HomeMy WebLinkAboutOrdinance No. 02-1390 ORDINANCE NO. 02-1390
AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF THE COLONY, TEXAS,
AUTHORIZING THE ISSUANCE AND SALE OF CITY OF THE COLONY, TEXAS,
COMBINATION TAX AND LIMITED SURPLUS REVENUE CERTIFICATES OF
OBLIGATION, SERIES 2002; LEVYING AN ANNUAL AD VALOREM TAX AND
PROVIDING FOR THE SECURITY FOR AND PAYMENT OF SAID CERTIFICATES;
APPROVING THE OFFICIAL STATEMENT; AND ENACTING OTHER PROVISIONS
RELATING TO THE SUBJECT
THE STATE OF TEXAS §
COUNTY OF DENTON §
CITY OF THE COLONY §
WHEI~AS, the City Council of the City of The Colony, Texas, deems it advisable to issue
Certificates of Obligation in the amount of $14,000,000 for the purposes hereinafter set forth; and
WHEREAS, the Certificates of Obligation hereinafter authorized and designated are to be
issued and delivered for cash pursuant to Subchapter C of Chapter 271, Local Government Code and
Subchapter B, Chapter 1502, Government Code; and
WHEREAS, the City Council has heretofore passed a resolution authorizing and directing the
City Secretary to give notice of intention to issue Certificates of Obligation, and said notice has been
duly published in a newspaper of general circulation in said City, said newspaper being a "newspaper"
as defined in §2051.044, Texas Government Code; and
WHEREAS, the City received no petition from the qualified electors of the City protesting the
issuance of such Certificates of Obligation;
WHEREAS, it is considered to be to the best interest of the City that said interest-bearing
Certificates of Obligation be issued; 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 ofTex. Gov't Code Ann. ch. 551;
Now, Therefore
BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF THE COLONY, TEXAS:
Section 1. RECITALS, AMOUNT AND PURPOSE OF THE CERTIFICATES. The recitals
set forth in the preamble hereof are incorporated herein and shall have the same force and effect as
if set forth in this Section. The certificates of the City of The Colony, Texas (the "Issuer") are hereby
authorized to be issued and delivered in the aggregate principal amount of $14,000,000 for paying
all or a portion of the Issuer's contractual obligations incurred in connection with (i) constructing and
improving streets and alleys, and acquisition of street repair and maintenance equipment, (ii)
improving and equipping municipal parks and recreation center and acquisition of park maintenance
equipment, (iii) additions, extensions and improvements to the City's waterworks and sewer system,
(iv) installing and constructing storm water drainage improvements, (v) acquisition of
telecommunications and computer equipment and software for municipal offices and departments,
(vi) acquisition of vehicles and equipment for police, fire, public works, utility and parks and
recreation departments, (vii) renovation and equipment of the Old Library building for convention
and community recreation facilities, (viii) renovation and equipment of fire stations, and (ix) legal,
fiscal and engineering fees in connection with such projects (collectively, the "Project").
Section 2. DESIGNATION, DATE, DENOMINATIONS, NUMBERS, AND MATURITIES
AND INTEREST RATES OF CERTIFICATES. Each certificate issued pursuant to this Ordinance
shall be designated: "CITY OF THE COLONY, TEXAS, COMBINATION TAX AND LIMITED
SURPLUS REVENUE CERTIFICATE OF OBLIGATION, SERIES 2002," and initially there shall
be issued, sold, and delivered hereunder one fully registered certificate, without interest coupons,
dated August 1, 2002, in the principal amount stated above and in the denominations hereinafter
stated, numbered T- 1, with certificates issued in replacement thereof being in the denominations and
principal amounts hereinafter stated and numbered consecutively from R-1 upward, payable to the
respective Registered Owners thereof (with the initial certificate being made payable to the initial
purchaser as described in Section 10 hereof), or to the registered assignee or assignees of said
certificates or any portion or portions thereof (in each case, the "Registered Owner"), and said
certificates shall mature and be payable serially on August 15 in each of the years and in the principal
amounts, respectively, and shall bear interest from the dates set forth in the FORM OF
CERTIFICATE set forth in Section 4 of this Ordinance to their respective dates of maturity or
redemption prior to maturity at the rates per annum, as set forth in the following schedule:
Principal Interest Principal Interest
Years Amount Rates Years Amount Rates
2003 $670,000 3.500% 2013 $610,000 4.000%
2004 $730,000 3.500% 2014 $635,000 4.125%
2005 $755,000 3.500% 2015 $660,000 4.250%
2006 $795,000 3.500% 2016 $700,000 4.300%
2007 $835,000 3.500% 2017 $730,000 4.375%
2008 $480,000 3.500% 2018 $765,000 4.500%
2009 $505,000 3.750% 2019 $805,000 4.625%
2010 $530,000 5.000% 2020 $845,000 4.750%
2011 $555,000 4.000% 2021 $885,000 5.000%
2012 $575,000 4.100% 2022 $935,000 5.000%
The term "Certificates" as used in this Ordinance shall mean and include collectively the certificates
initially issued and delivered pursuant to this Ordinance and all substitute certificates exchanged
therefor, as well as all other substitute certificates and replacement certificates issued pursuant hereto,
and the term "Certificate" shall mean any of the Certificates.
Section 3. CHARACTERISTICS OF THE CERTIFICATES. (a) Registration, Transfer,
Conversion and Exchange; Authentication. The Issuer shall keep or cause to be kept at the principal
corporate trust office of Wachovia Bank, National Association, Houston, Texas, (the "Paying
Agent/Registrar"), books or records for the registration of the transfer, conversion and exchange of
the Certificates (the "Registration Books"), and the Issuer hereby appoints the Paying Agent/Registrar
as its registrar and transfer agent to keep such books or records and make such registrations of
transfers, conversions and exchanges under such reasonable regulations as the Issuer and Paying
Agent/Registrar may prescribe; and the Paying Agent/Registrar shall make such registrations,
transfers, conversions and exchanges as herein provided. The Paying Agent/Registrar shall obtain
and record in the Registration Books the address of the registered owner of each Certificate to which
payments with respect to the Certificates shall be mailed, as herein provided; but it shall be the duty
of each registered owner to notify the Paying Agent/Registrar in writing of the address to which
payments shall be mailed, and such interest payments shall not be mailed unless such notice has been
given. The Issuer shall have the right to inspect the Registration Books 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. The Issuer shall pay the Paying Agent/Registrar's standard or customary fees and
charges for making such registration, transfer, conversion, exchange and delivery of a substitute
Certificate or Certificates. Registration of assignments, transfers, conversions and exchanges of
Certificates shall be made in the manner provided and with the effect stated in the FORM OF
CERTIFICATE set forth in this Ordinance. Each substitute Certificate shall bear a letter and/or
number to distinguish it from each other Certificate.
Except as provided in Section 3(c) of this Ordinance, an authorized representative of the Paying
Agent/Registrar shall, before the delivery of any such Certificate, date and manually sign said
Certificate, and no such Certificate shall be deemed to be issued or outstanding unless such Certificate
is so executed. The Paying Agent/Registrar promptly shall cancel all paid Certificates and Certificates
surrendered for conversion and exchange. No additional ordinances, orders, or resolutions need be
passed or adopted by the governing body of the Issuer or any other body or person so as to
accomplish the foregoing conversion and exchange of any Certificate or portion thereof, and the
Paying Agent/Registrar shall provide for the printing, execution, and delivery of the substitute
Certificates in the manner prescribed herein, and said Certificates shall be printed or typed on paper
of customary weight and strength. Pursuant to Chapter 1201, Government Code, as amended, the
duty of conversion and exchange of Certificates as aforesaid is hereby imposed upon the Paying
Agent/Registrar, and, upon the execution of said Certificate, the converted and exchanged Certificate
shall be valid, incontestable, and enforceable in the same manner and with the same effect as the
Certificates that initially were issued and delivered pursuant to this Ordinance, approved by the
Attorney General and registered by the Comptroller of Public Accounts.
(b) Payment of Certificates and Interest. The Issuer hereby further appoints the Paying
Agent/Registrar to act as the paying agent for paying the principal of and interest on the Certificates,
all as provided in this Ordinance. The Paying Agent/Registrar shall keep proper records of all
payments made by the Issuer and the Paying Agent/Registrar with respect to the Certificates, and of
all conversions and exchanges of Certificates, and all replacements of Certificates, as provided in this
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Ordinance. However, in the event of a nonpayment of interest on a scheduled payment date, and for
thirty (30) days thereafter, a new record date for such interest payment (a "Special Record Date") will
be established by the Paying Agent/Registrar, if and when funds for the payment of such interest have
been received from the Issuer. Notice of the past due interest shall be sent at least five (5) business
days prior to the Special Record Date by United States mail, first-class postage prepaid, to the
address of each registered owner appearing on the Registration Books at the close of business on the
last business day next preceding the date of mailing of such notice.
(c) In General. The Certificates (i) shall be issued in fully registered form, without interest
coupons, with the principal of and interest on such Certificates to be payable only to the registered
owners thereof, (ii) may be redeemed prior to their scheduled maturities (notice of which shall be
given to the Paying Agent/Registrar by the Issuer at least 50 days prior to any such redemption date),
(iii) may be converted and exchanged for other Certificates, (iv) may be transferred and assigned,
(v) shall have the characteristics, (vi) shall be signed, sealed, executed and authenticated, (vii) the
principal of and interest on the Certificates shall be payable, and (viii) shall be administered and the
Paying Agent/Registrar and the Issuer shall have certain duties and responsibilities with respect to the
Certificates, all as provided, and in the manner and to the effect as required or indicated, in the FORM
OF CERTIFICATE set forth in this Ordinance. The Certificate initially issued and delivered pursuant
to this Ordinance is not required to be, and shall not be, authenticated by the Paying Agent/Registrar,
but on each substitute Certificate issued in conversion of and exchange for any Certificate or
Certificates issued under this Ordinance the Paying Agent/Registrar shall execute the PAYING
AGENT/REGISTRAR'S AUTHENTICATION CERTIFICATE, in the form set forth in the FORM
OF CERTIFICATE.
(d) The Issuer covenants with the registered owners of the Certificates that at all times while
the Certificates are outstanding the Issuer will provide a competent and legally qualified bank, trust
company, financial institution, or other entity to act as and perform the services of Paying
Agent/Registrar for the Certificates under this Ordinance, and that the Paying Agent/Registrar will
be one entity. The Issuer reserves the right to, and may, at its option, change the Paying
Agent/Registrar upon not less than 120 days written notice to the Paying Agent/Registrar, to be
effective not later than 60 days prior to the next principal or interest payment date alter such notice.
In the event that the entity at any time acting as Paying Agent/Registrar (or its successor by merger,
acquisition, or other method) should resign or otherwise cease to act as such, the Issuer covenants
that promptly it will appoint a competent and legally qualified bank, trust company, financial
institution, or other agency to act as Paying Agent/Registrar under this Ordinance. Upon any change
in the Paying Agent/Registrar, the previous Paying Agent/Registrar promptly shall transfer and deliver
the Registration Books (or a copy thereof), along with all other pertinent books and records relating
to the Certificates, to the new Paying Agent/Registrar designated and appointed by the Issuer. Upon
any change in the Paying Agent/Registrar, the Issuer promptly will cause a written notice thereof to
be sent by the new Paying Agent/Registrar to each Registered Owner of the Certificates, by United
States mail, first-class postage prepaid, which notice also shall give the address of the new Paying
Agent/Registrar. By accepting the position and performing as such, each Paying Agent/Registrar
shall be deemed to have agreed to the provisions of this Ordinance, and a certified copy of this
Ordinance shall be delivered to each Paying Agent/Registrar.
(e) Except as provided below, no Certificate 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 Agent/Registrar substantially in the form provided in this Ordinance, duly
authenticated by manual execution of the Paying Agent/Registrar. 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 Certificates. In lieu of the executed Certificate of Paying Agent/Registrar
described above, the Initial Certificate 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 Certificate has been duly approved by the Attorney
General of the State of Texas and that it is a valid and binding obligation of the Issuer, and has been
registered by the Comptroller.
(f) Book-Entry Only System. The Certificates issued in exchange for the Certificate initially
issued to the initial purchaser specified herein shall be initially issued in the form of a separate single
fully registered Certificate for each of the maturities thereof. Upon initial issuance, the ownership of
each such Certificate shall be registered in the name of Cede & Co., as nominee of The Depository
Trust Company, New York, New York ("DTC"), and except as provided in subsection (f) hereof,
all of the outstanding Certificates shall be registered in the name of Cede & Co., as nominee ofDTC.
With respect to Certificates registered in the name of Cede & Co., as nominee of DTC, the
Issuer and the Paying Agent/Registrar shall have no responsibility or obligation to any securities
brokers and dealers, banks, trust companies, clearing corporations and certain other organizations
on whose behalfDTC was created ("DTC Participant") to hold securities to facilitate the clearance
and settlement of securities transactions among DTC Participants or to any person on behalf of whom
such a DTC Participant holds an interest in the Certificates. Without limiting the immediately
preceding sentence, the Issuer 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 Certificates, (ii) the delivery to any DTC Participant or
any other person, other than a Registered Owner of Certificates, as shown on the Registration Books,
of any notice with respect to the Certificates, or (iii) the payment to any DTC Participant or any other
person, other than a Registered Owner of Certificates, as shown in the Registration Books of any
amount with respect to principal of or interest on the Certificates. Notwithstanding any other
provision of this Ordinance to the contrary, the Issuer and the Paying Agent/Registrar shall be entitled
to treat and consider the person in whose name each Certificate is registered in the Registration
Books as the absolute owner of such Certificate for the purpose of payment of principal and interest
with respect to such Certificate, for the purpose of registering transfers with respect to such
Certificate, and for all other purposes whatsoever. The Paying Agent/Registrar shall pay all principal
of and interest on the Certificates only to or upon the order of the Registered Owners, as shown in
the Registration Books 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 Issuer's
obligations with respect to payment of principal of and interest on the Certificates to the extent of the
sum or sums so paid. No person other than a Registered Owner, as shown in the Registration Books,
shall receive a Certificate evidencing the obligation of the Issuer to make payments of principal and
interest 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 being mailed to the
Registered Owner at the close of business on the Record date, the words "Cede & Co." in this
Ordinance shall refer to such new nominee of DTC.
The previous execution and delivery of the Blanket Letter of Representations with respect to
obligations of the Issuer is hereby ratified and confirmed; and the provisions thereof shall be fully
applicable to the Certificates.
(g) Successor Securities Depository; Transfers Outside Book-Entry Only System. In the
event that the Issuer determines that DTC is incapable of discharging its responsibilities described
herein and in the representations letter of the Issuer to DTC or that it is in the best interest of the
beneficial owners of the Certificates that they be able to obtain certificated Certificates, the Issuer
shall (i) appoint a successor securities depository, qualified to act as such under Section 17A of the
Securities and Exchange Act of 1934, as amended, notify DTC and DTC Participants of the
appointment of such successor securities depository and transfer one or more separate Certificates
to such successor securities depository or (ii) notify DTC and DTC Participants of the availability
through DTC of Certificates and transfer one or more separate certificated Certificates to DTC
Participants having Certificates credited to their DTC accounts. In such event, the Certificates shall
no longer be restricted to being registered in the Registration Books 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 Registered Owners transferring or exchanging Certificates
shall designate, in accordance with the provisions of this Ordinance.
(h) Payments to Cede & Co. Notwithstanding any other provision of this Ordinance to the
contrary, so long as any Certificate is registered in the name of Cede & Co., as nominee of DTC, all
payments with respect to principal of and interest on such Certificate and all notices with respect to
such Certificate shall be made and given, respectively, in the manner provided in the representations
letter of the Issuer to DTC.
(i) Cancellation of Initial Certificate. On the closing date, one initial Certificate representing
the entire principal amount of the Certificates, payable in stated installments to the purchaser
designated in Section 10 or its designee, executed by manual or facsimile signature of the Mayor and
City Secretary of the Issuer, 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 such
purchaser or its designee. Upon payment for the initial Certificate, the Paying Agent/Registrar shall
cancel the initial Certificate and deliver to the Depository Trust Company on behalf of such purchaser
one registered definitive Certificate for each year of maturity of the Certificates, in the aggregate
principal amount of all of the Certificates for such maturity.
Section 4. FORM OF CERTIFICATES. The form of the Certificates, including the form of
Paying Agent/Registrar's Authentication Certificate, the form of Assignment and the form of
Registration Certificate of the Comptroller of Public Accounts of the State of Texas to be attached
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to the Certificates initially issued and delivered pursuant to this Ordinance, shall be, respectively,
substantially as follows, with such appropriate variations, omissions or insertions as are permitted or
required by this Ordinance.
(a) [Form of Certificate]
NO. R- UNITED STATES OF AMERICA PRINCIPAL
STATE OF TEXAS AMOUNT
CITY OF THE COLONY, TEXAS $
COMBINATION TAX AND LIMITED
SURPLUS REVENUE
CERTIFICATE OF OBLIGATION
SERIES 2002
Interest Rate Dated Date Maturity Date CUSIP No.
August 1, 2002 August 15,
REGISTERED OWNER:
PRINCIPAL AMOUNT: DOLLARS
ON THE MATURITY DATE specified above, the City of The Colony, in Denton County,
Texas (the "Issuer"), being a political subdivision and municipal corporation of the State of Texas,
hereby promises to pay to the Registered Owner specified above, or registered assigns (hereinafter
called the "Registered Owner"), on the Maturity Date specified above, the Principal Amount specified
above. The Issuer promises to pay interest on the unpaid principal amount hereof(calculated on the
basis of a 360-day year of twelve 30-day months) from August 1, 2002 at the Interest Rate per annum
specified above. Interest is payable on February 15, 2003 and semiannually on each August 15 and
February 15 thereafter to the Maturity Date specified above, or the date of redemption prior to
maturity; except, if this Certificate is required to be authenticated and the date of its authentication
is later than the first Record Date (hereinafter defined), such Principal Amount shall bear interest from
the interest payment date next preceding the date of authentication, unless such date of authentication
is after any Record Date but on or before the next following interest payment date, in which case such
principal amount shall bear interest from such next following interest payment date; provided,
however, that if on the date of authentication hereof the interest on the Certificate or Certificates, if
any, for which this Certificate is being exchanged is due but has not been paid, then this Certificate
shall bear interest from the date to which such interest has been paid in full.
THE PRINCIPAL OF AND INTEREST ON this Certificate are payable in lawful money of the
United States of America, without exchange or collection charges. The principal of this Certificate
shall be paid to the registered owner hereof upon presentation and surrender of this Certificate at
maturity, or upon the date fixed for its redemption prior to maturity, at the principal corporate trust
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office of Wachovia Bank, National Association, Houston, Texas, which is the "Paying
Agent/Registrar" for this Certificate. The payment of interest on this Certificate shall be made by the
Paying Agent/Registrar to the registered owner hereof on each interest payment date by check or
draft, dated as of such interest payment date, drawn by the Paying Agent/Registrar on, and payable
solely from, funds of the Issuer required by the ordinance authorizing the issuance of this Certificate
(the "Certificate Ordinance") to be on deposit with the Paying Agent/Registrar for such purpose as
hereinafter provided; and such check or draft shall be sent by the Paying Agent/Registrar by United
States mail, first-class postage prepaid, on each such interest payment date, to the registered owner
hereof, at its address as it appeared on the last business day of the month preceding each such date
(the "Record Date") on the Registration Books kept by the Paying Agent/Registrar, as hereinafter
described. In addition, interest may be paid by such other method, acceptable to the Paying
Agent/Registrar, requested by, and at the risk and expense of, the registered owner. In the event of
a non-payment of interest on a scheduled 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
Issuer. Notice of the Special Record Date and of the scheduled payment date of the past due interest
(which shall be 15 days after the Special Record Date) shall be sent at least five business days prior
to the Special Record Date by United States mail, first-class postage prepaid, to the address of each
owner of a Certificate appearing on the Registration Books at the close of business on the last
business day next preceding the date of mailing of such notice.
ANY ACCRUED INTEREST due at maturity or upon the redemption of this Certificate prior
to maturity as provided herein shall be paid to the registered owner upon presentation and surrender
of this Certificate for redemption and payment at the principal corporate trust office of the Paying
Agent/Registrar. The Issuer covenants with the registered owner of this Certificate that on or before
each principal payment date, interest payment date, and accrued interest payment date for this
Certificate it will make available to the Paying Agent/Registrar, from the "Interest and Sinking Fund"
created by the Certificate Ordinance, the amounts required to provide for the payment, in immediately
available funds, of all principal of and interest on the Certificates, when due.
IF THE DATE for the payment of the principal of or interest on this Certificate shall be a
Saturday, Sunday, a legal holiday or a day on which banking institutions in the city where the
principal corporate trust office of the Paying Agent/Registrar is located are authorized by law or
executive order to close, then the date for such payment shall be the next succeeding day that is not
such a Saturday, Sunday, legal holiday or day on which 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 CERTIFICATE is one of a series of Certificates dated August 1, 2002, authorized in
accordance with the Constitution and laws of the State of Texas in the principal amount of
$14,000,000 for paying all or a portion of the Issuer's contractual obligations incurred in connection
with constructing and equipping public improvements and acquisition of equipment and vehicles for
municipal purposes, and paying legal, fiscal and engineering fees in connection with such projects.
ON AUGUST 15, 2012, or on any date thereafter, the Certificates of this series having stated
maturities on and after August 15, 2013, may be redeemed prior to their scheduled maturities, at the
option of the Issuer, with funds derived from any available and lawful source, as a whole, or in pan,
and, if in part, the particular Certificates, or portions thereof, to be redeemed shall be selected and
designated by the Issuer (provided that a portion of a Certificate may be redeemed only in an integral
multiple of $5,000), at a redemption price equal to the principal amount to be redeemed plus accrued
interest to the date fixed for redemption.
AT LEAST 30 days prior to the date fixed for any redemption of Certificates or portions
thereof prior to maturity a written notice of such redemption shall be sent by the Paying
Agent/Registrar by United States mail, first-class postage prepaid, at least 30 days prior to the date
fixed for any such redemption, to the registered owner of each Certificate to be redeemed at its
address as it appeared on the 45th day prior to such redemption date; provided, however, that the
failure of the registered owner to receive such notice, or any defect therein or in the sending or
mailing thereof, shall not affect the validity or effectiveness of the proceedings for the redemption of
any Certificate. By the date fixed for any such redemption due provision shall be made with the
Paying Agent/Registrar for the payment of the required redemption price for the Certificates or
portions thereof that are to be so redeemed. If such written notice of redemption is sent and if due
provision for such payment is made, all as provided above, the Certificates or portions thereof that
are to be so redeemed thereby automatically shall be treated as redeemed prior to their scheduled
maturities, and they shall not bear interest after the date fixed for redemption, and they shall not be
regarded as being outstanding except for the right of the registered owner to receive the redemption
price from the Paying Agent/Registrar out of the funds provided for such payment. Ifa portion of
any Certificate shall be redeemed, a substitute Certificate or Certificates having the same maturity
date, beating interest at the same rate, in any denomination or denominations in any integral multiple
of $5,000, at the written request of the registered owner, and in aggregate principal amount equal to
the unredeemed portion thereof, will be issued to the registered owner upon the surrender thereof for
cancellation, at the expense of the Issuer, all as provided in the Certificate Ordinance.
ALL' CERTIFICATES OF THIS SERIES are issuable solely as fully registered certificates,
without interest coupons, in the denomination of any integral multiple of $5,000. As provided in the
Certificate Ordinance, this Certificate may, at the request of the registered owner or the assignee or
assignees hereof, be assigned, transferred, converted into and exchanged for a like aggregate principal
amount of fully registered certificates, without interest coupons, payable to the appropriate registered
owner, assignee or assignees, as the case may be, having the same denomination or denominations
in any integral multiple of $5,000 as requested in writing by the appropriate registered owner,
assignee or assignees, as the case may be, upon surrender of this Certificate to the Paying
Agent/Registrar for cancellation, all in accordance with the form and procedures set forth in the
Certificate Ordinance. Among other requirements for such assignment and transfer, this Certificate
must be presented and surrendered to the Paying Agent/Registrar, together with proper instruments
of assignment, in form and with guarantee of signatures satisfactory to the Paying Agent/Registrar,
evidencing assignment of this Certificate or any portion or portions hereof in any integral multiple of
$5,000 to the assignee or assignees in whose name or names this Certificate or any such portion or
portions hereof is or are to be registered. The form of Assignment printed or endorsed on this
Certificate may be executed by the registered owner to evidence the assignment hereof, but such
method is not exclusive, and other instruments of assignment satisfactory to the Paying
Agent/Registrar may be used to evidence the assignment of this Certificate or any portion or portions
hereof from time to time by the registered owner. The Paying Agent/Registrar's reasonable standard
or customary fees and charges for assigning, transferring, converting and exchanging any Certificate
or portion thereof will be paid by the Issuer. In any circumstance, any taxes or governmental charges
required to be paid with respect thereto shall be paid by the one requesting such assignment, transfer,
conversion or exchange, as a condition precedent to the exercise of such privilege. The Paying
Agent/Registrar shall not be required to make any such transfer, conversion, or exchange (i) during
the period commencing with the close of business on any Record Date and ending with the opening
of business on the next following principal or interest payment date, or (ii) with respect to any
Certificate or any portion thereof called for redemption prior to maturity, within 45 days prior to its
redemption date.
IN THE EVENT any Paying Agent/Registrar for the Certificates is changed by the Issuer,
resigns, or otherwise ceases to act as such, the Issuer has covenanted in the Certificate Ordinance that
it promptly will appoint a competent and legally qualified substitute therefor, and cause written notice
thereof to be mailed to the registered owners of the Certificates.
IT IS HEREBY certified, recited and covenanted that this Certificate has been duly and validly
authorized, issued and delivered; that all acts, conditions and things required or proper to be
performed, exist and be done precedent to or in the authorization, issuance and delivery of this
Certificate have been performed, existed and been done in accordance with law; that this Certificate
is a general obligation of said Issuer, issued on the full faith and credit thereof, and that annual ad
valorem taxes sufficient to provide for the payment of the interest on and principal of this Certificate,
as such interest comes due and such principal matures, have been levied and ordered to be levied
against all taxable property in said Issuer, and have been pledged for such payment, within the limit
prescribed by law, and that this Certificate is additionally secured by and payable from a limited
pledge of the net revenues of the Issuer's waterworks and sewer system remaining after payment of
all operation and maintenance expenses thereof, and all debt service, reserve and other requirements
in connection with all of the Issuer's revenue obligations (now or hereafter outstanding) that are
payable from all or part of said revenues, all as provided in the Certificate Ordinance.
THE ISSUER HAS RESERVED THE RIGHT to amend the Certificate Ordinance as provided
therein, and under some (but not all) circumstances amendments thereto must be approved by the
registered owners of a majority in aggregate principal amount of the outstanding Certificates.
BY BECOMING the registered owner of this Certificate, the registered owner thereby
acknowledges all of the terms and provisions of the Certificate Ordinance, agrees to be bound by such
terms and provisions, acknowledges that the Certificate Ordinance is duly recorded and available for
inspection in the official minutes and records of the governing body of the Issuer, and agrees that the
terms and provisions of this Certificate and the Certificate Ordinance constitute a contract between
each registered owner hereof and the Issuer.
10
IN WITNESS WHEREOF, the Issuer has caused this Certificate to be signed with the manual
or facsimile signature of the Mayor of the Issuer and countersigned with the manual or facsimile
signature of the City Secretary of said Issuer, and has caused the official seal of the Issuer to be duly
impressed, or placed in facsimile, on this Certificate.
(signature) (signature)
City Secretary Mayor
(SEAL)
(b) [Form of Paying Agent/Registrar's Authentication Certificate]
PAYING AGENT/REGISTRAR'S AUTHENTICATION CERTIFICATE
(To be executed if this Certificate is not accompanied by an
executed Registration Certificate of the Comptroller
of Public Accounts of the State of Texas)
It is hereby certified that this Certificate has been issued under the provisions of the Certificate
Ordinance described in the text of this Certificate; and that this Certificate has been issued in
conversion or replacement of, or in exchange for, a certificate, certificates, or a portion of a certificate
or certificates of a series that originally was approved by the Attorney General of the State of Texas
and registered by the Comptroller of Public Accounts of the State of Texas.
Dated:
Wachovia Bank, National Association
Houston, Texas
Paying Agent/Registrar
By:
Authorized Representative
11
(c) [Form of Assignment]
ASSIGNMENT
For value received, the undersigned hereby sells, assigns and transfers unto
Please insert Social Security or Taxpayer Identification Number of Transferee
(Please prim or typewrite name and address, including zip code, of Transferee.)
the within Certificate and all rights thereunder, and hereby irrevocably constitutes and appoints
, attorney, to register the transfer of the within
Certificate on the books kept for registration thereof, with full power of substitution in the premises.
Dated:
Signature Guaranteed:
NOTICE: Signature(s) must be guaranteed NOTICE: The signature above must
by an eligible guarantor institution correspond with the name of the registered
participating in a securities transfer owner as it appears upon the front of this
association recognized signature guarantee Certificate in every particular, without
program, alteration or enlargement or any change
whatsoever.
(d) [Form of Registration Certificate of the Comptroller of Public Accounts]
COMPTROLLER'S REGISTRATION CERTIFICATE: REGISTER NO.
I hereby certify that this Certificate has been examined, certified as to validity and approved by
the Attorney General of the State of Texas, and that this Certificate has been registered by the
Comptroller of Public Accounts of the State of Texas.
Witness my signature and seal this
Comptroller of Public Accounts of the State of Texas
(COMPTROLLER'S SEAL)
12
(e) [Initial Certificate Insertions]
(i) The initial Certificate shall be in the form set forth is paragraph (a) of this Section, except
that:
A. immediately under the name of the Certificate, the headings "Interest Rate" and
"Maturity Date" shall both be completed with the words "As shown below" and "CUSIP
No. "shall be deleted.
B. the first paragraph shall be deleted and the following will be inserted:
"THE CITY OF THE COLONY, TEXAS, in Denton County, Texas (the "Issuer"), being a political
subdivision and municipal corporation of the State of Texas, hereby promises to pay to the Registered
Owner specified above, or registered assigns (hereinafter called the "Registered Owner"), on August
15 in each of the years, in the principal installments and bearing interest at the per annum rates set
forth in the following schedule:
Years Principal Installments Interest Rates
(Information fi.om Section 2 to be inserted)
The Issuer promises to pay interest on the unpaid principal amount hereof (calculated on the basis
of a 360-day year of twelve 30-day months) from August 1, 2002 at the respective Interest Rate per
annum specified above. Interest is payable on February 15, 2003, and semiannually on each August
15 and February 15 thereafter to the date of payment of the principal installment specified above, or
the date of redemption prior to maturity; except, that if this Certificate is required to be authenticated
and the date of its authentication is later than the first Record Date (hereinafter defined), such
Principal Amount shall bear interest from the interest payment date next preceding the date of
authentication, unless such date of authentication is after any Record Date but on or before the next
following interest payment date, in which case such principal amount shall bear interest fi.om such
next following interest payment date; provided, however, that if on the date of authentication hereof
the interest on the Certificate or Certificates, if any, for which this Certificate is being exchanged is
due but has not been paid, then this Certificate shall bear interest from the date to which such interest
has been paid in full."
C. The Initial Certificate shall be numbered "T-1."
Section 5. INTEREST AND SINKING FUND; SURPLUS REVENUES. (a) A special
"Interest and Sinking Fund" is hereby created and shall be established and maintained by the Issuer
at an official depository bank of said Issuer. Said Interest and Sinking Fund shall be kept separate
and apart from all other funds and accounts of said Issuer, and shall be used only for paying the
interest on and principal of said Certificates. All amounts received from the sale of the Certificates
as accrued interest, and premium, if any, shall be deposited upon receipt to the Interest and Sinking
13
Fund, and all ad valorem taxes levied and collected for and on account of said Certificates shall be
deposited, as collected, to the credit of said Interest and Sinking Fund. During each year while any
of said Certificates are outstanding and unpaid, the governing body of said Issuer shall compute and
ascertain a rate and amount of ad valorem tax that will be sufficient to raise and produce the money
required to pay the interest on said Certificates as such interest comes due, and to provide and
maintain a sinking fund adequate to pay the principal of said Certificates as such principal matures
(but never less than 2% of the original amount of said Certificates as a sinking fund each year); and
said tax shall be based on the latest approved tax rolls of said Issuer, with full allowances being made
for tax delinquencies and the cost of tax collection. Said rate and amount of ad valorem tax is hereby
levied, and is hereby ordered to be levied, against all taxable property in said Issuer, for each year
while any of said Certificates are outstanding and unpaid, and said tax shall be assessed and collected
each such year and deposited to the credit of the aforesaid Interest and Sinking Fund. Said ad
valorem taxes sufficient to provide for the payment of the interest on and principal of said
Certificates, as such interest comes due and such principal matures, are hereby pledged for such
payment, within the limit prescribed by law.
(b) The Certificates are additionally secured by revenues of the Issuer's waterworks and sewer
system that remain after the payment of all maintenance and operation expenses thereofi and all debt
service, reserve and other requirements in connection with all of the Issuer's revenue obligations (now
or hereafter outstanding) that are secured by a lien on all or any part of the net revenues of the
Issuer's waterworks and sewer system, constituting "Surplus Revenues", with such Surplus Revenues
from the waterworks and sewer system not to exceed $1,000. The Issuer shall deposit such Surplus
Revenues to the credit of the Interest and Sinking Fund created pursuant to Section 6, to the extent
necessary to pay the principal and interest on the Certificates. Notwithstanding the requirements of
Section 6, if Surplus Revenues or other lawfully available moneys of the Issuer are actually on deposit
in the Interest and Sinking Fund in advance of the time when ad valorem taxes are scheduled to be
levied for any year, then the amount of taxes that otherwise would have been required to be levied
pursuant to Section 6 may be reduced to the extent and by the amount of the Surplus Revenues or
other lawfully available funds then on deposit in the Interest and Sinking Fund.
(c) Article 1208, Government Code, applies to the issuance of the Certificates of Obligation
and the pledge of the taxes and Surplus Revenues granted by the Issuer under this Section and
Section 9, respectively, and is therefore valid, effective, and perfected. Should Texas law be amended
at any time while the Certificates of Obligation are outstanding and unpaid, the result of such
amendment being that the pledge of the taxes and Surplus Revenues granted by the Issuer under this
Section and Section 9, respectively, is to be subject to the filing requirements of Chapter 9, Business
& Commerce Code, in order to preserve to the registered owners of the Certificates of Obligation
a security interest in said pledge, the Issuer agrees to take such measures as it determines are
reasonable and necessary under Texas law to comply with the applicable provisions of Chapter 9,
Business & Commerce Code and enable a filing of a security interest in said pledge to occur.
14
Section 6. DEFEASANCE OF CERTIFICATES.
(a) Any Certificate and the interest thereon shall be deemed to be paid, retired and no longer
outstanding (a "Defeased Certificate") within the meaning of this Ordinance, except to the extent
provided in subsection (d) of this Section, when payment of the principal of such Certificate, plus
interest thereon to the due date (whether such due date be by reason of maturity or otherwise) either
(i) shall have been made or caused to be made in accordance with the terms thereof, or (ii) shall have
been provided for on or before such due date by irrevocably depositing with or making available to
the Paying Agent/Registrar in accordance with an escrow agreement or other instrument (the "Future
Escrow Agreement") for such payment (1) lawful money of the United States of America sufficient
to make such payment or (2) Defeasance Securities that mature as to principal and interest in such
amounts and at such times as will insure the availability, without reinvestment, of sufficient money
to provide for such payment, and when proper arrangements have been made by the Issuer with the
Paying Agent/Registrar for the payment of its services until all Defeased Certificates shall have
become due and payable. At such time as a Certificate shall be deemed to be a Defeased Certificate
hereunder, as aforesaid, such Certificate and the interest thereon shall no longer be secured by,
payable from, or entitled to the benefits of, the ad valorem taxes herein levied and pledged as
provided in this Ordinance, and such principal and interest shall be payable solely from such money
or Defeasance Securities. Notwithstanding any other provision of this Ordinance to the contrary, it
is hereby provided that any determination not to redeem Defeased Certificates that is made in
conjunction with the payment arrangements specified in subsection 6(a)(i) or (ii) shall not be
irrevocable, provided that: (1) in the proceedings providing for such payment arrangements, the
Issuer expressly reserves the right to call the Defeased Certificates for redemption; (2) gives notice
of the reservation of that right to the owners of the Defeased Certificates immediately following the
making of the payment arrangements; and (3) directs that notice of the reservation be included in any
redemption notices that it authorizes.
(b) Any moneys so deposited with the Paying Agent/Registrar may at the written direction
of the Issuer be invested in Defeasance Securities, maturing in the amounts and times as hereinbefore
set forth, and all income from such Defeasance Securities received by the Paying Agent/Registrar that
is not required for the payment of the Certificates and interest thereon, with respect to which such
money has been so deposited, shall be turned over to the Issuer, or deposited as directed in writing
by the Issuer. Any Future Escrow Agreement pursuant to which the money and/or Defeasance
Securities are held for the payment of Defeased Certificates may contain provisions permitting the
investment or reinvestment of such moneys in Defeasance Securities or the substitution of other
Defeasance Securities upon the satisfaction of the requirements specified in subsection 6(a)(i) or (ii).
All income from such Defeasance Securities received by the Paying Agent/Registrar which is not
required for the payment of the Defeased Certificates, with respect to which such money has been
so deposited, shall be remitted to the Issuer or deposited as directed in writing by the Issuer.
(c) The term "Defeasance Securities" means (i) direct, noncallable obligations of the United
States of America, including obligations that are unconditionally guaranteed by the United States of
America., (ii) noncallable obligations of an agency or instrumentality of the United States of America,
including obligations that are unconditionally guaranteed or insured by the agency or instrumentality
15
and that, on the date of the purchase thereof are rated as to investment quality by a nationally
recognized investment rating firm not less than AAA or its equivalent, and (iii) noncallable obligations
of a state or an agency or a county, municipality, or other political subdivision of a state that have
been refunded and that, on the date the governing body of the Issuer adopts or approves the
proceedings authorizing the financial arrangements are rated as to investment quality by a nationally
recognized investment rating firm not less than AAA or its equivalent.
(d) Until all Defeased Certificates shall have become due and payable, the Paying
Agent/Registrar shall perform the services of Paying Agent/Registrar for such Defeased Certificates
the same as if they had not been defeased, and the Issuer shall make proper arrangements to provide
and pay for such services as required by this Ordinance.
(e) In the event that the Issuer elects to defease less than all of the principal amount of
Certificates of a maturity, the Paying Agent/Registrar shall select, or cause to be selected, such
amount of Certificates by such random method as it deems fair and appropriate.
Section 7. DAMAGED, MUTILATED, LOST, STOLEN, OR DESTROYED
CERTIFICATES. (a) Replacement Certificates. In the event any outstanding Certificate is damaged,
mutilated, lost, stolen or destroyed, the Paying Agent/Registrar shall cause to be printed, executed
and delivered, a new certificate of the same principal amount, maturity and interest rate, as the
damaged, mutilated, lost, stolen or destroyed Certificate, in replacement for such Certificate in the
manner hereinafter provided.
(b) Application for Replacement Certificates. Application for replacement of damaged,
mutilated, lost, stolen or destroyed Certificates shall be made by the registered owner thereof to the
Paying Agent/Registrar. In every case of loss, theft or destruction of a Certificate, the registered
owner applying for a replacement certificate shall furnish to the Issuer and to the Paying
Agent/Registrar such security or indemnity as may be required by them to save each of them harmless
from any loss or damage with respect thereto. Also, in every case of loss, theft or destruction of a
Certificate, the registered owner shall fumish to the Issuer and to the Paying Agent/Registrar
evidence to their satisfaction of the loss, theft or destruction of such Certificate, as the case may be.
In every case of damage or mutilation of a Certificate, the registered owner shall surrender to the
Paying Agent/Registrar for cancellation the Certificate so damaged or mutilated.
(c) No Default Occurred. Notwithstanding the foregoing provisions of this, in the event any
such Certificate shall have matured, and no default has occurred that is then continuing in the payment
of the principal of, redemption premium, if any, or interest on the Certificate, the Issuer may authorize
the payment of the same (without surrender thereof except in the case of a damaged or mutilated
Certificate) instead of issuing a replacement Certificate, provided security or indemnity is furnished
as above provided in this Section.
(d) Charge for Issuing Replacement Certificates. Prior to the issuance of any replacement
certificate, the Paying Agent/Registrar shall charge the registered owner of such Certificate with all
legal, printing, and other expenses in connection therewith. Every replacement certificate issued
16
pursuant to the provisions of this Section by virtue of the fact that any Certificate is lost, stolen or
destroyed shall constitute a contractual obligation of the Issuer whether or not the lost, stolen or
destroyed Certificate shall be found at any time, or be enforceable by anyone, and shall be entitled to
all the benefits of this Ordinance equally and proportionately with any and all other Certificates duly
issued under this Ordinance.
(e) Authority for Issuing Replacement Certificates. In accordance with Sec. 1206.022,
Government Code, this Section 7 of this Ordinance shall constitute authority for the issuance of any
such replacement certificate without necessity of further action by the governing body of the Issuer
or any other body or person, and the duty of the replacement of such certificates is hereby authorized
and imposed upon the Paying Agent/Registrar, and the Paying Agent/Registrar shall authenticate and
deliver such Certificates in the form and manner and with the effect, as provided in Section 3(a) of
this Ordinance for Certificates issued in conversion and exchange for other Certificates.
Section 8. CUSTODY, APPROVAL, AND REGISTRATION OF CERTIFICATES; BOND
COUNSEL'S OPINION; CUSIP NUMBERS AND CONTINGENT INSURANCE PROVISION,
IF OBTAINED; ENGAGEMENT OF BOND COUNSEL. (a) The Mayor of the Issuer is hereby
authorized to have control of the Certificates initially issued and delivered hereunder and all necessary
records and proceedings pertaining to the Certificates pending their delivery and their investigation,
examination, and approval by the Attorney General of the State of Texas, and their registration by
the Comptroller of Public Accounts of the State of Texas. Upon registration of the Certificates said
Comptroller of Public Accounts (or a deputy designated in writing to act for said Comptroller) shall
manually sign the Comptroller's Registration Certificate attached to such Certificates, and the seal of
said Comptroller shall be impressed, or placed in facsimile, on such Certificate. The approving legal
opinion of the Issuer's Bond Counsel and the assigned CUSIP numbers may, at the option of the
Issuer, be printed on the Certificates issued and delivered under this Ordinance, but neither shall have
any legal effect, and shall be solely for the convenience and information of the registered owners of
the Certificates. In addition, if bond insurance is obtained, the Certificates may bear an appropriate
legend as provided by the insurer.
(b) The obligation of the initial purchaser to accept delivery of the Certificates is subject to
the initial purchaser being furnished with the final, approving opinion of McCall, Parkhurst &
Horton L.L.P., bond counsel to the Issuer, which opinion shall be dated as of and delivered on the
date of initial delivery of the Certificates to the initial purchaser. The engagement of such firm as
bond counsel to the Issuer in connection with issuance, sale and delivery of the Certificates is hereby
approved and confirmed. The execution and delivery of an engagement letter between the Issuer and
such firm, with respect to such services as bond counsel, is hereby authorized in such form as may
be approved by the Mayor, and the Mayor is hereby authorized to execute such engagement letter.
Section 9. COVENANTS REGARDING TAX EXEMPTION OF INTEREST ON THE
CERTIFICATES. (a) Covenants. The Issuer covenants to take any action necessary to assure, or
refrain from any action that would adversely affect, the treatment of the Certificates as Obligation
described in section 103 of the Code, the interest on which is not includable in the "gross income"
of the holder for purposes of federal income taxation. In furtherance thereof, the Issuer covenants
as follows:
17
(1) to take any action to assure that no more than 10 percent of the proceeds of the
Certificates (less amounts deposited to a reserve fund, if any) are used for any "private business
use," as defined in section 141 (b)(6) of the Code or, if more than 10 percent of the proceeds
or the projects financed therewith are so used, such amounts, whether or not received by the
Issuer, with respect to such private business use, do not, under the terms of this Ordinance or
any underlying arrangement, directly or indirectly, secure or provide for the payment of more
than 10 percent of the debt service on the Certificates, in contravention of section 141 (b)(2) of
the Code;
(2) to take any action to assure that in the event that the "private business use"
described in subsection (1) hereof exceeds 5 percent of the proceeds of the Certificates or the
projects financed therewith (less amounts deposited into a reserve fund, if any) then the amount
in excess of 5 percent is used for a "private business use" that is "related" and not
"disproportionate," within the meaning of section 141 (b)(3) of the Code, to the governmental
use;
(3) to take any action to assure that no amount that is greater than the lesser of
$5,000,000, or 5 percent of the proceeds of the Certificates (less amounts deposited into a
reserve fund, if any) is directly or indirectly used to finance loans to persons, other than state
or local governmental units, in contravention of section 141 (c) of the Code;
(4) to refrain from taking any action that would otherwise result in the Certificates being
txeated as "private activity bonds" within the meaning of section 141 (b) of the Code;
(5) to refrain from taking any action that would result in the Certificates being "federally
guaranteed" within the meaning of section 149(b) of the Code;
(6) to refrain from using any portion of the proceeds of the Certificates, directly or
indirectly, to acquire or to replace funds that were used, directly or indirectly, to acquire
investment property (as defined in section 148(b)(2) of the Code) that produces a materially
higher yield over the term of the Certificates, other than investment property acquired with -
(A) proceeds of the Certificates invested for a reasonable temporary period of 3
years or less or, in the case of a refunding bond, for a period of 30 days or less until such
proceeds are needed for the purpose for which the bonds are issued,
(B) amounts invested in a bona fide debt service fund, within the meaning of
section 1.148-1 (b) of the Treasury Regulations, and
(C) amounts deposited in any reasonably required reserve or replacement fund to
the extent such amounts do not exceed 10 percent of the proceeds of the Certificates;
(7) to otherwise restrict the use of the proceeds of the Certificates or amounts treated
as proceeds of the Certificates, as may be necessary, so that the Certificates do not otherwise
18
contravene the requirements of section 148 of the Code (relating to arbitrage) and, to the extent
applicable, section 149(d) of the Code (relating to advance refundings); and
(8) to pay to the United States of America at least once during each five-year period
(beginning on the date of delivery of the Certificates) an amount that is at least equal to 90
percent of the "Excess Earnings," within the meaning of section 148(f) of the Code and to pay
to the United States of America, not later than 60 days after the Certificates have been paid in
full, 100 percent of the amount then required to be paid as a result of Excess Earnings under
section 148(f) of the Code.
(b) Rebate Fund. In order to facilitate compliance with the above covenant (a)(8), a "Rebate
Fund" is hereby established by the Issuer for the sole benefit of the United States of America, and
such Fund shall not be subject to the claim of any other person, including without limitation the
certificateholders. The Rebate Fund is established for the additional purpose of compliance with
section 148 of the Code.
(c) Use of Proceeds. For purposes of the foregoing covenants (a)(1) and (a)(2), the Issuer
understands that the term "proceeds" includes "disposition proceeds" as defined in the Treasury
Regulations and, in the case of refunding bonds, transferred proceeds (if any) and proceeds of the
refunded bonds expended prior to the date of issuance of the Certificates. It is the understanding of
the Issuer that the covenants contained herein are intended to assure compliance with the Code and
any regulations or rulings promulgated by the U.S. Department of the Treasury pursuant thereto. In
the event that regulations or rulings are hereafter promulgated that modify or expand provisions of
the Code, as applicable to the Certificates, the Issuer will not be required to comply with any
covenant contained herein to the extent that such 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 Certificates under section 103 of the Code. In the event that regulations or rulings are
hereafter promulgated that impose additional requirements applicable to the Certificates, the Issuer
agrees to comply with the additional requirements to the extent necessary, in the opinion of nationally
recognized bond counsel, to preserve the exemption from federal income taxation of interest on the
Certificates under section 103 of the Code. In furtherance of such intention, the Issuer hereby
authorizes and directs the Mayor to execute any documents, certificates or reports required by the
Code and to make such elections, on behalf of the Issuer, that may be permitted by the Code as are
consistent with the purpose for the issuance of the Certificates.
(d) Allocation of, and Limitation on, Expenditures for the Project. The Issuer covenants to
account for the expenditure of sale proceeds and investment earnings to be used for the construction
and acquisition of the Project on its books and records by allocating proceeds to expenditures within
18 months of the later of the date that (1) the expenditure is made, or (2) the Project is completed.
The foregoing notwithstanding, the Issuer shall not expend proceeds of the sale of the Certificates
or investment earnings thereon more than 60 days after the earlier of (1) the fifth anniversary of the
delivery of the Certificates, or (2) the date the Certificates are retired, unless the Issuer obtains an
opinion of nationally-recognized bond counsel that such expenditure will not adversely affect the
status, for federal income tax purposes, of the Certificates or the interest thereon. For purposes
19
hereof, the Issuer shall not be obligated to comply with this covenant if it obtains an opinion that such
failure to comply will not adversely affect the excludability for federal income tax purposes from
gross income of the interest.
(e) Disposition of Project. The Issuer covenants that the Project will not be sold or otherwise
disposed in a transaction resulting in the receipt by the Issuer of cash or other compensation, unless
the Issuer obtains an opinion of nationally-recognized bond counsel that such sale or other disposition
will not adversely affect the tax-exempt status of the Certificates. For purposes of the foregoing, the
portion of the property comprising personal property and disposed in the ordinary course shall not
be treated as a transaction resulting in the receipt of cash or other compensation. For purposes hereofi
the Issuer shall not be obligated to comply with this covenant if it obtains a legal opinion that such
failure to comply will not adversely affect the excludability for federal income tax proposes from
gross income of the interest.
Section 10. SALE OF CERTIFICATES AND APPROVAL OF OFFICIAL STATEMENT;
FURTHER PROCEDURES. The Certificates are hereby initially sold and shall be delivered to ABN
AMRO Financial Services for cash for the par value thereof and accrued interest thereon to date of
delivery, plus a premium of $439.50. The Certificates shall initially be registered in the name of such
purchaser or its designee. It is hereby officially found, determined and declared that said purchaser
is the highest bidder for the Certificates as a result of invitations for competitive bids. It is further
officially found, determined, and declared that the Certificates have been sold at public sale to the
bidder offering the lowest interest cost, atter receiving sealed bids pursuant to an Official Notice of
Sale and Bidding Instructions and Official Statement prepared and distributed in connection with the
sale of the Certificates. Said Official Notice of Sale and Bidding Instructions and Official Statement,
and any addenda, supplement, or amendment thereto have been and are hereby approved by the
governing body of the Issuer, and their use in the offer and sale of the Certificates is hereby approved.
It is further officially found, determined, and declared that the statements and representations
contained in said Official Notice of Sale and Bidding Instructions and Official Statement are true and
correct in all material respects, to the best knowledge and belief of the governing body of the Issuer.
(b) The Issuer hereby approves the form and content of the Official Statement relating to the
Certificates and any addenda, supplement or amendment thereto, and approves the distribution of
such Official Statement in the reoffering of the Certificates by the Purchaser in final form, with such
changes therein or additions thereto as the officer executing the same may deem advisable, such
determination to be conclusively evidenced by his execution thereof. The distribution and use of the
Preliminary Official Statement dated July 22, 2002, prior to the date hereof is hereby ratified and
confirmed.
(c) The Mayor and Mayor Pro Tem, the City Manager, City Secretary and Director of
Finance and all other officers, employees and agents of the Issuer, and each of them, shall be and they
are hereby expressly authorized, empowered and directed from time to time and at any time to do and
perform all such acts and things and to execute, acknowledge and deliver in the name and under the
corporate seal and on behalf of the Issuer a Paying Agent/Registrar Agreement with the Paying
Agent/Registrar and all other instruments, whether or not herein mentioned, as may be necessary or
2O
desirable in order to carry out the terms and provisions of this Ordinance, the Certificates, the sale
of the Certificates and the Official Statement. In case any officer whose signature shall appear on
any Certificate shall cease to be such officer before the delivery of such Certificate, such signature
shall nevertheless be valid and sufficient for all purposes the same as if such officer had remained in
office until such delivery.
Section 11. INTEREST EARNINGS ON CERTIFICATE PROCEEDS. Interest earnings
derived from the investment of proceeds from the sale of the Certificates shall be used along with
other certificate proceeds for the Project; provided that after completion of such purpose, if any of
such interest earnings remain on hand, such interest earnings shall be deposited in the Interest and
Sinking Fund. It is further provided, however, that any interest earnings on certificate proceeds that
are required to be rebated to the United States of America pursuant to Section 9 hereof in order to
prevent the Certificates from being arbitrage bonds shall be so rebated and not considered as interest
earnings for the purposes of this Section.
Section 12. CONSTRUCTION FUND. (a) The Issuer hereby creates and establishes and shall
maintain on the books of the Issuer a separate fund to be entitled the "Series 2002 Combination Tax
and Limited Surplus Revenue Certificate of Obligation Construction Fund" for use by the Issuer for
payment of all lawful costs associated with the acquisition and construction of the Project as
hereinbefore provided. Upon payment of all such costs, any moneys remaining on deposit in said
Fund shall be transferred to the Interest and Sinking Fund. Amounts so deposited to the Interest and
Sinking Fund shall be used in the manner described in Section 5 of this Ordinance.
(b) The Issuer may place proceeds of the Certificates (including investment earnings thereon)
and amounts deposited into the Interest and Sinking Fund in investments authorized by the Public
Funds Investment Act, Chapter 2256, Texas Government Code, as amended~ provided, however, that
the Issuer hereby covenants that the proceeds of the sale of the Certificates will be used as soon as
practicable for the purposes for which the Certificates are issued.
(c) All deposits authorized or required by this Ordinance shall be secured to the fullest extent
required by law for the security of public funds.
Section 13. COMPLIANCE WITH RULE 15c2-12.
(a) Definitions. As used in this Section, 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.
21
"SEC" means the United States Securities and Exchange Commission.
"SID" means any person designated by the State of Texas or an authorized department, officer,
or agency thereof as, and determined by the SEC or its staff to be, a state information depository
within the meaning of the Rule from time to time.
(b) Annual Reports. (i) The Issuer shall provide annually to each NRMSIR and any SID,
within six months after the end of each fiscal year ending in or after 2002, financial information and
operating data with respect to the Issuer of the general type included in the final Official Statement
authorized by Section 10 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 described in Exhibit A hereto, or such other accounting principles as the Issuer may be
required to employ from time to time pursuant to state law or regulation, and (2) audited, if the Issuer
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 completed within such period,
then the Issuer shall provide unaudited financial statements within such period, and audited financial
statements for the applicable fiscal year to each NRMSIR and any SID, when and if the audit report
on such statements become available.
(ii) If the Issuer changes its fiscal year, it will notify each NRMS1R and any SID of the change
(and of the date of the new fiscal year end) prior to the next date by which the Issuer otherwise would
be required to provide financial information and operating data pursuant to this Section. The financial
information and operating data to be provided pursuant to this Section may be set forth in full in one
or more documents or may be included by specific reference to any document (including an official
statement or other offering document, if it is available from the MSRB) that theretofore has been
provided to each NRMSIR and any SID or filed with the SEC.
(c) Material Event Notices. The Issuer shall notify any SID and either each NRMSIR or the
MSRB, in a timely manner, of any of the following events with respect to the Certificates, if such
event is material within the meaning of the federal securities laws:
1. Principal and interest payment delinquencies;
2. Non-payment related defaults;
3. Unscheduled draws on debt service reserves reflecting financial difficulties;
4. Unscheduled draws on credit enhancements reflecting financial difficulties;
5. Substitution of credit or liquidity providers, or their failure to perform;
6. Adverse tax opinions or events affecting the tax-exempt status of the Certificates;
7. Modifications to rights of holders of the Certificates;
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8. Certificate calls;
9. Defeasances;
10. Release, substitution, or sale of property securing repayment of the Certificates; and
11. Rating changes.
The Issuer shall noti~ any SID and either each NRMSIR or the MSRB, in a timely manner, of any
failure by the Issuer to provide financial information or operating data in accordance with subsection
(b) of this Section by the time required by such subsection.
(d) Limitations, Disclaimers, and Amendments. (i) The Issuer shall be obligated to observe
and perform the covenants specified in this Section for so long as, but only for so long as, the Issuer
remains an "obligated person" with respect to the Certificates within the meaning of the Rule, except
that the Issuer in any event will give notice of any deposit made in accordance with this Ordinance
or applicable law that causes the Certificates no longer to be outstanding.
(ii) The provisions of this Section are for the sole benefit of the registered owners and beneficial
owners of the Certificates, and nothing in this Section, express or implied, shall give any benefit or
any legal or equitable right, remedy, or claim hereunder to any other person. The Issuer undertakes
to provide only the financial information, operating data, financial statements, and notices which it
has expressly agreed to provide pursuant to this Section and does not hereby undertake to provide
any other information that may be relevant or material to a complete presentation of the Issuer's
financial results, condition, or prospects or hereby undertake to update any information provided in
accordance with this Section or otherwise, except as expressly provided herein. The Issuer does not
make any representation or warranty concerning such information or its usefulness to a decision to
invest in or sell Certificates at any future date.
(iii) UNDER NO CIRCUMSTANCES SHALL THE ISSUER BE LIABLE TO THE
REGISTERED OWNER OR BENEFICIAL OWNER OF ANY CERTIFICATE OR ANY OTHER
PERSON, IN CONTRACT OR TORT, FOR DAMAGES RESULTING IN WHOLE OR IN PART
FROM ANY BREACH BY THE IS SUER, WHETHER NEGLIGENT OR WITHOUT FAULT ON
ITS PART, OF ANY COVENANT SPECIFIED IN THIS SECTION, BUT EVERY RIGHT AND
REMEDY OF ANY SUCH PERSON, IN CONTRACT OR TORT, FOR OR ON ACCOUNT OF
ANY SUCH BREACH SHALL BE LIMITED TO AN ACTION FOR MANDAMUS OR SPECIFIC
PERFORMANCE.
(iv) No default by the Issuer in observing or performing its obligations under this Section shall
comprise a breach of or default under the Ordinance for purposes of any other provision of this
Ordinance. Nothing in this Section is intended or shall act to disclaim, waive, or otherwise limit the
duties of the Issuer under federal and state securities laws.
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(v) The provisions of this Section may be amended by the Issuer 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 Issuer, but only if(l) the provisions of this
Section, as so amended, would have permitted an underwriter to purchase or sell Certificates in the
primary offering of the Certificates in compliance with the Rule, taking into account any amendments
or interpretations of the Rule since such offering as well as such changed circumstances and (2) either
(a) the registered 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
Certificates consent to such amendment or (b) a person that is unaffiliated with the Issuer (such as
nationally recognized bond counsel) determined that such amendment will not materially impair the
interest of the registered owners and beneficial owners of the Certificates. The Issuer may also amend
or repeal the provisions of this continuing disclosure agreement if the SEC amends or repeals the
applicable provision of the Rule or a court of final jurisdiction enters judgment that such provisions
of the Rule are invalid, but only if and to the extent that the provisions of this sentence would not
prevent an underwriter from lawfully purchasing or selling Certificates in the primary offering of the
Certificates. If the Issuer so amends the provisions of this Section, it shall include with any amended
financial information or operating data next provided in accordance with subsection (b) of this Section
an explanation, in narrative form, of the reason for the amendment and of the impact of any change
in the type of financial information or operating data so provided.
Section 14. METHOD OF AMENDMENT. The Issuer hereby reserves the right to amend this
Ordinance subject to the following terms and conditions, to-wit:
(a) The Issuer may from time to time, without the consent of any holder, except as otherwise
required by paragraph (b) below, amend or supplement this Ordinance in order to (i) cure any
ambiguity, defect or omission in this Ordinance that does not materially adversely affect the interests
of the holders, (ii) grant additional fights or security for the benefit of the holders, (iii) add events of
default as shall not be inconsistent with the provisions of this Ordinance and that shall not materially
adversely affect the interests of the holders, (v) qualify this Ordinance under the Trust Indenture Act
of 1939, as amended, or corresponding provisions of federal laws from time to time in effect, or
(iv) make such other provisions in regard to matters or questions arising under this Ordinance as shall
not be inconsistent with the provisions of this Ordinance and that shall not in the opinion of the
Issuer's Bond Counsel materially adversely affect the interests of the holders.
(b) Except as provided in paragraph (a) above, the holders of Certificates aggregating in
principal amount 51% of the aggregate principal amount of then outstanding Certificates that are the
subject of a proposed amendment shall have the right from time to time to approve any amendment
hereto that may be deemed necessary or desirable by the Issuer; provided, however, that without the
consent of 100% of the holders in aggregate principal amount of the then outstanding Certificates,
nothing herein contained shall permit or be construed to permit amendment of the terms and
conditions of this Ordinance or in any of the Certificates so as to:
24
(1) Make any change in the maturity of any of the outstanding Certificates;
(2) Reduce the rate of interest borne by any of the outstanding Certificates;
(3) Reduce the amount of the principal of, or redemption premium, if any, payable on
any outstanding Certificates;
(4) Modify the terms of payment of principal or of interest or redemption premium on
outstanding Certificates or any of them or impose any condition with respect to
such payment; or
(5) Change the minimum percentage of the principal amount of any series of
Certificates necessary for consent to such amendment.
(c) If at any time the Issuer shall desire to amend this Ordinance under this Section, the Issuer
shall send by U.S. mail to each registered owner of the affected Certificates a copy of the proposed
amendment and cause notice of the proposed amendment to be published at least once in a financial
publication published in The City of New York, New York or in the State of Texas. Such published
notice shall briefly set forth the nature of the proposed amendment and shall state that a copy thereof
is on file at the office of the Issuer for inspection by all holders of such Certificates.
(d) Whenever at any time within one year from the date of publication of such notice the
Issuer shall receive an instrument or instruments executed by the holders of at least 51% in aggregate
principal amount of all of the Certificates then outstanding that are required for the amendment,
which instrument or instruments shall refer to the proposed amendment and that shall specifically
consent to and approve such amendment, the Issuer may adopt the amendment in substantially the
same form.
(e) Upon the adoption of any amendatory Ordinance pursuant to the provisions of this
Section, this Ordinance shall be deemed to be modified and amended in accordance with such
amendatory Ordinance, and the respective rights, duties, and obligations of the Issuer and all holders
of such affected Certificates shall thereafter be determined, exercised, and enforced, subject in all
respects to such amendment.
(f) Any consent given by the holder of a Certificate pursuant to the provisions of this Section
shall be irrevocable for a period of six months from the date of the publication of the notice provided
for in this Section, and shall be conclusive and binding upon all future holders of the same Certificate
25
during such period. Such consent may be revoked at any time after six months from the date of the
publication of said notice by the holder who gave such consent, or by a successor in title, by filing
notice with the Issuer, but such revocation shall not be effective if the holders of 51% in aggregate
principal amount of the affected Certificates then outstanding, have, prior-to the attempted
revocation, consented to and approved the amendment.
(g) For the purposes of establishing ownership of the Certificates, the Issuer shall rely solely
upon the registration of the ownership of such Certificates on the registration books kept by the
Paying Agent/Registrar.
Section 15. INSURANCE. The Issuer approves the insurance of the Bonds by MBIA Inc. (the
"Insurer"), and the payment of the premium for such insurance, and agrees to comply with the terms
of the insurance commitment, a copy of which is attached hereto as Exhibit B.
(Execution Page Follows)
26
PASSED, APPROVED AND EFFECTIVE this
ATTEST: /-~ Mayor, City of The Colony, Texas
City Secretary, City of The Colony, Texas
APPROVED AS TO FORM:
~i~ty Attorney, City,of The Colony, Texas
27
EXHIRIT A
Annual Financial Statements and Operating Data
The following information is referred to in Section 13(b) of this Ordinance:
The financial information and operating data with respect to the Issuer 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:
-- Tables 1 through 5, inclusive, and 7 through 14, inclusive
-- APPENDIX B (FINANCIAL STATEMENTS FOR TH~ LAST COMPLETED FISCAL YEAR
WHICH WILL BE UNAUDITED, UNLESS AN AUDIT IS PERFORMED IN WHICH EVENT
THE AUDITED FINANCIAL STATEMENTS WILL BE MADE AVAILABLE)
Accounting Principles
The accouming principles referred to in such Section are the accounting principles described in the
notes to the financial statemems referred to in paragraph above.
EXHIBIT B
Commitment for Municipal Bond Insurance
(see attached)
COMMITMENT TO ISSUE A
FINANCIAL GUARANTY INSURANCE POLICY
Application No.: 2002-006422-001
Sale Date: August 5, 2002
Program Type: Competitive OBP
Re: $14,000,000 City of The Colony, Texas (Denton County), Combination Tax and Limited
Surplus Revenue Certificates of Obligation, Series 2002
(the "Obligations")
This commitment to issue a financial guaranty insurance policy (the "Commitment") dated
August 8, 2002, constitutes an agreement between ABN AMRO FINANCIAL SERVICES, INC.
(the "Applicant") and MBIA Insurance Corporation (the "Insurer"), a stock insurance company
incorporated under the laws of the State of New York.
Based on an approved application dated July 31, 2002, the Insurer agrees, upon satisfaction
of the conditions herein, to issue on the earlier of(i) 120 days of said approval date or (ii) on the
date of delivery of and payment for the Obligations, a financial guaranty insurance policy (the
"Policy") for the Obligations, insuring the payment of principal of and interest on the Obligations
when due. The issuance of the Policy shall be subject to the following terms and conditions:
1. Payment by the Applicant, or by the Trustee on behalf of the Applicant, on the date of
delivery of and payment for the Obligations, of a nonrefundable premium in the amount of
$46,700. The premium set out in this paragraph shall be the total premium required to be paid on
the Policy issued pursuant to this Commitment.
2. The Obligations shall have received the unqualified opinion of bond counsel with
respect to the tax-exempt status of interest on the Obligations.
3. There shall have been no material adverse change in the Obligations or the Resolution,
Bond Ordinance, Trust Indenture or other official document authorizing the issuance of the
Obligations or in the final official statement or other similar document, including the financial
statements included therein.
4. There shall have been no material adverse change in any information submitted to the
Insurer as a part of the application or subsequently submitted to be a part of the application to the
Insurer.
5. No event shall have occurred which would allow any underwriter or any other
purchaser of the Obligations not to be required to purchase the Obligations at closing.
6 A Statement of Insurance satisfactory to the Insurer shall be printed on the Obligations.
7. Prior to the delivery of and payment for the Obligations, none of the information or
documents submitted as a part of the application to the Insurer shall be determined to contain any
untrue or misleading statement of a material fact or fail to state a material fact required to be
stated therein or necessary in order to make the statements contained therein not misleading.
8. No material adverse change affecting any security for the Obligations shall have
occurred prior to the delivery of and payment for the Obligations.
9. This Commitment may be signed in counterpart by the parties hereto.
Dated this 8th day of August, 2002.
MBIA Insurance Corporation
By ~,~ ~ ~~X{,~
ABN AMRO FINANCIAL SERVICES, INC.
By:
Title: