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10-094 - O ORD. 10-094 ORDINANCE OF THE TOWN OF PROSPER, TEXAS AUTHORIZING THE ISSUANCE OF "DOWN OF PROSPER, TEXAS TAX NOTES, SERIES 2010 TABLE OF CONTENTS Section 1. Preambles and Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Section 2. Amount and Purpose of the Notes; Designation, Date, Denominations, Numbers and Maturities of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . 4 Section 3. Characteristics of the Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . _ 5 5 Section 4. Form of Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . 8 Section 5. Tax Levy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . 9 Section 6. Method of Amendment . . . . . . . . . . . . . . . . . . . . . . . . . , . . . . , . . 10 Section 7. Defeasance of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . „ . . . . , . . . . , . . . . „ . 1 I Section 8. Damaged, Mutilated, Lost, Stolen, or Destroyed Notes . . . . . . . . . . . . . . . . . . . 12 Section 9. Custody, Approval, and Registration of Notes; Bond Counsel's Opinion and Engagement of Bond Counsel; Use of Cusip Numbers and Contingent Insurance Provision, if Obtained; Attorney General Filing Fee . . . . . . . . . . . . . . . . . . . . . . . . _ 13 13 Section 10. Covenants Regarding Tax Exemption of Interest on the Notes . , . . . .. . , . , . _ 14 Section 11. Sale of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . , , , . . , , . 16 Section 12. Approval of Official Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Section 13. Further Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . „ , , . . . 17 Section 14. Compliance with Rule 15c2-12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Section 15. Interest Earnings on Note Proceeds;Use of Accrued Interest Received from Sale ofNotes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . 19 Section 16, Disposition of Project . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Section 17, Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . „ . . . . 20 Section 18, Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Section 19. Designation as Qualified Tax-Exempt Obligations 20 Section 20, Continued Perfection of Security Interest . . . . . . . . . . . . . . 20 Section 2l, Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Section 22. Remedies for Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . 21 Section 23, Remedies Not Exclusive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 i ORDINANCE OF THE TOWN COUNCIL OF THE TOWN OF PROSPER, TEXAS, PROVIDING FOR THE ISSUANCE OF TOWN OF PROSPER, TEXAS TAX NOTES, SERIES 2010; PRESCRIBING THE FORM OF THE NOTES; LEVYING AD VALOREM TAXES TO SECURE THE NOTES; AND ORDAINING OTHER MATTERS IN CONNECTION WITH THE ISSUANCE AND SALE OF THE TAX NOTES THE STATE OF TEXAS § COUNTIES OF COLLIN AND DENTON § TOWN OF PROSPER § WHEREAS, pursuant to Chapter 1431, Texas Government Code (hereinafter called the "Act"),the governing body(the"Town Council")of the Town of Prosper(the"Issuer")is authorized and empowered to issue tax notes to pay contractual obligations incurred or to be incurred(i)for the construction of any public work, (ii) for the purchase of materials, supplies, equipment, machinery, buildings,lands and rights-of-way for the Issuer's authorized needs and purposes and(iii)to pay costs of professional services, including a service by a tax appraisal engineer, engineer, architect, attorney, mapmaker, auditor, financial advisor, or fiscal agent; and WHEREAS,in accordance with the provisions ofthe Act,the Town Council hereby finds and determines that tax notes should be issued and sold at this time to finance the costs incurred by the Town in connection with the acquisition and implementation of a radio dispatch center for the Issuer, including radio relay equipment and other improvements associated with a radio communication network for municipal purposes, to purchase ambulances and to pay the costs associated with the issuance of the notes (the "Project"); and WHEREAS, the governing body of the Issuer deems it appropriate to adopt this Ordinance (the "Note Ordinance") and issue the Town of Prosper, Texas Tax Notes, Series 2010(the "Notes") herein authorized as permitted by the Act. NOW, THEREFORE, BE IT ORDAINED BY THE TOWN COUNCIL OF THE TOWN OF PROSPER: Section 1. PREAMBLES AND DEFINITIONS. The Town Council of the Issuer hereby incorporates the recitals set forth in the preamble hereto as if set forth in full at this place and further finds and determines that said recitals are true and correct. Unless the context shall indicate a contrary meaning or intent, the terms below defined, for all purposes of this Ordinance, or any Ordinance amendatory or supplemental hereto, shall be construed, are used, and are intended to have meanings as follows: "Act" —Chapter 1431, Texas Government Code, as amended. "Bond Counsel" — McCall, Parkhurst & Horton L.L.P., or such other firm of attorneys of nationally recognized standing in the field of law relating to municipal bonds selected by the Issuer. "Business Day" — Any day that is not a Saturday, Sunday, legal holiday, or a day on which banking institutions in the State or in the city where the Paying Agent/Registrar is located are authorized by law or executive order to close. "Code" — The Internal Revenue Code of 1986, and any amendments thereto. "Issuer"—The Town of Prosper, Texas, a political subdivision and home rule municipality of the State. "Note" and "Notes" —Individually, each note of that series known as the "Town of Prosper, Texas Tax Note, Series 2010", dated October 1, 2010, authorized by this Ordinance. Collectively, "Notes" shall mean and include collectively the Note initially issued and delivered pursuant to this Ordinance and all substitute Notes exchanged therefor, as well as all other substitute Notes and replacement Notes issued pursuant hereto, and the term "Notes" shall mean any of such Notes. "Paying Agent/Registrar" —The bank, trust company, financial institution or other entity so named in accordance with the provisions of Section 3 of this Ordinance. "Project"—Collectively,those projects to be funded with proceeds of the Notes, as described in the preambles hereto. "Registered Owner" —The registered owner of each Note from time to time as shown in the books kept by the Paying Agent/Registrar as note registrar and transfer agent. "Ordinance" —This ordinance and all amendments hereof and supplements hereto. "State" —The State of Texas. "Town Council" — The Town Council of the Issuer. Section 2. AMOUNT AND PURPOSE OF THE NOTES; DESIGNATION, DATE, DENOMINATIONS, NUMBERS AND MATURITIES OF NOTES. The Notes are hereby authorized to be issued and delivered in the aggregate principal amount of$2,045,000 for the purpose of paying the costs of the Project. Each Note issued pursuant to this Ordinance shall be designated: TOWN OF PROSPER, TEXAS TAX NOTE, SERIES 2010," and initially there shall be issued, sold and delivered hereunder fully registered Notes,without interest coupons,with the Notes being dated October 1, 2010, in the respective denominations and principal amounts hereinafter stated, with the initial Note numbered T-1 and with notes issued in replacement thereof being in the denominations and principal amounts hereinafter stated and numbered consecutively from R-1 upward, payable to the initial registered owner thereof(as designated in Section 11 hereof), or to the registered assignee or assignees of said Notes or any portion or portions thereof(the "Registered Owner"), and said Notes shall mature and be payable serially on February 15 in each of the years and in the principal amounts, respectively, and shall bear interest calculated on the basis of a 360-day year composed of twelve 30-day months from the dates specified in the FORM OF NOTE set forth in this Ordinance 3 to their respective dates of maturity or redemption prior to maturity at the following rates per annum, as set forth in the following schedule: Principal Interest Year Amount Fate 2012 $280,000 1.15% 2013 340,000 1.25 2014 345,000 1.35 2015 3553000 1.50 2016 360,000 1.60 2017 365,000 1.85 Section 3. CHARACTERISTICS OF THE NOTES, (a) Regi tratiop, Tran;fear, Conversion and Exchange, Authentication. The Issuer shall keep or cause to be kept at the corporate trust office of U.S. Bank National Association in Dallas, Texas(the"Paying Agent/Registrar"),books or records for the registration ofthe transfer,conversion and exchange of the Notes (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 at all times maintain an office in the State or shall keep a copy of the Registration Books in the State. The Paying Agent/Registrar shall obtain and record in the Registration Books the address of the registered owner of each Note to which payments with respect to the Notes shall be mailed, as herein provided;but it shall be the duty of each registered owner to notify the Paying Agent/Registrar in writing of the address to which payments shall be mailed, and such interest payments shall not be mailed unless such notice has been given. To the extent possible and under reasonable circumstances, all transfers of Notes shall be made within three business days after request and presentation thereof. 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 Paying Agent/Registrar's standard or customary fees and charges for making such registration, transfer, conversion, exchange and delivery of a substitute Note or Notes shall be paid as provided in the FORM OF NOTE set forth in this Ordinance. Registration of assignments, transfers, conversions and exchanges of Notes shall be made in the manner provided and with the effect stated in the FORM OF NOTE set forth in this Ordinance. Each substitute Note shall bear a letter and/or number to distinguish it from each other Note. An authorized representative of the Paying Agent/Registrar shall, before the delivery of any such Note, date and manually sign the Paying Agent/Registrar's Authentication Certificate, and no such Note shall be deemed to be issued or outstanding unless such Certificate is so executed. The Paying Agent/Registrar promptly shall cancel all paid Notes and Notes surrendered for conversion and exchange. No additional ordinances, orders, or resolutions need be passed or adopted by the 4 governing body of the Issuer or any other body or person so as to accomplish the foregoing conversion and exchange of any Note or portion thereof, and the Paying Agent/Registrar shall provide for the printing, execution, and delivery of the substitute Notes in the manner prescribed herein. Pursuant to Chapter 1201, Subchapter D, Texas Government Code, the duty of conversion and exchange of Notes as aforesaid is hereby imposed upon the Paying Agent/Registrar, and, upon the execution of said Certificate,the converted and exchanged Note shall be valid, incontestable and enforceable in the same manner and with the same effect as the Notes that initially were issued and delivered pursuant to this Ordinance, approved by the Attorney General, and registered by the Comptroller of Public Accounts. (b) Pa inent of Notes 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 Notes, 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 Notes, and of all conversions and exchanges of Notes, and all replacements of Notes, as provided in this Ordinance. However, in the event of a nonpayment of interest on a scheduled payment date, and for thirty(3 0)days thereafter, a new record date for such interest payment (a "Special Record Date") will be established by the Paying Agent/Registrar, if and when funds for the payment of such interest have been received from the Issuer. Notice of the Special Record Date and of the scheduled payment date of the past due interest (which shall be 15 days after the Special Record Date) shall be sent at least five(5)business days prior to the Special Record Date by United States mail, first-class postage prepaid, to the address of 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 Notes (i) shall be issued in fully registered form, without interest coupons,with the principal of and interest on such Notes to be payable only to the registered owners thereof, (ii) may or shall be redeemed prior to their scheduled maturities; (iii) may be transferred and assigned; (iv)may be converted and exchanged for other Notes;(v)shall have the characteristics;(vi) shall be signed, sealed, executed and authenticated; (vii) the principal of and interest on the Notes 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 Notes, all as provided, and in the manner and to the effect as required or indicated, in the FORM OF NOTE set forth in this Ordinance. The Note 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 Note issued in conversion of and exchange for any Note or Notes 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 NOTE. (d) Substitute Paying exit/Re istrar. The Issuer covenants with the registered owners of the Notes that at all times while the Notes are outstanding the Issuer will provide a competent and legally qualified bank, trust company, financial institution, or other agency to act as and perform the services of Paying Agent/Registrar for the Notes under this Ordinance, and that the Paying Agent/Registrar will be one such entity. The Issuer reserves the right to, and may, at its option, change the Paying Agent/Registrar upon not less than 60 days written notice to the Paying 5 Agent/Registrar, to be effective not later than 45 days prior to the next principal or interest payment date after such notice. In the event that the entity at any time acting as Paying Agent/Registrar (or its successor by merger,acquisition,or other method)should resign or otherwise cease to act as such, the Issuer covenants that promptly it will appoint a competent and legally qualified bank, trust company,financial institution,or other agency to act as Paying Agent/Registrar under this Ordinance. Upon any change in the Paying Agent/Registrar,the previous Paying Agent/Registrar promptly shall transfer and deliver the Registration Books (or a copy thereof), along with all other pertinent books and records relating to the Notes, to the new Paying Agent/Registrar designated and appointed by the Issuer. Upon any change in the Paying Agent/Registrar, the Issuer promptly will cause a written notice thereof to be sent by the new Paying Agent/Registrar to each registered owner of the Notes, by United States mail, first-class postage prepaid,which notice also shall give the address of the new Paying Agent/Registrar. By accepting the position and performing as such, each Paying Agent/Registrar shall be deemed to have agreed to the provisions of this Ordinance, and a certified copy of this Ordinance shall be delivered to each Paying Agent/Registrar. (e) Book-Entry Only System. The Notes issued in exchange for the Note initially issued to the purchaser specified herein shall be initially issued in the form of a separate single fully- registered Note for each of the maturities thereof. Upon initial issuance, the ownership of each such Note shall be registered in the name of Cede & Co., as nominee of The Depository Trust Company of New York("DTC"), and except as provided in subsection(f)hereof, all of the outstanding Notes shall be registered in the name of Cede & Co., as nominee of DTC. With respect to Notes 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 Notes. 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 Notes, (ii) the delivery to any DTC Participant or any other person, other than a registered owner of Notes, as shown on the Registration Books, of any notice with respect to the Notes, or(iii)the payment to any DTC Participant or any other person, other than a registered owner of Notes, as shown in the Registration Books of any amount with respect to principal of or interest on the Notes. 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 Note is registered in the Registration Books as the absolute owner of such Note for the purpose of payment of principal and interest with respect to such Note, for the purpose of registering transfers with respect to such Note, and for all other purposes whatsoever. The Paying Agent/Registrar shall pay all principal of and interest on the Notes 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 Notes to the extent of the sum or sums so paid. No person other than a registered owner, as shown in the Registration Books, shall 6 receive a Note 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. (i) Successor Securities Depository-,Transfers Outside Book-Ent! nlSystem. In the event that the Issuer determines that DTC is incapable of discharging its responsibilities described herein and in the representation letter of the Issuer to DTC or that it is in the best interest of the beneficial owners of the Notes that they be able to obtain certificated Notes, 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 Notes to such successor securities depository or (ii) notify DTC and DTC Participants of the availability through DTC of Notes and transfer one or more separate Notes to DTC Participants having Notes credited to their DTC accounts. In such event, the Notes 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 Notes shall designate, in accordance with the provisions of this Ordinance. (g) Payments to Cede& Co. Notwithstanding any other provision of this Ordinance to the contrary, so long as any Note is registered in the name of Cede& Co., as nominee of DTC, all payments with respect to principal of and interest on such Note and all notices with respect to such Note shall be made and given, respectively, in the manner provided in the representation letter of the Issuer to DTC. (h) Cancellation of lnitial Note. On the closing date, one initial Note representing the entire principal amount of the Notes,payable in stated installments to the order ofthe initial purchaser of the Notes or its designee, executed by manual or facsimile signature of the Mayor and the 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, will be delivered to such purchaser or its designee. Upon payment for the initial Note,the Paying Agent/Registrar shall cancel the initial Note and deliver to the Depository Trust Company on behalf of such purchaser one registered definitive Note for each year of maturity of the Notes, in the aggregate principal amount of all of the Notes for such maturity. Section 4. FORM OF NOTE. (a) generally. The form of the Notes, including the form of the initial Note, the form of Paying Agent/Registrar's Authentication Certificate, the form of Assignment and the form of Registration Certificate ofthe Comptroller of Public Accounts of the State to be attached to the Note initially issued and delivered pursuant to this Ordinance, shall be, respectively, substantially as 7 provided in Exhibit A hereto, with such appropriate variations, omissions, or insertions as are permitted or required by this Ordinance. (b) Insertions for the initial Note. The initial Note shall be in the form provided by paragraph (a) of this Section, except that: A. immediately under the name of the Note, the headings "INTEREST RATE" and "MATURITY DATE" shall both be completed with the words "As shown below" and "CUSIP NO. " shall be deleted. B. the first paragraph shall be deleted and the following will be inserted; "THE TOWN OF PROSPER, TEXAS (the "Issuer"),being a political subdivision and home rule municipality of the State of Texas, located in Collin and Denton Counties, hereby promises to pay to the Registered Owner specified above,or registered assigns(hereinafter called the"Registered Owner"), on February 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 for the Notes 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 October 1, 2010 at the respective Interest Rate per annum specified above. Interest is payable on February 15, 2012 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 Note 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 Note or Notes, if any, for which this Note is being exchanged is due but has not been paid, then this Note shall bear interest from the date to which such interest has been paid in full." C. The initial Note shall be numbered "T-1." Section 5. TAX LEVY. A special Interest and Sinking Fund (the "Interest and Sinking Fund") is hereby created solely for the benefit of the Notes, and the Interest and Sinking Fund shall be established and maintained by the Issuer at an official depository bank of the Issuer. The Interest and Sinking Fund shall be kept separate and apart from all other funds and accounts of the Issuer, and shall be used only for paying the interest on and principal of the Notes. All ad valorem taxes levied and collected for and on account of the Notes shall be deposited, as collected, to the credit of the Interest and Sinking Fund. During each year while any of the Notes or interest thereon are 8 outstanding and unpaid, the governing body of the Issuer shall compute and ascertain a rate and amount of ad valorem tax which will be sufficient to raise and produce the money required to pay the interest on the Notes (but never less than 2% of the original amount of the Notes as a sinking fund each year) as such interest comes due, and to provide and maintain a sinking fund adequate to pay the principal of its Notes as such principal matures; and said tax shall be based on the latest approved tax rolls of the Issuer, with full allowance being made for tax delinquencies and the cost of tax collection. Said rate and amount of ad valorem tax is hereby levied, and is hereby ordered to be levied, against all taxable property in the Issuer for each year while any of the Notes or interest thereon are outstanding and unpaid; and said tax shall be assessed and collected each such year and deposited to the credit of the aforesaid Interest and Sinking Fund. Said ad valorem taxes sufficient to provide for the payment of the interest on and principal of the Notes as such interest comes due and such principal matures are hereby pledged for such payment, within the limit prescribed by law. Section 6.METHOD OF AMENDMENT. The Issuer hereby reserves the right to amend this Ordinance subject to the following terms and conditions: (a) The Issuer may from time to time, without the consent of any holder, except as otherwise required by paragraph(b)below, amend or supplement this Ordinance in order to (i) cure any ambiguity, defect or omission in this Ordinance that does not materially adversely affect the interests of the holders, (ii) grant additional rights or security for the benefit of the holders, (iii) add events of default as shall not be inconsistent with the provisions of this Ordinance and that shall not materially adversely affect the interests of the holders, (iv) 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 (v) make such other provisions in regard to matters or questions arising under this Ordinance as shall not be inconsistent with the provisions of this Ordinance and that shall not in the opinion of Bond Counsel materially adversely affect the interests of the holders. (b) Except as provided in paragraph (a) above, the holders of Notes aggregating in principal amount 51% of the original principal amount of then outstanding Notes that are the subject of a proposed amendment shall have the right from time to time to approve any amendment hereto that may be deemed necessary or desirable by the Issuer;provided,however,that without the consent of 100% of the holders in original principal amount of the then outstanding Notes, nothing herein contained shall permit or be construed to permit amendment of the terms and conditions of this Ordinance or in any of the Notes so as to: (1) Make any change in the maturity of any of the outstanding Notes; (2) Reduce the rate of interest borne by any of the outstanding Notes; (3) Reduce the amount ofthe principal of, or redemption premium,if any,payable on any outstanding Notes; 9 (4) Modify the terms of payment of principal or of interest or redemption premium on outstanding Notes or any of them or impose any condition with respect to such payment, or (5) Change the minimum percentage of the principal amount of the Notes 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 Notes 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 New York,New York or in the State. 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 Notes. (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 original principal amount of all of the Notes then outstanding that are required for the amendment, which instrument or instruments shall refer to the proposed amendment and shall specifically consent to and approve such amendment, the Issuer may adopt the amendment in substantially the same form. (e) Upon the adoption of any amendatory Ordinance pursuant to the provisions of this Section, this Ordinance shall be deemed to be modified and amended in accordance with such amendatory Ordinance, and the respective rights, duties, and obligations of the Issuer and all holders of such affected Notes shall thereafter be determined, exercised, and enforced, subject in all respects to such amendment. (f) Any consent given by the holder of a Note 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 note 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 original principal amount of the affected Notes then outstanding, have, prior to the attempted revocation, consented to and approved the amendment. For the purposes of establishing ownership of the Notes, the Issuer shall rely solely upon the registration of the ownership of such Notes on the registration books kept by the Paying Agent/Registrar. Section 7. DEFEASANCE OF NOTES. (a) Any Note and the interest thereon shall be deemed to be paid, retired and no longer outstanding(a"Defeased Note")within the meaning of this Ordinance,except to the extent provided in subsection (d) of this Section, when payment of the principal of such Note, plus interest thereon 10 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 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 Notes shall have become due and payable. At such time as a Note shall be deemed to be a Defeased Note hereunder, as aforesaid, such Note 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. (b) Any moneys so deposited with the Paying Agent/Registrar may at the written direction of the Issuer be invested in Defeasance Securities, maturing in the amounts and times as hereinbefore set forth,and all income from such Defeasance Securities received by the Paying Agent/Registrar that is not required for the payment of the Notes 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 Notes 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(i)or(ii)of paragraph(a)above. All income from such Defeasance Securities received by the Paying Agent/Registrar that is not required for the payment of the Defeased Notes, with respect to which such money has been so deposited, shall be remitted to the Issuer or deposited as directed in writing by the Issuer. (c) The term "Defeasance Securities" means any securities and obligations now or hereafter authorized by State law that are eligible to refund, retire or otherwise discharge obligations such as the Notes. (d) Until all Defeased Notes shall have become due and payable, the Paying Agent/Registrar shall perform the services of Paying Agent/Registrar for such Defeased Notes 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 Notes of a maturity, the Paying Agent/Registrar shall select, or cause to be selected, such amount of Notes by such random method as it deems fair and appropriate. Section 8. DAMAGED, MUTILATED, LOST, STOLEN, OR DESTROYED NOTES. (a) Replacement Notes. In the event any outstanding Note is damaged, mutilated, lost, stolen, or destroyed, the Paying Agent/Registrar shall cause to be printed, executed, and delivered 11 a new note of the same principal amount, maturity, and interest rate, as the damaged, mutilated, lost, stolen, or destroyed Note in replacement for such Note in the manner hereinafter provided. (b) Application for Replacement Notes. Application for replacement of damaged, mutilated,lost, stolen, or destroyed Notes shall be made by the registered owner thereof to the Paying Agent/Registrar. In every case of loss, theft, or destruction of a Note, the registered owner applying for a replacement note 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 Note, the registered owner shall furnish to the Issuer and to the Paying Agent/Registrar evidence to their satisfaction of the loss,theft, or destruction of such Note. In every case of damage or mutilation of a Note, the registered owner shall surrender to the Paying Agent/Registrar for cancellation the Note so damaged or mutilated. (c) No Default Occurred.Notwithstanding the foregoing provisions ofthis Section,in the event any such Note shall have matured, and no default has occurred that is then continuing in the payment of the principal of or interest on the Note,the Issuer may authorize the payment of the same (without surrender thereof except in the case of a damaged or mutilated Note) instead of issuing a replacement Note, provided security or indemnity is furnished as above provided in this Section. (d) Charge for Issuing Replacement Notes.Prior to the issuance of any replacement note, the Paying Agent/Registrar shall charge the registered owner of such Note with all legal,printing,and other expenses in connection therewith. Every replacement note issued pursuant to the provisions of this Section by virtue of the fact that any Note is lost, stolen, or destroyed shall constitute a contractual obligation of the Issuer whether or not the lost, stolen, or destroyed Note 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 Notes duly issued under this Ordinance. (e) Authority for 'Issuing Replacement Notes. In accordance with Chapter 1201, Subchapter D, Texas Government Code, this Section of this Ordinance shall constitute authority for the issuance of any such replacement note 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 notes is hereby authorized and imposed upon the Paying Agent/Registrar, and the Paying Agent/Registrar shall authenticate and deliver such Notes in the form and manner and with the effect, as provided in Section 3(a) of this Ordinance for Notes issued in conversion and exchange for other Notes. Section 9. CUSTODY, APPROVAL, AND REGISTRATION OF NOTES; BOND COUNSEL'S OPINION AND ENGAGEMENT OF BOND COUNSEL; USE OF CUSIP NUMBERS AND CONTINGENT INSURANCE PROVISION, IF OBTAINED; ATTORNEY GENERAL FILING FEE. (a) The Mayor is hereby authorized to have control of the Notes initially issued and delivered hereunder and all necessary records and proceedings pertaining to the Notes pending their delivery and their investigation, examination, and approval by the Attorney General of the State, and their registration by the Comptroller of Public Accounts of the State. Upon registration of the Notes 12 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 Notes, 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 Notes 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 Notes. In addition, if bond insurance is obtained, the Notes may bear an appropriate legend as provided by the insurer. (b) The obligation of the initial purchaser to accept delivery of the Notes 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 Notes to the initial purchaser. The engagement of such firm as bond counsel to the Issuer in connection with issuance, sale and delivery of the Notes is hereby approved and confirmed. The execution and delivery of an engagement letter between the Issuer and such firm,with respect to such services as bond counsel, is hereby authorized in such form as may be approved by the Mayor, and the Mayor is hereby authorized to execute such engagement letter. (c) In accordance with the provisions of Section 1202.004, Tex. Gov't Code Ann., in connection with the submission of the Bond by the Attorney General of Texas for review and approval, a statutory fee (an amount equal to 0.1% principal amount of the Bond, 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 Bond. The Issuer hereby authorizes and directs that a check in the amount of the Attorney General filing fee for the Bond, 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 Bond. Section 10. COVENANTS REGARDING TAX EXEMPTION OF INTEREST ON THE NOTES. The Issuer covenants to take any action necessary to assure, or refrain from any action that would adversely affect, the treatment of the Notes as obligations described in section 103 of the Internal Revenue Code of 1986, as amended (the "Code), the interest on which is not includable in the "gross income" of the holder for purposes of federal income taxation. In furtherance thereof, the Issuer covenants as follows: (a) to take any action to assure that no more than 10 percent of the proceeds of the Notes or the projects refinanced therewith (less amounts deposited to a reserve fund, if any) are used for any "private business use," as defined in section 141(b)(6) of the Code or, if more than 10 percent of the proceeds or the projects financed therewith are so used, such amounts, whether received by the Issuer, with respect to such private business use, do not, under the terms of this Ordinance or any underlying arrangement,directly or indirectly,secure or provide for the payment of more than 10 percent of the debt service on the Notes, in contravention of section 141(b)(2) of the Code; 13 (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 Notes or the projects refinanced therewith (less amounts deposited into a reserve fund, if any) then the amount in excess of 5 percent is used for a "private business use" that is "related" and not "disproportionate,"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 Notes(less amounts deposited into a reserve fund, if any)is directly or indirectly used to finance loans to persons, other than state or local governmental units, in contravention of section 141(c) of the Code; (d) to refrain from taking any action that would otherwise result in the Notes being treated as "private activity notes" within the meaning of section 141(b) of the Code; (e) to refrain from taking any action that would result in the Notes 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 Notes, 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 Notes, other than investment property acquired with— (1) proceeds of the Notes invested for a reasonable temporary period of three (3) years or less until such proceeds are needed for the purpose for which the notes 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 Notes; (g) to otherwise restrict the use of the proceeds of the Notes or amounts treated as proceeds of the Notes, as may be necessary, so that the Notes 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); (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 Notes) an amount that is at least equal to 90 percent ofthe"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 Notes have been paid in full, 14 100 percent of the amount then required to be paid as a result of Excess Earnings under section 148(f) of the Code; and (i) to assure that the proceeds of the Notes will be used solely for new money projects. In order to facilitate compliance with the above covenant (h), a "Rebate Fund" is hereby established by the Issuer for the sole benefit of the United States of America, and such fund shall not be subject to the claim of any other person,including without limitation the bondholders. The Rebate Fund is established for the additional purpose of compliance with section 148 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 bonds, transferred proceeds (if any) and proceeds of the refunded notes expended prior to the date of issuance of the Notes. It is the understanding of the Issuer that the covenants contained herein are intended to assure compliance with the Code and any regulations or rulings promulgated by the U.S. Department of the Treasury pursuant thereto. In the event that regulations or rulings are hereafter promulgated that modify or expand provisions of the Code,as applicable to the Notes,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 Notes under section 103 of the Code. In the event that regulations or rulings are hereafter promulgated that impose additional requirements that are applicable to the Notes, 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 Notes 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 Notes. Section 11. SALE OF NOTES. The Notes are hereby sold and shall be delivered to UMB Bank N.A. (the "Purchaser"), at a price of par, plus accrued interest on the Notes. The Notes shall initially be registered in the name of the Purchaser. It is hereby officially found, determined and declared that the Notes have been sold at public sale to the bidder offering the lowest interest cost, after receiving sealed bids pursuant to an Official Notice of such and Bidding Instructions. Section 12. APPROVAL OF OFFICIAL STATEMENT. It is further officially found, determined and declared that the Notes have been offered pursuant to a Preliminary Official Statement dated September 28, 2010, prepared and distributed in connection with the sale of the Notes. Said Preliminary Official Statement,the Official Statement dated October 12, 2010, and any addenda, supplement or amendment thereto, have been and are hereby approved by the governing body of the Issuer, and its use in the offer and sale of the Notes is hereby approved. Section 13. FURTHER PROCEDURES. The Mayor and Town Secretary of the Issuer and all other officers, employees and agents of the Issuer, and each of them, shall be and are hereby 15 expressly authorized, empowered and directed from time to time and at any time to do and perform all such acts and things and to execute, acknowledge and deliver in the name and under the corporate seal and on behalf of the Issuer the Letter of Representation with DTC regarding the Book-Entry- Only System, the Paying Agent/Registrar Agreement with the Paying Agent/Registrar, and all other instruments, whether herein mentioned, as may be necessary or desirable in order to carry out the terms and provisions of this Ordinance,the Letter of Representation,the Notes,the sale of the Notes and the Official Statement. Notwithstanding anything to the contrary contained herein, while the Notes are subject to DTC's Book-Entry-Only System and to the extent permitted by law,the Letter of Representation is hereby incorporated herein and its provisions shall prevail over any other provisions of this Ordinance in the event of conflict. In case any officer whose signature shall appear on any Note shall cease to be such officer before the delivery of such Note, such signature shall nevertheless be valid and sufficient for all purposes the same as if such officer had remained in office until such delivery. Section 14. COMPLIANCE WITH RULE 15c2-12. (a) .Annual Reports, (i) The Issuer shall provide annually to the MSRB, within six months after the end of each fiscal year ending in or after 2010, financial information and operating data with respect to the Issuer of the general type included in the final Official Statement authorized by this Ordinance, being the information described in Exhibit B hereto. Any financial statements so to be provided shall be (1) prepared in accordance with the accounting principles described in :Exhibit B 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, then the Issuer shall provide unaudited financial statements by the required time and will provide audited financial statements for the applicable fiscal year to the MSRB, when and if the audit report on such statements become available. Such information shall be transmitted electronically to the MSRB, in such format and accompanied by such identifying information as prescribed by the MSRB. (ii) If the Issuer changes its fiscal year, it will notify the MSRB 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 the MSRB or filed with the SEC. (b) Material Event Notices. The Issuer shall notify the MSRB, in a timely manner, of any of the following events with respect to the Notes, if such event is material within the meaning of the federal securities laws: 16 I. 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 Notes; 7. Modifications to rights of holders of the Notes; 8. Note calls; 9. Defeasances; 10. Release, substitution, or sale of property securing repayment of the Notes; and 11. Rating changes. The Issuer shall notify 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) l,imita ions 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 Notes within the meaning of the Rule, except that the Issuer in any event will give the notice required by Subsection (b) hereof of any Note 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 Notes, and nothing in this Section, express or implied, shall give any benefit or any legal or equitable right, remedy, or claim hereunder to any other person. The Issuer undertakes to provide only the financial information, operating data,financial statements,and notices which it has expressly agreed to provide pursuant to this Section and does not hereby undertake to provide any other information that may be relevant or material to a complete presentation of the Issuer's financial results, condition, or prospects or hereby undertake to update any information provided in accordance with this Section or otherwise, except as expressly provided herein. The Issuer does not make any representation or warranty concerning such information or its usefulness to a decision to invest in or sell Notes at any future date. (iii) UNDER NO CIRCUMSTANCES SHALL THE ISSUER BE LIABLE TO THE REGISTERED OWNER OR BENEFICIAL OWNER OF ANY NOTE 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 17 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 Notes in the primary offering of the Notes 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 Notes 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 Notes. 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)of this Section an explanation, in narrative form, of the reason for the amendment and of the impact of any change in the type of financial information or operating data so provided. 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 Notes in the primary offering of the Notes. (d) Definitions. As used in this Section, the following terms have the meanings ascribed to such terms below: "MSRB" means the Municipal Securities Rulemaking Board or any successor to its functions under the Rule. "Rule" means SEC Rule 15c2-12, as amended from time to time. "SEC" means the United States Securities and Exchange Commission, Section 15. INTEREST EARNINGS ON NOTE PROCEEDS; USE OF ACCRUED INTEREST RECEIVED FROM SALE OF NOTES. Interest earnings derived from the investment of proceeds from the sale of the Notes shall be used for the purposes for which the Notes are issued or deposited in the Interest and Sinking Fund. It is further provided, however, that any interest earnings on note proceeds that are required to be rebated to the United States of America pursuant to Section 10 hereof in order to prevent the Notes from being arbitrage notes shall be so rebated and not considered as interest earnings for the purposes of this Section. The accrued interest received from the sale of the Notes shall be deposited to the Interest and Sinking Fund. Section 16. DISPOSITION OF PROJECT. The Issuer covenants that the property constituting the Project will not be sold or otherwise disposed in a transaction resulting in the receipt 18 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 Notes. 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 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 17. GOVERNING LAW. This Ordinance shall be construed and enforced in accordance with the laws of the State and the United States of America. Section 18. 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 19.DESIGNATION AS QUALIFIED TAX-EXEMPT OBLIGATIONS. The Issuer hereby designates the Notes as "qualified tax-exempt obligations" as defined in section 265(b)(3)of the Code. In furtherance of such designation, the Issuer represents, covenants and warrants the following: (a) that during the calendar year in which the Notes are issued, the Issuer(including any subordinate entities) has not designated nor will designate obligations,which when aggregated with the Notes, will result in more than $10,000,000 ($30,000,000 for taxable years beginning after December 31, 2008 and ending prior to January 1, 2011)of"qualified tax-exempt obligations"being issued; (b) that the Issuer reasonably anticipates that the amount of tax-exempt obligations issued, during the calendar year in which the Notes are issued,by the Issuer(or any subordinate entities)will not exceed $10,000,000 ($30,000,000 for taxable years beginning after December 31, 2008 and ending prior to January 1, 2011); and, (c) that the Issuer will take such action or refrain from such action as necessary, and as more particularly set forth in this Section, in order that the Notes will not be considered "private activity notes" within the meaning of section 141 of the Code. Section 20. CONTINUED PERFECTION OF SECURITY INTEREST. Chapter 1208, Government Code, applies to the issuance of the Notes and the pledge of the ad valorem taxes granted by the Issuer under Section 5 of this Ordinance, and such pledge is therefore valid, effective, and perfected. If Texas law is amended at any time while the Notes are outstanding and unpaid such that the pledge of the taxes granted by the Issuer under Section 5 of this Ordinance is to be subject to the filing requirements of Chapter 9,Business&Commerce Code,then in order to preserve to the registered owners of the Notes the perfection of the security interest in said pledge,the Issuer agrees to take such measures as it determines are reasonable and necessary under Texas law to comply with the applicable provisions of Chapter 9,Business&Commerce Code and enable a filing to perfect the security interest in said pledge to occur. Section 21. 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"): 19 (i) the failure to make payment of the principal of or interest on any of the Notes 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 Town Council of the Issuer, as appropriate for the purpose of protecting and enforcing the rights of the registered owner under this Ordinance, by mandamus or other suit, action or special proceeding in equity or at law, in any court of competent jurisdiction,for any relief permitted by law, including the specific performance 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 owner hereunder or any combination of such remedies. (b) It is provided that all such proceedings shall be instituted and maintained for the equal benefit of registered owners of the Note 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 Note 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 Note 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 Note 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 Town Council of the Issuer. 20 Exhibit A FORM OF NOTE NO. R- UNITED STATES OF AMERICA PRINCIPAL STATE OF TEXAS AMOUNT TOWN OF PROSPER, TEXAS $ TAX NOTE, SERIES 2010 INTEREST RATE DATED DATE OF NOTE MATURITY DATE CUSIP NO. —% October 1, 2010 February 15, REGISTERED OWNER: PRINCIPAL AMOUNT: DOLLARS ON THE MATURITY DATE specified above, Town of Prosper, Texas(the "Issuer"),being a political subdivision and home rule municipality of the State of Texas, located in Collin and Denton Counties, 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 October 1, 2010 at the Interest Rate per annum specified above. Interest is payable on February 15, 2012, and semiannually on each August 15 and February 15 thereafter to the Maturity Date specified above; except, if this Note 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 Note or Notes, if any, for which this Note is being exchanged is due but has not been paid,then this Note shall bear interest from the date to which such interest has been paid in full. THE PRINCIPAL OF AND INTEREST ON this Note are payable in lawful money of the United States of America, without exchange or collection charges. The principal of this Note shall be paid to the Registered Owner hereof upon presentation and surrender of this Note at maturity, at the corporate trust office of U.S. Bank National Association in Dallas, Texas, which is the "Paying Agent/Registrar" for this Note. The payment of interest on this Note shall be made by the Paying Agent/Registrar to the Registered Owner hereof on each interest payment date by check, 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 Note(the "Note Ordinance") to be on deposit with the Paying Agent/Registrar for such purpose as hereinafter provided; and such check shall be sent by the Paying Agent/Registrar by United States mail, first-class postage prepaid, A-1 on each such interest payment date, to the Registered Owner hereof, at its address as it appeared on the last business day of the month next preceding each such date (the "Record Date") on the Registration Books kept by the Paying Agent/Registrar, as hereinafter described. 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 ofthe past due interest(the"Special Payment Date," 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 Registered Owner appearing on the Registration Books of the Paying Agent/Registrar at the close of business on the last business day next preceding the date of mailing of such notice. The Issuer covenants with the Registered Owner of this Note that on or before each principal payment date, interest payment date, and accrued interest payment date for this Note it will make available to the Paying Agent/Registrar,from the"Interest and Sinking Fund" created by the Note Ordinance,the amounts required to provide for the payment, in immediately available funds, of all principal of and interest on the Notes, when due. IF THE DATE for the payment of the principal of or interest on this Note shall be a Saturday, Sunday,legal holiday, or day on which banking institutions in the city where the corporate trust office of the Paying Agent/Registrar that is designated for payment of the Notes is located are authorized by law or executive order to close, or the United States Postal Service is not open for business, 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, or the United States Postal Service is not open for business; and payment on such date shall have the same force and effect as if made on the original date payment was due. THIS NOTE is authorized and issued pursuant to and in compliance with Chapter 1431, Texas Government Code, as amended(the"Act"),and pursuant to the Note Ordinance in the original aggregate principal amount of$2,045,000, dated as of October 1, 2010 for the purpose of paying costs of the Project as provided in the Note Ordinance. The Note Ordinance has been passed and adopted by the Town Council of the Issuer and duly recorded in the minutes of the Town Council, as authorized by the Constitution and laws of the State of Texas, including the Act. THE NOTES OF THIS SERIES are not subject to redemption prior to maturity. ALL NOTES OF THIS SERIES are issuable solely as fully-registered Notes,without interest coupons, in the denomination of any integral multiple of$5,000. As provided in the Note Ordinance, this Note, or any unredeemed portion hereof, may, at the request of the Registered Owner or the assignee or assignees hereof, be assigned, transferred and exchanged for a like aggregate principal amount of fully-registered Notes, 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 Note to the Paying Agent/Registrar for cancellation, all in accordance with the form and procedures set forth in the Note Ordinance. A-2 Among other requirements for such assignment and transfer, this Note 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 Note or any portion or portions hereof in any integral multiple of$5,000 to the assignee or assignees in whose name or names this Note or any such portion or portions hereof is or are to be registered. The form of Assignment printed or endorsed on this Note 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 Note 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 transferring and exchanging any Note or portion thereof shall be paid by the Issuer, but any taxes or governmental charges required to be paid with respect thereto shall be paid by the one requesting such assignment, transfer 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 or exchange during the period commencing with the close of business on any Record Date and ending with the opening of business on the next following principal or interest payment date. IN THE EVENT any Paying Agent/Registrar for the Notes is changed by the Issuer, resigns, or otherwise ceases to act as such, the Issuer has covenanted in the Note 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 Notes. IT IS HEREBY certified, recited, and covenanted that this Note 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 Note have been performed, existed, and been done in accordance with law; that this Note is a general obligation of the Issuer, issued on the full faith and credit thereof,and that ad valorem taxes sufficient to provide for the payment of the interest on and principal of this Note, as such interest comes due, and as such principal matures, have been levied and ordered to be levied against all taxable property in the Issuer, and have been pledged for such payment, within the limit prescribed by law. THE ISSUER ALSO HAS RESERVED THE RIGHT to amend the Note Ordinance as provided therein, and under some(but not all)circumstances amendments thereto must be approved by the Registered Owners of a majority in aggregate principal amount of the outstanding Notes. BY BECOMING the Registered Owner of this Note, the Registered Owner thereby acknowledges all of the terms and provisions of the Note Ordinance, agrees to be bound by such terms and provisions, acknowledges that the Note 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 Note and the Note Ordinance constitute a contract between each Registered Owner hereof and the Issuer. IN WITNESS WHEREOF, the Issuer has caused this Note to be signed with the manual or facsimile signature of the Mayor of the Issuer and countersigned with the manual or facsimile A-3 signature of the Town Secretary of the Issuer, and has caused the official seal of the Issuer to be duly impressed, or placed in facsimile, on this Note. fsinature (signature) Mayor Town Secretary (SEAL) [Form of Paying Agent/Registrar's Authentication Certificate] PAYING AGENT/REGISTRAR'S AUTHENTICATION CERTIFICATE (To be executed if this Note 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 Note has been issued under the provisions of the Note Ordinance described in the text of this Note; and that this Note has been issued in conversion or replacement of, or in exchange for, a note, notes, or a portion of a note or notes of a Series which originally was approved by the Attorney General of the State of Texas and registered by the Comptroller of Public Accounts of the State of Texas. Dated: U.S. Bank National Association, Dallas, Texas Paying Agent/Registrar By _. _.. Authorized Representative A-4 [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) the within Note and all rights thereunder, and hereby irrevocably constitutes and appoints attorney,to register the transfer of the within Note 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 a member firm of the New York Stock correspond with the name of the Registered Exchange or a commercial bank or trust Owner as it appears upon the front of this company. Note in every particular, without alteration or enlargement or any change whatsoever. A-5 [Form of Registration Certificate Of the Comptroller of Public Accounts] COMPTROLLER'S REGISTRATION CERTIFICATE: REGISTER NO. I hereby certify that this Note has been examined, certified as to validity, and approved by the Attorney General of the State of Texas, and that this Note 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) A-6 Exhibit B CONTINUING DISCLOSURE INFORMATION ,The following information is referred to in Section 14(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 Issuer of the general type included Tables numbered 1 through 5 and 7 through 14 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. ------------------------ B-1