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Ordinance No. 5,574ORDINANCE NO. 5574 • ORDINANCE AUTHORIZING THE ISSUANCE OF $4,800,000 CITY OF BAYTOWN, TEXAS, COMBINATION TAX AND REVENUE CERTIFICATES OF OBLIGATION, SERIES 1990 THE STATE OF TEXAS § COUNTIES OF HARRIS AND CHAMBERS § CITY OF BAYTOWN § WHEREAS, the City Council of the CITY OF BAYTOWN, TEXAS (the "City ") , authorized the publication of a notice of intention to issue certificates of obligation to the effect that the City Council would meet on June 28, 1990, to adopt an ordinance and take such other action as may be deemed necessary to authorize the issuance of certificates of obligation payable from City ad valorem taxes and a pledge of revenues of the City's water and sewer system, for the purpose of evidencing the indebtedness of the City for all or any part of the cost of the construction of water and sewer system improvements, street improvements, library improve- ments, and the acquisition of land for park purposes, and the cost of professional services incil -red in connection therewith; and WHEREAS, such notice was published at the times and in the manner required by the Constitution and laws of the State of Texas and of the United States of America, respectively, particularly Sections 271.041, et sec, Texas Local Government Code as amended; and WHEREAS, no petition or other request has been filed with or presented to any official of the City requesting that any of the proceedings authorizing such certificates of obligation be sub- mitted to a referendum or other election; THEFEFORE, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF BAYTOWN: 1. Definitions. Throughout this ordinance the following terms and expressions as used herein shall have the meanings set forth below: The term "Business Day" shall mean any day which is not a Saturday, Sunday, or a day on which the Registrar is authorized by law or executive order to close, or a legal holiday. The term "Certificates" or "Series 1990 Certificates" shall mean the Series 1990 Certificates authorized in this Ordinance, unless the context clearly indicates otherwise. The term "City" shall mean the City of- Baytown, Texas. • • The term "Code" shall mean the Internal Revenue Code of 1986, as amended. The term "Interest and Sinking Fund" shall mean the interest and sinking fund established by the City pursuant to Section 18 of this Ordinance. The term "Interest Payment Date ", when used in connection with any Certificate, shall mean February 1, 1991, and each August 1 and February 1 thereafter until maturity or earlier redemption. The term "Ordinance" as used herein and in the Certificates shall mean this ordinance authorizing the Certificates. The term "Owner" shall mean any person who shall be the registered owner of any outstanding Certificate. • The term "Paying Agent" shall mean the Registrar. The term "Record Date" shall mean, for any Interest Payment Date, the fifteenth (15th) calendar day of the month next preceding such Interest Payment Date. The term "Register" shall mean the books of registration kept by the Registrar in which are maintained the names and addresses of and the principal amounts registered to each Owner. The term "Registrar" shall mean First Interstate Bank of Texas, N.A., Houston, Texas, and its successors in that capacity. 2. Authorization. The Certificates shall be issued in fully registered form, without coupons, in the total authorized aggregate amount of Four Million Eight Hundred Thousand Dollars ($4,800,000) for the purpose of evidencing the indebtedness of the City for all or any part of the cost of the construction of water and sewer system improvements, street improvements, library improvements, and the acquisition of land for park purposes, and the cost of professional services incurred in connection therewith. 3. Designation, Date, and Interest Payment Dates. The Certificates shall be designated as the "CITY OF BAYTOWN, TEXAS, COMBINATION TAX AND REVENUE CERTIFICATES OF OBLIGATION, SERIES 199011, and shall be dated July 15, 1990. The Certificates shall bear interest from the later of July 15, 1990, or the most recent Interest Payment Date to which interest has been paid or duly provided for, calculated on the basis of a 360 day year of twelve 30 day months, interest payable on February 1, 1991, and semi- annually thereafter on August 1 and February 1 of each year until maturity or prior redemption. -2- • 4. Initial Certificates; Numbers and Denominations. The Certificates shall be issued 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 Certificates shall mature, subject to prior redemption in accordance with this Ordinance, on February 1 in each of the years and in the amounts set out in such schedule. Certifi- cates delivered on transfer of or in exchange for other Certifi- cates 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 Certificate or Certificates in lieu of which they are delivered. • Certificate Principal Interest Number Year Amount Rate R- 1 1992 $ 100,000 6.50% R- 2 1993 100,000 6.50% R- 3 1994 100,000 6.50% R- 4 1995 100,000 6.50% R- 5 1996 100,000 6.50% R- 6 1997 100,000 6.60% R- 7 1998 100,000 6.60% R- 8 1999 100,000 6.70% R- 9 2000 1,000,000 7.75% R -10 2001 1,0001000 6.75% R -11 2002 1,000,000 6.80% R -12 2003 1,000,000 6.90% 5. Execution of Certificates; Seal. The Certificates shall be signed by the Mayor of the City and countersigned by the City Clerk of the City, 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 Certificates shall have the same effect as if each of the Certifi- cates had been signed manually and in person by each of said officers, and such facsimile seal on the Certificates shall have the same effect as if the official seal of the City had been manually impressed upon each of the Certificates. If any officer of the City whose manual or facsimile signature shall appear on the Certificates shall cease to be such officer before the authen- tication of such Certificates or before the delivery of such Certificates, such manual or facsimile signature shall nevertheless be valid and sufficient for all purposes as if such officer had remained in such office. 6. Approval by Attorney General; Registration by Comp- troller. The Certificates to be initially issued shall be deliv- ered to the Attorney General of Texas for approval and shall be -3- • registered by the Comptroller of Public Accounts of the State of Texas. The manually executed registration certificate of the Comptroller of Public Accounts substantially in the form provided in Section 16 of this Order shall be attached or affixed to the Certificates to be initially issued. • 7. Authentication. Except for the Certificates to be initially issued, which need not be authenticated by the Registrar, only Certificates which bear thereon a certificate of authentica- tion, substantially in the form provided in Section 16 of this Ordinance, manually executed by an authorized representative of the Registrar, 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 Certificates so authenticated were delivered by the Registrar hereunder. 8. Payment of Principal and Interest. The Registrar is hereby appointed as the paying agent for the Certificates. The principal of the Certificates 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 become due and payable, whether at maturity or by prior redemption, at the principal corporate trust office of the Registrar. The interest on each Certificate shall be payable by check payable on the Interest Payment Date, mailed by the Registrar on or before each Interest Payment Date to the Owner of record as of the Record Date, to the address of such Owner as shown on the Register, or by such other method acceptable to the Registrar, requested by, and at the risk and expense of, the Owner. Any accrued interest payable at maturity or earlier redemp- tion shall be paid upon presentation and surrender of the Certificate to which such interest appertains. If the date for payment of the principal of or interest on any Certificate is not a Business Day, then the date for such payment shall be the next succeeding Business Day, with the same force and effect as if made on the original date payment was due. 9. Successor Registrars. The City covenants that at all times while any Certificates are outstanding it will provide a commercial bank or trust company organized under the laws of the State of Texas, or other entity duly qualified and legally authorized to act as Registrar for the Certificates. The City reserves the right to change the Registrar on not less than 60 days written notice to the Registrar, 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 Certificates. Promptly upon the appointment of any successor Registrar, the previous -4- . Registrar shall deliver the Register or copies thereof to the new Registrar, and the new Registrar shall notify each Owner, by United States mail, first class postage prepaid, of such change and of the address of the new Registrar. Each Registrar hereunder, by acting in that capacity, shall be deemed to have agreed to the provisions of this Section. • 10. Special Record Date. If interest on any Certificate is not paid on any Interest Payment Date and continues unpaid for thirty (30) days thereafter, the Registrar shall establish a new record date for the payment of such interest, to be known as a Special Record Date. The 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 (15) 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 United States mail, first class postage prepaid, not later than five (5) days prior to the Special Record Date, to each affected Owner of record as of the close of business on the day prior to the mailing of such notice. 11. Ownership; Unclaimed Principal and Interest. The City, the Registrar and any other person may treat the person in whose name any Certificate is registered as the absolute Owner of such Certificate for the purpose of making payment of principal or interest on such Certificate, and for all other purposes, whether or not such Certificate is overdue, and neither the City nor the Registrar shall be bound by any notice or knowledge to the con- trary. All payments made to the person deemed to be the Owner of any Certificate in accordance with this Section 11 shall be valid and effectual and shall discharge the liability of the City and the Registrar upon such Certificate to the extent of the sums paid. Amounts held by the Registrar which represent principal of and interest on the Certificates remaining unclaimed by the Owner after the expiration of three years from the date such amounts have become due and payable shall be reported and disposed of by the Registrar in accordance with the applicable provisions of Texas law including, to the extent applicable, Title 6 of the Texas Property Code, as amended. 12. Registration, Transfer. and Exchange. So long as any Certificates remain outstanding, the Registrar shall keep the Register at its principal corporate trust office and, subject to such reasonable regulations as it may prescribe, the Registrar shall provide for the registration and transfer of Certificates in accordance with the terms of this Ordinance. Each Certificate shall be transferable only upon the presenta- tion and surrender thereof at the principal corporate trust office -5- 0 of the 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 Registrar. Upon due presentation of any Certificate for transfer, the Registrar shall authenticate and deliver in exchange therefor, within three (3) Business Days after such presentation, a new Certificate or Certificates, registered in the name of the transferee or trans- ferees, in authorized denominations and of the same maturity and aggregate principal amount and bearing interest at the same rate as the Certificate or Certificates so presented. All Certificates shall be exchangeable upon presentation and surrender thereof at the principal corporate trust office of the Registrar for a Certificate or Certificates of the same maturity and interest rate and in any authorized denomination, in an aggregate principal amount equal to the unpaid principal amount of the Certificate or Certificates presented for exchange. The Registrar shall be and is hereby authorized to authenticate and deliver exchange Certificates in accordance with the provisions of this Section 12. Each Certificate delivered in accordance with this Section 12 shall be entitled to the benefits and security of this Ordinance to the same extent as the Certificate or certifi- cates in lieu of which such Certificate is delivered. The City or the Registrar may require the Owner of any Certificate 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 Certificate. Any fee or charge of the Registrar for such transfer or exchange shall be paid by the City. 13. Mutilated Lost or Stolen Certificates. Upon the presentation and surrender to the Registrar of a mutilated Certifi- cate, the Registrar shall authenticate and deliver in exchange therefor a replacement Certificate of like maturity, interest rate and principal amount, bearing a number not contemporaneously outstanding. If any Certificate 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 Certificate has been acquired by a bona fide purchaser, shall authorize and the Registrar shall authenticate and deliver a replacement Certificate of like maturity, interest rate and principal amount, bearing a number not contemporaneously outstanding. The City or the Registrar may require the Owner of a mutilated Certificate 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 therewith, including the fees and expenses of the Registrar. 0 The City or the Registrar may require the Owner of a lost, apparently destroyed or wrongfully taken Certificate, before any replacement Certificate is issued, to: (1) furnish to the City and the Registrar satisfac- tory evidence of the ownership of and the circumstances of the loss, destruction or theft of such Certificate; (2) furnish such security or indemnity as may be required by the 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 Registrar and any tax or other governmental charge that may be imposed; and (4) meet any other reasonable requirements of the City and the Registrar. If, after the delivery of such replacement Certificate, a bona fide purchaser of the original Certificate in lieu of which such replacement Certificate was issued presents for payment such original Certificate, the City and the Registrar shall be entitled to recover such replacement Certificate 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 Registrar in connection therewith. If any such mutilated, lost, apparently destroyed or wrong- fully taken Certificate has become or is about to become due and payable, the City in its discretion may, instead of issuing a replacement Certificate, authorize the Registrar to pay such Certificate. Each replacement Certificate delivered in accordance with this Section 13 shall be entitled to the benefits and security of this Ordinance to the same extent as the Certificate or Certificates in lieu of which such replacement Certificate is delivered. 14. Cancellation of Certificates. All Certificates paid in accordance with this Ordinance, and all Certificates in lieu of which exchange Certificates or replacement Certificates are authenticated and delivered in accordance herewith, shall be cancelled and destroyed upon the making of proper records regarding such payment. The Registrar shall furnish the City with appro- priate certificates of destruction of such Certificates. o►m • 15. Optional Redemption. The City reserves the right, at its option, to redeem the Certificates prior to maturity, on February 1, 2000, or any date thereafter, at par plus accrued interest on the amounts called for redemption to the date fixed for redemption. If less than all of the Certificates are to be redeemed, the City shall determine the Certificates to be redeemed. Principal amounts may be redeemed only in integral multiples of $5,000. If a Certificate subject to redemption is in a denomi- nation larger than $5,000, a portion of such Certificate may be redeemed, but only in integral multiples of $5,000. Upon surrender of any Certificate for redemption in part, the Registrar, in accordance with Section 12 hereof, shall authenticate and deliver in exchange therefor a Certificate or Certificates of like maturity and interest rate in an aggregate principal amount equal to the unredeemed portion of the Certificate so surrendered. Notice of any redemption identifying the Certificates to be redeemed in whole or in part shall be given by the Registrar at least thirty days prior to the date fixed for redemption by sending written notice by first class mail, postage prepaid, to the Owner of each Certificate to be redeemed in whole or in part at the address shown on the Register. Such notices shall state the redemption date, the redemption price, the place at which Certifi- cates are to be surrendered for payment and, if less than all Certificates Outstanding are to be redeemed, the numbers of the Certificates or portions thereof to be redeemed. Any notice given as provided in this Section 15 shall be conclusively presumed to have been duly given, whether or not the Owner receives such notice. By the date fixed for redemption, due provision shall be made with the Registrar for payment of the redemption price of the Certificates or portions thereof to be redeemed, plus accrued interest to the date fixed for redemption. When Certificates have been called for redemption in whole or in part and due provision has been made to redeem the same as herein provided, the Certifi- cates 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 Certificate or portion thereof called for redemption shall terminate on the date fixed for redemption. 16. Forms. The form of the Certificates, including the form of the Registrar's Authentication Certificate, the form of Assign- ment, and the form of Registration Certificate of the Comptroller of Public Accounts of the State of Texas which shall be attached or affixed to the Certificates initially issued shall be, respec- tively, substantially as follows, with such additions, deletions and variations as may be necessary or desirable and not prohibited -8- 0 0 by this Ordinance, including any legend regarding bond insurance if such insurance is obtained by the purchaser: NUMBER R- REGISTERED INTEREST RATE: REGISTERED OWNER: 9PJA 0*2A 1W:1 Z8 11WIF (Face of Certificate) UNITED STATES OF AMERICA STATE OF TEXAS COUNTIES OF HARRIS AND CHAMBERS CITY OF BAYTOWN, TEXAS COMBINATION TAX AND REVENUE CERTIFICATE OF OBLIGATION SERIES 1990 MATURITY DATE: ISSUE DATE: July 15, 1989 DENOMINATION REGISTERED CUSIP: 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 Certificate at the principal corporate trust office of First Interstate Bank of Texas, N.A., Houston, Texas, (the "Registrar "), the principal amount identified 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 July 15, 1990, or the most recent interest payment date to which interest has been paid or duly provided for. Interest on this Certificate is payable by check on February 1, 1991, and semiannually thereafter on each August 1 and February 1, mailed to the registered owner as shown on the books of registration kept by the Registrar on the fifteenth (15th) calendar day of the month next preceding each interest payment date, or by such other method, acceptable to the Registrar, requested by, and at the risk and expense of, the registered owner. REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS CERTIFICATE SET FORTH ON THE REVERSE HEREOF, WHICH PROVISIONS SHALL HAVE THE SAME FORCE AND EFFECT AS IF SET FORTH AT THIS PLACE. Q� 0 IN WITNESS WHEREOF, this Certificate has been signed with the manual or facsimile signature of the Mayor of the City and counter- signed with the manual or facsimile signature of the City Clerk of the City, and the official seal of the City has been duly impressed, or placed in facsimile, on this Certificate. (AUTHENTICATION CERTIFICATE) (SEAL) CITY OF BAYTOWN, TEXAS Mayor City Clerk (Back Panel of Certificate) THIS CERTIFICATE is one of a duly authorized issue of certifi- cates of Obligation, aggregating $4,800,000 (the "Certificates "), issued in accordance with the Constitution and laws of the State of Texas, particularly Sections 271.041, et s_eg, Texas Local Government Code, as amended, for the purpose of evidencing the indebtedness of the City for all or any part of the cost of the construction of water and sewer system improvements, street improvements, library improvements, and the acquisition of land for park purposes, and the cost of professional services incurred in connection therewith, and pursuant to an ordinance duly adopted by the City Council of the City (the "Ordinance "), which Ordinance is of record in the official minutes of the City Council. THE CITY RESERVES THE RIGHT to redeem Certificates prior to maturity, in integral multiples of $5,000, on February 1, 2000, or any date thereafter at par plus accrued interest on the principal amounts called for redemption to the date fixed for redemption. Reference is made to the Ordinance for complete details concerning the manner of redeeming the Certificates. 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 Certificate to be redeemed in whole or in part at the address shown on the books of registration kept by the Registrar. When Certificates or portions thereof have been called for redemption, 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 CERTIFICATE is transferable only upon presentation and surrender at the principal corporate trust office of the Registrar, at= • duly endorsed for transfer or accompanied by an assignment duly executed by the registered owner or his authorized representative, subject to the terms and conditions of the Ordinance. • THE CERTIFICATES are exchangeable at the principal corporate trust office of the Registrar for Certificates in the principal amount of $5,000 or any integral multiple thereof, subject to the terms and conditions of the Ordinance. THIS CERTIFICATE shall not be valid or obligatory for any purpose or be entitled to any benefit under the Ordinance unless this Certificate is either (i) registered by the Comptroller of Public Accounts of the State of Texas by registration certificate attached or affixed hereto or (ii) authenticated by the Registrar by due execution of the authentication certificate endorsed hereon. THE REGISTERED OWNER of this Certificate, by acceptance hereof, acknowledges and agrees to be bound by all the terms and conditions of the Ordinance. THE CITY has covenanted in the Ordinance that it will at all times provide a legally qualified registrar for the Certificates and will cause notice of any change of registrar to be mailed to each registered owner. IT IS HEREBY certified, recited and covenanted that this Certificate has been duly and validly issued and delivered; that all acts, conditions and things required or proper to be performed, to exist and to be done precedent to or in the issuance and delivery of this Certificate have been performed, exist and have been done in accordance with law; and that annual ad valorem taxes, within the limits prescribed by law, sufficient to provide for the payment of the interest on and principal of this Certificate, as such interest comes due and such principal matures, have been levied and ordered to be levied against all taxable property in the City. IT IS FURTHER certified, recited and represented that the Net Revenues, in an amount not to exceed $10,000, to be derived from the operation of the City's water and sewer system, after the payment of all operation and maintenance expenses thereof, are pledged to the payment of the principal of and interest on this Certificate and the series of Certificates of which it is a part to the extent that taxes may ever be insufficient or unavailable for said purpose; provided, however, that such pledge of Net Revenues is and shall be junior and subordinate in all respects to the pledge of such Net Revenues to the payment of any obligation of the City, whether authorized heretofore or hereafter, which the City designates as having a pledge senior to the pledge of such Net Revenues to the payment of this Certificate and the series of -11- 0 Certificates of which it is a part, and the City also reserves the right to issue, for any lawful purpose at any time, in one or more installments, bonds, certificates of obligation and other obliga- tions of any kind payable in whole or in part from the Net Revenues of its water and sewer system, secured by a pledge of the Net Revenues of such system that may be prior and superior in right to, on a parity with, or junior and subordinate to the pledge of Net Revenues securing this Certificate and the series of Certificates of which it is a part. Form of Registration Certificate of Comptroller of Public Accounts COMPTROLLER'S REGISTRATION CERTIFICATE: REGISTER NO. I hereby certify that this Certificate has been examined, certified as to validity, and approved by the Attorney General of the State of Texas, and that this Certificate 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 Registrar's Authentication Certificate AUTHENTICATION CERTIFICATE It is hereby certified that this Certificate has been delivered pursuant to the Ordinance described in the text of this Certificate, in exchange for or in replacement of a Certifi- cate, Certificates or a portion of a Certifi- cate or Certificates 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 Interstate Bank of Texas, N.A. Houston, Texas By Authorized Signature Date of Authentication -12- • Form of Assignment ASSIGNMENT 0 For value received, the undersigned hereby sells, assigns, and transfers unto (Please print or type name, address, and zip code of Transferee) (Please insert Social Security or Taxpayer Identification Number of Transferee) the within Certificate and all rights thereunder, and hereby irrevocably constitutes and appoints attorney to transfer said certificate 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 Certifi- cate in every particular, without any alteration, enlargement or change whatsoever. 17. Le,alopinion; Cusiv. The approving opinion of Vinson & Elkins, Houston, Texas, and CUSIP Numbers may be printed on the Certificates, but errors or omissions in the printing of such opinion or such numbers shall have no effect on the validity of the Certificates. 18. Interest and Sinking Fund; Tax Levy. The proceeds from all taxes levied, assessed and collected for and on account of the Certificates authorized by this Ordinance shall be deposited, as collected, in a special fund to be designated "City of Baytown, Texas, Combination Tax and Revenue Certificates of Obligation, Series 1990 Interest and Sinking Fund ". While the Certificates or any part of the principal thereof or interest thereon remain outstanding and unpaid, there is hereby levied and there shall be annually levied, assessed and collected in due time, form and manner, and at the same time other City taxes are levied, assessed and collected, in each year, beginning with the current year, a continuing direct annual ad valorem tax, within the limits prescribed by law, upon all taxable property in the City sufficient to pay the current interest on the Certificates as the same becomes -13- • due, and to provide and maintain a sinking fund adequate to pay the principal of the Certificates as such principal matures, but never less than two percent (2%) of the original principal amount of the Certificates each year, full allowance being made for delinquencies and costs of collection, and such taxes when collected shall be applied to the payment of the interest on and principal of the Certificates and to no other purpose. • 19. Pledge of Revenues. The revenues to be derived from the operation of the City's water and sewer system, after the payment of all operation and maintenance expenses thereof (the "Net Revenues "), in an amount not to exceed $10,000, are hereby pledged to the payment of the principal of and interest on the Certificates as the same come due, to the extent that the taxes mentioned in Section 18 of this Ordinance may ever be insufficient or unavail- able for said purpose; provided, however, that such pledge of the Net Revenues is and shall be junior and subordinate in all respects to the pledge of the Net Revenues to the payment of any obligation of the City, whether authorized heretofore or hereafter, which the City designates as having a pledge senior to the pledge of the Net Revenues to the payment of the Certificates, and the City also reserves the right to issue, for any lawful purpose at any time, in one or more installments, bonds, certificates of obligation and other obligations of any kind payable in whole or in part from the Net Revenues, secured by a pledge of the Net Revenues that may be prior and superior in right to, on a parity with, or junior and subordinate to the pledge of Net Revenues securing this series of Certificates. 20. Further Proceedings. After the Certificates to be initially issued shall have been executed, it shall be the duty of the Mayor of the City to deliver the Certificates to be initially issued and all pertinent records and proceedings to the Attorney General of Texas, for examination and approval. After the Certifi- cates to be initially issued shall 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 Certificates to be initially issued, the Comptroller of Public Accounts (or a deputy lawfully designated in writing to act for the Comptroller) shall manually sign the Comptroller's Registration Certificate prescribed herein to be affixed or attached to the Certificates to be initially issued, and the seal of said Comptroller shall be impressed, or placed in facsimile, thereon. 21. Sale. The Certificates are hereby sold and shall be delivered to NCNB TEXAS - MGR. (herein referred to as the "Purchaser "), at a price of $4,800,000 plus accrued interest to the date of delivery, and the City Council hereby finds and determines -14- that such price is the best reasonably obtainable by the City after advertising for and receiving sealed bids. 22. Books and Records. So long as any of the Certificates are outstanding the City covenants and agrees that it will keep proper books of record and account in which full, true and correct entries will be made of all dealings, activities and transactions relating to the Certificates and the funds created pursuant to this Ordinance, and all books, documents and vouchers relating thereto shall at all reasonable times be made available for inspection upon request of any Owner. 23. Tax Exemption. (a) General Tax Covenant. The City intends that the interest on the Certificates shall be excludable from gross income for purposes of federal income taxation pursuant to sections 103 and 141 through 150 of the Code, and applicable regulations. The City covenants and agrees not to take any action, or knowingly omit to take any action within its control that, if taken or omitted, respectively, would cause the interest on the Certificates to be includable in gross income, as defined in section 61 of the Code, of the owners thereof for purposes of federal income taxation. In particular, the City covenants and agrees to comply with each requirement of this Section 23; provid- ed, however, that the City shall not be required to comply with any particular requirement of this Section 23 if the City has received an opinion of nationally recognized bond counsel ( "Counsel's Opinion ") that such noncompliance will not adversely affect the exclusion from gross income for federal income tax purposes of interest on the Certificates or if the City has received a Counsel's Opinion to the effect that compliance with some other requirement set forth in this Section 23 will satisfy the applicable requirements of the Code, in which case compliance with such other requirement specified in such Counsel's Opinion shall constitute compliance with the corresponding requirement specified in this Section 23. (b) Use of Proceeds. The City covenants and agrees that its use of the Net Proceeds of the Certificates will at all times satisfy the following requirements: (i) The City will limit the amount of original or investment proceeds of the Certificates to be used (other than use as a member of the general public) in the trade or business of any person other than a governmental unit to an amount aggregating no more than ten percent of the Net Proceeds of the Certificates ( "private -use pro- ceeds") . For purposes of this Section, the term "person" includes any individual, corporation, partnership, unincorporated association, or any other entity capable of carrying on a trade or business; and the term "trade -15- ior business" means, with respect to any natural person, any activity regularly carried on for profit and, with respect to persons other than natural persons, any activity other than an activity carried on by a govern- mental unit. Any use of proceeds of the Certificates in any manner contrary to the guidelines set forth in Revenue Procedures 82 -14, 1982 -1 C.B. 459, and 82 -15, 1982 -1 C.B. 460, including any revisions or amendments thereto, shall constitute the use of such proceeds in the trade or business of one who is not a governmental unit; 0 (ii) The City will not permit more than five percent of the Net Proceeds of the Certificates to be used in the trade or business of any person other than a governmen- tal unit if such use is unrelated to the governmental purpose of the Certificates. Further, the amount of private -use proceeds of the Certificates in excess of five percent of the Net Proceeds of the Certificates ( "excess private -use proceeds ") will not exceed the pro- ceeds of the Certificates expended for the governmental purpose of the Certificates to which such excess private -use proceeds relate; (iii) The City will not permit an amount of proceeds of the Certificates exceeding the lesser of (a) $5,000,000 or (b) five percent of the Net Proceeds of the Certificates to be used, directly or indirectly, to finance loans to persons other than governmental units. When used in this Section 23, the term Net Proceeds of the Certifi- cates shall mean the proceeds from the sale of the Certificates, including investment earnings on such proceeds, less accrued interest. (c) No Federal Guaranty. The City covenants and agrees not to take any action, or knowingly omit to take any action within its control, that, if taken or omitted, respectively, would cause the Certificates to be "federally guaranteed" within the meaning of section 149(b) of the Code and applicable regulations thereunder, except as permitted by section 149(b)(3) of the Code and such regulations. (d) Certificates are not Hedge Bonds. The City covenants and agrees that not more than 50 percent of the proceeds of the Certificates will be invested in nonpurpose investments (as defined in section 148(f)(6)(A) of the Code) having a substantially guaranteed yield for four years or more within the meaning of section 149 (g) (3) (A) (ii) of the Code, and the City reasonably expects that at least 85 percent of the spendable proceeds of the Certificates will be used to carry out the governmental purpose of -16- • the Certificates within the three -year period beginning on the date the Certificates are issued. 0 (e) No- Arbitrage Covenant. The City shall certify, through an authorized officer, employee or agent, that based upon all facts and estimates known or reasonably expected to be in existence on the date the Certificates are delivered, the City will reasonably expect that the proceeds of the Certificates will not be used in a manner that would cause the Certificates to be "arbitrage bonds" within the meaning of section 148(a) of the Code and applicable regulations thereunder. Moreover, the City covenants and agrees that it will make such use of the proceeds of the Certificates including interest or other investment income derived from Certifi- cate proceeds, regulate investments of proceeds of the Certificates, and take such other and further action as may be required so that the Certificates will not be "arbitrage bonds" within the meaning of section 148(a) of the Code and applicable regulations thereunder. (f) Arbitrage Rebate. The City expects to qualify for an exception to the requirements of the Code relating to rebate to the United States, because the City will use at least 95% of the Net Proceeds of the Certificates for local governmental activities of the City and expects that the total of all tax - exempt obligations (excluding "private activity" bonds) issued by or attributable to the City during calendar year 1990 will not exceed $5,000,000. If the City does not qualify for such exception, the City will take all necessary steps to comply with the requirement that certain amounts earned by the City on the investment of the "gross proceeds" of the Certificates (within the meaning of section 148 (f) (6) (B) of the Code) , be rebated to the federal government. Specifically, the City will (i) maintain records regarding the investment of the gross proceeds of the Certificates as may be required to calculate the amount earned on the investment of the gross proceeds of the Certificates separately from records of amounts on deposit in the funds and accounts of the City allocable to other obligations of the City or moneys which do not represent gross proceeds of any obligations of the City, (ii) calculate at such times as are required by applicable regulations, the amount earned from the investment of the gross proceeds of the Certificates which is required to be rebated to the federal government, and (iii) pay, not less often than every fifth anniversary date of the delivery of the Certificates and within sixty days following retirement of the Certificates, all amounts required to be rebated to the federal government. (g) Information Reporting. The City covenants and agrees to file or cause to be filed with the Secretary of the Treasury, not later than the 15th day of the second calendar month after the close of the calendar quarter in which the Certificates are issued, -17- • an information statement concerning the Certificates, all under and in accordance with section 149(e) of the Code and applicable regulations thereunder. • 24. Oualified Tax - Exempt Obligations. The City hereby designates the Certificates as "qualified tax - exempt obligations" for purposes of section 265(b) of the Code. In connection there- with, the City represents (a) that the aggregate amount of tax - exempt obligations issued by the City during calendar year 1990, including the Certificates, which have been designated as "qualified tax- exempt obligations" under section 265(b)(3) of the Code does not exceed $10,000,000, and (b) that the reasonably anticipated amount of tax - exempt obligations which will be issued by the City during calendar year 1990, including the Certificates, will not exceed $10,000,000. For purposes of this Section 24, the term "tax- exempt obligation" does not include "private activity bonds" within the meaning of section 141 of the Code, other than "qualified 501(c)(3) bonds" within the meaning of section 145 of the Code. In addition, for purposes of this Section 24, the City includes all governmental units which are aggregated with the City under the Code. 25. Use of Proceeds. Accrued interest on the Certificates will be deposited into the Interest and Sinking Fund. The remain- ing proceeds of sale of the Certificates, together with investment earnings on such proceeds, shall be used for the purposes set out in Section 2 of this Ordinance, with any remainder being deposited into the Interest and Sinking Fund. 26. Official Statement. The City Council of the City ratifies and confirms its prior approval of the form and content of the Official Statement prepared in the initial offering and sale of the Certificates and hereby authorizes the preparation of a supplement or amendment thereto reflecting the terms of the Purchaser's bid and other relevant matters. The use of such Official Statement in the reoffering of the Certificates by the Purchaser is hereby approved and authorized. The proper officials of the City are hereby authorized to execute and deliver a certificate pertaining to such Official Statement as prescribed therein, dated as of the date of payment for and delivery of the Certificates. 27. Registrar. The form of agreement setting forth the duties of the Registrar is hereby approved, and the appropriate officials of the City are hereby authorized to execute such agreement for and on behalf of the City. 28. Open Meeting. The meeting at which this Ordinance was adopted was open to the public, and public notice of the time, -18- 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 28th day of June, 1990. ATTEST: City Clerk CITY OF BAYTOWN, TEXAS (SEAL) 0 St Mayor CITY OF BAYTOWN, TEXAS