HomeMy WebLinkAboutOrdinance No. 07-1731
ORDINANCE NO. 0'7 - (7'3 I
AN ORDINANCE AUTHORIZING THE ISSUANCE AND SALE OF CITY OF THE COLONY,
TEXAS, COMBINATION TAX AND LIMITED SURPLUS REVENUE CERTIFICATES OF
OBLIGA TION, SERIES 2007; LEVYING AN ANNUAL AD VALOREM TAX AND PROVIDING
FOR THE SECURITY FOR AND PAYMENT OF SAID CERTIFICATES; APPROVING THE
OFFICIAL STATEMENT; PROVIDING AN EFFECTIVE DATE; AND ENACTING OTHER
PROVISIONS RELATING TO THE SUBJECT
THE STATE OF TEXAS
COUNTY OF DENTON
CITY OF THE COLONY
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WHEREAS, the City Council of the City of The Colony, Texas, deems it advisable to issue
Certificates of Obligation in the amount and for the purposes hereinafter set forth;
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;
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;
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 of Tex. 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 $14,515,000 for paying all or a portion of the Issuer's
contractual obligations incurred in connection with (i) constructing and improving streets and roads, including
signalization, landscaping, lighting, signage and related drainage, (ii) constructing and equipping fire stations,
(iii) constructing, installing and equipping park improvements, (iv) landscaping right of way and public areas,
(v) professional fees for architectural services for design of public service building, (vi) constructing,
installing, acquiring and equipping additions, extensions and improvements to the City's waterworks and
sanitary sewer system, including a joint use water transmission line, (vii) acquisition of equipment and vehicles
for the fire department, general administration, public works, parks and recreation, police and building
inspections departments and City Secretary's office, (viii) electronic message signs, (ix) renovating the
municipal library and City Hall, (x) and the acquisition ofland and interests in land for such projects, and (xi)
legal, fiscal and engineering fees in connection with such projects.
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 2007," and initially there shall be issued, sold, and
delivered hereunder one fully registered certificate, without interest coupons, dated August 15,2007, 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
2008 $570,000 4.000% 2016 $ 615,000 5.000%
2009 595,000 4.000% 2017 645,000 5.000%
2010 620,000 4.000% 2018 680,000 4.375%
2011 640,000 4.000% 2019 710,000 4.500%
2012 670,000 5.000% 2020 740,000 4.500%
2013 530,000 5.000% 2021 775,000 4.625%
2014 560,000 5.000% 2027 5,575,000 5.500%
2015 590,000 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 Regions Bank, 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 AgentlRegistrar 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
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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 l20 1, 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 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 FO RM OF CER TIFI CA TE 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
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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 AgentlRegistrar, to be effective not later than 60 days prior to the next principal or interest
payment date after 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 ofthis
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-Entrv 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 ofthe outstanding Certificates shall be registered
in the name of Cede & Co., as nominee of OTC.
With respect to Certificates registered in the name of Cede & Co., as nominee ofOTC, 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 behalf OTC was
created ("OTC Participant") to hold securities to facilitate the clearance and settlement of securities
transactions among OTC Participants or to any person on behalf of whom such a OTC 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
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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 17 A of the Securities and Exchange Act of 1934, as
amended, notify DTC and OTC 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) Pavrnents to Cede & Co. Notwithstanding any other provision of this Ordinance to the contrary,
so l~ng 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 ofInitial 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
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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 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
STATE OF TEXAS
CITY OF THE COLONY, TEXAS
COMBINA TION TAX AND LIMITED SURPLUS REVENUE
CERTIFICATE OF OBLIGATION
SERIES 2007
PRINCIPAL
AMOUNT
$
Interest Rate
Dated Date
Maturity Date
February 15, _
CUSIP No.
August 15,2007
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 ofthe 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 15, 2007 at the Interest Rate per annum specified above. Interest is payable on February 15,
2008 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
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date fixed for its redemption prior to maturity, at the principal corporate trust office of Regions Bank, 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 l5, 2007, authorized in
accordance with the Constitution and laws of the State of Texas in the principal amount of$14,515,000 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 l5, 2017, or on any date thereafter, the Certificates of this series 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 part, 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.
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THE CERTIFICATES scheduled to mature on August 15 in the year 2027 (the "Term Certificates")
are subject to scheduled mandatory redemption by the Paying Agent/Registrar by lot, or by any other
customary method that results in a random selection, at a price equal to the principal amount thereof, plus
accrued interest to the redemption date, out of moneys available for such purpose in the interest and sinking
fund for the Certificates, on the dates and in the respective principal amounts, set forth in the following
schedule:
Term Certificate
Maturity: August 15, 2027
Mandatory Redemption Date
August 15,2022
August 15,2023
August 15, 2024
August 15, 2025
August 15, 2026
August 15, 2027 (maturity)
Principal
Amount
$ 810,000
855,000
905,000
950,000
1,000,000
1,055,000
The principal amount of Term Certificates of a stated maturity required to be redeemed on any mandatory
redemption date pursuant to the operation of the mandatory sinking fund redemption provisions shall be
reduced, at the option of the District, by the principal amount of any Term Certificates ofthe same maturity
which, at least 50 days prior to a mandatory redemption date (1) shall have been acquired by the District at
a price not exceeding the principal amount of such Term Certificates plus accrued interest to the date of
purchase thereof, and delivered to the Paying Agent/Registrar for cancellation, (2) shall have been purchased
and canceled by the Paying Agent/Registrar at the request of the District at a price not exceeding the principal
amount of such Term Certificates plus accrued interestto the date of purchase, or (3) shall have been redeemed
pursuant to the optional redemption provisions and not theretofore credited against a mandatory redemption
requirement.
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. If a portion of any Certificate shall be redeemed, a substitute Certificate or Certificates
having the same maturity date, bearing interest at the same rate, in any denomination or denominations in any
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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 ofthe 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 ofbusiness 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.
9
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 ofa 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.
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)
City Secretary
(signature)
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:
Regions Bank
Houston, Texas
Paying Agent/Registrar
By:
Authorized Representative
(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
10
(Please print 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 by an
eligible guarantor institution participating in a
securities transfer association recognized signature
guarantee program.
NOTICE: The signature above must correspond
with the name of the registered owner as it appears
upon the front of this Certificate in every
particular, without 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)
(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:
11
Years
Principal Installments
Interest Rates
(Information from 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 3 O-day months) from August 15, 2007 at the respective Interest Rate per annum specified above.
Interest is payable on February 15,2008, 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
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."
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 shall be deposited upon receipt to the Interest and Sinking 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 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 secured by a lien on all or any part of the net revenues of the Issuer's waterworks and sewer system,
constituting "Surplus Revenues", notto exceed $1,000. The Issuer shall deposit such Surplus Revenues to the
credit of the Interest and Sinking Fund created pursuant to subsection (a) of this section, to the extent necessary
to pay the principal and interest on the Certificates. Notwithstanding the requirements of subsection (a) of this
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section, 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 limited Surplus Revenues granted by the Issuer under this Section, 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 limited
Surplus Revenues granted by the Issuer under this Section, 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.
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 or the pledge of Surplus Revenues 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
13
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 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 ofloss, theft or destruction of a Certificate, the registered owner shall furnish 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 AgentlRegistrar 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.
14
(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 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) Authoritv 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, ifbond
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 l03 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:
15
(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 l4l(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 l41 (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 l4l(c) of the Code;
(4) to refrain from taking any action that would otherwise result in the Certificates being
treated as "private activity bonds" within the meaning of section 14l(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 l48(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 of3 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.l48-1(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 lO 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 contravene
the requirements of section 148 of the Code (relating to arbitrage) and, to the extent applicable, section
l49(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
16
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), theIssuer 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 Proiect. 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 l8 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 (l) 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 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 ofProiect. 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 hereof, 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.
17
(a) The Certificates are hereby sold and shall be delivered to Southwest Securities, Inc. and First
Albany Capital (the "Underwriters") for the purchase price of$14,894,730.55 (representing the par amount
of the Certificates of Obligation of $14,515,000.00, plus net original issue premium of $471,004.00 (with
$236,004 of said premium used to pay costs of issuance and $235,000 deposited into the Construction Fund
established in Section 12) , and less an Underwriters' discount of $91,273.45) plus interest accrued thereon
to date of delivery (accrued interest to be deposited into the Interest and Sinking Fund) pursuant to the terms
and provisions of a Purchase Agreement which the Mayor is hereby authorized to execute and deliver. It is
hereby officially found, determined, and declared that the terms of this sale are the most advantageous
reasonably obtainable. The Certificates shall initially be registered in the name of Southwest Securities, Inc.
or its designee.
(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
August 13, 2007, 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 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 2007 Certificate of Obligation Construction Fund" for use by the Issuer for
payment of all lawful costs associated with the Project as hereinbefore provided and to pay costs of issuance
of the Certificates. 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
18
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.
"SEe" 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 2005, financial information and operating data with
respect to the Issuer of the general type included in the final Official Statement authorized by
Section lO 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 ifthe audit report
on such statements become available.
(ii) If the Issuer changes its fiscal year, it will notify each NRMSIR and any SID of the
change (and of the date of the new fiscal year end) prior to the next date by which the Issuer otherwise
would be required to provide fmancial 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 SEe.
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(c) Material Event Notices. The Issuer shall notify any SID and either each NRMSIRorthe MSRB,
in a timely manner, of any of the following events with respect to the Certificates, if such event is material
within the meaning of the federal securities laws:
1. Principal and interest payment delinquencies;
2. Non-payment related defaults;
3. Unscheduled draws on debt service reserves reflecting financial difficulties;
4. Unscheduled draws on credit enhancements reflecting financial difficulties;
5. Substitution of credit or liquidity providers, or their failure to perform;
6. Adverse tax opinions or events affecting the tax-exempt status of the Certificates;
7. Modifications to rights of holders of the Certificates;
8. Certificate calls;
9. Defeasances;
10. Release, substitution, or sale of property securing repayment of the Certificates; and
ll. Rating changes.
The Issuer shall notify 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 ISSUER, WHETHER NEGLIGENT OR WITHOUT F AUL TON
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.
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(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.
(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 ofamajority 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 rights 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 5l % 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% ofthe
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:
(1) Make any change in the maturity of any of the outstanding Certificates;
21
(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 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 5 1 % 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 Certificates by XL Capital
Assurance Inc. (the "Insurer"), and the payment of the premium for such insurance, and agrees to comply with
the terms of the bond insurance commitment as set forth in Exhibit B and incorporated herein.
Section 16. EFFECTIVE DATE. In accordance with the provisions ofV.T.C.A., Government Code,
Section 1201.028, this Ordinance shall be effective immediately upon its adoption by the City Council.
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Section l7. SEVERABILITY. If any section, article, paragraph, sentence, clause, phrase or word
in this Ordinance, or application thereofto any persons or circumstances is held invalid or unconstitutional by
a court of competent jurisdiction, such holding shall not affect the validity of the remaining portion of this
Ordinance, despite such invalidity, which remaining portions shall remain in full force and effect.
[Execution Page Follows]
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PASSED, APPROVED AND EFFECTIVE this {Lt..~ ;}-o ?w.7
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City Secretary, City of The Colony, Texas
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EXHIBIT 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 THE 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 accounting principles referred to in such Section are the accounting principles described in the notes to the
financial statements referred to in paragraph above.
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EXHIBIT B
PROVISIONS RELATING TO MUNICIPAL BOND INSURANCE
1. Definitions.
(a) "Insurance Policy" means the insurance policy issued by the Certificate Insurer guaranteeing
the scheduled payment of principal of and interest on the Certificates when due.
(b) "Insurer" means XL Capital Assurance Inc., or any successor thereto or assignee thereof.
2. Applicability of Provisions. Notwithstanding anything to the contrary set forth in the Ordinance,
the provisions set forth in this Exhibit B shall control so long as the Certificates are insured by the Insurer and
the Insurer is not in default under the Insurance Policy.
3. Notices to be Delivered to Insurer; Consent ofInsurer.
(a) Any notices required to be given by the Issuer or the Paying Agent/Registrar should also be
given to the Insurer, Attn: Surveillance.
(b) The Insurer must be given notice of any amendments to the Ordinance or the Paying
Agent/Registrar Agreement, and the Insurer's consent shall be required for all amendments of the Ordinance,
the Paying Agent/Registrar Agreement. Any amendments to the Ordinance which are consented to by the
Insurer shall be sent to Standard & Poor's.
4. Events of Default and Remedies.
(a) Events of default shall be defined as follows:
(i) The issuer fails to pay principal when due;
(ii) The issuer fails to pay interest when due;
(iii) The issuer fails to observe any other covenant or condition of the Ordinance and such
failure continues for 60 days; and
(iv) The issuer declares bankruptcy.
(b) The Insurer, acting alone, shall have the right to direct all remedies in the event of a default.
The Insurer shall be recognized as the registered owner of each Certificate which it insures for the purposes
of exercising all rights and privileges available to Certificateholders. For Certificates which it insures, the
Insurer shall have the right to institute any suit, action, or proceeding at law or in equity under the same terms
as a Certificateholder in accordance with applicable provisions of the governing documents. Other than
redemption of the Certificates as authorized pursuant to the Ordinance, any acceleration of principal payments
must be subject to the Insurer's prior written consent.
5. Defeasance Securities. Defeasance Securities shall be limited to the following, to the extent
such investments are authorized under Section 6 of the Ordinance and Chapter 1207, Texas Government Code:
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(a) Cash;
(b) U.S. Treasury Certificates, Notes and Certificates (including State and Local Government
Series -- " SLGs");
(c) Direct obligations of the Treasury which have been stripped by the Treasury itself;
(d) Resolution Funding Corp. (REFCORP). Only the interest component of REF CORP strips
which have been stripped by request to the Federal Reserve Bank of N ew York in book entry form are
acceptable;
(e) Pre-refunded municipal bonds rated "Aaa" by Moody's and "AAA" by S&P. Ifhowever, the
issue is only rated by S&P (i.e., there is no Moody's rating), then the pre-refunded Certificates must have been
pre-refunded with cash, direct U. S. or U. S. guaranteed obligations, or AAA rated pre-refunded municipals to
satisfy this condition;
(f) Obligations issued by the following agencies which are backed by the full faith and credit of
the U.S.:
(i) U.S. Export-Import Bank (Eximbank)
Direct obligations or fully guaranteed certificates of beneficial ownership
(ii) Farmers Home Administration (FmHA)
Certificates of beneficial ownership
(iii) Federal Financing Bank;
(iv) General Services Administration
Participation certificates
(v) U.S. Maritime Administration
Guaranteed Title XI financing
(vi) U.S. Department of Housing and Urban Development (HUD)
Project Notes
Local Authority Bonds
New Communities Debentures - U. S. government guaranteed debentures
U.S. Public Housing Notes and Bonds - U.S. government guaranteed public housing
notes and bonds
6. Insurer As Third Party Beneficiary. To the extent that the Ordinance confers upon or gives or grants
to Insurer any right, remedy or claim under or by reason of this Ordinance, Insurer is hereby explicitly
recognized as being a third-party beneficiary thereunder and may enforce any such right remedy or claim
conferred, given or granted thereunder.
7. Subrogation. In the event that the principal and redemption price, if applicable, and interest due on
the Certificates shall be paid by Insurer pursuant to the Insurance policy, the Certificates shall remain
outstanding for all purposes, not be defeased or otherwise satisfied and not be considered paid by the Issuer
and all covenants, agreements and other obligations of the Issuer to the holders of the Certificates shall continue
to exist and Insurer shall be subrogated to the rights of such Holders.
8. Pavrnents Under the Insurance Policv.
(a) If on the third Business Day prior to the related scheduled interest payment date or principal
payment date ("Payment Date"), there is not on deposit with the City under this Ordinance, after making all
transfers and deposits required under this Ordinance, money sufficient to pay the principal of, and interest on,
the Certificates due on such Payment Date, the City shall give notice to XLCA and to its designated agent (if
any) (the "Insurer's Fiscal Agent"), by telephone or telecopy, of the amount of such deficiency by 10: 00 A. M.,
New York City time, on such Business Day. If, on the Business Day prior to the related Payment Date, there
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is not on deposit with the Paying Agent/Registrar moneys sufficient to pay the principal of, and interest on, the
Certificates due on such Payment Date, the Paying Agent/Registrar shall maJ<.e a claim under the Insurance
Policy and give notice to XLCA and XLCA's Fiscal Agent (if any) by telephone of the amount of any
deficiency in the amount available to pay principal and interest, and the allocation of such deficiency between
the amount required to pay interest on the Certificates and the amount required to pay principal of the
Certificates, confirmed in writing to XLCA and XLCA's Fiscal Agent by 10:00 AM., New York City time,
on such Business Day, by delivering the Notice of Nonpayment and Certificate.
(b) F or the purposes of the preceding paragraph, "Notice" means telephonic or telecopied notice,
subsequently confirmed in a signed writing, or written notice by registered or certified mail, from the Paying
Agent/Registrar to XLCA, which notice shall specify (1) the name of the entity making the claim, (2) the policy
number, (3) the claimed amount and (4) the date such claimed amount will become Due for Payment.
"Nonpayment" means the failure of the City to have provided sufficient funds to the Paying Agent/Registrar
for payment in full of all principal of, and interest on, the Certificates that are Due for Payment. "Due for
Payment," when referring to the principal of Certificates, means when the stated maturity date or mandatory
redemption date for the application of a required sinking fund installment has been reached and does not refer
to any earlier date on which payment is due by reason of call for redemption (other than by the application of
required sinking fund installments), acceleration or other advancement of maturity, unless XLCA shall elect,
in its sole discretion, to pay such principal due upon such acceleration; and when referring to interest on
Certificates, means when the stated date for the payment of interest has been reached. "Certificate" means a
certificate in form and substance satisfactory to XLCA as to the Paying Agent/Registrar's right to receive
payment under the Insurance Policy.
(c) The Paying Agent/Registrar shall designate any portion of payment of principal on Certificates
paid by XLCA at maturity on its books as a reduction in the principal amount of Certificates registered to the
then current owner, whether DTC or its nominee or otherwise, and shall issue a replacement Certificate to
XLCA, registered in the name of XLCA, as the case may be, in a principal amount equal to the amount of
principal so paid (without regard to authorized denominations); provided that the Paying Agent/Registrar's
failure to so designate any payment or issue any replacement Certificate shall have no effect on the amount of
principal or interest payable by the City on any Certificate or the subrogation rights of XLCA
(d) The Paying Agent/Registrar shall keep a complete and accurate record of all funds deposited
by XLCA into the Policy Payments Account (as hereinafter defined) and the allocation of such funds to
payment of interest on and principal paid with respect to any Certificate. XLCA 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 the registered owners of Certificates
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 registered owners of Certificates and shall deposit any such
amount in the Policy Payments Account and distribute such amount only for purposes of making the payments
for which a claim was made. Such amounts shall be disbursed by the Paying Agent/Registrar to registered
owners of Certificates in the same manner as principal and interest payments are to be made with respect to
the Certificates under the sections hereof regarding payment of Certificates. 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.
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(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 Certificate payment date
shall promptly be remitted to XLCA.
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