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Ordinance No. 4,32451126 -1a ORDINANCE NO. 4324 ORDINANCE AUTHORIZING THE ISSUANCE OF $27,270,000 CITY OF BAYTOWN GENERAL OBLIGATION REFUNDING BONDS, SERIES 1985; AUTHORIZING THE REDEMPTION PRIOR TO MATURITY OF CERTAIN OBLIGATIONS; AUTHOR- IZING THE PURCHASE OF CERTAIN SECURITIES AND THE TRANSFER OF CERTAIN FUNDS; AND AUTHORIZING THE EXECUTION OF AN ESCROW AGREEMENT THE STATE OF TEXAS COUNTIES OF HARRIS AND CHAMBERS THE CITY OF BAYTOWN WHEREAS, the City of Baytown, Texas (the "City ") has heretofore issued or assumed bonds and certificates of obligation which are payable in whole or in part from ad valorem taxes and which are more fully described in Exhibit "A" hereto, of which $28,903,000 in aggregate amount remains outstanding (the "Refunded Bonds "); and WHEREAS, the City desires to refund the Refunded Bonds, in advance of their maturities, to reduce and restructure the debt service payable by the City; and WHEREAS, the City is authorized by Article 717k, Vernon's Texas Civil Statutes, as amended (the "Act ") , to issue refunding bonds for the purpose of refunding the Refunded Bonds in advance of their maturities, and to accomplish such refunding by depositing directly with a paying agent for the Refunded Bonds the proceeds of such refunding bonds, together with other available funds, in an amount sufficient to provide for the payment or redemption of the Refunded Bonds, which deposit shall constitute the making of firm banking and financial arrangements for the discharge and final payment or redemption of the Refunded Bonds; and WHEREAS, the City desires to enter into an escrow agreement with First City National Bank of Houston, Houston, Texas (the "Escrow Agent "), as authorized by the Act, pursu- ant to which proceeds of the refunding bonds herein author- ized, together with other available funds, will be deposited, invested and applied in a manner independently certified to be sufficient to provide for the full and timely payment of all interest on and principal of the Refunded Bonds; and WHEREAS, the City desires to authorize the subscription for and purchase of certain obligations of the United States of America for deposit under and pursuant to such escrow agreement and to authorize the transfer and deposit of certain existing funds; and WHEREAS, upon the issuance of the refunding bonds herein authorized and the creation of the escrow referred to above, the Refunded Bonds shall no longer be regarded as being out- standing, except for the purpose of being paid pursuant to such Escrow Agreement, and the pledges, liens, trusts and all other covenants, provisions, terms and conditions of the ordinances, orders, and resolutions authorizing the issuance of the Refunded Bonds shall be discharged, terminated and defeased; Now, Therefore BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF BAYTOWN: 51126 -1b 1. Consideration. It is hereby found and determined that the transactions contemplated in this Ordinance will benefit the City by reducing the debt service payable on the City's tax supported debt, providing a present value savings in debt service, and consolidating debt service payments to enhance cash flow and money management, to permit the issuance of future tax supported bonds on terms advantageous to the City, and that such benefits are sufficient considera- tion for the refunding of the Refunded Bonds. 2. Definitions. Throughout this ordinance the follow- ing terms and expressions as used herein shall have the meanings set forth below: The term "Act" shall mean Article 717k, Vernon's Texas Civil Statutes, as amended. The term "Bond Register" shall mean the books of regis- tration kept by the Paying Agent /Registrar in which are maintained the names and addresses of, and the principal amounts of the Bonds registered to, each Owner. The term "Bonds" shall mean the $27,270,000 City of Baytown General Obligation Refunding Bonds, Series 1985 authorized in this Ordinance, unless the context clearly indicates otherwise, and such term shall include the bonds initially issued and delivered under this Ordinance and all bonds issued in exchange for or in replacement of such initial bonds as well as all other substitute or replacement bonds issued pursuant to this Ordinance. The term "Interest and Sinking Fund" shall mean the interest and sinking fund for payment of the Bonds estab- lished by the City pursuant to Section 19 of this Ordinance. The term "City" shall mean The City of Baytown, Texas. The term "Interest Payment Date ", when used in connec- tion with any Bond, shall mean February 1, 1986, and each August 1 and February 1 thereafter until maturity or earlier redemption of such Bond. The term "Ordinance" as used herein and in the Bonds shall mean this ordinance authorizing the Bonds. The term "Owner" shall mean any person who shall be the registered owner of any outstanding Bond. The term "Paying Agent /Registrar" shall mean First City National Bank of Houston, Houston, Texas, and its successors in that capacity. The term "Record Date" shall mean the fifteenth (15th) calendar day of the month next preceding each Interest Payment Date. The term "Refunded Bonds" shall mean the City's out- standing Bonds and Certificates of Obligation which are more fully described on Exhibit "A" hereto, in the aggregate principal amount of $28,903,000. The term "Underwriters" shall mean Masterson & Company and First Southwest Company. 3. Authorization. The Bonds shall be issued pursuant to the provisions of the Act in fully registered form in the -2- 51126 -1c total authorized aggregate amount of Twenty -Seven Million Two Hundred Seventy Thousand Dollars ($27,270,000) for the purpose of refunding all of the Refunded Bonds. 4. Designation, Date and Interest Payment Dates. The Bonds shall be designated as "CITY OF BAYTOWN GENERAL OBLIGA- TION REFUNDING BONDS, SERIES 1985 ", and shall be dated December 1, 1985. The Bonds shall bear interest at the rates set forth in Section 5 of this Ordinance from the later of December 1, 1985, or the most recent Interest Payment Date to which such interest has been paid or duly provided for, calculated on the basis of a 360 day year of twelve 30 day months, payable on February 1, 1986, and semiannually there- after on August 1 and February 1 of each year until maturity or prior redemption. 5. Initial Bonds; Numbers and Denominations. The Bonds shall be initially issued in typed or printed form, bearing the numbers, in the principal amounts, and bearing interest at the rates set forth in the following schedule, and may be transferred and exchanged as set out in this Ordinance. The Bonds shall mature, subject to prior redemp- tion in accordance with this Ordinance, on February 1 in each of the years and in the amounts set out in such schedule. Bonds delivered on transfer of or in exchange for other Bonds shall be numbered in order of their authentication by the Registrar, shall be in the denomination of $5,000 or integral multiples thereof, and shall mature on the same date and bear interest at the same rate as the Bond or Bonds in lieu of which they are delivered. Bond Principal Interest Number Year Amount Rate R- 1 1986 $ 395,000 5.00% R- 2 1987 1,480,000 5.75% R- 3 1988 1,370,000 6.25% R- 4 1989 1,450,000 6.60% R- 5 1990 1,550,000 6.85% R- 6 1991 1,640,000 7.00% R- 7 1992 1,775,000 7.20% R- 8 1993 2,390,000 7.40% R- 9 1994 2,460,000 7.50% R -10 1995 2,215,000 7.70% R -11 1996 2,330,000 7.90% R -12 1997 2,520,000 8.00% R -13 1998 2,730,000 8.10% R -14 1999 2,965,000 8.25% 6. Execution of Bonds; Seal. The Bonds shall be signed by the Mayor and countersigned by the City Clerk, by their manual, lithographed, or facsimile signatures, and the official seal of the City shall be impressed or placed in facsimile thereon. Such facsimile signatures on the Bonds shall have the same effect as if each of the Bonds had been signed manually and in person by each of said officers, and such facsimile seal on the Bonds shall have the same effect as if the official seal of the City had been manually impressed upon each of the Bonds. if any officer of the City whose manual or facsimile signature shall appear on the Bonds shall cease to be such officer before the authentication of such Bonds or before the delivery of such Bonds, such manual or facsimile signature shall nevertheless be valid and -3- 51126 -1d sufficient for all purposes as if such officer had remained in such office. 7. Approval by Attorney General; Registration by Comptroller. The Bonds to be initially issued shall be delivered to the Attorney General of the State of Texas for approval and shall be registered by the Comptroller of Public Accounts of the State of Texas. The manually executed registration certificate of the Comptroller of Public Accounts of the State of Texas substantially in the form provided in Section 17 of this Ordinance shall be attached to the Bonds to be initially issued. 8. Authentication. Except for the Bonds to be ini- tially issued, which need not be authenticated by the Paying Agent/ Registrar, only such Bonds as shall bear thereon a certificate of authentication, substantially in the form provided in Section 17 of this Ordinance, manually executed by an authorized representative of the Paying Agent /Regis- trar, shall be entitled to the benefits of this Ordinance or shall be valid or obligatory for any purpose. Such duly executed certificate of authentication shall be conclusive evidence that the Bond so authenticated was delivered by the Paying Agent /Registrar hereunder. 9. Payment of Principal and Interest. The Paying Agent /Registrar is hereby appointed as the paying agent and registrar for the Bonds. The principal of the Bonds shall be payable, without exchange or collection charges, in any coin or currency of the United States of America which, on the date of payment, is legal tender for the payment of debts due the United States of America, upon their presentation and surrender as they respectively become due and payable, whether at maturity or by prior redemption, at the principal corporate trust office of the Paying Agent/ Registrar. The interest on each Bond shall be payable on each Interest Payment Date, by check mailed by the Paying Agent /Registrar on or before the Interest Payment Date to the Owner of record as of the Record Date, to the address of such Owner as shown on the Bond Register, or, at the Owner's expense, in such other manner as may be agreed upon by the Owner and the Paying Agent/ Registrar. Any accrued interest payable at maturity or redemption shall be paid upon presentation and surrender of such Bond at the principal corporate trust office of the Paying Agent /Registrar. If the date for payment of the principal of or interest on any Bond is a Saturday, Sunday, or a day on which banking institutions in the city where the principal corporate trust office of the Paying Agent /Registrar is located are autho- rized by law or executive order to close, or a day on which 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 a Saturday, Sunday, 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 a day on which the United States Postal Service is not open for business. 10. Successor Paying Agent/Registrars. The City covenants that at all times while any Bonds are outstanding it will provide a legally qualified bank, trust company, financial institution or other agency to act as Paying Agent /Registrar for the Bonds. The City reserves the right -4- 51126 -1e to change the Paying Agent /Registrar for the bonds on not less than 60 days written notice to the Paying Agent /Regis- trar, so long as any such notice is effective not less than 60 days prior to the next succeeding principal or interest payment date on the Bonds. Promptly upon the appointment of any successor Paying Agent/ Registrar, the previous Paying Agent /Registrar shall deliver the Bond Register or a copy thereof to the new Paying Agent /Registrar, and the new Paying Agent /Registrar shall notify each Owner, by United States mail, first class postage prepaid, of such change and of the address of the new Paying Agent /Registrar. Each Paying Agent /Registrar hereunder, by acting in that capacity, shall be deemed to have agreed to the provisions of this Section. 11. Special Record Date. If interest on any Bond is not paid on any Interest Payment Date and continues unpaid for thirty days thereafter, the Paying Agent /Registrar shall establish a new record date for the payment of such interest, to be known as a Special Record Date. The Paying Agent /Registrar shall establish a Special Record Date when funds to make such interest payment are received from or on behalf of the City. Such Special Record Date shall be fifteen days prior to the date fixed for payment of such past due interest, and notice of the date of payment and the Special Record Date shall be sent by first class United States mail, postage prepaid, not later than five days prior to the Special Record Date, to each Owner of record as of the close of business on the day prior to the mailing of such notice. 12. Owners. The City, the Paying Agent /Registrar and any other person may treat the person in whose name any Bond is registered as the absolute owner of such Bond for the purpose of making and receiving payment of the principal of such Bond, and for the further purpose of making and receiving payment of the interest on such Bond, and for all other purposes, whether or not such Bond is overdue, and neither the City nor the Paying Agent /Registrar shall be bound by any notice or knowledge to the contrary. All payments made to the person deemed to be the Owner of any Bond in accordance with this Section 12 shall be valid and effectual and shall discharge the liability of the City and the Paying Agent /Registrar upon such Bond to the extent of the sums paid. 13. Registration, Transfer, and Exchange. So long as any Bonds remain outstanding, the Paying Agent /Registrar shall keep at its principal corporate trust office the Bond Register, in which, subject to such reasonable regulations as it may prescribe, the Paying Agent /Registrar shall provide for the registration and transfer of Bonds in accordance with the terms of this Ordinance. Each Bond shall be transferable only upon the presenta- tion and surrender thereof at the principal corporate trust office of the Paying Agent/ Registrar, duly endorsed for transfer, or accompanied by an assignment duly executed by the registered Owner or his authorized representative in form satisfactory to the Paying Agent /Registrar. Upon due presen- tation of any Bond for transfer, the Paying Agent /Registrar shall authenticate and deliver in exchange therefor, within 72 hours after such presentation, a new Bond or Bonds, registered in the name of the transferee or transferees, in authorized denominations and of the same maturity and -5- 51126 -1f aggregate principal amount and bearing interest at the same rate as the Bond or Bonds so presented. All Bonds shall be exchangeable upon presentation and surrender thereof at the principal corporate trust office of the Paying Agent /Registrar for a Bond or Bonds of the same maturity and interest rate and in any authorized denomina- tion, in an aggregate principal amount equal to the unpaid principal amount of the Bond or Bonds presented for exchange. The Paying Agent /Registrar shall be and is hereby authorized to authenticate and deliver exchange Bonds in accordance with the provisions of this Section 13. Each Bond delivered in accordance with this Section 13 shall be entitled to the benefits and security of this Ordinance to the same extent as the Bond or Bonds in lieu of which such Bond is delivered. The City or the Paying Agent /Registrar may require the Owner of any Bond to pay a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with the transfer or exchange of such Bond. Any fee or charge of the Paying Agent /Registrar for such transfer or exchange shall be paid by the City. The Paying Agent /Registrar shall not be required to transfer or exchange any Bond called for redemption in whole or in part during the forty -five (45) calendar days prior to the date fixed for redemption; provided, however, such limitation shall not apply to the transfer or exchange by the Owner of the unredeemed balance of a Bond called for redemp- tion in part. 14. Cancellation of Bonds. All Bonds paid or redeemed in accordance with this Ordinance, and all Bonds in lieu of which exchange Bonds or replacement Bonds are authenticated and delivered in accordance herewith, shall be cancelled and destroyed upon the making of proper records regarding such payment or redemption. The Paying Agent /Registrar shall periodically furnish the City with appropriate certificates of destruction of such Bonds. 15. Mutilated, Lost or Stolen Bonds. Upon the presen- tation and surrender to the Paying Agent /Registrar of a mutilated Bond, the Paying Agent /Registrar shall authenticate and deliver in exchange therefor a replacement Bond of like maturity, interest rate and principal amount, bearing a number not contemporaneously outstanding. If any Bond is lost, apparently destroyed, or wrongfully taken, the City, pursuant to the applicable laws of the State of Texas and in the absence of notice or knowledge that such Bond has been acquired by a bona fide purchaser, shall execute and the Paying Agent /Registrar shall authenticate and deliver a replacement Bond of like maturity, interest rate and princi- pal amount, bearing a number not contemporaneously outstand- ing. The City or the Paying Agent /Registrar may require the Owner of a mutilated Bond to pay a sum sufficient to cover any tax or other governmental charge that may be imposed in connection therewith and any other expenses connected there- with, including the fees and expenses of the Paying Agent /Registrar. The City or the Paying Agent /Registrar may require the Owner of a lost, apparently destroyed or 51126 -1g wrongfully taken Bond, before any replacement Bond is issued, to: (1) furnish to the City and the Paying Agent /Reg- istrar satisfactory evidence of the ownership of and the circumstances of the loss, destruction or theft of such Bond; (2) furnish such security or indemnity as may be required by the Paying Agent /Registrar and the City to save them harmless; (3) pay all expenses and charges in connection therewith, including, but not limited to, printing costs, legal fees, fees of the Paying Agent /Registrar and any tax or other governmental charge that may be imposed; and (4) meet any other reasonable requirements of the City and the Paying Agent /Registrar. If, after the delivery of such replacement Bond, a bona fide purchaser of the original Bond in lieu of which such re- placement Bond was issued presents for payment such original Bond, the City and the Paying Agent /Registrar shall be entitled to recover such replacement Bond from the person to whom it was delivered or any person taking therefrom, except a bona fide purchaser, and shall be entitled to recover upon the security or indemnity provided therefor to the extent of any loss, damage, cost or expense incurred by the City or the Paying Agent /Registrar in connection therewith. If any such mutilated, lost, apparently destroyed or wrongfully taken Bond has become or is about to become due and payable, the City in its discretion may, instead of issuing a replacement Bond, authorize the Paying Agent /Regis- trar to pay such Bond. Each replacement Bond delivered in accordance with this Section 15 shall be entitled to the benefits and security of this Ordinance to the same extent as the Bond or Bonds in lieu of which such replacement Bond is delivered. 16. Optional Redemption. The City reserves the right, at its option, to redeem the Bonds prior to maturity, in whole or from time to time in part, in such manner as the City may select, on February 1, 1994, or on any Interest Payment Date thereafter, at par plus accrued interest on the Bonds called for redemption to the date fixed for redemption. If less than all the Bonds of a particular maturity are to be redeemed, the particular Bonds to be redeemed shall be selected by the City. Principal amounts may be redeemed only in integral multiples of $5,000. If a Bond subject to redemption is in a denomination larger than $5,000, a portion of such Bond may be redeemed, but only in integral multiples of $5,000. Upon surrender of any Bond for redemption in part, the Paying Agent /Registrar, in accordance with Section 13 hereof, shall authenticate and deliver in exchange therefor a Bond or Bonds of like maturity and interest rate in an aggregate principal amount equal to the unredeemed portion of the Bond so surren- dered. -7- 51126 -1h Notice of any redemption identifying the Bonds to be redeemed in whole or in part shall be given by the Paying Agent /Registrar at least thirty days prior to the date fixed for redemption by sending written notice by first class mail to the Owner of each Bond to be redeemed in whole or in part at the address shown on the Bond Register, and by publication one time in a financial journal, publication or reporter of general circulation among securities dealers in the City of New York, New York, or the State of Texas. Such notices shall state the redemption date, the redemption price, the amount of accrued interest payable on the redemption date, the place at which Bonds are to be surrendered for payment and, if less than all Bonds outstanding are to be redeemed, the numbers of the Bonds or portions thereof to be redeemed. Any notice given as provided in this Section 16 shall be conclusively presumed to have been duly given, whether or not the Owner receives such notice, and it is specifically provided that the publication of notice set forth above is the only notice that shall be required as a prerequisite to the validity of any redemption of Bonds. By the date fixed for redemption, due provision shall be made with the Paying Agent /Registrar for payment of the redemption price of the Bonds or portions thereof to be redeemed, plus accrued interest to the date fixed for redemption. When Bonds have been called for redemption in whole or in part and due provision has been made to redeem the same as herein provided, the Bonds or portions thereof so redeemed shall no longer be regarded as outstanding except for the purpose of receiving payment solely from the funds so provided for redemption, and the rights of the Owners to collect interest which would otherwise accrue after the redemption date on any Bond or portion thereof called for redemption shall terminate on the date fixed for redemption. 17. Forms. The form of the Bonds, including the form of the Paying Agent/ Registrar's Authentication Certificate, the form of Assignment, and the form of Registration Certif- icate of the Comptroller of Public Accounts of the State of Texas which shall be attached or affixed to the Bonds ini- tially issued shall be, respectively, substantially as follows, with such additions, deletions and variations as may be necessary or desirable and not prohibited by this Ordi- nance: Form of Bond United States of America State of Texas NUMBER DENOMINATION REGISTERED REGISTERED CITY OF BAYTOWN General Obligation Refunding Bond Series 1985 INTEREST RATE: MATURITY DATE: ISSUE DATE: CUSIP: December 1, 1985 REGISTERED OWNER: PRINCIPAL AMOUNT: WE DOLLARS 51126 -1i The City of Baytown, Texas (the "City ") promises to pay to the Registered Owner identified above, or registered assigns, on the date specified above, upon presentation and surrender of this bond at the principal corporate trust office of First City National Bank of Houston, Houston, Texas (the "Paying Agent /Registrar "), the principal amount identi- fied above, payable in any coin or currency of the United States of America which on the date of payment of such principal is legal tender for the payment of debts due the United States of America, and to pay interest thereon at the rate shown above, calculated on the basis of a 360 day year of twelve 30 day months, from the later of December 1, 1985, or the most recent interest payment date to which interest has been paid or duly provided for. Interest on this bond is payable by check payable on February 1 and August 1, begin- ning on February 1, 1986, mailed to the registered owner of record as of the previous January 15 and July 15 as shown on the books of registration kept by the Paying Agent /Registrar, or at the registered owner's expense, in such other manner as may be agreed upon by the registered owner and the Paying Agent /Registrar. Any accrued interest due at maturity or earlier redemption shall be paid upon presentation and surrender of this Bond at the principal corporate trust office of the Paying Agent /Registrar. REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS BOND SET FORTH ON THE REVERSE HEREOF, WHICH PROVISIONS SHALL HAVE THE SAME FORCE AND EFFECT AS IF SET FORTH AT THIS PLACE. IN WITNESS WHEREOF, this bond has been signed with the manual or facsimile signature of the Mayor and countersigned with the manual or facsimile signature of the City Clerk, and the official seal of the City has been duly impressed, or placed in facsimile, on this bond. (AUTHENTICATION CERTIFICATE) (SEAL) THE CITY OF BAYTOWN Mayor City Clerk (Back Panel of Bond) THIS BOND is one of a duly authorized issue of Bonds, aggregating $27,270,000 (the "Bonds "), issued for the purpose of refunding all of the City's outstanding General Obligation Bonds, Series 1966, 1967, 1968, 1971, 1972, 1975, and 1975 -A; Permanent Improvement Bonds, Series 1977, 1979, 1981 and 1982; Public Improvement Bonds, Series 1985; Waterworks and Sewer System Refunding Bonds, Series 1966; Waterworks and Sanitary Sewer System Certificates of Obligation, Series 1980; Harris County FWSD #8 Bonds, Series 1961 and 1961 -A; and Harris County WC &ID #58 Bonds, Series 1956 and 1961; pursuant to an ordinance adopted by the City Council on November 26, 1985 (the "Ordinance "). THE CITY RESERVES THE RIGHT, at its option, to redeem the Bonds prior to their scheduled maturities, in whole or from time to time in part, in integral multiples of $5,000, on February 1, 1994, or on any interest payment date thereafter, at par plus accrued interest on the principal amounts called for redemption to the date fixed for ME 51126 -1j redemption. Reference is made to the Ordinance for complete details concerning the manner of redeeming the Bonds. Notice of any redemption shall be given at least thirty (30) days prior to the date fixed for redemption by first class mail, addressed to the registered owners of each Bond to be redeemed in whole or in part at the address shown on the books of registration kept by the Paying Agent /Registrar and by publication once in a financial journal, publication, or reporter of general circulation among securities dealers in the City of New York, New York, or the State of Texas. When Bonds or portions thereof have been called for redemp- tion, and due provision has been made to redeem the same, the principal amounts so redeemed shall be payable solely from the funds provided for redemption, and interest which would otherwise accrue on the amounts called for redemption shall terminate on the date fixed for redemption. This Bond is transferable only upon presentation and surrender at the principal corporate trust office of the Paying Agent /Registrar, duly endorsed for transfer or accom- panied by an assignment duly executed by the registered owner or his authorized representative, subject to the terms and conditions of the Ordinance. The Bonds are exchangeable at the principal corporate trust office of the Paying Agent /Registrar for bonds in the principal amount of $5,000 or any integral multiple thereof, subject to the terms and conditions of the Ordinance. The Paying Agent /Registrar is not required to transfer or exchange any Bond called for redemption during the forty - five days prior to the date fixed for redemption; provided, however, that such limitation shall not apply to the transfer or exchange by the owner of a Bond called for redemption in part. The registered owner of this Bond, by acceptance hereof, acknowledges and agrees to be bound by all of the terms and conditions of the Ordinance. The City has covenanted in the Ordinance that it will at all times provide a legally qualified Paying Agent /Registrar for the Bonds and will cause notice of any change of Paying Agent /Registrar to be mailed to each registered owner. IT IS HEREBY certified, recited and covenanted that this Bond has been duly and validly issued and delivered; that all acts, conditions and things required or proper to be per- formed, to exist and to be done precedent to or in the issu- ance and delivery of this Bond have been performed, exist and have been done in accordance with law; and that annual ad valorem taxes sufficient to provide for the payment of the interest on and principal of this Bond, as such interest comes due and such principal matures, have been levied and ordered to be levied against all taxable property in the City, within the limits prescribed by law, and have been pledged irrevocably for such payment. FORM OF REGISTRATION CERTIFICATE OF COMPTROLLER OF PUBLIC ACCOUNTS COMPTROLLER'S REGISTRATION CERTIFICATE: REGISTER NO. I hereby certify that this bond has been examined, certified as to validity, and approved by the Attorney -10- 51126 -lk General of the State of Texas, and that this bond has been registered by the Comptroller of Public Accounts of the State of Texas. WITNESS MY SIGNATURE AND SEAL this xxxxxxxxxx Comptroller of Public Accounts (SEAL) of the State of Texas FORM OF PAYING AGENT /REGISTRAR'S AUTHENTICATION CERTIFICATE AUTHENTICATION CERTIFICATE It is hereby certified that this bond has been delivered pursuant to the Bond Ordinance described in the text of this Bond, in exchange for or in replacement of a bond, bonds, or a portion of a bond or bonds of a Series which was originally approved by the Attorney General of the State of Texas and registered by the Comptroller of Public Accounts of the State of Texas. First City National Bank of Houston Paying Agent /Registrar By Authorized Signature Date of Authentication FORM OF ASSIGNMENT ASSIGNMENT For value received, the undersigned hereby sells, assigns, and transfers unto (Please print or type name, address, and zip code of Trans- feree) (Please insert Social Security or Taxpayer Identification Number of Tranferee) the within bond and all rights thereunder, and hereby irrevo- cably constitutes and appoints attorney to transfer said bond on the books kept for registration thereof, with full power of substitution in the premises. DATED: Signature Guaranteed: NOTICE: Signature must be guaranteed by a member firm of the New York Stock Exchange or a commercial bank or trust company. Registered Owner NOTICE: The signature above must correspond to the name of the registered owner as shown on the face of this bond in every particular, without any alteration, enlargement or change whatsoever. -11- 5112£ -11 18. Le al O inion; CUSIP. The approving opinion of Vinson & Elkins, Houston, Texas, and CUSIP Numbers may be printed on the Bonds, but errors or omissions in the printing of such opinion or such numbers shall have no effect on the validity of the Bonds. 19. Interest and Sinking Fund; Tax Levy. A special fund, to be designated as "City of Baytown General Obligation Refunding Bonds, Series 1985 Interest and Sinking Fund" is hereby created, and the proceeds from all taxes levied, assessed and collected for and on account of the Bonds authorized by this Ordinance shall be credited to such fund. While the Bonds or any part of the principal thereof or interest thereon remain outstanding and unpaid, there is hereby levied and there shall be annually assessed and collected in due time, form and manner, and at the same time as other City taxes are assessed, levied and collected, in each year, beginning with the current year, a continuing direct annual ad valorem tax upon all taxable property in the City, within the limits prescribed by law, sufficient to pay the current interest on the Bonds as the same becomes due and to provide and maintain a sinking fund of not less than two percent of the principal amount of the Bonds or the amount required to pay each installment of principal of the Bonds as the same matures, whichever is greater, full allowance being made for delinquencies and costs of collection, and said taxes are hereby irrevocably pledged to the payment of the interest on and principal of the Bonds and to no other purpose. 20. Further Proceedings. After the Bonds to be ini- tially issued have been executed, it shall be the duty of the Mayor and other appropriate officials and agents of the City to deliver the Bonds to be initially issued and all pertinent records and proceedings to the Attorney General of Texas, for examination and approval by the Attorney General. After the Bonds to be initially issued have been approved by the Attorney General, they shall be delivered to the Comptroller of Public Accounts of the State of Texas for registration. Upon registration of the Bonds to be initially issued, the Comptroller of Public Accounts (or the Comptroller's bond clerk or an assistant bond clerk lawfully designated in writing to act for the Comptroller) shall manually sign the Comptroller's Registration Certificate prescribed herein and the seal of said Comptroller shall be impressed, or placed in facsimile, thereon. 21. Sale; Purchase Contract. The Bonds are hereby sold and shall be delivered to the Underwriters for $26,772,322.50, plus accrued interest to date of delivery, in accordance with the terms of a purchase contract presented to and approved by the City Council concurrently with the adoption of this Ordinance. The Mayor or Mayor Pro Tem and other appropriate City officials are hereby authorized to execute such purchase contract, and the Mayor or Mayor Pro Tem and all other officers, agents and representatives of the City are hereby authorized to do any and all things necessary or desirable to satisfy the conditions set out in such purchase contract and to provide for the issuance and delivery of the Bonds. It is hereby found and determined that the sale of the Bonds pursuant to such purchase contract is on the best terms and at the best price reasonably obtainable by the City. 22. No Arbitrage. The City certifies that based upon all facts and estimates now known or reasonably expected to -12- 51126 -1m be in existence on the date the Bonds initially issued are delivered and paid for, the City reasonably expects that the proceeds of the Bonds will not be used in a manner that would cause the Bonds or any portion of the Bonds to be an "arbi- trage bond" under Section Code of 1954, as amended, thereunder. Furthermore, of the City are authorized tions of facts and estimat, able expectations of the initially issued are deliv all or any officers of the the City the facts and cir tions of the City on the d delivered and paid for rec proceeds of the Bonds. MC shall make such use of the investments of proceeds of further actions as may be not be "arbitrage bonds" Internal Revenue Code of tions prescribed from time LU.S kC) 1LJ U L1lC 1liLCl.11Q1 nCVriiuc and the regulations prescribed ill officers, employees and agents and directed to provide certifica- :s that are material to the reason - Clity as of the date the Bonds 1red and paid for. In particular, City are authorized to certify for :umstances and reasonable expecta- ate the Bonds initially issued are arding the amount and use of the reover, the City covenants that it proceeds of the Bonds, regulate the Bonds and take such other and required so that the Bonds shall under Section 103(c) (2) of the 954, as amended, and the regula- to time thereunder. 23. Use of Proceeds. Proceeds from the sale of the Bonds shall, promptly upon receipt by the City, be applied as follows: (a) Accrued interest shall be deposited into the Interest and Sinking Fund. (b) The remaining proceeds from the sale of the Bonds, together with other available funds, shall be applied to establish an Escrow Fund to refund the Refunded Bonds, as more fully provided in the Escrow Agreement referred to below and, to the extent not otherwise provided for, to pay all expenses arising in connection with the issuance of the Bonds, the establishment of such Escrow Fund and the refund- ing of the Refunded Bonds. Any proceeds of the Bonds remain- ing after making all such deposits and payments shall be deposited into the Interest and Sinking Fund. 24. Redem tion of Certain Refunded Bonds. The City hereby calls the following bonds of the City for redemption prior to maturity on the dates set forth below, and authorizes and directs notice of such redemption to be given in accordance with the ordinances authorizing the issuance of such bonds: Bonds To Be Redeemed Redemption Date Permanent Improvement Bonds, Series 1981 Maturities 1991 through 1994 February 1, 1990 Permanent Improvement Bonds, Series 1982 Maturities 1992 through 1996 February 1, 1991 Public Improvement Bonds, Series 1985 Maturities 1996 through 1998 February 1, 1995 25. Escrow Agreement. The discharge and defeasance of the Refunded Bonds shall be effectuated pursuant to the terms and provisions of an Escrow Agreement to be entered into by and between the City and First City National Bank of Houston, Houston, Texas, as Escrow Agent, which shall be substantially in the form attached hereto as Exhibit "B ", the terms and -13- 51126 -1n provisions of which are hereby approved, subject to such insertions, additions and modifications as shall be necessary (a) to carry out the program designed for the City by the Underwriters, which shall be certified as to mathematical accuracy by Peat, Marwick, Mitchell & Co., Certified Public Accountants, whose Report (the "Report ") shall be attached to the Escrow Agreement, (b) to maximize the City's present value savings and /or to minimize the City's costs of refunding, (c) to comply with all applicable laws and regulations relating to the refunding of the Refunded Bonds and (d) to carry out the other intents and purposes of this Ordinance; and the Mayor or Mayor Pro Tem is hereby authorized to execute and deliver such Escrow Agreement on behalf of the City in multiple counterparts and the City Clerk is hereby authorized to attest thereto and affix the City's seal. 26. Transfer of Money in Interest and Sinking Funds. T On the date of delivery of the Refunding Bonds, there shall be transferred from the City's existing tax bond interest and sinking funds an amount sufficient to purchase the Open Market Securities for deposit with the Escrow Agent, pursuant to the Escrow Agreement. 27. Purchase of United States Treasury Obligations. To assure the purchase of the Escrowed Securities referred to in the Escrow Agreement, the Mayor, Mayor Pro Tem, or City Manager and other appropriate officers of the City are hereby authorized to subscribe for, agree to purchase and purchase, obligations of the United States of America, in such amounts and maturities and bearing interest at such rates as may be provided for in the Report to be attached to the Escrow Agreement, and to execute any and all subscriptions, purchase agreements, commitments, letters of authorization and other documents necessary to effectuate the foregoing, and any actions heretofore taken for such purpose are hereby ratified and approved. 28. Related Matters. To satisfy in a timely manner all of the City's obligations under this Ordinance, the purchase contract, and the Escrow Agreement, the Mayor, Mayor Pro Tem and all other appropriate officers and agents of the City are hereby authorized and directed to take all other actions that are reasonably necessary to provide for the refunding of the Refunded Bonds, including, without limitation, executing and delivering on behalf of the City all certificates, consents, receipts, requests, and other documents as may be reasonably necessary to satisfy the City's obligations under the purchase contract and the Escrow Agreement and to direct the transfer and application of funds of the City consistent with the provisions of such Escrow Agreement. 29. Payin5 Agent /Registrar. The form of agreement setting forth the duties of the Paying Agent /Registrar is hereby approved, and the Mayor is hereby authorized to execute such agreement for and on behalf of the City. 30. Official Statement. The Preliminary Official Statement submitted to the City Council is hereby approved and the preparation of a final Official Statement for use by the Underwriters in connection with the distribution of the Bonds is hereby authorized. 31. Open Meet in It is hereby officially found and determined that the meeting at which this Ordinance was adopted was open to the public, and that public notice of the -14- 51126 -10 time, place and purpose of said meeting was given, all as required by Article 6252 -17, Vernon's Texas Civil Statutes, as amended. PASSED AND APPROVED this 26th day of November, 1985, ATTEST: City Clerk CITY OF BAYTOWN, TEXAS (SEAL) 7�� -arl- ayor CITY OF BAYTOWN, TEXAS -15- 51126 -1p EXHIBIT "A" Original Principal Amount Issue Date Amount Outstanding Harris County 12 -1 -56 $ 475,000 $ 100,000 WC &ID #58 WW & SSS & DR Imp Comb Rev & U/L Tax Bonds, Series 1956 Harris County 3 -1 -61 350,000 126,000 FWSD #8 WW & SS U/L Tax Bonds, Series 1961 Harris County 3 -1 -61 102,000 102,000 FWSD #8 WW & SS U/L Tax Bonds, Series 1961 -A Harris County 4 -1 -61 300,000 235,000 WC &ID #58 WW & SSS & DR Imp Comb Rev & U/L Tax Bonds, Series 1961 General Obligation 2 -15 -66 1,740,000 200,000 Bonds, Series 1966 Waterworks & Sewer 8 -1 -66 784,000 435,000 System Refunding Bonds, Series 1966 General Obligation 5 -15 -67 891,000 100,000 Bonds, Series 1967 General Obligation 8 -15 -68 1,133,000 300,000 Bonds, Series 1968 General Obligation 4 -15 -71 6,500,000 3,650,000 Bonds, Series 1971 General Obligation 4 -15 -72 2,600,000 1,775,000 Bonds, Series 1972 General Obligation 10 -1 -75 2,000,000 1,300,000 Bonds, Series 1975 General Obligation 12 -1 -75 3,000,000 2,150,000 Bonds, Series 1975 -A Permanent Improvement 5 -1 -77 3,665,000 2,850,000 Bonds, Series 1977 Permanent Improvement 6 -1 -79 2,880,000 2,330,000 Bonds, Series 1979 Waterworks & Sanitary 6 -1 -80 1,100,000 700,000 Sewer System Certifi- cates of Obligation, Series 1980 Permanent Improvement 10 -1 -81 2,000,000 1,675,000 Bonds, Series 1981 Permanent Improvement 6 -1 -82 4,800,000 4,375,000 Bonds, Series 1982 Public Improvement 2 -1 -85 6,500,000 6,500,000 Bonds, Series 1985 51126 -1q EXHIBIT "B" ESCROW AGREEMENT THIS ESCROW AGREEMENT (the "Escrow Agreement ") dated for convenience November 26, 1985, but effective on the Escrow Funding Date described herein, is made and entered into by and between The City of Baytown, Texas, a Home Rule City or- ganized and existing under the Constitution and laws of the State of Texas (together with any successor to its duties and functions, the "City "), and First City National Bank of Houston, Houston, Texas, as paying agent for the City's Public Improvement Bonds, Series 1985, and as Escrow Agent under this Agreement (the "Escrow Agent "). WHEREAS, the City has heretofore issued or assumed and there remain outstanding the bonds and certificates of obligation payable in whole or in part from ad valorem taxes which are more fully described in Exhibit "A" attached hereto, in the aggregate principal amount of $28,903,000 (hereinafter referred to collectively as the "Refunded Bonds "); and WHEREAS, Article 717k, Vernon's Texas Civil Statues, as amended, authorizes and empowers the City to issue, sell and deliver refunding bonds payable from ad valorem taxes and to deposit the proceeds of such bonds, together with other available funds or resources, with any place of payment for the Refunded Bonds in an amount which is sufficient to provide for the payment or redemption of the principal of and interest on the Refunded Bonds; and WHEREAS, the City Council of the City has adopted an ordinance authorizing the issuance of the City's General Obligation Refunding Bonds, Series 1985, in the aggregate principal amount of $27,270,000 (the "Refunding Bonds "), for the purpose of providing a portion of the funds necessary to refund the Refunded Bonds, in order to restructure the City's debt service requirements and reduce the City's debt service; and WHEREAS, the City has provided for the transfer to the Escrow Agent pursuant to this Escrow Agreement of certain money held in the City's Interest and Sinking Funds created and maintained pursuant to the ordinances authorizing the issuance of the Refunded Bonds, and for the application of such money, along with the proceeds of the Refunding Bonds and other money lawfully available for such purpose, to provide for the payment or redemption of the Refunded Bonds; and WHEREAS, the City Council of the City has further deter- mined to effectuate the advance refunding of the Refunded Bonds pursuant to this Escrow Agreement, under which provi- sion is made for the safekeeping, investment, reinvestment, administration and disposition of the proceeds of the Re- funding Bonds and such other money made available in connec- tion with such advance refunding, so as to provide firm banking and financial arrangements for the discharge and final payment or redemption of the Refunded Bonds; NOW, THEREFORE, in consideration of the mutual under- takings, promises and agreements herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and in order to secure the full and timely payment of the principal of and the interest 51126 -1r on the Refunded Bonds, the City and the Escrow Agent contract and agree as follows: ARTICLE I DEFINITIONS AND INTERPRETATIONS Section 1.01. Definitions. Unless otherwise expressly provided or unless the context clearly requires otherwise, the following terms shall have the respective meanings specified below for all purposes of this Escrow Agreement: "Book Entry Securities" shall mean the United States Treasury Obligations, State and Local Government Series, initially purchased with the proceeds of the Refunding Bonds, all as more fully described in Schedule _ of the Report. "City" shall mean The City of Baytown, Texas, and any successor to its duties and functions. "Code" shall mean the Internal Revenue Code of 1954, as amended, and the regulations promulgated thereunder. "Escrow Agent" shall mean First City National Bank of Houston, Houston, Texas, in its capacity as escrow agent hereunder, and any successor or assign in such capacity. "Escrow Agreement" shall mean this escrow agreement as it may be amended or supplemented from time to time. "Escrow Fund" shall mean 3.01 of this Escrow Agreement Escrow Agent pursuant to the Agreement. the fund created in Section to be administered by the provisions of this Escrow "Escrow Funding Date" shall mean the date on which the City deposits with the Escrow Agent the cash and Escrowed Securities described in Section 2.01. "Escrowed Securities" shall mean, collectively, the Book Entry Securities and the Open Market Securities, together with all reinvestments of the proceeds thereof as contem- plated and required by the provisions of this Escrow Agree- ment and the Report. "Open Market Securities" shall mean the United States Treasury obligations to be purchased in the open market with funds other than proceeds of the Refunding Bonds, as more fully described in Schedule — of the Report. "Paying Agents for the Refunded Bonds" shall mean, collectively: 1. The Treasurer of the State of Texas for the following: A. Harris County FWSD #8 Waterworks and Sewer System Unlimited Tax Bonds, Series 1961; and B. Harris County FWSD #8 Waterworks and Sewer System System Unlimited Tax Bonds, Series 1961 -A. 2. First City National Bank of Houston, Houston, Texas, for the following: -2- A. Harris County WC &ID Sanitary Sewer and Combination Revenue Series 1956; 51126 -1s #58 Waterworks and Drainage Improvement and Unlimited Tax Bonds, B. Harris County WC &ID #58 Waterworks and Sanitary Sewer and Drainage Improvement Combination Revenue and Unlimited Tax Bonds, Series 1961; and C. City of Baytown Public Improvement Bonds, Series 1985. 3. Citizens Bank and Trust Co. of Baytown, Baytown, Texas, for all other Refunded Bonds. "Refunded Bond Ordinances" shall mean the ordinances, resolutions, and orders authorizing the issuance, sale and delivery of the Refunded Bonds. "Refunded Bonds" shall mean, collectively, the bonds and certificates of obligation described in Exhibit "A ". "Refunding Bond Ordinance" shall mean the City's Ordi- nance adopted November 26, 1985, authorizing the issuance, sale and delivery of the Refunding Bonds. "Refunding Bonds" shall mean the City's General Obliga- tion Refunding Bonds, Series 1985, dated December 1, 1985, in the initial aggregate principal amount of $27,275,000. "Report" shall mean the verification report prepared by Peat, Marwick, Mitchell & Co. relating to the advance refunding of the Refunded Bonds, a copy of which is attached hereto as Exhibit "B ". Section 1.02. Interpretations. The titles and headings of the articles and sections of this Escrow Agreement have been inserted for convenience of reference only and are not to be considered a part hereof and shall not in any way modify or restrict the terms hereof. This Escrow Agreement and all of the terms and provisions hereof shall be liberally construed to effectuate the purposes set forth herein and to achieve the intended purpose of providing for the refunding of the Refunded Bonds in accordance with applicable law. ARTICLE II DEPOSIT OF FUNDS AND ESCROWED SECURITIES Section 2.01. Deposits with Escrow Agent; Acquisition of Escrowed Securities. On the Escrow Funding Date the City will deposit, or cause to be deposited, with the Escrow Agent the following: (a) Book Entry Securities in the principal amount of $ , purchased with a portion of the proceeds of the Refunding Bonds; (b) Open Market Securities in the principal amount of $ , purchased with funds other than proceeds of the Refunding Bonds (or the equivalent in cash or United States Treasury Bills); and (c) A beginning cash balance of $ -3- 51126 -1t ARTICLE III CREATION AND OPERATION OF ESCROW FUND Section 3.01. Escrow Fund. On the Escrow Funding Date the Escrow Agent will create on its books a special fund and irrevocable escrow to be known as The City of Baytown Series 1985 Escrow Fund, into which will be deposited the cash and Escrowed Securities described in Section 2.01. The Escrowed Securities, all proceeds therefrom and all cash balances from time to time on deposit in the Escrow Fund shall be the property of the Escrow Fund, and shall be applied only in strict conformity with the terms and conditions hereof. The Escrowed Securities, all proceeds therefrom and all cash balances from time to time on deposit in the Escrow Fund are hereby irrevocably pledged to the payment of the principal of and interest on the Refunded Bonds, which payment shall be made by timely transfers to the Paying Agents for the Re- funded Bonds of such amounts at such times as are provided in Section 3.02 hereof provided, however, that nothing contained in this Section 3.01 shall prohibit the transfer to the City of any income or increment earned from the reinvestment of the proceeds of Open Market Securities, as provided in Sec- tion 5.02 of this Escrow Agreement. When the final transfers have been made to the Paying Agents for the Refunded Bonds for the payment of such principal of 'and interest on the Refunded Bonds, any balance then remaining in the Escrow Fund shall be transferred to the City, and the Escrow Agent shall thereupon be discharged from any further duties hereunder. Section 3.02. Pa ent of Princi al of and Interest on Refunded Bonds. (a) The Escrow Agent is hereby irrevocably instructed to transfer to the Paying Agents for the Refunded Bonds from the cash balance from time to time on deposit in the Escrow Fund the amounts required to pay the principal of and interest on the Refunded Bonds as the same become due and payable, all as provided on Schedule _ of the Report. (b) Money transferred to and held by the Paying Agents for the Refunded Bonds in accordance with the provisions hereof shall be held by the Paying Agents for the Refunded Bonds as a separate trust fund for the account of the respec- tive holders of the Refunded Bonds in connection with which such money is held; provided, however, that money so held remaining unclaimed by the owners of such Refunded Bonds for four (4) years after the dates on which payment thereon was due, payable and available for payment shall be paid to the City to be used for any lawful purpose. Thereafter, neither the City, the Escrow Agent, the Paying Agents for the Re- funded Bonds nor any other person shall be liable or respon- sible to any holders of such Refunded Bonds for any further payment of such unclaimed money or on account of any such Refunded Bonds. (c) Except as provided in Article IV hereof, the City hereby covenants and agrees that it will not exercise any right that it may have to redeem any of the Refunded Bonds prior to their scheduled maturities. Section 3.03. Sufficiency of Escrow Fund. The City represents (based solely upon the Report) that the successive receipts of the principal of and interest on the Escrowed Securities will assure that the cash balance on deposit from time to time in the Escrow Fund will be at all times suffi- cient to provide money for transfer to the Paying Agents for -4- 51126 -1u the Refunded Bonds at the times and in the amounts required to pay the interest on the Refunded Bonds as such interest comes due and to pay the principal of the Refunded Bonds as the Refunded Bonds mature or are redeemed. Section 3.04. Escrow Fund. The Escrow Agent at all times shall hold the Escrow Fund, the Escrowed Securities and all other assets of the Escrow Fund wholly segregated from all other funds and securities on deposit with the Escrow Agent; it shall never allow the Escrowed Securities or any other assets of the Escrow Fund to be commingled with any other funds or securities of the Escrow Agent; and it shall hold and dispose of the assets of the Escrow Fund only as set forth herein. The Escrowed Securities and other assets of the Escrow Fund always shall be maintained by the Escrow Agent for the benefit of the holders of the Refunded Bonds; and a special account therefor evidencing such fact shall be maintained at all times on the books of the Escrow Agent. The holders of the Refunded Bonds shall be entitled to the same preferred claim and first lien upon the Escrowed Secu- rities, the proceeds thereof and all other assets of the Escrow Fund as are enjoyed by other beneficiaries of similar accounts. The amounts received by the Escrow Agent under this Escrow Agreement shall not be considered as a banking deposit by the City, and the Escrow Agent shall have no right or title with respect thereto except as escrow agent under the terms hereof. The amounts received by the Escrow Agent hereunder shall not be subject to warrants, drafts or checks drawn by the City. Section 3.05. Security for Cash Balances. Cash bal- ances from time to time on deposit in the Escrow Fund, to the extent not insured by the Federal Deposit Insurance Corpora- tion or its successor, shall be continuously secured by a pledge of direct obligations of, or obligations uncondition- ally guaranteed by, the United States of America, having a market value at least equal to such cash balances. ARTICLE IV REDEMPTION OF CERTAIN REFUNDED BONDS PRIOR TO MATURITY Section 4.01. optional Redem tion of Certain Refunded Bonds. The City has irrevocably exercised its option to call the bonds set forth below for redemption prior to maturity on the dates indicated. Such optional redemption shall be carried out in accordance with the ordinances authorizing the issuance of such bonds. The Escrow Agent is hereby au- thorized to provide funds therefor as set forth in Section 3.02(a) hereof. Bonds To Be Redeemed Redemption Date Permanent Improvement Bonds, Series 1981 Maturities 1991 through 1994 Permanent Improvement Bonds, Series 1982 Maturities 1992 through 1996 Public Improvement Bonds, Series 1985 Maturities 1996 through 1998 -5- February 1, 1990 February 1, 1991 February 1, 1995 51126 -1v ARTICLE V LIMITATION ON INVESTMENTS Section 5.01. General. Except as herein otherwise expressly provided, the Escrow Agent shall not have any power or duty to invest any money held hereunder; or to make sub- stitutions of the Escrowed Securities; or to sell, transfer or otherwise dispose of the Escrowed Securities. Section 5.02. Reinvestment of Open Market Securities. At the written request of the City, the Escrow Agent is hereby authorized and directed to reinvest the proceeds of the Open Market Securities, including interest received and maturing principal, in direct obligations of the United States of America maturing no later than the date on which the proceeds are needed for transfer to the Paying Agents for the Refunded Bonds as contemplated by the Report. Any income or increment earned from such reinvestment which is not re- quired according to the schedules contained in the Report for the payment of the Refunded Bonds (that is any amount which on any payment date, after making all required transfers to the Paying Agents for the Refunded Bonds, is in excess of the amount shown in Schedule of the Report as the ending balance for such date) shall be transferred to the City. Section 5.03. Reinvestment of Proceeds of Book Entry Securities. The Escrow Agent is hereby directed to reinvest the proceeds of the Book Entry Securities at the times, in the amounts, bearing interest at the rates, and maturing on the dates, all as set out on of the Report. Section 5.04. Substitution of Securities. At the written request of the City, and upon compliance with the conditions hereinafter stated, the Escrow Agent shall sell, transfer, otherwise dispose of or request the redemption of all or any portion of the Escrowed Securities and apply the proceeds therefrom to purchase Refunded Bonds or direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America and which do not permit the redemption thereof at the option of the obligor. Any such transaction may be effected by the Escrow Agent only if (1) the Escrow Agent shall have received a written opinion from a recognized firm of certified public accountants that such transaction will not cause the amount of money and securities in the Escrow Fund to be reduced below an amount which will be sufficient, when added to the interest to accrue thereon, to provide for the payment of principal and interest on the remaining Refunded Bonds as they become due, and (2) the Escrow Agent shall have received the unqualified written legal opinion of nationally recognized bond counsel or tax counsel acceptable to the City and the Escrow Agent to the effect that such transaction will not cause any of the Refunding Bonds to be an "arbitrage bond" within the meaning of Section 103(c) of the Code. ARTICLE VI RECORDS AND REPORTS Section 6.01. Records. The Escrow Agent shall keep books of record and account in which complete and correct entries shall be made of all transactions relating to the receipts, disbursements, allocations and application of the am 51126 -1w money and Escrowed Securities deposited to the Escrow Fund and all proceeds thereof, and such books shall be available for inspection at reasonable hours and under reasonable conditions by the City and the holders of the Refunded Bonds. Section 6.02. Reports. For the period beginning on the Escrow Funding Date and ending on February 1, 1987, and for each twelve (12) month period thereafter while this Agreement remains in effect, the Escrow Agent shall prepare and send to the City, at the City's request, within thirty (30) days following the end of such period a written report summarizing all transactions relating to the Escrow Fund during such period, including, without limitation, credits to the Escrow Fund as a result of interest payments on or maturities of the Escrowed Securities and transfers from the Escrow Fund to the Paying Agents for the Refunded Bonds or otherwise, together with a detailed statement of all Escrowed Securities and the cash balance on deposit in the Escrow Fund as of the end of such period. Section 6.03. Notification. The Escrow Agent shall notify the City immediately if at any time during the term of this agreement it determines that there is insufficient cash and Escrowed Securities in the Escrow Fund to provide for the transfer to the Paying Agents for the Refunded Bonds for timely payment of all interest on and principal of the Refunded Bonds. ARTICLE VII CONCERNING THE ESCROW AGENT Section 7.01. Representations. The Escrow Agent hereby represents that it has all necessary power and authority to enter into this Escrow Agreement and undertake the obliga- tions and responsibilities imposed upon it herein, and that it will carry out all of its obligations hereunder. Section 7.02. Limitation on Liability. The Escrow Agent shall not be liable for any action taken or neglected to be taken in good faith in the exercise of reasonable care and believed to be within the discretion or power conferred by this Escrow Agreement, nor shall it be responsible for the consequences of any error of judgment; and it shall not be answerable except for its own neglect or default, nor for any loss unless the same shall have been through their negligence or want of good faith. The liability of the Escrow Agent to transfer funds to the Paying Agents for the Refunded Bonds for the payments of the principal of and interest on the Refunded Bonds shall be limited to the proceeds of the Escrowed Securities and the cash balances from time to time on deposit in the Escrow Fund. Notwithstanding any provision contained herein to the contrary, the Escrow Agent shall have no liability whatsoever for the insufficiency of funds from time to time in the Escrow Fund or any failure of the obligor of the Escrowed Securities to make timely payment thereon, except for the obligation to notify the City promptly of any such occur- rence. The recitals herein and in the proceedings authorizing the Refunding Bonds shall be taken as the statements of the City and shall not be considered as made by, or imposing any obligation or liability upon, the Escrow Agent. In its -7- 51125 -1x capacity as Escrow Agent, it is agreed that the Escrow Agent need look only to the terms and provisions of this Escrow Agreement. The Escrow Agent makes no representation as to the value, condition or sufficiency of the Escrow Fund, or any part thereof, or as to the title of the City thereto, or as to the security afforded thereby or hereby, and the Escrow Agent shall incur no liability or responsibility with respect to any of such matters. It is the intention of the City and the Escrow agent that the Escrow Agent shall never be required to use or advance its own funds or otherwise incur personal financial liability in the performance of any of its duties or the exercise of any of its rights and powers hereunder. Unless it is specifically provided otherwise herein, the Escrow Agent has no duty to determine or inquire into the happening or occurrence of any event or contingency or the performance or failure of performance of the City with re- spect to arrangements or contracts with others, with the Escrow Agent's sole duty hereunder being to safeguard the Escrow Fund and to dispose of and deliver the same in accor- dance with this Escrow Agreement. If, however, the Escrow Agent is called upon by the terms of this Escrow Agreement to determine the occurrence of any event or contingency, the Escrow Agent shall be obligated, in making such determina- tion, only to exercise reasonable care and diligence, and in event of error in making such determination the Escrow Agent shall be liable only for its own misconduct or its negli- gence. In determining the occurrence of any such event or contingency the Escrow Agent may request from the City or any other person such reasonable additional evidence as the Escrow Agent in its discretion may deem necessary to deter- mine any fact relating to the occurrence of such event or contingency, and in this connection may make inquiries of, and consult with the City, among others, at any time. Section 7.03. Compensation. (a) On the Escrow Funding Date the City will pay the Escrow Agent, as a fee for per- forming the services hereunder and for all expenses incurred or to be incurred by the Escrow Agent in the administration of this Escrow Agreement, and for its services in its capa- city as a Paying Agent for the Refunded Bonds, the sum of $ If the Escrow Agent is requested to perform any extraordinary services hereunder, the City hereby agrees to pay reasonable fees to the Escrow Agent for such extraordi- nary services and to reimburse the Escrow Agent for all expenses incurred by the Escrow Agent in performing such extraordinary services. It is expressly provided that the Escrow Agent shall look only to the City for the payment of such additional fees and reimbursement of such additional expenses. The Escrow Agent hereby agrees that in no event shall it ever assert any claim or lien against the Escrow Fund for any fees for its services, whether regular, addi- tional or extraordinary, as Escrow Agent, or in any other capacity, or for reimbursement for any of its expenses. Section 7.04. Successor Escrow Agents. If it any time the Escrow Agent or its legal successor or successors should cease to be the Escrow Agent hereunder, a vacancy shall forthwith exist hereunder in the office of the Escrow Agent. Any successor Escrow Agent appointed by the City shall succeed, without further act, to all the rights, immunities, 51126 -1y powers and trusts of the predecessor Escrow Agent hereunder. Upon the request of any such successor Escrow Agent, the City shall execute any and all instruments in writing for more fully and certainly vesting in and confirming to such successor Escrow Agent all such immunities, rights, powers and duties. The Escrow Agent shall pay over to its successor Escrow Agent a proportional part of the Escrow Agent's fee hereunder equal to the portion of such fee attributable to duties to be performed after the date of succession. ARTICLE VIII MISCELLANEOUS Section 8.01. Notices. Any notice, authorization, request, or demand required or permitted to be given here- under shall be in writing and shall be deemed to have been duly given when mailed by registered or certified mail, postage prepaid addressed as follows: To the Escrow Agent: First City National Bank of Houston Post Office Box 809 Houston, Texas 77001 Attention: Corporate Trust Department To the City: The City of Baytown, Texas Post Office Box 424 Baytown, Texas 77520 Attention: Mayor The United States Post Office registered or certified mail receipt showing delivery of the aforesaid shall be conclusive evidence of the date and fact of delivery. Any party hereto may change the address to which notices are to be delivered by giving to the other parties not less than ten days prior notice thereof. Section 8.02. Termination of Escrow Agent's _Obliga- tions. Upon the taking by the Escrow Agent of all the actions as described herein, the Escrow Agent shall have no further obligations or responsibilities hereunder to the City, the holders of the Refunded Bonds or to any other person or persons in connection with this Escrow Agreement. Section 8.03. Binding Agreement. This Escrow Agreement shall be binding upon the City, and the Escrow Agent and their respective successors and legal representatives, and shall inure solely to the benefit of the holders of the Refunded Bonds, the City, the Escrow Agent and their respec- tive successors and legal representatives. Section 8.04. Severability. In case any one or more of the provisions contained in this Escrow Agreement shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Escrow Agree- ment, but this Escrow Agreement shall be construed as if such invalid or illegal or unenforceable provision had never been contained herein. cm 51126 -1z Section 8.05. Governing Law. This Escrow Agreement shall be governed exclusively by the provisions hereof and by the applicable laws of the State of Texas. Section 8.06. Time of Essence. Time shall be of the essence in the performance of obligations from time to time imposed upon the Escrow Agent by this Escrow Agreement. Executed as of November 26, 1985, but effective as set forth herein. ATTEST: City Clerk (SEAL) ATTEST: Assistant Cashier (SEAL) THE CITY OF BAYTOWN, TEXAS Mayor FIRST CITY NATIONAL BANK OF HOUSTON, as Escrow Agent and Paying Agent By Vice President and Trust Officer -10- 51126 -1aa EXHIBIT "A" Original Principal Amount Issue Date Amount Outstanding Harris County 12 -1 -56 $ 475,000 $ 100,000 WC &ID #58 WW & SSS & DR Imp Comb Rev & U/L Tax Bonds, Series 1956 Harris County 3 -1 -61 350,000 126,000 FWSD #8 WW & SS U/L Tax Bonds, Series 1961 Harris County 3 -1 -61 102,000 102,000 FWSD #8 WW & SS U/L Tax Bonds, Series 1961 -A Harris County 4 -1 -61 300,000 235,000 WC &ID #58 WW & SSS & DR Imp Comb Rev & U/L Tax Bonds, Series 1961 General Obligation 2- 15-66 1,740,000 200,000 Bonds, Series 1966 Waterworks & Sewer 8 -1 -66 784,000 435,000 System Refunding Bonds, Series 1966 General Obligation 5 -15 -67 891,000 100,000 Bonds, Series 1967 General Obligation 8 -15 -68 1,133,000 300,000 Bonds, Series 1968 General Obligation 4 -15 -71 6,500,000 3,650,000 Bonds, Series 1971 General Obligation 4 -15 -72 2,600,000 1,775,000 Bonds, Series 1972 General Obligation 10 -1 -75 2,000,000 1,300,000 Bonds, Series 1975 General Obligation 12 -1 -75 3,000,000 2,150,000 Bonds, Series 1975 -A Permanent Improvement 5 -1 -77 3,665,000 2,850,000 Bonds, Series 1977 Permanent Improvement 6 -1 -79 2,880,000 2,330,000 Bonds, Series 1979 Waterworks & Sanitary 6 -1 -80 1,100,000 700,000 Sewer System Certifi- cates of Obligation, Series 1980 Permanent Improvement 10 -1--81 2,000,000 1,675,000 Bonds, Series 1981 Permanent Improvement 6 -1 -82 4,800,000 4,375,000 Bonds, Series 1982 Public Improvement 2 -1 -85 6,500,000 6,500,000 Bonds, Series 1985 51126 -2 CERTIFICATE FOR ORDINANCE THE STATE OF TEXAS § COUNTIES OF HARRIS AND CHAMBERS § CITY OF BAYTOWN § We, the undersigned officers of the CITY OF BAYTOWN, TEXAS (the "City "), hereby certify as follows: 1. The City Council of the City convened in special meeting on the 26th day of November, 1985, at the regular meeting place thereof, within the City, and the roll was called of the duly constituted offi- cers and members of the City Council and the City Clerk, to -wit: Emmett 0. Hutto Mayor Perry M. Simmons Councilman Roy L. Fuller Councilman Fred T. Philips Councilman Jimmy Johnson Councilman Gerald E. Dickens Councilman Ronald G. Embry Councilman Eileen P. Hall City Clerk and all of said persons were present, except the following absentees: Gerald Dickens , thus constituting a quorum. Whereupon, among other business, the following was transacted at said meeting: a written ORDINANCE AUTHORIZING THE ISSUANCE OF $250,000 CITY OF BAYTOWN, TEXAS, CERTIFICATES OF OBLIGATION, SERIES 1985 (the "Ordinance ") was duly introduced for the consideration of the City Council and read in full. It was then duly moved and seconded that the Ordinance be adopted; and, after due discussion, said motion, carrying with it the adoption of the Ordinance, prevailed and carried by the following vote: AYES: All members of the City Council shown present above voted "Aye ". NAYS: None. 2. That a true, full and correct copy of the Ordinance adopted at the meeting described in the above and foregoing paragraph is attached to and follows this certificate; that the Ordinance has been duly recorded in the City Council's minutes of said meeting; that the above and foregoing paragraph is a true, full and correct excerpt from the City Council's minutes of said meeting pertaining to the adoption of the Ordinance; that the persons named in the above and foregoing paragraph are the duly chosen, qualified and acting officers and members of the City Council as indicated therein; that each of the officers and members of the City Council was duly and sufficiently notified officially and personally, in advance, of the date, hour, place and subject of the aforesaid meeting, and that the Ordinance would be introduced and considered for adoption at said meeting, and each of said officers and members consented, in advance, to the holding of such meeting for such purpose; that said meeting was open to the public as required by law; and that public notice of the date, hour, place and subject of said meeting was given as required by Vernon's Article 6252 -17, as amended. SIGNED AND SEALED this 26th day of November, 1985. 7 . City Cleik Mayor (SEAL)