06-086 - O ORDINANCE OF THE TOWN OF PROSPER, TEXAS
AUTHORIZING THE ISSUANCE OF
TOWN OF PROSPER, TEXAS
COMBINATION TAX AND REVENUE CERTIFICATES OF
OBLIGATION, SERIES 2006
TABLE OF CONTENTS
Section 1. Recitals, Amount and Purpose of the Certificates 1
Section 2. Designation, Date, Denominations, Numbers, Maturities of Certificates and
Interest Rates 2
Section 3. Characteristics of the Certificates 2
Section 4. Form of Certificates 5
Section 5. Interest and Sinking Fund 12
Section 6. Surplus Revenues 13
Section 7. Defeasance of Certificates 13
Section 8. Damaged, Mutilated, Lost, Stolen, or Destroyed Certificates 14
Section 9. Custody, Approval, and Registration of Certificates; Bond Counsel's Opinion
and Engagement; Attorney General Filing Fee; CUSIP Numbers and
Contingent Insurance Provision, if Obtained 15
Section 10. Covenants Regarding Tax Exemption of Interest on the Certificates 16
Section 11. Sale of Certificates; Approval of Official Statement; Application of Premium
and Accrued Interest 18
Section 12. Allocation of Certificate Proceeds 19
Section 13. Disposition of Project. 19
Section 14. Interest Earnings on Certificate Proceeds 19
Section 15. Construction Fund 19
Section 16 Compliance with Rule 15c2-12 20
Section 17. Method of Amendment 22
Section 18. Continued Perfection of Security Interest 24
Section 19. Inconsistent Provisions 24
Section 20. Governing Law 24
Section 21. Severability 24
Section 22. Events of Default 24
Section 22. Remedies for Default 25
Section 23. Remedies Not Exclusive 25
Section 24. Appropriation 25
Exhibit A Continuing Disclosure Information A-1
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ORDINANCE AUTHORIZING THE ISSUANCE
OF CERTIFICATES OF OBLIGATION
STATE OF TEXAS §
COUNTY OF COLLIN §
TOWN OF PROSPER §
WHEREAS, the Town Council deems it advisable to issue Certificates of Obligation in the
amount of$12,000,000 for the purpose of(i) constructing and improving the Town's water system,
including the construction of an elevated water storage tank and water distribution lines, (ii)
acquiring,constructing and equipping municipal park improvements and open space(iii)constructing
and improving roads and streets in the Town and related infrastructure, (iv) extending, constructing
and improving the Town's sewer system, (v) acquiring land and interests in land as may be required
in connection with the purposes described in clauses (i) through (iv), and (vi) paying legal, fiscal,
engineering and architectural fees in connection with these projects; 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 Town Council has heretofore passed a resolution authorizing and directing
the Town 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
Town, said newspaper being a "newspaper" as defined in §2051.044, Texas Government Code; and
WHEREAS,the Town received no petition from the qualified electors of the Town protesting
the issuance of such Certificates of Obligation; and
WHEREAS, it is considered to be to the best interest of the Town that said interest bearing
Certificates of Obligation be issued.
BE IT ORDAINED BY THE TOWN COUNCIL OF THE TOWN OF PROSPER:
Section 1. RECITALS, AMOUNT AND PURPOSE OF THE CERTIFICATES. The
recitals set forth in the preamble hereof are incorporated herein and shall have the same force and
effect as if set forth in this Section. The certificates of the Town of Prosper, Texas(the "Issuer") are
hereby authorized to be issued and delivered in the aggregate principal amount of$12,000,000 for
the purpose of(i) constructing and improving the Town's water system, including the construction
of an elevated water storage tank and water distribution lines, (ii) acquiring, constructing and
equipping municipal park improvements and open space (iii) constructing and improving roads and
streets in the Town and related infrastructure,(iv) extending, constructing and improving the Town's
sewer system, (v) acquiring land and interests in land as may be required in connection with the
purposes described in clauses (i) through (iv), and (vi) paying legal, fiscal, engineering and
architectural fees in connection with these projects (collectively, the "Project").
Section 2. DESIGNATION,DATE,DENOMINATIONS,NUMBERS,MATURITIES OF
CERTIFICATES AND INTEREST RATES. Each certificate issued pursuant to this Ordinance shall
be designated: "TOWN OF PROSPER, TEXAS, COMBINATION TAX AND REVENUE
CERTIFICATE OF OBLIGATION, SERIES 2006", and initially there shall be issued, sold, and
delivered hereunder one fully registered certificate,without interest coupons,dated August 15,2006,
in the principal amount stated above and in the denominations hereinafter stated,numbered T-1,with
certificates issued in replacement thereofbeing in the denominations and principal amounts hereinafter
stated and numbered consecutively from R-1 upward, payable to the respective Registered Owners
thereof(with the initial certificate being made payable to the initial purchaser as described in Section
11 hereof), or to the registered assignee or assignees of said certificates or any portion or portions
thereof(in each case, the "Registered Owner"). The Certificates shall mature on August 15 in the
years and in the principal amounts and interest rates set forth below, interest on each Certificate
accruing on the basis of a 360-day year of twelve 30-day months from August 15, 2006 or the most
recent interest payment date to which interest has been paid or provided for at the per annum rates
of interest, payable semiannually on February 15 and August 15 of each year until the principal
amount shall have been paid or provision for such payment shall have been made, commencing
February 15, 2007, as follows:
Principal Interest Principal Interest
Year Amount Rate Year Amount Rate
2007 $190,000 4.250% 2017 $620,000 4.000%
2008 175,000 4.250 2018 645,000 4.125
2009 415,000 4.250 2019 675,000 4.200
2010 465,000 4.250 2020 700,000 4.250
2011 485,000 4.250 2021 730,000 4.300
2012 505,000 4.250 2022 760,000 4.375
2013 525,000 4.250 2023 795,000 4.375
2014 550,000 4.250 2024 830,000 4.400
2015 570,000 4.250 2025 865,000 4.500
2016 595,000 4.250 2026 905,000 4.500
Section 3. CHARACTERISTICS OF THE CERTIFICATES. (a) Registration, Transfer,
Conversion and Exchange;Authentication. The Issuer shall keep or cause to be kept at the corporate
trust office ofU.S.Bank National Association,Houston,Texas,the"Paying Agent/Registrar"),books
or records for the registration of the transfer, conversion and exchange of the Certificates (the
"Registration Books"),and the Issuer hereby appoints the Paying Agent/Registrar as its registrar and
transfer agent to keep such books or records and make such registrations of transfers, conversions
and exchanges under such reasonable regulations as the Issuer and Paying Agent/Registrar may
prescribe; and the Paying Agent/Registrar shall make such registrations, transfers, conversions and
exchanges as herein provided. The Paying Agent/Registrar shall obtain and record in the Registration
Books the address of the registered owner of each Certificate to which payments with respect to the
Certificates shall be mailed, as herein provided; but it shall be the duty of each registered owner to
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notify the Paying Agent/Registrar in writing of the address to which payments shall be mailed, and
such interest payments shall not be mailed unless such notice has been given. The Issuer shall have
the right to inspect the Registration Books during regular business hours of the Paying
Agent/Registrar, but otherwise the Paying Agent/Registrar shall keep the Registration Books
confidential and, unless otherwise required by law, shall not permit their inspection by any other
entity. The Issuer shall pay the Paying Agent/Registrar's standard or customary fees and charges for
making such registration, transfer, conversion, exchange and delivery of a substitute Certificate or
Certificates. Registration of assignments, transfers, conversions and exchanges of Certificates shall
be made in the manner provided and with the effect stated in the FORM OF CERTIFICATE set forth
in this Ordinance. Each substitute Certificate shall bear a letter and/or number to distinguish it from
each other Certificate.
Except as provided in Section 3(c) of this Ordinance, an authorized representative of the
Paying Agent/Registrar shall,before the delivery of any such Certificate, date and manually sign said
Certificate,and no such Certificate shall be deemed to be issued or outstanding unless such Certificate
is so executed. The Paying Agent/Registrar promptly shall cancel all paid Certificates and Certificates
surrendered for conversion and exchange. No additional ordinances, orders, or resolutions need be
passed or adopted by the governing body of the Issuer or any other body or person so as to
accomplish the foregoing conversion and exchange of any Certificate or portion thereof, and the
Paying Agent/Registrar shall provide for the printing, execution, and delivery of the substitute
Certificates in the manner prescribed herein, and said Certificates shall be printed or typed on paper
of customary weight and strength. Pursuant to Chapter 1201, Government Code, and particularly
Subchapter D thereof, the duty of conversion and exchange of Certificates as aforesaid is hereby
imposed upon the Paying Agent/Registrar, and,upon the execution of said Certificate,the converted
and exchanged Certificate shall be valid, incontestable, and enforceable in the same manner and with
the same effect as the Certificates that initially were issued and delivered pursuant to this Ordinance,
approved by the Attorney General and registered by the Comptroller of Public Accounts.
(b) Payment of Certificates and Interest. The Issuer hereby further appoints the Paying
Agent/Registrar to act as the paying agent for paying the principal of and interest on the Certificates,
all as provided in this Ordinance. The Paying Agent/Registrar shall keep proper records of all
payments made by the Issuer and the Paying Agent/Registrar with respect to the Certificates, and of
all conversions and exchanges of Certificates, and all replacements of Certificates, as provided in this
Ordinance. However, in the event of a nonpayment of interest on a scheduled payment date, and for
thirty(30)days thereafter,a new record date for such interest payment(a"Special Record Date")will
be established by the Paying Agent/Registrar, if and when funds for the payment of such interest have
been received from the Issuer. Notice of the past due interest shall be sent at least five(5)business
days prior to the Special Record Date by United States mail, first-class postage prepaid, to the
address of each registered owner appearing on the Registration Books at the close of business on the
last business day next preceding the date of mailing of such notice.
(c) In General. The Certificates(i)shall be issued in fully registered form,without interest
coupons, with the principal of and interest on such Certificates to be payable only to the registered
owners thereof, (ii) may be redeemed prior to their scheduled maturities (notice of which shall be
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given to the Paying Agent/Registrar by the Issuer at least 50 days prior to any such redemption date),
(iii) may be converted and exchanged for other Certificates, (iv) may be transferred and assigned,
(v) shall have the characteristics, (vi) shall be signed, sealed, executed and authenticated, (vii) the
principal of and interest on the Certificates shall be payable, and (viii) shall be administered and the
Paying Agent/Registrar and the Issuer shall have certain duties and responsibilities with respect to the
Certificates, all as provided, and in the manner and to the effect as required or indicated,in the FORM
OF CERTIFICATE set forth in this Ordinance. The Certificate initially issued and delivered pursuant
to this Ordinance is not required to be, and shall not be, authenticated by the Paying Agent/Registrar,
but on each substitute Certificate issued in conversion of and exchange for any Certificate or
Certificates issued under this Ordinance the Paying Agent/Registrar shall execute the PAYING
AGENT/REGISTRAR'S AUTHENTICATION CERTIFICATE, in the form set forth in the FORM
OF CERTIFICATE.
(d) Book-Entry Only System. The Certificates issued in exchange for the Certificate
initially issued to the initial purchaser specified herein shall be initially issued in the form of a separate
single fully registered Certificate for each of the maturities thereof. Upon initial issuance, the
ownership of each such Certificate shall be registered in the name of Cede& Co., as nominee of The
Depository Trust Company, New York, New York ("DTC"), and except as provided in subsection
(f) hereof, all of the outstanding Certificates shall be registered in the name of Cede & Co., as
nominee of DTC.
With respect to Certificates registered in the name of Cede & Co., as nominee of DTC, the
Issuer and the Paying Agent/Registrar shall have no responsibility or obligation to any securities
brokers and dealers, banks, trust companies, clearing corporations and certain other organizations
on whose behalf DTC was created ("DTC Participant")to hold securities to facilitate the clearance
and settlement of securities transactions among DTC Participants or to any person on behalf of whom
such a DTC Participant holds an interest in the Certificates. Without limiting the immediately
preceding sentence, the Issuer and the Paying Agent/Registrar shall have no responsibility or
obligation with respect to(i)the accuracy of the records of DTC, Cede&Co. or any DTC Participant
with respect to any ownership interest in the Certificates, (ii)the delivery to any DTC Participant or
any other person,other than a Registered Owner of Certificates, as shown on the Registration Books,
of any notice with respect to the Certificates, or(iii)the payment to any DTC Participant or any other
person, other than a Registered Owner of Certificates, as shown in the Registration Books of any
amount with respect to principal of or interest on the Certificates. Notwithstanding any other
provision of this Ordinance to the contrary,the Issuer and the Paying Agent/Registrar shall be entitled
to treat and consider the person in whose name each Certificate is registered in the Registration
Books as the absolute owner of such Certificate for the purpose of payment of principal and interest
with respect to such Certificate, for the purpose of registering transfers with respect to such
Certificate,and for all other purposes whatsoever. The Paying Agent/Registrar shall pay all principal
of and interest on the Certificates only to or upon the order of the Registered Owners, as shown in
the Registration Books as provided in this Ordinance, or their respective attorneys duly authorized
in writing, and all such payments shall be valid and effective to fully satisfy and discharge the Issuer's
obligations with respect to payment of principal of and interest on the Certificates to the extent of the
sum or sums so paid. No person other than a Registered Owner, as shown in the Registration Books,
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shall receive a Certificate evidencing the obligation of the Issuer to make payments of principal and
interest pursuant to this Ordinance. Upon delivery by DTC to the Paying Agent/Registrar of written
notice to the effect that DTC has determined to substitute a new nominee in place of Cede & Co.,
and subject to the provisions in this Ordinance with respect to interest checks being mailed to the
Registered Owner at the close of business on the Record date, the words "Cede & Co." in this
Ordinance shall refer to such new nominee of DTC.
(e) Successor Securities Depository.,Transfers Outside Book-Entry Only System. In the
event that the Issuer determines that DTC is incapable of discharging its responsibilities described
herein and in the representations letter of the Issuer to DTC or that it is in the best interest of the
beneficial owners of the Certificates that they be able to obtain certificated Certificates, the Issuer
shall (i) appoint a successor securities depository, qualified to act as such under Section 17A of the
Securities and Exchange Act of 1934, as amended, notify DTC and DTC Participants of the
appointment of such successor securities depository and transfer one or more separate Certificates
to such successor securities depository or (ii) notify DTC and DTC Participants of the availability
through DTC of Certificates and transfer one or more separate certificated Certificates to DTC
Participants having Certificates credited to their DTC accounts. In such event, the Certificates shall
no longer be restricted to being registered in the Registration Books in the name of Cede& Co., as
nominee of DTC, but may be registered in the name of the successor securities depository, or its
nominee, or in whatever name or names Registered Owners transferring or exchanging Certificates
shall designate, in accordance with the provisions of this Ordinance.
(f) Payments to Cede & Co. Notwithstanding any other provision of this Ordinance to
the contrary, so long as any Certificate is registered in the name of Cede& Co., as nominee of DTC,
all payments with respect to principal of and interest on such Certificate and all notices with respect
to such Certificate shall be made and given, respectively, in the manner provided in the
representations letter of the Issuer to DTC.
(g) Cancellation of Initial Certificate. On the closing date, one initial Certificate
representing the entire principal amount of the Certificates, payable in stated installments to the
purchaser designated in Section 11 or its designee, executed by manual or facsimile signature of the
Mayor and Town Secretary of the Issuer, approved by the Attorney General of Texas, and registered
and manually signed by the Comptroller of Public Accounts of the State of Texas, will be delivered
to such purchaser or its designee. Upon payment for the initial Certificate, the Paying
Agent/Registrar shall cancel the initial Certificate and deliver to the Depository Trust Company on
behalf of such purchaser one registered definitive Certificate for each year of maturity of the
Certificates, in the aggregate principal amount of all of the Certificates for such maturity.
Section 4. FORM OF CERTIFICATES. The form of the Certificates, including the form
of Paying Agent/Registrar's Authentication Certificate, the form of Assignment and the form of
Registration Certificate of the Comptroller of Public Accounts of the State of Texas to be attached
to the Certificates initially issued and delivered pursuant to this Ordinance, shall be, respectively,
substantially as follows, with such appropriate variations, omissions or insertions as are permitted or
required by this Ordinance.
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(a) [Form of Certificate]
NO. R- UNITED STATES OF AMERICA PRINCIPAL
STATE OF TEXAS AMOUNT
TOWN OF PROSPER, TEXAS $
COMBINATION TAX AND REVENUE
CERTIFICATE OF OBLIGATION
SERIES 2006
Interest Rate Dated Date Maturity Date CUSIP No.
August 15, 2006 August 15,
REGISTERED OWNER:
PRINCIPAL AMOUNT: DOLLARS
ON THE MATURITY DATE specified above,the Town of Prosper,in Collin County,Texas
(the "Issuer"), being a political subdivision and municipal corporation of the State of Texas, hereby
promises to pay to the Registered Owner specified above,or registered assigns(hereinafter called the
"Registered Owner"), on the Maturity Date specified above, the Principal Amount specified above.
The Issuer promises to pay interest on the unpaid principal amount hereof(calculated on the basis
of a 360-day year of twelve 30-day months) from August 15, 2006 at the Interest Rate per annum
specified above. Interest is payable on February 15, 2007 and semiannually on each August 15 and
February 15 thereafter to the Maturity Date specified above, or the date of redemption prior to
maturity; except, if this Certificate is required to be authenticated and the date of its authentication
is later than the first Record Date(hereinafter defined), such Principal Amount shall bear interest from
the interest payment date next preceding the date of authentication,unless such date of authentication
is after any Record Date but on or before the next following interest payment date, in which case such
principal amount shall bear interest from such next following interest payment date; provided,
however, that if on the date of authentication hereof the interest on the Certificate or Certificates, if
any, for which this Certificate is being exchanged is due but has not been paid, then this Certificate
shall bear interest from the date to which such interest has been paid in full.
THE PRINCIPAL OF AND INTEREST ON this Certificate are payable in lawful money of
the United States of America, without exchange or collection charges. The principal of this
Certificate shall be paid to the registered owner hereof upon presentation and surrender of this
Certificate at maturity, or upon the date fixed for its redemption prior to maturity, at the corporate
trust office of U.S. Bank National Association in Houston, Texas, which is the "Paying
Agent/Registrar" for this Certificate. The payment of interest on this Certificate shall be made by the
Paying Agent/Registrar to the registered owner hereof on each interest payment date by check or
draft, dated as of such interest payment date, drawn by the Paying Agent/Registrar on, and payable
solely from, funds of the Issuer required by the ordinance authorizing the issuance of this Certificate
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(the "Certificate Ordinance") to be on deposit with the Paying Agent/Registrar for such purpose as
hereinafter provided; and such check or draft shall be sent by the Paying Agent/Registrar by United
States mail, first-class postage prepaid, on each such interest payment date, to the registered owner
hereof, at its address as it appeared on the last day of the month preceding each such date (the
"Record Date") on the Registration Books kept by the Paying Agent/Registrar, as hereinafter
described. In addition, interest may be paid by such other method, acceptable to the Paying
Agent/Registrar, requested by, and at the risk and expense of, the registered owner. In the event of
a non-payment of interest on a scheduled payment date, and for 30 days thereafter,a new record date
for such interest payment (a "Special Record Date") will be established by the Paying
Agent/Registrar, if and when funds for the payment of such interest have been received from the
Issuer. Notice of the Special Record Date and of the scheduled payment date of the past due interest
(which shall be 15 days after the Special Record Date) shall be sent at least five business days prior
to the Special Record Date by United States mail, first-class postage prepaid, to the address of each
owner of a Certificate appearing on the Registration Books at the close of business on the last
business day next preceding the date of mailing of such notice.
ANY ACCRUED INTEREST due at maturity or upon the redemption of this Certificate prior
to maturity as provided herein shall be paid to the registered owner upon presentation and surrender
of this Certificate for redemption and payment at the corporate trust office of the Paying
Agent/Registrar. The Issuer covenants with the registered owner of this Certificate that on or before
each principal payment date, interest payment date, and accrued interest payment date for this
Certificate it will make available to the Paying Agent/Registrar, from the"Interest and Sinking Fund"
created by the Certificate Ordinance,the amounts required to provide for the payment,in immediately
available funds, of all principal of and interest on the Certificates, when due.
IF THE DATE for the payment of the principal of or interest on this Certificate shall be a
Saturday, Sunday, a legal holiday or a day on which banking institutions in the city where the
corporate trust office of the Paying Agent/Registrar is located are authorized by law or executive
order to close, then the date for such payment shall be the next succeeding day that is not such a
Saturday, Sunday, legal holiday or day on which banking institutions are authorized to close; and
payment on such date shall have the same force and effect as if made on the original date payment
was due.
THIS CERTIFICATE is one of a series of Certificates dated August 15, 2006, authorized in
accordance with the Constitution and laws of the State of Texas in the principal amount of
$12,000,000 for the purpose of(i) constructing and improving the Town's water system, including
the construction of an elevated water storage tank and water distribution lines, (ii) acquiring,
constructing and equipping municipal park improvements and open space (iii) constructing and
improving roads and streets in the Town and related infrastructure, (iv) extending, constructing and
improving the Town's sewer system, (v) acquiring land and interests in land as may be required in
connection with the purposes described in clauses (i) through (iv), and (vi) paying legal, fiscal,
engineering and architectural fees in connection with these projects.
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THE CERTIFICATES OF THIS SERIES having stated maturities on and after August 15,
2017 may be redeemed prior to their scheduled maturities, at the option of the Issuer, on August 15,
2016 or on any date thereafter, with funds derived from any available and lawful source, as a whole,
or in part, and, if in part, the particular Certificates, or portions thereof, to be redeemed shall be
selected and designated by the Issuer(provided that a portion of a Certificate may be redeemed only
in an integral multiple of$5,000), at a redemption price equal to the principal amount to be redeemed
plus accrued interest to the date fixed for redemption.
AT LEAST 30 days prior to the date fixed for any redemption of Certificates or portions
thereof prior to maturity a written notice of such redemption shall be sent by the Paying
Agent/Registrar by United States mail, first-class postage prepaid, at least 30 days prior to the date
fixed for any such redemption, to the registered owner of each Certificate to be redeemed at its
address as it appeared on the 45th day prior to such redemption date and to major securities
depositories, national bond rating agencies and bond information services; provided, however, that
the failure of the registered owner to receive such notice, or any defect therein or in the sending or
mailing thereof, shall not affect the validity or effectiveness of the proceedings for the redemption of
any Certificate. By the date fixed for any such redemption due provision shall be made with the
Paying Agent/Registrar for the payment of the required redemption price for the Certificates or
portions thereof that are to be so redeemed. If such written notice of redemption is sent and if due
provision for such payment is made, all as provided above, the Certificates or portions thereof that
are to be so redeemed thereby automatically shall be treated as redeemed prior to their scheduled
maturities, and they shall not bear interest after the date fixed for redemption, and they shall not be
regarded as being outstanding except for the right of the registered owner to receive the redemption
price from the Paying Agent/Registrar out of the funds provided for such payment. If a portion of
any Certificate shall be redeemed, a substitute Certificate or Certificates having the same maturity
date,bearing interest at the same rate, in any denomination or denominations in any integral multiple
of$5,000, at the written request of the registered owner, and in aggregate principal amount equal to
the unredeemed portion thereof,will be issued to the registered owner upon the surrender thereof for
cancellation, at the expense of the Issuer, all as provided in the Certificate Ordinance.
ALL CERTIFICATES OF THIS SERIES are issuable solely as fully registered certificates,
without interest coupons, in the denomination of any integral multiple of$5,000. As provided in the
Certificate Ordinance, this Certificate may, at the request of the registered owner or the assignee or
assignees hereof,be assigned,transferred,converted into and exchanged for a like aggregate principal
amount offully registered certificates,without interest coupons,payable to the appropriate registered
owner, assignee or assignees, as the case may be, having the same denomination or denominations
in any integral multiple of $5,000 as requested in writing by the appropriate registered owner,
assignee or assignees, as the case may be, upon surrender of this Certificate to the Paying
Agent/Registrar for cancellation, all in accordance with the form and procedures set forth in the
Certificate Ordinance. Among other requirements for such assignment and transfer, this Certificate
must be presented and surrendered to the Paying Agent/Registrar, together with proper instruments
of assignment, in form and with guarantee of signatures satisfactory to the Paying Agent/Registrar,
evidencing assignment of this Certificate or any portion or portions hereof in any integral multiple of
$5,000 to the assignee or assignees in whose name or names this Certificate or any such portion or
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portions hereof is or are to be registered. The form of Assignment printed or endorsed on this
Certificate may be executed by the registered owner to evidence the assignment hereof, but such
method is not exclusive, and other instruments of assignment satisfactory to the Paying
Agent/Registrar may be used to evidence the assignment of this Certificate or any portion or portions
hereof from time to time by the registered owner. The Paying Agent/Registrar's reasonable standard
or customary fees and charges for assigning,transferring, converting and exchanging any Certificate
or portion thereof will be paid by the Issuer. In any circumstance, any taxes or governmental charges
required to be paid with respect thereto shall be paid by the one requesting such assignment,transfer,
conversion or exchange, as a condition precedent to the exercise of such privilege. The Paying
Agent/Registrar shall not be required to make any such transfer, conversion, or exchange (i) during
the period commencing with the close of business on any Record Date and ending with the opening
of business on the next following principal or interest payment date, or (ii) with respect to any
Certificate or any portion thereof called for redemption prior to maturity, within 45 days prior to its
redemption date.
IN THE EVENT any Paying Agent/Registrar for the Certificates is changed by the Issuer,
resigns, or otherwise ceases to act as such,the Issuer has covenanted in the Certificate Ordinance that
it promptly will appoint a competent and legally qualified substitute therefor, and cause written notice
thereof to be mailed to the registered owners of the Certificates.
IT IS HEREBY certified, recited and covenanted that this Certificate has been duly and
validly authorized, issued and delivered; that all acts, conditions and things required or proper to be
performed, exist and be done precedent to or in the authorization, issuance and delivery of this
Certificate have been performed, existed and been done in accordance with law;that this Certificate
is a general obligation of said Issuer, issued on the full faith and credit thereof; and that annual ad
valorem taxes sufficient to provide for the payment of the interest on and principal of this Certificate,
as such interest comes due and such principal matures, have been levied and ordered to be levied
against all taxable property in said Issuer, and have been pledged for such payment, within the limit
prescribed by law, and that this Certificate is additionally secured by and payable from a pledge 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 said revenues, all as provided in the Certificate Ordinance.
BY BECOMING the registered owner of this Certificate, the registered owner thereby
acknowledges all of the terms and provisions of the Certificate Ordinance,agrees to be bound by such
terms and provisions, acknowledges that the Certificate Ordinance is duly recorded and available for
inspection in the official minutes and records of the governing body of the Issuer, and agrees that the
terms and provisions of this Certificate and the Certificate Ordinance constitute a contract between
each registered owner hereof and the Issuer.
IN WITNESS WHEREOF,the Issuer has caused this Certificate to be signed with the manual
or facsimile signature of the Mayor of the Issuer and countersigned with the manual or facsimile
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signature of the Town Secretary of said Issuer,and has caused the official seal of the Issuer to be duly
impressed, or placed in facsimile, on this Certificate.
(signature) (signature)
Town Secretary Mayor
(SEAL)
(b) [Form of Paying Agent/Registrar's Authentication Certificate]
PAYING AGENT/REGISTRAR'S AUTHENTICATION CERTIFICATE
(To be executed if this Certificate is not accompanied by an
executed Registration Certificate of the Comptroller
of Public Accounts of the State of Texas)
It is hereby certified that this Certificate has been issued under the provisions of the Certificate
Ordinance described in the text of this Certificate; and that this Certificate has been issued in
conversion or replacement of,or in exchange for, a certificate, certificates,or a portion of a certificate
or certificates of a series that originally was approved by the Attorney General of the State of Texas
and registered by the Comptroller of Public Accounts of the State of Texas.
Dated:
U.S. Bank National Association
Houston, Texas
Paying Agent/Registrar
By:
Authorized Representative
(c) [Form of Assignment]
ASSIGNMENT
For value received, the undersigned hereby sells, assigns and transfers unto
Please insert Social Security or Taxpayer Identification Number of Transferee
(Please print or typewrite name and address, including zip code, of Transferee.)
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the within Certificate and all rights thereunder, and hereby irrevocably constitutes and appoints
,attorney,to register the transfer ofthe within
Certificate on the books kept for registration thereof,with full power of substitution in the premises.
Dated:
Signature Guaranteed:
NOTICE: Signature(s) must be guaranteed NOTICE: The signature above must
by an eligible guarantor institution correspond with the name of the registered
participating in a securities transfer owner as it appears upon the front of this
association recognized signature guarantee Certificate in every particular, without
program. alteration or enlargement or any change
whatsoever.
(d) [Form of Registration Certificate of the Comptroller of Public Accounts]
COMPTROLLER'S REGISTRATION CERTIFICATE: REGISTER NO.
I hereby certify that this Certificate has been examined, certified as to validity and approved
by the Attorney General of the State of Texas, and that this Certificate has been registered by the
Comptroller of Public Accounts of the State of Texas.
Witness my signature and seal this
Comptroller of Public Accounts of the State of Texas
(COMPTROLLER'S SEAL)
(e) [Initial Certificate Insertions]
(i) The initial Certificate shall be in the form set forth is paragraph (a) of this Section,
except that:
A. immediately under the name of the Certificate, the headings "Interest Rate"
and "Maturity Date" shall both be completed with the words "As shown below" and
"CUSIP No. " shall be deleted.
B. the first paragraph shall be deleted and the following will be inserted:
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"THE TOWN OF PROSPER, TEXAS (the "Issuer"), being a political subdivision and
municipal corporation of the State of Texas, hereby promises to pay to the Registered Owner
specified above, or registered assigns (hereinafter called the "Registered Owner"), on August 15 in
each of the years, in the principal installments and bearing interest at the per annum rates set forth in
the following schedule:
Years Principal Installments Interest Rates
(Information from Section 2 to be inserted)
The Issuer promises to pay interest on the unpaid principal amount hereof(calculated on the basis
of a 360-day year of twelve 30-day months)from August 15,2006 at the respective Interest Rate per
annum specified above. Interest is payable on February 15, 2007 and semiannually on each August
15 and February 15 thereafter to the date of payment of the principal installment specified above, or
the date of redemption prior to maturity;except,that if this Certificate is required to be authenticated
and the date of its authentication is later than the first Record Date (hereinafter defined), such
Principal Amount shall bear interest from the interest payment date next preceding the date of
authentication, unless such date of authentication is after any Record Date but on or before the next
following interest payment date, in which case such principal amount shall bear interest from such
next following interest payment date; provided, however, that if on the date of authentication hereof
the interest on the Certificate or Certificates, if any, for which this Certificate is being exchanged is
due but has not been paid, then this Certificate shall bear interest from the date to which such interest
has been paid in full."
C. The Initial Certificate shall be numbered "T-1."
Section 5. INTEREST AND SINKING FUND. A special "Interest and Sinking Fund" is
hereby created and shall be established and maintained by the Issuer at an official depository bank of
the Issuer. Said 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
Certificates. All amounts received from the sale ofthe Certificates as accrued interest and ad valorem
taxes levied and collected for and on account of the Certificates shall be deposited, as collected, to
the credit of said Interest and Sinking Fund. During each year while any of the Certificates are
outstanding and unpaid, the governing body of the Issuer shall compute and ascertain a rate and
amount of ad valorem tax that will be sufficient to raise and produce the money required to pay the
interest on the Certificates as such interest comes due, and to provide and maintain a sinking fund
adequate to pay the principal of the Certificates as such principal matures(but never less than 2% of
the original amount of the Certificates as a sinking fund each year); and said tax shall be based on the
latest approved tax rolls of the Issuer, with full allowances being made for tax delinquencies and the
cost of tax collection. Said rate and amount of ad valorem tax is hereby levied, and is hereby ordered
to be levied, against all taxable property in the Issuer, for each year while any of the Certificates are
outstanding and unpaid, and said tax shall be assessed and collected each such year and deposited to
the credit of the aforesaid Interest and Sinking Fund. Said ad valorem taxes sufficient to provide for
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the payment of the interest on and principal of the Certificates, 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 Certificates are additionally secured by and payable
from a pledge 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, 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 the Surplus Revenues then on deposit in the Interest and Sinking Fund.
Section 7. DEFEASANCE OF CERTIFICATES. (a) Any Certificate and the interest
thereon shall be deemed to be paid, retired and no longer outstanding (a "Defeased Certificate")
within the meaning of this Ordinance, except to the extent provided in subsection(d) of this Section
7, when payment of the principal of such Certificate, plus interest thereon to the due date (whether
such due date be by reason of maturity or otherwise) either(i) shall have been made or caused to be
made in accordance with the terms thereof, or(ii) shall have been provided for on or before such due
date by irrevocably depositing with or making available to the Paying Agent/Registrar in accordance
with an escrow agreement or other instrument (the "Future Escrow Agreement") for such payment
(1)lawful money of the United States of America sufficient to make such payment or(2)Defeasance
Securities that mature as to principal and interest in such amounts and at such times as will insure the
availability,without reinvestment, of sufficient money to provide for such payment,and when proper
arrangements have been made by the Issuer with the Paying Agent/Registrar for the payment of its
services until all Defeased Certificates shall have become due and payable. At such time as a
Certificate shall be deemed to be a Defeased Certificate hereunder, as aforesaid, such Certificate and
the interest thereon shall no longer be secured by, payable from, or entitled to the benefits of, the ad
valorem taxes 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. Notwithstanding any
other provision of this Ordinance to the contrary, it is hereby provided that any determination not to
redeem Defeased Certificates that is made in conjunction with the payment arrangements specified
in subsection 7(a)(i) or(ii) shall not be irrevocable, provided that: (1) in the proceedings providing
for such payment arrangements, the Issuer expressly reserves the right to call the Defeased
Certificates for redemption; (2) gives notice of the reservation of that right to the owners of the
Defeased Certificates immediately following the making of the payment arrangements;and(3)directs
that notice of the reservation be included in any redemption notices that it authorizes.
(b) Any moneys so deposited with the Paying Agent/Registrar may at the written direction
of the Issuer be invested in Defeasance Securities,maturing in the amounts and times as hereinbefore
set forth,and all income from such Defeasance Securities received by the Paying Agent/Registrar that
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is not required for the payment of the Certificates and interest thereon, with respect to which such
money has been so deposited, shall be turned over to the Issuer, or deposited as directed in writing
by the Issuer. Any Future Escrow Agreement pursuant to which the money and/or Defeasance
Securities are held for the payment of Defeased Certificates may contain provisions permitting the
investment or reinvestment of such moneys in Defeasance Securities or the substitution of other
Defeasance Securities upon the satisfaction of the requirements specified in subsection 7(a)(i)or(ii).
All income from such Defeasance Securities received by the Paying Agent/Registrar that is not
required for the payment of the Defeased Certificates, with respect to which such money has been
so deposited, shall be remitted to the Issuer or deposited as directed in writing by the Issuer.
(c) The term "Defeasance Securities" means (i) direct, noncallable obligations of the
United States of America, including obligations that are unconditionally guaranteed by the United
States of America, (ii) noncallable obligations of an agency or instrumentality of the United States
of America, including obligations that are unconditionally guaranteed or insured by the agency or
instrumentality and that, on the date of the purchase thereof are rated as to investment quality by a
nationally recognized investment rating firm not less than AAA or its equivalent, and(iii)noncallable
obligations of a state or an agency or a county, municipality, or other political subdivision of a state
that have been refunded and that, on the date the governing body of the Issuer adopts or approves
the proceedings authorizing the financial arrangements are rated as to investment quality by a
nationally recognized investment rating firm not less than AAA or its equivalent.
(d) Until all Defeased Certificates shall have become due and payable, the Paying
Agent/Registrar shall perform the services of Paying Agent/Registrar for such Defeased Certificates
the same as if they had not been defeased, and the Issuer shall make proper arrangements to provide
and pay for such services as required by this Ordinance.
(e) In the event that the Issuer elects to defease less than all of the principal amount of
Certificates of a maturity, the Paying Agent/Registrar shall select, or cause to be selected, such
amount of Certificates by such random method as it deems fair and appropriate.
Section 8. DAMAGED, MUTILATED, LOST, STOLEN, OR DESTROYED
CERTIFICATES. (a) Replacement Certificates. In the event any outstanding Certificate is damaged,
mutilated, lost, stolen or destroyed, the Paying Agent/Registrar shall cause to be printed, executed
and delivered, a new certificate of the same principal amount, maturity and interest rate, as the
damaged, mutilated, lost, stolen or destroyed Certificate, in replacement for such Certificate in the
manner hereinafter provided.
(b) Application for Replacement Certificates. Application for replacement of damaged,
mutilated, lost, stolen or destroyed Certificates shall be made by the registered owner thereof to the
Paying Agent/Registrar. In every case of loss, theft or destruction of a Certificate, the registered
owner applying for a replacement certificate shall furnish to the Issuer and to the Paying
Agent/Registrar such security or indemnity as may be required by them to save each of them harmless
from any loss or damage with respect thereto. Also, in every case of loss, theft or destruction of a
Certificate, the registered owner shall furnish to the Issuer and to the Paying Agent/Registrar
14
evidence to their satisfaction of the loss, theft or destruction of such Certificate, as the case may be.
In every case of damage or mutilation of a Certificate, the registered owner shall surrender to the
Paying Agent/Registrar for cancellation the Certificate so damaged or mutilated.
(c) No Default Occurred. Notwithstanding the foregoing provisions of this Section, in
the event any such Certificate shall have matured, and no default has occurred that is then continuing
in the payment of the principal of, redemption premium, if any, or interest on the Certificate, the
Issuer may authorize the payment of the same (without surrender thereof except in the case of a
damaged or mutilated Certificate) instead of issuing a replacement Certificate, provided security or
indemnity is furnished as above provided in this Section.
(d) Charge for Issuing Replacement Certificates. Prior to the issuance of any replacement
certificate, the Paying Agent/Registrar shall charge the registered owner of such Certificate with all
legal, printing, and other expenses in connection therewith. Every replacement certificate issued
pursuant to the provisions of this Section by virtue of the fact that any Certificate is lost, stolen or
destroyed shall constitute a contractual obligation of the Issuer whether or not the lost, stolen or
destroyed Certificate shall be found at any time, or be enforceable by anyone, and shall be entitled to
all the benefits of this Ordinance equally and proportionately with any and all other Certificates duly
issued under this Ordinance.
(e) Authority for Issuing Replacement Certificates. In accordance with Subchapter D of
Chapter 1201, Government Code, this Section 8 of this Ordinance shall constitute authority for the
issuance of any such replacement certificate without necessity of further action by the governing body
of the Issuer or any other body or person, and the duty of the replacement of such certificates is
hereby authorized and imposed upon the Paying Agent/Registrar, and the Paying Agent/Registrar
shall authenticate and deliver such Certificates in the form and manner and with the effect, as
provided in Section 3(a) of this Ordinance for Certificates issued in conversion and exchange for
other Certificates.
Section 9. CUSTODY,APPROVAL,AND REGISTRATION OF CERTIFICATES;BOND
COUNSEL'S OPINION AND ENGAGEMENT; ATTORNEY GENERAL FILING FEE; CUSIP
NUMBERS AND CONTINGENT INSURANCE PROVISION, IF OBTAINED. (a) The Mayor
of the Issuer is hereby authorized to have control of the Certificates initially issued and delivered
hereunder and all necessary records and proceedings pertaining to the Certificates pending their
delivery and their investigation, examination, and approval by the Attorney General of the State of
Texas, and their registration by the Comptroller of Public Accounts of the State of Texas. Upon
registration of the Certificates said Comptroller of Public Accounts(or a deputy designated in writing
to act for said Comptroller) shall manually sign the Comptroller's Registration Certificate attached
to such Certificates, and the seal of said Comptroller shall be impressed, or placed in facsimile, on
such Certificate. The approving legal opinion of the Issuer's Bond Counsel and the assigned CUSIP
numbers may, at the option of the Issuer, be printed on the Certificates issued and delivered under
this Ordinance, but neither shall have any legal effect, and shall be solely for the convenience and
information of the registered owners of the Certificates. In addition, if bond insurance is obtained,
the Certificates may bear an appropriate legend as provided by the insurer.
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(b) The obligation of the initial purchaser to accept delivery of the Certificates is subject
to the initial purchaser being furnished with the final, approving opinion of McCall, Parkhurst &
Horton L.L.P., bond counsel to the Issuer, which opinion shall be dated as of and delivered on the
date of initial delivery of the Certificates to the initial purchaser. The engagement of such firm as
bond counsel to the Issuer in connection with issuance, sale and delivery of the Certificates is hereby
approved and confirmed. The execution and delivery of an engagement letter between the Issuer and
such firm, with respect to such services as bond counsel, is hereby authorized in such form as may
be approved by the Mayor of the Issuer and 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 Certificates by the Attorney General of Texas for review and
approval, a statutory fee (an amount equal to 0.1% principal amount of the Certificates, subject to
a minimum of$750 and a maximum of$9,500) is required to be paid to the Attorney General upon
the submission of the transcript of proceedings for the Certificates. The Issuer hereby authorizes and
directs that a check in the amount of the Attorney General filing fee for the Certificates,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 of the Certificates.
Section 10. COVENANTS REGARDING TAX EXEMPTION OF INTEREST ON THE
CERTIFICATES. The Issuer covenants to take any action necessary to assure, or refrain from any
action that would adversely affect,the treatment of the Certificates as Obligation described in section
103 of the Code, the interest on which is not includable in the "gross income" of the holder for
purposes of federal income taxation. In furtherance thereof, the Issuer covenants as follows:
(a) to take any action to assure that no more than 10 percent of the proceeds of
the Certificates (less amounts deposited to a reserve fund, if any) are used for any "private
business use," as defined in section 141(b)(6) of the Code or, if more than 10 percent of the
proceeds or the projects financed therewith are so used, such amounts, whether or not
received by the Issuer, with respect to such private business use, do not, under the terms of
this Ordinance or any underlying arrangement,directly or indirectly, secure or provide for the
payment of more than 10 percent of the debt service on the Certificates, in contravention of
section 141(b)(2) of the Code;
(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 Certificates or the
projects financed therewith (less amounts deposited into a reserve fund, if any) then the
amount in excess of 5 percent is used for a "private business use" that is "related" and not
"disproportionate,"within the meaning of section 141(b)(3)of the Code,to the governmental
use;
(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 Certificates (less amounts deposited into a
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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 Certificates
being treated as "private activity bonds" within the meaning of section 141(b) of the Code;
(e) to refrain from taking any action that would result in the Certificates being
"federally guaranteed" within the meaning of section 149(b) of the Code;
(f) to refrain from using any portion of the proceeds of the Certificates, directly
or indirectly, to acquire or to replace funds that were used, directly or indirectly, to acquire
investment property(as defined in section 148(b)(2)of the Code)that produces a materially
higher yield over the term of the Certificates, other than investment property acquired with--
(1) proceeds ofthe Certificates invested for a reasonable temporary period
of 3 years or less or, in the case of a refunding bond, for a period of 30 days or less
until such proceeds are needed for the purpose for which the bonds are issued,
(2) amounts invested in a bona fide debt service fund,within the meaning
of section 1.148-1(b) of the Treasury Regulations, and
(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
Certificates;
(g) to otherwise restrict the use of the proceeds of the Certificates or amounts
treated as proceeds of the Certificates, as may be necessary, so that the Certificates do not
otherwise contravene the requirements of section 148 of the Code(relating to arbitrage)and,
to the extent applicable, section 149(d) of the 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 Certificates) an amount that is at least equal
to 90 percent of the"Excess Earnings,"within the meaning of section 148(f)of the Code and
to pay to the United States of America, not later than 60 days after the Certificates have been
paid in full, 100 percent of the amount then required to be paid as a result of Excess Earnings
under section 148(f) of the Code.
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 certificateholders. The
Rebate Fund is established for the additional purpose of compliance with section 148 of the Code.
For purposes of the foregoing (a) and (b), the Issuer understands that the term "proceeds"
includes "disposition proceeds" as defined in the Treasury Regulations and, in the case of refunding
17
bonds, transferred proceeds (if any) and proceeds of the refunded bonds expended prior to the date
of issuance of the Certificates. It is the understanding of the Issuer that the covenants contained
herein are intended to assure compliance with the Code and any regulations or rulings promulgated
by the U.S. Department of the Treasury pursuant thereto. In the event that regulations or rulings are
hereafter promulgated that modify or expand provisions ofthe Code, as applicable to the Certificates,
the Issuer will not be required to comply with any covenant contained herein to the extent that such
failure to comply, in the opinion of nationally recognized bond counsel, will not adversely affect the
exemption from federal income taxation of interest on the Certificates under section 103 of the Code.
In the event that regulations or rulings are hereafter promulgated that impose additional requirements
applicable to the Certificates, the Issuer agrees to comply with the additional requirements to the
extent necessary, in the opinion of nationally recognized bond counsel, to preserve the exemption
from federal income taxation of interest on the Certificates under section 103 of the Code. In
furtherance of such intention, the Issuer hereby authorizes and directs the Mayor to execute any
documents, certificates or reports required by the Code and to make such elections, on behalf of the
Issuer, that may be permitted by the Code as are consistent with the purpose for the issuance of the
Certificates.
Section 11. SALE OF CERTIFICATES; APPROVAL OF OFFICIAL STATEMENT;
APPLICATION OF PREMIUM AND ACCRUED INTEREST. (a) The Certificates are hereby
initially sold and shall be delivered to RBC Capital Markets (the "Underwriter") for cash at a price
of par plus accrued interest thereon to the date of delivery. The Certificates shall initially be
registered in the name of"RBC Capital Markets." The Certificates are sold to the Underwriter at a
price of$11,983,888.35(representing the par amount of the Certificates, plus a net original issue
premium of$10,314.20, less underwriter's discount on the Certificates of$77,954.35, plus accrued
interest on the Certificates in the amount of$51,528.50). The net original issue premium shall be
used to pay a portion of the underwriter's discount and the accrued interest received from the sale of
the Certificates shall be deposited into the Interest and Sinking Fund. It is hereby officially found,
determined, and declared that the terms of this sale are the most advantageous reasonably obtainable.
(b) The Issuer hereby approves the form and content of the Official Statement relating to the
Certificates and any addenda, supplement or amendment thereto, and approves the distribution of
such Official Statement in the reoffering of the Certificates by the Underwriter in final form,with such
changes therein or additions thereto as the officer executing the same may deem advisable, such
determination to be conclusively evidenced by his execution thereof. The distribution and use of the
Preliminary Official Statement dated August 15, 2006 prior to the date hereof is hereby ratified and
confirmed.
Section 12. ALLOCATION OF CERTIFICATE PROCEEDS. The Issuer covenants to
account for the expenditure of sale proceeds and investment earnings to be used for the construction
and acquisition of the Project on its books and records by allocating proceeds to expenditures within
18 months of the later of the date that (1) the expenditure is made, or (2) the Project is completed.
The foregoing notwithstanding, the Issuer shall not expend proceeds of the sale of the Certificates
or investment earnings thereon more than 60 days after the earlier of(1) the fifth anniversary of the
delivery of the Certificates, or (2) the date the Certificates are retired, unless the Issuer obtains an
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opinion of nationally-recognized bond counsel that such expenditure will not adversely affect the
status, for federal income tax purposes, of the Certificates or the interest thereon. For purposes
hereof,the Issuer shall not be obligated to comply with this covenant if it obtains an opinion that such
failure to comply will not adversely affect the excludability for federal income tax purposes from
gross income of the interest.
Section 13. DISPOSITION OF PROJECT. The Issuer covenants that the Project will not
be sold or otherwise disposed in a transaction resulting in the receipt by the Issuer of cash or other
compensation, unless the Issuer obtains an opinion of nationally-recognized bond counsel that such
sale or other disposition will not adversely affect the tax-exempt status of the Certificates. For
purposes of the foregoing, the portion of the property comprising personal property and disposed in
the ordinary course shall not be treated as a transaction resulting in the receipt of cash or other
compensation. For purposes hereof, the Issuer shall not be obligated to comply with this covenant
if it obtains a legal opinion that such failure to comply will not adversely affect the excludability for
federal income tax proposes from gross income of the interest.
Section 14. INTEREST EARNINGS ON CERTIFICATE PROCEEDS. Interest earnings
derived from the investment of proceeds from the sale of the Certificates shall be used along with
other certificate proceeds for the Project; provided that after completion of such purpose, if any of
such interest earnings remain on hand, such interest earnings shall be deposited in the Interest and
Sinking Fund. It is further provided, however,that any interest earnings on certificate proceeds that
are required to be rebated to the United States of America pursuant to Section 10 hereof in order to
prevent the Certificates from being arbitrage bonds shall be so rebated and not considered as interest
earnings for the purposes of this Section.
Section 15. CONSTRUCTION FUND. The Issuer hereby creates and establishes and shall
maintain on the books of the Issuer a separate fund to be entitled the "Series 2006 Combination Tax
and Revenue Certificate of Obligation Construction Fund" for use by the Issuer for payment of all
lawful costs associated with the acquisition and construction of the Project as hereinbefore provided.
Upon payment of all such costs, any moneys remaining on deposit in said Fund shall be transferred
to the Interest and Sinking Fund. Amounts so deposited to the Interest and Sinking Fund shall be
used in the manner described in Section 5 of this Ordinance.
Section 16 COMPLIANCE WITH RULE 15c2-12.
(a) Annual Reports. (i) The Issuer shall provide annually to each NRMSIR and any SID,
within six months after the end of each fiscal year ending in or after 2006, financial information and
operating data with respect to the Issuer of the general type included in the final Official Statement
authorized by Section 15 of this Ordinance,being the information described in Exhibit A hereto. Any
financial statements so to be provided shall be (1) prepared in accordance with the accounting
principles described in Exhibit A hereto, or such other accounting principles as the Issuer may be
required to employ from time to time pursuant to state law or regulation,and(2)audited,if the Issuer
commissions an audit of such statements and the audit is completed within the period during which
they must be provided. If the audit of such financial statements is not complete within such period,
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then the Issuer shall provide unaudited financial statements by the required time and will provide
audited financial statements for the applicable fiscal year to each NRMSIR and any SID, when and
if the audit report on such statements become available.
(ii) If the Issuer changes its fiscal year, it will notify each NRMSIR and any SID of the
change (and of the date of the new fiscal year end) prior to the next date by which the Issuer
otherwise would be required to provide financial information and operating data pursuant to this
Section. The financial information and operating data to be provided pursuant to this Section may
be set forth in full in one or more documents or may be included by specific reference to any
document (including an official statement or other offering document, if it is available from the
MSRB) that theretofore has been provided to each NRMSIR and any SID or filed with the SEC.
(b) Material Event Notices. The Issuer shall notify any SID and either each NRMSIR or the
MSRB, in a timely manner, of any of the following events with respect to the Certificates, if such
event is material within the meaning of the federal securities laws:
1. Principal and interest payment delinquencies;
2. Non-payment related defaults;
3. Unscheduled draws on debt service reserves reflecting financial difficulties;
4. Unscheduled draws on credit enhancements reflecting financial difficulties;
5. Substitution of credit or liquidity providers, or their failure to perform;
6. Adverse tax opinions or events affecting the tax-exempt status of the
Certificates;
7. Modifications to rights of holders of the Certificates;
8. Certificate calls;
9. Defeasances;
10. Release, substitution, or sale of property securing repayment of the
Certificates; and
11. Rating changes.
The Issuer shall notify any SID and either each NRMSIR or the MSRB, in a timely manner, of any
failure by the Issuer to provide financial information or operating data in accordance with subsection
(a) of this Section by the time required by such subsection.
(c) Limitations, Disclaimers, and Amendments. (i) The Issuer shall be obligated to observe
and perform the covenants specified in this Section for so long as, but only for so long as, the Issuer
remains an"obligated person" with respect to the Certificates within the meaning of the Rule, except
that the Issuer in any event will give the notice required by Subsection(b) hereof of any Certificate
calls and defeasance that cause the Issuer to no longer be such an "obligated person".
(ii) The provisions of this Section are for the sole benefit of the registered owners and
beneficial owners of the Certificates, and nothing in this Section, express or implied, shall give any
benefit or any legal or equitable right, remedy, or claim hereunder to any other person. The Issuer
undertakes to provide only the financial information,operating data,financial statements,and notices
20
which it has expressly agreed to provide pursuant to this Section and does not hereby undertake to
provide any other information that may be relevant or material to a complete presentation of the
Issuer's financial results, condition, or prospects or hereby undertake to update any information
provided in accordance with this Section or otherwise, except as expressly provided herein. The
Issuer does not make any representation or warranty concerning such information or its usefulness
to a decision to invest in or sell Certificates at any future date.
(iii) UNDER NO CIRCUMSTANCES SHALL THE ISSUER BE LIABLE TO THE
REGISTERED OWNER OR BENEFICIAL OWNER OF ANY CERTIFICATE OR ANY OTHER
PERSON,IN CONTRACT OR TORT,FOR DAMAGES RESULTING IN WHOLE OR IN PART
FROM ANY BREACH BY THE ISSUER,WHETHER NEGLIGENT OR WITHOUT FAULT ON
ITS PART,OF ANY COVENANT SPECIFIED IN THIS SECTION,BUT EVERY RIGHT AND
REMEDY OF ANY SUCH PERSON, IN CONTRACT OR TORT, FOR OR ON ACCOUNT OF
ANY SUCH BREACH SHALL BE LIMITED TO AN ACTION FOR MANDAMUS OR SPECIFIC
PERFORMANCE.
(iv) No default by the Issuer in observing or performing its obligations under this Section
shall comprise a breach of or default under the Ordinance for purposes of any other provision of this
Ordinance. Nothing in this Section is intended or shall act to disclaim,waive, or otherwise limit the
duties of the Issuer under federal and state securities laws.
(v) The provisions of this Section may be amended by the Issuer from time to time to adapt
to changed circumstances that arise from a change in legal requirements,a change in law,or a change
in the identity, nature, status, or type of operations of the Issuer,but only if(1)the provisions of this
Section, as so amended, would have permitted an underwriter to purchase or sell Certificates in the
primary offering of the Certificates in compliance with the Rule,taking into account any amendments
or interpretations of the Rule since such offering as well as such changed circumstances and(2)either
(a)the registered owners of a majority in aggregate principal amount(or any greater amount required
by any other provision of this Ordinance that authorizes such an amendment) of the outstanding
Certificates consent to such amendment or(b) a person that is unaffiliated with the Issuer(such as
nationally recognized bond counsel) determined that such amendment will not materially impair the
interest of the registered owners and beneficial owners of the Certificates. If the Issuer so amends
the provisions of this Section, it shall include with any amended financial information or operating
data next provided in accordance with subsection(a)ofthis Section an explanation,in narrative form,
of the reason for the amendment and of the impact of any change in the type of financial information
or operating data so provided. The Issuer may also amend or repeal the provisions of this continuing
disclosure agreement if the SEC amends or repeals the applicable provision of the Rule or a court of
final jurisdiction enters judgment that such provisions of the Rule are invalid, but only if and to the
extent that the provisions of this sentence would not prevent an underwriter from lawfully purchasing
or selling Certificates in the primary offering of the Certificates.
(d) Definitions. As used in this Section, the following terms have the meanings ascribed to
such terms below:
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"MSRB" means the Municipal Securities Rulemaking Board.
"NRMSIR" means each person whom the SEC or its staff has determined to be a
nationally recognized municipal securities information repository within the meaning
of the Rule from time to time.
"Rule" means SEC Rule 15c2-12, as amended from time to time.
"SEC" means the United States Securities and Exchange Commission.
"SID" means any person designated by the State of Texas or an authorized
department, officer, or agency thereof as, and determined by the SEC or its staff to
be, a state information depository within the meaning of the Rule from time to time.
Section 17. METHOD OF AMENDMENT. The Issuer hereby reserves the right to amend
this Ordinance subject to the following terms and conditions, to-wit:
(a) The Issuer may from time to time, without the consent of any holder, except as
otherwise required by paragraph(b)below, amend or supplement this Ordinance in order to (i) cure
any ambiguity, defect or omission in this Ordinance that does not materially adversely affect the
interests of the holders, (ii) grant additional rights or security for the benefit of the holders, (iii) add
events of default as shall not be inconsistent with the provisions of this Ordinance and which shall not
materially adversely affect the interests of the holders, (v) qualify this Ordinance under the Trust
Indenture Act of 1939, as amended, or corresponding provisions of federal laws from time to time
in effect, or (iv) make such other provisions in regard to matters or questions arising under this
Ordinance as shall not be inconsistent with the provisions of this Ordinance and which shall not in the
opinion of the Issuer's Bond Counsel materially adversely affect the interests of the holders.
(b) Except as provided in paragraph(a) above, the holders of Certificates aggregating in
principal amount 51% of the aggregate principal amount of then outstanding Certificates which are
the subject of a proposed amendment shall have the right from time to time to approve any
amendment hereto which may be deemed necessary or desirable by the Issuer; provided, however,
that without the consent of 100%of the holders in aggregate principal amount ofthe then outstanding
Certificates, nothing herein contained shall permit or be construed to permit amendment of the terms
and conditions of this Ordinance or in any of the Certificates so as to:
(1) Make any change in the maturity of any of the outstanding Certificates;
(2) Reduce the rate of interest borne by any of the outstanding Certificates;
(3) Reduce the amount of the principal of,or redemption premium,if any, payable
on any outstanding Certificates;
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(4) Modify the terms of payment of principal or of interest or redemption
premium on outstanding Certificates or any of them or impose any condition with
respect to such payment; or
(5) Change the minimum percentage of the principal amount of any series of
Certificates necessary for consent to such amendment.
(c) If at any time the Issuer shall desire to amend this Ordinance under this Section, the
Issuer shall send by U.S. mail to each registered owner of the affected Certificates a copy of the
proposed amendment and cause notice of the proposed amendment to be published at least once in
a financial publication published in The City of New York,New York or in the State of Texas. Such
published notice shall briefly set forth the nature of the proposed amendment and shall state that a
copy thereof is on file at the office of the Issuer for inspection by all holders of such Certificates.
(d) Whenever at any time within one year from the date of publication of such notice the
Issuer shall receive an instrument or instruments executed by the holders of at least 51%in aggregate
principal amount of all of the Certificates then outstanding which are required for the amendment,
which instrument or instruments shall refer to the proposed amendment and which shall specifically
consent to and approve such amendment, the Issuer may adopt the amendment in substantially the
same form.
(e) Upon the adoption of any amendatory Ordinance pursuant to the provisions of this
Section, this Ordinance shall be deemed to be modified and amended in accordance with such
amendatory Ordinance, and the respective rights, duties, and obligations of the Issuer and all holders
of such affected Certificates shall thereafter be determined, exercised, and enforced, subject in all
respects to such amendment.
(f) Any consent given by the holder of a Certificate pursuant to the provisions of this
Section shall be irrevocable for a period of six months from the date of the publication of the notice
provided for in this Section, and shall be conclusive and binding upon all future holders of the same
Certificate during such period. Such consent may be revoked at any time after six months from the
date of the publication of said notice by the holder who gave such consent, or by a successor in title,
by filing notice with the Issuer, but such revocation shall not be effective if the holders of 51% in
aggregate principal amount of the affected Certificates then outstanding,have,prior to the attempted
revocation, consented to and approved the amendment.
For the purposes of establishing ownership ofthe Certificates,the Issuer shall rely solely upon
the registration of the ownership of such Certificates on the registration books kept by the Paying
Agent/Registrar.
Section 18. CONTINUED PERFECTION OF SECURITY INTEREST. Chapter 1208,
Government Code, applies to the issuance of the Certificates and the pledge of the ad valorem taxes
granted by the Issuer under Section 5 of this Ordinance and the pledge of the Surplus Revenues under
Section 6 of this Ordinance, and such pledge is therefore valid, effective, and perfected. If Texas law
23
is amended at any time while the Certificates are outstanding and unpaid such that the pledge of the
taxes granted by the Issuer under Section 5 of this Ordinance or the pledge of the Surplus Revenues
under Section 6 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 Certificates the
perfection of the security interest in said pledges, 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
pledges to occur.
Section 19. INCONSISTENT PROVISIONS. All indentures, ordinances or resolutions, or
parts thereof, that are in conflict or inconsistent with any provision of this Ordinance are hereby
repealed to the extent of such conflict and the provisions of this Ordinance shall be and remain
controlling as to the matters contained herein.
Section 20. 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 21. 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 this governing body hereby declares
that this Ordinance would have been enacted without such invalid provision.
Section 22. 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 any of the Certificates when
the same becomes due and payable; or
(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 Owners, including, but not limited to, their prospect or ability to be repaid in
accordance with this Ordinance, and the continuation thereof for a period of 60 days after
notice of such default is given by any Registered Owner to the Issuer.
Section 22. REMEDIES FOR DEFAULT. (a) Upon the happening of any Event of Default,
then and in every case, any Registered Owner or an authorized representative thereof, including,but
not limited to, a trustee or trustees therefor, may proceed against the may proceed against the Issuer
or the Board of Trustees of the Issuer, as appropriate for the purpose of protecting and enforcing the
rights of the Registered Owners under this Ordinance, by mandamus or other suit, action or special
proceeding in equity or at law, in any court of competent jurisdiction, for any relief permitted by law,
including the specific performance of any covenant or agreement contained herein, or thereby to
enjoin any act or thing that may be unlawful or in violation of any right of the Registered Owners
hereunder or any combination of such remedies.
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(b) It is provided that all such proceedings shall be instituted and maintained for the equal
benefit of all Registered Owners of Certificates then outstanding.
Section 23. 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
Certificates 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 Certificates
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 a Certificate authorized under this Ordinance, such
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 Board
of Trustees of the Issuer.
Section 24. APPROPRIATION. The Issuer hereby appropriates from current funds on hand,
and directs the transfer to the Interest and Sinking Fund for the Certificates of, an amount of money
sufficient to pay the interest due for payment on the Certificates on February 15, 2007 and to pay the
principal and interest due for payment on the Certificates on August 15, 2007.
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Exhibit A
Continuing Disclosure Information
The following information is referred to in Section 16(a) of this Ordinance:
Annual Financial Statements and Operating Data
The financial information and operating data with respect to the Issuer to be provided annually in
accordance with such Section are as specified (and included in the Appendices of the Official
Statement referred to) below:
The quantitative financial information and operating data pertaining to the District ofthe general type
included Tables numbered 1 through 6 and 8 through 16 and in Appendix B of the Official Statement.
The financial statements of the Issuer that will be provided will be unaudited, unless an audit is
performed, in which event the audited financial statements will be made available.
Accounting Principles
The accounting principles referred to in such Section are the accounting principles described in the
notes to the financial statements that are attached to the Official Statement as Exhibit B,or such other
accounting principles as the Issuer may be required to employ from time to time pursuant to state law
or regulation.
A-1
LAW OFFICES
•
McCALL, PARKHURST & HORTON L.L.P.
600 CONGRESS AVENUE 717 NORTH HARWOOD 700 N. ST. MARY'S STREET
1250 ONE AMERICAN CENTER NINTH FLOOR 1525 ONE RIVERWALK PLACE
AUSTIN,TEXAS 78701-3248 DALLAS,TEXAS 75201-6587 SAN ANTONIO,TEXAS 7 8 205-3503
TELEPHONE:512 478-3805 TELEPHONE: 214 754-9200 TELEPHONE: 210 225-2800
FACSIMILE:512 472-0871 FACSIMILE:214 754-9250 FACSIMILE: 210 225-2984
August 22, 2006
Mayor and Members of the Town Council
Town of Prosper
P.O. Box 307
Prosper, Texas 75078
Re: Town of Prosper,Texas Combination Tax and Revenue Certificates of Obligation, Series
2006
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 Town of Prosper(the "Issuer") in connection with the issuance
of the above-referenced Certificates of Obligation (the "Certificates"). We understand that the
Certificates are being issued paying all or a portion of the Town's contractual obligations incurred in
connection with(i)constructing and improving the Town's water system, including the construction
of an elevated water storage tank and water distribution lines, (ii) acquiring, constructing and
equipping municipal park improvements and open space (iii) constructing and improving roads and
streets in the Town and related infrastructure,(iv) extending, constructing and improving the Town's
sewer system, (v) acquiring land and interests in land as may be required in connection with the
purposes described in clauses (i) through (iv), and (vi) paying legal, fiscal, engineering and
architectural fees in connection with these projects. We further understand that the Certificates will
be secured by a pledge of the receipts of an ad valorem tax levied by the Issuer within the limitation
prescribed by law and additionally from the surplus net revenues ofthe Issuer's waterworks and sewer
system. We understand that the Certificates will be issued in the amount of$12,000,000. We further
understand that the Certificates will be sold by the Town Council of the Issuer(the"Town Council")
by negotiated sale on or about August 22, 2006 (the "Sale Date").
A. THE FINANCING
As Bond Counsel to the Issuer, we would like for the Town Council to understand how the
issuance of the Certificates will be effected. I will briefly describe the procedures and certain
applicable law that pertains to the issuance of the Certificates,below. However,you should feel free
to call me at any time to discuss any questions that you or your staff may have.
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(1) The first step in the issuance of the Certificates will be the adoption of a resolution
expressing the Issuer's intention to issue the Certificates, providing for the intended use of the
Certificate proceeds and describing the sources of payment. The resolution will include a notice
that must be published in the local paper on two occasions, with the first publication to be at
least 14 days prior to the adoption of the Certificate Ordinance, described below. The
publication of the notice gives right to voters of the Issuer to present a petition calling for a
referendum on the adoption of the Certificate Ordinance. If no such petition is received from
at least five percent of the registered voters of the Issuer prior to the adoption of the Certificate
Ordinance, then the Issuer may proceed with the issuance without holding an election.
(2) The Certificates will be "ordered to be issued" when and if the Town Council approves an
ordinance(the "Ordinance")on the Sale Date. The Ordinance provides for(i)the terms of the
Certificates,including the principal amortization schedule and interest rates,(ii)the redemption
right of the Issuer with respect to the Certificates, (iii)the Issuer's commitment to levy its debt
service tax each year in an amount sufficient to pay the debt service on the Certificates to the
extent that the other revenues are not on deposit in the Issuer's Interest and Sinking Fund for
the Certificates in amounts sufficient to pay the debt service on the Certificates when the annual
tax levy is set,(iv)the sale of the Certificates to the winning bidder, (v)the approval of a paying
agent agreement to whom you will make semiannual payments sufficient to pay the debt service
on the Certificates, (vi) certain other covenants of the Issuer that are designed to allow the
Issuer to issue the Certificates as tax-exempt obligations and (vii)the Issuer's commitment to
annually provide information to certain persons that describe the Issuer's financial condition,
the status of the Certificates and certain other matters. As you can see, the Ordinance is an
omnibus undertaking of the Issuer that is intended to provide for all actions and undertakings
that are required for the issuance, sale and delivery of the Certificates. 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.
(3) As noted above, the Certificates will be sold to the winning bidder in accordance with the
provisions of the Ordinance and, in addition, the winning bidder will require that the Issuer
make certain representations to the underwriter to the effect that the Issuer is authorized to
issue the Certificates and that it has made full disclosure to the Certificate holders of all material
information. Therefore,if there are any unusual financial,legal or other circumstances affecting
the Issuer which would make such representations or statements made by the Issuer untrue,you
should let your Financial Advisor know about them as soon as possible. As a condition to the
underwriter paying for the Certificates, they will require this firm to deliver our Bond Counsel
opinion to them, through which we will opine that the Certificates are valid obligations of the
Issuer and that, assuming ongoing compliance by the Issuer with the provisions of the
Ordinance, the interest on the Certificates will be exempt from Federal income taxation. State
law will also require the delivery of an opinion of the Texas Attorney General approving the
Certificates.
(4)The Issuer will offer the Certificates into the public debt markets prior to the time that the
Town Council meets to accept the underwriter's offer for the Certificates. Through this
process, the Certificates will be "priced," i.e., interest rates and premiums or discounts, if any,
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for the Certificates will be established. Again, your financial advisor will assist you in the
marketing of the Certificates to the underwriter. On the Sale Date, the Town Council will
consider the terms offered to the Issuer by the winning bidder based upon the market conditions
and other factors that determine interest rates and pricing information. The Issuer, working
with its financial advisor and Bond Counsel, will prepare an offering document called an
"Official Statement" that contains financial and operating data concerning the Issuer, and
information that describes the Certificates. The Issuer is responsible for the information that
is contained in the Official Statement to the extent that it describes the Certificates and the
Issuer.
B. SCOPE OF ENGAGEMENT
In this engagement, we 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 Certificates, the source
of payment and security for the Certificates, and the excludability of interest on the
Certificates from gross income for Federal income tax purposes.
Our Bond Opinion will be delivered by us on the date the Certificates 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 Certificates. 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 Certificates 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.
(2) Prepare and review documents necessary or appropriate to the authorization,issuance and
delivery of the Certificates, 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 Certificates, 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 Certificates 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.
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(4) Review legal issues relating to the structure of the Certificate issue.
(5) Review those sections of the official statement to be disseminated in connection with the
sale of the Certificates that describe the Certificates,the Ordinance pursuant to which they
will be issued and the tax-exempt treatment of the interest on the Certificates for purposes
of federal income taxation.
(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
Certificates.
(7) Draft the continuing disclosure undertaking of 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:
(1) Preparing requests for tax rulings from the Internal Revenue Service, or no action letters
from the Certificates and Exchange Commission.
(2) Preparing state securities law memoranda or investment surveys with respect to the
Certificates.
(3) Drafting state constitutional or legislative amendments.
(4) Pursuing test cases or other litigation.
(5) Expressing any view as to the creditworthiness of the Issuer or the Certificates.
(6) Representing the Issuer in Internal Revenue Service examinations or inquiries, or
Certificates and Exchange Commission investigations.
(7) Except as described in paragraph(7)above, assisting in the preparation of,or opining on,
a continuing disclosure undertaking pertaining to the Certificates or, after Closing,
providing advice concerning any actions necessary to assure compliance with any
continuing disclosure undertaking.
(8) After Closing,providing continuing advice to the Issuer or any other party concerning any
actions necessary to assure that interest paid on the Certificates will continue to be
excludable from gross income for federal income tax purposes(e.g.,our engagement does
not include rebate calculations for the Certificates).
(9) Negotiating the terms of, or opining as to, any investment contract.
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(10) Addressing any other matter not specifically set forth above that is not required to render
our Bond Opinion or our disclosure 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 Certificates. Nevertheless, subsequent to Closing, we
will mail the appropriate Internal Revenue Service Form 8038, prepare and distribute to the
participants in the transaction a transcript of the proceedings pertaining to the Certificates.
D. CONFLICTS
As you are aware,our firm represents many political subdivisions and investment banking firms,
among others, who do business with political subdivisions. 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 Certificates. 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 Certificates 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 Certificates. Execution of this letter
will signify the Issuer's consent to our representation of others consistent with the circumstances
described in this paragraph. A CONFLICT OF INTEREST QUESTIONNAIRE COMPLETED
IN THE FORM PRESCRIBED BY CHAPTER 176 OF THE TEXAS LOCAL
GOVERNMENT CODE, AS AMENDED, WILL BE PROVIDED TO THE ISSUER
E. FEES
Based upon: (i) our current understanding of the terms, structure, size and schedule of the
financing represented by the Certificates;(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 for Bond Counsel services will be $5,000 plus .001 times the
principal amount of the Bonds that is in excess of$1,000,000. In addition,we will be reimbursed for
all travel costs, photocopying, deliveries,long distance telephone charges, telecopier charges and all
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 Certificate
Page 5 of 6
Ordinance, 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 Certificates so that the
Certificates may be approved by the Attorney General in time to meet the closing date of September
25, 2006.
F. 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 dispose of any 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:
Dan . Culver
Accepted and Approved
Town of Prosper
By:
Mayor
Date: August 22, 2006
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