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Home My WebLink AboutOrdinance No. 98-1010ORIGINAL ORDINANCE NO. 98-1010 ORDINANCE AUTHORIZING THE ISSUANCE OF $3,105,000 CITY OF THE COLONY, TEXAS WATER AND SEWER SYSTEM REVENUE BONDS SERIES 1998 Adopted on January 19,1998 TABLE OF CONTENTS Recitals................. ........................ ..... ..... .-.......... 1 ARTICLE I DEFINITIONS AND OTHER PRELIMINARY MATTERS Section 1.01. Definitions .......................... Section 1.02. Other Definitions ............................................ . ......3 Section 1.03. Findings........................................................... 3 Section 1.04. Table of Contents, Titles and Headings ................. ............... . . 3 Section 1.05. Interpretation....................................................... 4 ARTICLE II SECURITY FOR THE BONDS Section 2.01. Security for the Bonds .................. ............................ 4 Section 2.02. Limited Obligations ........................................ 4 ARTICLE III AUTHORIZATION; GENERAL TERMS AND PROVISIONS REGARDING THE BONDS Section 3.01. Authorization . Section 3.02. Date, Denomination, Maturities, Numbers and Interest ..................... . Section 3.03. Medium, Method and Place of Payment ................................ . . Section 3.04. Execution and Initial Registration ..................................... . Section 3.05. Ownership........................................................ . Section 3.06. Registration, Transfer and Exchange .................................... Section 3.07. Cancellation and Authentication ........................................ Section 3.08. Temporary Bonds ................................................... Section 3.09. Replacement Bonds ................................................. Section 3.10. Book -Entry Only System ............................................ Section 3.11. Successor Securities Depository; Transfer Outside Book -Entry Only System .. - Section 3.12. Payments to Cede & Co ............................................. ARTICLE IV REDEMPTION OF BONDS BEFORE MATURITY Section 4.01. Limitation on Redemption .......................................... . Section 4.02. Redemption of Bonds Prior to Maturity ..... . .......................... . Section 4.03. Partial Redemption ................................................. Section 4.04. Notice of Redemption to Owners ..................................... . Section 4.05. Payment Upon Redemption ................... _ ..................... . Section 4.06. Effect of Redemption .............................................. . CPd,G\CLIENTS\COLONY\RE V98\DOCS\ORD-RE V.98 4 4 5 6 6 7 8 8 9 10 11 11 11 11 11 12 12 12 ARTICLE V PAYING AGENT/REGISTRAR Section 5.01. Appointment of Initial Paying Agent/Registrar ........................... 13 Section 5.02. Qualifications .............................................. . ...... 13 Section 5.03. Maintaining Paying Agent/Registrar ....... . ........................... 13 Section 5.04. Termination............................................13 22 Section 5.05. Notice of Change to Owners .......................................... 14 Section 5.06. Agreement to Perform Duties and Functions .................... 14 Section 5.07. Delivery of Records to Successor ...................................... 14 ARTICLE VI FORM OF THE BONDS Section 6.01. Form Generally ..................... ...... .-......... ....... 14 Section 6.02. Form of Bonds .................................................... 14 Section 6.03. CUSIP Registration ........................... ..........19 Section 6.04. Legal Opinion ..................................................... 19 Section 6.05. Municipal Bond Insurance ........................................... 19 ARTICLE VII SALE OF THE BONDS; CONTROL AND DELIVERY OF THE BONDS Section 7.01. Sale of Bonds; Official Statement .................... . .......... . . . ... 20 Section 7.02. Control and Delivery of Bonds ........................................ 20 ARTICLE VIII CREATION OF FUNDS AND ACCOUNTS; DEPOSIT OF PROCEEDS; INVESTMENTS Section 8.01. Special Funds ......................... ......................... 21 Section 8.02. Flow of Funds . .................................................... 21 Section 8.03. Construction Fund..................................................22 Section 8.04. Security of Funds .................................................. 22 Section 8.05. Initial Deposits .................................................... 22 Section 8.06. Investments.......................................................23 Section 8.07, Investment Income ................................................. 23 C:\LG\CLIENTS\COLONY\REV98\DOCS\ORD-REV.98 ii ARTICLE IX ADDITIONAL PARITY REVENUE BONDS AND OBLIGATIONS Section 9.01. Additional Bonds .................................................. 23 ARTICLE X PARTICULAR REPRESENTATIONS AND COVENANTS Section 10.01. Payment of the Bonds; Binding Obligations .................... ........ 24 Section 10.02. Rate Covenant ..................................................... 24 Section 10.03. Nonimpairment of Lien..............................................24 Section 10.04. No Sale or Encumbrance of System....................................24 Section 10.05. No Competing Systems.............................................25 Section 10.06. No Free Service ............... . ........... ........... 25 Section 10.07. Insurance......................................................... 25 Section 10.08. Federal Tax Matters ............................................. I - . 25 ARTICLE XI DEFAULT AND REMEDIES Section 11.01. Events of Default .............................. . ................... 26 Section 11.02. Remedies for Default ....................................... 26 Section 11.03. Remedies Not Exclusive ................ --- ....... 27 ARTICLE XII DISCHARGE Section 12.01. Discharge by Payment .......................... ......... 27 Section 12.02. Discharge by Deposit .... - - - ...... . .................... 27 ARTICLE XIII LAPSE OF PAYMENT Section 13.01. Lapse of Payment .......... I ....................................... 28 ARTICLE XIV CONTINUING DISCLOSURE UNDERTAKING Section 14.01. Defmitions........................................................ 29 Section 14.02. Annual Reports .................................................... 29 Section 14.03. Material Event Notices .............................................. 29 Section 14.04. Limitations, Disclaimers, and Amendments ....................... • ...... 30 C:\LG\CLIENTS\COLONY\REV98\DOCS\ORD-REV.98 iii ARTICLE XIV PROVISIONS RELATING TO BOND INSURANCE Section 15.01. Applicability of Article .............................................. 31 Section 15.02. Additional Definitions ....................................... - - - .... 31 Section 15.03. Consent of Insurer; Notices ....................................... 31 Section 15.04. Payment Pursuant to Insurance Policy .................................. 32 EXHIBIT A. DESCRIPTION OF ANNUAL FINANCIAL INFORMATION C:\LG\CLIENTS\COLONY\REV98\DOCS\ORD-REV.98 iv ORDINANCE NO. 98-1010 AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF THE COLONY, TEXAS, AUTHORIZING THE ISSUANCE AND SALE OF CITY OF THE COLONY, TEXAS, WATER AND SEWER SYSTEM REVENUE BONDS, SERIES 1998, IN THE AGGREGATE PRINCIPAL AMOUNT OF $3,105,000; PRESCRIBING THE FORM OF SAID BONDS; PROVIDING FOR THE SECURITY FOR AND PAYMENT OF SAID BONDS; AWARDING THE SALE THEREOF; APPROVING THE OFFICIAL STATEMENT; AND ENACTING OTHER PROVISIONS RELATING TO THE SUBJECT WHEREAS, this City Council (the "City Council"), by resolution adopted on December 29, 1997, directed publication of notice of the intention of the City of The Colony, Texas (the "City"} to issue not to exceed $3,150,000 water and sewer system revenue bonds of the City for the purposes set forth in such notice; WHEREAS, such notice was published in the manner and to the extent required by law; WHEREAS, there has not been filed with the City Secretary or any other office of the City a petition protesting the issuance of such revenue bonds and requesting an election on same; WHEREAS, it is affirmatively found and determined that the City is authorized to proceed with the issuance and sale of such revenue bonds as authorized by the laws of the State of Texas, including, particularly, Tex. Rev. Civ. Stat. Ann. arts. 2368a and 1111, et seq.; and WHEREAS, it is officially found, determined, and declared that the meeting at which this Ordinance has been adopted was open to the public and public notice of the time, place and subject matter of the public business to be considered and acted upon at said meeting, including this Ordinance, was given, all as required by the applicable provisions of Chap. 551, Texas Government Code; Now Therefor, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF THE COLONY: ARTICLE I DEFINITIONS AND OTHER PRELIMINARY MATTERS Section 1.01. Definitions. Unless otherwise expressly provided or unless the context clearly requires otherwise, in this Ordinance the following terms shall have the meanings specified below: "Additional Bonds" means the additional parity revenue bonds permitted to be issued under the provisions of this Ordinance. "Bond" means any of the Bonds. "Bonds" means the City's bonds entitled "City of The Colony, Texas, Water and Sewer System Revenue Bonds, Series 1998" authorized to be issued by Section 3.01. C:\LG\CLIENTS\COLONY\REV98\DOCS\ORD-REV.98 "Closing Date" means the date of the initial delivery of and payment for the Bonds. "Code" means the Internal Revenue Code of 1986, as amended, including applicable regulations, published rulings and court decisions relating thereto. "Construction Fund" means the construction fund established by Section 8.01(d). "Designated Payment/Transfer Office" means (i) with respect to the initial Paying Agent/Registrar named herein, its corporate trust office in New York, New York, and (ii) with respect to any successor Paying AgenMegistrar, the office of such successor designated and located as may be agreed upon by the City and such successor. "DTC" shall mean The Depository Trust Company of New York, New York, or any successor securities depository. "DTC Participant" shall mean any broker, dealer, bank, trust company, clearing corporation or certain other organizations with Bonds credited to an account maintained on its behalf by DTC. "Event of Default" means any Event of Default as defined in Section 11.01. "Fiscal Year" means twelve months' 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. "Gross Revenues" shall have the meaning assigned to such term in Section 8.01. "Initial Bond" means the Bond described in Sections 3.04(d) and 6.02(d). "Interest and Sinking Fund" means the interest and sinking fund described in Section 8.01(b). "Interest Payment Date" means the date or dates upon which interest on the Bonds is scheduled to be paid until the maturity of the Bonds, such dates being February 15 and August 15 of each year commencing August 15, 1998. "Net Revenues" shall have the meaning assigned to such term in Section 8.02(a). "Ordinance" means this Ordinance. "Original Issue Date" means the initial date from which interest on the Bonds accrues and which is designated in Section 3.02(a). "Owner" means the person who is the registered owner of a Bond or Bonds, as shown in the Register. "Parity Bonds" means the City's outstanding Waterworks and Sewer System Revenue Bonds, Series 1991, the City's outstanding Waterworks and Sewer System Revenue Bonds, Series 1995, the City's outstanding Water and Sewer System Revenue Bonds, Series 1996-A, the City's Water and Sewer System Revenue Bonds, Series 1996-B, the Bonds and any Additional Bonds. C:\LG\CLIENTS\COLONY\REV98\DOCS\ORD-REV.98 2 "Paying Agent/Registrar" means U.S. Trust Company of Texas, N.A., any successor thereto or an entity which is appointed as and assumes the duties of paying agent/registrar as provided in this Ordinance. "Purchaser" means the person, firm or entity initially purchasing the Bonds from the City and which is designated in Section 7.01. "Record Date" means the last business day of the month next preceding an Interest Payment Date. "Register" means the Register specified in Section 3.06(a) of this Ordinance. "Representation Letter" means the blanket Letter of Representations between the City and DTC. "Revenue Fund" means the revenue fund established and confirmed in Section 8.01(a). "Reserve Fund" means the reserve fund established and confirmed in Section 8.01(c). "Special Payment Date" means the Special Payment Date prescribed by Section 3.03(b). "Special Record Date" means the special record date prescribed by Section 3.03(b) of this Ordinance. "System" means the City's combined waterworks and sewer system. "Unclaimed Payments" means money deposited with the Paying Agent/Registrar for the payment of the principal of or interest on the Bonds as the same come due and payable and remaining unclaimed by the Owners of Bonds after the applicable payment or redemption date. Section 1.02. Other Definitions. The terms "City Council" and "City" shall have the respective meanings assigned in the preamble to this Ordinance. Section 1.03. Findings. The declarations, determinations and findings declared, made and found in the preamble to this Ordinance are hereby adopted, restated and made a part of the operative provisions hereof. Section 1.04. Table of Contents. Titles and Headings. The table of contents, titles and headings of the Articles and Sections of this Ordinance have been inserted for convenience of reference only and are not to be considered a part hereof and shall not in any way mollify or restrict any of the terms or provisions hereof and shall never be considered or given any effect in construing this Ordinance or any provision hereof or in ascertaining intent, if any question of intent should arise. C.\LG\CLIENTS\COLONY\REV98\DOCS\ORD-MV.98 3 Section 1.05. Inter retation. (a) Unless the context requires otherwise, words of the masculine gender shall be construed to include correlative words of the feminine and neuter genders and vice versa, and words of the singular number shall be construed to include correlative words of the plural number and vice versa. (b) This Ordinance and all the terms and provisions hereof shall be liberally construed to effectuate the purposes set forth herein to sustain the validity of this Ordinance. (c) Article and section references shall mean references to articles and sections of this Ordinance unless designated otherwise. ARTICLE II SECURITY FOR THE BONDS Section 2.01. Security for the Bonds. The Bonds are being issued as Additional Bonds on a parity with the outstanding Parity Bonds. The Bonds, together with the outstanding Parity Bonds, are and shall be equally and ratably secured by and payable from a first lien on and pledge of the Net Revenues of the System. Section 2.02. Limited Obligations. The Parity Bonds are special obligations of the City, payable solely from the Net Revenues, and shall never be payable out of funds raised or to be raised by taxation. ARTICLE III AUTHORIZATION; GENERAL TERMS AND PROVISIONS REGARDING THE BONDS Section 3.01. Authorization. The City's revenue bonds to be designated City of The Colony, Texas, Water and Sewer System Revenue Bonds, Series 1998," are hereby authorized to be issued and delivered in accordance with the laws of the State of Texas in the aggregate principal amount of $3,105,000 for the purpose of providing funds for the construction, acquisition and installation of additions, improvements and extensions to the System, to fund all or a portion of the Reserve Fund requirement relating to the Bonds, and to pay all or a portion of the costs of issuance of the Bonds. Section 3.02. Date. Denomination Maturities Numbers and Interest. (a) The Bonds shall have the Original Issue Date of January 15, 1998, shall be in fully registered form, without coupons, in the denomination of $5,000 or any integral multiple thereof, and shall be numbered separately from one upward or such other designation acceptable to the City and the Paying Agent/Registrar. C:\LG\CLIENTS\COLONY\UV98\DOCS\ORD-REV.98 4 (b) The Bonds shall mature on August 15 in the years and in the principal amounts and interest rates set forth below, interest on each Bond accruing from the Original Issue Date or the most recent Interest Payment Date to which interest has been paid or provided for at the per annum rates of interest, payable semiannually on February 15 and August 15 of each year until the principal amount shall have been paid or provision for such payment shall have been made, commencing August 15, 1998, as follows: Section 3.03. Medium. Method and Place of Payment. (a) The principal of, premium, if any, and interest on the Bonds shall be paid in lawful money of the United States of America as provided in this Section. (b) Interest on the Bonds shall be payable to the Owners whose names appear in the Register at the close of business on the Record Date; provided, however, that in the event of nonpayment of interest on a scheduled Interest Payment Date, and for 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 (the "Special Payment Date", which shall be at least 15 days after the Special Record Date) shall be sent at least five business days prior to the Special Record Date by United States mail, first class postage prepaid, to the address of each Owner of a Bond appearing on the books of the Paying Agent/Registrar at the close of business on the last business day next preceding the date of mailing of such notice. (c) Interest on the Bonds shall be paid by check (dated as of the Interest Payment Date) and sent by the Paying Agent/Registrar to the person entitled to such payment by United States mail, first class postage prepaid, to the address of such person as it appears in the Register or by such other customary banking arrangements acceptable to the Paying Agent/Registrar and the person to whom interest is to be paid; provided, however, that such person shall bear all risk and expenses of such other customary banking arrangements - (d) The principal of each Bond shall be paid to the person in whose name such Bond is registered on the due date thereof (whether at the maturity date or the date of prior redemption thereof) upon presentation and surrender of such Bond at the Designated Payment/Transfer Office. (e) If a date for the payment of the principal of or interest on the Bonds is a Saturday, Sunday, legal holiday, or a day on which banking institutions in the city in which the Designated Payment/Transfer Office is located are authorized by law or executive order to close, then the date for such payment shall be the next C:\LG\CLIENTS\COLONY\REV98\DOCS\ORD-REV.99 Principal Interest Principal Interest Year Amount Rate Year Amount Rate 1999 $100,000 4.25% 2009 $ 155,000 4.50% 2000 105,000 4.25% 2010 160,000 4.50% 2001 105,000 4.25% 2011 170,000 4.60% 2002 110,000 4.25% 2012 175,000 4.65% 2003 115,000 4.25% 2013 185,000 4.75% 2004 120,000 4.25% 2014 195,000 4.80% 2005 125,000 5.25% 2015 200,000 4.75% 2006 135,000 5.25% 2016 210,000 4.75% 2007 140,000 5.25% 2017 220,000 4.75% 2008 150,000 4.40% 2018 230,000 4.75% Section 3.03. Medium. Method and Place of Payment. (a) The principal of, premium, if any, and interest on the Bonds shall be paid in lawful money of the United States of America as provided in this Section. (b) Interest on the Bonds shall be payable to the Owners whose names appear in the Register at the close of business on the Record Date; provided, however, that in the event of nonpayment of interest on a scheduled Interest Payment Date, and for 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 (the "Special Payment Date", which shall be at least 15 days after the Special Record Date) shall be sent at least five business days prior to the Special Record Date by United States mail, first class postage prepaid, to the address of each Owner of a Bond appearing on the books of the Paying Agent/Registrar at the close of business on the last business day next preceding the date of mailing of such notice. (c) Interest on the Bonds shall be paid by check (dated as of the Interest Payment Date) and sent by the Paying Agent/Registrar to the person entitled to such payment by United States mail, first class postage prepaid, to the address of such person as it appears in the Register or by such other customary banking arrangements acceptable to the Paying Agent/Registrar and the person to whom interest is to be paid; provided, however, that such person shall bear all risk and expenses of such other customary banking arrangements - (d) The principal of each Bond shall be paid to the person in whose name such Bond is registered on the due date thereof (whether at the maturity date or the date of prior redemption thereof) upon presentation and surrender of such Bond at the Designated Payment/Transfer Office. (e) If a date for the payment of the principal of or interest on the Bonds is a Saturday, Sunday, legal holiday, or a day on which banking institutions in the city in which the Designated Payment/Transfer Office is located are authorized by law or executive order to close, then the date for such payment shall be the next C:\LG\CLIENTS\COLONY\REV98\DOCS\ORD-REV.99 succeeding day which is not a Saturday, Sunday, legal holiday, or day on which such 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. Section 3.04. Execution and Initial Re &#ration. (a) The Bonds shall be executed on behalf of the City by the Mayor and City Secretary of the City, by their manual or facsimile signatures, and the official seal of the City shall be impressed or placed in facsimile thereon. Such facsimile signatures on the Bonds shall have the same effect as if each of the Bonds had been signed manually and in person by each of said officers, and such facsimile seal on the Bonds shall have the same effect as if the official seal of the City had been manually impressed upon each of the Bonds. (b) In the event that any officer of the City whose manual or facsimile signature appears on the Bonds ceases to be such officer before the authentication of such Bonds or before the delivery thereof, such manual or facsimile signature nevertheless shall be valid and sufficient for all purposes as if such officer had remained in such office. (e) Except as provided below, no Bond shall be valid or obligatory for any purpose or be entitled to any security or benefit of this Ordinance unless and until there appears thereon the Certificate of Paying AgentlRegistrar substantially in the form provided in this Ordinance, duly authenticated by manual execution of the Paying AgentfRegistrar. It shall not be required that the same authorized representative of the Paying Agent/Registrar sign the Certificate of Paying Agent/Registrar on all of the Bonds. In lieu of the executed Certificate of Paying Agent/Registrar described above, the Initial Bond delivered on the Closing Date shall have attached thereto the Comptroller's Registration Certificate substantially in the form provided in this Ordinance, manually executed by the Comptroller of Public Accounts of the State of Texas or by his duly authorized agent, which certificate shall be evidence that the Initial Bond has been duly approved by the Attorney General of the State of Texas and that it is a valid and binding obligation of the City, and has been registered by the Comptroller. (d) On the Closing Date, one Initial Bond representing the entire principal amount of the Bonds, payable in stated installments to the Purchaser or its designee, executed by manual or facsimile signature of the Mayor and City Secretary of the City, approved by the Attorney General of Texas, and registered and manually signed by the Comptroller of public Accounts of the State of Texas, will be delivered to the Purchaser or its designee. Upon payment for the initial Bond, the Paying Agent/Registrar shall cancel the Initial Bond and deliver to DTC on behalf of the Purchaser one registered definitive Bond for each year of maturity of the Bonds, in the aggregate principal amount of all of the Bonds for such maturity, registered in the name of Cede & Co., as nominee of DTC. To the extent that the Paying AgentlRegistrar is eligible to participate in DTC's FAST System, as evidenced by agreement between the Paying Agent/Registrar and DTC, the Paying Agent/Registrar shall hold the definitive Bonds in safekeeping for DTC. Section 3.05. Ownership. (a) The City, the Paying Agent/Registrar and any other person may treat the person in whose name any Bond is registered as the absolute owner of such Bond for the purpose of making and receiving payment of the principal thereof and premium, if any, thereon, for the further purpose of making and receiving payment of the interest thereon (subject to the provisions herein that interest is to be paid to the person in whose name the Bond is registered on the Record Date), and for all other purposes, whether or not such Bond is overdue, and neither the City nor the Paying Agent/Registrar shall be bound by any notice or knowledge to the contrary. C:\LG\CLIENTS\COLONY\REV98\DOCS\ORD-RE V.98 (b) All payments made to the person deemed to be the Owner of any Bond in accordance with this Section shall be valid and effectual and shall discharge the liability of the City and the Paying Agent/Registrar upon such Bond to the extent of the sums paid. Section 3.06. Reg' tration. Transfer and Exchange. (a) So long as any Bonds remain outstanding, the City shall cause the Paying Agent/Registrar to keep at the Designated Payment/Transfer Office a register (the "Register") in which, subject to such reasonable regulations as it may prescribe, the Paying Agent/Registrar shall provide for the registration and transfer of Bonds in accordance with this Ordinance. (b) Registration of any Bond may be transferred in the Register only upon the presentation and surrender thereof at the Designated Payment/Transfer Office for transfer of registration and cancellation, together with proper written instruments of assignment, in form and with guarantee of signatures satisfactory to the Paying AgenYRegistrar, evidencing assignment of the Bonds, or any portion thereof in any integral multiple of $5,000, to the assignee or assignees thereof, and the right of such assignee or assignees thereof to have the Bond or any portion thereof registered in the name of such assignee or assignees. No transfer of any Bond shall be effective until entered in the Register. Upon assignment and transfer of any Bond or portion thereof, a new Bond or Bonds will be issued by the Paying Agent/ReV strar in conversion and exchange for such transferred and assigned Bond. To the extent possible the Paying Agent/Registrar will issue such new Bond or Bonds in not more than three business days after receipt of the Bond to be transferred in proper form and with proper instructions directing such transfer. (c) Any Bond may be converted and exchanged only upon the presentation and surrender thereof at the Designated Payment/Transfer Office, together with a written request therefor duly executed by the registered owner or assignee or assignees thereof, or its or their duly authorized attorneys or representatives, with guarantees of signatures satisfactory to the Paying Agent/Registrar, for a Bond or Bonds of the same maturity and interest rate and in any authorized denomination and in an aggregate principal amount equal to the unpaid principal amount of the Bond presented for exchange. If a portion of any Bond is redeemed prior to its scheduled maturity as provided herein, a substitute Bond or Bonds having the same maturity date, bearing interest at the same rate, in the denomination or denominations of any integral multiple of $5,000 at the request of the registered owner, and in an aggregate principal amount equal to the unredeemed portion thereof, will be issued to the registered owner upon surrender thereof for cancellation. To the extent possible, a new Bond or Bonds shall be delivered by the Paying Agent/Registrar to the registered owner of the Bond or Bonds in not more than three business days after receipt of the Bond to be exchanged in proper form and with proper instructions directing such exchange. (d) Each Bond issued in exchange for any Bond or portion thereof assigned, transferred or converted shall have the same principal maturity date and bear interest at the same rate as the Bond for which it is being exchanged. Each substitute Bond shall bear a letter and/or number to distinguish it from each other Bond. The Paying Agent/Registrar shall convert and exchange the Bonds as provided herein, and each substitute Bond delivered in accordance with this Section shall constitute an original contractual obligation of the City and shall be entitled to the benefits and security of this Ordinance to the same extent as the Bond or Bonds in lieu of which such substitute Bond is delivered. (e) The City will pay the Paying Agent/Registrar's reasonable and customary charge for the initial registration or any subsequent transfer, exchange or conversion of Bonds, but the Paying Agent/Registrar will require the Owner to pay a sum sufficient to cover any tax or other governmental charge that is authorized to be C:\LG\CLIENTS\COLONY\REV98\DOCS\ORD-REV.98 7 imposed in connection with the registration, transfer, exchange or conversion of a Bond. In addition, the City hereby covenants with the Owners of the Bonds that it will (i) pay the reasonable and standard or customary fees and charges of the Paying AgentlRegistrar for its services with respect to the payment of the principal of and interest on the Bonds, when due, and (u) pay the fees and charges of the Paying Agent/Registrar for services with respect to the transfer, registration, conversion and exchange of Bonds as provided herein. (f) Neither the City nor the Paying Agent/Registrar shall be required to transfer or exchange any Bond called for redemption, in whole or in part, within 45 days of the date fixed for redemption; provided, however, such limitation shall not be applicable to an exchange by the Owner of the uncalled balance of a Bond. Section 3.07. Cancellation and Authentication. (a) All Bonds paid or redeemed before scheduled maturity in accordance with this Ordinance, and all Bonds in lieu of which exchange Bonds or replacement Bonds are authenticated and delivered in accordance with this Ordinance, shall be canceled and destroyed upon the making of proper records regarding such payment, redemption, exchange or replacement. The Paying Agent/Registrar shall periodically furnish the City with certificates of destruction of such Bonds. (b) Each substitute Bond issued pursuant to the provisions of Sections 3.06 and 3.09 of this Ordinance, in conversion of and exchange for or replacement of any Bond or Bonds issued under this Ordinance, shall have printed thereon a Paying Agent/Registrar's Authentication Certificate, in the form hereinafter set forth. An authorized representative of the Paying AgentlRegistrar shall, before the delivery of any such Bond, manually sign and date such Certificate, and no such Bond shall be deemed to be issued or outstanding unless such Certificate is so executed. No additional ordinances, orders, or resolutions need be passed or adopted by the City Councilor any other body or person so as to accomplish the foregoing conversion and exchange or replacement of any Bond or portion thereof, and the Paying Agent/Registrar shall provide for the printing, execution, and delivery of the substitute Bonds in the manner prescribed herein, and said Bonds shall be of customary type and composition and be, printed on paper with lithographed or steel engraved borders of customary weight and strength. Pursuant to Article 717k-6, Vernods Annotated Civil Statutes, as amended, and particularly Section 6 thereof, the duty of conversion and exchange or replacement of Bonds as aforesaid is hereby imposed upon the Paying Agent/Registrar, and, upon the execution of the above Paying Agent/Registraes Authentication Certificate, the converted and exchanged or replaced Bonds shall be valid, incontestable, and enforceable in the same manner and with the same effect as the Initial Bond which was originally delivered pursuant to this Ordinance, approved by the Attorney General, and registered by the Comptroller of Public Accounts. (c) Bonds issued in conversion and exchange or replacement of any other Bond or portion thereof, (i) shall be issued in fully registered form, without interest coupons, with the principal of and interest on such Bonds to be payable only to the registered owners thereof, (ii) may be redeemed prior to their scheduled maturities, (iii) may be transferred and assigned, (iv) may be converted and exchanged for other Bonds, (v) shall have the characteristics, (vi)Ishall be signed and sealed, and (vii) shall be payable as to principal and interest, all as provided, and in the manner required or indicated, in the Form of Bonds set forth in this Ordinance. Section 3.08. Temporary Bonds. (a) Following the delivery and registration of the Initial Bonds and pending the preparation of definitive Bonds, the proper officers of the City may execute and, upon the City's request, the Paying AgentlRegistrar shall authenticate and deliver, one or more temporary Bonds that are printed, lithographed, typewritten, mimeographed or otherwise produced, in any denomination, substantially of the tenor of the C:\LG\CLIENTS\COLONY\REV98\DOCS\ORD-REV.98 8 definitive Bonds in lieu of which they are delivered, without coupons, and with such appropriate insertions, omissions, substitutions and other variations as the officers of the City executing such temporary Bonds may determine, as evidenced by their signing of such temporary Bonds. (b) Until exchanged for Bonds in definitive form, such Bonds in temporary form shall be entitled to the benefit and security of this Ordinance. (c) The City, without unreasonable delay, shall prepare, execute and deliver to the Paying Agent/Registrar the Bonds in definitive form; thereupon, upon the presentation and surrender of the Bond or Bonds in temporary form to the Paying Agent/Registrar, the Paying AgentlRegistrar shall cancel the Bonds in temporary form and authenticate and deliver in exchange therefor a Bond or Bonds of the same maturity and series, in definitive form, in the authorized denomination, and in the same aggregate principal amount, as the Bond or Bonds in temporary form surrendered. Such exchange shall be made without the making of any charge therefor to any Owner. Section 3.09. Re lacement Bonds. (a) Upon the presentation and surrender to the Paying Agent/Registrar, at the Designated Payment/Transfer Office, of a mutilated Bond, the Paying Agent/Registrar shall authenticate and deliver in exchange therefor a replacement Bond of like tenor and principal amount, bearing a number not contemporaneously outstanding. The City or the Paying Agent/ Registrar may require the Owner of such Bond to pay a sum sufficient to cover any tax or other governmental charge that is authorized to be imposed in connection therewith and any other expenses connected herewith. (b) In the event that any Bond is lost, apparently destroyed or wrongfully taken, the Paying AgentrRegistrar, pursuant to the applicable laws of the State of Texas and in the absence of notice or knowledge that such Bond has been acquired by a bona fide purchaser, shall authenticate and deliver a replacement Bond of like tenor and principal amount, bearing a number not contemporaneously outstanding, provided that the Owner first: (i) finnishes to the Paying Agent/Registrar satisfactory evidence of his or her ownership of and the circumstances of the loss, destruction or theft of such Bond; (ii) furnishes such security or indemnity as may be required by the Paying Agent/Registrar and the City to save them harmless; (iii) pays all expenses and charges in connection therewith, including, but not limited to, printing costs, legal fees, fees of the Paying Agent/Registrar and any tax or other governmental charge that is authorized to be imposed; and (iv) satisfies any other reasonable requirements imposed by the City and the Paying Agent/Registrar. (c) If, after the delivery of such replacement Bond, a bona fide purchaser of the original Bond in lieu of which such replacement Bond was issued presents for payment such original Bond, the City and the Paying Agent/Registrar shall be entitled to recover such replacement Bond from the person to whom it was delivered or any person taking therefrom, except a bona fide purchaser, and shall be entitled to recover upon the security or C:\LG\CLIENTS\COLONY\REV98\DOCS\ORD-REV.98 9 indemnityprovided therefor to the extent of any loss, damage, cost or expense incurred by the City or the Paying Agent/Registrar in connection therewith. (d) In the event that any such mutilated, lost, apparently destroyed or wrongfully taken Bond has become or is about to become due and payable, the Paying Agent/Registrar, in its discretion, instead of issuing a replacement Bond, may pay such Bond. (e) Each replacement Bond delivered in accordance with this Section shall constitute an original contractual obligation of the City and shall be entitled to the benefits and security of this Ordinance to the same extent as the Bond or Bonds in lieu of which such replacement Bond is delivered. Section 3.10. Book -Entry Only System. (a) The definitive Bonds shall be initially issued in the form of a separate single fully registered Bond for each of the maturities thereof. Upon initial issuance, the ownership of each such Bond shall be registered in the name of Cede & Co., as nominee of DTC, and except as provided in Section 3.11 hereof, all of the outstanding Bonds shall be registered in the name of Cede & Co., as nominee of DTC. (b) With respect to Bonds registered in the name of Cede & Co., as nominee of DTC, the City and the Paying Agent/Registrar shall have no responsibility or obligation to any DTC Participant or to any person on behalf of whom such a DTC Participant holds an interest in the Bonds, except as provided in this Ordinance. Without limiting the immediately preceding sentence, the City and the Paying Agent/Registrar shall have no responsibility or obligation with respect to (i) the accuracy of the records of DTC, Cede & Co. or any DTC Participant with respect to any ownership interest in the Bonds, (ii) the delivery to any DTC Participant or any other person, other than an Owner, as shown on the Register, of any notice with respect to the Bonds, including any notice of redemption, or (iii) the payment to any DTC Participant or any other person, other than an Owner, as shown in the Register of any amount with respect to principal of, premium, if any, or interest on the Bonds. Notwithstanding any other provision of this Ordinance to the contrary, the City and the Paying Agent/Registrar shall be entitled to treat and consider the person in whose name each Bond is registered in the Register as the absolute Owner of such Bond for the purpose of payment of principal of, premium, if any, and interest on the Bonds, for the purpose of giving notices of redemption and other matters with respect to such Bond, for the purpose of registering transfer with respect to such Bond, and for all other purposes whatsoever. The Paying Agent/Registrar shall pay all principal of, premium, if any, and interest on the Bonds only to or upon the order of the respective Owners, as shown in the Register as provided in this Ordinance, or their respective attorneys duly authorized in writing, and all such payments shall be valid and effective to fully satisfy and discharge the City's obligations with respect to payment of, premium, if any, and interest on the Bonds to the extent of the sum or sums so paid. No person other than an Owner, as shown in the register, shall receive a Bond certificate evidencing the obligation of the City to make payments of amounts due pursuant to this Ordinance. Upon delivery by DTC to the Paying Agent/Registrar of written notice to the effect that DTC has determined to substitute a new nominee in place of Cede & Co., and subject to the provisions in this Ordinance with respect to interest checks or drafts being mailed to the registered Owner at the close of business on the Record Date, the word "Cede & Co." in this Ordinance shall refer to such new nominee of DTC. (c) The previous execution and delivery of the Representation Letter with respect to obligations of the City is hereby ratified and confirmed; and the provisions thereof shall be fully applicable to the Bonds. C:\LG\CLIENTS\COLONY\REV98\DOCS\ORD-REV.98 10 Section 3.11. Successor Securities Depository_ Transfer Outside Book -Entry Only System. In the event that the City or the Paying Agent/Registrar determines that DTC is incapable of discharging its responsibilities described herein and in the Representation Letter, and that it is in the best interest of the beneficial owners of the Bonds that they be able to obtain certificated Bonds, or in the event DTC discontinues the services described herein, the City or the Paying Agent/Registrar shall (i) appoint a successor securities depository, qualified to act as such under Section 17(a) of the Securities and Exchange Act of 1934, as amended, notify DTC and DTC Participants, as identified by DTC, of the appointment of such successor securities depository and transfer one or more separate Bonds to such successor securities depository or (ii) notify DTC and DTC Participants, as identified by DTC, of the availability through DTC of Bonds and transfer one or more separate Bonds to DTC Participants having Bonds credited to their DTC accounts, as identified by DTC. In such event, the Bonds shall no longer be restricted to being registered in the Register in the name of Cede & Co., as nominee of DTC, but may be registered in the name of the successor securities depository, or its nominee, or in whatever name or names Owners transferring or exchanging Bonds shall designate, in accordance with the provisions of this Ordinance. Section 3.12. Payments to Cede & Co. Notwithstanding any other provision of this Ordinance to the contrary, so long as any Bonds are registered in the name of Cede & Co., as nominee of DTC, all payments with respect to principal of, premium, if any, and interest on such Bonds, and all notices with respect to such Bonds, shall be made and given, respectively, in the manner provided in the Representation Letter. ARTICLE IV REDEMPTION OF BONDS BEFORE MATURITY Section 4.01. Limitation on Redem tion. The Bonds shall be subject to redemption before scheduled maturity only as provided in this Article IV. Section 4.02. Redemption of Bonds Prior to MattiritY. The City reserves the option to redeem Bonds maturing on and after August 15, 2009 in whole or in part, before their scheduled maturity date, on February 15, 2008, or on any date thereafter (such redemption date or dates to be fixed by the City) at a price equal to the principal amount of the Bonds called for redemption plus accrued interest from the most recent interest payment date on which interest has been paid or duly provided for to the redemption date. The City, at least 45 days before the redemption date (unless a shorter period shall be satisfactory to the Paying Agent/Registrar), shall notify the Paying Agent/Registrar of such redemption date and of the principal amount of Bonds to be redeemed. Section 4.03. Partial Redem tion. (a) If less than all of the Bonds are to be redeemed, the City shall determine the amounts thereof to be redeemed and shall direct the Paying Agent/Registrar to call by lot Bonds, or portions thereof within such maturity and in such principal amounts, for redemption. C.\LG\CLIENTS\COLONY\REV98\DOCS\ORD-REV,98 11 (b) A portion of a single Bond of a denomination greater than $5,000 may be redeemed, but only in a principal amount equal to $5,000 or any integral multiple thereof. The Paying Agent/Registrar shall treat each $5,000 portion of the Bond as though it were a single Bond for purposes of selection for redemption. (c) Upon surrender of any Bond for redemption in part, the Paying Agent/Registrar, in accordance with Section 3.06 of this Ordinance, shall authenticate and deliver an exchange Bond or Bonds in an aggregate principal amount equal to the unredeemed portion of the Bond so surrendered. (d) The Paying Agent/Registrar shall promptly notify the City in writing of the principal amount to be redeemed of any Bond as to which only a portion thereof is to be redeemed. Section 4.04. Notice of Redemption to Owners. (a) The Paying Agent/Registrar shall give notice of any redemption of Bonds by sending notice by United States mail, first class postage prepaid, not less than 30 days before the date fixed for redemption, to the Owner of each Bond (or part thereof) to be redeemed, at the address shown on the Register. (b) The notice shall state the redemption date, the redemption price, the place at which the Bonds are to be surrendered for payment, and, if less than all the Bonds outstanding are to be redeemed, an identification of the Bonds or portions thereof to be redeemed. (c) Any notice given as provided in this Section shall be conclusively presumed to have been duly given, whether or not the Owner receives such notice. Section 4.05. Poyment. Upon Redem tion. (a) Before or on each redemption date, the Paying Agent/Registrar shall make provision for the payment of the Bonds to be redeemed on such date by setting aside and holding in trust an amount from the Interest and Sinking Fund or otherwise received by the Paying Agent/Registrar from the City sufficient to pay the principal of, premium, if any, and accrued interest on such Bonds. (b) Upon presentation and surrender of any Bond called for redemption at the Designated Payment/Transfer Office on or after the date fixed for redemption, the Paying Agent/Registrar shall pay the principal of, premium, if any, and accrued interest on such Bond to the date of redemption from the money set aside for such purpose. Section 4.06. Effect of Redemption. (a) Notice of redemption having been given as provided in Section 4.04 of this Ordinance, the Bonds or portions thereof called for redemption shall become due and payable on the date fixed for redemption and, unless the City defaults in the payment of the principal thereof, premium, if any, or accrued interest thereon, such Bonds or portions thereof shall cease to bear interest from and after the date fixed for redemption, whether or not such Bonds are presented and surrendered for payment on such date. (b) If any Bond or portion thereof called for redemption is not so paid upon presentation and surrender of such Bond for redemption, such Bond or portion thereof shall continue to bear interest at the rate stated on the Bond until paid or until due provision is made for the payment of same. C.\LG\CLIENTS\COLONY\REV98\DOCS\ORD-REV.98 12 ARTICLE V PAYING AGENT/REGISTRAR Section 5.01. Aointment of Initial Pa)Jng Agent/Registrar. (a) The City hereby appoints U. S. Trust Company of Texas, N.A. as its registrar and transfer agent to keep such books or records and make such transfers and registrations under such reasonable regulations as the City and the Paying Agent/Registrar may prescribe; and the Paying Agent/Registrar shall make such transfer and registrations as herein provided. It shall be the duty of the Paying Agent/Registrar to obtain from the Owners and record in the Register the address of such Owner of each Bond to which payments with respect to the Bonds shall be mailed, as provided herein. The City or its designee shall have the right to inspect the Register during regular business hours of the Paying Agent/Registrar, but otherwise the Paying Agent/Registrar shall keep the Registration Books confidential and, unless otherwise required by law, shall not permit their inspection by any other entity. (b) The City hereby further appoints the Paying Agent/Registrar to act as the paying agent for paying the principal of and interest on the Bonds. The Paying Agent/Registrar shall keep proper records of all payments made by the City and the Paying Agent/Registrar with respect to the Bonds, and of all conversions, exchanges and replacements of such Bonds, as provided in this Ordinance. (c) The execution and delivery of a Paying Agent/Registrar Agreement, specifying the duties and responsibilities of the City and the Paying Agent/Registrar, is hereby approved with such changes as may be approved by the Mayor of the City, and the Mayor and City Secretary of the City are hereby authorized to execute such agreement. Section 5.02. Oualifieations. Each Paying Agent/Registrar shall be (i) a commercial bank, trust company, or other entity duly qualified and legally authorized under applicable law, (ii) authorized under such laws to exercise trust powers, (iii) subject to supervision or examination by a federal or state governmental authority, and (iv) a single entity. Section 5.03. Maintaining Paying Agent/Registrar. (a) At all times while any Bonds are outstanding, the City will maintain a Paying Agent/Registrar that is qualified under Section 5.02 of this Ordinance. (b) If the Paying AgentlRegistrar resigns or otherwise ceases to serve as such, the City will promptly appoint a replacement. Section 5.04. Termination. The City reserves the right to terminate the appointment of any Paying Agent/Registrar by delivering to the entity whose appointment is to be terminated a certified copy of a resolution of the City (i) giving notice of the termination of the appointment and of the Paying Agent/Registrar Agreement, stating the effective date of such termination, and (ii) appointing a successor Paying Agent/Registrar; provided, that, no such termination shall be effective until a successor Paying Agent/Registrar has accepted the duties of Paying Agent/Registrar for the Bonds. C.\LG\CLIENTS\COLONY\REV98\DOCS\ORD-REV.98 13 Section 5.05. Notice of Change to Owners. Promptly upon each change in the entity serving as Paying Agent/Registrar, the City will cause notice of the change to be sent to each Owner by United States mail, first class postage prepaid, at the address in the Register, stating the effective date of the change and the name of the replacement Paying Agent/Registrar and the mailing address of its Designated Payment/Transfer Office. Section 5.06. A Bement to Perform Duties and Functions. By accepting the appointment as Paying Agent/Registrar, the Paying Agent/Registrar is deemed to have agreed to the provisions of this Ordinance and that it will perform the duties and functions of Paying Agent/Registrar prescribed hereby. Section 5.07. Deliv of Records to Successor. If a Paying Agent/Registrar is replaced, such Paying AgentlRegistrar, promptly upon the appointment of the successor, will deliver the Register (or a copy thereof) and all other pertinent books and records relating to the Bonds to the successor Paying Agent/Registrar. ARTICLE VI FORM OF THE BONDS Section 6.01. Foran Generally. (a) The Bonds, including the Registration Certificate of the Comptroller of Public Accounts of the State of Texas, the Certificate of the Paying Agent/Registrar, and the Assignment form to appear on each of the Bonds, (i) shall be substantially in the form set forth in this Article, with such appropriate insertions, omissions, substitutions, and other variations as are permitted or required by this Ordinance, and (ii) 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 (including any reproduction of an opinion of counsel) thereon as, consistently herewith, may be determined by the City or by the officers executing such Bonds, as evidenced by their execution thereof. (b) Any portion of the text of any Bonds may be set forth on the reverse side thereof, with an appropriate reference thereto on the face of the Bonds. (c) The Bonds shall be printed, lithographed, or engraved, and may be produced by any combination of these methods or produced in any other manner, all as determined by the officers executing such Bonds, as evidenced by their execution thereof. Section 6.02. Form of Bonds. The form of Bonds, including the form of the Registration Certificate of the Comptroller of Public Accounts of the State of Texas, the form of Certificate of the Paying Agent/Registrar and the form of Assignment appearing on the Bonds, shall be substantially as follows: C:\LG\CLIENTS\COLONY\EEV96\DOCS\ORD-REV.99 14 (a) [Form of Bond] REGISTERED 061 The United States of America State of Texas CITY OF THE COLONY, TEXAS WATER AND SEWER SYSTEM REVENUE BOND SERIES 1998 REGISTERED INTEREST RATE: MATURITY'DATE: ORIGINAL ISSUE DATE: CUSIP NUMBER: January 15, 1998 The City of The Colony (the "City") in the County of Denton, State of Texas, for value received, hereby promises to pay to or registered assigns, on the Maturity Date specified above, the sum of DOLLARS unless this Bond shall have been sooner called for redemption and the payment of the principal hereof shall have been paid or provision for such payment shall have been made, and to pay interest on the unpaid principal amount hereof from the later of the Original Issue Date specified above or the most recent interest payment date to which interest has been paid or provided for until such principal amount shall have been paid or provided for, 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 to be paid semiannually on February 15 and August 15 of each year, commencing August 15, 1998. The principal of this Bond shall be payable without exchange or collection charges in lawful money of the United States of America upon presentation and surrender of this Bond at the corporate trust office in New York, New York (the "Designated Payment/Transfer Office"), of the Paying Agent/Registrar executing the registration certificate appearing hereon, or, with respect to a successor Paying Agent/Registrar, at the Designated Payment/Transfer Office of such successor. Interest on this Bond is payable by check dated as of the interest payment date, mailed by the Paying Agent/Registrar to the registered owner at the address shown on the registration books kept by the Paying AgentlRegistrar or by such other customary banking arrangements acceptable to the Paying Agent/Registrar, requested by, and at the risk and expense of, the person to whom interest is to be paid. For the purpose of the payment of interest on this Bond, the registered owner shall be the person in whose name this Bond is registered at the close of business on the "Record Date," which shall be the last business day of the month next preceding such interest payment date; provided, however, that in the event of nonpayment of interest on a scheduled interest payment date, and for 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 (the "Special Payment Date", which shall be 15 days after the Special Record Date) shall be sent at least five business days prior to the Special Record Date by United C.\LG\CLIENTS\COLONY\REV98\DOCS\ORD-REV.98 15 States mail, fust class postage prepaid, to the address of each Owner of a Bond appearing on the books of the Paying Agent/Registrar at the close of business on the last business day preceding the date of mailing such notice. If a date for the payment of the principal of or interest on the Bonds is a Saturday, Sunday, legal holiday, or a day on which banking institutions in the city in which the Designated Payment/Transfer Office 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 a Saturday, Sunday, legal holiday, or day on which such 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. This Bond is one of a series of fully registered bonds specified in the title hereof issued in the aggregate principal amount of $3,105,000 (herein referred to as the "Bonds"), issued pursuant to a certain Ordinance of the City Council of the City (the "Ordinance") for the purpose of providing funds for the construction, acquisition and installation of additions, improvements and extensions to the City's waterworks and sewer system, to fund all or a portion of the Reserve Fund requirement relating to the Bonds, and to pay the costs of issuance related to the Bonds. This Bond and all the Bonds of the series of which it is a part constitute special obligations of the City of The Colony, Texas, and, together with certain previously issued parity bonds defined and described in the Ordinance, are payable as to both principal and interest from and equally secured by a lien on and pledge of the Net Revenues of the City's water and sewer system. Reference is hereby made to the Ordinance for a more complete statement of the covenants and provisions securing the payment of this Bond and the series of which it is one. The City expressly reserves the right to issue further and additional special revenue obligations equally secured by alien on and pledge of the net revenues of the City's water and sewer system on a parity with the bonds of this issue; provided, however, that any and all such additional parity obligations may be issued only in accordance with and subject to the covenants, conditions, limitations and restrictions relating thereto which are set out and contained in the Ordinance, to which reference is hereby made for more complete and full particulars. The holder hereof shall never have the right to demand payment of this obligation out of any funds raised or to be raised by taxation. The City has reserved the option to redeem the Bonds maturing on and after August 15, 2009, before their respective scheduled maturity in whole or in part in integral multiples of $5,000 on February 15, 2008, or on any date thereafter, at a price equal to the principal amount of the Bonds so called for redemption plus accrued interest to the redemption date. If less than all of the Bonds are to be redeemed, the City shall determine the amounts thereof to be redeemed and shall direct the Paying AgentlRegistrar to call by lot Bonds, or portions thereof within such maturity or maturities and in such amounts, for redemption. Notice of such redemption or redemptions shall be sent by United States mail, first class postage prepaid, not less than 30 days before the date fixed for redemption, to the registered owner of each of the Bonds to be redeemed in whole or in part. Notice having been so given, the Bonds or portions thereof designated for redemption shall become due and payable on the redemptkm date specified in such notice, and from and after such date, notwithstanding that any of the Bonds or portions thereof so called for redemption shall not have been surrendered for payment, interest on such Bonds or portions thereof shall cease to accrue. As provided in the Ordinance, and subject to certain limitations therein set forth, this Bond is transferable upon surrender of this Bond for transfer at the Designated Payment/Transfer Office, with such endorsement or C.\LG\CLIENTS\COLONY\REV98\DOCS\ORD-REV.98 16 other a ider= of transfer as is acceptable to the Paying Agent/Registrar, and, thereupon, one or more new fully registered Bonds of the same stated maturity, of authorized denominations, bearing the same rate of interest, and for the same aggregate principal amount will be issued to the designated transferee or transferees. The City, the Paying Agent/Registrar, and any other person may treat the person in whose name this Bond is registered as the owner hereof for the purpose of receiving payment as herein provided (except interest shall be paid to the person in whose name this Bond is registered on the Record Date or Special Record Date, as applicable) and for all other purposes, whether or not this Bond be overdue, and neither the City nor the Paying Agent/Registrar shall be affected by notice to the contrary. Neither the City nor the Paying Agent/Registrar shall be required to issue, transfer or exchange any Bond called for redemption where such redemption is scheduled to occur within 45 calendar days of the transfer or exchange date; provided, however, such limitation shall not be applicable to an exchange by the registered owner of the uncalled principal balance of a Bond. IT IS HEREBY CERTIFIED AND RECITED that the issuance of this Bond and the series of which it is a part is duly authorized by law; that all acts, conditions and things required to be done precedent to and in the issuance of the Bonds have been properly done and performed and have happened in regular and due time, form and manner, as required by law; and that the total indebtedness of the City, including the Bonds, does not exceed any constitutional or statutory limitation. IN WITNESS WHEREOF, this Bond has been duly executed on behalf of the City, under its official seal, in accordance with law. City Secretary Mayor City of The Colony, Texas City of The Colony, Texas [SEAL] (b) [Form of Certificate of Paying Agent/Registrar] CERTIFICATE OF PAYING AGENT/REGISTRAR This is one of the Bonds referred to in the within mentioned Ordinance. The series of Bonds of which this Bond is a part was originally issued as one Initial Bond which was approved by the Attorney General of the State of Texas and registered by the Comptroller of Public Accounts of the State of Texas. U.S. TRUST COMPANY OF TEXAS, N.A. as Paying Agent/Registrar Dated: Authorized Signatory C.\LG\CLIENTS\COLONY\REV98\DOCS\ORD-REV.98 17 (c) [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): other identifying number: constitutes and appoints (Social Security or the within Bond and all rights hereunder and hereby irrevocably attorney to transfer the within Bond on the books kept for registration hereof, with full power of substitution in the premises. Dated: Signature Guaranteed By: Authorized Signatory (d) Initial Bond Insertions. that: NOTICE: The signature on this Assignment must correspond with the name of the registered owner as it appears on the face of the within Bond in every particular and must be guaranteed in a manner acceptable to the Paying Agent/Registrar. (i) The Initial Bond shall be in the form set forth in paragraph (a) of this Section, except A. immediately under the name of the Bond, the headings "INTEREST RATE" and "MATURITY DATE" shall both be completed with the words "As Shown Below" and "CUSIP NO. " deleted; B. in the first paragraph: the words "on the Maturity Date specified above" shall be deleted and the following will be inserted: "on the fifteenth day of August in the years, in the principal installments and bearing interest at the per annum rates set forth in the following schedule: Principal Interest Years Installments Rates (Information to be inserted from Section 3.02(b) hereof.) C. In the second paragraph of the Initial Bond, "initial' shall be inserted before "Paying Agent/Registrar" in the first sentence, "executing the registration certificate appearing hereon," shall be deleted and an additional sentence shall be added to the C.\LG\CLIENTS\COLONY\REV98\DOCS\ORD-MV.98 18 paragral)h as follows: "The initial Paying Agent/Registrar is U. S. Trust Company of Texas, N.A."; D. the Initial Bond shall be numbered T-1. (ii) The following Registration Certificate of Comptroller of Public Accounts shall appear on the Initial Bond in lieu of the Certificate of Paying Agent/Registrar: REGISTRATION CERTIFICATE OF COMPTROLLER OF PUBLIC ACCOUNTS OFFICE OF THE COMPTROLLER § OF PUBLIC ACCOUNTS § REGISTER NO, THE STATE OF TEXAS I HEREBY CERTIFY THAT there is on file and of record in my office a certificate to the effect that the Attorney General of the State of Texas has approved this Bond, and that this Bond has been registered this day by me. [SEAL] WITNESS MY SIGNATURE AND SEAL OF OFFICE this Section 6.03. CUSIP Registration. Comptroller of Public Accounts of the State of Texas The City may secure identification numbers through the CUSIP Service Bureau Division of Standard & Poor's Corporation, New York, New York, and may authorize the printing of such numbers on the face of the Bonds. It is expressly provided, however, that the presence or absence of CUSIP numbers on the Bonds shall be of no significance or effect as regards the legality thereof and neither the City nor the attorneys approving said Bonds as to legality are to be held responsible for CUSIP numbers incorrectly printed on the Bonds. Section 6.04. Legal Opinion. The approving legal opinion of Fisher & Newsom, P.C., Bond Counsel, may be printed on the back of each Bond over the certification of the Secretary of the Board, which may be executed in facsimile. Section 6.05. Municipal Bond Insurance. Municipal bond guaranty insurance has been obtained with respect to the Bonds. The Bonds, including the Initial Bond, shall bear an appropriate legend, as provided by the insurer. The Mayor or City Manager, either or both of said officials, are authorized to execute the commitment provided by the insurer with respect to such policy. C.\LG\CLIENTS\COLONY\REV98\DOCS\ORD-REV.98 19 ARTICLE VII SALE OF THE BONDS; CONTROL AND DELIVERY OF THE BONDS Section 7.01. Sale of Bonds_ Official Statement. (a) The Bonds are herby officially sold and awarded to Dain Rauscher Incorporated, in accordance with the terms and provisions of that certain Purchase Contract relating to the Bonds between the City and the Purchaser and dated the date of the passage of this Ordinance. The form and content of such Purchase Contract are hereby approved, and the Mayor and City Secretary are hereby authorized and directed to execute and attest, respectively, and deliver such Purchase Contract. It is hereby officially found, determined and declared that the terms of this sale are the most advantageous reasonably obtainable. The Bonds shall initially be registered in the name of Dain Rauscher Incorporated or its designee. (b) The form and substance of the Official Statement for the Bonds and any addenda, supplement or amendment thereto (the "Official Statement") presented to and considered at this meeting, is hereby in all respects approved and adopted, and the Official Statement is hereby deemed final as of its date (except for the omission of pricing and related information) within the meaning and for the purposes of paragraph (b)(1) of Rule 15c2-12 under the Securities Exchange Act of 1934, as amended, by the Board. The Mayor and City Secretary of the City are hereby authorized and directed to execute the same and deliver appropriate numbers of executed copies thereof to the Purchaser of the Bonds. The Official Statement as thus approved, executed and delivered, with such appropriate variations as shall be approved by the Mayor of the City and the Purchaser of the Bonds, may be used by the Purchaser in the public offering and sale thereof. The use and distribution of the Official Statement in the public offering of the Bonds by the Purchaser is hereby ratified, approved and confirmed. The City Secretary of the City is hereby authorized and directed to include and maintain a copy of the Official Statement and any addenda, supplement or amendment thereto thus approved among the permanent records of this meeting. The use and distribution of the Official Statement for the Bonds and the preliminary public offering of the Bonds by the Purchasers is hereby ratified, approved and confirmed. (c) All officers of the City are authorized to take such actions and to execute such documents, certificates and receipts as they may deem necessary and appropriate in order to consummate the delivery of the Bonds. (d) The obligation of the Purchaser to accept delivery of the Bonds is subject to the Purchaser being furnished with the final, approving opinion of Fisher & Newsom, P.C., Bond Counsel for the City, which opinion shall be dated as of and delivered on the Closing Date. The Mayor is hereby authorized and directed to execute the engagcmcnt letter with Fisher & Newsom, P.C., setting forth such firm's duties as Bond Counsel for the City in connection with the issuance of the Bonds, and such engagement letter and the terms thereof in the form presented at this meeting is hereby approved and accepted. Section 7.02. Control and Delivery of Bonds. (a) The Mayor of the City is hereby authorized to have control of the Initial Bond and all necessary records and proceedings pertaining thereto pending investigation, examination and approval of the Attorney General of the State of Texas, registration by the Comptroller of Public Accounts of the State of Texas, and registration with, and initial exchange or transfer by, the Paying Agent/Registrar. C.\LG\CLIENTS\COLONY\REV98\DOCS\ORD-REV.98 20 (b) After registration by the Comptroller of Public Accounts, delivery of the Bonds shall be made to the Purchaser under and subject to the general supervision and direction of the Mayor of the City, against receipt by the City of all amounts due to the City under the terms of sale. ARTICLE VIII CREATION OF FUNDS AND ACCOUNTS; DEPOSIT OF PROCEEDS; INVESTMENTS Section 8.01. Special Funds. The City covenants and agrees that all revenues derived from the operation of the System (the "Gross Revenues") shall be kept separate from other funds of the City. To that end, the following special funds have been established and shall be maintained at a depository bank of the City so long as any of the Parity Bonds are outstanding and unpaid, to -wit: (a) "City of The Colony, Texas, Water and Sewer System Revenue Bonds Revenue Fund," herein called the "Revenue Fund"; (b) "City of The Colony, Texas, Water and Sewer System Revenue Bonds Interest and Sinking Fund," herein called the "Interest and Sinking Fund"; (c) "City of The Colony, Texas, Water and Sewer System Revenue Bonds Reserve Fund," herein called the "Reserve Fund"; and (d) "City of The Colony, Texas, Water and Sewer System Revenue Bonds, Series 1998 Construction Fund," (herein called the "Construction Fund"). Section 8.02. Flow of Funds. (a) All Gross Revenues shall be deposited from day to day as collected into the Revenue Fund. Moneys on deposit in the Revenue Fund shall first be used to pay all operation and maintenance expenses of the System. The revenues of the System not actually required to pay operation and maintenance expenses (the "Net Revenues") shall be transferred from the Revenue Fund to the other funds described in this Ordinance, in the order of priority, in the manner, and in the amounts set forth below: (b) There shall be deposited into the Interest and Sinking Fund the following: (i) such amounts, in equal monthly installments, conunencing on the tenth day of the month following the month in which the Closing Date occurs, and on the tenth day of each month thereafter, as will be sufficient to pay the interest scheduled to come due on the Parity Bonds on the next Interest Payment Date, less any amounts already in deposit therein for such purpose derived from the proceeds of the Bonds or from any other lawfully available source; and (ii) such amounts, in equal monthly installments, commencing on the tenth day of the month following the month in which the Closing Date occurs, and on the tenth day of each month thereafter, as will be sufficient to pay the next maturing principal of the Parity Bonds. C:\LG\CLIENTS\COLONY\REV98\DOCS\ORD-REV.98 21 The Interest and Sinking Fund shall be used to pay the principal of and interest on the Parity Bonds as such principal matures and such interest becomes due. (c) So long as the funds on deposit in the Reserve Fund are equal to the Reserve Fund Requirement, no deposits need to be made to the credit of the Reserve Fund; but should the Reserve Fund at any time contain less than the Reserve Fund Requirement, which shall be an amount equal to the average annual debt service of the Parity Bonds and any Additional Bonds outstanding from time to time, then, subject and subordinate to making the required deposits to the credit of the Interest and Sinking Fund, the City shall transfer from the first available Net Revenues in the Revenue Fund and deposit to the credit of the Reserve Fund, such amounts as are required to restore the amount on deposit therein to the Reserve Fund Requirement. The money on deposit in the Reserve Fund may be used to pay the principal of and interest on the Parity Bonds at any time there are not sufficient funds on deposit in the Interest and Sinking Fund for such purpose. Upon issuance of the Bonds, the City shall calculate the Reserve Fund Requirement that will be required after giving effect to the issuance of the Bonds. In accordance with the procedures specified in the preceding paragraph and in addition to any deposits required to be made pursuant to such paragraph, deposits shall be made to the Reserve Fund by the City to accumulate in the Reserve Fund, within sixty months from the month in which the Closing Date occurs, an amount equal to the Reserve Fund Requirement. Section 8.03. Construction Fund. (a) Money on deposit in the Construction Fund, together with any investment earnings thereof, shall be used for the purposes specified in Section 3.01(a) of this Ordinance. (b) All amounts remaining in the Construction Fund after the accomplishment of the purposes for which the Bonds are hereby issued, including investment earnings of the Construction Fund, shall be deposited into the Interest and Sinking Fund, unless applicable law permits or authorizes all or any part of such funds to be used for other purposes. Section 8.04. Security of Funds. All moneys on deposit in the funds referred to in this Ordinance shall be secured in the manner and to the fullest extent required by the laws of the State 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. follows: Section 8.05. Initial Deposits. On the Closing Date, the City shall cause the proceeds from the sale of the Bonds to be deposited as (i) all accrued interest on the Bonds from the Original Issue Date until the Closing Date shall be deposited to the credit of the Interest and Sinking Fund; (ii) the amount of $166,944.00 shall be deposited into the Reserve Fund; and (iii) the remaining balance, less any amounts paid at Closing as costs of issuance including the premium for municipal bond insurance, shall be deposited to the credit of the Construction Fund. C.\LG\CLIENTS\COLONY\REV98\DOCS\ORD-REV.98 22 Section 8.06. Investments. (a) Money in the funds created by this Ordinance, at the option of the City, may be invested in such securities or obligations as permitted under applicable law. (b) Any securities or obligations in which money is so invested shall be kept and held in trust for the benefit of the Owners and shall be sold and the proceeds of sale shall be timely applied to the making of all payments required to be made from the fund from which the investment was made. Section 8.07. Investment Income. Interest and income derived from investment of any fund created by this Ordinance shall be credited to such fund. ARTICLE IX ADDITIONAL PARITY REVENUE BONDS AND OBLIGATIONS Section 9.01. Additional Bonds. (a) The City may issue Additional Bonds if the following conditions are met: (i) the City is not then in default. as to any covenant, condition or obligation prescribed by an ordinance authorizing the issuance of any Parity Bonds; - (ii) the Additional Bonds are made to mature on August 15 in each of the years in which they are scheduled to mature; (iii) the Net Revenues of the System for any consecutive period of 12 months of the 15 months next preceding the month in which the ordinance authorizing the proposed Additional Bonds is adopted, or for the City's completed fiscal year next preceding the date of such Additional Bonds, are equal to at least (A) 1.10 times the maximum annual principal and interest requirements and (B) 1.25 times the average annual principal and interest requirements of all Parity Bonds to be outstanding after the issuance of the Additional Bonds, as such Net Revenues are shown by a report by a certified public accountant or a licensed public accountant; provided, that, the calculation of Net Revenues for the purpose of this Section 9.01(a)(iii) may be made on the basis of new rates and charges as then proposed and adopted by the City and in effect not later than the issuance date of the Additional Bonds; and (iv) the amount to be accumulated and maintained in the Reserve Fund shall be increased to an amount not less than the average annual requirements for the payment of principal of and interest on Parity Bonds including the proposed Additional Bonds, such additional amount to be accumulated in equal monthly installments during a period not to exceed five years and one month. C.\LO\CLIENTS\COLONY\REV98\DOCS\ORD-REV.98 23 ARTICLE X PARTICULAR REPRESENTATIONS AND COVENANTS Section 10.01. Payment of the Bonds; Bjnding_Obligations. (a) While any of the Bonds are outstanding and unpaid, there shall be made available to the Paying Agent/Registrar, out of the Interest and Sinking Fund or, if funds in the Interest and Sinking Funds are insufficient for such purpose, the Reserve Fund, money sufficient to pay the interest on and the principal of the Bonds, as applicable, as will accrue or mature on each applicable Interest Payment Date. (b) The City will faithfully perform at all times any and all covenants, undertakings, stipulations, and provisions contained in this Ordinance and in each Bond; the City will promptly pay or cause to be paid the principal of, interest on, and premium, if any, with respect to, each Bond on the dates and at the places and manner prescribed in such Bond; and the City will, at the times and in the manner prescribed by this Ordinance, deposit or cause to be deposited the amounts of money specified by this Ordinance. (c) The City is duly authorized under the laws of the State of Texas to issue the Bonds; all action on its part for the creation and issuance of the Bonds has been duly and effectively taken; and the Bonds in the hands of the Owners thereof are and will be valid and enforceable obligations of the City in accordance with their terms. Section 10.02. Rate Covenant. The City hereby covenants that it will establish rates for water and sewer services supplied by the System which shall produce or yield revenues sufficient to pay maintenance and operating expenses of the System, maintain the funds established hereunder and an additional amount equal to at least 110% of the aggregate amount required to be paid in such year for principal and interest on all outstanding Parity Bonds. Section 10.03. Nonim airment of Lien. The City hereby covenants to take no action or omit to take any action, or suffer to be done or omitted to be done, any matter or thing whatsoever whereby the lien of the Parity Bonds on the revenues of the System might or could be lost or impaired, and that the City will pay or cause to be paid, or will make adequate provision for the satisfaction and discharge of all lawful claims and demands for labor, materials, supplies, or other objects which, if unpaid, might by law be given precedence to, or an equality with the Parity Bonds as a lien or charge upon the revenues of the System or any part thereof, provided that nothing in this section shall be construed to require the City to pay, discharge or make provision for any such lien, charge, claim or demand so long as the validity thereof shall be by it in good faith contested. Section 10.04. No Sale or Encumbrance of System. The City hereby covenants that it will not in any manner dispose of the System or any substantial part thereof, including any and all extensions and additions that may be made thereto, until the Parity Bonds shall have been paid in full as to both principal and interest; provided, however, that this covenant shall not be construed to prevent the disposal by the City of property, which, in the City's judgment, has become inexpedient to use in connection with the System, when other property of equal value is substituted therefor or when the proceeds of such disposition of such property are placed in the Interest and Sinking Fund, in addition to all other amounts C.\LG\CLIENTS\COLONY\REV99\DOCS\ORD-REV.98 24 required to be placed in the Interest and Sinking Fund in the current fiscal year, and are used for the retirement of Parity Bonds in advance of their respective maturities. Section 10.05. No Competing Systems. The City hereby covenants that it will not grant a franchise for the operation of any competing water or sewer system in the City until all Parity Bonds have been paid in full with respect to principal and interest. Section 10.06. No Free Service. The City hereby covenants that it will not permit free water or services to be supplied to the City or to any other user, and the City hereby agrees that it will pay from its general fund the reasonable value of all water and services obtained from the System by the City and all departments and agencies thereof. Section 10.07. Insurance. So long as any of the Parity Bonds are outstanding, the City agrees to maintain, for the benefit of the holder or holders of such bonds, insurance on the System of a kind and in an amount that usually would be carried by private companies engaged in a similar type of business. Section 10.08. Federal Tax Matters. (a) The City hereby represents that the proceeds of the Bonds are needed at this time for the purposes described in Section 3.01; that it is not reasonably expected that the money deposited in the Interest and Sinking Fund will be used or invested in a manner that would cause the Bonds to be or become "arbitrage bonds," within the meaning of Section 148 of the Code; and that, except for the Interest and Sinking Fund and Reserve Fund, no other funds or accounts have been established or pledged to the payment of the Bonds. (b) The City will not take any action or fail to take any action with respect to the investment of the proceeds of the Bonds or any other funds of the City, including amounts received from the investment of any of the foregoing, if such action or inaction would result in constituting the Bonds "arbitrage bonds," within the meaning of Section 148 of the Code, and the City will not take any deliberate action motivated by arbitrage that would have such result. (c) The City will not take any action or fail to take any action which act or omission would (i) result in the interest on the Bonds being includable in gross income for federal tax purposes; (ii) result in the Bonds being treated as "private activity bonds" within the meaning or Section 141(a) of the Code; or (iii) result in the Bonds being treated as "federally guaranteed" within the meaning of Section 149(b) of the Code. (d) The City will comply with the provisions of Section 148(f) of the Code (relating to paying certain excess earnings of investment proceeds of the Bonds to the United States) and the regulations promulgated thereunder. This covenant includes the maintenance of records regarding investments acquired with the proceeds by or on behalf of the City adequate to calculate the City's rebate liability. (e) It is the understanding of the City that the covenants contained herein are intended to assure compliance with the regulations and rulings issued by the Internal Revenue Service. In the event that regulations or rulings are hereafter issued which modify or expand provisions of the Code, as applicable to the Bonds, the City will not be required to comply with any covenant contained herein to the extent that such C.\LG\CLIENTS\COLONY\REV98\DOCS\ORD-REV.98 25 failure to comply, in the opinion of nationally -recognized bond counsel, will not adversely affect the exemption from federal income taxation of interest on the Bonds under Section 103 of the Code. In the event that regulations or rulings are hereafter issued which impose additional requirements which are applicable to the Bonds, the City agrees to comply with the additional requirements to the extent necessary, in the opinion of nationally -recognized bond counsel, to preserve the exclusion of interest on the Bonds for federal tax purposes under Section 103 of the Code. (f) The City covenants that the City will regulate the use of the property financed, directly or indirectly, with the proceeds of the Bonds and will not sell, lease, or otherwise dispose of such property prior to the last stated maturity of the Bonds, unless (i) the City takes the remedial measures as may be required by the Code and the regulations and rulings thereunder in order to preserve the exclusion from gross income of interest on the Contractual Bonds under section 103 of the Code or (ii) the City seeks the advice of nationally - recognized bond counsel with respect to such sale, lease, or other disposition. (g) The covenants set forth in subsections (b), (c), and (d) of this Section shall survive the later of the defeasance or discharge of the Bonds. (h) Proper officers of the City charged with the responsibility of issuing the Bonds are hereby directed to make, execute and deliver certifications as to facts, estimates and circumstances in existence as of the Closing Date and stating whether there are any facts, estimates or circumstances that would materially change the City's current expectations. (i) The covenants and representations made or required by this Section are for the benefit of the Owners and may be relied upon by the Owners and Bond Counsel for the City. ARTICLE XI DEFAULT AND REMEDIES Section 11.01. Events of Default. Each of the following occurrences or events for the purpose of this Ordinance is hereby declared to be an "Event of Default," to -wit: (i) the failure to make payment of the principal of or interest on any of the Bonds when the same becomes due and payable; or (ii) default in the performance or observance of any other covenant, agreement or obligation of the City, the failure to perform which materially, adversely affects the rights of the Owners, including but not limited to, their prospect or ability to be repaid in accordance with this Ordinance, and the continuation thereof for a period of 60 days after notice of such default is given by any Owner to the City. Section 11.02. Remedies for Default. (a) Upon the happening of any Event of Default, then and in every case any Owner or an authorized representative thereof, including but not limited to, a trustee or trustees therefor, may proceed against the City for the purpose of protecting and enforcing the rights of the Owners under this Ordinance, by mandamus or other suit, action or special proceeding in equity or at law, in any court of competent jurisdiction, for any relief permitted by law, including the specific performance of any covenant or agreement contained herein, or thereby C:\LG\CLIENTS\COLONY\REV98\DOCS\ORD-REV.98 26 to enjoin any act or thing that may be unlawful or in violation of any right of the Owners hereunder or any combination of such remedies. (b) It is provided that all such proceedings shall be instituted and maintained for the equal benefit of all Owners of Bonds then outstanding. Section 11.03. Remedies Not Exclusive. (a) No remedy herein conferred or reserved is intended to be exclusive of any other available remedy or remedies, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or under the Bonds or now or hereafter existing at law or in equity; provided, however, that notwithstanding any other provision of this Ordinance, the right to accelerate the debt evidenced by the Bonds shall not be available as a remedy under this Ordinance. (b) The exercise of any remedy herein conferred or reserved shall not be deemed a waiver of any other available remedy. ARTICLE XII DISCHARGE Section 12.01. Dischar e b Pa ent. When all or any portion of the Bonds have been paid in full as to principal and as to interest and premium, if any, or when all or any portion of the Bonds have become due and payable, whether at maturity or otherwise, and the City shall have provided for the payment of the whole amount due or to become due on such Bonds then outstanding, including all interest that has accrued thereon or that may accrue to the date of maturity, and any premium due or that may become due at maturity, by depositing with the Paying Agent/Registrar, for payment of the principal of such outstanding Bonds and the interest accrued thereon and any premium due thereon, the entire amount due or to become due thereon, and the City shall also have paid or caused to be paid all sums payable under this Ordinance by the City, including the compensation due or to become due the Paying Agent (Registrar, then the Paying Agent/Registrar, upon receipt of a letter of instructions from the City requesting the same, shall discharge and release the lien of this Ordinance as it relates to such Bonds and execute and deliver to the City such releases or other instruments as shall be requisite to release the lien hereof. Section 12.02. Discharge by Deposit. (a) The City may discharge its obligation to pay the principal of, premium, if any, and interest on all or any portion of the Bonds and its obligation to pay other sums payable or to become payable under this Ordinance by the City, including the compensation due or to become due the Paying Agent/Registrar, by: (i) depositing or causing to be deposited with the Paying Agent/Registrar an amount of money that, together with the interest earned on or capital gains or profits to be realized from the investment of such money, will be sufficient to pay the principal of, premium, if any, and accrued interest on such Bonds to maturity or to the date fixed for prior redemption of such Bonds, and to pay such other amounts as may be reasonably estimated by the Paying Agent/Registrar to become payable under this Ordinance, including the compensation due or to become due the Paying Agent/Registrar; and (ii) providing the Paying Agent/Registrar with an opinion of nationally recognized bond counsel acceptable to the Paying Agent/Registrar to the effect that the deposit specified in subdivision C:\LG\CLIENTS\COLONY\REV98\DOCS\ORD-REV.98 27 (i) of this subsection (a) will not cause the interest on the Bonds to become subject to federal income taxation. (b) Subject to subsection (c) of this Section, upon compliance with subsection (a) of this Section, the Bonds for which provision is so made shall no longer be regarded as outstanding and unpaid, and the Paying Agent/Registrar, upon receipt of a letter of instructions from the City requesting the same, shall discharge and release the lien of this Ordinance and execute and deliver to the City such releases or other instruments as shall be requisite to release the lien hereof. (c) Before the discharge and release of the lien of this Ordinance pursuant to this Section, provision shall have been made by the City with the Paying Agent/Registrar for: (i) the establishment of a separate escrow account fund with the Paying Agent/Registrar for the deposit pursuant to subsection (a)(i) of this Section; (ii) the payment to the Owners at the date of maturity, of the full amount to which the Owners would be entitled by way of principal, premium, if any, and interest to the date of such maturity or prior redemption; (iii) the investment of such moneys by the Paying Agent/Registrar in direct 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, which may be in book entry form, maturing and/or bearing interest payable at such times and in such amounts as will be sufficient to provide for the scheduled payments of such bonds; (iv) the sending of written notice by first class United States mail to the Owner of each Bond then outstanding within 30 days following the date of such deposit that such moneys are so available for such payment; and (v) the payment to the City, periodically or following final payment of the principal of, premium, if any, and interest on the Bonds, of any moneys, interest earnings, profits or capital gains over and above the amounts necessary for such purposes. ARTICLE XIII LAPSE OF PAYMENT Section 13.01. La se of Pa meat. Subject to any applicable escheat, abandoned property or similar law, including Title b of the Texas Property Code, Unclaimed Payments remaining unclaimed by the Owners entitled thereto for two years after the applicable payment or redemption date shall be applied to the next payment or payments on the Bonds thereafter coming due, and, to the extent any such money remains after the retirement of all outstanding Bonds, shall be paid to the City to be used for any lawful purpose. Thereafter, neither the City, the Paying Agent/Registrar nor any other person shall be liable or responsible to any Owners of such Bonds for any further payment of such unclaimed moneys or on account of any such Bonds, subject to any applicable escheat law or similar law. C:\LG\CLIENTS\COLONY\REV98\DOCS\ORD-REV.98 28 ARTICLE XIV CONTINUING DISCLOSURE UNDERTAKING Section 14.01. Definitions. As used in this Article, the following terms have the meanings ascribed to such terms below: "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. Section 14.02. Annual Reports. The City shall provide annually to each NRMSIR and any SID, within six months after the end of each fiscal year ending in or after 1998, financial information and operating data with respect to the City of the general type included in the final Official Statement authorized by Section 7.01(b) of this Ordinance, being the information described in Exhibit A hereto. Any financial statements so to be provided shall be (1) prepared in accordance with the accounting principles as the City may be required to employ from time to time pursuant to state law or regulation and (2) audited, if the City commissions an audit of such statements and the audit is completed within the period during which they must be provided. If the audit of such financial statements is not complete within such period, then the City shall provide unaudited financial statements by the required time and audited financial statements for the applicable fiscal year to each NRMSIR and any SID, when and if the audit report on such statements becomes available. 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 day 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. Section 14.03. 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 Bonds, if such event is material within the meaning of the federal securities laws: A. Principal and interest payment delinquencies; C:\LG\CLIENTS\COLONY\REV98\DOCS\ORD-REV.98 29 B. Non-payment related defaults; C. Unscheduled draws on debt service reserves reflecting financial difficulties; D. Unscheduled draws on credit enhancements reflecting financial difficulties; E. Substitution of credit or liquidity providers, or their failure to perform; F. Adverse tax opinions or events affecting the tax-exempt status of the Bonds; G. Modifications to rights of holders of the Bonds; H. Bond calls; I. Defeasances; Release, substitution, or sale of property securing repayment of the Bonds; and K. Rating changes. 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 Section 14.02 of this Ordinance by the time required by such Section. Section 14.04. Limitations. Disclaimers, and Amendments. The City shall be obligated to observe and perform the covenants specified in this Article for so long as, but only for so long as, the City remains an "obligated person" with respect to the Bonds within the meaning of the Rule, except that the City in any event will give notice of any deposit made in accordance with Section 14.03 or Tex. Rev. Civ. Stat. Ann. art. 717k, as amended, that causes Bonds no longer to be outstanding. The provisions of this Article are for the sole benefit of the Owners and beneficial owners of the Bonds, and nothing in this Article, 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 Article 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 Article 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 Bonds at any future date. UNDER NO CIRCUMSTANCES SHALL THE CITY BE LIABLE TO THE OWNER OR BENEFICIAL OWNER OF ANY BOND OR ANY OTHER PERSON, IN CONTRACT OR TORT, FOR DAMAGES RESULTING IN WHOLE OR IN PART FROM ANY BREACH BY THE CITY, WHETHER NEGLIGENT OR WITHOUT FAULT ON ITS PART, OF ANY COVENANT SPECIFIED IN THIS ARTICLE, BUT EVERY RIGHT AND REMEDY OF ANY SUCH PERSON, IN CONTRACT OR TORT, FOR OR ON ACCOUNT OF ANY SUCH BREACH, NOTWITHSTANDING ANY PROVISION OF THIS ORDINANCE TO THE CONTRARY, SHALL BE LIMITED TO AN ACTION FOR MANDAMUS OR SPECIFIC PERFORMANCE. C:\LG\CLIENTS\COLONY\REV98\DOCS\ORD-REV.98 30 No default by the City in observing or performing its obligations under this Article shall comprise a breach of or default under the Ordinance for purposes of any other provision of this Ordinance. Nothing in this Article is intended or shall act to disclaim, waiver, or otherwise limit the duties of the City under federal state securities laws. The provisions of this Article may be amended by the City from time to time to adapt to changed circumstances that arise from a change in legal requirements, a change in law, or a change in the identity, nature, status, or type of operations of the City, but only if (1) the provisions of this Article, as so amended, would have permitted an underwriter to purchase or sell Bonds in the primary offering of the Bonds in compliance with the Rule, taking into account any amendments or interpretations of the Rule to the date of such amendment, as well as such changed circumstances, and (2) either (a) the Owners 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 Bonds 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 Owners and beneficial owners of the Bonds. The City may also repeal or amend the provisions of this Article if the SEC amends or repeals the applicable provisions of the Rule or any court of final jurisdiction enters judgment that such provisions of the Rule are invalid, but in either case only if and to the extent that the provisions of this sentence would not prevent an underwriter from lawfully purchasing or selling Bonds in the primary offering of the Bonds. If the City so amends the provisions of this Article, it shall include with any amended financial information or operating data next provided in accordance with Section 14.02 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. ARTICLE XV PROVISIONS RELATING TO BOND ISSUANCE Section 15.01. AMlicabilily of Article. Notwithstanding anything to the contrary set forth in this Ordinance, the provisions of this Article shall control so long as the Bonds are insured by the Insurer (hereinafter defined) and the Insurer is not in default under the Insurance Policy (hereinafter defined). Section 15.02. Additional Definitions. (a) "Insurance Policy" means the insurance policy issued by the Bond Insurer guaranteeing the scheduled payment of principal of and interest on the Bonds when due. (b) "Insurer" means Financial Security Assurance Inc., a New York stock insurance company, or any successor thereto or assignee thereof. Section 15.03. Consent of Insurer. Notices. (a) No waiver, modification, amendment or supplement to the Ordinance may become effective except upon obtaining the prior written consent of the Insurer. (b) Copies of any modification or amendment to the Ordinance shall be provided to Standard & Poor's Ratings Services and Moody's Investors Service, Inc. C:\LG\CLIENTS\COLONY\REV98\DOCS\ORD-REV.98 31 (c) The Insurer shall be provided with all reports, notices and correspondence to be delivered under the terms of the Ordinance. (d) The notice address of the Insurer is: Financial Security Assurance Inc., 350 Park Avenue, New York, New York 10022-6022, Attention: Managing Director -- Surveillance; Re: Policy No. (insert polio no.), Teleplloilc: (212) 826-0100; Telecopier: (212) 339-3529. In each case in which notice or other communication refers to an Event of Default, then a copy of such notice or other communication shall also be sent to the attention of General Counsel and shall be marked to indicate "URGENT MATERIAL ENCLOSED." Section 15.04. Payment Pursuant to Insurance Policy. (a) Amounts paid by the Insurer under the Insurance Policy shall not be deemed paid for purposes of the Ordinance and shall remain Outstanding and continue to be due and owing until paid by the Issuer in accordance with the Ordinance. The Insurer shall, to the extent it makes any payment of principal of or interest on the Bonds, become subrogated to the rights of the recipients of such payments in accordance with the terms of the Insurance Policy. The Ordinance shall not be discharged unless all amounts due or to become due to the Insurer have been paid in full or duly provided for. (b) If, on the business day prior to the related scheduled interest payment date or principal payment date ("Payment Date") there is not on deposit with the Paying Agent/Registrar, after making all transfers and deposits required under the Ordinance, moneys sufficient to pay the principal of and interest on the Bonds due on such Payment Date, the Paying AgmYRegistrar shall make a claim under the Insurance Policy and give notice to the Insurer and to its designated agent (if any) (the "Insurer's Fiscal Agent") by telephone or telecopy of the amount of such deficiency, and the allocation of such deficiency between the amount required to pay interest on the Bonds and the amount required to pay principal of the Bonds, confirmed in writing to the Insurer and the Insurer's Fiscal Agent by 12:00 noon, New York City time, on such Business Day by filling in the form of Notice of Claim and Certificate delivered with the Insurance Policy. (c) In the event the claim to be made is for a mandatory sinking fund redemption installment, upon receipt of the moneys due, the Paying AgmYRcgistrar shall authenticate and deliver to affected Bondholders who surrender their Bonds a new Bond or Bonds in an aggregate principal amount equal to the unredeemed portion of the Bond surrendered. The Paying Agent/Registrar shall designate any portion of payment of principal on Bonds paid by the insurer, whether by virtue of mandatory sinking fund redemption, maturity or other advancement of maturity, on its books as a reduction in the principal amount of Bonds registered to the then current Bondholder, whether DTC or its nominee or otherwise, and shall issue a replacement Bond to the Insurer, registered in the name of Financial Security Assurance Inc., in a principal amount equal tot he amount of principal so paid (without regard to authorized denominations); provided that the Paying Agent/Registrar's failure to do so designate any payment or issue any replacement Bond shall have no effect on the amount of principal or interest payable by the Issuer on any Bond or the subrogation rights of the Insurer. (d) The Paying Agent/Registrar shall keep a complete and accurate record of all funds deposited by the Insurer into the Policy Payments Account and the allocation of such funds to payment of interest on and principal paid in respect of any Bond. The Insurer shall have the right to inspect such records at reasonable times upon reasonable notice to the Paying Agent/Registrar. (e) Upon payment of a claim under the Insurance Policy the Paying Agent/Registrar shall establish a separate special purpose trust account for the benefit of Bondholders referred to herein as the "Policy Payments Account" and over which the Paying Agent/Registrar shall have exclusive control and sole right of withdrawal. The Paying Agent/Registrar shall receive any amount paid under the Insurance Policy in trust on behalf of Bondholders and shall deposit any such amount in the Policy Payments Account and distribute such amount only C:\LG\CLIENTS\COLONY\REV98\DOCS\ORD-REV.98 32 for purposes of making the payments for which a claim was made. Such amounts shall be disbursed by the Paying Agent/Registrar to Bondholders in the same manner as principal and interest payments are to be made with respect to the Bonds under the sections hereof regarding payment of Bonds. It shall not be necessary for such payments to be made by checks or wire transfers separate from the check or wire transfer used to pay debt service with other funds available to make such payments. (f) Funds held in the Policy Payments Account shall not be invested by the Paying Agent/Registrar and may not be applied to satisfy any costs, expenses or liabilities of the Paying Agent/Registrar. (g) Any funds remaining in the Policy Payments Account following a Payment Date shall be promptly be remitted to the Insurer. C:\LG\CLIENTS\COLONY\REV98\DOCS\ORD-REV.98 33 FINALLY PASSED, APPROVED AND EFFECTIVE this JAN. 19, 098. Mayor, Cary of The alony, Texas ATTEST: City Secretary, City of The Colony, Texas APPROVED AS TO FORM: �r 1 a tto , City of The Colony, Texas z ~ � SEAL C:\LG\CLIENTS\COLONY\REV98\DOCS\ORD-REV,98 34 EXHIBIT A DESCRIPTION OF ANNUAL FINANCIAL INFORMATION The following information is referred to in Section 14.02 of this Ordinance. Annual Financial Statements and Operating 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 portions of the financial statements of the City appended to the Official Statement as Appendix B, but for the most recently concluded fiscal year. Statistical and financial data set forth in Tables 1 through 13, inclusive. Accounting _ Principles The accounting principles referred to in such Article are the accounting principles described in the notes to the financial statements referred to in Paragraph 1 above. C:\LG\CLIENTS\COLONY\RE V98\DOCS\ORD-RE V.98