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HomeMy WebLinkAbout21-91-Ordinance-Issuance of Utility System Refunding Revenue Bonds, Series 1991-11/18/1991CERTIFICATE FOR ORDINANCE THE STATE OF TEXAS COUNTY OF DENTON CITY OF SANGER We, the undersigned officers of said City, hereby certify as follows: 1. The City Council of said City convened in REGULAR MEETING ON THE 18TH DAY OF NOVEMBER, 1991, at the City Hall, and the roll was called of the duly constituted officers and members of said City Council, to -wit: Nel Armstrong, Mayor Gerald Jenkins, Mayor Pro Tern John Berndt Wendell Thomas Margie C. Braxton Tommy Kincaid Rosalie Garcia, City Secretary and all of said persons were present, except the following absentees: (q A P, qi thus constituting a quorum. Whereupon, am at said Meeting: a written business, the following was transacted ORDINANCE AUTHORIZING THE ISSUANCE OF UTILITY SYSTEM REFUNDING AND IMPROVEMENT REVENUE BONDS, SERIES 1991 was duly introduced for the consideration of said City Council and read in full. It was then duly moved and seconded that said Ordinance be passed; and, after due discussion, said motion carrying with it the passage of said Ordinance, prevailed and carried by the following vote: AYES: All members of said City Council shown present above voted "Aye". NOES: None. CITY SECRETARY ORIGINAL GOP 2. That a true, full and correct copy of the aforesaid Ordinance passed at the Meeting described in the above and foregoing paragraph is attached to and follows this Certificate; that said Ordinance has been duly recorded in said City Council's minutes of said Meeting; that the above and foregoing paragraph is a true, full and correct excerpt from said City Council's minutes of said Meeting pertaining to the passage of said Ordinance; that the persons named in the above and foregoing paragraph are the duly chosen, qualified and acting officers and members of said City Council as indicated therein; that each of the officers and members of said City Council was duly and sufficiently notified officially and personally, in advance, of the time, place and purpose of the aforesaid Meeting, and that said Ordinance would be introduced and considered for passage at said Meeting, and each of said officers and members consented, in advance, to the holding of said Meeting for such purpose, and that said Meeting was open to the public and public notice of the time, place and purpose of said meeting was given, all as required by Vernon's Ann. Civ. St. Article 6252-17. 3. That the Mayor of said City has approved and hereby approves the aforesaid Ordinance; that the Mayor and the City Secretary of said City have duly signed said Ordinance; and that the Mayor and the City Secretary of said City hereby declare that their signing of this Certificate shall constitute the signing of the attached and following copy of said Ordinance for all purposes. SIGNED AND SEALED the 18th day of November, 1991. City Secretary Mayor CITY SECRETARY ORIGINAL COPY ORDINANCE � I- q 1 AUTHORIZING THE ISSUANCE OF UTILITY SYSTEM REFUNDING AND IMPROVEMENT REVENUE BONDS, SERIES 1991, AUTHORIZING THE EXECUTION OF A PURCHASE CONTRACT, APPROVING AN OFFICIAL STATEMENT, AND THE EXECUTION OF AN ESCROW AGREEMENT, AND OTHER MATTERS RELATED THERETO THE STATE OF TEXAS § COUNTY OF DENTON § CITY OF SANGER § WHEREAS, the following Waterworks and Sewer System Revenue Bonds of the City of Sanger, Texas (the "Issuer") are presently outstanding: City of Sanger, Texas Utility System Revenue Bonds, Series 1973, dated May 15, 1973, outstanding in the aggregate principal amount of $40,000 ("Series 1973 Bonds"); . City of Sanger, Texas Utility System Revenue Bonds, Series 1976, dated March 15, 1976, outstanding in the aggregate principal amount of $175,000 ("Series 1976 Bonds"); City of Sanger, Texas Utility System Revenue Bonds, Series 1977, dated May 15, 1977, outstanding in the aggregate principal amount of $165,000 ("Series 1977 Bonds"); City of Sanger, Texas Utility System Revenue Bonds, Series 1982, dated June 15, 1982, outstanding in the aggregate principal amount of $280,000 ("Series 1982 Bonds"); City of Sanger, Texas Utility System Revenue Bonds, Series 1985, dated May 15, 1985, outstanding in the aggregate principal amount of $795,000 ("Series 1985 Bonds"); WHEREAS, the Issuer now desires to refund all of the Series 1977 Bonds, Series 1982 Bonds and Series 1985 Bonds in the principal amount of $1,240,000 (the "Refunded Bonds"); and WHEREAS, the City Council of the Issuer deems it advisable to refund the Refunded Bonds in order to change the bond covenants for the issuance of additional bonds and to permit the issuance of additional bonds for improvements to the Utility System, with a limited increase to the annual debt service requirements of the Issuer, with an approximate increase to the debt service of $784,403.38. WHEREAS, Article 717k, V.A.T.C.S. authorizes the Issuer to issue refunding bonds and to deposit the proceeds from the sale thereof together with any other available funds or resources, directly with a place of payment (paying agent) for the Refunded Bonds, and such deposit, if made before such payment dates, shall constitute the making of firm banking and financial arrangements for the discharge and final payment of the Refunded Bonds; and WHEREAS, Article 717k further authorizes the Issuer to enter into an escrow agreement with the paying agent for the Refunded Bonds with respect to the safekeeping, investment, reinvestment, administration and disposition of any such deposit, upon such terms and conditions as the Issuer and such paying agent may agree, provided that such deposits may be invested and reinvested including obligations the principal of and interest on which are unconditionally guaranteed by the United States of America, and which shall mature and bear interest payable at such times and in such amounts as will be sufficient to provide for the scheduled payment or prepayment of the Refunded Bonds; and WHEREAS, Ameritrust Texas National Association, Dallas, Texas, is the paying agent for the Refunded Bonds, and the Escrow Agreement hereinafter authorized, constitutes an agreement of the kind authorized and permitted by said Article 717k; and WHEREAS, all the Refunded Bonds mature or are subject to redemption prior to maturity within 20 years of the date of the bonds hereinafter authorized. WHEREAS, the City Council has heretofore, on the 21st day of October, 1991, adopted a resolution authorizing and directing the city secretary to give notice of intention to issue revenue bonds in the amount of $800,000 for the purpose of improving and extending the combined Waterworks, Sewer and Electric System; and WHEREAS, said notice has been duly published in the Sanger Courier, which is a newspaper of general circulation in said City, in its issues of October 30, 1991 and November 7, 1991; and WHEREAS, the City received no petition from the qualified electors of the City protesting the issuance of such revenue bonds; and WHEREAS, the bonds hereinafter authorized in the total amount of $2,300,000 for the purpose of providing $800,000 for improving and extending the combined Waterworks, Sewer and Electric System, and providing $1,430,000 for the purpose of refunding all of the outstanding City of Sanger, Texas Utility System Revenue Bonds, Series 1977, Series 1982 and Series 1985, are to be issued and delivered pursuant to Articles 1111 through 1118, V.A.T.C.S., Article 2368a, V.A.T.C.S., Chapter 252, Local Government Code and Article 717k, V.A.T.C.S.; and 2 CITY SECRETARY ORIGINAL COPY WHEREAS, the meeting was open to the public and public notice of the time, place and purpose of said meeting was given pursuant to Article 6252-17, V.A.T.C.S. THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF SANGER, TEXAS: Section 1. AMOUNT AND PURPOSE OF THE BONDS. The bond or bonds of the City of Sanger (the "Issuer") are hereby authorized to be issued and delivered in the aggregate principal amount of $2,230,000, for the purpose of providing $800,000 for improving and extending the combined Waterworks, Sewer and Electric System, and providing $1,430,000 for the purpose of refunding all of the outstanding City of Sanger, Texas Utility System Revenue Bonds, Series 1977, Series 1982 and Series 1985. Section 2. DESIGNATION OF THE BONDS. Each bond issued pursuant to this Ordinance shall be designated: "CITY OF SANGER, TEXAS UTILITY SYSTEM REFUNDING AND IMPROVEMENT REVENUE BOND, SERIES 1991", and initially there shall be issued, sold, and delivered hereunder a single fully registered bond, without interest coupons, payable in annual installments of principal (the "Initial Bond"), but the Initial Bond may be assigned and transferred and/or converted into and exchanged for a like aggregate principal amount of fully registered bonds, without interest coupons, having serial and annual maturities, and in the denomination or denominations of $5,000 or any integral multiple of $5,000, all in the manner hereinafter provided. The term "Bonds" as used in this Ordinance shall mean and include collectively the Initial Bond and all substitute bonds ex- changed therefor, as well as all other substitute bonds and replacement bonds issued pursuant hereto, and the term "Bond" shall mean any of the Bonds. Section 3. INITIAL DATE, DENOMINATION, NUMBER, MATURITIES, INITIAL REGISTERED OWNER, AND CHARACTERISTICS OF THE INITIAL BOND. (a) The Initial Bond is hereby authorized to be issued, sold, and delivered hereunder as a single fully registered Bond, without interest coupons, dated December 1, 1991, in the denomination and aggregate principal amount of $2,230,000, numbered R-1, payable in annual installments of principal to the initial registered owner thereof, to -wit: Southwest Securities Incorporated, or to the registered assignee or assignees of said Bond or any portion or portions thereof (in each case, the "registered owner"), with the annual install- ments of principal of the Initial Bond to be payable on the dates, respectively, and in the principal amounts, respectively, stated in the FORM OF INITIAL BOND set forth in this Ordinance. (b) The Initial Bond (i) may be prepaid or redeemed prior to the respective scheduled due dates of installments of principal thereof, (ii) may be assigned and transferred, (iii) may be converted and exchanged for other Bonds, (iv) shall have the characteristics, and (v) shall be signed and sealed, and the principal of and interest on the Initial Bond shall be payable, all as provided, and in the manner required or indicated, in the FORM OF INITIAL BOND set forth in this Ordinance. 3 CITY SECRETARY ORIGINAL COPY Section 4. INTEREST. The unpaid principal balance of the Initial Bond shall bear interest from the date of the Initial Bond and will be calculated on the basis of a 360-day year of twelve 30-day months to the respective scheduled due dates, or to the respective dates of prepayment or redemption, of the installments of principal of the Initial Bond, and said interest shall be payable, all in the manner provided and at the rates and on the dates stated in the FORM OF INITIAL BOND set forth in this Ordinance. Section 5. FORM OF INITIAL BOND. The form of the Initial Bond, including the form of Registration Certificate of the Comptroller of Public Accounts of the State of Texas to be endorsed on the Initial Bond, shall be substantially as follows: FORM OF INITIAL BOND NO. R-1 $2,230,000 UNITED STATES OF AMERICA STATE OF TEXAS COUNTY OF DENTON CITY OF SANGER, TEXAS UTILITY SYSTEM REFUNDING AND IMPROVEMENT REVENUE BOND SERIES 1991 The CITY OF SANGER, in Denton County, Texas (the "Issuer"), being a political subdivision of the State of Texas, hereby promises to pay to Southwest Securities Incorporated or to the registered assignee or assignees of this Bond or any portion or portions hereof (in each case, the "registered owner") the aggregate principal amount of TWO MILLION TWO HUNDRED THIRTY THOUSAND DOLLARS in annual installments of principal due and payable on May 15 in each of the years, and in the respective principal amounts, as set forth in the following schedule: Cl YEAR AMOUNT YEAR` AMOUNT 1992 $ 15,000 2002 $115,000 1993 15,000 2003 125,000 1994 20,000 2004 130,000 1995 25,000 2005 140,000 1996 85,000 2006 150,000 1997 85,000 2007 160,000 1998 90,000 2008 170,000 1999 100,000 2009 185,000 2000 105,000 2010 195,000 2001 110,000 2011 210,000 and to pay interest, from the date of this Bond hereinafter stated, on the balance of each such installment of principal, respectively, from time to time remaining unpaid, at the rates as follows: maturity 1992, 4.70% maturity 2002, 6.40% maturity 1993, 4.90% maturity 2003, 6.55% maturity 1994, 5.10% maturity 2004, 6.70% maturity 1995, 5.25% maturity 2005, 6.80% maturity 1996, 5.40% maturity 2006, 6.90% maturity 1997, 5.60% maturity 2007, 7.00% maturity 1998, 5.80% maturity 2008, 7.05% maturity 1999, 6.00% maturity 2009, 7.15 % maturity 2000, 6.15% maturity 2010, 7.15% maturity 2001, 6.25% maturity 2011, 7.15% with said interest being payable on May 15, 1992, and semiannually on each November 15 and May 15 thereafter while this Bond or any portion hereof is outstanding and unpaid. THE INSTALLMENTS OF PRINCIPAL OF AND THE INTEREST ON this Bond are payable in lawful money of the United States of America, without exchange or collection charges. The installments of principal and the interest on this Bond are payable to the registered owner hereof through the services of Ameritrust Texas National Association, Dallas, Texas, which is the "Paying Agent/Registrar" for this Bond. Payment of all principal of and interest on this Bond shall be made by the Paying Agent/Registrar to the registered owner hereof on each principal and/or interest payment date by check or draft, dated as of such date, drawn by the Paying Agent/Registrar on, and payable solely from, funds of the Issuer required by the ordinance authorizing the issuance of this Bond (the 'Bond Ordi- nance) to be on deposit with the Paying Agent/Registrar for such purpose as hereinafter provided; and such check or draft shall be sent by the Paying Agent/Registrar by United States mail, first-class postage prepaid, on each such principal and/or interest payment date, to the registered owner hereof, at the address of the registered owner, as it appeared on the 5 CITY SECRETARY ORIGINAL COPY last business day of the month next preceding each such date (the "Record Date") on the Registration Books kept by the Paying Agent/Registrar, as hereinafter described, or by such other method acceptable to the Paying Agent/Registrar requested by, and at the risk and expense of, the registered owner. The Issuer covenants with the registered owner of this Bond that on or before each principal and/or interest payment date for this Bond it will make available to the Paying Agent/Registrar, from the "Interest and Sinking Fund" created by the Bond Ordinance, the amounts required to provide for the payment, in immediately available funds, of all principal of and interest on this Bond, when due. IF THE DATE for the payment of the principal of or interest on this Bond shall be a Saturday, Sunday, a legal holiday, or a day on which banking institutions in the city where the Paying Agent/Registrar is located are authorized by law or executive order to close, then the date for such payment shall be the next succeeding day which is not such a Saturday, Sunday, legal holiday, or day on which banking institutions are authorized to close; and payment on such date shall have the same force and effect as if made on the original date payment was due. THIS BOND has been authorized in accordance with the Constitution and laws of the State of Texas in the principal amount of $2,230,000, for the purpose of providing $800,000 for improving and extending the combined Waterworks, Sewer and Electric System, and providing $1,430,000 for the purpose of refunding all of the outstanding City of Sanger, Texas Utility System Revenue Bonds, Series 1977, Series 1982 and Series 1985. ON MAY 15, 2001, or any date thereafter, the unpaid installments of principal of this Bond may be prepaid or redeemed prior to their scheduled due dates, at the option of the Issuer, with funds derived from any available source, as a whole, or in part, and, if in part, the Issuer shall select and designate the maturity, or maturities, and the amount that is to be redeemed, and if less than a whole maturity is to be called, the Issuer shall direct the Paying Agent/Registrar to call by lot (provided that a portion of this Bond may be redeemed only in an integral multiple of $5,000), at the redemption price of the principal amount, plus accrued interest to the date fixed for prepayment or redemption. AT LEAST 30 days prior to the date fixed for any such prepayment or redemption a written notice of such prepayment or redemption shall be mailed by the Paying Agent/Reg- istrar to the registered owner hereof. By the date fixed for any such prepayment or redemption due provision shall be made by the Issuer with the Paying Agent/Registrar for the payment of the required prepayment or redemption price for this Bond or the portion hereof which is to be so prepaid or redeemed, plus accrued interest thereon to the date fixed for prepayment or redemption. If such written notice of prepayment or redemption is given, and if due provision for such payment is made, all as provided above, this Bond, or the portion thereof which is to be so prepaid or redeemed, thereby automatically shall be treated as prepaid or redeemed prior to its scheduled due date, and shall not bear interest after the date fixed for its prepayment or redemption, and shall not be regarded as being outstanding except for the right of the registered owner to receive the prepayment or no CITY SECRETARY ORIGINAL COPY redemption price plus accrued interest to the date fixed for prepayment or redemption from the Paying Agent/Registrar out of the funds provided for such payment. The Paying Agent/Registrar shall record in the Registration Books all such prepayments or redemptions of principal of this Bond or any portion hereof. THIS BOND, to the extent of the unpaid or unredeemed principal balance hereof, or any unpaid and unredeemed portion hereof in any integral multiple of $5,000, may be assigned by the initial registered owner hereof and shall be transferred only in the Registration Books of the Issuer kept by the Paying Agent/Registrar acting in the capacity of registrar for the Bonds, upon the terms and conditions set forth in the Bond Ordinance. Among other requirements for such transfer, this Bond must be presented and surrendered to the Paying Agent/Registrar for cancellation, together with proper instruments of assignment, in form and with guarantee of signatures satisfactory to the Paying Agent/Registrar, evidencing assignment by the initial registered owner of this Bond, or any portion or portions hereof in any integral multiple of $5,000, to the assignee or assignees in whose name or names this Bond or any such portion or portions hereof is or are to be trans- ferred and registered. Any instrument or instruments of assignment satisfactory to the Paying Agent/Registrar may be used to evidence the assignment of this Bond or any such portion or portions hereof by the initial registered owner hereof. A new bond or bonds payable to such assignee or assignees (which then will be the new registered owner or owners of such new Bond or Bonds) or to the initial registered owner as to any portion of this Bond which is not being assigned and transferred by the initial registered owner, shall be delivered by the Paying Agent/Registrar in conversion of and exchange for this Bond or any portion or portions hereof, but solely in the form and manner as provided in the next paragraph hereof for the conversion and exchange of this Bond or any portion hereof. The registered owner of this Bond shall be deemed and treated by the Issuer and the Paying Agent/Registrar as the absolute owner hereof for all purposes, including payment and discharge of liability upon this Bond to the extent of such payment, and the Issuer and the Paying Agent/Registrar shall not be affected by any notice to the contrary. AS PROVIDED above and in the Bond Ordinance, this Bond, to the extent of the unpaid or unredeemed principal balance hereof, may be converted into and exchanged for a like aggregate principal amount of fully registered bonds, without interest coupons, payable to the assignee or assignees duly designated in writing by the initial registered owner hereof, or to the initial registered owner as to any portion of this Bond which is not being assigned and transferred by the initial registered owner, in any denomination or denominations in any integral multiple of $5,000 (subject to the requirement hereinafter stated that each substitute bond issued in exchange for any portion of this Bond shall have a single stated principal maturity date), upon surrender of this Bond to the Paying Agent/Registrar for cancellation, all in accordance with the form and procedures set forth in the Bond Ordinance. If this Bond or any portion hereof is assigned and transferred or converted each bond issued in exchange for any portion hereof shall have a single stated principal maturity date corresponding to the due date of the installment of principal of this Bond or portion hereof for which the substitute bond is being exchanged, and shall bear interest at the rate 7 applicable to and borne by such installment of principal or portion thereof. Such bonds, respectively, shall be subject to redemption prior to maturity on the same dates and for the same prices as the corresponding installment of principal of this Bond or portion hereof for which they are being exchanged. No such bond shall be payable in installments, but shall have only one stated principal maturity date. AS PROVIDED IN THE BOND ORDINANCE, THIS BOND IN ITS PRESENT FORM MAY BE ASSIGNED AND TRANSFERRED OR CONVERTED ONCE ONLY, and to one or more assignees, but the bonds issued and delivered in exchange for this Bond or any portion hereof may be assigned and transferred, and converted, subsequently, as provided in the Bond Ordinance. The Issuer shall pay the Paying Agent/Registrar's standard or customary fees and charges for transferring, converting, and exchanging this Bond or any portion thereof, but the one requesting such transfer, conversion, and exchange shall pay any taxes or governmental charges required to be paid with respect thereto. The Paying Agent/Registrar shall not be required to make any such assignment, conversion, or exchange (i) during the period commencing with the close of business on any Record Date and ending with the opening of business on the next following principal or interest payment date, or, (ii) with respect to any Bond or portion thereof called for prepayment or redemption prior to maturity, within 45 days prior to its prepayment or redemption date. IN THE EVENT any Paying Agent/Registrar for this Bond is changed by the Issuer, resigns, or otherwise ceases to act as such, the Issuer has covenanted in the Bond Ordinance that it promptly will appoint a competent and legally qualified substitute therefor, and promptly will cause written notice thereof to be mailed to the registered owner of this Bond. IT IS HEREBY certified, recited, and covenanted that this Bond has been duly and validly authorized, issued, and delivered pursuant to the laws of the State of Texas; that all acts, conditions, and things required or proper to be performed, exist, and be done precedent to or in the authorization, issuance, and delivery of this Bond and the Series of which it is a part have been performed, existed, and been done in accordance with law; that this Bond is a special obligation of said Issuer, and that the principal of and interest on this Bond, together with other outstanding revenue bonds of the Issuer, are payable and secured by a first lien on and pledge of the Net Revenues of the Issuer's Utility System, being the Waterworks, Sewer and Electric System. THE ISSUER has reserved the right, subject to the restrictions stated, and adopted by reference, in the Ordinance authorizing this Series of Bonds, to issue additional parity revenue bonds which also may be made payable from, and secured by a first lien on and pledge of, the aforesaid Net Revenues. THE REGISTERED OWNER HEREOF shall never have the right to demand payment of this Bond or the interest hereon out of any funds raised or to be raised by taxation, or from any sources whatsoever other than those described in the Bond Ordinance. CITY SECRETARY ORIGINAL COPY BY BECOMING the registered owner of this Bond, the registered owner thereby acknowledges all of the terms and provisions of the Bond Ordinance, agrees to be bound by such terms and provisions, acknowledges that the Bond Ordinance is duly recorded and available for inspection in the official minutes and records of the governing body of the Issuer, and agrees that the terms and provisions of this Bond and the Bond Ordinance constitute a contract between the registered owner hereof and the Issuer. IN WITNESS WHEREOF, the Issuer has caused this Bond to be signed with the manual signature of the Mayor of the Issuer and countersigned with the manual signature of the City Secretary of the Issuer, has caused the official seal of the Issuer to be duly impressed on this Bond, and has caused this Bond to be dated December 1, 1991. City Secretary (CITY SEAL) za, Mayor FORM OF REGISTRATION CERTIFICATE OF THE 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 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 (COMPTROLLER'S SEAL) Comptroller of Public Accounts of the State of Texas 0 CITY SECRETARY ORIGINAL COPY Section 6. ADDITIONAL CHARACTERISTICS OF THE BONDS. (a) Registration and Transfer. The Issuer shall keep or cause to be kept at the principal corporate trust office of Ameritrust Texas National Association, Dallas, Texas, (the 'Paying Agent/Registrar") books or records of the registration and transfer of the Bonds (the "Registration Books"), and the Issuer hereby appoints the Paying Agent/Registrar as its registrar and transfer agent to keep such books or records and make such transfers and registrations under such reasonable regulations as the Issuer and Paying Agent/Registrar may prescribe; and the Paying Agent/Registrar shall make such transfers and registrations as herein provided. The Paying Agent/Registrar shall obtain and record in the Registration Books the address of the registered owner of each Bond to which payments with respect to the Bonds shall be mailed, as herein provided; but it shall be the duty of each registered owner to notify the Paying Agent/Registrar in writing of the address to which payments shall be mailed, and such interest payments shall not be mailed unless such notice has been given. The Issuer shall have the right to inspect the Registration Books during regular business hours of the Paying Agent/Registrar, but otherwise the Paying Agent/Registrar shall keep the Registration Books confidential and, unless otherwise required by law, shall not permit their inspection by any other entity. Registration of each Bond may be transferred in the Registration Books only upon presentation and surrender of such Bond to the Paying Agent/Registrar for transfer of registration and cancellation, together with proper written instruments of assignment, in form and with guarantee of signatures satisfactory to the Paying Agent/Registrar, (i) evidencing the assignment of the Bond, or any portion thereof in any integral multiple of $5,000, to the assignee or assignees thereof, and (ii) the right of such assignee or assignees to have the Bond or any such portion thereof registered in the name of such assignee or assignees. Upon the assignment and transfer of any Bond or any portion thereof, a new substitute Bond or Bonds shall be issued in conversion and exchange therefor in the manner herein provided. The Initial Bond, to the extent of the unpaid or unredeemed principal balance thereof, may be assigned and transferred by the initial regis- tered owner thereof once only, and to one or more assignees designated in writing by the initial registered owner thereof. All Bonds issued and delivered in conversion of and exchange for the Initial Bond shall be in any denomination or denominations of any integral. multiple of $5,000 (subject to the requirement hereinafter stated that each substitute Bond shall have a single stated principal maturity date), shall be in the form prescribed in the FORM OF SUBSTITUTE BOND set forth in this Ordinance, and shall have the characteristics, and may be assigned, transferred, and converted as hereinafter provided. If the Initial Bond or any portion thereof is assigned and transferred or converted the Initial Bond must be surrendered to the Paying Agent/Registrar for cancellation, and each Bond issued in exchange for any portion of the Initial Bond shall have a single stated principal maturity date, and shall not be payable in installments; and each such Bond shall have a principal maturity date corresponding to the due date of the installment of principal or portion thereof for which the substitute Bond is being exchanged; and each such Bond shall bear interest at the single rate applicable to and borne by such installment of principal or portion thereof for which it is being exchanged. If only a portion of the Initial Bond is assigned and transferred, there shall be delivered to and registered in the name of the initial registered owner substitute Bonds in exchange for the unassigned balance of the Initial Bond 10 CITY SECRETARY ORIGINAL COPY in the same manner as if the initial registered owner were the assignee thereof. If any Bond or portion thereof other than the Initial Bond is assigned and transferred or converted each Bond issued in exchange shall have the same principal maturity date and bear interest at the same rate as the Bond for which it is exchanged. A form of assignment shall be printed or endorsed on each Bond, excepting the Initial Bond, which shall be executed by the registered owner or its duly authorized attorney or representative to evidence an assignment thereof. Upon surrender of any Bonds or any portion or portions thereof for transfer of registration, an authorized representative of the Paying Agent/Registrar shall make such transfer in the Registration Books, and shall deliver a new fully registered substitute Bond or Bonds, having the characteristics herein described, payable to such assignee or assignees (which then will be the registered owner or owners of such new Bond or Bonds), or to the previous registered owner in case only a portion of a Bond is being assigned and transferred, all in conversion of and exchange for said assigned Bond or Bonds or any portion or portions thereof, in the same form and manner, and with the same effect, as provided in Section 6(d), below, for the conversion and exchange of Bonds by any registered owner of a Bond. The Issuer shall pay the Paying Agent/Registrar's standard or customary fees and charges for making such transfer and delivery of a substitute Bond or Bonds, but the one requesting such transfer shall pay any taxes or other governmental charges required to be paid with respect thereto. The. Paying Agent/Registrar shall not be required to make transfers of registration of any Bond or any portion thereof (i) during the period commencing with the close of business on any Record Date and ending with the opening of business on the next following principal or interest payment date, or, (ii) with respect to any Bond or any portion thereof called for redemption prior to maturity, within 30 days prior to its redemption date. (b) Ownership of Bonds. The entity in whose name any Bond shall be registered in the Registration Books at any time shall be deemed and treated as the absolute owner thereof for all purposes of this Ordinance, whether or not such Bond shall be overdue, and the Issuer and the Paying Agent/Registrar shall not be affected by any notice to the contrary; and payment of, or on account of, the principal of, premium, if any, and interest on any such Bond shall be made only to such registered owner. All such payments shall be valid and effectual to satisfy and discharge the liability upon such Bond to the extent of the sum or sums so paid. (c) Payment of Bonds and Interest. The Issuer hereby further appoints the Paying Agent/Registrar to act as the paying agent for paying the principal of and interest on the Bonds, and to act as its agent to convert and exchange or replace Bonds, all as provided in this Ordinance. The Paying Agent/Registrar shall keep proper records of all payments made by the Issuer and the Paying Agent/Registrar with respect to the Bonds, and of all conversions and exchanges of Bonds, and all replacements of Bonds, as provided in this Ordinance. However, in the event of a nonpayment of interest on a scheduled payment date, and for thirty (30) days thereafter, a new record date for such interest payment (a "Special Record Date") will be established by the Paying Agent/Registrar, if and when funds for the payment of such interest have been received from the Issuer. Notice of the Special Record Date and of the scheduled payment date of the past due interest (which shall be 15 11 CITY SECRETARY ORIGINAL COPY days after the Special Record Date) shall be sent at least five (5) business days prior to the Special Record Date by United States mail, first class postage prepaid, to the address of each Bondholder appearing on the Security Register at the close of business on the last business day next preceding the date of mailing of such notice. (d) Conversion and Exchange or Replacement; Authentication. Each Bond issued and delivered pursuant to this Ordinance, to the extent of the unpaid or unredeemed principal balance or principal amount thereof, may, upon surrender of such Bond at the principal corporate trust office of the Paying Agent/Registrar, together with a written request therefor, duly executed by the registered owner or the assignee or assignees thereof, or its or their duly authorized attorneys or representatives, with guarantee of signatures satisfactory to the Paying Agent/Registrar, may, at the option of the registered owner or such assignee or assignees, as appropriate, be converted into and exchanged for fully registered bonds, without interest coupons, in the form prescribed in the FORM OF SUBSTITUTE BOND set forth in this Ordinance, in the denomination of $5,000, or any integral multiple of $5,000 (subject to the requirement hereinafter stated that each substitute Bond shall have a single stated maturity date), as requested in writing by such registered owner or such assignee or assignees, in an aggregate principal amount equal to the unpaid or unredeemed principal balance or principal amount of any Bond or Bonds so surrendered, and payable to the appropriate registered owner, assignee, or assignees, as the case may be. If the Initial Bond is assigned and transferred or converted each substitute Bond issued in exchange for any portion of the Initial Bond shall have a single stated principal maturity date, and shall not be payable in installments; and each such Bond shall have a principal maturity date corresponding to the due date of the installment of principal or portion thereof for which the substitute Bond is being exchanged; and each such Bond shall bear interest at the single rate applicable to and borne by such installment of principal or portion thereof for which it is being exchanged. If a portion of any Bond (other than the Initial Bond) shall be redeemed prior to its scheduled maturity as provided herein, a substitute Bond or Bonds having the same maturity date, bearing interest at the same rate, in the denomination or denominations of any integral multiple of $5,000 at the request of the registered owner, and in aggregate principal amount equal to the unredeemed portion thereof, will be issued to the registered owner upon surrender thereof for cancellation. If any Bond or portion thereof (other than the Initial Bond) is assigned and transferred or converted, each Bond issued in exchange therefor shall have the same principal maturity date and bear interest at the same rate as the Bond for which it is being exchanged. Each substitute Bond shall bear a letter and/or number to distinguish it from each other Bond. The Paying Agent/Registrar shall convert and exchange or replace Bonds as provided herein, and each fully registered bond delivered in conversion of and exchange for or replacement of any Bond or portion thereof as permitted or required by any provision of this Ordinance shall constitute one of the Bonds for all purposes of this Ordinance, and may again be converted and exchanged or replaced. It is specifically provided that any Bond authenticated in conversion of and exchange for or replacement of another Bond on or prior to the first scheduled Record Date for the Initial Bond shall bear interest from the date of the Initial Bond, but each substitute Bond so authenticated after such first scheduled Record Date shall bear interest from the 12 CITY SECRETARY ORIGINAL COPY interest payment date next preceding the date on which such substitute Bond was so authenticated, unless such Bond is authenticated after any Record Date but on or before the next following interest payment date, in which case it shall bear interest from such next following interest payment date; provided, however, that if at the time of delivery of any substitute Bond the interest on the Bond for which it is being exchanged is due but has not been paid, then such Bond shall bear interest from the date to which such interest has been paid in full. THE INITIAL BOND issued and delivered pursuant to this Ordinance is not required to be, and shall not be, authenticated by the Paying Agent/ Registrar, but on each substitute Bond issued in conversion of and exchange for or replacement of any Bond or Bonds issued under this Ordinance there shall be printed a certificate, in the form substantially as follows: "PAYING AGENT/REGISTRAR'S AUTHENTICATION CERTIFICATE It is hereby certified that this Bond has been issued under the provisions of the Bond Ordinance described on the face of this Bond; and that this Bond has been issued in conver- sion of and exchange for or replacement of a bond, bonds, or a portion of a bond or bonds of an issue which originally was approved by the Attorney General of the State of Texas and registered by the Comptroller of Public Accounts of the State of Texas. Paying Agent/Registrar Dated By Authorized Representative" An authorized representative of the Paying Agent/Registrar shall, before the delivery of any such Bond, date and manually sign the above Certificate, and no such Bond shall be deemed to be issued or outstanding unless such Certificate is so executed. The Paying Agent/Registrar promptly shall cancel all Bonds surrendered for conversion and exchange or replacement. No additional ordinances, orders, or resolutions need be passed or adopted by the governing body of the Issuer or any other body or person so as to accomplish the foregoing conversion and exchange or replacement of any Bond or portion thereof, and the Paying Agent/Registrar shall provide for the printing, execution, and delivery of the substitute Bonds in the manner prescribed herein, and said Bonds shall be of type composi- tion printed on paper with lithographed or steel engraved borders of customary weight and strength. Pursuant to Vernon's Ann. Tex. Civ. St. Art. 717k-6, and particularly Section 6 thereof, the duty of conversion and exchange or replacement of Bonds as aforesaid is hereby imposed upon the Paying Agent/Registrar, and, upon the execution of the above Paying Agent/Registrar's Authentication Certificate, the converted and exchanged or replaced Bond shall be valid, incontestable, and enforceable in the same manner and with the same effect as the Initial Bond which originally was issued pursuant to this Ordinance, approved by the Attorney General, and registered by the Comptroller of Public Accounts. The Issuer shall pay the Paying Agent/Registrar's standard or customary fees and charges for transferring, converting, and exchanging any Bond or any portion thereof, but the one requesting any such 13 CITY SECRETARY ORIGINAL COPY transfer, conversion, and exchange shall pay any taxes or governmental charges required to be paid with respect thereto as a condition precedent to the exercise of such privilege of conversion and exchange. The Paying Agent/Registrar shall not be required to make any such conversion and exchange or replacement of Bonds or any portion thereof (i) during the period commencing with the close of business on any Record Date and ending with the opening of business on the next following principal or interest payment date, or, (ii) with respect to any Bond or portion thereof called for redemption prior to maturity, within 45 days prior to its redemption date. (e) In General. All Bonds issued in conversion and exchange or replacement of any other Bond or portion thereof, (i) shall be issued in fully registered form, without interest coupons, with the principal of and interest on such Bonds to be payable only to the registered owners thereof, (ii) may be redeemed prior to their scheduled maturities, (iii) may be transferred and assigned, (iv) may be converted and exchanged for other Bonds, (v) shall have the characteristics, (vi) shall be signed and sealed, and (vii) the principal of and interest on the Bonds shall be payable, all as provided, and in the manner required or indicated, in the FORM OF SUBSTITUTE BOND set forth in this Ordinance. (f) Payment of Fees and Charges. The Issuer hereby covenants with the registered owners of the Bonds that it will (i) pay the standard or customary fees and charges of the Paying Agent/Registrar for its services with respect to the payment of the principal of and interest on the Bonds, when due, and (ii) pay the fees and charges of the Paying Agent/Registrar for services with respect to the transfer of registration of Bonds, and with respect to the conversion and exchange of Bonds solely to the extent above provided in this Ordinance. (g) Substitute Paying _Agent/Registrar. The Issuer covenants with the registered owners of the Bonds that at all times while the Bonds are outstanding the Issuer will provide a competent and legally qualified bank, trust company, financial institution, or other agency to act as and perform the services of Paying Agent/Registrar for the Bonds under this Ordinance, and that the Paying Agent/Registrar will be one entity. The Issuer reserves the right to, and may, at its option, change the Paying Agent/Registrar upon not less than 120 days written notice to the Paying Agent/ Registrar, to be effective not later than 60 days prior to the next principal or interest payment date after such notice. In the event that the entity at any time acting as Paying Agent/Registrar (or its successor by merger, acquisition, or other method) should resign or otherwise cease to act as such, the Issuer covenants that promptly it will appoint a competent and legally qualified bank, trust company, financial institution, or other agency to act as Paying Agent/Registrar under this Ordinance. Upon any change in the Paying Agent/Registrar, the previous Paying Agent/Registrar promptly shall transfer and deliver the Registration Books (or a copy thereof), along with all other pertinent books and records relating to the Bonds, to the new Paying Agent/Registrar designated and appointed by the Issuer. Upon any change in the Paying Agent/Registrar, the Issuer promptly will cause a written notice thereof to be sent by the new Paying Agent/Registrar to each registered owner of the Bonds, by United States mail, first-class IV postage prepaid, which notice also shall give the address -of the new Paying Agent/Registrar. By accepting the position and performing as such, each Paying Agent/Registrar shall be deemed to have agreed to the provisions of this Ordinance, and a certified copy of this Ordinance shall be delivered to each Paying Agent/Registrar. Section 7. FORM OF SUBSTITUTE BONDS. The form of all Bonds issued in conversion and exchange or replacement of any other Bond or portion thereof, including the form of Paying Agent/Registrar's Certificate to be printed on each of such Bonds, and the Form of Assignment to be printed on each of the Bonds, shall be, respectively, substantially as follows, with such appropriate variations, omissions, or insertions as are permitted or required by this Ordinance. FORM OF SUBSTITUTE BOND PRINCIPAL NO. AMOUNT UNITED STATES OF AMERICA STATE OF TEXAS COUNTY OF DENTON CITY OF SANGER, TEXAS UTILITY SYSTEM REFUNDING AND IMPROVEMENT REVENUE BOND SERIES 1991 INTEREST MATURITY DATE OF CUSIP RATE DATE ORIGINAL ISSUE NO. December 1, 1991 ON THE MATURITY DATE specified above, the CITY OF SANGER, in Denton County, Texas (the "Issuer"), being a political subdivision of the State of Texas, hereby. promises to pay to or to the registered assignee hereof (either being hereinafter called the "registered owner") the principal amount of and to pay interest thereon from December 1, 1991 to the maturity date specified above, or the date of redemption prior to maturity, at the interest rate per annum specified above; with interest being payable on May 15, 1992 and semiannually thereafter on each November 15 and May 15, except that if the date of authentication of this Bond is later than April 30, 1992, such principal amount shall bear interest from the interest payment date next preceding the date of authentication, unless such date of authentication is after any Record Date (hereinafter defined) but on or before the next following interest payment date, in which case such principal amount shall bear interest from such next following interest payment date. 15 THE PRINCIPAL OF AND INTEREST ON this Bond are payable in lawful money of the United States of America, without exchange or collection charges. The principal of this Bond shall be paid to the registered owner hereof upon presentation and surrender of this Bond at maturity or upon the date fixed for its redemption prior to maturity, at the principal corporate trust office of Ameritrust Texas National Association, Dallas, Texas, which is the "Paying Agent/Registrar" for this Bond. The payment of interest on this Bond shall be made by the Paying Agent/Registrar to the registered owner hereof on each interest payment date by check or draft, dated as of such interest payment date, drawn by the Paying Agent/Registrar on, and payable solely from, funds of the Issuer required by the ordinance authorizing the issuance of the Bonds (the 'Bond Ordinance") to be on deposit with the Paying Agent/Registrar for such purpose as hereinafter provided; and such check or draft shall be sent by the Paying Agent/Registrar by United States mail, first-class postage prepaid, on each such interest payment date, to the registered owner hereof, at the address of the registered owner, as it appeared on the last business day of the month next preceding each such date (the "Record Date") on the Registration Books kept by the Paying Agent/Registrar, as hereinafter described, or by such other method acceptable to the Paying Agent/Registrar requested by, and the risk and expense of, the registered owner. Any accrued interest due upon the redemption of this Bond prior to maturity as provided herein shall be paid to the registered owner upon presentation and surrender of this Bond for redemption and payment at the principal corporate trust office of the Paying Agent/Registrar. The Issuer covenants with the registered owner of this Bond that on or before each principal payment date, interest payment date, and accrued interest payment date for this Bond it will make available to the Paying Agent/Registrar, from the "Interest and Sinking Fund" created by the Bond Ordinance, the amounts required to provide for the payment, in immediately available funds, of all principal of and interest on the Bonds, when due. IF THE DATE for the payment of the principal of or interest on this Bond shall be a Saturday, Sunday, a legal holiday, or a day on which banking institutions in the City where the Paying Agent/Registrar is located are authorized by law or executive order to close, then the date for such payment shall be the next succeeding day which is not such a Saturday, Sunday, legal holiday, or day on which banking institutions are authorized to close; and payment on such date shall have the same force and effect as if made on the original date payment was due. THIS BOND is one of an issue of Bonds initially dated December 1, 1991, authorized in accordance with the Constitution and laws of the State of Texas in the principal amount of $2,230,000, for the purpose of providing $800,000 for improving and extending the combined Waterworks, Sewer and Electric System, and providing $1,430,000 for the purpose of refunding all of the outstanding City of Sanger, Texas Utility System Revenue Bonds, Series 1977, Series 1982 and Series 1985. ON MAY 151 2001, or any date thereafter, the Bonds of this Series may be redeemed prior to their scheduled maturities, at the option of the Issuer, with funds derived from any 16 CITY SECRETARY ORIGINAL COPY available and lawful source, as a whole, or in part, and, if'in part, the Issuer shall select and designate the maturity or maturities and the amount that is to be redeemed, and if less than a whole maturity is to be called, the Issuer shall direct the Paying Agent/Registrar to call by lot (provided that a portion of a Bond may be redeemed only in an integral multiple of $5,000), at the redemption price of the principal amount thereof, plus accrued interest to the date fixed for redemption. AT LEAST 30 days prior to the date fixed for any redemption of Bonds or portions thereof prior to maturity a written notice of such redemption shall be published once in a financial publication, journal, or reporter of general circulation among securities dealers in The City of New York, New York (including, but not limited to, The Bond Buyer and The Wall Street Journal), or in the State of Texas (including, but not limited to, The Texas Bond Reporter). Such notice also shall be sent by the Paying Agent/Registrar by United States mail, first class postage prepaid, not less than 30 days prior to the date fixed for any such redemption, to the registered owner of each Bond to be redeemed at its address as it ap- peared on the 45th day prior to such redemption date; provided, however, that the failure to send, mail, or receive such notice, or any defect therein or in the sending or mailing thereof, shall not affect the validity or effectiveness of the proceedings for the redemption of any Bond, and it is hereby specifically provided that the publication of such notice as required above shall be the only notice actually required in connection with or as a prerequisite to the redemption of any Bonds or portions thereof. By the date fixed for any such redemption due provision shall be made with the Paying Agent/Registrar for the payment of the required redemption price for the Bonds or portions thereof which are to be so redeemed,plus accrued interest thereon to the date fixed for redemption. If such written notice of redemption is published and if due provision for such payment is made, all as provided above, the Bonds or portions thereof which are to be so redeemed thereby automatically shall be treated as redeemed prior to their scheduled maturities, and they shall not bear interest after the date fixed for redemption, and they shall not be regarded as being outstanding except for the right of the registered owner to receive the redemption price plus accrued interest from the Paying Agent/Registrar out of the funds provided for such payment. If a portion of any Bond shall be redeemed a substitute Bond or Bonds having the same maturity date, bearing interest at the same rate, in any denomination or denominations in any integral multiple of $5,000, at the written request of the registered owner, and in aggregate principal amount equal to the unredeemed portion thereof, will be issued to the registered owner upon the surrender thereof for cancellation, at the expense of the Issuer, all as provided in the Bond Ordinance. THIS BOND OR ANY PORTION OR PORTIONS HEREOF IN ANY INTEGRAL MULTIPLE OF $5,000 may be assigned and shall be transferred only in the Registration Books of the Issuer kept by the Paying Agent/Registrar acting in the capacity of registrar for the Bonds, upon the terms and conditions set forth in the Bond Ordinance. Among other requirements for such assignment and transfer, this Bond must be presented and surrendered to the Paying Agent/Registrar, together with proper instruments of assignment, in form and with guarantee of signatures satisfactory to the Paying Agent/Registrar, 17 CITY SECRETARY 3RIGNAl- COPY evidencing assignment of this Bond or any portion or portions hereof in any integral multiple of $5,000 to the assignee or assignees in whose name or names this Bond or any such portion or portions hereof is or are to be transferred and registered. The form of Assignment printed or endorsed on this Bond shall be executed by the registered owner or its duly authorized attorney or representative,to evidence the assignment hereof. A new Bond or Bonds payable to such assignee or assignees (which then will be the new registered owner or owners of such new Bond or Bonds), or to the previous registered owner in the case of the assignment and transfer of only a portion of this Bond, may be delivered by the Paying Agent/Registrar in conversion of and exchange for this Bond, all in the form and manner as provided in the next paragraph hereof for the conversion and exchange of other Bonds. The Issuer shall pay the Paying Agent/Registrar's standard or customary fees and charges for making such transfer, but the one requesting such transfer shall pay any taxes or other governmental charges required to be paid with respect thereto. The Paying Agent/Registrar shall not be required to make transfers of registration of this Bond or any portion hereof (i) during the period commencing with the close of business on any Record Date and ending with the opening of business on the next following principal or interest payment date, or, (ii) with respect to any Bond or any portion thereof called for redemption prior to maturity, within 45 days prior to its redemption date. The registered owner of this Bond shall be deemed and treated by the Issuer and the Paying Agent/Registrar as the absolute owner hereof for all purposes, including payment and discharge of liability upon this Bond to the extent of such payment, and the Issuer and the Paying Agent/Registrar shall not be affected by any notice to the contrary. ALL BONDS OF THIS SERIES are issuable solely as fully registered bonds, without interest coupons, in the denomination of any integral multiple of $5,000. As provided in the Bond Ordinance, this Bond, or any unredeemed portion hereof, may, at the request of the registered owner or the assignee or assignees hereof, be converted into and exchanged for a like aggregate principal amount of fully registered bonds, without interest coupons, payable to the appropriate registered owner, assignee, or assignees, as the case may be, having the same maturity date, and bearing interest at the same rate, in any denomination or denominations in any integral multiple of $5,000 as requested in writing by the appropriate registered owner, assignee, or assignees, as the case may be, upon surrender of this Bond to the Paying Agent/Registrar for cancellation, all in accordance with the form and procedures set forth in the Bond Ordinance. The Issuer shall pay the Paying Agent/Registrar's standard or customary fees and charges for transferring, converting, and exchanging any Bond or any portion thereof, but the one requesting such transfer, conver- sion, and exchange shall pay any taxes or governmental charges required to be paid with respect thereto as a condition precedent to the exercise of such privilege of conversion and exchange. The Paying Agent/Registrar shall not be required to make any such conversion and exchange (i) during the period commencing with the close of business on any Record Date and ending with the opening of business on the next following principal or interest payment date, or, (ii) with respect to any Bond or portion thereof called for redemption prior to maturity, within 45 days prior to its redemption date. CITY SECRETARY ORIGINAL COPY IN THE EVENT any Paying Agent/Registrar for the Bonds is changed by the Issuer, resigns, or otherwise ceases to act as such, the Issuer has covenanted in the Bond Ordinance that it promptly will appoint a competent and legally qualified substitute therefor, and promptly will cause written notice thereof to be mailed to the registered owners of the Bonds. IT IS HEREBY certified, recited, and covenanted that this Bond has been duly and validly authorized, issued, and delivered pursuant to the laws of the State of Texas; that all acts, conditions, and things required or proper to be performed, exist, and be done precedent to or in the authorization, issuance, and delivery of this Bond and the Series of which it is a part have been performed, existed, and been done in accordance with law; that this Bond is a special obligation of said Issuer, and that the principal of and interest on this Bond, together with other outstanding revenue bonds of the Issuer, are payable and secured by a first lien on and pledge of the Net Revenues of the Issuer's Utility System, being the Waterworks, Sewer and Electric System. THE ISSUER has reserved the right, subject to the restrictions stated, and adopted by reference, in the Ordinance authorizing this Series of Bonds, to issue additional parity revenue bonds which also may be made payable from, and secured by a first lien on and pledge of, the aforesaid Net Revenues. THE REGISTERED OWNER HEREOF shall never have the right to demand payment of this Bond or the interest hereon out of any funds raised or to be raised by taxation, or from any sources whatsoever other than those described in the Bond Ordinance. BY BECOMING the registered owner of this Bond, the registered owner thereby acknowledges all of the terms and provisions of the Bond Ordinance, agrees to be bound by such terms and provisions, acknowledges that the Bond Ordinance is duly recorded and available for inspection in the official minutes and records of the governing body of the Issuer, and agrees that the terms and provisions of this Bond and the Bond Ordinance constitute a contract between each registered owner hereof and the Issuer. IN WITNESS WHEREOF, the Issuer has caused this Bond to be signed with the facsimile signature of the Mayor of the Issuer and countersigned with the facsimile signature of the City Secretary of the Issuer, and has caused the official seal of the Issuer to be duly impressed, or placed in facsimile, on this Bond. (facsimile signature) ature) City Secretary SEAL M (facsimile si�naturel Mayor^ FORM OF PAYING AGENTIREGISTRAR'S AUTHENTICATION CERTIFICATE PAYING AGENT/REGISTRAR'S AUTHENTICATION CERTIFICATE (To be executed if this Bond is not accompanied by an executed Registration Certificate of the Comptroller of Public Accounts of the State of Texas) It is hereby certified that this Bond has been issued under the provisions of the Bond Ordinance described in the text of this Bond; and that this Bond has been issued in conversion or replacement of, or in exchange for, a bond, bonds, or a portion of a bond or bonds of a Series which originally was approved by the Attorney General of the State of Texas and registered by the Comptroller of Public Accounts of the State of Texas. Dated Ameritrust Texas National Association Dallas, Texas By Authorized Representative FORM OF ASSIGNMENT: ASSIGNMENT FOR VALUE RECEIVED, the undersigned registered owner of this Bond, or duly authorized representative or attorney thereof, hereby assigns this Bond to (Assignee's Social Security print or type Assignees name or Taxpayer Identification Number and address, including zip code) and hereby irrevocably constitutes and appoints attorney to transfer the registration of this Bond on the Paying Agent/Registrar's Registration Books with full power of substitution in the premises. Dated Signature Guaranteed: NOTICE: This signature must be guaranteed by a member of the New York Stock Exchange or a commercial bank or trust company. Registered Owner NOTICE: This signature must correspond with the name of the Registered Owner appearing on the face of this Bond in every particular without alteration or enlargement or any change whatsoever. 20 Section 8. DEFINITIONS. For all purposes of this ordinance and in particular for clarity with respect to the issuance of the Bonds herein authorized and the pledge and appropriation of revenues for the payment of the Bonds, the following definitions are provided: (a) The term "Utility System" as used in this Ordinance, shall mean and include the Issuer's entire Waterworks, Sewer and Electric System, together with all future improvements, extensions, enlargements, and additions thereto, and replacements thereof. (b) The term "Net Revenues," as used in this Ordinance, shall mean gross revenues of the Utility System, after deducting the expenses of operation and maintenance of the Utility System, including all salaries, labor, materials, repairs and extensions necessary to render efficient service, provided, however, that only such repairs and extensions, as in the judgment of the City Council of said Issuer, reasonably and fairly exercised by the passage of appropriate ordinances, are necessary to keep the Utility System in operation and render adequate service to said Issuer and the inhabitants thereof, or such as might be necessary to meet some physical accident or condition which would otherwise impair the Bonds and any Additional Bonds shall be deducted in determining "Net Revenues." Depreciation, and payments into and out of the Interest and Sinking Fund, Reserve Fund, and Emergency Fund hereinafter created, shall never be considered as expenses of operation and maintenance. (c) The term 'Bonds" shall mean the Bonds authorized to be issued and delivered by this Ordinance and the outstanding Series 1973 Bonds and Series 1976 Bonds. (e) The term "Additional Bonds" shall mean the additional parity revenue bonds which the Issuer reserves the right to issue and deliver in the future, as provided by this Ordinance. Section 9. PLEDGE. The Bonds and all Additional Bonds, and the interest thereon, are and shall be payable from and secured by an irrevocable first lien on and pledge of the Net Revenues of the Utility System. The Bonds authorized by this Ordinance are parity Additional Bonds as defined and permitted in the ordinance that authorized the City of Sanger, Texas Utility System Revenue Bonds, Series 1969, and Sections 9 through 27 of the ordinance that authorized the City of Sanger, Texas Utility System Revenue Bonds, Series 1969 are hereby adopted by reference and shall be restated and be applicable to the Bonds authorized by this Ordinance in Sections 8 through 25 hereof for all purposes except to the extent hereinafter specifically modified and supplemented. Section 10. RATES. The Issuer covenants and agrees with the holders of the Bonds and all Additional Bonds, as follows: (a) That it will at all times fix, maintain, charge and collect for services rendered by the Utility System, rates and charges which will produce gross revenues at least sufficient 21 CITY SECRETARY ORIGINAL COPY to pay all operating, maintenance, depreciation, replacement and betterment expenses, and other costs deductible in determining "Net Revenues" as herein defined and to produce each month Net Revenues which together with other pledged revenues will be adequate to pay promptly all of the principal of and interest on the Bonds and all Additional Bonds, and to accumulate and maintain the Funds created and established by this Ordinance, and (b) That if the Utility System indebtedness, the Issuer shall fix, maintain, rendered by the Utility System sufficient to thereof. should become legally liable for any other charge and collect additional rates for services establish and maintain funds for the payment Section 11. FUNDS, All gross revenues of the Utility System shall be kept separate and apart from all other funds of the Issuer and the following Special Funds have been created and shall be established and maintained in an official depository bank of the Issuer, so long as any of the Bonds or Additional Bonds, or interest thereon, are outstanding and unpaid: (a) City of Sanger Utility System Revenue Bonds Revenue Fund, hereinafter called the "Revenue Fund." (b) City of Sanger Utility System Revenue Bonds Interest and Sinking Fund, hereinafter called the "Interest and Sinking Fund." (c) City of Sanger Utility System Revenue Bonds Reserve Fund, hereinafter called the 'Reserve Fund." (d) City of Sanger Utility System Revenue Bonds Emergency Fund, hereinafter called the "Emergency Fund." Section 12. REVENUE FUND. All gross revenues of every nature received from the operation and ownership of the Utility System shall be deposited from day to day as collected into the Revenue Fund. The reasonable, necessary, and proper expenses of operation and maintenance of the Utility System shall be paid from the gross revenues of the Utility System. The revenues remaining in the Revenue Fund shall be deposited into the other Funds, in the manner and amounts hereinafter provided, and each of such Funds shall have priority as to such deposits in the order in which they are treated in the following sections. Section 13. INTEREST AND SINKING FUND, There shall be deposited into the Interest and Sinking Fund the following: (a) such amounts, in equal monthly installments commencing on or before the tenth day of each month hereafter, as will be sufficient to pay the interest scheduled to come due on the Bonds on the next interest payment date; and 22 CITY SECRETARY ORIGINAL COPY (b) such amounts, in equal monthly installments, made on or before the tenth day of each month, commencing December 10, 1991, as will be sufficient to pay the next maturing principal of the bonds. Section 14. RESERVE FUND. That, in addition to all other amounts now required by the ordinances that authorized the outstanding Bonds, there shall be deposited into the Reserve Fund, the sum of at least $ , until the Reserve Fund shall contain an aggregate amount of $ . No deposits shall be required to be made into the Reserve Fund as long as the Fund contains said aggregate amount, but if and whenever said Reserve Fund is reduced below said aggregate amount, the aforesaid monthly deposits into the Fund shall be resumed and continued until such time as the Fund has been restored to said aggregate amount. The Reserve Fund shall be used to pay the principal of or interest on the Bonds and any Additional Bonds falling due at any time when there is not sufficient money available in the Interest and Sinking Fund created for their payment. Money in the Reserve Fund may, upon authorization by the City Council of said Issuer, be invested in direct obligations of, or obligations, the principal of and interest on which are guaranteed by, the United States of America, or invested in direct obligations of the Federal Intermediate Credit Banks, Federal Land Banks, Federal National Mortgage Association, Federal Home Loan Banks or Banks for Cooperatives, provided that each of the aforesaid obligations must mature, or be subject to redemption at the option of the holder thereof; Any obligation in which money in said Reserve Fund is so invested shall be kept and held by the Bank holding said Fund in escrow and in trust for the benefit of the holders of the Bonds and all Additional Bonds, and shall be promptly sold and the proceeds of sale applied to the making of all payments required to be made from the Reserve Fund. Section 15. EMERGENCY FUND. There is presently on deposit in the Emergency Fund $ . No deposits shall be required to be made into the Emergency Fund as long as the Emergency Fund contains said aggregate amount, but if and whenever said Emergency Fund is reduced below said aggregate amount, the aforesaid monthly deposits into the Emergency Fund shall be resumed and continued until such time as the Emergency Fund has been restored to said aggregate amount. The Emergency Fund shall be used to pay the cost of any repairs or extensions to the System authorized by Vernon's Article 1113, for the payment of which no other funds are available. Also, the Emergency Fund shall be used to pay the principal of or interest on the Bonds and all Additional Bonds, at any time when there are not sufficient amounts in the Interest and Sinking Fund and the Reserve Fund for such purpose. Money in the Emergency Fund may, upon authorization by the City Council, be invested in the same manner and to the same extent as provided for money in the Reserve Fund. Any obligation in which money in the Emergency Fund is so invested shall be kept and held in an official depository bank of the Issuer in escrow and in trust for the benefit of the holders of the Bonds and all Additional Bonds, and shall be promptly sold and the proceeds of sale applied to the making of payments permitted or required to be made from the Emergency Fund. 23 CITY SECRETARY ORIGINAL COPY Section 16. DEFICIENCIES IN FUNDS. If in any month the Issuer shall fail to deposit into any Fund created by this Ordinance the full amounts required, amounts equivalent to such deficiencies shall be set apart and paid into said Funds from the first available and unallocated pledged revenues for the following month or months, and such payments shall be in addition to the amounts otherwise required to be paid into said Funds during such month or months. To the extent necessary, the Issuer shall increase the rates and charges for services of the Utility System to make up for any such deficiencies. Section 17. EXCESS REVENUES. The revenues pledged hereunder, in excess of those necessary to establish and maintain the Funds as required in this Ordinance, or as hereafter may be required in connection with the issuance of Additional Bonds, may be used for any lawful purpose. Section 18. SECURITY FOR FUNDS, All Funds created by this Ordinance shall be secured in the manner and to the fullest extent permitted or required by law for the security of public funds, and such Funds shall be used only for the purposes and in the manner permitted or required by this Ordinance. Section 19.. ADDITIONAL BONDS. The Issuer reserves the right to issue additional parity revenue bonds, to be known as Additional Bonds, which when issued and delivered, shall be payable from and secured by a lien on and pledge of the same revenues as those securing the Bonds, and be on a parity with the Bonds and all outstanding Additional Bonds, or any bonds issued to refund same, and the Bonds and all Additional Bonds shall in all respects be on a parity and of equal dignity. The Additional Bonds may be issued in one or more installments or series, provided, however, that no installment or series of Additional Bonds shall be issued unless: (a) A certificate is executed by the Mayor and City Secretary of said Issuer to the effect that no (default exists in connection with any of the covenants or requirements of the ordinance or ordinances authorizing the issuance of all then outstanding Bonds and Additional Bonds; (b) A certificate is executed by the Mayor and City Secretary of said Issuer to the effect that the Interest and Sinking Fund and the Reserve Fund each maintain the amount then required to be on deposit therein; (c) A certificate is executed by a Certified Public Accountant to the effect that, in his opinion, the Net Earnings of the Utility System, either for the last complete fiscal year of the Issuer, or for any twelve consecutive calendar month period ending not more than ninety days prior to the passage of the ordinance authorizing the issuance of such Additional Bonds, were at least 1-1/2 times the average annual principal and interest requirements for all then outstanding Bonds and Additional Bonds, and for the installment or series of Additional Bonds then proposed to be issued. The term "Net Earnings" as used in this sub- section (c) shall mean the gross revenues of the Utility System after deducting the expenses 24 CITY SECRETARY ORIGINAL COPY of operation and maintenance but not deducting depreciation, bond interest or expenditures which under standard accounting practice should be charged to capital expenditures. (d) The Additional Bonds are scheduled to mature only on May 15, and the interest thereon is scheduled to be paid only on November 15 and May 15. (e) The ordinance authorizing the issuance of such installment or series of Additional Bonds provides that the aggregate amount to be accumulated and maintained in the Reserve Fund shall be increased by an additional amount not less than the average annual principal and interest requirements for said Additional Bonds, and that such additional amount shall be so accumulated within sixty-one months from the date of the Additional Bonds by the deposit in the Reserve Fund of the necessary amount in equal monthly installments; provided, however, that the aggregate amount to be accumulated in the Reserve Fund shall never be required to exceed the, average annual principal and interest requirements for all then outstanding Bonds and Additional Bonds; (f) All calculations of average annual principal and interest requirements made pursuant to this Section are made as of and from the date of the Additional Bonds then proposed to be issued. (g) Once the outstanding Series 1973 Bonds and Series 1976 Bonds are retired and are no longer outstanding, subparagraph (c) of this Section shall be replaced by the following substitute subparagraph (c): "(c) A certificate is executed by a Certified Public Accountant to the effect that, in his opinion, the Net Earnings of the Utility System, either for the last complete fiscal year of the Issuer, or for any twelve consecutive calendar month period ending not more than ninety days prior to the passage of the ordinance authorizing the issuance of such Additional Bonds, were at least 1.10 times the average annual principal and interest requirements for all then outstanding Bonds and Additional Bonds, and for the installment or series of Additional Bonds then proposed to be issued. The term "Net Earnings" as used in this subsection (c) shall mean the gross revenues of the Utility System after deducting the expenses of operation and maintenance but not deducting depreciation, bond interest or expenditures which under standard accounting practice should be charged to capital expenditures." Section 20. MAINTENANCE AND OPERATION; INSURANCE. While any of the Bonds or Additional Bonds are outstanding the Issuer covenants and agrees to maintain the Utility System in good condition and operate the same in an efficient manner and at reasonable expense, and to maintain insurance on the Utility System, for the benefit of the holder or holders of the Bonds and Additional Bonds, of a kind and in an amount which usually would be carried by private companies engaged in a similar type of business. Nothing in this Ordinance shall be construed as requiring the Issuer to expend any funds 25 which are derived from sources other than the Utility System, but nothing herein shall be construed as preventing the Issuer from doing so. Section 21. ACCOUNTS AND FISCAL YEAR. The Issuer shall keep proper books of records and accounts, separate from all other records and accounts of the Issuer, in which complete and correct entries shall be made of all transactions relating to the Utility System, and shall have said books audited once each fiscal year by a certified public accountant. The Issuer agrees to operate the Utility System and keep its books of records and accounts pertaining thereto on the basis of its current fiscal year; provided, however, that the City Council may change such fiscal year by ordinance duly passed, and if such change is deemed necessary by the City Council. Section 22. ACCOUNTING REPORTS, Within ninety days after the close of each fiscal year hereafter., the Issuer will furnish, without cost, to any holder of any outstanding Bonds or Additional Bonds who may so request, a signed or certified copy of a report by a Certified Public Accountant, covering the next preceding fiscal year, showing the following information: (a) A detailed statement of all gross revenues of the Utility System and all expenses of operation and maintenance thereof for said fiscal year; (b) Balance sheet as of the end of said fiscal year; (c) Accountant's comment regarding the manner in which the Issuer has complied with the requirements of this Ordinance and his recommendations, if any, for any changes or improvements in the operation of the Utility System; (d) List of insurance policies in force at the end of said fiscal year, showing, as to each policy, the name of the insurer, and the expiration date; (e) The number of properties connected with the water system, sewer system and electric system, and the gross revenues from the Utility System for said fiscal year. Section 23. INSPECTION. Any holder or holders of any Bonds or Additional Bonds shall have the right at all reasonable times to inspect the Utility System and all records, accounts, and data of the Issuer relating thereto. Section 24. SPECIAL COVENANTS. The Issuer further covenants as follows: (a) That other than for the payment of the Bonds herein authorized, the revenues pledged hereunder have not in any manner been pledged to the payment of any debt or obligation of the Issuer or the Utility System. 26 CITY SECRETARY ORIGINAL COPY (b) That while any of the Bonds or Additional Bonds are outstanding, the Issuer will not sell or encumber the Utility System or any substantial part thereof, and that, with the exception of the Additional Bonds expressly permitted by this Ordinance to be issued, it will not encumber the revenues pledged hereunder unless such encumbrance is made junior and subordinate in all respects to the Bonds and Additional Bonds and all liens and pledges in connection therewith. (c) That no free service of the Utility System shall be allowed, and should the Issuer or any of its agencies or instrumentalities make use of the services and facilities of the Utility System, payment of the reasonable value thereof shall be made by the Issuer out of funds from sources other than the revenues and income of the Utility System. (d) That to the extent it legally may, the Issuer further covenants and agrees that while any of the Bonds or Additional Bonds are outstanding, no franchise shall be granted for the installation or operation of any competing water system, sewer system or electric system; that the Issuer will prohibit the operation of any such competing system; and the operation of any such competing system is hereby prohibited. Section 25. BONDS ARE SPECIAL OBLIGATIONS, The Bonds and Additional Bonds shall be special obligations of the Issuer payable solely from the pledged Net Revenues, and the holder or holders thereof shall never have the right to demand payment thereof out of funds raised or to be raised by taxation. Section 26. DEFEASANCE OF BONDS. (a) Any Bond and the interest thereon shall be deemed to be paid, retired, and no longer outstanding (a "Defeased Bond") within the meaning of this Ordinance, except to the extent provided in subsection (d) of this Section 32, when payment of the principal of such Bond, plus interest thereon to the due date (whether such due date be by reason of maturity, upon redemption, or otherwise) either (i) shall have been made or caused to be made in accordance with the terms thereof (including the giving of any required notice of redemption), or (ii) shall have been provided for on or before such due date by irrevocably depositing with or making available to the Paying Agent/Registrar for such payment (1) lawful money of the United States of America sufficient to make such payment or (2) Government Obligations which mature as to principal and interest in such amounts and at such times as will insure the availability, without rein- vestment, of sufficient money to provide for such payment, and when proper arrangements have been made by the Issuer with the Paying Agent/Registrar for the payment of its services until all Defeased Bonds shall have become due and payable. At such time as a Bond shall be deemed to be a Defeased Bond hereunder, as aforesaid, such Bond and the interest thereon shall no longer be secured by, payable from, or entitled to the benefits of, revenue pledged as provided in this Ordinance, and such principal and interest shall be pay- able solely from such money or Government Obligations. (b) Any moneys so deposited with the Paying Agent/Registrar may at the written direction of the Issuer also be invested in Government Obligations, maturing in the amounts 27 CITY SECRETARY ORIGINAL COPY and times as hereinbefore set forth, and all income from such Government Obligations received by the Paying Agent/Registrar which is not required for the payment of the Bonds and interest thereon, with respect to which such money has been so deposited, shall be turned over to the Issuer, or deposited as directed in writing by the Issuer. (c) The term "Government Obligations" as used in this Section shall mean direct obligations of the United States of America, including obligations the principal of and interest on which are unconditionally guaranteed by the United States of America, which may be United States Treasury obligations such as its State and Local Government Series, which may be in book -entry form. (d) Until all Defeased Bonds shall have become due and payable, the Paying Agent/Registrar shall perform the services of Paying Agent/Registrar for such Defeased Bonds the same as if they had not been defeased, and the Issuer shall make proper arrangements to provide and pay for such services as required by this Ordinance. Section 27. DAMAGED, MUTILATED, LOST, STOLEN, OR DESTROYED BONDS. (a) Replacement Bonds. In the event any outstanding Bond is damaged, mutilated, lost, stolen, or destroyed, the Paying Agent/Registrar shall cause to be printed, executed, and delivered, a new bond of the same principal amount, maturity, and interest rate, as the damaged, mutilated, lost, stolen, or destroyed Bond, in replacement for such Bond in the manner hereinafter provided. (b) Application for Replacement Bonds. Application for replacement of damaged, mutilated, lost, stolen, or destroyed Bonds shall be made by the registered owner thereof to the Paying Agent/Registrar. In every case of loss, theft, or destruction of a Bond, the registered owner applying for a replacement bond shall furnish to the Issuer and to the Paying Agent/Registrar such security or indemnity as may be required by them to save each of them harmless from any loss or damage with respect thereto. Also, in every case of loss, theft, or destruction of a Bond, the registered owner shall furnish to the Issuer and to the Paying Agent/Registrar evidence to their satisfaction of the loss, theft, or destruction of such Bond, as the case may be. In every case of damage or mutilation of a Bond, the registered owner shall surrender to the Paying Agent/Registrar for cancellation the Bond so damaged or mutilated. (c) No Default Occurred. Notwithstanding the foregoing provisions of this Section, in the event any such Bond shall have matured, and no default has occurred which is then continuing in the payment of the principal of, redemption premium, if any, or interest on the Bond, the Issuer may authorize the payment of the same (without surrender thereof except in the case of a damaged or mutilated Bond) instead of issuing a replacement Bond, provided security or indemnity is furnished as above provided in this Section. (d) Charge for Issuing Replacement Bonds. Prior to the issuance of any replacement bond, the Paying Agent/Registrar shall charge the registered owner of such Bond with all 28 CITY SECRETARY ORIGINAL COPY legal, printing, and other expenses in connection therewith. Every replacement bond issued pursuant to the provisions of this Section by virtue of the fact that any Bond is lost, stolen, or destroyed shall constitute a contractual obligation of the Issuer whether or not the lost, stolen, or destroyed Bond shall be found at any time, or be enforceable by anyone, and shall be entitled to all the benefits of this Ordinance equally and proportionately with any and all other Bonds duly issued under this Ordinance. (e) Authority for Issuing Replacement Bonds. In accordance with Section 6 of Vernon's Ann. Tex. Civ. St. Art. 717k-6, this Section of this Ordinance shall constitute authority for the issuance of any such replacement bond without necessity of further action by the governing body of the Issuer or any other body or person, and the duty of the replacement of such bonds is hereby authorized and imposed upon the Paying Agent/Registrar, and the Paying Agent/Registrar shall authenticate and deliver such bonds in the form and manner and with the effect, as provided in Section 4(d) of this Ordinance for Bonds issued in conversion and exchange for other Bonds. Section 28. CUSTODY, APPROVAL, AND REGISTRATION OF BONDS; BOND COUNSEL'S OPINION; CUSIP NUMBERS; AND CONTINGENT INSURANCE PROVISION, IF OBTAINED. The Mayor of the Issuer is hereby authorized to have control of the Initial Bond issued hereunder and all necessary records and proceedings pertaining to the Initial Bond pending its delivery and its investigation, examination, and approval by the Attorney General of the State of Texas, and its registration by the Comptroller of Public Accounts of the State of Texas. Upon registration of the Initial Bond said Comptroller of Public Accounts (or a deputy designated in writing to act for said Comptroller) shall manually sign the Comptroller's Registration Certificate on the Initial Bond, and the seal of said Comptroller shall be impressed, or placed in facsimile, on the Initial Bond. In addition, if bond insurance is obtained, the Bonds may bear an appropriate legend as provided by the Insurer. Section 29. COVENANTS REGARDING TAX EXEMPTION. The Issuer covenants not to take any action which would adversely affect, and to take any required action to ensure, the treatment of the Bonds as obligations described in Section 103 of the Internal Revenue Code of 1986 (the "Code"), the interest on which is not includable in the "gross income" of the holder for purposes of federal income taxation. In furtherance thereof, the Issuer covenants as follows: (a) to take any action to assure that no more than 10 percent of the proceeds of the Bonds (less amounts deposited to a reserve fund, if any) are used for any "private business use," as defined in Section 141(b)(6) of the Code or, if more than 10 percent of the proceeds are so used, that amounts, whether or not received by the Issuer, with respect to such private business use, do not, under the terms of this Resolution, or any underlying arrangement, directly or indirectly, secure or provide for the payment of more than 10 percent of the debt service on the Bonds, in contravention of Section 141(b)(2) of the Code; 29 CITY SECRETARY ORIGINAL COPY (b) to take any action to assure that in the event that the "private business use" described in SubSection (a) hereof exceeds 5 percent of the proceeds of the Bonds (less amounts deposited into a reserve fund, if any) then the amount in excess of 5 percent is used for a "private business use" which is "related" and not "disproportionate," within the meaning of Section 141(b)(3) of the Code, to the governmental use; (c) to take any action to assure that no amount which is greater than the lesser of $5,000,000, or 5 percent of the proceeds of the Bonds (less amounts deposited into a reserve fund, if any) is directly or indirectly used to finance loans to persons, other than state or local governmental units, in contravention of Section 141(c) of the Code; (d) to refrain from taking any action which would otherwise result in the Bonds being treated as "private activity bonds" within the meaning of Section 141(b) of the Code; (e) to refrain from taking any action that would result in the Bonds being "federally guaranteed" within the meaning of Section 149(b) of the Code; (f) to refrain from using any portion of the proceeds of the Bonds, directly or indirectly, to acquire or to replace funds which were used, directly or indirectly, to acquire investment property (as defined in Section 148(b)(2) of the Code) which produces a materially higher yield over the term of the Bonds, other than investment property acquired with -- (1) proceeds of the Bonds invested for a reasonable temporary period of 3 years or less or, in the case of a refunding bond, for a period of 30 days or less until such proceeds are needed for the purpose for which the bonds are issued, (2) amounts invested in a bona fide debt service fund, within the meaning of Section 1.103-13(b)(12) of the Treasury Regulations, and (3) amounts deposited in any reasonably required reserve or replacement fund to the extent such amounts do not exceed 10 percent of the proceeds of the Bonds; (g) to otherwise restrict the use of the proceeds of the Bonds or amounts treated as proceeds of the Bonds, as may be necessary, so that the Bonds do not otherwise contravene the requirements of Section 148 of the Code (relating to arbitrage) and, to the extent applicable, Section 149(d) of the Code (relating to advance refundings); (h) to pay to the United States of America at least once during each five-year period (beginning on the date of delivery of the Bonds) an amount that is at least equal to 90 percent of the "Excess Earnings," within the meaning of Section 148(f) of the Code and to pay to the United States of America, not later than 60 days after the Bonds have been paid 30 CITY SECRETARY ®RIGINAL COPY in full, 100 percent of the amount then required to be paid as a result of Excess Earnings under Section 148(f) of the Code; and (i) to maintain such records as will enable the Issuer to fulfill its responsibilities under this Section and Section 148 of the Code and to retain such records for at least six years following the final payment of principal and interest on the Bonds. In order to facilitate compliance with the above covenants (g), (h), and (i), a "Rebate Fund" is hereby established by the Issuer for the sole benefit of the United States of America, and such Fund shall not be subject to the claim of any other person, including without limitation the bondholders. The Rebate Fund is established for the additional purpose of compliance with Section 148 of the Code. It is the understanding of the Issuer that the covenants contained herein are intended to assure compliance with the Code and any regulations or rulings promulgated by the U.S. Department of the Treasury pursuant thereto. In the event that regulations or ruling are hereafter promulgated which modify, or expand provisions of the Code, as applicable to the Bonds, the Issuer will not be required to comply with any covenant contained herein to the extent that such modification or expansion, in the opinion of nationally -recognized bond counsel, will not adversely affect the exemption from federal income taxation of interest on the Bonds under Section 103 of the Code. In the event that regulations or rulings are hereafter promulgated which impose additional requirements which are applicable to the Bonds, the Issuer agrees to comply with the additional requirements to the extent necessary, in the opinion of nationally -recognized bond counsel, to preserve the exemption from federal income taxation of interest on the Bonds under Section 103 of the Code. Section 30. DESIGNATION AS QUALIFIED TAX-EXEMPT OBLIGATIONS. The Issuer hereby designates the Bonds as "qualified tax-exempt obligations" as defined in Section 265(b)(3) of the Code. In furtherance of such designation, the Issuer represents, covenants and warrants the following: (a) that during the calendar year in which the Bonds are issued, the Issuer (including any subordinate entities) has not designated nor will designate obligations, which when aggregated with the Bonds, will result in more than $10,000,000 of "qualified tax-exempt obligations" being issued; and (b) that the Issuer reason- ably anticipates that the amount of tax-exempt obligations issued, during the calendar year in which the Bonds are issued, by the Issuer (or any subordinate entities) will not exceed $10,000,000. Section 31. SALE OF INITIAL BOND. The Initial Bond is hereby sold and shall be delivered to Southwest Securities Incorporated for cash for the price of $2,178,933, which represents the par amount of such Bonds less an underwriter's discount for such Bonds of $51,067. It is hereby officially found, determined, and declared that the Initial Bond has been sold pursuant to the terms and provisions of a Purchase Contract in substantially the form attached hereto as Exhibit A, which the Mayor of the Issuer is hereby authorized and directed to execute and deliver and which the City Secretary of the issuer is hereby 31 r S .G T IC1iA4- COPY authorized and directed to attest. It is hereby officially found, determined, and declared that the terms of this sale are the most advantageous reasonably obtainable. The Initial Bond shall be registered in the name of Southwest Securities Incorporated. Section 32. APPROVAL OF OFFICIAL STATEMENT. The Issuer hereby approves the form and content of the Official Statement relating to the Bonds and any addenda, supplement or amendment thereto, and approves the distribution of such Official Statement in the reoffering of the Bonds by the Underwriter in final form, with such changes therein or additions thereto as the officer executing the same may deem advisable, such determination to be conclusively evidenced by his execution thereof. Section 33. APPROVAL OF ESCROW AGREEMENT AND TRANSFER OF FUNDS. The Mayor of the Issuer is hereby authorized and directed to execute and deliver and the City Secretary of the Issuer is hereby authorized and directed to attest an Escrow Agreement in substantially the form attached hereto as Exhibit B. In Addition, the Mayor is authorized to execute such subscription for the purchase of U. S. Treasury Securities, State and Local Government Series, and to authorize the transfer of such funds of the Issuer, as may be necessary for the Escrow Fund. Section 34. NOTICE OF REDEMPTION. That there is attached to this Ordinance, as Exhibit C, and made a part hereof for all purposes, a notice of prior redemption for the Refunded Bonds to be redeemed prior to stated maturity, and such Refunded Bonds described in said notice of prior redemption are hereby called for redemption and shall be redeemed prior to maturity on the date, place, and at the price as set forth therein. Section 35. NOTICE TO PAYING AGENT. The Refunded Bonds described in Exhibit C attached hereto are so called for redemption, and Ameritrust Texas National Association, Dallas, Texas is hereby directed to make appropriate arrangements so that such Refunded Bonds may be redeemed at said bank on the redemption date. A copy of such Notice of Redemption shall be delivered to the Paying Agent bank so mentioned. Section 36. REASONS FOR REFUNDING. That the Issuer deems it advisable to issue the refunding bonds in order to change the bond covenants for the issuance of additional bonds and to permit the issuance of additional bonds for improvements to the Utility System, with a limited increase to the annual debt service requirements of the Issuer, with an approximate increase to the debt service of $784,403.38. 32 CITY SECRETARY ORIGINAL COPY EXHIBIT A Purchase Contract The Purchase Contract has been omitted at this point as it appears in executed form elsewhere in this transcript. 33 EXHIBIT B Escrow Agreement The Escrow Agreement has been omitted at this point as it appears in executed form elsewhere in this transcript. 34 CITY SECRETARY ORIGINAL COPY EXHIBIT C NOTICE OF REDEMPTION NOTICE IS HEREBY GIVEN that the City of Sanger, in Denton County, Texas, has called for redemption the outstanding bonds of the City as described as follows: CITY OF SANGER, TEXAS UTILITY SYSTEM REVENUE BONDS, SERIES 1977, dated May 15, 1977, maturing May 15, 1993 through May 15, 1996, in the aggregate principal amount of $145,000 for the redemption price of the principal amount thereof and accrued interest to call date of the Bonds so called for redemption at Ameritrust Texas National Association, Dallas, Texas. Call date: May 15, 1992. On May 15, 1992, interest on such Bonds shall cease to accrue and be payable. CITY OF SANGER, TEXAS UTILITY SYSTEM REVENUE BONDS, SERIES 1982, dated June 15, 1982, maturing May 15, 1993 through May 15, 1997, in the aggregate principal amount of $250,000 for the redemption price of the principal amount thereof and accrued interest to call date of the Bonds so called for redemption at Ameritrust Texas National Association, Dallas, Texas. Call date: May 15, 1992. On May 15, 1992, interest on such Bonds shall cease to accrue and be payable. THIS NOTICE is issued and given pursuant to the redemption provisions in the proceedings authorizing the issuance of the aforementioned Bonds and in accordance with the recitals and provisions of said Bonds. NOTICE IS GIVEN that due and proper arrangements have been made for providing the place of payment of said Bonds called for redemption with funds sufficient to pay the principal amount of said Bon ds and the interest thereon to the redemption date. In the event said Bonds, or any of them are not presented for redemption by the date fixed for their redemption, they shall not thereafter bear interest. IN COMPLIANCE with the Interest and Dividend Tax Compliance Act of 1983, taxpayers making payments of principal due on debt securities may be obligated to withhold 20% tax from remittance to individuals who failed to provide such taxpayer with a valid taxpayer identification number. To avoid the imposition of this withholding tax, such bondholders should submit a certified taxpayer identification numb er when surrendering the bonds for redemption. NOTICE IS FURTHER GIVEN that the Bonds should be submitted to either of the following addresses: In Person Ameritrust Texas National Association 1900 Pacific Avenue, 14th Floor Dallas, Texas 75201 In Writine Ameritrust Texas National Association P. O. Box 2320 Dallas, Texas 75221-2320 Nei Armstrong, Mayor City of Sanger 35 NOTICE OF REDEMPTION NOTICE IS HEREBY GIVEN that the City of Sanger, in Denton County, Texas, has called for redemption the outstanding bonds of the City as described as follows: CITY OF SANGER, TEXAS UTILITY SYSTEM REVENUE BONDS, SERIES 1985, dated May 15, 1985, maturing May 15, 1996 through May 15, 2001, in the aggregate principal amount of $725,000 for the redemption price of the principal amount thereof and accrued interest to call date of the Bonds so called for redemption at Ameritrust Texas National Association, Dallas, Texas. Call date: May 15, 1995. On May 15, 1995, interest on such Bonds shall cease to accrue and be payable. THIS NOTICE is issued and given pursuant to the redemption provisions in the proceedings authorizing the issuance of the aforementioned Bonds and in accordance with the recitals and provisions of said Bonds. NOTICE IS GIVEN that due and proper arrangements have been made for providing the place of payment of said Bonds called for redemption with funds sufficient to pay the principal amount of said Bonds and the interest thereon to the redemption date. In the event said Bonds, or any of them are not presented for redemption by the date fixed for their redemption, they shall not thereafter bear interest. IN COMPLIANCE with the Interest and Dividend Tax Compliance Act of 1983, taxpayers making payments of principal due on debt securities may be obligated to withhold 20% tax from remittance to individuals who failed to provide such taxpayer with a valid taxpayer identification number. To avoid the imposition of this withholding tax, such bondholders should submit a certified taxpayer identification number when surrendering the bonds for redemption. NOTICE IS FURTHER GIVEN that the Bonds should be submitted to either of the following addresses: In Person Ameritrust Texas National Association 1900 Pacific Avenue, 14th Floor Dallas, Texas 75201 Nel Armstrong, Mayor City of Sanger 36 In Writine Ameritrust Texas National Association P. O. Box 2320 Dallas, Texas 75221-2320 CITY SECRETARY ORIGINAL GORY CITY OF SANGER, TEXAS UTILITY SYSTEM REFUNDING AND IMPROVEMENT REVENUE BONDS, SERIES 1991 $2,230,000 CERTIFICATE FOR RESOLUTION THE STATE OF TEXAS COUNTY OF DENTON CITY OF SANGER We, the undersigned officers of said City, hereby certify as follows: 1. The City Council of said City convened in REGULAR MEETING ON THE 21ST DAY OF OCTOBER, 1991, at the City Hall, and the roll was called of the duly constituted officers and members of said City Council, to -wit: Nel Armstrong, Mayor Gerald Jenkins, Mayor Pro Tem John Berndt Wendell Thomas Margie C. Braxton Tommy Kincaid Rosalie Garcia, City Secretary and all of said persons were present, except the following absentees: Wendell Thomas, thus constituting a quorum. Whereupon, among other business, the following was transacted at said Meeting: a written RESOLUTION DIRECTING PUBLICATION OF NOTICE OF INTENTION TO ISSUE UTILITY SYSTEM REFUNDING AND IMPROVEMENT REVENUE BONDS, SERIES 1991 was duly introduced for the consideration of said City Council and read in full. It was then duly moved and seconded that said Resolution be passed; and, after due discussion, said motion carrying with it the passage of said Resolution, prevailed and carried by the following vote: AYES: All members of said City Council shown present above voted "Aye". NOES: None. 2. That a true, full and correct copy of the aforesaid Resolution passed at the Meeting described in the above and foregoing paragraph is attached to and follows this Certificates that said Resolution has been duly recorded in said City Council's minutes of said Meeting; that the above and foregoing paragraph is a true, full and correct excerpt from said City Council's minutes of said Meeting pertaining to the passage of said Resolution; that the persons named in the above and foregoing paragraph are the duly chosen, qualified and acting officers and members of said City Council as indicated therein; that each of the officers and members of said City Council was duly and sufficiently notified officially and personally, in advance, of the time, place and purpose of the aforesaid Meeting, and that said Resolution would be introduced and considered for passage at said Meeting, and each A said officers and members consented, in advance, to the holding of said Meeting for such purpose, and that said Meeting was open to the public and public notice of the time, place and purpose of said meeting was given, all as required by Vernon's Ann. Civ. St. Article 625247. 3. That the Mayor of said City has approved and hereby approves the aforesaid Resolution; that the Mayor and the City Secretary of said City have duly signed said Resolution; and that the Mayor and the City Secretary of said City hereby declare that their signing of this Certificate shall constitute the signing of the attached and following copy of said Resolution for all purposes. SIGNED AND SEALED the 21st day of October, 1991. SEAL RESOLUTION DIRECTING PUBLICATION OF NOTICE OF INTENTION TO ISSUE CITY OF SANGER, TEXAS UTILITY SYSTEM REFUNDING AND IMPROVEMENT REVENUE BONDS, SERIES 1991, IN THE PRINCIPAL AMOUNT OF $2930%000 THE STATE OF TEXAS COUNTY OF DENTON CITY OF SANGER WHEREAS, it is deemed advisable by the City Council to authorize the publication A notice of intention to issue Utility System revenue bonds; and WHEREAS, it is hereby officially found and determined that the meeting at which this Resolution was passed, was open to the public and public notice of the time, place, and purpose of said meeting was given, all as required by Art. 625247, V.A.T.C.S. THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF SANGER. 1. That attached hereto is a form of the notice of intention to issue Utility System Revenue Bonds, the form and substance of which is hereby adopted and approved. 2. That the City Secretary shall cause said notice to be published in substantially the form attached hereto, in a newspaper of general circulation in said City, and published in said City, on the same day in each of two consecutive weeks, the date of the first publication thereof to be at least 14 days prior to the time set for the issuance of such revenue bonds shown in said notice. 3. That this Resolution shall become effective immediately upon adoption. ------------------ CITY OF SANGER, TEXAS NOTICE OF INTENTION TO ISSUE UTILITY SYSTEM REFUNDING AND IMPROVEMENT REVENUE BONDS, SERIES 1991, IN THE PRINCIPAL AMOUNT OF $2,3001000 Notice is hereby given that the City Council of the City of Sanger, Texas, intends to consider for passage, at a Regular Meeting to be held at 7:00 P.M. on November 18, 1991, at their meeting place, at City Hall, Sanger, Texas, an Ordinance authorizing the issuance, sale and delivery of an issue of bonds to be designated as "City of Sanger, Texas Utility System Revenue Refunding and Improvement Bonds, Series 1991", providing $800,000 in principal amount of bonds for the purpose of improving and extending the combined Waterworks, Sewer and Electric System, and providing $1,500,000 in principal amount of bonds for the purpose of refunding the outstanding City of Sanger, Texas Utility System Revenue Bonds, Series 1977, Series 1982 and Series 1985, for a total aggregate amount not to exceed $2,300,000, with such bonds to be payable from and secured by, a first lien on and pledge of the Net Revenues of the City's Utility System, being the City's Waterworks, Sewer and Electric System, all as will be further described, defined and provided in the aforesaid Ordinance. Said bonds will bear interest at maximum rates not to exceed 15% per annum, will be scheduled to mature serially within a maximum of not to exceed 30 years from their date, and will be subject to redemption prior to maturity, and will have such other and further characteristics as will be provided in the aforesaid Ordinance. Said bonds will be authorized, issued, sold and delivered pursuant to Articles 1111 through 1118, V.A.T.C.S., and other applicable laws. Nel Armstrong, Mayor City of Sanger AFFIDAVIT OF PUBLICATION THE STATE OF TEXAS COUNTY OF DENTON . CITY OF SANGER . BEFORE ME, a notary public in and for the above named County, on this day personally appeared the person whose name is subscribed below, who, having been duly sworn, says upon oath that he or she is a duly authorized officer or employee of the the SANGER COURIER, which is a newspaper of general circulation in the above named County, devoting not less than 25% of its total column lineage to the carrying of items of general interest, published not less frequently than once each week, entered as second-class postal matter in the county where published, and having been published regularly and continuously for not less than 12 months prior to the making of any publication; and that a true and correct copy of the NOTICE OF INTENTION TO ISSUE UTILITY SYSTEM REVENUE REFUNDING AND IMPROVEMENT BONDS, SERIES 1991, a clipping of which is attached to this Affidavit, was published in said Newspaper on the following dates: 1991. October 31, 1991 November 7, 1991 Authorized Officer or Employee SUBSCRIBED AND SWORN TO BEFORE ME on the �� day of��� � , Notary Public ETTA �Tf�� ;pill aT�Tfv pF T��A� commission Expires 1=205 NEW ISSUE RATINGS MOODY'S: IN THE OPINION OF BOND COUNSEL, INTEREST ON THE BONDS WILL BE EXCLUDABLE FROM GROSS INCOME FOR PURPOSES OF FEDERAL INCOME TAXATION UNDER EXISTING LAW. SEE "TAX EXEMPTION" HEREINFOR ADISCUSSION OF BOND COUNSEL'S OPINION, INCLUDING A DESCRIPTION OF THE ALTERNATIVE MINIMUM TAX. THE CITY HAS DESIGNATED THE BONDS AS "QUALIFIED TAX-EXEMPT" BONDS FOR FINANCIAL INSTITUTIONS. 0 Dated: December 1, 1991 $292309000* CITY OF SANGER, TEXAS (Denton County) UTILITY SYSTEM REFUNDING EVIPROVEMENT REVENUE BONDS, S 1991 Due: May 15, as shown below The Utility System Refunding and Improvement Revenue Bonds, Series 1991 (the "Bonds"), are special obligations of the City of Sanger, Texas (the "City") issued pursuant to a bond ordinance (the "Bond Ordinance") adopted by the City Council of the City and are payable solely from and equally and ratably secured by a first lien on and pledge of the Net Revenues of the City's combined Waterworks, Electric, and Sewer Systems (the "System"), pledged therefor under the Bond Ordinance. The Bonds do not constitute general obligations of the City, the State of Texas or any political subdivision of the State of Texas. The taxing power of neither the City nor the State of Texas is pledged as security for the Bonds. Principal of the Bonds is LA upon presentation at maturity or redemption at the office of the paying agent/registrar (the "Paying Agent/Registrar"), initially Amentrust Texas National Association, at its office in Dallas, Texas. Interest on the Bonds is payable May 15, 1992, and each November 15 and May 15 thereafter until the earlier of maturity or redemption by check, dated as of the interest payment date, and mailed by the Paying Agent/Registrar to registered owners, as shown on the registration books of the Paying Agent/Registrar on the Record Date, or by such other customary banking arrangements, acceptable to the Paying Agent/Registrar, requested by, and at the risk and expense of, the registered owner. The Bonds are subject to redemption prior to stated maturity on and after May 15, 2001. See "THE BONDS -Optional Redemption" herein. The proceeds of the Bonds will be used to provide funds sufficient (i) to refund all of the City's outstanding Series 1977, Series 1982 and Series 1985 utility system revenue bonds, (ii) to construct improvements and extensions to the System and, (iii) to pay the costs related to the issuance of the Bonds. See "PLAN OF FINANCING" herein. � _;_ _Il I' Y • I 1 Principal Interest Reoffering Principal Interest Reoffering Amount* Maturity Rate Yield a Amount* Maturit Rate Yield a $ 15,000 1992 % % $ 115,000 2002 15,000 1993 125,000 2003 20,000 1994 135,000 2004 25,000 1995 1409000 2005 80,000 1996 150,000 2006 85,000 1997 160,000 2007 90,000 1998 170,000 2008 100,000 1999 185,000 2009 105,000 2000 195,000 2010 110,000 2001 210,000 2011 (a) The initial offering yields will be established by and are the sole responsibility of the Underwriter. The Bonds are offered for delivery when, as and if issued and are subject to approval of legality by the Attorney General of the State of Texas and the approval of certain legal matters by McCall, Parkhurst & Horton , Bond Counsel, Dallas, Texas. It is expected that the Bonds, in definitive form, will be available for delivery in New York, New York, on or about December 18, 1991. *Subject to change. `61 U,1 1 • .: : 1 1 .. �'. • I • :- 1 • • 1 1 • • i - : • 1 1 any jurisdiction to any person to whom it is unlawfidto make such offer 1 such jurisdiction. 11 1 • : 1 • I - 1 - • 1 1 : • ��1 i • �. • 1 i • II • 1 • 11 - 1 • 1 • 1 1 1 - 1 1 ,11 1 • • 1 1 �1 I - 1 1 • 1 / = 1 • 1 i 1 • I ` 74 : • 1 • . : i . - 1 IT-• it : 1 - 5JXJ2 1 • 11 : U111.• epresentations must not be relied upon. 1 i • il: •1 • 1 1' - 1 1: r��i i 1 �• • 1- :11 1 1- I • 11 •1 •1 1�1 111 • 1' ;ources which are believed to be reliable,but not guaranteed as to accuracy or • 11 • - 1 and is I • to be :onstrued as a representation by the Underwriter. The information 1 1 expressions of opinions co1 i 1 heremi • � • 1 : i 1 1 • i • 1 - 1 1 i - 1 � 1 � 1 - - • 1 � 11 1 1 • : 1 II : 1 - 1 - / 1 " 1111111 61 in 1,11.1• i 1: 1 1: • 1 /• 1: 1P1 I• 1' 1 1 1: 1 �• 1 ' • 1 1 • I � - 11 - r � / � 1 • 1 � : 1 1 • / i • 1 • 11 • ' 1 : 1 � • • // 11 • 11 � • Underwriter 1' Bonds are released for - :11 the Bonds maybe offered :1/ sold at prices other than the initial offering price, includmigyto dealers1• may sell 1' Bonds 1. 1 • investment accounts. Ran i it it I ' ' t 1 1 1 I Official Statement: Introduction................................................... 1 Planof Financing ............................................... 1 Purpose .................................................... 1 RefundedBonds ............................................... 1 Sourcesand Uses of Funds ........................................ 3 TheBonds ................................................... 3 General.................................................... 3 Description of the Bonds .......................................... 3 Securityfor Payment ............................................ 4 Application of System Revenues ..................................... 4 Rates ...................................................... 4 Additional Parity Bonds .......................................... 5 Revenue Fund ................................................ 5 Remedies in the Event of Default .................................... 6 OptionalRedemption ............................................ 6 PayingAgent/Registrar........................................... 6 Transfer, Exchange and Registration .................................. 7 Record Date for Interest Payment .................................... 7 Limitation on Transfer or Exchange of Bonds ............................. 7 ReplacementBonds ............................................. 7 Condensed Waterworks and Sewer System Operating Statements .................. 8 EnterpriseFund Balances ......................................... 8 RevenueBond Debt Data .......................................... 9 Revenue Bonds Authorized but Unissued ................................ 9 NotesPayable ................................................ 9 Anticipated Issuance of Additional Revenue Bonds .......................... 9 PaymentRecord ............................................... 9 CoverageFactors of the Bonds ....................................... 9 Revenue Bond Debt Service Requirements ................................ 10 Principal Repayment Schedule ....................................... 11 OFFICIAL STATEMENT 52,230,000• •PPP (Denton UT,ELrrY SYSTEM REFUNDING AND 4FROVEMENT REVENUE BONDS, SERIES 1991 INTRODUCTION This Official Statement provides certain information in connection with the issuance by the City of Sanger, Texas the "City") of its Utility System Refunding and Improvement Revenue Bonds, Series 1991 (the "Bonds"). Ir or IT )f the State of Texas, particularly Article 717k and Articles 1111 through 1118, V.A.T.C.S., as amended. Certj"—*-Pr )ortions of the Bond Ordm=ce are contained 'in Appendix B. Included in this Official Statement are descriptions of the Bonds, the Bond Ordinance, information relating to the operation or the La s combined Waterworks, Electric and Sewer Systems (the "System") and certain information about the City and its finances. ALL DESCRIPTIONS OF DOCUMENTS CONTAINED HEREIN ARE SUMMARIES ONLY AND ARE QUALIFIED IN THEIR ENTIRETY BY REFERENCE TO EACH SUCH DOCUMENT. Copies of such documents may be obtained from the City or the Underwriter. PLAN OF FINANCING ' 1; 4.7►`l� The Bonds are being issued by the City to provide funds sufficient to refund all of the City's outstanding Utility System Revenue Bonds, Series 1977, Series 1982 and Series 1985, as more fully described below under the caption "Refunded Bonds% for the purpose of restructuring its debt service requirements in a manner to allow for extended level annual principal and interest payments, resulting in a reduction in annual debt service requirements for the first nine years. Additionally, proceeds of the Bonds will be used to improve and extend the System and to pay the costs related to the issuance of the Bonds. 044111010 The series of bonds of which all are being refunded were originally issued in the aggregate principal amount of $1,655,000 and are presently outstanding in the aggregate principal amount of $1,240,000 (the."Refunded Bonds") as described on the following page: *Subject to change. SOURCES AND USES OF FUNDS Par Amount of :.n•. ._ rued Interest Purchase Beginning Deposit . Construction Fund Costs of Issuance and Municipal Bond Insurance Policy Original Issue Discount Discount Deposit to Interest and Sinidng Fund Contingency Total :d • n- Bond d-•.. _, . n- •n ,.i n, � •- �, • •n Evil VJ of n n are availablefrom the City or nUnderwriter. •r n- • ,: n .• n .n n- Bond ,- •: • •n •• n, n • -n•- n• 15, thereafter until the earlier of maturity or redemption. 3 The City has reserved the right to issue Additional Bonds for any lawful purpose, subject to the terms and conditions Saar stated in the Bond Ordinance. See Appendix B - "CERTAIN PROVISIONS OF THE BOND ORDINANCE". The Bond Ordinance provides that Additional Bonds may be issued, provided that none shall be issued unless the following conditions have been met: (a) a certificate is executed by the Mayor and City Secretary of said City to the effect that no default exists in connection with any of the covenants or requirements of the ordinance or ordinances authorizing the issuance of all then outstanding Bonds, First Lien Bonds, Additional Parity First Lien Bonds, and Additional Bonds; (b) a certificate is executed by the Mayor and City Secretary of said City to the effect that the Interest and Sinking Fund or Reserve Fund contains the amounts then required to be on deposit therein; (c) a certificate is executed by a Certified Public Accountant to the effect that, in his opinion, the Net Earnings of the System for the last complete fiscal year of the City, or for any twelve consecutive calendar month period ending not more than 90 days prior to the passage of the ordinance authorizing the issuance of such Additional Bonds, were at least 1.50 times the average annual principal and interest requirements for all then outstanding bonds, First Lien Bonds, Additional Parity First Lien Bonds, Additional Bonds, and the proposed Bonds; (d) a certificate is executed by an Independent Consulting Engineer to the effect that, in his opinion, the average annual Net Revenues of the System will be at least equal to the average annual principal and interest requirements for all then outstanding Bonds, First Lien Bonds, Additional Bonds then First Lien Bonds and Additional Bonds, and for the installment or series of Additional Bonds then proposed to be issued, throughout the period during which said obligations are scheduled to be outstanding; (e) the Additional Bonds are scheduled to mature only on May 15 in each of the years in which they are scheduled to mature; (f) the ordinance authorizing the issuance of such installment or series of Additional Bonds provides that the aggregate amount to be accumulated and maintained in the Reserve Fund shall be increased by an additional amount not less than the average annual principal and interest requirements for said Additional Bonds, and that such additional amount shall be so accumulated within sixty one months from the date of the Additional Bonds, by the deposit in the Reserve Fund of the necessary sums in equal monthly installments; provided, however, that the aggregate amount to be accumulated in the Reserve Fund shall never be required to exceed the average annual principal and interest requirements for all then outstanding bonds and Additional Bonds and for the installment or series of Additional Bonds then proposed to be issued; and (g) all calculations of average annual principal and interest requirements made pursuant to this section are made as of and from the date of the Additional Bonds then proposed to be issued. .W. . 7or repairs or .� extensionsIng Following retirement or defeasance of the Outstanding Bonds, the Bond Ordinance provides that condition (b) will be modified to require that the City must secure a certificate executed by a Certified Public Accountant to the effect that, in his opinion, the Net Revenues of the System pledged to the payment of the Outstanding Bonds and Additional Bonds, for the last complete fiscal year of the City or for any twelve consecutive calendar month period ending not more than ninety days prior to the passage of the ordinance authorizing the issuance of such Additional Bonds were at least 1.10 times the average annual principal and interest requirements for all then Outstanding Bonds and Additional Bonds, including the Additional Bonds then proposed to be issued. In making a determination of the Net Revenues, the Accountant may take into consideration a change in the rates and charges for services and facilities afforded by the System that became effective at least sixty (60) days prior to the last day of the period for which such Net Revenues are determined and, for purposes of satisfying the above Net Revenues test, make a pro forma determination of the Net Revenues for the period of time covered by his certification or opinion based on such change in rates and charges being in effect for the entire period covered by the Accountant's certificate or opinion. R144i"TORIC The City covenants in the Bond Ordinance that it will provide for the accumulation of an amount not less than the average annual principal and interest requirements of Bonds Similarly Secured. See Appendix B -"CERTAIN PROVISIONS OF THE BOND ORDINANCE". On or before the loth day of each month following the month of delivery of the Bonds, the City shall deposit an amount which, in equal monthly installments, will accumulate within 60 months the difference between the amount on deposit in the Reserve Fund and the additional amount required after giving effect to the issuance of the Bonds. The Reserve Fund shall be used to pay principal of or interest on the then Outstanding Bonds and the Bonds falling due at any time when there is not sufficient money available in the Interest and Sinking Fund. No payment will be required to be made into the Reserve Fund so long as there is on deposit therein the sum equal to the average annual principal and interest requirements for the then Outstanding Bonds and the Bonds, except that whenever said Reserve Fund is reduced below that amount, payments into the Reserve Fund shall be made on or before the loth day of the month until such time as the Reserve Fund has been restored to the required amount. 5 • M • .' 1 - �1 : 1 / i 1 ` �1 • 1 1 - = • 1 • I - 1 ` �1 • i 1 11 surrender thereof to 1' Paying AgentfRegistrar a11 such transferor exchange 1 be without1-1 1 chargeto the - e1 owner / • :1 • • 1 `• 1111 charges required • 1- paid 1 •eto such- •1 exchange 11transfer,i :•11 I1: 1- `1e1 / 1-execution of 1 ass ignment • 11 • 1 1' Bonds • 1 • t- t 11 - 1 1transfer: and ` 1 11 ' 1 acceptable 11 1 1 ` 1 Bondsqew e1 and delivered 1 an exchange or transfer1' 1 the same type,1 authorized 1 ' 1 • 1/ 1 : / 1 : i 1 • 1 ' : 11 11 : 1 / t i 1 : : 11 • i / 1 1 - 1 ` 1 1Iond or Bonds surrendered for exchange or transfer. ' ♦ 1 ♦ : - • 1 : - ♦ 1 ' 1 / : 1 • 1 : 1 1 - - 1 11 �' 1 1 : • : ♦ 1 1 1 1 1 •: of the month next preceding 1 interest payment date,1ee1 1 the :♦11 Ordinance. In the event of anon -payment of interest on a scheduled interest payment date, and for thirty (30) days thereafter, a new record date for such interest payment (the "Special Record Date") will be established by the Paying Agent/Registrar, if and when funds for the payment of such interest have been received from the City. Notice of the Special Record Date and of the scheduled payment date of the past due interest (the "Special Payment Date" which shall be fifteen (15) days after the Special Record Date) shall be sent at least five (5) business days prior to the Special Record Date by United States mail, first-class postage prepaid, to the address of each registered owner of a Bond appearing on the Security Register of the Paying Agent/Registrar at the close of business on the last business day next preceding the date of mailing of such notice. Neither the City nor the Paying Agent/Registrar shall be required to issue, transfer or exchange -any Bond called for redemption, in whole or in part, when such redemption is scheduled to occur within thirty (30) calendar days after the transfer or exchange date, provided, however, such limitation shall not be applicable to an exchange by the registered owner of the uncalled principal balance of a Bond. If any Bond is mutilated, destroyed, stolen or lost, a new Bond of the same series and maturity, and in the same principal amount as the Bond so mutilated, destroyed, stolen or lost, will be issued subject to the provisions therefor in the Bond Ordinance. In the case of a mutilated Bond, such new Bond will be delivered only upon surrender and cancellation of such mutilated Bond. In the case of any Bond issued in lieu of and substitution for a Bond which as been destroyed, stolen or lost, such new Bond will be delivered 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, only (a) upon filing with the Paying Agent/Registrar evidence that such Bond has been destroyed, stolen or lost and proof of the ownership thereof, (b) upon furnishing the Paying Agent/Registrar with such security and indemnity as may be required by the Paying Agent/Registrar to save it and the City harmless, and (c) upon satisfaction of any other reasonable requirements imposed by the City and the Paying Agent/Registrar. The person requesting the authentication and delivery of a new Bond must pay such expenses as the Paying Agent/Registrar may incur in connection therewith. 7 Original Issue Amount Description $ 295,000 Utility System Revenue Bonds, Series 1973 3059000 Utility System Revenue Bonds, Series 1976 2,2309000 (a) Utility System Refunding and Improvement Revenue Bonds, Series 1991 (a) Includes the Bonds, but excludes the Refunded Bonds. Subject to change. 40,000 1759000 2,230,000 (a) 111 Date of Amount Issued To Amount Authorization Purpose Authorized Date Unissued 1-3141 Water $ 860,000 $ 450,000 $ 410,000 1-3141 Landfill 150,000 - 150,000 4-0243 Electric 300.000 300.000 Totals The City entered into a note payable with Gainesville National Bank of Sanger for the purpose of purchasing a bucket truck for the System. The original amount of this note was $54,487 and bears interest at the rate of 9.59b per annum. The note is presently outstanding in the amount of $7,193 with final payment due on March 10, 1992. The City does not anticipate the issuance of additional revenue bonds in calendar year 1992. The City has never defaulted with respect to the timely payment of its principal and interest requirements on its revenue bonds. Unaudited Net Revenues Available for Debt Service, Fiscal Year Ended September 30, 1991............................................ . Average Annual Principal and Interest Requirements on the Bonds, 1993-2011.......................................... . Coverage Based on Unaudited Net Revenues, Fiscal Year Ended September30, 1991............................................ . *Subject to change. $ 407,885 $ 225,148* 1.81X* 0 Fiscal Year Principal Repayment Schedule Bonds Percent of Ending Outstanding The Unpaid At Principal M0 Bonds(a) Bonds Total Year End Retired 1992 $ 500000 $ 150000 65,000 $ 2,380,000 2.66 % 1993 55,000 15,000 709000 213102000 5.52 1994 559000 20,000 75,000 2,235,000 8.59 1995 559000 25,000 800000 2,155,000 11.86 1996 80,000 809000 2,0759000 15.13 1997 85,000 85,000 1,99%000 18.61 1998 90,000 909000 1,900,000 22.29 1999 100,000 100,000 19800,000 26.38 2000 105,000 105,000 10695,000 30.67 2001 1109000 110,000 19585,000 35.17 2002 1150000 1159000 19470,000 39.88 2003 125,000 1259000 1,345,000 44.99 2004 1359000 1359000 1,210,000 50.51 2005 140,000 140,000 19070,000 56.24 2006 150,000 150,000 920,000 62.37 2007 160,000 160,000 7609000 69.92 2008 1709000 170,000 590,000 75.87 2009 185,000 185,000 405,000 83.44 2010 195,000 195,000 210,000 91.41 2011 210.000 210.000 0 100.00 (a) Excludes the Refunded Bonds. *Subject to change. Residential: First 1,000 gallons Over 1,000 gallons Maximum /11 11- First 000 gallons Over 000 gallons Maximum it 1 11 11 . I 1ve Smtember 1 Multi -family dwellings are charged the residential rate times the number of occupied units. Average Name Monthly Bill National Living Center S 125.00 Sanger High School 125.00 Dairy Queen 125.00 North Texas Plastics 125.00 SweeneyIs 87.91 Royal Sanger Inn 78.14 W. W. Family Restaurant 67.51 Frank Millar (Business) 64.20 Buckhorn Restaurant 44.73 Sanger Auto -Mat 43.03 Total 885.52 DESCRIPTION OF THE ELECTRIC SYSTEM The City owns and operates its own electric distribution system. On January 7, 1985, the City entered into a ten year contract with the Brazos Electric Power Cooperative, Inc. whereby the City purchases electric power and energy at the rates shown below, subject to a fuel adjustment charge and power adjustment on demand and energy charges. Facilities Charge $ 257.00 per delivery point per month Demand Charge $ 6.75/KW of billing demand Energy Charge $ 9.8233 mills/KWH In addition, the City generates power only on a standby basis for emergencies. The electric system serves approximately 1,696 meters. The Bonds offered herein are secured by and payablefrom a lien on and pledge of the Net Revenues derived from the operation of the System. 7hereforc, the financial and statistical data that follows is presented for general informational purposes only. 1990 Certified Appraised Value established by the Denton Central Appraisal District ................................................ $ 79,914,917 (a) Less Exemptions: Local, Optional, Over 65 or Disabled Homestead ..... 21498,592 Disabled or Deceased Veterans' ................ 55,500 Open -Space Land 5.234.282 7.788.374 1990 Certified Net Assessed Valuation (100% of Market Value) 72 126 543 Total General Obligation Debt Outstanding 450,000 Interest and Sinking Fund Balance (Unaudited as of October 15, 1991) ....... $ 9,949 Ratio of Total General Obligation Debt to 1991 Net Assessed Valuation............................................ 0.62 % 1990 Estimated Census Population - 3,508 Per Capita 1990 Certified Net Assessed Valuation - $20,561 Per Capita Total General Obligation Debt - $128 Area - 2.5 Square Miles (a) For a detailed discussion of ad valorem taxation see "THE PROPERTY TAX CODE AS APPLIED TO THE CITY", herein. The value placed upon property within the Appraisal District is subject to review by an appraisal review board appointed by the Board of Directors of the Appraisal District. The Appraisal District is required to review the value of property within the Appraisal District every three years. The City may require annual review, at its own expense, and is entitled to challenge the determination of appraised value of property within the City by petition filed with the Appraisal Review Board. :I '' A' N 1 Pursuant to a comprehensive Property Tax Code enacted by the Texas Legislature (the "Tax Code"), there has been establisher) for each county in the State of Texas a single appraisal district with responsibility for recording and appraising property for all taxing units within the county and a single appraisal review board with responsibility for reviewing and equalizing the values established by the appraisal district. The appraisal of property within the City is the responsibility of the Appraisal District for Denton County (the "Appraisal District"). The Appraisal District is governed by a board of five directors appointed by the votes of the governing bodies of the various governmental units within Denton County, with votes weighted by relative tax levy. The Tax Code requires the Appraisal District, by May 15 of each year or as soon thereafter as practicable, to prepare appraisal records listing all property that is taxable in the Appraisal District and stating the appraised value of each parcel or item of taxable property. Property is to be appraised as of January 1 of each year, and the Tax Code generally requires appraisals at 100 % of market value. Land used for agriculture, timber production or open space may qualify for valuation on productive capacity rather than market value, thereby resulting in a lower taxable value. The next year of full reappraisal of all taxable property within the City is 1993. Appraisals are subject to review by the appraisal review board. Under certain circumstances taxpayers and taxing units (such as the City) may appeal an order of the appraisal review board by filing a petition for review in state district court. In such event, the value of the property in question will be determined by the court, or by a jury if requested by any party. Absent any such appeal, the appraisal roll as prepared by the appraisal district and approved by the appraisal review board must be used by each taxing jurisdiction in establishing its tax rolls and tax rate. 15 • 1 1 1 : 1 i 1: 1 i 1 • 1: 1 1 1 1 • 1 • 1- 1• 1 • • 1 :IM10117MM • tt • 1 • 1 - • 1 • 1 1 • 1 i 1 � • 1 � �'• • 1 1 1 �1 • 1 ' 1 • : 11 • 1 • 1 • • ' 11 1 • , 1 1 1 • • 1 • 1 1 1 11 : 1 • 1 1 - • 11 • 1 • 1 •1- - 111• �• 1 1- 1 !1 i� I 1• • 1 -1 • •1 :11 : public hearing •1 1' proposed increase is held before 1' total-*increased.Section 1 of the Tax Code provides that a public hearing 1- held when an annual increase1 the effective tax rate, calculated 1 1' manner prescribed 1 Section 1 of the Tax • 1 - is more tharl%and Section 26.07 • an increase in 1- eff9ctive t9x 5izte, trik- -11 it elv.6im wYeT, fie-eltickve,1 11111 If 1' ;r'7LvlTW mar's effective tax rate. Amendmentsto the Tax • 1 - effective January1988, 1 / 1 the methods 1 • 1 �alculating and determining 1- effective tax rate, and the effectof such changes1- to reduce the basis • 1letermining a percentage micrease in 1' effective1: necessitates 1holding of a public hearing • 1 • • 1• e1 tax increaseand subjects1 adopted tax rate to a referendum election. LEVY OF TAXES - , 11 • - • 1 • • i 1 1 - I : 1 - i - - • • 1 1 1 - , �1 • . 1 he valuation . property within the City as . the preceding 1Taxesdue October and become lefinquent if not paid / January . the following year. The City 1 • w I • permit spayments . tax bills1 1 loes not allow discounts for early payment of taxes. Delinquent taxes incur a penalty of from 6 % to 12 % of the mount 1 . the tax, depending 1 . 1 the time . payment,and accrue interest at the rate . • 1 ' percent per month 1til paid. the tax is 1• paid . July 1, an additional penalty. up to %maybe imposed. COLLECTION OF DELINQUENT TAXES 1 - U nal /. nen ror unpaia taxes .1 personal property, but does nave a nen gram.G1 • statute forunpaid taxes on real property, which is discharged .. 1 payment, Thereafter, no hen 1 favor. the City until again levies taxes. I the event 1 : - . make timely payment . taxes due to the City • 1 realproperty, penalty. .• . unpaid taxes is incurred 1 February11% added monthlyuntilthe penalty1 0• after which becomes 1 addition, delinquent tax- incurthe rate . %per month. 1 City may file suit for the. • 1 thereof and • may foreclose 1 hen / a foreclosing proceeding. The City has elected to assess an additional 15% charge against delinquent taxes to defray the legal costs of collecting the delinquent tax- Under - 1 circumstances,which become ' delinquent on the homestead . a taxpayer1 vears • . or older incurpenaltyof %per 11 11 with 1 • additionalpenalties.'intereste. 1 general, &L ect to the itrA's hen mar, be sold, in whole or in Federal does not . for the collection . penalty and interest against. estate 1 bankruptcy.Federal 3:1 1 provides t1 1 automatic. action 1 creditors and other entities,including governmental mits, goes into effect1 the filing of any petition 1 bankruptcy. The automaticprevents governmental units vm fgr - • 11 1 i . 1. 1' 1 1 . 1 1 1 ;ecured creditor status unless, in either case, an order lifting the stay is obtained from the bankruptcy court. In 11 : 1 1 • / . 1 • : 1 1 • 11 1 . - i - . 1 ' - i 1 : 1 . . . . 1 - • 1 " The Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA), enacted on August 9, 1989, contains certain provisions which affect the time for protesting property valuations, the fixing the tax liens and the collection of penalties and interest on delinquent taxes on real property owned by the FDIC and the RTC. Under FIRREA, real property held by the FDIC or RTC is still subject to ad valorem taxation, but (i) no real property of the FDIC or RTC is subject to foreclosure or sale without the consent of the FDIC or RTC and no involuntary lien will attach to such property, (ii) the FDIC or RTC is not liable for any penalties or fines, including those arising from the failure to pay any real property tax when due and (Ili) notwithstanding the failure of a person to challenge an appraisal in accordance with State law, such value will be determined as of the period for which such tax is imposed. 17 CLASSIFICATION OF ASSESSED VALUATION Ima.z ear 19911990 Amount 1989 Provertv Use Category Amount Percent PlattedReal, Residential, Real, Vacant •0 RanchReal, Farm & Personal,Improvements Real, Commercial Real, Industrial Utilities Tangible Personal,Commercial Ti gible MobileIndustrial rangible Personal, Personal,rangible Other InventoryZeal Property, Total Appraised Value HomesteadPersons Disabled and Deceased Open�Space Land Taxable Assessed Valuation 47,916,349 59.,015,972 59.129b 41 50,750,941 59.859b 2,639,075 3.30 2,509,226 3.09 2,142,395 2.53 2,585,761 3.24 2,981,132 3.67 3,397,010 4.00 6,241,542 7.81 6,946,531 8.55 6,807,844 8.03 536,961 0.67 585,536 0.72 555,891 0.66 8,5299529 10.67 9019196 11.16 10,509,636 12.39 297,277 0.37 297,186 0.37 296,648 0.35 4,486,830 5.61 39592,850 4.42 3,579,466 4.22 4,28%269 5.36 5,461,653 6.73 4,727,908 5.57 1,08%129 1.35 3929500 0.48 392,500 0.46 981J11 1.23 1,002,722 1.23 1,269,821 1950 340,084 0.43 $ 79,914,917 100.00 $ 2,498,592 3.139� 55,000 0.07 9025 5.234,282 6.55 96 72 126 543 372.544 0.46 � 81,219,048 100.009b � 2,515,192 3.109b ASSESSED VALUATION INCREASES OR (DECREASES) 55,000 0.07 5.729,755 7.05 Increase or (Decrease) Tax Assessed Over Prior Years Year Valuation Amount Percent 1985 $ 51,763,572 - - 1986 62,066,231 (a) $ 10,302,659 19490 % 1987 749735,416 12,669,185 20.41 1988 78,458,315 3,722,899 4.98 1989 77,491,976 (a) (966,339) (1.23) 1990 72,919,101 (b) (4,572,875) (5.90) 1991 72,126,543 (792,557) (1.09) (a) Revaluation of all taxable property located within the City. (b) Decrease due to general economic decline. 19 372,544 0.44 � 1,488,857 1.76 58,000 0.07 5,763,771 6.80 MIMATED DIRECT AND OVERLAPPING 1 VALOREM TAX SUPPORTED • 1 STATEMENTof October GrossEstimated Estimated Debt Percent Amount Denton County $ 7,785 0.76% $ 59,166 Sanger Independent School District 6,314,298 (a) 48.54 3,064,960 Sanger, City of 450,000 100.00 450.000 Total Direct and Overlapping Gross Debt ................................ 3 574 126 Ratio of Direct and Overlapping Debt to 1991 NetAssessed Valuation ............................................ 4.91 % Per Capita Direct and Overlapping Gross Debt $ 19168.78 gross debt outstanding. 1 • 1 i 1 1' 1 � " 1 P GOVERNMENTAL:1 • Governmental Subdivision 1991 Taz Rate Denton County $ 9,684,452,988 $ 0.2844 Sanger Independent School District 161,7119444 0.4700 Denton County Education District 79707,4579986 0.8200 Sanger, City of 72,126,543 0.4633 AUTHORIZED BUT UNISSUED GENERAL OBLIGATION BONDS OF DIRECT AND OVERLAPPING GOVERNMENTAL SUBDIVISIONS Estimated Estimated Potential Percent Amount Governmental Subdivision Amount Overlapping Applicable Denton County $ 4)- 0.76 % $ -)- Sanger Independent School District 50,000 48.54 24,270 Sanger, City of -0- 100.00 -0- Total Potential Direct and Overlapping Debt ............................. 24 270 Fiscal Year Ending 9-30 Principal Interest Total 1992 $ 75,000 $ 33,950 $ 108,950 1993 80,000 28,700 108,700 1994 90,000 22,900 112,900 1995 1000000 16,150 116,150 1996 105.000 8.400 113.400 Total 21 GOVERNMENTAL FUND BALANCES (Unaudited as of October 15, 1991) OperatingFund ...................................... . Interest and Sinking Fund ................................ . EquipmentReplacement Fund ............................. . TotalFunds .......................................... st i'k %I' 3LI ` 19,767 9,949 7.578 All permanent, full-time City employees who were less than 55 years of age when employed by the City are covered by the Texas Municipal Retirement System (TMRS). TMRS is contributory, annuity -purchase type plan which is covered by a State statute and is administered by six trustees appointed by the Governor of the State of Texas. TMRS operates independently of its member cities. The City joined TMRS to supplement Social Security. The City's employees contribution rate is currently 5 %and the City's contribution rate for the year 1992 is 4.579b. When an employee terminates and withdraws his contribution, the City's portion remains in the fund. Credit is allowed annually toward reducing the City's contribution rate to maintain a two -for one matching balance. The 1990 Annual Report for TMRS reported that the City has an unfunded accrued liability of $21,593, which was being amortized over a twenty-five year period. Assets held by TMRS for the City amounted to $211,497. Accrued current service liabilities totaled $159,060 and accrued prior service liabilities totaled $74,030. Enabling statutes prohibit any member city from adopting options which impose liabilities that cannot be amortized over twenty-five years within a specified statutory rate. Moody's Investors Service has rated the Bonds "_". An explanation of the significance of such rating may be obtained from the company furnishing the rating. Certain information concerning the Bonds and the City was furnished to such rating agency by the City and others. There is no assurance that said rating will be maintained for any given period of time or that it will not be raised, lowered or withdrawn entirely if, in the judgment of the rating agency, circumstances so warrant. Any downward change in or withdrawal of such rating may have an adverse effect on the price at which the Bonds may be sold. LEGAL MATTERS LEGAL OPIlVIONS AND NO -LITIGATION CERTIFICATE The City will furnish a complete transcript of proceedings incident to the authorization and issuance of the Bonds, including the unqualified approving legal opinion of the Attorney General of the State of Texas as to the Bonds to the effect that the Bonds are valid and legally binding obligations of the City, and based upon examination of such transcript of proceedings, the approving legal opinion of McCall, Parkhurst & Horton, Dallas, Texas, Bond Counsel ("Bond Counsel"), with respect to the Bonds issued in compliance with the provisions of the Bond Ordinance. The customary closing papers, including a certificate to the effect that no litigation of any nature has been filed or is then pending to restrain the issuance and delivery of the Bonds, or which would affect the provisions made for their payment or security, or in any manner questioning the validity of said Bonds will also be furnished. Bond Counsel was not requested to participate, and did not take part, in the preparation of the Official Statement and such firm has not assumed any responsibility with respect thereto or undertaken independently to verify any of the information contained therein, except that, in its capacity as Bond Counsel, such firm has reviewed the information under the captions "PLAN OF FINANCING", "THE BONDS", "LEGAL MATTERS" and Appendix B " CERTAIN PROVISIONS OF THE BOND ORDINANCE in the Official Statement, and such firm is of the opinion that the information relating to the Bonds and matters of law contained under such captions, in all material respects, accurately and fairly reflects the provisions thereof. The legal fee to be paid Bond Counsel for services rendered in connection with the issuance of the Bonds is contingent upon the sale and delivery of the Bonds. The legal opinion will be printed on the definitive Bonds. 23 OVIDDIVIC01 1 I i The Bond Procedures Act, Article 717k-6, V.A.T.C.S., as amended, provides that all bonds, issued by an issuer, such as the City, shall constitute negotiable instruments, and are investment securities governed by Chapter 8, Texas Uniform Commercial Code, notwithstanding any provisions of law or court decision to the contrary, and are legal and authorized investments for banks, savings banks, trust companies, building and loan associations, savings and loan associations, insurance companies, fiduciaries, and trustees, and for the sinking fund of counties, cities, towns, villages, school districts, and other political subdivisions or public agencies of the State of Texas. Texas law additionally requires that bonds must have a then current rating, as to investment quality, of not less than "A", or its equivalent, by a nationally recognized rating agency in order to achieve and maintain eligibility to secure deposits of any public funds of the State of Texas or any political subdivision or public agency thereof. No application for a rating has been made for the Bonds. See "RATINGS" herein. No review by the City has been made of the laws in other states to determine whether the Bonds are legal investments for various institutions in those states. REGISTRATION AND QUALIFICATION OF BONDS FOR SALE The sale of We Bonds has not been registered under the Federal Securities Act of 1933, as amended, in reliance upon the exception provided thereunder by Section 3(a)(2); and the Bonds have not been qualified under the Securities Act of Texas in reliance upon various exemptions contained therein; nor have the Bonds been qualified under the securities acts of any jurisdiction. The City assumes no responsibility for qualification of the Bonds under the securities laws of any jurisdiction in which the Bonds may be sold, assigned, pledged, hypothecated or otherwise transferred. This disclaimer of responsibility for qualification for sale or other disposition of the Bonds shall not be construed as an interpretation of any kind with regard to the availability of any exemption from securities registration provisions. ' :I III III 1' � W1661 fell vill be verified by the firm of Grant Thornton, 'independent Certified Public Accountants. Such verification shall )e based upon information supplied to Grant Thornton by the District through the Underwriter. LOR 1 A I •- �•- �: __• • � • i •i• •� • • is i• :•i., •n �- • ;ell the :•i•. into investment accounts. 25 1 1' 1 l i OI 1 AND DENTON COUNTY, 1 1' 1 II 1 oil) 1 1 The City of Sanger (the "City") is located in northern Denton County on Interstate Highway 35 approximately fifteen miles north of the City of Denton. The City's economy is primarily based upon agriculture and manufacturing. The City's 1990 Census is 3,508, an increase of 36.3 % over the 1980 Census of 2,574. A local bank and a branch office of Gainesville National Bank are located in the City. The City of Denton is the county seat and covers an area of 33.2 square miles. The City of Denton is known as the upper most point of the Dallas - Fort Worth -Denton industrial triangle and is located approximately 38 miles from both Dallas and Fort Worth on Interstate Highway 35. The 1990 Census for the City of Denton is 66,270, increasing 37.9 % over the 1980 Census of 48,0630 Denton County (the "County") is located in north central Texas and encompasses an area of 911 square miles. It is the third largest county of the nine counties comprising the Dallas -Fort Worth Consolidated Metropolitan Statistical Area (CMSA). The County is traversed by Interstate Highway 35, United States Highways 77, 377 and 380 and State Highways 114 and 121. The County is divided north and south geographically by the East Cross Timbers which is a narrow strip of woodland that extends from the Red River to the Brams River around Waco. The County's 1990 census is at 273,525 increasing 91.1 % over the 1980 population of 143,126. POPULATION STATISTICS Dallas - Year City of Sanger Denton County Fort Worth CMSA (a) 1990 Census 3,508 273,525 3,8859415 1980 Census 29574 1439126 2,9749805 (b) 1970 Census 19603 759633 2,377,623 (b) 1960 Census 1,190 479432 117379960 (b) (a) The Consolidated Metropolitan Statistical Area (CMSA) includes the counties of Collin, Dallas, Denton, Ellis, Johnson, Kaufman, Parker, Rockwall and Tarrant. (b) The figures for year 19604980 are for the Dallas -Fort Worth Standard Metropolitan Statistical Area (SMSA) which includes the counties of Collin, Dallas, Denton, Ellis, Hood, Johnson, Kaufman, Parker, Rockwall, Tarrant and Wise. Source: United States Bureau of the Census 1991 Approximate Number of Principal Line of Business Employees e Education 220 Nursing Home 45 Paper Business 40 Supermarket 34 Government 32 Bathroom Fixtures 28 M mufacturing/Trucking Business 20 Bank 17 Automobile Dealership 12 Day Care School 10 Bank 9 A-1 EFFECTIVE BUYING INCOME STATISTICS Tenton CounT4 �A Total EBI Median Total EBI Median Total EBI Median tll) Household 111 Household EBI ($000). EBI 1990 S 4,575,175 S 35,083 S 60,083,408 S 31,078 S 214,142,943 S 25,847 1989 3,372,545 339364 53,3349107 289420 1989479,285 23,975 1988 3,089,983 31,333 49,3069524 26,701 184,097,002 229539 1987 39149,823 33,467 52,271,840 28,799 198,762,908 24,341 1986 2,9269588 32,879 49,634,723 28,192 1959120,293 249272 1985 297069200 339021 469909,379 279921 187,692,522 24,059 1984 2,468,443 35,357 42,451,292 29,786 172,873,159 26,004 1983 2,1219539 309875 36,504,653 26,257 154,4219640 239412 1982 19834,548 28,856 3396979232 25,138 1459203,201 22,643 1981 193839489 21,909 32,716,122 (a) 25,035 (a) 132,308,070 21,291 1980 1,2219356 20,316 289404,977 (a) 2211409 (a) 11590209555 19,123 1979 7909858 189278 24,030,255 (a) 219187 (a) 99,528,547 189135 (a) The figures for years 1979-1981 are for the Dallas -Fort Worth Standard Metropolitan Statistical Area (SMSA) which includes the counties of Collin, Dallas, Denton, Ellis, Hood, Johnson, Kaufman, Parker, Rockwall, Tarrant and Wise. EDUCATION s a state�supported mistitution. The universities have a combined enrollment of approximately 30,00 and employ GOVERNMENT ACTIVITY Located approximately 18 miles from the City of Sanger is the site of the first underground Control Center built by the Federal Government. The Center serves Region 5 Headquarters for the Office of Civil and Defense Mobilization, which consists of Texas, Oklahoma, Arkansas, Louisiana and New Mexico, and is designed to resist nuclear blasts and radiation. Vill 3overnment. TRANSPORTATION A-3 �- • Illr -- :$ i 1 KOM r: 1t. V�sj OATMO I ftyj 1 In n 1 .. I tv4 w Ito)I Section 8. DEFINITIONS. For all purposes of this ordinance and in particular for clarity with respect to the issuance of the Bonds herein authorized and the pledge and appropriation of revenues for the payment of the Bonds, the following definitions are provided: (a) The term "Utility System" as used in this Ordinance, shall mean and include the Issuer's entire Waterworks, Sewer and Electric System, together with all future improvements, extensions, enlargements, and additions thereto, and replacements thereof. (b) The term "Net Revenues," as used in this Ordinance, shall mean gross revenues of the Utility System, after deducting the expenses of operation and maintenance A the Utility System, including all salaries, labor, materials, repairs and extensions necessary to render efficient service, provided, however, that only such repairs and extensions, as in the judgment of the City Council of said Issuer, reasonably and fairly exercised by the passage of appropriate ordinances, are necessary to keep the Utility System in operation and render adequate service to said Issuer and the inhabitants thereof, or such as might be necessary to meet some physical accident or condition which would otherwise impair the Bonds and any Additional Bonds shall be deducted in determining "Net Revenues." Depreciation, and payments into and out of the Interest and Sinking Fund, Reserve Fund, and Emergency Fund hereinafter created, shall never be considered as expenses of operation and maintenance. (c) The term "Bonds" shall mean the Bonds authorized to be issued and delivered by this Ordinance and the outstanding Series 1973 Bonds and Series 1976 Bonds. (e) The term "Additional Bonds" shall mean the additional parity revenue bonds which the Issuer reserves the right to issue and deliver in the future, as provided by this Ordinance. Section 9. PLEDGE. The Bonds and all Additional Bonds, and the interest thereon, are and shall be payable from and secured by an irrevocable first lien on and pledge of the Net Revenues of the Utility System. The Bonds authorized by this Ordinance are parity Additional Bonds as defined and permitted in the ordinance that authorized the City of Sanger, Texas Utility System Revenue Bonds, Series 1969, and Sections 9 through 27 of the ordinance that authorized the City of Sanger, Texas Utility System Revenue Bonds, Series 1969 are hereby adopted by reference and shall be restated and be applicable to the Bonds authorized by this Ordinance in Sections 8 through 25 hereof for all purposes except to the extent hereinafter specifically modified and supplemented. Section 10. RATES. The Issuer covenants and agrees with the holders of the Bonds and all Additional Bonds, as follows: (a) That it will at all times fix, maintain,. charge and collect for services rendered by the Utility System, rates and charges which will produce gross revenues at least sufficient (b) such amounts, in equal monthly installments, made on or before the tenth day A each month, commencing December 10, 1991, as will be sufficient to pay the next maturing principal of the bonds. Section 14, RESERVE FUND. That, in addition to all other amounts now required by the ordinances that authorized the outstanding Bonds, there shall be deposited into the Reserve Fund, the sum of at least $ until the Reserve Fund shall contain an aggregate amount of $ No deposits shall be required to be made into the Reserve Fund as long as the Fund contains said aggregate amount, but if and whenever said Reserve Fund is reduced below said aggregate amount, the aforesaid monthly deposits into the Fund shall be resumed and continued until such time as the Fund has been restored to said aggregate amount. The Reserve Fund shall be used to pay the principal of or interest on the Bonds and any Additional Bonds falling due at any time when there is not sufficient money available in the Interest and Sinking Fund created for their payment. Money in the Reserve Fund may, upon authorization by the City Council of said Issuer, be invested in direct obligations of, or obligations, the principal of and interest on which are guaranteed by, the United States of America, or invested in direct obligations of the Federal Intermediate Credit Banks, Federal Land Banks, Federal National Mortgage Association, Federal Home Loan Banks or Banks for Cooperatives, provided that each of the aforesaid obligations must mature, or be subject to redemption at the option of the holder thereof, Any obligation in which money in said Reserve Fund is so invested shall be kept and held by the Bank holding said Fund in escrow and in trust for the benefit of the holders of the Bonds and all Additional Bonds, and shall be promptly sold and the proceeds of sale applied to the making of all payments required to be made from the Reserve Fund. Section 15. EMERGENCY FUND. There is presently on deposit in the Emergency Fund $ No deposits shall be required to be made into the Emergency Fund as long as the Emergency Fund contains said aggregate amount, but if and whenever said Emergency Fund is reduced below said aggregate amount, the aforesaid monthly deposits into the Emergency Fund shall be resumed and continued until such time as the Emergency Fund has been restored to said aggregate amount. The Emergency Fund shall be used to pay the cost of any repairs or extensions to the System authorized by Vernon's Article 1113, for the payment of which no other funds are available. Also, the Emergency Fund shall be used to pay the principal of or interest on the Bonds and all Additional Bonds, at any time when there are not sufficient amounts in the Interest and Sinking Fund and the Reserve Fund for such purpose. Money in the Emergency Fund may, upon authorization by the City Council, be invested in the same manner and to the same extent as provided for money in the Reserve Fund. Any obligation in which money in the Emergency Fund is so invested shall be kept and held in an official depository bank of the Issuer in escrow and in trust for the benefit of the holders of the Bonds and all Additional Bonds, and shall be promptly sold and the proceeds of sale applied to the making of payments permitted or required to be made from the Emergency Fund. A operation and maintenance but not deducting depreciation, bond interest or expenditures which under standard accounting practice should be charged to capital expenditures. (d) The Additional Bonds are scheduled to mature only on May 15, and the interest thereon is scheduled to be paid only on November 15 and May 15. (e) The ordinance authorizing the issuance of such installment or series of Additional Bonds provides that the aggregate amount to be accumulated and maintained in the Reserve Fund shall be increased by an additional amount not less than the average annual principal and interest requirements for said Additional Bonds, and that such additional amount shall be so accumulated within sixty-one months from the date of the Additional Bonds by the deposit in the Reserve Fund of the necessary amount in equal monthly installments; provided, however, that the aggregate amount to be accumulated in the Reserve Fund shall never be required to exceed the average annual principal and interest requirements for all then outstanding Bonds and Additional Bonds, (f) All calculations of average annual principal and interest requirements made pursuant to this Section are made as of and from the date of the Additional Bonds then proposed to be issued. (g) Once the outstanding Series 1973 Bonds and Series 1976 Bonds are retired and are no longer outstanding, subparagraph (c) of this Section shall be replaced by the following substitute subparagraph (c). certificate is executed by a Certified Public Accountant to the effect that, in his opinion, the Net Earnings of the Utility System, either for the last complete fiscal year of the Issuer, or for any twelve consecutive calendar month period ending not more than ninety days prior to the passage of the ordinance authorizing the issuance of such Additional Bonds, were at least 1.10 times the average annual principal and interest requirements for all then outstanding Bonds and Additional Bonds, and for the installment or series of Additional Bonds then proposed to be issued. The term "Net Earnings" as used in this subsection (c) shall mean the gross revenues of the Utility System after deducting the expenses of operation and maintenance but not deducting depreciation, bond interest or expenditures which under standard accounting practice should be charged to capital expenditures." Section 20. MAINTENANCE AND OPERATION; INSURANCE. While any of the Bonds or Additional Bonds are outstanding the Issuer covenants and agrees to maintain the Utility System in good condition and operate the same in an efficient manner and at reasonable expense, and to maintain insurance on the Utility System, for the benefit of the holder or holders of the Bonds and Additional Bonds, of a kind and in an amount which usually would be carried by private companies engaged in a similar type of business. Nothing in this Ordinance shall be construed as requiring the Issuer to expend any funds B-5 (b) That while any of the Bonds or Additional Bonds are outstanding, the Issuer will not sell or encumber the Utility System or any substantial part thereof, and that, with the exception of the Additional Bonds expressly permitted by this Ordinance to be issued, it will not encumber the revenues pledged hereunder unless such encumbrance is made junior and subordinate in all respects to the Bonds and Additional Bonds and all liens and pledges in connection therewith. (c) That no free service of the Utility System shall be allowed, and should the Issuer or any of its agencies or instrumentalities make use of the services and facilities of the Utility System, payment of the reasonable value thereof shall be made by the Issuer out of funds from sources other than the revenues and income of the Utility System. (d) That to the extent it legally may, the Issuer further covenants and agrees that while any of the Bonds or Additional Bonds are outstanding, no franchise shall be granted for the installation or operation of any competing water system, sewer system or electric system; that the Issuer will prohibit the operation of any such competing system; and the operation of any such competing system is hereby prohibited. Section 25. BONDS ARE SPECIAL OBLIGATIONS, The Bonds and Additional Bonds shall be special obligations of the Issuer payable solely from the pledged Net Revenues, and the holder or holders thereof shall never have the right to demand payment thereof out of funds raised or to be raised by taxation. Section 26. DEFEASANCE OF BONDS. (a) Any Bond and the interest thereon shall be deemed to be paid, retired, and no longer outstanding (a "Defeased Bond") within the meaning of this Ordinance, except to the extent provided in subsection (d) of this Section 32, when payment of the principal of such Bond, plus interest thereon to the due date (whether such due date be by reason of maturity, upon redemption, or otherwise) either (i) shall have been made or caused to be made in accordance with the terms thereof (including the giving of any required notice of redemption), or (ii) shall have been provided for on or before such due date by irrevocably depositing with or making available to the Paying Agent/Registrar for such payment (1) lawful money of the United States of America sufficient to make such payment or (2) Government Obligations which mature as to principal and interest in such amounts and at such times as will insure the availability, without rein- vestment, of sufficient money to provide for such payment, and when proper arrangements have been made by the Issuer with the Paying Agent/Registrar for the payment of its services until all Defeased Bonds shall have become due and payable. At such time as a Bond shall be deemed to be a Defeased Bond hereunder, as aforesaid, such Bond and the interest thereon shall no longer be secured by, payable from, or entitled to the benefits of, revenue pledged as provided in this Ordinance, and such principal and interest shall be pay- able solely from such money or Government Obligations. (b) Any moneys so deposited with the Paying Agent/Registrar may at the written direction of the Issuer also be invested in Government Obligations, maturing in the amounts B-7 legal, printing, and other expenses in connection therewith. Every replacement bond issued pursuant to the provisions of this Section by virtue of the fact that any Bond is lost, stolen, or destroyed shall constitute a contractual obligation of the Issuer whether or not the lost, stolen, or destroyed Bond shall be found at any time, or be enforceable by anyone, and shall be entitled to all the benefits of this Ordinance equally and proportionately with any and all other Bonds duly issued under this Ordinance. (e) Authority for Issuing Replacement Bonds. In accordance with Section 6 of Vernon's Ann. Tex. Civ, St. Art. 717k=6, this Section of this Ordinance shall constitute authority for the issuance of any such replacement bond without necessity of further action by the governing body of the Issuer or any other body or person, and the duty of the replacement of such bonds is hereby authorized and imposed upon the Paying Agent/Registrar, and the Paying Agent/Registrar shall authenticate and deliver such bonds in the form and manner and with the effect, as provided in Section 4(d) of this Ordinance for Bonds issued in conversion and exchange for other Bonds. Section 28. CUSTODY, APPROVAL, AND REGISTRATION OF BONDS; BOND COUNSEL'S OPINION; CUSIP NUMBERS; AND CONTINGENT INSURANCE PROVISION, IF OBTAINED. The Mayor of the Issuer is hereby authorized to have control of the Initial Bond issued hereunder and all necessary records and proceedings pertaining to the Initial Bond pending its delivery and its investigation, examination, and approval by the Attorney General of the State of Texas, and its registration by the Comptroller of Public Accounts of the State of Texas. Upon registration of the Initial Bond said Comptroller of Public Accounts (or a deputy designated in writing to act for said Comptroller) shall manually sign the Comptroller's Registration Certificate on the Initial Bond, and the seal of said Comptroller shall be impressed, or placed in facsimile, on the Initial Bond. In addition, if bond insurance is obtained, the Bonds may bear an appropriate legend as provided by the Insurer. Section 29. COVENANTS REGARDING TAX EXEMPTION. The Issuer covenants not to take any action which would adversely affect, and to take any required action to ensure, the treatment of the Bonds as obligations described in Section 103 of the Internal Revenue Code of 1986 (the "Code"), the interest on which is not includable in the "gross income" of the holder for purposes of federal income taxation. In furtherance thereof, the Issuer covenants as follows. (a) to take any action to assure that no more than 10 percent of the proceeds of the Bonds (less amounts deposited to a reserve fund, if any) are used for any "private business use," as defined in Section 141(b)(6) of the Code or, if more than 10 percent of the proceeds are so used, that amounts, whether or not received by the Issuer, with respect to such private business use, do not, under the terms of this Resolution, or any underlying arrangement, directly or indirectly, secure or provide for the payment of more than 10 percent of the debt service on the Bonds, in contravention of Section 141(b)(2) of the Code; in full, 100 percent of the amount then required to be paid as a result of Excess Earnings under Section 148(f) of the Code, and (1) to maintain such records as will enable the Issuer to fulfill its responsibilities under this Section and Section 148 of the Code and to retain such records for at least six years following the final payment of principal and interest on the Bonds. In order to facilitate compliance with the above covenants (g), (h), and (i), a "Rebate Fund" is hereby established by the Issuer for the sole benefit of the United States of America, and such Fund shall not be subject to the claim of any other person, including without limitation the bondholders. The Rebate Fund is established for the additional purpose of compliance with Section 148 of the Code. It is the understanding of the Issuer that the covenants contained herein are intended to assure compliance with the Code and any regulations or rulings promulgated by the U.S. Department of the Treasury pursuant thereto. In the event that regulations or ruling are hereafter promulgated which modify, or expand provisions of the Code, as applicable to the Bonds, the Issuer will not be required to comply with any covenant contained herein to the extent that such modification or expansion, in the opinion of nationally -recognized bond counsel, will not adversely affect the exemption from federal income taxation of interest on the Bonds under Section 103 of the Code. In the event that regulations or rulings are hereafter promulgated which impose additional requirements which are applicable to the Bonds, the Issuer agrees to comply with the additional requirements to the extent necessary, in the opinion of nationally -recognized bond counsel, to preserve the exemption from federal income taxation of interest on the Bonds under Section 103 of the Code. Section 30. DESIGNATION AS QUALIFIED TAX-EXEMPT OBLIGATIONS. The Issuer hereby designates the Bonds as "qualified tax-exempt obligations" as defined in Section 265(b)(3) of the Code. In furtherance of such designation, the Issuer represents, covenants and warrants the following: (a) that during the calendar year in which the Bonds are issued, the Issuer (including any subordinate entities) has not designated nor will designate obligations, which when aggregated with the Bonds, will result in more than $10,000,000 of "qualified tax-exempt obligations" being issued; and (b) that the Issuer reason- ably anticipates that the amount of tax-exempt obligations issued, during the calendar year in which the Bonds are issued, by the Issuer (or any subordinate entities) will not exceed $109000,0009 Section 31. SALE OF INITIAL BOND. The Initial Bond is hereby sold and shall be delivered to Southwest Securities Incorporated for cash for the price of $ , which represents the par amount of such Bonds less an underwriter's discount for such Bonds of $ . It is hereby officially found, determined, and declared that the Initial Bond has been sold pursuant to the terms and provisions of a Purchase Contract in substantially the form attached hereto as Exhibit A, which the Mayor of the Issuer is hereby authorized and directed to execute and deliver and which the City Secretary of the issuer CertifiedReport (the "Report") for the Fiscal Year Ended September 30, 1990, as prepared by John P. Graves & Co., Public Accountant,Denton, THE INFORMATION PRESENTED REPRESENTS ONLY A PART OF THE REPORT AND DOES NOT PURPORT TO BE A COMPLETE STATEMENT OF THE DISTRICT'S FINANCIAL CONDMON. REFERENCE IS MADE TO THE COMPLETE REPORT FOR ADDITIONAL INFORMATION. JOHN P. GRAVES CERTIFIED PUBLIC ACCOUNTANT 520 SOUTH HIGHWAY 377P.O.BOX 33 PILOT POINT, TEXAS 76258 (817) 686.24A9 P December 19, 1990 To the city council City of Sanger, Texas We have audited the accompanying financial statements of the City of Sanger, Texas, as of September 30, 1990, and for the year then ended as listed in the table of contents. These financial statements are the responsibility of the City of Sanger, Texas, management. Our responsibility is to express an opinion on.these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as the overall financial statements presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the City of Sanger, Texas, as of September 30, 1990, and the results of its operations and cash flows of its proprietary fund types for the year then ended in conformity with generally accepted accounting principles. Our audit was made for the purpose of forming an opinion on the financial statements taken as a whole. The combining and individual fund and account group financial statements and schedules listed in the table of contents are presented for purposes of additional analysis and are not a required part of the financial statements of the City of Sanger, Texas. Such information has been subjected to the auditing procedures applied in the audit of the financial statements and, in our opinion, is fairly presented in all material respects in relation to the financial statements taken as a whole. John P. Graves Certified Public Accountant Certified Internal Auditor Certified Fraud Examiner Proprietary Fund ---------------- Account Groups -------------------- Totals ------------------------ General General Fixed Long -Term (Memorandum Only) Enterprise Assets Debt 1990 1989 -------------------------------------------------------------------- 88,586 172,896 102,073 299,626 2991626 10,178 10,332 7,462 10,192 10,192 816,699 816,699 1,500 58,683 60,183 125,945 125,945 1,0761536 lt076,536 11805,221 11805,221 11528,464 1/5280464 293,308 380,695 674,003 14,623 491,647 506,270 (11814,007) (11814,007) $ 98,040 136,799 87,380 294,277 73,550 61,445 849,482 60,183 125,945 943,290 1,790,298 1,528,466 591,095 489,178 (1,648,489) 564,519 564,519 663,106 -------------------------------------------------------------------- $ 41153,612 $ lt056,970 $ 564,519 $ 5,975,167 $ 61144,045 eaa��m�emaamoQaoeaaQ�Qa=ma.e==aam�a=a�aaQQ�aQaa�a�ma=acaeaemmae�=sacra 3 Proprietary Fund Account Groups ------------------ ------------------ Totals --------------------- General General Fixed Long -Term (Memorandum Only) Enterprise Assets Debt 1990 1989 ------------------------------------------------------------------ $ 130,880 $ $ $ 130,880 $ 122,073 72,695 63,790 63,790 61,108 102,073 86,811 105,000 105,000 95,000 52,232 60,416 48,062 1,455,000 1,455,000 11565,000 520,000 520,000 585,000 18,410 44,519 62,929 107,781 ------------------------------------------------------------------ $ 11825,312 $ $ 564,519 $ 21500,088 $ 2,743,530 $ 100,196 $ $ $ 100,196 $ 100,196 1,056,970 871, 231 1,356,873 1,056,970 871,231 1,356,873 1,026,348 871,231 1,374,677 89,809 28,063 ------------------------------------------------------------------ $ 2,328,300 $ 1,056,970 $ $ 3,475,079 $ 31400,515 ------------------------------------------------------------------ $ 41153,612 $ 11056,970 $ 564,519 $ 5,975,167 $ 6,144,045 aaaaaaaaaaaaaaaaaaaaaa aaa =aa aaaaaa aaaaa oaaaaa aaaaaaaaaaaa=aaaaeaaa 5 Totals -------------------------------------- (Memorandum Only) 1990 1989 -------------------------------------- $ 350,751 24,016 93,490 159,162 18,525 $ 347,871 28,925 95,003 145,733 17,442 11,814 10,452 61311 57,420 46,925 68,374 ----------------------------------------------- $ 782,190 $ 700,024 ----------------------------------------------- $ 133,540 $ 206,098 266,028 212,446 241,696 212,842 20,812 30,622 30,220 93,976 60,536 757 86,276 54,877 1,033 ----------------------------------------------- $ 827,155 $ 824,604 ----- ----- --- ---------------------------------- $ (44,965) $ (124,580) ----------------------------------------------- $ 106,711 $ 123,245 ----------------------------------------------- $ 106,711 $ 123,245 ----------------------------------------------- $ 61,746 $ (11335) ----------------------------------------------- $ 28,063 $ 28,018 ----------------------------------------------- $ 89,809 aaaaaaaaaoaaaaaaaaaace __ 7 $ 26,683 ca=aaaaaa=eao CITY OF SANGER, TEXAS ACCRUAL CASH FLOW STATEMENT FOR THE YEAR ENDED SEPTEMBER 30, 1990 Year to Date Cash from Operating Activities: Sales $ 2,465,045 (Increase) Decrease -Accounts Receivable 49,873 Total Cash from Customers $ 21514,918 Total Cash from Operations $ 21514,918 Cash Disbursed for Operating Activities Cost of Sales $ 11485,360 (Increase) Decrease - Accounts Payable (71978) Cash Paid for Merchandise $ 11477,382 Expenses: Operating Expenses $ 924,440 (Increase) Decrease -Accrued Expenses (4,170) Less Depreciation Expense (1651518) Cash Paid for Expenses $ 754,752 Total Cash Disbursed $ 21232,134 Net Cash from Operations $ 282,784 Cash Flow from Investing Activities: Interest Income $ 83,360 Interest Expense (156,409) Cash from Investing $ (73,049) Cash Flow from Financing Activities: Increase (Decrease) -Long Term Debt (106,298) (Increase) Decrease Fixed Assets (166,292) Increase (Decrease) in Fund Equity 11380 Cash from Financing $ (271,210) Net Increase (Decrease) in Cash $ (62,527) Reconciliation: Cash in Bank - Operating $ (60,578) Cash in Hank - Investments 30,834 Restricted Assets (32,783) Net Change in Cash Accounts $ (62,527) r7 DEBT SERVICE FUND - The General Debt Service Fund is used to account for the accumulation of resources for, and the payment of, general long-term debt principal, capitalized lease obligations, interest, and related costs. Proprietary Funds ----------------- ENTERPRISE FUND - The Water Works, Electric and Sewer System Fund is used to account for the operations of the Water, Electric and Sewer Utility Enterprise Fund. Enterprise Funds are used to account for operations (a) which are financed and operated in a manner similar to private business enterprises - where the intent of the governing body is the costs (expenses, including depreciation) of providing goods or services to the general public on a continuing basis to be financed or recovered primarily through user charges, or (b) where the governing body has decided that periodic determination of revenues earned, expenses incurred, and/or net income is appropriate for capital maintenance, public policy, management control, accountability, or other purposes. Fixed Assets and Long -Term Liabilities -------------------------------------- The accounting and reporting treatment applied to the fixed assets and long-term liabilities associated with a fund are determined by its measurement focus. All governmental funds are accounted for on a spending or "financial flow" measurement focus. This means that only current assets and current liabilities are generally included on their balance sheets. Their fund balance (net current assets) is considered a measure of "available spendable resources". Governmental fund operating statements present increases (revenues and other financing sources) and decreases (expenditures and other financing uses) in net current assets. Accordingly, they are said to present a summary of sources and uses of "available spendable resources" during a period. Fixed assets used in governmental fund type operations (general fixed assets) are accounted for in the General Fixed Assets Account Group, rather than in governmental funds. Public domain ("infrastructure") general fixed assets consisting of certain improvements other than buildings, including roads, bridges, curbs and gutters, streets and sidewalks, drainage systems, and lighting systems, have not been capitalized. Such assets are normally immovable and of value only to the City, therefore, the purpose of stewardship for these items is satisfied without recording of these assets. No depreciation has been provided on general fixed assets. All fixed assets are valued at historical cost or estimated historical cost if actual historical cost is not available. Donated fixed assets are valued at their estimated fair value on the date donated. 11 Expenditures are generally recognized under the modified accrual basis of accounting when the related fund liability is incurred. Exceptions to this general rule include principal and interest on general long-term debt which is recognized when due. All proprietary funds are accounted for using the accrual basis of accounting. Their revenues are recognized when they are earned, and their expenses are recognized when they are incurred. Unbilled Water Works, Electric, and Sewer System Fund utility service receivables are recorded at year end. Investments Investments are stated at cost or amortized cost, which approximates market. Inventories Inventory held by the Water Works, Electric, and Sewer System Fund is priced at the lower of cost (first -in, first -out) or market. Minimum amounts of inventory are not maintained, therefore, equity reserves for inventory have been presented on an average cost basis. Restricted Assets These assets assets consist of cash and short-term Reserves The City records reserves to indicate that a balance is legally segregated for a specific investments portion of the fund future use. Following is a list of all reserves used by the City and a description of each: Reserved for Revenue Bond a portion of fund balance restricted to the payment amounts maturing in future Debt Service - An account used to segregate for debt service resources legally of long-term debt principal and interest years. Reserved for Revenue Bond Retirement - An account used to segregate a portion of fund balance for debt service resources restricted to the payment of long-term debt principal and interest amounts maturing in future years when sufficient amounts are not reserved in bond debt service accounts. Reserved for Revenue Bond Contingency - An account used to segregate a portion of fund balance for debt service resources restricted to the payment of long-term principal and interest amounts maturing in future years when sufficient amounts are not reserved in the bond debt service and bond retirement reserve accounts. 13 NOTE 3 - CERTIFICATES OF OBLIGATION/NOTES PAYABLE Certificates of Obligation consisted of the following: Description General Fund -Street Construction 8-11� interest rate Notes Payable consisted of the Description Gainesville National Bank of Sanger 9.5$ interest rate Gruman Emergency Products, Inc. 8.25$ interest rate Sanger Bank 9.5$ interest rate Sanger Bank 9.5� interest rate Gainesville National Bank of Sanger 9.5� interest rate TOTAL NOTE 4 - SECURITY BOND The Gainesville National Bank bank for the City of Sanger. Sanger pledged bonds totaling City's cash accounts. Original Use Amount Road Improve. following: Use Utility Truck Fire Truck Police Car Patchman Fire Equipment $ 700,000 $ $ 54,487 $ 76,688 23,914 23,675 16,000 $ 894,764 asa�am�anam current Amount 520,000 18, 410 27,125 2,281 3,724 11,389 $ 582,929 •sa:seac� of Sanger operates as the depository The Gainesville National Bank of $1,300,000 as security for the NOTE 5 - Prior Period adjustment to General Fund Equity. On the FYE 09-30-89 audit report, the Police Reserve Checking account was not reported as an asset or as fund equity. The total value of this savings account at 9-30-89 was $1,380. The following is a recalculation of the beginning General Fund balance: 15 NOTE 8 - CASH IN BANK - GENERAL FUND AND ENTERPRISE FUNDS GENERAL FUND - The following are included in cash for the General Fund: General Fund Checking Police Reserve Fire Department Accounts Payable Payroll Total 2493 $ (7,737j 195164 1,407 3038 11,128 12930 802 299 467 $ 6,067 MMMMMMv ENTERPRISE FUND - The following are included in Enterprise Fund: cash for the Sanger Electric Equipment Replacement Water Capital Reserve Sewer Capital Reserve Cash on Hand - Register Total 2535 $ 17,453 160002 4,925 208108 103 208116 105 100 $ 22,686 o=mass: NOTE 9 - RESTRICTED ASSETS - ENTERPRISE FUND The following Certificates of Deposit and savings accounts are held as restricted assets in the Enterprise Fund as required by Bond Ordinances and Customer Deposits: Sanger Electric Deposits 448 $ 7 880 Water Deposit Sanger Electric 10553 6,018 CD #58026 127,308 Sanger Electric CD #57610 115,121 Water Deposit CD #93741 25,000 Sanger Electric Deposit CD #57855 25,000 Bond Construction Checking 2543 94,429 Bond Construction Savings ' 82 Reserve CD #56736 242,000 Interest & Sinking Savings 192245 22,500 Interest & Sinking CD #57183 88,400 Emergency CD #57829 13,654 Emergency Checking 160101 420 Interest & Sinking CD #58117 48,887 Total ------ $ 816,699 17 OFFICIAL STATEMENT NEW ISSUE MOODY'S RATING: "Baa" IN THE OPINION OF BOND COUNSEL, INTEREST ON THE BONDS WILL BE EXCLUDABLE FROM GROSS INCOME FOR PURPOSES OF FEDERAL INCOME TAXATION UNDER EXISTING LAW. SEE "TAX EXEMPTION" HEREIN FORA DISCUSSION OF BOND COUNSEL'S OPINION, INCLUDING A DESCRIPTION OF THE ALTERNATIVE MINIMUM TAX. THE CITY HAS DESIGNATED THE BONDS AS "QUALIFIED TAX-EXEMPT" BONDS FOR FINANCIAL INSTITUTIONS. $2,230,000 CITY OF SANGER, TEXAS (Denton County) UTILITY SYSTEM REFUNDING AND IMPROVEMENT REVENUE BONDS, SERIES 1991 Dated: December 1, 1991 Due: May 15, as shown below The Utility System Refunding and Improvement Revenue Bonds, Series 1991 (the "Bonds"), are special obligations of the City of Sanger, Texas (the "City") issued pursuant to a bond ordinance (the "Bond Ordinance") adopted by the City Council of the City and are payable solely from and equally and ratably secured by a first lien on and pledge of the Net Revenues of the City's combined Waterworks, Electric, and Sewer Systems (the "System"), pledged therefor under the Bond Ordinance. The Bonds do not constitute general obligations of the City, the State of Texas or any political subdivision of the State of Texas. The taxing power of neither the City nor the State of Texas is pledged as security for the Bonds. Principal of the Bonds is payable upon presentation at maturity or redemption at the office of the paying agent/registrar (the "Paying Agent/Registrar"), initially Amerurust Texas National Association, at its office in Dallas, Texas. Interest on the Bonds is payable May 15, 1992, and each November 15 and May 15 thereafter until the earlier of maturity or redemption by check, dated as of the interest payment date, and mailed by the Paying Agent/Registrar to registered owners, as shown on the registration books of the Paying Agent/Registrar on the Record Date, or by such other customary banking arrangements, acceptable to the Paying Agent/Registrar, requested by, and at the risk and expense of, the registered owner. The Bonds are subject to redemption prior to stated maturity on and after May 15, 2001. See "THE BONDS -Optional Redemption" herein. The proceeds of the Bonds will be used to provide funds sufficient (i) to refund all of the City's outstanding Series 1977, Series 1982 and Series 1985 utility system revenue bonds, (ii) to construct improvements and extensions to the System and, (iii) to pay the costs related to the issuance of the Bonds. See "PLAN OF FINANCING" herein. MATURITY SCHEDULE Principal Interest Reoffering Principal Interest Reoffering Amount Maturit Rate Yield a Amount Maturity Rate Yield a $ 15,000 1992 4.70% 4.70% $ 115,000 2002 6.40% 6.40% 15,000 1993 4.90 4.90 125,000 2003 6.55 6.55 201000 1994 5.10 5.10 1301000 2004 6.70 6.70 25,000 1995 5.25 5.25 140,000 2005 6.80 6.80 85,000 1996 5.40 5.40 1509000 2006 6.90 6.90 859000 1997 5.60 5.60 160,000 2007 7.00 7.00 90,0o0 1998 5.80 5.80 1701000 2008 7.05 7.05 100,000 1999 6.00 6.00 1859000 2009 7.15 7.15 1059000 2000 6.15 6.15 195,000 2010 7.15 7.15 110,000 2001 6.25 6.25 210,000 2011 7.15 7.15 (a) The initial offering yields will be established by and are the sole responsibility of the Underwriter. The Bonds are offered for delivery when, as and if issued and are subject to approval of legality by the Attorney General of the State of Texas and the approval of certain legal matters by McCall, Parkhurst Horton Bond Counsel, Dallas, Texas. It is expected that the Bonds, in definitive form, will be available for delivery in New York, New York, on or about December 18, 1991. SOUTHWEST SECURITIES INCORPORATED Dated: November 18, 1991 This Official Statement, which includes the cover page and appendices, does not constitute an offer to sell the Bonds in any jurisdiction to any person to whom it is unlawful to make such offer in such jurisdiction. No dealer, salesman, or any other person has been authorized to give any information or make any representation, other than those contained herein, in connection with the offering of the Bonds, and if given or made, such information or representations must not be relied upon. ," , . „: ., 37. , ,- - , is •� i .1 Ources which are believed to be reliable, but is not guaranteed as to accuracy or completeness and is not to be =strued as a representation by the Underwriter. The information and expressions of opinions contained herein VMYgk*c:iwL �4&�RT g--;R I 4tiTal I (4uasfic�r- 1 a4tic4lir4 - le deliveKA of this Official Statement nor any sale made hereunder hall, under any circumstances, create an implication that there has been no change in the affairs of the City since date hereof. nde*4 Ater the Bonds are released for sale and the Bonds be offered and ..at rices other than the • 1 • ' 1 1 :1 • '1 • 1 IN wa061 :•AS :M AM :1 1 : • :I 1 1 :I •' :I I 1 aftem, 1 1 / 11 gallwo1 1 11 TABLE OF CONTENTS Official Statement: Introduction................................................... 1 Plan of Financing ............................................... i Purpose.................................................... 1 Refunded Bonds ............................................... 1 Sourcesand Uses of Funds ........................................ 3 TheBonds ................................................... 3 General.................................................... 3 Description of the Bonds .......................................... 3 Security for Payment ............................................ 4 Application of System Revenues ..................................... 4 Rates...................................................... 4 Additional Parity Bonds .......................................... 5 Revenue Fund ................................................ 5 Remedies in the Event of Default .................................... 6 Optional Redemption ............................................ 6 Paying Agent/Registrar........................................... 6 Transfer, Exchange and Registration 7 Record Date for Interest Payment .................................... 7 Limitation on Transfer or Exchange of Bonds ............................. 7 Replacement Bonds ............................................. 7 Condensed Waterworks and Sewer System Operating Statements 4 0 0 6 a a 0 4 6 6 0 0 0 0 9 a 8 Enterprise Fund Balances ...................................... 0 8 Revenue Bond Debt Data ..................................... 9 Revenue Bonds Authorized but Unissued ................................ 9 NotesPayable ................................................ 9 Anticipated Issuance of Additional Revenue Bonds .......................... 9 PaymentRecord ............................................... 9 Coverage Factors of the Bonds ...................................... 0 9 Revenue Bond Debt Service Requirements ................................ 10 Principal Repayment Schedule 11 OFFICIAL STATEMENT relating to $2,230,000 CITY OF BANGER, TEXAS (Denton County) UTILITY SYSTEM REFUNDING AND IlqPROVEMENT REVENUE BONDS, SERIES 1991 INTRODUCTION This Official Statement provides certain information in connection with the issuance by the City of Sanger, Texas (the "City") of its Utility System Refunding and Improvement Revenue Bonds, Series 1991 (the "Bonds"). The City is a political subdivision of the State of Texas and a municipal corporation organized and existing under the laws of the State of Texas. The Bonds are issued pursuant to an Ordinance (the "Bond Ordinance") adopted by the City Council on the date of sale of the Bonds to the Underwriter, and pursuant to the Constitution and laws of the State of Texas, particularly Article 717k and Articles IIII through 1118, V.A.T.C.S., as amended. Certain portions of the Bond Ordinance are contained in Appendix B. Unless otherwise indicated, capitalized terms used in this Official Statement have the same meanings assigned to such terms in the Bond Ordinance. See Appendix B ""CERTAIN PROVISIONS OF THE BOND ORDINANCE". Included in this Official Statement are descriptions of the Bonds, the Bond Ordinance, information relating to the operation of the City's combined Waterworks, Electric and Sewer Systems (the "System") and certain information about the City and its finances. ALL DESCRIPTIONS OF DOCUMENTS CONTAINED HEREIN ARE SUMMARIES ONLY AND ARE QUALIFIED IN THEIR ENTIRETY BY REFERENCE TO EACH SUCH DOCUMENT. Copies of such documents may be obtained from the City or the Underwriter. PURPOSE The Bonds are being issued by the City to provide funds sufficient to refund all of the City's outstanding Utility System Revenue Bonds, Series 1977, Series 1982 and Series 1985, as more fully described below under the caption "Refunded Bonds", for the purpose of restructuring its debt service requirements in a manner to allow for extended level annual principal and interest payments, resulting in a reduction in annual debt service requirements for the first nine years. Additionally, proceeds of the Bonds will be used to improve and extend the System and to pay the costs related to the issuance of the Bonds. The series of bonds of which all are being refunded were originally issued in the aggregate principal amount of $1,655,000 and are presently outstanding in the aggregate principal amount of $1,240,000 (the "Refunded Bonds") as described on the following page: SOURCES AND USES OF r uNDS The proceeds from the sale of the Bonds will be applied as follows: Sources of Funds: Par Amount of the Bonds Accrued Interest Total Uses of Funds: Purchase Federal Securities for Escrow Fund Beginning Cash Deposit to Escrow Fund Deposit to Construction Fund (a) Costs of Issuance Underwriter's Discount Deposit to Interest and Sinking Fund Contingency Total $ 2,230,000.00 6,949.81 $ 2,236,949.81 $ 1,343,500.00 40.39 800,000.00 33,000.00 519067600 6,949.81 24392.61 2,236,949.81 (a) Proceeds of the Bonds deposited to the City's Construction Fund will be used to construct a water well, a 200,000 gallon elevated storage tank and related appurtances. The Bond Ordinance authorizes the issuance and prescribes the terms, conditions and provisions for payment of the principal of and interest on the Bonds by the City. Set forth below is a description of the Bonds and a summary of certain provisions of the Bond Ordinance. Capitalized terms in such summary are used as defined in the Bond Ordinance. See Appendix B - "CERTAIN PROVISIONS OF THE BOND ORDINANCE". Such summary is not a complete description of the entire Bond Ordinance and is qualified by reference to the Bond Ordinance, copies of which are available from the City or the Underwriter. The Bonds will be issued as fully registered bonds without interest coupons in principal denominations of $5,000 or any integral multiple thereof. The Bonds will be dated December 1, 1991 and will bear interest from such date at the stated interest rates indicated on the cover page hereof. Interest on the Bonds will be payable on May 15, 1992 and each November 15 and May 15, thereafter until the earlier of maturity or redemption. 14 3 The City has reserved the right to issue Additional Bonds for any lawful purpose, subject to the terms and conditions stated in the Bond Ordinance, See Appendix B - "CERTAIN PROVISIONS OF THE BOND ORDINANCE". The Bond Ordinance provides that Additional Bonds may be issued, provided that none shall be issued unless the following conditions have been met: (a) a certificate is executed by the Mayor and City Secretary of said City to the effect that no default exists in connection with any of the covenants or requirements of the ordinance or ordinances authorizing the issuance of all then outstanding Bonds, First Lien Bonds, Additional Parity First Lien Bonds, and Additional Bonds; (b) a certificate is executed by the Mayor and City Secretary of said City to the effect that the Interest and Sinking Fund or Reserve Fund contains the amounts then required to be on deposit therein; (c) a certificate is executed by a Certified Public Accountant to the effect that, in his opinion, the Net Earnings of the System for the last complete fiscal year of the City, or for any twelve consecutive calendar month period ending not more than 90 days prior to the passage of the ordinance authorizing the issuance of such Additional Bonds, were at least 1.50 times the average annual principal and interest requirements for all then outstanding bonds, First Lien Bonds, Additional Parity First Lien Bonds, Additional Bonds, and the proposed Bonds, (d) a certificate is executed by an Independent Consulting Engineer to the effect that, in his opinion, the average annual Net Revenues of the System will be at least equal to the average annual principal and interest requirements for all then outstanding Bonds, First Lien Bonds, Additional Bonds then First Lien Bonds and Additional Bonds, and for the installment or series of Additional Bonds then proposed to be issued, throughout the period during which said obligations are scheduled to be outstanding; (e) the Additional Bonds are scheduled to mature only on May 15 in each of the years in which they are scheduled to mature; (f) the ordinance authorizing the issuance of such installment or series of Additional Bonds provides that the aggregate amount to be accumulated and maintained in the Reserve Fund shall be increased by an additional amount not less than the average annual principal and interest requirements for said Additional Bonds, and that such additional amount shall be so accumulated within sixty one months from the date of the Additional Bonds, by the deposit in the Reserve Fund of the necessary sums in equal monthly installments, provided, however, that the aggregate amount to be accumulated in the Reserve Fund shall never be required to exceed the average annual principal and interest requirements for all then outstanding bonds and Additional Bonds and for the installment or series of Additional Bonds then proposed to be issued; and (g) all calculations of average annual principal and interest requirements made pursuant to this section are made as of and from the date of the Additional Bonds then proposed to be issued. The term "Net Earnings of the System" shall mean all of the Net Revenues of the System, except that in calculating Net Revenues there shall not be deducted as an expense of operation and maintenance any charge or disbursement I or repairs or extensions which, under standard accounting practice, should be charged to capital expenditures. Following retirement or defeasance of the Outstanding Bonds, the Bond Ordinance provides that condition (b) will be modified to require that the City must secure a certificate executed by a Certified Public Accountant to the effect that, in his opinion, the Net Revenues of the System pledged to the payment of the Outstanding Bonds and Additional Bonds, for the last complete fiscal year of the City or for any twelve consecutive calendar month period ending not more than ninety days prior to the passage of the ordinance authorizing the issuance of such Additional Bonds were at least 1.10 times the average annual principal and interest requirements for all then Outstanding Bonds and Additional Bonds, including the Additional Bonds then proposed to be issued. In making a determination of the Net Revenues, the Accountant may take into consideration a change in the rates and charges for services and facilities afforded by the System that became effective at least sixty (60) days prior to the last day of the period for which such Net Revenues are determined and, for purposes of satisfying the above Net Revenues test, make a pro forma determination of the Net Revenues for the period of time covered by his certification or opinion based on such change in rates and charges being in effect for the entire period covered by the Accountant's certificate or opinion. • • 1 The City covenants in the Bond Ordinance that it will provide for the accumulation of an amount not less than the average annual principal and interest requirements of Bonds Similarly Secured. See Appendix B -"CERTAIN PROVISIONS OF THE BOND ORDINANCE". On or before the 10m day of each month following the month A delivery of the Bonds, the City shall deposit an amount which, in equal monthly installments, will accumulate within 60 months the difference between the amount on deposit in the Reserve Fund and the additional amount required after giving effect to the issuance of the Bonds. The Reserve Fund shall be used to pay principal of or interest on the then Outstanding Bonds and the Bonds falling due at any time when there is not sufficient money available in the Interest and Sinking Fund. No payment will be required to be made into the Reserve Fund so long as there is on deposit therein the sum equal to the average annual principal and interest requirements for the then Outstanding Bonds and the Bonds, except that whenever said Reserve Fund is reduced below that amount, payments into the Reserve Fund shall be made on or before the loth day of the month until such time as the Reserve Fund has been restored to the required amount. 5 TRANSFER, EXCHANGE AND REGISTRATION ITIMSOM so: .. ,"do N lilt ToM re �.� .. .:. executionrespect to such registration, exchange and transfer, The Bonds may be assigned by the of an assignment form on the Bonds or by other instrument of transfer and assignment acceptable to the Paying Agent/Registrar. .14ew Bonds registered and delivered 'in an exchange or transfer shall be of the same type, in authorized .... .. 3ond or Bonds surrendered for exchange or transfer. The record date ("Record Date") for the interest payable on any interest payment date of a Bond is the last business day of the month next preceding such interest payment date, as specified in the Bond Ordinance. In the event of anon -payment of interest on a scheduled interest payment date, and for thirty (30) days thereafter, a new record date for such interest payment (the "Special Record Date") will be established by the Paying Agent/Registrar, if and when funds for the payment of such interest have been received from the City. Notice of the Special Record Date and of the scheduled payment date of the past due interest (the "Special Payment Date" which shall be fifteen (15) days after the Special Record Date) shall be sent at least five (5) business days prior to the Special Record Date by United States mail, first-class postage prepaid, to the address of each registered owner of a Bond appearing on the Security Register of the Paying Agent/Registrar at the close of business on the last business day next preceding the date of mailing of such notice. Neither the City nor the Paying Agent/Registrar shall be required to issue, transfer or exchange any Bond called for redemption, in whole or in part, when such redemption is scheduled to occur within thirty (30) calendar days after the transfer or exchange date; provided, however, such limitation shall not be applicable to an exchange by the registered owner of the uncalled principal balance of a Bond. REPLACEMENT BONDS If any Bond is mutilated, destroyed, stolen or lost, a new Bond of the same series and maturity, and in the same principal amount as the Bond so mutilated, destroyed, stolen or lost, will be issued subject to the provisions therefor in the Bond Ordinance. In the case of a mutilated Bond, such new Bond will be delivered only upon surrender and cancellation of such mutilated Bond. In the case of any Bond issued in lieu of and substitution for a Bond which as been destroyed, stolen or lost, such new Bond will be delivered 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, only (a) upon filing with the Paying Agent/Registrar evidence that such Bond has been destroyed, stolen or lost and proof of the ownership thereof, (b) upon furnishing the Paying Agent/Registrar with such security and indemnity as may be required by the Paying Agent/Registrar to save it and the City harmless, and (c) upon satisfaction of any other reasonable requirements imposed by the City and the Paying Agent/Registrar. The person requesting the authentication and delivery of a new Bond must pay such expenses as the Paying Agent/Registrar may incur in connection therewith. 7 /wl 11 : ►11 1 : 1 REVENUE BONDS OUTSTANDING (Upon the Issuance of the Bonds) Original Issue Amount Description $ 295,000 Utility System Revenue Bonds, Series 1973 305,000 Utility System Revenue Bonds, Series 1976 2,230,000 (a) Utility System Refunding and Improvement Revenue Bonds, Series 1991 (a) Includes the Bonds, but excludes the Refunded Bonds. Amount Outstanding $ 40,000 175,000 2,230,000 (a) $ 2,445,000 (a) Date of Amount Issued To Amount Authorization Purpose Authorized Date Unissued 1-31-81 Water $ 8609000 $ 450,000 $ 410,000 1-31-81 Landfill 150,000 - 150,000 4-02-83 Electric 300.000 - 300,000 Totals NOTES PAYABLE 450 000 The City entered into a note payable with Gainesville National Bank of Sanger for the purpose of purchasing a bucket truck for the System. The original amount of this note was $54,487 and bears interest at the rate of 9.5 Y per annum. The note is presently outstanding in the amount of $7,193 with final payment due on March 10, 1992. 1'• 1 � 1 1 o :� 1 The City does not anticipate the issuance of additional revenue bonds in calendar year 1992. PAYMENT The City has never defaulted with respect to the timely payment of its principal and interest requirements on its revenue bonds. Unaudited Net Revenues Available for Debt Service, Fiscal Year Ended September 30, 1991 .............................. . Average Annual Principal and Interest Requirements on the Bonds, 1992-2011 . ........ . .................. . Coverage Based on Unaudited Net Revenues, Fiscal Year Ended September 30, 1991 ........ . ........ boom . .......04 $ 407,885 $ 227,482 1.79X • • 1015 1'W431 m OZA N MAW 1 MEN1 1 Fiscal Year Principal Repayment Schedule Bonds Percent of Ending Outstanding The Unpaid At Principal 9-30 Bonds(a) Bonds Total Year End Retired 1992 $ 502000 $ 15,000 $ 65,000 $ 2,380,000 2.66 % 1993 55,000 15,000 70,000 2,310,000 5.52 1994 55,000 20,000 75,000 2,235,000 8.59 1995 55,000 25,000 80,000 2,155,000 11.86 1996 859000 85,000 2,070,000 15.34 1997 859000 85,000 1,9859000 18.81 1998 90,000 90,000 1,895,000 22.49 1999 1009000 1009000 19795,000 26.58 2000 105,000 105,000 1,6901000 30.88 2001 1101000 1109000 1,580,000 35.38 2002 115,000 1159000 11465,000 40.08 2003 125,000 125,000 1,340,000 45.19 2004 130,000 130,000 1,2101000 50.51 2005 140,000 140,000 1,0709000 56.24 2006 150,000 150,000 920,000 62.37 2007 160,000 160,000 760,000 68.92 2008 170,000 170,000 590,000 75.87 2009 185,000 185,000 405,000 83.44 2010 195,000 195,000 210,000 91.41 2011 210,000 210,000 0 100.00 (a) Excludes the Refunded Bonds. 11 SEWER RATES - (Monthly Billing Based on Water Conswnpuon) Residential: First 1,000 gallons Over 1,000 gallons Maximum Commercial: First 1,000 gallons Over 1,000 gallons Maximum Old Rates (Effective September 4, 1990) 10.00 (minimum) 0.85/M gallons 25.00 $ 16.00 (minimum) 0.85/M gallons 125.00 New Rates (Effective September 16, 1991) $ 10.00 (minimum) 0.90/M gallons 25.00 � 16.00 (minimum) 0.90/M gallons 125.00 Multi -family dwellings are charged the residential rate times the number of occupied units. Average Name Monthly Bill National Living Center $ 125.00 Sanger High School 125.00 Dairy Queen 125.00 North Texas Plastics 125.00 Sweeney's 87.91 Royal Sanger Inn 78.14 W. W. Family Restaurant 67.51 Frank Millar (Business) 64.20 Buckhorn Restaurant 44.73 Sanger Auto -Mat 43.03 Total 885.52 DESCRIPTION OF THE ELECTRIC SYSTEM The City owns and operates its own electric distribution system. On January 7, 1985, the City entered into a ten year contract with the Brazos Electric Power Cooperative, Inc. whereby the City purchases electric power and energy at the rates shown below, subject to a fuel adjustment charge and power adjustment on demand and energy charges. Facilities Charge $ 257.00 per delivery point per month Demand Charge $ 6.75/KW of billing demand Energy Charge $ 9.8233 mills/KWH In addition, the City generates power only on a standby basis for emergencies. The electric system serves approximately 1,696 meters. 13 The Bonds offered herein are secured by and payable from alien on and pledge of the Net Revenues derived from the operation of the System. Therefore, the financial and statistical data that follows is presented for general informational purposes only. 1991 Appraised Value established by the Denton Central Appraisal District............................................... Less Exemptions, Local, Optional, Over 65 or Disabled Homestead ..... $ 2,498,592 Disabled or Deceased Veterans' ................ 559500 Open -Space Land 5,234,282 1991 Net Assessed Valuation (100 % of Market Value) ................ . Total General Obligation Debt Outstanding ........... . ...... . .... . Interest and Sinking Fund Balance (Unaudited, as of October 15, 1991) ...... . Ratio of Total General Obligation Debt to 1991 Net Assessed Valuation........................................... . 1990 Estimated Census Population - 3,508 Per Capita 1991 Net Assessed Valuation - $20,561 Per Capita Total General Obligation Debt - $128 Area - 2.5 Square Miles $ 79,914,917 (a) 7,788,374 $ 72,126,543 $ 450,000 $ 9,949 (a) For a detailed discussion of ad valorem taxation see "THE PROPERTY TAX CODE AS APPLIED TO THE CITY", herein. The value placed upon property within the Appraisal District is subject to review by an appraisal review board appointed by the Board of Directors of the Appraisal District. The Appraisal District is required to review the value of property within the Appraisal District every three years. The City may require annual review, at its own expense, and is entitled to challenge the determination of appraised value of property within the City by petition filed with the Appraisal Review Board. THE PROPERTY TAX CODE AS APPLIED TO THE CITY Pursuant to a comprehensive Property Tax Code enacted by the Texas Legislature (the "Tax Code"), there has been established for each county in the State of Texas a single appraisal district with responsibility for recording and appraising property for all taxing units within the county and a single appraisal review board with responsibility for reviewing and equalizing the values established by the appraisal district. The appraisal of property within the City is the responsibility of the Appraisal District for Denton County (the "Appraisal District"). The Appraisal District is governed by a board of five directors appointed by the votes of the governing bodies of the various governmental units within Denton County, with votes weighted by relative tax levy. The Tax Code requires the Appraisal District, by May 15 of each year or as soon thereafter as practicable, to prepare appraisal records listing all property that is taxable in the Appraisal District and stating the appraised value of each parcel or item of taxable property. Property is to be appraised as of January 1 of each year, and the Tax Code generally requires appraisals at 100 % of market value. Land used for agriculture, timber production or open space may qualify for valuation on productive capacity rather than market value, thereby resulting in a lower taxable value. The next year of full reappraisal of all taxable property within the City is 1993. Appraisals are subject to review by the appraisal review board. Under certain circumstances taxpayers and taxing units (such as the City) may appeal an order of the appraisal review board by filing a petition for review in state district court. In such event, the value of the property in question will be determined by the court, or by a jury if requested by any party. Absent any such appeal, the appraisal roll as prepared by the appraisal district and approved by the appraisal review board must be used by each taxing jurisdiction in establishing its tax rolls and tax rate. 15 MMMAIMMMIne of property taxes imposed in the preceding year unless a notice of intent to consider an *increase in taxes is given and a public hearing on the proposed increase is held before the total., 26.05 of Code provides that msinner prescribed in Section 26.04 of the Tax Code, is more than 3 % and Section 26.07 subjects an increase in he effective tax rate to a referendum election when the effective tax rate increase is more thari 8 % of the previous (ear's effective tax rate. Amendments to the Tax Code, effective January 1, 1988, change the methods for Wculating and determining the effective tax rate, and the effect of such changes will be to reduce the basis for •letermining a percentage increase. the effective tax rate thatnecessitates theholding of public hearing on • ••• c• tax increase:,. subjects :, adopted tax rate to a referendum election, By September 1 of each year, or as soon thereafter a practicable, the rate of taxation is set by the City based upon the valuation of property within the City as of the preceding January 1. Taxes are due October 1 and become delinquent if not paid by January 31 of the following year. The City does not permit split payments of tax bills and does not allow discounts for early payment of taxes. Delinquent taxes incur a penalty of from 6 % to 12 % of the amount of the tax, depending upon the time of payment, and accrue interest at the rate of one percent per month until paid. If the tax is not paid by July 1, an additional penalty of up to 15% may be imposed. COLLECTION OF DELINQUENT TAXES Taxes levied by the City are the personal obligations of the person who owns the property on January 1 of the tax year. The City has no lien for unpaid taxes on personal property, but does have alien granted by statute for unpaid taxes on real property, which is discharged upon payment. Thereafter, no lien exists in favor of the City until it again levies taxes. In the event a taxpayer fails to make timely payment of taxes due to the City on real property, a penalty of 6 % of unpaid taxes is incurred in February and 1 % is added monthly until the penalty reaches 10 after which it becomes a flat 12 %. In addition, delinquent taxes incur interest at the rate of 1 % per month. The City may file suit for the collection thereof and may foreclose such lien in a foreclosing proceeding. The City has elected to assess an additional 15 % charge against delinquent taxes to defray the legal costs of collecting the delinquent taxes. Under certain circumstances, taxes which become delinquent on the homestead of a taxpayer 65 years old or older incur a penalty of 8 % per annum with no additional penalties of interest assessed. In general, property subject to the City's lien may be sold, in whole or in parcels, pursuant to court order to collect the amounts due. Federal law does not allow for the collection of penalty and interest against an estate in bankruptcy. Federal bankruptcy law provides that an automatic stay of action by creditors and other entities, including governmental units, goes into effect with the filing of any petition in bankruptcy. The automatic stay prevents governmental units from foreclosing on property and prevents liens for post -petition taxes from attaching to property and obtaining secured creditor status unless, in either case, an order lifting the stay is obtained from the bankruptcy court. In many cases post -petition taxes are paid as an administrative expense of the estate in bankruptcy or by order of the bankruptcy court. The Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA), enacted on August 9, 1989, contains certain provisions which affect the time for protesting property valuations, the fixing the tax liens and the collection of penalties and interest on delinquent taxes on real property owned by the FDIC and the RTC. Under FIRREA, real property held by the FDIC or RTC is still subject to ad valorem taxation, but (i) no real property of the FDIC or RTC is subject to foreclosure or sale without the consent of the FDIC or RTC and no involuntary lien will attach to such property, (ii) the FDIC or RTC is not liable for any penalties or fines, including those arising from the failure to pay any real property tax when due and (iii) notwithstanding the failure of a person to challenge an appraisal in accordance with State law, such value will be determined as of the period for which such tax is imposed. 17 CLASSIFICATION OF ASSESSED VALUATION 1991 1990 ... Propgrty Use Catejeory Amount Percent Amount Percent AmMount Percers Real, Residential, Single -Family Real, Residential, Multi -Family Real, Vacant Platted Lots/Tracts Real, Acreage (Land Only) Real, Farm & Ranch Improvements Real, Commercial Real, Industrial Utilities Tangible Personal, Commercial Tangible Personal, Industrial Tangible Personal, Mobile Homes Tangible Personal, Other Real Property, Inventory :.:. Persons.m:. Disabled Open�Space Land Basis of Assessment $ 47,9169349 59.96% $ 48,015,972 59.12% $ 50,750,941 59,8570 2,639,075 3.30 2,509,226 3.09 2,142,395 2.53 2,585,761 3.24 2,981,132 3.67 3,397,010 4.00 6,241,542 7,81 6,946,531 8,55 61807,844 8.03 536,961 0.67 585,536 0.72 555,891 0.66 8,529,529 10,67 91061,196 11,16 109509,636 12.39 297,277 0.37 297,186 0.37 2969648 0.35 4,486,830 5,61 3,592,850 4,42 395799466 4,22 4,2809269 5,36 5,461,653 6.73 4,727,908 5,57 1,080,129 1,35 392,500 0.48 392,500 0.46 981,111 1,23 19002,722 1.23 1,269,821 1,50 340,084 0.43 $ 79,914,917 100.00 $ 2,498,592 3.13 % 55,000 0.07 5,234,282 6.55 372,544 0.46 � 2,515,192 3.10 % ASSESSED VALUATION INCREASES OR (DECREASES) 55,000 0.07 5,729,755 7.05 Increase or (Decrease) Tax Assessed Over Prior Years Year Valuation Amount Percent 1985 $ 51,763,572 - - 1986 629066,231 (a) $ 109302,659 19.90% 1987 74,735,416 12,669,185 20.41 1988 781458,315 31722,899 4.98 1989 77,491,976 (a) (966,339) (1.23) 1990 72,919,101 (b) (4,5721875) (5.90) 1991 72,126,543 (792,557) (1.09) (a) Revaluation of all taxable property located within the City. (b) Decrease due to general economic decline. 19 372,544 0.44 $ 1,488,857 1.76% 58,000 0.07 5,763,771 6.80 77,491,976 91.37 % ESTIMATED DIRECT / OVERLAPPING 1 VALOREM TAX SUPPORTED GROSS DEBT STATEMENTOctober Estimated Estimated GrossDebt n• Denton County $ 7,785 0.76 % 59,166 Sanger Independent School District 6,314,298 (a) 48.54 3,064,960 Sanger, City of 4509000 100.00 450.000 Total Direct and Overlapping Gross Debt ................................. 3 574 126 Ratio of Direct and Overlapping Debt to 1991 Net Assessed Valuation ............................................ 4.91 % Per Capita Direct and Overlapping Gross Debt .............................. $ 1,168.78 GOVERNMENTAL SU1 1 Governmental Subdivision sessed 1991 luation Tax Rate Denton County � 9,684,452,988 S 0.2844 Sanger Independent School District 101,711,444 0.4700 Denton County Education District 7,707,457,986 0.8200 Sanger, City of 72,126,543 0.4633 AUTHORIZED BUT UNISSUED GENERAL OBLIGATION BONDS OF DIRECT AND OVERLAPPING GOVERNMENTAL SUBDIVISIONS Estimated Estimated Potential Percent Amount Governmental Subdivisionmonow, Amount Overlapping Applicable Denton County � -0- 0.76 % $ -0- SangerIndependentSchool District 50,000 48.54 24,270 Sanger, City of 40- 100.00 -0- Total Potential Direct and Overlapping Debt ............................. 24 270 EXISTING GENERAL OBLIGATION BOND DEBT SERVICE REQUIREMENTS Fiscal Year Ending 9-30 Principal Interest Total 1992 $ 759000 $ 33,950 $ 108,950 1993 80,000 28,700 108,700 1994 90,000 22,900 1121900 1995 1000000 16,150 116,150 1996 ow 1056000 8.400 113.400 110 100 21 GOVERNMENTAL FUND BALANCES (Unaudited, as of October 15, 1991) Operating Fund ....................................... $ 19,767 Interest and Sinking Fund ................................. 9,949 Equipment Replacement Fund 7,578 TotalFunds .......................................... T37 294 I�ul' �[�ii���i: ii ui ►Y ►1 DIY All permanent, full-time City employees who were less than 55 years of age when employed by the City are covered by the Texas Municipal Retirement System (TMRS). TMRS is contributory, annuity -purchase type plan which is covered by a State statute and is administered by six trustees appointed by the Governor of the State of Texas. TMRS operates independently of its member cities. The City joined TMRS to supplement Social Security. The City's employees contribution rate is currently 5 4o and the City's contribution rate for the year 1992 is 4.57 %. When an employee terminates and withdraws his contribution, the City's portion remains in the fund. Credit is allowed annually toward reducing the City's contribution rate to maintain a two -for one matching balance. The 1990 Annual Report for TMRS reported that the City has an unfunded accrued liability of $21,593, which was being amortized over a twenty-five year period. Assets held by TMRS for the City amounted to $211,497. Accrued current service liabilities totaled $159,060 and accrued prior service liabilities totaled $74,030. Enabling statutes prohibit any member city from adopting options which impose liabilities that cannot be amortized over twenty-five years within a specified statutory rate. Moody's Investors Service has rated the Bonds "Baa". An explanation of the significance of such rating may be obtained from the company furnishing the rating. Certain information concerning the Bonds and the City was furnished to such rating agency by the City and others. There is no assurance that said rating will be maintained for any given period of time or that it will not be raised, lowered or withdrawn entirely if, in the judgment of the rating agency, circumstances so warrant. Any downward change in or withdrawal of such rating may have an adverse effect on the price at which the Bonds may be sold. LEGAL OPINIONS AND NO -LITIGATION CERTIFICATE The City will furnish a complete transcript of proceedings incident to the authorization and issuance of the Bonds, including the unqualified approving legal opinion of the Attorney General of the State of Texas as to the Bonds to the effect that the Bonds are valid and legally binding obligations of the City, and based upon examination of such transcript of proceedings, the approving legal opinion of McCall, Parkhurst & Horton, Dallas, Texas, Bond Counsel ("Bond Counsel"), with respect to the Bonds issued in compliance with the provisions of the Bond Ordinance. The customary closing papers, including a certificate to the effect that no litigation of any nature has been filed or is then pending to restrain the issuance and delivery of the Bonds, or which would affect the provisions made for their payment or security, or in any manner questioning the validity of said Bonds will also be famished. Bond Counsel was not requested to participate, and did not take part, in the preparation of the Official Statement and such firm has not assumed any responsibility with respect thereto or undertaken independently to verify any of the information contained therein, except that, in its capacity as Bond Counsel, such firm has reviewed the information under the captions "PLAN OF FINANCING", "THE BONDS", "LEGAL MATTERS" and Appendix B " CERTAIN PROVISIONS OF THE BOND ORDINANCE in the Official Statement, and such firm is of the opinion that the information relating to the Bonds and matters of law contained under such captions, in all material respects, accurately and fairly reflects the provisions thereof. The legal fee to be paid Bond Counsel for services rendered in connection with the issuance of the Bonds is contingent upon the sale and delivery of the Bonds. The legal opinion will be printed on the definitive Bonds. 23 THE BONDS AS LEGAL IIWESTMENTS IN TEXAS The on Procedures Act, Article 717k-ti, V.A.T.C.S., as amended, provides that all bonds, issued by an issuer, such as the City, shall constitute negotiable instruments, and are investment securities governed by Chapter 8, Texas Uniform Commercial Code, notwithstanding any provisions of law or court decision to the contrary, and are legal and authorized investments for banks, savings banks, trust companies, building and loan associations, savings and loan associations, insurance companies, fiduciaries, and trustees, and for the sinking fund of counties, cities, towns, villages, school districts, and other political subdivisions or public agencies of the State of Texas. Texas law additionally requires that bonds must have a then current rating, as to investment quality, of not less than "A", or its equivalent, by a nationally recognized rating agency in order to achieve and maintain eligibility to secure deposits of any public funds of the State of Texas or any political subdivision or public agency thereof. No application for a rating has been made for the Bonds. See "RATINGS" herein. No review by the City has been made of the laws in other states to determine whether the Bonds are legal investments for various institutions in those states. REGISTRATION AND QUALIFICATION OF BONDS FOR SALE The sale of the Bonds has not been registered under the Federal Securities Act of 1933, as amended, in reliance upon the exception provided thereunder by Section 3(a)(2); and the Bonds have not been qualified under the Securities Act of Texas in reliance upon various exemptions contained therein; nor have the Bonds been qualified under the securities acts of any jurisdiction. The City assumes no responsibility for qualification of the Bonds under the securities laws of any jurisdiction in which the Bonds may be sold, assigned, pledged, hypothecated or otherwise transferred. This disclaimer of responsibility for qualification for sale or other disposition of the Bonds shall not be construed as an interpretation of any kind with regard to the availability of any exemption from securities registration provisions. VERIFICATION OF ARITHMETICAL AND MATHEMATICAL COMPUTATIONS The accuracy of (a) the arithmetical computations of the adequacy of the maturing principal and interest of the Federal Securities and uninvested cash on hand under the Escrow Agreement to pay, when due, the principal of and interest and redemption premiums, if any, on the Refunded Bonds and (b) the mathematical computation supporting the conclusion of Bond Counsel that the Bonds are obligations described under sections 148 and 149(d) of the Code will be verified by the firm of Grant Thornton, independent Certified Public Accountants. Such verification shall be based upon information supplied to Grant Thornton by the District through the Underwriter. The Underwriter has agreed, subject to certain conditions, to purchase the Bonds from the City at a price representing an aggregate discount of �51,067 from the initial public offering prices set forth on the cover page hereof. The Underwriter's obligation is subject to certain conditions precedent, and they will be obligated to purchase all the Bonds if any Bonds are purchased. The price and other terms respecting the offering and the sale of the Bonds may be changed from time to time by the Underwriter after the Bonds are released for sale, and such Bonds may be offered and sold at prices other than the initial offering price, including sales to dealers who may sell the Bonds into investment accounts. AND DENTON COUNTY, TEXAS GENERAL INFORMATION REGARDING CITY OF SANGER AND DENTON COUNTY, TEXAS The City %J Sanger (the "City") is located in northern Denton County on Interstate Highway 35 approximately fifteen miles north of the City of Denton. The City's economy is primarily based upon agriculture and manufacturing. The City's 1990 Census is 3,508, an increase of 36.3 % over the 1980 Census of 2,574. A local bank and a branch office of Gainesville National Bank are located in the City. The City of Denton is the county seat and covers an area of 33.2 square miles. The City of Denton is known as the upper most point of the Dallas - Fort Worth -Denton industrial triangle and is located approximately 38 miles from both Dallas and Fort Worth on Interstate Highway 35. The 1990 Census for the City of Denton is 66,270, increasing 37.9 % over the 1980 Census of 48,0636 Denton County (the "County") is located in north central Texas and encompasses an area of 911 square miles. It is the third largest county of the nine counties comprising the Dallas -Fort Worth Consolidated Metropolitan Statistical Area (CMSA). The County is traversed by Interstate Highway 35, United States Highways 77, 377 and 380 and State Highways 114 and 121. The County is divided north and south geographically by the East Cross Timbers which is a narrow strip of woodland that extends from the Red River to the Brazos River around Waco. The County's 1990 census is at 273,525 increasing 91.1 % over the 1980 population of 143,126. POPULATION STATISTICS Dallas - Year City of Sanger Denton Countv Fort Worth CMSA (a) 1990 Census 3,508 273,525 3,885,415 1980 Census 29574 143,126 299749805 (b) 1970 Census 19603 759633 2,3779623 (b) 1960 Census 19190 479432 1,737,960 (b) (a) The Consolidated Metropolitan Statistical Area (CMSA) includes the counties of Collin, Dallas, Denton, Ellis, Johnson, Kaufman, Parker, Rockwall and Tarrant. (b) The figures for year 19604980 are for the Dallas -Fort Worth Standard Metropolitan Statistical Area (SMSA) which includes the counties of Collin, Dallas, Denton, Ellis, Hood, Johnson, Kaufman, Parker, Rockwall, Tarrant and Wise. Source: United States Bureau of the Census Ernployer Sanger Independent School District Care Inn We Package It Burrus City of Sanger Ampco Hollingsworth Manufacturing Company Sanger Bank Hilz-Snider Chevrolet Company Coblestone Day Care Gainesville National Bank of Sanger Principal Line of Business Education Nursing Home Paper Business Supermarket Government Bathroom Fixtures Manufacturing/Trucking Business Bank Automobile Dealership Day Care School Bank 220 45 40 34 32 28 20 17 12 10 9 EFFECTIVE BUYING INCOME STATISTICS I•n F: MedianTotal EBI Total EBI Median Total EBI Median Year 111) Household 111) Household 111) Household EBI 1990 S 4,575,175 $ 35,083 60,083,408 31,078 $ 214,1429943 $ 259847 1989 3,3729545 33,364 53,334,107 289420 198,479,285 23,975 1988 3,0899983 31,333 499306,524 269701 184,0979002 22,539 1987 39149,823 33,467 5292719840 28,799 1981762,908 24,341 1986 2,926,588 32,879 49,634,723 28,192 1959120,293 249272 1985 2,706,200 33,021 46,9099379 27,921 187,692,522 249059 1984 2,468,443 359357 42,4519292 29,786 172,8739159 26,004 1983 2,121,539 3%875 36,504,653 26,257 154,421,640 23,412 1982 11834,548 28,856 3396979232 259138 1459203,201 22,643 1981 1,383,489 21,909 32,716,122 (a) 25,035 (a) 132,308,070 21,291 1980 1,221,356 20,316 28,404,977 (a) 22,409 (a) 11590209555 19,123 1979 790,858 189278 24p030,255 (a) 219187 (a) 99,5289547 189135 which includes the counties of Collin, Dallas, Denton, Ellis, Hood, Johnson, Kaufman, Parker, Rockwall, __lf: l -t and Wise. Source: Sales and Marketing Management magazine, Survey of Buying Power, 1980 through 1991. EDUCATION The County is served by seventeen independent school districts, all of which have been accredited by the Accreditation Division of the Texas Education Agency. The University of North Texas (formerly North Texas State University) and Texas Woman's University provided higher education facilities to the County and surrounding area. The University of North Texas, a state -supported co-educational school, offers degree programs in eight major fields. Degree programs and a School of Library Science are offered by the Texas Woman's University, which also is a state -supported institution. The universities have a combined enrollment of approximately 30,00 and employ over 2,000 full-time and part-time faculty members. Another prominent state -supported institution is the Denton State School for the mentally retarded. The school is located on a 200 acre site which was contributed to the State by county residents. There are twenty-five dormitories which house 820 students and 60-bed infirmary located on the campus. The school employs 1,200 faculty members. GOVERNMENT ACTIVITY Located approximately 18 miles from the City of Sanger is the site of the first underground Control Center built by the Federal Government. The Center serves Region 5 Headquarters for the Office of Civil and Defense Mobilization, which consists of Texas, Oklahoma, Arkansas, Louisiana and New Mexico, and is designed to resist nuclear blasts and radiation. The Center consists of an above ground "flangible" building and a story underground structure. The structure has its own water well, an infirmary, first aid station, communications headquarters and will house 200 persons on a day -today basis and 500 on a 30-day "buttoned up" emergency basis. In time of emergency, the Center will house the administrative personnel of 16,000 federal employees in the Dallas -Fort Worth metroplex. In the event of a national emergency, the Center would serve as headquarters for over 235,000 civilian employees of the Federal Government. The County's transportation needs are served by the Denton Municipal Airport, with a full instrument landing system, and the Dallas -Fort Worth International Airport, the nation's largest airport, which provides access to all parts of the United States as well as many international markets. /:Qc3 11 1 1 01 :1 1 1'll Section 8. DEFINITIONS. For all purposes of this ordinance and in particular for clarity with respect to the issuance of the Bonds herein authorized and the pledge and appropriation of revenues for the payment of the Bonds, the following definitions are provided: (a) The term "Utility System" as used in this Ordinance, shall mean and include the Issuer's entire Waterworks, Sewer and Electric System, together with all future improvements, extensions, enlargements, and additions thereto, and replacements thereof. (b) The term "Net Revenues," as used in this Ordinance, shall mean gross revenues of the Utility System, after deducting the expenses of operation and maintenance of the Utility System, including all salaries, labor, materials, repairs and extensions necessary to render efficient service, provided, however, that only such repairs and extensions, as in the judgment of the City Council of said Issuer, reasonably and fairly exercised by the passage of appropriate ordinances, are necessary to keep the Utility System in operation and render adequate service to said Issuer and the inhabitants thereof, or such as might be necessary to meet some physical accident or condition which would otherwise impair the Bonds and any Additional Bonds shall be deducted in determining "Net Revenues." Depreciation, and payments into and out of the Interest and Sinking Fund, Reserve Fund, and Emergency Fund hereinafter created, shall never be considered as expenses of operation and maintenance. (c) The term "Bonds" shall mean the Bonds authorized to be issued and delivered by this Ordinance and the outstanding Series 1973 Bonds and Series 1976 Bonds. (e) The term "Additional Bonds" shall mean the additional parity revenue bonds which the Issuer reserves the right to issue and deliver in the future, as provided by this Ordinance. Section 9. PLEDGE. The Bonds and all Additional Bonds, and the interest thereon, are and shall be payable from and secured by an irrevocable first lien on and pledge of the Net Revenues of the Utility System. The Bonds authorized by this Ordinance are parity Additional Bonds as defined and permitted in the ordinance that authorized the City of Sanger, Texas Utility System Revenue Bonds, Series 1969, and Sections 9 through 27 of the ordinance that authorized the City of Sanger, Texas Utility System Revenue Bonds, Series 1969 are hereby adopted by reference and shall be restated and be applicable to the Bonds authorized by this Ordinance in Sections 8 through 25 hereof for all purposes except to the extent hereinafter specifically modified and supplemented. Section 10. RATES. The Issuer covenants and agrees with the holders of the Bonds and all Additional Bonds, as follows: (a) That it will at all times fix, maintain, charge and collect for services rendered by the Utility System, rates and charges which will produce gross revenues at least sufficient (b) such amounts, in equal monthly installments, made on or before the tenth day A each month, commencing December 10, 1991, as will be sufficient to pay the next maturing principal of the bonds. Section 14. RESERVE FUND. That, in addition to all other amounts now required by the ordinances that authorized the outstanding Bonds, there shall be deposited into the Reserve Fund, the sum of at least $ until the Reserve Fund shall contain an aggregate amount of $ . No deposits shall be required to be made into the Reserve Fund as long as the Fund contains said aggregate amount, but if and whenever said Reserve Fund is reduced below said aggregate amount, the aforesaid monthly deposits into the Fund shall be resumed and continued until such time as the Fund has been restored to said aggregate amount. The Reserve Fund shall be used to pay the principal of or interest on the Bonds and any Additional Bonds falling due at any time when there is not sufficient money available in the Interest and Sinking Fund created for their payment. Money in the Reserve Fund may, upon authorization by the City Council of said Issuer, be invested in direct obligations of, or obligations, the principal of and interest on which are guaranteed by, the United States of America, or invested in direct obligations of the Federal Intermediate Credit Banks, Federal Land Banks, Federal National Mortgage Association, Federal Home Loan Banks or Banks for Cooperatives, provided that each of the aforesaid obligations must mature, or be subject to redemption at the option of the holder thereof, Any obligation in which money in said Reserve Fund is so invested shall be kept and held by the Bank holding said Fund in escrow and in trust for the benefit of the holders of the Bonds and all Additional Bonds, and shall be promptly sold and the proceeds of sale applied to the making of all payments required to be made from the Reserve Fund. Section 15. EMERGENCY FUND. There is presently on deposit in the Emergency Fund $ No deposits shall be required to be made into the Emergency Fund as long as the Emergency Fund contains said aggregate amount, but if and whenever said Emergency Fund is reduced below said aggregate amount, the aforesaid monthly deposits into the Emergency Fund shall be resumed and continued until such time as the Emergency Fund has been restored to said aggregate amount. The Emergency Fund shall be used to pay the cost of any repairs or extensions to the System authorized by Vernon's Article 1113, for the payment of which no other funds are available. Also, the Emergency Fund shall be used to pay the principal of or interest on the Bonds and all Additional Bonds, at any time when there are not sufficient amounts in the Interest and Sinking Fund and the Reserve Fund for such purpose. Money in the Emergency Fund may, upon authorization by the City Council, be invested in the same manner and to the same extent as provided for money in the Reserve Fund. Any obligation in which money in the Emergency Fund is so invested shall be kept and held in an official depository bank of the Issuer in escrow and in trust for the benefit of the holders of the Bonds and all Additional Bonds, and shall be promptly sold and the proceeds of sale applied to the making of payments permitted or required to be made from the Emergency Fund. B-3 A operation and maintenance but not deducting depreciation, bond interest or expenditures which under standard accounting practice should be charged to capital expenditures. (a) The Additional Bonds are scheduled to mature only on May 15, and the interest thereon is scheduled to be paid only on November 15 and May 15. (e) The ordinance authorizing the issuance of such installment or series of Additional Bonds provides that the aggregate amount to be accumulated and maintained in the Reserve Fund shall be increased by an additional amount not less than the average annual principal and interest requirements for said Additional Bonds, and that such additional amount shall be so accumulated within sixty-one months from the date of the Additional Bonds by the deposit in the Reserve Fund of the necessary amount in equal monthly installments; provided, however, that the aggregate amount to be accumulated in the Reserve Fund shall never be required to exceed the average annual principal and interest requirements for all then outstanding Bonds and Additional Bonds; (f) All calculations of average annual principal and interest requirements made pursuant to this Section are made as of and from the date of the Additional Bonds then proposed to be issued. (g) Once the outstanding Series 1973 Bonds and Series 1976 Bonds are retired and are no longer outstanding, subparagraph (c) of this Section shall be replaced by the following substitute subparagraph (c): certificate is executed by a Certified Public Accountant to the effect that, in his opinion, the Net Earnings of the Utility System, either for the last complete fiscal year of the Issuer, or for any twelve consecutive calendar month period ending not more than ninety days prior to the passage of the ordinance authorizing the issuance of such Additional Bonds, were at least 1.10 times the average annual principal and interest requirements for all then outstanding Bonds and Additional Bonds, and for the installment or series of Additional Bonds then proposed to be issued. The term "Net Earnings" as used in this subsection (c) shall mean the gross revenues of the Utility System after deducting the expenses of operation and maintenance but not deducting depreciation, bond interest or expenditures which under standard accounting practice should be charged to capital expenditures." Section 20. MAINTENANCE AND OPERATION; INSURANCE. While any of the Bonds or Additional Bonds are outstanding the Issuer covenants and agrees to maintain the Utility System in good condition and operate the same in an efficient manner and at reasonable expense, and to maintain insurance on the Utility System, for the benefit of the holder or holders of the Bonds and Additional Bonds, of a kind and in an amount which usually would be carried by private companies engaged in a similar type of business. Nothing in this Ordinance shall be construed as requiring the Issuer to expend any funds B-5 (b) That while any of the Bonds or Additional Bonds are outstanding, the Issuer will not sell or encumber the Utility System or any substantial part thereof, and that, with the exception of the Additional Bonds expressly permitted by this Ordinance to be issued, it will not encumber the revenues pledged hereunder unless such encumbrance is made junior and n subordinate in all respects to the Bonds and Additional Bonds and all liens and pledges in connection therewith. (c) That no free service of the Utility System shall be allowed, and should the Issuer or any of its agencies or instrumentalities make use of the services and facilities of the Utility System, payment of the reasonable value thereof shall be made by the Issuer out of funds from sources other than the revenues and income of the Utility System. (d) That to the extent it legally may, the Issuer further covenants and agrees that while any of the Bonds or Additional Bonds are outstanding, no franchise shall be granted for the installation or operation of any competing water system, sewer system or electric system; that the Issuer will prohibit the operation of any such competing system; and the operation of any such competing system is hereby prohibited. Section 25. BONDS ARE SPECIAL OBLIGATIONS, The Bonds and Additional Bonds shall be special obligations of the Issuer payable solely from the pledged Net Revenues, and the holder or holders thereof shall never have the right to demand payment thereof out of funds raised or to be raised by taxation. Section 26. DEFEASANCE OF BONDS. (a) Any Bond and the interest thereon shall be deemed to be paid, retired, and no longer outstanding (a "Defeased Bond") within the meaning of this Ordinance, except to the extent provided in subsection (d) of this Section 32, when payment of the principal of such Bond, plus interest thereon to the due date (whether such due date be by reason of maturity, upon redemption, or otherwise) either (1) shall have been made or caused to be made in accordance with the terms thereof (including the giving of any required notice of redemption), or (ii) shall have been provided for on or before such due date by irrevocably depositing with or making available to the Paying Agent/Registrar for such payment (1) lawful money of the United States of America sufficient to make such payment or (2) Government Obligations which mature as to principal and interest in such amounts and at such times as will insure the availability, without rein- vestment, of sufficient money to provide for such payment, and when proper arrangements have been made by the Issuer with the Paying Agent/Registrar for the payment of its services until all Defeased Bonds shall have become due and payable. At such time as a Bond shall be deemed to be a Defeased Bond hereunder, as aforesaid, such Bond and the interest thereon shall no longer be secured by, payable from, or entitled to the benefits of, revenue pledged as provided in this Ordinance, and such principal and interest shall be pay- able solely from such money or Government Obligations. (b) Any moneys so deposited with the Paying Agent/Registrar may at the written direction of the Issuer also be invested in Government Obligations, maturing in the amounts legal, printing, and other expenses in connection therewith. Every replacement bond issued pursuant to the provisions of this Section by virtue of the fact that any Bond is lost, stolen, or destroyed shall constitute a contractual obligation of the Issuer whether or not the lost, stolen, or destroyed Bond shall be found at any time, or be enforceable by anyone, and shall be entitled to all the benefits of this Ordinance equally and proportionately with any and all other Bonds duly issued under this Ordinance. (e) Authority for Issuing, Replacement Bonds. In accordance with Section 6 of Vernon's Ann. Tex. Civ, St. Art. 717k-6, this Section of this Ordinance shall constitute authority for the issuance of any such replacement bond without necessity of further action by the governing body of the Issuer or any other body or person, and the duty of the replacement of such bonds is hereby authorized and imposed upon the Paying Agent/Registrar, and the Paying Agent/Registrar shall authenticate and deliver such bonds in the form and manner and with the effect, as provided in Section 4(d) of this Ordinance for Bonds issued in conversion and exchange for other Bonds. Section 28. CUSTODY, APPROVAL, AND REGISTRATION OF BONDS; BOND COUNSEL'S OPINION; CUSIP NUMBERS; AND CONTINGENT INSURANCE PROVISION, IF OBTAINED. The Mayor of the Issuer is hereby authorized to have control of the Initial Bond issued hereunder and all necessary records and proceedings pertaining to the Initial Bond pending its delivery and its investigation, examination, and approval by the Attorney General of the State of Texas, and its registration by the Comptroller of Public Accounts of the State of Texas. Upon registration of the Initial Bond said Comptroller of Public Accounts (or a deputy designated in writing to act for said Comptroller) shall manually sign the Comptroller's Registration Certificate on the Initial Bond, and the seal of said Comptroller shall be impressed, or placed in facsimile, on the Initial Bond. In addition, if bond insurance is obtained, the Bonds may bear an appropriate legend as provided by the Insurer. Section 29. COVENANTS REGARDING TAX EXEMPTION. The Issuer covenants not to take any action which would adversely affect, and to take any required action to ensure, the treatment of the Bonds as obligations described in Section 103 of the Internal Revenue Code of 1986 (the "Code"), the interest on which is not includable in the "gross income" of the holder for purposes of federal income taxation. In furtherance thereof, the Issuer covenants as follows. (a) to take any action to assure that no more than 10 percent of the proceeds of the Bonds (less amounts deposited to a reserve fund, if any) are used for any "private business use," as defined in Section 141(b)(6) of the Code or, if more than 10 percent of the proceeds are so used, that amounts, whether or not received by the Issuer, with respect to such private business use, do not, under the terms of this Resolution, or any underlying arrangement, directly or indirectly, secure or provide for the payment of more than 10 percent of the debt service on the Bonds, in contravention of Section 141(b)(2) of the Code, in full, 100 percent of the amount then required to be paid as a result of Excess Earnings under Section 148(f) of the Codes and (i) to maintain such records as will enable the Issuer to fulfill its responsibilities under this Section and Section 148 of the Code and to retain such records for at least six years following the final payment of principal and interest on the Bonds. In order to facilitate compliance with the above covenants (g), (h), and (i), a "Rebate Fund" is hereby established by the Issuer for the sole benefit of the United States of America, and such Fund shall not be subject to the claim of any other person, including without limitation the bondholders. The Rebate Fund is established for the additional purpose of compliance with Section 148 of the Code. It is the understanding of the Issuer that the covenants contained herein are intended to assure compliance with the Code and any regulations or rulings promulgated by the U.S. Department of the Treasury pursuant thereto. In the event that regulations ions or ruling are hereafter promulgated which modify, or expand provisions of the Code, as applicable to the Bonds, the Issuer will not be required to comply with any covenant contained herein to the extent that such modification or expansion, in the opinion of nationally -recognized bond counsel, will not adversely affect the exemption from federal income taxation of interest on the Bonds under Section 103 of the Code. In the event that regulations or rulings are hereafter promulgated which impose additional requirements which are applicable to the Bonds, the Issuer agrees to comply with the additional requirements to the extent necessary, in the opinion of nationally -recognized bond counsel, to preserve the exemption from federal income taxation of interest on the Bonds under Section 103 of the Code. Section 30. DESIGNATION AS QUALIFIED TAX-EXEMPT OBLIGATIONS. The Issuer hereby designates the Bonds as "qualified tax-exempt obligations" as defined in Section 265(b)(3) of the Code. In furtherance of such designation, the Issuer represents, covenants and warrants the following: (a) that during the calendar year in which the Bonds are issued, the Issuer (including any subordinate entities) has not designated nor will designate obligations, which when aggregated with the Bonds, will result in more than $10,000,000 of "qualified tax-exempt obligations" being issued; and (b) that the Issuer reason- ably anticipates that the amount of tax-exempt obligations issued, during the calendar year in which the Bonds are issued, by the Issuer (or any subordinate entities) will not exceed $10,00090004 Section 31. SALE OF INITIAL BOND. The Initial Bond is hereby sold and shall be delivered to Southwest Securities Incorporated for cash for the price of $ , which represents the par amount of such Bonds less an underwriter's discount for such Bonds of $ . It is hereby officially found, determined, and declared that the Initial Bond has been sold pursuant to the terms and provisions of a Purchase Contract in substantially the form attached hereto as Exhibit A, which the Mayor of the Issuer is hereby authorized and directed to execute and deliver and which the City Secretary of the issuer .. ..rt") for the Fiscal Year Ended September 30, 1990, as prepared by John �ertified Public Accountant, THE INFORMATION PRESENTED REPRESENTS ONLY A PART OF THE REPORT AND DOES NOT PURPORT TO BE A COMPLETE STATEMENT OF THE DISTRICT'S FINANCIAL CONDITION. REFERENCE IS MADE TO THE COMPLETE REPORT FOR ADDITIONAL INFORMATION. JOHN P. GRAVES CERTIFIED PUBLIC ACCOUNTANT 520 SOUTH HIGHWAY 377 P.O. BOX 33 PILOT POINT, TEXAS 76258 (817) 686.24A9 December 19, 1990 To the City Council City of Sanger, Texas We have audited the accompanying financial statements of the City of Sanger, Texas, as of September 30, 1990, and for the year then ended as listed in the table of contents. These financial statements are the responsibility of the City of Sanger, Texas, management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as the overall financial statements presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the City of Sanger, Texas, as of September 30, 1990, and the results of its operations and cash flows of its proprietary fund types for the year then ended in conformity with generally accepted accounting principles. Our audit was made for the purpose of forming an opinion on the financial statements taken as a whole. The combining and individual fund and account group financial statements and schedules listed in the table of contents are presented for purposes of additional analysis and are not a required part of the financial statements of the City of Sanger, Texas. Such information has been subjected to the auditing procedures applied in the audit of the financial statements and, in our opinion, is fairly presented in all material respects in relation to the financial statements taken as a whole. John P. Graves Certified Public Accountant Certified Internal Auditor Certified Fraud Examiner Proprietary Fund Account Groups Totals ---------------- -------------------- ------------------------ General General Fixed Long -Term (Memorandum Only) Enterprise Assets Debt 1990 1989 -------------------------------------------------------------------- 88,586 172,896 102,073 299,626 299,626 10,178 10,332 7,462 10,192 10,192 816,699 816,699 1,500 58,683 60,183 125,945 125,940 1,076,536 11076,536 11805,221 1,805,221 11528,464 11528,464 293,308 380,695 674,003 14,623 491,647 506,270 (1,8141007) (11814,007) $ 98,040 136,799 87,380 294,277 73,550 61,445 60,183 125,945 943,290 1,790,298 1,528,466 591,095 489,178 (1,648,489) 564,519 564,519 663,106 -------------------------------------------------------------------- $ 41153,612 $ 1,056,970 $ 564,519 $ 51975,167 $ 6,144,045 caaa vaa eaaaoccaa caaacc cac oc c c a caa coca aaaa caca a o ccaa ac=aaaaaQ as maaaaa K� Proprietary Fund ------------------ Enterprise Account Groups ------------------ General General Fixed Long -Term Assets Debt Totals --------------------- (Memorandum Only) 1990 1989 ------------------------------------------------------------------ $ 130,880 $ $ $ 130,880 $ 122,073 72,695 63,790 63,790 61,108 102,073 86,811 105,000 105,000 95,000 52,232 60,416 48,062 11455,000 1,455,000 11565,000 520,000 520,000 585,000 18,410 44,519 62,929 107,781 ------------------------------------------------------------------ $ 11825,312 $ 100,196 871,231 1,356,873 564,519 $ $ 1,056,970 $ 2,5001088 $ 2,743,530 $ 100,196 $ 1,056,970 871,231 1,356,873 100,196 1,026,348 871,231 1,374,677 89,809 28,063 ------------------------------------------------------------------ $ 2,328,300 $ 1,056,970 $ $ 3,475,079 $ 31400,515 ------------------------------------------------------------------ $ 4,153,612 $ 11056,970 $ 564,519 $ 5,9751167 $ 61144,045 aaaa a mma ma a aaoaea a s aacc o a=. a� v Q a a a a as a m Q Q e e a a a �aaoaaaaaase enasaa:ss 5 Totals -------------------------------------- (Memorandum Only) E -------------------------------------- $ 350,751 24,016 93,490 159,162 18,525 $ 347,871 28,925 95,003 145,733 17,442 11,814 10,452 61311 57,420 46,925 68,374 ----------------------------------------------- $ 782,190 $ 700,024 ----------------------------------------------- $ 133,540 $ 206,098 266,028 212,446 241,696 212,842 20, 812 30,622 30,220 93,976 86,276 60,536 541877 757 1,033 ----------------------------------------------- $ 827,155 $ 824,604 ----------------------------------------------- $ (44,965) $ (124,580) ----------------------------------------------- $ 106,711 $ 123,245 ----------------------------------------------- $ 106,711 $ 123,245 ----------------------------------------------- $ 61,746 $ (11335) ----------------------------------------------- $ 28,063 $ 28,018 ----------------------------------------------- $ 89,809 $ 26,683 7 CITY OF SANGER, TEXAS ACCRUAL CASH FLAW STATEMENT FOR THE YEAR ENDED SEPTEMBER 30, 1990 Year to Date Cash from Operating Activities: Sales $ 21465,045 (Increase) Decrease -Accounts Receivable 49,873 Total Cash from Customers $ 20514,918 Total Cash from Operations $ 21514,918 Cash Disbursed for Operating Activities Cost of Sales $ 1,485,360 (Increase) Decrease - Accounts Payable (71978) Cash Paid for Merchandise $ 11477,382 Expenses: Operating Expenses $ 924,440 (Increase) Decrease -Accrued Expenses (41170) Less Depreciation Expense (165,518) Cash Paid for Expenses $ 754,752 Total Cash Disbursed $ 21232,134 Net Cash from Operations $ 282,784 Cash Flow from Investing Activities: Interest Income $ 83,360 Interest Expense (156,409) Cash from Investing $ (73,049) Cash Flow from Financing Activities: Increase (Decrease) -Long Term Debt (106,298) (Increase) Decrease Fixed Assets (166,292) Increase (Decrease) in Fund Equity 11380 Cash from Financing $, (271,210) Net Increase (Decrease) in Cash $ (62,527) •as���a�s Reconciliation: Cash in Bank - Operating $ (60,578) Cash in Bank - Investments 30,834 Restricted Assets (32,783) Net Change in Cash Accounts $ (62,527) DEBT SERVICE FUND - The General Debt Service Fund is used to account for the accumulation of resources for, and the payment of, general long-term debt principal, capitalized lease obligations, interest, and related costs. Proprietary Funds ----------------- ENTERPRISE FUND - The Water Works, Electric and Sewer System Fund is used to account for the operations of the Water, Electric and Sewer Utility Enterprise Fund, Enterprise Funds are usedryto account for operations (a) which are financed and operated in a manner similar to private business enterprises - where the intent of the governing body is the costs (expenses, including depreciation) of providing ..goods or services to the general public on a continuing basis to be financed or recovered primarily through user charges, or (b) where the governing body has decided that periodic determination of revenues earned, expenses incurred, and/or net income is appropriate for capital maintenance, public policy, management control, accountability, or other purposes. Fixed Assets and Long -Term Liabilities -------------------------------------- The accounting and reporting treatment applied to the fixed assets and long-term liabilities associated with a fund are determined by its measurement focus. All governmental funds are accounted for on a spending or "financial flow" measurement focus. This means that only current assets and current liabilities are generally included on their balance sheets. Their fund balance (net current assets) is considered a measure of "available spendable resources". Governmental fund operating statements present increases (revenues and other financing sources) and decreases (expenditures and other financing uses) in net current assets. Accordingly, they are said to present a summary of sources and uses of "available spendable resources" during a period. Fixed assets used in governmental fund type operations (general fixed assets) are accounted for in the General Fixed Assets Account Group, rather than in governmental funds. Public domain ("infrastructure") general fixed assets consisting of certain improvements other than buildings, including roads, bridges, curbs and gutters, streets and sidewalks, drainage systems, and lighting systems, have not been capitalized. Such assets are normally immovable and of value only to the City, therefore, the purpose of stewardship for these items is satisfied without recording of these assets. No depreciation has been provided on general fixed assets. All fixed assets are valued at historical cost or estimated historical cost if actual historical cost is not available. Donated fixed assets are valued at their estimated fair value on the date donated. 11 Expenditures are generally recognized under the modified accrual basis of accounting when the related fund liability is incurred. Exceptions to this general rule include principal and interest on general long-term debt which is recognized when due. All proprietary funds are accounted for using the accrual basis of accounting. Their revenues are recognized when they are earned, and their expenses are recognized when they are incurred. Unbilled Water Works, Electric, and Sewer System Fund utility service receivables are recorded at year end. Investments Investments are stated at cost or amortized cost, which approximates market. Inventories Inventory held by the Water Works, Electric, and Sewer System Fund is priced at the lower of cost (first -in, first -out) or market. Minimum amounts of inventory are not maintained, therefore, equity reserves for inventory have been presented on an average cost basis. Restricted Assets These assets assets consist of cash and short-term Reserves The City records reserves to indicate that a balance is legally segregated for a specific investments portion of the fund future use. Following is a list of all reserves used by the City and a description of each: Reserved for Revenue Bond Debt Service - An a portion of fund balance for debt service restricted to the payment of long-term debt amounts maturing in future years, account used to segregate resources legally principal and interest Reserved for Revenue Bond Retirement - An account used to segregate a portion of fund balance for debt service resources restricted to the payment of long-term debt principal and interest amounts maturing in future years when sufficient amounts are not reserved in bond debt service accounts. Reserved for Revenue Bond Contingency - An account used to segregate a portion of fund balance for debt service resources restricted to the payment of long-term principal and interest amounts maturing in future years when sufficient amounts are not reserved in the bond debt service and bond retirement reserve accounts. 13 NOTE 3 - CERTIFICATES OF OBLIGATION/NOTES PAYABLE Certificates of Obligation consisted of the following: original Current Description Use Amount Amount General Fund -Street Construction 8-11t interest rate Road Improve. $ 700,000 $ 520,000 Notes Payable consisted of the following: Description Use Gainesville National Bank of Sanger Utility 9.5% interest rate Truck $ 54,487 $ 18,410 Gruman Emergency Products, Inc. 8.25% interest rate Fire Truck 76,688 27,125 Sanger Bank 9.5% interest rate Police Car 23,914 2,281 Sanger Bank 9.5% interest rate Patchman 23,675 31724 Gainesville National Bank of Sanger 9.5% interest rate Fire Equipment 16,000 11,389 -------------------- TOTAL $ 894,764 $ 582,929 aaaaaacmaam caaccaeac NOTE 4 - SECURITY BOND The Gainesville National Bank of Sanger operates as the depository bank for the City of Sanger. The Gainesville National Bank of Sanger pledged bonds totaling $1,300,000 as security for the City's cash accounts. NOTE 5 - Prior Period adjustment to General Fund Equity. On the FYE 09-30-89 audit report, the Police Reserve Checking account was not reported as an asset or as fund equity. The total value of this savings account at 9-30-89 was $11380, The following is a recalculation of the beginning General Fund balance: 15 NOTE 8 - CASH IN BANK - GENERAL FUND AND ENTERPRISE FUNDS GENERAL FUND - General FundThe following are included in cash for the : General Fund Checking 2493 $ (71737) Police Reserve 195164 11407 Fire Department 3038 11,128 Accounts Payable 12930 802 Payroll 299 467 Total $ 6,067 assssss ENTERPRISE FUND - The following are included in cash for the Enterprise Fund: Sanger Electric Equipment Replacement Water Capital Reserve Sewer Capital Reserve Cash on Hand - Register Total NOTE 9 - RESTRICTED ASSETS - ENTERPRISE FUND 2535 $ 17,453 160002 4,925 208108 103 208116 105 100 The following certificates of Deposit and savings accounts are held as restricted assets in the Enterprise Fund as required by Bond Ordinances and Customer Deposits: Sanger Electric Deposits 448 $ 7 880 Water Deposit 10553 6.018 Sanger Electric CD #58026 127,308 Sanger Electric CD #57610 115,121 Water Deposit CD #93741 25,000 Sanger Electric Deposit CD #57855 25,000 Bond Construction Checking 2543 94,429 Bond Construction Savings 82 Reserve CD #56736 242,000 Interest & Sinking Savings 192245 220500 Interest & Sinking CD #57183 88,400 Emergency CD #57829 13,654 Emergency Checking 160101 420 Interest & Sinking CD #58117 48,887 Total $ 816,699 Fit] CERTIFICATE FOR ORDINANCE THE STATE OF TEXAS COUNTY OF DENTON CITY OF SANGER We, the undersigned officers of said City, hereby certify as follows: 1. The City Council of said City convened in REGULAR MEETING ON THE 18TH DAY OF NOVEMBER, 1991, at the City Hall, and the roll was called of the duly constituted officers and members of said City Council, to -wit: Nel Armstrong, Mayor Gerald Jenkins, Mayor Pro Tem John Berndt Wendell Thomas Margie C. Braxton Tommy Kincaid Rosalie Garcia, City Secretary and all of said persons were present, except the following absentees: _ f} i(� Q d thus constituting a quorum. Whereupon, among at said Meeting: a written r business, the following was transacted ORDINANCE AUTHORIZING THE ISSUANCE OF UTILITY SYSTEM REFUNDING AND IMPROVEMENT REVENUE BONDS, SERIES 1991 was duly introduced for the consideration of said City Council and read in full. It was then duly moved and seconded that said Ordinance be passed; and, after due discussion, said motion carrying with it the passage of said Ordinance, prevailed and carried by the following vote: AYES: All members of said City Council shown present above voted "Aye". NOES: None. 2. That a true, full and correct copy of the aforesaid Ordinance passed at the Meeting described in the above and foregoing paragraph is attached to and follows this Certificate; that said Ordinance has been duly recorded in said City Council's minutes of said Meeting; that the above and foregoing paragraph is a true, full and correct excerpt from said City Council's minutes of said Meeting pertaining to the passage of said Ordinance; that the persons named in the above and foregoing paragraph are the duly chosen, qualified and acting officers and members of said City Council as indicated therein; that each of the officers and members of said City Council was duly and sufficiently notified officially and personally, in advance, of the time, place and purpose of the aforesaid Meeting, and that said Ordinance would be introduced and considered for passage at said Meeting, and each A said officers and members consented, in advance, to the holding of said Meeting for such purpose, and that said Meeting was open to the public and public notice of the time, place and purpose of said meeting was given, all as required by Vernon's Ann. Civ, St. Article 625247. 3. That the Mayor of said City has approved and hereby approves the aforesaid Ordinance; that the Mayor and the City Secretary of said City have duly signed said Ordinance; and that .the Mayor and the City Secretary of said City hereby declare that their signing of this Certificate shall constitute the signing of the attached and following copy of said Ordinance for all purposes. SIGNED AND SEALED the 18th day of November, 1991. City Secretary (s, A, SEAL Mayor ORDINANCE AUTHORIZING THE ISSUANCE OF UTILITY SYSTEM REFUNDING AND IMPROVEMENT REVENUE BONDS, SERIES 1991, AUTHORIZING THE EXECUTION OF A PURCHASE CONTRACT, APPROVING AN OFFICIAL STATEMENT, AND THE EXECUTION OF AN ESCROW AGREEMENT, AND OTHER MATTERS RELATED THERETO THE STATE OF TEXAS § COUNTY OF DENTON § CITY OF SANGER § WHEREAS, the following Waterworks and Sewer System Revenue Bonds of the City A Sanger, Texas (the "Issuer") are presently outstanding: City of Sanger, Texas Utility System Revenue Bonds, Series 1973, dated May 15, 1973, outstanding in the aggregate principal amount of $40,000 ("Series 1973 Bonds"), City of Sanger, Texas Utility System Revenue Bonds, Series 1976, dated March 15, 1976, outstanding in the aggregate principal amount of $175,000 ("Series 1976 Bonds"), City of Sanger, Texas Utility System Revenue Bonds, Series 1977, dated May 15, 1977, outstanding in the aggregate principal amount of $165,000 ("Series 1977 Bonds"); City of Sanger, Texas Utility System Revenue Bonds, Series 1982, dated June 15, 1982, outstanding in the aggregate principal amount of $280,000 ("Series 1982 Bonds"); City of Sanger, Texas Utility System Revenue Bonds, Series 1985, dated May 159 1985, outstanding in the aggregate principal amount of $795,000 ("Series 1985 Bonds"); WHEREAS, the Issuer now desires to refund all of the Series 1977 Bonds, Series 1982 Bonds and Series 1985 Bonds in the principal amount of $1,240,000 (the "Refunded Bonds"); and WHEREAS, the City Council of the Issuer deems it advisable to refund the Refunded Bonds in order to change the bond covenants for the issuance of additional bonds and to permit the issuance of additional bonds for improvements to the Utility System, with a limited increase to the annual debt service requirements of the Issuer, with an approximate increase to the debt service of $784,403.38. WHEREAS, Article 717k, V.A. I C.S. authorizes the Issuer to issue refunding bonds and to deposit the proceeds from the sale thereof together with any other available funds or resources, directly with a place of payment (paying agent) for the Refunded Bonds, and such deposit, if made before such payment dates, shall constitute the making of firm banking and Financial arrangements for the discharge and final payment of the Refunded Bonds; and WHEREAS, Article 717k further authorizes the Issuer to enter into an escrow agreement with the paying agent for the Refunded Bonds with respect to the safekeeping, investment, reinvestment, administration and disposition of any such deposit, upon such terms and conditions as the Issuer and such paying agent may agree, provided that such deposits may be invested and reinvested including obligations the principal of and interest on which are unconditionally guaranteed by the United States of America, and which shall mature and bear interest payable at such times and in such amounts as will be sufficient to provide for the scheduled payment or prepayment of the Refunded Bonds; and WHEREAS, Ameritrust Texas National Association, Dallas, Texas, is the paying agent for the Refunded Bonds, and the Escrow Agreement hereinafter authorized, constitutes an agreement of the kind authorized and permitted by said Article 717k; and WHEREAS, all the Refunded Bonds mature or are subject to redemption prior to maturity within 20 years of the date of the bonds hereinafter authorized. WHEREAS, the City Council has heretofore, on the 21st day of October, 1991, adopted a resolution authorizing and directing the city secretary to give notice of intention to issue revenue bonds in the amount of $800,000 for the purpose of improving and extending the combined Waterworks, Sewer and Electric System; and WHEREAS, said notice has been duly published in the Sanger Courier, which is a newspaper of general circulation in said City, in its issues %J October 31, 1991 and November 7, 1991; and WHEREAS, the City received no petition from the qualified electors of the City protesting the issuance of such revenue bonds; and WHEREAS, the bonds hereinafter authorized in the total amount of $2,230,000 for the purpose of providing $800,000 for improving and extending the combined Waterworks, Sewer and Electric System, and providing $1,430,000 for the purpose of refunding all of the outstanding City of Sanger, Texas Utility System Revenue Bonds, Series 1977, Series 1982 and Series 1985, are to be issued and delivered pursuant to Articles 1111 through 1118, V.A.T.C.S., Article 2368a, V.A.T.C.S., Chapter 252, Local Government Code and Article 717k, V.A.T.C.S.; and 2 WHEREAS, the meeting was open to the public and public notice of the time, place and purpose of said meeting was given pursuant to Article 625247, V.A.T.C.S. THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF SANGER, TEXAS: Section 1. AMOUNT AND PURPOSE OF THE BONDS. The bond or bonds of the City of Sanger (the "Issuer") are hereby authorized to be issued and delivered in the aggregate principal amount of $2,230,000, for the purpose of providing $800,000 for improving and extending the combined Waterworks, Sewer and Electric System, and providing $1,430,000 for the purpose of refunding all of the outstanding City of Sanger, Texas Utility System Revenue Bonds, Series 1977, Series 1982 and Series 1985. Section 2. DESIGNATION OF THE BONDS. Each bond issued pursuant to this Ordinance shall be designated: CITY OF SANGER, TEXAS UTILITY SYSTEM REFUNDING AND IMPROVEMENT REVENUE BOND, SERIES 1991", and initially there shall be issued, sold, and delivered hereunder a single fully registered bond, without interest coupons, payable in annual installments of principal (the "Initial Bond"), but the Initial Bond may be assigned and transferred and/or converted into and exchanged for a like aggregate principal amount of fully registered bonds, without interest coupons, having serial and annual maturities, and in the denomination or denominations of $5,000 or any integral multiple of $5,000, all in the manner hereinafter provided. The term 'Bonds" as used in this Ordinance shall mean and include collectively the Initial Bond and all substitute bonds ex- changed therefor, as well as all other substitute bonds and replacement bonds issued pursuant hereto, and the term 'Bond" shall mean any of the Bonds. Section 3. INITIAL DATE, DENOMINATION, NUMBER, MATURITIES, INITIAL REGISTERED OWNER, AND CHARACTERISTICS OF THE INITIAL BOND. (a) The Initial Bond is hereby authorized to be issued, sold, and delivered hereunder as a single fully registered Bond, without interest coupons, dated December 1, 1991, in the denomination and aggregate principal amount of $2,230,000, numbered R-1, payable in annual installments of principal to the initial registered owner thereof, to -wit: Southwest Securities Incorporated, or to the registered assignee or assignees of said Bond or any portion or portions thereof (in each case, the "registered owner"), with the annual install- ments of principal of the Initial Bond to be payable on the dates, respectively, and in the principal amounts, respectively, stated in the FORM OF INITIAL BOND set forth in this Ordinance. (b) The Initial Bond (i) may be prepaid or redeemed prior to the respective scheduled due dates of installments of principal thereof, (ii) may be assigned and transferred, (iii) may be converted and exchanged for other Bonds, (iv) shall have the characteristics, and (v) shall be signed and sealed, and the principal of and interest on the Initial Bond shall be payable, all as provided, and in the manner required or indicated, in the FORM OF INITIAL BOND set forth in this Ordinance. 3 Section 4. INTEREST. The unpaid principal balance of the Initial Bond shall bear interest from the date of the Initial Bond and will be calculated on the basis of a 360-day year of twelve 30-day months to the respective scheduled due dates, or to the respective dates of prepayment or redemption, of the installments of principal of the Initial Bond, and said interest shall be payable, all in the manner provided and at the rates and on the dates stated in the FORM OF INITIAL BOND set forth in this Ordinance. Section 5. FORM OF INITIAL BOND. The form of the Initial Bond, including the form of Registration Certificate of the Comptroller of Public Accounts of the State of Texas to be endorsed on the Initial Bond, shall be substantially as follows: FORM OF INITIAL BOND NO. R-1 $2,230,000 UNITED STATES OF AMERICA STATE OF TEXAS COUNTY OF DENTON CITY OF SANGER, TEXAS UTILITY SYSTEM REFUNDING AND IMPROVEMENT REVENUE BOND SERIES 1991 The CITY OF BANGER, in Denton County, Texas (the "Issuer"), being a political subdivision of the State of Texas, hereby promises to pay to Southwest Securities Incorporated or to the registered assignee or assignees of this Bond or any portion or portions hereof (in each case, the "registered owner") the aggregate principal amount of TWO MILLION TWO HUNDRED THIRTY THOUSAND DOLLARS in annual installments of principal due and payable on May 15 in each of the years, and in the respective principal amounts, as set forth in the following schedule: YEAR AMOUNT YEAR AMOUNT 1992 $ 15,000 2002 $1157000 1993 15,000 2003 125,000 1994 20,000 2004 130,000 1995 252000 2005 140,000 1996 85,000 2006 150,000 1997 85,000 2007 160,000 1998 90,000 2008 170,000 1999 1009000 2009 185,000 2000 105,000 2010 195,000 2001 110,000 2011 2109000 and to pay interest, from the date of this Bond hereinafter stated, on the balance of each such installment of principal, respectively, from time to time remaining unpaid, at the rates as follows: maturity 1992, 4.70% maturity 2002, 6.40% maturity 1993, 4.90% maturity 2003, 6.55% maturity 1994, 5.10% maturity 2004, 6.70% maturity 1995, 5.25 % maturity 2005, 6.80% maturity 1996, 5.40% maturity 2006, 6.90% maturity 1997, 5.60% maturity 2007, 7.00% maturity 1998, 5.80% maturity 2008, 7.05% maturity 1999, 6.00% maturity 2009, 7.15% maturity 2000, 6.15% maturity 2010, 7.15% maturity 2001, 6.25% maturity 2011, 7.15% with said interest being payable on May 15, 1992, and semiannually on each November 15 and May 15 thereafter while this Bond or any portion hereof is outstanding and unpaid. THE INSTALLMENTS OF PRINCIPAL OF AND THE INTEREST ON this Bond are payable in lawful money of the United States of America, without exchange or collection charges. The installments of principal and the interest on this Bond are payable to the registered owner hereof through the services of Ameritrust Texas National Association, Dallas, Texas, which is the "Paying Agent/Registrar" for this Bond. Payment of all principal A and interest on this Bond shall be made by the Paying Agent/Registrar to the registered owner hereof on each principal and/or interest payment date by check or draft, dated as of such date, drawn by the Paying Agent/Registrar on, and payable solely from, funds of the Issuer required by the ordinance authorizing the issuance of this Bond (the Bond Ordi- nance") to be on deposit with the Paying Agent/Registrar for such purpose as hereinafter provided; and such check or draft shall be sent by the Paying Agent/Registrar by United States mail, first-class postage prepaid, on each such principal and/or interest payment date, to the registered owner hereof, at the address of the registered owner, as it appeared on the last business day of the month next preceding each such date (the "Record Date") on the Registration Books kept by the Paying Agent/Registrar, as hereinafter described, or by such other method acceptable to the Paying Agent/Registrar requested by, and at the risk and expense of, the registered owner. The Issuer covenants with the registered owner of this Bond that on or before each principal and/or interest payment date for this Bond it will make available to the Paying Agent/Registrar, from the "Interest and Sinking Fund" created by the Bond Ordinance, the amounts required to provide for the payment, in immediately available funds, of all principal of and interest on this Bond, when due. IF THE DATE for the payment of the principal of or interest on this Bond shall be a Saturday, Sunday, a legal holiday, or a day on which banking institutions in the city where the Paying Agent/Registrar is located are authorized by law or executive order to close, then the date for such payment shall be the next succeeding day which is not such a Saturday, Sunday, legal holiday, or day on which banking institutions are authorized to close; and payment on such date shall have the same force and effect as if made on the original date payment was due. THIS BOND has been authorized in accordance with the Constitution and laws of the State of Texas in the principal amount of $2,230,000, for the purpose of providing $800,000 for improving and extending the combined Waterworks, Sewer and Electric System, and providing $1,430,000 for the purpose of refunding all of the outstanding City of Sanger, Texas Utility System Revenue Bonds, Series 1977, Series 1982 and Series 1985. ON MAY 15, 2001, or any date thereafter, the unpaid installments of principal of this Bond may be prepaid or redeemed prior to their scheduled due dates, at the option of the Issuer, with funds derived from any available source, as a whole, or in part, and, if in part, the Issuer shall select and designate the maturity, or maturities, and the amount that is to be redeemed, and if less than a whole maturity is to be called, the Issuer shall direct the Paying Agent/Registrar to call by lot (provided that a portion of this Bond may be redeemed only in an integral multiple of $5,000), at the redemption price of the principal amount, plus accrued interest to the date fixed for prepayment or redemption. AT LEAST 30 days prior to the date fixed for any such prepayment or redemption a written notice of such prepayment or redemption shall be mailed by the Paying Agent/Reg- istrar to the registered owner hereof. By the date fixed for any such prepayment or redemption due provision shall be made by the Issuer with the Paying Agent/Registrar for the payment of the required prepayment or redemption price for this Bond or the portion hereof which is to be so prepaid or redeemed, plus accrued interest thereon to the date fixed for prepayment or redemption. If such written notice of prepayment or redemption is given, and if due provision for such payment is made, all as provided above, this Bond, or the portion thereof which is to be so prepaid or redeemed, thereby automatically shall be treated as prepaid or redeemed prior to its scheduled due date, and shall not bear interest after the date fixed for its prepayment or redemption, and shall not be regarded as being outstanding except for the right of the registered owner to receive the prepayment or redemption price plus accrued interest to the date fixed for prepayment or redemption from the Paying Agent/Registrar out of the funds provided for such payment. The Paying Agent/Registrar shall record in the Registration Books all such prepayments or redemptions A principal of this Bond or any portion hereof. THIS BOND, to the extent of the unpaid or unredeemed principal balance hereof, or any unpaid and unredeemed portion hereof in any integral multiple of $5,000, may be assigned by the initial registered owner hereof and shall be transferred only in the Registration Books of the Issuer kept by the Paying Agent/Registrar acting in the capacity of registrar for the Bonds, upon the terms and conditions set forth in the Bond Ordinance. Among other requirements for such transfer, this Bond must be presented and surrendered to the Paying Agent/Registrar for cancellation, together with proper instruments of assignment, in form and with guarantee of signatures satisfactory to the Paying Agent/Registrar, evidencing assignment by the initial registered owner of this Bond, or any portion or portions hereof in any integral multiple of $5,000, to the assignee or assignees in whose name or names this Bond or any such portion or portions hereof is or are to be trans- ferred and registered. Any instrument or instruments of assignment satisfactory to the Paying Agent/Registrar may be used to evidence the assignment of this Bond or any such portion or portions hereof by the initial registered owner hereof. A new bond or bonds payable to such assignee or assignees (which then will be the new registered owner or owners of such new Bond or Bonds) or to the initial registered owner as to any portion of this Bond which is not being assigned and transferred by the initial registered owner, shall be delivered by the Paying Agent/Registrar in conversion of and exchange for this Bond or any portion or portions hereof, but solely in the form and manner as provided in the next paragraph hereof for the conversion and exchange of this Bond or any portion hereof. The registered owner of this Bond shall be deemed and treated by the Issuer and the Paying Agent/Registrar as the absolute owner hereof for all purposes, including payment and discharge of liability upon this Bond to the extent of such payment, and the Issuer and the Paying Agent/Registrar shall not be affected by any notice to the contrary. AS PROVIDED above and in the Bond Ordinance, this Bond, to the extent of the unpaid or unredeemed principal balance hereof, may be converted into and exchanged for a like aggregate principal amount of fully registered bonds, without interest coupons, payable to the assignee or assignees duly designated in writing by the initial registered owner hereof, or to the initial registered owner as to any portion of this Bond which is not being assigned and transferred by the initial registered owner, in any denomination or denominations in any integral multiple of $5,000 (subject to the requirement hereinafter stated that each substitute bond issued in exchange for any portion of this Bond shall have a single stated principal maturity date), upon surrender of this Bond to the Paying Agent/Registrar for cancellation, all in accordance with the form and procedures set forth in the Bond Ordinance. If this Bond or any portion hereof is assigned and transferred or converted each bond issued in exchange for any portion hereof shall have a single stated principal maturity date corresponding to the due date of the installment of principal of this Bond or portion hereof for which the substitute bond is being exchanged, and shall bear interest at the rate 7 applicable to and borne by such installment of principal or portion thereof. Such bonds, respectively, shall be subject to redemption prior to maturity on the same dates and for the same prices as the corresponding installment of principal of this Bond or portion hereof for which they are being exchanged. No such bond shall be payable in installments, but shall have only one stated principal maturity date. AS PROVIDED IN THE BOND ORDINANCE, THIS BOND IN ITS PRESENT FORM MAY BE ASSIGNED AND TRANSFERRED OR CONVERTED ONCE ONLY, and to one or more assignees, but the bonds issued and delivered in exchange for this Bond or any portion hereof may be assigned and transferred, and converted, subsequently, as provided in the Bond Ordinance. The Issuer shall pay the Paying Agent/Registrar's standard or customary fees and charges for transferring, converting, and exchanging this Bond or any portion thereof, but the one requesting such transfer, conversion, and exchange shall pay any taxes or governmental charges required to be paid with respect thereto. The Paying Agent/Registrar shall not be required to make any such assignment, conversion, or exchange (1) during the period commencing with the close of business on any Record Date and ending with the opening of business on the next following principal or interest payment date, or, (ii) with respect to any Bond or portion thereof called for prepayment or redemption prior to maturity, within 45 Jays prior to its prepayment or redemption date. IN THE EVENT any Paying Agent/Registrar for this Bond is changed by the Issuer, resigns, or otherwise ceases to act as such, the Issuer has covenanted in the Bond Ordinance that it promptly will appoint a competent and legally qualified substitute therefor, and promptly will cause written notice thereof to be mailed to the registered owner of this Bond. IT IS HEREBY certified, recited, and covenanted that this Bond has been duly and validly authorized, issued, and delivered pursuant to the laws of the State of Texas; that all acts, conditions, and things required or proper to be performed, exist, and be done precedent to or in the authorization, issuance, and delivery of this Bond and the Series of which it is a part have been performed, existed, and been done in accordance with law; that this Bond is a special obligation of said Issuer, and that the principal of and interest on this Bond, together with other outstanding revenue bonds of the Issuer, are payable and secured by a first lien on and pledge of the Net Revenues of the Issuer's Utility System, being the Waterworks, Sewer and Electric System. THE ISSUER has reserved the right, subject to the restrictions stated, and adopted by reference, in the Ordinance authorizing this Series of Bonds, to issue additional parity revenue bonds which also may be made payable from, and secured by a first lien on and pledge of, the aforesaid Net Revenues. THE REGISTERED OWNER HEREOF shall never have the right to demand payment of this Bond or the interest hereon out of any funds raised or to be raised by taxation, or from any sources whatsoever other than those described in the Bond Ordinance. BY BECOMING the registered owner of this Bond, the registered owner thereby acknowledges all of the terms and provisions of the Bond Ordinance, agrees to be bound by such terms and provisions, acknowledges that the Bond Ordinance is duly recorded and available for inspection in the official minutes and records of the governing body of the Issuer, and agrees that the terms and provisions of this Bond and the Bond Ordinance constitute a contract between the registered owner hereof and the Issuer. IN WITNESS WHEREOF, the Issuer has caused this Bond to be signed with the manual signature of the Mayor of the Issuer and countersigned with the manual signature of the City Secretary of the Issuer, has caused the official seal of the Issuer to be duly impressed on this Bond, and has caused this Bond to be dated December 1, 1991. City Secretary s Mayor (C1TZ` SEAL) FORM OF REGISTRATION CERTIFICATE OF THE 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 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 Comptroller of Public Accounts of the State of Texas (COMPTROLLER'S SEAL) Section 6. ADDITIONAL CHARACTERISTICS OF THE BONDS. (a) Registration and Transfer. The Issuer shall keep or cause to be kept at the principal corporate trust office of Ameritrust Texas National Association, Dallas, Texas, (the "Paying Agent/Registrar") books or records of the registration and transfer of the Bonds (the "Registration Books"), and the Issuer hereby appoints the Paying Agent/Registrar as its registrar and transfer agent to keep such books or records and make such transfers and registrations under such reasonable regulations as the Issuer and Paying Agent/Registrar may prescribe; and the Paying Agent/Registrar shall make such transfers and registrations as herein provided. The Paying Agent/Registrar shall obtain and record in the Registration Books the address of the registered owner of each Bond to which payments with respect to the Bonds shall be mailed, as herein provided; but it shall be the duty of each registered owner to notify the Paying Agent/Registrar in writing of the address to which payments shall be mailed, and such interest payments shall not be mailed unless such notice has been given. The Issuer shall have the right to inspect the Registration Books during regular business hours of the Paying Agent/Registrar, but otherwise the Paying Agent/Registrar shall keep the Registration Books confidential and, unless otherwise required by law, shall not permit their inspection by any other entity. Registration of each Bond may be transferred in the Registration Books only upon presentation and surrender of such Bond to the Paying Agent/Registrar for transfer of registration and cancellation, together with proper written instruments of assignment, in form and with guarantee of signatures satisfactory to the Paying Agent/Registrar, (1) evidencing the assignment of the Bond, or any portion thereof in any integral multiple of $5,000, to the assignee or assignees thereof, and (ii) the right of such assignee or assignees to have the Bond or any such portion thereof registered in the name of such assignee or assignees. Upon the assignment and transfer of any Bond or any portion thereof, a new substitute Bond or Bonds shall be issued in conversion and exchange therefor in the manner herein provided. The Initial Bond, to the extent of the unpaid or unredeemed principal balance thereof, may be assigned and transferred by the initial regis- tered owner thereof once only, and to one or more assignees designated in writing by the initial registered owner thereof. All Bonds issued and delivered in conversion of and exchange for the Initial Bond shall be in any denomination or denominations of any integral multiple of $5,000 (subject to the requirement hereinafter stated that each substitute Bond shall have a single stated principal maturity date), shall be in the form prescribed in the FORM OF SUBSTITUTE BOND set forth in this Ordinance, and shall have the characteristics, and may be assigned, transferred, and converted as hereinafter provided. If the Initial Bond or any portion thereof is assigned and transferred or converted the Initial Bond must be surrendered to the Paying Agent/Registrar for cancellation, and each Bond issued in exchange for any portion of the Initial Bond shall have a single stated principal maturity date, and shall not be payable in installments; and each such Bond shall have a principal maturity date corresponding to the due date of the installment of principal or portion thereof for which the substitute Bond is being exchanged; and each such Bond shall bear interest at the single rate applicable to and borne by such installment of principal or portion thereof for which it is being exchanged. If only a portion of the Initial Bond is assigned and transferred, there shall be delivered to and registered in the name of the initial registered owner substitute Bonds in exchange for the unassigned balance of the Initial Bond 10 in the same manner as if the initial registered owner were the assignee thereof. If any Bond or portion thereof other than the Initial Bond is assigned and transferred or converted each Bond issued in exchange shall have the same principal maturity date and bear interest at the same rate as the Bond for which it is exchanged. A form of assignment shall be printed or endorsed on each Bond, excepting the Initial Bond, which shall be executed by the registered owner or its duly authorized attorney or representative to evidence an assignment thereof. Upon surrender of any Bonds or any portion or portions thereof for transfer of registration, an authorized representative of the Paying Agent/Registrar shall make such transfer in the Registration Books, and shall deliver a new fully registered substitute Bond or Bonds, having the characteristics herein described, payable to such assignee or assignees (which then will be the registered owner or owners of such new Bond or Bonds), or to the previous registered owner in case only a portion of a Bond is being assigned and transferred, all in conversion of and exchange for said assigned Bond or Bonds or any portion or portions thereof, in the same form and manner, and with the same effect, as provided in Section 6(d), below, for the conversion and exchange of Bonds by any registered owner of a Bond. The Issuer shall pay the Paying Agent/Registrar's standard or customary fees and charges for making such transfer and delivery of a substitute Bond or Bonds, but the one requesting such transfer shall pay any taxes or other governmental charges required to be paid with respect thereto. The Paying Agent/Registrar shall not be required to make transfers of registration of any Bond or any portion thereof (1) during the period commencing with the close of business on any Record Date and ending with the opening of business on the next following principal or interest payment date, or, (ii) with respect to any Bond or any portion thereof called for redemption prior to maturity, within 30 days prior to its redemption date. (b) Ownersh� of Bonds. The entity in whose name any Bond shall be registered in the Registration Books at any time shall be deemed and treated as the absolute owner thereof for all purposes of this Ordinance, whether or not such Bond shall be overdue, and the Issuer and the Paying Agent/Registrar shall not be affected by any notice to the contrary, and payment of, or on account of, the principal of, premium, if any, and interest on any such Bond shall be made only to such registered owner. All such payments shall be valid and effectual to satisfy and discharge the liability upon such Bond to the extent of the sum or sums so paid. (c) Payment of Bonds and Interest. The Issuer hereby further appoints the Paying Agent/Registrar to act as the paying agent for paying the principal of and interest on the Bonds, and to act as its agent to convert and exchange or replace Bonds, all as provided in this Ordinance. The Paying Agent/Registrar shall keep proper records of all payments made by the Issuer and the Paying Agent/Registrar with respect to the Bonds, and of all conversions and exchanges of Bonds, and all replacements of Bonds, as provided in this Ordinance. However, in the event of a nonpayment of interest on a scheduled payment date, and for thirty (30) days thereafter, a new record date for such interest payment (a "Special Record Date") will be established by the Paying Agent/Registrar, if and when funds for the payment of such interest have been received from the Issuer. Notice of the Special Record Date and of the scheduled payment date of the past due interest (which shall be 15 11 Jays after the Special Record Date) shall be sent at least five (5) business days prior to the Special Record Date by United States mail, first class postage prepaid, to the address of each Bondholder appearing on the Security Register at the close of business on the last business day next preceding the date of mailing of such notice. (d) Conversion and Exchan6e or Replacement; Authentication. Each Bond issued and delivered pursuant to this Ordinance, to the extent of the unpaid or unredeemed principal balance or principal amount thereof, may, upon surrender of such Bond at the principal corporate trust office of the Paying Agent/Registrar, together with a written request therefor duly executed by the registered owner or the assignee or assignees thereof, or its or their duly authorized attorneys or representatives, with guarantee of signatures satisfactory to the Paying Agent/Registrar, may, at the option of the registered owner or such assignee or assignees, as appropriate, be converted into and exchanged for fully registered bonds, without interest coupons, in the form prescribed in the FORM OF SUBSTITUTE BOND set forth in this Ordinance, in the denomination of $5,000, or any integral multiple of $5,000 (subject to the requirement hereinafter stated that each substitute Bond shall have a single stated maturity date), as requested in writing by such registered owner or such assignee or assignees, in an aggregate principal amount equal to the unpaid or unredeemed principal balance or principal amount of any Bond or Bonds so surrendered, and payable to the appropriate registered owner, assignee, or assignees, as the case may be. If the Initial Bond is assigned and transferred or converted each substitute Bond issued in exchange for any portion of the Initial Bond shall have a single stated principal maturity date, and shall not be payable in installments; and each such Bond shall have a principal maturity date corresponding to the due date of the installment of principal or portion thereof for which the substitute Bond is being exchanged; and each such Bond shall bear interest at the single rate applicable to and borne by such installment of principal or portion thereof for which it is being exchanged. If a portion of any Bond (other than the Initial Bond) shall be redeemed prior to its scheduled maturity as provided herein, a substitute Bond or Bonds having the same maturity date, bearing interest at the same rate, in the denomination or denominations of any integral multiple of $5,000 at the request of the registered owner, and in aggregate principal amount equal to the unredeemed portion thereof, will be issued to the registered owner upon surrender thereof for cancellation. If any Bond or portion thereof (other than the Initial Bond) is assigned and transferred or converted, each Bond issued in exchange therefor shall have the same principal maturity date and bear interest at the same rate as the Bond for which it is being exchanged. Each substitute Bond shall bear a letter and/or number to distinguish it from each other Bond. The Paying Agent/Registrar shall convert and exchange or replace Bonds as provided herein, and each fully registered bond delivered in conversion of and exchange for or replacement of any Bond or portion thereof as permitted or required by any provision of this Ordinance shall constitute one of the Bonds for all purposes of this Ordinance, and may again be converted and exchanged or replaced. It is specifically provided that any Bond authenticated in conversion of and exchange for or replacement of another Bond on or prior to the first scheduled Record Date for the Initial Bond shall bear interest from the date of the Initial Bond, but each substitute Bond so authenticated after such first scheduled Record Date shall bear interest from the interest payment date next preceding the date on which such substitute Bond was so authenticated, unless such Bond is authenticated after any Record Date but on or before the next following interest payment date, in which case it shall bear interest from such next following interest payment date; provided, however, that if at the time of delivery of any substitute Bond the interest on the Bond for which it is being exchanged is due but has not been paid, then such Bond shall bear interest from the date to which such interest has been paid in full. THE INITIAL BOND issued and delivered pursuant to this Ordinance is not required to be, and shall not be, authenticated by the Paying Agent/ Registrar, but on each substitute Bond issued in conversion of and exchange for or replacement of any Bond or Bonds issued under this Ordinance there shall be printed a certificate, in the form substantially as follows: "PAYING AGENT/REGISTRAR'S AUTHENTICATION CERTIFICATE It is hereby certified that this Bond has been issued under the provisions of the Bond Ordinance described on the face of this Bond; and that this Bond has been issued in conver- sion of and exchange for or replacement of a bond, bonds, or a portion of a bond or bonds A an issue which originally was approved by the Attorney General of the State of Texas and registered by the Comptroller of Public Accounts of the State of Texas. Paying Agent/Registrar By Authorized Representative" An authorized representative of the Paying Agent/Registrar shall, before the delivery of any such Bond, date and manually sign the above Certificate, and no such Bond shall be deemed to be issued or outstanding unless such Certificate is so executed. The Paying Agent/Registrar promptly shall cancel all Bonds surrendered for conversion and exchange or replacement. No additional ordinances, orders, or resolutions need be passed or adopted by the governing body of the Issuer or any other body or person so as to accomplish the foregoing conversion and exchange or replacement of any Bond or portion thereof, and the Paying Agent/Registrar shall provide for the printing, execution, and delivery of the substitute Bonds in the manner prescribed herein, and said Bonds shall be of type composi- tion printed on paper with lithographed or steel engraved borders of customary weight and strength. Pursuant to Vernon's Ann. Tex. Civ. St. Art. 717k-6, and particularly Section 6 thereof, the duty of conversion and exchange or replacement of Bonds as aforesaid is hereby imposed upon the Paying Agent/Registrar, and, upon the execution of the above Paying Agent/Registrar's Authentication Certificate, the converted and exchanged or replaced Bond shall be valid, incontestable, and enforceable in the same manner and with the same effect as the Initial Bond which originally was issued pursuant to this Ordinance, approved by the Attorney General, and registered by the Comptroller of Public Accounts. The Issuer shall pay the Paying Agent/Registrar's standard or customary fees and charges for transferring, converting, and exchanging any Bond or any portion thereof, but the one requesting any such 13 transfer, conversion, and exchange shall pay any taxes or governmental charges required to be paid with respect thereto as a condition precedent to the exercise of such privilege of conversion and exchange. The Paying Agent/Registrar shall not be required to make any such conversion and exchange or replacement of Bonds or any portion thereof (1) during the period commencing with the close of business on any Record Date and ending with the opening of business on the next following principal or interest payment date, or, (n) with respect to any Bond or portion thereof called for redemption prior to maturity, within 45 Jays prior to its redemption date. (e) In General. All Bonds issued in conversion and exchange or replacement of any other Bond or portion thereof, (i) shall be issued in fully registered form, without interest coupons, with the principal of and interest on such Bonds to be payable only to the registered owners thereof, (ii) may be redeemed prior to their scheduled maturities, (Ili) may be transferred and assigned, (iv) may be converted and exchanged for other Bonds, (v) shall have the characteristics, (vi) shall be signed and sealed, and (vii) the principal of and interest on the Bonds shall be payable, all as provided, and in the manner required or indicated, in the FORM OF SUBSTITUTE BOND set forth in this Ordinance. (f) Payment of Fees and Charges. The Issuer hereby covenants with the registered owners of the Bonds that it will (i) pay the standard or customary fees and charges of the Paying Agent/Registrar for its services with respect to the payment of the principal of and interest on the Bonds, when due, and (ii) pay the fees and charges of the Paying Agent/Registrar for services with respect to the transfer of registration of Bonds, and with respect to the conversion and exchange of Bonds solely to the extent above provided in this Ordinance. (g) Substitute Pa�in� Agent/Re isg trar. The Issuer covenants with the registered owners of the Bonds that at all times while the Bonds are outstanding the Issuer will provide a competent and legally qualified bank, trust company, financial institution, or other agency to act as and perform the services of Paying Agent/Registrar for the Bonds under this Ordinance, and that the Paying Agent/Registrar will be one entity. The Issuer reserves the right to, and may, at its option, change the Paying Agent/Registrar upon not less than 120 Jays written notice to the Paying Agent/ Registrar, to be effective not later than 60 days prior to the next principal or interest payment date after such notice. In the event that the entity at any time acting as Paying Agent/Registrar (or its successor by merger, acquisition, or other method) should resign or otherwise cease to act as such, the Issuer covenants that it will appoint a competent and legally qualified bank, trust company, financial promptly institution, or other agency to act as Paying Agent/Registrar under this Ordinance. Upon any change in the Paying Agent/Registrar, the previous Paying Agent/Registrar promptly shall transfer and deliver the Registration Books (or a copy thereof), along with all other pertinent books and records relating to the Bonds, to the new Paying Agent/Registrar designated and appointed by the Issuer. Upon any change in the Paying Agent/Registrar, the Issuer promptly will cause a written notice thereof to be sent by the new Paying Agent/Registrar to each registered owner of the Bonds, by United States mail, first-class 14 postage prepaid, which notice also shall give the address of the new Paying Agent/ Registrar. By accepting the position and performing as such, each Paying Agent/Registrar shall be deemed to have agreed to the provisions of this Ordinance, and a certified copy of this Ordinance shall be delivered to each Paying Agent/Registrar. Section 7. FORM OF SUBSTITUTE BONDS. The form of all Bonds issued in conversion and exchange or replacement of any other Bond or portion thereof, including the form of Paying Agent/Registrar's Certificate to be printed on each of such Bonds, and the Form of Assignment to be printed on each of the Bonds, shall be, respectively, substantially as follows, with such appropriate variations, omissions, or insertions as are permitted or required by this Ordinance. FORM OF SUBSTITUTE BOND PRINCIPAL NO. AMOUNT UNITED STATES OF AMERICA STATE OF TEXAS COUNTY OF DENTON CITY OF SANGER, TEXAS UTILITY SYSTEM REFUNDING AND IMPROVEMENT REVENUE BOND SERIES 1991 INTEREST MATURITY DATE OF CUSIP RATE DATE ORIGINAL ISSUE NO. December 1, 1991 ON THE MATURITY DATE specified above, the CITY OF BANGER, in Denton County, Texas (the "Issuer being a political subdivision of the State of Texas, hereby promises to pay to or to the registered assignee hereof (either being hereinafter called the "registered owner") the principal amount of and to pay interest thereon from December 1, 1991 to the maturity date specified above, or the date of redemption prior to maturity, at the interest rate per annum specified above; with interest being payable on May 15, 1992 and semiannually thereafter on each November 15 and May 15, except that if the date of authentication of this Bond is later than April 30, 1992, such principal amount shall bear interest from the interest payment date next preceding the date of authentication, unless such date of authentication is after any Record Date (hereinafter defined) but on or before the next following interest payment date, in which case such principal amount shall bear interest from such next following interest payment date. 15 THE PRINCIPAL OF AND INTEREST ON thisBond are payable in lawful money of the United States of America, without exchange or collection charges. The principal of this Bond shall be paid to the registered owner hereof upon presentation and surrender of this Bond at maturity or upon the date fixed for its redemption prior to maturity, at the principal corporate trust office of Ameritrust Texas National Association, Dallas, Texas, which is the "Paying Agent/Registrar" for this Bond. The payment of interest on this Bond shall be made by the Paying Agent/Registrar to the registered owner hereof on each interest payment date by check or draft, dated as of such interest payment date, drawn by the Paying Agent/Registrar on, and payable solely from, funds of the Issuer required by the ordinance authorizing the issuance of the Bonds (the "Bond Ordinance") to be on deposit with the Paying Agent/Registrar for such purpose as hereinafter provided; and such check or draft shall be sent by the Paying Agent/Registrar by United States mail, first-class postage prepaid, on each such interest payment date, to the registered owner hereof, at the address of the registered owner, as it appeared on the last business day of the month next preceding each such date (the "Record Date") on the Registration Books kept by the Paying Agent/Registrar, as hereinafter described, or by such other method acceptable to the Paying Agent/Registrar requested by, and the risk and expense of, the registered owner. Any accrued interest due upon the redemption of this Bond prior to maturity as provided herein shall be paid to the registered owner upon presentation and surrender of this Bond for redemption and payment at the principal corporate trust office of the Paying Agent/Registrar. The Issuer covenants with the registered owner of this Bond that on or before each principal payment date, interest payment date, and accrued interest payment date for this Bond it will make available to the Paying Agent/Registrar, from the Interest and Sinking Fund" created by the Bond Ordinance, the amounts required to provide for the payment, in immediately available funds, of all principal of and interest on the Bonds, when due. IF THE DATE for the payment of the principal of or interest on this Bond shall be a Saturday, Sunday, a legal holiday, or a day on which banking institutions in the City where the Paying Agent/Registrar is located are authorized by law or executive order to close, then the date for such payment shall be the next succeeding day which is not such a Saturday, Sunday, legal holiday, or day on which banking institutions are authorized to close; and payment on such date shall have the same force and effect as if made on the original date payment was due. THIS BOND is one of an issue of Bonds initially dated December 1, 1991, authorized in accordance with the Constitution and laws of the State of Texas in the principal amount A $2,230,000, for the purpose of providing $800,000 for improving and extending the combined Waterworks, Sewer and Electric System, and providing $1,430,000 for the purpose A refunding all of the outstanding City of Sanger, Texas Utility System Revenue Bonds, Series 1977, Series 1982 and Series 1985. ON MAY 15, 2001, or any date thereafter, the Bonds of this Series may be redeemed prior to their scheduled maturities, at the option of the Issuer, with funds derived from any 16 available and lawful source, as a whole, or in part, and, if in part, the Issuer shall select and designate the maturity or maturities and the amount that is to be redeemed, and if less than a whole maturity is to be called, the Issuer shall direct the Paying Agent/Registrar to call by lot (provided that a portion of a Bond may be redeemed only in an integral multiple of $5,000), at the redemption price of the principal amount thereof, plus accrued interest to the date fixed for redemption. Al LEAST 30 days prior to the date fixed for any redemption of Bonds or portions thereof prior to maturity a written notice of such redemption shall be published once in a financial publication, journal, or reporter of general circulation among securities dealers in The City of New York, New York (including, but not limited to, The Bond Buyer and The Wall Street Journal), or in the State of Texas (including, but not limited to, The Texas Bond Reporter). Such notice also shall be sent by the Paying Agent/Registrar by United States mail, first class postage prepaid, not less than 30 days prior to the date fixed for any such redemption, to the registered owner of each Bond to be redeemed at its address as it ap- peared on the 45th day prior to such redemption date; provided, however, that the failure to send, mail, or receive such notice, or any defect therein or in the sending or mailing thereof, shall not affect the validity or effectiveness of the proceedings for the redemption of any Bond, and it is hereby specifically provided that the publication of such notice as required above shall be the only notice actually required in connection with or as a prerequisite to the redemption of any Bonds or portions thereof. By the date fixed for any such redemption due provision shall be made with the Paying Agent/Registrar for the payment of the required redemption price for the Bonds or portions thereof which are to be so redeemed,plus accrued interest thereon to the date fixed for redemption. If such written notice of redemption is published and if due provision for such payment is made, all as provided above, the Bonds or portions thereof which are to be so redeemed thereby automatically shall be treated as redeemed prior to their scheduled maturities, and they shall not bear interest after the date fixed for redemption, and they shall not be regarded as being outstanding except for the right of the registered owner to receive the redemption price plus accrued interest from the Paying Agent/Registrar out of the funds provided for such payment. If a portion of any Bond shall be redeemed a substitute Bond or Bonds having the same maturity date, bearing interest at the same rate, in any denomination or denominations in any integral multiple of $5,000, at the written request of the registered owner, and in aggregate principal amount equal to the unredeemed portion thereof, will be issued to the registered owner upon the surrender thereof for cancellation, at the expense of the Issuer, all as provided in the Bond Ordinance, THIS BOND OR ANY PORTION OR PORTIONS HEREOF IN ANY INTEGRAL MULTIPLE OF $5,000 may be assigned and shall be transferred only in the Registration Books of the Issuer kept by the Paying Agent/Registrar acting in the capacity of registrar for the Bonds, upon the terms and conditions set forth in the Bond Ordinance. Among other requirements for such assignment and transfer, this Bond must be presented and surrendered to the Paying Agent/Registrar, together with proper instruments of assignment, in form and with guarantee of signatures satisfactory to the Paying Agent/Registrar, 17 evidencing assignment of this Bond or any portion or portions hereof in any integral multiple of $5,000 to the assignee or assignees in whose name or names this Bond or any such portion or portions hereof is or are to be transferred and registered. The form of Assignment printed or endorsed on this Bond shall be executed by the registered owner or its duly authorized attorney or representative,to evidence the assignment hereof. A new Bond or Bonds payable to such assignee or assignees (which then will be the new registered owner or owners of such new Bond or Bonds), or to the previous registered owner in the case of the assignment and transfer of only a portion of this Bond, may be delivered by the Paying Agent/Registrar in conversion of and exchange for this Bond, all in the form and manner as provided in the next paragraph hereof for the conversion and exchange of other Bonds. The Issuer shall pay the Paying Agent/Registrar's standard or customary fees and charges for making such transfer, but the one requesting such transfer shall pay any taxes or other governmental charges required to be paid with respect thereto. The Paying Agent/Registrar shall not be required to make transfers of registration of this Bond or any portion hereof (i) during the period commencing with the close of business on any Record Date and ending with the opening of business on the next following principal or interest payment date, or, (ii) with respect to any Bond or any portion thereof called for redemption prior to maturity, within 45 days prior to its redemption date. The registered owner of this Bond shall be deemed and treated by the Issuer and the Paying Agent/Registrar as the absolute owner hereof for all purposes, including payment and discharge of liability upon this Bond to the extent of such payment, and the Issuer and the Paying Agent/Registrar shall not be affected by any notice to the contrary. ALL BONDS OF THIS SERIES are issuable solely as fully registered bonds, without interest coupons, in the denomination of any integral multiple of $5,000. As provided in the Bond Ordinance, this Bond, or any unredeemed portion hereof, may, at the request of the registered owner or the assignee or assignees hereof, be converted into and exchanged for a like aggregate principal amount of fully registered bonds, without interest coupons, payable to the appropriate registered owner, assignee, or assignees, as the case may be, having the same maturity date, and bearing interest at the same rate, in any denomination or denominations in any integral multiple of $5,000 as requested in writing by the appropriate registered owner, assignee, or assignees, as the case may be, upon surrender of this Bond to the Paying Agent/Registrar for cancellation, all in accordance with the form and procedures set forth in the Bond Ordinance. The Issuer shall pay the Paying Agent/Registrar's standard or customary fees and charges for transferring, converting, and exchanging any Bond or any portion thereof, but the one requesting such transfer, conver- sion, and exchange shall pay any taxes or governmental charges required to be paid with respect thereto as a condition precedent to the exercise of such privilege of conversion and exchange. The Paying Agent/Registrar shall not be required to make any such conversion and exchange (1) during the period commencing with the close of business on any Record Date and ending with the opening of business on the next following principal or interest payment date, or, (ii) with respect to any Bond or portion thereof called for redemption prior to maturity, within 45 days prior to its redemption date. IN THE EVENT any Paying Agent/Registrar for the Bonds is changed by the Issuer, resigns, or otherwise ceases to act as such, the Issuer has covenanted in the Bond Ordinance that it promptly will appoint a competent and legally qualified substitute therefor, and promptly will cause written notice thereof to be mailed to the registered owners of the Bonds. IT IS HEREBY certified, recited, and covenanted that this Bond has been duly and validly authorized, issued, and delivered pursuant to the laws of the State of Texas, that all acts, conditions, and things required or proper to be performed, exist, and be done precedent to or in the authorization, issuance, and delivery of this Bond and the Series of which it is a part have been performed, existed, and been done in accordance with law; that this Bond is a special obligation of said Issuer, and that the principal of and interest on this Bond, together with other outstanding revenue bonds of the Issuer, are payable and secured by a first lien on and pledge of the Net Revenues of the Issuer's Utility System, being the Waterworks, Sewer and Electric System. THE ISSUER has reserved the right, subject to the restrictions stated, and adopted by reference, in the Ordinance authorizing this Series of Bonds, to issue additional parity revenue bonds which also may be made payable from, and secured by a first lien on and pledge of, the aforesaid Net Revenues. THE REGISTERED OWNER HEREOF shall never have the right to demand payment of this Bond or the interest hereon out of any funds raised or to be raised by taxation, or from any sources whatsoever other than those described in the Bond Ordinance. BY BECOMING the registered owner of this Bond, the registered owner thereby acknowledges all of the terms and provisions of the Bond Ordinance, agrees to be bound by such terms and provisions, acknowledges that the Bond Ordinance is duly recorded and available for inspection in the official minutes and records of the governing body of the Issuer, and agrees that the terms and provisions of this Bond and the Bond Ordinance constitute a contract between each registered owner hereof and the Issuer. IN WITNESS WHEREOF, the Issuer has caused this Bond to be signed with the facsimile signature of the Mayor of the Issuer and countersigned with the facsimile signature A the City Secretary of the Issuer, and has caused the official seal of the Issuer to be duly impressed, or placed in facsimile, on this Bond. facsimile signature) City Secretary SEAL facsimile signature) Mayor TIO PAYING AGENT/REGISTRAR'S AUTHENTICATION CERTIFICATE To be executed if this Bond is not accompanied by an executed Registration Certificate of the Comptroller of Public Accounts of the State of Texas) It is hereby certified that this Bond has been issued under the provisions of the Bond Ordinance described in the text of this Bond; and that this Bond has been issued in conversion or replacement of, or in exchange for, a bond, bonds, or a portion of a bond or bonds of a Series which originally was approved by the Attorney General of the State of Texas and registered by the Comptroller of Public Accounts of the State of Texas. Dated Ameritrust Texas National Association Dallas, Texas By Authorized Representative FORM OF ASSIGNMENT: ASSIGNMENT FOR VALUE RECEIVED, the undersigned registered owner of this Bond, or duly authorized representative or attorney thereof, hereby assigns this Bond to signee s ocia ecunty or Taxpayer Identification Number print or tyQe Assignee s name and address, including zip code) and hereby irrevocably constitutes and appoints attorney to transfer the registration of this Bond on the Paying Agent/Registrar's Registration Books with full power of substitution in the premises. Dated Signature Guaranteed. NOTICE: This signature must be guaranteed by a member of the New York Stock Exchange oI a commercial bank or trust company. Registered Owner NOTICE: This signature must correspond with the name of the Registered Owner appearing on the face of this Bond in every particular without alteration or enlargement or any change whatsoever. 20 Section 8. DEFINITIONS. For all purposes of this ordinance and in particular for clarity with respect to the issuance of the Bonds herein authorized and the pledge and appropriation of revenues for the payment of the Bonds, the following definitions are provided: (a) The term "Utility System" as used in this Ordinance, shall mean and include the Issuer's entire Waterworks, Sewer and Electric System, together with all future improvements, extensions, enlargements, and additions thereto, and replacements thereof. (b) The term "Net Revenues," as used in this Ordinance, shall mean gross revenues of the Utility System, after deducting the expenses of operation and maintenance A the Utility System, including all salaries, labor, materials, repairs and extensions necessary to render efficient service, provided, however, that only such repairs and extensions, as in the judgment of the City Council of said Issuer, reasonably and fairly exercised by the passage of appropriate ordinances, are necessary to keep the Utility System in operation and render adequate service to said Issuer and the inhabitants thereof, or such as might be necessary to meet some physical accident or condition which would otherwise impair the Bonds and any Additional Bonds shall be deducted in determining "Net Revenues." Depreciation, and payments into and out of the Interest and Sinking Fund, Reserve Fund, and Emergency Fund hereinafter created, shall never be considered as expenses of operation and maintenance. (c) The term "Bonds" shall mean the Bonds authorized to be issued and delivered by this Ordinance and the outstanding Series 1973 Bonds and Series 1976 Bonds. (e) The term "Additional Bonds" shall mean the additional parity revenue bonds which the Issuer reserves the right to issue and deliver in the future, as provided by this Ordinance. Section 9. PLEDGE. The Bonds and all Additional Bonds, and the interest thereon, are and shall be payable from and secured by an irrevocable first lien on and pledge of the Net Revenues of the Utility System. The Bonds authorized by this Ordinance are parity Additional Bonds as defined and permitted in the ordinance that authorized the City of Sanger, Texas Utility System Revenue Bonds, Series 1969, and Sections 9 through 27 of the ordinance that authorized the City of Sanger, Texas Utility System Revenue Bonds, Series 1969 are hereby adopted by reference and shall be restated and be applicable to the Bonds authorized by this Ordinance in Sections 8 through 25 hereof for all purposes except to the extent hereinafter specifically modified and supplemented. Section 10. RATES. The Issuer covenants and agrees with the holders of the Bonds and all Additional Bonds, as follows: (a) That it will at all times fix, maintain, charge and collect for services rendered by the Utility System, rates and charges which will produce gross revenues at least sufficient 21 to pay all operating, maintenance, depreciation, replacement and betterment expenses, and other costs deductible in determining "Net Revenues" as herein defined and to produce each month Net Revenues which together with other pledged revenues will be adequate to pay promptly all of the principal of and interest on the Bonds and all Additional Bonds, and to accumulate and maintain the Funds created and established by this Ordinance, and (b) That if the Utility System should become legally liable for any other indebtedness, the Issuer shall fix, maintain, charge and collect additional rates for services rendered by the Utility System sufficient to establish and maintain funds for the payment thereof. Section 11. FUNDS, All gross revenues of the Utility System shall be kept separate and apart from all other funds of the Issuer and the following Special Funds have been created and shall be established and maintained in an official depository bank of the Issuer, so long as any of the Bonds or Additional Bonds, or interest thereon, are outstanding and unpaid: (a) City of Sanger Utility System Revenue Bonds Revenue Fund, hereinafter called the "Revenue Fund." (b) City of Sanger Utility System Revenue Bonds Interest and Sinking Fund, hereinafter called the "Interest and Sinking Fund." (c) City of Sanger Utility System Revenue Bonds Reserve Fund, hereinafter called the "Reserve Fund." (d) City of Sanger Utility System Revenue Bonds Emergency Fund, hereinafter called the "Emergency Fund." Section 12. REVENUE FUND. All gross revenues of every nature received from the operation and ownership of the Utility System shall be deposited from day to day as collected into the Revenue Fund. The reasonable, necessary, and proper expenses of operation and maintenance of the Utility System shall be paid from the gross revenues of the Utility System. The revenues remaining in the Revenue Fund shall be deposited into the other Funds, in the manner and amounts hereinafter provided, and each of such Funds shall have priority as to such deposits in the order in which they are treated in the following sections. Section 13. INTEREST AND SINKING FUND, There shall be deposited into the Interest and Sinking Fund the following: (a) such amounts, in equal monthly installments commencing on or before the tenth day of each month hereafter, as will be sufficient to pay the interest scheduled to come due on the Bonds on the next interest payment date; and 99 (b) such amounts, in equal monthly installments, made on or before the tenth day of each month, commencing December 10, 1991, as will be sufficient to pay the next maturing principal of the bonds. Section 14. RESERVE FUND. The Reserve Fund, in accordance with the requirements of the ordinances that authorized the outstanding Bonds, contains $227,482. Whenever said Reserve Fund is reduced below said aggregate amount, there shall be deposited into the Reserve Fund an amount of at least equal to 1/60th of the average annual principal and interest requirements of the outstanding Bonds, until such time as the Fund has been restored to said aggregate amount. The Reserve Fund shall be used to pay the principal of or interest on the Bonds and any Additional Bonds falling due at any time when there is not sufficient money available in the Interest and Sinking Fund created for their payment. Money in the Reserve Fund may, upon authorization by the City Council of said Issuer, be invested in direct obligations of, or obligations, the principal of and interest on which are guaranteed by, the United States of America, or invested in direct obligations of the Federal Intermediate Credit Banks, Federal Land Banks, Federal National Mortgage Association, Federal Home Loan Banks or Banks for Cooperatives, provided that each of the aforesaid obligations must mature, or be subject to redemption at the option of the holder thereof. Any obligation in which money in said Reserve Fund is so invested shall be kept and held by the Bank holding said Fund in escrow and in trust for the benefit of the holders of the Bonds and all Additional Bonds, and shall be promptly sold and the proceeds of sale applied to the making of all payments required to be made from the Reserve Fund. Section 15. EMERGENCY FUND. There is presently on deposit in the Emergency Fund $16,212. No deposits shall be required to be made into the Emergency Fund as long as the Emergency Fund contains said aggregate amount, but if and whenever said Emergency Fund is reduced below said aggregate amount, the aforesaid monthly deposits into the Emergency Fund shall be resumed and continued until such time as the Emergency Fund has been restored to said aggregate amount. The Emergency Fund shall be used to pay the cost of any repairs or extensions to the System authorized by Vernon's Article 1113, for the payment of which no other funds are available. Also, the Emergency Fund shall be used to pay the principal of or interest on the Bonds and all Additional Bonds, at any time when there are not sufficient amounts in the Interest and Sinking Fund and the Reserve Fund for such purpose. Money in the Emergency Fund may, upon authorization by the City Council, be invested in the same manner and to the same extent as provided for money in the Reserve Fund. Any obligation in which money in the Emergency Fund is so invested shall be kept and held in an official depository bank of the Issuer in escrow and in trust for the benefit of the holders of the Bonds and all Additional Bonds, and shall be promptly sold and the proceeds of sale applied to the making of payments permitted or required to be made from the Emergency Fund. 23 Section 16. DEFICIENCIES IN FUNDS. If in any month the Issuer shall fail to deposit into any Fund created by this Ordinance the full amounts required, amounts equivalent to such deficiencies shall be set apart and paid into said Funds from the first available and unallocated pledged revenues for the following month or months, and such payments shall be in addition to the amounts otherwise required to be paid into said Funds during such month or months. To the extent necessary, the Issuer shall increase the rates and charges for services of the Utility System to make up for any such deficiencies. Section 17. EXCESS REVENUES. The revenues pledged hereunder, in excess of those necessary to establish and maintain the Funds as required in this Ordinance, or as hereafter may be required in connection with the issuance of Additional Bonds, may be used for any lawful purpose. Section 18. SECURITY FOR FUNDS, All Funds created by this Ordinance shall be secured in the manner and to the fullest extent permitted or required by law for the security of public funds, and such Funds shall be used only for the purposes and in the manner permitted or required by this Ordinance. Section 19. ADDITIONAL BONDS. The Issuer reserves the right to issue additional parity revenue bonds, to be known as Additional Bonds, which when issued and delivered, shall be payable from and secured by a lien on and pledge of the same revenues as those securing the Bonds, and be on a parity with the Bonds and all outstanding Additional Bonds, or any bonds issued to refund same, and the Bonds and all Additional Bonds shall in all respects be on a parity and of equal dignity. The Additional Bonds may be issued in one or more installments or series, provided, however, that no installment or series of Additional Bonds shall be issued unless: (a) A certificate is executed by the Mayor and City Secretary of said Issuer to the effect that no (default exists in connection with any of the covenants or requirements of the ordinance or ordinances authorizing the issuance of all then outstanding Bonds and Additional Bonds, (b) A certificate is executed by the Mayor and City Secretary of said Issuer to the effect that the Interest and Sinking Fund and the Reserve Fund each maintain the amount then required to be on deposit therein, (c) A certificate is executed by a Certified Public Accountant to the effect that, in his opinion, the Net Earnings of the Utility System, either for the last complete fiscal year of the Issuer, or for any twelve consecutive calendar month period ending not more than ninety days prior to the passage of the ordinance authorizing the issuance of such Additional Bonds, were at least 1-1/2 times the average annual principal and interest requirements for all then outstanding Bonds and Additional Bonds, and for the installment or series of Additional Bonds then proposed to be issued. The term "Net Earnings" as used in this sub- section (c) shall mean the gross revenues of the Utility System after deducting the expenses 24 of operation and maintenance but not deducting depreciation, bond interest or expenditures which under standard accounting practice should be charged to capital expenditures. (d) The Additional Bonds are scheduled to mature only on May 15, and the interest thereon is scheduled to be paid only on November 15 and May 15. (e) The ordinance authorizing the issuance of such installment or series of Additional Bonds provides that the aggregate amount to be accumulated and maintained in the Reserve Fund shall be increased by an additional amount not less than the average annual principal and interest requirements for said Additional Bonds, and that such additional amount shall be so accumulated within sixty-one months from the date of the Additional Bonds by the deposit in the Reserve Fund of the necessary amount in equal monthly installments; provided, however, that the aggregate amount to be accumulated in the Reserve Fund shall never be required to exceed the, average annual principal and interest requirements for all then outstanding Bonds and Additional Bonds; (f) All calculations of average annual principal and interest requirements made pursuant to this Section are made as of and from the date of the Additional Bonds then proposed to be issued. (g) Once the outstanding Series 1973 Bonds and Series 1976 Bonds are retired and are no longer outstanding, subparagraph (c) of this Section shall be replaced by the following substitute subparagraph (c): "(c) A certificate is executed by a Certified Public Accountant to the effect that, in his opinion, the Net Earnings of the Utility System, either for the last complete fiscal year of the Issuer, or for any twelve consecutive calendar month period ending not more than ninety days prior to the passage of the ordinance authorizing the issuance of such Additional Bonds, were at least 1.10 times the average annual principal and interest requirements for all then outstanding Bonds and Additional Bonds, and for the installment or series of Additional Bonds then proposed to be issued. The term "Net Earnings" as used in this subsection (c) shall mean the gross revenues of the Utility System after deducting the expenses of operation and maintenance but not deducting depreciation, bond interest or expenditures which under standard accounting practice should be charged to capital expenditures." Section 20. MAINTENANCE AND OPERATION; INSURANCE. While any of the Bonds or Additional Bonds are outstanding the Issuer covenants and agrees to maintain the Utility System in good condition and operate the same in an efficient manner and at reasonable expense, and to maintain insurance on the Utility System, for the benefit of the holder or holders of the Bonds and Additional Bonds, of a kind and in an amount which usually would be carried by private companies engaged in a similar type of business. Nothing in this Ordinance shall be construed as requiring the Issuer to expend any funds 25 which are derived from sources other than the Utility System, but nothing herein shall be construed as preventing the Issuer from doing so. Section 21. ACCOUNTS AND FISCAL YEAR. The Issuer shall keep proper books of records and accounts, separate from all other records and accounts of the Issuer, in which complete and correct entries shall be made of all transactions relating to the Utility System, and shall have said books audited once each fiscal year by a certified public accountant. The Issuer agrees to operate the Utility System and keep its books of records and accounts pertaining thereto on the basis of its current fiscal year; provided, however, that the City Council may change such fiscal year by ordinance duly passed, and if such change is deemed necessary by the City Council. Section 22. ACCOUNTING REPORTS, Within ninety days after the close of each fiscal year hereafter., the Issuer will furnish, without cost, to any holder of any outstanding Bonds or Additional Bonds who may so request, a signed or certified copy of a report by a Certified Public Accountant, covering the next preceding fiscal year, showing the following information: (a) A detailed statement of all gross revenues of the Utility System and all expenses A operation and maintenance thereof for said fiscal year; (b) Balance sheet as of the end of said fiscal year; (c) Accountant's comment regarding the manner in which the Issuer has complied with the requirements of this Ordinance and his recommendations, if any, for any changes or improvements in the operation of the Utility System, (d) List of insurance policies in force at the end of said fiscal year, showing, as to each policy, the name of the insurer, and the expiration date, (e) The number of properties connected with the water system, sewer system and electric system, and the gross revenues from Lite Utility System for said fiscal year. Section 23. INSPECTION. Any holder or holders of any Bonds or Additional Bonds shall have the right at all reasonable times to inspect the Utility System and all records, accounts, and data of the Issuer relating thereto. Section 24. SPECIAL COVENANTS. The Issuer further covenants as follows: (a) That other than for the payment of the Bonds herein authorized, the revenues pledged hereunder have not in any manner been pledged to the payment of any debt or obligation of the Issuer or the Utility System. (b) That while any of the Bonds or Additional Bonds are outstanding, the Issuer will not sell or encumber the Utility System or any substantial part thereof, and that, with the exception of the Additional Bonds expressly permitted by this Ordinance to be issued, it will not encumber the revenues pledged hereunder unless such encumbrance is made junior and subordinate in all respects to the Bonds and Additional Bonds and all liens and pledges in connection therewith. (c) That no free service of the Utility System shall be allowed, and should the Issuer or any of its agencies or instrumentalities make use of the services and facilities of the Utility System, payment of the reasonable value thereof shall be made by the Issuer out of funds from sources other than the revenues and income of the Utility System. (d) That to the extent it legally may, the Issuer further covenants and agrees that while any of the Bonds or Additional Bonds are outstanding, no franchise shall be granted for the installation or operation of any competing water system, sewer system or electric systems that the Issuer will prohibit the operation of any such competing system, and the operation of any such competing system is hereby prohibited. Section 25. BONDS ARE SPECIAL OBLIGATIONS, The Bonds and Additional Bonds shall be special obligations of the Issuer payable solely from the pledged Net Revenues, and the holder or holders thereof shall never have the right to demand payment thereof out of funds raised or to be raised by taxation. Section 26. DEFEASANCE OF BONDS. (a) Any Bond and the interest thereon shall be deemed to be paid, retired, and no longer outstanding (a "Defeased Bond") within the meaning of this Ordinance, except to the extent provided in subsection (d) of this Section 32, when payment of the principal of such Bond, plus interest thereon to the due date (whether such due date be by reason of maturity, upon redemption, or otherwise) either (i) shall have been made or caused to be made in accordance with the terms thereof (including the giving of any required notice of redemption), or (ii) shall have been provided for on or before such due date by irrevocably depositing with or making available to the Paying Agent/Registrar for such payment (1) lawful money of the United States of America sufficient to make such payment or (2) Government Obligations which mature as to principal and interest in such amounts and at such times as will insure the availability, without rein- vestment, of sufficient money to provide for such payment, and when proper arrangements have been made by the Issuer with the Paying Agent/Registrar for the payment of its services until all Defeased Bonds shall have become due and payable. At such time as a Bond shall be deemed to be a Defeased Bond hereunder, as aforesaid, such Bond and the interest thereon shall no longer be secured by, payable from, or entitled to the benefits of, revenue pledged as provided in this Ordinance, and such principal and interest shall be pay- able solely from such money or Government Obligations. (b) Any moneys so deposited with the Paying Agent/Registrar may at the written direction of the Issuer also be invested in Government Obligations, maturing in the amounts and times as hereinbefore set forth, and all income from such Government Obligations received by the Paying Agent/Registrar which is not required for the payment of the Bonds and interest thereon, with respect to which such money has been so deposited, shall be turned over to the Issuer, or deposited as directed in writing by the Issuer. (c) The term "Government Obligations" as used in this Section shall mean direct obligations of the United States of America, including obligations the principal of and interest on which are unconditionally guaranteed by the United States of America, which may be United States Treasury obligations such as its State and Local Government Series, which may be in book -entry form. (d) Until all Defeased Bonds shall have become due and payable, the Paying Agent/Registrar shall perform the services of Paying Agent/Registrar for such Defeased Bonds the same as if they had not been defeased, and the Issuer shall make proper arrangements to provide and pay for such services as required by this Ordinance. Section 27. DAMAGED, MUTILATED, LOST, STOLEN, OR DESTROYED BONDS. (a) Replacement Bonds. In the event any outstanding Bond is damaged, mutilated, lost, stolen, or destroyed, the Paying Agent/Registrar shall cause to be printed, executed, and delivered, a new bond of the same principal amount, maturity, and interest rate, as the damaged, mutilated, lost, stolen, or destroyed Bond, in replacement for such Bond in the manner hereinafter provided. (b) Appplication for Replacement Bonds. Application for replacement of damaged, mutilated, lost, stolen, or destroyed Bonds shall be made by the registered owner thereof to the Paying Agent/Registrar. In every case of loss, theft, or destruction of a Bond, the registered owner applying for a replacement bond shall furnish to the Issuer and to the Paying Agent/Registrar such security or indemnity as may be required by them to save each of them harmless from any loss or damage with respect thereto. Also, in every case of loss, theft, or destruction of a Bond, the registered owner shall furnish to the Issuer and to the Paying Agent/Registrar evidence to their satisfaction of the loss, theft, or destruction of such Bond, as the case may be. In every case of damage or mutilation of a Bond, the registered owner shall surrender to the Paying Agent/Registrar for cancellation the Bond so damaged or mutilated. (c) Mn Default Occurred. Notwithstanding the foregoing provisions of this Section, in the event any such Bond shall have matured, and no default has occurred which is then continuing in the payment of the principal of, redemption premium, if any, or interest on the Bond, the Issuer may authorize the payment of the same (without surrender thereof except in the case of a damaged or mutilated Bond) instead of issuing a replacement Bond, provided security or indemnity is furnished as above provided in this Section. (d) Charge for Issuing Replacement Bonds. Prior to the issuance of any replacement bond, the Paying Agent/Registrar shall charge the registered owner of such Bond with all legal, printing, and other expenses in connection therewith. Every replacement bond issued pursuant to the provisions of this Section by virtue of the fact that any Bond is lost, stolen, or destroyed shall constitute a contractual obligation of the Issuer whether or not the lost, stolen, or destroyed Bond shall be found at any time, or be enforceable by anyone, and shall be entitled to all the benefits of this Ordinance equally and proportionately with any and all other Bonds duly issued under this Ordinance. (e) Authority for Issuine Replacement Bonds. In accordance with Section 6 of Vernon's Ann. Tex. Civ, St. Art. 717k-6, this Section of this Ordinance shall constitute authority for the issuance of any such replacement bond without necessity of further action by the governing body of the Issuer or any other body or person, and the duty of the replacement of such bonds is hereby authorized and imposed upon the Paying Agent/Registrar, and the Paying Agent/Registrar shall authenticate and deliver such bonds in the form and manner and with the effect, as provided in Section 4(d) of this Ordinance for Bonds issued in conversion and exchange for other Bonds. Section 28. CUSTODY, APPROVAL, AND REGISTRATION OF BONDS; BOND COUNSEL'S OPINION; CUSIP NUMBERS; AND CONTINGENT INSURANCE PROVISION, IF OBTAINED. The Mayor of the Issuer is hereby authorized to have control of the Initial Bond issued hereunder and all necessary records and proceedings pertaining to the Initial Bond pending its delivery and its investigation, examination, and approval by the Attorney General of the State of Texas, and its registration by the Comptroller of Public Accounts of the State of Texas. Upon registration of the Initial Bond said Comptroller of Public Accounts (or a deputy designated in writing to act for said Comptroller) shall manually sign the Comptroller's Registration Certificate on the Initial Bond, and the seal of said Comptroller shall be impressed, or placed in facsimile, on the Initial Bond. In addition, if bond insurance is obtained, the Bonds may bear an appropriate legend as provided by the Insurer. Section 29. COVENANTS REGARDING TAX EXEMPTION. The Issuer covenants not to take any action which would adversely affect, and to take any required action to ensure, the treatment of the Bonds as obligations described in Section 103 of the Internal Revenue Code of 1986 (the "Code"), the interest on which is not includable in the "gross income" of the holder for purposes of federal income taxation. In furtherance thereof, the Issuer covenants as follows. (a) to take any action to assure that no more than 10 percent of the proceeds of the Bonds (less amounts deposited to a reserve fund, if any) are used for any "private business use," as defined in Section 141(b)(6) of the Code or, if more than 10 percent of the proceeds are so used, that amounts, whether or not received by the Issuer, with respect to such private business use, do not, under the terms of this Resolution, or any underlying arrangement, directly or indirectly, secure or provide for the payment of more than 10 percent of the debt service on the Bonds, in contravention of Section 141(b)(2) of the Code, 29 (b) to take any action private business use to assure that in the event that the described in SubSection (a) hereof exceeds 5 percent of the proceeds of the Bonds (less amounts deposited into a reserve fund, if any) then the amount in excess of 5 percent is used for a "private business use" which is "related" and not "disproportionate," within the meaning of Section 141(b)(3) of the Code, to the governmental use, (c) to take any action to assure that no amount which is greater than the lesser of $5,000,000, or 5 percent of the proceeds of the Bonds (less amounts deposited into a reserve fund, if any) is directly or indirectly used to finance loans to persons, other than state or local governmental units, in contravention of Section 141(c) of the Code; (d) to refrain from taking any action which would otherwise result in the Bonds being treated as "private activity bonds" within the meaning of Section 141(b) of the Code; (e) to refrain from taking any action that would result in the Bonds being "federally guaranteed" within the meaning of Section 149(b) of the Code; (f) to refrain from using any portion of the proceeds of the Bonds, directly or indirectly, to acquire or to replace funds which were used, directly or indirectly, to acquire investment property (as defined in Section 148(b)(2) of the Code) which produces a materially higher yield over the term of the Bonds, other than investment property acquired with -- (1) proceeds of the Bonds invested for a reasonable temporary period of 3 years or less or, in the case of a refunding bond, for a period of 30 days or less until such proceeds are needed for the purpose for which the bonds are issued, (2) amounts invested in a bona fide debt service fund, within the meaning of Section 1.10343(b)(12) of the Treasury Regulations, and (3) amounts deposited in any reasonably required reserve or replacement fund to the extent such amounts do not exceed 10 percent of the proceeds of the Bonds; (g) to otherwise restrict the use of the proceeds of the Bonds or amounts treated as proceeds of the Bonds, as may be necessary, so that the Bonds do not otherwise contravene the requirements of Section 148 of the Code (relating to arbitrage) and, to the extent applicable, Section 149(d) of the Code (relating to advance refundings); (h) to pay to the United States of America at least once during each five-year period (beginning on the date of delivery of the Bonds) an amount that is at least equal to 90 percent of the "Excess Earnings," within the meaning of Section 148(f) of the Code and to pay to the United States of America, not later than 60 days after the Bonds have been paid 30 in full, 100 percent of the amount then required to be paid as a result of Excess Earnings under Section 148(f) of the Code; and (i) to maintain such records as will enable the Issuer to fulfill its responsibilities under this Section and Section 148 of the Code and to retain such records for at least six years following the final payment of principal and interest on the Bonds. In order to facilitate compliance with the above covenants (g), (h), and (i), a "Rebate Fund is hereby established by the Issuer for the sole benefit of the United States of America, and such Fund shall not be subject to the claim of any other person, including without limitation the bondholders. The Rebate Fund is established for the additional purpose of compliance with Section 148 of the Code. It is the understanding of the Issuer that the covenants contained herein are intended to assure compliance with the Code and any regulations or rulings promulgated by the U.S. Department of the Treasury pursuant thereto. In the event that regulations or ruling are hereafter promulgated which modify, or expand provisions of the Code, as applicable to the Bonds, the Issuer will not be required to comply with any covenant contained herein to the extent that such modification or expansion, in the opinion of nationally -recognized bond counsel, will not adversely affect the exemption from federal income taxation of interest on the Bonds under Section 103 of the Code. In the event that regulations or rulings are hereafter promulgated which impose additional requirements which are applicable to the Bonds, the Issuer agrees to comply with the additional requirements to the extent necessary, in the opinion of nationally -recognized bond counsel, to preserve the exemption from federal income taxation of interest on the Bonds under Section 103 of the Code. Section 30. DESIGNATION AS QUALIFIED TAX-EXEMPT OBLIGATIONS. The Issuer hereby designates the Bonds as "qualified tax-exempt obligations" as defined in Section 265(b)(3) of the Code. In furtherance of such designation, the Issuer represents, covenants and warrants the following: (a) that during the calendar year in which the Bonds are issued, the Issuer (including any subordinate entities) has not designated nor will designate obligations, which when aggregated with the Bonds, will result in more than $10,000,000 of It qualified tax-exempt obligations" being issued; and (b) that the Issuer reason- ably anticipates that the amount of tax-exemptobligations issued, during the calendar year in which the Bonds are issued, by the Issuer (or any subordinate entities) will not exceed $109000,0000 Section 31. SALE OF INITIAL BOND. The Initial Bond is hereby sold and shall be delivered to Southwest Securities Incorporated for cash for the price of $2,178,933, which represents the par amount of such Bonds less an underwriter's discount for such Bonds of $51,067. It is hereby officially found, determined, and declared that the Initial Bond has been sold pursuant to the terms and provisions of a Purchase Contract in substantially the form attached hereto as Exhibit A, which the Mayor of the Issuer is hereby authorized and directed to execute and deliver and which the City Secretary of the issuer is hereby authorized and directed to attest. It is hereby officially found, determined, and declared that the terms of this sale are the most advantageous reasonably obtainable. The Initial Bond shall be registered in the name of Southwest Securities Incorporated. Section 32, APPROVAL OF OFFICIAL STATEMENT. The Issuer hereby approves the form and content of the Official Statement relating to the Bonds and any addenda, supplement or amendment thereto, and approves the distribution of such Official Statement in the reoffering of the Bonds by the Underwriter in final form, with such changes therein or additions thereto as the officer executing the same may deem advisable, such determination to be conclusively evidenced by his execution thereof. Section 33. APPROVAL OF ESCROW AGREEMENT AND TRANSFER OF FUNDS. The Mayor of the Issuer is hereby authorized and directed to execute and deliver and the City Secretary of the Issuer is hereby authorized and directed to attest an Escrow Agreement in substantially the form attached hereto as Exhibit B. In Addition, the Mayor is authorized to execute such subscription for the purchase of U. S. Treasury Securities, State and Local Government Series, and to authorize the transfer of such funds of the Issuer, as may be necessary for the Escrow Fund. Section 34. NOTICE OF REDEMPTION. That there is attached to this Ordinance, as Exhibit C, and made a part hereof for all purposes, a notice of prior redemption for the Refunded Bonds to be redeemed prior to stated maturity, and such Refunded Bonds described in said notice of prior redemption are hereby called for redemption and shall be redeemed prior to maturity on the date, place, and at the price as set forth therein. Section 35. NOTICE TO PAYING AGENT. The Refunded Bonds described in Exhibit C attached hereto are so called for redemption, and Ameritrust Texas National Association, Dallas, Texas is hereby directed to make appropriate arrangements so that such Refunded Bonds may be redeemed at said bank on the redemption date. A copy of such Notice of Redemption shall be delivered to the Paying Agent bank so mentioned. Section 36. REASONS FOR REFUNDING. That the Issuer deems it advisable to issue the refunding bonds in order to change the bond covenants for the issuance of additional bonds and to permit the issuance of additional bonds for improvements to the Utility System, with a limited increase to the annual debt service requirements of the Issuer, with an approximate increase to the debt service of $784,403.38. ---------------- 32 EXHIBIT A Purchase Contract The Purchase Contract has been omitted at this point as it appears in executed form elsewhere in this transcript. 33 EXHIBIT B Escrow Agreement The Escrow Agreement has been omitted at this point as it appears in executed form elsewhere in this transcript. 34 EXHIBIT C NOTICE OF REDEMPTION NOTICE IS HEREBY GIVEN that the City of Sanger, in Denton County, Texas, has called for redemption the outstanding bonds of the City as described as follows: CITY OF SANGER, TEXAS UTILITY SYSTEM REVENUE BONDS, SERIES 1977, dated May 15, 1977, maturing May 15, 1993 through May 15, 1996, in the aggregate principal amount of $145,000 for the redemption price of the principal amount thereof and accrued interest to call date of the Bonds so called for redemption at Ameritrust Texas National Association, Dallas, Texas. Call date: May 15, 1992. On May 15, 1992, interest on such Bonds shall cease to accrue and be payable. CITY OF SANGER, TEXAS UTILITY SYSTEM REVENUE BONDS, SERIES 1982, dated June 15, 1982, maturing May 15, 1993 through May 15, 1997, in the aggregate principal amount of $250,000 for the redemption price of the principal amount thereof and accrued interest to call date of the Bonds so called for redemption at Ameritrust Texas National Association, Dallas, Texas. Call date: May 15, 1992. On May 15, 1992, interest on such Bonds shall cease to accrue and be payable. THIS NOTICE is issued and given pursuant to the redemption provisions in the proceedings authorizing Lite issuance of the aforementioned Bonds and in accordance with the recitals and provisions of said Bonds. NOTICE IS GIVEN that due and proper arrangements have been made for providing the place of payment of said Bonds called for redemption with funds sufficient to pay the principal amount of said Bonds and the interest thereon to the redemption date. In the event said Bonds, or any of them are not presented for redemption by the date fixed for their redemption, they shall not thereafter bear interest. IN COMPLIANCE with the Interest and Dividend Tax Compliance Act of 1983, taxpayers making payments of principal due on debt securities may be obligated to withhold 20% tax from remittance to individuals who failed to provide such taxpayer with a valid taxpayer identification number. To avoid the imposition of this withholding tax, such bondholders should submit a certified taxpayer identification numb er when surrendering the bonds for redemption. NOTICE IS FURTHER GIVEN that the Bonds should be submitted to either of the following addresses: In Person Ameritrust Texas National Association 1900 Pacific Avenue, 14th Floor Dallas, Texas 75201 In Writing Ameritrust Texas National Association P. O. Box 2320 Has, Texas 75221-2320 Nel Armstrong, Mayor City of Sanger 35 NOTICE OF REDEMPTION NOTICE IS HEREBY GIVEN that the City of Sanger, in Denton County, Texas, has called for redemption the outstanding bonds of the City as described as follows: CITY OF BANGER, TEXAS UTILITY SYSTEM REVENUE BONDS, SERIES 1985, dated May 15, 1985, maturing May 15, 1996 through May 15, 2001, in the aggregate principal amount of $725,000 for the redemption price of the principal amount thereof and accrued interest to call date of the Bonds so called for redemption at Ameritrust Texas National Association, Dallas, Texas. Call date: May 15, 1995. On May 15, 1995, interest on such Bonds shall cease to accrue and be payable. THIS NOTICE is issued and given pursuant to the redemption provisions in the proceedings authorizing the issuance of the aforementioned Bonds and in accordance with the recitals and provisions of said Bonds. NOTICE IS GIVEN that due and proper arrangements have been made for providing the place of payment of said Bonds called for redemption with funds sufficient to pay the principal amount of said Bonds and the interest thereon to the redemption date. In the event said Bonds, or any of them are not presented for redemption by the date fixed for their redemption, they shall not thereafter bear interest. IN COMPLIANCE with the Interest and Dividend Tax Compliance Act of 1983, taxpayers making payments of principal due on debt securities may be obligated to withhold 20% tax from remittance to individuals who failed to provide such taxpayer with a valid taxpayer identification number. To avoid the imposition of this withholding tax, such bondholders should submit a certified taxpayer identification number when surrendering the bonds for redemption. NOTICE IS FURTHER GIVEN that the Bonds should be submitted to either of the following addresses: In Person In Writing Ameritrust Texas National Association 1900 Pacific Avenue, 14th Floor Dallas, Texas 75201 Ameritrust Texas National Association P. O. Box 2320 Dallas, Texas 75221-2320 Nel Armstrong, Mayor City of Sanger 36 CITY OF BANGER, TEXAS $2,230,000 Utility System Refunding and Improvement Revenue Bonds Series 1991 November 18, 1991 THE HONORABLE MAYOR AND CITY COUNCIL City of Sanger, Texas P. O. Box 7578 Sanger, Texas 7626&0578 Dear Ladies and Gentlemen: Southwest Securities Incorporated (the "Underwriter"), offers to enter into this Purchase Contract with the City of Sanger, Texas (the "City"). This offer is made subject to the City's acceptance of this Purchase Contract on or before 10:00 p.m., Central Standard Time, on November 18, 1991. 1. Purchase and Sale of the Bonds. Upon the terms and conditions and upon the basis of the representations set forth herein, the Underwriter hereby agrees to purchase from the City, and the City hereby agrees to sell and deliver to the Underwriter an aggregate of $2,230,000.00 principal amount of City of Sanger, Texas, Utility System Refunding and Improvement Revenue Bonds, Series 1991 (the "Bonds"). The Bonds shall be dated December 1, 1991 and shall have the maturities and bear interest from their date at the rate or rates per annum as shown on the cover page of the Official Statement (hereinafter defined), such interest being payable on May 15, 1992, and semiannually thereafter on November 15 and May 15 in each year. The purchase price for the Bonds shall be $2,178,933.00 (representing the par amount of the Bonds, less an underwriter's discount of $51,067.00), plus interest accrued on the Bonds from their date to the date of the payment for and delivery of the Bonds (the "Closing"). Exhibit A hereto is the Official Statement, including the cover page and appendices thereto (hereinafter called the "Official Statement"). 2. Ordinance. The Bonds shall be as described in and shall be issued and secured under the provisions of the Ordinance adopted by the City on November 181 1991 (the "Ordinance"). The Bonds shall be secured and payable as provided in the Ordinance. 3. Public Offering. It shall be a condition of the obligations of the City to sell and deliver the Bonds to the Underwriter, and of the obligations of the Underwriter to purchase and accept delivery of the Bonds, that the entire principal amount of the Bonds authorized by the Ordinance shall be sold and delivered by the City and accepted and paid for by the Underwriter at the Closing. The Underwriter agrees to make a bona fide public offering of all of the Bonds, at not in excess of the initial public offering prices, as set forth on the cover page of the Official Statement, plus interest accrued thereon from the date of the Bonds. 4. Official Statement and Escrow Agreement. The City hereby authorizes the Escrow Agreement, hereinafter defined, the Ordinance and the Official Statement and the information therein contained to be used by the Underwriter in connection with the public offering and sale of the Bonds. The City confirms its consent to the use by the Underwriter, prior to the date hereof, of the Preliminary Official Statement, dated November 11, 1991 (the "Preliminary Official Statement"), in connection with the public offering and sale of the Bonds and the Preliminary Official Statement was "deemed final" by the City, as of the date of its initial mailing, within the meaning, and for the purposes, of Rule 15c2-12 of the federal Securities and Exchange Act of 1934 (the "Rule"). The City agrees to cooperate with the Underwriter to provide a supply of final Official Statements within seven (7) business days of the date hereof in sufficient quantities to comply with the Underwriter's obligations under applicable MSRB Rules and the Rule. The Underwriter will use its best efforts to assist the City in the preparation of the final Official Statement in order to ensure compliance with the aforementioned rules. If at any time after the date of this Purchase Contract but before the first to occur of (i) the date upon which the Underwriter notify the City that the period of the initial public offering of the Bonds has expired or (ii) the date that is 180 days after the date hereof, any event shall occur which might or would cause the Official Statement to contain any untrue statement of a material fact or to omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, the City shall notify the Underwriter, and if, in the opinion of the Underwriter such event requires the preparation and publication of a supplement or amendment to the Official Statement, the City will at its expense supplement or amend the Official Statement in the form and in a manner approved by the Underwriter and furnish to the Underwriter a reasonable number of copies requested by the Underwriter in order to enable the Underwriter to comply with the Rule; provided, however, that the cost of any such supplement or amendment required after 90 days from the date hereof shall be borne by the Underwriter requiring an Official Statement for delivery. 5. Representations, Warranties and Agreements of the City. On the date hereof, the City represents, warrants and agrees as follows: (a) The City is a municipal corporation, a political subdivision of the State of Texas and a body politic and corporate, and has full legal right, power and authority to enter into this Purchase Contract and the Escrow Agreement between the City and the Escrow Agent named in the Official Statement (the "Escrow Agreement"), to adopt the Ordinance, to sell the Bonds, and to issue and deliver the Bonds to the Underwriter as provided herein and to carry out and consummate all other transactions contemplated by the Ordinance, the Escrow Agreement and this Purchase Contract; (b) By official action of the City prior to or concurrently with the acceptance hereof, the City has duly adopted the Ordinance, has duly authorized and approved the execution and delivery of, and the performance by the City of the obligations contained in the Bonds, the Escrow Agreement and this Purchase Contract and has duly authorized and approved the performance by the City of its obligations contained in the Ordinance, the Escrow Agreement and in this Purchase Contract; (c) The City is not in breach of or default under any applicable law or administrative regulation of the State of Texas or the United States or any applicable judgment or decree or any loan agreement, note, resolution, agreement or other instrument, except as may be disclosed in the Official Statement, to which the City is a party or is otherwise subject, which would have a material and adverse effect upon the business or financial condition of the City; and the execution and deliver of the Escrow Agreement and this Purchase Contract by the City and the execution and delivery of the Bonds and the adoption of the Ordinance by the City and compliance with the provisions of each thereof will not violate or constitute a breach of or default under any existing law, administrative regulation, judgment, decree or any agreement or other instrument to which the City is party or, to the knowledge of the City, is otherwise subject; (d) All approvals, consents and orders of any governmental authority or agency having jurisdiction of any matter which would constitute a condition precedent to the performance by the City of its obligations to sell and deliver the Bonds hereunder will have been obtained prior to the Closing, (e) At the time of the City's acceptance hereof and at the time of the Closing, the Official Statement does not and will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; 3 (f) Between the date of this Purchase Contract and Closing, the City will not, without the prior written consent of the Underwriter, issue any additional bonds, notes or other obligations for borrowed money payable in whole or in part from revenues of the System, and the City will not incur any material liabilities, direct or contingent, nor will there by any adverse change of a material nature in the financial position of the City, (g) Except as described in the Official Statement, no litigation is pending or, to the knowledge of the City, threatened in any court affecting the organization, existence or powers of the City or any of its respective officers in their capacity as such, or the business, properties or assets or financial condition of the City, or seeking to restrain or enjoin the issuance or delivery of the Bonds, the pledge of revenues of the City's System to pay principal and interest on the Bonds, or in any way contesting or affecting the issuance, execution, delivery, payment, security or validity of the Bonds, or in any way contesting or affecting the validity or enforceability of the Ordinance, the Escrow Agreement or this Purchase Contract, or contesting the powers of the City or any authority for the Bonds, the Ordinance, the Escrow Agreement or this Purchase Contract or contesting in any way the completeness, accuracy or fairness of the Preliminary Official Statement or the Official Statement, (h) The City will cooperate with the Underwriter in arranging for the qualification of the Bonds for sale and the determination of their eligibility for investments under the laws of such jurisdictions as the Underwriter designates and will use their best efforts to continue such qualifications in effect so long as required for distribution of the Bonds, provided, however, that the City will not be required to execute a general consent to service of processing or to qualify to do business in connection with any such qualification in any jurisdiction, (i) The descriptions contained in the Official Statement of the Bonds, the Escrow Agreement and the Ordinance accurately reflect the provisions of such instruments, and the Bonds, when validly executed, authenticated and delivered in accordance with the Ordinance and sold to the Underwriter, as provided herein, will be validly issued and outstanding direct obligations of the City entitled to the benefits of, and subject to the limitations contained in, the Ordinance, prior to the Closing an event occurs affecting the City, which is materially adverse for the purpose for which the Official Statement is to be used and is not disclosed in the Official Statement, the City shall notify the Underwriter, and if in the opinion of the City and the Underwriter such event requires a supplement or amendment to the Official Statement, the City will supplement or amend the Official Statement in a form and in a manner approved by the Underwriter and Bond Counsel (as hereinafter defined) to the City, and (k) The financial statements, or excerpts therefrom, contained in the Official Statement present fairly the financial position of the City and the System as of the date thereof and for the period covered thereby. 6. Closing. At 10:00 A.M., Central Standard Time, on December 18, 1991 (the "Closing"), the City will deliver the Initial Bond or Bonds (as defined in the Ordinance) to the Underwriter and, provided the Underwriter shall have given written instructions to the Registrar for the Bonds, as hereinafter provided, will have available for immediate exchange the Bonds, duly executed and authenticated, together with the other documents hereinafter mentioned, and the Underwriter will accept such delivery and pay the purchase price of the Bonds, as set forth in Paragraph 1 hereof, in immediately available funds. Delivery and payment as aforesaid shall be made at the offices of Ameritrust Texas National Association, Dallas, Texas, or such other place, as shall have been mutually agreed upon by the City and the Underwriter. The Bonds (except for the Initial Bonds which may be typed) shall be printed or lithographed, shall be prepared and delivered as fully registered bonds in the denominations or maturity amounts, as applicable, of $5,000 or any multiple thereof, shall be registered in the names as shall be requested by written instructions of the Underwriter to the Registrar for the Bonds at least five (5) business days prior to the Closing, and, if the Underwriter shall so request, shall be made available to the Underwriter at least one (1) business day before the Closing for purposes of inspection in New York, New York or such other place as shall be mutually satisfactory to the City and the Underwriter. 7. Conditions. The Underwriter has entered into this Purchase Contract in reliance upon the representations and warranties of the City contained herein and to be contained in the documents and instruments to be delivered at the Closing, and upon the performance by the City of its obligations hereunder, both as of the date hereof and as of the date of Closing. Accordingly, the Underwriter's obligations under this Purchase Contract to purchase and pay for the Bonds shall be subject to the performance by the City of its obligations to be performed hereunder and under such documents and instruments at or prior to the Closing, and shall also be subject to the following conditions: (a) The representations and warranties of the City contained herein shall be true, complete and correct in all material respects on the date hereof and on and as of the date of Closing, as if made on the date of Closing, (b) At thVA time %J the Closing, the Ordinance and the Escrow Agreement shall be in full force and effect, and the Ordinance and the Escrow Agreement shall not have been amended, or supplemented and the Official Statement shall not have been amended, modified or supplemented, except as may have been agreed to by the Underwriter; (c) At the time of the Closing, all official action of the City related to the Ordinance shall be in full force and effect and shall not have been amended, modified or supplemented, (d) The City shall not have failed to pay principal or interest when due on any of its outstanding obligations for borrowed money, (e) The City will purchase the government securities, including State and Local Government Series Obligations, if any, necessary to provide the funds needed to refund the City's outstanding obligations as contemplated by the Escrow Agreement, (f) The Underwriter's purchase of the Refunded Obligations (as defined in the Ordinance) from the State of Texas on the date of Closing, (g) At or prior to the Closing, the Underwriter shall have received each of the following documents: (1) The Official Statement of the City executed on behalf of the City by the Mayor and City Secretary, (2) The Ordinance executed on behalf of the City by the Mayor and certified by the Secretary under its seal as having been duly adopted by the City and as being in effect, with such changes or amendments as may have been agreed to by the Underwriter, (3) The bond opinion of McCall, Parkhurst &Horton ("Bond Counsel") in substantially the form and substance of Exhibit B hereto; (4) An opinion or opinions, dated the date of Closing, of Bond Counsel addressed to the City and the Underwriter to the effect that: (1) the Bonds are exempt securities within the meaning of Section 3(a)(2) of the Securities Act of 1933, as amended, and it is not necessary in connection with the sale of the Bonds to the public to register the Bonds under the Securities Act of 1933, as amended, or to qualify the Ordinance under the Trust Indenture Act of 1939, as amended, (ii) except to the extent noted therein, said firm has not verified and is not passing upon, and does not assume any responsibility for, the accuracy, completeness of fairness of the statements contained in the Official Statement but that said firm has reviewed the information contained under the captions "Plan of Financing," "The Bonds," "Legal Matters" and "Appendix B--Certain Provisions of the Bond Ordinance" contained in the Official Statement and such firm is of the opinion that the information relating to the Bonds and Ordinance contained under such captions in all material respects accurately and fairly reflects the provisions thereof and that the information and descriptions contained under such captions relating to the provisions of applicable state and federal laws conform to such state and federal laws, and Oil) in the performance of its duties as Bond Counsel for the City, without having undertaken to determine independently the accuracy and completeness of the statements contained in the Official Statement, nothing has come to the attention of such counsel which would lead it to believe that the Official Statement (excluding the financial and statistical data and forecasts included therein, all as to which no view need be expressed) contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. (5) An opinion or certificate, dated on or prior to the date of Closing, of the Attorney General of Texas, approving the Bonds as required by law and the registration certificate of the Comptroller of Public Accounts of the State of Texas, 7 (6) A certcate, dated the date of Closing, signed by the City Manager and City Secretary, to the effect that (i) the representations and warranties of the City contained herein are true and correct in all material respects on and as of the date of Closing as if made on the date of Closing; (ii) except to the extent disclosed in the Official Statement, no litigation is pending or, to the knowledge of such persons, threatened to any court to restrain or enjoin the issuance or delivery of the Bonds, or the pledge of the Net Revenues of the System to pay principal and interest on the Bonds, or in any way contesting or affecting the validity of the Bonds, the Ordinance, the Escrow Agreement, or this Purchase Contract, or contesting the organization, existence or powers of the City or any of its respective officers in their capacity as such, or the business, properties, assets or financial condition of the City, or contesting the authorization of the Bonds or the Ordinance or contesting in any way the accuracy, completeness or fairness of the Official Statement (but in lieu of or in conjunction with such certificate the Underwriter may, in its sole discretion, accept certificates or opinions of the City attorney that, in his or her opinion, the issues raised in any such pending or threatened litigation are without substance or that the contentions of all plaintiffs therein are without merit); (ill) to the best of their knowledge, no event affecting the City has occurred since the date of the Official Statement which should be disclosed in the Official Statement for the purpose for which it is to be used or which it is necessary to disclose therein in order to make the statements and information therein not misleading in any respect; and (iv) there has not been any material and adverse change in the affairs or financial condition of the City since September 30, 1990, the latest date as to which audited financial information is available; (7) A certificate, dated the date of the Closing, of an appropriafie official of the City to the effect that, on the basis of the facts, estimates and circumstances in effect on the date of delivery of the Bonds, it is not expected that the proceeds of the Bonds will be used in a manner that would cause the Bonds to be arbitrage bonds within the meaning of Section 148 of the Internal Revenue Code of 1986, as amended; (8) A copy of a special report prepared by the independent Certified Public Accountants named in the Official Statement, addressed to the City, Bond Counsel and the Underwriter verifying the arithmetical computations of the adequacy of the maturing principal and interest on the escrowed securities and uninvested cash on hand under the Escrow Agreement to pay, when due, the principal or and interest on the Bonds being refunded and the computation of the yield with respect to such securities and the Bonds; (9) Evidence of the rating of "Baa" by Moody's Investors Service, Inc; (10) Such additional legal opinions, certificates, instruments and other documents as Bond Counsel or the Underwriter may reasonably request to evidence the truth, accuracy and completeness, as of the date hereof and as of the date of Closing, of the City's representations and warranties contained herein and of the statements and information contained in the Official Statement and the due performance and satisfaction by the City at or prior to the date of Closing of all agreements then to be performed and all conditions then to be satisfied by the City. All of the opinions, letters, certificates, instruments and other documents mentioned above or elsewhere in this Purchase Contract shall be deemed to be in compliance with the provisions hereof if, but only if, they are satisfactory to the Underwriter. If the City shall be unable to satisfy the conditions to the obligations of the Underwriter to purchase, to accept delivery of and to pay for the bonds, as set forth in this Purchase Contract, or if the obligations of the Underwriter to purchase, to accept delivery of and to pay for the bonds shall be terminated for any reason permitted by this Purchase Contract, this Purchase Contract shall terminate and neither the Underwriter nor the City shall be under further obligation hereunder, except that the respective obligations of the City and the Underwriter set forth in Paragraphs 9 and 11 hereof shall continue in full force and effect. 8. Termination. The Underwriter may terminate their obligation to purchase at any time before the Closing if any of the following should occur: E (a) Legislation (including any amendment thereto) shall have been introduced in or adopted by either House of the Congress of the United States or recommended to the Congress or otherwise endorsed for passage by the President of the United States, the Treasury Department of the United States, the Internal Revenue Service or the Chairman or ranking minority member of the Committee on Finance of the United States Senate or the Committee on Ways and Means of the United States House of Representatives, or legislation is proposed for consideration by either such committee by any member thereof or presented as an option for consideration by either such committee by the staff of such committee, or by the staff of the Joint Committee on Taxation of the Congress of the United States, or a bill to amend the Internal Revenue Code (which, if enacted, would be effective as of a date prior to the Closing) shall be filed in either house, or (ii) a decision shall have been rendered by a court established under Article III of the Constitution of the United States or by the United States Tax Court, or (iii) an order, filing, ruling or regulation shall have been issued or proposed by or on behalf of the Treasury Department of the United States or the Internal Revenue Service or any other agency of the United States, or (iv) a release or official statement shall have been issued by the President of the United States, the Treasury Department of the United States or the Internal Revenue Service, the effect of which, in any such case described in clause (i), (ii), (iii), or (iv), would be to impose, directly or indirectly, federal income taxation upon interest received on obligations of the general character of the Bonds or upon income of the general character to be derived by the City, other than as imposed on the Bonds and income therefrom under the federal tax laws in effect on the date hereof, in such a manner as in the judgment of the Representative would make it impracticable to market the Bonds on the terms and in the manner contemplated in the Official Statement; (b) Any action shall have been taken by the Securities and Exchange Commission or by a court which would require registration of any security under the Securities Act of 1933, as amended, or qualification of any indenture under the Trust Indenture Act of 1939, as amended, in connection with the public offering of the Bonds, or any action shall have been taken by any court or by any governmental authority suspending the use of the Preliminary Official Statement or the Official Statement or any amendment or supplement thereto, or any proceeding for that purpose shall have been initiated or threatened in any such court or by any such authority. 10 Constitution of the State of Texas shall be amended or an amendment shall be proposed, or (ii) legislation shall be enacted, or (iii) a decision shall have been rendered as to matters of Texas law, or (iv) any order, ruling or regulation shall have been issued or proposed by or on behalf of the State of Texas by an official, agency or department thereof, affecting the legality or tax status of the City, its property or income, its bonds (including the Bonds) or the interest thereon, which in the judgment, reasonably exercised, of the Underwriter would materially affect the market price of the Bonds. (d) (i) A general suspension of trading in securities shall have occurred on the New York Stock Exchange, or (ii) the United States becomes engaged in any outbreak of armed hostilities (whether or not foreseeable at the time of execution hereof) or hostilities previously commenced shall escalate, the effect of which, in either case described in clause (i) and (ii), is, in the judgment, reasonably exercised, of the Underwriter, is so material and adverse as to make it impracticable or inadvisable to proceed with the public offering or the delivery of the Bonds on the terms and in the manner contemplated in this Purchase Contract and the Official Statement, including without limitation any material adverse affect on the market price of the Bonds. (e) An event described in Paragraph 5(j) hereof occurs which, in the opinion of the Underwriter, requires a supplement or amendment to the Official Statement. (f) A general banking moratorium shall have been declared by authorities of the United States, the State of New York %J the State of Texas. (g) The debt ceiling of the United States is such that the State and Local Government Series securities, if any, required to fund the Escrow Agreement are not available for delivery on the date of the delivery of the Bonds. (h) A lower of the rating or ratings initially assigned to the Bonds shall occur prior to Closing. 9. Expenses. (a) The City shall pay out of the bond proceeds all expenses incident to the issuance of the Bonds, including but not limited to: (i) the cost of the preparation, printing and distribution of the Official Statements (ii) the cost of the preparation and printing of the Bonds, (iii) the fees and expenses of Bond Counsel to the City, (iv) the fees and disbursements of the City's accountants, advisors, and of any other experts or consultants retained by the City including the fee of the independent Certified Public Accountant for the preparation of the verification report relating to the refunding, and (v) fees for bond rating and any travel or other expenses incurred incident thereto, 11 (b) The Underwriter shall pay (i) all advertising expenses in connection with the offering of the Bonds, and (ii) the costs of the preparation and printing of all the underwriting documents. 10. Notices. Any notice or other communication to be given to the City under this Purchase Contract may be given by delivering the same in writing at the address for the City set forth above, and any notice or other communication to be given to the Underwriter under this Purchase Contract may be given by delivering the same in writing to Southwest Securities Incorporated, 1201 Elm Street, Suite 4300, Dallas, Texas 75270, Attention: Dan A. Almon. 1 1. Parties in Interest. This Purchase Contract is made solely for the benefit of the City and the Underwriter (including the successors or assigns of the Underwriter) and no other person shall acquire or have any right hereunder or by virtue hereof. The City's representations, warranties and agreements contained in this Purchase Contract shall remain operative and in full force and effect, regardless of (i) any investigations made by or on behalf of the Underwriter, and (ii) delivery of any payment for the Bonds hereunder, and the City's representations and warranties contained in Paragraph 5 of this Purchase Contract shall remain operative and in full force and effect, regardless of any termination of this Purchase Contract. 12 12. Effective Date. This Purchase Contract shall become effective upon the execution of the acceptance hereof by the Mayor of the City and shall be valid and enforceable as of the time of such acceptance. Very truly yours, SOUTHWEST SECURITIES INCORPORATED ACCEPTED: This_ day of November, 1991. ATTEST: , Mayor, City Sanger, Texas (CITY SEAL) 13 i�:�ar��r�� OFFICIAL STATEMENT LEGAL OPINION ESCROW AGREEMENT City of Sanger, Texas Utility System Revenue Bonds, Series 1977 maturities May 15, 1992 through May 15, 1996 City of Sanger, Texas Utility System Revenue Bonds, Series 1982 maturities May 15, 1992 through May 15, 1997 City of Sanger, Texas Utility System Revenue Bonds, Series 1985 maturities May 15, 1992 through May 15, 2001 THIS ESCROW AGREEMENT, dated as of December 1, 1991 (herein, together with any amendments or supplements hereto, called the "Agreement") is entered into by and between the City of Sanger, Texas (herein called the "Issuer") and Ameritrust Texas National Association, Dallas, Texas, as escrow agent (herein, together with any successor in such capacity, called the "Escrow Agent"). The addresses of the Issuer and the Escrow Agent are shown on Exhibit "A" attached hereto and made a part hereof. WITNESSETH: WHEREAS, the Issuer heretofore has issued and there presently remain outstanding the obligations described in Exhibit "B" attached hereto (the "Refunded Obligations"); and WHEREAS, the Refunded Obligations are scheduled to come due in such years, bear interest at such rates, and be payable at such times and in such amounts as are set forth in Exhibit "C" attached hereto and made a part hereof, and WHEREAS, when firm banking arrangements have been made for the payment of all principal and interest of the Refunded Obligations when due, then the Refunded Obligations shall no longer be regarded as outstanding except for the purpose of receiving payment from the funds provided for such purpose; and WHEREAS, Article 717k, V.A.T.C.S. authorizes the Issuer to issue refunding bonds and to deposit the proceeds from the sale thereof, and any other available funds or resources, directly with any place of payment (paying agent) for any of the Refunded Obliga- tions, and such deposit, if made before such payment dates and in sufficient amounts, shall constitute the making of firm banking and financial arrangements for the discharge and final payment of the Refunded Obligations; and WHEREAS, Article 717k, V.A.T.C.S. further authorizes the Issuer to enter into an escrow agreement with any such paying agent for any of the Refunded Obligations with respect to the safekeeping, investment, administration and disposition of any such deposit, upon such terms and conditions as the Issuer and such paying agent may agree, provided that such deposits may be invested only in direct obligations of the United States of America, including obligations the principal of and interest on which are unconditionally guaranteed by the United States of America, and which may be in book entry form, and which shall mature and/or bear interest payable at such times and in such amounts as will be sufficient to provide for the scheduled payment of principal and interest on the Refunded Obligations when due; and WHEREAS, Ameritrust Texas National Association, Dallas, Texas is the paying agent For the Series 1977 Bonds, Series 1982 Bonds and Series 1985 Bonds, and this Escrow Agreement constitutes an escrow agreement of the kind authorized and permitted by said Article 717k, V.A.T.C.S. and such Bank has signed this agreement acknowledging same; and WHEREAS, Article 717k, V.A.T.C.S. makes it the duty of the Escrow Agent to comply with the terms of this Agreement and timely make available to the place of payment (paying agent) for the Refunded Obligations the amounts required to provide for the payment of the principal of and interest on such obligations when due, and in accordance with their terms, but solely from the funds, in the manner, and to the extent provided in this Agreement; and WHEREAS, the issuance, sale, and delivery of City of Sanger, Texas Utility System Refunding and Improvement Revenue Bonds, Series 1991 (the "Refunding Obligations") have been duly authorized to be issued, sold, and delivered for the purpose of obtaining funds required to provide for the payment of the principal of and interest on the Refunded Obligations when due; and WHEREAS, the Issuer desires that, concurrently with the delivery of the Refunding Obligations to the purchasers thereof, certain proceeds of the Refunding Obligations, together with certain other available funds of the Issuer, shall be applied to purchase certain direct obligations of the United States of America hereinafter defined as the "Escrowed Securities" for deposit to the credit of the Escrow Fund created pursuant to the terms of this Agreement and to establish a beginning cash balance (if needed) in such Escrow Fund; and WHEREAS, the Escrowed Securities shall mature and the interest thereon shall be payable at such times and in such amounts so as to provide moneys which, together with cash balances from time to time on deposit in the Escrow Fund, will be sufficient to pay interest on the Refunded Obligations as it accrues and becomes payable and the principal of the Refunded Obligations as it becomes due and payable; and 2 WHEREAS, to facilitate the receipt and transfer of proceeds of the Escrowed Securities, particularly those in book entry form, the Issuer desires to establish the Escrow Fund at the principal corporate trust office of the Escrow Agents and WHEREAS, the Escrow Agent is a party to this Agreement to acknowledge its acceptance of the terms and provisions hereof, NOW, THEREFORE, in consideration of the mutual undertakings, promises and agreements herein contained, the sufficiency of which hereby are acknowledged, and to secure the full and timely payment of principal of and the interest on the Refunded Obligations, the Issuer and the Escrow Agent mutually undertake, promise, and agree for themselves and their respective representatives and successors, as follows: ARTICLE I DEFINITIONS AND INTERPRETATIONS Section 1.01. Definitions. Unless the context clearly indicates otherwise, the following terms shall have the meanings assigned to them below when they are used in this Agreement: "Escrow Fund" means the fund created by this Agreement to be administered by the Escrow Agent pursuant to the provisions of this Agreement. "Escrowed Securities" means the noncallable United States Treasury obligations described in Exhibit "D" attached to this Agreement, or cash or other direct obligations of the United States of America. Section 1.02. Other Definitions. The terms "Agreement", "Issuer", "Escrow Agent", "Refunded Obligations", "Refunding Obligations" and "Paying Agent", when they are used in this Agreement, shall have the meanings assigned to them in the preamble to this Agreement. Section 1.03. Interpretations. The titles and headings of the articles and sections of this Agreement have been inserted for convenience and reference only and are not to be considered a part hereof and shall not in any way in or restrict the terms hereof. This Agreement and all of the terms and provisions hereof shall be liberally construed to effect- uate the purposes set forth herein and to achieve the intended purpose of providing for the refunding of the Refunded Obligations in, accordance with applicable law. 3 ARTICLE II DEPOSIT OF FUNDS AND ESCROWED SECURITIES Section 2.01. Deposits in the Escrow Fund. Concurrently with the sale and delivery of the Refunding Obligations the Issuer shall deposit, or cause to be deposited, with the Escrow Agent, for deposit in the Escrow Fund, the funds and Escrowed Securities described herein, and the Escrow Agent shall, upon the receipt thereof, acknowledge such receipt to the Issuer in writing. ARTICLE III CREATION AND OPERATION OF ESCROW FUND Section 3.01. Escrow Fund. The Escrow Agent has created on its books a special trust fund and irrevocable escrow to be known as the City of Sanger, Texas Utility System Revenue Bonds, Series 1977, Series 1982, and Series 1985 "Escrow Fund"). The Escrow Agent hereby agrees that upon receipt thereof it will deposit to the credit of the Escrow Fund the funds and the Escrowed Securities described in Exhibit "D" attached hereto. Such deposit, all proceeds therefrom, and all cash balances from time to time on deposit therein (a) shall be the property of the Escrow Fund, (b) shall be applied only in strict conformity with the terms and conditions of this Agreement, and (c) are hereby irrevocably pledged to the payment of the principal of and interest on the Refunded Obligations, which payment shall be made by timely transfers of such amounts at such times as are provided for in Section 3.02 hereof. When the final transfers have been made for the payment of such principal of and interest on the Refunded Obligations, any balance then remaining in the Escrow Fund shall be transferred to the Issuer, and the Escrow Agent shall thereupon be discharged from any further duties hereunder. Section 3.02. Payment of Principal and Interest. The Escrow Agent is hereby irrevocably instructed to transfer from the cash balances from time to time on deposit in the Escrow Fund, the amounts required to pay the principal of the Refunded Obligations at their respective maturity dates and interest thereon to such maturity dates in the amounts and at the times shown in Exhibit "C" attached hereto. Section 3.03. Sufficiency of Escrow Fund. The Issuer represents 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 sufficient to provide moneys for transfer to the Paying Agent at the times and in the amounts required to pay the interest on the Refunded Obligations as such interest comes due and the principal A the Refunded Obligations as the Refunded Obligations mature, all as more fully set forth in Exhibit " E" attached hereto. If, for any reason, at any time, the cash balances on deposit or scheduled to be on deposit in the Escrow Fund shall be insufficient to transfer the 0 amounts required by each place of payment (paying agent) for the Refunded Obligations to make the payments set forth in Section 3.02 hereof, the Issuer shall timely deposit in the Escrow Fund, from any funds that are lawfully available therefor, additional funds in the amounts required to make such payments. Notice of any such insufficiency shall be given promptly as hereinafter provided, but the Escrow Agent shall not in any manner be responsible for any insufficiency of funds in the Escrow Fund or the Issuer's failure to make additional deposits thereto. Section 3.04. Trust Fund. The Escrow Agent shall hold at ail times 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 shall always be maintained by the Escrow Agent as trust funds for the benefit A the owners of the Refunded Obligations; and a special account thereof shall at all times be maintained on the books of the Escrow Agent. The owners of the Refunded Obligations shall be entitled to the same preferred claim and first lien upon the Escrowed Securities, the proceeds thereof, and all other assets of the Escrow Fund to which they are entitled as owners of the Refunded Obligations. The amounts received by the Escrow Agent under this Agreement shall not be considered as a banking deposit by the Issuer, and the Escrow Agent shall have no right to title with respect thereto except as a constructive trustee and Escrow Agent under the terms of this Agreement. The amounts received by the Escrow Agent under this Agreement shall not be subject to warrants, drafts or checks drawn by the Issuer or, except to the extent expressly herein provided, by the Paying Agent. Section 3.05. Securityfor Cash Balances. Cash balances from time to time on deposit in the Escrow Fund shall, to the extent not insured by the Federal Deposit Insurance Corporation or its successor, be continuously secured by a pledge of direct obligations of, or obligations unconditionally guaranteed by, the United States of America, having a market value at least equal to such cash balances. ARTICLE IV LIMITATION ON INVESTMENTS Section 4.01. Investments. Except for the initial deposit in the Escrowed Securities, and except as provided in Section 4.02 hereof, the Escrow Agent shall not have any power or duty to invest or reinvest any money held hereunder, or to make substitutions of the Escrowed Securities, or to sell, transfer, or otherwise dispose of the Escrowed Securities. 5 Section 4.02. Substitution of Securities. At the written request of the Issuer, and upon compliance with the conditions hereinafter stated, the Escrow Agent shall utilize cash balances in the Escrow Fund, or sell, transfer, otherwise dispose of or request the redemption of the Escrowed Securities and apply the proceeds therefrom to purchase Refunded Obligations or direct obligations of, or obligations the principal of and interest on which is unconditionally guaranteed by, the United States of America 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 (a) the Escrow Agent shall have received a written opinion from a nationally 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 sufficient to provide for the full and timely payment of principal of, redemption premium on and interest on all of the remaining Refunded Obligations as they become due, taking into account any optional redemption thereof exercised by the Issuer in connection with such transaction; and (b) the Escrow agent shall have received the unqualified written legal opinion of nationally recognized bond counsel or tax counsel licensed in the State of Texas to the effect that such transaction will not cause any of the Refunded Obligations to be an "arbitrage bond" within the meaning of Section 103(c) of the Code. Section 4.03. Arbitrage. The Issuer and the Escrow Agent hereby covenant and agree that they shall never request the Escrow Agent to exercise any power hereunder or permit any part of the money in the Escrow Fund or proceeds from the sale of Escrowed Securities to be used directly or indirectly to acquire any securities or obligations if the exercise of such power or the acquisition of such securities or obligations would cause any Refunding Obligations or Refunded Obligations to be an "arbitrage bond" within the meaning of the Internal Revenue Code of 1986 or, if applicable, the Internal Revenue Code A 1954, as amended. ARTICLE V APPLICATION OF CASH BALANCES Section 5.01. In General. Except as provided in Section 3.02 and 4.02 hereof, no withdrawals, transfers, or reinvestment shall be made of cash balances in the Escrow Fund. ARTICLE VI RECORDS AND REPORTS Section 6.01. Records. The Escrow Agent will 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 money and Escrowed Securities deposited to the Escrow Fund and all proceeds thereof, and such books shall be available for in- spection at reasonable hours and under reasonable conditions by the Issuer and the owners A the Refunded Obligations. 0 r. Section 6.02, Reports. While this Agreement remains in effect, the Escrow Agent annually shall prepare and send to the Issuer a written report summarizing all transactions relating to the Escrow Fund during the preceding year, 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 for payments on the Refunded Obligations 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. ARTICLE VII CONCERNING THE PAYING AGENTS AND ESCROW AGENT Section 7.01. Representations. The Escrow Agent hereby represents that it has all necessary power and authority to enter into this Agreement and undertake the obligations and responsibilities imposed upon it herein, and that it will carry out all of its obligations hereunder. Section 7.02. Limitation on Liability. The liability of the Escrow Agent to transfer funds for the payment of the principal of and interest on the Refunded Obligations 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, neither the Escrow Agent nor the Paying Agent shall have any 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 Issuer promptly of any such occurrence. The recitals herein and in the proceedings authorizing the Refunding Obligations shall be taken as the statements of the Issuer and shall not be considered as made by, or imposing any obligation or liability upon, the Escrow Agent. The Escrow Agent is not a party to the proceedings authorizing the Refunding Obligations or the Refunded Obligations and is not responsible for nor bound by any of the provisions thereof (except as a place of payment and paying agent and/or a Paying Agent/Registrar therefor). In its capacity as Escrow Agent, it is agreed that the Escrow Agent need look only to the terms and provisions of this Agreement. The Escrow Agent makes no representations as to the value, conditions or sufficiency of the Escrow Fund, or any part thereof, or as to the title of the Issuer thereto, or as to the security afforded thereby or hereby, and the Escrow Agent shall not incur any liability or responsibility in respect to any of such matters. It is the intention of the parties hereto that the Escrow Agent shall never be required to use or advance its own funds or otherwise incur personal financial liability in the perfor- mance of any of its duties or the exercise of any of its rights and powers hereunder. The Escrow Agent shall not be liable for any action taken or neglected to be taken by it in good faith in any exercise of reasonable care and believed by it to be within the discretion or power conferred upon it by this Agreement, nor shall the Escrow Agent be responsible for the consequences of any error of judgment; and the Escrow Agent shall not be answerable except for its own action, neglect or default, nor for any loss unless the same shall have been through its negligence or want of good faith. Unless it is specifically otherwise provided 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 Issuer with respect to arrangements or contracts with others, with the Escrow Agent's sole duty hereunder being to safeguard the Escrow Fund, to dispose of and deliver the same in accordance with this Agreement. If, however, the Escrow Agent is called upon by the terms of this Agreement to determine the occurrence of any event or contingency, the Escrow Agent shall be obligated, in making such determination, 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 negligence. In determining the occurrence of any such event or contingency the Escrow Agent may request from the Issuer or any other person such reasonable additional evidence as the Escrow Agent in its discretion may deem necessary to determine any fact relating to the occurrence of such event or contingency, and in this connection may make inquiries of, and consult with, among others, the Issuer at any time. Section 7.03. Compensation. (a) Concurrently with the sale and delivery of the Refunding Obligations, the Issuer shall pay to the Escrow Agent, as a fee for performing the services hereunder and for all expenses incurred or to be incurred by the Escrow Agent in the administration of this Agreement, the sum of $3,000, the sufficiency of which is hereby acknowledged by the Escrow Agent. In the event that the Escrow Agent is requested to perform any extraordinary services hereunder, the Issuer hereby agrees to pay reasonable fees to the Escrow Agent for such extraordinary services and to reimburse the Escrow Agent for all expenses incurred by the Escrow Agent in performing such extraordinary services, and the Escrow Agent hereby agrees to look only to the Issuer for the payment of such fees and reimbursement of such 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 or extraordinary, as Escrow Agent, or in any other capacity, or for reimbursement for any of its expenses. (b) Concurrently with the sale and delivery of the Refunding Obligations the Issuer shall pay to the Escrow Agent the sum of $3,425, the sufficiency of which is hereby acknowledged by the Escrow Agent, for all future paying agency services of the Escrow Agent and all of the other places of payment (paying agents) for any of the Refunded Obligations; and the Escrow Agent warrants that such sum is sufficient for such purpose, and that it has confirmed such sufficiency, and received approval of the arrangements herein made, with all of said places of payment (paying agents). The Escrow Agent shall be obligated to make available to send the places of payment (paying agents) for the Refunded Obligations amounts from the Escrow Fund sufficient to pay when due the principal of and interest on any Refunded Obligations presented to them for payment. (c) Upon receipt of the aforesaid specific sums stated in subsections (a) and (b) of this Section 7.03 for Escrow Agent and paying agency fees, expenses, and services, the Escrow Agent shall acknowledge such receipt to the Issuer in writing. Section 7.04. Successor Escrow Agents. If at any time the Escrow Agent or its legal successor or successors should become unable, through operation or law or otherwise, to act as escrow agent hereunder, or if its property and affairs shall be taken under the control of any state or federal court or administrative body because of insolvency or bankruptcy or for any other reason, a vacancy shall forthwith exist in the office of Escrow Agent hereunder. In such event the Issuer, by appropriate action, promptly shall appoint an Escrow Agent to fill such vacancy. If no successor Escrow Agent shall have been appointed by the Issuer within 60 days, a successor may be appointed by the owners of a majority in principal amount of the Refunded Obligations then outstanding by an instrument or instruments in writing filed with the Issuer, signed by such owners or by their duly authorized attorneys4n- fact. If, in a proper case, no appointment of a successor Escrow Agent shall be made pur. suant to the foregoing provisions of this section within three months after a vacancy shall have occurred, the owner of any Refunded Obligation may apply to any court of competent jurisdiction to appoint a successor Escrow Agent. Such court may thereupon, after such notice, if any, as it may deem proper, prescribe and appoint a successor Escrow Agent. Any successor Escrow Agent shall be a corporation organized and doing business under the laws of the United States or the State of Texas, authorized under such laws to exercise corporate trust powers, having its principal office and place of business in the State of Texas, having a combined capital and surplus of at least $5,000,000 and subject to the supervision or examination by Federal or State authority. Any successor Escrow Agent shall execute, acknowledge and deliver to the Issuer and the Escrow Agent an instrument accepting such appointment hereunder, and the Escrow Agent shall execute and deliver an instrument transferring to such successor Escrow Agent, subject to the terms of this Agreement, all the rights, powers and trusts of the Escrow Agent hereunder. Upon the request of any such successor Escrow Agent, the Issuer shall execute any and all instruments in writing for more fully and certainly vesting in and confirming to such successor Escrow Agent all such rights, powers and duties. 0 The Escrow Agent at the time acting hereunder may at any time resign and be discharged from the trust hereby created by giving not less than sixty (60) days' written notice to the Issuer and publishing notice thereof, specifying the date when such resignation will take effect, in a newspaper printed in the English language and with general circulation in New York, New York, such publication to be made once at least three (3) weeks prior to the date when the resignation is to take effect. No such resignation shall take effect unless a successor Escrow Agent shall have been appointed by the owners of the Refunded Obligations or by the Issuer as herein provided and such successor Escrow Agent shall be a paying agent for the Refunded Obligations and shall have accepted such appointment, in which event such resignation shall take effect immediately upon the appointment and acceptance of a successor or Escrow Agent. Under any circumstances, the Escrow Agent shall pay over to its successor Escrow Agent proportional parts of the Escrow Agent's fee and its Paying Agent's fee hereunder. ARTICLE VIII MISCELLANEOUS Section 8.01. Notice. Any notice, authorization, request, or demand required or permitted to be given hereunder shall be in writing and shall be deemed to have been duly given when mailed by registered or certified mail, postage prepaid addressed to the Issuer or the Escrow Agent at the address shown on Exhibit "A" attached hereto. 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 (10) days prior notice thereof. Section 8.02. Termination of Responsibilities. Upon the taking of all the actions as described herein by the Escrow Agent, the Escrow Agent shall have no further obligations or responsibilities hereunder to the Issuer, the owners of the Refunded Obligations or to any other person or persons in connection with this Agreement. Section 8.03. Binding Agreement. This Agreement shall be binding upon the Issuer, the Escrow Agent and the Paying Agent and their respective successors and legal representa- tives, and shall inure solely to the benefit of the owners of the Refunded Obligations, the Issuer, the Escrow Agent, the Paying Agent and their respective successors and legal representatives. Section 8.04. Severability. In case any one or more of the provisions contained in this Agreement shall for any reason be held to be invalid, illegal or unenforceable in any respect, 10 such invalidity, illegality or unenforceability shall not affect any other provisions of this Agreement, but this Agreement shall be construed as if such invalid or illegal or unenforceable provision had never been contained herein. Section S.M. Texas Law Governs, This Agreement shall be governed exclusively by the provisions hereof and by the applicable laws of the State of Texas. Section 8.06. Time of the Essence. Time shall be of the essence in the performance of obligations from time to time imposed upon the Escrow Agent by this Agreement. Section 8.07. Amendments. This Agreement shall not be amended except to cure any ambiguity or formal defect or omission in this Agreement. No amendment shall be effective unless the same shall be in writing and signed by the parties thereto. No such amendment shall adversely affect the rights of the holders of the Refunded Obligations. EXECUTED as of the date first written above. CITY OF SANGER (SEAL) AMERITRUST Dallas, Texas L LT i TEXAS NATIONAL ASSOCIATION INDEX TO EXHIBITS Exhibit "A" Addresses of the Issuer and the Escrow Agent Exhibit "B" Description of the Refunded Obligations Exhibit "C" Schedule of Debt Service on Refunded Obligations Exhibit "D" Description of Beginning Cash Deposit (if any) and Escrowed Securities Exhibit "E" Escrow Fund Cash Flow EXHIBIT "A" ADDRESSES OF THE ISSUER, ESCROW AGENT AND RATING AGENCIES ISSUER City of Sanger 201 Bolivar Sanger, Texas 76266 ESCROW AGENT Ameritrust Texas National Association 1201 Elm Street Dallas, Texas 75221 RATING AGENCIES Moodys Investor Service Public Finance Rating Desk 99 Church Street New York, New York 10007 (Notice only of amendment or exercise of severability provision of the Escrow Agreement) with such notice to be made as soon as possible. EXHIBIT "B" DESCRIPTION OF THE REFUNDED OBLIGATIONS City of Sanger, Texas Utility System Revenue Bonds, Series 1977 maturities May 15, 1992 through May 15, 1996 City of Sanger, Texas Utility System Revenue Bonds, Series 1982 maturities May 15, 1992 through May 15, 1997 City of Sanger, Texas Utility System Revenue Bonds, Series 1985 maturities May 15, 1992 through May 15, 2001 Page 1 of 3 'J EXHIBIT "C" SCHEDULE OF DEBT SERVICE ON REFUNDED OBLIGATIONS REMAIMNG DEBT SERVICE PAYMENTS ON 1977 BONDS Total remaining Interest debt service Date Principal rate Interest payments 05-15-92 $1659000 Various $49602*50 $1699602*50 $1659000 $4,602*50 $169,6M50 Payment date OS-15-92 EXHIBIT "C" SCHEDULE OF DEBT SERVICE ON REFUNDED OBLIGATIONS REMAIMNG DEBT SERVICE PAYMENTS ON 1982 BONDS Principal $2809000 $2809000 Interest rate Various Interest $17,893.75 $17,893.75 Page 2 of 3 Total remaining debt service payments $297,893.75 $297,893.75 Page 3 of 3 EXHIBIT "C" SCHEDULE OF DEBT SERVICE ON REFUNDED OBLIGATIONS REMAINING DEBT SERVICE PAYMENTS ON 1985 BONDS Total remaining Payment Interest debt service date Principal rate Interest payments 05-15-92 $ 15,000 11.50% $ 379417.50 $ 529417.50 11-15-92 - - 369555.00 369555.00 05-15-93 15,000 11.50% 36,555.00 51,555.00 11-15-93 - - 35,692.50 35,692.50 OS-15-94 15,000 11.50% 35,692.50 50,692.50 11-15-94 - - 34,830.00 34,830.00 OS-15-95 750,000 Various 34,830.00 784,830.00 $795,000 $2519572.50 $190469572.50 II. A. EXHIBIT "D" ESCROW DEPOSIT I. CASH $40.39 UNITED STATES TREASURY STATE AND LOCAL GOVERNMENT SERIES CERTIFICATES OF INDEBTEDNESS Principal Amount $490,700 11,700 B. NOTES Principal Amount $ 27,200 11,900 27,300 12,200 762,500 Interest Rate 4.630% 4.740% Interest Rate 4.870% 5.280% 5.500% 5.670% 5.850% Maturity Date 05/15/92 11/15/92 Maturity Date 05/15/93 11/15/93 05/15/94 11/15/94 05/15/95 EXHIBIT "E" ESCROW FUND CASH FLOW Remaining debt service Total payments on cash receipts Refunded Refunded Bonds' debt from SLGS Bonds Cash service payment date balance Initial cash deposit December 18, 1991 $ - $ - $40.39 05-15-92 519,905.53 5199913.75 32.17 11-15-92 369580981 369555.00 57.98 05-15-93 51,576.23 519555.00 79.21 11-15-93 35,613.91 35,692.50 0.62 05-15-94 50t699.75 509692.50 7.87 11-15-94 349849900 349830.00 26.87 05-15-95 7849803.13 7849830.00 0.00 4t 1,514,028.36 4t1,514,068.75 GENERAL CERTIFICATE THE STATE OF TEXAS COUNTY OF DENTON CITY OF SANGER We, the undersigned officers of said City, hereby certify as follows: 1. That this certificate is executed for and on behalf of said City with reference to the issuance of the proposed CITY OF SANGER, TEXAS UTILITY SYSTEM REFUNDING AND IMPROVEMENT REVENUE BONDS, SERIES 1991, dated December 1, 1991, in the principal amount of $2,230,000. 2. That said City was incorporated, and is now operating and existing under the general laws of the State of Texas, with an Aldermanic form of government; and that the provisions of Title 28, Revised Civil Statutes of Texas, 1925, as amended, relating to cities and towns, including particularly Chapters 1 through 10 thereof, are applicable to, and have been lawfully accepted or adopted by said City. 3. That no litigation of any nature has ever been filed pertaining to, affecting, questioning, or contesting: (a) the ordinance which authorized said City's proposed Bonds described in paragraph 1 of this certificates (b) the issuance, execution, delivery, payment, security or validity of said proposed Bonds, (c) the authority of the City Council and the officers of said City to issue, execute and deliver said Bonds, (d) the validity of the corporate existence or charter of said City, or (e) the current tax rolls of said City; and that no litigation is pending pertaining, affecting, questioning, or contesting the current boundaries of said City. 5. That no petition was received protesting the issuance of the proposed Bonds. 6. That the City finds this refunding is necessary to refund the Refunded Bonds in order to change the bond covenants for the issuance of additional bonds and to permit the issuance of additional bonds for improvements to the Utility System, with a limited increase to the annual debt service requirements of the Issuer, with an approximate increase to the debt service of $784,403.38. 7. That the City's current water, sewer and electric rates are reflected in ordinances adopted by the City on September 16, 1991, copies of which are attached hereto. 8. That none of the revenues or income of said City's Utility System have been pledged or encumbered to the payment of any debt or obligation of said City or said System, except in connection with the aforesaid proposed Bonds and the following outstanding revenue bonds: Utility System Revenue Bonds, Series 1973, now outstanding in the aggregate principal amount of $40,0004, Utility System Revenue Bonds, Series 1976, now outstanding in the aggregate principal amount of $175,0006, * Utility System Revenue Bonds, Series 1977, now outstanding in the aggregate principal amount of $165,000, * Utility System Revenue Bonds, Series 1982, now outstanding in the aggregate principal amount of $280,000; * Utility System Revenue Bonds, Series 1985, now outstanding in the aggregate principal amount of $795,000. * being refunded by the proposed Bonds. 9. That said City is not in default in connection with any of the covenants, conditions, or obligations contained in the ordinances that authorized the issuance of the outstanding bonds listed above, and that each of the Funds, including the Interest and Sinking Fund and Reserve Fund created in said ordinances and maintained for the benefit of said outstanding bonds, contains the amount now required to be on deposit therein. 10. That the following is a true, full and correct schedule of the income and expenses A the Utility System for the past three years, to -wit: Income Exp Net Revenues $2,519,644 2,111,759 $ 407,885 $2,397,557 1,996,868 $ 243,495 SIGNED AND SEALED this the 18th day of November, 1991. City Secretary Mayor $2,262,863 1,541,670 $ 245,607 CITY OF SANGER, TEXAS ORDINANCE NO. #014-91 AN ORDINANCE OF THE CITY OF SANGER, DENTON COUNTY, TEXAS, AMENDING CHAPTER 10, SECTION 7, SUBSECTION A. PARAGRAPH 3, AND PARAGRAPH 4, AND SUBSECTION B, PARAGRAPH 3, AND PARAGRAPH 4, SUBSECTION C, PARAGRAPH 3, AND, PROVIDING FOR REPEAL OF ORDINANCES IN CONFLICT, PROVIDING A SEVERABILITY CLAUSE: AND, PROVIDING FOR AN EFFECTIVE DATE. BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF SANGER, TEh.4S; SECTION I THAT CHAPTER 10, SECTION 7, OF THE SANGER CODE OF ORDINANCES IS HERE BY AMENDED TO READ AS FOLLOWS: 0 B. C. RESIDENTIAL ELECTRIC RATE FacilitiesCharge: Energy Charge: Minimum Bi1L �8.00 per month $0.0579161 per K�VH SA�IALL COMMERCIAL ELECTRIC RATE FacilitiesCharge: Energy Charge: Minimum Bill: LARGE COMMERCIAL RATE 3} Rate Demand Charge: Energy Charge: Minimum BiIL per month 4t 10 .50 per month $0.06397 per KWH � 10.50 per month $49.00 for first 6 K�i'I-i � 7.83 per KWH $0.0224 per Ii��'H for all I��VH �49.00 per month r ORDINANCE # 14-91 ELECTRIC RATES PAGE 2 D. FUEL ADJUSTMENT The fuel adjustment charge for all K�,VH shall be �,d 154. SECTION II All Ordinances or parts of Ordinances in conflict herewith are, to the extent of such conflict, hereby repealed. SECTION III It is hereby declared to be the intention of the CitS► Council that the sections, paragraphs, sentences, clauses, and phrases of this Ordinance are severable and, if any phrase, clause, sentence, paragraph, or section of this Ordinance shall be declared unconstitutional by the valid judgment or decree of any court of competent jurisdiction, such unconstitutionality shall not affect any A the remaining phrases, clauses, sentences, paragraphs, and sections of this Ordinance, since the same would have been enacted by the City Council without the incorporation in this Ordinance of anv such unconstitutional phrase, clause, sentence, paragraph, or section. SECTION IV This Ordinance will take effect immediately from and after its passage and the publication of the caption as the law in such cases provides. PASSED AND APPROVED this 16th day of September 199 1, by the Cir<r Council of the City of Sanger, Texas. ATTEST: Rosalie Garcia Ciry Secretary APPROVED: Nel Armstrong Manor . CITY OF BANGER TEXAS ORDINANCE NO. AN ORDINANCE AMENDING CHAPTER 100 SECTION 4 OF THE CODE OF ORDINANCES OF THE CITY OF SANGER DENTON COUNTY, TEXAS, ENTITLED SEWER SERVICE RATES; ESTABLISHING RATES FOR MULTI -FAMILY DWELLINGS; PROVIDING FOR REPEAL OF ORDINANCES IN CONFLICT; PROVIDING A SEVERABILITY CLAUSE; PROVIDING A PENALTY CLAUSE; AND PROVIDING AN EFFECTIVE DATE. BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF SANGER DENTON COUNTY, TEXAS. SECi`ION 1 Chapter 10, Section 4 of the Sanger Code of Ordinances is hereby amended to read as follows. Section 4: Sewer Service Rates (1) Residential -Class A Class A customers shall include all residential type users including but not limited to, single-family residences, apartment units, trailer court units, duplexes, or any other service primarily intended for domestic or residential use. The City may include similar low volume users such as churches and small business offices or stores in Class A. All Class A customers of municipal wastewater facilities will be charged a minimum of $10 per monthly cycle and .00 per thousand gallons of metered water in excess of the first one thousand (1,000) gallons, but in no case to exceed $25.00 per month (2) Commercial - Class B Class B customers shall include commercial users such as but not limited to, restaurants, cafes, car washes, schools, hospitals, nursing homes, offices, hotels, motels, laundries, grocery stores, department stores and other commercial business operations as maybe identified as not a Class A type user. All Class B customers of municipal wastewater facilities shall be charged a minimum of $16.00 per monthly cycle ORDINANCE 18-91 SEWER SERV. RATES PAGE 2 aI d $.90 per thousand gallons oP metered water in excess of the first one thousand (1,000) gallons, but in no case to exceed $125 per month. (3) Multi -family Dwellings The amount due for multi -family dwellings shall be the Class A rate multiplied by the number of occupied dwelling units. Section II All Ordinances or parts of Ordinances in conflict herewith are, to the extent of such conflict, hereby repealed. Section III It is declared to be the intention of the City Council that the sections, paragraphs, sentences, clauses and phrases of this Ordinance are severable and if any phrase, clause, sentence, paragraph or section of this Ordinance shall be declared unconstitutional by the valid judgment or decree of any court of competent jurisdiction, such unconstitutionality shall not affect any of the remaining phrases, clauses, sentences, paragraphs, and sections of this Ordinance, since the same would have been enacted by the City Council without the Incorporation in this Ordinance of any such unconstitutional phrase, clause, sentence, paragraph or section. Section N Whenever in the Ordinance an act is prohibited or is made or declared to be unlawful or an offense or a misdemeanor or ORDINANCE # 16-91 SEWER SERV. RATES PAGE 3 whenever Al such Ordinance, the doing of an act is required or the failure to do any act is declared to be unlawful, the violation of any such provision shall be punishable by a fine not to exceed One Thousand ($1,000.00) Dollars; provided that no penalty shall be greater or less than the penalty provided for the same or similar offense under the laws of the State. Each day any violation of this Ordinance shall continue shall constitute a separate offense. Section V This Ordinance will take effect September 16, 1991. PASSED AND APPROVED this 16 th day of September , 1991, by the City Council of the City of Sanger, Denton County, Texas. Nei Armstrong Mayor, City of Sanger ATTEST: City Secretary CITY OF BANGER, TEXt1S QRDINANCE � 17-9 J. AN ORDINANCE Alt1ENDING CHAPTER 14. SECTION 3A OF THE CODE OF ORDINANCES OF THE CITY OF SANGER DENTON COUNTY, TEXAS, TO PROVIDE FOR A SCHEDULE OF WATER UTILITY RATES: PROVIDING FOR THE REPEAL OF ORDINANCES IN CONFLICT; PROVIDING A SEVERABILITY CLAUSE; PROVIDING A PENALTY CLAUSE, AND PROVIDING FOR AN EFFECTIVE DATE, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF BANGER. TEY.� B: SECTION I THE SCHEDULE OF FEES FOR CONSUMPTION OF WATER UTILIT'r FOR BOTH COIt'IMERCIAL AND RESIDENTIAL CUSTOMERS SHALL BE: � 10.00 Minimum per unit served for 0-1,000 gallons � 1.60 per thousand gallons 1.80 per thousand gallons 12.2n per thousand gallons 33.00 per thousand gallons eFfective September 16, 1991. SECTION II 1001-4999 ,. gallons 5,000- l4tfzM go V"*:% 1 �pon_29,999 gallons 30,000+ gallons AlI ordinances or parts of Ordinances in conflict hereof are, to the extent of such conflict, repealed SECTION III it is declared to be the intention of the Cite Council that the sections, paragraphs, sentences, clauses and phrases of this Ordinance are severable and should any of the same be declared null or void by any court of competent jurisdiction, such action shall not affect the remaining phrases, clauses, sentences, paragraphs or sections of this Ordinance. SECTION IV Failure to comply with any section or provision of this Ordinane� that is prohibited or is declared to be unlawfi�l or a misdemeanor, or whenever in this Ordinance, the commission of an act i required or the omission thereof is prohibited, the violation of such r ORDINANCE # 17-91 �'VATER UT. RATES PAGE 2 pI ovision shall be punishable by a fine not to exceed One Thousand Dollars ($1,000.00); provided however, that no penalty shall be greater or less than the penalty provided under the laws of the State of Texas. Each day any violation of this Ordinance shall continue shall constitute a separate offense. PASSED AND APPROVED this 16th dayof September 1991, by the City Council of the City of Sanger, Denton County, Texas. APPROVED: Mayor ATTEST: City Secretary ORDINANCE # 16-91 SEWER SERV. RATES PAGE 3 whenever in such Ordinance, the doing of an act is required or the failure to do any act is declared to be unlawful, the violation of any such provision shall be punishable by a fine not to exceed One Thousand ($1,000.00) Dollars; provided that no penalty shall be greater or less than the penalty provided for the same or similar offense under the laws of the State. Each day any violation of this Ordinance shall continue shall constitute a separate offense. Section V This Ordinance will take effect September 16, 1991. PASSED AND APPROVED this 16th day of September , 1991, by the City Council of the City of Sanger, Denton County, Texas. Nel Armstrong Mayor, City of Sanger ATTEST: City Secretary C.P.A. CER'I IF 1%I ATE THE STATE OF TEXAS COUNTY OF DENTON CITY OF SANGER I, the undersigned, Certified Public Accountant, for the City of Sanger, Texas, hereby state as follows. 1. That this certificate and report is executed with reference to the proposed CITY OF SANGER, TEXAS UTILITY SYSTEM REFUNDING AND IMPROVEMENT REVENUE BONDS, SERIES 1991, dated December 1, 1991, in the principal amount of $2,230,000 (the "Bonds"). 2. That the term "Net Earnings", as used in this Certificate, shall mean the annual gross revenues of the City's Waterworks, Sewer and Electric System (the "Utility System"), after deducting the expenses, operation and maintenance thereof, but not deducting expenditures which, under standard accounting practice, should be charged to capital expenditures, and excluding depreciation. 3. That the Net Earnings of said Utility System for the preceding fiscal year ending September 30, 1991, were equal to one and one half times the average annual requirements for the payment of principal and interest on the aforesaid proposed Bonds, and the outstanding bonds of the following issues of said City after delivery of the Bonds. 1991. Utility System Revenue Bonds, Series 1973, now outstanding in the aggregate principal amount of $4U,000; Utility System Revenue Bonds, Series 1976, now outstanding in the aggregate principal amount of $175,000. EXECUTED THIS THE C� day of November, 1991. Certified Public Accountant SUBSCRIBED AND SWORN TO BEFORE ME, this the day of November, �< STd�TE OF 1 L�XAo Commission Expiros 1.2€ 6 ,•,. I If 1 PD F4144 ft I m I+ OMB No@ 1535.0092 FAAA rr.I rf<, ,. "Dept of the Treasury EXP. 2/92 SUBSCRIPTION•POF3 PURCHASE AND �ISSUE.OF. (Rev 8/89) Bur. of the Public Debt f T ,. ■ r. a 1 ! aI ' 61 1 S. TREASURY SECURITIES e.FIF STATE AND LOCAL GOVERNMENT SERIES , ;' IF at _ r l . F. IV 61 ''"",' `.. TIME DEPOSIT SECURITIES I'tI off IF ` I Ft ' IF I QIF INITIAL] FINAL ❑ AMENDED J' A14 To. Federat Reserve Bank or Branch at `11cc 1t5 < exr 5 ... rit . r A. i P0r8uar4t 6 `the' provisions -of Department of the •Treasury `Circu/ar,';�ublic Debt Series Na3.72; current revision (31 CFR Part 344), the undersigned : f hereby subscribes for the purchase of the following securities. " ' 'IF I 3 ' United States Treasury Certificates of Indebtedness —State and Local Government Series pp�� //�� T r Ill (PD F 41442) TOTAL AMOUNT $ �tJ�ta Qr/ , '''••' b United States Treasury Notes , State-andom1Lr+cal Government Series ,.lo.... ' •. • , t�L �D " (PD F 41443) '"' TOTAL AMOUNT $ ;ot G United States Treasury Bonds —State and Local Government Series i , (PD F 4144 4) • i < ' ° + TOTAL AMOUNT $— r "F "'1 GRAND TOTAL :t. t i • Iof , c. ,,. v as described on the attached schedules, accompanied by PD 'F 41441; which are incorporated by reference' in this subscription o be issueas , 1� entries on the books of the Bureau of the Public Debt, Department'of the Treasury. VI w� 2 The undersigned certifies that this, subscription complies withoff food thFof)e certification requirements in 31 CFR Sea 344,3.VIA 3 The n1. requests that b6l4 %eni acc#66his be es� ished`for '` ` ' tV /'' �; Name 5 owner ( qtl ow0e4 , eJ�Q.S t s + 0 yr l •, • , i , t L , - 1 IF - �tth 4 ' <ry o 1 •l1 i"�ft+F t.. yi., t tX 'a},< . :L ,r,.�: i; 4 The undersigned: . t�IF I" ! . , ` 'at.0 submits payment in full herewith for theabovesecurities ;'as shown IF elow, IV e IF a.�, <FI6ry i+1 ' requests that issuiiflarlce be deferred until " g' 9 (not, to exceed by' more than 60'days the date on which this ' "" `5 �t f t, . e�Vtiption is received at a'Federal Reserve Bank orJBranc 6r, lvhere mailed by the postmark date on the envelope in which` it is`` k�0 to ifoo ed) °and I'm 11agrees to make payment' on that dateIt,,1 44, u e1/ "" 5 Tfie Undersigned agrees thato t interest and redemption payments made to the subscriber will be by Automated Clearing House (ACH) method. ' IF I , 6 Tkie Undersigned further certifies. that the following officiai(s),:by.title(s),are:authorized, subject the provisionsof the above referenced circular, :y '�ItVI IFif 0 IFto.request redemption prior to;tYtaturity,of the securities, (If naone has been so authorized„enter.the word '•'none'). .: i a ' It�ik :q rs-I II f t ''ti H <1 7 1 f r': >, < a 1 J A i}, t? � �' f ..1 i #i.l mom t " , , l(Jdi •'f tdG, + tt�ii 7 ,"i;};ya.-S,,.iJ-! ri'7.� f`.tr ... s - ,t. t.o or 7: If tha,undersigned is a financial Institution; it certifies that it has received the specific authorization of the government body to submit this sub• I,F-A " .� 'scription. Subscriptions submitted by an agent other than a commercial bank must be accompanied by evidence of the agent's authority to act. . ' IfIV I. Such evidence must describe• the nature and scope of the agent's authorization, specify the legal authority under which the agent was designated,IV F Ft IF.r and relate by its terms to the investment action being undertaken. Subscriptions unsupported by such evidence will not be accepted. X IF ���,� <^., r§ + Dated this ? day of ip V , 19 C! op, C�/lk e R TcZa 5 I IF a I if -For too 4 f Stat r Local v ment or Other iigiIF)ble Entity)IF y fJ I+t`Y (telephone —include Area Code) (Signatu and Title)' +11 For I 'Fit tI FOR USE OF FINANCIAL INSTITUTION IN TRANSMITTING PAYMENT FOR ABOVE SECURITY Iff.-of 4 It 114t..14t fly r u�.ar f*O if([he''issue date of the account;will be the date specified In this subscription,' provided payment therefor in readily available funds is received here ��s`.:.; IF Iwith or within the time' limitation specified above. -Where payment is submitted sgparately, i should be aca I ❑Check enclosed 1: :;'. ; J / Nam�of Ins itution l�ft?'It:K tRLCSt ALL T x Charge reserve clearing account on �a I lq City 1p�Other `� , (Date) Authorized 'signature and title y : -j f �i �R USE OF FEDERAL BANK :irt a 3 r .F; t ACCOUNTINUMBERS j` t; Volt 4�K <., - A of F„nka + C OPTS FromIF,. :'±: Through: ®�®� A IV �; fJOTES From: Through: IF ®NRAMIN E low m .F IF ' BONDS Fromi�l Through:'lot I FOR USE OF THE BUREAU OF THE PUBLIC DEBT Im IF ��... APPLICABLE ISSUE Date Credited INTEREST `DATE '• toTreas. Acct. RATE TABLE -- (Cannot be NQ Subsequent to Issue Date) Approved y F If By Date 4I to r ' Signature and Title fit { If For th'e notice required under the Privacy and Paperwork Reduction Acts, see the reverse side of this form.Ft h10 VIA.IF :.\'. �':. ..lot #w`• � �A�'`, ar .,'�� i 4'�� . ems. rle, i ee ee le �. ee 1,6 t , .,Z s > 5ee y:. y i Kt, rM11W111MMcs W �IM��MFIY W �� PD F 4144.2 SCHEDULE OF U.S. TREASURY ofiAl3 Na �s3s�ooez Dept. of the Treasury EXP. 2192 Bureau of the Public Debt CERTIFICATES OF INDEBTEDNESS- (Rev.Bl89) _ STATE AND LOCAL GOVERNMENT SERIES TIME DEPOSIT SECURITIES - The United States Treasury Certificates of Indebtedness —State and Local Government Series subscribed for on PD F 4144 and account information furnished on PD F 4144.1 to which this schedule is attached and incorporated, 'are requested to be issued and held in book -entry accounts on the books of the Department of the Treasury, as follows; ACCOUNT NUMBERS asalgned by FR8 PRINCIPAL AMOUNT INTEREST RATE ISSUE DATE MATURITY FOR TREASURY DATE DEPT. USE ONLY ,, . .,:�, . , � ,- .. ,; . �,: ::; . >�. ;. . �: �;: .,. ;:• ,� "'- 'TOTAL I�/D� "7''D� I ��, �s� i�� w 3a� :� � :�', rt :,; NdTE The interest rate �on each certificate may not exceed the maximum interest rate for Treasury securities of comparable terms of maturity, as shown in the Treasury rate table applicable to this issuance. The maturity dates specified must beat least 30 days but not , , =,;.. � � _ . i ,greater than one year from date of Issue. Interest well be paid at maturity with the principal t ���' ,, a .c ;,� .. `:: FRB CERTIFlCATION .'. � rr,rw � � : y ��_ � M OF ST E R IJJt:.AL GOVERNMENT BODY: • � �� � �> ' .,. .'' / ,� :ram r ,:�.\' is ]� SIGNATURE: I TITLE: �`. �; . , '_ < .h Y yy a .A..�Bureau of the Public Debt Copy '�� � ' �4 Y . PD F 4144.3 SCHEDULE OF U.S. TREASURY NOTES OMB NQ 1535-0092 Dept, of the Treasury D(P. 2192 Bureau of the Public Debt STATE AND LOCAL GOVERNMENT SERIES (Rev. 8/89) TIME DEPOSIT SECURITIES I The United States Treasury Notes —State and Local Government Series subscribed for on PD F 4144 and account information furnished on PD F 4144.1 to which this schedule is attached and incorporated, are requested to be issued and held in book -entry accounts on the books of the Department of the Treasury, as follows: ACCOUNT NUMBERS assigned by FRB PRINCIPAL AMOUNT INTEREST RATE ISSUE DATE MATURITY DATE FIRST INTEREST PAYMENT DATE FOR TREASURY DEPT, USE ONLY got TOTAL D Na'fE The interest rate on each note may not exceed the maximum interest rate for Treasury securities of comparable terms of maturity, as shown in the Treasury rate table applicable to this issuance. The maturity dates specified must be at least one year and one day but not greater than ten years from date of issue. Interest will be paid on the designated first interest payment date and semiannually thereafter, the final six months interest to be paid at maturity with the principal. FRB CERriFICATiON re The undersigned certifies that this form has been viewed and is in compliance with regulat(ons govern- ing U.S. Treasury securities —State and Local Govem- ment Series. Signature FRB Date Phone SIGNATURE TITLE: GOVERN curl FOR BUREAU USE ONLY: ACCOUNTS ESTABLISHED BY: Y= A. Bureau of the Pubilc Debt Copy ON PS For June 1990 Cn c nj v n - -- QAo N N 0 N < U T _ � m `- 0 « D �� Inc a T Z 5_ ` I \ - Picrsuant to the provisions of Department of the Treasury Circular, Public Debt Series No. 3-7"2 current revisioal, the undersigned hereby subscribes for United States Treasury Time Deposit Securities' -State and T.ocal Government Series, to be issued as entries on the books of the Bureau of the Public Debt, Department of the Treasury, in the total amount and with the issue date shown. below, which date is at Icast 15 calendar days after the date of this subscription: Total Principal Amount: $ i , 343, 500.00 Issue Date: December 1$, 1991 The undersigned agrees that the final subscription, together with the remittance, will be submitted on or before the issue date. Tax I.T]. Number. Issuer Name and Address: City of Sanger P. O. Box 7578 Sanger, Texas 7626"578 Financial Institution: Ameritrust Texas National Association, Dallas, Texas By: City Manager PAYING AGENT/REGISTRAR AGREEMENT THIS AGREEMENT entered into as of November 1, 1991 (this "Agreement"), by and between the City of Sanger, Texas (the "Issuer"), and Ameritrust Texas National Association, Dallas, Texas, a national banking association duly organized and existing under the laws of the United States of America (the "Bank"). RECITALS WHEREAS, the Issuer has duly authorized and provided for the issuance of its Utility System Refunding and Improvement Revenue Bonds, Series 1991 (the "Securities") in the aggregate principal amount A $2,230,000, such Securities to be issued in fully registered form only as to the payment of principal and interest thereon; and WHEREAS, the Securities are scheduled to be delivered to the initial purchasers thereof on or about December 18, 1991; and WHEREAS, the Issuer has selected the Bank to serve as Paying Agent/Registrar in connection with the payment of the principal of, premium, if any, and interest on said Securities and with respect to the registration, transfer and exchange thereof by the registered owners thereof; and WHEREAS, the Bank has agreed to serve in such capacities for and on behalf of the Issuer and has full power and authority to perform and serve as Paying Agent/Registrar for the Securities; NOW, THEREFORE, it is mutually agreed as follows: ARTICLE ONE APPOINTMENT OF BANK AS PAYING AGENT AND REGISTRAR Section 1.01. Appointment. The Issuer hereby appoints the Bank to serve as Paying Agent with respect to the Securities. As Paying Agent for the Securities, the Bank shall be responsible for paying on behalf of the Issuer the principal, premium (if any), and interest on the Securities as the same become due and payable to the registered owners thereof, all in accordance with this Agreement and the "Ordinance" (hereinafter defined). The Issuer hereby appoints the Bank as Registrar with respect to the Securities. As Registrar for the Securities, the Bank shall keep and maintain for and on behalf of the Issuer books and records as to the ownership of said Securities and with respect to the transfer and exchange thereof as provided herein and in the "Ordinance." The Bank hereby accepts its appointment, and agrees to serve as the Paying Agent and Registrar for the Securities. Section 1.02. Compensation. As compensation for the Bank's services as Paying Agent/Registrar, the Issuer hereby agrees to pay the Bank the fees and amounts set forth in Schedule A attached hereto. 1 In addition, the Issuer agrees to reimburse the Bank upon its request for all reasonable expenses, disbursements and advances incurred or made by the Bank in accordance with any of the provisions hereof (including the reasonable compensation and the expenses and disbursements of its agents and counsel). ARTICLE TWO DEFINITIONS Section 2.01. Definitions. For all purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires. "Acceleration Date" on any Security means the date on and after which the principal or any or all installments of interest, or both, are due and payable on any Security which has become accelerated pursuant to the terms of the Security. "Bank Office" means the principal corporate trust office of the Bank as indicated on the signature page hereof. The Bank will notify the Issuer in writing of any change in location of the Bank Office. "Fiscal Year" means the fiscal year of the Issuer, ending September 30. "Holder" and "Security Holder" each means the Person in whose name a Security is registered in the Security Register. "Issuer Request" and "Issuer Ordinance" means a written request or ordinance signed in the name of the Issuer by the Mayor of the Issuer, any one or more of said officials, delivered to the all "Legal Holiday" means a day on which the Bank is required or authorized to be closed. "Person" means any individual, corporation, partnership, joint venture, association, joint stock company, trust, unincorporated organization or government or any agency or political subdivision of a government. "Predecessor Securities" of any particular Security means every previous Security evidencing all or a portion of the same obligation as that evidenced by such particular Security (and, for the purposes of this definition, any mutilated, lost, destroyed, or stolen Security for which a replacement Security has been registered and delivered in lieu thereof pursuant to Section 4.06 hereof and the Ordinance). "Redemption Date" when used with respect to any Bond to be redeemed means the date fixed for such redemption pursuant to the terms of the Ordinance. "Ordinance" means the order of the governing body of the Issuer pursuant to which the Securities are issued, certified by the City Secretary of the Issuer or any other officer of the Issuer and delivered to the Bank. "Responsible Officer" when used with respect to the Bank means the Chairman or Vice -Chairman of the Board of Directors, the Chairman or Vice-chairman of the Executive Committee of the Board of Directors, the President, any Vice President, the Secretary, any Assistant Secretary, the Treasurer, any Assistant Treasurer, the Cashier, any Assistant Cashier, any Trust Officer or Assistant Trust Officer, or any other officer of the Bank customarily performing functions similar to those performed by any 2 of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject. "Security Register" means a register maintained by the Bank on behalf of the Issuer providing for the registration and transfer of the Securities. "Stated Maturity" means the date specified in the Ordinance the principal of a Security is scheduled to be due and payable. Section 2.02. Other Definitions. The terms "Bank," Issuer," and Securities (Security)" have the meanings assigned to them in the recital paragraphs of this Agreement. The term "Paying Agent/Registrar" refers to the Bank in the performance of the duties and functions of this Agreement. ARTICLE THREE PAYING AGENT Section 3.01. Duties of Paying Agent. As Paying Agent, the Bank shall, provided adequate collected funds have been provided to it for such purpose by or on behalf of the Issuer, pay on behalf of the Issuer the principal of each Security at its Stated Maturity, Redemption Date, or Acceleration Date, to the Holder upon surrender of the Security to the Bank at the Bank Office. As Paying Agent, the Bank shall, provided adequate collected funds have been provided to it for such purpose by or on behalf of the Issuer, pay on behalf of the Issuer the interest on each Security when due, by computing the amount of interest to be paid each Holder and preparing and sending checks by United States Mail, first class postage prepaid, on each payment date, to the Holders of the Securities (or their Predecessor Securities) on the respective Record Date, to the address appearing on the Security Register or by such other method, acceptable to the Bank, requested in writing by the Holder at the Holder's risk and expense. Section 3.02. Payment Dates, The Issuer hereby instructs the Bank to pay the principal of and interest on the Securities on the dates specified in the Ordinance. ARTICLE FOUR Section 4.01. Security Register -Transfers and Exchanges. The Bank agrees to keep and maintain for and on behalf of the Issuer at the Bank Office books and records (herein sometimes referred to as the "Security Register") for recording the names and addresses of the Holders of the Securities, the transfer, exchange and replacement of the Securities and the payment of the principal of and interest on the Securities to the Holders and containing such other information as may be reasonably required by the Issuer and subject to such reasonable regulations as the Issuer and the Bank may prescribe. All transfers, exchanges and replacement of Securities shall be noted in Lite Security Register. Every Security surrendered for transfer or exchange shall be duly endorsed or be accompanied by a written instrument of transfer, the signature on which has been guaranteed by an officer of a federal or state bank or a member of the National Association of Securities Dealers, in form satisfactory to the Bank, duly executed by the Holder thereof or his agent duly authorized in writing. The Bank may request any supporting documentation it feels necessary to effect a re -registration, transfer or exchange of the Securities. To the extent possible and under reasonable circumstances, the Bank agrees that, in relation to an exchange or transfer of Securities, the exchange or transfer by the Holders thereof will be completed and new Securities delivered to the Holder or the assignee of the Holder in not more than three (3) business days after the receipt of the Securities to be cancelled in an exchange or transfer and the written instrument of transfer or request for exchange duly executed by the Holder, or his duly authorized agent, in form and manner satisfactory to the Paying Agent/Registrar. Section 4.02. Certificates. The Issuer shall provide an adequate inventory of printed Securities to facilitate transfers or exchanges thereof. The Bank covenants that the inventory of printed Securities will be kept in safekeeping pending their use, and reasonable care will be exercised by the Bank in maintaining such Securities in safekeeping, which shall be not less than the care maintained by the Bank for debt securities of other political subdivisions or corporations for which it serves as registrar, or that is maintained for its own securities. Section 4.03. Form of Security Register. The Bank, as Registrar, will maintain the Security Register relating to the registration, payment, transfer and exchange of the Securities in accordance with the Bank's general practices and procedures in effect fTom time to time. The Bank shall not be obligated to maintain such Security Register in any form other than those which the Bank has currently available and currently utilizes at the time. The Security Register may be maintained in converted into written form within a reasonable time. Section 4.04. List of Security Holders, written form or in any other form capable of being The Bank will provide the Issuer at any time requested by the Issuer, upon payment of the required fee, a copy of the information contained in the Security Register. The Issuer may also inspect the information contained in the Security Register at any time the Bank is customarily open for business, provided that reasonable time is allowed the Bank to provide an up-to-date listing or to convert the information into written form. The Bank will not release or disclose the contents of the Security Register to any person other than to, or at the written request of, an authorized officer or employee of the Issuer, except upon receipt of a court order or as otherwise required by law. Upon receipt of a court order and prior to the release or disclosure of the contents of the Security Register, the Bank will notify the Issuer so that the Issuer may contest the court order or such release or disclosure of the contents of the Security Register. Section 4.05. Return of Cancelled Certificates. The Bank will, at such reasonable intervals as it determines, surrender to the Issuer, Securities in lieu of which or in exchange for which other Securities have been issued, or which have been paid. Section 4.06. Mutilated, Destroyed, Lost or Stolen Secures. The Issuer hereby instructs the Bank, subject to the applicable provisions of the Ordinance, to deliver and issue Securities in exchange for or in lieu of mutilated, destroyed, lost, or stolen Securities as long as the same does not result in an overissuance. In case any Security shall be mutilated, or destroyed, lost or stolen, the Bank, in its discretion, may execute and deliver a replacement Security of like form and tenor, and in the same denomination and bearing a number not contemporaneously outstanding, in exchange and substitution for such mutilated Security, or in lieu of and in substitution for such destroyed lost or stolen Security, only after (i) the filing by the Holder thereof with the Bank of evidence satisfactory to the Bank of the destruction, loss or theft of such Security, and of the authenticity of the ownership thereof and (ii) the furnishing to the Bank of indemnification in an amount satisfactory to hold the Issuer and the Bank harmless. All expenses and charges associated with such indemnity and with the preparation, execution and delivery of a replacement Security shall be borne by the Holder of the Security mutilated, or destroyed, lost or stolen. Section 4.07. Transaction Information to Issuer. The Bank will, within a reasonable time after receipt of written request from the Issuer, furnish the Issuer information as to the Securities it has paid pursuant to Section 3.01, Securities it has delivered upon the transfer or exchange of any Securities pursuant to Section 4.01, and Securities it has delivered in exchange for or in lieu of mutilated, destroyed, lost, or stolen Securities pursuant to Section 4.06. ARTICLE FIVE Section 5.01. Duties of Bank. The Bank undertakes to perform the duties set forth herein and agrees to use reasonable care in the performance thereof. Section 5.02. Reliance on Documents, Etc. (a) The Bank may conclusively rely, as to the truth of the statements and correctness of the opinions expressed therein, on certificates or opinions furnished to the Bank. (b) The Bank shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it shall be proved that the Bank was negligent in ascertaining the pertinent facts. (c) No provisions of this Agreement shall require the Bank to expend or risk its own funds or otherwise incur any financial liability for performance of any of its duties hereunder, or in the exercise of any A its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity satisfactory to it against such risks or liability is not assured to it. 5 (d) The Bank may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, note, security, or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties. Without limiting the generality of the foregoing statement, the Bank need not examine the ownership of any Securities, but is protected in acting upon receipt of Securities containing an endorsement or instruction of transfer or power of transfer which appears on its face to be signed by the Holder or an agent of the Holder. The Bank shall not be bound to make any investigation into the facts or matters stated in a resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, note, security, or other paper or document supplied by Issuer. (e) The Bank may consult with counsel, and the written advice of such counsel or any opinion of counsel shall be full and complete authorization and protection with respect to any action taken, suffered, or omitted by it hereunder in good faith and in reliance thereon. (f) The Bank may exercise any of the powers hereunder and perform any duties hereunder either directly or by or through agents or attorneys of the Bank. Section 5.03. Recitals of Issuer. The recitals contained herein with respect to the Issuer and in the Securities shall be taken as the statements of the Issuer, and the Bank assumes no responsibility for their correctness. The Bank shall in no event be liable to the Issuer, any Holder or Holders of any Security, or any other Person for any amount due on any Security from its own funds. Section 5.04. May Hold Securities. The Bank, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with the Issuer with the same rights it would have if it were not the Paying Agent/Registrar, or any other agent. Section 5.05. Moneys Held by Bank. The Bank shall deposit any moneys received from the Issuer into a trust account to be held in a fiduciary capacity for the payment of the Securities, with such moneys in the account that exceed the deposit insurance available to the Issuer by the Federal Deposit Insurance Corporation, to be fully collateralized, and to the extent practicable under the laws of the United States of America, to secure and be pledged as collateral for trust accounts until the principal and interest on such securities have been presented for payment and paid to the owner thereof. Payments made from such trust account shall be made by check drawn on such trust account unless the owner of such Securities shall, at its own expense and risk, request such other medium of payment. Subject to the Unclaimed Property Law of the State of Texas, any money deposited with the Bank for the payment of the principal, premium (if any), or interest on any Security and remaining unclaimed for three years after the final maturity of the Security has become due and payable will be paid by the Bank to the Issuer if the Issuer so elects, and the Holder of such Security shall hereafter look only to the Issuer for payment thereof, and all liability of the Bank with respect to such monies shall thereupon cease. If the Issuer does not elect, the Bank is directed to report and dispose of the funds in compliance with Title Six of the Texas Property Code, as amended. Section 5.06. Indemncation. To the extent permitted by law, the Issuer agrees to indemnify the Bank for, and hold it harmless against, any loss, liability, or expense incurred without negligence or bad faith on its part, arising out of or in connection with its acceptance or administration of its duties hereunder, including the cost and expense against any claim or liability in connection with the exercise or performance of any of its powers or duties under this Agreement. Section 5.07. Interpleader. The Issuer and the Bank agree that the Bank may seek adjudication of any adverse claim, demand, or controversy over its person as well as funds on deposit, in either a Federal or State District Court located in the State and County where either the Bank Office or the administrative offices of the Issuer is located, and agree that service of process by certified or registered mail, return receipt requested, to the address referred to in Section 6.03 of this Agreement shall constitute adequate service. The Issuer and the Bank further agree that the Bank has the right to file a Bill of Interpleader in any court of competent jurisdiction to determine the rights of any Person claiming any interest herein. Section 5.08. Depository Trust Company Services. It is hereby represented and warranted that, in the event the Securities are otherwise qualified and accepted for "Depository Trust Company" services or equivalent depository trust services by other organizations, the Bank has the capability and, to the extent within its control, will comply with the "Operational Arrangements," effective August 1, 1987, which establishes requirements for securities to be eligible for such type depository trust services, including, but not limited to, requirements for the timeliness of payments and funds availability, transfer turnaround time, and notification of redemptions and calls. ARTICLE SIX MISCELLANEOUS PROVISIONS Section 6.01. Amendment. This Agreement may be amended only by an agreement in writing signed by both of the parties hereto. Section 6.02. Assignment. This Agreement may not be assigned by either party without the prior written consent of the other. Section 6.03. Notices. Any request, demand, authorization, direction, notice, consent, waiver, or other document provided or permitted hereby to be given or furnished to the Issuer or the Bank shall be mailed or delivered to the Issuer or the Bank, respectively, at the addresses shown on the signature page of this Agreement. hereof. Section 6.04. Effect of Headings. The Article and Section headings herein are for convenience only and shall not affect the construction i7 r Section 6.05. Successors and Assigns. All covenants and agreements herein by the Issuer shalt bind its successors and assigns, whether so expressed or not. Section 6.Q6. Severability. In case any provision herein shall be invalid, illegal, or unenforceable, the validity, legality, and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. Section 6.07. Benefits of Agreement. Nothing herein, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder, any benefit or any legal or equitable right, remedy, or claim hereunder. Section 6.08. Entire Agreement. This Agreement and the Ordinance constitute the entire agreement between the parties hereto relative to the Bank acting as Paying Agent/Registrar and if any conflict exists between his Agreement and the Ordinance, the Ordinance shall govern. Section 6.09. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original and all of which shall constitute one and the same Agreement. Section 6.10. Termination. This Agreement will terminate (i) on the date of final payment of the principal of and interest on the Securities to the Holders thereof or (ii) may be earlier terminated by either party upon sixty (60) days written notice; provided, however, an early termination of this Agreement by either party shall not be effective until (a) a successor Paying Agent/Registrar has been appointed by the Issuer and such appointment accepted and (b) notice has been given to the Holders of the Securities of the appointment of a successor Paying Agent/Registrar. Furthermore, the Bank and Issuer mutually agree that the effective date of an early termination of this Agreement shall not occur at any time which would disrupt, delay or otherwise adversely affect the payment of the Securities. Upon an early termination of this Agreement, the Bank agrees to promptly transfer and deliver the Security Register (or a copy thereof), together with other pertinent books and records relating to the Securi- ties, to the successor Paying Agent/Registrar designated and appointed by the Issuer. The provisions of Section 1.02 and of Article Five shall survive and remain in full force and effect following the termination of this Agreement. Section 6.11. Governing Law. This Agreement shall be construed in accordance with and governed by the laws of the State of Texas. E: IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. AMERITRUST TEXAS NATIONAL ASSOCIATION Dallas, Texas By � Title [RANK SESLj CITY OF SANGER �— By , I Mayor [ISSUER SEAL] Attest: City Secretary � ''J SCIIEDULE OF FEFS FOR PAYINGAGENT/REGISTRAR Initial Fee $150 Annual Fee $450 These fees do not include out of pocket expenses which are billed at cost to the issuer. These fees also do not cover extraordinary services which are priced on the time and scope of our duties. THE STATE OF TEXAS X COUNTY OF TP.AVIS X X. Before me, the undersigned authority, on this date personally appeared Gloria P. Carter, who, having been by me duly sworn, upon her oath deposes and says; That she is editor of TEXAS BOND REPORTER, an official publication of Municipal Advisory Council of Texas, and is authorized to make this affidavit; that the attached is a true and correct copy of NOTICE OF REDEMPTION - CITY OF BANGER UTILITY SYSTEM REVENUE BONDS, SERIES 1985 was published in TEXAS BOND REPORTER on the following date(s), to wit: December 13, 1991. Sworn to and subscribed before me this the 13th day of December, A.D. 1991. Notary Public in and for the State of Texas My commission expires 940-94. TEXA S BOND REPOR TER NOTICE OF REDEMPTION NOTICE IS HEREBY GIVEN that the City of Sanger, in Denton County, Texas, has cal for redemption the outstanding bonds of the City as described as follows: led CITY OF SANGER, TEXAS UTILITY SYSTEM REVENUE BONDS, SERIES 1985, dated May 15, 1985, maturing May 15, 1996 through May 15, 2001, in the aggregate principal amount of $725,000 for the redemption price of the principal amount: thereof and accrued interest to call date of the Bonds so called for redemption at Ameritrust Texas National Association, Dallas, 5, 1995. Texas. Call date: May1 On May 15, 1995, interest on such Bonds shall cease to accrue and be payable, authorizing the THIS NOTICE is issued and given pursuant to the redemption provisions in the proceedin issuance of the aforementioned Bonds and in accordance with the recitals gs provisions of said Bonds. and NOTICE IS GIVEN that due and have proper arrangements habeen made for providing the place of payment of said Bonds called for redemption with funds sufficient to pay the amount of said Bonds and the interest thereon to the redemption date. In the event saidprincipal any of them are not presented for redemption by the date fixed for their redemption, theyBonds, or thereafter bear interest. not IN COMPLIANCE with the Interest and Dividend Tax Compliance Act of 1983, taxpayers making payments of principal due on debt securities may be obligated to withhold 20% tafrom remittance to Individuals who failed to provide such taxpayer with a valid taxpayer identification number. To avoid the imposition of this withholding tax, such bondholders should submit a certitlon taxpayer identification number when surrendering the bonds for redemption. fied NOTICE IS FURTHER GIVEN that the Bonds should be submitted to either of the following addresses, In Person Ameritrust Texas National Association 1900 Pacific Avenue, 14th Floor Dallas, Texas 75201 Nel Armstrong, Mayor City of Sanger PAID ADV. age 372 In Wr�tina Ameritrust Texas National Association P. O. Box 2320 Dallas, Texas 75221-2320 December 13, 1991 0 I, the undersigned, do hereby acknowledge receipt of the attached Notice of Redemption for City of Sanger, Texas Utility System Revenue Bonds, Series 1977, Series 1982 and Series 1985. SIGNED this the � day of �, 1991. AMERITRUST TEXAS NATIONAL ASSOCIATION Dallas, Texas By Title. A& STA« ICE PRESIDENT NOTICE OF REDEMPTION NOTICE IS HEREBY GIVEN that the City of Sanger, in Denton County, Texas, has called for redemption the outstanding bonds of the City as described as follows: CITY OF SANGER, TEXAS UTILITY SYSTEM REVENUE BONDS, SERIES 1977, dated May 15, 1977, maturing May 15, 1993 through May 15, 1996, in the aggregate principal amount of $145,000 for the redemption price of the principal amount thereof and accrued interest to call date of the Bonds so called for redemption at Ameritrust Texas National Association, Dallas, Texas. Call date: May 15, 1992. On May 15, 1992, interest on such Bonds shall cease to accrue and be payable. CITY OF BANGER, TEXAS UTILITY SYSTEM REVENUE BONDS, SERIES 1982, dated June 15, 1982, maturing May 15, 1993 through May 15, 1997, in the aggregate principal amount of $250,000 for the redemption price of the principal amount thereof and accrued interest to call date of the Bonds so called for redemption at Ameritrust Texas National Association, Dallas, Texas. Call date: May 15, 1992. On May 15, 1992, interest on such Bonds shall cease to accrue and be payable. THIS NOTICE is issued and given pursuant to the redemption provisions in the proceedings authorizing the issuance of the aforementioned Bonds and in accordance with the recitals and provisions of said Bonds. NOTICE IS GIVEN that due and proper arrangements have been made for providing the place of payment of said Bonds called for redemption with funds sufficient to pay the principal amount of said Bonds and the interest thereon to the redemption date. In the event said Bonds, or any of them are not presented for redemption by the date fixed for their redemption, they shall not thereafter bear interest. IN COMPLIANCE with the Interest and Dividend Tax Compliance Act of 1983, taxpayers making payments of principal due on debt securities may be obligated to withhold 20% tax from remittance to individuals who failed to provide such taxpayer with a valid taxpayer identification number. To avoid the imposition of this withholding tax, such bondholders should submit a certified taxpayer identification numb er when surrendering the bonds for redemption. NOTICE IS FURTHER GIVEN that the Bonds should be submitted to either of the following addresses: In Person Ameritrust Texas National Association 1900 Pacific Avenue, 14th Floor Dallas, Texas 75201 Nel Armstrong, Mayor City of Sanger In Writing Ameritrust Texas National Association P. O. Box 2320 Has, Texas 75221-2320 NOTICE OF REDEMPTION NOTICE IS HEREBY GIVEN that the City of Sanger, in Denton County, Texas, has called for redemption the outstanding bonds of the City as described as follows: CITY OF SANGER, TEXAS UTILITY SYSTEM REVENUE BONDS, SERIES 1985, dated May 15, 1985, maturing May 15, 1996 through May 15, 2001, in the aggregate principal amount of $725,000 for the redemption price of the principal amount thereof and accrued interest to call date of the Bonds so called for redemption at Ameritrust Texas National Association, Dallas, Texas. Call date: May 15, 1995. On May 15, 1995, interest on such Bonds shall cease to accrue and be payable. THIS NOTICE is issued and given pursuant to the redemption provisions in the proceedings authorizing the issuance of the aforementioned Bonds and in accordance with the recitals and provisions of said Bonds. NOTICE IS GIVEN that due and proper arrangements have been made for providing the place of payment of said Bonds called for redemption with funds sufficient to pay the principal amount of said Bonds and the interest thereon to the redemption date. In the event said Bonds, or any of them are not presented for redemption by the date fixed for their redemption, they shall not thereafter bear interest. IN COMPLIANCE with the Interest and Dividend Tax Compliance Act of 1983, taxpayers making payments of principal due on debt securities may be obligated to withhold 20% tax from remittance to individuals who failed to provide such taxpayer with a valid taxpayer identification number. To avoid the imposition of this withholding tax, such bondholders should submit a certified taxpayer identification number when surrendering the bonds for redemption. NOTICE IS FURTHER GIVEN that the Bonds should be submitted to either of the following addresses: In Person Ameritrust Texas National Association 1900 Pacific Avenue, 14th Floor Dallas, Texas 75201 Nel Armstrong, Mayor City of Sanger In Writing Ameritrust Texas National Association P. O. Box 2320 Has, Texas 75221-2320 AMERITRUST TEXAS NATIONAL ASSOCIATION, ESCROW AGENT ESCROW AGENT'S INCUMBENCY CERTIFICATE I, the undersigned officer of Ameritrust Texas National Association ("the Escrow Agent"), which is the Escrow Agent appointed in connection with the City of Sanger Utility System Refunding and Imporvement Revenue Bonds,Series 1991 DO HEREBY CERTIFY as follows. 1. The Escrow Agent is a national banking association duly organized under the national banking laws of the United States of America, is authorized to carry out corporate trust powers, and has full power and authority to enter into and perform the obligations of Escrow Agent under the Bond Escrow Agreement for the City of Sanger Utility System Refunding and Imporvement Revenue Bonds,Series 1991 and attached hereto as Exhibit A are true and correct copies of the documents evidencing the authority of the Escrow Agent to act as Escrow Agent under the Escrow Agreement, 2. Attached hereto is Exhibit A as set forth below: Exhibit A - Articles of Association of Ameritrust Texas National Association, as amended, Bylaws of Ameritrust Texas National Association, as amended; Certificate of Resolution dated February 10, 1988. and the attached Exhibits are true and correct copies of such documents and are in full force and effect as of the date hereof. 3. The Bond Escrow Agreement was duly executed and attested on behalf of the Escrow Agent by the following persons who are duly elected or appointed officers of the Escrow Agent holding the office set forth opposite such officer's names: NAME Stephen J. Blackstone J. Gary Jones OFFICE Assistant Vice President Vice President SIGNATURE IN WITNESS WHEREOF, Ameritrust Texas National Association, as Escrow Agent has caused this certificate to be executed and its seal affixed on this � day of ��'L�M/,3E2. , 1991. AMERITRUST TEXAS NATIONAL ASSOCIATION As Escrow Agent Title: Vice President [Seal] RESOLVED, that the Association hereby adopts the additional officer titles to transact the business of the Association: Vice Chairman of the Board of Directors Executive Vice President Senior Vice President First Vice President Vice President Assistant Vice President Trust Officer Assistant Trust Officer RESOLVED TH?T any; officer of the Association and any non -officer of the Association specifically authorized by the Board of Directors be, and each of them is, hereby severally authorized, on behalf of the Association, to enter into agreements and accept judicial appointments under which the Association shall act as executor, administrator, trustee, guardian, receiver, agent, custodian or in anv such other capacity as peraitted by law, to.'do anv and all acts reasonabl-v or apparently necessary in the performance of such functions, and to execute any and all written instruments in the assumption or performance of such functions pertaining to any real property, or interest- therein, stocks, bonds, or other property, held by this Association in any fiduciary capacity; and that all acts heretofore done by said respective officers and non -officers in the premises are ratified and confirmed, and RESOLVED THAT aay; officers of the Association be, aad each of them is, hereby severally authorized, on behalf of the Association, to affix the corporate seal to any document, as required or appropriate, and to attest the same; and that all acts heretofore done by said respective officers in the premises are ratified and confirmed. I, Edward J. Tognetti, Secretary of MTrust Corp, National Association certify that the above is a true copy of the resolution adopted by the Board of Directors of MTrust Corp, National Association on February 9, 1988, at which time a quorum was present and that such resolution has not been amended, modified or rescinded and remains in full force and effect. IN WITNESS WHEREOF, I have hereunto set may hand and affixed the seal of MTrust Corp, National Association on this the loth day of February, _1988. Edward MT ru s t j SEATS? J _ T�g nett i' Secretary Corp, National Association ARTICLES 01= ASSOCaAT'aUN AMERITRUST TEXAS NATIONAI- ASSOCIATION For tyre purpose of arganiri.ng an Association, to continue the business of MTrust Corp, National Association, as a national banking association, and to carry on the lousiness of banking, including the exercise of fiduciary powers, under the laws of the United States, the undersigned do enter into the following Articles of Association: FIRST: -I he t-i.tl.e of this Association shall. be Ameritrust Texas National Association, SECOND: The main office of the Association shall be :in the City of Dallas, County of Dallas, State of= Texas. The general business of the Association shall be.. conducted at: its main office, its branches and otherwise as'permitted by law. - I'I-IIRD: l-he Board of Di.rcctors of th.-i.s Association shall consist of noi: less than five nor more than twenty --five persons, the exact number of Directors within such rninirnurn and maxi.rrrurn 1.irni.ts to be fixed and determined from ti.rne to i:.irne by resolution of a rriajori.ty of the full. Board of Directors or by resolution of the shareholders at any annual or special meeting thereof. No person shall serve as a Director who does not meet. >uch qualifications as may be prescribed by law. LIf1lE!S5 �therr,kii.se provided by t:he 1.a(.krs of the Unj.ted States, any vacancy in the Board of Directors for any reason, :including an increase in the number tliereof, may be filled by action of the Board of )irectors. Tlrc! Board of Directors, by the af-t i.rrnai:ive vote oi= a najority of the full Board may between meetings of shareholders, Lncrease the membership of Lyre Board by not more than trio embers and by like vote appoint qualified persons t.o fia.:l. the jacancies creates: thereby. FOURTH: l.. l he annual rneetinq of L.hc sharchoalders for the i�l.ect..i.on �f O:ireci:ors and tire transact:. :ion of r��hai:ever other bus:i.ness roperly may be hroughL before said rnceti.nq shall. b e he Id at uch Lime and place as the. Board of-' Directors sha.1.1 des:igl-late in ccordance with Lhe 13y1<ar.,i sA17. elcct_i.ons shall. k>e Irel.d ccordinq to Such laurfui rules as may be prescribed by Else Board f Directors, �.. No111inat101"1S for electiont.o . the Board of Directors may be made by the Board of Directors or by any shareholder of any outstanding class of capital stock of the Association entitled to vote for election of directors. Nominations, other than those made by or on behalf of the existing management of the Association, shall be made in writing and shall be delivered or mailed to the President 'of the Association and to the Comptroller of the Currency, Washington, D. C., not less than 14 days nor more than 50 days prior to any meeting of shareholders called for the election of directors, provided, however, that if less than 21. days' notice of the meeting is given to shareholders, such nomination shall be mailed or delivered to the President of the Association and to the Comptroller of the Currency not .later than the close of business on the seventh day foll.ouring the day on which the notice of meeting was mailed, Such notification shall contain the following information to the extent known to the notifying shareholder: (a) the name and address of each proposed norninee; (b) the principal occupation of each proposed nominee; (c) the total. number of shares of capital stock of the Associat:ion that will be. voted for each proposed nominee; (d) the name and residence address of the notifying shareholder; and (e) the number of shares of capital stock of the Association owned by the notifying shareholder. Nominations not made in accordance herer,,rith may, in his or her discretion, be disregarded by the Chairman of the meeting, and upon his or her instructions, the vote tellers may disregard all votes cast for each such norninee. 1= :C 1= f fi 1.. The authorized arnot.inl-. of cap:i.i::a1. stock of tl�is Association shall be one mill.ion (1,000,OE)0) shares of common stock of the par value of one dollar ($,1..00) each. Said capital stock may be increase.(] or decreased from tame to t:imc!, in accordance with the provisions of the larxrs of the United States . 2. No holder of shares of the capital. stock of any class of tl�e Association sha1.1. 1-�ave any pre--ernpi:-i.ve or prcferenti.al right of subscription to any sharc,.s of any class of stock of the Association, whether now or hereafter ar.iLihorized, or to any obligations convertible into stock of the. Association, issued, or sold, nor any right of subscription to tiny thereof other than such, if any, as the Board of Directors, :in its discretion may From tirne to tirrne detcrmi.ne and at such price as the Board of Directors may from time to tune. fix. 3. The Association, at any ti.rnc and from ti.rnc to time, may authorize and i-ssue debt ok�ligations , whether or not subordinated, r= itllout tilc approval of the shareholders . S:CXI-N I . t he Board of Di.rec L.ors s I(A appoi.rrt. one of its rnernbers President of= this Association, who shall be Chairman of= the Board, unless the Board a[)points another director to be the Chairman. The Board of Directors shall have the ponder to appoi.rrt one or more Vice [)residents; and to appoint such other officers and employees as may be required to transact the business of this Association. 7_4 l"he Board of Directors shal.7. have the [)ewer to define the duties of the officers and employees of the Association; to fi.x the salaries to be paid to them; to dismiss there at pleasure; to require bonds from them and to fix the penalty thereof; to regulate the manner in which any increase of the capital of the Association shall be rnade; to manages and administer the business and affairs of the Association; to [flake all Bylaws that it may be lawful for them i_o make; and generally to do . and perform all acts that it may be legal. for a Board of Directors to do and perforirr. SEUEN11-I : -I he Board of=Directors shall. have -this pouter to change the location of the main office to any other place w:i.thin the limits of the City of Dallas, Texas, without the approval of the shareholders but: subject to the approval of the Comptroller of the Currency; and shall have the power to establish or change the .location of any branch or branches of the. Association to any other location (Ali.thout tlei e approval. of th(A s h a r e lei ol. d e r s but subject to the approval of the Comptroller c)f- the Currency. EI:GFI-(FI: The corporate exi.st:ence of t:lei _i.s Associat_i.olei slei al.1. continue. until i:errninated in accordance [�,r:i.i:h the laws o(- the United States . NINTH: The Board of Directors of this Assoc:i.at-i.on, or• any sharehol.dr--,r• or shareholders otAining, in the aggregate, at. :least 20 percent: of the stock of this Association, mi-. y call a special. rrree.ting of- shareholders at any time. Unless otherwise provided by the laws of the United States, a notice of the t.:i.rnc, place, and purpose of every arinu(a and spec:i.al rncet.ilei y of= the slei arehol.ders sha1.1. be giver[ by fi.r•st-c1.ass rnai.L, postage prepaid, mailed -at least ten days prior to the date of such meeting to each shareholder of record at his address as shown upon the books of this Association. 1 ENTH : 1. Indemnification. A. The Association may indemnify to the ful7.est extent permitted by law any person who is or was rnade, or threatened to be made, a party to any action, suit or* proceeding (whether civil, criminal, administrative or inuvestigative): (i) by reason of the fact that he is or was a director, advisory director, officer or employee of the Association; or (i:i.) by reason of any action alleged to have been taken or omitted by such person in the foregoing capacities. E3. Any person who is or was a director, advisory director, officer or employee of the: Association and who performs or performed services for any subsidiary of the Association, shall be deemed to be. an agent of such subsidiary and shall further be deemed to have performed such services at the request of the Association. The Association may indemnify such person to the fullest extant permitted by Iaw if he i.s or was made, or threatened to be made, a party to any action, suit or proceeding (whether civil, criminal, administrative or investigative): (i) by reason_ of the fact that he is or was an agent of or performed services for such subsidiary; or (ii.) by reason of any action alleged to have been taken or omitted by such person as such an agent or while performing services for such subsidiary. C. To the extent t.ha{= any person. referred- to in Paragraphs A and E3 above i�as been successful. on t.l'te rner i.i:.s or othcrw:i.se in defense of any action, sui.i_ or proceeding referred to therCIn or in defense of any claim, issue or matter therein such person shall be. indemnified against expenses, :inc1ud:ing attorneys' fees, actually and reasonably incurred by such person i.n connection therewith. D. As used in this Arti.cl.c -Imenth, t:I'ie t;,iord "subs idi.ary" means any entity of whici� L-he Assoc:iai:ion holds d:i.rect:ly, or indirectly through one or more subsidiaries, 80% or more of that entity's voting common shares, exclusive of any such shares held and voted in a fiduciary capacity. 2, I.xclusions . Notwithstanding the f>roui.si.ons of �>ection 1 above, no indemnification shoal be made. to any direct:or, advisory director, officer• or eml:)l.oyee of the ASSOCiatlnrl against expenses, penalties or other payments incurred in an adrnini.str�ative proceeding or action i.nstitut.ed by an appropriate bank regulatory agency which proceeding or action results in a final order assessing civil money perial.ti.cs or requiring affirmative action by such person in the form of payments to the Association. 3. Certain Procedures for Indemnification. A. Any indemnification under this Article Tenth shall bc. made by the Association unless the Association determines that the person seeking indemnification is not entitled to same. Such determination shall be made: (i) by the Board of Directors by a majority vote of a quorum consisting of directors who are not parties to such action, suit or proceeding; or (ii.) if such quorum is not obtainable, or, even if obtainable but a quorum of disinterested directors so directs, by independent legal counsel in a written opinion; or (iii) by the stockholders. B. Ar�y determination made pursuant'to Paragraph A of this Section 3 that a person is not entitled to indemnification shall be subject to de novo review by a court of competent jurisdiction. In any such review, the Association shall have the burden of proving by clear and convincing evidence that indemnification was not appropriate. All costs and expenses incurred by any person in connection with successfully establishing his riglei tee to indemnification pursuant to this Paragraph B of this Section 3, in whole or in part, shall also be indemnified by the Association. 4. Advance of Expenses. Fxpc�nses incurred by any person i.n defending an_y act-i.an, suit or proceeding may be paid by the Association in advance of the final. disposition of such action, suit or proceeding. A person receiving any such advance must repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the Association; and the Association, as a condition to making any advance, may require a written undertaking to so repay. 5. Other Rights, A. Tlei e indemnification provided by this Article Tenth shall. =-- not be deemed exclusive of any other rights to which a person seeking indemnification may be. entitled and shall be deemed to be. a contract between the. Association and the persons being provided indemnification hereunder. Any right to indemnification shall inure to the benefit of the legal representatives of the persons entitled to the same. Notwithstanding any other provisions of the Association's Articles of Association or Bylaws, no amendment to or repeal of the Articles of Association or Bylaws shall apply to or have any effect on the indemnification obligations of the ASSOCi.atlon for or with respect to any claim for indernnificaLion arising out of acts or orriissi.ons which occurred prior to the effective date of such amendment or repeal. B. The Association shall. have the power to dxecute and deliver written contraci_s of indernnification providing indernnification to the full. extent set forth in this Article 6 . Liak>ili.ty Insurance . The Association shall. have the power to purchase and maintain insurance on behalf of any person who is or was a director, advisory director, officer, employee or agent of the Association or any of its subsidiaries, or is or was serving at the request of the -Association as a director, advisory director, officer, employee or agent of an outside entity against any liability asserted against him and incurred by him in any such capacity or arising out of his status as such, whether or not the., Association would have the power to indemnify him against such liability under the provisions of these Articles of Association or the Association's Bylaws. Notwithstanding the foregoing, the Association shall not have the power to purchase and maintain insurance coverage for a formal order assessing civil money penalties against a director or employee of the Association. ELE:VEN1-H: These Arti.ca.es of Associ.ati.on may be arnended at. any regular or special rneetiny of the shareholders by the affirmative vote of the holders of tujo-thirds of the outstanding shares of capital stock of this Association, unless the vote of the holders of a greater ai,riount of stock -is required by law, and in that case by the vote of the holders of such greater amount. IN WI-INESS WHEREOF, we, the undersigned, being aa.-1 of the directors of Anieritrust Texas National Association, acting pursuant to Title 1.1 of the United States Code, and for the purposes of carrying on said business as a national barik:i.ng association under the. provisions of the United States Code, as amended, have hereunto set our hand as on the date set forth opposite our respective s:i.gn<:itures . 1y_p_c d_ Nam e Robert= H Cooley ;John -F. Cooney S:icinature Dat:c - ....-I___ _....... - - - --- Typed _Name James D. Kemp Lonnie L. Parr Robert S. Patterson James M. Spellings Edward J. Tognetti Eugene L. Weber 0738C-39 SiUnature AMERITRUST TEXAS NATIONAL ASSOCIATION BYLAWS ARTICLE I -Meeting %J Shareholders Section 1.1. Annual Meeting. The regular annual meeting of shareholders for the election of directors and the transaction of whatever other business as may properly come before the meeting, shall be held at the principal place of business of the Association, wherever located, or at such other place, and on such date and at such time, as may be fixed by the Board of Directors and stated in the notice of the meeting. Notice of such meeting shall be mailed, postage prepaid, at least ten days prior to the meeting date, addressed to each shareholder at his address appearing on the books of the Association. If, for any cause, an election of directors is not made on the scheduled meeting day, the Board of Directors shall order the election to be held on some subsequent day, as soon thereafter as practicable, according to the provisions of law; and notice thereof shall be given in the manner herein provided for the annual meeting. Section 1.2. Proxies. Shareholders may vote at any meeting of the shareholders by proxies duly authorized in writing, but no officer or employee of this Association shall act as proxy. Proxies shall be valid only for one meeting, to be specified therein, and any adjournments of such meeting. Proxies shall be dated and shall be filed with the records of the meeting. Section 1.3. uorum. One-third (1/3) of the outstanding capital stock, represented in person or by proxy, shall constitute a quorum of any meeting of shareholders, unless otherwise provided by law; but less than a quorum may adjourn any meeting, from time to time, and the meeting may be held, as adjourned, without further notice. A majority of the votes cast shall decide every question or matter submitted to the shareholders at any meeting unless otherwise provided by law or by the Articles of Association. ARTICLE II -Directors Section 2.1. Board of Directors. The Board of Directors (hereinafter referred to as the "Board") shall have power to manage and administer the business and affairs of the Association. Except as expressly limited by law, all corporate powers of the Association shall be vested in and may be exercised by said Board. Section 2.2. Organization Meeting. The Secretary, upon his certification of the result of any election, shall notify the Directors -elect of their election and of the time and place at which they are required to meet for the purpose of organizing the new Board and electing and appointing officers of the Association for the succeeding year. Such meeting shall be held on the day of the election or as soon thereafter as practicable, and, in any event, within thirty days thereof. If, at the time fixed for such meeting, there shall not be a quorum present, the Directors present may adjourn the meeting, from time to time, until a quorum is obtained. Section 2.3. Regular Meetings. Regular meetings of the Board of Directors shall be held at such time and place as may be fixed by the Directors, and such fixed meetings may be held without further notice. Any Director who is also an officer may fix a different place or date for any regular meeting fixed by the Directors, provided prior notice thereof is given to each Director. Section 2.4. Special Meetings. Special meetings of the Board of Directors may be called by any Director who is also an officer of the Association, or at the request of three (3) or more Directors, prior notice thereof to be given each Director. Section 2.5. uorum. A majority of the Directors shall constitute a quorum at any meeting, except when otherwise provided by laws but a lesser number may adjourn any meeting, from time to time, and the meeting may be held, as adjourned without further notice. Section 2.6. Vacancies. When any vacancy occurs among the Directors, the remaining members of the Board of Directors, in accordance with the laws of the United States, may appoint a Director to fill such vacancy at any regular meeting of the Board of Directors, or at a special meeting called for that purpose. ARTICLE III -Committees Section 3.1. Loan Committee. There shall be a Loan Committee composed of two Directors, appointed by the Board annually or more often. The Loan Committee shall have power to discount and purchase bills, notes and other evidences of debt, to buy and sell bills and exchange, to examine and approve loans and discounts, to exercise authority regarding loans and discounts, and to exercise, when the Board is not in session, all other powers of the Board that may lawfully be delegated. The Loan Committee shall keep minutes of its meetings, and such minutes shall be submitted at the next regular meeting of the Board of Directors at which a quorum is present, and any action taken by the Board with respect thereto shall be entered into the minutes of the Board. Section 3.2. Investment/Asset-Liability Committee. There shall be an Investment Committee composed of two Directors, appointed by the Board annually or more often. The Investment Committee shall have the power to ensure adherence to the investment policy, to recommend amendments thereto, to purchase and sell securities, to exercise authority regarding investments and to exercise, when the Board is not in session, all other powers of the Board regarding investment securities that may be lawfully delegated. The Investment Committee shall keep minutes of its meetings, and such minutes shall be submitted at the next regular meeting of the Board of Directors at which a quorum is present, and any action taken by the Board with respect thereto shall be entered in the minutes of the Board. Section 3.3. Examining Committee. There shall be an Examining Committee appointed by the Board annually or more often. The duty of that Committee shall be to examine at least once during each calendar year and within 15 months of the last examination the affairs of the Association or cause suitable examinations to be made by auditors responsible only to the Board of Directors and to report the result of such examination in writing to the Board at the next regular meeting thereafter. Such report shall state whether the Association is in a sound condition, and whether adequate internal controls and procedures are being maintained and shall recommend to the Board such changes in the manner of conducting the affairs of the Association as shall be deemed advisable. The Examining Committee shall be composed of not less than two Directors, ided, however, that during any period in which there are exclusive of any active officers; prov less than two qualifying Directors, the full Board of Directors shall compose this Committee. During such periods a Board member shall excuse himself from participating as a committee member in review of areas which he supervises. *Section 3.4. Trust Policy Committee. There shall be a Trust Policy Committee, consisting of a least three Directors of the Association, appointed by the Board. This Committee shall review the activities listed below of the Trust Departments of the Association subject to supervision by the Board, and report to the Board with respect thereto. No fiduciary account shall be accepted or closed without the approval of such Committee, and all investments of fiduciary funds shall be made, retained or disposed of only with its approval. The Committee shall, promptly after the acceptance of a fiduciary account for which the Association has investment responsibilities, review the assets thereof, to determine the advisability of retaining or disposing of such assets. The Committee shall conduct a similar review at least once during each calendar year thereafter, and within 15 months of the last such review. A report of all such reviews, together with the action taken as a result thereof, shall be noted in the minutes of the Committee. The Trust Policy Committee may appoint a sub -committees) to assist in the performance of these duties. Each such sub -committees) shall include at least one capable and experienced officer of the Association. Any sub -committees) so appointed shall have such powers and authority as may be properly delegated to it and shall conduct its affairs in the same manner as the Trust Policy Committee. Sub -committees) shall keep written minutes of their actions which shall be presented for ratification by the Trust Policy Committee. In addition to the above, the Trust Policy Committee shall exercise full power with respect to determination of the manner and procedures by which shares of Ameritrust Corporation stock held by the Association in fiduciary accounts administered by the Association shall be voted on each proposal to be voted on at any annual or special meeting of Ameritrust Corporation stockholders or any adjournment of any such meeting, subject to the Association's fiduciary obligations including obtaining directions, approvals or instructions where required by the governing instruments or by law. Section 3.5. Trust Audit Committee. The Board of Directors shall appoint a Trust Audit Committee which shall, at least once during each calendar year and within 15 months of the last such audit make suitable audits of the Trust Department or cause suitable audits to be made by auditors responsible only to the Board of Directors, and at such time shall ascertain whether the Department has been administered according to law, Part 9 of the Regulations of the Comptroller of the Currency, and sound fiduciary principles. The Trust Audit Committee shall be composed of not less than two Directors, exclusive of any active officers; provided, however, that during any period in which there are less than two qualifying Directors, the requirement that no active officer is eligible for membership on the committee shall be suspended. During such periods a committee member shall excuse himself from participating in review of areas which he supervises. Section 3.6. Other Committees. The Board of Directors may appoint, from time to time, from its own members, other committees of one or more persons, for such purposes and with such powers as the Board may determine. Section 3.7. Regular Meetings. Regular meetings of Committees shall be at such time and place as the members of a committee shall specify. Section 3.8. Special Meetings. Any committee established by these Bylaws may hold a special meeting at any time on the call of any member or on the call of the Chief Executive Officer, notice of the time and date of the meeting to be given to each member A the committee. Section 3.9. uorum. A quorum for any meeting of a committee established by these bylaws shall be at least one-half of the number of members of the committee. If at any meeting a quorum is not present, the Directors present may adjourn the meeting from time to time until a quorum is present, at which time the meeting may be held as adjourned, all without further notice. Section 3.10. Alternates. In the absence of any member of any committee established by these bylaws, the chairman of that committee or any Director who is also an officer of the Association may designate another Director to serve as a temporary substitute who shall be deemed to be a member of that committee for all purposes at that meeting; provided, that only a Director who is also an officer of the Association may so substitute for another director who is also an officer, and only a director who is not an officer may so substitute for another director who is not an officer. Section 3.11. Board Review. Any matter brought before any committee established by these bylaws shall be referred to the Board of Directors for review of action upon request of any member of the committee. Policies established by any such committee shall be reported to, and shall be subject to review by, the Board. Section 3.12. Dele ation. A In order to promote consistent human resources policies, practices and procedures, the Compensation and Organization Committee of Ameritrust Corporation is authorized to be responsible for all matters relating to human resources for the Association, including management succession, retention and development plans, and changes in management structure, and to fix all employee salaries and benefits and other compensation (direct or indirect) and to approve the plans related thereto; and to further delegate such authority as it determines is appropriate; provided that, with respect to the election or appointment of officers of the Association, such Committee shall have authority only to make recommendations to this Board with respect to individuals to be considered for positions at or above the level of senior vice president (or equivalent positions, including the Auditor) of the Association, with this Board retaining full authority to elect all officers but hereby also authorizing the Chief Executive Officer of the Association (or such officer(s) or committees) to which he may further delegate such authority) to appoint such officers as he determines are appropriate below such level. B. Each committee may, to the extent permitted by law, delegate responsibility to such person or persons as it may designate. ARTICLE IV -Officers and Employees Section 4.1. Election. The Board of Directors shall annually elect from its membership, a Chairman of the Board, a President and, if it deems advisable, one or more Vice Chairmen of the Board. The Chairman and the President may be the same person. It shall also elect annually, or from time to time as it may deem advisable, one or more Vice Presidents, a Secretary, a Comptroller, one or more Trust Officers, Managers of Branches and Departments and such other or additional officers as the Board of Directors may deem advisable. Section 4.2. Chairman of the Board. The Chairman of the Board shall preside at all meetings of the shareholders and the Board of Directors. The Chairman of the Board shall have such other duties and powers as may be assigned by the Board and if not the designated Chief Executive Officer, by the Chief Executive Officer. Section 4.3. President. The President shall preside at meetings of the shareholders and of the Board of Directors in the absence of the Chairman of the Board, or of a Vice Chairman of the Board designated by him so to act, and shall, subject to these bylaws, have the normal powers and duties of the office of President. The President shall have such other duties and powers as may be assigned by the Board and if not the designated Chief Executive Officer, by the Chief Executive Officer. Section 4.4. Chief Executive Officer. The Board of Directors shall designate the Chairman of the Board or the President as the Chief Executive Officer of the Association. Subject to these bylaws, the designated Chief Executive Officer shall have, and may delegate to other officers and employees, full executive power and authority over the business and property of the Association. Section 4.5. Other Officers. The other officers shall, subject to these bylaws, respectively have such power and duties as pertain to their several offices, or as may be conferred upon them by the Board or by the Chief Executive Officer. The Secretary shall additionally have and may exercise the power and duties pertaining to the office of Cashier. Section 4.6. Tenure. Except when a written employment contract specifies otherwise, each officer and employee of the Association is an employee at will who can be dismissed at the pleasure of the Chief Executive Officer or such other persons as may be designated by the Chief Executive Officer. ARTICLE V -Transactions With Directors and Officers Section 5.1. Overdrafts. No officer or employee of the Association shall willfully overdraw his or her checking account except to the extent, if any, permitted by a check credit, credit card or similar plan (so long as the aggregate liability does not exceed the highest amount permitted by law and no discrimination is made in favor of directors or officers of the Association in respect of interest rates) and except, in the case of a non - officer employee, with the written approval of an officer authorized by the Chief Executive Officer to grant such approvals. A report of overdrafts shall be made periodically pursuant to the direction of the Audit Committee. Section 5.2. Directorships. No officer or employee of the Association shall serve as a director or in any other official capacity with any corporation or other business enterprise without giving prior notice thereof to the Chief Executive Officer. ARTICLE VI -Stock and Stock Certificates Section 6.1. Transfers. Shares of stock shall be transferable on the books of the Association, and a transfer book shall be kept in which all transfers of stock shall be recorded. Every person becoming a shareholder by such transfer shall, in proportion to his shares, succeed to all rights of the prior holder of such shares. Section 6.2. Stock Certificates. Certificates of stock shall bear the signature of the President (which may be engraven, printed or impressed), and shall be signed manually or by facsimile process by the Secretary, Assistant Secretary, or any other officer appointed by the Board of Directors for that purpose, to be known as an Authorized Officer, and the seal of the Association shall be engraved thereon. Each certificate shall recite on its face that the stock represented thereby is transferable only upon the books of the Association properly endorsed. ARTICLE VII - Corporate Seal The Chairman of the Board, President, the Secretary, any Vice President, the Comptroller, or any Assistant Secretary, or other officer thereunto designated by the Board of Directors or pursuant to authorization by the Chief Executive Officer, shall have authority to affix the corporate seal to any document requiring such seal, and to attest the same. Such seal shall be substantially in the following form: ( Impression ) ( of ) ( Seal ) ARTICLE VIII -Miscellaneous Provisions Section 8.1. Fiscal Year. The Fiscal Year of the Association shall be the calendar year. Section 8.2. Execution of Instruments. All agreements, indentures, mortgages, deeds, conveyances, transfers, certificates, declarations, receipts, discharges, releases, satisfactions, settlements, petitions, schedules, accounts, affidavits, bonds, undertakings, proxies and other instruments or documents may be signed, executed, acknowledged, verified, delivered or accepted in behalf of the Association by the Chairman of the Board, or the President, or any officer at or above the level of Senior Vice President (or equivalent position), or the Secretary, or the Comptroller. Any such instruments may also be executed, acknowledged, verified, delivered or accepted in behalf of the Association in such other manner and by other officers and employees pursuant to authorization by the Chief Executive Officer. The provisions of this Section 8.2. are supplementary to any other provision of these bylaws. Section 8.3. Minute Records. The Articles of Association, the bylaws and minutes of the proceedings of the shareholders, the Board of Directors and of each committee established by these bylaws shall be recorded in appropriate minute books provided for the purpose. The minutes of each meeting shall be signed by the secretary or other officer appointed to act as secretary of the meeting. The original minutes shall ' be promptly submitted to the Association's Secretary. Section 8.4. Notice. Any notice of a meeting required or permitted to be given to a director pursuant to Articles II or III of these bylaws shall be given personally or mailed or telegraphed to the address of the director according to the records of the Secretary of the Association or left at that address or at the residence of the director, with any such notice by mail to be sent on or before the second banking day prior to the meeting and other notice to be delivered or given prior to the day of the meeting. Notice may be waived either before or after the meeting, and the presence of a director at a meeting shall constitute the director's waiver of notice. Section 8.5. Legal Holidays. If the day set for any regular meeting of the Board of Directors or any committee established by these bylaws shall fall on a holiday observed by the Association, the meeting shall be held without further notice at the same time and place on the next banking day unless another date, time or place shall be duly designated. Section 8.6. Depositaries. All funds belonging to the Association shall be deposited in the name of the Association and only with depositaries approved by the Board of Directors. At least once each year a list of all such depositaries shall be submitted to the Board of Directors. Section 8.7. Capital Accounts and Reserves. Any charge or credit to any capital account of the Association or to its reserve for contingencies, allowances for loan losses or any similar reserve shall be reported to the Board of Directors not later than the calendar month next following the month in which such charge or credit was entered. Section 8.8. Proceedings. Criminal or tort proceedings or any involuntary petition against a debtor in any bankruptcy or other proceedings shall only be initiated by or on behalf of the Association pursuant to authorization of the Chief Executive Officer. ARTICLE IX -Corporate EmergencX Section 9.1 Notwithstanding other provisions of these bylaws, the following special rules may be used if the President of the United States or the Governor of the State of Texas or any person lawfully -exercising the power and discharging the duty of such offices, proclaims that an attack on the United States or any nuclear, atomic, or other disaster has caused an emergency for association and until such emergency is terminated by proclamation: (a) special meetings of the directors may be called, and a different place, time, or date for any regular meeting of the directors may be fixed, by any director or any of the two most senior officers, who need not be directors, or the Secretary; (b) notice of the time and place of each special, and the prior notice specified in Section 2.4. for a different place, time or date for any regular meeting of the directors shall be given to such of the directors as it may be feasible to reach at the time and by such means of communication, written or oral, personal or mass, as may be practicable at that time; (c) the director or directors. present at any regular meeting of the directors, or at any special meeting of the directors which has been duly called, and for which any required notice has been duly given, if less than a quorum, shall, together with the two most senior officers who need not be directors, and without further notice, meet as an executive committee hereby fully empowered to exercise, to the extent permitted by law, all of the powers and authority of the Board of Directors; (d) in the event that none of the directors attends a meeting of the directors, or a special meeting of the directors which has been duly called, and for which any required notice has been duly given, the officers of the Association who are present, not exceeding three, in order of rank, shall meet as an executive committee hereby fully empowered to exercise, to the extent permitted by law, all of the powers and authority of the Board of Directors; (e) if the Chief Executive Officer dies, is missing, or for any other reason is temporarily or permanently incapable of discharging the duties of office, the next ranking officer who is available shall assume the duties and authority of the office of the Chief Executive Officer, and shall also assume the duties and authority of the office of the President if such next ranking officer is not the President, until such time as the directors shall otherwise order; and (f) for purposes of this Article, rank of officers shall be determined within the same office by priority in time of the first election to office or, if two or more persons were first elected to the office at the same time, by seniority in age. ARTICLE X -Reservation of Power and Bvlaws Section 10.1. Reservation of Power. Nothing in these bylaws shall be construed to limit the authority of the Board of Directors. Section 10.2. Inspection. A copy of the bylaws, with all amendments thereto, shall at all times be kept by the Secretary of the Association, and shall be open for inspection to all shareholders, during banking hours. Section 10.3. Amendments. These bylaws maybe amended, supplemented, repealed or otherwise changed at any meeting of the Board %J Directors by an affirmative vote of a majority of the then members of the Board of Directors or without meeting by the written consent of all the then members of the Board of Directors. • tRev. t-9t51 OFFICE OF COMPTROLLER X OF THE STATE OF TEXAS X I, John Sharp, Comptroller of Public Accounts of the State of Texas, do hereby certify that the attachment is a true and correct copy of the opinion of the Attorney General approving the City of Sanger, Texas Utility System Refunding and Improvement Bonds, Series 1991 numbered R-1 g 2 , 230, 000 dated issuer, interest various in this office, on the 16 appears of record on page Register Number 53610 December 1 of the denomination of as authorized by percent, under and by authority of which said bonds were registered day of December , 19 91 as the same Bond Register of the Comptroller's Office, Vol. 93 , ,Given under my hand and seal of office, at Austin, Texas, the day of December 19 91 16 / JOHN SHARP Comptroller of Public Accounts State of Texas ®luce of [PC 1� tttotnep Venerat DAN MORAL ATTORNEY GENER December 16, 1991 THIS IS TO CERTIFY that the City of Sanger, Texas (the "Issuer") has submitted to me City of Sanger, Texas Utility System Refunding and Improvement Revenue Bond, Series 1991 (the "Bond"), in the principal amount of $2,230,000 for approval, The Bond is dated December 1, 1991, numbered R-1 and was authorized by an Ordinance of the Issuer passed on November 18, 1991 (the "Ordinance") . I have examined the law and such certified proceedings and other papers as I deem necessary to render this opinion. As to questions of fact material to my opinion, I have relied upon representations of the Issuer contained in the certified proceedings and other certifications of public officials furnished to me without undertaking to verify the same by independent I nvestigation. I express no opinion relating to the Official Statement or any other offering material relating to the Bond. Based on my examination, I am of the opinion, as of the date hereof and under existing law, as follows (capitalized terms, except as herein defined, have the meanings given to them in the Ordinance): (1) The Bond has been issued in accordance with law and is a valid and binding special obligation of the Issuer. (2) In accordance with the provisions of the law, including an Escrow Agreement dated December 1, 1991, firm banking arrangements have been made for the discharge and final payment or redemption of the obligations being refunded upon deposit of an amount sufficient to pay said obligations when due. (3) The Bond, together with other outstanding revenue bonds of the Issuer, is payable from and secured by a first lien on and pledge of the Net Revenues of the Issuer's Utility System. (4) The owner of the Bond shall never have the right to demand payment of the Bond out of any funds raised or to be raised by taxation. 512/463-2100 P.O. BOX 12548 AUSTIN, TEXAS 78711-2548 AN E(2� Ar. E;�rPLorniENr c�rrotrr�NrrY Enirr.c�YER City of Sanger, Texas Utility System Refunding and Improvement Revenue Bond, Series 1991 - $21230,000 Therefore, the Bond is approved. The Comptroller is instructed that he may register the Bond without the cancellation of the underlying securities being refunded thereby. Attorney General of the State of Texas No. 25470 Book No. 90 spc \.1�1 Rev. OFFICE OF COMPTROLLER t OF THE STATE OF TEXAS j Arlene Chisholm ❑ Bond Clerk /U Assistant Bond Clerk in the office of the Comptroller of the State of Texas, do hereby certify that, acting under the direction and authority of the Comptroller on the 16 day of December signed the name of the Comptroller to the certificate of registration endorsed upon the t991 I City of Sanger, Texas Utility System Refunding and Improvement Bonds, Series 1991 numbered R-1 ,dated December 1, 1991 ihaj.{n signing the certificate of registration I used the following signature: IN WITNESS WHEREOF I have executed this certificate this 16 December day of and I, John Sharp, Comptroller of Public Accounts of the State of Texas, certity that the person who has signed the above certificate was duly designated and appointed by me, under authority vested in me by law, with authority to sign my name to all certificates of registration, and/or cancellation of bonds required by law to be registered and/or cancelled by me, and was acting as such on the date first mentioned in this certificate, and that the bonds described in this certificate have been duly registered in the office of the Comptroller, as appears of record on page 490 of volume 93 under Registration Number 53610 in the Bond Register kept in the office of the Comptroller. GIVEN under my hand and seal of office at Austin, Texas, this 16 day of December JOHN SHARP Comptroller of Public Accounts of the State of Texas Legal tilt. TEX. REV. CIV. STAT. ANN. Art. 4362 (19M SIGNATURE IDENTIFICATION AND NO- LITIGATION CERTIFICATE THE STATE OF TEXAS COUNTY OF DENTON CITY OF SANGER We, the undersigned officers of the City of Sanger hereby certify as follows: (a) That this certificate is executed and delivered with reference to CITY OF SANGER, TEXAS UTILITY SYSTEM REFUNDING AND IMPROVEMENT REVENUE BOND, SERIES 1991, dated December 1, 1991, in the principal amount of $2,230,000, being a single fully registered Bond payable in installments to the registered owner thereof (the "Initial Bond") and the Bonds (the "Definitive Bonds") initially made available by the Issuer for completion and exchange for the Initial Bond. (b) That each of us manually signed the Initial Bond. (c) That each of us signed the Definitive Bonds by causing facsimiles of our manual signatures to be printed or lithographed on each of the Definitive Bonds, and we hereby adopt said facsimile signatures as our own, respectively, and declare that said facsimile signa- tures constitute our signatures the same as if we had manually signed each of the Definitive Bonds. (d) That the Initial Bond is, and the Definitive Bonds are, substantially in the form, and each of them has been duly executed and signed in the manner, prescribed in the order authorizing the issuance thereof. (e) That at the time we so executed and signed the Initial Bond and the Definitive Bonds (collectively the "Bonds") we were, and at the time of executing this certificate we are, the duly chosen, qualified, and acting officers indicated therein, and authorized to execute and sign the same. (f) That no litigation of any nature has been filed or is now pending to restrain or enjoin the issuance or delivery of any of the Bonds, or which would affect the provision made for their payment or security, or in any manner questioning the proceedings or authority concerning the issuance of the Bonds, and that so far as we know and believe no such litigation is threatened. (g) That neither the corporate existence nor boundaries of the Issuer is being contested, that no litigation has been filed or is now pending which would affect the authority of the officers of the Issuer to issue, execute, sign, and deliver any of the Bonds, and that no authority or proceedings for the issuance of any of the Bonds have been repealed, revoked, or rescinded. (h) That we have caused the official seal of the Issuer to be impressed, or printed, or lithographed on each of the Bonds, and said seal on each of the Bonds has been duly adopted as, and is hereby declared to be, the official seal of the Issuer. EXECUTED and delivered this MANUAL SIGNATURES The signatures of the officers subscribed above are hereby certified to be true and genuine. The Gainesville National Bank ' : i OFFICIAL TITLES Mayor City Secretary Bank LIZ Adhorizied Officer (BANK SEAL) TREASURER'S RECEIPT THE STATE OF TEXAS COUNTY OF DENTON CITY OF BANGER The undersigned hereby certifies as follows: , (a) That this certificate is executed and delivered with reference to CITY OF BANGER, TEXAS UTILITY SYSTEM REVENUE REFUNDING AND IMPROVEMENT REVENUE BOND, SERIES 1991, dated December 1, 1991, in the principal amount of $2,230,000, being a single fully registered Bond payable in installments to the registered owner thereof. (b) That the undersigned is the duly chosen, qualified, and acting Treasurer of the Issuer of said Bond. (c) That said Bond has been duly delivered to the purchaser thereof, namely: SOUTHWEST SECURITIES INCORPORATED (d) That said Bond has been paid for in full by said purchaser concurrently with the delivery of this certificate, and the Issuer of said Bond has received, and hereby acknowledges receipt of, the agreed purchase price for said Bond and accrued interest to the date of delivery. EXECUTED and delivered �°�� � z�;{= lICdSUICi CITY OF BANGER DENTON COUNTY, TEXAS CASH FLOW AND YIELD VERIFICATION REPORT December 18, 1991 December 189 1991 City of Sanger P.O. Box 7578 Sanger, Texas McCall Parkhurst &Horton 717 North Harwood, Suite 900 Dallas, Texas Ameritrust Texas National Association P.O. Box 2320 Dallas, Texas Southwest Securities Incorporated 1201 Elm Street, Suite 4300 Dallas, Texas 500 Pillsbury Center Minneapolis, MN 55402-1459 612 332-0001 FAX 612 332-8361 Grant IHOMWn Ma Accountants and Management Consultants The U.S. Member Firm of Grant Thornton International Pursuant to the request of Southwest Securities Incorporated (the "Underwriter") on behalf of the City of Sanger, Texas (the "City"), we have independently verified the arithmetical accuracy of certain mathematical calculations relating to the City's pro- posed issuance of $2,230,000 Utility System Refunding and Improvement Revenue Bonds, Series 1991, dated December 1, 1991 (the "Refunding Bonds"). The Refunding Bonds are being issued in part to advance refund three of the City's out- standing series of bonds, as summarized below: (collectively referred to as the funded Bonds"): Description Utility System Revenue Bonds, Series 1977, dated May 15, 1977 (the "1977 Bonds") Utility System Revenue Bonds, Series 1982, dated June 15, 1982 (the "1982 Bonds") Utility System Revenue Bonds, Series 1985, dated May 15, 1985 (the "1985 Bonds") Amount outstanding as of 12-18-91 Maturities being refunded Amount being refunded Optional redemption date and price 1992 to 5-15-92 $1659000 1996 $1659000 At Par 1992 to 5-15-92 $280,000 1997 $2809000 At Par 1992 to 5-15-95 $795,000 2001 $795,000 At Par City of Sanger, Texas McCall, Parkhurst & Horton Ameritrust Texas National Association Southwest Securities Incorporated December 18, 1991 Page 2 VERIFICATION OF ESCROW ACCOUNT CASH SUFFICIENCY (Exhibit A) The Underwriter provided us with schedules summarizing future escrow account cash receipts and disbursements which indicate that there will be sufficient cash available in the escrow account to pay the remaining principal of and interest on the Refunded Bonds, assuming the maturities being refunded will be redeemed at par on the optional redemp- tions dates as set forth above. We independently calculated future escrow account cash receipts and disbursements using the following documents provided by the Underwriter: • Initial subscription letter, dated November 18, 1991, and final subscription forms used to acquire certain United States Treasury Securities - State and Local Gov- ernment Series (the "SLGS"), which, together with an initial cash deposit of $40.39, will be deposited to the escrow account on December 18, 1991; • Form PD 4262 Department of the Treasury -Bureau of the Public Debt -SLGS Table for Use on November 18, 1991; • Ordinances authorizing the issuance of the 1977 Bonds, 1982 Bonds, and 1985 Bonds, along with the Notice of Redemption insofar as the Refunded Bonds are described as to the maturity and interest payment dates, annual principal amounts, annual interest rates, and optional redemption dates and prices. The results of our independent calculations, which are attached hereto, were compared to the schedules provided by the Underwriter and, based on this comparison, we have concluded that the schedules related to the escrow account cash flow as provided by the Underwriter are arithmetically accurate. We have also concluded that (1) the interest rates on the SLGS to be deposited to the escrow account on December 18, 1991 are equal to or less than the maximum allowable interest rates as summarized on Form PD 4262 for Use on November 18, 1991; and (2) the terms (i.e. the par amount, interest rate, maturity date, issuance date, and first receipt date) of the SLGS to be acquired on December 18, 1991, summarized on Exhibit A-1, agree to those terms set forth in the final SLGS subscription forms. VERIFICATION OF YIELDS The Underwriter provided us with schedules less than the yield on the Refunding Bonds. assumed settlement date of December 18, compounded semiannually, which indicate that the yield on the SLGS is These schedules were prepared based on an 1991, using a 360-day year with interest City of Sanger, Texas McCall, Parkhurst & Horton Ameritrust Texas National Association Southwest Securities Incorporated December 18, 1991 Page 3 We independently calculated (1) the yield on the Refunding Bonds using the Official Statement provided by the Underwriter insofar as the bonds are described as to the maturity and interest payment dates, annual principal amounts, annual interest rates and issue prices to the public, and (2) the yield on the SLGS. The results of our calculations, based on the aforementioned assumptions, are summarized below: • Yield on SLGS • Yield on Refunding Bonds Yield Exhibit 5.73264270% A-1 6.76726433% B Based on our independent calculation of the yields, the schedules attached hereto sum- marizing the yields are arithmetically accurate. The results of our independent calculation of the proposed transactions are summarized in the accompanying exhibits. The original computations, along with related characteris- tics and assumptions contained herein, were provided by the Underwriter on behalf of the City. We relied solely on this information and assumptions and limited our work to a verification of the arithmetical accuracy of the computations involved. This letter is issued solely for the information of, and assistance to, the addressees of this letter. Our letter is not to be quoted or referred to in any document, other than the Official State- ment and certain closing documents, without our prior written consent. Exhibit A City of Sanger, Texas ESCROW ACCOUNT CASH FLOW Remaining debt service payments on Total Refunded cash receipts Bonds Refunded Bonds' debt from SLGS (Exhibits Cash service payment date (Exhibit A-1) A-2 to A4) balance Initial cash deposit December 18, 1991 $ - $ - $40.39 05-15-92 5199905.53 519,913.75 32.17 11-15-92 36,580.81 36,555.00 57.98 05-15-93 519576.23 51,555.00 79.21 11-15-93 352613.91 35,692.50 0.62 0545-94 50,699.75 509692.50 7.87 11-15-94 34,849.00 34,830.00 26.87 05-15-95 784,803.13 7849830.00 0.00 $1,514,028.36 4t1,514,068.75 Q 1n 4)ON 0 � °oov H 00 4)MCD> O I L �O aN N V% N u'^ 0 C N O M 7 M � N .t d tt vvi wo E Con M M O d � Ir � a v ro L 'n O m %D i V1 00 N aN I � O -� M ro+0V O00 N-� a\.t O N LS V n. powlV) 0^ h h \D �D 00 00 O t m U E a\\ VM VoM oho Z •, 0 ?? o ^ 1. h w Q• v N a� O as NO 0.�.. NO 00 MM 00 h00 N Z 00 N N N N N N O N N N N N 00 M w O a p C 0^0 O^0� co o^0� O^0 I �1 fn N p N al m ul tl'\ h v1 vl N 00 �h d d•40 .7� r >• Z N�DZ y NM MM M� N ro � 00 Q v} C uj N i7a M x } � W Q O M V\ h M T Z oo yal �0 00 0 d " Cl *' In n n In In 00 NZ h 00 0 V1 a i/} Cl N .o o w aE, H U M o 00 Q CD uj N 1 1 I a^ O ^--� �_ a\ QN N M M N O V) -. v-4 Z -Ift + N M CJ 0 t/Y t/f Ih d v U L E M N M M I I 1 1 00 O .O O p N 01 N N N �D w p N v� O %D �D fh 00 O �. �� \D 00 CD N .N. d Z O NCA �D t/Y {/} v N V M O L L � N 00 00 N cop p 1 v1 1 I 1 1 1 �l V �. tt V N N U i/i VY Y W V7 OV s_ V) x V1 O N 1 I 1 i I I ^+ v > L M+ O O V � d 0 C C pp 41 O N O Wt d w O v O 41 T U N � L Cie C w 1 0 n. o\ m rn al m al m ro > > o •� Y h 1 In vy vIr1 y v1 L U '� y V aC ayoLQl +j ooo U I-"y Exhibit A-2 City of Sanger, Texas REMAINING DEBT SERVICE PAYMENTS ON 1977 BONDS Total remaining Interest debt service Date Principal rate Interest payments OS-15-92 $165,000 Various $4,602.50 $169,602.50 $165,000 $4,602.50 $169,602.50 Payment date 05-15-92 City of Sanger, Texas REMAINING DEBT SERVICE PAYMENTS ON 1982 BONDS Principal $280,000 $280,000 Interest rate Various Interest $17,893.75 $17,893.75 Exhibit A-3 Total remaining debt service payments $297,893.75 $297,893.75 Exhibit A-4 City of Sanger, Texas REMAINING DEBT SERVICE PAYMENTS ON 1985 BONDS Total remaining Payment Interest debt service date Principal rate Interest payments 05-15-92 $ 15,000 11.50% $ 37,417.50 $ 52,417.50 11-15-92 - - 369555.00 369555.00 OS-15-93 15,000 11.50% 36,555.00 51,555.00 11-15-93 - - 359692.50 35,692.50 OS-15-94 15,000 11.50% 35,692.50 50,692.50 11-15-94 - - 34,830.00 349830.00 05-15-95 7509000 Various 34,830.00 784,830.00 $795,000 $2519572.50 $190469572.50 Exhibit A-5 City of Sanger, Texas SOURCES AND USES OF FUNDS Sources: Principal amount of Refunding Bonds $21230,000.00 Accrued interest 6,949.81 $2,236,949.81 Uses: Purchase price of SLGS $19343,500.00 Issuance expenses 33,000.00 Deposit to Interest and Sinking Fund 69949.81 Beginning cash in escrow account 40.39 Underwriter's discount 51,067.00 Deposit to Construction Fund 800,000.00 Contingency 29392.61 $2,236,949.81 Exhibit B Page 1 of 2 City 01 Sanger, Texas YIELD ON REFUNDING BONDS Present value on December 18, 1991 Debt service Interest Total debt using a yield of payment date Principal rate Interest service 6.76726433% OS-15-92 $ 15,000 4.70% $ 67,045.25 $ 82,045.25 $ 79,845.63 11-15-92 - - 73,233.75 73,233.75 689937.76 05-15-93 15,000 4.90% 73,233.75 88,233.75 80,339.45 11-15-93 - - 72,866.25 72,866.25 649175.43 05-15-94 20,000 5.10% 72,866.25 92,866.25 79,113.11 11-15-94 - - 72,356.25 72,356.25 59,623914 OS-15-95 25,000 5.25% 72,356.25 97,356.25 77,598.05 11-15-95 - - 71,700.00 I1,700.00 55,278.26 OS-15-96 85,000 5.40% 71,700.00 156,700.00 116,856.38 11-15-96 - - 69,405.00 69,405.00 50,063.64 05-15-97 85,000 5.60% 69,405.00 154,405.00 107,731.13 11-15-97 - - 67,025.00 67,025.00 45,233.99 05-15-98 90,000 5.80% 67,025.00 157,025.00 102,505.01 11-15-98 - - 64,415.00 64,415.00 40,673.50 05 -15-99 100,000 6.00% 64,415.00 164,415.00 100,418.59 11-15-99 - - 61,415.00 61,415.00 36,282.35 05-1540 105,000 6.15% 614415.00 166,415.00 95,095.86 11-15-00 - - 58,186.25 58,186.25 32,161.60 05-154 l 110,000 6.25% 589186.25 168,186.25 89,919.95 11-15-01 - - 54,748.75 54,748.75 28,313.14 05 -15-02 115,000 6.40% 549748.75 169,748.75 849911.90 11-15-02 - - 51,068.75 51,068.75 24,709.58 05 -15-03 125,000 6.55% 519068.75 176,068.75 82,402.56 11-15-03 - - 46,975.00 46,975.00 21,265.39 05 -15-04 1309000 6.70% 4699.75.00 176,975.00 779493.77 11-15-04 - - 42,620.00 42,620.00 18,051.63 05 -15-05 1409000 6.80% 42,620.00 182,620.00 74,816.88 37,860.00 37,860.00 15,003.07 City of Sanger, Texas YIELD ON REFUNDING BONDS -CONTINUED Debt service payment date Principal 05-15-06 $ 150,000 11-15-06 - OS-15-07 160,000 11-15-07 - OS-15-08 170,000 11-15-08 - OS-15-09 185,000 11-15-09 - OS-15-l0 195,000 11-15-10 - QS-15-11 210,000 $2,230,Ann Interest rate Interest Total debt service Exhibit B Page 2 of 2 Present value on December 18, 1991 using a yield of 6976726433% 6.90% $ 37,860.00 $ 187,860.00 $ 72,008.21 - 32,685.00 32,685.00 129118.38 7.00% 32,685.00 192,685.00 69,102.23 279085.00 279085.00 %395.53 7.05% 27,085.00 197,085.00 66,129.33 219092.50 21,092.50 6,845.68 7.15% 21,092.50 206,092.50 64,699.24 - 14,478.75 14,478.75 4,396.59 7.15% 14,478.75 209,478.75 61,528.08 - 7,507.50 7,507.50 2,132.93 7.15% 7,507.50 $1,960,492.75 Issue price of Refunding Bonds for yield calculation purposes: Principal amount of bonds Plus accrued interest $4,190,492.75 Note: The issue price to the public, as provided by the Underwriter, is $2,230,000.00. Conclusion 5977286 ,. $2,236,949.81 $2,230,000.00 6,949.81 $2,236,949.81 The sum of the present values of debt service payments on the Refunding Bonds, on December 18, 1991 using a yield of 6.76726433%, is equal to the issue price of the Refunding Bonds for yield calculation purposes; therefore, the yield on the Refunding Bonds is equal to 6.76726433%. NO -ARBITRAGE CERTIFICATE 1. In General. 1.1. The undersigned is the Mayor of the Ciry of Sanger, Texas (the "Issuer"). 1.2. This Certificate is executed for the purpose of establishing the reasonable expectations of the Issuer as to future events regarding the Issuer's Utility System Refunding and Improvement Revenue Bonds, Series 1991 (the "Bonds"). The Bonds are being issued pursuant to an ordinance of the Issuer (the "Ordinance") adopted on the date of sale of the Bonds. The Ordinance is incorporated herein by reference. The Issuer has not been notified of any listing or proposed listing of the Issuer by the Internal Revenue Service as an issuer that may not certify its bonds. 1.3. To the best of the undersigned's knowledge, information and belief, the expectations contained in this Certificate are reasonable. 1.4. The undersigned is an officer of the Issuer delegated with the responsibility, among others, of issuing and delivering the Bonds. 1.5. The undersigned is not aware of any facts or circumstances that would cause him to question the accuracy of the representations made by Southwest Securities Incorporated (the "Underwriter") in Sections 4.2 and 9.3 of this Certificate. 2. The Purpose of the Bonds. 2.1. The purpose for the issuance of the Bonds, as more fully described in the Ordinance, is (a) to establish an Escrow Fund (the "Escrow Fund") pursuant to an Escrow Agreement (the "Escrow Agreement") between the Issuer and an escrow agent to refund the outstanding obligations of the Issuer as listed in Exhibit "B" to the Escrow Agreement (the "Outstanding Bonds"), (b) to improve and extend the Issuer's combined waterworks, sewer and electric system (the "Project") and (c) to pay the related expenses of issuing the Bonds. The Escrow Agreement is included in the transcript for the Bonds and incorporated herein by reference. 2.2. The Issuer will realize a present value debt service savings (determined without regard to administrative expenses) in connection with the issuance of the Bonds and the refunding of the Outstanding Bonds. The Outstanding Bonds will be redeemed on the earliest date on which the Outstanding Bonds can be redeemed. 2.3. The Bonds are the first advance refunding of the outstanding obligations originally issued by the Issuer. 3. Source and Disbursement of Funds. The source and disbursement of the proceeds of the Bonds is shown in the report (the "Report") prepared by Grant Thornton, certified public accountants (the "Accountants")which is included in the transcript for the Bonds and is incorporated herein by reference. The Report shows that a portion of the proceeds of the Bonds will be applied to acquire United States Treasury Obligations -- State and Local Government Series (the "Acquired )bligations") to be deposited in the Escrow Fund. Proceeds from the sale of the Bonds in an amount equal to $2,230,000.00, less an underwriter's discount equal to $51,067.00, and accrued interest equal to $6,949.81, will be used as follows: a. to purchase $1,343,500.00, of principal amount of Acquired Obligations will be deposited in the escrow created pursuant to the Escrow Agreement; b. to deposit $40.39 in the escrow created pursuant to the Escrow Agreement to be used as an initial cash deposit; c. to pay costs of issuance of $35,392.61; d. to deposit $800,000.00 to the Construction Fund for the Project; and e. to deposit $6,949.81 to the Interest and Sinking Fund for the Bonds. 4. Yields. 4.1. The Underwriter has prepared certain schedules (the "Schedules") relating to the Bonds, the refunding of the Outstanding Bonds, the yield of the Bonds and the yield of the Acquired Obligations. The Accountants have verified these Schedules. The Accountants' opinion states that the yield on the Bonds and the Acquired Obligations has been computed by determining the yield which when used in computing the present worth of all payments of principal and interest to be paid on the Bonds or the Acquired Obligations produces an amount equal to their purchase price. In the case of the Bonds, the term "purchase price" means the initial offering price of the Bonds to the public plus accrued interest. In the case of the Acquired Obligations, the term "purchase price" means their cost from the Federal Reserve Bank. The Schedules show that the yield on the Acquired Obligations is less than the yield on the Bonds. 4.2. All of the Bonds have been the subject of a bona fide initial offering to the public (excluding bond houses, brokers, or similar persons or organizations acting in the capacity of underwriters or wholesalers) at prices no higher or at yields no lower than that shown on the cover of the Official Statement. At least 10 percent of the principal amount of each maturity of the Bonds were sold to the public (excluding such bond houses, brokers or similar persons or organizations acting in the capacity of underwriters or wholesalers) at an initial offering price or yield not greater than the price or not lower than the yield shown on the cover of the Official Statement for such maturity. The Official Statement is included in the transcript for the Bonds and is incorporated herein by reference. 5. Excess Proceeds and Other Investments. The principal of and interest on the Acquired Obligations and the beginning cash balance will not exceed the amount required to pay the principal of and interest on the Outstanding Bonds. The beginning cash balance will not be invested and the maturing principal of and interest on the Acquired Obligations will not be reinvested. Accordingly, after taking into account proceeds used to pay costs of issuance and accrued interest, the Issuer expects that "excess proceeds" within the meaning of Treas. Reg. U.10345 will not exceed one percent of the original proceeds of the Bonds. 6. Invested Sinking Fund Proceeds, Replacement Proceeds. 6.1. The Issuer has, in addition to the moneys received from the sale of the Bonds, certain other moneys that are invested in various funds which are pledged for various purposes. These other funds are not available to accomplish the purposes described in Section 2. 6.2. Other than the Interest and Sinking Fund, and the funds described in Sections 9 and 10 of this Certificate, there are, and will be no other funds or accounts established, or to be established, by or on behalf of the Issuer (a) which are reasonably expected to be used, or to generate earnings to be used, to pay debt service on the Bonds, or (b) which are re- served or pledged as collateral for payment of debt service on the Bonds and for which there is reasonable assurance that amounts therein will be available to pay such debt service if the Issuer encounters financial difficulties. Accordingly, there are no other amounts constituting "Gross Proceeds" of the Bonds, within the meaning of section 148 of the Internal Revenue Code of 1986 (the "Code"). 7. Transferred Proceeds. As of the date of this Certificate, all of the amounts received from the sale of the Outstanding Bonds have been expended. 8. Interest and Sinkin? Fund. 8.1. Money deposited in the Interest and Sinking Fund will be used to pay the principal of and interest on the Bonds. 8.2. All amounts deposited in the Interest and Sinking Fund will be spent within a thirteen -month period beginning on the date of deposit, and any amount received from the investment of money held in the Interest and Sinking Fund will be spent within a one-year period beginning on the date of receipt. 8.3. The Interest and Sinking Fund is a fund that is used primarily to achieve a proper matching of revenues and debt service within each bond year. The Interest and Sinking Fund will be completely depleted at least once each year except for an amount not in excess of the greater of (a) one -twelfth of the debt service on the Bonds for the previous year, or (b) the previous year's earnings on the Interest and Sinking Fund, 9. Reserve Fund, 9.1. Funds on deposit in the Reserve Fund created by the Ordinance are held in trust for the benefit of the holders of the Bonds. If on any interest payment or maturity date, the Interest and Sinking Fund does not contain an amount sufficient to make debt service payments on the Bonds, the Issuer is required to transfer money from the Reserve Fund to the Interest and Sinking Fund in an amount sufficient to make such payments. 3 9.2. The greater of the cost or the face amount of investments on deposit in the portion of the Reserve Fund allocable to the Bonds which are invested at a yield that exceeds the yield of the Bonds will not at any time exceed the lesser of (a) 10 percent of the proceeds of the Bonds (b) 1.25 times average annual debt service on the Bonds, or (c) maximum debt service on the Bonds. 9.3. Based on the recommendation of the Underwriter to the Issuer, the amount required to be deposited to the Reserve Fund does not exceed the average annual principal and interest requirement which is required by ordinance to be maintained to secure the timely payment of debt service in the event of periodic fluctuations in revenues of the Issuer. Since the amount on deposit is greater than required, the Issuer, on the date of closing, will transfer certain excess amounts deposited to the Reserve Fund to the Fund to pay debt service on the Bonds. 10. Revenue Fund. 10.1. The Ordinance creates a Revenue Fund into which certain revenues of the Issuer redeposited. Amounts on deposit in the Revenue Fund are transferred and used in the manner required by the Ordinance. 10.2. Other than moneys in the Revenue Fund that are transferred to the Interest and Sinking Fund, the moneys in the Revenue Fund are not reasonably expected to be used to pay the principal of and interest on the Bonds. There will be no assurance that such moneys will be available to meet debt service if the Issuer encounters financial difficulty. Amounts in the Revenue Fund will be invested without yield restriction. 11. Emergenc,� Fund. 11.1. The Ordinance creates an Emergency Fund which will be used solely for the purposes described in the Ordinance. 11.2. Moneys in the Emergency Fund are not reasonably expected to be used to pay the principal of and interest on the Bonds. There will be no assurance that such amounts will be available to meet debt services if the Issuer encounters financial difficulty. Amounts in the Emergency Fund will be invested without yield restriction. 12. Temporary Period. 12.1. All earnings received from the investment of the portion of the proceeds of the Bonds to be applied to the Project during the period of acquisition and construction of the Project which are not used to pay interest on the Bonds, will be used to pay the costs of the Project, unless required to be rebated and paid to the United States in accordance with section 148(f) of the Internal Revenue Code of 1986 (the "Code"). 12.2. The proceeds of the Bonds, together with any investment earnings thereon, are not expected to exceed the amount necessary for the governmental purpose of the Bonds. 12.3. The Issuer will incur, within six months after the date of issue of the Bonds, a binding obligation to commence the Project, either by entering into contracts for the 0 construction of the Project or by entering into contracts for architectural or engineering services for such Project, or contracts for the development, purchase of construction materials, or purchase of equipment, for the Project, with the amount to be paid under such contracts to be in excess of the lesser of 2 1/2 percent of the estimated cost of the Project or $100,000. 12.4. After entering into said binding obligations, work on such Project will proceed promptly with due diligence to completion. 12.5. All original proceeds derived from the sale of the Bonds to be applied to the Project and all investment earnings thereon (other than any amounts required to be rebated to the United States pursuant to section 148(f) of the Code) will be expended for the Project no later than a date which is three -years after the date of issue of the Bonds. 13. Other Obli atg ions. There are no other obligations of the Issuer which (a) are issued at substantially the same time as the Bonds (i.e., within 31 days hereof), (b) are sold pursuant to a common plan of financing with the Bonds, and (c) will be paid out of the same source or have substantially the same claim to be paid out of substantially the same source of funds as the Bonds. 14. Rebate to United States. The Issuer has covenanted in the Ordinance that it will comply with the requirements of the Code, which includes section 148(f) of the Code, relating to the required rebate to the United States. Specifically, the Issuer will take steps to ensure that all earnings on gross proceeds of the Bonds in excess of the yield on the Bonds required to be rebated to the United States will be timely paid to the United States. The Issuer acknowledges receipt of the memorandum attached hereto as Exhibit "A" which discusses regulations promulgated pursuant to section 148(f) of the Code. This memorandum does not constitute an opinion of Bond Counsel as to the proper federal tax or accounting treatment of any specific transaction. [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.] eaw DATED: CITY OF BANGER, TEXAS ayor The undersigned represents that, to the best of the undersigned's knowledge, information and belief, the representations contained in Sections 4.2 and 9.3 of this No - Arbitrage Certificate are accurate. SOUTHWEST SECURITIES INCORPORATED 2850 ONE AMERIGAN CENTER AUSTIN, TEXAS 78701-3234 TELEPHONE: 512 478.3805 TELECOPY" 512 472-0871 Exhibit "A" LAW OFFICES - McCALL, PARKHURST & HORTON 717 NORTH HARWOOO NINTH FLOOR DALLAS, TEXAS 75201-6587 TELEPHONE: ZI4 220.2800 TELECOPY: 214 953.0736 January 1, 1990 402 ONE RIVERWALK PLACE SAN ANTONIO, TEXAS 78205.3503 TELEPHONE: 512 225.2800 TELECOPY. SIZ 225-2984 The Tax Reform Act of 1986 amended the provisions of the Internal Revenue Code by providing newly -enacted section 148(f) of the Internal Revenue Code of 1986 (the "Code"), relating to arbitrage rebate. This arbitrage rebate requirement generally provides that in order for interest on any issue of obligations to be excluded from gross income (i.e., tax-exempt) the issuer must rebate to the United States the sum of, (1) the excess of the amount earned on all "nonpurpose investments" acquired with "gross proceeds" of the issue over the amount which would have been earned if such investments had been invested at a yield equal to the yield on the issue, and (2) the earnings on such excess earnings, These rules are substantially similar to the rules which, prior to the Tax Reform Act of 1986, applied to industrial development bonds and mortgage revenue bonds. On May 15, 1989, the U.S. Treasury Department promulgated temporary and proposed regulations relating to the computation of arbitrage rebate. This mVI I MA 0 - dum provides a general discussion of those arbitrage rebate regulations, This memorandum does not attempt to provide an exhaustive discussion of the arbitrage rebate regulations nor should it be considered advice with respect to the arbitrage rebate requirements as applied to any individual or governmental unit or any specific transaction. We recommend that issuers of tax•exempt obligations seek competent financial and accounting assistance in determining the amount of such issuer's rebate liability under section 148(f) of the Code. In this memorandum the word "bond" is defined to include any bond, note, certificate or other obligation of an issuer. Effective Date The temporary regulations adopted by the U.S. Treasury Department incorporate the same effective dates which generally apply for purposes of section 148(f) of the Code. The statutory provisions of section 148(f) of the Code apply to all bonds issued after August 15, 1986, (for private activity bonds) and August 31, 1986, for governmental public purpose bonds), As such, the arbitrage rebate rules as provided in these regulations would apply to any bond issued after such dates whether or not issued prior to, or after, the date of publication of the regulation. Therefore, in certain circumstances, these regulations are applied retroactively. The regulations provide certain transitional rules for bonds sold prior to May 151 1989, if the bonds are delivered on or before June 14, 1989. Since, under prior law, rules were previously published with respect to industrial development bonds and mortgage revenue bonds, the transitional rules contained in these newly -promulgated regulations permit an issuer to elect to apply certain of these prior -law rules for computing rebate. For these purposes, elections must be in writing and signed by an authorized representative of the issuer no later than the date of issue or if the issue is issued on or before November 15, 1989, the first date after June 14, 1989, that any rebate is paid or required to be paid to the United States. Such election must identify the issue to which it applies and be maintained as part of the official transcript of the proceedings relating to the issuance. Elections, once made, generally are not revocable. The temporary regulations provide for numerous elections which would permit an issuer to apply the provisions of prior law, rather than the newly - promulgated rules. Due to the complexity of the regulation, it is impossible to discuss in this memorandum all circumstances for which specific elections are provided. If an issuer would prefer, in certain circumstances, to use the computational method stated under prior law (e.g., due to prior redemption), please contact McCall, Parkhurst & Horton for advice as to the availability of such options. In the case of any issue of bonds issued after the effective date of the Tax Reform Act of 1986 but redeemed prior to May 15, 1989, the prior -law rules are applied if the issuer in good faith determines and pays the final rebate amount within the appropriate 60-day period. In any event, the rebate amount is timely paid if paid no later than January 16, 1990. As an example, with respect to obligations which may have been previously redeemed or, in the case of certain commercial paper programs, the amount need not be paid until such date. Future Value Computation Method The temporary regulations adopt an actuarial method for computing the rebate amount based on the future value of the investment receipts (i.e., earnings) and payments. The rebate method employs a two-step computation to determine the amount of the rebate payment. First, the issuer determines the bond yield. Second, the issuer determines the arbitrage rebate amount. The regulations require that the computations be made at the end of each five-year period and upon final maturity of the issue (the "computation dates"). In order to accommodate accurate record - keeping and to assure that sufficient amounts will be available for the payment of arbitrage rebate liability, however, we recommend that the computations be performed annually. Under the future value method, the amount of rebate is determined by compounding the aggregate earnings from all the investments from the date of receipt McCall, Parkhurst &Horton -Page 2 by the issuer to the computation date. Similarly, a payment for an investment is future valued from the date that the payment is made to the computation date. The receipts and payments are future valued at a discount rate equal to the yield on the bonds. The rebatable arbitrage, as of any computation date, is equal to the excess of the (1) future value of all receipts (i.e., earnings) from investments, over (2) the future value of all payments. The following example is provided by Notice 89-66 published by the U.S. Treasury Department in connection with the temporary regulations. "To illustrate how arbitrage rebate is computed under the future value method, assume that City X issues $10 million of general obligation bonds on March 1, 1989, to renovate its courthouse. The bonds are issued at par and have a term of 20 years. The yield on the bonds is 7 percent per annum compounded annually. On the issue date, City X invests $2 million of the bond proceeds in a one-year certificate of deposit paying 6 percent interest per year compounded annually, $5 million in a two-year certificate paying 7.5 percent interest per year compounded annually, and the remaining $3 million in a three-year certificate paying 8 percent interest per year compounded annually. Assume that City X receives the interest payments annually. Assume further that the bond proceeds invested in the certificates and all the interest are immediately spent on the project when the principal and interest from these investments are received. The rebatable arbitrage as of March 1, 1994 (the end of the first five-year period after issuance) is computed as shown in Table 1. McCall, Parkhurst &Horton -Page 3 Announcement 89-66, Table 1 Computation of Rebatable Arbitrage I. Future Value of Receipts Date Receivt 3/1/90 $ 2,735,000.00 3/1/91 $ 5,615,000.00 3/1/92 $ 3,240,000.00 Future Value of Receipts II Date Explanation Principal and Interest from Certificates Principal and Interest from Certificates Principal and Interest from Certificates Future Value of Payments Payment $10,000,000.00 Future Value of Payments Explanation Purchase Certificates III. Rebatable Arbitrage as of 3/1/94 Future Value of Receipts Less Future Value of Payments Excess of Future Value of Receipts Over Payments Less Computation Date Credit Rebatable Arbitrage as of 3/1/94 General Method for Computing held on Bonds Future Value as of 3/1/94 at 7% Compounded Annually $ 3,585,027.09 $ 6,878,616.45 $ 3,709,476.00 $14,173,119.54 Future Value as of 3/1/94 at 7% Compounded Annually $14,025,517.31 $14,025,517.31 $14,173,119.54 - $14,025,517.31 $ 147,602.23 - $ 1,000.00 $ 146,602.23" In general, the term "yield", with respect to a bond, means the discount rate that when used in computing the present value of all unconditionally due payments of principal and interest and all of the payments for a qualified guarantee produces an amount equal to the present value of the issue price of the bond. For this purpose, the term "issue price" has the same meaning as provided in sections 1273 and 1274 of the Code. That is, if bonds are publicly offered (i.e., sold by the issuer to a bond McCall, Parkhurst & Horton -Page 4 house, broker or similar person acting in the capacity of underwriter or wholesaler), the issue price of each bond is determined on the basis of the initial offering price to the public at which price a substantial amount of such bond was sold to the public. The "issue price" is separately determined for each bond (i.e., maturity) which com- prises an issue. It will be determined separately, however, for identical bonds (i.e., bonds of the same maturity and rate) if such bonds are sold at one price to the general public and another price to institutional or other investors at a discount. As such, it is important for an issuer to know how each bond is sold by an underwriter and the accurate "issue price" of such sale. The regulations also provide varying periods for computing yield on the bonds depending on the method by which the interest payment is determined. Thus, for example, yield on an issue of bonds sold with variable interest rates (i.e., interest rates which are reset periodically based on changes in market) is computed separately for each five-year period that the issue is outstanding. In effect, yield on variable yield issues is determined on each computation date by 'looking back" at the interest payments. In certain circumstances the temporary regulations, however, permit an issuer of variable -yield issues to elect to compute the yield for periods of less than 5 years in order to permit a matching of such yield to the expenditure of the proceeds. Yield on fixed interest rate issues (i.e., bonds the interest rate on which is determined as of the date of the issue) is computed over the entire term of the issue. Issuers of fixed -yield issues that are not retired early generally use the yield computed as of the date of issue for all rebate computations. Such yield on fixed -yield issues generally is recomputed only if the bond is retired earlier than its scheduled maturity date (e.g., advance refunded). In such case, the temporary regulations require the issuer to recompute the yield on such issues by taking into account the early retire- ment value of the bonds. For purposes of determining the principal or redemption payments on a bond, different rules are used for fixed-rate and variable -rate bonds. The payment is computed separately on each maturity of bonds rather than on the issue as a whole. In certain circumstances, the yield on the bond is determined by assuming that prin- cipal on the bond is paid as scheduled and that the bond is retired on the final maturity date for the stated retirement price. In other circumstances, the yield is determined by assuming the bond is retired on the date which produces the lowest arbitrage yield for the stated retirement price payable on such date. The "stated retirement price" of a bond generally means the lowest price at which the issuer has a right under the terms of the bond or pursuant to a separate agreement to retire or redeem the bonds. Special rules are provided for other purposes, including for deter- mining the "early retirement value" and for determining the retirement price of any discounted bonds subject to mandatory early redemption. Section 148 of the Code provides that premiums paid to insure bonds are taken into account in computing the yield on the bond. Payments for guarantees are taken into account by treating such premiums as the payment of interest on the McCall, Parkhurst &Horton -Page 5 r bonds. This treatment, in effect, raises the yield on the bond, thereby permitting the issuer to recover such fee with excess earnings. The guarantee must be an unconditional obligation %a the guarantor enforceable by the bondholder for the payment of principal or interest on the bond or the tender price of a tender bond. The guarantee may be in the form of an insurance policy, surety bond, irrevocable letter or line of credit, or standby purchase agreement. A guarantor must be the federal government or an entity that is subject to federal income tax. Importantly, the guarantor must be legally entitled to full reimbursement for any payment made on the guarantee either immediately or upon commercially reasonable repayment terms. As such, with respect to bonds secured by revenues to be provided from a project to be constructed with the proceeds of the bonds, a certain portion of the fee or premium paid for the guarantee may not be allowable for purposes of the computation if the security for the guarantor's obligation is the same revenues or the bonds secured by such revenues. Payments for the guarantee may not exceed a reasonable charge for the transfer of credit risk. This reasonable charge requirement is not satisfied unless it is reasonably expected that the guarantee will result in a net present value savings on the bond (i.e., the premium does not exceed the present value of the interest savings resulting by virtue of the guarantee). If the guarantee is entered into after June 14, 1989, then any fees charged for the nonguarantee services must be separately stated or the guarantee fee is not recoverable. The temporary regulations also provide rules for allocating payments for guarantees to the bonds guaranteed. Level payments for guarantees (i.e., payments which are made periodically at a predetermined percentage of the outstanding principal) are taken into account when actually paid. Nonlevel (front -loaded or back - loaded) payments are reallocated under the regulations. Nonlevel payments generally are allocated to each guaranteed bond in the same proportion as the interest savings resulting from the guarantee. The regulations provide significant additional rules with respect to the allocation of guarantee fees. "Approximate Method" for Computin4 veld on Bonds The regulations also provide a special rule to reduce administrative costs for certain small fixed -yield issues, which would otherwise be subject to recomputation of yield if retired earlier than scheduled. Under the special rule, these issuers may generally use the yield computed as of the date of issue (without regard to early retirements) for all their rebate computations. For this purpose, an issue is a small issue if the issue price of the bonds is $5 million or less. This amount is increased to $10 million for small issuers of governmental bonds, other than private activity bonds. In order to reduce administrative burdens even further, an approximate method permits issuers to use the outstanding par value of the bonds plus accrued interest as the early retirement value. In general, this approximate method is available McCall, Parkhurst &Horton -Page 6 if the bond is sold at par with accrued interest of one year or less and the bond is not backed by a letter of credit or other type of credit enhancement. Earnincds on Nonpurpose Investments The arbitrage rebate provisions apply only to the receipts from the investment Of "gross proceeds" in "nonpurpose investments." For this purpose, nonpurpose investments are stock, bonds or other obligations acquired with the proceeds of the bonds for the period prior to the use of the proceeds for its ultimate purpose. For example, investments deposited to construction funds, reserve funds (including surplus taxes or revenues deposited to sinking funds) or other similar funds are nonpurpose investments. Such investments must be acquired with "gross proceeds." For this purpose, "gross proceeds" include proceeds received from the sale of the bonds, investment earnings from the investment of such original proceeds, amounts pledged to the payment of debt service on the bonds or amounts actually used to pay debt service on the bonds. The temporary regulations do not provide sufficient amount of guidance to include an exhaustive list of "gross proceeds" for this purpose, however, it can be assumed that "gross proceeds" represent all amounts received from the sale of bonds, amounts earned as a result of such sale or amounts (including taxes and revenues) which are used in connection with the bonds. The temporary regulations provide generally that an investment is allocated to an issue for the period (1) that begins on the date gross proceeds are used to acquire the investment, and (2) that ends on the date such investment ceases to be allocated to the issue. Most of the rules for allocating gross proceeds for this purpose are reserved for future regulations and, therefore, these regulations provide no guidance. In general, however, proceeds are allocated to a bond issue until expended for the ultimate purpose for which the bond was issued or for which such proceeds are received (e.g., construction of a bond -financed facility or payment of debt service on the bonds). Unlike prior law, deposit of gross proceeds to the general fund of the issuer does not alleviate the obligation to compute rebate. As such, proceeds commingled with the general revenues of the issuer are not "freed -up" from the rebate obligation. In that regard, issuers may consider segregating investments in order to more easily compute the amount of such arbitrage earnings by not having to allocate investments. Special rules are provided for purposes of advance refundings. These rules are too complex to discuss in this memorandum. Essentially, the rules relating to refundings, however, do not require that amounts deposited to the escrow fund to defease the prior obligations of the issuer be subject to arbitrage rebate to the extent that the investments deposited to the escrow fund do not have a yield in excess of the yield on the bonds. Moreover, the regulations provide that a refunding bond is not tax-exempt unless rebate due and owing on the refunded bond is, in fact, paid. See the following discussion relating to the dates on which such rebate is due and owing. McCall, Parkhurst &Horton -Page 7 In general, the arbitrage regulations provide that demand deposits (e.g., checking accounts) be considered to have a yield equal to the yield on a comparable time deposit (e.g., certificate of deposit) for the period that the amount is on deposit. The temporary regulations provide that in certain circumstances amounts deposited, for short periods, to checking accounts, however, need not be taken into account for purposes of the computation. Special rules are provided in the temporary regulations which permit amounts deposited to checking or similar accounts to be disregarded for purposes of the computation. The temporary regulations provide that an expenditure of proceeds in a checking or similar account be treated as made on the date a negotiable check is drafted on the account if the check is delivered or mailed no later than one business date thereafter and the payor has no reason to believe that the check will not clear within a reasonable period of time. If the check is delivered or mailed more than one business day after it is written, the expenditure may be treated as a occurring on the date of delivery or mailing of the check, thereby requiring a computation of earnings. In such latter instance, the amounts deposited to the checking account must be taken into account for purposes of computing the excess arbitrage earnings. The arbitrage regulations generally provide tha# investment of bond proceeds in tax-exempt obligations does not result in arbitrage. The provisions of the Technical and Miscellaneous Revenue Act of 1988, however, amended that rule by providing that investment of bond proceeds in "private activity bonds" (i.e., bonds subject to the alternative minimum tax under section 57(a)(5) of the Code) are treated as investments in taxable obligations. As such, earnings from these tax-exempt invest- ments are subject to rebate. Similarly, the temporary regulations provide that investments in certain tax- exempt mutual funds are treated as a direct investment in the tax-exempt obligations deposited in such fund. While issuers may invest in such funds for purposes of avoiding arbitrage rebate, they should be aware that if "private activity bonds" are included in the fund then a portion of the earnings will be subject to arbitrage rebate. Issuers should be prudent in assuring that the funds do not contain private activity bonds. The arbitrage regulations also provide a number of instances in which earnings will be imputed to the nonpurpose investments. Receipts generally will be imputed to investments that do not bear interest at an arm's-length (i.e., market) interest rate. As such, the temporary regulations adopt a "market price" rule. In effect, this rule prohibits an issuer from investing bond proceeds in investments at a price which is higher than the market price of comparable obligations, in order to reduce the yield. An exception to this rule is available for investments in United States Treasury Obligations - State or Local Government Series. McCall, Parkhurst &Horton -Page 8 Rebate Payments Rebate payments generally are due 60 days after each installment computation date. The final rebate is due on the latest of (1) the date 60 days after the final computation date, (2) the date eight months after the date of issue for certain short-term obligations, (3) the date the issuer no longer reasonably expects any exception to apply to the issue, or (4) January 16, 1990. On such payment dates, other than the final payment date, an issuer is required to pay 90 percent of the rebatable arbitrage to the United States. On the final payment date, an issuer is re- quired to pay 100 percent of the remaining rebate liability. Rebate payments are not refundable. However, the preamble to the temporary regulations states that future regulations may provide that issuers may recover overpayments if the issuer establishes to the satisfaction of the Commissioner of the Internal Revenue Service that the issuer paid an amount in excess of the rebate as the result of a mistake and that the recovery of the overpayment on that date would not result in rebatable arbitrage. Three de minimis rules are applied for purposes of payment under the temporary regulations. First, the amount of each rebate installment and final rebate may be rounded to the nearest lower multiple of $100, and any amount less than $100, is rounded to $0. Second, no income is included in the final rebate if the income is less than $300, and the final rebate is paid no later than 60 days after the final computation date. Third, the rebatable arbitrage is reduced by the computation date credit. For this purpose, the credit is equal to $11000, if the outstanding amount of bonds is more than $5 million, $625, if the outstanding amount of bonds is more than $1 million but not more than $5 million and $250, if the outstanding amount of the bonds is $1 million or less. No credit is allowed on a computation date if the computation period is less than one year. Moreover, the credit may be taken by the issuer only for each computation period, however, the issuer may compute the rebate amount more frequently. Failure to Pay Rebate In general, the failure to pay rebate as required by section 148(f) of the Code will result in the interest on the bonds not being tax-exempt from their initial date of purchase. The temporary regulations provide that issuers may correct innocent failures (without loss of tax -exemption or penalty) if the failure is corrected no later than 60 days after the failure is discovered (180 days if the correction amount is less than $50,000). A failure is corrected by paying the correction amount to the Commissioner of the Internal Revenue Service. The correction amount required to be paid under the temporary regulations is equal to the underpayment, together with interest for the period of delay at the maximum interest rate for a United States Treasury Obligation - State or Local Government Series with a term equal to such period. In any event, the interest is computed at a rate no lower than the yield on the issue of bonds. McCall, Parkhurst &Horton -Page 9 IT the correction amount is $50,000, or more, a failure is not treated as innocent unless the issuer submits with the correction amount a brief explanation of the failure and the basis for concluding that it is an innocent mistake. The failure is treated as innocent if the brief description is reasonably accurate and submitted within 90 days. To the extent that the Commissioner of the Internal Revenue Service determines that the failure is not innocent but also is not due to willful neglect, the issuer will be required to pay the underpayment, the interest as described above and a penalty. Exceptions to Rebate The Code provides certain exceptions to the requirement that the excess investment earnings be rebated to the United States. a. Small Issuers. The first exception provides that if an issuer (together with all subordinate issuers) during a calendar year does not issue tax-exempt obligations in an aggregate face amount exceeding $5 million, then the obligations are not subject to rebate. For this purpose, "private activity bonds" neither are afforded the benefit of the first exception nor are taken into account for determining the amount of bonds issued. Subordinate issuers are those issuers who derive their authority to issue bonds from the same issuer, e.g., a city and a health facilities development corporation. b. Temporary Investments. The second exception to the rebate requirement is available to all tax-exempt bonds, all of the proceeds of which are expended during six months, or, in certain circumstances, two years. The six month rule is available to bonds issued after the effective date of the Tax Reform Act of 1986. See the discussion of effective dates on page one. For this purpose, proceeds used for the redemption of bonds (other than proceeds of a refunding bond deposited to an escrow fund to discharge refunded bonds) and amounts deposited to a reserve fund can not be taken into account as expended. As such, bonds with excess proceeds can not satisfy the second exception. The Code provides a special rule for tax anticipation notes (i.e., obligations issued to pay operating expenses in anticipation of the receipt of taxes and other revenues). In that regard, the computation of the "cumulative cash flow deficit" is important. If the "cumulative cash flow deficit" (i.e., the point at which the operating expenditures of the issuer on a cumulative basis exceed the revenues of the issuer during the fiscal year) occurs within the first six months of the date of issue, then the notes are deemed to satisfy the exception. The special rule requires, however, that the deficit actually occur, not that the issuer merely has an expectation that the deficit will occur. In certain circumstances, the six month period is extended to two years. Bonds issued after December 19, 1989 (i.e., the effective date of the Omnibus Reconciliation Act of 1989) at least 75 percent of the net proceeds of which are to be McCall, Parkhurst &Horton -Page 10 used for construction may be exempted from rebate. The exception applies only to governmental bonds, qualified 501(c) (3) bonds and private activity bonds for governmentally -owned airports and docks and wharves. The two-year exception requires that at least 10 percent of the net proceeds must be expended within six months after the date of issue, 45 percent within 12 months, 75 percent within 18 months and 95 percent within 24 months. All of the proceeds must be expended within 36 months. The two-year rule also provides for numerous elections which must be made prior to the issuance of the bonds and are irrevocable. Certain elections permit an issuer to bifurcate bond issues, thereby treating only a portion of the issue as a qualified construction bond; and, permit an issuer to disregard earnings from reserve funds for purposes of determining net proceeds. Another election permits an issuer to pay a penalty in lieu of rebate if the issuer ultimately fails to satisfy the two-year rule. Issuers should discuss these elections with their financial advisors and bond counsel prior to issuance of the bonds. c. Debt Service Funds. Additionally, an exception to the rebate requirement, whether or not any of the previously discussed exceptions are available, applies for earnings on "bona fide debt service funds". A "bona fide debt service fund" is one in which the amounts are expended within thirteen months of the accumulation of such amounts by the issuer. In general, most interest and sinking funds (other than any excess taxes or revenues accumulated therein) satisfy these requirements. For private activity bonds, short term bonds (i.e., have a term of less than 5 years) or variable rate bonds, the exclusion is available only if the gross earnings in such funds do not exceed $100,000, for the bond year. For other bonds issued after November 11, 1988, no limitation is applied to the gross earnings on such funds for purposes of this exception. Therefore, subject to the foregoing discussion, the issuer is not required to take such amounts into account for purposes of the computation. FOR BONDS ISSUED AFTER THE EFFECTIVE DATE OF THE TAX REFORM ACT OF 1986 WHICH WERE OUTSTANDING AS OF NOVEMBER 11, 1988, OTHER THAN PRIVATE ACTIVITY BONDS, SHORT TERM BONDS OR VARIABLE RATE BONDS, A ONE-TIME ELECTION MAY BE MADE TO EXCLUDE EARNINGS ON "BONA FIDE DEBT SERVICE FUNDS" WITHOUT REGARD TO THE $100,0009 LIMITATION. THE ELECTION MUST BE MADE IN WRITING (AND MAINTAINED AS PART OF THE ISSUER'S BOOKS AND RECORDS) NO LATER THAN THE LATER OF MARCH 21, 1990, OR THE FIRST DATE A REBATE PAYMENT IS REQUIRED. Conclusion We hope that this memorandum will prove to be useful as a general guide to the arbitrage rebate requirements. McCall, Parkhurst &Horton •Page 11 Again, this memorandum is not intended as an exhaustive discussion nor as specific advice with respect to any specific transaction. We advise our clients to seek competent financial and accounting assistance. Of course, we remain available to provide legal advice regarding all federal income tax matters, including arbitrage rebate. ff you have any questions, please feel free to contact Harold T. Flanagan at (214) 220-2800. McCall, Parkhurst &Horton -Page 12 2850 ONE AMERICAN CENTER AUSTIN, TEXAS 78701-3234 TELEPHONE: 5I2 478.3805 TELECO PY: 512 472-0871 LAW OFFICES M�CAL", PARKHURST & HORTON 717 NORTH HARWOOD NINTH FLOOR DALLAS, TEXAS 75201-6587 TELEPHONE: 214 220.2800 TELECOPY: 214 953-0736 January 28, 1992 Internal Revenue Service Center Philadelphia, Pennsylvania 19255 Re: Information Reporting - City of Sanger, Texas Utility System Refunding Series 1991 Ladies and Gentlemen: 402 ONE RIVERWALK PLACE SAN ANTONIO, TEXAS 78205.3503 Tax -Exempt Bonds TELEPHONE: 512 225-2800 TELECOPY: 512 225-2984 and Improvement Revenue Bonds, Pursuant to the requirements of Section 149 (e) of the Internal Revenue Code %J 1986, enclosed please find an original and a photocopy of Form 8038-G which is hereby submitted to you for the above -captioned bonds issued December 18, 19919 Please file the original and return the receipted copy of Form 8038-G to the undersigned in the enclosed self-addressed, postage paid envelope. Sincerely, Mc�CALL, PARKHURST & HORTON &AA &ecjt j .%2H)aJfZaoQir2 l ali"n Harold T. Flanagan HTF:amt Enclosures cc Mr. Peter M. Tart Form 8®38•G Information Return for Tax -Exempt Governmental Obligations (Rev. October 1989) ► Under Section 149(e) OMB No. 1545.0720 Pop See separate Instructions Expires 5-31-92 Department of the Treasury Internal Revenue Service ssup (se Form UF8038-GC if the issue rice is under $100,000) FMM Reporting Authority Check box if Amended Return ► 1 Issuer's name 2 Issuer's employer identification number City of Sanger, Texas 754000661 3 Number street 4 Report number P.O. Box 7578 G19 91_ 1 5 City or town, state, and ZIP code 6 Date of issue Sanger, Texas 76266-0578 12-18-91 7 Nameofissue Utility System Refunding and Improvement Revenue Bonds, 8 CUSIP Number Series 1991 800890 EJO GM Type of Issue (check box(es) that applies and enter the Issue Price) 9 Check box if obligations are tax or other revenue anticipation bonds ► ❑ Issue price 10 Check box if obligations are in the form of a lease or installment sale ► ❑ 11 ❑ Education . . . . . . . . . . . . . . . . 12 ❑ Health and hospital . 13 ❑ Transportation 14 ❑ Public safety . 15 ❑ Environment (including sewage bonds) 16 ❑Housing $2 , 230 , 000.00 17 10 Utilities 18 ❑ Other. Describe (see Instructions) ► Description of Obli ations (d) (e) f (g) (a) (b) (c) Stated redemption Weighted ( ) Net interest Maturity date Interest rate Issue price price at maturity avera a ma unty Yield cost 19 Final maturity 5-15-2011 7 015 210 , 000.00 210 , 000.00 20 Entireissue . 22230,000.00 222309000.00 12,892 years 6,767 % 6.818 % FORM Uses of Original Proceeds of Bond Issues (including underwriters' discount 21 Proceeds used for accrued interest . . . . . . . . . . . . . . . . . 21 6 , 949 o 8 l 22 Issue price of entire issue (enter line 20c) . . . . . , . . . . 9 a 0 4 1 a 9 F 6 4 22 2 , 230 , 000.00 23 Proceeds used for bond issuance costs (including underwriters' discount) . 23 1 86 459.61 24 Proceeds used for credit enhancement . 24 —0- 25 Proceeds allocated to reasonably required reserve or replacement fund 25 —0- 26 Proceeds used to refund prior issues . 26 1, 343 , 540.39 27 Total (add lines 23, 24, 25, and 26) . . . . . , . . 27 1 430 000.00 28 Nonrefunding proceeds of the issue subtract line 27 from line 22 and enter amount here 28T 800 000.00 Description of Refunded Bonds (complete this cart only for refunding bonds) 29 Enter the remaining weighted average maturity of the bonds to be refunded 31*243.,► 3.562 & 6.719 Years 30 Enter the last date on which the refunded bonds will be called . 5-15-92., ► 5-15-92 & 5-15-95 31 Enter the dates the refunded bonds were issued ► 8-24-77 , 7-22-82 & 7-24-85 Miscellaneous _ 32 Enter the amount of the state volume cap allocated tathe issue ► —0- 33 Enter the amount of the bonds designated by the issuer under section 265(b)(3)(B)(i)(111) (small i► $2 , 230 , 000.00 issuer exception) 34 Pooled financings: Enter the amount of the proceeds of this issue that are to be used to make loans to other governmental units ► —0— Check box if this issue is a loan made from the proceeds of another tax-exempt issue Poo Eland enter the name of the issuer ► and the date of the issue ► Under penalties of perjury, I declare that I have examined this return a they are true, correct, and complete. Please Sign Nere For Paperwork R�fiiction Act Notice, see page 1 of the Instructions. schedules and statements, and to the best of my 12-18-91 Date ' Type or print name and title Form 8038-G (Rev. 10-89) U.S. Government Printing Office: 1989-262-151 /00019 CLOSING CERTIFICATE THE STATE OF TEXAS COUNTY OF DENTON CITY OF SANGER We, the undersigned officers of said City, hereby certify as follows: 1. That this certificate is executed for and on behalf of said City with reference to the issuance of the proposed CITY OF SANGER, TEXAS UTILITY SYSTEM REVENUE REFUNDING AND IMPROVEMENT REVENUE BOND, SERIES 1991, dated December 1, 1991, in the principal amount of $2,230,000 (the "Bonds") and the definitions found in the Purchase Contract between the Issuer and Southwest Securities Incorporated dated November 18, 1991, applicable to this Certificate. 2. That: (i) the representations and warranties of the City contained in the Purchase Contract are true and correct in all material respects on and as of the date of Closing as if made on the date of Closing; (ii) except to the extent disclosed in the Official Statement, no litigation is pending or, to our knowledge, threatened in any court to restrain or enjoin the issuance or delivery of the Bonds, the pledge of the Net Revenues of the Waterworks and Sewer System to pay the principal of and interest on the Bonds, or the pledge thereof, or in any way contesting or affecting the validity of the Bonds, the Ordinance, the Escrow Agreement, or the Purchase Contract, or contesting the organization, existence or powers of the City or any A its respective officers in their capacity as such, or the business, properties, assets or financial condition of the City, or contesting the authorization of the Bonds or the Ordinance, or contesting in any way the accuracy, completeness or fairness of the Official Statement; () to the best of our knowledge, no event affecting the City has occurred since the date of the Official Statement which should be disclosed in the Official Statement For the purpose for which it is to be used or which it is necessary to disclose in the Purchase Contract in order to make the statements and information therein not misleading in any respect; and (iv) that there has not been any material and adverse change in the affairs or financial condition of the City since September 30, 1990, the latest date as to which audited financial information is available. SIGNED AND SEALED this SEAL b Ijil Manager RECEIPT AND DISBURSEMENT OF FUNDS AMERITRUST TEXAS NATIONAL ASSOCIATION, DALLAS, TEXAS THE STATE OF TEXAS COUNTY OF DALLAS 1. Ameritrust Texas National Association, Dallas, Texas (the "Bank"), in regard to the delivery on December 18, 1991, of the City of Sanger, Texas General Obligation Refunding Bonds, Series 1991, in the principal amount of $2,230,000, acknowledges receipt from Southwest Securities Incorporated, the Purchasers of the Bonds, the sum of. (a) The Bank received the sum of $2,185,882.81 from the following sources and in the amounts shown, to -wit: Southwest Securities Incorporated, by federal funds: purchase price accrued interest Total $2,178,933.00 $ 6,949.81 $2,185,882.81 2. Pursuant to instructions received from the City of Sanger, Texas (the Issuer") and the Escrow Agreement between the Issuer and the Bank, effective as of the date of this receipt, said amount of $2,185,882.81 has been applied, allocated and deposited in the following manner: (a) Paid to the Dallas Federal Reserve Bank for the purchase of U. S. Treasury Obligations, the sum of---------------------------------------------------------------$1,343,500.00. (b) Deposited a beginning cash balance in Escrow Fund, thesum of---------------------------------------------------------------$ 40.39. (c) Retained and disbursed for payment of the paying agent's charges for the Refunded Bonds and escrow fee for the obligations being refunded by the bonds in accordance with the Escrow Agreement, and Paying Agent/Registrar's fees for this bond issue, thesum of-------------------------------------------------------------- $ 6,425.00. 3. The balance %J funds received by the Bank in the amount of $835,917.42 was transferred as follows: (a) Accrued interest and the Series 1991 Bond proceeds were wire transferred to the Gainesville National Bank, Gainesville, Texas, for deposit into the Interest and Sinking Fund for the Series 1991 Bonds, the sum of--------------------------------------------------------------$ 6,949.81. (b) Issuance costs paid to Southwest Securities Incorporated for payment of issuance expense on behalf of the District with accounting made to the District, the sum of--------------------------------------------------------------$ 28,967.61. (c) Deposited into Construction Fund by wire transfer to Gainesville National Bank, the sum of--------------------------------------------------------------$ 80000.00. The Bank further acknowledges receipt of the securities described in subparagraph 2(a) above, and such securities have been credited and held for the Escrow Fund created and established pursuant to the above -mentioned Escrow Agreement. DATED this the 18th day of December, 1991. AMERITRUST TEXAS NATIONAL ASSOCIATION By Title: ASS STANT ICE PRESIDEM LAW OFFICES McCALLI PARKHURST & HORTON 2850 ONE AMERICAN CENTER 717 NORTH HARW000 402 ONE RIVERWALK PLACE AUSTIN, TEXAS 787OF3234 NINTH FLOOR SAN ANTONIO, TEXAS 78205-3503 TELEPHONE: 512 478-3805 DALLAS, TEXAS 7520i•6587 TELEPHONE: 512 225-2800 TELECOPY: 512 472.0871 TELEPHONE: 214 220-2800 TELECOPY: 512 225-2984 TELECOPY: 214 953-0736 CITY OF SANGER, TEXAS UTILITY SYSTEM REFUNDING AND IMPROVEMENT REVENUE BOND SERIES 1991, DATED DECEMBER 1, 19917 IN THE PRINCIPAL AMOUNT OF $292309000 AS BOND COUNSEL for the City of Sanger, Texas (the "Issuer"), we have examined into the legality and validity of the bond issue initially evidenced by the bond described above (the "Initial Bond"), which Initial Bond originally has been issued and delivered as a single fully registered bond, without interest coupons, with the principal amount thereof payable on May 15 in installments, and with the unpaid balance of each installment of principal, respectively, bearing interest from the date of the Initial Bond to the scheduled due date ("maturity"), or to the date of prepayment or redemption, of each installment of principal, at the following rates per annum for each maturity, respectively: maturity 1992, 4.70% maturity 1993, 4.90% maturity 1994, 5.10% maturity 1995, 5.25 % maturity 1996, 5.40% maturity 1997, 5.60% maturity 1998, 5.80% maturity 1999, 6.00% maturity 2000, 6.15% maturity 2001, 6.25 % maturity 2002, 6.40% maturity 2003, 6.55% maturity 2004, 6.70% maturity 2005, 6.80% maturity 2006, 6.90% maturity 2007, 7.00% maturity 2008, 7.05 % maturity 2009, 7.15% maturity 2010, 7.15% maturity 2011, 7.15% with interest payable May 15, 1992, and semiannually on each November 15 and May 15 thereafter, and with the principal of the Initial Bond being subject to prepayment or redemption prior to the scheduled maturities, at the option of the Issuer, on May 15, 2001, or on any date thereafter, in accordance with the terms and conditions stated in the text of the Initial Bond. The Initial Bond may, at the request of the registered owner, be trans- ferred and converted into, and/or exchanged for, fully registered bonds, without interest coupons, in the denomination of $5,000 or any integral multiple of $5,000, and such bonds again may be transferred and/or exchanged, all subject to the conditions stated and in the manner provided in the ordinance authorizing the issuance of the Initial Bond (the "Bond Ordinance"), with any such bonds which are registered, authenticated, and delivered in accordance with the Bond Ordinance being hereinafter called "Definitive Bonds". r WE HAVE EXAMINED the applicable and pertinent provisions of the Constitution and laws of the State of Texas, and a transcript of certified proceedings of the Issuer, the Escrow Agreement dated December 1, 1991 between the Issuer and Ameritrust Texas National Association, Dallas, Texas, as Escrow Agent (the "Escrow Agreement"), and other pertinent instruments relating to the authorization of the Initial Bond and Definitive Bonds and the issuance and delivery of the Initial Bond, including the executed Initial Bond and a printed specimen of the form for Definitive Bonds initially made available by the Issuer for conversion of and exchange for the Initial Bond, BASED ON SAID EXAMINATION, IT IS OUR OPINION that the Escrow Agreement has been duly authorized, executed, and delivered by the parties thereto and constitutes a binding and enforceable agreement of the parties thereto in accordance with its terms, and that the bonds, as defined in the Bond Ordinance, in the aggregate principal amount of $1,240,000, being refunded by the Bonds, are outstanding only for the purpose of receiving the funds provided by, and are secured by, and payable solely from, the Escrow Agreement and the cash and investments, including the income therefrom, held by the Escrow Agent pursuant to the Escrow Agreement. In rendering this opinion, we have relied upon the verification of Grant Thornton as to the sufficiency of the cash and investments deposited with the Escrow Agent pursuant to the Escrow Agreement for the purpose of paying such Refunded Bonds to be retired with the proceeds of the Bonds and the interest thereon. BASED ON SAID EXAMINATION, IT IS FURTHER OUR OPINION that the Initial Bond and Definitive Bonds have been duly authorized, and that the Initial Bond has been duly issued and delivered, all in accordance with law; and that, except as may be limited by laws applicable to the Issuer relating to bankruptcy, reorganization, and other similar matters affecting creditors' rights, the Initial Bond constitutes and Definitive Bonds (hereinafter referred to collectively as "Bonds") will constitute valid and legally binding special obligations of the Issuer, and that the principal of and interest on the Bonds are payable from and secured by a first lien on and pledge of Net Revenues of the Issuer's Utility System, being the Waterworks, Sewer and Electric System. THE ISSUER has reserved the right, subject to the restrictions stated in the Bond Ordinance, to issue additional parity revenue bonds which also may be made payable from and secured by a first lien on and pledge of the Net Revenues. THE OWNERS OF THE BONDS shall never have the right to demand payment of this obligation out of any funds raised or to be raised by taxation. IT IS FURTHER OUR OPINION, except as discussed below, that the interest on the Bonds is excludable from the gross income of the owners for federal income tax purposes under the statutes, regulations, published rulings, and court decisions existing on the date of this opinion. We are further of the opinion that the Bonds are not "private activity bonds" and that accordingly, interest on the Bonds will not be included as an individual or corporate alternative minimum tax preference item under Section 57(a)(5) of the Internal Revenue Code of 1986 (the "Code"). In expressing the aforementioned opinions, we have relied on, and assume compliance by the Issuer with, certain representations and covenants regarding the use and investment of the proceeds of the Bonds. We call your attention to the fact that failure by the Issuer to comply with such representations and covenants may cause. the interest on the Bonds to become includable in gross income retroactively to the date of issuance of the Bonds. WE CALL YOUR ATTENTION TO THE FACT that the interest on tax-exempt obligations, such as the Bonds will be (a) included in a corporation's alternative minimum taxable income for purposes of determining the alternative minimum tax and the environ- mental tax imposed on corporations by Sections 55 and 59A of the Code, (b) subject to the branch profits tax imposed on foreign corporations by Section 884 of the Code, and (c) included in the passive investment income of an S corporation and subject to the tax imposed by Section 1375 of the Code. EXCEPT AS STATED ABOVE, we express no opinion as to any other federal, state or local tax consequences of acquiring, carrying, owning or disposing of the Bonds. WE HAVE ACTED AS BOND COUNSEL for the Issuer for the sole purpose of rendering an opinion with respect to the legality and validity of the Bonds described above under the Constitution and laws of the State of Texas, and with respect to the exclusion from gross income of the interest on such Bonds for federal income tax purposes, and for no other reason or purpose. We have not been requested to investigate or verify, and have not investigated or verified, any records, data, or other material relating to the financial condition or capabilities of the Issuer, and we have not assumed any responsibility with respect thereto. We have relied solely on certificates executed by officials of the Issuer as to the availability and sufficiency of the Net Revenues of the Issuer's Utility System. Respectfully, kA 9 , Notice of Redemption NOTICE IS HEREBY GIVEN that the City of Sanger, in Denton County, Texas, has called for redemption the outstanding bonds of the City as described as follows: CITY OF SANGER, TEXAS UTILITY SYSTEM REVENUE BONDS, SERIES 1977, dated May 15, 1977, maturing May 15, 1993 through May 15, 1996. in the aggregate principal amount of $145,00 for the redemption price of a principal amount thereof and accrued Interest to call date of the Bonds so called for redemption at Ameritrust Texas National Association, Dal- las, Texas. Call date: May 15, 1992. On May 15, 1992, interest on such Bonds shall cease to accrue and be payable. CITY OF SANGER, TEXAS UTILITY SYSTEM REVENUE BONDS, SERIES 1982. dated June 15. 1982, maturing May 15, 1993 through May 15, 1997, in the aggregate principalamount of $250,00 for the redemption price of a principal amount thereof and accrued interest to call date of the Bonds so called for redemption at Ameritrust Texas National Association, Dal- las, Texas. Call date: May 15, 1992. On May 15, 1992, interest on such Bonds shall cease to accrue and be payable. THIS NOTICE is issued and given pursuant to the redemption provisions in the proceedings authorizing the issuance of the afore- mentioned Bonds and in accordance with the recitals and provi- sions of said Bonds. NOTICE IS GIVEN that due and proper arrangements have been made for providing the place of payment of said Bonds called for redemption with funds sufficient to pay the principal amount of said Bonds and the interest thereon to the redemption date. In the event said Bonds, or any of them are not presented for redemption by the date fixed for their redemption, they shall not thereafter bear interest. IN COMPLIANCE with the Interest and Dividend Tax Compli- ance Act of 1983, taxpayers making payments of principal due on debt securities may be obligated to withhold 20% tax from remit- tance to individuals who failed to provide such taxpayer with a val- id taxpayer identification number. To avoid the imposition of this withholding tax, such bondholders should submit a certified tax- payer identification number when surrendering the bonds for re- demption. NOTICE IS FURTHER GIVEN that the Bonds should be sub- mitted to either of the following addresses: In Person In Writing Ameritrust Texas National Association Ameritrust Texas National Association 1900 Pacific Avenue, 14th P. O. Box 2320 Dallas, Texas 75201 Dallas, Texas 75221-2320 Nel Armstrong, Mayor City of Sanger City and County of New York, ss.:- Joanne Ruvolo, being duly sworn, says that she is the Acvertis. ing Clerk of THE BOND BUYER, a daily and weekly newspaper printed and published at One State Street Plaza, in the City of New York, County of New York, State of New York; and the notice, of which the annexed is a printed copy, was regularly published in :aid THE BOND BUYER on ubscribed and sworn to before me this of� ' ALICIA PADILLA Notary Public, State of New York No. 01-4955198 Qualified in Kings County Commission Expires August 28, 1993 Advertising Clerk 0 0 0 0 0 0 0 0 0 IWltnafr I Uaya vlZ a, iIVRGT- CITY OF SANGER, TEXAS NOTICE OF INTENTION TO ISSUE UTILITY SYSTEM REVENUE REFUNDING AND IMPROVEMENT BONDS, SERIES 1991, IN THE PRINCIPAL AMOUNT OF $2,3001000 Notice is hereby given that the City Council of the City of Sanger, Texas, intends to consider for passage, at a Regular Meeting to be held at 7:00 p.m. on November 18, 1991, at their meeting place, at City Hall, Sanger, Texas, an Ordinance authorizing the issuance, sale and delivery of an issue of bonds to be designated as "City of Sanger, Texas Utility System Revenue Refunding and Improvement Bonds, Series 1991", providing $800,000 in principal amount of bonds for the purpose of improving and extending the com- bined Waterworks, Sewer and Electric System, and provid- ing $1,500,000 in principal amount of bonds for the purpose of refunding the outstanding City of Sanger, Texas Utility System Revenue Bonds, Series 1977, Series 1982 and Series 1985, for a total aggregate amount not to exceed $2,300,000, with such bonds to be payable from and secured by, a first lien on and pledge of the Net Revenues of the City's Utility System, being the City's Waterworks, Sewer and Electric System, all as will be further described, defined and provided in the aforesaid Ordinance. Said bonds will bear interest at maximum rates not to exceed 15% per annum, will be scheduled to mature serially within a maximum of not to exceed 30 years from their date, and will be subject to redemption prior to maturity, and will have such other and further characteristics as will be provided in the aforesaid Ordinance. Said bonds will be authorized, issued, sold and delivered pursuant to Articles 1111 through 1118, V.A.T.C.S., and other applicable laws. Nel Armstrong, Mayor City of Sanger .,qf x ,t* 4 • a- • xM1 _ _ I s 1 s - _ ^e _ t _ mWtk` PRINCIPAL STATE OF TEXAS AMOUNT ;{(Igals '...,'Z7 — RUrUeIS:EiH COUNTY OF DENTONlYmadL�H� Ti#V of 30 ttnger, extts $��-���_ gnxnl, ARfilitU ftstem Wdunding anb Improvement iftuenne None SERIES 1991 DATE OF INTEREST RATE MATURITY DATE ORIGINAL ISSUE CUSIP NO. d December 1, 1991 it `•y,.'- ON THE MATURITY DATE specified above, the CITY OF SANGER, in Denton County, Teaas (the "Issuer"), being a political subdivision of the State of Team, hereby promises to pay to A N'w nit\ :eat I tl j{pxaU I � l a4. or to the registered assignee hereof ylglp�l; (either being hereinafter called the "registered owner") t, DOLLARS Nv the principal amount of and to pay interest thereon from December 1, 1991 to the maturity date specified above, or the date of redemption prior to maturity, authorizing the issuaree of she Brands (da "Bann Ordinance-) to be on deposit wish she Paying Agenaci snar for ouch purpose as hereinafter at she irtceren ere per aznum apecifed above: wish inenw being pyabk ou Mey I5, 1992 xmiazmually shereafter on each November 15 provided; and such check or draft shall he sent by the Paying Agi nURegistrar by United Series mail. Rest -class passage prepaid, on each �+ and May 15, except that if the dale of authendention of this Ford is later than April 30, IW2, such principal amount shall bear interest such interest payment date, in the registered owner hereof, at she address of she registered owner, as it appeard ou the Iasi business day ,.. from disinterest payment date rent prceding she daze ofrstbor onsion, uokss such date of eudanticadon is after any Record Dne(lamemars, of de marsh at Interesting each meh doe ltM"Reeord One-) can the Rettomation Books kept by the Paying Al,mUReginrer, as hereinder '>f defined) but on or before the neat following interest payment date, in which cox such principal amount shall bear interest from such next described, or by such other method acceptable to the Paying Agent/Registrar requested by, ann in she risk and expense of, the registered t interest Bonn hennn be following payment date owner. Any accrued interest due upon the redemption of this prior to maturity as provided shall paid to the registered THE PRINCIPAL OF AND INTEREST ON this Bondare m lawful money office United Serer of America without exchange and surrender of this Bond for redemption and as the corpora¢ trust omc, of the Paying payable owner upon presentation payment principal v �j or collection charges. The principal of this Bond shall be paid to the registered owner hereof upon presentation sd surrender of this Bond AgenURegistrar, The Issuer covesana with the registered owner of this Bonn that on or before each principal payrrrem date, interest payment t f at maturity or upon the date fixed for its redempton prior to maturity, at the Principal corporate Wn office of Ameranust Texas National date, and acervd interest payment date for this Bond it will make available ro she Paying Agem/Registnq from the "Inserest aM Sinking ` Association, Dallas. Texas, which is the "Paying Agen✓itegistrar" for this Bond. The Payment of interest m this Bond shall be made Funn" created by she Ford Ordimmce, the amounts assulred ro provide for die payment, in immdi rely available funds, mail principal by she Paying Agent/Registrar to the registered owner hereof on each interest payment date by check or draft, dated as of such interest of and interest on the Bonds, when due. '•.h.:N. payment date, drawn by the Paying AgentARegisuar on, ann payable solely from, funds of she Issuer required by she ordinance CONTINUED ON BACK - j IN WITNESS WHEREOF, the Issuer has caused this Bond to be signed with she facsimile signature of the Mayor of the Issuer and countersigned with the facsimile signature of the City Secretary of the Issuer, and has caused the bR' official seal of the Issuer to be duly impressed, or placed in facsimile, on this Bond. PAYING AGENT/REGISTRAR'S AUTHENTICATION CER77FICATE (To be executed if this Bond is rout accompanied by an ` esecured Registration Certificate of the Comptroller � y\ of Public Accounts of the Stale of Tessa) . ... .-"I atSgM Cr', � ............ e'. +y /t is hereby certified diat this Bond has been issued under the pro visioru of the Bond Ordinance ` vrr • described in the text of this Bond; and that this Bond has been issued in conversion or replacement of, i� • • ' win erchange for, a bond, bonds, or a portion also bond or bonds ofa Series which originally war approved • by the Attorney General of the State ofTesas and registered by the Comptroller of Public Accounts cf the + - • o o Sate of Texas. • a •`•5,• •'+ •' • : .' /�/I • • • • • • �% •+ ! ••.......: +' Ameranut Texas National .Associmion ' •' f^''s-{g��-�•( Dined Dallas, Tester t •• •QA'u4�-: •• J araaauu'ASva.ssy" • • s` • City ehetyr}�• • • ♦♦•..• • X � � • • •• Y'd:i� U I • r• • ••••• • BY Authorized Representative a rry CONTINUED FROM FRONT _ IF THE DATE f the pay, t or the Invented f o umrw W on s Bond Mail be Saturday Sunday I gal h Inlay day , the f the asslgvlvm and bumfall, ofall,ro a ponn of Its Bond may be deltveM by the Paying Agent/Regrstter I cons arran ' on hob banking mmnmens, the ty where the Paying Age ✓Rtagatmr a falsest are tlmsued by I w use rd t lose f and —hag to ill Bead a0 , din farm and Iumm as pan dd ,the m I paragraph Aeseof f the ce ors aril exWunge then din date to ch payment ahsH be the most au ed 8 day wh ch i m h Saturday S day I gal Imlidry m day no wh h _ _ daats payee town dare Ihonxed m close d payment se, h data shall le, the mom force ud eft . f mode th goal f oth B Ms The Iss shall per the P y g Age,/R g tin mdoN ax mary, fan aM ebamen f me6n8 h Imnsf be, — the enna lsquesu g h tree fen ball Pay any uau odm g _ mm,mal han. mq red m be pa d w f rap- there, The Poy g t g guarershall rotbe nquued t .4, uaosfa f rate Vable.m. Bind ypomonkrtof()d g the pmand cemmemmg —Tbusfio . as far Lau (goods WdWlY deed Dawbe 1 iwi Named, aamdaea rnth the Caw on an and unth Os, lose fb.nmssawy R—,d Data ledmgwlh shop—' fbus— on the rod fo0aw.g p-apal aemifuymant _ laws of the Stare of Texas i Ore pnm,p l amou I of $2 230 000 fo the pu pose of pros ding $800 000 f unpin ,g ad umrmg dam m () wM rtslma m any god many pond thertofalld f ademptm pnmm ream ry w tin 43 days pnorm a aedempu n th cmvbmd W t so, rY Sewe ad Ricrac System ad proud ng $1 430 000 f th pulpy f rtin d g all f it uaund g Cry f S ge T x. UW ry Sy rem Rev Bond San 1977 Se 1982 and Stan 1985 ON MAY IS 2W t ant' dale , ream she Bolo f dus Sews may be rdremrd Proa , then sWrJ Id mamma , th dal Th g maned cam f th Bond hall he deemd ad ueatd by the 1 ad din Peyl g Ag V&9.. as the baol mown hereof f all puryoscs Ind,g Payment d d schurg f Iiubd ry po the, Bod m throre I f eltpsyme I ad the Iss d the Pay g AS VReguvar shall cot be ifrered by any more m thermometry was flit Iss w N fads den d from any a0aN nod bwful sass as whal or , pan and f sepan, the Ism shad! ALL BONDS OF THIS SERIES are ssuabl sekly ss fully regimred boils wnhat mmrw coupo. loth denommau f lee and du guam the nmmnry main m ar din amw t that u m he rcdumd err d less dun Mle main ry m he gild _ the I shall dlrct th P YI B Age t/R g, firer to call by lot (prorated that a poem of Bond may be redeemed only I an mlegrel any.multiple f f5 000 b pmdd N the god Ordnance ihu Bad o any wadeemd soma hereof mar a the teams, rib reg t red the as Igna o assignmes hereof be a ens! min and exchanged far a ldse aggrega p , pal ama I f ran., f $5 000) a the rtdamp"pals f the prom pal amount thereof plus amd mmre t t the data fad fin rdempt AT LEAST 30 day pro t th dam Rued fin sari, red.,.. f Bonds or parse. therm( Pn t m,un7 I such rd mpaa shall be pail shed olae, fivaMal publaauan loemal repener f Rantatod mubaa among scum es deal rs fully miss fared_bads, w Nat t rest en parts pay bl m the Pproprum regumad owner easigna uss%� as the use may be but ,6 Nta same memory dam and bung interest t the same rom , any dernmwua deammau . many mmgml m It pl f $5 000 as requess d to wrung by din ppropmm rtg rend owe sat gene r ass gone, . the use may be also sowed r of The C ty f New Y k N w Y k f all ding bin rot Ian id m The Bad B ye, and The Well Sine[ Journal) the San f Texas (m<I d g b [ non I aural to The Texas Bond Repom) Such n t also shall be se t by the Pay 8 Ag UR g t by Un rd dsu Boil I the Paying Agem/Reglsmar f omell no all fie leardame w th rhe form and proadum se, foM, the Bond Dad w , The Is of hall p y din Paying Agem/Regnuar a standard or counmary fees and hang f r trans( 8 con erung and schmgi g Sure, mad faubs posug preps d not la th. 30 days plan ro the data Bad far y such rdempuon to the reguterd w of emh Bind m be rdrand u address. a ppuned a th 45th day pro t such rdemps dam pre dd h_the any Bad any pain thereof but the one mquem g wh ma.m con on ad xclaw aball p y any tad r gov ream sed battles respa d to be Pad wah mapct thereto as adman prod t m th, eae= im hid d ge of. vema aril selang 1.ham m acnd mad ve h .tic airy d fat there. the mdm8 mannag thereof sha0 a feuds, sal Ny The Paying Agut/Reguuas shell not be lops m make mY surd . coo nod rycha� yrQQ g f lscnd rownrm g w f Rea moss (N proud gs f din tempt f am' god nd t hereby pc fNlyp. dal tut N publ au finch tiff . rtq rd abo bull be the WY moue emally rcq red ss ith . prcreq u re I ds d mpa f any B d o w thereof By dr data fad f h due be Paymg All for Um lose f buvneu an any Record D t nod end B w ds din opcnln8 f h.nms��s de mik T IIGy,B P . Pal t paymm t dal (U xrth mpss m anY Bond or podia thereof calld for rdempno pnyr to nuyf�, ssAAflyy dddd3553 days pn r m Its red cop date IN THE EVENT Fly Agaa/R f ds Bads hanpd by�be Issue port any se, redempnan p. u on $ball made wM th ,/Reg tar the payment f Ne rcquucd aedempt an f the Bolt o pontm. thereof wh ill eon t be . 14-11 Plus eanld unernt h ran m the d.. any g g soar u •sl�gra o abew tt eases to ass. rah the Ism has avenmrd m the But d Ord mame dot t promptly ell plan t a can Aod I Bally �u•�'jd n•s�mre Teal( W -Bonds dam toed f If oche watt. mouse f rdempron b publahei nd fdu prove, f sell paYm^"t u coed ill. pna rd pm rly will cause wnam ramas rbermf 1 hem ld m the regumr� Rj ban fe Bads .no.thacrfwh hare[ be as damd thereby mentus0y shall be uratd a redmmrd p t the scbd Id are es nd f y ahull lists bca Itcot fte din dam fad f dempal ad deny shall of be gandd. be 6 m awd g uPt RIS HEREBY amfid red ad ovewvted tld dos Bad lus'�en dWY+IB a1Wly thrum stiy ydll lad rynua t a the law f din Sum f T n that ell ace, cod uo. nd N,Ba r5gluAl AoN m be pe f Q'* rsf , d be doe pmed t f r U, f th rtg mad nave I rue e th ndwPba p le pl d ,rent from th Paying AgaURegamm, at f din Qr — m the No—U .nave and del very of the, Bond ar a'i w wlu h I a a pan M a been pedoDrnmdd axlmd aril fads pro dd fo a ch payment If Patinas Iany Rod shall be rdee ed a sabsumte Bad or Bads haysng the sae mab dy dan bun mre t d the same cot m any danmnm, on or do.. can . any ,n nwluple of $5 ODD at din women mq tit f the been done, mcondame wN law Nat the, Bad u a specW obhBjoA ds� d Lssmr l d the the ptaos�W�I�nV dos Bod mgeds w th ache aasundmg mew hod f tls, Iss u Y lad by frst I m f din No Re as g gal rtgurered can d 9919 t pane pal m at equal m din ndn,d pain th reef wdi be is end m th g temd owe Po yay �rBAsec ad P*8 f.I.UW ty Syse re be g f W t n 11s Sewe n�Maas, t m • • . s • • • th round therm(( ll non at th pe.e f m I all as pro dd ,the Rod Ordnua s, THIS BOND ORANY POR710NOR PORTION SHEREOFINANYINTEGRALMULTIPLEOF$5000.syheasugmd W THE ISSUER he, rc ervd the nght blest m the rum u mRq(d and doyd by ne•.mna u� Ordwntt a din u g N s Se of Bad means dd bowl far tym an hods whmh elm maybe matespytele(tdk ad nand b�e�rs�en onad pldge shall be transferred only m th R g man, Book, f the Issuer kept by the Paying AB dR Boom sang m the lapaa,y .rtg_ for the Boils upanthamrmsa d—dno. sett nh din Bad Ordmanu Amo Sed. agmre—f mochas gnmtam ndua.f of the afonesud Net Rene tie, i • THE REGISTERED OWNER HEREOF"' ,ur•ar �e ghtd demand pyY'A'*f the, Bow * west lmrca out of th But d m t be prase Id ml dercd m the P y g Ag t/R in ran tagah w th prose ,a.m a f a--t form f iguamre f igau find and o to he n.sd by eassua from y ElmgsQ86tacevv fR ty ,Min dean, ills B,9 Ord wale BY BECOMING Ac�egarercd ifi and w th guanant" It I y, t the P y g Ag Obli; d m g m. f du Bo d any pone pan Moen(, any im,gr loll f $5 ODD to the don Bad h fts rtg mod cane f th Bond can then yank Idg, el f the t d pmurons f the Bond Orda mean m be bound by h temaj dun Bad Odwy d ly m ass Bna genes, whose come wen or ar, pan. pomp. he�fu ertmben.f rrd and rtgsvered The fran fAa gmnrm pn[d endorscdan NU Bad stall be xsstvi by the regarerd grin s Q govu ckmwlWges ]m aundd and la aa061 to .pea „al if Wwv cos cad mord,QQ gli trrling bdy o[ L✓SuT Sod agrcrliha—t lfi •lam ed prom as wro ad ly Normd an may repress re, m demo th . gam whereof A cow Bad Bands payabl s h a Rau r f s god soil Bond Ord cam vsumle . n Tjlgpsan� n re® mad owe hem of ndk Izsm • — 18 ee (wh h f w ll be f w reg, t red wmr wmrs f b w Rod Bond) r t h pre lab t old can • • _ •o••• •••• LAW OFMCES • • • MCCALL • • PARXHURBT 6 HORTONas 717 NORTH HARWOOO 2B50 ONE AMEBICAN CENTER NINTH ROOR a02 ONErHIVE(#A& PLACE • O • • • 4 AUSnN TEXAS 78701 3234 DALLAS TEXAS 75201E687 SAN ANTON1* 4E); fj A 2053504 ••: • • • OF SANGEP_ _ anth ashandh nrefd col, 'th Nrcalmne, I.mg� �Sjreepsnsuantmibe UTILITY SYSTEM REFUNDING AND IMPROVEMENT REVENUE BOND noneaNf G. tTh yPC�roIw da p w Po .y ryof the hb&qg ads 'Po idwf the Ecrow Ag t pars. t m the Escrow Agree, t for the purpose all Raundd Bons & urd w ds he praceW, SERIES 1991 DATED DECEMBER 1 1991 IN THE PRINCIPAL AMOUNT OF S2 230 000 -fish f the Boils and th maw m� • BASED ON SAID EXAMINATION IT IS FURTHER OUR OPINA Nat the ImnW Bond ad Dell u eoa is Issue bin duly f rated ad th t th buoal Bond has bee d ly nand and d h erect B , as r! reS I w evdt •tJpt s may b Install AS BOND COUNSEL f th Cry f Seng T ass (th I ) w, h oar d , the I gal ry and WWiry f the bond Iss md"Y dead by th bond d s rfed bo a (the fount Bond )which Wted Boil rig ually h. bee I, d and d h red full, bond dw bl M 15 6 Ih 1 sal by 1 w ppl ab) m the I hating m bankruptcy on gareab d th ion% meVers offeb,8 crd fors tad'. Bad common. d Defwb Bind (brad afle rtf nradio .]I— aly as Bads•) w II valid ad. gully bmdag sputa . a $,el atagtmred what merest coup.. ands Paine pal amount thereof pay o y —,a0— a and w s. Inland balm" of each ou tallme t of pan pal mpamvely bung morel from the dot f th I cal Ba d m the scheduled obhg.— of the Issuer and fat the prone pat fad mIs— th Boils ere psya64T[om rd s mined by a first Icon o and pldge f Net Reuu a f din 1, r Uttar Sy rem be,g N W I m ka Sewn nd Eme- 21. d dam ( m nanry ) to the dot f prepay, t adempurn f m h , Wlm t f pro pal t th fell w g mar pe anmon \ THE ISSUER hem ress d the nghl s bjmd a the roe, coma anted , th Bond Ordemlk m ase addlwual parry rt tie f c h memory re p,cd sty bond whi h also may be mule payebl from and all: red by fuss I and pidg f the N t Revs . ,a.nry 1992 470 am. ry 2002 6 40% THE OWNERS OF THE BONDS hall w have the gM t demand paym t f Nu oil geurn a t of my fors mud or m be nosed by ova _'y 1"I 4 90% mammy 20W 6 55% IT IS FURTHER OUR OPINION seeps as dsttussed below flat the a last o th Bala u excludabl from the g.ss ncmro memory H", , .% roam ry 2004 17(1% —rdy 1995 5 25% ma. iry 2005 6 80% _ly 1996. 540% mum ry20a6 690% f the owrmn f fed d,cm a an propose ode the smmaes ugulao . Wbluhd ai g and . n dre . tit g th dam f fen op e W re mnhe f th p me that th Bond rc a pal t. ty bolds d th t econd,gly , f Boils will [be mauded.an,dwdualmemTo realte,aa arImumuxprtmm aianare Sou S/()(5) fth 1 temal Rave" .nty H'" 5 60% mu.nry 2001 100% Code of I986 (the Cd ') Is apressmg the of seen rbooed.Form. we have usbd ad assume compluna by th Lauer w th mawnry 1998 5 80% .iry 2008 7 05% euro m rcpns.mt . ad. aunts regarding times and reart of th prceds f the Banda W call year a moon to the f a _,dY 1999 6 o,% roam ry 2009 7 IS% rnatu.".00 6 15% maturry 2010 7 15% dud f 1 rc by th Ls co t .rattly vnths he rtp.. an d a m y c ua th attest o be Bond I be— cl dabm , gross . earely m th dew of assaults f ds Boma mammy 2MI 625% anamry 2011715% WE CALLYOURATTENTIONTOTHEFACTNa,th amanl —..T, bl genere, such. she Bads wdI be I),Idd .To— W.— musuramessubi mom for W,,D— f detenwog f Wt awhve ml.wml tax and N m msmal wM mmreat soy bl M y 15 1992 ad ornamentally on each N ender 15 r M y 15 f rra0er and withshe pne pW off coral ma unposd a coTo—.by Sul a.55 d 59A of the Code (b) subject to Om breach prefts ma unposed o core go .lporoe . R d be.g a bloc m prepayment or red opt pn t th sehdd u ma.nues at the opera, or the Issuer on May 15 2001 o any data therea0e an ao dance w th the to cos and continues stated as th re d f the Intend Bond Th I.ual &d any a the mquent by Sub. 894 f th Cod and (e) ocludd I the pass me t In.me f an S corporanon and subject to the cox mposd by Seen 1375 f th Code f the.& -rod be n.fmd and aamd min and/ ud—Sdf folly mV trust bond, whilst temar coapone Ie E%CEPTAS STATED ABOVE we pressmo p,er.manymbe federal sum Irralcoxcoose nerees fagoumg arrymg N de omtau f S5 000 any merge mWupl f S5 000 ar se, h bonds gals may he ua.f mat ad/ •changd, a8 blss I the . d do. bad and ds men a pm dal i the rdi. Nona g N f the N u d Bod (the Bond Ondluaece T wrong dap o,g f lh Barb WE HAVE ACTED A$ BOND COUNSEL f the I se, for the sole Purpose of ate retag upon w th, pea t th 1 gel ry w th any ch bonds whi b are rtg m ad nth t cared and d I d c rile ce wM the Bo d Ord- ce bang h reunder called M W d y of the Bonds dnc bd fie d , the Comumban ar laws off Strom IT— d w th pea t din I from Defm,re Bonds VIE HAVE EXAMINED the pph.bleadpenmemp, ran. film Consmuu d Uwe fthe Sam fT sas and tn.rnps gross ream fthe.rereaa soh Bondsf r fled mare a a a pury.n and f r no ad- reasoaar propose, We ha eaot been trainload emgere venfy and Iss a not mvnuened nfd any—r&daa ode mat rW re. g, the EnamW.dt or ofarUOd p neoldlag f din Iasn th Eonma, ABraemc t datd Demvbe 1 1991 bevel rise Is and Am anus, T a. N 6 .0 Aasama DWI T AssEacmw Agrm (the Ecmw Agrtem t ) and f perm t . a ref t lit N momama .,bd na f the b d w he net and y mpo.bd ry w threspect fear W h, rend sol ly cerofcere excutd by if ul f the Iss u lathe dab 1 ty adoff ry f th N t R . f the Iss Udl ry System _ flits lmnal Mr and Def In Bo d adth i m ndd It ry fit, 101Brad .Wud,gf .a red ,WBond ad p td Puorcn of the f n f Defmm Bonds totally mam mall bit by the Issue f on of and exchange to th I net Bond BASED ON SAID EXAMINATION IT IS OUR OPINION that the Ecrow Agae,me t bes, been duty althomd uaumd and dd sad by th pain s thereto end comnmtn brad g and acnbl gtam.t f the planes N rem .Nance wslh ham nd that the bond as d f d lb Bad Ordiva ce th gg,pm p re, pal m t f $1 240 ODD be lag ref dal by the re mastadmg ulyI the Writers, fmus 9the I rs pro dd by ad ore aavred by ends pay bl sal ly from the Esemw Agreement RespaduBy MCCALL, PAHIOIURST 6 HORTON CERTIFICATE I th ed n gned C ry Se many of the C ry f Sanger T an h by anufy Ib t the Ito d f reg g I me roll M mmct c py off omen f M Call Pankh Na & H tin Attain y t law as to th lid ry ad are my f f bond deor bed th rc wh h p I we dad and dI red mum dy wthth agi WdI ry find bad ASSIGNMENT FOR VALUE RECEIVED fie and g d Sir ed sun f hi B d d ly oath nod W, min,, apt mry th lay hrreby no fg. rM Bond t Mrragam Smfal and h reby -ably .cot can d appoi t ma mry r f ngunaan of rho Bind a f PalinB Agem/R Smrar Rrg4nadm Ba4 w1N JWi pawn flub rf m du prrmrs D. d Signal— G.— d Ope Aa.9 _.A_ , bully Cry Somerat), N077CE 7hf lgemare man be gm onmd by on mbl fah New Pont Stu* Euha g mom ran/ bank nrut rom➢any R gl t d Ow N077CE 7hu airman corm rom pad cash the aam f he&Sar red Own p➢eab g m the fac fthu Bord m serypmdrak rAml oh tin mlaegemal any change wh--