HomeMy WebLinkAboutOrdinance 15796ORDINANCE NO ~~ ~ 9~
TWELFTH SUPPLEMENTAL ORDINANCE AUTHORIZING THE
ISSUANCE AND SALE OF CITY OF FORT WORTH, TEXAS
WATER AND SEWER SYSTEM AUCTION RATE REVENUE BONDS SERIES 2004
ESTABLISHING PARAMETERS REGARDING THE SALE OF THE BONDS
APPROVING THE EXECUTION OF A BOND PURCHASE CONTRACT AND OTHER
INSTRUMENTS RELATED THERETO REPEALING ALL ORDINANCES IN CONFLICT
HEREWITH, AND PROVIDING THAT THIS ORDINANCE SHALL BE IN FORCE AND
EFFECT FROM AND AFTER THE DATE OF ITS PASSAGE
THE STATE OF TEXAS
COUNTIES OF TARRANT AND DENTON
CITY OF FORT WORTH
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WHEREAS the Crty of Fort Worth, Texas (the City" or the 'Issuer") a 'home rule city
operating under ahome-rule charter adopted pursuant to Section 5 of Article XI of the Texas
Constitution, with a population according to the latest federal decennial census ofin excess of 50 000
has established and currently owns and operates a combined waterworks and sanitary sewer system
(the System') and
WHEREAS the Crty heretofore has established the City of Fort Worth, Texas Water and
Sewer System Revenue Financing Program for the purpose of providing a financing structure for
revenue supported indebtedness of the System, and
WHEREAS, said Program was established pursuant to the terms of a 'Master Ordinance
Estabhsling the Crty of Fort Worth, Texas Water and Sewer System Revenue Financing Program
(the 'Master Ordinance'), and
W)=IEREAS unless otherwise defined herein, terms used herein shall have the meaning given
in the Master Ordinance, and
WHEREAS the Master Ordinance authorizes revenue supported indebtedness to be issued,
incurred or assumed pursuant to the terms of supplemental ordinances (any such ordinance being a
Supplement") and
WHEREAS, pursuant to the terms of the Master Ordinance, the Crty has adopted eleven
Supplements (designated as the 'First Supplement" Second Supplement" 'Third Supplement"
'Fourth Supplement 'Fifth Supplement Sixth Supplement Seventh Supplement 'Eighth
Supplement 'Ninth Supplement" 'Tenth Supplement and 'Eleventh Supplement" respectnvely
and the 'Pnor Supplements collectively) pursuant to which (i) the Crty of Fort Worth, Texas Water
and Sewer System Revenue Refunding Bonds Series 1991A and Series 1991B the City of Fort
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Worth, Texas Water and Sewer System Revenue Refunding Bonds, Serves 1993 the City of Fort
Worth, Texas Water and Sewer Sy"stem Revenue Refunding and Improvement Bonds, Series 1996,
the Crty of Fort Worth, Texas Water and Sewer System Revenue Refunding and Improvement
Bonds, Serves 1997 the Crty ofFort Worth, Texas Water and Sewer System Revenue Refunding and
Improvement Bonds, Serves 1998 the City ofFort Worth, Texas Water and Sewer System Revenue
Bonds, Serves 2000 the City ofFort Worth, Texas Water and Sewer System Revenue Refunding and
Improvement Bonds, Serves 2000B the City ofFort Worth, Texas Water and Sewer System Revenue
Bonds, Series 2001 and the City ofFort Worth, Texas Water and Sewer System Revenue Refunding
and Improvement Bonds, Serves 2003 were issued, (ii) the Crty entered into two respective ISDA
Master Agreements (referred to herein as the Swap Agreements'), one wrth Lehman Brothers
Special Financing Inc and the other wrth GBDP L.P and (iii) the Crty Council authonzed the
issuance of City of Fort Worth, Texas Water and Sewer System Revenue Refunding Bonds, Serves
2003A, in an aggregate principal amount not to exceed $60 000 000 (the Serves 2003A Bonds')
and
WHEREAS the aforesaid Series 1991ABonds and the Serves 1991B Bonds issued pursuant
to the terms of the First Supplement are no longer are outstanding, and the aforesaid Serves 1993
Bonds, Serves 1996 Bonds, Series 1997 Bonds, Series 1998 Bonds, Serves 2000 Bonds, Series 2000B
Bonds, Series 2001 Bonds and Serves 2003 Bonds are hereinafter referred to as the 'Previously
Issued Parity Bonds and
WHEREAS, the Swap Agreements entered into pursuant to the terms of the Fourth
Supplement by their respective terms have expired, and the Crty has no further obligations thereunder
and ~
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WHEREAS the Serves 2003A Bonds have been sold in the aggregate principal amount of
$50,370 000 and are pending delivery and upon delivery the Serves 2003A Bonds will be treated as
Previously Issued Parity Bonds, and
WHEREAS, the Previously Issued Parity Bonds are secured by a first hen on and pledge,of
the Pledged Revenues of the System, and
WHEREAS m addition to the Previously Issued Parity Bonds, the Crty has authonzed the
issuance of up to $75 000 000 of its Water and Sewer System Commercial Paper Notes, Series A (the
'Commercial Paper Notes'), for the purpose of providing a method of intenm financing to improve
and extend the City's Water and Sewer System, and
WHEREAS m connection with the Commercial Paper Notes, the Crty has obtained a line of
credit from West LB AG (formerly Westdeutsche Landesbank Girozentrale, New York Branch) (the
'Bank"), and
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WHEREAS the obligations of the Crty under the agreement wrth the Bank are secured by
a lien on and pledge of the Pledged Revenues of the System, subordinate to the lien on and pledge
of the Pledged Revenues of the System m favor of the owners of the Previously Issued Parity Bonds,
and
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set forth in the Purchase Contract, as shall be determined by the City Manager pursuant to subsection
(c) below The authority of the City Manager to execute the Purchase Contract shall expire if the
Purchase Contract has not been executed and delivered by the City and by Lehman Brothers by 5 00
p m. Tuesday February 17 2004 Any finding or determination made by the City Manager relating
to the issuance and sale of the Bonds and the execution of the Purchase Contract in connection
therewith shall have the same force and effect as a finding or determination made by the City Council.
(c) Terms of Bonds. As authorized by Chapter 1371 the City Manager is hereby authorized,
appointed, and designated to act on behalf of the City m selling and delivering the Bonds and carrying
out the other procedures specified m this Twelfth Supplement, including determining and fixing the
date of the Bonds, any additional or different designation or title by which the Bonds shall be known,
the aggregate principal amount of the Bonds sold (subject to the limitation set forth in Section 2
hereof), the date of delivery of the Bonds, the pace at which the Bonds will be sold, the years in
which the Bonds will mature (subject to the limitation set forth in Section 2 hereof), the principal
amount of Bonds to mature in each of such years, the rate of interest to be borne by each such
maturity the interest payment periods, the dates, pace, and terms upon and at which the Bonds shall
be subject to redemption prior to maturity at the option ofthe Crty as well as any mandatory sinking
fund redemption provisions, and all other matters relating to the issuance, sale, and delivery of the
Bonds, including, without lirrutation, deterrrumng the method by which the Reserve Fund shall be
funded in an amount equal to the Required Reserve Amount, and obtaining a municipal bond
insurance policy in support of all or any portion of the Bonds and/or a debt service reserve fund
surety policy m connection with the funding of the Reserve Fund, all of which shall be specified m
the Purchase Contract, provided, that (i) the pace to be paid for the Bonds shall not less than 95%
ofthe aggregate original principal amount thereof, plus accrued interest thereon from the date of their
delivery (ii) none of the Bonds shall bear interest at a rate greater than the Maximum Interest Rate
and (iii) the issuance of the Bonds satisfies the requirements of Section 8 of the Master Ordinance
(d) Offermi?; Documents The Crty Manager and the Director of Finance are authorized and
directed to provide for and oversee the preparation of a final official statement in connection with the
issuance of the Bonds, and to approve such final official statement and deem such official statement
final m compliance with the Rule and to provide rt to Lehman Brothers m compliance with the Rule
(e) Calculation of Interest on SAVRS Interest on the SAVRS in an Auction Period of 180
days or less will be calculated on the basis of actual days over 360 Interest on the SAVRS in an
Auction Period greater than 180 days will be calculated on the basis of a 360-day year of twelve 30-
day months.
(f) Bond Insurance and.Debt Service Reserve Fund Insurance Policies The Crty Manager is
authorized, m connection with effecting the sale of the Bonds, to obtain from the Bond Insurer a
municipal bond insurance policy and a debt service reserve fund policy in support of the Bonds To
that end, should the City Manager exercise such authority and commit the Crty to obtain either a
municipal bond insurance policy and a debt service reserve fund policy or both, for so long as either
or both policies are m effect, the requirements of the Bond Insurer relating to the issuance of said
policies are incorporated by reference into this Twelfth Supplement and made a part hereof for all
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purposes, notwithstanding any other provision of this Twelfth Supplement to the contrary The City
Manager any Assistant City Manager and the Director of Finance shall each have the authority to
execute any documents to effect the issuance of said policies by the Bond Insurer nncludnng, without
hmrtatnon, a guaranty agreement to be delivered nn connection with any debt service reserve fund
policy nn substantially the form attached to this Twelfth Supplement, with such changes as maybe
necessary to conform such agreement to the terms of the commitment issued nn respect to such
policy
Section 4 RIGHT OF PRIOR REDEMPTION (a) Redemption. That the Bonds maybe
subject to redemption prior to their scheduled maturities at the option of the Cnty on the dates and
nn the manner as provided nn the Purchase Contract. Should the Purchase Contract provide for the
redemption of the Bonds prior to their scheduled maturities at the option of the City of less than all
of the Bonds are to be redeemed by the Crty the Crty shall determine the maturity or maturntnes and
the amounts thereof to be redeemed and shall direct the Paying Agent/Regnstrar to call by lot Bonds,
or portions thereof, within such maturity or maturities and nn such principal amounts, for redemption,
provided, that during any period m which ownership of the Bonds ns detemm~ed only by a book entry
at the Securities Depository for the Bonds, of fewer than all of the Bonds of the same maturity and
bearing the same interest rate are to be redeemed, the particular Bonds of such maturity and bearing
such interest rate shall be selected nn accordance unth the arrangements between the City and the
Securities Depository
(b) Sinkm~ Fund Payments Should the Purchase Contract provide for the mandatory sinking
fund redemption of the Bonds, the terms and conditions governing any such mandatory snnknng fund
redemptnon and the payments relatnng thereto shall be as set forth nn the Purchase Contract.
(c) Redemption of SAVRS Bonds In addition to any redemption features set forth nn the
Purchase Contract, while the Bonds bear interest at a SAVRS Rate, the Bonds shall be subject to
redemptnon at the optnon of the Cnty on the Busnness Day immediately succeeding any Auctnon Period,
at the price of par and without premnum. The foregoing notwithstanding, nfthe Crty exercnses its rnght
to optnonally redeem a portion, but not all, of the Bonds bearing nnterest at a SAVRS Rate, the
aggregate pnncnpal amount of Bonds bearing interest at a SAVRS Rate after such a partnal
redemptnon shall be no less than $10 000 000 unless the Broker Dealer agrees to a lower outstandnng
pnncnpal balance While the Bonds bear nnterest at a SAVRS Rate, of the SAVRS are subject to
mandatory snrnknng fund redemptnon and the snrnknng fund redemptnon date ns not an nnterest payment
date, the SAVRS will be redeemed on the Interest Payment Date nmmednately preceding the
scheduled mandatory snnlcnng fund redemptnon date
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(d) Notnce ~ Notnce of any redemptnon of Bonds shall be gnven m the manner provided m the
FORM OF BOND By the date fixed for any such redemptnon due provnsnon shall be made by the
Cnty wrath the Payng AgentlRegnstrar for the payment of the requnred redemptnon prnce for the Bonds
or the portnons thereof whnch are to be so redeemed, plus accrued nnterest thereon to the date fixed
for redemptnon. If such notnce ofredemptnon ns gnven, and of due provnsnon for such payment ns made,
all as provnded above, the Bonds, or the portnons thereof whnch are to be so redeemed, thereby
automatncally shall be redeemed prnor to thenr scheduled maturntnes, and shall not bear nnterest after
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the date fixed for their redemption, and shall not be regarded as being outstanding except for the right
of the owner to receive the redemption puce plus accrued interest to the date fixed for redemption
from the Paying Agent/Registrar out of the funds provided for such payment. The Paying
AgentlRegistrarshah record in the Registration Books all such redemptions ofprmcipal ofthe Bonds
or any portion thereof. If a portion of any Bond shall be redeemed, a substitute Bond or Bands
having the same maturity date, bearing interest at the same rate, m any Authorized Denomination at
the written request of the owner and in an aggregate principal amount equal to the unredeemed
portion thereof, will be issued to the owner upon the surrender thereof for cancellation, at the expense
of the City all as provided m this Twelfth Supplement. The maturities of Bonds to be called for
redemption shall be deterrruned by the City The Bonds or portions to be redeemed within each such
maturity shall be selected by lot or other customary random method selected by the Paying
Agent/Registrar (provided that a portion of a Bond maybe redeemed only m an integral multiple of
an Authorized Denorrunation) The Ctty shall give written notice to the Paying Agent/Registrar of
any such redemption of Bonds at least 30 calendar days (or such shorter period as is acceptable to
the Paying Agent/Registrar) prior to such redemption.
(e) Notice to Securities Depositories (i) In addition to the manner of providing notice of
redemption of Bonds as set forth above, the Paying Agent/Registrar shall give notice of redemption
of Bonds by United States mail, first-class postage prepaid, at least thirty (30) days prior to a
redemption date to the Securities Depository and to any national information service that disseminates
redemption notices In addition, m the event of a redemption caused by an advance refunding of the
Bonds, the Paying Agent/Registrar shall send a second notice of redemption to the persons specified
m the immediately preceding sentence at least thirty (30) days but not more than ninety (90) days
prior to the actual redemption date Any notice sent to the Securities Depository or such national
information services shall be sent so that they are received at least two (2) days prior to the general
mailing or publication date of such notice. The Paying Agent/Registrar shall also send a notice of
prepayment or redemption to the owner of any Bond who has not sent the Bonds in for redemption
sixty (60) days after the redemption date
(ii) Each redemption notice, whether required in the FORM OF BOND or otherwise by this
Twelfth Supplement, shall contain a description of the Bonds to be redeemed including the complete
name of the Bonds, the serves, the date of issue, the interest rate, the maturity date, the CUSIP
number if any the amounts called for redemption, the publication and mailing date for the notice,
the date of redemption, the redemption pace, the name of the Paying Agent/R.egistrararid the address
at which the Bond maybe redeemed including a contact person and telephone number
(iii} All redemption payments made by the Paying Agent/Registrar to the registered owners
of the Bonds shall include a CUSIP number relating to each amount paid to such registered owner
Section 5 CHARACTERISTICS OFTHE BONDS (a) Registration, Transfer, Conversion
and Exchange, Authentication. That the City shall keep or cause to be kept at the designated
corporate trust office of Wells Fargo Bank, N A. (the 'Paying Agent/Registrar"), books or records
for the registration ofhe transfer conversion and exchange ofthe Bonds (the 'Registration Books')
and the City hereby appoints the Paying Agent/Registrar as its registrar and transfer agent to keep
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such books or records and make such registrations of transfers, conversions and exchanges under
such reasonable regulations as the City and the Paying Agent/Registrar may prescribe, and the Paying
AgentlRegnstrar shall make such registrations, transfers, conversions and exchanges as herein pro-
vided. The Paying Agent/Registrar shall obtain and record m the Registration Books the address of
the owner of each Bond to which payments wrath respect to the Bonds shall be mailed, as herein
provided, but rt shall be the duty of each owner to notify the Paying Agent/Regnstrar m wrntmg ofthe
address to which payments shall be mailed, and such interest payments shall not be mailed unless such
notice has been given. The City shall have the nght to inspect at the Designated Trust Office the
Registration Books dunng regular business hours of the Paying Agent/Registrar but otherwise the
Paying Agent/Registrar shall-keep the Regi-sty-anon Books-confidential and,-unless-otherwise-required
by law shall not pernnit their inspection by any other entity Except as otherwise provided m the
FORM OF BOND the owner of each Bond requesting a conversion, transfer exchange and delivery
of such Bond shall pay the Paying Agent/Registrar's standard or customary fees and charges for
making such registration, transfer conversion, exchange and delivery of a substitute Bond or Bonds
Registration of assignments, transfers, conversions and exchanges of Bonds shall be made in the
manner provided and wrth the effect stated in the m the FORM OF BOND Each substitute Bond
shall bear a letter and/or number to distinguish rt from each other Bond. An authorized representative
of the Paying Agent/Registrar shall, before the delivery of any such Bond, date and manually sign the
'Paying Agent/Regnstrar's Authentication Certificate m the form set forth in the FORM OF BOND
(the Authentication Certificate'), and, except as provided below no such Bond shall be deemed to
be issued or Outstanding unless the Authentication Certificate is so executed, the foregoing
notwithstanding, the Authentication Certificate need not be executed if any such Bond ns accompanied
by an executed Comptroller's Regnstratnon Certificate in the form set forth m the FORM OF BOND
The Paying Agent/Registrarpyomptly shall cancel all paid Bonds and Bonds surrendered for convey
slon and exchange No additional ordinances, orders, or resolutnons need be passed or adopted by
the governing body of the City or any other body or person so as to accomplish the foregoing
conversnon and exchange of any Bond or portion thereof, and the Paying Agent/Registrar shall
provide for the prnntnng, execution, and delnvery of the substitute Bonds m the manner prescribed
herein. Pursuant to Chapter 1206 the duty of conversion and exchange of Bonds as aforesand is
hereby nmposed upon the Paying Agent/Regnstrar and, upon the execution ofthe Authentication Cer
tificate, the converted and exchanged Bond shall be valid, incontestable, and enforceable in the same
manner and with the same effect as the Bonds which nnntially were issued and delivered pursuant to
this Twelfth Supplement, approved by the Attorney General, and registered by the Comptroller of
Public Accounts. As of the date thus Twelfth Supplement is approved by the City the Designated
Trust Office of Wells Fargo Bank, N A. ns its Minneapolis, Minnesota corporate must office
(b) Payment of Bonds and Interest. The City hereby further appoints the Paying
Agent/Regnstrar to act as the paying agent for paying the principal of, premium, if any and interest
on the Bonds, all as provided m this Twelfth Supplement. The Paying Agent/Registrar shall keep
proper records of all payments made by the City and the Paying Agent/Registrar with respect to the
Bonds
(c) In .General. The Bonds (i) shall be issued in fully registered form, without interest
coupons, with the principal of and interest on such Bonds to be payable only to the registered owners
thereof, (ii) may be redeemed prior to their scheduled maturities, (iii) may be transferred and assigned,
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(iv) maybe converted and exchanged for other Bonds, (v} shall have the characteristics, (vi) shall be
signed, sealed, executed and authenticated, (vii) the principal of and interest on the Bonds shall be
payable, and (viii) shall be adnumstered and the Paying Agent/Registrar and the City shall have certain
duties and responsibilities with respect to the Bonds, all as provided, and m the manner and to the
effect as required or indicated, in the FORM OF BOND The Bonds initially issued and delivered
pursuant to this Twelfth Supplement are not required to be, and shall not be, authenticated by the
Paying AgentlRegnstrar but on each substitute Bond issued m conversion of and exchange for any
Bond or Bonds issued under this Twelfth Supplement the Paying Agent/Registrar shall execute the
Authentication Certificate
(d) Substitute PaymgAgentlRe isg trar The City covenants with the owners ofthe Bonds that
at all times while the Bonds are Outstanding a competent and legally qualified entity shall act as and
perform the services of Paying Agent/Regnstrar for the Bonds under this Twelfth Supplement, and
that the Paying Agent/Registrar will be one entity Such entity may be the City to the extent
permitted bylaw or a bank, trust company financial institution, or other agency as selected by the
Czty The City reserves the right to and may at its option, change the Paying Agent/Regnstrarupori
not less than 120 days written notice to the Paying Agent/Registrar to be effective not later than 60.
days prior to the next principal or interest payment date after such notice In the event that the entity
at any time acting as Paying Agent/Registrar (or its successor by merger acquisition, or other
method) should resign or otherwise cease to act as such,. the City covenants that promptly rt will
appoint a competent and legally qualified entity to act as Paying Agent/Regnstrar under this Twelfth
Supplement. Upon any change m the Paying Agent/Regnstrar the previous Paying Agent/Regnstrar
promptly shall transfer and deliver the Registration Books (or a copy thereof), along with all other
pertinent books and records relating to the Bonds, to the new Paying Agent/Regnstrar desngnated and
appointed by the Crty Upon any change m the Paying Agent/Regnstrar the Crty promptly will cause
a written notice thereof to be sent by the new Paying Agent(Regnstrar to each owner of the Bonds,
by United States Mail, first-class postage prepaid, which notice also shall give the address of the new
Paying Agent/Registrar By accepting the posntnon and performing as such, each Paying Agent/Regis-
trar shall be deemed to have agreed to the provisions ofthns Twelfth Supplement, and a certified copy
of this Twelfth Supplement shall be delivered to each Paying Agent/Regnstrar
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(e) Deternunation_of Interest Rate for SAVRS The SAVRS Rate to be applicable to the
Bonds during each Auction Period shall be determined by the Auction Agent through the auction
process described in Exhibit C hereto and notice thereof shall be given to the City and the Paying
Agent/R.egistrar as provided nn Exhibit C hereto. The SAVRS Rate from the date of delivery to but
not nncludmg, the first Interest Payment Date of the Bonds will be determined by an Authorized
Representative, inconsultation with Lehman Brothers, prior to the date of delivery of the Bonds to
Lehman Brothers nn exchange for payment in full thereof nn accordance with the terms of the
Purchase Contract..
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Section 6 FORM OF BONDS (a) Form of Bonds That the form of all Bonds, including
the form of the Paying Agent/R.egistrar's Certificate, the form of Assignment, and the form of the
Comptroller's Registration Certificate to be attached only to the Bonds mrtially issued and delivered
pursuant to this Twelfth Supplement, shall be, respectively substantially as set forth in Exhibit B with
such appropriate variations, omnssions, or insertions as are permitted or required by this Twelfth
Supplement and the Purchase Contract.
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(b) Pnntin~ Bond Counsel Opinion and Statement of Insurance The punter of the Bonds is
hereby authorized to pant on the Bonds the form of bond counsel's opinion relating to the Bonds, and
is hereby authorized to pant on the Bonds an appropriate statement of insurance furnished by a
municipal bond insurance company providing municipal bond insurance, if any covering all or any
part of the Bonds
Section 7 ESTABLISI~VIEIVT OF FINANCING PROGRAM AND ISSUANCE OF
PARITY OBLIGATIONS That by adoption of the Master Ordinance the City has established the
City of Fort Worth, Texas Water and Sewer System Revenue Financing Program for the purpose of
providing a financing structure for revenue supported indebtedness of the System. The Master
Ordinance ns intended to establish a master plan under which revenue supported debt of the System
can be incurred. This Twelfth Supplement provides for the authorization, issuance, sale, delivery
form, characteristics, provisions of payment and redemption, and secunty of the Bonds which are a
series of Parity Obligations. The Master Ordinance is incorporated herein by reference and as such
made a part hereof for all purposes, except to the extent modified and supplemented hereby and the
Bonds are hereby~declared to be Parity Obligations under the Master Ordinance The City hereby
determines that it will have sufficient funds to meet the financial obligations of the System, including
sufficient Pledged Revenues to satisfy the Annual Debt Service Requirements of the System and to
meet all financial obligations of the City relating to the System
Section 8 PLEDGE (a) That the Bonds are and shall be secured by and payable from a first
lien on and pledge of the Pledged Revenues, and the Pledged Revenues are further pledged to the
establishment and' maintenance of the Debt Service Fund, and to the Reserve Fund to the extent
hereinafter provided. The Bonds are and will be secured by and payable only from the Pledged
Revenues, and are not secured by or payable from a mortgage or deed of trust on any properties,
whether real, personal, or mixed, constituting the System.
(b) Chapter 1208 applies to the issuance of the Bonds and the pledge of the Pledged
Revenues granted by the City under subsection (a) of this Section, and such pledge is therefore valid,
effective, and perfected If Texas law is amended at any time while the Bonds are outstanding and
unpaid such that the pledge of the Pledged Revenues granted by the City is to be subject to the filing
requirements of Chapter 9 Texas Business & Commerce Code, then in order to preserve to the
registered owners of the Bonds the perfection of the security interest in said pledge, the City agrees
to take such measures as it deternunes are reasonable and necessary under Texas law to comply with
the applicable provisions of Chapter 9 Texas Business & Commerce Code and enable a filing to
perfect the secunty interest in said pledge to occur
Section 9 DEBT SERVICE FUND ACCOUNTS That with respect to the Bonds the
Director of Finance is hereby authorized to create an account within the Debt Service Fund to
facilntate the payment ofpnncipal on any Bonds that constitute Term Bonds
Section 10 RESERVE FUND That deposits to the credit of the Reserve Fund shall be
made m the manner described in Section 12(b) of this Twelfth Supplement.
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Section 11 INVESTMENTS That money in the Reserve Fund created under this Twelfth
Supplement shall not be invested in securities with an average aggregate weighted maturity of greater
than seven years. The value of the Reserve Fund, in addition to the annual deternunation described
m the Master Ordinance, shall be established at the time or times withdrawals are made therefrom.
Investments shall be sold promptly when necessary to prevent any default m connection with the
Bonds Earnings derived from the investment of moneys on deposit m the various Funds and
Accounts shall be credited to the Fund or Account from which moneys used to acquire such
investment shall have come
Section 12 FLOW OF FUNDS That all monies. in the System Fund not required for paying
Operating Expenses dunng each month shall be applied by the Crty on or before the 10th day ofthe
following month, commencing dunng the months and m the order of priority with respect to the
Funds and Accounts that such applicatrons are hereinafter set forth in this Section.
(a) ,Debt Service Fund To the credit of the Debt Service Fund, in the following order of
pnorrty to-wit
(1) such amounts, deposited m approximately equal monthly installments,
commencing during the month in which the Bonds are delivered, or the month thereafter if
delivery is made after the 10th day thereof, as will be sufficient, together with other amounts,
if any m the Debt Service Fund available for such purpose, to pay the interest scheduled to
come due on the Bonds on the next succeeding interest payment date, and
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(2) such amounts, deposited in approximately equal monthly installments,
commencing dunng the month which shall be the later to occur of, (i) the twelfth month
before the first maturity date ofthe Bonds, or (ii) the month m which the Bonds are delivered,
or the month thereafter if delivery is made after the 10th day thereof, as will be sufficient,
together with other amounts, if any in the Debt Service Fund available for such purpose, to
pay the principal (including mandatory sinking fund redemption payments, if any) scheduled
to mature or come due on the Bonds on the next succeeding principal payment date or
mandatory sinking fund redemption date, as the case may be
(b) Reserve Fund. When and so long as the Reserve Fund Obligations in the Reserve Fund
are not less than the Required Reserve Amount, no deposits need be made to the credit of the
Reserve Fund. When and if the Reserve Fund at any time contains less than the Required Reserve
Amount due to any cause or condition then, subject and subordinate to making the required deposits
to the credit of the Debt Service Fund, commencing with the month dunng which such deficiency
occurs, such deficiency shall be made up from the next available Pledged Revenues or from any other
sources available for such purpose, in monthly installments of not less than 1/12 of the Required
Reserve Amount, m the manner provided in the Master Ordinance Reimbursements to the provider
if any of a Credit Facility shall constitute the making up of a deficiency to the extent that such
reimbursements result m the reinstatement, m whole or in part, as the case maybe, of the amount of
the Credit Facility
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Section 13 PAYMENT OF BONDS That on or before the first scheduled interest payment
date, and on or before each interest payment date and principal payment date thereafter while any of
the Bonds are Outstanding and unpaid, the City shall make available to the Paying Agent/Registrar
out of the Debt Service Fund (and the Reserve Fund, if necessary) monies sufficient to pay such
interest on and such principal amount of the Bonds, as shall become due on such dates, respectively
at maturity or by redemption pnor to matunty The Paying Agent/Registrar shall destroy all paid
Bonds and furnish the Crty with an appropriate certificate of cancellation or destruction.
Section 14 COVENANTS REGARDING TAX EXEMPTION That the Issuer covenants
to refrain from any action which would adversely affect, or to take such action as to ensure, the
treatment of the Bonds as obligations described in section 103 of the Code, the interest on which is
not includable in the gross income of the holder for purposes of federal income taxation. In
furtherance thereof, the Issuer covenants as follows
(a) to take any action to assure that no more than ten percent of the proceeds of the
Bonds or the projects financed therewith (less amounts deposited to a reserve fund, if any)
are used for any 'private business use as defined in section 141(b)(6) of the Code or if
more than ten percent of the proceeds are soused, that amounts, whether or not received by
the Issuer with respect to such private business use, do not, under the terms of this Ordinance
or any underlying arrangement, directly or indirectly secure or provide for the payment of
more than ten percent ofthe debt service on the Bonds, in contravention of section 141(b)(2)
of the Code,
(b) to take any action to assure that in the event that the 'private business use
described in subsection (a) hereof exceeds five percent of the proceeds of the Bonds or the
projects financed therewith (less amounts deposited into a reserve fund, if any) then the
amount in excess of five percent is used fora 'pnvate business use which is 'related and not
disproportionate withinthe meamng of section 141(b)(3) ofthe Code, to the governmental
use,
(c) to take any action to assure that no amount which is greater than the lesser of
$5 000 000 or five percent of the proceeds of the Bonds (less amounts deposited into a
reserve fund, if any) is directly or indirectly used to finance loans to persons, other than state
or local governmental units, in contravention of section 141(c) of the Code,
(d) to refrain from taking any action which would otherwise result m the Bonds being
treated as specified pnvate activity bonds within the meaning of section 141(b) of the Code,
(e) to refrain from taking any action that would result in the Bonds being 'federally
guaranteed within the meamng of section 149(b) of the Code,
(f) to refrain from using any portion of the proceeds of the Bonds, directly or
indirectly to acquire or to replace funds which were used, directly or indirectly to acquire
investment property (as defined m section 148(b)(2) ofthe Code) which produces a matenally
higher yield over the teen of the Bonds, other than investment property acquired with
1~
(1) proceeds of the Bonds invested for a reasonable temporary period of 30
days or less, nn the case of advance refunding bonds, or for a period of 90 days or less,
nn the case of current refunding bonds, until such proceeds are needed for the purpose
for which the Bonds are .issued,
(2) amounts invested in a bona fide debt service fund, within the meaning of
section 1 148-1(b) of the Treasury Regulations, and
(3) amounts deposited m any reasonably required reserve or replacement fund
to the extent such amounts do not exceed ten percent of the proceeds of the Bonds,
(g} to otherwise restrict the use of the proceeds of the Bonds or amounts treated as
proceeds of the Bonds, as may be necessary so that the Bonds do not otherwise contravene
the requirements of section 148 of the Code (relating to arbitrage) and, to the extent
applicable, section 149(d) of the Code (relating to advance refundmgs) and
(h) to pay to the United States of America at least once during each five-year
penod (beginning on the date of delivery of the Bonds) an amount that ns at least equal to 90
percent of the 'Excess Earnings within the meaning of section 148(f) of the Code and to pay
to the United States of America, not later than 60 days after the Bonds have been paid in full,
100 percent of the amount then required to be paid as a result of Excess Earnings under
section 148(f) of the Code
For purposes of the foregoing clauses (a) and (b) above, the Issuer understands that the term
'proceeds included dnsposntion proceeds as defined in the Treasury Regulations and, in the case
of a refunding bond, transferred proceeds (if any) and proceeds of the refunded bonds expended prior
to the date of the nssuance of the Bonds It is the understanding of the Issuer that the covenants
contained herein are intended to assure compliance wrth the Code and any regulations or rulings
promulgated by the U S Department of the Treasury pursuant thereto In the event that regulations
or rulings are hereafter promulgated which modify ar expand provisions of the Code, as applicable
to the Bonds, the Issuer will not be required to comply wrth any covenant contained herein to the
extent that such failure to comply m the opinion of nationally-recognized bond counsel, will not
adversely affect the exemption from federal income taxation of interest on the Bonds under section
103 of the Code. In the event that regulations or rulings are hereafter promulgated which impose
additional requirements which are applicable to the Bonds, the Issuer agrees to comply with the
additional requirements to the extent necessary in the opinion ofnationally-recognnzed bond counsel,
to preserve the exemption from federal income taxation of interest on the Bonds under section 103
of the Code In furtherance of the foregoing, the Mayor the City Manager any Assistant City
Manager and the Director of Finance may execute any certificates or other reports required by the
Code and to make such elections, on behalf of the City which may be permitted by the Code as are
consistent with the purpose for the issuance of the Bonds In order to facilitate compliance with the
above clause (h) a 'Rebate Fund is hereby established by the City for the sole benefit of the United
States of America, and such Rebate Fund shall not be subject to the claim of any other person,
including without limitation the registered owners of the Bonds. The Rebate Fund is established for
the additional purpose of compliance wrth section 148 of the Code.
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Section 15 AMENDMENT OF TWELFTH SUPPLEMENT (a) That the owners of a
majority in Outstanding Principal Amount of the Bonds shall have the right from time to time to
approve any amendment to this Twelfth Supplement which may be deemed necessary or desirable by
the City provided, however that nothing herein contained shall permit or be construed to permit the
amendment of the terms and conditions m this Twelfth Supplement or in the Bonds so as to
(1) Make any change m the maturity of any of the Outstanding Bonds,
(2) Reduce the rate of interest borne by any of the Outstanding Bonds,
(3) Reduce the amount of the principal payable on the Outstanding Bonds,
(4) Modify the terms of payment of principal of, premium, if any or interest on the
Outstanding Bonds or impose any conditions with respect to such payment,
(5) Affect the rights of the owners of less than all of the Bonds then Outstanding;
(6) Amend this clause (a) of this Section, or
(7) Change the minimum percentage of the principal amount of Bonds necessary for
consent to any amendment,
unless such amendment or amendments shall be approved by the owners of all of the Bonds then
Outstanding.
(b) That if at any time the City shall desire to amend the Twelfth Supplement under this
Section, the City shall cause notice of the proposed amendment to be published in a financial
newspaper or journal published m the City of New York, New York, and a newspaper of general
circulation m the Crty once during each calendar week for at least two successive calendar weeks
Such notice shall briefly set forth the nature of the proposed amendment and shall state that a copy
thereof is on file at the principal office of the Paying Agent/Registrar for inspection by all owners of
the Bonds Such publication is not required, however if notice m writing is given to each owner of
the Bonds.
(c) That whenever at any time not less than 30 days, and within one year from the date of
the first publication of said notice or other service of written notice the City shall receive an
instrument or instruments executed by the owners of at least a majority in Outstanding Principal
Amount of the Bonds then Outstanding, which instrument or instruments shall refer to the proposed
amendment described m said notice and which specifically consent to and approve such amendment
in substantially the form of the copy thereof on file with the Paying Agerit/Registrar the govermng
body of the Crty may pass such amendment in substantially the same form.
(d) That upon the passage of any such amendment pursuant to the provisions of this Section,
this Twelfth Supplement shall be deemed to be amended in accordance wrth such amendment, and
the respective rights, duties and obligations under this Twelfth Supplement of the Crty and all the
owners ofthen Outstanding Bonds shall thereafter be determined, exercised and enforced hereunder
subject m all respects to such amendment.
(e) That any consent given by the owners of a Bond pursuant to the provisions of this Section
shall be irrevocable for a period of six months from the date of the first publication of the notice
provided for m this Section, and shall be conclusive and binding upon all future owners of the same
Bond during such period. Such consent may be revoked at any time after six months from the date
13
of the first publication of such notice by the owner who gave such consent, or by a successor in title,
by filing written notice thereof with the Paying Agent/Registrar and the City but such revocation shall
not be effective if the owners of at least a ma~onty m Outstanding Principal Amount of the Bonds
have, pnor to the attempted revocation, consented to and approved the amendment.
(f) The foregoing provisions of this Section notwithstanding, the Crty by action of the Crty
Council may amend or supplement tlvs Twelfth Supplement without the consent of any owner of the
Bonds or any other Parity Obligations, solely for any one or more of the following purposes
(1) To add to the covenants and agreements of the City m this Twelfth Supplement
contained, other covenants and agreements thereafter to be observed, grant additional nghts
or remedies to the owners of the Bonds or to surrender restnct or hrmt any nght or power
herein reserved to or conferred upon the Crty
(2) To make such provisions for the purpose of cunng any ambiguity or cunng,
correcting or supplementing any defective provision contained in this Twelfth Supplement,
or in regard to clarifying matters or questions ansing under this Twelfth Supplement, as are
necessary or desirable and not contrary to or inconsistent with this Twelfth Supplement and
which shall not adversely affect the interests of the owners of the Bonds then Outstanding;
(3) To modify any of the provisions of this Twelfth Supplement m any other respect
whatever provided that such modification shall be, and be expressed to be, effective only
after the Bonds Outstanding at the date of the adoption of such modification shall cease to
be Outstanding;
(4) To make such amendments to this Twelfth Supplement as may be required, m the
op~mon ofBond Counsel, to ensure compliance with sections 103 and 141 through 150 ofthe
Code and the regulations promulgated thereunder and applicable thereto
(5) To make such changes, modifications or amendments as may be necessary or
desirable in order to allow the owners of the Bonds to thereafter avail themselves of a book
entry system for payments, transfers and other matters relating to the Bonds, which changes,
modifications or amendments are not contrary to or inconsistent with other provisions of this
Twelfth Supplement and which shall not adversely affect the interests of the owners of the
Bonds,
(6) To make such changes, modifications or amendments as may be necessary or
desirable m order to obtain or maintain the granting of a rating on the Bonds by a Rating
Agency or to obtain or maintain a Credit Agreement or a Credit Facility issued in support of
the Bonds,
(7) To make such changes, modifications or amendments as may be necessary or
desirable, which shall not adversely affect the interests of the owners of the Bonds, m order
to the extent permitted bylaw to facilitate the economic and practical utilization of interest
rate swap agreements, foreign currency exchange agreements, or similar type of agreements
with respect to the Bonds, and
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(8) To exercise the right reserved in Section 30 of this Twelfth Supplement
Notice of any such amendment may be published by the City in the manner described in clause (b) of
this Section, provided, however that the publication of such notice shall not constitute a condition
precedent to the adoption of such amendatory ordinance and the failure to publish such notice shall
not adversely affect the implementation of such amendment as adopted pursuant to such amendatory
ordinance I
(g) Ownership of the Bonds shall be established by the Registration Books maintained by the
Paying AgentlRegistrar m its capacity as registrar and transfer agent for the Bonds
(h) Any proposed amendment to this Twelfth Supplement shall be provided to the Auction
Agent (for so long as the Bonds are issued as SAVRS) at the address provided m the Auction
Agreement Amendments regarding matters described m Section 2 07(b) of Exhibit C may be
effected in the manner described therein, notwithstanding anything m this Section 15 to the contrary
Section 16 DAMAGED MUTILATED LOST STOLEN OR DESTROYED BONDS
(a) That in the event any Outstanding Bond is damaged, mutilated, lost, stolen, or destroyed, the
Paying Agent/Registrar shall cause to be punted, executed, and delivered, a new bond of the same
principal amount, maturity and interest rate, as the damaged, mutilated, lost, stolen, or destroyed
Bond, in replacement for such Bond m the manner hereinafter provided.
(b) Application for replacement of damaged, mutilated, lost, stolen, or destroyed Bonds shall
be made to the Paying Agent/Registrar In every case of loss, theft, or destruction of a Bond, the
applicant for a replacement bond shall furnish to the Crty and to the Paying AgentfRegistrar such
security or indemnity as may be required by them to save each of them harmless from any loss or
damage with respect thereto Also m every case of loss, theft, or destruction of a Bond, the
applicant shall furnish to the Crty and to the Paying AgentlRegistrar evidence to their satisfaction of
the loss, theft, or destruction of such Bond, as the case may be In every case of damage or
mutilation of a Bond, the applicant shall surrender to the Paying Agent/Registrar for cancellation the
Bond so damaged or mutilated.
(c) Notwithstanding the foregoing provisions ofthis Section, m the event any such Bond shall
have matured, and no default has occurred which is then continuing in the payment of the principal
of, redemption premium, if any or interest on the Bond, the City may authorize the payment of the
same (without surrender thereof except in the case of a damaged or mutihated Bond) instead of
issuing a replacement Bond, provided security or mdemrnty is furnished as above provided m this
Section.
(d) Prior to the issuance of any replacement bond, the Paying Agent/Registrar shall charge
the owner of such Bond with all legal, printing, and other expenses in connection therewith. Every
replacement bond issued pursuant to the provisions ofthis Section by virtue ofthe fact that any Bond
is lost, stolen, or destroyed shall constitute a contractual obligation of the City whether or not the
lost, stolen, or destroyed Bond shall be found at any time, or be enforceable by anyone, and shall be
entitled to all the benefits of this Twelfth Supplement equally and proportionately with any and all
other Bonds duly issued under this Twelfth Supplement.
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(e) In accordance with Chapter 1206 this Section ofthis Twelfth Supplement shall constitute
authority for the issuance of any such replacement bond without necessity of further action by the
governing body of the Crty or any other body or person, and the duty of the replacement of such
bonds is hereby authorized and imposed upon the Paying AgentJRegistrar and the Paying
AgentlRegistrarstiall authenticate and deliver such bonds m the form and manner and with the effect,
as provided in Section 5(a) oftlus Twelfth Supplement for Bonds issued m exchange for other Bonds
Section 17 CONTINUING DISCLOSURE UNDERTAKING (a) Annual Reports (i)
That the Crty shall provide annually to each NRMSIR and any SID within six months after the end
of each Fiscal Year ending in or after 2004 financial information and operating data with respect to
the Crty of the general type included in the final Official Statement authorized by Section 3 (d) of this
Twelfth Supplement, being the information described in Exhibit D hereto Any financial statements
so to be provided shall be (1) prepared in accordance with the accounting principles described in
Exhibit D hereto or such other accounting principles as the City may be required to employ from
time to time pursuant to state law or regulation, and (2) audited, if the Crty comrrvssions an audit of
such statements and the audit is completed within the period during which they must be provided.
If the audit of such financial statements is not complete within such period, then the City shall provide
unaudited financial statements within such period and shall provide audited financial statements for
the applicable Fiscal Year to each NRMSIR and any SID when and if the audit report on such
statements becomes available
(ii) If the Crty changes its Fiscal Year it will notify each NRMSIR and any SID of the change
(and of the date of the new Fiscal Year end) prior to the next date by which the City otherwise would
be required to provide financial information and operating data pursuant to this Section. The financial
information and operating data to be provided pursuant to this Section may be set forth m full m one
or more documents or maybe included by specific reference to any document (including an official
statement or other offering document, if it is available from the MSRB) that theretofore has been
provided to each NRMSIR and any SID or filed with the SEC
(b) Material Event Notices The Crty shall notify any SID and either each NRMSIR or the
MSRB in a timely manner of any of the following events with respect to the Bonds, if such event
is material within the meaning of the federal securities laws
1 Principal and interest payment delinquencies,
2 Non-payment related defaults,
3 Unscheduled draws on debt service reserves reflecting financial difficulties,
4 Unscheduled draws on credit enhancements reflecting financial difFiculties,
5 Substitution of credit or hquidrty providers, or their failure to perform,
6 Adverse tax opinions or events affecting the tax-exempt status of the Bonds,
7 Modifications to rights of holders of the Bonds,
8 Bond calls,
9 Defeasances,
10 Release, substitution, or sale ofproperty securing repayment oftheBonds, and
11 Rating changes
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The City shall notify any SID and either each NRMSIR or the MSRB m a timely manner of any
failure by the City to provide financial information or operating data m accordance with subsection
(a) of this Section by the time required by such subsection.
(c) Linutations, Disclaimers, and Amendments (i) The City shall be obligated to observe
and perform the covenants specified m this Section for so long as, but only for so long as, the City
remains an obligated person with respect to the Bonds within the meaning of the Rule, except that
the Crty in any event will give notice of any deposat made in accordance with this Twelfth Supplement
or applicable law that causes Bonds no longer to be outstanding.
(ii) The provisions of this Section are for the sole benefit of the Holders and beneficial owners
of the Bonds, and nothing in this Section, express or implied, shall give any benefit or any legal or
equitable right, remedy or claim hereunder to any other person. The Crty undertakes to provide only
the financial information, operating data, financial statements, and notices which rt has expressly
agreed to provide pursuant to this Section and does not hereby undertake to provide any other
information that may be relevant or material to a complete presentation of the City's financial results,
condition, or prospects or to update any information provided m accordance with this Section or
otherwise, except as expressly provided herein. The Crty does not make any representation or
warranty concerning such information or its usefulness to a decision to invest in or sell Bonds at any
future date.
(iii) UNDERNO CIRCUMSTANCES SHALL THE CITY BE LIABLE TO THE HOLDER
OR BENEFICIAL OWNER OF ANY BOND OR ANY OTHER PERSON IN CONTRACT OR
TORT FOR DAMAGES RESULTING IN WHOLE OR IN PART FROM ANY BREACH BY
THE CITY WHETHER NEGLIGENT OR WITHOUT FAULT ON ITS PART OF ANY
COVENANT SPECIFIED IN THIS SECTION BUT EVERY RIGHT AND REMEDY OF ANY
SUCH PERSON IN CONTRACT OR TORT FOR OR ON ACCOUNT OF ANY SUCH BREACH
SHALL BE LIMITED TO AN ACTION FOR MANDAMUS OR SPECIFIC PERFORMANCE
(iv) No default by the Crty m observing or performing its obligations under this Section shall
comprise a breach of or default under this Twelfth Supplement for purposes of any other provision
of this Twelfth Supplement. Nothing m this Section is intended or shall act to disclaim, waive, or
otherwise limit the duties of the Crty under federal and state securities laws
(v) The provisions of this Section maybe amended by the City from time to time to adapt to
changed circumstances that arise from a change m legal requirements, a change in law or a change
m the identity nature, status, or type of operations of the Crty but only if (1) the provisions of this
Section, as so amended, would have perirutted an underwriter to purchase or sell Bonds in the
primary offering of the Bonds in compliance with the Rule, taking into account any amendments or
interpretations of the Rule since such offering as well as such changed circumstances and (2) either
(a) the Holders of a ma~onty in aggregate principal amount (or any greater amount required by any
other provision of this Twelfth Supplement that authorizes such an amendment) of the outstanding
Bonds consent to such amendment or (b) a person that is unaffiliated with the Clty (such as nationally
recognized bond counsel) determines that such amendment will not materially impair the interest of
the holders and beneficial owners of the Bonds If the City so amends the provisions of this Section,
17
it shall include with any amended financial information or operating data next provided in accordance
with subsection (a) of this Section an explanation, m narrative form, of the reason for the amendment
and of the impact of any change in the type of financial information or operating data so provided.
Section 18 TWELFTH SUPPLEMENT TO CONSTITUTE A CONTRACT EQUAL
SECURITY That in consideration of the acceptance of the Bonds, the issuance of which is
authorized hereunder by those who shall hold the same from time to time, this Twelfth Supplement
shall be deemed to be and shall constitute a contract between the City and the Holders from time to
time of the Bonds and the pledge made in this Twelfth Supplement by the City and the covenants and
agreements set forth in this Twelfth Supplement to be performed by the City shall be for the equal
and proportionate benefit, security and protection of all Holders, without preference, priority or
distinction as to security or otherwise of any of the Bonds authorized hereunder over any of the
others by reason of time of issuance, sale, or maturity thereof or otherwise for any cause whatsoever
except as expressly provided in or perrrlltted by this Twelfth Supplement.
Section 19 SEVERABILITY OF INVALID PROVISIONS That if anyone or more of the
covenants, agreements, or provisions herein contained shall be held contrary to any express provisions
of law or contrary to the policy of express law though not expressly prohibited, or against public
policy or shall for any reason whatsoever be held invalid, then such covenants, agreements, or
provisions shall be null and void and shall be deemed separable from the remaimng covenants,
agreements, or provisions and shall in no way affect the validity of any ofthe other provisions hereof
or of the Bonds issued hereunder
Section 20 PAYMENT AND PERFORMANCE ON BUSINESS DAYS That, except as
provided to the contrary in the FORM OF BOND whenever under the terms of this Twelfth
Supplement or the Bonds, the performance date of any provision hereof or thereof, including the
payment of principal of or interest on the Bonds, shall occur on a day other than a Business Day then
the performance thereof, mcludmg the payment of principal of and interest on the Bonds, need not
be made on such day but may be performed or paid, as the case may be, on the next succeeding
Business Day with the same force and effect as if made on the date of performance or payment.
Section 21 LIMITATION OF BENEFITS WITH RESPECT TO THE TWELFTH
Supplement That with the exception of the rights or benefits herein expressly conferred, nothing
expressed or contained herein or implied from the provisions of this Twelfth Supplement or the Bonds
is intended or should be construed to confer upon or give to any person other than the City the
Holders, and the Paying Agent/Registrar any legal or equitable right, remedy or claim under or by
reason of or in respect to this Twelfth Supplement or any covenant, condition, stipulation, prorruse,
agreement, or provision herein contained This Twelfth Supplement and all of the covenants,
conditions, stipulations, promises, agreements, and provisions hereof are intended to be and shall be
for and inure to the sole and exclusive benefit of the City the Holders, and the Paying
AgentlRegistrar as herein and therein provided.
Section 22 FURTHER PROCEDURES That the Mayor the City Manager any Assistant
City Manager the Director of Finance, the City Secretary or any Assistant City Secretary and all
other officers, employees, and agents of the City and each of them, shall be and they are hereby
expressly authorized, empowered, and directed from time to time and at any time to do and perform
is-
all such acts and things and to execute, acknowledge, and deliver in the name and under the seal and
on behalf of the Issuer all such instruments, whether or not herein mentioned, as may be necessary
or desirable in order to carry out the terms and provisions of this Twelfth Supplement, the Purchase
Contract, the Bonds, the offering documents prepared in connection with the sale of the Bonds, or
the Auction Agreement and the Broker Dealer Agreement described in Section 27 hereof Should
a debt service reserve fund surety policy be obtained to fund the Reserve Fund, the Crty Manager is
authorized to execute an agreement in substantially the form attached hereto with such changes as
maybe necessary in the judgment of the Crty Manager to conform the agreement to the conditions
of any commitment to deliver a debt service reserve fund surety policy issued by the provider thereof
In case any officer whose signature appears on any Bond shall cease to be such officer before the
delivery of such Bond, such signature shall nevertheless be valid and sufficient for all purpose the
same as if he or she had remained m office until such delivery
Section 23 APPROVAL AND REGISTRATION OF BONDS That the Crty Manager of
the City is hereby authorized to have control of the Bonds and all necessary records and proceedings
pertaining to the Bonds pending their delivery and their investigation, examination and approval by
the Attorney General of the State of Texas, and their registration by the Comptroller of Public
Accounts ofthe State of Texas. Upon registration ofthe Bonds, said Comptroller ofPublic Accounts
(or a deputy designated in venting to act for said Comptroller) shall manually sign the Comptroller's
Registration Certificate accompanying the Bonds, and the seal of said Comptroller shall be impressed,
or placed in facsimile, on each such certificate
Section 24 RATINGS That for so long as the Bonds remain Outstanding, the Crty
covenants that it will use all reasonable efforts to maintain investment grade ratings on the Bonds
issued by at least two (2) Rating Agencies
Section 25 DTC REGISTRATION That the Bonds initially shall be issued and delivered
in such manner that no physical distribution of the Bonds will be made to the public, and The
Depository Trust Company ("DTC"), New York, New York, initially will act as depository for the
Bonds. DTC has represented that rt is a limited purpose trust company incorporated under the laws
of the State of New York, a member of the Federal Reserve System, a clearing corporation within
the meaning of the New York Uniform Commercial Code, and a cleanng agency" registered under
Section 17A ofthe Securities Exchange Act of 1934 as amended, and the City accepts, but in no way
verifies, such representations. The Bonds initially authonzed by this Twelfth Supplement shall be
delivered to and registered m the name of CEDE & CO the nominee of DTC It is expected that
DTC will hold the Bonds on behalf of Lehman Brothers and their respective participants So long
as each Bond is registered m the name of CEDE & CO the Paying Agent/Registrar shall treat and
deal with DTC the same m all respects as if rt were the actual and beneficial owner thereof. It is
expected that DTC will maintain a book-entry system which will identify ownership of the Bonds in
integral amounts of $5 000 with transfers of ownership being effected on the records of DTC and
its participants pursuant to rules and regulations established by them, and that the Bonds initially
deposited with DTC shall be immobilized and not be further exchanged for substitute Bonds except
as hereinafter provided. The Crty is not responsible or liable for any functions of DTC, will not be
responsible for paying any fees or charges with respect to its services, will not be responsible or liable
for maintaining, supervising, or reviewing the records of DTC or its participants, or protecting any
19-
interests or rights of the beneficial owners of the Bonds. It shall be the duty of the DTC Participants,
as defined in the Official Statement herein approved, to make all arrangements with DTC to establish
this book-entry system, the beneficial ownership of the Bonds, and the method of paying the fees and
charges of DTC The City does not represent, nor does it in any way covenant that the initial book
entry system established with DTC will be maintained in the future. Notwithstanding the initial
establishment of the foregoing book-entry system with DTC if for any reason any of the originally
delivered Bonds is duly filed with the Paying Agent/Registrar with proper request for transfer and
substitution, as provided for m this Twelfth Supplement, substitute Bonds will be duly delivered as
provided in this Twelfth Supplement, and there will be no assurance or representation that any book
entry system will be maintained for such Bonds. To effect the establishment of the foregoing book
entry system with respect to the SAVRS the City shall execute and file with DTC a 'DTC Letter
of Representations m the form provided by DTC to evidence the City's intent to establish said book
entry system for the SAVRS
Section 26 ADDITIONAL FEDERAL TAX COVENANTS
(a) Allocation of, and Lirnitation on, Expenditures for the Project. That the City covenants
to account for the expenditure of proceeds from the sale of the Bonds and any investment earnings
thereon to be used for the purposes described m clause (i) of Section 2 of this Ordinance (each such
purpose referred to herein and subsection (b) of this Section 26 as a 'Project') on its books and
records by allocating proceeds to expenditures within 18 months of the later of the date that (a) the
expenditure on a Project is made or (b) each such Project is completed The foregoing
notwrthstandmg, the City shall not expend such proceeds or investment earnings more than b0 days
after the later of (a) the fifth anniversary of the date of delivery of the Bonds or (b) the date the Bonds
are retired, unless the City obtains an opinion ofnationally-recognized bond counsel substantially to
the effect that such expenditure will not adversely affect the tax-exempt status of the Bonds
(b) Disposition of Pro,~ect. The City covenants that the property constituting a Protect will
not be sold or otherwise disposed in a transaction resulting m the receipt by the City of cash or other
compensation, unless the City obtains an opinion ofnationally-recognized bond counsel substantially
to the effect that such sale or other disposition will not adversely affect the tax-exempt status of the
Bonds For purposes of this subsection, the portion of the property composing personal property
and disposed of in the ordinary course of business shall not be treated as a transaction resulting m the
receipt of cash or other compensation. For purposes of this Section, the City shall not be obligated
to comply with this covenant if rt obtains an opinion of nationally recognized bond counsel to the
effect that such failure to comply will not adversely affect the excludability for federal income tax
purposes from gross income of the interest.
Section 27 AUCTION AGREEMENT BROKER DEALER AGREEMENT That the City
Manager of the City is hereby authorized and directed to execute, the City Secretary is authorized
to attest, and the City Attorney is authorized to approve as to form, on behalf of the City the Broker
Dealer Agreement, in connection with the issuance of SAVRS in substantially the form attached to
this Twelfth Supplement. The form of the Auction Agreement between the Paying Agent/Registrar
and the Auction Agent attached to this Twelfth Supplement is hereby approved. The City hereby
20-
directs the Paying Agent/Registrar to appoint The Bank of New York to act as Auction Agent m
accordance with the terms of the Auction Agreement. In consideration thereof, the City covenants
and agrees to perform the obligations of the City specified m Sections 2 2(b)(i), 3 4 3 5 and 5 1(b)
of the Auction Agreement.
Section 28 DELIVERY OF DOCUMENTS TO AMBAC That the Director of Finance
is hereby directed to send to Ambac Assurance Corporation copies of the Twelfth Supplement and
the final Official. Statement prepared m connection with the sale ofthe Bonds promptly after the date
of adoption of this Twelfth Supplement
Section 29 PREAMBLE That the preamble to this Twelfth Supplement is hereby
incorporated by reference, and is to be considered a part of the operative text of this Twelfth
Supplement.
Section 30 RIGHT TO CONVERT FROM SAVRS MODE RESERVED That the City
shall issue the Bonds initially in such a manner that the interest rate borne by the Bonds shall be a
SAVRS Rate, provided, however that the City Council reserves the right to supplement this Twelfth
Supplement with provisions that would permit the Bonds to be converted from SAVRS to variable
rate obligations bearing interest m various interest rate modes, including a fixed rate mode The
supplement to this Twelfth Supplement that maybe hereafter adopted to exercise this right maybe
adopted as permitted by Section 15(f) of this Twelfth Supplement, and notice of such supplement
shall be provided in the manner described m Section 15(b) of this Twelfth Supplement. Such a
supplement to this Twelfth Supplement may provide the provisions for the conversion of Bonds from
the SAVRS mode to another mode, conversion ofBonds from a variable rate mode to the SAVRS
mode, conversion ofBonds to a fixed rate mode, the approval of a Credit Agreement and the delivery
of a Credit Facility m support of the Bonds, and other provisions relating to setting the interest rate
for Bonds, the redemption and tender ofBonds upon conversion from one interest rate mode to
another interest rate mode, and matters relating to the tax-exempt status ofthe interest on the Bonds
Any supplement and Credit Agreement approved by the City Council shall be subrrutted to the Office
of the Attorney General of the State of Texas for review and approval thereby to the extent required
by law
Section 31 FINDING UNDER MASTER ORDINANCE That the Crty finds that for
purposes of the definition of Annual Debt Service Requirements contained m the Master Ordinance,
the Massachusetts Water Resources Authority Multi Modal Subordinated General Revenue Bonds,
1999 Series D (the `Comparable Debt") is an issue of bonds comparable to the Bonds The
Comparable Debt is secured by net water and sewer system revenues, and has an underlying rating
of Aa3
i
Section 32 RULES OF CONSTRUCTION That for all purposes of this Twelfth
Supplement, unless the context requires otherwise, all references to designated Sections and other
subdivisions are to' the Sections and other subdivisions of this Twelfth Supplement. The words
herein 'hereof' and 'hereunder" and other words of similar import refer to this Twelfth
Supplement as a whole and not to any particular Section or other subdivision. Except where the
context otherwise requires, terms defined m this Twelfth Supplement to impart the singular number
shall be considered to include the plural number and vice versa. References to any named person
21
means that party and its successors and assigns References to any constitutional, statutory or
regulatory provision means such provision as it exists on the date this Twelfth Supplement is adopted
by the City and any future amendments thereto or successor provisions thereof. All ordinances and
resolutions or parts thereof m conflict herewith are hereby repealed. While the Bonds bear interest
at the SAVRS Rate, the 'Record Date for the Bonds will be the Business Day immediately preceding
an Interest Payment Date Unless otherwise indicated, all references to time in this Twelfth
Supplement and the exhibits hereto shall refer to New York City time
Section 33 IMMEDIATE EFFECT That this Twelfth Supplement shall be effective
immediately from and after its passage m accordance with the provisions of Section 1201 028 Texas
Government Code, and it is accordingly so ordained.
SIGNED AND SEALED THIS 16TH DAY OF DECEMBER, 2003
Mayor City of Fort Wc/rth, Texas
City Secretary ~y of Fort Worth, Texas
(SEAL)
APPROVED AS TO FORM AND LEGALITY
~~
City Attorney
22
EXI-~IT A
That, as used nn this Twelfth Supplement, the following terms shall have the meanings set
forth below unless the text hereof specifically nndncates otherwise
Authentncatnon Certnficate shall have the meaning gnven sand term m Sectnon 5(a) of the
Twelfth Supplement.
Authornzed Denommatnon shall have the meaning given said term m Sectnon 3(a) of the
Twelfth Supplement.
`Bond Insurer" shall have the meaning given said tenor nn Sectnon 3(f) of the Twelfth
Supplement.
'Bonds means the Sernes 2004 Bonds
'Busnness Day" means a day other than a Sunday Saturday a legal holnday or a day on whnch
barnknng mstrtutnons m the cnty where the Desngnated Trust Office of the Paying Agent/Regnstrar ns
located are authorized bylaw or executnve order to close In addntnon, while the Bonds bear nnterest
at the SAVRS Rate, the term 'Busnness Day" shall have the meaning gnven sand term nn Artncle I of
Exhibnt C of the Twelfth Supplement.
'Chapter 1206 means Chapter 1206 Texas Government Code, as amended
Chapter 1208 means Chapter 1208 Texas Government Code, as amended
Chapter 1371 means Chapter 1371 Texas Government Code, as amended.
'Desngnated Trust Office means the city so designated nn Sectnon 5(a) of the Twelfth
Supplement.
'Enghth Supplement" means the ordnnance authornznng the nssuance of the Sernes 2000B
Bonds
'Eleventh Supplement means the ordnnance authornznng the nssuance of the Sernes 2003A
Bonds
'Fifth Supplement" means the ordinance authornznng the nssuance of the Sernes 1997 Bonds
'Master Ordnnance means the 'Master Ordnnance estabinshnng the Cnty ofFort Worth Texas
Water and Sewer System Revenue Financnng Program passed by the Cnty on December 10 1991
'MSRB means the Munncnpal Securntnes Rulemaknng Board.
'Ninth Supplement" means the ordnnance authornznng the nssuance of the Sernes 2001 Bonds
Al
'NRMSIR means each person whom the SEC or its staffhas determnned to be a nationally
recognized municipal securities information repository wrtlun the meaning of the Rule from time to
tame.
'Paying Agent/Registrar" means the financnal mstrtutnon specified m Section 5(a) of the
Twelfth Supplement.
'Previously Issued Panty Bonds means the Serves 1993 Bonds, the Series 1996 Bonds, the
Serves 1997 Bonds, the Series 1998 Bonds, the Series 2000 Bonds, the Serves 2000B Bonds, the
Series 2001 Bonds and the Senes 2003 Bonds. Upon their issuance, the Senes 2003A Bonds will
also be Previously Issued Parity Bonds
'Purchase Contract" means the Bond Purchase Agreement relating to the Bonds, between the
City and Lehman Brothers
'Registration Books shall have the meaning given said term in Section 5(a) of the Twelfth
Supplement
'Rule means SEC Rule 15c2 12, as amended from time to time
SEC means the United States Securities and Exchange Commission.
Second Supplement means the ordinance authorizing the issuance ofthe Senes 1993 Bonds.
Series 1993 Bonds means the City ofFort Worth, Texas Water and Sewer System Revenue
Refunding Bonds, Senes 1993 authorized by the Second Supplement.
Serves 1996 Bonds means the City ofFort Worth, Texas Water and Sewer System Revenue
Refunding and Improvement Bonds, Senes 1996 authorized by the Third Supplement.
Senes 1997 Bonds means the City ofFort Worth, Texas Water and Sewer System Revenue
Refunding and Improvement Bonds, Senes 1997 authorized by the Fifth Supplement.
Senes 1998 Bonds means the City ofFort Worth, Texas Water and Sewer System Revenue
Refunding and Improvement Bonds, Senes 1998 authorized by the Sixth Supplement.
Series 2000 Bonds" means the City ofFort Worth, Texas Water and Sewer System Revenue
Bonds, Senes 2000 authorized by the Seventh Supplement.
Serves 2000B Bonds means the Crty of Fort Worth, Texas Water and Sewer System
Revenue Refunding and Improvement Bonds, Series 2000B authorized by the Eighth Supplement.
Series 2001 Bonds means the City ofFort Worth, Texas Water and Sewer System Revenue
Bonds, Senes 2001 authorized by the Ninth Supplement.
A2
Senes 2003 Bonds means the City of Fort Worth, Texas Water and Sewer System Revenue
Refunding and Improvement Bonds, Senes 2003 authorized by the Tenth Supplement.
Senes 2003A Bonds means the City of Fort Worth, Texas Water and Sewer System
Revenue Refunding Bonds, Senes 2003A, authorized by the Eleventh Supplement.
Serves 2004 Bonds" means the City ofFort Worth, Texas Water and Sewer System Auction
Rate Revenue Bonds, Series 2004 authorized by the Twelfth Supplement.
Seventh Supplement means the ordinance authorizing the issuance of the Senes 2000
Bonds
SID means any person designated by the State of Texas or an authorized department,
officer or agency thereof as, and determined by the SEC or its staff to be, a state information
depository wnthnn the meaning of the Rule from time to time.
Snxth Supplement" means the ordinance authonzmg the issuance of the Senes 1998 Bonds.
'Tenth Supplement means the ordnnance authonzmg the issuance of the Series 2003 Bonds.
'Term Bonds means those Bonds ndentnfied nn the Purchase Contract as 'term bonds
'Thnrd Supplement" means the ordinance authorizing the issuance of the Senes 1996 Bonds
'Twelfth Supplement means the ordnnance authorizing the nssuance of the Bonds
A3
EXHIBIT B
FORM OF BOND
NO ~ $
UNITED STATES OF AMERICA
STATE OF TEXAS
COUNTIES OF TARRANT AND DENTON
CITY OF FORT WORTH, TEXAS
WATER AND SEWER SYSTEM
AUCTION RATE REVENUE BOND SERIES -2004
MATURITY DATE DATE OF DELIVERY DATED DATE CUSIP
ON THE MATURITY DATE SPECIFIED ABOVE, THE CITY OF FORT WORTH, IN
TA,RRANT AND DENTON COUNTIES TEXAS (the 'Issuer"), hereby promises to pay to
or to the registered assignee hereof, on the Maturity Date specified above, the principal amount of
unless this Bond shall have been called for redemption prior to maturity and to pay interest on the
unpaid principal amount of this Bond at the rate or rates of interest and on the date or dates as herein
provided. Interest on this Bond shall accrue from the Date of Delivery specified above.
This Bond ns one of a serves of bonds of like tenor and effect except as to number principal
amount, interest rate, maturity and right of prior redemption, dated as of the Dated Date specified
above, aggregating $ (herein sometimes called the 'Bonds') issued for the purpose of
(i) improving and extending the System (as defined nn the 'Twelfth Supplemental Ordinance to the
ordinance estabhshnng the City of Fort Worth, Texas Water and Sewer System Revenue Financing
Program (the 'Master Ordinance'), adopted by the Issuer authorizing the issuance of this Bond and
the series of which rt ns a part (the 'Bond Ordinance')), (ii) funding the Reserve Fund (as defined m
the Master Ordinance) and (iii) paying the costs related thereto All capitalized terms not defined
herein shall have the same meaning as given said terms nn the Master Ordinance or the Bond
Ordinance.
The principal of this Bond are payable nn lawful money of the United States of America,
without exchange or collectnon charges The prmcnpal of this Bond shall be payable without exchange
or collectnon charges nn lawful money of the United States of Amernca upon presentation and
surrender of thus Bond at the desngnated corporate trust office nn Minneapolis, Minnesota (the
'Desngnated Trust Office'), of Wells Fargo Bank, N.A. wlnnch ns the 'Paynng Agent/Regnstrar" for
this Bond or wrath respect to a successor Paynng Agent/Regnstrar at the Desngnated Trust Office of
such successor Accrued and unpaid nterest on thus Bond shall be due on the Interest Payment Dates
and payable by wire transfer of immediately available funds to the account specified by the Owner in
a wrntten direction received by the Paying Agent/Registrar on orpnor to aRecord Date or if no such
account number is furnished, by check mailed by the Paying Agent/Registrar to the Owner at the
address appearing on the books requnred to be kept by the Paying Agent/R.egistrar pursuant to the
Bond Ordinance For the purpose ofthe payment of interest on this Bond, the registered owner shall
be the person nn whose name thns Bond is registered at the close of business on the 'Record Date
which while this Bond bears interest at the SAVRS Rate shall be the opening of business on the
Business Day next preceding an Interest Payment Date provided, however that m the event of
nonpayment of interest on a scheduled Interest Payment Date, and for 30 days thereafter anew
record date for such nterest payment (a Special Record Date') will be established by the Paying
Agent/Registrar of and when funds for the payment of such interest have been received. Notice of
the Specnal Record Date and of the scheduled payment date of the past due interest (the Special
Payment Date which shall be 15 days after the Special Record Date} shall be sent at least five
business days pnor to the Special Record Date by United States mail, first class postage prepaid, to
the address of each Holder of a Bond appearing on the books of the Paying Agent/Registrar at the
close of business on the last Business Day preceding the date of mailing such notice The Issuer has
covenanted m the Bond Ordinance that on or before each principal payment date, interest payment
date, ~ and accrued interest payment date for this Bond it will make available to the Paying
Agent/Registrar from the 'Debt Service Fund created by the Master Ordinance, the amounts
required to provide for the payment, m immediately available funds, of all principal of and interest on
the Bonds, when due.
If the date for the payment of the prnncipal of or interest on this Bond shall be (a) a Saturday
Sunday a legal holiday or a day on wlich banking institutions m the city where the Designated Trust
Office of the Paying AgentlRegistrar islocated are authorized by law or executive order to close, or
(b) while the Bonds bear interest at the SAVRS Rate, an April 14 or 1 S a December 30 or 31 or a
day on which the Auction Agent or any Broker Dealer is not open for business, then the date for such
payment shall be the next succeeding day which is not such a Saturday Sunday legal holiday or day
on which banking instntutions are authorized to close, and payment on such date shall have the same
force and effect as if made on the ongnnal date payment was due Notwithstanding the foregoing,
during any period m which ownership of the Bonds ns determined only by a book entry at a securities
depository for the Bonds, any payment to the securities depository or its nominee or registered
assigns, shall be made in accordance wrath existing arrangements between the Issuer and the securities
depository
DETERMINATION OF INTEREST
This Bond is initially issued to bear interest at the Auction Rate determined in accordance with
the Bond Ordinance The Auction Period applncable to this Bond may at any time be changed to a
daily 7-day 28-day 35-day 180-day period or a Special Period, all as provided m the Bond
Ordinance From the Ornginal Issue Date set forth above to the initial Auction Date specified m
accordance with the Bond Ordinance for the Bonds, this Bond shall bear interest at a rate per annum
specified m accordance wrath the Bond Ordinance During any other Auction Period, the interest rate
applicable to this Bond will be determined at the times and m the manner provided in the Bond
Ordinance
While this Bond is m an Auction Penod of greater than 180 days, interest hereon shall be
computed on the basis of a year of 360 days composed of twelve 30-day months. While this Bond
is m an Auction Penod of 180 days or less, interest hereon shall be computed on the basis of the
actual number of days elapsed to the Interest Payment Date over 360 In no event shall the interest
rate on this Bond exceed the Maximum Interest Rate
REDEMPTION OF BOND
While this Bond bears interest at a SAVRS Rate, this Bond shall be subject to redemption
prior to maturity at the option of the Issuer in whole or in part, on the Business Day immediately
succeeding any Auction Penod, in the manner and under the terms and conditions provided m the
Bond Ordinance and the Purchase Contract, at a redemption price of the principal amount of the
Bonds to be redeemed without premium.
The Bonds are subject to mandatory sinking fund redemption m part (in accordance with
procedures of DTC, so long as DTC is the sole registered owner and otherwise at random in such
manner as the Paying Agent/Registrar mits discretion deems proper) on February 15 or if February
15' is not an Interest Payment Date, then on the immediately preceding Interest Payment Date, of each
year.and m the respective principal amounts set forth below at 100% of the principal amount thereof,
plus accrued interest to the Redemption Date, from Sinking Fund Installments which are required to
be made m amounts sufficient to redeem on February 15 or if February 15 is not an Interest Payment
Date, then on the succeeding Interest Payment Date, of each year set forth below the principal
amount of such respective Bonds specified for each of the years shown below
Sinkm~ Fund Installments
Year Principal Amount
* Stated Maturity Date
The Paying AgentlRegistrar will select at random the specific Bonds m Authorized
Denominations to be redeemed by mandatory redemption as provided m and m accordance with the
terms of the Bond Ordinance
Notice of such redemption or redemptions shall be given by Umted States mail, first class
postage prepaid, not less than 15 days before the date fixed for redemption, to the registered owner
of each of the Bonds to be redeemed m whole or m part. Notice having been so given, the Bonds or
portions thereof designated for redemption shall become due and payable on the redemption date
specified in such notice, from and after such date, notwithstanding that any of the Bonds or portions
thereof so called for redemption shall not have been surrendered for payment, interest on such Bonds
or portions thereof shall cease to accrue.
All Bonds of this serves are issuable solely as fully registered bonds, without interest coupons,
in the denonunation of any Authonzed Denomination. As provided in the Bond Ordinance, thus Bond
may at the request of the registered owner or the assignee or assignees hereof, be assigned,
transferred, converted into and exchanged for a like aggregate amount of fully registered Bonds,
without interest coupons, payable to the appropriate registered owner assignee or assignees, as the
case may be, having any Authorized Denomination as requested m wntmg by the appropriate regis-
tered owner assignee or assignees, as the case may be, upon surrender of this Bond to the Paying
Agent/Registrarfnr cancellation, all m accordance with the form and procedures set forth in the Bond
Ordinance. Among other requirements for such assignment and transfer this Bond must be presented
and surrendered to the Paying AgentiRegistrar at the Designated Trust Office, together with proper
instruments of assignment, in form and with guarantee of signatures satisfactory to the Paying
Agent/Registrar evidencing assignment oftlus Bond or any portion or portions hereofin any Author
ized Denonunation to the assignee or assignees m whose name or names this Bond or any such
portion or portions hereof is or are to be registered. The form of Assignment printed or endorsed
on this Bond maybe executed by the registered owner to evidence the assignment hereof, but such
method is not exclusive, and other instruments of assignment satisfactory to the Paying Agent/Regis-
trarmay beused to evidence the assignment of this Bond or any portion or portions hereof from time
to time by the registered owner The one requesting such conversion and exchange shall pay the
Paying Agent/Registrar's reasonable standard or customary fees and charges for converting and
exchanging any Bond or portion thereof. In any circumstance, any taxes or governmental charges
required to be paid with respect thereto shall be paid by the one requesting such assignment, transfer
conversion or exchange, as a condition precedent to the exercise of such privilege The foregoing
notwithstanding, m the case of the conversion and exchange of an assigned and transferred Bond or
Bonds or any portion or portions thereof, such fees and charges of the Paying Agent/Registrar will
be paid by the Issuer
In the event any Paying Agent/Registrar for the Bonds is changed by the Issuer resigns, or
otherwise ceases to act as such, the Issuer has covenanted in the Bond Ordinance that rt promptly will
appoint a competent and legally qualified substitute therefor whose qualifications are substantially
similar to the previous Paying Agent/Registrar rt is replacing, and promptly will cause written notice
thereof to be mailed to the registered owners of the Bonds
Whenever the beneficial ownership of this Bond is determined by a book entry at a secunties
depository for the Bonds, the foregoing requirements of holding, delivering or transferring thus Bond
shall be modified to require the appropriate person or entity to meet the requirements of the securities
depository as to registering or transferring the book entry to produce the same effect.
By becorrung the registered owner ofthus Bond, the registered owner thereby acknowledges
all of the terms and provisions of the Master Ordinance and the Bond Ordinance, agrees to be bound
by such terms and provisions, acknowledges that the Master Ordinance and the Bond Ordinance are
duly recorded and available for inspection in the official minutes and records ofthe Issuer and agrees
that the terms and provisions of thus Bond, the Master Ordinance and the Bond Ordinance constitute
a contract between each registered owner hereof and the Issuer
The Bonds are special obligations of the Issuer payable solely from and equally secured by
a first hen on and pledge of the Pledged Revenues of the System. The Issuer has reserved the right,
subject to the restrictions stated, and adopted by reference, in the Master Ordinance, to issue
additional parity revenue obligations which also may be made payable from, and secured by a first lien
on and pledge of, the Pledged Revenues For a more complete description and identification of the
revenues and funds pledged to the payment of the Bonds, and other obligations of the Issuer secured
by and payable from the same source or sources as the Bonds, reference is hereby made to the Master
Ordinance and the Bond Ordinance
The Issuer has reserved the right, subject to the restrictions stated, and adopted by reference,
in the Bond Ordinance, to amend the Bond Ordinance, and under some (but not all) circumstances
amendments must be approved by the owners of a majority in Outstanding Principal Amount of the
Bonds.
The.registered owner hereof shall never have the right to demand payment of this obligation
out of any funds raised or to be raised by taxation.
It is hereby certified and covenanted that this Bond has been duly and validly authorized,
issued and delivered, and that all acts, conditions and things required or proper to be performed, exist
and be done precedent to or in the authorization, issuance and delivery of this Bond have been
performed, existed and been done in accordance with law
IN WITNESS WHEREOF this Bond has been signed with the imprinted or lithographed
manual or facsimile signature of the Mayor or the Mayor Pro-Tem of said Issuer attested by the
imprinted or lithographed facsimile signature of the City Secretary and approved as to form and
legality by the imprinted or lithographed facsimile signature of the City Attorney and the official seal
of said Issuer has been duly affixed to printed, lithographed or impressed on this Bond.
AS TO FORM AND LEGALITY
City Attorney
FORM OF PAYING AGENT/REGISTRAR'S AUTHENTICATION CERTIFICATE
PAYING AGENT/REGISTRAR'S AUTHENTICATION CERTIFICATE
(To be executed if this Bond is not accompanied by an executed
Registration Certificate of the Comptroller of Public Accounts
of the State of Texas)
It is hereby certified that this Bond has been issued under the provisions of the
proceedings adopted by the Issuer as described in the text of this Bond, and that this Bond has been
issued m exchange for or replacement of a bond, bonds, or a portion of a bond or bonds of an issue
which originally was approved by the Attorney General of the State of Texas and registered by the
Comptroller of Public Accounts of the State of Texas
Dated WELLS FARGO BANK, N A.
Paying Agent/Registrar
By
Authorized Signatory
FORM OF COMPTROLLER'S REGISTRATION CERTIFICATE
OFFICE OF COMPTROLLER
STATE OF TEXAS
REGISTER NO
I hereby certify that this Bond has been exarruned, 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
(SEAL)
Comptroller of Public Accounts of
the State of Texas
NOTE TO PRINTER.
*¶ not to be printed on Bonds
FORM OF ASSIGNMENT
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto
Please insert Social Security or Taxpayer Identification Number of Transferee
(Please pant or typewrite name and address, including zip code of Transferee)
the within Bond and all rights thereunder and hereby
irrevocably constitutes and appoints
attorney to register the transfer of the within Bond on the
books kept for registration thereof, with full power of
substitution m the prerruses.
Dated
Signature Guaranteed
NOTICE Signature(s) must be guaranteed by
a member firm of the New York Stock
Exchange or a commercial bank or trust
company
NOTICE The signature(s) above must
correspond with the name of the Registered
Owner as rt appears upon the front of this
Bond m every particular without alteration or
enlargement or any change whatsoever
EXHIBIT C
TO
Twelfth Supplement
Auction Provisions
TABLE OF CONTENTS
Page
ARTICLE I Definitions 1
ARTICLE II Auct ion Procedures 7
Section 2 O1 Orders by Existing Owners and Potential Owners 7
Section 2 02 Subrrussion of Orders by Broker Dealers to Auction Agent 9
Section 2 03 Determination of SAVRS Rate 11
Section 2 04 Allocation of Bonds 12
Section 2 05 Notice of SAVRS Rate 14
Section 2 06 Reference Rate 15
Section 2 07 Miscellaneous Provisions Regarding Auctions lb
Section 2 08 Changes in Auction Penod or Auction Date 17
ARTICLE III Auct ion Agent 18
Section 3 O1 Auction Agent 18
Section 3 02 Qualifications of Auction Agent; Resignation, Removal 19
ARTICLE 1
Definitions
In addition to the words and terms elsewhere defined in this Twelfth Supplement, the
following words and terms as used m this Exhibit C and elsewhere m this Twelfth Supplement have
the following meanings with respect to the Bonds in an SAVRS Rate Penod unless the context or use
indicates another or different meaning or intent
Agent Member" means a member of, or participant in, the Securities Depository who shall
act on behalf of a Bidder
All Hold Rate means, as of any Auction Date, 45% of the Reference Rate m effect on such
Auction Date
Applicable Percentage means, as of any Auction Date, the Percentage of Reference Rate
(in effect or such Auction Date) determined as set forth below based on the Prevailing Rating of the
Bonds in effect at the close of business on the Business Day immediately preceding such Auction
Date
Percentage of
Prevailing_Ratmg Reference Rate
AAA/AAA/Aaa 175%
AA/AA/Aa 200
A/A/A 250
BBBBBBBaa 275
Below BBBBBBBaa 300
Auction means each periodic implementation of the Auction Procedures
Auction Agent means the auctioneer appointed m accordance with Section 3 O l or 3 02 of
this Exhibit C and shall initially be The Bank of New York.
Auction Agreement means an agreement between the Auction Agent .and the Paying
Agent/Registrar pursuant to which the Auction Agent agrees to follow the procedures specified in
this Exhibit C with respect to the Bonds while bearing interest at a SAVRS Rate, as such agreement
may from time to time be amended or supplemented.
Auction Date means during any period m which the Auction Procedures are not suspended
m accordance with the provisions hereof, (i) ifthe Bonds are in a daily Auction Period, each Business
Day (ii) if the Bonds are in a Special Rate Period, the last Business Day of the Special Rate Penod,
and (iii) if the Bonds are m any other Auction Penod, the Business Day next preceding each Interest
Payment Date for such Bonds (whether or not an Auction shall be conducted on such date) provided,
however that the last Auction Date with respect to the Bonds nn an Auction Penod other than a daily
Auction Penod or a Special Rate Penod shall be the earlier of (a) the Business Day next preceding
the Interest Payment Date next preceding the Conversion Date for the Bonds and (b) the Business
Day next preceding the Interest Payment Date next preceding the final maturity date for the Bonds,
and provided, further that of the Borids are nn a daily Auction Penod, the last Auction Date shall be
the earlier of (x) the Business Day next preceding the Conversion Date for the Bonds and (y) the
Business Day next preceding the final maturity date for the Bonds The last Business Day of a
Special Rate Period shall be the Auction Date for the Auction Period which begins on the next
succeeding Business Day of any On the Business Day preceding the conversion from a daily Auction
Period to another Auction Penod, there shall be two Auctions, one for the last daily Auction Penod
and one for the first Auction Penod following the conversion. The first Auction Date for the Bonds
ns February 18 2004
Auction Period means (i) a Special Rate Penod, (ii) with respect to Bonds nn a daily mode,
a period beginning on each Business'Day and extending to but not including the next succeeding
Business Day (iii) with respect to the Bonds nn a seven-day mode, a period of generally seven days
beginning on a Wednesday (or the day following the last day of the prior Auction Period of the prior
Auction Penod does not end on a Tuesday) and ending on the Tuesday thereafter (unless such
Tuesday ns not followed by a Business Day nn whnch case on the next succeeding day which ns
followed by a Business Day), (iv) with respect to the Bonds nn a 28-day mode, a period of generally
28 days begnmm~g on a Wednesday (or the day following the last day of the prior Auction Period of
the prior Auction Pernod does not end on a Tuesday) and ending on the fourth Tuesday thereafter
(unless such Tuesday ns not followed by a Busnness Day nn which case on the next succeeding day
which ns followed by a Business Day), (v) with respect to the Bonds nn a 35-day mode, a period of
generally 35 days beginning on a Wednesday (or the day following the last day of the prior Auction
Penod of the prnor Auction Pernod does not end on a Tuesday) and ending on the fifth Tuesday
thereafter (unless such Tuesday ns not followed by a Business Day nn which case on the next
succeeding day wtnnch ns followed by a Business Day), and (vi) with respect to the Bonds nn a
semiannual mode, a period ofgenerally six months (or shorter period upon a conversion from another
Auction Pernod) begnnuung on the day following the last day of the prior Auction Penod and ending
on the next succeeding February 15 or August 15 provided, however that of there ns a conversnon
of the Bonds from a daily Auction Period to a seven-day Auctnon Penod, the next Auctnon Pernod
shall began on the date ofthe conversnon (i.e the Interest Payment Date for the prnor Auctnon Pernod)
and shall end on the next succeednng Tuesday (unless such Tuesday ns not followed by a Busnness
Day in wYnnch case on the next succeednng day wliich ns followed by a Busnness Day) if there ns a
conversnon from a daily Auctnon Pernod to a 28-day Auctnon Period, the next Auctnon Period shall
began on the date of the conversnon (i. a the Interest Payment Date for the prnor Auctnon Pernod) and
shall end on the Tuesday (unless such Tuesday ns not followed by a Busnness Day nn whnch case on
the next succeednng day which ns followed by a Busnness Day) whnch ns more than 21 days but not
more than 28 days from such date of conversnon, and, of there ns a conversnon from a daily Auctnon
Penod to a 3 5-day Auctnon Penod, the next Auctnon Penod shall begin on the date of the conversnon
(i.e the Interest Payment Date for the prnor Auctnon Pernod) and shall end on the Tuesday (unless
such Tuesday ns not followed by a Busnness Day nn whnch case on the next succeednng day whnch ns
followed by a Busnness Day) whnch ns more than 28 days but not more than 35 days from such date
of conversnon.
2
Auction Procedures means the procedures for conducting Auctions for the Bonds during
a SAVRS Rate Penod set forth m this Exhibit C
Auction Rate means for eiach Auction Period, (i) of Sufficient Clearing Bids exist, the
Winning Bid Rate (provided, however of all of the Bonds are the subject of Submitted Hold Orders,
the All Hold Rate) and (ii) of Sufficient Cleanng Bids do not exist, the Maximum SAVRS Rate
Authorized Denomnnatuons means $25 000 and integral multnples thereof, notwithstanding
anything else nn this Twelfth Supplement to the contrary so long as the Bonds bear nnterest at a
SAVRS Rate
Available Bonds means on each Auction Date, the aggregate pnncupal amount ofthe Bonds
that are not the subject of Submitted Hold Orders
'Bid has the meaning specified m subsection (a) of Section 2 O1 of thus Exhibit C
'Budder" means each Existing Owner and Potential Owner who places an Order
i 'Broker Dealer" means any entity that ns perrnutted by law to perform the functuon requnred
of a Broker Dealer described un thus Exhibit, that ns a member of, or a dnrect partncupant un, the
Securutues Deposutory that has been selected by the Issuer wrath the consent ofLehman Brothers, Inc
so long as Lehman Brothers, Inc us a Broker Dealer and that ns a party to a Broker Dealer
Agreement wuth the Auctuon Agent.
i
'Broker Dealer Agreement" means an agreement among the Auctuon Agent, the Issuer and
a Broker Dealer pursuant to whuch such Broker Dealer agrees to follow the procedures described
un thus Exhibit, as such agreement may from to tome be amended or supplemented.
'Busuness Day" un addntnon to any other definntnon of 'Busuness Day" nncluded nn thus Twelfth
Supplement while the Bonds bear nnterest at a SAVRS Rate, the term Busuness Day shall not nnclude
April 14 or 15 or December 30 or 31 or days on which the Auctuon Agent or any Broker Dealer are
not open for busnness
Conversnon Date means the date on whuch the Bonds begin to bear interest at a Fixed Rate,
a Weekly Rate or a Flexible Rate, as each term may be defined nn a supplement to the Twelfth
Supplement adopted by the City Council m the exercnse of the nght reserved m Section 15(f) of the
Twelfth Supplement. ~
f 'Default Rate means, m respect of any Auctuon Penod other than a daily Auctuon Pernod, a
per annum rate equal to three hundred percent (300%) of the Reference Rate determined on the
Auctuon Date next preceding the first day of such Auctuon Penod or m the case of Bonds. nn a daily
Auctuon Penod, three hundred percent (300%) ofthe Reference Rate determined on the Auctuon Date
whuch was the first day of such Auctuon Pernod, provided, however the Default Rate shall not exceed
the Maximum Interest Rate
f
3
'Existing Owner" means a Person who ns listed as the beneficial owner of the Bonds nn the
records of the Auction Agent. j
'Favorable Opnmon of Bond. Counsel means the opinion of nationally recognized bond
counsel selected by the Issuer addressed to the Auction Agent, the Issuer and the Paying
Agent/Regnstrar to the effect that the actnon proposed to be taken ns authorized or permntted by the
laws of the State and the Twelfth Supplement and will not, nn and of ntself, adversely affect any
exclusnon of nnterest on the Bonds from gross nncome of the owners thereof for federal nncome tax
purposes
'Fitch means Fitch, Inc and any successor thereto
'Hold Order" has the meaning specnfied nn subsection (a) of Section 2 O 1 of tlis Exhibit C
'Initial Period" means the period from the date of delnvery of the Bonds to but not nncludnng
February I8 2004
'Interest Payment Date with respect to the Bonds bearnng nnterest at SAVRS Rates, means
February 18 2004 and thereafter (a) when used wrath respect to any Auction Pernod other than a daily
Auctnon Period or a Specnal Rate Penod, the Business Day nmmednately following such Auctnon
Period, (b) when used wrath respect to a daily Auction Pernod, the first Busnness Day of the month
nmmednately succeeding such Auctnon Penod, (c) when used wrath respect to a Specnal Rate Penod
of (i) seven or more but fewer than 92 days, the Busnness Day nmmednately following such Specnal
Rate Period, or (ii) 92 or more days, each thnrteenth Wednesday after the first day of such Specnal
Rate Pernod or the next Busnness Day of such Wednesday ns not a Busnness Day and on the Busnness
Day nmmednately following such Specnal Rate Pernod, (d) after a Fixed Rate Conversnon Date
determined nn accordance wrath the procedures to be set forth nn a supplement to the Twelfth
Supplement adopted by the City Council m the exercnse of the rnght reserved m Sectnon 15(fj of the
Twelfth Supplement, each February 15 and August 15 (e) each Mandatory Purchase Date
deternnined nn accordance wrath the procedures to be set forth nn a supplement to the Twelfth
Supplement adopted by the Cnty Council nn the exercnse of the rnght reserved nn Sectnon 15(f) of the
Twelfth Supplement, and (f) the Maturity Date
'LIBOR on any date of determnnatnon for any Auctnon Pernod, means (i) for any Auctnon
Pernod of fewer than 49 days, the offered rate for deposnts nn U S dollars for aone-month pernod
which appears on the Telerate Page 3750 at approxnmately 11 00 a.rri. London tame, on such date,
or of such date ns not a date on wlnnch dealnngs nn U S dollars are transacted nn the London nnterbank
market, then on the next precednng day on wlnnch such dealnngs were transacted nn such market (the
calculatnon date') and (ii) for any Auctnon Pernod of (A) 49 or more but fewer than 70 days, such
rates for deposnts nn U S dollars for atwo-month pernod, (B) 70 or more but fewer than 85 days, the
ainthmetnc average of such rates for deposnts nn U S dollars for two and three month pernods, (C) 85
or more but fewer than 120 days, such rate for deposnts nn U S dollars for athree-month pernod, (D)
120 or more but~fewer than 148 days, the arnthmetnc average of such rates for deposnts nn U S dollars
for three and snx month pernods, (E) 148 or more but fewer than 180 days, such rate for deposnts in
U S dollars for a snx month pernod, (F) 180 or more but fewer than 225 days, the arnthmetic average
4
of such rates for deposits in U S dollars for six and rune-month penods, (G) 225 or more but fewer
than 290 days, such rate for deposits in U S dollars for a mne-month period, (H) 290 or more but
fewer than 325 days, the arithmetic average of such rates for deposits in U S dollars for nine month
and one-year penods and (I) 325 or more but fewer than 365 days, such rate for deposits in U S
dollars for cone-year penod.
i
'Maximum Interest Rate means the maximum 'net effective interest rate as defined in and
calculated in accordance with the provisions of Chapter 1204 Texas Government Code
'Maximum SAVRS Rate means, as of any Auction Date, the product of the Reference Rate
multiplied by the Applicable Percentage provided, however the Maximum SAVRS Rate shall not
exceed the Maximum Interest Rate
'Moody's means Moody's Investors Service, Inc and any successor thereto
'Order" means a Hold Order Bid or Sell Order
I
'Potential Owner" means any Person, including any Existing Owner who may be interested
m acquiring a beneficial rnterest in the Bonds m addition to the Bonds currently owned by such
Person, if any j
'Prevailing Rating" means (a) AAA/AAA/Aaa, if the Bonds shall have a rating of AAA by
Fitch, a rating of AAA by S&P and a rating of Aaa by Moody's, (b) if not AAA/AAA/Aaa,
AA/AA/Aa if the Bonds shall have a rating of AA or better by Fitch, a rating of AA or better by
S&P and a rating of Aaa or better by Moody's, (c) if not AAA/AAA/Aaa or AA/AA/Aa, A/A/A if
the Bonds shall have a rating of A or better by Fitch, a rating of A or better by S&P and a rating
of A3 or better by Moody's, and (d) if not AAA/AAA/Aaa, AA/AA/Aa or A/A/A, then below A/A/A,
whether or not the Bonds are rated by any Rating Agency For purposes of this definition, Fitch's
rating categories of AAA AA and A S&P's rating categories of AAA AA and A and
Moody's rating categories of Aaa Aaa and A3 shall be deemed to refer to and include the
respective rating categories correlative thereto m the event that any such Rating Agencies shall have
changed or modified their generic rating categones or if any successor thereto appointed m
accordance with the definitions thereof shall use different rating categories Ifthe Bonds are not rated
by a Rating Agency the requirement of a rating by such Rating Agency shall be disregarded. If the
ratings for the Bonds are split between two of the foregoing categories, the lower rating shall
determine the Prevailing Rating. If there is no rating, then the SAVRS Rate shall be the Maximum
SAVRS Rate
'Principal Office means, with respect to the Auction Agent, the office thereof designated in
writing to the Issuer the Paying Ag ~nt/Registrar and each Broker Dealer
'Rating Agency" means any of Fitch, Moody's and S&P
I
'Reference Rate shall have the meaning specified in Section 2 06 of this Exhibit C
5
S&P means Standard & ~Poor's Ratings Services, A Division of The McGraw Hill
Companies, Inc and any successor thereto
SAVRS means the Bonds while they bear interest at the SAVRS Rate
SAVRS Rate means the rate of interest to be borne by the Bonds during each Auction
Period deterrnined nn accordance with Section 2 03 of this Exhibit C provided, however in no event
may the SAVRS Rate exceed the Maximum SAVRS Rate
SAVRS Rate Conversion Date means with respect to Bonds, the date on which the Bonds
of such Serves convert from an interest rate period other than a SAVRS Rate Period and begin to bear
interest at a SAVRS Rate.
SAVRS Rate Period means after the Initial Period any period of time commencing on the
day following the Initial Period and ending on a Weekly Rate Conversion Date, a Flexible Rate
Conversion Date or a Fixed Rate Conversion Date, each of which as defined m a supplement to the
Twelfth Supplement adopted by the City Council nn the exercise ofthe right reserved in Section 15(f)
of the Twelfth Supplement.
Securities Depository" means The Depository Trust Company and its successors and assigns
or any other securities depository selected by the Issuer which agrees to follow the procedures
required to be followed by such securities depository m connection with the Bonds
l
Sell Order" has the meaning' specified in subsection (a) of Section 2 O1 of Exhibit C
Special Rate Period means any period of not less than seven nor more than 1 092 days
which begins on an Interest Payment Date and ends on a Tuesday unless such Tuesday is not followed
by a Business Day m which case on the next succeeding day which is followed by a Business Day
Submission Deadline means 1 00 p m. on each Auction Date not m a daily Auction Period
and 1 100 a.m. on each Auction Date in a daily Auction Period, or such other time on such date as
shall be specified from time to time by the Auction Agent pursuant to the Auction Agreement as the
time by which Broker Dealers are required to submit Orders to the Auction Agent.
Submitted Bid has the meaning specified in subsection (b) of Section 2 03 of this Exhibit
C
Submitted Hold Order" has the meaning specified m subsection (b) of Section 2 03 of this
Exhibit C
Submitted Order" has the meaning specified in subsection (b) of Section 2 03 of this Exhibit
C
6
Submntted Sell Order" has the meaning specified nri subsection (b) of Section 2 03 of this
Exhibit C
i
Sufficnent Clearing Bnds means an Auctnon for whnch the aggregate pnncnpal amount of
Bonds that are the subject of Submntted Bnds by Potentnal Owners specnfynng one or more rates. not
higher than the Maximum SAVRS Rate ns not less than the aggregate prnncnpal amount of Bonds that
are the subject of Submntted Sell Orders and of Submntted Bnds by Exnstnng Owners specnfynng rates
higher than the Maximum SAVRS Rate.
'Winning Bnd Rate means the lowest rate specnfied nn any Submntted Bnd whnch of selected
by the Auctnon Agent as the SAVRS Rate would cause the aggregate pnncnpal amount of Bonds that
are the subject of Submitted Bnds specnfynng a rate not greater than such rate to be not less than the
aggregate pnncnpal amount of Available Bonds.
ARTICLE II
Auction Procedures
Section 2 01 Orders by Existing Owners and Potential Owners (a) Pnor to the
Submnssnon Deadline on each Auctnon Date
(i) each Exnstnng Owner may submnt to a Broker Dealer nn wrntnng or by such
other method as shall be reasonably acceptable to such Broker Dealer nnformatnon as to
(A) the pnncnpal amount of Bonds, of any held by such Exnstnng Owner
whnch such Exnstnng Owner nrrevocably commnts to continue to hold for the next
succeeding Auction Pernod wnthout regard to the rate determined by the Auctnon
Procedures for such Auctnon Penod,
(B) the prnncnpal amount of Bonds, of any held by such Exnstnng Owner
whnch such Existing Owner nrrevocably commnts to continue to hold for the next
succeeding Auctnon Penod of the rate determined by the Auction Procedures for such
Auctnon Period shall not be less than the rate per annum then specified by such
Exnstnng Owner (and which such Exnstnng Owner nrrevocably offers to sell on the
next succeednng Interest Payment Date (or the same day nn the ease of a daily
Auctnon Pernod) of the rate determnned by the Auction Procedures for the next
succeednng Auctnon Pernod shall be less than the rate per annum then specnfied by
such Exnstnng Owner) and/or
(C) the prnncnpal amount of Bonds, of any held by such Exnstnng Owner
whnch such Exnstnng Owner nrrevocably offers to sell on the next succeednng Interest
Payment Date (or on the same day nn the case of a daily Auctnon Pernod) wnthout
regard to the rate determnned by the Auctnon Procedures for the next succeednng
Auctnon Penod, and
7
(ii) for the purpose of implementing the Auctions and thereby to achieve the
lowest possible interest rate on the Bonds, the Broker Dealers shall contact Potential Owners,
including Persons that are Existing Owners, to determine the principal amount of Bonds, of
any which each such Potential Owner irrevocably offers to purchase of the rate determined
by the Auction Procedures for the next succeeding Auction Period ns not less than the rate per
annum then specified by such Potential Owner
For the purposes hereof an Order containing the information referred to nn clause (a)(i)(A)
above ns herein referred to as a 'Hold Order" an Order containing the information referred to nn
clause (a)(i)(B) or (ii) above ns herein referred to as a 'Bnd and an Order containing the reformation
referred to nn clause (a)(i)(C) above ns herein referred to as a Sell Order"
(b) (i) A Bid by an Exnstmg Owner shall constitute an nrrevocable offer to sell
(A) the principal amount of Bonds specnfied nn such Bnd of the rate
determnned by the Auctnon Procedures on such Auctnon Date shall be less than the
rate specified therenn, or
1
(B) such principal amount or a lesser prnncnpal amount of Bonds to be
determnned as set forth nn subsectnon (a)(v) of Sectnon 2 04 hereof of the rate
determnned by the Auctnon Procedures on such Auctnon Date shall be equal to such
specnfied rate, or ~
(C) a lesser prnncnpal amount of Bonds to be determnned as set forth nn
subsectnon (b)(iv) of Sectnon 2 04 hereof of such specnfied rate shall be hngher than
the Maxnmum SAVRS Rate and Sufficnent Clearing Bnds do not exnst
(ii) A Sell Order by an Exnstmg Owner shall constntute an nrrevocable offer to
sell
(A) the pnncnpal amount of Bonds specnfied m such Sell Order• or
(B) such prnncnpal amount or a lesser prnncnpal amount of Bonds as set
forth nn subsectnon (b)(iv) of Sectnon 2 04 hereof of Sufficnent Clearing Bnds do not
exnst.
(ini) A Bnd by a Potential Owner shall constntute an nrrevocable offer to purchase
(A) the prnncnpal amount of Bonds specnfied nn such Bnd of the rate
determined by the Auctnon Procedures on such Auctnon Date shall be hngher than the
rate specnfied therenn, or
i
(B) such prnncnpal amount or a lesser prnncnpal amount of Bonds as set
forth in subsectnon (a)(vi) of Sectnon 2 04 hereof of the rate determnned by the
Auctnon Procedures on such Auctnon Date shall be equal to such specnfied rate
8
(c) Anything herein to the contrary notwithstanding:
(i) for purposes of any Auction, any Order which specifies Bonds to be held,
purchased or sold in a pnncipal amount which is not $25 000 or an integral multiple thereof
shall be rounded down to the nearest $25 000 and the Auction Agent shall conduct the
Auction Procedures as if such Order had been subrrutted in such lower amount;
(ii) for purposes of any Auction other than dunng a daily Auction Period, any
portion of an Order of an Existing Owner which relates to a Bond which has been called for
redemption on or pnor to the Interest Payment Date next succeeding such Auction shall be
invalid with respect to such portion and the Auction Agent shall conduct the Auction
Procedures as if such portion of such Order had not been subrrutted,
(iii) for purposes of any Auction other than dunng a daily Auction Period, no
portion of a Bond which has been called for redemption on or pnor to the Interest Payment
Date next succeeding such Auction shall be included m the calculation of Available Bonds for
such Auction, and
(iv) the Auction Procedures shall be suspended dunng the period commencing
on the date of the Auction Agent's receipt of notice from the Paying Agent/Registrar or the
Issuer of the failure to pay principal, premium or interest on any Bond when due (provided,
however that for purposes of this provision only payment by the Bond Insurer shall be
deemed to cure such failure and no suspension of the Auction Procedures shall occur) but
shall resume two Business Days after the date on which the Auction Agent receives notice
from the Paying Agent/Registrar that such failure has been waived or cured, with the next
Auction to occur on the next regularly scheduled Auction Date occumng thereafter
Section 2.02 Submission of Orders by Broker Dealers to Auction Agent
(a) Each Broker Dealer shall submit to the Auction Agent in writing or by such
other method as shall be reasonably acceptable to the Auction Agerit, pnor to the Submission
Deadline on each Auction Date, all Orders obtained by such Broker Dealer and specifying, if
requested, with respect to each Order•
(i) the aggregate principal amount ofBonds, if any that are the subject of each
Order
(ii) to the extent that such Bidder is an Existing Owner•
(A) the principal amount of Bonds, if any subject to any Hold Order
placed by such .Existing Owner•
(B) the pnncipal amount ofBonds, if any subject to any Bid placed by
such Existing Owner and the rate specified in such Bid, and
I
i
9
(C) the principal amount ofBonds, if any subject to any Sell Order placed
by such Existing Owner and
(iii) to the extent such Bidder is a Potential Owner the rate specified m such Bid.
(b) If any rate specified in any Bid contains more than three figures to the right
of the decimal point, the Auction Agent shall round such rate up to the next highest one thousandth
of one percent (0 001 %)
(c) If an Order or Orders covering all of the Bonds held by an Existing Owner
is not submitted to the Auction Agent prior to the Submission Deadline, the Auction Agent shall
deem a Hold Order to have been submitted on behalf of such Existing Owner covering the principal
amount ofBonds held by such Existing Owner and not subject to Orders submitted to the Auction
Agent; provided, however that if there is a conversion from one Auction Period to another Auction
Period and Orders have not been submitted to the Auction Agent prior to the Submission Deadline
covering the aggregate principal amount ofBonds to be converted held by such Existing Owner the
Auction Agent shall deem a Sell Order to have been submitted on behalf of such Existing Owner
covering the principal amount ofBonds to be converted held by such Existing Owner not subject to
Orders submitted to the Auction Agent.
(d) If one or more Orders covering in the aggregate more than the principal
amount of Outstanding Bonds held by any Existing Owner are submitted to the Auction Agent, such
Orders shall be considered valid as follows
(i) all Hold Orders shall be considered Hold Orders, but only up to and
including in the aggregate the principal amount ofBonds held by such Existing Owner
(ii) (A) any Bid of an Existing Owner shall be considered valid as a Bid of an
Existing Owner up to and including the excess of the principal amount ofBonds held by such
Existing Owner over the principal amount of the Bonds subject to Hold Orders referred to
in paragraph (i) above,
(B) subject to clause (A) above, all Bids of an Existing Owner with the
same rate shall be aggregated and considered a single Bid of an Existing Owner up
to and including the excess of the principal amount ofBonds held by such Existing
Owner over the principal amount ofBonds held by such Existing Owner subject to
Hold Orders referred to in paragraph (i) above,
(C) subject to clause (A) above, if more than one Bid with different rates
is submitted on behalf of such Existing Owner such Bids shall be considered Bids
of an Existing Owner in the ascending order of their respective rates up to the
amount of the excess of the principal amount ofBonds held by such Existing Owner
over the principal amount ofBonds held by such Existing Owner subject to Hold
Orders referred to in paragraph (i) above and
10
i
(D) the principal amount, if any of such Bonds subject to Bids not
considered to be Bids of an Existing Owner under this paragraph (ii) shall be treated
as the subject of a Bid by a Potential Owner and
(iii) all Sell Orders. shall be considered Sell Orders, but only up to and including
a principal amount of Bonds equal to the excess of the principal amount of Bonds held by
such Existing Owner over the sum of the principal amount of the Bonds considered to be
subject to Hold Orders pursuant to paragraph (i) above and the principal amount of Bonds
considered to be subject to Bids of such Existing Owner pursuant to paragraph (ii) above
(e) If more than one Bid is submitted on behalf of any Potential Owner each Bid
subrrutted with the same rate shall be aggregated and considered a single Bid and each Bid submtted
with a different rate shall be considered a separate Bid with the rate and the principal amount of
Bonds.specified therein.
(f) Neither the Issuer the Paying Agent/Registrar nor the Auction Agent shall be
responsible for the failure of any Broker Dealer to submit an Order to the Auction Agent on behalf
of any Existing. Owner or Potential Owner
Section 2 03 Determination of SAVRS Rate (a) Not later than 9 30 a.m. on each
Auction Date, the Auction Agent shall advise the Broker Dealers and the Paying Agent/Registrar by
telephone of the All Hold Rate, the Maximum SAVRS Rate and the Reference Rate
(b) Promptly after the Subnussion Deadline on each Auction Date, the Auction Agent
shall assemble all Orders subrrutted or deemed subrrutted to it by the Broker Dealers (each such Order
as subrrutted or deemed submitted by a Broker Dealer being hereinafter referred to as a Submitted
Hold Order" a Subrrutted Bid or a Subrrutted Sell Order" as the case maybe, and collectively as
a Subrrutted Order") and shall deterrmne (i) the Available Bonds, (ii) whether there are Sufficient
Clearing Bids, and (iii) the Auction Rate
(c) Promptly after the Auction Agent has made the determinations pursuant to
subsection (b) above the Auction Agent shall advise the Paying Agent/Registrar by telephone
(promptly confirmed to writing), telex or facsimile transrrussion of the Auction Rate for the next
succeeding Auction Period and the Paying Agent/Registrar shall promptly notify DTC of such
Auction Rate
(d) In the event the Auction Agent fails to calculate or for any reason, fails to timely
provide the Auction Rate for any Auction Period, (i) if the preceding Auction Period was a period
of 35 days or less, the new Auction Period shall be the same as the preceding Auction Period and the
SAVRS Rate for the new Auction Period shall be the same as the SAVRS Rate for the preceding
Auction Period, and (ii) if the preceding Auction Period was a period of greater than 35 days, the
preceding Auction Period shall be extended to the seventh day following the day that would have
been the last day of such Auction Period had it not been extended (or if such seventh day is not
followed by a Business Day then to the next succeeding day which is followed by a Business Day)
11
and the SAVRS Rate m effect for the preceding Auction Perrod will continue m effect for the Auction
Period as so extended. In the event an Auction Perrod rs extended as set forth rn clause (ii) of the
preceding sentence, an Auction shall be held on the last Business Day of the Auction Period as so
extended to take effect for an Auction Period beginning on the Business Day immediately following
the last day of the Auction Perrod as extended wlirch Auction Period will end on the date it would
otherwise have ended on had the prior Auction Period not been extended.
(e) In the event the Auctron Procedures are suspended due to the failure to pay
principal of, premium or interest on any Bond, the SAVRS Rate for the next succeeding Auctron
Perrod shall be the Default Rate
i
(f) In the event of a failed conversron from a SAVRS Mode to another interest rate
mode or in the event of a failure to change the length of the current Auctron Perrod due to the lack
of Sufficrent Clearing Brds at the Auctron on the Auctron Date for the first new Auctron Perrod, the
SAVRS Rate for the next Auctron Perrod shall be the Maxrmum SAVRS Rate and the Auctron Perrod
shall be a seven-day Auctron Perrod.
(g) If the Bonds are not rated or rf the Bonds are no longer maintained rn
book-entry-only form by the Securrtres Deposrtory then the SAVRS Rate shall be the Maxrmum
SAVRS Rate.
Section 2 04 Allocation of Bonds.
(a) In the event of Sufficrent Clearing Brds, subject to the further provrsrons of
subsections (c) and (d) below Submrtted Orders shall be accepted or rejected as follows in the
followrg order of priorrty
(i) the Submitted Hold Order of each Existing Owner shall be accepted, thus
requiring each such Exrsting Owner to continue to hold the Bonds that are the subject of such
Submrtted Hold Order•
(ii) the Submrtted Sell Order of each Exrsting Owner shall be accepted and the
Submitted Brd of each Existrng Owner specrfying any rate that rs higher than the Wimm~g Brd
Rate shall be rejected, thus requiring each such Existing Owner to sell the Bonds that are the
subject of such Submitted Sell Order or Submitted Bid,
(iii) the Submitted Bid of each Exrstrng Owner specifying any rate that rs lower
than the Winning Brd Rate shall be accepted, thus requiring each such Exrsting Owner to
continue to hold the Bonds that are the sub~eet of such Submrtted Brd,
(iv) the Submrtted Bid of each Potentral Owner specifyrg any rate that rs lower
than the Winnrng Brd Rate shall be accepted, thus requirrng each such Potentral Owner to
purchase the Bonds that are the subject of such Submrtted Brd,
12
(v) the Submitted Bid of each Existing Owner specifying a rate that is equal to
the Winning Bid Rate shall be accepted, thus requiring each such Existing Owner to continue
to hold the Bonds that are the subject of such Submitted Bid, but only up to and including the
principal amount of Bonds obtained by multiplying (A) the aggregate principal amount of
Outstanding Bonds which are not the subject of Submitted Hold Orders described in
paragraph (i) above or of Submitted Bids described in paragraphs (iii) or (iv) above by (B)
a fraction the numerator of which shall be the principal amount of Outstanding Bonds held
by such Existing Owner subject to such Submitted Bid and the denominator of which shall
be the aggregate principal amount of Outstanding Bonds subject to such Submitted Bids made
by all such Existing Owners that specified a rate equal to the Winning Bid Rate, and the
remainder if any of such Submitted Bid shall be rejected, thus requiring each such Existing
Owner to sell any excess amount of Bonds,
(vi) the Submitted Bid of each Potential Owner specifying a rate that is equal to
the Winning Bid Rate shall be accepted, thus requiring each such Potential Owner to purchase
the Bonds that are the subject of such Submitted Bid, but only in an amount equal to the
principal amount of Bonds obtained by multiplying (A) the aggregate principal amount of
Outstanding Bonds which are not the subject of Submitted Hold Orders described in
paragraph (i) above or of Subnrutted Bids described in paragraphs (iii), (iv) or (v) above by
(B) a fraction the numerator of which shall be the principal amount of Outstanding Bonds
subject to such Submitted Bid and the denominator ofwliich shall be the sum ofthe aggregate
principal amount of Outstanding Bonds subject to such Submitted Bids made by all such
Potential Owners that specified a rate equal to the Winning Bid Rate, and the remainder of
such Submitted Bid shall be rejected, and
(vii) the Submitted Bid of each Potential Owner specifying any rate that is higher
than the Winning Bid Rate shall be rejected.
(b) In the event there are not Sufficient Clearing Bids, subject to the further
provisions of subsections (c) and (d) below Submitted Orders shall be accepted or rejected as follows
m the following order of priority
(i) the Submitted Hold Order of each Existing Owner shall be accepted, thus
requiring each such Existing Owner to continue to hold the Bonds that are the subject of such
Submitted Hold Order
(ii) the Submitted Bid of each Existing Owner specifying any rate that is not
higher than the Maximum SAVRS Rate shall be accepted, thus requiring each such Existing
Owner to continue to hold the Bonds that are the subject of such Submitted Bid,
(iii) the Submitted Bid of each Potential Owner specifying any rate that is not
higher than the Maximum SAVRS Rate shall be accepted, thus requiring each such Potential
Owner to purchase the Bonds that are the subject of such Submitted Bid,
13
(iv) the Submitted SeII Orders of each Existing Owner shall be accepted as
Submitted Sell Orders and the Submitted Bids of each Existing Owner specifying any rate that
is higher than the Maximum SAVRS Rate shall be deemed to be and shall be accepted as
Submitted Sell Orders, in both cases only up to and including the principal amount of Bonds
obtained by multiplying (A) the aggregate principal .amount of Bonds subject to Subrrutted
Bids described in paragraph (iii) of this subsection (b) by (B) a fraction the numerator of
which shall be the principal amount of Outstanding Bonds held by such Existing Owner
subject to such Submitted Sell Order or such Subrrutted Bid deemed to be a Submitted Sell
Order and the denominator of which shall be the principal amount of Outstanding Bonds
subject to all such Submitted Sell Orders and ,such Submitted Bids deemed to be Submitted
Sell Orders, and the remainder of each such Subrrutted Sell Order or Submitted Bid shall be
deemed to be and shall be accepted as a Hold Order and each such Existing Owner shall be
required to continue to hold such excess amount of Bonds, and
(v) the Submitted Bid of each Potential Owner specifying any rate that is higher
than the Maximum SAVRS Rate shall be rejected.
(c) If, as a result ofthe procedures described in subsection (a) or (b) above, any
Existing Owner or Potential Owner would be required to purchase or sell an aggregate principal
amount of Bonds which is not an integral multiple of $25 000 on any Auction Date, the Auction
Agent shall by lot, in such manner as it shall determine in its sole discretion, round up or down the
principal amount of Bonds to be purchased or sold by any Existing Owner or Potential Owner on
such Auction Date so that the aggregate principal amount of Bonds purchased or sold by each
Existing Owner or Potential Owner on such Auction Date shall be an integral multiple of $25 000
even if such allocation results in one or more of such Existing Owners or Potential Owners not
purchasing or selling any Bonds on such Auction Date
(d) If, as a result of the procedures described in subsection (a) above, any
Potential Owner would be required to purchase less than $25 000 in principal amount of Bonds on
any Auction Date, the Auction Agent shall by lot, in such manner as it shall determine in its sole
discretion, allocate Bonds for purchase among Potential Owners so that the principal amount of
SAVRS purchased on such Auction Date by any Potential Owner shall be an integral multiple of
$25 000 even if such allocation results in one or more of such Potential Owners not purchasing
Bonds on such Auction Date
Section 2 OS Notice of SAVRS Rate (a) On each Auction Date, the Auction Agent
shall notify by telephone or other telecommumaation device or in writing each Broker Dealer that
participated in the Auction held on such Auction Date of the followmg•
(i) the SAVRS Rate determined on such Auction Date for the succeeding
Auction Period, i
(ii) whether Sufficient Clearing Bids existed for the determination of the
Winning Bid Rate,
14
(iii) if such Broker Dealer submitted a Bid or a Sell Order on behalf of an
Existing Owner whether such Bid or Sell Order was accepted or rejected and the principal
amount of Bonds, if any to be sold by such Existing Owner
(iv) if such Broker Dealer submitted a Bid on behalf of a Potential Owner
whether such Bid was accepted or rejected and the principal amount of Bonds, if any to be
purchased by such Potential Owner
(v) if the aggregate principal amount of the Bonds to be sold by all Existing
Owners on whose behalf such Broker Dealer submitted Bids or Sell Orders is different from
the aggregate principal amount of Bonds to be purchased by all Potential Owners on whose
behalf such Broker Dealer ! submitted a Bid, the name or names of one or more
Broker Dealers (and the Agent Member if any of each such other Broker Dealer) and the
principal amount of Bonds to be (A) purchased from one or more Existing Owners on whose
behalf such other Broker Dealers submitted Bids or Sell Orders or (B) sold to one or more
Potential Owners on whose behalf such Broker Dealer submitted Bids, and
(vi) the immediately succeeding Auction Date
(b) On each Auction Date, each Broker Dealer that submtted an Order on
behalf of any Existing Owner or Potential Owner shall (i) advise each Existing Owner and Potential
Owner on whose behalf such Broker Dealer submitted an Order as to (A) the SAVRS Rate
determined on such Auction Date, (B) whether any Bid or Sell Order subriutted on behalf of each
such Owner was accepted or rejected and (C) the immediately succeeding Auction Date, (ii) instruct
each Potential Owner on whose behalf such Broker Dealer submitted a Bid that was accepted, in
whole or in part, to instruct such Existing Owner's Agent Member to pay to such Broker Dealer (or
its Agent Member) through the Securities Depository the amount necessary to purchase the principal
amount of Bonds to be purchased pursuant to such Bid (including, with respect to the Bonds in a
daily Auction Penod, accrued interest if the purchase date is not an Interest Payment Date for such
Bond) against receipt of such Bonds, and (iii) instruct each Existing Owner on whose behalf such
Broker Dealer submitted a Sell Order that was accepted or a Bid that was rejected in whole or in
part, to instruct such Existing Owner's Agent Member to deliver to such Broker Dealer (or its Agent
Member) through the Securities Depository the principal amount of Bonds to be sold pursuant to
such Bid or Sell Order against payment therefor
Section 2 06 Reference Rate (a) The Reference Rate on any Auction Date with
respect to Bonds in any Auction Period of less than 180 days shall be the greater of LIBOR or the
Thirty Day AA Composite Commercial Paper Rate on such date The Reference Rate with respect
to Bonds in any Auction Period of 180 days or more shall be the greater of LIBOR or the rate on
United States Treasury Securities having a maturity which most closely approximates the length of
the Auction Period, as last published in The Wall Street Journal. If either rate is unavailable, the
Reference Rate shall be an index or rate agreed to by all Broker Dealers and consented to by the
Issuer
15
i
'Thirty Day AA Composite (Commercial Paper Rate on any date of determination, means
the interest equivalent of the Thirty Day rate on commercial paper placed on behalf of non financial
issuers whose corporate bonds are rated AA by S&P or the equivalent of such rating by S&P as
made available on a discount basis or otherwise by (A) the Federal Reserve Bank of New York for
the Business Day immediately preceding such date of determination, or (B) if the Federal Reserve
Bank of New York does not make available any such rate, then the arithmetic average of such rates,
as quoted on a discount basis or otherwise, by Lehman Commercial Paper Inc Goldman, Sachs &
Co and Merrill Lynch, Pierce, Fenner & Smith Incorporated or in lieu of any thereof, their respective
affiliates or successors which are commercial paper dealers (the 'Commercial Paper Dealers ), to the
Auction Agent before the close of business on the Business Day immediately preceding such date of
determination.
For purposes ofthe definitions of Thirty Day AA Composite Commercial Paper Rate, the
'interest equivalent" means the equivalent yield on a 360-day basis of a discount-basis security to an
interest-bearing security If any Commercial Paper Dealer does not quote a commercial paper rate
required to determine the Thirty-Day AA Composite Commercial Paper Rate, the Thirty-Day AA
Composite Commercial Paper Rate shall be determined on the basis of the quotation or quotations
furnished by the remammg Commercial Paper Dealer or Commercial Paper Dealers and any substitute
commercial paper dealer not included within the definition of Commercial Paper Dealer above, which
may be CS First Boston Corporation or Morgan Stanley & Co Incorporated or their respective
affiliates or successors which are commercial paper dealers (a Substitute Commercial Paper Dealer")
selected by the Paying Agent/Registrar (who shall be under no liability for such selection) to provide
such commercial paper rate or rates not being supplied by any Commercial Paper Dealer or
Commercial Paper Dealers, as the case maybe, or if the Paying Agent/Registrar does not select any
such Substitute Commercial Paper Dealer or Substitute Commercial Paper Dealers, by the remammg
Commercial Paper Dealer or Commercial Paper Dealers
(b) If for any reason on any Auction Date the Reference Rate shall not be
determined as hereinabove provided in this Section, the Reference Rate shall be the Reference Rate
for the Auction Period ending on such Auction Date
(c) The deterirination of the Reference Rate as provided herein shall be
conclusive and binding upon the Issuer the Paying Agent/Registrar the Broker Dealers, the Auction
Agent and the Owners of the Bonds
Section 2 07 Miscellaneous Provisions Regarding Auctions.
(a) In this Exhibit C each reference to the purchase, sale or holding of Bonds
shall refer to beneficial interests in Bonds, unless the context clearly requires otherwise
(b) During a SAVRS Rate Period, the provisions of the Master Ordinance, the
Twelfth Supplement and the definitions contained therein and described in thus Exhibit C including
without limitation the definitions of All Hold Rate, Default Rate, Interest Payment Date, Maximum
SAVRS Rate, Reference Rate, Applicable Percentage and SAVRS Rate, maybe amended pursuant
i
16
to the Twelfth Supplement by obtaining the consent of the owners of all Outstanding Bonds bearing
interest at a SAVRS Rate as follows If on the first Auction Date occurring at least 20 days after the
date on which the Paying Agent/Regrstrar mailed notice of such proposed amendment to the
registered owners of the Outstanding Bonds as required by the Twelfth Supplement, (i) the SAVRS
Rate which is determined on such date rs the Winning Bid Rate and (ii) there is delivered to the Issuer
and the Paying Agent/Regrstrar an opinion ofBond Counsel to the effect that such amendment shall
not adversely affect the validity of the Bonds or any exemption from federal income tax to which the
interest on the Bonds would otherwise be entitled, the proposed amendment shall be deemed to have
been consented to by the owners of all affected Outstanding Bonds bearing interest at a SAVRS Rate
i
(c) If the Secunties Depository notifies the City that it is unwilling or unable to
continue as owner of the Bonds or if at any time the Secunties Depository shall no longer be
registered or in good standing under the Secunties Exchange Act of 1934 as amended, or other
applicable statute or regulation and a successor to the Securities Deposrtory is not appointed by the
Crty wrthm '90 days after the City receives notice or becomes aware of such condition, as the case
may be, the Crty shall execute and the Paynng Agent/Registrar shall authenticate and deliver
certificates representing the Bonds. Such Bonds shall be registered in such names and authorized
denominations as the Secunties Deposrtory pursuant to instructions from the Agent Members or
otherwise, shall instruct the City and the Paying Agent/Registrar
During a SAVRS Rate Penrod, so long as the ownership of the Bonds is
maintained inbook-entry form by the Secunties Depository an Existing Owner or a beneficial owner
may sell, transfer or otherwise dispose of a Bond only pursuant to a Bid or Sell Order rn accordance
with the Auction Procedures or to or through aBroker-Dealer provided that (i) in the case of all
transfers other than pursuant to Auctions such Existing Owner or its Broker Dealer or its Agent
Member advises the Auction Agent of such transfer and (ii) a sale, transfer or other disposition of
Bonds from a customer of a Broker Dealer who is listed on the records of that Broker Dealer as the
holder of such Bonds to that Broker Dealer or another customer of that Broker Dealer shall not be
deemed to be a sale, transfer or other disposition for purposes ofthis paragraph if such Broker Dealer
remains the Existing Owner of the Bonds so sold, transferred or disposed of immediately after such
sale, transfer or disposition.
Section 2 08 Changes in Auction Period or Auction Date
(a) Changes m Auction Period. (a) During any SAVRS Rate Penod, the Issuer may
from time to time on any Interest Payment Date, change the length of the Auction Period with respect
to all ofthe Bonds among daily seven-days, 28-days, 35-days, six months and a Special Rate Period
in order to accommodate economic and financial factors that may affect or be relevant to the length
of the Auction Penod and the interest rate borne by such Bonds. The Issuer shall initiate the change
m the length of the Auction Period by giving written notice to the Paying Agent/Registrar the
Auction Agent, the Broker Dealers and the Securities Depository that the Auction Period shall
change if the conditions described herein are satisfied and the proposed effective date of the change,
at least ten (10) Business Days prior to the Auction Date for such Auction Period. In addition, pnor
to any conversion from a SAVRS Rate Period during which the interest rate on the Bonds is set at
intervals of less than one year to a SAVRS Rate Period during which the interest rate on the Bonds
17
is set at intervals of one year or in excess of one year or vice versa, the Issuer must deliver a
Favorable Opimon ofBond Counsel relating to such conversion to the Auction Agent and the Paying
Agent/Registrar Failure to deliver such opinion shall result in conversion to a SAVRS Rate Period
of the same duration as that immediately prior to such conversion.
(ii) Any such changed Auction Period shall be for a period of one day
seven-days, 28-days, 35-days, six months or a Special Rate Period and shall be for all of the
Bonds in a SAVRS Rate Period.
(iu) The change m the length of the Auction Period shall not be allowed unless
Sufficient Clearing Bids existed at both the Auction before the date on which the notice of
the proposed change was given as provided in this subsection (a) and the Auction immediately
preceding the proposed change.
(iv) The change m length of the Auction Period shall take effect only if (A) the
Paying Agent/Registrar and the Auction Agent receive, by 11 00 a.m. on the Business Day
before the Auction Date for the first such Auction Period, a certificate from the Issuer
consenting to the change in the length of the Auction Period specified in such certificate and
(B) Sufficient Clearing Bids exist at the Auction on the Auction Date for such first Auction
Period. For purposes of the Auction for such first Auction Period only each Existing Owner
shall be deemed to have submitted Sell Orders with respect to all of its Bonds except to the
extent such Existing Owner submits an Order with respect to such Bonds. If the condition
referred to in (A) above is not met, the Auction Rate for the next Auction Period shall be
determined pursuant to the Auction Procedures and the Auction Period shall be the Auction
Period determined without reference to the proposed change If the condition referred to in
(A) is met but the condition referred to m (B) above is not met, the Auction Rate for the next
Auction Period shall be the Maximum SAVRS Rate, and the Auction Period shall be a
seven-day Auction Period.
(b) Changes m Auction Date During any SAVRS Rate Period, the Auction Agent,
with the written consent of the Issuer may specify an earlier Auction Date (but in no event more than
five Business Days earlier) than the Auction Date that would otherwise be determined in accordance
with the defimtion of Auction Date in order to conform with then current market practice with
respect to similar securities or to accommodate economic and financial factors that may affect or be
relevant to the day of the week constituting an Auction Date and the interest rate borne on the Bonds.
The Auction Agent shall provide notice of its determination to specify an earlier Auction Date for an
Auction Period by means of a written notice delivered at least 45 days prior to the proposed changed
Auction Date to the Paying Agent/Registrar the Issuer the Broker Dealers and the Securities
Depository
18
ARTICLE III
Auction Agent
Section 3 01 Auction Agent. (a) The Auction Agent shall be appointed by the Paying
Agent/Registrar acting on behalf of the Issuer to perform the functions specified herein. The
Auction Agent shall designate rts Principal Office and signify rts acceptance of the duties and
obligations imposed upon it hereunder by a written instrument, delivered to the Issuer the Paying
Agent/Registrar and each Broker Dealer which shall set forth such procedural and other matters
relating to the implementation of the Auction Procedures as shall be satisfactory to the Issuer and the
Paying Agent/Registrar
(b) SubJect to any applicable governmental restrictions, the Auction Agent may
be or become the owner of or trade m Bonds with the same rights as if such entity were not the
Auction Agent.
Section3 02 QualificationsofAuctionAgent, Resignation, Removal The Auction Agent
shall be (a) a bank or trust company organized under the laws of the United States or any state or
territory thereof having a combined capital stock, surplus and undivided profits of at least
$30 000 000 or (b) a member ofNASD having a capitalization of at least $30 000 000 and, m either
case, authorized by law to perform all the duties imposed upon rt by this Twelfth Supplement and a
member of or a participant m, the Securities Depository The Auction Agent may at any time resign
and be discharged of the duties and obligations created by this Twelfth Supplement by giving at least
ninety (90) days notice to the Issuer and the Paying AgentiRegistrar The Auction Agent maybe
removed at any time by the Paying Agent/Registrar bywritten notice, delivered to the Auction Agent,
the Bond Insurer and the Issuer Upon any such resignation or removal, the Paying Agerit/Registrar
shall appoint a successor Auction Agent meeting the requirements of this section. In the event of the
resignation or removal of the Auction Agent, the Auction Agent shall pay over assign and deliver
any moneys and Bonds held by it in such capacity to its successor The Auction Agent shall continue
to perform its duties until its successor has been appointed by the Paying Agent/Registrar In the
event that the Auction Agent has not been compensated for its services, the Auction Agent may
resign by giving thirty (30) days notice to Issuer and the Paying Agent/Registrar even if a successor
Auction Agent has not been appointed.
19
Exhibit D
to Twelfth
Supplemental Ordinance
DESCRIPTION OF ANNUAL FINANCIAL INFORMATION
The following information is referred to m Section 17 of this Twelfth Supplement.
Annual Financial Statements and Operating Data
The financial information and operating data with respect to the Crty to be provided annually
in accordance with such Section areas specified (and included iri the Appendix or under the headings
of the Official Statement referred to) below
Tables 1 through 16 contained m the Official Statement, and
'Excerpts from the Annual Financial Report as set forth m Appendix B to the
Official Statement
Accounting Principles
The accounting pninciples referred to m such Section are the accounting principles described
in the notes to the financial statements referred to m paragraph 1 above
CITY OF FORT WORTH, TEXAS
(TARRANT AND DENTON COUNTIES)
WATER AND SEWER SYSTEM AUCTION RATE REVENUE BONDS
SERIES 2004
BOND PURCHASE AGREEMENT
2004
The Honorable Mayor and Members of
the City Council
City of Fort Worth Texas
Ladies and Gentlemen
Lehman Brothers (the 'Underwriter") offers to enter into the following agreement with
the City of Fort Worth Texas (the 'City") which upon the City's written acceptance of this offer
as evidenced by the execution of this Bond Purchase Agreement (this Agreement") by an
Authorized Representative of the City (as defined in Paragraph 6(m) of this Agreement) will be
binding upon the City and upon the Underwriter Terms not otherwise defined in this Agreement
shall have the meanings set forth in the Ordinance (as defined herein) or in the Official
Statement (as defined herein)
1 Purchase and Sale of the Bonds (a) Subject to the terms and conditions and in
reliance upon the representations warranties and agreements set forth herein the Underwriter
hereby agrees to purchase from the City and the City hereby agrees to sell and deliver to the
Underwriter all but not less than all of an aggregate of $ .principal amount of City
of Fort Worth Texas Water and Sewer System Auction Rate Revenue Bonds Series 2004 (the
Bonds") Inasmuch as this purchase and sale represents a negotiated transaction the City
understands and hereby confirms that the Underwriter is not acting as a fiduciary of the City but
rather as acting solely in its capacity as an underwriter for its own account. The Bonds shall be
authorized by and shall be issued and secured under the provisions of a 'Master Ordinance
Establishing the City of Fort Worth, Texas Water and Sewer System Revenue Financing
Program, adopted by the City on December 10 1991 (the 'Master Ordinance') and the Twelfth
Supplemental Ordinance adopted by the City on December 16 2003 (the 'Supplemental
Ordinance and together with the Master Ordinance the 'Ordinance') providing for the
issuance of the Bonds The Bonds shall be dated shall be in the aggregate principal amount,
shall have the maturities shall bear interest from the dates shall establish the initial rate of
interest borne by the Bonds and the initial Auction Period shall be subject to redemption and
shall have the other characteristics and terms as set forth in Schedule I to this Agreement,
including without limitation the provision of bond insurance and/or a debt service reserve
surety policy in support of the payment of the Bonds The Bonds shall otherwise have such
terms and provisions as described in the Official Statement and set forth in the Ordinance The
Supplemental Ordinance authorized the City Manager to act on behalf of the City to effect the
sale of the Bonds
(a) The purchase price for the Bonds shall be $ (representing the
principal amount of the Bonds of $ plus an original issue premium of $ ,
less an underwriting discount of $ less $ paid on behalf of the City to
45382037.5110314554
Financial Security Assurance Inc. as the insurance premium for the municipal bond insurance
policy insuring the timely payment of principal of and interest on the Bonds and less
$ paid on behalf of the City to Financial Security Assurance Inc. as the premium
for the surety policy being issued to enable the City to satisfy the funding of the Required
Reserve Amount) plus accrued interest, if any from to the date of Closing (as
hereinafter defined) The payments to Financial Security Assurance Inc. are being made by the
Underwriters as an accommodation to the City
The Official Statement of the City including the cover page and Appendices thereto
relating to the Bonds (the 'Official Statement") as amended with changes and amendments to
the date of Closing has been authorized by the City and is hereinafter called the 'Official
Statement.
2. Security Deposit. Delivered to the City herewith is a corporate check of the
Underwriter payable to the order of the City in an amount equal to $ The City
agrees to hold such check uncashed until the Closing to ensure the performance by the
Underwriter of its obligation to purchase, accept delivery of and pay for the Bonds at the
Closing Concurrently with the payment by the Underwriter of the purchase price of the Bonds
the City shall return such check uncashed to the Underwriter as,provided in Paragraph 7 hereof
Should the City fail to deliver the Bonds at the Closing, or should the City be unable to satisfy
the conditions to the obligations of the Underwriter to purchase accept delivery of and pay for
the Bonds, as set forth in this Agreement (unless waived by the Underwriter) or should such
obligations of the Underwriter be terminated for any reason permitted by this Agreement, such
check shall immediately be returned to the Underwriter as provided in Paragraph 8 hereof In
the event the Underwriter fails (other than for a reason permitted hereunder) to purchase
accept delivery of and pay for the Bonds at the Closing as herein provided, such check shall be
retained by the City as and for full liquidated damages for such failure of the Underwriter and for
any defaults hereunder on the part of the Underwriter The Underwriter and the City understand
that in such event the City's actual damages may be greater or may be less than such amount.
Accordingly if the Underwriter fails (other than for a reason permitted hereunder) to purchase
accept delivery and pay for the Bonds at the Closing as herein provided the Underwriter hereby
waives any right to claim that the City's actual damages are less than such amount and the
City's acceptance of this offer shall constitute a waiver of any right the City may have to
additional damages from the Underwriter The Underwriter hereby agrees not to stop or cause
payment on said check to be stopped unless the City has breached any of the terms of this
Agreement.
3 The. Bonds and the Official Statement' End of the Underwriting Period (a) The
Bonds shalt be as described in and shall be issued and secured under and pursuant to the
provisions of the Ordinance
(a) The City hereby represents and warrants that the Official Statement delivered to
the Underwriter is deemed final by the City as of the date thereof 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 Rule 15c2 12 under the Securities Exchange Act of 1934 ("Rule
15c2 12")
(b) Unless otherwise notified in writing by the Underwriter by the date of Closing the
City can assume that the end of the underwriting period" for purposes of Rule 15c2 12 shall be
the date of Closing In the event such notice is so given in writing by the Underwriter the
Underwriter agrees to notify the City in writing following the occurrence of the end of the
45382037.5/10314554 2
underwriting period" as defined in Rule 15c2 12 The end of the underwriting period" as used
in this Agreement shall mean the date of Closing or such later date as to which notice is given
by the Underwriter in accordance with the preceding sentence
4 Sale to Underwriter ! It shall be a condition to the City's obligations to sell and
deliver the Bonds to the Underwriter and to the Underwriter's obligation to purchase to accept
delivery of and to pay for the Bonds that the entire principal amount of the Bonds sold in
accordance with authority granted by the Ordinance shall be issued sold and delivered by the
City and purchased, accepted and paid for by the Underwriter at the Closing The Underwriter
agrees to make a bona fide public offering of all the Bonds at prices not in excess of the initial
offering prices or yields set forth in the Official Statement, plus interest accrued on the Bonds if
any to the date of Closing
5 Use of Documents, Certain Covenants and Agreements of the Citv The City
hereby authorizes the use by the Underwriter of the Ordinance and the Official Statement,
including any supplements or amendments thereto and the information therein contained in
connection with the public offering and sale of the Bonds The City covenants and agrees
(i) To cooperate with the Underwriter to provide a supply of Official
Statements without charge, within seven business days of the date hereof in sufficient
quantities to comply with the Underwriter's obligations under applicable MSRB rules and
Rule 15c2 12;
(ii) To apply 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 to take or omit to take
any actions which action or omission will adversely affect the exclusion from gross
income for federal income tax purposes of interest on the Bonds
(iii) If after the date of this Agreement to and including the date the
Underwriter is no longer required pursuant to Rule 15c2 12 to provide the Official
Statement to potential customers requesting an Official Statement (such date being the
earlier of (A) 90 days from the end of the underwriting period and (B) 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) any event shall occur as a result of which it is necessary to amend or
supplement the Official Statement in order to make the statements made therein in the
light of the circumstances when the Official Statement is delivered to a purchaser not
misleading or if it is necessary to amend or supplement the Official Statement to comply
with law to notify the Underwriter (and for the purpose of this clause (iii) to provide the
Underwriter with such information as it may from time to time reasonably request) and
to cooperate with the Underwriter in the preparation of either amendments or
supplements to the Official Statement so that the statements in the Official Statement, as
so amended and supplemented will not, in the light of the circumstances when the
Official Statement is delivered to a purchaser be misleading or so that the Official
Statement will comply with law
i
(iv) To furnish such information and execute such instruments and take such
action in cooperation with the Underwriter at the sole expense of the Underwriter as the
Underwriter may reasonably request (A) to (y) 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 Underwriter may designate and (z) determine the
45382037.5/10314554
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 City 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 state
(v) To advise the Underwriter immediately of receipt by the City 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 and
(vi) Prior to Closing except as disclosed in the Official Statement, not to offer
or issue any bonds notes or other obligations for borrowed money or incur any material
liabilities direct or contingent, secured by the Pledged Revenues nor will there be any
adverse change of a material nature in the financial position of the City or of the System
6 Representations and Warranties of the City The City represents and warrants to
the Underwriter which representations and warranties shall survive the purchase and offering of
the Bonds as follows
(a) The City is a duly and lawfully incorporated home-rule city and municipal
corporation duly created and existing under the Constitution and laws of the State of Texas and
has full legal right, power and authority under V T C.A. Government Code Chapters 1371 and
1502 as amended (the Act") and on the Closing Date will have full legal right, power and
authority under the Act (i) to adopt the Ordinance and to enter into the Broker Dealer Agreement
and this Agreement, (ii) to sell issue and deliver the Bonds to the Underwriter as provided
herein (iii) to secure the payment of the Bonds as provided in the Ordinance and (iv) to carry
out and consummate all the transactions contemplated by the Ordinance the Broker Dealer
Agreement, the Auction Agreement, this Agreement and the Official Statement, and the City has
complied and will on the Closing Date be in compliance in all material respects with the terms of
the Act and the Ordinance as they pertain to such transactions
(b) The information contained in the Official Statement (other than the information
contained in the subcaption Book-Entry-Only System and Appendix D as to which no view is
expressed) is and as of the date of Closing will be correct in all material respects and such
information does not contain and will not contain any untrue statement of a material fact and
does not omit and will not omit to state a material fact required to be stated therein or necessary
to make the statements in such Official Statement, in light of the circumstances under which
they were made not misleading
(c) If the Official Statement is supplemented or amended pursuant to clause (iii) of
Paragraph 5 hereof 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 on which the Underwriter is
no longer required pursuant to Rule 15c2 12 to provide the Official Statement to potential
customers requesting an Official Statement (as more particularly described in clause (iii) of
Paragraph 5 hereof) the Official Statement (other than the information contained in the
subcaption 'Book Entry-Only System and Appendix D as to which no view is expressed) 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
45382037.5/10314554 4
(d) The City has duly authorized all necessary action to be taken by it for• (i) the
issuance and sale of the Bonds upon the terms set forth herein and in the Official Statement; (ii)
the approval of the Official Statement and the signing of the Official Statement by a duly
authorized officer and (iii) the execution delivery and receipt of the Broker Dealer Agreement,
the Auction Agreement (for the limited purposes therein expressed) and this Agreement, the
Bonds and any and all such other agreements and documents as may be required to be
executed delivered and received by the City in order to carry out, give effect to and
consummate the transactions contemplated hereby or by the Ordinance the Bonds and the
Official Statement.
(e) The Ordinance is and on the date of the Closing will be the legal and valid
instrument of the City
(f) The City has and at the time of the Closing will have duly authorized and
approved the execution and delivery of and the performance of the City's obligations contained
in the Broker Dealer Agreement, the Auction Agreement (for the limited purposes therein
expressed) and this Agreement. This Agreement has been duly executed and delivered by the
Underwriter and constitutes a legal valid and binding obligation of the City enforceable in
accordance with its terms
(g) The Bonds when issued, delivered and paid for as herein provided will have
been duly authorized executed and issued and will constitute legal valid and binding special
obligations of the City entitled to the benefits of the Ordinance payable from a pledge of and a
security interest in the Pledged Revenues and will be entitled to the benefits of the Ordinance
and enforceable in accordance with their terms (except to the extent that such enforceability
may be limited by bankruptcy insolvency reorganization and similar laws affecting creditors
rights generally and general principles of equity) and the City will undertake to fund the
Required Reserve Amount in accordance with the terms of the Ordinance
(h) Except as described in the Official Statement, there is no action suit, proceeding,
inquiry or investigation at law or in equity or before or by any court, public board or body
pending against the City or to the knowledge of the City threatened against or affecting the City
(or to the knowledge of the City any basis therefor) contesting the organization and corporate
existence of the City the title of its officers to their respective offices or seeking to restrain or
enjoin the issuance or delivery of the Bonds the collection or application of the Pledged
Revenues pledged to pay the principal of and interest on the Bonds or in any way contesting or
affecting the validity or enforceability of the Ordinance or this Agreement, or contesting the
powers of the City or any authority for the Bonds the Ordinance or this Agreement, or
contesting the exclusion from gross income of interest on the Bonds for federal income tax
purposes or contesting in any way the completeness, accuracy or fairness of the Official
Statement.
(i) The authorization execution and delivery by the City of the Official Statement,
the Broker-Dealer Agreement, the Auction Agreement (for the limited purposes therein
expressed) this Agreement, the Bonds and the other documents contemplated hereby and by
the Official Statement, the adoption of the Ordinance by the City Council the consummation of
the transactions contemplated hereby and thereby and compliance by the City with the
provisions of such instruments do not and will not conflict with or constitute on the part of the
City a breach of or a default under any provision of the Constitution of the State of Texas or the
Act or any other existing law court or administrative decision regulation decree or Ordinance
45382037.5/10314554 5
or any agreement, indenture mortgage lease or other instrument by which the City or its
properties are or on the date of Closing will be bound or affected
(j) Other than the opinion of the Attorney General of the State of Texas approving
the Bonds as required by law and the registration of the Bonds by the Comptroller of Public
Accounts of the State of Texas (which approval and registration shall have been duly obtained
or effected on or before the date of the Closing) and other than such permits consents
licenses, notices and filings if any as may be required under the securities or blue sky laws of
any jurisdiction no permit, consent, license notice authorization or filing with governmental
authorities is necessary or required (i) to permit the City to execute and deliver this Agreement
or the other instruments and documents contemplated hereby or thereby to perform its
obligations hereunder and thereunder or to consummate the transactions contemplated hereby
or thereby or (ii) to issue and deliver the Bonds as contemplated hereby and by the Official
Statement, or to perform in accordance with the terms hereof and thereof, or (iii) to adopt and
enact the Ordinance or to perform in accordance with the terms thereof or to issue and sell the
Bonds as therein and in the Official Statement provided
(k) The excerpts of the financial statements of the City and the unaudited financial
information for the City included in the Official Statement present fairly the financial position and
the results of operations of the City and the System at the respective dates and for the
respective periods indicated therein in conformity with generally accepted accounting principles
applied on a consistent basis throughout the periods presented
(I) The City Manager and the Director of Finance of the City (each an Authorized
Representative') have been duly authorized to act individually on behalf of the City as the
Authorized Representative for the purpose of taking the actions provided for herein
7 Closing At 1000 a.m Fort Worth Texas time on January 13 2004 or at such
other time and date as shall have been mutually agreed upon by the City and the Underwriter
(the 'Closing") the City will subject to the terms and conditions hereof deliver the Bonds to the
Underwriter duly executed and authenticated together with the other documents hereinafter
mentioned and the Underwriter will subject to the terms and conditions hereof accept such
delivery and pay the purchase price of the Bonds as set forth in Paragraph 1 hereof in
immediately available funds by a federal funds check or wire transfer to or for the account of the
City Concurrently with such payment by the Underwriter the City shall return to the
Underwriter's Representative the check referenced in Paragraph 2 hereof Delivery and
payment as aforesaid shall be made at the offices of Kelly Hart & Hallman Fort Worth Texas,
or such other place as shall have been mutually agreed upon by the City and the Underwriter
8 Closing Conditions. The Underwriter has entered into this Agreement in reliance
upon the representations, warranties and agreements of the City 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 City of its
obligations hereunder both as of the date hereof and as of the date of Closing Accordingly the
Underwriter's obligations under this Agreement to purchase to accept delivery of and to pay for
the Bonds shall be conditioned upon the performance by the City of its obligations to be
performed hereunder and under such documents and instruments at or prior to the Closing and
shall also be subject to the following additional conditions
(a) The representations and warranties of the City contained herein or in any Bond
or other document delivered pursuant to the provisions hereof shall be true complete and
45382037.5/10314554 B
correct in all material respects on the date hereof and on and as of the date of Closing as if
made on the date of Closing
(b) At the time of the Closing, the Ordinance the Broker Dealer Agreement, the
Auction Agreement, this Agreement and all other agreements approved and authorized by the
Ordinance or associated with the issuance of the Bonds shall be in full force and effect and
shall not have been amended, modified or supplemented and the Official Statement shall not
have been amended modified or supplemented except in any .such case as may have been
agreed to by the Underwriter
(c) At the time of the Closing all official action of the City relating to the Bonds the
Ordinance the Broker Dealer Agreement, the Auction Agreement and this Agreement shall be
in full force and effect and shall not have been amended modified or supplemented and the
Underwriter shall have received in appropriate form evidence thereof
(d) At the time of the Closing there shall not have occurred any change in the
condition financial or otherwise or in the operations of the City or the System from that set forth
in the Official Statement that, in the reasonable judgment of the Underwriter is material and
adverse and that makes it, in the reasonable judgment of the Underwriter impracticable to
market the Bonds on the terms and in the manner contemplated in the Official Statement;
(e) The City shall not have failed to pay principal or interest when due on any of its
outstanding obligations for borrowed money
(f) No suit, action investigation or legal or administrative proceeding shall be
seriously threatened or pending before any court or governmental agency which is likely to
result in the restraint, prohibition or the obtaining of damages or other relief in connection with
the issuance of the Bonds or the consummation of the transactions contemplated hereby or
which in the reasonable opinion of the Underwriter would have a materially adverse effect on
the transactions contemplated hereby or on the prudent operation of the System
(g) 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 counsel for the Underwriter
(h) At or prior to the Closing the Underwriter shall have received copies of each of
the following documents.
(i) The Official Statement and each supplement or amendment, if any
thereto
(ii) The Ordinance and all other ordinances or resolutions or other
proceedings of the City authorizing the issuance and sale of the Bonds and the
execution and delivery of this Agreement, the Official Statement and all other
agreements approved and executed in connection with the issuance of the Bonds in
each case being certified by the City Secretary of the City as having been duly adopted
or approved and being in full force and effect and as being true accurate and complete
copies of the same
45382037.5/10314554 ~
(iii) A copy of all proceedings of the City relating to the authorization of this
Agreement and to the authorization and issuance of the Bonds certified as true
accurate and complete by the City Secretary of the City
(iv) The opinion of McCall Parkhurst & Horton L.L.P and Kelly Hart &
Hallman as co-bond counsel ("Co-Bond Counsel") relating to among other things the
validity of the Bonds and the tax-exempt status of interest on the Bonds for federal
income tax purposes in substantially the form and substance of Appendix C to the
Official Statement;
(v) An unqualified opinion, dated on or prior to the date of Closing of the
Attomey General of Texas approving the Bonds as required by law and the registration
certificate of the Comptroller of Public Accounts of the State of Texas,
(vi) The supplemental opinion dated the date of Closing of Co-Bond Counsel
addressed to the City and the Underwriter containing the information specified in
Exhibit A hereto
(vii) The opinion dated the date of Closing of Fulbright & Jaworski L.L.P
addressed to the Underwriter to the effect that the offer and sale of the Bonds to the
public is exempt from registration under the Securities Act of 1933 as amended and the
Ordinance is not required to be qualified under the Trust Indenture Act of 1939 as
amended and such counsel shall also state that no facts have come to the attention of
such counsel which would lead them to believe that the Official Statement (excluding the
financial and statistical data included therein all as to which no view need be expressed)
as of the date thereof 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
(viii) A certificate of the City dated the date of Closing and signed on behalf of
the City by one or more Authorized Representatives of the City acting solely in his her
or their official capacities in form satisfactory to the Underwriter to the effect that (A) the
representations and warranties of the City contained herein or in any certificate or
document delivered by the City pursuant to the provisions hereof are true and correct in
all material respects on and as of the date of Closing as if made on the date of Closing
(B) all agreements or conditions to be performed or complied with by the City hereunder
on or prior to the date of Closing have been performed or complied with in all material
respects (C) except to the extent disclosed in the Official Statement, no litigation is
pending or to the knowledge of such persons threatened in any court to restrain or
enjoin the issuance or delivery of the Bonds or the collection of the revenues from the
System pledged to pay the debt service on the Bonds or the pledge thereof or in any
way contesting or affecting the validity of the Bonds the Ordinance or this Agreement, or
contesting the powers of the City or contesting the authorization of the Bonds or the
Ordinance or contesting in any way the accuracy completeness or fairness of the
Official Statement (but in lieu of or in conjunction with such certificate the Underwriter
may in their sole discretion accept certificates or opinions of the City Attorney to the
City that, in his opinion the issues raised in any such pending or threatened litigation are
without substance or that the contentions of all plaintiffs therein are without merit) (D) to
the best of his, her or their knowledge no event affecting the City or the System 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 be
45382037.5/10314554 $
disclosed therein in order to make the statements and information therein not misleading
in any material respect; and (E) there has not been any material and adverse change in
the affairs or financial condition of the City or the System since the latest date as to
which audited financial information is available
(ix) A certificate dated as of the Closing Date of an official of the City
satisfactory to Co-Bond Counsel to the effect that on the basis of the facts estimates
and circumstances in effect on the date of delivery of the Bonds it is not expected that
the proceeds of the Bonds will be used in a manner that would cause the Bonds to be
arbitrage bonds within the meaning of Section 148 of the Internal Revenue Code of
1986 as amended
(x) The City will agree in the Ordinance to provide certain periodic
information and notices of material events in accordance with Rule 15c2 12 as
described in the Official Statement under 'Continuing Disclosure of Information. The
Underwriter's obligation to accept and pay for the Bonds is conditioned upon delivery to
the Underwriter or its agent of a certified copy of the Ordinance containing the
agreement described under such heading
(xi) Evidence acceptable to the Underwriter that the timely payment of
principal of and interest on the Bonds has been insured by a municipal bond insurance
policy issued by Financial Security Assurance Inc.
(xii) Evidence acceptable to the Underwriter that the Required Reserve
Amount has been satisfied by a surety bond issued by Financial Security Assurance
Inc. to enable the City to satisfy the funding of the Required Reserve Amount;
(xiii) Evidence acceptable to the Underwriter that the Bonds have been rated
Aaa by Moody's Investors Services Inc. AAA by Standard and Poor's a Division of
The McGraw-Hill Companies Inc. and AAA by Fitch Inc.
(xiv) An executed copy of the Auction Agreement;
(xv) An executed copy of the Broker Dealer Agreement; and
(xvi) Such additional legal opinions certificates instruments and other
documents as the Underwriter or counsel to the Underwriter may reasonably request to
evidence the truth accuracy and completeness as of the date hereof and as of the date
of Closing of the City's representations and warranties contained herein and of the
statements and information contained in the Official Statement and the due performance
and satisfaction by the City on or prior to the date of Closing of all agreements then to be
performed and all conditions then to be satisfied by the City
i
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 Underwriter and their
counsel and Co-Bond Counsel The Underwriter shall be entitled to receive such conformed
copies or photocopies of such opinions certificates letters agreements and documents as the
Underwriter may reasonably request.
45382037.5/10314554 9
If the City shall be unable to satisfy the conditions to the obligations of the Underwriter to
purchase accept delivery of and pay for the Bonds as set forth in this Agreement, or if the
obligations of the Underwriter to purchase accept delivery of and pay for the Bonds shall be
terminated for any reason permitted by this Agreement, this Agreement shall terminate and
neither the Underwriter nor the City shall be under further obligation hereunder except that (i)
the check referred to in Paragraph 2 hereof shall be immediately returned to the Underwriter's
Representative and (ii) the respective obligations of the City and the Underwriter set forth in
Paragraphs 10 and 12 hereof shall continue in full force and effect.
9 Termination The Underwriter shall have the right to terminate in its absolute
discretion its obligations under this Agreement to purchase to accept delivery of and to pay for
the Bonds by notifying the City of its election to do so if after the execution hereof and prior to
the Closing
(a) (i) Legislation (including any amendment thereto) shall have been introduced in
or adopted by either House of the Congress of the United States or recommended to the
Congress or otherwise endorsed for passage by the President of the United States the
Treasury Department of the United States the Intemal Revenue Service or the Chairman or
ranking minority member of the Committee on Finance of the United States Senate or the
Committee on Ways and Means of the United States House of Representatives or legislation is
proposed for consideration by either such committee by any member thereof or presented as an
option for consideration by either such committee by the staff of such committee or by the staff
of the Joint Committee on Taxation of the Congress of the United States or a bill to amend the
Internal Revenue Code (which if enacted would be effected as of a date prior to the Closing)
shall be held in either house (ii) a decision shall have been rendered by a court established
under Article III of the Constitution of the United States or by the United States Tax Court, (iii) an
order ruling or regulation shall have been issued or proposed by or on behalf of the Treasury
Department of the United States or the Internal Revenue Service or any other agency of the
United States or (iv) a release or official statement shall have been issued by the President of
the United States or by the Treasury Department of the United States or the Internal Revenue
Service the effect of which in any such case described in clause (i) (ii) (iii) or (iv) would be to
impose, directly or indirectly federal income taxation upon interest received on obligations of
the general character of the Bonds or upon income of the general character to be derived by the
City other than as imposed on the Bonds and income therefrom under the federal tax laws in
effect on the date hereof in such a manner as in the reasonable judgment of the Underwriter
would make it impracticable to market the Bonds on the terms and in the manner contemplated
in the Official Statement.
(b) Legislation shall have been enacted by the federal government or the State of
Texas a decision of any federal or State of Texas court shall have been made a ruling or
regulation (proposed, temporary or final) shall have been made or issued, any action shall have
been taken by the Securities and Exchange Commission which would require registration of any
security under the Securities Act of 1933 as amended or qualification of any indenture under
the Trust Indenture Act of 1939 as amended in connection with the public offering of the
Bonds or any action shall have been taken by any court or any governmental authority
suspending the use of the Official Statement or any amendment or supplement thereto or any
proceeding for that purpose shall have been initiated or threatened in any such court or by any
such authority
(c) (i) The Constitution of the State of Texas shall be amended or an amendment
shall be proposed (ii) legislation shall be enacted (iii) a decision shall have been rendered as to
45382037.5/10314554 10
matters of Texas or federal law or (iv) any order ruling or regulation shall have been issued or
proposed by or on behalf of the State of Texas or the United States by an official agency or
department thereof affecting the legality or tax status of the City its property or income its
notes or bonds (including the Bonds) or the interest thereon or adversely affecting the
operations of the System or its ability to provide Pledged Revenues which in any such case in
the reasonable judgment of the Underwriter would make it undesirable or impracticable to
market the Bonds on the terms and in the manner contemplated in the Official Statement.
(d) (i) (A) Trading generally shall have been suspended or materially limited on or
by as the case may be either the New York Stock Exchange or the American Stock Exchange
(B) a general moratorium on commercial banking activities in New York shall have been
declared by either Federal or New York state authorities or (C) the United States shall have
become engaged in any outbreak of armed hostilities (whether or not foreseeable) or there shall
have occurred any change in financial markets or any calamity or crisis that, in the reasonable
judgment of the Underwriter is material and adverse and (ii) in the case of any of the events
specified in clauses (d)(i)(A) through (d)(i)(C) such event singly or together with any other such
event makes it, in the reasonable judgment of the Underwriter impracticable or inadvisable to
market the Bonds on the terms and in the manner contemplated in this Agreement and in the
Official Statement.
(e) The purchase of and payment for the Bonds by the Underwriter or the resale of
the Bonds by the Underwriter on the terms and conditions herein provided shall be prohibited
by any applicable law governmental authority board agency or commission.
(f) Any fact or event shall exist or have existed that, in the Underwriter's reasonable
judgment, requires or has required an amendment of or supplement to the Official Statement
that would materially and adversely affect the market for the Bonds
(g) There shall have occurred since the date of this Agreement any downgrading or
any notice shall have been given of ('i) any intended or potential downgrading or (ii) any review
or possible change that does not indicate a possible upgrade in the rating accorded any of the
City's obligations (including the rating to be accorded the Bonds)
If the Underwriter fails (other than for a reason permitted hereunder in which case the City will
immediately return to the Underwriter the check referenced in Paragraph 2 hereof) to accept
and pay for the Bonds upon the proper tender thereof by the City at the Closing as herein
provided the maximum liability of the Underwriter to the City will be limited to the amount of the
check referenced in Paragraph 2 and the expenses set forth in Paragraph 10(b) hereof The
Underwriter agrees and acknowledged that such amount is reasonable to compensate
adequately the City for its costs and expenses incurred in connection with the transactions
contemplated hereby When paid to the City the maximum amount shall serve as full liquidated
damages for such failure and for any and all defaults hereunder on the part of the Underwriter
and such maximum amount shall constitute a full release and discharge of all claims and
damages for such failure and for any and all such defaults and neither the City nor other
person shall have any further action for damages specific performance or any other legal or
equitable relief against the Underwriter
10 Expenses (a) The Underwriter shall be under no obligation to pay and the City
shall pay any expenses incident to the performance of the City's obligations hereunder
including but not limited to (i) the cost of the preparation printing and delivery of the Official
Statement; (ii) the cost of the preparation and printing of the Bonds (iii) the fees and expenses
45382037.5/10314554 11
of Co-Bond Counsel to the City• (iv) the fees and disbursements of First Southwest Company
and Estrada Hinojosa & Company Inc. as co-financial advisors to the City• (v) the fees and
disbursements of any engineers accountants attorneys and other experts consultants or
advisors retained by the City• and (vi) the fees for bond ratings and any travel or other expenses
incurred by the City incident thereto
(a) The Underwriter shall pay (i) the cost of the preparation and printing of this
Agreement; (ii) all advertising expenses incurred in 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 their counsel
11 Notices Any notice or other communication to be given to the City under this
Agreement may be given by delivering the same in writing to the City of Fort Worth Texas
1000 Throckmorton Fort Worth Texas 76102 Attention Mr James R Keyes Director of
Finance and any notice or other communication to be given to the Underwriter under this
Agreement may be given by delivering the same in writing to Lehman Brothers 399 Park
Avenue 16th Floor New York, New York 10022; Attention John Daniel
12 Parties in. Interest. This Agreement shall constitute the entire agreement between
the City and the Underwriter and is made solely for the benefit of the City and the Underwriter
(including successors or assigns of the Underwriter) and no other person shall acquire or have
any right hereunder or by virtue hereof The City's representations warranties and covenants
contained in this Agreement shall remain operative and in full force and effect, regardless of (a)
any investigations made by or on behalf of the Underwriter and (b} delivery of and payment for
the Bonds pursuant to this Agreement; and the City's representations and warranties contained
in Paragraph 6 of this Agreement shall remain operative and in full force and effect regardless of
any termination of this Agreement.
13 Reserved
14 Effective Date This Agreement shall become effective upon the execution of the
acceptance hereof by the City and shall be valid and enforceable as of the time of such
acceptance
15 Choice of Law This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas.
16 Severabilitv 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
17 Business Day For purposes of this Agreement, 'business day" means any day
on which the New York Stock Exchange is open for trading.
18 Paragraph Headings Paragraph headings have been inserted in this Agreement
as a matter of convenience of reference only and it is agreed that such Paragraph headings are
45382037.5/10314554 ~ 2
not a part of this Agreement and will not be used in the interpretation of any provisions of this
Agreement.
19 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. This Agreement shall become a binding agreement between the City and the
Underwriter when at least the counterpart of this Agreement shall have been signed by or on
behalf of each of the parties hereto
Very truly yours
LEHMAN BROTHERS
By•
Title
ACCEPTED AND AGREED to as of the
date first above written
CITY OF FORT WORTH TEXAS
By~
Authorized Representative
Title
45382037.5/10314554 i 13
ANNEX A
FORM OF MUNICIPAL BOND INSURANCE POLICY
[COPY TO FOLLOW]
45382037.5/10314554 S-I I-A
ANNEX B
FORM OF DEBT SERVICE RESERVE FUND SURETY POLICY
[COPY TO FOLLOW]
45382037.5/10314554 S-1 I I-A
EXHIBIT A
to
BOND PURCHASE AGREEMENT
Pursuant to Paragraph 8(h)(vi) of the Bond Purchase Agreement, the Underwriter shall
have received a supplemental opinion of Co-Bond Counsel to the following effect:
(i) The Bonds are exempted securities within the meaning of Section 3(a)(2)
of the Securities Act of 1933 as amended and it is not necessary in connection with the
sale of the Bonds to the public to register the Bonds under the Securities Act of 1933 as
amended or to qualify the Bonds, the Ordinance or any other instrument or document
under the Trust Indenture Act of 1939 as amended
(ii) The information in the Official Statement under the captions or
subcaptions Plan of Financing" (except under the subcaption Use of Proceeds') 'The
Bonds" (except under the subcaption 'Book Entry-Only System") 'Summary of Certain
Provisions of the Master Ordinance and the Twelfth Supplemental Ordinance 'Tax
Matters and the subcaptions 'Legal Investments and Eligibility to Secure Public Funds
in Texas, 'Legal Opinions" and 'Continuing Disclosure of Information" (except under the
subcaptions 'Compliance with Prior Undertakings" and Availability of Information from
NRMSIRS and SID") under the caption 'Other Information relating to the Bonds and
legal matters contained under such captions and subcaptions and the information
contained in Appendix D to the Official Statement present a fair and accurate description
of the laws and legal issues addressed therein and with respect to the Bonds such
information conforms to the Ordinance
45382037.5/10314554
Al
INSURANCE AGREEMENT
INSURANCE AGREEMENT dated as of 2004 (this Agreement") by and
between City of Fort Worth, Texas (the 'Issuer") and Financial Security Assurance Inc (the
'Insurer")
In consideration ofthe issuance by the Insurer of rts (a) Municipal Bond Debt Service Reserve
Insurance Policy as a Credit Facility for the City of Fort Worth, Texas Water and Sewer System
Revenue Bonds Reserve Fund (the 'Reserve Policy") with respect to the Issuer's Series 2003 Bonds,
Serves 2003A Bonds and Series 2004 Bonds (collectively the 'Bonds) and (b) a separate Municipal
Bond Insurance Policy (the 'Bond Insurance Policy") with respect to the Crty ofFort Worth, Texas
Water and Sewer System Auction Rate Revenue Bonds, Serves 2004 issued pursuant to the Master
Ordinance Establishing the City of Fort Worth, Texas Water and Sewer System Revenue Financing
Program (the 'Master Ordinance ')and the Twelfth Supplemental Ordinance to the Master Ordinance,
adopted December 16 2003 (the 'Twelfth Supplement') and the Issuer's payment to the Insurer of
the insurance premium for each ofthe Reserve Policy and the Bond Insurance Policy the Insurer and
the Issuer hereby covenant and agree as follows
Upon any payment by the Insurer under the Reserve Policy the Insurer shall furnish
to the Issuer written instructions as to the manner m which payment of amounts owed
to the Insurer as a result of such payment under the Reserve Policy shall be made
2 Subject to the provisions of Section 7(f) of the Master Ordinance, the Issuer shall pay
the Insurer the principal amount of any draws under the Reserve Policy and pay all
related reasonable expenses incurred by the Insurer and shall pay interest thereon from
the date of payment by Financial Security at the Late Payment Rate 'Late Payment
Rate means the lesser of (a) the greater of (i) the per annum rate of interest, publicly
announced from time to time by The Chase Manhattan Bank at rts principal office in
the Crty of New York, as rts prime or base lending rate ("Prime Rate') (any change
m such Prime Rate to be effective on the date such change is announced by The Chase
Manhattan Bank) plus 3% and (ii) the then applicable highest rate of interest on the
Bonds and (b) 15%, the maximum rate permissible under Chapter 1204 Texas
Government Code, as amended. The Late Payment Rate shall be computed on the
basis of the actual number of days elapsed over a year of 360 days. In the event The
Chase Manhattan Bank ceases to announce rts Prime Rate, the Prime Rate shall be the
prime or base lending rate of such national bank as the Insurer shall designate in
wasting to the Issuer
Repayment of draws and payment of expenses and the interest accrued thereon at the
Late Payment Rate (collectively 'Policy Costs) shall commence m the first month
following each draw and each such monthly payment shall be in an amount at least
equal to 1112th of the aggregate of Policy Costs related to such draw
4 Amounts in respect of Policy Costs paid to the Insurer shall be credited first to
interest due, then to the expenses due and then to principal due
5 As and to the extent that payments are made to the Insurer on account of principal
due, the coverage under the Reserve Policy will be increased by alike amount, subject
to the terms of the Reserve Policy
6 The ordinances authorizing the Bonds shall not be discharged until all Policy Costs
owing to the Insurer shall have been paid in full. The Issuer's obligation to pay such
amounts shall expressly survive payment in full of the Bonds
7 The Issuer agrees to comply with all conditions set forth in the Municipal Bond Debt
Service Reserve Insurance Commitment executed m connection with the issuance of
the Reserve Policy
8 The Issuer hereby incorporates by reference into the Twelfth Supplement the
conditions of the Insurer as to the issuance of the Bond Insurance Policy set forth in
the Commitments of the Insurer as attached hereto The Issuer hereby agrees to
comply with such conditions with the same force and effect as if set forth in full in the
Twelfth Supplement.
9 Notices to the Insurer shall be sent to the following address (or such other address as
the Insurer may designate in writing to the Issuer) Financial Security Assurance Inc
3 50 Park Avenue, New York, New York 10022-6022 Attention. Managing Director
Surveillance
10 This Agreement may be executed in counterparts, each of which alone and all of
which together shall be deemed one original Agreement.
11 If any one or more of the agreements, provisions or terms of this Agreement shall be
for any reason whatsoever held invalid, then such agreements, provisions or terms
shall be deemed severable from the remaining agreements, provisions or terms of this
Agreement and shall in no way affect the validity or enforceability of the other
provisions of this Agreement.
12 All capitalized terms used herein and not otherwise defined shall have the meanings
ascribed to them in the Twelfth Supplement.
13 This Agreement and the rights and obligations of the parties of the Agreement shall
be governed by and construed and interpreted in accordance with the laws ofthe State
of Texas
[Execution Page Follows]
IN WITNESS WHEREOF the parties hereto have set their hands as of the date wntten above
CITY OF FORT WORTH, TEXAS
By'
Title City Manager
FINANCIAL SECURITY ASSURANCE INC
By~
Title Managing Director
Approved 12/16/03
AUCTION AGREEMENT
Dated as of January 1 2004
Between
WELLS FARGO BANK, N A.
as Paying Agent/Registrar
and
THE BANK OF NEW YORK,
as Auction Agent
Relating to
City of Fort Worth, Texas Water and Sewer System Auction Rate Revenue Bonds, Series 2004
Select Auction Variable Rate Securities (SAVRS)
TABLE OF CONTENTS
Page
SECTION 1 DEFINITIONS AND RULES OF CONSTRUCTION 1
1 1 Terms Defined by Reference to the Twelfth Supplement 1
1 2 Terms Defined Herein I
1 3 Rules of Construction 2
SECTION 2 AUCTION 2
2 1 Purpose, Appointment, Incorporation by Reference of Auction Procedures and
Settlement Procedures 2
2 2 Preparation for each Auction, Maintenance of Registry of Beneficial
Owners 3
2 3 Auction Schedule 5
2 4 Notice of Auction Results 6
2 5 Notices to Existing Owners
2 6 Broker Dealers 6
2 7 Ownership of SAVRS ~
2 8 Access to and Maintenance of Auction Records '7
SECTION 3 THE AUCTION AGENT ~
3 1 Duties and Responsibilities of the Auction Agent 7
3 2 Rights of the Auction Agent g
3 3 Auction Agent s Disclaimer 9
3 4 Compensation, Expenses and Indemnification of the Auction Agent 9
3 5 Broker Dealer Fee g
i
SECTION 4 REPRESENTATIONS OF THE PAYING AGENT/REGISTRAR 10
SECTION 5 MISCELLANEOUS 11
5 1 Term of Agreement 11
5 2 Communications 12
5 3 Entire Agreement 13
5 4 Benefits, Successors and Assigns 13
5 5 Amendment, Waiver 13
5 6 SeverabilrtY 13
5 7 Execution m Counterparts 13
5 8 Governing Law 13
ii-
AUCTION AGREEMENT
THIS AUCTION AGREEMENT dated as of January 1 2004 (the Auction
Agreement') between The Bank of New York, as Auction Agent (the Auction Agent') and
Wells Fargo Bank, N A. (the 'Paying Agent/Registrar")
WITNES SETH
WHEREAS concurrently with the execution and delivery of this Auction Agreement, the
Crty of Fort Worth, Texas (the 'Issuer") ns issuing $ nn aggregate principal
amount of nts Water and Sewer System Auction Rate Revenue Bonds, Serves 2004 (the
SAVRS or SAVRS Bonds') pursuant to the 'Master Ordinance Estabhslung the Crty of Fort
Worth, Texas Water and Sewer System Revenue Financing Program (the 'Master Ordinance
and the 'Twelfth Supplemental Ordinance to the Master Ordinance (the Twelfth Supplement )
WHEREAS the Paying Agent/Registrar ns entering into this Auction Agreement as agent
for the Bond Owners pursuant to the Twelfth Supplement, and
WHEREAS the Auction Agent ns to perform certain duties set forth herein,
NOW THEREFORE, the Paying Agent/Registrar and the Auction Agent hereby agree as
follows
Section 1 Definitions and Rules of Construction
1 1 Terms Defined by Reference to the Twelfth Supplement. Capitalized terms not
defined herein shall have the respective meanings specified m the Twelfth Supplement,
including Exhibit C thereto
1 2 Terms Defined Herein. As used herein and nn the exhibits hereto the following
terms shall have the following meanings, unless the context otherwnse requires
(a) Auction Agent Acceptance Fee means an acceptance fee as set forth nn a
letter from the Auction Agent to the Issuer
(b) Auction Agent Fee means the fees, other than the Auction Agent
Acceptance Fee, set forth nn a letter from the Auction Agent to the Issuer
(c) Authornzed Officer" shall mean (i) nn the case of the Auction Agent, each
Semor Vice President, Vice President, Assistant Vice President and Assistant Treasurer of the
Auction Agent assigned to its Dealing and Trading Group of its Corporate Trust Department and
every other officer or employee of the Auction Agent designated an Authorized Officer" for
purposes hereof m a written communication delivered to the Paying Agent/Registrar (ii) in the
case of the Issuer its Crty Manager and every other officer or employee of the Issuer designated
an Authorized Officer" for purposes hereof in a written communication delivered to the Paying
Agent/Registrar and (iii) in the case of the Paying Agent/Registrar every officer or employee of
the Paying Agent/Registrar designated as an Authorized Officer" for purposes hereof in a
written communication delivered to the Auction Agent.
(d) 'Broker Dealer Agreement shall mean each agreement among the Auction
Agent, the Issuer and a Broker Dealer substantially nn the form attached hereto as EXHIBIT A,
(e) 'Existing Owner" shall mean (i) the owner of any beneficial interest nn any
SAVRS or (ii) the Broker Dealer m any SAVRS in the event the Auction Agent does not receive
a list of such beneficial owners from such beneficial owner's Broker Dealer as provided nn
Section 2 2(c)(i), as shown on the SAVRS Register
(f) SAVRS Register" ns defined nn Section 2 2(c) hereof
(g) Settlement Procedures shall mean the Settlement Procedures attached hereto
as EXIIIBIT B
1 3 Rules of Construction. Unless the context or use indicates another or different
meaning or intent, the following rules shall apply to the construction of this Auction Agreement.
(a) Words nmpon-tnng the singular number shall include the plural number and vice
versa.
(b) The captions and headings herein are solely for the convenience of reference
and shall not constitute a part of this Auction Agreement nor shall they affect nts meaning,
construction or effect.
(c) The words 'hereof' 'herein and other words of similar nmport refer to this
Auction Agreement as a whole.
(d) All references herein to a particular time of day shall be to New York City
tame
(e) Each reference to the purchase, sale or holding of SAVRS shall refer to
beneficial ownership interests m SAVRS unless the context clearly requires otherwise
(f) All references to the Twelfth Supplement include all exhibits thereto
Section 2 Auction.
2 1 Purpose; Appointment; Incorporation by Reference of Auction Procedures and
Settlement Procedures.
(a) The Twelfth Supplement provides that the interest rate on the SAVRS Bonds
for each Auction Period shall be the SAVRS Rate which shall be, except as otherwise provided
therein, the rate per annum that the Auction Agent determnnes to have resulted from the
implementation of the Auctnon Procedures.
2
(b) Pursuant to the Twelfth Supplement, and at the direction of the Issuer the
Paying Agent/Registrar hereby appoints The Bank of New York to act as Auction Agent The
Bank of New York hereby accepts such appointment to perform the Auction Procedures,
Settlement Procedures and other duties herein, in each Broker Dealer Agreement and in the
Twelfth Supplement specified to be performed by the Auction Agent.
(c) The Auction Procedures and other provisions contained m the Twelfth
Supplement are hereby incorporated herein by reference in their entirety and shall be deemed to
be a part hereof to the same extent as if such provisions were expressly set forth herein. To the
extent any provision contained herein conflicts with any provision incorporated herein by
reference the terms hereof shall control.
2.2 Preparation for each Auction Maintenance of Re~istry of Beneficial Owners
(a) Not later than seven days prior to any Auction Date for which any change in
Broker Dealers is to be effective, the Auction Agent shall notify or cause to be notified the
Paymg Agent/Registrar and the Issuer m wrrtmg of such change and, if such change is the
addition of a Broker Dealer the Issuer shall cause to be delivered to the Auction Agent, for
execution by the Auction Agent pursuant to Section 2 6(a) hereof, a Broker Dealer Agreement
manually signed by such Broker Dealer
(b) (i) On each Auction Date, the Auction Agent shall determine the Maximum
SAVRS Rate, the All Hold Rate and the SAVRS Rate For this purpose the prevailing rating(s)
of the SAVRS as of the Closing Date is [put in appropriate rating(s)] and the
Applicable Percentage is % [This will change according to rating information.] Thereafter
if there shall have been a change m the prevailing rating of the SAVRS the Issuer shall supply
by facsimile transrrussion, prior to 9 00 a.m. on the first Auction Date following such change, the
new prevailing rating of the SAVRS and the Applicable Percentage The Auction Agent may
conclusively rely upon such information so obtained and shall be entitled to assume that there
has been no change in the prevailing rating of the SAVRS and the Applicable Percentage unless
rt has been so notified by an Authorized Officer of the Issuer to the contrary Not later than 9 30
a.m. on each Auction Date, the Auction Agent shall notify the Paymg Agent/Registrar and the
Broker Dealers by telephone (confirmed to the Paymg Agent/Registrar in wrrtmg or by facsimile
transnussion after the Auction) or other electromc commumcation acceptable to the parties of the
All Hold Rate, Default Rate, the Maximum SAVRS Rate and the Reference Rate
(ii) Should the Issuer fail to timely provide funds to the Paymg
Agent/Registrar sufficient to pay principal, premium, if any or interest when due on any SAVRS
Bond, the Paymg Agent/Registrar shall forthwith notify the Auction Agent m wrrtmg of the
same and upon receipt of such notice, the Auction Procedures shall be suspended commencing
on the date of the Auction Agent s receipt of such notice from the Paymg Agent/Registrar and
the interest rate on the SAVRS for each Auction Period commencing after such occurrence and
during the continuance of such failure to and including the Auction Period, if any during which
such failure is cured will equal the Default Rate as determined by the Paymg Agent/Registrar on
the first day of each such Auction Period as provided in the Twelfth Supplement. If such failure
3
is later cured or waived, the Paying Agent/Registrar shall forthwith notify the Auction Agent of
the same. The Auction Procedures shall resume two Business Days after the Auction Agent
receives such notice of cure or waiver with the next Auction to occur on the next regularly
scheduled Auction Date occurring after such cure or waiver
(c) (i) The Auction Agent shall maintain a registry of Existing Owners for
purposes of Auctions and shall indicate thereon the identity of the respective Broker Dealer of
each Existing Owner if any on whose behalf such Broker Dealer submitted the most recent
Order in any Auction which resulted in such Existing Owner continuing to hold or purchase such
SAVRS (the SAVRS Register") The Auction Agent shall keep the SAVRS Registry current
and accurate based solely upon the information contained in notices furnished to the Auction
Agent pursuant to the last sentence of this Section 2 2(c)(i) Each Broker Dealer is required
under the Broker Dealer Agreement to which it is a party to deliver to the Auction Agerit on the
Closing Date a list of the initial Existing Owners that purchased such SAVRS through such
Broker Dealer The Auction Agent may conclusively rely upon, as evidence of the identities of
the Existing Owners, the following such lists, the results of Auctions, notices from DTC
regarding the results of redemptions or mandatory tenders, notices from any Existing Owner the
Agent Member of any Existing Owner or the Broker Dealer of any Existing Owner with respect
to such Existing Owner's transfer of SAVRS to another Person.
(ii) In the event of any partial redemption or mandatory tender of the
SAVRS of which the Auction Agent has received written notice from the Paying
Agent/Registrar the Auction Agent shall promptly thereafter request DTC to notify the Auction
Agent of the Agent Members whose SAVRS have been called for redemption or mandatory
tender and the person or department at such Agent Member to contact regarding such
redemption or mandatory tender and, within two Business Days after the receipt by the Auction
Agent of such information, the Auction Agent shall request each such Agent Member to disclose
to the Auction Agent (upon selection by such Agent Member of the Existing Owners whose
SAVRS are to be redeemed) the principal amount of SAVRS of each such Existing Owner if
any which are subject to such redemption or mandatory tender provided the Auction Agent
shall have been furnished with the name and telephone number of a person or department at such
Agent Member from which it is to request such information. In the absence of receiving any
such .information with respect to an Existing Owner from such Existing Owner's Agent Member
(or otherwise), the Auction Agent may continue to treat such Existing Owner as the beneficial
owner of the principal amount of SAVRS shown in the SAVRS Register
(iii) The Auction Agent may refuse to register a transfer of beneficial
ownership of SAVRS from an Existing Owner to another person unless such transfer is to
another Broker Dealer and unless (A) such transfer is pursuant to an Auction or (B) the Auction
Agent has been notified in writing (1) in a notice in the form of Exhibit C to the Broker Dealer
Agreements by such Existing Owner the Broker Dealer or an Agent Member of such Existing
Owner of such transfer (2) in a notice in the form of Exhibit D to the Broker Dealer Agreements
by the Broker Dealer of any Person that purchased or sold such SAVRS in an Auction of the
failure of such SAVRS to be transferred as a result of such Auction, or (3) in a notice from DTC
regarding the results of mandatory tenders. In the event a notice referred to in the preceding
clause (2) is received, the Auction Agent shall register the beneficial ownership of the SAVRS
4
covered thereby in the name of the Existing Owner thereof pnor to the Auction referred to in
such notice The Auction Agent shall not be required to accept any notice delivered pursuant to
the terms of the foregoing sentence if received by the Auction Agent after 3 00 p.m. on the
Business Day immediately preceding an Auction Date
(iv) The Auction Agent may request the Broker Dealers, as set forth in
the Broker Dealer Agreements, to provide the Auction Agent with a list of their respective
customers that such Broker Dealers believe are Existing Owners of SAVRS The Auction Agent
shall not disclose such information so provided to any Person other than the Paying
Agent/Registrar the Issuer and the Broker Dealer that provided the same, provided, however
that the Auction Agent reserves the right and is authorized to disclose any such information if
(A) it is ordered to do so by a court of competent jurisdiction or a regulatory judicial or quasi
judicial agency or authority having the authority to compel such disclosure, (B) rt is advised by
its counsel that its failure to do so would be unlawful or (C) failure to do so would expose the
Auction Agent to loss, liability claim, damage or expense for which it is has not received
indemnity satisfactory to rt.
(d) In the event that the notice referred to in clause (vi) of paragraph (a) of the
Settlement Procedures states an Auction Date that is subsequently changed, the Auction Agent,
by such means as the Auction Agent deems practicable, shall give notice of the new Auction
Date not later than 9 15 a.m. ~ n the earlier of the new Auction Date or the old Auction Date.
(e) The Auction Agent shall deliver a copy of any notice received by it from the
Paying Agent/Registrar pursuant to clause (ii) of the foregoing paragraph (b) to the effect that a
failure of the Issuer to timely provide funds to the Paying Agent/Registrar sufficient to pay the
principal, premium, if any and interest when due on any SAVRS Bond has been cured or
waived to the Broker Dealers on the Business Day following its receipt thereof by telecopy or
other electronic communication acceptable to such Broker Dealers
2 3 Auction Schedule The Auction Agent shall conduct Auctions for the SAVRS
Bonds in accordance with the schedule set forth below Such schedule may be changed by the
Auction Agent if directed in writing by the Issuer to reflect then currently accepted market
practices for similar auctions The Auction Agent shall give written notice of any such change to
the Paying Agent/Registrar the Issuer and each Broker Dealer Such notice shall be given prior
to the close of business on the Business Day next preceding the first Auction Date on which any
such change shall be effective Notwithstanding the foregoing, the Auction Agent will follow
The Bond Market Association s Market Practice U S Holiday Recommendations for shortened
trading days for the bond markets (the `BMA Recommendation'), unless the Auction Agent is
instructed otherwise In the event of a BMA Recommendation on an Auction Date the
Submission Deadline will be 11 30 a.m. instead of 1 00 p m. and as a result the notice of
auction results will occur at an earlier time
5
Time Event
By 9 30 a.m. Auction Agent advises the Broker Dealers of the All Hold Rate,
the Maximum SAVRS Rate and the Reference Rate, as set forth
in Section 2.2(b)(i) hereof
9 30 a.m. - 1 00 p m. Auction Agent assembles information communicated to rt by
(11 00 a.m. in the case of a Broker Dealers as provided in Section 2 02 of Exhibit C of the
daily Auction Period) Twelfth Supplement. Submission Deadline is 1 00 p m. (11 00
a.m. m the case of a daily Auction Period)
As soon as practical after 1 00 Auction Agent makes determination pursuant to Section 2 03
p m. (by 11 30 a.m. in the (b) of Exhibit C of the Twelfth Supplement.
case of a daily Auction
Penod)
By approximately 3 00 p m. Submitted Bids and Submitted Sell Orders are accepted and
but not later than the close of rejected and SAVRS allocated as provided in Section 2 04 of
business (by 12 00 noon in the Exhibit C of the Twelfth Supplement. Auction Agent gives
case of a daily Auction notice of Auction results as set forth m Section 2 4 hereof.
Period)
2 4 Notice of Auction Results Following such Auction, the Auction Agent shall
follow the notification procedures set forth in paragraph (a) of the Settlement Procedures In
addition, promptly after making the determinations required by Section 2 03 of Exhibit C of the
Twelfth Supplement on each Auction Date, the Auction Agent shall give notice of the Auction
Rate to the Paying Agent/Registrar and the Issuer by telephone (promptly confirmed in writing)
or by telecopy or other electronic communication acceptable to the parties and the Paying
Agent/Registrar shall promptly give notice to DTC of such Auction Rate The Auction Agent,
unless instructed otherwise in writing by the Issuer or the Paying Agent/Registrar is authorized
to release the Winning Bid Rate after each Auction for public dissemination.
2 5 Notices to Existm~ Owners. The Auction Agent shall be entitled to conclusively
rely upon the address of each Existing Owner delivered by such Existing Owner in connection
with any notice to Existing Owners required to be given by the Auction Agent pursuant to this
Section 2
2 6 Broker Dealers.
(a) On the Closing Date the Auction Agent shall enter into a Broker Dealer
Agreement with Lehman Brothers, Inc The Auction Agent shall from time to time enter into
such other Broker Dealer Agreements as the Issuer shall request with written notice to the
6
Paying Agent/Registrar and the written consent of Lehman Brothers, Inc so long as Lehman
Brothers, Inc is a Broker Dealer The Issuer shall cause to be delivered to the Auction Agent, for
execution by the Auction Agent, a Broker Dealer Agreement manually signed by such Broker
Dealer
(b) The Auction Agent shall terminate any Broker Dealer Agreement as set forth
therein if so directed by the Issuer m writing with pnor wntten notice to the Paying
Agent/Registrar
2 7 Ownership of SAVRS Neither the Issuer nor any Person controlled thereby may
submit any Order or Bid, directly or indirectly many Auction. The Auction Agent shall have no
duty to momtor compliance with this Section 2 7
2 8 Access to and Maintenance. of Auction Records The Auction Agent shall afford
to the Paying Agent/Registrar and its agents, independent public accountants and counsel, access
at reasonable times during normal business hours to all books, records, documents and other
information concerning the conduct and results of Auctions, provided that any such agent,
accountant or counsel of the Paying Agent/Registrar shall furnish the Auction Agent with a letter
from an Authonzed Officer of the Paying Agent/Registrar requesting that the Auction Agent
afford such person access Except as provided m Sections 3 1(d) and 5 1(b) the Auction Agent
shall maintain records relating to any Auction for a penod of two years after such Auction and
such records shall, m reasonable detail, accurately and fairly reflect the actions taken by the
Auction Agent hereunder At the end of such two-year period the Auction Agent shall deliver
such records to the Paying Agent/Registrar if the Paying Agent/Registrar so requests The
Auction Agent shall provide the Paying Agent/Registrar with copies of any report the Auction
Agent provides DTC concerning discrepancies between the records of the Auction Agent and
DTC of the aggregate portions registered m each CUSIP number The Auction Agent shall not
be responsible for any actions of the Paying Agent/Registrar or its agents, accountants or counsel
for passing on confidential information as a result of access to the records of the Auction Agent
Copies of all records and reports furnished to the Paying Agent/Registrar shall also be provided
to the Issuer by the Paying Agent/Registrar
Section 3 The Auction Agent.
3 1 Duties and Responsibilities of the Auction Agent.
(a) The Auction Agent is acting solely as agent of the Paying Agent/Registrar and
owes no duties to any other person by reason of this Auction Agreement and owes no fiduciary
duties to any person, except as otherwise expressly stated herein, and no implied duties,
fiduciary or otherwise, shall be read into this Auction Agreement.
(b) The Auction Agent and the Paying Agent/Registrar undertake to perform such
duties and only such duties as are expressly set forth herein, or expressly incorporated herein by
reference pursuant to Section 2 1 hereof, to be performed by it, and no implied covenants or
obligations shall be read into tlis Auction Agreement against the Auction Agent or the Paying
Agent/Registrar
7
(c) In the absence of willful misconduct or gross negligence on its part, the
Auction Agent, whether acting directly or through agents or attorneys as provided m Section
3 2(d), shall not be liable for any action taken, suffered, or omitted or for any error of judgment
made by rt in the performance of its duties hereunder The Auction Agent shall not be liable for
any error of judgment made in good faith unless the Auction Agent shall have been grossly
negligent m ascertaining the pertinent facts necessary to make such judgment. Absent willful
misconduct or gross negligence, the Auction Agent shall not be liable for special, indirect or
consequential loss or damages of any kind whatsoever (including but not limited to loss of
profit), even if the Auction Agent has been advised as to the likelihood of such loss or damage
and regardless of the form of action.
(d) Upon terrnination of this Auction Agreement, the Auction Agent shall
promptly deliver to the Issuer upon its request, the Auction records and accompanying
documentation and any other documents referred to m Section 2 8 to the extent not previously
delivered to the Paying Agent/Registrar
(e) The Auction Agerit shall (i) not be required to and shall make no
representations and have no responsibilities as to the validity accuracy value or genuineness of
any signatures or endorsements, other than its own, (ii) not be obligated to take any legal action
hereunder that aught, nn its judgment, involve any expense or liability unless it has been
furnished with reasonable nndemrity~ and (iii) not be responsible for or liable m any respect on
account of the identity authority or rights of any person executing or delivering or purporting to
execute or deliver any document under this Auction Agreement.
(f) The Auction Agent shall not be responsible or liable for any failure or delay m
the performance of its obligations under this Auction Agreement arising out of or caused,
directly or indirectly by circumstances beyond its reasonable control, including without
limitation. acts of God, earthquakes, fires, floods wars, civil or military disturbances, sabotage,
epidemics, Hots, interruptions, loss or malfunctions of utilities, computer (hardware or software)
or communication service, accidents, labor disputes, or acts of civil or military authority or
governmental actions, it being understood that the Auction Agent shall use reasonable efforts
which are consistent with accepted practnces m the banking industry to resume performance as
soon as practicable under the circumstances
3.2 Rights of the Auction A ent.
(a) The Auction Agent may rely upon, and shall be protected in acting or
refraining from acting upon, any communication authorized hereby and upon any such written
instruction, notice, request, direction, consent, report, certificate, share certificate or other
instrument, paper or other document believed by it to be genuine The Auction Agent shall not
be liable for acting m good Earth upon any such communication made by telephone or other
electronic communication acceptable to the parties which the Auction Agent reasonably believes
to have been given by the particular party or parties To the extent pernnitted by law the Auction
Agent may record telephone communications with the Issuer the Paying Agent/Registrar and the
Broker Dealers, and each of such parties may record telephone communications with the
Auction Agent.
8
(b) The Auction Agent may consult with counsel of rts choice (provided such
selection is made with reasonable care) and the advice of such counsel shall be full and complete
authonzation and protection in respect of any action taken, suffered or omitted by it hereunder m
good faith and in reliance thereon.
(c) The Auction Agent shall not be required to advance, expend or nsk its own
funds or otherwise incur or become exposed to financial liability m the performance of its duties
hereunder
(d) The Auction Agent may perform rts duties and exercise rts nghts hereunder
either directly or by or through agents or attorneys and shall not be responsible for any
misconduct or negligence on the part of any agent or attorney appointed by it with due care
3 3 Auction Agent s Disclaimer The Auction Agent makes no representations as to
the adequacy of this Auction Agreement, the Broker Dealer Agreement, the Twelfth Supplement
or the SAVRS Bonds or any offering material used m connection with the offer and sale of the
SAVRS or any other agreement or instrument executed in connection with the transactions
contemplated herein or m any thereof.
3 4 Compensation, Expenses and Indemnification of the Auction A eg_nt The Issuer
shall pay (i) the Auction Agent Acceptance Fee on the date of payment for and delivery of the
SAVRS Bonds, (ii) the Auction Agent Fee for the SAVRS Bonds on the first Interest Payment
Date following the Closing Date and annually thereafter and (iii) upon request of the Auction
Agent, reasonable expenses, disbursements and advances incurred or made by the Auction Agent
m accordance with this Auction Agreement and any Broker Dealer Agreement (including the
reasonable compensation, expenses and disbursements of rts agents and counsel) except any
expense, disbursement or advance attributable to the negligence or willful rrusconduct of the
Auction Agent. The Auction Agent Fee represents compensation for the services of the Auction
Agent in conducting Auctions for the benefit of the beneficial owners of the SAVRS Bonds
The Auction Agent Fee may be adjusted from time to time with the approval of the Issuer upon a
wntten request of the Auction Agent delivered to the Issuer To the extent permitted by Texas
law the Issuer shall indemnify the Auction Agent and its directors, officers, employees and
agents for and hold rt and them harmless against any loss, liability or expense (including
reasonable fees and expenses of its counsel) incurred without negligence or willful misconduct
on rts and their part ansmg out of or m connection with rts or their agency under the Auction
Agreement and Broker Dealer Agreement or the transactions contemplated hereby or thereby
including the costs and expenses of defending itself or themselves against any claim of liability
in connection with its exercise or performance of any of rts or their duties thereunder including
the enforcement of this provision, except such as may result from rts negligence or willful
nusconduct.
3 5 Broker Dealer Fee While the SAVRS are in an Auction Period other than a daily
Auction Period on each Interest Payment Date following each Auction Date, each Broker Dealer
shall be entitled to receive an amount equal to the product of (x) 25 of 1 % multiplied by (y)(A)
if an Auction was held on such Auction Date, the sum of the aggregate principal amount of
9
SAVRS that were (1) the subject of a valid Hold Order of an Existing Owner submitted by such
Broker Dealer (2) the subject of a Submitted Bid of an Existing Owner submitted by such
Broker Dealer and continued to be held by such Existing Owner as a result of such Auction, (3)
the subject of a Submitted Bid of a Potential Owner and were purchased by such Potential
Owner as a result of such Auctions and (4) deemed to be the subject of a Hold Order by an
Existing Owner that were acquired by such Existing Owner from such Broker Dealer or (B) if an
Auction was not held on such Auction Date, the aggregate pnncipal amount of Outstanding
SAVRS that were acquired by an Existing Owner through such Broker Dealer multiplied by (z)
a fraction, the numerator of which is (i) if the Auction Period is seven-days, 28-days, 35-days, or
a Special Rate Period of 180 days or less, the actual number of days in the Auction Penod next
succeeding such Auction Date or (ii) if the Auction Penod is six months or a Special Rate Penod
of more than 180 days, the number of days in the Auction Period next succeeding such Auction
Date, calculated on the basis of twelve 30 day months in a year and in either case the
denominator of which is 360 If the SAVRS are in a daily Auction Period each Broker Dealer
shall be entitled to receive on each Interest Payment Date an amount equal to the sum calculated
for each Auction Penod m the preceding month of the product of (x) 25 of 1 % multiplied by (y)
the aggregate principal amount of SAVRS for each Auction Period that were (1) the subject of a
valid Hold Order submitted by such Broker Dealer (2) the subject of a Submitted Bid of an
Existing Owner submitted by such Broker Dealer and continued to be held by such Existing
Owner as a result of such Auction, (3) the subject of a Submitted Bid of a Potential Owner
subiritted by such Broker Dealer and were purchased by such Potential Owner as a result of
such Auction, (4) deemed to be the subject of a Hold Order by an Existing Owner that were
acquired by such Existing Owner from such Broker Dealer and (5) if an Auction was not held
for any Auction Period, the aggregate principal amount of Outstanding Bonds that were acquired
by an Existing Owner through such Broker Dealer multiplied by (z) a fraction, the numerator of
which is the number of days in the Auction Period and denominator of which is 360 The
Broker Dealer Fee shall be calculated by the Auction Agent, which shall be conclusive absent
manifest error Such amounts shall be commumcated by the Auction Agent to the Issuer and the
Paying Agent/Registrar by 4 00 p m. on the Business Day immediately preceding each Interest
Payment Date On or before 10 00 a.m. on each Interest Payment Date, the Issuer shall pay to the
Paying Agent/Registrar the amount due to the Broker Dealer By noon on each Interest Payment
Date, the Paying Agent/Registrar shall deliver to the Auction Agent the amount constituting the
Broker Dealer Fee, by wire transfer of immediately available funds to such account as the
Auction Agent may designate The amount constituting the Broker Dealer Fee shall be held by
the Auction Agent on behalf of the Broker Dealer and immediately upon receipt thereof, the
Auction Agent shall deliver such Broker Dealer Fee to the Broker Dealer pursuant to the written
instructions of the Broker Dealer If any Existing Owner who acquired SAVRS through a
Broker Dealer transfers any such SAVRS to another Person other than pursuant to an Auction,
the Broker Dealer for the SAVRS so transferred shall continue to be the Broker Dealer with
respect to such SAVRS provided, however that if the transfer was effected by or if the
transferee is, another Person who has met the requirements specified in the definition of
`Broker Dealer" contained in the SAVRS and executed a Broker Dealer Agreement, such
Person shall be the Broker Dealer for such SAVRS
10
Section 4 Representations and Warranties of the Pavmg_A ent/Re isg trar The Paying
Agent/Registrar hereby represents and warrants that
(a) this Auction Agreement has been duly and validly authorized, executed and
delivered by the Paying Agent/Registrar and constitutes the legal, valid and binding hmrted
obligation of the Paying Agent/Registrar•
(b) neither the execution and delivery of this Auction Agreement, the
consummation of the transactions contemplated hereby nor the fulfillment of or compliance with
the terms and conditions of this Auction Agreement will conflict v~nth, or violate or result in a
breach of the terms, conditions or provisions of, or constitute a default under the organizational
documents of the Paying Agent/Registrar any law or regulation, any order or decree of any court
or public Issuer havrng jurisdiction over such party or any mortgage, resolution, contract,
agreement or undertakrng to which the Paying Agent/Registrar is a party or by which rt is bound,
and
(c) any approvals, consents and orders of any governmental Issuer legislative
body board, agency or commission havrng jurisdiction over the Paying Agent/Registrar which
would constitute a condition precedent to or the absence of which would materially adversely
affect the due performance by the Paying Agent/Registrar of its obligations under this Auction
Agreement have been obtained
Section 5 Miscellaneous.
5 1 Term of Agreement.
(a) This Auction Agreement shall remain m effect until (i) all SAVRS Bonds
are redeemed, paid or purchased and cancelled, (ii) the SAVRS Bonds are no longer held by
DTC in book-entry form, (iii) this Auction Agreement shall be terminated as provided m this
Section 5 1 or (iv) the Auction Agent is removed as provided m this Section 5 1 The Paying
Agent/Registrar shall, upon the written direction of the Issuer remove the Auction Agent;
provided that a successor Auction Agent has been appointed, the Auction Agent may terrrunate
this Auction Agreement by giving at least ninety (90) days notice to the Issuer and the Paying
Agent/Registrar who shall give notice of the same to each Broker Dealer In the event the
Auction Agent has not been compensated for its services rendered hereunder the Auction Agent
may terrrvnate this Auction Agreement by giving at least thirty (30) days notice to the Issuer and
the Paying Agent/Registrar (who shall give notice of the same to each Broker Dealer), and upon
the expiration of such thirty (30) days, the Auction Agent may resign even if a successor Auction
Agent has not been appointed. A successor Auction Agent shall be appointed by the Paying
Agent/Registrar subject to the approval of such successor by the Issuer
(b) Except as otherwise provided in this paragraph (b), the respective rights
and duties of the Paying Agent/Registrar and the Auction Agent under this Auction Agreement
shall cease upon termination of this Auction Agreement. The representations and warranties of
the Paying Agent/Registrar contained herein, and the rights of the Auction Agent under Sections
3 2 and 3 4 hereof, shall survive the terrrunation hereof for any reason and/or the resignation or
11
removal of the Auction Agent Upon termination of this Auction Agreement, the Auction Agent
shall be deemed to have resigned as Auction Agent under each of the Broker Dealer Agreements
and shall upon request promptly deliver to the Issuer copies of all books and records maintained
by rt m connection with rts duties hereunder
5 2 Communications Except for (a) communications authorized to be by telephone
(which shall be deemed to include such other electronic communications acceptable to the
parties using such means) pursuant to this Auction Agreement or the Auction Procedures and (b)
communications m connection with Auctions (other than those expressly required to be m
writing) all notices, requests and other communications to any party hereunder shall be in
wntmg (including telecopy or other electronic communication acceptable to the parties) and
shall be given to such party addressed to it, at its address, telecopy number or a-mail address set
forth below
If to the Paying Agent/Registrar
addressed
Wells Fargo Bank, N A.
608 2nd Avenue South
MAC N9303 10
Minneapolis, MN 55479
Attention. Corporate Trust Services
Telecopy~
E-mail
If to the Auction Agent,
Addressed
The Bank of New York
100 Church Street
8`h Floor
New York, New York 10286
Attention
Telecopy~ 212-437-6123
E-mail
If to the Issuer
addressed
City of Fort Worth, Texas
1000 Throckmorton
3`d Floor
Fort Worth, Texas 76102
Attention. Director of Finance
Telecopy~ 817-871-8966
E-mail ~ames.keyes@fortworthgov org
12
or such other address, telecopier number or e-mail address as such party may hereafter specify
for such purpose by notice to the other parties Each such notice, request or communication
shall be effective (a) if given by telecopy when such telecopy is transrrutted to the telecopier
number specified herein or (b) if given by any other means, when delivered at the address
specified herein. Communications shall be given on behalf of the parties hereto by one of their
respective Authorized Officers
5 3 Entire Agreement. This Auction Agreement contains the entire agreement
between the parties relating to the subject matter hereof, and there are no other representations,
endorsements, promises, agreements or understandings, oral, wntten or inferred, between the
parties relating to the subject matter hereof.
5 4 Benefits, Successors and Assi ns This Auction Agreement shall be binding
upon, inure to the benefit of and be enforceable by the Paying Agent/Registrar and the Auction
Agent and their respective successors and assigns Nothing herein, express or implied, shall give
to any person, other than the Paying Agent/Registrar and the Auction Agent and their respective
successors or assigns, any benefit of any legal or equitable right, remedy or claim hereunder
except as otherwise expressly stated, other than the rights expressly granted to the Issuer herern.
5 5 Amendment, Waiver (a) This Auction Agreement shall not be deemed or
construed to be modified, amended, rescinded, cancelled or waived, m whole or in part, except
by written instrument signed by a duly authorized representative of both parties hereto and
consented to m wntmg by a duly authorized representative of the Issuer
(b) The failure of either party hereto to exercise any nght or remedy hereunder m the
event of a breach hereof by the other party shall not constitute a waiver of any such nght or
remedy with respect to any subsequent breach.
5 6 Severabilrty If any clause provision or section hereof shall be ruled mvahd or
unenforceable by any court of competent jurisdiction, the invalidity or unenforceability of such
clause, provision or section shall not affect any of the remaimng clauses, provisions or sections
hereof.
5 7 Execution in Counter arts This Auction Agreement may be executed in several
counterparts, each of which shall be an original and all of which shall constitute but one and the
same instrument.
5 8 Govermn~ Law; Junsdiction Waiver of Trial by Jury This Auction Agreement
shall be governed by and construed m accordance with the laws of the State of New York
(including without linutation Section 5-1401 of the New York General Obligations Law or any
successor to such statute) The signatories hereto agree that, except as provided below all
actions and proceedings relating to or ansing from, directly or indirectly this Auction
Agreement or any of the transactions contemplated hereby may be litigated in courts located
within the State of New York. The signatories hereto hereby submit to the personal jurisdiction
of such courts, hereby waive personal service of process upon it and consent that any such
service of process may be made by certified or registered mail, return receipt requested, directed
to the other party at its address last specified for notices hereunder and service so made shall be
13
deemed completed five (5) days after the same shall have been so mailed, and hereby waive the
right to a trial by fury in any action or proceeding with Auction Agent. All actions and
proceedings brought by the signatories against the Auction Agent relating to or arising from,
directly or indirectly this Auction Agreement shall be litigated only in courts located within the
State of New York. In this regard, the signatories agree that the courts of the State of New York
located in Manhattan are the most convenient forum to resolve such actions and, accordingly
will not argue to the contrary in such actions or proceedings. The foregoing notwithstanding, any
attempt on the part of the Auction Agent to enforce the provisions set forth m Section 3 4 shall
be litigated only m Texas courts located in Tarrant County Texas.
IN WITNESS WHEREOF the parties hereto have caused this Auction Agreement to be
duly executed and delivered by their proper and duly Authorized Officers as of the date first
above written.
WELLS FARGO BANK, N A. as Paying
Agent/Registrar
By
Authorized Signatory
THE BANK OF NEW YORK, as Auction Agent
By
Authorized Signatory
14
EXI-WHIT A
Form of Broker Dealer Agreement
[See separate Broker Dealer Agreement]
Al
EXHIBIT B
SETTLEMENT PROCEDURES
(a) On each Auction Date, the Auction Agent shall notify by telephone or other
electromc communication acceptable to the parties each Broker Dealer that participated in the
Auction held on such Auction Date and submitted an Order on behalf of any Existing Owner or
Potential Owner of
(i) the SAVR5 Rate on the SAVRS fixed for the succeeding Auction Period
or in the case of SAVRS in a daily Auction Period, the SAVRS Rate on the SAVRS
fixed for the current Auction Period,
(ii) whether Sufficient Clearing Bids existed for the determination of the
Wimm~g Bid Rate,
(iii) if such Broker Dealer submitted a Bid or a Sell Order on behalf of an
Existing Owner whether such Bid or Sell Order was accepted or rejected, in whole or in
part, .and the principal amount of SAVRS if any to be sold by such Existing Owner
(iv) if such Broker Dealer submitted a Bid on behalf of a Potential Owner
whether such Bid was accepted or rejected, in whole or in part, and the principal amount
of SAVRS if any to be purchased by such Potential Owner
(v) if the aggregate principal amount of SAVRS to be sold by all Existing
Owners on whose behalf such Broker Dealer submitted Bids or Sell Orders is different
from the aggregate principal amount of SAVRS to be purchased by all Potential Owners
on whose behalf such Broker Dealer submitted a Bid, the name or names of one or more
other Broker Dealers (and the Agent Member if any of each such other Broker Dealer)
and the principal amount of SAVRS to be (A) purchased from one or more Existing
Owners on whose behalf such other Broker Dealers submitted Bids or Sell Orders or (B)
sold to one or more Potential Owners on whose behalf such Other Broker Dealers
submitted Bids; and
{vi) the immediately succeeding Auction Date
(b) On each Auction Date, each Broker Dealer that submitted an Order on behalf of
any Existing Owner or Potential Owner shall
(i) advise each Existing Owner and Potential Owner on whose behalf such
Broker Dealer submitted a Bid or Sell Order whether such Bid or Sell Order was
accepted or rejected, in whole or in part,
(ii) instruct each Potential Owner on whose behalf such Broker Dealer
submitted a Bid that was accepted, m whole or m part, to instruct such Potential Owner's
Agent Member to pay to such Broker Dealer (or its Agent Member) through DTC the
amount necessary to purchase the principal amount of SAVRS to be purchased pursuant
B-1
to such Bid (including, with respect to the SAVRS Bonds m a daily Auction Penod,
accrued interest if the purchase date is not an Interest Payment Date for such SAVRS
Bond) against receipt of such principal amount of SAVRS
(iii) instruct each Existing Owner on whose behalf such Broker Dealer
submitted a Sell Order that was accepted or a Bid that was rejected, in whole or in part, to
instruct such Existing Owner's Agent Member to deliver to such Broker Dealer (or its
Agent Member) through DTC the principal amount of SAVRS to be sold pursuant to
such Bid or Sell Order against payment therefor
(iv) advise each Existing Owner on whose behalf such Broker Dealer
submitted an Order and each Potential Owner on whose behalf such Broker Dealer
submitted a Bid of the SAVRS Rate for the next succeeding Auction Penod or in the
case of SAVRS in a daily Auction Period, the SAVRS Rate far the current Auction
Penod,
(v) advise each Existing Owner on whose behalf such Broker Dealer
submitted an Order of the Auction Date of the next succeeding Auction, and
(vi) advise each Potential Owner on whose behalf such Broker Dealer
submitted a Bid that was accepted, in whole or in part, of the Auction Date of the next
succeeding Auction.
(c) On the basis of the information provided to it pursuant to paragraph (a) above,
each Broker Dealer that submitted a Bid or Sell Order shall allocate any funds received by it
pursuant to subparagraph (b) (ii) above, and any SAVRS received by rt pursuant to (b) (iu)
above, among the Potential Owners, if any on whose behalf such Broker Dealer submitted Bids
and the Existing Owners, if any on whose behalf such Broker Dealer submitted Bids or Sell
Orders and any Broker Dealer identified to it by the Auction Agent pursuant to subparagraph
(a)(v) above
(d) On the Business Day after the Auction Date or in the case of SAVRS in a daily
Auction Period, on such Auction Date, DTC shall execute the transactions described above,
debiting and crediting the accounts of the respective Agent Members as necessary to effect the
purchase and sale of SAVRS as deteriruned in the Auction.
B-2
Approved 12/16/03
BROKER DEALER AGREEMENT
Dated as of January 1 2004
among
THE BANK OF NEW YORK,
as Auction Agent
and
I,EHMAN BROTHERS INC
and
CITY OF FORT WORTH, TEXAS
relating to
City of Fort Worth, Texas Water and Sewer System
Auction Rate Revenue Bonds, Series 2004
i
Select Auction Variable Rate Securities (SAVRS)
TABLE OF CONTENTS
Page
SECTION 1 DEFII~IITIONS AND RULES OF CONSTRUCTION 1
1 1 Terms Defined by Reference to the Twelfth Supplement 1
1.2 Terms Defined Herein 1
1 3 Rules of Construction 2
1 4 Warranties of BD 2
SECTION 2 THE AUCTION 3
2 1 Purpose Appointment; Incorporation by Reference of Auction Procedures and
Settlement Procedures 3
2.2 Preparation for each Auction 3
2 3 Auction Schedule, Method of Submission of orders 4
2 4 Notices 5
2 5 Compensation 5
2 6 Settlement ~
SECTION 3 THE AUCTION AGENT ~
3 1 Duties and Responsibilities of the Auction Agent '7
3 2 Rights of the Auction Agent g
SECTION 4 DISCLOSURE, 1NDEMNIF'ICATION g
41 Disclosure g
4.2 Indemnification and Contribution 9
SECTION 5 MISCELLANEOUS 10
51 Termnnatnon 10
5 2 Participant 10
5 3 Communications 11
5 4 Entire Agreement 11
5 5 Benefits, Successors and Assigns 12
5 6 Amendment; Waiver 12
5 7 Severability 12
5 8 Execution m Counterparts 12
5 9 Governing Law 12
5 10 No Implied Duties 12
BROKER DEALER AGREEMENT
THIS BROKER DEALER AGREEMENT dated as of January 1 2004 (the `Broker
Dealer Agreement'), among (i) THE BANK OF NEW YORK (the Auction Agent'), a New
York banking corporation, not in its individual capacity but solely as agent of Wells Fargo Bank,
N.A. (the `Paying AgentlRegistrar"), pursuant to authority granted to the Auction Agent in the
Auction Agreement, dated as of January 1 2004 (the Auction Agreement"), between the Paying
Agent/Registrar and the Auction Agent and acknowledged by the Issuer as hereinafter defined,
(ii) LEHMAN BROTHERS INC a Delaware corporation ("BD") and (iii) CITY OF FORT
WORTH, TEXAS a Texas home-rule municipality issuer (the `Issuer")
WITNESSETH
WHEREAS the Issuer is issuing $ m aggregate pnncipal amount of its
Water and Sewer System Auction Rate Revenue Bonds, Serves 2004 (the `SAVRS" or `SAVRS
Bonds") and
WHEREAS BD is to perform certain duties set forth herein, and
WHEREAS the ordinance authorizing the issuance of the SAVRS (the `Twelfth
Supplement") provides that, except as provided therein, the interest rate on the SAVRS shall be
the SAVRS Rate which shall be, except as otherwise provided therein, the rate per annum that the
.Auction Agent deterrrunes to have resulted from the implementation of the Auction Procedures,
and
WHEREAS The Bank of New York has been appointed as Auction Agent for purposes
of the Auction Agreement, and pursuant to Section 2 6(a) of the Auction Agreement, the Issuer
has requested and directed the Auction Agent to execute and deliver this Broker Dealer
Agreement; and
WHEREAS the Auction Procedures require the participation of one or more Broker
Dealers,
Now therefore, the Auction Agent, as agent for the Paying Agent/Registrar BD for the
benefit of the Existing Owners and the Potential Owners of the SAVRS and the Issuer agree as
follows
SECTION 1 DEFINITIONS AND RULES OF CONSTRUCTION
11 Terms Defined by Reference to the Twelfth Supplement
Capitalized terms not defined herein shall have the respective meanings specified in the Twelfth
Supplement. Unless otherwise specified, Section references to the Auction Agreement refer to
such Sections m the Auction Agreement.
1
1 2 Terms Defined Herein. As used herein and in the exhibits hereto the
following terms shall have the following meanings, unless the context otherwise requires
(a) Authorized Officers shall mean such Senior Vice President, Vice
President, Assistant Vice President and Assistant Treasurer of the Auction Agent assigned to its
Dealing and Trading Group of rts Corporate Trust Department and every other officer or
employee of the Auction Agent designated as an Authorized Officer" for purposes hereof in a
communication to the BD
(b) `BD Officer" shall mean each officer or employee of BD designated
as a `BD Officer" for purposes of this Broker Dealer Agreement m a communication to the
Auction Agent.
(c) `Broker Dealer Agreement" shall mean this Broker Dealer
Agreement and any substantially similar agreement between the Auctnon Agent and a Broker
Dealer
(d) Settlement Procedures" shall mean the Settlement Procedures for
the SAVRS and shall be substantially in the form attached hereto as EXHIBIT A.
1 3 Rules of Construction. Unless the context or rules nndicates another or
different meaning or intent, the following rules shall apply to the construction of this Broker
Dealer Agreement
(a) Words importing the singular number shall include the plural
number and vice versa.
(b) The captions and headings herein are solely for the convenience of
reference and shall not constitute a part of this Broker Dealer Agreement nor shall they affect its
meaning, construction or effect.
(c) The words `hereof, `herein, `hereto and other words of similar
import refer to this Broker Dealer Agreement as a whole
(d) All references herein to a particular time of day shall be to New
York Crty time
(e) Each reference to the purchase, sale or holding of SAVRS" shall
refer to beneficial ownershnp interests m SAVRS unless the context clearly requires otherwise
(f) All references to the Twelfth Supplement include all exhibits
thereto
2
1 4 Representations and Warranties of BD BD hereby represents and
warrants that this Broker Dealer Agreement has been duly authorized, executed and delivered by
BD and that, assuming the due authorization, execution and delivery hereof by the Auction Agent
and the Issuer this Broker Dealer Agreement constitutes a valid and binding agreement of BD
enforceable against rt m accordance with its terms
SECTION 2 THE AUCTION
21 Purpose Incorporation by Reference of Auction Procedures and
Settlement Procedures
(a) The Auction Procedures will be followed by the Auction Agent
for the purpose of determining the SAVRS Rate for each Auction Period after the Initial Period
for the SAVRS Bonds Each periodic implementation of such procedures is hereinafter referred
to as an Auction.
(b) All of the provisions contained m the Auction Procedures and the
Settlement Procedures are incorporated herein by reference in their entirety and shall be deemed
to be a part of this Broker Dealer Agreement to the same extent as if such provisions were fully
set forth herein. To the extent any provision contained herein conflicts with any provision
incorporated herein by reference the terms hereof shall control.
(c) BD agrees to act as, and assumes the obligations of, and
limitations and restrictions placed upon, a Broker Dealer under this Broker Dealer Agreement.
BD understands that other Persons meeting the requirements specified in the definition of
`Broker Dealer" contained in the Twelfth Supplement may execute Broker Dealer Agreements
and participate as Broker Dealers in Auctions. BD agrees to handle customer orders in
accordance with its respective duties under applicable securities laws and rules
(d) BD and other Broker Dealers may participate in Auctions for their
own accounts The Issuer may however by notice to BD and all other Broker Dealers, prohibit
all of the Broker Dealers from subiruttmg Bids m Auctions for their own accounts, provided that
Broker Dealers may continue to submit Hold Orders and Sell Orders Notwithstanding the
foregoing, if BD is an affiliate of the Issuer it may not submit Bids to purchase SAVRS in
Auctions for its own account, but may submit Hold Orders and Sell Orders in Auctions with
respect to SAVRS otherwise acquired for its own account. The Auction Agent shall be under no
duty or habilrty with respect to monitoring compliance with this Section 2 1(d)
2 2 Preparation for Each Auction.
(aj Not later than 9 30 A.M. on each Auction Date, the Auction
Agent shall advise the Broker Dealers by telephone or other electronic communication acceptable
to the parties of the All Hold Rate, the Maximum SAVRS Rate and the Reference Rate
3
(b) On the Closing Date and from time to time thereafter as the
Auction Agent shall request, BD shall provide the Auction Agent with a list, substantially m the
form of EXHIBIT E hereto of the names of its customers that it believes are Existing Owners of
SAVRS and the principal amount of SAVRS held by each of such customers The Auction Agent
shall not disclose any such information so provided to any Person other than the Paying
Agent/Registrar the Issuer or BD except as otherwise required by law
(c) Not later than 3 00 P.M. on the Record Date preceding each
Auction Date, the Auction Agent shall notify BD of any change in the aggregate principal amount
of SAVRS as of the opening of business on such Record Date by delivering a notice to BD by
telecopy or other electronic communication acceptable to the parties.
2 3 Auction Schedule Method of Submission of Orders.
(a) The Auction Agent shall conduct Auctions for the SAVRS m
accordance with the schedule set forth below Such schedule may be changed at any time by the
Auction Agent at the written direction of the Issuer to reflect then currently accepted market
practices for similar auctions. The Auction Agent shall give notice of any such change to BD the
Issuer and the Paying Agent/Registrar which notice shall be given prior to the close of business
on the Business Day next preceding the .first Auction Date on which any such change shall be
effective Notwithstanding the foregoing, the Auction Agent will follow The Bond Market
Association s Market Practice U S Holiday Recommendations for shortened trading days for the
bond markets (the `BMA Recommendation') unless the Auction Agent is instructed otherwise
In the event of a BMA Recommendation on an Auction Date the Submission Deadline will be
11 30 a.m. instead of 1 00 p m. and as a result the notice of auction results will occur at an
earlier time
Time
By 9 30 A.M.
Event
Auction Agent advises the Broker Dealers of
the All Hold Rate, the 1Vlaximum SAVRS
Rate and the Reference Rate, as set forth in
Section 2 2(a)
9 30 A.M. 1 00 P.M. (11 00 A.M. m the
case of a daily Auction Period)
Auction Agent assembles information
communicated to it by Broker Dealers as
provided m Section 2 02 of Exhibit C of the
Twelfth Supplement Submission Deadline is
1 00 P.M. (11 00 A.M. m the case of a daily
Auction Period)
4
As soon as practical after 1 00 P.M. (by
11 30 A.M. in the case of a daily Auction
Penod)
By approximately 3 00 P.M. but not later
than the close of business (by 12 00 Noon
m the case of a daily Auction Penod)
Auction Agent makes deternunations
pursuant to Section 2 03(b) of Exhibit C
of the Twelfth Supplement.
Submitted Bids and Submitted Sell Orders
are accepted and rejected and SAVRS
allocated as provided in Section 2 04 of
Exhibit C of the Twelfth Supplement.
Auction Agent gives notice of the Auction
results as set forth in Section 2 4(a) hereof
(b) BD agrees, for the purpose of implementing the Auctions (and thereby
achieving the lowest possible interest rate on the SAVRS), to contact Potential Owners, including
Persons that are not Existing Owners, prior to the Submission Deadline on each Auction Date to
determine the principal amount of SAVRS, if any that each such Potential Owner offers to
purchase if the rate determined by the Auction Procedures for the next succeeding Auction Period
is not less than the rate per annum requested by such Potential Owner BD further agrees, upon
request, to deliver a copy of the Auction Procedures and other relevant documents prepared for
the purpose of disclosure to Potential Owners by the Issuer relating to the SAVRS to each
Potential Owner prior to such Potential Owner's participation in any Auction.
(c) In each Auction in which BD submits one or more Orders, BD shall
submit a separate Order to the Auction Agent for each Potential Owner or Existing Owner on
whose behalf BD is subrrutting an Order and shall not net the Orders of different Potential Owners
or Existing Owners on whose behalf BD is submitting Orders Each Order shall be in writing in
substantially the form attached hereto as EXHIBIT B or in such other form as may be reasonably
acceptable to the Auction Agent.
(d) BD shall deliver to the Auction Agent (i) a written notice, substantially
in the form attached hereto as EXHIBIT C of transfers of SAVRS made through BD by an
Existing Owner to another Person other than pursuant to an Auction, and (ii) a written notice,
substantially in the form attached hereto as EXHIBIT D of the failure of any SAVRS to be
transferred to or by any Person that purchased or sold SAVRS through BD pursuant to an
Auction. The Auction Agent is not required to accept any such notice specified m this Subsection
(d) for an Auction if rt is received by rt after 3 00 P.M. on the Business Day preceding such
Auction.
2 4 Notices.
(a) On each Auction Date, the Auction Agent shall notify BD by
telephone or other electronic communication acceptable to the parties of the results of the
Auction as set forth in paragraph (a) of the Settlement Procedures As soon as reasonably
practicable thereafter the Auction Agent shall notify BD if so requested, in writing of the
disposition of all Orders submitted by BD iri the Auction held on such Auction Date
5
(b) The Auction Agent shall notify BD of any change in the Auction
schedule set forth in Section 2 3(a) hereof.
(c) BD shall notify each Existing Owner or Potential Owner on whose
behalf BD has submitted an Order as set forth in paragraph (b) of the Settlement Procedures, and
take such other action as is required of BD pursuant to the Settlement Procedures
(d) The Auction Agent shall deliver to BD after receipt all notices and
certificates which the Auction Agent is required to deliver to BD pursuant to Section 2 of the
Auction Agreement at the times and in the manner set forth in the Auction Agreement.
2 5 Compensation.
(a) The initial Broker Dealer Fee Rate shall equal .25 of 1 % per annum of
The Broker Dealer Fee for the SAVRS shall be paid by the Issuer and represents
compensation for the services of the Broker Dealer in facilitating Auctions for the benefit of the
beneficial owners of the SAVRS Bonds. The Broker Dealer Fee Rate may be adjusted from time
to time with the approval of the governing body of the Issuer upon a written request of the
Broker Dealer delivered to the Issuer
(b) While the SAVRS are m an Auction Period other than a daily Auction
Period on each Interest Payment Date following each Auction Date, each Broker Dealer shall be
entitled to receive an amount equal to the product of (x) .25 of 1% multiplied by (y)(A) if an
Auction was held on such Auction Date, the sum of the aggregate principal amount of SAVRS
that were (1) the subject of a valid Hold Order of an Existing Owner submitted by such Broker
Dealer (2) the subject of a Submitted Bid of an Existing Owner submitted by such Broker Dealer
and continued to be held by such Existing Owner as a result of such Auction, (3) the subject of a
Submitted Bid of a Potential Owner submitted by such Broker Dealer and were purchased by
such Potential Owner as a result of such Auction and (4) deemed to be the subject of a Hold
Order by an Existing Owner that were acquired by such Existing Owner from such Broker Dealer
or (B) if an Auction was not held on such Auction Date, the aggregate principal amount of
Outstanding SAVRS that were acquired by an Existing Owner through such Broker Dealer
multiplied by (z) a fraction, the numerator of which is (i) if the Auction Period is seven days, 28
days, 35 days or a Special Rate Period of 180 days or less, the actual number of days in the
Auction Period next succeeding such Auction Date or (ii) if the Auction Period is six months or a
Special Rate Period of more than 180 days, the number of days in the Auction Period next
succeeding such Auction Date calculated on the basis of twelve 30 day months in a year and in
either case the denorrunator of which is 360 If the SAVRS are m a daily Auction Penod each
Broker Dealer shall be entitled to receive on each Interest Payment Date an amount equal to the
sum calculated for each Auction Period in the preceding month of the product of (x) .25 of 1%
multiplied by (y) the aggregate principal amount of SAVRS for each Auction Period that were (1)
the subject of a valid Hold Order subrrutted by such Broker Dealer (2) the subject of a Submitted
Bid of an Existing Owner submtted by such Broker Dealer and continued to be held by such
Existing Owner as a result of such Auction, (3) the subject of a Submitted Bid of a Potential
6
Owner submitted by such Broker Dealer and were purchased by such Potential Owner as a result
of such Auction, (4) deemed to be the subject of a Hold Order by an. Existing Owner that were
acquired by such Existing Owner from such Broker Dealer and (5) if an Auction was not held for
any Auction Period, the aggregate principal amount of Outstanding SAVRS that were acquired by
an Existing Owner through such Broker Dealer multiplied by (z) a fraction, the numerator of
which is the number of days m the Auction Penod and denominator of which is 360 The Broker
Dealer Fee shall be calculated by the Auction Agent, which shall be conclusive absent manifest
error Such amounts shall be communicated by the Auction Agent to the Issuer and the Paying
Agent/Registrar by 4 00 P.M. on the Business Day immediately preceding each Interest Payment
Date On or before 10 00 A.M. on each Interest Payment Date, the Issuer shall pay to the Paying
Agent/Registrar the amount due to the Broker Dealer By noon on each Interest Payment Date,
the Paying Agent/Registrar shall deliver to the Auction Agent the amount constituting the Broker
Dealer Fee, by wire transfer of immediately available funds to such account as the Auction Agent
may designate The amount constituting the Broker Dealer Fee shall be held by the Auction
Agent on behalf of the Broker Dealer and immediately upon receipt of such Fee, the Auction
Agent shall deliver such Fee to the Broker Dealer pursuant to the written instructions of the
Broker Dealer If any Existing Owner who acquired SAVRS through a Broker Dealer transfers
any such SAVRS to another Person other than through an Auction, the Broker Dealer for the
SAVRS so transferred shall continue to be the Broker Dealer with respect to such SAVRS
provided, however that if the transfer was effected by or if the transferee is, another Person who
has met the requirements specified m the definition of `Broker Dealer" contained m the SAVRS
and executed a Broker Dealer Agreement, such Person shall be the Broker Dealer for such
SAVRS
2 6 Settlement.
(a) If any Potential Owner on whose behalf BD has submitted an Order
fails to deliver funds with respect to any Auction, BD shall promptly deliver such funds to the
party entitled to receive such funds If any Existing Owner on whose behalf BD has submitted an
Order fails to instruct its Agent Member to deliver SAVRS subject to such Order against payment
therefor BD shall instruct such Agent Member to deliver such SAVRS against payment therefor
The delivery of funds by BD for the purchase of SAVRS by a Potential Owner as provided
above, shall not relieve such Potential Owner of any liability to BD for payment for such SAVRS
Notwithstanding the foregoing provisions of this Section 2 6(a), any delivery or nondelivery of
SAVRS which represents any departure from the results of an Auction, as determined by the
Auction Agent, shall be of no effect unless and until the Auction Agent shall have been notified of
such delivery or non-delivery in accordance with the terms of Section 2 3(d) hereof. The Auction
Agent shall have no duty or liability with respect to enforcement of this Section 2 6(a)
(b) The Auction Agent, the Paying Agent/Registrar and the Issuer shall have
no responsibility or liability with respect to the failure of an Existing Owner a Potential Owner or
its respective Agent Member to deliver SAVRS or to pay for SAVRS sold or purchased pursuant
to the Auction Procedures or otherwise
7
SECTION 3 THE AUCTION AGENT
3 1 Duties and Responsibilities of the Auction Agent.
(a) The Auction Agent is acting solely as agent of the Paying
Agent/Registrar and owes no duties to any other person by reason of this Broker Dealer
Agreement and owes no fiduciary duties to any person, except as expressly set forth herein or in
the Auction Agreement, and no implied duties, fiduciary or otherwise, shall be read into this
Broker Dealer Agreement against the Auction Agent.
(b) The Auction Agent undertakes to perform such duties and only such
duties as are expressly set forth herein, or expressly incorporated herein by reference pursuant to
Section 2.1(b) hereof, to be performed by it, and no implied covenants or obligations shall be read
into this Broker Dealer Agreement against the Auction Agent.
(c) In the absence of willful misconduct or gross negligence on its part,
the Auction Agent, whether acting directly or through agents or attorneys as provided in Section
3 2(d) hereof, shall not be liable for any action taken, suffered, or omitted or for any error of
judgment made by it in the performance of rts duties hereunder The Auction Agent shall not be
liable for any error of judgment made in good faith unless the Auction Agent shall have been
grossly negligent in ascertaining the pertinent facts necessary to make such judgment. Absent
willful misconduct or gross negligence, the Auction Agent shall not be liable for special, indirect
or consequential loss or damages of any kind whatsoever (including but not limited to loss of
profit) even if the Auction Agent has been advised as to the likelihood of such loss or damage and
regardless of the form of action.
(d} The Auction Agent shall (i) not be required to and shall make no
representations and have no responsibilities as to the validity accuracy value or genuineness of
any signatures or endorsements, other than its own, (ii) not be obligated to take any legal action
hereunder that might, m its judgment, involve any expense or liability unless rt has been furnished
with reasonable indemnity' and (iii) not be responsible for or liable in any respect on account of
the identity authority or rights of any person executing or delivering or purporting to execute or
deliver any document under this Broker Dealer Agreement..
(e) The Auction Agent shall not be responsible or liable for any failure or
delay in the performance of rts obligations under this Broker Dealer Agreement arising out of or
caused, directly or indirectly by circumstances beyond its reasonable control, including without
limitation. acts of God, earthquakes, fires, floods, wars, civil or military disturbances, sabotage,
epidemics, pots, interruptions, loss or malfiznctions of utilities, computer (hardware or software)
or communication service, accidents, labor disputes, or acts of civil or military authority or
governmental actions, it being understood that the Auction Agent shall use reasonable efforts
which are consistent wrath accepted practices in the banking industry to resume performance as
soon as practicable under the circumstances
8
3 2 Rights of the Auction Agent
(a) The Auction Agent may rely upon, and shall be protected ~nn acting or
refraining from acting upon, any communication authorized hereby and upon any such written
instruction, notice, request, direction, consent, report, certificate, share certificate or other
instrument, paper or other document believed by rat to be genuine The Auction Agent shall not be
liable for acting nn good Earth upon any such communication made by telephone, facsimile or other
electronic communncatnon acceptable to the parties whch the Auction Agent reasonably belneves
to have been given by the partncular party or parties. To the extent permitted by law the Auctnon
Agent may record telephone communications with the Broker Dealers, and each of such Broker
Dealers may record telephone communications with the Auctnon Agent.
(b) The Auctnon Agent may consult wrath counsel of rats chonce (provnded
that such selection is made wrath reasonable care), and the advnce of such counsel shall be full and
complete authorizatnon and protectnon nn respect of any actnon taken, suffered or omntted by rat
hereunder nn good faith and nn reliance thereon.
(c) The Auctnon Agent shall not be required to advance, expend or risk rats
own funds or otheiwnse incur or become exposed to financial liability m the performance of its
duties hereunder
(d) The Auctnon Agent may perform rats dutnes and exercise its nghts
hereunder either directly or by or through agents or attorneys and shall not be responsible for any
misconduct or negligence on the part of any agent or attorney apponnted by rat wrath due care
SECTION 4 DISCLOSURE, INDEMNIFICATION
4 1 Disclosure
(a) The Issuer agrees to supply to BD at the Issuer's expense, such
number of copses of the Official Statement, dated (the `Officnal Statement '),
as BD shall reasonably request from mine to tame and, upon request of BD to amend the Official
Statement so that the Official Statement will not contain any untrue statement of a maternal fact or
omit to state a maternal fact necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading.
(b) The Issuer agrees to promptly notnfy BD of any maternal adverse
change in rats affanrs -financnal or otherwise If BD determines (upon consultatnon and mutual
agreement wrath the Issuer) that rat is necessary or desnrable to use a disclosure statement (other
than the Official Statement), relating specifically to the SAVRS Bonds (a `Disclosure Statement')
nn connectnon wrath the solncitatnon of Orders for the SAVRS Bonds, BD will notify the Issuer and
the Issuer will provnde BD wrath a Dnsclosure Statement reasonably satisfactory to BD and rats
counsel. The Issuer will supply BD at the Issuer's expense, wrath such number of copses of such
Dnsclosure Statement as BD requests from tame to tame and will, upon request of BD amend such
9
Disclosure Statement (as well as the documents incorporated by reference therein) so that such
Disclosure Statement will not contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in light of the circumstances under
which they are made, not nisleadmg. In connection with the use of any Disclosure Statement by
BD m rts solicitation of Orders for the SAVRS Bonds (other than the Official Statement), the
Issuer will furnish to BD such certificates, accountants letters and opinions of counsel as would
be customary m a public offering of tax-exempt securities underwritten by BD In addition, the
Issuer will, at rts own expense, take all steps reasonably requested by BD that BD or its counsel
may consider necessary or desirable to effect compliance with applicable federal or state securities
laws.
4 2 Indemnification and Contribution
(a) To the extent, if any that a court of competent jurisdiction in the State
of Texas would enforce such agreement as not contrary to law or public policy the Issuer agrees
to indemnify and hold harmless BD and each person, of any who controls (as such term is defined
in Section 15 of the Securities Act of 1933 as amended) BD against any and all losses, claims,
damages, expenses, and liabilities whatsoever arising out of any untrue statement or alleged
untrue statement in the Official Statement or the Disclosure Statement of a material fact or any
orssion or alleged omission of any material fact necessary to make the statements therein, at the
time and in light of the circumstances under which they were made, not misleading, mcludnng,
without hmrtmg the generality of the foregoing, the aggregate amount paid nn settlement of any
litigation commenced or threatened or of any claim whatsoever based upon any such untrue
statement or omission or alleged untrue statement or omission, if such settlement is effected with
the written consent of the Issuer and any amount reasonably incurred m investigatnng, preparing,
or defending against any litigation commenced or threatened or any claim based upon any such
untrue statement or ornissnon or alleged untrue statement or ornissnon. In case any claim should
be made or action brought against any of BD or any controlling person (as aforesaid) based upon
the Official Statement or the Disclosure Statement, in respect of which mdemmty may be sought
against the Issuer BD or such controlling person shall, as a condition to rts right to
indemnification hereunder promptly notify the Issuer m writing setting forth the particulars of
such claim or action and the Issuer shall assume the defense thereof, mcludmg the retaining of
counsel and the payment of all expenses BD or any such controlling person shall have the right
to retain separate counsel in any such action and to participate in the defense thereof, but the fees
and expenses of such counsel shall be at BD s expense or the expense of such controlling person
unless the retaining of such counsel has been specifically authorized in writing by the Issuer or
counsel retained by the Issuer has advised BD that the representation of the two parties would
constitute a conflict.
(b) BD will nndemnify and hold harmless the Issuer each of rts officers,
agents and employees and each person who controls the Issuer within the meaning of Section 15
of the Securnties Act of 1933 as amended (the 1933 Act') to the same extent as the foregoing
mdemmty from the Issuer to BD but only wrath reference to written information relating to BD
furnished by BD specifically for use m preparation of the Official Statement or Disclosure
Statement.
10
(c) In order to provide for lust and equitable contribution m circumstances
in which the nndemrity agreement provided for nn (a) and (b) above ns for any reason held to be
unavailable nn accordance with its terms, the Issuer and BD shall contribute to the aggregate
losses, liabilities, claims, damages and expenses of the nature contemplated by said indemnity
agreement incurred by the Issuer and BD nn such proportions that BD ns responsible for that
portion represented by the percentage that the underwriters discount on the sale of the SAVRS
Bonds bears to the initial public offering price appearing on the cover page of the Of~icnal
Statement and the Issuer ns responsible for the balance In addition, each person, of any who
controls BD or the Issuer as the case may be wnthnn the meaning of Section 15 of the 1933 Act
shall have the same rnghts to contribution.
(d) Notwnthstanding the foregoing paragraphs (a), (b) and (c) no person
guilty of fraudulent misrepresentation (wnthnn the meamng of Section 11(f) of the 1933 Act) shall
be entntled to nndemrificatnon or to contributnon from any person who was not guilty of such
fraudulent misrepresentatnon.
SECTION 5 MISCELLANEOUS
5 1 Termination BD may be removed by the Auction Agent at the wntten
direction of the Issuer or may resign at any tame, upon five Business Days notnce to the Auction
Agent; provided, however that BD may resign nmmednately of rat determnnes, nn its reasonable
judgment, that for any reason, nncludnng, wnthout lmm~ntatnon, (i) a pending or proposed change nn
applicable tax laws, (ii) a material adverse change nn the financnal condition of the Issuer (ini)
hostilities involving the Umted States, (iv) a down-rating of the SAVRS or (v) an nmposntnon of
maternal restrnctnons on the SAVRS or snmilar obingatnons, rat ns not advisable to attempt to Auctnon
the SAVRS The Auctnon Agent upon the wntten direction of the Issuer may terminate this
Broker Dealer Agreement at any tame on five Business Days notnce to the other partnes hereto
provided further that if the Broker Dealer nn thus Broker Dealer Agreement ns Lehman Brothers,
Inc the Auction Agent may not terminate this Broker Dealer Agreement wnthout the prnor
wrntten consent of the Issuer which consent shall not be unreasonably withheld or delayed, and
provnded further that thus Broker Dealer Agreement shall terminate upon the resignatnon or
removal of the BD pursuant to thus Section 5 1 or trmination of the Auctnon Agreement.
5 2 Participant BD is and for the term of thus Broker Dealer Agreement shall
remann a member of, a partncnpant m, or an affiliate of such a member or participant m DTC and
will gave the Auction Agent, each other Broker Dealer the Issuer and the Paynng Agent/Regnstrar
two Business Days notnce of rat ceases to be so or of rat changes its participatnon or affihatnon to a
dnfferent Bond Depository
5 3 Communications Except for (i) commumcatnons authornzed to be by
telephone pursuant to this Broker Dealer Agreement or the Auctnon Procedures and (ii)
commuincatnons in connectnon wrath Auctnons (other than those expressly requnred to be in
11
writing) all notices, requests and other communications to any party hereunder shall be in writing
(including telecopy or similar wrrtmg or other electronic communication acceptable to the parties)
and shall be given to such party addressed to it, at its address, telecopy number or a-maul address
set forth below and, where appropriate, reference the particular Auction to which such notice
relates
If to BD addressed
If to the Auction Agent addressed
If to the Issuer addressed
LEHMAN BROTHERS INC
3 World Financial Center
New York, New York 10285
Attention. Auction Products Desk
Telex No
Telecopier Number (212) 526-
Telephone Number (212) 526-
E mail
THE BANK OF NEW YORK
100 Church Street
8"' Floor
New York, New York 10286
Attention.
Telecopner Number
Telephone Number
E mail
CITY OF FORT WORTH, TEXAS
1000 Throckmorton
3`d Floor
Fort Worth, Texas 76102
Attention. Director of Finance
Telecopier Number 817-871-8966
Telephone Number 817-871-8517
E-mail 1 ames. keyesna~,fortworth~ov. org
or such other address, telecopy number or e-mail address as such party may hereafter specify for
such purpose by notice to the other party Each such notice, request or communication shall be
effective (i) if given by telecopier when such telecopy is transmitted to the telecopy number
specifed herein or (ii) of given by any other means, when delivered at the address specified herein.
Communications shall be given on behalf of BD by a BD Officer and on behalf of the Auction
Agent by an Authorized Officer
~ 5 4 Entire Agreement This Broker Dealer Agreement, and the other
agreements and instruments executed and delivered m connectnon with the issuance of the
SAVRS contain the entire agreement between the parties relating to the subject matter hereof,
12
i
and there are no other representations, endorsements, promises, agreements or understandings,
oral, written or inferred, between the parties relating to the subject matter hereof.
5 5 Benefits, Successors and Assigns Thus Broker Dealer Agreement shall be
binding upon, inure to the benefit of, and be enforceable by the respective successors and assigns
of BD and the Auction Agent. Nothing m this Broker Dealer Agreement, express or implied,
shall give to any person, other than the Auction Agent and BD and their respective successors and
assigns, any benefit of any legal or equitable right, remedy or claim under this Broker Dealer
Agreement, other than the rights expressly granted to the Issuer herein.
5 6 Amendment, Waiver
(a) This Broker Dealer Agreement shall not be deemed or construed to
be modified, amended, rescinded, canceled or waived, m whole or m part, except by a written
instrument signed by a duly authorized representative of the parties hereto and consented to in
writing by a duly authorized officer of the Issuer
(b) Failure of any party to this Broker Dealer Agreement to exercise any
right or remedy hereunder in the event of a breach of thus Broker Dealer Agreement by any other
party shall not constitute a waiver of any such right or remedy with respect to any subsequent
breach.
5 7 Severability If any clause, provision or section of this Broker Dealer
Agreement shall be ruled invalid or unenforceable by any court of competent jurisdiction, the
invalidity or unenforceabilrty of such clause, provision or section shall not affect any of the
remaimng clauses, provisions or sections hereof.
S 8 Execution in Counterparts This Broker Dealer Agreement may be
executed m several counterparts, each of which shall be an ongmal and all of which shall
constitute but one and the same instrument.
5 9 Governing Law This Broker Dealer Agreement shall be governed by and
construed m accordance with the laws of the State of Texas without regard to conflict of laws
principles, the foregoing notwithstanding, the rights, duties and obligations of the Auction Agent
and the BD shall be governed and construed in accordance with the laws of the State of New
York.
I 5 10 No Implied Duties Nothing contained m this Broker Dealer Agreement,
the Twelfth Supplement or the Auction Agreement shall be deemed to imply any duties,
covenants or obligations on the part of the Issuer not otherwise expressly set forth herein or
therein.
I
13
IN WITNESS WHEREOF the parties hereto have caused this Broker Dealer Agreement
to be duly executed and delivered by their proper and duly authorized officers as of the date first
above written.
THE BANK OF NEW YORK,
as Auction Agent
By
Authonzed Signatory
LEHMAN BROTHERS INC
By~
CITY OF FORT WORTH, TEXAS
By~
City Manager
14
EXHIBIT A
SETTLEMENT PROCEDURES FOR SAVRS
(a) On each Auction Date, the Auction Agent shall notify by telephone or other
electronic communication acceptable to the parties each Broker Dealer that participated in the
Auction held on such Auction .Date and submitted an Order on behalf of any Existing Owner or
Potential Owner of~
(i) the SAVRS Rate fixed for the succeeding Auction Period or in the case of
SAVRS in a daily Auction Period, the SAVRS Rate on the SAVRS fixed for the current Auction
Period,
(ii) whether Sufficient Clearing Bids existed for the deterrrunation of the
Winning Bid Rate
(iii) 'if such Broker Dealer submitted a Bid or a Sell Order on behalf of an
Existing Owner whether such Bid or Sell Order was accepted or rejected, in whole or in part, and
the principal amount of SAVRS if any to be sold by such Existing Owner•
(iv) if such Broker Dealer submitted a Bid on behalf of a Potential Owner
whether such Bid was accepted or rejected, in whole or in part, and the principal amount of
SAVRS if any to be purchased by such Potential Owner•
(v) if the aggregate principal amount of SAVRS to be sold by all Existing
Owners on whose behalf such Broker Dealer submitted Bids or Sell Orders is different from the
aggregate principal amount of SAVRS to be purchased by all Potential Owners on whose behalf
such Broker Dealer submitted a Bid, the name or names of one or more other Broker Dealers
(and the Agent Member if any of each such other Broker Dealer) and the principal amount of
SAVRS to be (A) purchased from one or more Existing Owners on whose behalf such other
Broker Dealers submitted Bids or Sell Orders or (B) sold to one or more Potential Owners on
whose behalf such other Broker Dealers submitted Bids, and
(vi) the immediately succeeding Auction Date
(b) On each Auction Date, each Broker Dealer that submitted an Order on behalf of
any Existing Owner or Potential Owner shall
(i) advise each Existing Owner and Potential Owner on whose behalf such
Broker Dealer submitted a Bid or Sell Order whether such Bid or Sell Order was accepted or
rejected, m whole or in part;
Al
(ii) instruct each Potential Owner on whose behalf such Broker Dealer
subrrutted a bid that was accepted, in whole or in part, to instruct such Potential Owner's Agent
Member to pay to such Broker Dealer (or its Agent Member) through DTC the amount necessary
to purchase the principal amount of SAVRS to be purchased pursuant to such Bid (including,
with respect to the SAVRS Bonds m a daily Auction Period, accrued interest if the purchase date
is not an Interest Payment Date for such SAVRS Bond) against receipt of such principal amount
of SAVRS
(iii) instruct each Existing Owner on whose behalf such Broker Dealer
submitted a Sell Order that was accepted or a Bid that was rejected, in whole or in part, to
instruct such Existing Owner's Agent Member to deliver to such Broker Dealer (or its Agent
Member) through DTC the principal amount of SAVRS to be sold pursuant to such Bid or Sell
Order against payment therefor
(iv) advise each Existing Owner on whose behalf such Broker Dealer subrrutted
an Order and each Potential Owner on whose behalf such Broker Dealer submitted a Bid of the
SAVRS Rate for the next succeeding Auction Penod,
(v) advise each Existing Owner on whose behalf such Broker Dealer submitted
an Order of the Auction Date of the next succeeding Auction or in the case of SAVRS in a daily
Auction Period, the SAVRS Rate for the current Auction Period, and
(vi) advise each Potential Owner on whose behalf such Broker Dealer
submitted a Bid that was accepted, in whole or in part, of the Auction Date of the next succeeding
Auction.
(c) On the basis of the information provided to it pursuant to paragraph (a) above,
each Broker Dealer that submitted a Bid or Sell Order shall allocate any funds received by it
pursuant to subparagraph (b) (ii) above, and any SAVRS received by it pursuant to (b) (iii) above,
among the Potential Owners, if any on whose behalf such Broker Dealer submitted Bids, the
Existing Owners, if any on whose behalf such Broker Dealer submitted Bids or Sell Orders, and
any Broker Dealer identified to it by the Auction Agent pursuant to subparagraph (a) (v) above
(d) On the Business Day after the Auction Date or in the case of SAVRS in a daily
Auction Period, on such Auction Date, DTC shall execute the transactions set forth above,
debiting and crediting the accounts of the respective Agent Members as necessary to effect the
purchase and sale of SAVRS as determined in the Auction.
A2
1 EXHIBIT B
(Subrrut only one Order on this Order Form)
CITY OF FORT WORTH, TEXAS
WATER AND SEWER
SYSTEM AUCTION RATE
REVENUE BONDS
Serves 2004
Attention.
Date of Auction
Select Auction Variable Rate Securities (SAVRS)
The undersigned Broker Dealer subrmts the following Order on behalf of the Bidder listed below
Name of Bidder
Bidder .places the Order fisted below covering the SAVRS indicated (complete only one blank)
$_
(check one)
SAVRS now held by Bidder (an Existing Owner) and the Order is a
Hold Order or
Bid at rate of %, or
Sell Order
or
$ SAVRS not now held by Bidder (a Potential Owner) and the Order is a
Bid at a rate of
B-1
Notes (1) If submitting more than one Order for one Bidder use additional Order
Forms
(2) If one or more Orders covering in the aggregate more than the number of
Outstanding SAVRS held by any Existing Owner are subrrutted, such Orders
shall be considered valid m the order or priority set forth m the Auction
Procedures.
(3) A Hold Order may be placed only by an Existing Owner covering a number
of Outstanding SAVRS not greater than the number of Outstanding SAVRS
currently held.
(4) Potential Owners may make only Bids, each of which must specify a rate If
more than one Bid is subrrutted on behalf of any Potential Owner each Bid
submitted shall be a separate Bid with the rate specified.
(5) Bids may contain no more than three figures to the nght of the decimal point.
(6) An Order must be submitted m integral multiples of $25 000
Name of Broker Dealer
By
B-2
EXHIBIT C
(To be used only for transfers of SAVRS made
other than pursuant to an Auction)
CITY OF FORT WORTH, TEXAS
WATER AND SEWER
SYSTEM AUCTION RATE
REVENUE BONDS
Series 2004
Select Auction Variable Rate Securities (BANKS)
TRANSFER FORM
Attention.
Check I, II or III
I. We are the Existing Owner named below
II We are the Agent Member for such Existing Owner
III. We are a Broker Dealer for such Existing Owner
We hereby notify you that the Existing Owner named below has transferred
$ SAVRS to
C1
Complete either I or II
By'
By•
I. Corporate Name of Existing Owner•
Printed Name
Title
II. Corporate Name of Existing Owner•
Name of Agent Member or Broker Dealer
Subrruttmg this notice
Printed Name
Title
* SAVRS may only be transferred m integral multiples of $25 000
C2
EXHIBIT D
(To be used for failure to deliver SAVRS
sold pursuant to an Auction)
CITY OF FORT WORTH, TEXAS
WATER AND SEWER
SYSTEM AUCTION RATE
REVENUE BONDS
Series 2004
Select Auction Variable Rate Securities (BANKS)
NOTICE OF FAILURE TO DELIVER
Attention.
Complete either I or II
I.
We are a Broker Dealer for (the `Purchaser") who
was to purchase $ SAVRS in the Auction held on
II. We are a Broker Dealer for (the Seller") who was
to sell $ SAVRS m the Auction held on
We hereby notify you that (check one)
the Seller failed to deliver such SAVRS to us
the Purchaser failed to make payment to us upon delivery of such SAVRS
the following Broker Dealer failed to deliver to us such SAVRS
the following Broker Dealer failed to make payment to us upon delivery of such
SAVRS
D-1
Name
(Name of Broker Dealer submrttmg this notice)
By
Panted Name
Title
* SAVRS may only be transferred m integral multiples of $25 000
D-2
EXHIBIT E
TO BROKER DEALER AGREEMENT
LISTING OF EXISTING OWNERS OF SAVRS
CITY OF FORT WORTH, TEXAS
WATER AND SEWER
SYSTEM AUCTION RATE
REVENUE BONDS
Series 2004
Select Auction Variable Rate Securities (BANKS)
Attention.
The undersigned Broker Dealer hereby provides the names and related principal amounts
of each of rts customers that rt believes is an Existing Owner of SAVRS
Name of Exishn~ Owner Pnnci~al Amount of SAVRS
Name of Broker Dealer
By•
Name
Title
E1
THE STATE OF TEXAS
COUNTIES OF TARRANT AND DENTON
CITY OF FORT WORTH
I, Glona Pearson, Crty Secretary of the Crty of Fort Worth, m the State of Texas, do hereby
certify that I have compared the attached and foregoing excerpt from the rrunutes of the regular
open, public meeting of the Crty Council of the City of Fort Worth, Texas held on December 16
2003 and of the ordinance authorizing the issuance of Water and Sewer System Auction Rate
Revenue Bonds, which was duly passed at said meeting, and that said copy is a true and correct copy
of said excerpt and the whole of said ordinance Said meeting was open to the public, and public
notice of the time, place, and purpose of said meeting was given, all as required by Chapter 551
Texas Government Code, as amended.
In testimony whereof, I have set my hand and have hereunto affixed the seal of said Crty of
Fort Worth, this 16th day of December 2003
Crty Secretary the
City of Fort W rth, Texas
(SEAL)