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O-85-2209 - 11/26/1985ORDINANCE 2209 CERTIFICATE FOR ORDINANCE THE STATE OF TEXAS COUNTY OF WILLIAMSON CITY OF ROUND ROCK We, the undersigned officers of said City, hereby certify as follows: 1. The City Council of said City convened in REGULAR MEETING ON THE 26TH DAY OF NOVEMBER, 1985, at the City Hall, and the roll was called of the duly constituted officers and members of said City Council, to -wit: Mike Robinson, Mayor Mike Heiligenstein, Mayor Pro Tem Joanne Land, City Secretary Graham Howell Pete Correa Trudy L. Lee Charles Culpepper Ronnie Jean and all of said persons were present, except the following absentees: NONE thus constituting a quorum. Whereupon, among other business, the following was transacted at said Meeting: a written ORDINANCE AUTHORIZING THE ISSUANCE OF WATERWORKS AND SEWER SYSTEM REFUNDING REVENUE BONDS, SERIES 1985, AUTHORIZING THE EXECUTION OF A BOND PURCHASE CONTRACT, APPROVING AN OFFICIAL STATEMENT, THE EXECUTION OF AN ESCROW AGREEMENT AND OTHER MATTERS RELATED THERETO was duly introduced for the considera- tion of said City Council and read in full. It was then duly moved and seconded that said Ordinance be passed; and, after due discussion, said motion carrying with it the passage of said Ordinance, prevailed and carried by the following vote: AYES: All members of said City Council shown present above voted "Aye". NAYS: None. 2. That a true, full and correct copy of the aforesaid Ordinance passed at the Meeting described in the above and foregoing paragraph is attached to and follows this Certifi- cate; that said Ordinance has been duly recorded in said City Council's minutes of said Meeting; that the above and foregoing paragraph is a true, full and correct excerpt from said City Council's minutes of said Meeting pertaining to the passage of said Ordinance; that the persons named in the above and fore- going paragraph are the duly chosen, qualified and acting officers and members of said City Council as indicated therein; that each of the officers and members of said City Council was duly and sufficiently notified officially and personally, in advance, of the time, place and purpose of the aforesaid Meeting, and that said Ordinance would be introduced and considered for passage at said Meeting, and each of said officers and members consented, in advance, to the holding of said Meeting for such purpose, and that said Meeting was open to the public and public notice of the time, place and purpose of said meeting was given, all as required by Vernon's Ann. Civ. St. Article 6252-17. 3. That the Mayor of said City has approved and hereby approves the aforesaid Ordinance; that the Mayor and the City Secretary of said City have duly signed said Ordinance; and that the Mayor and the City Secretary of said City hereby declare that their signing of this Certificate shall constitute the signing of the attached and following copy of said Ordin- ance for all purposes. SIGNED AND SEALED the 26th day of November, 1985. SEAL Mayor ORDINANCE NO. ORDINANCE AUTHORIZING THE ISSUANCE OF WATERWORKS AND SEWER SYSTEM REFUNDING REVENUE BONDS, SERIES 1985, AUTHORIZING THE EXECUTION OF A BOND PURCHASE CONTRACT, APPROVING AN OFFICIAL STATEMENT, THE EXECUTION OF AN ESCROW AGREEMENT AND OTHER MATTERS RELATED THERETO THE STATE OF TEXAS § COUNTY OF WILLIAMSON § CITY OF ROUND ROCK § WHEREAS, there are presently outstanding the following bonds of the following series of bonds of City of Round Rock (the "Issuer") which are now outstanding pursuant to Art. 1111 through 1118, V.A.T.C.S and are secured solely by a lien on and pledge of the net revenues of the Issuer's Waterworks and Sewer System: Waterworks and Sewer System Revenue Bonds, Series 1964, dated February 1, 1964, maturities February 1, 1986 through February 1, 1994, in the aggregate principal amount of $74,000 (the "Series 1964 Bonds"); Waterworks and Sewer System Revenue Bonds, Series 1971, dated June 1, 1971, maturities February 1, 1986 through February 1, 2001, in the aggregate principal amount of $130,000 (the "Series 1971 Bonds"); Waterworks and Sewer System Revenue Bonds, Series 1973, dated July 1, 1973, maturities February 1, 1986 through February 1, 1992, in the aggregate principal amount of $70,000 (the "Series 1973 Bonds"); Utility System Revenue Bonds, Series 1975, dated January 1, 1975, maturities February 1, 1986 through February 1, 1993, in the aggregate principal amount of $35,000 (the "Series 1975 Bonds"); Waterworks and Sewer System Revenue Bonds, Series 1978, dated January 1, 1978, maturities February 1, 1986 through February 1, 2003, in the aggregate principal amount of $1,050,000 (the "Series 1978 Bonds"); Waterworks and Sewer System Revenue Bonds, Series 1978-A, dated April 1, 1978, maturities February 1, 1986 through February 1, 2009, in the aggregate principal amount of $825,000 (the "Series 1978-A Bonds"); Waterworks and Sewer System Revenue Bonds, Series 1979, dated May 1, 1979, maturities February 1, 1986 through February 1, 2000, in the aggregate principal amount of $520,000 (the "Series 1979 Bonds"); Waterworks and Sewer System Revenue Bonds, Series 1980, dated May 1, 1980, maturities February 1, 1986 through February 1, 2004, in the aggregate principal amount of $1,805,000 (the "Series 1980 Bonds"); Waterworks and Sewer System Revenue Bonds, Series 1983, dated April 1, 1983, maturities February 1, 1986 through February 1, 2000, in the aggregate principal amount of $1,450,000 (the "Series 1983 Bonds"); Waterworks and Sewer System Revenue Bonds, Series 1984, dated July 1, 1984, maturities February 1, 1986 through February 1, 2002, in the aggregate principal amount of $1,510,000 (the "Series 1984 Bonds"); WHEREAS, the Issuer now desires to refund all of said outstanding Waterworks and Sewer System and Utility System Revenue Bonds (the "Refunded Bonds"); and WHEREAS, Article 717k, V.A.T.C.S. authorizes the Issuer to issue refunding bonds and to deposit the proceeds from the sale thereof together with any other available funds or resources, directly with a place of payment (paying agent) for the Re- funded Bonds, and such deposit, if made before such payment dates, shall constitute the making of firm banking and finan- cial arrangements for the discharge and final payment of the Refunded Bonds; and WHEREAS, Article 717k, V.A.T.C.S. further authorizes the Issuer to enter into an escrow agreement with any paying agent for the Refunded Bonds with respect to the safekeeping, invest- ment, reinvestment, administration and disposition of any such deposit, upon such terms and conditions as the Issuer and such paying agent may agree, provided that such deposits may be invested and reinvested including obligations the principal of and interest on which are unconditionally guaranteed by the United States of America, and which shall mature and bear interest payable at such times and in such amounts as will be sufficient to provide for the scheduled payment or prepayment of the Refunded Bonds; and WHEREAS, the City Council of the Issuer deems it advisable to refund the Refunded Bonds in order to lower the annual debt service requirements of the Issuer and to restructure the Issuer's cash flow and to change the covenants that permit the issuance of additional parity revenue bonds in order to facili- tate the issuance of additional bonds; and WHEREAS, MBank Austin, N.A., Austin, Texas is the paying agent for the Series 1964 Bonds, First City Bank of Dallas, Dallas, Texas is the paying agent for the Series 1971 Bonds, Series 1973 Bonds, Series 1978 Bonds, Series 1978-A Bonds, Series 1979 Bonds, Series 1980 Bonds, and Series 1983 Bonds, MBank Round Rock, Round Rock, Texas is the paying agent for the Series 1971 Bonds, Series 1973 Bonds, Series 1975 Bonds, Series 1978 Bonds, Series 1978-A Bonds, Series 1979 Bonds, Series 1980 Bonds, and Series 1983 Bonds, and First City National Bank of Austin, Austin, N.A. is the paying agent for the Series 1984 Bonds, and the Escrow Agreement hereinafter authorized consti- tutes an escrow agreement of the kind authorized and permitted by said Article 717k; and WHEREAS, all the Refunded Bonds mature or are subject to redemption prior to maturity within 20 years of the date of the bonds hereinafter authorized. THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF ROUND ROCK : Section 1. AMOUNT AND PURPOSE OF THE BONDS. The bonds of City of Round Rock -(the "Issuer") are hereby authorized to be issued and delivered in the aggregate principal amount of $7,180,000, FOR THE PURPOSE OF PROVIDING FUNDS TO REFUND ALL OF 'THE ISSUER'S OUTSTANDING WATERWORKS AND SEWER SYSTEM REVENUE BONDS (all as described in the preamble hereto) . Section 2. DESIGNATION, DATE DENOMINATIONS, NUMBERS AND MATURITIES OF BONDS. Each bond issued pursuant to this Ordin- ance shall be designated: "CITY OF ROUND ROCK, TEXAS WATER- WORKS AND SEWER SYSTEM REFUNDING REVENUE BOND, SERIES 1985", and initially there shall be issued, sold and delivered here- under fully registered bonds, without interest coupons, dated November 1, 1985, in the respective denominations and principal amounts hereinafter stated, numbered consecutively from R-1 upward, payable to the respective initial registered owners thereof (as designated in Section 27 hereof), or to the regis- tered assignee or assignees of said bonds or any portion or portions thereof (in each case, the' "Registered Owner"), and said bonds shall mature and be payable serially on February 1 in each of the years and in the principal amounts, respectively as set forth in the following schedule: YEARS AMOUNTS 1987 $260,000 1988 260,000 1999 265,000 1990 295,000 1991 295,000 1992 330,000 1993 365,000 1994 370,000 1995 400,000 YEARS AMOUNTS 1996 $465,000 1997 480,000 1998 540,000 1999 555,000 2000 640,000 2001 480,000 2002 525,000 2003 365,000 2004 290,000 The term "Bonds" as used in this Ordinance shall mean and include collectively the bonds initially issued and delivered pursuant to this Ordinance and all substitute bonds exchanged therefor, as well as all other substitute bonds and replacement bonds issued pursuant hereto, and the term "Bond" shall mean any of the Bonds. Section 3. INTEREST. The Bonds scheduled to mature during the years, respectively, set forth below shall bear interest from the dates specified in the FORM OF BOND set forth in this Ordinance to their respective dates of maturity at the following rates per annum: maturity 1987, maturity 1988, maturity 1989, maturity 1990, maturity 1991, maturity 1992, maturity 1993, maturity 1994, maturity 1995, 6.25% 6.70% 7.00% 7.20% 7.40% 7.60% 7.80% 8.10% 8.30% maturity 1996, maturity 1997, maturity 1998, maturity 1999, maturity 2000, maturity 2001, maturity 2002, maturity 2003, maturity 2004, 8.50% 8.70% 8.85% 9.00% 9.10% 9.20% 9.25% 9.30% 9.30% Said interest shall be payable in the manner provided and on the dates stated in the FORM OF BOND set forth in this Ordin- ance. Section 4. CHARACTERISTICS OF THE BONDS. Registration, Transfer, Conversion and Exchange; Authentication. (a) The Issuer shall keep or cause to be kept at the principal corpo- rate trust office of the MBank Austin, N.A., Austin, Texas, (the "Paying Agent/Registrar") books or records for the regis- tration of the transfer, conversion and exchange of the Bonds (the "Registration Books"), and the Issuer hereby appoints the Paying Agent/ Registrar as its registrar and transfer agent to keep such books or records and make such registrations of transfers, conversions and exchanges under such reasonable regulations as the Issuer and Paying Agent/Registrar may pre- scribe; and the Paying Agent/Registrar shall make such regis- trations, transfers, conversions and exchanges as herein pro- vided. The Paying Agent/Registrar shall obtain and record in the Registration Books the address of the registered owner of each Bond to which payments with respect to the Bonds shall be mailed, as herein provided; but it shall be the duty of each registered owner to notify the Paying Agent/ Registrar in writing of the address to which payments shall be mailed, and such interest payments shall not be mailed unless such notice has been given. To the extent possible and under reasonable circumstances, all transfers of Bonds shall be made within 3 three business days after request and presentation thereof. The Issuer shall have the right to inspect the Registration Books during regular business hours of the Paying Agent/Regis- trar, but otherwise the Paying Agent/Registrar shall keep the Registration Books confidential and, unless otherwise required by law, shall not permit their inspection by any other entity. The Paying Agent/Registrar's standard or customary fees and charges for making such registration, transfer, conversion, exchange and delivery of a substitute Bond or Bonds shall be paid as provided in the FORM OF BOND set forth in this Ordi- nance. Registration of assignments, transfers, conversions and exchanges of Bonds shall be made in the manner provided and with the effect stated in the FORM OF BOND set forth in this Ordinance. Each substitute Bond shall bear a letter and/or number to distinguish it from each other Bond. An authorized representative of the Paying Agent/Registrar shall, before the delivery of any such Bond, date and manually sign the Paying Agent/Registrar's Authentication Certificate, and no such Bond shall be deemed to be issued or outstanding unless such Certificate is so executed. The Paying Agent/ Registrar promptly shall cancel all paid Bonds and Bonds surrendered for conversion and exchange. No additional ordi- nances, orders, or resolutions need be passed or adopted by the governing body of the Issuer or any other body or person so as to accomplish the foregoing conversion and exchange of any Bond or portion thereof, and the Paying Agent/Registrar shall provide for the printing, execution, and delivery of the substitute Bonds in the manner prescribed herein, and said Bonds shall be of type composition printed on paper with lithographed or steel engraved borders of customary weight and strength. Pursuant to Vernon's Ann. Tex. Civ. St. Art. 717k-6, and particularly Section 6 thereof, the duty of conversion and exchange of Bonds as aforesaid is hereby imposed upon the Paying Agent/Registrar, and, upon the execution of said Cer- tificate, the converted and exchanged Bond shall be valid, incontestable, and enforceable in the same manner and with the same effect as the Bonds which initially were issued and delivered pursuant to this Ordinance, approved by the Attorney General, and registered by the Comptroller of Public Accounts. (b) Payment of Bonds and Interest. The Issuer hereby further appoints the Paying Agent/Registrar to act as the paying agent for paying the principal of and interest on the Bonds, all as provided in this Ordinance. The Paying Agent/ Registrar shall keep proper records of all payments made by the Issuer and the Paying Agent/Registrar with respect to the Bonds. However, in the event of a nonpayment of interest on a scheduled payment date, and for thirty (30) days thereafter, a new record date for such interest payment (a "Special Record Date") will be established by the Paying Agent/Registrar, if and when funds for the payment of such interest have been received from the Issuer. Notice of the past due interest (which shall be 15 days after the Special Record Date) shall be sent at least five (5) business days prior to the Special Record Date by United States mail, first class postage prepaid, to the address of each Bondholder appearing on the Registration Books at the close of business on the last business day next preceding the date of mailing of such notice. (c) In General. The Bonds (i) shall be issued in fully registered form, without interest coupons, with the principal of and interest on such Bonds to be payable only to the regis- tered owners thereof, (ii) may be redeemed prior to their scheduled maturities (notice of which shall be given to the Paying Agent/Registrar by the Issuer at least 50 days prior to any such redemption date), (iii) transferred and assigned, (iv) may be converted and exchanged for other Bonds, (v) shall have the characteristics, (vi) shall be signed, sealed, executed and 4 ql authenticated, (vii) the principal of and interest on the Bonds shall be payable, and (viii) shall be administered and the Paying Agent/Registrar and the Issuer shall have certain duties and responsibilities with respect to the Bonds, all as pro- vided, and in the manner and to the effect as required or indi- cated, in the FORM OF BOND set forth in this Ordinance. The Bonds initially issued and delivered pursuant to this Ordinance are not required to be, and shall not be, authenticated by the Paying Agent/Registrar, but on each substitute Bond issued in conversion of and exchange for any Bond or Bonds issued under this Ordinance the Paying Agent/Registrar shall execute the PAYING AGENT/REGISTRAR'S AUTHENTICATION CERTIFICATE, in the form set forth in the FORM OF BOND. (d) Substitute Paying Agent/Registrar. The Issuer covenants with the registered owners of the Bonds that at all times while the Bonds are outstanding the Issuer will provide a competent and legally qualified bank, trust company, financial institution, or other agency to act as and perform the services of Paying Agent/Registrar for the Bonds under this Ordinance, and that the Paying Agent/Registrar will be one entity and shall be an entity registered with the Securities and Exchange Commission. The Issuer reserves the right to, and may, at its option, change the Paying Agent/Registrar upon not less than 120 days written notice to the Paying Agent/Registrar, to be effective not later than 60 days prior to the next principal or interest payment date after such notice. In the event that the entity at any time acting as Paying Agent/Registrar (or its successor by merger, acquisition, or other method) should resign or otherwise cease to act as such, the Issuer covenants that promptly it will appoint a competent and legally qualified bank, trust company, financial institution, or other agency to act as Paying Agent/Registrar under this Ordinance. Upon any change in the Paying Agent/Registrar, the previous Paying Agent/Registrar promptly shall transfer and deliver the Regis- tration Books (or a copy thereof), along with all other perti- nent books and records relating to the Bonds, to the new Paying Agent/Registrar designated and appointed by the Issuer. Upon any change in the Paying Agent/Registrar, the Issuer promptly will cause a written notice thereof to be sent by the new Paying Agent/Registrar to each registered owner of the Bonds, by United States mail, first-class postage prepaid, which notice also shall give the address of the new Paying Agent/ Registrar. By accepting the position and performing as such, each Paying Agent/Registrar shall be deemed to have agreed to the provisions of this Ordinance, and a certified copy of this Ordinance shall be delivered to each Paying Agent/Registrar. Section 5. FORM OF BONDS. The form of the Bonds, includ- ing the form of Paying Agent/Registrar's Authentication Certificate, the form of Assignment and the form of Registra- tion Certificate of the Comptroller of Public Accounts of the State of Texas to be attached to the Bonds initially issued and delivered pursuant to this Ordinance, shall be, respectively, substantially as follows, with such appropriate variations, omissions, or insertions as are permitted or required by this Ordinance. 5 is FORM OF BOND No. R - PRINCIPAL AMOUNT UNITED STATES OF AMERICA STATE OF TEXAS COUNTY OF WILLIAMSON CITY OF ROUND ROCK, TEXAS WATERWORKS AND SEWER SYSTEM REFUNDING REVENUE BOND SERIES 1985 INTEREST RATE MATURITY DATE DATE OF ORIGINAL ISSUE CUSIP NO. November 1, 1985 ON THE MATURITY DATE specified above, CITY OF ROUND ROCK, in Williamson County (the "Issuer"), being a political subdivi- sion of the State of Texas, hereby promises to pay to (hereinafter called the "registered owner") the principal amount of and to pay interest thereon from November 1, 1985, on February 1, 1986 and semiannually on each August 1 and February 1 there- after to the maturity date specified above, or the date of redemption prior to maturity, at the interest rate per annum specified above; except that if this Bond is required to be authenticated and the date of its authentication is later than January 15, 1986, such principal amount shall bear interest from the interest payment date next preceding the date of authentication, unless such date of authentication is after any Record Date (hereinafter defined) but on or before the next following interest payment date, in which case such principal amount shall bear interest from such next following interest payment date; provided, however, that if on the date of au- thentication hereof the interest on the Bond or Bonds, if any, for which this Bond is being exchanged or converted from is due but has not been paid, then this Bond shall bear interest from the date to which such interest has been paid in full. THE PRINCIPAL OF AND INTEREST ON this Bond are payable in lawful money of the United States of America, without exchange or collection charges. The principal of this Bond shall be paid to the registered owner hereof upon presentation and surrender of this Bond at maturity or upon the date fixed for its redemption prior to maturity, at the principal corporate trust office of MBank Austin, N.A., Austin, Texas, which is the "Paying Agent/Registrar" for this Bond. The payment of inter- est on this Bond shall be made by the Paying Agent/Registrar to the registered owner hereof on each interest payment date by check or draft, dated as of such interest payment date, drawn by the Paying Agent/Registrar on, and payable solely from, funds of the Issuer required by the ordinance authorizing the issuance of this Bond (the "Bond Ordinance") to be on deposit with the Paying Agent/Registrar for such purpose as hereinafter provided; and such check or draft shall be sent by the Paying Agent/Registrar by United States mail, first-class postage pre- paid, on each such interest payment date, to the registered owner hereof, at its address as it appeared on the 15th day of the month next preceding each such date (the "Record Date") on the Registration Books kept by the Paying Agent/Registrar, as hereinafter described. Any accrued 'interest due at maturity or upon the redemption of this Bond prior to maturity as provided herein shall be paid to the registered owner upon presentation and surrender of this Bond for redemption and payment at the principal corporate trust office of the Paying Agent/Registrar. In the event of a nonpayment of interest on a scheduled payment date, and for thirty (30) days thereafter, a new record date 6 for such interest payment (a "Special Record Date") will be established by the Paying Agent/Registrar, if and when funds for the payment of such interest have been received from the Issuer. The Issuer covenants with the registered owner of this Bond that on or before each principal payment date, interest ;'payment date, and accrued interest payment date for this Bond it will make available to the Paying Agent/Registrar, from the "Interest and Sinking Fund" created by the Bond Ordinance, the amounts required to provide for the payment, in immediately available funds, of all principal of and interest on the Bonds, when due. IF THE DATE for the payment of the principal of or inter- est on this Bond shall be a Saturday, Sunday, a legal holiday, or a day on which banking institutions in the city where the principal corporate trust office of the Paying Agent/Registrar is located are authorized by law or executive order to close, or the United States Postal Service is not open for business, then the date for such payment shall be the next succeeding day which is not such a Saturday, Sunday, legal holiday, or day on which banking institutions are authorized to close, or the United States Postal Service is not open for business; and payment on such date shall have the same force and effect as if made on the original date payment was due. THIS BOND is one of a Series of Bonds dated November 1, 1985, authorized in accordance with the Constitution and laws of the State of Texas in the principal amount of $7,180,000, FOR THE PURPOSE OF PROVIDING FUNDS TO REFUND ALL OF THE ISSUER'S OUTSTANDING WATERWORKS AND SEWER SYSTEM REVENUE BONDS. ON FEBRUARY 1, 1996, or on any interest payment date thereafter, the Bonds of this Series may be redeemed prior to their scheduled maturities, at the option of the Issuer, with funds derived from any available and lawful source, as a whole, or in part, and, if in part, the particular Bonds, or portions thereof, to be redeemed shall be selected by the Paying Agent/ Registrar and approved by the Issuer (provided that a portion of a Bond may be redeemed only in an integral multiple of $5,000), at a redemption price equal to the principal amount to be redeemed plus accrued interest to the date fixed for re- demption. AT LEAST 30 days prior to the date fixed for any redemp- tion of Bonds or portions thereof prior to maturity a written notice of such redemption shall be published once in a finan- cial publication, journal or reporter of general circulation among securities dealers in the City of New York, New York or in the State of Texas. Such notice also shall be sent by the Paying Agent/Registrar by United States mail, first-class postage prepaid, at least 30 days prior to the date fixed for any such redemption, to the registered owner of each Bond to be redeemed at its address as it appeared on the 45th day prior to such redemption date; provided, however, that the failure to send, mail or receive such notice, or any defect therein or in the sending or mailing thereof, shall not affect the validity or effectiveness of the proceedings for the redemption of any Bond, and it is hereby specifically provided that the publica- tion of such notice as required above shall be the only notice actually required in connection with or as a prerequisite to the redemption of any Bonds or portions thereof. By the date fixed for any such redemption due provision shall be made with the Paying Agent/Registrar for the payment of the required redemption price for the Bonds or portions thereof which are to be so redeemed. If such written notice of redemption is published and if due provision for such payment is made, all as provided above, the Bonds or portions thereof which are to be so redeemed thereby automatically shall be treated as redeemed prior to their scheduled maturities, and they shall not bear 7 interest after the date fixed for redemption, and they shall not be regarded as being outstanding except for the right of the registered owner to receive the redemption price from the Paying Agent/Registrar out of the funds provided for such payment. If a portion of any Bond shall be redeemed a substi- tute Bond or Bonds having the same maturity date, bearing interest at the same rate, in any denomination or denominations in any integral multiple of $5,000, at the written request of the registered owner, and in aggregate principal amount equal to the unredeemed portion thereof, will be issued to the registered owner upon the surrender thereof for cancellation, at the expense of the Issuer, all as provided in the Bond Ordinance. ALL BONDS OF THIS SERIES are issuable solely as fully registered Bonds, without interest coupons, in the denomination of any integral multiple of $5,000. As provided in the Bond Ordinance, this Bond, may, at the request of the registered owner or the assignee or assignees hereof, be assigned, trans- ferred, converted into and exchanged for a like aggregate principal amount of fully registered Bonds, without interest coupons, payable to the appropriate registered owner, assignee or assignees, as the case may be, having the same denomination or denominations in any integral multiple of $5,000 as reques- ted in writing by the appropriate registered owner, assignee or assignees, as the case may be, upon surrender of this Bond to the Paying Agent/Registrar for cancellation, all in accordance with the form and procedures set forth in the Bond Ordinance. Among other requirements for such assignment and transfer, this Bond must be presented and surrendered to the Paying Agent/Reg- istrar, together with proper instruments of assignment, in form and with guarantee of signatures satisfactory to the Paying Agent/Registrar, evidencing assignment of this Bond or any portion or portions hereof in any integral multiple of $5,000 to the assignee or assignees in whose name or names this Bond or any such portion or portions hereof is or are to be regis- tered. The form of Assignment printed or endorsed on this Bond may be executed by the registered owner to evidence the assign- ment hereof, but such method is not exclusive, and other instruments of assignment satisfactory to the Paying Agent/Reg- istrar may be used to evidence the assignment of this Bond or any portion or portions hereof from time to time by the regis- tered owner. The one requesting such conversion and exchange shall pay the Paying Agent/Registrar's reasonable standard or customary fees and charges for converting and exchanging any Bond or portion thereof. In any circumstance, any taxes or governmental charges required to be paid with respect thereto shall be paid by the one requesting such assignment, transfer, conversion or exchange, as a condition precedent to the exer- cise of such privilege. The foregoing notwithstanding, in the case of the conversion and exchange of a portion of a Bond which has been redeemed prior to maturity, as provided herein, and in the case of the conversion and exchange of an assigned and transferred Bond or Bonds or any portion or portions thereof, such fees and charges of the Paying Agent/Registrar will be paid by the Issuer. The Paying Agent/Registrar shall not be required to make any such transfer, conversion, or exchange (i) during the period commencing with the close of business on any Record Date and ending with the opening of business on the next following principal or interest payment date, or, (ii) with respect to any Bond or any portion thereof called for redemption prior to maturity, within 45 days prior to its redemption date. IN THE EVENT any Paying Agent/Registrar for the Bonds is changed by the Issuer, resigns, or otherwise ceases to act as such, the Issuer has covenanted in the Bond Ordinance that it promptly will appoint a competent and legally qualified 8 substitute therefor, and cause written notice thereof to be mailed to the registered owners of the Bonds. IT IS HEREBY certified, recited, and covenanted that this Bond has been duly and validly authorized, issued, sold, and delivered; that all acts, conditions, and things required or proper to be performed, exist, and be done precedent to or in the authorization, issuance, and delivery of this Bond have been performed, existed, and been done in accordance with law; that this Bond is a special obligation; and that the interest on and principal of this Bond, are payable from and secured by a first lien on and pledge of the Pledged Revenues, as defined in the Ordinance authorizing this Series of Bonds, and which include the Net Revenues of said Issuer's combined Waterworks and Sewer System. SAID ISSUER has reserved the right, subject to the re- strictions stated, and adopted by reference, in the Ordinance authorizing this Series of Bonds, to issue additional parity revenue bonds which also may be made payable from, and secured by a first lien on and pledge of the aforesaid Pledged Rev- enues. THE HOLDER HEREOF shall never have the right to demand payment of this obligation out of any funds raised or to be raised by taxation. BY BECOMING the registered owner of this Bond, the regis- tered owner thereby acknowledges all of the terms and provi- sions of the Bond Ordinance, agrees to be bound by such terms and provisions, acknowledges that the Bond Ordinance is duly recorded and available for inspection in the official minutes and records of the governing body of the Issuer, and agrees that the terms and provisions of this Bond and the Bond Ordin- ance constitute a contract between each registered owner hereof and the Issuer. IN WITNESS WHEREOF, the Issuer has caused this Bond to be signed with the facsimile signature of the Mayor of the Issuer and countersigned with the facsimile signature of the City Secretary of the Issuer, and has caused the official seal of the Issuer to be duly impressed, or placed in facsimile, on this Bond. (facsimile signature) (facsimile signature) City Secretary Mayor (SEAL) FORM OF PAYING AGENT/REGISTRAR' S AUTHENTICATION CERTIFICATE PAYING AGENT/REGISTRAR'S AUTHENTICATION CERTIFICATE (To be executed if this Bond is not accompanied by an executed Registration Certificate of the Comptroller of Public Accounts of the State of Texas) It is hereby certified that this Bond has been issued under the provisions of the Bond Ordinance described in the text of this Bond; and that this Bond has been issued in conversion or replacement of, or in exchange for, a bond, bonds, or a portion of a bond or bonds of a Series which originally was approved by the Attorney General of the State of Texas and registered by the Comptroller of Public Accounts of the State of Texas. 9 9A Dated MBANK DALLAS, N.A. Paying Agent/Registrar By Authorized Representative FORM OF ASSIGNMENT: ASSIGNMENT FOR VALUE RECEIVED, the undersigned registered owner of this Bond, or duly authorized representative or attorney thereof, hereby assigns this Bond to / / (Assignee's Social Security or Taxpayer Identification Number) (print or type Assignee's name and address, including zip code) and hereby irrevocably constitutes and appoints attorney to transfer the registration of this Bond on the Paying Agent/Registrar's Registration Books with full power of substitution in the premises. Dated Signature Guaranteed: NOTICE: This signature must be guaranteed by a member of the New York Stock Exchange or a commercial bank or trust company. Registered Owner NOTICE: This signature must correspond with the name of the Registered Owner appearing on the face of this Bond in every particular without alteration or enlargement or any change whatsoever. Section 6. DEFINITIONS. That as used in this Ordinance the following terms shall have the meanings set forth below, unless the text hereof specifically indicates otherwise: (a) The term "Additional Bonds" shall mean the additional parity revenue bonds which the Issuer reserves the right to issue in the future in accordance with Section 22 and Section 23 of this Ordinance. (b) The term "Bonds" shall mean the City of Round Rock, Texas Waterworks and Sewer System Refunding Revenue Bonds, Series 1985 authorized by this Ordinance. (c) The term "City Council" or "Council" shall mean the governing body of the Issuer. (d) The term "Government Obligations" shall mean direct obligations of the United States of America, including obliga- tions the principal of and interest on which are uncondition- ally guaranteed by the United States of America, which may be United States Treasury obligations such as its State and Local Government Series, and which may be in book -entry form. (e) The terms "Gross Revenues of the System" and "Gross Revenues" shall mean all revenues and income of every nature derived or received by the Issuer from the operation and owner- ship of the System, including the interest income from the 10 !! investment or deposit of money in any Fund created by this Ordinance. (f) The term "Issuer" shall mean the City of Round Rock, in Williamson County, Texas. (g) The terms "Net Revenues of the System", and "Net Revenues" shall mean all Gross Revenues after deducting there- from an amount equal to the current expenses of operation and maintenance of the System, including all salaries, labor, materials, repairs, and extensions necessary to render effi- cient service, provided, however, that only such repairs and extensions, as in the judgment of the City Council, reasonably and fairly exercised by the adoption of appropriate resolu- tions, are necessary to keep the System in operation and render adequate service to said Issuer and the inhabitants thereof, or such as might be necessary to meet some physical accident or condition which would otherwise impair the Bonds or Additional Bonds, shall be deducted in determining "Net Revenues". Payments required to be made by the Issuer for water supply or water facilities, sewer services or sewer facilities, fuel supply, which payments under law constitute operation and maintenance expenses of any part of the System, shall consti- tute and be regarded as expenses of operation and maintenance of the System under this Ordinance. Depreciation and amortiza- tion shall not constitute or be regarded as expenses of opera- tion and maintenance of the System. (h) The term "Outstanding Bonds" shall mean collectively the presently outstanding Waterworks and Sewer System and Utility System Revenue Bonds of the Issuer described in the preamble of this Ordinance. (i) The term "Pledged Revenues" shall mean (1) the Net Revenues, plus (2) resources which are expected to be available to the Issuer on a regular periodic basis, including, without limitation, any grants, donations, or income received or to be received from the United States Government, or any other public or private source, whether pursuant to an agreement or other- wise, which in the future may, at the option of the Issuer, be pledged to the payment of the Bonds or Additional Bonds. (j) The term "System" shall mean (1) the Issuer's entire existing waterworks and sewer system, together with all future extensions, -improvements, enlargements, and additions thereto, and all replacements thereof, and (2) any other related facili- ties, all or any part of the revenues or income from which do, in the future, at the option of the Issuer, and in accordance with law, become "Pledged Revenues" as hereinafter defined; provided that, notwithstanding the foregoing, and to the extent now or hereafter authorized or permitted by law, the term System shall not mean any water, sewer, or other facilities of any kind which are declared not to be a part of the System, and which are acquired or constructed by the Issuer with the proceeds from the issuance of "Special Facilities Bonds", which are hereby defined as being special revenue obligations of the Issuer which are not payable from or secured by any Pledged Revenues, but which are secured by and payable from liens on and pledges of any other revenues, sources, or payments, including, but not limited to, special contract revenues or payments received from any other legal entity in connection with such facilities; and such revenues, sources, or payments shall not be considered as or constitute Gross Revenues of the System, unless and to the extent otherwise provided in the ordinance or ordinances authorizing the issuance of such "Special Facilities Bonds". 11 (k) The term "year" or "fiscal year" shall mean the fiscal year used by the Issuer in connection with the operation of the System. Section 7. PLEDGE. The Bonds and any Additional Bonds, and the interest thereon, are and shall be secured by and payable from a first lien on and pledge of the Pledged Rev- enues, and the Pledged Revenues are further pledged to the establishment and maintenance of the Funds created by this Ordinance, and any Funds created by any ordinance authorizing the issuance of any Additional Bonds. The Bonds and any Additional Bonds are not and will not be secured by or payable from a mortgage or deed of trust on any real, personal, or mixed properties constituting the System. Section 8. RATES. The Issuer covenants and agrees with the holders of the Bonds and Additional Bonds as follows: (a) That it will at all times fix, maintain, charge, and collect for services rendered by the System, rates and charges which will produce Gross Revenues, together with any other Pledged Revenues, at least sufficient to pay all expenses of operation and maintenance of the System and to provide an additional amount of Net Revenues to pay promptly all of the principal of and interest on the Bonds and Additional Bonds and to make all deposits now or hereafter required to be made into the Funds created by this Ordinance in connection with the Bonds and Additional Bonds with such Net Revenues being at least equal to 1.25 times the principal and interest require- ments on the Bonds and Additional Bonds. (b) If the System should become legally liable for any other obligations or indebtedness, the Issuer shall fix, maintain, charge and collect additional rates and charges for services rendered by the System sufficient to establish and maintain funds for the payment thereof. Section 9. SYSTEM FUND. That there is hereby created and there shall be established and maintained on the books of the Issuer, and accounted for separate and apart from all other funds of the Issuer, a special fund to be entitled the "City of Round Rock Waterworks and Sewer System Fund" (the "System Fund"). All Gross Revenues shall be credited to the System Fund immediately upon receipt, unless otherwise provided in this Ordinance. All current expenses of operation and mainten- ance of the System shall be paid from such Gross Revenues credited to the System Fund as a first charge against same. Before making any deposits hereinafter required to be made from the System Fund, the Issuer shall retain in the System Fund at all times an amount at least equal to one-sixth of the amount budgeted for the then current fiscal year for the current operation and maintenance expenses of the System. Section 10. INTEREST AND SINKING FUND. That for the sole purpose of paying the principal of and interest on all Bonds and Additional Bonds, there is hereby created and there shall be established and maintained on the books of the Issuer, and accounted for separate and apart from all other funds of the Issuer, a separate fund to be entitled the "City of Round Rock Waterworks and Sewer System Revenue Bonds Interest and Sinking Fund" (the "Interest and Sinking Fund"). Section 11. RESERVE FUND. That there is hereby created and there shall be established and maintained at the Issuer's depository bank a separate fund to be entitled the "City of Round Rock Waterworks and Sewer System Bonds and Additional Bonds Reserve Fund" (the "Reserve Fund"). The Reserve Fund shall be used to pay the principal of and interest on any Bonds or Additional Bonds when and to the extent the amounts in the 12 Interest and Sinking Fund available for such payment are insufficient for such purpose, and may be used for the purpose of finally retiring the last of any Bonds or Additional Bonds. Section 12. DEPOSITS OF PLEDGED REVENUES. That Pledged Revenues shall be credited to or deposited in the Interest and Sinking Fund, the Reserve Fund and other funds when and as required by this Ordinance and any ordinance authorizing the issuance of Additional Bonds. Section 13. INVESTMENTS. That money in any Fund estab- lished pursuant to this Ordinance or any ordinance authorizing the issuance of Additional Bonds, may, at the option of the Issuer, be placed in time deposits or certificates of deposit secured by obligations of the type hereinafter described, or be invested in Government Obligations (as defined in Section 6 hereof) or obligations guaranteed or insured by the United States of America, which, in the opinion of the Attorney General of the United States, are backed by its full faith and credit or represent its general obligations, or invested in obligations of instrumentalities of the United States of America, including, but not limited to, evidences of indebted- ness issued, insured, or guaranteed by such governmental agencies as the Federal Land Banks, Federal Intermediate Credit Banks, Banks for Cooperatives, Federal Home Loan Banks, Govern- ment National Mortgage Association, United States Postal Service, Farmers Home Administration, Federal Home Loan Mort- gage Association, Small Business Administration, Federal Housing Association, or Participation Certificates in the Federal Assets Financing Trust; provided that all such deposits and investments shall be made in such manner as will, in the opinion of the Issuer, permit the money required to be expended from any Fund to be available at the proper time or times as expected to be needed. Such investments (except United States Treasury Obligations --State and Local Government Series invest- ments held in book entry form, which shall at all times be valued at cost) shall be valued in terms of current market value as of the last day of each fiscal year. Unless otherwise set forth herein, all interest and income derived from such deposits and investments immediately shall be credited to, and any losses debited to, the Fund from which the deposit or investment was made, and surpluses in any Fund shall or may be disposed of as hereinafter provided. Such investments shall be sold promptly when necessary to prevent any default in connec- tion with the Bonds or Additional Bonds consistent with the ordinances, respectively, authorizing their issuance. Section 14. FUNDS SECURED. That money in all Funds created by this Ordinance, to the extent not invested, shall be secured in the manner prescribed by law. Section 15. PRIORITY OF DEPOSITS AND PAYMENTS FROM SYSTEM FUND. That the Issuer shall make the deposits and payments from Pledged Revenues in the System Fund when and as required by this Ordinance and any ordinance authorizing any Additional Bonds, and such deposits shall be made in the following manner and with the following irrevocable priorities, respectively: First, to the Interest and Sinking Fund, when and in the amounts required by this Ordinance and any ordinance authorizing any Additional Bonds; Second, to the Reserve Fund, when and in the amounts required by this Ordinance and any ordinance authorizing any Additional Bonds; and Section 16. INTEREST AND SINKING FUND REQUIREMENTS. (a) That promptly after the delivery of the Bonds the City shall cause to be deposited to the credit of the Interest and Sinking 13 Fund any accrued interest received from the sale and delivery of the Bonds, and any such deposit shall be used to pay part of the interest next coming due on the Bonds. (b) That the City shall transfer from the Pledged Revenues and deposit to the credit of the Interest and Sinking Fund the amounts, at the times, as follows: (1) such amounts, deposited in approximately equal monthly installments on or before the 25th day of each month hereafter, commencing with the month during which the Bonds are delivered, or the month thereafter if delivery is made after the 25th day thereof, as will be sufficient, together with other amounts, if any, then on hand in the Interest and Sinking Fund and available for such purpose, to pay interest scheduled to accrue and come due on the Bonds and Additional Bonds on the next succeed- ing interest payment date; (2) such amounts, deposited in approximately equal monthly installments on or before the 25th day of each month hereafter, commencing with the month during which the Bonds are delivered, or the month thereafter if delivery is made after the 25th day thereof, as will be sufficient, together with other amounts, if any, then on hand in the Interest and Sinking Fund and available for such purpose, to pay principal scheduled to mature and come due on the Bonds and any Additional Bonds on the next succeeding principal payment date; and Section 17. RESERVE FUND REQUIREMENTS. That promptly upon the delivery of the Bonds the Issuer shall cause to be deposited $623,171in the Reserve Fund from funds on hand and lawfully available for such purpose, and $ 1,820 shall be deposited on the 25th day of each month hereafter, commencing Jan. 25, 1986 until the Fund shall contain $ 732,350 The Issuer shall maintain in the Reserve Fund an amount of money and investments equal to the average annual principal and interest requirements of the Bonds (the "Required Reserve Amount"). Following the issuance of Additional Bonds, the Required Reserve Amount shall be equal to the average annual principal and interest requirements of all Bonds and Additional Bonds then outstanding. After the delivery of any Additional Bonds the Issuer shall cause the Reserve Fund to be increased, if and to the extent necessary, so that such fund will contain an amount of money and investments equal to the Required Reserve Amount. Any increase in the Required Reserve Amount may be funded from Pledged Revenues or from proceeds from the sale of any Additional Bonds, or any other available source or combination of sources. All or any part of the Required Reserve Amount not funded initially and immediately after the delivery of any installment or issue of Additional Bonds shall be funded, within not more than five years from the date of such delivery, by deposits of Pledged Revenues in approximately equal monthly installments on or before the 25th day of each month. Principal amounts of the Bonds and any Additional Bonds which must be redeemed pursuant to any applicable mandatory redemption requirements shall be deemed to be maturing amounts of principal for the purpose of calculating principal and interest requirements on such bonds. When and so long as the amount in the Reserve Fund is not less than the Required Reserve Amount no deposits shall be made to the credit of the Reserve Fund; but when and if the Reserve Fund at any time contains less than the Required Reserve Amount, then the Issuer shall transfer from Pledged Revenues in the System Fund, and deposit to the credit of the Reserve Fund, monthly on or before the 25th day of each month, a sum equal to 1/60th of the Required Reserve Amount, until the Reserve Fund is restored to the Required Reserve Amount. The Issuer specifically covenants 14 that when and so long as the Reserve Fund contains the Required Reserve Amount, the Issuer shall cause all interest and income derived from the deposit or investment of the Reserve Fund to be deposited to the credit of the System Fund. Section 18. DEFICIENCIES; EXCESS PLEDGED REVENUES. (a) That if on any occasion there shall not be sufficient Pledged Revenues to make the required deposits into the Interest and Sinking Fund or the Reserve Fund, such deficiency shall be made up as soon as possible from the next available Pledged Rev- enues. (b) That, subject to making the required deposits to the credit of the various Funds when and as required by this Ordinance or any ordinance authorizing the issuance of Addi- tional Bonds, any surplus Pledged Revenues may be used by the Issuer for any lawful purpose. Section 19. PAYMENT OF BONDS AND ADDITIONAL BONDS. On or before February 25, 1986, and semiannually on or before each August 25 and February 25 thereafter while any of the Bonds or Additional Bonds are outstanding and unpaid the Issuer shall make available to the Paying Agent/Registrar therefor, out of the Interest and Sinking Fund, or if necessary, out of the Reserve Fund, money sufficient to pay, on each of such dates, the principal of and interest on the Bonds and Additional Bonds as the same matures and comes due, or to redeem the Bonds or Additional Bonds prior to maturity, either upon mandatory redemption or at the option of the Issuer. At the direction of the Issuer the Paying Agent/Registrar shall either deliver paid Bonds and Additional Bonds to the Issuer or destroy all paid Bonds and Additional Bonds, and furnish the Issuer with an appropriate certificate of cancellation or destruction. Section 20. ADDITIONAL BONDS. (a) That the Issuer shall have the right and power at any time and from time to time, and in one or more series or issues, to authorize, issue, and deliver additional parity revenue bonds (herein called "Addi- tional Bonds"), in accordance with law, in any amounts, for any lawful purpose, including the refunding of any Bonds or Addi- tional Bonds, or other obligations. Such Additional Bonds, if and when authorized, issued, and delivered in accordance with this Ordinance, shall be payable from and secured by an irrev- ocable first lien on and pledge of the Pledged Revenues, equally and ratably on a parity in all respects with the Bonds and any other outstanding Additional Bonds. (b) That the principal of all Additional Bonds must be scheduled to be paid or mature on February 1 or August 1 (or both) of the years in which such principal is scheduled to be paid or mature. Section 21. FURTHER REQUIREMENTS FOR ADDITIONAL BONDS. That Additional Bonds shall be issued only in accordance with this Ordinance, and no installment, Series, or issue of Addi- tional Bonds shall be issued or delivered unless: (a) The Mayor of the Issuer and the City Secretary sign a written certificate to the effect that the Issuer is not in default as to any covenant, condition, or obligation in connec- tion with all then outstanding Bonds and Additional Bonds, and the ordinances authorizing same, and that the Interest and Sinking Fund and the Reserve Fund each contains the amount then required to be therein. (b) An independent certified public accountant, or in- dependent firm of certified public accountants, acting by and through a certified public accountant, signs a written certifi- cate to the effect that, in his or its opinion, during either 15 11 the next preceding fiscal year, or any twelve consecutive calendar month period out of the 18 -month period immediately preceding the month in which the ordinance authorizing the issuance of the then proposed Additional Bonds is passed, the Pledged Revenues were at least 1.25 times an amount equal to the average annual principal and interest requirements and 1.10 times the maximum annual principal and interest requirements of all Bonds and Additional Bonds which are scheduled to be outstanding after the delivery of the then proposed Additional Bonds. It is specifically provided, however, that in calculat- ing the amount of Pledged Revenues for the purposes of this subsection (b), if there has been any increase in the rates or charges for services of the System which is then in effect, but which was not in effect during all or any part of the entire period for which the Pledged Revenues are being calculated (hereinafter referred to as the "entire period") then the certified public accountant, or in lieu of the certified public accountant a firm of consulting engineers, shall determine and certify the amount of Pledged Revenues as being the total of (i) the actual Pledged Revenues for the entire period, plus (ii) a sum equal to the aggregate amount by which the actual billings to customers of the System during the entire period would have been increased if such increased rates or charges had been in effect during the entire period. (c) Provision shall be made in the ordinance authorizing their issuance for increasing the Reserve Fund to the Required Reserve Amount as required by Section 17 hereof with proceeds of the Additional Bonds, or other available source or combina- tion of sources including Pledged Revenues, or both. (e) That all calculations of average annual principal and interest requirements of any bonds made in connection with the issuance of any then proposed Additional Bonds shall be made as of the date of such Additional Bonds; and also in making calculations for such purpose, and for any other purpose under this Ordinance, principal amounts of any bonds which must be redeemed prior to maturity pursuant to any applicable mandatory redemption requirements shall be deemed to be maturing amounts of principal of such bonds. Section 22. GENERAL COVENANTS. The Issuer further cove- nants and agrees that in accordance with and to the extent required or permitted by law: (a) Performance. It will faithfully perform at all times any and all covenants, undertakings, stipulations, and provi- sions contained in this Ordinance, and each ordinance authoriz- ing the issuance of Additional Bonds, and in each and every Bond and Additional Bond; that it will promptly pay or cause to be paid the principal of and interest on every Bond and Addi- tional Bond, on the dates and in the places and manner pre- scribed in such ordinances and Bonds or Additional Bonds; and that it will, at the times and in the manner prescribed, deposit or cause to be deposited the amounts required to be deposited into the Interest and Sinking Fund and the Reserve Fund; and any holder of the Bonds or Additional Bonds may require the Issuer, its officials, and employees, to carry out, respect, or enforce the covenants and obligations of this Ordinance, or any ordinance authorizing the issuance of Addi- tional Bonds, by all legal and equitable means, including specifically, but without limitation, the use and filing of mandamus proceedings, in any court of competent jurisdiction, against the Issuer, its officials, and employees. (b) Issuer's Legal Authority. The Issuer is a duly created and existing home rule city of the State of Texas, and is duly authorized under the laws of the State of Texas to create and issue the Bonds and Additional Bonds; that all 16 action on its part for the creation and issuance of the said obligations has been or will be duly and effectively taken, and that said obligations in the hands of the holders and owners thereof are and will be valid and enforceable special obliga- tions of the Issuer in accordance with their terms. (c) Title. The Issuer has or will obtain lawful title to the lands, buildings, structures, and facilities constituting the System, that it warrants that it will defend the title to all the aforesaid lands, buildings, structures, and facilities, and every part thereof, for the benefit of the holders and owners of the Bonds and Additional Bonds, against the claims and demands of all persons whomsoever, that it is lawfully qualified to pledge the Pledged Revenues to the payment of the Bonds and Additional Bonds in the manner prescribed herein, and has lawfully exercised such rights. (d) Liens. The Issuer will from time to time and before the same become delinquent pay and discharge all taxes, assess- ments, and governmental charges, if any, which shall be law- fully imposed upon it, or the System, that it will pay all lawful claims for rents, royalties, labor, materials, and supplies which if unpaid might by law become a lien or charge thereon, the lien of which would be prior to or interfere with the liens hereof, so that the priority of the liens granted hereunder shall be fully preserved in the manner provided herein, and that it will not create or suffer to be created any mechanic's, laborer's, materialman's, or other lien or charge which might or could be prior to the liens hereof, or do or suffer any matter or thing whereby the liens hereof might or could be impaired; provided, however, that no such tax, assess- ment, or charge, and that no such claims which might be used as the basis of a mechanic's, laborer's, materialman's, or other lien or charge, shall be required to be paid so long as the validity of the same shall be contested in good faith by the Issuer. (e) Operation of System; No Free Service. While the Bonds or any Additional Bonds are outstanding and unpaid the Issuer shall continuously and efficiently operate the System, and shall maintain the System, or cause the System to be opera- ted and maintained in good condition, repair, and working order, all at reasonable cost. No free service of the System shall be allowed, and should the Issuer or any of its agencies, instrumentalities, lessors, or concessionaires make use of the services and facilities of the System, payment monthly of the standard retail price of the services provided shall be made by the Issuer or any of its agencies, instrumentalities, lessors, or concessionaires out of funds from sources other than the revenues of the System, unless made from surplus Pledged Revenues as permitted by Section 18(b) hereof. (f) Further Encumbrance. While the Bonds or any Addi- tional Bonds are outstanding and unpaid, the Issuer shall not additionally encumber the Pledged Revenues in any manner, except as permitted in this Ordinance in connection with Additional Bonds, unless said encumbrance is made junior and subordinate in all respects to the liens, pledges, covenants, and agreements of this Ordinance and any ordinance authorizing the issuance of Additional Bonds; but the right of the Issuer to issue revenue bonds payable from a subordinate lien on surplus Pledged Revenues is specifically recognized and retained. (g) Sale or Disposal of Property. While the Bonds or any Additional Bonds are outstanding and unpaid, the Issuer shall not sell, convey, mortgage, encumber, lease, or in any manner transfer title to, or dedicate to other use, or otherwise dispose of, the System, (except as permitted in paragrah (n) 17 hereof) or any significant or substantial part thereof; provided that whenever the Issuer deems it necessary to dispose of any property, machinery, fixtures, or equipment, or dedicate such property to other use, it may do so either when it has made arrangements to replace the same or provide substitutes therefor, or it is determined by resolution of the City Council that no such replacement or substitute is necessary. (h) Insurance. (1) The Issuer shall cause to be insured such parts of the System as would usually be insured by corpor- ations operating like properties, with a responsible insurance company or companies, against risks, accidents, or casualties against which and to the extent insurance is usually carried by corporations operating like properties, including, to the extent reasonably obtainable, fire and extended coverage insurance, insurance against damage by floods, and use and occupancy insurance. Public liability and property damage insurance also shall be carried unless the City Attorney gives a written opinion to the effect that the Issuer is not liable for claims which would be protected by such insurance. All insurance premiums shall be paid as an expense of operation of the System. At any time while any contractor engaged in construction work shall be fully responsible therefor, the Issuer shall not be required to carry insurance on the work being constructed if the contractor is required to carry appropriate insurance. All such policies shall be open to the inspection of the Bondholders and their representatives at all reasonable times. Upon the happening of any loss or damage covered by insurance from one or more of said causes, the Issuer shall make due proof of loss and shall do all things necessary or desirable to cause the insuring companies to make payment in full directly to the Issuer. The proceeds of insurance covering such property, together with any other funds necessary and available for such purpose, shall be used forth- with by the Issuer for repairing the property damaged or replacing the property destroyed; provided, however, that if said insurance proceeds and other funds are insufficient for such purpose, then said insurance proceeds pertaining to the System shall be deposited in a special and separate trust fund, at an official depository of the Issuer, to be designated the Insurance Account. The Insurance Account shall be held until such time as other funds become available which, together with the Insurance Account, will be sufficient to make the repairs or replacements originally required. (2) The annual audit hereinafter required may contain a section commenting on whether or not the Issuer has complied with the requirements of this Section with respect to the maintenance of insurance, and shall state whether or not all insurance premiums upon the insurance policies to which refer- ence is made have been paid. (i) Annual Budget and Rate Covenant. The Issuer shall prepare, prior to the beginning of each fiscal year, an annual budget, in accordance with law, reflecting an estimate of cash receipts and disbursements for the ensuing fiscal year in sufficient detail to indicate the probable Gross Revenues and Pledged Revenues for such fiscal year. The Issuer shall fix, establish, maintain, and collect, such rates, charges, and fees for the use and availability of the System at all times as are necessary (1) to produce Gross Revenues sufficient, together with any other Pledged Revenues, to pay all current operation and maintenance expenses of the System, and (2) to produce an amount of Pledged Revenues during each fiscal year at least 1.25 times the annual principal and interest requirements of all then outstanding Bonds and Additional Bonds. (j) Records. The Issuer shall keep proper books of record and account in which full, true, proper, and correct 18 entries will be made of all dealings, activities, and trans- actions relating to the System, the Pledged Revenues, and the Funds created pursuant to this Ordinance, and all books, documents, and vouchers relating thereto shall at all reason- able times be made available for inspection upon request of any Bondholder or citizen of the Issuer. To the extent consistent with the provisions of this Ordinance, the Issuer shall keep its books and records in a manner conforming to standard accounting practices as usually would be followed by private corporations owning and operating a similar System, with appropriate recognition being given to essential differences between municipal and corporate accounting practices. (k) Audits. After the close of each fiscal year while any of the Bonds or any Additional Bonds are outstanding, an audit will be made of the books and accounts relating to the System and the Pledged Revenues by an independent certified public accountant or an independent firm of certified public accountants. As soon as practicable after the close of each such year, and when said audit has been completed and made available to the Issuer, a copy of such audit for the preceding year shall be mailed to the Municipal Advisory Council of Texas, to each paying agent for any bonds payable from Pledged Revenues, to any Bondholders who shall so request in writing, and to First Southwest Company. The annual audit reports shall be open to the inspection of the Bondholders and their agents and representatives at all reasonable times. (1) Governmental Agencies. It will comply with all of the terms and conditions of any and all franchises, permits, and authorizations applicable to or necessary with respect to the System, and which have been obtained from any governmental agency; and the Issuer has or will obtain and keep in full force and effect all franchises, permits, authorization, and other requirements applicable to or necessary with respect to the acquisition, construction, equipment, operation, and maintenance of the System. (m) No Competition. It will not operate, or grant any franchise or, to the extent it legally may, permit the acquisi- tion, construction, or operation of, any facilities which would be in competition with the System, and to the extent that it legally may, the Issuer will prohibit any such competing facilities. (n) District or River Authority Contract. Nothing herein shall be construed to prevent the Issuer from making contracts with a district or river authority operating pursuant to Article 16, Section 59 of the Texas Constitution, as authorized by Chapter 30, Texas Water Code, or Article 4413 (32c), V.A.T.C.S., under which a district or river authority will make a sewer system or water system or portions thereof available to the Issuer, and will furnish waste water collection, transportation, treatment, disposal services or water treatment or water transportation facilities to the Issuer, through the district's or river authority's sewer system or water system or in such other manner as deemed appropriate by the Issuer. Such contracts may provide for the operation, or the acquisition by purchase or lease, of the Issuer's waste water treatment and disposal facilities or water treatment or water transportation facilities, in whole or in part, by the district or river authority. Section 23. DEFEASANCE OF THE BONDS. (a) Any Bond and the interest thereon shall be deemed to be paid, retired, and no longer outstanding (a "Defeased Bond") within the meaning of this Ordinance, except to the extent provided in subsection (d) of this Section 23, when payment of the principal of such Bond, plus interest thereon to the due date (whether such due date be 19 by reason of maturity, upon redemption, or otherwise) either (i) shall have been made or caused to be made in accordance with the terms thereof (including the giving of any required notice of redemption), or (ii) shall have been provided for on or before such due date by irrevocably depositing with or making available to the Paying Agent/Registrar for such payment (1) lawful money of the United States of America sufficient to make such payment or (2) Government Obligations which mature as to principal and interest in such amounts and at such times as will insure the availability, without reinvestment, of suffi- cient money to provide for such payment, and when proper arrangements have been made by the Issuer with the Paying Agent/Registrar for the payment of its services until all Defeased Bonds shall have become due and payable. At such time as a Bond shall be deemed to be a Defeased Bond hereunder, as aforesaid, such Bond and the interest thereon shall no longer be secured by, payable from, or entitled to the benefits of, the revenue herein levied and pledged as provided in this Ordinance, and such principal and interest shall be payable solely from such money or Government Obligations. (b) Any moneys so deposited with the Paying Agent/Regis- trar may at the written direction of the Issuer also be in- vested in Government Obligations, maturing in the amounts and times as hereinbefore set forth, and all income from such Government Obligations received by the Paying Agent/Registrar which is not required for the payment of the Bonds and interest thereon, with respect to which such money has been so depos- ited, shall be turned over to the Issuer, or deposited as directed in writing by the Issuer. (c) The term "Government Obligations" as used in this Section shall mean direct obligations of the United States of America, including obligations the principal of and interest on which are unconditionally guaranteed by the United States of America, which may be United States Treasury obligations such as its State and Local Government Series, which may be in book -entry form. (d) Until all Defeased Bonds shall have become due and payable, the Paying Agent/Registrar shall perform the services of Paying Agent/Registrar for such Defeased Bonds the same as if they had not been defeased, and the Issuer shall make proper arrangements to provide and pay for such services as required by this Ordinance. Section 24. DAMAGED, MUTILATED, LOST, STOLEN, OR DE- STROYED BONDS. (a) Replacement Bonds. In the event any outstanding Bond is damaged, mutilated, lost, stolen, or destroyed, the Paying Agent/Registrar shall cause to be print- ed, executed, and delivered, a new bond of the same principal amount, maturity, and interest rate, as the damaged, mutilated, lost, stolen, or destroyed Bond, in replacement for such Bond in the manner hereinafter provided. (b) Application for Replacement Bonds. Application for replacement of damaged, mutilated, lost, stolen, or destroyed Bonds shall be made by the registered owner thereof to the Paying Agent/Registrar. In every case of loss, theft, or destruction of a Bond, the registered owner applying for a replacement bond shall furnish to the Issuer and to the Paying Agent/Registrar such security or indemnity as may be required by them to save each of them harmless from any loss or damage with respect thereto. Also, in every case of loss, theft, or destruction of a Bond, the registered owner shall furnish to the Issuer and to the Paying Agent/Registrar evidence to their satisfaction of the loss, theft, or destruction of such Bond, as the case may be. In every case of damage or mutilation of a Bond, the registered owner shall surrender to the Paying 20 Agent/Registrar for cancellation the Bond so damaged or muti- lated. (c) No Default Occurred. Notwithstanding the foregoing provisions of this Section, in the event any such Bond shall have matured, and no default has occurred which is then con- tinuing in the payment of the principal of, redemption premium, if any, or interest on the Bond, the Issuer may authorize the payment of the same (without surrender thereof except in the case of a damaged or mutilated Bond) instead of issuing a replacement Bond, provided security or indemnity is furnished as above provided in this Section. (d) Charge for Issuing Replacement Bonds. Prior to the issuance of any replacement bond, the Paying Agent/Registrar shall charge the registered owner of such Bond with all legal, printing, and other expenses in connection therewith. Every replacement bond issued pursuant to the provisions of this Section by virtue of the fact that any Bond is lost, stolen, or destroyed shall constitute a contractual obligation of the Issuer whether or not the lost, stolen, or destroyed Bond shall be found at any time, or be enforceable by anyone, and shall be entitled to all the benefits of this Ordinance equally and proportionately with any and all other Bonds duly issued under this Ordinance. (e) Authority for Issuing Replacement Bonds. In accor- dance with Section 6 of Vernon's Ann. Tex. Civ. St. Art. 717k-6, this Section 24 of this Ordinance shall constitute authority for the issuance of any such replacement bond without necessity of further action by the governing body of the Issuer or any other body or person, and the duty of the replacement of such bonds is hereby authorized and imposed upon the Paying Agent/Registrar, and the Paying Agent/Registrar shall authen- ticate and deliver such bonds in the form and manner and with the effect, as provided in Section 4(d) of this Ordinance for Bonds issued in conversion and exchange for other Bonds. Section 25. CUSTODY, APPROVAL, AND REGISTRATION OF BONDS; BOND COUNSEL'S OPINION, AND CUSIP NUMBERS. The Mayor of the Issuer is hereby authorized to have control of the Initial Bonds issued hereunder and all necessary records and pro- ceedings pertaining to the Initial Bonds pending their delivery and their investigation, examination, and approval by the Attorney General of the State of Texas, and its registration by the Comptroller of Public Accounts of the State of Texas. Upon registration of the Initial Bond said Comptroller of Public Accounts (or a deputy designated in writing to act for said Comptroller) shall manually sign the Comptroller's Registration Certificate on each Initial Bond, and the seal of said Comp- troller shall be impressed, or placed in facsimile, on each Initial Bond. The approving legal opinion of the Issuer's Bond Counsel and the assigned CUSIP numbers may, at the option of the Issuer, be printed on each Initial Bond or on any Bonds issued and delivered in conversion of and exchange or replace- ment of any Bond, but neither shall have any legal effect, and shall be solely for the convenience and information of the registered owners of the Bonds. Section 26. NO ARBITRAGE. The Issuer covenants to and with the registered owners of the Bonds that it will make no use of the proceeds of the Bonds at any time throughout the term of this issue of Bonds which, if such use had been reason- ably expected on the date of delivery of the Bonds to and payment for the Bonds by the purchasers, would have caused the Bonds to be arbitrage bonds within the meaning of Section 103(c) of the Internal Revenue Code of 1954, as amended, or any regulations or rulings pertaining thereto; and by this covenant the Issuer is obligated to comply with the requirements of the 21 aforesaid Section 103(c) and all applicable and pertinent Department of the Treasury regulations relating to arbitrage bonds. The Issuer further covenants that the proceeds of the Bonds will not otherwise be used directly or indirectly so as to cause all or any part of the Bonds to be or become arbitrage bonds within the meaning of the aforesaid Section 103(c), or any regulations or rulings pertaining thereto. Section 27. SALE OF BONDS. The Bonds are hereby sold and shall be delivered to Rotan Mosle, Inc. (the "Underwriter"), for a total purchase price of $7,054,350 which amount is 98.25% of the principal amount of the Bonds authorized by the Ordin- ance, pursuant to the terms and provisions of a Purchase Contract in substantially the form attached hereto as Exhibit A which the Mayor of the Issuer is hereby authorized and directed to execute and deliver and which the City Secretary of the Issuer is hereby authorized and directed to attest. It is hereby officially found, determined, and declared that the terms of this sale are the most advantageous reasonably ob- tainable. The Bonds shall initially be registered in the name of Rotan Mosle, Inc. Section 28. PURPOSE OF REFUNDING BONDS. The Issuer hereby finds that it is necessary to refund the Refunded Bonds in order to reduce the annual debt service requirements of the Issuer and to restructure the Issuer's cash flow and to change the covenant that permits the issuance of additional parity revenue bonds in order to facilitate the issuance of Additional Bonds. Section 29. APPROVAL OF OFFICIAL STATEMENT. The Issuer hereby approves the form and content of the Official Statement relating to the Bonds and any addenda, supplement or amendment thereto, and approves the distribution of such Official State- ment in the reoffering of the Bonds by the Underwriters in final form, with such changes therein or additions thereto as the officer executing the same may deem advisable, such deter- mination to by conclusively evidenced by his execution thereof. Section 30. APPROVAL OF ESCROW AGREEMENT AND TRANSFER OF FUNDS. The Mayor of the Issuer are hereby authorized and directed to execute and deliver and the City Secretary of the Issuer is hereby authorized and directed to attest an Escrow Agreement in substantially the form attached hereto as Exhibit B. In addition, the Mayor is authorized to execute such subscriptions for the purchase of United States Treasury Securities, State and Local Government Series, as may be necessary for the Escrow Fund, and that the Issuer may also purchase for investment in the Escrow Fund of such obligations of the United States of America or any of its agencies, or such obligations fully guaranteed by the United States of America that will be appropriate open market investments for such Escrow Fund. In addition, officials of the Issuer are direct- ed, upon delivery of the Bonds, to transfer to the MBank Austin, N.A., Austin, Texas as Escrow Agent under the Escrow Agreement from the funds on hand an amount necessary to pur- chase such open market investments, which amount shall be deposited in the Escrow Fund and used in accordance with the provisions of the Escrow Agreement. Section 31. NOTICE OF REDEMPTION. There is attached to this Ordinance as Exhibit C, and made a part hereof for all purposes, a notice of prior redemption of bonds for the Series 1980 Bonds, Series 1983 Bonds and Series 1984 Bonds to be redeemed prior to stated maturity and such Series 1980 Bonds, Series 1983 Bonds and Series 1984 Bonds described in said notice of prior redemption are hereby called for redemption and shall be redeemed prior to maturity on the date, place and at the price as set forth herein. 22 EXHIBIT A NOTICE OF PRIOR REDEMPTION CITY OF ROUND ROCK, TEXAS WATERWORKS AND SEWER SYSTEM REVENUE BONDS, SERIES 1980 CITY OF ROUND ROCK, TEXAS WATERWORKS AND SEWER SYSTEM REVENUE BONDS, SERIES 1983 CITY OF ROUND ROCK, TEXAS WATERWORKS AND SEWER SYSTEM REVENUE BONDS, SERIES 1984 NOTICE IS HEREBY GIVEN that the City of Round Rock, Texas has called for redemption the following outstanding bonds at the redemption price of the principal thereof plus accrued interest to the date of redemption: City of Round, Rock, Texas Waterworks and Sewer System Revenue Bonds, Series 1980, dated May 1, 1980, maturing February 1, 1996 through February 1, 2004, inclusive, in the aggregate principal amount of $1,255,000. Call date for redemption on February 1, 1995, payable at First City Bank of Dallas or MBank Round Rock. City of Round, Rock, Texas Waterworks and Sewer System Revenue Bonds, Series 1983, dated April 1, 1983, maturing February 1, 1994 through February 1, 2000, inclusive, in the aggregate principal amount of $925,000. Call date for redemption on February 1, 1993, payable at First City Bank of Dallas or MBank Round Rock. City of Round, Rock, Texas Waterworks and Sewer System Revenue Bonds, Series 1984, dated July 1, 1984, maturing February 1, 1995 through February 1, 2002, inclusive, in the aggregate principal amount of $950,000 are called for redemption on February 1, 1994, payable at First City National of Austin. CITY OF ROUND ROCK