(a) (1) No refunding bonds shall be issued until the debt refunded is cancelled simultaneously with the delivery of the refunding bonds either:

(A) By the surrender and cancellation of the bonds to be refunded; or

(B) If the outstanding bonds are redeemable before maturity and have been duly called for payment, by the deposit of the money for their payment upon presentation according to the terms of the call in trust with an escrow agent duly designated by the city council, which escrow agent shall be a bank or trust company whose trust funds are secured in the manner provided by the national or state banking laws and regulations thereunder; or

(C) By a combination of methods (A) and (B).

(2) The refunding bonds shall not be in a greater principal amount than the principal amount of the bonds to be refunded and shall not bear a greater rate of interest than that borne by the bonds to be refunded, except that the owners of the outstanding bonds taking refunding bonds in exchange or the purchasers, as the case may be, may have the privilege of conversion to bonds bearing a lower rate of interest, provided that by the conversion the city will receive no less and pay no more in principal and interest combined substantially than it would receive and pay if the bonds were not converted.

(b)

(1) The refunding bonds may be exchanged for outstanding bonds or they may be sold for cash and the proceeds used to pay the outstanding bonds, or part may be exchanged and part may be sold.

(2) No refunding bonds shall be sold except at public sale after twenty (20) days' advertisement in some newspaper of bona fide circulation in the city issuing them.

(3) The refunding bonds that are sold shall be duly executed and deposited with the designated escrow agent which shall have authority to deliver them to the purchaser upon payment to it of the purchase price on or before the redemption date of the bonds that have been called, provided that the city has deposited with the escrow agent a sum sufficient to pay the interest on the bonds called to the redemption date.

(4) The proceeds of the sale of the refunding bonds and the interest to be paid by the city shall be held by the escrow agent and applied solely to the payment of the principal of the bonds refunded at their call date and the accrued interest thereon to that date when they are presented for payment.

(c) When any refunding bonds are to be exchanged for outstanding bonds, they may be executed and delivered to the escrow agent which shall have authority, from time to time, as outstanding bonds are presented to it for exchange, to deliver refunding bonds in principal amount of the same proportion of the total principal amount of the refunding bonds that the principal amount of the outstanding bonds to be exchanged bears to the total principal amount of the outstanding bonds to be refunded.