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HomeMy WebLinkAboutORD 87-66 i d D 97— ORDINANCE AUTHORIZING THE ISSUANCE OF THE CITY OF BEAUMONT REFUNDING BONDS, SERIES 1987; AUTHORIZING THE ADVANCE REFUNDING OF CERTAIN OUTSTANDING BONDS AND THE EXECUTION AND DELIVERY OF AN ESCROW AGREEMENT AND THE SUBSCRIPTION FOR AND PURCHASE OF CERTAIN ESCROWED SECURITIES; AND CONTAINING OTHER MATTERS RELATED THERETO THE STATE OF TEXAS § COUNTY OF JEFFERSON § THE CITY OF BEAUMONT § WHEREAS, the City of Beaumont, Texas (the "City" ) has heretofore issued its Refunding Bonds, Series 1985 (the "Refunded Bonds" ) and now desires to provide for the redemption of the Refunded Bonds prior to their maturity; and WHEREAS, Article 717k, Vernon' s Texas Civil Statutes, as amended, authorizes the City to issue refunding bonds for the purpose of refunding the Refunded Bonds in advance of their maturities, and to accomplish such refunding by depositing directly with any paying agent for the Refunded Bonds the proceeds of such refunding bonds, together with other available funds, in an amount sufficient to provide for the payment or redemption of the Refunded Bonds, and provides that such deposit shall constitute the making of firm banking and financial arrangements for the discharge and final payment or redemption of the Refunded Bonds; and WHEREAS, the City desires to authorize the execution of an escrow agreement and provide for the deposit of proceeds of the refunding bonds to pay the Refunded Bonds; and WHEREAS, upon the issuance of the refunding bonds herein authorized and the deposit of funds referred to above, the Refunded Bonds shall no longer be regarded as being outstanding, except for the purpose of being paid pursuant to such deposit, and the pledges, liens, trusts and all other cotenants, provisions, terms and conditions of the ordinance authorizing the issuance of the Refunded Bonds shall be discharged, terminated and defeased; Now, Therefore r t 1 BE IT ORDAINED BY THE CITY OF BEAUMONT: 1. Consideration. It is hereby found and determined that the transactions contemplated in this Ordinance will benefit the City by providing a savings in debt service, and that such benefit is sufficient consideration for the refunding of the Refunded Bonds. 2 . Definitions. Throughout this ordinance the following terms and expressions as used herein shall have the meanings set forth below: The term "Bond Register" shall mean the books of registration kept by the Registrar in which are maintained the names and addresses of, and the principal amounts of the Bonds registered to, each Owner. The term "Bonds" shall mean the $55, 636, 091.40 The City of Beaumont Refunding Bonds, Series 1987 authorized in this Ordinance, unless the context clearly indicates otherwise. The term "City" shall mean The City of Beaumont, Texas. The term "Compound Interest Bond" shall mean any one or more, as the case may be, of the Bonds maturing on March 1 in each of the years 2002 through 2005 in the principal and maturity amounts set forth in Section 5(b) of this Ordinance, in the aggregate principal amount of $8, 656, 091 . 40. The term "Current Interest Bond" shall mean any one or more, as the case may be, of the Bonds maturing on March 1 in each of the years 1988 through 2001 and described in Section 5-(a) of this Ordinance, issued in the aggregate principal amount of $46, 980, 000. The term "FGIC" shall mean Financial Guaranty Insurance Company and its successors. The term "Interest Payment Date" , when used in con- nection with' any Current Interest Bond, shall mean March 1, 1988, and each September 1 and March 1 thereafter until maturity or earlier redemption of such Bond. The term " Issuance Date" shall mean the date on which the Bonds are delivered to and paid for by the Underwriters. -2- t The term "Maturity Amount" shall mean, with respect to any Compound Interest Bond, the amount payable to the Owner thereof at maturity, which shall include both principal and accrued interest. The term "Ordinance" as used herein and in the Bonds shall mean this ordinance authorizing the Bonds. The term "Owner" shall mean any person who shall be the registered owner of any outstanding Bonds. The term "Paying Agent" shall mean the Registrar. The term "Record Date" shall mean, with respect to Current Interest Bonds, the fifteenth ( 15th) calendar day of the month next preceding each Interest Payment Date. The term "Refunded Bonds" shall mean the City' s Refunding Bonds, Series 1985, maturing on September 1 in the years 1996 through 2001 and in 2005, in the aggregate principal amount of $50,290, 000. The term "Registrar" shall mean the Texas Commerce Bank National Association, Houston, Texas, and its successors in that capacity. The term "Underwriters" shall mean E. F. Hutton & Company, Inc . , Allied Bank of Texas, First RepublicBank Dallas, N.A. , Texas Commerce Bank, N.A. , First City National Bank of Houston, MBank Capital Markets, George K. Baum & Company, and United Daniels Securities, Inc. 3 . Authorization. The Bonds shall be issued in fully registered form in the total authorized aggregate amount of Fifty-Five Million Six Hundred Thirty-Six Thousand Ninety-One Dollars and Forty Cents ($55, 636, 091 .40) for the purpose of refunding all of the outstanding Refunded Bonds. 4. Designation, Date, and Interest Payment Dates. The Bonds shall be designated as "THE CITY OF BEAUMONT REFUNDING BONDS, SERIES 1987" and shall be dated August 15, 1987 . The Current Interest Bonds shall bear interest at the rates set forth in Section 5(a) below from the later of August 15, 1987, or the most recent Interest Payment Date to which such interest has been paid or duly provided for, calculated on the basis of a 360 day year of twelve 30 day -3- i v , y � w months, payable on March 1, 1988, and semiannually there- after on September 1 and March 1 of each year until maturity or prior redemption. The Compound Interest Bonds shall bear interest at the rates set forth in Section 5(b) from the Issuance Date, calculated on the basis of a 360 day year of twelve 30 day months, compounded semiannually on March 1 and September 1, and payable at maturity. S . Initial Bonds; Numbers and Denominations. ( a) The Current Interest Bonds shall be initially issued bearing the numbers, in the principal amounts, and bearing interest at the rates set forth in the following schedule, and may be transferred and exchanged as set out in this Ordinance. The Current Interest Bonds shall mature, in accordance with this Ordinance, on March 1 in each of the years and in the amounts set out in such schedule. Current Interest Bonds delivered on transfer of or in exchange for other Current Interest Bonds shall be numbered (with appropriate prefix) in order of their authentication by the Registrar, shall be in the denomination of $5, 000 or integral multiples thereof, and shall mature on the same date and bear interest at the same rate as the Current Interest Bond or Bonds in lieu of which they are delivered. CURRENT INTEREST BONDS Bond Principal Interest Number Year Amount Rate R- 1 1988 $1, 100,000 4. 40% R- 2 1989 1, 080,000 4. 90% R- 3 1990 1, 135, 000 5. 40% R- 4 1991 1, 200, 000 5 . 70% R- 5 1992 1, 270, 000 5 . 90% R- 6 1993 1, 350,000 6. 10% R- 7 1994 1, 435,000 6. 30% R- 8 1995 1, 530, 000 6. 50% R- 9 1996 5, 110, 000 6. 70 0/0 R-10 1997 5 , 475, 000 6. 90% R-11 1998 5, 875, 000 7 . 10% R-12 1999 6, 310,000 7 . 25% R-13 2000 6, 795, 000 7. 40% R-14 2001 7, 315, 000 7 . 50% (b) The Compound Interest Bonds shall be initially issued bearing the numbers, in the principal amounts and bearing interest at the rates set forth in the following -4- i d schedule, and may be transferred and exchanged as set out in this Ordinance. The Compound Interest Bonds shall mature on March 1 in each of the years and in the Maturity Amounts set out in such schedule. Compound Interest Bonds delivered on transfer of or in exchange for other Compound Interest Bonds shall be numbered (with appropriate prefix) in order of their authentication by the Registrar, shall be in the Maturity Amount of $5, 000 or integral multiples thereof, and shall mature on the same date and bear interest at the same rate as the Compound Interest Bond or Bonds in lieu of which they are delivered. COMPOUND INTEREST BONDS Bond Principal Interest Maturity Number Year Amount Rate Amount CR-1 2002 $2 , 438, 515 .20 8. 00% $7 ,590, 000 CR-2 2003 2, 254, 533 . 60 8.00% 7, 590. 000 CR-3 2004 2, 067, 971. 40 8. 05% 7, 590, 000 CR-4 2005 1, 895, 071 .20 8. 10% 7,590, 000 6. Execution of Bonds; Seal . The Bonds shall be ` signed by the Mayor and countersigned by the City Clerk, by their manual, lithographed, or facsimile signatures, and the official seal of the City shall be impressed or placed in facsimile thereon. Such facsimile signatures on the Bonds shall have the same effect as if each of the Bonds had been signed manually and in person by each of said officers, and such facsimile seal on the Bonds shall have the same effect as if the official seal of the City had been manually impressed upon each of the Bonds. If any officer of the City whose manual or facsimile signature shall appear on the Bonds shall cease to be such officer before the authenti- cation of such Bonds or before the delivery of such Bonds, such manual or facsimile signature shall nevertheless be valid and sufficient for all purposes as if such officer had remained in such office. 7 . Approval by Attorney General; Registration by Comptroller. The Bonds to be initially issued shall be delivered to the Attorney General of Texas for approval and shall be registered by the Comptroller of Public Accounts of the State of Texas. The manually executed registration certificate of the Comptroller of Public Accounts sub- stantially in the form provided in Section 17 of this Ordinance shall be attached or affixed to the Bonds to be initially issued. -5- i f 8. Authentication. Except for the Bonds to be initially issued, which need not be authenticated by the Registrar, only such Bonds which bear thereon a certificate of authentication, substantially in the form provided in Section 17 of this Ordinance, manually executed by an autho- rized representative of the Registrar, shall be entitled to the benefits of this Ordinance or shall be valid or obliga- tory for any purpose. Such duly executed certificate of authentication shall be conclusive evidence that the Bonds so authenticated were delivered by the Registrar hereunder. 9 . Payment of Principal and Interest. The Registrar is hereby appointed as the paying agent for the Bonds. The principal of Current Interest Bonds and the Maturity Amount of the Compound Interest Bonds shall be payable, without exchange or collection charges, in any coin or currency of the United States of America which, on the date of payment, is legal tender for the payment of debts due the United States of America, upon their presentation and surrender as they respectively become due and payable, whether at maturity or (in the case of Current Interest Bonds) by prior redemption, at the principal corporate trust office of the Registrar. The interest on each Current Interest Bond shall' be payable by check on the Interest Payment Date, mailed by the Registrar on or before each Interest Payment Date to the Owner of record as of the Record Date, to the address of such Owner as shown on the Bond Register. Any accrued interest payable at maturity on a Current Interest Bond shall be paid upon presentation and surrender of such Bond at the principal corporate trust office of the Registrar. If the date for payment of the principal of or interest on any Bond is a Saturday, Sunday, or a day on which banking institutions in the city where the principal corporate trust office of the Registrar is located are authorized by law or executive order to close, or a legal holiday, then the date for such payment shall be the next succeeding day which is not a Saturday, Sunday, or a day on which banking insti- tutions in the city where the principal corporate trust office of the Registrar is located are authorized by law or executive order to close, or a legal holiday. 10. Successor Registrars. The City covenants that at all times while any Bonds are outstanding it will provide a legally qualified bank, trust company, financial institution or other agency to act as Registrar for the Bonds. The City reserves the right to change the Registrar for the Bonds on -6- 1 not less than 60 days written notice to the Registrar, so long as any such notice is effective not less than 60 days prior to the next succeeding principal or interest payment date on the Bonds. Promptly upon the appointment of any successor Registrar, the previous Registrar shall deliver the Bond Register or copies thereof to the new Registrar, and the new Registrar shall notify each Owner, by United States mail, first class postage prepaid, of such change and of the address of the new Registrar. Each Registrar here- under, by acting in that capacity, shall be deemed to have agreed to the provisions of this Section. 11 . Special Record Date. If interest on any Current Interest Bond is not paid on any Interest Payment Date and continues unpaid for thirty (30) days thereafter, the Registrar shall establish a new record date for the payment of such interest, to be known as a Special Record Date. The Registrar shall establish a Special Record Date when funds to make such interest payment are received from or on behalf of the City. Such Special Record Date shall be fifteen ( 15) days prior to the date fixed for payment of such past due interest, and notice of the date of payment and the Special Record Date shall be sent by United States mail, first class, postage prepaid, not later than five (5) days prior to the Special Record Date, to each affected Owner of record as of the close of business on the day prior to the mailing of such notice. 12 . Owners . The City, the Registrar and any other person may treat the person in whose name any Bond is registered as the absolute owner of such Bond for the purpose of making and receiving payment of principal, Maturity Amount, or interest on such Bond, and for all other purposes, - whether or not such Bond is overdue, and neither the City nor the Registrar shall be bound by any notice or knowledge to the contrary. All payments made to the person deemed to be the owner of any Bond in accordance with this Section 12 shall be valid and effectual and shall discharge the liability of the City and the Registrar upon such Bond to the extent of the sums paid. 13 . Registration, Transfer, and Exchange. So long as any Bonds remain outstanding, the Registrar shall keep the Bond Register at its principal corporate trust office and, subject to such reasonable regulations as it may prescribe, the Registrar shall provide for the registration and trans- fer of Bonds in accordance with the terms of this Ordinance. -7- r Each Bond shall be transferable only upon the presenta- tion and surrender thereof at the principal corporate trust office of the Registrar, duly endorsed for transfer, or accompanied by an assignment duly executed by the registered Owner or his authorized representative in form satisfactory to the Registrar. Upon due presentation of any Bond in proper form for transfer, the Registrar shall authenticate and deliver in exchange therefor, within 72 hours after such presentation, a new Bond or Bonds, registered in the name of the transferee or transferees, in authorized denominations and of the same maturity and aggregate principal amount (for Current Interest Bonds) or Maturity Amount (for Compound Interest Bonds) and bearing interest at the same rate as the Bond or Bonds so presented. All Bonds shall be exchangeable upon presentation and surrender thereof at the principal corporate trust office of the Registrar for a Bond or Bonds of the same type (Current Interest or Compound Interest) , maturity and interest rate and in any authorized denomination or Maturity Amount, in an aggregate amount equal to the unpaid principal amount or Maturity Amount of the Bond or Bonds presented for exchange. The Registrar shall be and is hereby authorized to authenti- cate and deliver exchange Bonds in accordance with the provisions of this Section 13 . Each Bond delivered in accordance with this Section 13 shall be entitled to the benefits and security of this Ordinance to the same extent as the Bond or Bonds in lieu of which such Bond is delivered. The City or the Registrar may require the Owner of any Bond to pay a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with the transfer or exchange of such Bond. Any fee or charge of the Registrar for such transfer or exchange shall be paid by the City. 14. Mutilated, Lost, or Stolen Bonds. Upon the presentation and surrender to the Registrar of a mutilated Bond, the Registrar shall authenticate and deliver in exchange therefor a replacement Bond of like maturity, interest rate, and principal amount or Maturity Amount, bearing a number not contemporaneously outstanding. If any Bond is lost, apparently destroyed, or wrongfully taken, the City, pursuant to the applicable laws of the State of Texas and in the absence of notice or knowledge that such Bond has been acquired by a bona fide purchaser, shall execute and -8- the Registrar shall authenticate and deliver a replacement Bond of like maturity, interest rate and principal amount or Maturity Amount, bearing a number not contemporaneously outstanding. The City or the Registrar may require the Owner of a mutilated Bond to pay a sum sufficient to cover any tax or other governmental charge that may be imposed in connection therewith and any other expenses connected therewith, including the fees and expenses of the Registrar. The City or the Registrar may require the Owner of a lost, apparently destroyed or wrongfully taken Bond, before any replacement Bond is issued, to: ( 1) furnish to the City and the Registrar satisfactory evidence of the ownership of and the circumstances of the loss, destruction or theft of such Bond; (2 ) furnish such security or indemnity as may be required by the Registrar and the City to save them harmless; (3 ) pay all expenses and charges in connection therewith, including, but not limited to, printing costs, legal fees, fees of the Registrar and any tax or other governmental charge that may be imposed; and (4) meet any other reasonable requirements of the City and the Registrar. If, after the delivery of such replacement Bond, a bona fide purchaser of the original Bond in lieu of which such re- placement- Bond was issued presents for payment such original Bond, the City and the Registrar shall be entitled to recover such replacement Bond from the person to whom it was delivered or any person taking therefrom, except a bona fide purchaser, and shall be entitled to recover upon the secur- ity or indemnity provided therefor to the extent of any loss, damage, cost or expense incurred by the City or the Registrar in "connection therewith. If any such mutilated, lost, apparently destroyed or wrongfully taken Bond has become or is about to become due and payable, the City in its discretion may, instead of issuing a replacement Bond, authorize the Registrar to pay such Bond. -9- i v A 9 v Each replacement Bond delivered in accordance with this Section 14 shall be entitled to the benefits and security of this Ordinance to the same extent as the Bond or Bonds in lieu of which such replacement Bond is delivered. 15 . Cancellation of Bonds. All Bonds paid in accor- dance with this Ordinance, and all Bonds in lieu of which exchange Bonds or replacement Bonds are authenticated and delivered in accordance herewith, shall be cancelled and destroyed upon the making of proper records regarding such payment. The Registrar shall furnish the City with appropriate certificates of destruction of such Bonds. 16. Optional Redemption. The City reserves the right, at its option, to redeem Current Interest Bonds prior to maturity, in whole or in part, in such manner as the City may select, on March 1, 1997, or on any date thereafter, at a price of par plus accrued interest on the amounts called for redemption to the date fixed for redemption. Principal amounts may be redeemed only in integral multiples of $5, 000. If a Current Interest Bond subject to redemption is in a denomination larger than $5, 000, a portion of such Bond may be redeemed, but only in integral multiples of $5, 000. Upon surrender of any Current Interest Bond for redemption in part, the Registrar, in accordance with Section 13 hereof, shall authenticate and deliver in exchange therefor a Current Interest Bond or Bonds of like maturity and interest rate in an aggregate principal amount equal to the unredeemed portion of the Bond so surrendered. Notice of any redemption identifying the Current Interest Bonds to be redeemed in whole or in part shall be given by the Registrar at least thirty days prior to the date fixed for redemption by sending written notice by first class mail to the Owner of each Bond to be redeemed in whole or in part at the address shown on the Register. Such notices shall state the redemption date, the redemption price, the place at which Bonds are to be surrendered for payment and, if less than all Bonds outstanding are to be redeemed, the numbers of the Bonds or portions thereof to be redeemed. Any notice given as provided in this Section 16 shall be conclusively presumed to have been duly given, whether or not the Owner receives such notice. By the date fixed for redemption, due provision shall be made with the Registrar for payment of the redemption price of the Bonds or portions thereof to be redeemed, plus accrued interest to -10- i k the date fixed for redemption. When Current Interest Bonds have been called for redemption in whole or in part and due provision has been made to redeem the same as herein pro- vided, the Bonds or portions thereof so redeemed shall no longer be regarded as outstanding except for the purpose of receiving payment solely from the funds so provided for redemption, and the rights of the Owners to collect interest which would otherwise accrue after the redemption date on any Current Interest Bond or portion thereof called for redemption shall terminate on the date fixed for redemption. 17. Forms. The form of the Bonds, including the form of the Registrar' s Authentication Certificate, the form of Assignment, the form of Statement of Insurance, and the form of Registration Certificate of the Comptroller of Public Accounts of the State of Texas which shall be attached or affixed' to the Bonds initially issued shall be, respec- tively, ' substantially as follows, with such additions, deletions and variations as may be necessary or desirable and not prohibited by this Ordinance: FORM OF CURRENT INTEREST BONDS United States of America State of Texas NUMBER DENOMINATION REGISTERED REGISTERED THE CITY OF BEAUMONT Refunding Bond Series 1987 INTEREST RATE: MATURITY DATE: ISSUE DATE: CUSIP: August 15, 1987 REGISTERED OWNER: PRINCIPAL AMOUNT: DOLLARS The City of Beaumont, Texas (the "City" ) promises to pay to the Registered Owner identified above, or registered assigns, on the date specified above, upon presentation and -11- i surrender of this bond at the principal corporate trust office of Texas Commerce Bank National Association, Houston, Texas (the "Registrar" ) , the principal amount identified above, payable in any coin or currency of the United States of America which on the date of payment of such principal is legal tender for the payment of debts due the United States of America, and to pay interest thereon at the rate shown above, calculated on the basis of a 360 day year of twelve 30 day months, from the later of August 15, 1987, or the most recent interest payment date to which interest has been paid or duly provided for. Interest on this bond is payable by check on March 1 and September 1, beginning on March 1, 1988, mailed to the registered owner of record as of the previous February 15 and August 15 as shown on the books of registration kept by the Registrar. Any accrued interest due at maturity shall be paid upon presentation and surrender of this Bond at the principal corporate trust office of the Registrar. THIS BOND is one of a duly authorized issue of Bonds, aggregating $55 , 636, 090. 40 (the "Bonds" ) , issued for the purpose of refunding prior to maturity all of the City' s outstanding Refunding Bonds, Series 1985, pursuant to an ordinance adopted by the City Council on August 18, 1987 (the "Ordinance" ) . The Bonds are issued as ( i) Bonds in the aggregate principal amount of $8, 656, 091 .40 which pay interest only at maturity (the "Compound Interest Bonds" ) , and ( ii) Bonds in the aggregate principal amount of- $46,980, 000 which are subject to redemption prior to matur- ity and which pay interest semiannually until maturity or earlier redemption (the "Current Interest Bonds" ) . REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS BOND- SET FORTH ON THE REVERSE HEREOF, WHICH PROVISIONS SHALL HAVE THE SAME FORCE AND EFFECT AS IF SET FORTH AT THIS PLACE. IN WITNESS WHEREOF, this bond has been signed with the manual or facsimile signature of the Mayor and countersigned with the manual or facsimile signature of the City Clerk, and the official seal of the City has been duly impressed, or placed in facsimile, on this bond. -12- i (AUTHENTICATION CERTIFICATE) (SEAL) THE CITY OF BEAUMONT Mayor City Clerk (Back Panel of Bond) THE CITY RESERVES THE RIGHT, at its option, to redeem Current Interest Bonds prior to their scheduled maturities, in whole or from time to time in part, in integral multiples of $5, 000, on March 1, 1997, or on any date thereafter, at a price equal to par plus accrued interest on the principal amounts called for redemption to the date fixed for redemp- tion. Reference is made to the Ordinance for complete details concerning the manner of redeeming Bonds. NOTICE OF ANY REDEMPTION shall be given at least thirty (30) days prior to the date fixed for redemption by first class mail, addressed to the registered owners of each Bond to be redeemed in whole or in part at the address shown on the books of registration kept by the Registrar. When Bonds or portions thereof have been called for redemption, and due provision has been made to redeem the same, the principal amounts so redeemed shall be payable solely from the funds provided for redemption, and interest which would otherwise accrue on the amounts called for redemption shall terminate on the date fixed for redemption. THIS BOND IS TRANSFERABLE only upon presentation and surrender at the principal corporate trust office of the Registrar; duly endorsed for transfer or accompanied by an assignment duly executed by the registered owner or his authorized representative, subject to the terms and condi- tions of the Ordinance. THE BONDS ARE EXCHANGEABLE at the principal corporate trust office of the Registrar for bonds in the principal amount of $5;000 or any integral multiple thereof, subject to the terms and conditions of the Ordinance. THIS BOND shall not be valid or obligatory for any purpose or be entitled to any benefit under the Ordinance unless this Bond either (i ) is registered by the Comptroller of Public Accounts of the State of Texas by registration -13- certificate attached or affixed hereto or (ii ) is authenticated by the Registrar by due execution of the authentication certificate endorsed hereon. THE REGISTERED OWNER of this Bond, by acceptance hereof, acknowledges and agrees to be bound by all the terms and conditions of the Ordinance. THE CITY has covenanted in the Ordinance that it will at all times provide a legally qualified registrar for the Bonds and will cause notice of any change of registrar to be mailed to each registered owner. IT IS HEREBY certified, recited and covenanted that this Bond has been duly and validly issued and delivered; that all acts, conditions and things required or proper to be performed, to exist and to be done precedent to or in the issuance and delivery of this Bond have been performed, exist and have been done in accordance with law; and that annual ad valorem taxes sufficient to provide for the payment of the interest on and principal of this Bond, as such interest comes due and such principal matures, have been levied and ordered to be levied, within the limits prescribed by law, against all taxable property in the City, and have been pledged irrevocably for such payment. FORM OF COMPOUND INTEREST BONDS United States of America State of Texas NUMBER MATURITY AMOUNT REGISTERED REGISTERED THE CITY OF BEAUMONT Refunding Bond Series 1987 INTEREST RATE: MATURITY DATE: ISSUANCE DATE: CUSIP September 10, 1987 REGISTERED OWNER: MATURITY AMOUNT: DOLLARS -14- i The City of Beaumont, Texas (the "City" ) promises to pay to the Registered Owner identified above, or registered assigns, on the Maturity Date specified above, on presenta- tion and surrender of this bond at the principal corporate trust office of Texas Commerce Bank National Association, Houston, Texas (the "Registrar" ) , the Maturity Amount identified above, representing the principal amount hereof and accrued and compounded interest hereon, in any coin or currency of the United States of America which on the date of payment is legal tender for the payment of debts due the United States of America. The date of this bond is August 15, 1987, but interest shall accrue on the principal amount hereof from the Issuance Date specified above at the per annum rate set forth above . The compounded value (per $5, 000 of Maturity Amount) as of the Issuance Date and as of each March 1 and September 1 is set forth on the reverse hereof. Such value as of any other date shall be determined by straight-line interpolation between such values. THIS BOND is one of a duly authorized issue of Bonds, aggregating $55, 636, 091 . 40 (the "Bonds" ) , issued for the purpose of refunding prior to maturity all of the City' s outstanding Refunding Bonds, Series 1985, pursuant to an ordinance adopted by the City Council on August 18, 1987 (the "Ordinance" ) . The Bonds are issued as ( i ) Bonds in the aggregate principal amount of $8, 656, 091 . 40 which pay interest only at maturity (the "Compound Interest Bonds" ) , and (ii ) Bonds in the aggregate principal amount of $46, 980, 000 which are subject to redemption prior to matur- ity and which pay interest semiannually until maturity or earlier redemption (the "Current Interest Bonds" ) . REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS BOND- SET FORTH ON THE REVERSE HEREOF, WHICH PROVISIONS SHALL HAVE THE SAME FORCE AND EFFECT AS IF SET FORTH AT THIS PLACE. IN WITNESS WHEREOF, this bond has been signed with the manual or facsimile signature of the Mayor and countersigned with the manual or facsimile signature of the City Clerk, and the official seal of the City has been duly impressed, or placed in facsimile, on this bond. -15- I (AUTHENTICATION CERTIFICATE) (SEAL) THE CITY OF BEAUMONT Mayor City Clerk (Back Panel of Bond) THIS BOND IS TRANSFERABLE only upon presentation and surrender at the principal corporate trust office of the Registrar, duly endorsed for transfer or accompanied by an assignment duly executed by the registered owner or his authorized representative, subject to the terms and condi- tions of the Ordinance. THE BONDS ARE EXCHANGEABLE at the principal corporate trust office of the Registrar for bonds in the Maturity Amount of $5, 000 or any integral multiple thereof, subject to the terms and conditions of the Ordinance. THIS BOND shall not be valid or obligatory for any purpose or be entitled to any benefit under the Ordinance unless this Bond either (i ) is registered by the Comptroller of Public Accounts of the State of Texas by registration certificate attached or affixed hereto or (ii) is authenticated by the Registrar by due execution of the authentication certificate endorsed hereon. THE REGISTERED OWNER of this Bond, by acceptance hereof, acknowledges and agrees to be bound by all the terms and conditions of the Ordinance. THE CITY has covenanted in the Ordinance that it will at all times provide a legally qualified registrar for the Bonds and will cause notice of any change of registrar to be mailed to each registered owner. IT IS HEREBY certified, recited and covenanted that this Bond has been duly and validly issued and delivered; that all acts, conditions and things required or proper to be performed, to exist and to be done precedent to or in the issuance and delivery of this Bond have been performed, exist and have been done in accordance with law; and that annual ad valorem taxes sufficient to provide for the -16- payment of the interest on and principal of this Bond, as such interest comes due and such principal matures, have been levied and ordered to be levied, within the limits prescribed by law, against all taxable property in the City, and have been pledged irrevocably for such payment. TABLE OF COMPOUND VALUES The Compound Amount per $5, 000 of Maturity Amount is as follows: MATURITY DATE -17- i The following form of Statement of Insurance shall be printed on the back of each Bond: Statement of Insurance Financial Guaranty Insurance Company ( "Financial Guaranty" ) has issued a policy containing the following provisions with respect to the City of Beaumont, Texas, Refunding Bonds, Series 1987 (the "Bonds" ) , such policy being on file at the principal office of the Registrar, as paying agent (the "Paying Agent" ) : Financial Guaranty hereby unconditionally and irrevo- cably agrees to pay for disbursement to the Bondholders that portion of the principal (or Compound Amount, in the case of Compound Interest Bonds) of and interest on the Bonds which is then due for payment and which the issuer of the Bonds (the "Issuer" ) shall have failed to provide. Due for payment means, with respect to the principal (or Compound Amount, in the case of Compound Interest bonds) , the stated maturity date thereof, or the date on which the same shall have been duly called for mandatory sinking fund redemption, , but not any earlier date on which the payment of principal (or Compound Amount, in the case of Compound Interest Bonds) of the Bonds is due by reason of acceleration, and with respect to interest, the stated date for payment of such interest. Upon receipt of telephonic or telegraphic notice, subsequently confirmed in writing, or written notice by registered or certified mail, from a Bondholder or the Paying Agent to Financial Guaranty that the required payment, of principal (or Compound Amount, in the case of Compound Interest Bonds) or interest has not been made by the Issuer to the Paying Agent, Financial Guaranty on the due date of such payment or within one business day after receipt of notice of such nonpayment, whichever is later, will make a deposit of funds, in an account with Citibank, N.A. , or its successor as its agent (the "Fiscal Agent" ) , sufficient to make the portion of such payment not paid by the Issuer. Upon presentation to the Fiscal Agent of evidence satisfac- tory to it of the Bondholder' s right to receive such payment, and any appropriate instruments of assignment required to vest all of such Bondholder' s right to such payment in Financial Guaranty, the Fiscal Agent will disburse such amount to the Bondholder. -18- As used herein the term "Bondholder" means the person other than the Issuer who at the time of nonpayment of a Bond is entitled under the terms of such Bond to payment thereof. The policy is non-cancellable for any reason. FINANCIAL GUARANTY INSURANCE COMPANY Form of Registration Certificate of Comptroller of Public Accounts COMPTROLLER' S REGISTRATION CERTIFICATE: REGISTER NO. I hereby certify that this bond has been examined, certified as to validity, and approved by the Attorney General of the State of Texas, and that this bond has been registered by the Comptroller of Public Accounts of the State of Texas. WITNESS MY SIGNATURE AND SEAL this xxxxxxxxxx Comptroller of Public Accounts (SEAL) of the State of Texas Form of Registrar' s Authentication Certificate AUTHENTICATION CERTIFICATE It is hereby certified that this bond has been delivered pursuant to the Bond Ordinance described in the text of this Bond, in exchange for or in replacement of a bond, bonds or a portion of a bond or bonds of a Series which was originally ap- proved by the Attorney General of the State of Texas and registered by the Comptroller of Public Accounts of the State of Texas. Texas Commerce Bank National Association By Authorized Signature Date of Authentication -19- Form of Assignment ASSIGNMENT For value received, the undersigned hereby sells, assigns, and transfers unto (Please print or type name, address, and zip code of Transferee) (Please insert Social Security or Taxpayer Identification Number of Transferee) the within bond and all rights thereunder, and hereby irrevocably constitutes and appoints attorney to transfer said bond on the books kept for registration thereof, with full power of substitution in the premises. DATED: Signature Guaranteed: _ Registered Owner NOTICE: The signature above must correspond to the name of the registered owner as shown NOTICE: Signature must be on the face of this bond in guaranteed by a member firm every particular, without any of the New York Stock alteration, enlargement or Exchange or a commercial change whatsoever. bank or trust company. 18. Legal Opinion; Cusip. The approving opinion of Vinson & Elkins, Houston, Texas, and CUSIP Numbers may be printed on the Bonds, but errors or omissions in the print- ing of such opinion or such numbers shall have no effect on the validity of the Bonds. 19 . Interest and Sinking Fund; Tax Levy. There is hereby established a separate fund of the City to be known as the Series 1987 Refunding Bonds Interest and Sinking Fund (the "Interest and Sinking Fund" ) , which shall be kept separate and apart from all other funds of the City. The proceeds from all taxes levied, assessed and collected for and on account of the Bonds authorized by this Ordinance shall be deposited, as collected, in the Interest and Sinking Fund. While the Bonds or any part of the principal thereof or interest thereon remain outstanding and unpaid, -20- there is hereby levied and there shall be annually assessed and collected in due time, form and manner, and at the same time as other City taxes are assessed; levied and collected, in each year, beginning with the current year, a continuing direct annual ad valorem tax, within the limits prescribed by law, upon all taxable property in the City, sufficient to pay the current interest on the Bonds as the same becomes due and to provide and maintain a sinking fund of not less than two percent of the principal amount of the Bonds or the amount required to pay each installment of principal of the Bonds as the same matures, whichever is greater, full allowance being made for delinquencies and costs of col- lection, and said taxes are hereby irrevocably pledged to the payment of the interest on and principal of the Bonds and to no other purpose. In addition, interest accrued from the date of the Bonds until their delivery will be deposited in such fund. 20. Further Proceedings. After the Bonds to be initially issued shall have been executed, it shall be the duty of the Mayor and other appropriate officials and agents of the City to deliver the Bonds to be initially issued and ., all pertinent records and proceedings to the Attorney General of the State of Texas, for examination and approval. After the Bonds to be initially issued shall have been approved by the Attorney General, they shall be delivered to the Comptroller of Public Accounts of the State of Texas for registration. Upon registration of the Bonds to be initial- ly issued, the Comptroller of Public Accounts (or the Comptroller' s bond clerk or an assistant bond clerk lawfully designated in writing to act for the Comptroller) shall manually sign the Comptroller' s Registration Certificate prescribed herein and the seal of said Comptroller shall be impressed, or placed in facsimile, thereon. 21 . Sale; Bond Purchase Agreement. The Bonds are hereby sold and shall be delivered to the Underwriters at a price of $55, 163 , 184. 62 plus accrued interest to the date of delivery, in accordance with the terms of a bond purchase agreement of even date herewith, presented to and hereby approved by 'the City Council, which price and terms are hereby found and determined to be the most advantageous reasonably obtainable by the City. The Mayor and other appropriate officials of the City are hereby authorized and directed to execute such bond purchase agreement on behalf of the City, and the Mayor and all other officers, agents and representatives of the City are hereby authorized to do -21- any and all things necessary or desirable to satisfy the conditions set out therein and to provide for the issuance and delivery of the Bonds. 22 . Tax Exemption. The City covenants that it shall make such use of the proceeds of the Bonds, regulate invest- ments of proceeds thereof and take such other and further actions as may be required by Sections 103 and 141-150 of the Internal Revenue Code of 1986 (the "Code" ) and all applicable temporary, proposed and final regulations and procedures promulgated thereunder or promulgated under the Internal Revenue Code of 1954, to the extent applicable to the Code ( "Regulations" ) , necessary to assure that interest on the Bonds is excludable from gross income for federal income tax purposes . Without limiting the generality of the foregoing covenant, the City hereby covenants as follows: (a) The City has not used and will not use, nor permit to be used, more than 10 percent of the net proceeds of the Bonds or the Refunded Bonds (including, for purposes of this Section 22, any issue of bonds which was refunded as a separate issue by the Refunded Bonds) , in the trade or ` business of any person (other than use as a member of the general public) other than a governmental unit ( "private-use proceeds" ) . For purposes of this Section, the term "net proceeds" means the proceeds derived from the sale of the bonds, plus interest earnings thereon, less any amounts depos- ited in a reasonably required reserve or replace- ment fund; the term "person" includes any indi- vidual, corporation, partnership, unincorporated association or any other entity capable of carry- ing on a trade or business; and the term "trade or business" means, with respect to any natural per- son, any activity regularly carried on for profit and, with respect to persons other than natural persons, means any activity other than an activity carried on by a governmental unit; (b) The City has not used and will not use, nor permit to be used, more than 5 percent of the net proceeds of the Bonds or the Refunded Bonds in the trade or business of any person other than a gov- ernmental unit if such use is unrelated to the governmental purpose of the Bonds. Further, the amount of private-use proceeds of the Refunded -22- Bonds ( "excess private-use proceeds" ) has not ex- ceeded and will not exceed the proceeds of the Re- funded Bonds expended for the governmental purpose of the Refunded Bonds to which such excess private-use proceeds relate; (c) Principal and interest on the Refunded Bonds has been, and on the Bonds will be paid solely out of ad valorem taxes received by the City. Fur- ther, no person using more than 10 percent of the proceeds of the Refunded Bonds or the Bonds in a trade or business, other than a governmental unit, has made or will make payments (other than as a member of the general public) , directly or indi- rectly, accounting for more than 10 percent of such revenues; (d) The City has not used and will not use, nor permit to be used, an amount exceeding the lesser of (i ) $5, 000, 000 or (ii ) 5 percent of the net proceeds of the Bonds or the Refunded Bonds to finance loans to persons other than governmental units, directly or indirectly; (e) Based upon all facts and estimates now known or reasonably expected to be in existence on the date the Bonds are delivered, the City reasonably expects that the proceeds of the Bonds will not be used in a manner that would cause the Bonds or any portion thereof to be an "arbitrage bond" within the meaning of Section 148 of the Code; (f) The City will monitor the yield on the in- vestment of the proceeds of the Bonds and moneys pledged to the repayment of the Bonds and will restrict the yield on such investments to the ex- tent required by the Code or the Regulations. Without limiting the generality of the foregoing, the City will take appropriate steps to restrict the yield on all proceeds on hand on a date that is three years from the date of delivery of the Bonds to a yield which is not materially higher than the yield on the Bonds ( in both cases cal- culated in accordance with the Code and Regula- tions) ; -23- (g) The City will not cause the Bonds to be treated as "federally guaranteed" obligations for purposes of Section 149(b) of the Code (as may be modified in any applicable rules, rulings, pol- icies, procedures, regulations or other official statements promulgated or proposed by the Depart- ment of the Treasury or the Internal Revenue Ser- vice with respect to "federally guaranteed" obligations described in Section 149(b) of the Code) ; and (h) The City will take all necessary steps to comply with the requirement that "rebatable arbi- trage earnings" on the investment of the "gross proceeds" of the Bonds (within the meaning of Sec- tion 148(f) (6) (B) of the Code) , if any, be rebated to the federal government. Specifically, the City will (i ) maintain records regarding the investment of the gross proceeds of the Bonds as may be required to calculate such "rebatable arbitrage earnings" separately from records of amounts on deposit in the funds and accounts of the City which are allocable to other bond issues of the City or moneys which do not represent gross pro- ceeds of any bonds of the City, (ii ) calculate, at such intervals as may be required by applicable Regulations, not less often than annually, the amount of "rebatable arbitrage earnings, " if any, earned from the investment of the gross proceeds of the Bonds and ( iii) pay, not less often than every fifth anniversary date of the delivery of the Bonds, except as may be required by applicable Regulations with respect to amounts in the Escrow Fund; all amounts required to be rebated to the federal government. Further, the City will not indirectly pay any amount otherwise payable to the federal government pursuant to the foregoing re- quirements to any person other than the federal government by entering into any investment ar- rangement with respect to the gross proceeds of the Bonds that might result in a "prohibited pay- ment" within the meaning of Temp. Treas. Reg. §1 . 103-15AT. All officers, employees and agents of the City are autho- rized and directed to provide certifications of facts and estimates that are material to the reasonable expectations of the City as of the date the Bonds are delivered. , In -24- b B complying with the foregoing covenants, the City may rely from time to time upon an opinion issued by national- ly-recognized bond counsel to the effect that any action by the City in reliance upon any interpretation of the Code or Regulations contained in such opinion will not cause inter- est on the Bonds to be includable in gross income for federal income tax purposes under existing law. 23 . Use of Proceeds. Proceeds from the sale of the Bonds shall, promptly upon receipt by the City, be applied as follows: (a) Accrued interest shall be deposited into the Interest and Sinking Fund. (b) The remaining proceeds from the sale of the Bonds shall be applied to establish an escrow fund to refund the Refunded Bonds, as more fully provided below, and, to the extent not otherwise provided for, to pay all expenses arising in connection with the issuance of the Bonds, the establishment of such escrow fund and the refunding of the Refunded Bonds. Any proceeds of the Bonds remaining after , making all such deposits and payments shall be deposited into the Interest and Sinking Fund. 24. Redemption of Refunded Bonds. The City hereby irrevocably calls the following bonds of the City for redemption prior to maturity on the date set forth below, and authorizes and directs notice of such redemption to be given in accordance with the ordinance authorizing their issuance: Bonds To Be Redeemed Redemption Date Refunding Bonds, Series 1985 Maturities 1996 through 2001 and 2005 September 1, 1995 25 . Escrow Agreement. The discharge and defeasance of the Refunded Bonds shall be effectuated pursuant to the terms and provisions of an Escrow Agreement to be entered into by and between the City and Texas Commerce Bank Nation- al Association, Houston, Texas, as Escrow Agent, which shall be substantially in the form attached hereto as Exhibit "A, " the terms and provisions of which are hereby approved, subject to such insertions, additions and modifications as shall be necessary (a) to carry out the program designed for -25- the City by Underwood, Neuhaus & Co. , Inc . , and which shall be certified as to mathematical accuracy by Peat, Marwick, Main & Co. , Certified Public Accountants, whose Report shall be attached to the Escrow Agreement (b) to maximize the City' s present value savings and/or to minimize the City' s costs of refunding, (c) to comply with all applicable laws and regulations relating to the refunding of the Refunded Bonds and (d) to carry out the other intents and purposes of this Ordinance, and the Mayor or Mayor Pro Tem is hereby authorized to execute and deliver such Escrow Agreement on behalf of the City in multiple counterparts and the City Clerk or an Assistant City Clerk is hereby authorized to attest thereto and affix the City' s seal. 26. Source of City Funds Used in Refunding. No money of the City other than proceeds of the Bonds shall be used to refund the Refunded Bonds. 27. Purchase of United States Treasury Obligations. To assure the purchase of the Escrowed Securities referred to in the Escrow Agreement, the Mayor or Mayor Pro Tem, the C•ity' s Chief Financial Officer, and the Escrow Agent are hereby authorized to subscribe for, agree to purchase, and purchase non-callable obligations of the United States of America, in such amounts and maturities and bearing interest at such rates as may be provided for in the Report, and to execute any and all subscriptions, purchase agreements, commitments, letters of authorization and other documents necessary to effectuate the foregoing, and any actions heretofore taken for such purpose are hereby ratified and approved. 28. Related Matters. To satisfy in a timely manner all of the City' s obligations under this Ordinance and the Escrow Agreement, the Mayor or Mayor Pro Tem, the City Clerk or an Assistant City Clerk, and all other appropriate officers and agents of the City are hereby authorized and directed to take all other actions that are reasonably necessary to provide for the refunding of the Refunded Bonds, including without limitation, executing and deliver- ing on behalf of the City all certificates, consents, receipts, requests, and other documents as may be reasonably necessary to satisfy the City' s obligations under the Escrow Agreement and this Ordinance and to direct the application of funds of the City consistent with the provisions of such Escrow Agreement and this Ordinance. -26- 29. Registrar. The form of agreement setting forth the duties of the Registrar is hereby approved, and the appropriate officials of the City are hereby authorized to execute such agreement for and on behalf of the City. 30. Official Statement. The City Council of the City hereby ratifies, authorizes and approves, in connection with the sale of the Bonds, the preparation and distribution of the Preliminary Official Statement dated August 12, 1987, and an Official Statement dated August 18; 1987, containing such information as may be necessary to conform to the terms of the Bonds, this Ordinance, and the purchase contract for the Bonds. The appropriate officials of the City are hereby authorized to sign such Official Statement and/or to deliver a certificate pertaining to such Official Statement as prescribed therein, dated as of the date of payment for and delivery of the Bonds . 31. No Personal Liability. No recourse shall be had for payment of the principal of or interest on any Bonds or for any claim based thereon, or on this Ordinance, against any official or employee of the City or any person executing any Bonds . ` 32 . Reports. The City covenants that it will provide FGIC with (a) a copy of the City' s annual audited financial statement for each fiscal year and the City' s budget for the following fiscal year, within 120 days of the end of each of the City' s fiscal years; (b) -notice of any issue of debt obligations by the City and a copy of any disclosure document prepared in connection therewith, within 30 days after the issuance of such obligations; and (c) such other information as FGIC may reasonably request. 33 . Open Meeting. It is hereby officially found and determined that the meeting at which this Ordinance was adopted was open to the public, and public notice of the time, place and purpose of said meeting was given, all as required by Article 6252-17, Vernon' s Texas Civil Statutes. -27- r PASSED AND APPROVED this 18th day of August, 1987 . ,Mayor The City of Beaumont ATTEST: • CityCl,erk The City"©.f Beaumont ,s (SEAL,)j -28- ESCROW AGREEMENT THIS ESCROW AGREEMENT (the "Escrow Agreement" ) dated for convenience August 18, 1987, but effective on the Escrow Funding Date described herein, is made and entered into by and between The City of Beaumont, Texas, a Home Rule City organized and existing under the Constitution and laws of the State of Texas (together with any successor to its duties and functions, the "City" ) , and Texas Commerce Bank National Association, Houston, Texas, a national banking association having its principal corporate trust office in Houston, Texas, as escrow agent (together with any successor or assign in such capacity, the "Escrow Agent") . WHEREAS, the City has heretofore issued and there remain outstanding the City' s Refunding Bonds, Series 1985, and the City desires to provide for the refunding prior to maturity of such bonds (the "Refunded Bonds" ) ; and WHEREAS, Article 717k, Vernon' s Texas Civil Statues, as amended, authorizes and empowers the City to issue, sell and deliver refunding bonds payable from ad valorem taxes and to ' deposit the proceeds of such bonds, together with other available funds or resources, with any place of payment for the Refunded Bonds in an amount which is sufficient to provide for the payment or redemption of the principal of and interest on the Refunded Bonds; and WHEREAS, the City Council of the City has adopted an ordinance authorizing the issuance of the City' s Refunding Bonds, Series 1987, in the aggregate principal amount of $55, 636, 091 . 40 (the "Refunding Bonds" ) , for the purpose of providing- a portion of the funds necessary to refund the Refunded Bonds, to provide a savings in debt service; and WHEREAS, the City has provided pursuant to this Escrow Agreement for the application of the proceeds of the Refunding Bonds to provide for the redemption of the Refunded Bonds; and WHEREAS, the City Council of the City has further determined to effectuate the advance refunding of the Refunded Bonds pursuant to this Escrow Agreement, under which provision is made for the safekeeping, investment, reinvestment, administration and disposition of the proceeds of the Refunding Bonds, so as to provide firm banking and i financial arrangements for the discharge and final payment or redemption of the Refunded Bonds; . NOW, THEREFORE, in consideration of the mutual under- takings, promises and agreements herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and in order to secure the full and timely payment of the principal of and the interest on the Refunded Bonds, the City and the Escrow Agent con- tract and agree as follows: ARTICLE I DEFINITIONS AND INTERPRETATIONS Section 1 . 01 . Definitions. Unless otherwise expressly provided or unless the context clearly requires otherwise, the following terms shall have the respective meanings specified below for all purposes of this Escrow Agreement: "Book Entry Securities" shall mean the United States Treasury Obligations, State and Local Government Series, initially purchased with the proceeds of the Refunding Bonds, all as more fully described in the Report. "Code" shall mean the Internal Revenue Code of 1986, as amended, and the applicable regulations thereunder and under the Internal Revenue Code of 1954. "City" shall mean The City of Beaumont, Texas, and any successor to its duties and functions. "Escrow Agent" shall mean Texas Commerce Bank National Association, Houston, Texas, in its capacity as escrow agent hereunder, and any successor or assign in such capacity. "Escrow Agreement" shall mean this escrow agreement by and between the City and the Escrow Agent, as it may be amended or supplemented from time to time. "Escrow ' Fund" shall mean the fund created in Section 3 . 01 of this Escrow Agreement to be administered by the Escrow Agent pursuant to the provisions of this Escrow Agreement. "Escrow Funding Date" shall mean the date on which the City deposits with the Escrow Agent the cash and Escrowed Securities described in Section 2 . 01 . "Escrowed Securities" shall mean the Book Entry Securities. "Paying Agent for the Refunded Bonds" shall mean, Texas Commerce Bank National Association, Houston, Texas. "Refunded Bond Ordinance" shall mean the City' s ordinance authorizing the issuance, sale and delivery of the Refunded Bonds. "Refunded Bonds" shall mean the City' s Refunding Bonds, Series 1985, maturing on September 1 in the years 1996 through 2001 and in 2005, in the aggregate principal amount of $50, 290,000. "Refunding Bonds" shall mean the City' s Refunding Bonds, Series 1987, dated August 15, 1987, in the initial aggregate principal amount of $55, 636, 091 . 40. "Refunding Bond Ordinance" shall mean the City' s Ordinance adopted August 18, 1987, authorizing the issuance, sale and delivery of the Refunding Bonds. "Report" shall mean the verification report prepared by Peat, Marwick, Main & Co. relating to the advance refunding of the Refunded Bonds, a copy of which is attached hereto as Exhibit "A" . Section 1 . 02 . . Interpretations. The titles and head- ings of the articles and sections of this Escrow Agreement have been inserted for convenience of reference only and are not to be considered a part hereof and shall not in any way modify or restrict the terms hereof. This Escrow Agreement and all of the terms and provisions hereof shall be liberal- ly construed to effectuate the purposes set forth herein and to achieve the intended purpose of providing for the refund- ing of the Refunded Bonds in accordance with applicable law. ARTICLE II DEPOSIT OF FUNDS AND ESCROWED SECURITIES Section 2 . 01. Deposits with Escrow Agent; Acquisition of Escrowed Securities. On the Escrow Funding Date the City will deposit, or cause to be deposited, with the Escrow Agent the following: e s A (a) Book Entry Securities in the principal amount of $ purchased with a portion of the proceeds of the Refunding Bonds; and (b) A beginning cash balance of $ ARTICLE III CREATION AND OPERATION OF ESCROW FUND Section 3 .01. Escrow Fund. On the Escrow Funding Date the Escrow Agent will create on its books a special fund and irrevocable escrow to be known as The City of Beaumont Refunding Bonds, Series 1987 Escrow Fund, into which will be deposited the cash and Escrowed Securities described in Section 2 . 01 . The Escrowed Securities, all proceeds there- from and all cash balances from time to time on deposit in the Escrow Fund shall be the property of the Escrow Fund, and shall be applied only in strict conformity with the terms and conditions hereof. The Escrowed Securities, all proceeds therefrom and all cash balances from time to time on deposit in the Escrow Fund are hereby irrevocably pledged, to the payment of the principal of and interest on the Refunded Bonds, which payment shall be made by timely transfers to the Paying Agent for the Refunded Bonds of such amounts at such times as are provided in Section 3 . 02 hereof. When the final transfers have been made to the Paying Agent for the Refunded Bonds for the payment of such principal of and interest on the Refunded Bonds, any balance then remaining in the Escrow Fund shall be transferred to the City, and the Escrow Agent shall thereupon be discharged from any further duties hereunder. Section 3 . 02 . Payment of Principal of and Interest on Refunded Bonds . (a) The Escrow Agent is hereby irrevocably instructed to transfer to the Paying Agent for the Refunded Bonds from the cash balance from time to time on deposit in the Escrow Fund the amounts required to pay the principal of and interest on the Refunded Bonds as the same become due and payable, all as provided in the Report. (b) Money transferred to and held by the Paying Agent for the Refunded Bonds in accordance with the provisions hereof shall be held by the Paying Agent for the Refunded Bonds as a separate trust fund for the account of the respective holders of the Refunded Bonds in connection with which such money is held; provided, however, that money so held remaining unclaimed by the owners of such Refunded Bonds for three (3 ) years after the dates on which payment thereon was due, payable and available for payment shall be paid to the City to be used for any lawful purpose. There- after, neither the City, the Escrow Agent, the Paying Agent for the Refunded Bonds nor any other person shall be liable or responsible to any holders of such Refunded Bonds for any further payment of such unclaimed money or on account of any such Refunded Bonds. (c) Except as provided in Article IV hereof, the City hereby covenants and agrees that it will not exercise any right that it may have to redeem any of the Refunded Bonds prior to their scheduled maturities. Section 3 . 03 . Sufficiency of Escrow Fund. The City represents (based solely upon the Report) that the suc- cessive receipts of the principal of and interest on the Escrowed Securities will assure that the cash balance on deposit from time to time in the Escrow Fund will be at all times sufficient to provide money for transfer to the Paying Agent for the Refunded Bonds at the times and in the amounts required to pay the interest on the Refunded Bonds as such interest comes due and to pay the principal of the Refunded Bonds as the Refunded Bonds mature or are redeemed. Section 3 . 04. Escrow Fund. The Escrow Agent at all times shall hold the Escrow Fund, the Escrowed Securities and all other assets of the Escrow Fund wholly segregated from all other funds and securities on deposit with the Escrow Agent; it shall never allow the Escrowed Securities or any other assets of the Escrow Fund to be commingled with any other funds or securities of the Escrow Agent; and it shall hold and dispose of the assets of the Escrow Fund only as set forth herein. The Escrowed Securities and other assets of the Escrow Fund always shall be maintained by the Escrow Agent for the benefit of the holders of the Refunded Bonds; and a special account therefor evidencing such fact shall be maintained at all times on the books of the Escrow Agent. The holders of the Refunded Bonds shall be entitled to the same preferred claim and first lien upon the Escrowed Securities, the proceeds thereof and all other assets of the Escrow Fund as are enjoyed by other beneficiaries of similar accounts. The amounts received by the Escrow Agent under this Escrow Agreement shall not be considered as a banking deposit by the City, and the Escrow Agent shall have no right or title with respect thereto except as escrow agent under the terms hereof. The amounts received by the Escrow Agent hereunder shall not be subject to warrants, drafts or checks drawn by the City. Section 3 . 05 . Security for Cash Balances. Cash bal- ances from time to time on deposit in the Escrow Fund, to the extent not insured by the Federal Deposit Insurance Corporation or its successor, shall be continuously secured by a pledge of direct obligations of, or obligations uncon- ditionally guaranteed by, the United States of America, held by an independent third party, and having a market value at least equal to such cash balances. ARTICLE IV REDEMPTION OF CERTAIN REFUNDED BONDS PRIOR TO MATURITY Section 4. 01. Optional Redemption of Certain Refunded_ Bonds. The City has irrevocably exercised its option to call for redemption prior to maturity the Refunded Bonds as set forth below. Such optional redemption shall be carried out in accordance with the Ordinance authorizing the issuance of such Bonds. The Escrow Agent is hereby au- thorized to provide funds therefor as set forth in Section 3 .02( a) hereof. Bonds To Be Redeemed Redemption Date Refunding Bonds, Series 1985 Maturities 1996 through 2001 and 2005 September 1, 1995 ARTICLE V LIMITATION ON INVESTMENTS Section 5 . 01. General . Except as herein otherwise expressly provided, the Escrow Agent shall not have any power or duty to invest any money held hereunder; or to make substitutions of the Escrowed Securities; or to sell, transfer or otherwise dispose of the Escrowed Securities. Section 5 . 02 . Substitution of Securities. At the written request of the City, and upon compliance with the conditions hereinafter stated, the Escrow Agent shall sell, transfer, otherwise dispose of or request the redemption of all or any portion of the Escrowed Securities and apply the , a proceeds therefrom to purchase Refunded Bonds or direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America and which do not permit the redemption thereof at the option of the obligor. Any such transaction may be effected by the Escrow Agent only if ( 1) the Escrow Agent shall have received a written opinion from a nationally recognized firm of certified public accountants acceptable to the City and the Escrow Agent that such trans- action will not cause the amount of money and securities in the Escrow Fund to be reduced below an amount which will be sufficient, when added to the interest to accrue thereon, to provide for the payment of principal and interest on the remaining Refunded Bonds as they become due, and (2 ) the Escrow Agent shall have received the unqualified written legal opinion of nationally recognized bond counsel or tax counsel acceptable to the City and the Escrow Agent to the effect that such transaction will not cause any of the Refunding Bonds to be an "arbitrage bond" within the meaning of the Code, and that such transaction will not result in a violation of the laws of the State of Texas. ARTICLE VI RECORDS AND REPORTS Section 6. 01 . Records. The Escrow Agent shall keep books of record and account in which complete and correct entries shall be made of all transactions relating to the receipts, disbursements, allocations and application of the money and Escrowed Securities deposited to the Escrow Fund and all proceeds thereof, and such books shall be available for inspection at reasonable hours and under reasonable conditions by the City and the holders of the Refunded Bonds. Section 6. 02 . Reports. For the period beginning on the Escrow Funding Date and ending on March 1, 1988, and for each twelve (12 ) month period thereafter while this Agree- ment remains in effect, the Escrow Agent shall prepare and send to the City, at the City' s request, within thirty (30) days following the end of such period a written report summarizing all transactions relating to the Escrow Fund during such period, including, without limitation, credits to the Escrow Fund as a result of interest payments on or maturities of the Escrowed Securities and transfers from the Escrow Fund to the Paying Agent for the Refunded Bonds or otherwise, together with a detailed statement of all Escrowed Securities and the cash balance on deposit in the Escrow Fund as of the end of such period. Section 6.03 . Notification. The Escrow Agent shall notify the City immediately if at any time during the term of this agreement it determines that there is insufficient cash and Escrowed Securities in the Escrow Fund to provide for the transfer to the Paying Agent for the Refunded Bonds for timely payment of all interest on and principal of the Refunded Bonds. ARTICLE VII CONCERNING THE ESCROW AGENT Section 7 . 01 . Representations. The Escrow Agent hereby represents that it has all necessary power and authority to enter into . this Escrow Agreement and undertake the obligations and responsibilities imposed upon it herein, and that it will carry out all of its obligations hereunder. Section 7 . 02 . Limitation on Liability. The Escrow Agent shall not be liable for any action taken or neglected to be taken in good faith in the exercise of reasonable care and believed to be within the discretion or power conferred by this Escrow Agreement, nor shall it be responsible for the consequences of any error of judgment; and it shall not be answerable except for its own neglect or default, nor for any loss unless the same shall have been through their negligence or want of good faith. The liability of the Escrow Agent to transfer funds to the Paying Agent for the Refunded Bonds for the payments of the principal of and interest on the Refunded Bonds shall be limited to the proceeds of the Escrowed Securities and the cash balances from time to time on deposit in the Escrow Fund. Notwithstanding any provision contained herein to the contrary, the Escrow Agent shall have no liability whatso- ever for the insufficiency of funds from time to time in the Escrow Fund or any failure of the obligor of the Escrowed Securities to make timely payment thereon, except for the obligation to notify the City promptly of any such occur- rence. The recitals herein and in the proceedings authorizing the Refunding Bonds shall be taken as the statements of the t e " City and shall not be considered as made by, or imposing any obligation or liability upon, the Escrow Agent. In its capacity as Escrow Agent, it is agreed that the Escrow Agent need look only to the terms and provisions of this Escrow Agreement. The Escrow Agent makes no representation as to the value, condition or sufficiency of the Escrow Fund, or any part thereof, or as to the title of the City thereto, or as to the security afforded thereby or hereby, and the Escrow Agent shall incur no liability or responsibility with respect to any of such matters. It is the intention of the City and the Escrow agent that the Escrow Agent shall never be required to use or advance its own funds or otherwise incur personal financial liability in the performance of any of its duties or the exercise of any of its rights and powers hereunder. Unless it is specifically provided otherwise herein, the Escrow Agent has no duty to determine or inquire into the happening or occurrence of any event or contingency or the performance or failure of performance of the City with ` respect to arrangements or contracts with others, with the Escrow Agent' s sole duty hereunder being to safeguard the Escrow Fund and to dispose of and deliver the same in accordance with this Escrow Agreement. If, however, the Escrow Agent is called upon by the terms of this Escrow Agreement to determine the occurrence of any event or contingency, the Escrow Agent shall be obligated, in making such determination, only to exercise reasonable care and diligence, and in event of error in making such determina- tion the Escrow Agent shall be liable only for its own misconduct or its negligence. In determining the occurrence of any such event or contingency the Escrow Agent may request from the City or any other person such reasonable additional evidence as the Escrow Agent in its discretion may deem necessary to determine any fact relating to the occurrence of such event or contingency, and in this connec- tion may make inquiries of, and consult with the City, among others, at any time. Section 7 . 03 . Compensation. (a) On the Escrow Funding Date the City will pay the Escrow Agent, as a fee for performing the services hereunder and for all expenses incurred or to be incurred by the Escrow Agent in the administration of this Escrow Agreement, and for its ser- vices in its capacity as Paying Agent for the Refunded Bonds, the sum of $90, 000. If the Escrow Agent is requested to perform any extraordinary services hereunder, the City hereby agrees to pay reasonable fees to the Escrow Agent for such extraordinary services and to reimburse the Escrow Agent for all expenses incurred by the Escrow Agent in performing such extraordinary services. It is expressly provided that the Escrow Agent shall look only to the City for the payment of such additional fees and reimbursement of such additional expenses. The Escrow Agent hereby agrees that in no event shall it ever assert any claim or lien against the Escrow Fund for any fees for its services, whether regular, additional or extraordinary, as Escrow Agent, or in any other capacity, or for reimbursement for any of its expenses. Section 7 . 04. Successor Escrow Agents. If it any time the Escrow Agent or its legal successor or successors should cease to be the Escrow Agent hereunder, a vacancy shall forthwith exist hereunder in the office of the Escrow Agent. Any successor Escrow Agent appointed by the City shall succeed, without further act, to all the rights, immunities, powers and trusts of the predecessor Escrow Agent hereunder. Upon the request of any such successor Escrow Agent, the City shall execute any and all instruments in writing for more fully and certainly vesting in and confirming to such successor Escrow Agent all such immunities, rights, powers and duties. The Escrow Agent shall pay over to its succes- sor Escrow Agent a proportional part of the Escrow Agent' s fee hereunder equal to the portion of such fee attributable to duties to be performed after the date of succession. ARTICLE VIII MISCELLANEOUS Section 8. 01 . Notices. Any notice, authorization, request, or demand required or permitted to be given here- under shall be in writing and shall be deemed to have been duly given when mailed by registered or certified mail, postage prepaid addressed as follows: To the Escrow Agent: Texas Commerce Bank National Association Post Office Box 2558 Houston, Texas 77252-8038 Attention: Corporate Trust Department Ik e „ s To the City: The City of Beaumont, Texas Post Office Box 3827 Beaumont, Texas 77704 Attention: Mayor The United States Post Office registered or certified mail receipt showing delivery of the aforesaid shall be conclusive evidence of the date and fact of delivery. Any party hereto may change the address to which notices are to be delivered by giving to the other parties not less than ten days prior notice thereof. Section 8 . 02 . Termination of Escrow Agent' s Obliga- tions . Upon the taking by the Escrow Agent of all the actions as described herein, the Escrow Agent shall have no further obligations or responsibilities hereunder to the City, the holders of the Refunded Bonds or to any other person or persons in connection with this Escrow Agreement. Section 8. 03 . Binding Agreement. This Escrow Agree- ment shall be binding upon the City, and the Escrow Agent and their respective successors and legal representatives, and shall inure solely to the benefit of the holders of the Refunded Bonds, the City, the Escrow Agent and their respective successors and legal representatives. Section 8. 04. Severability. In case any one or more of the provisions contained in this Escrow Agreement shall for any reason be held to be invalid, illegal or unenforce- able in any respect, such invalidity, illegality or unen- forceability shall not affect any other provisions of this Escrow Agreement, but this Escrow Agreement shall be con- strued as if such invalid or illegal or unenforceable provision had never been contained herein. Section 8. 05 . Governing Law. This Escrow Agreement shall be governed exclusively by the provisions hereof and by the applicable laws of the State of Texas. Section 8. 06. Time of Essence. Time shall be of the essence in the performance of obligations from time to time imposed upon the Escrow Agent by this Escrow Agreement. Executed as of August 18, 1987, but effective as set forth herein. THE CITY OF BEAUMONT, TEXAS Mayor ATTEST: City Clerk (SEAL) TEXAS COMMERCE BANK NATIONAL ASSOCIATION, as Escrow Agent By Vice president and Trust Officer ATTEST: Assistant Cashier (SEAL)