Item 7B Part OneORDINANCE NO.
AN ORDINANCE authorizing the issuance of "CITY OF SOUTHLAKE, TEXAS,
TAX AND WATERWORKS AND SEWER SYSTEM SURPLUS
REVENUE CERTIFICATES OF OBLIGATION, SERIES 2004A ";
specifying the terms and features of said certificates; providing for the
payment of said certificates of obligation by the levy of an ad valorem tax
upon all taxable property within the City and a lien on and pledge of the
net revenues from the operation of the City's Waterworks and Sewer
System; and resolving other matters incident and relating to the issuance,
payment, security, sale and delivery of said Certificates, including the
approval and execution of a Paying Agent /Registrar Agreement and a
Purchase Contract and the approval and distribution of an Official
Statement; and providing an effective date.
WHEREAS, notice of the City Council's intention to issue certificates of obligation in the
maximum principal amount of $3,500,000 for the purpose of paying contractual obligations to be
incurred for (i) the construction of public works, to wit: improvements and extensions to the
City's combined Waterworks and Sewer System, and (ii) professional services rendered in
relation to such projects and the financing thereof; has been duly published in The Fort Worth
Star Telegram on , 2004 and , 2004, the date the first publication of
such notice being not less than fifteen (15) days prior to the tentative date stated therein for the
adoption of the ordinance authorizing the issuance of such certificates; and
WHEREAS, no petition protesting the issuance of the certificates of obligation and
bearing valid petition signatures of at least 5% of the qualified electors of the City, has been
presented to or filed with the Mayor, City Secretary or any other official of the City on or prior to
the date of the passage of this ordinance; and
WHEREAS, the Council hereby finds and determines that the certificates of obligation
described in the aforesaid notice should be issued and sold at this time in the amount and
manner as hereinafter provided; now, therefore,
BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF SOUTHLAKE, TEXAS:
SECTION 1: Authorization, Designation, Principal Amount, Purpose Certificates of
obligation of the City shall be and are hereby authorized to be issued in the aggregate principal
amount of $2,965,000, to be designated and bear the title "CITY OF SOUTHLAKE, TEXAS,
TAX AND WATERWORKS AND SEWER SYSTEM SURPLUS REVENUE CERTIFICATES OF
OBLIGATION, SERIES 2004A" (hereinafter referred to as the "Certificates "), for the purpose of
paying contractual obligations to be incurred for (i) the construction of public works, to wit:
improvements and extensions to the City's combined Waterworks and Sewer System, and (ii)
professional services rendered in relation to such projects and the financing thereof; pursuant to
authority conferred by and in conformity with the Constitution and laws of the State of Texas,
including V.T.C.A., Local Government Code, Subchapter C of Chapter 271, as amended.
SECTION 2: Fully Registered Obligations - Authorized Denominations - Stated
Maturities -Date. The Certificates are issuable in fully registered form only; shall be dated
June 1, 2004 (the "Certificate Date ") and shall be in denominations of $5,000 or any integral
multiple thereof (within a Stated Maturity) and the Certificates shall become due and payable on
45461955.1
February 15 in each of the years and in principal amounts (the "Stated Maturities ") and bear
interest at the per annum rate(s) in accordance with the following schedule:
Year of
Principal
Interest
Stated Maturity
Amount
Rate (s
2005
$100,000
%
2006
105,000
%
2007
105,000
%
2008
110,000
%
2009
115,000
%
2010
115,000
%
2011
120,000
%
2012
125,000
%
2013
130,000
%
2014
140,000
%
2015
145,000
%
2016
150,000
%
2017
155,000
%
2018
165,000
%
2019
175,000
%
2020
180,000
%
2021
190,000
%
2022
200,000
%
2023
215,000
%
2024
225,000
%
The Certificates shall bear interest on the unpaid principal amounts from the Certificate
Date at the rate per annum shown above in this Section (calculated on the basis of a 360 -day
year of twelve 30 -day months), and such interest shall be payable on February 15 and August
15 of each year, commencing August 15, 2004.
SECTION 3: Terms of Payment- Paving Agent /Registrar. The principal of, premium, if
any, and the interest on the Certificates, due and payable by reason of maturity, redemption, or
otherwise, shall be payable only to the registered owners or holders of the Certificates
(hereinafter called the "Holders ") appearing on the registration and transfer books maintained by
the Paying Agent /Registrar and the payment thereof shall be 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, and shall be without exchange or collection charges to the Holders.
The selection and appointment of Wachovia Bank, National Association, Houston, Texas
to serve as Paying Agent /Registrar for the Certificates is hereby approved and confirmed.
Books and records relating to the registration, payment, transfer and exchange of the
Certificates (the "Security Register ") shall at all times be kept and maintained on behalf of the
City by the Paying Agent /Registrar, as provided herein and in accordance with the terms and
provisions of a "Paying Agent /Registrar Agreement ", substantially in the form attached hereto as
Exhibit A, and such reasonable rules and regulations as the Paying Agent /Registrar and the City
may prescribe. The Mayor and City Secretary are authorized to execute and deliver such
Agreement in connection with the delivery of the Certificates. The City covenants to maintain
and provide a Paying Agent /Registrar at all times until the Certificates are paid and discharged,
and any successor Paying Agent /Registrar shall be a bank, trust company, financial institution
45461955.1 2
or other entity qualified and authorized to serve in such capacity and perform the duties and
services of Paying Agent /Registrar. Upon any change in the Paying Agent /Registrar for the
Certificates, the City agrees to promptly cause a written notice thereof to be sent to each Holder
by United States Mail, first class postage prepaid, which notice shall also give the address of the
new Paying Agent/Registrar.
Principal of and premium, if any, on the Certificates shall be payable at the Stated
Maturities or the redemption thereof only upon presentation and surrender of the Certificates to
the Paying Agent /Registrar at its designated offices in Charlotte, North Carolina (the
"Designated Payment/Transfer Office "). Interest on the Certificates shall be paid to the Holders
whose name appears in the Security Register at the close of business on the Record Date (the
last business day of the month next preceding each interest payment date) and shall be paid by
the Paying Agent /Registrar (i) by check sent United States Mail, first class postage prepaid, to
the address of the Holder recorded in the Security Register or (ii) by such other method,
acceptable to the Paying Agent /Registrar, requested by, and at the risk and expense of, the
Holder. If the date for the payment of the principal of or interest on the Certificates shall be a
Saturday, Sunday, a legal holiday, or a day when banking institutions in the City where the
Designated Payment/Transfer Office of the Paying Agent /Registrar is located are authorized by
law or executive order to close, then the date for such payment shall be the next succeeding
day which is not such a Saturday, Sunday, legal holiday, or day when banking institutions are
authorized to close; and payment on such date shall have the same force and effect as if made
on the original date payment was due.
In the event of a nonpayment of interest on a scheduled payment date, and for thirty (30)
days thereafter, a new record date for such interest payment (a "Special Record Date ") will be
established by the Paying Agent /Registrar, if and when funds for the payment of such interest
have been received from the City. Notice of the Special Record Date and of the scheduled
payment date of the past due interest (which shall be 15 days after the Special Record Date)
shall be sent at least five (5) business days prior to the Special Record Date by United States
Mail, first class postage prepaid, to the address of each Holder appearing on the Security
Register at the close of business on the last business next preceding the date of mailing of such
notice.
SECTION 4: Redemption (a) Optional Redemption The Certificates maturing on and
after February 15, 2014 shall be subject to redemption prior to maturity, at the option of the City,
in whole or in part in principal amounts of $5,000 or any integral multiple thereof (and if within a
Stated Maturity by lot by the Paying Agent /Registrar), on February 15, 2013, or on any date
thereafter at the redemption price of par plus accrued interest to the date of redemption.
(b) Exercise of Redemption Option At least forty -five (45) days prior to a
redemption date for the Certificates (unless a shorter notification period shall be satisfactory to
the Paying Agent /Registrar), the City shall notify the Paying Agent /Registrar of the decision to
redeem Certificates, the principal amount of each Stated Maturity to be redeemed, and the date
of redemption therefor. The decision of the City to exercise the right to redeem Certificates shall
be entered in the minutes of the governing body of the City.
(c) Selection of Certificates for Redemption If less than all Outstanding Certificates
of the same Stated Maturity are to be redeemed on a redemption date, the Paying
Agent /Registrar shall treat such Certificates as representing the number of Certificates
Outstanding which is obtained by dividing the principal amount of such Certificates by $5,000
and shall select the Certificates to be redeemed within such Stated Maturity by lot.
45461955.1 3
(d) Notice of Redemption Not less than thirty (30) days prior to a redemption date
for the Certificates, a notice of redemption shall be sent by United States Mail, first class
postage prepaid, in the name of the City and at the City's expense, to each Holder of a
Certificate to be redeemed in whole or in part at the address of the Holder appearing on the
Security Register at the close of business on the business day next preceding the date of
mailing such notice, and any notice of redemption so mailed shall be conclusively presumed to
have been duly given irrespective of whether received by the Holder.
All notices of redemption shall (i) specify the date of redemption for the Certificates, (ii)
identify the Certificates to be redeemed and, in the case of a portion of the principal amount to
be redeemed, the principal amount thereof to be redeemed, (iii) state the redemption price,
(iv) state that the Certificates, or the portion of the principal amount thereof to be redeemed,
shall become due and payable on the redemption date specified and the interest thereon, or on
the portion of the principal amount thereof to be redeemed, shall cease to accrue from and after
the redemption date, provided moneys sufficient for the payment of such Certificate (or the
principal amount thereof to be redeemed) at the then applicable redemption price are held for
the purpose of such payment by the Paying Agent /Registrar and (v) specify that payment of the
redemption price for the Certificates, or the principal amount thereof to be redeemed, shall be
made at the Designated Payment /Transfer Office of the Paying Agent/Registrar only upon
presentation and surrender of the Certificates. If a Certificate is subject by its terms to prior
redemption and has been called for redemption and notice of redemption has been duly given
as hereinabove provided, such Certificate (or the principal amount thereof to be redeemed) shall
become due and payable and interest thereon shall cease to accrue from and after the
redemption date therefor.
SECTION 5: Registration - Transfer - Exchange of Certificates - Predecessor
Certificates. The Paying Agent /Registrar shall obtain, record, and maintain in the Security
Register the name and address of each and every owner of the Certificates issued under and
pursuant to the provisions of this Ordinance, or if appropriate, the nominee thereof. Any
Certificate may be transferred or exchanged for Certificates of other authorized denominations
by the Holder, in person or by his duly authorized agent, upon surrender of such Certificate to
the Paying Agent /Registrar for cancellation, accompanied by a written instrument of transfer or
request for exchange duly executed by the Holder or by his duly authorized agent, in form
satisfactory to the Paying Agent/Registrar.
Upon surrender of any Certificate (other than the Initial Certificate(s) authorized in
Section 8 hereof) for transfer at the Designated Payment/Transfer Office of the Paying
Agent /Registrar, the Paying Agent /Registrar shall register and deliver, in the name of the
designated transferee or transferees, one or more new Certificates of authorized denominations
and having the same Stated Maturity and of a like aggregate principal amount as the Certificate
or Certificates surrendered for transfer.
At the option of the Holder, Certificates (other than the Initial Certificate(s) authorized in
Section 8 hereof) may be exchanged for other Certificates of authorized denominations and
having the same Stated Maturity, bearing the same rate of interest and of like aggregate
principal amount as the Certificates surrendered for exchange, upon surrender of the
Certificates to be exchanged at the Designated Payment /Transfer Office of the Paying
Agent/Registrar. Whenever any Certificates are surrendered for exchange, the Paying
Agent /Registrar shall register and deliver new Certificates to the Holder requesting the
exchange.
45461955.1 4
All Certificates issued in any transfer or exchange of Certificates shall be delivered to the
Holders at the Designated Payment /Transfer Office of the Paying Agent /Registrar or sent by
United States Mail, first class, postage prepaid to the Holders, and, upon the registration and
delivery thereof, the same shall be the valid obligations of the City, evidencing the same
obligation to pay, and entitled to the same benefits under this Ordinance, as the Certificates
surrendered in such transfer or exchange.
All transfers or exchanges of Certificates pursuant to this Section shall be made without
expense or service charge to the Holder, except as otherwise herein provided, and except that
the Paying Agent /Registrar shall require payment by the Holder requesting such transfer or
exchange of any tax or other governmental charges required to be paid with respect to such
transfer or exchange.
Certificates cancelled by reason of an exchange or transfer pursuant to the provisions
hereof are hereby defined to be "Predecessor Certificates," evidencing all or a portion, as the
case may be, of the same obligation to pay evidenced by the new Certificate or Certificates
registered and delivered in the exchange or transfer therefor. Additionally, the term
"Predecessor Certificates" shall include any mutilated, lost, destroyed, or stolen Certificate for
which a replacement Certificate has been issued, registered and delivered in lieu thereof
pursuant to the provisions of Section 20 hereof and such new replacement Certificate shall be
deemed to evidence the same obligation as the mutilated, lost, destroyed, or stolen Certificate.
Neither the City nor the Paying Agent /Registrar shall be required to issue or transfer to
an assignee of a Holder any Certificate called for redemption, in whole or in part, within 45 days
of the date fixed for the redemption of such Certificate; provided, however, such limitation on
transferability shall not be applicable to an exchange by the Holder of the unredeemed balance
of a Certificate called for redemption in part.
SECTION 6: Book -Entry Only Transfers and Transactions Notwithstanding the
provisions contained in Sections 3, 4 and 5 hereof relating to the payment, and
transfer /exchange of the Certificates, the City hereby approves and authorizes the use of
"Book -Entry Only" securities clearance, settlement and transfer system provided by The
Depository Trust Company (DTC), a limited purpose trust company organized under the laws of
the State of New York, in accordance with the operational arrangements referenced in the
Blanket Issuer Letter of Representation, by and between the City and DTC (the "Depository
Agreement ").
Pursuant to the Depository Agreement and the rules of DTC, the Certificates shall be
deposited with DTC who shall hold said Certificates for its participants (the "DTC Participants ").
While the Certificates are held by DTC under the Depository Agreement, the Holder of the
Certificates on the Security Register for all purposes, including payment and notices, shall be
Cede & Co., as nominee of DTC, notwithstanding the ownership of each actual purchaser or
owner of each Certificate (the "Beneficial Owners ") being recorded in the records of DTC and
DTC Participants.
In the event DTC determines to discontinue serving as securities depository for the
Certificates or otherwise ceases to provide book -entry clearance and settlement of securities
transactions in general or the City determines that DTC is incapable of properly discharging its
duties as securities depository for the Certificates, the City covenants and agrees with the
Holders of the Certificates to cause Certificates to be printed in definitive form and provide for
the Certificate certificates to be issued and delivered to DTC Participants and Beneficial
45461955.1 5
Owners, as the case may be. Thereafter, the Certificates in definitive form shall be assigned,
transferred and exchanged on the Security Register maintained by the Paying Agent /Registrar
and payment of such Certificates shall be made in accordance with the provisions of Sections 3,
4 and 5 hereof.
SECTION 7: Execution - Registration The Certificates shall be executed on behalf of
the City by the Mayor under its seal reproduced or impressed thereon and countersigned by the
City Secretary. The signature of said officers on the Certificates may be manual or facsimile.
Certificates bearing the manual or facsimile signatures of individuals who are or were the proper
officers of the City on the Certificate Date shall be deemed to be duly executed on behalf of the
City, notwithstanding that one or more of the individuals executing the same shall cease to be
such officer at the time of delivery of the Certificates to the initial purchaser(s) and with respect
to Certificates delivered in subsequent exchanges and transfers, all as authorized and provided
in V.T.C.A., Government Code, Chapter 1201.
No Certificate shall be entitled to any right or benefit under this Ordinance, or be valid or
obligatory for any purpose, unless there appears on such Certificate either a certificate of
registration substantially in the form provided in Section 9C, manually executed by the
Comptroller of Public Accounts of the State of Texas, or his duly authorized agent, or a
certificate of registration substantially in the form provided in Section 9D, manually executed by
an authorized officer, employee or representative of the Paying Agent /Registrar, and either such
certificate duly signed upon any Certificate shall be conclusive evidence, and the only evidence,
that such Certificate has been duly certified, registered and delivered.
SECTION 8: Initial Certificate(s) The Certificates herein authorized shall be initially
issued either (i) as a single fully registered certificate in the total principal amount stated in
Section 1 hereof with principal installments to become due and payable as provided in Section 2
hereof and numbered T -1, or (ii) as multiple fully registered certificates, being one certificate for
each year of maturity in the applicable principal amount and denomination and to be numbered
consecutively from T -1 and upward (hereinafter called the "Initial Certificate(s) ") and, in either
case, the Initial Certificate(s) shall be registered in the name of the initial purchaser(s) or the
designee thereof. The Initial Certificate(s) shall be the Certificates submitted to the Office of the
Attorney General of the State of Texas for approval, certified and registered by the Office of the
Comptroller of Public Accounts of the State of Texas and delivered to the initial purchaser(s).
Any time after the delivery of the Initial Certificate(s), the Paying Agent /Registrar, pursuant to
written instructions from the initial purchaser(s), or the designee thereof, shall cancel the Initial
Certificate(s) delivered hereunder and exchange therefor definitive Certificates of authorized
denominations, Stated Maturities, principal amounts and bearing applicable interest rates for
transfer and delivery to the Holders named at the addresses identified therefor; all pursuant to
and in accordance with such written instructions from the initial purchaser(s), or the designee
thereof, and such other information and documentation as the Paying Agent /Registrar may
reasonably require.
SECTION 9: Forms A. Forms Generally The Certificates, the Registration
Certificate of the Comptroller of Public Accounts of the State of Texas, the Registration
Certificate of Paying Agent /Registrar, and the form of Assignment to be printed on each of the
Certificates, shall be substantially in the forms set forth in this Section with such appropriate
insertions, omissions, substitutions, and other variations as are permitted or required by this
Ordinance and may have such letters, numbers, or other marks of identification (including
identifying numbers and letters of the Committee on Uniform Securities Identification
Procedures of the American Bankers Association) and such legends and endorsements
45461955.1 6
(including insurance legends in the event the Certificates, or any maturities thereof, are
purchased with insurance and any reproduction of an opinion of counsel) thereon as may,
consistently herewith, be established by the City or determined by the officers executing such
Certificates as evidenced by their execution. Any portion of the text of any Certificates may be
set forth on the reverse thereof, with an appropriate reference thereto on the face of the
certificate.
The definitive Certificates and the Initial Certificate(s) shall be printed, lithographed, or
engraved, typewritten, photocopied or otherwise reproduced in any other similar manner, all as
determined by the officers executing such Certificates as evidenced by their execution.
B. Form of Certificates
REGISTERED REGISTERED
NO. $
UNITED STATES OF AMERICA
STATE OF TEXAS
CITY OF SOUTHLAKE, TEXAS,
TAX AND WATERWORKS AND SEWER SYSTEM SURPLUS
REVENUE CERTIFICATE OF OBLIGATION, SERIES 2004A
Certificate Date: Interest Rate: Stated Maturity: CUSIP NO:
June 1, 2004 % February 15,
Registered Owner:
Principal Amount: DOLLARS
The City of Southlake (hereinafter referred to as the "City "), a body corporate and
municipal corporation in the Counties of Tarrant and Denton, State of Texas, for value received,
acknowledges itself indebted to and hereby promises to pay to the order of the Registered
Owner named above, or the registered assigns thereof, on the Stated Maturity date specified
above the Principal Amount hereinabove stated (or so much thereof as shall not have been paid
upon prior redemption) and to pay interest on the unpaid principal amount hereof from the
Certificate Date at the per annum rate of interest specified above computed on the basis of a
360 -day year of twelve 30 -day months; such interest being payable on February 15 and August
15 in each year, commencing August 15, 2004. Principal of this Certificate is payable at its
Stated Maturity or redemption to the registered owner hereof, upon presentation and surrender,
at the Designated Payment/Transfer Office of the Paying Agent /Registrar executing the
registration certificate appearing hereon, or its successor; provided, however, while this
Certificate is registered to Cede & Co., the payment of principal upon a partial redemption of the
principal amount hereof may be accomplished without presentation and surrender of this
Certificate. Interest is payable to the registered owner of this Certificate (or one or more
Predecessor Certificates, as defined in the Ordinance hereinafter referenced) whose name
appears on the "Security Register" maintained by the Paying Agent/Registrar at the close of
business on the "Record Date ", which is the last business day of the month next preceding
each interest payment date, and interest shall be paid by the Paying Agent /Registrar by check
sent United States Mail, first class postage prepaid, to the address of the registered owner
recorded in the Security Register or by such other method, acceptable to the Paying
Agent /Registrar, requested by, and at the risk and expense of, the registered owner. All
45461955.1 7
payments of principal of, premium, if any, and interest on this Certificate shall be without
exchange or collection charges to the owner hereof and 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.
This Certificate is one of the series specified in its title issued in the aggregate principal
amount of $2,965,000 (herein referred to as the "Certificates ") for the purpose of paying
contractual obligations to be incurred for (i) the construction of public works, to wit:
improvements and extensions to the City's combined Waterworks and Sewer System, and (ii)
professional services rendered in relation to such projects and the financing thereof; under and
in strict conformity with the Constitution and laws of the State of Texas, particularly V.T.C.A.,
Local Government Code, Subchapter C of Chapter 271, as amended, and pursuant to an
Ordinance adopted by the City Council of the City (herein referred to as the "Ordinance ").
The Certificates maturing on and after February 15, 2014, may be redeemed prior to
their Stated Maturities, at the option of the City, in whole or in part in principal amounts of
$5,000 or any integral multiple thereof (and if within a Stated Maturity by lot by the Paying
Agent/Registrar), on February 15, 2013, or on any date thereafter, at the redemption price of
par, together with accrued interest to the date of redemption.
At least thirty days prior to a redemption date, the City shall cause a written notice of
such redemption to be sent by United States Mail, first class postage prepaid, to the registered
owners of each Certificate to be redeemed at the address shown on the Security Register and
subject to the terms and provisions relating thereto contained in the Ordinance. If a Certificate
(or any portion of its principal sum) shall have been duly called for redemption and notice of
such redemption duly given, then upon the redemption date such Certificate (or the portion of its
principal sum to be redeemed) shall become due and payable, and, if moneys for the payment
of the redemption price and the interest accrued on the principal amount to be redeemed to the
date of redemption are held for the purpose of such payment by the Paying Agent /Registrar,
interest shall cease to accrue and be payable from and after the redemption date on the
principal amount redeemed.
In the event a portion of the principal amount of a Certificate is to be redeemed and the
registered owner is someone other than Cede & Co., payment of the redemption price of such
principal amount shall be made to the registered owner only upon presentation and surrender of
such Certificate to the Designated Payment/Transfer Office of the Paying Agent /Registrar, and a
new Certificate or Certificates of like maturity and interest rate in any authorized denominations
provided by the Ordinance for the then unredeemed balance of the principal sum thereof will be
issued to the registered owner, without charge. If a Certificate is selected for redemption, in
whole or in part, the City and the Paying Agent /Registrar shall not be required to transfer such
Certificate to an assignee of the registered owner within 45 days of the redemption date
therefor; provided, however, such limitation on transferability shall not be applicable to an
exchange by the registered owner of the unredeemed balance of a Certificate redeemed in part.
The Certificates are payable from the proceeds of an ad valorem tax levied, within the
limitations prescribed by law, upon all taxable property in the City and, together with the
outstanding Previously Issued Certificates (identified and defined in the Ordinance), are
additionally payable from and secured by a lien on and pledge of the Net Revenues (as defined
in the Ordinance) of the City's combined Waterworks and Sewer System (the "System "), such
lien and pledge, however, being junior and subordinate to the lien on and pledge of the Net
Revenues of the System securing the payment of "Prior Lien Obligations" (as defined in the
45461955.1 8
Ordinance) now outstanding and hereafter issued by the City. In the Ordinance, the City
reserves and retains the right to issue Prior Lien Obligations without limitation as to principal
amount but subject to any applicable terms, conditions or restrictions under law or otherwise as
well as the right to issue additional obligations payable from the same sources as the
Certificates and, together with the Certificates and the Previously Issued Certificates, equally
and ratably secured by a parity lien on and pledge of the Net Revenues of the System.
Reference is hereby made to the Ordinance, a copy of which is on file in the Designated
Payment /Transfer Office of the Paying Agent /Registrar, and to all the provisions of which the
owner or holder of this Certificate by the acceptance hereof hereby assents, for definitions of
terms; the description of and the nature and extent of the tax levied for the payment of the
Certificates; the Net Revenues pledged to the payment of the principal of and interest on the
Certificates; the nature and extent and manner of enforcement of the pledge; the terms and
conditions relating to the transfer or exchange of this Certificate; the conditions upon which the
Ordinance may be amended or supplemented with or without the consent of the Holders; the
rights, duties, and obligations of the City and the Paying Agent /Registrar; the terms and
provisions upon which the tax levy and the pledges, charges and covenants made therein may
be discharged at or prior to the maturity of this Certificate, and this Certificate deemed to be no
longer Outstanding thereunder; and for the other terms and provisions contained therein.
Capitalized terms used herein have the meanings assigned in the Ordinance.
This Certificate, subject to certain limitations contained in the Ordinance, may be
transferred on the Security Register only upon its presentation and surrender at the Designated
Payment /Transfer Office of the Paying Agent /Registrar, with the Assignment hereon duly
endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the
Paying Agent/Registrar duly executed by, the registered owner hereof, or his duly authorized
agent. When a transfer on the Security Register occurs, one or more new fully registered
Certificates of the same Stated Maturity, of authorized denominations, bearing the same rate of
interest, and of the same aggregate principal amount will be issued by the Paying
Agent /Registrar to the designated transferee or transferees.
The City and the Paying Agent /Registrar, and any agent of either, shall treat the
registered owner whose name appears on the Security Register (i) on the Record Date as the
owner entitled to payment of interest hereon, (ii) on the date of surrender of this Certificate as
the owner entitled to payment of principal hereof at its Stated Maturity or its redemption, in
whole or in part, and (iii) on any other date as the owner for all other purposes, and neither the
City nor the Paying Agent /Registrar, or any agent of either, shall be affected by notice to the
contrary. In the event of nonpayment of interest on a scheduled payment date and for thirty (30)
days thereafter, a new record date for such interest payment (a "Special Record Date ") will be
established by the Paying Agent /Registrar, if and when funds for the payment of such interest
have been received from the City. Notice of the Special Record Date and of the scheduled
payment date of the past due interest (which shall be 15 days after the Special Record Date)
shall be sent at least five (5) business days prior to the Special Record Date by United States
Mail, first class postage prepaid, to the address of each Holder appearing on the Security
Register at the close of business on the last business day next preceding the date of mailing of
such notice.
It is hereby certified, recited, represented and declared that the City is a body corporate
and political subdivision duly organized and legally existing under and by virtue of the
Constitution and laws of the State of Texas; that the issuance of the Certificates is duly
authorized by law; that all acts, conditions and things required to exist and be done precedent to
45461955.1 9
and in the issuance of the Certificates to render the same lawful and valid obligations of the City
have been properly done, have happened and have been performed in regular and due time,
form and manner as required by the Constitution and laws of the State of Texas, and the
Ordinance; that the Certificates do not exceed any Constitutional or statutory limitation; and that
due provision has been made for the payment of the principal of and interest on the Certificates
as aforestated. In case any provision in this Certificate shall be invalid, illegal, or unenforceable,
the validity, legality, and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby. The terms and provisions of this Certificate and the Ordinance
shall be construed in accordance with and shall be governed by the laws of the State of Texas.
IN WITNESS WHEREOF, the City Council of the City has caused this Certificate to be
duly executed under the official seal of the City as of the Certificate Date.
CITY OF SOUTHLAKE, TEXAS
Mayor
COUNTERSIGNED:
City Secretary
(Seal)
C. *Form of Registration Certificate of Comptroller of Public Accounts to appear
on Initial Certificate(s) only.
REGISTRATION CERTIFICATE OF
COMPTROLLER OF PUBLIC ACCOUNTS
OFFICE OF THE COMPTROLLER
OF PUBLIC ACCOUNTS ) REGISTER NO.
THE STATE OF TEXAS
I HEREBY CERTIFY that this Certificate has been examined, certified as to validity and
approved by the Attorney General of the State of Texas, and duly registered by the Comptroller
of Public Accounts of the State of Texas.
WITNESS my signature and seal of office this
(SEAL)
Comptroller of Public Accounts
of the State of Texas
*NOTE TO PRINTER: Do not print on definitive Certificates
45461955.1 10
only.
D. Form of Certificate of Paying Agent /Registrar to appear on Definitive Certificates
REGISTRATION CERTIFICATE OF PAYING AGENT /REGISTRAR
This Certificate has been duly issued and registered under the provisions of the
within - mentioned Ordinance; the certificate or certificates of the above entitled and designated
series originally delivered having been approved by the Attorney General of the State of Texas
and registered by the Comptroller of Public Accounts, as shown by the records of the Paying
Agent /Registrar.
The designated office of the Paying Agent /Registrar located in Charlotte, North Carolina,
is the "Designated Payment /Transfer Office" for this Certificate.
WACHOVIA BANK,
NATIONAL ASSOCIATION,
Houston, Texas,
as Paying Agent /Registrar
Registration Date:
By
Authorized Signature
E. Form of Assignment
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns, and transfers unto
(Print or typewrite name, address, and zip code of transferee:)
(Social Security or other identifying number ) the within
Certificate and all rights thereunder, and hereby irrevocably constitutes and appoints
attorney to transfer the within Certificate on the books kept for registration thereof, with full
power of substitution in the premises.
DATED:
NOTICE: The signature on this
assignment must correspond with the
Signature guaranteed: name of the registered owner as it
appears on the face of the within
Certificate in every particular.
F. The Initial Certificate(s) shall be in the form set forth in paragraph B of this
Section, except that the form of a single fully registered Initial Certificate shall be modified
as follows:
45461955.1 11
(i) immediately under the name of the certificate the headings "Interest Rate ",
"Stated Maturity" and "CUSIP No:" shall be omitted;
(ii) paragraph one shall read as follows:
Registered Owner:
Principal Amount:
Dollars
The City of Southlake (hereinafter referred to as the "City "), a body corporate and
municipal corporation in the Counties of Tarrant and Denton, State of Texas, for value received,
acknowledges itself indebted to and hereby promises to pay to the order of the Registered
Owner named above, or the registered assigns thereof, the Principal Amount hereinabove
stated on February 15 in each of the years and in principal installments in accordance with the
following schedule:
PRINCIPAL INTEREST
YEAR INSTALLMENTS RATE
(Information to be inserted from schedule in Section 2 hereof).
(or so much thereof as shall not have been prepaid prior to maturity) and to pay interest on the
unpaid principal amounts hereof from the Certificate Date at the per annum rate(s) of interest
specified above computed on the basis of a 360 -day year of twelve 30 -day months; such
interest being payable on February 15 and August 15 of each year, commencing August 15,
2004. Principal installments of this Certificate are payable at its Stated Maturity or on a
prepayment date to the registered owner hereof by Wachovia Bank, National Association (the
"Paying Agent/Registrar "), upon presentation and surrender, at its designated offices in
Charlotte, North Carolina (the "Designated Payment /Transfer Office "). Interest is payable to the
registered owner of this Certificate whose name appears on the "Security Register" maintained
by the Paying Agent /Registrar at the close of business on the "Record Date ", which is the last
business day of the month next preceding each interest payment date hereof and interest shall
be paid by the Paying Agent /Registrar by check sent United States Mail, first class postage
prepaid, to the address of the registered owner recorded in the Security Register or by such
other method, acceptable to the Paying Agent/Registrar, requested by, and at the risk and
expense of, the registered owner. All payments of principal of, premium, if any, and interest on
this Certificate shall be without exchange or collection charges to the owner hereof and 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.
SECTION 10: Definitions For purposes of this Ordinance and for clarity with respect to
the issuance of the Certificates herein authorized, and the levy of taxes and appropriation of Net
Revenues therefor, the following words or terms, whenever the same appears herein without
qualifying language, are defined to mean as follows:
(a) The term "Additional Certificates" shall mean tax and revenue
obligations hereafter issued under and pursuant to the provisions of V.T.C.A.,
Local Government Code, Subchapter C of Chapter 271, or similar law hereafter
enacted and payable from ad valorem taxes and additionally payable from and
secured by a lien on and pledge of the Net Revenues of the System on a parity
45461955.1 12
with and of equal rank and dignity with the lien and pledge securing the payment
of the Previously Issued Certificates and the Certificates.
(b) The term "Certificates" shall mean the "CITY OF SOUTHLAKE,
TEXAS, TAX AND WATERWORKS AND SEWER SYSTEM SURPLUS
REVENUE CERTIFICATES OF OBLIGATION, SERIES 2004A" authorized by
this Ordinance.
(c) The term "Certificate Fund" shall mean the special Fund created
and established under the provisions of Section 11 of this Ordinance.
(d) The term "Collection Date" shall mean, when reference is being
made to the levy and collection of annual ad valorem taxes, the date annual ad
valorem taxes levied each year by the City become delinquent.
(e) The term "Fiscal Year" shall mean the twelve month accounting
period used by the City in connection with the operation of the System which may
be any twelve consecutive month period established by the City.
(f) The term "Government Securities" shall mean (i) direct
noncallable obligations of the United States of America, including obligations the
principal of and interest on which are unconditionally guaranteed by the United
States of America, (ii) noncallable obligations of an agency or instrumentality of
the United States, including obligations unconditionally guaranteed or insured by
the agency or instrumentality and on the date of their acquisition or purchase by
the City are rated as to investment quality by a nationally recognized investment
rating firm not less than AAA or its equivalent and (iii) noncallable obligations of a
state or an agency or a county, municipality, or other political subdivision of a
state that have been refunded and on the date of their acquisition or purchase by
the City, are rated as to investment quality by a nationally recognized investment
rating firm not less than AAA or its equivalent.
(g) The term "Gross Revenues" shall mean all income, receipts and
revenues of every nature derived or received from the operation and ownership
(excluding refundable meter deposits, restricted gifts and grants in aid of
construction) of the System, including earnings and income derived from the
investment or deposit of moneys in any special funds or accounts created and
established for the payment and security of the Prior Lien Obligations and other
obligations payable solely from and secured only by a lien on and pledge of the
Net Revenues.
(h) The term "Maintenance and Operating Expenses" shall mean all
current expenses of operating and maintaining the System, including all salaries,
labor, materials, repairs and extensions necessary to render efficient service;
provided, however, that only such repairs and extensions, as in the judgment of
the City Council, reasonably and fairly exercised, are necessary to maintain the
operations and render adequate service to the City and the inhabitants thereof,
or such as might be necessary to meet some physical accident or condition
which would otherwise impair obligations payable from Net Revenues shall be
deducted in determining "Net Revenues ". Depreciation charges shall not be
considered Maintenance and Operating Expenses. Maintenance and Operating
45461955.1 13
Expenses shall include payments under contracts for the purchase of water
supply, treatment of sewage or other materials, goods, services, or facilities for
the System to the extent authorized by law and the provisions of such contract.
(i) The term "Net Revenues" shall mean the Gross Revenues of the
System, with respect to any period, after deducting the System's Maintenance
and Operating Expenses during such period.
(j) The term "Outstanding" when used in this Ordinance with respect
to Certificates means, as of the date of determination, all Certificates theretofore
issued and delivered under this Ordinance, except:
(1) those Certificates cancelled by the Paying
Agent /Registrar or delivered to the Paying Agent /Registrar for
cancellation;
(2) those Certificates deemed to be duly paid by the
City in accordance with the provisions of Section 21 hereof; and
(3) those mutilated, destroyed, lost, or stolen
Certificates which have been replaced with Certificates registered
and delivered in lieu thereof as provided in Section 20 hereof.
(k) The term "Previously Issued Certificates" shall mean the
outstanding and unpaid (1) "City of Southlake, Texas, Tax and Waterworks and
Sewer System Surplus Revenue Certificates of Obligation, Series 2000 -A ", dated
March 1, 2000, originally issued in the principal amount of $9,215,000, (2) "City
of Southlake, Texas, Tax and Waterworks and Sewer System Surplus Revenue
Certificates of Obligation, Series 2000 -D ", dated December 1, 2000, originally
issued in the principal amount of $8,085,000, and (3) "City of Southlake, Texas,
Tax and Waterworks and Sewer System Surplus Revenue Certificates of
Obligation, Series 2003 ", dated April 15, 2003, originally issued in the principal
amount of $12,755,000.
(1) The term "Prior Lien Obligations" shall mean (i) the outstanding
and unpaid "City of Southlake, Texas, Waterworks and Sewer System Revenue
Refunding Bonds, Series 1987 ", dated March 1, 1987, and originally issued in the
aggregate principal amount of $217,000 and (ii) obligations hereafter issued
which by the terms of the authorizing ordinance are made payable from and
secured by a lien on and pledge of the Net Revenues of the System ranking prior
and superior to the lien and pledge securing the payment of the Previously
Issued Certificates and Certificates.
(m) The term "System" shall mean all properties, facilities and plants
currently owned, operated and maintained by the City for the supply, treatment,
transmission and distribution of treated potable water and the collection,
treatment and disposal of water - carried wastes, together with all future
extensions, improvements, replacements and additions thereto.
SECTION 11: Certificate Fund For the purpose of paying the interest on and to provide
a sinking fund for the payment, redemption and retirement of the Certificates, there shall be and
45461955.1 14
is hereby created a special account or fund on the books and records of the City known as the
"SPECIAL SERIES 2004A TAX AND REVENUE CERTIFICATE OF OBLIGATION FUND ", and
all moneys deposited to the credit of such Fund shall be shall be kept and maintained in a
special banking account at the City's depository bank. Authorized officials of the City are
hereby authorized and directed to make withdrawals from said Fund sufficient to pay the
principal of and interest on the Certificates as the same become due and payable, and, shall
cause to be transferred to the Paying Agent /Registrar from moneys on deposit in the Certificate
Fund an amount sufficient to pay the amount of principal and /or interest falling due on the
Certificates, such transfer of funds to the Paying Agent /Registrar to be made in such manner as
will cause immediately available funds to be deposited with the Paying Agent /Registrar on or
before the last business day next preceding each interest and principal payment date for the
Certificates.
Pending the transfer of funds to the Paying Agent /Registrar, money in the Certificate
Fund may, at the option of the City, be invested in obligations identified in, and in accordance
with the provisions of the "Public Funds Investment Act" (V.T.C.A., Government Code, Chapter
2256) relating to the investment of "bond proceeds "; provided that all such investments shall be
made in such a manner that the money required to be expended from said Fund will be
available at the proper time or times. All interest and income derived from deposits and
investments in said Certificate Fund shall be credited to, and any losses debited to, the said
Certificate Fund. All such investments shall be sold promptly when necessary to prevent any
default in connection with the Certificates.
SECTION 12: Tax Levy To provide for the payment of the "Debt Service
Requirements" on the Certificates being (i) the interest on said Certificates and (ii) a sinking
fund for their redemption at maturity or a sinking fund of 2% (whichever amount shall be the
greater), there shall be and there is hereby levied for the current year and each succeeding year
thereafter while said Certificates or any interest thereon shall remain Outstanding, a sufficient
tax on each one hundred dollars' valuation of taxable property in said City, within the limitations
prescribed by law, adequate to pay such Debt Service Requirements, full allowance being made
for delinquencies and costs of collection; said tax shall be assessed and collected each year
and applied to the payment of the Debt Service Requirements, and the same shall not be
diverted to any other purpose. The taxes so levied and collected shall be paid into the
Certificate Fund. The City Council hereby declares its purpose and intent to provide and levy a
tax legally and fully sufficient to pay the said Debt Service Requirements, it having been
determined that the existing and available taxing authority of the City for such purpose is
adequate to permit a legally sufficient tax in consideration of all other outstanding indebtedness.
The amount of taxes to be provided annually for the payment of the principal of and
interest on the Certificates shall be determined and accomplished in the following manner:
(a) Prior to the date the City Council establishes the annual tax rate and passes an
ordinance levying ad valorem taxes each year, the Council shall determine:
(1) The amount on deposit in the Certificate Fund after (a) deducting
therefrom the total amount of Debt Service Requirements to become due on
Certificates prior to the Collection Date for the ad valorem taxes to be levied and
(b) adding thereto the amount of the Net Revenues of the System appropriated
and allocated to pay such Debt Service Requirements prior to the Collection Date
for the ad valorem taxes to be levied.
45461955.1 15
(2) The amount of Net Revenues of the System, appropriated and to
be set aside for the payment of the Debt Service Requirements on the
Certificates between the Collection Date for the taxes then to be levied and the
Collection Date for the taxes to be levied during the next succeeding calendar
year.
(3) The amount of Debt Service Requirements to become due and
payable on the Certificates between the Collection Date for the taxes then to be
levied and the Collection Date for the taxes to be levied during the next
succeeding calendar year.
(b) The amount of taxes to be levied annually each year to pay the Debt Service
Requirements on the Certificates shall be the amount established in paragraph (3) above less
the sum total of the amounts established in paragraphs (1) and (2), after taking into
consideration delinquencies and costs of collecting such annual taxes.
SECTION 13: Pledge of Revenues The City hereby covenants and agrees that, subject
to the prior lien on and pledge of the Net Revenues of the System to the payment and security
of Prior Lien Obligations, all the Net Revenues of the System, with the exception of those in
excess of the amounts required to be deposited to the Certificate Fund as hereafter provided,
are hereby irrevocably pledged, equally and ratably, to the payment of the principal of and
interest on the Previously Issued Certificates, the Certificates, and Additional Certificates, if
issued, and the pledge of Net Revenues of the System herein made for the payment of the
Certificates shall constitute a lien on the Net Revenues of the System in accordance with the
terms and provisions hereof and be valid and binding and fully perfected from and after the date
of adoption of this Ordinance without physical delivery or transfer or transfer of control of the Net
Revenues, the filing of this Ordinance or any other act; all as provided in Chapter 1208 of the
Texas Government Code.
Section 1208, Government Code, applies to the issuance of the Certificates and the
pledge of the Net Revenues of the System granted by the City under this Section 13, and such
pledge is therefore valid, effective and perfected. If Texas law is amended at any time while the
Certificates are Outstanding such that the pledge of the Net Revenues of the System granted by
the City under this Section 13 is to be subject to the filing requirements of Chapter 9, Business
& Commerce Code, then in order to preserve to the registered owners of the Certificates the
perfection of the security interest in said pledge, the City agrees to take such measures as it
determines are reasonable and necessary under Texas law to comply with the applicable
provisions of Chapter 9, Business & Commerce Code and enable a filing to perfect the security
interest in said pledge to occur.
SECTION 14: System Fund The City hereby covenants and agrees that all Gross
Revenues (excluding earnings from the investment of money held in any special funds or
accounts created for the payment and security of Prior Lien Obligations) shall be deposited as
collected into a fund maintained at an official depository of the City and known on the books of
the City as the "City of Southlake Waterworks and Sanitary Sewer System Fund" (hereinafter
called the "System Fund "). All moneys deposited to the credit of the System Fund shall be
allocated, appropriated and budgeted to the extent required for the following purposes and in
the order of priority shown, to wit:
45461955.1 16
First To the payment of Operating and Maintenance Expenses of the System
as defined in herein or required by statute to be a first charge on and claim
against the Gross Revenues of the System.
Second To the payment of all amounts required to be deposited in the
special Funds created and established for the payment, security and benefit of
Prior Lien Obligations in accordance with the terms and provisions of the
ordinances authorizing the issuance of Prior Lien Obligations.
Third Equally and ratably, to the payment of the amounts required to be
deposited in the special funds and accounts created and established for the
payment of the Previously Issued Certificates, the Certificates (the Certificate
Fund), and Additional Certificates.
Any Net Revenues remaining in the System Fund after satisfying the foregoing
payments, or making adequate and sufficient provision for the payment thereof, may be
appropriated and used for any other City purpose now or hereafter permitted by law.
SECTION 15: Deposits to Certificate Fund The City hereby covenants and agrees to
cause to be deposited to the credit of the Certificate Fund prior to each principal and interest
payment date for the Certificates from the pledged Net Revenues of the System in the System
Fund, after the deduction of all payments required to be made to the special Funds or accounts
created for the payment and security of the Prior Lien Obligations, an amount equal to one
hundred per centum (100 %) of the amount required to fully pay the interest and principal
payments then due and payable on the Certificates. Such deposits to pay accrued interest and
maturing principal on the Certificates from the Net Revenues of the System shall be made in
substantially equal monthly installments on or before the 10th day of each month; provided,
however, should the annual tax levy pursuant to Section 12 hereof be sufficient to pay in full the
principal and interest on the Certificates, no such monthly deposits to the Certificate Fund from
the Net Revenues of the System shall be required.
Furthermore, accrued interest received by the City from the purchasers of the
Certificates and any proceeds of sale of the Certificates in excess of the amount required to pay
the contractual obligations to be incurred (including change orders to a construction contract)
shall be deposited in the Certificate Fund and such amounts deposited to the Certificate Fund
shall reduce the sums otherwise required to be deposited in said Fund from ad valorem taxes
and the Net Revenues of the System.
SECTION 16: Security of Funds All moneys on deposit in the Funds for which this
Ordinance makes provision (except any portion thereof as may be at any time properly
invested) shall be secured in the manner and to the fullest extent required by the laws of Texas
for the security of public funds, and moneys on deposit in such Funds shall be used only for the
purposes permitted by this Ordinance.
SECTION 17: Special Covenants The City hereby further covenants as follows:
(a) It has the lawful power to pledge the Net Revenues of the System
to the payment of the Certificates in the manner herein contemplated and has
lawfully exercised such power under the Constitution and laws of the State of
Texas, including said power existing under V.T.C.A, Government Code, Sections
45461955.1 17
1502.56 and 1502.58 and V.T.C.A., Local Government Code, Sections 271.041,
et seq.
(b) Other than for the payment of the outstanding Prior Lien
Obligations, Previously Issued Certificates, the Certificates and the outstanding
"City of Southlake, Texas, Tax and Waterworks and Sewer System (Limited
Pledge) Revenue Certificates of Obligation, Series 1994 ", dated December 1,
1994, "City of Southlake, Texas, Tax and Waterworks and Sewer System
(Limited Pledge) Revenue Certificates of Obligation, Series 1996 ", dated
February 15, 1996, "City of Southlake, Texas, Tax and Waterworks and Sewer
System (Limited Pledge) Revenue Certificates of Obligation, Series 1997 ", dated
February 15, 1997, "City of Southlake, Texas, Tax and Waterworks and Sewer
System (Limited Pledge) Revenue Certificates of Obligation, Series 1998 ", dated
May 15, 1998, "City of Southlake, Texas, Tax and Waterworks and Sewer
System (Limited Pledge) Revenue Certificates of Obligation, Series 1999 ", dated
April 1, 1999, the "City of Southlake, Texas, Tax and Waterworks and Sewer
System (Limited Pledge) Revenue Certificates of Obligation, Series 2000 ", dated
March 1, 2000 (until defeased with the proceeds of the "City of Southlake, Texas,
General Obligation Refunding Bonds, Series 2004" scheduled for delivery on
June 16, 2004), the "City of Southlake, Texas, Tax and Waterworks and Sewer
System (Limited Pledge) Revenue Certificates of Obligation, Series 2000 -C ",
dated December 1, 2000 and the proposed "City of Southlake, Texas, Tax and
Waterworks and Sewer System Limited Pledge Revenue Certificates of
Obligation, Series 2004 ", dated June 1, 2004 (authorized for issuance
concurrently with the Certificates), the Net Revenues of the System have not in
any manner been pledged to the payment of any debt or obligation of the City or
of the System.
SECTION 18: Issuance of Prior Lien Obligations and Additional Certificates The City
hereby expressly reserves the right to hereafter issue Prior Lien Obligations, without limitation
as to principal amount but subject to any terms, conditions or restrictions applicable thereto
under law or otherwise, and, also reserves the right to issue Additional Certificates which,
together with the Previously Issued Certificates and the Certificates, shall be equally and ratably
secured by a parity lien on and pledge of the Net Revenues of the System.
SECTION 19: Application of Prior Lien Obligations Covenants and Agreements It is
the intention of this governing body and accordingly hereby recognized and stipulated that the
provisions, agreements and covenants contained herein bearing upon the management and
operations of the System, and the administering and application of revenues derived from the
operation thereof, shall to the extent possible be harmonized with like provisions, agreements
and covenants contained in the ordinances authorizing the issuance of the Prior Lien
Obligations, and to the extent of any irreconcilable conflict between the provisions contained
herein and in the ordinances authorizing the issuance of the Prior Lien Obligations, the
provisions, agreements and covenants contained therein shall prevail to the extent of such
conflict and be applicable to this Ordinance but in all respects subject to the priority of rights and
benefits, if any, conferred thereby to the holders of the Prior Lien Obligations. Notwithstanding
the above, any change or modification affecting the application of revenues derived from the
operation of the System shall not impair the obligation of contract with respect to the pledge of
revenues herein made for the payment and security of the Certificates.
45461955.1 18
SECTION 20: Mutilated - Destroyed - Lost and Stolen Certificates In case any
Certificate shall be mutilated, or destroyed, lost or stolen, the Paying Agent /Registrar may
execute and deliver a replacement Certificate of like form and tenor, and in the same
denomination and bearing a number not contemporaneously outstanding, in exchange and
substitution for such mutilated Certificate, or in lieu of and in substitution for such destroyed, lost
or stolen Certificate, only upon the approval of the City and after (i) the filing by the Holder
thereof with the Paying Agent /Registrar of evidence satisfactory to the Paying Agent /Registrar
of the destruction, loss or theft of such Certificate, and of the authenticity of the ownership
thereof and (ii) the furnishing to the Paying Agent /Registrar of indemnification in an amount
satisfactory to hold the City and the Paying Agent /Registrar harmless. All expenses and
charges associated with such indemnity and with the preparation, execution and delivery of a
replacement Certificate shall be borne by the Holder of the Certificate mutilated, or destroyed,
lost or stolen.
Every replacement Certificate issued pursuant to this Section shall be a valid and
binding obligation, and shall be entitled to all the benefits of this Ordinance equally and ratably
with all other Outstanding Certificates; notwithstanding the enforceability of payment by anyone
of the destroyed, lost, or stolen Certificates.
The provisions of this Section are exclusive and shall preclude (to the extent lawful) all
other rights and remedies with respect to the replacement and payment of mutilated, destroyed,
lost or stolen Certificates.
SECTION 21: Satisfaction of Obligation of City. If the City shall pay or cause to be paid,
or there shall otherwise be paid to the Holders, the principal of, premium, if any, and interest on
the Certificates, at the times and in the manner stipulated in this Ordinance, then the pledge of
taxes levied under this Ordinance and the Net Revenues of the System (to the extent such
pledge of Net Revenues shall not have been discharged or terminated by prior payment of
principal of or interest on the Certificates) and all covenants, agreements, and other obligations
of the City to the Holders shall thereupon cease, terminate, and be discharged and satisfied.
Certificates or any principal amount(s) thereof shall be deemed to have been paid within
the meaning and with the effect expressed above in this Section when (i) money sufficient to
pay in full such Certificates or the principal amount(s) thereof at maturity or the redemption date
therefor, together with all interest due thereon, shall have been irrevocably deposited with and
held in trust by the Paying Agent /Registrar, or an authorized escrow agent, or (ii) Government
Securities shall have been irrevocably deposited in trust with the Paying Agent /Registrar, or an
authorized escrow agent, which Government Securities have been certified by an independent
accounting firm to mature as to principal and interest in such amounts and at such times as will
insure the availability, without reinvestment, of sufficient money, together with any moneys
deposited therewith, if any, to pay when due the principal of and interest on such Certificates, or
the principal amount(s) thereof, on and prior to the Stated Maturity thereof or (if notice of
redemption has been duly given or waived or if irrevocable arrangements therefor acceptable to
the Paying Agent /Registrar have been made) the redemption date thereof. The City covenants
that no deposit of moneys or Government Securities will be made under this Section and no use
made of any such deposit which would cause the Certificates to be treated as "arbitrage bonds"
within the meaning of Section 148 of the Internal Revenue Code of 1986, as amended, or
regulations adopted pursuant thereto.
Any moneys so deposited with the Paying Agent /Registrar, or an authorized escrow
agent, and all income from Government Securities held in trust by the Paying Agent /Registrar,
45461955.1 19
or an authorized escrow agent, pursuant to this Section which is not required for the payment of
the Certificates, or any principal amount(s) thereof, or interest thereon with respect to which
such moneys have been so deposited shall be remitted to the City or deposited as directed by
the City. Furthermore, any money held by the Paying Agent /Registrar for the payment of the
principal of and interest on the Certificates and remaining unclaimed for a period of three (3)
years after the Stated Maturity, or applicable redemption date, of the Certificates such moneys
were deposited and are held in trust to pay shall upon the request of the City be remitted to the
City against a written receipt therefor. Notwithstanding the above and foregoing, any remittance
of funds from the Paying Agent /Registrar to the City shall be subject to any applicable
unclaimed property laws of the State of Texas.
SECTION 22: Ordinance a Contract - Amendments This Ordinance shall constitute a
contract with the Holders from time to time, be binding on the City, and shall not be amended or
repealed by the City while any Certificates remain Outstanding except as permitted in this
Section and in Section 37 hereof. The City may, without the consent of or notice to any
Holders, from time to time and at any time, amend this Ordinance in any manner not detrimental
to the interests of the Holders, including the curing of any ambiguity, inconsistency, or formal
defect or omission herein. In addition, the City may, with the consent of Holders holding a
majority in aggregate principal amount of the Certificates then Outstanding, amend, add to, or
rescind any of the provisions of this Ordinance; provided that, without the consent of all Holders
of Outstanding Certificates, no such amendment, addition, or rescission shall (1) extend the
time or times of payment of the principal of, premium, if any, and interest on the Certificates,
reduce the principal amount thereof, the redemption price or the rate of interest thereon, or in
any other way modify the terms of payment of the principal of, premium, if any, or interest on the
Certificates, (2) give any preference to any Certificate over any other Certificate, or (3) reduce
the aggregate principal amount of Certificates required to be held by Holders for consent to any
such amendment, addition, or rescission.
SECTION 23: Covenants to Maintain Tax - Exempt Status (a) Definitions When used in
this Section, the following terms have the following meanings:
"Closing Date" means the date on which the Certificates are first authenticated and
delivered to the initial purchasers against payment therefor.
"Code" means the Internal Revenue Code of 1986, as amended by all legislation, if any,
effective on or before the Closing Date.
"Computation Date" has the meaning set forth in Section 1.148 -1(b) of the Regulations.
"Gross Proceeds" means any proceeds as defined in Section 1.148 -1(b) of the
Regulations, and any replacement proceeds as defined in Section 1.148 -1(c) of the
Regulations, of the Certificates.
"Investment" has the meaning set forth in Section 1.148 -1(b) of the Regulations.
"Nonpurpose Investment" means any investment property, as defined in section 148(b)
of the Code, in which Gross Proceeds of the Certificates are invested and which is not acquired
to carry out the governmental purposes of the Certificates.
"Rebate Amount" has the meaning set forth in Section 1.148 -1(b) of the Regulations.
45461955.1 20
"Regulations" means any proposed, temporary, or final Income Tax Regulations issued
pursuant to Sections 103 and 141 through 150 of the Code, and 103 of the Internal Revenue
Code of 1954, which are applicable to the Certificates. Any reference to any specific Regulation
shall also mean, as appropriate, any proposed, temporary or final Income Tax Regulation
designed to supplement, amend or replace the specific Regulation referenced.
"Yield" of (1) any Investment has the meaning set forth in Section 1.148 -5 of the
Regulations and (2) the Certificates has the meaning set forth in Section 1.148 -4 of the
Regulations.
(b) Not to Cause Interest to Become Taxable The City shall not use, permit the use
of, or omit to use Gross Proceeds or any other amounts (or any property the acquisition,
construction or improvement of which is to be financed directly or indirectly with Gross
Proceeds) in a manner which if made or omitted, respectively, would cause the interest on any
Certificate to become includable in the gross income, as defined in section 61 of the Code, of
the owner thereof for federal income tax purposes. Without limiting the generality of the
foregoing, unless and until the City receives a written opinion of counsel nationally recognized in
the field of municipal bond law to the effect that failure to comply with such covenant will not
adversely affect the exemption from federal income tax of the interest on any Certificate, the
City shall comply with each of the specific covenants in this Section.
(c) No Private Use or Private Payments Except as permitted by section 141 of the
Code and the Regulations and rulings thereunder, the City shall at all times prior to the last
Stated Maturity of Certificates:
(1) exclusively own, operate and possess all property the acquisition,
construction or improvement of which is to be financed or refinanced directly or
indirectly with Gross Proceeds of the Certificates, and not use or permit the use
of such Gross Proceeds (including all contractual arrangements with terms
different than those applicable to the general public) or any property acquired,
constructed or improved with such Gross Proceeds in any activity carried on by
any person or entity (including the United States or any agency, department and
instrumentality thereof) other than a state or local government, unless such use
is solely as a member of the general public; and
(2) not directly or indirectly impose or accept any charge or other
payment by any person or entity who is treated as using Gross Proceeds of the
Certificates or any property the acquisition, construction or improvement of which
is to be financed or refinanced directly or indirectly with such Gross Proceeds,
other than taxes of general application within the City or interest earned on
investments acquired with such Gross Proceeds pending application for their
intended purposes.
(d) No Private Loan Except to the extent permitted by section 141 of the Code and
the Regulations and rulings thereunder, the City shall not use Gross Proceeds of the
Certificates to make or finance loans to any person or entity other than a state or local
government. For purposes of the foregoing covenant, such Gross Proceeds are considered to
be "loaned" to a person or entity if: (1) property acquired, constructed or improved with such
Gross Proceeds is sold or leased to such person or entity in a transaction which creates a debt
for federal income tax purposes; (2) capacity in or service from such property is committed to
such person or entity under a take -or -pay, output or similar contract or arrangement; or (3)
45461955.1 21
indirect benefits, or burdens and benefits of ownership, of such Gross Proceeds or any property
acquired, constructed or improved with such Gross Proceeds are otherwise transferred in a
transaction which is the economic equivalent of a loan.
(e) Not to Invest at Higher Yield Except to the extent permitted by section 148 of
the Code and the Regulations and rulings thereunder, the City shall not at any time prior to the
final Stated Maturity of the Certificates directly or indirectly invest Gross Proceeds in any
Investment (or use Gross Proceeds to replace money so invested), if as a result of such
investment the Yield from the Closing Date of all Investments acquired with Gross Proceeds (or
with money replaced thereby), whether then held or previously disposed of, exceeds the Yield of
the Certificates.
(f) Not Federally Guaranteed Except to the extent permitted by section 149(b) of
the Code and the Regulations and rulings thereunder, the City shall not take or omit to take any
action which would cause the Certificates to be federally guaranteed within the meaning of
section 149(b) of the Code and the Regulations and rulings thereunder.
(g) Inf ormation Report The City shall timely file the information required by section
149(e) of the Code with the Secretary of the Treasury on Form 8038 -G or such other form and
in such place as the Secretary may prescribe.
(h) Rebate of Arbitrage Profits Except to the extent otherwise provided in section
148(f) of the Code and the Regulations and rulings thereunder:
(1) The City shall account for all Gross Proceeds (including all
receipts, expenditures and investments thereof) on its books of account
separately and apart from all other funds (and receipts, expenditures and
investments thereof) and shall retain all records of accounting for at least six
years after the day on which the last Outstanding Certificate is discharged.
However, to the extent permitted by law, the City may commingle Gross
Proceeds of the Certificates with other money of the City, provided that the City
separately accounts for each receipt and expenditure of Gross Proceeds and the
obligations acquired therewith.
(2) Not less frequently than each Computation Date, the City shall
calculate the Rebate Amount in accordance with rules set forth in section 148(f)
of the Code and the Regulations and rulings thereunder. The City shall maintain
such calculations with its official transcript of proceedings relating to the issuance
of the Certificates until six years after the final Computation Date.
(3) As additional consideration for the purchase of the Certificates by
the Purchasers and the loan of the money represented thereby and in order to
induce such purchase by measures designed to insure the excludability of the
interest thereon from the gross income of the owners thereof for federal income
tax purposes, the City shall pay to the United States from the construction fund,
other appropriate fund, or if as permitted by applicable Texas statute, regulation
or opinion of the Attorney General of the State of Texas, the Certificate Fund, the
amount that when added to the future value of previous rebate payments made
for the Certificates equals (i) in the case of a Final Computation Date as defined
in Section 1.148- 3(e)(2) of the Regulations, one hundred percent (100 %) of the
Rebate Amount on such date; and (ii) in the case of any other Computation Date,
45461955.1 22
ninety percent (90 %) of the Rebate Amount on such date. In all cases, the
rebate payments shall be made at the times, in the installments, to the place and
in the manner as is or may be required by section 148(f) of the Code and the
Regulations and rulings thereunder, and shall be accompanied by Form 8038 -T
or such other forms and information as is or may be required by Section 148(f) of
the Code and the Regulations and rulings thereunder.
(4) The City shall exercise reasonable diligence to assure that no
errors are made in the calculations and payments required by paragraphs (2) and
(3), and if an error is made, to discover and promptly correct such error within a
reasonable amount of time thereafter (and in all events within one hundred eighty
(180) days after discovery of the error), including payment to the United States of
any additional Rebate Amount owed to it, interest thereon, and any penalty
imposed under Section 1.148 -3(h) of the Regulations.
(i) Not to Divert Arbitrage Profits Except to the extent permitted by section 148 of
the Code and the Regulations and rulings thereunder, the City shall not, at any time prior to the
earlier of the Stated Maturity or final payment of the Certificates, enter into any transaction that
reduces the amount required to be paid to the United States pursuant to Subsection (h) of this
Section because such transaction results in a smaller profit or a larger loss than would have
resulted if the transaction had been at arm's length and had the Yield of the Certificates not
been relevant to either party.
(j) Elections The City hereby directs and authorizes the Mayor, City Secretary, City
Manager and Director of Finance, individually or jointly, to make elections permitted or required
pursuant to the provisions of the Code or the Regulations, as they deem necessary or
appropriate in connection with the Certificates, in the Certificate as to Tax Exemption or similar
or other appropriate certificate, form or document.
SECTION 24: Sale of Certificates - Official Statement Approval The sale of the
Certificates authorized by this Ordinance to RBC Dain Rauscher Inc., Estrada Hinojosa &
Company, Inc. and Morgan Keegan & Company, Inc. (herein referred to as the "Purchasers ") in
accordance with the Purchase Contract, dated June 1, 2004, attached hereto as Exhibit B and
incorporated herein by reference as a part of this Ordinance for all purposes. The Mayor or
Mayor Pro Tern is hereby authorized and directed to execute said Purchase Contract for and
on behalf of the City and as the act and deed of this Council, and in regard to the approval and
execution of the Purchase Contract, the Council hereby finds, determines and declares that the
representations, warranties and agreements of the City contained in the Purchase Contract are
true and correct in all material respects and shall be honored and performed by the City.
Furthermore, the use of the Official Statement by the Purchasers in connection with the
public offering and sale of the Certificates is hereby ratified, confirmed and approved in all
respects. The final Official Statement, which reflects the terms of sale (together with such
changes approved by the Mayor, City Manager, Director of Finance or City Secretary,
individually or collectively), shall be and is hereby in all respects approved, and the Purchasers
are hereby authorized to use and distribute said final Official Statement, dated June 1, 2004, in
the reoffering, sale and delivery of the Certificates to the public. The Mayor and City Secretary
are further authorized and directed to manually execute and deliver for and on behalf of the City
copies of said Official Statement in final form as may be required by the Purchasers, and such
final Official Statement in the form and content manually executed by said officials shall be
45461955.1 23
deemed to be approved by the City Council and constitute the Official Statement authorized for
distribution and use by the Purchasers.
SECTION 25: Proceeds of Sale The proceeds of sale of the Certificates, excluding the
accrued interest received from the Purchasers, shall be deposited in a construction fund
maintained at the City's depository bank. Pending expenditure for authorized projects and
purposes, such proceeds of sale may be invested in authorized investments in accordance with
the provisions of V.T.C.A., Government Code, Chapter 2256, including specifically guaranteed
investment contracts permitted in V.T.C.A., Section 2256.015, et seq, and any investment
earnings realized may be expended for such authorized projects and purposes or deposited in
the Certificate Fund as shall be determined by the City Council. Accrued interest as well as all
surplus proceeds of sale of the Certificates, including investment earnings, remaining after
completion of all authorized projects or purposes shall be deposited to the credit of the
Certificate Fund.
SECTION 26: Control and Custody of Certificates The Mayor of the City shall be and is
hereby authorized to take and have charge of all necessary orders and records pending the sale
of the Certificates, the investigation by the Attorney General of the State of Texas, including the
printing and supply of definitive Certificates, and shall take and have charge and control of the
Initial Certificate(s) pending the approval thereof by the Attorney General, the registration
thereof by the Comptroller of Public Accounts and the delivery thereof to the Purchasers.
Furthermore, the Mayor, Mayor Pro Tem, City Secretary, Director of Finance and City
Manager, any one or more of said officials, are hereby authorized and directed to furnish and
execute such documents and certifications relating to the City and the issuance of the
Certificates, including a certification as to facts, estimates, circumstances and reasonable
expectations pertaining to the use and expenditure and investment of the proceeds of the
Certificates as may be necessary for the approval of the Attorney General and their registration
by the Comptroller of Public Accounts. In addition, such officials, together with the City's
financial advisor, bond counsel and the Paying Agent /Registrar, are authorized and directed to
make the necessary arrangements for the delivery of the Initial Certificate(s) to the Purchasers
and the initial exchange thereof for definitive Certificates.
SECTION 27: Notices to Holders- Waiver Wherever this Ordinance provides for notice
to Holders of any event, such notice shall be sufficiently given (unless otherwise herein
expressly provided) if in writing and sent by United States Mail, first class postage prepaid, to
the address of each Holder appearing in the Security Register at the close of business on the
business day next preceding the mailing of such notice.
In any case where notice to Holders is given by mail, neither the failure to mail such
notice to any particular Holders, nor any defect in any notice so mailed, shall affect the
sufficiency of such notice with respect to all other Certificates. Where this Ordinance provides
for notice in any manner, such notice may be waived in writing by the Holder entitled to receive
such notice, either before or after the event with respect to which such notice is given, and such
waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with
the Paying Agent /Registrar, but such filing shall not be a condition precedent to the validity of
any action taken in reliance upon such waiver.
SECTION 28: Cancellation All Certificates surrendered for payment, redemption,
transfer, exchange, or replacement, if surrendered to the Paying Agent /Registrar, shall be
promptly cancelled by it and, if surrendered to the City, shall be delivered to the Paying
45461955.1 24
Agent /Registrar and, if not already cancelled, shall be promptly cancelled by the Paying
Agent/Registrar. The City may at any time deliver to the Paying Agent /Registrar for cancellation
any Certificates previously certified or registered and delivered which the City may have
acquired in any manner whatsoever, and all Certificates so delivered shall be promptly
cancelled by the Paying Agent /Registrar. All cancelled Certificates held by the Paying
Agent /Registrar shall be returned to the City.
SECTION 29: Bond Counsel's Opinion The Purchasers' obligation to accept delivery of
the Certificates is subject to being furnished a final opinion of Fulbright & Jaworski L.L.P.,
Dallas, Texas, approving the Certificates as to their validity, said opinion to be dated and
delivered as of the date of delivery and payment for the Certificates. An executed counterpart of
said opinion shall accompany the global certificates deposited with The Depository Trust
Company or a reproduction thereof shall be printed on the definitive Certificates in the event the
book entry only system shall be discontinued.
SECTION 30: CUSIP Numbers CUSIP numbers may be printed or typed on the
definitive Certificates. It is expressly provided, however, that the presence or absence of CUSIP
numbers on the definitive Certificates shall be of no significance or effect as regards the legality
thereof and neither the City nor attorneys approving the Certificates as to legality are to be held
responsible for CUSIP numbers incorrectly printed or typed on the definitive Certificates.
SECTION 31: Benefits of Ordinance Nothing in this Ordinance, expressed or implied,
is intended or shall be construed to confer upon any person other than the City, the Paying
Agent /Registrar and the Holders, any right, remedy, or claim, legal or equitable, under or by
reason of this Ordinance or any provision hereof, and this Ordinance and all its provisions is
intended to be and shall be for the sole and exclusive benefit of the City, the Paying
Agent /Registrar and the Holders.
SECTION 32: Inconsistent Provisions All ordinances, orders or resolutions, or parts
thereof, which are in conflict or inconsistent with any provision of this Ordinance are hereby
repealed to the extent of such conflict, and the provisions of this Ordinance shall be and remain
controlling as to the matters contained herein.
SECTION 33: Governing Law This Ordinance shall be construed and enforced in
accordance with the laws of the State of Texas and the United States of America.
SECTION 34: Effect of Headings The Section headings herein are for convenience
only and shall not affect the construction hereof.
SECTION 35: Construction of Terms. If appropriate in the context of this Ordinance,
words of the singular number shall be considered to include the plural, words of the plural
number shall be considered to include the singular, and words of the masculine, feminine or
neuter gender shall be considered to include the other genders.
SECTION 36: Severability If any provision of this Ordinance or the application thereof
to any circumstance shall be held to be invalid, the remainder of this Ordinance and the
application thereof to other circumstances shall nevertheless be valid, and the City Council
hereby declares that this Ordinance would have been enacted without such invalid provision.
SECTION 37: Continuing Disclosure Undertaking (a) Definitions. As used in this
Section, the following terms have the meanings ascribed to such terms below:
45461955.1 25
"MSRB" means the Municipal Securities Rulemaking Board.
"NRMSIR" means each person whom the SEC or its staff has determined to be a
nationally recognized municipal securities information repository within the meaning of the Rule
from time to time.
"Rule" means SEC Rule 15c2 -12, as amended from time to time.
"SEC" means the United States Securities and Exchange Commission.
"SID" means any person designated by the State of Texas or an authorized department,
officer, or agency thereof as, and determined by the SEC or its staff to be, a state information
depository within the meaning of the Rule from time to time.
(b) Annual Reports. The City shall provide annually to each NRMSIR and any SID,
within six months after the end of each fiscal year (beginning with the fiscal year ending
September 30, 2004) financial information and operating data with respect to the City of the
general type included in the final Official Statement approved by Section 24 of this Ordinance,
being the information described in Exhibit C hereto. Financial statements to be provided shall
be (1) prepared in accordance with the accounting principles described in Exhibit C hereto and
(2) audited, if the City commissions an audit of such statements and the audit is completed
within the period during which they must be provided. If audited financial statements are not
available at the time the financial information and operating data must be provided, then the City
shall provide unaudited financial statements for the applicable fiscal year to each NRMSIR and
any SID with the financial information and operating data and will file the annual audit report,
when and if the same becomes available.
If the City changes its fiscal year, it will notify each NRMSIR and any SID of the change
(and of the date of the new fiscal year end) prior to the next date by which the City otherwise
would be required to provide financial information and operating data pursuant to this Section.
The financial information and operating data to be provided pursuant to this Section may
be set forth in full in one or more documents or may be included by specific reference to any
document (including an official statement or other offering document, if it is available from the
MSRB) that theretofore has been provided to each NRMSIR and any SID or filed with the SEC.
(c) Material Event Notices. The City shall notify any SID and either each NRMSIR or
the MSRB, in a timely manner, of any of the following events with respect to the Certificates, if
such event is material within the meaning of the federal securities laws:
1. Principal and interest payment delinquencies;
2. Non - payment related defaults;
3. Unscheduled draws on debt service reserves reflecting financial difficulties;
4. Unscheduled draws on credit enhancements reflecting financial difficulties;
5. Substitution of credit or liquidity providers, or their failure to perform;
6. Adverse tax opinions or events affecting the tax - exempt status of the Certificates;
7. Modifications to rights of holders of the Certificates;
8. Certificate calls;
9. Defeasances;
10. Release, substitution, or sale of property securing repayment of the Certificates; and
11. Rating changes.
45461955.1 26
The City shall notify any SID and either each NRMSIR or the MSRB, in a timely manner,
of any failure by the City to provide financial information or operating data in accordance with
subsection (b) of this Section by the time required by such Section.
(d) Limitations, Disclaimers, and Amendments. The City shall be obligated to
observe and perform the covenants specified in this Section while, but only while, the City
remains an "obligated person" with respect to the Certificates within the meaning of the Rule,
except that the City in any event will give the notice required by subsection (c) hereof of any
Certificate calls and defeasance that cause the City to be no longer such an "obligated person."
The provisions of this Section are for the sole benefit of the Holders and beneficial
owners of the Certificates, and nothing in this Section, express or implied, shall give any benefit
or any legal or equitable right, remedy, or claim hereunder to any other person. The City
undertakes to provide only the financial information, operating data, financial statements, and
notices which it has expressly agreed to provide pursuant to this Section and does not hereby
undertake to provide any other information that may be relevant or material to a complete
presentation of the City's financial results, condition, or prospects or hereby undertake to update
any information provided in accordance with this Section or otherwise, except as expressly
provided herein. The City does not make any representation or warranty concerning such
information or its usefulness to a decision to invest in or sell Certificates at any future date.
UNDER NO CIRCUMSTANCES SHALL THE CITY BE LIABLE TO THE HOLDER OR
BENEFICIAL OWNER OF ANY CERTIFICATE OR ANY OTHER PERSON, IN CONTRACT OR
TORT, FOR DAMAGES RESULTING IN WHOLE OR IN PART FROM ANY BREACH BY THE
CITY, WHETHER NEGLIGENT OR WITHOUT FAULT ON ITS PART, OF ANY COVENANT
SPECIFIED IN THIS SECTION, BUT EVERY RIGHT AND REMEDY OF ANY SUCH PERSON,
IN CONTRACT OR TORT, FOR OR ON ACCOUNT OF ANY SUCH BREACH SHALL BE
LIMITED TO AN ACTION FOR MANDAMUS OR SPECIFIC PERFORMANCE.
No default by the City in observing or performing its obligations under this Section shall
constitute a breach of or default under this Ordinance for purposes of any other provision of this
Ordinance.
Nothing in this Section is intended or shall act to disclaim, waive, or otherwise limit the
duties of the City under federal and state securities laws.
Notwithstanding anything herein to the contrary, the provisions of this Section may be
amended by the City from time to time to adapt to changed circumstances resulting from a
change in legal requirements, a change in law, or a change in the identity, nature, status, or
type of operations of the City, but only if (1) the provisions of this Section, as so amended,
would have permitted underwriters to purchase or sell Certificates in the primary offering of the
Certificates in compliance with the Rule, taking into account any amendments or interpretations
of the Rule to the date of such amendment, as well as such changed circumstances, and (2)
either (a) the Holders of a majority in aggregate principal amount (or any greater amount
required by any other provision of this Ordinance that authorizes such an amendment) of the
Outstanding Certificates consent to such amendment or (b) a Person that is unaffiliated with the
City (such as nationally recognized bond counsel) determines that such amendment will not
materially impair the interests of the Holders and beneficial owners of the Certificates. The
provisions of this Section may also be amended from time to time or repealed by the City if the
45461955.1 27
SEC amends or repeals the applicable provisions of the Rule or a court of final jurisdiction
determines that such provisions are invalid, but only if and to the extent that reservation of the
City's right to do so would not prevent underwriters of the initial public offering of the Certificates
from lawfully purchasing or selling Certificates in such offering. If the City so amends the
provisions of this Section, it shall include with any amended financial information or operating
data next provided in accordance with subsection (b) an explanation, in narrative form, of the
reasons for the amendment and of the impact of any change in the type of financial information
or operating data so provided.
SECTION 38: Insurance The Certificates have been offered and sold with the principal
of and interest thereon being insured by Ambac Assurance Corporation (hereinafter called
"Ambac ") pursuant to a Financial Guaranty Insurance Policy (the "Policy "). In accordance with
the terms and conditions applicable to insurance provided by Ambac, the City covenants and
agrees that, in the event the principal and interest due on the Certificates shall be paid by
Ambac pursuant to the Policy, the Certificates shall remain Outstanding for all purposes, the
assignment and pledge of all funds and all covenants, agreements and other obligations of the
City to the Holders shall continue to exist and Ambac shall be subrogated to the rights of such
Holders; and furthermore, the City covenants and agrees that:
(a) Consent of Ambac in addition to Holder Consent Ambac's consent shall be
required in addition to Holder consent, when required, for the following purposes (i) execution
and delivery of any amendment, change or modification of this Ordinance and (ii) initiation or
approval of any action not described in (i) which requires Holder consent. Ambac reserves the
right to charge the City a fee for any consent or amendment to the Ordinance so long as the
Policy is in effect.
(b) Defeasance In the event that the principal and redemption price, if applicable,
and interest due on the Certificates shall be paid by Ambac pursuant to the policy referred to in
this Section, all covenants, agreements and other obligations of the City to the Holders shall
continue to exist and Ambac shall be subrogated to the rights of such Holders.
(c) Notices to be Given to Ambac While the Policy is in effect, the City shall furnish
to Ambac:
(1) upon request of Ambac, a copy of any financial statement of the
City and a copy of any audit and annual report of the City;
(2) a copy of any notice to be given to the registered owners of the
Certificates, including, without limitation, notice of any redemption or defeasance
of Certificates, and any certificate rendered pursuant to this Ordinance relating to
the security for the Certificates; and
(3) such additional information as it may reasonably request.
The City will permit Ambac to discuss the affairs, finances and accounts of the City, or
any information Ambac may reasonably request regarding the security for the Certificates with
appropriate officers of the City. The City will permit Ambac to have access to and make copies
of all books and records relating to the Certificates at any reasonable time.
Notwithstanding any other provision of this Ordinance, the Paying Agent /Registrar shall
immediately notify the General Counsel Office of Ambac if at any time there are insufficient
45461955.1 28
moneys to make payments of principal and /or interest as required and immediately upon the
occurrence of any event of default hereunder. The Paying Agent/Registrar shall also notify the
General Counsel Office of Ambac of any failure of the City to provide relevant notices,
certificates, etc.
(d) Consent of Ambac Any provision of this Ordinance expressly recognizing or
granting rights in or to Ambac may not be amended in any manner which affects the rights of
Ambac hereunder without the prior written consent of Ambac. Furthermore, anything in this
Ordinance to the contrary notwithstanding, upon the occurrence and continuance of an event of
default, Ambac shall be entitled to control and direct the enforcement of all rights and remedies
granted to the Holders of the Certificates for the benefit of such Holders. Any reorganization or
liquidation plan with respect to the City must be acceptable to Ambac. In the event of any
reorganization or liquidation, Ambac shall have the right to vote on behalf of all Holders who
hold Ambac- insured Certificates absent a default by Ambac under the applicable Policy insuring
the Certificates.
(e) Concerning the Insurance Policy As long as insurance for the Certificates shall
be in full force and effect, the City agrees to comply with the following provisions:
(1) if one (1) business day prior to an interest payment date for the
Certificates the City determines that there will be insufficient funds in the
Certificate Fund to pay the principal of or interest on the Certificates on such
interest payment date, the City shall so notify Ambac. Such notice shall specify
the amount of the anticipated deficiency, the Certificates to which such deficiency
is applicable and whether such Certificates will be deficient as to principal or
interest, or both.
(2) the City shall, after giving notice to Ambac as provided in (1)
above, make available to Ambac and at Ambac's direction, The Bank of New
York, as insurance trustee for Ambac, or any successor insurance trustee (the
"Insurance Trustee "), the registration books of the City maintained by the Paying
Agent/Registrar, and all records relating to the funds and accounts maintained
under this Ordinance.
(3) the City shall cause the Paying Agent /Registrar to provide Ambac
and the Insurance Trustee with a list of registered owners of Certificates entitled
to receive principal or interest payments from Ambac under the terms of the
Policy, and shall cause the Paying Agent /Registrar to make arrangements with
the Insurance Trustee (i) to mail checks or drafts to the registered owners of
Certificates entitled to receive full or partial interest payments from Ambac, and
(ii) to pay principal upon Certificates surrendered to Insurance Trustee by the
registered owners of Certificates entitled to receive full or partial principal
payments from Ambac.
(4) the Paying Agent /Registrar shall, at the time it provides notice to
Ambac pursuant to (1) above, notify the registered owners of Certificates entitled
to receive the payment of principal or interest thereon from Ambac (i) as to the
fact of such entitlement, (ii) that Ambac will remit to them all or a part of the
interest payments next coming due upon proof of Holder entitlement to interest
payments and delivery to the Insurance Trustee, in form satisfactory to the
Insurance Trustee, of an appropriate assignment of the registered owner's right
45461955.1 29
to payment, (iii) that should they be entitled to receive full payment of principal
from Ambac they must tender their Certificates (along with an appropriate
instrument of assignment in form satisfactory to the Insurance Trustee to permit
ownership of such Certificates to be registered in the name of Ambac) for
payment to the Insurance Trustee, and not the Paying Agent/Registrar, and (iv)
that should they be entitled to receive partial payment of principal from Ambac
they must tender their Certificates for payment thereon first to the Paying
Agent /Registrar, who shall note on such Certificates the portion of the principal
paid by the Paying Agent /Registrar, and then, along with an appropriate
instrument of assignment in form satisfactory to the Insurance Trustee, to the
Insurance Trustee, which will then pay the unpaid portion of principal.
(5) In the event the Paying Agent/Registrar has notice that any
payment of principal of or interest on a Certificate which has become Due for
Payment and which is made to a Holder by or on behalf of the City has been
deemed a preferential transfer and theretofore recovered from its registered
owner pursuant to the United States Bankruptcy Code by a trustee in bankruptcy
in accordance with the final, nonappealable order of a court having competent
jurisdiction, the Paying Agent /Registrar shall, at the time Ambac is notified
pursuant to (1) above, notify all registered owners that in the event that any
registered owner's payment is so recovered, such registered owner will be
entitled to payment from Ambac to the extent of such recovery if sufficient funds
are not otherwise available, and the Paying Agent/Registrar shall furnish to
Ambac its records evidencing the payments of principal of and interest on the
Certificates which have been made by the Paying Agent /Registrar and
subsequently recovered from registered owners and the dates on which such
payments were made.
Ambac shall, to the extent it makes a payment of principal of or interest on Certificates,
become subrogated to the rights of the recipients of such payments in accordance with the
terms of the Policy, and to evidence such subrogation (i) in the case of subrogation as to claims
for past due interest, the City shall cause the Paying Agent /Registrar to note Ambac's rights as
subrogee on the registration books of the City maintained by the Paying Agent /Registrar upon
receipt from Ambac of proof of the payment of interest thereon to the registered owners of the
Certificates, and (ii) in the case of subrogation as to claims for past due principal, the City shall
cause the Paying Agent/Registrar to note Ambac's rights as subrogee on the registration books
of the City maintained by the Paying Agent /Registrar upon surrender of the Certificates by the
registered owners thereof together with proof of the payment of principal thereof.
(f) Ambac as Third Party Beneficiary To the extent that this Ordinance confers
upon or gives or grants to Ambac any right, remedy or claim under or by reason of this
Ordinance, Ambac is hereby explicitly recognized as being a third -party beneficiary hereunder
and may enforce any such right, remedy or claim conferred, given or granted hereunder.
SECTION 39: Public Meeting It is officially found, determined, and declared that the
meeting at which this Ordinance is adopted was open to the public and public notice of the time,
place, and subject matter of the public business to be considered at such meeting, including this
Ordinance, was given, all as required by V.T.C.A., Government Code, Chapter 551, as
amended.
45461955.1 30
SECTION 40: Effective Date This Ordinance shall take effect and be in full force from
and after its adoption on the date shown below in accordance with V.T.C.A., Government Code,
Section 1201.028.
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45461955.1 31
PASSED AND ADOPTED, this June 1, 2004.
ATTEST:
City Secretary
(City Seal)
CITY OF SOUTHLAKE, TEXAS
Mayor
45461955.1 32
Exhibit C
DESCRIPTION OF ANNUAL FINANCIAL INFORMATION AND OPERATING DATA
The following information is referred to in Section 37 of this Ordinance.
Annual Financial Statements and Operatinq Data
The financial information and operating data with respect to the City to be provided
annually in accordance with such Section are as specified (and included in the Appendix or
under the headings of the Official Statement referred to) below:
1. The financial statements of the City appended to the Official Statement as
Appendix B, but for the most recently concluded fiscal year.
2. The information in the Official Statement contained in Tables 1 through 6 and 8
through 15.
Accounting Principles
The accounting principles referred to in such Section are the generally accepted
accounting principles as applicable to governmental units as prescribed by The Government
Accounting Standards Board.
45461955.1