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Ordinance No. 2,2117459 ORDINANCE NO. 2211 AN ORDINANCE APPROVING A RESOLUTION OF THE BAYTOWN AREA WATER AUTHORITY WHICH AUTHORIZES THE ISSUANCE OF " BAYTOWN AREA WATER AUTHORITY WATER SUPPLY CONTRACT REVENUE BONDS (CITY OF BAYTOWN, TEXAS PROJECT), SERIES 1977 "; ACCEPTING THE TERMS AND CONDITIONS OF SUCH RESOLUTION; AND PROVIDING FOR AN EFFECTIVE DATE. WHEREAS, the City Council (the "Council ") of the City of Baytown (the "City ") has entered into a Water Supply Contract -- Treated Water, dated January 31, 1977 (the "Con- tract"), with the Baytown Area Water Authority (the "Authority "); and WHEREAS, pursuant to Chapter 600, Acts of the 64th Legislature of the State of Texas, Regular Session, 1975 (the "Authority Act "), and the Contract, the Authority now proposes to issue its bonds styled "Baytown Area Water Authority Water Supply Contract Revenue Bonds (City of Baytown, Texas Project), Series 1977" (the "Bonds "); and WHEREAS, the Authority Act and the Contract require that the Council must approve the Bonds and a substantial draft of the resolution authorizing issuance of the Bonds (the "Bond Resolution ") prior to issuance of the Bonds and adoption of the Bond Resolution. NOW, THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF BAYTOWN, TEXAS: Section 1: That substantial draft of the Bond Resolution authorizing the issuance of the Bonds has been submitted to the Council, a copy of which is attached hereto as Exhibit "A" and made a part hereof. The Bond Resolution, including the terms and conditions thereof, is hereby approved, and the Bonds are hereby approved and authorized to be issued pursuant to the Bond Resolution. Section 2. That this ordinance shall take effect from and after its passage by the Council. INTRODUCED, READ, AND PASSED by the affirmative vote of the Council this April 21 , 1977. TOM GENTRY, Mayor _ATTEST: - EILEEN P. HALL, City Clerk APPROVED: NE EL FICHARDSON, City Attorney E X H I B I T "A" 7460 7461 RESOLUTION AUTHORIZING ISSUANCE OF BAYTOWN AREA WATER AUTHORITY WATER SUPPLY CONTRACT REVENUE BONDS (CITY OF BAYTOWN, TEXAS PROJECT), SERIES 1977 i r+. THE STATE OF TEXAS § COUNTY OF HARRIS § BAYTOWN AREA WATER AUTHORITY § WHEREAS, the Baytown Area Water Authority (the "Authority ") was organized, created, and established pursuant to Chapter 600, Acts of the 63rd Legislature of the State of Texas, Regular Session, 1973 (the "Authority Act "); WHEREAS, the Authority has the right, power, and authority to enter into contracts of not exceeding forty (40) years duration with persons, corporations (public or private), municipal corporations, including the City of Baytown ( "Baytown "), political subdivisions of the State of Texas, and others, on such terms and conditions as the board of directors of the Authority (the "Board ") may deem de- sirable, fair, and advantageous for the performance of its rights, powers, and authorities under the Authority Act, including the right, power, and authority to acquire surface and /or underground water supplies from sources both within and without the boundaries of the Authority and to conserve, store, transport, treat, purify, distribute, sell, and deliver water, both surface and underground, to such persons and other parties within the boundaries of the Authority; WHEREAS, the Authority has entered into a "Whole- sale Water Supply Contract - Untreated Water," dated as of November 1, 1976, with the City of Houston ( "Houston "), for the purchase of quantities of untreated surface water from Houston (the "Houston Contract "); WHEREAS, the Authority has also entered into a "Water Supply Contract Treated Water," dated lannary 1977, with Baytown for the sale and delivery of treate water to Baytown (the "Baytown Contract "), which was approved at an election within Baytown on January 15, 1977; WHEREAS, on April 21, 1977, the City Council of Baytown, by its Ordinance No. 977 , approved the issuance of the bonds authorized to be issued hereby (here- inafter defined as the "Series 1977 Bonds ") and the terms and conditions of this resolution (the "Resolution "); and WHEREAS, the Board, having taken all action neces- sary to be done prior to the issuance of the Series 1977 Bonds, now deems it necessary and advisable to do so. IT IS, THEREFORE, RESOLVED BY THE BOARD OF DIREC- TORS OF THE BAYTOWN AREA WATER AUTHORITY THAT: Section 1. Bonds Authorized. The Authority's negotiable bonds are hereby authorized to be issued in the aggregate principal amount of One Million Two Hundred Fifty Thousand Dollars ($1,250,000) to be called "Baytown Area Water Authority Water Supply Contract Revenue Bonds (City of Baytown, Texas Project), Series 1977" (the "Series 1977 Bonds ") for the purpose of acquiring funds to make, purchase, construct, lease, or otherwise acquire certain water supply, 7463 Section 5. Form of the Series 1977 Bonds. The Form of the Series 1977 Bonds, including the form of Regis- tration Certificate of the Comptroller of Public Accounts of the State of Texas to be printed and endorsed on each of the Series 1977 Bonds, the form of the interest coupons which shall appertain and be initially attached to each of the Series 1977 Bonds, and the form of endorsement for registra- tion as to principal alone shall be, respectively, substan- tially as follows, with necessary and appropriate variations, omissions, and insertions as permitted or required by this Resolution: NO. FORM OF THE SERIES 1977 BOND: United States of America State of Texas BAYTOWN AREA WATER AUTHORITY WATER SUPPLY CONTRACT REVENUE BOND (CITY OF BAYTOWN, TEXAS PROJECT) SERIES 1977 $5,000 ON , , the BAYTOWN AREA WATER AUTHOR - , ITY (the "Authority , for value received, hereby promises to pay to the bearer hereof the principal amount of FIVE THOUSAND DOLLARS and to pay interest thereon, from the date hereof, at the rate of % per annum, evidenced by interest coupons payable on November 1, 1977, and semiannually thereafter on May 1 and November 1 of each year while this Bond is out- standing; provided, however, that such principal and inter- est are payable solely from the sources and in the manner herein provided, and from no other source. THE PRINCIPAL of this Bond and the interest cou- pons appertaining hereto shall be payable to the bearer, in lawful money of the United States of America, without ex- change or collection charges to the bearer, upon presen- tation and surrender of this Bond or proper interest coupon, as the case may be, at the following, which shall be the Paying Agent (the "Paying Agent ") for this series of Bonds: Texas The Authority may at any time or from time to time, with the approval of the City of Baytown, Texas ( "Baytown "), appoint one or more other Paying Agents for the Bonds (hereinafter defined) in the manner and subject to the conditions set forth in the Resolution (hereinafter defined). If this bond be registered as to principal (other than to the bearer), such principal shall be paid to the registered owner shown on the bond registration books kept by the Paying Agent, as Bond Registrar (the "Bond Registrar "), without exchange or collection charges, upon presentation and surrender of this Bond only to the Bond Registrar. THIS BOND is one of a series of Bonds dated as of April 1, 1977 (the "Bonds "), authorized and issued in the aggregate principal amount of $1,250,000 for the purpose of acquiring funds to make, purchase, construct, lease, or otherwise acquire certain water supply, treatment, and dis- tribution facilities defined as the "Project" in the Water -3- Supply Contract Treated Water, 1977 (the "Contract "), between approved at an election within 7464 dated , the Authority and Baytown and Baytown on January 15, 1977. IN THE CONTRACT and pursuant to Ordinance No. 77- of the City Council of Baytown, in which Baytown approved the issuance of the Bonds and the terms and conditions of the resolution of the board of directors of the Authority (the "Board "), dated April 21, 1977, authorizing the issuance of the Bonds (the "Resolution "), Baytown has agreed and is unconditionally obligated to make payments of Pledged Revenues into the Debt Service Fund kept by the Paying Agent, all as defined in the Resolution. The prin- cipal of and interest on this Bond, and other Bonds of the series of which it is a part, are payable solely from, and secured by a first lien on and pledge of, the payments of Pledged Revenues or, in certain instances as described in the Resolution, from amounts attributable to the proceeds of the Bonds, as hereinafter described. Pursuant to the Con- tract, Pledged Revenues include the payments for treated water to be made by Baytown to the Paying Agent for deposit into the Debt Service Fund and pledged in the Resolution for payment of the principal and interest on the Bonds issued pursuant to the terms of the Contract, the source of which shall include any and all available sources that Baytown may pledge toward such payments, including gross revenues of its waterworks and sanitary sewer system. THE HOLDER OR OWNER HEREOF shall never have the right to demand payment of this obligation from moneys de- rived or to be derived by taxation or any other revenues of the Authority other than the Pledged Revenues as described in this Bond or, in certain instances as described in the Resolution, from amounts attributable to proceeds of the Bonds. Except for the lien on and the assignment and pledge of the Pledged Revenues, neither the Project nor any other property of Baytown or of the Authority is encumbered by any lien for the benefit of the holder or owner of this Bond. The Bonds of this series are special obligations payable as aforesaid and shall not be considered as general obligations of the governing body of the Authority, the Authority, the State of Texas, or any municipalities or subdivisions thereof. No entity other than the Authority is obligated, directly, indirectly, or contingently, to pay the Bonds of this series from any other source whatsoever. ON MAY 1, 1987, or on any interest payment date thereafter, any outstanding Bonds of this series may be redeemed prior to their scheduled maturities, in whole or in part, as instructed by Baytown, upon written notice of the exercise of the option to redeem delivered by Baytown to the Authority and the Paying Agent, for a price equal to the principal amount of the Bonds to be redeemed plus unpaid accrued interest to the date fixed for redemption. The Paying Agent shall cause a written notice of any redemption to be published at least once during each week for at least two consecutive weeks, each publication to be made in a newspaper of general circulation in Houston, Texas, with the first of such publications being at least 30 days prior to the date fixed for redemption. A similar notice may be mailed by the Bond Registrar, postage prepaid, not less than 30 days prior to the redemption date, to each registered owner, if any, of the Bonds to be redeemed, addressed to such owner at the address appearing on the bond registration books maintained by the Bond Registrar; but failure to mail or receive such notice, or any defect therein or in the -4- 7465 mailing thereof, shall not affect the validity of the pro- ceedings for the redemption of such Bonds. By the date fixed for any such redemption, due provision shall be made with the Paying Agent for redemption of the Bonds. If such written notice of redemption is published, the Bonds called for redemption shall become due and payable on the date fixed for redemption, and, if due provision for such payment is made, all as provided above, the Bonds which are to be redeemed thereby shall automatically be deemed to have been redeemed prior to their scheduled maturities; shall not bear interest after the date fixed for redemption; and shall not be regarded as being outstanding except for the right of the bearer or registered owner to receive the funds provided for such payment. Upon presentation and surrender of such registered Bonds to the Paying Agent in Baytown or such bearer Bonds to either Paying Agent, together with all coupons appertaining thereto maturing after such redemption date, such Bonds shall be paid. THIS BOND, until registered as to principal (other than to the bearer), shall be exchangeable or transferable by delivery and, at the option of the holder, may be regis- tered as to principal alone on the bond registration books kept by the Bond Registrar upon presentation hereof to the Bond Registrar, which shall make notation of such registra- tion in the registration blanks provided on the back of this Bond, and thereafter this Bond may be transferred only upon a duly executed assignment in such form as shall be satis- factory to the Bond Registrar, such transfer to be made on such bond registration books and endorsed hereon by the Bond Registrar. Any transfer may be to the bearer and thereby transferability by delivery shall be restored, but this Bond shall again be subject to successive registrations and transfers as before. The Bond Registrar shall not be re- quired to make any exchanges or transfers of this Bond within 15 days prior to an interest payment date or within 15 days prior to the first publication of notice of redemp- tion of this Bond. The principal of this Bond, if registered (other than to the bearer), shall be payable only to or upon the order of the registered owner or his legal representative upon presentation and surrender of this Bond to the Bond Registrar by such registered owner or representative, or to the Paying Agent unless registered other than to the bearer. The registered owner of this Bond (if registered other than to the bearer), the bearer of this Bond (unless registered other than to the bearer), and the bearer of any coupon hereunto appertaining may be deemed and regarded by the Paying Agent, also in its role as Bond Registrar, as the absolute owner for all purposes, including payment and discharge of liability upon such Bond or coupon to the extent of such payment, and the Paying Agent, also in its role as Bond Registrar, shall not be affected by notice to the contrary. Notwithstanding the registration of this Bond as to principal, the interest coupons appertaining hereto shall remain payable to the bearer and shall continue to be trans- ferable by delivery. For every transfer, the Bond Registrar may make a charge sufficient to reimburse it for any tax, fee, or governmental charge required to be paid with respect thereto. Registration of the principal of this Bond shall not affect or impair the negotiability of this Bond or the interest coupons appertaining hereto, which shall at all times be negotiable instruments within the meaning of the Texas Uniform Commercial Code, as amended. IT IS HEREBY certified and convenanted that this Bond has been duly and validly authorized, issued, and de- livered; that all acts, conditions, and things required or -5- 7466 proper to be performed, exist, and be done precedent to or in the authorization, issuance, and delivery of this Bond have been performed, exist, and have been done in accordance with law; and that this Bond is a special revenue obligation of the Authority, with the principal and interest on this Bond being payable solely from, and secured by a first lien on and pledge of, the payments of Pledged Revenues to be made by Baytown or, in certain instances as described in the Resolution, from amounts attributable to the proceeds of the Bonds. THE AUTHORITY has reserved the right, subject to the restrictions stated in the Resolution, to issue addi- tional parity revenue bonds which also may be made payable from, and be secured, equally and ratably with the Bonds, by a first lien on and pledge of the Pledged Revenues, all in accordance with the terms of the Resolution, as the same may be amended as provided therein, to acquire funds (a) to complete the Project, (b) to enlarge, expand, or modify the Project, (c) to reconstruct the Project, or (d) to refund any of the Bonds or any additional bonds. Such additional bonds may be issued in one or more series, in various prin- cipal amounts, to mature at different times, to bear interest at different rates, to be payable in such installments, to be redeemable prior to maturity on whatever terms or prices, and to contain other provisions as may be provided in any resolution or resolutions of the Board whereunder such additional bonds may be issued. THE AUTHORITY has also reserved the right to amend the Resolution with the prior written consent of Baytown and with the approval in certain circumstances of the holders or owners of two- thirds (2/3) in aggregate principal amount of the outstanding bonds who are materially adversely affected by such amendment; provided, however, that, without the consent of the holder or owner of each outstanding bond affected thereby, the Resolution shall not be amended so as to permit: (a) the reduction of the portion of bonds the consent of the holders or owners of which is required for any waiver, modification, or alteration; (b) the extension of the time or times of payment of the principal of and interest on the bonds, or the reduction in the principal amount thereof or in the rate of interest thereon or any other modification in the terms of payment of the principal of or interest on the bonds; (c) the creation by the Author- ity of any lien ranking prior to or on a parity with the lien of the Bonds (other than with respect to additional parity revenue bonds); (d) the giving of any preference of any bond over any other bond; or (e) the extension of any waiver of default to subsequent defaults. IN WITNESS WHEREOF, this Bond and the interest coupons appertaining hereto have been signed with the facsimile signature of the President of the Board, and countersigned with the facsimile signature of the Secretary of the Board, and the official seal of the Authority has been duly impressed, or placed in facsimile, on this Bond. XXXXXXXXXX Secretary, Board of Directors (Authority's Seal) XXXXXXXXXX President, Board of Directors FORM OF COMPTROLLER'S REGISTRATION CERTIFICATE: OFFICE OF THE COMPTROLLER OF PUBLIC REGISTER NO. ACCOUNTS OF THE STATE OF TEXAS I HEREBY CERTIFY THAT there is on file and of record in my office a certificate to the effect that this Bond has been examined, certified as to validity, and ap- proved by the Attorney General of the State of Texas and further that this Bond has been registered by the Comp- troller of Public Accounts of the State of Texas. WITNESS my signature and seal this (COMPTROLLER'S SEAL) NO. 7467 Comptroller of Public Accounts of the State of Texas FORM OF INTEREST COUPON: ON F BAYTOWN AREA WATER AUTHORITY El promises to pay to the bearer, but solely from the sources described in the Bond to which this interest coupon apper- tains, the amount shown on this interest coupon, in lawful money of the United States of America (without exchange or collection charges to the bearer), unless due provision has been made for the redemption prior to the scheduled maturity of the Bond to which this interest coupon appertains, upon presentation and surrender of this interest coupon at Texas, such amount being interest coming due on such day in respect of the Bond bearing the number hereinafter designated of that issue styled BAYTOWN AREA WATER AUTHORITY WATER SUPPLY CONTRACT REVENUE BONDS (CITY OF BAYTOWN, TEXAS PROJECT) SERIES 1977 dated April 1, 1977. The holder hereof shall never have the right to demand payment of this obligation out of any money derived or to be derived by taxation or any other revenues of the Authority other than the sources described in the Bond to which this coupon appertains. Bond No. . XXXXXXXXXX XXXXXXXXXX Secretary, Board of Directors President, Board of Directors FORM OF BOND REGISTRATION PROVISIONS: BOND REGISTRATION PROVISIONS This Bond may be registered as to principal on the bond registration books kept by , , Texas, as Bond Registrar, upon the terms and conditions specified on the face of this Bond. -7- id Date of Name of Registration Registered Owner [END OF FORMS] 7468 Signature of Bond Registrar Section 6. Definitions. In addition to the other terms and phrases defined herein, the following terms shall have the following meanings: Bonds -- Bonds issued by the Authority, including the Series 1977 Bonds and Additional Bonds, as described in Section 13, (1) which, together with the interest thereon, are to be paid from the payments of Pledged Revenues and (2) which have been issued and sold to acquire funds to (a) make, purchase, construct, lease, or other- wise acquire the Project, (b) complete such making, purchasing, constructing, leasing, or acquiring, (c) enlarge, expand, or modify the Project, (d) reconstruct the Project, or (e) refund any Bonds. Bondholder -- The holder of any Bond or the registered owner thereof. Costs of the Project -- The costs incurred or to be incurred by the Authority or Baytown with respect to the acquisition of the Project, whether incurred prior to or after the date of the Baytown Contract and including, but not limited to, the following items: (1) Obligations for labor, materials, services, and equipment; (2) Costs of any bonds and insurance the cost of which is not otherwise provided for; (3) Costs of engineering services, including costs for preliminary design and development work, test borings, surveys, estimates, plans and specifications, super- vising construction, and performing all other duties required by or consequent upon proper construction; (4) Expenses incurred in connection with the issuance and sale of the Bonds, including without limitation (a) fees and expenses of accountants, auditors, attorneys, underwriters, engineers, and financial advisors, (b) materials, supplies, printing, and engrav- ing, (c) recording and filing fees, (d) rating agency fees, and (e) initial fees and expenses of a trustee, if any; (5) Costs required terms of any contract or tion with the Project; -8- to be paid under the contracts in connec- 7469 (6) Sums required to reimburse the Authority or Baytown for advances made by either of them for any of the above items, including fees of any kind for any other cost incurred, including expenses for organization of the Authority, overhead expenses, and expenses for any work done by either the Authority or Baytown which are properly chargeable to the Project; and (7) Costs of all other items related to the acquisition of the Project. Houston Contract -- The Wholesale Water Supply Contract - Untreated Water, dated as of November 1, 1976, between the Authority, as buyer, and the City of Houston, Texas, as seller. Outstanding Bonds -- At any date as of which the amount of Outstanding Bonds is to be deter- mined, the aggregate of all Bonds, except the following: (i) Bonds cancelled or delivered to the Paying Agent for cancellation at or prior to such date; (ii) Bonds for the full payment of the principal of and interest on which cash shall have been theretofore deposited with the Paying Agent and which (A) shall have matured by their terms, or otherwise shall have become payable, but shall not have been rendered for payment or (B) shall have been purchased by the Authority but shall not have been presented for payment; and (iii) Bonds in exchange or in lieu of which other Bonds have been delivered under this Resolution. Paying Agent -- Any person named herein or in accordance herewith to pay the principal of and interest on any of the Bonds, one of which shall be _ Texas Commerce Bank ► Houston , Texas, and any successor Paying Agent. Pledged Revenues -- The payments to be made by Baytown to the Authority for treated water and pledged herein for payment of the principal of and interest on the Bonds issued pursuant to the terms of the Baytown Contract, the source of which shall include any and all available sources that Baytown may pledge toward such payments, including gross revenues of its waterworks and sanitary sewer system. Project -- The property, works, facilities, and improvements (whether previously existing or to be made, constructed, or acquired), within or without the boundaries of the Authority, necessary (1) to acquire surface water supplies from sources both within and without the boundaries of the Authority, including particularly the sources provided by the Houston Contract, (2) to conserve, 7470 store, transport, treat, and purify untreated water purchased by the Authority pursuant to the Houston Contract, and (3) to distribute, sell, and deliver treated water to Baytown pursuant to the terms of the Baytown Contract. The Project will consist of (1) property, works, facilities, and improvements to accept untreated water at a point of delivery pursuant to the Houston Contract, (2) pipelines and canals, (3) a reservoir and /or forebay between such point of delivery and the Authority's treatment facilities, and (4) certain water treatment facilities as may be revised pursuant to the Baytown Contract. Section 7. Pledge; Special Obligations. (a) The Series 1977 Bonds and the interest coupons appertaining thereto shall be payable from, and secured by an irrevocable first lien on and pledge of, the Pledged Revenues or, in certain instances as described in Section 8, from amounts attributable to the proceeds of the Series 1977 Bonds. The Pledged Revenues are further pledged irrevocably to the establishment and maintenance of the Debt Service Fund at the Paying Agent. ' (b) The Series 1977 Bonds and the interest coupons appertaining thereto shall be special obligations of the Authority payable solely from the sources described above, and no holder of any Series 1977 Bonds shall ever have the right to demand payment of the Series 1977 Bonds and in- terest coupons from funds derived or to be derived by taxa- tion or any revenues of the Authority other than those pledged in the preceding Subsection. The Series 1977 Bonds shall not be considered general obligations of the governing body of the Authority, the Authority, the State of Texas, or any municipality or subdivision thereof. No entity other than the Authority is obligated, directly, indirectly, or contingently, to pay the Series 1977 Bonds from any other source whatsoever. Section 8. Project Fund; Investment Thereof. (a) Immediately after the sale and delivery of the Series 1977 Bonds, the Authority shall deposit into a separate and special Project Fund, which is hereby created and shall be established at one of the Authority's official depositories, an amount equal to the principal amount of the Series 1977 Bonds less underwriter's discount, if any. The Acquisition Fund shall be established, drawn on, and used by the Author- ity to pay the eligible Costs of the Project. (b) Any moneys held as a part of the Project Fund shall, at the direction of Baytown, be invested and rein- vested pursuant to the Authority Act and in accordance with the laws of the State of Texas, subject to the provisions of Section 17 hereof. All interest and realized profit from such investment may be transferred to and deposited in the Debt Service Fund if so directed by the Authority. All losses resulting from such investment will be charged against the Project Fund. Any obligation in which such money is so invested shall be kept and held safely and shall be sold and the proceeds of the sale applied so as to make promptly all payments required to be made. (c) After completion of the Project, any surplus moneys remaining in the Project Fund (other than funds required to provide for the payment of the Costs of the Project not then due and payable or the liability for the -10- 7471 payment of which is being contested or disputed) shall, at such time or as soon thereafter as possible, be deposited in the Debt Service Fund. Any moneys retained in the Project Fund by the Authority for the payment of Costs of the Project not then due and payable, or the liability for the payment of which is being contested or disputed and which shall thereafter become available, shall be applied in accordance with the provisions of the preceding sentence. Section 9. Debt Service Fund; Investment Thereof. (a) Immediately after the sale and delivery of the Series 1977 Bonds, the Authority shall deposit into a separate and special fund called the Debt Service Fund, which is hereby created and shall be established by the Authority at the Paying Agent and maintained as provided in this Resolution so long as any Series 1977 Bond or interest coupon apper- taining thereto is outstanding and unpaid, the accrued interest, if any, on the Series 1977 Bonds to the date of delivery. All payments by Baytown of Pledged Revenues shall be deposited directly into the Debt Service Fund. (b) All moneys from time to time deposited and held in the Debt Service Fund shall be held in trust by the Paying Agent for the benefit of the Bondholders entitled to be paid therefrom. From the moneys in the Debt Service Fund the Authority shall pay, or cause to be paid, the interest on the Series 1977 Bonds as the same shall become due and the principal of the Series 1977 Bonds as the same shall mature or be called for redemption. (c) (i) Any moneys held as a part of the Debt Service Fund shall, at the direction of Baytown, be invested or reinvested by the Paying Agent pursuant to the Authority Act and in accordance with the laws of the State of Texas and subject to the provisions of Section 17 hereof. (ii) Any securities purchased with the moneys in the Debt Service Fund shall be deemed a part of the Debt Service Fund. The income and profits, including realized discount on securities purchased, received on all such securities (after deduction for accrued interest and premium paid from the Debt Service Fund at time of purchase) shall be deposited in or credited to the Debt Service Fund, and all losses thereon shall be charged against the Debt Service Fund. Neither the Authority nor the Paying Agent shall be liable or responsible for any loss resulting from any such investment or resulting from the redemption or sale of any such investment as herein authorized. If at any time it shall become necessary that some or all of the securities purchased with the moneys in the Debt Service Fund be re= deemed or sold to raise moneys necessary to comply with the provisions of this Resolution, the Paying Agent shall, at the direction of Baytown, effect such redemption or sale. Section 10. Security of Funds. All moneys de- posited with the Authority or the Paying Agent and not invested in securities by the Authority or the Paying Agent pursuant to the provisions hereof or insured by the Federal Deposit Insurance Corporation or other Federal agency, shall continuously be secured, for the benefit of the Bondholders, as required by law for the security of the Authority's funds. Section 11. Baytown's Payments of Pledged Revenues. (a) Baytown has agreed—En—the Baytown Contract, and by approving the issuance of the Series 1977 Bonds and the -11- 7472 terms and conditions of this Resolution, Baytown has further absolutely and unconditionally obligated itself and agreed (regardless of, and notwithstanding, any provisions of the Baytown Contract to the contrary, or the provisions of any other contract or agreement between Baytown and the Authority or any other party to the contrary) to make the following payments to the Authority in immediately available funds: (i) On or before June 1, 1977, and the first day of each month thereafter, such amount, in approximately equal monthly installments, as will be sufficient, together with any other amounts available therefor in the Debt Service Fund, as shall in the aggregate equal (A) the interest which shall become due on the Series 1977 Bonds on the next succeeding interest payment date, plus (B) the principal amount of any of the Series 1977 Bonds to be redeemed on such date; and (ii) On or before the first of the month twelve months prior to the first maturity of the Series 1977 Bonds, and the first day of each month thereafter, such amounts, in approximately equal monthly installments, as will be sufficient, together with any other amounts available therefor in the Debt Service Fund, as shall in the aggregate equal the principal amount of the Series 1977 Bonds which shall mature on the next maturity date of the Series 1977 Bonds. (b) The holders of the Series 1977 Bonds shall be entitled to rely unconditionally on the agreements, cove- nants, and representations set forth in this Resolution. It is further understood and agreed that Baytown may prepay all or any part of each payment of Pledged Revenues, and any such prepayment and any earnings thereon shall be applied by the Authority to Baytown's obligation to make succeeding payments of Pledged Revenues (except such amounts as may be specified by Baytown to be applied to the purchase or redemp- tion of any of the Series 1977 Bonds prior to their matur- ities); provided, however, that the redemption of any Outstanding Series 1977 Bonds prior to maturity at any time, pursuant to the provisions of this Section, with funds from any source (whether from Pledged Revenues or otherwise), shall not relieve Baytown of its unconditional obligation to pay each payment of Pledged Revenues, as specified above, when due. Section 12. Redemption of the Series 1977 Bonds Before Maturity. (a) Redemption Dates and Prices. (i) The Series 1977 Bonds are non - callable for redemption prior to May 1, 1987. (ii) On May 1, 1987, or on any interest payment date thereafter, any Outstanding Series 1977 Bonds are subject to optional redemption prior to their scheduled maturities, in whole or in part, at the option of and as directed by Baytown, upon written notice of the exercise of the option to redeem delivered by Baytown to the Authority and the Paying Agent. On or before the day fixed for such redemption, Baytown shall deposit, or cause to be deposited, Pledged Revenues into the Debt Service Fund, in immediately available -12- 7473 funds, a sum which, together with other moneys available therefor in the Debt Service Fund, is equal to the aggregate principal amount of the Series 1977 Bonds requested to be redeemed plus accrued interest to the date of redemption. (b) Notice of Redemption. The Paying Agent in Baytown shall cause a written notice of any redemption to be published at least once during each week for at least two consecutive weeks, each publication to be made in a newspaper of general circulation in Houston, Texas, with the first of such publications being at least 30 days prior to the day fixed for redemption. A similar notice may be mailed by the Paying Agent in Baytown, postage prepaid, not less than 30 days prior to the redemption date, to each registered owner, if any, of the Series 1977 Bonds to be redeemed, addressed to such owner at its address appearing on the bond regis- tration books maintained by the Paying Agent in Baytown; but failure to mail or receive such notice, or any defect therein or in the mailing thereof, shall not affect the validity of the proceedings for the redemption of such Series 1977 Bonds. By the date fixed for any such redemption, due provision shall be made with the Paying Agents for redemption of the Series 1977 Bonds. If such written notice of redemp- tion is published, the Series 1977 Bonds called for redemp- tion shall become due and payable on the date fixed for redemption, and, if due provision for such payment is made, all as provided above, the Series 1977 Bonds which are to be redeemed thereby shall automatically be deemed to have been redeemed prior to their scheduled maturities; shall not bear interest after the date fixed for redemption; and shall not be regarded as being Outstanding except for the right of the bearer or registered owner to receive the funds provided for such payment. Upon presentation and surrender of such registered Series 1977 Bonds to the Paying Agent in Baytown or such bearer Series 1977 Bonds to either Paying Agent, together with all coupons appertaining thereto maturing after such redemption date, such Series 1977 Bonds shall be paid. (c) Redemption Requests. In the event Baytown exercises its option under Section 12(a)(ii), redemption shall be made pursuant to such Section at such times and in such principal amounts as Baytown shall, not later than 45 days prior to the date on which any Series 1977 Bonds are to be redeemed pursuant to Section 12(a)(ii), state in a written certificate which is signed by a duly authorized repre- sentative of Baytown and received by the Authority. The Authority shall give the notice of redemption referred to in this Section 12(c) in respect of such redemption. Section 13. Additional Bonds. (a) The Authority reserves the right, upon the request of Baytown, to issue additional, bonds (the "Additional Bonds ") in such amounts as are required for the purpose of acquiring funds to (i) complete making, purchasing, constructing, leasing, or acquiring the Project, (ii) enlarge, expand, or modify the Project, (iii) reconstruct the Project, or (iv) refund or any Bonds. The Additional Bonds, when issued and delivered, shall be payable from and secured by a first lien on and pledge of the Pledged Revenues (which shall include addi- tional payments sufficient to enable the Authority to comply with all terms and conditions of this Resolution with respect to the issuance of such Additional Bonds), in the same manner and to the same extent as any previously Outstanding -13- 7474 Series 1977 Bonds; and all of the Series 1977 Bonds and any Additional Bonds shall in all respects be on a parity and of equal dignity. The Additional Bonds may be issued in one or more series, in various principal amounts, to mature at different times, to bear interest at different rates, to be payable in such installments, to be redeemable prior to maturity on whatever terms or prices, and to contain such other provisions as may be provided in any resolution or resolutions of the Board whereunder the Additional Bonds may be issued. (b) No such installment or series of Additional Bonds shall be issued unless: (i) A certificate is executed by the Presi- dent and Secretary of the Board to the effect that no default exists in connection with any covenants or requirements of any Outstanding Series 1977 Bonds or Additional Bonds, if any, and that the Debt Service Fund contains the amount then required to be on deposit therein; (ii) Baytown is not in default with respect to any series of bonds or other debt issued by it; and (iii) The principal of and interest on any such installment or series of Additional Bonds are payable on the same semiannual interest dates and annual principal dates as the Outstanding Bonds. (c) Nothing in this Section shall either require or preclude that (i) any bonds which may be issued by the Authority or any other issuer for the purpose of acquiring funds to (A) make, purchase, construct, lease, or otherwise acquire the Project; (B) complete such making, purchasing, constructing, leasing, or acquiring; (C) enlarge, expand, or modify the Project; (D) reconstruct the Project; or (E) refund any Series 1977 Bonds or Additional Bonds, if any; (ii) the Series 1977 Bonds or Additional Bonds, if any, must rank equally and on a parity with any such bonds not issued as Additional Bonds; or (iii) that the Series 1977 Bonds or Additional Bonds, if any, must be secured, together with any bonds not issued as Additional Bonds, by a pledge of the Pledged Revenues. Section 14. Amendments and Supplemental Resolu- tions. (a) The Authority may at any time, subject to the condrtions and restrictions contained in this Resolution and with the prior written consent of Baytown, but without the consent of, or notice to, the Bondholders, enter into a resolution or resolutions supplemental hereto, which there- after shall form a part hereof, for any one or more of the following purposes: (i) To add to the covenants and agreements of the Authority contained in this Resolution other covenants and agreements thereafter to be observed and performed; (ii) To cure any ambiguity or correct, or supplement any defect, inconsistent provision contained in or in any supplemental resolution; -14- to cure, omission, or this Resolution 7475 (iii) To establish the amount, terms, pro- visions, and conditions of a particular series of Additional Bonds and to prescribe the form of such bonds and the coupons appertaining thereto; or (iv) To make any other change in this Resolu- tion or any supplemental resolution which, in the judgment of the Authority in reliance upon an opinion of counsel of recognized national standing in the field of municipal bond law, does not materially adversely affect the rights of the Bondholders of any series. The Authority hereby covenants that it will perform all the requirements of any such supplemental resolutions which may be in effect from time to time. (b) (i) If at any time the Authority shall desire to amend this Resolution or the Baytown Contract, and such amendment, in the judgment of the Authority in reliance upon an opinion of counsel of recognized national standing in the field of municipal bond law, materially adversely affects the rights of the Bondholders, the Authority shall cause notice of the proposed amendment to be published at least once during each week for at least two consecutive weeks, each publication to be made in a newspaper of general circulation in Houston, Texas. Such notice shall briefly set forth the nature of the proposed amendment and shall state that a copy thereof is on file at the principal office of the Authority for inspection by all Bondholders. (ii) From time to time the Bondholders of not less than two - thirds (2/3) in principal amount of the Out- standing Bonds materially adversely affected by any waiver, modification, or alteration of this Resolution or the Baytown Contract, may, by an instrument or instruments in writing signed by such Bondholders and filed with the Authority, assent to and authorize any such waiver, modification, or alteration of this Resolution or the Baytown Contract that shall be proposed by the Authority and consented to by Baytown; and any action therein authorized to be taken, with the assent or authority given as aforesaid, shall be binding upon all Bondholders as fully as though such action were specifically and expressly authorized by the terms of this Resolution or the Baytown Contract, as the case may be; provided that, without the consent of the Bondholders affect- ed thereby, no such waiver, modification, or alteration shall permit: (a) the reduction of the portion of the Bonds the consent of the Bondholders of which is required for any waiver, modification, or alteration; (b) the extension of the time or times of payment of the principal of and interest on the Bonds, or the reduction in the principal amount thereof or in the rate of interest thereon or any other modification in the terms of payment of the principal or interest on the Bonds; (c) the creation by the Authority of any lien ranking on a parity with (other than with respect to Additional Bonds); (d) the giving of any preference of any Bond over any other Bond; or (e) the extension of any waiver of default to subsequent defaults. (c) Upon the adoption of any waiver, modification, or alteration pursuant to the provisions of this Section, this Resolution or the Baytown Contract, as the case may be, shall be deemed to be amended in accordance therewith and the respective rights, duties, and obligations of the Author- ity, Baytown, and all the Bondholders of the then Outstanding -15- 7476 Bonds shall thereafter be determined, exercised, and endorsed hereunder, subject in all respects to such amendment. Section 15. Sale and Deliverx of the Series 1977 Bonds; Approval and Registration Thereof. a) The sale of the Series 1977 Bonds to N.A. (the "Initial Purchaser ") pursuant to the taking of public bids therefor on the date of this Resolution, at a price of par and accrued interest to the date of delivery, is hereby confirmed. Delivery of the Series 1977 Bonds to the Initial Purchaser shall be made as soon as practicable after the adoption of this Resolution, upon payment therefor, in accordance with the terms of sale. (b) Before the delivery of any Series 1977 Bonds, all necessary records and proceedings pertaining to such Series 1977 Bonds shall be delivered to the Attorney General of Texas for investigation, examination, and approval and to the Comptroller of Public Accounts of the State of Texas for registration. Upon registration of the Series 1977 Bonds, the Comptroller of Public Accounts (or a deputy designated in writing to act for such Comptroller) shall manually sign the Comptroller's Registration Certificate prescribed herein to be printed and endorsed on each Series l 1977 Bond, and the seal of such Comptroller shall be impressed, printed, or lithographed on each of the Series 1977 Bonds. Thereafter the Series 1977 Bonds shall be delivered to the initial purchasers thereof in accordance with the terms of sale of such Series 1977 Bonds. Section 16. Damaged, Mutilated, Lost, Stolen, or Destroyed Bonds and Coupons. a) In the event any Bond is damaged, mutilated, lost, stolen, or destroyed, the Authority shall execute a new Bond of the same principal amount and maturity with coupons corresponding in all respects to those unpaid coupons, if any, of the damaged, mutilated, lost, stolen, or destroyed Bond, in exchange and substitution for, or in lieu of and substitution for, such Bond and its coupons, if any, submit such replacement Bond to the Attorney General of Texas for his approval and otherwise cooperate with the Bondholder of any such Bond in complying with the provisions of Article 715a, Vernon's Texas Civil Statutes, as amended, or any other statute or procedure available for the issuance of replacement Bonds. f (b) In the event any coupon appertaining to any Bond is damaged, mutilated, lost, stolen, or destroyed, the Authority shall execute and deliver a new Bond of the same principal amount and maturity and having attached coupons corresponding to the coupons appertaining to the Bond to which such damaged, mutilated, lost, stolen, or destroyed coupon appertained, in exchange and substitution for, or in lieu of and substition for, the Bond and appurtenant coupons to which such damaged, mutilated, lost, stolen, or destroyed coupon appertained, submit such replacement Bond to the Attorney General of Texas for his approval and otherwise cooperate with the Bondholder of any such Bond in complying with the provisions of Article 715a, Vernon's Texas Civil Statutes, as amended, or any other statute or procedure available for the issuance of replacement Bonds or coupons. (c) Application for exchange and substitution of damaged, mutilated, lost, stolen, or destroyed Bonds and coupons shall be made to the Authority. In every case, the applicant for a substitute Bond shall furnish to the Author- ity and Baytown such security or indemnity as may be, respec- tively, required by them to save each of them and the Paying -16- 7477 Agent harmless. In every case of loss, theft, or destruction of a Bond or a coupon, the applicant shall also furnish to the Authority and Baytown evidence to their respective satisfaction of the loss, theft, or destruction of a coupon or coupons only, the applicant shall surrender the Bond to which the coupon or coupons so damaged, mutilated, lost, stolen, or destroyed appertain, with all coupons appertaining thereto (including any damaged or mutilated coupons) not lost, stolen, or destroyed. In every case of damage or mutilation of a Bond only, or a Bond without coupons, the applicant shall surrender the Bond so damaged or mutilated together with all coupons, if any, appertaining thereto. (d) Notwithstanding the foregoing provision of this Section 16, in the event any such Bond or coupon shall have matured, and no default has occurred which is then continuing in the payment of the principal or interest on the Bonds, the Authority may authorize the payment of the same (without surrender thereof except in the case of a damaged or mutilated Bond or coupon) instead of issuing a substitute Bond and coupons, if any, provided security or indemnity is furnished as provided above in this Section 16. (e) Upon the issuance of any substitute Bond, the Authority and Baytown may charge any such Bondholder with all expenses in connection therewith. Every substitute Bond (and any coupon or coupons attached thereto) issued pursuant to the provisions of this Section 16 by virtue of the fact that any Bond or any coupon is lost, stolen, or destroyed shall constitute a contractual obligation of the Authority, whether or not the lost, stolen, or destroyed Bond or coupon shall be found at any time, or be enforceable by anyone, and shall be entitled to all the benefits of this Resolution equally and proportionately with any and all other Series 1977 Bonds or additional Bonds, as the case may be, and coupons duly issued under this Resolution. (f) This Resolution shall constitute sufficient authority for the issuance of any such substitute Bond with- out the necessity of further action by the Board or any other body or person, and the issuance of such substituted Bonds is hereby authorized, notwithstanding any other pro- visions of this Resolution. Section 17. No- Arbitrage. The Authority covenants that it will make no use of the proceeds from the issuance and sale of the Series 1977 Bonds which, on the basis of the facts, estimates, and circumstances now known and reasonably expected to be in existence on the date of issue of the Series 1977 Bonds would cause the Series 1977 Bonds to be classified at the date of issue as 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 Authority is obligated to comply with the requirements of the aforesaid Section 103(c) and all applicable and pertinent regulations relating to arbitrage bonds. Section 18. Resignation and Removal of the Paying Agent. The Paying Agent, as such and as Bond Regis- trar, may at any time resign and be discharged of the duties and obligations created by this Resolution by giving at least 60 days' written notice by registered or certified mail to the Authority and Baytown. The Paying Agent may be removed, as such and as Bond Registrar, at any time, with -17- M 7478 the consent of Baytown, by an instrument filed with the Paying Agent and signed by the Authority. Any successor Paying Agent shall be appointed by the Authority with the approval of Baytown. In the event of resignation or removal, the Paying Agent shall pay over, assign, and deliver any moneys held by it as Paying Agent and the bond registration books and any other records maintained by it as Bond Registrar to its successor, or, if there be no successor, to the Authority. Section 19. CUSIP Numbers. The Board of Directors of the Authority authorizes the imprinting of CUSIP (the American Bankers Association's Committee on Uniform Secur- ities Identification Procedures) numbers on the Series 1977 Bonds; provided, however, that the failure of such CUSIP numbers to appear on the Series 1977 Bonds, or the imprinting of incorrect CUSIP numbers, shall in no way affect the validity or enforceability of the Series 1977 Bonds or relieve the purchaser of any obligation to accept delivery of and make payment for the Series 1977 Bonds. Section 20. Emergency. It is hereby officially found and determined that a case of emergency or urgent public necessity exists which requires the holding of the meeting at which this Resolution is adopted, such emergency or urgent public necessity being that the proceeds from the sale of the Series 1977 Bonds are required as soon as possible and without delay for necessary and urgently needed public improvements and further that such meeting was open to the public, and public notice of the time, place, and purpose of such meeting was given, all as required by Article 6252 -17, Vernon's Texas Civil Statutes, as amended. Section 21. Effective Date. This resolution shall take effect from and after its passage by the Board of Directors of the Baytown Area Water Authority. INTRODUCED, READ, AND PASSED by the affirmative vote of the Board of Directors of the Baytown Area Water Authority this 21st day of April , 1977. o—cLGs� ROBERT L. GILLETTE, President ATTEST: PETER R. BUENZ, Secr y APPROVED: -18-