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Home My WebLink AboutORD 04-090 ORGAIN, BELL & TUCKER, L.L.P. ATTORNEYS AT LAW 470 ORLEANS STREET OTHER OFFCES LANCE FOX P. O. BOX 1751 PARTNER HOUSTON E ON 1376 EMAIL AIL LC F @OHT.COM BEAUMONT,TEXAS 77704-1 75 1 AUSTIN LC TELEPHONE(409) 838-641 2 SILSBEE FAX(409) 838-6959 WWW.OBT.COM VIA HAND DELIVERY December 16, 2004 Kandy Daniel City Treasurer Beaumont City Hall, 1St Floor 801 Main Street Beaumont,Texas 77701 RE: $20,640,000 City of Beaumont,Texas,Refunding Bonds,Series 2004 Dear Kandy: Enclosed is your copy of the closing transcript of documents for the above referenced transaction. I very much appreciate all of your help and assistance with this transaction. If you have any questions about this matter,please call me. Yours truly, Org * , ell&Tucke L.P. Lance Fox LCF/rd Enclosures RECEIVED DEC 1 7 2004 THE CITY OF BEAUMONT,TEXAS, GENERAL OBLIGATION REFUNDING BONDS, SERIES 2004 $20,640,000 DOCUMENT LIST Document No. Opinion of Bond Counsel 1 General Certificate of the City 2 Certificate of Assessed Valuation 3 Certified Copy of Ordinance Authorizing Bonds 4 Escrow Agreement 5 Verification Report 6 Signature Identification Certificate of Escrow Agent 7 Bond Purchase Agreement 8 Paying Agent/Registrar's Agreement 9 Signature Identification and No-Litigation Certificate 10 Attorney General's Opinion and Comptroller's Registration Certificate 11 Receipt of Escrow Agent 12 Closing Certificate of the City 13 No-Default Certificate of the City 14 Closing Opinion of City Attorney 15 Closing Opinion of Bond Counsel 16 Opinion of Underwriter's Counsel 17 Federal Tax Certificate 18 Preliminary Official Statement 19 Official Statement 20 Official Statement Certificate 21 Municipal Bond Insurance Policy 22 Reliance Letter from Bond Counsel to Insurance Company 23 Opinion of Counsel to Insurance Company 24 Paying Agent/Registrar's Receipt 25 Letter to Paying Agent regarding Redemption Notice 26 DTC Letter of Representations 27 Certificate of City as to Debt Service Schedule and Debt Service Savings 28 Specimen Bond 29 Certificate for Texas Bond Review Board 30 Form 8038-G 31 Disclosure,No Default and Tax Certificate of Financial Security Assurance Inc. 32 Rating Letters 33 Outstanding Ordinances for the Refunded Obligations 34 -2- Section 1 ORGAIN , BELL & TUCKER , L. L. P. ATTORNEYS AT LAW P. O. BOX 1 751 LANCE FOX OTHER OFFICES BEAUMONT, TEXAS 77704- 1 751 HOUSTON - THE WOODLANDS PARTNER EXTENSION 1.376 470 ORLEANS BUILDING, FOURTH FLOOR 77701 .AUSTIN E-MAIL: Icf @Obt.com TELEPHONE (409) 838-64 1 2 SILSBEE FAX (409) 838-6959 www.obt.com December 2, 2004 WE HAVE ACTED as bond counsel for The City of Beaumont, Texas (the "City"), in connection with an issue of bonds (the 'Bonds") described as follows: THE CITY OF BEAUMONT, TEXAS, GENERAL OBLIGATION REFUNDING BONDS,SERIES 2004,in the total authorized aggregate amount of$20,640,000,dated November 1,2004. The Bonds mature,bear interest, and may be transferred and exchanged as set out in the Bonds and in the ordinance adopted by the City Council of the City on November 2, 2004, authorizing their issuance (the "Ordinance"). The Bonds are subject to redemption prior to their stated maturities on March 1, 2014, or any date thereafter, at the option of the City. WE HAVE ACTED as bond counsel for the sole purpose of rendering an opinion with respect to the legality and validity of the Bonds under the Constitution and laws of the State of Texas,under which the City is acting as a home-rule city of the State of Texas, and with respect to the exclusion of interest on the Bonds from gross income for federal income tax purposes. We have not investigated or verified original proceedings, records, data or other material, but have relied solely upon the transcript of certified proceedings described in the following paragraph. We have not assumed any responsibility with respect to the financial condition or capabilities of the City or the disclosure thereof in connection with the sale of the Bonds. Our role in connection with the City's Official Statement prepared for use in connection with the sale of the Bonds has been limited as described therein. IN OUR CAPACITY as bond counsel, we have participated in the preparation of and have examined a transcript of certified proceedings pertaining to the Bonds and the obligations being refunded, on which we have relied in giving our opinion. The transcript contains certified copies of certain proceedings of the City Council of the City and of JPMorgan Chase Bank(the'Escrow Agent"); the report of Grant Thorton, L.L.P., verifying the sufficiency of the deposits made with the Escrow Agent for defeasance of the obligations being refunded and the mathematical accuracy of certain computations of the yield on the Bonds and obligations acquired with the proceeds of the Bonds; customary certificates of officers, agents and other representatives of the Escrow Agent,the City, and other public officials; and other certified showings related to the authorization and issuance of the Bonds and the firm banking and financial arrangements for the discharge and final payment of the obligations being refunded. We have also examined executed Bond No. R-1 of this issue. BASED ON SUCH EXAMINATION, IT IS OUR OPINION that: (1) The transcript of certified proceedings evidences complete legal authority for the Page 2 issuance of the Bonds in full compliance with the Constitution and laws of the State of Texas presently effective and that therefore the Bonds constitute valid and legally binding obligations of the City. (2) Firm banking and financial arrangements have been made for the discharge and final payment of the obligations being refunded pursuant to an Escrow Agreement entered into between the City and the Escrow Agent on the date of delivery of the Bonds, and that therefore such obligations are deemed to be fully paid and no longer outstanding except for the purpose of being paid from the funds provided therefor in such Escrow Agreement. (3) Taxable property in the City is subject to the levy of ad valorem taxes,within the limits prescribed by law, to pay the Bonds and interest thereon. THE RIGHTS OF THE HOLDERS of the Bonds are subject to the applicable provisions of the federal bankruptcy laws and any other similar laws affecting the rights of creditors of political subdivisions generally. IT IS OUR FURTHER OPINION that: (1) Interest on the Bonds is excludable from gross income of the holders for federal income tax purposes under existing law. (2) The Bonds are not "private activity bonds" within the meaning of the Internal Revenue Code of 1986, as amended (the "Code"), and interest on the Bonds is not subject to the alternative minimum tax on individuals and corporations,except that interest will be included in the "adjusted net book income" or"adjusted current earnings" of a corporation(other than any S Corporation,regulated investment company,REIT, or RENIIC) for purposes of computing its alternative minimum tax and its Superfund "environmental tax" liability. The opinion set forth above is subject to the condition that the City comply with all requirements of the Internal Revenue Code of 1986, as amended, that must be satisfied subsequent to the issuance of the Bonds in order that interest thereon be, or continue to be, excluded from gross income for federal income tax purposes. The City has covenanted to comply with all such requirements. Failure to comply with certain of such requirements may cause interest on the Bonds to be included in gross income for federal income tax purposes retroactive to the date of issuance of the Bonds. In providing such opinions, we have relied on representations of the City with respect to matters solely within the knowledge of the City which we have not independently verified, and have assumed continuing compliance with the covenants in the Ordinance and the Bonds pertaining to those sections of the Code which affect the exclusion from gross income of interest on the Bonds for federal income tax purposes. If such representations are determined to be inaccurate or incomplete or if the City fails to comply with the foregoing provisions of the Ordinance, interest on the Bonds could become includable in gross income from the date of original delivery,regardless of the date on which Page 3 the event causing such inclusion occurs. Except as stated above,we express no opinion as to any federal, state or local tax consequences resulting from the ownership of,receipt of interest on, or disposition of the Bonds. Holders of the Bonds should be aware that the ownership of tax-exempt obligations may result in collateral federal income tax consequences to financial institutions, life insurance and property and casualty insurance companies,certain S corporations with Subchapter C earnings and profits,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. 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). For these reasons,holders of the Bonds should consult their own tax advisors as to the consequences of investing in the Bonds. Yours truly, Orgain, Bell &Tucker,L.L.P. Q A 641Al 1,3 ( �- 4 - U r(_4511, C • C - Section 2 t No. 2 GENERAL CERTIFICATE THE STATE OF TEXAS § COUNTY OF JEFFERSON § THE CITY OF BEAUMONT § We, the undersigned Mayor and City Clerk of The City of Beaumont, Texas (the "City"), do hereby make and execute this certificate for the benefit of the Attorney General of the State of Texas and all other persons interested in the City's GENERAL OBLIGATION REFUNDING BONDS, SERIES 2004 (the "Bonds"), dated November 1, 2004, in the principal amount of $20,640,000,now in the process of issuance. We certify as follows: 1. That the City was incorporated pursuant to the general laws of the State of Texas, and is operating under the general laws relating to Home-Rule Cities and the Home-Rule Charter of the City; and that said Home-Rule Charter was adopted at an election held within the City on the 6th day of December, 1947; and that said Charter has in no way been amended, repealed, changed or altered since said Charter was amended by virtue of the elections held within the City on December 6, 1947, January 25, 1972, August 13, 1983, and April 5, 1986, May 2, 1998, and September 16, 2003,respectively. 2. That the following named persons now constitute the City Council of the City, to- wit: Evelyn M. Lord Mayor Becky Ames Mayor Pro Tern and Councilmember At Large Andrew P. Cokinos Councilmember At Large Lulu L. Smith Councilmember Ward 1 Nancy A. Beaulieu Councilmember Ward 2 Audwin Samuel Councilmember Ward 3 Bobbie J. Patterson Councilmember Ward 4 3. That Rose Ann Jones is the City Clerk of the City. 4. That Miriam Johnson is Tax Assessor-Collector of the City. 5. That the following is a true, correct and complete statement of all outstanding indebtedness of the City payable from ad valorem taxes,to-wit: GENERAL PURPOSE BONDS The City of Beaumont, Texas Refunding Bonds, Series 1987 $1,895,071 The City of Beaumont,Texas Refunding Bonds, Series 1993 $520,000 The City of Beaumont,Texas Refunding Bonds, Series 1996 $16,205,000 The City of Beaumont, Texas Combination Tax&Revenue Certificates of Obligation, Series 1995 $4,710,000 The City of Beaumont, Texas Combination Tax&Revenue Certificates of Obligation, Series 1996 $12,740,000 The City of Beaumont,Texas Certificates of Obligation Combination Tax& Revenue Certificates of Obligation, Series 1998 $12,900,000 The City of Beaumont,Texas Certificates of Obligation, Series 1999 $18,500,000 The City of Beaumont,Texas Certificates of Obligation, Series 2001 $7,800,000 The City of Beaumont,Texas Certificates of Obligation, Series 2003 $9,000,000 TOTAL OUTSTANDING 11-2-04 $84,270,071 6. Upon the issuance of the Bonds and the refunding of the obligations being refunded with the proceeds of the Bonds, the total outstanding principal amount of outstanding indebtedness of the City payable from ad valorem taxes will be equal to $84,085,071. -2- 7. That neither the revenues nor the properties of the City's waterworks and sewer system are in any way pledged or hypothecated except as the net revenues of the system are pledged to the payment of the City's outstanding (i) Waterworks and Sewer System Revenue and Refunding Bonds, Series 1998, (ii) Waterworks and Sewer System Revenue and Refunding Bonds, Series 1999, (iii) Waterworks and Sewer System Revenue Bonds, Series 2000, (iv) Waterworks and Sewer System Adjustable Rate Revenue Bonds, Series 2002 (v) Waterworks and Sewer System Revenue Bonds, Series 2004, (vi) Combination Tax and Revenue Certificates of Obligation, Series 1995, which pledge of revenues is limited to $10,000 in the aggregate and constitutes a junior lien pledge of the Net Revenues, (vii) Combination Tax and Revenue Certificates of Obligation, Series 1996, which pledge of revenues is limited to $10,000 in the aggregate and constitutes a junior lien pledge of the Net Revenues, (viii) Combination Tax and Revenue Certificates of Obligation, Series 1998, which pledge of revenues is limited to $10,000 in the aggregate and constitutes a junior lien pledge of the Net Revenues; (ix) Certificates of Obligation, Series 1999, which pledge of revenues is limited to $10,000 in the aggregate and constitutes a junior lien pledge of the Net Revenues; (x) Certificates of Obligation, Series 2001, which pledge of revenues is limited to $10,000 in the aggregate and constitutes a junior lien pledge of the Net Revenues; and (xi) Certificates of Oblitation, Series 2003, which pledge of revenues is limited to $10,000 in the aggregate and constitutes a junior lien pledge of the New Revenues; and that the City is not in default as to any covenant, condition or obligation on any prior bonds or certificates payable from the Net Revenues of the System. 8. The Bonds are being issued to refund the following obligations of the City and to pay the cost of issuance of the Bonds: Obligations to be Refunded: Redemption Date: A portion of The City of Beaumont, Texas, Combination Tax &Revenue Certificates of Obligation, Series 1998 Maturities 2008 through 2017, in the principal amounts of$40,000, $500,000, $500,000, $500,000, 500,000, $500,000, $360,000, $1,900,000, $2,005,000, and$2,100,000, respectively March 1, 2008 A portion of the City of Beaumont,Texas, Refunding Bonds, Series 1996, Maturities 2008 through 2010,in the principal amounts of$790,000, $780,000 and $785,000,respectively March 1, 2007 -3- A portion of the City of Beaumont,Texas Combination Tax&Revenue Certificates of Obligation, Series 1996, Maturities 2008 through 2014 in the principal amounts of$590,000, $610,000, $680,000, $725,000, $775,000, $825,000 and$850,000,respectively March 1, 2007 The City of Beaumont,Texas, Combination Tax& Revenue Certificates of Obligation, Series 1995, Maturities 2006 through 2014 in the principal amounts of $500,000, $500,000, $500,000, $500,000, $500,000, $500,000, $500,000, $500,000 and $500,000,respectively March 1, 2005 9. Attached hereto as Exhibit "A' is a debt service schedule that shows all outstanding bonds and certificates of obligation,including the Bonds,payable by the City. [The remainder of this page has intentionally been left blank.] -4- WITNESS OUR HANDS AND THE OFFICIAL SEAL OF THE CITY OF BEAUMONT, TEXAS, this 2nd day of November, 2004. ' QN AN �� Mayor,T CITY OF BEAUMO TEXAS { 8 s City Clerk,THE C OF BEAUMONT,TEXAS (SEAL) -5- EXHIBIT"A" Debt Service Schedule See attached. -6- Tax Supported Debt Service Schedule The following sets forth the principal and interest on the City's Outstanding Tax Supported Debt,less the debt supported by the City's water and sewer system,plus the principal and estimated interest on the Bonds. Less: Plus: The Bonds Fiscal Current Total Less: Debt Total Debt Service Year General Supported by Tax On the Total Ending Obligation Water& Supported Refunded Tax-Supported 30-Sep Debt Service Sewer System') Debt Service Obligations Principal Interest Total Debt Service 2005 $ 13,699,438 $1,085,425 $ 12,614,013 $1,072,915 $ $786,294 $ 786,294 $12,327,392 2006 12,603,936 768,800 11,835,136 1,559,915 220,000 940,253 1,160,253 11,435,474 2007 12,535,205 741,300 11,793,905 1,533,665 200,000 933,953 1,133,953 11,394,193 2008 7,961,086 715,050 7,246,036 2,891,115 2,000,000 890,953 2,890,953 7,245,874 2009 8,014,425 690,050 7,324,375 3,246,675 2,455,000 789,578 3,244,578 7,322,278 2010 8,065,435 762,550 7,302,885 3,193,768 2,525,000 665,078 3,190,078 7=299,195 2011 7,247,450 780,975 6,466,475 2,346,450 1,790,000 557,203 2,347,203 6,467,228 2012 7,230,318 796,200 6,434,118 2,305,000 1,835,000 466,578 2,301,578 6,430,696 2013 7,185,028 808,500 6,376,528 2,259,775 1,875,000 385,546 2,260,546 6,377,299 2014 7,151,618 769,500 6,382,118 2,053,600 1,735,000 318,576 2,053,576 6,382,094 2015 6,360,743 6,360,743 2,153,250 1,900,000 251,138 2,151,138 6,358,631 2016 6,344,658 6,344,658 2,160,625 2,000,000 163,013 2,163,013 6,347,046 2017 6,324,068 6,324,068 2,162,750 2,105,000 55,256 2,160,256 6,321,574 2018 6,331,839 6,331,839 6,331,839 $ $28,939,503 $27,843,419 $117,055,247 $ 7,918,350 109,136,897 $20,640,000 $ 7,203,419 $108,040,813 (a) Debt supported by revenues other than ad valorem tax revenues. See"CITY TAX DEBT-Revenue Support of Ad Valorem Tax Debt." Estimated Average Annual Requirements(2005 -2018).......................................................... $ 7,717,201 Estimated Maximum Annual Requirement (2005)................................................................. $ 12,327,392 EXHIBIT Section 3 No. 3 CERTIFICATE OF ASSESSED VALUATION THE STATE OF TEXAS § COUNTY OF JEFFERSON § The undersigned, as the duly appointed, qualified and acting Tax Assessor- Collector of The City of Beaumont, Texas, does hereby certify that the following is a true and correct statement of the assessed valuation of taxable property within the City as shown by the duly approved assessment rolls for the year 2004, which are the last approved assessment rolls on file in my office, to-wit: $ 4,568,576,349 WITNESS MY HAND AND THE OFFICIAL SEAL OF SAID CITY this 3rd day of /VO 0 e M 2004. Tax Assessor-Collect THE CITY OF BEA MONT, TEXAS (SEAL) Section 4 No. 4 CERTIFICATE FOR ORDINANCE THE STATE OF TEXAS § COUNTY OF JEFFERSON § We, the undersigned officers of the City Council of The City of Beaumont, Texas, hereby certify as follows: 1. The City Council of The City of Beaumont, Texas, convened in regular meeting on the 2nd day of November, 2004, at the regular meeting place thereof, within said City, and the roll was called of the duly constituted officers and members of said City Council and the City Clerk, to wit: Evelyn M. Lord Mayor Becky Ames Councilmember at Large Andrew P. Cokinos Councilmember at Large Lulu L. Smith Councilmember Ward 1 Nancy A. Beaulieu Councilmmember Ward 2 Audwin Samuel Councilmemember Ward 3 Bobbie J. Patterson Councilmember Ward 4 Rose Ann Jones City Clerk and all of said persons were present, except the following absentees: Audwin Samuel, thus constituting a quorum. Whereupon, among other business, the following was transacted at said meeting: a written ORDINANCE AUTHORIZING THE ISSUANCE OF THE CITY OF BEAUMONT, TEXAS, GENERAL OBLIGATION REFUNDING BONDS, SERIES 2004, AUTHORIZING THE ADVANCE REFUNDING OF CERTAIN BONDS AND OBLIGATIONS AND THE EXECUTION AND DELIVERY OF AN ESCROW AGREEMENT AND THE SUBSCRIPTION FOR AND PURCHASE OF CERTAIN ESCROWED SECURITES; AND CONTAINING OTHER MATTERS RELATED THERETO was duly introduced for the consideration of said City Council and read in full. It was then duly moved and seconded that said ordinance be adopted; and, after due discussion, said motion, carrying with it the adoption of said ordinance, prevailed and carried by the following vote: AYES: 6 NOES: 0 -1- 2. That a true, full and correct copy of the aforesaid ordinance adopted at the meeting described in the above and foregoing paragraph is attached to and follows this certificate; that said ordinance has been duly recorded in said City Council's minutes of said meeting pertaining to the adoption of said ordinance; that the above and foregoing paragraph is a true, full and correct excerpt from 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 as indicated therein; that the persons named in the above and foregoing paragraph are the duly chosen, qualified and acting officers and members of said City Council as indicated therein; that each of the officers and members of said City Council was duly and sufficiently notified officially and personally, in advance, of the date, hour, place and purpose of the aforesaid meeting, and that said ordinance would be introduced and considered for adoption at said meeting, and each of said officers and members consented, in advance, to the holding of said meeting for such purpose; that said meeting was open to the public as required-by law; and the public as required by law; and that public notice of the date, hour, place and subject of said meeting was given as required by Chapter 551 of the Texas Government Code Annotated, Vernon's 1994, as amended. SIGNED AND SEALED this IS day of November, 2004. CITY CLERK U MAYOR (SEAL) � 1�0 i L `® -2- -2- ORDINANCE NO. NO. 4 ORDINANCE AUTHORIZING THE ISSUANCE OF THE CITY OF. BEAUMONT, TEXAS, GENERAL OBLIGATION REFUNDING BONDS, SERIES 2004, AUTHORIZING THE ADVANCE REFUNDING OF CERTAIN BONDS AND OBLIGATIONS AND THE EXECUTION AND DELIVERY OF AN ESCROW AGREEMENT AND THE SUBSCRIPTION FOR AND PURCHASE OF CERTAIN ESCROWED SECURITES; 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 City of Beaumont, Texas, Combination Tax & Revenue Certificates of Obligation, Series 1998, its City of Beaumont, Texas, Refunding Bonds, Series 1996, its City of Beaumont, Texas, Combination Tax & Revenue Certificates of Obligation, Series 1996, and its City of Beaumont, Texas, Combination Tax & Revenue Certificates of Obligation, Series 1995 (collectively the "Refunded Obligations"), and now desires to refund a portion of certain maturities of the Refunded Obligations in advance of their maturities in order to provide a savings in debt service; and WHEREAS, Chapter 1207,Texas Government Code, as amended(formerly Article 717k of Vernon's Annotated Texas Civil Statutes, as amended), authorizes the City to issue refunding bonds for the purpose of refunding the Refunded Obligations in advance of their maturities, and to accomplish such refunding by depositing directly with any paying agent for the Refunded Obligations 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 Obligations, 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 Obligations; and WHEREAS, the City now desires to call certain of the Refunded Obligations for redemption prior to their maturities; and WHEREAS, the City also desires to authorize the execution of an escrow agreement in order to provide for the deposit of proceeds of the refunding bonds to pay and redeem the Refunded Obligations; and WHEREAS, upon issuance of the refunding bonds herein authorized and the deposit of funds referred to above, the Refunded Obligations shall no longer be regarded as being outstanding, except for the purpose of being paid pursuant to such deposits, and the pledges, liens, trusts and all other covenants, provisions, terms and conditions of the ordinances authorizing the issuance of the Refunded Obligations shall be discharged,terminated and defeased; NOW,THEREFORE,BE IT ORDAINED BY THE CITY OF BEAUMONT: 1. Consideration. The matters and facts contained in the preamble to this Ordinance are hereby found to be true and correct, and it is hereby found and determined that issuance of the refunding bonds described herein will benefit the City by providing a savings in debt service equal to a net present value of$749,657.89 and a gross debt service savings equal to $810,337.85, and that such benefit is sufficient consideration for the refunding of the Refunded Obligations. 2. Definitions. Throughout this Ordinance, the following terms and expressions as used herein shall have the meanings set forth below: The term 'Bonds" or "Series 2004 Bonds" shall mean The City of Beaumont, Texas, General Obligation Refunding Bonds, Series 2004 authorized in this Ordinance, unless the context clearly indicates otherwise. The term "City" shall mean The City of Beaumont,Texas. The term "Code" shall mean the Internal Revenue Code of 1986, as amended. The term "DTC" shall mean The Depository Trust Company of New York, New York, or any successor securities depository. The term "DTC Participant" shall mean brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations on whose behalf DTC was created to hold securities to facilitate the clearance and settlement of securities transactions among DTC Participants. The term "Insurer" shall mean Financial Security Assurance Inc., a New York domiciled financial guaranty insurance company, or any successor thereto or assignee thereof, the issuer of the Municipal Bond Guaranty Insurance Policy. The term "Interest and Sinking Fund" shall mean the interest and sinking fund established by the City pursuant to Section 17 of this Ordinance. The term "Interest Payment Date", when used in connection with any Bond, shall mean March 1,2005, and each September 1 and March 1 thereafter until maturity of such Bond. The term "Municipal Bond Guaranty Insurance Policy" shall mean the municipal bond guaranty insurance policy issued by the Insurer insuring the payment when due of the principal of and interest on the Bonds as provided therein. The term "Ordinance" as used herein and in the Bonds shall mean this ordinance -2- authorizing the Bonds. The term "Owner" shall mean any person or entity who shall be the registered owner of any outstanding Bonds. The term "Paying Agent" shall mean the Registrar. The term "Record Date" shall mean, for any Interest Payment Date, the fifteenth (15th) calendar day of the month next preceding each Interest Payment Date. The term "Refunded Obligations" shall mean: (a) a portion of the City's Combination Tax & Revenue Certificates of Obligation, Series 1998,maturing on March 1 in the years 2008 through 2017 in the principal amounts of $40,000, $500,000, $500,000, $500,000, 500,000, $500,000, 360,000, $1,900,000, $2,005,000, and $2,110,000, respectively; (b) a portion of the City's Refunding Bonds, Series 1996, maturing on March 1 in the years 2008 through 2010 in the principal amounts of $790,000, $780,000 and $785,000, respectively; (c) a portion of the City's Combination Tax & Revenue Certificates of Obligation, Series 1996, maturing on March 1 in the years 2008 through 2014 in the principal amounts of $590,000, $610,000, $680,000, $725,000, $775,000, $825,000 and $850,000, respectively; and (d) the City's Combination Tax & Revenue Certificates of Obligation, Series 1995, maturing on March 1 in the years 2006 through 2014 in the principal amounts of $500,000, $500,000, $500,000, $500,000, $500,000, $500,000, $500,000, $500,000 and $500,000,respectively. The term "Register" shall mean the books of registration kept by the Registrar in which are maintained the names and addresses of and the principal amounts registered to each Owner. The term "Registrar" shall mean Wells Fargo Bank, National Association, Houston, Texas, and its successors in that capacity. The term "Report" shall mean the report of Grant Thornton, L.L.P., Certified Public Accountants, certifying as to the mathematical accuracy of the program designed by RBC Dain Rauscher, Inc., for the City with respect to the defeasance of the Refunded Obligations. The term "SEC" shall mean the United States Securities and Exchange Commission, and its successors. The term "Underwriters" shall mean First Southwest Company, Morgan Keegan & Company, Inc., Estrada Hinojosa & Company, Inc., and Southwest Securities, Inc. 3. Authorization. The Bonds shall be issued in fully registered form, without coupons, in the total authorized aggregate amount of TWENTY MILLION SIX HUNDRED FORTY THOUSAND and NO/100 Dollars ($20,640,000.00) for the purpose of(i) refunding certain of the outstanding Refunded Obligations, and(ii)paying all costs of issuance of the Bonds. -3- 4. Designation, Date and Interest Payment Date. The Bonds shall be designated as the "THE CITY OF BEAUMONT, TEXAS, GENERAL OBLIGATION REFUNDING BONDS, SERIES 2004", and shall be dated November 1, 2004. The Bonds shall bear interest from the later of November 1, 2004, or the most recent Interest Payment Date to which interest has been paid or duly provided for, calculated on the basis of a 360 day year of twelve 30 day months, interest payable on March 1, 2005, and semiannually thereafter on September I and March 1 of each year until maturity or earlier redemption. 5. Initial Bonds, Numbers and Denominations. The Bonds shall be issued bearing the numbers, in the principal amounts, and bearing interest at the rates set forth in the following schedule, and may be transferred and exchanged as set out in this Ordinance. The 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. Bonds delivered in transfer of or in exchange for other Bonds shall be numbered in order of their authentication by the Registrar, shall be in the denomination of$5,000 or integral multiples thereof, and shall mature on the same date and bear interest at the same rate as the Bond or Bonds in lieu of which they are delivered. Bond Year of Principal Interest Number Maturity Amount Rate R-1 2006 $ 220,000 3.00% R-2 2007 $ 200,000 3.00% R-3 2008 $1,000,000 5.00% R-4 2008 $1,000,000 3.00% R-5 2009 $2,455,000 5.00% R-6 2010 $2,525,000 5.00% R-7 2011 $1,790,000 5.00% R-8 2012 $1,835,000 5.00% R-9 2013 $1,875,000 3.75% R-10 2014 $1,435,000 3.65% R-11 2014 $ 300,000 3.75% R-12 2015 $1,900,000 3.75% R-13 2016 $2,000,000 5.25% R-14 2017 $2,105,000 5.25% 5a. Optional Redemption. The City reserves the right, at its option, to redeem Bonds having stated maturities on and after March 1, 2015, in whole or in part, on March 1, 2014, or any date thereafter, at a price of par plus accrued interest to the date fixed for redemption. If less than all of the Bonds are to be redeemed, the City shall determine the Bonds, or portions thereof, to be redeemed. Bonds may be redeemed only in integral multiples of $5,000. If a Bond subject to redemption is in a denomination larger that $5,000, a portion of such Bond may be redeemed, but -4- only in integral multiples of $5,000. Upon surrender of any Bond for redemption in part, the Registrar, in accordance with Section 11 hereof, shall authenticate and deliver in exchange therefor a Bond or Bonds of like maturity and interest rate in an aggregate principal amount equal to the unredeemed portion of the Bond so surrendered. Not less than thirty(30)days prior to a redemption date for the Bonds,the City shall cause a notice of redemption to be sent by United States mail, first class,postage prepaid, to each Owner of each Bond to be redeemed in whole or in part, at the address of the Owner appearing on the Register at the close of business on the Business Day next preceding the date of the mailing of such notice. Such notice shall state the redemption date, the redemption price, the place at which Bonds are to be surrendered for payment and, if less than all the Bonds are to be redeemed, the numbers of the Bonds or portions thereof to be redeemed. Any notice of redemption so mailed 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. When Bonds have been called for redemption in whole or in part and due provision made to redeem the same as herein provided, the Bonds or portions thereof so redeemed shall no longer be regarded as outstanding except for the purpose of being paid solely from the funds so provided for redemption, and the rights of the Owners to collect interest which would otherwise accrue after the redemption date on any Bond or portion thereof called for redemption shall terminate on the date fixed for redemption. 6. Execution of Bonds; Seal. The Bonds shall be signed by the Mayor of the City and countersigned by the City Clerk of the City, by their manual, lithographed, or facsimile signatures, and the official seal of the City shall be impressed or placed in facsimile thereon. Such facsimile signatures on the Bonds shall have the same effect as if each of the Bonds had been signed manually and in person by each of said officers, and such facsimile seal on the Bonds shall have the same effect as if the official seal of the City had been manually impressed upon each of the Bonds. If any officer of the City whose manual or facsimile signature shall appear on the Bonds shall cease to be such officer before the authentication of such Bonds or before the delivery of such Bonds, such manual or facsimile signature shall nevertheless be valid and 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 substantially in the form provided in Section 15 of this Ordinance shall be attached or affixed to the Bonds to be initially issued. 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 15 of this Ordinance, manually executed by an authorized officer of the Registrar, shall be entitled to the benefits of this Ordinance or shall be valid or obligatory for any purpose. Such duly executed certificates of authentication shall be -5- 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 the Bonds shall be payable, without exchange or collection charges, in any coin or currency of the United States of America which, on the date of payment, is legal tender for the payment of debts due the United States of America, upon their presentation and surrender as they become due and payable, at the principal corporate trust office of the Registrar. The interest on each Bond shall be payable by check payable on the Interest Payment Date, mailed by the Registrar on or before each Interest Payment Date to the Owner of record as of the Record Date, to the address of such Owner as shown on the Register. At the request of the registered holder of $1,000,000 or more in aggregate principal amount of Bonds, the Registrar shall pay interest on such Bonds by wire transfer in immediately available funds to the account designated by such holder to the Registrar in writing at least 5 days before the Record Date for such payment. 10. Ownership; Unclaimed Principal and Interest. 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 the principal thereof and for the further purpose of making and receiving payment of the interest thereon, 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 10 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. Amounts held by the Registrar which represent principal of and interest on the Bonds remaining unclaimed by the Owner after the expiration of 3 years from the date such amounts have become due and payable shall be reported and disposed of by the Registrar in accordance with the provisions of Texas law, including to the extent applicable, Title 6 of the Texas Property Code, as amended. 11. Registration, Transfer and Exchange. So long as any Bonds remain outstanding, the Registrar shall keep the Register at its principal corporate trust office in which, subject to such reasonable regulations as it may prescribe, the Registrar shall provide for the registration and transfer of Bonds in accordance with the terms of this Ordinance. Each Bond shall be transferable only upon the presentation 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 for transfer, the Registrar shall authenticate and deliver in exchange therefor, within three business days 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 and bearing interest at the same rate as the Bond or Bonds so presented. -6- 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 maturity and interest rate and in any authorized denomination, in an aggregate principal amount equal to the unpaid principal amount of the Bond or Bonds presented for exchange. The Registrar shall be and is hereby authorized to authenticate and deliver exchange Bonds in accordance with the provisions of this Section 11 Each Bond delivered in accordance with this Section 11 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. 12. Cancellation of Bonds. All Bonds paid in accordance with this Ordinance, and all Bonds in lieu of which exchange Bonds or replacement Bonds are authenticated and delivered in accordance herewith, shall be cancelled and destroyed upon the making of proper records regarding such payment. The Registrar shall furnish the City with appropriate certificates of destruction of such Bonds. 13. 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, bearing a number not contemporaneously outstanding. The City or the Registrar may require the Owner of such 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. If any Bond is lost, apparently destroyed, or wrongfully taken, the City, pursuant to the applicable laws of the State of Texas and in the absence of notice or knowledge that such Bond has been acquired by a bona fide purchaser, shall execute and the Registrar shall authenticate and deliver a replacement Bond of like maturity, interest rate and principal amount, bearing a number not contemporaneously outstanding,provided that the Owner thereof shall have: (1) furnished 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) furnished such security or indemnity as may be required by the Registrar and the City to save them harmless; (3) paid 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 -7- (4) met 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 replacement 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 security or indemnity provided therefor to the extent of any loss, damage, cost or expense incurred by the City or the Registrar in connection therewith. If any such mutilated, lost, apparently destroyed or 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. Each replacement 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 replacement Bond is delivered. 14. Special Election for Uncertificated Bonds. Notwithstanding any other provision hereof, upon initial issuance of the Bonds but at the sole election of the Underwriters, the ownership of the Bonds shall be registered in the name of Cede & Co., as nominee of DTC, and except as otherwise provided in this Section, all of the outstanding Bonds shall be registered in the name of Cede& Co., as nominee of DTC. The definitive Bonds shall be initially issued in the form of a single separate certificate for each of the maturities thereof. If the purchaser shall elect to invoke the provisions of this Section, then the following provisions shall take effect with respect to the Bonds. With respect to Bonds registered in the name of Cede & Co., as nominee of DTC, the City and the Registrar shall have no responsibility or obligation to any DTC Participant or to any person on behalf of whom such a DTC Participant holds an interest in the Bonds. Without limiting the immediately preceding sentence, the City and the Registrar shall have no responsibility or obligation with respect to (i) the accuracy of the records of DTC, Cede & Co. or any DTC Participant with respect to any ownership interest in the Bonds, (ii) the delivery to any DTC Participant or any other person, other than an Owner of a Bond, as shown on the Register, of any notice with respect to the Bonds, including any notice of redemption, or (iii) the payment to any DTC Participant or any other person, other than an Owner of a Bond, as shown in the Register, of any amount with respect to principal of, premium, if any, or interest on the Bonds. Notwithstanding any other provision of this Ordinance to the contrary, the City and the Registrar shall be entitled to treat and consider the person in whose name each Bond is registered in the Register as the absolute Owner of such Bond for the purpose of payment of principal of, premium, if any, and interest on the Bonds, for the purpose of all matters with respect to such Bond, for the purpose of registering transfers with respect to such Bond, and for all other purposes whatsoever. The Registrar shall pay all principal of, premium, if any, and interest on the Bonds only to or upon -8- the order of the respective Owners, as shown in the Register as provided in this Ordinance, or their respective attorneys duly authorized in writing, and all such payments shall be valid and effective to fully satisfy and discharge the City's obligations with respect to payment of principal of, premium, if any, and interest on the Bonds to the extent of the sum or sums so paid. No person other than an Owner as shown in the Register, shall receive a Bond certificate evidencing the obligation of the City to make payments of amounts due pursuant to this Ordinance. Upon delivery by DTC to the Registrar of written notice to the effect that DTC has determined to substitute a new nominee in place of Cede & Co., the word "Cede & Co." in this Ordinance shall refer to such new nominee of DTC. In the event that the City or the Registrar determines that DTC is incapable of discharging its responsibilities described herein and in the Letter of Representations of the City to DTC, and that it is in the best interest of the beneficial Owners of the Bonds that they be able to obtain certificated Bonds, or if DTC Participants owning at least 50% of the Bonds outstanding based on current records of the DTC determine that continuation of the system of book-entry transfers through the DTC (or a successor securities depository) is not in the best interest of the beneficial Owners of the Bonds, or in the event DTC discontinues the services described herein, the City or the Registrar shall (i) appoint a successor securities depository, qualified to act as such under Section 17(a) of the Securities and Exchange Act of 1934, as amended, and notify DTC of the appointment of such successor securities depository and transfer one or more separate Bonds to such successor securities depository or (ii) notify DTC of the availability through DTC of Bonds and transfer one or more separate Bonds to DTC Participants having Bonds credited to their DTC accounts. In such event, the Bonds shall no longer be restricted to being registered in the Register in the name of Cede & Co., as nominee of DTC,but may be registered in the name of the successor securities depository, or its nominee, or in whatever name or names Bondholders transferring or exchanging Bonds shall designate, in accordance with the provisions of this Ordinance. Notwithstanding any other provision of this Ordinance to the contrary, so long as any Bonds are registered in the name of Cede & Co., as nominee of DTC, all payments with respect to principal of, premium, if any, and interest on the Bonds, and all notices with respect to the Bonds, shall be made and given,respectively, in the manner provided in the Letter of Representations from the City to DTC. 15. Form. (a) The Bonds shall be in substantially the following form, including the form of Registrar's Certificate of Authentication, the form of Assignment, the form of Statement of Insurance, and the form of Registration Statement of the Comptroller of Public Accounts, with such additions, deletions and variations as may be necessary or desirable and permitted by this Ordinance: (Face of Bond) United States of America State of Texas -9- County of Jefferson NUMBER DENOMINATION R- $ REGISTERED REGISTERED THE CITY OF BEAUMONT,TEXAS General Obligation Refunding Bond Series 2004 INTEREST RATE: MATURITY DATE: DATED DATE: CUSIP: November 1,2004 REGISTERED OWNER: PRINCIPAL AMOUNT: DOLLARS The City of Beaumont, in the County of Jefferson, State of Texas (the "City"), promises to pay to the Registered Owner identified above, or registered assigns, on the date specified above, upon presentation and surrender of this bond at the principal corporate trust office of Wells Fargo 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 November 1, 2004, or the most recent interest payment date to which interest has been paid or duly provided for. Interest on this bond shall be paid by check payable on September 1 and March 1, beginning on March 1, 2005, mailed to the registered owner of record as of the previous August 15 and February 15 as shown on the books of registration kept by the Registrar. At the request of the registered holder of$1,000,000 or more in aggregate principal amount of Bonds, the Registrar shall pay interest on such Bonds by wire transfer in immediately available funds to the account designated by such holder to the Registrar in writing at least 5 days before the Record Date for such payment. 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 of the City and countersigned with the manual or facsimile signature of the City Clerk of the City, and the official seal of the City has been duly impressed, or placed in facsimile, on this Bond. -10- (AUTHENTICATION CERTIFICATE) THE CITY OF BEAUMONT,TEXAS Mayor (SEAL) City Clerk (Back Panel of Bond) THIS BOND is one of a duly authorized issue of Bonds, aggregating $20,640,000 (the "Bonds"), issued pursuant to an ordinance adopted by the City Council on November 2, 2004 (the "Ordinance") for the purpose of refunding the following: (a) a portion of the City's Combination Tax & Revenue Certificates of Obligation, Series 1998, maturing on March 1 in the years 2008 through 2017 in the principal amounts of $40,000, $500,000, $500,000, $500,000, 500,000, $500,000, 360,000, $1,900,000, $2,005,000, and $2,110,000, respectively; (b) a portion of the City's Refunding Bonds, Series 1996, maturing on March 1 in the years 2008 through 2010 in the principal amounts of$790,000, $780,000 and $785,000, respectively; (c) a portion of the City's Combination Tax & Revenue Certificates of Obligation, Series 1996, maturing on March 1 in the years 2008 through 2014 in the principal amounts of $590,000, $610,000, $680,000, $725,000, $775,000, $825,000 and $850,000, respectively; and (d) the City's Combination Tax & Revenue Certificates of Obligation, Series 1995, maturing on March 1 in the years 2006 through 2014 in the principal amounts of $500,000, $500,000, $500,000, $500,000, $500,000, $500,000, $500,000, $500,000 and $500,000,respectively. THE CITY RESERVES THE RIGHT, at its option, to redeem the Bonds having stated maturities on or after March 1, 2015, in whole or in part, on March 1, 2014, or any date thereafter, in integral multiples of $5,000, at a price of par plus accrued interest to the date fixed for redemption. Reference is made to the Ordinance for complete details concerning the manner of redeeming the Bonds. NOTICE OF ANY REDEMPTION shall be given at least thirty (30) days prior the date fixed for redemption by first class mail, addressed to the registered owner 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 -11- executed by the registered owner or his authorized representative, subject to the terms and conditions of the Ordinance. THE BONDS are exchangeable at the principal corporate trust office of the 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 certificate endorsed hereon or (ii) is authenticated by the Registrar by due execution of the authentication certificate endorsed hereon. 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 within the limits prescribed by law sufficient to provide for the payment of the interest on and principal of this Bond, as such interest comes due and such principal matures, have been levied and ordered to be levied against all taxable property in the City and have been pledged irrevocably for such payment. (b) Bonds No. R-1 through R-14 shall be registered by the Comptroller of Public Accounts of the State of Texas, as provided by law. The registration certificate of the Comptroller of Public Accounts shall be printed on Bonds R-1 through R-14 and shall be in substantially the following form: 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 12004. xxxxxxxxxxx Comptroller of Public Accounts of the State of Texas (SEAL) -12- (c) Except for Bond Numbers R-1 through R-14, the following form of authentication certificate shall be printed on each of the Bonds: AUTHENTICATION CERTIFICATE This bond is one of the bonds described in and delivered pursuant to the within-mentioned Ordinance. Wells Fargo Bank,National Association, Registrar By Authorized Signature Date of Authentication: (d) The following form of assignment shall be printed on each of the Bonds: ASSIGNMENT For value received, the undersigned hereby sells, assigns, and transfers unto the within bond 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 NOTICE: Signature must be owner as shown on the face guaranteed by a member firm of this Bond in every of the New York Stock Exchange particular,without any or a commercial bank or trust alteration, enlargement or company. change whatsoever. -13- (e) The following statement of insurance shall be printed on each of the Bonds: STATEMENT OF INSURANCE Financial Security Assurance Inc. ("Financial Security"), New York, New York, has delivered its municipal bond insurance policy with respect to the scheduled payments due of principal of and interest on this Bond to Wells Fargo Bank, N.A., Houston, Texas, or its successor, as paying agent for the Bonds (the "Paying Agent"). Said Policy is on file and available for inspection at the principal office of the Paying Agent and a copy thereof may be obtained from Financial Security or the Paying Agent. 16. Legal Opinions; CUSIP. The approving opinion of Orgain, Bell & Tucker, L.L.P., Beaumont,Texas, Bond Counsel, and CUSIP Numbers may be printed on the Bonds, but errors or omissions in the printing of such opinions or such numbers shall have no effect on the validity of the Bonds. 17. Interest and Sinking Fund; Levy, Assessment and Collection of Taxes. There is hereby established a separate fund of the City to be known as the "Series 2004 General Obligation Refunding Bonds 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, there is hereby levied and there shall be annually assessed and collected in due time, form and manner, and at the same time other City taxes are assessed, levied and collected, in each year, beginning with the current year, a continuing direct annual ad valorem tax upon all taxable property in said City sufficient to pay the current interest on said Bonds as the same becomes due, and to create and provide a sinking fund of not less than two percent (2%) of the original principal amount of the Bonds or of not less than the amount required to pay each installment of the principal of said Bonds as the same matures, whichever is greater, full allowance being made for delinquencies and costs of collection, and said taxes when collected shall be applied to the payment of the interest on and principal of said Bonds and to no other purpose. In addition, interest accrued from the date of the Bonds until their delivery and premium, if any, is to be deposited in such fund. To pay the interest coming due on the Bonds on March 1, 2005, and the interest coming due on September 1, 2005, there is hereby appropriated from current funds on hand, which are certified to be on hand and available for such purpose, an amount sufficient to pay such interest, and such amount shall be used for no other purpose. 18. Further Proceedings. After the Bonds to be initially issued shall have been executed, it shall be the duty of the Mayor 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 by the Attorney General. 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 initially issued, the -14- Comptroller of Public Accounts (or a deputy lawfully designated in writing to act for the Comptroller) shall manually sign the Comptroller's Registration Certificate prescribed herein to be printed and endorsed on the Bonds to be initially issued, and the seal of said Comptroller shall be impressed, or placed in facsimile, thereon. 19. Sale of Bonds and Bond Insurance. The Bonds are hereby sold and shall be delivered to the Underwriters at a price of$22,012,597.50, representing the principal amount of Bonds of$20,640,000.00, plus accrued interest of$81,250.35, plus a premium of$1,410,027.15, and less an underwriter's discount of$118,680.00, in accordance with the terms of the Purchase Contract 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 do any and all things necessary or desirable to satisfy the conditions set out herein and to provide for the issuance and delivery of the Bonds. The purchase of and payment of the premium for the Municipal Bond Guaranty Insurance Policy in accordance with the terms of the commitment for such insurance presented to the City Council are hereby approved and authorized. All officials and representatives of the City are authorized and directed to execute such documents and to do any and all things necessary, desirable or appropriate to obtain the Municipal Bond Guaranty Insurance Policy, and the printing on the Bonds covered by the Municipal Bond Guaranty Insurance Policy of an appropriate legend regarding such insurance is hereby approved and authorized. 20. Tax Exemption. The City intends that the interest on the Bonds shall be excludable from gross income of the owners thereof for federal income tax purposes pursuant to Sections 103 and 141 through 150 of the Internal Revenue Code of 1986, as amended, (the "Code") and all applicable temporary, proposed and final regulations (the "Regulations") and procedures promulgated thereunder and applicable to the Bonds. For this purpose, the City covenants that it will monitor and control the receipt, investment, expenditure and use of all gross proceeds of the Bonds and take or omit to take such other and further actions as may be required by Sections 103 and 141 through 150 of the Code and the Regulations to cause the interest on the Bonds to be and remain excludable from the gross income, as defined in Section 61 of the Code, of the owners of the Bonds for federal income tax purposes. Without limiting the generality of the foregoing, the City shall comply with each of the following covenants: (a) The City will use all of the proceeds of the Bonds to (i) acquire non- callable obligations of the United States of America(the "Escrowed Securities") sufficient to pay the principal of, premium, if any, and interest on the Refunded Obligations and (ii)to pay the costs of issuing the Bonds except for amounts, if any, described in the Report (as defined in the Escrow Agreement) as the rounding amount and the ending cash balance in the Escrow Fund (as defined in the Escrow Agreement). (b) The City will not directly or indirectly take any action or omit to take any action, which action or omission would cause the Bonds or the Refunded Obligations to constitute"private activity bonds"within the meaning of Section 141(a) of the Code. -15- (c) Principal of and interest on the Bonds will be paid solely from ad valorem taxes collected by the City, investment earnings on such collections, and as available, proceeds of the Bonds. (d) 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 and the Refunded Obligations (to the extent any of such proceeds remain unexpended) will not be used in a manner that would cause the Bonds or the Refunded Obligations or any portion thereof to be "arbitrage bonds" within the meaning of Section 148 of the Code. (e) At all times while the Bonds are outstanding, the City will identify and properly account for all amounts constituting gross proceeds of the Bonds in accordance with the Regulations. The City will monitor the yield on the investments of the proceeds of the Bonds and, to the extent required by the Code and the Regulations, will restrict the yield on such investments to a yield which is not materially higher than the yield on the Bonds. To the extent necessary to prevent the Bonds from constituting "arbitrage bonds," the City will make such payments as are necessary to cause the yield on all yield-restricted nonpurpose investments allocable to the Bonds to be less than the yield that is materially higher than the yield on the Bonds. (f) The City will not take any action or knowingly omit to take any action, if taken or omitted, would cause the Bonds to be treated as "federally guaranteed" obligations for purposes of Section 149(b) of the Code. (g) The City represents that not more than fifty percent (50%) of the proceeds of any new money portion of the Bonds or any new money issue refunded by, the Refunded Obligations was invested in nonpurpose investments (as defined in Section 148(f)(b)(A) of the Code) having a substantially guaranteed yield for four years or more within the meaning of Section 149(g)(3)(A)(ii) of the Code, and the City reasonably expected at the time each issue of the Refunded Obligations was issued that at least eighty-five percent (85%) of the spendable proceeds of the Bonds or the Refunded Obligations would be used to carry out the governmental purpose of such Bonds within the corresponding three-year period beginning on the respective dates of the Bonds or the Refunded Obligations. (h) The City will take all necessary steps to comply with the requirement that certain amounts earned by the City on the investment of the gross proceeds of the Bonds, if any, be rebated to the federal government. Specifically, the City will (i)maintain records regarding the receipt, investment and expenditure of the gross proceeds of the Bonds as may be required to calculate such excess arbitrage profits separately from records of amounts on deposit in the funds and accounts of the City allocable to other obligations of the City or moneys which do not represent gross proceeds of any obligations of the City and retain such records for at least six years after the day on which the last outstanding Bond is discharged, (ii) account for all gross proceeds under a reasonable, consistently applied method of accounting, not employed as an -1b- artifice or device to avoid, in whole or in part, the requirements of Section 148 of the Code, including any specified method of accounting required by applicable Regulations to be used for all or a portion of the gross proceeds, (iii) calculate, at such times as are required by applicable Regulations, the amount of excess arbitrage profits, if any, earned from the investment of the gross proceeds of the Bonds and (iv)timely pay, as required by applicable Regulations, all amounts required to be rebated to the federal government. In addition, the City will exercise reasonable diligence to assure that no errors are made in the calculations required by the preceding sentence and, if such an error is made, to discover and promptly correct such error within a reasonable amount of time thereafter, including payment to the federal government of any delinquent amounts owed to it, including interest thereon and penalty. (i) The City will not indirectly pay any amount otherwise payable to the federal government pursuant to the foregoing requirements to any person other than the federal government by entering into any investment arrangement with respect to the gross proceeds of the Bonds that might result in a reduction in the amount required to be paid to the federal government because such arrangement results in smaller profit or a larger loss than would have resulted if such arrangement had been at arm's length and had the yield on the issue not been relevant to either party. (j) The City will timely file or cause to be filed with the Secretary of the Treasury of the United States the information required by Section 149(e) of the Code with respect to the Bonds on such form and in such place as the Secretary may prescribe. (k) The City will not issue or use the Bonds as part of an "abusive arbitrage device" (as defined in Section 1.148-10(a) of the Regulations). Without limiting the foregoing, the Bonds are not and will not be a part of a transaction or series of transactions that attempts to circumvent the provisions of Section 148 of the Code and the Regulations, by (i) enabling the City to exploit the difference between tax-exempt and taxable interest rates to gain a material financial advantage, or (ii) increasing the burden on the market for tax-exempt obligations. (1) Proper officers of the City charged with the responsibility for issuing the Bonds are hereby directed to make, execute and deliver certifications as to facts, estimates or circumstances in existence as of the Issue Date and stating whether there are facts, estimates or circumstances that would materially change the City's expectations. On or after the Issue Date, the City will take such actions as are necessary and appropriate to assure the continuous accuracy of the representations contained in such certificates. (m) The covenants and representations made or required by this Section are for the benefit of the Bond holders and any subsequent Bond holder, and may be relied upon by the Bondholder and any subsequent Bondholder and bond counsel to the City. (n) In complying with the foregoing covenants, the City may rely upon an unqualified opinion issued to the City by nationally recognized bond counsel that any action by -17- the City or reliance upon any interpretation of the Code or Regulations contained in such opinion will not cause interest on the Bonds to be includable in gross income for federal income tax purposes under existing law. (o) Notwithstanding any other provision of this Ordinance, the City's representations and obligations under the covenants and provisions of this Section shall survive the defeasance and discharge of the Bonds for as long as such matters are relevant to the exclusion of interest on the Bonds from the gross income of the owners for federal income tax purposes. Section 21. Application of Proceeds. The proceeds from the sale of the Bonds in the amount of$22,012,597.50, together with the transfer of the sum of$367,000 from the debt service fund for the Refunded Obligations, shall,promptly upon receipt by the City,be applied as follows: (a) Accrued interest in the amount of$81,250.35 shall be deposited into the Interest and Sinking Fund for the Bonds; (b) To establish the escrow fund to refund the Refunded Obligations as provided in Section 24 below, $22,109,645.58 from the sale of the Bonds shall be deposited with the Escrow Agent pursuant to Section 24 below. (c) $186,216.37 from the sale of the Bonds shall be used to pay the costs of issuing the Bonds, including the premium of$68,216.37 for the Municipal Bond Guaranty Insurance Policy, not later than 90 days after such issuance; and (d) The sum of $2,485.20 from the sale of the Bonds shall be used as a rounding amount and shall be deposited in the Interest and Sinking Fund for the Bonds; and (e) Any proceeds from the Bonds remaining after making all such deposits and payments shall be deposited into the Interest and Sinking Fund. 22. Transfer of Money in Interest and Sinking Funds Maintained for the Refunded Obligations. On the date of delivery of the Bonds, the sum of$367,000.00 contained in the Interest and Sinking Funds for the Refunded Obligations shall be transferred to the Paying Agent and shall be applied as herein provided. 23. Redemption of Refunded Obligations. The City hereby irrevocably calls the following bonds of the City for redemption on the date set forth below, and authorizes and directs notice of such redemption to be given in such form and in such manner as the Mayor, City Manager, City Clerk or any other official of the City may approve: -18- Obligations To Be Redeemed Redemption Date A portion of The City of Beaumont, Texas, Combination Tax&Revenue Certificates of Obligation, Series 1998 Maturities 2008 through 2017, in the principal amounts of$40,000, $500,000, $500,000, $500,000, 500,000, $500,000, $360,000, $1,900,000, $2,005,000, and$2,110,000,respectively March 1,2008 A portion of the City of Beaumont, Texas, Refunding Bonds, Series 1996, Maturities 2008 through 2010, in the principal amounts of$790,000, $780,000 and $785,000,respectively March 1,2007 A portion of the City of Beaumont, Texas Combination Tax&Revenue Certificates of Obligation, Series 1996, Maturities 2008 through 2014 in the principal amounts of$590,000, $610,000, $680,000, $725,000, $775,000, $825,000 and $850,000,respectively March 1,2007 The City of Beaumont, Texas, Combination Tax& Revenue Certificates of Obligation, Series 1995, Maturities 2006 through 2014 in the principal amounts of $500,000, $500,000, $500,000, $500,000, $500,000, $500,000, $500,000, $500,000 and$500,000,respectively March 1, 2005 24. Escrow Agreement. The discharge and defeasance of the Refunded Obligations shall be effectuated pursuant to the terms and provisions of an Escrow Agreement to be entered into by and between the City and JPMorgan Chase Bank, Dallas, 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 which has been designed for the City by RBC Dain Rauscher Inc., and which shall be certified as to mathematical accuracy by Grant Thornton, L.L.P., in the Report, (b) to maximize the City's present value savings and minimize the City's costs of refunding, (c)to comply with all applicable laws and regulations relating to the refunding of the Refunded Obligations and (d) to carry out the other intents and purposes of this Ordinance, and the Mayor is hereby authorized to execute and deliver the 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. -19- 25. Source of Funds Used in Refunding. No money of the City other than proceeds of the Bonds and other than the sum of $367,000.00 from the Interest and Sinking Fund for the Refunded Obligations shall be used to refund the Refunded Obligations. 26. Purchase of Escrowed Securities. To assure the purchase of the Escrowed Securities as described in the Report and in the Escrow Agreement, the Mayor, the City's Finance Officer, and the Escrow Agent are hereby authorized to subscribe for, agree to purchase, and purchase such Escrowed Securities 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. 27. 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 Chapter 551 of the Texas Government Code Annotated,Vernon's 1994, as amended. 28. Official Statement. The Preliminary Official Statement and the Official Statement prepared in the initial offering and sale of the Bonds have been and are hereby authorized, approved and ratified as to form and content. The use of the Preliminary Official Statement and the Official Statement in the reoffering of the Bonds by the Underwriters is hereby approved, authorized and ratified. The proper officials of the City are hereby authorized to execute and deliver a certificate pertaining to the Preliminary Official Statement and the Official Statement as prescribed therein, dated as of the date of payment for and delivery of the Bonds. 29. Registrar. The Registrar, by undertaking the performance of the duties of the Registrar and in consideration of the payment of fees or deposits of money pursuant to this Ordinance and a Paying Agent/Registrar's Agreement, accepts and agrees to abide by the terms of this Ordinance and such Agreement. The City hereby approves the form of the Paying Agent/Registrar's Agreement presented to the City Council and hereby authorizes the Mayor or any other official of the City to execute such agreement on behalf of the City, with such changes and revisions thereto as may be approved by the official executing such agreement. The City covenants that at all times while any Bonds are outstanding, it will provide a bank, trust company, financial institution or other entity duly qualified and authorized to act as Registrar for the Bonds. The City reserves the right to replace the Registrar or its successor at any time on not less than sixty (60) days' written notice to the Registrar, so long as any such notice is effective not less than sixty (60) days prior to the next succeeding principal or interest payment date on the Bonds. If the Registrar is replaced by the City, the new Registrar shall accept the previous Registrar's records and act in the same capacity as the previous 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. Any successor Registrar shall be either a national or state banking institution and a corporation or association organized and doing business under the laws of the -20- United States of America or any State authorized under such laws to exercise trust powers and subject to supervision or examination by Federal or State authority. Each Registrar hereunder, by acting in that capacity, shall be deemed to have agreed to the provisions of this Section. 30. Related Matters. To satisfy in a timely manner all of the City's obligations under this Ordinance, the Mayor, the Mayor Pro Tem, the City Manager, the City Clerk, or 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 issuance of the Bonds, including, without limitation, executing and delivering on behalf of the City all certificates, consents, receipts, requests and other documents as may be reasonably necessary to satisfy the City's obligations under this Ordinance and to direct the application of funds of the City consistent with the provisions hereof. 31. No Personal Liability. No recourse shall be had for payment of the principal of or premium, if any, 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. Severability. If any Section, paragraph, clause or provision of this Ordinance shall for any reason be held to be invalid or unenforceable, the invalidity or unenforceability of such Section, paragraph, clause or provision shall not affect any of the remaining provisions of this Ordinance. 33. Repealer. All orders, resolutions, and ordinances, and parts thereof inconsistent herewith are hereby repealed to the extent of such inconsistency. 34. Additional Obligations. The City undertakes and agrees for the benefit of the holders of the Bonds to provide directly, on or before six months after the end of the City's fiscal year,which fiscal year presently ends on September 30: a. to each nationally recognized municipal securities information repository and to the appropriate state information depository, if any, annual financial information (which may be unaudited) and operating data regarding the City for fiscal years ending on or after January 1, 2004 which annual financial information and operating data shall be of the type included in the following listed sections contained in the Final Official Statement: SELECTED FINANCIAL INFORMATION CITY TAX DEBT(except for"Estimated Overlapping Debt") TAX DATA SELECTED FINANCIAL DATA -21- INVESTMENT AUTHORITY AND INVESTMENT OBJECTIVES OF THE CITY-Current Investments Appendix B b. to each nationally recognized municipal securities information repository and to the appropriate state information depository, if any, audited financial statements for the City for fiscal years ending on or after January 1, 2004, when available, if the City commissions an audit and it is completed by the required time; provided that if audited statements are not commissioned or are not available by the required time, the City will provide unaudited statements when and if they become available; C. in a timely manner, to each nationally recognized municipal securities information repository or to the Municipal Securities Rulemaking Board, and to the appropriate state information depository, if any, notice of any of the following events with respect to the Bonds, if material within the meaning of the federal securities laws to a decision to purchase or sell Bonds: i. Principal and interest payment delinquencies; ii. Non-payment related defaults; iii. Unscheduled draws on debt service reserves reflecting financial difficulties; iv. Unscheduled draws on credit enhancements reflecting financial difficulties; V. Substitution of credit or liquidity providers, or their failure to perform; vi. Adverse tax opinions or events affecting the tax-exempt status of the Bonds; vii. Modifications to rights of Bondholders; viii. Bond calls; ix. Defeasances; X. Release, substitution or sale of property securing repayment of the securities; xi. Rating changes; and d. in a timely manner, to each nationally recognized municipal securities information repository or to the Municipal Securities Rulemaking Board, and to the appropriate state information depository, if any, notice of a failure of the City to provide required annual financial information and operating data, on or before six months after the end of the City's fiscal year. These undertakings and agreements are subject to appropriation of necessary funds and to -22- applicable legal restrictions, if any. The accounting principles pursuant to which the City's financial statements are currently prepared are generally accepted accounting principles set out by the Government Accounting Standards Board, and, subject to changes in applicable law or regulation, such principles will be applied in the future. If the City changes its fiscal year, it will notify each nationally recognized municipal securities information repository and the appropriate state information depository of the change (and of the new fiscal year end) prior to the next date by which the City otherwise would be required to provide annual financial information. The City's obligation to update information and to provide notices of material events shall be limited to the agreements herein. The City shall not be obligated to provide other information that may be relevant or material to a complete presentation of its financial results of operations, condition,prospects and shall not be obligated to update any information that is provided, except as described herein. The City makes no representation or warranty concerning such information or concerning its usefulness to a decision to invest in or sell Bonds at any future date. THE CITY DISCLAIMS ANY CONTRACTUAL OR TORT LIABILITY FOR DAMAGES RESULTING IN WHOLE OR IN PART FROM ANY BREACH, WHETHER NEGLIGENT OR WITHOUT FAULT ON ITS PART, OF ITS CONTINUING DISCLOSURE AGREEMENT OR FROM ANY STATEMENT MADE PURSUANT TO ITS AGREEMENT. HOLDERS OR BENEFICIAL OWNERS OF BONDS MAY SEEK AS THEIR SOLE REMEDY A WRIT OF MANDAMUS TO COMPEL THE CITY TO COMPLY WITH ITS AGREEMENT. No default by the City with respect to its continuing disclosure agreement shall constitute a breach of or default under this Ordinance for purposes of any other provision of this Ordinance. Nothing in this paragraph is intended or shall act to disclaim, waive, or otherwise limit the duties of the City under federal and state securities laws. The City may amend its continuing disclosure obligations and agreement in this Section 34 to adapt to changed circumstances that arise from a change in legal requirements, a change in law, or a change in the identity, nature, status or type of operations of the City, if the agreement, as amended, would have permitted the Underwriters to purchase or sell the Bonds in compliance with SEC Rule 15c2-12, taking into account any amendments or interpretations of such rule to the date of such amendment, as well as such changed circumstances, and either the holders of a majority in aggregate principal amount of the outstanding Bonds consent or any person unaffiliated with the City (such as nationally recognized bond counsel) determines the amendment will not materially impair the interests of the holders and beneficial owners of the Bonds. The City may also amend or repeal the obligations and agreement in this Section 34 if the SEC amends or repeals the applicable provisions of Rule 15c2-12 or a court of final jurisdiction determines that such provisions are invalid, and the City may amend the agreement in its discretion in any other circumstance or manner, but in either case only to the extent that its right to do so would not prevent the Underwriters from lawfully purchasing or reselling the Bonds in the primary offering of the Bonds -23- in compliance with Rule 15c2-12. If the City amends its agreement, it must include with the next financial information and operating data provided in accordance with its agreement an explanation, in narrative form, of the reasons for the amendment and of the impact of any change in the type of information and operating data so provided. The City's continuing obligation to provide annual financial information and operating data and notices of events will terminate if and when the City no longer remains an "obligated person" (as such term is defined in SEC Rule 15c2-12)with respect to the Bonds. [The remainder of this page has intentionally been left blank. Signature page follows.] -24- PASSED AND APPROVED this 2nd day of November, 2004. Mayor THE CITY OF BEAUMONT, TEXAS ATTEST: City Clerk THE CITY OF BEAUMONT,TEXAS (CITY SEAL) w ' ul . 6 tp -25- Section 5 No. 5 ESCROW AGREEMENT THIS ESCROW AGREEMENT (the "Escrow Agreement") dated for convenience November 1, 2004,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 (the "City"), and JPMorgan Chase Bank, a New York banking corporation having a principal corporate trust office in Dallas, Texas, as escrow agent(together with any successor or assign in such capacity,the "Escrow Agent"). WHEREAS, the City has heretofore issued and there remains outstanding the City's Combination Tax & Revenue Certificates of Obligation, Series 1998, the City's Refunding Bonds, Series 1996, the City's Combination Tax & Revenue Certificates of Obligation, Series 1996, and the City's Combination Tax & Revenue Certificates of Obligation, Series 1995 (the "Refunded Obligations"), and the City desires to provide for the refunding of a portion of certain maturities of the Refunded Obligations; and WHEREAS, Chapter 1207, Texas Government Code, as amended (formerly Article 717k, Vernon's Annotated Texas Civil Statutes, as amended), authorizes and empowers the City to issue, sell and deliver refunding bonds and to deposit the proceeds of such bonds, together with other available funds or resources, with any place of payment for the Refunded Obligations in an amount which is sufficient to provide for the payment or redemption of the principal of and interest on the Refunded Obligations; and WHEREAS, the City Council of the City has adopted an ordinance authorizing the issuance of the City's General Obligation Refunding Bonds, Series 2004, in the aggregate principal amount of$20,640,000 (the "Refunding Bonds"), for the purpose, among other things, of providing the funds necessary to pay and refund the Refunded Obligations, thereby providing a net present value 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 payment of the Refunded Obligations; and WHEREAS, the City Council of the City has further determined to effectuate the refunding of the Refunded Obligations 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 financial arrangements for the discharge and final payment or redemption of the Refunded Obligations; NOW, THEREFORE, in consideration of the mutual undertakings, promises and agreements herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and in ordinance to secure the full and timely payment of the principal of and the interest on the Refunded Obligations, the City and the Escrow Agent contract and agree as follows: ARTICLE I DEFINITIONS AND INTERPRETATIONS 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: "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 JPMorgan Chase Bank, 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 Restricted Acquired Obligations and the Other Acquired Obligations purchased with the funds deposited into the Escrow Fund, all as more fully described in the Report. "Paying Agents for the Refunded Obligations" shall mean J.P.Morgan Trust Company with respect to the City's Combination Tax & Revenue Certificates of Obligation, Series 1998, the Ciy's Refunding Bonds, Series 1996, and the City's Combination Tax & Revenue Certificates of Obligation, Series 1996, and any successors thereto, and shall mean The Bank of New York Trust Company,N.A.,with respect to the City's Combination Tax&Revenue Certificates of Obligation, Series 1995. "Refunded Obligation Ordinances" shall mean the City's ordinances authorizing the issuance, sale and delivery of the Refunded Obligations. "Refunded Obligations" shall mean: (a) a portion of the City's Combination Tax & Revenue Certificates of Obligation, Series 1998, maturing on March 1 in the years 2008 through 2017 in the principal amounts of $40,000, $500,000, $500,000, $500,000, 500,000, $500,000, 360,000, $1,900,000, $2,005,000, and $2,110,000, respectively; (b) a portion of the City's Refunding Bonds, Series 1996, maturing on March 1 in the years 2008 through 2010 in the -2- principal amounts of $790,000, $780,000 and $785,000, respectively; (c) a portion of the City's Combination Tax & Revenue Certificates of Obligation, Series 1996, maturing on March 1 in the years 2008 through 2014 in the principal amounts of $590,000, $610,000, $680,000, $725,000, $775,000, $825,000 and $850,000, respectively; and (d) the City's Combination Tax & Revenue Certificates of Obligation, Series 1995,maturing on March 1 in the years 2006 through 2014 in the principal amounts of $500,000, $500,000, $500,000, $500,000, $500,000, $500,000, $500,000, $500,000 and $500,000,respectively. "Refunding Bonds" shall mean the City's General Obligation Refunding Bonds, Series 2004, dated November 1, 2004, in the outstanding aggregate principal amount of$20,640,000. "Refunding Bond Ordinance" shall mean the City's Ordinance adopted November 2, 2004, authorizing the issuance, sale and delivery of the Refunding Bonds. "Report" shall mean the verification report prepared by Grant Thornton LLP, relating to the refunding of the Refunded Obligations, a copy of which is attached hereto as Exhibit"A". "Restricted Acquired Obligations" shall mean the United States Treasury Notes and STRIPS, initially purchased with the proceeds of the Bonds, and United States Treasury Securities - State and Local Government Series at 0%Interest Rate("SLGS"), all as more fully described in the Report. 1.02 Interpretations. The titles and headings of the articles and sections of this Escrow Agreement have been inserted for convenience of reference only and are not to be considered a part hereof and shall not in any way modify or restrict the terms hereof. This Escrow Agreement and all of the terms and provisions hereof shall be liberally construed to effectuate the purposes set forth herein and to achieve the intended purpose of providing for the refunding of the Refunded Obligations in accordance with applicable law. ARTICLE II DEPOSIT OF FUNDS AND ESCROWED SECURITIES 2.01 Deposits with Escrow Agent; Acquisition of Escrowed Securities. On the Escrow Funding Date, the City will deposit, or cause to be deposited, with the Escrow Agent the following: (a) Restricted Acquired Obligations in the principal price of$22,109,644.00,purchased with a portion of the proceeds of the Refunding Bonds; and (b) A beginning cash balance of$1.58. -3- ARTICLE III CREATION AND OPERATION OF ESCROW FUND 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 "City of Beaumont, Texas, General Obligation Refunding Bonds, Series 2004 Escrow Fund", into which will be deposited the cash and Escrowed Securities described in Section 2.01. The Escrowed Securities, all proceeds therefrom and all cash balances from time to time on deposit in the Escrow Fund shall be the property of the Escrow Fund, and shall be applied only in strict conformity with the terms and conditions hereof. The Escrowed Securities, all proceeds therefrom and all cash balances from time to time on deposit in the Escrow Fund are hereby irrevocably pledged to the payment of the principal of and interest on the Refunded Obligations, which payment shall be made by timely transfers to the Paying Agent for the Refunded Obligations of such amounts at such times as are provided in Section 3.02 hereof. When the final transfers have been made to the Paying Agents for the Refunded Obligations for the payment of such principal of and interest on the Refunded Obligations, any balance then remaining in the Escrow Fund shall be transferred to the City, and the Escrow Agent shall thereupon be discharged from any further duties hereunder. 3.02 Payment of Principal of and Interest on Refunded Obligations. (a) The Escrow Agent is hereby irrevocably instructed to transfer to the Paying Agent for the Refunded Obligations 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 Obligations 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 Obligations in accordance with the provisions hereof shall be held by the Paying Agent for the Refunded Obligations as a segregated account for the respective holders of the Refunded Obligations in connection with which such money is held; provided, however, subject to the provisions of Title 6 of the Texas Property Code regarding Unclaimed Property, that money so held remaining unclaimed by the owners of such Refunded Obligations 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. Thereafter, neither the City,the Escrow Agent, the Paying Agents for the Refunded Obligations nor any other person shall be liable or responsible to any holders of such Refunded Obligations for any further payment of such unclaimed money or on account of any such Refunded Obligations. (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 Obligations prior to their scheduled maturities. 3.03 Sufficiency of Escrow Fund. The City represents (based solely upon the Report) that the successive receipts of the principal of and interest on the Escrowed Securities will assure that the cash balance on deposit from time to time in the Escrow Fund will be at all times sufficient -4- to provide money for transfer to the Paying Agents for the Refunded Obligations at the times and in the amounts required to pay the interest on the Refunded Obligations as such interest comes due and to pay the principal of the Refunded Obligations as the Refunded Obligations mature or are redeemed. If any deficiency results from any error in the calculation of the report, the City shall transfer to the Escrow Agent for deposit to the Escrow Fund to be held pursuant to this Escrow Agreement an additional amount of cash or securities sufficient to provide for such deficiency. 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 Obligations; 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 Obligations shall be entitled to the same preferred claim and first lien upon the Escrowed Securities,the proceeds thereof and all other assets of the Escrow Fund 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. ARTICLE IV REDEMPTION OF CERTAIN REFUNDED OBLIGATIONS 4.01 Optional Redemption of Certain Refunded Obligations. The City has irrevocably exercised its option to call for redemption the Refunded Obligations as set forth below. Such optional redemption shall be carried out in accordance with the Ordinance authorizing the issuance of the Refunded Obligations. The Escrow Agent is hereby authorized to provide funds therefor as set forth in Section 3.02(a)hereof. Bonds To Be Redeemed Redemption Date A portion of The City of Beaumont, Texas, Combination Tax&Revenue Certificates of Obligation, Series 1998 Maturities 2008 through 2017, in the principal amounts of$40,000, $500,000, $500,000, $500,000, 500,000, $500,000, 360,000, $1,900,000, $2,005,000, and $2,110,000,respectively March 1,2008 -5- A portion of the City of Beaumont,Texas, Refunding Bonds, Series 1996, Maturities 2008 through 2010,in the principal amounts of$790,000, $780,000 and $785,000,respectively March 1,2007 A portion of the City of Beaumont, Texas Combination Tax&Revenue Certificates of Obligation, Series 1996, Maturities 2008 through 2014 in the principal amounts of$590,000, $610,000, $680,000, $725,000, $775,000, $825,000 and $850,000, respectively March 1,2007 The City of Beaumont,Texas, Combination Tax& Revenue Certificates of Obligation, Series 1995, Maturities 2006 through 2014 in the principal amounts of $500,000, $500,000, $500,000, $500,000, $500,000, $500,000, $500,000, $500,000 and$500,000,respectively March 1,2005 ARTICLE V LIMITATION ON INVESTMENTS 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, except for the purchase of the SLGS as described in the Report. 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 proceeds therefrom to purchase Refunded Obligations 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 new verification report together with a written opinion from a nationally recognized firm of certified public accountants acceptable to the City and the Escrow Agent that such transaction will not cause the amount of money and securities in the Escrow Fund to be reduced below an amount which will be sufficient, when added to the interest to accrue thereon, to provide for the payment of principal and interest on the remaining Refunded Obligations 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. -6- ARTICLE VI RECORDS AND REPORTS 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 Obligations. 6.02 Reports. For the period beginning on the Escrow Funding Date and ending on October 31, 2005, and for each twelve (12) month period thereafter while this Agreement remains in effect, the Escrow Agent shall prepare and send to the City, at the City's request, within thirty (30) days following the end of such period a written report summarizing all transactions relating to the Escrow Fund during such period, including, without limitation, credits to the Escrow Fund as a result of interest payments on or maturities of the Escrowed Securities and transfers from the Escrow Fund to the Paying Agents for the Refunded Obligations or otherwise, together with a detailed statement of all Escrowed Securities and the cash balance on deposit in the Escrow Fund as of the end of such period. 6.03 Notification. The Escrow Agent shall notify the City immediately if at any time during the term of this agreement it determines that there is insufficient cash and Escrowed Securities in the Escrow Fund to provide for the transfer to the Paying Agents for the Refunded Obligations for timely payment of all interest on and principal of the Refunded Obligations. ARTICLE VII CONCERNING THE ESCROW AGENT 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. 7.02 Limitation on Liability. The Escrow Agent shall not be liable for the performance of any duties, except such duties as are specifically set forth in this Escrow Agreement, and no implied covenants or obligations shall be read into this Escrow Agreement. Nothing herein contained shall relieve the Escrow Agent from liability for its own negligent action, negligent failure to act or willful misconduct, except that this sentence shall not be construed to limit the effect of the immediately preceding sentence. The Escrow Agent shall not incur any liability for any error of judgment made in good faith by a responsible officer thereof, unless it shall be proved that it was negligent in ascertaining the pertinent facts. The Escrow Agent shall be protected in acting upon any notice, resolution,request, consent, order, certificate,report, opinion,bond or other paper or document believed by it to be genuine, and to have been signed or presented by the proper -7- party or parties. The Escrow Agent may consult with counsel, and the opinion of such counsel shall be full and complete authorization and protection in respect of any action taken or suffered by it in good faith and in accordance therewith. The Escrow Agent is not a principal, participant or beneficiary of the underlying transaction to which this Escrow Agreement relates. The liability of the Escrow Agent to transfer funds to the Paying Agents for the Refunded Obligations for the payments of the principal of and interest on the Refunded Obligations shall be limited to the proceeds of the Escrowed Securities and the cash balances from time to time on deposit in the Escrow Fund. Notwithstanding any provision contained herein to the contrary, the Escrow Agent shall have no liability whatsoever for the insufficiency of funds from time to time in the Escrow Fund or any failure of the obligor of the Escrowed Securities to make timely payment thereon, except for the obligation to notify the City promptly of any such occurrence. The recitals herein and in the proceedings authorizing the Refunding Bonds shall be taken as the statements of the City and shall not be considered as made by, or imposing any obligation or liability upon, the Escrow Agent. In its 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. 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 connection may make inquiries of, and consult with the City, among others, at any time. In the absence of bad faith, the Escrow Agent may rely conclusively upon the truth, completeness and accuracy of the statements, certificates, opinions, resolutions and other documents conforming to the requirements of this Escrow Agreement, and shall not be obligated to make any independent investigation with respect thereto. To the full extent permitted by law, the parties agree to indemnify, defend and hold the -8- Escrow Agent harmless from and against any and all loss, damage, tax, liability and expense that may be incurred by the Escrow Agent arising out of or in connection with its acceptance or appointment as Escrow Agent hereunder, including attorneys' fees and expenses of defending itself against any claim or liability in connection with its performance hereunder except that the Escrow Agent shall not be indemnified for any loss, damage, tax, liability or expense resulting from its own negligence or willful misconduct. The Escrow Agent's right to indemnification shall survive its resignation or removal and the termination of this Agreement. The Escrow Agent shall have only those duties as are specifically provided herein, which shall be deemed purely ministerial in nature, and shall under no circumstance be deemed a fiduciary for any of the parties to this Agreement. The Escrow Agent shall neither be responsible for, nor chargeable with, knowledge of the terms and conditions of any other agreement, instrument or document between the other parties hereto, in connection herewith. This Agreement sets forth all matters pertinent to the escrow contemplated hereunder, and no additional obligations of the Escrow Agent shall be inferred from the terms of this Agreement or any other Agreement. IN NO EVENT SHALL THE ESCROW AGENT BE LIABLE, DIRECTLY OR INDIRECTLY, FOR ANY (i) DAMAGES OR EXPENSES ARISING OUT OF THE SERVICES PROVIDED HEREUNDER, OTHER THAN DAMAGES WHICH RESULT FROM THE ESCROW AGENT'S FAILURE TO ACT IN ACCORDANCE WITH THE STANDARDS SET FORTH IN THIS AGREEMENT, OR (ii) SPECIAL OR CONSEQUENTIAL DAMAGES, EVEN IF THE ESCROW AGENT HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. In the event that any escrow property shall be attached, garnished or levied.upon by any court order, or the delivery thereof shall be stayed or enjoined by an order of a court, or any order, judgment or decree shall be made or entered by any court order affecting the property deposited under this Agreement, the Escrow Agent is hereby expressly authorized, in its sole discretion, to obey and comply with all writs, orders or decrees so entered or issued, which it is advised by legal counsel of its own choosing is binding upon it, whether with or without jurisdiction, and in the event that the Escrow Agent obeys or complies with any such writ, order or decree it shall not be liable to any of the parties hereto or to any other person, firm or corporation, by reason of such compliance notwithstanding such writ, order or decree be subsequently reversed, modified, annulled, set aside or vacated. Any banking association or corporation into which the Escrow Agent may be merged, converted or with which the Escrow Agent may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Escrow Agent shall be a party, or any banking association or corporation to which all or substantially all of the corporate trust business of the Escrow Agent shall be transferred, shall succeed to all the Escrow Agent's rights, obligations and immunities hereunder without the execution or filing of any paper or any further act on the part of any of the parties hereto, anything herein to the contrary notwithstanding. The Escrow Agent shall have the right, but not the obligation, to consult with counsel of choice and shall not be liable for action taken or omitted to be taken by Escrow Agent either in accordance with the advice of such counsel or in accordance with any opinion of counsel to the -9- Issuer addressed and delivered to the Escrow Agent. The Escrow Agent have the right to perform any of its duties hereunder through agents, attorneys, custodians or nominees. 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, the sum of$1,600.00, in cash. This sum does not include the cost of publication, printing costs or reasonable out-of-pocket expenses of the Escrow Agent. If the Escrow Agent incurs any out-of-pocket expenses or is requested to perform any extraordinary services hereunder, the City hereby agrees to reimburse the Escrow Agent for such out-of-pocket expenses and 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 reimbursement of such out-of-pocket expenses and 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. (b) J.P.Morgan Trust Company and The Bank of New York Trust Company,N.A. each serve as a Paying Agent for one or more of the Refunded Obligations. By execution of the Consent to Escrow Agreement attached hereto, J.P. Morgan Trust Company and The Bank of New York Trust Company, N.A. each agree to continue to serve as Paying Agent for the life of the Refunded Obligations for which it is now serving as Paying Agent, and they will serve as Paying Agents for the Refunded Obligations for the compensation provided under the fee schedule currently in effect and it will look to the City directly for payment of its fees; and, in the event of nonpayment of such fees, the sole remedy of the Paying Agent shall be an action against the City for recovery of the fees owing under the paying agency agreement for which it serves. 7.04 Successor Escrow Agents. If at 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. Any successor Escrow Agent must be qualified under the laws of the State of Texas to serve as an escrow agent and must be authorized to exercise corporate trust powers. No resignation or removal of the Escrow Agent and no early termination of this Agreement shall occur until a successor Escrow Agent has been appointed who is qualified to serve as Escrow Agent hereunder and who has accepted such appointment. Upon the request of any such successor Escrow Agent, the City shall execute any and all instruments in writing for more fully and certainly vesting in and confirming to such successor Escrow Agent all such immunities,rights, powers and duties. The Escrow Agent shall pay over to its successor Escrow Agent a proportional part of the Escrow Agent's fee hereunder equal to the portion of such fee attributable to duties to be -10- performed after the date of succession. ARTICLE VIII MISCELLANEOUS 8.01 Notices. Any notice, authorization, request, or demand required or permitted to be given hereunder shall be in writing and shall be deemed to have been duly given when mailed by registered or certified mail,postage prepaid addressed as follows: To the Escrow Agent: JPMorgan Chase Bank P.O. Box 2320,Dallas, Texas 75221-2320 Attention: Issuer Administrative Services To the City: City of Beaumont,Texas 801 Main Street Beaumont,TX 77701 ATTENTION: City Manager 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. 8.02 Termination of Escrow Agent's Obligations. 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 Obligations or to any other person or persons in connection with this Escrow Agreement. 8.03 Binding Agreement. This Escrow Agreement shall be binding upon the City, and the Escrow Agent and their respective successors and legal representatives, and shall inure solely to the benefit of the holders of the Refunded Obligations, the City, the Escrow Agent and their respective successors and legal representatives. This Escrow Agreement may not be modified except with the prior consent of the holders of all of the Refunded Obligations. 8.04 Severability. In case any one or more of the provisions contained in this Escrow Agreement shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Escrow Agreement, but this Escrow Agreement shall be construed as if such invalid or illegal or -11- unenforceable provision had never been contained herein. 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. 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. [The remainder of this page has intentionally been left blank. Signature page follows.] -12- Executed as of November 1, 2004, but effective as set forth herein. THE CITY OF BEAUMONT, TEXAS ATTEST: By: By: 42��Qna� Title: Mayor Title: City Clerk (SEAL) .urv2�i;fit JPMORGAN CHASE BANK,as Escrow Agent i A "u� By' h c R , L� NT Title: SSI T 6 I r !? -13- CONSENT TO ESCROW AGREEMENT Upon receipt of sufficient funds from the Escrow Agent, J.P. MORGAN TRUST COMPANY, as paying agent for one or more series of the Refunded Obligations (as defined in the foregoing Escrow Agreement), hereby acknowledges and consents to provide for the full and timely payment of the principal of and interest on such series of Refunded Obligations. J.P. MORGAN TRUST COMPANY further consents to the management of the Escrow Fund by the Escrow Agent in accordance with the terms and conditions of the Escrow Agreement and agrees to be bound by the terms of the Escrow Agreement with respect to its obligations as a paying agent. J.P. MORGAN TRUST COMPANY agrees to continue to serve as Paying Agent for which it is now serving as Paying Agent, and it will serve as Paying Agent for the Refunded Obligations for the compensation provided under the fee schedule currently in effect and it will look to the City directly for payment of its fees; and, in the event of nonpayment of such fees, the sole remedy of the Paying Agent shall be an action against the City for recovery of the fees owing under the paying agency agreement for which it serves. J.P. MORGAN TRUST COMPANY By: Name: y�Cn -L,,on, t lc-:cc-e-- Title: AggjS `kj%'IT y,,-rE PRESIDENT -14- CONSENT TO ESCROW AGREEMENT Upon receipt of sufficient funds from the Escrow Agent, The Bank of New York Trust Company, N.A., as paying agent for one or more series of the Refunded Obligations (as defined in the foregoing Escrow Agreement), hereby acknowledges and consents to provide for the full and timely payment of the principal of and interest on such series of Refunded Obligations. The Bank of New York Trust Company, N.A. further consents to the management of the Escrow Fund by the Escrow Agent in accordance with the terms and conditions of the Escrow Agreement and agrees to be bound by the terms of the Escrow Agreement with respect to its obligations as a paying agent. The Bank of New York Trust Company, N.A. agrees to continue to serve as Paying Agent for which it is now serving as Paying Agent, and it will serve as Paying Agent for the Refunded Obligations for the compensation provided under the fee schedule currently in effect and it will look to the City directly for payment of its fees; and, in the event of nonpayment of such fees, the sole remedy of the Paying Agent shall be an action against the City for recovery of the fees owing under the paying agency agreement for which it serves. The Bank of New York Trust, N.A. Ti le: MTANT REAA�URFq -15- Section 6 Cash Flow and Yield Verification Report City of Beaumont, Texas December 2, 2004 INDEX Letter Exhibit A Schedule of Sources and Uses of Funds Exhibit B Escrow Account Cash Flow Exhibit B-1 Cash Receipts From and Yield on the SLGS Purchased with Bond Proceeds Exhibit B-2 Cash Receipt From the SLGS Purchased with Debt Service Funds Exhibit B-3 Debt Service Payment on the 1995 Certificates Exhibit B-4 Debt Service Payments on the 1996 Certificates Exhibit B-5 Debt Service Payments on the 1996 Bonds Exhibit B-6 Debt Service Payments on the 1998 Certificates Exhibit C Debt Service Payments and Yield on the Bonds Exhibit C-1 Original Issue Premium on the Bonds Exhibit D Multipurpose Allocation on the 1996 Certificates and 1996 Bonds Appendix I Applicable schedules provided by RBC Dain Rauscher Inc. Grant Thorntowila Accountants and Business Advisors Report of Independent Certified Public Accountants On Applying Agreed-Upon Procedures City of Beaumont 801 Main Beaumont,Texas Orgain,Bell&Tucker,L.L.P. JP Morgan Chase Bank 470 Orleans,Suite 400 2001 Bryan Street, 8th Floor Beaumont,Texas Dallas,Texas First Southwest Company Texas Attorney General's Office 325 North St. Paul Street, Suite 800 300 West 15th Street,Ninth Floor Dallas,Texas Austin,Texas RBC Dain Rauscher Inc. Financial Security Assurance Inc. 2711 North Haskell Avenue, Suite 2400 350 Park Avenue Dallas,Texas New York,New York $20,640,000 City of Beaumont,Texas (A political subdivision of the State of Texas located within Jefferson County) General Obligation Refunding Bonds, Series 2004 Dated November 1, 2004 We have performed the procedures described in this report, which were agreed to by the City of Beaumont, Texas (the "City") and RBC Dain Rauscher Inc. (the "Financial Advisor"), to verify the mathematical accuracy of certain computations contained in the schedules attached in Appendix I provided by the Financial Advisor. The Financial Advisor is responsible for these schedules. These procedures were performed solely to assist you in the issuance of the above-captioned bond issue (the "Bonds") for the purpose of refunding portions of the City's outstanding Combination Tax and Revenue Certificates of Obligation, Series 1995 (the "1995 Certificates"), Series 1996 (the "1996 Certificates"), Refunding Bonds, Series 1996 (the "1996 Bonds"), and Combination Tax and Revenue Certificates of Obligation, Series 1998 (the "1998 Certificates") (collectively referred to as the "Refunded Obligations") as summarized on the next page. This engagement was performed in accordance with attestation standards established by the American Institute of Certified Public Accountants. The sufficiency of these procedures is solely the responsibility of the addressees of this report who are the specified parties. Consequently, we make no representation regarding the sufficiency of the procedures described in this report either for the purpose for which this report has been requested or for any other purpose. 500 US Bank Plaza North 200 South Sixth Street Minneapolis,MN 55402 T 612.332.0001 F 612.332.8361 W www.grantthornton.com Grant Thornton LLP US Member of Grant Thornton International Page 2 Principal Principal Maturities Redemption Redemption Series Issued Dated Refunded Refunded Date Price 1995 3-1-06 to Certs. $6,000,000 May 1,1995 $4,500,000 3-1-14 3-1-05 100% 1996 3-1-08 to Certs. $16,000,000 January 1,1996 $5,055,000* 3-1-14 3-1-07 100% 1996 3-1-08 to Bonds $16,205,000 January 1,1996 $2,355,000* 3-1-10 3-1-07 100% 1998 3-1-08 to Certs. $15,000,000 April 1, 1998 $8,915,000* 3-1-17 3-1-08 100% * Represents a portion of the principal amounts outstanding. VERIFICATION OF ESCROW ACCOUNT CASH FLOW SUFFICIENCY The Financial Advisor provided us with schedules (Appendix I) summarizing future escrow account cash receipts and disbursements. These schedules indicate that there will be sufficient cash available in the escrow account to pay the principal and interest on the Refunded Obligations assuming the 1995 Certificates will be redeemed on March 1, 2005 at 100 percent of par plus accrued interest, the 1996 Certificates and the 1996 Bonds will be redeemed on March 1, 2007 at 100 percent of par plus accrued interest, and the 1998 Certificates maturing on and after March 1, 2009 will be redeemed on March 1, 2008 at 100 percent of par plus accrued interest. The attached Exhibit A (Schedule of Sources and Uses of Funds) was compiled based upon information provided by the Financial Advisor. As part of our engagement to recalculate the schedules attached as Appendix I we prepared schedules attached hereto as Exhibits B through B-6 independently calculating future escrow account cash receipts and disbursements and compared the information used in our calculations to the information listed below contained in applicable pages of the following documents: • Subscription confirmation, dated October 8, 2004, and Schedule of U.S. Treasury Securities provided by the Financial Advisor used to acquire certain United States Treasury Securities - State and Local Government Series (the "SLGS") insofar as the SLGS are described as to the principal amounts, interest rates, maturity dates, issuance date and first interest payment date; and • Ordinances for the Refunded Obligations were provided by Orgain, Bell & Tucker, L.L.P. insofar as the Refunded Obligations are described as to the maturity and interest payment dates, principal amounts, interest rates and optional redemption dates and price. The principal amounts refunded of the March 1, 2008 maturity of the 1998 Certificates represents a portion of the principal amount outstanding. The principal amounts refunded for the 1996 Certificates and the 1996 Bonds represent portions of the principal amounts outstanding as shown on Exhibit D. Page 3 In addition, we compared the interest rates for each maturity of the SLGS, as shown on the Schedule of U.S. Treasury Securities, with the maximum allowable interest rates shown on the Department of Treasury, Bureau of Public Debt, SLGS Table (Form PD 4262) for use on October 8, 2004 and found that the interest rates were equal to the maximum allowable interest rates for each maturity. Our procedures, as summarized in Exhibits B through B-6, prove the mathematical accuracy of the schedules provided by the Financial Advisor summarizing future escrow account cash receipts and disbursements. The schedules provided by the Financial Advisor and those prepared by us reflect that the anticipated receipts from the SLGS, together with an initial cash deposit of $1.58 to be deposited into the escrow account on December 2, 2004, will be sufficient to pay, when due, the principal and interest related to the Refunded Obligations assuming the 1995 Certificates will be redeemed on March 1, 2005 at 100 percent of par plus accrued interest, the 1996 Certificates and the 1996 Bonds will be redeemed on March 1, 2007 at 100 percent of par plus accrued interest, and the 1998 Certificates maturing on and after March 1, 2009 will be redeemed on March 1, 2008 at 100 percent of par plus accrued interest. VERIFICATION OF YIELDS The Financial Advisor provided us with schedules (Appendix 1) which indicate that the yield on the cash receipts from the SLGS purchased with Bond proceeds is less than the yield on the Bonds. These schedules were prepared based on the assumed settlement date of December 2, 2004 using a 360-day year with interest compounded semi-annually. The term "yield", as used herein, means that yield which, when used in computing the present value of all payments of principal and interest to be paid or received on an obligation produces an amount equal to, in the case of the cash receipts from the SLGS purchased with Bond proceeds, the purchase price, and in the case of the Bonds, the issue price adjusted for the bond insurance premium of$68,216.37. In addition, we found that the schedules provided by the Financial Advisor, which assume the redemption of the March 1, 2016 and March 1, 2017 maturities identified on Exhibits C and C-1 at par on March 1, 2014 plus accrued interest, correctly treat those Bonds as yield-to-call Bonds as retired on the respective dates that for each Bond produces the lowest yield for the issue that includes the Bonds. Those Bonds identified as yield-to-call Bonds on the attached Exhibits C and C-1 are those Bonds that are subject to optional redemption and that are issued at an issue price that exceeds the stated redemption price at maturity of such Bonds by more than one-fourth of one percent multiplied by the product of the stated redemption price at maturity of such Bonds and the number of complete years to the first optional redemption date for the Bonds. We found that there are no other yield-to-call Bonds other than those identified on the attached Exhibits C and C-1. As part of our engagement to recalculate the schedules attached as Appendix I we prepared schedules attached hereto as Exhibits B-1 and C independently calculating the yields on (i) the cash receipts from the SLGS purchased with Bond proceeds calculated on Exhibit B-1, and (ii) the Bonds using the Official Statement provided by the Financial Advisor insofar as the Bonds are described as to the maturity and interest payment dates, dated date, principal amounts, interest rates, optional redemption date and price, and issue price to the public. The results of our calculations, based on the aforementioned assumptions, are summarized on the next page: Page 4 Yield Exhibit • Yield on the cash receipts from the SLGS purchased with Bond Proceeds 2.812619% B-1 • Yield on the Bonds 3.495529% C Our procedures, as summarized in Exhibits B-1 and C, prove the mathematical accuracy of the schedules provided by the Financial Advisor summarizing the yields. The schedules provided by the Financial Advisor and those prepared by us reflect that the yield on the cash receipts from the SLGS purchased with Bond proceeds is less than the yield on the Bonds. VERIFICATION OF MULTIPURPOSE ALLOCATION The Financial Advisor provided us with schedules (Appendix I) allocating on a pro-rata basis the new money portions of the 1996 Certificates and the 1996 Bonds. As part of our engagement we independently calculated the multipurpose allocation of the 1996 Certificates and the 1996 Bonds using assumptions and methodologies as provided by the Financial Advisor. Our procedures, as summarized in Exhibit D, prove the mathematical accuracy of the schedules provided by the Financial Advisor summarizing the multipurpose allocations of the 1996 Certificates and the 1996 Bonds. The schedules provided by the Financial Advisor and those prepared by us reflect that the portions of the 1996 Certificates and 1996 Bonds allocated to the new money proceeds are as shown on Exhibit D. We were not engaged to, and did not, perform an examination in accordance with attestation standards established by the American Institute of Certified Public Accountants, the objective of which would be the expression of an examination opinion on the items referred to above. Accordingly we do not express such an opinion. Had we performed additional procedures, other matters might have come to our attention that would have been reported to you. This report is intended solely for the information and use of those to whom this letter is addressed and is not intended to be and should not be used by anyone other than these specified parties. Minneapolis, Minnesota December 2, 2004 Exhibit A City of Beaumont,Texas SCHEDULE OF SOURCES AND USES OF FUNDS December 2,2004 SOURCES: Principal amount of the Bonds $205640,000.00 Original issue premium 1,410,027.15 Transfers from prior issue Debt Service Funds 367,000.00 Accrued interest 81,250.35 $22,498,277.50 USES: Purchase price of the SLGS: - Purchased with Bond proceeds $21,742,645.00 - Purchased with Debt Service Funds 366,999.00 Beginning cash deposit to the escrow account 1.58 Accrued interest 81,250.35 Underwriters' discount 118,680.00 Costs of issuance 118,000.00 Bond insurance premium 68,216.37 Contingency 2,485.20 $22,498,277.50 Exhibit B City of Beaumont,Texas ESCROW ACCOUNT CASH FLOW Debt service Cash receipts from SLGS: payments on Purchased the Refunded Purchased with with Debt Obligations Bond proceeds Service Funds (Exhibits B-3 Cash Dates (Exhibit B-1) (Exhibit B-2) through B-6) balance Cash deposit on December 2, 2004 $1.58 03-01-05 $4,668,053.90 $368,403.95 $5,036,457.50 1.93 09-01-05 414,519.84 414,520.00 1.77 03-01-06 414,520.16 414,520.00 1.93 09-01-06 414,519.57 414,520.00 1.50 03-01-07 7,824,519.75 7,824,520.00 1.25 09-01-07 225,675.75 225,675.00 2.00 03-01-08 9,140,674.00 9,140,675.00 1.00 $23,102,482.97 $368,403.95 $23,470,887.50 Exhibit B-1 City of Beaumont,Texas CASH RECEIPTS FROM AND YIELD ON THE SLGS PURCHASED WITH BOND PROCEEDS Cash receipts Present value on from SLGS December 2, 2004 Receipt Interest purchased with using a yield of date Principal rate Interest Bond proceeds 2.812619% 03-01-05 $4,532,697 1.570% $135,356.90 $4,668,053.90 $4,635,932.12 09-01-05 171,897 2.050% 242,622.84 414,519.84 405,958.42 03-01-06 174,533 2.210% 239,987.16 414,520.16 400,328.87 09-01-06 176,461 2.440% 238,058.57 414,519.57 394,776.52 03-01-07 7,588,614 2.670% 235,905.75 7,824,519.75 7,348,504.93 09-01-07 91,078 2.830% 134,597.75 225,675.75 209,007.19 03-01-08 9,007,365 2.960% 133,309.00 9,140,674.00 8,348,136.96 $21,742,645 $1,359,837.97 $23,102,482.97 $21,742,645.00 Purchase price of the SLGS purchased with Bond proceeds $21,742,645.00 The sum of the present values of the cash receipts from the SLGS purchased with Bond proceeds on December 2, 2004, using a yield of 2.812619%, is equal to the purchase price of the SLGS purchased with Bond proceeds. Exhibit B-2 City of Beaumont,Texas CASH RECEIPT FROM THE SLGS PURCHASED WITH DEBT SERVICE FUNDS Cash receipt from SLGS purchased Receipt Interest with Debt date Principal rate Interest Service Funds 03-01-05 $366,999 1.570% $1,404.95 $368,403.95 Exhibit B-3 City of Beaumont,Texas DEBT SERVICE PAYMENT ON THE 1995 CERTIFICATES Interest Debt service Date Principal rate Interest payment 03-01-05 $4,500,000 (1) $121,937.50 $4,621,937.50 (1) Actual maturity dates, principal amounts and interest rates are as follows: Maturity Principal Interest date amount rate 03-01-06 $500,000 5.200% 03-01-07 500,000 5.300% 03-01-08 500,000 5.400% 03-01-09 500,000 5.500% 03-01-10 500,000 5.600% 03-01-11 500,000 5.625% 03-01-12 500,000 5.700% 03-01-13 500,000 5.750% 03-01-14 500,000 4.700% $4,500,000 Exhibit B-4 City of Beaumont,Texas DEBT SERVICE PAYMENTS ON THE 1996 CERTIFICATES Interest Debt service Date Principal rate Interest payments 03-01-05 $129,187.50 $129,187.50 09-01-05 129,187.50 129,187.50 03-01-06 129,187.50 129,187.50 09-01-06 129,187.50 129,187.50 03-01-07 $5,055,000 (1) 129,187.50 5,184,187.50 $5,055,000 $645,937.50 $5,700,937.50 (1) Actual maturity dates, principal amounts and interest rates are as follows: Maturity Principal Interest date amount rate 03-01-08 $590,000 * 5.000% 03-01-09 610,000 * 5.000% 03-01-10 680,000 * 5.000% 03-01-11 725,000 * 5.100% 03-01-12 775,000 * 5.200% 03-01-13 825,000 * 5.200% 03-01-14 850,000 * 5.200% $5,055,000 * Represents portions of the principal amounts outstanding as shown on Exhibit D. Exhibit B-5 City of Beaumont,Texas DEBT SERVICE PAYMENTS ON THE 1996 BONDS Interest Debt service Date Principal rate Interest payments 03-01-05 $59,657.50 $59,657.50 09-01-05 59,657.50 59,657.50 03-01-06 59,657.50 59,657.50 09-01-06 59,657.50 59,657.50 03-01-07 $2,355,000 (1) 59,657.50 2,414,657.50 $2,355,000 $298,287.50 $2,653,287.50 (1) Actual maturity dates,principal amounts and interest rates are as follows: Maturity Principal Interest date amount rate 03-01-08 $790,000 * 5.000% 03-01-09 780,000 * 5.100% 03-01-10 785,000 * 5.100% $2,355,000 * Represents portions of the principal amounts outstanding as shown on Exhibit D. Exhibit B-6 City of Beaumont,Texas DEBT SERVICE PAYMENTS ON THE 1998 CERTIFICATES Interest Debt service Date Principal rate Interest payments 03-01-05 $225,675.00 $225,675.00 09-01-05 225,675.00 225,675.00 03-01-06 225,675.00 225,675.00 09-01-06 225,675.00 225,675.00 03-01-07 225,675.00 225,675.00 09-01-07 225,675.00 225,675.00 03-01-08 $8,915,000 (1) 225,675.00 9,140,675.00 $8,915,000 $1,579,725.00 $10,494,725.00 (1) Actual maturity dates,principal amounts and interest rates are as follows: Maturity Principal Interest date amount rate 03-01-08 $40,000 * 6.500% 03-01-09 500,000 6.500% 03-01-10 500,000 4.700% 03-01-11 500,000 4.800% 03-01-12 500,000 5.000% 03-01-13 500,000 5.000% 03-01-14 360,000 5.000% 03-01-15 1,900,000 5.000% 1 03-01-16 2,005,000 5.000% 03-01-17 2,110,000 5.000% $8,915,000 * Represents a portion of the principal amount outstanding. Exhibit C City of Beaumont,Texas DEBT SERVICE PAYMENTS AND YIELD ON THE BONDS Present value on $20,640,000 issue dated November 1,2004 (1) December 2,2004 Interest Total debt Adjusted using a yield of Date Principal rate Interest service debt service 3.495529% 03-01-05 $314,517.50 $314,517.50 $314,517.50 $311,834.51 09-01-05 471,776.25 471,776.25 471,776.25 459,717.00 03-01-06 $220,000 3.000% 471,776.25 691,776.25 691,776.25 662,514.31 09-01-06 468,476.25 468,476.25 468,476.25 440,953.01 03-01-07 200,000 3.000% 468,476.25 668,476.25 668,476.25 618,394.82 09-01-07 465,476.25 465,476.25 465,476.25 423,206.68 03-01-08 2,000,000 (2) 465,476.25 2,465,476.25 2,465,476.25 2,203,083.35 09-01-08 425,476.25 425,476.25 425,476.25 373,663.39 03-01-09 2,455,000 5.000% 425,476.25 2,880,476.25 2,880,476.25 2,486,249.17 09-01-09 364,101.25 364,101.25 364,101.25 308,871.36 03-01-10 2,525,000 5.000% 364,101.25 2,889,101.25 2,889,101.25 2,408,759.06 09-01-10 300,976.25 300,976.25 300,976.25 246,625.48 03-01-11 1,790,000 5.000% 300,976.25 2,090,976.25 2,090,976.25 1,683,952.92 09-01-11 256,226.25 256,226.25 256,226.25 202,805.43 03-01-12 1,835,000 5.000% 256,226.25 2,091,226.25 2,091,226.25 1,626,792.32 09-01-12 210,351.25 210,351.25 210,351.25 160,824.17 03-01-13 1,875,000 3.750% 210,351.25 2,085,351.25 2,085,351.25 1,566,969.54 09-01-13 175,195.00 175,195.00 175,195.00 129,383.28 03-01-14 1,735,000 (2) 175,195.00 1,910,195.00 6,015,195.00 4,365,97550 09-01-14 143,381.25 143,381.25 35,625.00 25,413.33 03-01-15 1,900,000 3.750% 143,381.25 2,043,381.25 1,935,625.00 1,357,072.51 09-01-15 107,756.25 107,756.25 03-01-16 2,000,000 5.250% 107,756.25 2,107,756.25 09-01-16 55,256.25 55,256.25 03-01-17 2,105,000 5.250% 55,256.25 2,160,256.25 $20,640,000 $7,203,415.00 $27,843,415.00 $27,301,877.50 $22,063,061.13 The present value of the future payments is equal to: Principal amount of the Bonds $20,640,000.00 Accrued interest 81,250.35 Original issue premium 1,410,027.15 Bond insurance premium {68,216.37) $22,063,061.13 The sum of the present values of the adjusted debt service payments of the Bonds on December 2,2004,using a yield of 3.495529%,is equal to the issue price of the Bonds adjusted for the bond insurance premium. (1) Assumes that the March 1,2016 and March 1,2017 maturities are called on March 1,2014 at 100 percent of par plus accrued interest. (2) Actual principal amounts and interest rates are shown on Exhibit C-1. Exhibit C-1 City of Beaumont,Texas ORIGINAL ISSUE PREMIUM ON THE BONDS Initial public Original Maturity Interest offering issue date Principal rate Yield price premium 03-01-06 $220,000 3.000% 1.940% 101.298% $2,855.60 03-01-07 200,000 3.000% 2.130% 101.897% 3,794.00 03-01-08 1,000,000 5.000% 2.460% 107.876% 78,760.00 03-01-08 1,000,000 3.000% 2.460% 101.673% 16,730.00 03-01-09 2,455,000 5.000% 2.770% 108.873% 217,832.15 03-01-10 2,525,000 5.000% 3.030% 109.486% 239,521.50 03-01-11 1,790,000 5.000% 3.220% 109.995% 178,910.50 03-01-12 1,835,000 5.000% 3.390% 110.263% 188,326.05 03-01-13 1,875,000 3.750% 3.540% 101.486% 27,862.50 03-01-14 1,435,000 3.650% 3.650% 100.000% 03-01-14 300,000 3.750% 3.650% 100.774% 2,322.00 03-01-15 1,900,000 3.750% 3.750% 100.000% 03-01-16 2,000,000 5.250% 3.780% 111.376% (1) (2) 227,520.00 03-01-17 2,105,000 5.250% 3.860% 110.717% (1) (2) 225,592.85 $20,640,000 $1,410,027.15 (1) Maturities were priced to call on March 1, 2014 at 100 percent of par. (2) Represents the yield-to-call Bonds included for purposes of computing yield on the Bonds. Exhibit D Page 1 of 2 City of Beaumont,Texas MULTIPURPOSE ALLOCATION ON THE 1996 CERTIFICATES AND 1996 BONDS 1990 Escrow Present value on Other funds Adjusted February 22, 1996 Escrow allocated to Allocated escrow using a yield of Date requirements requirement percentage requirements 5.08642% 03-01-96 $86,295.00 $42,498.84 17.7078% $43,796.16 $43,741.20 09-01-96 86,295.00 0.00 17.7078% 86,295.00 84,049.16 03-01-97 671,295.00 0.00 46.3817% 671,295.00 637,608.72 09-01-97 66,990.00 0.00 14.7721% 66,990.00 62,050.30 03-01-98 696,990.00 0.00 46.9831% 696,990.00 629,583.83 09-01-98 46,200.00 0.00 11.0738% 46,200.00 40,696.97 03-01-99 721,200.00 0.00 47.5349% 721,200.00 619,539.39 09-01-99 23,925.00 0.00 6.3217% 23,925.00 20,042.79 03-01-00 748,925.00 0.00 47.4467% 748,925.00 611,839.79 $3,148,115.00 $42,498.84 $3,105,616.16 $2,749,152.16 1992 Escrow Present value on Other funds Adjusted February 22, 1996 Escrow allocated to Allocated escrow using a yield of Date requirements requirement percentage requirements 5.08642% 03-01-96 $401,031.25 $197,501.16 82.2922% $203,530.09 $203,274.68 09-01-96 401,031.25 0.00 82.2922% 401,031.25 390,594.35 03-01-97 776,031.25 0.00 53.6183% 776,031.25 737,089.20 09-01-97 386,500.00 0.00 85.2279% 386,500.00 358,000.33 03-01-98 786,500.00 0.00 53.0169% 786,500.00 710,437.29 09-01-98 371,000.00 0.00 88.9262% 371,000.00 326,809.01 03-01-99 796,000.00 0.00 52.4651% 796,000.00 683,795.55 09-01-99 354,531.25 0.00 93.6783% 354,531.25 297,002.99 03-01-00 829,531.25 0.00 52.5533% 829,531.25 677,691.66 09-01-00 336,125.00 0.00 100.0000% 336,125.00 267,789.35 03-01-01 836,125.00 0.00 100.0000% 836,125.00 649,616.10 09-01-01 316,750.00 0.00 100.0000% 316,750.00 239,991.18 03-01-02 10,191,750.00 0.00 100.0000% 10,191,750.00 7,530,442.83 $16,782,906.25 $197,501.16 $16,585,405.09 $13,072,534.51 Exhibit D ' Page 2 of 2 City of Beaumont,Texas MULTIPURPOSE ALLOCATION ON THE 1996 CERTIFICATES AND 1996 BONDS Present value Percent of Percent requirements total refundable Refunding $15,821,686.67 50.042995% 0.000000% New Money 15,794,500.00 49.957005% 49.957005% $31,616,186.67 100.000000% 49.957005% Series 1996 Certificates Principal Date issued 49.957005% Refundable 03-01-08 $1,175,000.00 $586,994.81 $590,000.00 03-01-09 1,215,000.00 606,977.61 610,000.00 03-01-10 1,355,000.00 676,917.42 680,000.00 03-01-11 1,450,000.00 724,376.57 725,000.00 03-01-12 1,545,000.00 771,835.73 775,000.00 03-01-13 1,645,000.00 821,792.73 825,000.00 03-01-14 1,700,000.00 849,269.09 850,000.00 $10,085,000.00 $5,038,163.97 $5,055,000.00 Series 1996 Bonds Principal Date issued 49.957005% Refundable 03-01-08 $1,580,000.00 $789,320.68 $790,000.00 03-01-09 1,560,000.00 779,329.28 780,000.00 03-01-10 1,570,000.00 784,324.98 785,000.00 $4,710,000.00 $2,352,974.94 $2,355,000.00 APPENDIX I Applicable schedules provided by RBC Dain Rauscher Inc. City of Beaumont, General Obligation Debt Sources&Uses Report Advance Refunding of Series 1995,1996(2 Issues)and 1998 Bonds Sources of Funds: Principal Amount of Current Interest Bonds(CIBs) 20,640,000.00 CIB Premium 1,410,027.15 Transfer from Debt Service Fund 367,000.00 Accrued Interest 81,250.35 Total SOURCES of Funds $22,498,277.50 Uses of Funds: SLG Escrow Cost 22,109,645.58 Accrued Interest Deposit to D/S Fund 81,250.35 Issuance Expenses: ($304,896.37) Underwriter's Discount 118,680.00 Rating Agency 30,000.00 Insurance 68,216.37 Financial Advisor Fee 35,000.00 Bond Counsel 25,000.00 c Trustee/Escrow Agent 5,000.00 Printing 10,000.00 Miscellaneous 5,000.00 CPA/Accountant 8,000.00 Rounding Amount 2,485.20 Total USES of Funds $22,498,277,50 Miscellaneous Bond Issuance Information: Delivery Date: 12/02/2004 Principal Amount of Bonds Being Refunded 20,825,000.00 Principal Amount of the Refunding Bonds 20,640,000.00 Proceeds of"The new Bonds" 22,050 027.15 Rate/Yield on the Refunded Bonds 5.33999579% "All Costs Included"TIC on the New Issue is 3.75853501% Federal Arbitrage Yield on the New Issue is 3.49552934% Yield on Escrow 2.81261859% Total Debt Service Savings 810,337.85 Present Value Savings 3.75853501% 749,657.89 Total Debt Service Savings as a Percent of Total Debt Service of Refunded Bonds 2.80010982% Present Value Savings as a Percent of Principal Amount of Bonds Being Refunded 3.59979782% BEAUMONT CITY.RUN2004REF NEW2004REF NEW2004REF2 AGGREFUND Prepared by.RBC Dain Rauscher--Houston,Texas 1110212004 @ 12.15 v7.03 Page-2 City of Beaumont,General Obligation Debt Escrow Sufficiency&Balance Report Advance Refunding of Series 1995,1996(2 Issues)and 1998 Bonds Escrow Settlement Date Is 12/02/2004 This is a birfucated escrow--Cost of"Early"escrow is$366,999.00 Proceeds from Less Amts to Plus Maturing Adjusted Proceeds from Original be Invested Amts Invested Proceeds from Present Value 'Other' Old D/S Escrow Escrow Dates ResEse ed in 0%SLGs in 0%SLGs Rstrct'd Esc @ 2.81261859% Investments Requirement New Balance Old Balance 12/02/2004 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1.58 1.58 03/01/2005 5,036,457.85 0.00 0.00 4,668,053.90 4,635,932.12 368,403.95 5,036,457.50 1.93 1.93 09/0112005 414,519.84 0.00 0.00 414,519.84 405,958.42 0.00 414,520.00 1.77 1.77 03/01/2006 414,520.16 0.00 0.00 414,520.16 400,328.87 0.00 414,520.00 1.93 1.93 09/01/2006 414,519.57 0.00 0.00 414,519.57 394,776.52 0.00 414,520.00 1.50 1.50 03/01/2007 7,824,519.75 0.00 0.00 7,824,519.75 7,348,504.93 0.00 7,824,520.00 1.25 1.25 09/01/2007 225,675.75 0.00 0.00 225,675.75 209,007.19 0.00 225,675.00 2.00 2.00 03/01/2008 9,140,674.00 0.00 0.00 9,140,674.00 8,348,136.96 0.00 9,140,675.00 1.00 1.00 Totals $23,470,886.92 $0.00 $0.00 $23,102,482.97 $21,742,645.00 $368,403.95 $23,470,887.50 Cost of"Late"Escrow SLG Securities $21,742,645.00 Escrow Arbitrage YLD after Reinvestment in 0%SLGs=2.81261859% Cost of"Early"Escrow SLG Securities $366,999.00 Cost of'Other'Restricted Investments $0.00 Escrow Starting Balance $1.58 Total Escrow Cost... $22,109,645.58 SLG Rates Were Taken From SLG Table Dated 1010812004 r { BEAUMONT CITY:RUN2004REFAGGREFUND Prepared by:RBC Dain Rauscher-Houston,Texas 1110212004 @ 12:15 v7.03 Page-10 City of Beaumont,General Obligation Debt U. S.Treasury SLG Investments Advance Refunding of Series 1995,1996(2 Issues)and 1998 Bonds Escrow Settlement Date Is 12/02/2004 Payment SLG SLG Rates Total Receipts PV'd SLG Rates Dates Principal Subscribed Interest SLG Receipts 2.81261859% From Table 03/01/2005 4,899,696 1.570000 136,761.85 5,036,457.85 5,001,801.01 1.570000 09/01/2005 171,897 2.050000 242,622.84 414,519.84 405,958.42 2.050000 03/01/2006 174,533 2.210000 239,987.16 414,520.16 400,328.87 2.210000 09/01/2006 176,461 2.440000 238,058.57 414,519.57 394,776.52 2.440000 03101/2007 7,588,614 2.670000 235,905.75 7,824,519.75 7,348,504.93 2.670000 09/01/2007 91,078 2.830000 134,597.75 225,675.75 209,007.19 2.830000 03/01/2008 9,007,365 2.960000 133,309.00 9,140,674.00 8,348,136.96 2.960000 Totals $22,109,644 Y$1,361,242.92 $23,470,886.92 $22,108,513.89 a Early(Bifurcated)Escrow Payment SLG SLG Rates Total SLG Rates Dates Principal Subscribed Interest SLG Receipts From Table 03/01/2005 366,999 1.570000 1,404.95 368,403.95 0.00 1.570000 Totals $366,999 $1,404.95 $368,403.95 $0.00 7 SLG Rates were taken from a SLG table dated 10/0812004 r, BEAUMONT CITY:RUN2004REF AGGREFUND Prepared by:RBC Dain Rauscher—Houston,Texas 1110212004 @ 12:15 v7.03 Page-11 City of Beaumont,General Obligation Debt Aggregation Spreadsheet Report Advance Refunding of Series 1995,1996(2 Issues)and 1998 Bonds Data are Principal Amounts Data are to Maturity FY 10/01 Dates Totals OLD1995R OLD1996R OLD1996REFR OLD1998R 2005 0.00 2006 500,000.00 500,000.00 2007 500,000.00 500,000.00 2008 1,920,000.00 500,000.00 590,000.00 790,000.00 40,000.00 2009 2,390,000.00 500 000.00 610 000.00 780,000.00 500 000.00 2010 2,465,000.00 500,000.00 680,000.00 785,000.00 500,000.00 2011 1,725,000.00 500,000.00 725,000.00 500,000.00 2012 1,775,000.00 500,000.00 775,000.00 500,000.00 2013 1,825,000.00 500,000.00 825,000.00 500,000.00 2014 1710,000.00 500,000.00 850,000.00 360,000.00 2015 1,900,000.00 1,900,000.00 2016 2,005,000.00 2,005,000.00 2017 2,110,000.00 2,110,000.00 2018 0.00 Totals $20 825 000.00 4 500 000.00 $5 055 000.00 $2 355 000.00 $8,91 000.00 Component Face Amt ----Title---- From To OLD1995R $4,500,000.00 Combination Tax&Revenue CO,Series 1995 OLD1996R $5,055,000.00 Series 1996 Dated 1/111996 Bonds to Refund OLD1996REFR $2,355,000.00 Refunding Bonds,Series 1996 OLD1998R $8,915,000.00 Series 1998 Bonds to Refund BEAUMONT CITY:AGGREFUND Prepared by.RBC Dain Rauscher--Houston,Texas 1110212004 @ 12:16 v7.03 Page-12 City of Beaumont,General Obligation Debt Advance Refunding of Series 1995,1996(2 Issues)and 1998 Bonds Dated Date=09/01/2004 Combination Tax S Revenue CO,Series 1995 Delivery Date 09/01/2004 To Be Refunded Term Bond Bond Coupon Interest Total Fiscal Year Debt Service Dates Maturities Redemptions Proceeds Rate Yield Price Amount Debt Service Debt Service to Call 03/01/2005 - - - 6.400 6.400000 100.000000 121,937.50 121,937.50 - 7621,937.50 09/01/2005 - - - - - 121,937.50 121,937.50 243,875.00 - 03/01/2006 - 500,000.00 - 500,000.00 5.200 5.200000 100.000000 121,937.50 621,937.50 - 09/01/2006 - - - - - - 108,937.50 108,937.50 730,875.00 03/01/2007 - 500,000.00 - 500,000.00 5.300 5.300000 100.000000 108,937.50 608,937.50 - - 09/01/2007 - - - - - - 95,687.50 95,687.50 704,625.00 03/01/2008 - 500,000.00 . 500,000.00 5.400 5.400000 100.000000 95,687.50 595,687.50 - 09/01/2008 - - - - - - 82,187.50 82,187.50 677,875.00 03/01/2009 - 500,000.00 - 500,000.00 5.500 5.500000 100.000000 82,187.50 582,187.50 - 09101/2009 - - - - - - 68,437.50 68,437.50 650,625.00 03/01/2010 - 500,000.00 ' 500,000.00 5.600 5.600000 100.000000 68,437.50 568,437.50 - 09/01/2010 - - - - 54,437.50 54,437.50 622,875.00 03/01/2011 - 500,000.00 - 500,000.00 5.625 5.625000 100.000000 54,437.50 554,437.50 - 09/01/2011 - - - - - 40,375.00 40,375.00 594,812.50 03/01/2012 - 500,000.00 " 500,000.00 5.700 5.700000 100.000000 40,375.00 540,375.00 09/01/2012 - - - - - - 26,125.00 26,125.00 566,500.00 03/0112013 - 500,000.00 ` 500,000.00 5.750 5.750000 100.000000 26,125.00 526,125.00 - 09/01/2013 - - - - - - 11,750.00 11,750.00 537,875.00 03/01/2014 500,000.00 ' 500,000.00 4.700 4.700000 100.000000 11,750.00 511,750.00 511,750.00 Total - 4,500,000.00 4,500,000.00 1,341,687.50 5,841,687.50 5,841,687.50 4,621,937.50 Acc Int rand Totals 4,500,000.00 4 500 000.00 1,341,687.50 5 841 687.50 5,841,687.50 4 621,937.50 r -Bonds callable... 03/01/2005 @ 100.000 TIC(Incl.all expenses)....5.42630359% Average Coupon.......5.42095960% Net Eff.Int.Rate(Texas Vernon's)= 5.420960%(with Adjstmnt of$0.00). TIC(Arbitrage TIC).........5.42630359% Average Life(yrs)... 5.50 IRS Form 8038-G NIC =5.420960%(with Adjstmnt of$0.00). Bond Years.................. 24,750.00 WAM rs)............. 5.500000 NIC= 5.420960% with Adjstmnt of$0.00). BEAUMONT CITY:OLD1995R Prepared by:RBC Dain Rauscher-Houston,Texas 1110212004 @ 12:16 v7.03 Page-13 City of Beaumont,General Obligation Debt Advance Refunding of Series 1995,1996(2 Issues)and 1998 Bonds Dated Date=09/01/2004 Series 1996 Dated 1/1/1996 Bonds to Refund Delivery Date= 09/01/2004 Term Bond Bond Coupon Interest Total Fiscal Year Debt Service Dates Maturities Redemptions Proceeds Rate Yield Price Amount Debt Service Debt Service to Call 03/01/2005 - - 5.500 5.500000 100.000000 129,187.50 129,187.50 - 129,187.50 09/01/2005 - - - - - - 129,187.50 129,187.50 258,375.00 129,187.50 03/01/2006 - - - 5.500 5.500000 100.000000 129,187.50 129,187.50 - 129,187.50 09/01/2006 - - - - - - 129,187.50 129,187.50 258,375.00 129,187.50 03101/2007 - 5.500 5.500000 100.000000 129,187.50 129,187.50 5,184,187.50 09/01/2007 - - - - - - 129,187.50 129,187.50 258,375.00 03/01/2008 - 590,000.00 * 590,000.00 5.000 5.000000 100.000000 129,187.50 719,187.50 - 09/01/2008 - - - - - - 114,437.50 114,437.50 833,625.00 03/01/2009 - 610,000.00 * 610,000.00 5.000 5.000000 100.000000 114,437.50 724,437.50 - 09/01/2009 - 99,187.50 99,187.50 823,625.00 03101/2010 - 680,000.00 * 680,000.00 5.000 5.000000 100.000000 99,187.50 779,187.50 - 09/0112010 - - - - - - 82,187.50 82,187.50 861,375.00 03/01/2011 - 725,000.00 * 725,000.00 5.100 51100000 100.000000 82,187.50 807,187.50 - 09/01/2011 - - - - - - 63,700.00 63,700.00 870,887.50 - 03/01/2012 - 775,000.00 * 775,000.00 5.200 5.200000 100.000000 63,700.00 838,700.00 - k 09/01/2012 - - - - - - 43,550.00 43,550.00 882,250.00 - 03/01/2013 - 825,000.00 * 825,000.00 5.200 5.200000 100.000000 43,550.00 868,550.00 09/01/2013 - - - - 22,100.00 22,100.00 890,650.00 03/01/2014 850,000.00 * 850,000.00 5.200 5.200000 100.000000 22,100.00 872,100.00 872,100.00 Total - 5,055,000.00 5,055,000.00 1,754,637.50 6,809,637.50 6,809,637.50 5,700,937.50 Acc int - - rand Totals 5,055,000.00 5 055 000.00 1,754,637.50 6 809 637.50 6,809,637.50 5 700 937.50 *-Bonds callable... 03/01/2007 @ 100.000 TIC(Incl.all expenses)....5.13266346% Average Coupon.......5.13615075% Net Eff.Int.Rate(Texas Vernon's)= 5.136151%(with Adjstmnt of$0.00). TIC(Arbitrage TIC).........5.13266346% Average Life(yrs)... 6.76 IRS Form 8038-G NIC =5.136151%(with Adjstmnt of$0.00). Bond Years.................. 34,162.50 WAM rs)............. 6.758160 NIC= 5.136151% with Adjstmnt of$0.00). a k t BEAt1MONT CITY:OLD1996R Prepared by:RBC Da1n Rauscher--Houston, Texas 1110212004 @ 12:16 v7.03 Page-14 City of Beaumont,General Obligation Debt Advance Refunding of Series 1995,1996(2 Issues)and 1998 Bonds Dated Date=09/01/2004 Refunding Bonds Series 1996 Delivery Date=09/01/2004 Term Bond Bond Coupon Interest Total Fiscal Year Debt Service Dates Maturities Redemptions Proceeds Rate Yield Price Amount Debt Service Debt Service to Call 03/01/2005 - - - - - 59,657.50 59,657.50 - 59,657.50 09/01/2005 - - - - - 59,657.50 59,657.50 119,315.00 59,657.50 03/01/2006 - - 4.750 4.750000 100.000000 59,657.50 59,657.50 - 59,657.50 09/01/2006 - - - - - 59,657.50 59,657.50 119,315.00 59,657.50 03/01/2007 - - - 4.900 4.900000 100.000000 59,657.50 59,657.50 - 2,414,657.50 09/01/2007 - - - - - - 59,657.50 59,657.50 119,315.00 03/01/2008 - 790,000.00 ` 790,000.00 5.000 5.000000 100.000000 59,657.50 849,657.50 - - 09/01/2008 - - - - - - 39,907.50 39,907.50 889,565.00 03/01/2009 - 780,000.00 ' 780,000.00 5.100 5.100000 100.000000 39,907.50 819,907.50 - 09/01/2009 20,017.50 20,017.50 839 925.00 - 03/01/2010 - 785,000.00 ` 785,000.00 5.100 5.100000 100.000000 20,017.50 805,017.50 805,017.50 - I Total - 2,355,000.00 2,355,000.00 537,452.50 2,892,452.50 2,892,452.50 2,653,287.50 Acc Int - - - - - - rand Totals 2,355,000.00 2 355 000.00 537 452.50 2,892 452.50 2,892,452.50 2 653 287.50 "-Bonds callable... 03/01/2007 @ 100.000 TIC(incl.all expenses)....5.07316912% Average Coupon.......5.07389662% Net Eff.Int.Rate(Texas Vernon's)= 5.073897%(with Adjstmnt of$0.00). I TIC(Arbitrage TIC).........5.07316912% Average Life(yrs)... 4.50 IRS Form 8038-G NIC =5.073897%(with Adjstmnt of$0.00). Bond Years.................. 10,592.50 WAM rs)............. 4.497877 NIC= 5.073897% with Adjstmnt of$0.00). t BEAUMONT CITY:OLD1996REFR Prepared by:RBC Dain Rauscher--Houston,Texas 1110212004 @ 12:16 v7.03 Page-15 City of Beaumont, General Obligation Debt Advance Refunding of Series 1995,1996(2 Issues)and 1998 Bonds Dated Date=09/01/2004 Series 1998 Bonds to Refund Delivery Date=09/01/2004 Term Bond I Bond Coupon Interest Total Fiscal Year Debt Service Dates Maturities Redemptions Proceeds Rate Yield Price Amount Debt Service Debt Service to Call 03101/2005 - - 6.500 6.500000 100.000000 225,675.00 225,675.00 - 225,675.00 . 09/01/2005 - - - - - - 225,675.00 225,675.00 451,350.00 225,675.00 03/01/2006 - - - 6.500 6.500000 100.000000 225,675.00 225,675.00 - 225,675.00 09/01/2006 - - - - - - 225,675.00 225,675.00 451,350.00 225,675.00 03101/2007 - - 6.500 6.500000 100.000000 225,675.00 225,675.00 - 225,675.00 09/01/2007 - - - - - 225,675.00 225,675.00 451,350.00 225,675.00 03/01/2008 - 40,000.00 40,000.00 6.500 6.500000 100.000000 225,675.00 265,675.00 - 91140,675.00 09/01/2008 - - - - - - 224,375.00 224,375.00 490,050.00 03/01/2009 - 500,000.00 * 500,000.00 6.500 6.500000 100.000000 224,375.00 724,375.00 - - _09/0112009 - - 208,125.00 208,125.00 932,500.00 03/01/2010 - 500,000.00 * 500,000.00 4.700 4.700000 100.000000 208,125.00 708,125.00 - 09/01/2010 - - - - - - 196,375.00 196,375.00 904,500.00 - z 03/01/2011 - 500,000.00 * 500,000.00 4.800 4.800000 100.000000 196,375.00 696,375.00 - t 09/01/2011 - - - - - - 184,375.00 184,375.00 880,750.00 03/01/2012 500,000.00 * 500,000.00 5.000 5.000000 100.000000 184,375.00 684,375.00 - 09101/2012 - - - - - - 171,875.00 171,875.00 856,250.00 03/01/2013 - 500,000.00 * 500,000.00 5.000 5.000000 100.000000 171,875.00 671,875.00 - 09/01/2013 - - - - - - 159,375.00 159,375.00 831,250.00 - 03/0112014 - 360,000.00 * 360,000.00 5.000 5.000000 100.000000 159,375.00 519,375.00 - 09/01/2014 - - - - 150,375.00 150,375.00 669,750.00 - 03/01/2015 - 1,900,000.00 * 1,900,000.00 5.000 5.000000 100.000000 150,375.00 2,050,375.00 - - 09/01/2015 - - - - - - 102,875.00 102,875.00 2,153,250.00 03/01/2016 - 2,005,000.00 * 2,005,000.00 5.000 5.000000 100.000000 102,875.00 2,107,875.00 09/01/2016 - - - - - 52,750.00 52,750.00 2,160,625.00 _ p _03/01/2017 2,110,000.00 * 2,110,000.00 5.000 5.000000 100.000000 52,750.00 2,162750.00 § 09/01/2017 - - - - - - - - 2,162,750.00 03/01/2018 - - 4.500 4.500000 100.000000 - - Total - 8,915,000.00 8,915,000.00 4,480,725.00 13,395,725.00 13,395,725.00 10,494,725.00 Acc int - - - - - rand Totals 8,915,000.00 8 915 000.00 4,480,725.00 13 395 725.00 13 395 725.00 10 494 725.00 *-Bonds callable... 03/01/2008 @ 100.000 TIC(incl.all expenses)....5.02794453% Average Coupon.......5.02365670% Net Eff.Int.Rate(Texas Vernon's)= 5.023657%(with Adjstmnt of$0.00). TIC(Arbitrage TIC).........5.02794453% Average Life(yrs)... 10.00 IRS Form 8038-G NIC =5.023657%(with Adjstmnt of$0.00). Bond Years.................. 89,192.50 WAM rs)............. 10.004767 NIC= 5.023657% with Adjstmnt of$0.00). BEAUMONT CITY:OLD1998R Prepared by:RBC Dain Rauscher-Houston,Texas 1110212004 @ 12:16 v7.03 Page-16 City of Beaumont,General Obligation Debt Advance Refunding of Series 1995,1996(2 Issues)and 1998 Bonds Dated Date=11/01/2004 Refunding Bonds Series 2004 Delivery Date=12/02/2004 Term Bond Bond Coupon Interest Total Fiscal Year Debt Service Dates Maturities Redemptions Proceeds Rate Yield Price Amount Debt Service Debt Service to Call 03/01/2005 - - - - - - 300,767.50 300,767.50 - 300,767.50 09/01/2005 - - - - - - 451,151.25 451,151.25 751,918.75 451,151.25 03/0112006 - 220,000.00 222,855.60 3.000 1.940000 101.298000 451,151.25 671,151.25 - 671,151.25 09/01/2006 - - - - - 447,851.25 447,851.25 1,119,002.50 447,851.25 03/01/2007 - 200,000.00 203,794.00 3.000 2.130000 101.897000 447,851.25 647,851.25 647,851.25 09/01/2007 - - - - - 444,851.25 444,851.25 1,092,702.50 444,851.25 03/01/2008 - 1,000,000.00 1,078,760.00 5.000 2.460000 107.876000 444,851.25 1,444,851.25 - 1,444,851.25 09/01/2008 - - - - - - 419,851.25 419,851.25 1,864,702.50 419,851.25 03/01/2009 - 2,455,000.00 2,672,832.15 5.000 2.770000 108.873000 419,851.25 2,874,851.25 - 2,874,851.25 09/01/2009 - - - - 358 476.25 358 476.25 3,233,327.50 358 476.25 03/01/2010 - 2,525,000.00 2,764,521.50 5.000 3.030000 109.486000 358,476.25 2,883,476.25 - 2,883,476.25 09/01/2010 - - - - - 295,351.25 295,351.25 3,178,827.50 295,351.25 03/01/2011 - 1,790,000.00 1,968,910.50 5.000 3.220000 109.995000 295,351.25 2,085,351.25 - 2,085,351.25 09/01/2011 - - - - - - 250,601.25 250,601.25 2,335,952.50 250,601.25 03/01/2012 - 1,835,000.00 2,023,326.05 5.000 3.390000 110.263000 250,601.25 2,085,601.25 - 2,085,601.25 09/01/2012 - - - - - - 204,726.25 204,726.25 2,290,327.50 204,726.25 . 03101/2013 - 1,875,000.00 1,902,862.50 3.750 3.540000 101.486000 204,726.25 2,079,726.25 - 2,079,726.25 09/01/2013 - - - - - - 169,570.00 169,570.00 2,249,296.25 169,570.00 03/01/2014 - 1,435,000.00 1,435,000.00 3.650 3.650000 100.000000 169,570.00 1,604,570.00 - 7,609,570.00 09/01/2014 - - - - - - 143,381.25 143,381.25 1,747,951.25 03/01/2015 - 1,900,000.00 * 1,900,000.00 3.750 3.750000 100.000000 143,381.25 2,043,381.25 09/01/2015 - - - - - - 107,756.25 107,756.25 2,151,137.50 03/01/2016 2,000,000.00 * 2,227,520.00 5.250 3.780000 111.376000 107,756.25 2,107,756.25 - 09/01/2016 - - - - - - 55,256.25 55,256.25 2,163,012.50 03/01/2017 - 2,105,000.00 * 2,330,592.85 5.250 3.860000 110.717000 55,256.25 2,160,256.25 2,160,256.25 Total - 19,340,000.00 20,730,975.15 6,998,415.00 26,338,415.00 26,338,415.00 25,725,627.50 Acc Int - - - -77,698.27 -77,698.27 - rand Totals 19 340 000.00 20 730 975.15 6,920,716.73 26 260 716.73 26 338 415.00 25 725 627.50 *-Bonds callable... 03/01/2014 @ 100.000 TIC(Incl.all expenses)....3.78235619% Average Coupon.......4.65717534% Net Eff.Int.Rate(Texas Vernon's)= 3.731535%(with Adjstmnt of$0.00). TIC(Arbitrage TIC).........3.51509860% Average Life(yrs)... 7.77 IRS Form 8038-G NIC =3.475851%(with Adjstmnt of$0.00). Bond Years.................. 150,271.67 WAM rs)............. 7.674038 NIC= 3.731535% with Adjstmnt of$0.00). BEAUMONT CITY:NEW2004REF Prepared by:RBC Dain Rauscher-Houston, Texas 1110212004 @ 12:15 v7.03 Page-3 City of Beaumont,General Obligation Debt Advance Refunding of Series 1995,1996(2 Issues)and 1998 Bonds Dated Date=11/0112004 Series 2004 Refunding Bonds Delivery Date=12/02/2004 Term Bond Bond Coupon Interest Total Fiscal Year Debt Service Dates Maturities Redemptions Proceeds Rate Yield Price Amount Debt Service Debt Service to Call 03/01/2005 - - - - - 13,750.00 13,750.00 - 13,750.00 09/01/2005 - - - - - - 20,625.00 20,625.00 34,375.00 20,625.00 03/01/2006 - - 3.000 1.940000 101.298000 20,625.00 20,625.00 - 20,625.00 09/01/2006 - - - 20,625.00 20,625.00 41,250.00 20,625.00 03/01/2007 - - 3.000 2.130000 101.897000 20,625.00 20,625.00 - 20,625.00 09/01/2007 - - - - - 20,625.00 20,625.00 41,250.00 20,625.00 03/01/2008 - 1,000,000.00 1,016,730.00 3.000 2.460000 101.673000 20,625.00 1,020,625.00 - 1,020,625.00 09/01/2008 - - - - - - 5,625.00 5,625.00 1,026,250.00 5,625.00 03/01/2009 - - - 5.000 2.770000 108.873000 5,625.00 5,625.00 - 5,625.00 09/01/2009 5,625.00 5,625.00 11,250.00 5,625.00 03/01/2010 - 5.000 3.030000 109.486000 5,625.00 5,625.00 - 5,625.00 09/01/2010 - - - - - - 5,625.00 5,625.00 11,250.00 5,625.00 03/01/2011 - - - 5.000 3.220000 109.995000 5,625.00 5,625.00 - 5,625.00 09/01/2011 - - - - - 5,625.00 5,625.00 11,250.00 5,625.00 03/01/2012 - - 3.625 3.390000 101.495000 5,625.00 5,625.00 - 5,625.00 09/01/2012 - - - - - - 5,625.00 5,625.00 11,250.00 5,625.00 03/01/2013 - - - 3.750 3.540000 101.486000 5,625.00 5,625.00 - 5,625.00 09/01/2013 - - - - 5,625.00 5,625.00 11,250.00 5,625.00 03/01/2014 - 300,000.00 302,322.00 3.750 3.650000 100.774000 5,625.00 305,625.00 - 305,625.00 09/01/2014 - - - - - - - 305,625.00 03/01/2015 - - ' 3.750 3.750000 100.000000 - - - 09/01/2015 - - - - -03/01/2016 - - - 5.250 3.780000 111.376000 - - - - 09/01/2016 - - - - - - -03/01/2017 - - - 5.250 3.860000 110.717000 - - - Total - 1,300,000.00 1,319,052.00 205,000.00 1,505,000.00 1,505,000.00 1,505,000.00 Acc Int - - - -3,552.08 -3,552.08 - rand Totals 1,300,000.00 1 319 052.00 201 447.92 1,501,447.92 1 505 000.00 1,505.000.00 -Bonds callable... 03/01/2014 @ 100.000 TIC(Incl.all expenses)....3.18396696% Average Coupon.......3.34239130% Net Eff.Int.Rate(Texas Vernon's)= 3.031761%(with Adjstmnt of$0.00). TIC(Arbitrage TIC).........3.04861271% Average Life(yrs)... 4.72 IRS Form 8038-G NIC =2.991477%(with Adjstmnt of$0.00). Bond Years.................. 6,133.33 WAM rs)............. 4.622401 NIC= 3.031761% with Adjstmnt of$0.00). BEAUMONT CITY:NEW2004REF2 Prepared by:RBC Dain Rauscher--Houston,Texas 1110212004 @ 12:15 v7.03 Page-4 City of Beaumont,General Obligation Debt Proof of Federal Arbitrage Yield Advance Refunding of Series 1995,1996(2 Issues)and 1998 Bonds Dated Date 11/01/2004 Delivery Date 12/0212004 Proceeds to: Interest to: Disc Term Total(1) PV of Adj D/S Face Bondholder(+) Maturing Bondholder(+) Recoverable Total Bond Adjusted to Dates Amounts Issuer(-) Amounts Issuer(-) Recurring Debt Service Adjustments Cash Flow @ 3.49552934% Fees for Yld Calc 12/02/2004 0.00 -22,050,027.15 0.00 -22,131,277.50 0.00 0.00 0.00 -22,131,277.50 -22,131,277.50 03/01/2005 0.00 0.00 0.00 629,035.00 0.00 314,517.50 0.00 314,517.50 311,834.51 09/01/2005 0.00 0.00 0.00 943,552.50 0.00 471,776.25 0.00 471,776.25 459,717.00 03/01/2006 220,000.00 222,855.60 220,000.00 1,163,552.50 0.00 691,776.25 0.00 691,776.25 662,514.31 09/01/2006 0.00 0.00 0.00 936,952.50 0.00 468,476.25 0.00 468,476.25 440,953.01 03/01/2007 200,000.00 203,794.00 200,000.00 1,136,952.50 0.00 668,476.25 0.00 668,476.25 618,394.82 09/01/2007 0.00 0.00 0.00 930,952.50 0.00 465,476.25 0.00 465,476.25 423,206.68 03/01/2008 2,000,000.00 2,095,490.00 2,000,000.00 2,930,952.50 0.00 2,465,476.25 0.00 2,465,476.25 2,203,083.35 09/01/2008 0.00 0.00 0.00 850,952.50 0.00 425,476.25 0.00 425,476.25 373,663.39 03/01/2009 2,455,000.00 2,672,832.15 2,455,000.00 3,305,952.50 0.00 2,880,476.25 0.00 2,880,476.25 2,486,249.17 09/01/2009 0.00 0.00 0.00 728,202.50 0.00 364,101.25 0.00 364,101.25 308,871.36 03/01/2010 2,525,000.00 2,764,521.50 2,525,000.00 3,253,202.50 0.00 2,889,101.25 0.00 2,889,101.25 2,408,759.06 ' 09/01/2010 0.00 0.00 0.00 601,952.50 0.00 300,976.25 0.00 300,976.25 246,625.48 03/01/2011 1,790,000.00 1,968,910.50 1,790,000.00 2,391,952.50 0.00 2,090,976.25 0.00 2,090,976.25 1,683,952.92 09/01/2011 0.00 0.00 0.00 512,452.50 0.00 256,226.25 0.00 256,226.25 202,805.43 03/01/2012 1,835,000.00 2,023,326.05 1,835,000.00 2,347,452.50 0.00 2,091,226.25 0.00 2,091,226.25 1,626,792.32 09/01/2012 0.00 0.00 0.00 420,702.50 0.00 210,351.25 0.00 210,351.25 160,824.17 03/01/2013 1,875,000.00 1,902,862.50 1,875,000.00 2,295,702.50 0.00 2,085,351.25 0.00 2,085,351.25 1,566,969.54 09/01/2013 0.00 0.00 0.00 350,390.00 0.00 175,195.00 0.00 175,195.00 129,383.28 03/01/2014 1,735,000.00 1,737,322.00 1,735 000.00 6,190 390.00 0.00 1,910 195.00 0.00 6,015,195.00 4,365,975.50 09101/2014 0.00 0.00 0.00 179,006.25 0.00 143,381.25 0.00 35,625.00 25,413.33 03/01/2015 1,900,000.00 1,900,000.00 1,900,000.00 2,079,006.25 0.00 2,043,381.25 0.00 1,935,625.00 1,357,072.51 09/01/2015 0.00 0.00 0.00 107,756.25 0.00 107,756.25 0.00 0.00 0.00 03/01/2016 2,000,000.00 2,227,520.00 2,000,000.00 107,756.25 0.00 2,107,756.25 0.00 0.00 0.00 09/01/2016 0.00 0.00 0.00 55,256.25 0.00 55,256.25 0.00 0.00 0.00 03/01/2017 2,105,000.00 2,330,592.85 2,105,000.00 55,256.25 0.00 2,160,256.25 0.00 0.00 0.00 Totals 20,640,000.00 0.00 20,640,000.00 12,374,015.00 + W 0.00 27,843,415.00 0.00 5,170,600.00 -68,216.37 Plus PV of Bond Insurance.......... 68,216.37 0.00 (1)--Adjustments to cash flow are based on the following"yield to call'optional redemption schedule: NEW2004REF••Call the 03/01/2016 maturity on 03/0112014 @ 100.000 NEW2004REF--Call the 03/01/2017 maturity on 03/01/2014 @ 100.000 BEAUMONT CITY:AGGNEW Prepared by:RBC Dain Rauscher--Houston,Texas 1110212004 @ 12:15 v7.03 Page-7 ERIN Analy ics November 1, 2004 Mark Peroutka Grant Thornton Re: City of Beaumont—Allocation of the Series 1996 New Money and Refunding Bonds. The Series 1996 Bonds were dated 1/1/1996. Mark, According to the KPMG verification report(dated 2/22/1996) for the Series 1996 multi- purpose refunding and new money bond issue the dollars spent for the escrow was $15,825,298.90 and the deposit to the project fund was$15,843,500.00. The percentage of the new money is calculated as follows: 15,843,500 New Money Percentage = -------------------------------- 15,843,500+ 15,825,298.90 New Money Percentage = 50.02873664% Mike O'Hara (979) 278-3294 Section 7 i L No. 7 CERTIFICATE OF ESCROW AGENT RELATING TO AUTHORITY OF OFFICERS AND SIGNATURE IDENTIFICATION I, the undersigned officer of JPMORGAN CHASE BANK (the 'Bank"), do hereby execute and deliver this certificate for the benefit of the Attorney General of the State of Texas and the purchasers of, and all other persons interested in the validity of, the $20,640,000 The City of Beaumont,Texas, General Obligation Refunding Bonds, Series 2004, and I do hereby certify as follows: 1. That I am the duly chosen, qualified and acting officer of the Bank for the office shown beneath my signature and I am duly authorized to execute and deliver this Certificate. 2. That attached as Exhibit "A" to this Certificate is a Secretary's Certificate of the Bank relating to the corporate authority of the Bank to enter into Escrow Agreements, Bond Registrar, Paying Agency and Transfer Agency Agreements and similar types of agreements in connection with the issuance of the Bonds and designating the officers of the Bank authorized to execute such agreements. 3. That the following are duly elected, qualified and acting officers of the Bank having the authority to act for and in the name of the Bank as set forth in Exhibit "A" and that the signatures set opposite their names are their true and correct signatures: i NAME TITLE SIGNATURE Vice Presiden", IN WITNESS WHEREOF, I have hereunto set my hand and affixed the corporate seal of the Bank as of the Z day of V p C Q 4A Qr 92004. JPMorga has Ban >�r e By ` Its: A PRE IDENT' ATTEST: By: Its: (SEAL) -2- EXHIBIT "A" SECRETARY'S CERTIFICATE See attached. Section 8 BOND PURCHASE AGREEMENT $20,640,000 CITY OF BEAUMONT,TEXAS GENERAL OBLIGATION REFUNDING BONDS, SERIES 2004 November 2,2004 Mayor and City Council City of Beaumont,Texas 801 Main Street Beaumont,Texas 77704 The undersigned, First Southwest Company on behalf of itself and Morgan Keegan& Company, Inc., Estrada Hinojosa&Company, Inc., and Southwest Securities, Inc. (collectively,the"Underwriters") offers to enter into the following agreement (this "Agreement") with the City of Beaumont, Texas (the "Issuer") which, upon the Issuer's written acceptance of this offer, will be binding upon the Issuer and upon the Underwriters. This offer is made subject to the Issuer's written acceptance hereof on or before 10:30 p.m. Central Standard Time on November 2, 2004 and, if not so accepted, will be subject to withdrawal by the Underwriters upon notice delivered to the Issuer at any time prior to the acceptance hereof by the Issuer. Terms not otherwise defined in this Agreement shall have the same meanings set forth in the Ordinance(as defined herein)or in the Official Statement(as defined herein). 1. Purchase and Sale of the Bonds. Subject to the terms and conditions and in reliance upon the representations,warranties and agreements set forth herein,the Underwriters hereby agree to purchase from the Issuer, and the Issuer hereby agrees to sell and deliver to the Underwriters, all,but not less than all, of the Issuer's $20,640,000 General Obligation Refunding Bonds, Series 2004 (the "Bonds"). Inasmuch as this purchase and sale represents a negotiated transaction,the Issuer understands, and hereby confirms, that the Underwriters are not acting as a fiduciary of the Issuer, but rather are acting solely in their capacity as Underwriters for their own account. The Underwriters have been duly authorized to execute this Agreement and to act hereunder. The principal amount of the Bonds to be issued, the dated date therefor, the maturities, sinking fund and optional redemption provisions and interest rates per annum are set forth in Schedule I hereto. The Bonds shall be as described in, and shall be issued and secured under and pursuant to the provisions of an Ordinance adopted by the Issuer on November 2,2004(the"Ordinance"). The purchase price for the Bonds shall be $21,931,347.15 (representing the par amount of the Bonds, less an underwriters' discount of $118,680.00, plus a net original issue premium of $1,410,027.15),plus accrued interest on the Bonds to the date of Closing(as defined herein). 2. Public Offerin>?. The Underwriters agree to make a bona fide public offering of all of the Bonds at a price not to exceed the public offering price set forth on the cover of the Official Statement and may subsequently change such offering price without any requirement of prior notice. The Underwriters may offer and sell Bonds to certain dealers (including dealers depositing Bonds into investment trusts) and others at prices lower than the public offering price stated on the cover of the Official Statement. 1874867 2.DOC 3. The Official Statement. (a) Attached hereto as Exhibit A is either a draft of the final Official Statement or a copy of the Preliminary Official Statement dated October 27, 2004 (the "Preliminary Official Statement"), including the cover page and Appendices thereto,of the Issuer relating to the Bonds. Such draft of the final Official Statement or copy of the Preliminary Official Statement, as amended to reflect the changes marked or otherwise indicated on Exhibit A hereto, is hereinafter called the"Official Statement." (b) The Preliminary Official Statement has been prepared for use in connection with the public offering, sale and distribution of the Bonds by the Underwriters. The Issuer hereby represents and warrants that the Preliminary Official Statement was deemed final by the Issuer as of its date, except for the omission of such information which is dependent upon the final pricing of the Bonds for completion, all as permitted to be excluded by Section (b)(1) of Rule 15c(2)-12 under the Securities Exchange Act of 1934(the"Rule"). (c) The Issuer hereby authorizes the Official Statement and the information therein contained to be used by the Underwriters in connection with the public offering and the sale of the Bonds. The Issuer consents to the use by the Underwriters prior to the date hereof of the Preliminary Official Statement in connection with the public offering of the Bonds. The Issuer shall provide, or cause to be provided, to the Underwriters, as soon as practicable after the date of the Issuer's acceptance of this Agreement (but, in any event, not later than within seven business days after the Issuer's acceptance of this Agreement and in sufficient time to accompany any confirmation that requests payment from any customer), copies of the Official Statement which is complete as of the date of its delivery to the Underwriters in such quantity as the Underwriters shall request in order for the Underwriters to comply with Section(b)(4)of the Rule and the rules of the Municipal Securities Rulemaking Board. (d) If, after the date of this Agreement to and including the date the Underwriters are no longer required to provide an Official Statement to potential customers who request the same pursuant to the Rule (the earlier of(i) 90 days from the "end of the underwriting period" (as defined in the Rule) and (ii) the time when the Official Statement is available to any person from a nationally recognized municipal securities repository,but in no case less than 25 days after the"end of the underwriting period" for the Bonds), the Issuer becomes aware of any fact or event which might or would cause the Official Statement, as then supplemented or amended,to contain any untrue statement of a material fact or to omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, or if it is necessary to amend or supplement the Official Statement to comply with law, the Issuer will notify the Underwriters(and for the purposes of this clause provide the Underwriters with such information as it may from time to time request), and if, in the opinion of the Underwriters, such fact or event requires preparation and publication of a supplement or amendment to the Official Statement, the Issuer will forthwith prepare and furnish, at the Issuer's own expense(in a form and manner approved by the Underwriters), a reasonable number of copies of either amendments or supplements to the Official Statement so that the statements in the Official Statement as so amended and supplemented will not, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading or so that the Official Statement will comply with law. If such notification shall be subsequent to the Closing, the Issuer shall furnish such legal opinions, certificates, instruments and other documents as the Underwriters may deem necessary to evidence the truth and accuracy of such supplement or amendment to the Official Statement. (e) The Underwriters hereby agree to timely file the Official Statement with a nationally recognized municipal securities information repository. Unless otherwise notified in writing by the Underwriters, the Issuer can assume that the "end of the underwriting period" for purposes of the Rule is the date of the Closing. 1874867 2.DOC -2- (f) In connection with the execution of this Agreement,the Underwriters will deliver to the Issuer a corporate check payable to the Issuer in the amount of $123,650, as security for the performance by the Underwriters of their obligations to accept and pay for the Bonds at the Closing (described below) in accordance with the provisions of this Agreement. Such check shall be held by the Issuer uncashed until the Closing and at the Closing shall be returned to the Underwriters upon receipt by or on behalf of the Issuer of the Purchase Price for the Bonds. In the event the Issuer does not accept this offer agreed to by the undersigned, or upon its failure to deliver the Bonds at the Closing, or if it shall be unable to satisfy the conditions to the obligations of the Underwriters contained in this Agreement, or if such obligations shall be terminated for any reason permitted by this Agreement, such check shall be immediately returned to the Underwriters. In the event that the Underwriters fail(other than for a reason permitted under this Agreement) to accept and pay for the Bonds at the Closing, such check shall be retained and may be cashed by the Issuer as and for full liquidated damages for such failure and for any and all defaults hereunder on the part of the Underwriters, and the cashing of such check and retention of such proceeds shall constitute a full release and discharge of all claims and rights hereunder against the Underwriters. 4. Representations. Warranties, and Covenants of the Issuer. The Issuer hereby represents and warrants to and covenants with the Underwriters that: (a) The Issuer is a political subdivision and municipal corporation of the State of Texas (the "State"), organized and existing as such under the Constitution and laws of the State. The Issuer is authorized by the provisions of Chapter 1207,Texas Government Code, as amended(the"Act"), among other things, (i) to enter into, execute and deliver this Agreement and the Ordinance and all documents required hereunder and thereunder to be executed and delivered by the Issuer(this Agreement and the Ordinance are hereinafter referred to as the"Issuer Documents"), (ii)to sell, issue and deliver the Bonds to the Underwriter as provided herein, and (iii) to carry out and consummate the transactions contemplated by the Issuer Documents and the Official Statement, and the Issuer has complied, and will at the Closing be in compliance in all respects,with the terms of the Act and the Issuer Documents as they pertain to such transactions; (b) By all necessary official action of the Issuer prior to or concurrently with the acceptance hereof,the Issuer has duly authorized all necessary action to be taken by it for(i)the adoption of the Ordinance and the issuance and sale of the Bonds, (ii)the approval, execution and delivery of, and the performance by the Issuer of the obligations on its part contained in, the Bonds and the Issuer Documents and (iii) the consummation by it of all other transactions contemplated by the Official Statement, and the Issuer Documents and any and all such other agreements and documents as may be required to be executed, delivered and/or received by the Issuer in order to carry out, give effect to, and consummate the transactions contemplated herein and in the Official Statement; (c) The Issuer Documents constitute legal, valid and binding obligations of the Issuer, enforceable in accordance with their respective terms, subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws and principles of equity relating to or affecting the enforcement of creditors' rights; the Bonds, when issued, delivered and paid for in accordance with the Ordinance and this Agreement,will constitute legal, valid and binding obligations of the Issuer entitled to the benefits of the Ordinance and enforceable in accordance with their terms, subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws and principles of equity relating to or affecting the enforcement of creditors' rights;upon the issuance, authentication and delivery of the Bonds as aforesaid, the Ordinance will provide, for the benefit of the holders, from time to time, of the Bonds, the legally valid and binding pledge it purports to create as set forth in the Ordinance; 1874867 2.DOC -3- (d) The Issuer is not in breach of or default in any material respect under any applicable constitutional provision, law or administrative regulation of the State of Texas or the United States or any applicable judgment or decree or any loan agreement, indenture, bond, note, resolution, agreement or other instrument to which the Issuer is a party or to which the Issuer is or any of its property or assets are otherwise subject, and no event has occurred and is continuing which constitutes or with the passage of time or the giving of notice,or both,would constitute a default or event of default by the Issuer under any of the foregoing; and the execution and delivery of the Bonds and the Issuer Documents, and the adoption of the Ordinance and compliance with the provisions on the Issuer's part contained therein, will not conflict with or constitute a breach of or default under any constitutional provision, administrative regulation,judgment, decree, loan agreement, indenture, bond, note, resolution, agreement or other instrument to which the Issuer is a party or to which the Issuer is or to which any of its property or assets are otherwise subject,nor will any such execution,delivery,adoption or compliance result in the creation or imposition of any lien, charge or other security interest or encumbrance of any nature whatsoever upon any of the property or assets of the Issuer to be pledged to secure the Bonds or under the terms of any such law,regulation or instrument, except as provided by the Bonds and the Ordinance; (e) Except for the approval of the Bonds by the Attorney General of the State of Texas and the registration thereof by the Comptroller of Public Accounts of the State of Texas, all authorizations, approvals, licenses, permits, consents and orders of any governmental authority, legislative body,board, agency or commission having jurisdiction of the matter which are required for the due authorization of, which would constitute a condition precedent to, or the absence of which would materially adversely affect the due performance by the Issuer of its obligations under the Issuer Documents, and they have been duly obtained, except for such approvals, consents and orders as may be required under the Blue Sky or securities laws of any jurisdiction in connection with the offering and sale of the Bonds; (f) The Bonds and the Ordinance conform to the descriptions thereof contained in the Official Statement under the caption"THE BONDS", and the proceeds of the sale of the Bonds will be applied generally as described in the Official Statement under the caption"THE BONDS—Sources and Uses of Funds"; (g) There is no litigation, action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, government agency, public board or body, pending or, to the best knowledge of the Issuer after due inquiry, threatened against the Issuer, affecting the existence of the Issuer or the titles of its officers to their respective offices, or affecting or seeking to prohibit, restrain or enjoin the sale, issuance or delivery of the Bonds, or the collection of taxes pledged to the payment of principal of and interest on the Bonds, or the construction or operation of any project financed with the proceeds of the Bonds pursuant to the Ordinance or in any way contesting or affecting the validity or enforceability of the Bonds, the Issuer Documents, or contesting the exclusion from gross income of interest on the Bonds for federal income tax purposes, or contesting in any way the completeness or accuracy of the Preliminary Official Statement or the Official Statement or any supplement or amendment thereto, or contesting the powers of the Issuer or any authority for the issuance of the Bonds,the adoption of the Ordinance or the execution and delivery of the Issuer Documents,nor,to the best knowledge of the Issuer, is there any basis therefor, wherein an unfavorable decision, ruling or finding would materially adversely affect the validity or enforceability of the Bonds or the Issuer Documents; (h) As of the date thereof and with respect to the Issuer, the Preliminary Official Statement did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made,not misleading; 1874867 2.DOC -4- (i) At the time of the Issuer's acceptance hereof and(unless the Official Statement is amended or supplemented pursuant to paragraph (d) of Section 3 of this Agreement) at all times subsequent thereto during the period up to and including the date of Closing, the Official Statement does not and will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein,in light of the circumstances under which they were made,not misleading; 0) If the Official Statement is supplemented or amended pursuant to paragraph (d) of Section 3 of this Agreement, at the time of each supplement or amendment thereto and (unless subsequently again supplemented or amended pursuant to such paragraph) at all times subsequent thereto during the period up to and including the date of Closing, the Official Statement as so supplemented or amended will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made,not misleading; (k) The Issuer will apply, or cause to be applied, the proceeds from the sale of the Bonds as provided in and subject to all of the terms and provisions of the Ordinance and not take or omit to take any action which action or omission will adversely affect the exclusion from gross income for federal income tax purposes of the interest on the Bonds; (1) The Issuer will furnish such information and execute such instruments and take such action in cooperation with the Underwriters as the Underwriters may reasonably request (A) to (i) qualify the Bonds for offer and sale under the Blue Sky or other securities laws and regulations of such states and other jurisdictions in the United States as the Underwriters may designate and(ii)determine the eligibility of the Bonds for investment under the laws of such states and other jurisdictions and (B) to continue such qualifications in effect so long as required for the distribution of the Bonds (provided, however, that the Issuer will not be required to qualify as a foreign corporation or to file any general or special consents to service of process under the laws of any jurisdiction)and will advise the Underwriters immediately of receipt by the Issuer of any notification with respect to the suspension of the qualification of the Bonds for sale in any jurisdiction or the initiation or threat of any proceeding for that purpose; (m) The financial statements of, and other financial information regarding, the Issuer included in the Official Statement fairly present the financial position and results of the Issuer as of the dates and for the periods therein set forth. Prior to the Closing, there will be no adverse change of a material nature in such financial position, results of operations or condition, financial or otherwise, of the Issuer. The Issuer is not a party to any litigation or other proceeding pending or, to its knowledge, threatened which, if decided adversely to the Issuer, would have a materially adverse effect on the financial condition of the Issuer; (n) Prior to the Closing the Issuer will not offer or issue any bonds, notes or other obligations for borrowed money or incur any material liabilities, direct or contingent, payable from or secured by any of the revenues or assets which will secure the Bonds without the prior approval of the Underwriters; and (o) Any certificate, signed by any official of the Issuer authorized to do so in connection with the transactions contemplated by this Agreement, shall be deemed a representation and warranty by the Issuer to the Underwriters as to the statements made therein. 5. Closing. (a) At 10:00 a.m. Central Standard Time, on December 2, 2004, or at such other time and date as shall have been mutually agreed upon by the Issuer and the Underwriters (the "Closing"), the Issuer will, subject to the terms and conditions hereof, deliver the Bonds to the 1874867 2.DOC -5- Underwriters duly executed and authenticated, together with the other documents hereinafter mentioned, and the Underwriters will, subject to the terms and conditions hereof, accept such delivery and pay the purchase price of the Bonds as set forth in Section 1 of this Agreement by a certified or bank cashier's check or checks or wire transfer payable in immediately available funds to the order of the Issuer. Payment for the Bonds as aforesaid shall be made at the offices of Bond Counsel, or such other place as shall have been mutually agreed upon by the Issuer and the Underwriters. Upon receipt of such payment, the Issuer immediately shall return to the Underwriters the good faith check described within Section 3(f) herein. (b) Delivery of the Bonds in definitive form shall be made to The Depository Trust Company("DTC"), or to the Paying Agent/Registrar pursuant to DTC's FAST System. The Bonds shall be prepared and delivered as fully registered bonds in authorized denominations thereof, shall be registered in the name of Cede&Co., all as provided in the Ordinance,and shall be made available to the Underwriters at least one business day before Closing for purpose of inspection. 6. Closing Conditions. The Underwriters have entered into this Agreement in reliance upon the representations, warranties and agreements of the Issuer contained herein, and in reliance upon the representations, warranties and agreements to be contained in the documents and instruments to be delivered at the Closing and upon the performance by the Issuer of its obligations hereunder, both as of the date hereof and as of the date of the Closing. Accordingly, the Underwriters' obligations under this Agreement to purchase, to accept delivery of and to pay for the Bonds shall be conditioned upon the performance by the Issuer of its obligations to be performed hereunder and under such documents and instruments at or prior to the Closing, and shall also be subject to the following additional conditions, including the delivery by the Issuer of such documents as are enumerated herein, in form and substance reasonably satisfactory to the Underwriters: (a) The representations and warranties of the Issuer contained herein shall be true, complete and correct on the date hereof and on and as of the date of the Closing, as if made on the date of the Closing; (b) The Issuer shall have performed and complied with all agreements and conditions required by this Agreement to be performed or complied with by it prior to or at the Closing; (c) At the time of the Closing, (i) the Issuer Documents and the Bonds shall be in full force and effect in the form heretofore approved by the Underwriters and shall not have been amended, modified or supplemented, and the Official Statement shall not have been supplemented or amended, except in any such case as may have been agreed to by the Underwriters, and(ii) all actions of the Issuer required to be taken by the Issuer shall be performed in order for Bond Counsel and Counsel to the Underwriters to deliver their respective opinions referred to hereafter; (d) At the time of the Closing, all official action of the Issuer relating to the Bonds and the Issuer Documents shall be in full force and effect and shall not have been amended, modified or supplemented; (e) At or prior to the Closing, the Ordinance shall have been duly executed and delivered by the Issuer and the Issuer shall have duly executed and delivered and the Registrar shall have duly authenticated the Bonds; (f) At the time of the Closing, there shall not have occurred any change or any development involving a prospective change in the project to be financed with the proceeds of the Bonds, in the condition, financial or otherwise, or in the revenues or operations of the Issuer, from that set forth 1874867 2.DOC -6- in the Official Statement that in the judgment of the Underwriters is material and adverse and that makes it, in the judgment of the Underwriters, impracticable to market the Bonds on the terms and in the manner contemplated in the Official Statement; (g) The Issuer shall not have failed to pay principal or interest when due on any of its outstanding obligations for borrowed money; (h) All steps to be taken and all instruments and other documents to be executed, and all other legal matters in connection with the transactions contemplated by this Agreement, shall be reasonably satisfactory in legal form and effect to the Underwriters; (i) At or prior to the Closing,the Underwriters shall have received copies of each of the following documents: (1) The Official Statement, and each supplement or amendment thereto, if any; (2) The Ordinance with such supplements or amendments as may have been agreed to by the Underwriters, which Ordinance will include an agreement by the Issuer to provide certain periodic information and notices of material events in accordance with the Rule as described in the Official Statement under "CONTINUING DISCLOSURE OF INFORMATION;" (3) The approving opinion of Bond Counsel with respect to the Bonds, in substantially the form attached to the Official Statement; (4) a supplemental opinion of Bond Counsel addressed to the Underwriters, substantially to the effect that: (i) the Ordinance has been duly adopted and is in full force and effect; (ii) the Bonds are exempted securities under the Securities Act of 1933, as amended (the "1933 Act"), and the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act") and it is not necessary, in connection with the offering and sale of the Bonds, to register the Bonds under the 1933 Act or to qualify the Ordinance under the Trust Indenture Act; and (iii) the information appearing in the Official Statement under the captions or subcaptions "THE BONDS" (except for the subsections captioned "Book- Entry-Only System"and"Sources and Uses of Funds"),"CONTINUING DISCLOSURE OF INFORMATION" (except the subsection captioned "Compliance With Prior Undertakings"), and "LEGAL MATTERS" fairly summarizes the procedures and documents referred to therein and is correct as to matters of law. (5) An opinion, dated the date of the Closing and addressed to the Underwriters,of counsel for the Underwriters,to the effect that: (i) the Bonds are exempt securities under the 1933 Act and the Trust Indenture Act and it is not necessary, in connection with the offering and sale of the 1874867 2.DOC -7- Bonds,to register the Bonds under the 1933 Act and the Ordinance need not be qualified under the Trust Indenture Act;and (ii) based upon their participation in the preparation of the Official Statement as counsel for the Underwriters and their participation at conferences at which the Official Statement was discussed, but without having undertaken to determine independently the accuracy, completeness or fairness of the statements contained in the Official Statement, such counsel has no reason to believe that the Official Statement contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading (except for any financial, forecast, technical and statistical statements and data included in the Official Statement and in Appendices A and B thereto, and the information regarding DTC and its book-entry system as to which no view need be expressed); (6) A certificate, dated the date of Closing, of the Issuer to the effect that (i) the representations and warranties of the Issuer contained herein are true and correct in all material respects on and as of the date of Closing as if made on the date of Closing; (ii) no litigation or proceeding or tax challenge against it is pending or, to its knowledge, threatened in any court or administrative body nor is there a basis for litigation which would (a) contest the right of the members or officials of the Issuer to hold and exercise their respective positions, (b) contest the due organization and valid existence of the Issuer, (c) contest the validity, due authorization and execution of the Bonds or the Issuer Documents or(d) attempt to limit, enjoin or otherwise restrict or prevent the Issuer from functioning and collecting revenues, including payments on the Bonds pursuant to the Ordinance, and other income, or the levy or collection of the taxes pledged or to be pledged to pay the principal of and interest on the Bonds, or the pledge thereof; (iii) the Ordinance of the Issuer authorizing the execution, delivery and/or performance of the Official Statement,the Bonds and Issuer Documents has been duly adopted by the Issuer,is in full force and effect and has not been modified, amended or repealed, and(iv)to the best of its knowledge, no event affecting the Issuer has occurred since the date of the Official Statement which should be disclosed in the Official Statement for the purpose for which it is to be used or which it is necessary to disclose therein in order to make the statements and information therein, in light of the circumstances under which they were made,not misleading in any material respect as of the time of Closing, and the information contained in the Official Statement is correct in all material respects and, as of the date of the Official Statement did not, and as of the date of the Closing does not, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements made therein, in the light of the circumstances under which they were made,not misleading; (7) A certificate of the Issuer in form and substance satisfactory to Bond Counsel and counsel to the Underwriters(a)setting forth the facts,estimates and circumstances in existence on the date of the Closing, which establish that it is not expected that the proceeds of the Bonds will be used in a manner that would cause the Bonds to be"arbitrage bonds"within the meaning of Section 148 of the Internal Revenue Code of 1986,as amended(the"Code"),and any applicable regulations (whether final, temporary or proposed) issued pursuant to the Code, and (b) certifying that to the best of the knowledge and belief of the Issuer there are no other facts, estimates or circumstances that would materially change the conclusions, representations and expectations contained in such Bonds; (8) Any other certificates and opinions required by the Ordinance for the issuance thereunder of the Bonds; 1874867 2.DOC -8- (9) Evidence satisfactory to the Underwriters that the Bonds have been rated "AAA" by Standard & Poor's and "Aaa" by Moody's Investors Service, Inc., and that such ratings are in effect as of the date of Closing; (10) A copy of a special report prepared by the independent certified public accountants Grant Thornton LLP, addressed to the Issuer, Bond Counsel and the Underwriters, verifying the arithmetical computations of the adequacy of the maturing principal and interest on the escrowed securities and uninvested cash on hand under the Escrow Agreement to pay, when due, the principal of and interest on the Bonds and the computation of the yield with respect to such Bonds; (11) The Escrow Agreement, executed by the Issuer and the Escrow Agent; (12) A copy of the municipal bond insurance policy insuring payment of principal of and interest on the Bonds, issued by Financial Security Assurance Inc. ("FSA"), together with an opinion of counsel to FSA, in form and substance satisfactory to the Underwriters; (13) The approving opinion of the Attorney General of the State of Texas with respect to the Bonds; (14) The registration certificate of the Comptroller of the State of Texas with respect to the Bonds; and (15) Such additional legal opinions, certificates, instruments and other documents as the Underwriters or counsel to the Underwriters may reasonably request to evidence the truth and accuracy, as of the date hereof and as of the date of the Closing, of the Issuer's representations and warranties contained herein and of the statements and information contained in the Official Statement and the due performance or satisfaction by the Issuer on or prior to the date of the Closing of all the respective agreements then to be performed and conditions then to be satisfied by the Issuer. All of the opinions, letters, certificates, instruments and other documents mentioned above or elsewhere in this Agreement shall be deemed to be in compliance with the provisions hereof if, but only if,they are in form and substance satisfactory to the Underwriters. If the Issuer shall be unable to satisfy the conditions to the obligations of the Underwriters to purchase,to accept delivery of and to pay for the Bonds contained in this Agreement, or if the obligations of the Underwriters to purchase,to accept delivery of and to pay for the Bonds shall be terminated for any reason permitted by this Agreement, this Agreement shall terminate and neither the Underwriters nor the Issuer shall be under any further obligation hereunder, except that the respective obligations of the Issuer and the Underwriters set forth in Section 4 hereof shall continue in full force and effect. 7. Termination. The Underwriters shall have the right to cancel its obligation to purchase the Bonds if,between the date of this Agreement and the Closing,the market price or marketability of the Bonds shall be materially adversely affected, in the reasonable judgment of the Underwriters, by the occurrence of any of the following: (a) legislation shall be enacted by or introduced in the Congress of the United States or recommended to the Congress for passage by the President of the United States, or the Treasury Department of the United States or the Internal Revenue Service or any member of the Congress or the 1874867 2.DOC -9- legislature of the State of Texas or favorably reported for passage to either House of the Congress by any committee of such House to which such legislation has been referred for consideration, a decision by a court of the United States or of the State of Texas or the United States Tax Court shall be rendered, or an order,ruling,regulation(final,temporary or proposed),press release, statement or other form of notice by or on behalf of the Treasury Department of the United States, the Internal Revenue Service or other governmental agency shall be made or proposed, the effect of any or all of which would be to impose, directly or indirectly, federal income taxation or State income taxation upon revenues or other income of the general character to be derived by the Issuer pursuant to the Ordinance, or upon interest received on obligations of the general character of the Bonds or, with respect to State taxation, of the interest on the Bonds as described in the Official Statement, or other action or events shall have transpired which may have the purpose or effect, directly or indirectly, of changing the federal income tax consequences of any of the transactions contemplated herein; (b) legislation introduced in or enacted (or ordinance passed) by the Congress or an order, decree, or injunction issued by any court of competent jurisdiction, or an order, ruling, regulation (final,temporary,or proposed),press release or other form of notice issued or made by or on behalf of the Securities and Exchange Commission, or any other governmental agency having jurisdiction of the subject matter, to the effect that obligations of the general character of the Bonds, including any or all underlying arrangements, are not exempt from registration under or other requirements of the 1933 Act, or that the Ordinance is not exempt from qualification under or other requirements of the Trust Indenture Act,or that the issuance, offering, or sale of obligations of the general character of the Bonds, including any or all underlying arrangements, as contemplated hereby or by the Official Statement or otherwise, is or would be in violation of the federal securities law as amended and then in effect; (c) any state blue sky or securities commission or other governmental agency or body shall have withheld registration, exemption or clearance of the offering of the Bonds as described herein, or issued a stop order or similar ruling relating thereto; (d) a general suspension of trading in securities on the New York Stock Exchange or the American Stock Exchange, the establishment of minimum prices on either such exchange, the establishment of material restrictions (not in force as of the date hereof)upon trading securities generally by any governmental authority or any national securities exchange, a general banking moratorium declared by federal, State of New York, or State officials authorized to do so; (e) the New York Stock Exchange or other national securities exchange or any governmental authority, shall impose, as to the Bonds or as to obligations of the general character of the Bonds, any material restrictions not now in force, or increase materially those now in force, with respect to the extension of credit by,or the charge to the net capital requirements of,Underwriters; (f) any amendment to the federal or state Constitution or action by any federal or state court, legislative body, regulatory body, or other authority materially adversely affecting the tax status of the Issuer, its property, income securities(or interest thereon), or the validity or enforceability of the levy of taxes to pay principal of and interest on the Bonds; (g) any event occurring, or information becoming known which, in the judgment of the Underwriters, makes untrue in any material respect any statement or information contained in the Official Statement, or has the effect that the Official Statement contains any untrue statement of material fact or omits 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; 1874867 2.DOC -10- (h) there shall have occurred since the date of this Agreement any materially adverse change in the affairs or financial condition of the Issuer; (i) the United States shall have become engaged in hostilities which have resulted in a declaration of war or a national emergency or there shall have occurred any other outbreak or escalation of hostilities or a national or international calamity or crisis, financial or otherwise, the effect of such outbreak, calamity or crisis on the financial markets of the United States being such as, in the reasonable opinion of the Underwriters, would materially and adversely affect the ability of the Underwriters to market the Bonds; 0) any fact or event shall exist or have existed that, in the Underwriters'judgment, requires or has required an amendment of or supplement to the Official Statement; (k) there shall have occurred any downgrading, or any notice shall have been given of(A) any intended or potential downgrading or(B) any review or possible change that does not indicate a possible upgrade, in the rating accorded any of the Issuer's obligations (including the rating to be accorded the Bonds); and (1) the purchase of and payment for the Bonds by the Underwriters, or the resale of the Bonds by the Underwriters, on the terms and conditions herein provided shall be prohibited by any applicable law, governmental authority, board, agency or commission, unless such prohibition is due to the action or inaction of the Underwriters. 8. Expenses. (a) The Underwriters shall be under no obligation to pay, and the Issuer shall pay, any expenses incident to the performance of the Issuer's obligations hereunder, including, but not limited to (i) the cost of preparation and printing of the Bonds, (ii) the fees and disbursements of Bond Counsel; (iii) the fees and disbursements of the Financial Advisor to the Issuer, and (iv) the fees and disbursements of any other engineers, accountants, and other experts, consultants or advisers retained by the Issuer. (b) The Underwriters shall pay (i) the cost of preparation and printing of this Agreement,the Blue Sky Survey and Legal Investment Memorandum, if any; (ii)all advertising expenses in connection with the public offering of the Bonds; and (iii) all other expenses incurred by them in connection with the public offering of the Bonds, including the fees and disbursements of Counsel to the Underwriters. 9. Notices. Any notice or other communication to be given to the Issuer under this Agreement may be given by delivering the same in writing at City of Beaumont, Texas, 801 Main Street, Beaumont, Texas 77704, Attention: Mayor, and any notice or other communication to be given to the Underwriters under this Agreement may be given by delivering the same in writing to First Southwest Company, 1021 Main Street, Suite 2200,Houston,Texas 77002,Attention: C.Terrell Palmer. 10. Parties in Interest. This Agreement as heretofore specified shall constitute the entire agreement between us and is made solely for the benefit of the Issuer and the Underwriters (including successors or assigns of the Underwriters) and no other person shall acquire or have any right hereunder or by virtue hereof. This Agreement may not be assigned by the Issuer. All of the Issuer's representations, warranties and agreements contained in this Agreement shall remain operative and in full force and effect, regardless of(i) any investigations made by or on behalf of any of the Underwriters; (ii) delivery of and payment for the Bonds pursuant to this Agreement; and (iii) any termination of this Agreement. 1874867 2.DOC -11- 11. Effectiveness. This Agreement shall become effective upon the acceptance hereof by the Issuer and shall be valid and enforceable at the time of such acceptance. 12. Choice of Law. This Agreement shall be governed by and construed in accordance with the law of the State of Texas. 13. Severability. If any provision of this Agreement shall be held or deemed to be, or shall in fact be, invalid, inoperative or unenforceable as applied in any particular case in any jurisdiction or jurisdictions, or in all jurisdictions because it conflicts with any provisions of any Constitution, statute, rule of public policy, or any other reason, such circumstances shall not have the effect of rendering the provision in question invalid, inoperative or unenforceable in any other case or circumstance, or of rendering any other provision or provisions of this Agreement invalid, inoperative or unenforceable to any extent whatever. 14. Business Day. For purposes of this Agreement, "business day"means any day on which the New York Stock Exchange is open for trading. 15. Section Headings. Section headings have been inserted in this Agreement as a matter of convenience of reference only, and it is agreed that such section headings are not a part of this Agreement and will not be used in the interpretation of any provisions of this Agreement. 16. Counterparts. This Agreement may be executed in several counterparts each of which shall be regarded as an original(with the same effect as if the signatures thereto and hereto were upon the same document)and all of which shall constitute one and the same document. 1874867 2.DOC -12- If you agree with the foregoing,please sign the enclosed counterpart of this Agreement and return it to the Underwriters. This Agreement shall become a binding agreement between you and the Underwriters when at least the counterpart of this letter shall have been signed by or on behalf of each of the parties hereto. Very truly yours, FIRST SOUTHWEST COMPANY MORGAN KEEGAN&COMPANY, INC. ESTRADA HINOJOSA&COMPANY, INC. SOUTHWEST SECURITIES,INC. By:FIRST SOUTHWEST COMPANY By: Authorized Officer Accepted and agreed to this 2nd day of November, 2004. CITY OF BEAUMONT, TEXAS B �- Y Name: &i z s Title: Schedule I City of Beaumont, Texas $20,640,000 General Obligation Refunding Bonds, Series 2004 Principal Amount Maturity Date Interest Rate Yield ($) (March 1) (%) (%) 220,000 2006 3.000 1.940 200,000 2007 3.000 2.130 1,000,000 2008 3.000 2.460 1,000,000 2008 5.000 2.460 2,455,000 2009 5.000 2.770 2,525,000 2010 5.000 3.030 1,790,000 2011 5.000 3.220 1,835,000 2012 5.000 3.390 1,875,000 2013 3.750 3.540 1,435,000 2014 3.650 3.650 300,000 2014 3.750 3.650 1,900,000 2015* 3.750 3.750 2,000,000 2016* 5.250 3.780 2,105,000 2017* 5.250 3.860 *Subject to redemption on March 1, 2014 at the option of the City. Section 9 No. BOND REGISTRAR, PAYING AGENCY AND TRANSFER AGENCY AGREEMENT THIS BOND REGISTRAR, PAYING AGENCY AND TRANSFER AGENCY AGREEMENT (the "Agreement"), dated as of this 1st day of November, 2004, by and between The City of Beaumont, Texas [a municipal corporation organized and operating under the Texas Constitution], (hereinafter, with any authorized successor, the "Issuer"), and Wells Fargo Bank, N.A., a national banking association organized and existing under the laws of the United States of America (hereinafter, with any authorized successor, the "Paying Agent"); WITNESSETH : WHEREAS, the Issuer is authorized to issue the $20,640,000 The City of Beaumont, Texas, General Obligation Refunding Bonds, Series 2004 (the "Bonds") in accordance with the Ordinance attached hereto as Exhibit "A" and incorporated herein for all purposes (the"Bond Order'); WHEREAS, the Issuer desires that the Bonds be issued in fully registered form with privileges of transfer and exchange as provided in the Bond Order to assure the exemption from federal income tax of interest thereon pursuant to Section 103 of the Internal Revenue Code of 1986, as amended, and is authorized by Chapter 1203, Texas Government Code Annotated, to issue the Bonds in such form and amount and to provide for the issuance of bonds upon transfer or replacement thereof or in exchange therefor at any place of payment as provided in the Bond Order; WHEREAS, the governing body of the Issuer has authorized the issuance of the Bonds subject to the terms of the Bond Order and, to provide for registration, payment, transfer, exchange, and replacement of the Bonds, the Issuer has authorized the execution and delivery of this Agreement; and WHEREAS, all things have been done which are necessary to make the Bonds, when registered by the Comptroller of Public Accounts of the State of Texas and delivered, the valid obligations of the Issuer and to constitute this Agreement a valid and binding contract in accordance with its terms: NOW, THEREFORE, for and in consideration of the premises and the mutual covenants herein contained, and subject to the conditions herein set forth, the Issuer and the Paying Agent agree as follows: ARTICLE ONE DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION SECTION 1.01. Definitions. For all purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires: A. The terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular. B. All references in this Agreement to "Articles," "Sections" and other subdivisions are to the designated Articles, Sections and other subdivisions of this Agreement as originally executed. C. The words "herein," "hereof' and "hereunder" and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section or other subdivision. 1 "Agreement" means this instrument as originally executed or as it may from time to time be supplemented, modified, or amended by one or more instruments supplemental hereto entered into pursuant to the applicable provisions hereof. "Board" means the governing body of the Issuer. "Board Action" means an official action adopted by the Board as certified by a duly authorized officer thereof. "Bond Order" has the meaning ascribed to such term in the preamble to this Agreement. "Bonds" has the meaning ascribed to such term in the preamble to this Agreement. "Holder" when used with respect to any Bond, means the Person in whose name such Bond is registered in the Bond Register. "Issuer" has the meaning ascribed to such term in the preamble to this Agreement. "Paying Agent" means Wells Fargo Bank, N. A. or any successor paying agent selected in accordance with this Agreement. "Person" means any entity, individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, or government or any governmental agency or political subdivision. "Redemption Date" when used with respect to any Bond to be redeemed means the date fixed for such redemption pursuant to the terms thereof and this Agreement. "Redemption Price" when used with respect to any Bond to be redeemed means the price at which it is to be redeemed pursuant to terms thereof, excluding installments of interest whose Stated Maturity is on or before the Redemption Date. SECTION 1.02. Notices. Any request, demand, authorization, direction, notice, consent, waiver, or other written communication provided or permitted by this Agreement or the Bond Order to be made upon, given or furnished to, or filed with A. the Issuer, shall be sufficient for every purpose hereunder if in writing and mailed, first- class postage prepaid, to the Issuer and received by it at 801 Main Street, Beaumont, Texas 77701 ATTENTION: City Manager, with a copy to be provided to Orgain, Bell & Tucker, L.L.P.; 470 Orleans Street; Beaumont, TX 77701; Attention: Lance Fox or at any other address previously furnished to the Paying Agent in writing by the Issuer Request, 2 B. the Paying Agent, shall be sufficient for every purpose hereunder if in writing and mailed, first-class postage prepaid (and properly referencing this Agreement or the Bonds) to and received by the Paying Agent 1000 Louisiana Street, Suite 640, MAC T5001-061, Houston, Texas 77002, Attention: Trust Department, or any other address previously furnished to the Issuer in writing by the Paying Agent. Where this Agreement provides for notice to Holders of Bonds of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to each Holder, at the address of such Holder as it appears in the bond register. In any case where notice to Holders is given by mail, neither the failure to mail such notice nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to all other Holders. Where this Agreement provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Paying Agent, but such filing is not a condition precedent to the validity of any action taken in reliance upon such waiver. SECTION 1.03. Effect of Headings. The Article and Section headings herein are for convenience only and do not affect the construction hereof. SECTION 1.04. Successors and Assigns. All covenants and agreements in this Agreement by the Issuer or the Paying Agent shall bind their respective successors and assigns. SECTION 1.05. Severability Clause. In case any provision of this Agreement, the Bond Order, or the Bonds or any application thereof shall be invalid, illegal, or unenforceable, the validity, legality, and enforceability of the remaining provisions and applications of this Agreement shall not in any way be affected or impaired thereby. SECTION 1.06. Benefits of Agreement. Nothing in this Agreement or in the Bonds, express or implied, shall give to any Person other than the parties hereto and their successors hereunder, any benefit or any legal or equitable right, remedy, or claim under this Agreement. SECTION 1.07. Governing Law. This Agreement shall be construed in accordance with and governed by the laws of the State of Texas. 3 ARTICLE TWO THE BONDS SECTION 2.01. Form Generally. The Bonds have the title and are in the denominations specified in the Bond Order. The aggregate principal amount of the Bonds which may be authenticated and delivered and outstanding under this Agreement is limited as provided in the Bond Order. SECTION 2.02. Execution, Authentication, Delivery, Dating, Registration, Replacement, Cancellation, Transfer, Exchange, Redemption and Payment of Bonds. The Bonds are to be executed, authenticated, delivered, dated, registered, replaced, cancelled, and subject to transfer, exchange and redemption as provided, and the principal and Redemption Price of and interest on the Bonds is payable to the Persons and in the manner provided, in the Bond Order. ARTICLE THREE RIGHTS AND OBLIGATIONS OF PAYING AGENT SECTION 3.01. Certain Duties and Responsibilities. A. The Paying Agent 1. undertakes to perform only such duties as are specifically set forth in this Agreement and in the Bond Order, and no implied covenants or obligations shall be read into this Agreement or the Bond Order against the Paying Agent, and 2. in the absence of bad faith on its part, may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Paying Agent and conforming to the requirements of this Agreement and the Bond Order, but in the case of any such certificates or opinions which by any provision of this Agreement or the Bond Order are specifically required to be furnished to the Paying Agent, shall be under a duty to examine the same to determine whether or not they conform to the requirements thereof. B. No provision of this Agreement shall be construed to relieve the Paying Agent from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that 1. this Subsection shall not be construed to limit the effect of Subsection A of this Section; and 2. the Paying Agent shall not be liable for any error of judgment made in good faith by any officer thereof, unless it shall be proved that the Paying Agent was negligent in ascertaining the pertinent facts. C. Whether or not therein expressly so provided, every provision of this Agreement relating to the conduct or affecting the liability of or affording protection to the Paying Agent shall be subject to the provisions of this Section. SECTION 3.02. Certain Rights of Paying Agent. Except as otherwise provided in Section 3.01 hereof: 4 A. the Paying Agent may rely and shall be protected in acting or refraining from acting upon any Order, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, coupon, or other paper or document reasonably believed by it to be genuine and to have been signed or presented by the proper party or parties; B. the Paying Agent may consult with legal counsel and the written advice of such counsel or any opinion of counsel shall be full and complete authorization and protection in respect of any action taken, suffered, or omitted by the Paying Agent hereunder in good faith and in reliance thereon; C. the Paying Agent shall not be bound to make any investigation into the facts of matters stated in any Order, certificate, statement, instruments, opinion, report, notice, request, direction, consent, order, bond, coupon, or other paper or document, but the Paying Agent, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Paying Agent shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records, and premises of the Issuer, personally or by agent or attorney; and D. the Paying Agent may execute any of the trusts or powers hereunder or perform any of the duties hereunder either directly or by or through agents or attorneys, and the Paying Agent shall not be responsible for any misconduct or negligence on the part of any agent employed or attorney retained with due care by it. SECTION 3.03. Not Responsible for Recitals. The recitals contained in the Bonds, except for the certificate of authentication on the Bonds, shall be taken as the statements of the Issuer, and the Paying Agent assumes no responsibility for their correctness. SECTION 3.04. May Hold Bonds. The Paying Agent, in its commercial banking or any other capacity, may become the owner or pledgee of Bonds and otherwise deal with the Issuer with the same rights it would have if it were not serving as Paying Agent. SECTION 3.05. Money Deposited with Paying Agent. Money deposited by the Issuer with the Paying Agent for payment of the principal (or Redemption Price, if applicable) of or interest on any Bonds shall be segregated from other funds of the Paying Agent and the Issuer and shall be held in trust for the benefit of the Holders of such Bonds. All money deposited with the Paying Agent hereunder shall be secured in the manner and to the fullest extent required by law for the security of funds of the Issuer. 5 Amounts held by the Paying Agent which represent principal of and interest on the Bonds remaining unclaimed by the owner after the expiration of three years from the date such amounts have become due and payable shall be reported and disposed of by the Paying Agent in accordance with the provisions of Texas law including, to the extent applicable, Title 6 of the Texas Property Code, as amended. The Paying Agent shall have no liability by virtue of actions taken in compliance with this provision. The Paying Agent is not obligated to pay interest on any money received by it hereunder. This Agreement relates solely to money deposited for the purposes described herein, and the parties agree that the Paying Agent may serve as depository for other funds of the Issuer, act as trustee under indentures authorizing other bond transactions of the Issuer, or act in any other capacity not in conflict with its duties hereunder. SECTION 3.06. Compensation and Reimbursement. The Issuer agrees: A. to pay to the Paying Agent from time to time reasonable compensation for all services rendered by it hereunder, which compensation shall be established initially for the Bonds in accordance with the schedule attached as Exhibit"B", which is made a part hereof for all purposes; B. except as otherwise expressly provided herein, to reimburse the Paying Agent upon its request for all reasonable expenses, disbursements, and advances incurred or made by the Paying Agent in accordance with any provisions of this Agreement (including expenses disbursements and advances of its counsel), except to the extent covered by the compensation established pursuant to Subsection A of this Section except any such expense, disbursement, or advance as may be attributable to the negligence or bad faith of the Paying Agent; and C. to and shall, to the full extent permitted by law, indemnify, defend and hold harmless the Paying Agent, together with its officers, directors, agents and employees, from and against any and all claims, losses, damages, causes of action, suits and liability of every kind, including all expenses of litigation, court costs and attorney's fees, incurred without negligence or bad faith on the part of the Paying Agent, arising out of or in connection with the administration or performance of its duties and obligations or the exercise or performance of any of its powers hereunder. SECTION 3.07. Resignation and Removal The Paying Agent may resign from its duties hereunder at any time by giving not less than 30 days' written notice to the Issuer; provided, however, that such resignation shall not become effective until a successor shall have accepted the duties of the Paying Agent hereunder by written instrument. The Paying Agent may be removed from its duties hereunder at any time with or without cause by Board Action designating a successor upon not less than 30 days' notice; provided, however, that no such removal shall become effective until such successor has accepted the duties of the Paying Agent hereunder by written instrument. Upon the effective date of such resignation or removal (or any earlier date designated by the Issuer in case of resignation) the Paying Agent shall, upon payment of all its fees, charges, and expenses then due, transfer and deliver to, or upon the order of, the Issuer all funds, records, and Bonds held by it (except any Bonds owned by the Paying Agent as Holder or pledgee), under this Agreement. If the Paying Agent resigns or is removed, the Issuer shall by Board Action promptly appoint and engage a successor to act in the place of the Paying Agent hereunder, which appointment shall be effective as of the 6 effective date of the resignation or removal of the Paying Agent. Such successor shall immediately give notice of its substitution hereunder in the name and at the expense of the Issuer to its predecessor and to the Holders, which notice shall include the name of the successor to the Paying Agent and the address of its principal office. SECTION 3.08. Merger, Conversion, Consolidation, or Succession. Any corporation into which the Paying Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion, or consolidation to which the Paying Agent shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of the Paying Agent shall be the successor of the Paying Agent hereunder without the execution or filing of any paper or any further act on the part of either of the parties hereto. In case any Bond shall have been registered, but not delivered, by the Paying Agent then in office, any successor by merger, conversion, or consolidation to such authenticating Paying Agent may adopt such registration and deliver the Bond so registered with the same effect as if such successor Paying Agent had itself registered such Bonds. SECTION 3.09. Paying Agent Not a Trustee. This Agreement shall not be construed to require the Paying Agent to enforce any remedy which any Holder may have against the Issuer during any default or event of default under any agreement between any Holder and the Issuer, including the Bond Order or to act as trustee for such Holder. SECTION 3.10. Paying Agent Not Responsible for Bonds. The Paying Agent shall not be accountable for the use of any Bonds or for the use or application of the proceeds thereof. SECTION 3.11. Paying Agent's Funds Not Used. No provision of this Agreement shall require the Paying Agent 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 of powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity satisfactory to it against such risks or liability is not assured to it. The Paying Agent shall in no event be liable to the Issuer, any Holder, or any other Person for any amount due on any Bond from its own funds. SECTION 3.12. Counterparts. This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. 7 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written. The City of Beaumont, Texas ("Issuer") Title: Mayor ATTEST: City Clerk (=;EAL' of WELLS FARGO BANK, N.A. 4 ("Paying Agent") � a� �® By: Name: Deirdre H. Ward Title: Trust Officer ATTEST: ®+ 44 rN --------- U so0 Faith 0''14 G F�re`i 'dent 4fi p 8 EXHIBIT "A" See the certified copy of the Bond Ordinance that is included under Tab of the Transcript of Documents. 9 Wells Fargo Bank Corporate Trust Services 1445 Ross Avenue, 2nd Floor 0' Dallas, Texas 75202 Tel: (214) 668.6450 Fax: (214)777-4086 SCHEDULE OF FEES $209640,000 City of Beaumont, Texas General Obligation Refunding Bonds, Series 2004 To act as PAYING AGENT & REGISTRAR Acceptance Fee: $0.00 Initial Fees as they relate to Wells Fargo Bank acting in the capacity of Paying Agent/Registrar — includes creation and examination of the Paying Agent/Registrar Agreement; acceptance of the appointment; setting up of Paying Agent/Registrar records and accounting records; and coordination of closing. Acceptance Fee payable at time of Paying Agent/Registrar Agreement execution. Annual Administration Fee: $500.00 For ordinary administration services by Paying Agent/Registrar—includes daily routine account management; investment transactions; cash transaction processing in accordance with the agreement; and mailing of trust account statements to all applicable parties.Float credit received by the bank for receiving funds that remain uninvested are deemed part of the Paying Agent's compensation. The Annual Administration fees are payable in advance,with the first installment due at closing. Out of Pocket Expenses: We only charge for out-of-pocket expenses in response to specific tasks assigned by the client. Therefore, we cannot anticipate what specific out-of-pocket items will be needed or what corresponding expenses will be incurred. Possible expenses would be, but are not limited to, express mail and messenger charges, travel expenses to attend closing or other meetings. There are no charges for indirect out-of-pocket expenses. This fee schedule is based upon the assumptions listed above which pertain to the responsibilities and risks involved in Wells Fargo undertaking the role of Paying Agent/Registrar. These assumptions are based on information provided to us as of the date of this fee schedule. Our fee schedule is subject to review and acceptance of the final documents. Should any of the assumptions, duties or responsibilities change, we reserve the right to affirm,modify or rescind our fee schedule. Submitted by: Sherri Owen-November 19,2004 Vice President/Business Development Wells Fargo Bank (214)668-6450 p#29769 Section 10 No. 10 SIGNATURE IDENTIFICATION AND NO-LITIGATION CERTIFICATE THE STATE OF TEXAS § COUNTY OF JEFFERSON § THE CITY OF BEAUMONT § We, the undersigned officers of THE CITY OF BEAUMONT, TEXAS (the "City"), in connection with the issuance and delivery of the following described refunding bonds (the 'Bonds"): THE CITY OF BEAUMONT, TEXAS, GENERAL OBLIGATION REFUNDING BONDS, SERIES 2004, dated November 1, 2004, aggregating $20,640,000, and maturing serially on March 1 in each of the years 2006 through 2017, inclusive, do hereby certify, as of the date set forth below, the following: 1. We officially executed and signed the Bonds by manually signing or causing facsimiles of our manual signatures to be imprinted or lithographed on each of the Bonds, and we hereby adopt such facsimile signatures as our own, respectively, and declare that such facsimile signatures constitute our signatures the same as if we have manually signed each of the Bonds. 2. The Bonds are substantially in the form, and have been duly executed and signed in the manner, prescribed in the ordinance authorizing the issuance of such Bonds. 3. At the time we so executed and signed the Bonds we were, and at the time of executing this certificate we are, the duly chosen, qualified and acting officers authorized to execute the Bonds and execute and deliver this certificate, and we hold the offices set forth below opposite our signatures. 4. No litigation of any nature has been filed or is now pending or threatened, which contests or attacks the validity of the Bonds; which would restrain or enjoin the issuance or delivery of the Bonds; which would restrain or enjoin the levy and/or collection and/or pledge of revenue or funds from which the Bonds are payable, or which would in any other manner affect the provisions made for their payment or security; or which in any manner questions the proceedings or authority concerning the issuance of the Bonds. 5. Neither the corporate existence nor the boundaries of the City are being contested; no litigation has been filed or is now pending which would affect the authority of the officers of the City to issue, execute, and deliver the Bonds or would affect the title of the undersigned to their respective offices; and no authority or proceedings for the issuance, execution or delivery of the Bonds have been repealed, rescinded or revoked. 6. No additional certificates, warrants or other indebtedness have been issued by the City since the date of the City's General Certificate submitted to the Attorney General of the State of Texas in connection with his approval of the Bonds. 7. The seal which has been impressed, or placed in facsimile, upon each of the Bonds is the legally adopted, proper and only official seal of the City, and such official seal is impressed on this certificate. 8. The information contained in the General Certificate dated November 2, 2004, is still true and correct. SIGNED AND SEALED as of e = embgj' Z , 2004. Signatures Title of Office MAYOR, THE CITY OF n • BEAUMONT, TEXAS CITY CLERK, THE CITY OF BEAUMONT, TEXAS (SEAL) l -2- THE STATE OF TEXAS § COUNTY OF JEFFERSON § BEFORE ME, the undersigned Notary Public, on this day personally appeared Evelyn Lord and Rose ,Ann Jones, known to me to be the persons whose names are subscribed to the attached and foregoing instrument, and who executed such instrument in my presence, and who acknowledged to me that such instrument was executed by them for the purposes and in the capacities stated therein. WITNESS MY HAND AND SEAL OF OFFICE this day of November, 2004. NOTARY PUBLIC, STATE OF TEXAS (SEAL) � LANCE FO X NOTARY PUBLIC STATE OF TEXAS M Comm.Expires 10-22.2005 Y —3— Section 11 ATTORNEY GENERAL OF TEXAS GREG ABBOTT December 1, 2004 THIS IS TO CERTIFY that The City of Beaumont,Texas (the "Issuer")has submitted to me The City of Beaumont, Texas, General Obligation Refunding Bonds,Series 2004(the"Bonds"),in the aggregate principal amount of$20,640,000 for approval. The Bonds are dated November 1,2004,numbered R-1 through R-14, and were authorized by an Ordinance of the Issuer passed on November 2, 2004. I have examined the law and such certified proceedings and other papers as I deem necessary to render this opinion. As to questions of fact material to my opinion, I have relied upon representations of the Issuer contained in the certified proceedings and other certifications of public officials furnished to me without undertaking to verify the same by independent investigation. I express no opinion relating to any official statement or any 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: (1) The Bonds have been issued in accordance with law and are valid and binding obligations of the Issuer. (2) In accordance with the provisions of the law,including an Escrow Agreement dated as of November 1, 2004, firm banking arrangements have been made for the discharge and final payment or redemption of the obligations being refunded upon deposit of an amount sufficient to pay said obligations when due. (3) The Bonds are payable from the proceeds of an ad valorem tax levied, within the limits prescribed by law, on all taxable property within the Issuer. Therefore, the Bonds are approved. POST OFFicE Boa 12548, AUSTIN, TEXAS 78711-2548 TEL:(512)463-2100 wWW.0Ac.STA'I1;.'rs.US An Equal Employment Oppor/naity Employer • Priated on Retyeled Paper .The City of Beaumont, Texas, General Obligation Refunding Bonds, Series 2004 - $20,640,000 -Page 2- The Comptroller is instructed that she may register the Bonds without the cancellation of the underlying securities being refunded thereby. CA mey eral of the State of Texas No.42640 Book No.2004-D JCK OFFICE OF COMPTROLLER OF THE STATE OF TEXAS I, Melissa Mora, 11 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 1 st day of December, 2004, 1 signed the name of the Comptroller to the certificate of registration endorsed upon the: The City of Beaumont. Texas, General Obligation Refunding Bonds Series 2004, numbered R-1/R-14, date vember 1 2004, and that in signing the certificate of registration I used the following signat re: IN REOF I have executed is c ate this the 1 st day of December. 2004. I, Carole Keeton Strayhorn, 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 Chapter 403, Subchapter H, Government Code, with authority to sign my name to all certificates of registration, and/or cancellation of bonds required by law to be registered and/or cancelled by me, and was acting as such on the date first mentioned in this certificate, and that the bonds/certificates described in this certificate have been duly registered in the office of the Comptroller, under Registration Number 69272. GIVEN under my hand and seal of office at Austin, Texas, this the 1 st day of December. 2004. CAROLE KEETON STRAYHORN Comptroller of Public Accounts of the State of Texas OFFICE OF COMPTROLLER OF THE STATE OF TEXAS I, CAROLE KEETON STRAYHORN, Comptroller of Public Accounts of the State of Texas, do hereby certify that the attachment is a true and correct copy of the opinion of the Attorney General approving the: The City of Beaumont. Texas General Obligation Refunding Bonds Series 2004 numbered R-1/R-14, of the denomination of $ various, dated November 1, 2004, as authorized by issuer, interest various percent, under and by authority of which said bonds/certificates were registered electronically in the office of the Comptroller, on the 1 st day of December. 2004 under Registration Number 69272. Given under my hand and seal of office, at Austin, Texas, the 1st day of December, 2004. CAROLE KEETON STRAYHORN Comptroller of Public Accounts of the State of Texas (c) Except for Bond Numbers R-1 through R-14, the following form of authentication certificate shall be printed on each of the Bonds: AUTHENTICATION CERTIFICATE This bond is one of the bonds described in and delivered pursuant to the within-mentioned Ordinance. Wells Fargo Bank,National Association, Registrar By Authorized Signature Date of Authentication: (d) The following form of assignment shall be printed on each of the Bonds: ASSIGNMENT For value received, the undersigned hereby sells, assigns, and transfers unto the within bond 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 NOTICE: Signature must be owner as shown on the face guaranteed by a member firm of this Bond in every of the New York Stock Exchange particular,without any or a commercial bank or trust alteration, enlargement or company. change whatsoever. -13- (e) The following statement of insurance shall be printed on each of the Bonds: STATEMENT OF INSURANCE Financial Security Assurance Inc. ("Financial Security"), New York, New York, has delivered its municipal bond insurance policy with respect to the scheduled payments due of principal of and interest on this Bond to Wells Fargo Bank, N.A., Houston, Texas, or its successor, as paying agent for the Bonds (the "Paying Agent"). Said Policy is on file and available for inspection at the principal office of the Paying Agent and a copy thereof may be obtained from Financial Security or the Paying Agent. 16. Legal Opinions; CUSIP. The approving opinion of Orgain, Bell & Tucker, L.L.P., Beaumont,Texas, Bond Counsel, and CUSIP Numbers may be printed on the Bonds, but errors or omissions in the printing of such opinions or such numbers shall have no effect on the validity of the Bonds. 17. Interest and Sinking Fund; Levy, Assessment and Collection of Taxes. There is hereby established a separate fund of the City to be known as the "Series 2004 General Obligation Refunding Bonds 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, there is hereby levied and there shall be annually assessed and collected in due time, form and manner, and at the same time other City taxes are assessed, levied and collected, in each year, beginning with the current year, a continuing direct annual ad valorem tax upon all taxable property in said City sufficient to pay the current interest on said Bonds as the same becomes due, and to create and provide a sinking fund of not less than two percent (2%) of the original principal amount of the Bonds or of not less than the amount required to pay each installment of the principal of said Bonds as the same matures, whichever is greater, full allowance being made for delinquencies and costs of collection, and said taxes when collected shall be applied to the payment of the interest on and principal of said Bonds and to no other purpose. In addition, interest accrued from the date of the Bonds until their delivery and premium, if any, is to be deposited in such fund. To pay the interest coming due on the Bonds on March 1, 2005, and the interest coming due on September 1, 2005, there is hereby appropriated from current funds on hand, which are certified to be on hand and available for such purpose, an amount sufficient to pay such interest, and such amount shall be used for no other purpose. 18. Further Proceedings. After the Bonds to be initially issued shall have been executed, it shall be the duty of the Mayor 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 by the Attorney General. 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 initially issued, the -14- Comptroller of Public Accounts (or a deputy lawfully designated in writing to act for the Comptroller) shall manually sign the Comptroller's Registration Certificate prescribed herein to be printed and endorsed on the Bonds to be initially issued, and the seal of said Comptroller shall be impressed, or placed in facsimile, thereon. 19. Sale of Bonds and Bond Insurance. The Bonds are hereby sold and shall be delivered to the Underwriters at a price of$22,012,597.50, representing the principal amount of Bonds of$20,640,000.00, plus accrued interest of$81,250.35, plus a premium of$1,410,027.15, and less an underwriter's discount of$118,680.00, in accordance with the terms of the Purchase Contract 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 do any and all things necessary or desirable to satisfy the conditions set out herein and to provide for the issuance and delivery of the Bonds. The purchase of and payment of the premium for the Municipal Bond Guaranty Insurance Policy in accordance with the terms of the commitment for such insurance presented to the City Council are hereby approved and authorized. All officials and representatives of the City are authorized and directed to execute such documents and to do any and all things necessary, desirable or appropriate to obtain the Municipal Bond Guaranty Insurance Policy, and the printing on the Bonds covered by the Municipal Bond Guaranty Insurance Policy of an appropriate legend regarding such insurance is hereby approved and authorized. 20. Tax Exemption. The City intends that the interest on the Bonds shall be excludable from gross income of the owners thereof for federal income tax purposes pursuant to Sections 103 and 141 through 150 of the Internal Revenue Code of 1986, as amended, (the "Code") and all applicable temporary, proposed and final regulations (the "Regulations") and procedures promulgated thereunder and applicable to the Bonds. For this purpose, the City covenants that it will monitor and control the receipt, investment, expenditure and use of all gross proceeds of the Bonds and take or omit to take such other and further actions as may be required by Sections 103 and 141 through 150 of the Code and the Regulations to cause the interest on the Bonds to be and remain excludable from the gross income, as defined in Section 61 of the Code, of the owners of the Bonds for federal income tax purposes. Without limiting the generality of the foregoing, the City shall comply with each of the following covenants: (a) The City will use all of the proceeds of the Bonds to (i) acquire non- callable obligations of the United States of America(the "Escrowed Securities") sufficient to pay the principal of, premium, if any, and interest on the Refunded Obligations and (ii)to pay the costs of issuing the Bonds except for amounts, if any, described in the Report (as defined in the Escrow Agreement) as the rounding amount and the ending cash balance in the Escrow Fund (as defined in the Escrow Agreement). (b) The City will not directly or indirectly take any action or omit to take any action, which action or omission would cause the Bonds or the Refunded Obligations to constitute"private activity bonds"within the meaning of Section 141(a) of the Code. -15- (c) Principal of and interest on the Bonds will be paid solely from ad valorem taxes collected by the City, investment earnings on such collections, and as available, proceeds of the Bonds. (d) 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 and the Refunded Obligations (to the extent any of such proceeds remain unexpended) will not be used in a manner that would cause the Bonds or the Refunded Obligations or any portion thereof to be "arbitrage bonds" within the meaning of Section 148 of the Code. (e) At all times while the Bonds are outstanding, the City will identify and properly account for all amounts constituting gross proceeds of the Bonds in accordance with the Regulations. The City will monitor the yield on the investments of the proceeds of the Bonds and, to the extent required by the Code and the Regulations, will restrict the yield on such investments to a yield which is not materially higher than the yield on the Bonds. To the extent necessary to prevent the Bonds from constituting "arbitrage bonds," the City will make such payments as are necessary to cause the yield on all yield-restricted nonpurpose investments allocable to the Bonds to be less than the yield that is materially higher than the yield on the Bonds. (f) The City will not take any action or knowingly omit to take any action, if taken or omitted, would cause the Bonds to be treated as "federally guaranteed" obligations for purposes of Section 149(b) of the Code. (g) The City represents that not more than fifty percent (50%) of the proceeds of any new money portion of the Bonds or any new money issue refunded by, the Refunded Obligations was invested in nonpurpose investments (as defined in Section 148(f)(b)(A) of the Code) having a substantially guaranteed yield for four years or more within the meaning of Section 149(g)(3)(A)(ii) of the Code, and the City reasonably expected at the time each issue of the Refunded Obligations was issued that at least eighty-five percent (85%) of the spendable proceeds of the Bonds or the Refunded Obligations would be used to carry out the governmental purpose of such Bonds within the corresponding three-year period beginning on the respective dates of the Bonds or the Refunded Obligations. (h) The City will take all necessary steps to comply with the requirement that certain amounts earned by the City on the investment of the gross proceeds of the Bonds, if any, be rebated to the federal government. Specifically, the City will (i)maintain records regarding the receipt, investment and expenditure of the gross proceeds of the Bonds as may be required to calculate such excess arbitrage profits separately from records of amounts on deposit in the funds and accounts of the City allocable to other obligations of the City or moneys which do not represent gross proceeds of any obligations of the City and retain such records for at least six years after the day on which the last outstanding Bond is discharged, (ii) account for all gross proceeds under a reasonable, consistently applied method of accounting, not employed as an -1b- artifice or device to avoid, in whole or in part, the requirements of Section 148 of the Code, including any specified method of accounting required by applicable Regulations to be used for all or a portion of the gross proceeds, (iii) calculate, at such times as are required by applicable Regulations, the amount of excess arbitrage profits, if any, earned from the investment of the gross proceeds of the Bonds and (iv)timely pay, as required by applicable Regulations, all amounts required to be rebated to the federal government. In addition, the City will exercise reasonable diligence to assure that no errors are made in the calculations required by the preceding sentence and, if such an error is made, to discover and promptly correct such error within a reasonable amount of time thereafter, including payment to the federal government of any delinquent amounts owed to it, including interest thereon and penalty. (i) The City will not indirectly pay any amount otherwise payable to the federal government pursuant to the foregoing requirements to any person other than the federal government by entering into any investment arrangement with respect to the gross proceeds of the Bonds that might result in a reduction in the amount required to be paid to the federal government because such arrangement results in smaller profit or a larger loss than would have resulted if such arrangement had been at arm's length and had the yield on the issue not been relevant to either party. (j) The City will timely file or cause to be filed with the Secretary of the Treasury of the United States the information required by Section 149(e) of the Code with respect to the Bonds on such form and in such place as the Secretary may prescribe. (k) The City will not issue or use the Bonds as part of an "abusive arbitrage device" (as defined in Section 1.148-10(a) of the Regulations). Without limiting the foregoing, the Bonds are not and will not be a part of a transaction or series of transactions that attempts to circumvent the provisions of Section 148 of the Code and the Regulations, by (i) enabling the City to exploit the difference between tax-exempt and taxable interest rates to gain a material financial advantage, or (ii) increasing the burden on the market for tax-exempt obligations. (1) Proper officers of the City charged with the responsibility for issuing the Bonds are hereby directed to make, execute and deliver certifications as to facts, estimates or circumstances in existence as of the Issue Date and stating whether there are facts, estimates or circumstances that would materially change the City's expectations. On or after the Issue Date, the City will take such actions as are necessary and appropriate to assure the continuous accuracy of the representations contained in such certificates. (m) The covenants and representations made or required by this Section are for the benefit of the Bond holders and any subsequent Bond holder, and may be relied upon by the Bondholder and any subsequent Bondholder and bond counsel to the City. (n) In complying with the foregoing covenants, the City may rely upon an unqualified opinion issued to the City by nationally recognized bond counsel that any action by -17- the City or reliance upon any interpretation of the Code or Regulations contained in such opinion will not cause interest on the Bonds to be includable in gross income for federal income tax purposes under existing law. (o) Notwithstanding any other provision of this Ordinance, the City's representations and obligations under the covenants and provisions of this Section shall survive the defeasance and discharge of the Bonds for as long as such matters are relevant to the exclusion of interest on the Bonds from the gross income of the owners for federal income tax purposes. Section 21. Application of Proceeds. The proceeds from the sale of the Bonds in the amount of$22,012,597.50, together with the transfer of the sum of$367,000 from the debt service fund for the Refunded Obligations, shall,promptly upon receipt by the City,be applied as follows: (a) Accrued interest in the amount of$81,250.35 shall be deposited into the Interest and Sinking Fund for the Bonds; (b) To establish the escrow fund to refund the Refunded Obligations as provided in Section 24 below, $22,109,645.58 from the sale of the Bonds shall be deposited with the Escrow Agent pursuant to Section 24 below. (c) $186,216.37 from the sale of the Bonds shall be used to pay the costs of issuing the Bonds, including the premium of$68,216.37 for the Municipal Bond Guaranty Insurance Policy, not later than 90 days after such issuance; and (d) The sum of $2,485.20 from the sale of the Bonds shall be used as a rounding amount and shall be deposited in the Interest and Sinking Fund for the Bonds; and (e) Any proceeds from the Bonds remaining after making all such deposits and payments shall be deposited into the Interest and Sinking Fund. 22. Transfer of Money in Interest and Sinking Funds Maintained for the Refunded Obligations. On the date of delivery of the Bonds, the sum of$367,000.00 contained in the Interest and Sinking Funds for the Refunded Obligations shall be transferred to the Paying Agent and shall be applied as herein provided. 23. Redemption of Refunded Obligations. The City hereby irrevocably calls the following bonds of the City for redemption on the date set forth below, and authorizes and directs notice of such redemption to be given in such form and in such manner as the Mayor, City Manager, City Clerk or any other official of the City may approve: -18- Obligations To Be Redeemed Redemption Date A portion of The City of Beaumont, Texas, Combination Tax&Revenue Certificates of Obligation, Series 1998 Maturities 2008 through 2017, in the principal amounts of$40,000, $500,000, $500,000, $500,000, 500,000, $500,000, $360,000, $1,900,000, $2,005,000, and$2,110,000,respectively March 1,2008 A portion of the City of Beaumont, Texas, Refunding Bonds, Series 1996, Maturities 2008 through 2010, in the principal amounts of$790,000, $780,000 and $785,000,respectively March 1,2007 A portion of the City of Beaumont, Texas Combination Tax&Revenue Certificates of Obligation, Series 1996, Maturities 2008 through 2014 in the principal amounts of$590,000, $610,000, $680,000, $725,000, $775,000, $825,000 and $850,000,respectively March 1,2007 The City of Beaumont, Texas, Combination Tax& Revenue Certificates of Obligation, Series 1995, Maturities 2006 through 2014 in the principal amounts of $500,000, $500,000, $500,000, $500,000, $500,000, $500,000, $500,000, $500,000 and$500,000,respectively March 1, 2005 24. Escrow Agreement. The discharge and defeasance of the Refunded Obligations shall be effectuated pursuant to the terms and provisions of an Escrow Agreement to be entered into by and between the City and JPMorgan Chase Bank, Dallas, 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 which has been designed for the City by RBC Dain Rauscher Inc., and which shall be certified as to mathematical accuracy by Grant Thornton, L.L.P., in the Report, (b) to maximize the City's present value savings and minimize the City's costs of refunding, (c)to comply with all applicable laws and regulations relating to the refunding of the Refunded Obligations and (d) to carry out the other intents and purposes of this Ordinance, and the Mayor is hereby authorized to execute and deliver the 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. -19- 25. Source of Funds Used in Refunding. No money of the City other than proceeds of the Bonds and other than the sum of $367,000.00 from the Interest and Sinking Fund for the Refunded Obligations shall be used to refund the Refunded Obligations. 26. Purchase of Escrowed Securities. To assure the purchase of the Escrowed Securities as described in the Report and in the Escrow Agreement, the Mayor, the City's Finance Officer, and the Escrow Agent are hereby authorized to subscribe for, agree to purchase, and purchase such Escrowed Securities 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. 27. 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 Chapter 551 of the Texas Government Code Annotated,Vernon's 1994, as amended. 28. Official Statement. The Preliminary Official Statement and the Official Statement prepared in the initial offering and sale of the Bonds have been and are hereby authorized, approved and ratified as to form and content. The use of the Preliminary Official Statement and the Official Statement in the reoffering of the Bonds by the Underwriters is hereby approved, authorized and ratified. The proper officials of the City are hereby authorized to execute and deliver a certificate pertaining to the Preliminary Official Statement and the Official Statement as prescribed therein, dated as of the date of payment for and delivery of the Bonds. 29. Registrar. The Registrar, by undertaking the performance of the duties of the Registrar and in consideration of the payment of fees or deposits of money pursuant to this Ordinance and a Paying Agent/Registrar's Agreement, accepts and agrees to abide by the terms of this Ordinance and such Agreement. The City hereby approves the form of the Paying Agent/Registrar's Agreement presented to the City Council and hereby authorizes the Mayor or any other official of the City to execute such agreement on behalf of the City, with such changes and revisions thereto as may be approved by the official executing such agreement. The City covenants that at all times while any Bonds are outstanding, it will provide a bank, trust company, financial institution or other entity duly qualified and authorized to act as Registrar for the Bonds. The City reserves the right to replace the Registrar or its successor at any time on not less than sixty (60) days' written notice to the Registrar, so long as any such notice is effective not less than sixty (60) days prior to the next succeeding principal or interest payment date on the Bonds. If the Registrar is replaced by the City, the new Registrar shall accept the previous Registrar's records and act in the same capacity as the previous 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. Any successor Registrar shall be either a national or state banking institution and a corporation or association organized and doing business under the laws of the -20- United States of America or any State authorized under such laws to exercise trust powers and subject to supervision or examination by Federal or State authority. Each Registrar hereunder, by acting in that capacity, shall be deemed to have agreed to the provisions of this Section. 30. Related Matters. To satisfy in a timely manner all of the City's obligations under this Ordinance, the Mayor, the Mayor Pro Tem, the City Manager, the City Clerk, or 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 issuance of the Bonds, including, without limitation, executing and delivering on behalf of the City all certificates, consents, receipts, requests and other documents as may be reasonably necessary to satisfy the City's obligations under this Ordinance and to direct the application of funds of the City consistent with the provisions hereof. 31. No Personal Liability. No recourse shall be had for payment of the principal of or premium, if any, 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. Severability. If any Section, paragraph, clause or provision of this Ordinance shall for any reason be held to be invalid or unenforceable, the invalidity or unenforceability of such Section, paragraph, clause or provision shall not affect any of the remaining provisions of this Ordinance. 33. Repealer. All orders, resolutions, and ordinances, and parts thereof inconsistent herewith are hereby repealed to the extent of such inconsistency. 34. Additional Obligations. The City undertakes and agrees for the benefit of the holders of the Bonds to provide directly, on or before six months after the end of the City's fiscal year,which fiscal year presently ends on September 30: a. to each nationally recognized municipal securities information repository and to the appropriate state information depository, if any, annual financial information (which may be unaudited) and operating data regarding the City for fiscal years ending on or after January 1, 2004 which annual financial information and operating data shall be of the type included in the following listed sections contained in the Final Official Statement: SELECTED FINANCIAL INFORMATION CITY TAX DEBT(except for"Estimated Overlapping Debt") TAX DATA SELECTED FINANCIAL DATA -21- INVESTMENT AUTHORITY AND INVESTMENT OBJECTIVES OF THE CITY-Current Investments Appendix B b. to each nationally recognized municipal securities information repository and to the appropriate state information depository, if any, audited financial statements for the City for fiscal years ending on or after January 1, 2004, when available, if the City commissions an audit and it is completed by the required time; provided that if audited statements are not commissioned or are not available by the required time, the City will provide unaudited statements when and if they become available; C. in a timely manner, to each nationally recognized municipal securities information repository or to the Municipal Securities Rulemaking Board, and to the appropriate state information depository, if any, notice of any of the following events with respect to the Bonds, if material within the meaning of the federal securities laws to a decision to purchase or sell Bonds: i. Principal and interest payment delinquencies; ii. Non-payment related defaults; iii. Unscheduled draws on debt service reserves reflecting financial difficulties; iv. Unscheduled draws on credit enhancements reflecting financial difficulties; V. Substitution of credit or liquidity providers, or their failure to perform; vi. Adverse tax opinions or events affecting the tax-exempt status of the Bonds; vii. Modifications to rights of Bondholders; viii. Bond calls; ix. Defeasances; X. Release, substitution or sale of property securing repayment of the securities; xi. Rating changes; and d. in a timely manner, to each nationally recognized municipal securities information repository or to the Municipal Securities Rulemaking Board, and to the appropriate state information depository, if any, notice of a failure of the City to provide required annual financial information and operating data, on or before six months after the end of the City's fiscal year. These undertakings and agreements are subject to appropriation of necessary funds and to -22- applicable legal restrictions, if any. The accounting principles pursuant to which the City's financial statements are currently prepared are generally accepted accounting principles set out by the Government Accounting Standards Board, and, subject to changes in applicable law or regulation, such principles will be applied in the future. If the City changes its fiscal year, it will notify each nationally recognized municipal securities information repository and the appropriate state information depository of the change (and of the new fiscal year end) prior to the next date by which the City otherwise would be required to provide annual financial information. The City's obligation to update information and to provide notices of material events shall be limited to the agreements herein. The City shall not be obligated to provide other information that may be relevant or material to a complete presentation of its financial results of operations, condition,prospects and shall not be obligated to update any information that is provided, except as described herein. The City makes no representation or warranty concerning such information or concerning its usefulness to a decision to invest in or sell Bonds at any future date. THE CITY DISCLAIMS ANY CONTRACTUAL OR TORT LIABILITY FOR DAMAGES RESULTING IN WHOLE OR IN PART FROM ANY BREACH, WHETHER NEGLIGENT OR WITHOUT FAULT ON ITS PART, OF ITS CONTINUING DISCLOSURE AGREEMENT OR FROM ANY STATEMENT MADE PURSUANT TO ITS AGREEMENT. HOLDERS OR BENEFICIAL OWNERS OF BONDS MAY SEEK AS THEIR SOLE REMEDY A WRIT OF MANDAMUS TO COMPEL THE CITY TO COMPLY WITH ITS AGREEMENT. No default by the City with respect to its continuing disclosure agreement shall constitute a breach of or default under this Ordinance for purposes of any other provision of this Ordinance. Nothing in this paragraph is intended or shall act to disclaim, waive, or otherwise limit the duties of the City under federal and state securities laws. The City may amend its continuing disclosure obligations and agreement in this Section 34 to adapt to changed circumstances that arise from a change in legal requirements, a change in law, or a change in the identity, nature, status or type of operations of the City, if the agreement, as amended, would have permitted the Underwriters to purchase or sell the Bonds in compliance with SEC Rule 15c2-12, taking into account any amendments or interpretations of such rule to the date of such amendment, as well as such changed circumstances, and either the holders of a majority in aggregate principal amount of the outstanding Bonds consent or any person unaffiliated with the City (such as nationally recognized bond counsel) determines the amendment will not materially impair the interests of the holders and beneficial owners of the Bonds. The City may also amend or repeal the obligations and agreement in this Section 34 if the SEC amends or repeals the applicable provisions of Rule 15c2-12 or a court of final jurisdiction determines that such provisions are invalid, and the City may amend the agreement in its discretion in any other circumstance or manner, but in either case only to the extent that its right to do so would not prevent the Underwriters from lawfully purchasing or reselling the Bonds in the primary offering of the Bonds -23- in compliance with Rule 15c2-12. If the City amends its agreement, it must include with the next financial information and operating data provided in accordance with its agreement an explanation, in narrative form, of the reasons for the amendment and of the impact of any change in the type of information and operating data so provided. The City's continuing obligation to provide annual financial information and operating data and notices of events will terminate if and when the City no longer remains an "obligated person" (as such term is defined in SEC Rule 15c2-12)with respect to the Bonds. [The remainder of this page has intentionally been left blank. Signature page follows.] -24- PASSED AND APPROVED this 2nd day of November, 2004. Mayor THE CITY OF BEAUMONT, TEXAS ATTEST: City Clerk THE CITY OF BEAUMONT,TEXAS (CITY SEAL) w ' ul . 6 tp -25- Section 5 No. 5 ESCROW AGREEMENT THIS ESCROW AGREEMENT (the "Escrow Agreement") dated for convenience November 1, 2004,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 (the "City"), and JPMorgan Chase Bank, a New York banking corporation having a principal corporate trust office in Dallas, Texas, as escrow agent(together with any successor or assign in such capacity,the "Escrow Agent"). WHEREAS, the City has heretofore issued and there remains outstanding the City's Combination Tax & Revenue Certificates of Obligation, Series 1998, the City's Refunding Bonds, Series 1996, the City's Combination Tax & Revenue Certificates of Obligation, Series 1996, and the City's Combination Tax & Revenue Certificates of Obligation, Series 1995 (the "Refunded Obligations"), and the City desires to provide for the refunding of a portion of certain maturities of the Refunded Obligations; and WHEREAS, Chapter 1207, Texas Government Code, as amended (formerly Article 717k, Vernon's Annotated Texas Civil Statutes, as amended), authorizes and empowers the City to issue, sell and deliver refunding bonds and to deposit the proceeds of such bonds, together with other available funds or resources, with any place of payment for the Refunded Obligations in an amount which is sufficient to provide for the payment or redemption of the principal of and interest on the Refunded Obligations; and WHEREAS, the City Council of the City has adopted an ordinance authorizing the issuance of the City's General Obligation Refunding Bonds, Series 2004, in the aggregate principal amount of$20,640,000 (the "Refunding Bonds"), for the purpose, among other things, of providing the funds necessary to pay and refund the Refunded Obligations, thereby providing a net present value 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 payment of the Refunded Obligations; and WHEREAS, the City Council of the City has further determined to effectuate the refunding of the Refunded Obligations 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 financial arrangements for the discharge and final payment or redemption of the Refunded Obligations; NOW, THEREFORE, in consideration of the mutual undertakings, promises and agreements herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and in ordinance to secure the full and timely payment of the principal of and the interest on the Refunded Obligations, the City and the Escrow Agent contract and agree as follows: ARTICLE I DEFINITIONS AND INTERPRETATIONS 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: "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 JPMorgan Chase Bank, 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 Restricted Acquired Obligations and the Other Acquired Obligations purchased with the funds deposited into the Escrow Fund, all as more fully described in the Report. "Paying Agents for the Refunded Obligations" shall mean J.P.Morgan Trust Company with respect to the City's Combination Tax & Revenue Certificates of Obligation, Series 1998, the Ciy's Refunding Bonds, Series 1996, and the City's Combination Tax & Revenue Certificates of Obligation, Series 1996, and any successors thereto, and shall mean The Bank of New York Trust Company,N.A.,with respect to the City's Combination Tax&Revenue Certificates of Obligation, Series 1995. "Refunded Obligation Ordinances" shall mean the City's ordinances authorizing the issuance, sale and delivery of the Refunded Obligations. "Refunded Obligations" shall mean: (a) a portion of the City's Combination Tax & Revenue Certificates of Obligation, Series 1998, maturing on March 1 in the years 2008 through 2017 in the principal amounts of $40,000, $500,000, $500,000, $500,000, 500,000, $500,000, 360,000, $1,900,000, $2,005,000, and $2,110,000, respectively; (b) a portion of the City's Refunding Bonds, Series 1996, maturing on March 1 in the years 2008 through 2010 in the -2- principal amounts of $790,000, $780,000 and $785,000, respectively; (c) a portion of the City's Combination Tax & Revenue Certificates of Obligation, Series 1996, maturing on March 1 in the years 2008 through 2014 in the principal amounts of $590,000, $610,000, $680,000, $725,000, $775,000, $825,000 and $850,000, respectively; and (d) the City's Combination Tax & Revenue Certificates of Obligation, Series 1995,maturing on March 1 in the years 2006 through 2014 in the principal amounts of $500,000, $500,000, $500,000, $500,000, $500,000, $500,000, $500,000, $500,000 and $500,000,respectively. "Refunding Bonds" shall mean the City's General Obligation Refunding Bonds, Series 2004, dated November 1, 2004, in the outstanding aggregate principal amount of$20,640,000. "Refunding Bond Ordinance" shall mean the City's Ordinance adopted November 2, 2004, authorizing the issuance, sale and delivery of the Refunding Bonds. "Report" shall mean the verification report prepared by Grant Thornton LLP, relating to the refunding of the Refunded Obligations, a copy of which is attached hereto as Exhibit"A". "Restricted Acquired Obligations" shall mean the United States Treasury Notes and STRIPS, initially purchased with the proceeds of the Bonds, and United States Treasury Securities - State and Local Government Series at 0%Interest Rate("SLGS"), all as more fully described in the Report. 1.02 Interpretations. The titles and headings of the articles and sections of this Escrow Agreement have been inserted for convenience of reference only and are not to be considered a part hereof and shall not in any way modify or restrict the terms hereof. This Escrow Agreement and all of the terms and provisions hereof shall be liberally construed to effectuate the purposes set forth herein and to achieve the intended purpose of providing for the refunding of the Refunded Obligations in accordance with applicable law. ARTICLE II DEPOSIT OF FUNDS AND ESCROWED SECURITIES 2.01 Deposits with Escrow Agent; Acquisition of Escrowed Securities. On the Escrow Funding Date, the City will deposit, or cause to be deposited, with the Escrow Agent the following: (a) Restricted Acquired Obligations in the principal price of$22,109,644.00,purchased with a portion of the proceeds of the Refunding Bonds; and (b) A beginning cash balance of$1.58. -3- ARTICLE III CREATION AND OPERATION OF ESCROW FUND 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 "City of Beaumont, Texas, General Obligation Refunding Bonds, Series 2004 Escrow Fund", into which will be deposited the cash and Escrowed Securities described in Section 2.01. The Escrowed Securities, all proceeds therefrom and all cash balances from time to time on deposit in the Escrow Fund shall be the property of the Escrow Fund, and shall be applied only in strict conformity with the terms and conditions hereof. The Escrowed Securities, all proceeds therefrom and all cash balances from time to time on deposit in the Escrow Fund are hereby irrevocably pledged to the payment of the principal of and interest on the Refunded Obligations, which payment shall be made by timely transfers to the Paying Agent for the Refunded Obligations of such amounts at such times as are provided in Section 3.02 hereof. When the final transfers have been made to the Paying Agents for the Refunded Obligations for the payment of such principal of and interest on the Refunded Obligations, any balance then remaining in the Escrow Fund shall be transferred to the City, and the Escrow Agent shall thereupon be discharged from any further duties hereunder. 3.02 Payment of Principal of and Interest on Refunded Obligations. (a) The Escrow Agent is hereby irrevocably instructed to transfer to the Paying Agent for the Refunded Obligations 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 Obligations 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 Obligations in accordance with the provisions hereof shall be held by the Paying Agent for the Refunded Obligations as a segregated account for the respective holders of the Refunded Obligations in connection with which such money is held; provided, however, subject to the provisions of Title 6 of the Texas Property Code regarding Unclaimed Property, that money so held remaining unclaimed by the owners of such Refunded Obligations 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. Thereafter, neither the City,the Escrow Agent, the Paying Agents for the Refunded Obligations nor any other person shall be liable or responsible to any holders of such Refunded Obligations for any further payment of such unclaimed money or on account of any such Refunded Obligations. (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 Obligations prior to their scheduled maturities. 3.03 Sufficiency of Escrow Fund. The City represents (based solely upon the Report) that the successive receipts of the principal of and interest on the Escrowed Securities will assure that the cash balance on deposit from time to time in the Escrow Fund will be at all times sufficient -4- to provide money for transfer to the Paying Agents for the Refunded Obligations at the times and in the amounts required to pay the interest on the Refunded Obligations as such interest comes due and to pay the principal of the Refunded Obligations as the Refunded Obligations mature or are redeemed. If any deficiency results from any error in the calculation of the report, the City shall transfer to the Escrow Agent for deposit to the Escrow Fund to be held pursuant to this Escrow Agreement an additional amount of cash or securities sufficient to provide for such deficiency. 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 Obligations; 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 Obligations shall be entitled to the same preferred claim and first lien upon the Escrowed Securities,the proceeds thereof and all other assets of the Escrow Fund 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. ARTICLE IV REDEMPTION OF CERTAIN REFUNDED OBLIGATIONS 4.01 Optional Redemption of Certain Refunded Obligations. The City has irrevocably exercised its option to call for redemption the Refunded Obligations as set forth below. Such optional redemption shall be carried out in accordance with the Ordinance authorizing the issuance of the Refunded Obligations. The Escrow Agent is hereby authorized to provide funds therefor as set forth in Section 3.02(a)hereof. Bonds To Be Redeemed Redemption Date A portion of The City of Beaumont, Texas, Combination Tax&Revenue Certificates of Obligation, Series 1998 Maturities 2008 through 2017, in the principal amounts of$40,000, $500,000, $500,000, $500,000, 500,000, $500,000, 360,000, $1,900,000, $2,005,000, and $2,110,000,respectively March 1,2008 -5- A portion of the City of Beaumont,Texas, Refunding Bonds, Series 1996, Maturities 2008 through 2010,in the principal amounts of$790,000, $780,000 and $785,000,respectively March 1,2007 A portion of the City of Beaumont, Texas Combination Tax&Revenue Certificates of Obligation, Series 1996, Maturities 2008 through 2014 in the principal amounts of$590,000, $610,000, $680,000, $725,000, $775,000, $825,000 and $850,000, respectively March 1,2007 The City of Beaumont,Texas, Combination Tax& Revenue Certificates of Obligation, Series 1995, Maturities 2006 through 2014 in the principal amounts of $500,000, $500,000, $500,000, $500,000, $500,000, $500,000, $500,000, $500,000 and$500,000,respectively March 1,2005 ARTICLE V LIMITATION ON INVESTMENTS 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, except for the purchase of the SLGS as described in the Report. 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 proceeds therefrom to purchase Refunded Obligations 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 new verification report together with a written opinion from a nationally recognized firm of certified public accountants acceptable to the City and the Escrow Agent that such transaction will not cause the amount of money and securities in the Escrow Fund to be reduced below an amount which will be sufficient, when added to the interest to accrue thereon, to provide for the payment of principal and interest on the remaining Refunded Obligations 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. -6- ARTICLE VI RECORDS AND REPORTS 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 Obligations. 6.02 Reports. For the period beginning on the Escrow Funding Date and ending on October 31, 2005, and for each twelve (12) month period thereafter while this Agreement remains in effect, the Escrow Agent shall prepare and send to the City, at the City's request, within thirty (30) days following the end of such period a written report summarizing all transactions relating to the Escrow Fund during such period, including, without limitation, credits to the Escrow Fund as a result of interest payments on or maturities of the Escrowed Securities and transfers from the Escrow Fund to the Paying Agents for the Refunded Obligations or otherwise, together with a detailed statement of all Escrowed Securities and the cash balance on deposit in the Escrow Fund as of the end of such period. 6.03 Notification. The Escrow Agent shall notify the City immediately if at any time during the term of this agreement it determines that there is insufficient cash and Escrowed Securities in the Escrow Fund to provide for the transfer to the Paying Agents for the Refunded Obligations for timely payment of all interest on and principal of the Refunded Obligations. ARTICLE VII CONCERNING THE ESCROW AGENT 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. 7.02 Limitation on Liability. The Escrow Agent shall not be liable for the performance of any duties, except such duties as are specifically set forth in this Escrow Agreement, and no implied covenants or obligations shall be read into this Escrow Agreement. Nothing herein contained shall relieve the Escrow Agent from liability for its own negligent action, negligent failure to act or willful misconduct, except that this sentence shall not be construed to limit the effect of the immediately preceding sentence. The Escrow Agent shall not incur any liability for any error of judgment made in good faith by a responsible officer thereof, unless it shall be proved that it was negligent in ascertaining the pertinent facts. The Escrow Agent shall be protected in acting upon any notice, resolution,request, consent, order, certificate,report, opinion,bond or other paper or document believed by it to be genuine, and to have been signed or presented by the proper -7- party or parties. The Escrow Agent may consult with counsel, and the opinion of such counsel shall be full and complete authorization and protection in respect of any action taken or suffered by it in good faith and in accordance therewith. The Escrow Agent is not a principal, participant or beneficiary of the underlying transaction to which this Escrow Agreement relates. The liability of the Escrow Agent to transfer funds to the Paying Agents for the Refunded Obligations for the payments of the principal of and interest on the Refunded Obligations shall be limited to the proceeds of the Escrowed Securities and the cash balances from time to time on deposit in the Escrow Fund. Notwithstanding any provision contained herein to the contrary, the Escrow Agent shall have no liability whatsoever for the insufficiency of funds from time to time in the Escrow Fund or any failure of the obligor of the Escrowed Securities to make timely payment thereon, except for the obligation to notify the City promptly of any such occurrence. The recitals herein and in the proceedings authorizing the Refunding Bonds shall be taken as the statements of the City and shall not be considered as made by, or imposing any obligation or liability upon, the Escrow Agent. In its 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. 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 connection may make inquiries of, and consult with the City, among others, at any time. In the absence of bad faith, the Escrow Agent may rely conclusively upon the truth, completeness and accuracy of the statements, certificates, opinions, resolutions and other documents conforming to the requirements of this Escrow Agreement, and shall not be obligated to make any independent investigation with respect thereto. To the full extent permitted by law, the parties agree to indemnify, defend and hold the -8- Escrow Agent harmless from and against any and all loss, damage, tax, liability and expense that may be incurred by the Escrow Agent arising out of or in connection with its acceptance or appointment as Escrow Agent hereunder, including attorneys' fees and expenses of defending itself against any claim or liability in connection with its performance hereunder except that the Escrow Agent shall not be indemnified for any loss, damage, tax, liability or expense resulting from its own negligence or willful misconduct. The Escrow Agent's right to indemnification shall survive its resignation or removal and the termination of this Agreement. The Escrow Agent shall have only those duties as are specifically provided herein, which shall be deemed purely ministerial in nature, and shall under no circumstance be deemed a fiduciary for any of the parties to this Agreement. The Escrow Agent shall neither be responsible for, nor chargeable with, knowledge of the terms and conditions of any other agreement, instrument or document between the other parties hereto, in connection herewith. This Agreement sets forth all matters pertinent to the escrow contemplated hereunder, and no additional obligations of the Escrow Agent shall be inferred from the terms of this Agreement or any other Agreement. IN NO EVENT SHALL THE ESCROW AGENT BE LIABLE, DIRECTLY OR INDIRECTLY, FOR ANY (i) DAMAGES OR EXPENSES ARISING OUT OF THE SERVICES PROVIDED HEREUNDER, OTHER THAN DAMAGES WHICH RESULT FROM THE ESCROW AGENT'S FAILURE TO ACT IN ACCORDANCE WITH THE STANDARDS SET FORTH IN THIS AGREEMENT, OR (ii) SPECIAL OR CONSEQUENTIAL DAMAGES, EVEN IF THE ESCROW AGENT HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. In the event that any escrow property shall be attached, garnished or levied.upon by any court order, or the delivery thereof shall be stayed or enjoined by an order of a court, or any order, judgment or decree shall be made or entered by any court order affecting the property deposited under this Agreement, the Escrow Agent is hereby expressly authorized, in its sole discretion, to obey and comply with all writs, orders or decrees so entered or issued, which it is advised by legal counsel of its own choosing is binding upon it, whether with or without jurisdiction, and in the event that the Escrow Agent obeys or complies with any such writ, order or decree it shall not be liable to any of the parties hereto or to any other person, firm or corporation, by reason of such compliance notwithstanding such writ, order or decree be subsequently reversed, modified, annulled, set aside or vacated. Any banking association or corporation into which the Escrow Agent may be merged, converted or with which the Escrow Agent may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Escrow Agent shall be a party, or any banking association or corporation to which all or substantially all of the corporate trust business of the Escrow Agent shall be transferred, shall succeed to all the Escrow Agent's rights, obligations and immunities hereunder without the execution or filing of any paper or any further act on the part of any of the parties hereto, anything herein to the contrary notwithstanding. The Escrow Agent shall have the right, but not the obligation, to consult with counsel of choice and shall not be liable for action taken or omitted to be taken by Escrow Agent either in accordance with the advice of such counsel or in accordance with any opinion of counsel to the -9- Issuer addressed and delivered to the Escrow Agent. The Escrow Agent have the right to perform any of its duties hereunder through agents, attorneys, custodians or nominees. 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, the sum of$1,600.00, in cash. This sum does not include the cost of publication, printing costs or reasonable out-of-pocket expenses of the Escrow Agent. If the Escrow Agent incurs any out-of-pocket expenses or is requested to perform any extraordinary services hereunder, the City hereby agrees to reimburse the Escrow Agent for such out-of-pocket expenses and 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 reimbursement of such out-of-pocket expenses and 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. (b) J.P.Morgan Trust Company and The Bank of New York Trust Company,N.A. each serve as a Paying Agent for one or more of the Refunded Obligations. By execution of the Consent to Escrow Agreement attached hereto, J.P. Morgan Trust Company and The Bank of New York Trust Company, N.A. each agree to continue to serve as Paying Agent for the life of the Refunded Obligations for which it is now serving as Paying Agent, and they will serve as Paying Agents for the Refunded Obligations for the compensation provided under the fee schedule currently in effect and it will look to the City directly for payment of its fees; and, in the event of nonpayment of such fees, the sole remedy of the Paying Agent shall be an action against the City for recovery of the fees owing under the paying agency agreement for which it serves. 7.04 Successor Escrow Agents. If at 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. Any successor Escrow Agent must be qualified under the laws of the State of Texas to serve as an escrow agent and must be authorized to exercise corporate trust powers. No resignation or removal of the Escrow Agent and no early termination of this Agreement shall occur until a successor Escrow Agent has been appointed who is qualified to serve as Escrow Agent hereunder and who has accepted such appointment. Upon the request of any such successor Escrow Agent, the City shall execute any and all instruments in writing for more fully and certainly vesting in and confirming to such successor Escrow Agent all such immunities,rights, powers and duties. The Escrow Agent shall pay over to its successor Escrow Agent a proportional part of the Escrow Agent's fee hereunder equal to the portion of such fee attributable to duties to be -10- performed after the date of succession. ARTICLE VIII MISCELLANEOUS 8.01 Notices. Any notice, authorization, request, or demand required or permitted to be given hereunder shall be in writing and shall be deemed to have been duly given when mailed by registered or certified mail,postage prepaid addressed as follows: To the Escrow Agent: JPMorgan Chase Bank P.O. Box 2320,Dallas, Texas 75221-2320 Attention: Issuer Administrative Services To the City: City of Beaumont,Texas 801 Main Street Beaumont,TX 77701 ATTENTION: City Manager 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. 8.02 Termination of Escrow Agent's Obligations. 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 Obligations or to any other person or persons in connection with this Escrow Agreement. 8.03 Binding Agreement. This Escrow Agreement shall be binding upon the City, and the Escrow Agent and their respective successors and legal representatives, and shall inure solely to the benefit of the holders of the Refunded Obligations, the City, the Escrow Agent and their respective successors and legal representatives. This Escrow Agreement may not be modified except with the prior consent of the holders of all of the Refunded Obligations. 8.04 Severability. In case any one or more of the provisions contained in this Escrow Agreement shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Escrow Agreement, but this Escrow Agreement shall be construed as if such invalid or illegal or -11- unenforceable provision had never been contained herein. 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. 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. [The remainder of this page has intentionally been left blank. Signature page follows.] -12- Executed as of November 1, 2004, but effective as set forth herein. THE CITY OF BEAUMONT, TEXAS ATTEST: By: By: 42��Qna� Title: Mayor Title: City Clerk (SEAL) .urv2�i;fit JPMORGAN CHASE BANK,as Escrow Agent i A "u� By' h c R , L� NT Title: SSI T 6 I r !? -13- CONSENT TO ESCROW AGREEMENT Upon receipt of sufficient funds from the Escrow Agent, J.P. MORGAN TRUST COMPANY, as paying agent for one or more series of the Refunded Obligations (as defined in the foregoing Escrow Agreement), hereby acknowledges and consents to provide for the full and timely payment of the principal of and interest on such series of Refunded Obligations. J.P. MORGAN TRUST COMPANY further consents to the management of the Escrow Fund by the Escrow Agent in accordance with the terms and conditions of the Escrow Agreement and agrees to be bound by the terms of the Escrow Agreement with respect to its obligations as a paying agent. J.P. MORGAN TRUST COMPANY agrees to continue to serve as Paying Agent for which it is now serving as Paying Agent, and it will serve as Paying Agent for the Refunded Obligations for the compensation provided under the fee schedule currently in effect and it will look to the City directly for payment of its fees; and, in the event of nonpayment of such fees, the sole remedy of the Paying Agent shall be an action against the City for recovery of the fees owing under the paying agency agreement for which it serves. J.P. MORGAN TRUST COMPANY By: Name: y�Cn -L,,on, t lc-:cc-e-- Title: AggjS `kj%'IT y,,-rE PRESIDENT -14- CONSENT TO ESCROW AGREEMENT Upon receipt of sufficient funds from the Escrow Agent, The Bank of New York Trust Company, N.A., as paying agent for one or more series of the Refunded Obligations (as defined in the foregoing Escrow Agreement), hereby acknowledges and consents to provide for the full and timely payment of the principal of and interest on such series of Refunded Obligations. The Bank of New York Trust Company, N.A. further consents to the management of the Escrow Fund by the Escrow Agent in accordance with the terms and conditions of the Escrow Agreement and agrees to be bound by the terms of the Escrow Agreement with respect to its obligations as a paying agent. The Bank of New York Trust Company, N.A. agrees to continue to serve as Paying Agent for which it is now serving as Paying Agent, and it will serve as Paying Agent for the Refunded Obligations for the compensation provided under the fee schedule currently in effect and it will look to the City directly for payment of its fees; and, in the event of nonpayment of such fees, the sole remedy of the Paying Agent shall be an action against the City for recovery of the fees owing under the paying agency agreement for which it serves. The Bank of New York Trust, N.A. Ti le: MTANT REAA�URFq -15- Section 6 Cash Flow and Yield Verification Report City of Beaumont, Texas December 2, 2004 INDEX Letter Exhibit A Schedule of Sources and Uses of Funds Exhibit B Escrow Account Cash Flow Exhibit B-1 Cash Receipts From and Yield on the SLGS Purchased with Bond Proceeds Exhibit B-2 Cash Receipt From the SLGS Purchased with Debt Service Funds Exhibit B-3 Debt Service Payment on the 1995 Certificates Exhibit B-4 Debt Service Payments on the 1996 Certificates Exhibit B-5 Debt Service Payments on the 1996 Bonds Exhibit B-6 Debt Service Payments on the 1998 Certificates Exhibit C Debt Service Payments and Yield on the Bonds Exhibit C-1 Original Issue Premium on the Bonds Exhibit D Multipurpose Allocation on the 1996 Certificates and 1996 Bonds Appendix I Applicable schedules provided by RBC Dain Rauscher Inc. Grant Thorntowila Accountants and Business Advisors Report of Independent Certified Public Accountants On Applying Agreed-Upon Procedures City of Beaumont 801 Main Beaumont,Texas Orgain,Bell&Tucker,L.L.P. JP Morgan Chase Bank 470 Orleans,Suite 400 2001 Bryan Street, 8th Floor Beaumont,Texas Dallas,Texas First Southwest Company Texas Attorney General's Office 325 North St. Paul Street, Suite 800 300 West 15th Street,Ninth Floor Dallas,Texas Austin,Texas RBC Dain Rauscher Inc. Financial Security Assurance Inc. 2711 North Haskell Avenue, Suite 2400 350 Park Avenue Dallas,Texas New York,New York $20,640,000 City of Beaumont,Texas (A political subdivision of the State of Texas located within Jefferson County) General Obligation Refunding Bonds, Series 2004 Dated November 1, 2004 We have performed the procedures described in this report, which were agreed to by the City of Beaumont, Texas (the "City") and RBC Dain Rauscher Inc. (the "Financial Advisor"), to verify the mathematical accuracy of certain computations contained in the schedules attached in Appendix I provided by the Financial Advisor. The Financial Advisor is responsible for these schedules. These procedures were performed solely to assist you in the issuance of the above-captioned bond issue (the "Bonds") for the purpose of refunding portions of the City's outstanding Combination Tax and Revenue Certificates of Obligation, Series 1995 (the "1995 Certificates"), Series 1996 (the "1996 Certificates"), Refunding Bonds, Series 1996 (the "1996 Bonds"), and Combination Tax and Revenue Certificates of Obligation, Series 1998 (the "1998 Certificates") (collectively referred to as the "Refunded Obligations") as summarized on the next page. This engagement was performed in accordance with attestation standards established by the American Institute of Certified Public Accountants. The sufficiency of these procedures is solely the responsibility of the addressees of this report who are the specified parties. Consequently, we make no representation regarding the sufficiency of the procedures described in this report either for the purpose for which this report has been requested or for any other purpose. 500 US Bank Plaza North 200 South Sixth Street Minneapolis,MN 55402 T 612.332.0001 F 612.332.8361 W www.grantthornton.com Grant Thornton LLP US Member of Grant Thornton International Page 2 Principal Principal Maturities Redemption Redemption Series Issued Dated Refunded Refunded Date Price 1995 3-1-06 to Certs. $6,000,000 May 1,1995 $4,500,000 3-1-14 3-1-05 100% 1996 3-1-08 to Certs. $16,000,000 January 1,1996 $5,055,000* 3-1-14 3-1-07 100% 1996 3-1-08 to Bonds $16,205,000 January 1,1996 $2,355,000* 3-1-10 3-1-07 100% 1998 3-1-08 to Certs. $15,000,000 April 1, 1998 $8,915,000* 3-1-17 3-1-08 100% * Represents a portion of the principal amounts outstanding. VERIFICATION OF ESCROW ACCOUNT CASH FLOW SUFFICIENCY The Financial Advisor provided us with schedules (Appendix I) summarizing future escrow account cash receipts and disbursements. These schedules indicate that there will be sufficient cash available in the escrow account to pay the principal and interest on the Refunded Obligations assuming the 1995 Certificates will be redeemed on March 1, 2005 at 100 percent of par plus accrued interest, the 1996 Certificates and the 1996 Bonds will be redeemed on March 1, 2007 at 100 percent of par plus accrued interest, and the 1998 Certificates maturing on and after March 1, 2009 will be redeemed on March 1, 2008 at 100 percent of par plus accrued interest. The attached Exhibit A (Schedule of Sources and Uses of Funds) was compiled based upon information provided by the Financial Advisor. As part of our engagement to recalculate the schedules attached as Appendix I we prepared schedules attached hereto as Exhibits B through B-6 independently calculating future escrow account cash receipts and disbursements and compared the information used in our calculations to the information listed below contained in applicable pages of the following documents: • Subscription confirmation, dated October 8, 2004, and Schedule of U.S. Treasury Securities provided by the Financial Advisor used to acquire certain United States Treasury Securities - State and Local Government Series (the "SLGS") insofar as the SLGS are described as to the principal amounts, interest rates, maturity dates, issuance date and first interest payment date; and • Ordinances for the Refunded Obligations were provided by Orgain, Bell & Tucker, L.L.P. insofar as the Refunded Obligations are described as to the maturity and interest payment dates, principal amounts, interest rates and optional redemption dates and price. The principal amounts refunded of the March 1, 2008 maturity of the 1998 Certificates represents a portion of the principal amount outstanding. The principal amounts refunded for the 1996 Certificates and the 1996 Bonds represent portions of the principal amounts outstanding as shown on Exhibit D. Page 3 In addition, we compared the interest rates for each maturity of the SLGS, as shown on the Schedule of U.S. Treasury Securities, with the maximum allowable interest rates shown on the Department of Treasury, Bureau of Public Debt, SLGS Table (Form PD 4262) for use on October 8, 2004 and found that the interest rates were equal to the maximum allowable interest rates for each maturity. Our procedures, as summarized in Exhibits B through B-6, prove the mathematical accuracy of the schedules provided by the Financial Advisor summarizing future escrow account cash receipts and disbursements. The schedules provided by the Financial Advisor and those prepared by us reflect that the anticipated receipts from the SLGS, together with an initial cash deposit of $1.58 to be deposited into the escrow account on December 2, 2004, will be sufficient to pay, when due, the principal and interest related to the Refunded Obligations assuming the 1995 Certificates will be redeemed on March 1, 2005 at 100 percent of par plus accrued interest, the 1996 Certificates and the 1996 Bonds will be redeemed on March 1, 2007 at 100 percent of par plus accrued interest, and the 1998 Certificates maturing on and after March 1, 2009 will be redeemed on March 1, 2008 at 100 percent of par plus accrued interest. VERIFICATION OF YIELDS The Financial Advisor provided us with schedules (Appendix 1) which indicate that the yield on the cash receipts from the SLGS purchased with Bond proceeds is less than the yield on the Bonds. These schedules were prepared based on the assumed settlement date of December 2, 2004 using a 360-day year with interest compounded semi-annually. The term "yield", as used herein, means that yield which, when used in computing the present value of all payments of principal and interest to be paid or received on an obligation produces an amount equal to, in the case of the cash receipts from the SLGS purchased with Bond proceeds, the purchase price, and in the case of the Bonds, the issue price adjusted for the bond insurance premium of$68,216.37. In addition, we found that the schedules provided by the Financial Advisor, which assume the redemption of the March 1, 2016 and March 1, 2017 maturities identified on Exhibits C and C-1 at par on March 1, 2014 plus accrued interest, correctly treat those Bonds as yield-to-call Bonds as retired on the respective dates that for each Bond produces the lowest yield for the issue that includes the Bonds. Those Bonds identified as yield-to-call Bonds on the attached Exhibits C and C-1 are those Bonds that are subject to optional redemption and that are issued at an issue price that exceeds the stated redemption price at maturity of such Bonds by more than one-fourth of one percent multiplied by the product of the stated redemption price at maturity of such Bonds and the number of complete years to the first optional redemption date for the Bonds. We found that there are no other yield-to-call Bonds other than those identified on the attached Exhibits C and C-1. As part of our engagement to recalculate the schedules attached as Appendix I we prepared schedules attached hereto as Exhibits B-1 and C independently calculating the yields on (i) the cash receipts from the SLGS purchased with Bond proceeds calculated on Exhibit B-1, and (ii) the Bonds using the Official Statement provided by the Financial Advisor insofar as the Bonds are described as to the maturity and interest payment dates, dated date, principal amounts, interest rates, optional redemption date and price, and issue price to the public. The results of our calculations, based on the aforementioned assumptions, are summarized on the next page: Page 4 Yield Exhibit • Yield on the cash receipts from the SLGS purchased with Bond Proceeds 2.812619% B-1 • Yield on the Bonds 3.495529% C Our procedures, as summarized in Exhibits B-1 and C, prove the mathematical accuracy of the schedules provided by the Financial Advisor summarizing the yields. The schedules provided by the Financial Advisor and those prepared by us reflect that the yield on the cash receipts from the SLGS purchased with Bond proceeds is less than the yield on the Bonds. VERIFICATION OF MULTIPURPOSE ALLOCATION The Financial Advisor provided us with schedules (Appendix I) allocating on a pro-rata basis the new money portions of the 1996 Certificates and the 1996 Bonds. As part of our engagement we independently calculated the multipurpose allocation of the 1996 Certificates and the 1996 Bonds using assumptions and methodologies as provided by the Financial Advisor. Our procedures, as summarized in Exhibit D, prove the mathematical accuracy of the schedules provided by the Financial Advisor summarizing the multipurpose allocations of the 1996 Certificates and the 1996 Bonds. The schedules provided by the Financial Advisor and those prepared by us reflect that the portions of the 1996 Certificates and 1996 Bonds allocated to the new money proceeds are as shown on Exhibit D. We were not engaged to, and did not, perform an examination in accordance with attestation standards established by the American Institute of Certified Public Accountants, the objective of which would be the expression of an examination opinion on the items referred to above. Accordingly we do not express such an opinion. Had we performed additional procedures, other matters might have come to our attention that would have been reported to you. This report is intended solely for the information and use of those to whom this letter is addressed and is not intended to be and should not be used by anyone other than these specified parties. Minneapolis, Minnesota December 2, 2004 Exhibit A City of Beaumont,Texas SCHEDULE OF SOURCES AND USES OF FUNDS December 2,2004 SOURCES: Principal amount of the Bonds $205640,000.00 Original issue premium 1,410,027.15 Transfers from prior issue Debt Service Funds 367,000.00 Accrued interest 81,250.35 $22,498,277.50 USES: Purchase price of the SLGS: - Purchased with Bond proceeds $21,742,645.00 - Purchased with Debt Service Funds 366,999.00 Beginning cash deposit to the escrow account 1.58 Accrued interest 81,250.35 Underwriters' discount 118,680.00 Costs of issuance 118,000.00 Bond insurance premium 68,216.37 Contingency 2,485.20 $22,498,277.50 Exhibit B City of Beaumont,Texas ESCROW ACCOUNT CASH FLOW Debt service Cash receipts from SLGS: payments on Purchased the Refunded Purchased with with Debt Obligations Bond proceeds Service Funds (Exhibits B-3 Cash Dates (Exhibit B-1) (Exhibit B-2) through B-6) balance Cash deposit on December 2, 2004 $1.58 03-01-05 $4,668,053.90 $368,403.95 $5,036,457.50 1.93 09-01-05 414,519.84 414,520.00 1.77 03-01-06 414,520.16 414,520.00 1.93 09-01-06 414,519.57 414,520.00 1.50 03-01-07 7,824,519.75 7,824,520.00 1.25 09-01-07 225,675.75 225,675.00 2.00 03-01-08 9,140,674.00 9,140,675.00 1.00 $23,102,482.97 $368,403.95 $23,470,887.50 Exhibit B-1 City of Beaumont,Texas CASH RECEIPTS FROM AND YIELD ON THE SLGS PURCHASED WITH BOND PROCEEDS Cash receipts Present value on from SLGS December 2, 2004 Receipt Interest purchased with using a yield of date Principal rate Interest Bond proceeds 2.812619% 03-01-05 $4,532,697 1.570% $135,356.90 $4,668,053.90 $4,635,932.12 09-01-05 171,897 2.050% 242,622.84 414,519.84 405,958.42 03-01-06 174,533 2.210% 239,987.16 414,520.16 400,328.87 09-01-06 176,461 2.440% 238,058.57 414,519.57 394,776.52 03-01-07 7,588,614 2.670% 235,905.75 7,824,519.75 7,348,504.93 09-01-07 91,078 2.830% 134,597.75 225,675.75 209,007.19 03-01-08 9,007,365 2.960% 133,309.00 9,140,674.00 8,348,136.96 $21,742,645 $1,359,837.97 $23,102,482.97 $21,742,645.00 Purchase price of the SLGS purchased with Bond proceeds $21,742,645.00 The sum of the present values of the cash receipts from the SLGS purchased with Bond proceeds on December 2, 2004, using a yield of 2.812619%, is equal to the purchase price of the SLGS purchased with Bond proceeds. Exhibit B-2 City of Beaumont,Texas CASH RECEIPT FROM THE SLGS PURCHASED WITH DEBT SERVICE FUNDS Cash receipt from SLGS purchased Receipt Interest with Debt date Principal rate Interest Service Funds 03-01-05 $366,999 1.570% $1,404.95 $368,403.95 Exhibit B-3 City of Beaumont,Texas DEBT SERVICE PAYMENT ON THE 1995 CERTIFICATES Interest Debt service Date Principal rate Interest payment 03-01-05 $4,500,000 (1) $121,937.50 $4,621,937.50 (1) Actual maturity dates, principal amounts and interest rates are as follows: Maturity Principal Interest date amount rate 03-01-06 $500,000 5.200% 03-01-07 500,000 5.300% 03-01-08 500,000 5.400% 03-01-09 500,000 5.500% 03-01-10 500,000 5.600% 03-01-11 500,000 5.625% 03-01-12 500,000 5.700% 03-01-13 500,000 5.750% 03-01-14 500,000 4.700% $4,500,000 Exhibit B-4 City of Beaumont,Texas DEBT SERVICE PAYMENTS ON THE 1996 CERTIFICATES Interest Debt service Date Principal rate Interest payments 03-01-05 $129,187.50 $129,187.50 09-01-05 129,187.50 129,187.50 03-01-06 129,187.50 129,187.50 09-01-06 129,187.50 129,187.50 03-01-07 $5,055,000 (1) 129,187.50 5,184,187.50 $5,055,000 $645,937.50 $5,700,937.50 (1) Actual maturity dates, principal amounts and interest rates are as follows: Maturity Principal Interest date amount rate 03-01-08 $590,000 * 5.000% 03-01-09 610,000 * 5.000% 03-01-10 680,000 * 5.000% 03-01-11 725,000 * 5.100% 03-01-12 775,000 * 5.200% 03-01-13 825,000 * 5.200% 03-01-14 850,000 * 5.200% $5,055,000 * Represents portions of the principal amounts outstanding as shown on Exhibit D. Exhibit B-5 City of Beaumont,Texas DEBT SERVICE PAYMENTS ON THE 1996 BONDS Interest Debt service Date Principal rate Interest payments 03-01-05 $59,657.50 $59,657.50 09-01-05 59,657.50 59,657.50 03-01-06 59,657.50 59,657.50 09-01-06 59,657.50 59,657.50 03-01-07 $2,355,000 (1) 59,657.50 2,414,657.50 $2,355,000 $298,287.50 $2,653,287.50 (1) Actual maturity dates,principal amounts and interest rates are as follows: Maturity Principal Interest date amount rate 03-01-08 $790,000 * 5.000% 03-01-09 780,000 * 5.100% 03-01-10 785,000 * 5.100% $2,355,000 * Represents portions of the principal amounts outstanding as shown on Exhibit D. Exhibit B-6 City of Beaumont,Texas DEBT SERVICE PAYMENTS ON THE 1998 CERTIFICATES Interest Debt service Date Principal rate Interest payments 03-01-05 $225,675.00 $225,675.00 09-01-05 225,675.00 225,675.00 03-01-06 225,675.00 225,675.00 09-01-06 225,675.00 225,675.00 03-01-07 225,675.00 225,675.00 09-01-07 225,675.00 225,675.00 03-01-08 $8,915,000 (1) 225,675.00 9,140,675.00 $8,915,000 $1,579,725.00 $10,494,725.00 (1) Actual maturity dates,principal amounts and interest rates are as follows: Maturity Principal Interest date amount rate 03-01-08 $40,000 * 6.500% 03-01-09 500,000 6.500% 03-01-10 500,000 4.700% 03-01-11 500,000 4.800% 03-01-12 500,000 5.000% 03-01-13 500,000 5.000% 03-01-14 360,000 5.000% 03-01-15 1,900,000 5.000% 1 03-01-16 2,005,000 5.000% 03-01-17 2,110,000 5.000% $8,915,000 * Represents a portion of the principal amount outstanding. Exhibit C City of Beaumont,Texas DEBT SERVICE PAYMENTS AND YIELD ON THE BONDS Present value on $20,640,000 issue dated November 1,2004 (1) December 2,2004 Interest Total debt Adjusted using a yield of Date Principal rate Interest service debt service 3.495529% 03-01-05 $314,517.50 $314,517.50 $314,517.50 $311,834.51 09-01-05 471,776.25 471,776.25 471,776.25 459,717.00 03-01-06 $220,000 3.000% 471,776.25 691,776.25 691,776.25 662,514.31 09-01-06 468,476.25 468,476.25 468,476.25 440,953.01 03-01-07 200,000 3.000% 468,476.25 668,476.25 668,476.25 618,394.82 09-01-07 465,476.25 465,476.25 465,476.25 423,206.68 03-01-08 2,000,000 (2) 465,476.25 2,465,476.25 2,465,476.25 2,203,083.35 09-01-08 425,476.25 425,476.25 425,476.25 373,663.39 03-01-09 2,455,000 5.000% 425,476.25 2,880,476.25 2,880,476.25 2,486,249.17 09-01-09 364,101.25 364,101.25 364,101.25 308,871.36 03-01-10 2,525,000 5.000% 364,101.25 2,889,101.25 2,889,101.25 2,408,759.06 09-01-10 300,976.25 300,976.25 300,976.25 246,625.48 03-01-11 1,790,000 5.000% 300,976.25 2,090,976.25 2,090,976.25 1,683,952.92 09-01-11 256,226.25 256,226.25 256,226.25 202,805.43 03-01-12 1,835,000 5.000% 256,226.25 2,091,226.25 2,091,226.25 1,626,792.32 09-01-12 210,351.25 210,351.25 210,351.25 160,824.17 03-01-13 1,875,000 3.750% 210,351.25 2,085,351.25 2,085,351.25 1,566,969.54 09-01-13 175,195.00 175,195.00 175,195.00 129,383.28 03-01-14 1,735,000 (2) 175,195.00 1,910,195.00 6,015,195.00 4,365,97550 09-01-14 143,381.25 143,381.25 35,625.00 25,413.33 03-01-15 1,900,000 3.750% 143,381.25 2,043,381.25 1,935,625.00 1,357,072.51 09-01-15 107,756.25 107,756.25 03-01-16 2,000,000 5.250% 107,756.25 2,107,756.25 09-01-16 55,256.25 55,256.25 03-01-17 2,105,000 5.250% 55,256.25 2,160,256.25 $20,640,000 $7,203,415.00 $27,843,415.00 $27,301,877.50 $22,063,061.13 The present value of the future payments is equal to: Principal amount of the Bonds $20,640,000.00 Accrued interest 81,250.35 Original issue premium 1,410,027.15 Bond insurance premium {68,216.37) $22,063,061.13 The sum of the present values of the adjusted debt service payments of the Bonds on December 2,2004,using a yield of 3.495529%,is equal to the issue price of the Bonds adjusted for the bond insurance premium. (1) Assumes that the March 1,2016 and March 1,2017 maturities are called on March 1,2014 at 100 percent of par plus accrued interest. (2) Actual principal amounts and interest rates are shown on Exhibit C-1. Exhibit C-1 City of Beaumont,Texas ORIGINAL ISSUE PREMIUM ON THE BONDS Initial public Original Maturity Interest offering issue date Principal rate Yield price premium 03-01-06 $220,000 3.000% 1.940% 101.298% $2,855.60 03-01-07 200,000 3.000% 2.130% 101.897% 3,794.00 03-01-08 1,000,000 5.000% 2.460% 107.876% 78,760.00 03-01-08 1,000,000 3.000% 2.460% 101.673% 16,730.00 03-01-09 2,455,000 5.000% 2.770% 108.873% 217,832.15 03-01-10 2,525,000 5.000% 3.030% 109.486% 239,521.50 03-01-11 1,790,000 5.000% 3.220% 109.995% 178,910.50 03-01-12 1,835,000 5.000% 3.390% 110.263% 188,326.05 03-01-13 1,875,000 3.750% 3.540% 101.486% 27,862.50 03-01-14 1,435,000 3.650% 3.650% 100.000% 03-01-14 300,000 3.750% 3.650% 100.774% 2,322.00 03-01-15 1,900,000 3.750% 3.750% 100.000% 03-01-16 2,000,000 5.250% 3.780% 111.376% (1) (2) 227,520.00 03-01-17 2,105,000 5.250% 3.860% 110.717% (1) (2) 225,592.85 $20,640,000 $1,410,027.15 (1) Maturities were priced to call on March 1, 2014 at 100 percent of par. (2) Represents the yield-to-call Bonds included for purposes of computing yield on the Bonds. Exhibit D Page 1 of 2 City of Beaumont,Texas MULTIPURPOSE ALLOCATION ON THE 1996 CERTIFICATES AND 1996 BONDS 1990 Escrow Present value on Other funds Adjusted February 22, 1996 Escrow allocated to Allocated escrow using a yield of Date requirements requirement percentage requirements 5.08642% 03-01-96 $86,295.00 $42,498.84 17.7078% $43,796.16 $43,741.20 09-01-96 86,295.00 0.00 17.7078% 86,295.00 84,049.16 03-01-97 671,295.00 0.00 46.3817% 671,295.00 637,608.72 09-01-97 66,990.00 0.00 14.7721% 66,990.00 62,050.30 03-01-98 696,990.00 0.00 46.9831% 696,990.00 629,583.83 09-01-98 46,200.00 0.00 11.0738% 46,200.00 40,696.97 03-01-99 721,200.00 0.00 47.5349% 721,200.00 619,539.39 09-01-99 23,925.00 0.00 6.3217% 23,925.00 20,042.79 03-01-00 748,925.00 0.00 47.4467% 748,925.00 611,839.79 $3,148,115.00 $42,498.84 $3,105,616.16 $2,749,152.16 1992 Escrow Present value on Other funds Adjusted February 22, 1996 Escrow allocated to Allocated escrow using a yield of Date requirements requirement percentage requirements 5.08642% 03-01-96 $401,031.25 $197,501.16 82.2922% $203,530.09 $203,274.68 09-01-96 401,031.25 0.00 82.2922% 401,031.25 390,594.35 03-01-97 776,031.25 0.00 53.6183% 776,031.25 737,089.20 09-01-97 386,500.00 0.00 85.2279% 386,500.00 358,000.33 03-01-98 786,500.00 0.00 53.0169% 786,500.00 710,437.29 09-01-98 371,000.00 0.00 88.9262% 371,000.00 326,809.01 03-01-99 796,000.00 0.00 52.4651% 796,000.00 683,795.55 09-01-99 354,531.25 0.00 93.6783% 354,531.25 297,002.99 03-01-00 829,531.25 0.00 52.5533% 829,531.25 677,691.66 09-01-00 336,125.00 0.00 100.0000% 336,125.00 267,789.35 03-01-01 836,125.00 0.00 100.0000% 836,125.00 649,616.10 09-01-01 316,750.00 0.00 100.0000% 316,750.00 239,991.18 03-01-02 10,191,750.00 0.00 100.0000% 10,191,750.00 7,530,442.83 $16,782,906.25 $197,501.16 $16,585,405.09 $13,072,534.51 Exhibit D ' Page 2 of 2 City of Beaumont,Texas MULTIPURPOSE ALLOCATION ON THE 1996 CERTIFICATES AND 1996 BONDS Present value Percent of Percent requirements total refundable Refunding $15,821,686.67 50.042995% 0.000000% New Money 15,794,500.00 49.957005% 49.957005% $31,616,186.67 100.000000% 49.957005% Series 1996 Certificates Principal Date issued 49.957005% Refundable 03-01-08 $1,175,000.00 $586,994.81 $590,000.00 03-01-09 1,215,000.00 606,977.61 610,000.00 03-01-10 1,355,000.00 676,917.42 680,000.00 03-01-11 1,450,000.00 724,376.57 725,000.00 03-01-12 1,545,000.00 771,835.73 775,000.00 03-01-13 1,645,000.00 821,792.73 825,000.00 03-01-14 1,700,000.00 849,269.09 850,000.00 $10,085,000.00 $5,038,163.97 $5,055,000.00 Series 1996 Bonds Principal Date issued 49.957005% Refundable 03-01-08 $1,580,000.00 $789,320.68 $790,000.00 03-01-09 1,560,000.00 779,329.28 780,000.00 03-01-10 1,570,000.00 784,324.98 785,000.00 $4,710,000.00 $2,352,974.94 $2,355,000.00 APPENDIX I Applicable schedules provided by RBC Dain Rauscher Inc. City of Beaumont, General Obligation Debt Sources&Uses Report Advance Refunding of Series 1995,1996(2 Issues)and 1998 Bonds Sources of Funds: Principal Amount of Current Interest Bonds(CIBs) 20,640,000.00 CIB Premium 1,410,027.15 Transfer from Debt Service Fund 367,000.00 Accrued Interest 81,250.35 Total SOURCES of Funds $22,498,277.50 Uses of Funds: SLG Escrow Cost 22,109,645.58 Accrued Interest Deposit to D/S Fund 81,250.35 Issuance Expenses: ($304,896.37) Underwriter's Discount 118,680.00 Rating Agency 30,000.00 Insurance 68,216.37 Financial Advisor Fee 35,000.00 Bond Counsel 25,000.00 c Trustee/Escrow Agent 5,000.00 Printing 10,000.00 Miscellaneous 5,000.00 CPA/Accountant 8,000.00 Rounding Amount 2,485.20 Total USES of Funds $22,498,277,50 Miscellaneous Bond Issuance Information: Delivery Date: 12/02/2004 Principal Amount of Bonds Being Refunded 20,825,000.00 Principal Amount of the Refunding Bonds 20,640,000.00 Proceeds of"The new Bonds" 22,050 027.15 Rate/Yield on the Refunded Bonds 5.33999579% "All Costs Included"TIC on the New Issue is 3.75853501% Federal Arbitrage Yield on the New Issue is 3.49552934% Yield on Escrow 2.81261859% Total Debt Service Savings 810,337.85 Present Value Savings 3.75853501% 749,657.89 Total Debt Service Savings as a Percent of Total Debt Service of Refunded Bonds 2.80010982% Present Value Savings as a Percent of Principal Amount of Bonds Being Refunded 3.59979782% BEAUMONT CITY.RUN2004REF NEW2004REF NEW2004REF2 AGGREFUND Prepared by.RBC Dain Rauscher--Houston,Texas 1110212004 @ 12.15 v7.03 Page-2 City of Beaumont,General Obligation Debt Escrow Sufficiency&Balance Report Advance Refunding of Series 1995,1996(2 Issues)and 1998 Bonds Escrow Settlement Date Is 12/02/2004 This is a birfucated escrow--Cost of"Early"escrow is$366,999.00 Proceeds from Less Amts to Plus Maturing Adjusted Proceeds from Original be Invested Amts Invested Proceeds from Present Value 'Other' Old D/S Escrow Escrow Dates ResEse ed in 0%SLGs in 0%SLGs Rstrct'd Esc @ 2.81261859% Investments Requirement New Balance Old Balance 12/02/2004 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1.58 1.58 03/01/2005 5,036,457.85 0.00 0.00 4,668,053.90 4,635,932.12 368,403.95 5,036,457.50 1.93 1.93 09/0112005 414,519.84 0.00 0.00 414,519.84 405,958.42 0.00 414,520.00 1.77 1.77 03/01/2006 414,520.16 0.00 0.00 414,520.16 400,328.87 0.00 414,520.00 1.93 1.93 09/01/2006 414,519.57 0.00 0.00 414,519.57 394,776.52 0.00 414,520.00 1.50 1.50 03/01/2007 7,824,519.75 0.00 0.00 7,824,519.75 7,348,504.93 0.00 7,824,520.00 1.25 1.25 09/01/2007 225,675.75 0.00 0.00 225,675.75 209,007.19 0.00 225,675.00 2.00 2.00 03/01/2008 9,140,674.00 0.00 0.00 9,140,674.00 8,348,136.96 0.00 9,140,675.00 1.00 1.00 Totals $23,470,886.92 $0.00 $0.00 $23,102,482.97 $21,742,645.00 $368,403.95 $23,470,887.50 Cost of"Late"Escrow SLG Securities $21,742,645.00 Escrow Arbitrage YLD after Reinvestment in 0%SLGs=2.81261859% Cost of"Early"Escrow SLG Securities $366,999.00 Cost of'Other'Restricted Investments $0.00 Escrow Starting Balance $1.58 Total Escrow Cost... $22,109,645.58 SLG Rates Were Taken From SLG Table Dated 1010812004 r { BEAUMONT CITY:RUN2004REFAGGREFUND Prepared by:RBC Dain Rauscher-Houston,Texas 1110212004 @ 12:15 v7.03 Page-10 City of Beaumont,General Obligation Debt U. S.Treasury SLG Investments Advance Refunding of Series 1995,1996(2 Issues)and 1998 Bonds Escrow Settlement Date Is 12/02/2004 Payment SLG SLG Rates Total Receipts PV'd SLG Rates Dates Principal Subscribed Interest SLG Receipts 2.81261859% From Table 03/01/2005 4,899,696 1.570000 136,761.85 5,036,457.85 5,001,801.01 1.570000 09/01/2005 171,897 2.050000 242,622.84 414,519.84 405,958.42 2.050000 03/01/2006 174,533 2.210000 239,987.16 414,520.16 400,328.87 2.210000 09/01/2006 176,461 2.440000 238,058.57 414,519.57 394,776.52 2.440000 03101/2007 7,588,614 2.670000 235,905.75 7,824,519.75 7,348,504.93 2.670000 09/01/2007 91,078 2.830000 134,597.75 225,675.75 209,007.19 2.830000 03/01/2008 9,007,365 2.960000 133,309.00 9,140,674.00 8,348,136.96 2.960000 Totals $22,109,644 Y$1,361,242.92 $23,470,886.92 $22,108,513.89 a Early(Bifurcated)Escrow Payment SLG SLG Rates Total SLG Rates Dates Principal Subscribed Interest SLG Receipts From Table 03/01/2005 366,999 1.570000 1,404.95 368,403.95 0.00 1.570000 Totals $366,999 $1,404.95 $368,403.95 $0.00 7 SLG Rates were taken from a SLG table dated 10/0812004 r, BEAUMONT CITY:RUN2004REF AGGREFUND Prepared by:RBC Dain Rauscher—Houston,Texas 1110212004 @ 12:15 v7.03 Page-11 City of Beaumont,General Obligation Debt Aggregation Spreadsheet Report Advance Refunding of Series 1995,1996(2 Issues)and 1998 Bonds Data are Principal Amounts Data are to Maturity FY 10/01 Dates Totals OLD1995R OLD1996R OLD1996REFR OLD1998R 2005 0.00 2006 500,000.00 500,000.00 2007 500,000.00 500,000.00 2008 1,920,000.00 500,000.00 590,000.00 790,000.00 40,000.00 2009 2,390,000.00 500 000.00 610 000.00 780,000.00 500 000.00 2010 2,465,000.00 500,000.00 680,000.00 785,000.00 500,000.00 2011 1,725,000.00 500,000.00 725,000.00 500,000.00 2012 1,775,000.00 500,000.00 775,000.00 500,000.00 2013 1,825,000.00 500,000.00 825,000.00 500,000.00 2014 1710,000.00 500,000.00 850,000.00 360,000.00 2015 1,900,000.00 1,900,000.00 2016 2,005,000.00 2,005,000.00 2017 2,110,000.00 2,110,000.00 2018 0.00 Totals $20 825 000.00 4 500 000.00 $5 055 000.00 $2 355 000.00 $8,91 000.00 Component Face Amt ----Title---- From To OLD1995R $4,500,000.00 Combination Tax&Revenue CO,Series 1995 OLD1996R $5,055,000.00 Series 1996 Dated 1/111996 Bonds to Refund OLD1996REFR $2,355,000.00 Refunding Bonds,Series 1996 OLD1998R $8,915,000.00 Series 1998 Bonds to Refund BEAUMONT CITY:AGGREFUND Prepared by.RBC Dain Rauscher--Houston,Texas 1110212004 @ 12:16 v7.03 Page-12 City of Beaumont,General Obligation Debt Advance Refunding of Series 1995,1996(2 Issues)and 1998 Bonds Dated Date=09/01/2004 Combination Tax S Revenue CO,Series 1995 Delivery Date 09/01/2004 To Be Refunded Term Bond Bond Coupon Interest Total Fiscal Year Debt Service Dates Maturities Redemptions Proceeds Rate Yield Price Amount Debt Service Debt Service to Call 03/01/2005 - - - 6.400 6.400000 100.000000 121,937.50 121,937.50 - 7621,937.50 09/01/2005 - - - - - 121,937.50 121,937.50 243,875.00 - 03/01/2006 - 500,000.00 - 500,000.00 5.200 5.200000 100.000000 121,937.50 621,937.50 - 09/01/2006 - - - - - - 108,937.50 108,937.50 730,875.00 03/01/2007 - 500,000.00 - 500,000.00 5.300 5.300000 100.000000 108,937.50 608,937.50 - - 09/01/2007 - - - - - - 95,687.50 95,687.50 704,625.00 03/01/2008 - 500,000.00 . 500,000.00 5.400 5.400000 100.000000 95,687.50 595,687.50 - 09/01/2008 - - - - - - 82,187.50 82,187.50 677,875.00 03/01/2009 - 500,000.00 - 500,000.00 5.500 5.500000 100.000000 82,187.50 582,187.50 - 09101/2009 - - - - - - 68,437.50 68,437.50 650,625.00 03/01/2010 - 500,000.00 ' 500,000.00 5.600 5.600000 100.000000 68,437.50 568,437.50 - 09/01/2010 - - - - 54,437.50 54,437.50 622,875.00 03/01/2011 - 500,000.00 - 500,000.00 5.625 5.625000 100.000000 54,437.50 554,437.50 - 09/01/2011 - - - - - 40,375.00 40,375.00 594,812.50 03/01/2012 - 500,000.00 " 500,000.00 5.700 5.700000 100.000000 40,375.00 540,375.00 09/01/2012 - - - - - - 26,125.00 26,125.00 566,500.00 03/0112013 - 500,000.00 ` 500,000.00 5.750 5.750000 100.000000 26,125.00 526,125.00 - 09/01/2013 - - - - - - 11,750.00 11,750.00 537,875.00 03/01/2014 500,000.00 ' 500,000.00 4.700 4.700000 100.000000 11,750.00 511,750.00 511,750.00 Total - 4,500,000.00 4,500,000.00 1,341,687.50 5,841,687.50 5,841,687.50 4,621,937.50 Acc Int rand Totals 4,500,000.00 4 500 000.00 1,341,687.50 5 841 687.50 5,841,687.50 4 621,937.50 r -Bonds callable... 03/01/2005 @ 100.000 TIC(Incl.all expenses)....5.42630359% Average Coupon.......5.42095960% Net Eff.Int.Rate(Texas Vernon's)= 5.420960%(with Adjstmnt of$0.00). TIC(Arbitrage TIC).........5.42630359% Average Life(yrs)... 5.50 IRS Form 8038-G NIC =5.420960%(with Adjstmnt of$0.00). Bond Years.................. 24,750.00 WAM rs)............. 5.500000 NIC= 5.420960% with Adjstmnt of$0.00). BEAUMONT CITY:OLD1995R Prepared by:RBC Dain Rauscher-Houston,Texas 1110212004 @ 12:16 v7.03 Page-13 City of Beaumont,General Obligation Debt Advance Refunding of Series 1995,1996(2 Issues)and 1998 Bonds Dated Date=09/01/2004 Series 1996 Dated 1/1/1996 Bonds to Refund Delivery Date= 09/01/2004 Term Bond Bond Coupon Interest Total Fiscal Year Debt Service Dates Maturities Redemptions Proceeds Rate Yield Price Amount Debt Service Debt Service to Call 03/01/2005 - - 5.500 5.500000 100.000000 129,187.50 129,187.50 - 129,187.50 09/01/2005 - - - - - - 129,187.50 129,187.50 258,375.00 129,187.50 03/01/2006 - - - 5.500 5.500000 100.000000 129,187.50 129,187.50 - 129,187.50 09/01/2006 - - - - - - 129,187.50 129,187.50 258,375.00 129,187.50 03101/2007 - 5.500 5.500000 100.000000 129,187.50 129,187.50 5,184,187.50 09/01/2007 - - - - - - 129,187.50 129,187.50 258,375.00 03/01/2008 - 590,000.00 * 590,000.00 5.000 5.000000 100.000000 129,187.50 719,187.50 - 09/01/2008 - - - - - - 114,437.50 114,437.50 833,625.00 03/01/2009 - 610,000.00 * 610,000.00 5.000 5.000000 100.000000 114,437.50 724,437.50 - 09/01/2009 - 99,187.50 99,187.50 823,625.00 03101/2010 - 680,000.00 * 680,000.00 5.000 5.000000 100.000000 99,187.50 779,187.50 - 09/0112010 - - - - - - 82,187.50 82,187.50 861,375.00 03/01/2011 - 725,000.00 * 725,000.00 5.100 51100000 100.000000 82,187.50 807,187.50 - 09/01/2011 - - - - - - 63,700.00 63,700.00 870,887.50 - 03/01/2012 - 775,000.00 * 775,000.00 5.200 5.200000 100.000000 63,700.00 838,700.00 - k 09/01/2012 - - - - - - 43,550.00 43,550.00 882,250.00 - 03/01/2013 - 825,000.00 * 825,000.00 5.200 5.200000 100.000000 43,550.00 868,550.00 09/01/2013 - - - - 22,100.00 22,100.00 890,650.00 03/01/2014 850,000.00 * 850,000.00 5.200 5.200000 100.000000 22,100.00 872,100.00 872,100.00 Total - 5,055,000.00 5,055,000.00 1,754,637.50 6,809,637.50 6,809,637.50 5,700,937.50 Acc int - - rand Totals 5,055,000.00 5 055 000.00 1,754,637.50 6 809 637.50 6,809,637.50 5 700 937.50 *-Bonds callable... 03/01/2007 @ 100.000 TIC(Incl.all expenses)....5.13266346% Average Coupon.......5.13615075% Net Eff.Int.Rate(Texas Vernon's)= 5.136151%(with Adjstmnt of$0.00). TIC(Arbitrage TIC).........5.13266346% Average Life(yrs)... 6.76 IRS Form 8038-G NIC =5.136151%(with Adjstmnt of$0.00). Bond Years.................. 34,162.50 WAM rs)............. 6.758160 NIC= 5.136151% with Adjstmnt of$0.00). a k t BEAt1MONT CITY:OLD1996R Prepared by:RBC Da1n Rauscher--Houston, Texas 1110212004 @ 12:16 v7.03 Page-14 City of Beaumont,General Obligation Debt Advance Refunding of Series 1995,1996(2 Issues)and 1998 Bonds Dated Date=09/01/2004 Refunding Bonds Series 1996 Delivery Date=09/01/2004 Term Bond Bond Coupon Interest Total Fiscal Year Debt Service Dates Maturities Redemptions Proceeds Rate Yield Price Amount Debt Service Debt Service to Call 03/01/2005 - - - - - 59,657.50 59,657.50 - 59,657.50 09/01/2005 - - - - - 59,657.50 59,657.50 119,315.00 59,657.50 03/01/2006 - - 4.750 4.750000 100.000000 59,657.50 59,657.50 - 59,657.50 09/01/2006 - - - - - 59,657.50 59,657.50 119,315.00 59,657.50 03/01/2007 - - - 4.900 4.900000 100.000000 59,657.50 59,657.50 - 2,414,657.50 09/01/2007 - - - - - - 59,657.50 59,657.50 119,315.00 03/01/2008 - 790,000.00 ` 790,000.00 5.000 5.000000 100.000000 59,657.50 849,657.50 - - 09/01/2008 - - - - - - 39,907.50 39,907.50 889,565.00 03/01/2009 - 780,000.00 ' 780,000.00 5.100 5.100000 100.000000 39,907.50 819,907.50 - 09/01/2009 20,017.50 20,017.50 839 925.00 - 03/01/2010 - 785,000.00 ` 785,000.00 5.100 5.100000 100.000000 20,017.50 805,017.50 805,017.50 - I Total - 2,355,000.00 2,355,000.00 537,452.50 2,892,452.50 2,892,452.50 2,653,287.50 Acc Int - - - - - - rand Totals 2,355,000.00 2 355 000.00 537 452.50 2,892 452.50 2,892,452.50 2 653 287.50 "-Bonds callable... 03/01/2007 @ 100.000 TIC(incl.all expenses)....5.07316912% Average Coupon.......5.07389662% Net Eff.Int.Rate(Texas Vernon's)= 5.073897%(with Adjstmnt of$0.00). I TIC(Arbitrage TIC).........5.07316912% Average Life(yrs)... 4.50 IRS Form 8038-G NIC =5.073897%(with Adjstmnt of$0.00). Bond Years.................. 10,592.50 WAM rs)............. 4.497877 NIC= 5.073897% with Adjstmnt of$0.00). t BEAUMONT CITY:OLD1996REFR Prepared by:RBC Dain Rauscher--Houston,Texas 1110212004 @ 12:16 v7.03 Page-15 City of Beaumont, General Obligation Debt Advance Refunding of Series 1995,1996(2 Issues)and 1998 Bonds Dated Date=09/01/2004 Series 1998 Bonds to Refund Delivery Date=09/01/2004 Term Bond I Bond Coupon Interest Total Fiscal Year Debt Service Dates Maturities Redemptions Proceeds Rate Yield Price Amount Debt Service Debt Service to Call 03101/2005 - - 6.500 6.500000 100.000000 225,675.00 225,675.00 - 225,675.00 . 09/01/2005 - - - - - - 225,675.00 225,675.00 451,350.00 225,675.00 03/01/2006 - - - 6.500 6.500000 100.000000 225,675.00 225,675.00 - 225,675.00 09/01/2006 - - - - - - 225,675.00 225,675.00 451,350.00 225,675.00 03101/2007 - - 6.500 6.500000 100.000000 225,675.00 225,675.00 - 225,675.00 09/01/2007 - - - - - 225,675.00 225,675.00 451,350.00 225,675.00 03/01/2008 - 40,000.00 40,000.00 6.500 6.500000 100.000000 225,675.00 265,675.00 - 91140,675.00 09/01/2008 - - - - - - 224,375.00 224,375.00 490,050.00 03/01/2009 - 500,000.00 * 500,000.00 6.500 6.500000 100.000000 224,375.00 724,375.00 - - _09/0112009 - - 208,125.00 208,125.00 932,500.00 03/01/2010 - 500,000.00 * 500,000.00 4.700 4.700000 100.000000 208,125.00 708,125.00 - 09/01/2010 - - - - - - 196,375.00 196,375.00 904,500.00 - z 03/01/2011 - 500,000.00 * 500,000.00 4.800 4.800000 100.000000 196,375.00 696,375.00 - t 09/01/2011 - - - - - - 184,375.00 184,375.00 880,750.00 03/01/2012 500,000.00 * 500,000.00 5.000 5.000000 100.000000 184,375.00 684,375.00 - 09101/2012 - - - - - - 171,875.00 171,875.00 856,250.00 03/01/2013 - 500,000.00 * 500,000.00 5.000 5.000000 100.000000 171,875.00 671,875.00 - 09/01/2013 - - - - - - 159,375.00 159,375.00 831,250.00 - 03/0112014 - 360,000.00 * 360,000.00 5.000 5.000000 100.000000 159,375.00 519,375.00 - 09/01/2014 - - - - 150,375.00 150,375.00 669,750.00 - 03/01/2015 - 1,900,000.00 * 1,900,000.00 5.000 5.000000 100.000000 150,375.00 2,050,375.00 - - 09/01/2015 - - - - - - 102,875.00 102,875.00 2,153,250.00 03/01/2016 - 2,005,000.00 * 2,005,000.00 5.000 5.000000 100.000000 102,875.00 2,107,875.00 09/01/2016 - - - - - 52,750.00 52,750.00 2,160,625.00 _ p _03/01/2017 2,110,000.00 * 2,110,000.00 5.000 5.000000 100.000000 52,750.00 2,162750.00 § 09/01/2017 - - - - - - - - 2,162,750.00 03/01/2018 - - 4.500 4.500000 100.000000 - - Total - 8,915,000.00 8,915,000.00 4,480,725.00 13,395,725.00 13,395,725.00 10,494,725.00 Acc int - - - - - rand Totals 8,915,000.00 8 915 000.00 4,480,725.00 13 395 725.00 13 395 725.00 10 494 725.00 *-Bonds callable... 03/01/2008 @ 100.000 TIC(incl.all expenses)....5.02794453% Average Coupon.......5.02365670% Net Eff.Int.Rate(Texas Vernon's)= 5.023657%(with Adjstmnt of$0.00). TIC(Arbitrage TIC).........5.02794453% Average Life(yrs)... 10.00 IRS Form 8038-G NIC =5.023657%(with Adjstmnt of$0.00). Bond Years.................. 89,192.50 WAM rs)............. 10.004767 NIC= 5.023657% with Adjstmnt of$0.00). BEAUMONT CITY:OLD1998R Prepared by:RBC Dain Rauscher-Houston,Texas 1110212004 @ 12:16 v7.03 Page-16 City of Beaumont,General Obligation Debt Advance Refunding of Series 1995,1996(2 Issues)and 1998 Bonds Dated Date=11/01/2004 Refunding Bonds Series 2004 Delivery Date=12/02/2004 Term Bond Bond Coupon Interest Total Fiscal Year Debt Service Dates Maturities Redemptions Proceeds Rate Yield Price Amount Debt Service Debt Service to Call 03/01/2005 - - - - - - 300,767.50 300,767.50 - 300,767.50 09/01/2005 - - - - - - 451,151.25 451,151.25 751,918.75 451,151.25 03/0112006 - 220,000.00 222,855.60 3.000 1.940000 101.298000 451,151.25 671,151.25 - 671,151.25 09/01/2006 - - - - - 447,851.25 447,851.25 1,119,002.50 447,851.25 03/01/2007 - 200,000.00 203,794.00 3.000 2.130000 101.897000 447,851.25 647,851.25 647,851.25 09/01/2007 - - - - - 444,851.25 444,851.25 1,092,702.50 444,851.25 03/01/2008 - 1,000,000.00 1,078,760.00 5.000 2.460000 107.876000 444,851.25 1,444,851.25 - 1,444,851.25 09/01/2008 - - - - - - 419,851.25 419,851.25 1,864,702.50 419,851.25 03/01/2009 - 2,455,000.00 2,672,832.15 5.000 2.770000 108.873000 419,851.25 2,874,851.25 - 2,874,851.25 09/01/2009 - - - - 358 476.25 358 476.25 3,233,327.50 358 476.25 03/01/2010 - 2,525,000.00 2,764,521.50 5.000 3.030000 109.486000 358,476.25 2,883,476.25 - 2,883,476.25 09/01/2010 - - - - - 295,351.25 295,351.25 3,178,827.50 295,351.25 03/01/2011 - 1,790,000.00 1,968,910.50 5.000 3.220000 109.995000 295,351.25 2,085,351.25 - 2,085,351.25 09/01/2011 - - - - - - 250,601.25 250,601.25 2,335,952.50 250,601.25 03/01/2012 - 1,835,000.00 2,023,326.05 5.000 3.390000 110.263000 250,601.25 2,085,601.25 - 2,085,601.25 09/01/2012 - - - - - - 204,726.25 204,726.25 2,290,327.50 204,726.25 . 03101/2013 - 1,875,000.00 1,902,862.50 3.750 3.540000 101.486000 204,726.25 2,079,726.25 - 2,079,726.25 09/01/2013 - - - - - - 169,570.00 169,570.00 2,249,296.25 169,570.00 03/01/2014 - 1,435,000.00 1,435,000.00 3.650 3.650000 100.000000 169,570.00 1,604,570.00 - 7,609,570.00 09/01/2014 - - - - - - 143,381.25 143,381.25 1,747,951.25 03/01/2015 - 1,900,000.00 * 1,900,000.00 3.750 3.750000 100.000000 143,381.25 2,043,381.25 09/01/2015 - - - - - - 107,756.25 107,756.25 2,151,137.50 03/01/2016 2,000,000.00 * 2,227,520.00 5.250 3.780000 111.376000 107,756.25 2,107,756.25 - 09/01/2016 - - - - - - 55,256.25 55,256.25 2,163,012.50 03/01/2017 - 2,105,000.00 * 2,330,592.85 5.250 3.860000 110.717000 55,256.25 2,160,256.25 2,160,256.25 Total - 19,340,000.00 20,730,975.15 6,998,415.00 26,338,415.00 26,338,415.00 25,725,627.50 Acc Int - - - -77,698.27 -77,698.27 - rand Totals 19 340 000.00 20 730 975.15 6,920,716.73 26 260 716.73 26 338 415.00 25 725 627.50 *-Bonds callable... 03/01/2014 @ 100.000 TIC(Incl.all expenses)....3.78235619% Average Coupon.......4.65717534% Net Eff.Int.Rate(Texas Vernon's)= 3.731535%(with Adjstmnt of$0.00). TIC(Arbitrage TIC).........3.51509860% Average Life(yrs)... 7.77 IRS Form 8038-G NIC =3.475851%(with Adjstmnt of$0.00). Bond Years.................. 150,271.67 WAM rs)............. 7.674038 NIC= 3.731535% with Adjstmnt of$0.00). BEAUMONT CITY:NEW2004REF Prepared by:RBC Dain Rauscher-Houston, Texas 1110212004 @ 12:15 v7.03 Page-3 City of Beaumont,General Obligation Debt Advance Refunding of Series 1995,1996(2 Issues)and 1998 Bonds Dated Date=11/0112004 Series 2004 Refunding Bonds Delivery Date=12/02/2004 Term Bond Bond Coupon Interest Total Fiscal Year Debt Service Dates Maturities Redemptions Proceeds Rate Yield Price Amount Debt Service Debt Service to Call 03/01/2005 - - - - - 13,750.00 13,750.00 - 13,750.00 09/01/2005 - - - - - - 20,625.00 20,625.00 34,375.00 20,625.00 03/01/2006 - - 3.000 1.940000 101.298000 20,625.00 20,625.00 - 20,625.00 09/01/2006 - - - 20,625.00 20,625.00 41,250.00 20,625.00 03/01/2007 - - 3.000 2.130000 101.897000 20,625.00 20,625.00 - 20,625.00 09/01/2007 - - - - - 20,625.00 20,625.00 41,250.00 20,625.00 03/01/2008 - 1,000,000.00 1,016,730.00 3.000 2.460000 101.673000 20,625.00 1,020,625.00 - 1,020,625.00 09/01/2008 - - - - - - 5,625.00 5,625.00 1,026,250.00 5,625.00 03/01/2009 - - - 5.000 2.770000 108.873000 5,625.00 5,625.00 - 5,625.00 09/01/2009 5,625.00 5,625.00 11,250.00 5,625.00 03/01/2010 - 5.000 3.030000 109.486000 5,625.00 5,625.00 - 5,625.00 09/01/2010 - - - - - - 5,625.00 5,625.00 11,250.00 5,625.00 03/01/2011 - - - 5.000 3.220000 109.995000 5,625.00 5,625.00 - 5,625.00 09/01/2011 - - - - - 5,625.00 5,625.00 11,250.00 5,625.00 03/01/2012 - - 3.625 3.390000 101.495000 5,625.00 5,625.00 - 5,625.00 09/01/2012 - - - - - - 5,625.00 5,625.00 11,250.00 5,625.00 03/01/2013 - - - 3.750 3.540000 101.486000 5,625.00 5,625.00 - 5,625.00 09/01/2013 - - - - 5,625.00 5,625.00 11,250.00 5,625.00 03/01/2014 - 300,000.00 302,322.00 3.750 3.650000 100.774000 5,625.00 305,625.00 - 305,625.00 09/01/2014 - - - - - - - 305,625.00 03/01/2015 - - ' 3.750 3.750000 100.000000 - - - 09/01/2015 - - - - -03/01/2016 - - - 5.250 3.780000 111.376000 - - - - 09/01/2016 - - - - - - -03/01/2017 - - - 5.250 3.860000 110.717000 - - - Total - 1,300,000.00 1,319,052.00 205,000.00 1,505,000.00 1,505,000.00 1,505,000.00 Acc Int - - - -3,552.08 -3,552.08 - rand Totals 1,300,000.00 1 319 052.00 201 447.92 1,501,447.92 1 505 000.00 1,505.000.00 -Bonds callable... 03/01/2014 @ 100.000 TIC(Incl.all expenses)....3.18396696% Average Coupon.......3.34239130% Net Eff.Int.Rate(Texas Vernon's)= 3.031761%(with Adjstmnt of$0.00). TIC(Arbitrage TIC).........3.04861271% Average Life(yrs)... 4.72 IRS Form 8038-G NIC =2.991477%(with Adjstmnt of$0.00). Bond Years.................. 6,133.33 WAM rs)............. 4.622401 NIC= 3.031761% with Adjstmnt of$0.00). BEAUMONT CITY:NEW2004REF2 Prepared by:RBC Dain Rauscher--Houston,Texas 1110212004 @ 12:15 v7.03 Page-4 City of Beaumont,General Obligation Debt Proof of Federal Arbitrage Yield Advance Refunding of Series 1995,1996(2 Issues)and 1998 Bonds Dated Date 11/01/2004 Delivery Date 12/0212004 Proceeds to: Interest to: Disc Term Total(1) PV of Adj D/S Face Bondholder(+) Maturing Bondholder(+) Recoverable Total Bond Adjusted to Dates Amounts Issuer(-) Amounts Issuer(-) Recurring Debt Service Adjustments Cash Flow @ 3.49552934% Fees for Yld Calc 12/02/2004 0.00 -22,050,027.15 0.00 -22,131,277.50 0.00 0.00 0.00 -22,131,277.50 -22,131,277.50 03/01/2005 0.00 0.00 0.00 629,035.00 0.00 314,517.50 0.00 314,517.50 311,834.51 09/01/2005 0.00 0.00 0.00 943,552.50 0.00 471,776.25 0.00 471,776.25 459,717.00 03/01/2006 220,000.00 222,855.60 220,000.00 1,163,552.50 0.00 691,776.25 0.00 691,776.25 662,514.31 09/01/2006 0.00 0.00 0.00 936,952.50 0.00 468,476.25 0.00 468,476.25 440,953.01 03/01/2007 200,000.00 203,794.00 200,000.00 1,136,952.50 0.00 668,476.25 0.00 668,476.25 618,394.82 09/01/2007 0.00 0.00 0.00 930,952.50 0.00 465,476.25 0.00 465,476.25 423,206.68 03/01/2008 2,000,000.00 2,095,490.00 2,000,000.00 2,930,952.50 0.00 2,465,476.25 0.00 2,465,476.25 2,203,083.35 09/01/2008 0.00 0.00 0.00 850,952.50 0.00 425,476.25 0.00 425,476.25 373,663.39 03/01/2009 2,455,000.00 2,672,832.15 2,455,000.00 3,305,952.50 0.00 2,880,476.25 0.00 2,880,476.25 2,486,249.17 09/01/2009 0.00 0.00 0.00 728,202.50 0.00 364,101.25 0.00 364,101.25 308,871.36 03/01/2010 2,525,000.00 2,764,521.50 2,525,000.00 3,253,202.50 0.00 2,889,101.25 0.00 2,889,101.25 2,408,759.06 ' 09/01/2010 0.00 0.00 0.00 601,952.50 0.00 300,976.25 0.00 300,976.25 246,625.48 03/01/2011 1,790,000.00 1,968,910.50 1,790,000.00 2,391,952.50 0.00 2,090,976.25 0.00 2,090,976.25 1,683,952.92 09/01/2011 0.00 0.00 0.00 512,452.50 0.00 256,226.25 0.00 256,226.25 202,805.43 03/01/2012 1,835,000.00 2,023,326.05 1,835,000.00 2,347,452.50 0.00 2,091,226.25 0.00 2,091,226.25 1,626,792.32 09/01/2012 0.00 0.00 0.00 420,702.50 0.00 210,351.25 0.00 210,351.25 160,824.17 03/01/2013 1,875,000.00 1,902,862.50 1,875,000.00 2,295,702.50 0.00 2,085,351.25 0.00 2,085,351.25 1,566,969.54 09/01/2013 0.00 0.00 0.00 350,390.00 0.00 175,195.00 0.00 175,195.00 129,383.28 03/01/2014 1,735,000.00 1,737,322.00 1,735 000.00 6,190 390.00 0.00 1,910 195.00 0.00 6,015,195.00 4,365,975.50 09101/2014 0.00 0.00 0.00 179,006.25 0.00 143,381.25 0.00 35,625.00 25,413.33 03/01/2015 1,900,000.00 1,900,000.00 1,900,000.00 2,079,006.25 0.00 2,043,381.25 0.00 1,935,625.00 1,357,072.51 09/01/2015 0.00 0.00 0.00 107,756.25 0.00 107,756.25 0.00 0.00 0.00 03/01/2016 2,000,000.00 2,227,520.00 2,000,000.00 107,756.25 0.00 2,107,756.25 0.00 0.00 0.00 09/01/2016 0.00 0.00 0.00 55,256.25 0.00 55,256.25 0.00 0.00 0.00 03/01/2017 2,105,000.00 2,330,592.85 2,105,000.00 55,256.25 0.00 2,160,256.25 0.00 0.00 0.00 Totals 20,640,000.00 0.00 20,640,000.00 12,374,015.00 + W 0.00 27,843,415.00 0.00 5,170,600.00 -68,216.37 Plus PV of Bond Insurance.......... 68,216.37 0.00 (1)--Adjustments to cash flow are based on the following"yield to call'optional redemption schedule: NEW2004REF••Call the 03/01/2016 maturity on 03/0112014 @ 100.000 NEW2004REF--Call the 03/01/2017 maturity on 03/01/2014 @ 100.000 BEAUMONT CITY:AGGNEW Prepared by:RBC Dain Rauscher--Houston,Texas 1110212004 @ 12:15 v7.03 Page-7 ERIN Analy ics November 1, 2004 Mark Peroutka Grant Thornton Re: City of Beaumont—Allocation of the Series 1996 New Money and Refunding Bonds. The Series 1996 Bonds were dated 1/1/1996. Mark, According to the KPMG verification report(dated 2/22/1996) for the Series 1996 multi- purpose refunding and new money bond issue the dollars spent for the escrow was $15,825,298.90 and the deposit to the project fund was$15,843,500.00. The percentage of the new money is calculated as follows: 15,843,500 New Money Percentage = -------------------------------- 15,843,500+ 15,825,298.90 New Money Percentage = 50.02873664% Mike O'Hara (979) 278-3294 Section 7 i L No. 7 CERTIFICATE OF ESCROW AGENT RELATING TO AUTHORITY OF OFFICERS AND SIGNATURE IDENTIFICATION I, the undersigned officer of JPMORGAN CHASE BANK (the 'Bank"), do hereby execute and deliver this certificate for the benefit of the Attorney General of the State of Texas and the purchasers of, and all other persons interested in the validity of, the $20,640,000 The City of Beaumont,Texas, General Obligation Refunding Bonds, Series 2004, and I do hereby certify as follows: 1. That I am the duly chosen, qualified and acting officer of the Bank for the office shown beneath my signature and I am duly authorized to execute and deliver this Certificate. 2. That attached as Exhibit "A" to this Certificate is a Secretary's Certificate of the Bank relating to the corporate authority of the Bank to enter into Escrow Agreements, Bond Registrar, Paying Agency and Transfer Agency Agreements and similar types of agreements in connection with the issuance of the Bonds and designating the officers of the Bank authorized to execute such agreements. 3. That the following are duly elected, qualified and acting officers of the Bank having the authority to act for and in the name of the Bank as set forth in Exhibit "A" and that the signatures set opposite their names are their true and correct signatures: i NAME TITLE SIGNATURE Vice Presiden", IN WITNESS WHEREOF, I have hereunto set my hand and affixed the corporate seal of the Bank as of the Z day of V p C Q 4A Qr 92004. JPMorga has Ban >�r e By ` Its: A PRE IDENT' ATTEST: By: Its: (SEAL) -2- EXHIBIT "A" SECRETARY'S CERTIFICATE See attached. Section 8 BOND PURCHASE AGREEMENT $20,640,000 CITY OF BEAUMONT,TEXAS GENERAL OBLIGATION REFUNDING BONDS, SERIES 2004 November 2,2004 Mayor and City Council City of Beaumont,Texas 801 Main Street Beaumont,Texas 77704 The undersigned, First Southwest Company on behalf of itself and Morgan Keegan& Company, Inc., Estrada Hinojosa&Company, Inc., and Southwest Securities, Inc. (collectively,the"Underwriters") offers to enter into the following agreement (this "Agreement") with the City of Beaumont, Texas (the "Issuer") which, upon the Issuer's written acceptance of this offer, will be binding upon the Issuer and upon the Underwriters. This offer is made subject to the Issuer's written acceptance hereof on or before 10:30 p.m. Central Standard Time on November 2, 2004 and, if not so accepted, will be subject to withdrawal by the Underwriters upon notice delivered to the Issuer at any time prior to the acceptance hereof by the Issuer. Terms not otherwise defined in this Agreement shall have the same meanings set forth in the Ordinance(as defined herein)or in the Official Statement(as defined herein). 1. Purchase and Sale of the Bonds. Subject to the terms and conditions and in reliance upon the representations,warranties and agreements set forth herein,the Underwriters hereby agree to purchase from the Issuer, and the Issuer hereby agrees to sell and deliver to the Underwriters, all,but not less than all, of the Issuer's $20,640,000 General Obligation Refunding Bonds, Series 2004 (the "Bonds"). Inasmuch as this purchase and sale represents a negotiated transaction,the Issuer understands, and hereby confirms, that the Underwriters are not acting as a fiduciary of the Issuer, but rather are acting solely in their capacity as Underwriters for their own account. The Underwriters have been duly authorized to execute this Agreement and to act hereunder. The principal amount of the Bonds to be issued, the dated date therefor, the maturities, sinking fund and optional redemption provisions and interest rates per annum are set forth in Schedule I hereto. The Bonds shall be as described in, and shall be issued and secured under and pursuant to the provisions of an Ordinance adopted by the Issuer on November 2,2004(the"Ordinance"). The purchase price for the Bonds shall be $21,931,347.15 (representing the par amount of the Bonds, less an underwriters' discount of $118,680.00, plus a net original issue premium of $1,410,027.15),plus accrued interest on the Bonds to the date of Closing(as defined herein). 2. Public Offerin>?. The Underwriters agree to make a bona fide public offering of all of the Bonds at a price not to exceed the public offering price set forth on the cover of the Official Statement and may subsequently change such offering price without any requirement of prior notice. The Underwriters may offer and sell Bonds to certain dealers (including dealers depositing Bonds into investment trusts) and others at prices lower than the public offering price stated on the cover of the Official Statement. 1874867 2.DOC 3. The Official Statement. (a) Attached hereto as Exhibit A is either a draft of the final Official Statement or a copy of the Preliminary Official Statement dated October 27, 2004 (the "Preliminary Official Statement"), including the cover page and Appendices thereto,of the Issuer relating to the Bonds. Such draft of the final Official Statement or copy of the Preliminary Official Statement, as amended to reflect the changes marked or otherwise indicated on Exhibit A hereto, is hereinafter called the"Official Statement." (b) The Preliminary Official Statement has been prepared for use in connection with the public offering, sale and distribution of the Bonds by the Underwriters. The Issuer hereby represents and warrants that the Preliminary Official Statement was deemed final by the Issuer as of its date, except for the omission of such information which is dependent upon the final pricing of the Bonds for completion, all as permitted to be excluded by Section (b)(1) of Rule 15c(2)-12 under the Securities Exchange Act of 1934(the"Rule"). (c) The Issuer hereby authorizes the Official Statement and the information therein contained to be used by the Underwriters in connection with the public offering and the sale of the Bonds. The Issuer consents to the use by the Underwriters prior to the date hereof of the Preliminary Official Statement in connection with the public offering of the Bonds. The Issuer shall provide, or cause to be provided, to the Underwriters, as soon as practicable after the date of the Issuer's acceptance of this Agreement (but, in any event, not later than within seven business days after the Issuer's acceptance of this Agreement and in sufficient time to accompany any confirmation that requests payment from any customer), copies of the Official Statement which is complete as of the date of its delivery to the Underwriters in such quantity as the Underwriters shall request in order for the Underwriters to comply with Section(b)(4)of the Rule and the rules of the Municipal Securities Rulemaking Board. (d) If, after the date of this Agreement to and including the date the Underwriters are no longer required to provide an Official Statement to potential customers who request the same pursuant to the Rule (the earlier of(i) 90 days from the "end of the underwriting period" (as defined in the Rule) and (ii) the time when the Official Statement is available to any person from a nationally recognized municipal securities repository,but in no case less than 25 days after the"end of the underwriting period" for the Bonds), the Issuer becomes aware of any fact or event which might or would cause the Official Statement, as then supplemented or amended,to contain any untrue statement of a material fact or to omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, or if it is necessary to amend or supplement the Official Statement to comply with law, the Issuer will notify the Underwriters(and for the purposes of this clause provide the Underwriters with such information as it may from time to time request), and if, in the opinion of the Underwriters, such fact or event requires preparation and publication of a supplement or amendment to the Official Statement, the Issuer will forthwith prepare and furnish, at the Issuer's own expense(in a form and manner approved by the Underwriters), a reasonable number of copies of either amendments or supplements to the Official Statement so that the statements in the Official Statement as so amended and supplemented will not, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading or so that the Official Statement will comply with law. If such notification shall be subsequent to the Closing, the Issuer shall furnish such legal opinions, certificates, instruments and other documents as the Underwriters may deem necessary to evidence the truth and accuracy of such supplement or amendment to the Official Statement. (e) The Underwriters hereby agree to timely file the Official Statement with a nationally recognized municipal securities information repository. Unless otherwise notified in writing by the Underwriters, the Issuer can assume that the "end of the underwriting period" for purposes of the Rule is the date of the Closing. 1874867 2.DOC -2- (f) In connection with the execution of this Agreement,the Underwriters will deliver to the Issuer a corporate check payable to the Issuer in the amount of $123,650, as security for the performance by the Underwriters of their obligations to accept and pay for the Bonds at the Closing (described below) in accordance with the provisions of this Agreement. Such check shall be held by the Issuer uncashed until the Closing and at the Closing shall be returned to the Underwriters upon receipt by or on behalf of the Issuer of the Purchase Price for the Bonds. In the event the Issuer does not accept this offer agreed to by the undersigned, or upon its failure to deliver the Bonds at the Closing, or if it shall be unable to satisfy the conditions to the obligations of the Underwriters contained in this Agreement, or if such obligations shall be terminated for any reason permitted by this Agreement, such check shall be immediately returned to the Underwriters. In the event that the Underwriters fail(other than for a reason permitted under this Agreement) to accept and pay for the Bonds at the Closing, such check shall be retained and may be cashed by the Issuer as and for full liquidated damages for such failure and for any and all defaults hereunder on the part of the Underwriters, and the cashing of such check and retention of such proceeds shall constitute a full release and discharge of all claims and rights hereunder against the Underwriters. 4. Representations. Warranties, and Covenants of the Issuer. The Issuer hereby represents and warrants to and covenants with the Underwriters that: (a) The Issuer is a political subdivision and municipal corporation of the State of Texas (the "State"), organized and existing as such under the Constitution and laws of the State. The Issuer is authorized by the provisions of Chapter 1207,Texas Government Code, as amended(the"Act"), among other things, (i) to enter into, execute and deliver this Agreement and the Ordinance and all documents required hereunder and thereunder to be executed and delivered by the Issuer(this Agreement and the Ordinance are hereinafter referred to as the"Issuer Documents"), (ii)to sell, issue and deliver the Bonds to the Underwriter as provided herein, and (iii) to carry out and consummate the transactions contemplated by the Issuer Documents and the Official Statement, and the Issuer has complied, and will at the Closing be in compliance in all respects,with the terms of the Act and the Issuer Documents as they pertain to such transactions; (b) By all necessary official action of the Issuer prior to or concurrently with the acceptance hereof,the Issuer has duly authorized all necessary action to be taken by it for(i)the adoption of the Ordinance and the issuance and sale of the Bonds, (ii)the approval, execution and delivery of, and the performance by the Issuer of the obligations on its part contained in, the Bonds and the Issuer Documents and (iii) the consummation by it of all other transactions contemplated by the Official Statement, and the Issuer Documents and any and all such other agreements and documents as may be required to be executed, delivered and/or received by the Issuer in order to carry out, give effect to, and consummate the transactions contemplated herein and in the Official Statement; (c) The Issuer Documents constitute legal, valid and binding obligations of the Issuer, enforceable in accordance with their respective terms, subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws and principles of equity relating to or affecting the enforcement of creditors' rights; the Bonds, when issued, delivered and paid for in accordance with the Ordinance and this Agreement,will constitute legal, valid and binding obligations of the Issuer entitled to the benefits of the Ordinance and enforceable in accordance with their terms, subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws and principles of equity relating to or affecting the enforcement of creditors' rights;upon the issuance, authentication and delivery of the Bonds as aforesaid, the Ordinance will provide, for the benefit of the holders, from time to time, of the Bonds, the legally valid and binding pledge it purports to create as set forth in the Ordinance; 1874867 2.DOC -3- (d) The Issuer is not in breach of or default in any material respect under any applicable constitutional provision, law or administrative regulation of the State of Texas or the United States or any applicable judgment or decree or any loan agreement, indenture, bond, note, resolution, agreement or other instrument to which the Issuer is a party or to which the Issuer is or any of its property or assets are otherwise subject, and no event has occurred and is continuing which constitutes or with the passage of time or the giving of notice,or both,would constitute a default or event of default by the Issuer under any of the foregoing; and the execution and delivery of the Bonds and the Issuer Documents, and the adoption of the Ordinance and compliance with the provisions on the Issuer's part contained therein, will not conflict with or constitute a breach of or default under any constitutional provision, administrative regulation,judgment, decree, loan agreement, indenture, bond, note, resolution, agreement or other instrument to which the Issuer is a party or to which the Issuer is or to which any of its property or assets are otherwise subject,nor will any such execution,delivery,adoption or compliance result in the creation or imposition of any lien, charge or other security interest or encumbrance of any nature whatsoever upon any of the property or assets of the Issuer to be pledged to secure the Bonds or under the terms of any such law,regulation or instrument, except as provided by the Bonds and the Ordinance; (e) Except for the approval of the Bonds by the Attorney General of the State of Texas and the registration thereof by the Comptroller of Public Accounts of the State of Texas, all authorizations, approvals, licenses, permits, consents and orders of any governmental authority, legislative body,board, agency or commission having jurisdiction of the matter which are required for the due authorization of, which would constitute a condition precedent to, or the absence of which would materially adversely affect the due performance by the Issuer of its obligations under the Issuer Documents, and they have been duly obtained, except for such approvals, consents and orders as may be required under the Blue Sky or securities laws of any jurisdiction in connection with the offering and sale of the Bonds; (f) The Bonds and the Ordinance conform to the descriptions thereof contained in the Official Statement under the caption"THE BONDS", and the proceeds of the sale of the Bonds will be applied generally as described in the Official Statement under the caption"THE BONDS—Sources and Uses of Funds"; (g) There is no litigation, action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, government agency, public board or body, pending or, to the best knowledge of the Issuer after due inquiry, threatened against the Issuer, affecting the existence of the Issuer or the titles of its officers to their respective offices, or affecting or seeking to prohibit, restrain or enjoin the sale, issuance or delivery of the Bonds, or the collection of taxes pledged to the payment of principal of and interest on the Bonds, or the construction or operation of any project financed with the proceeds of the Bonds pursuant to the Ordinance or in any way contesting or affecting the validity or enforceability of the Bonds, the Issuer Documents, or contesting the exclusion from gross income of interest on the Bonds for federal income tax purposes, or contesting in any way the completeness or accuracy of the Preliminary Official Statement or the Official Statement or any supplement or amendment thereto, or contesting the powers of the Issuer or any authority for the issuance of the Bonds,the adoption of the Ordinance or the execution and delivery of the Issuer Documents,nor,to the best knowledge of the Issuer, is there any basis therefor, wherein an unfavorable decision, ruling or finding would materially adversely affect the validity or enforceability of the Bonds or the Issuer Documents; (h) As of the date thereof and with respect to the Issuer, the Preliminary Official Statement did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made,not misleading; 1874867 2.DOC -4- (i) At the time of the Issuer's acceptance hereof and(unless the Official Statement is amended or supplemented pursuant to paragraph (d) of Section 3 of this Agreement) at all times subsequent thereto during the period up to and including the date of Closing, the Official Statement does not and will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein,in light of the circumstances under which they were made,not misleading; 0) If the Official Statement is supplemented or amended pursuant to paragraph (d) of Section 3 of this Agreement, at the time of each supplement or amendment thereto and (unless subsequently again supplemented or amended pursuant to such paragraph) at all times subsequent thereto during the period up to and including the date of Closing, the Official Statement as so supplemented or amended will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made,not misleading; (k) The Issuer will apply, or cause to be applied, the proceeds from the sale of the Bonds as provided in and subject to all of the terms and provisions of the Ordinance and not take or omit to take any action which action or omission will adversely affect the exclusion from gross income for federal income tax purposes of the interest on the Bonds; (1) The Issuer will furnish such information and execute such instruments and take such action in cooperation with the Underwriters as the Underwriters may reasonably request (A) to (i) qualify the Bonds for offer and sale under the Blue Sky or other securities laws and regulations of such states and other jurisdictions in the United States as the Underwriters may designate and(ii)determine the eligibility of the Bonds for investment under the laws of such states and other jurisdictions and (B) to continue such qualifications in effect so long as required for the distribution of the Bonds (provided, however, that the Issuer will not be required to qualify as a foreign corporation or to file any general or special consents to service of process under the laws of any jurisdiction)and will advise the Underwriters immediately of receipt by the Issuer of any notification with respect to the suspension of the qualification of the Bonds for sale in any jurisdiction or the initiation or threat of any proceeding for that purpose; (m) The financial statements of, and other financial information regarding, the Issuer included in the Official Statement fairly present the financial position and results of the Issuer as of the dates and for the periods therein set forth. Prior to the Closing, there will be no adverse change of a material nature in such financial position, results of operations or condition, financial or otherwise, of the Issuer. The Issuer is not a party to any litigation or other proceeding pending or, to its knowledge, threatened which, if decided adversely to the Issuer, would have a materially adverse effect on the financial condition of the Issuer; (n) Prior to the Closing the Issuer will not offer or issue any bonds, notes or other obligations for borrowed money or incur any material liabilities, direct or contingent, payable from or secured by any of the revenues or assets which will secure the Bonds without the prior approval of the Underwriters; and (o) Any certificate, signed by any official of the Issuer authorized to do so in connection with the transactions contemplated by this Agreement, shall be deemed a representation and warranty by the Issuer to the Underwriters as to the statements made therein. 5. Closing. (a) At 10:00 a.m. Central Standard Time, on December 2, 2004, or at such other time and date as shall have been mutually agreed upon by the Issuer and the Underwriters (the "Closing"), the Issuer will, subject to the terms and conditions hereof, deliver the Bonds to the 1874867 2.DOC -5- Underwriters duly executed and authenticated, together with the other documents hereinafter mentioned, and the Underwriters will, subject to the terms and conditions hereof, accept such delivery and pay the purchase price of the Bonds as set forth in Section 1 of this Agreement by a certified or bank cashier's check or checks or wire transfer payable in immediately available funds to the order of the Issuer. Payment for the Bonds as aforesaid shall be made at the offices of Bond Counsel, or such other place as shall have been mutually agreed upon by the Issuer and the Underwriters. Upon receipt of such payment, the Issuer immediately shall return to the Underwriters the good faith check described within Section 3(f) herein. (b) Delivery of the Bonds in definitive form shall be made to The Depository Trust Company("DTC"), or to the Paying Agent/Registrar pursuant to DTC's FAST System. The Bonds shall be prepared and delivered as fully registered bonds in authorized denominations thereof, shall be registered in the name of Cede&Co., all as provided in the Ordinance,and shall be made available to the Underwriters at least one business day before Closing for purpose of inspection. 6. Closing Conditions. The Underwriters have entered into this Agreement in reliance upon the representations, warranties and agreements of the Issuer contained herein, and in reliance upon the representations, warranties and agreements to be contained in the documents and instruments to be delivered at the Closing and upon the performance by the Issuer of its obligations hereunder, both as of the date hereof and as of the date of the Closing. Accordingly, the Underwriters' obligations under this Agreement to purchase, to accept delivery of and to pay for the Bonds shall be conditioned upon the performance by the Issuer of its obligations to be performed hereunder and under such documents and instruments at or prior to the Closing, and shall also be subject to the following additional conditions, including the delivery by the Issuer of such documents as are enumerated herein, in form and substance reasonably satisfactory to the Underwriters: (a) The representations and warranties of the Issuer contained herein shall be true, complete and correct on the date hereof and on and as of the date of the Closing, as if made on the date of the Closing; (b) The Issuer shall have performed and complied with all agreements and conditions required by this Agreement to be performed or complied with by it prior to or at the Closing; (c) At the time of the Closing, (i) the Issuer Documents and the Bonds shall be in full force and effect in the form heretofore approved by the Underwriters and shall not have been amended, modified or supplemented, and the Official Statement shall not have been supplemented or amended, except in any such case as may have been agreed to by the Underwriters, and(ii) all actions of the Issuer required to be taken by the Issuer shall be performed in order for Bond Counsel and Counsel to the Underwriters to deliver their respective opinions referred to hereafter; (d) At the time of the Closing, all official action of the Issuer relating to the Bonds and the Issuer Documents shall be in full force and effect and shall not have been amended, modified or supplemented; (e) At or prior to the Closing, the Ordinance shall have been duly executed and delivered by the Issuer and the Issuer shall have duly executed and delivered and the Registrar shall have duly authenticated the Bonds; (f) At the time of the Closing, there shall not have occurred any change or any development involving a prospective change in the project to be financed with the proceeds of the Bonds, in the condition, financial or otherwise, or in the revenues or operations of the Issuer, from that set forth 1874867 2.DOC -6- in the Official Statement that in the judgment of the Underwriters is material and adverse and that makes it, in the judgment of the Underwriters, impracticable to market the Bonds on the terms and in the manner contemplated in the Official Statement; (g) The Issuer shall not have failed to pay principal or interest when due on any of its outstanding obligations for borrowed money; (h) All steps to be taken and all instruments and other documents to be executed, and all other legal matters in connection with the transactions contemplated by this Agreement, shall be reasonably satisfactory in legal form and effect to the Underwriters; (i) At or prior to the Closing,the Underwriters shall have received copies of each of the following documents: (1) The Official Statement, and each supplement or amendment thereto, if any; (2) The Ordinance with such supplements or amendments as may have been agreed to by the Underwriters, which Ordinance will include an agreement by the Issuer to provide certain periodic information and notices of material events in accordance with the Rule as described in the Official Statement under "CONTINUING DISCLOSURE OF INFORMATION;" (3) The approving opinion of Bond Counsel with respect to the Bonds, in substantially the form attached to the Official Statement; (4) a supplemental opinion of Bond Counsel addressed to the Underwriters, substantially to the effect that: (i) the Ordinance has been duly adopted and is in full force and effect; (ii) the Bonds are exempted securities under the Securities Act of 1933, as amended (the "1933 Act"), and the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act") and it is not necessary, in connection with the offering and sale of the Bonds, to register the Bonds under the 1933 Act or to qualify the Ordinance under the Trust Indenture Act; and (iii) the information appearing in the Official Statement under the captions or subcaptions "THE BONDS" (except for the subsections captioned "Book- Entry-Only System"and"Sources and Uses of Funds"),"CONTINUING DISCLOSURE OF INFORMATION" (except the subsection captioned "Compliance With Prior Undertakings"), and "LEGAL MATTERS" fairly summarizes the procedures and documents referred to therein and is correct as to matters of law. (5) An opinion, dated the date of the Closing and addressed to the Underwriters,of counsel for the Underwriters,to the effect that: (i) the Bonds are exempt securities under the 1933 Act and the Trust Indenture Act and it is not necessary, in connection with the offering and sale of the 1874867 2.DOC -7- Bonds,to register the Bonds under the 1933 Act and the Ordinance need not be qualified under the Trust Indenture Act;and (ii) based upon their participation in the preparation of the Official Statement as counsel for the Underwriters and their participation at conferences at which the Official Statement was discussed, but without having undertaken to determine independently the accuracy, completeness or fairness of the statements contained in the Official Statement, such counsel has no reason to believe that the Official Statement contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading (except for any financial, forecast, technical and statistical statements and data included in the Official Statement and in Appendices A and B thereto, and the information regarding DTC and its book-entry system as to which no view need be expressed); (6) A certificate, dated the date of Closing, of the Issuer to the effect that (i) the representations and warranties of the Issuer contained herein are true and correct in all material respects on and as of the date of Closing as if made on the date of Closing; (ii) no litigation or proceeding or tax challenge against it is pending or, to its knowledge, threatened in any court or administrative body nor is there a basis for litigation which would (a) contest the right of the members or officials of the Issuer to hold and exercise their respective positions, (b) contest the due organization and valid existence of the Issuer, (c) contest the validity, due authorization and execution of the Bonds or the Issuer Documents or(d) attempt to limit, enjoin or otherwise restrict or prevent the Issuer from functioning and collecting revenues, including payments on the Bonds pursuant to the Ordinance, and other income, or the levy or collection of the taxes pledged or to be pledged to pay the principal of and interest on the Bonds, or the pledge thereof; (iii) the Ordinance of the Issuer authorizing the execution, delivery and/or performance of the Official Statement,the Bonds and Issuer Documents has been duly adopted by the Issuer,is in full force and effect and has not been modified, amended or repealed, and(iv)to the best of its knowledge, no event affecting the Issuer has occurred since the date of the Official Statement which should be disclosed in the Official Statement for the purpose for which it is to be used or which it is necessary to disclose therein in order to make the statements and information therein, in light of the circumstances under which they were made,not misleading in any material respect as of the time of Closing, and the information contained in the Official Statement is correct in all material respects and, as of the date of the Official Statement did not, and as of the date of the Closing does not, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements made therein, in the light of the circumstances under which they were made,not misleading; (7) A certificate of the Issuer in form and substance satisfactory to Bond Counsel and counsel to the Underwriters(a)setting forth the facts,estimates and circumstances in existence on the date of the Closing, which establish that it is not expected that the proceeds of the Bonds will be used in a manner that would cause the Bonds to be"arbitrage bonds"within the meaning of Section 148 of the Internal Revenue Code of 1986,as amended(the"Code"),and any applicable regulations (whether final, temporary or proposed) issued pursuant to the Code, and (b) certifying that to the best of the knowledge and belief of the Issuer there are no other facts, estimates or circumstances that would materially change the conclusions, representations and expectations contained in such Bonds; (8) Any other certificates and opinions required by the Ordinance for the issuance thereunder of the Bonds; 1874867 2.DOC -8- (9) Evidence satisfactory to the Underwriters that the Bonds have been rated "AAA" by Standard & Poor's and "Aaa" by Moody's Investors Service, Inc., and that such ratings are in effect as of the date of Closing; (10) A copy of a special report prepared by the independent certified public accountants Grant Thornton LLP, addressed to the Issuer, Bond Counsel and the Underwriters, verifying the arithmetical computations of the adequacy of the maturing principal and interest on the escrowed securities and uninvested cash on hand under the Escrow Agreement to pay, when due, the principal of and interest on the Bonds and the computation of the yield with respect to such Bonds; (11) The Escrow Agreement, executed by the Issuer and the Escrow Agent; (12) A copy of the municipal bond insurance policy insuring payment of principal of and interest on the Bonds, issued by Financial Security Assurance Inc. ("FSA"), together with an opinion of counsel to FSA, in form and substance satisfactory to the Underwriters; (13) The approving opinion of the Attorney General of the State of Texas with respect to the Bonds; (14) The registration certificate of the Comptroller of the State of Texas with respect to the Bonds; and (15) Such additional legal opinions, certificates, instruments and other documents as the Underwriters or counsel to the Underwriters may reasonably request to evidence the truth and accuracy, as of the date hereof and as of the date of the Closing, of the Issuer's representations and warranties contained herein and of the statements and information contained in the Official Statement and the due performance or satisfaction by the Issuer on or prior to the date of the Closing of all the respective agreements then to be performed and conditions then to be satisfied by the Issuer. All of the opinions, letters, certificates, instruments and other documents mentioned above or elsewhere in this Agreement shall be deemed to be in compliance with the provisions hereof if, but only if,they are in form and substance satisfactory to the Underwriters. If the Issuer shall be unable to satisfy the conditions to the obligations of the Underwriters to purchase,to accept delivery of and to pay for the Bonds contained in this Agreement, or if the obligations of the Underwriters to purchase,to accept delivery of and to pay for the Bonds shall be terminated for any reason permitted by this Agreement, this Agreement shall terminate and neither the Underwriters nor the Issuer shall be under any further obligation hereunder, except that the respective obligations of the Issuer and the Underwriters set forth in Section 4 hereof shall continue in full force and effect. 7. Termination. The Underwriters shall have the right to cancel its obligation to purchase the Bonds if,between the date of this Agreement and the Closing,the market price or marketability of the Bonds shall be materially adversely affected, in the reasonable judgment of the Underwriters, by the occurrence of any of the following: (a) legislation shall be enacted by or introduced in the Congress of the United States or recommended to the Congress for passage by the President of the United States, or the Treasury Department of the United States or the Internal Revenue Service or any member of the Congress or the 1874867 2.DOC -9- legislature of the State of Texas or favorably reported for passage to either House of the Congress by any committee of such House to which such legislation has been referred for consideration, a decision by a court of the United States or of the State of Texas or the United States Tax Court shall be rendered, or an order,ruling,regulation(final,temporary or proposed),press release, statement or other form of notice by or on behalf of the Treasury Department of the United States, the Internal Revenue Service or other governmental agency shall be made or proposed, the effect of any or all of which would be to impose, directly or indirectly, federal income taxation or State income taxation upon revenues or other income of the general character to be derived by the Issuer pursuant to the Ordinance, or upon interest received on obligations of the general character of the Bonds or, with respect to State taxation, of the interest on the Bonds as described in the Official Statement, or other action or events shall have transpired which may have the purpose or effect, directly or indirectly, of changing the federal income tax consequences of any of the transactions contemplated herein; (b) legislation introduced in or enacted (or ordinance passed) by the Congress or an order, decree, or injunction issued by any court of competent jurisdiction, or an order, ruling, regulation (final,temporary,or proposed),press release or other form of notice issued or made by or on behalf of the Securities and Exchange Commission, or any other governmental agency having jurisdiction of the subject matter, to the effect that obligations of the general character of the Bonds, including any or all underlying arrangements, are not exempt from registration under or other requirements of the 1933 Act, or that the Ordinance is not exempt from qualification under or other requirements of the Trust Indenture Act,or that the issuance, offering, or sale of obligations of the general character of the Bonds, including any or all underlying arrangements, as contemplated hereby or by the Official Statement or otherwise, is or would be in violation of the federal securities law as amended and then in effect; (c) any state blue sky or securities commission or other governmental agency or body shall have withheld registration, exemption or clearance of the offering of the Bonds as described herein, or issued a stop order or similar ruling relating thereto; (d) a general suspension of trading in securities on the New York Stock Exchange or the American Stock Exchange, the establishment of minimum prices on either such exchange, the establishment of material restrictions (not in force as of the date hereof)upon trading securities generally by any governmental authority or any national securities exchange, a general banking moratorium declared by federal, State of New York, or State officials authorized to do so; (e) the New York Stock Exchange or other national securities exchange or any governmental authority, shall impose, as to the Bonds or as to obligations of the general character of the Bonds, any material restrictions not now in force, or increase materially those now in force, with respect to the extension of credit by,or the charge to the net capital requirements of,Underwriters; (f) any amendment to the federal or state Constitution or action by any federal or state court, legislative body, regulatory body, or other authority materially adversely affecting the tax status of the Issuer, its property, income securities(or interest thereon), or the validity or enforceability of the levy of taxes to pay principal of and interest on the Bonds; (g) any event occurring, or information becoming known which, in the judgment of the Underwriters, makes untrue in any material respect any statement or information contained in the Official Statement, or has the effect that the Official Statement contains any untrue statement of material fact or omits 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; 1874867 2.DOC -10- (h) there shall have occurred since the date of this Agreement any materially adverse change in the affairs or financial condition of the Issuer; (i) the United States shall have become engaged in hostilities which have resulted in a declaration of war or a national emergency or there shall have occurred any other outbreak or escalation of hostilities or a national or international calamity or crisis, financial or otherwise, the effect of such outbreak, calamity or crisis on the financial markets of the United States being such as, in the reasonable opinion of the Underwriters, would materially and adversely affect the ability of the Underwriters to market the Bonds; 0) any fact or event shall exist or have existed that, in the Underwriters'judgment, requires or has required an amendment of or supplement to the Official Statement; (k) there shall have occurred any downgrading, or any notice shall have been given of(A) any intended or potential downgrading or(B) any review or possible change that does not indicate a possible upgrade, in the rating accorded any of the Issuer's obligations (including the rating to be accorded the Bonds); and (1) the purchase of and payment for the Bonds by the Underwriters, or the resale of the Bonds by the Underwriters, on the terms and conditions herein provided shall be prohibited by any applicable law, governmental authority, board, agency or commission, unless such prohibition is due to the action or inaction of the Underwriters. 8. Expenses. (a) The Underwriters shall be under no obligation to pay, and the Issuer shall pay, any expenses incident to the performance of the Issuer's obligations hereunder, including, but not limited to (i) the cost of preparation and printing of the Bonds, (ii) the fees and disbursements of Bond Counsel; (iii) the fees and disbursements of the Financial Advisor to the Issuer, and (iv) the fees and disbursements of any other engineers, accountants, and other experts, consultants or advisers retained by the Issuer. (b) The Underwriters shall pay (i) the cost of preparation and printing of this Agreement,the Blue Sky Survey and Legal Investment Memorandum, if any; (ii)all advertising expenses in connection with the public offering of the Bonds; and (iii) all other expenses incurred by them in connection with the public offering of the Bonds, including the fees and disbursements of Counsel to the Underwriters. 9. Notices. Any notice or other communication to be given to the Issuer under this Agreement may be given by delivering the same in writing at City of Beaumont, Texas, 801 Main Street, Beaumont, Texas 77704, Attention: Mayor, and any notice or other communication to be given to the Underwriters under this Agreement may be given by delivering the same in writing to First Southwest Company, 1021 Main Street, Suite 2200,Houston,Texas 77002,Attention: C.Terrell Palmer. 10. Parties in Interest. This Agreement as heretofore specified shall constitute the entire agreement between us and is made solely for the benefit of the Issuer and the Underwriters (including successors or assigns of the Underwriters) and no other person shall acquire or have any right hereunder or by virtue hereof. This Agreement may not be assigned by the Issuer. All of the Issuer's representations, warranties and agreements contained in this Agreement shall remain operative and in full force and effect, regardless of(i) any investigations made by or on behalf of any of the Underwriters; (ii) delivery of and payment for the Bonds pursuant to this Agreement; and (iii) any termination of this Agreement. 1874867 2.DOC -11- 11. Effectiveness. This Agreement shall become effective upon the acceptance hereof by the Issuer and shall be valid and enforceable at the time of such acceptance. 12. Choice of Law. This Agreement shall be governed by and construed in accordance with the law of the State of Texas. 13. Severability. If any provision of this Agreement shall be held or deemed to be, or shall in fact be, invalid, inoperative or unenforceable as applied in any particular case in any jurisdiction or jurisdictions, or in all jurisdictions because it conflicts with any provisions of any Constitution, statute, rule of public policy, or any other reason, such circumstances shall not have the effect of rendering the provision in question invalid, inoperative or unenforceable in any other case or circumstance, or of rendering any other provision or provisions of this Agreement invalid, inoperative or unenforceable to any extent whatever. 14. Business Day. For purposes of this Agreement, "business day"means any day on which the New York Stock Exchange is open for trading. 15. Section Headings. Section headings have been inserted in this Agreement as a matter of convenience of reference only, and it is agreed that such section headings are not a part of this Agreement and will not be used in the interpretation of any provisions of this Agreement. 16. Counterparts. This Agreement may be executed in several counterparts each of which shall be regarded as an original(with the same effect as if the signatures thereto and hereto were upon the same document)and all of which shall constitute one and the same document. 1874867 2.DOC -12- If you agree with the foregoing,please sign the enclosed counterpart of this Agreement and return it to the Underwriters. This Agreement shall become a binding agreement between you and the Underwriters when at least the counterpart of this letter shall have been signed by or on behalf of each of the parties hereto. Very truly yours, FIRST SOUTHWEST COMPANY MORGAN KEEGAN&COMPANY, INC. ESTRADA HINOJOSA&COMPANY, INC. SOUTHWEST SECURITIES,INC. By:FIRST SOUTHWEST COMPANY By: Authorized Officer Accepted and agreed to this 2nd day of November, 2004. CITY OF BEAUMONT, TEXAS B �- Y Name: &i z s Title: Schedule I City of Beaumont, Texas $20,640,000 General Obligation Refunding Bonds, Series 2004 Principal Amount Maturity Date Interest Rate Yield ($) (March 1) (%) (%) 220,000 2006 3.000 1.940 200,000 2007 3.000 2.130 1,000,000 2008 3.000 2.460 1,000,000 2008 5.000 2.460 2,455,000 2009 5.000 2.770 2,525,000 2010 5.000 3.030 1,790,000 2011 5.000 3.220 1,835,000 2012 5.000 3.390 1,875,000 2013 3.750 3.540 1,435,000 2014 3.650 3.650 300,000 2014 3.750 3.650 1,900,000 2015* 3.750 3.750 2,000,000 2016* 5.250 3.780 2,105,000 2017* 5.250 3.860 *Subject to redemption on March 1, 2014 at the option of the City. Section 9 No. BOND REGISTRAR, PAYING AGENCY AND TRANSFER AGENCY AGREEMENT THIS BOND REGISTRAR, PAYING AGENCY AND TRANSFER AGENCY AGREEMENT (the "Agreement"), dated as of this 1st day of November, 2004, by and between The City of Beaumont, Texas [a municipal corporation organized and operating under the Texas Constitution], (hereinafter, with any authorized successor, the "Issuer"), and Wells Fargo Bank, N.A., a national banking association organized and existing under the laws of the United States of America (hereinafter, with any authorized successor, the "Paying Agent"); WITNESSETH : WHEREAS, the Issuer is authorized to issue the $20,640,000 The City of Beaumont, Texas, General Obligation Refunding Bonds, Series 2004 (the "Bonds") in accordance with the Ordinance attached hereto as Exhibit "A" and incorporated herein for all purposes (the"Bond Order'); WHEREAS, the Issuer desires that the Bonds be issued in fully registered form with privileges of transfer and exchange as provided in the Bond Order to assure the exemption from federal income tax of interest thereon pursuant to Section 103 of the Internal Revenue Code of 1986, as amended, and is authorized by Chapter 1203, Texas Government Code Annotated, to issue the Bonds in such form and amount and to provide for the issuance of bonds upon transfer or replacement thereof or in exchange therefor at any place of payment as provided in the Bond Order; WHEREAS, the governing body of the Issuer has authorized the issuance of the Bonds subject to the terms of the Bond Order and, to provide for registration, payment, transfer, exchange, and replacement of the Bonds, the Issuer has authorized the execution and delivery of this Agreement; and WHEREAS, all things have been done which are necessary to make the Bonds, when registered by the Comptroller of Public Accounts of the State of Texas and delivered, the valid obligations of the Issuer and to constitute this Agreement a valid and binding contract in accordance with its terms: NOW, THEREFORE, for and in consideration of the premises and the mutual covenants herein contained, and subject to the conditions herein set forth, the Issuer and the Paying Agent agree as follows: ARTICLE ONE DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION SECTION 1.01. Definitions. For all purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires: A. The terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular. B. All references in this Agreement to "Articles," "Sections" and other subdivisions are to the designated Articles, Sections and other subdivisions of this Agreement as originally executed. C. The words "herein," "hereof' and "hereunder" and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section or other subdivision. 1 "Agreement" means this instrument as originally executed or as it may from time to time be supplemented, modified, or amended by one or more instruments supplemental hereto entered into pursuant to the applicable provisions hereof. "Board" means the governing body of the Issuer. "Board Action" means an official action adopted by the Board as certified by a duly authorized officer thereof. "Bond Order" has the meaning ascribed to such term in the preamble to this Agreement. "Bonds" has the meaning ascribed to such term in the preamble to this Agreement. "Holder" when used with respect to any Bond, means the Person in whose name such Bond is registered in the Bond Register. "Issuer" has the meaning ascribed to such term in the preamble to this Agreement. "Paying Agent" means Wells Fargo Bank, N. A. or any successor paying agent selected in accordance with this Agreement. "Person" means any entity, individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, or government or any governmental agency or political subdivision. "Redemption Date" when used with respect to any Bond to be redeemed means the date fixed for such redemption pursuant to the terms thereof and this Agreement. "Redemption Price" when used with respect to any Bond to be redeemed means the price at which it is to be redeemed pursuant to terms thereof, excluding installments of interest whose Stated Maturity is on or before the Redemption Date. SECTION 1.02. Notices. Any request, demand, authorization, direction, notice, consent, waiver, or other written communication provided or permitted by this Agreement or the Bond Order to be made upon, given or furnished to, or filed with A. the Issuer, shall be sufficient for every purpose hereunder if in writing and mailed, first- class postage prepaid, to the Issuer and received by it at 801 Main Street, Beaumont, Texas 77701 ATTENTION: City Manager, with a copy to be provided to Orgain, Bell & Tucker, L.L.P.; 470 Orleans Street; Beaumont, TX 77701; Attention: Lance Fox or at any other address previously furnished to the Paying Agent in writing by the Issuer Request, 2 B. the Paying Agent, shall be sufficient for every purpose hereunder if in writing and mailed, first-class postage prepaid (and properly referencing this Agreement or the Bonds) to and received by the Paying Agent 1000 Louisiana Street, Suite 640, MAC T5001-061, Houston, Texas 77002, Attention: Trust Department, or any other address previously furnished to the Issuer in writing by the Paying Agent. Where this Agreement provides for notice to Holders of Bonds of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to each Holder, at the address of such Holder as it appears in the bond register. In any case where notice to Holders is given by mail, neither the failure to mail such notice nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to all other Holders. Where this Agreement provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Paying Agent, but such filing is not a condition precedent to the validity of any action taken in reliance upon such waiver. SECTION 1.03. Effect of Headings. The Article and Section headings herein are for convenience only and do not affect the construction hereof. SECTION 1.04. Successors and Assigns. All covenants and agreements in this Agreement by the Issuer or the Paying Agent shall bind their respective successors and assigns. SECTION 1.05. Severability Clause. In case any provision of this Agreement, the Bond Order, or the Bonds or any application thereof shall be invalid, illegal, or unenforceable, the validity, legality, and enforceability of the remaining provisions and applications of this Agreement shall not in any way be affected or impaired thereby. SECTION 1.06. Benefits of Agreement. Nothing in this Agreement or in the Bonds, express or implied, shall give to any Person other than the parties hereto and their successors hereunder, any benefit or any legal or equitable right, remedy, or claim under this Agreement. SECTION 1.07. Governing Law. This Agreement shall be construed in accordance with and governed by the laws of the State of Texas. 3 ARTICLE TWO THE BONDS SECTION 2.01. Form Generally. The Bonds have the title and are in the denominations specified in the Bond Order. The aggregate principal amount of the Bonds which may be authenticated and delivered and outstanding under this Agreement is limited as provided in the Bond Order. SECTION 2.02. Execution, Authentication, Delivery, Dating, Registration, Replacement, Cancellation, Transfer, Exchange, Redemption and Payment of Bonds. The Bonds are to be executed, authenticated, delivered, dated, registered, replaced, cancelled, and subject to transfer, exchange and redemption as provided, and the principal and Redemption Price of and interest on the Bonds is payable to the Persons and in the manner provided, in the Bond Order. ARTICLE THREE RIGHTS AND OBLIGATIONS OF PAYING AGENT SECTION 3.01. Certain Duties and Responsibilities. A. The Paying Agent 1. undertakes to perform only such duties as are specifically set forth in this Agreement and in the Bond Order, and no implied covenants or obligations shall be read into this Agreement or the Bond Order against the Paying Agent, and 2. in the absence of bad faith on its part, may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Paying Agent and conforming to the requirements of this Agreement and the Bond Order, but in the case of any such certificates or opinions which by any provision of this Agreement or the Bond Order are specifically required to be furnished to the Paying Agent, shall be under a duty to examine the same to determine whether or not they conform to the requirements thereof. B. No provision of this Agreement shall be construed to relieve the Paying Agent from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that 1. this Subsection shall not be construed to limit the effect of Subsection A of this Section; and 2. the Paying Agent shall not be liable for any error of judgment made in good faith by any officer thereof, unless it shall be proved that the Paying Agent was negligent in ascertaining the pertinent facts. C. Whether or not therein expressly so provided, every provision of this Agreement relating to the conduct or affecting the liability of or affording protection to the Paying Agent shall be subject to the provisions of this Section. SECTION 3.02. Certain Rights of Paying Agent. Except as otherwise provided in Section 3.01 hereof: 4 A. the Paying Agent may rely and shall be protected in acting or refraining from acting upon any Order, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, coupon, or other paper or document reasonably believed by it to be genuine and to have been signed or presented by the proper party or parties; B. the Paying Agent may consult with legal counsel and the written advice of such counsel or any opinion of counsel shall be full and complete authorization and protection in respect of any action taken, suffered, or omitted by the Paying Agent hereunder in good faith and in reliance thereon; C. the Paying Agent shall not be bound to make any investigation into the facts of matters stated in any Order, certificate, statement, instruments, opinion, report, notice, request, direction, consent, order, bond, coupon, or other paper or document, but the Paying Agent, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Paying Agent shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records, and premises of the Issuer, personally or by agent or attorney; and D. the Paying Agent may execute any of the trusts or powers hereunder or perform any of the duties hereunder either directly or by or through agents or attorneys, and the Paying Agent shall not be responsible for any misconduct or negligence on the part of any agent employed or attorney retained with due care by it. SECTION 3.03. Not Responsible for Recitals. The recitals contained in the Bonds, except for the certificate of authentication on the Bonds, shall be taken as the statements of the Issuer, and the Paying Agent assumes no responsibility for their correctness. SECTION 3.04. May Hold Bonds. The Paying Agent, in its commercial banking or any other capacity, may become the owner or pledgee of Bonds and otherwise deal with the Issuer with the same rights it would have if it were not serving as Paying Agent. SECTION 3.05. Money Deposited with Paying Agent. Money deposited by the Issuer with the Paying Agent for payment of the principal (or Redemption Price, if applicable) of or interest on any Bonds shall be segregated from other funds of the Paying Agent and the Issuer and shall be held in trust for the benefit of the Holders of such Bonds. All money deposited with the Paying Agent hereunder shall be secured in the manner and to the fullest extent required by law for the security of funds of the Issuer. 5 Amounts held by the Paying Agent which represent principal of and interest on the Bonds remaining unclaimed by the owner after the expiration of three years from the date such amounts have become due and payable shall be reported and disposed of by the Paying Agent in accordance with the provisions of Texas law including, to the extent applicable, Title 6 of the Texas Property Code, as amended. The Paying Agent shall have no liability by virtue of actions taken in compliance with this provision. The Paying Agent is not obligated to pay interest on any money received by it hereunder. This Agreement relates solely to money deposited for the purposes described herein, and the parties agree that the Paying Agent may serve as depository for other funds of the Issuer, act as trustee under indentures authorizing other bond transactions of the Issuer, or act in any other capacity not in conflict with its duties hereunder. SECTION 3.06. Compensation and Reimbursement. The Issuer agrees: A. to pay to the Paying Agent from time to time reasonable compensation for all services rendered by it hereunder, which compensation shall be established initially for the Bonds in accordance with the schedule attached as Exhibit"B", which is made a part hereof for all purposes; B. except as otherwise expressly provided herein, to reimburse the Paying Agent upon its request for all reasonable expenses, disbursements, and advances incurred or made by the Paying Agent in accordance with any provisions of this Agreement (including expenses disbursements and advances of its counsel), except to the extent covered by the compensation established pursuant to Subsection A of this Section except any such expense, disbursement, or advance as may be attributable to the negligence or bad faith of the Paying Agent; and C. to and shall, to the full extent permitted by law, indemnify, defend and hold harmless the Paying Agent, together with its officers, directors, agents and employees, from and against any and all claims, losses, damages, causes of action, suits and liability of every kind, including all expenses of litigation, court costs and attorney's fees, incurred without negligence or bad faith on the part of the Paying Agent, arising out of or in connection with the administration or performance of its duties and obligations or the exercise or performance of any of its powers hereunder. SECTION 3.07. Resignation and Removal The Paying Agent may resign from its duties hereunder at any time by giving not less than 30 days' written notice to the Issuer; provided, however, that such resignation shall not become effective until a successor shall have accepted the duties of the Paying Agent hereunder by written instrument. The Paying Agent may be removed from its duties hereunder at any time with or without cause by Board Action designating a successor upon not less than 30 days' notice; provided, however, that no such removal shall become effective until such successor has accepted the duties of the Paying Agent hereunder by written instrument. Upon the effective date of such resignation or removal (or any earlier date designated by the Issuer in case of resignation) the Paying Agent shall, upon payment of all its fees, charges, and expenses then due, transfer and deliver to, or upon the order of, the Issuer all funds, records, and Bonds held by it (except any Bonds owned by the Paying Agent as Holder or pledgee), under this Agreement. If the Paying Agent resigns or is removed, the Issuer shall by Board Action promptly appoint and engage a successor to act in the place of the Paying Agent hereunder, which appointment shall be effective as of the 6 effective date of the resignation or removal of the Paying Agent. Such successor shall immediately give notice of its substitution hereunder in the name and at the expense of the Issuer to its predecessor and to the Holders, which notice shall include the name of the successor to the Paying Agent and the address of its principal office. SECTION 3.08. Merger, Conversion, Consolidation, or Succession. Any corporation into which the Paying Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion, or consolidation to which the Paying Agent shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of the Paying Agent shall be the successor of the Paying Agent hereunder without the execution or filing of any paper or any further act on the part of either of the parties hereto. In case any Bond shall have been registered, but not delivered, by the Paying Agent then in office, any successor by merger, conversion, or consolidation to such authenticating Paying Agent may adopt such registration and deliver the Bond so registered with the same effect as if such successor Paying Agent had itself registered such Bonds. SECTION 3.09. Paying Agent Not a Trustee. This Agreement shall not be construed to require the Paying Agent to enforce any remedy which any Holder may have against the Issuer during any default or event of default under any agreement between any Holder and the Issuer, including the Bond Order or to act as trustee for such Holder. SECTION 3.10. Paying Agent Not Responsible for Bonds. The Paying Agent shall not be accountable for the use of any Bonds or for the use or application of the proceeds thereof. SECTION 3.11. Paying Agent's Funds Not Used. No provision of this Agreement shall require the Paying Agent 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 of powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity satisfactory to it against such risks or liability is not assured to it. The Paying Agent shall in no event be liable to the Issuer, any Holder, or any other Person for any amount due on any Bond from its own funds. SECTION 3.12. Counterparts. This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. 7 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written. The City of Beaumont, Texas ("Issuer") Title: Mayor ATTEST: City Clerk (=;EAL' of WELLS FARGO BANK, N.A. 4 ("Paying Agent") � a� �® By: Name: Deirdre H. Ward Title: Trust Officer ATTEST: ®+ 44 rN --------- U so0 Faith 0''14 G F�re`i 'dent 4fi p 8 EXHIBIT "A" See the certified copy of the Bond Ordinance that is included under Tab of the Transcript of Documents. 9 Wells Fargo Bank Corporate Trust Services 1445 Ross Avenue, 2nd Floor 0' Dallas, Texas 75202 Tel: (214) 668.6450 Fax: (214)777-4086 SCHEDULE OF FEES $209640,000 City of Beaumont, Texas General Obligation Refunding Bonds, Series 2004 To act as PAYING AGENT & REGISTRAR Acceptance Fee: $0.00 Initial Fees as they relate to Wells Fargo Bank acting in the capacity of Paying Agent/Registrar — includes creation and examination of the Paying Agent/Registrar Agreement; acceptance of the appointment; setting up of Paying Agent/Registrar records and accounting records; and coordination of closing. Acceptance Fee payable at time of Paying Agent/Registrar Agreement execution. Annual Administration Fee: $500.00 For ordinary administration services by Paying Agent/Registrar—includes daily routine account management; investment transactions; cash transaction processing in accordance with the agreement; and mailing of trust account statements to all applicable parties.Float credit received by the bank for receiving funds that remain uninvested are deemed part of the Paying Agent's compensation. The Annual Administration fees are payable in advance,with the first installment due at closing. Out of Pocket Expenses: We only charge for out-of-pocket expenses in response to specific tasks assigned by the client. Therefore, we cannot anticipate what specific out-of-pocket items will be needed or what corresponding expenses will be incurred. Possible expenses would be, but are not limited to, express mail and messenger charges, travel expenses to attend closing or other meetings. There are no charges for indirect out-of-pocket expenses. This fee schedule is based upon the assumptions listed above which pertain to the responsibilities and risks involved in Wells Fargo undertaking the role of Paying Agent/Registrar. These assumptions are based on information provided to us as of the date of this fee schedule. Our fee schedule is subject to review and acceptance of the final documents. Should any of the assumptions, duties or responsibilities change, we reserve the right to affirm,modify or rescind our fee schedule. Submitted by: Sherri Owen-November 19,2004 Vice President/Business Development Wells Fargo Bank (214)668-6450 p#29769 Section 10 No. 10 SIGNATURE IDENTIFICATION AND NO-LITIGATION CERTIFICATE THE STATE OF TEXAS § COUNTY OF JEFFERSON § THE CITY OF BEAUMONT § We, the undersigned officers of THE CITY OF BEAUMONT, TEXAS (the "City"), in connection with the issuance and delivery of the following described refunding bonds (the 'Bonds"): THE CITY OF BEAUMONT, TEXAS, GENERAL OBLIGATION REFUNDING BONDS, SERIES 2004, dated November 1, 2004, aggregating $20,640,000, and maturing serially on March 1 in each of the years 2006 through 2017, inclusive, do hereby certify, as of the date set forth below, the following: 1. We officially executed and signed the Bonds by manually signing or causing facsimiles of our manual signatures to be imprinted or lithographed on each of the Bonds, and we hereby adopt such facsimile signatures as our own, respectively, and declare that such facsimile signatures constitute our signatures the same as if we have manually signed each of the Bonds. 2. The Bonds are substantially in the form, and have been duly executed and signed in the manner, prescribed in the ordinance authorizing the issuance of such Bonds. 3. At the time we so executed and signed the Bonds we were, and at the time of executing this certificate we are, the duly chosen, qualified and acting officers authorized to execute the Bonds and execute and deliver this certificate, and we hold the offices set forth below opposite our signatures. 4. No litigation of any nature has been filed or is now pending or threatened, which contests or attacks the validity of the Bonds; which would restrain or enjoin the issuance or delivery of the Bonds; which would restrain or enjoin the levy and/or collection and/or pledge of revenue or funds from which the Bonds are payable, or which would in any other manner affect the provisions made for their payment or security; or which in any manner questions the proceedings or authority concerning the issuance of the Bonds. 5. Neither the corporate existence nor the boundaries of the City are being contested; no litigation has been filed or is now pending which would affect the authority of the officers of the City to issue, execute, and deliver the Bonds or would affect the title of the undersigned to their respective offices; and no authority or proceedings for the issuance, execution or delivery of the Bonds have been repealed, rescinded or revoked. 6. No additional certificates, warrants or other indebtedness have been issued by the City since the date of the City's General Certificate submitted to the Attorney General of the State of Texas in connection with his approval of the Bonds. 7. The seal which has been impressed, or placed in facsimile, upon each of the Bonds is the legally adopted, proper and only official seal of the City, and such official seal is impressed on this certificate. 8. The information contained in the General Certificate dated November 2, 2004, is still true and correct. SIGNED AND SEALED as of e = embgj' Z , 2004. Signatures Title of Office MAYOR, THE CITY OF n • BEAUMONT, TEXAS CITY CLERK, THE CITY OF BEAUMONT, TEXAS (SEAL) l -2- THE STATE OF TEXAS § COUNTY OF JEFFERSON § BEFORE ME, the undersigned Notary Public, on this day personally appeared Evelyn Lord and Rose ,Ann Jones, known to me to be the persons whose names are subscribed to the attached and foregoing instrument, and who executed such instrument in my presence, and who acknowledged to me that such instrument was executed by them for the purposes and in the capacities stated therein. WITNESS MY HAND AND SEAL OF OFFICE this day of November, 2004. NOTARY PUBLIC, STATE OF TEXAS (SEAL) � LANCE FO X NOTARY PUBLIC STATE OF TEXAS M Comm.Expires 10-22.2005 Y —3— Section 11 ATTORNEY GENERAL OF TEXAS GREG ABBOTT December 1, 2004 THIS IS TO CERTIFY that The City of Beaumont,Texas (the "Issuer")has submitted to me The City of Beaumont, Texas, General Obligation Refunding Bonds,Series 2004(the"Bonds"),in the aggregate principal amount of$20,640,000 for approval. The Bonds are dated November 1,2004,numbered R-1 through R-14, and were authorized by an Ordinance of the Issuer passed on November 2, 2004. I have examined the law and such certified proceedings and other papers as I deem necessary to render this opinion. As to questions of fact material to my opinion, I have relied upon representations of the Issuer contained in the certified proceedings and other certifications of public officials furnished to me without undertaking to verify the same by independent investigation. I express no opinion relating to any official statement or any 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: (1) The Bonds have been issued in accordance with law and are valid and binding obligations of the Issuer. (2) In accordance with the provisions of the law,including an Escrow Agreement dated as of November 1, 2004, firm banking arrangements have been made for the discharge and final payment or redemption of the obligations being refunded upon deposit of an amount sufficient to pay said obligations when due. (3) The Bonds are payable from the proceeds of an ad valorem tax levied, within the limits prescribed by law, on all taxable property within the Issuer. Therefore, the Bonds are approved. POST OFFicE Boa 12548, AUSTIN, TEXAS 78711-2548 TEL:(512)463-2100 wWW.0Ac.STA'I1;.'rs.US An Equal Employment Oppor/naity Employer • Priated on Retyeled Paper .The City of Beaumont, Texas, General Obligation Refunding Bonds, Series 2004 - $20,640,000 -Page 2- The Comptroller is instructed that she may register the Bonds without the cancellation of the underlying securities being refunded thereby. CA mey eral of the State of Texas No.42640 Book No.2004-D JCK OFFICE OF COMPTROLLER OF THE STATE OF TEXAS I, Melissa Mora, 11 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 1 st day of December, 2004, 1 signed the name of the Comptroller to the certificate of registration endorsed upon the: The City of Beaumont. Texas, General Obligation Refunding Bonds Series 2004, numbered R-1/R-14, date vember 1 2004, and that in signing the certificate of registration I used the following signat re: IN REOF I have executed is c ate this the 1 st day of December. 2004. I, Carole Keeton Strayhorn, 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 Chapter 403, Subchapter H, Government Code, with authority to sign my name to all certificates of registration, and/or cancellation of bonds required by law to be registered and/or cancelled by me, and was acting as such on the date first mentioned in this certificate, and that the bonds/certificates described in this certificate have been duly registered in the office of the Comptroller, under Registration Number 69272. GIVEN under my hand and seal of office at Austin, Texas, this the 1 st day of December. 2004. CAROLE KEETON STRAYHORN Comptroller of Public Accounts of the State of Texas OFFICE OF COMPTROLLER OF THE STATE OF TEXAS I, CAROLE KEETON STRAYHORN, Comptroller of Public Accounts of the State of Texas, do hereby certify that the attachment is a true and correct copy of the opinion of the Attorney General approving the: The City of Beaumont. Texas General Obligation Refunding Bonds Series 2004 numbered R-1/R-14, of the denomination of $ various, dated November 1, 2004, as authorized by issuer, interest various percent, under and by authority of which said bonds/certificates were registered electronically in the office of the Comptroller, on the 1 st day of December. 2004 under Registration Number 69272. Given under my hand and seal of office, at Austin, Texas, the 1st day of December, 2004. CAROLE KEETON STRAYHORN Comptroller of Public Accounts of the State of Texas (c) Except for Bond Numbers R-1 through R-14, the following form of authentication certificate shall be printed on each of the Bonds: AUTHENTICATION CERTIFICATE This bond is one of the bonds described in and delivered pursuant to the within-mentioned Ordinance. Wells Fargo Bank,National Association, Registrar By Authorized Signature Date of Authentication: (d) The following form of assignment shall be printed on each of the Bonds: ASSIGNMENT For value received, the undersigned hereby sells, assigns, and transfers unto the within bond 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 NOTICE: Signature must be owner as shown on the face guaranteed by a member firm of this Bond in every of the New York Stock Exchange particular,without any or a commercial bank or trust alteration, enlargement or company. change whatsoever. -13- (e) The following statement of insurance shall be printed on each of the Bonds: STATEMENT OF INSURANCE Financial Security Assurance Inc. ("Financial Security"), New York, New York, has delivered its municipal bond insurance policy with respect to the scheduled payments due of principal of and interest on this Bond to Wells Fargo Bank, N.A., Houston, Texas, or its successor, as paying agent for the Bonds (the "Paying Agent"). Said Policy is on file and available for inspection at the principal office of the Paying Agent and a copy thereof may be obtained from Financial Security or the Paying Agent. 16. Legal Opinions; CUSIP. The approving opinion of Orgain, Bell & Tucker, L.L.P., Beaumont,Texas, Bond Counsel, and CUSIP Numbers may be printed on the Bonds, but errors or omissions in the printing of such opinions or such numbers shall have no effect on the validity of the Bonds. 17. Interest and Sinking Fund; Levy, Assessment and Collection of Taxes. There is hereby established a separate fund of the City to be known as the "Series 2004 General Obligation Refunding Bonds 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, there is hereby levied and there shall be annually assessed and collected in due time, form and manner, and at the same time other City taxes are assessed, levied and collected, in each year, beginning with the current year, a continuing direct annual ad valorem tax upon all taxable property in said City sufficient to pay the current interest on said Bonds as the same becomes due, and to create and provide a sinking fund of not less than two percent (2%) of the original principal amount of the Bonds or of not less than the amount required to pay each installment of the principal of said Bonds as the same matures, whichever is greater, full allowance being made for delinquencies and costs of collection, and said taxes when collected shall be applied to the payment of the interest on and principal of said Bonds and to no other purpose. In addition, interest accrued from the date of the Bonds until their delivery and premium, if any, is to be deposited in such fund. To pay the interest coming due on the Bonds on March 1, 2005, and the interest coming due on September 1, 2005, there is hereby appropriated from current funds on hand, which are certified to be on hand and available for such purpose, an amount sufficient to pay such interest, and such amount shall be used for no other purpose. 18. Further Proceedings. After the Bonds to be initially issued shall have been executed, it shall be the duty of the Mayor 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 by the Attorney General. 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 initially issued, the -14- Comptroller of Public Accounts (or a deputy lawfully designated in writing to act for the Comptroller) shall manually sign the Comptroller's Registration Certificate prescribed herein to be printed and endorsed on the Bonds to be initially issued, and the seal of said Comptroller shall be impressed, or placed in facsimile, thereon. 19. Sale of Bonds and Bond Insurance. The Bonds are hereby sold and shall be delivered to the Underwriters at a price of$22,012,597.50, representing the principal amount of Bonds of$20,640,000.00, plus accrued interest of$81,250.35, plus a premium of$1,410,027.15, and less an underwriter's discount of$118,680.00, in accordance with the terms of the Purchase Contract 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 do any and all things necessary or desirable to satisfy the conditions set out herein and to provide for the issuance and delivery of the Bonds. The purchase of and payment of the premium for the Municipal Bond Guaranty Insurance Policy in accordance with the terms of the commitment for such insurance presented to the City Council are hereby approved and authorized. All officials and representatives of the City are authorized and directed to execute such documents and to do any and all things necessary, desirable or appropriate to obtain the Municipal Bond Guaranty Insurance Policy, and the printing on the Bonds covered by the Municipal Bond Guaranty Insurance Policy of an appropriate legend regarding such insurance is hereby approved and authorized. 20. Tax Exemption. The City intends that the interest on the Bonds shall be excludable from gross income of the owners thereof for federal income tax purposes pursuant to Sections 103 and 141 through 150 of the Internal Revenue Code of 1986, as amended, (the "Code") and all applicable temporary, proposed and final regulations (the "Regulations") and procedures promulgated thereunder and applicable to the Bonds. For this purpose, the City covenants that it will monitor and control the receipt, investment, expenditure and use of all gross proceeds of the Bonds and take or omit to take such other and further actions as may be required by Sections 103 and 141 through 150 of the Code and the Regulations to cause the interest on the Bonds to be and remain excludable from the gross income, as defined in Section 61 of the Code, of the owners of the Bonds for federal income tax purposes. Without limiting the generality of the foregoing, the City shall comply with each of the following covenants: (a) The City will use all of the proceeds of the Bonds to (i) acquire non- callable obligations of the United States of America(the "Escrowed Securities") sufficient to pay the principal of, premium, if any, and interest on the Refunded Obligations and (ii)to pay the costs of issuing the Bonds except for amounts, if any, described in the Report (as defined in the Escrow Agreement) as the rounding amount and the ending cash balance in the Escrow Fund (as defined in the Escrow Agreement). (b) The City will not directly or indirectly take any action or omit to take any action, which action or omission would cause the Bonds or the Refunded Obligations to constitute"private activity bonds"within the meaning of Section 141(a) of the Code. -15- (c) Principal of and interest on the Bonds will be paid solely from ad valorem taxes collected by the City, investment earnings on such collections, and as available, proceeds of the Bonds. (d) 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 and the Refunded Obligations (to the extent any of such proceeds remain unexpended) will not be used in a manner that would cause the Bonds or the Refunded Obligations or any portion thereof to be "arbitrage bonds" within the meaning of Section 148 of the Code. (e) At all times while the Bonds are outstanding, the City will identify and properly account for all amounts constituting gross proceeds of the Bonds in accordance with the Regulations. The City will monitor the yield on the investments of the proceeds of the Bonds and, to the extent required by the Code and the Regulations, will restrict the yield on such investments to a yield which is not materially higher than the yield on the Bonds. To the extent necessary to prevent the Bonds from constituting "arbitrage bonds," the City will make such payments as are necessary to cause the yield on all yield-restricted nonpurpose investments allocable to the Bonds to be less than the yield that is materially higher than the yield on the Bonds. (f) The City will not take any action or knowingly omit to take any action, if taken or omitted, would cause the Bonds to be treated as "federally guaranteed" obligations for purposes of Section 149(b) of the Code. (g) The City represents that not more than fifty percent (50%) of the proceeds of any new money portion of the Bonds or any new money issue refunded by, the Refunded Obligations was invested in nonpurpose investments (as defined in Section 148(f)(b)(A) of the Code) having a substantially guaranteed yield for four years or more within the meaning of Section 149(g)(3)(A)(ii) of the Code, and the City reasonably expected at the time each issue of the Refunded Obligations was issued that at least eighty-five percent (85%) of the spendable proceeds of the Bonds or the Refunded Obligations would be used to carry out the governmental purpose of such Bonds within the corresponding three-year period beginning on the respective dates of the Bonds or the Refunded Obligations. (h) The City will take all necessary steps to comply with the requirement that certain amounts earned by the City on the investment of the gross proceeds of the Bonds, if any, be rebated to the federal government. Specifically, the City will (i)maintain records regarding the receipt, investment and expenditure of the gross proceeds of the Bonds as may be required to calculate such excess arbitrage profits separately from records of amounts on deposit in the funds and accounts of the City allocable to other obligations of the City or moneys which do not represent gross proceeds of any obligations of the City and retain such records for at least six years after the day on which the last outstanding Bond is discharged, (ii) account for all gross proceeds under a reasonable, consistently applied method of accounting, not employed as an -1b- artifice or device to avoid, in whole or in part, the requirements of Section 148 of the Code, including any specified method of accounting required by applicable Regulations to be used for all or a portion of the gross proceeds, (iii) calculate, at such times as are required by applicable Regulations, the amount of excess arbitrage profits, if any, earned from the investment of the gross proceeds of the Bonds and (iv)timely pay, as required by applicable Regulations, all amounts required to be rebated to the federal government. In addition, the City will exercise reasonable diligence to assure that no errors are made in the calculations required by the preceding sentence and, if such an error is made, to discover and promptly correct such error within a reasonable amount of time thereafter, including payment to the federal government of any delinquent amounts owed to it, including interest thereon and penalty. (i) The City will not indirectly pay any amount otherwise payable to the federal government pursuant to the foregoing requirements to any person other than the federal government by entering into any investment arrangement with respect to the gross proceeds of the Bonds that might result in a reduction in the amount required to be paid to the federal government because such arrangement results in smaller profit or a larger loss than would have resulted if such arrangement had been at arm's length and had the yield on the issue not been relevant to either party. (j) The City will timely file or cause to be filed with the Secretary of the Treasury of the United States the information required by Section 149(e) of the Code with respect to the Bonds on such form and in such place as the Secretary may prescribe. (k) The City will not issue or use the Bonds as part of an "abusive arbitrage device" (as defined in Section 1.148-10(a) of the Regulations). Without limiting the foregoing, the Bonds are not and will not be a part of a transaction or series of transactions that attempts to circumvent the provisions of Section 148 of the Code and the Regulations, by (i) enabling the City to exploit the difference between tax-exempt and taxable interest rates to gain a material financial advantage, or (ii) increasing the burden on the market for tax-exempt obligations. (1) Proper officers of the City charged with the responsibility for issuing the Bonds are hereby directed to make, execute and deliver certifications as to facts, estimates or circumstances in existence as of the Issue Date and stating whether there are facts, estimates or circumstances that would materially change the City's expectations. On or after the Issue Date, the City will take such actions as are necessary and appropriate to assure the continuous accuracy of the representations contained in such certificates. (m) The covenants and representations made or required by this Section are for the benefit of the Bond holders and any subsequent Bond holder, and may be relied upon by the Bondholder and any subsequent Bondholder and bond counsel to the City. (n) In complying with the foregoing covenants, the City may rely upon an unqualified opinion issued to the City by nationally recognized bond counsel that any action by -17- the City or reliance upon any interpretation of the Code or Regulations contained in such opinion will not cause interest on the Bonds to be includable in gross income for federal income tax purposes under existing law. (o) Notwithstanding any other provision of this Ordinance, the City's representations and obligations under the covenants and provisions of this Section shall survive the defeasance and discharge of the Bonds for as long as such matters are relevant to the exclusion of interest on the Bonds from the gross income of the owners for federal income tax purposes. Section 21. Application of Proceeds. The proceeds from the sale of the Bonds in the amount of$22,012,597.50, together with the transfer of the sum of$367,000 from the debt service fund for the Refunded Obligations, shall,promptly upon receipt by the City,be applied as follows: (a) Accrued interest in the amount of$81,250.35 shall be deposited into the Interest and Sinking Fund for the Bonds; (b) To establish the escrow fund to refund the Refunded Obligations as provided in Section 24 below, $22,109,645.58 from the sale of the Bonds shall be deposited with the Escrow Agent pursuant to Section 24 below. (c) $186,216.37 from the sale of the Bonds shall be used to pay the costs of issuing the Bonds, including the premium of$68,216.37 for the Municipal Bond Guaranty Insurance Policy, not later than 90 days after such issuance; and (d) The sum of $2,485.20 from the sale of the Bonds shall be used as a rounding amount and shall be deposited in the Interest and Sinking Fund for the Bonds; and (e) Any proceeds from the Bonds remaining after making all such deposits and payments shall be deposited into the Interest and Sinking Fund. 22. Transfer of Money in Interest and Sinking Funds Maintained for the Refunded Obligations. On the date of delivery of the Bonds, the sum of$367,000.00 contained in the Interest and Sinking Funds for the Refunded Obligations shall be transferred to the Paying Agent and shall be applied as herein provided. 23. Redemption of Refunded Obligations. The City hereby irrevocably calls the following bonds of the City for redemption on the date set forth below, and authorizes and directs notice of such redemption to be given in such form and in such manner as the Mayor, City Manager, City Clerk or any other official of the City may approve: -18- Obligations To Be Redeemed Redemption Date A portion of The City of Beaumont, Texas, Combination Tax&Revenue Certificates of Obligation, Series 1998 Maturities 2008 through 2017, in the principal amounts of$40,000, $500,000, $500,000, $500,000, 500,000, $500,000, $360,000, $1,900,000, $2,005,000, and$2,110,000,respectively March 1,2008 A portion of the City of Beaumont, Texas, Refunding Bonds, Series 1996, Maturities 2008 through 2010, in the principal amounts of$790,000, $780,000 and $785,000,respectively March 1,2007 A portion of the City of Beaumont, Texas Combination Tax&Revenue Certificates of Obligation, Series 1996, Maturities 2008 through 2014 in the principal amounts of$590,000, $610,000, $680,000, $725,000, $775,000, $825,000 and $850,000,respectively March 1,2007 The City of Beaumont, Texas, Combination Tax& Revenue Certificates of Obligation, Series 1995, Maturities 2006 through 2014 in the principal amounts of $500,000, $500,000, $500,000, $500,000, $500,000, $500,000, $500,000, $500,000 and$500,000,respectively March 1, 2005 24. Escrow Agreement. The discharge and defeasance of the Refunded Obligations shall be effectuated pursuant to the terms and provisions of an Escrow Agreement to be entered into by and between the City and JPMorgan Chase Bank, Dallas, 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 which has been designed for the City by RBC Dain Rauscher Inc., and which shall be certified as to mathematical accuracy by Grant Thornton, L.L.P., in the Report, (b) to maximize the City's present value savings and minimize the City's costs of refunding, (c)to comply with all applicable laws and regulations relating to the refunding of the Refunded Obligations and (d) to carry out the other intents and purposes of this Ordinance, and the Mayor is hereby authorized to execute and deliver the 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. -19- 25. Source of Funds Used in Refunding. No money of the City other than proceeds of the Bonds and other than the sum of $367,000.00 from the Interest and Sinking Fund for the Refunded Obligations shall be used to refund the Refunded Obligations. 26. Purchase of Escrowed Securities. To assure the purchase of the Escrowed Securities as described in the Report and in the Escrow Agreement, the Mayor, the City's Finance Officer, and the Escrow Agent are hereby authorized to subscribe for, agree to purchase, and purchase such Escrowed Securities 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. 27. 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 Chapter 551 of the Texas Government Code Annotated,Vernon's 1994, as amended. 28. Official Statement. The Preliminary Official Statement and the Official Statement prepared in the initial offering and sale of the Bonds have been and are hereby authorized, approved and ratified as to form and content. The use of the Preliminary Official Statement and the Official Statement in the reoffering of the Bonds by the Underwriters is hereby approved, authorized and ratified. The proper officials of the City are hereby authorized to execute and deliver a certificate pertaining to the Preliminary Official Statement and the Official Statement as prescribed therein, dated as of the date of payment for and delivery of the Bonds. 29. Registrar. The Registrar, by undertaking the performance of the duties of the Registrar and in consideration of the payment of fees or deposits of money pursuant to this Ordinance and a Paying Agent/Registrar's Agreement, accepts and agrees to abide by the terms of this Ordinance and such Agreement. The City hereby approves the form of the Paying Agent/Registrar's Agreement presented to the City Council and hereby authorizes the Mayor or any other official of the City to execute such agreement on behalf of the City, with such changes and revisions thereto as may be approved by the official executing such agreement. The City covenants that at all times while any Bonds are outstanding, it will provide a bank, trust company, financial institution or other entity duly qualified and authorized to act as Registrar for the Bonds. The City reserves the right to replace the Registrar or its successor at any time on not less than sixty (60) days' written notice to the Registrar, so long as any such notice is effective not less than sixty (60) days prior to the next succeeding principal or interest payment date on the Bonds. If the Registrar is replaced by the City, the new Registrar shall accept the previous Registrar's records and act in the same capacity as the previous 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. Any successor Registrar shall be either a national or state banking institution and a corporation or association organized and doing business under the laws of the -20- United States of America or any State authorized under such laws to exercise trust powers and subject to supervision or examination by Federal or State authority. Each Registrar hereunder, by acting in that capacity, shall be deemed to have agreed to the provisions of this Section. 30. Related Matters. To satisfy in a timely manner all of the City's obligations under this Ordinance, the Mayor, the Mayor Pro Tem, the City Manager, the City Clerk, or 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 issuance of the Bonds, including, without limitation, executing and delivering on behalf of the City all certificates, consents, receipts, requests and other documents as may be reasonably necessary to satisfy the City's obligations under this Ordinance and to direct the application of funds of the City consistent with the provisions hereof. 31. No Personal Liability. No recourse shall be had for payment of the principal of or premium, if any, 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. Severability. If any Section, paragraph, clause or provision of this Ordinance shall for any reason be held to be invalid or unenforceable, the invalidity or unenforceability of such Section, paragraph, clause or provision shall not affect any of the remaining provisions of this Ordinance. 33. Repealer. All orders, resolutions, and ordinances, and parts thereof inconsistent herewith are hereby repealed to the extent of such inconsistency. 34. Additional Obligations. The City undertakes and agrees for the benefit of the holders of the Bonds to provide directly, on or before six months after the end of the City's fiscal year,which fiscal year presently ends on September 30: a. to each nationally recognized municipal securities information repository and to the appropriate state information depository, if any, annual financial information (which may be unaudited) and operating data regarding the City for fiscal years ending on or after January 1, 2004 which annual financial information and operating data shall be of the type included in the following listed sections contained in the Final Official Statement: SELECTED FINANCIAL INFORMATION CITY TAX DEBT(except for"Estimated Overlapping Debt") TAX DATA SELECTED FINANCIAL DATA -21- INVESTMENT AUTHORITY AND INVESTMENT OBJECTIVES OF THE CITY-Current Investments Appendix B b. to each nationally recognized municipal securities information repository and to the appropriate state information depository, if any, audited financial statements for the City for fiscal years ending on or after January 1, 2004, when available, if the City commissions an audit and it is completed by the required time; provided that if audited statements are not commissioned or are not available by the required time, the City will provide unaudited statements when and if they become available; C. in a timely manner, to each nationally recognized municipal securities information repository or to the Municipal Securities Rulemaking Board, and to the appropriate state information depository, if any, notice of any of the following events with respect to the Bonds, if material within the meaning of the federal securities laws to a decision to purchase or sell Bonds: i. Principal and interest payment delinquencies; ii. Non-payment related defaults; iii. Unscheduled draws on debt service reserves reflecting financial difficulties; iv. Unscheduled draws on credit enhancements reflecting financial difficulties; V. Substitution of credit or liquidity providers, or their failure to perform; vi. Adverse tax opinions or events affecting the tax-exempt status of the Bonds; vii. Modifications to rights of Bondholders; viii. Bond calls; ix. Defeasances; X. Release, substitution or sale of property securing repayment of the securities; xi. Rating changes; and d. in a timely manner, to each nationally recognized municipal securities information repository or to the Municipal Securities Rulemaking Board, and to the appropriate state information depository, if any, notice of a failure of the City to provide required annual financial information and operating data, on or before six months after the end of the City's fiscal year. These undertakings and agreements are subject to appropriation of necessary funds and to -22- applicable legal restrictions, if any. The accounting principles pursuant to which the City's financial statements are currently prepared are generally accepted accounting principles set out by the Government Accounting Standards Board, and, subject to changes in applicable law or regulation, such principles will be applied in the future. If the City changes its fiscal year, it will notify each nationally recognized municipal securities information repository and the appropriate state information depository of the change (and of the new fiscal year end) prior to the next date by which the City otherwise would be required to provide annual financial information. The City's obligation to update information and to provide notices of material events shall be limited to the agreements herein. The City shall not be obligated to provide other information that may be relevant or material to a complete presentation of its financial results of operations, condition,prospects and shall not be obligated to update any information that is provided, except as described herein. The City makes no representation or warranty concerning such information or concerning its usefulness to a decision to invest in or sell Bonds at any future date. THE CITY DISCLAIMS ANY CONTRACTUAL OR TORT LIABILITY FOR DAMAGES RESULTING IN WHOLE OR IN PART FROM ANY BREACH, WHETHER NEGLIGENT OR WITHOUT FAULT ON ITS PART, OF ITS CONTINUING DISCLOSURE AGREEMENT OR FROM ANY STATEMENT MADE PURSUANT TO ITS AGREEMENT. HOLDERS OR BENEFICIAL OWNERS OF BONDS MAY SEEK AS THEIR SOLE REMEDY A WRIT OF MANDAMUS TO COMPEL THE CITY TO COMPLY WITH ITS AGREEMENT. No default by the City with respect to its continuing disclosure agreement shall constitute a breach of or default under this Ordinance for purposes of any other provision of this Ordinance. Nothing in this paragraph is intended or shall act to disclaim, waive, or otherwise limit the duties of the City under federal and state securities laws. The City may amend its continuing disclosure obligations and agreement in this Section 34 to adapt to changed circumstances that arise from a change in legal requirements, a change in law, or a change in the identity, nature, status or type of operations of the City, if the agreement, as amended, would have permitted the Underwriters to purchase or sell the Bonds in compliance with SEC Rule 15c2-12, taking into account any amendments or interpretations of such rule to the date of such amendment, as well as such changed circumstances, and either the holders of a majority in aggregate principal amount of the outstanding Bonds consent or any person unaffiliated with the City (such as nationally recognized bond counsel) determines the amendment will not materially impair the interests of the holders and beneficial owners of the Bonds. The City may also amend or repeal the obligations and agreement in this Section 34 if the SEC amends or repeals the applicable provisions of Rule 15c2-12 or a court of final jurisdiction determines that such provisions are invalid, and the City may amend the agreement in its discretion in any other circumstance or manner, but in either case only to the extent that its right to do so would not prevent the Underwriters from lawfully purchasing or reselling the Bonds in the primary offering of the Bonds -23- in compliance with Rule 15c2-12. If the City amends its agreement, it must include with the next financial information and operating data provided in accordance with its agreement an explanation, in narrative form, of the reasons for the amendment and of the impact of any change in the type of information and operating data so provided. The City's continuing obligation to provide annual financial information and operating data and notices of events will terminate if and when the City no longer remains an "obligated person" (as such term is defined in SEC Rule 15c2-12)with respect to the Bonds. [The remainder of this page has intentionally been left blank. Signature page follows.] -24- PASSED AND APPROVED this 2nd day of November, 2004. Mayor THE CITY OF BEAUMONT, TEXAS ATTEST: City Clerk THE CITY OF BEAUMONT,TEXAS (CITY SEAL) w ' ul . 6 tp -25- Section 5 No. 5 ESCROW AGREEMENT THIS ESCROW AGREEMENT (the "Escrow Agreement") dated for convenience November 1, 2004,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 (the "City"), and JPMorgan Chase Bank, a New York banking corporation having a principal corporate trust office in Dallas, Texas, as escrow agent(together with any successor or assign in such capacity,the "Escrow Agent"). WHEREAS, the City has heretofore issued and there remains outstanding the City's Combination Tax & Revenue Certificates of Obligation, Series 1998, the City's Refunding Bonds, Series 1996, the City's Combination Tax & Revenue Certificates of Obligation, Series 1996, and the City's Combination Tax & Revenue Certificates of Obligation, Series 1995 (the "Refunded Obligations"), and the City desires to provide for the refunding of a portion of certain maturities of the Refunded Obligations; and WHEREAS, Chapter 1207, Texas Government Code, as amended (formerly Article 717k, Vernon's Annotated Texas Civil Statutes, as amended), authorizes and empowers the City to issue, sell and deliver refunding bonds and to deposit the proceeds of such bonds, together with other available funds or resources, with any place of payment for the Refunded Obligations in an amount which is sufficient to provide for the payment or redemption of the principal of and interest on the Refunded Obligations; and WHEREAS, the City Council of the City has adopted an ordinance authorizing the issuance of the City's General Obligation Refunding Bonds, Series 2004, in the aggregate principal amount of$20,640,000 (the "Refunding Bonds"), for the purpose, among other things, of providing the funds necessary to pay and refund the Refunded Obligations, thereby providing a net present value 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 payment of the Refunded Obligations; and WHEREAS, the City Council of the City has further determined to effectuate the refunding of the Refunded Obligations 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 financial arrangements for the discharge and final payment or redemption of the Refunded Obligations; NOW, THEREFORE, in consideration of the mutual undertakings, promises and agreements herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and in ordinance to secure the full and timely payment of the principal of and the interest on the Refunded Obligations, the City and the Escrow Agent contract and agree as follows: ARTICLE I DEFINITIONS AND INTERPRETATIONS 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: "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 JPMorgan Chase Bank, 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 Restricted Acquired Obligations and the Other Acquired Obligations purchased with the funds deposited into the Escrow Fund, all as more fully described in the Report. "Paying Agents for the Refunded Obligations" shall mean J.P.Morgan Trust Company with respect to the City's Combination Tax & Revenue Certificates of Obligation, Series 1998, the Ciy's Refunding Bonds, Series 1996, and the City's Combination Tax & Revenue Certificates of Obligation, Series 1996, and any successors thereto, and shall mean The Bank of New York Trust Company,N.A.,with respect to the City's Combination Tax&Revenue Certificates of Obligation, Series 1995. "Refunded Obligation Ordinances" shall mean the City's ordinances authorizing the issuance, sale and delivery of the Refunded Obligations. "Refunded Obligations" shall mean: (a) a portion of the City's Combination Tax & Revenue Certificates of Obligation, Series 1998, maturing on March 1 in the years 2008 through 2017 in the principal amounts of $40,000, $500,000, $500,000, $500,000, 500,000, $500,000, 360,000, $1,900,000, $2,005,000, and $2,110,000, respectively; (b) a portion of the City's Refunding Bonds, Series 1996, maturing on March 1 in the years 2008 through 2010 in the -2- principal amounts of $790,000, $780,000 and $785,000, respectively; (c) a portion of the City's Combination Tax & Revenue Certificates of Obligation, Series 1996, maturing on March 1 in the years 2008 through 2014 in the principal amounts of $590,000, $610,000, $680,000, $725,000, $775,000, $825,000 and $850,000, respectively; and (d) the City's Combination Tax & Revenue Certificates of Obligation, Series 1995,maturing on March 1 in the years 2006 through 2014 in the principal amounts of $500,000, $500,000, $500,000, $500,000, $500,000, $500,000, $500,000, $500,000 and $500,000,respectively. "Refunding Bonds" shall mean the City's General Obligation Refunding Bonds, Series 2004, dated November 1, 2004, in the outstanding aggregate principal amount of$20,640,000. "Refunding Bond Ordinance" shall mean the City's Ordinance adopted November 2, 2004, authorizing the issuance, sale and delivery of the Refunding Bonds. "Report" shall mean the verification report prepared by Grant Thornton LLP, relating to the refunding of the Refunded Obligations, a copy of which is attached hereto as Exhibit"A". "Restricted Acquired Obligations" shall mean the United States Treasury Notes and STRIPS, initially purchased with the proceeds of the Bonds, and United States Treasury Securities - State and Local Government Series at 0%Interest Rate("SLGS"), all as more fully described in the Report. 1.02 Interpretations. The titles and headings of the articles and sections of this Escrow Agreement have been inserted for convenience of reference only and are not to be considered a part hereof and shall not in any way modify or restrict the terms hereof. This Escrow Agreement and all of the terms and provisions hereof shall be liberally construed to effectuate the purposes set forth herein and to achieve the intended purpose of providing for the refunding of the Refunded Obligations in accordance with applicable law. ARTICLE II DEPOSIT OF FUNDS AND ESCROWED SECURITIES 2.01 Deposits with Escrow Agent; Acquisition of Escrowed Securities. On the Escrow Funding Date, the City will deposit, or cause to be deposited, with the Escrow Agent the following: (a) Restricted Acquired Obligations in the principal price of$22,109,644.00,purchased with a portion of the proceeds of the Refunding Bonds; and (b) A beginning cash balance of$1.58. -3- ARTICLE III CREATION AND OPERATION OF ESCROW FUND 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 "City of Beaumont, Texas, General Obligation Refunding Bonds, Series 2004 Escrow Fund", into which will be deposited the cash and Escrowed Securities described in Section 2.01. The Escrowed Securities, all proceeds therefrom and all cash balances from time to time on deposit in the Escrow Fund shall be the property of the Escrow Fund, and shall be applied only in strict conformity with the terms and conditions hereof. The Escrowed Securities, all proceeds therefrom and all cash balances from time to time on deposit in the Escrow Fund are hereby irrevocably pledged to the payment of the principal of and interest on the Refunded Obligations, which payment shall be made by timely transfers to the Paying Agent for the Refunded Obligations of such amounts at such times as are provided in Section 3.02 hereof. When the final transfers have been made to the Paying Agents for the Refunded Obligations for the payment of such principal of and interest on the Refunded Obligations, any balance then remaining in the Escrow Fund shall be transferred to the City, and the Escrow Agent shall thereupon be discharged from any further duties hereunder. 3.02 Payment of Principal of and Interest on Refunded Obligations. (a) The Escrow Agent is hereby irrevocably instructed to transfer to the Paying Agent for the Refunded Obligations 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 Obligations 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 Obligations in accordance with the provisions hereof shall be held by the Paying Agent for the Refunded Obligations as a segregated account for the respective holders of the Refunded Obligations in connection with which such money is held; provided, however, subject to the provisions of Title 6 of the Texas Property Code regarding Unclaimed Property, that money so held remaining unclaimed by the owners of such Refunded Obligations 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. Thereafter, neither the City,the Escrow Agent, the Paying Agents for the Refunded Obligations nor any other person shall be liable or responsible to any holders of such Refunded Obligations for any further payment of such unclaimed money or on account of any such Refunded Obligations. (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 Obligations prior to their scheduled maturities. 3.03 Sufficiency of Escrow Fund. The City represents (based solely upon the Report) that the successive receipts of the principal of and interest on the Escrowed Securities will assure that the cash balance on deposit from time to time in the Escrow Fund will be at all times sufficient -4- to provide money for transfer to the Paying Agents for the Refunded Obligations at the times and in the amounts required to pay the interest on the Refunded Obligations as such interest comes due and to pay the principal of the Refunded Obligations as the Refunded Obligations mature or are redeemed. If any deficiency results from any error in the calculation of the report, the City shall transfer to the Escrow Agent for deposit to the Escrow Fund to be held pursuant to this Escrow Agreement an additional amount of cash or securities sufficient to provide for such deficiency. 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 Obligations; 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 Obligations shall be entitled to the same preferred claim and first lien upon the Escrowed Securities,the proceeds thereof and all other assets of the Escrow Fund 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. ARTICLE IV REDEMPTION OF CERTAIN REFUNDED OBLIGATIONS 4.01 Optional Redemption of Certain Refunded Obligations. The City has irrevocably exercised its option to call for redemption the Refunded Obligations as set forth below. Such optional redemption shall be carried out in accordance with the Ordinance authorizing the issuance of the Refunded Obligations. The Escrow Agent is hereby authorized to provide funds therefor as set forth in Section 3.02(a)hereof. Bonds To Be Redeemed Redemption Date A portion of The City of Beaumont, Texas, Combination Tax&Revenue Certificates of Obligation, Series 1998 Maturities 2008 through 2017, in the principal amounts of$40,000, $500,000, $500,000, $500,000, 500,000, $500,000, 360,000, $1,900,000, $2,005,000, and $2,110,000,respectively March 1,2008 -5- A portion of the City of Beaumont,Texas, Refunding Bonds, Series 1996, Maturities 2008 through 2010,in the principal amounts of$790,000, $780,000 and $785,000,respectively March 1,2007 A portion of the City of Beaumont, Texas Combination Tax&Revenue Certificates of Obligation, Series 1996, Maturities 2008 through 2014 in the principal amounts of$590,000, $610,000, $680,000, $725,000, $775,000, $825,000 and $850,000, respectively March 1,2007 The City of Beaumont,Texas, Combination Tax& Revenue Certificates of Obligation, Series 1995, Maturities 2006 through 2014 in the principal amounts of $500,000, $500,000, $500,000, $500,000, $500,000, $500,000, $500,000, $500,000 and$500,000,respectively March 1,2005 ARTICLE V LIMITATION ON INVESTMENTS 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, except for the purchase of the SLGS as described in the Report. 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 proceeds therefrom to purchase Refunded Obligations 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 new verification report together with a written opinion from a nationally recognized firm of certified public accountants acceptable to the City and the Escrow Agent that such transaction will not cause the amount of money and securities in the Escrow Fund to be reduced below an amount which will be sufficient, when added to the interest to accrue thereon, to provide for the payment of principal and interest on the remaining Refunded Obligations 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. -6- ARTICLE VI RECORDS AND REPORTS 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 Obligations. 6.02 Reports. For the period beginning on the Escrow Funding Date and ending on October 31, 2005, and for each twelve (12) month period thereafter while this Agreement remains in effect, the Escrow Agent shall prepare and send to the City, at the City's request, within thirty (30) days following the end of such period a written report summarizing all transactions relating to the Escrow Fund during such period, including, without limitation, credits to the Escrow Fund as a result of interest payments on or maturities of the Escrowed Securities and transfers from the Escrow Fund to the Paying Agents for the Refunded Obligations or otherwise, together with a detailed statement of all Escrowed Securities and the cash balance on deposit in the Escrow Fund as of the end of such period. 6.03 Notification. The Escrow Agent shall notify the City immediately if at any time during the term of this agreement it determines that there is insufficient cash and Escrowed Securities in the Escrow Fund to provide for the transfer to the Paying Agents for the Refunded Obligations for timely payment of all interest on and principal of the Refunded Obligations. ARTICLE VII CONCERNING THE ESCROW AGENT 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. 7.02 Limitation on Liability. The Escrow Agent shall not be liable for the performance of any duties, except such duties as are specifically set forth in this Escrow Agreement, and no implied covenants or obligations shall be read into this Escrow Agreement. Nothing herein contained shall relieve the Escrow Agent from liability for its own negligent action, negligent failure to act or willful misconduct, except that this sentence shall not be construed to limit the effect of the immediately preceding sentence. The Escrow Agent shall not incur any liability for any error of judgment made in good faith by a responsible officer thereof, unless it shall be proved that it was negligent in ascertaining the pertinent facts. The Escrow Agent shall be protected in acting upon any notice, resolution,request, consent, order, certificate,report, opinion,bond or other paper or document believed by it to be genuine, and to have been signed or presented by the proper -7- party or parties. The Escrow Agent may consult with counsel, and the opinion of such counsel shall be full and complete authorization and protection in respect of any action taken or suffered by it in good faith and in accordance therewith. The Escrow Agent is not a principal, participant or beneficiary of the underlying transaction to which this Escrow Agreement relates. The liability of the Escrow Agent to transfer funds to the Paying Agents for the Refunded Obligations for the payments of the principal of and interest on the Refunded Obligations shall be limited to the proceeds of the Escrowed Securities and the cash balances from time to time on deposit in the Escrow Fund. Notwithstanding any provision contained herein to the contrary, the Escrow Agent shall have no liability whatsoever for the insufficiency of funds from time to time in the Escrow Fund or any failure of the obligor of the Escrowed Securities to make timely payment thereon, except for the obligation to notify the City promptly of any such occurrence. The recitals herein and in the proceedings authorizing the Refunding Bonds shall be taken as the statements of the City and shall not be considered as made by, or imposing any obligation or liability upon, the Escrow Agent. In its 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. 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 connection may make inquiries of, and consult with the City, among others, at any time. In the absence of bad faith, the Escrow Agent may rely conclusively upon the truth, completeness and accuracy of the statements, certificates, opinions, resolutions and other documents conforming to the requirements of this Escrow Agreement, and shall not be obligated to make any independent investigation with respect thereto. To the full extent permitted by law, the parties agree to indemnify, defend and hold the -8- Escrow Agent harmless from and against any and all loss, damage, tax, liability and expense that may be incurred by the Escrow Agent arising out of or in connection with its acceptance or appointment as Escrow Agent hereunder, including attorneys' fees and expenses of defending itself against any claim or liability in connection with its performance hereunder except that the Escrow Agent shall not be indemnified for any loss, damage, tax, liability or expense resulting from its own negligence or willful misconduct. The Escrow Agent's right to indemnification shall survive its resignation or removal and the termination of this Agreement. The Escrow Agent shall have only those duties as are specifically provided herein, which shall be deemed purely ministerial in nature, and shall under no circumstance be deemed a fiduciary for any of the parties to this Agreement. The Escrow Agent shall neither be responsible for, nor chargeable with, knowledge of the terms and conditions of any other agreement, instrument or document between the other parties hereto, in connection herewith. This Agreement sets forth all matters pertinent to the escrow contemplated hereunder, and no additional obligations of the Escrow Agent shall be inferred from the terms of this Agreement or any other Agreement. IN NO EVENT SHALL THE ESCROW AGENT BE LIABLE, DIRECTLY OR INDIRECTLY, FOR ANY (i) DAMAGES OR EXPENSES ARISING OUT OF THE SERVICES PROVIDED HEREUNDER, OTHER THAN DAMAGES WHICH RESULT FROM THE ESCROW AGENT'S FAILURE TO ACT IN ACCORDANCE WITH THE STANDARDS SET FORTH IN THIS AGREEMENT, OR (ii) SPECIAL OR CONSEQUENTIAL DAMAGES, EVEN IF THE ESCROW AGENT HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. In the event that any escrow property shall be attached, garnished or levied.upon by any court order, or the delivery thereof shall be stayed or enjoined by an order of a court, or any order, judgment or decree shall be made or entered by any court order affecting the property deposited under this Agreement, the Escrow Agent is hereby expressly authorized, in its sole discretion, to obey and comply with all writs, orders or decrees so entered or issued, which it is advised by legal counsel of its own choosing is binding upon it, whether with or without jurisdiction, and in the event that the Escrow Agent obeys or complies with any such writ, order or decree it shall not be liable to any of the parties hereto or to any other person, firm or corporation, by reason of such compliance notwithstanding such writ, order or decree be subsequently reversed, modified, annulled, set aside or vacated. Any banking association or corporation into which the Escrow Agent may be merged, converted or with which the Escrow Agent may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Escrow Agent shall be a party, or any banking association or corporation to which all or substantially all of the corporate trust business of the Escrow Agent shall be transferred, shall succeed to all the Escrow Agent's rights, obligations and immunities hereunder without the execution or filing of any paper or any further act on the part of any of the parties hereto, anything herein to the contrary notwithstanding. The Escrow Agent shall have the right, but not the obligation, to consult with counsel of choice and shall not be liable for action taken or omitted to be taken by Escrow Agent either in accordance with the advice of such counsel or in accordance with any opinion of counsel to the -9- Issuer addressed and delivered to the Escrow Agent. The Escrow Agent have the right to perform any of its duties hereunder through agents, attorneys, custodians or nominees. 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, the sum of$1,600.00, in cash. This sum does not include the cost of publication, printing costs or reasonable out-of-pocket expenses of the Escrow Agent. If the Escrow Agent incurs any out-of-pocket expenses or is requested to perform any extraordinary services hereunder, the City hereby agrees to reimburse the Escrow Agent for such out-of-pocket expenses and 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 reimbursement of such out-of-pocket expenses and 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. (b) J.P.Morgan Trust Company and The Bank of New York Trust Company,N.A. each serve as a Paying Agent for one or more of the Refunded Obligations. By execution of the Consent to Escrow Agreement attached hereto, J.P. Morgan Trust Company and The Bank of New York Trust Company, N.A. each agree to continue to serve as Paying Agent for the life of the Refunded Obligations for which it is now serving as Paying Agent, and they will serve as Paying Agents for the Refunded Obligations for the compensation provided under the fee schedule currently in effect and it will look to the City directly for payment of its fees; and, in the event of nonpayment of such fees, the sole remedy of the Paying Agent shall be an action against the City for recovery of the fees owing under the paying agency agreement for which it serves. 7.04 Successor Escrow Agents. If at 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. Any successor Escrow Agent must be qualified under the laws of the State of Texas to serve as an escrow agent and must be authorized to exercise corporate trust powers. No resignation or removal of the Escrow Agent and no early termination of this Agreement shall occur until a successor Escrow Agent has been appointed who is qualified to serve as Escrow Agent hereunder and who has accepted such appointment. Upon the request of any such successor Escrow Agent, the City shall execute any and all instruments in writing for more fully and certainly vesting in and confirming to such successor Escrow Agent all such immunities,rights, powers and duties. The Escrow Agent shall pay over to its successor Escrow Agent a proportional part of the Escrow Agent's fee hereunder equal to the portion of such fee attributable to duties to be -10- performed after the date of succession. ARTICLE VIII MISCELLANEOUS 8.01 Notices. Any notice, authorization, request, or demand required or permitted to be given hereunder shall be in writing and shall be deemed to have been duly given when mailed by registered or certified mail,postage prepaid addressed as follows: To the Escrow Agent: JPMorgan Chase Bank P.O. Box 2320,Dallas, Texas 75221-2320 Attention: Issuer Administrative Services To the City: City of Beaumont,Texas 801 Main Street Beaumont,TX 77701 ATTENTION: City Manager 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. 8.02 Termination of Escrow Agent's Obligations. 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 Obligations or to any other person or persons in connection with this Escrow Agreement. 8.03 Binding Agreement. This Escrow Agreement shall be binding upon the City, and the Escrow Agent and their respective successors and legal representatives, and shall inure solely to the benefit of the holders of the Refunded Obligations, the City, the Escrow Agent and their respective successors and legal representatives. This Escrow Agreement may not be modified except with the prior consent of the holders of all of the Refunded Obligations. 8.04 Severability. In case any one or more of the provisions contained in this Escrow Agreement shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Escrow Agreement, but this Escrow Agreement shall be construed as if such invalid or illegal or -11- unenforceable provision had never been contained herein. 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. 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. [The remainder of this page has intentionally been left blank. Signature page follows.] -12- Executed as of November 1, 2004, but effective as set forth herein. THE CITY OF BEAUMONT, TEXAS ATTEST: By: By: 42��Qna� Title: Mayor Title: City Clerk (SEAL) .urv2�i;fit JPMORGAN CHASE BANK,as Escrow Agent i A "u� By' h c R , L� NT Title: SSI T 6 I r !? -13- CONSENT TO ESCROW AGREEMENT Upon receipt of sufficient funds from the Escrow Agent, J.P. MORGAN TRUST COMPANY, as paying agent for one or more series of the Refunded Obligations (as defined in the foregoing Escrow Agreement), hereby acknowledges and consents to provide for the full and timely payment of the principal of and interest on such series of Refunded Obligations. J.P. MORGAN TRUST COMPANY further consents to the management of the Escrow Fund by the Escrow Agent in accordance with the terms and conditions of the Escrow Agreement and agrees to be bound by the terms of the Escrow Agreement with respect to its obligations as a paying agent. J.P. MORGAN TRUST COMPANY agrees to continue to serve as Paying Agent for which it is now serving as Paying Agent, and it will serve as Paying Agent for the Refunded Obligations for the compensation provided under the fee schedule currently in effect and it will look to the City directly for payment of its fees; and, in the event of nonpayment of such fees, the sole remedy of the Paying Agent shall be an action against the City for recovery of the fees owing under the paying agency agreement for which it serves. J.P. MORGAN TRUST COMPANY By: Name: y�Cn -L,,on, t lc-:cc-e-- Title: AggjS `kj%'IT y,,-rE PRESIDENT -14- CONSENT TO ESCROW AGREEMENT Upon receipt of sufficient funds from the Escrow Agent, The Bank of New York Trust Company, N.A., as paying agent for one or more series of the Refunded Obligations (as defined in the foregoing Escrow Agreement), hereby acknowledges and consents to provide for the full and timely payment of the principal of and interest on such series of Refunded Obligations. The Bank of New York Trust Company, N.A. further consents to the management of the Escrow Fund by the Escrow Agent in accordance with the terms and conditions of the Escrow Agreement and agrees to be bound by the terms of the Escrow Agreement with respect to its obligations as a paying agent. The Bank of New York Trust Company, N.A. agrees to continue to serve as Paying Agent for which it is now serving as Paying Agent, and it will serve as Paying Agent for the Refunded Obligations for the compensation provided under the fee schedule currently in effect and it will look to the City directly for payment of its fees; and, in the event of nonpayment of such fees, the sole remedy of the Paying Agent shall be an action against the City for recovery of the fees owing under the paying agency agreement for which it serves. The Bank of New York Trust, N.A. Ti le: MTANT REAA�URFq -15- Section 6 Cash Flow and Yield Verification Report City of Beaumont, Texas December 2, 2004 INDEX Letter Exhibit A Schedule of Sources and Uses of Funds Exhibit B Escrow Account Cash Flow Exhibit B-1 Cash Receipts From and Yield on the SLGS Purchased with Bond Proceeds Exhibit B-2 Cash Receipt From the SLGS Purchased with Debt Service Funds Exhibit B-3 Debt Service Payment on the 1995 Certificates Exhibit B-4 Debt Service Payments on the 1996 Certificates Exhibit B-5 Debt Service Payments on the 1996 Bonds Exhibit B-6 Debt Service Payments on the 1998 Certificates Exhibit C Debt Service Payments and Yield on the Bonds Exhibit C-1 Original Issue Premium on the Bonds Exhibit D Multipurpose Allocation on the 1996 Certificates and 1996 Bonds Appendix I Applicable schedules provided by RBC Dain Rauscher Inc. Grant Thorntowila Accountants and Business Advisors Report of Independent Certified Public Accountants On Applying Agreed-Upon Procedures City of Beaumont 801 Main Beaumont,Texas Orgain,Bell&Tucker,L.L.P. JP Morgan Chase Bank 470 Orleans,Suite 400 2001 Bryan Street, 8th Floor Beaumont,Texas Dallas,Texas First Southwest Company Texas Attorney General's Office 325 North St. Paul Street, Suite 800 300 West 15th Street,Ninth Floor Dallas,Texas Austin,Texas RBC Dain Rauscher Inc. Financial Security Assurance Inc. 2711 North Haskell Avenue, Suite 2400 350 Park Avenue Dallas,Texas New York,New York $20,640,000 City of Beaumont,Texas (A political subdivision of the State of Texas located within Jefferson County) General Obligation Refunding Bonds, Series 2004 Dated November 1, 2004 We have performed the procedures described in this report, which were agreed to by the City of Beaumont, Texas (the "City") and RBC Dain Rauscher Inc. (the "Financial Advisor"), to verify the mathematical accuracy of certain computations contained in the schedules attached in Appendix I provided by the Financial Advisor. The Financial Advisor is responsible for these schedules. These procedures were performed solely to assist you in the issuance of the above-captioned bond issue (the "Bonds") for the purpose of refunding portions of the City's outstanding Combination Tax and Revenue Certificates of Obligation, Series 1995 (the "1995 Certificates"), Series 1996 (the "1996 Certificates"), Refunding Bonds, Series 1996 (the "1996 Bonds"), and Combination Tax and Revenue Certificates of Obligation, Series 1998 (the "1998 Certificates") (collectively referred to as the "Refunded Obligations") as summarized on the next page. This engagement was performed in accordance with attestation standards established by the American Institute of Certified Public Accountants. The sufficiency of these procedures is solely the responsibility of the addressees of this report who are the specified parties. Consequently, we make no representation regarding the sufficiency of the procedures described in this report either for the purpose for which this report has been requested or for any other purpose. 500 US Bank Plaza North 200 South Sixth Street Minneapolis,MN 55402 T 612.332.0001 F 612.332.8361 W www.grantthornton.com Grant Thornton LLP US Member of Grant Thornton International Page 2 Principal Principal Maturities Redemption Redemption Series Issued Dated Refunded Refunded Date Price 1995 3-1-06 to Certs. $6,000,000 May 1,1995 $4,500,000 3-1-14 3-1-05 100% 1996 3-1-08 to Certs. $16,000,000 January 1,1996 $5,055,000* 3-1-14 3-1-07 100% 1996 3-1-08 to Bonds $16,205,000 January 1,1996 $2,355,000* 3-1-10 3-1-07 100% 1998 3-1-08 to Certs. $15,000,000 April 1, 1998 $8,915,000* 3-1-17 3-1-08 100% * Represents a portion of the principal amounts outstanding. VERIFICATION OF ESCROW ACCOUNT CASH FLOW SUFFICIENCY The Financial Advisor provided us with schedules (Appendix I) summarizing future escrow account cash receipts and disbursements. These schedules indicate that there will be sufficient cash available in the escrow account to pay the principal and interest on the Refunded Obligations assuming the 1995 Certificates will be redeemed on March 1, 2005 at 100 percent of par plus accrued interest, the 1996 Certificates and the 1996 Bonds will be redeemed on March 1, 2007 at 100 percent of par plus accrued interest, and the 1998 Certificates maturing on and after March 1, 2009 will be redeemed on March 1, 2008 at 100 percent of par plus accrued interest. The attached Exhibit A (Schedule of Sources and Uses of Funds) was compiled based upon information provided by the Financial Advisor. As part of our engagement to recalculate the schedules attached as Appendix I we prepared schedules attached hereto as Exhibits B through B-6 independently calculating future escrow account cash receipts and disbursements and compared the information used in our calculations to the information listed below contained in applicable pages of the following documents: • Subscription confirmation, dated October 8, 2004, and Schedule of U.S. Treasury Securities provided by the Financial Advisor used to acquire certain United States Treasury Securities - State and Local Government Series (the "SLGS") insofar as the SLGS are described as to the principal amounts, interest rates, maturity dates, issuance date and first interest payment date; and • Ordinances for the Refunded Obligations were provided by Orgain, Bell & Tucker, L.L.P. insofar as the Refunded Obligations are described as to the maturity and interest payment dates, principal amounts, interest rates and optional redemption dates and price. The principal amounts refunded of the March 1, 2008 maturity of the 1998 Certificates represents a portion of the principal amount outstanding. The principal amounts refunded for the 1996 Certificates and the 1996 Bonds represent portions of the principal amounts outstanding as shown on Exhibit D. Page 3 In addition, we compared the interest rates for each maturity of the SLGS, as shown on the Schedule of U.S. Treasury Securities, with the maximum allowable interest rates shown on the Department of Treasury, Bureau of Public Debt, SLGS Table (Form PD 4262) for use on October 8, 2004 and found that the interest rates were equal to the maximum allowable interest rates for each maturity. Our procedures, as summarized in Exhibits B through B-6, prove the mathematical accuracy of the schedules provided by the Financial Advisor summarizing future escrow account cash receipts and disbursements. The schedules provided by the Financial Advisor and those prepared by us reflect that the anticipated receipts from the SLGS, together with an initial cash deposit of $1.58 to be deposited into the escrow account on December 2, 2004, will be sufficient to pay, when due, the principal and interest related to the Refunded Obligations assuming the 1995 Certificates will be redeemed on March 1, 2005 at 100 percent of par plus accrued interest, the 1996 Certificates and the 1996 Bonds will be redeemed on March 1, 2007 at 100 percent of par plus accrued interest, and the 1998 Certificates maturing on and after March 1, 2009 will be redeemed on March 1, 2008 at 100 percent of par plus accrued interest. VERIFICATION OF YIELDS The Financial Advisor provided us with schedules (Appendix 1) which indicate that the yield on the cash receipts from the SLGS purchased with Bond proceeds is less than the yield on the Bonds. These schedules were prepared based on the assumed settlement date of December 2, 2004 using a 360-day year with interest compounded semi-annually. The term "yield", as used herein, means that yield which, when used in computing the present value of all payments of principal and interest to be paid or received on an obligation produces an amount equal to, in the case of the cash receipts from the SLGS purchased with Bond proceeds, the purchase price, and in the case of the Bonds, the issue price adjusted for the bond insurance premium of$68,216.37. In addition, we found that the schedules provided by the Financial Advisor, which assume the redemption of the March 1, 2016 and March 1, 2017 maturities identified on Exhibits C and C-1 at par on March 1, 2014 plus accrued interest, correctly treat those Bonds as yield-to-call Bonds as retired on the respective dates that for each Bond produces the lowest yield for the issue that includes the Bonds. Those Bonds identified as yield-to-call Bonds on the attached Exhibits C and C-1 are those Bonds that are subject to optional redemption and that are issued at an issue price that exceeds the stated redemption price at maturity of such Bonds by more than one-fourth of one percent multiplied by the product of the stated redemption price at maturity of such Bonds and the number of complete years to the first optional redemption date for the Bonds. We found that there are no other yield-to-call Bonds other than those identified on the attached Exhibits C and C-1. As part of our engagement to recalculate the schedules attached as Appendix I we prepared schedules attached hereto as Exhibits B-1 and C independently calculating the yields on (i) the cash receipts from the SLGS purchased with Bond proceeds calculated on Exhibit B-1, and (ii) the Bonds using the Official Statement provided by the Financial Advisor insofar as the Bonds are described as to the maturity and interest payment dates, dated date, principal amounts, interest rates, optional redemption date and price, and issue price to the public. The results of our calculations, based on the aforementioned assumptions, are summarized on the next page: Page 4 Yield Exhibit • Yield on the cash receipts from the SLGS purchased with Bond Proceeds 2.812619% B-1 • Yield on the Bonds 3.495529% C Our procedures, as summarized in Exhibits B-1 and C, prove the mathematical accuracy of the schedules provided by the Financial Advisor summarizing the yields. The schedules provided by the Financial Advisor and those prepared by us reflect that the yield on the cash receipts from the SLGS purchased with Bond proceeds is less than the yield on the Bonds. VERIFICATION OF MULTIPURPOSE ALLOCATION The Financial Advisor provided us with schedules (Appendix I) allocating on a pro-rata basis the new money portions of the 1996 Certificates and the 1996 Bonds. As part of our engagement we independently calculated the multipurpose allocation of the 1996 Certificates and the 1996 Bonds using assumptions and methodologies as provided by the Financial Advisor. Our procedures, as summarized in Exhibit D, prove the mathematical accuracy of the schedules provided by the Financial Advisor summarizing the multipurpose allocations of the 1996 Certificates and the 1996 Bonds. The schedules provided by the Financial Advisor and those prepared by us reflect that the portions of the 1996 Certificates and 1996 Bonds allocated to the new money proceeds are as shown on Exhibit D. We were not engaged to, and did not, perform an examination in accordance with attestation standards established by the American Institute of Certified Public Accountants, the objective of which would be the expression of an examination opinion on the items referred to above. Accordingly we do not express such an opinion. Had we performed additional procedures, other matters might have come to our attention that would have been reported to you. This report is intended solely for the information and use of those to whom this letter is addressed and is not intended to be and should not be used by anyone other than these specified parties. Minneapolis, Minnesota December 2, 2004 Exhibit A City of Beaumont,Texas SCHEDULE OF SOURCES AND USES OF FUNDS December 2,2004 SOURCES: Principal amount of the Bonds $205640,000.00 Original issue premium 1,410,027.15 Transfers from prior issue Debt Service Funds 367,000.00 Accrued interest 81,250.35 $22,498,277.50 USES: Purchase price of the SLGS: - Purchased with Bond proceeds $21,742,645.00 - Purchased with Debt Service Funds 366,999.00 Beginning cash deposit to the escrow account 1.58 Accrued interest 81,250.35 Underwriters' discount 118,680.00 Costs of issuance 118,000.00 Bond insurance premium 68,216.37 Contingency 2,485.20 $22,498,277.50 Exhibit B City of Beaumont,Texas ESCROW ACCOUNT CASH FLOW Debt service Cash receipts from SLGS: payments on Purchased the Refunded Purchased with with Debt Obligations Bond proceeds Service Funds (Exhibits B-3 Cash Dates (Exhibit B-1) (Exhibit B-2) through B-6) balance Cash deposit on December 2, 2004 $1.58 03-01-05 $4,668,053.90 $368,403.95 $5,036,457.50 1.93 09-01-05 414,519.84 414,520.00 1.77 03-01-06 414,520.16 414,520.00 1.93 09-01-06 414,519.57 414,520.00 1.50 03-01-07 7,824,519.75 7,824,520.00 1.25 09-01-07 225,675.75 225,675.00 2.00 03-01-08 9,140,674.00 9,140,675.00 1.00 $23,102,482.97 $368,403.95 $23,470,887.50 Exhibit B-1 City of Beaumont,Texas CASH RECEIPTS FROM AND YIELD ON THE SLGS PURCHASED WITH BOND PROCEEDS Cash receipts Present value on from SLGS December 2, 2004 Receipt Interest purchased with using a yield of date Principal rate Interest Bond proceeds 2.812619% 03-01-05 $4,532,697 1.570% $135,356.90 $4,668,053.90 $4,635,932.12 09-01-05 171,897 2.050% 242,622.84 414,519.84 405,958.42 03-01-06 174,533 2.210% 239,987.16 414,520.16 400,328.87 09-01-06 176,461 2.440% 238,058.57 414,519.57 394,776.52 03-01-07 7,588,614 2.670% 235,905.75 7,824,519.75 7,348,504.93 09-01-07 91,078 2.830% 134,597.75 225,675.75 209,007.19 03-01-08 9,007,365 2.960% 133,309.00 9,140,674.00 8,348,136.96 $21,742,645 $1,359,837.97 $23,102,482.97 $21,742,645.00 Purchase price of the SLGS purchased with Bond proceeds $21,742,645.00 The sum of the present values of the cash receipts from the SLGS purchased with Bond proceeds on December 2, 2004, using a yield of 2.812619%, is equal to the purchase price of the SLGS purchased with Bond proceeds. Exhibit B-2 City of Beaumont,Texas CASH RECEIPT FROM THE SLGS PURCHASED WITH DEBT SERVICE FUNDS Cash receipt from SLGS purchased Receipt Interest with Debt date Principal rate Interest Service Funds 03-01-05 $366,999 1.570% $1,404.95 $368,403.95 Exhibit B-3 City of Beaumont,Texas DEBT SERVICE PAYMENT ON THE 1995 CERTIFICATES Interest Debt service Date Principal rate Interest payment 03-01-05 $4,500,000 (1) $121,937.50 $4,621,937.50 (1) Actual maturity dates, principal amounts and interest rates are as follows: Maturity Principal Interest date amount rate 03-01-06 $500,000 5.200% 03-01-07 500,000 5.300% 03-01-08 500,000 5.400% 03-01-09 500,000 5.500% 03-01-10 500,000 5.600% 03-01-11 500,000 5.625% 03-01-12 500,000 5.700% 03-01-13 500,000 5.750% 03-01-14 500,000 4.700% $4,500,000 Exhibit B-4 City of Beaumont,Texas DEBT SERVICE PAYMENTS ON THE 1996 CERTIFICATES Interest Debt service Date Principal rate Interest payments 03-01-05 $129,187.50 $129,187.50 09-01-05 129,187.50 129,187.50 03-01-06 129,187.50 129,187.50 09-01-06 129,187.50 129,187.50 03-01-07 $5,055,000 (1) 129,187.50 5,184,187.50 $5,055,000 $645,937.50 $5,700,937.50 (1) Actual maturity dates, principal amounts and interest rates are as follows: Maturity Principal Interest date amount rate 03-01-08 $590,000 * 5.000% 03-01-09 610,000 * 5.000% 03-01-10 680,000 * 5.000% 03-01-11 725,000 * 5.100% 03-01-12 775,000 * 5.200% 03-01-13 825,000 * 5.200% 03-01-14 850,000 * 5.200% $5,055,000 * Represents portions of the principal amounts outstanding as shown on Exhibit D. Exhibit B-5 City of Beaumont,Texas DEBT SERVICE PAYMENTS ON THE 1996 BONDS Interest Debt service Date Principal rate Interest payments 03-01-05 $59,657.50 $59,657.50 09-01-05 59,657.50 59,657.50 03-01-06 59,657.50 59,657.50 09-01-06 59,657.50 59,657.50 03-01-07 $2,355,000 (1) 59,657.50 2,414,657.50 $2,355,000 $298,287.50 $2,653,287.50 (1) Actual maturity dates,principal amounts and interest rates are as follows: Maturity Principal Interest date amount rate 03-01-08 $790,000 * 5.000% 03-01-09 780,000 * 5.100% 03-01-10 785,000 * 5.100% $2,355,000 * Represents portions of the principal amounts outstanding as shown on Exhibit D. Exhibit B-6 City of Beaumont,Texas DEBT SERVICE PAYMENTS ON THE 1998 CERTIFICATES Interest Debt service Date Principal rate Interest payments 03-01-05 $225,675.00 $225,675.00 09-01-05 225,675.00 225,675.00 03-01-06 225,675.00 225,675.00 09-01-06 225,675.00 225,675.00 03-01-07 225,675.00 225,675.00 09-01-07 225,675.00 225,675.00 03-01-08 $8,915,000 (1) 225,675.00 9,140,675.00 $8,915,000 $1,579,725.00 $10,494,725.00 (1) Actual maturity dates,principal amounts and interest rates are as follows: Maturity Principal Interest date amount rate 03-01-08 $40,000 * 6.500% 03-01-09 500,000 6.500% 03-01-10 500,000 4.700% 03-01-11 500,000 4.800% 03-01-12 500,000 5.000% 03-01-13 500,000 5.000% 03-01-14 360,000 5.000% 03-01-15 1,900,000 5.000% 1 03-01-16 2,005,000 5.000% 03-01-17 2,110,000 5.000% $8,915,000 * Represents a portion of the principal amount outstanding. Exhibit C City of Beaumont,Texas DEBT SERVICE PAYMENTS AND YIELD ON THE BONDS Present value on $20,640,000 issue dated November 1,2004 (1) December 2,2004 Interest Total debt Adjusted using a yield of Date Principal rate Interest service debt service 3.495529% 03-01-05 $314,517.50 $314,517.50 $314,517.50 $311,834.51 09-01-05 471,776.25 471,776.25 471,776.25 459,717.00 03-01-06 $220,000 3.000% 471,776.25 691,776.25 691,776.25 662,514.31 09-01-06 468,476.25 468,476.25 468,476.25 440,953.01 03-01-07 200,000 3.000% 468,476.25 668,476.25 668,476.25 618,394.82 09-01-07 465,476.25 465,476.25 465,476.25 423,206.68 03-01-08 2,000,000 (2) 465,476.25 2,465,476.25 2,465,476.25 2,203,083.35 09-01-08 425,476.25 425,476.25 425,476.25 373,663.39 03-01-09 2,455,000 5.000% 425,476.25 2,880,476.25 2,880,476.25 2,486,249.17 09-01-09 364,101.25 364,101.25 364,101.25 308,871.36 03-01-10 2,525,000 5.000% 364,101.25 2,889,101.25 2,889,101.25 2,408,759.06 09-01-10 300,976.25 300,976.25 300,976.25 246,625.48 03-01-11 1,790,000 5.000% 300,976.25 2,090,976.25 2,090,976.25 1,683,952.92 09-01-11 256,226.25 256,226.25 256,226.25 202,805.43 03-01-12 1,835,000 5.000% 256,226.25 2,091,226.25 2,091,226.25 1,626,792.32 09-01-12 210,351.25 210,351.25 210,351.25 160,824.17 03-01-13 1,875,000 3.750% 210,351.25 2,085,351.25 2,085,351.25 1,566,969.54 09-01-13 175,195.00 175,195.00 175,195.00 129,383.28 03-01-14 1,735,000 (2) 175,195.00 1,910,195.00 6,015,195.00 4,365,97550 09-01-14 143,381.25 143,381.25 35,625.00 25,413.33 03-01-15 1,900,000 3.750% 143,381.25 2,043,381.25 1,935,625.00 1,357,072.51 09-01-15 107,756.25 107,756.25 03-01-16 2,000,000 5.250% 107,756.25 2,107,756.25 09-01-16 55,256.25 55,256.25 03-01-17 2,105,000 5.250% 55,256.25 2,160,256.25 $20,640,000 $7,203,415.00 $27,843,415.00 $27,301,877.50 $22,063,061.13 The present value of the future payments is equal to: Principal amount of the Bonds $20,640,000.00 Accrued interest 81,250.35 Original issue premium 1,410,027.15 Bond insurance premium {68,216.37) $22,063,061.13 The sum of the present values of the adjusted debt service payments of the Bonds on December 2,2004,using a yield of 3.495529%,is equal to the issue price of the Bonds adjusted for the bond insurance premium. (1) Assumes that the March 1,2016 and March 1,2017 maturities are called on March 1,2014 at 100 percent of par plus accrued interest. (2) Actual principal amounts and interest rates are shown on Exhibit C-1. Exhibit C-1 City of Beaumont,Texas ORIGINAL ISSUE PREMIUM ON THE BONDS Initial public Original Maturity Interest offering issue date Principal rate Yield price premium 03-01-06 $220,000 3.000% 1.940% 101.298% $2,855.60 03-01-07 200,000 3.000% 2.130% 101.897% 3,794.00 03-01-08 1,000,000 5.000% 2.460% 107.876% 78,760.00 03-01-08 1,000,000 3.000% 2.460% 101.673% 16,730.00 03-01-09 2,455,000 5.000% 2.770% 108.873% 217,832.15 03-01-10 2,525,000 5.000% 3.030% 109.486% 239,521.50 03-01-11 1,790,000 5.000% 3.220% 109.995% 178,910.50 03-01-12 1,835,000 5.000% 3.390% 110.263% 188,326.05 03-01-13 1,875,000 3.750% 3.540% 101.486% 27,862.50 03-01-14 1,435,000 3.650% 3.650% 100.000% 03-01-14 300,000 3.750% 3.650% 100.774% 2,322.00 03-01-15 1,900,000 3.750% 3.750% 100.000% 03-01-16 2,000,000 5.250% 3.780% 111.376% (1) (2) 227,520.00 03-01-17 2,105,000 5.250% 3.860% 110.717% (1) (2) 225,592.85 $20,640,000 $1,410,027.15 (1) Maturities were priced to call on March 1, 2014 at 100 percent of par. (2) Represents the yield-to-call Bonds included for purposes of computing yield on the Bonds. Exhibit D Page 1 of 2 City of Beaumont,Texas MULTIPURPOSE ALLOCATION ON THE 1996 CERTIFICATES AND 1996 BONDS 1990 Escrow Present value on Other funds Adjusted February 22, 1996 Escrow allocated to Allocated escrow using a yield of Date requirements requirement percentage requirements 5.08642% 03-01-96 $86,295.00 $42,498.84 17.7078% $43,796.16 $43,741.20 09-01-96 86,295.00 0.00 17.7078% 86,295.00 84,049.16 03-01-97 671,295.00 0.00 46.3817% 671,295.00 637,608.72 09-01-97 66,990.00 0.00 14.7721% 66,990.00 62,050.30 03-01-98 696,990.00 0.00 46.9831% 696,990.00 629,583.83 09-01-98 46,200.00 0.00 11.0738% 46,200.00 40,696.97 03-01-99 721,200.00 0.00 47.5349% 721,200.00 619,539.39 09-01-99 23,925.00 0.00 6.3217% 23,925.00 20,042.79 03-01-00 748,925.00 0.00 47.4467% 748,925.00 611,839.79 $3,148,115.00 $42,498.84 $3,105,616.16 $2,749,152.16 1992 Escrow Present value on Other funds Adjusted February 22, 1996 Escrow allocated to Allocated escrow using a yield of Date requirements requirement percentage requirements 5.08642% 03-01-96 $401,031.25 $197,501.16 82.2922% $203,530.09 $203,274.68 09-01-96 401,031.25 0.00 82.2922% 401,031.25 390,594.35 03-01-97 776,031.25 0.00 53.6183% 776,031.25 737,089.20 09-01-97 386,500.00 0.00 85.2279% 386,500.00 358,000.33 03-01-98 786,500.00 0.00 53.0169% 786,500.00 710,437.29 09-01-98 371,000.00 0.00 88.9262% 371,000.00 326,809.01 03-01-99 796,000.00 0.00 52.4651% 796,000.00 683,795.55 09-01-99 354,531.25 0.00 93.6783% 354,531.25 297,002.99 03-01-00 829,531.25 0.00 52.5533% 829,531.25 677,691.66 09-01-00 336,125.00 0.00 100.0000% 336,125.00 267,789.35 03-01-01 836,125.00 0.00 100.0000% 836,125.00 649,616.10 09-01-01 316,750.00 0.00 100.0000% 316,750.00 239,991.18 03-01-02 10,191,750.00 0.00 100.0000% 10,191,750.00 7,530,442.83 $16,782,906.25 $197,501.16 $16,585,405.09 $13,072,534.51 Exhibit D ' Page 2 of 2 City of Beaumont,Texas MULTIPURPOSE ALLOCATION ON THE 1996 CERTIFICATES AND 1996 BONDS Present value Percent of Percent requirements total refundable Refunding $15,821,686.67 50.042995% 0.000000% New Money 15,794,500.00 49.957005% 49.957005% $31,616,186.67 100.000000% 49.957005% Series 1996 Certificates Principal Date issued 49.957005% Refundable 03-01-08 $1,175,000.00 $586,994.81 $590,000.00 03-01-09 1,215,000.00 606,977.61 610,000.00 03-01-10 1,355,000.00 676,917.42 680,000.00 03-01-11 1,450,000.00 724,376.57 725,000.00 03-01-12 1,545,000.00 771,835.73 775,000.00 03-01-13 1,645,000.00 821,792.73 825,000.00 03-01-14 1,700,000.00 849,269.09 850,000.00 $10,085,000.00 $5,038,163.97 $5,055,000.00 Series 1996 Bonds Principal Date issued 49.957005% Refundable 03-01-08 $1,580,000.00 $789,320.68 $790,000.00 03-01-09 1,560,000.00 779,329.28 780,000.00 03-01-10 1,570,000.00 784,324.98 785,000.00 $4,710,000.00 $2,352,974.94 $2,355,000.00 APPENDIX I Applicable schedules provided by RBC Dain Rauscher Inc. City of Beaumont, General Obligation Debt Sources&Uses Report Advance Refunding of Series 1995,1996(2 Issues)and 1998 Bonds Sources of Funds: Principal Amount of Current Interest Bonds(CIBs) 20,640,000.00 CIB Premium 1,410,027.15 Transfer from Debt Service Fund 367,000.00 Accrued Interest 81,250.35 Total SOURCES of Funds $22,498,277.50 Uses of Funds: SLG Escrow Cost 22,109,645.58 Accrued Interest Deposit to D/S Fund 81,250.35 Issuance Expenses: ($304,896.37) Underwriter's Discount 118,680.00 Rating Agency 30,000.00 Insurance 68,216.37 Financial Advisor Fee 35,000.00 Bond Counsel 25,000.00 c Trustee/Escrow Agent 5,000.00 Printing 10,000.00 Miscellaneous 5,000.00 CPA/Accountant 8,000.00 Rounding Amount 2,485.20 Total USES of Funds $22,498,277,50 Miscellaneous Bond Issuance Information: Delivery Date: 12/02/2004 Principal Amount of Bonds Being Refunded 20,825,000.00 Principal Amount of the Refunding Bonds 20,640,000.00 Proceeds of"The new Bonds" 22,050 027.15 Rate/Yield on the Refunded Bonds 5.33999579% "All Costs Included"TIC on the New Issue is 3.75853501% Federal Arbitrage Yield on the New Issue is 3.49552934% Yield on Escrow 2.81261859% Total Debt Service Savings 810,337.85 Present Value Savings 3.75853501% 749,657.89 Total Debt Service Savings as a Percent of Total Debt Service of Refunded Bonds 2.80010982% Present Value Savings as a Percent of Principal Amount of Bonds Being Refunded 3.59979782% BEAUMONT CITY.RUN2004REF NEW2004REF NEW2004REF2 AGGREFUND Prepared by.RBC Dain Rauscher--Houston,Texas 1110212004 @ 12.15 v7.03 Page-2 City of Beaumont,General Obligation Debt Escrow Sufficiency&Balance Report Advance Refunding of Series 1995,1996(2 Issues)and 1998 Bonds Escrow Settlement Date Is 12/02/2004 This is a birfucated escrow--Cost of"Early"escrow is$366,999.00 Proceeds from Less Amts to Plus Maturing Adjusted Proceeds from Original be Invested Amts Invested Proceeds from Present Value 'Other' Old D/S Escrow Escrow Dates ResEse ed in 0%SLGs in 0%SLGs Rstrct'd Esc @ 2.81261859% Investments Requirement New Balance Old Balance 12/02/2004 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1.58 1.58 03/01/2005 5,036,457.85 0.00 0.00 4,668,053.90 4,635,932.12 368,403.95 5,036,457.50 1.93 1.93 09/0112005 414,519.84 0.00 0.00 414,519.84 405,958.42 0.00 414,520.00 1.77 1.77 03/01/2006 414,520.16 0.00 0.00 414,520.16 400,328.87 0.00 414,520.00 1.93 1.93 09/01/2006 414,519.57 0.00 0.00 414,519.57 394,776.52 0.00 414,520.00 1.50 1.50 03/01/2007 7,824,519.75 0.00 0.00 7,824,519.75 7,348,504.93 0.00 7,824,520.00 1.25 1.25 09/01/2007 225,675.75 0.00 0.00 225,675.75 209,007.19 0.00 225,675.00 2.00 2.00 03/01/2008 9,140,674.00 0.00 0.00 9,140,674.00 8,348,136.96 0.00 9,140,675.00 1.00 1.00 Totals $23,470,886.92 $0.00 $0.00 $23,102,482.97 $21,742,645.00 $368,403.95 $23,470,887.50 Cost of"Late"Escrow SLG Securities $21,742,645.00 Escrow Arbitrage YLD after Reinvestment in 0%SLGs=2.81261859% Cost of"Early"Escrow SLG Securities $366,999.00 Cost of'Other'Restricted Investments $0.00 Escrow Starting Balance $1.58 Total Escrow Cost... $22,109,645.58 SLG Rates Were Taken From SLG Table Dated 1010812004 r { BEAUMONT CITY:RUN2004REFAGGREFUND Prepared by:RBC Dain Rauscher-Houston,Texas 1110212004 @ 12:15 v7.03 Page-10 City of Beaumont,General Obligation Debt U. S.Treasury SLG Investments Advance Refunding of Series 1995,1996(2 Issues)and 1998 Bonds Escrow Settlement Date Is 12/02/2004 Payment SLG SLG Rates Total Receipts PV'd SLG Rates Dates Principal Subscribed Interest SLG Receipts 2.81261859% From Table 03/01/2005 4,899,696 1.570000 136,761.85 5,036,457.85 5,001,801.01 1.570000 09/01/2005 171,897 2.050000 242,622.84 414,519.84 405,958.42 2.050000 03/01/2006 174,533 2.210000 239,987.16 414,520.16 400,328.87 2.210000 09/01/2006 176,461 2.440000 238,058.57 414,519.57 394,776.52 2.440000 03101/2007 7,588,614 2.670000 235,905.75 7,824,519.75 7,348,504.93 2.670000 09/01/2007 91,078 2.830000 134,597.75 225,675.75 209,007.19 2.830000 03/01/2008 9,007,365 2.960000 133,309.00 9,140,674.00 8,348,136.96 2.960000 Totals $22,109,644 Y$1,361,242.92 $23,470,886.92 $22,108,513.89 a Early(Bifurcated)Escrow Payment SLG SLG Rates Total SLG Rates Dates Principal Subscribed Interest SLG Receipts From Table 03/01/2005 366,999 1.570000 1,404.95 368,403.95 0.00 1.570000 Totals $366,999 $1,404.95 $368,403.95 $0.00 7 SLG Rates were taken from a SLG table dated 10/0812004 r, BEAUMONT CITY:RUN2004REF AGGREFUND Prepared by:RBC Dain Rauscher—Houston,Texas 1110212004 @ 12:15 v7.03 Page-11 City of Beaumont,General Obligation Debt Aggregation Spreadsheet Report Advance Refunding of Series 1995,1996(2 Issues)and 1998 Bonds Data are Principal Amounts Data are to Maturity FY 10/01 Dates Totals OLD1995R OLD1996R OLD1996REFR OLD1998R 2005 0.00 2006 500,000.00 500,000.00 2007 500,000.00 500,000.00 2008 1,920,000.00 500,000.00 590,000.00 790,000.00 40,000.00 2009 2,390,000.00 500 000.00 610 000.00 780,000.00 500 000.00 2010 2,465,000.00 500,000.00 680,000.00 785,000.00 500,000.00 2011 1,725,000.00 500,000.00 725,000.00 500,000.00 2012 1,775,000.00 500,000.00 775,000.00 500,000.00 2013 1,825,000.00 500,000.00 825,000.00 500,000.00 2014 1710,000.00 500,000.00 850,000.00 360,000.00 2015 1,900,000.00 1,900,000.00 2016 2,005,000.00 2,005,000.00 2017 2,110,000.00 2,110,000.00 2018 0.00 Totals $20 825 000.00 4 500 000.00 $5 055 000.00 $2 355 000.00 $8,91 000.00 Component Face Amt ----Title---- From To OLD1995R $4,500,000.00 Combination Tax&Revenue CO,Series 1995 OLD1996R $5,055,000.00 Series 1996 Dated 1/111996 Bonds to Refund OLD1996REFR $2,355,000.00 Refunding Bonds,Series 1996 OLD1998R $8,915,000.00 Series 1998 Bonds to Refund BEAUMONT CITY:AGGREFUND Prepared by.RBC Dain Rauscher--Houston,Texas 1110212004 @ 12:16 v7.03 Page-12 City of Beaumont,General Obligation Debt Advance Refunding of Series 1995,1996(2 Issues)and 1998 Bonds Dated Date=09/01/2004 Combination Tax S Revenue CO,Series 1995 Delivery Date 09/01/2004 To Be Refunded Term Bond Bond Coupon Interest Total Fiscal Year Debt Service Dates Maturities Redemptions Proceeds Rate Yield Price Amount Debt Service Debt Service to Call 03/01/2005 - - - 6.400 6.400000 100.000000 121,937.50 121,937.50 - 7621,937.50 09/01/2005 - - - - - 121,937.50 121,937.50 243,875.00 - 03/01/2006 - 500,000.00 - 500,000.00 5.200 5.200000 100.000000 121,937.50 621,937.50 - 09/01/2006 - - - - - - 108,937.50 108,937.50 730,875.00 03/01/2007 - 500,000.00 - 500,000.00 5.300 5.300000 100.000000 108,937.50 608,937.50 - - 09/01/2007 - - - - - - 95,687.50 95,687.50 704,625.00 03/01/2008 - 500,000.00 . 500,000.00 5.400 5.400000 100.000000 95,687.50 595,687.50 - 09/01/2008 - - - - - - 82,187.50 82,187.50 677,875.00 03/01/2009 - 500,000.00 - 500,000.00 5.500 5.500000 100.000000 82,187.50 582,187.50 - 09101/2009 - - - - - - 68,437.50 68,437.50 650,625.00 03/01/2010 - 500,000.00 ' 500,000.00 5.600 5.600000 100.000000 68,437.50 568,437.50 - 09/01/2010 - - - - 54,437.50 54,437.50 622,875.00 03/01/2011 - 500,000.00 - 500,000.00 5.625 5.625000 100.000000 54,437.50 554,437.50 - 09/01/2011 - - - - - 40,375.00 40,375.00 594,812.50 03/01/2012 - 500,000.00 " 500,000.00 5.700 5.700000 100.000000 40,375.00 540,375.00 09/01/2012 - - - - - - 26,125.00 26,125.00 566,500.00 03/0112013 - 500,000.00 ` 500,000.00 5.750 5.750000 100.000000 26,125.00 526,125.00 - 09/01/2013 - - - - - - 11,750.00 11,750.00 537,875.00 03/01/2014 500,000.00 ' 500,000.00 4.700 4.700000 100.000000 11,750.00 511,750.00 511,750.00 Total - 4,500,000.00 4,500,000.00 1,341,687.50 5,841,687.50 5,841,687.50 4,621,937.50 Acc Int rand Totals 4,500,000.00 4 500 000.00 1,341,687.50 5 841 687.50 5,841,687.50 4 621,937.50 r -Bonds callable... 03/01/2005 @ 100.000 TIC(Incl.all expenses)....5.42630359% Average Coupon.......5.42095960% Net Eff.Int.Rate(Texas Vernon's)= 5.420960%(with Adjstmnt of$0.00). TIC(Arbitrage TIC).........5.42630359% Average Life(yrs)... 5.50 IRS Form 8038-G NIC =5.420960%(with Adjstmnt of$0.00). Bond Years.................. 24,750.00 WAM rs)............. 5.500000 NIC= 5.420960% with Adjstmnt of$0.00). BEAUMONT CITY:OLD1995R Prepared by:RBC Dain Rauscher-Houston,Texas 1110212004 @ 12:16 v7.03 Page-13 City of Beaumont,General Obligation Debt Advance Refunding of Series 1995,1996(2 Issues)and 1998 Bonds Dated Date=09/01/2004 Series 1996 Dated 1/1/1996 Bonds to Refund Delivery Date= 09/01/2004 Term Bond Bond Coupon Interest Total Fiscal Year Debt Service Dates Maturities Redemptions Proceeds Rate Yield Price Amount Debt Service Debt Service to Call 03/01/2005 - - 5.500 5.500000 100.000000 129,187.50 129,187.50 - 129,187.50 09/01/2005 - - - - - - 129,187.50 129,187.50 258,375.00 129,187.50 03/01/2006 - - - 5.500 5.500000 100.000000 129,187.50 129,187.50 - 129,187.50 09/01/2006 - - - - - - 129,187.50 129,187.50 258,375.00 129,187.50 03101/2007 - 5.500 5.500000 100.000000 129,187.50 129,187.50 5,184,187.50 09/01/2007 - - - - - - 129,187.50 129,187.50 258,375.00 03/01/2008 - 590,000.00 * 590,000.00 5.000 5.000000 100.000000 129,187.50 719,187.50 - 09/01/2008 - - - - - - 114,437.50 114,437.50 833,625.00 03/01/2009 - 610,000.00 * 610,000.00 5.000 5.000000 100.000000 114,437.50 724,437.50 - 09/01/2009 - 99,187.50 99,187.50 823,625.00 03101/2010 - 680,000.00 * 680,000.00 5.000 5.000000 100.000000 99,187.50 779,187.50 - 09/0112010 - - - - - - 82,187.50 82,187.50 861,375.00 03/01/2011 - 725,000.00 * 725,000.00 5.100 51100000 100.000000 82,187.50 807,187.50 - 09/01/2011 - - - - - - 63,700.00 63,700.00 870,887.50 - 03/01/2012 - 775,000.00 * 775,000.00 5.200 5.200000 100.000000 63,700.00 838,700.00 - k 09/01/2012 - - - - - - 43,550.00 43,550.00 882,250.00 - 03/01/2013 - 825,000.00 * 825,000.00 5.200 5.200000 100.000000 43,550.00 868,550.00 09/01/2013 - - - - 22,100.00 22,100.00 890,650.00 03/01/2014 850,000.00 * 850,000.00 5.200 5.200000 100.000000 22,100.00 872,100.00 872,100.00 Total - 5,055,000.00 5,055,000.00 1,754,637.50 6,809,637.50 6,809,637.50 5,700,937.50 Acc int - - rand Totals 5,055,000.00 5 055 000.00 1,754,637.50 6 809 637.50 6,809,637.50 5 700 937.50 *-Bonds callable... 03/01/2007 @ 100.000 TIC(Incl.all expenses)....5.13266346% Average Coupon.......5.13615075% Net Eff.Int.Rate(Texas Vernon's)= 5.136151%(with Adjstmnt of$0.00). TIC(Arbitrage TIC).........5.13266346% Average Life(yrs)... 6.76 IRS Form 8038-G NIC =5.136151%(with Adjstmnt of$0.00). Bond Years.................. 34,162.50 WAM rs)............. 6.758160 NIC= 5.136151% with Adjstmnt of$0.00). a k t BEAt1MONT CITY:OLD1996R Prepared by:RBC Da1n Rauscher--Houston, Texas 1110212004 @ 12:16 v7.03 Page-14 City of Beaumont,General Obligation Debt Advance Refunding of Series 1995,1996(2 Issues)and 1998 Bonds Dated Date=09/01/2004 Refunding Bonds Series 1996 Delivery Date=09/01/2004 Term Bond Bond Coupon Interest Total Fiscal Year Debt Service Dates Maturities Redemptions Proceeds Rate Yield Price Amount Debt Service Debt Service to Call 03/01/2005 - - - - - 59,657.50 59,657.50 - 59,657.50 09/01/2005 - - - - - 59,657.50 59,657.50 119,315.00 59,657.50 03/01/2006 - - 4.750 4.750000 100.000000 59,657.50 59,657.50 - 59,657.50 09/01/2006 - - - - - 59,657.50 59,657.50 119,315.00 59,657.50 03/01/2007 - - - 4.900 4.900000 100.000000 59,657.50 59,657.50 - 2,414,657.50 09/01/2007 - - - - - - 59,657.50 59,657.50 119,315.00 03/01/2008 - 790,000.00 ` 790,000.00 5.000 5.000000 100.000000 59,657.50 849,657.50 - - 09/01/2008 - - - - - - 39,907.50 39,907.50 889,565.00 03/01/2009 - 780,000.00 ' 780,000.00 5.100 5.100000 100.000000 39,907.50 819,907.50 - 09/01/2009 20,017.50 20,017.50 839 925.00 - 03/01/2010 - 785,000.00 ` 785,000.00 5.100 5.100000 100.000000 20,017.50 805,017.50 805,017.50 - I Total - 2,355,000.00 2,355,000.00 537,452.50 2,892,452.50 2,892,452.50 2,653,287.50 Acc Int - - - - - - rand Totals 2,355,000.00 2 355 000.00 537 452.50 2,892 452.50 2,892,452.50 2 653 287.50 "-Bonds callable... 03/01/2007 @ 100.000 TIC(incl.all expenses)....5.07316912% Average Coupon.......5.07389662% Net Eff.Int.Rate(Texas Vernon's)= 5.073897%(with Adjstmnt of$0.00). I TIC(Arbitrage TIC).........5.07316912% Average Life(yrs)... 4.50 IRS Form 8038-G NIC =5.073897%(with Adjstmnt of$0.00). Bond Years.................. 10,592.50 WAM rs)............. 4.497877 NIC= 5.073897% with Adjstmnt of$0.00). t BEAUMONT CITY:OLD1996REFR Prepared by:RBC Dain Rauscher--Houston,Texas 1110212004 @ 12:16 v7.03 Page-15 City of Beaumont, General Obligation Debt Advance Refunding of Series 1995,1996(2 Issues)and 1998 Bonds Dated Date=09/01/2004 Series 1998 Bonds to Refund Delivery Date=09/01/2004 Term Bond I Bond Coupon Interest Total Fiscal Year Debt Service Dates Maturities Redemptions Proceeds Rate Yield Price Amount Debt Service Debt Service to Call 03101/2005 - - 6.500 6.500000 100.000000 225,675.00 225,675.00 - 225,675.00 . 09/01/2005 - - - - - - 225,675.00 225,675.00 451,350.00 225,675.00 03/01/2006 - - - 6.500 6.500000 100.000000 225,675.00 225,675.00 - 225,675.00 09/01/2006 - - - - - - 225,675.00 225,675.00 451,350.00 225,675.00 03101/2007 - - 6.500 6.500000 100.000000 225,675.00 225,675.00 - 225,675.00 09/01/2007 - - - - - 225,675.00 225,675.00 451,350.00 225,675.00 03/01/2008 - 40,000.00 40,000.00 6.500 6.500000 100.000000 225,675.00 265,675.00 - 91140,675.00 09/01/2008 - - - - - - 224,375.00 224,375.00 490,050.00 03/01/2009 - 500,000.00 * 500,000.00 6.500 6.500000 100.000000 224,375.00 724,375.00 - - _09/0112009 - - 208,125.00 208,125.00 932,500.00 03/01/2010 - 500,000.00 * 500,000.00 4.700 4.700000 100.000000 208,125.00 708,125.00 - 09/01/2010 - - - - - - 196,375.00 196,375.00 904,500.00 - z 03/01/2011 - 500,000.00 * 500,000.00 4.800 4.800000 100.000000 196,375.00 696,375.00 - t 09/01/2011 - - - - - - 184,375.00 184,375.00 880,750.00 03/01/2012 500,000.00 * 500,000.00 5.000 5.000000 100.000000 184,375.00 684,375.00 - 09101/2012 - - - - - - 171,875.00 171,875.00 856,250.00 03/01/2013 - 500,000.00 * 500,000.00 5.000 5.000000 100.000000 171,875.00 671,875.00 - 09/01/2013 - - - - - - 159,375.00 159,375.00 831,250.00 - 03/0112014 - 360,000.00 * 360,000.00 5.000 5.000000 100.000000 159,375.00 519,375.00 - 09/01/2014 - - - - 150,375.00 150,375.00 669,750.00 - 03/01/2015 - 1,900,000.00 * 1,900,000.00 5.000 5.000000 100.000000 150,375.00 2,050,375.00 - - 09/01/2015 - - - - - - 102,875.00 102,875.00 2,153,250.00 03/01/2016 - 2,005,000.00 * 2,005,000.00 5.000 5.000000 100.000000 102,875.00 2,107,875.00 09/01/2016 - - - - - 52,750.00 52,750.00 2,160,625.00 _ p _03/01/2017 2,110,000.00 * 2,110,000.00 5.000 5.000000 100.000000 52,750.00 2,162750.00 § 09/01/2017 - - - - - - - - 2,162,750.00 03/01/2018 - - 4.500 4.500000 100.000000 - - Total - 8,915,000.00 8,915,000.00 4,480,725.00 13,395,725.00 13,395,725.00 10,494,725.00 Acc int - - - - - rand Totals 8,915,000.00 8 915 000.00 4,480,725.00 13 395 725.00 13 395 725.00 10 494 725.00 *-Bonds callable... 03/01/2008 @ 100.000 TIC(incl.all expenses)....5.02794453% Average Coupon.......5.02365670% Net Eff.Int.Rate(Texas Vernon's)= 5.023657%(with Adjstmnt of$0.00). TIC(Arbitrage TIC).........5.02794453% Average Life(yrs)... 10.00 IRS Form 8038-G NIC =5.023657%(with Adjstmnt of$0.00). Bond Years.................. 89,192.50 WAM rs)............. 10.004767 NIC= 5.023657% with Adjstmnt of$0.00). BEAUMONT CITY:OLD1998R Prepared by:RBC Dain Rauscher-Houston,Texas 1110212004 @ 12:16 v7.03 Page-16 City of Beaumont,General Obligation Debt Advance Refunding of Series 1995,1996(2 Issues)and 1998 Bonds Dated Date=11/01/2004 Refunding Bonds Series 2004 Delivery Date=12/02/2004 Term Bond Bond Coupon Interest Total Fiscal Year Debt Service Dates Maturities Redemptions Proceeds Rate Yield Price Amount Debt Service Debt Service to Call 03/01/2005 - - - - - - 300,767.50 300,767.50 - 300,767.50 09/01/2005 - - - - - - 451,151.25 451,151.25 751,918.75 451,151.25 03/0112006 - 220,000.00 222,855.60 3.000 1.940000 101.298000 451,151.25 671,151.25 - 671,151.25 09/01/2006 - - - - - 447,851.25 447,851.25 1,119,002.50 447,851.25 03/01/2007 - 200,000.00 203,794.00 3.000 2.130000 101.897000 447,851.25 647,851.25 647,851.25 09/01/2007 - - - - - 444,851.25 444,851.25 1,092,702.50 444,851.25 03/01/2008 - 1,000,000.00 1,078,760.00 5.000 2.460000 107.876000 444,851.25 1,444,851.25 - 1,444,851.25 09/01/2008 - - - - - - 419,851.25 419,851.25 1,864,702.50 419,851.25 03/01/2009 - 2,455,000.00 2,672,832.15 5.000 2.770000 108.873000 419,851.25 2,874,851.25 - 2,874,851.25 09/01/2009 - - - - 358 476.25 358 476.25 3,233,327.50 358 476.25 03/01/2010 - 2,525,000.00 2,764,521.50 5.000 3.030000 109.486000 358,476.25 2,883,476.25 - 2,883,476.25 09/01/2010 - - - - - 295,351.25 295,351.25 3,178,827.50 295,351.25 03/01/2011 - 1,790,000.00 1,968,910.50 5.000 3.220000 109.995000 295,351.25 2,085,351.25 - 2,085,351.25 09/01/2011 - - - - - - 250,601.25 250,601.25 2,335,952.50 250,601.25 03/01/2012 - 1,835,000.00 2,023,326.05 5.000 3.390000 110.263000 250,601.25 2,085,601.25 - 2,085,601.25 09/01/2012 - - - - - - 204,726.25 204,726.25 2,290,327.50 204,726.25 . 03101/2013 - 1,875,000.00 1,902,862.50 3.750 3.540000 101.486000 204,726.25 2,079,726.25 - 2,079,726.25 09/01/2013 - - - - - - 169,570.00 169,570.00 2,249,296.25 169,570.00 03/01/2014 - 1,435,000.00 1,435,000.00 3.650 3.650000 100.000000 169,570.00 1,604,570.00 - 7,609,570.00 09/01/2014 - - - - - - 143,381.25 143,381.25 1,747,951.25 03/01/2015 - 1,900,000.00 * 1,900,000.00 3.750 3.750000 100.000000 143,381.25 2,043,381.25 09/01/2015 - - - - - - 107,756.25 107,756.25 2,151,137.50 03/01/2016 2,000,000.00 * 2,227,520.00 5.250 3.780000 111.376000 107,756.25 2,107,756.25 - 09/01/2016 - - - - - - 55,256.25 55,256.25 2,163,012.50 03/01/2017 - 2,105,000.00 * 2,330,592.85 5.250 3.860000 110.717000 55,256.25 2,160,256.25 2,160,256.25 Total - 19,340,000.00 20,730,975.15 6,998,415.00 26,338,415.00 26,338,415.00 25,725,627.50 Acc Int - - - -77,698.27 -77,698.27 - rand Totals 19 340 000.00 20 730 975.15 6,920,716.73 26 260 716.73 26 338 415.00 25 725 627.50 *-Bonds callable... 03/01/2014 @ 100.000 TIC(Incl.all expenses)....3.78235619% Average Coupon.......4.65717534% Net Eff.Int.Rate(Texas Vernon's)= 3.731535%(with Adjstmnt of$0.00). TIC(Arbitrage TIC).........3.51509860% Average Life(yrs)... 7.77 IRS Form 8038-G NIC =3.475851%(with Adjstmnt of$0.00). Bond Years.................. 150,271.67 WAM rs)............. 7.674038 NIC= 3.731535% with Adjstmnt of$0.00). BEAUMONT CITY:NEW2004REF Prepared by:RBC Dain Rauscher-Houston, Texas 1110212004 @ 12:15 v7.03 Page-3 City of Beaumont,General Obligation Debt Advance Refunding of Series 1995,1996(2 Issues)and 1998 Bonds Dated Date=11/0112004 Series 2004 Refunding Bonds Delivery Date=12/02/2004 Term Bond Bond Coupon Interest Total Fiscal Year Debt Service Dates Maturities Redemptions Proceeds Rate Yield Price Amount Debt Service Debt Service to Call 03/01/2005 - - - - - 13,750.00 13,750.00 - 13,750.00 09/01/2005 - - - - - - 20,625.00 20,625.00 34,375.00 20,625.00 03/01/2006 - - 3.000 1.940000 101.298000 20,625.00 20,625.00 - 20,625.00 09/01/2006 - - - 20,625.00 20,625.00 41,250.00 20,625.00 03/01/2007 - - 3.000 2.130000 101.897000 20,625.00 20,625.00 - 20,625.00 09/01/2007 - - - - - 20,625.00 20,625.00 41,250.00 20,625.00 03/01/2008 - 1,000,000.00 1,016,730.00 3.000 2.460000 101.673000 20,625.00 1,020,625.00 - 1,020,625.00 09/01/2008 - - - - - - 5,625.00 5,625.00 1,026,250.00 5,625.00 03/01/2009 - - - 5.000 2.770000 108.873000 5,625.00 5,625.00 - 5,625.00 09/01/2009 5,625.00 5,625.00 11,250.00 5,625.00 03/01/2010 - 5.000 3.030000 109.486000 5,625.00 5,625.00 - 5,625.00 09/01/2010 - - - - - - 5,625.00 5,625.00 11,250.00 5,625.00 03/01/2011 - - - 5.000 3.220000 109.995000 5,625.00 5,625.00 - 5,625.00 09/01/2011 - - - - - 5,625.00 5,625.00 11,250.00 5,625.00 03/01/2012 - - 3.625 3.390000 101.495000 5,625.00 5,625.00 - 5,625.00 09/01/2012 - - - - - - 5,625.00 5,625.00 11,250.00 5,625.00 03/01/2013 - - - 3.750 3.540000 101.486000 5,625.00 5,625.00 - 5,625.00 09/01/2013 - - - - 5,625.00 5,625.00 11,250.00 5,625.00 03/01/2014 - 300,000.00 302,322.00 3.750 3.650000 100.774000 5,625.00 305,625.00 - 305,625.00 09/01/2014 - - - - - - - 305,625.00 03/01/2015 - - ' 3.750 3.750000 100.000000 - - - 09/01/2015 - - - - -03/01/2016 - - - 5.250 3.780000 111.376000 - - - - 09/01/2016 - - - - - - -03/01/2017 - - - 5.250 3.860000 110.717000 - - - Total - 1,300,000.00 1,319,052.00 205,000.00 1,505,000.00 1,505,000.00 1,505,000.00 Acc Int - - - -3,552.08 -3,552.08 - rand Totals 1,300,000.00 1 319 052.00 201 447.92 1,501,447.92 1 505 000.00 1,505.000.00 -Bonds callable... 03/01/2014 @ 100.000 TIC(Incl.all expenses)....3.18396696% Average Coupon.......3.34239130% Net Eff.Int.Rate(Texas Vernon's)= 3.031761%(with Adjstmnt of$0.00). TIC(Arbitrage TIC).........3.04861271% Average Life(yrs)... 4.72 IRS Form 8038-G NIC =2.991477%(with Adjstmnt of$0.00). Bond Years.................. 6,133.33 WAM rs)............. 4.622401 NIC= 3.031761% with Adjstmnt of$0.00). BEAUMONT CITY:NEW2004REF2 Prepared by:RBC Dain Rauscher--Houston,Texas 1110212004 @ 12:15 v7.03 Page-4 City of Beaumont,General Obligation Debt Proof of Federal Arbitrage Yield Advance Refunding of Series 1995,1996(2 Issues)and 1998 Bonds Dated Date 11/01/2004 Delivery Date 12/0212004 Proceeds to: Interest to: Disc Term Total(1) PV of Adj D/S Face Bondholder(+) Maturing Bondholder(+) Recoverable Total Bond Adjusted to Dates Amounts Issuer(-) Amounts Issuer(-) Recurring Debt Service Adjustments Cash Flow @ 3.49552934% Fees for Yld Calc 12/02/2004 0.00 -22,050,027.15 0.00 -22,131,277.50 0.00 0.00 0.00 -22,131,277.50 -22,131,277.50 03/01/2005 0.00 0.00 0.00 629,035.00 0.00 314,517.50 0.00 314,517.50 311,834.51 09/01/2005 0.00 0.00 0.00 943,552.50 0.00 471,776.25 0.00 471,776.25 459,717.00 03/01/2006 220,000.00 222,855.60 220,000.00 1,163,552.50 0.00 691,776.25 0.00 691,776.25 662,514.31 09/01/2006 0.00 0.00 0.00 936,952.50 0.00 468,476.25 0.00 468,476.25 440,953.01 03/01/2007 200,000.00 203,794.00 200,000.00 1,136,952.50 0.00 668,476.25 0.00 668,476.25 618,394.82 09/01/2007 0.00 0.00 0.00 930,952.50 0.00 465,476.25 0.00 465,476.25 423,206.68 03/01/2008 2,000,000.00 2,095,490.00 2,000,000.00 2,930,952.50 0.00 2,465,476.25 0.00 2,465,476.25 2,203,083.35 09/01/2008 0.00 0.00 0.00 850,952.50 0.00 425,476.25 0.00 425,476.25 373,663.39 03/01/2009 2,455,000.00 2,672,832.15 2,455,000.00 3,305,952.50 0.00 2,880,476.25 0.00 2,880,476.25 2,486,249.17 09/01/2009 0.00 0.00 0.00 728,202.50 0.00 364,101.25 0.00 364,101.25 308,871.36 03/01/2010 2,525,000.00 2,764,521.50 2,525,000.00 3,253,202.50 0.00 2,889,101.25 0.00 2,889,101.25 2,408,759.06 ' 09/01/2010 0.00 0.00 0.00 601,952.50 0.00 300,976.25 0.00 300,976.25 246,625.48 03/01/2011 1,790,000.00 1,968,910.50 1,790,000.00 2,391,952.50 0.00 2,090,976.25 0.00 2,090,976.25 1,683,952.92 09/01/2011 0.00 0.00 0.00 512,452.50 0.00 256,226.25 0.00 256,226.25 202,805.43 03/01/2012 1,835,000.00 2,023,326.05 1,835,000.00 2,347,452.50 0.00 2,091,226.25 0.00 2,091,226.25 1,626,792.32 09/01/2012 0.00 0.00 0.00 420,702.50 0.00 210,351.25 0.00 210,351.25 160,824.17 03/01/2013 1,875,000.00 1,902,862.50 1,875,000.00 2,295,702.50 0.00 2,085,351.25 0.00 2,085,351.25 1,566,969.54 09/01/2013 0.00 0.00 0.00 350,390.00 0.00 175,195.00 0.00 175,195.00 129,383.28 03/01/2014 1,735,000.00 1,737,322.00 1,735 000.00 6,190 390.00 0.00 1,910 195.00 0.00 6,015,195.00 4,365,975.50 09101/2014 0.00 0.00 0.00 179,006.25 0.00 143,381.25 0.00 35,625.00 25,413.33 03/01/2015 1,900,000.00 1,900,000.00 1,900,000.00 2,079,006.25 0.00 2,043,381.25 0.00 1,935,625.00 1,357,072.51 09/01/2015 0.00 0.00 0.00 107,756.25 0.00 107,756.25 0.00 0.00 0.00 03/01/2016 2,000,000.00 2,227,520.00 2,000,000.00 107,756.25 0.00 2,107,756.25 0.00 0.00 0.00 09/01/2016 0.00 0.00 0.00 55,256.25 0.00 55,256.25 0.00 0.00 0.00 03/01/2017 2,105,000.00 2,330,592.85 2,105,000.00 55,256.25 0.00 2,160,256.25 0.00 0.00 0.00 Totals 20,640,000.00 0.00 20,640,000.00 12,374,015.00 + W 0.00 27,843,415.00 0.00 5,170,600.00 -68,216.37 Plus PV of Bond Insurance.......... 68,216.37 0.00 (1)--Adjustments to cash flow are based on the following"yield to call'optional redemption schedule: NEW2004REF••Call the 03/01/2016 maturity on 03/0112014 @ 100.000 NEW2004REF--Call the 03/01/2017 maturity on 03/01/2014 @ 100.000 BEAUMONT CITY:AGGNEW Prepared by:RBC Dain Rauscher--Houston,Texas 1110212004 @ 12:15 v7.03 Page-7 ERIN Analy ics November 1, 2004 Mark Peroutka Grant Thornton Re: City of Beaumont—Allocation of the Series 1996 New Money and Refunding Bonds. The Series 1996 Bonds were dated 1/1/1996. Mark, According to the KPMG verification report(dated 2/22/1996) for the Series 1996 multi- purpose refunding and new money bond issue the dollars spent for the escrow was $15,825,298.90 and the deposit to the project fund was$15,843,500.00. The percentage of the new money is calculated as follows: 15,843,500 New Money Percentage = -------------------------------- 15,843,500+ 15,825,298.90 New Money Percentage = 50.02873664% Mike O'Hara (979) 278-3294 Section 7 i L No. 7 CERTIFICATE OF ESCROW AGENT RELATING TO AUTHORITY OF OFFICERS AND SIGNATURE IDENTIFICATION I, the undersigned officer of JPMORGAN CHASE BANK (the 'Bank"), do hereby execute and deliver this certificate for the benefit of the Attorney General of the State of Texas and the purchasers of, and all other persons interested in the validity of, the $20,640,000 The City of Beaumont,Texas, General Obligation Refunding Bonds, Series 2004, and I do hereby certify as follows: 1. That I am the duly chosen, qualified and acting officer of the Bank for the office shown beneath my signature and I am duly authorized to execute and deliver this Certificate. 2. That attached as Exhibit "A" to this Certificate is a Secretary's Certificate of the Bank relating to the corporate authority of the Bank to enter into Escrow Agreements, Bond Registrar, Paying Agency and Transfer Agency Agreements and similar types of agreements in connection with the issuance of the Bonds and designating the officers of the Bank authorized to execute such agreements. 3. That the following are duly elected, qualified and acting officers of the Bank having the authority to act for and in the name of the Bank as set forth in Exhibit "A" and that the signatures set opposite their names are their true and correct signatures: i NAME TITLE SIGNATURE Vice Presiden", IN WITNESS WHEREOF, I have hereunto set my hand and affixed the corporate seal of the Bank as of the Z day of V p C Q 4A Qr 92004. JPMorga has Ban >�r e By ` Its: A PRE IDENT' ATTEST: By: Its: (SEAL) -2- EXHIBIT "A" SECRETARY'S CERTIFICATE See attached. Section 8 BOND PURCHASE AGREEMENT $20,640,000 CITY OF BEAUMONT,TEXAS GENERAL OBLIGATION REFUNDING BONDS, SERIES 2004 November 2,2004 Mayor and City Council City of Beaumont,Texas 801 Main Street Beaumont,Texas 77704 The undersigned, First Southwest Company on behalf of itself and Morgan Keegan& Company, Inc., Estrada Hinojosa&Company, Inc., and Southwest Securities, Inc. (collectively,the"Underwriters") offers to enter into the following agreement (this "Agreement") with the City of Beaumont, Texas (the "Issuer") which, upon the Issuer's written acceptance of this offer, will be binding upon the Issuer and upon the Underwriters. This offer is made subject to the Issuer's written acceptance hereof on or before 10:30 p.m. Central Standard Time on November 2, 2004 and, if not so accepted, will be subject to withdrawal by the Underwriters upon notice delivered to the Issuer at any time prior to the acceptance hereof by the Issuer. Terms not otherwise defined in this Agreement shall have the same meanings set forth in the Ordinance(as defined herein)or in the Official Statement(as defined herein). 1. Purchase and Sale of the Bonds. Subject to the terms and conditions and in reliance upon the representations,warranties and agreements set forth herein,the Underwriters hereby agree to purchase from the Issuer, and the Issuer hereby agrees to sell and deliver to the Underwriters, all,but not less than all, of the Issuer's $20,640,000 General Obligation Refunding Bonds, Series 2004 (the "Bonds"). Inasmuch as this purchase and sale represents a negotiated transaction,the Issuer understands, and hereby confirms, that the Underwriters are not acting as a fiduciary of the Issuer, but rather are acting solely in their capacity as Underwriters for their own account. The Underwriters have been duly authorized to execute this Agreement and to act hereunder. The principal amount of the Bonds to be issued, the dated date therefor, the maturities, sinking fund and optional redemption provisions and interest rates per annum are set forth in Schedule I hereto. The Bonds shall be as described in, and shall be issued and secured under and pursuant to the provisions of an Ordinance adopted by the Issuer on November 2,2004(the"Ordinance"). The purchase price for the Bonds shall be $21,931,347.15 (representing the par amount of the Bonds, less an underwriters' discount of $118,680.00, plus a net original issue premium of $1,410,027.15),plus accrued interest on the Bonds to the date of Closing(as defined herein). 2. Public Offerin>?. The Underwriters agree to make a bona fide public offering of all of the Bonds at a price not to exceed the public offering price set forth on the cover of the Official Statement and may subsequently change such offering price without any requirement of prior notice. The Underwriters may offer and sell Bonds to certain dealers (including dealers depositing Bonds into investment trusts) and others at prices lower than the public offering price stated on the cover of the Official Statement. 1874867 2.DOC 3. The Official Statement. (a) Attached hereto as Exhibit A is either a draft of the final Official Statement or a copy of the Preliminary Official Statement dated October 27, 2004 (the "Preliminary Official Statement"), including the cover page and Appendices thereto,of the Issuer relating to the Bonds. Such draft of the final Official Statement or copy of the Preliminary Official Statement, as amended to reflect the changes marked or otherwise indicated on Exhibit A hereto, is hereinafter called the"Official Statement." (b) The Preliminary Official Statement has been prepared for use in connection with the public offering, sale and distribution of the Bonds by the Underwriters. The Issuer hereby represents and warrants that the Preliminary Official Statement was deemed final by the Issuer as of its date, except for the omission of such information which is dependent upon the final pricing of the Bonds for completion, all as permitted to be excluded by Section (b)(1) of Rule 15c(2)-12 under the Securities Exchange Act of 1934(the"Rule"). (c) The Issuer hereby authorizes the Official Statement and the information therein contained to be used by the Underwriters in connection with the public offering and the sale of the Bonds. The Issuer consents to the use by the Underwriters prior to the date hereof of the Preliminary Official Statement in connection with the public offering of the Bonds. The Issuer shall provide, or cause to be provided, to the Underwriters, as soon as practicable after the date of the Issuer's acceptance of this Agreement (but, in any event, not later than within seven business days after the Issuer's acceptance of this Agreement and in sufficient time to accompany any confirmation that requests payment from any customer), copies of the Official Statement which is complete as of the date of its delivery to the Underwriters in such quantity as the Underwriters shall request in order for the Underwriters to comply with Section(b)(4)of the Rule and the rules of the Municipal Securities Rulemaking Board. (d) If, after the date of this Agreement to and including the date the Underwriters are no longer required to provide an Official Statement to potential customers who request the same pursuant to the Rule (the earlier of(i) 90 days from the "end of the underwriting period" (as defined in the Rule) and (ii) the time when the Official Statement is available to any person from a nationally recognized municipal securities repository,but in no case less than 25 days after the"end of the underwriting period" for the Bonds), the Issuer becomes aware of any fact or event which might or would cause the Official Statement, as then supplemented or amended,to contain any untrue statement of a material fact or to omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, or if it is necessary to amend or supplement the Official Statement to comply with law, the Issuer will notify the Underwriters(and for the purposes of this clause provide the Underwriters with such information as it may from time to time request), and if, in the opinion of the Underwriters, such fact or event requires preparation and publication of a supplement or amendment to the Official Statement, the Issuer will forthwith prepare and furnish, at the Issuer's own expense(in a form and manner approved by the Underwriters), a reasonable number of copies of either amendments or supplements to the Official Statement so that the statements in the Official Statement as so amended and supplemented will not, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading or so that the Official Statement will comply with law. If such notification shall be subsequent to the Closing, the Issuer shall furnish such legal opinions, certificates, instruments and other documents as the Underwriters may deem necessary to evidence the truth and accuracy of such supplement or amendment to the Official Statement. (e) The Underwriters hereby agree to timely file the Official Statement with a nationally recognized municipal securities information repository. Unless otherwise notified in writing by the Underwriters, the Issuer can assume that the "end of the underwriting period" for purposes of the Rule is the date of the Closing. 1874867 2.DOC -2- (f) In connection with the execution of this Agreement,the Underwriters will deliver to the Issuer a corporate check payable to the Issuer in the amount of $123,650, as security for the performance by the Underwriters of their obligations to accept and pay for the Bonds at the Closing (described below) in accordance with the provisions of this Agreement. Such check shall be held by the Issuer uncashed until the Closing and at the Closing shall be returned to the Underwriters upon receipt by or on behalf of the Issuer of the Purchase Price for the Bonds. In the event the Issuer does not accept this offer agreed to by the undersigned, or upon its failure to deliver the Bonds at the Closing, or if it shall be unable to satisfy the conditions to the obligations of the Underwriters contained in this Agreement, or if such obligations shall be terminated for any reason permitted by this Agreement, such check shall be immediately returned to the Underwriters. In the event that the Underwriters fail(other than for a reason permitted under this Agreement) to accept and pay for the Bonds at the Closing, such check shall be retained and may be cashed by the Issuer as and for full liquidated damages for such failure and for any and all defaults hereunder on the part of the Underwriters, and the cashing of such check and retention of such proceeds shall constitute a full release and discharge of all claims and rights hereunder against the Underwriters. 4. Representations. Warranties, and Covenants of the Issuer. The Issuer hereby represents and warrants to and covenants with the Underwriters that: (a) The Issuer is a political subdivision and municipal corporation of the State of Texas (the "State"), organized and existing as such under the Constitution and laws of the State. The Issuer is authorized by the provisions of Chapter 1207,Texas Government Code, as amended(the"Act"), among other things, (i) to enter into, execute and deliver this Agreement and the Ordinance and all documents required hereunder and thereunder to be executed and delivered by the Issuer(this Agreement and the Ordinance are hereinafter referred to as the"Issuer Documents"), (ii)to sell, issue and deliver the Bonds to the Underwriter as provided herein, and (iii) to carry out and consummate the transactions contemplated by the Issuer Documents and the Official Statement, and the Issuer has complied, and will at the Closing be in compliance in all respects,with the terms of the Act and the Issuer Documents as they pertain to such transactions; (b) By all necessary official action of the Issuer prior to or concurrently with the acceptance hereof,the Issuer has duly authorized all necessary action to be taken by it for(i)the adoption of the Ordinance and the issuance and sale of the Bonds, (ii)the approval, execution and delivery of, and the performance by the Issuer of the obligations on its part contained in, the Bonds and the Issuer Documents and (iii) the consummation by it of all other transactions contemplated by the Official Statement, and the Issuer Documents and any and all such other agreements and documents as may be required to be executed, delivered and/or received by the Issuer in order to carry out, give effect to, and consummate the transactions contemplated herein and in the Official Statement; (c) The Issuer Documents constitute legal, valid and binding obligations of the Issuer, enforceable in accordance with their respective terms, subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws and principles of equity relating to or affecting the enforcement of creditors' rights; the Bonds, when issued, delivered and paid for in accordance with the Ordinance and this Agreement,will constitute legal, valid and binding obligations of the Issuer entitled to the benefits of the Ordinance and enforceable in accordance with their terms, subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws and principles of equity relating to or affecting the enforcement of creditors' rights;upon the issuance, authentication and delivery of the Bonds as aforesaid, the Ordinance will provide, for the benefit of the holders, from time to time, of the Bonds, the legally valid and binding pledge it purports to create as set forth in the Ordinance; 1874867 2.DOC -3- (d) The Issuer is not in breach of or default in any material respect under any applicable constitutional provision, law or administrative regulation of the State of Texas or the United States or any applicable judgment or decree or any loan agreement, indenture, bond, note, resolution, agreement or other instrument to which the Issuer is a party or to which the Issuer is or any of its property or assets are otherwise subject, and no event has occurred and is continuing which constitutes or with the passage of time or the giving of notice,or both,would constitute a default or event of default by the Issuer under any of the foregoing; and the execution and delivery of the Bonds and the Issuer Documents, and the adoption of the Ordinance and compliance with the provisions on the Issuer's part contained therein, will not conflict with or constitute a breach of or default under any constitutional provision, administrative regulation,judgment, decree, loan agreement, indenture, bond, note, resolution, agreement or other instrument to which the Issuer is a party or to which the Issuer is or to which any of its property or assets are otherwise subject,nor will any such execution,delivery,adoption or compliance result in the creation or imposition of any lien, charge or other security interest or encumbrance of any nature whatsoever upon any of the property or assets of the Issuer to be pledged to secure the Bonds or under the terms of any such law,regulation or instrument, except as provided by the Bonds and the Ordinance; (e) Except for the approval of the Bonds by the Attorney General of the State of Texas and the registration thereof by the Comptroller of Public Accounts of the State of Texas, all authorizations, approvals, licenses, permits, consents and orders of any governmental authority, legislative body,board, agency or commission having jurisdiction of the matter which are required for the due authorization of, which would constitute a condition precedent to, or the absence of which would materially adversely affect the due performance by the Issuer of its obligations under the Issuer Documents, and they have been duly obtained, except for such approvals, consents and orders as may be required under the Blue Sky or securities laws of any jurisdiction in connection with the offering and sale of the Bonds; (f) The Bonds and the Ordinance conform to the descriptions thereof contained in the Official Statement under the caption"THE BONDS", and the proceeds of the sale of the Bonds will be applied generally as described in the Official Statement under the caption"THE BONDS—Sources and Uses of Funds"; (g) There is no litigation, action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, government agency, public board or body, pending or, to the best knowledge of the Issuer after due inquiry, threatened against the Issuer, affecting the existence of the Issuer or the titles of its officers to their respective offices, or affecting or seeking to prohibit, restrain or enjoin the sale, issuance or delivery of the Bonds, or the collection of taxes pledged to the payment of principal of and interest on the Bonds, or the construction or operation of any project financed with the proceeds of the Bonds pursuant to the Ordinance or in any way contesting or affecting the validity or enforceability of the Bonds, the Issuer Documents, or contesting the exclusion from gross income of interest on the Bonds for federal income tax purposes, or contesting in any way the completeness or accuracy of the Preliminary Official Statement or the Official Statement or any supplement or amendment thereto, or contesting the powers of the Issuer or any authority for the issuance of the Bonds,the adoption of the Ordinance or the execution and delivery of the Issuer Documents,nor,to the best knowledge of the Issuer, is there any basis therefor, wherein an unfavorable decision, ruling or finding would materially adversely affect the validity or enforceability of the Bonds or the Issuer Documents; (h) As of the date thereof and with respect to the Issuer, the Preliminary Official Statement did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made,not misleading; 1874867 2.DOC -4- (i) At the time of the Issuer's acceptance hereof and(unless the Official Statement is amended or supplemented pursuant to paragraph (d) of Section 3 of this Agreement) at all times subsequent thereto during the period up to and including the date of Closing, the Official Statement does not and will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein,in light of the circumstances under which they were made,not misleading; 0) If the Official Statement is supplemented or amended pursuant to paragraph (d) of Section 3 of this Agreement, at the time of each supplement or amendment thereto and (unless subsequently again supplemented or amended pursuant to such paragraph) at all times subsequent thereto during the period up to and including the date of Closing, the Official Statement as so supplemented or amended will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made,not misleading; (k) The Issuer will apply, or cause to be applied, the proceeds from the sale of the Bonds as provided in and subject to all of the terms and provisions of the Ordinance and not take or omit to take any action which action or omission will adversely affect the exclusion from gross income for federal income tax purposes of the interest on the Bonds; (1) The Issuer will furnish such information and execute such instruments and take such action in cooperation with the Underwriters as the Underwriters may reasonably request (A) to (i) qualify the Bonds for offer and sale under the Blue Sky or other securities laws and regulations of such states and other jurisdictions in the United States as the Underwriters may designate and(ii)determine the eligibility of the Bonds for investment under the laws of such states and other jurisdictions and (B) to continue such qualifications in effect so long as required for the distribution of the Bonds (provided, however, that the Issuer will not be required to qualify as a foreign corporation or to file any general or special consents to service of process under the laws of any jurisdiction)and will advise the Underwriters immediately of receipt by the Issuer of any notification with respect to the suspension of the qualification of the Bonds for sale in any jurisdiction or the initiation or threat of any proceeding for that purpose; (m) The financial statements of, and other financial information regarding, the Issuer included in the Official Statement fairly present the financial position and results of the Issuer as of the dates and for the periods therein set forth. Prior to the Closing, there will be no adverse change of a material nature in such financial position, results of operations or condition, financial or otherwise, of the Issuer. The Issuer is not a party to any litigation or other proceeding pending or, to its knowledge, threatened which, if decided adversely to the Issuer, would have a materially adverse effect on the financial condition of the Issuer; (n) Prior to the Closing the Issuer will not offer or issue any bonds, notes or other obligations for borrowed money or incur any material liabilities, direct or contingent, payable from or secured by any of the revenues or assets which will secure the Bonds without the prior approval of the Underwriters; and (o) Any certificate, signed by any official of the Issuer authorized to do so in connection with the transactions contemplated by this Agreement, shall be deemed a representation and warranty by the Issuer to the Underwriters as to the statements made therein. 5. Closing. (a) At 10:00 a.m. Central Standard Time, on December 2, 2004, or at such other time and date as shall have been mutually agreed upon by the Issuer and the Underwriters (the "Closing"), the Issuer will, subject to the terms and conditions hereof, deliver the Bonds to the 1874867 2.DOC -5- Underwriters duly executed and authenticated, together with the other documents hereinafter mentioned, and the Underwriters will, subject to the terms and conditions hereof, accept such delivery and pay the purchase price of the Bonds as set forth in Section 1 of this Agreement by a certified or bank cashier's check or checks or wire transfer payable in immediately available funds to the order of the Issuer. Payment for the Bonds as aforesaid shall be made at the offices of Bond Counsel, or such other place as shall have been mutually agreed upon by the Issuer and the Underwriters. Upon receipt of such payment, the Issuer immediately shall return to the Underwriters the good faith check described within Section 3(f) herein. (b) Delivery of the Bonds in definitive form shall be made to The Depository Trust Company("DTC"), or to the Paying Agent/Registrar pursuant to DTC's FAST System. The Bonds shall be prepared and delivered as fully registered bonds in authorized denominations thereof, shall be registered in the name of Cede&Co., all as provided in the Ordinance,and shall be made available to the Underwriters at least one business day before Closing for purpose of inspection. 6. Closing Conditions. The Underwriters have entered into this Agreement in reliance upon the representations, warranties and agreements of the Issuer contained herein, and in reliance upon the representations, warranties and agreements to be contained in the documents and instruments to be delivered at the Closing and upon the performance by the Issuer of its obligations hereunder, both as of the date hereof and as of the date of the Closing. Accordingly, the Underwriters' obligations under this Agreement to purchase, to accept delivery of and to pay for the Bonds shall be conditioned upon the performance by the Issuer of its obligations to be performed hereunder and under such documents and instruments at or prior to the Closing, and shall also be subject to the following additional conditions, including the delivery by the Issuer of such documents as are enumerated herein, in form and substance reasonably satisfactory to the Underwriters: (a) The representations and warranties of the Issuer contained herein shall be true, complete and correct on the date hereof and on and as of the date of the Closing, as if made on the date of the Closing; (b) The Issuer shall have performed and complied with all agreements and conditions required by this Agreement to be performed or complied with by it prior to or at the Closing; (c) At the time of the Closing, (i) the Issuer Documents and the Bonds shall be in full force and effect in the form heretofore approved by the Underwriters and shall not have been amended, modified or supplemented, and the Official Statement shall not have been supplemented or amended, except in any such case as may have been agreed to by the Underwriters, and(ii) all actions of the Issuer required to be taken by the Issuer shall be performed in order for Bond Counsel and Counsel to the Underwriters to deliver their respective opinions referred to hereafter; (d) At the time of the Closing, all official action of the Issuer relating to the Bonds and the Issuer Documents shall be in full force and effect and shall not have been amended, modified or supplemented; (e) At or prior to the Closing, the Ordinance shall have been duly executed and delivered by the Issuer and the Issuer shall have duly executed and delivered and the Registrar shall have duly authenticated the Bonds; (f) At the time of the Closing, there shall not have occurred any change or any development involving a prospective change in the project to be financed with the proceeds of the Bonds, in the condition, financial or otherwise, or in the revenues or operations of the Issuer, from that set forth 1874867 2.DOC -6- in the Official Statement that in the judgment of the Underwriters is material and adverse and that makes it, in the judgment of the Underwriters, impracticable to market the Bonds on the terms and in the manner contemplated in the Official Statement; (g) The Issuer shall not have failed to pay principal or interest when due on any of its outstanding obligations for borrowed money; (h) All steps to be taken and all instruments and other documents to be executed, and all other legal matters in connection with the transactions contemplated by this Agreement, shall be reasonably satisfactory in legal form and effect to the Underwriters; (i) At or prior to the Closing,the Underwriters shall have received copies of each of the following documents: (1) The Official Statement, and each supplement or amendment thereto, if any; (2) The Ordinance with such supplements or amendments as may have been agreed to by the Underwriters, which Ordinance will include an agreement by the Issuer to provide certain periodic information and notices of material events in accordance with the Rule as described in the Official Statement under "CONTINUING DISCLOSURE OF INFORMATION;" (3) The approving opinion of Bond Counsel with respect to the Bonds, in substantially the form attached to the Official Statement; (4) a supplemental opinion of Bond Counsel addressed to the Underwriters, substantially to the effect that: (i) the Ordinance has been duly adopted and is in full force and effect; (ii) the Bonds are exempted securities under the Securities Act of 1933, as amended (the "1933 Act"), and the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act") and it is not necessary, in connection with the offering and sale of the Bonds, to register the Bonds under the 1933 Act or to qualify the Ordinance under the Trust Indenture Act; and (iii) the information appearing in the Official Statement under the captions or subcaptions "THE BONDS" (except for the subsections captioned "Book- Entry-Only System"and"Sources and Uses of Funds"),"CONTINUING DISCLOSURE OF INFORMATION" (except the subsection captioned "Compliance With Prior Undertakings"), and "LEGAL MATTERS" fairly summarizes the procedures and documents referred to therein and is correct as to matters of law. (5) An opinion, dated the date of the Closing and addressed to the Underwriters,of counsel for the Underwriters,to the effect that: (i) the Bonds are exempt securities under the 1933 Act and the Trust Indenture Act and it is not necessary, in connection with the offering and sale of the 1874867 2.DOC -7- Bonds,to register the Bonds under the 1933 Act and the Ordinance need not be qualified under the Trust Indenture Act;and (ii) based upon their participation in the preparation of the Official Statement as counsel for the Underwriters and their participation at conferences at which the Official Statement was discussed, but without having undertaken to determine independently the accuracy, completeness or fairness of the statements contained in the Official Statement, such counsel has no reason to believe that the Official Statement contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading (except for any financial, forecast, technical and statistical statements and data included in the Official Statement and in Appendices A and B thereto, and the information regarding DTC and its book-entry system as to which no view need be expressed); (6) A certificate, dated the date of Closing, of the Issuer to the effect that (i) the representations and warranties of the Issuer contained herein are true and correct in all material respects on and as of the date of Closing as if made on the date of Closing; (ii) no litigation or proceeding or tax challenge against it is pending or, to its knowledge, threatened in any court or administrative body nor is there a basis for litigation which would (a) contest the right of the members or officials of the Issuer to hold and exercise their respective positions, (b) contest the due organization and valid existence of the Issuer, (c) contest the validity, due authorization and execution of the Bonds or the Issuer Documents or(d) attempt to limit, enjoin or otherwise restrict or prevent the Issuer from functioning and collecting revenues, including payments on the Bonds pursuant to the Ordinance, and other income, or the levy or collection of the taxes pledged or to be pledged to pay the principal of and interest on the Bonds, or the pledge thereof; (iii) the Ordinance of the Issuer authorizing the execution, delivery and/or performance of the Official Statement,the Bonds and Issuer Documents has been duly adopted by the Issuer,is in full force and effect and has not been modified, amended or repealed, and(iv)to the best of its knowledge, no event affecting the Issuer has occurred since the date of the Official Statement which should be disclosed in the Official Statement for the purpose for which it is to be used or which it is necessary to disclose therein in order to make the statements and information therein, in light of the circumstances under which they were made,not misleading in any material respect as of the time of Closing, and the information contained in the Official Statement is correct in all material respects and, as of the date of the Official Statement did not, and as of the date of the Closing does not, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements made therein, in the light of the circumstances under which they were made,not misleading; (7) A certificate of the Issuer in form and substance satisfactory to Bond Counsel and counsel to the Underwriters(a)setting forth the facts,estimates and circumstances in existence on the date of the Closing, which establish that it is not expected that the proceeds of the Bonds will be used in a manner that would cause the Bonds to be"arbitrage bonds"within the meaning of Section 148 of the Internal Revenue Code of 1986,as amended(the"Code"),and any applicable regulations (whether final, temporary or proposed) issued pursuant to the Code, and (b) certifying that to the best of the knowledge and belief of the Issuer there are no other facts, estimates or circumstances that would materially change the conclusions, representations and expectations contained in such Bonds; (8) Any other certificates and opinions required by the Ordinance for the issuance thereunder of the Bonds; 1874867 2.DOC -8- (9) Evidence satisfactory to the Underwriters that the Bonds have been rated "AAA" by Standard & Poor's and "Aaa" by Moody's Investors Service, Inc., and that such ratings are in effect as of the date of Closing; (10) A copy of a special report prepared by the independent certified public accountants Grant Thornton LLP, addressed to the Issuer, Bond Counsel and the Underwriters, verifying the arithmetical computations of the adequacy of the maturing principal and interest on the escrowed securities and uninvested cash on hand under the Escrow Agreement to pay, when due, the principal of and interest on the Bonds and the computation of the yield with respect to such Bonds; (11) The Escrow Agreement, executed by the Issuer and the Escrow Agent; (12) A copy of the municipal bond insurance policy insuring payment of principal of and interest on the Bonds, issued by Financial Security Assurance Inc. ("FSA"), together with an opinion of counsel to FSA, in form and substance satisfactory to the Underwriters; (13) The approving opinion of the Attorney General of the State of Texas with respect to the Bonds; (14) The registration certificate of the Comptroller of the State of Texas with respect to the Bonds; and (15) Such additional legal opinions, certificates, instruments and other documents as the Underwriters or counsel to the Underwriters may reasonably request to evidence the truth and accuracy, as of the date hereof and as of the date of the Closing, of the Issuer's representations and warranties contained herein and of the statements and information contained in the Official Statement and the due performance or satisfaction by the Issuer on or prior to the date of the Closing of all the respective agreements then to be performed and conditions then to be satisfied by the Issuer. All of the opinions, letters, certificates, instruments and other documents mentioned above or elsewhere in this Agreement shall be deemed to be in compliance with the provisions hereof if, but only if,they are in form and substance satisfactory to the Underwriters. If the Issuer shall be unable to satisfy the conditions to the obligations of the Underwriters to purchase,to accept delivery of and to pay for the Bonds contained in this Agreement, or if the obligations of the Underwriters to purchase,to accept delivery of and to pay for the Bonds shall be terminated for any reason permitted by this Agreement, this Agreement shall terminate and neither the Underwriters nor the Issuer shall be under any further obligation hereunder, except that the respective obligations of the Issuer and the Underwriters set forth in Section 4 hereof shall continue in full force and effect. 7. Termination. The Underwriters shall have the right to cancel its obligation to purchase the Bonds if,between the date of this Agreement and the Closing,the market price or marketability of the Bonds shall be materially adversely affected, in the reasonable judgment of the Underwriters, by the occurrence of any of the following: (a) legislation shall be enacted by or introduced in the Congress of the United States or recommended to the Congress for passage by the President of the United States, or the Treasury Department of the United States or the Internal Revenue Service or any member of the Congress or the 1874867 2.DOC -9- legislature of the State of Texas or favorably reported for passage to either House of the Congress by any committee of such House to which such legislation has been referred for consideration, a decision by a court of the United States or of the State of Texas or the United States Tax Court shall be rendered, or an order,ruling,regulation(final,temporary or proposed),press release, statement or other form of notice by or on behalf of the Treasury Department of the United States, the Internal Revenue Service or other governmental agency shall be made or proposed, the effect of any or all of which would be to impose, directly or indirectly, federal income taxation or State income taxation upon revenues or other income of the general character to be derived by the Issuer pursuant to the Ordinance, or upon interest received on obligations of the general character of the Bonds or, with respect to State taxation, of the interest on the Bonds as described in the Official Statement, or other action or events shall have transpired which may have the purpose or effect, directly or indirectly, of changing the federal income tax consequences of any of the transactions contemplated herein; (b) legislation introduced in or enacted (or ordinance passed) by the Congress or an order, decree, or injunction issued by any court of competent jurisdiction, or an order, ruling, regulation (final,temporary,or proposed),press release or other form of notice issued or made by or on behalf of the Securities and Exchange Commission, or any other governmental agency having jurisdiction of the subject matter, to the effect that obligations of the general character of the Bonds, including any or all underlying arrangements, are not exempt from registration under or other requirements of the 1933 Act, or that the Ordinance is not exempt from qualification under or other requirements of the Trust Indenture Act,or that the issuance, offering, or sale of obligations of the general character of the Bonds, including any or all underlying arrangements, as contemplated hereby or by the Official Statement or otherwise, is or would be in violation of the federal securities law as amended and then in effect; (c) any state blue sky or securities commission or other governmental agency or body shall have withheld registration, exemption or clearance of the offering of the Bonds as described herein, or issued a stop order or similar ruling relating thereto; (d) a general suspension of trading in securities on the New York Stock Exchange or the American Stock Exchange, the establishment of minimum prices on either such exchange, the establishment of material restrictions (not in force as of the date hereof)upon trading securities generally by any governmental authority or any national securities exchange, a general banking moratorium declared by federal, State of New York, or State officials authorized to do so; (e) the New York Stock Exchange or other national securities exchange or any governmental authority, shall impose, as to the Bonds or as to obligations of the general character of the Bonds, any material restrictions not now in force, or increase materially those now in force, with respect to the extension of credit by,or the charge to the net capital requirements of,Underwriters; (f) any amendment to the federal or state Constitution or action by any federal or state court, legislative body, regulatory body, or other authority materially adversely affecting the tax status of the Issuer, its property, income securities(or interest thereon), or the validity or enforceability of the levy of taxes to pay principal of and interest on the Bonds; (g) any event occurring, or information becoming known which, in the judgment of the Underwriters, makes untrue in any material respect any statement or information contained in the Official Statement, or has the effect that the Official Statement contains any untrue statement of material fact or omits 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; 1874867 2.DOC -10- (h) there shall have occurred since the date of this Agreement any materially adverse change in the affairs or financial condition of the Issuer; (i) the United States shall have become engaged in hostilities which have resulted in a declaration of war or a national emergency or there shall have occurred any other outbreak or escalation of hostilities or a national or international calamity or crisis, financial or otherwise, the effect of such outbreak, calamity or crisis on the financial markets of the United States being such as, in the reasonable opinion of the Underwriters, would materially and adversely affect the ability of the Underwriters to market the Bonds; 0) any fact or event shall exist or have existed that, in the Underwriters'judgment, requires or has required an amendment of or supplement to the Official Statement; (k) there shall have occurred any downgrading, or any notice shall have been given of(A) any intended or potential downgrading or(B) any review or possible change that does not indicate a possible upgrade, in the rating accorded any of the Issuer's obligations (including the rating to be accorded the Bonds); and (1) the purchase of and payment for the Bonds by the Underwriters, or the resale of the Bonds by the Underwriters, on the terms and conditions herein provided shall be prohibited by any applicable law, governmental authority, board, agency or commission, unless such prohibition is due to the action or inaction of the Underwriters. 8. Expenses. (a) The Underwriters shall be under no obligation to pay, and the Issuer shall pay, any expenses incident to the performance of the Issuer's obligations hereunder, including, but not limited to (i) the cost of preparation and printing of the Bonds, (ii) the fees and disbursements of Bond Counsel; (iii) the fees and disbursements of the Financial Advisor to the Issuer, and (iv) the fees and disbursements of any other engineers, accountants, and other experts, consultants or advisers retained by the Issuer. (b) The Underwriters shall pay (i) the cost of preparation and printing of this Agreement,the Blue Sky Survey and Legal Investment Memorandum, if any; (ii)all advertising expenses in connection with the public offering of the Bonds; and (iii) all other expenses incurred by them in connection with the public offering of the Bonds, including the fees and disbursements of Counsel to the Underwriters. 9. Notices. Any notice or other communication to be given to the Issuer under this Agreement may be given by delivering the same in writing at City of Beaumont, Texas, 801 Main Street, Beaumont, Texas 77704, Attention: Mayor, and any notice or other communication to be given to the Underwriters under this Agreement may be given by delivering the same in writing to First Southwest Company, 1021 Main Street, Suite 2200,Houston,Texas 77002,Attention: C.Terrell Palmer. 10. Parties in Interest. This Agreement as heretofore specified shall constitute the entire agreement between us and is made solely for the benefit of the Issuer and the Underwriters (including successors or assigns of the Underwriters) and no other person shall acquire or have any right hereunder or by virtue hereof. This Agreement may not be assigned by the Issuer. All of the Issuer's representations, warranties and agreements contained in this Agreement shall remain operative and in full force and effect, regardless of(i) any investigations made by or on behalf of any of the Underwriters; (ii) delivery of and payment for the Bonds pursuant to this Agreement; and (iii) any termination of this Agreement. 1874867 2.DOC -11- 11. Effectiveness. This Agreement shall become effective upon the acceptance hereof by the Issuer and shall be valid and enforceable at the time of such acceptance. 12. Choice of Law. This Agreement shall be governed by and construed in accordance with the law of the State of Texas. 13. Severability. If any provision of this Agreement shall be held or deemed to be, or shall in fact be, invalid, inoperative or unenforceable as applied in any particular case in any jurisdiction or jurisdictions, or in all jurisdictions because it conflicts with any provisions of any Constitution, statute, rule of public policy, or any other reason, such circumstances shall not have the effect of rendering the provision in question invalid, inoperative or unenforceable in any other case or circumstance, or of rendering any other provision or provisions of this Agreement invalid, inoperative or unenforceable to any extent whatever. 14. Business Day. For purposes of this Agreement, "business day"means any day on which the New York Stock Exchange is open for trading. 15. Section Headings. Section headings have been inserted in this Agreement as a matter of convenience of reference only, and it is agreed that such section headings are not a part of this Agreement and will not be used in the interpretation of any provisions of this Agreement. 16. Counterparts. This Agreement may be executed in several counterparts each of which shall be regarded as an original(with the same effect as if the signatures thereto and hereto were upon the same document)and all of which shall constitute one and the same document. 1874867 2.DOC -12- If you agree with the foregoing,please sign the enclosed counterpart of this Agreement and return it to the Underwriters. This Agreement shall become a binding agreement between you and the Underwriters when at least the counterpart of this letter shall have been signed by or on behalf of each of the parties hereto. Very truly yours, FIRST SOUTHWEST COMPANY MORGAN KEEGAN&COMPANY, INC. ESTRADA HINOJOSA&COMPANY, INC. SOUTHWEST SECURITIES,INC. By:FIRST SOUTHWEST COMPANY By: Authorized Officer Accepted and agreed to this 2nd day of November, 2004. CITY OF BEAUMONT, TEXAS B �- Y Name: &i z s Title: Schedule I City of Beaumont, Texas $20,640,000 General Obligation Refunding Bonds, Series 2004 Principal Amount Maturity Date Interest Rate Yield ($) (March 1) (%) (%) 220,000 2006 3.000 1.940 200,000 2007 3.000 2.130 1,000,000 2008 3.000 2.460 1,000,000 2008 5.000 2.460 2,455,000 2009 5.000 2.770 2,525,000 2010 5.000 3.030 1,790,000 2011 5.000 3.220 1,835,000 2012 5.000 3.390 1,875,000 2013 3.750 3.540 1,435,000 2014 3.650 3.650 300,000 2014 3.750 3.650 1,900,000 2015* 3.750 3.750 2,000,000 2016* 5.250 3.780 2,105,000 2017* 5.250 3.860 *Subject to redemption on March 1, 2014 at the option of the City. Section 9 No. BOND REGISTRAR, PAYING AGENCY AND TRANSFER AGENCY AGREEMENT THIS BOND REGISTRAR, PAYING AGENCY AND TRANSFER AGENCY AGREEMENT (the "Agreement"), dated as of this 1st day of November, 2004, by and between The City of Beaumont, Texas [a municipal corporation organized and operating under the Texas Constitution], (hereinafter, with any authorized successor, the "Issuer"), and Wells Fargo Bank, N.A., a national banking association organized and existing under the laws of the United States of America (hereinafter, with any authorized successor, the "Paying Agent"); WITNESSETH : WHEREAS, the Issuer is authorized to issue the $20,640,000 The City of Beaumont, Texas, General Obligation Refunding Bonds, Series 2004 (the "Bonds") in accordance with the Ordinance attached hereto as Exhibit "A" and incorporated herein for all purposes (the"Bond Order'); WHEREAS, the Issuer desires that the Bonds be issued in fully registered form with privileges of transfer and exchange as provided in the Bond Order to assure the exemption from federal income tax of interest thereon pursuant to Section 103 of the Internal Revenue Code of 1986, as amended, and is authorized by Chapter 1203, Texas Government Code Annotated, to issue the Bonds in such form and amount and to provide for the issuance of bonds upon transfer or replacement thereof or in exchange therefor at any place of payment as provided in the Bond Order; WHEREAS, the governing body of the Issuer has authorized the issuance of the Bonds subject to the terms of the Bond Order and, to provide for registration, payment, transfer, exchange, and replacement of the Bonds, the Issuer has authorized the execution and delivery of this Agreement; and WHEREAS, all things have been done which are necessary to make the Bonds, when registered by the Comptroller of Public Accounts of the State of Texas and delivered, the valid obligations of the Issuer and to constitute this Agreement a valid and binding contract in accordance with its terms: NOW, THEREFORE, for and in consideration of the premises and the mutual covenants herein contained, and subject to the conditions herein set forth, the Issuer and the Paying Agent agree as follows: ARTICLE ONE DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION SECTION 1.01. Definitions. For all purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires: A. The terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular. B. All references in this Agreement to "Articles," "Sections" and other subdivisions are to the designated Articles, Sections and other subdivisions of this Agreement as originally executed. C. The words "herein," "hereof' and "hereunder" and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section or other subdivision. 1 "Agreement" means this instrument as originally executed or as it may from time to time be supplemented, modified, or amended by one or more instruments supplemental hereto entered into pursuant to the applicable provisions hereof. "Board" means the governing body of the Issuer. "Board Action" means an official action adopted by the Board as certified by a duly authorized officer thereof. "Bond Order" has the meaning ascribed to such term in the preamble to this Agreement. "Bonds" has the meaning ascribed to such term in the preamble to this Agreement. "Holder" when used with respect to any Bond, means the Person in whose name such Bond is registered in the Bond Register. "Issuer" has the meaning ascribed to such term in the preamble to this Agreement. "Paying Agent" means Wells Fargo Bank, N. A. or any successor paying agent selected in accordance with this Agreement. "Person" means any entity, individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, or government or any governmental agency or political subdivision. "Redemption Date" when used with respect to any Bond to be redeemed means the date fixed for such redemption pursuant to the terms thereof and this Agreement. "Redemption Price" when used with respect to any Bond to be redeemed means the price at which it is to be redeemed pursuant to terms thereof, excluding installments of interest whose Stated Maturity is on or before the Redemption Date. SECTION 1.02. Notices. Any request, demand, authorization, direction, notice, consent, waiver, or other written communication provided or permitted by this Agreement or the Bond Order to be made upon, given or furnished to, or filed with A. the Issuer, shall be sufficient for every purpose hereunder if in writing and mailed, first- class postage prepaid, to the Issuer and received by it at 801 Main Street, Beaumont, Texas 77701 ATTENTION: City Manager, with a copy to be provided to Orgain, Bell & Tucker, L.L.P.; 470 Orleans Street; Beaumont, TX 77701; Attention: Lance Fox or at any other address previously furnished to the Paying Agent in writing by the Issuer Request, 2 B. the Paying Agent, shall be sufficient for every purpose hereunder if in writing and mailed, first-class postage prepaid (and properly referencing this Agreement or the Bonds) to and received by the Paying Agent 1000 Louisiana Street, Suite 640, MAC T5001-061, Houston, Texas 77002, Attention: Trust Department, or any other address previously furnished to the Issuer in writing by the Paying Agent. Where this Agreement provides for notice to Holders of Bonds of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to each Holder, at the address of such Holder as it appears in the bond register. In any case where notice to Holders is given by mail, neither the failure to mail such notice nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to all other Holders. Where this Agreement provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Paying Agent, but such filing is not a condition precedent to the validity of any action taken in reliance upon such waiver. SECTION 1.03. Effect of Headings. The Article and Section headings herein are for convenience only and do not affect the construction hereof. SECTION 1.04. Successors and Assigns. All covenants and agreements in this Agreement by the Issuer or the Paying Agent shall bind their respective successors and assigns. SECTION 1.05. Severability Clause. In case any provision of this Agreement, the Bond Order, or the Bonds or any application thereof shall be invalid, illegal, or unenforceable, the validity, legality, and enforceability of the remaining provisions and applications of this Agreement shall not in any way be affected or impaired thereby. SECTION 1.06. Benefits of Agreement. Nothing in this Agreement or in the Bonds, express or implied, shall give to any Person other than the parties hereto and their successors hereunder, any benefit or any legal or equitable right, remedy, or claim under this Agreement. SECTION 1.07. Governing Law. This Agreement shall be construed in accordance with and governed by the laws of the State of Texas. 3 ARTICLE TWO THE BONDS SECTION 2.01. Form Generally. The Bonds have the title and are in the denominations specified in the Bond Order. The aggregate principal amount of the Bonds which may be authenticated and delivered and outstanding under this Agreement is limited as provided in the Bond Order. SECTION 2.02. Execution, Authentication, Delivery, Dating, Registration, Replacement, Cancellation, Transfer, Exchange, Redemption and Payment of Bonds. The Bonds are to be executed, authenticated, delivered, dated, registered, replaced, cancelled, and subject to transfer, exchange and redemption as provided, and the principal and Redemption Price of and interest on the Bonds is payable to the Persons and in the manner provided, in the Bond Order. ARTICLE THREE RIGHTS AND OBLIGATIONS OF PAYING AGENT SECTION 3.01. Certain Duties and Responsibilities. A. The Paying Agent 1. undertakes to perform only such duties as are specifically set forth in this Agreement and in the Bond Order, and no implied covenants or obligations shall be read into this Agreement or the Bond Order against the Paying Agent, and 2. in the absence of bad faith on its part, may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Paying Agent and conforming to the requirements of this Agreement and the Bond Order, but in the case of any such certificates or opinions which by any provision of this Agreement or the Bond Order are specifically required to be furnished to the Paying Agent, shall be under a duty to examine the same to determine whether or not they conform to the requirements thereof. B. No provision of this Agreement shall be construed to relieve the Paying Agent from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that 1. this Subsection shall not be construed to limit the effect of Subsection A of this Section; and 2. the Paying Agent shall not be liable for any error of judgment made in good faith by any officer thereof, unless it shall be proved that the Paying Agent was negligent in ascertaining the pertinent facts. C. Whether or not therein expressly so provided, every provision of this Agreement relating to the conduct or affecting the liability of or affording protection to the Paying Agent shall be subject to the provisions of this Section. SECTION 3.02. Certain Rights of Paying Agent. Except as otherwise provided in Section 3.01 hereof: 4 A. the Paying Agent may rely and shall be protected in acting or refraining from acting upon any Order, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, coupon, or other paper or document reasonably believed by it to be genuine and to have been signed or presented by the proper party or parties; B. the Paying Agent may consult with legal counsel and the written advice of such counsel or any opinion of counsel shall be full and complete authorization and protection in respect of any action taken, suffered, or omitted by the Paying Agent hereunder in good faith and in reliance thereon; C. the Paying Agent shall not be bound to make any investigation into the facts of matters stated in any Order, certificate, statement, instruments, opinion, report, notice, request, direction, consent, order, bond, coupon, or other paper or document, but the Paying Agent, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Paying Agent shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records, and premises of the Issuer, personally or by agent or attorney; and D. the Paying Agent may execute any of the trusts or powers hereunder or perform any of the duties hereunder either directly or by or through agents or attorneys, and the Paying Agent shall not be responsible for any misconduct or negligence on the part of any agent employed or attorney retained with due care by it. SECTION 3.03. Not Responsible for Recitals. The recitals contained in the Bonds, except for the certificate of authentication on the Bonds, shall be taken as the statements of the Issuer, and the Paying Agent assumes no responsibility for their correctness. SECTION 3.04. May Hold Bonds. The Paying Agent, in its commercial banking or any other capacity, may become the owner or pledgee of Bonds and otherwise deal with the Issuer with the same rights it would have if it were not serving as Paying Agent. SECTION 3.05. Money Deposited with Paying Agent. Money deposited by the Issuer with the Paying Agent for payment of the principal (or Redemption Price, if applicable) of or interest on any Bonds shall be segregated from other funds of the Paying Agent and the Issuer and shall be held in trust for the benefit of the Holders of such Bonds. All money deposited with the Paying Agent hereunder shall be secured in the manner and to the fullest extent required by law for the security of funds of the Issuer. 5 Amounts held by the Paying Agent which represent principal of and interest on the Bonds remaining unclaimed by the owner after the expiration of three years from the date such amounts have become due and payable shall be reported and disposed of by the Paying Agent in accordance with the provisions of Texas law including, to the extent applicable, Title 6 of the Texas Property Code, as amended. The Paying Agent shall have no liability by virtue of actions taken in compliance with this provision. The Paying Agent is not obligated to pay interest on any money received by it hereunder. This Agreement relates solely to money deposited for the purposes described herein, and the parties agree that the Paying Agent may serve as depository for other funds of the Issuer, act as trustee under indentures authorizing other bond transactions of the Issuer, or act in any other capacity not in conflict with its duties hereunder. SECTION 3.06. Compensation and Reimbursement. The Issuer agrees: A. to pay to the Paying Agent from time to time reasonable compensation for all services rendered by it hereunder, which compensation shall be established initially for the Bonds in accordance with the schedule attached as Exhibit"B", which is made a part hereof for all purposes; B. except as otherwise expressly provided herein, to reimburse the Paying Agent upon its request for all reasonable expenses, disbursements, and advances incurred or made by the Paying Agent in accordance with any provisions of this Agreement (including expenses disbursements and advances of its counsel), except to the extent covered by the compensation established pursuant to Subsection A of this Section except any such expense, disbursement, or advance as may be attributable to the negligence or bad faith of the Paying Agent; and C. to and shall, to the full extent permitted by law, indemnify, defend and hold harmless the Paying Agent, together with its officers, directors, agents and employees, from and against any and all claims, losses, damages, causes of action, suits and liability of every kind, including all expenses of litigation, court costs and attorney's fees, incurred without negligence or bad faith on the part of the Paying Agent, arising out of or in connection with the administration or performance of its duties and obligations or the exercise or performance of any of its powers hereunder. SECTION 3.07. Resignation and Removal The Paying Agent may resign from its duties hereunder at any time by giving not less than 30 days' written notice to the Issuer; provided, however, that such resignation shall not become effective until a successor shall have accepted the duties of the Paying Agent hereunder by written instrument. The Paying Agent may be removed from its duties hereunder at any time with or without cause by Board Action designating a successor upon not less than 30 days' notice; provided, however, that no such removal shall become effective until such successor has accepted the duties of the Paying Agent hereunder by written instrument. Upon the effective date of such resignation or removal (or any earlier date designated by the Issuer in case of resignation) the Paying Agent shall, upon payment of all its fees, charges, and expenses then due, transfer and deliver to, or upon the order of, the Issuer all funds, records, and Bonds held by it (except any Bonds owned by the Paying Agent as Holder or pledgee), under this Agreement. If the Paying Agent resigns or is removed, the Issuer shall by Board Action promptly appoint and engage a successor to act in the place of the Paying Agent hereunder, which appointment shall be effective as of the 6 effective date of the resignation or removal of the Paying Agent. Such successor shall immediately give notice of its substitution hereunder in the name and at the expense of the Issuer to its predecessor and to the Holders, which notice shall include the name of the successor to the Paying Agent and the address of its principal office. SECTION 3.08. Merger, Conversion, Consolidation, or Succession. Any corporation into which the Paying Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion, or consolidation to which the Paying Agent shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of the Paying Agent shall be the successor of the Paying Agent hereunder without the execution or filing of any paper or any further act on the part of either of the parties hereto. In case any Bond shall have been registered, but not delivered, by the Paying Agent then in office, any successor by merger, conversion, or consolidation to such authenticating Paying Agent may adopt such registration and deliver the Bond so registered with the same effect as if such successor Paying Agent had itself registered such Bonds. SECTION 3.09. Paying Agent Not a Trustee. This Agreement shall not be construed to require the Paying Agent to enforce any remedy which any Holder may have against the Issuer during any default or event of default under any agreement between any Holder and the Issuer, including the Bond Order or to act as trustee for such Holder. SECTION 3.10. Paying Agent Not Responsible for Bonds. The Paying Agent shall not be accountable for the use of any Bonds or for the use or application of the proceeds thereof. SECTION 3.11. Paying Agent's Funds Not Used. No provision of this Agreement shall require the Paying Agent 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 of powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity satisfactory to it against such risks or liability is not assured to it. The Paying Agent shall in no event be liable to the Issuer, any Holder, or any other Person for any amount due on any Bond from its own funds. SECTION 3.12. Counterparts. This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. 7 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written. The City of Beaumont, Texas ("Issuer") Title: Mayor ATTEST: City Clerk (=;EAL' of WELLS FARGO BANK, N.A. 4 ("Paying Agent") � a� �® By: Name: Deirdre H. Ward Title: Trust Officer ATTEST: ®+ 44 rN --------- U so0 Faith 0''14 G F�re`i 'dent 4fi p 8 EXHIBIT "A" See the certified copy of the Bond Ordinance that is included under Tab of the Transcript of Documents. 9 Wells Fargo Bank Corporate Trust Services 1445 Ross Avenue, 2nd Floor 0' Dallas, Texas 75202 Tel: (214) 668.6450 Fax: (214)777-4086 SCHEDULE OF FEES $209640,000 City of Beaumont, Texas General Obligation Refunding Bonds, Series 2004 To act as PAYING AGENT & REGISTRAR Acceptance Fee: $0.00 Initial Fees as they relate to Wells Fargo Bank acting in the capacity of Paying Agent/Registrar — includes creation and examination of the Paying Agent/Registrar Agreement; acceptance of the appointment; setting up of Paying Agent/Registrar records and accounting records; and coordination of closing. Acceptance Fee payable at time of Paying Agent/Registrar Agreement execution. Annual Administration Fee: $500.00 For ordinary administration services by Paying Agent/Registrar—includes daily routine account management; investment transactions; cash transaction processing in accordance with the agreement; and mailing of trust account statements to all applicable parties.Float credit received by the bank for receiving funds that remain uninvested are deemed part of the Paying Agent's compensation. The Annual Administration fees are payable in advance,with the first installment due at closing. Out of Pocket Expenses: We only charge for out-of-pocket expenses in response to specific tasks assigned by the client. Therefore, we cannot anticipate what specific out-of-pocket items will be needed or what corresponding expenses will be incurred. Possible expenses would be, but are not limited to, express mail and messenger charges, travel expenses to attend closing or other meetings. There are no charges for indirect out-of-pocket expenses. This fee schedule is based upon the assumptions listed above which pertain to the responsibilities and risks involved in Wells Fargo undertaking the role of Paying Agent/Registrar. These assumptions are based on information provided to us as of the date of this fee schedule. Our fee schedule is subject to review and acceptance of the final documents. Should any of the assumptions, duties or responsibilities change, we reserve the right to affirm,modify or rescind our fee schedule. Submitted by: Sherri Owen-November 19,2004 Vice President/Business Development Wells Fargo Bank (214)668-6450 p#29769 Section 10 No. 10 SIGNATURE IDENTIFICATION AND NO-LITIGATION CERTIFICATE THE STATE OF TEXAS § COUNTY OF JEFFERSON § THE CITY OF BEAUMONT § We, the undersigned officers of THE CITY OF BEAUMONT, TEXAS (the "City"), in connection with the issuance and delivery of the following described refunding bonds (the 'Bonds"): THE CITY OF BEAUMONT, TEXAS, GENERAL OBLIGATION REFUNDING BONDS, SERIES 2004, dated November 1, 2004, aggregating $20,640,000, and maturing serially on March 1 in each of the years 2006 through 2017, inclusive, do hereby certify, as of the date set forth below, the following: 1. We officially executed and signed the Bonds by manually signing or causing facsimiles of our manual signatures to be imprinted or lithographed on each of the Bonds, and we hereby adopt such facsimile signatures as our own, respectively, and declare that such facsimile signatures constitute our signatures the same as if we have manually signed each of the Bonds. 2. The Bonds are substantially in the form, and have been duly executed and signed in the manner, prescribed in the ordinance authorizing the issuance of such Bonds. 3. At the time we so executed and signed the Bonds we were, and at the time of executing this certificate we are, the duly chosen, qualified and acting officers authorized to execute the Bonds and execute and deliver this certificate, and we hold the offices set forth below opposite our signatures. 4. No litigation of any nature has been filed or is now pending or threatened, which contests or attacks the validity of the Bonds; which would restrain or enjoin the issuance or delivery of the Bonds; which would restrain or enjoin the levy and/or collection and/or pledge of revenue or funds from which the Bonds are payable, or which would in any other manner affect the provisions made for their payment or security; or which in any manner questions the proceedings or authority concerning the issuance of the Bonds. 5. Neither the corporate existence nor the boundaries of the City are being contested; no litigation has been filed or is now pending which would affect the authority of the officers of the City to issue, execute, and deliver the Bonds or would affect the title of the undersigned to their respective offices; and no authority or proceedings for the issuance, execution or delivery of the Bonds have been repealed, rescinded or revoked. 6. No additional certificates, warrants or other indebtedness have been issued by the City since the date of the City's General Certificate submitted to the Attorney General of the State of Texas in connection with his approval of the Bonds. 7. The seal which has been impressed, or placed in facsimile, upon each of the Bonds is the legally adopted, proper and only official seal of the City, and such official seal is impressed on this certificate. 8. The information contained in the General Certificate dated November 2, 2004, is still true and correct. SIGNED AND SEALED as of e = embgj' Z , 2004. Signatures Title of Office MAYOR, THE CITY OF n • BEAUMONT, TEXAS CITY CLERK, THE CITY OF BEAUMONT, TEXAS (SEAL) l -2- THE STATE OF TEXAS § COUNTY OF JEFFERSON § BEFORE ME, the undersigned Notary Public, on this day personally appeared Evelyn Lord and Rose ,Ann Jones, known to me to be the persons whose names are subscribed to the attached and foregoing instrument, and who executed such instrument in my presence, and who acknowledged to me that such instrument was executed by them for the purposes and in the capacities stated therein. WITNESS MY HAND AND SEAL OF OFFICE this day of November, 2004. NOTARY PUBLIC, STATE OF TEXAS (SEAL) � LANCE FO X NOTARY PUBLIC STATE OF TEXAS M Comm.Expires 10-22.2005 Y —3— Section 11 ATTORNEY GENERAL OF TEXAS GREG ABBOTT December 1, 2004 THIS IS TO CERTIFY that The City of Beaumont,Texas (the "Issuer")has submitted to me The City of Beaumont, Texas, General Obligation Refunding Bonds,Series 2004(the"Bonds"),in the aggregate principal amount of$20,640,000 for approval. The Bonds are dated November 1,2004,numbered R-1 through R-14, and were authorized by an Ordinance of the Issuer passed on November 2, 2004. I have examined the law and such certified proceedings and other papers as I deem necessary to render this opinion. As to questions of fact material to my opinion, I have relied upon representations of the Issuer contained in the certified proceedings and other certifications of public officials furnished to me without undertaking to verify the same by independent investigation. I express no opinion relating to any official statement or any 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: (1) The Bonds have been issued in accordance with law and are valid and binding obligations of the Issuer. (2) In accordance with the provisions of the law,including an Escrow Agreement dated as of November 1, 2004, firm banking arrangements have been made for the discharge and final payment or redemption of the obligations being refunded upon deposit of an amount sufficient to pay said obligations when due. (3) The Bonds are payable from the proceeds of an ad valorem tax levied, within the limits prescribed by law, on all taxable property within the Issuer. Therefore, the Bonds are approved. POST OFFicE Boa 12548, AUSTIN, TEXAS 78711-2548 TEL:(512)463-2100 wWW.0Ac.STA'I1;.'rs.US An Equal Employment Oppor/naity Employer • Priated on Retyeled Paper .The City of Beaumont, Texas, General Obligation Refunding Bonds, Series 2004 - $20,640,000 -Page 2- The Comptroller is instructed that she may register the Bonds without the cancellation of the underlying securities being refunded thereby. CA mey eral of the State of Texas No.42640 Book No.2004-D JCK OFFICE OF COMPTROLLER OF THE STATE OF TEXAS I, Melissa Mora, 11 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 1 st day of December, 2004, 1 signed the name of the Comptroller to the certificate of registration endorsed upon the: The City of Beaumont. Texas, General Obligation Refunding Bonds Series 2004, numbered R-1/R-14, date vember 1 2004, and that in signing the certificate of registration I used the following signat re: IN REOF I have executed is c ate this the 1 st day of December. 2004. I, Carole Keeton Strayhorn, 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 Chapter 403, Subchapter H, Government Code, with authority to sign my name to all certificates of registration, and/or cancellation of bonds required by law to be registered and/or cancelled by me, and was acting as such on the date first mentioned in this certificate, and that the bonds/certificates described in this certificate have been duly registered in the office of the Comptroller, under Registration Number 69272. GIVEN under my hand and seal of office at Austin, Texas, this the 1 st day of December. 2004. CAROLE KEETON STRAYHORN Comptroller of Public Accounts of the State of Texas OFFICE OF COMPTROLLER OF THE STATE OF TEXAS I, CAROLE KEETON STRAYHORN, Comptroller of Public Accounts of the State of Texas, do hereby certify that the attachment is a true and correct copy of the opinion of the Attorney General approving the: The City of Beaumont. Texas General Obligation Refunding Bonds Series 2004 numbered R-1/R-14, of the denomination of $ various, dated November 1, 2004, as authorized by issuer, interest various percent, under and by authority of which said bonds/certificates were registered electronically in the office of the Comptroller, on the 1 st day of December. 2004 under Registration Number 69272. Given under my hand and seal of office, at Austin, Texas, the 1st day of December, 2004. CAROLE KEETON STRAYHORN Comptroller of Public Accounts of the State of Texas (c) Except for Bond Numbers R-1 through R-14, the following form of authentication certificate shall be printed on each of the Bonds: AUTHENTICATION CERTIFICATE This bond is one of the bonds described in and delivered pursuant to the within-mentioned Ordinance. Wells Fargo Bank,National Association, Registrar By Authorized Signature Date of Authentication: (d) The following form of assignment shall be printed on each of the Bonds: ASSIGNMENT For value received, the undersigned hereby sells, assigns, and transfers unto the within bond 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 NOTICE: Signature must be owner as shown on the face guaranteed by a member firm of this Bond in every of the New York Stock Exchange particular,without any or a commercial bank or trust alteration, enlargement or company. change whatsoever. -13- (e) The following statement of insurance shall be printed on each of the Bonds: STATEMENT OF INSURANCE Financial Security Assurance Inc. ("Financial Security"), New York, New York, has delivered its municipal bond insurance policy with respect to the scheduled payments due of principal of and interest on this Bond to Wells Fargo Bank, N.A., Houston, Texas, or its successor, as paying agent for the Bonds (the "Paying Agent"). Said Policy is on file and available for inspection at the principal office of the Paying Agent and a copy thereof may be obtained from Financial Security or the Paying Agent. 16. Legal Opinions; CUSIP. The approving opinion of Orgain, Bell & Tucker, L.L.P., Beaumont,Texas, Bond Counsel, and CUSIP Numbers may be printed on the Bonds, but errors or omissions in the printing of such opinions or such numbers shall have no effect on the validity of the Bonds. 17. Interest and Sinking Fund; Levy, Assessment and Collection of Taxes. There is hereby established a separate fund of the City to be known as the "Series 2004 General Obligation Refunding Bonds 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, there is hereby levied and there shall be annually assessed and collected in due time, form and manner, and at the same time other City taxes are assessed, levied and collected, in each year, beginning with the current year, a continuing direct annual ad valorem tax upon all taxable property in said City sufficient to pay the current interest on said Bonds as the same becomes due, and to create and provide a sinking fund of not less than two percent (2%) of the original principal amount of the Bonds or of not less than the amount required to pay each installment of the principal of said Bonds as the same matures, whichever is greater, full allowance being made for delinquencies and costs of collection, and said taxes when collected shall be applied to the payment of the interest on and principal of said Bonds and to no other purpose. In addition, interest accrued from the date of the Bonds until their delivery and premium, if any, is to be deposited in such fund. To pay the interest coming due on the Bonds on March 1, 2005, and the interest coming due on September 1, 2005, there is hereby appropriated from current funds on hand, which are certified to be on hand and available for such purpose, an amount sufficient to pay such interest, and such amount shall be used for no other purpose. 18. Further Proceedings. After the Bonds to be initially issued shall have been executed, it shall be the duty of the Mayor 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 by the Attorney General. 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 initially issued, the -14- Comptroller of Public Accounts (or a deputy lawfully designated in writing to act for the Comptroller) shall manually sign the Comptroller's Registration Certificate prescribed herein to be printed and endorsed on the Bonds to be initially issued, and the seal of said Comptroller shall be impressed, or placed in facsimile, thereon. 19. Sale of Bonds and Bond Insurance. The Bonds are hereby sold and shall be delivered to the Underwriters at a price of$22,012,597.50, representing the principal amount of Bonds of$20,640,000.00, plus accrued interest of$81,250.35, plus a premium of$1,410,027.15, and less an underwriter's discount of$118,680.00, in accordance with the terms of the Purchase Contract 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 do any and all things necessary or desirable to satisfy the conditions set out herein and to provide for the issuance and delivery of the Bonds. The purchase of and payment of the premium for the Municipal Bond Guaranty Insurance Policy in accordance with the terms of the commitment for such insurance presented to the City Council are hereby approved and authorized. All officials and representatives of the City are authorized and directed to execute such documents and to do any and all things necessary, desirable or appropriate to obtain the Municipal Bond Guaranty Insurance Policy, and the printing on the Bonds covered by the Municipal Bond Guaranty Insurance Policy of an appropriate legend regarding such insurance is hereby approved and authorized. 20. Tax Exemption. The City intends that the interest on the Bonds shall be excludable from gross income of the owners thereof for federal income tax purposes pursuant to Sections 103 and 141 through 150 of the Internal Revenue Code of 1986, as amended, (the "Code") and all applicable temporary, proposed and final regulations (the "Regulations") and procedures promulgated thereunder and applicable to the Bonds. For this purpose, the City covenants that it will monitor and control the receipt, investment, expenditure and use of all gross proceeds of the Bonds and take or omit to take such other and further actions as may be required by Sections 103 and 141 through 150 of the Code and the Regulations to cause the interest on the Bonds to be and remain excludable from the gross income, as defined in Section 61 of the Code, of the owners of the Bonds for federal income tax purposes. Without limiting the generality of the foregoing, the City shall comply with each of the following covenants: (a) The City will use all of the proceeds of the Bonds to (i) acquire non- callable obligations of the United States of America(the "Escrowed Securities") sufficient to pay the principal of, premium, if any, and interest on the Refunded Obligations and (ii)to pay the costs of issuing the Bonds except for amounts, if any, described in the Report (as defined in the Escrow Agreement) as the rounding amount and the ending cash balance in the Escrow Fund (as defined in the Escrow Agreement). (b) The City will not directly or indirectly take any action or omit to take any action, which action or omission would cause the Bonds or the Refunded Obligations to constitute"private activity bonds"within the meaning of Section 141(a) of the Code. -15- (c) Principal of and interest on the Bonds will be paid solely from ad valorem taxes collected by the City, investment earnings on such collections, and as available, proceeds of the Bonds. (d) 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 and the Refunded Obligations (to the extent any of such proceeds remain unexpended) will not be used in a manner that would cause the Bonds or the Refunded Obligations or any portion thereof to be "arbitrage bonds" within the meaning of Section 148 of the Code. (e) At all times while the Bonds are outstanding, the City will identify and properly account for all amounts constituting gross proceeds of the Bonds in accordance with the Regulations. The City will monitor the yield on the investments of the proceeds of the Bonds and, to the extent required by the Code and the Regulations, will restrict the yield on such investments to a yield which is not materially higher than the yield on the Bonds. To the extent necessary to prevent the Bonds from constituting "arbitrage bonds," the City will make such payments as are necessary to cause the yield on all yield-restricted nonpurpose investments allocable to the Bonds to be less than the yield that is materially higher than the yield on the Bonds. (f) The City will not take any action or knowingly omit to take any action, if taken or omitted, would cause the Bonds to be treated as "federally guaranteed" obligations for purposes of Section 149(b) of the Code. (g) The City represents that not more than fifty percent (50%) of the proceeds of any new money portion of the Bonds or any new money issue refunded by, the Refunded Obligations was invested in nonpurpose investments (as defined in Section 148(f)(b)(A) of the Code) having a substantially guaranteed yield for four years or more within the meaning of Section 149(g)(3)(A)(ii) of the Code, and the City reasonably expected at the time each issue of the Refunded Obligations was issued that at least eighty-five percent (85%) of the spendable proceeds of the Bonds or the Refunded Obligations would be used to carry out the governmental purpose of such Bonds within the corresponding three-year period beginning on the respective dates of the Bonds or the Refunded Obligations. (h) The City will take all necessary steps to comply with the requirement that certain amounts earned by the City on the investment of the gross proceeds of the Bonds, if any, be rebated to the federal government. Specifically, the City will (i)maintain records regarding the receipt, investment and expenditure of the gross proceeds of the Bonds as may be required to calculate such excess arbitrage profits separately from records of amounts on deposit in the funds and accounts of the City allocable to other obligations of the City or moneys which do not represent gross proceeds of any obligations of the City and retain such records for at least six years after the day on which the last outstanding Bond is discharged, (ii) account for all gross proceeds under a reasonable, consistently applied method of accounting, not employed as an -1b- artifice or device to avoid, in whole or in part, the requirements of Section 148 of the Code, including any specified method of accounting required by applicable Regulations to be used for all or a portion of the gross proceeds, (iii) calculate, at such times as are required by applicable Regulations, the amount of excess arbitrage profits, if any, earned from the investment of the gross proceeds of the Bonds and (iv)timely pay, as required by applicable Regulations, all amounts required to be rebated to the federal government. In addition, the City will exercise reasonable diligence to assure that no errors are made in the calculations required by the preceding sentence and, if such an error is made, to discover and promptly correct such error within a reasonable amount of time thereafter, including payment to the federal government of any delinquent amounts owed to it, including interest thereon and penalty. (i) The City will not indirectly pay any amount otherwise payable to the federal government pursuant to the foregoing requirements to any person other than the federal government by entering into any investment arrangement with respect to the gross proceeds of the Bonds that might result in a reduction in the amount required to be paid to the federal government because such arrangement results in smaller profit or a larger loss than would have resulted if such arrangement had been at arm's length and had the yield on the issue not been relevant to either party. (j) The City will timely file or cause to be filed with the Secretary of the Treasury of the United States the information required by Section 149(e) of the Code with respect to the Bonds on such form and in such place as the Secretary may prescribe. (k) The City will not issue or use the Bonds as part of an "abusive arbitrage device" (as defined in Section 1.148-10(a) of the Regulations). Without limiting the foregoing, the Bonds are not and will not be a part of a transaction or series of transactions that attempts to circumvent the provisions of Section 148 of the Code and the Regulations, by (i) enabling the City to exploit the difference between tax-exempt and taxable interest rates to gain a material financial advantage, or (ii) increasing the burden on the market for tax-exempt obligations. (1) Proper officers of the City charged with the responsibility for issuing the Bonds are hereby directed to make, execute and deliver certifications as to facts, estimates or circumstances in existence as of the Issue Date and stating whether there are facts, estimates or circumstances that would materially change the City's expectations. On or after the Issue Date, the City will take such actions as are necessary and appropriate to assure the continuous accuracy of the representations contained in such certificates. (m) The covenants and representations made or required by this Section are for the benefit of the Bond holders and any subsequent Bond holder, and may be relied upon by the Bondholder and any subsequent Bondholder and bond counsel to the City. (n) In complying with the foregoing covenants, the City may rely upon an unqualified opinion issued to the City by nationally recognized bond counsel that any action by -17- the City or reliance upon any interpretation of the Code or Regulations contained in such opinion will not cause interest on the Bonds to be includable in gross income for federal income tax purposes under existing law. (o) Notwithstanding any other provision of this Ordinance, the City's representations and obligations under the covenants and provisions of this Section shall survive the defeasance and discharge of the Bonds for as long as such matters are relevant to the exclusion of interest on the Bonds from the gross income of the owners for federal income tax purposes. Section 21. Application of Proceeds. The proceeds from the sale of the Bonds in the amount of$22,012,597.50, together with the transfer of the sum of$367,000 from the debt service fund for the Refunded Obligations, shall,promptly upon receipt by the City,be applied as follows: (a) Accrued interest in the amount of$81,250.35 shall be deposited into the Interest and Sinking Fund for the Bonds; (b) To establish the escrow fund to refund the Refunded Obligations as provided in Section 24 below, $22,109,645.58 from the sale of the Bonds shall be deposited with the Escrow Agent pursuant to Section 24 below. (c) $186,216.37 from the sale of the Bonds shall be used to pay the costs of issuing the Bonds, including the premium of$68,216.37 for the Municipal Bond Guaranty Insurance Policy, not later than 90 days after such issuance; and (d) The sum of $2,485.20 from the sale of the Bonds shall be used as a rounding amount and shall be deposited in the Interest and Sinking Fund for the Bonds; and (e) Any proceeds from the Bonds remaining after making all such deposits and payments shall be deposited into the Interest and Sinking Fund. 22. Transfer of Money in Interest and Sinking Funds Maintained for the Refunded Obligations. On the date of delivery of the Bonds, the sum of$367,000.00 contained in the Interest and Sinking Funds for the Refunded Obligations shall be transferred to the Paying Agent and shall be applied as herein provided. 23. Redemption of Refunded Obligations. The City hereby irrevocably calls the following bonds of the City for redemption on the date set forth below, and authorizes and directs notice of such redemption to be given in such form and in such manner as the Mayor, City Manager, City Clerk or any other official of the City may approve: -18- Obligations To Be Redeemed Redemption Date A portion of The City of Beaumont, Texas, Combination Tax&Revenue Certificates of Obligation, Series 1998 Maturities 2008 through 2017, in the principal amounts of$40,000, $500,000, $500,000, $500,000, 500,000, $500,000, $360,000, $1,900,000, $2,005,000, and$2,110,000,respectively March 1,2008 A portion of the City of Beaumont, Texas, Refunding Bonds, Series 1996, Maturities 2008 through 2010, in the principal amounts of$790,000, $780,000 and $785,000,respectively March 1,2007 A portion of the City of Beaumont, Texas Combination Tax&Revenue Certificates of Obligation, Series 1996, Maturities 2008 through 2014 in the principal amounts of$590,000, $610,000, $680,000, $725,000, $775,000, $825,000 and $850,000,respectively March 1,2007 The City of Beaumont, Texas, Combination Tax& Revenue Certificates of Obligation, Series 1995, Maturities 2006 through 2014 in the principal amounts of $500,000, $500,000, $500,000, $500,000, $500,000, $500,000, $500,000, $500,000 and$500,000,respectively March 1, 2005 24. Escrow Agreement. The discharge and defeasance of the Refunded Obligations shall be effectuated pursuant to the terms and provisions of an Escrow Agreement to be entered into by and between the City and JPMorgan Chase Bank, Dallas, 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 which has been designed for the City by RBC Dain Rauscher Inc., and which shall be certified as to mathematical accuracy by Grant Thornton, L.L.P., in the Report, (b) to maximize the City's present value savings and minimize the City's costs of refunding, (c)to comply with all applicable laws and regulations relating to the refunding of the Refunded Obligations and (d) to carry out the other intents and purposes of this Ordinance, and the Mayor is hereby authorized to execute and deliver the 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. -19- 25. Source of Funds Used in Refunding. No money of the City other than proceeds of the Bonds and other than the sum of $367,000.00 from the Interest and Sinking Fund for the Refunded Obligations shall be used to refund the Refunded Obligations. 26. Purchase of Escrowed Securities. To assure the purchase of the Escrowed Securities as described in the Report and in the Escrow Agreement, the Mayor, the City's Finance Officer, and the Escrow Agent are hereby authorized to subscribe for, agree to purchase, and purchase such Escrowed Securities 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. 27. 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 Chapter 551 of the Texas Government Code Annotated,Vernon's 1994, as amended. 28. Official Statement. The Preliminary Official Statement and the Official Statement prepared in the initial offering and sale of the Bonds have been and are hereby authorized, approved and ratified as to form and content. The use of the Preliminary Official Statement and the Official Statement in the reoffering of the Bonds by the Underwriters is hereby approved, authorized and ratified. The proper officials of the City are hereby authorized to execute and deliver a certificate pertaining to the Preliminary Official Statement and the Official Statement as prescribed therein, dated as of the date of payment for and delivery of the Bonds. 29. Registrar. The Registrar, by undertaking the performance of the duties of the Registrar and in consideration of the payment of fees or deposits of money pursuant to this Ordinance and a Paying Agent/Registrar's Agreement, accepts and agrees to abide by the terms of this Ordinance and such Agreement. The City hereby approves the form of the Paying Agent/Registrar's Agreement presented to the City Council and hereby authorizes the Mayor or any other official of the City to execute such agreement on behalf of the City, with such changes and revisions thereto as may be approved by the official executing such agreement. The City covenants that at all times while any Bonds are outstanding, it will provide a bank, trust company, financial institution or other entity duly qualified and authorized to act as Registrar for the Bonds. The City reserves the right to replace the Registrar or its successor at any time on not less than sixty (60) days' written notice to the Registrar, so long as any such notice is effective not less than sixty (60) days prior to the next succeeding principal or interest payment date on the Bonds. If the Registrar is replaced by the City, the new Registrar shall accept the previous Registrar's records and act in the same capacity as the previous 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. Any successor Registrar shall be either a national or state banking institution and a corporation or association organized and doing business under the laws of the -20- United States of America or any State authorized under such laws to exercise trust powers and subject to supervision or examination by Federal or State authority. Each Registrar hereunder, by acting in that capacity, shall be deemed to have agreed to the provisions of this Section. 30. Related Matters. To satisfy in a timely manner all of the City's obligations under this Ordinance, the Mayor, the Mayor Pro Tem, the City Manager, the City Clerk, or 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 issuance of the Bonds, including, without limitation, executing and delivering on behalf of the City all certificates, consents, receipts, requests and other documents as may be reasonably necessary to satisfy the City's obligations under this Ordinance and to direct the application of funds of the City consistent with the provisions hereof. 31. No Personal Liability. No recourse shall be had for payment of the principal of or premium, if any, 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. Severability. If any Section, paragraph, clause or provision of this Ordinance shall for any reason be held to be invalid or unenforceable, the invalidity or unenforceability of such Section, paragraph, clause or provision shall not affect any of the remaining provisions of this Ordinance. 33. Repealer. All orders, resolutions, and ordinances, and parts thereof inconsistent herewith are hereby repealed to the extent of such inconsistency. 34. Additional Obligations. The City undertakes and agrees for the benefit of the holders of the Bonds to provide directly, on or before six months after the end of the City's fiscal year,which fiscal year presently ends on September 30: a. to each nationally recognized municipal securities information repository and to the appropriate state information depository, if any, annual financial information (which may be unaudited) and operating data regarding the City for fiscal years ending on or after January 1, 2004 which annual financial information and operating data shall be of the type included in the following listed sections contained in the Final Official Statement: SELECTED FINANCIAL INFORMATION CITY TAX DEBT(except for"Estimated Overlapping Debt") TAX DATA SELECTED FINANCIAL DATA -21- INVESTMENT AUTHORITY AND INVESTMENT OBJECTIVES OF THE CITY-Current Investments Appendix B b. to each nationally recognized municipal securities information repository and to the appropriate state information depository, if any, audited financial statements for the City for fiscal years ending on or after January 1, 2004, when available, if the City commissions an audit and it is completed by the required time; provided that if audited statements are not commissioned or are not available by the required time, the City will provide unaudited statements when and if they become available; C. in a timely manner, to each nationally recognized municipal securities information repository or to the Municipal Securities Rulemaking Board, and to the appropriate state information depository, if any, notice of any of the following events with respect to the Bonds, if material within the meaning of the federal securities laws to a decision to purchase or sell Bonds: i. Principal and interest payment delinquencies; ii. Non-payment related defaults; iii. Unscheduled draws on debt service reserves reflecting financial difficulties; iv. Unscheduled draws on credit enhancements reflecting financial difficulties; V. Substitution of credit or liquidity providers, or their failure to perform; vi. Adverse tax opinions or events affecting the tax-exempt status of the Bonds; vii. Modifications to rights of Bondholders; viii. Bond calls; ix. Defeasances; X. Release, substitution or sale of property securing repayment of the securities; xi. Rating changes; and d. in a timely manner, to each nationally recognized municipal securities information repository or to the Municipal Securities Rulemaking Board, and to the appropriate state information depository, if any, notice of a failure of the City to provide required annual financial information and operating data, on or before six months after the end of the City's fiscal year. These undertakings and agreements are subject to appropriation of necessary funds and to -22- applicable legal restrictions, if any. The accounting principles pursuant to which the City's financial statements are currently prepared are generally accepted accounting principles set out by the Government Accounting Standards Board, and, subject to changes in applicable law or regulation, such principles will be applied in the future. If the City changes its fiscal year, it will notify each nationally recognized municipal securities information repository and the appropriate state information depository of the change (and of the new fiscal year end) prior to the next date by which the City otherwise would be required to provide annual financial information. The City's obligation to update information and to provide notices of material events shall be limited to the agreements herein. The City shall not be obligated to provide other information that may be relevant or material to a complete presentation of its financial results of operations, condition,prospects and shall not be obligated to update any information that is provided, except as described herein. The City makes no representation or warranty concerning such information or concerning its usefulness to a decision to invest in or sell Bonds at any future date. THE CITY DISCLAIMS ANY CONTRACTUAL OR TORT LIABILITY FOR DAMAGES RESULTING IN WHOLE OR IN PART FROM ANY BREACH, WHETHER NEGLIGENT OR WITHOUT FAULT ON ITS PART, OF ITS CONTINUING DISCLOSURE AGREEMENT OR FROM ANY STATEMENT MADE PURSUANT TO ITS AGREEMENT. HOLDERS OR BENEFICIAL OWNERS OF BONDS MAY SEEK AS THEIR SOLE REMEDY A WRIT OF MANDAMUS TO COMPEL THE CITY TO COMPLY WITH ITS AGREEMENT. No default by the City with respect to its continuing disclosure agreement shall constitute a breach of or default under this Ordinance for purposes of any other provision of this Ordinance. Nothing in this paragraph is intended or shall act to disclaim, waive, or otherwise limit the duties of the City under federal and state securities laws. The City may amend its continuing disclosure obligations and agreement in this Section 34 to adapt to changed circumstances that arise from a change in legal requirements, a change in law, or a change in the identity, nature, status or type of operations of the City, if the agreement, as amended, would have permitted the Underwriters to purchase or sell the Bonds in compliance with SEC Rule 15c2-12, taking into account any amendments or interpretations of such rule to the date of such amendment, as well as such changed circumstances, and either the holders of a majority in aggregate principal amount of the outstanding Bonds consent or any person unaffiliated with the City (such as nationally recognized bond counsel) determines the amendment will not materially impair the interests of the holders and beneficial owners of the Bonds. The City may also amend or repeal the obligations and agreement in this Section 34 if the SEC amends or repeals the applicable provisions of Rule 15c2-12 or a court of final jurisdiction determines that such provisions are invalid, and the City may amend the agreement in its discretion in any other circumstance or manner, but in either case only to the extent that its right to do so would not prevent the Underwriters from lawfully purchasing or reselling the Bonds in the primary offering of the Bonds -23- in compliance with Rule 15c2-12. If the City amends its agreement, it must include with the next financial information and operating data provided in accordance with its agreement an explanation, in narrative form, of the reasons for the amendment and of the impact of any change in the type of information and operating data so provided. The City's continuing obligation to provide annual financial information and operating data and notices of events will terminate if and when the City no longer remains an "obligated person" (as such term is defined in SEC Rule 15c2-12)with respect to the Bonds. [The remainder of this page has intentionally been left blank. Signature page follows.] -24- PASSED AND APPROVED this 2nd day of November, 2004. Mayor THE CITY OF BEAUMONT, TEXAS ATTEST: City Clerk THE CITY OF BEAUMONT,TEXAS (CITY SEAL) w ' ul . 6 tp -25- Section 5 No. 5 ESCROW AGREEMENT THIS ESCROW AGREEMENT (the "Escrow Agreement") dated for convenience November 1, 2004,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 (the "City"), and JPMorgan Chase Bank, a New York banking corporation having a principal corporate trust office in Dallas, Texas, as escrow agent(together with any successor or assign in such capacity,the "Escrow Agent"). WHEREAS, the City has heretofore issued and there remains outstanding the City's Combination Tax & Revenue Certificates of Obligation, Series 1998, the City's Refunding Bonds, Series 1996, the City's Combination Tax & Revenue Certificates of Obligation, Series 1996, and the City's Combination Tax & Revenue Certificates of Obligation, Series 1995 (the "Refunded Obligations"), and the City desires to provide for the refunding of a portion of certain maturities of the Refunded Obligations; and WHEREAS, Chapter 1207, Texas Government Code, as amended (formerly Article 717k, Vernon's Annotated Texas Civil Statutes, as amended), authorizes and empowers the City to issue, sell and deliver refunding bonds and to deposit the proceeds of such bonds, together with other available funds or resources, with any place of payment for the Refunded Obligations in an amount which is sufficient to provide for the payment or redemption of the principal of and interest on the Refunded Obligations; and WHEREAS, the City Council of the City has adopted an ordinance authorizing the issuance of the City's General Obligation Refunding Bonds, Series 2004, in the aggregate principal amount of$20,640,000 (the "Refunding Bonds"), for the purpose, among other things, of providing the funds necessary to pay and refund the Refunded Obligations, thereby providing a net present value 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 payment of the Refunded Obligations; and WHEREAS, the City Council of the City has further determined to effectuate the refunding of the Refunded Obligations 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 financial arrangements for the discharge and final payment or redemption of the Refunded Obligations; NOW, THEREFORE, in consideration of the mutual undertakings, promises and agreements herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and in ordinance to secure the full and timely payment of the principal of and the interest on the Refunded Obligations, the City and the Escrow Agent contract and agree as follows: ARTICLE I DEFINITIONS AND INTERPRETATIONS 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: "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 JPMorgan Chase Bank, 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 Restricted Acquired Obligations and the Other Acquired Obligations purchased with the funds deposited into the Escrow Fund, all as more fully described in the Report. "Paying Agents for the Refunded Obligations" shall mean J.P.Morgan Trust Company with respect to the City's Combination Tax & Revenue Certificates of Obligation, Series 1998, the Ciy's Refunding Bonds, Series 1996, and the City's Combination Tax & Revenue Certificates of Obligation, Series 1996, and any successors thereto, and shall mean The Bank of New York Trust Company,N.A.,with respect to the City's Combination Tax&Revenue Certificates of Obligation, Series 1995. "Refunded Obligation Ordinances" shall mean the City's ordinances authorizing the issuance, sale and delivery of the Refunded Obligations. "Refunded Obligations" shall mean: (a) a portion of the City's Combination Tax & Revenue Certificates of Obligation, Series 1998, maturing on March 1 in the years 2008 through 2017 in the principal amounts of $40,000, $500,000, $500,000, $500,000, 500,000, $500,000, 360,000, $1,900,000, $2,005,000, and $2,110,000, respectively; (b) a portion of the City's Refunding Bonds, Series 1996, maturing on March 1 in the years 2008 through 2010 in the -2- principal amounts of $790,000, $780,000 and $785,000, respectively; (c) a portion of the City's Combination Tax & Revenue Certificates of Obligation, Series 1996, maturing on March 1 in the years 2008 through 2014 in the principal amounts of $590,000, $610,000, $680,000, $725,000, $775,000, $825,000 and $850,000, respectively; and (d) the City's Combination Tax & Revenue Certificates of Obligation, Series 1995,maturing on March 1 in the years 2006 through 2014 in the principal amounts of $500,000, $500,000, $500,000, $500,000, $500,000, $500,000, $500,000, $500,000 and $500,000,respectively. "Refunding Bonds" shall mean the City's General Obligation Refunding Bonds, Series 2004, dated November 1, 2004, in the outstanding aggregate principal amount of$20,640,000. "Refunding Bond Ordinance" shall mean the City's Ordinance adopted November 2, 2004, authorizing the issuance, sale and delivery of the Refunding Bonds. "Report" shall mean the verification report prepared by Grant Thornton LLP, relating to the refunding of the Refunded Obligations, a copy of which is attached hereto as Exhibit"A". "Restricted Acquired Obligations" shall mean the United States Treasury Notes and STRIPS, initially purchased with the proceeds of the Bonds, and United States Treasury Securities - State and Local Government Series at 0%Interest Rate("SLGS"), all as more fully described in the Report. 1.02 Interpretations. The titles and headings of the articles and sections of this Escrow Agreement have been inserted for convenience of reference only and are not to be considered a part hereof and shall not in any way modify or restrict the terms hereof. This Escrow Agreement and all of the terms and provisions hereof shall be liberally construed to effectuate the purposes set forth herein and to achieve the intended purpose of providing for the refunding of the Refunded Obligations in accordance with applicable law. ARTICLE II DEPOSIT OF FUNDS AND ESCROWED SECURITIES 2.01 Deposits with Escrow Agent; Acquisition of Escrowed Securities. On the Escrow Funding Date, the City will deposit, or cause to be deposited, with the Escrow Agent the following: (a) Restricted Acquired Obligations in the principal price of$22,109,644.00,purchased with a portion of the proceeds of the Refunding Bonds; and (b) A beginning cash balance of$1.58. -3- ARTICLE III CREATION AND OPERATION OF ESCROW FUND 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 "City of Beaumont, Texas, General Obligation Refunding Bonds, Series 2004 Escrow Fund", into which will be deposited the cash and Escrowed Securities described in Section 2.01. The Escrowed Securities, all proceeds therefrom and all cash balances from time to time on deposit in the Escrow Fund shall be the property of the Escrow Fund, and shall be applied only in strict conformity with the terms and conditions hereof. The Escrowed Securities, all proceeds therefrom and all cash balances from time to time on deposit in the Escrow Fund are hereby irrevocably pledged to the payment of the principal of and interest on the Refunded Obligations, which payment shall be made by timely transfers to the Paying Agent for the Refunded Obligations of such amounts at such times as are provided in Section 3.02 hereof. When the final transfers have been made to the Paying Agents for the Refunded Obligations for the payment of such principal of and interest on the Refunded Obligations, any balance then remaining in the Escrow Fund shall be transferred to the City, and the Escrow Agent shall thereupon be discharged from any further duties hereunder. 3.02 Payment of Principal of and Interest on Refunded Obligations. (a) The Escrow Agent is hereby irrevocably instructed to transfer to the Paying Agent for the Refunded Obligations 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 Obligations 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 Obligations in accordance with the provisions hereof shall be held by the Paying Agent for the Refunded Obligations as a segregated account for the respective holders of the Refunded Obligations in connection with which such money is held; provided, however, subject to the provisions of Title 6 of the Texas Property Code regarding Unclaimed Property, that money so held remaining unclaimed by the owners of such Refunded Obligations 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. Thereafter, neither the City,the Escrow Agent, the Paying Agents for the Refunded Obligations nor any other person shall be liable or responsible to any holders of such Refunded Obligations for any further payment of such unclaimed money or on account of any such Refunded Obligations. (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 Obligations prior to their scheduled maturities. 3.03 Sufficiency of Escrow Fund. The City represents (based solely upon the Report) that the successive receipts of the principal of and interest on the Escrowed Securities will assure that the cash balance on deposit from time to time in the Escrow Fund will be at all times sufficient -4- to provide money for transfer to the Paying Agents for the Refunded Obligations at the times and in the amounts required to pay the interest on the Refunded Obligations as such interest comes due and to pay the principal of the Refunded Obligations as the Refunded Obligations mature or are redeemed. If any deficiency results from any error in the calculation of the report, the City shall transfer to the Escrow Agent for deposit to the Escrow Fund to be held pursuant to this Escrow Agreement an additional amount of cash or securities sufficient to provide for such deficiency. 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 Obligations; 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 Obligations shall be entitled to the same preferred claim and first lien upon the Escrowed Securities,the proceeds thereof and all other assets of the Escrow Fund 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. ARTICLE IV REDEMPTION OF CERTAIN REFUNDED OBLIGATIONS 4.01 Optional Redemption of Certain Refunded Obligations. The City has irrevocably exercised its option to call for redemption the Refunded Obligations as set forth below. Such optional redemption shall be carried out in accordance with the Ordinance authorizing the issuance of the Refunded Obligations. The Escrow Agent is hereby authorized to provide funds therefor as set forth in Section 3.02(a)hereof. Bonds To Be Redeemed Redemption Date A portion of The City of Beaumont, Texas, Combination Tax&Revenue Certificates of Obligation, Series 1998 Maturities 2008 through 2017, in the principal amounts of$40,000, $500,000, $500,000, $500,000, 500,000, $500,000, 360,000, $1,900,000, $2,005,000, and $2,110,000,respectively March 1,2008 -5- A portion of the City of Beaumont,Texas, Refunding Bonds, Series 1996, Maturities 2008 through 2010,in the principal amounts of$790,000, $780,000 and $785,000,respectively March 1,2007 A portion of the City of Beaumont, Texas Combination Tax&Revenue Certificates of Obligation, Series 1996, Maturities 2008 through 2014 in the principal amounts of$590,000, $610,000, $680,000, $725,000, $775,000, $825,000 and $850,000, respectively March 1,2007 The City of Beaumont,Texas, Combination Tax& Revenue Certificates of Obligation, Series 1995, Maturities 2006 through 2014 in the principal amounts of $500,000, $500,000, $500,000, $500,000, $500,000, $500,000, $500,000, $500,000 and$500,000,respectively March 1,2005 ARTICLE V LIMITATION ON INVESTMENTS 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, except for the purchase of the SLGS as described in the Report. 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 proceeds therefrom to purchase Refunded Obligations 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 new verification report together with a written opinion from a nationally recognized firm of certified public accountants acceptable to the City and the Escrow Agent that such transaction will not cause the amount of money and securities in the Escrow Fund to be reduced below an amount which will be sufficient, when added to the interest to accrue thereon, to provide for the payment of principal and interest on the remaining Refunded Obligations 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. -6- ARTICLE VI RECORDS AND REPORTS 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 Obligations. 6.02 Reports. For the period beginning on the Escrow Funding Date and ending on October 31, 2005, and for each twelve (12) month period thereafter while this Agreement remains in effect, the Escrow Agent shall prepare and send to the City, at the City's request, within thirty (30) days following the end of such period a written report summarizing all transactions relating to the Escrow Fund during such period, including, without limitation, credits to the Escrow Fund as a result of interest payments on or maturities of the Escrowed Securities and transfers from the Escrow Fund to the Paying Agents for the Refunded Obligations or otherwise, together with a detailed statement of all Escrowed Securities and the cash balance on deposit in the Escrow Fund as of the end of such period. 6.03 Notification. The Escrow Agent shall notify the City immediately if at any time during the term of this agreement it determines that there is insufficient cash and Escrowed Securities in the Escrow Fund to provide for the transfer to the Paying Agents for the Refunded Obligations for timely payment of all interest on and principal of the Refunded Obligations. ARTICLE VII CONCERNING THE ESCROW AGENT 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. 7.02 Limitation on Liability. The Escrow Agent shall not be liable for the performance of any duties, except such duties as are specifically set forth in this Escrow Agreement, and no implied covenants or obligations shall be read into this Escrow Agreement. Nothing herein contained shall relieve the Escrow Agent from liability for its own negligent action, negligent failure to act or willful misconduct, except that this sentence shall not be construed to limit the effect of the immediately preceding sentence. The Escrow Agent shall not incur any liability for any error of judgment made in good faith by a responsible officer thereof, unless it shall be proved that it was negligent in ascertaining the pertinent facts. The Escrow Agent shall be protected in acting upon any notice, resolution,request, consent, order, certificate,report, opinion,bond or other paper or document believed by it to be genuine, and to have been signed or presented by the proper -7- party or parties. The Escrow Agent may consult with counsel, and the opinion of such counsel shall be full and complete authorization and protection in respect of any action taken or suffered by it in good faith and in accordance therewith. The Escrow Agent is not a principal, participant or beneficiary of the underlying transaction to which this Escrow Agreement relates. The liability of the Escrow Agent to transfer funds to the Paying Agents for the Refunded Obligations for the payments of the principal of and interest on the Refunded Obligations shall be limited to the proceeds of the Escrowed Securities and the cash balances from time to time on deposit in the Escrow Fund. Notwithstanding any provision contained herein to the contrary, the Escrow Agent shall have no liability whatsoever for the insufficiency of funds from time to time in the Escrow Fund or any failure of the obligor of the Escrowed Securities to make timely payment thereon, except for the obligation to notify the City promptly of any such occurrence. The recitals herein and in the proceedings authorizing the Refunding Bonds shall be taken as the statements of the City and shall not be considered as made by, or imposing any obligation or liability upon, the Escrow Agent. In its 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. 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 connection may make inquiries of, and consult with the City, among others, at any time. In the absence of bad faith, the Escrow Agent may rely conclusively upon the truth, completeness and accuracy of the statements, certificates, opinions, resolutions and other documents conforming to the requirements of this Escrow Agreement, and shall not be obligated to make any independent investigation with respect thereto. To the full extent permitted by law, the parties agree to indemnify, defend and hold the -8- Escrow Agent harmless from and against any and all loss, damage, tax, liability and expense that may be incurred by the Escrow Agent arising out of or in connection with its acceptance or appointment as Escrow Agent hereunder, including attorneys' fees and expenses of defending itself against any claim or liability in connection with its performance hereunder except that the Escrow Agent shall not be indemnified for any loss, damage, tax, liability or expense resulting from its own negligence or willful misconduct. The Escrow Agent's right to indemnification shall survive its resignation or removal and the termination of this Agreement. The Escrow Agent shall have only those duties as are specifically provided herein, which shall be deemed purely ministerial in nature, and shall under no circumstance be deemed a fiduciary for any of the parties to this Agreement. The Escrow Agent shall neither be responsible for, nor chargeable with, knowledge of the terms and conditions of any other agreement, instrument or document between the other parties hereto, in connection herewith. This Agreement sets forth all matters pertinent to the escrow contemplated hereunder, and no additional obligations of the Escrow Agent shall be inferred from the terms of this Agreement or any other Agreement. IN NO EVENT SHALL THE ESCROW AGENT BE LIABLE, DIRECTLY OR INDIRECTLY, FOR ANY (i) DAMAGES OR EXPENSES ARISING OUT OF THE SERVICES PROVIDED HEREUNDER, OTHER THAN DAMAGES WHICH RESULT FROM THE ESCROW AGENT'S FAILURE TO ACT IN ACCORDANCE WITH THE STANDARDS SET FORTH IN THIS AGREEMENT, OR (ii) SPECIAL OR CONSEQUENTIAL DAMAGES, EVEN IF THE ESCROW AGENT HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. In the event that any escrow property shall be attached, garnished or levied.upon by any court order, or the delivery thereof shall be stayed or enjoined by an order of a court, or any order, judgment or decree shall be made or entered by any court order affecting the property deposited under this Agreement, the Escrow Agent is hereby expressly authorized, in its sole discretion, to obey and comply with all writs, orders or decrees so entered or issued, which it is advised by legal counsel of its own choosing is binding upon it, whether with or without jurisdiction, and in the event that the Escrow Agent obeys or complies with any such writ, order or decree it shall not be liable to any of the parties hereto or to any other person, firm or corporation, by reason of such compliance notwithstanding such writ, order or decree be subsequently reversed, modified, annulled, set aside or vacated. Any banking association or corporation into which the Escrow Agent may be merged, converted or with which the Escrow Agent may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Escrow Agent shall be a party, or any banking association or corporation to which all or substantially all of the corporate trust business of the Escrow Agent shall be transferred, shall succeed to all the Escrow Agent's rights, obligations and immunities hereunder without the execution or filing of any paper or any further act on the part of any of the parties hereto, anything herein to the contrary notwithstanding. The Escrow Agent shall have the right, but not the obligation, to consult with counsel of choice and shall not be liable for action taken or omitted to be taken by Escrow Agent either in accordance with the advice of such counsel or in accordance with any opinion of counsel to the -9- Issuer addressed and delivered to the Escrow Agent. The Escrow Agent have the right to perform any of its duties hereunder through agents, attorneys, custodians or nominees. 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, the sum of$1,600.00, in cash. This sum does not include the cost of publication, printing costs or reasonable out-of-pocket expenses of the Escrow Agent. If the Escrow Agent incurs any out-of-pocket expenses or is requested to perform any extraordinary services hereunder, the City hereby agrees to reimburse the Escrow Agent for such out-of-pocket expenses and 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 reimbursement of such out-of-pocket expenses and 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. (b) J.P.Morgan Trust Company and The Bank of New York Trust Company,N.A. each serve as a Paying Agent for one or more of the Refunded Obligations. By execution of the Consent to Escrow Agreement attached hereto, J.P. Morgan Trust Company and The Bank of New York Trust Company, N.A. each agree to continue to serve as Paying Agent for the life of the Refunded Obligations for which it is now serving as Paying Agent, and they will serve as Paying Agents for the Refunded Obligations for the compensation provided under the fee schedule currently in effect and it will look to the City directly for payment of its fees; and, in the event of nonpayment of such fees, the sole remedy of the Paying Agent shall be an action against the City for recovery of the fees owing under the paying agency agreement for which it serves. 7.04 Successor Escrow Agents. If at 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. Any successor Escrow Agent must be qualified under the laws of the State of Texas to serve as an escrow agent and must be authorized to exercise corporate trust powers. No resignation or removal of the Escrow Agent and no early termination of this Agreement shall occur until a successor Escrow Agent has been appointed who is qualified to serve as Escrow Agent hereunder and who has accepted such appointment. Upon the request of any such successor Escrow Agent, the City shall execute any and all instruments in writing for more fully and certainly vesting in and confirming to such successor Escrow Agent all such immunities,rights, powers and duties. The Escrow Agent shall pay over to its successor Escrow Agent a proportional part of the Escrow Agent's fee hereunder equal to the portion of such fee attributable to duties to be -10- performed after the date of succession. ARTICLE VIII MISCELLANEOUS 8.01 Notices. Any notice, authorization, request, or demand required or permitted to be given hereunder shall be in writing and shall be deemed to have been duly given when mailed by registered or certified mail,postage prepaid addressed as follows: To the Escrow Agent: JPMorgan Chase Bank P.O. Box 2320,Dallas, Texas 75221-2320 Attention: Issuer Administrative Services To the City: City of Beaumont,Texas 801 Main Street Beaumont,TX 77701 ATTENTION: City Manager 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. 8.02 Termination of Escrow Agent's Obligations. 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 Obligations or to any other person or persons in connection with this Escrow Agreement. 8.03 Binding Agreement. This Escrow Agreement shall be binding upon the City, and the Escrow Agent and their respective successors and legal representatives, and shall inure solely to the benefit of the holders of the Refunded Obligations, the City, the Escrow Agent and their respective successors and legal representatives. This Escrow Agreement may not be modified except with the prior consent of the holders of all of the Refunded Obligations. 8.04 Severability. In case any one or more of the provisions contained in this Escrow Agreement shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Escrow Agreement, but this Escrow Agreement shall be construed as if such invalid or illegal or -11- unenforceable provision had never been contained herein. 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. 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. [The remainder of this page has intentionally been left blank. Signature page follows.] -12- Executed as of November 1, 2004, but effective as set forth herein. THE CITY OF BEAUMONT, TEXAS ATTEST: By: By: 42��Qna� Title: Mayor Title: City Clerk (SEAL) .urv2�i;fit JPMORGAN CHASE BANK,as Escrow Agent i A "u� By' h c R , L� NT Title: SSI T 6 I r !? -13- CONSENT TO ESCROW AGREEMENT Upon receipt of sufficient funds from the Escrow Agent, J.P. MORGAN TRUST COMPANY, as paying agent for one or more series of the Refunded Obligations (as defined in the foregoing Escrow Agreement), hereby acknowledges and consents to provide for the full and timely payment of the principal of and interest on such series of Refunded Obligations. J.P. MORGAN TRUST COMPANY further consents to the management of the Escrow Fund by the Escrow Agent in accordance with the terms and conditions of the Escrow Agreement and agrees to be bound by the terms of the Escrow Agreement with respect to its obligations as a paying agent. J.P. MORGAN TRUST COMPANY agrees to continue to serve as Paying Agent for which it is now serving as Paying Agent, and it will serve as Paying Agent for the Refunded Obligations for the compensation provided under the fee schedule currently in effect and it will look to the City directly for payment of its fees; and, in the event of nonpayment of such fees, the sole remedy of the Paying Agent shall be an action against the City for recovery of the fees owing under the paying agency agreement for which it serves. J.P. MORGAN TRUST COMPANY By: Name: y�Cn -L,,on, t lc-:cc-e-- Title: AggjS `kj%'IT y,,-rE PRESIDENT -14- CONSENT TO ESCROW AGREEMENT Upon receipt of sufficient funds from the Escrow Agent, The Bank of New York Trust Company, N.A., as paying agent for one or more series of the Refunded Obligations (as defined in the foregoing Escrow Agreement), hereby acknowledges and consents to provide for the full and timely payment of the principal of and interest on such series of Refunded Obligations. The Bank of New York Trust Company, N.A. further consents to the management of the Escrow Fund by the Escrow Agent in accordance with the terms and conditions of the Escrow Agreement and agrees to be bound by the terms of the Escrow Agreement with respect to its obligations as a paying agent. The Bank of New York Trust Company, N.A. agrees to continue to serve as Paying Agent for which it is now serving as Paying Agent, and it will serve as Paying Agent for the Refunded Obligations for the compensation provided under the fee schedule currently in effect and it will look to the City directly for payment of its fees; and, in the event of nonpayment of such fees, the sole remedy of the Paying Agent shall be an action against the City for recovery of the fees owing under the paying agency agreement for which it serves. The Bank of New York Trust, N.A. Ti le: MTANT REAA�URFq -15- Section 6 Cash Flow and Yield Verification Report City of Beaumont, Texas December 2, 2004 INDEX Letter Exhibit A Schedule of Sources and Uses of Funds Exhibit B Escrow Account Cash Flow Exhibit B-1 Cash Receipts From and Yield on the SLGS Purchased with Bond Proceeds Exhibit B-2 Cash Receipt From the SLGS Purchased with Debt Service Funds Exhibit B-3 Debt Service Payment on the 1995 Certificates Exhibit B-4 Debt Service Payments on the 1996 Certificates Exhibit B-5 Debt Service Payments on the 1996 Bonds Exhibit B-6 Debt Service Payments on the 1998 Certificates Exhibit C Debt Service Payments and Yield on the Bonds Exhibit C-1 Original Issue Premium on the Bonds Exhibit D Multipurpose Allocation on the 1996 Certificates and 1996 Bonds Appendix I Applicable schedules provided by RBC Dain Rauscher Inc. Grant Thorntowila Accountants and Business Advisors Report of Independent Certified Public Accountants On Applying Agreed-Upon Procedures City of Beaumont 801 Main Beaumont,Texas Orgain,Bell&Tucker,L.L.P. JP Morgan Chase Bank 470 Orleans,Suite 400 2001 Bryan Street, 8th Floor Beaumont,Texas Dallas,Texas First Southwest Company Texas Attorney General's Office 325 North St. Paul Street, Suite 800 300 West 15th Street,Ninth Floor Dallas,Texas Austin,Texas RBC Dain Rauscher Inc. Financial Security Assurance Inc. 2711 North Haskell Avenue, Suite 2400 350 Park Avenue Dallas,Texas New York,New York $20,640,000 City of Beaumont,Texas (A political subdivision of the State of Texas located within Jefferson County) General Obligation Refunding Bonds, Series 2004 Dated November 1, 2004 We have performed the procedures described in this report, which were agreed to by the City of Beaumont, Texas (the "City") and RBC Dain Rauscher Inc. (the "Financial Advisor"), to verify the mathematical accuracy of certain computations contained in the schedules attached in Appendix I provided by the Financial Advisor. The Financial Advisor is responsible for these schedules. These procedures were performed solely to assist you in the issuance of the above-captioned bond issue (the "Bonds") for the purpose of refunding portions of the City's outstanding Combination Tax and Revenue Certificates of Obligation, Series 1995 (the "1995 Certificates"), Series 1996 (the "1996 Certificates"), Refunding Bonds, Series 1996 (the "1996 Bonds"), and Combination Tax and Revenue Certificates of Obligation, Series 1998 (the "1998 Certificates") (collectively referred to as the "Refunded Obligations") as summarized on the next page. This engagement was performed in accordance with attestation standards established by the American Institute of Certified Public Accountants. The sufficiency of these procedures is solely the responsibility of the addressees of this report who are the specified parties. Consequently, we make no representation regarding the sufficiency of the procedures described in this report either for the purpose for which this report has been requested or for any other purpose. 500 US Bank Plaza North 200 South Sixth Street Minneapolis,MN 55402 T 612.332.0001 F 612.332.8361 W www.grantthornton.com Grant Thornton LLP US Member of Grant Thornton International Page 2 Principal Principal Maturities Redemption Redemption Series Issued Dated Refunded Refunded Date Price 1995 3-1-06 to Certs. $6,000,000 May 1,1995 $4,500,000 3-1-14 3-1-05 100% 1996 3-1-08 to Certs. $16,000,000 January 1,1996 $5,055,000* 3-1-14 3-1-07 100% 1996 3-1-08 to Bonds $16,205,000 January 1,1996 $2,355,000* 3-1-10 3-1-07 100% 1998 3-1-08 to Certs. $15,000,000 April 1, 1998 $8,915,000* 3-1-17 3-1-08 100% * Represents a portion of the principal amounts outstanding. VERIFICATION OF ESCROW ACCOUNT CASH FLOW SUFFICIENCY The Financial Advisor provided us with schedules (Appendix I) summarizing future escrow account cash receipts and disbursements. These schedules indicate that there will be sufficient cash available in the escrow account to pay the principal and interest on the Refunded Obligations assuming the 1995 Certificates will be redeemed on March 1, 2005 at 100 percent of par plus accrued interest, the 1996 Certificates and the 1996 Bonds will be redeemed on March 1, 2007 at 100 percent of par plus accrued interest, and the 1998 Certificates maturing on and after March 1, 2009 will be redeemed on March 1, 2008 at 100 percent of par plus accrued interest. The attached Exhibit A (Schedule of Sources and Uses of Funds) was compiled based upon information provided by the Financial Advisor. As part of our engagement to recalculate the schedules attached as Appendix I we prepared schedules attached hereto as Exhibits B through B-6 independently calculating future escrow account cash receipts and disbursements and compared the information used in our calculations to the information listed below contained in applicable pages of the following documents: • Subscription confirmation, dated October 8, 2004, and Schedule of U.S. Treasury Securities provided by the Financial Advisor used to acquire certain United States Treasury Securities - State and Local Government Series (the "SLGS") insofar as the SLGS are described as to the principal amounts, interest rates, maturity dates, issuance date and first interest payment date; and • Ordinances for the Refunded Obligations were provided by Orgain, Bell & Tucker, L.L.P. insofar as the Refunded Obligations are described as to the maturity and interest payment dates, principal amounts, interest rates and optional redemption dates and price. The principal amounts refunded of the March 1, 2008 maturity of the 1998 Certificates represents a portion of the principal amount outstanding. The principal amounts refunded for the 1996 Certificates and the 1996 Bonds represent portions of the principal amounts outstanding as shown on Exhibit D. Page 3 In addition, we compared the interest rates for each maturity of the SLGS, as shown on the Schedule of U.S. Treasury Securities, with the maximum allowable interest rates shown on the Department of Treasury, Bureau of Public Debt, SLGS Table (Form PD 4262) for use on October 8, 2004 and found that the interest rates were equal to the maximum allowable interest rates for each maturity. Our procedures, as summarized in Exhibits B through B-6, prove the mathematical accuracy of the schedules provided by the Financial Advisor summarizing future escrow account cash receipts and disbursements. The schedules provided by the Financial Advisor and those prepared by us reflect that the anticipated receipts from the SLGS, together with an initial cash deposit of $1.58 to be deposited into the escrow account on December 2, 2004, will be sufficient to pay, when due, the principal and interest related to the Refunded Obligations assuming the 1995 Certificates will be redeemed on March 1, 2005 at 100 percent of par plus accrued interest, the 1996 Certificates and the 1996 Bonds will be redeemed on March 1, 2007 at 100 percent of par plus accrued interest, and the 1998 Certificates maturing on and after March 1, 2009 will be redeemed on March 1, 2008 at 100 percent of par plus accrued interest. VERIFICATION OF YIELDS The Financial Advisor provided us with schedules (Appendix 1) which indicate that the yield on the cash receipts from the SLGS purchased with Bond proceeds is less than the yield on the Bonds. These schedules were prepared based on the assumed settlement date of December 2, 2004 using a 360-day year with interest compounded semi-annually. The term "yield", as used herein, means that yield which, when used in computing the present value of all payments of principal and interest to be paid or received on an obligation produces an amount equal to, in the case of the cash receipts from the SLGS purchased with Bond proceeds, the purchase price, and in the case of the Bonds, the issue price adjusted for the bond insurance premium of$68,216.37. In addition, we found that the schedules provided by the Financial Advisor, which assume the redemption of the March 1, 2016 and March 1, 2017 maturities identified on Exhibits C and C-1 at par on March 1, 2014 plus accrued interest, correctly treat those Bonds as yield-to-call Bonds as retired on the respective dates that for each Bond produces the lowest yield for the issue that includes the Bonds. Those Bonds identified as yield-to-call Bonds on the attached Exhibits C and C-1 are those Bonds that are subject to optional redemption and that are issued at an issue price that exceeds the stated redemption price at maturity of such Bonds by more than one-fourth of one percent multiplied by the product of the stated redemption price at maturity of such Bonds and the number of complete years to the first optional redemption date for the Bonds. We found that there are no other yield-to-call Bonds other than those identified on the attached Exhibits C and C-1. As part of our engagement to recalculate the schedules attached as Appendix I we prepared schedules attached hereto as Exhibits B-1 and C independently calculating the yields on (i) the cash receipts from the SLGS purchased with Bond proceeds calculated on Exhibit B-1, and (ii) the Bonds using the Official Statement provided by the Financial Advisor insofar as the Bonds are described as to the maturity and interest payment dates, dated date, principal amounts, interest rates, optional redemption date and price, and issue price to the public. The results of our calculations, based on the aforementioned assumptions, are summarized on the next page: Page 4 Yield Exhibit • Yield on the cash receipts from the SLGS purchased with Bond Proceeds 2.812619% B-1 • Yield on the Bonds 3.495529% C Our procedures, as summarized in Exhibits B-1 and C, prove the mathematical accuracy of the schedules provided by the Financial Advisor summarizing the yields. The schedules provided by the Financial Advisor and those prepared by us reflect that the yield on the cash receipts from the SLGS purchased with Bond proceeds is less than the yield on the Bonds. VERIFICATION OF MULTIPURPOSE ALLOCATION The Financial Advisor provided us with schedules (Appendix I) allocating on a pro-rata basis the new money portions of the 1996 Certificates and the 1996 Bonds. As part of our engagement we independently calculated the multipurpose allocation of the 1996 Certificates and the 1996 Bonds using assumptions and methodologies as provided by the Financial Advisor. Our procedures, as summarized in Exhibit D, prove the mathematical accuracy of the schedules provided by the Financial Advisor summarizing the multipurpose allocations of the 1996 Certificates and the 1996 Bonds. The schedules provided by the Financial Advisor and those prepared by us reflect that the portions of the 1996 Certificates and 1996 Bonds allocated to the new money proceeds are as shown on Exhibit D. We were not engaged to, and did not, perform an examination in accordance with attestation standards established by the American Institute of Certified Public Accountants, the objective of which would be the expression of an examination opinion on the items referred to above. Accordingly we do not express such an opinion. Had we performed additional procedures, other matters might have come to our attention that would have been reported to you. This report is intended solely for the information and use of those to whom this letter is addressed and is not intended to be and should not be used by anyone other than these specified parties. Minneapolis, Minnesota December 2, 2004 Exhibit A City of Beaumont,Texas SCHEDULE OF SOURCES AND USES OF FUNDS December 2,2004 SOURCES: Principal amount of the Bonds $205640,000.00 Original issue premium 1,410,027.15 Transfers from prior issue Debt Service Funds 367,000.00 Accrued interest 81,250.35 $22,498,277.50 USES: Purchase price of the SLGS: - Purchased with Bond proceeds $21,742,645.00 - Purchased with Debt Service Funds 366,999.00 Beginning cash deposit to the escrow account 1.58 Accrued interest 81,250.35 Underwriters' discount 118,680.00 Costs of issuance 118,000.00 Bond insurance premium 68,216.37 Contingency 2,485.20 $22,498,277.50 Exhibit B City of Beaumont,Texas ESCROW ACCOUNT CASH FLOW Debt service Cash receipts from SLGS: payments on Purchased the Refunded Purchased with with Debt Obligations Bond proceeds Service Funds (Exhibits B-3 Cash Dates (Exhibit B-1) (Exhibit B-2) through B-6) balance Cash deposit on December 2, 2004 $1.58 03-01-05 $4,668,053.90 $368,403.95 $5,036,457.50 1.93 09-01-05 414,519.84 414,520.00 1.77 03-01-06 414,520.16 414,520.00 1.93 09-01-06 414,519.57 414,520.00 1.50 03-01-07 7,824,519.75 7,824,520.00 1.25 09-01-07 225,675.75 225,675.00 2.00 03-01-08 9,140,674.00 9,140,675.00 1.00 $23,102,482.97 $368,403.95 $23,470,887.50 Exhibit B-1 City of Beaumont,Texas CASH RECEIPTS FROM AND YIELD ON THE SLGS PURCHASED WITH BOND PROCEEDS Cash receipts Present value on from SLGS December 2, 2004 Receipt Interest purchased with using a yield of date Principal rate Interest Bond proceeds 2.812619% 03-01-05 $4,532,697 1.570% $135,356.90 $4,668,053.90 $4,635,932.12 09-01-05 171,897 2.050% 242,622.84 414,519.84 405,958.42 03-01-06 174,533 2.210% 239,987.16 414,520.16 400,328.87 09-01-06 176,461 2.440% 238,058.57 414,519.57 394,776.52 03-01-07 7,588,614 2.670% 235,905.75 7,824,519.75 7,348,504.93 09-01-07 91,078 2.830% 134,597.75 225,675.75 209,007.19 03-01-08 9,007,365 2.960% 133,309.00 9,140,674.00 8,348,136.96 $21,742,645 $1,359,837.97 $23,102,482.97 $21,742,645.00 Purchase price of the SLGS purchased with Bond proceeds $21,742,645.00 The sum of the present values of the cash receipts from the SLGS purchased with Bond proceeds on December 2, 2004, using a yield of 2.812619%, is equal to the purchase price of the SLGS purchased with Bond proceeds. Exhibit B-2 City of Beaumont,Texas CASH RECEIPT FROM THE SLGS PURCHASED WITH DEBT SERVICE FUNDS Cash receipt from SLGS purchased Receipt Interest with Debt date Principal rate Interest Service Funds 03-01-05 $366,999 1.570% $1,404.95 $368,403.95 Exhibit B-3 City of Beaumont,Texas DEBT SERVICE PAYMENT ON THE 1995 CERTIFICATES Interest Debt service Date Principal rate Interest payment 03-01-05 $4,500,000 (1) $121,937.50 $4,621,937.50 (1) Actual maturity dates, principal amounts and interest rates are as follows: Maturity Principal Interest date amount rate 03-01-06 $500,000 5.200% 03-01-07 500,000 5.300% 03-01-08 500,000 5.400% 03-01-09 500,000 5.500% 03-01-10 500,000 5.600% 03-01-11 500,000 5.625% 03-01-12 500,000 5.700% 03-01-13 500,000 5.750% 03-01-14 500,000 4.700% $4,500,000 Exhibit B-4 City of Beaumont,Texas DEBT SERVICE PAYMENTS ON THE 1996 CERTIFICATES Interest Debt service Date Principal rate Interest payments 03-01-05 $129,187.50 $129,187.50 09-01-05 129,187.50 129,187.50 03-01-06 129,187.50 129,187.50 09-01-06 129,187.50 129,187.50 03-01-07 $5,055,000 (1) 129,187.50 5,184,187.50 $5,055,000 $645,937.50 $5,700,937.50 (1) Actual maturity dates, principal amounts and interest rates are as follows: Maturity Principal Interest date amount rate 03-01-08 $590,000 * 5.000% 03-01-09 610,000 * 5.000% 03-01-10 680,000 * 5.000% 03-01-11 725,000 * 5.100% 03-01-12 775,000 * 5.200% 03-01-13 825,000 * 5.200% 03-01-14 850,000 * 5.200% $5,055,000 * Represents portions of the principal amounts outstanding as shown on Exhibit D. Exhibit B-5 City of Beaumont,Texas DEBT SERVICE PAYMENTS ON THE 1996 BONDS Interest Debt service Date Principal rate Interest payments 03-01-05 $59,657.50 $59,657.50 09-01-05 59,657.50 59,657.50 03-01-06 59,657.50 59,657.50 09-01-06 59,657.50 59,657.50 03-01-07 $2,355,000 (1) 59,657.50 2,414,657.50 $2,355,000 $298,287.50 $2,653,287.50 (1) Actual maturity dates,principal amounts and interest rates are as follows: Maturity Principal Interest date amount rate 03-01-08 $790,000 * 5.000% 03-01-09 780,000 * 5.100% 03-01-10 785,000 * 5.100% $2,355,000 * Represents portions of the principal amounts outstanding as shown on Exhibit D. Exhibit B-6 City of Beaumont,Texas DEBT SERVICE PAYMENTS ON THE 1998 CERTIFICATES Interest Debt service Date Principal rate Interest payments 03-01-05 $225,675.00 $225,675.00 09-01-05 225,675.00 225,675.00 03-01-06 225,675.00 225,675.00 09-01-06 225,675.00 225,675.00 03-01-07 225,675.00 225,675.00 09-01-07 225,675.00 225,675.00 03-01-08 $8,915,000 (1) 225,675.00 9,140,675.00 $8,915,000 $1,579,725.00 $10,494,725.00 (1) Actual maturity dates,principal amounts and interest rates are as follows: Maturity Principal Interest date amount rate 03-01-08 $40,000 * 6.500% 03-01-09 500,000 6.500% 03-01-10 500,000 4.700% 03-01-11 500,000 4.800% 03-01-12 500,000 5.000% 03-01-13 500,000 5.000% 03-01-14 360,000 5.000% 03-01-15 1,900,000 5.000% 1 03-01-16 2,005,000 5.000% 03-01-17 2,110,000 5.000% $8,915,000 * Represents a portion of the principal amount outstanding. Exhibit C City of Beaumont,Texas DEBT SERVICE PAYMENTS AND YIELD ON THE BONDS Present value on $20,640,000 issue dated November 1,2004 (1) December 2,2004 Interest Total debt Adjusted using a yield of Date Principal rate Interest service debt service 3.495529% 03-01-05 $314,517.50 $314,517.50 $314,517.50 $311,834.51 09-01-05 471,776.25 471,776.25 471,776.25 459,717.00 03-01-06 $220,000 3.000% 471,776.25 691,776.25 691,776.25 662,514.31 09-01-06 468,476.25 468,476.25 468,476.25 440,953.01 03-01-07 200,000 3.000% 468,476.25 668,476.25 668,476.25 618,394.82 09-01-07 465,476.25 465,476.25 465,476.25 423,206.68 03-01-08 2,000,000 (2) 465,476.25 2,465,476.25 2,465,476.25 2,203,083.35 09-01-08 425,476.25 425,476.25 425,476.25 373,663.39 03-01-09 2,455,000 5.000% 425,476.25 2,880,476.25 2,880,476.25 2,486,249.17 09-01-09 364,101.25 364,101.25 364,101.25 308,871.36 03-01-10 2,525,000 5.000% 364,101.25 2,889,101.25 2,889,101.25 2,408,759.06 09-01-10 300,976.25 300,976.25 300,976.25 246,625.48 03-01-11 1,790,000 5.000% 300,976.25 2,090,976.25 2,090,976.25 1,683,952.92 09-01-11 256,226.25 256,226.25 256,226.25 202,805.43 03-01-12 1,835,000 5.000% 256,226.25 2,091,226.25 2,091,226.25 1,626,792.32 09-01-12 210,351.25 210,351.25 210,351.25 160,824.17 03-01-13 1,875,000 3.750% 210,351.25 2,085,351.25 2,085,351.25 1,566,969.54 09-01-13 175,195.00 175,195.00 175,195.00 129,383.28 03-01-14 1,735,000 (2) 175,195.00 1,910,195.00 6,015,195.00 4,365,97550 09-01-14 143,381.25 143,381.25 35,625.00 25,413.33 03-01-15 1,900,000 3.750% 143,381.25 2,043,381.25 1,935,625.00 1,357,072.51 09-01-15 107,756.25 107,756.25 03-01-16 2,000,000 5.250% 107,756.25 2,107,756.25 09-01-16 55,256.25 55,256.25 03-01-17 2,105,000 5.250% 55,256.25 2,160,256.25 $20,640,000 $7,203,415.00 $27,843,415.00 $27,301,877.50 $22,063,061.13 The present value of the future payments is equal to: Principal amount of the Bonds $20,640,000.00 Accrued interest 81,250.35 Original issue premium 1,410,027.15 Bond insurance premium {68,216.37) $22,063,061.13 The sum of the present values of the adjusted debt service payments of the Bonds on December 2,2004,using a yield of 3.495529%,is equal to the issue price of the Bonds adjusted for the bond insurance premium. (1) Assumes that the March 1,2016 and March 1,2017 maturities are called on March 1,2014 at 100 percent of par plus accrued interest. (2) Actual principal amounts and interest rates are shown on Exhibit C-1. Exhibit C-1 City of Beaumont,Texas ORIGINAL ISSUE PREMIUM ON THE BONDS Initial public Original Maturity Interest offering issue date Principal rate Yield price premium 03-01-06 $220,000 3.000% 1.940% 101.298% $2,855.60 03-01-07 200,000 3.000% 2.130% 101.897% 3,794.00 03-01-08 1,000,000 5.000% 2.460% 107.876% 78,760.00 03-01-08 1,000,000 3.000% 2.460% 101.673% 16,730.00 03-01-09 2,455,000 5.000% 2.770% 108.873% 217,832.15 03-01-10 2,525,000 5.000% 3.030% 109.486% 239,521.50 03-01-11 1,790,000 5.000% 3.220% 109.995% 178,910.50 03-01-12 1,835,000 5.000% 3.390% 110.263% 188,326.05 03-01-13 1,875,000 3.750% 3.540% 101.486% 27,862.50 03-01-14 1,435,000 3.650% 3.650% 100.000% 03-01-14 300,000 3.750% 3.650% 100.774% 2,322.00 03-01-15 1,900,000 3.750% 3.750% 100.000% 03-01-16 2,000,000 5.250% 3.780% 111.376% (1) (2) 227,520.00 03-01-17 2,105,000 5.250% 3.860% 110.717% (1) (2) 225,592.85 $20,640,000 $1,410,027.15 (1) Maturities were priced to call on March 1, 2014 at 100 percent of par. (2) Represents the yield-to-call Bonds included for purposes of computing yield on the Bonds. Exhibit D Page 1 of 2 City of Beaumont,Texas MULTIPURPOSE ALLOCATION ON THE 1996 CERTIFICATES AND 1996 BONDS 1990 Escrow Present value on Other funds Adjusted February 22, 1996 Escrow allocated to Allocated escrow using a yield of Date requirements requirement percentage requirements 5.08642% 03-01-96 $86,295.00 $42,498.84 17.7078% $43,796.16 $43,741.20 09-01-96 86,295.00 0.00 17.7078% 86,295.00 84,049.16 03-01-97 671,295.00 0.00 46.3817% 671,295.00 637,608.72 09-01-97 66,990.00 0.00 14.7721% 66,990.00 62,050.30 03-01-98 696,990.00 0.00 46.9831% 696,990.00 629,583.83 09-01-98 46,200.00 0.00 11.0738% 46,200.00 40,696.97 03-01-99 721,200.00 0.00 47.5349% 721,200.00 619,539.39 09-01-99 23,925.00 0.00 6.3217% 23,925.00 20,042.79 03-01-00 748,925.00 0.00 47.4467% 748,925.00 611,839.79 $3,148,115.00 $42,498.84 $3,105,616.16 $2,749,152.16 1992 Escrow Present value on Other funds Adjusted February 22, 1996 Escrow allocated to Allocated escrow using a yield of Date requirements requirement percentage requirements 5.08642% 03-01-96 $401,031.25 $197,501.16 82.2922% $203,530.09 $203,274.68 09-01-96 401,031.25 0.00 82.2922% 401,031.25 390,594.35 03-01-97 776,031.25 0.00 53.6183% 776,031.25 737,089.20 09-01-97 386,500.00 0.00 85.2279% 386,500.00 358,000.33 03-01-98 786,500.00 0.00 53.0169% 786,500.00 710,437.29 09-01-98 371,000.00 0.00 88.9262% 371,000.00 326,809.01 03-01-99 796,000.00 0.00 52.4651% 796,000.00 683,795.55 09-01-99 354,531.25 0.00 93.6783% 354,531.25 297,002.99 03-01-00 829,531.25 0.00 52.5533% 829,531.25 677,691.66 09-01-00 336,125.00 0.00 100.0000% 336,125.00 267,789.35 03-01-01 836,125.00 0.00 100.0000% 836,125.00 649,616.10 09-01-01 316,750.00 0.00 100.0000% 316,750.00 239,991.18 03-01-02 10,191,750.00 0.00 100.0000% 10,191,750.00 7,530,442.83 $16,782,906.25 $197,501.16 $16,585,405.09 $13,072,534.51 Exhibit D ' Page 2 of 2 City of Beaumont,Texas MULTIPURPOSE ALLOCATION ON THE 1996 CERTIFICATES AND 1996 BONDS Present value Percent of Percent requirements total refundable Refunding $15,821,686.67 50.042995% 0.000000% New Money 15,794,500.00 49.957005% 49.957005% $31,616,186.67 100.000000% 49.957005% Series 1996 Certificates Principal Date issued 49.957005% Refundable 03-01-08 $1,175,000.00 $586,994.81 $590,000.00 03-01-09 1,215,000.00 606,977.61 610,000.00 03-01-10 1,355,000.00 676,917.42 680,000.00 03-01-11 1,450,000.00 724,376.57 725,000.00 03-01-12 1,545,000.00 771,835.73 775,000.00 03-01-13 1,645,000.00 821,792.73 825,000.00 03-01-14 1,700,000.00 849,269.09 850,000.00 $10,085,000.00 $5,038,163.97 $5,055,000.00 Series 1996 Bonds Principal Date issued 49.957005% Refundable 03-01-08 $1,580,000.00 $789,320.68 $790,000.00 03-01-09 1,560,000.00 779,329.28 780,000.00 03-01-10 1,570,000.00 784,324.98 785,000.00 $4,710,000.00 $2,352,974.94 $2,355,000.00 APPENDIX I Applicable schedules provided by RBC Dain Rauscher Inc. City of Beaumont, General Obligation Debt Sources&Uses Report Advance Refunding of Series 1995,1996(2 Issues)and 1998 Bonds Sources of Funds: Principal Amount of Current Interest Bonds(CIBs) 20,640,000.00 CIB Premium 1,410,027.15 Transfer from Debt Service Fund 367,000.00 Accrued Interest 81,250.35 Total SOURCES of Funds $22,498,277.50 Uses of Funds: SLG Escrow Cost 22,109,645.58 Accrued Interest Deposit to D/S Fund 81,250.35 Issuance Expenses: ($304,896.37) Underwriter's Discount 118,680.00 Rating Agency 30,000.00 Insurance 68,216.37 Financial Advisor Fee 35,000.00 Bond Counsel 25,000.00 c Trustee/Escrow Agent 5,000.00 Printing 10,000.00 Miscellaneous 5,000.00 CPA/Accountant 8,000.00 Rounding Amount 2,485.20 Total USES of Funds $22,498,277,50 Miscellaneous Bond Issuance Information: Delivery Date: 12/02/2004 Principal Amount of Bonds Being Refunded 20,825,000.00 Principal Amount of the Refunding Bonds 20,640,000.00 Proceeds of"The new Bonds" 22,050 027.15 Rate/Yield on the Refunded Bonds 5.33999579% "All Costs Included"TIC on the New Issue is 3.75853501% Federal Arbitrage Yield on the New Issue is 3.49552934% Yield on Escrow 2.81261859% Total Debt Service Savings 810,337.85 Present Value Savings 3.75853501% 749,657.89 Total Debt Service Savings as a Percent of Total Debt Service of Refunded Bonds 2.80010982% Present Value Savings as a Percent of Principal Amount of Bonds Being Refunded 3.59979782% BEAUMONT CITY.RUN2004REF NEW2004REF NEW2004REF2 AGGREFUND Prepared by.RBC Dain Rauscher--Houston,Texas 1110212004 @ 12.15 v7.03 Page-2 City of Beaumont,General Obligation Debt Escrow Sufficiency&Balance Report Advance Refunding of Series 1995,1996(2 Issues)and 1998 Bonds Escrow Settlement Date Is 12/02/2004 This is a birfucated escrow--Cost of"Early"escrow is$366,999.00 Proceeds from Less Amts to Plus Maturing Adjusted Proceeds from Original be Invested Amts Invested Proceeds from Present Value 'Other' Old D/S Escrow Escrow Dates ResEse ed in 0%SLGs in 0%SLGs Rstrct'd Esc @ 2.81261859% Investments Requirement New Balance Old Balance 12/02/2004 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1.58 1.58 03/01/2005 5,036,457.85 0.00 0.00 4,668,053.90 4,635,932.12 368,403.95 5,036,457.50 1.93 1.93 09/0112005 414,519.84 0.00 0.00 414,519.84 405,958.42 0.00 414,520.00 1.77 1.77 03/01/2006 414,520.16 0.00 0.00 414,520.16 400,328.87 0.00 414,520.00 1.93 1.93 09/01/2006 414,519.57 0.00 0.00 414,519.57 394,776.52 0.00 414,520.00 1.50 1.50 03/01/2007 7,824,519.75 0.00 0.00 7,824,519.75 7,348,504.93 0.00 7,824,520.00 1.25 1.25 09/01/2007 225,675.75 0.00 0.00 225,675.75 209,007.19 0.00 225,675.00 2.00 2.00 03/01/2008 9,140,674.00 0.00 0.00 9,140,674.00 8,348,136.96 0.00 9,140,675.00 1.00 1.00 Totals $23,470,886.92 $0.00 $0.00 $23,102,482.97 $21,742,645.00 $368,403.95 $23,470,887.50 Cost of"Late"Escrow SLG Securities $21,742,645.00 Escrow Arbitrage YLD after Reinvestment in 0%SLGs=2.81261859% Cost of"Early"Escrow SLG Securities $366,999.00 Cost of'Other'Restricted Investments $0.00 Escrow Starting Balance $1.58 Total Escrow Cost... $22,109,645.58 SLG Rates Were Taken From SLG Table Dated 1010812004 r { BEAUMONT CITY:RUN2004REFAGGREFUND Prepared by:RBC Dain Rauscher-Houston,Texas 1110212004 @ 12:15 v7.03 Page-10 City of Beaumont,General Obligation Debt U. S.Treasury SLG Investments Advance Refunding of Series 1995,1996(2 Issues)and 1998 Bonds Escrow Settlement Date Is 12/02/2004 Payment SLG SLG Rates Total Receipts PV'd SLG Rates Dates Principal Subscribed Interest SLG Receipts 2.81261859% From Table 03/01/2005 4,899,696 1.570000 136,761.85 5,036,457.85 5,001,801.01 1.570000 09/01/2005 171,897 2.050000 242,622.84 414,519.84 405,958.42 2.050000 03/01/2006 174,533 2.210000 239,987.16 414,520.16 400,328.87 2.210000 09/01/2006 176,461 2.440000 238,058.57 414,519.57 394,776.52 2.440000 03101/2007 7,588,614 2.670000 235,905.75 7,824,519.75 7,348,504.93 2.670000 09/01/2007 91,078 2.830000 134,597.75 225,675.75 209,007.19 2.830000 03/01/2008 9,007,365 2.960000 133,309.00 9,140,674.00 8,348,136.96 2.960000 Totals $22,109,644 Y$1,361,242.92 $23,470,886.92 $22,108,513.89 a Early(Bifurcated)Escrow Payment SLG SLG Rates Total SLG Rates Dates Principal Subscribed Interest SLG Receipts From Table 03/01/2005 366,999 1.570000 1,404.95 368,403.95 0.00 1.570000 Totals $366,999 $1,404.95 $368,403.95 $0.00 7 SLG Rates were taken from a SLG table dated 10/0812004 r, BEAUMONT CITY:RUN2004REF AGGREFUND Prepared by:RBC Dain Rauscher—Houston,Texas 1110212004 @ 12:15 v7.03 Page-11 City of Beaumont,General Obligation Debt Aggregation Spreadsheet Report Advance Refunding of Series 1995,1996(2 Issues)and 1998 Bonds Data are Principal Amounts Data are to Maturity FY 10/01 Dates Totals OLD1995R OLD1996R OLD1996REFR OLD1998R 2005 0.00 2006 500,000.00 500,000.00 2007 500,000.00 500,000.00 2008 1,920,000.00 500,000.00 590,000.00 790,000.00 40,000.00 2009 2,390,000.00 500 000.00 610 000.00 780,000.00 500 000.00 2010 2,465,000.00 500,000.00 680,000.00 785,000.00 500,000.00 2011 1,725,000.00 500,000.00 725,000.00 500,000.00 2012 1,775,000.00 500,000.00 775,000.00 500,000.00 2013 1,825,000.00 500,000.00 825,000.00 500,000.00 2014 1710,000.00 500,000.00 850,000.00 360,000.00 2015 1,900,000.00 1,900,000.00 2016 2,005,000.00 2,005,000.00 2017 2,110,000.00 2,110,000.00 2018 0.00 Totals $20 825 000.00 4 500 000.00 $5 055 000.00 $2 355 000.00 $8,91 000.00 Component Face Amt ----Title---- From To OLD1995R $4,500,000.00 Combination Tax&Revenue CO,Series 1995 OLD1996R $5,055,000.00 Series 1996 Dated 1/111996 Bonds to Refund OLD1996REFR $2,355,000.00 Refunding Bonds,Series 1996 OLD1998R $8,915,000.00 Series 1998 Bonds to Refund BEAUMONT CITY:AGGREFUND Prepared by.RBC Dain Rauscher--Houston,Texas 1110212004 @ 12:16 v7.03 Page-12 City of Beaumont,General Obligation Debt Advance Refunding of Series 1995,1996(2 Issues)and 1998 Bonds Dated Date=09/01/2004 Combination Tax S Revenue CO,Series 1995 Delivery Date 09/01/2004 To Be Refunded Term Bond Bond Coupon Interest Total Fiscal Year Debt Service Dates Maturities Redemptions Proceeds Rate Yield Price Amount Debt Service Debt Service to Call 03/01/2005 - - - 6.400 6.400000 100.000000 121,937.50 121,937.50 - 7621,937.50 09/01/2005 - - - - - 121,937.50 121,937.50 243,875.00 - 03/01/2006 - 500,000.00 - 500,000.00 5.200 5.200000 100.000000 121,937.50 621,937.50 - 09/01/2006 - - - - - - 108,937.50 108,937.50 730,875.00 03/01/2007 - 500,000.00 - 500,000.00 5.300 5.300000 100.000000 108,937.50 608,937.50 - - 09/01/2007 - - - - - - 95,687.50 95,687.50 704,625.00 03/01/2008 - 500,000.00 . 500,000.00 5.400 5.400000 100.000000 95,687.50 595,687.50 - 09/01/2008 - - - - - - 82,187.50 82,187.50 677,875.00 03/01/2009 - 500,000.00 - 500,000.00 5.500 5.500000 100.000000 82,187.50 582,187.50 - 09101/2009 - - - - - - 68,437.50 68,437.50 650,625.00 03/01/2010 - 500,000.00 ' 500,000.00 5.600 5.600000 100.000000 68,437.50 568,437.50 - 09/01/2010 - - - - 54,437.50 54,437.50 622,875.00 03/01/2011 - 500,000.00 - 500,000.00 5.625 5.625000 100.000000 54,437.50 554,437.50 - 09/01/2011 - - - - - 40,375.00 40,375.00 594,812.50 03/01/2012 - 500,000.00 " 500,000.00 5.700 5.700000 100.000000 40,375.00 540,375.00 09/01/2012 - - - - - - 26,125.00 26,125.00 566,500.00 03/0112013 - 500,000.00 ` 500,000.00 5.750 5.750000 100.000000 26,125.00 526,125.00 - 09/01/2013 - - - - - - 11,750.00 11,750.00 537,875.00 03/01/2014 500,000.00 ' 500,000.00 4.700 4.700000 100.000000 11,750.00 511,750.00 511,750.00 Total - 4,500,000.00 4,500,000.00 1,341,687.50 5,841,687.50 5,841,687.50 4,621,937.50 Acc Int rand Totals 4,500,000.00 4 500 000.00 1,341,687.50 5 841 687.50 5,841,687.50 4 621,937.50 r -Bonds callable... 03/01/2005 @ 100.000 TIC(Incl.all expenses)....5.42630359% Average Coupon.......5.42095960% Net Eff.Int.Rate(Texas Vernon's)= 5.420960%(with Adjstmnt of$0.00). TIC(Arbitrage TIC).........5.42630359% Average Life(yrs)... 5.50 IRS Form 8038-G NIC =5.420960%(with Adjstmnt of$0.00). Bond Years.................. 24,750.00 WAM rs)............. 5.500000 NIC= 5.420960% with Adjstmnt of$0.00). BEAUMONT CITY:OLD1995R Prepared by:RBC Dain Rauscher-Houston,Texas 1110212004 @ 12:16 v7.03 Page-13 City of Beaumont,General Obligation Debt Advance Refunding of Series 1995,1996(2 Issues)and 1998 Bonds Dated Date=09/01/2004 Series 1996 Dated 1/1/1996 Bonds to Refund Delivery Date= 09/01/2004 Term Bond Bond Coupon Interest Total Fiscal Year Debt Service Dates Maturities Redemptions Proceeds Rate Yield Price Amount Debt Service Debt Service to Call 03/01/2005 - - 5.500 5.500000 100.000000 129,187.50 129,187.50 - 129,187.50 09/01/2005 - - - - - - 129,187.50 129,187.50 258,375.00 129,187.50 03/01/2006 - - - 5.500 5.500000 100.000000 129,187.50 129,187.50 - 129,187.50 09/01/2006 - - - - - - 129,187.50 129,187.50 258,375.00 129,187.50 03101/2007 - 5.500 5.500000 100.000000 129,187.50 129,187.50 5,184,187.50 09/01/2007 - - - - - - 129,187.50 129,187.50 258,375.00 03/01/2008 - 590,000.00 * 590,000.00 5.000 5.000000 100.000000 129,187.50 719,187.50 - 09/01/2008 - - - - - - 114,437.50 114,437.50 833,625.00 03/01/2009 - 610,000.00 * 610,000.00 5.000 5.000000 100.000000 114,437.50 724,437.50 - 09/01/2009 - 99,187.50 99,187.50 823,625.00 03101/2010 - 680,000.00 * 680,000.00 5.000 5.000000 100.000000 99,187.50 779,187.50 - 09/0112010 - - - - - - 82,187.50 82,187.50 861,375.00 03/01/2011 - 725,000.00 * 725,000.00 5.100 51100000 100.000000 82,187.50 807,187.50 - 09/01/2011 - - - - - - 63,700.00 63,700.00 870,887.50 - 03/01/2012 - 775,000.00 * 775,000.00 5.200 5.200000 100.000000 63,700.00 838,700.00 - k 09/01/2012 - - - - - - 43,550.00 43,550.00 882,250.00 - 03/01/2013 - 825,000.00 * 825,000.00 5.200 5.200000 100.000000 43,550.00 868,550.00 09/01/2013 - - - - 22,100.00 22,100.00 890,650.00 03/01/2014 850,000.00 * 850,000.00 5.200 5.200000 100.000000 22,100.00 872,100.00 872,100.00 Total - 5,055,000.00 5,055,000.00 1,754,637.50 6,809,637.50 6,809,637.50 5,700,937.50 Acc int - - rand Totals 5,055,000.00 5 055 000.00 1,754,637.50 6 809 637.50 6,809,637.50 5 700 937.50 *-Bonds callable... 03/01/2007 @ 100.000 TIC(Incl.all expenses)....5.13266346% Average Coupon.......5.13615075% Net Eff.Int.Rate(Texas Vernon's)= 5.136151%(with Adjstmnt of$0.00). TIC(Arbitrage TIC).........5.13266346% Average Life(yrs)... 6.76 IRS Form 8038-G NIC =5.136151%(with Adjstmnt of$0.00). Bond Years.................. 34,162.50 WAM rs)............. 6.758160 NIC= 5.136151% with Adjstmnt of$0.00). a k t BEAt1MONT CITY:OLD1996R Prepared by:RBC Da1n Rauscher--Houston, Texas 1110212004 @ 12:16 v7.03 Page-14 City of Beaumont,General Obligation Debt Advance Refunding of Series 1995,1996(2 Issues)and 1998 Bonds Dated Date=09/01/2004 Refunding Bonds Series 1996 Delivery Date=09/01/2004 Term Bond Bond Coupon Interest Total Fiscal Year Debt Service Dates Maturities Redemptions Proceeds Rate Yield Price Amount Debt Service Debt Service to Call 03/01/2005 - - - - - 59,657.50 59,657.50 - 59,657.50 09/01/2005 - - - - - 59,657.50 59,657.50 119,315.00 59,657.50 03/01/2006 - - 4.750 4.750000 100.000000 59,657.50 59,657.50 - 59,657.50 09/01/2006 - - - - - 59,657.50 59,657.50 119,315.00 59,657.50 03/01/2007 - - - 4.900 4.900000 100.000000 59,657.50 59,657.50 - 2,414,657.50 09/01/2007 - - - - - - 59,657.50 59,657.50 119,315.00 03/01/2008 - 790,000.00 ` 790,000.00 5.000 5.000000 100.000000 59,657.50 849,657.50 - - 09/01/2008 - - - - - - 39,907.50 39,907.50 889,565.00 03/01/2009 - 780,000.00 ' 780,000.00 5.100 5.100000 100.000000 39,907.50 819,907.50 - 09/01/2009 20,017.50 20,017.50 839 925.00 - 03/01/2010 - 785,000.00 ` 785,000.00 5.100 5.100000 100.000000 20,017.50 805,017.50 805,017.50 - I Total - 2,355,000.00 2,355,000.00 537,452.50 2,892,452.50 2,892,452.50 2,653,287.50 Acc Int - - - - - - rand Totals 2,355,000.00 2 355 000.00 537 452.50 2,892 452.50 2,892,452.50 2 653 287.50 "-Bonds callable... 03/01/2007 @ 100.000 TIC(incl.all expenses)....5.07316912% Average Coupon.......5.07389662% Net Eff.Int.Rate(Texas Vernon's)= 5.073897%(with Adjstmnt of$0.00). I TIC(Arbitrage TIC).........5.07316912% Average Life(yrs)... 4.50 IRS Form 8038-G NIC =5.073897%(with Adjstmnt of$0.00). Bond Years.................. 10,592.50 WAM rs)............. 4.497877 NIC= 5.073897% with Adjstmnt of$0.00). t BEAUMONT CITY:OLD1996REFR Prepared by:RBC Dain Rauscher--Houston,Texas 1110212004 @ 12:16 v7.03 Page-15 City of Beaumont, General Obligation Debt Advance Refunding of Series 1995,1996(2 Issues)and 1998 Bonds Dated Date=09/01/2004 Series 1998 Bonds to Refund Delivery Date=09/01/2004 Term Bond I Bond Coupon Interest Total Fiscal Year Debt Service Dates Maturities Redemptions Proceeds Rate Yield Price Amount Debt Service Debt Service to Call 03101/2005 - - 6.500 6.500000 100.000000 225,675.00 225,675.00 - 225,675.00 . 09/01/2005 - - - - - - 225,675.00 225,675.00 451,350.00 225,675.00 03/01/2006 - - - 6.500 6.500000 100.000000 225,675.00 225,675.00 - 225,675.00 09/01/2006 - - - - - - 225,675.00 225,675.00 451,350.00 225,675.00 03101/2007 - - 6.500 6.500000 100.000000 225,675.00 225,675.00 - 225,675.00 09/01/2007 - - - - - 225,675.00 225,675.00 451,350.00 225,675.00 03/01/2008 - 40,000.00 40,000.00 6.500 6.500000 100.000000 225,675.00 265,675.00 - 91140,675.00 09/01/2008 - - - - - - 224,375.00 224,375.00 490,050.00 03/01/2009 - 500,000.00 * 500,000.00 6.500 6.500000 100.000000 224,375.00 724,375.00 - - _09/0112009 - - 208,125.00 208,125.00 932,500.00 03/01/2010 - 500,000.00 * 500,000.00 4.700 4.700000 100.000000 208,125.00 708,125.00 - 09/01/2010 - - - - - - 196,375.00 196,375.00 904,500.00 - z 03/01/2011 - 500,000.00 * 500,000.00 4.800 4.800000 100.000000 196,375.00 696,375.00 - t 09/01/2011 - - - - - - 184,375.00 184,375.00 880,750.00 03/01/2012 500,000.00 * 500,000.00 5.000 5.000000 100.000000 184,375.00 684,375.00 - 09101/2012 - - - - - - 171,875.00 171,875.00 856,250.00 03/01/2013 - 500,000.00 * 500,000.00 5.000 5.000000 100.000000 171,875.00 671,875.00 - 09/01/2013 - - - - - - 159,375.00 159,375.00 831,250.00 - 03/0112014 - 360,000.00 * 360,000.00 5.000 5.000000 100.000000 159,375.00 519,375.00 - 09/01/2014 - - - - 150,375.00 150,375.00 669,750.00 - 03/01/2015 - 1,900,000.00 * 1,900,000.00 5.000 5.000000 100.000000 150,375.00 2,050,375.00 - - 09/01/2015 - - - - - - 102,875.00 102,875.00 2,153,250.00 03/01/2016 - 2,005,000.00 * 2,005,000.00 5.000 5.000000 100.000000 102,875.00 2,107,875.00 09/01/2016 - - - - - 52,750.00 52,750.00 2,160,625.00 _ p _03/01/2017 2,110,000.00 * 2,110,000.00 5.000 5.000000 100.000000 52,750.00 2,162750.00 § 09/01/2017 - - - - - - - - 2,162,750.00 03/01/2018 - - 4.500 4.500000 100.000000 - - Total - 8,915,000.00 8,915,000.00 4,480,725.00 13,395,725.00 13,395,725.00 10,494,725.00 Acc int - - - - - rand Totals 8,915,000.00 8 915 000.00 4,480,725.00 13 395 725.00 13 395 725.00 10 494 725.00 *-Bonds callable... 03/01/2008 @ 100.000 TIC(incl.all expenses)....5.02794453% Average Coupon.......5.02365670% Net Eff.Int.Rate(Texas Vernon's)= 5.023657%(with Adjstmnt of$0.00). TIC(Arbitrage TIC).........5.02794453% Average Life(yrs)... 10.00 IRS Form 8038-G NIC =5.023657%(with Adjstmnt of$0.00). Bond Years.................. 89,192.50 WAM rs)............. 10.004767 NIC= 5.023657% with Adjstmnt of$0.00). BEAUMONT CITY:OLD1998R Prepared by:RBC Dain Rauscher-Houston,Texas 1110212004 @ 12:16 v7.03 Page-16 City of Beaumont,General Obligation Debt Advance Refunding of Series 1995,1996(2 Issues)and 1998 Bonds Dated Date=11/01/2004 Refunding Bonds Series 2004 Delivery Date=12/02/2004 Term Bond Bond Coupon Interest Total Fiscal Year Debt Service Dates Maturities Redemptions Proceeds Rate Yield Price Amount Debt Service Debt Service to Call 03/01/2005 - - - - - - 300,767.50 300,767.50 - 300,767.50 09/01/2005 - - - - - - 451,151.25 451,151.25 751,918.75 451,151.25 03/0112006 - 220,000.00 222,855.60 3.000 1.940000 101.298000 451,151.25 671,151.25 - 671,151.25 09/01/2006 - - - - - 447,851.25 447,851.25 1,119,002.50 447,851.25 03/01/2007 - 200,000.00 203,794.00 3.000 2.130000 101.897000 447,851.25 647,851.25 647,851.25 09/01/2007 - - - - - 444,851.25 444,851.25 1,092,702.50 444,851.25 03/01/2008 - 1,000,000.00 1,078,760.00 5.000 2.460000 107.876000 444,851.25 1,444,851.25 - 1,444,851.25 09/01/2008 - - - - - - 419,851.25 419,851.25 1,864,702.50 419,851.25 03/01/2009 - 2,455,000.00 2,672,832.15 5.000 2.770000 108.873000 419,851.25 2,874,851.25 - 2,874,851.25 09/01/2009 - - - - 358 476.25 358 476.25 3,233,327.50 358 476.25 03/01/2010 - 2,525,000.00 2,764,521.50 5.000 3.030000 109.486000 358,476.25 2,883,476.25 - 2,883,476.25 09/01/2010 - - - - - 295,351.25 295,351.25 3,178,827.50 295,351.25 03/01/2011 - 1,790,000.00 1,968,910.50 5.000 3.220000 109.995000 295,351.25 2,085,351.25 - 2,085,351.25 09/01/2011 - - - - - - 250,601.25 250,601.25 2,335,952.50 250,601.25 03/01/2012 - 1,835,000.00 2,023,326.05 5.000 3.390000 110.263000 250,601.25 2,085,601.25 - 2,085,601.25 09/01/2012 - - - - - - 204,726.25 204,726.25 2,290,327.50 204,726.25 . 03101/2013 - 1,875,000.00 1,902,862.50 3.750 3.540000 101.486000 204,726.25 2,079,726.25 - 2,079,726.25 09/01/2013 - - - - - - 169,570.00 169,570.00 2,249,296.25 169,570.00 03/01/2014 - 1,435,000.00 1,435,000.00 3.650 3.650000 100.000000 169,570.00 1,604,570.00 - 7,609,570.00 09/01/2014 - - - - - - 143,381.25 143,381.25 1,747,951.25 03/01/2015 - 1,900,000.00 * 1,900,000.00 3.750 3.750000 100.000000 143,381.25 2,043,381.25 09/01/2015 - - - - - - 107,756.25 107,756.25 2,151,137.50 03/01/2016 2,000,000.00 * 2,227,520.00 5.250 3.780000 111.376000 107,756.25 2,107,756.25 - 09/01/2016 - - - - - - 55,256.25 55,256.25 2,163,012.50 03/01/2017 - 2,105,000.00 * 2,330,592.85 5.250 3.860000 110.717000 55,256.25 2,160,256.25 2,160,256.25 Total - 19,340,000.00 20,730,975.15 6,998,415.00 26,338,415.00 26,338,415.00 25,725,627.50 Acc Int - - - -77,698.27 -77,698.27 - rand Totals 19 340 000.00 20 730 975.15 6,920,716.73 26 260 716.73 26 338 415.00 25 725 627.50 *-Bonds callable... 03/01/2014 @ 100.000 TIC(Incl.all expenses)....3.78235619% Average Coupon.......4.65717534% Net Eff.Int.Rate(Texas Vernon's)= 3.731535%(with Adjstmnt of$0.00). TIC(Arbitrage TIC).........3.51509860% Average Life(yrs)... 7.77 IRS Form 8038-G NIC =3.475851%(with Adjstmnt of$0.00). Bond Years.................. 150,271.67 WAM rs)............. 7.674038 NIC= 3.731535% with Adjstmnt of$0.00). BEAUMONT CITY:NEW2004REF Prepared by:RBC Dain Rauscher-Houston, Texas 1110212004 @ 12:15 v7.03 Page-3 City of Beaumont,General Obligation Debt Advance Refunding of Series 1995,1996(2 Issues)and 1998 Bonds Dated Date=11/0112004 Series 2004 Refunding Bonds Delivery Date=12/02/2004 Term Bond Bond Coupon Interest Total Fiscal Year Debt Service Dates Maturities Redemptions Proceeds Rate Yield Price Amount Debt Service Debt Service to Call 03/01/2005 - - - - - 13,750.00 13,750.00 - 13,750.00 09/01/2005 - - - - - - 20,625.00 20,625.00 34,375.00 20,625.00 03/01/2006 - - 3.000 1.940000 101.298000 20,625.00 20,625.00 - 20,625.00 09/01/2006 - - - 20,625.00 20,625.00 41,250.00 20,625.00 03/01/2007 - - 3.000 2.130000 101.897000 20,625.00 20,625.00 - 20,625.00 09/01/2007 - - - - - 20,625.00 20,625.00 41,250.00 20,625.00 03/01/2008 - 1,000,000.00 1,016,730.00 3.000 2.460000 101.673000 20,625.00 1,020,625.00 - 1,020,625.00 09/01/2008 - - - - - - 5,625.00 5,625.00 1,026,250.00 5,625.00 03/01/2009 - - - 5.000 2.770000 108.873000 5,625.00 5,625.00 - 5,625.00 09/01/2009 5,625.00 5,625.00 11,250.00 5,625.00 03/01/2010 - 5.000 3.030000 109.486000 5,625.00 5,625.00 - 5,625.00 09/01/2010 - - - - - - 5,625.00 5,625.00 11,250.00 5,625.00 03/01/2011 - - - 5.000 3.220000 109.995000 5,625.00 5,625.00 - 5,625.00 09/01/2011 - - - - - 5,625.00 5,625.00 11,250.00 5,625.00 03/01/2012 - - 3.625 3.390000 101.495000 5,625.00 5,625.00 - 5,625.00 09/01/2012 - - - - - - 5,625.00 5,625.00 11,250.00 5,625.00 03/01/2013 - - - 3.750 3.540000 101.486000 5,625.00 5,625.00 - 5,625.00 09/01/2013 - - - - 5,625.00 5,625.00 11,250.00 5,625.00 03/01/2014 - 300,000.00 302,322.00 3.750 3.650000 100.774000 5,625.00 305,625.00 - 305,625.00 09/01/2014 - - - - - - - 305,625.00 03/01/2015 - - ' 3.750 3.750000 100.000000 - - - 09/01/2015 - - - - -03/01/2016 - - - 5.250 3.780000 111.376000 - - - - 09/01/2016 - - - - - - -03/01/2017 - - - 5.250 3.860000 110.717000 - - - Total - 1,300,000.00 1,319,052.00 205,000.00 1,505,000.00 1,505,000.00 1,505,000.00 Acc Int - - - -3,552.08 -3,552.08 - rand Totals 1,300,000.00 1 319 052.00 201 447.92 1,501,447.92 1 505 000.00 1,505.000.00 -Bonds callable... 03/01/2014 @ 100.000 TIC(Incl.all expenses)....3.18396696% Average Coupon.......3.34239130% Net Eff.Int.Rate(Texas Vernon's)= 3.031761%(with Adjstmnt of$0.00). TIC(Arbitrage TIC).........3.04861271% Average Life(yrs)... 4.72 IRS Form 8038-G NIC =2.991477%(with Adjstmnt of$0.00). Bond Years.................. 6,133.33 WAM rs)............. 4.622401 NIC= 3.031761% with Adjstmnt of$0.00). BEAUMONT CITY:NEW2004REF2 Prepared by:RBC Dain Rauscher--Houston,Texas 1110212004 @ 12:15 v7.03 Page-4 City of Beaumont,General Obligation Debt Proof of Federal Arbitrage Yield Advance Refunding of Series 1995,1996(2 Issues)and 1998 Bonds Dated Date 11/01/2004 Delivery Date 12/0212004 Proceeds to: Interest to: Disc Term Total(1) PV of Adj D/S Face Bondholder(+) Maturing Bondholder(+) Recoverable Total Bond Adjusted to Dates Amounts Issuer(-) Amounts Issuer(-) Recurring Debt Service Adjustments Cash Flow @ 3.49552934% Fees for Yld Calc 12/02/2004 0.00 -22,050,027.15 0.00 -22,131,277.50 0.00 0.00 0.00 -22,131,277.50 -22,131,277.50 03/01/2005 0.00 0.00 0.00 629,035.00 0.00 314,517.50 0.00 314,517.50 311,834.51 09/01/2005 0.00 0.00 0.00 943,552.50 0.00 471,776.25 0.00 471,776.25 459,717.00 03/01/2006 220,000.00 222,855.60 220,000.00 1,163,552.50 0.00 691,776.25 0.00 691,776.25 662,514.31 09/01/2006 0.00 0.00 0.00 936,952.50 0.00 468,476.25 0.00 468,476.25 440,953.01 03/01/2007 200,000.00 203,794.00 200,000.00 1,136,952.50 0.00 668,476.25 0.00 668,476.25 618,394.82 09/01/2007 0.00 0.00 0.00 930,952.50 0.00 465,476.25 0.00 465,476.25 423,206.68 03/01/2008 2,000,000.00 2,095,490.00 2,000,000.00 2,930,952.50 0.00 2,465,476.25 0.00 2,465,476.25 2,203,083.35 09/01/2008 0.00 0.00 0.00 850,952.50 0.00 425,476.25 0.00 425,476.25 373,663.39 03/01/2009 2,455,000.00 2,672,832.15 2,455,000.00 3,305,952.50 0.00 2,880,476.25 0.00 2,880,476.25 2,486,249.17 09/01/2009 0.00 0.00 0.00 728,202.50 0.00 364,101.25 0.00 364,101.25 308,871.36 03/01/2010 2,525,000.00 2,764,521.50 2,525,000.00 3,253,202.50 0.00 2,889,101.25 0.00 2,889,101.25 2,408,759.06 ' 09/01/2010 0.00 0.00 0.00 601,952.50 0.00 300,976.25 0.00 300,976.25 246,625.48 03/01/2011 1,790,000.00 1,968,910.50 1,790,000.00 2,391,952.50 0.00 2,090,976.25 0.00 2,090,976.25 1,683,952.92 09/01/2011 0.00 0.00 0.00 512,452.50 0.00 256,226.25 0.00 256,226.25 202,805.43 03/01/2012 1,835,000.00 2,023,326.05 1,835,000.00 2,347,452.50 0.00 2,091,226.25 0.00 2,091,226.25 1,626,792.32 09/01/2012 0.00 0.00 0.00 420,702.50 0.00 210,351.25 0.00 210,351.25 160,824.17 03/01/2013 1,875,000.00 1,902,862.50 1,875,000.00 2,295,702.50 0.00 2,085,351.25 0.00 2,085,351.25 1,566,969.54 09/01/2013 0.00 0.00 0.00 350,390.00 0.00 175,195.00 0.00 175,195.00 129,383.28 03/01/2014 1,735,000.00 1,737,322.00 1,735 000.00 6,190 390.00 0.00 1,910 195.00 0.00 6,015,195.00 4,365,975.50 09101/2014 0.00 0.00 0.00 179,006.25 0.00 143,381.25 0.00 35,625.00 25,413.33 03/01/2015 1,900,000.00 1,900,000.00 1,900,000.00 2,079,006.25 0.00 2,043,381.25 0.00 1,935,625.00 1,357,072.51 09/01/2015 0.00 0.00 0.00 107,756.25 0.00 107,756.25 0.00 0.00 0.00 03/01/2016 2,000,000.00 2,227,520.00 2,000,000.00 107,756.25 0.00 2,107,756.25 0.00 0.00 0.00 09/01/2016 0.00 0.00 0.00 55,256.25 0.00 55,256.25 0.00 0.00 0.00 03/01/2017 2,105,000.00 2,330,592.85 2,105,000.00 55,256.25 0.00 2,160,256.25 0.00 0.00 0.00 Totals 20,640,000.00 0.00 20,640,000.00 12,374,015.00 + W 0.00 27,843,415.00 0.00 5,170,600.00 -68,216.37 Plus PV of Bond Insurance.......... 68,216.37 0.00 (1)--Adjustments to cash flow are based on the following"yield to call'optional redemption schedule: NEW2004REF••Call the 03/01/2016 maturity on 03/0112014 @ 100.000 NEW2004REF--Call the 03/01/2017 maturity on 03/01/2014 @ 100.000 BEAUMONT CITY:AGGNEW Prepared by:RBC Dain Rauscher--Houston,Texas 1110212004 @ 12:15 v7.03 Page-7 ERIN Analy ics November 1, 2004 Mark Peroutka Grant Thornton Re: City of Beaumont—Allocation of the Series 1996 New Money and Refunding Bonds. The Series 1996 Bonds were dated 1/1/1996. Mark, According to the KPMG verification report(dated 2/22/1996) for the Series 1996 multi- purpose refunding and new money bond issue the dollars spent for the escrow was $15,825,298.90 and the deposit to the project fund was$15,843,500.00. The percentage of the new money is calculated as follows: 15,843,500 New Money Percentage = -------------------------------- 15,843,500+ 15,825,298.90 New Money Percentage = 50.02873664% Mike O'Hara (979) 278-3294 Section 7 i L No. 7 CERTIFICATE OF ESCROW AGENT RELATING TO AUTHORITY OF OFFICERS AND SIGNATURE IDENTIFICATION I, the undersigned officer of JPMORGAN CHASE BANK (the 'Bank"), do hereby execute and deliver this certificate for the benefit of the Attorney General of the State of Texas and the purchasers of, and all other persons interested in the validity of, the $20,640,000 The City of Beaumont,Texas, General Obligation Refunding Bonds, Series 2004, and I do hereby certify as follows: 1. That I am the duly chosen, qualified and acting officer of the Bank for the office shown beneath my signature and I am duly authorized to execute and deliver this Certificate. 2. That attached as Exhibit "A" to this Certificate is a Secretary's Certificate of the Bank relating to the corporate authority of the Bank to enter into Escrow Agreements, Bond Registrar, Paying Agency and Transfer Agency Agreements and similar types of agreements in connection with the issuance of the Bonds and designating the officers of the Bank authorized to execute such agreements. 3. That the following are duly elected, qualified and acting officers of the Bank having the authority to act for and in the name of the Bank as set forth in Exhibit "A" and that the signatures set opposite their names are their true and correct signatures: i NAME TITLE SIGNATURE Vice Presiden", IN WITNESS WHEREOF, I have hereunto set my hand and affixed the corporate seal of the Bank as of the Z day of V p C Q 4A Qr 92004. JPMorga has Ban >�r e By ` Its: A PRE IDENT' ATTEST: By: Its: (SEAL) -2- EXHIBIT "A" SECRETARY'S CERTIFICATE See attached. Section 8 BOND PURCHASE AGREEMENT $20,640,000 CITY OF BEAUMONT,TEXAS GENERAL OBLIGATION REFUNDING BONDS, SERIES 2004 November 2,2004 Mayor and City Council City of Beaumont,Texas 801 Main Street Beaumont,Texas 77704 The undersigned, First Southwest Company on behalf of itself and Morgan Keegan& Company, Inc., Estrada Hinojosa&Company, Inc., and Southwest Securities, Inc. (collectively,the"Underwriters") offers to enter into the following agreement (this "Agreement") with the City of Beaumont, Texas (the "Issuer") which, upon the Issuer's written acceptance of this offer, will be binding upon the Issuer and upon the Underwriters. This offer is made subject to the Issuer's written acceptance hereof on or before 10:30 p.m. Central Standard Time on November 2, 2004 and, if not so accepted, will be subject to withdrawal by the Underwriters upon notice delivered to the Issuer at any time prior to the acceptance hereof by the Issuer. Terms not otherwise defined in this Agreement shall have the same meanings set forth in the Ordinance(as defined herein)or in the Official Statement(as defined herein). 1. Purchase and Sale of the Bonds. Subject to the terms and conditions and in reliance upon the representations,warranties and agreements set forth herein,the Underwriters hereby agree to purchase from the Issuer, and the Issuer hereby agrees to sell and deliver to the Underwriters, all,but not less than all, of the Issuer's $20,640,000 General Obligation Refunding Bonds, Series 2004 (the "Bonds"). Inasmuch as this purchase and sale represents a negotiated transaction,the Issuer understands, and hereby confirms, that the Underwriters are not acting as a fiduciary of the Issuer, but rather are acting solely in their capacity as Underwriters for their own account. The Underwriters have been duly authorized to execute this Agreement and to act hereunder. The principal amount of the Bonds to be issued, the dated date therefor, the maturities, sinking fund and optional redemption provisions and interest rates per annum are set forth in Schedule I hereto. The Bonds shall be as described in, and shall be issued and secured under and pursuant to the provisions of an Ordinance adopted by the Issuer on November 2,2004(the"Ordinance"). The purchase price for the Bonds shall be $21,931,347.15 (representing the par amount of the Bonds, less an underwriters' discount of $118,680.00, plus a net original issue premium of $1,410,027.15),plus accrued interest on the Bonds to the date of Closing(as defined herein). 2. Public Offerin>?. The Underwriters agree to make a bona fide public offering of all of the Bonds at a price not to exceed the public offering price set forth on the cover of the Official Statement and may subsequently change such offering price without any requirement of prior notice. The Underwriters may offer and sell Bonds to certain dealers (including dealers depositing Bonds into investment trusts) and others at prices lower than the public offering price stated on the cover of the Official Statement. 1874867 2.DOC 3. The Official Statement. (a) Attached hereto as Exhibit A is either a draft of the final Official Statement or a copy of the Preliminary Official Statement dated October 27, 2004 (the "Preliminary Official Statement"), including the cover page and Appendices thereto,of the Issuer relating to the Bonds. Such draft of the final Official Statement or copy of the Preliminary Official Statement, as amended to reflect the changes marked or otherwise indicated on Exhibit A hereto, is hereinafter called the"Official Statement." (b) The Preliminary Official Statement has been prepared for use in connection with the public offering, sale and distribution of the Bonds by the Underwriters. The Issuer hereby represents and warrants that the Preliminary Official Statement was deemed final by the Issuer as of its date, except for the omission of such information which is dependent upon the final pricing of the Bonds for completion, all as permitted to be excluded by Section (b)(1) of Rule 15c(2)-12 under the Securities Exchange Act of 1934(the"Rule"). (c) The Issuer hereby authorizes the Official Statement and the information therein contained to be used by the Underwriters in connection with the public offering and the sale of the Bonds. The Issuer consents to the use by the Underwriters prior to the date hereof of the Preliminary Official Statement in connection with the public offering of the Bonds. The Issuer shall provide, or cause to be provided, to the Underwriters, as soon as practicable after the date of the Issuer's acceptance of this Agreement (but, in any event, not later than within seven business days after the Issuer's acceptance of this Agreement and in sufficient time to accompany any confirmation that requests payment from any customer), copies of the Official Statement which is complete as of the date of its delivery to the Underwriters in such quantity as the Underwriters shall request in order for the Underwriters to comply with Section(b)(4)of the Rule and the rules of the Municipal Securities Rulemaking Board. (d) If, after the date of this Agreement to and including the date the Underwriters are no longer required to provide an Official Statement to potential customers who request the same pursuant to the Rule (the earlier of(i) 90 days from the "end of the underwriting period" (as defined in the Rule) and (ii) the time when the Official Statement is available to any person from a nationally recognized municipal securities repository,but in no case less than 25 days after the"end of the underwriting period" for the Bonds), the Issuer becomes aware of any fact or event which might or would cause the Official Statement, as then supplemented or amended,to contain any untrue statement of a material fact or to omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, or if it is necessary to amend or supplement the Official Statement to comply with law, the Issuer will notify the Underwriters(and for the purposes of this clause provide the Underwriters with such information as it may from time to time request), and if, in the opinion of the Underwriters, such fact or event requires preparation and publication of a supplement or amendment to the Official Statement, the Issuer will forthwith prepare and furnish, at the Issuer's own expense(in a form and manner approved by the Underwriters), a reasonable number of copies of either amendments or supplements to the Official Statement so that the statements in the Official Statement as so amended and supplemented will not, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading or so that the Official Statement will comply with law. If such notification shall be subsequent to the Closing, the Issuer shall furnish such legal opinions, certificates, instruments and other documents as the Underwriters may deem necessary to evidence the truth and accuracy of such supplement or amendment to the Official Statement. (e) The Underwriters hereby agree to timely file the Official Statement with a nationally recognized municipal securities information repository. Unless otherwise notified in writing by the Underwriters, the Issuer can assume that the "end of the underwriting period" for purposes of the Rule is the date of the Closing. 1874867 2.DOC -2- (f) In connection with the execution of this Agreement,the Underwriters will deliver to the Issuer a corporate check payable to the Issuer in the amount of $123,650, as security for the performance by the Underwriters of their obligations to accept and pay for the Bonds at the Closing (described below) in accordance with the provisions of this Agreement. Such check shall be held by the Issuer uncashed until the Closing and at the Closing shall be returned to the Underwriters upon receipt by or on behalf of the Issuer of the Purchase Price for the Bonds. In the event the Issuer does not accept this offer agreed to by the undersigned, or upon its failure to deliver the Bonds at the Closing, or if it shall be unable to satisfy the conditions to the obligations of the Underwriters contained in this Agreement, or if such obligations shall be terminated for any reason permitted by this Agreement, such check shall be immediately returned to the Underwriters. In the event that the Underwriters fail(other than for a reason permitted under this Agreement) to accept and pay for the Bonds at the Closing, such check shall be retained and may be cashed by the Issuer as and for full liquidated damages for such failure and for any and all defaults hereunder on the part of the Underwriters, and the cashing of such check and retention of such proceeds shall constitute a full release and discharge of all claims and rights hereunder against the Underwriters. 4. Representations. Warranties, and Covenants of the Issuer. The Issuer hereby represents and warrants to and covenants with the Underwriters that: (a) The Issuer is a political subdivision and municipal corporation of the State of Texas (the "State"), organized and existing as such under the Constitution and laws of the State. The Issuer is authorized by the provisions of Chapter 1207,Texas Government Code, as amended(the"Act"), among other things, (i) to enter into, execute and deliver this Agreement and the Ordinance and all documents required hereunder and thereunder to be executed and delivered by the Issuer(this Agreement and the Ordinance are hereinafter referred to as the"Issuer Documents"), (ii)to sell, issue and deliver the Bonds to the Underwriter as provided herein, and (iii) to carry out and consummate the transactions contemplated by the Issuer Documents and the Official Statement, and the Issuer has complied, and will at the Closing be in compliance in all respects,with the terms of the Act and the Issuer Documents as they pertain to such transactions; (b) By all necessary official action of the Issuer prior to or concurrently with the acceptance hereof,the Issuer has duly authorized all necessary action to be taken by it for(i)the adoption of the Ordinance and the issuance and sale of the Bonds, (ii)the approval, execution and delivery of, and the performance by the Issuer of the obligations on its part contained in, the Bonds and the Issuer Documents and (iii) the consummation by it of all other transactions contemplated by the Official Statement, and the Issuer Documents and any and all such other agreements and documents as may be required to be executed, delivered and/or received by the Issuer in order to carry out, give effect to, and consummate the transactions contemplated herein and in the Official Statement; (c) The Issuer Documents constitute legal, valid and binding obligations of the Issuer, enforceable in accordance with their respective terms, subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws and principles of equity relating to or affecting the enforcement of creditors' rights; the Bonds, when issued, delivered and paid for in accordance with the Ordinance and this Agreement,will constitute legal, valid and binding obligations of the Issuer entitled to the benefits of the Ordinance and enforceable in accordance with their terms, subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws and principles of equity relating to or affecting the enforcement of creditors' rights;upon the issuance, authentication and delivery of the Bonds as aforesaid, the Ordinance will provide, for the benefit of the holders, from time to time, of the Bonds, the legally valid and binding pledge it purports to create as set forth in the Ordinance; 1874867 2.DOC -3- (d) The Issuer is not in breach of or default in any material respect under any applicable constitutional provision, law or administrative regulation of the State of Texas or the United States or any applicable judgment or decree or any loan agreement, indenture, bond, note, resolution, agreement or other instrument to which the Issuer is a party or to which the Issuer is or any of its property or assets are otherwise subject, and no event has occurred and is continuing which constitutes or with the passage of time or the giving of notice,or both,would constitute a default or event of default by the Issuer under any of the foregoing; and the execution and delivery of the Bonds and the Issuer Documents, and the adoption of the Ordinance and compliance with the provisions on the Issuer's part contained therein, will not conflict with or constitute a breach of or default under any constitutional provision, administrative regulation,judgment, decree, loan agreement, indenture, bond, note, resolution, agreement or other instrument to which the Issuer is a party or to which the Issuer is or to which any of its property or assets are otherwise subject,nor will any such execution,delivery,adoption or compliance result in the creation or imposition of any lien, charge or other security interest or encumbrance of any nature whatsoever upon any of the property or assets of the Issuer to be pledged to secure the Bonds or under the terms of any such law,regulation or instrument, except as provided by the Bonds and the Ordinance; (e) Except for the approval of the Bonds by the Attorney General of the State of Texas and the registration thereof by the Comptroller of Public Accounts of the State of Texas, all authorizations, approvals, licenses, permits, consents and orders of any governmental authority, legislative body,board, agency or commission having jurisdiction of the matter which are required for the due authorization of, which would constitute a condition precedent to, or the absence of which would materially adversely affect the due performance by the Issuer of its obligations under the Issuer Documents, and they have been duly obtained, except for such approvals, consents and orders as may be required under the Blue Sky or securities laws of any jurisdiction in connection with the offering and sale of the Bonds; (f) The Bonds and the Ordinance conform to the descriptions thereof contained in the Official Statement under the caption"THE BONDS", and the proceeds of the sale of the Bonds will be applied generally as described in the Official Statement under the caption"THE BONDS—Sources and Uses of Funds"; (g) There is no litigation, action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, government agency, public board or body, pending or, to the best knowledge of the Issuer after due inquiry, threatened against the Issuer, affecting the existence of the Issuer or the titles of its officers to their respective offices, or affecting or seeking to prohibit, restrain or enjoin the sale, issuance or delivery of the Bonds, or the collection of taxes pledged to the payment of principal of and interest on the Bonds, or the construction or operation of any project financed with the proceeds of the Bonds pursuant to the Ordinance or in any way contesting or affecting the validity or enforceability of the Bonds, the Issuer Documents, or contesting the exclusion from gross income of interest on the Bonds for federal income tax purposes, or contesting in any way the completeness or accuracy of the Preliminary Official Statement or the Official Statement or any supplement or amendment thereto, or contesting the powers of the Issuer or any authority for the issuance of the Bonds,the adoption of the Ordinance or the execution and delivery of the Issuer Documents,nor,to the best knowledge of the Issuer, is there any basis therefor, wherein an unfavorable decision, ruling or finding would materially adversely affect the validity or enforceability of the Bonds or the Issuer Documents; (h) As of the date thereof and with respect to the Issuer, the Preliminary Official Statement did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made,not misleading; 1874867 2.DOC -4- (i) At the time of the Issuer's acceptance hereof and(unless the Official Statement is amended or supplemented pursuant to paragraph (d) of Section 3 of this Agreement) at all times subsequent thereto during the period up to and including the date of Closing, the Official Statement does not and will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein,in light of the circumstances under which they were made,not misleading; 0) If the Official Statement is supplemented or amended pursuant to paragraph (d) of Section 3 of this Agreement, at the time of each supplement or amendment thereto and (unless subsequently again supplemented or amended pursuant to such paragraph) at all times subsequent thereto during the period up to and including the date of Closing, the Official Statement as so supplemented or amended will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made,not misleading; (k) The Issuer will apply, or cause to be applied, the proceeds from the sale of the Bonds as provided in and subject to all of the terms and provisions of the Ordinance and not take or omit to take any action which action or omission will adversely affect the exclusion from gross income for federal income tax purposes of the interest on the Bonds; (1) The Issuer will furnish such information and execute such instruments and take such action in cooperation with the Underwriters as the Underwriters may reasonably request (A) to (i) qualify the Bonds for offer and sale under the Blue Sky or other securities laws and regulations of such states and other jurisdictions in the United States as the Underwriters may designate and(ii)determine the eligibility of the Bonds for investment under the laws of such states and other jurisdictions and (B) to continue such qualifications in effect so long as required for the distribution of the Bonds (provided, however, that the Issuer will not be required to qualify as a foreign corporation or to file any general or special consents to service of process under the laws of any jurisdiction)and will advise the Underwriters immediately of receipt by the Issuer of any notification with respect to the suspension of the qualification of the Bonds for sale in any jurisdiction or the initiation or threat of any proceeding for that purpose; (m) The financial statements of, and other financial information regarding, the Issuer included in the Official Statement fairly present the financial position and results of the Issuer as of the dates and for the periods therein set forth. Prior to the Closing, there will be no adverse change of a material nature in such financial position, results of operations or condition, financial or otherwise, of the Issuer. The Issuer is not a party to any litigation or other proceeding pending or, to its knowledge, threatened which, if decided adversely to the Issuer, would have a materially adverse effect on the financial condition of the Issuer; (n) Prior to the Closing the Issuer will not offer or issue any bonds, notes or other obligations for borrowed money or incur any material liabilities, direct or contingent, payable from or secured by any of the revenues or assets which will secure the Bonds without the prior approval of the Underwriters; and (o) Any certificate, signed by any official of the Issuer authorized to do so in connection with the transactions contemplated by this Agreement, shall be deemed a representation and warranty by the Issuer to the Underwriters as to the statements made therein. 5. Closing. (a) At 10:00 a.m. Central Standard Time, on December 2, 2004, or at such other time and date as shall have been mutually agreed upon by the Issuer and the Underwriters (the "Closing"), the Issuer will, subject to the terms and conditions hereof, deliver the Bonds to the 1874867 2.DOC -5- Underwriters duly executed and authenticated, together with the other documents hereinafter mentioned, and the Underwriters will, subject to the terms and conditions hereof, accept such delivery and pay the purchase price of the Bonds as set forth in Section 1 of this Agreement by a certified or bank cashier's check or checks or wire transfer payable in immediately available funds to the order of the Issuer. Payment for the Bonds as aforesaid shall be made at the offices of Bond Counsel, or such other place as shall have been mutually agreed upon by the Issuer and the Underwriters. Upon receipt of such payment, the Issuer immediately shall return to the Underwriters the good faith check described within Section 3(f) herein. (b) Delivery of the Bonds in definitive form shall be made to The Depository Trust Company("DTC"), or to the Paying Agent/Registrar pursuant to DTC's FAST System. The Bonds shall be prepared and delivered as fully registered bonds in authorized denominations thereof, shall be registered in the name of Cede&Co., all as provided in the Ordinance,and shall be made available to the Underwriters at least one business day before Closing for purpose of inspection. 6. Closing Conditions. The Underwriters have entered into this Agreement in reliance upon the representations, warranties and agreements of the Issuer contained herein, and in reliance upon the representations, warranties and agreements to be contained in the documents and instruments to be delivered at the Closing and upon the performance by the Issuer of its obligations hereunder, both as of the date hereof and as of the date of the Closing. Accordingly, the Underwriters' obligations under this Agreement to purchase, to accept delivery of and to pay for the Bonds shall be conditioned upon the performance by the Issuer of its obligations to be performed hereunder and under such documents and instruments at or prior to the Closing, and shall also be subject to the following additional conditions, including the delivery by the Issuer of such documents as are enumerated herein, in form and substance reasonably satisfactory to the Underwriters: (a) The representations and warranties of the Issuer contained herein shall be true, complete and correct on the date hereof and on and as of the date of the Closing, as if made on the date of the Closing; (b) The Issuer shall have performed and complied with all agreements and conditions required by this Agreement to be performed or complied with by it prior to or at the Closing; (c) At the time of the Closing, (i) the Issuer Documents and the Bonds shall be in full force and effect in the form heretofore approved by the Underwriters and shall not have been amended, modified or supplemented, and the Official Statement shall not have been supplemented or amended, except in any such case as may have been agreed to by the Underwriters, and(ii) all actions of the Issuer required to be taken by the Issuer shall be performed in order for Bond Counsel and Counsel to the Underwriters to deliver their respective opinions referred to hereafter; (d) At the time of the Closing, all official action of the Issuer relating to the Bonds and the Issuer Documents shall be in full force and effect and shall not have been amended, modified or supplemented; (e) At or prior to the Closing, the Ordinance shall have been duly executed and delivered by the Issuer and the Issuer shall have duly executed and delivered and the Registrar shall have duly authenticated the Bonds; (f) At the time of the Closing, there shall not have occurred any change or any development involving a prospective change in the project to be financed with the proceeds of the Bonds, in the condition, financial or otherwise, or in the revenues or operations of the Issuer, from that set forth 1874867 2.DOC -6- in the Official Statement that in the judgment of the Underwriters is material and adverse and that makes it, in the judgment of the Underwriters, impracticable to market the Bonds on the terms and in the manner contemplated in the Official Statement; (g) The Issuer shall not have failed to pay principal or interest when due on any of its outstanding obligations for borrowed money; (h) All steps to be taken and all instruments and other documents to be executed, and all other legal matters in connection with the transactions contemplated by this Agreement, shall be reasonably satisfactory in legal form and effect to the Underwriters; (i) At or prior to the Closing,the Underwriters shall have received copies of each of the following documents: (1) The Official Statement, and each supplement or amendment thereto, if any; (2) The Ordinance with such supplements or amendments as may have been agreed to by the Underwriters, which Ordinance will include an agreement by the Issuer to provide certain periodic information and notices of material events in accordance with the Rule as described in the Official Statement under "CONTINUING DISCLOSURE OF INFORMATION;" (3) The approving opinion of Bond Counsel with respect to the Bonds, in substantially the form attached to the Official Statement; (4) a supplemental opinion of Bond Counsel addressed to the Underwriters, substantially to the effect that: (i) the Ordinance has been duly adopted and is in full force and effect; (ii) the Bonds are exempted securities under the Securities Act of 1933, as amended (the "1933 Act"), and the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act") and it is not necessary, in connection with the offering and sale of the Bonds, to register the Bonds under the 1933 Act or to qualify the Ordinance under the Trust Indenture Act; and (iii) the information appearing in the Official Statement under the captions or subcaptions "THE BONDS" (except for the subsections captioned "Book- Entry-Only System"and"Sources and Uses of Funds"),"CONTINUING DISCLOSURE OF INFORMATION" (except the subsection captioned "Compliance With Prior Undertakings"), and "LEGAL MATTERS" fairly summarizes the procedures and documents referred to therein and is correct as to matters of law. (5) An opinion, dated the date of the Closing and addressed to the Underwriters,of counsel for the Underwriters,to the effect that: (i) the Bonds are exempt securities under the 1933 Act and the Trust Indenture Act and it is not necessary, in connection with the offering and sale of the 1874867 2.DOC -7- Bonds,to register the Bonds under the 1933 Act and the Ordinance need not be qualified under the Trust Indenture Act;and (ii) based upon their participation in the preparation of the Official Statement as counsel for the Underwriters and their participation at conferences at which the Official Statement was discussed, but without having undertaken to determine independently the accuracy, completeness or fairness of the statements contained in the Official Statement, such counsel has no reason to believe that the Official Statement contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading (except for any financial, forecast, technical and statistical statements and data included in the Official Statement and in Appendices A and B thereto, and the information regarding DTC and its book-entry system as to which no view need be expressed); (6) A certificate, dated the date of Closing, of the Issuer to the effect that (i) the representations and warranties of the Issuer contained herein are true and correct in all material respects on and as of the date of Closing as if made on the date of Closing; (ii) no litigation or proceeding or tax challenge against it is pending or, to its knowledge, threatened in any court or administrative body nor is there a basis for litigation which would (a) contest the right of the members or officials of the Issuer to hold and exercise their respective positions, (b) contest the due organization and valid existence of the Issuer, (c) contest the validity, due authorization and execution of the Bonds or the Issuer Documents or(d) attempt to limit, enjoin or otherwise restrict or prevent the Issuer from functioning and collecting revenues, including payments on the Bonds pursuant to the Ordinance, and other income, or the levy or collection of the taxes pledged or to be pledged to pay the principal of and interest on the Bonds, or the pledge thereof; (iii) the Ordinance of the Issuer authorizing the execution, delivery and/or performance of the Official Statement,the Bonds and Issuer Documents has been duly adopted by the Issuer,is in full force and effect and has not been modified, amended or repealed, and(iv)to the best of its knowledge, no event affecting the Issuer has occurred since the date of the Official Statement which should be disclosed in the Official Statement for the purpose for which it is to be used or which it is necessary to disclose therein in order to make the statements and information therein, in light of the circumstances under which they were made,not misleading in any material respect as of the time of Closing, and the information contained in the Official Statement is correct in all material respects and, as of the date of the Official Statement did not, and as of the date of the Closing does not, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements made therein, in the light of the circumstances under which they were made,not misleading; (7) A certificate of the Issuer in form and substance satisfactory to Bond Counsel and counsel to the Underwriters(a)setting forth the facts,estimates and circumstances in existence on the date of the Closing, which establish that it is not expected that the proceeds of the Bonds will be used in a manner that would cause the Bonds to be"arbitrage bonds"within the meaning of Section 148 of the Internal Revenue Code of 1986,as amended(the"Code"),and any applicable regulations (whether final, temporary or proposed) issued pursuant to the Code, and (b) certifying that to the best of the knowledge and belief of the Issuer there are no other facts, estimates or circumstances that would materially change the conclusions, representations and expectations contained in such Bonds; (8) Any other certificates and opinions required by the Ordinance for the issuance thereunder of the Bonds; 1874867 2.DOC -8- (9) Evidence satisfactory to the Underwriters that the Bonds have been rated "AAA" by Standard & Poor's and "Aaa" by Moody's Investors Service, Inc., and that such ratings are in effect as of the date of Closing; (10) A copy of a special report prepared by the independent certified public accountants Grant Thornton LLP, addressed to the Issuer, Bond Counsel and the Underwriters, verifying the arithmetical computations of the adequacy of the maturing principal and interest on the escrowed securities and uninvested cash on hand under the Escrow Agreement to pay, when due, the principal of and interest on the Bonds and the computation of the yield with respect to such Bonds; (11) The Escrow Agreement, executed by the Issuer and the Escrow Agent; (12) A copy of the municipal bond insurance policy insuring payment of principal of and interest on the Bonds, issued by Financial Security Assurance Inc. ("FSA"), together with an opinion of counsel to FSA, in form and substance satisfactory to the Underwriters; (13) The approving opinion of the Attorney General of the State of Texas with respect to the Bonds; (14) The registration certificate of the Comptroller of the State of Texas with respect to the Bonds; and (15) Such additional legal opinions, certificates, instruments and other documents as the Underwriters or counsel to the Underwriters may reasonably request to evidence the truth and accuracy, as of the date hereof and as of the date of the Closing, of the Issuer's representations and warranties contained herein and of the statements and information contained in the Official Statement and the due performance or satisfaction by the Issuer on or prior to the date of the Closing of all the respective agreements then to be performed and conditions then to be satisfied by the Issuer. All of the opinions, letters, certificates, instruments and other documents mentioned above or elsewhere in this Agreement shall be deemed to be in compliance with the provisions hereof if, but only if,they are in form and substance satisfactory to the Underwriters. If the Issuer shall be unable to satisfy the conditions to the obligations of the Underwriters to purchase,to accept delivery of and to pay for the Bonds contained in this Agreement, or if the obligations of the Underwriters to purchase,to accept delivery of and to pay for the Bonds shall be terminated for any reason permitted by this Agreement, this Agreement shall terminate and neither the Underwriters nor the Issuer shall be under any further obligation hereunder, except that the respective obligations of the Issuer and the Underwriters set forth in Section 4 hereof shall continue in full force and effect. 7. Termination. The Underwriters shall have the right to cancel its obligation to purchase the Bonds if,between the date of this Agreement and the Closing,the market price or marketability of the Bonds shall be materially adversely affected, in the reasonable judgment of the Underwriters, by the occurrence of any of the following: (a) legislation shall be enacted by or introduced in the Congress of the United States or recommended to the Congress for passage by the President of the United States, or the Treasury Department of the United States or the Internal Revenue Service or any member of the Congress or the 1874867 2.DOC -9- legislature of the State of Texas or favorably reported for passage to either House of the Congress by any committee of such House to which such legislation has been referred for consideration, a decision by a court of the United States or of the State of Texas or the United States Tax Court shall be rendered, or an order,ruling,regulation(final,temporary or proposed),press release, statement or other form of notice by or on behalf of the Treasury Department of the United States, the Internal Revenue Service or other governmental agency shall be made or proposed, the effect of any or all of which would be to impose, directly or indirectly, federal income taxation or State income taxation upon revenues or other income of the general character to be derived by the Issuer pursuant to the Ordinance, or upon interest received on obligations of the general character of the Bonds or, with respect to State taxation, of the interest on the Bonds as described in the Official Statement, or other action or events shall have transpired which may have the purpose or effect, directly or indirectly, of changing the federal income tax consequences of any of the transactions contemplated herein; (b) legislation introduced in or enacted (or ordinance passed) by the Congress or an order, decree, or injunction issued by any court of competent jurisdiction, or an order, ruling, regulation (final,temporary,or proposed),press release or other form of notice issued or made by or on behalf of the Securities and Exchange Commission, or any other governmental agency having jurisdiction of the subject matter, to the effect that obligations of the general character of the Bonds, including any or all underlying arrangements, are not exempt from registration under or other requirements of the 1933 Act, or that the Ordinance is not exempt from qualification under or other requirements of the Trust Indenture Act,or that the issuance, offering, or sale of obligations of the general character of the Bonds, including any or all underlying arrangements, as contemplated hereby or by the Official Statement or otherwise, is or would be in violation of the federal securities law as amended and then in effect; (c) any state blue sky or securities commission or other governmental agency or body shall have withheld registration, exemption or clearance of the offering of the Bonds as described herein, or issued a stop order or similar ruling relating thereto; (d) a general suspension of trading in securities on the New York Stock Exchange or the American Stock Exchange, the establishment of minimum prices on either such exchange, the establishment of material restrictions (not in force as of the date hereof)upon trading securities generally by any governmental authority or any national securities exchange, a general banking moratorium declared by federal, State of New York, or State officials authorized to do so; (e) the New York Stock Exchange or other national securities exchange or any governmental authority, shall impose, as to the Bonds or as to obligations of the general character of the Bonds, any material restrictions not now in force, or increase materially those now in force, with respect to the extension of credit by,or the charge to the net capital requirements of,Underwriters; (f) any amendment to the federal or state Constitution or action by any federal or state court, legislative body, regulatory body, or other authority materially adversely affecting the tax status of the Issuer, its property, income securities(or interest thereon), or the validity or enforceability of the levy of taxes to pay principal of and interest on the Bonds; (g) any event occurring, or information becoming known which, in the judgment of the Underwriters, makes untrue in any material respect any statement or information contained in the Official Statement, or has the effect that the Official Statement contains any untrue statement of material fact or omits 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; 1874867 2.DOC -10- (h) there shall have occurred since the date of this Agreement any materially adverse change in the affairs or financial condition of the Issuer; (i) the United States shall have become engaged in hostilities which have resulted in a declaration of war or a national emergency or there shall have occurred any other outbreak or escalation of hostilities or a national or international calamity or crisis, financial or otherwise, the effect of such outbreak, calamity or crisis on the financial markets of the United States being such as, in the reasonable opinion of the Underwriters, would materially and adversely affect the ability of the Underwriters to market the Bonds; 0) any fact or event shall exist or have existed that, in the Underwriters'judgment, requires or has required an amendment of or supplement to the Official Statement; (k) there shall have occurred any downgrading, or any notice shall have been given of(A) any intended or potential downgrading or(B) any review or possible change that does not indicate a possible upgrade, in the rating accorded any of the Issuer's obligations (including the rating to be accorded the Bonds); and (1) the purchase of and payment for the Bonds by the Underwriters, or the resale of the Bonds by the Underwriters, on the terms and conditions herein provided shall be prohibited by any applicable law, governmental authority, board, agency or commission, unless such prohibition is due to the action or inaction of the Underwriters. 8. Expenses. (a) The Underwriters shall be under no obligation to pay, and the Issuer shall pay, any expenses incident to the performance of the Issuer's obligations hereunder, including, but not limited to (i) the cost of preparation and printing of the Bonds, (ii) the fees and disbursements of Bond Counsel; (iii) the fees and disbursements of the Financial Advisor to the Issuer, and (iv) the fees and disbursements of any other engineers, accountants, and other experts, consultants or advisers retained by the Issuer. (b) The Underwriters shall pay (i) the cost of preparation and printing of this Agreement,the Blue Sky Survey and Legal Investment Memorandum, if any; (ii)all advertising expenses in connection with the public offering of the Bonds; and (iii) all other expenses incurred by them in connection with the public offering of the Bonds, including the fees and disbursements of Counsel to the Underwriters. 9. Notices. Any notice or other communication to be given to the Issuer under this Agreement may be given by delivering the same in writing at City of Beaumont, Texas, 801 Main Street, Beaumont, Texas 77704, Attention: Mayor, and any notice or other communication to be given to the Underwriters under this Agreement may be given by delivering the same in writing to First Southwest Company, 1021 Main Street, Suite 2200,Houston,Texas 77002,Attention: C.Terrell Palmer. 10. Parties in Interest. This Agreement as heretofore specified shall constitute the entire agreement between us and is made solely for the benefit of the Issuer and the Underwriters (including successors or assigns of the Underwriters) and no other person shall acquire or have any right hereunder or by virtue hereof. This Agreement may not be assigned by the Issuer. All of the Issuer's representations, warranties and agreements contained in this Agreement shall remain operative and in full force and effect, regardless of(i) any investigations made by or on behalf of any of the Underwriters; (ii) delivery of and payment for the Bonds pursuant to this Agreement; and (iii) any termination of this Agreement. 1874867 2.DOC -11- 11. Effectiveness. This Agreement shall become effective upon the acceptance hereof by the Issuer and shall be valid and enforceable at the time of such acceptance. 12. Choice of Law. This Agreement shall be governed by and construed in accordance with the law of the State of Texas. 13. Severability. If any provision of this Agreement shall be held or deemed to be, or shall in fact be, invalid, inoperative or unenforceable as applied in any particular case in any jurisdiction or jurisdictions, or in all jurisdictions because it conflicts with any provisions of any Constitution, statute, rule of public policy, or any other reason, such circumstances shall not have the effect of rendering the provision in question invalid, inoperative or unenforceable in any other case or circumstance, or of rendering any other provision or provisions of this Agreement invalid, inoperative or unenforceable to any extent whatever. 14. Business Day. For purposes of this Agreement, "business day"means any day on which the New York Stock Exchange is open for trading. 15. Section Headings. Section headings have been inserted in this Agreement as a matter of convenience of reference only, and it is agreed that such section headings are not a part of this Agreement and will not be used in the interpretation of any provisions of this Agreement. 16. Counterparts. This Agreement may be executed in several counterparts each of which shall be regarded as an original(with the same effect as if the signatures thereto and hereto were upon the same document)and all of which shall constitute one and the same document. 1874867 2.DOC -12- If you agree with the foregoing,please sign the enclosed counterpart of this Agreement and return it to the Underwriters. This Agreement shall become a binding agreement between you and the Underwriters when at least the counterpart of this letter shall have been signed by or on behalf of each of the parties hereto. Very truly yours, FIRST SOUTHWEST COMPANY MORGAN KEEGAN&COMPANY, INC. ESTRADA HINOJOSA&COMPANY, INC. SOUTHWEST SECURITIES,INC. By:FIRST SOUTHWEST COMPANY By: Authorized Officer Accepted and agreed to this 2nd day of November, 2004. CITY OF BEAUMONT, TEXAS B �- Y Name: &i z s Title: Schedule I City of Beaumont, Texas $20,640,000 General Obligation Refunding Bonds, Series 2004 Principal Amount Maturity Date Interest Rate Yield ($) (March 1) (%) (%) 220,000 2006 3.000 1.940 200,000 2007 3.000 2.130 1,000,000 2008 3.000 2.460 1,000,000 2008 5.000 2.460 2,455,000 2009 5.000 2.770 2,525,000 2010 5.000 3.030 1,790,000 2011 5.000 3.220 1,835,000 2012 5.000 3.390 1,875,000 2013 3.750 3.540 1,435,000 2014 3.650 3.650 300,000 2014 3.750 3.650 1,900,000 2015* 3.750 3.750 2,000,000 2016* 5.250 3.780 2,105,000 2017* 5.250 3.860 *Subject to redemption on March 1, 2014 at the option of the City. Section 9 No. BOND REGISTRAR, PAYING AGENCY AND TRANSFER AGENCY AGREEMENT THIS BOND REGISTRAR, PAYING AGENCY AND TRANSFER AGENCY AGREEMENT (the "Agreement"), dated as of this 1st day of November, 2004, by and between The City of Beaumont, Texas [a municipal corporation organized and operating under the Texas Constitution], (hereinafter, with any authorized successor, the "Issuer"), and Wells Fargo Bank, N.A., a national banking association organized and existing under the laws of the United States of America (hereinafter, with any authorized successor, the "Paying Agent"); WITNESSETH : WHEREAS, the Issuer is authorized to issue the $20,640,000 The City of Beaumont, Texas, General Obligation Refunding Bonds, Series 2004 (the "Bonds") in accordance with the Ordinance attached hereto as Exhibit "A" and incorporated herein for all purposes (the"Bond Order'); WHEREAS, the Issuer desires that the Bonds be issued in fully registered form with privileges of transfer and exchange as provided in the Bond Order to assure the exemption from federal income tax of interest thereon pursuant to Section 103 of the Internal Revenue Code of 1986, as amended, and is authorized by Chapter 1203, Texas Government Code Annotated, to issue the Bonds in such form and amount and to provide for the issuance of bonds upon transfer or replacement thereof or in exchange therefor at any place of payment as provided in the Bond Order; WHEREAS, the governing body of the Issuer has authorized the issuance of the Bonds subject to the terms of the Bond Order and, to provide for registration, payment, transfer, exchange, and replacement of the Bonds, the Issuer has authorized the execution and delivery of this Agreement; and WHEREAS, all things have been done which are necessary to make the Bonds, when registered by the Comptroller of Public Accounts of the State of Texas and delivered, the valid obligations of the Issuer and to constitute this Agreement a valid and binding contract in accordance with its terms: NOW, THEREFORE, for and in consideration of the premises and the mutual covenants herein contained, and subject to the conditions herein set forth, the Issuer and the Paying Agent agree as follows: ARTICLE ONE DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION SECTION 1.01. Definitions. For all purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires: A. The terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular. B. All references in this Agreement to "Articles," "Sections" and other subdivisions are to the designated Articles, Sections and other subdivisions of this Agreement as originally executed. C. The words "herein," "hereof' and "hereunder" and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section or other subdivision. 1 "Agreement" means this instrument as originally executed or as it may from time to time be supplemented, modified, or amended by one or more instruments supplemental hereto entered into pursuant to the applicable provisions hereof. "Board" means the governing body of the Issuer. "Board Action" means an official action adopted by the Board as certified by a duly authorized officer thereof. "Bond Order" has the meaning ascribed to such term in the preamble to this Agreement. "Bonds" has the meaning ascribed to such term in the preamble to this Agreement. "Holder" when used with respect to any Bond, means the Person in whose name such Bond is registered in the Bond Register. "Issuer" has the meaning ascribed to such term in the preamble to this Agreement. "Paying Agent" means Wells Fargo Bank, N. A. or any successor paying agent selected in accordance with this Agreement. "Person" means any entity, individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, or government or any governmental agency or political subdivision. "Redemption Date" when used with respect to any Bond to be redeemed means the date fixed for such redemption pursuant to the terms thereof and this Agreement. "Redemption Price" when used with respect to any Bond to be redeemed means the price at which it is to be redeemed pursuant to terms thereof, excluding installments of interest whose Stated Maturity is on or before the Redemption Date. SECTION 1.02. Notices. Any request, demand, authorization, direction, notice, consent, waiver, or other written communication provided or permitted by this Agreement or the Bond Order to be made upon, given or furnished to, or filed with A. the Issuer, shall be sufficient for every purpose hereunder if in writing and mailed, first- class postage prepaid, to the Issuer and received by it at 801 Main Street, Beaumont, Texas 77701 ATTENTION: City Manager, with a copy to be provided to Orgain, Bell & Tucker, L.L.P.; 470 Orleans Street; Beaumont, TX 77701; Attention: Lance Fox or at any other address previously furnished to the Paying Agent in writing by the Issuer Request, 2 B. the Paying Agent, shall be sufficient for every purpose hereunder if in writing and mailed, first-class postage prepaid (and properly referencing this Agreement or the Bonds) to and received by the Paying Agent 1000 Louisiana Street, Suite 640, MAC T5001-061, Houston, Texas 77002, Attention: Trust Department, or any other address previously furnished to the Issuer in writing by the Paying Agent. Where this Agreement provides for notice to Holders of Bonds of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to each Holder, at the address of such Holder as it appears in the bond register. In any case where notice to Holders is given by mail, neither the failure to mail such notice nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to all other Holders. Where this Agreement provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Paying Agent, but such filing is not a condition precedent to the validity of any action taken in reliance upon such waiver. SECTION 1.03. Effect of Headings. The Article and Section headings herein are for convenience only and do not affect the construction hereof. SECTION 1.04. Successors and Assigns. All covenants and agreements in this Agreement by the Issuer or the Paying Agent shall bind their respective successors and assigns. SECTION 1.05. Severability Clause. In case any provision of this Agreement, the Bond Order, or the Bonds or any application thereof shall be invalid, illegal, or unenforceable, the validity, legality, and enforceability of the remaining provisions and applications of this Agreement shall not in any way be affected or impaired thereby. SECTION 1.06. Benefits of Agreement. Nothing in this Agreement or in the Bonds, express or implied, shall give to any Person other than the parties hereto and their successors hereunder, any benefit or any legal or equitable right, remedy, or claim under this Agreement. SECTION 1.07. Governing Law. This Agreement shall be construed in accordance with and governed by the laws of the State of Texas. 3 ARTICLE TWO THE BONDS SECTION 2.01. Form Generally. The Bonds have the title and are in the denominations specified in the Bond Order. The aggregate principal amount of the Bonds which may be authenticated and delivered and outstanding under this Agreement is limited as provided in the Bond Order. SECTION 2.02. Execution, Authentication, Delivery, Dating, Registration, Replacement, Cancellation, Transfer, Exchange, Redemption and Payment of Bonds. The Bonds are to be executed, authenticated, delivered, dated, registered, replaced, cancelled, and subject to transfer, exchange and redemption as provided, and the principal and Redemption Price of and interest on the Bonds is payable to the Persons and in the manner provided, in the Bond Order. ARTICLE THREE RIGHTS AND OBLIGATIONS OF PAYING AGENT SECTION 3.01. Certain Duties and Responsibilities. A. The Paying Agent 1. undertakes to perform only such duties as are specifically set forth in this Agreement and in the Bond Order, and no implied covenants or obligations shall be read into this Agreement or the Bond Order against the Paying Agent, and 2. in the absence of bad faith on its part, may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Paying Agent and conforming to the requirements of this Agreement and the Bond Order, but in the case of any such certificates or opinions which by any provision of this Agreement or the Bond Order are specifically required to be furnished to the Paying Agent, shall be under a duty to examine the same to determine whether or not they conform to the requirements thereof. B. No provision of this Agreement shall be construed to relieve the Paying Agent from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that 1. this Subsection shall not be construed to limit the effect of Subsection A of this Section; and 2. the Paying Agent shall not be liable for any error of judgment made in good faith by any officer thereof, unless it shall be proved that the Paying Agent was negligent in ascertaining the pertinent facts. C. Whether or not therein expressly so provided, every provision of this Agreement relating to the conduct or affecting the liability of or affording protection to the Paying Agent shall be subject to the provisions of this Section. SECTION 3.02. Certain Rights of Paying Agent. Except as otherwise provided in Section 3.01 hereof: 4 A. the Paying Agent may rely and shall be protected in acting or refraining from acting upon any Order, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, coupon, or other paper or document reasonably believed by it to be genuine and to have been signed or presented by the proper party or parties; B. the Paying Agent may consult with legal counsel and the written advice of such counsel or any opinion of counsel shall be full and complete authorization and protection in respect of any action taken, suffered, or omitted by the Paying Agent hereunder in good faith and in reliance thereon; C. the Paying Agent shall not be bound to make any investigation into the facts of matters stated in any Order, certificate, statement, instruments, opinion, report, notice, request, direction, consent, order, bond, coupon, or other paper or document, but the Paying Agent, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Paying Agent shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records, and premises of the Issuer, personally or by agent or attorney; and D. the Paying Agent may execute any of the trusts or powers hereunder or perform any of the duties hereunder either directly or by or through agents or attorneys, and the Paying Agent shall not be responsible for any misconduct or negligence on the part of any agent employed or attorney retained with due care by it. SECTION 3.03. Not Responsible for Recitals. The recitals contained in the Bonds, except for the certificate of authentication on the Bonds, shall be taken as the statements of the Issuer, and the Paying Agent assumes no responsibility for their correctness. SECTION 3.04. May Hold Bonds. The Paying Agent, in its commercial banking or any other capacity, may become the owner or pledgee of Bonds and otherwise deal with the Issuer with the same rights it would have if it were not serving as Paying Agent. SECTION 3.05. Money Deposited with Paying Agent. Money deposited by the Issuer with the Paying Agent for payment of the principal (or Redemption Price, if applicable) of or interest on any Bonds shall be segregated from other funds of the Paying Agent and the Issuer and shall be held in trust for the benefit of the Holders of such Bonds. All money deposited with the Paying Agent hereunder shall be secured in the manner and to the fullest extent required by law for the security of funds of the Issuer. 5 Amounts held by the Paying Agent which represent principal of and interest on the Bonds remaining unclaimed by the owner after the expiration of three years from the date such amounts have become due and payable shall be reported and disposed of by the Paying Agent in accordance with the provisions of Texas law including, to the extent applicable, Title 6 of the Texas Property Code, as amended. The Paying Agent shall have no liability by virtue of actions taken in compliance with this provision. The Paying Agent is not obligated to pay interest on any money received by it hereunder. This Agreement relates solely to money deposited for the purposes described herein, and the parties agree that the Paying Agent may serve as depository for other funds of the Issuer, act as trustee under indentures authorizing other bond transactions of the Issuer, or act in any other capacity not in conflict with its duties hereunder. SECTION 3.06. Compensation and Reimbursement. The Issuer agrees: A. to pay to the Paying Agent from time to time reasonable compensation for all services rendered by it hereunder, which compensation shall be established initially for the Bonds in accordance with the schedule attached as Exhibit"B", which is made a part hereof for all purposes; B. except as otherwise expressly provided herein, to reimburse the Paying Agent upon its request for all reasonable expenses, disbursements, and advances incurred or made by the Paying Agent in accordance with any provisions of this Agreement (including expenses disbursements and advances of its counsel), except to the extent covered by the compensation established pursuant to Subsection A of this Section except any such expense, disbursement, or advance as may be attributable to the negligence or bad faith of the Paying Agent; and C. to and shall, to the full extent permitted by law, indemnify, defend and hold harmless the Paying Agent, together with its officers, directors, agents and employees, from and against any and all claims, losses, damages, causes of action, suits and liability of every kind, including all expenses of litigation, court costs and attorney's fees, incurred without negligence or bad faith on the part of the Paying Agent, arising out of or in connection with the administration or performance of its duties and obligations or the exercise or performance of any of its powers hereunder. SECTION 3.07. Resignation and Removal The Paying Agent may resign from its duties hereunder at any time by giving not less than 30 days' written notice to the Issuer; provided, however, that such resignation shall not become effective until a successor shall have accepted the duties of the Paying Agent hereunder by written instrument. The Paying Agent may be removed from its duties hereunder at any time with or without cause by Board Action designating a successor upon not less than 30 days' notice; provided, however, that no such removal shall become effective until such successor has accepted the duties of the Paying Agent hereunder by written instrument. Upon the effective date of such resignation or removal (or any earlier date designated by the Issuer in case of resignation) the Paying Agent shall, upon payment of all its fees, charges, and expenses then due, transfer and deliver to, or upon the order of, the Issuer all funds, records, and Bonds held by it (except any Bonds owned by the Paying Agent as Holder or pledgee), under this Agreement. If the Paying Agent resigns or is removed, the Issuer shall by Board Action promptly appoint and engage a successor to act in the place of the Paying Agent hereunder, which appointment shall be effective as of the 6 effective date of the resignation or removal of the Paying Agent. Such successor shall immediately give notice of its substitution hereunder in the name and at the expense of the Issuer to its predecessor and to the Holders, which notice shall include the name of the successor to the Paying Agent and the address of its principal office. SECTION 3.08. Merger, Conversion, Consolidation, or Succession. Any corporation into which the Paying Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion, or consolidation to which the Paying Agent shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of the Paying Agent shall be the successor of the Paying Agent hereunder without the execution or filing of any paper or any further act on the part of either of the parties hereto. In case any Bond shall have been registered, but not delivered, by the Paying Agent then in office, any successor by merger, conversion, or consolidation to such authenticating Paying Agent may adopt such registration and deliver the Bond so registered with the same effect as if such successor Paying Agent had itself registered such Bonds. SECTION 3.09. Paying Agent Not a Trustee. This Agreement shall not be construed to require the Paying Agent to enforce any remedy which any Holder may have against the Issuer during any default or event of default under any agreement between any Holder and the Issuer, including the Bond Order or to act as trustee for such Holder. SECTION 3.10. Paying Agent Not Responsible for Bonds. The Paying Agent shall not be accountable for the use of any Bonds or for the use or application of the proceeds thereof. SECTION 3.11. Paying Agent's Funds Not Used. No provision of this Agreement shall require the Paying Agent 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 of powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity satisfactory to it against such risks or liability is not assured to it. The Paying Agent shall in no event be liable to the Issuer, any Holder, or any other Person for any amount due on any Bond from its own funds. SECTION 3.12. Counterparts. This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. 7 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written. The City of Beaumont, Texas ("Issuer") Title: Mayor ATTEST: City Clerk (=;EAL' of WELLS FARGO BANK, N.A. 4 ("Paying Agent") � a� �® By: Name: Deirdre H. Ward Title: Trust Officer ATTEST: ®+ 44 rN --------- U so0 Faith 0''14 G F�re`i 'dent 4fi p 8 EXHIBIT "A" See the certified copy of the Bond Ordinance that is included under Tab of the Transcript of Documents. 9 Wells Fargo Bank Corporate Trust Services 1445 Ross Avenue, 2nd Floor 0' Dallas, Texas 75202 Tel: (214) 668.6450 Fax: (214)777-4086 SCHEDULE OF FEES $209640,000 City of Beaumont, Texas General Obligation Refunding Bonds, Series 2004 To act as PAYING AGENT & REGISTRAR Acceptance Fee: $0.00 Initial Fees as they relate to Wells Fargo Bank acting in the capacity of Paying Agent/Registrar — includes creation and examination of the Paying Agent/Registrar Agreement; acceptance of the appointment; setting up of Paying Agent/Registrar records and accounting records; and coordination of closing. Acceptance Fee payable at time of Paying Agent/Registrar Agreement execution. Annual Administration Fee: $500.00 For ordinary administration services by Paying Agent/Registrar—includes daily routine account management; investment transactions; cash transaction processing in accordance with the agreement; and mailing of trust account statements to all applicable parties.Float credit received by the bank for receiving funds that remain uninvested are deemed part of the Paying Agent's compensation. The Annual Administration fees are payable in advance,with the first installment due at closing. Out of Pocket Expenses: We only charge for out-of-pocket expenses in response to specific tasks assigned by the client. Therefore, we cannot anticipate what specific out-of-pocket items will be needed or what corresponding expenses will be incurred. Possible expenses would be, but are not limited to, express mail and messenger charges, travel expenses to attend closing or other meetings. There are no charges for indirect out-of-pocket expenses. This fee schedule is based upon the assumptions listed above which pertain to the responsibilities and risks involved in Wells Fargo undertaking the role of Paying Agent/Registrar. These assumptions are based on information provided to us as of the date of this fee schedule. Our fee schedule is subject to review and acceptance of the final documents. Should any of the assumptions, duties or responsibilities change, we reserve the right to affirm,modify or rescind our fee schedule. Submitted by: Sherri Owen-November 19,2004 Vice President/Business Development Wells Fargo Bank (214)668-6450 p#29769 Section 10 No. 10 SIGNATURE IDENTIFICATION AND NO-LITIGATION CERTIFICATE THE STATE OF TEXAS § COUNTY OF JEFFERSON § THE CITY OF BEAUMONT § We, the undersigned officers of THE CITY OF BEAUMONT, TEXAS (the "City"), in connection with the issuance and delivery of the following described refunding bonds (the 'Bonds"): THE CITY OF BEAUMONT, TEXAS, GENERAL OBLIGATION REFUNDING BONDS, SERIES 2004, dated November 1, 2004, aggregating $20,640,000, and maturing serially on March 1 in each of the years 2006 through 2017, inclusive, do hereby certify, as of the date set forth below, the following: 1. We officially executed and signed the Bonds by manually signing or causing facsimiles of our manual signatures to be imprinted or lithographed on each of the Bonds, and we hereby adopt such facsimile signatures as our own, respectively, and declare that such facsimile signatures constitute our signatures the same as if we have manually signed each of the Bonds. 2. The Bonds are substantially in the form, and have been duly executed and signed in the manner, prescribed in the ordinance authorizing the issuance of such Bonds. 3. At the time we so executed and signed the Bonds we were, and at the time of executing this certificate we are, the duly chosen, qualified and acting officers authorized to execute the Bonds and execute and deliver this certificate, and we hold the offices set forth below opposite our signatures. 4. No litigation of any nature has been filed or is now pending or threatened, which contests or attacks the validity of the Bonds; which would restrain or enjoin the issuance or delivery of the Bonds; which would restrain or enjoin the levy and/or collection and/or pledge of revenue or funds from which the Bonds are payable, or which would in any other manner affect the provisions made for their payment or security; or which in any manner questions the proceedings or authority concerning the issuance of the Bonds. 5. Neither the corporate existence nor the boundaries of the City are being contested; no litigation has been filed or is now pending which would affect the authority of the officers of the City to issue, execute, and deliver the Bonds or would affect the title of the undersigned to their respective offices; and no authority or proceedings for the issuance, execution or delivery of the Bonds have been repealed, rescinded or revoked. 6. No additional certificates, warrants or other indebtedness have been issued by the City since the date of the City's General Certificate submitted to the Attorney General of the State of Texas in connection with his approval of the Bonds. 7. The seal which has been impressed, or placed in facsimile, upon each of the Bonds is the legally adopted, proper and only official seal of the City, and such official seal is impressed on this certificate. 8. The information contained in the General Certificate dated November 2, 2004, is still true and correct. SIGNED AND SEALED as of e = embgj' Z , 2004. Signatures Title of Office MAYOR, THE CITY OF n • BEAUMONT, TEXAS CITY CLERK, THE CITY OF BEAUMONT, TEXAS (SEAL) l -2- THE STATE OF TEXAS § COUNTY OF JEFFERSON § BEFORE ME, the undersigned Notary Public, on this day personally appeared Evelyn Lord and Rose ,Ann Jones, known to me to be the persons whose names are subscribed to the attached and foregoing instrument, and who executed such instrument in my presence, and who acknowledged to me that such instrument was executed by them for the purposes and in the capacities stated therein. WITNESS MY HAND AND SEAL OF OFFICE this day of November, 2004. NOTARY PUBLIC, STATE OF TEXAS (SEAL) � LANCE FO X NOTARY PUBLIC STATE OF TEXAS M Comm.Expires 10-22.2005 Y —3— Section 11 ATTORNEY GENERAL OF TEXAS GREG ABBOTT December 1, 2004 THIS IS TO CERTIFY that The City of Beaumont,Texas (the "Issuer")has submitted to me The City of Beaumont, Texas, General Obligation Refunding Bonds,Series 2004(the"Bonds"),in the aggregate principal amount of$20,640,000 for approval. The Bonds are dated November 1,2004,numbered R-1 through R-14, and were authorized by an Ordinance of the Issuer passed on November 2, 2004. I have examined the law and such certified proceedings and other papers as I deem necessary to render this opinion. As to questions of fact material to my opinion, I have relied upon representations of the Issuer contained in the certified proceedings and other certifications of public officials furnished to me without undertaking to verify the same by independent investigation. I express no opinion relating to any official statement or any 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: (1) The Bonds have been issued in accordance with law and are valid and binding obligations of the Issuer. (2) In accordance with the provisions of the law,including an Escrow Agreement dated as of November 1, 2004, firm banking arrangements have been made for the discharge and final payment or redemption of the obligations being refunded upon deposit of an amount sufficient to pay said obligations when due. (3) The Bonds are payable from the proceeds of an ad valorem tax levied, within the limits prescribed by law, on all taxable property within the Issuer. Therefore, the Bonds are approved. POST OFFicE Boa 12548, AUSTIN, TEXAS 78711-2548 TEL:(512)463-2100 wWW.0Ac.STA'I1;.'rs.US An Equal Employment Oppor/naity Employer • Priated on Retyeled Paper .The City of Beaumont, Texas, General Obligation Refunding Bonds, Series 2004 - $20,640,000 -Page 2- The Comptroller is instructed that she may register the Bonds without the cancellation of the underlying securities being refunded thereby. CA mey eral of the State of Texas No.42640 Book No.2004-D JCK OFFICE OF COMPTROLLER OF THE STATE OF TEXAS I, Melissa Mora, 11 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 1 st day of December, 2004, 1 signed the name of the Comptroller to the certificate of registration endorsed upon the: The City of Beaumont. Texas, General Obligation Refunding Bonds Series 2004, numbered R-1/R-14, date vember 1 2004, and that in signing the certificate of registration I used the following signat re: IN REOF I have executed is c ate this the 1 st day of December. 2004. I, Carole Keeton Strayhorn, 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 Chapter 403, Subchapter H, Government Code, with authority to sign my name to all certificates of registration, and/or cancellation of bonds required by law to be registered and/or cancelled by me, and was acting as such on the date first mentioned in this certificate, and that the bonds/certificates described in this certificate have been duly registered in the office of the Comptroller, under Registration Number 69272. GIVEN under my hand and seal of office at Austin, Texas, this the 1 st day of December. 2004. CAROLE KEETON STRAYHORN Comptroller of Public Accounts of the State of Texas OFFICE OF COMPTROLLER OF THE STATE OF TEXAS I, CAROLE KEETON STRAYHORN, Comptroller of Public Accounts of the State of Texas, do hereby certify that the attachment is a true and correct copy of the opinion of the Attorney General approving the: The City of Beaumont. Texas General Obligation Refunding Bonds Series 2004 numbered R-1/R-14, of the denomination of $ various, dated November 1, 2004, as authorized by issuer, interest various percent, under and by authority of which said bonds/certificates were registered electronically in the office of the Comptroller, on the 1 st day of December. 2004 under Registration Number 69272. Given under my hand and seal of office, at Austin, Texas, the 1st day of December, 2004. CAROLE KEETON STRAYHORN Comptroller of Public Accounts of the State of Texas (c) Except for Bond Numbers R-1 through R-14, the following form of authentication certificate shall be printed on each of the Bonds: AUTHENTICATION CERTIFICATE This bond is one of the bonds described in and delivered pursuant to the within-mentioned Ordinance. Wells Fargo Bank,National Association, Registrar By Authorized Signature Date of Authentication: (d) The following form of assignment shall be printed on each of the Bonds: ASSIGNMENT For value received, the undersigned hereby sells, assigns, and transfers unto the within bond 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 NOTICE: Signature must be owner as shown on the face guaranteed by a member firm of this Bond in every of the New York Stock Exchange particular,without any or a commercial bank or trust alteration, enlargement or company. change whatsoever. -13- (e) The following statement of insurance shall be printed on each of the Bonds: STATEMENT OF INSURANCE Financial Security Assurance Inc. ("Financial Security"), New York, New York, has delivered its municipal bond insurance policy with respect to the scheduled payments due of principal of and interest on this Bond to Wells Fargo Bank, N.A., Houston, Texas, or its successor, as paying agent for the Bonds (the "Paying Agent"). Said Policy is on file and available for inspection at the principal office of the Paying Agent and a copy thereof may be obtained from Financial Security or the Paying Agent. 16. Legal Opinions; CUSIP. The approving opinion of Orgain, Bell & Tucker, L.L.P., Beaumont,Texas, Bond Counsel, and CUSIP Numbers may be printed on the Bonds, but errors or omissions in the printing of such opinions or such numbers shall have no effect on the validity of the Bonds. 17. Interest and Sinking Fund; Levy, Assessment and Collection of Taxes. There is hereby established a separate fund of the City to be known as the "Series 2004 General Obligation Refunding Bonds 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, there is hereby levied and there shall be annually assessed and collected in due time, form and manner, and at the same time other City taxes are assessed, levied and collected, in each year, beginning with the current year, a continuing direct annual ad valorem tax upon all taxable property in said City sufficient to pay the current interest on said Bonds as the same becomes due, and to create and provide a sinking fund of not less than two percent (2%) of the original principal amount of the Bonds or of not less than the amount required to pay each installment of the principal of said Bonds as the same matures, whichever is greater, full allowance being made for delinquencies and costs of collection, and said taxes when collected shall be applied to the payment of the interest on and principal of said Bonds and to no other purpose. In addition, interest accrued from the date of the Bonds until their delivery and premium, if any, is to be deposited in such fund. To pay the interest coming due on the Bonds on March 1, 2005, and the interest coming due on September 1, 2005, there is hereby appropriated from current funds on hand, which are certified to be on hand and available for such purpose, an amount sufficient to pay such interest, and such amount shall be used for no other purpose. 18. Further Proceedings. After the Bonds to be initially issued shall have been executed, it shall be the duty of the Mayor 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 by the Attorney General. 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 initially issued, the -14- Comptroller of Public Accounts (or a deputy lawfully designated in writing to act for the Comptroller) shall manually sign the Comptroller's Registration Certificate prescribed herein to be printed and endorsed on the Bonds to be initially issued, and the seal of said Comptroller shall be impressed, or placed in facsimile, thereon. 19. Sale of Bonds and Bond Insurance. The Bonds are hereby sold and shall be delivered to the Underwriters at a price of$22,012,597.50, representing the principal amount of Bonds of$20,640,000.00, plus accrued interest of$81,250.35, plus a premium of$1,410,027.15, and less an underwriter's discount of$118,680.00, in accordance with the terms of the Purchase Contract 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 do any and all things necessary or desirable to satisfy the conditions set out herein and to provide for the issuance and delivery of the Bonds. The purchase of and payment of the premium for the Municipal Bond Guaranty Insurance Policy in accordance with the terms of the commitment for such insurance presented to the City Council are hereby approved and authorized. All officials and representatives of the City are authorized and directed to execute such documents and to do any and all things necessary, desirable or appropriate to obtain the Municipal Bond Guaranty Insurance Policy, and the printing on the Bonds covered by the Municipal Bond Guaranty Insurance Policy of an appropriate legend regarding such insurance is hereby approved and authorized. 20. Tax Exemption. The City intends that the interest on the Bonds shall be excludable from gross income of the owners thereof for federal income tax purposes pursuant to Sections 103 and 141 through 150 of the Internal Revenue Code of 1986, as amended, (the "Code") and all applicable temporary, proposed and final regulations (the "Regulations") and procedures promulgated thereunder and applicable to the Bonds. For this purpose, the City covenants that it will monitor and control the receipt, investment, expenditure and use of all gross proceeds of the Bonds and take or omit to take such other and further actions as may be required by Sections 103 and 141 through 150 of the Code and the Regulations to cause the interest on the Bonds to be and remain excludable from the gross income, as defined in Section 61 of the Code, of the owners of the Bonds for federal income tax purposes. Without limiting the generality of the foregoing, the City shall comply with each of the following covenants: (a) The City will use all of the proceeds of the Bonds to (i) acquire non- callable obligations of the United States of America(the "Escrowed Securities") sufficient to pay the principal of, premium, if any, and interest on the Refunded Obligations and (ii)to pay the costs of issuing the Bonds except for amounts, if any, described in the Report (as defined in the Escrow Agreement) as the rounding amount and the ending cash balance in the Escrow Fund (as defined in the Escrow Agreement). (b) The City will not directly or indirectly take any action or omit to take any action, which action or omission would cause the Bonds or the Refunded Obligations to constitute"private activity bonds"within the meaning of Section 141(a) of the Code. -15- (c) Principal of and interest on the Bonds will be paid solely from ad valorem taxes collected by the City, investment earnings on such collections, and as available, proceeds of the Bonds. (d) 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 and the Refunded Obligations (to the extent any of such proceeds remain unexpended) will not be used in a manner that would cause the Bonds or the Refunded Obligations or any portion thereof to be "arbitrage bonds" within the meaning of Section 148 of the Code. (e) At all times while the Bonds are outstanding, the City will identify and properly account for all amounts constituting gross proceeds of the Bonds in accordance with the Regulations. The City will monitor the yield on the investments of the proceeds of the Bonds and, to the extent required by the Code and the Regulations, will restrict the yield on such investments to a yield which is not materially higher than the yield on the Bonds. To the extent necessary to prevent the Bonds from constituting "arbitrage bonds," the City will make such payments as are necessary to cause the yield on all yield-restricted nonpurpose investments allocable to the Bonds to be less than the yield that is materially higher than the yield on the Bonds. (f) The City will not take any action or knowingly omit to take any action, if taken or omitted, would cause the Bonds to be treated as "federally guaranteed" obligations for purposes of Section 149(b) of the Code. (g) The City represents that not more than fifty percent (50%) of the proceeds of any new money portion of the Bonds or any new money issue refunded by, the Refunded Obligations was invested in nonpurpose investments (as defined in Section 148(f)(b)(A) of the Code) having a substantially guaranteed yield for four years or more within the meaning of Section 149(g)(3)(A)(ii) of the Code, and the City reasonably expected at the time each issue of the Refunded Obligations was issued that at least eighty-five percent (85%) of the spendable proceeds of the Bonds or the Refunded Obligations would be used to carry out the governmental purpose of such Bonds within the corresponding three-year period beginning on the respective dates of the Bonds or the Refunded Obligations. (h) The City will take all necessary steps to comply with the requirement that certain amounts earned by the City on the investment of the gross proceeds of the Bonds, if any, be rebated to the federal government. Specifically, the City will (i)maintain records regarding the receipt, investment and expenditure of the gross proceeds of the Bonds as may be required to calculate such excess arbitrage profits separately from records of amounts on deposit in the funds and accounts of the City allocable to other obligations of the City or moneys which do not represent gross proceeds of any obligations of the City and retain such records for at least six years after the day on which the last outstanding Bond is discharged, (ii) account for all gross proceeds under a reasonable, consistently applied method of accounting, not employed as an -1b- artifice or device to avoid, in whole or in part, the requirements of Section 148 of the Code, including any specified method of accounting required by applicable Regulations to be used for all or a portion of the gross proceeds, (iii) calculate, at such times as are required by applicable Regulations, the amount of excess arbitrage profits, if any, earned from the investment of the gross proceeds of the Bonds and (iv)timely pay, as required by applicable Regulations, all amounts required to be rebated to the federal government. In addition, the City will exercise reasonable diligence to assure that no errors are made in the calculations required by the preceding sentence and, if such an error is made, to discover and promptly correct such error within a reasonable amount of time thereafter, including payment to the federal government of any delinquent amounts owed to it, including interest thereon and penalty. (i) The City will not indirectly pay any amount otherwise payable to the federal government pursuant to the foregoing requirements to any person other than the federal government by entering into any investment arrangement with respect to the gross proceeds of the Bonds that might result in a reduction in the amount required to be paid to the federal government because such arrangement results in smaller profit or a larger loss than would have resulted if such arrangement had been at arm's length and had the yield on the issue not been relevant to either party. (j) The City will timely file or cause to be filed with the Secretary of the Treasury of the United States the information required by Section 149(e) of the Code with respect to the Bonds on such form and in such place as the Secretary may prescribe. (k) The City will not issue or use the Bonds as part of an "abusive arbitrage device" (as defined in Section 1.148-10(a) of the Regulations). Without limiting the foregoing, the Bonds are not and will not be a part of a transaction or series of transactions that attempts to circumvent the provisions of Section 148 of the Code and the Regulations, by (i) enabling the City to exploit the difference between tax-exempt and taxable interest rates to gain a material financial advantage, or (ii) increasing the burden on the market for tax-exempt obligations. (1) Proper officers of the City charged with the responsibility for issuing the Bonds are hereby directed to make, execute and deliver certifications as to facts, estimates or circumstances in existence as of the Issue Date and stating whether there are facts, estimates or circumstances that would materially change the City's expectations. On or after the Issue Date, the City will take such actions as are necessary and appropriate to assure the continuous accuracy of the representations contained in such certificates. (m) The covenants and representations made or required by this Section are for the benefit of the Bond holders and any subsequent Bond holder, and may be relied upon by the Bondholder and any subsequent Bondholder and bond counsel to the City. (n) In complying with the foregoing covenants, the City may rely upon an unqualified opinion issued to the City by nationally recognized bond counsel that any action by -17- the City or reliance upon any interpretation of the Code or Regulations contained in such opinion will not cause interest on the Bonds to be includable in gross income for federal income tax purposes under existing law. (o) Notwithstanding any other provision of this Ordinance, the City's representations and obligations under the covenants and provisions of this Section shall survive the defeasance and discharge of the Bonds for as long as such matters are relevant to the exclusion of interest on the Bonds from the gross income of the owners for federal income tax purposes. Section 21. Application of Proceeds. The proceeds from the sale of the Bonds in the amount of$22,012,597.50, together with the transfer of the sum of$367,000 from the debt service fund for the Refunded Obligations, shall,promptly upon receipt by the City,be applied as follows: (a) Accrued interest in the amount of$81,250.35 shall be deposited into the Interest and Sinking Fund for the Bonds; (b) To establish the escrow fund to refund the Refunded Obligations as provided in Section 24 below, $22,109,645.58 from the sale of the Bonds shall be deposited with the Escrow Agent pursuant to Section 24 below. (c) $186,216.37 from the sale of the Bonds shall be used to pay the costs of issuing the Bonds, including the premium of$68,216.37 for the Municipal Bond Guaranty Insurance Policy, not later than 90 days after such issuance; and (d) The sum of $2,485.20 from the sale of the Bonds shall be used as a rounding amount and shall be deposited in the Interest and Sinking Fund for the Bonds; and (e) Any proceeds from the Bonds remaining after making all such deposits and payments shall be deposited into the Interest and Sinking Fund. 22. Transfer of Money in Interest and Sinking Funds Maintained for the Refunded Obligations. On the date of delivery of the Bonds, the sum of$367,000.00 contained in the Interest and Sinking Funds for the Refunded Obligations shall be transferred to the Paying Agent and shall be applied as herein provided. 23. Redemption of Refunded Obligations. The City hereby irrevocably calls the following bonds of the City for redemption on the date set forth below, and authorizes and directs notice of such redemption to be given in such form and in such manner as the Mayor, City Manager, City Clerk or any other official of the City may approve: -18- Obligations To Be Redeemed Redemption Date A portion of The City of Beaumont, Texas, Combination Tax&Revenue Certificates of Obligation, Series 1998 Maturities 2008 through 2017, in the principal amounts of$40,000, $500,000, $500,000, $500,000, 500,000, $500,000, $360,000, $1,900,000, $2,005,000, and$2,110,000,respectively March 1,2008 A portion of the City of Beaumont, Texas, Refunding Bonds, Series 1996, Maturities 2008 through 2010, in the principal amounts of$790,000, $780,000 and $785,000,respectively March 1,2007 A portion of the City of Beaumont, Texas Combination Tax&Revenue Certificates of Obligation, Series 1996, Maturities 2008 through 2014 in the principal amounts of$590,000, $610,000, $680,000, $725,000, $775,000, $825,000 and $850,000,respectively March 1,2007 The City of Beaumont, Texas, Combination Tax& Revenue Certificates of Obligation, Series 1995, Maturities 2006 through 2014 in the principal amounts of $500,000, $500,000, $500,000, $500,000, $500,000, $500,000, $500,000, $500,000 and$500,000,respectively March 1, 2005 24. Escrow Agreement. The discharge and defeasance of the Refunded Obligations shall be effectuated pursuant to the terms and provisions of an Escrow Agreement to be entered into by and between the City and JPMorgan Chase Bank, Dallas, 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 which has been designed for the City by RBC Dain Rauscher Inc., and which shall be certified as to mathematical accuracy by Grant Thornton, L.L.P., in the Report, (b) to maximize the City's present value savings and minimize the City's costs of refunding, (c)to comply with all applicable laws and regulations relating to the refunding of the Refunded Obligations and (d) to carry out the other intents and purposes of this Ordinance, and the Mayor is hereby authorized to execute and deliver the 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. -19- 25. Source of Funds Used in Refunding. No money of the City other than proceeds of the Bonds and other than the sum of $367,000.00 from the Interest and Sinking Fund for the Refunded Obligations shall be used to refund the Refunded Obligations. 26. Purchase of Escrowed Securities. To assure the purchase of the Escrowed Securities as described in the Report and in the Escrow Agreement, the Mayor, the City's Finance Officer, and the Escrow Agent are hereby authorized to subscribe for, agree to purchase, and purchase such Escrowed Securities 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. 27. 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 Chapter 551 of the Texas Government Code Annotated,Vernon's 1994, as amended. 28. Official Statement. The Preliminary Official Statement and the Official Statement prepared in the initial offering and sale of the Bonds have been and are hereby authorized, approved and ratified as to form and content. The use of the Preliminary Official Statement and the Official Statement in the reoffering of the Bonds by the Underwriters is hereby approved, authorized and ratified. The proper officials of the City are hereby authorized to execute and deliver a certificate pertaining to the Preliminary Official Statement and the Official Statement as prescribed therein, dated as of the date of payment for and delivery of the Bonds. 29. Registrar. The Registrar, by undertaking the performance of the duties of the Registrar and in consideration of the payment of fees or deposits of money pursuant to this Ordinance and a Paying Agent/Registrar's Agreement, accepts and agrees to abide by the terms of this Ordinance and such Agreement. The City hereby approves the form of the Paying Agent/Registrar's Agreement presented to the City Council and hereby authorizes the Mayor or any other official of the City to execute such agreement on behalf of the City, with such changes and revisions thereto as may be approved by the official executing such agreement. The City covenants that at all times while any Bonds are outstanding, it will provide a bank, trust company, financial institution or other entity duly qualified and authorized to act as Registrar for the Bonds. The City reserves the right to replace the Registrar or its successor at any time on not less than sixty (60) days' written notice to the Registrar, so long as any such notice is effective not less than sixty (60) days prior to the next succeeding principal or interest payment date on the Bonds. If the Registrar is replaced by the City, the new Registrar shall accept the previous Registrar's records and act in the same capacity as the previous 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. Any successor Registrar shall be either a national or state banking institution and a corporation or association organized and doing business under the laws of the -20- United States of America or any State authorized under such laws to exercise trust powers and subject to supervision or examination by Federal or State authority. Each Registrar hereunder, by acting in that capacity, shall be deemed to have agreed to the provisions of this Section. 30. Related Matters. To satisfy in a timely manner all of the City's obligations under this Ordinance, the Mayor, the Mayor Pro Tem, the City Manager, the City Clerk, or 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 issuance of the Bonds, including, without limitation, executing and delivering on behalf of the City all certificates, consents, receipts, requests and other documents as may be reasonably necessary to satisfy the City's obligations under this Ordinance and to direct the application of funds of the City consistent with the provisions hereof. 31. No Personal Liability. No recourse shall be had for payment of the principal of or premium, if any, 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. Severability. If any Section, paragraph, clause or provision of this Ordinance shall for any reason be held to be invalid or unenforceable, the invalidity or unenforceability of such Section, paragraph, clause or provision shall not affect any of the remaining provisions of this Ordinance. 33. Repealer. All orders, resolutions, and ordinances, and parts thereof inconsistent herewith are hereby repealed to the extent of such inconsistency. 34. Additional Obligations. The City undertakes and agrees for the benefit of the holders of the Bonds to provide directly, on or before six months after the end of the City's fiscal year,which fiscal year presently ends on September 30: a. to each nationally recognized municipal securities information repository and to the appropriate state information depository, if any, annual financial information (which may be unaudited) and operating data regarding the City for fiscal years ending on or after January 1, 2004 which annual financial information and operating data shall be of the type included in the following listed sections contained in the Final Official Statement: SELECTED FINANCIAL INFORMATION CITY TAX DEBT(except for"Estimated Overlapping Debt") TAX DATA SELECTED FINANCIAL DATA -21- INVESTMENT AUTHORITY AND INVESTMENT OBJECTIVES OF THE CITY-Current Investments Appendix B b. to each nationally recognized municipal securities information repository and to the appropriate state information depository, if any, audited financial statements for the City for fiscal years ending on or after January 1, 2004, when available, if the City commissions an audit and it is completed by the required time; provided that if audited statements are not commissioned or are not available by the required time, the City will provide unaudited statements when and if they become available; C. in a timely manner, to each nationally recognized municipal securities information repository or to the Municipal Securities Rulemaking Board, and to the appropriate state information depository, if any, notice of any of the following events with respect to the Bonds, if material within the meaning of the federal securities laws to a decision to purchase or sell Bonds: i. Principal and interest payment delinquencies; ii. Non-payment related defaults; iii. Unscheduled draws on debt service reserves reflecting financial difficulties; iv. Unscheduled draws on credit enhancements reflecting financial difficulties; V. Substitution of credit or liquidity providers, or their failure to perform; vi. Adverse tax opinions or events affecting the tax-exempt status of the Bonds; vii. Modifications to rights of Bondholders; viii. Bond calls; ix. Defeasances; X. Release, substitution or sale of property securing repayment of the securities; xi. Rating changes; and d. in a timely manner, to each nationally recognized municipal securities information repository or to the Municipal Securities Rulemaking Board, and to the appropriate state information depository, if any, notice of a failure of the City to provide required annual financial information and operating data, on or before six months after the end of the City's fiscal year. These undertakings and agreements are subject to appropriation of necessary funds and to -22- applicable legal restrictions, if any. The accounting principles pursuant to which the City's financial statements are currently prepared are generally accepted accounting principles set out by the Government Accounting Standards Board, and, subject to changes in applicable law or regulation, such principles will be applied in the future. If the City changes its fiscal year, it will notify each nationally recognized municipal securities information repository and the appropriate state information depository of the change (and of the new fiscal year end) prior to the next date by which the City otherwise would be required to provide annual financial information. The City's obligation to update information and to provide notices of material events shall be limited to the agreements herein. The City shall not be obligated to provide other information that may be relevant or material to a complete presentation of its financial results of operations, condition,prospects and shall not be obligated to update any information that is provided, except as described herein. The City makes no representation or warranty concerning such information or concerning its usefulness to a decision to invest in or sell Bonds at any future date. THE CITY DISCLAIMS ANY CONTRACTUAL OR TORT LIABILITY FOR DAMAGES RESULTING IN WHOLE OR IN PART FROM ANY BREACH, WHETHER NEGLIGENT OR WITHOUT FAULT ON ITS PART, OF ITS CONTINUING DISCLOSURE AGREEMENT OR FROM ANY STATEMENT MADE PURSUANT TO ITS AGREEMENT. HOLDERS OR BENEFICIAL OWNERS OF BONDS MAY SEEK AS THEIR SOLE REMEDY A WRIT OF MANDAMUS TO COMPEL THE CITY TO COMPLY WITH ITS AGREEMENT. No default by the City with respect to its continuing disclosure agreement shall constitute a breach of or default under this Ordinance for purposes of any other provision of this Ordinance. Nothing in this paragraph is intended or shall act to disclaim, waive, or otherwise limit the duties of the City under federal and state securities laws. The City may amend its continuing disclosure obligations and agreement in this Section 34 to adapt to changed circumstances that arise from a change in legal requirements, a change in law, or a change in the identity, nature, status or type of operations of the City, if the agreement, as amended, would have permitted the Underwriters to purchase or sell the Bonds in compliance with SEC Rule 15c2-12, taking into account any amendments or interpretations of such rule to the date of such amendment, as well as such changed circumstances, and either the holders of a majority in aggregate principal amount of the outstanding Bonds consent or any person unaffiliated with the City (such as nationally recognized bond counsel) determines the amendment will not materially impair the interests of the holders and beneficial owners of the Bonds. The City may also amend or repeal the obligations and agreement in this Section 34 if the SEC amends or repeals the applicable provisions of Rule 15c2-12 or a court of final jurisdiction determines that such provisions are invalid, and the City may amend the agreement in its discretion in any other circumstance or manner, but in either case only to the extent that its right to do so would not prevent the Underwriters from lawfully purchasing or reselling the Bonds in the primary offering of the Bonds -23- in compliance with Rule 15c2-12. If the City amends its agreement, it must include with the next financial information and operating data provided in accordance with its agreement an explanation, in narrative form, of the reasons for the amendment and of the impact of any change in the type of information and operating data so provided. The City's continuing obligation to provide annual financial information and operating data and notices of events will terminate if and when the City no longer remains an "obligated person" (as such term is defined in SEC Rule 15c2-12)with respect to the Bonds. [The remainder of this page has intentionally been left blank. Signature page follows.] -24- PASSED AND APPROVED this 2nd day of November, 2004. Mayor THE CITY OF BEAUMONT, TEXAS ATTEST: City Clerk THE CITY OF BEAUMONT,TEXAS (CITY SEAL) w ' ul . 6 tp -25- Section 5 No. 5 ESCROW AGREEMENT THIS ESCROW AGREEMENT (the "Escrow Agreement") dated for convenience November 1, 2004,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 (the "City"), and JPMorgan Chase Bank, a New York banking corporation having a principal corporate trust office in Dallas, Texas, as escrow agent(together with any successor or assign in such capacity,the "Escrow Agent"). WHEREAS, the City has heretofore issued and there remains outstanding the City's Combination Tax & Revenue Certificates of Obligation, Series 1998, the City's Refunding Bonds, Series 1996, the City's Combination Tax & Revenue Certificates of Obligation, Series 1996, and the City's Combination Tax & Revenue Certificates of Obligation, Series 1995 (the "Refunded Obligations"), and the City desires to provide for the refunding of a portion of certain maturities of the Refunded Obligations; and WHEREAS, Chapter 1207, Texas Government Code, as amended (formerly Article 717k, Vernon's Annotated Texas Civil Statutes, as amended), authorizes and empowers the City to issue, sell and deliver refunding bonds and to deposit the proceeds of such bonds, together with other available funds or resources, with any place of payment for the Refunded Obligations in an amount which is sufficient to provide for the payment or redemption of the principal of and interest on the Refunded Obligations; and WHEREAS, the City Council of the City has adopted an ordinance authorizing the issuance of the City's General Obligation Refunding Bonds, Series 2004, in the aggregate principal amount of$20,640,000 (the "Refunding Bonds"), for the purpose, among other things, of providing the funds necessary to pay and refund the Refunded Obligations, thereby providing a net present value 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 payment of the Refunded Obligations; and WHEREAS, the City Council of the City has further determined to effectuate the refunding of the Refunded Obligations 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 financial arrangements for the discharge and final payment or redemption of the Refunded Obligations; NOW, THEREFORE, in consideration of the mutual undertakings, promises and agreements herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and in ordinance to secure the full and timely payment of the principal of and the interest on the Refunded Obligations, the City and the Escrow Agent contract and agree as follows: ARTICLE I DEFINITIONS AND INTERPRETATIONS 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: "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 JPMorgan Chase Bank, 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 Restricted Acquired Obligations and the Other Acquired Obligations purchased with the funds deposited into the Escrow Fund, all as more fully described in the Report. "Paying Agents for the Refunded Obligations" shall mean J.P.Morgan Trust Company with respect to the City's Combination Tax & Revenue Certificates of Obligation, Series 1998, the Ciy's Refunding Bonds, Series 1996, and the City's Combination Tax & Revenue Certificates of Obligation, Series 1996, and any successors thereto, and shall mean The Bank of New York Trust Company,N.A.,with respect to the City's Combination Tax&Revenue Certificates of Obligation, Series 1995. "Refunded Obligation Ordinances" shall mean the City's ordinances authorizing the issuance, sale and delivery of the Refunded Obligations. "Refunded Obligations" shall mean: (a) a portion of the City's Combination Tax & Revenue Certificates of Obligation, Series 1998, maturing on March 1 in the years 2008 through 2017 in the principal amounts of $40,000, $500,000, $500,000, $500,000, 500,000, $500,000, 360,000, $1,900,000, $2,005,000, and $2,110,000, respectively; (b) a portion of the City's Refunding Bonds, Series 1996, maturing on March 1 in the years 2008 through 2010 in the -2- principal amounts of $790,000, $780,000 and $785,000, respectively; (c) a portion of the City's Combination Tax & Revenue Certificates of Obligation, Series 1996, maturing on March 1 in the years 2008 through 2014 in the principal amounts of $590,000, $610,000, $680,000, $725,000, $775,000, $825,000 and $850,000, respectively; and (d) the City's Combination Tax & Revenue Certificates of Obligation, Series 1995,maturing on March 1 in the years 2006 through 2014 in the principal amounts of $500,000, $500,000, $500,000, $500,000, $500,000, $500,000, $500,000, $500,000 and $500,000,respectively. "Refunding Bonds" shall mean the City's General Obligation Refunding Bonds, Series 2004, dated November 1, 2004, in the outstanding aggregate principal amount of$20,640,000. "Refunding Bond Ordinance" shall mean the City's Ordinance adopted November 2, 2004, authorizing the issuance, sale and delivery of the Refunding Bonds. "Report" shall mean the verification report prepared by Grant Thornton LLP, relating to the refunding of the Refunded Obligations, a copy of which is attached hereto as Exhibit"A". "Restricted Acquired Obligations" shall mean the United States Treasury Notes and STRIPS, initially purchased with the proceeds of the Bonds, and United States Treasury Securities - State and Local Government Series at 0%Interest Rate("SLGS"), all as more fully described in the Report. 1.02 Interpretations. The titles and headings of the articles and sections of this Escrow Agreement have been inserted for convenience of reference only and are not to be considered a part hereof and shall not in any way modify or restrict the terms hereof. This Escrow Agreement and all of the terms and provisions hereof shall be liberally construed to effectuate the purposes set forth herein and to achieve the intended purpose of providing for the refunding of the Refunded Obligations in accordance with applicable law. ARTICLE II DEPOSIT OF FUNDS AND ESCROWED SECURITIES 2.01 Deposits with Escrow Agent; Acquisition of Escrowed Securities. On the Escrow Funding Date, the City will deposit, or cause to be deposited, with the Escrow Agent the following: (a) Restricted Acquired Obligations in the principal price of$22,109,644.00,purchased with a portion of the proceeds of the Refunding Bonds; and (b) A beginning cash balance of$1.58. -3- ARTICLE III CREATION AND OPERATION OF ESCROW FUND 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 "City of Beaumont, Texas, General Obligation Refunding Bonds, Series 2004 Escrow Fund", into which will be deposited the cash and Escrowed Securities described in Section 2.01. The Escrowed Securities, all proceeds therefrom and all cash balances from time to time on deposit in the Escrow Fund shall be the property of the Escrow Fund, and shall be applied only in strict conformity with the terms and conditions hereof. The Escrowed Securities, all proceeds therefrom and all cash balances from time to time on deposit in the Escrow Fund are hereby irrevocably pledged to the payment of the principal of and interest on the Refunded Obligations, which payment shall be made by timely transfers to the Paying Agent for the Refunded Obligations of such amounts at such times as are provided in Section 3.02 hereof. When the final transfers have been made to the Paying Agents for the Refunded Obligations for the payment of such principal of and interest on the Refunded Obligations, any balance then remaining in the Escrow Fund shall be transferred to the City, and the Escrow Agent shall thereupon be discharged from any further duties hereunder. 3.02 Payment of Principal of and Interest on Refunded Obligations. (a) The Escrow Agent is hereby irrevocably instructed to transfer to the Paying Agent for the Refunded Obligations 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 Obligations 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 Obligations in accordance with the provisions hereof shall be held by the Paying Agent for the Refunded Obligations as a segregated account for the respective holders of the Refunded Obligations in connection with which such money is held; provided, however, subject to the provisions of Title 6 of the Texas Property Code regarding Unclaimed Property, that money so held remaining unclaimed by the owners of such Refunded Obligations 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. Thereafter, neither the City,the Escrow Agent, the Paying Agents for the Refunded Obligations nor any other person shall be liable or responsible to any holders of such Refunded Obligations for any further payment of such unclaimed money or on account of any such Refunded Obligations. (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 Obligations prior to their scheduled maturities. 3.03 Sufficiency of Escrow Fund. The City represents (based solely upon the Report) that the successive receipts of the principal of and interest on the Escrowed Securities will assure that the cash balance on deposit from time to time in the Escrow Fund will be at all times sufficient -4- to provide money for transfer to the Paying Agents for the Refunded Obligations at the times and in the amounts required to pay the interest on the Refunded Obligations as such interest comes due and to pay the principal of the Refunded Obligations as the Refunded Obligations mature or are redeemed. If any deficiency results from any error in the calculation of the report, the City shall transfer to the Escrow Agent for deposit to the Escrow Fund to be held pursuant to this Escrow Agreement an additional amount of cash or securities sufficient to provide for such deficiency. 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 Obligations; 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 Obligations shall be entitled to the same preferred claim and first lien upon the Escrowed Securities,the proceeds thereof and all other assets of the Escrow Fund 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. ARTICLE IV REDEMPTION OF CERTAIN REFUNDED OBLIGATIONS 4.01 Optional Redemption of Certain Refunded Obligations. The City has irrevocably exercised its option to call for redemption the Refunded Obligations as set forth below. Such optional redemption shall be carried out in accordance with the Ordinance authorizing the issuance of the Refunded Obligations. The Escrow Agent is hereby authorized to provide funds therefor as set forth in Section 3.02(a)hereof. Bonds To Be Redeemed Redemption Date A portion of The City of Beaumont, Texas, Combination Tax&Revenue Certificates of Obligation, Series 1998 Maturities 2008 through 2017, in the principal amounts of$40,000, $500,000, $500,000, $500,000, 500,000, $500,000, 360,000, $1,900,000, $2,005,000, and $2,110,000,respectively March 1,2008 -5- A portion of the City of Beaumont,Texas, Refunding Bonds, Series 1996, Maturities 2008 through 2010,in the principal amounts of$790,000, $780,000 and $785,000,respectively March 1,2007 A portion of the City of Beaumont, Texas Combination Tax&Revenue Certificates of Obligation, Series 1996, Maturities 2008 through 2014 in the principal amounts of$590,000, $610,000, $680,000, $725,000, $775,000, $825,000 and $850,000, respectively March 1,2007 The City of Beaumont,Texas, Combination Tax& Revenue Certificates of Obligation, Series 1995, Maturities 2006 through 2014 in the principal amounts of $500,000, $500,000, $500,000, $500,000, $500,000, $500,000, $500,000, $500,000 and$500,000,respectively March 1,2005 ARTICLE V LIMITATION ON INVESTMENTS 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, except for the purchase of the SLGS as described in the Report. 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 proceeds therefrom to purchase Refunded Obligations 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 new verification report together with a written opinion from a nationally recognized firm of certified public accountants acceptable to the City and the Escrow Agent that such transaction will not cause the amount of money and securities in the Escrow Fund to be reduced below an amount which will be sufficient, when added to the interest to accrue thereon, to provide for the payment of principal and interest on the remaining Refunded Obligations 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. -6- ARTICLE VI RECORDS AND REPORTS 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 Obligations. 6.02 Reports. For the period beginning on the Escrow Funding Date and ending on October 31, 2005, and for each twelve (12) month period thereafter while this Agreement remains in effect, the Escrow Agent shall prepare and send to the City, at the City's request, within thirty (30) days following the end of such period a written report summarizing all transactions relating to the Escrow Fund during such period, including, without limitation, credits to the Escrow Fund as a result of interest payments on or maturities of the Escrowed Securities and transfers from the Escrow Fund to the Paying Agents for the Refunded Obligations or otherwise, together with a detailed statement of all Escrowed Securities and the cash balance on deposit in the Escrow Fund as of the end of such period. 6.03 Notification. The Escrow Agent shall notify the City immediately if at any time during the term of this agreement it determines that there is insufficient cash and Escrowed Securities in the Escrow Fund to provide for the transfer to the Paying Agents for the Refunded Obligations for timely payment of all interest on and principal of the Refunded Obligations. ARTICLE VII CONCERNING THE ESCROW AGENT 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. 7.02 Limitation on Liability. The Escrow Agent shall not be liable for the performance of any duties, except such duties as are specifically set forth in this Escrow Agreement, and no implied covenants or obligations shall be read into this Escrow Agreement. Nothing herein contained shall relieve the Escrow Agent from liability for its own negligent action, negligent failure to act or willful misconduct, except that this sentence shall not be construed to limit the effect of the immediately preceding sentence. The Escrow Agent shall not incur any liability for any error of judgment made in good faith by a responsible officer thereof, unless it shall be proved that it was negligent in ascertaining the pertinent facts. The Escrow Agent shall be protected in acting upon any notice, resolution,request, consent, order, certificate,report, opinion,bond or other paper or document believed by it to be genuine, and to have been signed or presented by the proper -7- party or parties. The Escrow Agent may consult with counsel, and the opinion of such counsel shall be full and complete authorization and protection in respect of any action taken or suffered by it in good faith and in accordance therewith. The Escrow Agent is not a principal, participant or beneficiary of the underlying transaction to which this Escrow Agreement relates. The liability of the Escrow Agent to transfer funds to the Paying Agents for the Refunded Obligations for the payments of the principal of and interest on the Refunded Obligations shall be limited to the proceeds of the Escrowed Securities and the cash balances from time to time on deposit in the Escrow Fund. Notwithstanding any provision contained herein to the contrary, the Escrow Agent shall have no liability whatsoever for the insufficiency of funds from time to time in the Escrow Fund or any failure of the obligor of the Escrowed Securities to make timely payment thereon, except for the obligation to notify the City promptly of any such occurrence. The recitals herein and in the proceedings authorizing the Refunding Bonds shall be taken as the statements of the City and shall not be considered as made by, or imposing any obligation or liability upon, the Escrow Agent. In its 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. 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 connection may make inquiries of, and consult with the City, among others, at any time. In the absence of bad faith, the Escrow Agent may rely conclusively upon the truth, completeness and accuracy of the statements, certificates, opinions, resolutions and other documents conforming to the requirements of this Escrow Agreement, and shall not be obligated to make any independent investigation with respect thereto. To the full extent permitted by law, the parties agree to indemnify, defend and hold the -8- Escrow Agent harmless from and against any and all loss, damage, tax, liability and expense that may be incurred by the Escrow Agent arising out of or in connection with its acceptance or appointment as Escrow Agent hereunder, including attorneys' fees and expenses of defending itself against any claim or liability in connection with its performance hereunder except that the Escrow Agent shall not be indemnified for any loss, damage, tax, liability or expense resulting from its own negligence or willful misconduct. The Escrow Agent's right to indemnification shall survive its resignation or removal and the termination of this Agreement. The Escrow Agent shall have only those duties as are specifically provided herein, which shall be deemed purely ministerial in nature, and shall under no circumstance be deemed a fiduciary for any of the parties to this Agreement. The Escrow Agent shall neither be responsible for, nor chargeable with, knowledge of the terms and conditions of any other agreement, instrument or document between the other parties hereto, in connection herewith. This Agreement sets forth all matters pertinent to the escrow contemplated hereunder, and no additional obligations of the Escrow Agent shall be inferred from the terms of this Agreement or any other Agreement. IN NO EVENT SHALL THE ESCROW AGENT BE LIABLE, DIRECTLY OR INDIRECTLY, FOR ANY (i) DAMAGES OR EXPENSES ARISING OUT OF THE SERVICES PROVIDED HEREUNDER, OTHER THAN DAMAGES WHICH RESULT FROM THE ESCROW AGENT'S FAILURE TO ACT IN ACCORDANCE WITH THE STANDARDS SET FORTH IN THIS AGREEMENT, OR (ii) SPECIAL OR CONSEQUENTIAL DAMAGES, EVEN IF THE ESCROW AGENT HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. In the event that any escrow property shall be attached, garnished or levied.upon by any court order, or the delivery thereof shall be stayed or enjoined by an order of a court, or any order, judgment or decree shall be made or entered by any court order affecting the property deposited under this Agreement, the Escrow Agent is hereby expressly authorized, in its sole discretion, to obey and comply with all writs, orders or decrees so entered or issued, which it is advised by legal counsel of its own choosing is binding upon it, whether with or without jurisdiction, and in the event that the Escrow Agent obeys or complies with any such writ, order or decree it shall not be liable to any of the parties hereto or to any other person, firm or corporation, by reason of such compliance notwithstanding such writ, order or decree be subsequently reversed, modified, annulled, set aside or vacated. Any banking association or corporation into which the Escrow Agent may be merged, converted or with which the Escrow Agent may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Escrow Agent shall be a party, or any banking association or corporation to which all or substantially all of the corporate trust business of the Escrow Agent shall be transferred, shall succeed to all the Escrow Agent's rights, obligations and immunities hereunder without the execution or filing of any paper or any further act on the part of any of the parties hereto, anything herein to the contrary notwithstanding. The Escrow Agent shall have the right, but not the obligation, to consult with counsel of choice and shall not be liable for action taken or omitted to be taken by Escrow Agent either in accordance with the advice of such counsel or in accordance with any opinion of counsel to the -9- Issuer addressed and delivered to the Escrow Agent. The Escrow Agent have the right to perform any of its duties hereunder through agents, attorneys, custodians or nominees. 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, the sum of$1,600.00, in cash. This sum does not include the cost of publication, printing costs or reasonable out-of-pocket expenses of the Escrow Agent. If the Escrow Agent incurs any out-of-pocket expenses or is requested to perform any extraordinary services hereunder, the City hereby agrees to reimburse the Escrow Agent for such out-of-pocket expenses and 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 reimbursement of such out-of-pocket expenses and 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. (b) J.P.Morgan Trust Company and The Bank of New York Trust Company,N.A. each serve as a Paying Agent for one or more of the Refunded Obligations. By execution of the Consent to Escrow Agreement attached hereto, J.P. Morgan Trust Company and The Bank of New York Trust Company, N.A. each agree to continue to serve as Paying Agent for the life of the Refunded Obligations for which it is now serving as Paying Agent, and they will serve as Paying Agents for the Refunded Obligations for the compensation provided under the fee schedule currently in effect and it will look to the City directly for payment of its fees; and, in the event of nonpayment of such fees, the sole remedy of the Paying Agent shall be an action against the City for recovery of the fees owing under the paying agency agreement for which it serves. 7.04 Successor Escrow Agents. If at 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. Any successor Escrow Agent must be qualified under the laws of the State of Texas to serve as an escrow agent and must be authorized to exercise corporate trust powers. No resignation or removal of the Escrow Agent and no early termination of this Agreement shall occur until a successor Escrow Agent has been appointed who is qualified to serve as Escrow Agent hereunder and who has accepted such appointment. Upon the request of any such successor Escrow Agent, the City shall execute any and all instruments in writing for more fully and certainly vesting in and confirming to such successor Escrow Agent all such immunities,rights, powers and duties. The Escrow Agent shall pay over to its successor Escrow Agent a proportional part of the Escrow Agent's fee hereunder equal to the portion of such fee attributable to duties to be -10- performed after the date of succession. ARTICLE VIII MISCELLANEOUS 8.01 Notices. Any notice, authorization, request, or demand required or permitted to be given hereunder shall be in writing and shall be deemed to have been duly given when mailed by registered or certified mail,postage prepaid addressed as follows: To the Escrow Agent: JPMorgan Chase Bank P.O. Box 2320,Dallas, Texas 75221-2320 Attention: Issuer Administrative Services To the City: City of Beaumont,Texas 801 Main Street Beaumont,TX 77701 ATTENTION: City Manager 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. 8.02 Termination of Escrow Agent's Obligations. 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 Obligations or to any other person or persons in connection with this Escrow Agreement. 8.03 Binding Agreement. This Escrow Agreement shall be binding upon the City, and the Escrow Agent and their respective successors and legal representatives, and shall inure solely to the benefit of the holders of the Refunded Obligations, the City, the Escrow Agent and their respective successors and legal representatives. This Escrow Agreement may not be modified except with the prior consent of the holders of all of the Refunded Obligations. 8.04 Severability. In case any one or more of the provisions contained in this Escrow Agreement shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Escrow Agreement, but this Escrow Agreement shall be construed as if such invalid or illegal or -11- unenforceable provision had never been contained herein. 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. 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. [The remainder of this page has intentionally been left blank. Signature page follows.] -12- Executed as of November 1, 2004, but effective as set forth herein. THE CITY OF BEAUMONT, TEXAS ATTEST: By: By: 42��Qna� Title: Mayor Title: City Clerk (SEAL) .urv2�i;fit JPMORGAN CHASE BANK,as Escrow Agent i A "u� By' h c R , L� NT Title: SSI T 6 I r !? -13- CONSENT TO ESCROW AGREEMENT Upon receipt of sufficient funds from the Escrow Agent, J.P. MORGAN TRUST COMPANY, as paying agent for one or more series of the Refunded Obligations (as defined in the foregoing Escrow Agreement), hereby acknowledges and consents to provide for the full and timely payment of the principal of and interest on such series of Refunded Obligations. J.P. MORGAN TRUST COMPANY further consents to the management of the Escrow Fund by the Escrow Agent in accordance with the terms and conditions of the Escrow Agreement and agrees to be bound by the terms of the Escrow Agreement with respect to its obligations as a paying agent. J.P. MORGAN TRUST COMPANY agrees to continue to serve as Paying Agent for which it is now serving as Paying Agent, and it will serve as Paying Agent for the Refunded Obligations for the compensation provided under the fee schedule currently in effect and it will look to the City directly for payment of its fees; and, in the event of nonpayment of such fees, the sole remedy of the Paying Agent shall be an action against the City for recovery of the fees owing under the paying agency agreement for which it serves. J.P. MORGAN TRUST COMPANY By: Name: y�Cn -L,,on, t lc-:cc-e-- Title: AggjS `kj%'IT y,,-rE PRESIDENT -14- CONSENT TO ESCROW AGREEMENT Upon receipt of sufficient funds from the Escrow Agent, The Bank of New York Trust Company, N.A., as paying agent for one or more series of the Refunded Obligations (as defined in the foregoing Escrow Agreement), hereby acknowledges and consents to provide for the full and timely payment of the principal of and interest on such series of Refunded Obligations. The Bank of New York Trust Company, N.A. further consents to the management of the Escrow Fund by the Escrow Agent in accordance with the terms and conditions of the Escrow Agreement and agrees to be bound by the terms of the Escrow Agreement with respect to its obligations as a paying agent. The Bank of New York Trust Company, N.A. agrees to continue to serve as Paying Agent for which it is now serving as Paying Agent, and it will serve as Paying Agent for the Refunded Obligations for the compensation provided under the fee schedule currently in effect and it will look to the City directly for payment of its fees; and, in the event of nonpayment of such fees, the sole remedy of the Paying Agent shall be an action against the City for recovery of the fees owing under the paying agency agreement for which it serves. The Bank of New York Trust, N.A. Ti le: MTANT REAA�URFq -15- Section 6 Cash Flow and Yield Verification Report City of Beaumont, Texas December 2, 2004 INDEX Letter Exhibit A Schedule of Sources and Uses of Funds Exhibit B Escrow Account Cash Flow Exhibit B-1 Cash Receipts From and Yield on the SLGS Purchased with Bond Proceeds Exhibit B-2 Cash Receipt From the SLGS Purchased with Debt Service Funds Exhibit B-3 Debt Service Payment on the 1995 Certificates Exhibit B-4 Debt Service Payments on the 1996 Certificates Exhibit B-5 Debt Service Payments on the 1996 Bonds Exhibit B-6 Debt Service Payments on the 1998 Certificates Exhibit C Debt Service Payments and Yield on the Bonds Exhibit C-1 Original Issue Premium on the Bonds Exhibit D Multipurpose Allocation on the 1996 Certificates and 1996 Bonds Appendix I Applicable schedules provided by RBC Dain Rauscher Inc.