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78-03 O - Authorizing the Issuance of Revenue Bonds ORDINANCE NO. -7 g- 3 ORDINANCE AUTHORIZING THE ISSUANCE OF REVENUE BONDS THE STATE OF TEXAS • COUNTY OF COLLIN • TOWN OF PROSPER • WHEREAS , notice of intention to issue Waterworks and Sewer System Revenue Bonds was published on February 17 , 1978 and February 24 , 1978 in the McKinney Courier Gazette ; and WHEREAS , no petition for a referendum election was re- ceieved by the Town ; and WHEREAS , the bonds hereinafter authorized are to be issued and delivered pursuant to Articles lllla, 1112 , 1113 , 1114 , and 1115 , V.A.T .C .S . , and other applicable laws. THEREFORE, BE IT ORDAINED BY THE TOWN COUNCIL OF THE TOWN OF PROSPER, TEXAS : Section 1. BONDS AUTHORIZED . That the Town' s bonds (the "Bonds") are hereby authorized to be issued in the principal • amount of $30 ,000 , FOR THE PURPOSE OF PROVIDING MONEY FOR IM- PROVEMENTS AND EXTENSIONS OF THE COMBINED WATERWORKS AND SEWER SYSTEM OF THE TOWN OF PROSPER. Section 2. BONDS DESIGNATED. That the Bonds shall be designated as the : TOWN OF PROSPER, TEXAS WATERWORKS AND SEWER SYSTEM REVENUE BONDS , SERIES 1978. Section 3. DATE AND MATURITIES . That the Bonds shall be dated April 10 , 1978 , shall be in the denomination of $5 ,000 each , except for Bonds Nos . 1 through 4 , in the denomination of $1,000 each, and shall be numbered consecutively from one up- ward, and shall mature serially on the maturity date , in each of the years , and in the amounts , respectively , as set forth in jthe following schedule: MATURITY DATE: JANUARY 10 YEARS AMOUNTS 1979 $1 ,000 1980 4 ,000 1981 5 ,000 1982 5 ,000 1983 5 , 000 1984 5 ,000 1985 5 ,000 Section 4 . INTEREST. That the Bonds shall bear interest at the rate of 5. 50% per annum. Said interest shall be evidenced Hoy interest coupons which shall appertain to said bonds , and which shall be payable in the manner provided and on the dates stated in the FORM OF BOND set forth in this Ordinance. Section 5. GENERAL CHARACTERISTICS. That said Bonds and interest coupons shall be issued, shall be payable , shall lhave the characteristics , and shall be signed and executed (and said Bonds shall be sealed) , all as provided, and in the manner indicated, in the FORM OF BOND set forth in this Ordinance. Section 6. FORMS . That the form of said Bonds, including the form of Registration Certificate of the Comptroller of 1 Public Accounts of the State of Texas to be printed and endorsed on each of said Bonds , and the form of the aforesaid interest coupons which shall appertain and be attached initially to each of said Bonds , shall be , respectively , substantially as follows : t 1 f FORM OF BOND NO. $ ,000 411 UNITED STATES OF AMERICA STATE OF TEXAS COUNTY OF COLLIN TOWN OF PROSPER, TEXAS • WATERWORKS AND SEWER SYSTEM REVENUE BOND SERIES 1978 ON JANUARY 10 , 19 , THE TOWN OF PROSPER, IN COLLIN COUNTY, TEXAS , hereby promises to pay to bearer hereof the principal amount of THOUSAND DOLLARS and to pay interest thereon, from date hereof, at the rate of 5. 50% per annum, evidenced by interest coupons payable January 10 , 1979 , and semiannually thereafter while this Bond is outstanding. THE PRINCIPAL of this Bond and the interest coupons ap- pertaining hereto shall be payable to bearer, in lawful money of the United States of America, without exchange or collection • charges to the bearer, upon presentation and surrender of this Bond or proper interest coupon , at the following, which shall constitute and be defined as the paying agent for this series of Bonds. MERCANTILE NATIONAL BANK AT DALLAS , DALLAS , TEXAS . THIS BOND is one of a Series dated as of April 10 , 1978 , , authorized and issued in the principal amount of $30 ,000 , FOR THE PURPOSE OF PROVIDING MONEY FOR IMPROVEMENTS AND EXTENSIONS OF THE COMBINED WATERWORKS AND SEWER SYSTEM OF THE TOWN OF PROSPER. IT IS HEREBY certified, recited and covenanted that this Bond 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 author- ization, issuance and delivery of this Bond have been performed, lexisted, and been done in accordance with law; that this Bond lis a special obligation ; and that the principal of and interest on this Bond are payable from, and secured by a first lien on and pledge of , the Pledged Revenues , as defined in the Ordinance authorizing this Series of Bonds , and which include the Net 1Revenues of said Town' s Combined Waterworks and Sewer System. SAID CITY has reserved the right, subject to the restric- tions stated, or adopted by reference , in the Ordinance author- izing this Series of Bonds , to issue additional parity revenue bonds which also may be made payable from, and secured by a first lien on and pledge of the aforesaid Pledged Revenues . THE HOLDER HEREOF shall never have the right to demand pay- ment of this obligation out of any funds raised or to be raised by taxation, or from any source whatsoever other than the afore- said Pledged Revenues . IN WITNESS WHEREOF, this Bond and the interest coupons 'appertaining hereto have been signed with the facsimile signa- ture of the Mayor of said Town and countersigned with the facsimile signature of the Town Secretary of said Town , and the official seal of said Town has been duly impressed, or 4 placed in facsimile , on this Bond. xxxxx xxxxx Town Secretary Mayor FORM OF REGISTRATION CERTIFICATE COMPTROLLER'S REGISTRATION CERTIFICATE : REGISTER NO. • I hereby certify that this Bond has been examined, cer- tified as to validity , and approved by the Attorney General of the State of Texas , and that this Bond 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 FORM OF INTEREST COUPON NO. $ ON , , THE TOWN OF PROSPER IN COLLIN COUNTY, TEXAS , promises to pay to bearer, the amount shown on this interest coupon, in lawful money of the United States of America, without exchange or collection charges to the bearer, upon presentation and sur- render of this interest coupon , at the MERCANTILE NATIONAL BANK AT DALLAS, DALLAS , TEXAS , said amount being interest due that day on the bond, bearing the number hereinafter designated of that issue of TOWN OF PROSPER, TEXAS WATERWORKS AND SEWER SYSTEM REVENUE BONDS , SERIES 1978 , DATED APRIL 10 , 1978. The 'holder hereof shall never have the right to demand payment lof this obligation out of any funds raised or to be raised 1by taxation , or from any source whatsoever other than the afore- said Pledged Revenues described in the Bond to which this coupon lis attached. Bond No. 1 jxxxxx xxxxx 1Town Secretary Mayor Section 7. DEFINITIONS . That as used in this Ordinance the following terms shall have the meanings set forth below, unless the text hereof specifically indicates otherwise : (a) The term "Town" shall mean the Town of Prosper, in 'Collin County, Texas . (b) The term "Bonds" shall mean the Town of Prosper Water- works and Sewer System Revenue Bonds , Series 1978 , authorized by this Ordinance. (c) The term "Additional Bonds" shall mean the additional parity revenue bonds which the City reserves the right to issue and deliver in the future, as provided by this Ordinance. (d) The term "Waterworks and Sewer System" and "System" shall mean and include the Town' s existing combined waterworks and sewer system, together with all future extensions , improve- ments , enlargements , and additions thereto, and all replacements thereof; provided that, notwithstanding the foregoing, and to the extent now or hereafter authorized or permitted by law. (e) The term "Gross Revenues of the Town ' s Waterworks and Sewer System" and "Gross Revenues" shall mean all revenues , in- [come , and receipts of every nature derived or received by the Town from the operation and ownership of the System, including the interest income from the investment or deposit of money in any Fund created by this Ordinance. ( f) The term "Net Revenues of the Town' s Waterworks and Sewer System" and "Net Revenues" shall mean all Gross Revenues after deducting and paying the current expenses of operation and maintenance of the System as required by Article 1113 , V.A.T .C.S . , including all salaries , labor, materials , repairs , and extensions necessary to render efficient service, provided, however, that only such repairs and extension , as in the judgment of the Town Council of said Town reasonably and fairly exercised by the passage of appropriate ordinances , are necessary to keep the System in operation and render adequate service to said Town and the inhabitants thereof, or such as might be necessary to meet some physical accident or condition which would otherwise impair the Bonds or Additional Bonds , shall be deducted in determining "Net Revenues" . Depreciation shall never be considered as expenses of operation and maintenance. (g) The term "Pledged Revenues" shall mean (1) the Net Revenues , plus (2) any additional revenues , income , receipts , or other resources , including, without limitation , any grants , donations , or income received or to be received from the United States government , or any other public or priavte source , whether pursuant to an agreement or otherwise , which hereafter may be pledged to the payment of the Bonds or Additional Bonds . (h) The term "year" shall mean the regular fiscal year • used by the Town in connection with the operation of the System, which may be any twelve consecutive months period established by the Town. Section 8. PLEDGE . The Bonds and any Additional Bonds , and the interest coupons appertaining thereto, are and shall be secured by and payable from an irrevocable first lien on and pledge of the Pledged Revenues ; and the Pledged Revenues are further pledged irrevocably to the establishment and maintenance of the Interest and Sinking Fund and the Reserve Fund as herein- after provided. The Bonds and any Additional are and will be secured by and payable only from the Pledged Revenues , and are not secured by or payable from a mortgage or deed of trust on any real , personal, or mixed properties constituting the System. Section 9. REVENUE FUND . That there is hereby created and there shall be established and maintained on the books of the Town , and accounted for separate and apart from all other funds of the Town , a special fund to be entitled the "Town of Prosper Waterworks and Sewer System Revenue Bonds Revenue Fund" - 411 (hereinafter called the "Revenue Fund") . All Gross Revenues shall be credited to the Revenue Fund immediately upon receipt. All current expenses of operation and maintenance of the System 7 shall be paid from such Gross Revenues credited to the Revenue Fund, as a first charge against same. Section 10 . INTEREST AND SINKING FUND. That for the sole • purpose of paying the principal of and interest on all Bonds and any Additional Bonds , as the same come 'due , there is hereby created and there shall be established and maintained at any official depository bank of the Town a separate fund to be entitled the "Town of Prosper Waterworks and Sewer System Revenue Bonds -Interest and Sinking Fund" (hereinafter called the ,"Interest and Sinking Fund" ) . Section 11. RESERVE FUND. That there is hereby created and there shall be established and maintained at the official depository of the Town, a separate fund to be entitled the "Town of Prosper Waterworks and Sewer System Revenue Bonds Reserve i Fund" (hereinafter called the "Reserve Fund" . The Reserve Fund All shall be used solely for the purpose of finally retiring the last of any Bonds or Additional Bonds when and to the extent the .' amounts in the Interest and Sinking Fund are insufficient for isuch purpose. Section 12 . DEPOSITS OF PLEDGED REVENUES; INVESTMENTS . (a) The Pledged Revenues shall be deposited into the Interest and Sinking Fund and the Reserve Fund when and as required by this Ordinance. (b) That money in any Fund established pursuant to this Ordinance may , at the option of the Town , be placed in time de- posits or certificates of deposit secured by obligations of the type hereinafter described , or be invested in direct obligations of the United States of America, obligations guaranteed or in- sured by the Unites States of America, which, in the opinion of the Attorney General of the United States , are backed by its full faith and credit or represent its general obligations , or invested in indirect obligations of the United States of America, including, but not limited to , evidences of indebtedness issued, insured, or guaranteed by such governmental agencies as the Federal Land Banks , Federal Intermediate Credit Banks , Banks for Cooperatives , Federal Home Loan Banks , Government National Mortgage Association, United States Postal Service , Farmers Home Administration , Federal Home Loan Mortgage Association , Small Business Administration , Federal Housing Association , or Participation Certificates in the Federal Assets Financing Trust; provided that all such deposits and investments shall be made in ; such manner that the money required to be expended from any Fund will be abailable at the proper time or times . Such investments . shall be valued by the City in terms of current market value as of the 20th day of March of each year. All interest and income derived from such deposits and investments immediately shall be credited to, and any losses debited to, the Fund from which the deposit or investment was made , and surpluses in any Fund shall or may be disposed of as hereinafter provided. Scuh investments shall be sold promptly when necessary to prevent any default in connection with the Bonds or Additional Bonds . Section 13. FUNDS SECURED. That money in all Funds created by this Ordinance , to the extent not invested, shall be secured in the manner prescribed by law for securing funds of the City. V Section 14. DEBT SERVICE REQUIREMENTS . (a) That promptly after the delivery of the Bonds the Town shall cause to be de- posited to the credit of the Interest and Sinking Fund any ac- crued interest received from the sale and delivery of the Bonds , and any such deposit shall be used to pay part of the interest ' next coming due on the Bonds. (b) That the Town shall transfer from the Pledged Revenues and deposit to the credit of the Interest and Sinking Fund the amounts , at the times , as follows : (1) such amounts , deposited in approximately equal monthly installments on or before the 25th day of each month hereafter, commencing with the month during which the Bonds are delivered , or the month thereafter if de- livery is made after the 25th day thereof, as will be sufficient, together with other amounts , if any , then on hand in the Interest and Sinking Fund and available for such purpose , to pay the interest scheduled to accrue and come due on the Bonds and any Additional Bonds on the next succeeding interest payment date ; and (2) such amounts , deposited in approximately equal monthly installments on or before the 25th day of each month hereafter, commencing with the month during which the Bonds are delivered, or the month thereafter if de- livery is made after the 25th day thereof, as will be • sufficient , together with other amounts , if any , then on hand in the Interest and Sinking Fund and available for such purpose , to pay the principal scheduled to mature and come due on the Bonds and any Additional Bonds on the next succeeding principal payment date. Section 15. RESERVE REQUIREMENTS . (a) That on or before the 25th day of each month hereafter, commencing with the month during which the Bonds are delivered, or the month thereafter, if delivery is made after the 25th day thereof, the Town shall • cause to be transferred from Pledged Revenues and deposited to the credit of the Reserve Fund an amount equal to 1/60th of the average annual principal and interest requirements of the Bonds , until the Reserve Fund contains an amount of money and investments at least equal in market value to the average annual principal and interest requirements on all then outstanding Bonds (the " Required Amount") . When and so long as the money and in- vestments in the Reserve Fund are not less than the Required Amount, no deposits need be made to the credit of the Reserve Fund; but, when and if the Reserve Fund at any time contains less than the Required Amount , then , subject and subordinate to making the required deposits to the credit of the Interest and Sinking Fund, the Town shall transfer from the Pledged Revenues and deposit to the credit of the Reserve Fund, on or before the 25th day of each month, a sum equal to 1/60th of the Required Amount until the Reserve Fund is restored to the Required Amount. The Town may , at its option , withdraw and use for any lawful purpose all surplus in the Reserve Fund over the Required Amount. Section 16. DEFICIENCIES, EXCESS PLEDGED REVENUES. (a) That if on any occasion there shall not be sufficient Pledged Revenues to make the required deposits into the Interest and Sinking Fund and the Reserve Fund, then such deficiency shall be made up as soon as possible from the next available Pledged Revenues , or from any other sources available for such purpose. (b) That, subject to making the required deposits to the credit of the Interest and Sinking Fund and the Reserve Fund when and as required by this Ordinance, or any ordinances au- thorizing the issuance of Additional Bonds , the excess Pledged Revenues may be used by the Town for any lawful purpose. Section 17. PAYMENT OF BONDS AND ADDITIONAL BONDS . On or before January 10 , 1979 , and semiannually on or before each July 10 and January 10 thereafter while any of the Bonds or Additional Bonds are outstanding and unpaid, the Town shall make ! available to the paying agent therefor, out of the Interest and ! Sinking Fund and the Reserve Fund, if necessary , money sufficient to pay such interest on and such principal of the Bonds and Addi- tional Bonds as will accrue or mature on such dates , respectively . The paying agent shall destroy all paid Bonds and Additional . ; Bonds , and the coupons appertaining thereto , and furnish the I Town with an appropriate certificate of cancellation or destru destruction. Section 18. FINAL DEPOSITS ; GOVERNMENTAL OBLIGATIONS . I (a) That any Bond or Additional Bond shall be deemed to be paid, ! retired, and no longer outstanding within the meaning of this Ordinance when payment of the principal of, redemption premium, if any , on such Bond or Additional Bond, plus interest thereon to the due date thereof (whether such due date by reason of maturity , upon redemption , or otherwise) either (i) shall have been made or caused to be made in accordance with the terms thereof (including the giving of any required notice of redemp- tion) or (ii) shall have been provided by irrevocably depositing wi,; th, or making available to , a paying agent therefor, in trust and irrevocably set aside exclusively for such payment , (1) money sufficient to make such payment or (2) Government obliga- tions , as hereinafter defined in this SEction , certified by an independent public accounting firm of national reputation to Imature as to principal and interest in such amounts and at such 'I times as will insure the availability , without reinvestment , of sufficient money to make such payment, and all necessary and • proper fees , compensation and expenses of such paying agent pertaining to the Bonds and Additional Bonds with respect to which such deposit is made shall have been paid or the payment thereof provided for to the satisfaction of such paying agent. At such time as a Bond or Additional Bond shall be deemed to be paid hereunder, as aforesaid, it shall no longer be secured • by or entitled to the benefit of this Ordinance or a lien on and pledge of the Pledged Revenues , and shall be entitled to payment solely from such money or Government Obligations . . (b) That any moneys so deposited with a paying agent may at the direction of the Town also be invested in Government Obligations , maturing in the amounts and times as hereinbefore Iset forth , and all income from all Government Obligations in ' the hands of the paying agent pursuant to this Section which is not required for the payment of the Bonds and Additional Bonds , the redemption premium, if any , and interest thereon , with re- spect to which such money has been so deposited, shall be turned over to the Town or deposited as directed by the Town. (c) That the Town covenants that no deposit will be made or accepted under clause (a) (ii) of this Section and no use made of any such deposit which would cause the Bonds or any Addition- al Bonds to be treated as arbitrage bonds within the meaning of Section 103 (c) (2) of the Internal Revenue Code of 1954 , as ! amended. j (d) That for the purpose of this Section, the term • l "Government Obligations" shall mean direct obligations of the ! United States of America, including obligations the principal of and interest on which are unconditionally guaranteed by the United States of America, which may be United States Treasury obligations such as its State and Local Government Series , and which may be in book-entry form. (e) That notwithstanding any other provisions of this Ordinance , all money or Government Obligations set aside and held in trust pursuant to the provisions of this Section for the payment of Bonds and Additional Bonds , the redemption premium, i if any, and interest thereon , shall be applied to and used for ; the payment of such Bonds and Additional Bonds , the redemption premium, if any, and interest thereon. Section 19 . ADDITIONAL BONDS . (a) That the Town shall l have the right and power at any time and from time to time , and in one or more Series or issues , to authorize , issue , and deliver additional parity revenue bonds (herein called "Additional Bonds" ) , in accordance with law, in any amounts , for any lawful 411 purpose, including the refunding of any Bonds or Additional Bonds. Such Additional Bonds , if and when authorized, issued, and delivered in accordance with this Ordinance , shall be secured by and made payable equally and ratably on a parity with the Bonds , and all other outstanding Additional Bonds, from an irre- vocable first lien on and pledge of the Pledged Revenues. (b) That the Interest and Sinking Fund and the Reserve Fund established by this Ordinance shall secure and be used to pay all Additional Bonds as well as the Bonds . However, each ordinance under which Additional Bonds are issued shall provide land require that, in addition to the amounts required by the !provisions of this Ordinance and the provisions of any other !ordinance or ordinances authorizing Additional Bonds to be de- posited to the credit of the Interest and Sinking Fund, the Town shall deposit to the credit of the Interest and Sinking Fund at least such amounts as are required for the payment of all prin- cipal of and interest on said Additional Bonds then being issued, as the same come due ; and that the aggregate amount to be ac- cumulated and maintained in the Reserve Fund shall be increased (if and to the extent necessary) to an amount not less than the 111 average annual principal and interest requirements of all Bonds and Additional Bonds which will be outstanding after the issuance and delivery of the then proposed Additional Bonds ; and that the I • required additional amount shall be so accumulated by the de- posit in the Reserve Fund of all or any part of said required 'additional amount in cash immediately after the delivery of the then proposed Additional Bonds , or, at the option of the Town , • by the deposit of said required additional amount (or any balance of said required additional amount not deposited in cash as permitted above) in monthly installments , made on or before the 25th day of each month following the delivery of the then proposed Additional Bonds , of not less than 1/60th of said required additional amount (or 1/60th of the balance of said required additional amount not deposited in cash as permitted above) . (c) That all calculations of average annual principal and • interest requirements made pursuant to this Section shall be made as of and from the date of the Additional Bonds then pro- posed to be issued. (d) That the principal of all Additional Bonds must be scheduled to be paid or mature on January 10 of the years in which such principal is scheduled to be paid or mature ; and all interest thereon must be payable on July 10 and January 10. Section 20 . FURTHER REQUIREMENTS FOR ADDITIONAL BONDS . That Additional Bonds shall be issued only in accordance with • this Ordinance , but notwithstanding any provisions of this Ordinance to the contrary , no installment , Series , or issue of Additional Bonds shall be issued or delivered unless : (a) The Mayor and the Town Secretary of the Town sign a written certificate to the effect that the Town is not in de- fault as to any covenant, condition , or obligation in connection with all outstanding Bonds and Additional Bonds , and the 1 ordinances authorizing same , and that the Interest and Sinking Fund and the Reserve Fund each contains the amount then required to be therein. (b) An independent certified public accountant, or in- dependent firm of certified public accountants , signs a written certificate to the effect that, during either the next preced- ing year, or any twelve consecutive calendar month period ending ; not more than ninety days prior to the passage of the ordinance ; authorizing the issuance of the then proposed Additional Bonds , ; the Pledged Revenues were , in his or its opinion, at least equal Ito 1. 25 times the principal and interest requirements of all 1Bonds and Additional Bonds to be outstanding after the issuance of the then proposed Additional Bonds , the Pledged Revenues were , in his or its opinion , at least equal to 1. 25 times the princi- pal and interest requirements of all Bonds and Additional Bonds to be outstanding after the issuance of the then proposed Addi- tional Bonds for the year during which such requirements are scheduled to be the greatest. Section 21. GENERAL COVENANTS . The Town further covenants and agrees that in accordance with and to the extent required or permitted by law: (a) PERFORMANCE . It will faithfully perform at all times and any and all covenants , undertakings , stipulations , and pro- visions contained in this Ordinance , and each such ordinance authorizing the issuance of Additional Bonds , and in each and ' every Bond and Additional Bond; that it will promptly pay or ( cause to be paid the principal of and interest on every Bond and Additional Bond, on the dates and in the places and manner prescribed in such ordinances and Bonds or Additional Bonds ; and ,that it will , at the times and in the manner prescribed, deposit 411 or cause to be deposited the amounts required to be deposited into the Interest and Sinking Fund and the Reserve Fund; and any 'holder of the Bonds or Additional Bonds may require the Town , ;;its officials , and employees , to carry out, respect , or enforce Ilthe covenants and obligations of this Ordinance, or any ordinance authorizing the issuance of Additional Bonds , by all legal and equitable means , including specifically, but without limitation, the use and filing of mandamus proceedings , in any court of competent jurisdiction, against the Town , its offi- . cials , and employees. (b) TOWN ' S LEGAL AUTHORITY . It is a duly created and existing general law city of the State of Texas , and is duly authorized under the laws of the State of Texas to create and issue the Bonds ; that all action on its part for the creation and issuance of the Bonds has been duly and effectively taken , and that the Bonds in the hands of the holders and owners thereof are and will be valid and enforceable special obliga- tions of the Town in accordance with their terms . (c) TITLE . It has or will obtain lawful title to the lands , buildings , structures , and facilities constituting the System, that it warrants that it will defent, the title to all the aforesaid lands , building, structures , and facilities , and levery part thereof, for the benefit of the holders and owners of the Bonds and Additional Bonds , against the claims and de- mands of all persons whomsoever, that it is lawfully qualified to pledge the Pledged Revenues to the payment of the Bonds and Additional Bonds in the manner prescribed herein , and has law- fully exercised such rights. • (d) LIENS . It will from time to time and before the same become delinquent pay and discharge all taxes , assessments , and governmental charges , if any, which shall be lawfully imposed upon it, or the System, that it will pay all lawful claims for rents , royalties , labor, materials , and supplies which if un- paid might by law become a lien or charge thereon , the lien of which would be prior to or interfere with the liens hereof, so , that the priority of the liens granted hereunder shall be fully ' preserved in the manner provided herein , and that it will not create or suffer to be created any mechanic' s , laborer' s , ma- 1terialman' s , or other lien or charge which might be or could be prior to the liens hereof, or do or suffer any matter or thing whereby the liens hereof might or could be impaired; provided, ' however, that no such tax, assessment , or charge , and that no such claims which might be used as the basis of a mechanic' s , ; laborer' s materialman ' s or other lien or charge, shall be required to be paid so long as the validity of the same shall be contested in good faith by the Town. • (e) OPERATION OF SYSTEM; NO FREE SERVICE. While the ;Bonds or any Additional Bonds are outstanding and unpaid the Town shall continuously and efficiently operate the System, and ' shall maintain the System in good condition, repair, and work- . ing order, all at reasonable cost. No free service of the System shall be allowed, and should the Town or any of its lagencies or instrumentalities make use of the services and facilities of the System, payment of the reasonable value shall be made by the Town out of funds from sources other than the revenues of the System, unless made from surplus or excess Pledged Revenues as permitted in Section 18 (b) hereof. ( f) FURTHER ENCUMBRANCE . While the Bonds or any Addi- tional Bonds are outstanding and unpaid, the Town shall not ' additionally encumber the Pledged Revenues on any manner, ex- cept as permitted in this Ordinance in connection with Addition- al Bonds , unless said encumbrance is made junior and subordinate in all respects to the liens , pledges , covenants , and agreements of this Ordinance ; but the right of the Town to issue revenue ,bonds payable from a subordinate lien on the Pledged Revenues 'is specifically recognized and retained. 411 (g) SALE OR DISPOSAL OF PROPERTY. While the Bonds or any Additional Bonds are outstanding and unpaid, the Town shall not sell , convey, mortgage , encumber, lease , or in any manner trans- fer title to , or otherwise dispose of the System, or any signi- 411 ficant or substantial part thereof; provided that whenever the Town deems it necessary to dispose of any property , machinery, fixtures , or equipment, it may sell or otherwise dispose of such property, machinery, fixtures , or equipment when it has made arrangements to replace the same or provide substitutes there- for, unless it is determined by resolution of the Town Council that no such replacement or substitute is necessary. (h) INSURANCE . (1) The Town shall cause to be insured such parts of the System as would usually be insured by cor- porations operating like properties , with a responsible insur- ance company or companies , against risks , accidents , or casualties against which and to the extent insurance is usually carried by corporations operating like properties , including, to the extent reasonably obtainable , fire and extended coverage insuance, insurance against damage by floods , and use and oc- cupancy insurance. Public liability and property damage insur- ance shall also be carried unless the Town Attorney of the Town gives a written opinion to the effect that the Town is not liable for claims which would be protected by such insurance. At any time while any contractor engaged in construction work shall be fully responsible therefor, the Town shall not be re- quired to carry insurance on the work being constructed if the contractor is required to carry appropriate insurance. All such policies shall be open to the inspection of the Bondholders and their representatives at all reasonable times. Upon the happen- ing of any loss or damage covered by insurance from one or more of said causes, the Town shall make due proof of loss and shall do all things necessary or desirable to cause the insuring com- panies to make payment in full directly to the Town. The pro- ceeds of insurance covering such property, together with any other funds necessary and available for such purpose , shall be fused forthwith by the Town for repairing the property damaged or replacing the property destroyed; provided, however, that if said insurance proceeds and other funds are insufficient for such purpose , then said insurance proceeds pertaining to the ( System shall be used promptly as follows : (i) for the redemption prior to maturity of the Bonds and Additional Bonds , ratably in the proportion that the out- standing principal of each Series or issue of Bonds or • Additional Bonds bdars to the total outstanding principal of all Bonds and Additional Bonds, provided that if on any such occasion the principal of any such Series or issue is not subject to redemption , it shall not be regarded as out- standing in making the foregoing computation ; or (ii) if none of the outstanding Bonds or Additional Bonds is subject to redemption , then for the purchase on the open market and retirement of said Bonds and Additional Bonds in the same proportion as prescribed in the foregoing clause (i) , to the extent practicable ; provided that the purchase price for any Bond or Additional Bond shall not exceed the redemption price of such Bond or Additional Bond on the first date upon which it becomes subject to redemption ; or (iii) to the extent that the foregoing clauses (i) and (ii) cannot be complied with at the time , the insurance proceeds , or the remainder thereof, shall be deposited in a special and separate trust fund, at an official deposi- tory of the Town, to be designated the Insurance Account. The Insurance Account shall be held until such time as the foregoing clauses (i) and/or (ii) can be complied with, or until other funds become available which, together with the Insurance Account, will be sufficient to make the re- pairs or replacements originally required, whichever of said events occur first. • (2) The annual audit hereinafter required shall contain a section commenting on whether or not the Town has complied with the requirements of this Section with respect to the main- tenance of insurance , and listing all policies carried, and 110 whether or not all insurance premiums upon the insurance policies to which reference is hereinbefore made have been paid. (i) RATE COVENANT. The Town Council of the Town will fix, establish, maintain , and collect such rates , charges, and fees for the use and availability of the System at all times as are necessary to produce Gross Revenues sufficient , together with any other Pledged Revenues , (1) to pay all current operation and maintenance expenses of the System, and (2) to produce Pledged Revenues for each year at least equal to 1. 25 times the principal and interest requirements of all then outstanding Bonds and Additional Bonds for the year during which such re- quirements are scheduled to be the greatest. (j ) RECORDS . It will keep proper books of record and account in which full, true , and correct entries will be made of all dealings, activities , and transactions relating to the System, the Pledged Revenues , and the Funds created pursuant to this Ordinance , and all books , documents , and vouchers re- lating thereto shall at all reasonable times be made available for inspection upon request of any Bondholder. • (k) AUDITS. After the close of each year while any of the onds or any Additional Bonds are outstanding, an audit will be ade of the books and accounts relating to the System and the ledged Revenues by an independent certified public accountant or an independent firm of certified public accountants. As soon as practicalbe after the close of each such year, and when said audit has been completed and made available to the Town, a copy of such audit for the preceding year shall be mailed to the 'Municipal Advisory Council of Texas and to any holder of 5% or more in aggregate principal amount of then outstanding Bonds 'land Additional Bonds who shall so request in writing. Such annual audit reports shall be open to the inspection of the bondholders and their agents and representatives at all reason- able times. (1) GOVERNMENTAL AGENCIES . It will comply with all of the terms and conditions of any and all franchises , permits , and au- thorizations applicable to or necessary with respect to the System, and which have been obtained from any governmental agency; and the Town has or will obtain and keep in full force and effect all franchises , permits , authorization , and other requirements applicable to or necessary with respect to the acquisition , construction, equipment, operation , and maintenance of the System. (m) NO COMPETITION . It will not grant any franchise or permit for the acquisition , construction, or operation of any competing facilities which might be used as a substitute for the System' s facilities , and, to the extent that it legally may , the Town will prohibit any such competing facilities . (n) NO ARBITRAGE. That the Town covenants to and with the purchasers of the Bonds that it will make no use of the proceeds of the Bonds at any time throughout the term of this issue of Bonds , which, if such use had been reasonably expected on the date of delivery of the Bonds to and payment for the Bonds by the purchasers , would have caused the Bonds to be arbitrage bonds within the meaning of Section 103 (c) of the Internal Revenue Code of 1954 , as amended, or any regu- lations , or rulings pertaining thereto; and by this covenant the Town is obligated to comply with the requirements of the 1 41111P aforesaid Section 103 (c) and all applicable and pertinent Department of the Treasury regulations relating to arbitrage bonds. The Town further covenants that the proceeds of the Bonds will not otherwise be used directly or indirectly so as to cause all or any part of the Bonds to be or become arbitrage bonds within the meaning of the aforesaid Section 103 (c) , or any regulations or rulings pertaining thereto. F • , . . r Section 22 . AMENDMENT OF ORDINANCE. (a) The holders of Bonds and Additional Bonds aggregating in principal amount 51% of the aggregate principal amount of then outstanding Bonds and Additional Bonds shall have the right from time to time to ap- prove any amendment to this Ordinance which may be deemed neces- sary or desirable by the Town , provided, however, that nothing herein contained shall permit or be construed to permit the amendment of the terms and conditions in this Ordinance or in the. Bonds or Additional Bonds so as to: (1) Make any change in the maturity of the outstanding Bonds or Additional Bonds ; (2) Reduce the rate of interest borned by any of the outstanding Bonds or Additional Bonds ; (3) Reduce the amount of the principal payable on the outstanding Bonds or Additional Bonds ; (4) Modify the terms of payment of principal of or interest on the outstanding Bonds or Additional Bonds , or impose any conditions with respect to such payment; (5) Affect the right of the holders of less than all of the Bonds and Additional Bonds then outstanding ; (6) Change the minimum percentage of the principal amount of Bonds and Additional Bonds necessary for consent to such amendment. (b) If at any time the Town shall desire to amend the Ordinance under this Section , the Town shall cause notice of the proposed amendment to bepublished in a financial newspaper or journal published in the City of New York , New York , once during , each calendar week for at least two successvie calendar weeks . ! Such Notice shall briefly set forth the nature of the proposed : amendment and shall state that a copy thereof is on file at ' the principal office of the Paying Agent for inspection by all ; holders of Bonds and Additional Bonds. Such publication is not , required, however, if notice in writing is given to each holder j of Bonds and Additional Bonds . (c) Whenever at any time not less than thirty days , and within one year, from the date of the first publication of said notice or other service of written notice the Town shall re- , ceive an instrument or instruments executed by the holders of at least 51% in aggregate principal amount of all Bonds and { Additional Bonds then outstanding, which instrument or instru- ments shall refer to the proposed amendment described in said ; notice and which specifically consent to and approve such amend- ment in substantially the form of the copy thereof on file with the Paying Agent, the Town Council may pass the amendatory ordinance in substantially the same form. (d) Upon the passage of any amendatory ordinance pursuant to the provisions of this Section , this Ordinance shall be ! deemed to be amended in accordance with such amendatory ordin- ance , and the respective rights , duties , and obligations under this Ordinance of the Town , and all of the holders of then out- standing Bonds and Additional Bonds shall thereafter be deter- mined, exercised and enforced hereunder, subject in all respects to such amendments . (e) Any consent given by the holder of a Bond or Addition- al Bond pursuant to the provisions of this Section shall be ir- revocable for a period of six months from the date of the first ' publication of the notice provided for in this Section , and ' shall be conclusive and binding upon all future holders of the same Bond or Additional Bond during such period. Such consent may be revoked at any time after six months from the date of the first publication of such notice by the holder who gave r . . . .. such consent, or by a successor in title , by filing notice thereof with the paying agent and the Town , but such revocation shall not be effective if the holders of 51% in aggregate prin- cipal amount of the then outstanding Bonds and Additional Bonds as in this Section defined have, prior to the attempted revoca- tion, consented to and approved the amendment. (f) For the purpose of this Section , the fact of the holding of Bonds or Additional Bonds by any bondholder and the amount and numbers of such Bonds or Additional Bonds and the date of their holding same, may be proved by the affidavit of the person claiming to be such holder, or by a certificate executed by any trust company , bank, banker, or any other de- pository wherever situated showing that at the date therein mentioned such person had on deposit with such trust company , bank, banker, or other depository , the Bonds and Additional Bonds secribed in such certificate. The Town may conclusively assume that such ownership continues until written notice to the contrary is served upon the Town. Section 23. APPROVAL AND REGISTRATION OF BONDS . That the Mayor of said Town is hereby authorized to hav control of said Bonds and all necessary records and proceedings pertaining to said Bonds pending their delivery and their investigation, examination and approval by the Attorney General of the State IP of Texas , and their registration by the Comptroller of Public Accounts of the State of Texas. Upon registration of said Bonds , said Comptroller of Public Accounts (or a deputy desig- nated in writing to act for said Comptroller) shall manually sign the Comptroller' s Registration Certificate prescribed herein to be printed and endorsed on each Bond, and the seal of said Comptroller shall be impressed, or printed, or litho- graphed on each of said Bonds . Section 24. SALE OF BONDS . That said Bonds are hereby jsold and shall be delivered to the Texas Water Development Board for cash for the par value thereof and accrued interest thereon to date of delivery, plus a premium or a discount in an amount necessary to adjust the interest rate borne by the Bonds to the statutory lending rate of the Texas Water Develop- ment Board, pursuant to Section 17 . 174 of Chapter 5 , Title 2 of the Texas Water Code. Section 25. FINAL ACCOUNTING. That the Town shall render a final accounting to the Texas Water Development Board of the total cost incurred in connection with the project for improve- ments and extensions to the Town ' s Sewer System upon completion of same. 1 Section 26. SURPLUS BOND PROCEEDS. That any surplus Bond 7 proceeds from the sale of the Bonds after completion of this project shall be used to redeem the Bonds prior to maturity as directed by the Texas Water Development Board. III • r ,. ,A,,-.4.A.:., , CERTIFICATE FOR ORDINANCE AUTHORIZING THE ISSUANCE OF REVENUE BONDS 0 . . • THE STATE OF TEXAS : COUNTY OF COLLIN , TOWN OF PROSPER ,• We, the undersigned officers of said Town, hereby certify gi as follows : 1. The Town Council of said Town convened in SPECIAL MEETING ON THE 7TH DAY OF MARCH , 19 78 , at the City Hall , and the roll was called of the duly constituted officers and members of said Town Council , to-wit: Roy Skelton, Mayor Vera Clary Mattie Bridges, Town Secretary Danny Webb Morris Jackson Tommy Bailey R. L. Dalton, Sr. and all of said persons were present, except the following absentees : thus constituting a quorum. Whereupon, among other business, the following was transacted at said Meeting: a written . ORDINANCE AUTHORIZING THE ISSUANCE OF REVENUE BONDS was duly introduced for the consideration of said Town Council and read in full. It was then duly moved and seconded that said Ordinance be passed; and, after due discussion, said motion, carrying with it the passage of said Ordinance, prevailed and carried by the following vote: AYES : All members of said Town Council shown present above voted "Aye" . NOES: None. 2. That a true, full and correct copy of the aforesaid j Ordinance passed at the Meeting described in the above and fore- going paragraph is attached to and follows this Certificate; that said Ordinance has been duly recorded in said Town Council minutes of said Meeting; that the above and foregoing paragraph is a true, full and correct excerpt from said Town Council ' s Al, minutes of said Meeting pertaining to the passage of said • Ordinance; that the persons named in the above and foregoing paragraph are the duly chosen, qualified and acting officers and members of said Town Council as indicated therein; that each of the officers and members of said Town Council was duly and sufficiently notified officially and personally, in advance, of the time, place and purpose of the aforesaid Meeting, and that said Ordinance would be introduced and considered for passage at said Meeting, and each of said officers and members consented, in advance, to the holding of said Meeting for such purpose; and that said Meeting was open to the public , and public notice of the time, place and purpose of said meeting was given, all as required by' Vernon' s Ann. Civ. St. Article 6252-17 . 3 . That the Mayor of Town has approved and hereby approves Ithe aforesaid Ordinance; that the Mayor and the Town Secretary of said Tcwn have duly signed said Ordinance; and that the Mayor I. and Town Secretary of said Town hereby declare that their sign- ing of this Certificate shall constitute the signing of the attached and following copy of said Ordinance for all purposes . SIGNED AND SEALED the 7th day of M T-ch , 1978. /Il/�_)-,pia ,' 3- __ ,,,, , l�tt -4t2---- • _ Town Secretary LayoT` '1 (!SEAL