HomeMy WebLinkAbout2016-R-18 - Delinquent Tax CollectionsRESOLUTION No. 2016-R-18
RESOLUTION PROVIDING FOR ADDITIONAL PENALTY ON DELINQUENT PERSONAL PROPERTY TAXES
-f o....�......illn 'c6ac to riafrav I L' • T wneneH�, ule G[y _._�.._......_ _ is costs of collection, as auu c. Le .,,
Tax Code §33.11, that it incurs under a contract for collection of delinquent property taxes between said
City of Stephenville and a private law firm entered into pursuant to Texas Tax Code §6.30; and
WHEREAS, under said Section 33.11, the governing body of the City of Stephenville is empowered
to authorize the addition of a collection penalty in an amount that does not exceed the amount of the
compensation specified in the contract with the private law firm.
NOW THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF STEPHENVILLE SITTING AS THE
GOVERNING BODY OF SAID DISTRICT THAT:
Section 1. The recitals set forth in this resolution are true and correct.
Section 2. An additional penalty on delinquent personal property taxes for tax years 2016 and
subsequent years is hereby authorized and imposed, as provided by Section 33.11, Texas Tax Code, in the
amount of 20% of the delinquent tax, penalty and interest if the tax becomes delinquent on February 1 of
a year and remains delinquent on the 60th day thereafter.
PASSED, APPROVED and ADOPTED by the City Council of the City of Stephenville in a meeting held
on the In day of November, 2016.
�j�
Jerry K Wel Il, Mayor
ATTEST:
Cindy L.4tafford, City/S' oretary
Revie%4ed by Wayne McKethan,
Interim City Administrator
I
Approved as to form and legality by
Randy Thomas, City Attorney
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AMENDMENT NO.2
TO THE CONTRACT ("Contract) BETWEEN
CITY OF STEPHENVILLE, TEXAS
AND
LINEBARGER GOGGAN BLAIR & SAMPSON, LLP
WHEREAS, on August 29, 1989, the City of Stephenville (hereinafter "City") approved a contract
between the City and the law firm of Calame, Linebarger and Graham, (now known as Linebarger
Goggan Blair & Sampson, LLP hereinafter "Firm"); and
WHEREAS, Texas Property Tax Code Section 33.11 was amended by the Seventy -Ninth
Legislature by act effective September 1, 2005, to provide that certain taxes may incur an additional
penalty to defray costs of collection.
NOW, THEREFORE, by execution of this Amendment No. 2, the Contract is amended hereby as
set for the below.
SECTION 1. PURPOSE
The following language is hereby substituted for Section I of the Contract:
City agrees to employ and does hereby employ Firm to enforce by suit or otherwise the
collection of all delinquent taxes, penalty and interest, on behalf of City of Stephenville, with City of
Stephenville, owing to City of Stephenville, provided taxes owed to the Client shall become subject to
this agreement upon the following dates, whichever occurs first:
(a) On February 1 of the year in which the taxes become delinquent if a previously filed tax suit
is then pending against the property subject to the tax;
(b) On the date any lawsuit is filed with respect to the recovery of the tax if the tax is
delinquent and is required to be included in the suit pursuant to Texas Tax Code §33.42(a);
(c) On the date of filing any application for tax warrant where recovery of the tax or estimated
tax is sought and where the filing of an application for tax warrant by the Firm is at the
request of Client's Tax Assessor -Collector,
(d) On the date of filing any claim in bankruptcy where recovery of the tax is sought; or
(e) In the case of tangible personal property, on the 60th day after the February 1 delinquency
date; or
(f) On July 1 of the year in which the taxes become delinquent.
Page 1 of 2
Amendment 2 to Contract between
City ofStephertville, Texas and
Linebarger Goggan Blair & Sampson, LLP
SECTION 2. EFFECT OF THE AMENDMENT
By execution of this Amendment No. 2, the Contract is amended. No other sections, provisions,
clauses or conditions of the Contract are waived or changed hereby and they shall all remain in full force
and effect throughout the term of the Contract and any duly authorized extensions.
IN WITNESS WHEREOF, by their signatures below, the duly authorized representatives of the
City of Stephenville and of Linebarger Goggan Blair & Sampson, LLP do hereby agree and append this
Amendment No. 2 to the Contract dated August 29, 1989.
EXECUTED this the 1n day of November, 2016.
CITY OF STEPHENVILLE
Sry I . We n II, Mayor
i
ATTEST: S ; r
F- T'
CindyL. ord, 6ityS taryORP�KP��O
LINEBARGER GOGGAN BLAIR & SAMPSON LLP
By
Page 2 of 2
Amendment 2 to Contract between
City of Stephenville, Texas and
Linebarger Cioggan Blair & Sampson, LLP
LAW OFFICES
M-CALL, PARKHURST & HORTON L.L.P.
600 CONGRESS AVENUE
717 NORTH HARWOOD
1800 ONE AMERICAN CENTER
NINTH FLOOR
AUSTIN. TEXAS 78701-3248
DALLAS, TEXAS 75201-6587
TELEPHONE512478�3805
TELEPHONE'. 2147549200
November 1, 2016
Mayor and Members of the City Council
City of Stephenville
298 West Washington
Stephenville, Texas 76401
700 N ST MARV'S STREET
1525 ONE RIVERWALK PLACE
SAN ANTONIO, TEXAS 78205-3503
TELEPHONE. 210 225 2800
Re: Proposed issuance of $2,040,000 City of Stephenville, Texas Combination Tax and Revenue
Certificate of Obligation, Series 2016
Ladies and Gentlemen:
The purpose of this engagement letter is to set forth certain matters concerning the services we will
perform as bond counsel to the City of Stephenville, Texas (the "Issuer") in connection with the
issuance of the referenced Certificates of Obligation (the "Securities") pursuant to an ordinance
adopted on the date hereof (the "Ordinance") by the City Council of the Issuer (the "Council"). We
understand that the Securities are being issued for the purpose of paying all or a portion of the City's
contractual obligations incurred in connection with the construction of improvements to the sanitary
sewer collection system and paying legal, fiscal, engineering and architectural fees in connection
with this project. In accordance with the Ordinance, the Securities will be secured by a pledge of
the taxes levied by the City each year in an amount sufficient to pay the Securities, within the
limitation prescribed by law, and from a limited pledge of the surplus net revenues of the City's
combined Waterworks and Sewer System (the "System"), that remain after paying all operation and
maintenance expenses of the System, and all debt service, reserve, and other requirements in
connection with all of the City's revenue bonds or other obligations (now or hereafter outstanding),
which are payable from all or any part of the net revenues of the System. We further understand that
the Securities will be sold through private placement on the date hereof (the "Sale Date") to First
National Bank Texas, Stephenville, Texas (the "Purchaser").
A. THE FINANCING
As Bond Counsel to the Issuer, we would like for the Council to understand how the issuance
of the Securities will be effected and the ramifications of the financing. I will briefly describe the
procedures and certain applicable law that pertains to the issuance of the Securities, below.
However, you should feel free to call me at any time to discuss any questions that you or your staff
may have.
(1) The Securities will be "ordered to be issued" when and if the Council approves the Ordinance
on the Sale Date. The Ordinance provides for (i) the terms of the Securities, including the
principal amortization schedule and interest rates; (ii) the Issuer's commitment to levy its debt
service tax each year in an amount sufficient to pay the debt service on the Securities; (iii) the
sale of the Securities to the Purchaser; (iv) the approval of this engagement letter; (v) approval
of a paying agent agreement to the Purchaser to whom you will make semiannual payments
sufficient to pay the debt service on the Securities; and (vi) certain other covenants of the
Issuer that are designed to allow the Issuer to issue the Securities as tax-exempt obligations.
As you can see, the Ordinance is a comprehensive undertaking of the Issuer that is intended
to provide for all actions and undertakings that are required for the issuance of the Securities.
There will be other certificates and letters that will be required to be executed by officers of
the Issuer on the Sale Date, but they all spring from, and are authorized by, the Ordinance.
(2) As noted above, the Securities will be sold to the Purchaser in accordance with the provisions
of the Ordinance and, in addition, the Purchaser will want the Issuer to accept their bid for the
Securities, which will set forth the terms of the sale of the Securities. As a condition to the
Purchaser's payment for the Securities, the Purchaser will require this firm to deliver our Bond
Counsel opinion to them, in which we will opine that the Securities are valid obligations of the
Issuer and that, assuming ongoing compliance by the Issuer with the provisions of the
Ordinance, the interest on the Securities will be exempt from federal income taxation. The
Purchaser's bid will also require the delivery of an opinion of the Texas Attorney General
approving the Securities, as is required by State law. Please note that the Issuer has a legal
duty to inform the Purchaser if there are any unusual financial or legal circumstances affecting
the Issuer that would affect the Purchaser's determination to purchase the Securities, or affect
the price at which it would pay for the Securities. If there are such circumstances, you should
let your Financial Advisor or the undersigned know about them as soon as possible.
B. SCOPE OF ENGAGEMENT
In this engagement, we have performed, or expect to perform, the following duties:
(1) Subject to the completion of proceedings to our satisfaction, render our legal opinion (the
"Bond Opinion") regarding the validity and binding effect of the Securities, the source
of payment and security for the Securities, and the excludability of interest on the
Securities from gross income for federal income tax purposes.
(2) Prepare and review documents necessary or appropriate to the authorization, issuance and
delivery of the Securities, coordinate the authorization and execution of such documents,
and review enabling legislation.
(3) Assist the Issuer in seeking from other governmental authorities such approvals,
permissions and exemptions as we determine are necessary or appropriate in connection
with the authorization, issuance and delivery of the Securities, except that we will not be
responsible for any required federal or state securities law filings. In this connection, we
particularly undertake to assist the Issuer in having the Securities approved by the Public
Finance Division of the Office of the Texas Attorney General, and, following such
approval, registered by the Texas Comptroller of Public Accounts.
(4) Review legal issues relating to the structure of the Securities issue.
j�
(6) If requested, assist the Issuer in presenting information to bond rating organizations and
providers of credit enhancement relating to legal issues affecting the issuance of the
Securities.
(7) Draft the continuing disclosure undertaking of the Issuer, if one is required by the
Purchaser.
Our Bond Opinion will be delivered by us on the date the Securities are exchanged for their
purchase price (the "Closing"). The Issuer will be entitled to rely on our Bond Opinion.
The Bond Opinion will be based on facts and law existing as of its date. In rendering our Bond
Opinion, we will rely upon the certified proceedings and other certifications of public officials and
other persons furnished to us without undertaking to verify the same by independent investigation,
and we will assume continuing compliance by the Issuer with applicable laws relating to the
Securities. During the course of this engagement, we will rely on you to provide us with complete
and timely information on all developments pertaining to any aspect of the Securities and their
security. We understand that you will direct members of your staff and other employees of the Issuer
to cooperate with us in this regard. The Bond Counsel opinion is not a guarantee of a result.
Applicable law pertaining to the Bond Opinion is subject to change by the Congress and to
subsequent judicial and administrative interpretation by the courts and the Department of the
Treasury. There can be no assurance that such applicable law or the interpretation thereof will not
be changed in a manner which would adversely affect the tax treatment of the purchase, ownership
or disposition of the Bonds. As Bond Counsel to the Issuer, we are not being retained to monitor
compliance with the requirements of applicable law subsequent to the issuance of the Bonds, but we
will provide advice to the Issuer following the issuance of the Bonds, which advice will be based on
post -issuance information (if any) provided to us by the Issuer
Our duties in this engagement are limited to those expressly set forth above. Unless we are
separately engaged in writing to perform other services, our duties do not include any other services,
including the following:
(a) Assisting in the preparation or review of an official statement or any other disclosure
document with respect to the Securities, or performing an independent investigation to
determine the accuracy, completeness or sufficiency of any such document or rendering
advice that the official statement or other disclosure document does not contain any
untrue statement of a material fact or omit to state a material fact necessary to make the
statements contained therein, in light of the circumstances under which they were made,
not misleading.
(b) Preparing requests for tax rulings from the Internal Revenue Service, or no action letters
from the Securities and Exchange Commission.
(c) Preparing state securities law memoranda or investment surveys with respect to the
Securities.
(d) Drafting state constitutional or legislative amendments.
(e) Pursuing test cases or other litigation.
(f) Making an investigation or expressing any view as to the creditworthiness of the Issuer
or the Securities.
(g) Except as described in paragraph (7) above, assisting in the preparation of, or opining on,
a continuing disclosure undertaking pertaining to the Securities or, after Closing,
providing advice concerning any actions necessary to assure compliance with any
continuing disclosure undertaking.
(h) Representing the Issuer in Internal Revenue Service examinations or inquiries, or
Securities and Exchange Commission investigations.
(i) After Closing, providing continuing advice to the Issuer or any other party concerning
any actions necessary to assure that interest paid on the Securities will continue to be
excludable from gross income for federal income tax purposes (e.g., our engagement
does not include rebate calculations for the Securities).
Q) Negotiating the terms of, or opining as to, any investment contract.
(k) Addressing any other matter not specifically set forth above that is not required to render
our Bond Opinion.
C. ATTORNEY -CLIENT RELATIONSHIP
Upon execution of this engagement letter, the Issuer will be our client and an attorney -client
relationship will exist between us. We further assume that all other parties in this transaction
understand that we represent only the Issuer in this transaction, we are not counsel to any other party,
and we are not acting as an intermediary among the parties. Our services as bond counsel are limited
to those contracted for in this letter; the Issuer's execution of this engagement letter will constitute
an acknowledgment of those limitations. Our representation of the Issuer will not affect, however,
our responsibility to render an objective Bond Opinion.
Our representation of the Issuer and the attorney -client relationship created by this engagement
letter will be concluded upon issuance of the Securities. Nevertheless, subsequent to Closing, we will
mail the appropriate Internal Revenue Service Form 8038G, prepare and distribute to the participants
in the transaction a transcript of the proceedings pertaining to the Securities.
FIRM NOT A MUNICIPAL ADVISOR
As a consequence of the adoption of Rule 1513al A pursuant to the Securities Exchange Act
of 1934 (the "Municipal Advisor Rule"), which has been promulgated by the Securities and
Exchange Commission as a result of the enactment of the Dodd -Frank Wall Street Reform and
Consumer Protection Act (the "Dodd -Frank Act"), we hereby inform the Issuer that we are not a
"Municipal Advisor" within the meaning of the Municipal Advisor Rule or the Dodd -Frank Act
(collectively, the "MA Rule"). In the course of performing our services as Bond Counsel in this
transaction, we may engage in analysis, discussion, negotiation, and advice tot he Issuer regarding
the legal ramifications of the structure, timing, terms, and other provisions of the financial
transaction that culminates with the planned issuance of the Bonds, and such services and advice
may be essential to the development of the plan of finance for the issuance of the Bonds. In turn,
these services become, among other things, the basis for the transaction's basic legal documents, the
preparation and delivery of the official statement or any other disclosure document that describes the
material terms and provisions of the transaction, if an offering document is used in the offering of
the Bonds, the preparation of the various closing certificates that embody the terms and provisions
of this transaction and the preparation and delivery of our Bond Opinion. Moreover, legal advice
and services of a traditional legal nature in the area of municipal finance inherently involve a
financial advice component; but we hereby advise the Issuer that while we have expertise with
respect to the legal aspects relating to the issuance of municipal securities, we are not "financial
advisors" or "financial experts" in a manner that would subject us to the provisions of the MA Rule.
As Bond Counsel, we provide only legal advice, not purely financial advice that is not inherent in
our legal advice to the Issuer. The Issuer should seek the advice of its financial advisor with respect
to the financial aspects of the issuance of the Bonds. By signing this engagement letter, the Issuer
acknowledges receipt of this information, and evidences its understanding of the limitations of our
role to the Issuer as Bond Counsel with respect to the MA Rule, as discussed in this paragraph.
D. CONFLICTS
As you are aware, our firm represents many political subdivisions and investment banking
firms, among others, who do business with political subdivisions, including the financial advisor of
the Issuer. It is possible that during the time that we are representing the Issuer, one or more of our
present or future clients will have transactions with the Issuer. It is also possible that we may be
asked to represent, in an unrelated matter, one or more of the entities involved in the issuance of the
Securities. We do not believe such representation, if it occurs, will adversely affect our ability to
represent you as provided in this letter, either because such matters will be sufficiently different from
the issuance of the Securities so as to make such representations not adverse to our representation
of you, or because the potential for such adversity is remote or minor and outweighed by the
consideration that it is unlikely that advice given to the other client will be relevant to any aspect of
the issuance of the Securities. Execution of this letter will signify the Issuer's consent to our
representation of others consistent with the circumstances described in this paragraph.
E. FEES
Based upon: (i) the terms, structure, size and schedule of the financing represented by the
Securities; (ii) the duties we will undertake pursuant to this engagement letter; (iii) the time we
anticipate devoting to the financing; and (iv) the responsibilities we will assume in connection
therewith, our fee will be $6,000 for the first $1,000,000 in net proceeds of the Securities issued,
plus $1 per $1,000 of net proceeds of the Securities for all such amounts above $1,000,000, with a
minium fee of $7,500. Net proceeds include any net original issue premium, less the amount of the
underwriters' discount, plus the principal amount of the Securities (accrued interest is excluded from
net proceeds). The fee includes our services rendered as Bond Counsel, but does not include client
charges made or incurred on your behalf, such as travel costs, photocopying, deliveries, long distance
telephone charges, telecopier charges, computer -assisted research and other expenses. Our fee will
be billed after the Closing. If the financing is not consummated, we understand and agree that we
will not be paid. In accordance with the terms of the Order, the Issuer will provide the filing fee of
the Texas Attorney General to Bond Counsel on a timely basis to permit the filing of the transcript
of proceedings for the Securities so that the Securities may be approved by the Attorney General in
time to meet the closing date set forth in the Official Statement.
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G. RECORDS
At your request, papers and property furnished by you will be returned promptly upon receipt
of payment for outstanding fees and client charges. Our own files, including lawyer work product,
pertaining to the transaction will be retained by us. For various reasons, including the minimization
of unnecessary storage expenses, we reserve the right to di snnse of anv documents or other materials
retained by us after the termination of this engagement.
If the foregoing terms are acceptable to you, please so indicate by returning the enclosed copy
of this engagement letter dated and signed by an authorized officer, retaining the original for your
files. We look forward to working with you.
Respectfully yours,
McCall, Parkhurst & Horton L.L.P.
By a': ew�
D Culver
Accepted and Approved
City of Stephenville, Texas
By:
Its: M yor
Date: November 1, 2016
ORDINANCE
OF THE CITY OF STEPHENVILLE, TEXAS
AUTHORIZING THE ISSUANCE OF
CITY OF STEPHENVILLE, TEXAS
COMBINATION TAX AND REVENUE
CERTIFICATE OF OBLIGATION
SERIES 2016
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Table of Contents
Section 1.
Amount and Purpose of the Certificate .................................... 1
Section 2.
Designation, Date, Denomination, Payment Dates and Interest Rate of
Certificate.
.............................................. .........I
Section 3.
Characteristics of the Certificate ......................................... 2
Section 4.
Form of Certificate.................................................... 4
Section 5.
Tax Levy........................................................... 4
Section 6.
Surplus Revenues.....................................................5
Section 7.
Method of Amendment ................................................. 5
Section 8.
Defeasance of Certificate ............................................... 6
Section 9.
Damaged, Mutilated, Lost, Stolen, or Destroyed Certificate .................... 7
Section 10. Custody, Approval, and Registration of Certificate; Certificate Counsel's
Opinion and Engagement of Certificate Counsel; Use ofCUSIP Numbers; Approval
of Attorney General Review Fee ............................................ 8
Section 11. Covenants Regarding Tax Exemption of Interest on the Certificate ............. 9
Section 12.
Sale of Certificate ..................................................
11
Section 13.
Further Procedures..................................................II
Section 14.
No Rule 15c2-12 Undertaking .........................................
11
Section 15.
Disposition of Project; Allocation Of, and Limitation On, Expenditures for the
Project...............................................................II
Section 16.
Governing Law....................................................12
Section 17.
Severability.......................................................12
Section 18.
Designation as Qualified Tax -Exempt Obligation ..........................
12
Section 19.
Continued Perfection of Security Interest ................................
13
Section 20.
Events of Default ...................................................
13
Section 21.
Remedies for Default................................................13
Section 22.
Remedies Not Exclusive .............................................
13
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ORDINANCE AUTHORIZING THE ISSUANCE AND SALE OF THE CITY OF
STEPHENVILLE, TEXAS COMBINATION TAX AND REVENUE CERTIFICATE OF
OBLIGATION, SERIES 2016 AND ENACTING OTHER PROVISIONS RELATED
THERETO
STATE OF TEXAS
COUNTY OF ERATH
CITY OF STEPHENVILLE
WHEREAS, the City Council of the City of Stephenville, Texas (the "Issuer") deems it
advisable to issue Certificates of Obligation in the amount of $2,040,000 for paying all or a portion
of the City's contractual obligations incurred in connection with the construction of improvements
to the sanitary sewer collection system and paying legal, fiscal, engineering and architectural fees
in connection with this project; and
WHEREAS, the Certificates of Obligation hereinafter authorized and designated are to be
issued and delivered for cash pursuant to Subchapter C of Chapter 271, Local Government Code and
Chapter 1502, Government Code, as amended; and
WHEREAS, the City Council has heretofore passed a resolution authorizing and directing
the City Secretary to give notice of intention to issue Certificates of Obligation; and
WHEREAS, said notice has been duly published in a newspaper of general circulation in said
City, said newspaper being a "newspaper" as defined in §2051.044, Texas Government Code; and
WHEREAS, the City received no petition from the qualified electors of the City protesting
the issuance of such Certificates of Obligation; and
WHEREAS, during the preceding three years, the Issuer has not submitted a bond
proposition to authorize the issuance of bonds for the same purpose for which the Certificates are
hereby being issued and which proposition was disapproved by voters; and
WHEREAS, it is considered to be to the best interest of the City that said interest bearing
Certificates of Obligation be issued.
BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF STEPHENVILLE:
Section 1. AMOUNT AND PURPOSE OF THE CERTIFICATE. The City Council of the
Issuer hereby incorporates the recitals set forth in the preamble hereto as if set forth in full at this
place and further finds and determines that said recitals are true and correct. The certificate of
obligation of the City of Stephenville, Texas (the "Issuer") is hereby authorized to be issued and
delivered in the aggregate principal amount of $2,040,000 for paying all or a portion of the City's
contractual obligations incurred in connection with the construction ofimprovements to the sanitary
sewer collection system and paying legal, fiscal, engineering and architectural fees in connection
with this project (the "Project").
Section 2. DESIGNATION, DATE, DENOMINATION, PAYMENT DATES AND
INTEREST RATE OF CERTIFICATE. The Certificate issued pursuant to this Ordinance shall be
designated: CITY OF STEPHENVILLE, TEXAS COMBINATION TAX AND REVENUE
CERTIFICATE OF OBLIGATION, SERIES 2016," and there shall be issued, sold, and delivered
heren iucru,1c gay ior,istei6d Certificate, without interest coupons, aatea November 1, 20i6, in the
principal amount stated above, numbered R-1, with any Certificate issued in replacement thereof
being in the denomination and principal amount of $2,040,000 or the remaining principal amount
of the outstanding Certificates of this series if an exchange of Certificate is made after a reduction
in the principal amount of the series, either by a payment of a scheduled installment of principal or
as a result of redemption of part of the Certificates prior to final maturity ("Authorized
Denominations"), and numbered consecutively from R-2 upward, payable to the Registered Owner
thereof, or to the registered assignee of said Certificate (in each case, the "Registered Owner").
Principal on the Certificate shall be payable in installments in the amounts and on the dates specified
in the FORM OF CERTIFICATE set forth in this Ordinance. The Certificate shall bear interest from
the date of delivery to the date of payment or prepayment of principal installment ofthe Certificate
at a rate determined in accordance with the terms set forth in the FORM OF CERTIFICATE in this
Ordinance, calculated on the basis of a 360-day year of twelve 30-day months. Said interest shall
be payable in the manner provided and on the dates stated in the FORM OF CERTIFICATE set forth
in this Ordinance
Section 3. CHARACTERISTICS OF THE CERTIFICATE.
(a) Registration. Transfer and Exchange: Authentication. The Issuer shall keep or cause
to be kept at the office of First National Bank Texas, Stephenville, Texas (the "Paying
Agent/Registrar"), books or records for the registration of the transfer of the Certificate (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 under such
reasonable regulations as the Issuer and Paying Agent/Registrar may prescribe; and the Paying
Agent/Registrar shall make such registrations and transfers as herein provided within three days of
presentation in due and proper form. The Paying Agent/Registrar shall obtain and record in the
Registration Books the address of the Registered Owner of the Certificate to which payments with
respect to the Certificate shall be mailed, as herein provided; but it shall be the duty of the
Registered Owner to notify the Paying Agent/Registrar in writing of the address to which payments
shall be mailed, and such interest payments shall not be mailed unless such notice has been given.
The Issuer shall have the right to inspect the Registration Books during regular business hours of
the Paying Agent/Registrar, but otherwise the Paying Agent/Registrar shall keep the Registration
Books confidential and, unless otherwise required by law, shall not permit their inspection by any
other entity. The Issuer shall pay the Paying Agent/Registrar's standard or customary fees and
charges for making such registration and transfer of a substitute Certificate. Registration of
assignments and transfers ofthe Certificate 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.
I
Except as provided in Section 5(c) hereof, 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 a Certificate.
�ullettucred fur traits erf-- or the Certificate when paid in tuu. No additionai 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 transfer of any Certificate or portion thereof, and the
Paying Agent/Registrar shall provide for the printing, execution and delivery of the substitute
Certificate in the manner prescribed herein. Pursuant to Subchapter D, Chapter 1201, Texas
Government Code, the duty of transfer of the Certificate as aforesaid is hereby imposed upon the
Paying Agent/Registrar, and, upon the execution of said Certificate, said Certificate shall be valid,
incontestable, and enforceable in the same manner and with the same effect as the Certificate which
initially was issued and delivered pursuant to this Ordinance, approved by the Attorney General, and
registered by the Comptroller of Public Accounts.
(b) Payment of Certificate 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 Certificate,
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 Certificate and shall
properly and accurately record all payments on the Certificate on the Registration Books, and shall
keep proper records of all transfers of the Certificate, and all replacements of the Certificate, as
^ provided in this Ordinance. However, in the event of a nonpayment of interest on a scheduled
[E ji 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 Special Record Date and
of the scheduled payment date of the past due interest (which shall be 15 days after the Special
Record Date) shall be sent at least five (5) business days prior to the Special Record Date by United
States mail, first-class postage prepaid, to the address of the 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 Certificate (i) shall be issued in fully registered form, without
interest coupons, with the principal of and interest on such Certificate to be payable only to the
Registered Owner thereof, (ii) may and shall be redeemed prior to its scheduled final maturity
(notice of which shall be given to the Paying Agent/Registrar by the Issuer at least 15 days prior to
any such redemption date), (iii) may be transferred and assigned, (iv) shall have the characteristics,
(v) shall be signed, sealed, executed and authenticated, (vi) the principal of and interest on the
Certificate shall be payable, and (vii) shall be administered and the Paying Agent/Registrar and the
Issuer shall have certain duties and responsibilities with respect to the Certificate, all as provided,
and in the manner and to the effect as required or indicated, in the FORM OF CERTIFICATE set
forth in this Ordinance. The Certificate initially issued and delivered pursuant to this Ordinance is
not required to be, and shall not be, authenticated by the Paying Agent/Registrar, but on each
substitute Certificate issued in exchange for any Certificate the Paying Agent/Registrar shall execute
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I
the PAYING AGENT/REGISTRAR'S AUTHENTICATION CERTIFICATE, in the form set forth
in the FORM OF CERTIFICATE.
(d) Substitute Paving Agent/Registrar. The Issuer covenants with the Registered Owner
of the Ccrtificate that at all times while the certiticate is outstanding the Issuer will provide a
competent and legally qualified bank, trust company, financial institution or other agency to act as
and perform the services ofPaying Agent/Registrar for the Certificate 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 40 days written notice to the Paying
Agent/Registrar, to be effective not later than 30 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 Certificate, 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 the Registered
Owner of the Certificate, 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
n such, each Paying Agent/Registrar shall be deemed to have agreed to the provisions of this
{ I Ordinance, and a certified copy ofthis Ordinance shall be delivered to each Paying Agent/Registrar.
(e) On the closing date, the initial Certificate No. R-1 representing the entire principal
amount of the Certificate, payable to the Purchaser, executed by manual or facsimile signature of
the Mayor and City Secretary of the Issuer, approved by the Attorney General of Texas, and
registered and manually signed by the Comptroller of Public Accounts of the State, and with the date
of delivery inserted thereon by the Paying Agent/Registrar, will be delivered to the Purchaser or its
designee.
Section 4. FORM OF CERTIFICATE. The form of the Certificate, 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 Certificate initially issued and delivered pursuant to this Ordinance, shall be, respectively,
substantially as provided in Exhibit A hereto, with such appropriate variations, omissions, or
insertions as are permitted or required by this Ordinance.
Section 5. TAX LEVY. A special Interest and Sinking Fund (the "Interest and Sinking
Fund") is hereby created solely for the benefit of the Certificate, and the Interest and Sinking Fund
shall be established and maintained by the Issuer at an official depository bank of the Issuer. The
Interest and Sinking Fund shall be kept separate and apart from all other funds and accounts of the
Issuer, and shall be used only for paying the interest on and principal of the Certificate. All ad
valorem taxes levied and collected for and on account of the Certificate shall be deposited, as
collected, to the credit of the Interest and Sinking Fund. During each year while the Certificate or
interest thereon are outstanding and unpaid, the governing body of the Issuer shall compute and
ascertain a rate and amount of ad valorem tax which will be sufficient to raise and produce the
money required to oav the interest on the Certificate as such interest comes due. and to provide and
maintain a sinking fund adequate to pay the principai of the Certificate as such principal becomes
due for payment on each installment payment date (but never less than 2% of the original amount
of the Certificate as a sinking fund each year); and said tax shall be based on the latest approved tax
rolls of the Issuer, with full allowance 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 the Issuer for each year while the Certificate or interest thereon
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 the Certificate as such interest comes
due and such principal matures are hereby pledged for such payment, within the limit prescribed by
law.
Section 6. SURPLUS REVENUES. The Certificate is additionally secured by and payable
from a limited pledge, not to exceed $1,000 over the life of the issue, of the revenues of the Issuer's
combined Waterworks and Sewer Systems 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 the Net Revenues of the Issuer's Waterworks and Sewer Systems, constituting "Surplus
Revenues." The Issuer shall deposit such Surplus Revenues to the credit of the Interest and Sinking
Fund created pursuant to Section 5, to the extent necessary to pay the principal and interest on the
Certificates. Notwithstanding the requirements of Section 5, if Surplus Revenues 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, or if Surplus Revenues are budgeted for deposit into the Interest and
Sinking Fund in advance of the times when payments are scheduled to be made with respect to the
Certificates in each fiscal year, then the amount of taxes that otherwise would have been required
to be levied pursuant to Section 5 may be reduced to the extent and by the amount of such Surplus
Revenues.
Section 7. METHOD OF AMENDMENT. The Issuerhereby reserves the right to amend this
Ordinance subject to the following terms and conditions:
(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
a
Ordinance as shall not be inconsistent with the provisions of this Ordinance and that shall not in the
opinion of Bond Counsel materially adversely affect the interests of the holders.
(b) Except as provided in paragraph (a) above, the registered owner of the Certificate
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 the registered
owner ofthe Certificate, nothing herein contained shall permit or be construed to permit amendment
of the terms and conditions of this Ordinance or in the Certificate so as to:
(1) Make any change in the final maturity or any other date fixed hereby for the
payment of an installment of principal of the Certificate;
(2) Reduce the rate of interest bome by the Certificate;
(3) Reduce the amount of the principal of, or redemption premium, if any,
payable on the Certificate;
(4) Modify the terms of payment of principal or of interest or redemption
premium the Certificate or impose any condition with respect to such payment; or
(5) Change the requirement with respect to approval by the registered owner of
the Certificate 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 the registered owner of the Certificate a copy of the proposed
amendment.
(d) Whenever at any time within one year from the date of the mailing of such notice the
Issuer shall receive an instrument or instruments executed by the holder of the Certificate, which
instrument or instruments shall refer to the proposed amendment and 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 rights, duties, and obligations of the Issuer and the holder of the
Certificate shall thereafter be determined, exercised, and enforced, subject in all respects to such
amendment.
For the purposes ofestablishing ownership ofthe Certificate, the Issuer shall rely solely upon
the registration of the ownership of such bond on the registration books kept by the Paying
Agent/Registrar.
Section 8. DEFEASANCE OF CERTIFICATE.
(a) The Certificate or a portion of the principal amount thereof and the interest thereon
shall be deemed to be paid, retired and no longer outstandine (a "Defeased Certificate") within the
meaning of this urainance, except to the extent provided in subsection (d) of this Section, when
payment of the principal of the Certificate, plus interest thereon to the due date (whether such due
date be by reason of payment, final 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 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 the Defeased Certificate shall have become due and payable. At such time as the
Certificate or a portion thereof shall be deemed to be a Defeased Certificate hereunder, as aforesaid,
such Certificate or portion thereof and the interest thereon shall no longer be secured by, payable
from, or entitled to the benefits of, the ad valorem taxes or revenues herein levied and pledged as
provided in this Ordinance, and such principal and interest shall be payable solely from such money
or Defeasance Securities and thereafter the Issuer will have no further responsibility with respect
to amounts available to the Paying Agent/Registrar (or other financial institution permitted by
applicable law) for the payment of such Defeased Certificate, including any insufficiency therein
caused by the failure of the Paying Agent/Registrar (or other financial institution permitted by
applicable law) to receive payment when due on the Defeasance Securities.
(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 ofthe Certificate or portion thereof 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 the Defeased Certificate may
contain provisions permitting the investment or reinvestment of such moneys in Defeasance
Securities or the substitution ofother Defeasance Securities upon the satisfaction ofthe requirements
specified in (i) or (ii) of paragraph (a) above. All income from such Defeasance Securities received
by the Paying Agent/Registrar that is not required for the payment of the Defeased Certificate, 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 any securities and obligations now or
hereafter authorized by State law that are eligible to refund, retire or otherwise discharge obligations
such as the Certificate.
(d) Until the Defeased Certificate shall have become due and payable, the Paying
Agent/Registrar shall perform the services of Paying Agent/Registrar for such Defeased Certificate
the same as if it had not been defeased, and the Issuer shall make proper arrangements to provide
and pay for such services as required by this Ordinance.
Section 9. DAMAGED, MUTILATED, LOST, STOLEN, OR DESTROYED
CERTIFICATE.
(a) _Replacement Certificate. In the event the Certificate is damaged, mutilated, lost,
stolen, or destroyed, the Paying Agent/Registrar shall cause to be printed, executed, and delivered
a new bond of the same principal amount, final maturity, and interest rate, as the damaged,
mutilated, lost, stolen, or destroyed Certificate in replacement for the Certificate in the manner
hereinafter provided.
(b) Application for Replacement Certificate. Application for replacement of damaged,
mutilated, lost, stolen, or destroyed Certificate shall be made by the registered owner thereof to the
Paying Agent/Registrar. In every case of loss, theft, or destruction of the Certificate, the registered
owner applying for a replacement bond shall furnish to the Issuer and to the Paying Agent/Registrar
such security or indemnity as may be required by them to save each of them harmless from any loss
or damage with respect thereto. Also, in every case of loss, theft, or destruction of the 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. In every case of damage or
mutilation of the Certificate, the registered owner shall surrender to the Paying Agent/Registrar for
cancellation the Certificate.
(c) No Default Occurred. Notwithstanding the foregoing provisions of this Section, in
the event any such Certificate shall have finally matured, and no default has occurred that is then
continuing in the payment of the principal of 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 fumished
as above provided in this Section.
(d) Charge for Issuing Replacement Certificate. Prior to the issuance of any replacement
bond, the Paying Agent/Registrar shall charge the registered owner of the Certificate with all legal,
printing, and other expenses in connection therewith. Every replacement bond issued pursuant to
the provisions of this Section by virtue of the fact that the 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 ofthis Ordinance equally and proportionately with any and all other Certificates duly issued
under this Ordinance.
(e) Authority for Issuing Replacement Certificate. In accordance with Chapter 1201,
Subchapter D, Texas Government Code, this Section of this Ordinance shall constitute authority for
the issuance of any such replacement bond without necessity offurther action by the governing body
of the Issuer or any other body or person, and the duty of the replacement of such bonds is hereby
authorized and imposed upon the Paying Agent/Registrar, and the Paying Agent/Registrar shall
authenticate and deliver such Certificate in the form and manner and with the effect, as provided in
Section 3(a) of this Ordinance for a Certificate issued in exchange for another Certificate.
Section 10. CUSTODY, APPROVAL, AND REGISTRATION OF CERTIFICATE;
CERTIFICATE COUNSEL'S OPINION AND ENGAGEMENT OF CERTIFICATE COUNSEL;
USE OF CUSIP NUMBERS; APPROVAL OF ATTORNEY GENERAL REVIEW FEE. (a) The
Mayor is hereby authorized to have control ofthe Certificate initially issued and delivered hereunder
and all necessary records and proceedings pertaining to the Certificate pending its delivery and its
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
Certificate the 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 the
Certificate, 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 Certificate 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 Certificate. In addition, if bond insurance is obtained,
the Certificate may bear an appropriate legend as provided by the insurer.
(b) The obligation ofthe initial purchaser to accept delivery of the Certificate 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 Certificate to the initial purchaser. The engagement of such firm as
bond counsel to the Issuer in connection with issuance, sale and delivery ofthe Certificate 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 ofthe Issuer (or the Mayor Pro-tem in the absence ofthe Mayor), and the
Mayor of the Issuer (or the Mayor Pro-tem in the absence of the Mayor) is hereby authorized to
execute such engagement letter.
(c) In accordance with the provisions of Section 1202.004, Tex. Gov't Code Ann., in
connection with the submission of the Certificate by the Attorney General of Texas for review and
approval, a statutory fee (an amount equal to 0.1 % principal amount ofthe Certificate, subject to a
minimum of $750 and a maximum of $9,500) is required to be paid to the Attorney General upon
the submission ofthe transcript of proceedings for the Certificate. The Issuer hereby authorizes and
directs that a check in the amount of the Attorney General filing fee for the Certificate, made
payable to the "Texas Attorney General," be promptly furnished to the Issuer's Bond Counsel, for
payment to the Attorney General in connection with his review ofthe Certificate.
Section 11. COVENANTS REGARDING TAX EXEMPTION OF INTEREST ON THE
CERTIFICATE. The Issuer covenants to take any action necessary to assure, or refrain from any
action that would adversely affect, the treatment of the Certificate as an obligation described in
section 103 of the Internal Revenue Code of 1986, as amended (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:
(a) to take any action to assure chat no more Than 10 percent of the proceeds of
the Certificate or the projects refinanced therewith (less amounts deposited to a reserve fund,
if any) are used for any "private business use," as defined in section 141(b)(6) of the Code
or, if more than 10 percent of the proceeds or the projects financed therewith are so used,
such amounts, whether 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
Certificate, in contravention of section 141(b)(2) of the Code;
(b) to take any action to assure that in the event that the "private business use"
described in subsection (a) hereof exceeds 5 percent of the proceeds of the Certificate or the
projects refinanced 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," withinthe meaning of section 141(b)(3) ofthe Code, to the governmental
use;
(c) 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 Certificate (less amounts deposited into a
reserve fund, if any) is directly or indirectly used to finance loans to persons, other than state
or local governmental units, in contravention of section 141(c) of the Code;
(d) to refrain from taking any action that would otherwise result in the Certificate
being treated as a "private activity bond" within the meaning of section 141(b) of the Code;
(e) to refrain from taking any action that would result in the Certificate being
"federally guaranteed" within the meaning of section 149(b) of the Code;
(f) to refrain from using any portion of the proceeds of the Certificate, directly
or indirectly, to acquire or to replace funds that were used, directly or indirectly, to acquire
investment property (as defined in section 148(b)(2) of the Code) that produces a materially
higher yield over the term of the Certificate, other than investment property acquired with—
(1) proceeds ofthe Certificate invested for a reasonable temporary period
of 3 years or less until such proceeds are needed for the purpose for which the bond
is issued,
(2) amounts invested in a bona fide debt service fund, within the meaning
of section 1.148-1(b) of the Treasury Regulations, and
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(3) amounts deposited in any reasonably required reserve or replacement
fund to the extent such amounts do not exceed 10 percent of the proceeds of the
Certificate;
(g) to otherwise restrict: the use of the proceeds of the Certificate or amounts
treated as proceeds of the Certificate, as may be necessary, so that the Certificate does not
otherwise contravene the requirements of section 148 ofthe Code (relating to arbitrage) and,
to the extent applicable, section 149(d) ofthe Code (relating to advance refundings); and
(h) to pay to the United States of America at least once during each five-year
period (beginning on the date of delivery of the Certificate) an amount that is at least equal
to 90 percent ofthe "Excess Earnings," within the meaning of section 148(f) ofthe Code and
to pay to the United States of America, not later than 60 days after the Certificate has been
paid in full, 100 percent ofthe amount then required to be paid as a result of Excess Earnings
under section 148(f) of the Code.
In order to facilitate compliance with the above covenant (h), 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 bondholders. The
Rebate Fund is established for the additional purpose of compliance with section 148 ofthe Code.
^ For purposes of the foregoing (a) and (b), the Issuer understands that the term "proceeds"
JI includes "disposition proceeds" as defined in the Treasury Regulations and, in the case of refunding
bonds, transferred proceeds (if any) and proceeds ofthe refunded bonds expended prior to the date
of issuance of the Certificate. 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 ofthe Treasury pursuant thereto. In the event that regulations or rulings are
hereafter promulgated that modify or expand provisions ofthe Code, as applicable to the Certificate,
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 Certificate under section 103 ofthe Code.
In the event that regulations or rulings are hereafter promulgated that impose additional
requirements that are applicable to the Certificate, 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 Certificate under section 103
of the Code. In furtherance of such intention, the Issuer hereby authorizes and directs the
Superintendent 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 Certificate.
Section 12. SALE OF CERTIFICATE. The Certificate is hereby sold and shall be delivered
to First National Bank Texas, Stephenville, Texas (the 'Purchaser") for cash for the par value
thereof, pursuant to the pursuant to the Private Placement Letter dated the date ofthe adoption of
this Ordinance. The Certificate shall initially be registered in the name ofthe Purchaser. It is hereby
11
officially found, determined, and declared that the terms of this sale are the most advantageous
reasonably obtainable.
Section 13. FURTHER PROCEDURES. The Mayor of the Issuer (or the Mayor Pro -tern in
the absence of the Mayer) and City Sacwctw-y of the Issuer and all other officers, empioyees and
agents of the Issuer, and each ofthem, shall be and 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, if required, and on behalf of the
Issuer the Paying Agent/Registrar Agreement with the Paying Agent/Registrar and all other
instruments, whether herein mentioned, as may be necessary or desirable in order to carry out the
terms and provisions of this Ordinance, the Certificate and the sale of the Certificate. 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 14. NO RULE 15c2-12 UNDERTAKING. The Issuer has not made an undertaking
in accordance with Rule 15c2-12 of the Securities and Exchange Commission (the "Rule") due the
offering of the Certificate not being within the purview of the Rule, based upon the private
placement of the Certificate to the Purchaser. The Issuer is not, therefore, obligated pursuant to the
Rule to provide any on -going disclosure relating to the Issuer or the Certificate.
Section 15. DISPOSITION OF PROJECT; ALLOCATION OF, AND LIMITATION ON,
EXPENDITURES FOR THE PROJECT. (a) The Issuer covenants that the Project will not be sold
or otherwise disposed of in a transaction resulting in the receipt by the Issuer of cash or other
compensation, unless any action taken in connection with such disposition will not adversely affect
the tax-exempt status of the Certificate. For purpose of the foregoing, the Issuer may rely on an
opinion of nationally -recognized bond counsel that the action taken in connection with such sale or
other disposition will not adversely affect the tax-exempt status of the Certificate. For purposes of
the foregoing, the portion ofthe 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 an
opinion that such failure to comply will not adversely affect the excludability for federal income tax
purposes from gross income of the interest.
(b) The Issuer covenants to account for the expenditure of sale proceeds and investment
earnings to be used for the Project on its books and records in accordance with the requirements of
the Code. The Issuer recognizes that in order for the proceeds to be considered used for the
reimbursement of costs, the proceeds must be allocated to expenditures within 18 months ofthe later
of the date that (1) the expenditure is made, or (2) the Project is completed; but in no event later than
three years after the date on which the original expenditure is paid. The foregoing notwithstanding,
the Issuer recognizes that in order for proceeds to be expended under the Code, the sale proceeds
or investment earnings must be expended no more than 60 days after the earlier of (1) the fifth
anniversary ofthe delivery of the Certificates, or (2) the date the Certificates are retired. The Issuer
agrees to obtain the advise of nationally -recognized bond counsel if such expenditure fails to comply
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with the foregoing to assure that such expenditure will not adversely affect the tax-exempt status of
the Certificates. For purposes hereof, the Issuer shall not be obligated to comply with this covenant
if it obtains an opinion of nationally -recognized bond counsel that such failure to comply will not
adversely affect the excludability for federal income tax oumoses from gross income of the interest.
Section 16. GOVERNING LAW. This Ordinance shall be construed and enforced in
accordance with the laws of the State of Texas and the United States of America.
Section 17. SEVERABILITY. If any provision of this Ordinance or the application thereof
to any circumstance shall be held to be invalid, the remainder of this Ordinance and the application
thereof to other circumstances shall nevertheless be valid, and the City Council hereby declares that
this Ordinance would have been enacted without such invalid provision.
Section18. DESIGNATION AS QUALIFIED TAX-EXEMPT OBLIGATION. The Issuer
hereby designates the Certificate as a "qualified tax-exempt obligation' as defined in section
265(b)(3) of the Code. In furtherance of such designation, the Issuer represents, covenants and
warrants the following: (a) that during the calendar year in which the Certificate are issued, the
Issuer (including any subordinate entities) has not designated nor will designate obligations that
when aggregated with the Certificate, will result in more than $10,000,000 (or such other amount
permitted by such section 265 of the Code) of "qualified tax-exempt obligations" being issued;
(b) that the Issuer reasonably anticipates that the amount of tax-exempt obligations issued, during
the calendar year in which the Certificate is issued, by the Issuer (or any subordinate entities) will
not exceed $10,000,000 (or such other amount permitted by such section 265 of the Code); and, (c)
that the Issuer will take such action or refrain from such action as necessary, and as more
particularly set forth in Section 11, hereof, in order that the Certificate will not be considered a
"private activity bond" within the meaning of section 141 of the Code.
Section 19. CONTINUED PERFECTION OF SECURITY INTEREST. Chapter 1208,
Government Code, applies to the issuance of the Certificate and the pledge of the ad valorem taxes
granted by the Issuer under Section 5 of this Ordinance, and such pledge is therefore valid, effective,
and perfected. If Texas law is amended at any time while the Certificate are outstanding and unpaid
such that the pledge of the taxes granted by the Issuer under Section 5 of this Ordinance is to be
subject to the filing requirements of Chapter 9, Business & Commerce Code, then in order to
preserve to the registered owners of the Certificate the perfection of the 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 to perfect the security interest in said pledge to occur.
Section 20. EVENTS OF DEFAULT. Each of the following occurrences or events for the
purpose of this Ordinance is hereby declared to be an event of default (an 'Event of Default"):
(i) the failure to make payment of the principal of or interest on the Certificate when the
same becomes due and payable; or
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(ii) default in the performance or observance of any other covenant, agreement or obligation
of the Issuer, the failure to perform which materially, adversely affects the rights of the
registered owner, including, but not limited to, the prospect or ability to be repaid in
accordance with this Ordinance, and the c^ntin»ation thereof for a period of 60 days after
notice of such default is given by the registered owner to the Issuer.
Section 21. REMEDIES FOR DEFAULT. Upon the happening of any Event of Default,
then and in every case, the registered owner or an authorized representative thereof, including, but
not limited to, a trustee or trustees therefor, may proceed against the Issuer or the Council, as
appropriate, for the purpose of protecting and enforcing the rights of the registered owner under this
Ordinance, by mandamus or other suit, action or special proceeding in equity or at law, in any court
of competent jurisdiction, for any relief permitted by law, including the specific performance ofany
covenant or agreement contained herein, or thereby to enjoin any act or thing that may be unlawful
or in violation of any right of the registered owner hereunder or any combination of such remedies.
Section 22. REMEDIES NOT EXCLUSIVE. (a) No remedy herein conferred or reserved
is intended to be exclusive of any other available remedy or remedies, but each and every such
remedy shall be cumulative and shall be in addition to every other remedy given hereunder or under
the Certificate or now or hereafter existing at law or in equity; provided, however, that
notwithstanding any other provision of this Ordinance, the right to accelerate the debt evidenced by
the Certificate shall not be available as a remedy under this Ordinance.
(b) The exercise of any remedy herein conferred or reserved shall not be deemed a waiver
of any other available remedy.
(c) By accepting the delivery of the Certificate authorized under this Ordinance, the
registered owner agrees that the certifications required to effectuate any covenants or representations
contained in this Ordinance do not and shall never constitute or give rise to a personal or pecuniary
liability or charge against the officers, employees or trustees of the Issuer or the City Council.
Passed and Approved this 1' day of November, 2016.
(::�L4 (AL7,
Jer I
K. W I on II, Mayor
Interim City Administrator
Approved as to form and legality
Randy Thomas, City Attorney
j
Exhibit A
(a) FORM OF CERTIFICATE
NO. R-_ UNITED STATES OF AMERICA PRINCIPAL
STATE OF TEXAS AMOUNT
CITY OF STEPHENVILLE, TEXAS $
COMBINATION TAX AND REVENUE
CERTIFICATE OF OBLIGATION
SERIES 2016
DATE OF DELIVERY: December 1, 2016
REGISTERED OWNER:
PRINCIPAL AMOUNT:
INTEREST RATE: 1.84%
FINAL MATURITY DATE: February 15, 2027
THE CITY OF STEPHENVILLE, TEXAS (the "Issuer"), being a political subdivision of
the State of Texas located in Erath County, for value received, promises to pay, from the sources
described herein, to the registered owner specified above, or registered assigns, the principal amount
specified above, and to pay interest thereon, from the Date of Delivery set forth above, on the
balance of said principal amount from time to time remaining unpaid, at the interest rate per annum
set forth above. The unpaid principal of this Certificate shall finally mature on the Final Maturity
Date shown above, but shall be paid in installments on February 15 of the years and in the amounts
set forth in the table below:
Principal
Years
Installment
2020
$ 50,000
2021
40,000
2022
55,000
2023
20,000
2024
20,000
2025
605,000
2026
620,000
2027
630,000
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 Issuer shall pay interest on this
Certificate on February 15, 2017, and on each August 15 and February 15 thereafter to the date of
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final maturity or redemption prior to maturity. The last principal installment ofthis Certificate shall
be paid to the registered owner hereofupon presentation and surrender ofthis Certificate at maturity,
or upon the date fixed for its redemption prior to maturity, at the corporate trust office of First
National Bank Texas, Stephenville, Texas, which is the "Paying Agent/Registrar" for this
Certificate. The payment of all other principal installments of and interest on this Certificate shall
be made by the Paying Agent/Registrar to the registered owner hereof on each principal and interest
payment date by check or draft, dated as of such principal and interest payment date, drawn by the
Paying Agent/Registrar on, and payable solely from, funds of the Issuer required by the ordinance
adopted by the Issuer for the purpose of authorizing the issuance ofthis Certificate (the "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 day of the month next preceding each such date (the "Record Date") on the
Registration Books kept by the Paying Agent/Registrar, as hereinafter described. In addition,
principal and 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.
Any accrued interest due in connection with the payment of the final installment ofprincipal
of this Certificate shall be paid to the registered owner upon presentation and surrender of this
Certificate for payment or redemption at the designated corporate trust office of the Paying
Agent/Registrar. The Issuer covenants with the registered owner ofthis 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 Ordinance, the amounts required to provide for the payment, in immediately
available funds, of all principal of and interest on this Certificate, when due.
If the date for the payment of this Certificate shall be a Saturday, Sunday, a legal holiday,
or a day on which banking institutions in the city where the designated 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 which 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 dated as of November 1, 2016 and is authorized in accordance with the
Constitution and laws of the State of Texas in the principal amount of $2,040,000 for the purpose
of paying all or a portion of the City's contractual obligations incurred in connection with the
construction of improvements to the sanitary sewer collection system and paying legal, fiscal,
engineering and architectural fees in connection with this project.
On any date, the unpaid principal installments of this Certificate are subject to redemption,
and may be redeemed prior to the scheduled due dates by the Issuer, in a amount of not less than
$5,000, at a redemption price equal to the principal amount thereof to be redeemed plus accrued
interest thereon to the date of redemption, without premium. The Issuer shall give notice of its
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direction to redeem the principal installments of this Certificate to the Paying Agent/Registrar and
the registered owner of this Certificate no later than 15 days prior to the applicable redemption date.
This Certificate is issuable solely as a single fully registered Certificate, without interest
coupons in the denomination of $2,U4U,VVV or the remaining principal amount of the outstanding
Certificates of this series if an exchange of a Certificate is made after a reduction in the principal
amount of the series, either by a payment of a scheduled installment of principal or as a result of
redemption of part of the Certificates prior to maturity (the "Authorized Denomination"). As
provided in the Ordinance, this Certificate may, at the request of the registered owner or the assignee
or assignees hereof, be assigned and transferred for a like aggregate principal amount Certificate,
without interest coupons, payable to the appropriate registered owner, assignee or assignees, as the
case may be, in the Authorized Denomination, upon surrender of this Certificate to the Paying
Agent/Registrar for cancellation, all in accordance with the form and procedures set forth in the
Ordinance. Among other requirements for such assignment and transfer, this Certificate must be
presented and surrendered to the Paying Agent/Registrar, together with the proper instruments of
assignment, in form and with guarantee of signatures satisfactory to the Paying Agent/Registrar,
evidencing assignment of this Certificate to the assignee this Certificate is 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 from time to time by the registered owner. In the case ofthe assignment and transfer
of this Certificate, the reasonable standard or customary fees and charges of the Paying
Agent/Registrar 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 and
transfer, as a condition precedent to the exercise of such privilege. The Paying Agent/Registrar shall
not be required to make any such transfer during the period commencing with the close of business
on any Record Date and ending with the opening of business on the next following principal or
interest Payment Date.
In the event any Paying Agent/Registrar for this Certificate is changed by the Issuer, resigns,
or otherwise ceases to act as such, the Issuer has covenanted in the Ordinance that it promptly will
appoint a competent and legally qualified substitute therefor, and cause written notice thereof to be
mailed to the registered owner of this Certificate.
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 the 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, not to exceed 11,000 over the life of the issue, of the revenues of the Issuer's
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combined Waterworks and Sewer Systems 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 Ordinance.
The Issuer has reserved the right, subject to the restrictions referred to in the Ordinance, to
amend the provisions of the Ordinance under the conditions provided in the Ordinance.
By becoming the registered owner of this Certificate, the registered owner thereby
acknowledges all of the terms and provisions of the Ordinance, agrees to be bound by such terms
and provisions, acknowledges that the Ordinance is duly recorded and available for inspection in
the official minutes and records of the Issuer, and agrees that the terms and provisions of this
Certificate and the 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 (or in the absence of the Mayor, the Mayor Pro-tem) of
the Issuer and countersigned with the manual or facsimile signature of the City Secretary of the
Issuer, and has caused the official seal of the Issuer to be duly impressed, or placed in facsimile, on
this Certificate.
(signature)
City Secretary
(SEAL)
(signature)
Mayor
(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
Ordinance described in the text of this Certificate; and that this Certificate has been issued in
replacement of, or in exchange for, a Certificate which 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 First National Bank Texas, Stephenville, Texas
Paying Agent/Registrar
QI
Authorized Representative
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(c) FORM OF ASSIGNMENT
ASSIGNMENT
For value recerveo, me undersigned hereby sells, assigns and transfers unto
Please insert Social Security or Taxpayer
Identification Number of Transferee
(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.
n
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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
OFFICE OF THE COMPTROLLER §
OF PUBLIC ACCOUNTS § REGISTER NO.
OF THE STATE OF TEXAS &
I hereby certify that this Certificate has been examined, certified as to validity, and approved
by the Attorney General of the State of Texas, and that this Certificate has been registered by the
Comptroller of Public Accounts of the State of Texas.
Witness my signature and seal this
(COMPTROLLER'S SEAL)
Comptroller of Public Accounts of the State of Texas
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