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HomeMy WebLinkAboutResolution - 3523 - Certificate - BRA - Special Facilities Revenue Bonds, Series 1991 - 01/10/1991Resolution #3523 January,10, 1991 Item #21 CERTIFICATE FOR RESOLUTION (1) APPROVING A RESOLUTION AUTHORIZING AND REQUESTING THE ISSUANCE OF BRAZOS RIVER AUTHORITY SPECIAL FACILITIES (LAKE ALAN HENRY) REVENUE BONDS, SERIES 1991; PRESCRIBING THE FORM AND TERMS OF SAID BONDS; PROVIDING FOR THE SECURITY AND PAYMENT THEREOF; AUTHORIZING THE FORM AND USE OF THE OFFICIAL STATEMENT; AND RESOLVING OTHER MATTERS RELATING TO THE SUBJECT; AND (2) REQUESTING THE ISSUANCE AND SALE OF SUCH BONDS THE STATE OF TEXAS COUNTY OF LUBBOCK CITY OF LUBBOCK We, the undersigned officers of the City of Lubbock, Texas, hereby certify as follows: 1. The City Council of said City convened in REGULAR MEETING ON THE 10TH DAY OF JANUARY, 1991, at the City Hall, and the roll was called of the duly constituted officers and members of said City Council, to -wit: B. C. "Peck" McMinn, Mayor Joan Baker Bill Maloy Gary D. Phillips Ranette Boyd, City Secretary M. J. "Bud" Aderton T. J. Patterson Maggie Trejo and all of said persons were present, except the following absentees: None , thus constituting a quorum. Whereupon, among other business, the following was transacted at said Meeting: a written RESOLUTION (1) APPROVING A RESOLUTION AUTHORIZING AND REQUESTING THE ISSUANCE OF BRAZOS RIVER AUTHORITY SPECIAL FACILITIES (LAKE ALAN HENRY) REVENUE BONDS, SERIES 1991; PRESCRIBING THE FORM AND TERMS OF SAID BONDS; PROVIDING FOR THE SECURITY AND PAYMENT THEREOF; AUTHORIZING THE FORM AND USE OF THE OFFICIAL STATEMENT; AND RESOLVING OTHER MATTERS RELATING TO THE SUBJECT; AND (2) REQUESTING THE ISSUANCE AND SALE OF SUCH BONDS was duly introduced for the consideration of said City Council for passage and adoption. It was then duly moved and seconded that said Resolution be adopted; and, after due discussion, said motion, carrying with it the adoption of said Resolution, prevailed and carried by the following vote: 7 voted "For",voted "Against", _0 abstained, all as shown in the official Minutes of the City Council for the Meeting held on the aforesaid date. 2. That a true, full, and correct copy of the aforesaid Resolution adopted at the Meeting described in the above and foregoing paragraph is attached to and follows this Certificate; 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 Services. The power granted in this section shall be exercised in accordance with the following criteria: the Bonds are sold upon the terms and conditions as set forth in the Notice of Sale and Bidding Instructions and Official Statement dated January 4, 1991, and in the professional judgment of the Assistant City Manager the terms of sale of the Bonds are feasible and within the City's ability to pay. Passed by the City Council this 10th day of January, 1991. . C. MCMINN, MAYOR ATTEST: Ran tte Boyd, City Secretary APPROVED AS TO CONTENT: obert Massengale, Assistant City Manager for Financial Services of said Meeting pertaining to the adoption 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; and 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 adoption at said Meeting; 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 City Council 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 SEA the 10th day of January, 1991. City Secretary Mayor RESOLUTION (1) APPROVING A RESOLUTION AUTHORIZING AND REQUESTING THE ISSUANCE OF BRAZOS RIVER AUTHORITY SPECIAL FACILITIES (LAKE ALAN HENRY) REVENUE BONDS, SERIES 1991; PRESCRIBING THE FORM AND TERMS OF SAID BONDS; PROVIDING FOR THE SECURITY AND PAYMENT THEREOF; AUTHORIZING THE FORM AND USE OF THE OFFICIAL STATEMENT; AND RESOLVING OTHER MATTERS RELATING TO THE SUBJECT; AND (2) REQUESTING THE ISSUANCE AND SALE OF SUCH BONDS THE STATE OF TEXAS COUNTY OF LUBBOCK CITY OF LUBBOCK WHEREAS, on May 11, 1989, the City of Lubbock, Texas (the "City") and Brazos River Authority (the "Authority") entered into that certain Water Supply Agreement (the "Contract") in order that City may obtain an additional surface water supply; and WHEREAS, in order to provide the additional water supply the Authority is to construct, maintain and operate the "Project" (as defined in the Contract); and WHEREAS, pursuant to the Contract, upon request of the City, and only upon its request, the Authority is to issue and sell Bonds (as defined in the Contract) in an aggregate amount sufficient in the opinion of the Authority and the City to pay all Project Costs (as defined in the Contract) and to establish any funds required by the resolution authorizing the Bonds; and WHEREAS, the Contract provides that the initial resolution authorizing the issuance of the preconstruction bonds and construction bonds for the Project (the "Bond Resolution") is subject to approval by the City; NOW THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF LUBBOCK: SECTION 1. In accordance with the Contract, the City and Authority have determined that the Authority shall issue and sell bonds more particularly described as "Brazos River Authority Special Facilities (Lake Alan Henry) Revenue Bonds, Series 1991 in the aggregate amount of $39,685,000 (the "Bonds"). SECTION 2. There has been submitted to the City the Bond Resolution substantially in the form to be adopted by the Board of Directors (the "Board") of the Authority on January 21, 1991 and bearing the draft date 12/17/90. SECTION 3. The Bond Resolution is hereby approved by the City, and the Authority is requested to issue and sell the Bonds. SECTION 4. The City's approval of the Bond Resolution is subject to the review and approval of the terms of sale of the Bonds on January 21, 1991. The City expressly delegates the power of review and approval to the Assistant City Manager for Financial LAW OFFICES Mr. -CALL, PARKHURST & NORTON 2850 ONE AMERICAN CENTER 717 NORTH HARWOOD AUSTIN, TEXAS 78701.3234 NINTH FLOOR TELEPHONE: 512 478-3805 DALLAS, TEXAS 75201-6587 TELECOPY: 512 472.0871 TELEPHONE: 214 220.2800 TELECOPY: 214 953.0736 March 13, 1991 Mr. Robert Massengale Assistant City Manager for Financial Services City of Lubbock P. O. Box 2000 Lubbock, Texas 79457 �-3S2 3 402 ONE RIVERWALK PLACE SAN ANTONIO, TEXAS 78205.3503 TELEPHONE: 512 225-2800 TELECOPY: 512 225.2984 BRAZOS RIVER AUTHORITY SPECIAL FACILITIES (LAKE ALAN HENRY) REVENUE BONDS, SERIES 1991, $39,685,000 41 Dear Mr. Maw e: 11 Transmitted herewith for the City's file is a copy of the transcript of proceedings in connection with the above issue of bonds. Yours very truly, McCALL, PARKHURST & HORTON BY: HHM:am enclosure '�-w W"�'j V,-% Draft 12\17\90 RESOLUTION AUTHORIZING THE ISSUANCE OF BRAZOS RIVER AUTHORITY SPECIAL FACILITIES (LAKE ALAN HENRY) REVENUE BONDS, SERIES 1991 IN THE AGGREGATE PRINCIPAL AMOUNT OF $39,685,000; PRESCRIBING THE FORM AND TERMS OF SAID BONDS; PROVIDING FOR THE SECURITY AND PAYMENT THEREOF; AUTHORIZING THE FORM AND USE OF THE OFFICIAL STATEMENT; AND RESOLVING OTHER MATTERS RELATING TO THE SUBJECT WHEREAS, Brazos River Authority (hereinafter defined as and called the "Authority") was duly created and is lawfully operating under Articles 8280-101 and 717q, V.A.T.C.S., as amended (the "Acts"), all pursuant to and in furtherance of the purposes of Article XVI," Section 59 of the Constitution of Texas; and WHEREAS, the Authority is authorized by the Acts and the applicable laws of the State of Texas to exercise the powers therein granted, in order to provide for the conservation and development of the surface waters in the Brazos River basin for beneficial use; and WHEREAS, the Authority proposes to construct and operate a dam and reservoir on the South Fork of the Double Mountain Fork of the Brazos River, to provide a long-term, firm supply of surface water to the City of Lubbock ("Lubbock") pursuant to an agreement with Lubbock; and WHEREAS, in the accomplishment of said purpose, the Authority has determined it necessary to issue revenue bonds of the Authority secured by payments made pursuant to such agree- ment, as authorized by and in accordance with the applicable V 1. laws of the State of Texas; and WHEREAS, the Authority has heretofore issued its Brazos River Authority Special Facilities (Lake Alan Henry) Revenue Bonds, Series 1989, dated October 15, 1989 (the "Series 1989 Bonds") in the aggregate principal amount of $16,970,000, as the first installment of such bonds to be issued for the purpose of paying the costs of acquiring, constructing and operating the Project; and WHEREAS, the Authority has determined that it is appropriate to issue at this time bonds on a parity with the Series 1989 Bonds for the purpose of completing the cost of acquiring and constructing Lake Alan Henry (the "Project"); THEREFORE, BE IT RESOLVED BY THE BOARD OF DIRECTORS OF BRAZOS RIVER AUTHORITY: ARTICLE I DEFINITIONS AND CONSTRUCTION Section 1.1. DEFINITIONS. Throughout this Resolution the following terms and expressions as used herein shall be con- strued and are intended to have the following meanings, to - wit: (a) "Accountant" means an independent certified public accountant or an independent firm of certified public accoun- tants; (b) "Acts" means Articles 717q and 8280-101, V.A.T.C.S., as amended; (c) "Additional Bonds" means the additional revenue bonds on a parity with the Bonds which the Authority reserves the 2 41 right to issue in the future, as provided in this Resolution; (d) "Agreement Date" means the date of the Contract; (e) "Amortization Installment" means, with respect to any Term Bonds, the amount of money which is required to be depos- ited into the "Mandatory Redemption Account" for retirement of such Term Bonds (whether at maturity or by mandatory redemption and including redemption premium, if any) provided that the, total Amortization Installments for such Term Bonds shall be sufficient to provide for retirement of the aggregate principal amount of such Term Bonds; (f) "Authority" or "Issuer" means Brazos River Authority and any other public body or agency at any time succeeding to the property, rights, powers and obligations thereof; (g) "Authorized Officer" means the General Manager of the Authority; (h) "Board of Directors" or "Board" means the Board of Directors of the Authority; (i) "Bond" or "Bonds" means the Brazos River Authority Special Facilities (Lake Alan Henry) Revenue Bonds, Series 1991, authorized to be issued and sold by this Resolution; (j) "Capital Costs" means those moneys received pursuant to the Contract and required thereby to be transferred to the Debt Service Fund, the Repair and Replacement Reserve Fund and the Reserve Fund for the benefit of the owners of the Bonds and Additional Bonds; (k) "Code" means the Internal Revenue Code of 1986, and any amendments thereto; 3 (1) "Completion Date" means the date on which the Con- sulting Engineer certifies that construction of Lake Alan Henry is complete and the reservoir is operational; (m) "Construction Fund" means the Brazos River Authority Special Facilities (Lake Alan Henry) Construction Fund created by this Resolution; (n) "Construction Period" means the period of time commencing upon the Authority's award of the initial contract for construction of Lake Alan Henry and ending on the Comple- tion Date; (o) "Consulting Engineer" means an engineer with a favorable reputation for competence in water resources engi- neering employed by the Authority to provide consulting ser- vices in connection with Lake Alan Henry; (p) "Contract" means the agreement, dated May 11, 1989, as amended from time to time, between Lubbock and the Author- ity; (q) "Debt Service" means the amount of money required to pay Capital Costs, plus fees, charges, and costs such as those of the Paying Agent/Registrar, which are incurred incident to the handling and servicing of Bonds and any Additional Bonds; (r) "Debt Service Fund" means the Brazos River Authority Special Facilities (Lake Alan Henry) Revenue Bonds Debt Service Fund created by this Resolution; (s) "Depository" means the bank or banks which the Authority selects (whether one or more), in accordance with 4 y ` r law, as its depository; (t) "Eligible Securities" means those investment securi- ties described in the Public Funds Investment Act of 1987, Article 842a-2, V.A.T.C.S. from time to time, as amended; (u) "Engineering Report" means the report of Freese and Nichols, dated 1978, entitled "Feasibility Report on the Justiceburg Reservoir", as may be supplemented or amended from time to time; (v) "Lake Alan Henry" means the proposed dam and reser- voir (formerly known as Justiceburg Reservoir) and all related land and interests in land, water, water rights and all other interests owned by the Authority (whether corporeal or incor- poreal), as described in the Engineering Report as the "Justiceburg Reservoir", with said dam and reservoir proposed to be located on the South Fork of the Double Mountain Fork of the Brazos River, together with additions thereto and improve- ments thereof; provided that, notwithstanding the foregoing, and to the extent now or hereafter authorized or permitted by law, the term Lake Alan Henry shall not include any water or sewer facilities which the Authority finds by resolution not to be a part of Lake Alan Henry and which may be acquired or constructed by the Authority in the future with the proceeds from the issuance of "Special Facilities Bonds", which if issued will be special revenue obligations of the Authority which are not secured by or payable from the Net Revenues, but which will be secured by and payable solely from other contract revenues or payments received from any other legal entity in 5 I connection with such facilities; and such revenues or payments shall not be considered as or constitute Net Revenues of Lake Alan Henry, unless and to the extent otherwise provided in the resolution or resolutions authorizing the issuance of such "Special Facilities Bonds"; (w) "Lubbock" means the City of Lubbock, Texas; (x) "Maintenance and Operation Costs" means all costs of repairs and replacements of Project for which no special fund is created and all costs considered by Authority to be required for proper maintenance and operation of Project, including (for greater certainty but without limiting the generality of the foregoing) the direct costs of labor, equipment, supplies, materials, energy, professional services, supervision, engi- neering, accounting, administration, auditing, insurance and payments made by Authority in satisfaction of judgments result- ing from claims not covered by Authority's insurance, plus any additional cost or expenses in payment of claims in amounts which have been proposed by Authority and preapproved by Lubbock, and in connection with the fulfillment of its obligations under the Contract by taxation or as a result of actions requested by Lubbock or regulations or requirements lawfully imposed by the State of Texas, the United States, any governmental subdivision of the State of Texas or any federal agency, plus the share of Authority's unallocated general and administrative expenses determined annually by Authority's certified public accountants to be appropriate to cover Authority's expense of supervision and administration 6 attributable to its obligations under the Contract, plus any certified reimbursement amount due Lubbock under Section 28 of the Contract; (y) "Management Fees" means the fees by such name re- ceived by the Authority pursuant to the Contract; (z) "Mandatory Redemption Account" means the account by such name created in Section 4.2. (aa) "Net Revenues" means Revenues less Maintenance and Operation Costs; (bb) "Paying Agent/Registrar" means the banking institu- tion named in Section 2.5(a), and its herein permitted succes- sors or assigns; (cc) "Payments" means all payments required to be made to the Authority under the terms of the Contract; (dd) "Person" shall be as defined in the Code Construction Act (Chapter 311, Texas Government Code); (ee) "Project" means Lake Alan Henry; (ff) "Project Costs" means all costs of constructing the Project, including (without being limited to) all necessary costs for permitting, acquisition of land, easements and mineral rights, clearing, relocations, administration costs, planning and design, field supervision and inspection, engi- neering, legal expenses and expenses of financing and con- struction, and all payments and reimbursements to Lubbock as provided in the Contract; (gg) "Registration Books" shall be the books so designated in Section 2.5(a); F (hh) "Repair and Replacement Fund Required Amount" means the amount of $500,000 or such increased amount or amounts as hereafter required from time to time by resolution or resolutions of the Board authorizing,Additional Bonds; (ii) "Repair and Replacement Reserve Fund" means the Brazos River Authority Special Facilities (Lake Alan Henry) Revenue Bonds Repair and Replacement Reserve Fund created by this Resolution; (jj) "Reserve Fund" means the Brazos River Authority Special Facilities (Lake Alan Henry) Revenue Bonds Reserve Fund created by this Resolution; (kk) "Reserve Fund Required Amount" means the average annual principal and interest requirements computed at time of issuance of the outstanding and unpaid Series 1989 Bonds, the Bonds and Additional Bonds until such amount is increased from time to time by resolution or resolutions of the Board authorizing Additional Bonds; (11) "Resolution" means this resolution and any amendments hereto; (mm) "Revenue Fund" means the Brazos River Authority Special Facilities (Lake Alan Henry) Revenue Bonds Revenue Fund created by this Resolution; (nn) "Revenues" means the gross receipts and income from ownership or operation of Lake Alan Henry received by the Authority (i) as Payments made pursuant to the Contract and (ii) from any other sources; such term, however, does not include Payments by Lubbock which are Management Fees or which E3 are capital advances to the Authority for capital improvements or capital donations of property in lieu of payments of money; (oo) "Series 1989 Bonds" means the Brazos River Authority Special Facilities (Lake Alan Henry) Revenue Bonds, Series 1989, dated October 15, 1989 and authorized to be issued and sold by the 1989 Resolution; (pp) "Term Bonds" means the Series 1989 Bonds maturing in 2009 and 2019, and Bonds maturing in 2011 and 2021, and those Additional Bonds so designated in the resolutions authorizing such Additional Bonds which shall be subject to retirement by operation of the Mandatory Redemption Account; (qq) "1989 Resolution" means the resolution adopted by the Board of Directors on October 16, 1989 authorizing the issuance and sale of the Series 1989 Bonds; (rr) "Year" shall mean the regular fiscal year used by the Authority in connection with the operation of Lake Alan Henry, which may be any twelve consecutive months period established by the Authority. Section 1.2. CONSTRUCTION. For all purposes of this Resolution, except where the context otherwise requires, (a) words of the masculine gender shall be deemed and construed to include correlative words of the feminine and neuter genders and words of the neuter gender shall be deemed and construed to include correlative words of the masculine and feminine gend- ers; and (b) words of the singular numbers shall be deemed and construed to include correlative words of the plural number and vice versa. 9 ARTICLE II AUTHORIZATION, FORM, EXECUTION AND DELIVERY OF BONDS Section 2.1. BONDS AUTHORIZED. The Authority's bonds (the "Bonds") are hereby authorized to be issued in the aggre- gate principal amount of $39,685,000 for the purpose of completing the acquisition and construction of Lake Alan Henry, a dam and reservoir and related facilities for storing, controlling and conserving the waters of Brazos River. The Bonds shall be designated as the "Brazos River Authority Special Facilities (Lake Alan Henry) Revenue Bonds, Series 1991". Section 2.2. DATES AND MATURITIES. The Bonds shall be dated January 15, 1991, shall be issued in fully registered form, shall be in the denomination of $5,000 or any integral multiple thereof, shall be numbered consecutively from 1 upward, and shall mature on the maturity date, in each of the years, and in the amounts, respectively, as set forth in the following schedule: MATURITY DATE: AUGUST 15 YEARS AMOUNTS YEARS AMOUNTS 1992 $ 440,000 2001 $ 760,000 1993 465,000 2002 810,000 1994 490,000 2003 870,000 1995 520,000 2004 930,000 1996 555,000 2005 1,000,000 1997 590,000 **** 1998 625,000 2011 7,650,000 1999 670,000 **** 2000 710,000 2021 22,600,000 The Bonds maturing on August 15 in the years 2011 and 2021 are hereby designated "Term Bonds". 10 Section 2.3. RIGHT OF PRIOR REDEMPTION. (a) The Author- ity reserves the right to redeem the Bonds, in whole or in part in principal amounts of $5,000 or any integral multiple there- of, on February 15, 2001 and on any date thereafter, at the par value thereof plus accrued interest to the date fixed for redemption. If less than all of the Bonds are to be redeemed by the Authority, the Authority shall determine the maturity or maturities and the amounts thereof to be redeemed and shall direct the Paying Agent/Registrar to call by lot Bonds, or portions thereof, within such maturity or maturities and in such principal amounts, for redemption. (b) The Term Bonds of the series of Bonds are subject to mandatory redemption, at the par value thereof plus accrued interest to the date fixed for redemption, on the dates and in the amounts as described in Section 4.7(1)(111) and Section 4.7(2) of this Resolution. (c) At least thirty (30) days prior to the date any such Bonds are to be redeemed, (i) a written notice of redemption shall be given to the registered owner of each Bond or a por- tion thereof being called for redemption by depositing such notice in the United States mail, postage prepaid, addressed to each such registered owner at his address shown on the Regis- tration Books of the Paying Agent/Registrar and (ii) notice of such redemption shall be published one (1) time in a financial journal or publication of general circulation in the United States of America carrying as a regular feature notices of municipal bonds called for redemption; provided, however, that 11 the failure to send, mail, or receive such notice described in (i) above, 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 notice described in (ii) above shall be the only notice actually required in connection with or as a prerequisite to the redemption of any Bond. By the date fixed for any such redemption due provision shall be made by the Authority with the Paying Agent/Registrar for the payment of the required redemption price for the Bonds or the portions thereof which are to be so redeemed, plus accrued interest thereon to the date fixed for redemption. If such notice of redemption is given, and if due provision for such payment is made, all as provided above, the Bonds, or the portions thereof which are to be so redeemed, thereby automati- cally shall be redeemed prior to their scheduled maturities, and shall not bear interest after the date fixed for their redemption, and shall not be regarded as being outstanding except for the right of the registered owner to receive the redemption price plus accrued interest to the date fixed for their 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 redemptions of principal of the Bonds or any portion thereof. 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 12 $5,000, at the written request of the registered owner, and in an 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 Authority all as provided in this Resolution. Section 2.4. INTEREST. That the Bonds scheduled to mature during the years, respectively, set forth below shall bear interest at the following rates per annum: Maturity 1992, % Maturity 2001, $ Maturity 1993, % Maturity 2002, $ Maturity 1994, % Maturity 2003, Maturity 1995, % Maturity 2004, Maturity 1996, % Maturity 2005, Maturity 1997, $ Maturity 1998, % Maturity 2011, Maturity 1999, $ ****************** Maturity 2000, % Maturity 2021, payable August 15, 1991, and semiannually thereafter on February 15 and August 15 of each year. Said interest shall be payable to the registered owner of any such Bond in the manner provided in the FORM OF BOND set forth in this Resolution. Section 2.5. PAYING AGENT/REGISTRAR. (a) The Authority shall keep or cause to be kept at the principal corporate trust office of NCNB Texas National Bank, Dallas, Texas, or such other banking institution named in accordance with the provi- sions of Section 2.5(g) hereof (the "Paying Agent/Registrar"), books or records of the registration and transfer of the Bonds (the "Registration Books"), and the Authority 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 Author - 13 ity and Paying Agent/Registrar may prescribe; and the Paying Agent/Registrar shall make such transfers and registrations as herein provided. It shall be the duty of the Paying Agent/Registrar to obtain from the registered owner and record in the Registration Books the address of such registered owner of each Bond to which payments with respect to the Bonds shall be mailed, as herein provided. The Authority or its designee 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 Registra- tion Books confidential and, unless otherwise required by law, shall not permit their inspection by any other entity. Regis- tration 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 cancel- lation, together with proper written instruments of assignment, in form and with guarantee of signatures satisfactory to the Paying Agent/Registrar, evidencing the assignment of the Bonds, or any portion thereof in any integral multiple of $5,000, to the assignee or assignees thereof, and 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. (b) The entity in whose name any Bond shall be registered in the Registration Books at any time shall be treated as the 14 absolute owner thereof for all purposes of this Resolution, whether or not such Bond shall be overdue, and the Authority 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) The Authority 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 Resolution. The Paying Agent/Registrar shall keep proper records of all payments made by the Authority and the Paying Agent/Registrar with respect to the Bonds, and of all conver- sions and exchanges of Bonds, and all replacements of Bonds, as provided in this Resolution. (d) Each Bond may be converted and exchanged for fully registered bonds in the manner set forth herein. Each Bond issued and delivered pursuant to this Resolution, to the extent of the unpaid or unredeemed 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 of the assignee or assignees thereof, or its or their duly authorized attorneys or representatives, with guarantee of signatures satisfactory 15 to the Paying Agent/Registrar, at the option of the registered owner or such assignee or assignees, as appropriate, be con- verted into and exchanged for fully registered bonds, without interest coupons, in the form prescribed in the FORM OF BOND set forth in this Resolution, 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 amount of any Bond or Bonds so surrendered, and payable to the appropriate registered owner, assignee, or assignees, as the case may be. If any Bond or portion thereof 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/Regis- trar 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 Resolution shall constitute one of the Bonds for all purposes of this Resolution, and may again be converted and exchanged or replaced. It is specifically provided, however, that any Bond delivered in conversion of and exchange for or replacement of another Bond prior to the first scheduled interest payment date 16 on the Bonds shall be dated the same date as such Bond, but each substitute Bond so delivered on or after such first scheduled interest payment date shall be dated as of the interest payment date preceding the date on which such substi- tute Bond is delivered, unless such Bond is delivered on an interest payment date, in which case it shall be dated as of such date of delivery; provided, however, that if at the time of delivery of any substitute Bond the interest on the Bond for which it is being exchanged has not been paid, then such Bond shall be dated as of the date to which such interest has been paid in full. On each substitute Bond issued in conversion of and exchange for or replacement of any Bond or Bonds issued under this Resolution there shall be printed thereon a Paying Agent/Registrar's Authentication Certificate, in the form hereinafter set forth. An authorized representative of the Paying Agent/Registrar shall, before the delivery of any such Bond, date such Bond in the manner set forth above, and man- ually sign and date such 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 replace- ment. No additional ordinances, orders or resolutions need by passed or adopted by the Board of the Authority 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, execu- tion, and delivery of the substitute Bonds in the manner 17 prescribed herein, and said Bonds shall be of type composition printed on paper with lithographed or steel engraved borders of customary weight and strength. Pursuant to Article 717k-6, V.A.T.C.S., 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 described 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 Bonds which originally were delivered pursuant to this Resolution, approved by the Attorney General, and registered by the Comptroller of Public Accounts. Neither the Board nor the Paying Agent/Regis- trar shall be required (1) to issue, transfer, or exchange any bond during a period beginning at the opening of business 30 days before the day the first to occur of the mailing or the first publication of notice of redemption of bonds and ending at the close of business on such day, or (2) to transfer or exchange any Bond so selected for redemption in whole when such redemption is scheduled to occur within 30 calendar days. (e) 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 transferred and assigned, (iii) may be converted and exchanged for other Bonds, (iv) may be subject to redemption prior to their scheduled 18 maturities, (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 BOND set forth in this Resolution. (f) The Authority shall pay the Paying Agent/Registrar's reasonable standard or customary fees and charges for making transfers, conversions and exchanges of Bonds, but the regis- tered owner of any Bond requesting such transfer, conversion or exchange shall pay any taxes or other governmental charges required to be paid with respect thereto. In addition, the Authority hereby covenants with the registered owners of the Bonds that it will pay the reasonable 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. (g) The Authority covenants with the registered owners of the Bonds that at all times while the Bonds are outstanding the Authority will provide a competent and legally qualified Paying Agent/Registrar for the Bonds under this Resolution, and that the Paying Agent/Registrar will be one entity. The Authority reserves the right to, and may, at its option, change the Paying Agent/Registrar upon not less than 60 days written notice to the Paying Agent/Registrar. 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 Authority cove - 19 nants that promptly it will appoint a competent and legally qualified national or state banking institution which shall be a corporation organized and doing business under the laws of the United States of America or of any state, authorized under such laws to exercise trust powers, subject to supervision or examination by federal or state authority, and whose qualifi- cations substantially are similar to the previous Paying Agent/Registrar to act as Paying Agent/Registrar under this Resolution, or other entity qualified under law to act in such capacity. 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 Authority. Upon any change in the Paying Agent/Registrar, the Authority 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, postage prepaid, which notice also shall give the address of the new Paying Agent/Reg- istrar. By accepting the position and performing as such, each Paying Agent/Registrar shall be deemed to have agreed to the provisions of this Resolution, and a certified copy of this Resolution shall be delivered to each Paying Agent/Registrar. Section 2.6. FORMS. The form of all Bonds, including the form of the Paying Agent/Registrar's Authentication Certifi- cate, the Form of Assignment, and the form of the Comptroller's Registration Certificate to accompany the Bonds on the initial 20 delivery thereof, with such appropriate variations, omissions, or insertions as are permitted or required by this Resolution: FORM OF BOND NO. $ UNITED STATES OF AMERICA STATE OF TEXAS BRAZOS RIVER AUTHORITY SPECIAL FACILITIES (LAKE ALAN HENRY) REVENUE BOND SERIES 1991 MATURITY DATE INTEREST RATE ORIGINAL ISSUE DATE CUSIP January 15, 1991 ON THE MATURITY DATE SPECIFIED ABOVE, the Brazos River Authority (the "Issuer"), a governmental agency and body politic and corporate of the State of Texas, for value received hereby promises to pay to , or to the regis- tered assignee hereof (either being hereinafter called the "registered owner") the principal amount of DOLLARS and to pay interest thereon, from the original issue date stated above, to the date of its scheduled maturity, or its date of redemption prior to scheduled maturity, at the rate of interest per annum specified above, with said interest being payable on August 15, 1991, and semiannually on each February 15 and August 15 thereafter, except that if this Bond is dated later than August 15, 1991, such interest is payable semi- annually on each February 15 and August 15 following its date. REFERENCE IS HEREBY MADE to the further provisions of this Bond set forth on the reverse side hereof and such further provisions shall for all purposes have the same effect as if 21 set forth at this place. *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 NCNB Texas National Bank, 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/Regis- trar to the registered owner hereof as shown by the Registra- tion Books kept by the Paying Agent/Registrar at the close of business on the last day of the month next preceding each interest payment date by check drawn by the Paying Agent/Reg- istrar on, and payable solely from, funds of the Issuer re- quired to be on deposit with the Paying Agent/Registrar for such purpose as hereinafter provided; and such check 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 its address as it appears on the Registration Books kept by the Paying Agent/Reg- istrar, as hereinafter described; provided, that in the alter- native such payment may be made by any other method requested in writing by the registered owner, at the risk and expense of such registered owner, subject to the approval of the Paying Agent/Registrar. The Issuer covenants with the registered owner of this Bond that prior to each principal payment date 22 and interest payment date for this Bond it will make available to the Paying Agent/Registrar the amounts required to provide for the payment, in immediately available funds, of all princi- pal 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 a series of bonds of like tenor and effect except as to number, principal amount, interest rate, right of prior redemption, and maturity, aggregating Thirty- nine Million Six Hundred Eighty-five Thousand Dollars ($39,685,000 (hereinafter sometimes called the "Bonds"), issued pursuant to a resolution (the "Resolution") of the Board of Directors A the Issuer for the purpose of acquiring, constructing and operating a dam and reservoir and related facilities known as Lake Alan Henry (the "Project") for storing, controlling and conserving the waters of the Brazos River. 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. 23 *THE ISSUER reserves the right to redeem the Bonds, in whole, or in part in principal amounts of $5,000 or any inte- gral multiple thereof, on February 15, 2001 and on any date thereafter, at the par value thereof plus accrued interest to the date fixed for redemption. If less than all of the Bonds are to be redeemed by the Issuer, the Issuer shall determine the maturity or maturities and the amounts thereof to be redeemed and shall direct the Paying Agent/Registrar to call by lot Bonds, or portions thereof, within such maturity or matur- ities and in such principal amounts, for redemption. *THE BONDS of this series maturing August 15, 2011 and August 15, 2021 are subject to mandatory redemption, and shall be redeemed in part by lot prior to maturity annually on August 15 in the years 2006 through 2020 with funds in the Mandatory Redemption Account of the Debt Service Fund established in the Resolution, at par and accrued interest to date of redemption. *AT LEAST 30 days prior to the date fixed for any such redemption, (a) written notice of such redemption shall be mailed by first-class mail, postage prepaid, by the Paying Agent/Registrar to the registered owner hereof at his address shown on the Registration Books kept by the Paying Agent/Reg- istrar, and (b) notice of such redemption shall be published one (1) time in a financial journal or publication of general circulation in the United States of America carrying as a regular feature notices of municipal bonds called for redemp- tion, provided, however, that the failure to send, mail, or receive such notice described in (a) above, or any defect 24 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 the Resolution provides that the publication of notice as described in (b) above shall be the only notice actually required in connection with or as a prerequisite to the redemption of any Bond. By the date fixed for any such redemption due provision shall be made by the Issuer with the Paying Agent/Registrar for the payment of the required redemption price for this Bond or the portion hereof which is to be so redeemed, plus accrued interest thereon to the date fixed for redemption. If such written notice of 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 redeemed, thereby automatically shall be redeemed prior to its scheduled maturity, and shall not bear interest after the date fixed for its redemption, and shall not be regarded as being outstanding except for the right of the registered owner to receive the redemption price plus accrued interest to the date fixed for 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 redemptions of principal of this Bond or any portion hereof. 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 25 to the unredeemed portion thereof, will be issued to the regis- tered owner upon the surrender thereof for cancellation, at the expense of the Issuer, all as provided in the Resolution. *THIS BOND OR ANY PORTION OR PORTIONS HEREOF IN ANY INTEGRAL MULTIPLE OF $5,000 may be assigned and shall be transferred only on the Registration Books of the Issuer kept by the Paying Agent/Registrar acting in the capacity of regis- trar for the Bonds, upon the terms and conditions set forth in the Resolution. 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 satisfac- tory to the Paying Agent/Registrar, evidencing assignment of this Bond or any portion or portions hereof in any integral multiple of $51000 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 may be executed by the regis- tered owner to evidence the assignment hereof, but such method is not exclusive, and other instruments of assignment satisfac- tory to the Paying Agent/Registrar may be used to evidence the assignment of this Bond or any portion or portions hereof from time to time by the registered owner. A new Bond or Bonds payable to such assignee (which then will be the new registered owner 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/Reg- 26 istrar in conversion of and exchange for this Bond, all in the form and manner as provided in the Resolution. Also, as provided in the Resolution, this Bond 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 Resolution. The Issuer shall pay the Paying Agent/Registrar's reasonable standard or customary fees and charges for transferring, converting and exchanging any Bond or 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, all as a condition precedent to the exercise of such privilege of transfer, conversion and exchange. In any circumstance, neither the Issuer nor the Paying Agent/Registrar shall be required (1) to make any transfer or exchange during a period beginning at the opening of business 30 days before the day the first to occur of the mailing or the first publication of a notice of redemption of bonds and ending at the close of business on such day, or (2) to transfer or exchange any Bonds so selected for redemption when such redemption is scheduled to occur within 30 calendar days. *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 Resolution that it promptly will appoint a competent and legally qualified sub- stitute therefor, whose qualifications substantially are similar to the previous Paying Agent/Registrar it is replacing, and promptly will cause written notice thereof to be mailed to the registered owners of the Bonds. *BY BECOMING the registered owner of this Bond, the registered owner thereby acknowledges all of the terms and provisions of the Resolution, agrees to be bound by such terms and provisions, acknowledges that the Resolution is duly recorded and available for inspection in the official minutes and records of the Issuer, and agrees that the terms and provisions of this Bond and the Resolution constitute a con- tract between each registered owner hereof and the Issuer. *THE RESOLUTION provides that this issue of bonds is secured by a pledge of and shall be payable solely from and equally secured by a lien on and pledge of the "Net Revenues", as defined in the Resolution. The Resolution defines "Net Revenues" to mean the gross receipts and income from the ownership and operation of Lake Alan Henry received by the Authority including receipts pursuant to the Contract (as therein defined), less Maintenance and Operation Costs (as therein defined). Reference is hereby made to the Resolution 28 for a full and complete statement of (a) the nature and extent of such pledge and security; (b) the rights and responsibili- ties of the Issuer with respect thereto; (c) the rights and circumstances under and the purposes for which the Resolution may be amended; (d) the rights of the Issuer to issue bonds on a parity and of equal dignity with this issue of bonds, subject to compliance with the terms and requirements of such con- tract, and (e) other matters relating to or affecting this issue of Bonds and the rights and duties of the Issuer and the rights of the owners thereof, this Bond, and the issue of which it is a part, being subject to all of the provisions thereof and to all of which the owner of this Bond by his acceptance hereof agrees and assents. *THE REGISTERED OWNER HEREOF shall never have the right to demand payment of this obligation out of any funds raised or to be raised by taxation. IT IS HEREBY CERTIFIED AND RECITED that all acts, condi- tions and things required by the Constitution and laws of the State of Texas to happen, to. exist and to be performed prece- dent to and in the issuance of this issue of Bonds, the adop- tion of the Resolution, the making of such contract and the pledge of said revenues have happened, do exist and have been performed as so required. IN WITNESS WHEREOF, Brazos River Authority has caused this bond to be signed by the imprinted or lithographed facsimile signature of the [President] [Vice President] of the Brazos River Authority and attested by the facsimile signature of its 29 im [Secretary] [Assistant Secretary], and the corporate seal of the Brazos River Authority to be duly impressed, or printed, or lithographed on this bond. (SEAL) ATTEST: Secretary BRAZOS RIVER AUTHORITY President FORM OF PAYING AGENT/REGISTRAR'S AUTHENTICATION CERTIFICATE PAYING AGENT/REGISTRAR'S AUTHENTICATION CERTIFICATE It is hereby certified that this Bond has been issued under the provisions of the Resolution described on the face of this Bond; and that this Bond has been issued in conversion 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. Dated Paying Agent/Registrar- By Authorized Representative KM *FORM OF ASSIGNMENT ASSIGNMENT FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto Please insert Social Security or Taxpayer Identification Number of Transferee (Please print or typewrite name and address, including zip code of Transferee) the within Bond and all rights thereunder, and hereby irrevocably constitutes and appoints attorney to register the transfer of the within Bond on the books kept for registration thereof, with full power of substitution in the premises. Dated: Signature Guaranteed: NOTICE: Signature(s) must be guaranteed by a member firm of the New York Stock Exchange or a commercial bank or trust company. NOTICE: The signature above must correspond with the name of the Registered Owner as it appears upon the front of this Bond in every particular, without alteration or enlarge- ment or any change whatsoever. **(FORM OF COMPTROLLER'S CERTIFICATE ATTACHED TO THE BONDS UPON INITIAL DELIVERY THEREOF) OFFICE OF COMPTROLLER REGISTER NO. STATE OF TEXAS I hereby certify that there is on file and of record in my office a certificate of the Attorney General of the State of Texas to the effect that this Bond has been examined by him as 31 Texas to the effect that this Bond has been examined by him as required by law, and that he finds that it has been issued in conformity with the Constitution and laws of the State of Texas, and that it is a valid and binding special obligation of the Brazos River Authority, and that the contract herein mentioned is valid and has been approved, and said Bond has this day been registered by me. WITNESS MY HAND and seal of office at Austin, Texas Comptroller of Public Accounts of the State of Texas ( SEAL) NOTE TO PRINTER: *Is to be on reverse side of bond **Is not to be on bond Section 2.7. ,EXECUTION OF BONDS. The Bonds shall be signed by the imprinted or lithographed facsimile signature of the President or Vice President of the Authority and attested by the facsimile signature of the Secretary or an Assistant Secretary of the Authority, and the official seal of the Authority shall be affixed thereto or a facsimile of such seal shall be printed or lithographed thereon. All facsimile signatures shall have the same effect as though they were manual signatures. In case any officer whose signature shall appear on any Bond shall cease to be such officer before the delivery of such Bonds, such signature or facsimile signature shall nevertheless be valid and sufficient for all purposes the same as if he had remained in office until such delivery. Section 2.8. APPROVAL AND REGISTRATION OF BONDS. The 32 proper officers of the Authority shall prepare and the Secre- tary of the Authority shall certify a complete transcript of these proceedings, and such transcript shall thereupon be submitted to the Attorney General of the State of Texas for his examination with a request that he examine the same and approve the Bonds to be issued under the provisions of this Resolution, and the Contract as recited in the Resolution and in the Bonds, and no such Bonds shall be issued under the terms of this Resolution unless and until the same shall have been approved by the Attorney General of the State of Texas and registered by the Comptroller of Public Accounts of the State of Texas as required by law. Upon registration of said Bonds, the Comp- troller of Public Accounts (or a deputy designated in writing to act for the Comptroller) shall manually sign the Comp- troller s certificate of registration prescribed herein, and the seal of said Comptroller shall be affixed to each of said certificates. Section 2.9. FURTHER PROCEEDINGS. The officers, employ- ees and agents of the Authority, and each of them, shall be and they are hereby expressly authorized, empowered and directed from time to time and at any time to do and perform all such acts and things and to execute, acknowledge and deliver in the name and under the corporate seal and on behalf of the Authori- ty all such instruments, whether or not herein mentioned, as may be necessary or desirable in order to carry out the terms and provisions of this Resolution and of the Bonds to be issued hereunder. 33 ARTICLE III SALE OF BONDS, APPLICATION OF BOND PROCEEDS Section 3.1. NOTICE OF SALE AND BIDDING INSTRUCTIONS. THE OFFICIAL BID FORM AND OFFICIAL STATEMENT. That the Notice of Sale and Bidding Instructions, the Official Bid Form and the Official Statement dated January 4, 1991, together with any addenda thereto, prepared and circulated with respect to the sale of the Bonds, are hereby approved and authorized for use in the reoffering on the Bonds. Section 3.2. SALE OF BONDS. That the sale of the Bonds to (the "Purchaser"), at a price of $ , and accrued interest to the date of delivery, is hereby authorized, ratified and confirmed. One Bond in the principal amount maturing on each maturity date as set forth in Section 2.2 hereof shall be delivered to the Purchaser, and the Purchaser shall have the right to exchange such Bonds as provided in Section 2.5 hereof without cost. Section 3.3. BOND PROCEEDS. From the proceeds of the sale of the Bonds to the purchaser thereof the following deposits and disbursements shall be made, to -wit: (1) Into the Debt Service Fund - the interest accrued on the Bonds and received upon delivery of same to the Purchaser thereof. (2) Into the Reserve Fund - an amount equal to the average annual principal and interest requirements of the Bonds, provided that the amount deposited from the proceeds of 34 the sale of the Bonds into the Reserve Fund together with the amount required herein to be deposited into the Repair and Replacement Fund shall not exceed 10% of the aggregate principal amount of the Bonds. (3) Into the Repair and Replacement Fund - $500,000. (4) Into the Construction Fund - the remaining amount. Section 3.4. THE CONSTRUCTION FUND. (a) The Depository shall be required to secure cash funds in the Construction Fund in the manner required of depositories of the Authority. To the extent practicable, monies in the Construction Fund shall be kept invested by the Authority in Eligible Securities. All interest and profits from such investments, to the extent not required to be rebated to the United States as provided in Section 13.3, shall remain on deposit in the Construction Fund as a part thereof, except as otherwise provided in Section 3.5. Section 3.5. DISBURSEMENTS. (a) Money in the Construc- tion Fund shall be subject to disbursement by the Authority for payment of the Project Costs including reimbursement to itself and others for Project Costs paid prior to the delivery of the Bonds to the Purchaser. Such disbursements shall be made only by checks stating the purpose of the payment signed and count- ersigned by such officers or employees of the Authority as may from time to time be designated by the Authority by resolution. (b) After Completion Date, any residue remaining in the Construction Fund to the extent not required to be rebated to the United States or paid to Lubbock in accordance with the Contract shall be deposited into the Debt Service Fund and 35 shall be applied to the payment of the principal of and inter- est on the Bonds and/or the Additional Bonds. ARTICLE IV PLEDGE, FUNDS, APPLICATION OF REVENUES Section 4.1. PLEDGE. The Bonds and any Additional Bonds are and shall be secured by and payable from a first lien on and pledge of the Net Revenues including such revenues within the Funds created in this Resolution. The Bonds and any Additional Bonds are and will be secured by and payable only from the Net Revenues, and are not secured by or payable from a mortgage or deed of trust on any properties, whether real, personal, or mixed, constituting Lake Alan Henry. The owners of the Bonds or Additional Bonds shall never have the right to demand payment from taxes, nor shall they have the right to demand payment thereof out of any other funds of the Authority. Section 4.2. FUNDS. The following special funds of the Authority have been created heretofore by the 1989 Resolution and shall be continued for so long as any of Series 1989 Bonds, the Bonds or Additional Bonds shall be outstanding and unpaid: (i) the "Brazos River Authority Special Facilities (Lake Alan Henry) Revenue Bonds Revenue Fund" (the "Revenue Fund"); (ii) the "Brazos River Authority Special Facilities (Lake Alan Henry) Revenue Bonds Debt Service Fund" (the "Debt Service Fund") and created as an account therein there is hereby established the "Mandatory Redemption Account"; (iii) the "Brazos River Authority Special Facilities (Lake Alan Henry) Revenue Bonds Repair and Replacement Reserve Fund" 36 (the "Repair and Replacement Reserve Fund"); (iv) the "Brazos River Authority Special Facilities (Lake Alan Henry) Revenue Bonds Reserve Fund" (the "Reserve Fund"); (v) the "Brazos River Authority Special Facilities (Lake Alan Henry) Construction Fund" (the "Construction Fund"). Monies in said Funds shall be maintained at a Depository of the Authority, and shall be charged with a lien in favor of the owners of the Bonds until said monies are paid out in accordance with this Resolution. Section 4.3. REVENUE FUND. All Revenues other than Capital Costs and Management Fees received as, Payments pursuant to the Contract shall be deposited in the Revenue Fund as received and shall be used to pay as a first charge against said Fund, the Maintenance and Operation Costs as they shall become due from time to time. Section 4.4. DEBT SERVICE FUND. Monies in the Debt Service Fund shall be used for the sole purpose of paying the principal of (including Amortization Installments) and interest on all Series 1989 Bonds, Bonds and any Additional Bonds, as the same shall mature and come due, together with the fees of the Paying Agent/Registrar and the costs of servicing the Series 1989 Bonds, the Bonds, and all Additional Bonds. Section 4.5. RESERVE FUND. Monies in the Reserve Fund shall be used for the sole purpose of retiring the last of any Series 1989 Bonds, Bonds or Additional Bonds as they shall mature or paying principal of and interest on any Series 1989 Bonds, Bonds or Additional Bonds when and to the extent the 37 amounts in the Debt Service Fund are insufficient for such purpose. Section 4.6. REPAIR AND REPLACEMENT RESERVE FUND. Monies in the Repair and Replacement Reserve Fund shall be used for the sole purpose of making necessary repairs or replacement of worn, damaged or obsolete portions of Lake Alan Henry. Section 4.7. FLOW OF FUNDS. Capital Costs as received by the Authority and Net Revenues remaining on deposit in the Revenue Fund after payment of the Maintenance and Operation Costs shall be deposited to the following funds, at the times and in the order of priority listed below: (1) To the Debt Service Fund - in addition to all amounts heretofore required to be deposited to the credit of the Debt Service Fund, the amounts, at the times, as follows: (i) such amount, deposited on or before the 10th day of each February and August hereafter, commencing with the month of February, 1991, as will be sufficient, together with other amounts, if any, then on hand in the Debt Service Fund and available for such purpose, to pay the interest scheduled to accrue and come due on the Bonds on the next succeeding interest payment date; (ii) such amounts, deposited on or before the 10th day of each August hereafter, commencing with the month of August, 1991 as will be sufficient, together with other amounts, If any, then on hand in the Debt Service Fund and available for such purpose, to pay the principal scheduled to mature and come due on the Bonds on the next succeeding princi- 38 pal payment date; (iii) such amounts, as shall be required as Amorti- zation Installments for the Term Bonds of the Bonds, deposited in the Mandatory Redemption Account on or before the 10th day of each August, commencing August 10, 2005, for the redemption of Term Bonds; and (iv) such amounts required to pay the fees, the Paying Agent/Registrar and other costs of servicing the Bonds. (2) Operation of Mandatory Redemption Account. As Amortization Installments of the Term Bonds of the Bonds there shall be deposited to the credit of the Mandatory Redemption Account respective amounts on the dates as follows: TERM BONDS MATURING AUGUST 15, 2011: Redemption Date Amount August August 15, 2006 $1,065,000 August 15, 2007 1,140,000 August 15, 2008 1,225,000 August 15, 2009 1,310,000 August 15, 2010 1,4001000 August 15, 2011* 1,510,000 TERM BONDS MATURING AUGUST 15, 2021: Redemption Date Amount August 15, 2012 $1,610,000 August 15, 2013 1,730,000 August 15, 2014 1,860,000 August 15, 2015 2,000,000 August 15, 2016 2,140,000 August 15, 2017 2,300,000 August 15, 2018 2,460,000 August 15, 2019 2,640,000 August 15, 2020 2,830,000 August 15, 2021* 3,030,000 *Maturity 39 The Authority shall redeem Term Bonds of the Bonds matur- ing on August 15, 2011 and August 15, 2021, respectively, on August 15 of each of the years 2006 to 2010, inclusive and August 15 of each of the years 2012 to 2020, inclusive. The principal amount of the Term Bonds required to be redeemed pursuant to the operation of such mandatory redemption provi- sions shall be reduced, at the option of the Authority, by the principal amount of any Term Bonds which, (1) shall have been acquired by the Authority at a price not exceeding the princi- pal amount of such Term Bonds plus accrued interest to the date of purchase thereof, and delivered to the Paying Agent/Registrar for cancellation, (2) shall have been purchased and cancelled by the Paying Agent/Registrar at the request of the Authority with moneys in the Mandatory Redemption Account, at a price not exceeding the principal amount of such Term Bonds plus accrued interest to the date of purchase thereof, or (3) have been redeemed pursuant to the optional redemption provisions set forth above in Section 2.3(a) and not theretofore credited against a mandatory redemption require- ment. On the maturity date of any Term Bonds, the Authority shall apply the .monies on hand in the Mandatory Redemption Account for the payment of the principal of the maturing Term Bonds. (3) To the Reserve Fund - an amount, if any, required on or before the 10th day of each February and August, beginning with the first such month following the occurrence of a defi- ciency, to restore any deficiency in the Reserve Fund Required 40 Amount in not more than ten (10) equal semiannual payments. So long as the amount on deposit in the Reserve Fund equals or exceeds the Reserve Fund Required Amount, no transfers into the Reserve Fund shall be required. (4) To the Repair and Replacement Reserve Fund - an amount, if any, required on or before the 10th day of each February and August, beginning with the first such month following the occurrence of a deficiency in the Repair and Replacement Fund Required Amount, to restore any deficiency in the Repair and Replacement Fund Required Amount in not more than ten (10) equal semiannual payments. So long as the amount on deposit in the Repair and Replacement Reserve Fund equals or exceeds the Repair and Replacement Fund Required Amount, no transfers to the Repair and Replacement Reserve Fund shall be required. Section 4.8. DEFICIENCIES; EXCESS NET REVENUES. (a) If on any occasion there shall not be sufficient Net Revenues to make the required deposits into the Debt Service Fund, the Reserve Fund and the Repair and Replacement Reserve Fund, then such deficiency shall be made up as soon as possible from the next available Net Revenues, or from any other sources avail- able for such purpose. (b) Subject to making the required deposits to the credit of the Debt Service Fund, the Reserve Fund and the Repair and Replacement Fund when and as required by this Resolution, or any resolution authorizing the issuance of Additional Bonds, the excess Net Revenues may be used by the Authority for any 41 lawful purpose. Section 4.9. PAYMENT OF BONDS. On or before February 15, 2001, and semiannually on or before each August 15 and February 15 thereafter while any of the Bonds are outstanding and unpaid, the Authority shall make available to the Paying Agent/Registrar therefor, out of the Debt Service Fund (and the Reserve Fund, if necessary) money sufficient to pay such interest on and such principal of the Bonds as shall become due and mature on such dates, respectively, at stated maturity or by redemption prior to maturity. The Paying Agent/Registrar shall destroy all paid Bonds and furnish the Authority with an appropriate certificate of cancellation or destruction. Section 4.10. SECURITY AND INVESTMENT OF FUNDS, The Authority will cause the Depository to secure and keep secured, in the manner required by law, all cash funds on deposit in the Funds herein established with it, and will cause the Paying Agent/Registrar to secure all funds deposited with it as other trust funds are secured. Money in the Debt Service Fund, the Reserve Fund and the Repair and Replacement Reserve Fund shall be invested and reinvested in Eligible Securities. All inter- est and profits from such investments, to the extent not required to be rebated to the United States as provided in Section 13.3, shall be credited to the Revenue Fund to the extent not needed to cure any deficiency, if any, within any such Funds. Section 4.11. PAYMENTS FROM OTHER SOURCES. Nothing in this Resolution prohibits the Authority from applying money 42 other than Net Revenues to the payment of the Bonds, but if it does apply money from any of its funds other than Net Revenues, the Authority shall be entitled to reimburse such fund from Net Revenues thereafter received for the amount advanced plus interest lost by Authority on account of such advance. ARTICLE V THE CONTRACT, ACCOUNTING, INSPECTION AND AUDITS Section 5.1. THE CONTRACT, FISCAL PROVISIONS. The Authority covenants and warrants that it has entered into the Contract with Lubbock, and the Contract is enforceable in accordance with its terms. Section 5.2 ENFORCEMENT, The Authority covenants to and with the owners of the Bonds that it will keep in effect and enforce the Contract and that it will not voluntarily consent to or permit the rescission thereof or non-performance there- under; and the Authority will not consent or agree to any amendment to the Contract which would reduce the amounts payable thereunder or which would extend the time of such payments or which would in any manner impair or adversely affect the rights of the owners of the Bonds and Additional Bonds, if any. If Lubbock fails to make Payments under the Contract as required thereby, the Authority will take all necessary action to preserve and protect the rights of the owners of the Bonds with respect thereto in order to assure the payment of the Bonds and the interest thereon when due. Section 5.3. CONTRACT PAYMENTS. The Authority covenants 43 to furnish Lubbock with schedules of Payments to be made by Lubbock to the Authority pursuant to the Contract during each succeeding Fiscal Year, all in accordance with the terms of the Contract. Section 5.4. ACCOUNTING AND REPORTING. The Authority covenants that proper books of record and account will be kept in which true, full and correct entries will be made of all income, expense and transactions of and in relation to Lake Alan Henry, and each and every part thereof. Section 5.5. PUBLIC INSPECTION. The Authority further covenants and agrees that Lake Alan Henry, and each and every part thereof, and all books, records, accounts, documents and vouchers relating to the construction, operation, maintenance, repair, improvement and extension thereof, will at all times be open to inspection by Lubbock and the owners of Bonds and their respective representatives. Section 5.6. AUDITS. Following the end of each Year after the Completion Date, the Authority, as part of the overall audit of the Authority, shall have an Accountant audit all Funds established by this Resolution and submit a written report of each such audit to the Authority each year. The scope of the audit shall be such that the Accountant can render an independent opinion as to the financial condition of Funds created herein and as to the adequacy and correctness of the accounting records pertaining thereto. The audit report shall recommend any activities which, in the professional judgment of the Accountant, may be advisable to assure compli- 44 ance with the provisions of this Resolution. Section 5.7. PAYMENT FOR AUDIT. The costs of the audits prepared under this Article V shall constitute Maintenance and Operation Costs. Section 5.8. COPIES OF AUDIT. Upon request, the Author- ity shall furnish a copy of the audit to the Purchaser named in Section 3.2 hereof and to the owners of the Bonds at the time outstanding requesting same in writing. ARTICLE VI INSURANCE Section 6.1. INSURANCE. (a) The Authority covenants that it will at all times keep insured such parts of Lake Alan Henry as would usually be insured by corporations operating like pro- perties, with a responsible insurance company or companies, .against risks, accidents or casualties against which and to the extent insurance is usually carried by corporations operating like properties, including, to the extent reasonably obtain- able, fire and extended coverage insurance, insurance against damage by floods, use and occupancy insurance and public liability and property damage insurance. At any time while any contractor engaged in construction work shall be fully respon- sible therefor, the Authority shall not be required to carry insurance on the work being constructed if the contractor is required to carry appropriate insurance. All such policies shall be open to the inspection of the owners of the Bonds and their representatives at all reasonable times. Upon the happening of any loss or damage covered by insurance from one E-1-4 or more of said causes, the Authority shall make due proof of loss and shall do all things necessary or desirable to cause the insuring companies to make payment in full directly to the Authority. The proceeds of insurance covering such property, together with any other funds necessary and available for such purpose, shall be used forthwith by the Authority for repairing the property damaged or replacing the property destroyed; provided, however, that if said insurance proceeds and other funds are insufficient for such purpose, then said insurance proceeds pertaining to Lake Alan Henry shall be used, at the option of the Board, promptly as follows: (i) for the redemption prior to maturity of the Bonds and Additional Bonds, ratably in the proportion that the outstanding principal of each series of Bonds or Additional Bonds bear to the total outstanding principal of all Bonds and Additional Bonds, provided that if on any such occasion the principal of any such series is not subject to redemption, it shall not be regarded as out- standing in making the foregoing computation; or (ii) if none of the outstanding Bonds or Additional Bonds is subject to redemption, then for the purchase on the open market and retirement of said Bonds and Addi- tional Bonds in the same proportion as prescribed in the foregoing clause (i), to the extent practicable; provided that the purchase price for any Bond or Additional Bond shall not exceed the redemption price of such Bond or Additional Bond on the first date upon which it becomes 46 subject to redemption; or (iii) the insurance proceeds, or the remainder thereof, shall be deposited in a special and separate trust fund, at a Depository of the Authority, to be designated the "Insurance Account". The Insurance Account shall be held until such time as the foregoing clauses (i) and/or (ii) can be complied with, or until other funds become available which, together with the Insurance Account, will be sufficient to make the repairs or re- placements originally required, whichever of said events occurs first. (b) The foregoing provisions of (a) above notwithstand- ing, the Authority shall have authority either to self -insure or enter into co-insurance or similar plans where risk of loss is shared in whole or in part by the Authority. (c) The annual audit required by Section 5.6 shall contain a section commenting on whether the Authority has complied with the requirements of this Section with respect to the maintenance of insurance, and listing all policies carried, and whether all insurance premiums upon the insurance policies to which reference is hereinbefore made have been paid. Section 6.2. UNUSED INSURANCE PROCEEDS. Any insurance proceeds remaining after the completion of and payment for any such reconstruction or repair shall be deposited to the credit of the Debt Service Fund. 47 ARTICLE VII ADDITIONAL BONDS AND REFUNDING BONDS Section 7.1. DEFINITIONS. For the purpose of this Article VII, the following definitions shall apply: (a) "Completion Bonds" means any bonds issued to pay the Project Costs to complete the acquisition and construction of Lake Alan Henry. (b) "Improvement Bonds" means bonds issued for improve- ments, betterments, extensions or replacements of Lake Alan Henry, which may include bonds issued by the Authority to provide additional facilities for the withdrawal, treatment and delivery to Lubbock of water from Lake Alan Henry. Section 7.2. COMPLETION BONDS AND IMPROVEMENT BONDS. Subject to the provisions of Section 7.3, the Authority re- serves the right to issue Completion Bonds and Improvement Bonds which, in the discretion of the Authority, may be Addi- tional Bonds or subordinate lien bonds junior to the Bonds, or Bonds which a portion of same may be Additional Bonds or subordinate lien bonds. Section 7.3. REOUIREMENTS. (a) Completion Bonds may be issued in such amounts and at such times as the Authority may deem appropriate. (b) Improvement Bonds may be issued under (i) the circum- stances and subject to the limitations contained in the Con- tract, or (ii) under other circumstances considered desirable by the Authority if Lubbock shall agree to an amendment of the Contract increasing Payments thereunder by aggregate amounts 48 sufficient, with other revenues from Lake Alan Henry, to pay when due all interest on and principal of the Improvement Bonds at the time proposed to be issued and the maintenance of any special funds created in connection therewith. Section 7.4. REFUNDING BONDS. The Authority reserves the right to issue refunding bonds to refund all or any part of the outstanding Bonds or Additional Bonds (pursuant to any law then available), or for any other lawful purpose, upon such terms and conditions as the Authority may deem to be in the best interest of the Authority and Lubbock. Section 7.5. AUTHORIZATION. Completion Bonds, Improve- ment Bonds, and Refunding Bonds permitted by this Article to be issued shall be authorized by resolutions of the Board of Directors which shall prescribe the form and terms of such bonds. ARTICLE VIII REMEDIES Section 8.1. SUITS BY OWNERS. In the event of a default hereunder by the Authority, any owner of the Bonds or group of owners of the Bonds owning no less than 25% of the aggregate principal amount of the outstanding Bonds and Additional Bonds may file suit or action for the enforcement of any covenants of the Authority or rights of owners of the Bonds to require proper and efficient construction and/or operation of Lake Alan Henry and the application of any income therefrom. By such suit or action, the owners of the Bonds may enjoin any act or thing which may be unlawful or in violation of the rights of the owners of the Bonds. Provided, however, the foregoing shall not affect or impair the right of any owner of the Bonds to enforce the payment of the principal of and interest on any Bond at and after the maturity thereof or the time the same comes due. Section 8.2. TRUSTEE. In the event of default, the owners of at least twenty-five percent (25%) in the aggregate principal amount of outstanding Bonds and Additional Bonds are authorized to appoint a Trustee which shall be a national bank having trust powers and having a combined capital and surplus of not less than $10,000,000, and located either within or without the State of Texas. Not more than one Trustee shall serve at any one time. Such Trustee, with or without having possession of the Bonds, shall have the following powers: (a) To direct the operation of Lake Alan Henry by the Authority and the application of Payments under the Contract, or take possession of and operate Lake Alan Henry and make proper application of any revenues thereof; or (b) To file any suit or action which could be filed by the owners of Bonds. Section 8.3. CONCLUSION OF DEFAULT. After such event of default has been cured and an additional event of default does not appear, in the discretion of the Trustee, to be eminent, the Trustee shall return the possession, operation and mainten- ance of Lake Alan Henry to the Board of Directors. Section 8.4. LIMITATION OF TRUSTEE'S LIABILITY. Any 50 Trustee appointed under this Article shall not be personally liable for any loss or damage whatsoever to any person whomso- ever arising out of any action or failure on its part to act or for any error or judgment made in good faith except for fraud, willful misconduct or negligence. Section 8.5. OTHER REMEDIES; REMEDIES NOT WAIVED. No remedy herein specified is intended to be exclusive of any other available remedy or remedies, but each and every such remedy shall be cumulative and shall be in addition to every other available remedy or remedies, now or hereafter existing at law or in equity, or by statute. No delay or omission to exercise any right or power shall impair any such right or power or shall be construed to be a waiver of any default or acquiescence therein, and every such right and power may be exercised from time to time and as often as may be deemed expedient. ARTICLE IX AMENDMENTS Section 9.1. AMENDMENT. (a) The owners of Series 1989 Bonds, Bonds and Additional Bonds aggregating in principal amount two-thirds of the aggregate principal amount of the Series 1989 Bonds, Bonds and Additional Bonds at the time outstanding (but not including in any case Series 1989 Bonds, Bonds and Additional Bonds which may then be held or owned by or for the account of the Authority) shall have the right from time to time to approve an amendment of this Resolution which may be deemed necessary or desirable by the Authority, pro - 51 vided, however, that nothing herein contained shall permit or be construed to permit the amendment of the terms and condi- tions contained in this Resolution or in the Bonds and Addi- tional Bonds so as to: (i) Make any change in the maturity of the Series 1989 Bonds, Bonds and Additional Bonds; (ii) Reduce the rate of interest borne by any of the Series 1989 Bonds, Bonds and Additional Bonds; (iii)Reduce the amount of the principal payable on the Series 1989 Bonds, Bonds and Additional Bonds; (iv) Modify the terms of payment of principal of or interest on the Series 1989 Bonds, Bonds and Additional Bonds, or any of them, or impose any conditions with respect to such payment; (v) Change the minimum percentage of the principal amount of Series 1989 Bonds, Bonds and Additional Bonds necessary for consent to such amendment; or (vi) Affect the rights of the holders of less than all of the Series 1989 Bonds, Bonds and Additional Bonds then outstanding; unless such amendment or amendments be approved by the owners of all of the Series 1989 Bonds and the Bonds at the time outstanding. (b) The provisions of this Resolution notwithstanding, the Authority may, without the consent of any of the owners of the Series 1989 Bonds, Bonds or Additional Bonds, pursuant to amendatory resolution, from time to time: 52 (i) impose upon the Authority conditions or restrictions additional to, but not in diminution of, those contained in this Resolution respecting the issuance of Additional Bonds; (ii) undertake covenants additional to but not incon sistent with those contained in this Resolution; or (iii)correct any ambiguity or correct or supplement any inconsistent or defective provision contained in this Resolution or any amendatory resolution. Section 9.2. KOTICE REQUIRED. If at any time the Author- ity shall desire to amend this Resolution under this Article, the Authority shall cause notice of the proposed amendment to be published in a financial newspaper or journal published in The City of New York, New York or in the State of Texas, once during each calendar week for at least two successive calendar weeks. Such notice shall briefly set forth the nature of the proposed amendment and shall state that a copy thereof is on file at the principal offices of the Authority, the Paying Agent/Registrar and with each of the Participants for inspec- tion by all owners of Bonds and Additional Bonds. Such publi- cation is not required, however, if notice in writing by first- class mail, postage prepaid, is given to each owner of Bonds and Additional Bonds. Section 9.3. ADOPTION OF AMENDMENT. Whenever at any time within one year from the date of the first publication of said notice or other service or written notice the Authority shall receive an instrument or instruments executed by the owners of F�3 at least two-thirds in aggregate principal amount of the Series 1989 Bonds, Bonds and Additional Bonds then outstanding, which instrument or instruments shall refer to the proposed amendment described in said notice and which specifically consent to and approve such amendment in substantially the form of the copy thereof on file with the Paying Agent/Registrar, the Authority may adopt the amendatory resolution in substantially the same form. Section 9.4. EFFECTIVE UPON ADOPTION. Upon the adoption of any amendatory resolution pursuant to the provisions of this Article, this Resolution shall be deemed to be amended in accordance with such amendatory resolution, and the respective rights, duties and obligations under this Resolution of the Authority and all the owners of outstanding Series 1989 Bonds, Bonds and Additional Bonds shall thereafter be determined, exercised and enforced hereunder, subject in all respects to such amendments. Section 9.5. REVOCATION OF CONSENT. Any consent given by an owner of a Series 1989 Bond, a Bond or Additional Bond pursuant to the provisions of this Article shall be irrevocable for a period of six months from the date of the first publication of the notice provided for in this Article, and shall be conclusive and binding upon all future owners of the same bond during such period. Such consent may be revoked at any time after six months from the date of the first publication of such notice by the owner who gave such consent, or by a successor in title, by filing notice thereof with the 54 Paying Agent/Registrar and the Authority, but such revocation shall not be effective if the owners of two-thirds aggregate principal amount of the Series 1989 Bonds, Bonds and Additional Bonds outstanding have, prior to the attempted revocation, consented to and approved the amendment. Section 9.6. PROOF OF OWNERSHIP. For the purpose of this Article, ownership of any Series 1989 Bond, Bond or Additional Bond and the date of owning the same shall be proved by the entries in the Registration Books kept by the Paying Agent/Registrar. ARTICLE X GENERAL COVENANTS Section 10.1. PAYMENT OF BONDS AND INTEREST,. The Author- ity covenants and agrees that Payments will be sufficient to provide funds for the payment of all Maintenance and Operation Costs and to duly and punctually pay the principal of every Series 1989 Bond, Bond and Additional Bond and the interest thereon, on the dates, at the place and in the manner specified in such bonds, and that it will faithfully do and perform and at all times fully observe any and all covenants, undertakings and provisions contained herein or in such bonds. Section 10.2. RATE COVENANT. The Board has fixed, estab- lished, and will maintain and collect such rates, charges and fees, including but not limited to the Payments, for the use and availability of Lake Alan Henry at all times as are neces- sary to produce Revenues in no less than amounts sufficient (1) to pay all current Maintenance and Operation Costs, and (2) to 55 produce Net Revenues for each Year sufficient to pay the principal of and interest on the Series 1989 Bonds, the Bonds and Additional Bonds as the same mature and come due, and all other amounts required by this Resolution and other resolutions authorizing such Series 1989 Bonds, Bonds and Additional Bonds. Section 10.3. LEGAL ABILITY. The Authority represents that it is a governmental agency and body politic and corporate of the State of Texas, duly created, organized and existing under the Constitution and laws of the State of Texas and has proper authority from all other public bodies and authorities, if any, having jurisdiction thereof to execute and deliver the Contract and to pledge the Net Revenues in the manner and form as herein done or intended, and that all corporate action on its part to that end has been duly and validly taken. Section 10.4. COMPLETION OF PROJECT. The Authority further covenants that it will use its best efforts to timely complete the Project in accordance with the Contract and the Engineering Report. Section 10.5. OTHER LIENS. The Authority further cove- nants that there is not now outstanding and that the Authority will not at any time create or allow to accrue or to exist any lien upon Lake Alan Henry, or any part thereof, or the revenues pledged herein to the payment of the principal of and interest on the Bonds, at any time derived from the operation thereof, or any of its funds, except as authorized by this Resolution; that the security of the Bonds will not be impaired in any way as a result of any action or any non -action on the part of the 56 Authority, its Board of Directors or officers, or any thereof, and that the Authority will acquire and continuously preserve good and indefeasible title to Lake Alan Henry.for the duration of the easements on the land upon which Lake Alan Henry is to be built and each and every part thereof owned by the Author- ity. The foregoing notwithstanding, the Authority reserves the right to create pledges and liens on the Net Revenues subordi- nate to the liens herein created. Section 10.6. KEEP FRANCHISES AND PERMITS IN EFFECT. The Authority further covenants that it will use its best efforts to ensure that no franchises, permits, privileges, or easements will be allowed to lapse or be forfeited so long as the same shall be necessary for Lake Alan Henry. Section 10.7. GOVERNMENTAL REQUIREMENTS; LIENS; CLAIMS. The Authority covenants that it will use its best efforts to observe and comply with all valid requirements of any govern- mental authority relative to Lake Alan Henry or any part thereof, and that it will pay or cause to be discharged, or will make adequate provision to satisfy and discharge, within sixty (60) days after the same shall accrue, all lawful claims and demands for labor, materials, supplies, or other objects which if unpaid, might by law become a lien upon such Project or any part thereof or the revenue therefrom; provided, how- ever, that nothing in this Section contained shall require the Authority to pay or cause to be discharged, or make provision for any such lien or charge, so long as the validity thereof shall be contested in good faith and by appropriate legal 57 . proceedings. Section 10.8. FURTHER ASSURANCE. The Authority covenants that it will take such further action as may be required to carry out the purposes of this Resolution and to assure its validity. Section 10.9. SALE AND LEASE OF PROPERTY. (a) The Authority covenants that so long as the Bonds or any of them shall be outstanding, and except as in this Section otherwise permitted, after the Completion Date it will not sell, lease or otherwise dispose of or encumber any part of Lake Alan Henry, or any of the Revenues derived therefrom except as provided herein. The Authority may from time to time sell any mach- inery, fixtures, apparatus, tools, instruments, or other movable property and any materials used in connection there- with, if the Authority shall determine that such articles are no longer needed or are no longer useful in connection with the operation and maintenance of Lake Alan Henry. The Authority may from time to time sell such real estate or interests therein that is not needed or serves no useful purposes in connection with the operation and maintenance of the Project. The proceeds of any sale of real property acquired from the proceeds of the Series 1989 Bonds, Bonds and Additional Bonds shall be deposited in the Debt Service Fund. (b) The Authority may lease any of its lands (or its interest therein) comprising a part of Lake Alan Henry for any purpose, if such lease or the use of such lands will not be detrimental to the operation and maintenance of Lake Alan 58 Henry. All rentals, revenues, receipts and royalties derived by the Authority from any and all leases so made, shall be deposited in the Revenue Fund. ARTICLE XI LOST, STOLEN, MUTILATED BONDS (a) In the event any outstanding Bond is damaged, muti- lated, 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 of damaged, mutilated, lost, stolen, or destroyed Bonds shall be made by the regis- tered 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 Authority 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 Board 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 can- cellation the Bond so damaged or mutilated. (c) Notwithstanding the foregoing provisions of this 59 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 Board 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) 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 the expenses in con- nection 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 contrac- tual obligation of the Authority 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 bene- fits of this Resolution equally and proportionally with any and all other Bonds duly issued under this Resolution. (e) In accordance with Section 6 of Article 717k-6, V.A.T.C.S., this Section shall constitute authority for the issuance of any such replacement bond without necessity of further action by the Authority or any other body or person, and the duty of the replacement of such bonds is hereby author- ized 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 W in Section 2.5(d) of this Resolution for Bonds issued in conversion and exchange for other Bonds. ARTICLE XII DEFEASANCE (a) Any Bond shall be deemed to be paid and no longer outstanding when payment of the principal of, redemption premium, if any, on such Bond, plus interest thereon to the date thereof (whether such due date be by reason of maturity, upon redemption, or otherwise), either (A) shall have been made or caused to be made in accordance with the terms thereof, or (B) shall have been provided by irrevocably depositing with a paying agent, in trust and irrevocably set aside exclusively for such payment (1) money sufficient to make such payment or (2) Federal Securities, as hereinafter defined, certified by an independent public accounting firm of national reputation to mature as to principal and interest in such amount and at such times as will insure the availability without reinvestment, of sufficient money to make such payment, and all necessary and proper fees, compensation and expenses of such payment agent for the Bonds pertaining to this Bond with respect to which such deposit is made shall have been paid or the payment thereof provided for. At such time as a Bond shall be deemed to be paid hereunder, as aforesaid, it shall no longer be secured by or entitled to the benefits of this Resolution, except for the purposes of any such payment from such money of Federal Securities. (b) The deposit under clause (B) of paragraph (a) shall 61 be deemed a payment of a Bond as aforesaid when proper notice of redemption of such Bond shall have been given, in accordance with this Resolution. Any money so deposited with a paying agent as herein provided may at the discretion of the Board also be invested in Federal Securities, maturing in the amounts and times as hereinbefore set forth, and all income from all Federal Securities in the hands of a paying agent which is not required for the payment of the Bond, the redemption premium, if any, and interest thereon, with respect to which such money has been so deposited, shall be turned over to the Board. (c) For the purpose of this Article, the term "Federal Securities" 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, and which are noncallable and which at the time of investment are legal investments under the laws of the State of Texas for the money proposed to be invested therein. (d) Notwithstanding any provision of this Resolution, all money or Federal Securities set aside and held in trust pur- suant to the provisions of this Article for the payment of Bonds, the redemption premium, if any, and interest thereon, shall be applied to and used solely for the payment of the particular Bonds, the redemption premium, if any, and interest thereon, with respect to which such money or Federal Securities have been set aside in trust. (e) Notwithstanding anything elsewhere in this Resolution contained, if money or Federal Securities have been deposited 62 } or set aside with a paying agent pursuant to this Article for the payment of Bonds and such Bonds shall not have in fact been actually paid in full, no amendment to the provisions of this Article shall be made without the consent of the owner of each Bond affected thereby. ARTICLE XIII MISCELLANEOUS Section 13.1. REPEAL. All resolutions or parts thereof, or other corporate action of the Authority or of the Board of Directors, which in any manner or to any extent conflict with any provisions of this Resolution, shall be, and such other resolutions and corporate action are hereby expressly repealed. Section 13.2. SEVERABILITY. In case any one or more of the provisions of this Resolution shall be held to be invalid or ineffective by any court of competent jurisdiction or invalid or ineffective as to any person or circumstance, the remainder hereof and the application of such provision or provisions to persons or circumstances other than those as to which it is held invalid shall not be affected thereby. Section 13.3. COVENANTS REGARDING TAX -EXEMPTION. The Issuer covenants to refrain from any action which would ad- versely affect, or to take such action as to ensure, the treatment of the Bonds as obligations described in Section 103 of 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 63 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; (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 "disproportion- ate", 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 five percent of the proceeds of the Bonds (less amounts depos- ited into a reserve fund, if any) is directly or indir- ectly used to finance loans to persons, other than state or local governmental units, in contravention of Section 64 A 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 pro- ceeds 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 three 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 to the Reserve Fund, the Repair and Replacement Fund and in any other reasonably required reserve or replacement fund to the extent such amounts do not exceed 10 percent of 65 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 refund- ings); (i) to take such action to ensure that at no time will proceeds from the sale of the Bonds deposited to the Reserve Fund, the Repair and Replacement Fund and any other reserve or replacement fund will exceed 10 percent; (i) 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 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 (j) 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 princi- pal and interest on the Bonds. It is the understanding of the Issuer that the covenants 66 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 coun- sel, 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 rermslations or rulings are here- after 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 13.4. PRINTING OF STATEME'iT OF INSURANCE. The Authority hereby authorizes the printer of the Bonds to print thereon any statement of insurance with respect to the Bonds furnished by any municipal bond insurance company insuring the Bonds. Section 13.5. OPEN MEETING. It is hereby officially found and determined that the meeting at which this Resolution is adopted is open to the public as required by law and that public notice of the time, place and purpose of said meeting 67 was given as required by Vernon's Ann. Civ. St., Article 6252- 17, as amended. 68 BRAZOS RIVER AUTHORITY SPECIAL FACILITIES �^ (LAKE ALAN HENRY) REVENUE BONDS, SERIES 1991, $39,685,000 n TRANSCRIPT OF PROCEEDINGS THE STATE OF TEXAS BRAZOS RIVER AUTHORITY I, the undersigned, General Manager of Brazos River Authority, do hereby certify that the attached and following agreement between the Brazos River Authority and the City of Lubbock, dated May ll,- 1989, (1) is a true and correct copy of such agreement as the same appears in the files of the ow Brazos River Authority, and (2) the same has not been amended, and remains in full force and effect. WITNESS my hand and seal of the Brazos River Authority this the 21st day of January, 1991. Carson H. og General Manager (SEAL) ATTE j nt Secretary River Autho ity to,Y a May 3, 1989 n WATER SUPPLY AGREEMENT BY AND BETWEEN BRAZOS RIVER AUTHORITY AND CITY OF LUBBOCK 00% AGREEMENT made and entered into this the &64 day of , 1989, by and between. BRAZOS RIVER AUTHORITY, a river authority of the State of Texas, and THE CITY OF LUBBOCK, LUBBOCK COUNTY, TEXAS, a home -rule city organized under the laws of Texas. 1. DEFINITIONS - The following terms have the following ,. meanings in this Agreement. (a) "Administration Costs" means (i) "Direct Labor Cost" plus (ii) the share of Authority's un -allocated general �. and administrative expenses determined annually by Authority's certified public accountants to be appropriate to cover Authority's expense of supervision and administration attributable to its obligations under this Agreement (initially estimated to be 125% of "Direct Labor Cost") plus (iii) other costs incurred by Authority to develop, plan, construct and complete Project which Authority and City have each agreed in writing should be incurred by Authority in initiating fulfillment of its obligations under this Agreement before Bond proceeds are available to pay such costs. (b) "Assignee" means a party other than City to which PM% 0 Authority assigns a percentage of Dependable Yield after release thereof by City. (c) "Authority" means the Brazos River Authority. (d) "Board of Directors" means the Board of Directors of Brazos River.Authority. (e) "Bonds" means bonds or other obligations issued by Authority (1) for the purpose of obtaining money to establish the funds required by the Resolution pursuant to which the Bonds are issued, (2) to pay Project Costs, and, (3) pursuant to Section 17. (f) "Capital Costs" means principal payments and interest on Bonds plus costs incident to issuing and servicing of Bonds plus such deposits from other than Bond proceeds into reserve funds and other funds as may be required by any Resolution. (g) "City" means the City of Lubbock, Lubbock County, Texas. (h) "Construction Project Costs" means Project Costs incurred beginning with the date of Authority's award of the initial Construction Contract for the construction of the Project. (i) "Construction Fund" means the fund (other than any fund established as a repair and replacement fund, debt service fund or a reserve fund for use in payment of principal of and interest on bonds in the event that revenues payable under this Agreement should ever be Page 2 n Page 3 FIM, insufficient for those purposes) established by any Resolution into which Bond proceeds are to be deposited pursuant to such Resolution. ti . (j) "Debt Service Fund" means the fund established by any Resolution into which monies are to be deposited by Authority in amounts necessary to pay Capital Costs and from which Authority. is to make disbursements to pay Capital Costs. (k) "Dependable Yield" means that amount of water which the Engineer estimates can be withdrawn from Lake each year without completely depleting the supply of.water in Lake during the most severe drought of record on the watershed upstream of and tributary to Lake under the r siltation and runoff conditions determined to exist on such watershed in the year for which the estimate is made. (1) "Direct Labor Costs" means hourly salary cost of Authority employees directly allocable to the planning, financing and construction of Project, together with costs of Social Security, retirement plan, hospitalization, major medical insurance, life insurance and worker's compensation insurance attributable to such salary costs. (m)- "Engineer" means Freese and Nichols, Inc. a consulting engineering firm, or such other firm as may in the Page 3 FIM, future be designated by Authority, after approval by City, to perform the services assigned to the Engineer in this Agreement. (n) "Equity Payment" means a sum of money to be established by Board of Directors and approved by City to be paid to Authority by an Assignee upon assignment by Authority to such Assignee of the right to receive any percentage of Dependable Yield and paid over or credited to City by Authority to prevent injustice to City resulting from the fact that expenditures made by City before such assignment shall have contributed to the planning, financing and construction of Project and its availability for supplying water to Assignee. OW (o) "Fiscal Year" means the fiscal year of Authority, which is September 1 through August 31. (p) "Intake Facilities" means facilities to be constructed OW by Authority or approved by Authority for construction by others for release or withdrawal of water from Lake for City's and/or any Assignee's use. (q) "Lake" means Lake Alan Henry (formerly called Justiceburg Reservoir) including the dam, spillways and outlet works, roads, fences, buildings and all other facilities to be constructed as part of Project. (r) "Maintenance and Operation Costs" means all costs of repairs and replacements of Project for which no special Page 4 fund is created and all costs considered by Authority to be required for proper maintenance and operation of Project, including (for greater certainty but without limiting the generality of the foregoing) the direct costs of labor, equipment, supplies, materials, energy, professional services, supervision, engineering, accounting, administration, auditing,. insurance and payments made by Authority in satisfaction of judgments resulting from claims not covered by Authority's insurance, plus any additional cost or expenses which may be imposed upon Authority in payment of claims in amounts preapproved by City and in connection with the fulfillment of its obligations under this Agreement by r taxation or as a result of actions requested by City or regulations or requirements lawfully imposed by the State of Texas, the United States, any governmental r subdivision of the State of Texas or any federal agency, plus the share of Authority's un -allocated general and administrative expenses determined annually by Authority's certified public accountants to be appropriate to cover Authority's expense of supervision and administration attributable to its obligations under this Agreement plus any certified reimbursement amount due City under Section 28, below. 0^ (s) "Management Fee" means an amount of money payable by Page 5 ems* City or any Assignee to Authority each Fiscal Year, in r consideration of Authority's management of Project, which amount shall equal the sum of 5% of the Maintenance and Operation Costs plus one-half of it of the annual payment for the principal of and interest on the Bonds. (t) "Operational" means the status of the project when the construction thereof is certified as complete by the Engineer. (u) "Permit" means permit No. 4155 issued by the Texas Water Commission. (v) "PreConstruction Project Costs" means Project costs incurred before the date of Authority -Is award of the r initial Construction Contract for the construction of the Project. (w) "Project" means Lake, municipal facilities, and Intake e Facilities to be located on the South Fork of the Double Mountain Fork of the Brazos River in Garza County, Texas, constructed generally in accordance with pians submitted to the Texas Water Commission in connection with the application by City which resulted in the issuance by the Texas Water Commission of Permit. (x) "Project Cost" means all costs of constructing Project, including (without being limited to) all necessary costs for acquisition of land, easements and mineral rights, Page 6 owl rte, clearing, relocations, Administration Costs, planning r and design, field supervision and inspection, engineering, legal expenses and expenses. of financing and construction, and all payments and reimbursements to City as herein provided. (y) "Resolution" means any Resolution of the Board of Directors providing for the issuance of Bonds. n 2. RECITALS. City desires to obtain an additional surface water supply. Authority is willing to assist City in its efforts to obtain such surface water supply. In order to provide such assistance, Authority must construct, maintain and operate Project. To obtain money to construct Project, Authority must issue and sell Bonds. For Authority to be able to sell Bonds, it - r must be able to demonstrate to the prospective purchasers thereof that it will have sufficient monies available to pay Capital Costs and Maintenance and Operation Costs. Such demonstration of n the availability of sufficient monies can be made by Authority's pledging for the payment of such costs, the revenues to be received by Authority from the sale to the City of water from Project, provided that City agrees to pay for such water an amount sufficient to pay all Capital Costs and all Maintenance and Operation Costs, and that such agreement by City with respect to Capital Costs is unconditional and for the benefit of the 0161 holders of the Bonds. The parties have agreed that City shall pay a Management Fee to Authority in addition to such costs. It Page 7 r is contemplated by the parties that City may release portions of .City's rights under this Agreement to Authority in order that Authority may assign the rights released unto Assignees having needs for water. In such event, it is appropriate for each Assignee to make an Equity Payment to Authority and for Authority to immediately pay over to City each Equity Payment as received r by it. City has acquired a substantial part of the land needed for Project. It is contemplated that City will acquire the remainder of the land needed for that purpose, will continue to own all such land and will grant to Authority easements over such land for construction, maintenance and operation of Pro3ect thereon. It is recognized by the parties that it will be beneficial to the public to have facilities located at Project adjacent to Lake for use by the public and for access to the waters of Lake for municipal purposes. It is contemplated that r such areas will be operated by City. The purpose of this Agreement is to provide that City will grant unto Authority easements over, across and upon the lands which it has acquired and will acquire for Project for the construction, maintenance and operation thereon of Project; that City will acquire the remainder of the land needed for construction, operation and maintenance of Project; that City will assign Permit to Authority; that Authority will construct Project (selling Bonds for that purpose) and operate and maintain it; that Authority will make available the water which can be supplied from Project Page 8 to City and/or Assignee(s); that City will include land for municipal area adjacent to Project in the land over which Authority is to be granted an easement pursuant hereto; that City will operate facilities thereon, under an appropriate agreement with Authority, for public use and for access to the waters of Lake for public use; that City will make sufficient payments to Authority for availability of water hereunder to enable Authority with such payments, together with payments to' be made by Assignees, to pay Capital Costs and Maintenance and Operation Cost; that City and/or Assignee will pay Management Fees to Authority; that City's obligations to make payments hereunder shall be maintenance and operating expenses of its waterworks system; that City will set rates for water supplied through its n waterworks system which are adequate to enable it to fulfill its obligations to Authority to make payments hereunder; that Authority will be ' paid Equity Payments by Assignees upon ell assignments unto them of rights previously held by City; that Authority will immediately pay over to City as received all of such Equity Payments; that the obligations of City to pay Capital Costs shall be unconditional; that upon termination of this Agreement, the easements to be granted by City to Authority pursuant hereto will terminate; that when all Bonds and related r� obligations have been paid in full, City may assume responsibility for operation of Project; and that upon such assumption, Authority shall reassign Permit to City and Cityls Page 9 rr, obligations to make payments to Authority referable to periods after the date of such assumption shall terminate. 3. CONSTRUCTION OF PROJECT. Subject to the availability of fiunda through the sale of Bonds and/or as provided under Section 8, below, Authority agrees that it will proceed diligently with the planning, financing and construction of Project in accordance with the schedule to be proposed by Authority and approved by City. City shall assign Permit unto Authority in time so that Authority can proceed with the actions described in the preceding sentence without delay. City shall promptly acquire all lands r, and land rights not already owned by it which may be required in connection with the construction, operation and maintenance of Project and shall grant unto Authority easements upon the lands now owned or to be acquired by it for Project for the construction, maintenance and operation of Project so long as n this Agreement shall remain in force. City shall reserve easements required for construction of City -'s water pumping and transmission facilities and shall retain title to all land and easements which City reasonably determines is not necessary for Authority to construct and operate the Project. Authority shall cause the relocation of all highways, railroads, pipelines, utilities, bridges and other facilities which must be relocated in connection with construction and operation of Project. Authority shall take actions reasonably requested by City to abate and prevent pollution of water in Lake from activities Page 10 associated with the exploration, development, and production of oil, gas, and other minerals, and geothermal resources. Authority will cooperate with City and City will cooperate with Authority in obtaining any required consent from the Texas Water r Commission or any other governmental agency necessary for transfer of Permit as contemplated herein and any other permits or licenses required in connection with Project and the delivery and use of water to be supplied from it. The obtaining of all such needed consents, licenses and permits (other than consent for reassignment of Permit as provided in Section 14, below) is a n condition of the obligations of the parties under this Agreement. Should Authority or City be unable to obtain any such required consent, license or permit, the obligations of the parties under n this Agreement, except the obligations of City set forth in Section 10, below, shall cease. Authority shall cause a copy of this Agreement to be filed with the Texas Water Commission. As plans and specifications for Project are developed by Authority, same will be made available to City and shall be subject to approval of City. Prior to letting of any contract for construction of Project or any part thereof, Authority will allow City to review bids received, and the letting of any such contract shall be subject to the approval of City, which approval may be withheld if the amount of the bid by the lowest responsible bidder exceeds the Engineer's advance estimates of costs for such contract as supplied to City by Authority. City Page 11 ^ reserves the right to review and approve any change order that exceeds five percent of the contract price. It is agreed, however, that Authority shall be excused from meeting a responsibility it has hereunder to the extent it is 'prevented r from meeting such responsibility as a result of rejection or modification by City of any change order proposed by Authority. City shall be responsible for construction and installation of r, water pumping and transmission facilities, except the intake facilities, and such facilities shall not be included in the Project. 4. CERTIFICATION THAT THE PROJECT IS OPERATIONAL. Authority shall certify to City and to any Assignee in writing the date on which Project is expected to become Operational at least thirty (30) days prior to such date. The obligation of City and of any Assignee to make payments to Authority under Section 7, below, shall begin on the date thus certified to be the date on which Project is to become Operational, unless City or Assignee is , obligated to begin such payments prior to such date under the terms of said Section 7 or Section 9, below. 5. AUTHORITY'S BONDS. Upon request of City, and only upon its request, Authority shall issue and sell Bonds in an aggregate amount sufficient in the opinion of Authority and City to pay all Project Costs and to establish any funds required by the Resolution. Bonds will be sold in one or more increments at times selected by Authority after consultation with City. Bonds Page 12 r► will be described in a Resolution, as amended or supplemented r from time to time. The initial Resolution issued for PreConstruction Project Costs and the initial Resolution issued for Construction Project Costs each shall be subject to approval of City. The entire proceeds from the sale of Bonds (other than costs of issuance of Bonds and any amount required by the terms of Resolution to be deposited into a repair and replacement fund, a debt service fund, or a reserve fund to be used for payment of principal of and interest on Bonds in the event of insufficiency of revenues hereunder for that purpose) shall be placed by n Authority in Construction Fund. All Project Costs shall be paid from Construction Fund. Immediately upon receipt of proceeds from Bonds, Authority shall, at the option of City, pay to City from Construction fund for the easements to be granted by City to Authority pursuant hereto an amount of money certified in writing by City to Authority prior to the issuance of Bonds as being equal to the amount of costs theretofore paid by City for lands for Project, for expenses incurred in obtaining Permit, for advances to Authority under the provisions of Section 8, below, and for fulfillment of ancillary obligations as provided in Section 27, below. Should City, after such initial payment and prior to Project becoming operational, incur and pay additional costs for the acquisition of land, easements or mineral interest for Project or for fulfillment of ancillary obligations provided in Section 27, below, Authority shall, immediately upon receipt Page 13 of written notice from City that such additional costs have been paid and of the amount thereof, reimburse City for same from Construction Fund. Disbursements from Construction Fund shall be made only for the payment of Project Costs. Any funds remaining in the Construction Fund after the payment of all Project Costs shall be utilized to reduce the Capital Costs payments required to be made by City under Section 7, below, and by any Assignee under provisions in the agreement between Authority and such Assignee of like effect to the provisions in Section 7, below, and may be withdrawn from Construction Fund and deposited into n Debt Service Fund for such purpose after the payment of all Project Costs. All Capital Costs shall be payable from Debt Service Fund. Bonds shall be sold on the basis of competitive bidding, unless Authority and City agree otherwise. Bonds shall be revenue bonds payable solely from reserve funds established by a Resolution and monies to be paid hereunder. n ' 6. SALE AND PURCHASE OF WATER. Subject to assignment of rights under Section 11, below, Authority agrees to sell to City and City agrees to buy from Authority, and to pay for as provided herein, whether such water is actually used or not, the entire amount of water which can be supplied from Project. Times and rates of delivery of water from Project to City shall, within the limits of capability of Project, be selected by City. Deliveries shall be through the Intake Facilities. Authority and City shall each have the right of access to the sites and facilities of the Page 14 7 other as reasonably required for effective utilization of Project r► for delivery of water to City. Authority will measure and maintain accurate records of water withdrawn from Lake and of water delivered to City and will furnish City with monthly summaries 'of such records. City shall have the right to inspect the measuring devices and records of operation of Project at reasonable times. 7. PAYMENTS BY CITY. Subject to assignment of rights and obligations pursuant to Section 11, below, City shall make payments to Authority during each Fiscal Year which shall equal the sum of: (i) Capital Costs payable during such Fiscal Year; plus (ii) Maintenance and Operation Costs as adjusted, which, by n Board of Directors' estimates made prior to the beginning of such Fiscal Year, will be incurred during such Fiscal Year; plus r (iii)Management Fees for such Fiscal Year. Payments to be made under this Section 7 on account of Capital Costs shall be due and payable on or before ten (10) days before r the date on which such Capital Costs are required to be paid by Authority and shall be in such amounts as shall enable Authority, with the monies thus paid, to pay Capital Costs as they become r► payable. All payments representing Capital Costs shall be deposited by Authority into Debt Service Fund and other funds as shall be required by the terms of any Resolution. Disbursements Page 15 r'* shall be made from Debt Service Fund only for payment of those n Capital Costs required by a Resolution to be made therefrom. At or prior to its regular July meeting each year, Board of Directors shall determine the amount estimated as necessary to pay Maintenance and Operation Costs for the following Fiscal Year, which amount shall be adjusted by any deficit or surplus in the payments by City to cover Maintenance and Operation Costs for preceding Fiscal Years and shall include credit for any miscellaneous income to Authority resulting from operation of Project. At the same time, Board of Directors shall determine the amount of Management Fees payable during the following Fiscal Year. These determinations, together with a schedule of monthly payments necessary to pay such Maintenance and Operation Costs as r adjusted, plus Management Fees, for the following Fiscal Year, and with the data on which such determinations and schedule are based, shall be submitted to City in writing before August 1, following such meeting. The amount of each monthly payment specified in such schedule shall be 1/12th of such Maintenance and Operation Costs, as adjusted, plus 1/12th of Management Fees for such following Fiscal Year less any reimbursement credit due City under Section 28, below. If City shall make written objections to such determinations within thirty (30) days after receipt of same, the parties shall negotiate during the month of September in an attempt to resolve their differences. Should the parties fail to resolve their differences by the end of Page 16 September, the matter shall be submitted to arbitration pursuant n to Section 21, below. Pending the outcome of such arbitration, City shall make payments to Authority in accordance with the schedule. When the decision of the arbitrator is received, subsequent payments during the Fiscal Year shall be in equal installments and shall be in such adjusted amount so that total payments for the Fiscal Year involved shall be in accordance with r such decision. In the event of subsequent reversal of the decision of the arbitrator, appropriate adjustments to account for the effects of such reversal shall be made in the determinations made by the Board of Directors with respect to Operation and Maintenance Costs and Management Fees to be paid in subsequent Fiscal Years. The amount payable for each month shall be due and payable on or before the first day of that month. For the Fiscal Year in which Project becomes Operational, the aforesaid written determination and schedule for the remainder of that Fiscal Year shall be furnished with the certification required to be given in Section 4, above. Authority agrees to keep proper financial and operating records and books of account, pursuant to law and in accordance with generally accepted governmental accounting principles as presented and recommended in the National Committee on Governmental Accounting publication, r Governmental Accounting, Auditing and Financial Reporting and the Industry Audit Guide of the American Institute of Certified Public Accountants, entitled Audits of State and Local Page 17 'ate Governmental Units, as such principles are supplemented and modified from time to time, pertaining to Authority's performance of its obligations under this Agreement, and such records and books of account shall be open to audit by City at all reasonable r� times. All payments required hereunder shall be payable in McLennan County, Texas. 8. ADVANCES OF FUNDS. Monthly, beginning upon execution of this Agreement, Authority will invoice City for Administration Costs. That portion of Administration Costs defined in Section 1(a) (ii) , above, for which estimated payments have been made by City shall be adjusted, estimated amount versus actual determined amount, annually by Authority's certified public accountants after the end of each Fiscal Year. City will receive credit for or refund of any surplus or invoice for any deficit amounts. City shall make payments within ten (10) days of receipt of monthly invoices from Authority but City reserves the right to challenge propriety of such costs. As provided above, City shall, at its option, be reimbursed for such advances, as adjusted, out of the first available Bond proceeds. That portion of Administration 'Costs defined in Section 1(a)(i) and (ii), above, shall not exceed 3 (three) percent of the estimated total price of the contracts for construction of the Project without the prior approval by City and, absent such approval, that portion of the Administration Costs that is in excess of such percentage shall be deducted from Management Fee. Page 18 r rao n 9. ADDITIONAL PROVISIONS TO ASSURE PAYMENTS. Should the amount of money set aside from Bond proceeds to pay interest on Bonds during construction of the Project prove insufficient for that purpose, or should any payments of principal fall due before the Project is Operational, City shall pay to Authority such amounts of money at such times as will enable Authority to pay Capital Costs when due. Authority shall certify to City in writing the need for such payments. at least thirty (30) days prior to the date when same are required to be made by City. 10. PAYMENT UNCONDITIONAL. Bonds that will be issued to pay Project costs will be payable only from payments made by City or any Assignee pursuant to this Agreement; therefore the obligation of the City to make payments under Section 7, above, shall be unconditional whether or not Project is completed and even in the event of a total failure of the water supply agreed to be made available under this Agreement. The obligation to make such payment shall not be relieved by release and reassignment of any or all of City's rights hereunder. 11. ASSIGNMENTS. Upon agreement by a prospective Assignee to assume a percentage or all of the payments required to be made by City hereunder at the times when payments are required of City, City shall have the right to release a percentage or all of Dependable Yield unto Authority. When City shall have thus released any percentage of Dependable Yield unto Authority and such prospective Assignee shall have made the Equity Payment Page 19 r� hereinafter provided for, Authority shall thereupon assign the percentage of Dependable Yield thus released unto such.Assignee, subject to the limitation of Section 12., and such Assignee shall assume the obligations of City to make a percentage or all of the payments required to be made by City hereunder at the times when payments are required of City. Such percentage shall be a fraction (expressed as a percentage) the numerator of which shall be the part of Dependable Yield, as determined at the time of such assignment, expressed in acre-feet per year (AF/Y) released by City and assigned by Authority unto such Assignee and the r, denominator of which shall be the total Dependable Yield, as determined at the time such assignment is made, also expressed in AF/Y. So long as an Assignee shall fully and promptly discharge e its assumed obligations to make payments to Authority, City.shall be relieved of the obligation to make such payments to the extent of the obligations assumed. However, City shall not be thus relieved to the extent that such Assignee defaults in prompt fulfillment of the obligations which it has assumed. As a condition for any such assignment, Authority shall require r Assignee to make an Equity Payment to Authority in an amount or amounts and at a time or times to be established by Authority and OM approved by City in advance of such assignment. All Equity Payments received by Authority shall be paid over by Authority to City immediately upon receipt. In the event of any such assignment, Authority shall make available to Assignee, rather Page 20 than to City, the percentage of Dependable Yield thus assigned by Authority so long as such Assignee shall promptly fulfill all obligations to Authority assumed by it in consideration of such assignment. Upon failure of any Assignee to fulfill such obligations promptly, Authority shall give written notice of such failure to Assignee and to City. If such failure is not cured by Assignee within 30 days after effective date of such notice, City shall fulfill the obligations in default, such assignment shall terminate and shall be renewed only with approval of City on terms approved by City and the percentage of Dependable Yield assigned unto the Assignee under such assignment shall revert to City. At the time an initial assignment is made, and thereafter at the time of subsequent assignments or at 10 -year intervals, whichever is less, Authority shall cause the Engineer to prepare a current estimate of Dependable Yield. The amount of water an Assignee shall be entitled to from the Project in any full calendar year shall be equal to Dependable Yield of the Project as last determined by the Engineer prior to January I of that calendar year multiplied by the percentage of Dependable Yield assigned to such Assignee. If any assignment becomes effective on any date other than January 1, then the amount of water available to that Assignee during the remainder of that beginning year shall be a prorated amount of the total assigned amount of Dependable Yield expressed in AF/Y. Proration shall be on the basis of a fraction in which the numerator is the number of days Page 21 W q. remaining in the beginning year following the effective date of the assignment and the denominator is 365 days. Payment obligations of City assumed by Assignee as described above shall be prorated on the same basis in any partial beginning year. .ti Upon assumption of operation of Project by City as provided in Section 14, below, City will assume then existing obligations of Authority to any Assignee arising out of assignments made pursuant to this Section 11. 12. DIVERSION RIGHTS OF CITY. Prior to any release and assignment of an amount of Dependable Yield in accordance with Section 11., City shall have the right to make a total annual diversion of up to 35,000 acre-feet. The monthly diversion rate and the total annual diversion amount up to 35,000 acre-feet will be decided by City. It is anticipated that City will limit its total annual diversion in accordance with the overdraft mode of operation defined by Freese and Nichols, Inc. in Feasibility Report on the Justiceburg Reservoir; 1978, which is summarized in the following table: Lake Contents Annual Diversion Limits -Overdraft mode more than 60,000 35,000 Acre-feet Acre-feet less than 60,000 r Acre-feet but more 25,000 Acre-feet than 30,000 Acre-feet less than 30,000 Acre-feet OW ii 20,000 Acre-feet Page 22 I As described in Section 11., Engineer will be directed to prepare r a current estimate of Dependable Yield at the time of the initial assignment of an amount of Dependable Yield and thereafter at the time of subsequent assignments or at 10 -year intervals, whichever is less. Concurrently, Engineer will be directed to re-evaluate the overdraft mode of operation in order- to account for the effects of the total assigned amount(s) of Dependable Yield. City's diversion rights subsequent to any release and assignment shall be limited by the results of Engineer's reevaluation of the overdraft mode of operation. Authority shall not be obligated to assign any amount of Dependable Yield released by City unless City agrees at the time of any such release to accept annual diversion limits and conditions which will, in the opinion of Engineer, allow Authority to provide assigned amount(s) of Dependable Yield to Assignee(s) on a reliable basis through the most severe drought of record as used to define Dependable Yield. 13. MUNICIPAL FACILITIES. City may, at its option, acquire land as part of Project as it shall determine to be needed for municipal facilities to be owned and operated by City in connection with operation of Project and as an area across which the public shall have access to the water of. Lake. Such land shall be subject to the easements to be granted by City to r■ Authority for operation of Project but shall be owned and operated by City to provide municipal functions and access to Lake. Lake Rangers who have been designated by Authority as Page 23 Authority -peace officers in connection with operation of Project shall have jurisdiction for the purpose of law enforcement in such municipal area through the easement provided to Authority by City. 14. TERM, ASSUMPTION OF OPERATION AND TERMINATION. The term of this Agreement shall commence on the date hereof. This Agreement shall remain in effect for so long as any Bonds,or any bonds that have been issued to refund or refinance the obligations originally represented by the Bonds, or issued pursuant to Section 17 remain outstanding and thereafter for so long as City shall elect while Project continues to be useful for the purpose of supplying water to City or to any Assignee. When all obligations under Bonds have been fully discharged, City may elect to assume operation of Project at any time by written notice to the Board of Directors given at least one year prior to the date of election. Upon the effective date of election, City r� shall assume responsibility for operation of Project, subject to then existing obligations to Assignees and with existing rights as against Assignees. Thereupon, Authority shall be relieved of n further responsibility for operation of Project and City shall be relieved of all obligations to make payments to Authority provided for in this Agreement and referable to periods of time r after the date of such assumption. Upon any such assumption, Authority shall reassign Permit unto City, and shall assign to City any other permits or licenses or contractual rights required Page 24 r, or held in connection with maintenance and operation of Project. fi Upon such reassignment and assignments, Authority shall cooperate with City in obtaining any necessary consent to such reassignment and assignments from the Texas Water Commission and/or any other governmental agency having jurisdiction in the premises. Upon any such assumption, this Agreement shall terminate and the easements granted by City to Authority pursuant hereto shall A terminate. 15. FORCE MAJEURE. Neither party shall be under any liability or suffer any default for any failure to perform or for delay in performing such party's obligations hereunder where the same is due to acts of God, fire, storm, war, riot, sabotage, drought, low flows in the South Fork of the Double Mountain Fork of the Brazos River, strikes or other differences with labor (whether or not within the power of such party, to settle same), decrees or orders of courts or other governmental authority, or other similar or dissimilar causes not within the reasonable control of such party and not due to the negligence of such party, while and so long and to the extent that performance is prevented for such cause (hereinafter sometimes called a "Force Majeure") and due diligence is used to resume performance at the earliest practical time. Force Majeure shall not, however, r excuse City from performing the obligations and fulfilling its undertaking under Section 10, above. 16. CONDITIONS. The obligations of Authority hereunder are Page 25 conditional upon its ability to sell Bonds for sums of money sufficient to enable it to pay therewith the costs of what it has undertaken to do under the terms of Section 3, above, and to obtain labor, materials and equipment to fulfill such obligations, and upon its being furnished with an opinion of counsel for City to the effect that the execution of this Agreement is within the power of City under the laws of Texas, that all proceedings for the authorization of the execution of this Agreement by the officials of City executing it on behalf of City are valid and that this Agreement is and will be a binding and fully enforceable obligation of City. The obligations of City hereunder are conditioned upon receipt by it of a written opinion of counsel for Authority to the effect that the execution of this Agreement by Authority is authorized under the laws of Texas, that all proceedings respecting authorization of execution of this Agreement on behalf of Authority are valid and that this Agreement is and will be a binding and fully enforceable obligation of Authority. 17. MAINTENANCE AND REPAIRS. So long as it shall operate Project, Authority shall maintain, repair and operate same in a prudent, efficient and economical manner, to the end that it shall be able to fulfill its obligations hereunder at a minimum cost. Authority may issue additional Bonds to obtain funds to make repairs and replacements to Project necessary or desirable for its efficient and economical operation or as required by any Page 26 0 regulatory body with applicable jurisdiction so long as this Agreement remains in effect. Such additional Bonds may be on a parity with Bonds issued per Section 5, above, or may be subordinate to the pledge of revenues to the payment of Bonds. 18. INSURANCE. Authority shall maintain a practical insurance program, with reasonable terms, provisions, insurance and costs which the Board of Directors determines will afford adequate protection against liability for bodily injury and property damage occurring in connection with the construction, operation and maintenance of Project, which insurance shall also � protect Cit if an p y and Assignees, g y, as named insureds. Authority shall also carry such insurance against fire and other casualties affecting Project as is usual and practical to obtain with n respect to such facilities. Proceeds of insurance against fire and other casualties will be used solely to repair and maintain Project. 19. WAIVER. Any waiver at any time by any party of its rights with respect to a default under this Agreement or with respect to any other matter arising in connection with this Agreement shall not be deemed a waiver with respect to any subsequent default or matter. 20. REMEDIES. Nothing in this Agreement shall be construed, in any manner, to abridge, limit or deprive either party hereto of any means which it would otherwise have of enforcing any remedy, either at law or in equity, for breach of any of the Page 27 Page 28 provisions hereof; provided, however, that no default hereunder shall excuse performance by City of its obligations under Section 10, above, it being expressly acknowledged, understood and agreed that Bonds will be issued and purchased in reliance upon the undertakings of City in Section 10, above. Recognizing that failure in the performance of Authority's or City's obligations hereunder could not be adequately compensated in money damages r alone, each party agrees in the event of any default of its part that the other party shall have available to it the equitable remedy of mandamus and specific performance in addition to any other legal or equitable remedies (other than termination) which may also be available to the party. Notwithstanding anything to the contrary contained in this Agreement, any right or remedy or n any default hereunder, except the right of the Authority to receive payments per Section 7, which shall never be determined to be waived, shall be deemed to be conclusively waived unless asserted by a proper proceeding at law or in equity within two (2) years plus one (1) day after the occurrence of such default. No waiver or waivers of any breach or default (or any breaches or defaults) by any party hereto or of performance shall be deemed a waiver thereof in the future, nor shall any such waiver or waivers be deemed or construed to be waiver of subsequent breaches or defaults of any kind, character, or description, under any circumstances. 21. ARBITRATION. In the event that any dispute between the Page 28 Authority and the City arises under any of the terms or provisions of this Agreement, other than a dispute with respect to payments described in Section 7 and Section 10, above, the obligations to make such payments being unconditional, the parties will adhere to the following procedures. This is the exclusive. procedure for the resolution of disputes under this Agreement. (a) The parties agree that every effort will be made to resolve the dispute on an informal basis. The parties agree to submit written notices of objections as specified in various sections of this Agreement. In the absence of specific time frames, the parties agree to submit written objections to acts or occurrences which they dispute within twenty (20) calendar days of the date they become aware or should have become aware of the act or occurrence. The parties will meet within fourteen (14) calendar days of receipt of the notice to attempt informal resolution. (b) In the event the parties are not able to reach a mutually satisfactory settlement within ten (10) calendar days from the first informal meeting, either party may invoke arbitration. The moving party must submit a written notification to the other party specifying the disputed item(s) being submitted to arbitration. Such arbitration shall occur and shall comply with and be governed by this section and by the provisions of the Texas General Arbitration Act, Articles 224 through 238-6 Page 29 c V.A.T.S. Page 30 W (c) The term "dispute(s)" shall be given the broadest meaning and interpretation and shall include but not be limited to any dispute over sums due by one party to another, any interpretation or application of the provisions of this Agreement, any issues relating to any rights, liabilities, remedies of any party herein. While under this Agreement neither �. party will institute a lawsuit pertaining to any dispute that may arise under this Agreement. Either party may institute action for specific enforcement in a court of competent jurisdiction to compel another party to arbitrate any dispute under this Agreement. The moving party shall, within fifteen (15) days following the date of the notice invoking arbitration, submit a request to the American Arbitration Association to provide a list of potential arbitrators from which selection can be made. If r„5 the estimated, or actual, value of the disputed issue is $100,000 or less, a list of seven (7) arbitrators will be requested. If ,., the estimated, or actual, value of the disputed issue is greater than $100,000 a list of fifteen (15) arbitrators will be requested. The parties shall meet within ten (10) calendar days ,. after receipt of such list to select an arbitrator, or arbitrators. If they cannot mutually agree on one of the listed arbitrators, then the Authority and the City will alternately ,., strike an arbitrator's name from the list. If the value of the Page 30 W 0-, r 041 disputed issue is $100,000 or less, the striking continues until one name remains. If the value is greater than $100,000, the striking continues until three (3) names remain. :The remaining person(s) shall be the duly selected arbitrator(s). The procedures to determine who strikes the first name will be determined by lot. If either party refuses to participate in the selection process, the other party will make a selection of an arbitrator from the list. The arbitrator shall hold the hearing at a mutually agreeable date and location not later than ninety (90) days following ,the date of notice invoking arbitration. The procedures used to conduct the hearing shall be determined by the arbitrator. The arbitrator shall issue and sign a written decision within forty-five (45) days after the close of the hearing. Time limits at any step of the arbitration procedure may be extended by mutual consent of the parties. The arbitrator has full authority to award, in his judgment, appropriate remedies including reasonable attorney's fees in any case where he deems it to be warranted. The decision of the arbitrator shall state the findings and conclusions which are the basis for the decision. The arbitrator's decision shall be final and binding subject to the applicable provisions of the Texas General Arbitration Act. If, upon application of a party, a court of competent jurisdiction vacates the award in accordance with Article 237, Section A (1) through (4) of the Texas General Page 31 Arbitration Act, and orders a rehearing before a new arbitrator, the new arbitrator will be selected in the same manner as the original arbitrator. The costs of the arbitration, including fees and expenses of the arbitrator and fees of the American Arbitration Association, shall be paid by Authority from and be a part of r Maintenance and Operation Costs. 22. NOTICES. All notices or communications provided for herein shall be in writing and shall be delivered to City or to Authority, or, if mailed, shall be sent by certified mail, postage prepaid, addressed to City at City Hall, Lubbock, Texas 79457, and to Authority, P.O. Box 7555, Waco, Texas 76714-7555. Either party may change the address to which such notices and communications are to be delivered or sent to it by written notice to the other party. Mailed notices shall be deemed to have been received on the first business day following day of mailing. 23. MISCELLANEOUS. The payments by City required hereunder shall constitute full* consideration for all rights and benefits accruing to City under this Agreement. 24. COMPLIANCE WITH LAWS. The parties hereto agree to discharge their respective obligations under this Agreement in compliance with all applicable laws, ordinances and governmental rules and regulations. 25. COMPLETION BONDS. Should the proceeds of Bonds issued Page 32 ,+ per Section 5, above, be insufficient to enable Authority to complete the Project, place it into operation and pay from the proceeds thereof all costs enumerated in Section 5, above, Authority may issue additional Bonds for the purpose of obtaining funds for completion of Project. Such additional Bonds may be on a parity with Bonds issued per Section 5, above, or may be r, subordinate to the pledge of revenues to the payment of Bonds. Upon agreement of the parties and to the extent not precluded by the provisions of any resolution or other document pertaining to Bonds, Authority may issue other additional bonds to obtain funds to provide additional facilities agreed upon by the'parties for the withdrawal, treatment and delivery to City, of water from Project, which additional bonds may be on a parity with Bonds issued per Section 5, above and/or per the foregoing provisions of this Section 25 or may be subordinate to the pledge of revenues to the payment of such other Bonds. 26. SEVERED MINERAL INTEREST. In some cases, there are outstanding severed mineral interests in the lands to be subject to easements in favor of Authority for the construction, maintenance and operation of Project pursuant hereto. Should acquisition of such outstanding severed mineral interests or their subjection to the easement rights of Authority ever be necessary in order to prevent interference with the construction, operation or maintenance of Project.or with the quality of the water impounded in Lake, City will either acquire such Page 33 Page 34 outstanding mineral interests and subject them to Authorityls easements or will otherwise arrange for their subjection to Authority's easements. 27. ANCILLARY OBLIGATIONS. City shall fulfill all obligations imposed by the terms of any license or permit issued in connection with operation of Project, whether held by City or by Authority, for operation of municipal facilities and for mitigation of losses of wildlife habitat resulting from construction of Project. City shall take actions and institute programs which are necessary to allow Authority to meet obligations of any and all permits required for construction and operation of Project. 28. ADDITIONAL REIMBURSEMENT. Prior to Project becoming n Operational, reimbursement of City's costs associated with Sections 26 and 27, above, shall be in accordance with Section 5. After Project becomes Operational, should City incur and pay additional costs for the acquisition of land, easements or mineral interests or otherwise in fulfillment of its obligations under Sections 26 and 27, above, at City's option and upon receipt of written notice from City of the fact and amount of such additional costs, Authority shall include such certified amount in Maintenance and Operation Costs for the following Fiscal Year. City shall receive reimbursement in the form of monthly credit of 1/12th of such certified amount applied to payments to be made by City under Section 7 during such Fiscal Page 34 0- y Year. O 29. NO TAX OBLIGATION OF THE CITY. The Authority shall never have the right to demand payment by the_ City of any obligation assumed or imposed on it under and by virtue of this Agreement from funds raised or to be raised by taxation. 30. OPERATING AND MAINTENANCE EXPENSES AND RATES. City represents and covenants that the services to be obtained r� pursuant to this Agreement are essential and necessary to the operation of the City's waterworks system and that all payments to be made hereunder by it will constitute reasonable and r necessary "operating and maintenance expenses" of ' City's waterworks system, within the meaning of Articles 1112 and 4413(32c), Vernon's Texas Civil Statutes, and the provisions of T ' all ordinances authorizing the issuance of all bonds or other obligations of the City's waterworks or waterworks and sanitary sewer system. City will set and charge rates for services supplied through its waterworks system (or waterworks and sewer system) which are adequate to enable it to fulfill its obligations hereunder, as well as all other obligations which must be discharged out of revenues of such waterworks system (or is waterworks and sewer system). 31. WATER CONSERVATION AND WATER QUALITY PROGRAMS. The I^ construction of the Project and the proper maintenance and operation of the Project shall include, subject to Authority's legal power to adopt and jurisdiction, -development and Page 35 r,, implementation of any water conservation program or water quality r program that City requests Authority to adopt. These programs shall include (for greater certainty, but without limiting the generality of the foregoing) the controlling or prohibiting the installation of or use of private sewage facilities in the area surrounding the Lake and the abatom--* s„a Pollution from activities associated with the exploration, development, and production of oil, gas, or geothermal resources. Within a reasonable time after approval by the Texas Water Commission of the transfer of Permit to Authority, Authority shall request and use due diligence to obtain an order from the Texas Water Commission adopting rules to abate or prevent r pollution or injury to public health from private sewage facilities in the area surrounding the Lake and delegating to Authority the responsibility for performing a licensing function and administrating a licensing system. To the extent private sewage facility license fees do not pay all regulatory expenses, the shortfall shall 'be Mainfonm",%e -_s Authority and City recognize that the chemical quality of the r water'stored in the Lake will be influenced by the annual volumes of diversions. The chemical quality will be best when diversions are at the allowable maximum rates under the overdraft mode of operation described in Section 12 above. Concentrations of dissolved minerals in the impounded water will tend to increase when diversions are less than the allowable annual amounts. When Page 36 diversions are less than the allowable maximum amounts, Authority r shall, if requested by City, release water through the outlet works at the dam so long as the sum of diversions and releases is not greater than the City's allowable maximum diversion, in order to avoid undue build-up of dissolved mineral concentrations. In the event that there is disagreement as to whether such releases are actually needed for control of the chemical quality of the r� impounded water, the matter shall be submitted to Engineer for evaluation, and Engineer's recommendation shall be followed so long as such releases can be made without impairing Authority's obligation, if any, to provide an assigned amount of Dependable Yield to any Assignee. 32. CONTROL OF PROJECT. As between Authority and City, t Authority shall control the construction and operation of the Project and all related facilities and improvements and shall hold exclusive possession of the Project. Authority agrees to defend and save and hold harmless, City from all claims, demands, and causes of action which may be asserted by anyone on account of the construction and operation of the Project and related r� facilities and improvements, or possession and use of the Project. This promise is not made for the benefit of any third party. This section shall in no manner be construed to relieve City from its obligation to pay Capital Costs and Maintenance and Operation Costs. Page 37 owl + } BRAZOSVER AUTHORITY BY l/�2 , //, General Mana er 10,ATTEST: Assistant Secretary "Authority" CITY OF LUBBOCK BY "Mayor" ATTEST: Secretapyr "City" Page 38 Resolution #3523 CERTIFICATE FOR RESOLUTION (1) APPROVING A RESOLUTION AUTHORIZING AND REQUESTING THE ISSUANCE OF BRAZOS RIVER AUTHORITY SPECIAL FACILITIES (LAKE ALAN HENRY) REVENUE BONDS, SERIES 1991; PRESCRIBING THE FORM AND TERMS OF SAID BONDS; PROVIDING FOR THE SECURITY AND- PAYMENT THEREOF; AUTHORIZING THE FORM AND USE OF THE OFFICIAL STATEMENT; AND RESOLVING OTHER MATTERS RELATING TO THE SUBJECT; AND (2) REQUESTING THE ISSUANCE AND SALE OF SUCH BONDS THE STATE OF TEXAS COUNTY OF LUBBOCK CITY OF LUBBOCK We, the undersigned officers of the City of Lubbock, Texas, hereby certify as follows: 1. The City Council of said City convened in REGULAR MEETING ON THE 10TH DAY OF JANUARY, 1991, at the City Hall, and the roll was called of the duly constituted officers and members of said City Council, to -wit: B. C. "Peck" McMinn, Mayor Joan Baker Bill Maloy Gary D. Phillips Ranette Boyd, City Secretary M. J. "Bud" Aderton T. J. Patterson Maggie Trejo and all of said persons were present, except the following absentees: None , thus constituting a quorum. Whereupon, among other business, the following was transacted at said Meeting: a written RESOLUTION (1) APPROVING A RESOLUTION AUTHORIZING AND REQUESTING THE ISSUANCE OF BRAZOS RIVER AUTHORITY SPECIAL FACILITIES (LAKE ALAN HENRY) REVENUE BONDS, SERIES 1991; PRESCRIBING THE FORM AND TERMS OF SAID BONDS; PROVIDING FOR THE SECURITY AND PAYMENT THEREOF; AUTHORIZING THE FORM AND USE OF THE OFFICIAL STATEMENT; AND RESOLVING OTHER MATTERS RELATING TO THE SUBJECT; AND (2) REQUESTING THE ISSUANCE AND SALE OF SUCH BONDS was duly introduced for the consideration of said City Council for passage and adoption. It was then duly moved and seconded that said Resolution be adopted; and, after due discussion, said motion, carrying with it the adoption of said Resolution, prevailed and carried by the following vote: 7 voted "For", 0_ voted "Against", U abstained, all as shown in the official Minutes of the City Council for the Meeting held on the aforesaid date. 2. That a true, full, and correct copy of the aforesaid Resolution adopted at the Meeting described in the above and foregoing paragraph is attached to and follows this Certificate; 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 adoption 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; and 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 adoption at said Meeting; 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 City Council 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 t e loth day of January, 1991. ity Secretary Mayor rte, RESOLUTION (1) APPROVING A RESOLUTION AUTHORIZING AND REQUESTING THE ISSUANCE OF BRAZOS RIVER AUTHORITY SPECIAL FACILITIES (LAKE ALAN HENRY) REVENUE BONDS, SERIES 1991; PRESCRIBING THE FORM AND TERMS OF SAID BONDS; PROVIDING FOR THE SECURITY AND PAYMENT THEREOF; AUTHORIZING THE FORM AND USE OF THE OFFICIAL STATEMENT; AND RESOLVING OTHER MATTERS RELATING TO THE SUBJECT; AND (2) REQUESTING THE ISSUANCE AND SALE OF SUCH BONDS THE STATE OF TEXAS COUNTY OF LUBBOCK CITY OF LUBBOCK WHEREAS, on May 11, 1989, the City of Lubbock, Texas (the "City") and Brazos River Authority (the "Authority") entered into that certain Water Supply Agreement (the "Contract") in order that City may obtain an additional surface water supply; and WHEREAS, in order to provide the additional water supply the Authority is to construct, maintain and operate the "Project" (as defined in the Contract); and WHEREAS, pursuant to the Contract, upon request of the City, and only upon its request, the Authority is to issue and sell Bonds (as defined in the Contract) in an aggregate amount sufficient in the opinion of the Authority and the City to pay all Project Costs (as defined in the Contract) and to establish any funds required by the resolution authorizing the Bonds; and WHEREAS, the Contract provides that the initial resolution authorizing the issuance of the preconstruction bonds and construction bonds for the Project (the "Bond Resolution") is subject to approval by the City; NOW THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF LUBBOCK: SECTION 1. In accordance with the Contract, the City and Authority have determined that the Authority shall issue and sell bonds more particularly described as "Brazos River Authority Special Facilities (Lake Alan Henry) Revenue Bonds, Series 1991 in the aggregate amount of $39,685,000 (the "Bonds"). SECTION 2. There has been submitted to the City the Bond Resolution substantially in the form to be adopted by the Board of Directors (the "Board") of the Authority on January 21, 1991 and bearing the draft date 12/17/90. SECTION 3. The Bond Resolution is hereby approved by the City, and the Authority is requested to issue and sell the Bonds. . SECTION 4. The City's approval of the Bond Resolution is subject to the review and approval of the terms of sale of the Bonds on January 21, 1991. The City expressly delegates the power of review and approval to the Assistant City Manager for Financial i r, s' Services. The power granted in this section shall be exercised in accordance with the following criteria: the Bonds are sold upon the terms and conditions as set forth in the Notice of Sale and �• Bidding Instructions and Official Statement dated January 4, 1991, and in the professional judgment of the Assistant City Manager the terms of sale 'of the Bonds are feasible and within the City's ability to pay. Passed by the City Council this 10th day of January, 1991. . C. MCMINN, MAYOR ATTEST: r Ranet a Boyd, City Sec etary APPROVED AS TO CONTENT: n Obert Massengale, Xssistant City Manager for Financial Services i BRAZOS RIVER AUTHORITY (Texas) $3996859000 SPECIAL FACILITIES (LAKE ALAN HENRY) REVENUE BONDS, SERIES -1991 Selling Monday, January 21, 1991, at 11:00 AM, CST r This Official Statement does not constitute an offer to sell 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 these Bonds, and if given or made, such information or representation must not be relied upon. The information and expressions of opinion herein are subject to change without notice and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the Authority since the date hereof. TABLE OF CONTENTS Official Statement Page No. Description of the Bonds ------------------------------------------------------ 1 Board of Directors----------------------------------------------------------- 2 Administrative Staff--------------------------------------------------------- 2 Consultants and Advisors------------------------------------------------------ 2 Introduction-------------------------------------------------------------------- 3 The Bonds General-------------------------------------------------------------------- 3 Optional Redemption--------------------------------------------------------- 3 Mandatory Redemption of Term Bonds ------------------------------------------ 3 Notice of Redemption-------------------------------------------------------- 4 Paying Agent/Registrar------------------------------------------------------- 4 Transfer, Exchange and Registration ------------=------------------------------- 4 Limitation on Transfer of Bonds Called for Redemption --------------------------- 5 Securityfor the Bonds -------------------------------------------------------- 5 Estimated Application of Bond Proceeds -----=---------------------------------- 5 Estimated Debt Service Requirements Schedule ------------------------------------- 6 The City of Lubbock Waterworks System The Waterworks System ------------------------------------------------------- 6 Condensed Statement of Operations -------------------------------------------- 7 WaterRates----------------------------------------------------------------- 7 Billings--------------------------------------------------------------------- 7 Residential Water Rate Comparison -------------------------------------------- 8 TheAuthority------------------------------------------------------------------ 8 The Project Purpose and Basis of Need for the Project --------------------------------------- 9 Summary of Selected Provisions of the Contract ------------------------------------ 11-14 Summary of Certain Provisions of the Bond Resolution ------------------------------- 15-22 Other Relevant Information Ratings--------------------------------------------------------------------- 23 TaxExemption-------------------------------------------------------------- 23 Tax Accounting Treatment of Original Issue Discount ----------------------------- 23 Registration and Qualification of Bonds for Sale ---------------------------------- 24 Legal Investments and Eligibility to Secure Public Funds in Texas------------------- 24 Legal Opinions and No -Litigation Certificate ------------------------------------ 24 Texas Water Commission - Administrative Proceeding ---------------------------- 24 FinancialAdvisor------------------------------------------------------------ 25 Authenticity of Financial and Other Information --------------------------------- 25 Certification of the Official Statement ----------------------------------------- 25 Appendices General Information Regarding the City----------------------------------------- Appendix A Lubbock Water Enterprise Fund ------------------------------------------------ Appendix B Form of Bond Counsel's Opinion ------------------------------------------------ Appendix C The cover page hereof, this page, the appendices included herein, the Financial Statements and any addenda, supplement or amendment hereto, are part of the Official Statement. -i- ADDENDUM TO NOTICE OF SALE AND BIDDING INSTRUCTIONS AND OFFICIAL STATEMENT ON $39,685,000 BRAZOS RIVER AUTHORITY (Texas) SPECIAL FACILITIES (LAKE ALAN HENRY) REVENUE BONDS, SERIES 1991 Selling Monday, January 21, 1991, at 11:00 AM, CST The folowing paragraph replaces the one shown on Page i of the Notice of Sale and Bidding Instructions: Redemption Prior to Maturity The Authority reserves the right, at its option, to redeem Bonds having stated maturities on and after August 15, 2001, in whole or any part in principal amounts of $5,000 or any integral multiple thereof, on February 15, 2001, or any date thereafter, at the par value thereof plus accrued interest to the date fixed for redemption. The Bonds scheduled to mature on August 15 in the years 2011 and 2021 are subject to mandatory redemption on the dates and in the amounts as described in the Official Statement. The following paragraphs replace the ones shown in the Official Statement: Page 1 The Bonds scheduled to mature on and after August 15, 2001, are optional for redemption prior to their scheduled maturities, in whole or in part, at the option of the Authority, on February 15, 2001, or on any date thereafter, for the principal amount thereof plus accrued interest to the date fixed for redemption. The Bonds scheduled to mature on August 15, 2011, and August 15, 2021, are subject to mandatory redemption on the dates and in the amounts as described herein. Page 3 Optional Redemption The Authority may, at its option, redeem Bonds having stated maturities on and after August 15, 2001, in whole or in part in principal amounts of $5,000 or any integral multiple thereof, on February 15, 2001, or any date thereafter, at the par value thereof plus accrued interest to the date fixed for redemption. FIRST SOUTHWEST COMPANY Financial Advisor - January 14,1991 - ow, i ,,. Ratings: Moodyls: ■Aaa■ Standard do Poor -s.. ■AAA. (AMBAC Indemnity Corp, Insured) SUPPLEMENT TO OFFICIAL STATEMENT „., relating to $39,685,000 BRAZOS RIVER AUTHORITY (Texas) SPECIAL FACILITIES (LAKE ALAN HENRY) ell REVENUE BONDS, SERIES 1991 On January 21, 1991, the above -captioned bonds (the 'Bonds") were awarded to an underwriters managed by Donaldson, Lufkin do Jenrette Securities Corporation�� interest rate with respect to each maturity of Bonds and the initial reoffering underwriter or group of as follows:a (the Purchasers"). The g yields for each maturity are MATURITY SCHEDULE Initial Amount 440,000 Maturity —'9g2— Reoffering Rate Yield Initial 463,000 490,000 1 1993 8.80% 3.70% 8.80% Amount Maturity 6000 Rate Reoffering Y—_ 00 1994 1995 6.00% 8.80% 1999 710,000 2000 8.800% 8.800% 6.70% 01% 555,0 00 590,000 1996 8.80% 6.30% 8,8096 6.40% 760,000 810,000 2002 8.800% 6.80% 6.90% 625,000 1997 1998 8.80% 8.80% 6.60% 870,000 2003 930,000 8.625% 8.500% 6.95% 7.00% 6.60% 2004 1,000,000 2003 8.300% 7.00% PERM BONDS 8.500% 7.00% Initial Amount Maturity 7,6 S 00 - .� Reoffering Rate Yield 2011 22,600,000 2021 7.00% 7.15% The initial reoffering yields 6.80% 7.20% were supplied to the Authorityb and yields for one or more maturities may be changed at any imetandhe pfromatiime and imch Initial reoffering cost of Insurance noted below, would pre initial oducecompensation gmer with the discount bid b e by the Purchasers The Purchasers have indicated in their bid form theBondswiilhe Purchasers of app oX,th ma ei ers, less the AMBAC Indemnity y $115,678. specimen insurance a policy. The following pages contain information be regarding such insurance and Policy to be issued by Subject to circumstances occurring a Official Statement noted above, dated January 4quent to the date hereof, this Su the meaning of SEC Rule 13c2-12. Y , 1991, constitute the "P . - Dated: together with the anal Official Statement" within Dated: January 21, 1991 ^ (, BOND INSURANCE The information contained or referred to in this Supplement to Official Statement relating to the Insurer and the Insurance Policy has been provided by the Insurer. Such information has not been independently verified by the Authority or the Purchaser and is not guaranteed as to completeness or accuracy by the Authority or the Purchaser and is not to be construed as a representation of the Authority or the Purchaser. Reference is made to the specimen of the Insurer's policy attached hereto. Payment Pursuant to Municipal Bond Guaranty Insurance Policy ... AMBAC Indemnity has made a commitment to issue a municipal bond guaranty insurance policy the "Municipal Bond Guaranty Insurance Policy") relating to the Bonds effective as of the date of issuance of the Bonds. Under the terms of the Municipal Bond Guaranty Insurance Policy, AMBAC Indemnity guarantees the timely payment of the principal of and interest on the Bonds to the United States Trust Company of New York, in New York, New York or any successor thereto (the "Insurance Trustee") less any amount held by the Paying Agent for the payment thereof. AMBAC Indemnity will make such payments to the Insurance Trustee on the date due for payment or within one business day after receipt of notice of nonpayment, whichever is later. The insurance will extend for the term of the Bonds and, once issued, cannot be cancelled by AMBAC Indemnity. The Municipal Bond Guaranty Insurance Policy will insure payment only as principal or interest payments shall become due but shall not be paid. It will not insure payment on acceleration, as a result of a call for redemption (other than mandatory sinking fund redemption) or as a result of any other advancement of maturity, nor will it insure the payment of any prepayment premium. In the event of any acceleration of the principal of the Bonds, the payments insured will be made at such times and in such amounts as would have been made had there not been an acceleration. The Municipal Bond Guaranty Insurance Policy will not insure against nonpayment of principal or interest caused by the insolvency or negligence of any Trustee or Paying Agent. If the Bonds become subject to '^ mandatory redemption and insufficient funds are available for redemption of all outstanding Bonds, AMBAC Indemnity will remain obligated to pay principal of and interest on outstanding Bonds on the originally scheduled interest and principal payment dates including mandatory sinking fund redemption dates. In the event the Trustee has notice that any payment of principal of or interest on a Bond which has become Due for Payment and which is made to a Bondholder by or on behalf of the Issuer has been deemed a preferential transfer and theretofore recovered from its registered owner pursuant to the United States Bankruptcy Code in accordance with a final, nonappealable order of a court of competent �. jurisdiction, such registered owner will be entitled to payment from AMBAC Indemnity to the extent of such recovery if sufficient funds are not otherwise available. If it becomes necessary to call upon the Municipal Bond Guaranty Insurance Policy, payment of interest and principal requires surrender of Bonds or coupons and an appropriate assignment of the Bondholder's right to payment to the Insurance Trustee. Upon remittance and transfer of Bonds and coupons, if any, or appropriate instruments of assignment, -em' AMBAC Indemnity will become the owner thereof. AMBAC Indemnity Corporation ... AMBAC Indemnity Corporation ("AMBAC Indemnity") is a Wisconsin domiciled stock insurance company, regulated by the Insurance Department of the State of Wisconsin, and licensed to do business in various states, with admitted assets (unaudited) of approximately $1,247,000,000 and statutory capital (unaudited) of approximately $741,300,000 as of September 30, 1990. Statutory capital consists of AMBAC Indemnity's statutory contingency reserve and policyholders' surplus. AMBAC .+ Indemnity is a wholly-owned subsidiary of AMBAC Inc., a financial holding company which is wholly-owned by Citibank, N.A. Neither AMBAC Inc. nor its shareholders are obligated to pay the debts of or claims against AMBAC Indemnity Corporation. Standard & Poor's Corporation and Moody's Investors Service, Inc. have assigned their ratings of "AAA" and "Aaa", respectively, to the claims paying ability of AMBAC Indemnity. Citicorp, the parent company of Citibank, N.A., issued a press release on March S, 1990 stating that as part of Citicorp's effort to strengthen its capital base, it is considering the possible sale of AMBAC Indemnity. Both Moody's Investors Service Inc. and Standard & Poor's Corporation have publicly stated that the possible sale of AMBAC will not impact AMBAC Indemnity's claims -paying ratings of "Aaa" and "AAA", respectively. Any sale of AMBAC Indemnity would be subject to the prior approval of the Wisconsin Insurance Department. Furthermore, Citicorp has stated that "AMBAC ... will not be sold unless an attractive proposal is made by a high quality, well -capitalized institution with a long-term perspective on its investment in AMBAC." IW40 AV* % OM r� '"`ti Copies of AMBAC Indemnity's financial statements .prepared in accordance with statutory accounting ive standards are available and its telephonefrom number are one AC nState 1Street Plaza, 17th Floo. The address of r, New York, NBAC ews York110004t off and (212)668-0340. s entered into quota share reinsurance agreements under which a percentage of the AMBAC Indemnity hacertain municipal bond insurance programs of AMBAC Indemnity has insurance underwritten pursuant to r of foreign and domestic unaffiliated reinsurers. been and will be assumed by a numbe AMBAC Indemnity has obtained a ruling from the Internal Revenue Service to the effect that the insuring of an obligation by AMBAC Indemnity will not affect the treatment for federal income tax purposes of interest on such obligation and that insurance proceeds representing maturing interest paid by AMBAC Indemnity under policy provisions subtantially identical to those contained in its municipal bond guaranty insurance policy shall be treated for federal income tax purposes in the same manner as if such payments were made by the issuer of the Bonds. AMBAC Indemnity makes no representation regarding the Bonds or the advisability of investing in the aration of, the official SBonds and makes no tatement other than thesinformat ontation n supplied oby AMBr has it AC tIndemn Inated demnity pthe resented under the heading "Bond Insurance". M -M A j woswttttT-COPwcft^?WN AMBAC Indemnity Corporation 1 c/o CT Corporation systema 222 West Washington Avenue Madison, Wisconsin 53703 Municipal Bond Guaranty Insurance Policy Administrative Office: One state street Plaza New York, New York 10004 Effective Date: Policy No.: AMBAC Indemnity Corporation (AMBAC), in consideration of the payment tit the prentlunt and subject to the terms of this policy, hereby unconditionally and Irrevocably guarantees to any owner or holder. a, herctnaticr defined, of the following described obligations, the full and complete payment required to be made by or on behalf of ttu L.ucr to: or its successor (the "Paying Agent") of an amount equal to (t) the principal of f cot hvr at the stated maturity or by any advancement of maturity pursuant to a mandatory sinking fund payment) and interest on. the ( "hI ions u 'term is defined below) as such payments shall become due but shall not be so paid (except that in the event of an.' aces Irnria f due date of such principal by reason of mandatory or optional redemption or acceleration resulting from default or oth isr. a an any advancement of maturity pursuant to a mandatory sinking fund payment, the payments guaranteed here shall e i tach amounts and at Am such times as such payments of principal would have been due had there not been an u a d (ii) the reimburse. ment of any such payment which is subsequently recovered from any owner or hu cr urs t a final judgement by a court of competent jurisdiction that such payment constitutes an avoidable preference tt u r o within the meaning of any applicable bankruptcy law. The amounts referred to in clauses (i) and (i() the p cc nc h be referred to herein collec- tively as the "Insured Amounts" "Obligations" shall mean: Ise+ Upon receipt of telephonic or telegraphic notice, such notice h en , firmed in writing by registered or cerrifted mail, or upon receipt of written notice by registered or certified Iv B or rsignre from the Paying Agent or any owner or holder of an Obligation or coupon thereof the payme of 1 ur m t for which is then due, that such required payment has not been made. AMBAC. on the due date of such y ent or in business day after receipt of notice of such nonpay- ment, whichever is later, will make a deposit of fund I n acco t 'ith United States Trust Company of New York, in New York, New York, or its successor, sufficient for c f a y ch insured Amounts which are than due. Upon presentment and surrender of such Obligations or coupo r resen ent o s other proof of ownership of the Obligations, together with any appropriate instruments of assignment o id c he nment of the Insured Amounts due on the Obligations as are paid by AMBAC, and appropriate instruments t if It ent of AMBAC as agent for such owners or holders of the Obliga- tions or coupons in any legal proceedi t to v r of Insured Amounts on the Obligations or coupons, such instruments being in form satisfactory to United a Tr 1 p of New York. United States Trust Company of New York shall disburse to such owners holders or the Pa ge p • men the Insured Amounts due on such Obligations and coupons, less any x amount held by the Paying Agent t ent of such Insured Amounts and legally available therefore. This policy does not in- sure against loss of any prep t emi which may at any time be payable with respect to any Obligation or coupon. As used herein• the term o ne It a e registered owner of any Obligation as indicated in the books maintained by the Paying Agent, the Issuer r de ' e fthe Issuer [or tion not registered a to p such purpose and the term "holder" shall mean the bearer of any Oblig t- or t principal and Interest for such purpose and, when used with reference to a coupon, shall mean the bearer of the coupon,, t s owner or holder shall not Include the Issuer or any party whose agreement with the Issuer constitutes the underlyi rity for the Obligations. Any service of process on AMBAC mac be made to AMBAC or an agent designated for such purpose and such service of process shall be valid and binding as to AMBAC. AMBAC's offices are located at One State Street Plaza. New York, New York, 10004. This policy is non -cancellable for any reason. The premium on his policy is not refundable for any reason including the payment prior to maturity of the Obligations. A Disclosure of Guaranty Fund Nonparticipation In the event the insurer is unable to fulfill its contractual obligation under this policy or contract or ap- plication or certificate or evidence of coverage, the policyholder or certificateholder is not protected by an insurance guaranty fund or other solvency protection arrangement. IN WITNESS WHEREOF, AMBAC has caused this policy to be executed by its duly authorized officers in facsimile. AMBAC Indemnity Corporation 1^. Authorized Representative President ♦ ttMITY r ri secretary I^ NOTICE OF SALE AND BIDDING INSTRUCTIONS On $39,685,000 BRAZOS RIVER AUTHORITY (Texas) SPECIAL IrACILITIES (LAKE ALAN HENRY) REVENUE BONDS, SERIES 1991 Selling Monday, January 21, 1991, at 11:00 AM, CST THE SALE Bonds Offered for Sale at Competitive Bidding The Brazos River Authority (the "Authority"), is offering for sale its $39,685,000 Special Facilities (Lake Alan Henry) Revenue Bonds, Series 1991 (the "Bonds"). Address of Bids Sealed bids, plainly marked 'Bid for Bonds", should be addressed to "President and Board of Directors, delivered to the Administration Building, 4400 Cobbs Drive, Waco, Texas, Brazos River Authority", and prior to 11:00 AM, CST, on the date of the bid opening. All bids must be submitted on the Official Bid Form, without alteration or interlineation. Place and Time of Bid Opening bids for the Bonds will be opened and publicly read in the Administration Building at 11:00 AM, CST, The Monday, January 21, 1991. Award of the Bonds The Board of Directors will take action to award the Bonds (or reject all bids) promptly after the opening the Bonds and approving the Official Statement (the of bids and will adopt a resolution authorizing "Resolution'h. THE BONDS General Description The Bonds will be dated January 15, 1991 (the 'Bond Date' ), and interest will be due on August 15, 1991, the of maturity or prior redemption. The and each February 15 and August 15 thereafter until earlier form in integral multiple of $5,000 for any one maturity. The Bonds will be issued in fully registered any Bonds will mature on August 15 in each year as follows: Principal Principal Principal Year Amount Year Amount Year Amount 760,000 1092 440,000 1097 590,000 2001 1993 465,000 1998 625,000 2002 810,000 0,,,, 1994 490,000 1999 670,000 2003 870,000 1995 520,000 2000 710,000 2 04 930,000 1996 555,000 005 1,000,000 $7,650,000 TERM BONDS DUE AUGUST 15, 2011 $22,600,000 TERM BONDS DUE AUGUST 15, 2021 Redemption Prior to Maturity elk The Authority reserves the right, at its option, to redeem Bonds having stated maturities on and after amounts of $5,000 or any integral multiple thereof, on August 15, 2001, in whole or any part in principal February 15, 2001, or any date thereafter, at the par value thereof plus accrued interest to the date fixed 2011 and 2021 are subject to ' for redemption. The Bonds scheduled to mature on August 15 in the years dates and in the amounts as described in the Official Statement. mandatory redemption on the A. Paying Agent/Registrar The initial Paying Agent/Registrar shall be Ameritrust Texas National Association, Austin, Texas (see "Paying Agent/Registrar" in Official Statement). Source of Payment The Bonds are special obligations of the Authority payable from the revenues pledged under the including received by the Authority under a contract with the City of Lubbock, Resolution, payments r' Texas. Such payments constitute operating expenses of Lubbock's waterworks system and shall be sufficient to pay operation and maintenance costs of the Project and the principal and interest requirements on the Bonds. Further details with reference to the Bonds are set forth in the Official Statement. CONDITIONS OF THE SALE Types of Bids and Interest Rates The Bonds will be sold in one block on an "All or None" basis, and at a price of not less than 98.5% of their par value plus accrued interest to the date of delivery of the Bonds. Bidders are invited to name the rate(s) of interest to be borne by the Bonds, provided that each rate bid must be in a multiple of 1/8 of 1% or 1/20 of 1% and the net effective interest cost must not exceed 15%. The highest rate bid may not exceed the lowest rate bid by more than 2% in rate. No limitation is imposed upon bidders as to the number of rates or changes which may be used. All Bonds of one maturity must bear one and the same rate. No bids involving supplemental interest rates will be considered. Each bidder shall state in his bid the total interest cost in dollars and the net effective interest rate determined thereby (calculated in the manner prescribed by Article 717k-2, VATCS), which shall be considered informative only and not as a part of the bid. Basis for Award For the purpose of awarding the sale of the Bonds, the Interest cost of each bid will be computed by determining, at the rate or rates specified therein, the total dollar cost of all interest on the Bonds from the Bond Date to their respective maturities, using the table of Bond Years herein, and adding thereto the discount bid, if any. Subject to the Authority's right to reject any or all bids and to waive any irregularities except time of filing, the Bonds will be awarded to the bidder or syndicate account whose name first appears on the Official Bid Form (the "Purchaser") whose bid based on the above computation produces the lowest net effective interest cost to the Authority. Good Faith Deposit A Good Faith Deposit, payable to the "Brazos River Authority', in the amount of $793,700.00 is required. Such Good Faith Deposit shall be in the form of a Cashier's Check, or its equivalent, which is to be retained uncashed by the Authority pending the Purchaser's compliance with the terms of its bid and the Notice of Sale and Bidding Instructions. The Good Faith Deposit may accompany the Official Bid Form or it may be submitted separately. If submitted separately, it shall be made available to the Authority prior to the opening of the bids, and shall be accompanied by instructions from the bank on which drawn which authorize its use as a Good Faith Deposit by the Purchaser who shall be named in such instructions. The Good Faith Deposit of the Purchaser will be returned to the Purchaser on the date of delivery of the Bonds. No interest will be allowed on the Good Faith Deposit. In the event the Purchaser should fail or refuse to take up and pay for the Bonds in accordance with its bid, said check shall be cashed and accepted by the Authority as full and complete liquidated damages. The checks accompanying bids other than the winning bid will be returned immediately after the bids are opened, and an award of the Bonds has been made. DELIVERY OF THE BONDS AND ACCOMPANYING DOCUMENTS CUSIP Numbers It is anticipated that CUSIP identification numbers will appear on the Bonds, but neither the failure to print or type such number on any Bond nor any error with respect thereto shall constitute cause for a failure or refusal by the Purchaser to accept delivery of and pay for the Bonds in accordance with the terms of this Notice of Sale and Bidding Instructions and the terms of the Official Bid Form. All expenses in relation to the printing or typing of CUSIP numbers on the Bonds shall be paid by the Authority; provided, however, that the CUSIP Service Bureau charge for the assignment of the numbers shall be the responsibility of and shall be paid for by the Purchaser. Initial Delivery Initial Delivery will be accomplished, by the issuance of one Bond for each maturity of this Series, either in typed or printed form, in the aggregate principal amount,of $39,685,000 "payable to the'Purchaser, signed by the President and Secretary of the Authority, approved by the Attorney General, and registered and manually signed. by the Comptroller of Public Accounts.Initial Delivery will be at the principal corporate office of the Paying Agent/Registrar. Payment for the Bonds must be made in Immediately available funds for unconditional credit to the Authority, or as otherwise directed by the Authority. The Purchaser will be given six business days' notice of the time fixed for delivery of the Bonds. It is anticipated that Initial Delivery of the Bonds can be made on or about February 26, 1991, and it is understood and agreed that the Purchaser will accept delivery and make payment for the Bonds by 10:00 AM, CST, on February 26, 1991, or thereafter on the date the Bonds are tendered for delivery, up to and including March 12, 1991. If for any reason the Authority is unable to make delivery on or before March 12, 1991, the Authority shall immediately contact the Purchaser and offer to allow the Purchaser to extend its offer for an additional thirty days. If the Purchaser does not elect to extend its offer within six days thereafter, its Good Faith Deposit will be returned, and both the Authority and the Purchaser shall be relieved of any further obligation. In no event shall the Authority be liable for any damages by reason n of its failure to deliver the Bonds, provided such failure is due to circumstances beyond the Authority's reasonable control. Delivery of Definitive Bonds Upon payment for the Bonds at the time of the In Delivery, the Paying Agent/Registrar shall cancel the initial Bonds, provided registration instructions have been received by the Paying Agent/Registrar, and shall register and deliver the registered definitive Bonds, in any integral multiple of $5,000 for any one maturity, in accordance with instructions received from the Purchaser and/or members of the Purchaser's syndicate account. It shall be the responsibility of the Purchaser to furnish to the Paying Agent/Registrar, at least five business days prior to the Initial Delivery, written instructions designating the names in which the Bonds are to be registered, the addresses of the registered owners, the maturities, interest rates and denominations. The Paying Agent/Registrar will not be required to accept registration instructions after the fifth business day prior to Initial Delivery. If such written instructions are not received within the specified time period, the cancellation of the initial Bonds and delivery of registered definitive Bonds will be delayed until such written instructions are received. Conditions to Delivery The obligation of the Purchaser to take up and pay for the Bonds is subject to the Purchaser's receipt of certificate, a din(c) thencerrt ficati nhass t athe ooffic al Statement, all as further rtont Bond Counsel for the rdescrib d in the official Statement. Legal Opinions s are offered when, as and if issued, subject to the unqualified legal opinion of the Attorney The Bondthe State of Texas. Delivery of and payment for the Bonds is subject to receipt by the General s ^ Purchaser of an opinion of McCall, Parkhurst do Horton, Bond Counsel, to the effect that the Bonds are valid and enforceable obligations of the Authority, except to the extent such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting creditors' rights and the exercise of judicial discretion in accordance with principles of equity, and that the interest on the Bonds is exempt from federal income taxation under existing law, subject to matters as disclosed in the Official Statement under "Tax Exemption". Certification of Official Statement At the time of payment for, and Initial Delivery of, the initial Bond, the Authority will execute and deliver to the Purchaser a certificate in the form set forth in the Official Statement. Change in Tax Exempt Status w its id if he At any time before the Bonds are tendered for m bonds of the sametype and delivery, Purchaser received shall beadeclared t the interest received by private holders from income under present Federal income tax laws, either by ruling of the Internal Revenue Service or by a account in decision g any Federal income taxes, bl be declared y the terms of anylFede al income tax law enacted subsequent to e or be required to be taken into computing any Federal the date of this Notice of Sale and Bidding Instructions. GENERAL Certificate of Underwriter In order to provide the Authority with information required to enable it re comply with certain conditions of the Internal Revenue Code of 1986 relating to the exemption of interest on the Bods from the gross income of their owners, the Purchaser will be required to complete, execute, and deliver to the Authority -y of the ion as to formy in the rbefore and to theedate of effect at ached hereto.ivetBIntheaeventfthetsuccessful bidder willir "Issue of reoffer the blonds for sale, such certificate may c modified in a manner approved by the Authority. In no event will the Authority fail to deliver the Bonds as a result of the Purchaser's inability to sell a substantial amount of the Bonds at a particular price prior to delivery. Each bidder, by submitting its bid, agrees to complete, execute, and deliver such a certificate by the date of delivery of the Bonds, if its bid is accepted by the Authority. It will be the responsibility of the Purchaser to institute such syndicate reporting requirements, to make such investigation, or otherwise to ascertain e to enable it to ithe facts necessary make such certification with reasonable certainty. Any questions concerning such certification should be directed to Bond Counsel. Financial Advisor First Southwest Company is employed as Financial Advisor to the Authority in connection with the issuance of the Bonds. The Financial Advisor's fee for services rendered with respect to the sale of the Bonds is contingent upon the issuance and delivery of the Bonds. First Southwest Company may submit a bid for the Bonds, either independently or as is capacity tmasrof a Fnanc ail Advlsorghase of ver'if ed andd to submit a does not Bonds. First Southwest Company, P y i assume any resnsibility for the documentation with respect to the Federal Income tax status of representationsn, covenants and contained in any of the bond he Bonds. n Blue Sky Laws By submission of its bid, the Purchaser represents that the sale of the Bonds in states other than Texas will be made only pursuant to exemptions from registration or, where necessary, the Purchaser will register the Bonds in accordance with the securities law of the states in which the Bonds are offered or sold. The Authority agrees to cooperate with the Purchaser, at the Purchaser's written request and expense, in registering the Bonds or obtaining an exemption from registration in any state where such action is necessary; provided, however, that the Authority shall not be required to consent to service of process in any other jurisdicition. Not an Offer to Sell This Notice of Sale and Bidding Instructions does not alone constitute an offer to sell the Bonds, but is merely notice of the sale of the Bonds. The offer to sell the Bonds is being made by means of the Notice of Sale and Bidding Instructions, the Official Bid Form and the Official Statement. Prospective purchasers are urged to carefully examine the Official Statement to determine the investment quality of the Bonds. Issuance of Additional Bonds The Authority anticipates that proceeds derived from the sale of the Series 1991 Bonds will be sufficient to complete the Project and presently has no plans to issue Additional Bonds for such purpose. See "The Project" in the Official Statement. Ratings Applications for contract ratings on this issue have been made to both Moody's Investors Service and Standard do Poor's Corporation. The results of their determinations will be provided as soon as possible. Municipal Bond Insurance In the event the Bonds are qualified for municipal bond insurance, and the Purchaser desires to purchase such insurance, the cost therefor will be paid by the Purchaser. Any fees to be paid to the rating agencies as a result of said insurance will be paid by the Authority. It will be the responsibility of the Purchaser to disclose the existence of insurance, its terms and the effect thereof with respect to the reoffering of the Bonds. The Official Statement and Compliance with SEC Rule 15c2-12 The Authority has prepared the accompanying Official Statement and, for the limited purpose of complying with SEC Rule 15c2-12, deems such Official Statement to be final as of its date within the meaning of such Rule for the purpose of review prior to bidding. Representations made and to be made by the Authority concerning the absence of material misstatements and omissions in the Official Statement are addressed elsewhere in this Notice of Sale and Bidding Instructions and in the Official Statement. The Authority will furnish to the Purchaser, in accordance with instructions received from the Purchaser, n within seven (7) business days from the sale date an aggregate of 250 copies.of the Official Statement including a like number of copies of a Supplement reflecting interest rates and other terms relating to the initial reoffering of the Bonds. The cost of preparation of the Supplement, or of a reprinted Official Statement, if the Purchaser shall so elect, and the cost of any Official Statement in excess of the number specified shall be prepared and distributed at the cost of the Purchaser. The Purchaser shall be responsible for providing in writing the initial reoffering prices and other terms, if any, to the Financial Advisor by the close of the next business day after the award. Except as noted above, the Authority assumes no responsibility or obligation for the distribution or delivery of any copies of the Official Statement in connection with the offering or reoffering of the Bonds. Additional Copies of Notice, Bid Form and Statement A limited number of additional copies of this Notice of Sale and Bidding Instructions, the Official Bid Form and the Official Statement, as available over and above the normal mailing, may be obtained at the offices of First Southwest Company, Investment Bankers, 500 First City Center, 1700 Pacific Avenue, Dallas, Texas 75201, Financial Advisor to the Authority. The Authority reserves the right to reject any and all bids and to waive irregularities, except time of filing. The Authority has approved the form and content of the Notice of Sale and Bidding Instructions, the Official Bid Form and Official Statement, and authorized the use thereof in its initial offering of the Bonds. On the date of the sale, the Board of Directors will, in the Resolution authorizing the issuance of the Bonds, confirm its approval of the form and content of the Official Statement, and any addenda, supplement or amendment thereto, and authorize its further use in the reoffering of the Bonds by the Purchaser. January 4, 1991 - iv - ROBERT UPHAM, III President Brazos River Authority *► Year 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Amount(l) $ 440,000 465,000 490,000 520,000 555,000 590,000 625,000 670,000 710,000 760,000 810,000 870,000 930,000 1,000,000 1,065,000 1,140,000 1,225,000 1,310,OOA 1,400,000 1,510,000 1,610,000 1,730,000 1,860,000 2,000,000 2,140,000 2,300,000 2,460,000 2,640,000 2,830,000 3,030,000 BOND YEARS Bond Years 696.667 1,201.250 1,755.833 2,383.333 3,098.750 3,884.167 4,739.583 5,750.833 6,804.167 8,043.333 9,382.500 10,947.500 12',632.500 14,583.333 16,596.250 18,905.000 21,539.583 24,344.167 27,416.667 31,080.833 34,749.167 39,069.167 43,865.000 49,166.667 54,748.333 61,141.667 67,855.000 75,460.000 83,720.833 92,667.500 Accumulated Bond Years 696.667 1,897.917 3,653.750 6,037.083 9,135.833 13,020.000 17,759.583 23,510.416 30,314.583 38,357.916 47,740.416 58,687.916 71,320.416 85,903.749 102,499.999 121,404.999 .142,944.582 167,288.749 194,705.416 225,786.249 260,535.416 299,604.583 343,469.583 392,636.250 447,384.583 508,526.250 576,381.250 651,841.250 735,562.083 828,229.583 Year 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Average Maturity ---------------------------------20.870 Years (1) Includes Mandatory Sinking Fund Redemptions m el i OFFICIAL BID FORM Honorable President and Board of Directors January 21, 1991 Brazos River Authority Waco, Texas Gentlemen: Reference is made to your Official. Statement and Notice of Sale and Bidding Instructions, dated January 4, 1991, of $39,685,000 BRAZOS RIVER AUTHORITY SPECIAL FACILITIES (LAKE ALAN HENRY) REVENUE BONDS, SERIES 1991, both of which constitute a part hereof. For your legally Issued Bonds, as described In said Notice of Sale and Bidding Instructions and Official Statement, we will pay you par and accrued interest from date of Issue to date of delivery to us, less a cash discount of $ for Bonds maturing and bearing interest as follows: Interest 'Interest Interest Maturltv Rate Maturity Rate Maturity Rate 8-15-1992 % 8-15-1997 % 8-15-2001 % 8-15-1993 % 8-15-1998 % 8-15-2002 % 8-15-1994 % 8-15-1999 % 8-15-2003 % 8-15-1995 % 8-15-2000 % 8-15-2004 % 8-13-1996 % 8-15-2005 % 8-15-2011 % 8-15-2021 % Our calculation (which is not a part of this bid) of the interest cost from the above is: Total Interest Cost $ Plus Discount NET INTEREST COST $ EFFECTIVE INTEREST RATE % We are having the Bonds of the following maturities insured by at a premium of $ . said premium to be paid by, the urchaser. Any fees to be paid to the rating agencies as a result of said insurance will be paid by the City. The Initial Bond shall be registered in the name of We will advise the Corporate Trust Office, Ameritrust Texas National Association, 600 Congress, 4th Floor, Austin, Texas 78701, the Paying Agent/Registrar, our registration instructions for the definitive Bonds at least five business days prior to the date set for Initial Delivery. Check of the Bank, , in the amount of 793,70Q which represents our Good Faith Deposit is attached hereto or has been made available to you prior to the opening of this bid), and is submitted in accordance with the terms as set forth In the Official Statement and Notice of Sale and Bidding Instructions. We agree to accept delivery of and make payment for the Bonds in immediately available funds at Ameritrust Texas National Association, Austin, Texas, not later than 10:00 AM, CST, on February 26, 1991, or thereafter on the date the Bonds are tendered for delivery, pursuant to the terms set forth in the Notice of Sale and Bidding Instructions. The undersigned agrees to complete, execute, and deliver to the Authority, at least six business days prior to delivery of the Bonds, a certificate relating to the "issue price" of the Bonds In the form and to the effect accompanying the Notice of Sale and Bidding Instructions, with such changes thereto as may be acceptable to the Authority. We agree to provide in writing the initial reoffering prices and other terms, if any, to the Financial Advisor by the close of the next business day after the award. Respectfully submitted, By ACCEPTANCE CLAUSE Authorized Representative 9 ( The above and foregoing bid Is hereby in all things accepted by the Brazos River Authority subject to and in accordance with the Notice of Sale and Bidding Instructions, this the 21st day of January, 1991. I I General Manager ATTEST: e Assistant Secretary I OFFICIAL BID FORM Honorable President and Board of Directors Brazos River Authority Waco, Texas January 21, 1991 Gentlemen: REVENUE BONDS, SERIES Reference is made to your Official Statement and Notice of Sale and Bidding Instructions, dated 41 1991, of $39,685,000 BRAZOS RIVER AUTHORITY SPECIAL FACILITIES January 1991, both of which constitute a part hereof. (LAKE ALAN HENRY) For your legally issued Bonds, as described In said Notice of Sale and Bidding instructions and Official Statement, we will pay you par and accrued interest from date of issue to date of delivery to us, less a cash discount of $ for Bonds maturing and bearing interest as follows: tuInterest Maritv Rate Interest gb Maturitv 8-15-1992 Rate Interest Maturitv 8-15-1997 �� Rate 8-15-1993 % % 8-15-2001 8-15-1998 —% 8-15-1994 -% 8-15-1999 8-15-2002 % ------� 8-15-19958-15-2000 % 8-15-2003 % % 8-15-19968-15-2004 96 % 8-15-2011 8-15-2005 96 96 --'--- 8-15-2021 % Our calculation (which is not a part of this bid) of the interest cost from the above is: Total Interest Cost Plus Discount NET INTEREST COST EFFECTIVE INTEREST RATE We are having the Bonds% of the following maturities urchaser. at a premium of $ insured b Any fees to be paid to the rating agencie's as a result of saidlmsuranAu will be t>a:d by tlu City- — be caul by the The Initial Bond shall be registered in the name of the Corporate Trust Office, Ameritrust Texas National Association, 600 Con resWe ise Texas 78701 ness' the Paying Agent/Registrar, our registration instructions for the definitive Bonds ilat least five business days prior to the date set for Initial Delivery, g kth Floor, Austin, Check of the 793,70Q which represents our Good Faith Deposit is attached hereto or has been made available to you in the amount of prior to the opening.of this bid), and is submitted in accordance with the terms as set forth in the Official Statement and Notice of Sale and Bidding Instructions. 'Ameritrust Texas We agree to accept delivery of and make payment for the Bonds In immediately available funds at 1991, or thereafter nithe date he Bonds areitendered for delivnot ery, than 10:00 AM Notice of Sale and Bidding Instructions. ,CST, on February 26, y, pursuant to the terms set forth in he The undersigned agrees to complete, execute, and deliver to the Authority, at least six business days prior to delivery of the Bonds, a certificate relating to the "issue price" of the Bonds in the form and to the effect accompanying the Notice of Sale and Bidding Instructions, with such changes thereto as may be acceptable m the Authority. We agree to provide in writing the initial reoffering prices and other terms, if an Advisor by the close of the next business day after the award. Y. to the Financial Respectfully submitted, By Authorized Representative ACCEPTANCE CLAUSE The above and foregoing bid is hereby in all things accepted by the Brazos River Authority subject to and in accordance with the Notice of Sale and Bidding Instructions, this the 21st day of January, 1991. ATTEST: Assistant Secretary General Manager CERTIFICATE OF UNDERWRITER The undersigned ect to the sale of $9,685,000 BAZS RIVER AUTHORITY SPECIAL hereby ACILITIES (LAKE ALAN HENcertifies as follows with RY) REVENUE BONDS3SERIES 11991(the Bonds' l. 1. The undersigned is the manager of the underwriters and selling group (the "Underwriter") which has purchased the Bonds from the Brazos River Authority (the "Authority"). 2. The undersigned has made a bona fide offering of the Bonds to the public. 3. The first price during the initial offering (expressed as a "yield") of the Bonds at which at least 10 percent of the principal amount of the Bonds was sold to the public is set forth below: Principal Principal Amount at Years of Amount at Years of Maturity Maturit Yield Maturity MaturityYield __Y $ 440,000 1992 $ 670,000 1999 465,000 1993 710,.000 2000 490,000 1994 760,000 2001 520,000 1995 810,000 2002 555,000 1996 870,000 2003 590,000 1997 930,000 2004 625,000 1998. 1,000,000 2005 $ 7,650,000 2011 $22,600,000 2021 The Bonds sold by the undersigned have not been offered at one price to the general public and at a discount from such price to institutional or other investors. 4. For purposes of this certificate, the term "public" does not include (a) the undersigned, (b) members of the syndicate, if any, managed by the undersigned, or (c) any bondhouses, brokers, dealers, and similar persons or organizations acting in the capacity of underwriters or wholesalers that are related to, or controlled by, or are acting on behalf of or as agents for the undersigned or members of any syndicate in which the undersigned is participating in the sale of the Bonds. 5. The offering price described above reflects current market prices at the time of such sales. 6. If any or all of the obligations constituting the Bonds are to be insured then the premium paid for bond insurance is solely for the transfer of credit risk for the payment of debt service on the Bonds. The Underwriter has represented that the present value of the premium paid for bond insurance for each obligation constituting the Bonds to which such premium is properly allocated and which are insured thereby is less than the present value of the interest reasonably expected to be saved as a result of the insurance on each obligation constituting the Bonds. The premium has been paid to a person which is not exempt from federal income taxation and which is not a user or related to the user of any proceeds of the Bonds. In determining present value for this purpose, the yield of the Bonds (determined with regard to the payment of the guarantee fee) has been used as the discount rate. 7. The undersigned understands that the statements made herein will be relied upon by the Authority in its effort to comply with the conditions imposed by the Internal Revenue Code of 1986 and by Bond Counsel in rendering their opinion that the interest on the Bonds is excludable from the gross income of the owners thereof. EXECUTED and DELIVERED this day of , 1991. By (Underwriter) (Title n NEW ISSUE OFFICIAL STATEMENT Dated January 4, 1991 In the opinion of Bond Counsel, the interest on the Bonds will be excludable from gross income for federal income tax purposes under existing law, subject to the matters described under "Tax Exemption" herein, including the alternative minimum tax on corporations. $39,685,000 BRAZOS RIVER AUTHORITY (Texas) SPECIAL FACILITIES (LAKE ALAN HENRY) REVENUE BONDS, SERIES 1991 Dated: January 15, 1991 Due: August 15, as shown below r'` Interest on the Brazos River Authority Special Facilities (Lake Alan Henry) Revenue Bonds, Series 1991 (the "Bonds") will be payable February 15 and August 15 of each year, commencing August 15, 1991. The Bonds will be issued only in fully registered form in integral multiples of $5,000 for any one maturity. Principal of the Bonds will be payable to the registered owner at maturity or prior redemption upon presentation at the principal corporate trust office of Ameritrust Texas National Association, Austin, Texas (the "Paying Agent/Registrar"). r,,, The Bonds are being issued to provide funds to pay for construction costs associated with the Authority's Lake Alan Henry Project and to pay the costs of issuance of the Bonds. The Bonds are special obligations of the Authority payable solely from a first lien on and pledge of the Net Revenues derived from the operation or ownership of Lake Alan Henry, including a contract entered into between the Authority and the City of Lubbock, Texas. Payments under such contract constitute operating expenses of Lubbock's waterworks system, and such payments are to be paid from the gross revenues of such system. Neither the full faith and credit nor any taxing power of the Authority or the City of Lubbock are pledged or available for the payment of the principal of or interest on the Bonds. n MATURITY SCHEDULE Amount Maturity Rate Yield Amount Maturity Rate Yield 440,000 8-15-1992 670,000 8-15-1999 465,000 8-15-1993 710,000 8-15-2000 490,000 8-15-1994 760,000 - S-15-2001 520,000 8-15-1995 810,000 8-15-2002 555,000 8-15-1996 870,000 8-15-2003 590,000 8715-1997 930,000 8-15-2004 625,000 '8-15-1998 1,000,000 8-15-2005 $7,650,000 TERM BONDS DUE AUGUST 15, 2011 $22,600,000 TERM BONDS DUE AUGUST 15, 2021 The Bonds scheduled to mature on and after August 15, 2001, are optional for redemption prior to their scheduled maturities, in whole or In part, at the option of the Authority, on February 15, 2001, or on any date thereafter, for the principal amount thereof plus accrued interest to the date fixed for redemption. The Bonds scheduled to mature on August 15, 2011, and August 15, 2021, are subject to mandatory redemption on the dates and in the amounts as described herein. The Bonds are offered for delivery when, as and if issued, and subject to the unqualified approval of the Attorney General of Texas and of McCall, Parkhurst do Horton, Bond Counsel (whose approving opinion will be printed on the Bonds). Certain legal matters will be passed upon for the Authority by Beard and Kultgen, General Counsel, Waco, Texas. It is expected that the Bonds will be delivered on or about February 26, 1991. BRAZOS RIVER AUTHORITY 4400 Cobbs Drive Waco, Texas 76714 (817) 776=1441 Board of Directors Jack Wooley, C.P.A.-------------------------------------- Assistant General Manager and Treasurer Roy A. Roberts --------- ------------------ -- Assistant General Manager John Garland, P.E.----------------------------------------------------- Projects Division Manager Bill Trussell-------------------------------------------- Comptroller Consultants and Advisors General Counsel -------------- ------------------=---------------Beard and Kultgen Waco, Texas ___________ McCall, Parkhurst do Norton Bond Counsel ---------------------- _______________ Dallas, Texas ___________________________________________Freese and Nichols, Inc. Consulting Engineer ----------- Fort Worth, Texas Financial Advisor--------------------------- _--------------------------- First Southwest Company 'Dallas, Texas For additional information regarding the Authority, please contact: Jack Wooley Brazos River Authority 4400 Cobbs Drive Waco, Texas 76714 (817) 776-1441 or J. C. Hall First Southwest Company 500 First City Center 1700 Pacific Avenue Dallas, Texas 75201 (214)953-4000 -2- r^ Date of Date Original Current Term City Appointment Expires Director Robert Upham, III Mineral Wells 5-11-81 2-1-93 President Abilene 6_18_87 2-1-93 Deborah H. Bell Vice President Salado 6_18_87 2-1-93 Perry V. Dalby Secretary5-07-81 James C. Atkins, Jr. Lake Jackson 4-28-89 2-1-93 2-1-93 Chauncey Bogan Houston Burleson 6_02_89 2-1-91 R. G. "Jerry" Boone Lubbock 4-13-87 2-1-93 Brad Crawford Dublin 5-15-89 2-1-95 Charles J. "Jack" Farrar Bryan 5-31-89 2-1-95 Ramiro A. Galindo Guthrie 5-15-81 2-1-91 J. J. Gibson Sugar Land g 4-20-89 2-1-95 Robert E. Hebert Jesse L. Hibbetts, Jr. Lake Jackson 4_20_89 2-1-95 2-1-91 Don T. Kearby Mineral Wells 5-28-85* 4-10-89 2-1-95 Art King College Station Round Rock 5-31-85 2-1-91 James H. Mills Brenham 5_22_85 2-1-91 Charles R. Moser Waco 5-31-85* 2-1-91 Lyndon Olson, Sr. Wichita Falls 3-14-89 2-1-95 Robert K. Pace Lubbock 4-20-89 2-1-95 Ruth C. Schiermeyer Taylor 5-09-83 2-1-91 John M. Wehby Waco 5-16-88 2-1-93 James F. Wood successors have been designated and qualified. Terms of office are six years and until * Also served as a director prior to current term. Administrative Staff General Manager ------------------------------------------------------- Carson H. Hoge, P.E.----------------------------------------------- Jack Wooley, C.P.A.-------------------------------------- Assistant General Manager and Treasurer Roy A. Roberts --------- ------------------ -- Assistant General Manager John Garland, P.E.----------------------------------------------------- Projects Division Manager Bill Trussell-------------------------------------------- Comptroller Consultants and Advisors General Counsel -------------- ------------------=---------------Beard and Kultgen Waco, Texas ___________ McCall, Parkhurst do Norton Bond Counsel ---------------------- _______________ Dallas, Texas ___________________________________________Freese and Nichols, Inc. Consulting Engineer ----------- Fort Worth, Texas Financial Advisor--------------------------- _--------------------------- First Southwest Company 'Dallas, Texas For additional information regarding the Authority, please contact: Jack Wooley Brazos River Authority 4400 Cobbs Drive Waco, Texas 76714 (817) 776-1441 or J. C. Hall First Southwest Company 500 First City Center 1700 Pacific Avenue Dallas, Texas 75201 (214)953-4000 -2- r^ OFFICIAL STATEMENT OF THE BRAZOS RIVER AUTHORITY Relating to its $39,685,000 SPECIAL FACILITIES (LAKE ALAN HENRY) REVENUE BONDS, SERIES 1991 INTRODUCTION The purpose, of this Official Statement, which includes the cover page and appendices hereto, is to set thority (the "Authority"), and its $39,685,000 Special forth information concerning the Brazos River Au e"` '�.. Facilities (Lake Alan Henry) Revenue Bonds, Series 1991 (the "Bonds'9. The Bonds are being issued pursuant to Articles 8280-101 and 717q, V.A.T.C.S., as amended, and a resolution of the Authority to be adopted on January 21, 1991 (the "Bond Resolution") to pay for certain construction costs associated with the Authority's proposed Lake Alan Henry Project (the "Project'l and are on a parity with the Authority's Special Facilities (Lake Alan Henry) Revenue Bonds, Series 1989 (the !'Series 1989 Bonds") presently outstanding in the amount of $16,810,000. In order to conserve and develop water resources in the Brazos River watershed, the Authority works in cooperation with cities, towns, districts and other entities to carry out such purposes. The proposed Lake Alan Henry is planned as a surface water supply for the City of Lubbock, Texas ("Lubbock" or the "City'9 to augment Lubbock's depleting ground water reserves. The Authority has entered into an agreement with Lubbock dated May 11, 1989 (the "Contract") which provides for the costs of the Project and provides for the operation and maintenance of the Project by the e principal of and interest on the Bonds to be issued for such purposes (see Authority and the payment of th 'Summary of Selected Provisions of the Contract"). There follows in this Official Statement brief descriptions of the Bonds, the Lake Alan Henry Project, the Bond 'Resolution, the Contract and certain information about Lubbock. The Authority assumes no responsibility for the matters contained in this Official Statement under the caption "The City of Lubbock Waterworks System" and Appendices A and B of this Official Statement. Ali descriptions of documents contained herein are only summaries and are qualified in their entirety by reference to each such document.' Copies of such documents may be obtained from the Authority. THE BONDS General The Bonds are dated January 15, 1991, are issued as fully registered bonds only, in the 'denomination of integral multiple thereof, $5,000' or any f, and mature on August 15 in each of the years and in the amounts set forth on page 1 hereof. Interest on the Bonds will accrue from the dated date and is payable on t 15 thereafter until maturity or prior redemption, August 15, 1991, and on each February 15 and Augus calculated, on the basis of a 360 -day year of twelve 30 -day months. Interest on the Bonds will be payable by check and mailed on each interest payment date by the Paying Agent/Registrar to registered owners as'shown on the records of the Paying Agent/Registrar at the close of business on the last business day of the month next preceding each interest payment date, or by such other method, acceptable to the Paying ,. Agent/Registrar, requested by and at the risk and expense of, the registered owner. If the date for the paXment of the principal of or interest on the Bonds shall be a Saturday,. Sunday, legal holiday, or day on which banking institutions in the city where the Paying Agent/Registrar is located are authorized by law or executive order to close, 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. The principal of the Bonds is payable, at maturity or prior redemption, upon presentation and surrender thereof at the principal corporate trust office of Ameritrust Texas National Association, Austin, Texas (the "Paying Agent/Registrar"). Optional Redemption The :Authorliy may, at its option, redeem Bonds having stated maturities on and after August 15, 2001, in whole or in part in principal amounts of $5,000 or any integral multiple thereof, on February 15, 2001, or any date thereafter, at the par value thereof plus accrued interest to the date fixed for redemption. Mandatory Redemption of Term Bonds The Bonds maturing on August 15, 2011 and August 15, 2021 are subject to mandatory redemption through application of sinking fund installments prior to maturity in part by lot, at 100% of the principal amount thereof plus accrued interest to the date of redemption, from payments into the "Mandatory Redemption -3 Account" within the "Debt Service Fund" established by the Bond Resolution which are required to be made in amounts sufficient to redeem on August 15 of each year the principal amount of such Bonds specified for each of the years below: 2011 Maturit Year Amount 2006 $1,065,000 2007 1,140,000 2008 1,225,000 2009 1,310,000 2010 1,400,000 2011(maturity) 1,510,000 2021 Maturit Year Amount 2012 $1,610,000 2013 1,730,000 2014 1,860,000 2015 2,000,000 2016 2,140,000 2017 2,300,000 2018 2,460,000 2019 2,640,000 2020 2,830,000 2021 (maturity) 3,030,000 The Authority shall redeem Term Bonds of the Bonds maturing on August 15, 2011 and August 15, 2021, respectively, on August 15 of each of the years 2006 to 2010, inclusive and August 15 of each of the years 2012 to 2020, inclusive. The principal amount of the Term Bonds required to be redeemed pursuant to the operation of such mandatory redemption provisions shall be reduced, at the option of the Authority, by the principal amount of any Term Bonds which, (1) shall have been acquired by the Authority at a price not exceeding the principal amount of such Term Bonds plus accrued interest to the date of purchase thereof, and delivered to the Paying Agent/Registrar for cancellation, (2) shall have been purchased and cancelled by the Paying Agent/Registrar at the request of the Authority with moneys in the Mandatory Redemption Account, at a price not exceeding the principal amount of such Term Bonds plus accrued interest to the date of purchase thereof, or (3) have been redeemed pursuant to the optional redemption provisions set forth above and not theretofore credited against a mandatory redemption requirement. On the maturity date -of any Term Bonds, the Authority shall apply the monies on hand in the Mandatory Redemption Account for the payment of the principal of the maturing Term Bonds. Notice of Redemption Not less than 30 days prior to the date fixed for any redemption, (a) written notice of such redemption shall be mailed by first-class mail, postage prepaid, by the Paying Agent/Registrar'to each registered owner of the Bonds at his address shown on the Registration Books kept by the Paying Agent/Registrar, and (b) notice of such redemption shall be published one (1) time in a financial journal or publication of general circulation in the United States of America carrying as a regular feature notices of municipal bonds called for redemption, provided, however, that the failure to send, mail, or receive such notice described in (a) above, 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 the Bond Resolution provides that the publication of notice as described in (b) above shall be the only notice actually required in connection with or as a prerequisite to the redemption of any Bond. Paying Agent/Registrar The initial Paying Agent/Registrar is Ameritrust Texas National Association, Austin, Texas. In the Bond Resolution the Authority retains the right to replace the Paying Agent/Registrar. The Authority covenants to maintain and provide a Paying Agent/Registrar at all times while the Bonds are outstanding and any successor Paying Agent/Registrar shall be a national or state banking institution or other entity duly qualified and legally authorized to serve as and perform the duties and services of Paying Agent/Registrar for the Bonds. Upon any change in the Paying Agent/Registrar for the Bonds, the Authority agrees to promptly cause a written notice thereof to be sent to each registered owner of the Bonds .by first-class mail, postage prepaid, which notice shall also give the address of the new Paying Agent/Registrar. Transfer, Exchange and Registration The Bonds may be transferred and exchanged on the registration books of the Paying Agent/Registrar only upon presentation and surrender thereof to the Paying Agent/Registrar, and such transfer or exchange shall be without expense or service charge to the registered owner, except for any tax or other governmental charges required to be paid with respect to such registration, exchange and transfer. Bonds may be assigned by the execution of an assignment form on the Bonds or by other instrument of transfer and assignment acceptable to the Paying Agent/Registrar. New Bonds will be delivered by the Paying Agent/Registrar, in lieu of the Bonds being transferred or exchanged, at the principal corporate office of the Paying Agent/Registrar, or sent by first-class mail, postage prepaid, to the new registered owner or his designee. New Bonds registered and delivered in an exchange or transfer shall be in any integral multiple of $5,000 for any one maturity and for a like aggregate principal amount as the Bonds surrendered for exchange or transfer. -4- n W WN ^i Limitation on Transfer of Bonds Called for Redemption Neither the Authority nor the Paying Agent/Registrar shall be required (1) to issue, transfer, or exchange any Bond during a period beginning at the opening of business 30 days before the day of the first mailing of a notice of redemption of Bonds and ending at the close of business on the day of such mailing, or (2) to r� transfer or exchange any Bond so selected for redemption in whole when such redemption is scheduled to occur within 30 calendar days. Security for the Bonds The Bonds, together with the Series 1989 Bonds, are special revenue obligations of the Authority payable solely from, and secured by a first lien on, the pledge of the Net Revenues derived from the operation or ownership of Lake Alan Henry, including payments by Lubbock under the Contract, and the funds established by the Bond Resolution. From the proceeds of the Bonds, accrued interest received will be deposited into the Debt Service Fund and an amount will be deposited into the Reserve Fund which, together with monies currently in such Fund, will be equal to the average annual principal and interest requirements of the Bonds and the Series 1989 Bonds (1). In the Contract, Lubbock covenants to fix and collect water rates sufficient at all times to pay the operation and maintenance expenses of its water system (which expenses include the contractual ,r• payments to the Authority), and the payment of principal and interest on its obligations payable from the revenues of its water system, if any. The Authority covenants to fix, establish, maintain and collect such rates, charges and fees, including but not limited to the payments by Lubbock, for the use and availability of Lake Alan Henry at all times as are necessary to produce Revenues in no less than amounts sufficient (1) to pay all current Maintenance and Operation Costs, and (2) to produce Net Revenues for each year sufficient to pay the principal of and interest on the Bonds and Additional Bonds as the same mature and come due, and all other amounts required by the Bond Resolution and other resolutions authorizing such bonds. The Authority has reserved the right to issue Additional Bonds on a parity with the Bonds for completion of the Project and for improvements, betterments, extensions or replacements to the Project in accordance with the Contract. (See "Summary of Certain Provisions of the Bond Resolution, Additional Bonds'7. Payments to the Authority by Lubbock constitute operating expenses of Lubbock's waterworks system and are payable from the gross revenues of such system. Estimated Application of Bond Proceeds The Authority estimates that the proceeds of the Bonds (excluding accrued interest) will be applied as follows: Construction Fund $35,046,000 ^ Debt Service Reserve Fund (1) 3,246,000 Repair and Replacement Fund 500,000 Allowance for Costs of Issuance, Including Underwriter's Discount 893,000 $39,695,00 (1) Amount which, when added to the balance on hand, will equal the average annual debt service requirement. Such amount, when added to the deposit into the Repair and Replacement Fund, will not .. be permitted to exceed $3,968,500 (the 10% limitation established by Internal Revenue Service regulations). n Owl -5- ESTIMATED DEBT SERVICE REQUIREMENTS SCHEDULE (1) Fiscal Year Ending 8/31Pri_ nc_ ipal Interest 1,642,498 Total 1,642,498 1991 1992 $ 4 ,000 2,815,710 2,789,970 3,255,710 3,254,970 1993 44040 000 ' 490,000 2,762,070 3,252,070 3,252,180 1994 1995 520,000 2,732,190 ' 732 180 2699,940 3,254,940 1996 555,000 590,000 2,664,975 3,254,975 3,252,215 1997 1998 625,000 2,627,215 2,596,590 3,256,590 1999 670,000 710,000 25437 3,252,370 3,254,800 2000 2001 760,000 2,494,800 2,,120 3,253,120 2002 810,000 870,000 2,338787,230 3,257,230 3,256,330 2003 2004 930,000 2,326,330 2,260,300 3,260,300 2005 1,000,000 1,065,000 2,189,300 3,254,300 3,252,620 2006 2007 1,140,000 2,112,620 2,030,540 3,255,540 2008 2009 1,225,000 1,310,000 1,942,340 1,48,020 3,252,340 3,248,020 2010 1,400000 1,510,000 1,747,220 3,257,220 3,248,500 2011 2012 1,610,000 1,638,500 1,.521,775 3,251,775 2013 1,7 30,000 1,860,000 1,396,350 3,256,350 3,261,500 2014 2015 2,000,000 1,261,500 1,116,500 3,256,500 2016 2017 2,140,000 2,300,000 961,350 794,600 3,261,350 3,254,600 2018 2019 2,460,000 2,640,000 - 616,250 424,850 3,256,250 3,254,850 2020 2,830,000 3 0 00 219.675 �— 3,249,675 2021 $39,685,000 $59,596,688 $99,281,688 Totals 1 Principal amounts include mandatory sinking fund payments. at rates ranging from 5.85% to 7.25% for purposes of illustration. THE CITY OF LUBBOCK WATERWORKS SYSTEM Interest on the Bonds has been calculated The Waterworks System Water Supply ... Currently, the primary source of water for Lubbock is the Canadian River Municipal ") which delivers water from its Lake Meredith reservoir, located Water Authority "CRMWA on the ties an underground Canadian River abouto t 30 miles of eleven member cities r of CRMWAnothermember �membersua a Amarillo, Pa pa, aqueduct , system. Lubbock is Plainview, Slaton, Leveliand, Brownfield, Tahoka, O'Donroxima el aLubbock received82% of theCity stotal consumption. feet of water from CRMWA in Calendar Year 1989, app Y oan Cost of the project is being repaid to debt requireeau of Reclamati ments ents a e paid from on revenues received by CRMWA from sale maturing annually throng of water to member cities. payments for water received from revenues derived from operation of their respective waterworks systems. obtained from 8 potable water Other Water Supply Source lala•A Partof whichcunderl es the H ghsP Plains of Texas. Combined capacity llof all producing from the Ogal q out 60 these wells is over 45 bocknin Lamblons per and Baild H eyPrimary Count eslinawh ch the City ow snapproximately ills" area b80,000 miles northwest of Lub acres r water rrcessadjacentl o the Sand Hills tract. has also contracted These waterlsources are used60 acre feet of water pr primarily for peaking from private sou l purposes. The S stem ... Lubbock's Waterworks System is modern and efficient; property, plant and equipment are valued at 76,143,711, after depreciation and in cost of construction work in progress, alized op September 30, 1989. Equipment includes rities emote control and communication The distribution system xtendslthroughout thwith e City and is designed direction of the water supply Y Avera a daily water consumption for expansion. Present pumping capacity is 106 million gallons per day. g was 36.6 million gallons in 1989. -6- rr W n near the water treatment p which Storage capacity includes 1, water received 0 acre-foot enfrostCRMWA in off -reservoir peak period$.Inadd tion,nine�ground permits the storage storage reservoirs and three elevated steel storage tanks provide storage capacity of 65.5 million gallons, entirely adequate for peak hour and fire protection requirements. of wat ved om for nt eatm Water Treas aemaximumlhydraul'icecapac tytof 75waterent mil ionngallonshperrday. eThe plantetreats lwaterrfor CRMWA has several other CRMWA members; Lubbock is fully reimbursed for these costs. Condensed Statement of Operations 1 Unaudited. ance charges paid (2) Operating expense includes construction repayment costs and operating and mainten to CRMWA and to the Authority. nue bonds ble om the enues of its orks Note: Lubbocu rend Lubbock does have approx mately $24.1 million ofrtax bonds voutstanding which Wwere system; however, issued for waterworks system purposes and are supported by revenues of the system. Water Rates (Monthly) .-� -. , _ 19 622 392 ' 16,660,193 15,381, > > 803 167 ' 1 328 939 Operating Revenues Non -Operating Income ' 1 407 557 626 042 17,286,235 978 585 16,360,138 14,516,185 15,312,223 Gross Income 21,029,949 $7.31 1.53 Next 49,000 Gallons (per thousand) 1.12 1.37 Operating Expense (excluding depreciation)(2) 10 633 297 396 652 9 871 506 7 414 729 9 494 108 6 830 9 863 218 4 652 967 10 548 979 4 763 244 Net Revenue 10 ---- 62,631 61,628 60,981 60,751 Water Meters 62,119 ' 1 Unaudited. ance charges paid (2) Operating expense includes construction repayment costs and operating and mainten to CRMWA and to the Authority. nue bonds ble om the enues of its orks Note: Lubbocu rend Lubbock does have approx mately $24.1 million ofrtax bonds voutstanding which Wwere system; however, issued for waterworks system purposes and are supported by revenues of the system. Water Rates (Monthly) Previous Rate New Rate Water Effective October 1, 1989 (1) Effective October 1, 1990 (1) Consumption First 1,000 Gallons (Minimum) $6.76 1.28 $7.31 1.53 Next 49,000 Gallons (per thousand) 1.12 1.37 Next 200,000 Gallons (per thousand) 1.06 1.31 Gallons (per thousand) All Over 250,000 the uent ncrease ective ober 1 19 The have beendesignedto provide effective nce eta ed revenues todprovide for debt lsery service onffinancing for and 1990, have b g maintenance and operation costs of Lake Alan Henry as well as other projected Waterworks System costs. The water rate increase effective October 1, 1989, provided estimated increased gross revenues in excess of $2,000,000 during Fiscal Year Ended September 30, 1990. The subsequent water rate increaseeffecti Enve October 1, 1d provide 30,1taannual increase in excess O00 $5,000,000. Fiscal Year Endedd September 1991, or an estimated combined Lubbock anticipates that, under current Waterworks System capital cost estimates, further rate increases will not be required until 1993. Billings Cusco sters of Lubbock's omer s connected torstatement; if the City's electric system, teand sanitation m, a ectric charges arstems are billed e also inaneousleludedon neAll customers the cu who do not pay their bill within 22 days of the date it is mailed to them are charged a 5% late payment penalty. etherthe wthl he current bnot been 11. If the billaid on the s emlains del'inquentdate, a e7 days afterment is the hehdate ofhtheasecond bill tog statement, areminder/cut-off notice is mailed. The cut-off notice specifies that service will e discontinued in andif payment ent in ll is no collect payment,made. At hsery ce end e is cutthe 7 doff. Tperihe r conn ctiona field tch cor harge, on the including electric service if the customer is connected to the City's electric system, is 15.00 before 5:00 p.m. and $25.00 after 5:00 p.m. and during weekends and holidays. -7- Residential Water Rate Comparison The following table illustrates Lubbock's residential water rates as compared to those of selected Texas cities, as of June, 1990. Source: City of Lubbock THE AUTHORITY Brazos River Authority, created in 1929 by the Texas Legislature, is a conservation and reclamation district of the State of Texas acting pursuant to the provisions of Article XVI, Section 59 of the Texas Constitution. It has statutory power and responsibility for developing and conserving the water resources of the entire Brazos River Basin. The Brazos River Basin is over 600 miles long, extending from the New Mexico border to the Gulf of Mexico, and includes 42,840 square miles (about 1/6th of the land area of the State), exclusive of associated coastal areas which include an additional 1,382 square miles. It was the first authority in the United States created to manage the water resources of an entire major river basin. The Authority is governed by a board of 21 directors appointed by the Governor, and approved by the State Senate, for six year terms. The Authority was created to conserve, control, and develop the surface water resources of the Brazos River Basin and make them available to help meet the water needs of the Brazos River Basin. The Authority has built, and now owns and operates, two major lakes on the main stem of the Brazos River and one on a Brazos River tributary. It also owns, through contracts with the United States, the conservation storage space in nine Corps of Engineers lakes operated in the Brazos River watershed. The Authority also owns and operates three regional sewerage systems. Although a public agency of the State of Texas, the Authority carries out all of its activities without benefit of any tax money other than that made available through government grants to help pay the costs of specific projects. Except for such occasional grant assistance, the Authority is entirely self-supporting, utilizing revenues from its own operations to pay all of its costs. Water from Authority -owned storage in various reservoirs on the Brazos River and its tributaries is supplied to meet municipal, industrial, and agricultural needs of several cities and utility districts and of farmers and industrial users who pump water from Authority reservoirs or directly from the Brazos River. The Authority owns and operates three regional sewerage systems. The Waco Metropolitan Area Regional Sewerage System, placed in service in 1971, serves the cities of Waco, Bellmead, Beverly Hills, Hewitt, Lacy -Lakeview, Northcrest, Robinson and Woodway, all in McLennan County, Texas. The Temple -Belton Regional Sewerage System serves the Cities of Temple and Belton, Texas, and began operating in 1975. The Sugar Land Regional Sewerage System commenced operations in 1973 and serves an area in the vicinity of Sugar Land, Texas, approximately 20 miles from downtown Houston. -8- 6,400 8,000 City . Gallons Rank Gallons Rank Houston 13.36 7 16.59 6 Dallas 9.48 17 11.53 17 San Antonio 9.66 16 11.33 18 E1 Paso 6.99 20 9.52 20 Fort Worth 14.01 5 16.75 5 Austin 21.21 1 26.94 1 Corpus Christi 10.23 12 12.58 12 Arlington 15.96 3 19.00 3 Lubbock 15.57 4 18.05 4 Garland 11.46 9 13.70 10 Amarillo 8.18 19 9.57 19 Irving 9.33 18 11.78 16 Beaumont 10.08 14 12.18 13 Pasadena 10.08 14 12.18 13 Abilene 11.27 10 13.09 11 Waco 12.15 8 14.81 8 Odessa 13.64 6 15.80 7 Wichita Falls 10.14 13 13.96 9 Midland 18.05 2 20.98 2 Plano 10.26 11 12.12 15 AVERAGE $12.05 514.62 Source: City of Lubbock THE AUTHORITY Brazos River Authority, created in 1929 by the Texas Legislature, is a conservation and reclamation district of the State of Texas acting pursuant to the provisions of Article XVI, Section 59 of the Texas Constitution. It has statutory power and responsibility for developing and conserving the water resources of the entire Brazos River Basin. The Brazos River Basin is over 600 miles long, extending from the New Mexico border to the Gulf of Mexico, and includes 42,840 square miles (about 1/6th of the land area of the State), exclusive of associated coastal areas which include an additional 1,382 square miles. It was the first authority in the United States created to manage the water resources of an entire major river basin. The Authority is governed by a board of 21 directors appointed by the Governor, and approved by the State Senate, for six year terms. The Authority was created to conserve, control, and develop the surface water resources of the Brazos River Basin and make them available to help meet the water needs of the Brazos River Basin. The Authority has built, and now owns and operates, two major lakes on the main stem of the Brazos River and one on a Brazos River tributary. It also owns, through contracts with the United States, the conservation storage space in nine Corps of Engineers lakes operated in the Brazos River watershed. The Authority also owns and operates three regional sewerage systems. Although a public agency of the State of Texas, the Authority carries out all of its activities without benefit of any tax money other than that made available through government grants to help pay the costs of specific projects. Except for such occasional grant assistance, the Authority is entirely self-supporting, utilizing revenues from its own operations to pay all of its costs. Water from Authority -owned storage in various reservoirs on the Brazos River and its tributaries is supplied to meet municipal, industrial, and agricultural needs of several cities and utility districts and of farmers and industrial users who pump water from Authority reservoirs or directly from the Brazos River. The Authority owns and operates three regional sewerage systems. The Waco Metropolitan Area Regional Sewerage System, placed in service in 1971, serves the cities of Waco, Bellmead, Beverly Hills, Hewitt, Lacy -Lakeview, Northcrest, Robinson and Woodway, all in McLennan County, Texas. The Temple -Belton Regional Sewerage System serves the Cities of Temple and Belton, Texas, and began operating in 1975. The Sugar Land Regional Sewerage System commenced operations in 1973 and serves an area in the vicinity of Sugar Land, Texas, approximately 20 miles from downtown Houston. -8- 1 THE PROJECT The Lake Alan Henry dam site is located at river mile 126.9 on the South Fork of the Double Mountain Fork of the Brazos River, approximately 1,050.1 river miles upstream from the Gulf of Mexico. At this location, the reservoir has a contributing drainage area of 394 square miles. The reservoir conservation pool will �^• extend 14.6 miles upstream and will inundate 2,884 surface acres at elevation 2,220 ft. msl. The probable maximum flood pool will extend an additional 6.7 miles upstream and will inundate a total of about 9,220 surface acres at elevation 2,259.2 ft. msl. The yield of Lake Alan Henry was estimated by Freese and Nichols in 1978 based on simulated operation of the reservoir under hydrologic conditions from 1940 through 1981. The simulated reservoir operation included a variable rate of demand which was dependent on reservoir contents. The average yield available initially under the proposed operation is estimated to be 30,200 acre-feet per year. At conservation storage, the reservoir will contain 115,937 acre-feet. The mean depth at conservation storage will be approximately 40 feet; maximum depth will be approximately 100 feet near the dam. See "Summary of Selected Provisions of the Contract" for a discussion of the relationship of the Authority and Lubbock with respect to rights of the parties in the ownership, management and operation of the Project. Purpose and Basis of Need for the Project Lubbock currently supplies water to approximately 192,500 citizens within its corporate limits. In 1989, the City provided an average of 36.6 million gallons per day (mgd) of water. The maximum daily water demand for the year was 69.1 mgd. Over the past 15 years, the population of Lubbock has increased by about 20 percent. Over the same period of time, water use correspondingly increased by 24 percent. Future population and water demand estimates for Lubbock, projected by the Texas Water Development Board in 1988, show a 60 to 78 percent increase in the City's population by the year 2040. As a result of population growth, Lubbock's water use in high -use years is expected to 'increase 51.7 mgd assuming low population growth. With high population increases, water use in high -use years is expected to increase 57.3 mgd. These population increases cannot be supported by the City's existing water supply sources. Lubbock currently obtains water from four sources: CRMWA; the Sand Hills Well Field; the Shallowater Well Field; and local wells within the city limits. The CRMWA supply is piped approximately 150 miles from Lake Meredith to Lubbock. Although Lubbock has a contractual allocation for 34.1 mgd average use and 41.7 mgd maximum daily use, CRMWA, pursuant to a study by its consulting engineer in 1987, has cut back Lubbock's supply in order to meet the projected safe yield limitations of Lake Meredith. Lubbock currently receives 80 percent of its contractual allocation (27.3 mgd); however, CRMWA estimates that the allocation could be reduced to 65 percent (22.1 mgd). The remaining water deficit is supplied from the Sand Hills Well Field located in Bailey and Lamb Counties, and local wells. The wells supply from 0 to 45 mgd. During the past few years, the Sand Hills has supplied about 15 to 20 percent of the City's total use. The Sand Hills supply is based on a large volume of water stored in the Ogallala aquifer and is not replenished to any significant degree by recharge. At the present rate of withdrawal (less than 10,000 acre-feet per year or approximately 8.9 mgd average use), the Sand Hills reserve should provide 80 to 100 years of supply. However, full use of the Sand Hills to meet Lubbock's projected needs over and above the amounts available from other existing sources would probably exhaust the field prior to the year 2020. The local wells are not capable of sustained operation for long periods of time. Water from these sources is used only for emergency and peak hour use. The peak rate provided from the local wells on days of heavy demand is about 10 mgd. Several local wells have exceeded the state water quality standard for selenium. In response thereto, Lubbock has closed several of these wells. On an annual basis, the volume of water obtained from local well sources is essentially negligible; the CRMWA and Sand Hills sources furnish virtually all of the City's supply. Although the historical population increases have not been as great as the Texas Department of Water Resources (TDWR) 1980 population estimates (which projected a 25 percent increase between 1975 and 1990), increased population and decreasing water supplies have required the City to pursue new sources of supply. Since 1971, the City has been studying the potential development of a water supply reservoir on the South Fork of the Double Mountain Fork of the Brazos River near Justiceburg in Garza and Kent Counties. In 1971, Lubbock contracted with Freese and Nichols to prepare a report on the probable long-range water requirements of the City and potential sources of additional future supply. Comparison of several alternative sources led to the recommendation that Lubbock consider development of new surface water supplies, including the site near Justiceburg. In 1975, Freese and Nichols was asked to prepare a supplemental report in which the basic findings of the 1971 study were reviewed and updated. The 1975 investigation, like the earlier study, indicated the -9- also emphasized the need for field testing of the water potential of the Justiceburg source. The report reliminary geotechnical studies, to confirm the basic feasibility of the justiceburg site. for quality and P proceed with additional, more detailed studies a roved a program of field investigations In August -Of 19759 Lubbock authorized Freese and Nichols to P Inc., a geotechnical consulting firm relating to the justiceburg project. At that same time, the City PP re and near the lusticeburg site by Mason -Johnston and Associates, USGS) for establishment and operation of a chemical quality experienced in dam foundation work. Lubbock also instructed Freese and Nichols to enter Into an agreement with the U.S. Geological Survey Freese and monitoring station on the Double Mountain Fork at austiceburg• sented in a 1978 report by am The results of the geotechnical and water quality studies were pre preliminary design analysis Of the ield of 26x100 Nichols, which included an evaluation of the reservoir yield and a p that year after 50 years of spillway. Findings of the reportfe�st constructed, a and 210 600eacre-feery t Perim have a firm Y yield of and p an estimated average acre-feet per year when the lake is operation. If the reservoir is operated with a vareableAlter 50 years of operation, the variable demand 30,200 acre-feet per year could be withdrawn initially. This would provide Lubbock with a reliable water supply 1 of ear mgd. Assuming a worst case scenario of: a band a firm yield would decrease to 27,000 acre-feet per y of 23.3 mgd and an average water supply j of 54.3 mgd which would be 'on from CRMWA (22.1 mgd), an average withdrawal from the Sand Hills Field (8.9 mgd + allocate d Lubbock would have a reliable sues 2040. Based on the results of yield from Lake Alan Henry (23.3 mg )+ sufficient to meet projected normal water demands through about the y t monitoring program by the USGS ake Meredith, et was concluded that water in Lake Alan the water quality Henry would be of better quality than water from to construct a dam and water supply reservoir at the Lake Alan provides for the Authority a of 26.9 mgd of municipal water supply- It is The Contract p rovide Lubbock with an average ears to fill, based on average Henry site. The Project will p estimated that the Project will require two years to construct and three y runoff conditions. upon which the The Contract further provides for Lubbock to acquire all of the land for the Projects P ed. Currently, all land for the construction of the dam e ranted an .easement to constra nt and operate the facilities, and to obtain all oft e Authority will b g required permits. All such permits have been obtained. 2% of the land to be inundated has been acg6 19 and all but less than 0. Estimated costs of the Project are Construction bids were received by the Authority on December 6, as follows: Dam Construction Costs Contingencies @ 10% Total Dam Cost Access Road Petroleum Conflicts Pipeline Relocation M & O Facilities Total Construction Cost Development, Permitting and Land Cost Final Engineering (Design & Construction) Oiti l/Gas Eva luaCOntC01 Plan On Water Quality - -and Management Fees $29,317,871 2.931.787 $32,249,658 $ 543,640 3,821,265 505,000 600 ,_000 $37,719,563 $11,350,000 3,145,000 1.00,000 250,000 2 P_74_04_37 Contingencie 54 , 639 , 000 TOTAL the Authority as Additional Bonds, Additional facilities, which may be financed by Lubbock directlyor bSuch facilities are not included in will be required to .transport and treat the water from Lake AlanHenry.r the costs shown above. - 10 - SUMMARY OF SELECTED PROVISIONS OF THE CONTRACT The Authority entered into an agreement with Lubbock dated May 11, 1989 (the "Contract'l which provides, among other things, for the Authority to pursue the activities in connection with the construction of Lake Alan Henry Project, and for payments by Lubbock for debt service on Bonds issued by the Authority for such activities. The following summarizes certain provisions of the Contract between the the Authority and Lubbock and is not purported to be a full statement of all relevant matters contained therein. Purpose The purpose of the Contract is to provide that City will grant unto Authority easements over, across and r` upon the lands which it has acquired and will aquire for Project for the construction, maintenance and operation thereon of Project; that City will acquire the remainder of the land needed for construction, operation and maintenance of Project; that City will assign Permit to Authority; that Authority will construct Project (selling Bonds for that purpose) and operate and maintain it; that Authority will make available the water which can be supplied from Project to City and/or Assignee(s); that City will include land for municipal area adjacent to Project in the land over which Authority is to be granted an easement pursuant the Contract; that City will operate facilities thereon, under an appropriate agreement with i Authority, dor public use and for access to the waters of Lake for public use; that City will make sufficient payments to Authority for availability of water under the Contract to enable Authority with such payments, together with payments to be made by Assignees, to pay Capital Costs and Maintenance and Operation Cost; that City and/or Assignee will pay Management Fees to Authority; that City's obligations to make payments under the Contract shall be maintenance and operating expenses of its waterworks system; that City will set rates for water supplied through its waterworks system which are adequate to enable it to fulfill its obligations to Authority to make payments hereunder; that Authority will be paid Equity Payments by Assignees upon assignments unto them of rights previously held by City; that Authority i► will immediately pay over to City as received all of such Equity Payments; that the obligations of City to pay Capital Costs shall be unconditional; that upon termination of the Contract, the easements to be granted by City to Authority pursuant the Contract will terminate; that when all Bonds and related obligations have been paid in full, City may assume responsibility for operation of Project; and that upon such assumption, Authority shall reassign Permit to City and City's obligations to make payments to Authority referable to periods after the date of such assumption shall terminate. Construction of Project Subject to the availability of funds (through the sale of Bonds or otherwise) Authority agrees that it will proceed diligently with the planning, financing and construction of Project in accordance with the schedule to be proposed by Authority and approved by City. City shall assign Permit unto Authority in time so that Authority can proceed with the actions described in the preceding sentencewithout delay. City shall promptly acquire all lands and land rights not already owned by it which may be required in connection with the construction, operation and maintenance of Project and shall grant unto Authority easements upon the lands now owned or to be acquired by it for Project for the construction, maintenance and operation of Project so long as the Contract shall remain in force. City shall reserve easements required for construction of City's water pumping and transmission facilities and shall retain title to all land and easements which City reasonably determines is not necessary for Authority to construct and operate the Project. Authority shall cause the relocation of all highways, railroads, pipelines, utilities, bridges and other 'facilities which must be relocated in connection with construction and operation of Project. Authority shall take actions reasonably requested by City to abate and prevent pollution of water in Lake from activities associated with the exploration, development, and production of oil, gas, and other minerals, and geothermal resources. Authority will cooperate with City and City will cooperate with Authority in obtaining any required consent from the Texas Water Commission or any other governmental agency necessary for transfer of Permit as contemplated under the Contract and any other permits or licenses required in connection with Project and the delivery and use of water to be supplied from it. The obtaining of all such needed consents, licenses and permits (other than consent for reassignment of Permit as provided in "Term, Assumption of Operation and Termination", below) is a condition of the obligations of the parties under the Contract. Should Authority or City be unable to obtain any such required consent, f.license or permit, the obligations of the parties under the Contract, except the obligations of City set forth in "Payment Unconditional", below, shall cease. Authority shall cause a copy of the Contract to be filed with the Texas Water Commission. As plans and specifications for Project are developed by Authority, same'will'be n.ade available to City and shall be subject to approval of City. Prior to letting of any contract for construction of Project or any part thereof, Authority will allow City to review bids received, and the letting of any such contract shall be subject to the approval of City, which approval may be withheld if the amount of the bid by the lowest responsible bidder exceeds the Engineer's advance estimates of costs for such contract as supplied to City by Authority. City reserves the right to review and approve any change order that exceeds five percent of the contract price. It is agreed, however, that Authority shall be excused from meeting a responsibility it has under the Contract to the extent it is prevented from meeting such responsibility as a result of rejection or modification by City of any change order; proposed by Authority. City shall be responsible for construction and installation of water pumping and transmission facilities, except the intake facilities, and such facilities shall not be included in the Project. '�' -11- Authority's Bonds Upon request of City, and only upon its request, Authority shall issue and sell Bonds in an aggregate amount sufficient in the opinion of Authority and City to pay all Project Costs and to establish any funds required by the Resolution. Bonds will be sold in one or more increments at times selected by Authority after consultation with City. Bonds will be described in a Resolution, as amended or supplemented from time to e* time. The initial Resolution issued for PreConstruction Project Costs and the initial Resolution issued for Construction Project Costs each shall be subject to approval of City. The entire proceeds from the sale of Bonds (other than costs of issuance of Bonds and any amount required by the terms of Resolution to be deposited into a repair and replacement fund, a debt service fund, or a debt service reserve fund) shall be placed by Authority in Construction Fund. All Project Costs shall be paid from Construction Fund. Immediately upon receipt of proceeds from Bonds, Authority shall, at the option of City, pay to City from Construction Fund for the easements to be granted by City to Authority pursuant to the Contract an ry amount of money certified in writing by City to Authority prior to the issuance of Bonds as being equal to the amount of costs theretofore paid by City for lands for Project, for expenses incurred in obtaining Permit, for advances to Authority pursuant to the Contract, and for fulfillment of ancillary obligations as provided in the Contract. Should City, after such initial payment and prior to Project becoming Operational, incur and pay additional costs for the acquisition of land, easements or mineral interest for Project or for fulfillment of ancillary obligations, Authority shall, immediately upon receipt of written notice from City that such additional costs have been paid and of the amount thereof, reimburse City for same from Construction Fund. Disbursements from Construction Fund shall be made only for the payment of Project Costs. Any funds remaining in the Construction Fund after the payment of all Project Costs shall be utilized to reduce the Capital Costs payments required to be made by City under "Payments by City", below, and by any Assignee under provisions in the agreement between Authority and such Assignee of like effect to the provisions of "Payments by City", below, and may be withdrawn from Construction Fund and deposited into Debt Service Fund for such purpose after the payment of all Project Costs. All Capital Costs shall be payable from Debt Service Fund. Bonds shall be sold on the basis of competitive bidding, unless Authority and City agree otherwise. Bonds shall be revenue bonds payable solely from funds �. established by a Resolution and monies to be paid under the Contract. Sale and Purchase of Water Subject to assignment of rights under "Assignments", below, Authority agrees to sell to City and City agrees to buy from Authority, and to pay for as provided in the Contract, whether such water is actually used or not, the entire amount of water which can be supplied from Project. Times and rates of delivery of water from Project to City shall, within the limits of capability of Project, be selected by City. Deliveries shall be through the Intake Facilities. Authority and City shall each have the right of access to the sites and facilities of the other as reasonably required for effective utilization of Project for delivery of water to City. Authority will measure and maintain accurate records of water withdrawn from Lake and of water delivered to City and will furnish City with monthly summaries of such records. City shall have the right to inspect the measuring devices and records of operation of Project at reasonable times. Payments By City . Subject to assignment of rights and obligations pursuant to "Assignments", below, City shall make payments to Authority during each Fiscal Year which shall equal the sum of: (i) Capital Costs payable during such Fiscal Year; plus (ii) Maintenance and Operation Costs as adjusted, which, by the Authority's estimates made prior to the beginning of such Fiscal Year, will be incurred during such Fiscal Year; plus (iii) Management Fees for such Fiscal Year. Payments to be made under the Contract on account of Capital Costs shall be due and payable on or before ten (10) days before the date on which such Capital Costs are required to be paid by Authority and shall be in such amounts as shall enable Authority, with the monies thus paid, to pay Capital Costs as they become payable. All payments representing Capital Costs shall be deposited by Authority into Debt Service Fund and other funds as shall be required by the terms of any Resolution. Disbursements shall be made from Debt Service Fund only for payment of those Capital Costs required by a Resolution to be made therefrom. At or prior to its regular July meeting each year, the Authority shall determine the amount estimated as necessary to pay Maintenance and Operation Costs for the following Fiscal Year, which amount shall be adjusted by any deficit or surplus in the payments by City to cover Maintenance and Operation Costs for preceding Fiscal Years and shall include credit for any miscellaneous income to Authority resulting from operation of Project. At the same time, the Authority shall determine the amount of Management Fees payable during the following Fiscal Year. These determinations, together with a schedule of monthly payments necessary to pay such Maintenance and Operation Costs as adjusted, plus Management Fees, for the following Fiscal Year, and with the data on which such determinations and schedule are based, shall be submitted to City in writing before August 1, following such meeting. The amount of each monthly payment specified in such schedule shall be 1/12th of such Maintenance and Operation Costs, as adjusted, plus 1/12th of Management Fees for such following Fiscal Year less any reimbursement credit due City. If City shall make written objections to such determinations within thirty (30) days after receipt of same, the e^ - 12 - parties shall negotiate during the month of September in an attempt to resolve their differences. Should the parties fail to resolve their differences by the end of September, the matter shall be submitted to arbitration pursuant to the Contract. Pending the outcome of such arbitration, City shall make payments to Authority in accordance with the schedule. When the decision of the arbitrator is received, subsequent payments during the Fiscal Year shall be in equal installments and shall be in such adjusted amount so that total payments for the Fiscal Year involved shall be in accordance with such decision. In the event of subsequent reversal of the decision of the arbitrator, appropriate adjustment to account for the effects of such reversal shall be made in the determinations made by the Authority with respect to Maintenance and Operation Costs and Management Fees to be paid in subsequent Fiscal Years. The amount payable for each month shall be due and payable on or before the first day of that month. For the Fiscal Year in which Project becomes Operational, the aforesaid written determination and schedule for the remainder of that Fiscal Year shall be furnished with the certification required to be given pursuant to the Contract. Additional Provisions to Assure Payments Should the amount of money set aside from Bond proceeds to pay interest on Bonds during construction of the Project prove insufficient for that purpose, or should any payments of principal fall due before the Project is Operational, City shall pay to Authority such amounts of money at such times as will enable Authority to pay Capital Costs when due. Authority shall certify to City in writing the need for such payments at least thirty (30) days prior to the date when same are required to be made by City. Payment Unconditional Bonds that will be issued to pay Project Costs will be payable only from payments made by City or any Assignee pursuant to the Contract; therefore the obligation of the City to make payments under "Payments By City", above, shall be unconditional whether or not Project is completed and even in the event of a total failure of the water supply agreed to be made available under the Contract. The obligation to make such payment shall not be relieved by release and reassignment of any or all of City's rights hereunder. Maintenance and Operating Expenses and Rates City represents and covenants that the services to be obtained pursuant to the Contract are essential and necessary to the operation of the City's waterworks system and that all payments to be made under the Contract by it will constitute reasonable and necessary ."maintenance and operating expenses" of City's waterworks system, within the meaning of Articles 1112 and 4413 (32c), VernoWs Texas Civil Statutes, and ,.� the provisions of all ordinances authorizing the issuance of all bonds or other obligations of the City's waterworks or waterworks and sanitary sewer system. City will set and charge rates for services supplied through its waterworks system (or waterworks and sewer system) which are adequate to enable it to fulfill its obligations under the Contract, as well as all other obligations which must be discharged out of revenues of such waterworks system (or waterworks and sewer system). No Tax Obligation of the City , The Authority shall never have the right to demand payment by the City of any obligation assumed or imposed on it under and by virtue of the Contract from funds raised or to be raised by taxation. Completion Bonds Should the proceeds of the Bonds be insufficient to enable Authority to complete the Project, place it into operation and pay from the proceeds thereof all Project Costs, Authority may issue additional bonds for the 'AN% purpose of obtaining funds for completion of Project. Such additional bonds may be on a parity with the Bonds, or may be subordinate to the pledge of revenues to the payment of Bonds. Upon agreement of the parties and to the extent not precluded by the provisions of any resolution or other document pertaining to Bonds, Authority may issue other additional bonds to obtain funds to provide additional facilities agreed upon by the parties for the withdrawal, treatment and delivery to City of water from Project, which additional bonds may be on a parity with Bonds or may be subordinate to the pledge of revenues to the payment of the Bonds. Assignments Upon agreement by a prospective Assignee to assume a percentage or all of the payments required to be made by City under the Contract at the times when payments are required of City, City shall have the right to release a percentage or all of Dependable Yield unto Authority. When City shall have thus released any percentage of Dependable Yield unto Authority and such prospective Assignee shall have made the Equity Payment as provided in the Contract, Authority shall thereupon assign the percentage of Dependable Yield thus released unto such Assignee, subject to the limitation in the Contract, .and such Assignee shall assume the obligations of City to make a percentage or all of the payments required to be made by City under the Contract at the times when payments are required of City. Such percentage shall be a fraction (expressed as a percentage) the numerator of which shall be the part of Dependable Yield, as determined at the time of such assignment, expressed in acre-feet per year (AF/Y) released by City and assigned by Authority unto such Assignee and the denominator of which shall be the total Dependable Yield, as determined at the time such assignment is made, also expressed in AF/Y. So long as an Assignee shall fully and promptly discharge its assumed obligations to make payments to Authority, City shall be relieved of the obligation to make such payments to the extent of obligations assumed. However, City shall not be thus relieved to the extent that such Assignee defaults in prompt fulfillment of the obligations which 'it'has assumed. As a condition for any such assignment, Authority shall require Assignee to make an Equity Payment to Authority in an amount or amounts and at a time or times to be established by Authority and approved by City in advance of such assignment. All Equity Payments received by Authority shall be paid over by Authority to City immediately upon receipt. In the event of any such assignment, Authority shall make available to Assignee, rather than to City, the percentage of Dependable Yield thus assigned by Authority so long as such Assignee shall promptly fulfill all obligations to Authority assumed by it in consideration of such assignment. Upon failure of any Assignee to fulfill such obligations promptly, Authority shall give written notice of such failure to Assignee and to City. If such failure is not cured by Assignee within 30 days after effective date of such notice, City shall fulfill the obligations in default, such assignment shall terminate and shall be renewed only with approval of City on terms approved by City and the percentage of Dependable Yield assigned unto the Assignee under such assignment shall revert to City. At the time an initial assignment is made, and thereafter at the time of subsequent assignments or at 10 -year intervals, whichever is less, Authority shall cause the Engineer to prepare a current estimate of Dependable Yield. The amount of water an Assignee shall be entitled to from the Project in any full calendar year shall be equal to Dependable Yield of the Project as last determined by the Engineer prior to January 1 of that calendar year multiplied by the percentage of Dependable Yield assigned to such Assignee. If any assignment becomes effective on any date other than January 1, then the amount of water available to that Assignee during the remainder of that beginning year shall be a prorated amount of the total assigned amount of Dependable Yield expressed in AF/Y. Proration shall be on the basis of a fraction in which the numerator is the number of days remaining in the beginning year following the effective date of the assignment and the denominator is 365 days. Payment obligations of City assumed by Assignee as described above shall be prorated on the same basis in any partial beginning year. Upon assumption of operation of Project by City as provided in "Term, Assumption of Operation and Termination", below; City will assume then existing obligations of Authority to any Assignee arising out of assignments made pursuant to the Contract. Term, Assumption of Operation and Termination The term of the Contract shall commence on May 11, 1989, and shall remain in effect for so long as any Bond or any bonds that have been issued to refund or refinance the obligations originally represented by the Bonds, or issued pursuant to other authority under the Contract, remain outstanding and thereafter for so long as City shall elect while Project continues to be useful for the purpose of supplying water to City or to any Assignee. When all obligations under Bonds have been fully discharged, City may elect to assume operation of Project at any time by written notice to the Authority given at least one year prior to the date of election. Upon the effective date of election, City shall assume responsibility for operation of Project, subject to then existing obligations to Assignees and with existing rights as against Assignees. Thereupon, Authority shall be relieved of further responsibility for operation of Project and City shall be relieved of all obligations to make payments to Authority provided for in the Contract and referable to periods of time after the date of such assumption. Upon any such assumption, Authority shall reassign Permit unto City, and shall assign to City any other permits or licenses or contractual rights required or held in connection with maintenance and operation of Project. Upon such reassignment and assignments, Authority shall cooperate with City in obtaining any necessary consent to such reassignment and assignments from the Texas Water Commission and/or any other governmental agency having jurisdiction in the premises. Upon any such assumption, the Contract shall terminate and the easements granted by City to Authority pursuant to the Contract shall terminate. Insurance Authority shall maintain a practical insurance program, with reasonable terms, provisions, insurance and costs which the Authority determines will afford adequate protection against liability for bodily injury and property damage occurring in connection with the construction, operation and maintenance of Project, which insurance shall also protect City and Assignees, if any, as named insureds. Authority shall also carry such insurance against fire and other casualties affecting Project as is usual and practical to obtain with respect to such facilities. Proceeds of insurance against fire and other casualties will be used solely to repair and maintain Project. Control of Project As between Authority and City, Authority shall control the construction and operation of the Project and all related facilities and improvements and shall hold exclusive possession of the Project. Authority agrees to defend and save and hold harmless, City from all claims, demands, and causes of action which may be asserted by anyone on account of the construction and operation of the Project and related facilities and improvements, or possession and use of the Project. This promise is not made for the benefit of any third party. This provision shall in no manner be construed to relieve City from its obligation to pay Capital Costs and Maintenance and Operation Costs. - 14' - iii n SUMMARY OF CERTAIN PROVISIONS OF THE BOND RESOLUTION of Directors will adopt a resolution authorizing the Bonds, selected provisions of which are The Board herein summarized. �► Definitions hout the Bond Resolution the following terms and expressions shall be construed and are intended to Throu g have the following meanings, to -wit: parity with the Bonds which the "Additional Bonds" means the additional revenue bonds on a p Y as provided in the Resolution; Authority reserves the right to issue in the future, "Amortization Installment" means, with respect to any Term Bonds, th-ement of such Term e amount of money which is rovided that required to be deposited into the toMaredempt onndatory dandpincluding� redemption premium, ovide for any) of (whether at maturity or by mandatory the total Amortization Installments for such Term Bonds shall be sufficient to p Installment - the aggregate principal amount of such rBonds;received pursuant to the Contract and required thereby to be "Capital Costs' moneys means those Ys r t Service Fundtahe Repair and nd Additional Bonds•,Replacement Reserve Fund and the Reserve Fund or transferred to the Deb the benefit of the owners of the Bonds Completion Date" means the date n which h the Coni oa sulting Engineer certifies that construction of Lake Alan Henry is complete and the reservoir "Contract" means the agreement, dated May 11, 1989, as amended from time to time, between Lubbock and the Authority; a Capital Costs, plus fees, charges, and "Debt Service" means the amount of money required to pay P costs such as those of the Paying /Registrar, which are incurred incident to the handling and servicing of Bonds and any Additional Bonds; "Eligible Securities" means those amended from time ies t me; ibed in the Public Funds Investment Act �^ of 1987, Article 842a-2, V.A.T.C.S., rly known as ,Justiceburg ir (forr "Lake Alan Henry" means nd and interests in land, and, water, water dam and rights andeall other interest owned by Reservoir) and all related la as described in the Engineering Report as the Justiceburg the Authority (whether corporeal or incorporeal), on provided that, Reservoir, with said dam and reservoir vp th additionsbetheretood andtimprovements thForthereof; the Able Mountain Fork of the Brazos River, together notwithstanding the foregoing�lude any and to the extent now water or ewer facilities hereafter wh ch the Authority finds by resolut resrm olution t Lake Alan Henry shall not int r which if issued will be special revenue to be a part of Lake Alan Henryeessuance of "Special tiy be acquired or al Facities Bonds constructed by the Authority in the future with the proceeds from the or payab obligations of the Authority whit from other contract are not secured revenues lorfpayments receet ived from any whichvenues, but will legal secured by and payable solely unless and to the extent otherwise provided in the resolution entity in connection with such facilities; and such revenues or payments shall not be considered as or constitute Net Revenues of Lake Alan Henry, or resolutions authorizing the issuance of such "Special Facilities Bonds"; ject for "Maintenance and Operation Costs means ail c osts of repairs and Authority to be requ ped foreproperof Pmainte ante and no special fund is created and all costs considered y professional servty butices, supervision, operation of Project, including, uiomentatsuppl eslnmaterials,withenergy,out tpg the generality of theforegoing) n the direct costs of labor, equipment, insurance and payments made y Authorit,plus an additional ` engineering, accounting, administration, auditing, satisfaction of juin payment oftclaims n amounts which haing from claims not vebbeen proposed 1byuAuthority and preapproved cost or expense payment the State a by Lubbock, and in connection with the fulfillment of its obligations under the Contract by taxation or as a result of actions requested by Lubbock or regulations or requirements lawfully imposed by Texas, the United States, any governmental subdivision of the State of Texas or any federal agency, plus untants to be appropriate to cover Authority's expense of supervision and the share of Authority's unallocated general and administrative expenses determined annually y Authority's certified public ac administration attributable to its obligations under the Contract, plus any certified reimbursement amount due Lubbock under the Contract; "Net Revenues11 means Revenues less Maintenance and Operation Costs; uired to be made to the Authority under the terms of the Contract; "Payments" means all payments req "Repair and Replacement Fund Required from tlme11t means t me by resolution o$5rresollut ons of the000 or such Beased oard amount or amounts as hereafterrequired authorizing Additional Bonds; '" - 15 - r "Reserve Fund" Required Amount" means the average, annual principal and interest requirements computed at time of issuance of the outstanding and unpaid Series 1989 Bonds, the Bonds and Additional Bonds until such amount is increased from time to time by resolution or resolutions of the Board authorizing Additional Bonds; "Revenues" means the gross receipts and income from ownership or operation of Lake Alan Henry r` received by the Authority (i) as Payments made pursuant to the Contract and (ii) from any other sources; such term, however, does not include Payments by Lubbock which are Management Fees or which are capital advances to the Authority for capital improvements or capital donations of property in lieu of payments of money. Pledge The Bonds and any Additional Bonds are and shall be secured by and payable from a first lien on and pledge of the Net Revenues including such revenues within the Funds created in the Resolution. ; The Bonds and any Additional Bonds are and will be secured by and payable only from the Net Revenues, and are not secured by or payable from a mortgage or deed of trust on any properties, whether real, personal, or mixed, constituting Lake Alan Henry. The owners of the Bonds or Additional Bonds shall never have the right to demand payment from taxes, nor shall they have the right to demand payment thereof out of any other funds of the Authority. �• Funds The following special funds of the Authority have been created heretofore by the 1989 Resolution and shall be continued for so long as any Bonds, Series 1989 Bonds or Additional Bonds shall be outstanding and unpaid: (i) the 'Brazos River Authority Special Facilities (Lake Alan Henry) Revenue Bonds Revenue f Fund" (the "Revenue Fund"); (ii) the 'Brazos River Authority Special Facilities (Lake Alan Henry) Revenue Bonds Debt Service Fund" (the "Debt Service Fund") and created as an account therein there shall be established the "Mandatory Redemption Account'; (iii) the 'Brazos River Authority Special Facilities (Lake Alan Henry) Revenue Bonds Repair and Replacement Reserve Fund" (the "Repair and Replacement Reserve Fund"); !" (iv) the 'Brazos River Authority Special Facilities (Lake Alan Henry) Revenue Bonds Reserve Fund" (the "Reserve Fund"); (v) the 'Brazos River Authority Special Facilities (Lake Alan Henry) Construction Fund" (the "Construction Fund"). r Monies in said Funds shall be maintained at a Depository of the, Authority, and shall be charged with a lien in favor of the owners of the Bonds until said monies are paid out in accordance with this Resolution. Bond Proceeds From the proceeds of the sale of the Bonds to the purchaser 'thereof the following deposits and disbursements shall be made, to -wit: (1) Into the Debt Service Fund - the interest accrued on the Bonds and received upon delivery of same to the Purchaser thereof. (2) Into the Reserve Fund - the amount required to bring the Reserve Fund to the Reserve Fund Required Amount, provided that the amount deposited from the'Iproceeds of the sale of the Bonds into the Reserve Fund together with the amount required herein'' to be deposited into the Repair and Replacement Reserve Fund shall not exceed 10% of the aggregate principal amount of the Bonds. (3) Into the Repair and Replacement Reserve Fund - $500,000; (4) Into the Construction Fund - the remaining amount. The Construction Fund The Depository shall be required to secure cash funds in the Construction Fund in the manner required of depositories of the Authority. To the extent practicable, monies ih' the Construction Fund shall be kept invested by the Authority in Eligible Securities. All interest and 'profits from such investments, to the extent not required to be rebated to the United States as provided herein, shall remain on deposit in the Construction Fund as a part thereof, except as otherwise provided herein. - 16 - Disbursements (a) Money in the Construction Fund shall be subject to disbursement by the Authority for payment of the Project Costs including reimbursement to itself and others for Project Costs paid prior to the delivery of the Bonds to the Purchaser. Such disbursments shall be made only by checks stating the ,., purpose of the payment signed and countersigned by such officers or employees of the Authority as may from time to time be designated by the Authority by resolution. (b) After Completion Date, 'any residue remaining in the Construction Fund to the extent not required to be rebated to the United States or paid to Lubbock in accordance with the Contract shall be deposited into the Debt Service Fund and shall be applied to the payment of the principal of and interest on the Bonds and/or the Additional Bonds. Revenue Fund All Revenues other than Capital Costs and Management Fees received as Payments pursuant to the Contract shall be deposited in the Revenue Fund as received and shall be used to pay as a first charge against said Fund, the Maintenance and Operation Costs as they shall become due from time to time. Debt Service Fund Monies in the Debt Service Fund shall be used for the sole purpose of paying the principal of (including Amortization Installments) and interest on all Bonds, Series 1989 Bonds and any Additional Bonds, as the same shall mature and come due, together with the fees of the Paying Agent/Registrar and the costs of servicing the Bonds, the Series 1989 Bonds and all Additional Bonds. Reserve Fund 001, Monies in the Reserve Fund shall be used for the sole purpose of retiring the last of any Bonds, Series 1989 Bonds or Additional Bonds as they shall mature or paying principal of and interest on any Bonds, Series 1989 Bonds or Additional Bonds when and to the extent the amounts in the Debt Service Fund are insufficient for such purpose. Repair and Replacement Reserve Fund 01` Monies in the Repair and Replacement Reserve Fund shall be used for the sole purpose of making necessary repairs or replacement of worn, damaged or obsolete portions of Lake Alan Henry. Flow of Funds Capital Costs as received by the Authority and Net Revenues remaining on deposit in the Revenue Fund after payment of the Maintenance and Operation Costs shall be deposited to the following funds, at the times and in the order of priority listed below: (1) To the Debt Service Fund - in addition to all amounts heretofore required to be deposited to the credit of the Debt Service Fund, the amounts, at the times as follows: (i) such amount, deposited on or before the 10th day of each February and August hereafter, commencing with the month of August, 1991, as will be sufficient, together with other amounts, if any, then on hand in the Debt Service Fund and available for such purpose, to pay the interest scheduled to accrue and come due on the Bonds on the next succeeding interest payment date; (ii) such amounts, deposited on or before the 10th day of each August hereafter, commencing with the month of February, 1991, as will be sufficient, together with other amounts, if any, then on hand in the Debt Service Fund and available for such purpose, to pay the principal scheduled to mature or come due on the Bonds on the next succeeding principal payment date; and (iii) such amounts, as shall be required as Amortization Installments for the Term Bonds of the Bonds, deposited in the Mandatory Redemption Account on or before the 10th day of each August, commencing August 10, 2005, for the redemption of such Term Bonds. (2) To the Reserve Fund - an amount, if any, required on or before the 10th day of each February and August, beginning with the first such month following the occurence of a deficiency, to restore any deficiency in the Reserve Fund Required Amount in not more than ten (10) equal semiannual payments. So long as the amount on deposit in the Reserve Fund equals or exceeds the Reserve Fund Required Amount, no transfers into the Reserve Fund shall be required. (3) To the Repair and Replacement Reserve Fund - an amount, if any, required on or before the 10th day of each February and August, beginning with the first such month following the occurrence of a deficiency in the Repair and Replacement Fund Required Amount, to restore any deficiency in the Repair and Replacement Fund Required Amount in not more than ten (10) equal semiannual payments. So long as the amount on deposit in the Repair and Replacement Reserve Fund equals or exceeds the Repair and Replacement Fund Required amount, no transfers to the Repair and Replacement Reserve Fund shall be required. -17- Deficiencies: Excess Net Revenues (a) If on any occasion there shall not be sufficient Net Revenues to make the required deposits into the Debt Service Fund, the Reserve Fund and the Repair and Replacement Reserve Fund, then such deficiency shall be made up as soon as possible from the next available Net Revenues, or from any other sources available for such purpose. (b) Subject to making the required deposits to the credit of the Debt Service Fund, the Reserve Fund and the Repair and Replacement Reserve Fund when and as required by this Resolution, or any resolution authorizing the issuance of Additional Bonds, the excess Net Revenues may be used by the Authority for any lawful purpose. Payment of Bonds On or before August 15, 1991, and semiannually on or before each August 15 and February 15 thereafter while any of the Bonds are outstanding and unpaid, the Authority shall make available to the Paying Agent/Registrar therefor, out of the Debt Service Fund (and the Reserve Fund if necessary) money sufficient to pay such interest on and such principal of the Bonds as shall become due and mature on such dates, respectively, at stated maturity or by redemption prior to maturity. The Paying Agent/Registrar shall destory all paid Bonds and furnish the Authority with an appropriate certificate of cancellation or destruction. Security and Investment of Funds The Authority will cause the Depository to secure and keep secured, in the manner required by law, all cash funds on deposit in the Funds herein established with it, and will cause the Paying Agent/Registrar to secure all funds deposited with it as other trust funds are secured. Money in the Debt Service Fund, the Reserve Fund and the Repair and Replacement Reserve Fund shall be invested and reinvested in Eligible Securities. All interest and profits from such investments, to the extent not required to be rebated to the United States as provided herein, shall be credited to the Revenue Fund to the extent not needed to cure any deficiency, if any, within any such Funds. Payments from Other Sources Nothing in this Resolution prohibits the Authority from applying money other than Net Revenues to the payment of the Bonds, but if it does apply money from any of its funds other than Net Revenues, .the Authority shall be entitled to reimburse such fund from Net Revenues thereafter received for the amount advanced plus interest lost by the Authority on account of such advance. The Contract The Authority covenants and warrants that it has entered into the Contract with Lubbock, and the Contract is enforceable in accordance with its terms. Enforcement The Authority covenants to and with the owners of the Bonds that it will keep in effect and enforce the Contract and that it will not voluntarily consent to or permit the rescission thereof or non-performance thereunder; and the Authority will not consent or agree to any amendment to the Contract which would reduce the amounts payable thereunder or which would extend the time of such payments or which would in any manner impair or adversely affect the rights of the owners of the Bonds and Additional Bonds, if any. If Lubbock fails to make Payments under the Contract as required thereby, the Authority will take all necessary action to preserve and protect the rights of the owners of the Bonds with respect thereto in order to assure the payment of the Bonds and the interest thereon when due. Contract Payments The Authority covenants to furnish Lubbock with schedules of Payments to be made by Lubbock to the Authority pursuant to the Contract during the succeeding Fiscal Year, all in accordance with the terms of the Contract. Audits Following the end of each Fiscal Year after completion of the Project, the Authority, as part of the overall audit of the Authority, shall have an Accountant audit all Funds established by this Resolution and submit a written report of each such audit to the Authority each year. The scope of the audit shall be such that the Accountant can render an independent opinion as to the financial condition of Funds created herein and as to the adequacy and correctness of the accounting records pertaining thereto. The audit report shall recommend any activities which, in the professional judgment of the Accountant, may be advisable to assure compliance with the provisions of this Resolution. -18- -19- Insurance (a) The Authority covenants that it will at all times keep insured such parts of Lake Alan Henry as would usually be insured by corporations operating like properties, with a responsible insurance company or companies, against risks, accidents or casualties against which and to the extent insurance is usually carried. by corporations operating like properties, including, to the extent reasonably obtainable, fire and extended coverage insurance, insurance against damage by floods, use and occupancy insurance and public liability and property damage insurance. At any time while any contractor engaged in construction work shall be fully responsible therefor, the Authority shall not be required to carry insurance on the work being constructed if the contractor is required to carry appropriate insurance. All such policies shall be open to the inspection of the owners of the Bonds and their representatives at all reasonable times. Upon the happening of any loss or damage covered by insurance from one or more of said causes, the Authority shall make due proof of loss and shall do all things necessary or desirable to cause the insuring companies to make payment in full directly to the Authority. The proceeds of insurance covering such property, together with any other funds necessary and available for such purpose, shall be used forthwith by the Authority for repairing the property damaged or replacing the property destroyed; provided, however, that if said insurance proceeds and other funds are insufficient for such purpose, then said insurance proceeds pertaining to Lake Alan Henry shall be used, at the option of the Authority, promptly as follows: (i) for the redemption prior to maturity of the Bonds and Additional Bonds, ratably in the proportion that the outstanding principal of each series of Bonds or Additional Bonds bear to the total outstanding principal of all Bonds and Additional Bonds, provided that if on any such occasion the principal of any such series is not subject to redemption, it shall not be regarded as outstanding in making the foregoing computation; or (ii) if none of the outstanding Bonds or Additional Bonds is subject to redemption, then for the purchase on the open market and retirement of said Bonds and Additional Bonds in the same ell proportion as prescribed in the foregoing clause (i), to the extent practicable; provided that the purchase price for any Bond or Additional Bond shall not exceed the redemption price of such Bond or Additional Bond on the first date upon which it becomes subject to redemption; or (iii) the insurance proceeds, or the remainder thereof, shall be deposited in a special and separate trust fund, at a Depository of the Authority, to be designated the "Insurance Account". The Insurance Account shall be held until such time as the foregoing clauses (i) and/or (ii) can be n complied with, or until other funds become available which, together with the Insurance Account, will be sufficient to make the repairs or replacements originally required, whichever of said events occurs first. (b) The foregoing provisions of (a) above notwithstanding, the Authority, shall have authority either to self -insure or enter into co-insurance or similar plans where risk of loss is shared in whole or in part by the Authority. (c) The annual audit referred to above shall contain a section commenting on whether the Authority has complied with the above requirements with respect to the maintenance of insurance, and listing all policies carried, and whether all insurance premiums upon the insurance policies to which reference is hereinbefore made have been paid. Unused Insurance Proceeds Any insurance proceeds remaining after the completion of and payment for any such reconstruction or repair shall be deposited to the credit of the Debt Service Fund. Additional Bonds and Refunding Bonds For the purpose of the Bond Resolution, the following definitions shall apply: !� (a) "Completion Bonds" means any bonds issued to pay the Project Costs to complete the acquisition and construction of Lake Alan Henry. (b) "Improvement Bonds" means bonds issued for improvements, betterments, extensions or replacements of Lake Alan Henry, which may include bonds issued by the Authority to provide additional facilities for the withdrawal, treatment and delivery to Lubbock of water from Lake Alan Henry. ,. Completion Bonds and Improvement Bonds Subject to the provisions herein, the Authority reserves the right to issue Completion Bonds and Improvement Bonds which, in the discretion of the Authority, may be Additional Bonds or subordinate lien bonds junior to the Bonds, or Bonds which a portion of same may be Additional Bonds or subordinate lien bonds. -19- Requirements (a) Completion Bonds may be issued in such amounts and at such times as the Authority may deem appropriate. the circmstances and ect to the limitations (b) Improvement Bo (ebe issuunder (i)her stancesu considered desirable by the Authority if contained in the Contract or (10 under re ate Lubbock shall agree wto an ith other revenues from Contracte Alan Henry, i o pay when due all inments terest on and the amounts sufficient, principal of the Improvement Bonds at the time proposed to be issued and the maintenance o any special funds created in connection therewith. Refunding Bonds Bonds The Authority reserves the right an issue law then available), or bonds for uany nd aother ll or alawny ful purpose, uponart Of the suchterms or Additional Bonds' (pursuant to y and conditions as the Authority may deem to be in the best interest of the Authority and Lubbock. Authorization Completion Bonds, ImprovemencBonds, shall arescrribe he form anBonds d terms of such bondsed to be d shall be authorized by resolutions of the Authority which P Suits by Owners no less In the event of a default hereunder amount f theteutstanding Bonds anndowner or drAddit Additional Bonds may filof bondowners e suit or than 25% of the aggregate principal nd lication othe income therefrom. action for the enforcand/orent fany covenants of operation of LaketAlanuHenry and theor s of application bondownersf t e require proper a efficient construction act or n of By such suit or action, the boe gondsrsProvided, howoin ever, theforegoingnig shall not affect ori impair ther in y right the rights of the owners of th of any bondowner to enforce the payment of the principal of and interest on any Bond at and after the maturity thereof or the time the same comes due. Trustee appoint a Trustee which shall be a national In the event of defauland Additional Bondsaare authorized torappt (25%) in the aggregate principa amoun of outstanding Bonds of not less than 00,00, and bank having trust powers State combined of caps.Not more thansone Trustee hall se Ove0at0any one located either within or without the time. Such Trustee, with or without having possession of the Bonds, shall have the following powers: Auth rity and the cation of ments (a) To direct the operationossess on of and ope ate Lake Alan Hendry and m ke p roper applicat onyof any under the Contract, or take p revenues thereof; or hich could be filed by the owners of Bonds. (b) To file any suit or action w Conclusion of Default an in the After such event of default h cured aedTrusteel shalll return event of heeposse fault dsion,es nmaot in enance and discretion of the Trustee, to be eminent, operation of Lake Alan Henry to the Authority. Limitation of Trustee's Liability Any Trustee app ointed under this Resolution shall not be personally liable for any loss or damage whatsoever to any perood faith excver ewhomsoe pt forlfraout of any action or failure on its rt to act or fraud, willful misconduct or negligence.for any error or judgment made in g Other Remedies; Remedies not Waived No remedy herein specified is bet Cumulatided to ve andlusive of shall beany add'tionavailable to every otheror re avai able remuedy or and every such remedy shall statute. No delay or omission to exercise any remedies, now or he existing at law or in equity, or bbe y to be a waier of right or power shall impair an ssuch fight and power may lbe exercised dfrom time t vt me and default ower or as often as acquiescence therein, an Y may be deemed expedient. Amendment (a) The owners of Series 1989 Bonds, Bofdsanderie1989 Bondsr,d8ondseandnAddiin ptional ual amount t t Aditional Bonds he time of the aggregate principal -20- outstanding (but not including in any case Series 1989 Bonds, Bonds and Additional Bonds which may then be held or owned by or for the account of the Authority) shall have the right from time to time to approve an amendment of this Resolution which may be deemed necessary or desirable by the Authority, provided, however, that nothing herein contained shall permit or be construed to permit the amendment of the terms and conditions contained in this Resolution or in the Bonds and Additional Bonds so as to: (i) Make any change in the maturity of the Series 1989 Bonds, the Bonds and Additional Bonds; (ii) Reduce the rate of interest borne by any of the Series 1989 Bonds, the Bonds and Additional Bonds; (iii) Reduce the amount of the principal payable on the Series 1989 Bonds, the Bonds and Additional Bonds; (iv) Modify the terms of payment of principal of or interest on the Series 1989 Bonds, the Bonds and Additional Bonds, or any of them, or impose any conditions with respect to such payment; (v) Change the minimum percentage of the principal amount of the Series 1989 Bonds, Bonds and Additional Bonds necessary for consent to such amendment; or (vi) Affect the rights of the holders of less than all of the Series 1989 Bonds, the Bonds and Additional Bonds then outstanding; unless such amendment or amendments be approved by the owners of all of the Series 1989 Bonds and the Bonds at the time outstanding. (b) The provisions of this Resolution notwithstanding, the Authority may, without the consent of any of the owners of the Series 1989 Bonds, the Bonds or Additional Bonds, pursuant to amendatory resolution, from time to time: r�► (i) impose upon the Authority conditions or restrictions additional to, but not in diminution of, those contained in this Resolution respecting the issuance of Additional Bonds; (ii) undertake covenants additional to but not inconsistent with those contained in this Resolution; or (iii) correct any ambiguity or correct or supplement any Inconsistent or defective provision contained in this Resolution or any amendatory resolution. Notice Required If at any time the Authority shall desire to amend the Resolution as provided therein, the Authority shall cause notice of the proposed amendment to be published in a financial newspaper or journal published in The City of New York or the State of Texas, once during each calendar week for at least two successive calendar weeks. Such notice shall briefly set forth the nature of ,the proposed amendment and shall state that a copy thereof is on file at the principal offices of the Authority, the Paying Agent/Registrar and with P` each of the Participants for inspection by all owners of Bonds and Additional Bonds. Such publication is not required, however, if notice in writing by first-class mail, postage prepaid, is given to each owner of Bonds and Additional Bonds. Adoption of Amendment Whenever at any time within one year from the date of the first publication of said notice or other service or written notice the Authority shall receive an instrument or instruments executed by the owners of at least two-thirds in aggregate principal amount of Bonds, the Series 1989 Bonds and Additional Bonds then outstanding, which instrument or instruments shall refer to the proposed amendment described in said notice and which specifically consent to and approve such amendment in substantially the form of the copy thereof on file with the Paying Agent/Registrar, the Authority may adopt the amendatory resolution in substantially the same form. Effective Upon Adoption Upon the adoption of any amendatory resolution pursuant to the provisions herein, this Resolution shall be deemed to be amended in accordance with such amendatory resolution, and the respective rights, duties and obligations under the Resolution of the Authority and all the owners `of outstanding :Bonds, Series 1989 Bonds and Additional Bonds shall thereafter be determined, exercised and enforced hereunder, subject in all respects to such amendments. Revocation of Consent Any consent given by an owner of a Series 1989 Bond, a Bond or Additional Bond pursuant to the provisions herein shall be irrevocable for a period of six months from the date of the first publication of the notice provided for herein, and shall be conclusive and binding upon all future owners of the same bond during such period. Such consent may be revoked at any time after six months from the date of the first publication of such notice by the owner who gave such consent, or by a successor in title, by filing notice thereof with the -21 - Paying Agent/Registrar and the Authority, but such revocation shall not be effective if the owners of two- thirds aggregate principal amount of the Series 1989 Bonds, the Bonds and Additional Bonds outstanding have, prior to the attempted revocation, consented to and approved the amendment. Payment of Bonds and Interest The Authority covenants and agrees that Payments will be sufficient to provide funds for the payment of all Maintenance and Operation Costs and to duly and punctually pay the principal of every Series 1989 Bond, Bond and Additional Bond and the interest thereon, on the dates, at the place and in the manner specified in such bonds, and that it will faithfully do and perform and at all times fully observe any and all covenants, undertakings -and provisions contained herein or in such bonds. Rate Covenant The Authority has fixed, established, and will maintain and collect such rates, charges and fees, including but not limited to the Payments, for the use and availability of Lake Alan Henry at all times as are necessary to produce Revenues in no less than amounts sufficient (1) to pay all current Maintenance and Operation Costs, and (2) to produce Net Revenues for each Year sufficient to pay the principal of and interest on the Series 1989 Bonds, the Bonds and Additional Bonds as the same mature and come due, and all other amounts required by this Resolution and other resolutions authorizing such Series 1989 Bonds, Bonds and Additional Bonds. Other Liens The Authority further covenants that there is not now outstanding -and that the Authority will not at any time create or allow to accrue or to exist any lien upon Lake Alan Henry, or any part thereof, or the revenues pledged herein to the payment of the principal of and interest on the Bonds, at any time derived from the operation thereof, or any of its funds, except as authorized by this Resolution; that the security of the Bonds will not be impaired in any way as a result of any action or any non -action on the part of the Authority, its Board of Directors or officers, or any thereof, and that the Authority will acquire and continuously preserve good and indefeasible title to Lake Alan Henry for the duration of the easements on the land upon which Lake Alan Henry is to be built and each and every part thereof owned by the Authority. The foregoing notwithstanding, the Authority reserves the right to create pledges and liens on the Net Revenues subordinate to the liens created in the Resolution. Keep Franchises and Permits in Effect The Authority further covenants that it will use its best efforts to ensure that no franchises, permits, privileges, or easements will be allowed to lapse or be forfeited so long as the same shall be necessary for Lake Alan Henry. Governmental Requirements; Liens; Claims The Authority covenants that it will use its best efforts to observe and comply with all valid requirements of any governmental authority relative to Lake Alan Henry or any part thereof, and that it will pay or cause to be discharged, or will make adequate provision to satisfy and discharge, within sixty (60) days after the same shall accrue, all lawful claims and demands for labor, materials, supplies, or other objects which if unpaid, might by law become a lien upon such Project or any part thereof or the revenue therefrom; provided, however, that nothing herein contained shall require the Authority to pay or cause to be discharged, or make provision for any such lien or charge, so long as the validity thereof shall be contested in good faith and by appropriate legal proceedings. Sale and Lease of Property (a) The Authority covenants that so long as the Bonds or any of them shall be outstanding, and except as herein otherwise permitted, after the Completion Date it will not sell, lease or otherwise dispose of or encumber any part of Lake Alan Henry, or any of the Revenues derived therefrom except as provided herein. The Authority may from time to time sell any machinery, fixtures, apparatus, tools, instruments, or other movable property and any materials used in connection therewith, if the Authority shall determine that such articles are no longer needed or are no longer useful in connection with the maintenance and operation of Lake Alan Henry. The Authority may from time to time sell such real estate or interests therein that is not needed or serves no useful purposes in connection with the maintenance and operation of the Project. The proceeds of any sale of real property acquired from the proceeds of the Series 1989 Bonds, the Bonds and Additional Bonds shall be deposited in the Debt Service Fund. (b) The Authority may lease any of its lands (or its interest therein) comprising a part of Lake Alan Henry for any purpose, if such lease or the use of such lands will not be detrimental to the maintenance and operation of Lake Alan Henry. All rentals, revenues, receipts and royalties derived by the Authority from any and all leases so made, shall be deposited in the Revenue Fund. -22 - 61 OTHER RELEVANT INFORMATION Ratings Applications for contract ratings on this issue have been made to Moody's Investors Service, Inc. and 04, Standard do Poor's Corporation. An explanation of the significance of such ratings may be obtained from the company furnishing the rating. The ratings reflect only the respective views of such organizations and the Authority makes no representation as to the appropriateness of the ratings. There is no assurance that such ratings will continue for any given period of time or that they will not be revised downward or withdrawn entirely by either or both of such rating companies, if in the judgment of either or both companies, circumstances so warrant. Any such downward revision or withdrawal of such ratings, or either of them, may have an adverse effect on the market price of the Bonds. Tax Exemption In the opinion of McCall, Parkhurst do Horton, Dallas, Texas, Bond Counsel, under statutes, regulations, Published rulings and court decisions, (1) interest on the Bonds is excludable from the gross income of the owners of the Bonds for federal income tax purposes (2) the Bonds will not be treated as "private activity bonds" the interest on which would be included as an alternative minimum tax preference item under section 57(a)(5) of the Internal Revenue Code of 1986 (the "Code"). In expressing the foregoing opinions, ell. Bond Counsel will rely on the Authority's no -arbitrage certificate and will assume compliance by the Authority with certain covenants of the Authority with respect to the use and investment of the proceeds of the Bonds. Failure by the Authority to comply with these covenants may cause the interest on the Bonds to become includable in gross income retroactively to the date of issuance of the Bonds. Interest on the Bonds will be includable as an adjustment for book income or adjusted earnings and profits to calculate alternative minimum taxable income for purposes of determining the alternative minimum tax imposed on corporations by section 55 of the Code, and for purposes of the environmental tax imposed on corporations by section 59A of the Code. In addition, certain foreign corporations doing business in the United States may be subject to the new "branch profits tax" on their effectively -connected earnings and profits including tax-exempt interest such as interest on the Bonds. Furthermore in the case of an S corporation, interest on the Bonds is treated as "passive investment income" which pis subject to the tax imposed by section 1375 of the Code. Except as stated above with respect to the exclusion of the interest on the Bonds from gross income, Bond 00*1 Counsel expressses no opinion as to any other federal, state or local tax consequences of acquiring, carrying, owning or disposing of the Bonds. The law upon which Bond Counsel have based their opinion is subject to change by the Congress and the Department of the Treasury and to subsequent judicial and administrative interpretation. There can be no assurance that such law or the interpretation thereof will not be changed in a manner which would adversely affect the tax treatment of ownership of the Bonds. ^ Prospective purchasers of the Bonds should be aware that the ownership of tax-exempt obligations may result in collateral federal income tax consequences to financial institutions, property and casualty insurance companies, individual recipients of Social Security or Railroad Retirement benefits and taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry tax-exempt obligations. Prospective purchasers falling within any of these categories should consult their own tax advisors as to the applicability of these consequences. r, Tax Accounting Treatment of Original Issue Discount The initial public offering price to be paid for one or more maturities of the Bonds (the "Original Issue Discount Bonds") may be less than the principal amount thereof. In such event, the difference between (i) the amount payable at the maturity of each Original Issue Discount Bond, and (ii) the initial offering price to the public of such Original Issue Discount Bond constitutes original issue discount with respect to such Original Issue Discount Bond in the hands of any owner who has purchased such Original Issue Discount Bond in the initial public offering of the Bonds. Under existing law, such initial owner is entitled to exclude from gross income (as defined in Section 61 of the Code) an amount of income with respect to such Original Issue Discount Bond equal to that portion of the amount of such original issue discount allocable to the period that such Original Issue Discount Bond continues to be owned by such owner. See "Tax Exemption" herein for a discussion of certain collateral federal tax consequences. In the event of the redemption, sale or other taxable disposition of such Original Issue Discount Bond prior to stated maturity, however, the amount realized by such owner in excess of the basis of such Original Issue Discount Bond in the hands of such owner (adjusted upward by the portion of the original issue discount allocable to the period for which such Original Issue Discount Bond was held by such initial owner) is includable in gross income. -23 - Under existing law, the original issue discount on each Original Issue Discount Bond is accrued daily to the stated maturity thereof (in amounts calculated as described below for each six-month period ending on the date before the semiannual anniversary dates of the date of the Bonds and ratably within each such six- month period) and the accrued amount is added to an initial owner's basis for such Original Issue Discount Bond for purposes of determining the amount of gain or loss recognized by such owner upon the redemption, sale or other disposition thereof. The amount to be added to basis for each accrual period is equal to (a) the sum of the issue price and the amount of original issue discount accrued in prior periods multiplied by the yield to stated maturity (determined on the basis of compounding at the close of each accrual period and properly adjusted for the length of the accrual period) less (b) the amounts payable as current interest during such accrual period on such Bond. The federal income tax consequences of the purchase, ownership, redemption, sale or other disposition of Original Issue Discount Bonds which are not purchased in the initial offering at the initial offering price may be determined according to rules which differ from those described above. All owners of Original Issue Discount Bonds should consult their own tax advisors with respect to the determination for federal, state and local income tax purposes of interest accrued upon redemption, sale or other disposition of such Original Issue Discount Bonds and with respect to the federal, state, local and foreign tax consequences of the purchase, ownership, redemption, sale or other disposition of such Original Issue Discount Bonds. 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 exemption 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 Authority 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 qualifica- tion 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. Legal Investments and Eligibility to Secure Public Funds in Texas Section 9 of the Bond Procedures Act provides that the Bonds "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 autharized 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 cities, towns, villages, school districts, and other political subdivisions or public agencies of the State of Texas". Texas law further provides that, providing they are rated not less than "A" or its equivalent as to investment quality by a nationally recognized rating agency, the Bonds are eligible to secure deposits of any public funds of the state, its agencies and political subdivisions, and are legal security for those deposits to the extent of their market value. 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. To determine whether the Bonds are eligible to secure public deposits, reference should be made to current ratings shown herein under Ratings (see "Ratings'l. Legal Opinions and No -Litigation Certificate The Authority will furnish a complete transcript of proceedings had incident to the authorization and issuance of the Bonds, including the unqualified approving legal opinion of the Attorney General of Texas to the effect that the Bonds are valid and legally binding special obligations of the Authority, and based upon examination of such transcript of proceedings, the unqualified approving legal opinion of Bond Counsel, to like effect and to the effect that the interest on the Bonds is excludable from gross income for Federal income tax purposes under Section 103(a) of the Code, subject to the matters discussed under the caption "Tax Exemption" above, including the minimum tax on corporations. 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 provision 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 Notice of Sale and Bidding Instructions, the Official Bid Form and the Official Statement, and such firm has not assumed any responsibility with respect thereto or undertaken to verify any of the information contained therein, except that, in its capacity as Bond Counsel, such firm has reviewed the information describing the Bonds in the Official Statement to verify that such description conforms to the provisions of the Bond Resolution authorizing the issuance of the Bonds. The legal fee to be paid Bond Counsel for services rendered in connection with the issuance of the Bonds is contingent on the sale and delivery of the Bonds. The legal opinion of Bond Counsel will be printed on the Bonds. Texas Water Commission - Administrative Proceeding The Authority is a party to an administrative proceeding before the Texas Water Commission in which rates charged by it for water supplied from its system reservoirs are being questioned. No question has been raised in the proceeding about the validity of the provisions of the Contract between the Authority -24 - and Lubbock relating the to the rates to be pion of counsender the I for the Author ty thaed for water t the olied utcome fothe hthe proceeding inority to Lubbock uquestion Contract. P will have no effect on such rates or on the obligation of Lubbock to make payments which will be pledge to support the Bonds. Financial Advisor ion th the dvisor the First ceof he Bonds. The1Finaneial Advisor's feeloyed as al forAservicesorendered with trespect to the sale`of the in connect issuance Bonds is contingent upon the issuance and delivery of the Bonds. First Southwest Company may submit a bid for FrsBt°Southwestr Comindepany, inlyitsr capacity asas a eF na cal Advisor, r of a syndicate has zn t zed tver fi verified and l does not Bonds. aswlthrecfor the t to the Federal income tax status of the Bondsons contained in any of the bon documentation esp Authenticity of Financial and Other Information The financial data and other information contained herein have been obtained from the Authority's ources which are believed to be reliable. There is no records, audited financial statements and other s guarantee that any of the assumptions or estimates contained herein will be realized. All of the ions ned in this tement are made summ t ito all ofe ethe provis onsuofesuch statutesstatutes, docmnts and ,tddocuments land resolutions. These ial asummar es do not purport to be complete statements of such provisions and reference is made to such documents for further information. Reference is made to original documents in all respects. Certification of he Official Statement At the time of payment for and delivery of the Bonds, the initial purchasers will be furnished a officers, acting in their official capacity, to the effect that to the best of certificate, executed by proper their knowledge and belief: o the descriptions and statements of or pertaining to the Authority contained in its Official Statement, and any addenda, supplement or amendment thereto, on the date of such Official Statement, on the date of sale of said Bonds and the acceptance of the best bid therefor, and on the date of the delivery, were and are true and correct in all material respects; (b) insofar as the Authority and its affairs, including its financial affairs, are concerned, such Official Statement did not and does not contain an 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; (c) insofar as the descriptions and statements, including financial data, mof or et are concerned such statements and and data have been obtained cfrom sourctivities es officialained in such to entities, other s wh ch the Authority State believes to be reliable and that the Authority has no reason to believe that they are untrue n any materia respect; and (d) there has been no material adverse change in the financial condition of the Authority since the date of the last audited financial statements of the Authority. The Bond Resolution authorizing the issuance of the Bonds also approves the form and content of this Official Statement, and any addenda, supplement or amendment thereto, and authorizes its further use in the reoffering of the Bonds by the initial purchasers. ROBERT UPHAM, III President Board of Directors -25- LUBE tw" lo� APPENDIX A GENERAL INFORMATION REGARDING THE CITY OF LUBBOCK Location and Area r The City of Lubbock, County Seat of Lubbock County, Texas, is located on the South Plains of West Texas. Lubbock is the economic, educational, cultural and medical center of the area. Population Lubbock is the ninth largest City in Texas: 1910 Census 1920 Census 1930 Census 1940 Census 1950 Census 1960 Census 1970 Census 1980 Census 1990 Estimate r► City of Lubbock (Corporate Limits) 1,938 4,051 20,520 31,853 71,390 128,691 149,101 173,979 194,148* Metropolitan Statistical Area ("MSA") (Lubbock County) 1970 Census 179,295 1980 Census 211,651 1990 Estimate 234,090* (Source: Texas Department of Commerce) * Source: Lubbock Board of City Development. The preliminary unofficial population figure provided by the U.S. Bureau of the Census is 181,930. The City has requested further studies regarding the Census Bureau count. Agriculture Lubbock is the center of a highly mechanized agricultural area with a majority of the crops irrigated with water from underground sources. Principal crops are cotton and grain sorghums with livestock a major additional source of agricultural income. The estimated 1990 cotton crop in the 25 -county area around Lubbock is approximately 2,655,000 bales; 1989 official production was 1,608,200 bales (source: Plains Cotton Growers, Inc., Lubbock, Texas). Two major vegetable oil plants located in Lubbock have a combined weekly capacity of over 1,869 tons of cottonseed and soybean oil. Several major seed companies are headquartered in Lubbock. Over 204 manufacturing plants in Lubbock produce such products as semi -conductor products, vegetable oils, heavy earth -moving machinery, irrigation equipment and pipe, farm equipment, paperboard boxes, foodstuffs, mobile and prefabricated homes, poultry and livestock feeds, boilers and pressure vessels, automatic sprinkler system heads, structural steel fabrication and soft drinks. Lubbock MSA Labor Force Estimates (Average Annual Data) (1) (1) Source: Texas Employment Commission. Estimated non-agricultural wage and salaried jobs in various categories as of October, 1990 were: Manufacturing October 1990 1989 1988 1987 1986 1985 Civilian Labor Force 115,245 114,337 114,123 112,623 109,461 109,087 Total Employment 110,288 108,615 5,722 107,933 6,190 105,701 6,922 102,026 7,435 102,500 6,587 Unemployment Percent Unemployed 4,957 4.3% 5.0% 5.4% 6.1% 6.8% 6.0% Texas Percent Unemployed 5.3% 6.7% 7.3% 8.4% 8.9% 7.0% (1) Source: Texas Employment Commission. Estimated non-agricultural wage and salaried jobs in various categories as of October, 1990 were: Manufacturing 7,2000 Mining Construction 3,300 Transportation 5,600 Trade 28,700 Finance, Insurance and Real Estate 5,300 Services 24,100 Government 23,700 Total 98,100 rl! l el*` r Some larger industries in Lubbock (with 300 employees or more) are: Com an exas Tech University Lubbock Independent School District Methodist Hospital Reese Air Force Base City of Lubbock St. Mary's Hospital University Medical Hospital Texas Instruments, Incorporated Furr's Incorporated United Supermarkets Lubbock State School U.S. Postal Service Furr's Cafeterias Southwestern Bell Telephone Company Flemming Company ARA Food Services Eagle Picher Southwestern Public Service Company Marriott Corporation McCrory's Product State University Public Schools Hospital U.S. Military Installation City Government Hospital Hospital Electronics Manufacturer Retail Groceries Retail Groceries School for Mentally Retarded Post Office Cafeterias Telephone Utility Grocers Supplier Food Broker Earth Moving Equipment Electric Utility Hotel/Housekeeping and Hotel Management Wholesale Distribution *Full and part - Source: Lubbock Board of City Development. Estimated Employees September, 1990 6,715- 3,000 2,800 2,034 2,018- 1,687 1,627 1,314 1,300 1,070 979 750 625 540 449* 425 379 363 355* 349 Education ... Texas Tech University Established in Lubbock in 1923, Texas Tech University is the fifth largest State-owned University in Texas and has a Fall, 1990, enrollment of approximately 25,363. Accredited by the Southern Association of Colleges and Schools, the University is a co-educational, State supported institution offering the bachelor's degree in 158 major fields, the master's degree in 106 major fields, the doctorate degree in 61 major fields, and the professional degree in 2 major fields (law and medicine). The University proper is situated on 451 acres of the 1,829 acre campus, and has over 160 permanent buildings with additional construction in progress. Fall 1990 faculty membership is approximately 869 full-time and 797 part-time. Including the Health Science Center, the University's operating budget for 1990-91 is $209.9 million of which $110.4 million is from State appropriations; book value of physical plant assets, including the Health Science Center, is in excess of $300 million. The medical school has an enrollment of 389 for the Fall Semester, 1990, not including residents; there are 36 graduate students. The School of Nursing has a Fall Semester, 1990, enrollment of 326 including the Permian Basin Program located in Midland/Odessa; there are 12 graduate students. The Allied Health School has a Fall Semester, 1990, enrollment of 142. -. A - 2 Other Education Information The Lubbock Independent School District, with an area of 87.5 square miles, includes over 90% of the City of Lubbock. September, 1990, enrollment is approximately 30,684; there are approximately 2,850 total employees, including 2,308 certified (professional) personnel and 542 other employees. The District operates five senior high schools, nine junior high schools, 44 elementary schools and other educational programs. Scholastic Membership History* Ref ined Average School Student Daily Year Membership Attendance 1981-82 28,942 26,995 1982-83 28,647 27,059 1983-84 28,424 27,135 1984-85 28,223 26,853 1985-86 29,209 27,521 1986-87 29,490 27,837 1987-88 30,955 28,194 1988-89 30,052 28,637 1989-90 30,684 28,328 * Source: Superintendent's Office, Lubbock Independent School District. Lubbock Christian University, a privately owned, co-educational senior college located in Lubbock, has an enrollment of 1,003 for the Fall Semester, 1990. South Plains College, Levelland, Texas (South Plains Junior College District) operates a major off -campus learning center in a downtown Lubbock, 7 -story building owned by the College. Course offerings cover technical/vocational subjects, and Fall Semester, 1990, enrollment is 1,203. The College also operates a major off -campus learning center at Reese Air Force Base; course offerings are in primarily academic subjects and Fall Session, 1990, enrollment is approximately 754. The State of Texas School for the Mentally Retarded, located on a 226 -acre site in Lubbock, now consists of 40 buildings with' accommodations for 483 students. The School's operating budget for 1989/90 is in excess of $18.0 million. The School is operating at 100% capacity, and has approximately 979 professional and other employees. Transportation Scheduled airline transportation at Lubbock International Airport is furnished by American Airlines, Delta Airlines, Southwest Airlines, America West Airlines, Continental Express and American Eagle; non-stop service is provided to Dallas -Fort Worth International Airport, Dallas Love Field, El Paso, Austin, Amarillo, Midland -Odessa, Albuquerque and Phoenix. 1989 passenger boardings totaled 615,514. Extensive private aviation services are located at the airport. Rail transportation is furnished by the Atchison, Topeka and Santa Fe Railway Company and the Burlington -Northern, Inc., with through service to Dallas, Houston, Kansas City, Chicago, Los Angeles, and San Francisco. Short -haul rail service is also furnished by the Seagraves, Whiteface and Lubbock Railroad. Texas, New Mexico and Oklahoma Bus Lines, a subsidiary of Greyhound Corporation, provides bus service. Several motor freight common carriers provide service. Lubbock has a well developed highway network including Interstate 27 (Lubbock -Amarillo), 4 U.S. Highways, 1 State Highway, a controlled -access outer loop and a county -wide system of paved farm -to -market roads. An East-West freeway is in the advanced stages of planning. Government and Military Reese Air Force Base, located 5 miles west of Lubbock, is an undergraduate Jet Pilot Training Base of the Air Training Command. The Base covers over 3,000 acres and has 1,643 military and approximately 391 civilian personnel. State of Texas ... More than 25 State of Texas boards, departments, agencies and commissions have offices in Lubbock; several of these offices have multiple units or offices. Federal Government ... Several Federal departments and various other administrations and agencies have offices in Lubbock; a Federal District Court is located in the City. A-3 Hospitals and Medical Care There are eight hospitals in the City with approximately 1,744 beds. Methodist Hospital is the largest and also operates an accredited nursing school. Lubbock County Hospital District, ;with boundaries contiguous with Lubbock County, owns the University Medical Center which it operates as a teaching hospital for the Texas Tech University Medical School. There are numerous clinics and over 200 practicing physicians and surgeons (M.D.) plus the Texas Tech University Medical School Staff, and over 90 dentists. A radiology center for the treatment of malignant diseases is located in the City. Recreation and Entertainment Lubbock's Mackenzie State Park and over 65 City parks and playgrounds provide recreation centers, r, shelter buildings, a garden and art center, swimming pools, a golf course, tennis and volley ball courts, baseball diamonds and picnic areas, including the Yellowhouse Canyon Lakes system of six lakes and 500 acres of adjacent parkland extending from northwest to southeast Lubbock along the Yellowhouse Canyon, representing one of the largest urban parks in the United States. There are several privately -owned public swimming pools and golf courses, and country clubs. The City of Lubbock has developed a 36 square block area of approximately 100 acres adjacent to downtown Lubbock under the Lubbock Memorial Civic Center program. Approximately 50 acres contain the 300,000 square foot Lubbock Memorial Civic Center, the main City library building and State Department of Public Safety Offices; a 50 acre peripheral area has been redeveloped privately with office buildings, hotels and motels, a hospital and other facilities. Available to residents are Texas Tech University programs and events, Texas Tech University Museum, Planetarium and Ranch Heritage Center exhibits and programs, Lubbock Memorial Civic Center and its events, Lubbock Symphony Orchestra programs, Lubbock Theatre Center, Lubbock Civic Ballet, Municipal �. Auditorium and Coliseum programs and events, the library and its branches, the annual Panhandle -South Plains Fair, college and high school football, basketball and other sporting events. Churches Lubbock has approximately 200 churches representing more than 25 denominations. Utility Services Water and Sewer - City of Lubbock. Gas - Energas Company. Electric - City of Lubbock (Lubbock Power & Light) and Southwestern Public Service Company; and, in a small area, South Plains Electric Co-operative. Economic Indices (1) 1 All data as of 12-31; Sources: City of Lubbock; Energas Company. (2) Electric connections are those of City of Lubbock owned Lubbock Power and Light ("LP&L") and do not include those of Southwestern Public Service Company or South Plains Electric Cooperative. A-4 Utility Connections Building _ Electric Year 1980 Permits 88,829,331 Water 54,788 Gas (LP&L Only) (2). 53,083 32,528 1981 106,757,064 55,527 53,785 33,716 1982 130,720,599 56,172 54,650 34,987 1983 230,440,777 58,034 54,927 37,282 1984 212,353,170 59,262 56,540 39,037 1985 168,740,229 60,051 56,600 40,506 1986 139,317,252 60,751 56,900 41,759 1987 100,046,309 61,027 57,226 42,696 1988 105,159,525 61,628 57,886 43,781 1989 105,363,072 61,857 60,312 44,518 1 All data as of 12-31; Sources: City of Lubbock; Energas Company. (2) Electric connections are those of City of Lubbock owned Lubbock Power and Light ("LP&L") and do not include those of Southwestern Public Service Company or South Plains Electric Cooperative. A-4 A-5 •--� D� O tT. N tS h N d 0. q M O h n N N M h0 0 - ro .41 S �+� E N -h N. h �• ....1 h �D cop ... L 00 n N .'h M N M O - 1 M 0000 O M eOn .°Oo M 0 0 O �.. .0 C t0 - - ..•-+ N 0%%D L. N O 00 M h ^ -r I� 00 a% X y 0 h h %D 011 h h O M h 00 0 _ L 4L - �D -+ O %D M 0% N O \D A. O E h O� h �D N 00 N K N N •L . E .a L O n �• 0m M �• h h h +' aoa, �aM M o h � � U � v V . O _ cn -t N u 00 .No h Ch 00 %D ,WN �D m N (r, aT •-1 $ y K h cs � m 0w0 -t " n C C > O\ �D 01 00 h D� �• h •••� 00 M to 4� ro L Hy M -.D %,D %D-. M M 00 -t t• C. 3• A 00 -• N � �D �D h Ow N �D %D n •. �D O h -. �• t� M y /n a p W z o n a O N O h h O O O O O O p y M O 00 tT %D N N 7 E L to C Sd �%4 � % N � 0 0 0 0 3 y, N N 00 W C. � p N ++ z C ++ dl E N h M C tJ tJ ro ^.!. .� M tr% IlO 000 to N w c . i N M d f\ o O � h h .D• H N 'gyp •> X -pi C E * i•. - 'C in N M 00 O N �D .� 1 I �p tV0 ^` :t n N �D ^ .••1 �D •� O O 41 C+ O h h O %D n h h •�+ ": -Z h O t, .~r M N 0I a M to ro •.w. y M OM O h O 0% %D 00 h d ^ O �1 M d M -r ; The following Tax Data and information concerning the Sewer System, Electric Light and Power System, and Airport System is for general informational purposes only. Valuation, Exemptions and Debt Obligations 1989 1990 Market Valuation Established by Lubbock Central Appraisal District ("LCAD") $4,848,359,781. $4,931,021,795 Less Exemptions/Reductions at Market Value: Residence Homestead (Over 65 or Disabled) Disabled Veterans Exemptions Open -Space Land Use Value lost because property is exempted from taxation under the Property Redevelopment and Tax Abatement Act (1) Value of property in a Reinvestment Zone created under the Tax Increment Financing Act (2) Taxable Assessed Valuation City Funded Debt Payable From Ad Valorem Taxes (3): General Obligation Bonds (as of 9-30-90) Less: Self -Supporting Debt (4): Waterworks System General Obligation Debt Sewer System General Obligation Debt Golf Course General Obligation Debt General Purpose Funded Debt Payable From Ad Valorem Taxes Interest and Sinking Fund (as of 9-30-90; unaudited) 154,399,286 3,257,281 34,935,218 5,034,673 161,405,526 3,322,281 34,569,789 5,034,673 4,818,613 981,312 $4,645,914,710 $4,725,708,214 $ 79,088,752 24,109,035 15,095,950 705,000 39,178,767 $ 3,831,248 Ratio Total Funded Debt to 1990 Taxable Assessed Valuation -------------------------------- 1.67% Ratio General Purpose Funded Debt to 1989 Taxable Assessed Valuation ---------------------- 0.83% 1990 Estimated Population - 194,148 (5) Per Capita 1989 Taxable Assessed Valuation - $24,341 Per Capita General Purpose Funded Debt - $202 Area - 104 Square Miles (1) Article 1066f, VTCA, permits the granting of tax abatements for qualifying businesses; the City has entered into one such agreement with McLane Foodservice -Lubbock, a division of McLane, Inc., Temple, Texas, an institutional food service distributor. The abatement, which began in the 1988 tax year, covers McLane's improved real property in the City of Lubbock. The contract provides for the agreement to expire when McLane Foodservice receives $770,000 in tax abatement relief or ten years whichever comes first from date of execution, June 23, 1986; other participants in the abatement include Lubbock County, Lubbock County Hospital District, Lubbock Independent School District and the High Plains Underground Water Conservation District No. 1. Appraised value of the property is $5 263,952 and the taxable value of the property after abatement is $229,279 resulting in an abated value of $5,034,673. (2) The City participates in a tax increment district ("TID'I pursuant to Article 1066e, VTCS. State law provides that the base of such tax increment districts is to be frozen at the level of the taxable values for such district as of January 1 of the year following creation. The TID was created in December, 1986, and covers an approximately .71 square mile area which includes part of the central business district, the Overton addition and the Broadway corridor of the City of Lubbock. Taxes relating to the growth of the tax increment district's tax base above the frozen base may be used only to finance improvements within the TID. The tax base of the TID as of January 1, 1987, was $91,919,040; the 1990 assessed valuation is $92,900,352, resulting in an increment of $981,312. (3) The statement of indebtedness does not include outstanding $39,005,000 Electric Light and Power System Revenue Bonds, as these bonds are payable solely from the net revenues derived from the System. The statement also does not include outstanding $710,000 Airport Revenue Bonds, as these bonds are payable solely from gross revenues derived from the City of Lubbock Airport. The Waterworks System and the Sewer System are unencumbered with Revenue Bond Debt. (4) See "Computation of Self -Supporting Debt". (5) Source: Lubbock Board of City Development. The preliminary, unofficial population figure provided ., by the U.S. Bureau of the Census is 181,930. The City has requested further studies regarding the Census Bureau count. A-6 O ••+d MMS -+14 C\00 N1000O C Yt•1a%0��-+ttM�••+�•NO%O%ONMO � o y d C; C4 N 0 0 0 O H h -�M 10 411D r�1DW N M1DN •--� 1� N M I- -t d 10 1D 10 N %0 w � M 01 O -.i00 G1 N 01 N M f� O 10 01 O M 1% C M 01 Mm v1 M1 M T" O W w n -M N p10 h�N 10 N o0 h -tN 00 dN-+N 00 p O01 -t --k ^0100-01 " N w M E 10 0 0o cn In O� v cn c, o0 00 -• 1. Q' .y M O 10 .r . O - --I• h N M 10 M M - 00 N N h N d N R ti C w NW'%IZ tr 1�0110N 1D h v110 NuYO•--�0 C w p•••+Ir1MOd1ONM O W L• aQ 0 O L. Clro u NdN1�1ON OIr11D 1�N%D r -I -+-+0 4 IrlO-1•.-r Nh 01 C%10M Irl N W N • k• ILS 00WWC\h0001M•--cN00M01NON O C10: 0� -+ M 1: 01 NM NIr1 X001 u1O U. 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C `".944 " F o o io ro ro ioiaivia c c cro.% W fl ;ao'a�:G:aG�.ra04 FF -Wt- 11Z C4MNW3 %DCR%D�-a°7R00 y.1 NMh 001010O1D 1D •-+0100 p Y 1001O1r1M00-co001OdOO O 01 1 N_ O N O O N N 0 0 0 0 O O O O * O G1 0 01 C1 10...1 11, 00 01 0100MI�M0 - 00N 1 0101001 O 10 M O - O 1 O 1D M C N •--i c h q1.e1 O .;c; c,;,0 Irl O •--X 00 10 0 � -C� -t M VIA v1 N N p No0h v1MONM0 vl� O1� M E%D d•N10(N r - N O r, 000 NM ^~OM-�v1 N ".^-i d A 6 y 1 01 0� N O� 0 0 Ul\ 01 0 N 0 0 p k11r1NMcf 10ON0110OOO � 0 C�1�N-:C; NOON,4 000O O -y 0100%D 1000 C) It Irl 10 C4 00 NMf\d 101x1 -11-4-010d1, 1D 01 wM 0v1N 00 N- , I "NN C N 01 N •--� N 1D 10 00 C Irl -1,4 N p h1D M.M 1D d 01 -+Irl co OM 1l 0 t %4 -t 1-. 00 0s — C Mm 0 % 7 o0 cr1 E 01 z• M o0 00 " rn r. o0 01 -j• 1D d -+ -k 0 1D O m M -� W 00 11, MM-- 0 1D 1D-. A-7 C M O y a 4Eio XC • > w =•O E O ly->,E L I E N v �m> root c L2 Eo O o �F D c O0%U CO c�+� h E cOn ++ 0 .. D 'L cd ro app o 0 0 N X y y r 00 ro 0 'L ro 9 L L L+ 4 w 0 rCo E E yuF N °'a 0)'L° i0-0 Provoo'v.r"oa�a�o0aoX rorororororororoW— C CC4�H+' W CJ N O C1 G/ W 41 ro ro 0 v 0 0 0 rxrxc>~rxrxc�c�xFFFCd - .Iz W r C 2 o r C ro > N ro d f's' J e'^ r, r� n r Valuation and Funded Debt History Charges for penalty and interest on the unpaid balance of delinquent taxes are made as follows: Month Penalty Funded Ratio Funded Total Fiscal Taxable Tax Debt Debt to March Year Taxable Assessed Outstanding Taxable Funded Ended Estimated Assessed Valuation at End Assessed Debt 9-30 Population Valuation (1) 1981 176,700 1,516,565,090 Per Ca ita 8,583 of Year $61,710,000 Valuation Per Ca ita 349 4.07% 1982 178,282 2,682,330,673 15,045 67,900,000 2.53% 381 1983 181,500 3,224,288,000 17,765 81,500,000 2.59% 449 1984 182,103 3,233,722,496 17,758 89,180,000 2.76% 490 1985 187,629 3,764,763,644 20,065 82,535,000 2.19% 440 1986 188,283 4,012,901,338 21,313 79,889,070 1.99% 424 `1987 188,694 4,408,325,399 23,362 78,279,070 1.78% 415 1988 190,017 4,476,572,268 23,558 82,958,752 1.85% 437 1989 191,403 4,567,387,737 23,863 87,500,462 1.92% 457 1990 194,148(2) 4,645,914,710 23,930 79,088,752(3) 1.70% 407 1) Basis of assessment Fiscal Year Ended 9-30-81 60% of appraised value; beginning with Fiscal Year Ended 9-30-82, basis of assessment 100% of market value. Since 1982 all taxable property has been revalued each year. (2) Source: Lubbock Board of City Development. The preliminary, unofficial population figure provided by the U.S. Bureau of the Census is 181,930. The City has requested further studies regarding the Census Bureau count. (3) General Purpose Funded Debt payable from ad valorem taxes (Funded Tax Debt Less Self -Supporting Debt) at 9-30-90 is $39,883,767 (see "Valuation, Exemptions and Debt. Obligations"). Tax Rate, Levy and Collections History Fiscal Year Distribution Ended Tax General Board of City Interest and % Current % Total 9-30 Rate Fund Development Sinking Fund Tax Lev (1) Collections Collections 1982 0.66 0.3225 0.05 50.2875 517,703,382 95.55% 98.97% 1983 0.61 0.2791 0.05 0.2809 19,190,311 92.94% 97.30% 1984 0.61 0.2230 0.05 0.3370 19,725,707 95.32% 97.94% 1985 0.61 0.2105 0.05 0.3495 22,966,969 93.77% 95.93% 1986 0.60 0.2553 0.05 0.2947. 24,077,408 94.16% 96.60% 1987 0.60 0.2762 0.05 0.2738 26,448,985 95.74% 98.84% 1988 0.61 0.2767 0.05 0.2833 27,303,606 .95.93% 98.94% 1989 0.64 0.3171 0.05 0.2729 29,231,282 96.01% 98.98% 1990 0.64 0.3314 0.05 0.2586 29,733,854 96.15% 99.10% 1991 0.64 0.3568 --- 0.2832 30,244,533 In Process of Collection 1) Fiscal years 9-30-82 through 9-30-89 have been corrected for errors and adjustments. Property within the City is assessed as of January 1 of each year; taxes become due October 1 of the same year, and become delinquent on February 1 of the following year. Split payments are not permitted. Discounts are not allowed. Charges for penalty and interest on the unpaid balance of delinquent taxes are made as follows: Month Penalty Interest Total February 6% 1% 7% March 7% 2% 9% April 8% 3% 11% May 9% 4% 13% June 10% 5% 15% July 12% 6% 18% After July penality remains at 12%, and interest increases as the rate of 1% each month. In addition, if an account is delinquent in July, a 15% attorney's collection fee is added to the total tax penalty and interest charge. A-8 Ten Largest Taxpayers Name of Taxpayer Texas Instruments Incorporated South Plains Mall Southwestern Bell Telephone Company Southwestern Public Service Company Furr's Incorporated Plains Co-op Oil Mill Farmers Co-op Compress First National Bank at Lubbock Flemming Company Sentry Savings Association (1) (1) Now Consolidated Federal Savings Bank. Tax Rate Limitation All taxable property within the City is subject to the assessment, levy and collection by the City of a continuing, direct annual ad valorem tax sufficient to provide for the payment of principal of and interest on all ad valorem tax debt within the limits prescribed by law. Article XI, Section 5 of the Texas Constitution is applicable to the City, and limits its maximum ad valorem tax rate to 2.50 per $100 Assessed Valuation for all City purposes. The City operates under a Home Rule Charter which adopts the constitutional provisions. By each September 1 or as soon thereafter as practicable, the City Council adopts a tax rate per $100 taxable value for the current year. The tax rate consists of two components: (1) a rate for funding of maintenance and operation expenditures, and (2) a rate for debt service. Under the Tax Code the City must annually calculate and publicize its "effective tax rate" and "rollback tax rate". The City Council may not adopt a tax rate that exceeds the lower of the rollback tax rate or 103% of the effective tax rate until it has held a public hearing on the proposed increase following notice to the taxpayers and otherwise complied with the Tax Code. If the adopted tax rate exceeds the rollback tax rate the qualified voters of the City by petition may require that an election be held to determine whether or not to reduce the tax rate adopted for the current year to the rollback tax rate. "Effective tax rate" means the rate that will produce last year's total tax levy (adjusted) from this year's total taxable values (adjusted). "Adjusted" means lost values are not included in the calculation of last year's taxes and new values are not included in this year's taxable values. "Rollback tax rate" means the rate that will produce last year's maintenance and operation tax levy (adjusted) from this year's values (adjusted) multiplied by 1.08 plus a rate that will produce this year's debt service from this year's values (unadjusted) divided by the anticipated tax collection rate. Reference is made to the Tax Code for definitive requirements for the levy and collection of ad valorem taxes and the calculation of the various defined tax rates. A-9 1990 % of Total Taxable Taxable Assessed Assessed Nature of Property Valuation Valuation Electronics Manufacturer 89,851,906 1.90% Regional Shopping Mall 71,320,087 1.51% Telephone Utility 71, 004,114 1.50% Electric Utility 39,883,026 0.84% .Retail Groceries 36,828,694 0.78% Agricultural Processing 23,185,122 0.49% .Cotton Compress 20,106,438 0.43% Bank 19,575,019 0.41% Grocers Supplier 17,269,140 0.37% Savings and Loan; Residential/ Commercial Properties 16,577,249 0.35% 405,600,795 8.58% (1) Now Consolidated Federal Savings Bank. Tax Rate Limitation All taxable property within the City is subject to the assessment, levy and collection by the City of a continuing, direct annual ad valorem tax sufficient to provide for the payment of principal of and interest on all ad valorem tax debt within the limits prescribed by law. Article XI, Section 5 of the Texas Constitution is applicable to the City, and limits its maximum ad valorem tax rate to 2.50 per $100 Assessed Valuation for all City purposes. The City operates under a Home Rule Charter which adopts the constitutional provisions. By each September 1 or as soon thereafter as practicable, the City Council adopts a tax rate per $100 taxable value for the current year. The tax rate consists of two components: (1) a rate for funding of maintenance and operation expenditures, and (2) a rate for debt service. Under the Tax Code the City must annually calculate and publicize its "effective tax rate" and "rollback tax rate". The City Council may not adopt a tax rate that exceeds the lower of the rollback tax rate or 103% of the effective tax rate until it has held a public hearing on the proposed increase following notice to the taxpayers and otherwise complied with the Tax Code. If the adopted tax rate exceeds the rollback tax rate the qualified voters of the City by petition may require that an election be held to determine whether or not to reduce the tax rate adopted for the current year to the rollback tax rate. "Effective tax rate" means the rate that will produce last year's total tax levy (adjusted) from this year's total taxable values (adjusted). "Adjusted" means lost values are not included in the calculation of last year's taxes and new values are not included in this year's taxable values. "Rollback tax rate" means the rate that will produce last year's maintenance and operation tax levy (adjusted) from this year's values (adjusted) multiplied by 1.08 plus a rate that will produce this year's debt service from this year's values (unadjusted) divided by the anticipated tax collection rate. Reference is made to the Tax Code for definitive requirements for the levy and collection of ad valorem taxes and the calculation of the various defined tax rates. A-9 n Estimated Direct and Overlapping Funded Debt Payable From Ad Valorem Taxes (As of 9-30-90) are aid out ad lorem Expenditures ofy the entitiesng entities within ln the the City. territory entities are independent offthe City and taxes levied by such entit may incur borrowings to finance their expenditures. The following statement of direct and estimate ovei�heba valorem developed information containedLubbock al pubd YheMuncipal Adisory Counclof Texas and fromdata funshed by the in "Texas Central Appraisal District. Except for the amounts relating to the City, the City has not independently verified the accuracy or completeness of such information, and no person should rely upon such information as being accurate or complete. Furthermore, certain of the entities listed below may have issued additional bonds since the date stated in the table, and such entities may have programs requiring the issuance of substantial amounts of additional bonds the amount of which cannot be determined. The following table reflects'the estimated share of funded debt of these overlapping entities. Taxing Jurisdiction City of Lubbock Lubbock Independent School District Lubbock County Lubbock County Hospital District Lubbock -Cooper Independent School District Frenship Independent School District Roosevelt Independent School District New Deal Independent School District Idalou Independent School District Total Direct and Overlapping Funded Debt Ratio of Direct and Overlapping Funded Debt to 1990 Taxable Assessed Valuation =___ Per Capita Overlapping Funded Debt ------------------------ (1) General purpose funded debt. 1.78% $434 Interest and Sinking Fund Budget Projection Estimated T' General Obligation Debt Service Requirements Total % Overlapping Funded Debt Applicable Funded Debt $39,L78,767 39,178,767(1) 100.00% 17 368 823 32,499,989 98.55% 32,029'739 3,590,000 82.50% 750 2, ,750 -0- 82.50% Waterworks System (1) 5,370,000 16.79% 901,623 13,890,000 65.74% 131,286 9,131,286 -0- 5.93% -0- 1.92% -0- 1,1111000 0.95% 10.555 i. Balance Percentage of System General Obligation Debt 100.00% 100.00% 100.00% $84,212,720 Ratio of Direct and Overlapping Funded Debt to 1990 Taxable Assessed Valuation =___ Per Capita Overlapping Funded Debt ------------------------ (1) General purpose funded debt. 1.78% $434 Interest and Sinking Fund Budget Projection T' General Obligation Debt Service Requirements $13,204,770 for Fiscal Year Ending 9-30-91 ------------- ---------------------- Interest and Sinking Fund, All General Obligation Issues, 9-30-90 3,831,248 -________$12,064,922 1990 Interest and Sinking Fund Tax Levy at 97% Collection -- Estimated Interest Earned and Transfers From Other ------------------- 1,472,653 17 368 823 City Funds, as budgeted ----------------------- 4 164 053 Estimated Balance at 9-30-91 ------------ --------------------------- ,,•, Computation of Self -Supporting Debt Waterworks System (1) Fiscal Year Fiscal Year Fiscal Year Ended Ended Ended 9-30-88 9-30-89 JON 6 866 030 7,414,729 6,86.6,030-0- 9-30-90(2) 10,396,652 Net System Revenue Available -0- Less: Revenue Bond Requirements '866 Balance Available for Other Purposes $ 6030 $7,414,729 4,849,574 4,585,553 $10,396,652 4,562.964. System General Obligation Debt Requirements - $ 2,016,456 ILA29 176 $ 5,833,688 i. Balance Percentage of System General Obligation Debt 100.00% 100.00% 100.00% Self -Supporting 1 Each fiscal year the City transfers from Water Enterprise Fund surplus to the General Fund an amount requirementsWaterworksBonds. e at least equivalent to debt serSystemation on he net revenues of the W. City has no outstanding revenuee bonds payable from a lien "Rate Stabilization Fund" within the Water In Fiscal Year Ended 9-30-83 the City Council established a from System net revenues. At 9-30-90 the balance in the rate Enterprise Fund to be accumulated stabilization account was $4,993,058. (2) Unaudited. A-10 Sewer System (1) Net System Revenue Available Less: Revenue Bond Requirements Balance Available for Other Purposes System General Obligation Debt Requirements Balance Percentage of System General Obligation Debt Self -Supporting Fiscal Year Fiscal Year Fiscal Year Ended Ended Ended 9-30-88 2,169,327 9-30-89 $4,972,520 9-30-90(2) 5,886,078 -0- -0- -0- $2,169,327 $4,972,520 $5,886,078 2,329,907 2,047,830 2,311,728 160 580) 2 924 690 $3,574,353 93.11% 100.00% 100.00% 1 It is the City's policy each Fiscal Year to transfer from Sewer Revenue Fund surplus to the General Fund an amount at least equivalent to debt service requirements on Sewer System General Obligation debt. The City has no outstanding revenue bonds payable from a lien on the net revenues of the Sewer System. A subordinate lien on Net Revenues is held by certain outstanding Combination Tax and Sewer System Subordinate Lien Revenue Refunding Bonds, Series 1988, and Combination Tax and Sewer System Subordinate Lien Revenue Certificates of Obligation, Series 1988; debt service requirements on these issues are included in "Sewer System General Obligation Requirements". The City has outstanding $15,095,950 in Sewer System General Obligation Debt which is deducted as fully self-supporting in the calculation of General Purpose Funded Debt payable from ad valorem taxes in "Valuation, Exemptions and Debt Obligations" and other related calculations. (2) Unaudited. Authorized General Obligation Bonds (1) Acquisition and Renovation of Sears Building ... On October 15, 1982, the City of Lubbock entered into an agreement with the American State Bank, Lubbock ("American"), to purchase the 96,810 square foot "Sears" building located in downtown Lubbock. Originally constructed by Sears, Roebuck do Co., the building and site were sold to the adjacent American State Bank following Sears construction of new facilities in South Plains Mail, Lubbock, several years ago. The City also acquired 3 additional sites near the Sears site for parking expansion in the future. The City has renovated and remodeled approximately 55,000 square feet of the Sears building to house administrative and City Council functions, and this building is now the main Municipal Complex with parking space for 205 vehicles and a future expanded parking capability of 450 vehicles. A-11 Amount Date Amount Heretofore Unissued Purpose Authorized Authorized 5,226,000 Issued 5,000,000 Balance 226,000 Waterworks System 11-21-81 Waterworks System 10-17-87 2,810,000 200,000 2,610,000 Sewer System 5-21-77 3,303,000 10-17-87 2,535,000 2,175,000 2,535,000 1,128,000 -0- Sewer System Street Improvements 10-17-87 13275 000 27,149,000 7 227 000 17,137,000 6 048 000 10,012,000 Anticipated Issuance of General Obligation Bonds 1991 Waterworks System $1,418,000 1992 $1,418,000 Sewer System 564,000 564,000 Street Improvements 3 024 000 5 006 000 3.024,000 5006 000 Funded Debt Limitation There is no direct debt limitation in the City Charter or under State Law. The City operates under a to $2.50 $100 Assessed Home Rule Charter that limits the maximum tax rate, for all City purposes, per General the State of Texas will permit allocation of $1.50 of Valuation. Administratively, the Attorney of the $2.50 maximum tax rate for general obligation debt service. Other Obligations (1) Acquisition and Renovation of Sears Building ... On October 15, 1982, the City of Lubbock entered into an agreement with the American State Bank, Lubbock ("American"), to purchase the 96,810 square foot "Sears" building located in downtown Lubbock. Originally constructed by Sears, Roebuck do Co., the building and site were sold to the adjacent American State Bank following Sears construction of new facilities in South Plains Mail, Lubbock, several years ago. The City also acquired 3 additional sites near the Sears site for parking expansion in the future. The City has renovated and remodeled approximately 55,000 square feet of the Sears building to house administrative and City Council functions, and this building is now the main Municipal Complex with parking space for 205 vehicles and a future expanded parking capability of 450 vehicles. A-11 .k, Budget for the project was $31600,000: Acquisition of Sears building/site $ 751,000 302,925 Purchase of additional property of 55,000 square feet 2,201, 849 344-92-2-6- 44 226Contingencies Renovation Contingenciesand other costs 3,600,000 Total Cost 0 was Under the agreemewith from American; they CiOty also acquired ,000 of the dadd to nal kites for ected ofutu a parking, st of Opaying financed by advances om $159,000 in cash andassuming and aaf nal principal ents on eandonterest payment of $2,917,818 mont1-15-941forrthe 1-15-83 through 10over $3,310,000 advances and hasadeposit d fundsment schedule for the into an "Escrow Account',' at American frohm which periode same payments osited established; the y 0,000 has bee have and will be made oAmerican erica th earned antere inance terest, providesufor futu e8payments and the Escrow into the Escrow Account Account is funded. b does not In the opinion of the City Attorney the financial arrangement with "American" described a ove aced in the "Escrow constitute a legal debt of theinterest nt este funds will excwill be eed pledged outsdtanding Adval times andncle Balance throughout Account" in amounts that, with ement the life of the agre . On Feruar13, the of (2) Lease -Purchase A� ement ... (Lessob) to leaselpuchase $3,000,000 Of various entered var ous equipment litems for with American Finance Group, Inc.leequipment ordered eoIh of b use in City of LCboc oMarch1,1986 dditono equipment placed into eall payments made p acquisition funds, the Lessor deposited $450,000 in an interest bearing reserve account with any interns earned applied to rental payments. Acquisition of Various Equipment $3,000,000450,000 Reserve Account 89,553 Insurance Expenses 447 Accrued Interest 3,540,000 Total t acquisition costs by issuance of Certificates of Participation. The The Lessor financed the equipmenssor for the Lessee is making semi-annual rental d final payment of payment 856.76 s to the is due February 1equipment leased. These payments 991, began August 13, 1985 "+ A 12 Pension Funds ty Texas MunicipatRetirement _y__ he Texas Municipal Retirement System. The System ermarlis a contributory, yees wh,an uityare tpurchase are covered by and is administered by six trustees appointed by the type plan which is covered by a State statute Governor of Texas.;; The System operates independently of its member cities. ffered der The City of Lubbock joined the he System incluin 1950 to s, current, proreand antecedement Social nts servicoptions eredits� 10 yearnvestinge System; and adopte y survivor for the f a vested updated service credit, occupational cupatiowho etiress receives ability ean lannuty based onnthesamount spouse theoemployees employee.employee contribution rate contributions effective January l,ed two 1991). for Thene by the City. C'rty's coss salary ntr but on rate isccalculated each lyearb usiof ngoactuarial (6%990 rate will techniques applied o statutes prohibitlany rate is 9.47and the 19 adopting options wh chi mposenl liabilities be 11.31%. Enabling that cannot be amortized over 25 years within a specified statutory rate. ing those the Supplemental On December whi 8S'„assets ooled"held for theiCity of Lubbock werhe System, not e $59,340,355• Unfunded accrued liabilities Benefits Fund P on December 31,'i 1989, were 17,302,189, which is being amortized over the period 1989 throng 2012. Total contributions by the City to the System in Fiscal Year Ended 9-30-90 were $3,348,997. n are members the locally Firemen's Relief and Lubbock Firemen's Relief and Retirement Fund, operating etirement fund ... City of Lubbock eunder an ct passed In 937 by the administered State legislature'' and adopted by City firemen, by vote of the department, in 1941. Firemen are no covered by Social Security. The fund is governed by seven trustees, three firemen, two outside trustees (appointed by the other trusteesthe Mayor or his representative and the Assistant City Manager for Financial Services of the , who is appointed by the City. Execution of the act is monitored by the Firemen's Pension Commissioner Governor. or Benefit d every three years, and the fundi audited nnon a 1ually.aFiremen contribute 11% ofrial fullr alarysare into perform Y the fund a of salary which isca ratio ute a adjustedeannually; that the contributes on a ship to thesis of the firemen s percentage Y ars to contribution rate' that the ay into the Texas te paid io the Mun Municipal Texas ent System and FICA. The City's present the rate other employees pay contribution rate is 14.89%. An actuarial evaluation as of 6-30-87 was conducted by the firm of Rudd andinbein nainortized over a The 'valuation balance sheet estimated unfunded liabilities of $5,005,433, g 21 year period, and f benefits andreontributionscludes: "Consequen, we are of the has an adequate financing arrangement°pinion that the plan, based on level o The City contributed $1,139,214 to the Fund during Fiscal Year Ended 9-30-90. Sources: Texas Municipal 8Retirement System, Comprehensive Annual Financial Report for Year Ended December 31, City of Lubbock, Texas. A-13 En w w FINANCIAL INFORMATION M41NN000 NO1-41w --k I.- 0 00 1� 0 ct N ON v1 00 41-wM41M 41N %000 00 c�00410N o0MWIN -t00 %D .-�-r C> -.I- 41 0 O 0041 M I�M41d0�-rN1�00 -� 00Mcn-t CD %D O %D C) N00 -d'VN 00 U1 41 M N w CN ON .O• O •7MO�41 Nf\-t�DU h (IN (TN O\.-rNTO�M �D ONN-�N•-+NO �D N 1�lu1N^-t 41ON-It h — 00 NO 00"0— * O1 ^ISOs M1"-� 41dt� 00 ON M 00-tM-r ND 00 X41 N 'flOdND-t"00000MO -� �MO41 NO %D -+0041 a0M I� U]01��M -r rNti y L ro v i- 00 l�00NO1 c1ND hNl�IN-t 1D I�N01 �D M00 VoOMONNM N�NoOM �' ty000000101 -toOM-tOy 41 (OM1D0%0N N411DO1 M41(IN w1O 41 •rOONOM •--� 1 -+KNOW—I"r�ON O � I-, I� N 1D I� h 00 NO d •-� Q1 NOOMMID NNP, US -+ ''. 0/O1 O1 c�O1M O1-•+41NM ^� O N 41 I., N MMOCl ID -+O ON M (1fV M y � O1Nh1�OO10-:t41 --� 1D ••• 41 DO M.—J. n O Mt�MNOO X4\100010 1�, D 4100100 000-t010 O T1DN 1D 1010b10 N OI�MN10 f� M4104100 N 41 M N N M N 1� 01 .-� ...+ •--� 41 F 000 NEON — N %D N00 N -+NOON -+ MMNMd.h00 M v1.ON d 01 O, N 41 ND O d-+0041 e4 v1 <N N d — c! -- m 00 . O1 M O 00 0 O— OM � O N ^ W N WN 00 %D NM M C0 M� O�DO O cl N rz L} ON -+ N \0 ON w NO 41 N0 M41MM0 00 NO ON O ON 00 -j- LIN M t� •-� N 00 00 N ND 401 O fn N O M c� 47A N-�(14411M M Ar). 41N N t NNO 01 0141 MNN0\0 O\ O h X10 w1D d I� ND N N -+N01 - 41 1c1 1� O 41.0 .-r O 1D N M 00 N N -+N 41 �' O M 41 L> �0041N�-+1D O 1� 1� c CIN w O1 OS w4, 10 M-+MNN1D-� M N - WN -.t N N—N411� 41 I 41 M 41 00 0 N N 1�1 O1 00 * 00 00 O1 O1 O N N 00 d d 41 M 1 00 1D -r f., 00 0 M h 11 d0-t0cn 1l O NDO--k^� n -I. N �+(14 41M M h L} L).v L? L)-` NO N A-14 y (D ro H N O N O M O O% %In O --+00 O%(14 1� O ON 00 00 N Z 41NM hcn N M NO 1., 1�l 4t M N L} L).v L? 0000 NO N O M OD 000 00 041Q\ 00 h -th00 ON -t h d\ N 41 000% 01 fn n M 4' 00 NO \0 - 4/). Lf L} 001 00 00 �.r M -t Ow0 O 00 N ON M M M C% 10 1� •-� '41 n d O 0000 ccnn 0"•1 NO 1 00 41 M N 000 M 000 M h 00 O 1� N n 01 h - *mm 1D O 1D O1 41 41 000 N 1: N h ll . - O O1 O O O\ — eq 04 1D%D O1 00 DD •-� tp Li Liv L} M 1 01 N cm M 0 O CD 0 - M N -i O -+a% 00 1D -t 1D 1� 00 c -+ DD E 0 L � L � ro � d y C y 0 c O > .y c H c >- 0b0 b +• c 0 0 y y c c° �? co W c 0 t y (D 0u u > 0.N u >c c vyi x 0"o 7 7 d w ¢w w -a a .7 v Municipal Sales Tax History The City has adopted the Municipal Sales and Use Tax Act, VTCA, Tax Code, Chapter 321, which grants the City the power to impose and levy a 1% Local Sales and Use Tax within the City, the proceeds are credited to the General Fund and are not pledged to the payment of General Obligation debt. Collections and enforcements are effected through the offices of the Comptroller of Public Accounts, State of Texas, who remits the proceeds of the tax, after deduction of a 2% service fee, to the City monthly. Revenue from this source, for the years shown, has been: Fiscal Year % of Equivalent of Ended Total Ad Valorem Ad Valorem Per 9-30 1981 Collected 9,791,566 Tax Levy 58.69% Tax Rate _ 0.646 Capita* $53.41 1982 10,939,663 61.79% 0.408 61.36 1983 11,355,581 59.17% 0.361 62.57 1984 12,480,746 63.27% 0.386 68.54 1985 13,310,105 57.95% 0.341 70.94 1986 12,953,236 53.80% 0.323 68.80 1987 12,563,905 47.50% 0.285 66.58 1988 13,960,077 51.14% 0.312 73.47 1989 15,059,072 51.69% 0.330 78.68 1990 15,390,782 51.94% 0.332 79.27 * Based on estimated (or U. S. Census) population for all years. The Sewer System Water Reclamation Facilities ... Treatment facilities consist of the Southeast Plant, with an average daily flow design capacity of 25 million gallons and the Northwest Plant, with an average daily flow design capacity of 0.75 million gallons. The Southeast Plant uses two processes for treatment; trickling filter and activated sludge. The Northwest Plant uses the contact stabilization process for sewage treatment. Recent funding will provide for upgrading and expansion of the Southeast Plant which will permit the City to consistently comply with requirements of the Texas Water Commission for wastewater treatment and effluent disposal by irrigation of land -application sites. Effluent Disposal... Treated effluent is used for beneficial purposes; no effluent is discharged into streams. Treated effluent from the northwest plant is used to irrigate approximately 1,060 acres of farm land at Texas Tech University for agricultural research. Treated effluent from the southeast plant is used to irrigate two land -application sites: (1) A site located adjacent to the City on the southeast, consisting of 5,800 acres owned by the City, currently being upgraded. (2) A 3,400 acre privately owned farmland site near- Wilson, Texas, approximately 15 miles southeast of Lubbock. There is storage capacity of 780 million gallons at this site for effluent pending its use for irrigation. Southwestern Public Service Company has a contract with the City to use treated effluent from the southeast plant for cooling purposes in Southwestern Public Service Company's 512,000 kilowatt electric generating plant near Lubbock when the plant is in use. wastewaier ►reatment and Effluent Dis osal Improvement Program ... The primary purpose of the wastewater treatment and effluent disposal improvement program is: (1) upgrading of the Southeast Plant in order to consistently comply with Texas Water Commission and United States Environmental Protection Agency current effluent permit limits and, (2) expansion of the Southeast Plant to include tertiary treatment components capable of meeting stream quality discharge limits mandated by a new National Pollution Discharge Elimination System permit which will allow the discharge of effluent into the North Fork of the Double Mountain Fork of the Brazos River in the vicinity of the Southeast Plant. facilities may exceed $50 million. The City has entered into a contract with Black do Veatch, Dallas, It is the City's preliminary opinion that the cost of the program for upgrading and expanding treatment Texas for the design of these facilities. Funding for the balance of the program is presently planned through the Texas Water Development Board's State Water Pollution Control Revolving Fund ("SRF'h loan program, a low-interest revolving loan fund established from federal appropriations for financing the construction of wastewater treatment projects. The City of Lubbock has qualified for SRF financing during the Board's 1990 and 1991 Fiscal Year Intended Use Plans. r The Collection System ... The sanitary sewage collection system, handled separately from the storm J installed for future expansion of the collection system. drainage system, includes approximately 750 miles of trunk mains and collection lines with trunk mains gallons. Average daily flow in 1989 was 18.1 million C r a A-15 P"r AIN fZ e+� Condensed Statement of Operations Sewer System Sewer Rates (Monthly) Residential gallons 9-30-90 1 9-30-89 J---�= 2 Present Rates (Effective 8-1-88) 4.60 Minimum) Revs $ 9,502,243 $8,518,054 $6,070,743 $ 4 481,683 $3,433,423 $2,976,107 Operating Revenues Non -Operating 7 90 270 579 026 300 024 520 311 5,001,994 760 6636231. 4,194,086 197 623 4,173,730 Revenues 10,293,513 9,097,080 6 ,370,767 First Over 3,000 gallons $4.60 (Minimum)" 3,000 gallons 0.33/M gallons First 3,000 gallons 68/M Gross Revenues Operating Expense depreciation) 4 406 435 124 560 4 4 201 440' 3 248 237 ,fi2.085.015 2 482 623 (excluding 078 4 972 520 L2, 1 27 1 7757 5109. 71 1 6__"_ Net Revenues 5 886 �— ---- 61,628 60,981 60,751 60,062 Meters (Estimated) '62,119 62,631 Sewer TJT_Unaud and h e revenues of the Sewer There are no outstanding lienvonuNeStoRevenuesnds or authorized hBonds Series 1999 aneld by the d tfor aSewer System are unencumbered except Sewer System Subordinate Lien Revenue (1) Refun ing Combination Tax and (2) Certificates of Obligation, Series 1988. Sewer Rates (Monthly) Residential gallons Previous Rates Present Rates (Effective 8-1-88) 4.60 Minimum) (Effective 1-1-89) 3,000 5.60 Minimum) First Next 3,000 gallons 7,000 gallons 0.33/M gallons First gallons 0.68/M gallons Next 7,000 gallons No charge Over 10,000 gallons No additional charge Monthly Charge - $6.91) Over 10,000 gallons additional Monthly Charge - $10.36) (Maximum (Maximum Commercial/Industrial 5.60 (Minimum)** $0 First Over 3,000 gallons $4.60 (Minimum)" 3,000 gallons 0.33/M gallons First 3,000 gallons 68/M Over 39000 gallons itted to m only by contract * Industrial waste that exceeds the allowable hem cal oxygen demand (B O.D )tandhe ssuspendedewer esolids (S S.) are: with the City; charges for treating $0.0800/lb. B.O.D. $0.1076/lb. $0.0683/lb. S.S. $0.0918 /!b. ** Based on 5/8" or 3/4" meter; higher minimums for larger meters up to a maximum charge fora 10 meter of: $478.36 $766.35 Lubbock Power and Light Lubbock Power and Light was established in 1916, and is Presently ubbo the largest municipal system in the t tern Public Service"), a privately owned utility company operating West Texas region and the third largest. in the State of Texas. Lubbock Power and Light and Southwestern Public Service Company ("Southwestern within the corporate limits of the City, each provide electric service to �ch has residents and businesses of the City. Essentially all of the City is covered by both Southstems, each o Electric hi erat ve and lone small area is the City; one small area is served exclusively y served exclusively by Lubbock Power and Light. p y pays the City a Southwestern Public Service was granted anew 20 -year franchise d into t Cit The General an p y franchise tax of 2% of its gross reeptsowhich is depositemately 43.9% tof the cus omers in Lubbock. present, Southwestern Public Service suppliespower Lubbock Power and Light generates part of its hese plant areer requph cally separated irements through andsdeliver bulk powere of three s to ^ stations located within the City. ogra substations through a 69 kilovolt (kV) transmission loop system. A 16 Power from Southwestern public Service; The City contracts for the purchase of 20 megawatts ergsMW) of n 100 MW to Lubbock Power and Light. ener zed in 86. power is delivered via two interconnections, leefirstfeliverng up 1981 and the second Lightlof sufficient Each of these two interconnections is caps The Capability of buying P 200 mw load growth of additional past 2010power assures Lubbock Power a resources to meet aexpected quick -start is 500 kilowatts e the system with 52,500 kW of ready reserve and Generatin Stations ... The total generating capacity of Lubbock Power andgat Texas Tech will be (kir), Gasturbinegenerators prove generation forGemergenenerating uand n is peaking onsistof the following: v high efficiency gasturbine base loaded. Generator * d emergency power purposes. Since the completion of the second interconnection with Southwestern Public Service, Station No. 2 as been kept on standby and is. used for peak 1 for Lubbock Power and Light's generatingsystem eneral Land Fuel_ S�pp�y , , .Present primary fuel supply subsidiary of Adobe Gas Company, stems, Inc.,� y gas, which is 'supplied by Gas Gathering SY Mid Plains Petrochem, Inc.; the City has other alternative gas Office (Gas Marketing Department) and by provide Lubbock Power and Light supplies. These major gas suppliers are under long term contra all times. cts which with maximum flexibility in securing the lowest cost energyCity. City's resent storage 500,000 gallons, an adequate supply of fuel oil Secondary fuel in the form of fu secondary fuel,liseover d in forage in the tantially extended. The newest capability of fuel oil, for standby, 1 this period would for 5 days operation; with expected lcapab Y, approximately 600,000 gallons of fuel oil in storage due to the Holly steam generator has amulti-fuel capability as it is designed to burn natural gas or all grades of fu H y oil. In practice the City maintains aPP su 1 availability of purchased power and the back-up gas supply- Psystem, 73.59 miles in length, smission kV) an: Transmission and Distribution ... A 69,000 volt (69 with a combinations ed provide up to 467 MVA. Of ides bulk power to ten 69,000/12470 bulksubstations heswith a combined base capacity kV of 3Whe 22 megavolt stem prov stems in Operation, amps (MVA). With all cooling systems lines will be energized to 115kV and provide an additional 250% of transmission the above 69kV transmission lines, 27 miles have been constructedLubbockopowero and Light also has two load dictates, these rovide up to 200 MVA o capacity on these lines due to the increased voltage. interconnections with Southwestern Public Service Company which can p ower. These interconnections are tied to Lubbock Power and Light through 4.33 miles of 230 additionalP V transmission lines. proximately distribution lines. There are six 12,470/4160as 934 099,116 kilowatt hours (kWh) The distribution system includes approximately 653 miles of overhe0advdvolt istribu substations lines an approximately 185 miles of underground distr system. Net system load for Fiscal Year Ended September 30, 199 , with a peak demand of 208,500 kW• using internally generated funds is in progress. Transmission and Distribution S ste �Im rovement Pro ram ... A transmission and distribution system construction and improvement progra = includes installation of a 12.5 relays, steel and miscellaneous items to anew south Transmission S stem lm rovements ...The transmission system program kV transformer along with required breakers, Y even miles of the existing twenty-one miles of 69 k substation and reconductoring of approximately s transmission line from 4/0 ACSR to 477 MCM ACSR. is for substations, extensions from e Csinmeters,tse vie lines and Distribution S stem Im rovements ..:Extensions of and improvements to the existline ing distribution system including additional distribution cher re ulat , areas of service, transformers, meter pedestals, poles and crossarms, S appurtenances, addition of capacitors switches 470 voltimprovement system power factor and upgrading two 0 PP the six existing 4,160 volt substation , A-17 Capacity Year Installed Station Prime Mover F----e1— Dual Fuel in k W Manufacturer _9 1946 * 2* Diesel Dual Fuel 2' 500 Nordberg Nordberg 1947 2* 2 Diesel Steam Turbine Gas or Oil Oil 500 11, 500 11, Westinghouse 1952 1953 � 2* Steam Turbine Turbine Gas or Gas or Oil 22,000 Westinghouse Westinghouse 1958 1964 2* Holly Steam Gas Turbine Gas or Oil Gas or Oil 12,500 44,000 Westinghouse General Electric 1965 Holly Holly Steam Turbine Gas Turbine Gas or Oil Oil 18,000 22,000 Worthington General Electric 1971 1974 Holly • Holly Gas Turbine Steam Turbine Gas or Gas or Oil 54,000 20.000 General Electric 1978 1990 E.Z. Brandon Gas Turbine Gas 220,500 General Electric * d emergency power purposes. Since the completion of the second interconnection with Southwestern Public Service, Station No. 2 as been kept on standby and is. used for peak 1 for Lubbock Power and Light's generatingsystem eneral Land Fuel_ S�pp�y , , .Present primary fuel supply subsidiary of Adobe Gas Company, stems, Inc.,� y gas, which is 'supplied by Gas Gathering SY Mid Plains Petrochem, Inc.; the City has other alternative gas Office (Gas Marketing Department) and by provide Lubbock Power and Light supplies. These major gas suppliers are under long term contra all times. cts which with maximum flexibility in securing the lowest cost energyCity. City's resent storage 500,000 gallons, an adequate supply of fuel oil Secondary fuel in the form of fu secondary fuel,liseover d in forage in the tantially extended. The newest capability of fuel oil, for standby, 1 this period would for 5 days operation; with expected lcapab Y, approximately 600,000 gallons of fuel oil in storage due to the Holly steam generator has amulti-fuel capability as it is designed to burn natural gas or all grades of fu H y oil. In practice the City maintains aPP su 1 availability of purchased power and the back-up gas supply- Psystem, 73.59 miles in length, smission kV) an: Transmission and Distribution ... A 69,000 volt (69 with a combinations ed provide up to 467 MVA. Of ides bulk power to ten 69,000/12470 bulksubstations heswith a combined base capacity kV of 3Whe 22 megavolt stem prov stems in Operation, amps (MVA). With all cooling systems lines will be energized to 115kV and provide an additional 250% of transmission the above 69kV transmission lines, 27 miles have been constructedLubbockopowero and Light also has two load dictates, these rovide up to 200 MVA o capacity on these lines due to the increased voltage. interconnections with Southwestern Public Service Company which can p ower. These interconnections are tied to Lubbock Power and Light through 4.33 miles of 230 additionalP V transmission lines. proximately distribution lines. There are six 12,470/4160as 934 099,116 kilowatt hours (kWh) The distribution system includes approximately 653 miles of overhe0advdvolt istribu substations lines an approximately 185 miles of underground distr system. Net system load for Fiscal Year Ended September 30, 199 , with a peak demand of 208,500 kW• using internally generated funds is in progress. Transmission and Distribution S ste �Im rovement Pro ram ... A transmission and distribution system construction and improvement progra = includes installation of a 12.5 relays, steel and miscellaneous items to anew south Transmission S stem lm rovements ...The transmission system program kV transformer along with required breakers, Y even miles of the existing twenty-one miles of 69 k substation and reconductoring of approximately s transmission line from 4/0 ACSR to 477 MCM ACSR. is for substations, extensions from e Csinmeters,tse vie lines and Distribution S stem Im rovements ..:Extensions of and improvements to the existline ing distribution system including additional distribution cher re ulat , areas of service, transformers, meter pedestals, poles and crossarms, S appurtenances, addition of capacitors switches 470 voltimprovement system power factor and upgrading two 0 PP the six existing 4,160 volt substation , A-17 Electric Rates Electric rates in the City are set by City Council Ordinance and are the same for Lubbock Power and Light and Southwestern Public Service except for church, school and municipal rates, and minor variations in billing policies, and South Plains Electric Cooperative customers. New rates became effective dune 1, 1989. Selected Electric Rates (Effective 6-1-89) Residential Service Availability Charge: $4.66 per month All kWh per month @ 3.93 per kWh Plus: Fuel Cost Recovery General Service Service Availability Charge: $12.48 per month First 1,000 kWh per month 5.24 per kWh* Next 6,000 kWh per month 2.22 per kWh Next 6,000 kWh per month 1.05 per kWh All additional kWh per month 0.65 per kWh * Add to the 5.24 block 200 kWh for every kW of demand in excess of 10 kWs. Demand: Measured as the customer's kW demand for the 30 -minute period of greatest use during the month. Plus: Fuel Cost Recovery. Minimum Charge: $12.98 per month for demand of 10 kW or less, plus $3.50 per kW for next 15 kW above 10 kW, plus $2.30 per kW for all additional kW. No demand shall be taken as less than 50% of highest demand established in 12 months ending with current month. Condensed Statement of Operations Electric Light and Power System Operating Revenues $49,545,044 $49,285,975 $49,102,951 $44,514,574 $44,873,526 Non -Operating Income 4,107,122 3,802,433 2,629,613 803,100 989,194 Gross Revenues $53,652,166 $53,088,408 $51,732,564 $45,317,674 $45,862,720 Operating Expense (excluding depreciation) 34,409,383 34,442,694 31,928,1.52: 32,649,325 33,391,266 Net Revenues $19,242,783 $18,645,714$19,804,412 $12,668,349 $12,471,454 Electric Connections 44,405 43,315 43,781 42,702 41,399 Maximum Principal and Interest Requirements, Electric System Revenue Bonds, Fiscal Year Ending 9 -30-91 -------------------------------------------------------$ 6,350,075 Coverage by Net Revenues, Fiscal Year Ended 9-30-90(1) ------------------------------ 2.94 Times Electric Light and Power System Revenue Bonds Outstanding, 9-30-90 ------------------$39,005,000 Interest and Sinking Fund, 9-30-90(1) ------------------------------------------------ $ 4,557,634 Reserve Fund, 9-30-900) --------------------------------------------------------- $ 3,811,807 1 Unaudited. ..4 1. A-18 Airport System The City has owned and operated its airport since 1929, with scheduled airline service beginning in 1946. Lubbock International Airport is located six miles north of the central business district and has an area of 3,148 acres, of which approximately 1,900 acres is used for farming and clear zones. Scheduled Airline Service ... Scheduled airline transportation is furnished by American Air Lines, Delta Airlines, Southwest Airlines, America West Airlines, Continental Express and American Eagle. Non-stop scheduled service is provided to Dallas -Fort Worth International Airport, Dallas Love Field, El Paso, Austin, Amarillo, Midland -Odessa, Albuquerque and Phoenix. 1988 passenger enplanements totaled 563,235; 1989 enplanements were 615,514. Lubbock International Airport Terminal .. The terminal building contains approximately 222,000 square feet; the terminal houses airport administrative offices, airline offices and ticket counters, the baggage claim area, car rental offices, a restaurant and inflight meal preparation kitchen, air freight tenants, meeting and press rooms, and 9 jetway equipped gates for airline use. Parking capacity is 1,820, including 140 employees. The old terminal building has been converted to government and commercial office space and houses a Federal Aviation Administration ("FAA") Flight Standard District Office. Runway System ... The runway system consists of: 1 - 11,500' x 1501, north/south, primary runway with high intensity lighting and a FAA -operated instrument landing system and other navigational aids; 1 - 8,000' x 1501, east/west, cross -wind runway, with high intensity lighting and a FAA operated instrument landing system; 1 - 2,800' x 75' general aviation runway; and a taxiway system connecting the runways with aprons, the terminal and other facilities. General Aviation Facilities ... A building designed for the use of private aviation is located on the east side of the airport. This 8,779 square foot building still houses some general aviation services, a National Weather Service office and a U. S. Customs office. General aviation services are mainly available from two west -side located major fixed base operators who provide hangars, aprons, fuel sales and other services for private aviation. 100 T -Hangars house most of thea proximately 200 private aircraft that are based at the airport. Construction has been completed on a $3,043,629 project, partially funded by Federal participation, to provide taxiways, streets, utilities, drainage, etc. for general aviation hangar sites in the Southwest part of the airport. Construction is underway on a $5.2 million project to improve ramps, taxiways, and airfield lighting. Warehouses and Land Rentals ... The airport has five 16,000 square foot warehouses and six other warehouses for storage space rental. Industrial ... Located at the Airport are two steel companies and one manufacturing company. Condensed Statement of Operations Airport System Fiscal Year Ended 9-30-90(l) 9-30-89 9-30-88 9-30-87 9-30-86 Operating Revenues 3,811,895 3,617,038 3,223,095 2,966,294 2,881,641 Non -Operating Revenue 193,006 55,518 146,809 113.182 115.185 Gross Income 4,004,901 3,672,556 3,369,904 3,079,476 2,996,826 Operating Expense (excluding depreciation) 3,174,808 3,222,437 3,038,175 2,785,283 2,736,319 Net Revenue, 830,093 $ 450,119 $ 331,729 $ 294,193 $ 260,507 Maximum Principal and Interest Requirements, Airport Revenue Bonds, Fiscal Year Ending 9 -30 -91 --------------------------------------------------------$ 122,720 Coverage Based on Gross Income, Fiscal Year Ended 9-30-90(1)-------------------------- 31.1 Times Airport Revenue Bonds Outstanding, 9-30-90------------------------------------------- $ 710,000 Interest and Sinking Fund, 9-30-90(1) -------------------------------------------------- $ 313,219 Reserve Fund, Cash and Investments, 9-30-90(1)--------------------------------------- $ 300,000 (l)Unaudited. A-19 06, r► e^1 APPENDIX B LUBBOCK WATER ENTERPRISE FUND r The information contained in this Appendix was excerpted from the City of Lubbock Monthly Operating Report for the fiscal year ended September 30, 1990. Such Report is unaudited and is not purported to be a complete statement of Lubbock's financial condition. r .., CITY OF LUBBOCK, TEXAS r+, WATER ENTERPRISE FUND COMPARATIVE BALANCE SHEET September 30, 1990 and 1989 Assets 1990 1989 rl` Current assets: Cash and investments Accounts receivable - less allowance for doubtful accounts (1990 - $159,263; 1989 - $148,826) Due from Brazos River Authority Interest receivable Contributions receivable Inventory at cost Advance to internal service Prepaid expense Total current assets Restricted assets: Customer deposits: Cash and Investments Utility deposits: Accounts receivable Water pro rata construction: Cash and investments Interest receivable Accounts receivable Capital projects: Cash and investments Interest receivable Permanent capital maintenance: Cash and investments Accounts and interest receivable System improvements: Cash and investments Interest receivable Rate stabilization: Cash and Investments Interest receivable Total restricted assets Property, plant and equipment: Land Buildings Improvements other than buildings Machinery and equipment Construction in progress Less accumulated depreciation Net property, plant and equipment Total assets 417,375 4,071 315,836 1 (1,337): 27,804 12,806,404`: (16,527): .18,339 705 1,648,327 10,267 4,942,112 31,966 428,215 974,861 0 238,815 123,334 61,200 560,499 30,231 2,417,155 429,259 4,071 333,244 0 13,030 6,374,305 140,256 186,738 18,217 1,108,043 64,477 2,745,265 252,579 zu,zu5,saz 11,669,484 1,255,433 1,221,130 4,328,359 4,328,359 81,170,360 76,208,663 2,888,643 2,493,846 10,905, 043 14, 296,348 100,547,838 98,548,346 (23,838,825) (22,128,461) 76,709,013 76,419,885 $ 109,550,197 $ 90,506,524 41 CITY OF LUBBOCK. TEXAS WATER ENTERPRISE FUND COMPARATIVE BALANCE SHEET September 30, 1990 and 1989 Llabilities and Fund Equity 1990 1989 Liabilities: Current liabilities (payable from -current assets): $ 75,752. $ 30,720 Accounts and vouchers payable 252,380 252,380 Accrued general obligation interest 249,200 235,763 Other accrued expenses Current portion of general 2669,020 2,733,816 obligation bonds Total current liabilities 3,246,352 3,252,679 (payable from current assets) Current liabilities (payable from restricted assets): 19,793 28,828 Accounts and vouchers payable 417,375 429,259 Customer deposits Total current liabilities 437,168 ' 458,087 (payable from restricted assets) Long-term liabilities: Water pro rata construction: 563,673 539,069 Contracts payable General obligation bonds (net of 40 919,019- 24,044,222 current portion) 290,886 277,058 Accrued vacation and sick leave 41,773,578 41860349 Total long-term liabilities 45,457,098 28,571,115 Total liabilities Fund equity: Contributed capital: 29,707,483 29,636,246 Municipality 2,961,174 2,821,715 Customers Total contributed capital 32,668,657 _ 32,457,961 Retained earnings: 4,974,078 0 Reserved for pro rata construction 12,803,364 6,345,477 Reserved for capital projects Reserved for permanent capital 2,291 204,955 maintenance Reserved for system improvements 1,658,594 1,172,520 2,997,844 Reserved for rate stabilization 4,974,078 7,012,037 18,756,652 Unreserved 31,424,442 29,477,448 Total retained earnings 64 pg3,099 61,935,409 Total fund equity $ 109,550,197 $ _ 90,5 4 Total liabilities and fund equity ---- — -- 42 CITY OF LUSBOCK, TEXAS WATER ENTERPRISE FUND COMPARATIVE STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN RETAINED EARNINGS Twelve Months Ended September 30, 1990 and 1989 0 (48,500) 1990 1989 Operating revenues: $ 18,517,867 $ 15,763,047 General consumer sales 663,492 449,561 Municipal sales 179,369 161,795 Sales to other cities 57,914 48,009 Fire hydrant 203,750 191,791 New taps and reconnects 19,622,392 16,614,203 Total operating revenues Operating expenses: 3,265,897 2,872,791 Personal services 3,176,664 3,552,086 Purchased water 565,520 421,261 Supplies 750,369 660,725 Maintenance 167,505 167,645 Uncollectible accounts 1,038,764 1,053,470 Collection 346,983 0 Property tax 355,684 0 Franchise tax 965,911 775,569 Other charges 1,566,756 1,277,281 Depreciation 12,200,053 10,760,828 Total operating expenses 7,422,339 5,833,375 Operating income Nonoperating revenues (expenses): 1,515,712 1,014,080 Interest earnings (82,919) 33,490 Disposition of properties (25,236) (4,181) Miscellaneous interest expense general (925,801) (12940,737) obligation bonds Total nonoperating 481,756 (897.348) revenues (expenses) Income (loss) before operating 7,904,095 4,936,027 �— transfers Operating transfers in (out): General fund Electric fund Sewer fund Debt service fund Total transfers in (out) Net Income (loss) Retained earnings at beginning of year Retained earnings at end of period (4,938,073) (5,576,397) 0 (48,500) 2,000 (12,920) 0 4,585,561 (4,936,073) (1,052,256) 2,968,022 3,883,771 28,456,420 25,593,677_�— $ 31,424,442 $ _ 4__77_-- 43 W ,r. CITY OF LUBBOCK TEXAS WATER ENTERPRISE FUND BUDGET REPORT Twelve Months Ended September 30, 1990 ACTUAL 00% BUDGET Revenues: General Customer Sales $ 17,784,189 $ 18,517,867 104% Municipal Sales 549,000 663,492 121% Net charges for services 18,333,189 19,181,359 105% Sales to other cities 150,000 179,369 120% Fire hydrant rental 48,000 57,914 121% Interest on Investments 361,250 1,515,712 420% Interest on notes 2,500 0 0% Service charges -checks 2.700 8,230 305% New service and connections 82,800 203,750 246% Loading rack sales 0 25 -- Equipment rental 0 0 -- Miscellaneous revenue (expense) 96,060 (116,410) Total revenue 19,076,499 21,029.949 110% Operating expenses: 287,783 284,872 99% Administration Production 763,118 642,972 840.6 Treatment 3,036,303 2,545,475 84% Metering and customer service 797,580 663,891 83% Distribution and maintenance 1,374,407 972,023 71% Pumping and control 1,502,696 1,401,075 93% Engineering 282,187 211,516 75% Equipment maintenance 774,142 521,721 670/b Laboratory services 186,119 119,929 64% Collections 1,193,114 1,038,764 87% Uncollectible accounts 148,075 167.505 113% Total operating disbursements 10,345,524 8,569,743 83% Other Disbursements: 346,983 346,983 100% Property tax 355,684 355'684 100% Franchise tax General fund -debt service 4,567,251 4,721,760 103% General fund -Indirect cost allocation 370,822 216,313 58% CRMWA Debt Service 1,351,543 1,238,914 92% B.R.A. debt service 745,000 925,801_ 124% Total other disbursements 7,737,283 7,805,455 101% Reserves: Permanent capital maintenance 377,960 377.960 100% System improvement 425,006 425,006 100% Rate stabilization 190,726 190,726 100% Total reserves 993.692 993,692 100% Total disbursements and reserves 19,076,499 17,368,890 91% Available to Increase reserves $ 0 $ 3,661,059 -- 44 CITY OF LUBBOCK, TEXAS WATER PRO RATA SCHEDULE OF ASSETS, LIABILITIES, AND FUND BALANCE September 30, 1990 and 1989 Fund Balance: Reserved for expended Construction in progress Reserved for unexpended Construction in progress Unreserved -undesignated Total fund balance Total liabilities and fund balance 174,076 323,255 0 0 (221,728) (192,795) (47,652) 130,460 $ 516,379 $ 669,529 WATER PRO RATA SCHEDULE OF YEAR-TO-DATE REVENUES, EXPENSES AND OPERATING TRANSFERS IN AND OUT Twelve Months Ended September 30, 1990 Fund balance, 10-01-89 1990 1989 Assets: Contributions from developers 71,237 Cash and investments $ 315,836 $ 333,244 Accounts receivable - pro rata 26,467 13,030 Construction in progress (through 09/30/89) 105,090 238,232 Construction in progress (Year-to-date) 68,986 85,023 Total assets $ 516,379 $ 669,529 Liabilities and Fund Balance: Liabilities: Vouchers payable $ 358 $ 0 Contracts payable - pro rata 563,673 539,069 Fund Balance: Reserved for expended Construction in progress Reserved for unexpended Construction in progress Unreserved -undesignated Total fund balance Total liabilities and fund balance 174,076 323,255 0 0 (221,728) (192,795) (47,652) 130,460 $ 516,379 $ 669,529 WATER PRO RATA SCHEDULE OF YEAR-TO-DATE REVENUES, EXPENSES AND OPERATING TRANSFERS IN AND OUT Twelve Months Ended September 30, 1990 Fund balance, 10-01-89 $ (198,621) Adjustments: Contributions from developers 71,237 Interest on investments 29,071 Capital Outlay, YTD (123,415) Total Increase (Decrease) (23,107) Fund balance, YTD (221,728) Reserved for unexpended capital projects, YTD. 0 Unreserved -Undesignated fund balance, YTD $ (221,728) 45 CITY OF LUBBOCK, TEXAS �►* WATER PRO RATA SCHEDULE OF EXPENDITURES (BUDGET AND ACTUAL) Twelve Months Ended September 30, 1990 • Variance Work Favorable Fund 2122 Capital Projects: Order Budget Actual (Unfavorable) Water extensions pro -rata 88-89 7888 54,386 54,386 0 Water extensions pro -rata 89-90 7889 119,690 119,690 0 174,076 174,076 0 Add: over expenditures 0 r^ Total reserved fund balance .0 W W r .h 46 CITY OF LUBBOCK, TEXAS WATER CAPITAL PROJECTS SCHEDULE OF ASSETS, LIABILITIES, AND FUND BALANCE Fund 2123 September 30, 1990 and 1989 1990 1989 Assets Cash and investments $ 12,806,404 $ 6,374,305 Interest receivable . (16,527): 140,256 Construction in progress (through 09/30189) 17,261,003 12,811,622 Construction in progress (Year-to-date) 1,790,647 9,237,636 Due from rate stabilization 0 0 Due from state 1,620,244 2,739,280 Total assets $�—$ ' Liabilities and Fund Balance Liabilities: Vouchers payable $ 2,682 $ 28,756 Fund Balance: Reserved for expended 19,051,650 22,049,258 Construction in progress 9,299,542 7,319,799 Reserved for unexpended Construction in progress 334,703 0 Budgeted increase -reimbursement from Tx. Dept. of Highways 0 Budgeted increase -reimbursement 90,000 from Reese A.F.B. 0 Designated for future B.R.A. 2,235,254 projects Unreserved 3,297,346 1,905,286 Undesignated Total fund balance 33,459,089 31,274,343 Total liabilities and fund balance $ 33,461,771 $ 31,303,099 WATER CAPITAL PROJECTS SCHEDULE OF YEAR-TO-DATE REVENUES, EXPENSES AND OPERATING TRANSFERS IN AND OUT Twelve Months Ended September 30, 1990 Fund balance, 10-01-89 $ 4,915,236 Adjustments: 904,568 Interest revenue 784,784 Texas Department of Highways revenue Proceeds from B.R.A. bond sale 1,954,947 1 Budgeted increase -Tx.. Dept. of Highways ,973'254 Budgeted increase -Reese A.F.B. 90,000 Capital outlay, YTD (1,790,647) 9,91 6,UUb Total Expenses Fund balance, YTD 14,832,142 Reserved for unexpended capital projects, YTD 9,299,542 2,235,254 Designated for B.R.A. capital projects Unreserved -Undesignated fund balance, YTD $ 3,297,346 47 CITY OF LUBBOCK, TEXAS ell WATER CAPITAL PROJECTS SCHEDULE OF EXPENDITURES (BUDGET AND ACTUAL) Twelve Months Ended September 30, 1990 5d ell W W . over expenditures Total reserved fund balance 48 9,299,54 Variance Work Favorable Fund 2123 Capital Projects: Order Budget Actual (Unfavorable Sandhills wells rehab 9912 40,000 22,038 17,96 PS it & treatment plant 9017 35,000 23 ' 34,97 Backup power - w.p.s. 9018 9018 100,000 1.236 98,76 IH 27 - Utility adjustments 9023 10,965,000 10,630,747 ` 334,25 Radio repeater sys-Sandhill 9025 10,000 432 " 9,56 Water racks 9030 35,000 190 34,81 Water utilities radio equip 9032 70,000 8.321`:: 61,67 Water rights & supply 9072 5,000,000 17,119 i 4,982,88 Special.water project 9142 300,000 50,662 249,33 Back flow preventers - Phase I 9219 20,000 162 19,83 Pumping station rehab 9221 251,742 170,179 81,56 Test meter field Phase II 9222 24,950 14,235 10,71 Justiceburg Project II 9271 8,138,000 7,485,403 652,59 Mobile radio equipment 9291 48,000 35,088 12,91 Laboratory instruments 9306 140,000 121,845 18,15 Lines ahead of paving 1988-89 9429 60,000 23,501 36,49 Airport water system 9430 59,500 55,303 4,19 Justiceburg project -phase III 9431 2,250,000 84,859 ': 2,165,14 Test well -groundwater quality 9471 60,000 26,536 33,46 Work management system 9542 25,000 5,966 19,03 Water treatment plant eval 9543 185,000 160,877 24,12 Meter testing & repair van 9544 40,000 11,834 28,16 Water lines ahead of paving 9545 60,000 24,004: 35,99 New water meters 89-90 9546 105,000 99,223 5,77 SCADA Control functions 9547 50,000 316: 49,68 Pump station fence 9548 39,000 1,332: 37,6E Reese AFB supply line 9549 240,000 219 239,78 Add• 28,351,192 19,051,650 9,299,54 . over expenditures Total reserved fund balance 48 9,299,54 CITY OF LUBBOCK, TEXAS WATER PERMANENT CAPITAL MAINTENANCE SCHEDULE OF ASSETS, LIABILITIES, AND FUND BALANCE September 30, 1990 and 1989 Assets Cash and investments Interest receivable Construction in progress (through 09/30/89) Construction in progress (Year-to-date) Total assets Liabilities and Fund Balance Liabilities: Vouchers payable Fund Balance: Reserved for expended Construction in progress Reserved for unexpended Construction in progress Unreserved -Undesignated Total fund balance Total liabilities and fund balance 1990 1989 $ 18,339 $ 187,543 705: 14,907 115,549 150,652 574,270 222,798 $ 708,863 $ 575,900 $ 16,753 ; $ 0 689,819 373,450 801,790 159,710 (799,499) 42,740 692,110 575,900 $ 708,863 $ 575,900 WATER PERMANENT CAPITAL MAINTENANCE SCHEDULE OF YEAR-TO-DATE REVENUES, EXPENSES AND OPERATING TRANSFERS IN AND OUT Twelve Months Ended September 30, 1990 Fund balance, 10-01-89 Adjustments: Interest revenue Municipalities Transfer from Water Operations Capital outlay, YTD Total Increase (Decrease) Fund balance, YTD Reserved for unexpended capital projects, YTD Unreserved -Undesignated fund balance, YTD 49 $ 154,531 9,231 34,839 377,960 (574,270) (152,240) 2,291 801,790 $ (799,499) n CITY OF LUBBOCK, TEXAS WATER PERMANENT CAPITAL MAINTENANCE SCHEDULE OF EXPENDITURES (BUDGET AND ACTUAL) r r-, Twelve Months Ended September 30, 1990 Variance Favorable Work Budget Actual (Unfavorable) � Fund 2124 Capital Projects: Order 55,000 20,856 34,144 Rehab cath protection system 9026 150,000 98,781. 51,219 Filter media replacement 9432 9433 12,000 0 ,' 12,000 (1,609) Lowhead-B valve N8 by-pass 9435 .24,000 25,609 7,728 Switch gear replacement 9447 182,000 154,272 >: 247'197 Line chg-out &ext. 88-89 256,000 8,803 ar Scheduled mtnce &repair 9550 80,000 34,319 ;' 45,681 Filter controls & monitor 9551 170,000 157,552 12,448 Line change -outs & ext 9552 165,000 2,658 162,342 Repaint water towers 9553 9554 15,000 13,049 1,951 13,903 Fire hydrants replace 9555 15,000 1,097 34,819 Emergency water supply 9556 35,000 181 178,358 Rehabilitate well rig 9557 351,000 172,642 800,181 Major capital equip replace 1,490,000 689,819 -- 1,609 Add: over expenditures 801,790 Total reserved fund balance r r-, CITY OF LUBBOCK, TEXAS WATER SYSTEM IMPROVEMENTS SCHEDULE OF ASSETS, LIABILITES, AND FUND BALANCE September 30, 1990 and 1989 WATER SYSTEM IMPROVEMENTS SCHEDULE OF YEAR-TO-DATE REVENUES, EXPENSES AND OPERATING TRANSFERS IN AND OUT Twelve Months Ended September 30, 1990 Fund Balance, 10-01-89 Adjustments: Interest revenue Municipalities Transfer from Water Operations Capital outlay, YTD Total Increase (Decrease) Fund Balance, YTD Reserved for unexpended capital projects, YTD Unreserved -Undesignated fund balance, YTD 51 $ 1,123,150 107,903 2,535 425,006 0 535,444 1,658,594 0 $ 1,658,594 1990 1989 Assets Cash and investments $ 1,648,327 $ 1,108,043 Interest receivable 10,267 ` 64,477 Total assets $ 1,658,594 $ 1,172,520 Liabilities and Fund Balance Liabilities: Vouchers payable $ 0 $ 0 Fund Balance: Reserved 0 0 Unreserved -Undesignated 1,658,594 1,172,520 Total fund balance 1,658,594 1,172,520 Total liabilities and fund balance $ 1,658,594 $ 1,172,520 WATER SYSTEM IMPROVEMENTS SCHEDULE OF YEAR-TO-DATE REVENUES, EXPENSES AND OPERATING TRANSFERS IN AND OUT Twelve Months Ended September 30, 1990 Fund Balance, 10-01-89 Adjustments: Interest revenue Municipalities Transfer from Water Operations Capital outlay, YTD Total Increase (Decrease) Fund Balance, YTD Reserved for unexpended capital projects, YTD Unreserved -Undesignated fund balance, YTD 51 $ 1,123,150 107,903 2,535 425,006 0 535,444 1,658,594 0 $ 1,658,594 4OF-, r` CITY OF LUBBOCK, TEXAS WATER SYSTEM IMPROVEMENTS SCHEDULE OF EXPENDITURES (BUDGET AND ACTUAL) Twelve Months Ended September 30, 1990 Variance Work Favorable )bl favorae Fund 2125 Capital Projects: Order Budget Actual (Unfavorable) Total reserved fund balance 0 0 0 0 0 52 0^ n n I" P°' 0% APPENDIX C FORM OF BOND COUNSEL'S OPINION LAW OFFICES McCALL, PARKHURST & HORTON 2850 ONE AMERICAN CENTER 1992, 1993, % 717 NORTH HARWOOU AUSTIN, TEXAS 78701.3234 Maturity NINTH FLOOR TELEPHONE: 512478.3805 DALLAS, TEXAS 75201.6587 TELECOPY: 512 472-0871 TELEPHONE: 214 220.2800 - TELECOPY: 214 953.0736 BRAZOS RIVER AUTHORITY SPECIAL FACILITI 402 ONE RIVERWALK PLACE SAN ANTONIO, TEXAS 78205-3503 TELEPHONE: 512 225.2600 TELECOPY: 512 225-2984 ES (LAKE ALAN HENRY) REVENUE BONDS, SERIES 1991, DATED JANUARY 15, 1991, IN THE AGGREGATE PRINCIPAL AMOUNT OF $39,685,000 AS BOND COUNSEL for the issuer of the Bonds described above (the "Bonds"), we have examined into the legality and validity of the Bonds, which mature serially on August 15 of each of the years 1992 through 2005, and on August 15, 2011 and August 15, 2021, bearing interest from their date, until maturity or redemption, at the following rates per annum: Maturity Maturity 1992, 1993, % Maturity 2001, Maturity 1994, % Maturity Maturity 2002, 2003, Maturity Maturity 1995, 1996, % % Maturity 2004, Maturity 1997, % Maturity 2005, % ******************** Maturity Maturity 1998, 1999, % % Maturity 2011, % Maturity 2000, % Maturity 2021, with said interest payable on August 15, 1991, and semiannu- ally thereafter on February 15 and August 15 of each year. All Bonds maturing on and after August 15, 2002 will be redeemable prior to scheduled maturity, in whole or in part, on February 15, 2001, or on any date thereafter, at the par value thereof Plus accrued interest to the date fixed for redemption. The Bonds maturing on August 15, 2011 and August 15, 2021 are subject to mandatory sinking fund redemption in accordance with the terms of the resolution authorizing the issuance of the Bonds (the "Resolution"), at the par value thereof plus accrued interest to the date fixed for redemption. WE HEREBY CERTIFY that we have examined the following: (a) The Constitution and laws of the State of Texas under which Brazos River Authority (herein called "Authority") was created and is acting as a governmental agency, body politic and corporate. e* ,n (b) Certified copies of the Resolution and other proceed- ings of the Board of Directors of the Authority authorizing the issuance of said bonds and pledging certain revenues for their payment. (c) An executed copy of a Contract between the Authority and the City of Lubbock, Texas, dated May 11, 1989, and other proceedings authorizing said Contract. (d) Executed Bond Number One. We have not examined, however, and do not express any opinion with respect to any statement of insurance printed on any of the Bonds. BASED ON SAID EXAMINATION, IT IS OUR OPINION that the bonds have been authorized, issued and delivered in accordance with the Constitution and laws of the State of Texas, and constitute valid and legally binding special obligations of the Authority, and that, except as may be limited by laws applic- able to the Authority relating to bankruptcy, reorganization, and other similar matters affecting creditors, rights, said bonds, together with any outstanding bonds on a parity there- with, are secured by and payable from "Net Revenues". The term "Net Revenues" is defined in the Resolution as "Revenues" less maintenance and operation costs incurred in connection with the ownership and operation of Lake Alan Henry. The term "Reve- nues" is defined in the Resolution to be the gross receipts and income derived in connection with the ownership and operation of Lake Alan Henry, and received by the Authority, including that received under the said Contract with the City of Lubbock, Texas. THE AUTHORITY has reserved the right, subject to the restrictions stated in the Resolution, to issue Completion Bonds and Improvement Bonds which may be first lien bonds on a parity with the Bonds or may be junior to the Bonds, or a portion of them may be such first lien bonds and a_portion may be subordinate lien bonds. �^ THE OWNER of any of the Bonds shall never have the right to demand payment thereof out of any funds raised or to be raised by taxation. IN OUR OPINION, except as discussed below, the interest on the Bonds is excludable from the gross income of the owners for federal income tax purposes under law existing on the date of this opinion. We are further of the opinion that theBon stds are not "private activity bonds" and that accordingly, on the Bonds will not be included as an individual or corporate alternative minimum tax preference item under section express- ing of the Internal Revenue Code of 1986 (the "Code"). P ing the aforementioned opinions, we have relied on, and dons sume and compliance by the Authority with, certain covenants regarding the use and investment of the proceeds of the Bonds. We call your with such r presentationsention to the fact h and failure covenants the Authority to comply may cause the re roactively theBonds the sto date bof omi suancedaof a the in gross income Bonds. WE CALL YOUR ATTENTION TO THE FACT that theinterest a a in a tax-exempt obligations, such as the Bonds, is (a) ina -corporation's alternative minimum taxable income for purposes of determining the alternative minimand 59A environmen- taltax imposed on corporations by sections 55 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. Respectfully, t, CERTIFICATE FOR RESOLUTION THE STATE OF TEXAS : COUNTY OF McLENNAN : We, the undersigned officers of the Brazos River Authority, hereby certify as follows: 1. The Board of Directors of said Authority convened in Regular Meeting on the 21st day of January, 1991, at the designated meeting place, and the roll was called of the duly constituted officers and members of said Board, to -wit: Robert Upham, III, President Robert E. Hebert Deborah H. Bell, Vice President Jesse L. Hibbetts, Jr. Perry V. Dalby, Secretary Don T. Kearby James C. Atkins, Jr. Art King Chauncey Bogan James H. Mills R. G. "Jerry" Boone Charles R. Moser Brad Crawford Lyndon Olson, Sr. �• Charles J. "Jack" Farrar Robert K. Pace Ramiro A. Galindo Ruth C. Schiermeyer J. J. Gibson John M. Wehb3► James F. Wood and all of said persons were present, except the following absentees: Crawford, Pace and Wehby, thus constituting a quorum. Whereupon, among other business, the following was transacted at said Meeting: a written RESOLUTION AUTHORIZING THE ISSUANCE OF BRAZOS RIVER AUTHORITY SPECIAL FACILITIES (LAKE ALAN HENRY) REVENUE BONDS, SERIES 1991, $39,685,000; AND AUTHORIZING THE FORM AND USE OF THE OFFICIAL STATEMENT was duly introduced for the consideration of said Board. It was then duly moved and seconded that said Resolution be adopted, and, after due discussion, said motion, carrying with it the adoption of said Resolution, prevailed and carried by the following vote: AYES: All members of said Board shown present ^ above voted "Aye". NOES: None. 2. That a true, full and correct copy of the aforesaid Resolution adopted at the Meeting described in the above and foregoing paragraph is attached to and follows this Certificate; that said Resolution has been duly recorded in said Board's minutes of said Meeting pertaining to the adoption 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 Board as indicated therein; and that each of the officers and members of said Board was duly and sufficiently notified officially and personally, in advance, of the time, place and purpose of the aforesaid Meeting, 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, as amended. %MIA Z-0/3-1 PrWsAd r RESOLUTION AUTHORIZING THE ISSUANCE OF BRAZOS RIVER AUTHORITY SPECIAL FACILITIES (LAKE ALAN HENRY) REVENUE BONDS, SERIES 1991 IN THE AGGREGATE PRINCIPAL AMOUNT OF $39,685,000; PRESCRIBING THE FORM AND TERMS OF SAID BONDS; PROVIDING FOR THE SECURITY AND PAYMENT THEREOF; AUTHORIZING THE FORM AND USE OF THE OFFICIAL STATEMENT; AND RESOLVING OTHER MATTERS RELATING TO THE SUBJECT WHEREAS, Brazos River Authority (hereinafter defined as and called the "Authority") was duly created and is lawfully operating under Articles 8280-101 and 717q, V.A.T.C.S., as amended (the "Acts"), all pursuant to and in furtherance of the purposes of Article XVI, Section 59 of the Constitution of Texas; and WHEREAS, the Authority is authorized by the Acts and the applicable laws of the State of Texas to exercise the powers therein granted, in order to provide for the conservation and '^, development of the surface waters in the Brazos River basin for beneficial use; and WHEREAS, the Authority proposes to construct and operate a 40" dam and reservoir on the South Fork of the Double Mountain Fork of the Brazos River, to provide a long-term, firm supply of surface water to the City of Lubbock ("Lubbock") pursuant to an "` agreement with Lubbock; and WHEREAS, in the accomplishment of said purpose, the Authority has determined it necessary to issue revenue bonds of the Authority secured by payments made pursuant to such agree- ment, as authorized by and in accordance with the applicable laws of the State of Texas; and WHEREAS, the Authority has heretofore issued its Brazos River Authority Special Facilities (Lake Alan Henry) Revenue Bonds, Series 1989, dated October 15, 1989 (the "Series 1989 Bonds") in the aggregate principal amount of $16,970,000, as the first installment of such bonds to be issued for the purpose of paying the costs of acquiring, constructing and opk operating the Project; and WHEREAS, the Authority has determined that it is appropriate to issue at this time bonds on a parity with the Series 1989 Bonds for the purpose of completing the cost of acquiring and constructing Lake Alan Henry (the "Project"); THEREFORE, BE IT RESOLVED BY THE BOARD OF DIRECTORS OF BRAZOS RIVER AUTHORITY: ARTICLE I DEFINITIONS AND CONSTRUCTION ' Section 1.1. DEFINITIONS. Throughout this Resolution the following terms and expressions as used herein shall be con- strued and are intended to have the following meanings, to - wit: (a) "Accountant" means an independent certified public accountant or an independent firm of -certified public accoun- tants; (b) "Acts" means Articles 717q and 8280-101, V.A.T.C.S., as amended; r� (c) "Additional Bonds" means the additional revenue bonds on a parity with the Bonds which the Authority reserves the 2 r• right to issue in the future, as provided in this Resolution; n (d) "Agreement Date" means the date of the Contract; (e) "Amortization Installment" means, with respect to any Term Bonds, the amount of money which is required to be depos- ited into the "Mandatory Redemption Account" for retirement of such Term Bonds (whether at maturity or by mandatory redemption and including redemption premium, if any) provided that the r total Amortization Installments for such Term Bonds shall be sufficient to provide for retirement of the aggregate principal amount of such Term Bonds; (f) "Authority" or "Issuer" means Brazos River Authority and any other public body or agency at any time succeeding to the property, rights, powers and obligations thereof; All, (g) "Authorized Officer" means the General Manager of the Authority; (h) "Board of Directors" or "Board" means the Board of r► Directors of the Authority; (i) "Bond" or "Bonds" means the Brazos River Authority Special Facilities (Lake Alan Henry) Revenue Bonds, Series *� 1991, authorized to be issued and sold by this Resolution; (j) "Capital Costs" means those moneys received pursuant to the Contract and required thereby to be transferred to the Debt Service Fund, the Repair and Replacement Reserve Fund and the Reserve Fund for the benefit of the owners of the Bonds and Additional Bonds; (k) "Code" means the Internal Revenue Code of 1986, and any amendments thereto; 3 ?W1 r (1) "Completion Date" means the date on which the Con- sulting Engineer certifies that construction of Lake Alan Henry is complete and the reservoir is operational; (m) "Construction Fund" means the Brazos River Authority Special Facilities (Lake Alan Henry) Construction Fund created by this Resolution; r, (n) "Construction Period" means the period of time commencing upon the Authority's award of the initial contract for construction of Lake Alan Henry and ending on the Comple- tion Date; (o) "Consulting Engineer" means an engineer with a favorable reputation for competence in water resources engi- neering employed by the Authority to provide consulting ser- vices in connection with Lake Alan Henry; (p) "Contract" means the agreement, dated May 11, 1989, +� as amended from time to time, between Lubbock and the Author- ity; (q) "Debt Service" means the amount of money required to pay Capital Costs, plus fees, charges, and costs such as those of the Paying Agent/Registrar, which are incurred incident to the handling and servicing of Bonds and any Additional Bonds; (r) "Debt Service Fund" means the Brazos River Authority Special Facilities (Lake Alan Henry) Revenue Bonds Debt Service Fund created by this Resolution; �^ (s) "Depository" means the bank or banks which the Authority selects (whether one or more), in accordance with 4 W law, as its depository; Oft (t) "Eligible Securities" means those investment securi- ties described in the Public Funds Investment Act of 1987, Article 842a-2, V.A.T.C.S. from time to time, as amended; (u) "Engineering Report" means the report of Freese and Nichols, dated 1978, entitled "Feasibility Report on the Justiceburg Reservoir", as may be supplemented or amended from time to time; (v) "Lake Alan Henry" means the proposed dam and reser- voir (formerly known as Justiceburg Reservoir) and all related land and interests in land, water, water rights and all other interests owned by the Authority (whether corporeal or incor- poreal), as described in the Engineering Report as the "Justiceburg Reservoir", with said dam and reservoir proposed to be located on the South Fork of the Double Mountain Fork of the Brazos River, together with additions thereto and improve- ments thereof; provided that, notwithstanding the foregoing, and to the extent now or hereafter authorized or permitted by law, the term Lake Alan Henry shall not include any water or sewer facilities which the Authority finds by resolution not to be a part of Lake Alan Henry and which may be acquired or constructed by the Authority in the future with the proceeds from the issuance of "Special Facilities Bonds", which if issued will be special revenue obligations of the Authority which are not secured by or payable from the Net Revenues, but '^ which will be secured by and payable solely from other contract revenues or payments received from any other legal entity in t*. 5 ,�, 6 connection with such facilities; and such revenues or payments shall not be considered as or constitute Net Revenues of Lake Alan Henry, unless and to the extent otherwise provided in the resolution or resolutions authorizing the issuance of such "Special Facilities Bonds"; (w) "Lubbock" means the City of Lubbock, Texas; (x) "Maintenance and Operation Costs" means all costs of 'R repairs and replacements of Project for which no special fund is created and all costs considered by Authority to be required for proper maintenance and operation of Project, including (for greater certainty but without limitingthe generality of the foregoing) the direct costs of labor, equipment, supplies, materials, energy, professional services, supervision, engi- neering, accounting, administration, auditing, insurance and payments made by Authority in satisfaction of judgments result- ing from claims not covered by Authority's insurance, plus any additional cost or expenses in xp payment of claims in amounts which have been proposed by Authority and preapproved by Lubbock, and in connection with the fulfillment of its obligations under the Contract by taxation or as a result of actions requested by Lubbock or regulations or requirements lawfully imposed by the State of Texas, the United States, any ' governmental subdivision of the State of Texas or any federal agency, plus the share of Authority's unallocated general and administrative expenses determined annually by Authority's certified public accountants to be appropriate to cover Authority's expense of supervision and administration ,�, 6 r^� attributable to its obligations under the Contract, plus any n certified reimbursement amount due Lubbock under Section 28 of the Contract; (y) "Management Fees" means the fees by such name re- ceived by the Authority pursuant to the Contract; (z) "Mandatory Redemption Account" means the account by such name created in Section 4.2. (aa) "Net Revenues" means Revenues less Maintenance and Operation Costs; (bb) "Paying Agent/Registrar" means the banking institu- tion named in Section 2.5(a), and its herein permitted succes- sors or assigns; (cc) "Payments" means all payments required to be made to r� the Authority under the terms of the Contract; (dd) "Person" shall be as defined in the Code Construction Act (Chapter 311, Texas Government Code); (ee) "Project" means Lake Alan Henry; (ff) "Project Costs" means all costs of constructing the Project, including (without being limited to) all necessary costs for permitting, acquisition of land, easements and mineral rights, clearing, relocations, administration costs, planning and design, field supervision and inspection, engi- neering, legal expenses and expenses of financing and con- struction, and all payments and reimbursements to Lubbock as provided in the Contract; (gg) "Registration Books" shall be the books so designated in Section 2.5(a); 7 (hh) "Repair and Replacement Fund Required Amount" means ., the amount of $500,000 or such increased amount or amounts as hereafter required from time to time by resolution or resolutions of the Board authorizing Additional Bonds; .- (ii) "Repair and Replacement Reserve Fund" means the Brazos River Authority Special Facilities (Lake Alan Henry) Revenue Bonds Repair and Replacement Reserve Fund created by this Resolution; di) "Reserve Fund" means the Brazos River Authority Special Facilities (Lake Alan Henry) Revenue Bonds Reserve Fund created by this Resolution; (kk) "Reserve Fund Required Amount" means the average annual principal and interest requirements computed at time of n. issuance of the outstanding and unpaid Series 1989 Bonds, the Bonds and Additional Bonds until such amount is increased from time to time by resolution or resolutions of the Board authorizing Additional Bonds; (11) "Resolution" means this resolution and any amendments hereto; (mm) "Revenue Fund" means the Brazos River Authority Special Facilities (Lake Alan Henry) Revenue Bonds Revenue Fund created by this Resolution; (nn) "Revenues" means the gross receipts and income from ownership or operation of Lake Alan Henry received by the Authority (i) as Payments made pursuant to the Contract and r (ii) from any other sources; such term, however, does not include Payments by Lubbock which are Management Fees or which 8 N are capital advances to the Authority for capital improvements or capital donations of property in lieu of payments of money; (oo) "Series 1989 Bonds" means the Brazos River Authority Special Facilities (Lake Alan Henry) Revenue Bonds, Series 1989, dated October 15, 1989 and authorized to be issued and sold by the 1989 Resolution; r"`' 9 (pp) "Term Bonds" means the Series 1989 Bonds maturing in 2009 and 2019, and Bonds maturing in 2011 and 2021, and those Additional Bonds so designated in the resolutions authorizing such Additional Bonds which shall be subject to retirement by operation of the Mandatory Redemption Account; (qq) 111989 Resolution" means the resolution adopted by the Board of Directors on October 16, 1989 authorizing the issuance and sale of the Series 1989 Bonds; (rr) "Year" shall mean the regular fiscal year used by the Authority in connection with the operation of Lake Alan Henry, which may be any twelve consecutive months period established by the Authority. Section 1.2. CONSTRUCTION. For all purposes of this Resolution, except where the context otherwise requires, (a) words of the masculine gender shall be deemed and construed to include correlative words of the feminine and neuter genders r and words of the neuter gender shall be deemed and construed to include correlative words of the masculine and feminine gend- ers; and (b) words of the singular numbers shall be deemed and construed to include correlative words of the plural number and vice versa. r"`' 9 ARTICLE II r AUTHORIZATION, FORM, EXECUTION AND DELIVERY OF BONDS Section 2.1. BONDS AUTHORIZED. The Authority's bonds (the "Bonds") are hereby authorized to be issued in the aggre- gate principal amount of $39,685,000 for the purpose of completing the acquisition and construction of Lake Alan Henry, a dam and reservoir and related facilities for storing, controlling and conserving the waters of Brazos River. The Bonds shall be designated as the "Brazos River Authority Special Facilities (Lake Alan Henry) Revenue Bonds, Series r 1991". Section 2.2. DATES AND MATURITIES. The Bonds shall be dated January 15, 1991, shall be issued in fully registered n form, shall be in the denomination of $5,000 or any integral multiple thereof, shall be numbered consecutively from 1 upward, and shall mature on the maturity date, in each of the ,•• years, and in the amounts, respectively, as set forth in the following schedule: MATURITY DATE: AUGUST 15 ARS AMOUNTS YEARS AMOUNTS 1992 $ 440,000 2001 $ 760,000 1993 465,000 2002 810,000 1994 490,000 2003 870,000 1995 520,000 2004 930,000 ?11 1996 555,000 2005 1,000,000 1997 590,000 **** 1998 625,000 2011 7,650,000 1999 670,000 **** 2000 710,000 2021 22,600,000 ., The Bonds maturing on August 15 in the years 2011 and 2021 are hereby designated "Term Bonds". Section 2.3. RIGHT OF PRIOR REDEMPTION. (a) The Author - 10 ity reserves the right to redeem the Bonds, in whole or in part in principal amounts of $5,000 or any integral multiple there- of, on February 15, 2001 and on any date thereafter, at the par value thereof plus accrued interest to the date fixed for ., redemption. If less than all of the Bonds are to be redeemed by the Authority, the Authority shall determine the maturity or maturities and the amounts thereof to be redeemed and shall direct the Paying Agent/Registrar to call by lot Bonds, or portions thereof, within such maturity or maturities and in such principal amounts, for redemption. (b) The Term Bonds of the series of Bonds are subject to mandatory redemption, at the par value thereof plus accrued interest to the date fixed for redemption, on the dates and in ,•. the amounts as described in Section 4.7(1)(111) and Section 4.7(2) of this Resolution. (c) At least thirty (30) days prior to the date any such Bonds are to be redeemed, (i) a written notice of redemption shall be given to the registered owner of each Bond or a por- tion thereof being called for redemption by depositing such .• notice in the United States mail, postage prepaid, addressed to each such registered owner at his address shown on the Regis- tration Books of the Paying Agent/Registrar and (ii) notice of r• such redemption shall be published one (1) time in a financial journal or publication of general circulation in the United States of America carrying as a regular feature notices of •� municipal bonds called for redemption; provided, however, that the failure to send, mail, or receive such notice described in (i) above, or any defect therein or in the sending or mailing 016, 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 notice described 4011in (ii) above shall be the only notice actually required in connection with or as a prerequisite to the redemption of any Bond. By the date fixed for any such redemption due provision 'Oft shall be made by the Authority with the Paying Agent/Registrar for the payment of the required redemption price for the Bonds or the portions thereof which are to be so redeemed, plus accrued interest thereon to the date fixed for redemption. If such notice of redemption is given, and if due provision for such payment is made, all as provided above, the Bonds, or the '~ portions thereof which are to be so redeemed, thereby automati- cally shall be redeemed prior to their scheduled maturities, and shall not bear interest after the date fixed for their redemption, and shall not be regarded as being outstanding except for the right of the registered owner to receive the redemption price plus accrued interest to the date fixed for '~ their 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 redemptions of principal of the Bonds or any portion thereof. 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 $5,000, at the written request of the registered owner, and in r, 12 r< 13 an aggregate principal amount equal to the unredeemed portion thereof, will be issued to the registered owner upon the surrender thereof for cancellation, at the expense of the Authority all as provided in this Resolution. Section 2.4. INTEREST. That the Bonds scheduled to mature during the years, respectively, set forth below shall bear interest at the following rates per annum: r Maturity 1992, 8.8% Maturity 2001, 8.8% Maturity 1993, 8.8$ Maturity 2002, 8.625% Maturity 1994, 8.8% Maturity 2003, 8.5% Maturity 1995, 8.8% Maturity 2004, 8.5% Maturity 1996, 8.8% Maturity 2005, 8.5% Maturity 1997, 8.8% ****************** Maturity 1998, 8.8% Maturity 2011, 7.0% Maturity 19990 8.8% ***************** Maturity 20000 8.8% Maturity 2021, 6.8% payable August 15, 1991, and semiannually thereafter on February 15 and August 15 of each year. Said interest shall be payable to the registered owner of any such Bond in the manner provided in the FORM OF BOND set forth in this Resolution. Section 2.5. PAYING AGENT/REGISTRAR. (a) The Authority shall keep or cause to be kept at the principal corporate trust office of Ameritrust Texas National Association, Austin, Texas, or such other banking institution named in accordance with the provisions of Section 2.5(g) hereof (the "Paying Agent/Registrar"), books or records of the registration, and r► transfer of the Bonds (the "Registration Books"), and the Authority 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 Authority and Paying Agent/Registrar may r< 13 prescribe; and the Paying Agent/Registrar shall make such �•, transfers and registrations as herein provided. It shall be the duty of the Paying Agent/Registrar to obtain from the registered owner and record in the Registration Books the .�, address of such registered owner of each Bond to which payments with respect to the Bonds shall be mailed, as herein provided. The Authority or its designee shall have the right to inspect the Registration Books during regular business hours of the Paying Agent/Registrar, but otherwise the Paying Agent/Regis- trar 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 r 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 r► signatures satisfactory to the Paying Agent/Registrar, evidenc- ing the assignment of the Bonds, or any portion thereof in any integral multiple of $5,000, to the assignee or assignees .� thereof, and 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. r� (b) The entity in whose name any Bond shall be registered in the Registration Books at any time shall be treated as the 14 absolute owner thereof for all purposes of this Resolution, r. whether or not such Bond shall be overdue, and the Authority 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) The Authority 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 Resolution. The Paying Agent/Registrar shall keep proper records of all payments made by the Authority and the Paying Agent/Registrar with respect to the Bonds, and of all conver- •• sions and exchanges of Bonds, and all replacements of Bonds, as provided in this Resolution. (d) Each Bond may be converted and exchanged for fully �* registered bonds in the manner set forth herein. Each Bond issued and delivered pursuant to this Resolution, to the extent of the unpaid or unredeemed 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 of the assignee or assignees thereof, or its or their duly authorized attorneys or representatives, with guarantee of signatures satisfactory 15 .*R to the Paying Agent/Registrar, at the option of the registered ,•. owner or such assignee or assignees, as appropriate, be con- verted into and exchanged for fully registered bonds, without interest coupons, in the form prescribed in the FORM OF BOND set forth in this Resolution, 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 r 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 �-, amount of any Bond or Bonds so surrendered, and payable to the appropriate registered owner, assignee, or assignees, as the case may be. If any Bond or portion thereof 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/Regis- trar 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 Resolution shall constitute one of the Bonds for all purposes of this Resolution, and may again be converted and exchanged or replaced. It is specifically provided, however, that any Bond n delivered in conversion of and exchange for or replacement of another Bond prior to the first scheduled interest payment date 16 n 17 n on the Bonds shall be dated the same date as such Bond, but each substitute Bond so delivered on or after such first scheduled interest payment date shall be dated as of the interest payment date preceding the date on which such substi- tute Bond is delivered, unless such Bond is delivered on an interest payment date, in which case it shall be dated as of such date of delivery; provided, however, that if at the time •* of delivery of any substitute Bond the interest on the Bond for which it is being exchanged has not been paid, then such Bond shall be dated as of the date to which such interest has been r paid in full. on each substitute Bond issued in conversion of and exchange for or replacement of any Bond or Bonds issued under this Resolution there, shall be printed thereon a Paying r, Agent/Registrar's Authentication Certificate, in the form hereinafter set forth. An authorized representative of the Paying Agent/Registrar shall, before the delivery of any such .. Bond, date such Bond in the manner set forth above, and man- ually sign and date such 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 replace- ment. No additional ordinances, orders or resolutions need by �^ passed or adopted by the Board of the Authority 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, execu- tion, and delivery of the substitute Bonds in the manner 17 n :� the principal of and interest on such Bonds to be payable only to the registered owners thereof, (ii) may be transferred and assigned, (iii) may be converted and exchanged for other Bonds, (iv) may be subject to redemption prior to their scheduled � 18 prescribed herein, and said Bonds shall be of type composition printed on paper with lithographed or steel engraved borders of customary weight and strength. Pursuant to Article 717k-6, V.A.T.C.S., 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 described 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 Bonds which originally were delivered pursuant to this Resolution, approved by the Attorney General, and registered by the Comptroller of Public Accounts. Neither the Board nor the Paying Agent/Regis- trar shall be required (1) to issue, transfer, or exchange any bond during a period beginning at the opening of business 30 days before the day the first to occur of the mailing or the first publication of notice of redemption of bonds and ending at the close of business on such day, or (2) to transfer or exchange any Bond so selected for redemption in whole when such ^ redemption is scheduled to occur within 30 calendar days. (e) 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 transferred and assigned, (iii) may be converted and exchanged for other Bonds, (iv) may be subject to redemption prior to their scheduled � 18 maturities, (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 BOND set forth in this ^ Resolution. (f) The Authority shall pay the Paying Agent/Registrar's reasonable standard or customary fees and charges for making 19 transfers, conversions and exchanges of Bonds, but the regis- tered owner of any Bond requesting such transfer, conversion or exchange shall pay any taxes or other governmental charges ^ required to be paid with respect thereto. In addition, the Authority hereby covenants with the registered owners of the Bonds that it will pay the reasonable 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. (g) The Authority covenants with the registered owners of the Bonds that at all times while the Bonds are outstanding the Authority will provide a competent and legally qualified Paying ^ Agent/Registrar for the Bonds under this Resolution, and that the Paying Agent/Registrar will be one entity. The Authority reserves the right to, and may, at its option, change the Paying Agent/Registrar upon not less than 60 days written notice to the Paying Agent/Registrar. 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 Authority cove - 19 0 20 nants that promptly it will appoint a competent and legally .-k qualified national or state banking institution which shall be a corporation organized and doing business under the laws of the United States of America or of any state, authorized under n such laws to exercise trust powers, subject to supervision or examination by federal or state authority, and whose qualifi- cations substantially are similar to the previous Paying •� Agent/Registrar to act as Paying Agent/Registrar under this Resolution, or other entity qualified under law to act in such capacity. 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 Authority. Upon any change in the Paying Agent/Registrar, the Authority 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, postage prepaid, which notice also shall give the address of the new Paying Agent/Reg- istrar. By accepting the position and performing as such, each Paying Agent/Registrar shall be deemed to have agreed to the provisions of this Resolution, and a certified copy of this Resolution shall be delivered to each Paying Agent/Registrar. Section 2.6. FORMS. The form of all Bonds, including the form of the Paying Agent/Registrar's Authentication Certifi- cate, the Form of Assignment, and the form of the Comptroller's Registration Certificate to accompany the Bonds on the initial 20 delivery thereof, with such appropriate variations, omissions, Oft or insertions as are permitted or required by this Resolution: FORM OF BOND NO. $ UNITED STATES OF AMERICA STATE OF TEXAS BRAZOS RIVER AUTHORITY SPECIAL FACILITIES (LAKE ALAN HENRY) REVENUE BOND SERIES 1991 MATURITY DATE INTEREST RATE ORIGINAL ISSUE DATE CUSIP January 15, 1991 ON THE MATURITY DATE SPECIFIED ABOVE, the Brazos River Authority (the "Issuer"), a governmental agency and body politic and corporate of the State of Texas, for value received hereby promises to pay to , or to the regis- tered assignee hereof (either being hereinafter called the "registered owner") the principal amount of DOLLARS and to pay interest thereon, from the original issue date stated above, to the date of its scheduled maturity, or its date of redemption prior to scheduled maturity, at the rate of 00, interest per annum specified above, with said interest being payable on August 15, 1991, and semiannually on each February 15 and August 15 thereafter, except that if this Bond is dated later than August 15, 1991, such interest is payable semi- annually on each February 15 and August 15 following its date. REFERENCE IS HEREBY MADE to the further provisions of this Bond set forth on the reverse side hereof and such further provisions shall for all purposes have the same effect as if n 21 Ok set forth at this place. *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, Austin, 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 as shown by the Registration Books kept by the Paying Agent/Registrar at the close of business on the last day of the month next *� preceding each interest payment date by check drawn by the Paying Agent/Registrar on, and payable solely from, funds of the Issuer required to be on deposit with the Paying Agent/Registrar for such purpose as hereinafter provided; and such check 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 its address as it appears on the Registration Books kept by the Paying Agent/Registrar, as hereinafter described; provided, '^ that in the alternative such payment may be made by any other method requested in writing by the registered owner, at the risk and expense of such registered owner, subject to the �^ approval of the Paying Agent/Registrar. The Issuer covenants with the registered owner of this Bond that prior to each 22 principal payment date and interest payment date for this Bond it will make available to the Paying Agent/Registrar 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 a series of bonds of like tenor and effect except as to number, principal amount, interest rate, right of prior redemption, and maturity, aggregating Thirty- nine Million Six Hundred Eighty-five Thousand Dollars "^ ($39,685,000) (hereinafter sometimes called the "Bonds"), issued pursuant to a resolution (the "Resolution") of the Board of Directors of the Issuer for the purpose of acquiring, constructing and operating a dam and reservoir and related facilities known as Lake Alan Henry (the "Project") for storing, controlling and conserving the waters of the Brazos ^ River. -All Bonds of this series are issuable solely as fully registered bonds, without interest coupons, in the denomination 23 W 24 of any integral multiple of $5,000. �. *THE ISSUER reserves the right to redeem the Bonds, in whole, or in part in principal amounts of $5,000 or any inte- gral multiple thereof, on February 15, 2001 and on any date . thereafter, at the par value thereof plus accrued interest to the date fixed for redemption. If less than all of the Bonds are to be redeemed by the Issuer, the Issuer shall determine .•, the maturity or maturities and the amounts thereof to be redeemed and shall direc the Paying Agent/Registrar to call by lot Bonds, or portions thereof, within such maturity or matur- ities and in such principal amounts, for redemption. *THE BONDS of this series maturing August 15, 2011 and August 15, 2021, respectively, are subject to mandatory redemp- tion, and shall be redeemed in part by lot prior to maturity annually on August 15 in the years 2006 through 2010 and 2012 through 2020, with funds in the Mandatory Redemption Account of the Debt Service Fund established in the Resolution,'at par and accrued interest to date of redemption. *AT LEAST 30 days prior to the date fixed for any such redemption, (a) written notice of such redemption shall be mailed by first-class mail, postage prepaid, by the Paying Agent/Registrar to the registered owner hereof at his address �► shown on the Registration Books kept by the Paying Agent/Reg- istrar, and (b) notice of such redemption shall be published one (1) time in a financial journal or publication of general .� circulation in the United States of America carrying as a regular feature notices of municipal bonds called for redemp- 24 r., 25 tion, provided, however, that the failure to send, mail, or receive such notice described in (a) above, 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 the Resolution provides that the publication of notice as described in (b) above shall be the only notice actually required in connection with or as a prerequisite to the redemption of any Bond. By the date fixed for any such redemption due provision shall be made by the Issuer with the Paying Agent/Registrar for the payment of the required redemption price for this Bond or the portion hereof which is to be so redeemed, plus accrued interest thereon to the date fixed for redemption. If such written notice of " 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 redeemed, thereby automatically shall be redeemed prior to its scheduled maturity, and shall not bear interest after the date fixed for its redemption, and shall not be regarded as being outstanding except for the right of the registered owner to receive the redemption price plus accrued interest to the date fixed for 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 redemptions of principal of this Bond or any portion hereof. If a portion of any Bond shall be redeemed a 'WN substitute Bond or Bonds having the same maturity date, bearing interest at the same rate, in any denomination or denominations r., 25 tory to the Paying Agent/Registrar may be used to evidence the `assignment of this Bond or any portion or portions hereof from time to time by the registered owner. A new Bond or Bonds payable to such assignee (which then will be the new registered owner of such new Bond or Bonds), or to the previous registered r, 26 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 regis- tered owner upon the surrender thereof for cancellation, at the expense of the Issuer, all as provided in the Resolution. *THIS BOND OR ANY PORTION OR PORTIONS HEREOF IN ANY INTEGRAL MULTIPLE OF $5,000 may be assigned and shall be transferred only on the Registration Books of the Issuer kept by the Paying Agent/Registrar acting in the capacity of regis- trar for the Bonds, upon the terms and conditions set forth in the Resolution. 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 satisfac- tory to the Paying Agent/Registrar, evidencing assignment of this Bond or any portion or portions hereof in any integral r 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 may be executed by the regis- tered owner to evidence the assignment hereof, but such method is not exclusive, and other instruments of assignment satisfac- tory to the Paying Agent/Registrar may be used to evidence the `assignment of this Bond or any portion or portions hereof from time to time by the registered owner. A new Bond or Bonds payable to such assignee (which then will be the new registered owner of such new Bond or Bonds), or to the previous registered r, 26 r► of such privilege of transfer, conversion and exchange. In any circumstance, neither the Issuer nor the Paying Agent/Registrar shall be required (1) to make any transfer or exchange during a �^ period beginning at the opening of business 30 days before the day the first to occur of the mailing or the first publication 27 owner in the case of the assignment and transfer of only a portion of this Bond, may be delivered by the Paying Agent/Reg- istrar in conversion of and exchange for this Bond, all in the form and manner as provided in the Resolution. Also, as provided in the Resolution, this Bond may, at the request of the registered owner or the assignee or assignees hereof, be converted into and exchanged for a like aggregate principal r 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, r 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: Resolution. The r Issuer shall pay the Paying Agent/Registrar's reasonable standard or customary fees and charges for transferring, converting and exchanging any Bond or 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, all as a condition precedent to the exercise r► of such privilege of transfer, conversion and exchange. In any circumstance, neither the Issuer nor the Paying Agent/Registrar shall be required (1) to make any transfer or exchange during a �^ period beginning at the opening of business 30 days before the day the first to occur of the mailing or the first publication 27 of a notice of redemption of bonds and ending at the close of '^ business on such day, or (2) to transfer or exchange any Bonds so selected for redemption when such redemption is scheduled to occur within 30 calendar days. '~ *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 Resolution that it promptly will appoint a competent and legally qualified sub- stitute therefor, whose qualifications substantially are similar to the previous Paying Agent/Registrar it is replacing, and promptly will cause written notice thereof to be mailed to the registered owners of the Bonds. *BY BECOMING the registered owner of this Bond, the registered owner thereby acknowledges all, of the terms and provisions of the Resolution, agrees to be bound by such terms and provisions, acknowledges that the Resolution is duly recorded and available for inspection in the official minutes and records of the Issuer, and agrees that the terms and provisions of this Bond and the Resolution constitute a con- tract between each registered owner hereof and the Issuer. *THE RESOLUTION provides that this issue of bonds, together with outstanding revenue bonds, is secured by a pledge of and shall be payable solely from and equally secured by a lien on and pledge of the "Net Revenues", as defined in the Resolution. The Resolution defines "Net Revenues" to mean the gross receipts and income from the ownership and operation of Lake Alan Henry received by the Authority including receipts 28 0 pledge of said revenues have happened, do exist and have been performed as so required. IN WITNESS WHEREOF, Brazos River Authority has caused this bond to be signed by the imprinted or lithographed facsimile P 29 pursuant to the Contract (as therein defined), less Maintenance and Operation Costs (as therein defined). Reference is hereby made to the Resolution for a full and complete statement of (a) the nature and extent of such pledge and security; (b) the rights and responsibilities of the Issuer with respect thereto; (c) the rights and circumstances under and the purposes for which the Resolution may be amended; (d) the rights of the Issuer to issue bonds on aarit and of P Y equal dignity with this issue of bonds, subject to compliance with the terms and requirements of such contract, and (e) other matters relating to or affecting this issue of Bonds and the rights and duties of the Issuer and the rights of the owners thereof, this Bond, and the issue of which it is a part, being subject to all of the provisions thereof and to all of which the owner of this Bond by his acceptance hereof agrees and assents. *THE REGISTERED OWNER HEREOF shall never have the right to Oft demanda p yment of this obligation out of any funds raised or to be raised by taxation. IT IS HEREBY CERTIFIED AND RECITED that all acts, condi- tions and things required by the Constitution and laws of the State of Texas to happen, to exist and to be performed prece- dent to and in the issuance of this issue of Bonds, the adop- tion of the Resolution, the making of such contract and the pledge of said revenues have happened, do exist and have been performed as so required. IN WITNESS WHEREOF, Brazos River Authority has caused this bond to be signed by the imprinted or lithographed facsimile P 29 signature of the [President] [Vice President] of the Brazos River Authority and attested by the facsimile signature of its [Secretary] [Assistant Secretary], and the corporate seal of the Brazos River Authority to be duly impressed, or printed, or lithographed on this bond. (SEAL) ATTEST: Secretary BRAZOS RIVER AUTHORITY President ,. FORM OF PAYING AGENT/REGISTRAR'S-AUTHENTICATION CERTIFICATE PAYING AGENT/REGISTRAR'S AUTHENTICATION CERTIFICATE r� It is hereby certified that this Bond has been issued under the provisions of the Resolution described on the face of this Bond; and that this Bond has been issued in conversion 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. Dated Ameritrust Texas National Association Austin, Texas Paying Agent/Registrar By �^ Authorized Representative 30 r *FORM OF ASSIGNMENT ASSIGNMENT FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto Please insert Social security or Taxpayer Identification Number of Transferee �^ (Please print or typewrite name and address, including zip code of Transferee) the within Bond and all rights thereunder, and hereby irrevocably constitutes and appoints attorney to register the transfer of the within Bond on the books kept for registration thereof, with full power of �^ substitution in the premises. Dated: Signature Guaranteed: NOTICE: Signature(s) must be guaranteed by a member firm of the New York Stock Exchange or a commercial bank or trust company. ri NOTICE: The signature above must correspond with the name of the Registered Owner as it appears upon the front of this Bond in every particular, without alteration or enlarge- ment or any change whatsoever. **(FORM OF COMPTROLLER'S CERTIFICATE ATTACHED TO THE BONDS UPON INITIAL DELIVERY THEREOF) OFFICE OF COMPTROLLER : REGISTER NO. STATE OF TEXAS : I hereby certify that there is on file and of record in my '^ office a certificate of the Attorney General of the State of Texas to the effect that this Bond has been examined by him as 31 required by law, and that he finds that it has been issued in conformity with the Constitution and laws of the State of Texas, and that it is a valid and binding special obligation of the Brazos River Authority, and that the contract herein mentioned is valid and has been approved, and said Bond has this day been registered by me. WITNESS MY HAND and seal of office at Austin, Texas • r^ 32 Comptroller of Public Accounts of the State of Texas ( SEAL) NOTE TO PRINTER: *Is to be on reverse side of bond **Is not to be on bond Section 2.7. EXECUTION OF BONDS. The Bonds shall be signed by the imprinted or lithographed facsimile signature of the President or Vice President of the Authority and attested by the facsimile signature of the Secretary or an Assistant Secretary of the Authority, and the official seal of the Authority shall be affixed thereto or a facsimile of such seal shall be printed or lithographed thereon. All facsimile signatures shall have the same effect as though they were manual signatures. In case any officer whose signature shall appear on any Bond shall cease to be such officer before the delivery of such Bonds, such signature or facsimile signature shall nevertheless be valid and sufficient for all purposes the same as if he had remained in office until such delivery. Section 2.8. APPROVAL AND REGISTRATION OF BONDS. The proper officers of the Authority shall prepare and the Secre- r^ 32 tary of the Authority shall certify a complete transcript of ^ these proceedings, and such transcript shall thereupon be submitted to the Attorney General of the State of Texas for his examination with a request that he examine the same and approve the Bonds to be issued under the provisions of this Resolution, and the Contract as recited in the Resolution and in the Bonds, and no such Bonds shall be issued under the terms of this +^ Resolution unless and until the same shall have been approved by the Attorney General of the State of Texas and registered by the Comptroller of Public Accounts of the State of Texas as required by law. Upon registration of said Bonds, the Comp- troller of Public Accounts (or a deputy designated in writing to act for the Comptroller) shall manually sign the Comp- troller's certificate of registration prescribed herein, and the seal of said Comptroller shall be affixed to each of said certificates. Section 2.9. FURTHER PROCEEDINGS. The officers, employ- ees and agents of the Authority, and each of them, shall be and they are hereby expressly authorized, empowered and directed from time to time and at any time to do and perform all such acts and things and to execute, acknowledge and deliver in the name and under the corporate seal and on behalf of the Authori- ty all such instruments, whether or not herein mentioned, as may be necessary or desirable in order to carry out the terms and provisions of this Resolution and of the Bonds to be issued .� hereunder. 33 ARTICLE III 00 SALE OF BONDS, APPLICATION OF BOND PROCEEDS Section 3.1. NOTICE OF SALE AND BIDDING INSTRUCTIONS THE OFFICIAL BID FORM AND OFFICIAL STATEMENT. That the Notice of Sale and Bidding Instructions, the Official Bid Form and the Official Statement dated January 4, 1991, together with any addenda thereto, prepared and circulated with respect to the sale of the Bonds, are hereby approved and authorized for use in the reoffering on the Bonds. Section 3.2. SALE OF BONDS. That the sale of the Bonds to Donaldson, Lufkin & Jenrette Securities Corporation & Associates (the "Purchaser"), at a price of $39,092,355.45, and accrued interest to the date of delivery, is hereby author- ized, ratified and confirmed. One Bond in the principal amount maturing on each maturity date as set forth in Section 2.2 hereof shall be delivered to the Purchaser, and the Purchaser shall have the right to exchange such Bonds as provided in Section 2.5 hereof without cost. Section 3.3. BOND PROCEEDS. From the proceeds of the sale of the Bonds to the purchaser thereof the following deposits and disbursements shall be made, to -wit: (1) Into the Debt Service Fund - the interest accrued on the Bonds and received upon delivery of same to the Purchaser thereof. (2) Into the Reserve Fund - the amount required to bring the Reserve Fund to the Reserve Fund Required Amount, provided that the amount deposited from the proceeds of the sale of the ow� 34 Ook Bonds into the Reserve Fund together with the amount required herein to be deposited into the Repair and Replacement Fund shall not exceed 10% of the aggregate principal amount of the Bonds. (3) Into the Repair and Replacement Reserve Fund - $500,000. Oft 35 (4) Into the Construction Fund - the remaining amount. Section 3.4. THE CONSTRUCTION FUND. (a) The Depository shall be required to secure cash funds in the Construction Fund in the manner required of depositories of the Authority. To the extent practicable, monies in the Construction Fund shall be kept invested by the Authority in Eligible Securities. All interest and profits from such investments, to the extent not '^ required to be rebated to the United States as provided in Section 13.3, shall remain on deposit in the Construction Fund as a part thereof, except as otherwise provided in Section 3.5. Section 3.5. DISBURSEMENTS. (a) Money in the Construc- tion Fund shall be subject to disbursement by the Authority for payment of the Project Costs including reimbursement to itself and others for Project Costs paid prior to the delivery of the Bonds to the Purchaser. Such disbursements shall be made only by checks stating the purpose of the payment signed and count- ersigned by such officers or employees of the Authority as may from time to time be designated by the Authority by resolution. (b) After Completion Date, any residue remaining in the Construction Fund to the extent not required to be rebated to the United States or paid to Lubbock in accordance with the Oft 35 Contract shall be deposited into the Debt Service Fund and shall be applied to the payment of the principal of and inter- est on the Bonds and/or the Additional Bonds. r ARTICLE IV PLEDGE, FUNDS, APPLICATION OF REVENUES Section 4.1. PLEDGE. The Bonds together with the Series 1989 Bonds and any Additional Bonds are and shall be secured by and payable.from a first lien on and pledge of the Net Revenues including such revenues within the Funds created in this r Resolution. The Bonds, the Series 1989 Bonds and any Additional Bonds are and will be secured by and payable only from the Net Revenues, and are not secured by or payable from a mortgage or deed of trust on any properties, whether real, personal, or mixed, constituting Lake Alan Henry. The owners of the Bonds or Additional Bonds shall never have the right to demand payment from taxes, nor shall they have the right to demand payment thereof out of any other funds of the Authority. r Section 4.2. FUNDS. The following special funds of the Authority have been created heretofore by the 1989 Resolution and shall be continued for so long as any of Series 1989 Bonds, r the Bonds or Additional Bonds shall be outstanding and unpaid: (i) the "Brazos River Authority Special Facilities (Lake Alan Henry) Revenue Bonds Revenue Fund" (the "Revenue Fund"); r, (ii) the "Brazos River Authority Special Facilities (Lake Alan Henry) Revenue Bonds Debt Service Fund" (the "Debt Service Fund") and created as an account therein there is hereby established the "Mandatory Redemption Account"; (iii) the "Brazos River. Authority Special Facilities (Lake Alan Henry) Revenue Bonds Repair and Replacement Reserve Fund" 36 (the "Repair and Replacement Reserve Fund"); (iv) the "Brazos River Authority Special Facilities (Lake Alan Henry) Revenue Bonds Reserve Fund" (the "Reserve Fund"); (v) the "Brazos River Authority Special Facilities (Lake Alan Henry) Construction Fund" (the "Construction Fund"). Monies in said Funds shall be maintained at a Depository of the Authority, and shall be charged with a lien in favor of the owners of the Bonds until said monies are paid out in accordance with this Resolution. Section 4.3. REVENUE FUND. All Revenues other than Capital Costs and Management Fees received as Payments pursuant to the Contract shall be deposited in the Revenue Fund as received and shall be used to pay as a first charge against said Fund, the Maintenance and Operation Costs as they shall become due from time to time. Section 4.4. DEBT SERVICE FUND. Monies in the Debt Service Fund shall be used for the sole purpose of paying the principal of (including Amortization Installments) and interest on all Series 1989 Bonds, Bonds and any Additional Bonds, as the same shall mature and come due, together with the fees of the Paying Agent/Registrar and the costs of servicing the Series 1989 Bonds, the Bonds, and all Additional Bonds. Section 4.5. RESERVE FUND. Monies in the Reserve Fund shall be used for the sole purpose of retiring the last of any Series 1989 Bonds, Bonds or Additional Bonds as they shall .h mature or paying principal of and interest on any Series 1989 Bonds, Bonds or Additional Bonds when and to the extent the 0A, 37 amounts in the Debt Service Fund are insufficient for such purpose. Section 4.6. REPAIR AND REPLACEMENT RESERVE FUND. Monies in the Repair and Replacement Reserve Fund shall be used for the sole purpose of making necessary repairs or replacement of worn, damaged or obsolete portions of Lake Alan Henry. Section 4.7. FLOW OF FUNDS. Capital Costs as received by r^ the Authority and Net Revenues remaining on deposit in the Revenue Fund after payment of the Maintenance and Operation Costs shall be deposited to the following funds, at the times and in the order of priority listed below: (1) To the Debt Service Fund - in addition to all amounts heretofore required to be deposited to the credit of the Debt r Service Fund, the amounts, at the times, as follows: (i) such amount, deposited on or before the 10th day of each February and August hereafter, commencing with the r month of August, 1991, as will be sufficient, together with other amounts, if any, then on hand in the Debt Service Fund and available for such purpose, to pay the interest scheduled �^ to accrue and come due on the Bonds on the next succeeding interest payment date; (ii) such amounts, deposited on or before the 10th day of each August hereafter, commencing with the month of August, 1992 as will be sufficient, together with other amounts, if any, then on hand in the Debt Service Fund and available for such purpose, to pay the principal scheduled to mature and come due on the Bonds on the next succeeding princi- h 38 r►. SQ pal payment date; (iii) such amounts, as shall be required as Amorti- zation Installments for the Term Bonds of the Bonds, deposited in the Mandatory Redemption Account on or before the 10th day of each August, commencing August 10, 2006, for the redemption of Term Bonds; and (iv) such amounts required to pay the fees, the Paying Agent/Registrar and other costs of servicing the Bonds. (2) Operation of Mandatory Redemption Account. As Amortization Installments of the Term Bonds of the Bonds there shall be deposited to the credit of the Mandatory Redemption Account respective amounts on the dates as follows: *Maturity TERM BONDS MATURING AUGUST 15, 2011: edemption Date Amount August 15, 2006 $1,065,000 August 15, 2007 1,140,000 August 15, 2008 1,225,000 August 15, 2009 1,310,000 August 15, 2010 1.,400,000 August 15, 2011* 1,510,000 TERM BONDS MATURING AUGUST 15, 2021: Redemption Date Amount August 15, 2012 $1,610,000 August 15, 2013 11730,000 August 15, 2014 1,860,000 August 15, 2015 2,000,000 August 15, 2016 2,140,000 August 15, 2017 2,300,000 August 15, 2018 2,460,000 August 15, 2019 2,640,000 August 15, 2020 2,830,000 August 15, 2021* 3,030,000 39 (3 ) To the Reserve Fund - an amount, if any, required on or before the 10th day of each February and August, beginning em with the first such month following the occurrence of a defi- ciency, to restore any deficiency in the Reserve Fund Required ell 40 The Authority shall redeem Term Bonds of the Bonds matur- ing on August 15, 2011 and August 15, 2021, respectively, on August 15 of each of the years 2006 to 2010, inclusive and August 15 of each of the years 2012 to 2020, inclusive. The principal amount of the Term Bonds required to be redeemed pursuant to the operation of such mandatory redemption provi- sions shall be reduced, at the option of the Authority, by the principal amount of any Term Bonds which, (1) shall have been acquired by the Authority at a price not exceeding the princi- pal amount of such Term Bonds plus accrued interest to the date of purchase thereof, and delivered to the Paying Agent/Registrar for cancellation, (2) shall have been purchased and cancelled by the Paying Agent/Registrar at the request of the Authority with moneys in the Mandatory Redemption Account, at a price not exceeding the principal amount of such Term Bonds plus accrued interest to the date of purchase thereof, or (3) have been redeemed pursuant to the optional redemption provisions set forth above in Section 2.3(a) and not theretofore credited against a mandatory redemption require- ment. On the maturity date of any Term Bonds, the Authority shall apply the monies on hand in the Mandatory Redemption Account for the payment of the principal of the maturing Term Bonds. (3 ) To the Reserve Fund - an amount, if any, required on or before the 10th day of each February and August, beginning em with the first such month following the occurrence of a defi- ciency, to restore any deficiency in the Reserve Fund Required ell 40 Ok Amount in not more than ten (10) equal semiannual payments. So r� long as the amount on deposit in the Reserve Fund equals or exceeds the Reserve Fund Required Amount, no transfers into the Reserve Fund shall be required. (4) To the Repair and Replacement Reserve Fund - an amount, if any, required on or before the 10th day of each February and August, beginning with the first such month following the occurrence of a deficiency in the Repair and Replacement Fund Required Amount, to restore any deficiency in the Repair and Replacement Fund Required Amount in not more than ten (10) equal semiannual payments. So long as the amount on deposit in the Repair and Replacement Reserve Fund equals or exceeds the Repair and Replacement Fund Required Amount, no transfers to the Repair and Replacement Reserve Fund shall be required. Section 4.8. DEFICIENCIES; EXCESS NET REVENUES. (a) If r� on any occasion there shall not be sufficient Net Revenues to make the required deposits into the Debt Service Fund, the Reserve Fund and the Repair and Replacement Reserve Fund, then r^ such deficiency shall be made up as soon as possible from the next available Net Revenues, or from any other sources avail- able for such purpose. (b) Subject to making the required deposits to the credit of the Debt Service Fund, the Reserve Fund and the Repair and Replacement Fund when and as required by this Resolution, or any resolution authorizing the issuance of Additional Bonds, the excess Net Revenues may be used by the Authority for any 41 42 lawful purpose. A^ Section 4.9. PAYMENT OF BONDS. On or before August 15, 1991, and semiannually on or before each February 15 and August 15 thereafter while any of the Bonds are outstanding and unpaid, the Authority shall make available to the Paying Agent/Registrar therefor, out of the Debt Service Fund (and the Reserve Fund, if necessary) money sufficient to pay such !` interest on and such principal of the Bonds as shall become due and mature on such dates, respectively, at stated maturity or by redemption prior to maturity. The Paying Agent/Registrar. �^ shall destroy all paid Bonds and furnish the Authority with an appropriate certificate of cancellation or destruction. Section 4.10. SECURITY AND INVESTMENT OF FUNDS, The Authority will cause the Depository to secure and keep secured, in the manner required by law, all cash funds on deposit in the Funds herein established with it, and will cause the Paying Oft Agent/Registrar to secure all funds deposited with it as other trust funds are secured. Money in the Debt Service Fund, the Reserve Fund and the Repair and Replacement Reserve Fund shall be invested and reinvested in Eligible Securities. All inter- est and profits from such investments, to the extent not required to be rebated to the United States as provided in Section 13.3, shall be credited to the Revenue Fund to the extent not needed to cure any deficiency, if any, within any such Funds. Section 4.11. PAYMENTS FROM OTHER SOURCES. Nothing in this Resolution prohibits the Authority from applying money 42 43 00, other than Net Revenues to the payment of the Bonds, but if it does apply money from any of its funds other than Net Revenues, the Authority shall be entitled to reimburse such fund from Net Revenues thereafter received for the amount advanced plus ,. interest lost by Authority on account of such advance. ARTICLE V THE CONTRACT, ACCOUNTING, INSPECTION AND AUDITS Section 5.1. THE CONTRACT, FISCAL PROVISIONS. The Authority covenants and warrants that it has entered into the Contract with Lubbock, and the Contract is enforceable in accordance with its terms. Section 5.2 ENFORCEMENT, The Authority covenants to and with the owners of the Bonds that it will keep in effect and enforce the Contract and that it will not voluntarily consent to or permit the rescission thereof or non-performance there- under; and the Authority will not consent or agree to any amendment to the Contract which would reduce the amounts payable thereunder or which would extend the time of such payments or which would in any manner impair or adversely affect the rights of the owners of the Bonds and Additional Bonds, if any. If Lubbock fails to make Payments under the ,• Contract as required thereby, the Authority will take all necessary action to preserve and protect the rights of the owners of the Bonds with respect thereto in order to assure the �. payment of the Bonds and the interest thereon when due. Section 5.3. CONTRACT PAYMENTS. The Authority covenants 43 00, to furnish Lubbock with schedules of Payments to be made by Lubbock to the Authority pursuant to the Contract during each succeeding Fiscal Year, all in accordance with the terms of the Contract. Section 5.4. ACCOUNTING AND REPORTING. The Authority covenants that proper books of record and account will be kept in which true, full and correct entries will be made of all income, expense and transactions of and in relation to Lake Alan Henry, and each and every part thereof. Section 5.5. PUBLIC INSPECTION. The Authority further covenants and agrees that Lake Alan Henry, and each and every part thereof, and all books, records, accounts, documents and vouchers relating to the construction, operation, maintenance, repair, improvement and extension thereof, will at all times be open to inspection by Lubbock and the owners of Bonds and their respective representatives. Section 5.6. AUDITS. Following the end of each Year after the Completion Date, the Authority, as part of the overall audit of the Authority, shall have an Accountant audit all Funds established by this Resolution and submit a written report of each such audit to the Authority each year. The scope of the audit shall be such that the Accountant can render an independent opinion as to the financial condition of Funds created herein and as to the adequacy and correctness of the accounting records pertaining thereto. The audit report shall recommend any activities which, in the professional judgment of the Accountant, may be advisable to assure compli- 0^ 44 ance with the provisions of this Resolution. Section 5.7. PAYMENT FOR AUDIT. The costs of the audits prepared under this Article V shall constitute Maintenance and Operation Costs. ,. Section 5.8. COPIES OF AUDIT. Upon request, the Author- ity shall furnish a copy of the audit to the Purchaser named in Section 3.2 hereof and to the owners of the Bonds at the time ,. outstanding requesting same in writing. ARTICLE VI INSURANCE 45 Section 6.1. INSURANCE. (a) The Authority covenants that it will at all times keep insured such parts of Lake Alan Henry as would usually be insured by corporations operating like pro- perties, with a responsible insurance company or companies, against risks, accidents or casualties against which and to the extent insurance is usually carried by corporations operating like properties, including, to the extent reasonably obtain- able, fire and extended coverage insurance, insurance against damage by floods, use and occupancy insurance and public ., liability and property damage insurance. At any time while any contractor engaged in construction work shall be fully respon- sible therefor, the Authority shall not be required to carry ,►• insurance on the work being constructed if the contractor is required to carry appropriate insurance. All such policies shall be open to the inspection of the owners of the Bonds and -. their representatives at all reasonable times. Upon the happening of any loss or damage covered by insurance from one 45 or more of said causes, the Authority shall make due proof of loss and shall do all things necessary ry or desirable to cause the insuring companies to make payment in full directly to the Authority. The proceeds of insurance covering such property, together with any other funds necessary and available for such purpose, shall be used forthwith by the Authority for repairing the property damaged or replacing the property destroyed; provided, however, that if said insurance proceeds and other funds are insufficient for such purpose, then said insurance proceeds pertaining to Lake Alan Henry shall be used, at the owl option of,the Board, promptly as follows: (i) for the redemption prior to maturity of the Bonds and Additional Bonds, ratably in the proportion that the outstanding principal of each series of Bonds or Additional Bonds bear to the total outstanding principal of all Bonds and Additional Bonds, provided that if on any r such occasion the principal of any such series is not subject to redemption, it shall not be regarded as out- standing in making the foregoing computation; or (ii) if none of the outstanding Bonds or Additional Bonds is subject to redemption, then for the purchase on the open market and retirement of said Bonds and Addi- tional Bonds in the same proportion as prescribed in the foregoing clause (i), to the extent practicable; provided that the purchase price for any Bond or Additional Bond shall not exceed the redemption price of such Bond or Additional Bond on the first date upon which it becomes OW 46 47 subject to redemption; or (iii) the insurance proceeds, or the remainder thereof, shall be deposited in a special and separate trust fund, at a Depository of the Authority, to be ,•, designated the "Insurance Account". The Insurance Account shall be held until such time as the foregoing clauses (i) and/or (ii) can be complied with, or until other funds r become available which, together with the Insurance Account, will be sufficient to make the repairs or re- placements originally required, whichever of said events occurs first. (b) The foregoing provisions of (a) above notwithstand- ing, the Authority shall have authority either to self -insure r► or enter into,co-insurance or similar plans where risk of loss is shared in whole or in part by the Authority. (c) The annual audit required by Section 5.6 shall contain a section commenting on whether the Authority has complied with the requirements of this Section with respect to the maintenance of insurance, and listing all policies carried, .� and whether all insurance premiums upon the insurance policies to which reference is hereinbefore made have been paid. Section 6.2. UNUSED INSURANCE PROCEEDS. Any insurance proceeds remaining after the completion of and payment for any such reconstruction or repair shall be deposited to the credit of the Debt Service Fund. 47 f ARTICLE VII ADDITIONAL BONDS AND REFUNDING BONDS Section 7.1. DEFINITIONS. For the purpose of this Article VII, the following definitions shall apply: (a) "Completion Bonds" means any bonds issued to pay the Project Costs to complete the acquisition and construction of Lake Alan Henry. e^ (b) "Improvement Bonds" means bonds issued for improve- ments, betterments, extensions or replacements of Lake Alan Henry, which may include bonds issued by the Authority to r provide additional facilities for the withdrawal, treatment and delivery to Lubbock of water from Lake Alan Henry. Section 7.2. COMPLETION BONDS AND IMPROVEMENT BONDS. r� Subject to the provisions of Section 7.3, the Authority re- serves the right to issue Completion Bonds and Improvement Bonds which, in the discretion of the Authority, may be Addi- tional Bonds or subordinate lien bonds junior to the Bonds, or Bonds which a portion of same may be Additional Bonds or subordinate lien bonds. �^ Section 7.3. REQUIREMENTS. (a) Completion Bonds may be issued in such amounts and at such times as the Authority may deem appropriate. �^ (b) Improvement Bonds may be issued under (i) the circum- stances and subject to the limitations contained in the Con- tract, or (ii) under other circumstances considered desirable r by the Authority if Lubbock shall agree to an amendment of the Contract increasing Payments thereunder by aggregate amounts 48 r,.` sufficient, with other revenues from Lake Alan Henry, to pay when due all interest on and principal of the Improvement Bonds at the time proposed to be issued and the maintenance of any special funds created in connection therewith. Section 7.4. REFUNDING BONDS. The Authority reserves the right to issue refunding bonds to refund all or any part of the outstanding Bonds or Additional Bonds (pursuant to any law then available), or for any other lawful purpose, upon such terms and conditions as the Authority may deem to be in the best interest of the Authority and Lubbock. Section 7.5. AUTHORIZATION. Completion Bonds, Improve- ment Bonds, and Refunding Bonds permitted by this Article to be issued shall be authorized by resolutions of the Board of ,,. Directors which shall prescribe the form and terms of such bonds. ARTICLE VIII REMEDIES Section 8.1. SUITS BY OWNERS. In the event of a default hereunder by the Authority, any owner of the Bonds or group of owners of the Bonds owning no less than 25% of the aggregate principal amount of the outstanding Bonds and Additional Bonds may file suit or action for the enforcement of any covenants of the Authority or rights of owners of the Bonds to require proper and efficient construction and/or operation of Lake Alan Henry and the application of any income therefrom. By such �. suit or action, the owners of the Bonds may enjoin any act or thing which may be unlawful or in violation of the rights of 49 n the owners of the Bonds. Provided, however, the foregoing shall not affect or impair the right of any owner of the Bonds to enforce the payment of the principal of and interest on any Bond at and after the maturity thereof or the time the same comes due. Section 8.2. TRUSTEE. In the event of default, the owners of at least twenty-five percent (25%) in the aggregate principal amount of outstanding Bonds and Additional Bonds are authorized to appoint a Trustee which shall be a national bank having trust powers and having a combined capital and surplus of not less than $10,000,000, and located either within or without the State of Texas. Not more than one Trustee shall serve at any one time. Such Trustee, with or without having n possession of the Bonds, shall have the following powers: (a) To direct the operation of Lake Alan Henry by the Authority and the application of Payments under the Contract, or take possession of and operate Lake Alan r Henry and make proper application of any revenues thereof; (b) To file any suit or action which could be filed by the owners of Bonds. Section 8.3. CONCLUSION OF DEFAULT. After such event of default has been cured and an additional event of default does not appear, in the discretion of the Trustee, to be eminent, the Trustee shall return the possession, operation and mainten- ance of Lake Alan Henry to the Board of Directors. Section 8.4. LIMITATION OF TRUSTEE IS __LIABILITY. Any r% 50 d Trustee appointed under this Article shall not be personally .. liable for any loss or damage whatsoever to any person whomso- ever arising out of any action or failure on its part to act or for any error or judgment made in good faith except for fraud, ,» willful misconduct or negligence. Section 8.5. OTHER REMEDIES; REMEDIES NOT WAIVED. No remedy herein specified is intended to be exclusive of any ,.. other available remedy or remedies, but each and every such remedy shall be cumulative and shall be in addition to every other available remedy or remedies, now or hereafter existing at law or in equity, or by statute. No delay or omission to exercise any right or power shall impair any such right or power or shall be construed to be a waiver of any default or ,►. acquiescence therein, and every such right and power may be exercised from time to time and as often as may be deemed expedient. ARTICLE IX AMENDMENTS Section 9.1. AMENDMENT. (a) The owners of Series 1989 .� Bonds, Bonds and Additional Bonds aggregating in principal amount two-thirds of the aggregate principal amount of the Series 1989 Bonds, Bonds and Additional Bonds at the time ,r., outstanding (but not including in any case Series 1989 Bonds, Bonds and Additional Bonds which may then be held or owned by or for the account of the Authority) shall have the right from r time to time to approve an amendment of this Resolution which may be deemed necessary or desirable by the Authority, pro - 51 vided, however, that nothing herein contained shall permit or r be construed to permit the amendment of the terms and condi- tions contained in this Resolution or in the Bonds and Addi- tional Bonds so as to: (i) Make any change in the maturity of the Series 1989 Bonds, Bonds and Additional Bonds; (ii) Reduce the rate of interest borne by any of the OM Series 1989 Bonds, Bonds and Additional Bonds; (iii)Reduce the amount of the principal payable on the Series 1989 Bonds, Bonds and Additional Bonds; (iv) Modify the terms of payment of principal of or interest on the Series 1989 Bonds, Bonds and Additional Bonds, or any of them, or impose any conditions with respect to such payment; (v) Change the minimum percentage of the principal amount of Series 1989 Bonds, Bonds and Additional �+^ Bonds necessary for consent to such amendment; or (vi) Affect the rights of the holders of less than all of the Series 1989 Bonds, Bonds and Additional Bonds .� then outstanding; unless such amendment or amendments be approved by the owners of all of the Series 1989 Bonds and the Bonds at the time outstanding. (b) The provisions of this Resolution notwithstanding, the Authority may, without the consent of any of the owners of the Series 1989 Bonds, Bonds or Additional Bonds, pursuant to amendatory resolution, from time to time: 52 r► (i) impose upon the Authority conditions or restrictions additional to, but not in diminution of, those contained in this Resolution respecting the issuance of Additional Bonds; undertake covenants additional to but not incon sistent with those contained in this Resolution; or (iii)correct any ambiguity or correct or supplement any ,.• inconsistent or defective provision contained in this Resolution or any amendatory resolution. Section 9.2. NOTICE REQUIRED. If at any time the Author- ity shall desire to amend this Resolution under this Article, the Authority shall cause notice of the proposed amendment to be published in a financial newspaper or journal published in �. The City of New York, New York or in the State of Texas, once during each calendar week for at least two successive calendar weeks. Such notice shall briefly set forth the nature of the proposed amendment and shall state that a copy thereof is on file at the principal offices of the Authority, the Paying Agent/Registrar and with each of the Participants for inspec- tion by all owners of Bonds and Additional Bonds. Such publi- cation is not required, however, if notice in writing by first- class mail, postage prepaid, is given to each owner of Bonds and Additional Bonds. Section 9.3. ADOPTION OF AMENDMENT. Whenever at any time within one year from the date of the first publication of said r notice or other service or written notice the Authority shall receive an instrument or instruments executed by the owners of 53 el I at least two-thirds in aggregate principal amount of the Series 1989 Bonds, Bonds and Additional Bonds then outstanding, which instrument or instruments shall refer to the proposed amendment described in said notice and which specifically consent to and approve such amendment in substantially the form of the copy thereof on file with the Paying Agent/Registrar, the Authority may adopt the amendatory resolution in substantially the same form. Section 9.4. EFFECTIVE UPON ADOPTION. Upon the adoption of any amendatory resolution pursuant to the provisions of this *� Article, this Resolution shall be deemed to be amended in accordance with such amendatory resolution, and the respective rights, duties and obligations under this Resolution of the Authority and all the owners of outstanding Series 1989 Bonds, Bonds and Additional Bonds shall thereafter be determined, exercised and enforced hereunder, subject in all respects to such amendments. Section 9.5. REVOCATION OF CONSENT. Any consent given by an owner of a Series 1989 Bond, a Bond or Additional Bond .� pursuant to the provisions of this Article shall be irrevocable for a period of six months from the date of the first publication of the notice provided for in this Article, and shall be conclusive and binding upon all future owners of the same bond during such period. Such consent may be revoked at any time after six months from the date of the first r publication of such notice by the owner who gave such consent, or by a successor in title, by filing notice thereof with the 54 fi Paying Agent/Registrar and the Authority, but such revocation shall not be effective if the owners of two-thirds aggregate principal amount of the Series 1989 Bonds, Bonds and Additional Bonds outstanding have, prior to the attempted revocation, ,., consented to and approved the amendment. Section 9.6. PROOF OF OWNERSHIP. For the purpose of this Article, ownership of any Series 1989 Bond, Bond or Additional ,., Bond and the date of owning the same shall be proved by the entries in the Registration Books kept by the Paying Agent/Registrar. ARTICLE X GENERAL COVENANTS Section 10.1. PAYMENT OF BONDS AND INTEREST. The Author- ity covenants and agrees that Payments will be sufficient to provide funds for the payment of all Maintenance and Operation Costs and to duly and punctually pay the principal of every Oft Series 1989 Bond, Bond and Additional Bond and the interest thereon, on the dates, at the place and in the manner specified in such bonds, and that it will faithfully do and perform and ,•► at all times fully observe any,and all covenants, undertakings and provisions contained herein or in such bonds. Section 10.2. RATE COVENANT. The Board has fixed, estab- •� lished, and will maintain and collect such rates, charges and fees, including but not limited to the Payments, for the use and availability of Lake.Alan Henry at all times as are neces- r11 sary to produce Revenues in no less than amounts sufficient (1) to pay all current Maintenance and Operation Costs, and (2) to 55 produce Net Revenues for each Year sufficient to pay the r^ principal of and interest on the Series 1989 Bonds, the Bonds and Additional Bonds as the same mature and come due, and all other amounts required by this Resolution and other resolutions authorizing such Series 1989 Bonds, Bonds and Additional Bonds. Section 10.3. .LEGAL ABILITY. The Authority represents that it is a governmental agency and body politic and corporate r'^ of the State of Texas, duly created, organized and existing under the Constitution and laws of the State of Texas and has proper authority from all other public bodies and authorities, if any, having jurisdiction thereof to execute and deliver the Contract and to pledge the Net Revenues in the manner and form as herein done or intended, and that all corporate action on its part to that end has been duly and validly taken. Section 10.4. COMPLETION OF PROJECT. The Authority further covenants that it will use its best efforts to timely complete the Project in accordance with the Contract and the Engineering Report. Section 10.5. OTHER LIENS. The Authority further cove- nants that there is not now outstanding and that the Authority will not at any time create or allow to accrue or to exist any lien upon Lake Alan Henry, or any part thereof, or the revenues pledged herein to the payment of the principal of and interest on the Bonds, at any time derived from the operation thereof, or any of its funds, except as authorized by this Resolution; that the security of the Bonds will not be impaired in any way as a result of any action or any non -action on the part of the 56 r Authority, its Board of Directors or officers, or any thereof, and that the Authority will acquire and continuously preserve good and indefeasible title to Lake Alan Henry for the duration of the easements on the land upon which Lake Alan Henry is to be built and each and every part thereof owned by the Author- ity. The foregoing notwithstanding, the Authority reserves the right to create pledges and liens on the Net Revenues subordi- nate to the liens herein created. Section 10.6. KEEP FRANCHISES AND PERMITS IN EFFECT. The Authority further covenants that it will use its best efforts to ensure that no franchises, permits, privileges, or easements will be allowed to lapse or be forfeited so long as the same shall be necessary for Lake Alan Henry. ,r. Section 10.7. GOVERNMENTAL REQUIREMENTS; LIENS; CLAIMS. The Authority covenants that it will use its best efforts to observe and comply with all valid requirements of any govern- mental authority relative to Lake Alan Henry or any part thereof, and that it will pay or cause to be discharged, or will make adequate provision to satisfy and discharge, within .► sixty (60) days after the same shall accrue, all lawful claims and demands for labor, materials, supplies, or other objects which if unpaid, might by law become a lien upon such Project or any part thereof or the revenue therefrom; provided, how- ever, that nothing in this Section contained shall require the Authority to pay or cause to be discharged, or make provision r for any such lien or charge, so long as the validity thereof shall be contested in good faith and by appropriate legal 57 proceedings. ,. Section 10.8. FURTHER ASSURANCE. The Authority covenants that it will take such further action as may be required to carry out the purposes of this Resolution and to assure its r validity. Section 10.9. SALE AND LEASE OF PROPERTY. (a) The Authority covenants that so long as the Bonds or any of them shall be outstanding, and except as in this Section otherwise permitted, after the Completion Date it will not sell, lease or otherwise dispose of or encumber any part of Lake Alan Henry, r• or any of the Revenues derived therefrom except as provided herein. The Authority may from time to time sell any mach- inery, fixtures, apparatus, tools, instruments, or other r movable property and any materials used in connection there- with, if the Authority shall determine that such articles are no longer needed or are no longer useful in connection with the roperation and maintenance of Lake Alan Henry. The Authority may from time to time sell such real estate or interests therein that is not needed or serves no useful purposes in connection with the operation and maintenance of the Project. The proceeds of any sale of real property acquired from the proceeds of the Series 1989 Bonds, Bonds and Additional Bonds shall be deposited in the Debt Service Fund. (b) The Authority may lease any of its lands (or its interest therein) comprising a part of Lake Alan Henry for any purpose, if such lease or the use of such lands will not be detrimental to the operation and maintenance of Lake Alan 58 Henry. All rentals, revenues, receipts and royalties derived ,., by the Authority from any and all leases so made, shall be deposited in the Revenue Fund. r ARTICLE XI LOST, STOLEN, MUTILATED BONDS (a) In the event any outstanding Bond is damaged, muti- lated, 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 of damaged, mutilated, lost, stolen, or destroyed Bonds shall be made by the regis- tered 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 Authority 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 Board 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 can- e cellation the Bond so damaged or mutilated. (c) Notwithstanding the foregoing provisions of this 59 e a 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 Board 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) 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 the expenses in con- vection 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 contrac- tual. obligation of the Authority 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 bene- fits of this Resolution equally and proportionally with any and all other Bonds duly issued under this Resolution. �- (e) In accordance with Section 6 of Article 717k-6, V.A.T.C.S., this Section shall constitute authority for the issuance of any such replacement bond without necessity of further action by the Authority or any other body or person, and the duty of the replacement of such bonds is hereby author- ized 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 00,, 60 in Section 2.5(d) of this Resolution for Bonds issued in conversion and exchange for other Bonds. ARTICLE XII DEFEASANCE �. (a) Any Bond shall be deemed to be paid and no longer outstanding when payment of the principal of, redemption premium, if any, on such Bond, plus interest thereon to the r date thereof (whether such due date be by reason of maturity, upon redemption, or otherwise), either (A) shall have been made or caused to be made in accordance with the terms thereof, or ,�. (B) shall have been provided by irrevocably depositing with a paying agent, in trust and irrevocably set aside exclusively for such payment (1) money sufficient to make such payment or r (2) Federal Securities, as hereinafter defined, certified by an independent public accounting firm of national reputation to mature as to principal and interest in such amount and at such times as will insure the availability without reinvestment, of sufficient money to make such payment, and all necessary and proper fees, compensation and expenses of such payment agent for the Bonds pertaining to this Bond with respect to which such deposit is made shall have been paid or the payment thereof provided for. At such time as a Bond shall be deemed to be paid hereunder, as aforesaid, it shall no longer be secured by or entitled to the benefits of this Resolution, except for the purposes of any such payment from such money of r* Federal Securities. (b) The deposit under clause (B) of paragraph (a) shall 61 be deemed a payment of a Bond as aforesaid when proper notice of redemption of such Bond shall have been given, in accordance with this Resolution. Any money so deposited with a paying agent as herein provided may at the discretion of the Board ,•, also be invested in Federal Securities, maturing in the amounts and times as hereinbefore set forth, and all income from all Federal Securities in the hands of a paying agent which is not ,.� required for the payment of the Bond, the redemption premium, if any, and interest thereon, with respect to which such money has been so deposited, shall be turned over to the Board. .� (c) For the purpose of this Article, the term "Federal Securities" shall mean direct obligations of the United States of America, including obligations the principal of and interest a, on which are unconditionally guaranteed by the United States of America, and which are noncallable and which at the time of investment are legal investments under the laws of the State of n Texas for the money proposed to be invested therein. (d) Notwithstanding any provision of this Resolution, all money or Federal Securities set aside and held in trust pur- suant to the provisions of this Article for the payment of Bonds, the redemption premium, if any, and interest thereon, shall be applied to and used solely for the payment of the particular Bonds, the redemption premium, if any, and interest thereon, with respect to which such money or Federal Securities have been set aside in trust. +� (e) Notwithstanding anything elsewhere in this Resolution contained, if money or Federal Securities have been deposited 62 0 or set aside with a paying agent pursuant to this Article for the payment of Bonds and such Bonds shall not have in fact been actually paid in full, no amendment to the provisions of this Article shall be made without the consent of the owner of each ^ Bond affected thereby. � Jt Section 13.1.ER PEAL. All resolutions or parts thereof, or other corporate action of the Authority or of the Board of Directors, which in any manner or to any extent conflict with "^ any provisions of this Resolution, shall be, and such other resolutions and corporate action are hereby expressly repealed. Section 13.2. SEVERABILITY. In case any one or more of the provisions of this Resolution shall be held to be invalid or ineffective by any court of competent jurisdiction or invalid or ineffective as to any person or circumstance, 'the remainder hereof and the application of such provision or provisions to persons or circumstances other than those as to which it is held invalid shall not be affected thereby. Section 13.3. COVENANTS REGARDING TAX -EXEMPTION. The Issuer covenants to refrain from any action which would ad- versely affect, or to take such action as to ensure, the treatment of the Bonds as obligations described in Section 103 of the Code, the interest on which is not includable in the ell, "gross income" of the holder for purposes of federal income taxation. In furtherance thereof, the Issuer covenants as 63 r 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 h 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 r the payment of more than 10 percent of the debt service on the Bonds, in contravention of Section 141(b)(2) of the Code; n (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 r (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 "disproportion- ate", 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 five percent of the proceeds of the Bonds (less amounts depos- ited into a reserve fund, if any) is directly or indir- ectly used to finance loans to persons, other than state or local governmental units, in contravention of Section 64 A OP4 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 pro- ceeds 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 three 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 to the Reserve Fund, the Repair and Replacement Fund and in any other �. reasonably required reserve or replacement fund to the extent such amounts do not exceed 10 percent of 65 r*k n 66 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 refund- efund- ings); ings); (i) to take such action to ensure that at no time will proceeds from the sale of the Bonds deposited to the Reserve Fund, the Repair and Replacement Fund and any other reserve or replacement fund will exceed 10 percent; (i) to pay to the United States of America at least r 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 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 (j) 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 princi- pal and interest on the Bonds. It is the understanding of the Issuer that the covenants n 66 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 coun- sel, 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 here- after 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 13.4. PRINTING OF STATEMENT OF INSURANCE. The Authority hereby authorizes the printer of the Bonds to print thereon any statement of insurance with respect to the Bonds furnished by any municipal bond insurance company insuring the Bonds. r^ Section 13.5. OPEN MEETING. It is hereby officially found and determined that the meeting at which this Resolution is adopted is open to the public as required by law and that .� public notice of the time, place and purpose of said meeting 67 r l oft ra was given as required by Vernon's Ann. Civ. St., Article 6252- 17, as amended. 68 r, 0^ City of Lubbock P.O. Box 2000 Lubbock. Texas 79457 E306-762-6411 Brazos River Authority _4400 Cobbs Drive Waco, TX 76714-7555 Office of The City Manager January 21,1991 RE: Brazos River Authority Special Facilities (Lake Alan Henry) Revenue Bonds, Series 1991, $39,685,000 Gentlemen: Please be advised that in accordance with authority given the undersigned in the resolution adopted by the City Council of the City of Lubbock, Texas on the 10th day of January, 1991, approving the resolution authorizing the issuance and sale of the above bonds, I have reviewed and approved the terms of the sale of such bonds, and I have made the following findings: 1) The bonds are sold upon terms and conditions as set forth in the Notice of Sale and Bidding Instructions and Official Statement dated January 4, 1991, and 2) In my professional judgment as Assistant City Manager, the terms of sale of the bonds are feasible and within the City's ability to pay - Yours very truly, J. Robert Massengale Assistant City Manager For Financial Services JRM:ytb GENERAL CERTIFICATE THE STATE OF TEXAS BRAZOS RIVER AUTHORITY : We, the undersigned, President and Secretary of Brazos River Authority, respectively, do hereby certify that we are the duly elected and acting President and Secretary of the Brazos River Authority (the "Authority"), and do further certify as follows: 1. That this certificate is made for the benefit of the Attorney General of the State of Texas and the purchas- ers and subsequent owners of Brazos River Authority Special Facilities (Lake Alan Henry) Revenue Bonds, Series 1991, in the aggregate principal amount of $39,685,000 (hereinafter called the "Bondsol) . 2. That the Brazos River Authority was duly created and is lawfully operating under Article 8280-101, V.A.C.S., as supplemented and amended. 3. That the following are the duly qualified and acting officers and members of said Authority: Robert Upham, III, President Robert E. Hebert Deborah H. Bell, Vice President Jesse L. Hibbetts, Jr. Perry V. Dalby, Secretary Don T. Kearby James C. Atkins, Jr. Art King Chauncey Bogan James H. Mills R. G. "Jerry" Boone Charles R. Moser Brad Crawford Lyndon Olson, Sr. Charles J. "Jack" Farrar Robert K. Pace Ramiro A. Galindo Ruth C. Schiermeyer i. J. J. Gibson John M. Wehby James F. Wood and that such officers were the duly appointed and acting officers of the Authority at all times during the proceed- ings pertaining to the authorization and issuance of the Bonds and serve in such capacities on this date. 4. That no litigation of any nature has been filed or is now pending (a) to restrain the issuance and delivery of the Bonds or which would affect the provision made for their payment or security, or in any manner questioning the validity of said Bonds; (b) pertaining to, contesting or affecting the title of the present members of the Board of Directors and the officers of the Authority to their respective offices; or (c) the validity of the corporate existence of the Authority. 5. That none of the revenues or income pledged to the payment of said Bonds have been pledged to or encumbered by the payment of any other debt or obligation of the Authority, with the exception of Brazos River Authority Special Facilities (Lake Alan Henry) Revenue Bonds, Series 1989. 2 Ale 5. That none of the revenues or income pledged to the payment of said Bonds have been pledged to or encumbered by the payment of any other debt or obligation of the Authority, with the exception of Brazos River Authority Special Facilities (Lake Alan Henry) Revenue Bonds, Series 1989. 2 p CERTIFICATE FOR RESOLUTION THE STATE OF TEXAS COUNTY OF McLENNAN We, the undersigned officers of the Brazos River Authority, hereby certify as follows: 1. The Board of Directors of said Authority convened in Regular Meeting on the 21st day of January, 1991, at the designated meeting place, and the roll was called of the duly constituted officers and members of said Board, to -wit: Robert Upham, III, President Robert E. Hebert Deborah H. Bell, Vice President Jesse L. Hibbetts, Jr. Perry V. Dalby, Secretary Don T. Kearby James C. Atkins, Jr. Art King Chauncey Bogan James H. Mills R. G. "Jerry" Boone Charles R. Moser Brad Crawford Lyndon Olson, Sr. Charles J. "Jack" Farrar Robert K. Pace Ramiro A. Galindo Ruth C. Schiermeyer J. J. Gibson John M. Wehby James F. Wood ,,k) and all of said persons were present, except the following absentees: Crawford, Pace and Wehby, thus constituting a quorum. Whereupon, among other business, the following was transacted at said Meeting: a written RESOLUTION AUTHORIZING THE GENERAL MANAGER TO EXECUTE AN AGREEMENT WITH THE CITY OF LUBBOCK REGARDING TAX EXEMPTION was duly introduced for the consideration of said Board. It was then duly moved and seconded that said Resolution be adopted, and, after due discussion, said motion, carrying with it the adoption of said Resolution, prevailed and carried by the following vote: AYES: All members of said Board shown present above voted "Aye". NOES: None. 2. That a true, full and correct copy of the aforesaid Resolution adopted at the Meeting described in the above and foregoing paragraph is attached to and follows this Certificate; that said Resolution has been duly recorded in said Board's minutes of said Meeting pertaining to the adoption 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 Board as indicated therein; and that each of the officers and members of said Board was duly and sufficiently notified officially and personally, in advance, of the time, place and purpose of the aforesaid Meeting, 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, as amended. A •1-1 ^1 the 21st day of J , 1 91. Pre i t RESOLUTION AUTHORIZING THE GENERAL MANAGER TO EXECUTE AN AGREEMENT WITH THE CITY OF LUBBOCK REGARDING TAX EXEMPTION WHEREAS, the Brazos River Authority (the "Authority") has authorized the issuance of its Special Facilities (Lake Alan Henry) Revenue Bonds, Series 1991 (the "Bonds") for the purpose Of completing the construction of a reservoir (the "Project") on the south fork of the double mountained fork of the Brazos River to provide a long-term, firm supply of surface water to the City of Lubbock, Texas ("Lubbock"); and ,.� WHEREAS, the Authoritv and Luhhew- r have _-4--. 2 A— _ contract dated May 11, 1989, which provides, among other things, for the Authority to construct the Project and operate and maintain it on the land acquired by Lubbock and pursuant to easements granted to the Authority; and WHEREAS, the Authority has agreed to sell to Lubbock and r,, Lubbock has agreed to buy from the Authority and to pay as provided in the contract, whether such water is actually used or not, the entire amount of the water which can be: supplied from ,., the Project; and WHEREAS, the payments received by the Authority with respect to such sale will be used for the payment of debt service on the Bonds; and WHEREAS, it is appropriate that the Authority and Lubbock enter into an agreement whereby Lubbock agrees to refrain from any action .which would adversely affect, or to take such action to ensure, the treatment of the Bonds as obligations described in section 103 of the Internal Revenue Code of 1986, the interest on which is not includable in the "gross income" of the holder for purposes of federal income taxation; NOW, THEREFORE, IT IS HEREBY RESOLVED BY THE BOARD OF DIRECTORS OF BRAZOS RIVER AUTHORITY: 1. The General Manager is authorized to enter into an agreement with Lubbock, and the Secretary is authorized to affix the seal thereto and attest such agreement, being substantially in the form attached hereto as Exhibit A and made a part hereof. 2. The General Manager and other officers of the Authority are hereby authorized to take such further action as shall be appropriate or necessary to carry out the intent and purposes of said agreement. n "Exhibit All AGREEMENT BETWEEN BRAZOS RIVER AUTHORITY AND CITY OF LUBBOCK TEXAS REGARDING TAX.EXEMPTION WHEREAS, the Brazos River Authority (the "Authority") has authorized the issuance of its Special Facilities (Lake Alan Henry) Revenue Bonds, Series 1991 (the "Bonds") for the purpose Of completing the construction of Lake Alan Henry (the "Project") on the south fork of the double mountained fork of the Brazos River to provide a long-term, firm supply of surface water for the City of Lubbock, Texas ("Lubbock"); ., WHEREAS, the Authority and Lubbock have entered into a contract dated May 11, 1989, which provides, among other things, for the Authority to construct the Project and operate and maintain it on the land acquired by Lubbock and pursuant to easements granted to the Authority; WHEREAS, the Authority has agreed to sell to Lubbock and Lubbock has agreed to buy from the Authority and to pay as provided in the contract, whether such water is actually used or not, the entire amount of the water which can be supplied from the Project; and WHEREAS, the payments received by the Authority with respect to such sale will be used for the payment of debt service on the Bonds; THE AUTHORITY AND LUBBOCK DO HEREBY AGREE AS FOLLOWS: r. 1. Lubbock agrees to refrain from any action which would adversely affect, or to take such action to ensure, the treatment of the Bonds as obligations described in section 103 of the Code, the interest on which is not includable in the "gross income" of the holder for purposes of federal income taxation. 2. In furtherance'thereof, Lubbock agrees as. follows: (a) to take any action to assure that no portion of the proceeds of the Bonds received by Lubbock or no more than five percent of the output received by Lubbock from the Project are used for any "private business use," as defined in section 141(b)(6) of the Code or, if more than 5 percent of the output is so used, that amounts, whether or not received by Lubbock, with respect to such private business use, do not, under the terms of the Resolution adopted by the Authority or any underlying arrangement, directly or. indirectly, secure or provide for the payment of more than 5 percent of the debt service on the Bonds, in contravention of section. 141(b) (2 ) of the Code; (b) 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; (c) 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; (d) to refrain from using any portion of the proceeds of the Bonds or amounts treated as 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 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 r, (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; (e) 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); (f) to take such action as necessary to assist the Authority in paying 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 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 (g) to maintain such records fulfill its responsibilities under 148 of the Code and to retain such years following the final payment on the Bonds. as will enable Lubbock to this section and section. records for at least six of principal and interest 3. It is the understanding of the Authority and Lubbock ^ 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, Lubbock will not be required to comply with any covenant contained herein to the extent that such failure'to comply, 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, Lubbock 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. Dated as of January 21, 1991. (SEAL) Attest: Secretary (SEAL) BRAZOS RIVER AUTHORITY Carson Hoge, General Manager CITY OF LUBBOCK, TEXAS Attest: City Secretary B.C. McMinn, Mayor CERTIFICATE FOR RESOLUTION AUTHORIZING THE MAYOR OF THE CITY OF LUBBOCK TO AUTHORITY EAN REGARDING�NT WITH S RIVER TAX EXEMPTION THE STATE OF TEXAS COUNTY OF LUBBOCK CITY OF LUBBOCK We, the undersigned officers of the City of Lubbock, Texas, hereby certify as follows: 1. The Cit Council of said City convened in CITE COUNCIL MEETING ON THE Y4th DAY OF JANUARY , 1991, at the City Hall and the roll was called of the duly constituted officers and members of said City Council, to -wit: B. C. "Peck" McMinn, Mayor Ranette Boyd, City Secretary Joan Baker M. J. (Bud) Aderton Bill Maloy T. J. Patterson Gary D. Phillips Maggie Trejo and all. of said persons were present, except the following absentees: None , thus constituting a quorum. Whereupon, among other business, the following was transacted at said Meeting: a written n RESOLUTION AUTHORIZING THE MAYOR OF THE CITY OF LUBBOCK TO EXECUTE AN AGREEMENT WITH BRAZOS RIVER AUTHORITY REGARDING TAX EXEMPTION was duly introduced for the consideration of said City Council for adoption. It was then duly moved and seconded that said Resolution be adopted; and, after due discussion, said motion, carrying with it the adoption of said Resolu- tion, prevailed and carried by the followoing abstained, all voted "For" 0 voted Against as shown in the official Minutes of the City Council for the Meeting held on the aforesaid date. 2. That a true, full, and correct copy of the afore- said Resolution adopted at the Meeting described in the, above and foregoing paragraph is attached to and follows this Certificate; that said Resolution has been duly record- ed 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 adoption 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; and that each of the officers and members of said City Council was duly and sufficiently notified officially and of the aforesaid Meeting, e in advance, of the time, place, and purpose rLO and that said Resolution would be introduced and considered for adoption at said Meeting; 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 City Council 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 24thday of TANTTARV , 1991. ( SEAL) W ,AN Mayor Resolution No. 3533 r* i' RESOLUTION AUTHORIZING THE MAYOR OF THE CITY OF LUBBOCK TO EXECUTE AN AGREEMENT WITH r BRAZOS RIVER AUTHORITY REGARDING TAX EXEMPTION WHEREAS, the Brazos River Authority (the "Authority") has authorized the issuance of its Special Facilities (Lake �^ Alan Henry) Revenue Bonds, Series 1991 (the "Bonds") for the purpose of constructing a reservoir (the "Project") on the south fork of the double mountained fork of the Brazos River r� to provide a long-term, firm supply of surface water to the City of Lubbock, Texas ("Lubbock"); and WHEREAS, the Authority and Lubbock have entered into a il, 1989, which provides, among other con dated May tract Y things, for the Authority to construct the .Project and operate and maintain it on the land acquired by Lubbock and pursuant to easements granted to the Authority; and WHEREAS, the Authority has agreed to sell to Lubbock and Lubbock has agreed to buy from the Authority and to pay as provided in the contract, whethgr such water is actually used or not, the entire amount of the water which can be supplied from the Project; and WHEREAS, the payments received by the Authority with respect to such sale will be used for the payment of debt service on the Bonds; and - WHEREAS, it is appropriate that Lubbock and the Author- ity enter into an agreement whereby Lubbock agrees to refrain from any action which would adversely affect, or to take such action to ensure, the treatment of the Bonds as obligations described in section 103 of the Internal Revenue r Code of 19860 the interest on which is not includable in the "gross income" of. the holder for purposes of federal income taxation; BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF LUBBOCK: 1. The Mayor is authorized to enter into an agreement with the Authority, and the City Secretary is authorized to affix the seal of the City thereto and attest such agree- ment, being substantially in the form attached hereto as Exhibit A and made a part hereof. �^ 2. The Mayor and other officers and employees of the City are hereby authorized to take such further action as shall be appropriate or necessary to carry out the intent and purposes of said agreement. ro "Exhibit A" AGREEMENT BETWEEN BRAZOS RIVER AUTHORITY AND CITY OF LUBBOCK TEXAS REGARDING TAX EXEMPTION WHEREAS, the Brazos River Authority (the "Authority") has authorized the issuance of its Special Facilities (Lake Alan r► Henry) Revenue Bonds, Series 1991 (the "Bonds") for the purpose of completing the construction of Lake Alan Henry (the "Project") on the south fork of the double mountained fork of the Brazos River to provide a long-term, firm supply of surface water for the City of Lubbock, Texas ("Lubbock"); '.. WHEREAS, the Authority and Lubbock have entered into a contract dated May 11, 1989, which provides,, among other things, for the Authority to construct the Project and operate and maintain it on the land acquired by Lubbock and pursuant to easements granted to the Authority; WHEREAS, the Authority has agreed to sell to Lubbock and Lubbock has agreed to buy from the Authority and to pay as provided in the contract, whether such water is actually used or not, the entire amount of the water which can be supplied from the Project; and .•, WHEREAS, the payments received by the Authority with respect to such sale will be used for the payment of debt service on the Bonds; THE AUTHORITY AND LUBBOCK DO HEREBY AGREE AS FOLLOWS: 1. . Lubbock agrees to refrain from any action which would adversely affect, or to take such action to ensure, the treatment of the Bonds as obligations described in section 103 of the Code, the interest on which is not includable in the "gross income" of the holder for purposes of federal income taxation. 2. In furtherance thereof, Lubbock agrees as follows: W (a) to take any action to assure that no portion of the proceeds of the Bonds received by Lubbock or no more than five percent of the output received by Lubbock from the Project are used for any "private business use," as defined in section 141(b)(6) of the Code or, if more than 5 percent of the output is so used, that amounts, whether or not received by Lubbock, with respect to such private business use, do not, under the terms of the Resolution adopted by the Authority or any underlying arrangement, directly or indirectly, secure or provide for the payment of more than 5 percent of the debt service on the Bonds, in contravention of section 141(b)(2) of the Code; (b) 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; (c) 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; (d) to refrain from using any portion of the proceeds of the Bonds or amounts treated as 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 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 r* (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; (e) 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); (f) to take such action as necessary to assist the Authority in paying 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 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 (g) to maintain such records as will enable Lubbock 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. 3. It is the understanding of the Authority and Lubbock 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, Lubbock will not be required to comply with any covenant contained herein to the extent that such failure to comply, 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, Lubbock 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. Dated as of January 21, 1991. BRAZOS RIVER AUTHORITY ( SEAL) Attest: r. Secretary Carson Hoge, General Manager CITY OF LUBBOCK, TEXAS (SEA Attes City ecretary B.C. McMinn, Mayor r AGREEMENT BETWEEN BRAZOS RIVER AUTHORITY AND ITY OF LUBBOCK TEXAS REGARDING TAX EXEMPTION WHEREAS, the Brazos River Authority (the "Authority") has authorized' and issued its Special Facilities (Lake Alan Henry) Revenue Bonds, Series 1991 (the "Bonds") for the purpose of completing the construction of Lake Alan Henry (the "Project") on the south fork of the double mountained fork of the Brazos River to provide a long-term, firm supply of surface water to the City of Lubbock, Texas ("Lubbock"); WHEREAS, the Authority and Lubbock have entered into a contract dated May 11, 1989, which provides, among other things, for the Authority to construct the Project and operate and maintain it on the land acquired by Lubbock and pursuant to easements granted to the Authority; WHEREAS, the Authority has agreed to sell to Lubbock and Lubbock has agreed to buy from the Authority and to pay as provided in the contract, whether such water is actually used or not, the entire amount of the water which can be supplied from the Project; and WHEREAS, the payments received by the Authority with respect to such sale will be used for the payment of debt service on the Bonds; THE AUTHORITY AND LUBBOCK DO HEREBY AGREE AS FOLLOWS: r 1. Lubbock agrees to refrain from any action which would adversely affect, or to take such action to ensure, the treatment of the Bonds as obligations described in section 103 of the Code, the interest on which is not includable in the "gross income" of the holder for purposes of federal income taxation. 2. In furtherance thereof, Lubbock agrees as follows: (a) to take any action to assure that no portion of the proceeds of the Bonds received by Lubbock or no more than five percent of the output received by Lubbock from the Project are used for any "private business use," as defined in section 141(b)(6) of the Code or, if more than 5 percent of the output is so used, that amounts, whether or not received by Lubbock, with respect to such private business use, do not, under the terms of the Resolution adopted by the Authority or any underlying arrangement, directly or indirectly, secure or provide for the payment of more than 5 percent of the debt service on the Bonds, in contravention of section 141(b)(2) of the Code; (b) 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; (c) 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; (d) to refrain from using any portion of the proceeds of the Bonds or amounts treated as proceeds of the Bonds, directly or indirectly, to acquire or to replace funds which were used, directly or indirectly, toc the investment property (as defined in section 148(b)(2) 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 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 r (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; (e) 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); (f) to take such action as necessary to assist the Authority in paying 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 50 days after the Bonds have been paid 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 (g) to maintain such records as will enable Lubbock 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. r. a. 3. It is the understanding of the Authority and Lubbock 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, Lubbock will not be required to comply with any covenant contained herein to the extent that such failure to comply, 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, Lubbock 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. Dated as of January 21, 1991. ( SEAL) Attest: BRAZOS RIVER AUTHORITY 'W Carson Hoge, Ge al Ma CITY OF LUBBOCK, TEXAS ( SEA Atte Ci Secretary B.C. McMinn, Mayor CERTIFICATE FOR RESOLUTION THE STATE OF TEXAS COUNTY OF McLENNAN We, the undersigned officers of the Brazos River Authority, hereby certify as follows: 1. The Board of Directors of said Authority convened in Regular Meeting on the 21st day of January, 1991, at the designated meeting place, and the roll was called of the duly constituted officers and members of said Board, to - wit: Robert Upham, III, President Deborah H. Bell, Vice President Perry V. Dalby, Secretary James C. Atkins, Jr. Chauncey Bogan R. G. "Jerry" Boone Brad Crawford Charles J. "Jack" Farrar Ramiro A. Galindo J. J. Gibson Robert E. Hebert Jesse L. Hibbetts, Jr. Don T. Kearby Art King James H. Mills Charles R. Moser Lyndon Olson, Sr. Robert K. Pace Ruth C. Schiermeyer John M. Wehby James F. Wood n and all of said persons were present, except the following absentees: Crawford, Pace and Wehby, thus constituting a quorum. Whereupon, among other business, the following was transacted at -said Meeting: a written . RESOLUTION APPROVING THE FORM OF THE PAYING AGENT/REGISTRAR AGREEMENT WITH AMERITRUST TEXAS NATIONAL ASSOCIATION RELATING TO THE BRAZOS RIVER AUTHORITY SPECIAL FACILITIES (LAKE ALAN HENRY) REVENUE BONDS, SERIES 1991, IN THE AGGREGATE PRINCIPAL AMOUNT OF $39,685,000 AND AUTHORIZING THE EXECUTION OF SUCH AGREEMENT BY THE GENERAL .. MANAGER AND THE SECRETARY was duly introduced for the consideration of said Board. It was then duly moved and seconded that said Resolution be adopted, and, after due discussion, said motion, carrying with it the adoption of said Resolution, prevailed and carried by the following vote: AYES: All members of said Board shown present above voted "Aye". NOES: None. 2. That a true, full and correct copy of the aforesaid Resolution adopted at the Meeting described in the above and foregoing paragraph is attached to and follows this Certifi- cate; that said Resolution has been duly recorded in said _V 50, Board's minutes of said Meeting pertaining to the adoption 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 Board as indicated therein; and that each of the officers and members of said Board was duly and sufficiently notified officially and personally, in advance, of the time, place and purpose of the aforesaid Meeting, 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, as amended. GO W RESOLUTION APPROVING THE FORM OF THE PAYING AGENT/ REGISTRAR AGREEMENT WITH AMERITRUST TEXAS NATIONAL ASSOCIATION RELATING TO THE BRAZOS RIVER AUTHORITY SPECIAL FACILITIES (LAKE ALAN HENRY) REVENUE BONDS, SERIES 1991 IN THE AGGREGATE PRINCIPAL AMOUNT OF $39,685,000 AND AUTHORIZING THE EXECUTION OF SUCH AGREEMENT BY THE GENERAL MANAGER AND THE SECRETARY WHEREAS, Brazos River Authority (hereinafter defined as and called the "Authority") concurrently herewith is considering authorizing the issuance of Brazos River Authority Special Facilities (Lake Alan Henry) Revenue Bonds, Series 1991, in the aggregate principal amount of $39,685,000 (the "Bonds"); and n WHEREAS, in connection with the issuance of the Bonds, the Authority has appointed Ameritrust Texas, N.A. as the initial Paying Agent/Registrar for the Bonds; and WHEREAS, the Authority deems it necessary and appropriate to enter into a navincr Ameritrust Texas, N.A., to approve the form of such agreement +� and authorize its execution by the proper officers of the Authority; THEREFORE, BE IT RESOLVED BY THE BOARD OF DIRECTORS OF *, BRAZOS RIVER AUTHORITY: 1. The Paying Agent/Registrar Agreement between the Authority and Ameritrust Texas, N.A., relating to the Bonds, is hereby approved. 2. The General Manager and the Secretary are hereby S authorized and directed to execute the Paying Agent/Registrar Agreement. 0 r PAYING AGENT/REGISTRAR AGREEMENT AGREEMENT entered into as of January 21, 19 91 (this 'Agreement'), by and between Ameritrust Texas, National Association, a national association, duly organized and operating under the laws of the United States of America ("Ameritrust") and the Brazos River Authority a conservation and reclamation district organized and existing under the Constitution and laws of the State of Texas (the 'Issuer"). RECITALS WHEREAS, the issuer has duly authorized and provided for the issuance of its securities to be Issued only In registered form, as to the payment of principal and Interest thereon in an aggregate principal amount of $_ $39,685,000.00 and titled BRAZOS RIVER AUTHORITY SPECIAL FACILITIES (LAKE ALAN HENRY) REVENUE (the "Securities"); and BONDS, SERIES 1991 WHEREAS, the Issuer has selected Ameritrust 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, Arneritrust 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 AMERITRUST AS PAYING AGENT AND REGISTRAR Section 1.01.Appointment The Issuer hereby appoints Ameritrust to serve as Paying Agent with respect to the Securities, to pay to the registered owners of the Securities 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 Security Resolution (hereinafter defined). The Issuer hereby appoints Ameritrust as Registrar with respect to the Securities and, as Registrar for the Securities, Amerltrust 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 of said Securities as provided herein and in the Security Resolution. Ameritrust hereby accepts its appointment, and agrees to serve as, the Paying Agent and Registrar for the Securities. Section 1.02 ComAensaUon. As compensation for Ameritrust's services as Paying Agent/Registrar, the Issuer hereby agrees to pay Ameritrust the fees and amounts set forth in Annex A attached hereto for the remainder of the Fiscal Year during which this Agreement is executed and thereafter the fees and ' amounts set forth in Ameritrusft current fee schedule then in effect for services as Paying Agent/Registrar for municipalities, which shall be supplied to the issuer on or before 90 days prior to the close of the Fiscal Year of the Issuer, and shall be effective upon the first day of the following Fiscal Year. In addition, the Issuer agrees to reimburse Amedhist upon its request for all reasonable expenses, disbursements and advances (including the reasonable compensation and expenses and disbursements of Its agents and counsel) incurred or made by Amerkrust pursuant to, or as a result of, any of the provisions hereof. ARTICLE IWO DEFINITIONS Section* 241. Definitions. For all purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires: !� 'Axeleration 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. 'Amedtrust Office` means the office of Ameribust as indicated on page 11. *� Amedtr wt YA1 notify the Issuer in writing of any change in location of Ameritrust Office. `Security Resolution" means the resolution, order or ordinance of the governing body of the Issuer pursuant to which the Securities are issued, certified by the secretary or any other officer of the Issuer and delivered to AmeriirusL 'Fiscal Year" means the fiscal year of the Issuer ending August 31. "Holder" and "Security Holder" each means a Person in whose name a Security is registered in the Security Register. 'issuer Request" and "issuer Order' means a written -request or order signed in the name of the Issuer by an officer of the governing body of the Issuer or such other person named, or appointed by virtue of holding a particular position with the Issuer, in the Security Resolution as authorized to sign, and delivered to Ameritrust. '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 govemment. `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 Security registered and delivered under Section 4.06 in lieu of a mutilated, lost, destroyed or stolen Security shall be deemed to evidence the same obligation as the mutilated, lost, destroyed or stolen Security. 'Redemption Date` when used with respect to any Security to be redeemed means the date fixed for such redemption pursuant to the terms of the Security Resolution. "Responsible Officer when used with respect to Ameritrust 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 lice President, the Secretary, and Assistant Secretary, the Treasurer, and Assistant Treasurer, the Cashier, and Assistant Cashier, and Trust Officer or Assistant Trust Officer, or any other officer of Ameritrust customarily performing functions similar to those performed by any 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 the boosts and records to be maintained by Ameritrust on behalf of the Issuer relating to the registration, transfer, exchange, and payment of the Securities. "Stated Maturity" means the date specified In the Security Resolution as the fixed date on which the principal of the Security is scheduled to be due and payable. Section 2.02. Other Definitions. . The terms "Ameritrust,"'Issuer" and "SecudY have the meaning assigned to them In the 10* recital paragraphs of this Agreement The term "Paying Agent/Registrar` refers to Ameritrust when it is performing the functions -associated with such terns In this Agreement Section 2.03. Construction of Teras. If appropriate in the context of this Agreement, words of the singular shall be considered to include the plural, wcrds of the plural shall be considered to include the singular, and words of the masculine, feminine, or neuter gender shall be considered to include the other genders. ARTICLE THREE 4 PAYING AGENT Section 3.01. duties of Paying Agent As Paying Agent, Ameritrust 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 interests on each Security when due. Ameritrust shall compute the amount of interest to be paid each Holder, and shall prepare and send a check in such amount by United States mail (first class postage prepaid) on or prior to each interest payment date, to the Holder of each Security (or Predecessor Securities) whose name appears In the Security Register on the record date. Such checks shall be mailed in such manner to such Holder the address for each such Holder appearing on the Security Register, or shall be transmitted to such Holder on each interest payment date by such other method acceptable to Ameritrust, requested In writing by, and at the risk and expense of, the Holder. Section 3.02. Payment bates. The issuer hereby instructs Ameritrust to pay the principal of and interest on the Securities �. at the dates specified in the Security Resolution. ARTICLE FOUR REGISTRAR Section 4.01. Transfer and Exchange.' Ameritrust agrees to keep and maintain for and on behalf of the Issuer at the Ameritrust. 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 Ameritrust may prescribe. All transfer, exchanges and replacement of Securities shall be noted in the Security Register. Every Security certificate surrendered for transfer or exchange shalt be duty endorsed or be accompanied by a written instrument or transfer, the signature on which has been guaranteed by an officer of a bank, Trust Company or a member of the National Association of Securities Oealers, in form satisfactory to Ameritrust, duty executed by the Holder or his attorney duty authorized in writing. As a condition to effecting a re -registration, transfer or exchange of the Securities, the Registrar 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, Ameritrust 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 5 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 Certlficates. The issuer shall provide the Registrar with an adequate inventory of Securities certificates to facilitate transfers. Ameritrust covenants that it will maintain the Securities certificates in safekeeping and will use reasonable care in maintaining such Securities certificates in safekeeping, which shalt be not less than the level of care it maintains for debt securities of other govemments or corporations for which it serves as registrar, or which it maintains for its own securities. Section 4.03. Eorm of Security Re, fq ster. Ameritrust as Registrar will maintain the records of the Security Register In accordance with the Ameritrust's general practices and procedures in effect from time to time. Ameritrust shall not be obligated to maintain such Register in any form other than those which Ameritrust has currently available and currently utilizes at the time. The Security Register may be maintained in written form or in any other form capable of being converted into written form with a reasonable time. Section 4.04. List of Security Holders. Ameritrust 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 in the Security Register at any time Ameritrust is customarily open for business, provided that reasonable time Is allowed Ameritrust to provide an up-to-date fisting or to convert the information into written form. Ameritrust will not release or disclose the content of the Security Register to any Person other than to, or at the written request of, an authorized officer or employee of the Issuer as specified in an issuer Order. or as otherwise required by law. Upon receipt of a subpoena or court order or other legal proceedings, Ameriirust wiili notify the Issuer so that the Issuer may contest the same. Section 4.05. Return of Cancelled Certificates. Ameritrust will, at such reasonable intervals as It determines, surrender to the Issuer those Securities certificates in fieu of which or in exchange for which other Securities certificates have been Issued, or which have been paid. Section 4.06. MuKitated, Destroyed. Lost. or Stolen Securltles Certificates. The Issuer hereby instructs Ameritrust to deriver and issue Securities certificates in exchange for or in lieu of mutilated, destroyed, lost or stolen Securities certificates as long as the same does not result in an overissuance. r - Ameritrust will issue and deliver a new Security certificate in exchange for a mutilated Security certificate surrendered to it Ameritrust will issue a new Security certificate In lieu of a Security certificate for which it received written representation form the Holder that the certificate representing such Security Is destroyed, lost, or stolen; without the surrender or production of the original certiftate. Ameritrust will pay on behalf of the issuer the unpaid principal and premium, if any, of a Security at the Stated Maturity or on the Redemption Date or Acceleration Date, for which it receives written representation that the certificate representing such Security Is destroyed, lost or stolen without the surrender or production of the original certificate. Ameritrust will not issue a replacement Security certificate or pay such replacement Security certificate unless there is delivered to Ameritrust such security or indemnity as it may require (which may. be by Ameritrust's Blanker Lost Original Instruments Bond) to save both Amedbust.and the Issuer harmless. On satisfaction of Ameritrust and the Issuer that a Security certificate has been mutilated, destroyed, lost, or stolen, the certificate number on the mutitated, destroyed, lost, or stolen Security certificate will be cancelled with a notation that it has been mutilated, destroyed, lost or stolen and a new Security certificate will be issued of the same series and of like tenor and principal amount bearing a number (according to the Security Register) not contemporaneously outstanding. Ameritrust may charge the Holder Ameritrust's fees and expense in connection with Issuing a new Security certificate in lieu of or exchange for a mutilated, destroyed, lost or stolen Security certificate. 'The Issuer hereby accepts Ameritrust's /current blanket Lost Original Instrument Bond for lost, stolen, or destroyed certificates and any future substitute bond for lost, stolen, or destroyed certificates that Ameritrust may arrange, and agrees that the coverage under any such bond is acceptable to it and meets the Issuer's requirements as to security or indemnity. Ameritrust need not notify the Issuer of any changes in the security or other company giving such bond or the terms of such bond. At any time Ameritrust is customarily open for business, the blanket Lost Original Instrument Bond then uta%¢ed for the purpose of lost, stolen or destroyed certificates by Amerkrust shall be available for inspection by the Issuer on request. The issuer hereby accepts Ameritrust's indemnity to replace Security certificates de ,troyed or lost while in the possession or under the control of Ameritrust Section 4.07. TMnS00tion tnformatiort to Issuer. Ameritrust will, within a reasonable time after receipt of an Issuer Request; furnish the Issuer information as to the Securities it has paid pursuant to 3.01, Security certificate it has delivered upon the transfer or exchange of any Security certificates pursuant to Section 4.01 and Security certificates it has delivered in exchange for or in lieu of mutilated, destroyed, lost or stolen Security certificates pursuant to Section 4.06. ARTICLE FIVE 7 AMERITRUST Section 5.01. Duties of Amerltrue, Ameritrust undertakes to perform the duties set forth herein and agrees to use reasonable care in the performance thereof. Section 5.02. Beltance on Documents Etc (a) Ameritrus: may conclusively rely, as to the truth of the statements and correctness of the opinions expressed therein, on certificates or opinions furnished to Ameritrust by the Issuer. (b) Ameritrust shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it shall be proved In a court of competent Jurisdiction that Ameritrust was negligent In ascertaining the pertinent facts. (c) No provision of this Agreement shall require Ameritrust 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 of 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 risk or liability is not assured to it (d) Amerkrust may rely and shalt be protected by the Issuer against any claim by the Issuer or any other Person in acting or refraining from acting upon any resolution, cer ficate,. 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, Ameritrust need not examine the ownership of any Securities, but Is protected in acting upon receipt of a Security certificate containing an endorsement or instruction of transfer or power of transfer which appears on its face to be signed by the Holder or any agent of the Holder. Ameritrust 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) Ameritrust may consult with legal counsel, and the written advise 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 therein; Provided that any such written advice or opinion is supplied to the Issuer by Ameritrust. (f) Ameritrust may exercise any of the powers hereunder and perform any duties hereunder either directly or by or though agents or attorneys of Ameritrust Section 5.03. Recitals of issuer. The recitals contained herein other than any recital, relating to the power and authority of Ameritrust under this Agreement and in the Securities shall be taken as the statements of the Issuer, and Ameritrust assumes no responsibility for their correctness. 0 Oal Ameritrust 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. Ameritrust, 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; provided that such dealings do not result In a breach of any duties or agreements Imposed by this Agreement. Section 5.05. Moneys Held by Ameritrust. Funds held by Amentrust hereunder need not be segregated from any other funds provided appropriate accounts are maintained in the name and for the benefit of the Issuer. Ameritrust shall be under no liability for interest on any money received by It hereunder. Any money deposited with Ameritrust for the payment of the principal, premium, if any or interest on any Security wilt be subject to app cable unclaimed property laws, if any security or interest check shall not be presented for payment within three (3) years following the stated maturity, Amerib ust shall, except as otherwise directed by the Issuer, upon Issuer order, return to the Issuer. The Holder of such Security shall thereafter look only to the Issuer for payment thereof, and all liability of Ameritrust with respect to such money shall thereupon cease. Moneys Held by Sank - 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, 'avaiiable to the Issuer, provided by the Federal Deposit insurance Corporation to be fully collateralized with securities or obligations that are eligible under the laws of the State of Texas 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•paymenL Section 5.06. Indemnification. To the extent permitted by law, the Issuer agrees to indemnify Ameritrust for, and hold It harmless against, any loss, Rability or expense incurred by AmenImst without negrigence or bad faith on Ameritruses part, arising out of or in connection with its acceptance or administration of Ameritrust's duties hereunder, including the cost and expense (Including Ameritrust's counsel fees) 'of defending against any claim or liability in connection with the exercise or performance of any of Amentrust's powers or duties under this Agreement. Section 5.07. Interpleader.. The Issuer and Ameritrust agree that Arneritrust may seek adjudication of any adverse claim, demand or controversy over its person as well as funds on deposit, in any Federal or State District Court located in the State and County where either the Ameritrust Office or the Administrative Once 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 Ameritrust further agree that Ameritrust has the right to file a Bili of Interpleader in any court of competent jurisdiction to determine the rights of any Person claiming any interest herein. . i _ Section 5.08. Depository Services. It is hereby represented and warranted that, in the event the Securities are otherwise qualified and accepted for Depository Trust Company or equivalent depository trust service by other organizations, Ameritrust has the capabTrty and, to the extent within its control, will comply with the operational arrangements, which estabCshes requirements for securities to be eligible for such typed depository trust services, including but not .!united to, requirements for the timeliness of payments and funds "ability, transferred 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, otices. Any request, demand, authorization, direction, notice, consent, waiver or other document provided or permitted hereby to be given or furnished to the Issuer or Ameritrust shall be mailed or delivered to the issuer or Ameritrust, respectively, at the address shown on page 11. Section 6.04. effect of Headings. The Article and Section headings herein are for convenience only and shall not affect the construction hereof. Section 6.05. Successors and Assigns. All covenants and agreements herein by the Issuer and Ameritrust shall bind their respective successors, and'assigns, whether so expressed or not Section 6.06. Severability. 10 In Case any provision herein shall be invalid, illegal or unenforceable, the validity, legality 001. and enforceability of the remaining provisions shall not in any way be effected or impaired thereby. Section 6.07. Benefits of Agreement. Nothing herein, expressed 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. jEntfre Agreement, This Agreement and the Security Resolution constitute the entire agreement between the parties hereto relative to Ameritrust ming as Paying Agent/Registrar and if any conflict exists between this Agreement and the Security Resolution, the Security Resolution shall govern. Section 6.09, Counterparts. This Agreements may be executed in any number of counterparts, each which shall be deemed an original and all of which shalt constitute one and the same Agreement Section 6.10. Terrnlnat;on. This Agreement will terminate (r) on the date of final payment of the principal of and interest on the Securities to the Holders thereof or (n� may be earlier terminated by either party Won sixty (60) days written notice; provided, however, an early termination of this Agreement by eitherpartyshalt not be effective until (a) a successor Paying Agent/Registrar has been .appointed by the Issuer and such appointment accepted and (b) notice given to the Holders of the Securities of the appointment of a successor Paying Agent/Registrar by the Issuer. Furthermore, Ameritrust and Issuer mutually agree that the effective date of any 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, Ameritrust agrees to promptly transfer and deliver the Security Register (or a copy thereof), together with other pertinent books and records relating to the Securities, to the successor Paying Agent/Registrar designated and appointed by Me 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. Goveming Law. This Agreement shall be construed In accordance with and governed by the laws of the State of Texas. i1 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above mitten. 12 y ,., Attest: Vie': Oct P,rs:det4 MAIKA I Ge,hlexailima&�,-, / Address: 4400 Cobbs Drive Waco, Texas 76714 Ameritrust Texas N.A. By Lr T4Z7 l Mailing Address: Amedtrust Texas NA Debt Operations Division P. O. Box 2320 Dafts, Texas 75221-2320 Delivery Address: Ameritrust Texas N.A. Debt Operations Division 212 N. St Paul St. -14th Floor 13 r-. 14 Registered Bond Processing Dallas, Texas 75201 EXHMIT "Ar l mal ministration Fee $ 350.00 SIGNATURE IDENTIFICATION AND NO -LITIGATION CERTIFICATE THE STATE OF TEXAS BRAZOS RIVER AUTHORITY We, the undersigned, hereby certify as follows: (a) That this certificate is executed and delivered with reference to that issue of Brazos seRiver Bonds uthority Special Facilities (Lake Alan Henry) 1991, dated January 15, 1991, in the principal amount of $39,685,000. (b) That we officially executed and signed said Bonds by causing facsimiles of our manual signatures to be im- printed or lithographed on each of said Bonds, and we hereby adopt said facsimile signatures as our own, respectively, and declare that said facsimile signatures constitute our signatures the same as if we had manually signed each of said Bonds. (c) That said Bonds are substantially in the form, and have been duly executed and signed in the manner, prescribed in the resolution authorizing the issuance of said Bonds. (d) That at the time we so executed and signed said 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 same. (e) That no litigation of any nature has been filed or is now pending to restrain or enjoin the issuance or deliv- ery of said Bonds, or which would affect the provision made for their payment or security, or in any manner questioning the proceedingsanat rsoauthority ar as weCeknowngande believe issuance of said no such Bonds, and litigation is threatened. (f) That neither the corporate existence nor bound- aries of said issuer is being contested, that no litigation has been filed or is now pending which would affect the authority of the officers of said issuer to issue, execute, fr^ and deliver said Bonds, and that no authority or proceedings for the issuance of said Bonds have been repealed, revoked or rescinded. (g) That we have caused the official seal of said issuer to be impressed, or printed, or lithographed on each of said Bonds, and said seal on said Bonds has been duly adopted as, and is hereby declared to be, the official seal of said issuer. r 0 OW r. EXECUTED and delivered this,;Eg OFFICIAL TITLES President, Board of Directors Secretary, Board of Directors Df the officers subscribed above are hereby certiI to be truSl GNAT eGl 41 "b �eaAR MArn N A A 0. TEA'3nx BY: By 71 Authorized Officer FEB 15 1991 Public Finance Division Attorney General's Office 411 West 13th Street Eighth Floor Austin, Texas 78701 BRAZOS RIVER AUTHORITY SPECIAL FACILITIES (LAKE ALAN HENRY) REVENUE BONDS, SERIES 1991, $39,685,000 Gentlemen: The above issue of bonds is being sent to your office, and ,.� it is requested that you examine and approve the Bonds in accordance with law. We enclose herewith one signed but undated copy of the Signature Identification and No -Litigation Certificate. Upon approval of the bonds, you are authorized to insert the date of approval in said Signature Certificate. IIf any litigation or contest should develop pertaining to the Bonds or any other matters covered by said Certificate, we will notify you at once both by telephone and telegraph. With this assurance you can rely upon the absence of any such litigation or contest, and on the veracity and currency of 'r• said Certificate at the time you approve the bonds unless we advise you otherwise. After you have examined the bonds, kindly deliver them to a representative from the Office of the Comptroller of Public Accounts of the State of Texas. The Comptroller has received instructions as to disposition of such bonds following their registration. Yours very truly, BRAZOS RIVER AUTHORITY General Man ge cc: Comptroller of Public Accounts First Southwest Company McCall, Parkhurst & Horton FEB 1 � 1991 Bond Division Office of Comptroller of Public Accounts Attention: Arlene Chisholm 111 E. 17th Street Austin, Texas 78774 BRAZOS RIVER AUTHORITY SPECIAL FACILITIES HENRY) REVENUE 'BONDS, SERIES 19911 , Gentlemen: The approved Bonds of the captioned Series will. be delivered to you by the Attorney General of Texas. You are hereby re- quested to register said Series of ti►edBonds. as Atred suchylaw time and by the proceedings authorizing as you have registered such bonds, and the comptroller's as nd Registration Certif bce to our authority to delon each Bond is iver them to sealed, this will your Texas, together with eight Attorney Ameritrust Texas o A''General's opinion and the Comptrol- copies of the said issue of bonds. ler's Signature Certificate covering Yours very truly, cc: Attorney General of the State of Texas ,. First Southwest Company Ameritrust Texas N. A., Austin, Texas McCall, Parkhurst & Horton r ., no r, r r.0 y, a ti �sT�As. DAN MORALES ATTORNEY GENERAL office of the 91ttornep general otate of Texas February 20, 1991 B azo= River Authority THIS IS TO CERTIFY that the Brazos River Authoritv (the "Issuer") has submitted to me Special Faie Bonds cilities (Lake` Aian y He he aggregate principal Series 1991 (the "Bonds") approval. .The Bonds are dated amount of $39,685,000 for app January 15, 1991, numbered 1 through 16 and eon authorized by a Resolution of the Issuer passed January 21, 1991 (the "Resolution"). I have examined the law aandsurendcertified e this opinion.proceedings and other papers as I deem necessary to As to questions of fact material to my opinion, I have relied upon representations of the Issuer contained officials furnished proceedings and other certifications verify the same by independent to me without undertaking investigation. I express no opinion relating to any Official Statement or other offering material relating to the Bonds. Based on my examination, I am of the opinion, as of the date hereof and under existing law, as follows (capi to ized them terms, except as herein defined, have the meanings given in the Resolution): (1) The Bonds have been ssued in accornce with obligations of the issuer. .and are valid and binding special (2) The Bonds, together with outstanding revenue lien bonds, are and payable solely from and equally secured by pledge of the Net Revenues, being the gross receipts and income from the ownership and operation of Lake Alan uant to etre received by the Issuer including receipts p ursContract with the Cita of j Lubbock County, Texas, less Maintenance and operation Costs. e the (3) The owner of the BondsBonds out of any funds orright to be to demand payment of the raised by taxation. Therefore, the Contract and the Bonds are approved. 06 4 Attorney General f the State of Texas No. 24630 Book No. 89 spc 5121463.2100 P.O. BOX 12548 AUSTIN, TEXAS 78711.2548 72 r t% ar... .',..6 OFFICE OF COMPTROLLER X OF THE STATE OF TEXAS Z 1. John Sharp. Comptroller of Public Accounts of the State of Texas. do hereby certify that inion of the Attorney General approving the the attachment is a true and correct copy of the op Brazos River Authority Special Facilities (Lake Alan Henry) Revenue Bonds, Series 1991 1/16 of the denomination of numbered January 15 , tggl as authorized by $ various dated various percent. under and by authority of which said bonds were registered issuer, interest 20 day of February ,19 991 as the same in this office. on the 92 379 Bond Register of the Comptroller's Office, Vol. appears of record on page 52799 RegisterNumber 20 Given under my hand and seal of office, at Austin, Texas, the day of February �g91 154 JOHN SHARP Comptroller of Public Accounts State of Texas OFFICE OF COMPTROLLER ( OF THE STATE OF TEXAS j I Arlene Chisholm -1 Bond Clerk X 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 20 day of February .19 91 .1 signed the name of the Comptroller to the certificate of registration endorsed upon the Brazos River Authority Special Facilities (Lake Alan Henry) Revenue Bonds, Series 1991 1/16 January 15, 1991 numbered dated and that Isigning the certificate of registration I used the following signature: IN WITNESS WHEREOF I have executed this certificate this February i9 91 /1 .. A 3 day of ,., I. John Sharp, Comptroller of Public Accounts of the State of Texas, certify 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 ,f 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 379 of volume 379 under Registration Number 52799 in the Bond Register kept in the office of the Comptroller. GIVEN under my hand and seal of office at Austin, Texas, this 20 day of February 19 91 ♦� ` JOHN SHARP J Comptroller of Public Accounts of the State of Texas Legal cite: TEX. REV. CIV STAT. ANN. An. 4362 (1990) FEB 2 0 1991 Ameritrust Texas N. A. Attention: Robert Patterson Vice -President, Debt Administration Dept. 600 Congress Avenue, 4th Floor Austin, Texas 78701 BRAZOS RIVER AUTHORITY SPECIAL FACILITIES (LAKE ALAN HENRY) REVENUE BONDS, SERIES 1991, $39,685,000 Gentlemen: The issuer and the purchasers of the captioned series of bonds have designated your bank as the place, and as their agent, for the delivery and payment of the. bonds. Upon their registration, you are hereby authorized and directed to receive the bonds from the Public Finance Section of the Office of the Comptroller of Public Accounts, and to hold the bonds for safekeeping pending said delivery and payment. When you receive the bonds, please send, or make available, Bond Number One of said series to McCall., Parkhurst & Horton, Attorneys at Law, Dallas, Texas, for examination and return to you. Upon your receipt of the final unqualified approving legal opinion of said Attorneys as to the validity of the bonds, you are authorized and directed to deliver the bonds to the purchasers thereof, to -wit: Donaldson, Lufkin & Jenrette Securities Corporation & Associates when you have received payment for the bonds, in immediately available funds, in the sum of $39,092,355.45 and accrued interest to the date of delivery. You are further authorized and directed to remit all of the aforesaid proceeds received from the delivery and payment of the bonds, immediately upon receipt, and by the fastest means available, to the credit of the issuer of the bonds, at its official depository, as follows: MBank Waco, N.A. Waco, Texas Enclosed herewith are four signed but undated copies of the Treasurer's Receipt, Signature Identification and No -Liti- gation Certificate and Closing Certificate for said series of bonds. You are hereby authorized and directed to date all copies of each of said documents concurrently with the date of delivery of and payment for the bonds. If any litigation or contest should develop or be filed, or if any event should occur, or any knowledge should. come to our attention, which would change or affect the veracity of the statements and representations contained in any of said documents, the undersigned will notify you thereof imme- diately by telephone and telegraph. With this assurance you can rely on the absence of any such litigation, contest, event, or knowledge, and on the veracity and currency of each of said documents at the time of delivery of and payment for the bonds, unless you are notified otherwise as aforesaid. After all copies of each of said documents have been dated in accordance with the foregoing instructions, please send all of them to McCall, Parkhurst & Horton. Sincerely yours, B S RIVER RITY General M na e cc: Comptroller of Public Accounts First Southwest Company Donaldson, Lufkin & Jenrette Securities Corporation McCall, Parkhurst & Horton t CLOSING CERTIFICATE THE STATE OF TEXAS BRAZOS RIVER AUTHORITY We, the undersigned President and Secretary of Brazos River Authority, hereby certify as follows: 1. That this certificate is executed for and on behalf .� of the Attorney General of the State of Texas and the purchasers and subsequent owners of BrazosiBonds uthories Special Facilities (Lake Alan Henry) Revenue1991, dated January 15, 1991, in the principal amount of $39,685,000 (the "Series 1991 Bonds"). 2. That to our best knowledge and belief: (a) the descriptions and statements of or per- taining to the Authority containedin or amendment official Statement, and any addenda, supplement thereto, on the date of such Official Statement, and on the date of sale of said Series 1991 Bonds and the acceptance of the best a d i area truer and and on the correct inteall of the delivery, were material respects; (b) insofar as the Authority and its affairs, ., including its financial affairs, are concerned, such Official Statement did not and does not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or neces- sary to make the statements therein, nth made light not of the circumstances under which they weremisleading; (c) insofar as the descriptions and statements, including financial data, of or pertaining to entities, other than the Authority, and their activities con- tained in such Official Statement are concerned, such statements and data have been obtained from sources which the Authority no reason t believes o be believeiable and that that they are the Authority untrue in any material respect; and o r rr� (d) there has been no material adverse change in the financial condition of the Authority since the date of the last audited financial statements of the Author- ity. SIGNED AND $BALED this CFR (SEAL) ry NO ARBITRAGE CERTIFICATE 1. In General. 1.1. The undersigned is the General Manager of the Brazos River Authority (the "Issuer"). 1.2. This Certificate is executed for the purpose of �^ establishing the reasonable expectations of the Issuer as to future events regarding $39,685,b00 principal amount of the Issuer's Special Facilities (Lake Alan Henry) Revenue Bonds, Series 1991 (the "Bonds"). The Bonds are being issued pursuant to a resolution of the Issuer (the "Resolution") adopted on the date of sale of the Bonds. The Resolution 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, n 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 of issuing and delivering the Bonds. Olmk 2. The Purpose of the Bonds. 2.1. The Bonds are being issued pursuant to the Resolution (a) to provide for the payment of costs of issuing the Bonds, (b) to acquire and construct a dam and reservoir and related facilities for storing, controlling and conserving the waters of the Brazos River (the "Project") and (c) to deposit funds in the reserve fund (the "Reserve Fund") established by the Resolution. 2.2. All earnings, such as interest and dividends, received from the investment of the proceeds of the Bonds during the period of acquisition and construction of the Project and 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") . 2.3. 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. 3. Temporary Period. 3.1. 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 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 $100,000. 3.2. After entering into said binding obligations, work on such Project will proceed promptly with due diligence to completion. 3.3. All original proceeds derived from the sale of the Bonds 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. 4. Debt Service Fund. 4.1 A separate and special "Debt Service Fund" (the "Fund") has been created and established solely to pay the principal of and interest on the Bonds and any parity bonds, with a portion of the Fund constituting a bona fide debt service fund for. the Bonds, and money deposited into the Fund for the Bonds will not be invested, except during the thirteen month period beginning on the date of each such deposit of money, and the amounts received from the investment of money in the Fund will not be invested except during the one year period beginning on the date of receipt of such amounts; pro- vided, however, and except that, if any money so deposited, and any amounts received from the investment thereof, are .accumulated in the Fund and remain on hand in the Fund after thirteen months from the date of deposit of any such money or one year after the receipt of any such amounts from the investment thereof, such money and amounts allocable to the Bonds, to the extent of an aggregate not exceeding the lesser of 5 percent of the proceeds of the Bonds or $100,000 will not be subject to investment yield restrictions, and shall constitute a separate portion of the Fund. 4.2. It is expected that a portion of the Fund will be used primarily to achieve a proper matching of revenues collected for the Bonds and debt service on the Bonds within each bond year, and it is expected that such portion of the Fund will be depleted once a year on a first -in - first -out basis,.except for a possible carryover amount which will not exceed the greater of one years earnings on the Fund or 1/12 of annual debt service on the Bonds payable from the Fund, but 2 any money and amounts which may be accumulated in the Fund, to constitute a debt service reserve fund for the Bonds as described in section 4.1, above, shall constitute a separate r` portion of the Fund, and may not be depleted annually, and will not. be subject to yield restrictions; provided that in no event will such debt service reserve fund portion of the Fund ever exceed the lesser of 5 percent of the proceeds of the Bonds or $100,000. '^ 4.3. The gross earnings on that part of the Fund allocable to the Bonds for every bond year through the final maturity of the Bonds will be less than $100,000. 5. Debt Service Reserve Fund. ^ 5.1. Funds on deposit in the Debt Service Reserve Fund (the "Reserve Fund") are held in trust for the benefit of the holders of the bonds. If on any interest payment or maturity date, the 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 Fund in an amount ^ sufficient to make such payments. 5.2. Moneys on deposit in the Reserve Fund allocable to the Bonds and the greater of the cost or the face amount of investments in the Reserve Fund allocable to the Bonds will not at any time exceed the lesser of (a) 10 percent of the ^, face amount of the Bonds (b) 1.25 times average annual debt service on the Bonds, or (c) maximum annual debt service on the Bonds. 5.3. Amounts deposited in the Reserve Fund from proceeds received from the sale of the Bonds do not exceed 10 percent 0^1 of the proceeds of the Bonds. 5.4. The aggregate amount in the Reserve Fund (regardless of the source of the deposits to the Reserve Fund) allocable to the Bonds and invested at a yield that is higher than the yield of the Bonds will not at any time exceed an !^ amount equal to 10 percent of the proceeds of the Bonds. 6. Revenue Fund. 6.1. The Resolution confirms the creation of a Revenue Fund into which certain revenues of the Issuer are deposited. r Amounts on deposit in the Revenue Fund are transferred and used in the manner required by the Resolution. 6.2. Other than moneys in the Revenue Fund that are transferred to the 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 3 encounters financial difficulty. Amounts in the Revenue Fund will be invested without yield restriction. 7. Repair and Replacement Reserve Fund. 7.1. The Resolution confirms the creation of a Repair and Replacement Reserve Fund which is to be used solely for the purpose of making necessary repairs or replacement of worn, damaged or obsolete portions of Lake Alan Henry. 7.2. Moneys in the Repair and Replacement Reserve 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 Contingency and Improvement Fund will be invested without yield restriction. 8. Invested Sinking Fund Proceeds Replacement Proceeds. 801. 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 of this Certificate. 8.2. There are no funds or accounts other than the Fund +^; and the Reserve Fund which the Issuer reasonably expects to be available to pay the principal of or interest on the Bonds. 9. Other Obligations. 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. 10. Rebate to United States. The Issuer has covenanted in the Resolution 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. 4 it DATED: FEB 2 6 1991 r. BRAZOS RIVER AUTHORITY By: 4r�s"on .H. Hoge General Manager 2850 ONE AMERICAN CENTER AUSTIN, TEXAS 78701-3234 TELEPHONE: 512 478.3805 TELECOPY: 512 4720871 Exhibit "A" UW OFrICES McCALL, PARKHURST & HORTON 717 NORTH HARWOOD NINTH FLOOR DALLAS, TEXAS 75201.6587 TELEPHONE: 214 220.2800 TELECovr: 214 953-0736 January 1, 1990 402 ONE RIVERWALK PLACE SAN ANTONIO, TEXAS 78205-3503 ARBITRAGE REBATE REGULATIONS TELEPHONE: 512 2254800 TELECOPY: 512 225.2984 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 memoran- 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, 0-1 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 W 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 15, 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. Qections, 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 detemnines 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 McCall, Parkhurst & Horton - Page 2 s% 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 eamings from all the investments from the date of receipt 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 computa- tion 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 tern 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 40% W w Announcement 89-66, Table 1 Computation of Rebatable Arbitrage I. Future Value of Receipts Date Receipt 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 Explanation Principal and Interest from Certificates Principal and Interest from Certificates Principal and Interest from Certificates II. Future Value of Payments Date Payment Explanation 3/1/89 $10,000,000.00 Purchase Certificates Future Value of Payments 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 Yield 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 $14,015,517.31 $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 pubficly offered (i.e., sold by the issuer McCall. Parkhurst & Horton - Page 4 to a bond 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 comprises 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 O- 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 retirement 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 principal 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 determining the "early retirement value" and for determining the retirement price of any discounted bonds subject to mandatory early redemption. mcc:an, Parkhurst & Horton - Page 5 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 .. 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 of 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 pur- chase 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 Computing Yield 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 MUM, Parkhurst & Horton - Page 6 r`, 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 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. Earnings on Nonaurpose Investments The arbitrage rebate provisions apply only to the receipts from the r, 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 simi- lar 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. McCall, Parkhurst & Norton - Page 7 Oak 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 re- funding 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. 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 that 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 investments 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 obliga- tions 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. McCall, Parkhurst & Horton - Page 8 s. 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. 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 .4 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 -* required 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 $1,000, 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 mcc,an, rarKnurst & Horton - Page 9 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. If 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 obli- gations 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. T_ emaorary 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. McCalL Parkhurst & Horton - Page 10 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 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 require- ment, 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 (.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. McCall, Parkhurst & Horton - Page 11 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 $100,000, 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. Again, this memorandum is not intended as an exhaustive discussion nor as specific advice with respect to any specific transaction. We advise our dients 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. If you have any questions, please feel free to contact Harold T. Flanagan at (214) 220-2800. McCall, Parkhurst & Horton - Page 12 Exhibit "B" CERTIFICATE OF ELECTION PURSUANT TO SECTION 148(f)(4)(C) OF THE INTERNAL REVENUE CODE OF 1986 I, the undersigned, being the duly authorized representative of the Brazos River Authority (the 'Issuer") hereby state that the Issuer elects the provisions of section 148(f)(4)(C) of the Internal Revenue Code of 1986 (the 'Code"), relating to the exception to arbitrage rebate for temporary investments, with respect to the Issuer's Special Facilities (Lake Alan Henry) Revenue Bonds, Series 1991 (the "Bonds") as more specifically designated below. The Issuer intends to take action to comply with the two-year temporary investments exception to rebate afforded construction bonds under section 1.48(f)(4)(C) of the Code. Capitalized terms have the same meaning as defined in the No -Arbitrage Certificate. ❑ 1. PENALTY ELECTION. In the event that the Issuer should fail to expend the net proceeds of the Bonds in accordance with the provisions of section 148(f)(4)(C) of the Code, the Issuer elects, in lieu of rebate, the penalty provisions of section 148(f)(4)(C)(vii)(I) of the Code. 2. RESERVE FUND ELECTION. The Issuer elects to exclude from net proceeds", within the meaning of section 148(f)(4)(C)(iv) of the Code, of the Bonds, earnings on the Reserve Fund in accordance with section 148(f)(4)(C)(vi)(VI) of the Code. 3. MULTIPURPOSE ELECTION. The Issuer elects to treat that portion of the Bonds the proceeds of which are to be used for the payment of expenditures for construction, reconstruction or rehabilitation of the Project, as defined in the instrument authorizing the issuance of the Bonds, as separate issues in accordance with the provisions of section 148(f)(4)(C)(v)(II) of the Code. M 4. NO ELECTION. The Issuer understands that the elections which are adopted as evidenced by the check in the box adjacent to the applicable provision are irrevocable. Further, the Issuer understands that qualification for exclusion from the rebate requirement set forth in section 148(f) of the Code is based on subsequent events and is unaffected by the Issuer's expectations of such events as of the date of delivery of the Bonds. Accordingly, while failure to execute this certificate and to desienate the intended election does not preclude qualification, it would preclude the Issuer from the relief afforded by such election. DATED: FEB 2,6 1991 BRAZOS RIVER AUTHORITY TREASURER'S RECEIPT THE STATE OF TEXAS: .� BRAZOS RIVER AUTHORITY: The undersigned hereby certifies as follows: (a) That this certificate is executed and delivered with reference to that issue of BRAZOS RIVER AUTHORITY SPECIAL FACILITIES (LAKE ALAN HENRY) REVENUE BONDS, SERIES 1991, dated January 15, 1991, in the principal amount of $39,685,000. r (b) That the undersigned is the duly chosen, quali- fied, and acting Treasurer of the issuer of said Bonds. _(c) That of all said Bonds have been duly delivered to the purchasers thereof, namely: Donaldson, Lufkin & Jenrette Securities Corporation & Associates. (d) That all of said Bonds have been paid in full by said purchasers concurrently with the delivery of this r certificate, and the issuer of said Bonds has received, and hereby acknowledges receipt of, the agreed purchase price for said Bonds, being $39,092,355.45 and accrued interest to the date of delivery. ., EXECUTED and delivered this B 2 6 1991 n r CERTIFICATE OF UNDERWRITER The undersigned AUTHORITY SPECIAL FACILITIES (LAKE ALAN HENcertifics as follows with RY) REVENUE BONDS3Sect to the sale of ERIES 1991R(the "BondsER 1. The undersigned is the manager of the underwriters and selling group (the "Underwriter') which has purchased the Bonds from the Brazos River Authority (the "Authority'l. 2. The undersigned has made a bona fide offering of the Bonds to the public. 3. The first price during the initial offering (expressed as a "yield") of the Bonds at which at least 10 percent of the principal amount of the Bonds was sold to the public is set forth below: The Bonds sold by the undersigned have not been offered at one price to the general public and at a discount from such price to institutional or other investors. 4. For purposes of this certificate, the term "public" does not include (a) the undersigned, (b) members of the syndicate, if any, managed by the undersigned, or (c) any bondhouses, brokers, dealers, and similar persons or organizations acting.in the capacity of underwriters or wholesalers that are related to, or controlled by, or are acting on behalf of or as agents for the undersigned or members of any syndicate in which the undersigned is participating in the sale of the Bonds. 5. The offering price described above reflects current market prices at the time of such sales. 6. If any or all of the obligations constituting the Bonds are to be insured then the premium paid for bond insurance is solely for the transfer of credit risk for the payment of debt service on the Bonds. The Underwriter has represented that the present value of the premium paid for bond insurance for each obligation constituting the Bonds to which such premium is properly allocated and which are insured thereby Is less than -the present value of the interest reasonably expected to be saved as a result of the insurance on each obligation constituting the Bonds. The premium has been paid to a person which is not exempt from federal income taxation and which is not a user or related to the user of any proceeds of the Bonds. In determining present value for this purpose, the yield of the Bonds (determined with regard to the payment of the guarantee fee) has been used as the discount rate. 7. The undersigned understands that the statements made herein will be relied upon by the Authority in its effort to comply with the conditions imposed by the Internal Revenue Code of 1986 and by Bond Counsel in rendering their opinion that the interest on the Bonds is excludable from the gross income of the owners thereof. EXECUTED and DELIVERED this day of ",a, 1991. By Tit e) Principal Principal Amount at Years of Amount at Maturity Years of Mt Yield Maturity Maturityaturi Yield $ 440,000 1992 ri _ 70 $ 670,000 1999 ?() 465,000 L993 6-00 710,000 2000 6-90 490,000 1994 6.15 760,000 2001 6.90 520,000 1995 6.30 810,000 2002 6.95 555,000 1996 6.40 870,000 2003 7.00 6 50 930,000 2004 7.00 590,000 1997 • 7.00 625,000 1998. 6.60 1,000,000 2005 $ 7,650,000 2011 j -J5-___ $22,600,000 2021 7.20 The Bonds sold by the undersigned have not been offered at one price to the general public and at a discount from such price to institutional or other investors. 4. For purposes of this certificate, the term "public" does not include (a) the undersigned, (b) members of the syndicate, if any, managed by the undersigned, or (c) any bondhouses, brokers, dealers, and similar persons or organizations acting.in the capacity of underwriters or wholesalers that are related to, or controlled by, or are acting on behalf of or as agents for the undersigned or members of any syndicate in which the undersigned is participating in the sale of the Bonds. 5. The offering price described above reflects current market prices at the time of such sales. 6. If any or all of the obligations constituting the Bonds are to be insured then the premium paid for bond insurance is solely for the transfer of credit risk for the payment of debt service on the Bonds. The Underwriter has represented that the present value of the premium paid for bond insurance for each obligation constituting the Bonds to which such premium is properly allocated and which are insured thereby Is less than -the present value of the interest reasonably expected to be saved as a result of the insurance on each obligation constituting the Bonds. The premium has been paid to a person which is not exempt from federal income taxation and which is not a user or related to the user of any proceeds of the Bonds. In determining present value for this purpose, the yield of the Bonds (determined with regard to the payment of the guarantee fee) has been used as the discount rate. 7. The undersigned understands that the statements made herein will be relied upon by the Authority in its effort to comply with the conditions imposed by the Internal Revenue Code of 1986 and by Bond Counsel in rendering their opinion that the interest on the Bonds is excludable from the gross income of the owners thereof. EXECUTED and DELIVERED this day of ",a, 1991. By Tit e) FIRST SOUTHUE ST COMPANY 2/15/1991 PAGE: 1 RECORD NAME - BRA LAKE ALAN HENRY INITIAL OFFERING PRICE TO THE PUBLIC DOLLAR ISSUE PRICE DATE PRINCIPAL COUPON YIELD PRICE TO PUBLIC 8/15/1992 440,000.00 8.800 5.700 104.307 458,950.80 8/15/1993 465,000.00 8.800 6.000 106.335 494,457.75 r 8/15/1994 490,000.00 8.800 6.150 108.163 529,998.70 8/15/1995 520,000.00 8.800 6.300 109.604 569,940.80 8/15/1996 555,000.00 8.800 6.400 110.926 615,639.30 8/15/1997 590,000.00 8.800 6.500 111.987 660,723.30 8/15/1998 625,000.00 8.800 6.600 112.806 705,037.50 8/15/1499 670,000.00 8.800 6.700 113.402 759,793.40 8/15/2000 710,000.00 8.800 6.800 113.793 807,930.30 8/15/2001 760,000.00 8.800 6.900 113.996 866,369.60 8/15/2002 810,000.00 8.625 6.950 113.088 916,012.80 8/15/2003 870,000.00 8.500 7.000 112.337 977,331.90 8/15/2004 430,000.00 8.500 7.000 112.942 1,050,360.60 8/15/2005 1,000,000.00 8.500 7.000 113.506 1,135,060.00 8/15/2006 1,065,000.00 7.000 7.150 98.396 1,047,917.40 8/15/2007 1,140,000.00 7.000 7.150 98.396 1,121,714.40 8/15/2008 1,225,000.00 7.000 7.150 98.396 1,205,351.00 8/15/2009 1,310,000.00 7.000 7.150 98.346 1,288,487.60 8/15/2010 1,400,000.00 7.000 7.150 98.396 1,377,544.00 8/15/2011 1,510,000.00 7.000 7.150 98.396 1,485,779.60 8/15/2012 1,610,000.00 6.800 7.200 95.084 1,530,852.40 8/15/2013 1,730,000.00 6.800 7.200 95.084 1,644,953.20 8/15/2014 1,860,000.00 6.800 7.200 95.084 1,768,562.40 8/15/2015 2,000,000.00 6.800 7.200 95.084 1,901,680.00 8/15/2016 2,140,000.00 6.800 7.200 95.084 2,034,797.60 8/15/2017 2,300,000.00 6.800 7.200 95.084 2,186,932.00 8/15/2018 2,460,000.00 6.800 7.200 95.084 2,339,066.40 8/15/2014 2,640,000.00 6.800 7.200 95.084 2,510,217.60 8/15/2020 2,830,000.00 6.800 7.200 95.064 2,690,877.20 8/15/2021 3,030,000.00 6.800 7.200 95.084 2,881,045.20 TOTALS 39,685,000.00 39,563,884.75 PLUS ACCRUED INTEREST TO 2/26/1991 329,453.69 277,600.00 LESS INSURANCE FEE TARGET FIGURE FOR YIELD CALCULATION 39,615,738.44 WEIGHTED AVE MATURITY FOR 8038-G 20.29 Oft FIRST SOUTHWEST COMPANY 2/15/1991 PAGE: 1 RECORD NAME - BRA LAKE ALAN HENRY w PRICED TO MATURITY DATE PRINCIPAL COUPON INTEREST DEBT SERVICE YIELD PRICE 8/15/1991 1,687,445.73 1,687,445.73 2/15/1992 1,446,380.44 1,446,380.44 8/15/1992 440,000.00 8.800 1,446,382.06 1,886,382.06 5.700 104.307 2/15/1993 1,427,020.44 1,427,020.44 8/15/1993 465,000.00 8.800 1,427,022.06 1,892,022.06 6.000 106.335 2/15/1994 1,406,560.44 1,406,560.44 8/15/1994 490,000.00 8.800 1,406,562.06 1,896,562.06 6.150 108.163 2/15/1995 1,385,000.44 1,385,000.44 8/15/1995 520,000.00 8.800 1,385,002.06 1,905,002.06 6.300 109.604 2/15/1996 1,362,120.44 1,362,120.44 8/15/1996 555,000.00 8.800 1,362,122.06 1,917,122.06 6.400 110.926 2/15/1997 1,337,700.44 1,337,700.44 8/15/1997 590,000.00 8.800 1,337,702.06 1,927,702.06 6.500 111.987 r 2/15/1998 1,311,740.44 1,311,740.44 8/15/1998 625,000.00 8.800 1,311,742.06 1,936,742.06 6.600 112.806 2/15/1999 1,284,240.44' 1,284,240.44 8/15/1999 670,000.00 8.800 1,284,242.06 1,954,242.06 6.700 113.402 2/15/2000 1,254,760.44 1,254,760.44 8/15/2000 710,000.00 8.800 1,254,762.06 1,964,762.06 6.800 113.793 2/15/2001 1,223,520.44 1,223,520.44 8/15/2001 760,000.00 8.800 1,223,522.06 1,983,522.06 6.900 113.996 2/15/2002 1,190,080.44 1,190,080.44 8/15/2002 810,000.00 8.625 1,190,082.06 2,000,082.06 6.950 113.088 �^ 2/15/2003 1,155,150.00 1,155,150.00 8/15/2003 870,000.00 8.500 1,155,150.00 2,025,150.00 7.000 112.337 2/15/2004 1,118,175.00 1,118,175.00 8/15/2004 930,000.00 8.500 1,118,175.00 2,048,175.00 7.000 112.942 2/15/2005 1,078,650.00 1,078,650.00 8/15/2005 1,000,000.00 8.500 1,078,650.00 2,078,650.00 7.000 113.506 2/15/2006 1,036,150.00 1,036,150.00 8/15/2006 1,065,000.00 7.000 1,036,150.00 2,101,150.00 7.150 98.396 2/15/2007 998,875.00 998,875.00 8/15/2007 1,140,000.00 7.000 998,875.00 2,138,875.00 7.150 98.396 ^ 2/15/2008 958,975.00 958,975.00 8/15/2008 1,225,000.00 7.000 958,975.00 2,183,975.00 7.150 98.396 2/15/2009 916,100.00 916,100.00 8/15/2009 1,310,000.00 7.000 916,100.00 2,226,100.00 7.150 98.396 2/15/2010 870,250.00 870,250.00 +^ 8/15/2010 1,400,000.00 7.000 870,250.00 2,270,250.00 7.150 98.396 2/15/2011 821,250.00 821,250.00 w Oak FIRST SOUTHWEST COMPANY 2/15/1991 PAGE: 2 RECORD NAME - BRA LAKE ALAN HENRY PRICED TO MATURITY PRINCIPAL COUPON INTEREST DEBT SERVICE YIELD PRICE 1,510,000.00 7.000 821,250.00 2,331,250.00 7.150 98.396 768,400.00 768,400.00 1,610,000.00 6.800 768,400.00 2,378,400.00 7.200 95.084 713,660.00 713,660.00 1,730,000.00 6.800 713,660.00 2,443,660.00 7.200 95-084 654,840.00 654,840.00 1,860,000.00 6.800 654,840.00 2,514,840.00 7.200 95.084 591,600.00 591,600.00 2,000,000.00 6.800 591,600.00 2,591,600.00 7.200 95.0 84 523,600.00 523,600.00 2,140,000.00 6.800 523,600.00 2,663,600.00 7.200 95.084 450,840.00 450,840.00 2,300,000.00 6.800 450,840.00 2,750,840.00 T.200 95.084 372,640.00 372,640.00 2,460,000.00 6.800 372,640.00 2,832,640.00 7.200 95.084 289,000.00 289,000.00 2,640,000.00 6.800 289,000.00 2,929,000.00 7.200 95.084 199,240.00 199,240.00 2,830,000.00 6.800 199,240.00 3,029,240.00 7.200 95.084 103,020.00 103,020.00 3,030,000.00 6.800 103,020.00 3,133,020.00 7.200 95.084 39,685,000.00 58,186,543.23 97,871,543.23 ORIGINAL ISSUE DISCOUNT IS 1,233,722.00 THE HALF PENNY CODON IS ROUNDED UP ON THE 8/15 PAYMENT FIRST SOUTHWEST COMPANY 2/15/1991 PAGE: 1 RECORD NAME - BRA LAKE ALAN HENRY PRICED TO MATURITY PRINCIPAL COUPON INTEREST DEBT_ SERVICE YIELD PRICE 1,687,445.73 1,687,445.73 440,000.00 8.800 2,892,762.50 3,332,762.50 5.700 104.307 465,000.00 8.800 2,854,042.50 3,319,042.50 6.000 106.335 490,000.00 8.800 2,813,122.50 3,303,122.50 6.150 108.163 520,000.00 8.800 2,770,002.50 3,290,002.50 6.300 109.604 555,000.00 8.800 2,724,242.50 3,279,242.50 6.400 110.926 590,000.00 8.800 2,675,402.50 3,265,402.50 6.500 111.987 625,000.00 8.800 2,623,482.50 3,248,482.50 6.600 112.806 670,000.00 8.800 2,568,482.50 3,238,482.50 6.700 113.402 710,000.00 8.800 2,509,522.50 3,219,522.50 6.800 113.793 760,000.00 8.800 2,447,042.50 3,207,042.50 6.900 113.996 810,000.00 8.625 2,380,162.50 3,190,162.50 6.950 113.088 870,000.00 8.500 2,310,300.00 3,180,300.00 7.000 112.337 930,000.00 8.500 2,236,350.00 3,166,350.00 7.000 112.942 1,000,000.00 8.500 2,157,300.00 3,157,300.00 7.000 113.506 1,065,000.00 7.000 2,072,300.00 3,137,300.00 7.150 98.396 1,140,000.00 7.000 1,997,750.00 3,137,750.00 7.150 98.396 1,225,000.00 7.000 1,917,950.00 3,142,950.00 7.150 98.396 1,310,000.00 7.000 1,832,200.00 3,142,200.00 7.150 98.396 1,400,000.00 7.000 1,740,500.00 3,140,500.00 7.150 98.396 1,510,000.00 7.000 1,642,500.00 3,152,500.00 7.150 98.396 1,610,000.00 6.800 1,536,800.00 3,146,800.00 7.200 95.084 1,730,000.00 6.800 1,427,320.00 3,157,320.00 7.200 95.084• 1,860,000.00 6.800 1,309,680.00 3,169,680.00 7.200 95.084 2,000,000.00 6.800 1,183,200.00 3,183,200.00 7.200 95.084 2,140,000.00 6.800 1,047,200.00 3,187,200.00 7.200 95.084 2,300,000.00 6.800 901,680.00 3,201,680.00 7.200 95.084 2,460,000.00 6.800 745,280.00 3,205,280.00 7.200 95.0&: 2,640,000.00 6.800 578,000.00 3,218,000.00 7.200 95.0&4 2,830,000.00 6.800 398,480.00 3,228,480.00 7.200 95.08+ 3,030,000.00 6.800 206,040.00 3,236,040.00 7.200 95.084 39,685,000.00 58,186,543.23 97,871,543.23 ORIGINAL ISSUE DISCOUNT IS 1,233,722.00 THE HALF PENNY COUPON IS ROUNDED UP ON THE 8/15 PAYMENT FIRST SOUTHWEST COMPANY 2/15/1991 PAGE: 1 ------SCHEDULE OF PRESENT VALUE ------ AT A DISCOUNT RATE OF 7.208888852% START DATE 2/26/91 ' PRESENT CUMULATIVE DATE AMOUNTS P/V FACTOR VALUE PRESENT VALUE 1 8/15/91 1,687,445.73 .967300481 1,632,267.07 1,632,267.07 2 2/15/92 1,446,380.44 .933647670 1,350,409.73 2,982,676.80 3 8/15/92 1,886,382.06 .901165655 1,699,942.72 4,682,619.52 4 2/15/93 1,427,020.44 .869813703 1,241,241.93 5,923,861.45 5 8/15/93 1,892,022.06 .839552500 1,588,451.85 7,512,313.30 6 2/15/94 1,406,560.44 .810344097 1,139,797.95 8,652,111.25 r� 7 8/15/94 9,896,562.06 .782151868 1,483,399.56 10,135,510.81 8 2/15/95 1,385,000.44 .754940458 1,045,592.87 11,181,103.68 9 8/15/95 1,905,002.06 .728675746 1,388,128.80 12,569,232.48 10 2/15/96 1,362,120.44 .703324795 958,013.08 13,527,245.56 11 8/15/96 1,917,122.06 .678855814 1,301,449.46 14,828,695.02 r 12 2/15/97 1,337,700.44 .655238120 876,512.32 15,705,207.34 13 8/15/97 1,927,702.06 .632442096 1,219,159.93 16,924,367.27 14 2/15/98 1,311,740.44 .610439156 800,737.73 17,725,105.00 15 8/15/98 1,936,742.06 .589201708 1,141,131.73 18,866,236.73 16 2/15/99 1,284,240.44 .568703120 730,351.55 19,596,588.28 17 8/15/99 1,954,242.06 .548917687 1,072,718.03 20,669,306.31 18 2/15/00 1,254,760.44 .529820598' 664,797.93 21,334,104.24 19 8/15/00 1,964,762.06 .511387905 1,004,755.56 22,338,859.80 20 2/15/01 1,223,520.44 .493596494 603,925.40 22,942,785.20 21 8/15/01 1,983,522.06 .476424054 944,997.62 23,887,782.82 22 2/15/02 1,190,080.44 .459849050 547,257.36 24,435,040.18 23 8/15/02 2,000,082.06 .443850698 887,737.82 25,322,778.00 24 2/15/03 1,155,150.00 .428408936 494,876.58 25,817,654.58 25 8/15/03 2,025,150.00 .413504400 837,408.44 26,655,063.02 26 2/15/04 1,118,175.00 -399118399 446,284.22 27,101,347.24 27 8/15/04 2,048,175.00 .385232894 789,024.38 27,890,371.62 28 2/15/05 1,078,650.00 .371830471 401,074.94 28,291,446.56 29 8/15/05 2,078,650.00 .358894324 746,015.69 29,037,462.25 30 2/15/06 1,036,150.00 .346408232 358,930.89 29,396,393.14 31 8/15/06 2,101,150.00 .334356537 702,533.24 30,098,926.38 r� 32 2/15/07 998,875.00 '.322724125 322,361.06 30,421,287.44 33 8/15/07 2,138,875.00 .311496410 666,251.88 31,087,539.32 34 2/15/08 958,975.00 .300659312 288,324.76 31,375,864.08 35 8/15/08 2,183,975.00 .290199242 633,787.89 32,009,651.97 36 2/15/09 916,100.00 .280103082 256,602.43 32,266,254.40 37 8/15/09 2,226,100.00 .270358172 601,844.33 32,868,098.73 38 2/15/10 870,250.00 .260952291 227,093.73 33,095,192.46 39 8/15/10 2,270,250.00 .251873646 571,816.15 33,667,008.61 40 2/15/11 821,250.00 .243110850 199,654.79 33,866,663.40 FIRST SOUTHWEST COMPANY 2/15/1991 PAGE: 2 ----SCHEDULE OF PRESENT VALUE------ AT A DISCOUNT RATE OF 7.208888852% START DATE 2/26/91 PRESENT CUMULATIVE DATE AMOUNTS P/V FACTOR VALUE PRESENT VALUE 41 8/15/11 2,331,250.00 .234652916 547,034.61 34,413,698.01 42 2/15/12 768,400.00 .226489237 174,034.33 34,587,732.34 43 8/15/12 2,378,400.00 .218609577 519,941.02 35,107,673.36 44 2/15/13 713,660.00 .211004053 150,585.15 35,258,258.51 45 8/15/13 2,443,660.00 .203663129 497,683.44 35,755,941.95 46 2/15/14 654,840.00 .196577598 128,726.87 35,884,668.82 47 8/15/14 2,514,840.00 .189738577 477,162.16 36,361,830.98 48 2/15/15 591,600.00 .183137488 108,344.14 36,470,175.12 49 8/15/15 2,591,600.00 .176766054 458,106.91 36,928,282.03 50 2/15/16 523,600.00 .170616284 89,334.69 37,017,616.72 51 8/15/16 2,663,600.00 .164680468 438,642.90 37,456,259.62 52 2/15/17 450,840.00 .158951162 71,661.54 37,527,921.16 53 8/15/17 2,750,840.00 .153421181 422,037.12 37,949,958.28 54 2/15/18 372,640.00 .148083590 55,181.87 38,005,140.15 55 8/15/18 2,832,640.00 .142931697 404,874.04 38,410,014.19 56 2/15/19 289,000.00 .137959040 39,870.16 38,449,884.35 57 8/15/19 2,929,000.00 .133159384 390,023.84 38,839,908.19 58 2/15/20 199,240.00 .128526710 25,607.66 38,865,515.85 59 8/15/20 3,029,240.00 .124055209 375,793.00 39,241,308.85 60 2/15/21 103,020.00 .119739273 12,335.54 39,253,644.39 8/15/21 3,133,020.00 .115573491 362,094.05 39,615,738.44 TOTALS 97,871,543.23 39,615,738.44 lo1 r A LAW OFFICES M9CALL. PARKHURST & HORTON 2850 ONE AMERICAN CENTER 717 NORTH HARWOOD 402 ONE RIVERWALK PLACE NINTH FLOOR SAN ANTONIO, TEXAS 78206.3503 AUSTIN, TEXAS 78701.3234 TLLLOMONC 512 225.2600 T[LLPMpNL� 512.478-3805 DALLAS. TEXAS 73201.6587 TLLLCOPVt 512 225-2964 TLLVMONL'. 2-4 220.2600 TLLLCOPY'. 512 472.0671 TLLLCO'v: 214 953.0736 March 13, 1991 CERTIFIED MAIL Internal Revenue Service Center Philadelphia, Pennsylvania 19255 Re: Information Reporting - Tax -Exempt Bonds 'Brazos River Authority Revenue Bonds, Special Facilities (Lake Alan Henry) j Series 1991 Ladies and Gentlemen: Pursuant to the requirements o ion 1 San) original the Internand as Revenue Code of 1986, enclosed please photocopy of Form 8038-G which is hereby submitted to you for the above -captioned bonds issued February 26, 1991. ~ 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, r MCCALL, PARKHURST & HORTON Harold T. Flanagan HTF:amt Enclosures cc: Mr. Hobby H. McCall r, raa Form 8038-G (Rev. October 1989) Department of the Treasury Internal Revenue Service information Return for Tax -Exempt Governmental Obligations P. Under Section 149(e) OMB No. 1545-0120 ► see separate Instructions Expires 5-31-92 (Use Form 8038 -GC if the issue price is under $100.000) 1 Issuer's name RrA7niz River Authority 3 Number and street 11IIA !._t_L- 5 City or town. state. and ZIP code W.grn- Texas 76714 Check box if Amended Return ► 2 Issuer's employer identification number 74-6026892 4 Report number G19 91 - 1 6 Date of issue 2-26-91 7 Name of Issue Special Facilities (Lake Alan Henry) Revenue Bonds, Series 1991 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 ► ❑ 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 ❑ Utilities . • • . • • • ' • . • ' ' ' . ' ' ' ' . ' ' . . . . . . . 18 ❑ Other. Describe (see Instructions) ► S. tion of Obligations (a) (b) (c) Stated redemption weighted Maturity date Interest rate Issue price rice at m I ur avera a mall 1 045 2 3 030 000 105912 BH1 Issue pace S $39,563,884.75 19 Final maturity . 8-15-2021 6.80 % 2,88 , 39,563,884.7 39,685,000 20.87 VearsJ7. 20 Entireissue . Uses of Ori inat Proceeds of Bond Issues (including underwriters' discount)2. 21 Proceeds used for accrued interest . . . . . . . . . • • • • • • • • ' • ' ' ' ' 2� 22 Issue price of entire issue (enter line 20c) . . . • • . • ' ' ' ' ' ' 28 - '865,307'.26 23 Proceeds used for bond issuance costs (including underwriters' discount) . . 24 -0- 24 Proceeds used for credit enhancement . . . • • • • • . ' ' . 25 3,126,572.00 25 Proceeds allocated to reasonably required reserve or replacement fund . . 26 26 Proceeds used to refund prior issues . . . . . . . . . . . . . . 2 (f)I Net m%rest Yield cost %1 7.040 % ,563,884. 3,991,879.26 27 Total (add lines 23, 24.25, and 26) . . . . . . . . . . . . . . . . 28 Nonrefundin roceeds of the issue subtract line 27 from line 22 and enter amount here . . . 28 35 572 ,005.49 Description of Refunded Bonds (complete this part only for refundin bonds Not Applicable years 29 Enter the remaining weighted average maturity of the bonds to be refunded . . . . . . . . . ► 30 Enter the last date on which the refunded bonds will be called . . . • • • • • • • • • ' ► s • ria-. &4.w w.4e1e11 rhe raft ndPd hands were issued It - 32 32 Enter the amount of the state volume cap allocated to the issue . . . . . . . . . . . 33 Enter the amount of the bonds designated by the issuer under section 265MUBMI11) (small ► —0— issuer exception) . . . . . . . . . . . . . . . . . . . . . . 34 Pooled financings: —0— a Enter the amount of the proceeds of this issue that are to be used to make loans to other go. C1 and enter the name of the governmental units lo,b Check box if this issue is a ban made from the proceeds of another tax-exempt issue ❑ issuer ► and the date of the issue 10 - Under Under penalties of perjury. I declare that I have examined this return and accompanying schedules and statements. and to the gest of my knowledge and belief, thev are true. correct, and complete. IF I Please Sign e7 2-2 Here A,,n Date for Paperwork Reduction Act Notice, see page i of th instructions. Carson H. Hoge General Manafter Type or print name and title Form 8038-G (Rev.lo-89) .O.s. eo..rawnt h/atla8 Ortic- 1189-282-131100019 :0 FEB 2601 LAW OFFICES WCALL, PARKHURST & HORTON 2850 ONE AMERICAN CENTER 717 NORTH HARWOOD 402 ONE RIVERWALK PLACE AUSTIN, TEXAS 78701-3234 NINTH FLOOR SAN ANTONIO, TEXAS 78205-3503 TELEPHONE: 512 478-3805 DALLAS, TEXAS 75201.6587 TELEPHONE: 512 225-2800 N TELECOPY: 512 472-0871 TELEPHONE: 214 220.2800 TELECOPY: 512 225-2984 TELECOPY: 214 953.0738 BRAZOS RIVER AUTHORITY SPECIAL FACILITIES (LAKE ALAN HENRY) REVENUE BONDS, SERIES 1991, DATED JANUARY 15, 1991, IN THE AGGREGATE PRINCIPAL AMOUNT OF $39,685,000 AS BOND COUNSEL for the issuer of the Bonds described above (the "Bonds"), we have examined into the legality and validity of the Bonds, which mature serially on August 15 of each of the years 1992 through 2005, and on August 15, 2011 and August 15, 2021, bearing interest from their date, until maturity or redemption, at the following rates per annum: Maturity 1992, 8.8% Maturity 2001, 8.8% Maturity 1993, 8.8% Maturity 2002, 8.625% Maturity 1994, 8.8% Maturity 2003, 8.5% Maturity 1995, 8.8% Maturity 2004, 8.5% Maturity 1996, 8.8% Maturity 2005, 8.5% Maturity 1997, 8.8% ********************* Maturity 1998, 8.8% Maturity 2011, 7.0% Maturity 1999, 8.8% ********************* Maturity 2000, 8.8% Maturity 2021, 6.8% with said interest payable on August 15, 1991, and semiannu- ally thereafter on February 15 and August 15 of each year. All Bonds maturing on and after August 15, 2001 will be redeemable prior to scheduled maturity, in whole or in part, on February 15, 2001, or on any date thereafter, at the par value thereof plus accrued interest to the date fixed for redemption. The Bonds maturing on August 15, 2011 and August 15, 2021 are subject to mandatory sinking fund redemption in accordance with the terms of the resolution authorizing the issuance of the Bonds (the "Resolution"), at the par value thereof plus accrued interest to the date fixed for redemption. WE HEREBY CERTIFY that we have examined the following: (a) The Constitution and laws of the State of Texas under which Brazos River Authority (herein called "Authority") was created and is acting as a governmental agency, body politic and corporate. (b) Certified copies of the Resolution and other proceed- ings of the Board of Directors of the Authority authorizing the issuance of said bonds and pledging certain revenues for their payment. (c) An executed copy of a Contract between the Authority and the City of Lubbock, Texas, dated May 11, 1989, and other proceedings authorizing said Contract. (d) Executed Bond Number One. We have not examined, however, and do not express any opinion with respect to any statement of insurance printed on any of the Bonds. BASED ON SAID EXAMINATION, IT IS OUR OPINION that the bonds have been authorized, issued and delivered in accordance with the Constitution and laws of the State of Texas, and constitute valid and legally binding special obligations of the Authority, and that, except as may be limited by laws applic- able to the Authority relating to bankruptcy, reorganization, and other similar matters affecting creditors' rights, said bonds, together with any outstanding bonds on a parity there- with, are secured by and payable from "Net Revenues". The term "Net Revenues" is defined in the Resolution as "Revenues" less maintenance and operation costs incurred in connection with the ownership and operation of Lake Alan Henry. The term "Reve- nues" is defined in the Resolution to be the gross receipts and income derived in connection with the ownership and operation of Lake Alan Henry, and received by the Authority, including that received under the said Contract with the City of Lubbock, Texas. THE AUTHORITY has reserved the right, subject to the restrictions stated in the Resolution, to issue Completion Bonds and Improvement Bonds which may be first lien bonds on a parity with the Bonds or may be junior to the Bonds, or a portion of them may be such first lien bonds and a portion may be subordinate lien bonds. THE OWNER of any of the Bonds shall never have the right to demand payment thereof out of any funds raised or to be V raised by taxation. IN OUR OPINION, except as discussed below, the interest on the Bonds is excludable from the gross income of the owners for federal income tax purposes under law 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 express- ing the aforementioned opinions, we have relied on, and assume compliance by the Authority 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 Authority 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, is (a) included in a corporation's alternative minimum taxable income for purposes of determining the alternative minimum tax and the environmen- tal 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. Respectfully, T