COUNCIL OF BOND OVERSIGHT
2300 N. Lincoln, Room 217 (405) 521-4504 Oklahoma City, Oklahoma 73105 FAX (405) 521-4994
COUNCIL MEMBERS Council of Bond Oversight Notice of Regular Meeting (Virtual Meeting held in compliance with Open Meetings Act as amended by SB 1031)
MARK BEFFORT Date: February 25, 2021 Chairman Governor Appointee (Videoconference) Time: 10:00 A. M.
RANDY MCDANIEL State Treasurer Place: https://us02web.zoom.us/j/2091967460 (Videoconference) Or Dial in: +1 (346) 248-7799 Meeting ID: 209 196 7460 VACANT House Appointee *If the meeting connection is lost, proceedings will be stopped and an attempt to reconvene the meeting in 30 minutes will be made. If it is not possible to reconnect, the meeting will be STEVE WHITWORTH reconvened at 10:00 A.M. on Friday February 26, 2021. Senate Appointee (Videoconference) Agenda CATHY O’CONNOR Governor Appointee 1. Roll call and determination of a quorum. – (Chairman Beffort) (Videoconference) 2. Announcement of quorum and compliance with Open Meeting Act. – (Chairman Beffort)
LEGAL COUNSEL AND STAFF 3. Discussion and possible action to approve the Minutes of the Regular Meeting on December 17, 2020 – (Chairman Beffort)
JON DUTTON 4. Discussion and possible action to grant approval of $310,000,000 Taxable and Tax- Office of the Attorney Exempt Revenue Bonds, including Refunding and New Money Obligations and the General Legal Counsel Renewal of a $100,000,000 Revolving Credit Facility with the Federal Home Loan
ANDREW MESSER Bank of Topeka for the Oklahoma Housing Finance Agency's 2021 Single Family Deputy State Treasurer for Mortgage Program - (Andrew Messer) Debt Management 5. Discussion and possible action to grant approval to the Oklahoma Municipal Power ALEXANDRA EDWARDS Authority to issue up to $60,000,000 federally taxable Power Supply System Revenue Senior Bond Analyst Note. – (Andrew Messer)
6. Announcements and Report from Staff. Next Meeting March 25, 2021 7. Adjournment.
AGENDA ITEM THREE
- MINUTES - SPECIAL MEETING OF THE COUNCIL OF BOND OVERSIGHT THURSDAY, DECEMBER 17, 2020 AT 10:00AM 9220 NORTH KELLEY AVE OKLAHOMA CITY, OKLAHOMA
MEMBERS PRESENT STAFF PRESENT Mark Beffort Andrew Messer Randy McDaniel Steve Whitworth
ITEM 1 – ROLL CALL AND DETERMINATION OF A QUORUM
The meeting was scheduled as a Special Meeting of the Council of Bond Oversight. A meeting of the Council of Bond Oversight was held in compliance with the Open Meetings Act. Mr. Messer called the roll and noting that a quorum was present, Chairman Beffort called the meeting to order.
ITEM 2 – ANNOUNCEMENT OF A QUORUM AND COMPLIANCE WITH OPEN MEETINGS ACT
Chairman Beffort announced that a quorum was present. Mr. Messer confirmed compliance with the Open Meetings Act.
ITEM 3 – DISCUSSION AND POSSIBLE ACTION TO APPROVE THE MINUTES OF THE REGULAR MEETING ON November
Treasurer McDaniel made a motion to approve the minutes of the November 5, 2020 meeting of the Council of Bond Oversight. The motion was seconded by Mr. Whitworth and approved by the following vote: Chairman Beffort – aye; Treasurer McDaniel – aye; Mr. Whitworth – aye;
ITEM 4 – Discussion and possible action to grant approval to the Oklahoma Housing Finance Authority to issue approximately $5,400,000 tax-exempt Multi-Family Revenue Bonds, Series 2020.
Mr. Messer described the transaction in detail, noting the projected cost of capital given current market conditions and summarizing the financing team.
Treasurer McDaniel made a motion to grant approval subject to the following recommended conditions: 1) Receipt of final documentation showing use of State of Oklahoma Private Activity Volume Cap; 2) Receipt of the final legal opinion from Bond Counsel following closing; 3) Receipt of the signed Fee Approval Form BO-8 prior to closing; and 4) Receipt of the Final Official Statement at closing. The motion was seconded by Mr. Whitworth and approved by the following vote: Chairman Beffort – aye; Treasurer McDaniel – aye; Mr. Whitworth – aye;
ITEM 5 – REPORT FROM STAFF
Mr. Messer provided an update on 2020 bond activity approved by the Council and announced that a copy of the annual debt report would be provided to members once completed. ITEM 6 – ADJOURNMENT
Treasurer McDaniel made a motion to adjourn. The motion was seconded by Mr. Whitworth and approved by the following vote: Chairman Beffort – aye; Treasurer McDaniel – aye; Mr. Whitworth – aye;
AGENDA ITEM FOUR
MEMORANDUM
TO: Council of Bond Oversight
FROM: Andrew Messer, Deputy Treasurer for Debt Management
SUBJECT: Request for Provisional and Final Approval of $310,000,000 Taxable and Tax- Exempt Revenue Bonds, including Refunding and New Money Obligations and the Renewal of a $100,000,000 Revolving Credit Facility with the Federal Home Loan Bank of Topeka for the Oklahoma Housing Finance Agency's 2021 Single-Family Mortgage Program
DATE: February 25, 2021
Background
The Oklahoma Housing Finance Agency (the “OHFA”) is requesting authority to issue $310 million in taxable and tax-exempt obligations for its 2021 single-family mortgage bond program (the “2021 Program”). As detailed in OHFA’s application and as summarized on the next page, this requested authorization is expected to consist of up to $210 million of long-term Single- Family Mortgage Revenue Bonds, which is expected to be issued in several series and include both taxable and tax-exempt obligations. It will also include the renewal of a $100 million revolving credit facility with the Federal Home Loan Bank of Topeka. The OHFA Board granted final approval of the proposed 2021 Single-Family Program at its meeting on January 27, 2021.
Financing Proposal
It is expected that all bond issues and refundings will be sold through negotiation with the OHFA underwriting team or via private placement with the Federal Home Loan Bank or other government sponsored enterprises (or a combination designed to realize the lowest cost of funds).
The legal services providers and financial advisor for the 2021 Program were chosen by the OHFA Board. The firms chosen were Caine Mitter & Associates, New York as Financial Advisor; the Public Finance Law Group of Oklahoma City as Bond Counsel; Kutak Rock as Disclosure and Special Tax Counsel. The Bank of Oklahoma was selected as Trustee.
The OHFA has chosen underwriters for their 2021 single-family program, with the book- running underwriter being Bank of America/Merrill Lynch and JP Morgan and Raymond James selected as co-managers.
Pursuant to the “program” provisions of our Administrative Rules, the financing team selected can be used for any financing under the requested authorizations completed within one year from the date of the first issue.
Components of the proposed 2021 Program for which approval is requested are summarized as follows:
(1) Approximately $210 million of long term, fixed rate Single-Family Mortgage Revenue Bonds to continue funding OHFA’s Homeownership Loan Program: (2) Renewal of OHFA’s $100 million Revolving Credit Facility with the Federal Home Loan Bank of Topeka; and (3) Any other alternative products for retaining bonding authority approved by the Council of Bond Oversight.
The planned composition of the OHFA’s 2021 borrowing program is detailed below:
- Long-term, fixed-rate bonds (3 series of $70 million) $ 210,000,000 - Revolving credit facility 100,000,000 Total $ 310,000,000
Analysis
The OHFA is requesting financing authorization for its 2021 Program. If granted, this approval would be valid for 180 days. However, pursuant to 62 O.S. 695.9(B)(4), an applicant that has received issuance approval from the Council of Bond Oversight can request, and the Deputy Treasurer for Debt Management may grant, a single 180-day extension. An application for such extension must be requested at least five (5) business days prior to the expiration of the original approval. Due to the nature of their program, the OHFA typically requests an extension of their bonding authority to ensure continuous operations during each calendar year.
The requested financing includes virtually all of the program elements the OHFA uses to issue new money bonds and to execute current refundings. The refunding portion of the requested financing is used to recapture tax-exempt lending capacity. Estimated sale dates and costs of issuance for the various proposed transactions are detailed in attachments to the enclosed OHFA application.
The OHFA will require private activity bond allocation (“Cap”) for the majority of its 2021 Program. Provided below is a summary of Cap available to the OHFA at this time:
Private Activity Cap Summary for OHFA
Source Amounts
Volume Cap carried forward from 2018 (expires 12/2021) $ 186,940,720 Volume Cap carried forward from 2019 (expires 12/2022) 99,223,295 Volume Cap carried forward from 2020 (expires 12/2023) 190,740,977 Subtotal, tax-exempt bonding capacity carried forward $ 476,904,992 OHFA Pool, 2021 1 62,697,332 TOTAL $ 539,602,324 ______1 A portion of the State’s annual private activity cap is reserved for the OHFA. The amount for 2021 is shown. The OHFA can also request allocations from both the Consolidated Pool (beginning September 2nd and the Carryforward Pool (beginning December 20th).
OHFA’s issuance of tax-exempt mortgage revenue bonds also requires the approval of the Governor of the State of Oklahoma. That approval, historically, has been granted in a timely manner. OHFA had $237,743,197 single-family revenue bonds outstanding as of September 30, 2020.
The proposed issues do not constitute obligations of the State of Oklahoma and neither the full faith and credit nor the taxing power of the State are pledged.
Recommended Conditions
If the Council of Bond Oversight approves the OHFA request for sale of $310 million taxable and tax-exempt revenue bonds and other obligations, including the renewal of the $100 million revolving line of credit with the Federal Home Loan Bank of Topeka, the following conditions are recommended:
1) Receipt of Preliminary Official Statement prior to pricing;
2) Receipt of supporting documentation showing maturity schedule of proposed issue, how the schedule was determined (including interest rate assumptions), prior to pricing; and
3) Receipt of the final Official Statement prior to closing.
OKLAHOMA HO US ING FI NANCE AGENCY Oklahoma State Treasurer
100 N .W. 6 3 rd S uite 200 Oklahoma C ity, OK 73116 JAN O7 2020 P.O. Box 26720 Oklah o ma Cit y, OK 73126- 0720 P hon e , (405) 848- 1144 2300 N. Lincoln Blvd., 217 Toll F,· cc, (800) 256-1489 Oklahoma City, OK 73105 TDD, (405) 848-7471 www . ohfa . org
Janua ry 7, 2021
M r. Andrew Messer Deputy Treasu rer of Debt Management Office of Treas urer for Pol icy & Debt Management 2300 N Lincoln Blvd, Room 21 7 Oklahoma City, OK 73105
RE : Application of Oklahoma Housing Finance Agency ("OHFA") To the Cou ncil of Bond Oversight
Dear Mr. Messer:
The Oklahoma Housing Finance Agency hereby requests that the enclosed combined Request for Provisional and Final Approval be placed on the agenda for the next meeting of the Council of Bond Oversight. OHFA understands this meeting is currently scheduled to occur on January 28, 2021.
Proposed Issuance. As stated in the Application, OHFA proposes to execute up to $310,000,000 of borrowings that collectively comprise the Agency's "2021 Program Plan". The components of the Plan include the following: (1) Up to $210,000,000 (not including premium) of long term Single Family Mortgage Revenue Bonds to continue funding the Agency's Homeownership Loan Program; (2) Renewal of OHFA's previously authorized $100,000,000 Revolving Credit Facility with the Federal Home Loan Bank of Topeka to facilitate the implementation and management of the 2020 Program Plan ; (3) Any other alternative product(s) for retaining bonding authority approved by the Council of Bond Oversight; and
Bonding Capacity Sources. The 2021 Program Plan, as described in the Application, includes $62,697,332 in statutory allocation of Private Activity Bond Volume Cap received by OHFA in January 2021 plus additional amounts in the form of 2018, 2019 and 2020 Carry Forward Allocations. OHFA expects to leverage its allocation of tax-exempt bonding capacity by: (1) Recycling loan principal repayments and prepayments from prior series of OHFA single family mortgage revenue bonds, subject to bond market conditions; and (2) Issuing varying portions of each bond series as taxable bonds, subject to acceptable market conditions, in order to assist more low and moderate income families obtain affordable mortgage loans to purchase homes.
Expected Bond Ratings. All long term bonds will be rated 'Aaa' by Moody's Investors Service based on their issuance as parity bonds under the Agency's Homeownership Loan Program Master Trust Indentures (1994, 2009 and 2018).
IIQUALITY A IV ARD WINNER Letter to Mr. Andrew Messer, State Bond Advisor January 7, 2021 Page 2
Methods of Bond Sale. It is currently expected that: (1) The tax-exempt portion of each series of bonds will be issued via negotiated sale through the Agency's underwriting team; and (2) The taxable portion of each series of bonds will be issued via negotiated sale through the Agency's underwriting team except bonds which may be sold directly to the Federal Home Loan Bank or other government sponsored enterprises in a direct sale or private placement transaction; and
Transaction Costs. Included with this Request for Provisional / Final Approval are schedules of estimated transaction costs relating to each component of the proposed 2021 Program Plan .
Financing Team . The Agency's legal service providers, tax counsel service providers and financial advisor for the 2021 Program were selected by the OHFA Board at its September 16, 2020 meeting, pursuant to a competitive RFP process.
The bond underwriting team, trustee bank, master loan servicer and financial printer for the 2020 Program were selected by the OHFA Board at its November 18, 2020 meeting, pursuant to a competitive RFP process.
Under the terms of the competitive RFP selection process, the financing team is expected to handle all debt related transaction elements of the 2021 Program Plan .
OHFA respectfully requests consideration and approval of the Request for Provisional and Final Approval hereby submitted. Please contact me directly if additional information is needed to facilitate this request.
Sincerely
Deborah Jenkins Executive Director REQUEST FOR PROVISIONAL APPROVAL OFTHE COUNCIL OF BOND OVERSIGHT
The undersigned applicant ("Applicant") hereby requests the Council of Bond Oversight to grant provisional approval of the following described proposed obligation of the Applicant. References: 62 O.S. Section 695.1 et seq. and the Administrative Rules of the Council of Bond Oversight.
I hereby certify that the following info~ is true an ect to the best of my knowledge and belief.
Signature of Authorized Official: - ~------ Date: January 7, 2021
Printed Name and Title: Deborah Jenkins, E
Description of the Issuer and the Proposed Issue Issuer name: Oklahoma Housing Finance Agency Issuer address, telephone, point of contact: 100 NW 63rd Street, Suite 200 Oklahoma City, Oklahoma 73116 Lee Ann Smith, Director Single Family Programs - 405.419.8243 Anticipated amount of obligations to be issued:_$_3_1_0_,_00_0_,_0_0_0______How and date authorized (include any legislative approval and governing board approval): Resloutions attached: OHFA board of Trustees to meet on January 27, 2021 for final approval of the 2021 Single Family Program
Anticipated sale date: 4/21; 8/21; 12/21 Anticipated closing or delivery date: 5121 ; 9121 ; 1122 Expected term to maturity of the proposed issue:_3_0_y_e_a_r_s ______Was any temporary debt issued in anticipation of this obligation? If so, describe: ______
Type of obligations and structure - indicate all that apply: Bond or Note: Both Taxable or Tax-exempt: _B_o_t_h______Variable or Fixed Rate: Both Refunding or New Capital: _B_o_t_h______Negotiated Sale, Competitive Sale or Private Placement: ______Other (describe): ______Is this financing to be temporary or permanent? ______List anticipated prospective financings anticipated after this issue, including refunding:
FORM BO-1 (2/2004) PAGE 1 OF3 Professionals Hired and Quoted Fees and Expenses: UNDERWRITER: Takedown $ $ /$1,000 Management $ $ /$1,000 Risk $ $ /$1,000 Expenses $ $ /$1,000
TOTAL $ $ /$1,000
BOND COUNSEL: ______$______Fee $----- Expenses $____ _ TOTAL
SPECIAL TAX COUNSEL: ------$____ _ $______Fee $----- Expenses TOTAL
TRUSTEE: ------Commitment Fee $______Expenses $______Annual Fee: $----- or as % of outstanding principal balance: ______
FINANCIAL ADVISOR: ------$ _____ Fee $----- Expenses TOTAL $------
OTHER (Provide name of firm): ______Service Provided: ------Fee: $----- Expenses: _____
OTHER (Provide name of firm): ______Service Provided:------Fee: $----- Expenses: ____
OTHER (Provide name of firm): ______
Service Provided:------Fee: $----- Expenses: ----
FORM B0-1 (2/2004) PAGE20F3 PROJECT INFORMATION Provide a detailed description of the project(s). Address whether capital facilities are to be constructed or acquired; services to be provided; or products to be developed, produced, manufactured. Explain the nature, need and purpose of the project(s).
OUTSTANDING OBLIGATIONS Attach schedules detailing the annual and total debt service for all long-term and short-term obligations that are secured by the same source of funds as the proposed issue (include both parity bonds and any subordinated obligations secured by these funds). Provide the name and description of each issue, the annual and total debt service for each and whether any are backed by the credit of the State of Oklahoma.
FORM B0-1 (2/2004) PAGE30F3 Oklahoma Housing Finance Agency Home Ownership Program 2021 Program Plan
January 7, 2021
GOALS AND OBJECTIVES
Goals • Maximize use and leveraging of tax-exempt bonding capacity • Further expand loan production in non-urban counties which have been historically underserved by prior OHFA programs • Further expand homeownership opportunities for lower income first time home buyers and certain special needs groups such as teachers • Maintain continuous availability of OHFA mortgage funds in certain rural, historically under-served counties • Provide the most attractive mortgage products suited for low and moderate income home buyers
Objectives • Achieve up to $210 million of bond financing and possible loan production • Maximize leveraging of OHFA's 2021 Private Activity Bond Volume Cap and approved various Carry Forward Allocations, as market conditions may permit • Reduce cost of borrowing through bond refundings
COMPONENTS OF THE 2021 PROGRAM
Home Estimated Use of Available Tax-Exempt Bonding Capacity Ownership 2018 Carry Forward Volume Cap Allocation (12/18) $186,940,720.00 Loan Program 2019 Carry Forward Volume Cap Allocation (12/19) 99,223,295.00 (all amounts 2020 Carry Forward Volume Cap Allocation (12/20) 190,740,977.00 estimated) 2021 Statutory Volume Cap Allocation (1/21) 62.697.332.00 Total Tax-Exempt Bonding Capacity (including $539,602,324.00 amounts for MRB bond premium)
2021 Program Plan Use of Volume Cap $210,000,000 1
Credit Facility Revolving credit facility with FHLB $100,000,000 1
Totals Expected Total of 2021 Program Plan $310,000,000 1
HOMEOWNERSHIP LOAN PROGRAM
Program Types of Loans Offered. The Program may offer: Description • Low Rate Loans for families requiring a low monthly payment; • Assisted Loans with Down Payment Assistance ("DPA ") in the form of a grant or a second mortgage for families able to afford a higher monthly payment, but needing assistance to cover part of the cash required to close; and
Borrower Uses of Mortgage Loans. Program Loans can be used for: • Purchase of an existing or newly constructed single family residence
Statutory Federally Designated Targeted Areas: To comply with the IRS Code, at least 20% of each Set-Asides Program Installment attributable to new allocations of State Volume Cap for Private Activity Bonds will be made available to fund loans in federally-designated Targeted Areas. State Designated Critical Needs Areas: To comply with State law requirements, at least 35% of each Program Installment attributable to new allocations of State Volume Cap for Private Activity Bonds will be made available to fund loans in non-urban counties with populations of less than 300,000.
Continuous To enhance its ability to achieve certain Program goals, OHFA will commit to fund Origination Program Loans under its continuous rural origination policy to allow certain borrowers to Initiatives obtain a Program Loan reservation and funding commitment at any time during the term of the 2021 Program.
If bond proceeds are not immediately available to fund the purchase of these Loans, they will be funded on an interim basis either with OHFA reserves or with borrowings under OHFA's revolving credit facility with the Federal Home Loan Bank of Topeka ("FHLB").
Targeted markets benefiting from this targeted set-aside policy under the 2020 Program include: • Policemen I Firemen I Teachers ($5,000,000 in aggregate Loan amount); • Purchasers of homes in certain historically underserved rural counties); and • Purchasers of newly constructed homes.
Program It is expected the 2021 Program will consist of the following installments, sized and timed Installments approximately as follows:
Installment Bond Sale Program Start Date $ Amount I 2021 - I 4/15/2021 5/1/2021 $70,000,000 2021 - II 8/15/2021 9/1/2021 70,000,000 2021 - Ill 12/15/2021 1/1/2022 70,000,000 $210,000,000 1
REVOLVING CREDIT FACILITY
Size Not to exceed $100,000,000 with sufficient capacity through 2021 to capture and recycle loan repayments and prepayments from prior bond programs and/or to fund the purchase of Guaranteed Mortgage Securities ("GMS"), pending permanent financing with OHFA's mortgage revenue bond issues.
Purpose Provide a source of liquidity to recycle loan repayments and prepayments from prior bond programs and for the interim funding ("warehousing") of GMS consisting of Mortgage Loans under OHFA's Homeownership Loan Program, including Loans funded under targeted set-asides applicable to certain rural counties and beneficiary groups.
Source FHLB
Terms Fixed interest rate, fixed term, with interest rate for each borrowing set by a formula tied to the FHLB cost of borrowing. (Interest costs on credit facility advances are expected to be substantially less than the interest income realized on GMS.)
Security Each credit facility advance will be collateralized with: • GMS purchased with the funds advanced by the FHLB; plus • Interest bearing certificate of deposit funded with moneys from OHFA operating reserves in an amount equal to approximately 5% of the advance.
FHLBFees The FHLB charges no fee to establish or maintain the credit facility.
2 Oklahoma Housing Finance Agency Summary Schedule of Estimated Sources/Uses of Single Family MRB Issuance Capacity Calendar Year 2021 As of January 7, 2021
Expiration Date: 12/31/2021 12/31/2022 12/31/2023 12/31/2024 2018 State Ceiling 2019 State Ceiling 2020 State Ceiling 2021 Statutory I Totals Cumulative Date 11 Description I Carry Forward Alloc Carry Forward Alloc Carry Forward Alloc Vol Cap Alloc I Amount 11 Amount 1/1/2021 I OPENING BALANCE I 186,940,720.00 99,223,295.00 190,740,977.00 62,697,332.00 539,602,324.00 539,602,324.00 5/1/2021 2021 A Bonds ($70 Mil.) (70,000,000.00) (70,000,000.00) 469,602,324.00 9/1/2021 2021 B Bonds ($70 Mil.) (70,000,000.00) (70,000,000.00) 399,602,324.00 1/1/2022 2021 C Bonds ($70 Mil.) (46,940,720.00) (23,059,280.00) (70,000,000.00) 329,602,324.00 0.00 329,602,324.00 1/1/2022 I YEAR-END BALANCE I I 0.00 II 76, 164,015.oo 11 19o,74o,9n.oo 11 62,697,332.00 I I 329,602,324.oo I ------·------
Attachment "A"
Oklahoma Housing Finance Agency
SCHEDULE OF ANTICIPATED BOND ISSUANCE TRANSACTIONS 2021 Mortgc!gE! Revenue Bond Program
ESTIMATED BOND SERIES TOTAL SALE DATE CLOSING DATE TERM OF BOND PROGRAM DESIGNATION $AMOUNT (APPROXIMATE) (APPROXIMATE) OBLIGATION
Homeownership Loan Program
Long Term Bonds 2021 Series A 70,000,000 4/15/2021 5/1/2021 2051 (Note 1) 2021 Series B 70,000,000 8/15/2021 9/1/2021 2051
2021 Series C 70,000,000 12/15/2021 1/1/2022 2051
Program Total 210.000.oooJ
Federal Home Loan Bank Credit Facility N/A 100.000.oooJ 1/15/2021 1/15/2021 Up to 18 Months (Note 2)
TOTAL 310.000.oooJ
Note 1: To be issued as long term fixed rate and/or variable rate bonds (including any premium), either as a single series or as several concurrent sub-series which may include taxable and tax-exempt bonds in any combination.
Note 2: Revolving credit facility with each borrowing thereunder secured by guaranteed mortgage certificates backed by Program Loans, pending purchase of the certificates with Homeownership Loan Program bond proceeds. Attachment "8" $70,000,000 Oklahoma Housing Finance Agency Single Family Mortgage Revenue Bonds (Homeownership Loan Program) 2021 Series A, 2021 Series B & 2021 Series C
SCHEDULE OF ESTIMATED TRANSACTION COSTS
2021 Long Term Tax Exempt Mortgage Revenue Bonds $70,000,000 Negotiated Public Sale
Not-to-Exceed Amounts Cost Component $ I 1000 Amount Paid to Financing Team Member Underwriters' Spread Management Fee 1.25 87,500 Underwriting/ Risk 0.00 0 Takedown / Selling Fee 6.25 437,500 Estimated for an all-market bond issue Expenses (See Note 1 for detail) 0.50 35,196 Subtotal 560,196
Agency Expenses Bond Counsel Public Finance Law Group Fee for Bond Documents and Opinions 0.65 45,500 Expenses 0.04 2,500 Transcripts, etc.
Disclosure Counsel and Special Tax Counsel Kutak Rock Fee for POS/OS Prep and Opinions 0.69 48,500 Expenses 0.01 1,000
Financial Advisor Caine Mitter & Associates Advisory Fee 0.50 35,000 Expenses 0.09 6,000
Cash Flow Charges Caine Mitter & Associates Cash Flow Analyses/ Yield Calculations 0.34 23,500
Rebate Analyst Charges Dobbs Ram Rebate Analyses 0.01 1,000
Bond Trustee Bank of Oklahoma Acceptance Fee 0.05 3,500 Half of 1st Annual Fee 0.06 4,375 Trustee Counsel Fee / Expenses 0.04 3,000
Other Expenses State Bond Commission Fee 0.18 12,500 Council of Bond Oversight Rating Agency Fee 0.64 45,000 Moody's Investors Service Official Statement Printing/ Mailing 0.03 2,250 Image master Miscellaneous Expenses 0.14 10,012 OHFA Subtotal 3.48 243,637
Variable Rate and Swap Expenses Moody's Rating-Initial Fee 0.13 9,000 Moody's Investors Service Moody's Annual Surveillance Fee 0.14 9,500 Moody's Investors Service Remarketing Fees (First Year) 0.27 18,667 Rmarketing Agent Liquidity Fees (First Year) 1.50 105,000 Liquidity Provider Liquidity Bank Counsel Fees 0.64 45,000 Liquidity Provider Bank Counsel Bond Counsel Fees 0.00 0 Public Finance Law Group Special Tax Counsel Fees 0.00 0 Kutak Rock Disclosure Counsel Fees 0.00 0 Kutak Rock Financial Advisor Cash Flows Add On 0,07 5,000 Advisory-variable rate component 0.14 10,000 Caine Mitter & Associates Advisory-swap component 0.14 10,000 Caine Mitter & Associates Subtotal 3.03 212,167
Total Transaction Costs 14.51 1,016,000
Note 1: Underwriters' Expenses Underwriters' Counsel Kutak Rock Fee for SEC Disclosure Opinions 0.33 23,100 CUSIP Service Bureau Fee 0.02 1,326 Depository Trust Co. (DTC) Fee 0,01 800 i-Preo Access 0.11 7,470 Travel/ Out-of-Pocket Expenses 0.04 2,500 0.50 35,196 Attachment "C" Oklahoma Housing Finance Agency Single Family Mortgage Revenue Bonds
Nature, Need and Purpose of Project
Proposed Issuance. Under the 2021 Homeownership Loan Program adopted by the OHFA Board of Trustees, OHFA proposes to issue up to $210,000,000 Homeownership Loan Program long term mortgage revenue bonds ("MRBs") in several series, each consisting of: (a) One or more sub-series; (b) Any combination of tax-exempt and taxable bonds; and (c) Any combination of fixed rate and variable rate bonds.
Additionally, OHFA seeks Council of Bond Oversight authorization to: (a) Extend and maintain its previously established Revolving Credit Facility with the Federal Home Loan Bank of Topeka in the amount of $100,000,000; and (b) Make up to $10,000,000 in Mortgage Credit Certificates available to eligible borrowers.
Bonding Capacity Sources. The bond volume cap authority associated with each component of the Agency's request is summarized below.
Homeownership Loan Program Bonds. It is expected the 2021 Homeownership Loan Program Bonds will derive private activity bond issuance authority approximately as follows: (a) $186,940,720.00 of available tax-exempt bonding capacity received by OHFA from calendar year 2018 Carry Forward; (b) $99,223,295.00 of available tax-exempt bonding capacity received by OHFA from calendar year 2019 Carry Forward; (c) $190,740,977.00 of available tax-exempt bonding capacity received by OHFA from calendar year 2020 Carry Forward; and (d) $62,697,332.00 of available tax-exempt bonding statutory state volume capacity received by OHFA in calendar year 2021.
FHLB Credit Facility. No State Volume Cap Allocation is required.
Types and Amounts of Bonds. The $210.000.000 Homeownership Loan Program Bonds will be long term, fixed rate or variable rate bonds issued on a parity basis under (1) OHFA's 2018 Homeownership Loan Program Master Trust Indenture, (2) OHFA's 2009 Homeownership Loan Program Master Trust Indenture, established in connection with the NIBP program, (3) OHFA's 1994 Homeownership Loan Program Master Trust Indenture or will be monthly pass-through bonds issued under one of the above mentioned indentures or a new indenture. A portion of each series may be issued as taxable bonds in order to further leverage the Agency's limited allocation under the State Private Activity Bond Volume Cap. In addition, an interest rate swap may be entered into with one of OHFA's underwriters to manage interest rate risk on variable rate bonds, if issued.
The $100,000.000 Revolving Credit Facility with the Federal Home Loan Bank of Topeka will provide OHFA with the capacity to borrow on favorable terms at a taxable rate of interest (either on a floating rate or fixed rate basis) as may be required to facilitate interim funding of mortgage loans in the form of mortgage-backed securities under the Homeownership Loan Program, pending issuance/conversion of long term MRBs to permanently finance those mortgage loans. It is contemplated that no individual borrowings under this Revolving Credit Facility will be outstanding for more than eighteen (18) months. OHFA may periodically sell mortgage-backed securities financed by the revolving credit facility in the secondary market if pricing is favorable or to manage interest rate risk. Bond Ratings. The Homeownership Loan Program Bonds are expected be rated "Aaa" by Moody's Investors Service.
Methods of Bond Sale. All or a portion of the Homeownership Loan Program Bonds are expected to be issued via negotiated public sale due to the expected inclusion of premium bonds, Planned Amortization Class (" PAC") bonds*, and/or monthly pass-throughs, which effectively preclude a cost-efficient sale via competitive bid.
Transaction Costs. All service provider fees and expense allowances are based on the results of a competitive RFP selection process conducted by OHFA staff and approved by the OHFA Board. All RFPs are reviewed by the State Bond Advisor prior to their release. As required, all bond issuance costs will be reviewed with and approved by the State Bond Advisor.
Attachment B to this Application provides estimated transaction costs for the Homeownership Loan Program Bonds. The estimated transaction costs shown are based off OHFA's most recent bond financing. The transaction costs relate to the three expected issues of mortgage revenue bonds of up to $70 million each in 2021. If any single series of bonds is issued in a greater or lesser amount, the total transaction costs are expected to be adjusted more or less proportionately, based on the then applicable fee schedules of service providers.
2021 Program Financing Team. The Agency's current financing team is listed in the Application. The two law firms providing bond counsel, disclosure counsel, special tax counsel and underwriter counsel services, as well as the financial advisor for the 2020 Program, were selected under the terms of a competitive RFP selection process completed in September 2020. The investment banking firms serving as managing underwriters, the trustee bank, master loan servicer and financial printer for the 2020 Program were selected under the terms of a competitive RFP selection process completed in November 2020.
Objective. The public purpose objective of the proposed Homeownership Loan Program bond transactions is as follows:
Promote homeownership by low and moderate income Oklahomans in all areas of the State through a network of participating lenders by offering mortgage loans with below-market interest rates and/or down payment and closing cost assistance payments to borrowers who are eligible under the IRS Code for a loan funded with proceeds of tax-exempt bonds.
Leveraging Bonding Capacity. OHFA's strategy is designed to leverage the limited amount of Private Activity Bond issuance authority available to OHFA by:
(a) Recycling principal repayments and prepayments of Program loans funded with the proceeds of prior series of bonds (subject to certain limitations imposed by the IRS Code); and (bl Issuing taxable bonds that require no State Volume Cap Allocation.
* Planned Amortization Class bonds, or "PAC" bonds, are structured with special redemption terms to provide investors with more predictable and stable repayment expectations over a wide range of loan prepayment assumptions. This feature allows a PAC bond to sell for a lower yield than a term bond having an average life that varies more directly with loan portfolio prepayments. Oklahoma Housing Finance Agency Outstanding Single-Family Revenue Bonds (as of September 30, 2020)
Single Family Revenue Bonds
Original Outstanding Principal Principal
Series 1991 A 35,160,000 $40,548
1994 Master Indenture Series 2013 C 25,143,342 10,857,183 Series 2013 D 31,150,654 8,845,466
Single-Family Total $56,293,996 $19,702,649
2009C Master Indenture Series 2009 C-3 42,000,000 12,350,000 Series 2009 C-4 42,000,000 17,150,000 Series 2011 A 24,000,000 2,745,000 Series 2011 B 28,000,000 3,170,000 Series 2012 A 63,500,000 17,955,000 Series 2013 A 24,935,000 7,995,000 Series 2013 B 32,360,000 9,890,000 $ 256,795,000 71,255,000
2018 General Indenture Series 2018 A 44,310,000 35,200,000 Series 2019 A 66,755,000 62,615,000 Series 2020 A 50,000,000 48,930,000 $ 161,065,000 146,745,000
1 of 2 Oklahoma Housing Finance Agency Outstanding Multi-Family Revenue Bonds (as of September 30, 2020)
Multi-Family Revenue Bonds
Original Outstanding Issue/Project Principal Principal
Go Ye Village 13,315,000 2,130,000
John H. Johnson Care Suites 16,000,000 15,895,505
Highland Trails 9,000,000 5,605,427
Sooner Haven 12,500,000 12,500,000
The Curve 25,000,000 25,000,000
Deer Park 14,000,000 14,000,000
Stillwater Springs 12,000,000 10,414,023
Apache Manor/Sandy Park 23,600,000 23,600,000
Subtotal $125,415,000 $109,144,955
Multi-Family Tax Exempt Loans
Original Outstanding Issue/Project Principal Principal
New Page 21,000,000 7,223,475
Total $146,415,000 $116,368,430
2 of 2 REQUEST FOR FINAL APPROVAL OF THE COUNCIL OF BOND OVERSIGHT
The undersigned applicant ("Applicant") hereby requests the Council of Bond Oversight to grant final approval of the following described proposed obligation of the Applicant. References: 62 O.S. Section 695.1 et seq. and the Administrative Rules of the Council of Bond Oversight.
I hereby certify that the following inform · · true a to the best ofmy knowledge and belief.
Signature of Authorized Official: -~~------Date: January 7, 2021
Material Changes Identify and explain any material changes in the proposed obligations that have occurred since the date of Provisional Approval: ______
Project Information Anticipated construction/project start date: 2021 Estimated Completion Date: _20_2_1__ _ Provide details of any collateral, pledged revenue and/or other security for the obligations:
Provide details of credit enhancement providers: ______
ATTACHMENTS
Completed Form B0-1 or letter signifying Council approval.
If a blind pool financing, demand survey or other justification indicating reasonable expectations to lend proceeds.
Enabling Act, Legislation, Inducement Resolution and other document(s) authorizing the obligations.
Due diligence letter.
Statement from legal counsel indicating review of and compliance with applicable federal and/or state laws.
Letter from issuer's attorney or bond counsel stating that there is no litigation pending or threatened relating to outstanding or proposed obligations or the issuer's authority to enter into any agreements necessary to complete the proposed transaction.
Statement from issuer indicating that there is no conflict of interest between any parties to the issue.
Bond Counsel opinion letter (approval may be granted prior to receipt; however, this must be received prior to closing).
If CERF-backed obligations, completed Form B0-6 and report of the Program Development and Credit Review Committee.
Draw Schedule (month-by-month estimated amount of issue proceeds to be drawn down to meet construction/project requirements).
Preliminary Official Statement, Offering Circular or Private Placement Memorandum (approval may be granted prior to receipt; however, this must be received prior to closing).
Provide document indicating maturity schedule of proposed issue and describe how the schedule was determined. Include interest rate □ assumptions used to develop the schedule.
FORM BO-2 (2/2004) PAGE 1 OF 1 2021 Program
RESOLUTION #21-01-
THE TRUSTEES OF THE OKLAHOMA HOUSING FINANCE AGENCY ("OHF A"), A PUBLIC TRUST, MET IN A REGULARLY SCHEDULED AND QUARTERLY MEETING AFTER NOTICE OF SUCH MEETING HAD BEEN GIVEN IN ACCORDANCE WITH THE PROVISIONS OF THE OKLAHOMA OPEN MEETING LAW, AT THE HOLIDAY INN, OKLAHOMA CITY NORTH, 6200 N ROBINSON, OKLAHOMA, ON THE 27th DAY OF JANUARY, 2021, AT 10:00 A.M.
PRESENT:
ABSENT:
THEREUPON, a Resolution was introduced, presented in writing, and upon motion by Trustee-----~ seconded by Trustee-----~ was adopted by the following vote:
AYE:
NAY:
Said Resolution was thereupon signed by the Chairman, attested by the Secretary, sealed with the Seal of the Agency, and is as follows:
RESOLUTION
A RESOLUTION AUTHORIZING AND APPROVING THE DEVELOPMENT OF THE 2021 SINGLE FAMILY MORTGAGE REVENUE BOND AND MORTGAGE PROGRAM AS A PART OF OKLAHOMA HOUSING FINANCE AGENCY'S SINGLE FAMILY PROGRAM, FOR LATER FINAL APPROVAL BY THE OKLAHOMA HOUSING FINANCE AGENCY BOARD OF TRUSTEES; DIRECTING STAFF TO DEVELOP PROPOSED PROGRAM TERMS; AUTHORIZING STAFF AND OHFA OFFICERS TO SEEK 2021 ALLOCATIONS OF "NEW MONEY" FROM THE STATE'S VOLUME CAP TO BE INCLUDED IN SAID PROGRAM; AUTHORIZING SUBMISSION OF APPLICATIONS TO THE DEPUTY TREASURER OF DEBT MANAGEMENT AND THE COUNCIL OF BOND OVERSIGHT; AUTHORIZING PUBLIC HEARINGS; DECLARING OFFICIAL INTENT; AND AUTHORIZING STAFF AND OHFA OFFICERS TO TAKE SUCH OTHER PRELIMINARY ACTIONS AS MAY BE NECESSARY OR DESIRABLE FOR THE DEVELOPMENT OF THE 2021 SINGLE FAMILY MORTGAGE REVENUE BOND AND THE RELATED MORTGAGE LOAN PROGRAM. WHEREAS, OHF A, a Public Trust organized and existing under the laws of the State of Oklahoma (the "State"), including particularly Sections 176-180.3, inclusive, of Title 60, Oklahoma Statutes, as amended, and a certain Trust Indenture dated May 1, 197 5 (as amended and restated by the Second Amended Trust Indenture having the effective date of September 4, 1986, amended and restated by the Third Amended Trust Indenture having the effective date of August 19, 2002), pursuant to which OHF A was established, the beneficial interest in which was accepted by the Governor of the State; and
WHEREAS, OHFA has among its purposes to assist Oklahoma's public entities, private partners and developers in making the most efficient use of their resources and powers in providing single or multi-family housing to meet the needs of the communities and their residents by formulating, developing, or administering housing programs, plans, or activities relating to the improvement of housing for Oklahomans; and
WHEREAS, OHFA has determined that it is desirable to implement the 2021 Single Family Mortgage Revenue Bond and Mortgage Program hereinafter referred to as the "2021 Single Family Mortgage Program" as a single program or related plan of financing (in accordance with guidelines of the Council of Bond Oversight) by OHF A in order to provide additional sources of funds with which to meet the need for financing of mortgage loans to eligible persons of low to moderate income for the purpose of acquiring, constructing or rehabilitating eligible single family residences within Oklahoma; and
WHEREAS, the 2021 Single Family Mortgage Program transactions may include, but are not necessarily limited to the following:
(1) Not to exceed $210 million aggregate principal amount of both taxable and tax exempt current refunding bonds or new money bonds expected to be issued in the form of long-term fixed rate and/or variable rate single family MRBs in one or more series to fund Program phases;
(2) Not to exceed $100 million revolving line of credit to provide, as may be required, interim funding of the purchase of mortgage loans or mortgage-backed securities pending permanent funding of such obligations with proceeds oflong-term fixed rate bonds;and
WHEREAS, in order to more fully develop the details of the 2021 Single Family Mortgage Program and to effectuate the issuance, sale and delivery of bonds, it is deemed necessary to proceed to develop 2021 Single Family Mortgage Program terms and seek approval of allocation from the State's 2021 Private Activity Bond volume cap authorization.
NOW, THEREFORE, BE IT RESOLVED by the Trustees of OHF A that:
SECTION 1. OHF A hereby declares its official intent to develop and implement the 2021 Single Family Mortgage Program, as a "single program" or "related plan of financing" as contemplated by 62 O.S. §695.7, and the rules promulgated thereunder, which may involve the authorization and approval of the issuance of, but not necessarily limited to the following:
2 (1) Not to exceed $210 million aggregate principal amount of both taxable and tax exempt current refunding bonds or new money bonds expected to be issued in the form oflong-term fixed rate and/or variable rate single family MRBs in one or more series to fund Program phases;
(2) Not to exceed $100 million revolving line of credit to provide, as may be required, interim funding of the purchase of mortgage loans or mortgage-backed securities pending permanent funding of such obligations with proceeds of long-term fixed rate bonds;and
The issuance, sale and delivery ofthe bonds to the purchasers thereof and the detailed structure of the 2021 Single Family Mortgage Program shall be subject to such approvals as may be required by law or otherwise, including, but not necessarily limited to, approval of the Deputy Treasurer of Debt Management, approval of the Oklahoma Council of Bond Oversight, final approval of OHFA and General Counsel to OHFA, and receipt, as required, of allocations from the State's Private Activity Bond volume cap authorization with respect to "new money" bonds. OHFA intends to fund certain costs of the Program incurred prior to the issuance of the bonds from its own funds or borrowed funds. To the extent OHFA utilizes its own funds or borrowed funds for said purposes, it is intended that proceeds of the bonds will be utilized to reimburse OHFA and/or repay said borrowed funds. This Resolution constitutes a declaration of official intent as is required by the reimbursement regulations set forth in Section 1.150-2 of the Treasury Regulations and is intended to cover expenditures incurred within 60 days prior to the date of this Resolution and expenditures made after the date of this Resolution.
SECTION 2. OHFA staff is hereby authorized and directed to make applications to the State for an allocation of 15% of the total Oklahoma available volume cap for 2021 ( expected to be in excess of$65,200,000). OHFA staff is hereby authorized to request, as appropriate, additional volume cap allocations, including a carry-forward 2021 cap allocation, all as deemed appropriate and in the best interest of OHFA and its single-family programs. In addition, the Board directs the staff to make applications to the Oklahoma Council of Bond Oversight, the Governor and the Deputy Treasurer of Debt Management for approval of the 2021 Single Family Mortgage Program.
SECTION 3. OHFA staff and the Financial Advisor are hereby authorized and directed to proceed to develop terms and other necessary documents pertaining to the 2021 Single Family Mortgage Program, in order to present the same to the Trustees of OHF A as soon as practicable for their approval, to conduct one or more public hearings, as required by law, regarding the subject bond issues, to cause a notice or notices of public hearing to be published, as required by law, and to give notice of the proposed issuance of "new money" and current refunding single family mortgage revenue bonds to the Deputy Treasurer of Debt Management, the Oklahoma Council of Bond Oversight and such other persons or agencies as may be required under applicable laws, and to make application for any State Private Activity Bond volume cap allocation or other approval of the issuance of the Bonds as required under applicable law. The OHF A staff and Financial Advisor are also authorized and directed to prepare and distribute requests for proposals, from time to time, for additional service providers, if any, required for the completion of bond issues relating to the 2021 Single Family Program.
SECTION 4. OHFA staff is hereby directed to report to the Trustees from time to time as to its progress in the development of the 2021 Single Family Mortgage Program, and the receipt of a State Private Activity Bond volume cap allocation for the 2021 Single Family Mortgage Program,
3 and the receipt of approval of the 2021 Single Family Mortgage Program by the Oklahoma Council of Bond Oversight and as to the status of preparation for presentation for preliminary approval of the 2021 Single Family Mortgage Program terms.
SECTION 5. The officers and staff ofOHFA are hereby authorized and directed to take such further action as may be necessary or appropriate in order to effectuate the matters contemplated herein.
SECTION 6. This Resolution shall be entered of record and shall take effect immediately upon adoption hereof and shall supersede any prior resolution of OHF A to the extent this Resolution and the terms hereof conflict with such prior resolution.
PASSED AND ADOPTED this 27th day of January 2021.
TRUSTEES OF THE OKLAHOMA HOUSING FINANCE AGENCY
By:------Chairman
ATTEST:
Secretary/Assistant Secretary
(SEAL)
4 THE PUBLIC FINANCE LAW GROUP PLLC ATTORNEYS AND COUNSELORS AT LAW
January 4, 2021
Deputy Treasurer for Policy and Debt Management Office of State Treasurer 2300 N. Lincoln, Room 217 Oklahoma City, Oklahoma 73105
Oklahoma Housing Finance Agency 100 N.W. 63rd Street Oklahoma City, Oklahoma 73110
RE: $310,000,000 Single Family Mortgage Revenue Bonds, 2021 Program
Ladies and Gentlemen:
We have examined the Constitution and laws of the State of Oklahoma (the "State"), particularly Title 60 Oklahoma Statutes 2011, Sections 176 - 180.3, (the "Act") under authority of which the Oklahoma Housing Finance Agency (the "Agency") was created as a public trust for the use and benefit ofthe State, and the Trust Indenture dated as of May 1, 197 5, (as amended and restated in a Second Amended Trust Indenture dated as of November 4, 1986, and amended and restated by the Third Amended Trust Indenture having the effective date of August 19, 2002). We have also examined copies of certain proceedings to be adopted by the Agency relating to the issuance of revenue notes or bonds (the "Bonds"), both tax-exempt and taxable, for the purpose of financing single family homes in an amount not to exceed $310,000,000 (which includes $100,000,000 for interim line of credit funding). In addition, we have examined such other documents and instruments as we have deemed necessary to express the opinions hereinafter set forth.
Each issue of Bonds will be issued pursuant to a resolution adopted by the Agency (the "Authorizing Bond Resolution") and a supplemental bond indenture or similar security document between the Agency and a trustee bank (the "Trustee"), dated as of the first day of the month of delivery (together with the Agency's base Bond Indenture, the "Indenture").
Based upon such examinations, under present Oklahoma and federal laws (which exclude any pending legislation which may have a retroactive effect on or before the date hereof), rulings and decisions, it is our opinion that:
(a) The Agency is a validly existing public trust and as such an agency of the State and a regularly constituted authority of the State for the performance of the functions for which the Agency
t 405 .235.3413 • f 405-235.2807 5657 N. CLASSEN BOULEVARD, SUITE 100 • OKLAHOMA CITY, OK 73n8 was created, with powers, among others, to issue and sell the Bonds, to use the proceeds thereof as indicated and to execute and deliver the Indenture to secure the Bonds.
(b) The Bonds can be duly and validly executed and delivered by the Agency under the base Bond Indenture and upon authentication by the Trustee, the Bonds will be valid and binding obligations of the Agency payable in accordance with their terms and secured by and entitled to the benefits provided by the Indenture. The Bonds will be special obligations of the Agency payable solely from the sources set forth in the Indenture.
(c) Each Indenture will constitute a valid pledge of the properties and rights securing the Bonds and will be validly assigned and pledged to the Trustee.
( d) The Bonds will not be general obligations or indebtedness of the Agency within the meaning of any constitutional or statutory limitation, and will not give rise to a pecuniary liability of the Agency or a charge against its general credit or taxing powers, but will be payable solely from revenues and other sums irrevocably pledged to the payment thereof pursuant to the Indenture.
(e) Interest on the tax-exempt portion of the Bonds will be excludible from the gross income of the owner thereof for federal income tax purposes pursuant to Section 103 of the Internal Revenue Code of 1986, as amended (the "Code"). The tax exempt Bonds will be qualified mortgage bonds within the meaning of Section 143 of the Code.
(f) Interest on the Bonds exempt from federal income tax will be also exempt from State of Oklahoma income tax.
(g) To our knowledge, there is no litigation pending which will affect the issuance of the Bonds or require disclosure with respect thereto.
At this time, we express no opinion as to any other federal tax consequences caused by the ownership or receipt or accrual of interest on the Bonds.
The enforceability of the Bonds and the Indenture may be limited by state and federal laws, rulings and decisions affecting remedies and by bankruptcy, reorganization, moratorium or other laws relating to or affecting creditors' rights heretofore or hereafter enacted to the extent constitutionally applicable, and their enforcement also may be subject to exercise of judicial discretion.
Very truly yours, ~.OHFA OKLA HO!\ IA HO US ING Fl :'-JANCE AG ENCY
100 N.\V. 63 rd S uit e 2 00 Okl a hom a C it y, OK 73116 P. O . Bo x 26720 Okl a h o m a C it y. OK 73126 - 0720 Ph o n e , (405) 848-1144 T o ll Fr ee, (800) 256-1489 T D D, (405) 848- 7471 www . ohfa . org
January 7, 2021
Mr. Andrew Messer Deputy Treasurer of Debt Management Office of Treasurer for Policy & Debt Management 2300 N Lincoln Blvd, Room 217 Oklahoma City, Oklahoma 73105
Gentlemen:
This is intended to be responsive to those items referred to in the Request for Final Approval as Part 3 Attachments; due diligence letter and statement from issuer indicating that there is not a conflict of interest between any parties to the issue.
To the best of my knowledge and belief:
Oklahoma Housing Finance Agency ("OHF A") has performed due diligence in the development of the 2021 Bond Program. OHFA's Bond Counsel, General Counsel, the undersigned and other parties to the proposed transaction shall perform all other substantive matters of due diligence required for the sale and delivery of the bonds.
There is no conflict of interest between OHF A, potential service providers or any other parties to the proposed transaction other than the interests of such parties to the pertinent contracts with OHFA.
Sincerely,
Deborah Jenkins Executive Director
DS/las
MQUALITY A WARD WIN N ER
AGENDA ITEM FIVE
MEMORANDUM
TO: Council of Bond Oversight
FROM: Andrew Messer, Deputy Treasurer for Debt Management
SUBJECT: Request from the Oklahoma Municipal Power Authority for Provisional and Final Approval to execute a federally taxable Power Supply System Revenue Note in an amount not to exceed $60 million.
DATE: February 25, 2021
Background
The Oklahoma Municipal Power Authority (the “OMPA”) is requesting approval to execute a federally taxable bank loan directly placed with Bank of America in an amount not to exceed $60 million. The bank note proceeds will be utilized to provide financing for fuel supply costs incurred due to severe cold weather experienced February 8th-19th.
The historic winter storm that plunged the southern plains into below freezing temperatures for nearly two weeks resulted in an unforeseen spike in natural gas prices. The record cold not only drove up demand for natural gas, it also reduced supply as production was literally frozen in some cases. In order to provide uninterrupted electric service to its customers, OMPA was forced to purchase natural gas on the spot market as prices spiked to record levels hitting $600 per million btu’s.
While OMPA was successful in keeping electrical service on throughout the duration of the winter storm, the cost of the natural gas purchased far exceeded reserves available to make payment to suppliers when settlement occurs in mid-March. As a result, OMPA is seeking financing in the form of a bank note placed with Bank of America to pay its gas suppliers. The exact amount of the note has not been determined at this point, but it will not exceed $60 million and will not have a duration exceeding five years.
The OMPA was created by statute in 1981 and began operations as a power supplier on July 1, 1985. The Authority consists of thirty-nine (39) member cities and provides power from a variety of resources including wind, hydro, natural gas and coal.
Financing Plan
The Authority is leveraging its existing relationship with Bank of America, which provides a line of credit to the Authority, to negotiate a fixed rate loan that can be closed before the Authority is required to submit payment to its suppliers in mid-March. The Authority’s financial advisor, Hilltop Securities, is leading the negotiations in consultation with the Treasurer’s Office to obtain the most favorable terms for the borrowing. While a final agreement has not been executed, the note is expected to be structured with a five-year term to maturity, including an optional pre- payment provision, at a fixed interest rate of 1.46%.
The OMPA board authorized the execution of the bank note in an amount not to exceed $60 million at a special meeting held Friday February 19, 2021.
Analysis
The note will be issued under a supplemental resolution to the Authority’s 1985 Power Supply System Revenue Bond Resolution. Pursuant to the 1985 Resolution, the Authority is required to set an annual budget to the trustee setting forth, in detail, estimated revenues and expenses to ensure sufficient funds are available to pay all expenses including debt service1. Further, the Authority is required to establish and collect rates such that net revenues provide at least 1.1X aggregate debt service coverage2. The Authority has maintained coverage in excess of the 1.1X floor since the inception of the 1985 Resolution and in fiscal year 2020 debt service coverage was 1.22X3.
The note will be issued in parity with the Authority’s outstanding debt. A table showing the Authority’s outstanding obligations is provided in appendix I.
The proceeds of the bank note will be utilized to pay natural gas suppliers. Adjustments in rates for customers will be necessary to cover the cost of the acute crisis. As mentioned above the Authority will be required to increase rates in an amount sufficient to provide in excess of 1.1X coverage..
The proposed bank note is not an obligation of the State of Oklahoma and, neither the full faith and credit, nor the taxing power of the State are pledged to the repayment of this obligation.
1 Oklahoma Municipal Power Authority Power Supply Revenue Bond Resolution (Section 709) 2 Oklahoma Municipal Power Authority Power Supply Revenue Bond Resolution (Section 711) 3 Appendix II – Table of unaudited fiscal 2020 financials and fiscal 2021 budget
Recommended Conditions
If the Council of Bond Oversight approves the OMPA’s request to execute the federally taxable bank note in an amount not to exceed $60,000,000 the following conditions are recommended:
1) Receipt of the form of the legal opinion from bond counsel prior to pricing;
2) Receipt of the approved supplemental resolution authorizing the borrowing of not to exceed $60 million.
3) Receipt of the final terms and conditions of the bank note; and
4) Receipt of Form (B0-8) Statement of Approval of Professional Fees.
APPENDIX I
Oklahoma Municipal Power Authority Outstanding Bonded Indebtedness (as of December 31, 2020)
Original Outstanding Issue Principal Principal
Power Supply System Revenue Bonds, Series 1992B $166,675,000 $10,370,000 Power Supply System Revenue Bonds, Series 2005A $62,400,000 $15,300,000 Power Supply System Revenue Bonds, Series 2010B $70,000,000 $70,000,000 Power Supply System Revenue Bonds, Series 2013A $132,920,000 $132,920,000 Power Supply System Revenue Bonds, Series 2013B $39,565,000 $39,565,000 Power Supply System Revenue Refunding Bonds, Series 2014A $88,740,000 $85,540,000 Power Supply System Revenue Refunding Bonds, Series 2014B $34,440,000 $34,440,000 Power Supply System Revenue Refunding Bonds, Series 2016A $124,315,000 $124,315,000 Power Supply System Revenue Refunding Bonds, Series 2019A $59,105,000 $58,505,000 TOTAL $778,160,000 $570,955,000
APPENDIX II
OKLAHOMA MUNICIPAL POWER AUTHORITY Debt Service Coverage Calculations (In Thousands) Unaudited Preliminary Results Budget 2020 2021
Operating Revenues 175,249 172,176 Operating Expenses: Purchase Power 34,546 29,332 Generation 52,066 55,661 Transmission 21,391 24,126 Administrative 9,362 9,246 Other 1,343 938 Depreciation 32,949 151,657 119,303
Net Operating Revenues 23,592 52,873 Interest Income 1,187 1,431 Depreciation 32,949
Income available for debt service 57,728 54,304
Debt service: Interest expense 25,095 23,995 Principal 22,035 23,225 Total debt service 47,130 47,220
Debt service coverage ratio 1.22 1.15
OKLAHOMA MUNICIPAL POWER AUTHORITY MEETING NOTICE
A special meeting of the Board of Directors of the Oklahoma Municipal Power Authority will be held beginning at 2:00 p.m., Friday, February 19, 2021. The Board may consider, discuss, and vote on any item listed in this Agenda.
Join Zoom Meeting https://us02web.zoom.us/j/85028211577?pwd=UTlzdFBqdU1PRnhlUGpQT3hVNTQvZz09
Meeting ID: 850 2821 1577 Passcode: 319463 AGENDA
1. Call to order
2. Consideration and possible action on call for executive session upon the advice of the General Counsel pursuant to 25 O.S. § 307(B)(4) for the purpose of confidential communications between a public body and its attorney concerning a pending investigation, claim, or action if the public body, with the advice of its attorney, determines that disclosure will seriously impair the ability of the public body to process the claim or conduct a pending investigation, litigation, or proceeding in the public interest;
3. Consideration and possible action to return to regular session;
4. Consideration, discussion and possible action based upon executive session;
5. Consideration, discussion and possible action on the General Manager’s request for authorization for staff to secure a short-term loan in an amount not to exceed Sixty Million Dollars ($60,000,000) and for a term not to exceed 3 months at a fixed interest rate not to exceed 6% or a variable rate subject to the maximum rate permitted by law. Staff is further authorized to secure a longer-term loan to pay off the short-term loan of up to Sixty Million Dollars ($60,000,000) at a term not to exceed 7 years at a fixed rate of interest not to exceed 6% or a variable rate subject to the maximum rate permitted by law.
6. Review, discussion and possible approval of any other new business, if any, which has arisen since the posting of the agenda which could not have been reasonably foreseen prior to the time of posting (25 O.S. § 311(9))
7. Adjournment
This meeting notice was posted on the 17th day of February 2021 at 1:00 p.m., 2701 West I-35 Frontage Road, Edmond, Oklahoma 73013.
Approved as to form and legality:
s/ February 17, 2021 Ellen Edwards Date OMPA General Counsel
1 NOTICE OF MATERIAL EVENT FOR CONTINUING DISCLOSURE REQUIREMENTS OF SEC RULE 15c2-12 February 22, 2021
This Notice is being provided voluntarily by the Oklahoma Municipal Power Authority (the “Issuer”), pursuant to the requirement of Rule 15c2-12 (the “Rule”) of the Securities and Exchange Commission Act of 1934, as notification of occurrence of the following event as defined in paragraph (b)(5)(i)(C) of the Rule.
As a result of the recent extreme cold weather in the Southwestern United States commencing February 13, 2021, Oklahoma Municipal Power Authority (the “Authority”) was required by the Southwest Power Pool to run all available power generation for reliability of the electric grid. Widespread blackouts were avoided and the Authority satisfied the electric power needs of all its member cities throughout the period of extreme cold weather, and expects to continue to satisfy such power needs. In doing so it purchased additional gas to generate the needed electric power and was exposed to and incurred higher than normal gas costs due to the unusual demand for power caused by the extreme cold. This was exacerbated by a shortage of natural gas in the region due to significant wellhead freeze- offs. While the net cost of such gas and payments from the RTO will not be known for several weeks, the Authority is exploring its options, including borrowing an amount that it does not currently expect to exceed $60 million, to ensure its ability to satisfy its obligations while maintaining a minimum of 100 days cash on hand.
2 OKLAHOMA MUNICIPAL POWER AUTHORITY
Certificate of General Manager and Assistant Secretary as to the Power Supply System Revenue Bond Resolution
The undersigned, Roland Dawson, General Manager and Assistant Secretary of Oklahoma Municipal Power Authority, a governmental agency of the State of Oklahoma and a body politic and corporate (the "Authority"), hereby certifies that attached hereto is a true, complete and correct copy of the Power Supply System Revenue Bond Resolution duly adopted by the Authority at a meeting duly called and duly held on June 10, 1985, at which meeting a quorum was present and acting throughout. Such resolution,
1. as supplemented and amended by the First Supplemental Power Supply System Revenue Bond Resolution and the Second Supplemental Power Supply System Resolution, each of which supplemental resolutions was duly adopted by the Authority at a meeting duly called and held on June 10,1985,
2. as supplemented and amended by the Third Supplemental Power Supply System Revenue Bond Resolution duly adopted by the Authority at a meeting duly called and held on August 1,1985,
3. as supplemented and amended by the Fourth Supplemental Power Supply System Revenue Bond Resolution duly adopted by the Authority at a meeting duly called and held on September 11,1985,
4. as supplemented by the Fifth Supplemental Power Supply System Revenue Bond Resolution and the Sixth Supplemental Power Supply System Revenue Bond Resolution, each of which supplemental resolutions was duly adopted by the Authority at a meeting duly called and held on May 30, 1986,
5. as supplemented by the Seventh Supplemental Power Supply System Revenue Bond Resolution duly adopted by the Authority at a meeting duly called and held on November?, 1986,
6. as supplemented by the Eighth Supplemental Power Supply System Revenue Bond Resolution duly adopted by the Authority at a meeting duly called and held on December 19,1990,
7. as supplemented and amended by. the Ninth Supplemental Power Supply System Revenue Bond Resolution duly adopted by the Authority at a meeting duly called and held on May 14,1992,
8. as supplemented by the Tenth Supplemental Power Supply System Revenue Bond Resolution duly adopted by the Authority at a meeting duly called and held on July 16,1992,
9. as supplemented by the Eleventh Supplemental Power Supply System Revenue Bond Resolution duly adopted at a meeting duly called and held on December 13,1993, 1. 479504.4 028618 CLD 10. as supplemented by the Twelfth Supplemental Power Supply System Revenue Bond Resolution duly adopted at a meeting duly called and held on January 20,1994,
11. as supplemented and amended by the Thirteenth Supplemental Power Supply System Revenue Bond Resolution duly adopted at a meeting duly called and held on February 8, 2001 (including as a part thereof the Certificate of Determination dated March 1, 2001, executed pursuant thereto by the General Manager and Assistant Secretary of the Authority),
12. as supplemented by the Fourteenth Supplemental Power Supply System Revenue Bond Resolution duly adopted at a meeting duly called and held on February 8, 2001 (including as a part thereof the Certificate of Determination dated March 1, 2001, executed pursuant thereto by the General Manager and Assistant Secretary of the Authority),
13. as supplemented by the Fifteenth Supplemental Power Supply System Revenue Bond Resolution duly adopted at the meeting duly called and held on March 13, 2003 (including as a party thereof the Certificate of Determination dated April 1, 2003, executed pursuant thereto by the General Manager and Assistant Secretary of the Authority),
14. as supplemented by the Amended and Restated Sixteenth Supplemental Power Supply System Revenue Bond Resolution adopted October 9, 2003 (including as a part thereof the Certificate of Determination dated November 5, 2003, executed pursuant thereto by the General Manager and Assistant Secretary of the Authority),
15. as supplemented by the Seventeenth Supplemental Power Supply System Subordinated Indebtedness Revenue Bond Resolution adopted July 23,2004, and
16. as supplemented by the Eighteenth Supplemental Power Supply System Revenue Bond Resolution (including as a part thereof the Certificate of Determination dated October 6, 2005, executed pursuant thereto by the General Manager and Assistant Secretary of the Authority), at each of which meetings a quorum was present and acting throughout, has not been altered, amended, supplemented or rescinded and is in full force and effect on the date hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and the seaj-pf the Authority this 6th day of October, 2005.
Roland Dawson General Manager and Assistant Secretary
[SEAL]
-2- 479504.4 028618 CLD [CONFORMED COPY]
OKLAHOMA MUNICIPAL POWER AUTHORITY
.Power Supply System Revenue Bonds
POWER SUPPLY SYSTEM REVENUE BOND RESOLUTION
Adopted June 10, 1985 TABLE OF CONTENTS*
Page ARTICLE I DEFINITIONS AND STATUTORY AUTHORITY SECTION 101 Definitions . 1 SECTION 102 Authority for this Resolution . ... 10 SECTION 103 Resolution to Constitute Contract 10
ARTICLE II AUTHORIZATION AND ISSUANCE OF BONDS SECTION 201 Authorization of Bonds 10 SECTION 202 General Provisions for Issuance of Bonds 10 SECTION 203 Bonds Other than Refunding Bonds 13 SECTION 204 Refundirfg Bonds 13 SECTION 205 Certificate of the Consulting Engineer , 14 SECTION 206 Credit Obligations : 14
ARTICLE III GENERAL TERMS AND PROVISIONS OF BONDS SECTION 301 Medium of Payment; Form and Date; Letters and Numbers 15 SECTION 302 Legends 15 SECTION 303 Execution and Authentication 15 SECTION 304 Exchange, Transfer and Registry 16 SECTION 305 Regulations With Respect to Exchanges and Transfers 16 SECTION 306 Bonds Mutilated, Destroyed, Stolen or Lost 16 SECTION 307 Temporary Bonds 17 SECTION 308 Payment of Interest on Bonds; Interest Rights Preserved 17
ARTICLE IV REDEMPTION OF BONDS SECTION 401 Privilege of Redemption and Redemption Price * 17 SECTION 402 Redemption at the Election or Direction of .the Authority 17 SECTION 403 Redemption Otherwise Than at Authority's Election or Direction .'. 18 SECTION 404 Selection of Bonds to be Redeemed 18 SECTION 405 Notice of Redemption 18 SECTION 406 Payment of Redeemed Bonds 19 SECTION 407 Cancellation and Destruction of Bonds 19
ARTICLE V ESTABLISHMENT OF FUNDS AND APPLICATION THEREOF SECTION 501 The Pledge Effected by the Resolution 19 * This Table of Contents was not a part of the Resolution as adopted. Page SECTION 502 Establishment of Funds 20 SECTION 503 Construction Fund 20 SECTION 504 Revenues and Revenue Fund 22 SECTION 505 Payments Into Certain Funds 22 SECTION 506 Operation and Maintenance Fund — 23 SECTION 507 Debt Service Fund—Debt Service Account 24 SECTION 508 Debt Service Fund—Debt Service Reserve Account ...... 25 SECTION 509 Subordinated Indebtedness Fund 26 SECTION 510 Reserve and Contingency Fund 26 SECTION 511 General Reserve Fund '. 27 SECTION 512 Subordinated Indebtedness — 28 [
i ARTICLE VI DEPOSITARIES "OF MONEYS, SECURITY FOR DEPOSITS AND INVESTMENT OF FUNDS SECTION 601 Depositaries ^ ...... -.,...;..• ..... 29 SECTION 602 Deposits. ...; ...... 29 SECTION 603 Investment of Certain Funds — 30 SECTION 604 Valuation and Sale of Investments 30
ARTICLE VII PARTICULAR COVENANTS OF THE AUTHORITY SECTION 701 Payment of Bonds ...... ;.... — ... 31 SECTION 702 Extension of Payment of Bonds ...... 31 SECTION 703 Offices for Servicing Bonds : ...;.. 31 SECTION 704 Further Assurance 32 SECTION 705 Power to Issue Bonds and Pledge Revenues and Other Funds 32 SECTION 706 Power to Fix and Collect Rents, Rates and Charges 32 SECTION 707 Creation of Liens; Sale and Lease of Property 32 SECTION 708 Consulting Engineer 33 SECTION 709 Annual Budget 33 SECTION 710 Operation and Maintenance of System — 34 SECTION 711 Rents, Rates and Charges 34 SECTION 712 Power Sales Contracts; Amendment 34 SECTION 713 Maintenance of Insurance 35 SECTION 714 Reconstruction; Application of Insurance Proceeds —, 35 SECTION 715 Accounts and Reports 36 SECTION 716 Payment of Taxes and Charges 37 SECTION 717 Tax Covenants 37 SECTION 718 General 37
ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES OF BONDHOLDERS SECTION 801 Events of Default ,. 38 SECTION 802 Accounting and Examination of Records After Default 39 Page SECTION 803 Application of Revenues and Other Moneys After Default ..-.-...... 39 SECTION 804 Appointment of Receiver >...... , 40 SECTION 805 Proceedings Brought by Trustee ....!..,....;...... ; 41 SECTION 806 Restriction on Bondholder's Action ...... 41 SECTION 807 Remedies Not Exclusive ... 42 SECTION 808 Effect of Waiver and Other Circumstances. 42 SECTION 809 Notice of Default:.' , 42
ARTICLE IX CONCERNING THE FIDUCIARIES SECTION 901 Trustee; Appointment and Acceptance of Duties 42 SECTION 902 Paying Agents; Appointment and Acceptance of Duties ...... ; 42 SECTION 903 Responsibilities of Fiduciaries 43 SECTION 904 Evidence on Which Fiduciaries May Act , 43 SECTION 905 Compensation , 44 SECTION 906 Certain Permitted Acts 44 SECTION 907 Resignation of Trustee 44 SECTION 908 Removal of Trustee 44 SECTION 909 Appointment of Successor Trustee 44 SECTION 910 Transfer of Rights and Property to Successor Trustee 45 SECTION 911 Merger or Consolidation 45 SECTION 912 Adoption of Authentication 45 SECTION 913 Resignation or Removal of Paying Agent and Appointment of Successor 45 SECTION 914 Bond Registrar 46
ARTICLE X SUPPLEMENTAL RESOLUTIONS SECTION 1001 Supplemental Resolutions Effective Upon Filing With the Trustee 46 SECTION 1002 Supplemental Resolutions Effective Upon Consent of Trustee 47 SECTION 1003 Supplemental Resolutions Effective With Consent of Bondholders 47 SECTION 1004 General Provisions 47
ARTICLE XI AMENDMENTS SECTION 1101 Mailing 48 SECTION 1102 Powers of Amendment 48 SECTION 1103 Consent of Bondholders 50 SECTION 1104 Modifications or Amendments by Unanimous Consent 50 SECTION 1105 Exclusion of Bonds 50 SECTION 1106 Notation on Bonds 50
ARTICLE XII MISCELLANEOUS SECTION 1201 Defeasance 50
in Page SECTION 1202 Evidence of Signatures and Bondholders and Ownership of Bonds 54 SECTION 1203 Moneys Held for Particular Bonds ..." —. 55 SECTION 1204 Preservation and Inspection of Documents 55 SECTION 1205 Parties Interested Herein 55 SECTION 1206 No Recourse on the Bonds .-...' '.. 55 SECTION 1207 Publication of Notice; Suspension of Publication ...... — 55 SECTION 1208 Severability of Invalid Provisions 56 SECTION 1209 Holidays : 56 SECTION 1210 Repeal of Inconsistent Resolutions 56
ARTICLE XIII EFFECTIVE DATE SECTION 1301 Eifective Date. 56
IV POWER SUPPLY SYSTEM REVENUE BOND RESOLUTION
BE IT RESOLVED by the Board of Directors of Oklahoma Municipal Power Authority as follows:
ARTICLE I DEFINITIONS AND STATUTORY AUTHORITY SECTION 101. Definitions. The following terms shall, for all purposes of the Resolution, have the following meanings: Accountant's Certificate shall mean a certificate signed by an independent certified public accountant of recognized standing or a firm of independent certified public accountants of recognized standing (who may be the accountant or firm of accountants who regularly audit the books of the Authority) selected by the Authority. Accreted Value shall, mean with respect to any Capital Appreciation Bonds (i) as of any Valuation Date, the amount set forth for such date in the Supplemental Resolution authorizing such Capital Appreciation Bonds and (ii) as of any date other than a Valuation Date, the sum of (a) the Accreted Value on the preceding Valuation Date and (b) the product of (1) a fraction, the numerator of which is the number of days having elapsed from the preceding Valuation Date and the denominator of which is the number of days from such preceding Valuation Date to the next succeeding Valuation Date and (2) the difference between the Accreted Values for such Valuation Dates. Accrued Aggregate Debt Service shall mean, as of any date of calculation, an amount equal to the sum of the amounts of accrued Debt Service with respect to all Series, calculating the accrued Debt Service with respect to each Series at an amount equal to the sum of (i) interest on the Bonds of such Series accrued and unpaid and to accrue (as estimated by the Authority) to the end of the then current calendar month, and (ii) Principal Installments due and unpaid and that portion of the Principal Installment for such Series next due which would have accrued (if deemed to accrue in the manner set forth in the definition of Debt Service) to the end of such calendar month; provided, however, that there shall be excluded from the calculation of Accrued Aggregate Debt Service any Principal Installments which are Refundable Principal Installments. For purposes of this definition, the principal and interest portions of the Accreted Value of Capital Appreciation Bonds becoming due at maturity or by virtue of a Sinking Fund Installment shall be included in the calculations of accrued and unpaid and accruing interest or Principal Installments in such manner and during such period of time as is specified in the Supplemental Resolution authorizing such Capital Appreciation Bonds. Act shall mean Laws 1981, c. 218, §§ 1-27, the Oklahoma Municipal Power Authority Act, as amended from time to time. Adjusted Aggregate Debt Service for any period shall mean, as of any date of calculation, the Aggregate Debt Service for such period except that, if any Refundable Principal Installment for any Series of Bonds is included in Aggregate Debt Service for such period, Adjusted Aggregate Debt Service shall mean Aggregate Debt Service determined as if each such Refundable Principal Installment had been payable, Over a period extending from the due date of such Principal Installment through the later of the 35th anniversary of the issuance of such Series of Bonds or the 10th anniversary of the due date of such Principal Installment, in installments which would have required equal annual payments of principal and interest over such period. Interest deemed payable in any Fiscal Year after the actual due date of any Refundable Principal Installment of any Series of Bonds shall be calculated at the average rate of interest actually payable on the Bonds of such Series at the time the calculation is made (using the true, actuarial method of calculation) or such higher rate as the Authority determines appropriate. Aggregate Debt Service for any period shall mean, as of any date of calculation, the sum of the amounts of Debt Service for such period with respect to all Series; provided, however, that for purposes of estimating Aggregate Debt Service for any future period, any Option Bonds Outstanding during such period shall be assumed to mature on the stated maturity date thereof. For purposes of this definition, the principal and interest portions of the Accreted Value of Capital Appreciation Bonds becoming due at maturity or by virtue of a Sinking Fund Installment shall be included in the calculations of accrued and unpaid and accruing interest or Principal Installments in such manner and during such period of time as is specified in the Supplemental Resolution authorizing such Capital Appreciation Bonds. Annual Budget shall mean the annual budget, as amended or supplemented, adopted or in effect for a particular Fiscal Year as provided in Section 709. Authority shall mean Oklahoma Municipal Power Authority, a governmental agency of the State of Oklahoma and a body politic and corporate, created and existing under the Act. Authorized Newspapers shall mean a financial newspaper of general circulation in the Borough of Manhattan, City and State of New York (including, at such times as they are published, The New York Times, The Bond Buyer and The Wall Street Journal) and a newspaper of general circulation in Oklahoma City, Oklahoma, which, in each case, is customarily published at least once a day for at least five days (other than legal holidays) in each calendar week, printed in the English language. Authorized Officer of the Authority shall mean the Chairman, Vice Chairman, Secretary, an Assistant Secretary, the Treasurer, an Assistant Treasurer or General Manager of the Authority or any other officer or employee of the Authority authorized to perform specific acts or duties by resolution duly adopted by the Authority. Bond or Bonds shall mean any bonds, notes or other evidences of obligations, as the case may be, authenticated and delivered under and Outstanding pursuant to the Resolution but shall not mean Subordinated Indebtedness. Bondholder or Holder of Bonds shall mean any person who shall be the registered owner of any Bond or Bonds. , Bond Registrar shall mean the Trustee or any other institution qualified to act in the capacity of Bond Registrar as set forth in Section 703 appointed by the Authority to perform the duties of Bond Registrar enumerated in such Section. Capital Appreciation Bonds shall mean any Bonds hereafter issued as to which interest is payable only at the maturity or prior redemption of such Bonds. For the purposes of (i) receiving payment of the Redemption Price if a Capital Appreciation Bond is redeemed prior to maturity, or (ii) receiving payment of a Capital Appreciation Bond if the principal of all Bonds is declared immediately due and payable following an Event of Default as provided in Section 801 of the Resolution or (iii) computing the principal amount of Bonds held by the registered owner of a Capital Appreciation Bond in giving to the Authority or the Trustee any notice, consent, request, or demand pursuant to the Resolution for any purpose whatsoever, the principal amount of a Capital Appreciation Bond shall be deemed to be its Accreted Value. Construction Fund shall mean the Construction Fund established in Section 502. Consulting Engineer shall mean the engineer or engineering firm or corporation at the time retained by the Authority pursuant to Section 708 to perform the acts and carry out the duties provided for such Consulting Engineer in the Resolution.
Cost of Acquisition and Construction, with respect to any part of the System, shall mean the Authority's costs, expenses and liabilities paid or incurred or to be paid or incurred by the Authority in connection with the planning, engineering, designing, acquiring, constructing, installing, financing, operating, maintaining, retiring, decommissioning and disposing of any part thereof and the obtaining of all governmental approvals, certificates, permits and licenses with respect thereto, including, but not limited to, any good faith or other similar payment or deposits required in connection with the purchase of such part of the System, the cost of acquisition by or for the Authority of real and personal property or any interests therein, costs of physical construction of such part of the System and costs of the Authority incidental to such construction or acquisition, the cost of acquisition of fuel or fuel inventory or facilities for the production or transportation of fuel and working capital and reserves therefor and working capital and reserves for additional fuel inventories, all costs relating to injury and damage claims relating to such part of the System, the cost of any indemnity or surety bonds and premiums on insurance, preliminary investigation and development costs, engineering fees and expenses, contractors' fees and expenses, the costs of labor, materials, equipment and utility services and supplies, legal and financial advisory fees and expenses, interest and financing costs, including, without limitation, bank commitment and letter of credit fees and bond insurance and indemnity premiums, fees and expenses of the Fiduciaries, administration and general overhead expense and costs of keeping accounts and making reports required by the Resolution prior to or in connection with the completion of construction of such part of the System, amounts, if any, required by the Resolution to be paid into the Debt Service Fund to provide, among other things, for interest accruing on Bonds and to provide for the Debt Service Reserve Requirement or to be paid into the Operation and Maintenance Fund or the Reserve and Contingency Fund or the General Reserve Fund for any of the respective purposes thereof, payments when due (whether at the maturity of principal or the due date of interest or upon redemption) on any indebtedness of the Authority, including notes and Subordinated Indebtedness, incurred in respect of any of the foregoing, and working capital and reserves therefor, and all federal, state and local taxes and payments in lieu of taxes legally required to be paid in connection with any part of the System and shall include reimbursements to the Authority for any of the above items theretofore paid by or on behalf of the Authority. It is intended that this definition of Cost of Acquisition and Construction be broadly construed to encompass all costs, expenses and liabilities of the Authority related to the System which on the date of this Resolution or in the future shall be permitted to be funded with the proceeds of Bonds pursuant to the provisions of Oklahoma law.
Credit Obligation shall mean any obligation of the Authority under a contract, having a term in excess of five years, to make payments for power and energy whether or not such power and energy is made available but only to the extent such obligation is payable from any fund or account created under the Resolution.
Debt Service for any period shall mean, as of any date of calculation and with respect to any Series, an amount equal to the sum of (i) interest accruing during such period on Bonds of such Series, except to the extent that such interest is to be paid from deposits in the Debt Service Account in the Debt Service Fund made from the proceeds of Bonds or Subordinated Indebtedness (including amounts, if any, transferred thereto from the Construction Fund) and (ii) that portion of each Principal Installment for such Series which would accrue during such period if such Principal Installment were deemed to accrue daily in equal amounts from the next preceding Principal Installment due date for such Series (or, if (x) there shall be no such preceding Principal Installment due date or (y) such preceding Principal Installment due date is more than one year prior to the due date of such Principal Installment, then, from a date one year preceding the due date of such Principal Installment or from the date of issuance of the Bonds of such Series, whichever date is later). Such interest and Principal Installments for such Series shall be calculated on the assumption that (x) no Bonds (except for Option Bonds actually tendered for payment and not purchased in lieu of redemption prior to the redemption date thereof) of such Series Outstanding at the date of calculation will cease to be Outstanding except by reason of the payment of each Principal Installment on the due date thereof and (y) the principal amount of Option Bonds tendered for payment and not purchased in lieu of redemption before the redemption date thereof shall be deemed to accrue on the date required to be paid pursuant to such tender. For purposes of this definition, the principal and interest portions of the Accreted Value of Capital Appreciation Bonds becoming due at maturity or by virtue of a Sinking Fund Installment shall be included in the calculations of accrued and unpaid and accruing interest or Principal Installments in such manner and during such period of time as is specified in the Supplemental Resolution authorizing such Capital Appreciation Bonds.
Debt Service Fund shall mean the Debt Service Fund established in Section 502. Debt Service Reserve Requirement shall mean, as of any date of calculation, an amount equal to the maximum Adjusted Aggregate Debt Service coming due on Bonds then Outstanding in the then current or any future calendar year excluding interest to be paid from deposits in the Debt Service Account in the Debt Service Fund made from the proceeds of Bonds or Subordinated Indebtedness (including amounts, if any, transferred thereto from the Construction Fund). For purposes of the foregoing calculation, it shall be assumed that Variable Rate Bonds will bear interest during any period at a constant rate per annum equal to (x) the rate of interest borne by such Bonds when initially issued plus (y) one-half of the difference between the maximum rate of interest which such Bonds may bear at any time and (x). Defaulted Interest with respect to a Series of Bonds shall have the meaning given to such term in the Supplemental Resolution authorizing the issuance of such Series of Bonds. Depositary shall mean any bank or trust company organized under the laws of any state of the United States or any national banking association selected by the Authority as a depositary of moneys and securities held under the provisions of the Resolution, and may include the Trustee. Development Costs shall mean costs incurred or paid or to be incurred or paid by or on behalf of the Authority in connection with the planning and development of renewals, replacements, repairs, additions, betterments, enlargements or improvements to the System, including, without limitation, management expenses related thereto, costs in providing such engineering, legal, financial and other services as may be necessary or appropriate to determine the legality and the financial and engineering feasibility thereof and to obtain all licenses, permits and approvals necessary in connection therewith and other costs normally incurred prior to long-term financing as determined by the Board of Directors of the Authority. Event of Default shall have the meaning given to such term in Section 801. Fiduciary or Fiduciaries shall mean the Trustee, the Bond Registrar, the Paying Agents, the Depositaries, or any or all of them, as may be appropriate. Fiscal Year shall mean the twelve month period established by the Authority from time to time as its fiscal year. General Reserve Fund shall mean the General Reserve Fund established in Section 502. Investment Securities shall mean and include any of the following securities, if and to the extent the same are at the time legal for investment of Authority funds: (i) any bonds or other obligations which as to principal and interest constitute direct obligations of, or are unconditionally guaranteed by, the United States of America, including obligations of any of the Federal agencies set forth in clause (iii) below to the extent unconditionally guaranteed by the United States of America and any certificates or any other evidences of an ownership interest in obligations or in specified portions thereof (which may consist of specified portions of the interest thereon) of the character described in this clause (i); (ii) any bonds or other obligations of any state of the United States of America or of any agency, instrumentality or local governmental unit of any such state (a) which are (x) not callable prior to maturity or (y) as to which irrevocable instructions have been given to the trustee of such bonds or other obligations by the obligor to give due notice of redemption and to call such bonds for redemption on the date or dates specified in such instructions, (b) which are secured as to principal and interest and redemption premium, if any, by a fund consisting only of cash or bonds or other obligations of the character described in clause (i) hereof which fund may be applied only to the payment of such principal of and interest and redemption premium, if any, on such bonds or other obligations on the maturity date or dates thereof or the specified redemption date or dates pursuant to such irrevocable instructions, as appropriate, and (c) as to which the principal of and interest on the bonds and obligations of the character described in clause (i) hereof which have been deposited in such fund along with any cash on deposit in such fund are sufficient to pay principal of and interest and redemption premium, if any, on the bonds or other obligations described in this clause (ii) on the maturity date or dates thereof or on the redemption date or dates specified in the irrevocable instructions referred to in subclause (a).of this clause (ii), as appropriate, and any certificates or any other evidences of an ownership interest in obligations or specified portions thereof (which may consist of specified portions of the interest thereon) of the character described in this clause (ii); (iii) bonds, debentures, or other evidences of indebtedness issued or guaranteed by any agency or corporation which has been or may hereafter be created pursuant to an Act of Congress as an agency or instrumentality of the United States of America; (iv) New Housing Authority Bonds issued by public agencies or municipalities and fully secured as to the payment of both principal and interest by a pledge of annual contributions under an annual contributions contract or contracts with the United States of America; or Project Notes issued by public agencies or municipalities and fully secured as to the payment of both principal and interest by a requisition or payment agreement with the United States of America; (v) obligations of any state of the United States of America or of any agency, instrumentality or local governmental unit of any such state, provided that at the time of their purchase under the Resolution such obligations are rated by a nationally recognized bond rating agency in either of its two highest rating categories; (vi) certificates of deposit, whether negotiable or nonnegotiable, issued by any bank or trust company organized under the laws of any state of the United States or any national banking association (including the Trustee), which is a member of the Federal Deposit Insurance Corporation and savings and loans associations which are members of the Federal Savings and Loan Insurance Corporation, provided that the aggregate principal amount of all certificates of deposit issued by any such bank, trust company, national banking association or savings and loan association which are purchased with moneys held in any Fund under the Resolution shall not exceed at any time 5% of the total of the capital, surplus and undivided earnings of such bank, trust company, national banking association or savings and loan association unless such certificates of deposit are (1) fully insured by the Federal Deposit Insurance Corporation or the Federal Savings and Loan Insurance Corporation or (2) secured, to the extent not insured by the Federal Deposit Insurance Corporation or the Federal Savings and Loan Insurance Corporation by such securities as are described in clauses (i) through (v), inclusive, above having a market value (exclusive of accrued interest other than accrued interest paid in connection with the purchase of such securities) at least equal to the principal amount of such certificates of deposit (or portion thereof not insured by the Federal Deposit Insurance Corporation or the Federal Savings and Loan Insurance Corporation) which shall be lodged with the Trustee or a Depositary, as custodian, by such bank, trust company, national banking association or savings and loan association, and such bank, trust company, national banking association or savings and loan association shall furnish the Trustee with an undertaking satisfactory to it that the aggregate market value of all such obligations securing such certificates of deposit will at all times be an amount which meets the requirements of this clause (2) and the Trustee shall be entitled to rely on each such undertaking; (vii) bonds, notes, debentures or other evidences of indebtedness issued or guaranteed by any corporation which are, at the time of purchase, rated by a nationally recognized rating agency in its highest rating category, and by at least one other nationally recognized rating agency in either of its two highest rating categories, for comparable types of debt obligations; (viii) any repurchase agreement with any bank or trust company organized under the laws of any state of the United States or any national banking association (which may include the Trustee) or government bond dealer reporting to, trading with and recognized as a primary dealer by the Federal Reserve Bank of New York, if the securities which are the subject of such agreement are any or one or more of the securities described in clauses (i), (ii), (iii), (iv), (vi) or (vii) above which securities shall at all times have a market value not less than the full amount of the repurchase agreement; and (ix) interests in a portfolio of money market instruments containing obligations described in clauses (i), (vi), (vii) or (viii) above.
Net Revenues for any period shall mean the Revenues during such period, determined on an accrual basis, plus (x) the amounts, if any, paid from the Rate Stabilization Account in the Revenue Fund into the Revenue Account in the Revenue Fund during such period (excluding from (x) amounts included in the Revenues for such period representing interest earnings transferred from the Rate Stabilization Account in the Revenue Fund to the Revenue Account in the Revenue Fund pursuant to Section 603) and minus (y) the sum of (a) Operation and Maintenance Expenses during such period, determined on an accrual basis, to the extent paid or to be paid from Revenues and (b) the amounts, if any, paid from the Revenue Account in the Revenue Fund into the Rate Stabilization Account in the Revenue Fund during such period.
Operation and Maintenance Expenses shall mean all the Authority's costs and expenses for operation, maintenance, and ordinary repairs, renewals and replacements of the System, including all costs of producing and delivering electric power and energy from the System and payments into reserves in the Operation and Maintenance Fund for items of Operation and Maintenance Expenses the payment of which is not immediately required, and shall include, without limiting the generality of the foregoing, costs of purchased power including transmission expenses incurred to meet obligations of the Authority under the Power Sales Contracts, fuel costs, costs of transmission service, generating capacity reserve service and scheduled, emergency, or other interchange service, rents, administrative and general expenses, engineering expenses, legal and financial advisory expenses, required payments to pension, retirement, health and hospitalization funds, taxes, payments in-lieu-of taxes and other governmental charges, insurance premiums, and any other current expenses or obligations required to be paid by the Authority under the provisions of the Resolution or under or in connection with the performance of its obligations under the Power Sales Contracts or by law, all to the extent properly allocable to the System, and the fees and expenses of the Fiduciaries. Operation and Maintenance Expenses shall not include any allowance for depreciation or any costs and expenses for new construction and may include payments owed with respect to Credit Obligations only to the extent permitted by Section 206 hereof.
6 : Operation and Maintenance Fund shall mean the Operation and Maintenance Fund established in Section 502.
Opinion of Counsel shall mean an opinion in writing signed by an attorney or firm of attorneys (who may be counsel to the Authority) selected by the Authority. Option Bonds shall mean Bonds which by their terms may be tendered by and at the option of the Holder thereof for payment prior to the stated maturity thereof, or the maturities of which may be extended by and at the option of the Holder thereof^
Outstanding, when used with reference to Bonds, shall mean, as of any date of calculation, Bonds theretofore or thereupon being authenticated and delivered under the Resolution except: (i) Bonds cancelled by the Trustee at or prior to such date; (ii) Bonds (or portions of Bonds) for the payment or redemption of which moneys, equal to the principal amount or Redemption Price thereof, as the case may be, with interest to the date of maturity or redemption date, shall be held in trust under the Resolution and set asideffor such payment or redemption (whether at or prior to the maturity or redemption date), provided that if such Bonds (or portions of Bonds) are to be redeemed, notice of such redemption shall have been given as in Article IV provided or provision satisfactory to the Trustee shall have been made for the giving of such notice; (iii) Bonds in lieu of or in substitution for which other Bonds shall have been authenticated and delivered pursuant to Article III or Section 406 or 1106 unless proof satisfactory to the Trustee is presented that any such Bonds are held by a bona fide purchaser in due course; and (iv) Bonds deemed to have been paid as provided in subsection 2 of Section 1201, Paying Agent shall mean any bank or trust company organized under the laws of any state of the United States or any national banking association designated as paying agent for the Bonds of any Series, and its successor or successors hereafter appointed in the manner provided in the Resolution. Power Sales Contracts shall mean each of the Power Sales Contracts, dated as of December 1, 1984, as amended, by and between the Authority and certain public trusts in the State of Oklahoma entered into on or prior to the date of issuance of the first Series of Bonds, as each of such Contracts may be amended in accordance with the terms of the Resolution, together with any other contracts entered into by the Authority with other eligible public agencies or public trusts, as both terms are defined in the Act, after the date of issuance of the first Series of Bonds either (i) having terms and provisions substantially similar to the terms and provisions of the aforesaid contracts or (ii) which the Authority designates as Power Sales Contracts for the purposes of this Resolution. Principal Installment shall mean, as of any date of calculation and with respect to any Series, so long as any Bonds thereof are Outstanding, (i) the principal amount of Bonds (including the principal amount of any Option Bonds tendered for payment and not purchased in lieu of redemption prior to the redemption date thereof) of such Series due (or so tendered for payment and not purchased in lieu of redemption) on a certain future date for which no Sinking Fund Installments have been established, or (ii) the unsatisfied balance (determined as provided in subsection 3 of Section 511) of any Sinking Fund Installments due on a certain future date for Bonds of such Series, plus the amount of the sinking fund redemption premiums, if any, which would be applicable upon redemption of such Bonds on such future date in a principal amount equal to said unsatisfied balance of such Sinking Fund Installments, or (iii) if such future dates coincide as to different Bonds of such Series, the sum of such principal amount of Bonds and of such unsatisfied balance of Sinking Fund Installments due on such future date plus such applicable redemption premiums, if any. Prudent Utility Practice shall mean any of the practices, methods and acts which, in the exercise of reasonable judgment, in the light of the facts, including but not limited to the practices, methods and acts engaged in or approved by a significant portion of the electrical utility industry prior thereto, known at the time the decision was made, would have been expected to accomplish the desired result at the lowest reasonable cost consistent with reliability, safety and expedition. It is recognized that Prudent Utility Practice is not intended to be limited to the optimum practice, method or act to the exclusion of all others, but rather is a spectrum of possible practices, methods or acts which could have been expected to accomplish the desired result at the lowest reasonable cost consistent with reliability, safety and expedition.
Redemption Price shall mean, with respect to any Bond, the principal amount thereof plus the applicable premium, if any, payable upon redemption thereof pursuant to such Bond or the Resolution.
Refundable Principal Installment shall mean any Principal Installment for any Series of Bonds .which the Authority intends to pay with moneys which are not Revenues, provided that such intent'shall have been expressed in the Supplemental Resolution authorizing such Series of Bonds and provided further that such Principal Installment shall be a Refundable Principal Installment only through the penultimate day of the month preceding the month in which such Principal Installment comes due or such earlier time as the Authority no longer intends to pay such Principal Installment with moneys which are not Revenues.
Refunding Bonds shall mean all Bonds, whether issued in one or more Series, authenticated and delivered on original issuance pursuant to Section 204, and any Bonds thereafter authenticated and delivered in lieu of or in substitution for such Bonds pursuant to Article III or Section 406 or Section 1106.
Regular Record Date shall have the meaning given to such term in the Supplemental Resolution.
Reserve and Contingency Fund shall mean the Reserve and Contingency Fund established in Section 502.
Resolution shall mean this Power Supply System Revenue Bond Resolution as from time to time amended or supplemented by Supplemental Resolutions in accordance with the terms hereof.
Revenue Fund shall mean the Revenue Fund established in Section 502.
Revenues shall mean (i) all revenues, income, rents and receipts derived by the Authority from or attributable to the ownership and operation of the System, including all revenues attributable to the System or to the payment of the costs thereof received by the Authority under any contract for the sale of power, energy, transmission or other service from the System or any part thereof or any contractual arrangement with respect to the use of the System or any portion thereof or the services, output or capacity thereof, (ii) the proceeds of any insurance covering business interruption loss relating to the System, and (iii) interest received on any moneys or securities held pursuant to the Resolution and paid or required to be paid into the Revenue Account in the Revenue Fund.
Series shall mean all of the Bonds authenticated and delivered on original issuance and identified pursuant to this Resolution or the Supplemental Resolution authorizing such Bonds as a separate Series of Bonds, or any Bonds thereafter authenticated and delivered in lieu of or in substitution for such Bonds pursuant to Article III or Section 406 or Section 1106, regardless of variations in maturity, interest rate, Sinking Fund Installments, or other provisions. Sinking Fund Installment shall mean an amount so designated which is established pursuant to clause (i) of paragraph (3) of subsection 1 of Section 202. Special Record Date with respect to a Series of Bonds shall have the meaning given to such term in the Supplemental Resolution authorizing the issuance of such Series of Bonds. Subordinated Indebtedness shall mean an evidence of indebtedness referred to in, and complying with the provisions of, Section 512. Subordinated Indebtedness Fund shall mean the Subordinated Indebtedness Fund established in Section 502. Supplemental Resolution shall mean any resolution supplemental to or amendatory of the Resolution, adopted by the Authority in accordance with Article X. System shall mean all properties and interests in properties of the Authority, including, all electric production, transmission, distribution, general plant and other related facilities and any mine, well, pipeline, plant, structure or other facility for the development, production, manufacture, transportation, storage, fabrication or processing of fossil, nuclear or other fuel of any kind, or any facility or rights with respect to the supply of water, in each case for use, in whole or in major part, in any of the Authority's generating plants, now existing and hereafter acquired by lease, contract, purchase or otherwise or constructed by the Authority, including any interest or participation of the Authority in any such facilities, together with all additions, betterments, extensions and improvements to said system or any part thereof hereafter made and together with all lands, easements, licenses and rights of way of the Authority and all other works, property or structures of the Authority and rights to the use of any thereof or the output, products or services therefrom or other contract rights, including, without limitation, rights for the purchase of power and energy, transmission or other services from others, and other tangible and intangible assets of the Authority used or useful in connection with or related to said system. Notwithstanding the foregoing definition of the term System, such term shall not include any properties or interests in properties of the Authority which the Authority determines shall not constitute a part of the System for the purpose of the Resolution. Trust Estate shall mean (i) the proceeds of the sale of the Bonds, (ii) the Revenues, and (Hi) all Funds established by the Resolution (other than any Decommissioning Fund which may be established pursuant to subsection 2 of Section 502 hereof), including the investments and income, if any, thereof. Trustee shall mean the trustee appointed pursuant to Article IX, and its successor or successors and any other corporation which may at any time be substituted in its place pursuant to the Resolution. Valuation Date shall mean with respect to any Capital Appreciation Bonds the date or dates set forth in the Supplemental Resolution authorizing such Bonds on which specific Accreted Values are assigned to the Capital Appreciation Bonds. Variable Rate Bond shall mean any Bond not bearing interest throughout its term at a specified rate or specified rates determined at the time of issuance of the Series of Bonds of which such Bond is one. Except where the context otherwise requires, words importing the singular number shall include the plural number and vice versa, and words importing persons shall include firms, associations, corporations, districts, agencies and bodies. All references in the Resolution to Articles, Sections, and other subdivisions are to the corresponding Articles, Sections or subdivisions of the Resolution, and the words herein, hereof,
9 hereunder and other words of similar import refer to the Resolution as a whole and not to any particular- Article, Section or subdivision of the Resolution. The headings or titles of the several articles and sections of the Resolution, and any Table of Contents appended to copies of the Resolution, shall be solely for convenience of reference and shall not affect the meaning, construction or effect of the Resolution. SECTION 102. Authority for this Resolution. This Power Supply System Revenue Bond Resolution is adopted pursuant to the provisions of the Act. SECTION 103. Resolution to Constitute Contract. In consideration of the purchase and acceptance of any and all of the Bonds authorized to be issued hereunder by those who shall hold the same from time to time, the Resolution shall be deemed to be and shall constitute a contract between the Authority and the Holders from time to time of the Bonds; and the security interest granted and the pledge made in the Resolution and the covenants and agreements therein set forth to be performed on behalf of the Authority shall be for the equal benefit, protection and security of the Holders of any and all of the Bonds, all of which, regardless of the time or times of their authentication and delivery or maturity, shall be of equal rank without preference, priority or distinction of any of the.Bonds over any other thereof except as expressly provided in or permitted by this Resolution.
ARTICLE II AUTHORIZATION AND ISSUANCE OF BONDS SECTION 201. Authorization of Bonds. 1. The Resolution authorizes Bonds of the Authority to be designated as "Power Supply System Revenue Bonds". The aggregate principal amount of the Bonds which may be executed, authenticated and delivered under the Resolution is not limited except as may hereafter be provided in the Resolution or as may be limited by law. 2. The Bonds may, if and when authorized by the Authority pursuant to one or more Supplemental Resolutions, be issued in one or more Series, and the designation thereof, in addition to the name "Power Supply System Revenue Bonds", shall include such further appropriate particular designation added to or incorporated in such title for the Bonds of any particular Series as the Authority may determine. Each Bond shall bear upon its face the designation so determined for the Series to which it belongs. 3. Nothing in the Resolution shall be deemed to preclude or restrict the consolidation into a single Series for purposes of issuance and sale of Bonds otherwise permitted by the Resolution to be issued at the same time in two or more separate Series, provided that solely for the purpose of satisfying the requirements of Section 202, Section 203 or Section 204, as the case may be, the Bonds otherwise permitted by the Resolution to be issued as a separate Series shall be considered separately as if such Bonds were to be issued as a separate Series. In the event that separate Series are combined for purposes of issuance and sale, they may be issued under a single Supplemental Resolution notwithstanding any other provision of the Resolution. SECTION 202. General Provisions for Issuance of Bonds. 1. All (but not less than all) the Bonds of each Series shall be executed by the Authority for issuance under the Resolution and delivered to the Trustee and thereupon shall be authenticated by the Trustee and by it delivered to the Authority or upon its order, but only upon the receipt by the Trustee of: (1) An Opinion of Counsel of recognized standing in the field of law relating to municipal bonds to the effect that (i) the Authority has the right and power under the Act as amended to the date of such Opinion to adopt the Resolution, and the Resolution has been duly and lawfully
10 adopted by the Authority, is in full force and effect and is the valid and binding agreement of the Authority enforceable in accordance with its terms, and no other authorization for the Resolution is required; (ii) the Resolution creates a valid security interest on behalf of the Trustee in, and the valid pledge which it purports to create of, the Trust Estate, subject only to the provisions of the Resolution permitting the application thereof for the purposes and on the terms and conditions set forth in the Resolution; and (iii) the Authority is duly authorized and entitled to issue the Bonds of such Series and such Bonds have been duly and validly authorized and issued by the Authority, in accordance with law, including the Act as amended to the date of such Opinion, and in accordance with the Resolution, and constitute the valid and binding obligations of the Authority as provided in the Resolution, enforceable in accordance with their terms and the terms of the Resolution, and are entitled to the benefits of the Act as amended to the date of such Opinion and the Resolution. Such Opinion may take exception for limitations imposed by or resulting from bankruptcy, insolvency, moratorium, reorganization or other laws affecting creditors' rights and may state that no opinion is being rendered as to the availability of any particular remedy;
(2) A written order as to the delivery of such Bonds, signed by an Authorized Offiieer of the Authority;
(3) A copy of the Supplemental Resolution authorizing such Bonds, certified by an Authorized Officer of the Authority, which shall, among other provisions, specify: (a) the authorized principal amount, designation and Series of such Bonds; (b) the purposes for which such Series of Bonds is being issued, which shall be (i) the purpose specified in Section 203 or (ii) the refunding of Bonds as provided in Section 204; (c) the date, and the maturity date or dates, of the Bonds of such Series; (d) if such Bonds are interest-bearing Bonds, the interest rate or rates or the manner of determining the interest rate or rates on the Bonds of such Series and the interest payment dates therefor or in the case of Capital Appreciation Bonds, the Valuation Dates and the Accreted Value on such Dates; (e) if any Bonds of such Series are Variable Rate Bonds, the maximum numerical rate or rates of interest which such Bonds may bear at any time; (f) the manner of dating, numbering and lettering, the Bonds of such Series; (g) the Paying Agent or Paying Agents and the place or places of payment of the principal and Redemption Price, if any, of, and interest on, the Bonds of such Series; (h) the Redemption Price or Prices, if any, and, subject to Article IV, the redemption terms for the Bonds of such Series; (i) the amount and due date of each Sinking Fund Installment, if any, for Bonds of like maturity and interest rate within each such maturity of such Series; (j) if so determined by the Authority, provisions for the sale of the Bonds of such Series; (k) if any of the Bonds of such Series are Option Bonds, the terms and conditions of the exercise by the Holders of such Bonds of the payment and/or redemption options granted thereby; (1) the amount (or the method of determining the amount), if any, to be deposited from the proceeds of such Series of Bonds in the Debt Service Account in the Debt Service Fund; (m) the respective amounts, if any, to be deposited from the proceeds of such Series of Bonds in the Reserve and Contingency Fund; (n) the respective amounts, if any, to be deposited from the proceeds of such Series of Bonds in any account in the Operation and Maintenance Fund; (o) the forms of the Bonds of such Series and of the Trustee's certificate of authentication, which forms shall contain such variations, omissions and insertions as are required or permitted by the Resolution; (p) the Principal Installments, if any, for such Series of Bonds which shall be Refundable Principal Installments for purposes of the Resolution; (q) the regulations with respect to exchanges and transfers of such Series of Bonds; (r) if such Bonds are interest-bearing Bonds, the Regular Record Date and Special Record Date for the payment of interest and Defaulted Interest, respectively; (s) the manner of giving notice with respect to any redemption of such Series of Bonds at the election or direction of the Authority; and (t) offices for servicing such Series of Bonds, including, but not limited to, offices where such Series of Bonds may be presented for payment,
11 registration, transfer or exchange and where service upon the Authority of notices, demands and other documents may be made; (4) The amount, if any, required by the Supplemental Resolution to be deposited in the Debt Service Account in the Debt Service Fund for the payment of interest on Bonds and the amount, if any, necessary for deposit in the Debt Service Reserve Account in the Debt Service Fund so that such Account, after giving effect to any surety bond, insurance policy, letter of credit or other similar obligation deposited in such Account pursuant to Section 508.4 of the Resolution, shall equal the Debt Service Reserve Requirement calculated immediately after the authentication and delivery of such Series of Bonds; (5) Except in the case of Refunding Bonds, a certificate of an Authorized Officer of the Authority stating that either (a).no Event of Default has occurred and is continuing under the Resolution or (b) the application of the proceeds of sale of such Series of Bonds as required by the Supplemental Resolution will cure any such Event of Default; (6) An Opinion or Opinions of Counsel to the effect that all the Power Sales Contracts then in force have been duly authorized, executed and delivered by the parties thereto and constitute valid and binding obligations of such parties in accordance with their respective terms; provided that such Opinion-or Opinions of Counsel may take exception for limitations imposed by or resulting from bankruptcy, insolvency, moratorium, reorganization, or other laws affecting creditors' rights generally and state that no opinion is being rendered as to the availability of any particular remedy; and provided, further, that once an Opinion or Opinions of Counsel covering any of the matters referred to above has been received by the Trustee no new Opinion or Opinions of Counsel covering such matter need be furnished to the Trustee unless the contract or agreement to which the matter relates has been amended, modified or supplemented subsequent to the date of the prior Opinion or Opinions of Counsel furnished with respect thereto; (7) Evidence of filing with the Secretary of State of the State of Oklahoma of any documents or instruments then required to be so filed by Oklahoma law prior to the issuance of such Bonds; (8) For deposit in the Construction Fund, all amounts not deposited in other Funds under the Resolution; (9) Except in the case of (i) all Series of Bonds issued prior to the adoption of a Supplemental Resolution providing that the provisions of this Section 202.1(9) shall apply to all Series of Bonds issued thereafter and (ii) any Series of Refunding Bonds, a certificate of an Authorized Officer of the Authority setting forth (A) for any period of 12 consecutive calendar months within the 24 calendar months preceding the date of the authentication and delivery (or for the period from the date that the Authority commenced the sale of electric power and energy under the Power Sales Contracts through the end of the latest calendar month preceding such date of authentication and delivery for which financial information is available, if such period be less than 12 months), the Net Revenues for such period, and (B) the Aggregate Debt Service during the period for which Net Revenues are set forth pursuant to (A) with respect to all Series of Bonds which were then Outstanding excluding from Aggregate Debt Service any Principal Installment or portion thereof which was paid from sources other than Revenues, and showing that the amount set forth in (A) is at least equal to 1.10 times the amount set forth in (B); (10) Except in the case of (i) all Series of Bonds issued prior to the adoption of a Supplemental Resolution providing that the provisions of this Section 202.1(10) shall apply to all Series of Bonds issued thereafter and (ii) any Series of Refunding Bonds, a certificate of the Consulting Engineer stating that the Net Revenues for each of the full Fiscal Years in the period specified in the next sentence, as such Net Revenues are estimated by the Consulting Engineer in accordance with Section 205 hereof, shall be at least equal to 1.10 times the Adjusted
12 Aggregate Debt Service for each such Fiscal Year, as estimated by the Consulting Engineer in accordance with Section 205 hereof. The period to be covered by such certificate shall be the period beginning with the Fiscal Year in which the Series of Bonds is authenticated and delivered and ending with the later of (a) the fifth full Fiscal Year after such date of authentication and delivery or (b) the first full Fiscal Year in which less than 10% of the interest coming due on Bonds estimated by the Consulting Engineer to be Outstanding is to be paid from deposits made from Bond proceeds in the Debt Service Account in the Debt Service Fund (including amounts, if any, to be transferred thereto from the Construction Fund); (11) In the case of each Series of Bonds any portion of the proceeds of which is to be deposited in the Debt Service Account in the Debt Service Fund, a certificate of an Authorized Officer of the Authority setting forth the then estimated application of such proceeds so deposited for the payment of interest on any particular Series of Bonds, whether or not such Series of Bonds is then Outstanding, or then being issued, or to be issued thereafter; and (12) Such further documents, moneys and securities as are required by the provisions of Section 204 or Article X or any Supplemental Resolution adopted pursuant to Article X. 2. All the Bonds of each Series of like maturity shall be identical in all respects, except as to interest rate, denominations, numbers and letters. After the original issuance of Bonds of any Series, no Bonds of such Series shall be issued except in lieu of or in substitution for other Bonds of such Series pursuant to Article III or Section 406 or Section 1106. SECTION 203. Bonds Other than Refunding Bonds. 1. One or more Series of Bonds may be issued at any time for the purpose of paying all or a portion of the Cost of Acquisition and Construction of the System. Bonds of each such Series shall be authenticated and delivered by the Trustee only upon compliance with the terms and conditions set forth in Section 202. 2. Proceeds, including accrued interest, of each Series of Bonds authorized under this Section 203 shall be applied simultaneously with the delivery of such Bonds as shall be provided in the Supplemental Resolution authorizing such Series. SECTION 204. Refunding Bonds. 1. One or more Series of Refunding Bonds may be issued at any time to refund any Outstanding Bonds. Refunding Bonds shall be issued in a principal amount sufficient, together with other moneys available therefor, to accomplish such refunding and to make the deposits in the Funds and Accounts under the Resolution required by the provisions of the Supplemental Resolution authorizing such Bonds. 2. Refunding Bonds of each Series shall be authenticated and delivered by the Trustee only upon receipt by the Trustee (in addition to the documents required by Section 202) of: (a) Instructions to the Trustee, satisfactory to it, to give due notice of redemption, if applicable, of all the Bonds to be refunded on a redemption date or dates specified in such instructions; provided, that nothing in this Section 204 shall require or be deemed to require the redemption of Bonds as of any particular date or dates; (b) If the Bonds to be refunded are not to be redeemed within the next succeeding 60 days, irrevocable instructions to the Trustee, satisfactory to it, to mail the notice provided for in Section 1201 to the Holders of the Bonds being refunded; and (c) Either (i) moneys (including moneys withdrawn and deposited pursuant to subsection 4 of Section 507 and subsection 4 of Section 508) in an amount sufficient to effect payment at the applicable Redemption Price of the Bonds to be refunded together with accrued interest on such Bonds to the redemption date, which moneys shall be held by the Trustee or any one or more of the Paying Agents in a separate account irrevocably in trust for and assigned to the respective Holders of the Bonds to be refunded, or (ii) Investment Securities in such principal amounts, of
13 such maturities, bearing such interest, and otherwise having such terms and qualifications and any moneys, as shall be necessary to comply with the provisions of subsection 2 of Section 1201, which Investment Securities and moneys shall be held in trust and used only as provided in said subsection 2. 3. The proceeds, including accrued interest, of the Refunding Bonds of each Series shall be applied simultaneously with the delivery of such Bonds for the purposes of making deposits in such Funds and Accounts under the Resolution as shall be provided by the Supplemental Resolution authorizing such Series of Refunding Bonds and shall be applied to the refunding purposes thereof in the manner provided in said Supplemental Resolution. SECTION 205. Certificate of the Consulting Engineer. 1. In estimating Net Revenues for any of the purposes hereof, the Consulting Engineer may base its estimate upon such factors as it shall consider reasonable including, without limitation: (a) Revenues estimated to be derived from sales of power and energy pursuant to existing contracts with the Authority's participants and with other utilities which will result in the Authority being able to comply with the requirements of Section 711 hereof; provided, however, for any required increase in Revenues from the Authority's participants above those which would be derived from the application of the existing rate schedules, either (i) the certificate of the Consulting Engineer shall state that, in its opinion, such increase will result in total costs of power and energy per kilowatt-hour which will be reasonable in comparison to such costs for power and energy being supplied by other utilities in the region or is the most economical power and energy reasonably available to the Authority's participants or (ii) the Board of Directors of the Authority shall have adopted a resolution recognizing such required increase and stating its intention to raise rates as necessary to produce such an increase in Revenues; and (b) Revenues estimated to result from assumed sales of power and energy for which no contract is in effect on the date such certificate is delivered; provided, however, such Revenues shall be based upon estimated costs of power and energy per kilowatt-hour which are reasonable in comparison to the cost of power and energy per kilowatt-hour available to assumed purchasers from alternative sources during the same period of time; and provided further, that the amount of such Revenues under this paragraph (b) for any Fiscal Year shall not exceed 25% of the total Revenues estimated for such Fiscal Year. 2. In estimating the Adjusted Aggregate Debt Service for each of the Fiscal Years covered by any certificate required to be delivered by it, the Consulting Engineer shall include the Adjusted Aggregate Debt Service on all Bonds estimated to be Outstanding during each such Fiscal Year. With respect to (a) any Bonds which are not Outstanding on the date such certificate is delivered but which are projected to be issued during the period covered by such certificate, and (b) any Variable Rate Bonds Outstanding on the date such certificate is delivered, the Consulting Engineer shall estimate the Debt Service on such Bonds upon such assumptions as the Consulting Engineer shall consider reasonable and set forth in such certificate, including assumptions with respect to the interest rate or rates to be borne by such Bonds and the amounts and due dates of the Principal Installments for such Bonds; provided, however, that the interest rate or rates assumed to be borne by any Variable Rate Bonds shall not be less than the interest rate borne by such Variable Rate Bonds at the time that the Consulting Engineer delivers such certificate. SECTION 206. Credit Obligations. Payments owed by the Authority with respect to any Credit Obligation shall constitute Operation and Maintenance Expenses only if at the time the Authority enters into the contract relating to such Credit Obligation the Authority shall file with the Trustee a certificate of the Consulting Engineer stating that, assuming such payments are made as Operation and Maintenance Expenses from the Operation and Maintenance Fund, the Net Revenues for each of the full Fiscal Years in the period specified in the next sentence, as such Net Revenues
14 are estimated by the Consulting Engineer in accordance with Section 205 hereof, shall be at least equal to 1.10 times the Adjusted Aggregate Debt Service for each such Fiscal Year, as estimated by the Consulting Engineer in accordance with Section 205 hereof. The period to be covered by such certificate shall be the period beginning with the Fiscal Year in which the contract relating to the Credit Obligation becomes effective and ending with the later of (a) the fifth full Fiscal Year after such effective date or (b) the first full Fiscal Year in which less than \Q% of the interest coming due on Bonds estimated by the Consulting Engineer to be Outstanding is to be paid from deposits made from Bond proceeds in the Debt Service Account in the Debt Service Fund (including amounts, if any, to be transferred thereto from the Construction Fund). Notwithstanding any provision of the Resolution to the contrary, payments owed by the Authority with respect to any Credit Obligation shall not constitute Operation and Maintenance Expense if the Authority determines by resolution that such payments shall not constitute Operation and Maintenance Expenses for the purpose of the Resolution.
ARTICLE III GENERAL TERMS AND PROVISIONS OF BONDS SECTION 301. Medium of Payment; Form and Date; Letters and Numbers. 1. The Bonds shall be payable, with respect to interest, principal and Redemption Price, in any coin or currency of the United States of America which at the time of payment is legal tender for the payment of public and private debts. 2. The Bonds of each Series may be issued only in the form of fully registered Bonds without coupons unless otherwise authorized by a Supplemental Resolution. The Bonds shall be in such form as provided in the Supplemental Resolution authorizing such Series of Bonds. 3. Each Bond shall be lettered and numbered as provided in this Resolution; or the Supplemental Resolution authorizing the Series of which such Bond is a part and so as to be distinguished from every other Bond. 4. The Bonds of each Series shall be dated the date of authentication, except as may be otherwise provided in the Supplemental Resolution authorizing the Bonds of such Series, and shall bear interest as provided in the Supplemental Resolution authorizing the Bonds of such Series. SECTION 302. Legends. The Bonds of each Series may contain or have endorsed thereon such provisions, specifications and descriptive words not inconsistent with the provisions of the Resolution as may be necessary or desirable to comply with custom, the rules of any securities exchange or commission or brokerage board, or otherwise, as may be determined by the Authority prior to the authentication and delivery thereof. SECTION 303. Execution and Authentication. 1. The Bonds shall be executed in the name of the Authority by the manual or facsimile signature of its Chairman or its Vice Chairman, and its corporate seal (or a facsimile thereof), if any, shall be impressed, imprinted, engraved or otherwise reproduced thereon and attested by the manual or facsimile signature of the Secretary, an Assistant Secretary or the Treasurer or an Assistant Treasurer or other authorized officer of the Authority, or in such other manner as may be required or permitted by law; provided that for any Bond the attesting officer shall not be the same officer who shall have executed such Bond. In case any one or more of the officers who shall have signed or sealed any of the Bonds shall cease to be such officer before the Bonds so signed and sealed shall have been authenticated and delivered by the Trustee, such Bonds may, nevertheless, be authenticated and delivered as herein provided, and may be issued as if the persons who signed or sealed such Bonds had not ceased to hold such offices. Any Bond of a Series may be signed and sealed on behalf of the Authority by such persons as at the time of the
15 execution of such Bonds shall be duly authorized or hold the proper office in the Authority, although at the date borne by the Bonds of such Series such persons may not have been so authorized or have held such office. 2. Except as otherwise provided in a Supplemental Resolution authorizing the issuance of a Series of Bonds, the Bonds of each Series shall bear thereon a certificate of authentication, in such form as provided in the Supplemental Resolution authorizing such Series of Bonds, executed manually by the Trustee. Except as otherwise provided in a Supplemental Resolution authorizing the issuance of a Series of Bonds, only such Bonds as shall bear thereon such certificate of authentication shall be entitled to any right or benefit under the Resolution and no Bond shall be valid or obligatory for any purpose until such certificate of authentication shall have been duly executed by the Trustee. Any such certificate of the Trustee upon any Bond executed on behalf of the Authority shall be conclusive evidence that the Bond so authenticated has been duly authenticated and delivered under the Resolution and that the Holder thereof is entitled to the benefits of the Resolution. SECTION 304. Exchange, Transfer and Registry. 1. The Bonds shall be transferable only upon the books of the Authority, which shall be kept for such purposes at the corporate trust office of the Bond Registrar, by the registered owner thereof in person or by his attorney duly authorized in writing, upon surrender thereof together with a written instrument of transfer satisfactory to the Bond Registrar duly executed by the registered owner or his duly authorized attorney. Upon the transfer of any Bond the Authority shall issue in the name of the transferee a new Bond or Bonds of the same aggregate principal amount and Series and maturity as the surrendered Bond. 2. The registered owner of any Bond or Bonds of one or more denominations shall have the right to exchange such Bond or Bonds for a new Bond or Bonds of any denomination of the same aggregate principal amount and Series and maturity of the surrendered Bond or Bonds. Such Bond or Bonds shall be exchanged by the Authority for a new Bond or Bonds upon the request of the registered owner thereof in person or by his attorney duly authorized in writing, upon surrender of such Bond or Bonds together with a written instrument requesting such exchange satisfactory to the Bond Registrar duly executed by the registered owner or his duly authorized attorney. 3. The Authority and each Fiduciary may deem and treat the person in whose name any Bond shall be registered upon the books of the Authority as the absolute owner of such Bond, whether such Bond shall be overdue or not, for the purpose of receiving payment of, or on account of, the principal and Redemption Price, if any, of and interest on such Bond and for all other purposes, and all such payments so made to any such registered owner or upon his order shall be valid and effectual to satisfy and discharge the liability upon such Bond to the extent of the sum or sums so paid, and neither the Authority nor any Fiduciary shall be affected by any notice to the contrary. The Authority agrees to indemnify and save each Fiduciary harmless from and against any and all loss, cost, charge, expense, judgment or liability incurred by it, acting in good faith and without negligence under the Resolution, in so treating such registered owner. SECTION 305. Regulations With Respect to Exchanges and Transfers. Regulations with respect to exchanging or transferring Bonds, including, but not limited to, payment of fees, shall be as provided in the Supplemental Resolution authorizing such Series of Bonds. SECTION 306. Bonds Mutilated, Destroyed, Stolen or Lost. If any Bond becomes mutilated or is lost, stolen or destroyed, the Authority shall execute and the Trustee shall authenticate and deliver a new Bond of like date of issue, maturity date, principal amount and interest rate per annum , as the Bond so mutilated, lost, stolen or destroyed, provided that (i) in the case of such mutilated Bond, such Bond is first surrendered to the Authority, (ii) in the case of any such lost, stolen or destroyed Bond, there is first furnished evidence of such loss, theft or destruction satisfactory to the
16 Authority together with indemnity satisfactory to the Authority, (iii) all other reasonable requirements of'the-Authority are complied with, and (iv) expenses in connection with such transaction are paid by the Holder. Any Bond surrendered for transfer shall be cancelled. Any such new Bonds issued pursuant to this Section in substitution for Bonds alleged to be destroyed, stolen or lost shall constitute original additional contractual obligations on the part of the Authority, whether or not the Bonds so alleged to be destroyed, stolen or lost be at any time enforceable by anyone, and shall be equally secured by and entitled to equal and proportionate benefits with all other Bonds issued under the Resolution in the Trust Estate,
SECTION 307. Temporary Bonds. I. Until the definitive Bonds of any Series are prepared, the Authority may execute, in the same manner as is provided in Section 303, and upon the request of the Authority, the Trustee shall authenticate and deliver, in lieu of definitive Bonds, but subject to the same provisions, limitations and conditions as the definitive Bonds, one or more temporary Bonds substantially of the tenor of the definitive Bonds in lieu of which such temporary Bond or Bonds are issued, and with such omissions, insertions and variations as may be appropriate to temporary Bonds. The Authority at its own expense shall prepare and execute and, upon the surrender of such temporary Bonds, for exchange and the cancellation of such surrendered temporary Bonds, the Trustee shall authenticate'and, without charge to the Holder thereof, deliver in exchange therefor, definitive Bonds of the same aggregate principal amount and Series and maturity as the temporary Bonds surrendered. Until so exchanged, the temporary Bonds shall in all respects be entitled to the same benefits and security as definitive Bonds authenticated and issued pursuant to the Resolution.
2. All temporary Bonds surrendered in exchange either for another temporary Bond or Bonds or for a definitive Bond or Bonds shall be forthwith cancelled by the Trustee.
SECTION 308. Payment of Interest on Bonds; Interest Rights Preserved. Provisions relating to the payment of interest and Defaulted Interest on any Series of Bonds shall be as provided in the Supplemental Resolution providing for the issuance of such Series of Bonds.
ARTICLE IV REDEMPTION OP BONDS
SECTION 401. Privilege of Redemption and Redemption Price. Bonds of a Series subject to redemption prior to maturity pursuant to a Supplemental Resolution shall be redeemable, upon notice as provided in this Article IV, at such times, at such Redemption Prices and upon such terms in addition to the terms contained in this Article IV as may be specified in the Supplemental Resolution authorizing such Series.
SECTION402. Redemption at the Election or Direction of the Authority. Except as otherwise provided in a Supplemental Resolution authorizing the issuance of a Series of Bonds, in the case of any redemption of Bonds at the election or direction of the Authority, the Authority shall give written notice to the Trustee of its election or direction so to redeem, of the redemption date, of the Series, and of this principal amounts of the Bonds of each maturity of such Series and of the Bonds of each interest rate within a maturity to be redeemed (which Series, maturities and principal amounts thereof to be redeemed shall be determined by the Authority in its sole discretion, subject to any limitations with respect thereto contained in the Resolution). Except as otherwise provided in a Supplemental Resolution authorizing the issuance of a Series of Bonds, such notice shall be given at least 60 days prior to the redemption date or such shorter period as shall be acceptable to the Trustee. In the event notice of redemption shall have been given as in Section 405 provided, there shall be paid prior to the redemption date to the appropriate Paying Agents an amount in cash which, in addition to other moneys, if any, available therefor held by such Paying Agents, will be sufficient
17 to redeem on the redemption date at the Redemption Price thereof, plus interest accrued and unpaid to the redemption date, all of the Bonds to be redeemed. The Authority shall promptly notify the Trustee in writing of all such payments by it to a Paying Agent.
SECTION 403. Redemption Otherwise Than at Authority's Election or Direction. Whenever by the terms of the Resolution the Trustee is required or authorized to redeem Bonds otherwise than at the election or direction of the Authority, the Trustee shall (i) select the Bonds to be redeemed, (ii) give the notice of redemption and (iii) pay out of moneys available therefor the Redemption Price thereof, plus interest accrued and unpaid to the redemption date, to the appropriate Paying Agents in accordance with the terms of this Article IV and, to the extent applicable, Section 507.
SECTION 404. Selection of Bonds to be Redeemed. Except as otherwise provided in a Supplemental Resolution authorizing the issuance of a Series of Bonds, if fewer than all of the Bonds of like maturity of any Series shall be called for prior redemption, the particular Bonds or portions of Bonds to be redeemed shall be selected by the Trustee in such manner as the Trustee in its discretion may deem fair and appropriate; provided, however, that for any Bond (other than a Capital Appreciation Bond) of'a denomination of more than the minimum denomination specified in the Supplemental Resolution relating to such Series* the portion of such Bond to be redeemed shall be in a principal amount equal to such minimum denomination or a multiple thereof, and that, in selecting portions of such Bonds for redemption, the Trustee shall treat each such Bond as representing that number of Bonds of such minimum denomination which is obtained by dividing the principal amount of such Bond to be redeemed in part by the amount of such minimum denomination. For purposes of this Section 404, if less than all of the Capital Appreciation Bonds shall be called for prior redemption, the portion of any Capital Appreciation Bond of a denomination of more than the minimum maturity amount specified in the Supplemental Resolution relating to such Series, the portion of such Bond to be redeemed shall be in a maturity amount equal to such minimum maturity amount or a multiple thereof, and in selecting portions of such Capital Appreciation Bond for redemption, the Trustee shall treat each such Capital Appreciation Bond as representing that number of Capital Appreciation Bonds of such minimum maturity amount which is obtained by dividing the maturity amount of such Capital Appreciation Bond to be redeemed in part by the minimum maturity amount specified in such Supplemental Resolution.
SECTION 405. Notice of Redemption. When the Trustee shall receive notice from the Authority of its election or direction to redeem Bonds pursuant to Section 402, and when redemption of Bonds is authorized or required pursuant to Section 403, the Trustee shall give notice, in the name of the Authority, of the redemption of such Bonds, which notice shall specify the Series and maturities and interest rates within maturities, if any, of the Bonds to be redeemed, the redemption date and the place or places where amounts due upon such redemption will be payable and, if fewer than all of the Bonds of any like Series and maturity and interest rate within maturities are to be redeemed, the letters and numbers or other distinguishing marks of such Bonds so to be redeemed, and, in the case of Bonds to be redeemed in part only, such notice shall also specify the respective portions of the principal amount thereof to be redeemed. Such notice shall further state that on such date there shall become due and payable upon each Bond to be redeemed the Redemption Price thereof, or the Redemption Price of the specified portions of the principal thereof in the case of Bonds to be redeemed in part only, together with interest accrued to the redemption date, and that from and after such date interest thereon shall cease to accrue and be payable. Such notice shall be mailed by the Trustee, postage prepaid, not less than 30 days before the redemption date, to the registered owners of any Bonds or portions of Bonds which are to be redeemed, at their last, addresses, if any, appearing upon the registry books of the Authority. Failure of the registered owner of any Bond which are to be redeemed to receive any such notice shall not affect the sufficiency or validity of the proceedings for the redemption of Bonds.
18 SECTION 406. Payment of Redeemed Bonds. Notice having been given in the manner provided in Section 405, the Bonds or portions thereof so called for redemption shall become due and payable on the redemption date so designated at the Redemption Price, plus interest accrued and unpaid to the redemption date, and, upon presentation and surrender thereof at the office specified in such notice, such Bonds, or portions thereof, shall be paid at the Redemption Price, plus interest accrued and unpaid to the redemption date. If there shall be drawn for redemption less than all of a Bond, the Authority shall execute and the Trustee shall authenticate and the Paying Agent shall deliver, upon the surrender of such Bond, without charge to the owner thereof, for the unredeemed balance of the principal amount of the Bonds so surrendered, Bonds of like Series and maturity in any of the authorized denominations. If, on the redemption date, moneys for the redemption of all the Bonds or portions thereof of any like Series and maturity to be redeemed, together with interest to the redemption date, shall be held by the Paying Agents so as to be available therefor on said date and if notice of redemption shall have been given as aforesaid, then, from and after the redemption date interest on the Bonds or portions thereof of such Series and maturity so called for redemption shall cease to accrue and become payable. If said moneys shall not be so available on the redemption date, such Bonds or portions thereof shall continue to bear interest until paid at the same rate as they would have borne had they not been called for redemption.
« ' SECTION 407. Cancellation and Destruction of Bonds. All Bonds paid or redeemed, either at or before maturity, shall be delivered to the Trustee when such payment or redemption is made, and such Bonds, together with all Bonds purchased which have been delivered to the Trustee for application as a credit against Sinking Fund Installments and all Bonds purchased by the Trustee, shall thereupon be promptly cancelled. Bonds sb cancelled may at any time be destroyed by the Trustee, who shall execute a certificate of destruction in duplicate by the signature of one of its authorized officers describing the Bonds so destroyed, and one executed certificate shall be filed with the Authority and the other executed certificate shall be retained by the Trustee. '
ARTICLE V ESTABLISHMENT OP FUNDS AND APPLICATION THEREOF
SECTION 501. The Pledge Effected by the Resolution. 1. The Bonds shall be direct and special obligations of the Authority payable solely from and secured as to the payment of the principal and Redemption Price thereof, and interest thereon, in accordance with their terms and the provisions of the Resolution solely by the Trust Estate and the Trust Estate hereby is pledged to, and a security interest in the same is hereby granted to, the Trustee for the benefit of the holders of the Bonds subject to the provisions of the Resolution permitting the application thereof for the purposes and on the terms and conditions set forth in the Resolution.
2. The Bonds shall be payable, as to principal and Redemption Price thereof, and interest thereon, solely from the Revenues and other funds of the Authority as provided in the Resolution and neither the State of Oklahoma nor any political subdivision (other than the Authority) nor any eligible public agency or public trust which has contracted with the Authority shall be obligated to pay the principal or Redemption Price thereof or interest thereon and neither the faith and credit nor the taxing power of the State of Oklahoma or any political subdivision thereof or of any such eligible public agency or public trust is pledged to the payment of the principal or Redemption Price of, or interest on, the Bonds. No Bondholder or receiver or trustee in connection with the payment of the Bonds shall have any right to compel the State of Oklahoma, any political subdivision thereof or any eligible public agency or public trust which has contracted with the Authority to exercise its appropriation or taxing powers.
19 3. Nothing contained in the Resolution shall be construed to prevent the Authority from acquiring, constructing or financing through the issuance of its bonds, notes or other evidences of obligations any facilities which do not constitute a part of the System for the purposes of the Resolution or from securing such bonds, notes or other evidences of obligations by a mortgage of the facilities so financed or by a pledge of, or other security interest in, the revenues therefrom or any lease or other agreement with respect thereto or any revenues derived from such lease or other agreement; provided that such bonds, notes or other evidences of obligations shall not be payable out of or secured by the Trust Estate and neither the. cost of such facilities nor any expenditure in connection therewith or with the financing thereof shall be payable from the Trust Estate. Prior to the financing of any such facilities, the Authority shall deliver to the Trustee an opinion of the Consulting Engineer to the effect that the issuance by the Authority of its bonds, notes or other evidences of obligations for any of such facilities will not adversely affect the ability of the Authority to comply with the covenants contained in Section 711. SECTION 502. Establishment of Funds. 1. The following Funds and Accounts are hereby established: (1) Construction Fund, to be held by the Trustee, (2) Revenue Fund, to be held by the Authority, consisting of a Revenue Account and a Rate Stabilization Account, (3) Operation and Maintenance Fund, to be held by the Authority, consisting of an Operation and Maintenance Account and a Working Capital Account, (4) Debt Service Fund, to be held by the Trustee, consisting of a Debt Service Account and a Debt Service Reserve Account, (5) Subordinated Indebtedness Fund, to be held as provided in the Supplemental Resolution providing for the issuance of Subordinated Indebtedness, (6) Reserve and Contingency Fund, to be held by the Authority, and (7) General Reserve Fund, to be held by the Authority. 2. At such time as the Authority shall determine, there may be established by Supplemental Resolution a Decommissioning Fund to provide for costs of decommissioning, retirement or disposal of any facilities. The Decommissioning Fund shall be held by the Authority. The amounts to be deposited in such Fund, and the purposes to which amounts in such Fund are to be applied, shall be set forth in the Supplemental Resolution establishing such Fund. The Decommissioning Fund shall not be part of the Trust Estate. 3. Any Fund or Accounts held by the Authority pursuant to this Section 502 shall be maintained in an account at the Trustee or, at the option of the Authority, at one or more Depositaries in the manner contemplated by Section 601 hereof. SECTION 503. Construction Fund, 1. There shall be paid into the Construction Fund the amounts required to be so paid by the provisions of the Resolution and any Supplemental Resolutions, and there may be paid into the Construction Fund, at the option of the Authority, any moneys received for or in connection with the System by the Authority from any other source, unless required to be otherwise applied as provided by the Resolution. Amounts in the Construction Fund shall be applied to the Cost of Acquisition and Construction of the System in the manner provided in this Section. 2. The proceeds of insurance maintained pursuant to the Resolution against physical loss of or damage to the System, or of contractors' performance bonds with respect thereto, pertaining to the period of construction thereof, shall be paid into the Construction Fund.
20 3. The Trustee shall make payments from the Construction Fund, except payments and withdrawals pursuant to subsection 4 or 6 of this Section 503, in the amounts, at the times, in the manner, arid on the other terms and conditions set forth in this subsection. Before any such payment shall be made, the Authority shall file with the Trustee its requisition therefor, signed by • an Authorized Officer of the Authority, stating in respect of each payment to be made (a) the name and address of the person, firm or corporation to whom payment is due (which may be the Authority if the Authority provided the Cost of Acquisition and Construction which is the basis of such payment), (b) the amount to be paid, and (c) the particular item of the Cost of Acquisition and Construction to be paid and that the cost or the obligation in the stated amount is a proper charge against the Construction Fund which has not been previously paid. The Trustee shall issue its check for each payment required by such requisition or shall by interbank transfer or other method arrange to make the payment required by such requisition and promptly provide the Authority with written evidence thereof.
4. The Trustee shall pay from the Construction Fund to the Authority upon its requisitions therefor signed by an Authorized Officer of the Authority, at one time or from time to time, a sum or sums aggregating not more than $2,500,000 (or such larger amount as the Authority shall certify to the Trustee as necessary to allow for the expeditious payment of Costs of Acquisition and Construction), such sums to be used by the Authority to establish a revolving fund for the purpose of paying such items of the Cost of Acquisition and Construction thereof as cannot conveniently be paid as in this Section otherwise provided. So long as the amount in such revolving fund shall at any time be less than $2,500,000 (or such larger amount as shall be certified as aforesaid), such revolving fund shall be reimbursed by the Trustee from time to time for such expenses so paid, by payments from the Construction Fund upon requisitions signed by an Authorized Officer of the Authority specifying the payee and the amount and particular purpose of each payment from such revolving fund for which such reimbursement is requested and certifying that each such amount so paid was necessary for the payment of an item of the Cost of Acquisition and Construction of the System, and that such expense could not conveniently be paid except from such revolving fund. In making such reimbursement the Trustee may rely upon such requisitions and accompanying certificates. All amounts held by the Authority as part of the revolving fund provided for in this subsection 4 shall be held in an account with a Depositary in the manner contemplated by Section 601 hereof.
5. Notwithstanding any of the other provisions of this Section, to the extent that other moneys are not available therefor, amounts in the Construction Fund shall be applied to the payment of principal of and interest on Bonds when due.
6. Amounts credited to the Construction Fund which the Authority at any time determines to be in excess of the amounts required for the purposes thereof shall, at the request of the Authority, be transferred to the Debt Service Reserve Account in the Debt Service Fund, if and to the extent necessary to make the amount in such Account, after giving effect to any surety bond, insurance policy, letter of credit or other similar obligation deposited in such Account pursuant to Section 508.4 of the Resolution, equal to the Debt Service Reserve Requirement, and any balance of such excess shall be paid to the Authority for credit to the General Reserve Fund for application to the purposes specified in paragraph (b), (c), (d), (e), (f), (g) or (h) of Section 511.2, as the Authority shall determine.
7. Nothing in this Section 503 shall be construed to prevent the Authority from permanently discontinuing the acquisition or construction of any portion of the System the Cost of Acquisition and Construction of which is at the time being paid out of the Construction Fund, if the Board of Directors of the Authority determines by resolution that such discontinuance is necessary or desirable in the conduct of the business of the Authority and not disadvantageous to the Holders of the Bonds.
21 SECTION 504. Revenues and Revenue Fund. 1. As soon as practicable after the receipt of Revenues, and in any event within ten days of such receipt, the Authority shall deposit such Revenues in the Revenue Account in the Revenue Fund. 2. Each month the Authority shall transfer from the Revenue Account to the Rate Stabilization Account in the Revenue Fund the amount budgeted for credit to such Account for the then current month as set forth in the current Annual Budget or the amount otherwise determined by the Authority to be credited to such Account for the month. Except for amounts transferred from the Revenue Account to the Rate Stabilization Account pursuant to this.Section 504.2, no amounts shall be transferred from any other Fund or Account to the Rate Stabilization Account. 3. Each month the Authority shall transfer from the Rate Stabilization Account to the Revenue Account in the Revenue Fund the amount budgeted for credit to such Account for the then current month as set forth in the current Annual Budget or the amount otherwise determined by the Authority.to be credited to such Account for the month. SECTION 505. Payments Into Certain Funds. As soon as practicable in each month after the deposit of Revenues but in any case no later than the day when needed, the Authority shall transfer from the Revenue Account in the Revenue Fund to the following Funds and Accounts in the following order the amounts set forth below (such application to be made in such a manner so as to assure good funds in such Funds and Accounts on the last business day of such month): (1) To the credit of the Operation and Maintenance Fund, (i) for credit to the Operation and Maintenance Account, such amount as the Authority shall estimate is required, together with amounts then on deposit therein, to provide for the payment of Operation and Maintenance Expenses estimated to be paid through the next month, and (ii) for credit to the Working Capital Account, such amount as the Authority shall estimate is required, together with amounts then on deposit therein, to be so credited so that the amount in the Working Capital Account will be sufficient for the purposes thereof through the next month, plus such additional amount, for long-term purposes, as shall be budgeted for credit to said Account for the current month as set forth in the current Annual Budget; (2) To the Debt Service Fund (i) for credit to the Debt Service Account, the amount, if any, required so that the balance in said Account shall equal the Accrued Aggregate Debt Service as of the last day of the then current month; provided that, for the purposes of computing the amount to be deposited in said Account, there shall be excluded from the balance in said Account the amount, if any, set aside in said Account from the proceeds of Bonds (including amounts, if any, transferred thereto from the Construction Fund) for the payment of interest on Bonds less that amount of such proceeds to be applied in accordance with the Resolution to the payment of interest accrued and unpaid and to accrue on Bonds to the last day of the then current calendar month; and (ii) subject to the second proviso below, for credit to the Debt Service Reserve Account, the amount, if any, required for such Account, after giving effect to any surety bond, insurance policy, letter of credit or other similar obligation deposited in such Account pursuant to Section 508.4 of the Resolution, to equal the Debt Service Reserve Requirement as of the last day of the then current month; (3) To the Subordinated Indebtedness Fund, the amount, if any, as shall be required to be deposited therein in the then current month to pay principal or sinking fund installments of and premiums, if any, and interest on each issue of Subordinated Indebtedness coming due in such month, whether as a result of maturity or prior call for redemption, and to provide reserves therefor, as required by the Supplemental Resolution authorizing such issue of Subordinated Indebtedness; (4) To the Reserve and Contingency Fund, the amount budgeted for the then current month as set forth in the current Annual Budget;
22 (5) If a Decommissioning Fund shall have been established pursuant to subsection 2 of Section 502 hereof, to the credit of the Decommissioning Fund, the amount budgeted for credit to said Fund for the then current month as set forth in the current Annual Budget; (6) To the credit of the General Reserve Fund, the remaining balance, if any, of moneys in the Revenue Account in the Revenue Fund after making the above credits and deposits; provided, however, that so long as there shall be held in the Debt Service Fund an amount sufficient to pay in full all Outstanding Bonds in accordance with their terms (including the maximum amount of principal or applicable sinking fund Redemption Price and interest which could become payable thereon) j no transfers shall be required to be made to the Debt Service Fund; and provided further, that any deficiency in the Debt Service Reserve Account, after giving effect to any surety bond, insurance policy, letter of credit or other similar obligation deposited in such Account pursuant to Section 508.4 of the Resolution, other than a deficiency attributable to a withdrawal of amounts therefrom pursuant to subsection 1 of Section 508 hereof, shall be cured by depositing into the Debt Service Reserve Account each month during the period commencing with the month following the determination of the deficiency and ending with the twelfth month following the determination of the deficiency an amount equal to one-twelfth (yl2) of the deficiency, except that, if a new valuation of Investment Securities held" in the Debt Service Reserve Account is made pursuant to Section 604 hereof during the period that such deposits are required, then the obligation of the Authority to make deposits during the balance of such period on the basis of the preceding valuation shall be discharged and the deposits, if any, required to be made for the balance of such period shall be determined under this proviso on the basis of the new valuation. SECTION 506. Operation and Maintenance Fund. 1. Amounts credited to the Operation and Maintenance Account shall be applied from time to time by the Authority to the payment of Operation and Maintenance Expenses, 2. Amounts credited to the Operation and Maintenance Account which the Authority at any time determines to be in excess of the requirements of such Account shall be applied to make up any deficiencies in the following Funds and Accounts in the order stated: Working Capital Account in the Operation and Maintenance Fund; Debt Service Account in the Debt Service Fund; Debt Service Reserve Account, in the Debt Service Fund; Subordinated Indebtedness Fund; Reserve and Contingency Fund; and Decommissioning Fund if theretofore established pursuant to subsection 2 of Section 502 hereof. Any balance of such excess not so applied shall be credited to the General Reserve Fund. 3. Amounts credited to the Working Capital Account may, at the determination of the Authority, (i) be credited to the Operation and Maintenance Account, (ii) be applied directly to any of the purposes for which amounts credited to the Operation and Maintenance Account Could be applied, (iii) to the extent provided in the current Annual Budget, be transferred to the Debt Service Account in the Debt Service Fund, (iv) to the extent that such amounts were not credited thereto from the proceeds of Bonds, be credited to the Reserve and Contingency Fund or (v) to the extent that such amounts were not credited thereto from the proceeds of Bonds, be credited to the Decommissioning Fund if theretofore established pursuant to subsection 2 of Section 502 hereof. 4. If and to the extent provided in a Supplemental Resolution authorizing Bonds of a Series, amounts from the proceeds of such Bonds may be credited to the Operation and Maintenance Account or the Working Capital Account and set aside therein as specified in the Supplemental Resolution for any purpose of such Account. 5. Amounts credited to the Working Capital Account which the Authority at any time | determines to be in excess of the requirements of such Account shall be applied to make up any | deficiencies in the following Funds and Accounts in the order stated: Debt Service Account in the j
23 • j Debt Service Fund; Debt Service Reserve Account in the Debt Service Fund; Subordinated Indebtedness Fund; Reserve and Contingency Fund; and Decommissioning Fund if theretofore established pursuant to subsection 2 of Section 502 hereof. Any balance of such excess not so applied shall be credited to the General Reserve Fund.
SECTION 507. Debt Service Fund—Debt Service Account 1. The Trustee shall pay out of the Debt Service Account to the respective Paying Agents (i) on or before each interest payment date for any of the Bonds the amount required for the interest payable on such date; (ii) on or before each Principal Installment due date, the amount required for the Principal Installment payable on such due date; and (iii) on or before any redemption date for the Bonds, the amount required for the payment of interest on the Bonds then to be redeemed. Such amounts shall be applied by the Paying Agents on and after the due dates thereof. The Trustee shall also pay out of the Debt Service Account the accrued interest included in the purchase price of Bonds purchased for retirement.
2. Amounts accumulated in the Debt Service Account with respect to any Sinking Fund Installment (together with amounts accumulated therein with respect to interest on the Bonds for which such Sinking Fund Installment was established) may and, if so directed by the Authority, shall be applied by the Trustee, on or prior to the 60th day preceding the due date of such Sinking Fund Installment, to (i) the purchase of Bonds of the Series, maturity and interest rate within each maturity for which such Sinking Fund Installment was established, or (ii) the redemption at the applicable sinking fund Redemption Price of such Bonds, if then redeemable by their terms. After the 60th day but on or prior to the 40th day preceding the due date of such Sinking Fund Installment, any amounts then on deposit in the Debt Service Account (exclusive of amounts, if any, set aside in said Account which were deposited therein from proceeds of Bonds) may and, if so directed by the Authority, shall be applied by the Trustee to the purchase of Bonds of the Series, maturity and interest rate within each maturity for which such Sinking Fund Installment was established in an amount not exceeding that necessary to complete the retirement of the unsatisfied balance of such Sinking Fund Installment. All purchases of any Bonds pursuant to this subsection 2 shall be made at prices not exceeding the applicable sinking fund Redemption Price of such Bonds plus accrued interest, and such purchases shall be made by the Trustee as directed by the Authority. The applicable sinking fund Redemption Price (or principal amount of maturing Bonds) of any Bonds so purchased or redeemed shall be deemed to constitute part of the Debt Service Account until such Sinking Fund Installment date, for the purpose of calculating the amount of such Account. As soon as practicable after the 40th day preceding the due date of any such Sinking Fund Installment, the Trustee shall proceed to call for redemption, by giving notice as provided in Section 405 or in the Supplemental Resolution authorizing the Series of Bonds of which the Bonds to be redeemed are part, on such due date Bonds of the Series, maturity and interest rate within each maturity for which such Sinking Fund Installment was established (except in the case of Bonds maturing on a Sinking Fund Installment date) in such amount as shall be necessary to complete the retirement of the unsatisfied balance of such Sinking Fund Installment after making allowance for any Bonds purchased or redeemed pursuant to Section 511 which the Authority has directed the Trustee to apply as a credit against such Sinking Fund Installment as provided in subsection 3 of Section 511. The Trustee shall pay out of the Debt Service Account to the appropriate Paying Agents, on or before such redemption date (or maturity date), the amount required for the redemption of the Bonds so called for redemption (or for the payment of such Bonds then maturing), and such amount shall be applied by such Paying Agents to such redemption (or payment). All expenses in connection with the purchase or redemption of Bonds shall be paid by the Authority from the Operation and Maintenance Fund.
3. The amount, if any, deposited in the Debt Service Account from the proceeds of each Series of Bonds shall be set aside in such Fund and applied to the payment of interest on Bonds in accordance with certificates of the Authority delivered to the Trustee pursuant to paragraph (11) of subsection
24 1 of Section 202 or, in the event that the Authority shall modify or amend any such certificate by a subsequent certificate signed by an Authorized Officer of the Authority and filed with the Trustee, then in accordance with the most recent such certificates or amended certificates. 4. In the event of the refunding of any Bonds, the Trustee shall, upon the direction of the Authority, withdraw from the Debt Service Account in the Debt Service Fund all or any portion of amounts accumulated therein with respect to Debt Service on the Bonds being refunded and deposit such amounts with itself as Trustee to be held for the payment of the principal or Redemption Price, if applicable, and interest on the Bonds being refunded; provided that such withdrawal shall not be made unless (a) immediately thereafter the Bonds being refunded shall be deemed to have been paid pursuant to subsection 2 of Section 1201, and (b) the amount remaining in the Debt Service Account in the Debt Service Fund after such withdrawal shall not be less than the requirement of such Account pursuant to paragraph (2) of Section 505. SECTION 508. Debt Service Fund—Debt Service Reserve Account. 1. If on the last business day of any month the amount in the Debt Service Account shall be less than the amount required to be in such Account pursuant to paragraph (2) of Section 505, the Trustee shall apply amounts from the Debt Service Reserve Account to the extent necessary to cure the deficiency. 2. Whenever the moneys on deposit in the Debt Service Reserve Account shall exceed the Debt Service Reserve Requirement, after giving effect to any surety bond, insurance policy, letter of credit or other similar obligation deposited in such Account pursuant to Section 508.4 of the Resolution, such excess shall upon the request of the Authority be transferred to the Authority and credited upon the Authority's receipt thereof to make up any deficiencies in the following Funds and Accounts in the order stated: Subordinated Indebtedness Fund; Reserve and Contingency Fund; and Decommissioning Fund if theretofore established. Any balance of such excess shall be credited to the General Reserve Fund. 3. Whenever the amount in the Debt Service Reserve Account, without giving effect to any surety bond, insurance policy, letter of credit or other similar obligation deposited in such Account pursuant to Section 508.4 of the Resolution, together with the amount in the Debt Service Account, is sufficient to pay in full all Outstanding Bonds in accordance with their terms (including the maximum amount of principal or applicable sinking fund Redemption Price and interest which could become payable thereon), the funds on deposit in the Debt Service Reserve Account shall be transferred to the Debt Service Account. Prior to said transfer, all investments held in the Debt Service Reserve Account shall be liquidated to the extent necessary in order to provide for the timely payment of principal and interest (or Redemption Price) on Bonds. Any provision of the Resolution to the contrary notwithstanding, so long as there shall be held in the Debt Service Fund an amount sufficient to pay in full all Outstanding Bonds in accordance with their terms (including the maximum amount of principal or applicable sinking fund Redemption Price and interest which could become payable thereon), no deposits shall be required to be made into the Debt Service Reserve Account. 4. In lieu of the required transfers of moneys to the Debt Service Reserve Account, the Authority may cause to be deposited into the Debt Service Reserve Account for the benefit of the holders of the Bonds an irrevocable surety bond, an insurance policy, a letter of credit or any other similar obligation in an amount equal to the difference between the Debt Service Reserve Requirement and the sums of moneys or value of Investment Securities then on deposit in the Debt Service Reserve Account, if any. The surety bond, insurance policy, letter of credit or other similar obligation shall be payable (upon the giving of notice as required thereunder) on any due date on which moneys will be required to be withdrawn from the Debt Service Reserve Account and applied to the payment of a Principal Installment of or interest on any Bonds and such withdrawal cannot be met by amounts on deposit in the Debt Service Reserve Account. The insurer providing such surety
25 bond or insurance policy shall be an insurer whose municipal bond insurance policies insuring the .payment, when due, of the principal of and interest on municipal bond issues results in such issues being rated in the highest rating category by a nationally recognized bond rating agency. The letter of credit issuer shall be a bank or trust company which on the date of issuance of the letter of credit has an outstanding unsecured, uninsured and unguaranteed debt issue which is rated not lower than the second highest rating category by a nationally recognized bond rating agency. The issuer of any other similar obligation shall have the qualifications set forth in a Supplemental Resolution authorizing the issuance of a Series of Bonds. If a disbursement is made pursuant to a surety bond, an insurance policy, a letter of credit or any other similar obligation provided pursuant to this subsection, the Authority shall within twelve months either (i) reinstate the maximum limits of such surety bond, insurance policy, letter of credit or other similar obligation or (ii) deposit into the Debt Service Reserve Account, funds in the amount of the disbursement made under such surety bond, insurance policy, letter of credit or other similar obligation, or a combination of such alternatives, as shall provide that the amount in the Debt Service Reserve Account equals the Debt Service Reserve Requirement. In the event that the rating attributable to any insurer providing any surety bond, insurance policy or other similar obligation or any bank or trust company providing any letter of credit or other similar obligation held as above provided in the Debt Service Reserve Account shall fall below that required as above provided, the Authority shall within twelve months either (i) replace such surety bond, insurance policy, letter of credit or other similar obligation with a surety bond, insurance policy, letter of credit or other similar obligation which shall meet the above provided requirements or (ii) deposit into the Debt Service Reserve Account sufficient funds, or a combination of such alternatives, as shall provide that the amount in the Debt Service Reserve Account equals the Debt Service Reserve Requirement. 5. In the event of the refunding of any Bonds, the Trustee shall, upon the direction of the Authority, withdraw from the Debt Service Reserve Account in the Debt Service Fund all or any portion of amounts accumulated therein with respect to the Bonds being refunded and deposit such amounts with itself as Trustee to be held for the payment of the principal or Redemption Price, if appjicable, and interest on the Bonds being refunded; provided that such withdrawal shall not be made unless (a) immediately thereafter the Bonds being refunded shall be deemed to have been paid pursuant to subsection 2 of Section 1201, and (b) the amount remaining in the Debt Service Reserve Account, after giving effect to any surety bond, insurance policy, letter of credit or other similar obligation deposited in such Account pursuant to Section 508.4 of the Resolution, in the Debt Service Fund after such withdrawal shall not be less than the Debt Service Reserve Requirement. SECTION 509. Subordinated Indebtedness Fund. 1. Subject to subsection 2 hereof, amounts in the Subordinated Indebtedness Fund shall be applied to the payment of the principal or sinking fund installment of and interest on each issue of Subordinated Indebtedness and reserves therefor in accordance with the provisions of, and subject to the priorities and limitations and restrictions provided in, the Supplemental Resolution authorizing each issue of Subordinated Indebtedness. 2. If at any time the amounts in the Debt Service Account or the Debt Service Reserve Account, after giving effect to any surety bond, insurance policy, letter of credit or other similar obligation deposited in such Account pursuant to Section 508.4 of the Resolution, shall be less than the current requirements of such accounts, respectively, pursuant to paragraph (2) of Section 505 and there shall not be on deposit in the General Reserve Fund or the Reserve and Contingency Fund available moneys sufficient to cure such deficiency, there shall be withdrawn from the Subordinated Indebtedness Fund and deposited in the Debt Service Account or the Debt Service Reserve Account, as the case may be, the amount necessary (or all the moneys in said Fund, if less than the amount necessary) to make up such deficiency. SECTION 510. Reserve and Contingency Fund. 1. Amounts in the Reserve and Contingency Fund shall be applied to the payment of Development Costs and to the payment of the costs of major
26 renewals, replacements, repairs, additions, betterments^ enlargements and improvements to the System and to the payment of extraordinary operation and maintenance costs and contingencies, including the costs of scheduled, emergency or other interchange service, decommissioning or disposal of generation facilities, payments with respect to the prevention or correction of any unusual loss or damage in connection with the System or to prevent a loss of revenue therefrom, all to the extent not provided for in the then current Annual Budget or by reserves credited to the Operation and Maintenance Fund or from the proceeds of Bonds. 2. If and to the extent provided in a Supplemental Resolution authorizing Bonds of a Series, amounts from the proceeds of such Bonds may be credited to the Reserve and Contingency Fund as specified in the Supplemental Resolution for any purpose of such Fund. 3. No payments shall be made from the Reserve and Contingency Fund if and to the extent that the proceeds of insurance or other moneys recoverable as the result of damage, if any, are available to pay the costs otherwise payable from such Fund. 4. If at any time the amounts in the Debt Service Account or the Debt Service Reserve Account, after giving effect to any surety bond, insurance policy, letter of credit or other similar obligation deposited in such Account pursuant to Section 508.4 of the Resolution, in the Debt Service Fund shall be less than the current requirement of such Accounts, respectively, pursuant to paragraph (2) of Section 505, and there shall not be on deposit in the General Reserve Fund available moneys sufficient to cure such deficiency, then the Authority shall transfer from the credit of the Reserve and Contingency Fund to the Trustee for deposit in the Debt Service Account or Debt Service Reserve Account, as the case may be, the amount necessary (or all the moneys in said Fund if less than the amount necessary) to make up such deficiency. 5. If at any time the amounts in the Reserve and Contingency Fund exceed the amounts then required to be held therein, the excess, if not needed for any of the purposes specified in subsection 4 of this Section 510, may be credited (i) if a Decommissioning Fund shall have been established pursuant to subsection 2 of Section 502 hereof, to the Decommissioning Fund or (ii) to the General Reserve Fund. SECTION 511. General Reserve Fund. 1. The Authority shall apply moneys credited to the General Reserve Fund in the following amounts and in the following order Of .priority: (i) to the Trustee for deposit in the Debt Service Account and the Debt Service Reserve Account in the Debt Service Fund, in that order, the amount necessary (or all the moneys in the General Reserve Fund if less than the amount necessary) to make up any deficiencies in payments to said Accounts required by paragraph (2) of Section 505, (ii) to the Trustee for deposit in the Debt Service Reserve Account in the Debt Service Fund the amount necessary (or all moneys in the General Reserve Fund if less than the amount necessary) to make up any deficiency in such Account, after giving effect to any surety bond, insurance policy, letter of credit or other similar obligation deposited in such Account pursuant to Section 508.4 of the Resolution, resulting from any transfer of moneys from said Debt Service Reserve Account to the Debt Service Account, and (iii) to the Reserve and Contingency Fund the amount necessary (or all the moneys in the General Reserve Fund if less than the amount necessary) to make up any deficiencies in payments credited to said Fund required by paragraph (4) of Section 505. Such transfer shall be made notwithstanding any other provision of the Resolution requiring deposits in the General Reserve Fund to be applied to the purchase or redemption of Bonds. 2. Amounts credited to the General Reserve Fund not required to meet a deficiency as required in subsection 1 of this Section shall upon determination of the Authority be applied to or set aside for any one or more of the following: (a) transfer to the Revenue Account in the Revenue Fund;
27 (b) the purchase or redemption of Bonds and expenses in connection with the purchase or redemption of such Bonds or any reserves which the Authority determines shall be required for such purposes; (c) payment of Operation and Maintenance Expenses or credit to the Working Capital » Account in the Operation and Maintenance Fund for application to the purposes of that Account; I (d) transfer to the Subordinated Indebtedness Fund for the purposes set forth in Section I 509; (e) payments into the Construction Fund for application to the purposes thereof; (f) transfer to the Reserve and Contingency Fund for the purposes thereof; (g) if a Decommissioning Fund shall have been, established pursuant to. subsection 2 of Section 502 hereof, transfer to such Fund for application to the purposes thereof; and (h) any other lawful purpose of the Authority not otherwise prohibited by the Resolution; provided, further, that, subject to the provisions of subsection 1 of this Section, amounts deposited in the General Reserve Fund and required by the Resolution to be applied to the purchase or redemption of Bonds shall be applied to such purpose.
3. If at any time Bonds of any Series or maturity for which Sinking Fund Installments shall have been established are purchased or redeemed other than pursuant to subsection 2 of Section 507 or are deemed to have been paid pursuant to subsection 2 of Section 1201 and, with respect to such Bonds which are deemed paid, irrevocable instructions have been given to the Trustee to redeem or purchase the same on or prior to the due date of the Sinking Fund Installment to be credited under this Section 511, the Authority may from time to time and at any time by written notice to the Trustee specify the portion, if any, of such Bonds so purchased, redeemed or deemed to have been paid and not previously applied as a credit against any Sinking Fund Installment which are to be credited against future Sinking Fund Installments. Such notice shall specify the amounts of such Bonds to be applied a& a credit against such Sinking Fund Installment or Installments and the particular Sinking Fund Installment or Installments against which such Bonds are to be applied as a credit; provided, however, that none of such Bonds may be applied as a credit against a Sinking Fund Installment to become due less than 45 days after such notice is delivered to the Trustee. All such Bonds which have been purchased or redeemed and are to be applied as a credit shall be surrendered to the Trustee for cancellation on or prior to the due date of the Sinking Fund Installment against which they are being applied as a credit. The portion of any such Sinking Fund Installment remaining after the deduction of any such amounts credited toward the same (or the original amount of any such Sinking Fund Installment if no such amounts shall have been credited toward the same) shall constitute the unsatisfied balance of such Sinking Fund Installment for the purpose of calculation of Sinking Fund Installments due on a future date.
SECTION 512. Subordinated Indebtedness. The Authority may, at any time, or from time to time, issue Subordinated Indebtedness payable out of, and which may be secured by a security interest in and pledge and assignment of, such amounts in the Subordinated Indebtedness Fund or the General Reserve Fund as may from time to time be available for the purpose of payment thereof as provided in Section 509 or Section 511, as the case may be; provided, however, that (i) such j Subordinated Indebtedness shall be issued only for any one or more of the purposes set forth in j subsection 2 of Section 511 and the proceeds of such Subordinated Indebtedness shall be applied only f for such purpose or purposes, and (ii) any security interest and pledge and assignment shall be, and shall be expressed to be, subordinate in all respects to the security interest in and pledge of the Trust Estate created by the Resolution as security for the Bonds.
28 ARTICLE VI DEPOSITARIES OP MONEYS, SECURITY FOR DEPOSITS AND INVESTMENT OP FUNDS
SECTION 601. Depositaries. 1. All moneys held by the Trustee under the provisions of the Resolution shall constitute trust funds and the Trustee may deposit such moneys with one or more Depositaries in trust for the Trustee. All moneys held by the Authority under the Resolution shall constitute trust funds and the Authority shall deposit such moneys with one or more Depositaries as hereinafter provided. All moneys deposited under the provisions of the Resolution with the Trustee or any Depositary shall be held in trust and applied only in accordance with the provisions of the Resolution, and each of the Funds established by the Resolution shall be a trust fund for the purposes thereof.
2. Each Depositary shall be a bank or trust company organized under the laws of any state of the United States or a national banking association having ^capital stock, surplus and undivided earnings aggregating at least $10,000,000 and willing and able to accept the office on reasonable and customary terms and authorized by law to act in accordance with the provisions of the Resolution. 3. Moneys and securities credited to any Fund or Account held by the Authority may be commingled with moneys and securities credited to other Funds or Accounts held by the Authority for purposes of establishing checking or other bank accounts, for purposes of investing funds or otherwise; provided, however, the Authority sh?all at all times maintain or cause to be maintained accurate books and records reflecting the amounts credited to each Fund and Account held by the Authority. All withdrawals from any commingled moneys shall be charged against the proper Fund or Account and no moneys shall be withdrawn from commingled moneys if there is not on credit to the Fund or Account to be charged sufficient funds to cover such withdrawal. SECTION 602. Deposits. 1. All Revenues and other moneys held by any Depositary under the Resolution may be placed on demand or time deposit, if and as directed by the Authority, provided that such deposits shall permit the moneys so held to be available for use at the time when needed. All such moneys deposited with a Fiduciary, acting as a Depositary, may be made in the commercial banking department of any Fiduciary which may honor checks and drafts on such deposit with the same force and effect as if it were not such Fiduciary. All moneys held by any Fiduciary, as such, may be deposited by such Fiduciary in its banking department on demand or, if and to the extent directed by the Authority and acceptable to such Fiduciary, on time deposit, provided that such moneys on deposit be available for use at the time when needed. Such Fiduciary shall allow and credit on such moneys such interest, if any, as it customarily allows upon similar funds of similar size and under similar condition or as required by law. 2. All moneys held under the Resolution by the Trustee or any Depositary shall not at any time exceed 5% of the combined capital, surplus and undivided earnings of the Trustee or such Depositary, as the case may be, unless such moneys are either (1) fully insured by the Federal Deposit Insurance Corporation, or (2) secured, to the extent not insured by the Federal Deposit Insurance Corporation, by lodging with the Trustee, as custodian, as collateral security, such securities as are described in clauses (i) through (v) inclusive of the definition of "Investment Securities" in Section 101 having a market value (exclusive of accrued interest) not less than the amount of such moneys (or portion thereof not insured by the Federal Deposit Insurance Corporation), and secured in such other manner as may then be required by applicable Federal or State of Oklahoma laws and regulations and applicable state laws and regulations of the state in which the Trustee or such Depositary (as the case may be) is located, regarding security for the deposit of trust funds; provided, however, that, to the extent permitted by law, it shall not be necessary for the Fiduciaries to give security under this subsection 2 for the deposit of any moneys
29 with them held in trust and set aside by them for'the payment of the principal or Redemption Price of or interest on any Bonds, or for the Trustee of any Depositary to give security for any moneys which shall be represented by obligations or certificates of deposit purchased as an investment of such moneys. 3. All moneys deposited with the Trustee and each Depositary shall be credited to the particular Fund or Account to which such moneys belong. SECTION 603. Investment of Certain Funds. Moneys held in the1 Debt Service Account in the Debt Service Fund and the Debt Service Reserve Account in the Debt Service Fund shall be invested and reinvested by the Trustee to the fullest extent practicable in Investment Securities which mature not later than at such times as shall be necessary to provide moneys when needed for payments to be made from such Accounts. Subject to the terms of any resolutions, indentures, or other instruments securing any issue of Subordinated Indebtedness, moneys in the Subordinated Indebtedness Fund shall be invested and reinvested to the fullest extent practicable in Investment Securities which mature not later than such times as shall be necessary to provide moneys when needed for payments to be made from said Fund. Unless otherwise provided in a Supplemental Resolution, moneys held in the Construction Fund, the Revenue Account and Rate Stabilization Account in the Revenue Fund, the Operation and Maintenance Account and Working Capital Account in the Operation and Maintenance Fund, the Decommissioning Fund, the Reserve and Contingency Fund and the General Reserve Fund may be invested and reinvested in Investment Securities which mature not later than such times as shall be necessary to provide moneys when needed for payments to be made from such Funds. The Trustee shall make all such investments of moneys held by it in accordance with written instructions received from any Authorized Officer of the Authority. In making any investment in any Investment Securities with moneys in any.Fund or Account established under the Resolution, the Authority may, and may instruct the Trustee to, combine such moneys with moneys in any other Fund or Account, but solely for purposes of making such investment in such Investment Securities. Unless otherwise provided in a Supplemental Resolution, interest (net of that which represents a return of accrued interest paid in connection with the purchase of any investment) earned on any moneys or investments in such Funds and Accounts, other than the Construction Fund, shall be paid into the Revenue Account in the Revenue Fund; provided, however, that at the direction of the Authority, such income earned on moneys or investments in any Fund or Account or any portion thereof shall be paid into the Construction Fund. Interest earned on any moneys or investments in the Construction Fund shall be held in such Fund for application as provided in Section 503 or, if so directed by the Authority, paid into the Revenue Account in the Revenue Fund. All Investment Securities acquired with moneys in any Fund or Account, including any Fund or Account held by the Authority, shall be held by the Trustee in pledge or by a Depositary as agent in pledge in favor of the Trustee in accordance with Section 601 hereof. Nothing in the Resolution shall prevent any Investment Securities acquired as investments of funds held under the Resolution from being issued or held in book-entry form on the books of the issuer of such Investment Securities. SECTION 604. Valuation and Sale of Investments. Obligations purchased as an investment of moneys in any Fund created under the provisions of the Resolution shall be deemed at all times to be a part of such Fund and any profit realized from the liquidation of such investment shall be credited to such Fund and any loss resulting from the liquidation of such investment shall be charged to such Fund. In computing the amount in any Fund created under the provisions of the Resolution for any purpose provided in the Resolution, obligations purchased as an investment of moneys therein shall
30 be valued at the amortized cost of such obligations or the market value thereof, whichever is lower, except that any obligation maturing in less than five years after the date of valuation shall be valued at the amortized cost thereof. The accrued interest paid in connection with the purchase of any obligation shall be included in the value thereof until interest on such obligation is paid. Such computation shall be made as of December 31 in each year and at such other times as the Authority shall determine. Except as otherwise provided in the Resolution, the Trustee shall sell at the best price obtainable, or present for redemption, any; obligation so purchased as an investment whenever it shall be requested in writing by an Authorized Officer of the Authority so to do. Whenever it-shall be necessary in order to provide moneys to meet, any payment or transfer from any Fund held by the Trustee, the Trustee shall sell at the best price obtainable or present for redemption such obligation or obligations designated by an Authorized Officer of the Authority necessary to provide sufficient moneys for such payment or transfer; provided, however, that if the Authority fails to provide such designation promptly after request thereof,by the Trustee, the Trustee may in its discretion select the obligation or obligations to be sold or presented for redemption. The Trustee shall not be liable or responsible for any loss resulting from the making of any such investment or the sale of any obligation in the manner provided above.
ARTICLE VII PARTICULAR COVENANTS OP THE AUTHORITY The Authority covenants and agrees with the Trustee and the Bondholders as follows: SECTION 701. Payment of Bonds. The Authority shall duly and punctually pay or cause to be paid, but solely from the Trust Estate, the principal or Redemption Price of every Bond and the interest thereon, at the dates and places and in the manner provided in the Bonds, according to the true intent and meaning thereof. SECTION 702. Extension of Payment of Bonds. The Authority shall not directly or indirectly extend or assent to the extension of the maturity of any of the Bonds or the time of payment of any claims for interest by the funding of such Bonds or claims for interest or by any other arrangement and in case the maturity of any of the Bonds or the time for payment of any such claims for interest shall be extended, such Bonds or claims for interest shall not be entitled, in case of any default under the Resolution, to the benefit of the Resolution or to any payment out of Revenues or Funds established by the Resolution, including the investments, if any, thereof, pledged under the Resolution or the moneys (except moneys held in trust for the payment of particular Bonds or claims for interest pursuant to the Resolution) held by the Fiduciaries, except subject to the prior payment of the principal of all Bonds Outstanding the maturity of which has not been extended and of such portion of the accrued interest on the Bonds and shall not be represented by such extended claims for interest. Nothing herein shall be deemed to limit the right of the Authority to issue Option Bonds or Refunding Bonds and such issuance shall not be deemed to constitute an extension of maturity of Bonds. SECTION 703. Offices for Servicing Bonds. The Authority shall maintain one or more agencies where Bonds may be presented for payment, registration, transfer or exchange, and for the service upon the Authority of notices, demands and other documents as provided with respect to each Series of Bonds, in the Supplemental Resolution authorizing the issuance of such Series of Bonds. SECTION 704. Further Assurance. At any and all times the Authority shall, as far as it may be authorized by law, comply with any reasonable request of the Trustee to pass, make, do, execute, acknowledge and deliver, all and every such further resolutions, acts, deeds, conveyances,
31 assignments, transfers and assurances as may be necessary or desirable for the better assuring, conveying, granting, pledging, assigning, and confirming all and singular the rights, Revenues and other moneys, securities and funds hereby pledged or assigned, or intended so to be, or which the Authority may become bound to pledge or assign. SECTION 705. Power to Issue Bonds and Pledge Revenues and Other Funds. The Authority is duly authorized under all applicable laws to create and issue the Bonds and to adopt the Resolution arid to pledge and grant a security interest in the Trust Estate in the manner and to the extent provided in the Resolution. Except to the extent otherwise provided in the Resolution, the Trust Estate is and will be free and clear of any pledge, lien, charge or encumbrance thereon or with respect thereto prior to, or of equal rank with, the security interest^ pledge and assignment created by the Resolution, and all corporate or other action on the part of the Authority to that end has been and will be duly and validly taken. The Bonds and the provisions of the Resolution are and will be the valid and legally enforceable obligations of the Authority in accordance with their terms and the terms of the Resolution. The Authority shall at all times, to the extent permitted by law, defend, preserve and protect the pledge of and security interest in the Trust Estate and all the rights of the Bondholders under the Resolution against all claims and demands of all persons whomsoever. * SECTION 706. Power to Fix and Collect Rents, Rates and Charges. The Authority has, and will have as long as any Bonds are Outstanding, good right and lawful power to establish and collect rents, rates and charges with respect to the use and the sale of the capacity, output or service of the System subject to the terms of contracts relating thereto and subject to the jurisdiction of any applicable regulatory authority. SECTION 707. Creation of Liens; Sale and Lease of Property. 1. The Authority shall not issue any bonds, notes, debentures, or other evidences of obligations of similar nature, other than the Bonds, payable out of or secured by a security interest in or pledge or assignment of the Trust Estate or other moneys, securities or funds held or set aside by the Authority or by the Fiduciaries under the Resolution and shall not create or cause to be created any lien or charge on the Trust Estate, or such moneys, securities or funds; provided, however, that nothing contained in the Resolution shall prevent the Authority from issuing, if and to the extent permitted by law (i) evidences of obligations (a) payable out of moneys in the Construction Fund as part of the Cost of Acquisition and Construction of the System, or (b) payable out of, or secured by a security interest in or pledge or assignment of, Revenues to be received on and after such date as the pledge of the Revenues provided in the Resolution shall be discharged and satisfied as provided in Section 1201, or (ii) Subordinated Indebtedness. 2. No part of the System shall be sold, leased, mortgaged or otherwise disposed of, except as follows: (1) The Authority may sell or exchange at any time and from time to time any property or facilities constituting part of the System only if (a) it shall determine that such property or facilities are not useful in the operation of the System, or (b) the book value of property or facilities sold or exchanged is not more than \% of the book value of the assets of the System at such time or (c) the Authority shall file with the Trustee a certificate of the Consulting Engineer stating that, in its opinion, the sale or exchange of such property or facilities will not impair the ability of the Authority to comply during the current or any future Fiscal Year with the provisions of Section 711. The proceeds of any such sale or exchange not used to acquire other property necessary or desirable for the safe or efficient operation of the System shall forthwith be deposited in the General Reserve Fund and, subject to Section 511, used for the purposes of Section 511; and (2) The Authority may lease or make contracts or grant licenses for the operation of, or make arrangements for the use of, or grant easements or other rights with respect to, any part
32 of the System, provided that any such lease, contract,.license, arrangement, easement or right (i) does not impede the operation by the Authority or its agents of the System and (ii) does not in any manner impair or adversely affect the rights or security of the Bondholders under the Resolution; and provided, further, that if the book value of the property to be covered by any such lease, contract, license, arrangement, easement or other right is in excess of 1% of the book value of the assets of the Authority at such time, the Authority shall first file with the Trustee a certificate of an Authorized Officer of the Authority setting forth a determination of the Authority's Board of Directors that the action of the Authority with respect thereto does not result in a breach of the conditions under this paragraph (2). Any payments received by the Authority under or in connection with any such lease, contract, license, arrangement, easement or right in respect of the System or any part thereof shall constitute Revenues; and (3) The Authority may permanently discontinue the acquisition or construction of any portion of the System as provided in subsection 7 of Section 503.
3. The Authority shall not make any determination, pursuant to the last sentence of the definitions of the term "System" contained in the Power Sales Contracts and in this Resolution, that any properties or interests .in properties do not constitute a part of the System for the purposes of the Power Sales Contracts or the Resolution unless either (a) such determination is made prior to the acquisition of such properties or interests in properties or (b) such determination is made in accordance with subsection 2 of Section 707.
SECTION 708. Consulting Engineer. The Authority shall, until the Bonds and the interest thereon shall have been paid or provision for such payment shall have been made, for the purpose of performing and carrying out the duties imposed on the Consulting Engineer by the Resolution, employ an independent engineer or engineering firm or corporation of recognized standing for skill and experience in such work and, except in the case of the Consulting Engineer employed by the Authority at the time of the adoption of the Resolution, who shall be satisfactory to the Trustee; provided, however that the approval of the Trustee shall not be unreasonably withheld, and if the Trustee shall fail to so approve, it shall deliver to the Authority a statement of its reasons for such failure. In rendering any report, certificate or opinion required pursuant to this Resolution, the Consulting Engineer may rely upon information, certificates, opinions or reports required to be provided by others pursuant to this Resolution, and upon other sources which the Consulting Engineer considers reliable, and other considerations and assumptions as deemed appropriate by the Consulting Engineer.
SECTION 709. Annual Budget. Not less than 30 days prior to the beginning of each Fiscal Year, the Authority shall prepare and file with the Trustee an Annual Budget for the ensuing Fiscal Year which shall set forth in reasonable detail the estimated Revenues and Operation and Maintenance Expenses and other expenditures of the System for such Fiscal Year and which shall include monthly appropriations for the estimated amounts to be deposited during each month in such year in the Rate Stabilization Account in the Revenue Fund, the Operation and Maintenance Account and the Working Capital Account in the Operation and Maintenance Fund, the Reserve and Contingency Fund and the Decommissioning Fund (if theretofore established pursuant to subsection 2 of Section 502 hereof) and the requirements, if any, for and the amounts estimated to be expended during each month from each Fund and Account established under the Resolution. Such Annual Budget also may set forth such additional material as the Authority may determine. Following the end of each fiscal quarter and at such other times as the Authority shall determine, the Authority shall review its estimates set forth in the Annual Budget for such Fiscal Year, and in the event such estimates do not substantially correspond with actual Revenues, Operation and Maintenance Expenses or other requirements, or if there are at any time during any such Fiscal Year extraordinary receipts or payments of unusual costs, the Authority shall prepare an amended
33 Annual Budget for the remainder of such Fiscal Year. The Authority also may at any time adopt an amended Annual Budget for the remainder of the then current Fiscal Year. SECTION 710. Operation and Maintenance of System, The Authority shall at all times use its best efforts to operate or cause to be operated the System properly and in an efficient and economical manner, consistent with Prudent Utility Practice, and shall use its best efforts to maintain, preserve, reconstruct and keep the same or cause the same to be so maintained, preserved, reconstructed and kept, with the appurtenances and every part and parcel thereof, in good repair, working order and condition, and shall from time to time make, or use its best efforts to cause to be made, all necessary and proper repairs, replacements and renewals so that at all times the operation of the System may be properly and advantageously conducted. SECTION 711. Rents, Rates and Charges. 1. The Authority shall establish and collect rents, rates and charges under the Power Sales Contracts and shall otherwise charge and collect rents, rates and charges for the use or the sale of the output, capacity or service of the System which, together with other available Revenues, are reasonably expected to yield Net Revenues for the 12- month period commencing with the effective date of such rents, rates and charges which shall be equal to at least 1.10 times.the Aggregate Debt Service for such period and, in any event, as shall be required, together with other available funds, to pay or discharge all other indebtedness, charges and liens whatsoever payable out of Revenues under the Resolution; provided, however, that any Principal Installment which is a Refundable Principal Installment may be excluded from Aggregate Debt Service for purposes of the foregoing but only to the extent that the Authority intends to pay such Principal Installment from sources other than Revenues, Promptly upon any material change in the circumstances which were contemplated at the time such rents, rates and charges were most recently reviewed, but not less frequently than once every 12 months, the Authority shall review the rents, rates and charges so established and shall promptly establish or revise such rents, rates and charges as necessary to comply with the foregoing requirements,, provided that such rents, rates and charges shall in any event produce moneys sufficient to enable the Authority to comply with all its covenants under the Resolution. 2. The Authority will not furnish or supply or cause to be furnished or supplied any use, output, capacity, or service of the System, free of charge to any person, firm or corporation, public or private, and the Authority will enforce the payment of any and all accounts owing to the Authority by reason of the ownership and operation of the System by discontinuing such use, output, capacity, or service, or by filing suit therefor within 60 days after any such accounts are due, or by both such discontinuance and by filing suit. 3. In estimating Aggregate Debt Service on any Variable Rate Bonds for purposes of subsection 1 of this Section 711, the Authority shall be entitled to assume that such Variable Rate Bonds will bear such interest rate or rates as the Authority shall determine; provided, however, that the interest rate or rates assumed shall not be less than the interest rate borne by such Variable Rate Bonds at the time such estimate is made. SECTION 712. Power Sales Contracts; Amendment. The Authority shall collect all amounts payable to it pursuant to the Power Sales Contracts or payable to it pursuant to any other contract for the sale or use of output, capacity or other service from the System or any part thereof and as soon as practicable after receipt thereof, and in any event within ten days of such receipt, shall deposit the same in the Revenue Account in the Revenue Fund. The Authority shall enforce the provisions of the Power Sales Contracts and duly perform its covenants and agreements thereunder. The Authority will not consent or agree to or permit any rescission of or amendment to any Power Sales Contract unless it shall have delivered to the Trustee (a) a certificate of the Consulting Engineer stating that, in its opinion, such action will not impair the Authority's ability to comply with the covenant set forth in Section 711 hereof and (b) a certificate of an Authorized Officer of the
34 Authority setting forth a determination by the Authority's Board of Directors that, taking into account all relevant facts and circumstances, including, if and to the extent the Board deems appropriate, the advice of the Consulting Engineer as to engineering matters, an Opinion of Counsel of recognized standing in the field of law relating to municipal bonds as to legal matters and other consultants and advisors, such action will not have a material adverse effect on the interests of Bondholders. The extension of the term of any Power Sales Contract and the change of the full requirement period of any Power Sales Contract shall not constitute such an amendment nor shall (a) any change in or amendment to any schedule to any Power Sales Contract or (b) any amendment to any Power Sales Contract to permit a public trust or eligible public agency to purchase from the Southwestern Power Administration and utilize in its municipal electric system additional capacity and related energy. A copy of each Power Sales Contract certified by an Authorized Officer of the Authority shall be filed with the Trustee, and prior to execution by the Authority of any such amendment thereof, a copy of such amendment certified by an Authorized Officer of the Authority shall be filed with the Trustee. SECTION 7.13. Maintenance of Insurance. 1. The Authority shall at all times use its best efforts to keep or cause to be kept the properties of the System which are of an insurable nature and of the character usually insured by those operating properties similar to the System insured against loss or damage by fire and from other causes customarily insured against and in such relative amounts as are usually obtained. The Authority shall at all times use its best efforts to maintain or cause to be maintained insurance or reserves against loss or damage from such hazards and risks to the person and property of others as are usually insured or reserved against by those operating properties similar to the properties of the System. The Authority shall only be required to obtain such insurance if the same is available at reasonable rates and upon reasonable terms and conditions but if such insurance is not so obtainable, the Authority shall deliver an opinion to the Trustee of an independent insurance consultant to that effect. 2. The Authority shall also use its best efforts to maintain or cause to be maintained any additional or other insurance which it shall deem necessary or advisable to protect its interests and those of the Bondholders. 3. Any such insurance shall be in the form of policies or contracts for insurance with insurers of good standing and shall be payable to the Authority unless otherwise required by any agreement providing for the co-ownership by the Authority and any other entity of any facilities included in the System. 4. The Authority shall file with the Trustee annually, within 120 days after the close of each Fiscal Year, a certificate of an Authorized Officer of the Authority setting forth (i) a description in reasonable detail of the insurance then in effect pursuant to the requirements of this Section and that the Authority has complied in all respects with the requirements of this Section, and (ii) whether during such Fiscal Year any portion of the System has been damaged or destroyed and, if so, the amount of insurance proceeds covering such loss or damage and specifying the Authority's reasonable and necessary costs of reconstruction or replacement thereof. SECTION 714. Reconstruction; Application of Insurance Proceeds. 1. If any useful portion of the System shall be damaged or destroyed, the Authority shall, as expeditiously as possible, continuously and diligently prosecute or cause to be prosecuted the reconstruction or replacement thereof, unless the Consulting Engineer in a certificate filed with the Trustee shall state, in the opinion of signer, that such reconstruction and replacement is not in the interest of the Authority and the Bondholders or unless it is determined under the provisions of any agreement relating to the co-ownership of such portion of the System by the Authority and another entity that such reconstruction and replacements are not to be undertaken. The proceeds of any insurance paid on account of such damage or destruction (other than any business interruption loss insurance or
35 insurance proceeds deposited in the Construction Fund pursuant- to subsection 3 of Section 503), unless held and applied under any such agreement, shall be held by the Authority in a special account and made available for, and to the extent necessary be applied to, the cost of such reconstruction or replacement. Pending such application, such proceeds may be invested by the Authority in Investment Securities which mature not later than such times as shall be necessary to provide moneys when needed to pay such costs of reconstruction or replacement or may be invested as otherwise provided for under any such agreement. Interest earned on such investments shall be deposited in the Revenue Fund. The proceeds of any insurance not applied within 36 months after receipt thereof by the Authority to repairing or replacing damaged or destroyed property, or in respect of which notice in writing of intention to apply the same to the work of repairing or replacing the property damaged or destroyed shall not have been given to the Trustee by the Authority within such 36 months, or which the Authority shall at any time notify the Trustee are not to be so applied, shall be deposited in the General Reserve Fund unless otherwise applied or to be applied in accordance with any such agreement. Notwithstanding the foregoing, in the event that payments are made from the Reserve and Contingency Fund for any such repairing or replacing of property damaged or destroyed prior to the availability of insurance proceeds therefor, such insurance proceeds when received shall be deposited in the Reserve and Contingency Fund to the extent of such payments therefrom* 2. If the proceeds of insurance authorized by this Section to be applied to the reconstruction or replacement of any portion of the System are insufficient for such purpose, the deficiency may be supplied out of moneys in the Reserve and Contingency Fund to the extent, as shown by a certificate of the Consulting Engineer filed with the Trustee, not needed to be reserved for the purposes provided therefor. 3. The proceeds of business interruption loss insurance, if any, shall be paid into the Revenue Account in the Revenue Fund. SECTION 715. Accounts and Reports. 1. The Authority shall keep or cause to be kept proper books of record and account (separate from all other records and accounts) in which complete and correct entries shall be made of its transactions relating to the System and each Fund and Account established under the Resolution and relating to its costs and charges under the Power Sales Contracts, and which, together with all Power Sales Contracts and all other books and papers of the .Authority, including insurance policies, relating to the System, shall at all times be subject to the inspection of the Trustee and the Holders of an aggregate of not less than 5% in principal amount of the Bonds then Outstanding or their representatives duly authorized in writing. 2. The Trustee and the Authority shall advise each other promptly after the end of each fiscal quarter of their respective transactions during such quarter relating to each Fund and Account held by it under the Resolution. 3. The Authority shall annually y within 120 days after the close of each Fiscal Year (the first such report to be filed with respect to the Fiscal Year ending December 31, 1985), file with the Trustee, and otherwise as provided by law, a copy of an annual report for such Fiscal Year, accompanied by an Accountant's Certificate relating to the System which shall include the following statements in reasonable detail: a statement of assets and liabilities as of the end of such Fiscal Year, to the extent relating to the System; a statement of Revenues and Operation and Maintenance Expenses for such Fiscal Year; and a summary with respect to each Fund and Account established under the Resolution of the receipts therein and disbursements therefrom during such Fiscal Year and the amount held therein at the end of such Fiscal Year. Such Accountant's Certificate shall state whether or not, to the knowledge of the signer, the Authority is in default with respect to any of the covenants, agreements or conditions on its part contained in the Resolution, and if so, the nature of such default.
36 4. The Authority shall file with the Trustee no later than 180 days following the end oleach five- year period, beginning with the fifth full Fiscal Year ending after the adoption of the Resolution, a report or survey with respect to the operation and maintenance of the properties constituting the System, the making of necessary and proper renewals and replacements thereof and the status of the Annual Budget and the construction budget applicable to any part of the System which shall be under construction. Such report or survey shall be in sufficient detail to show whether the Authority has performed and complied with the covenants contained in the Resolution relating to such matters. 5. The reports, statements and other documents required to be furnished to the Trustee pursuant to any provisions of the Resolution shall be available for the inspection of Bondholders at the office of the Trustee and shall be mailed to each Bondholder who shall file a written request therefor with the Authority. The Authority may charge for such reports, statements and other documents, a reasonable fee to cover reproduction, handling and postage. 6. The Authority shall file with the Trustee (a) forthwith upon becoming aware of any Event of Default or default in the performance by the Authority of any covenant, agreement or condition contained in the Resolution, a certificate signed by an appropriate Authorized Officer of the Authority and specifying such Event of Default or default and (b) within 120 days after the end of each Fiscal Year, commencing with the Fiscal Year ending December 31,1985, a certificate signed by an appropriate Authorized Officer of the Authority stating that, to the best of his knowledge and belief, the Authority has kept, observed, performed and fulfilled each and every one of its covenants and obligations contained in the Resolution and there does not exist at the date of such certificate any default by the Authority under the Resolution or any Event of Default or other event which, with the lapse of time specified in Section 801 would become an Event of Default, or, if any such default or Event of Default or other event shall so exist, specifying the same and the nature and status thereof. SECTION 716. Payment of Taxes and Charges. The Authority will from time to time duly pay and discharge, or cause to be paid and discharged, all taxes, assessments and other governmental charges, or required payments in lieu thereof, lawfully imposed upon the properties of the Authority or upon the rights, revenues, income, receipts, and other moneys, securities and funds of the Authority when the same shall become due (including all rights, moneys and other property transferred, assigned or pledged under the Resolution), and all lawful claims for labor and material and supplies, except those taxes, assessments, charges or claims which the Authority shall in good faith contest by proper legal proceedings if the Authority shall in all such cases have set aside on its books reserves deemed adequate with respect thereto. SECTION 717. Tax Covenants. 1. Arbitrage Covenant. The Authority agrees that it will make no use of proceeds of the Bonds, or of amounts which may be treated as proceeds thereof, which would cause the Bonds to be "arbitrage bonds" within the meaning of Section 103 (c) of the Internal Revenue Code, as amended, and the applicable Treasury Regulations promulgated thereunder. 2. General. The Authority covenants that it will not take any action or fail to take any action with respect to the proceeds of the Bonds or ownership or use of any useful portion of the System that would result in loss of the exemption from state income taxation or federal income taxation pursuant to section 103(a) of the Internal Revenue Code of 1954, as amended, of interest paid on Outstanding Bonds which, when initially issued and sold, were the subject of an Opinion of Counsel to the effect that interest thereon (including, for this purpose, earned discount on discount Bonds) was so exempt. SECTION 718. General. 1. The Authority shall do and perform or cause to be done and performed all acts and things required to be done or performed by or on behalf of the Authority under the provisions of the Act and the Resolution.
37 ACCEPTANCE OF OFFICE OF TRUSTEE The undersigned, Bank of Oklahoma, Oklahoma City, N.A., hereby accepts its appointment as Trustee under the foregoing Power Supply System Revenue Bond Resolution, as supplemented and amended from time to time, and accepts the duties and obligations imposed upon the Trustee by said Resolution.
[SEAL] BANK OP OKLAHOMA, OKLAHOMA CITY, N.A.
Attest: /s/ TOM BIGGERS By /s/ MARJORIE MATHES
SECRETARY'S CERTIFICATE The undersigned Secretary of Oklahoma Municipal Power Authority, keeper of the records and seal thereof, certifies that the foregoing is a true and correct copy of the Power Supply System Revenue Bond Resolution approved and adopted by the Board of Directors of said Authority in a meeting properly and lawfully called and assembled on June 10, 1985, the original of which Resolution has been entered in the official records of said Authority under my supervision and is in my official possession, custody and control.
[SEAL] /s/ JERALD D. STONE Secretary
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