law SECTION 1210 Repeal of Inconsistent Resolutions Any resolution of the Agency and any part of any resolution, inconsistent with this Bond Resolution is hereby repealed to the extent of such inconsistency SECTION 1211 No Arbitrage The Agency certifies that based on facts, estimates and circumstances expected to exist on the date of the issue of the Series 1976 Bonds it is not reasonable to anticipate that the proceeds thereof will be used in a manner which would cause them to be "arbitrage bonds" within the meaning of Section 103(d) of the Internal Revenue Code of 1954, as amended, or regulations there- under applicable thereto, and the officers of the Agency charged with responsibilities in the issuance of bonds are authorized and directed to make, execute and deliver certifications as to facts, estimates and circumstances in existence as of the date of the issue of said Bonds and stating whether there are any facts, estimates or circumstances which would materially change the Agency's present expectations The covenants herein made and the certifications herein authorized are for the benefit of the Holders from time to time of said Series 1976 Bonds and the Coupons appertaining thereto and may be relied upon by said Holders and by bond counsel for the Agency SECTION 1212 Bonds not to be Industrial Development Bonds The Agency covenants that it will take no action or permit any action to be taken (which it may control) if the same would cause the Series 1976 Bonds to be classed as industrial development bonds under the Internal Revenue Code of 1954, as amended 28 08743-0—Texas Mumclpal--Proof of 8-23-76--Steck-Wancck—Phone (214) 631-3130 A RESOLUTION by the Board of Directors of the Texas Municipal Power Agency, relatmg to the authorization and issuance of "TEXAS MUNICIPAL POWER AGENCY REVENUE BONDS, SERIES 1976," for the purpose of providing funds with which to discharge certain costs and expenses of the Agency in connection with the acquisition or construction of certain electric facilities, to provide engineering, planning and financing expenses, for the purpose of paying off, discharging, cancelling, refunding and in lieu of "TEXAS MUNICIPAL POWER AGENCY REVENUE BONDS SERIES 1975," presently outstanding and for the purpose of setting aside certain amounts for payments into the Bond Fund and the Reserve Fund herein established, providing the terms and conditions and specifications for such Bonds and other obligations, pledging certain revenues of the Agency in payment of such obligations and interest thereon, and providing recitals and covenants incident and relevant thereto WHEREAS, the Texas Municipal Power Agency has heretofore been created as a municipal omtha corporation, a political subdivision of the State and a body politic and corporate, pursuant provisions of Chapter 166 Acts of the 63rd Legislature, Regular Session 1973, as amended by Chapter 143, Acts of the 64th Legislature, Regular Session, 1975, (codified as Article 1435a, Revised Civil Statutes of Texas, 1925, as amended), and WHEREAS, it has been determined that the Agency should proceed with the authonzation and issuance and delivery of revenue bonds in order that appropriate planning, engineering and other services may be provided and certain facilities and properties may be acquired or constructed by the Agency, and this Board has determined that the Agency is fully empowered to issue its revenue bonds for the purposes and under the provisions, conditions and in the manner hereinafter set forth, therefore, BE IT RESOLVED BY THE BOARD OF DIRECTORS OF TEXAS MUNICIPAL POWER AGENCY 08743-0—Texas Municipal —Proof of 8-23-76—Steck-Wancck—Phone (214) 631-3130