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HomeMy WebLinkAboutRes 02-03 Approving a Preliminary Statement, a Notice of Sale and Bidding Instructions, a Bid Form, Certificates of Obligations, and Authorizing Advertisement for BidsTOWN OF WESTLAKE RESOLUTION NO 02-03 A RESOLUTION BY THE BOARD OF ALDERMEN OF THE TOWN OF WESTLAKE, TEXAS APPROVING A PRELIMINARY OFFICIAL STATEMENT, AN OFFICIAL NOTICE OF SALE AND BIDDING INSTRUCTIONS, AND AN OFFICIAL BID FORM IN CONNECTION WITH THE ADVERTISING FOR BIDS FOR $12,400,000 OF TOWN OF WESTLAKE, TEXAS, COMBINATION TAX AND LIMITED PLEDGE CERTIFICATES OF OBLIGATION, SERIES 2002, AUTHORIZING THE ADVERTISEMENT FOR BIDS WITH RESPECT TO THE CERTIFICATES, PROVIDING FOR AN EFFECTIVE DATE, AND RESOLVING RELATED MATTERS WHEREAS, the Board of Aldermen (the "Board") of the Town of Westlake, Texas (the "Town") desires to offer for sale its $12,400,000 Combination Tax and Limited Pledge Certificates of Obligation, Series 2002 (the "Certificates"); WHEREAS, the Town's financial advisor has prepared, on behalf of the Town and in reliance on financial data and other information obtained from the official records of the Town, a Preliminary Official Statement, an Official Notice of Sale and Bidding Instructions, and an Official Bid Form to be used in connection with the advertisement for bids, issuance, sale, and delivery of the Certificates (collectively, the "Sale Documents"); WHEREAS, the Board hereby finds that the Sale Documents are appropriate to be used and may be used in connection with the advertisement and sale of the Certificates; WHEREAS, the meeting at which this Resolution has been considered was open to the public as required by law, and public notice of the time, place, and subject of the meeting has been given as required by Chapter 551 of the Texas Government Code; NOW, THEREFORE, BE IT RESOLVED BY THE BOARD OF ALDERMEN: SECTION 1: Form of Sale Documents. Attached as Exhibits A, B, and C hereto is a form of each of the Sale Documents, the form and substance of which are hereby adopted and approved. SECTION 2: Modification of Sale Documents. The Mayor of the Town is hereby authorized to approve any additions, amendments, or other modifications to the Sale Documents that are necessary or appropriate to assure the accuracy and completeness of such documents. SECTION 3: Execution of Sale Documents. The Mayor and Secretary of the Town are each hereby authorized to execute the Sale Documents on behalf of the Town. SECTION 4: Actions to Effect the Advertisement Issuance Sale and Deliveu of Certificates. The Board hereby authorizes the Mayor, Secretary, and Town Manager of the Town and the Financial Adviser and Finance Counsel to the Town to take all actions, to the extent permitted by law, to effect the advertisement, issuance, sale, and delivery of the Certificates on behalf of the Town. SECTION 5: Effective Date. This resolution shall take effect immediately upon the adoption and execution thereof. PASSED AND APPROVED ON THIS 14T'-' DAY OF JANUARY, 2002. ATTEST: Scott Bradley, Mayor w cCi—elucrosswy, Town ficretary Trent O. Petty, To anagen C� • 111:1 u Exhibit -A Preliminary Official Statement Exhibit -B Official Notice of Sale and Bidding Instructions Exhibit -C Official Bid Form PRELIMINARY OFFICIAL STATEMENT DATED JANUARY 14, 2002 NEW ISSUE: Book -Entry -Only RATING: S&P (See "Rating" herein) In the opinion of Co -Bond Counsel, interest on the Certificates will be excludable from gross income for federal income tax purposes under existing law, subject to the matters described under "Tax Matters " herein, including the alternative niininrum tay on corporations. $12,400,000 Town of Westlake, Texas Combination Tax and Limited Pledge Revenue Certificates of Obligations Series 2002 Dated: February 1, 2002 Due: May 1, as shown herein The Combination Tax and Limited Pledge Revenue Certificates of Obligation, Series 2002 (the "Certificates") are authorized and issued in accordance with the Constitution and laws of the State of Texas, including Chapter 271, Subchapter C, Texas Local Government Code, as amended, and an ordinance (the "Ordinance") adopted by the City Council of the Town of Westlake, Texas (the "Issuer"), and constitute direct obligations of the Issuer, payable from a continuing, direct annual ad valorem tax, levied upon all taxable property within the Issuer, within the limits prescribed by law, sufficient to provide for the payment of principal and interest due on the Certificates, as provided in the Ordinance. Additionally, the Certificates are payable from and secured by the revenues arising from the permitting and licensing fees charged by the Issuer, which the Issuer intends to use as the primary source for the payment of debt service on the Certificates (the "Revenues"). See "Description of the Certificates — Security for the Certificates" herein. The Certificates are initially issuable only to Cede & Co., the nominee of The Depository Trust Company, New York, New York ("DTC'), pursuant to the book -entry system described herein. Beneficial ownership of the Certificates may be acquired in denominations of $5,000 or integral multiples thereof, No physical delivery of the Certificates will be made to the purchasers thereof. Principal of and interest on the Certificates will be payable to Cede & Co., which will make distributions of the amounts so paid to the participating members of DTC for subsequent remittance to the owners of beneficial interests in the Certificates. Such book -entry -only system will affect the method and timing of payment and the method of transfer for the Certificates. Interest on the Certificates will be payable on May 1 and November 1 of each year, commencing November 1, 2002. Principal of the Certificates will be payable at maturity. The initial Paying Agent/Registrar for the Certificates is J. P. Morgan Chase Bank. The Bonds maturing on and after May 1, 2015 are subject to redemption at the option of the Issuer on and after May 1, 2014 as described herein. See "Description of the Certificates" herein. Proceeds of the Certificates will be used to pay for (1) the acquisition of and improvements to facilities for fire protection, law enforcement, civic administration,- recreation, cultural and civic improvement and educational development, and (2) the costs of issuing the Certificates. See "Plan of Financing" herein. A maturity schedule for the Certificates is set forth on the next page. The Cer•tifrcates are offered when, as and if delivered and subject to approval b!v the Attornev General of the State of Texas and the receipt of the opinion of Boyle & Lowry, L.L.P.. Irving, Texas, and Thomas Allen Moon, Attornev at Late, Dallas. Teras. Co -Bond Counsel. It is expected that delivery of the Certifrcates in definitive form will be through the.facilities of The Depository Trust Compan-v in New York, New York, on or about February 13, 2002. Date: January , 2002 Sealed Bids will be opened at 2:30 p.m., Central time, January 28, 2002 �--.-� J . _ .... - _ .� Maturity Schedule for the Certificates (Accrued Interest,fr-om February 1, 2002 to he added) Due 511 Amount Interest Rate Price or Yield*' Due 511 Amount Interest Rate Price or Yield* 2006 5210,000 2020 $445,000 2007 225,000 2021 470,000 2008 235,000 2022 495,000 2009 250,000 2023 520,000 2010 265,000 2024 550,000 2011 280,000 2025 580,000 2012 295,000 2026 610,000 2013 315,000 2027 640,000 2014 350,000 2028 675,000 2015 350,000 2029 710,000 2016 365,000 2030 750,000 2017 385,000 2031 790,000 2018 405,000 2032 830,000 2019 425,000 * Provided by initial purchaser of Certificales; represents pricelyield onlyfor initial reoffering of Certificates to public and mqv change for subsequent purchasers. Board of Aldermen Scott Bradley, Mayor Fred Held, Mayor Pro Tem Don Redding, Member Larry Sparrow, Member Buddy Brown, Member Bill Frey, Member Name Trent Petty Mary Midgette Ginger Crosswy TOWN OF WESTLAKE, TEXAS 3 Village Circle, Suite 207 Westlake, Texas 76262 (817) 430-0941 ELECTED OFFICIALS ADMINISTRATIVE OFFICIALS Title Years Town Manager 2 Assistant to Town Manager 1 Town Clerk 6 CONSULTANTS AND ADVISORS Name Whitley Penn, CPAs and Professional Consultants Fort Worth, Texas Boyle & Lowry, L.L.P., Irving, Texas Thomas Allen Moon, Attorney at Law, Dallas, Texas J. P. Morgan Chase Bank Larry Williamson Greenville, Texas Title Auditor Co -Bond Counsel Paying Agent/Registrar Financial Advisor Term Expires Years Occupation Ma On Board Lawyer (retired) 2002 8 V.P., Elliots Hdwr (retired) 2003 10 V.P., IBM (retired) 2003 2 V.P., GTE (retired) 2003 L Owner, Brown Automotive 2002 l V.P., GTE (retired) 2002 2 ADMINISTRATIVE OFFICIALS Title Years Town Manager 2 Assistant to Town Manager 1 Town Clerk 6 CONSULTANTS AND ADVISORS Name Whitley Penn, CPAs and Professional Consultants Fort Worth, Texas Boyle & Lowry, L.L.P., Irving, Texas Thomas Allen Moon, Attorney at Law, Dallas, Texas J. P. Morgan Chase Bank Larry Williamson Greenville, Texas Title Auditor Co -Bond Counsel Paying Agent/Registrar Financial Advisor USE OF INFORMATION IN OFFICIAL STATEMENT No dealer, broker, salesman or other person has been authorized to give any information or make any representations other than those contained in this Official Statement, and if given or made, such other information or representations must not be relied upon as having been authorized by the Issuer or any other person. This Official Statement does not constitute an offer to sell or solicitation of an offer to buy, and there shall not be any sale of, the Certificates in any state in which it is unlawful to make such offer, solicitation or sale. The information and expressions of opinion contained herein have been obtained from sources that are believed to be reliable, but the accuracy and completeness of such information cannot be guaranteed by the Issuer. The information and expressions of opinion contained herein are subject to change without notice, and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the Issuer or other matters described herein since the date hereof. See "Other Matters - Continuing Disclosure of Information" herein for a description of the Issuer's agreement to make periodic filings to update certain information contained in this. Official Statement. The prices and other terms respecting the offering and sale of the Certificates may be changed from time to time by the initial purchaser(s) of the Certificates after the Certificates are released for sale, and the Certificates may be offered and sold at prices other than the initial offering prices, including to dealers who may sell the Certificates into investment accounts. TABLE OF CONTENTS Pave Summary Statement iv Introduction I Plan of Financing 1 Description of the Certificates I Issuer Debt and Ad Valorem Tax Information 7 Other Financial information 13 Legal Matters 16 Tax Matters 16 Rating Is Other Matters 19 Appendix A, Form of Co -Bond Counsel Opinions A - 1 Appendix B, Financial Statements B - I Appendix C, General Information Regarding the issuer C - 1 U SUMMARY STATEMENT This Summary Statement is subject in all respects to the more complete information and to the definitions contained or incorporated in this Official Statement. The offering of the Certificates to potential investors is made only by means of this entire Official Statement, including the cover page and all appendices. No person is authorized to detach this Summary Statement from this Official Statement or to otherwise use it without the entire Official Statement. The Issuer The Town of Westlake is located in Denton and Tarrant Counties, Texas, was incorporated in 1956 and is a Type A general law city under the laws of the State of Texas. See Appendix C, General Information Regarding the Issuer." ~ The Certificates The Certificates are being issued in the aggregate principal amount set forth on the cover page pursuant to the Saws of the State of Texas, particularly Chapter 271, Subchapter C, Texas Local Government Code, as amended, and an ordinance adopted by the Board of Aldermen of the Issuer (the "Ordinance"). The Certificates maturing on and after May 1, 2015 are subject to redemption at the option of the Issuer on and after May 1, 2014 as described herein. See "Description of the Certificates — Optional Redemption." Security The Certificates constitute direct obligations of the Issuer, payable from a continuing annual ad valorem tax levied upon all taxable property located within the Issuer, within the limitations prescribed by law. The Ordinance irrevocably pledges such ad valorem taxes in an amount sufficient to provide for the payment of the Certificates while they remain outstanding. Additionally, the Certificates are payable from and secured by the revenues arising from the permitting and licensing fees charged by the Issuer, which the Issuer intends to use as the primary source for the payment of debt service on the Certificates (the "Revenues"). See "Description of the Certificates — Security for the Certificates." Tax Matters In the opinion of Co -Bond Counsel, interest on the Certificates will be excludable from gross income for purposes of federal income taxation under existing law, subject to the matters described under "Tax Matters" herein, including the alternative minimum tax on corporations. Summary of Key Analytical Bata(1) Taxable Assessed Valuation (TAV) for 2001-02 Year General Fund Equity Balance as of 9/30/01 (unaudited) Ad Valorem Tax Debt as of 9130101 (audited), plus the Certificates(2) TAV Per Capita (based on 2000 census population - 207) Tax Debt Per Capita (based on 2000 census population — 207) Ratio of Total Tax Debt to TA V (1) See "Issarer Debt and std Paloreni Tax Infornralion - herein. (2) Includes bonds and certificates ofobligaiion; excludes lax -supported capital leases. ry 5360,033,639 52,389,508 $12,400,000 51,739,293 559,903.38 3.444% OFFICIAL STATEMENT relating to $12,400,000 Town of Westlake, Texas Combination Tax and Limited Pledge�Revenue Certificates of Obligations Series 2002 INTRODUCTION This Official Statement provides certain information in connection with the issuance by Town of Westlake, Texas (the "Issuer') of its Combination Tax and Limited Pledge Revenue Certificates of Obligation, Series 2002 (the "Certificates"). Except as otherwise defined herein, capitalized terms used herein have the same meanings assigned to such terms in the ordinance authorizing the Certificates (the "Ordinance"). There follows in this Official Statement descriptions of the plan of financing, the Certificates and certain information about the Issuer and its finances. All descriptions of documents contained herein are only summaries and are qualified in their entirety by reference to each such document. Copies of such documents may be obtained from the Issuer. PLAN OF FINANCING Purpose of the Certificates Proceeds of the Certificates will be used to pay for (1) the acquisition of and improvements to facilities for fire protection, law enforcement, civic administration, recreation, cultural and civic improvement and educational development, and (2) the costs of issuing the Certificates. Sources and Uses of Funds The following is a summary of the anticipated sources and uses of proceeds of funds (excluding accrued interest) in connection with the issuance of the Certificates: Sources of Funds: Principal Amount of Certificates S 12,100,000 Cash Premium Total Sources of Funds Uses of Funds: Available for Improvements Capitalized Interest Fund Issuance Costs Total Uses of Funds DESCRIPTION OF THE CERTIFICATES The Certificates are dated February 1, 2002 and the principal amount of the Certificates will be due and payable on May 1 in each of the years and bear interest at per annum rates as shown on the cover page hereof. Interest will be computed on the basis of a 360 -day year of twelve 30 -day months, and such interest accrues from the date of the Certificates and is payable on May l and November 1 in each year, beginning November 1, 2002. The Certificates will be issued only in fully registered form in any integral multiple of $5,000 for any one maturity. Principal of the Certificates is payable at the designated corporate trust office of the Paying Agent/Registrar, initially J.P. Morgan Chase Bank, upon presentation and surrender of the Certificates. Interest on the Certificates will be paid to the registered owner (the "Holder") whose name appears on the registration books maintained by the Paying Agent/Registrar (the "Security Register") at the close of business on the Record Date (the last day of the month immediately preceding each interest payment date whether or not such day is a business day) and will be paid by the Paying Agent/Registrar by check sent by United States mail, first class, postage prepaid, to the address of the Holder recorded in the Security Register or by such other method, acceptable to the Paying Agent/Registrar, requested by, and at the risk and expense of, the Holder, In the event of a non-payment of interest on a scheduled payment date with respect to the Certificates, that remains unpaid for 30 days thereafter, the Order require the Paying Agent/Registrar to establish a Special Record Date, if and when funds for the payment of such interest are received from the Issuer. Notice of the Special Record Date and of the scheduled payment date of the past due interest (the "Special Payment Date" that 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 Holder of a Certificate, as the may be, appearing on the 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. If the date specified for the payment of the principal of or interest on the Certificates is a Saturday, Sunday, legal holiday or day when banking institutions in the city where the Paying Agent/Registrar is located are authorized or required to be closed, then such payment will be made on the next succeeding day which is not one of the foregoing days, without additional interest and with the same force and effect as if made on the specified date for such payment. Initially, the Issuer plans to use the Book -Entry -Only System of The Depository Trust Company in connection with the issuance and transferability of the Certificates. Such system will affect the method and tinging of payment and the method of transfer for the Certificates. See "Book -Entry -Only System" below. Book -Entry -Only System This section describes how ownership of the Certificates is to be transferred and how the principal of, preiniunr, if any, and interest an the Certificates are to be paid to and credited by The Depository Trust Company ("DTC'), New York, New York, while the Bonds are registered in its nominee name. The information in this section concerning DTC and the Book-Entr7�-Only Svstem has been provided by DTC for use in disclosure documents such as this Official Statement. The Issuer believes the source of such information to be reliable, but takes no responsibility for the accuracy or completeness thereof. The Issuer cannot and does not give any assurance that (1) DTC will distribute payment of debt service on the Certificates, or redemption or other notices, to DTC Participants, (2) DTC Participants or others will distribute debt service painnents paid to DTC or its nominee (as the registered owner- of the Certificates), or redemption or other notices, to the Beneficial Owners, or that they will do so on a tinaely basis, or (3) DTC will serve and act in a manner described in this Official .Statement. The current rules applicable to DTC are on file with the Securities and Exchange Commission, and the current procedures of DTC to be followed in dealing with DTC Participants are on file with DTC. DTC will act as securities depository for the securities described in this Official Statement. Such securities will be issued as fully -registered Certificates in the name of Cede & Co. (DTC's partnership nominee). One fully - registered security will be issued for each maturity of the Certificates in the aggregate principal amounts of such maturity, and will be deposited with DTC. DTC is a limited -purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds securities that its participants ("Direct Participants") deposit with DTC. DTC also facilitates the settlement among Participants of securities transactions, such as transfers and pledges, in deposited securities through electronic computerized book - entry changes in Participants' accounts, thereby eliminating the need for physical movement of securities. Direct Participants include securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is owned by a number of its Direct Participants and by the New York Stock Exchange, Inc., the American Stock Exchange, Inc., and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as securities brokers and dealers, banks, and trust companies that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). The Rules applicable to DTC and its Participants are on file with the Securities and Exchange Commission_ Purchases of securities under the DTC system must be made by or through Direct Participants, which will receive a credit for the securities on DTC's records. The ownership interest of each actual purchaser of each security ("Beneficial Owner") is in tum to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase, but Beneficial Owners are expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interest in securities are to be accomplished by entries made on the books of participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive securities representing their ownership interests in the securities, except in the event that the use of the book -entry -only system for the securities is discontinued. To facilitate subsequent transfers, all securities deposited by Direct Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co. The deposit of securities with DTC and their registration in the name of Cede & Co. effect no change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the securities; DTC's records reflect only the identity of the Direct Participants to whose accounts such securities are credited, which may or may not be the Beneficial Owners. The Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Neither DTC nor Cede & Co_ will consent or vote with respect to the securities. Under its usual procedures, DTC mails an Omnibus Proxy to the issuer of the securities as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts the securities are credited on the record date (identified in a listing attached to the Omnibus Proxy). Principal and interest payments on the Certificates will be made to DTC. DTC's practice is to credit Direct Participants' accounts on the payment date in accordance with their respective holdings shown on DTC's records unless DTC has reason to believe that it will not receive payment on the date. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of DTC, the Paying Agent/Registrar or the Issuer, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal and interest to DTC is the responsibility of the Issuer, disbursement of such payments to Direct Participants shall be the responsibility of DTC, and disbursements of such payments to the Beneficial Owners shall be the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as securities depository with respect to the Certificates described in this Official Statement at any time by giving reasonable notice to the Issuer. Under such circumstances, in the event that a successor securities depository is not obtained, securities are required to be printed and delivered. The Issuer may decide to discontinue use of the system of book -entry transfers through DTC (or a successor securities depository) for the Certificates. In that event, Certificates will be printed and delivered. According to DTC, the foregoing information with respect to DTC has been provided to the Industry for informational purposes only and is not intended to serve as a representation, warranty or contract modification of any kind. Use of Certain Terms in Other- Sections of this Official Statement. In reading this Official Statement, it should be understood that while the Certificates are in the Book -Entry -Only System, references in other sections of this Official Statement to Holders should be read to include the person for which the Participant acquires an interest in the Certificates, but (i) all rights of ownership must be exercised through DTC and the Book -Entry -Only System, and (ii) except as described above, notices that are to be given to Holders under the Ordinance will be given only to DTC. Information concerning DTC and the Book -Entry -Only System has been obtained from DTC and is not guaranteed as to accuracy or completeness by, and is not to be construed as a representation of, the Issuer or any purchaser or underwriter. Authority for Issuance The Certificates are authorized and issued pursuant to the Constitution and general laws of the State of Texas, including particularly Chapter 271, Subchapter C, Texas Local Government Code, as amended, and the Ordinance. Security for the Certificates The Certificates will constitute direct obligations of the Issuer, payable from ad valorem taxes levied against all taxable property located within the Issuer, within the limits prescribed by law. The Ordinance irrevocably pledges such ad valorem taxes to the payment of the principal of and interest on the Certificates while they remain outstanding. See "ISSUER DEBT AND AD VALOREM TAX INFORMATION" herein. The Constitution of the State of Texas provides that the ad valorem tax levied by the Issuer for general purposes and for the purpose of paying debt service requirements of the Issuer's general obligation debt shall not exceed S 1.50 for each $100 of assessed valuation of taxable property. There is no limitation within the S1.50 rate for interest and sinking fund purposes. Administratively, however, the Attorney General of the State of Texas generally will not permit allocation of more than $1.00 of the $1.50 maximum tax rate for all tax supported debt based on a 90% collection rate. Additionally, the Certificates are payable from and secured by the revenues arising from the permitting and licensing fees charged by the Issuer, which the Issuer intends to use as the primary source for the payment of debt service on the Certificates (the "Revenues"). The following is a summary of Revenues for the three most recent fiscal years of the Issuer, as set forth in Table 8 under "OTHER FINANCIAL INFORMATION." Fiscal Year Ended September 30 1999 2000 2001 Revenues 5516,609 $477,849 5700,313 Optional Redemption The Issuer reserves the right, at its option, to redeem Certificates maturing on and after May 1, 2015, in whole or in part in principal amounts of $5,000 or any integral multiple thereof, on May 1, 2014, or any date thereafter, at the par value thereof plus accrued interest to the date fixed for redemption. If less than all of the Certificates 4 within a maturity are to be redeemed, the Paying Agent/Registrar (or DTC, while the Certificates are in Book - Entry -Only form) shall determine by lot the Certificates, or portions thereof, within such maturity to be redeemed. Mandatory Sinking Fund Redemption In addition to being subject to optional redemption as provided above, should the initial purchaser(s) of the Certificates designate certain of the Certificates as Term Certificates as provided in the Notice of Sale and Bidding Instructions for the Certificates, the Term Certificates are subject to mandatory sinking fund redemption prior to maturity at a price of par plus accrued interest to the redemption date from amounts required to be deposited in the interest and sinking fund for the Certificates on the first February 15 following the last maturity for Serial Certificates, and annually thereafter on each February 15,until the stated maturity of the Term Certificates. The principal amount of Term Certificates to be redeemed on -each mandatory redemption date shall be the principal amount that would have been due and payable in the maturity schedule shown above had no conversion to Term Certificates occurred. The particular Certificates to be redeemed on February 15 of each year pursuant to such mandatory sinking fund redemption shall be chosen by the Paying Agent/Registrar at random by lot or other customary method. The principal amount of Term Certificates of a stated maturity required to be redeemed on any mandatory redemption date pursuant to the operation of the mandatory sinking fund redemption provisions shall he reduced, at the option of the Issuuer, by the principal amount of any Tenn Certificates of the same maturity which, at least 50 days prior to a mandatory redemption date (1) shall have been acquired by the Issuer and delivered to the Paying Agent/Registrar for cancellation, or (2) shall have been redeemed pursuant to the optional redemption provisions and not theretofore credited against a mandatory sinking fund redemption requirement. Notice of Redemption Not less than 30 days prior to a redemption date for the Certificates, the Issuer shall cause a notice of redemption to be sent by United States mail, first class, postage prepaid, to each Owner of a Certificate to be redeemed, in whole or in part, at the address of the Owner appearing in the Register at the close of business on the business day next preceding the date of mailing of such notice. ANY NOTICE GIVEN SHALL BE CONCLUSIVELY PRESUMED TO HAVE BEEN DULY GIVEN, WHETHER OR NOT THE OWNER RECEIVES SUCH NOTICE. NOTICE HAVING BEEN SO GIVEN AND FUNDS FOR PAYMENT OF THE REDEMPTION PRICE HAVING BEEN DEPOSITED WITH THE PAYING AGENT/REGISTRAR, THE CERTIFICATES CALLED FOR REDEMPTION SHALL BECOME DUE AND PAYABLE ON THE SPECIFIED REDEMPTION DATE, AND, NOTWITHSTANDING THAT ANY CERTIFICATE OR PORTION THEREOF HAS NOT BEEN SURRENDERED FOR PAYMENT, INTEREST ON SUCH CERTIFICA`T'E OR PORTION THEREOF SHALL CEASE TO ACCRUE. Paying Agent/Registrar The initial Paying Agent/Registrar for the Certificates is J.P. Morgan Chase Bank. In the Ordinance, the Issuer retains the right to replace the Paying Agent/Registrar. The Issuer covenants to maintain and provide a Paying Agent/Registrar at all times until the Certificates are paid, and any successor Paying Agent/Registrar shall be a bank, trust company, financial institution or other entity duly qualified and legally authorized to serve as and perform the duties and services of Paying Agent/Registrar for the Certificates. Upon any change in the Paying Agent/Registrar, the Issuer agrees to promptly cause a written notice thereof to be sent to each Holder by United States mail, first class, postage prepaid, which notice shall also give the effective date of the change and the address of the new Paying Agent/Registrar. If the Paying Agent/Registrar is replaced, the new Paving Agent/Registrar shall accept the previous Paying Agent/Registrar's records and act in the same capacity as the previous Paying Agent/Registrar. Transfer and Exchange In the event the Book -Entry -Only System shall be discontinued with respect to the Certificates, printed certificates will be issued to the holders of the Certificates and thereafter, the Certificates may be transferred and exchanged on the Security Register only upon presentation and surrender thereof to the Paying Agent/Registrar, and such transfer or exchange shall be without expense or service charge to the Holder, except for any tax or other governmental charges required to be paid with respect to such registration, exchange and transfer. A Certificate may be assigned by the execution of an assignment form on the Certificate or by other instrument of transfer and assignment acceptable to the Paying Agent/Registrar. A new Certificate or Certificates will be delivered by the ]Paying Agent/Registrar, in lieu of the Certificate being transferred or exchanged, at the designated office of the Paying Agent/Registrar, or sent by United States mail, first class, postage prepaid, to the new Holder or its designee, New Certificates registered and delivered in an exchange or transfer shall be in authorized denominations for any one stated maturity and of like kind and for a like aggregate principal amount and interest rate as the Certificates surrendered for exchange or transfer. Replacement Certificates If any Certificate is mutilated, destroyed, stolen or lost, a new Certificate in the same principal amount and bearing the same rate of interest as the Certificate so mutilated, destroyed, stolen or lost will be issued under the conditions set forth in the Ordinance. In the case of a mutilated Certificate, such new Certificate will be delivered only upon surrender and cancellation of such mutilated Certificate. In the case of any Certificate issued in lieu of and Substitution for a Certificate which has been destroyed, stolen or lost, such new Certificate will be delivered only upon (a) the filing with the Issuer and the Paying Agent/Registrar of evidence satisfactory to establish to the Paying Agent/Registrar proof of the ownership and the circumstances of loss, destruction or theft of such Certificate, and (b) the furnishing to the Paying Agent/Registrar of such security of indemnity satisfactory to it to hold it and the Issuer harmless. The person requesting the authentication and delivery of a new Certificate must comply with such other reasonable requirements as the Issuer and the Paying Agent/Registrar may prescribe and pay such expenses as may be incurred in connection therewith. Remedies The Ordinance obligates the governing body of the Issuer to assess and collect an annual ad valorem tax sufficient to pay principal and interest when due on the Certificates and it also pledges such tax to the payment of the Certificates. Although a Holder could presumably obtain a judgment against the Issuer if a default occurred in the payment of principal or interest on a Certificate, such judgment could not be satisfied in execution against any property of the Issuer. Stich Holder's only practical remedy, if a default occurs, is a mandamus or mandatory injunction proceeding to compel the Issuer to levy, assess and collect an annual ad valorem tax sufficient to pay principal of and interest on the Certificates as they become due. Such Holder could be required to enforce such remedy on a periodic basis. The enforcement of a claim for payment of principal and interest on the Certificates, including the remedy of mandamus, would be subject to the applicable provisions of the federal bankruptcy laws and to other laws affecting the rights of creditors of political subdivisions generally. The opinion of Co -Bond Counsel will note that all opinions relative to the enforceability of the Order and the Certificates are subject to bankruptcy and other laws affecting creditors' rights or remedies generally. Initially, the registered owner of the Certificates will be The Depository Trust Company. See "Book -Entry -Only System" herein. ISSUER DEBT AND VALOREM TAX INFORMATION General The following tables and calculations relate to the Certificates the only outstanding tax -supported debt of the Issuer, The Issuer and various other political subdivisions of goverment which overlap all or a portion of the Issuer are empowered to incur debt to be paid from revenues raised or to be raised by taxation against all or a portion of property within the Issuer. The Certificates are the Issuer's first debt obligation for which it will levy its ad valorem tax; provided, however, that it initially intends to repay the Certificates from other revenue sources (primarily sales tax revenues). Table 1 - Ad Valorem Tax Indebtedness Taxable Assessed Valuation for 2001-02 Fiscal Year (1) $360,033,639 Direct Debt (Bonds & Certificates of Obligation): The Certificates 12,400,000 Other Direct Debt 0 Total Direct Debt 2 4 Interest and Sinking Fund cash balance as of 9/30/2001 $0 (1) Source Tarrunt County Appraisal District Table 2 - Estimated Overlapping Debt(i) Total Overlapping Debt 26,370,867 Issuer's Outstanding Debt (See Table 1) 12,400,000 Total Direct & Overlapping Debt 538.770 867 (1) The above table indicates the indebtedness, defined as outstanding debt payable from art valorem taxes, gfgovernntewal entities overlappinz the Issuer and estintaied percentages and amounts o.fsuch indebtedness attributable to property within the Issuer. The ittforntanon is based upon data secured,from individual jurisdictions and/or the Teras Municipal Reports published bt- the Municipal Advisor Council of Teras. Such_fgures do not indicate the lax burden levied by the applicable taxing jurisdiction for operation and maintenance or for other purposes. Table 3 - Debt Ratios Debt Per TAV for 2001-02 Fiscal Year Debt Per Capita - 2000 census population of 207 Direct & Estimated Direct Debt Overlapping Debt 3.44% 10.77% 559,903 $187,299 Amount Overlapping Taxing Body of Debt As of Percent Amount Carroll CSD (gross debt) $168,234,083 09/30/01 8.3% $13,980,252 Keller ISD (net debt) $298,671,980 08/31/00 2.9% $8,751,089 Northwest ISD (net debt) $111,836,863 07/01/01 0.05% 555,918 Trophy Club MUD #1 (gross debt) $5,632,141 09/30/01 45.9% $2.584,590 Tarrant County Hospital District (net debt) $7,408,224 09/30/00 0.5% 537,041 Tarrant County College District (gross debt) $70,615,000 09/30/01 0.5% $353,075 Denton County (net debt) $139,412,570 09/30/01 0.03% 541,824 Tarrant County (net debt) 113,415,670 06/01/01 0.5% $567.078 Total Overlapping Debt 26,370,867 Issuer's Outstanding Debt (See Table 1) 12,400,000 Total Direct & Overlapping Debt 538.770 867 (1) The above table indicates the indebtedness, defined as outstanding debt payable from art valorem taxes, gfgovernntewal entities overlappinz the Issuer and estintaied percentages and amounts o.fsuch indebtedness attributable to property within the Issuer. The ittforntanon is based upon data secured,from individual jurisdictions and/or the Teras Municipal Reports published bt- the Municipal Advisor Council of Teras. Such_fgures do not indicate the lax burden levied by the applicable taxing jurisdiction for operation and maintenance or for other purposes. Table 3 - Debt Ratios Debt Per TAV for 2001-02 Fiscal Year Debt Per Capita - 2000 census population of 207 Direct & Estimated Direct Debt Overlapping Debt 3.44% 10.77% 559,903 $187,299 Table 4 - Debt Service Requirements The following schedule sets forth the total debt service requirements of the Certificates, which , upon issuance, will be the only outstanding ad valorem tax debt of the Issuer: Year End The Certificates 9130 Principal Interest Total 2002 s0 SO $0 2003 0 829,575 829,575 2004 fl 663,660 663,660 2005 0 663,660 663,660 2006 210,000 663,660 873,660 2007 225,000 651,060 876,060 2008 235,000 637,560 872,560 2009 250,000 623,813 873,813 2010 265,000 609,188 874,188 2011 280,000 593,685 873,685 2012 295,000 577,445 872,445 2013 315,000 560,335 875,335 2014 330,000 542,853 872,853 2015 350,000 525,363 875,363 2016 365,000 508,213 873,213 2017 385,000 490,145 875,145 2018 405,000 470,703 875,703 2019 425,000 450,048 875,048 2020 445,000 429,160 873,160 2021 470,000 405,020 875,020 2022 495,000 380,580 875,580 2023 520,000 354,593 874,593 2024 550,000 327,033 877,033 2025 580,000 297,883 877,883 2026 610,000 267,143 877,143 2027 640,000 234,813 874,813 2028 675,000 200,893 875,893 2029 710,000 164,780 874,780 2030 750,000 126,795 876,795 2031 790,000 86,670 876,670 2032 830.000 44,405 874,405 Totals $12.4nn.n00 iLLU2jZ $25.779.728 * Preliminary: sul feet to change. Based on an asswned net interest cost of5,23%; does not reflect capitalized interest that will be used to pay a substantial portion of debt service in 2063, 2004 and 2005. 9 Table 5 - Taxable Assessed Valuation and Outstanding Ad Valorem Tax Debt (1) Total Market Valuation Less: Agricultural Absolute Subject to Arbitration Disabled Vet Taxable Assessed Valuation Ad Valorem Tax Debt(2) Ratio of Total Debt to TAV 2000 Census Population: 207 TAV Per Capita for 2001-02 Fiscal Year. $1,739,292.94 Ratio of Total Debt to TAV for 2001-02 Fiscal Year 3.44% Total Debt Per Capita: $59,903.38 Approximate Area (square miles): 6.6 Voter Authorized but Unissued Ad Valorem Tax Debt: s0 Ad Valorem Tax Debt Planned for Next 12 Months: $5,000,000 (Additional Cer-q'ficates of Obligation) (1) Source: Tarrant County Appraisal District. Since its inception. the Issuer has not levied and collected an ad valorem tax. (2} .4s ref fiscal,vear end. ercept f it ?OQ1-0? ++high reflects outstanding de5t fo1lowirtg issuance of the CertrJuretes. Fable 6 - Historical and Current Tax Rates, Levies and Collections(1) (Per $100 of Taxable Assessed Valuation) FiscalYears 2000-01 2001-02(21 2000-01 1999-2000 $415,541,392 NA NA (45,560,880) NA NA (9,573,040) NA NA (356,833) • NA NA (17,000)' NA NA S360.033.639NA NA " $12,400,000 s0 $0 3.44% 0.00% 0.00% 2000 Census Population: 207 TAV Per Capita for 2001-02 Fiscal Year. $1,739,292.94 Ratio of Total Debt to TAV for 2001-02 Fiscal Year 3.44% Total Debt Per Capita: $59,903.38 Approximate Area (square miles): 6.6 Voter Authorized but Unissued Ad Valorem Tax Debt: s0 Ad Valorem Tax Debt Planned for Next 12 Months: $5,000,000 (Additional Cer-q'ficates of Obligation) (1) Source: Tarrant County Appraisal District. Since its inception. the Issuer has not levied and collected an ad valorem tax. (2} .4s ref fiscal,vear end. ercept f it ?OQ1-0? ++high reflects outstanding de5t fo1lowirtg issuance of the CertrJuretes. Fable 6 - Historical and Current Tax Rates, Levies and Collections(1) (Per $100 of Taxable Assessed Valuation) (1) Since its inception, the Issuer has not levied and collected an ad valorem tccr Table 7 - Largest Taxpayers(l) 2001-02 2000-01 1999-00 Debt Service Tax Rate $0.0000 $0.0000 $0.0000 Maintenance & Operations Tax Rate 0.0000 0.0000 0.0000 Total Tax Rate Nr M N9gQQ SO -02)a Total Taxes Levied s0 s0 s0 Current Collection Ratio (per Tice Assessor -Collector) NA NA NA Total Collection Ratio (per Tax Assessor -Collector) NA NA NA (1) Since its inception, the Issuer has not levied and collected an ad valorem tccr Table 7 - Largest Taxpayers(l) (1) Source: Tarrant Count17 Appraisal Disti-ict 10 Type of % of Issuer's Name Business 2001 TAV Total TAV Maguire Partners Real Estate $164,097,530 45.58% Fmr Texas Ltd. Partnership Real Estate 91,180,000 25.33% WB Texas Real Estate 14,884,370 4.13% Glenwyck Farms Ltd. Agriculture 4,808,617 1.34% Randall & Sherry Reed Real Estate 1,425,700 0.40% William Greenwood Real Estate 1,425,600 0.40% Terry Bradshaw Real Estate 1,398,540 0.39%n Nathan Graves Real Estate 1,094,100 0.30% AD Youngblood Construction Construction 767,100 0.21% JL and Gloria Richard Real Estate 520.200 0.14% Totals 5281.601-757 7S.).)0/� (1) Source: Tarrant Count17 Appraisal Disti-ict 10 Ad Valorem Taxes Levied by Issuer The Constitution of the State of Texas provides that the ad valorem tax levied by the Issuer for general purposes and for the purpose of paying debt service requirements of the Issuer's general obligation debt shall not exceed $1.50 for each $100 of assessed valuation of taxable property. There is no limitation within the $1.50 rate for interest and sinking fund purposes. Administratively, however, the Attorney General of the State of Texas generally will not permit allocation of more than $1.00 of the $1.50 maximum tax rate for all tax supported debt based on a 90% collection rate. Future Borrowing The Issuer does not currently have voter authorization to issue general obligation bonds, nor does the Issuer currently plan to hold a bond election to authorize general obligation bonds. However, the Issuer may issue additional ad valorem tax secured certificates of obligations and other tax -supported debt without voter authorization. The Issuer anticipates issuing approximately S5 million of combination tax and revenue certificates of obligation in 2002 to construct performing arts center. Regardless of the Issuer's future borrowing activities, the Issuer may be required to increase its annual ad valorem tax rate as a result of factors unrelated to the level of its outstanding debt and otherwise outside its control, including, for example, the following: (i)"a reduction in its taxable assessed valuation, (ii) a reduction in tax collections, or (iii) changes in State law. Property Tax Code General. Receipts from ad valorem taxation are one of the Issuer's principal sources of operational revenue and its principal source of funds for debt service payments. See "Other Financial information." The following is a summary of certain provisions of the Texas Property Tax Code, as amended (the "Property Tax Code"), relating to ad valorem taxation procedures. Property Tax Code and County -Wide Appraisal District. Pursuant to Chapter 6 of the Property Tax Code, each county in the State comprises a single appraisal district with responsibility for recording and appraising property for all taxing units within the county, and each county establishes a single appraisal review board for the purpose of reviewing and equalizing the values established by the appraisal district. Chapter 25 of the Property Tax Code requires the appraisal district, by May 15 of each year or as soon thereafter as practicable, to prepare appraisal records listing all property that is taxable in the appraisal district and stating the appraised value of each parcel or item. Property is required to be appraised as of January 1 of each year (except for business inventories which may be assessed as of September 1 and mineral reserves which are assessed on the basis of a monthly average), and Chapter 23 of the Property Tax Code generally requires appraisals at 100% of market value. In determining market value of property, different methods of appraisal may be used, including the cost method of appraisal, the income method of appraisal and market data comparison method of appraisal, and the most appropriate method is to be used by the chief appraiser, State law further limits the appraised value of a residence homestead for a tax year to an amount not to exceed the lesser of: (1) the market value of the property, or (2) the sum of (a) 10% of the appraised value of the property for the last year in which the property was appraised for taxation multiplied by the number of years since the property was last appraised, plus (b) the appraised value of the property for the last year in which the property was appraised, plus (c) the market value of all new improvements to the property. Appraisals are subject to review by the appraisal review board, and under certain circumstances, taxpayers and taxing units (such as the Issuer) may appeal the orders of the appraisal review board by filing a petition for review in the district court. In such event, the value of the property in question will be determined by the court or by a jury if requested by any party. Absent any such appeal, the orders of the appraisal review board must be used by each taxing jurisdiction in establishing its tax rolls and tax rate. Based upon their respective relative total appraised values, taxing units (such as the Issuer) are each entitled to vote upon the selection of members of the board of directors of the county -wide appraisal districts in their respective counties. IF Although each taxing unit retains the authority to establish its own tax rates and to levy and collect taxes each year, under the county -wide appraisal plan implemented by the Property Tax Code, the taxing units are unable to influence appraisal standards or determine the frequency of revaluation or reappraisal. Chapter 25 of the Property Tax Code requires each appraisal district to implement a plan for periodic reappraisal of property to update appraised values, and the plan must provide for reappraisal of all real property in the appraisal district at least once every three years. Property Subject to Taxation by the Issuer. Except for certain exemptions provided by Texas law, all real and tangible personal property and certain intangible persona] property in each taxing unit, including the Issuer, is subject to taxation by such taxing unit. Principal categories of exempt property which may be exempted under Chapter 11 of the Property Tax Code include: property owned by the State of Texas or its political subdivisions, if the property is used for public purposes; property exempt from ad valorem taxation by federal law; certain household goods, family supplies and personal effects that are not held or used for the production of income; farm products owned by the producer; certain property owned by charitable organizations, youth development associations, religious organizations and qualified schools, designated historical sites; solar and wind powered energy devices; and certain tangible personal property known as "freeport goods." In addition, owners of agricultural, timber and open space land may, under certain circumstances, request valuation of such land on the basis of productive capacity rather than market value. Article V1lI,'Section 2 of the Texas Constitution and Texas law mandate an additional exemption for disabled veterans and the surviving spouses and children of persons dying while on active duty in the armed forces, which exemption applies to either real or personal property and may range from S5,000 to 512,000. A taxing unit may also exempt portions of the taxable value of residential homesteads (see "Residential Homestead Exemption" below). Residential Homestead Exemption. Pursuant to Article VIII, Section 1-b of the Texas Constitution and the Property Tax Code, the governing body of each political subdivision in the State, including the Issuer, is authorized to exempt from ad valorem taxes (1) up to 20 percent of the appraised value of residential homesteads but not less than $5,000, and (2) at least $3,000 of the appraised value of the residential homesteads of persons at least 65 years old and disabled persons. Article VIII, Section 1-b of the Texas Constitution provides that, with respect to the homestead exemptions granted thereunder, a taxing unit may nevertheless continue to levy taxes against such exempted property if (1) ad valorem taxes had been pledged for the payment of such taxing unit's debt incurred prior to the granting of such exemption, and (2) the loss of ad valorem tax revenues attributable to such exempted property would impair the taxing unit's obligation under the contract pursuant to which the debt was created. Other Reductions in Assessed Valuation. The Issuer and other taxing units may jointly agree to the creation of a tax increment financing zone, under which the tax values on properties within the zone are "frozen" at their values at the time such zone is created. The Issuer and other taxing units may also enter into tax abatement agreements to encourage economic development. Linder such agreements, a property owner agrees to construct certain improvements on its property, while the taxing unit would in turn agree to not levy a tax on all or part of the increased value attributable to the improvements until the expiration of the agreement. The abatement agreement may last for as long as 10 years Notice and Hearinu Procedures. The ability of a taxing unit, such as the Issuer, to increase its tax levy from year to year is limited by Chapter 26 of the Property Tax Code, which imposes limitations on certain tax levies (other than tax levies for the payment of debt) based upon a complex formula. These limitations require that, prior to establishing and levying a rate of taxation for a year, the taxing unit compute an "effective rate" for such year pursuant to the Property Tax Code. Generally, this effective rate is the rate which will produce the same amount of operating revenue that the taxing unit levied in the previous year on the same property being taxed for both years, plus the amount necessary to pay bonded indebtedness of the taxing unit for the next year. The governing body of the Issuer may not adopt a tax rate that, if applied to the total taxable values, would exceed the lower of the rollback tax rate or 103% of the effective tax rate until a public hearing is held on the proposed tax rate following a 12 notice of such public hearing (including the requirement that notice be posted on the Issuer's website if the Issuer owns, operates or controls an internet website and public notice must be given by television if the Issuer has free access to a television channel) and the City Council has otherwise complied with the legal requirements for the adoption of such tax rate. If the rate of taxation to be levied for a year exceeds the sum of (i) the effective rate times 1.08, plus (ii) the Issuer's current debt rate (the "Rollback hate"), 10% of the qualified voters of the Issuer may petition to require an election to limit the tax levied by the Issuer in the current year to the Rollback hate. Le and Collection of Taxes. Each taxing unit, including the Issuer, is responsible pursuant to Chapter 31 of the Property Tax Code for the collection of its taxes, unless it elects to transfer such functions to another govemmental entity. By September 1 of each year, or as soon thereafter as practicable, the rate of taxation is set by the governing body of each taxing unit based upon the valuation of property within the taxing unit as of the preceding January 1. Generally, taxes are due October 1, or when billed, whichever comes later, and become delinquent after January 31 of the following year. A delinquent tax incurs a penalty of 12 percent of the amount of the tax through June 30 and additionally accrues interest at the rate of one percent per month. If the tax is not paid by July 1, an additional penalty of up to 15 percent may be imposed by the taxing unit to pay attorney fees for collection of the delinquent tax. Chapter 31 of the Property Tax Code also makes provision each year for consideration of split payments of taxes, discounts for early payment and the postponement of the delinquency date of taxes under certain circumstances. Collection of Delinquent Taxes. Taxes levied by each taxing unit are a personal obligation of the owner of the property. On January 1 of each year, a tax lien attaches to property to secure the payment of all taxes, penalties and interest ultimately imposed for the year on the property, whether or not the taxes are imposed in the year the lien attaches. The lien exists in favor of each taxing unit, including the Issuer, having the power to tax the property. The Issuer's tax lien is on a parity with the tax liens of all other such taxing units. A tax lien on real property has priority over the claims of most creditors and other holders of liens on the property encumbered by the tax lien, whether or not the debt or lien existed before the attachment of the tax lien. Personal property under certain circumstances is subject to seizure and sale for the payment of delinquent taxes, penalties and interest. At any time after taxes on property become delinquent, the Issuer may file suit to foreclose the lien securing payment of the tax or to enforce personal liability for the tax, or both. In filing a suit to foreclose a tax lien on real property, the Issuer must join other taxing units that have claims for delinquent taxes against all or part of the same property. The ability of the Issuer to collect delinquent taxes by foreclosure may be adversely affected by the amount of taxes owed to other taxing units, adverse market conditions, taxpayer redemption right or bankruptcy proceedings which restrain the collection of taxpayer debt. Issuer Application of Property Tax Code. The following table summarizes the current status of the Issuer's property tax procedures: Description Issuer Procedure Age 65/Disabled Homestead Exemption in addition to $10,000 basic exemption Not allowed Exemption for homestead (at least $5,000, up to 20% of market value) Split Payment of Taxes Discounts for Early Payment of Taxes Nonbusiness Personal Property Freeport Property Exemption Tax Abatement Policy Tax Collector for the Issuer Not allowed Not allowed Not allowed Not taxed Not allowed None adopted Tarrant County Tax Assessor -Collector It should be noted that, since its inception, the Issuer has not levied and collected a property tax. Although it will levy a property tax as security for the Certificates, it does not initially intend to collect such a tax to repay the certificates. Instead, the City intends to repay the Certificates from other lawfully available revenues. 13 OTHER FINANCIAL INFORMATION Table 8 - General Operating Fund Summary Revenues and Expenditures (Fiscal Years Ended September 30; derived frons audited financial statements, excep for 2001 whit, & unaudited) Revenues: 2001 2000 1999 1998 1997 Sales Tax $967,427 $1,359,540 $663,897 51,093,527 5799,112 Mixed Beverage Tax 9,479 9,747 0 0 0 Hotel Tax 433,679 121,293 0 0 0 Franchise Tax 285,726 236,498 210,054 184,528 161,407 Interest Income 122,960 118,789 84,664 84,52.9 91,334 Bldg Permits & Fees 700,313 477,849 516,609 79,051 41,638 Fines & Penalties 0 7,867 7,354 3,997 5,099 Miscellaneous 2.676 1.389 1,943 1,259 0 Total Revenues $2,522,260 52,332,971 $1,484.520 $1,446,890 $1,098,590 OoeratinQ Expenditures: General Government 2,039,773 1,738,277 1,045,865 Total Operating Expenditures 2,039,773 1,738,277 1.045,865 Other Financing Sources (Uses): $2,054,990 51,646,872 S 1,358,705 Transfers in 0 83,366 0 Transfers out 0 (727,457) 0 Total Other Sources (Uses) 0 (644,091) 0 Total Expenditures 2,039.773 2,382,368 1,045,865 ExcessRevenues over Exp. 482,487 (49,396) 438.655 Beginning Fund Balance 1,907,021 ,. 1,956,417 1,517 762 Ending Fund Balance 2.389.508 1.907.821 S 1.956.417 1,287,833 1,255,826 1,297,833 1,255.826 0 0 0 1,287,833 159,057 1358.705 517.76 0 0 0 1.255,826 (157,236) 1,515.941 1.358.705 Table 9 - General Operating Fund Summary Balance Sheet (Fiscal Years Ended September 30; derived frour audited financial statements, exceat for 2001 which is unaudited) Assets: 2001 2000 1999 19y 88 1997 Cash & Investments $2,595,178 $1,841,166 $2,054,990 51,646,872 S 1,358,705 Note Receivable 112,707 125,000 0 0 0 Accounts Receivable 243,319 0 0 0 0 Due from Other Fund 180,638 0 0 0 0 Total Assets 3.131.842 0 52.8.54.990 $1 fi46.872 51."358.705 Liabilities: Accrued Liabilities' 546,580 0 0 0 0 Accounts Payable 180,908 59,145 98,574 129,110 0 Due to Other Funds 14,846 0 0 0 0 Total Liabilities 742,334 59,W 98.574 129,110 0 Fund Equity: 1999 $1,318,332 NA 0.426 State of Texas 0.0625 Restricted 0 0 0 0 0 Undesignated 2-389,508 1,,907,021 1_,956.417 1_,517,762 1,358,705 Total Fund Equity 2-3.89,509 1,907,021 1,956 417 1,517.762 I,358,705 Total Liabilities & Fund Equity 3. C 31.8 Z } $1646.872,358.705 Table 10 - Municipal Sales Tax History Fis. Yr. Total % of Equivalent of Ended Sales Tax Ad Valorem Ad Valorem Breakdown of Sales Tax 30 -Sep Revenues(Ij Tax Levy _Tax Rate(2) Collected within the Issuer 1997 $1,530,280 NA 0.495 Taxing Unit Tax Rate 1998 $2,178,419 NA 0.704 The Issuer $0.0200 1999 $1,318,332 NA 0.426 State of Texas 0.0625 2000 $2,719,080 NA 0.879 Total 50.0825 2001 $1,934,854 NA 0.625 (1) Source: Audited Financial Statements: amount shown represents the aggregage sales tar revenues of the Issuer, 14 Investments The Issuer invests its investable funds in investments authorized by Texas law in accordance with investment policies approved by the City Council of the Issuer. Both state law and the Issuer's investment policies are subject to change. Legal Investments. Under Texas law, the Issuer is authorized to invest in (1) obligations of the United States or its agencies and instrumentalities, (2) direct obligations of the State of Texas or its agencies and instrumentalities, (3) collateralized mortgage obligations directly issued by a federal agency or instrumentality of the United States, the underlying security for which is guaranteed by an agency or instrumentality of the United States, (4) other obligations, the principal of and interest on which are unconditionally guaranteed or insured by, or backed by the full faith and credit of, the State of Texas or the United States or their respective agencies and instrumentalities, (S) obligations of states, agencies, counties, cities, and other political subdivisions of any state rated as to investment quality by a nationally recognized investment rating firm not less than A or its equivalent, (6) bonds issues, assumed or guaranteed by the State of Israel, (7) certificates of deposit issued by a state or national bank domiciled in Texas, a savings bank domiciled in Texas, or a state or federal credit union domiciled in Texas and are (i) guaranteed or insured by the Federal Deposit Insurance Corporation or its successor or the National Credit Union Share Insurance Fund or its successor, (ii) secured by obligations described in clauses (l) through (6), or (iii) in any other manner and amount provided by law for Issuer deposits, (8) fully collateralized repurchase agreements that have a defined termination date, are fully secured by obligations described in clause (t), purchased by the Issuer to be pledged to the Issuer, held in the Issuer's name, and deposited at the time the investment is made with the Issuer or with a third party selected and approved by the Issuer, and are placed through a primary government securities dealer or a financial institution doing business in the State of Texas, (9) bankers' acceptances with the remaining term of 270 days or less, if the short-term obligations of the accepting bank or its parent are rated at least A-1 or P-1 or the equivalent by at least one nationally recognized credit rating agency, (10) commercial paper that has a stated maturity of 270 days or less and is rated at least A-1 or P -I or the equivalent by either (a) two nationally recognized credit rating agencies or (b) one nationally recognized credit rating agency if the paper is fully secured by an irrevocable letter of credit issued by a U.S. or state bank, (11) no-load money market mutual funds regulated by the Securities and Exchange Commission having a dollar weighted average portfolio maturity of 90 days or less and include in their investment objectives the maintenance of a stable net asset value of $1 of each share, (12) no-load mutual funds registered with the Securities and Exchange Commission that: have an average weighted maturity of less than two years; invest exclusively in obligations described in the preceding clauses; and are continuously rated as to investment quality by at least one nationally recognized investment rating firm of not less than AAA or its equivalent, and (13) guaranteed investment contracts secured by obligations of the United States of America or its agencies and instrumentalities other than the prohibited obligations described below. The Issuer may invest in such obligations directly or through government investment pools that invest solely in such obligations provided that the pools are rated no lower than AAA or AAA -m or an equivalent by at least one nationally recognized rating service. The Issuer may contract for a term not to exceed two years with an investment management firm registered under the Investment Advisors Act of 1940 (15 U.S.C. Section $0b -I et seq.) or registered with the State Securities Board to provide for the investment and management of Issuer funds or funds under its control. The Issuer is specifically prohibited from investing in: (1) obligations whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage-backed security collateral and pays no principal; (2) obligations whose payment represents the principal stream of cash flow from the underlying mortgage-backed security and bears no interest; (3) collateralized mortgage obligations that have a stated final maturity of greater than 10 years; and (4) collateralized mortgage obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a market index_ Investment Policies. Under Texas law, the Issuer is required to invest its funds under written investment policies that primarily emphasize safety of principal and liquidity; that address investment diversification, yield, maturity, and the quality and capability of investment management; and that includes a list of authorized investments for Issuer funds, maximum allowable stated maturity of any individual investment, the maximum dollar -weighted average maturity allowed for pooled fund groups, methods to monitor the market price of investments acquired 15 with public funds, and requirement for settlement of all transactions, except investment pool funds and mutual funds, on a delivery versus payment basis. All Issuer funds must be invested consistent with a formally adopted "Investment Strategy Statement" that specifically addresses each funds' investment. Each Investment Strategy Statement will describe its objectives concerning: (1) suitability of investment type; (2) preservation and safety of principal, (3) liquidity, (4) marketability of each investment, (5) diversification of the portfolio, and (6) yield. Under Texas law, Issuer investments must be made "with judgment and care, under prevailing circumstances, that a person of prudence, discretion, and intelligence would exercise in the management of the person's own affairs, not for speculation, but for investment, considering the probable safety of capital and the probable income to be derived." At least quarterly the investment officers of the Issuer shall submit to the City Council an investment report detailing: (1) the investment position of the Issuer, (2) that all investment officers jointly prepared and signed the report, (3) the beginning market value, any additions and changes to market value, the ending value of each pooled fund group, and the fully accrued interest for the reporting period, (4) the book value and market value of each separately listed asset at the beginning and end of the reporting period; (5) the maturity date of each separately invested asset, (6) the account or fund or pooled fund group for which each individual investment was acquired, and (7) the compliance of the investment portfolio as it relates to: (a) adopted investment strategy statements and (b) state law. No person may invest Issuer funds without express written authority from the City Council. Additional Provisions. Under Texas law the Issuer is additionally required to: (1) annually review its adopted policies and strategies, (2) require any investment officers' with personal business relationships or relatives with firms seeking to sell securities to the entity to disclose the relationship and file a statement with the Texas Ethics Commission and the City Council; (3) require the registered principal of firms seeking to sell securities to the Issuer or the registered principal of an investment management firm under contract with the Issuer to: (a) receive and review the Issuer's investment policy, (b) acknowledge that reasonable controls and procedures have been implemented to preclude unauthorized investment activities, and (c) deliver a written statement attesting to these requirements; (4) perforin an annual audit of the management controls on investments and investment officers, (5) provide specific investment training for the Treasurer, Chief Financial Officer, or other investment officers: (6) restrict reverse repurchase agreements to not more than 90 days and restrict the investment in non -money market mutual funds in the aggregate to no more than 15% of the entity's monthly average fund balance, excluding bond proceeds and reserves and other funds held for debt service and further restrict the investment of funds in any one mutual fund to an amount not greater than ten percent of the total assets of a mutual fund; (7) prohibit the investment in non -money market mutual funds of any portion of bond proceeds, reserves and funds held for debt service and; (8) require local government investment pools to conform to the new disclosure, rating, net asset value, yield calculation, and advisory board requirements. The Issuer's current investment policy is in compliance with the State law requirements described above. Table 11 - Status of Current Investments As of November 30, 2001, the Issuer's investment portfolio, including its General Fund, Interest and Sinking Funds, Special Revenue Fund, Utility Fund and other miscellaneous funds, was invested as follows (with no material difference between book and market values): Investment Descri tion TexPool(l ) Bank Checking/Savings/CD Accounts Total Book Value 55,918,890.17 139,316.78 6.058.206.95 (1) TexPool is a local government investment pool under the control of -the Texas Comptroller of Public Accounts. The Comptroller has retained JP Morgan Chase Bank to provide investment management services for TacPool. TexPool caarerntly naainrains a rating of Alf,9m ji-otn Standard & Poor's. TexPool's investment objectives inclade achieving a stable net asset value of S1.00per share, Daih investment or redemption of funds is allowed by participants. l� LEGAL MATTERS The delivery of the Certificates to the initial purchaser(s) (the "Purchaser") is subject to approval by the Attorney General of the State of Texas and receipt of the opinion of Boyle & Lowry, L.L.P. and Thomas Allen Moon, Attorney at Law, Co -Bond Counsel, to the effect that the Certificates are valid and binding obligations of the Issuer payable from the sources described herein. The opinion of Co -Bond Counsel, in substantially the form set forth in Appendix A, will be based upon, among other things, an examination of a transcript of certain proceedings taken by the Commissioners Court of the Issuer incident to the authorization and issuance of the Certificates. Co -Bond Counsel was not requested to participate, and did not tak0 part, in the preparation of the Official Statement, and such firms have not assumed any responsibility with respect thereto or undertaken independently to verify any of the information contained therein, except that, in their respective capacities as Co -Bond Counsel, such firms have reviewed the information in the Official Statement relating to the Certificates, the Ordinance and legal matters relating thereto to verify that such information is a fair and accurate summary of the information purported to be shown. Co -Bond Counsels' fees are contingent upon the sale and issuance of the Certificates. The various legal opinions to be delivered concurrently with the delivery of the Certificates express the professional judgment of the attorneys rendering the opinions as to the legal issues explicitly addressed therein. In rendering a legal opinion the attorney does not become an insurer or guarantor of the expression of professional judgment, of the transaction opined upon, or of the future performance of the parties to the transaction. Nor does the rendering of an opinion guarantee the outcome of any legal dispute that may arise from the transaction. TAX MATTERS General In the opinion of Co -Bond Counsel, (i) interest on the Certificates is excludable from gross income for federal income tax purposes under existing law, (ii) certain "original issue discount" is excludable from gross income for federal income tax purposes under existing law as described more fully under "Tax Accounting Treatment of Original Issue Discount Bonds," and (iii) the Certificates are not "private activity bonds" under the Code, and interest on the Certificates will not be subject to the alternative minimum tax on individuals and corporations, except as described below in the discussion regarding the adjusted current earnings adjustment for corporations. The Code imposes a number of requirements that must be satisfied for interest on state or local obligations, such as the Certificates, to be excludable from gross income for federal income tax purposes. These requirements include a requirement that the Issuer be a governmental entity, limitations on the use of bond proceeds and the source of repayment of bonds, limitations on the investment of bond proceeds prior to expenditure, a requirement that excess arbitrage earned on the investment of bond proceeds be paid periodically to the United States and a requirement that the Issuer file an information report with the Internal Revenue IRS. The Issuer will covenant in the Ordinance that it will comply with these requirements. For purposes of their opinion, Co -Bond Counsel will assume continuing compliance with the covenants of the Ordinance pertaining to those sections of the Code that affect the status of the Issuer as a governmental entity and the exclusion from gross income of interest on the Certificates for federal income tax purposes. In addition, Co - Bond Counsel will rely on representations by the Issuer and the Financial Advisor to the Issuer with respect to matters solely within the knowledge of the Issuer and the Financial Advisor, respectively, which Co -Bond Counsel have not independently verified. If the Issuer should fail to comply with the covenants in the Ordinance or if the foregoing representations should be determined to be inaccurate or incomplete, interest on the Certificates could become taxable from the date of delivery of the Certificates, regardless of the date on which the event causing such taxability occurs. The Code also imposes a 20% alternative minimum tax on the "alternative minimum taxable income" of a corpo- ration if the amount of such alternative minimum tax is greater than the amount of the corporation's regular 17 income tax. Generally, the alternative minimum taxable income of a corporation (other than any S corporation, regulated investment company, REIT, REMIC or FASIT), includes 75% of the amount by which its "adjusted current earnings" exceeds its other "alternative minimum taxable income." Because interest on tax-exempt obligations, such as the Certificates, is included in a corporation's "adjusted current earnings," ownership of the Certificates could subject a corporation to alternative minimum tax consequences. Under the Code, taxpayers are required to report on their returns the amount of tax-exempt interest, such as interest on the Certificates, received or accrued during the.year. Except as stated above, and as stated below in "Tax Accounting Treatment of Original Issue Discount Bonds," Co - Bond Counsel will express no opinion as to any federal, state or local tax consequences resulting from the ownership of, receipt of interest on, or disposition of, the Certificates. Prospective purchasers of the Certificates should be aware that the ownership of tax-exempt obligations may result in collateral federal income tax consequences to financial institutions, life insurance and property and casualty insurance companies, certain S corporations with Subchapter C earnings and profits, individual recipients of Social Security or Railroad Retirement benefits, taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry tax-exempt obligations, taxpayers owning an interest in a FASIT that holds tax- exempt obligations and individuals otherwise qualifying for the earned income credit. In addition, certain foreign corporations doing business in the United States may be subject to the "branch profits tax" on their effectively - connected earnings and profits, including tax-exempt interest such as interest on the Certificates. These categories of prospective purchasers should consult their own tax advisors as to the applicability of these consequences. Co -Bond Counsel's opinion is based on existing law, which is subject to change. Such opinion is further based on Co -Bond Counsel's knowledge of facts as of the date thereof. Co -Bond Counsel assumes no duty to update or supplement its opinion to reflect any facts or circumstances that may thereafter come to CGBond Counsels' attention or to reflect any changes in any law that may thereafter occur or become effective. Moreover, Co -Bond Counsels' opinions are not a guarantee of result and are not binding on the Internal Revenue IRS (the "IRS'); rather, such opinions represent Co -Bond Counsel's legal judgment based upon Co -Band Counsels' review of existing law and in reliance upon the representations and covenants referenced above that Co - Bond Counsel deem relevant to such opinions. The IRS has an ongoing audit program to determine compliance with rules that relate to whether interest on state or local obligations is includable in gross income for federal income tax purposes. No assurance can be given whether or not the IRS will commence an audit of the Certificates. If an audit is commenced, in accordance with its current published procedures the IRS is likely to treat the Issuer as the taxpayer. Co -Bond Counsel observe that the Issuer has covenanted in the Ordinance not to take any action, or omit to take any action within its control, that if taken or omitted, respectively, may result in the treatment of interest on the Certificates as includable in gross income for federal income tax purposes. Tax Accounting Treatment of Original Issue Discount Bonds The initial offering price for certain of the Certificates may be less than the principal amount thereof (the "Original Issue Discount Bonds"). In such case, Co -Band Counsel, under existing law and based upon the assumptions hereinafter stated, will render an opinion to the effect that: (a) The difference between (i) the amount payable at the maturity of each Original Issue Discount Bond, and (ii) the initial offering price to the public of such Original Issue Discount Bond constitutes original issue discount with respect to such Original Issue Discount Bond in the hands of any owner who has purchased such Original Issue Discount Bond in the initial public offering of the Certificates; and (b) Such initial owner is entitled to exclude from gross income (as defined in Section 61 of the Code) an amount of income with respect to such Original Issue Discount Bond equal to that portion of the amount of such original issue discount allocable to the period that such Original Issue Discount Bond continues to be mvned by such owner. 18 In the event of the redemption, sale or other taxable disposition of such Original Issue Discount Bond prior to stated maturity, however, the amount realized by such owner in excess of the basis of such Original Issue Discount Bond in the hands of such owner (adjusted upward by the portion of the original issue discount allocable to the period for which such Original Issue Discount Bond was held by such initial owner) is includable in gross income. (Because original issue discount is treated as interest for federal income tax purposes, the discussion regarding interest on the Certificates under the caption "TAX MATTERS" generally applies, except as otherwise provided below, to original issue discount on an Original Issue Discount Bond held by an owner who purchased such Original Issue Discount Bond at the initial offering price in the initial public offering of the Certificates, and should be considered in connection with the discussion in this portion of the Official Statement.) Under existing law, the original issue discount on each Original Issue Discount Bond is accrued daily to the stated maturity thereof (in amounts calculated as described below for each six-month period ending on the date before the semiannual anniversary dates of the date of the Certificates and ratably within each such six-month period) and the accrued amount is added to an initial owner's basis for such Original Issue Discount Bond for purposes of determining the amount of gain or loss recognized by such owner upon the redemption, sale or other disposition thereof. The amount to be added to basis for each accrual period is equal to (a) the sum of the issue price and the amount of original issue discount accrued in prior periods multiplied by the yield to stated maturity (determined on the basis of compounding at the close of each accrual period and properly adjusted for the length of the accrual period) less (b) the amounts payable as current interest during such accrual period on such Original Issue Discount Bond. The federal income tax consequences of the purchase, ownership, and redemption, sale or other disposition of Original Issue Discount Bonds which are not purchased in the initial offering at the initial offering price may be determined according to rules which differ from those described above. All owners of Original Issue Discount Bonds should consult their own tax advisors with respect to the determination for federal, state, and local income tax purposes of interest accrued upon redemption, sale or other disposition of such Original Issue Discount Bonds and with respect to the federal, state, local and foreign tax consequences of the purchase, ownership, redemption, sale or other disposition of'such Original Issue Discount Bonds. Tax Accounting Treatment of Original Issue Premium The initial offering price for certain of the Certificates may exceed the stated redemption price payable at maturity of such Certificates. Such Certificates (the "Premium Bonds") will be considered for federal income tax purposes to have "bond premium" equal to the amount of such excess. The basis of a Premium Bond in the hands of an initial owner is reduced by the amount of such excess that is amortized during the period such initial owner holds such Premium Bond in determining gain or loss for federal income tax purposes. This reduction in basis will increase the amount of any gain or decrease the amount of any loss recognized for federal income tax purposes on the sale or other taxable disposition of a Premium Bond by the initial owner. No corresponding deduction is allowed for federal income tax purposes, however, for the reduction in basis resulting from amortizable bond premium. The amount of bond premium on a Premium Bond which is amortizable each year (or shorter period in the event of a sale or disposition of a Premium Bond) is determined using the yield to inaturity on the Premium Bond based on the initial offering price of such Certificate. The federal income tax consequences of the purchase, ownership and redemption, sale or other disposition of Premium Bonds that are not purchased in the initial offering at the initial offering price may be determined according to rules which differ from those described above. All owners of Premium Bonds should consult their own tax advisors with respect to the determination for federal, state, and local income tax purposes of amortized bond premium upon the redemption, sale or other disposition of a Premium Bond and with respect to the federal, state, local, and foreign tax consequences of the purchase, ownership, and sale, redemption or other disposition of such Premium Bonds. RATING 19 The Certificates will be rated " " by Standard & Poor's Ratings Group, a division of McGraw Hill Companies (S&P"). Such rating reflects only the view of S&P. No application has been made at any other rating agency. The explanation of the significance of such rating may be obtained from S&P. There is no assurance that any such rating will continue for any period of time or will not be revised or withdrawn. A revision or withdrawal of any such rating may have a materially adverse effect on the market price of the Certificates. OTHER MATTERS No Litigation Certificate Authorized representatives of the Issuer will certify that as of the date of initial delivery of the Certificates, no litigation of any nature is now pending or, to the best of such authorized representatives` knowledge and belief, threatened against the Issuer affecting directly or indirectly the validity of the Certificates or the Ordinance; restraining, enjoining or in any other manner affecting the issuance or delivery of the Certificates; affecting the provision made for the payment of or security for the Certificates, including the levy of or collection of the taxes or the pledge so made; affecting, in any way, the right or authority of the Issuer to pay such amounts from the sources pledged, or otherwise carrying out the terms and provisions of the Order or other authorizing proceedings, and the covenants and agreements therein, and each of them or affecting the corporate existence or boundaries of the Issuer, or the title of the officers or members of the City Council or any of them to their respective positions. Legal Investments in Texas Section 1201.041 of the Public Security Procedures Act provides the Certificates are (i) negotiable instruments, (ii) investment securities to which Chapter 8, Business and Commerce Code applies and (iii) legal and authorized investments for insurance companies, fiduciaries or trustees and sinking funds of municipalities or other political subdivisions or public agencies of the State of Texas. The Texas Finance Code also contains provisions that, subject to the prudent investor standard, provide for the Certificates to be legal investments for state banks, savings banks, tnist companies with capital of one million dollars or more, and savings and loan associations. For the Certificates to be an eligible investments for municipalities, political subdivisions or public agencies of Texas, the Public Funds Investment Act, V.T.C.A., Govemment Code, Chapter 2256, provides a rating of "A" or its equivalent as to investment quality must be assigned by a national rating agency. Furthermore, the Certificates are eligible to secure the deposits of any public funds of the State of Texas, its agencies and its political subdivisions and are legal security for those deposits to the extent of their market value. Additionally, The Certificate of Obligation Act of 1971 (V.T.C_A., Local Government Code, Section 271.051) expressly provides that certificates approved by the Attorney General of Texas are legal authorized investments for banks, savings banks, trust companies, and savings and loan associations; insurance companies; fiduciaries, trustees and guardians and sinking funds of municipalities, counties, school districts, or other political corporations or subdivisions of the State of Texas. The Issuer has made no investigation of any other laws, rules, regulations or investment criteria that might affect the suitability of the Certificates for any of the above purposes or limit the authority of any of the above entities or persons to purchase or invest in the Certificates. Registration and Qualification of Certificates for Sale The sale of the Certificates has not been registered under the Federal Securities Act of 1933, as amended, in reliance upon the exemption provided thereunder by Section 3(a)(2); and the Certificates have not been qualified under the Securities Act of Texas in reliance upon various exemptions contained therein; nor have the Certificates been qualified under the securities acts of any jurisdiction. The Issuer assumes no responsibility for qualification of the Certificates under the securities laws of any jurisdiction in which the Certificates may be sold, assigned, pledged, hypothecated or otherwise transferred. This disclaimer of responsibility for qualification for sale or other disposition of the Certificates shall not be constructed as an interpretation of any kind with regard to the availability of any exemption from securities registration provisions. 20 Financial Consultant Larry Williamson, Greenville, Texas, has been retained as financial advisor for the Issuer in connection with the issuance of the Certificates. The financial consultant's fee for services rendered with respect to the sale of the Certificates is contingent upon the issuance and delivery of the Certificates. The financial consultant has relied on the opinion of Co -Bond Counsel and has not verified and does not assume any responsibility for the information, covenants and representations contained in any of the legal documents with respect to the federal income tax status of the Certificates, or the possible impact of any present, pending or future actions taken by any legislative or judicial bodies. Financial Statements The general purpose financial statements of the Issuer for the year ended September 30, 2001, which have been excerpted from the Issuer's most recently audited Annual Financial Report, are included as Appendix B to this Official Statement. The accountants who audited such statements have not participated in the preparation of this Official Statement and have not been requested to and have not performed any post -audit procedures in connection with the offering of the Certificates. However, upon its availability, the Issuer will promptly file the same to satisfy its continuing disclosure obligation. See "Continuing Disclosure of Information" below. Purchaser The Purchaser has agreed to purchase the Certificates from the Issuer, subject to certain conditions, at prices that include a S discount from initial public offering prices of the Certificates as set forth on the cover page hereof. The Purchaser will be obligated to purchase all of the Certificates if any portion of each such series is purchased. The Issuer has no control over the prices at which the Certificates will initially be offered to the public. The price and other terms relating to the offering and sale of the Certificates may be changed from time to time by the initial purchaser(s) after the Certificates are released for sale, and the Certificates may be offered and sold at prices other than the initial offering price, including sales to dealers who may sell the Certificates into investment accounts. Continuing Disclosure of Information In the Ordinance, the Issuer has made the following agreement for the benefit of the holders and beneficial owners of the Certificates. The Issuer is required to observe the agreement while it remains obligated to advance funds to pay the Certificates. Under the agreement, the Issuer will be obligated to provide certain updated financial information and operating data annually, and timely notice of specified material events, to certain information vendors. This information will be available to securities brokers and others who subscribe to receive the information from vendors. Annual Reports. The Issuer will provide certain updated financial information and operating data to certain information vendors annually. The information to be updated includes all quantitative financial information and operating data with respect to the Issuer of the general type included in this Official Statement under Tables I through 11 and in Appendix B. The Issuer will update and provide this information within six months after the end of each fiscal year in or after 2002. The Issuer will provide the updated information to each nationally recognized municipal securities information repository ("NRMSIR") and to any state information depository ("SID") that is designated by the State of Texas and approved by the staff of the United States Securities and Exchange Commission (the "SEC"). The Issuer may provide updated information in full text or may incorporate by reference certain other publicly available documents, as permitted by SEC Rule 15c2-12 (the "Rule"). The updated information will include 21 audited financial statements, if audits are commissioned and completed by the required time. If audited financial statements are not available by the required time, the Issuer will provide unaudited financial statements by the required time and will provide audited financial statements when and if they become available. Any such financial statements of the Issuer will be prepared in accordance with the accounting principles described in Appendix B or such other accounting principles as the Issuer may be required to employ from time to time pursuant to state law or regulation. The Issuer's current fiscal year end is September 30. Accordingly, it must provide updated information by the last day of March each year, unless the Issuer changes its fiscal year. If the Issuer changes its fiscal year, it will notify each NRMSIR and any SID of the change. Material Event Notices. The Issuer will also provide timely notices of certain events to certain information vendors. The Issuer will provide notice of any of the following events with respect to the Certificates, if such event is material to a decision to purchase or sell Certificates: (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) Obligation calls; (9) defeasances; (10) release, substitution, or sale of property securing repayment of the Certificates; and (1 l) rating changes. Neither the Certificates nor the Orders make any provision for debt service reserves, credit enhancement or liquidity enhancement (except as described in this Official Statement), In addition, the Issuer will provide timely notice of any failure by the Issuer to provide information, data, or financial statements in accordance with its agreement described above under "Annual Reports." The Issuer will provide each notice described in this paragraph to any SID and to either each NRMSIR or the Municipal Securities Rulemaking Board ("MSR -13"). Availability of Material Event Notices and Requested Information. The Issuer has agreed to provide the foregoing information only to NRMSIRs and any SID or, in the case of material event notices, to the MSRB. The information will be available to holders of Certificates only if the holders comply with the procedures and pay the charges established by such information vendors or obtain the information through securities brokers who do so. The Municipal Advisory Council of Texas has been designated by the State of Texas as a SID, and approved as a qualified SID by the SEC. The address of the Municipal Advisory Council of Texas is 600 West 8th Street, P.O. Box 2177, Austin, Texas 78768-2177, and its telephone number is (512) 4766947. Limitations and Amendments. The Issuer has agreed to update information and to provide notices of material events only as described above. The Issuer has not agreed to provide other information that may be relevant or material -to a complete presentation of its financial results of operations, condition, or prospects or agreed to update any information that is provided, except as described above. The Issuer makes no representation or warranty concerning such information or concerning its usefulness to a decision to invest in or sell Certificates at any future date. The Issuer disclaims any contractual or tort liability for damages resulting in whole or in part from any breach of its continuing disclosure agreement or from any statement made pursuant to its agreement, although holders and beneficial owners of Certificates may seek a writ of mandamus to compel the Issuer to comply with its agreement. The Issuer may amend its continuing disclosure agreement 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 if (1) the agreement, as amended, would have permitted the Purchaser to purchase or sell Certificates in the offering described herein in compliance with the Rule, taking into account any amendments or interpretations of the Rule to the date of such amendment, as well as such changed circumstances, and (2) either (a) the holders of a majority in aggregate principal amount of the outstanding Certificates consent to the amendment or (b) any person unaffiliated with the Issuer (such as nationally recognized bond counsel) determines that the amendment will not materially impair the interests of the holders and beneficial owners of the Certificates. The Issuer may also repeal or amend its continuing disclosure agreement if the SEC amends or repeals the applicable provisions of the Rule or any court of final jurisdiction enters judgment that such provisions of the Rule 22 are invalid, but in either case only if and to the extent that the provisions of this sentence would not prevent an underwriter from lawfully purchasing or selling Certificates in the primary offering of the Certificates. If the Issuer so amends the agreement, it has agreed to include with the next financial information and operating data provided in accordance with its agreement described above under "Information Requests" an explanation, in narrative form, of the reasons for the amendment and of the impact of any change in the type of financial information and operating data so provided. Compliance with Prior Undertakings. The Issuer has not previously issued any debt that would be subject to a continuing disclosure agreement in accordance with SEC or 15c2-12. Conclusion The financial data and other information contained herein have been obtained from the Issuers records, audited financial statements and other sources that are believed to be reliable. There is no guarantee that any of the assumptions or estimates contained herein will be realized. All of the summaries of the statutes, documents and orders contained in this Official Statement are made subject to all of the provisions of such statutes, documents and orders. These summaries do not purport to be complete statements of such provisions and reference is made to such documents for further information. Reference is made to original documents in all respects. THIS OFFICIAL STATEMENT was approved, and the execution and delivery of this Official Statement authorized, by the Commissioners Court of the Issuer. Attest: Town Clerk 23 "TOWN OF WESTLAKE, TEXAS By: Mayor APPENDIX A FORM OF CO -BOND COUNSEL OPINION A-1 BOYLE & LOWRY, L.L.P. ATTORNEYS AT LAW 4201 Wingren Drive #108 Irving, Texas 75062-2763 972-650-7100(phone) 972- (fax) February [ ], 2002 Town of Westlake, Texas 3 Village Circle, Suite 207 Westlake, Texas 76262 Ladies and Gentlemen: THOMAS ALLEN MOON ATTORNEY AT LAW 15615 Preston Road #1012 Dallas, Texas 75248 972-503-9177(phone) 413-618-3423 (fax) We have acted as Co -Bond Counsel in connection with the issuance by the Town of Westlake, Texas (the "Issuer") of its Combination Tax and Limited Pledge Revenue Certificates of Obligation, Series 2002 in the aggregate principal amount of S12,400,000 (the "Certificates"). The Certificates are issued pursuant to an ordinance adopted by the Board of Aldermen of the Issuer on January 28, 2002 (the "Certificate Ordinance"). Capitalized terns used herein and not otherwise defined are used with the meanings assigned to such terms in the Certificate Ordinance. This opinion is being rendered for the benefit of the Issuer and the owners of the Certificates. We have assumed without independent verification (i) the genuineness of certificates, records and other documents submitted to me and the accuracy and completeness of the statements contained therein; (ii)) that all documents and certificates submitted to me as originals are accurate and complete; (iii) that all documents and certificates submitted to me as copies are true and correct copies of the originals thereof; and (iv) that all information submitted to me and on which we have relied was accurate and complete. The scope of our engagement as Co -Bond Counsel extends solely to an examination of the facts and law incident to rendering an opinion with respect to the legality and validity of the Certificates and the security therefor and with respect to the excludability from gross income for federal income tax purposes of interest on the Certificates. In rendering this opinion, we have reviewed the Constitution, the Certificate of Obligation Act, Chapter 271.041 of the Local Government Code (the "Certificate of Obligation Act"), and such other laws of the State of Texas and United States that we have deemed appropriate for the purpose of rendering this opinion. In our capacity as Co -Bond Counsel, we have participated in the preparation of and have examined a transcript of certain materials pertaining to the Certificates, including certain certified proceedings of the Issuer and customary certificates, opinions, affidavits, and other documents executed by officers, agents, and representatives of the Issuer and others. Based upon the foregoing, we are of the opinion that, under existing law: A-2 The Issuer is a municipality, within the meaning of the Certificate of Obligation Act, is duly organized and existing under the Constitution and laws of the State of Texas, and has full power and authority to issue the Certificates, to adopt the Certificate Ordinance, and perforrn its obligations thereunder. The Issuer has duly adopted the Certificate Ordinance, and ,the Certificate Ordinance constitutes a legal, valid, and binding obligation of the Issuer, enforceable against the Issuer in accordance with its terms. The Issuer has duly authorized the issuance, execution, and delivery of the Certificates. 4. The authorized officers of the Issuer have duly executed the Certificates, and the Certificates have been registered by the Comptroller of Public Accounts of the State of Texas. 5, The Certificates are issued pursuant to the provisions of the Certificate of Obligation Act, constitute legal, valid, and binding obligations of the Issuer, are enforceable against the Issuer in accordance with their terms, and are entitled to the benefit and security of the Certificate Ordinance. 6. The Certificates are equally and ratably secured by and payable from a pledge of the Issuer's permitting and licensing fees and a continuing ad valorem tax levied upon all taxable property in the Issuer within the limits prescribed by law. 7, The form and execution of the executed Certificate of each maturity numbered IC -1 is regular and proper. 8. Interest on the Certificates is excludable from gross income of the owners thereof for federal income tax purposes under existing law. 9. The Certificates are not private activity bond within the meaning of the Internal Revenue Code of 1986, as amended (the "Code"), and interest on the Certificates will not be subject to the alternative minimum tax on individuals and corporations, except that interest on the Certificates will be included in the "adjusted current earnings" of a corporation (other than any S corporation, regulated investment company, REIT, REMIC or FASIT) for purposes of computing its alternative minimum tax. In providing the opinions set forth in paragraphs 8 and 9 above, we have relied on representations of the Issuer and the underwriter of the Certificates, with respect to matters solely within the knowledge of such parties, which matters we have not independently verified. Furthermore, in providing the opinions set forth in paragraphs 8 and 9 above, we have assumed that subsequent to the date hereof there will be continuous compliance with the procedures, safeguards, and covenants in the Certificate Ordinance and the Federal Tax Certificate executed by the Issuer on the date hereof (including the exhibits thereto, the "Tax Certificate") pertaining to those sections of the Code that affect the exclusion from gross income of interest on the Certificates for federal income tax purposes. In the event that such representations are detennined to be inaccurate or incomplete or the Issuer fails to comply with the foregoing procedures, safeguards, and covenants in the Certificate Ordinance or the Tax Certificate, interest on the Certificates could become includable in gross income from the date of original delivery of the Certificates, regardless of the date on which the event causing such includability occurs. A-3 Except as stated above, we express no opinion as to any federal, state, or local tax consequences resulting from the ownership of, receipt of interest on, or disposition of, the Certificates. Owners of the Certificates should be aware that the ownership of tax-exempt obligations may result in collateral federal income tax consequences to financial institutions, life insurance and property and casualty insurance companies, certain S corporations with subchapter C earnings and profits, individual recipients of Social Security or Railroad Retiremenf benefits, taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry tax-exempt obligations, individuals owning an interest in a FASIT that holds tax-exempt obligations and individuals otherwise qualified for the earned income credit. In addition, certain foreign corporations doing business in the United States may be subject to the "branch profits tax" on their effectively -connected earnings and profits (including tax-exempt interest such as interest on the Certificates). The enforceability of certain provisions of the Certificates and the Certificate Ordinance may be limited by bankruptcy, insolvency, reorganization, moratorium and other laws for the relief of debtors. Furthermore, availability of equitable remedies ander the Certificates and the Certificate Ordinance may be limited by general principles of equity that permit the exercise of judicial discretion. The opinions set forth above speak only as of their date and only in connection with the Certificates and may not be applied to any other transaction. Such opinions are specifically limited to the laws of the State of Texas and, to the extent applicable, the laws of the United States of America. Further, the opinions set forth above are based on existing law that is subject to change. Such opinions are further based on my knowledge of facts as of the date hereof. We assume no duty to update or supplement these opinions to reflect any facts or circumstances that may hereafter come to my attention or to reflect any changes in any law that may hereafter occur or become effective. Moreover, our opinions are not a guarantee of result and are not binding on the Internal Revenue IRS (the "IRS"); rather, such opinions represent my legal judgment based upon my review of existing law and in reliance upon the representations and covenants referenced above that I deem relevant to such opinions. The IRS has an ongoing audit program to determine compliance with rules that relate to whether interest on state or local obligations is includable in gross income for federal income tax purposes. No assurance can be given whether or not the IRS will commence an audit of the Certificates. If an audit is commenced, in accordance with its current published procedures the IRS is likely to treat the Issuer as the taxpayer. We observe that the Issuer has covenanted in the Certificate Ordinance not to take any action, or omit to take any action within its control, that if taken or omitted, respectively, may result in the treatment of interest on the Certificates as includable in gross income for federal income tax purposes. Very truly yours, Boyle & Lowry, L.L.P. Thomas Allen Moon A-4 APPENDIX B FINANCIAL STATEMENTS* For Fiscal Year Ended September 30, 2001 s Thefinancial statements included in [his appendix erre excerpts from the Issuer's most recently audited Annual Financial and Compliance Report_ Reference is made to the complete report for additional information. Lel APPENDIX C GENERAL INFORMATION REGARDING THE ISSUER AND ITS ECONOMY Located along the Tarrant and Denton county border in the rapidly growing northern triangle of the Dallas -Fort Worth metroplex, Westlake combines a rural Texas atmosphere with the conveniences of the metroplex. Westlake was incorporated in 1956 and presently has approximately 207 residents. Westlake and the surronding area have been the subject of significant development over the last few years. Westlake is the home of the famous Circle T Ranch. In early 1993, the Circle T Ranch was acquired by Hillwood Development, which is controlled by H. Ross Perot, Jr. The development of the Circle T Ranch has been the source of considerable controversy between Westlake and the Perot interests. Westlake is also the home of Solana, a high profile corporate campus located near Texas State Highway 114. Tenants in Solana include Mercedes Benz Credit Corporation, Verizon Wireless, IBM, Citicorp Technology, Levi - Strauss National Communications Center, and other well-known international businesses as well as smaller local businesses. Solana's Village Circle provides a mix of office, retail, restaurant, and hotel space. Solana constitutes the majority Westlake's tax base. Westlake is one of a minority of towns in Texas that, prior to the issuance of the Certificates described in this Official Statement, have not levied a property tax. Instead, Westlake has relied on revenues from sales taxes and franchise fees. Employment Bata* Unemployment Rates November 2001 November 2000 Denton County 3.7% 1.7% Tarrant County 4.9% 2.8% State of Texas 5.2% 3.8% United States 5.3% 4.0% Labor Force Data for Denton Count} Total Labor Force Employed Unemployed November 2001 271,882 261,701 10,181 November 2000 262,565 258,069 4,496 Labor Force Data for Tarrant County Total Labor Force Employed Unemplo eed November 2001 830,188 789,782 40,406 November 2000 801,868 779,088 22,780 * Source: Texas Workforce Commission, uneinployrnent rates for- Texas and the United States are actual, non - seasonably adjusted rates. C-1 This Official Notice of Sale and Bidding bisnzrclions (this " Df cial Notice q(Sale ") does not alone constitute an invitation for bids bur is nrerelr notice of sale of the Certificates described herein. The invitation for- bids on such Cerii(icates is beings made bi° meansafthis (7ffcial Notice ofSale, the Official Bid Forrn and the accompanying Preliminary Official Statement relating to such Certificates (the Statement'). OFFICIAL NOTICE OF SALE AND BIDDING INSTRUCTIONS $12,400,000 TOWN OF WESTLAKE, TEXAS Combination Tax and Limited Pledge Revenue Certificates of Obligations, Series 2002 Sealed Bids Opened Monday, January 28, 2002, 2:30 p.m., Central Time THE SALE CERTIFICATES OFFERED FOR SALE AT COMPETITIVE BID: The Town of Westlake, Texas (the "Issuer") is offeri710 for sale its Combination Tax and Limited Pledge Revenue Certificates of Obligations, Series 2002 (collectively, the "Certificates" or, individually, a "Certificate"). FORM OF BIDS: Notice is hereby given that bids will be received either (a) electronically via PARITY or (b) in fully executed form, in the manner described below, until the time set for bid opening as described in this Official Notice of Sale. ELECTRONIC BIDS: Electronic bids must be computed by BIDCOMP and submitted via PARITY For further information about PARITY or BIDCOMP, potential bidders may contact the Issuer's financial advisor or I -Deal LLC at 395 Hudson Street, 3`1 Floor, New York, NY 10014, telephone (212) 806-8304. To the extent any instructions or directions set forth by PARITY conflict with this Official Notice of Sale. the terms of this Official Notice of Sale shall control. In the event of a malfunction in the electronic bidding process, bidders may submit their bids by fax as set forth below. FULLY EXECUTED BIDS: Each fully executed bid must be submitted on the applicable Official Bid Forin enclosed herewith, without alteration or intedineations, to the Issuer at 3 Village Circle, Suite 207, Westlake, Texas 76262, provided, however, that fully executed Official Bid Forms may be delivered withour pricing inforn-iation, as long as the pricing information is provided to the Issuer by telephone or fax before the time specified below for the opening of bids. The Issuer will accept pricing information by telephone and fax between 2:00 p.m. and 2:30 p.m., Central Time, January 28, 2002. 1♦ The number for telephone bids will be 817-430-0941 I L# The number forlax Fids will be 817-430-1812 The Issuer will not be responsible for accepting bids (or pricing information) after the 2:30 p.m., Central Time, deadline TIME OF BID OPENING: All bids will be opened at 2:30 p.m., Central Time, January 28, 2002. WITHDRAWAL OF BIDS: Any bid may be withdrawn by an authorized representative of the bidder at any time prior to the deadline for receiving bids. All bids shall remain firm for 24 hours after the deadline for receipt of the bids. The award of sale or rejection of all bids will occur within that period of time. EXTENSION OF SALE DATE: The Issuer reserves the right to extend the date and/or time for the receipt of sealed bids by giving notice, by Munifacts Wire Service, and by posting at the place established for receipt of bids, not later than 4:00 p.m., Central Time, on the first business day prior to the scheduled bid opening, of the new date and time for receipt of sealed bids. Such notice shall be considered an amendment to this Official Notice of Sale. AWARD OF THE CERTIFICATES: The Issuer intends to take action to award by separate sale each series of the Certificates (or reject all bids) at the January 28, 2002 meeting of its Board of Aldermen, and if awarded, the Board of Aldermen will adopt a separate ordinance for each series of Certificates sold. THE CERTIFICATES DESCRIPTION OF CERTIFICATES: Tile Certificates will be dated February 1, 2002 (the "Certificate Date"). The Certificates will be fully registered obligations in the denomination of 55,000 each or any integral multiple thereof (an :'Authorized Denomination")- The Certificates will mature serially on May 1 in each year as follows: Due 511 Principal Amount Due 511 Principal Amount Due 511 Principal Amount 2006 `;210,000 2015 5350,000 2024 5550,000 2007 225,000 2016 365,000 2025 580,000 2008 235,000 2017 385,000 2026 610,000 2009 250,000 2018 405,000 2027 640,000 2010 265,000 2019 425,000 2028 675,000 2011 280,000 2020 445,000 2029 710,000 2012 295,000 2021 470,000 2030 750,000 2013 315,000 2022 495,000 2031 790,000 2014 350,000 2023 520,000 2032 830,000 Interest on the Certificates will be payable on November 1, 2002 and each May I and November I thereafter by the Paying Agent/Registrar for the Certificates, initially J.P. Morgan Chase Bank (tlie "Paying/Agent Registrar"), to Cede & Co., as nominee of The Depository Trust Company ("DTC"), which will act as depository for the Certificates.. Such payments will then be distributed to the participating members of DTC and by such participating members to the beneficial owners of the Certificates. Principal shall be paid upon maturity in the same manner as interest. Serial Certificates and/or Term Certiflcares: Bidders may provide that all the Certificates be issued as serini certificates or may provide that any tivo or more consecutive annual principal amounts be combined into one or more term certificates. Alfandatory Sinking Fund: If the successful bidder designates principal amounts to be combined into one or more term certificates, each such term certificate shall be subject to mandatory sinking fund redemption commencing March i of the first year which has been combined to form such term certificate and continuing on March 1 in each vear thereafter until the stated maturity date of the term certificate. The amount redeemed in any year shall be equal to the principal amount for such year set forth in the table above under the caption "Maturity Schedule." Certificates to be redeemed in any year b% mandatory sinking fund redemption shall be redeemed at par and shall be selected by lot from among the Term Certificates then subject to mandatory redemption. The Issuer, at its option, may credit against any mandatory sinking fund redemption requirement term certificates of the maturity then subject to redemption which have been purchased and cancelled by the Issuer. The final Official Statement to be provided the successful bidder will incorporate the terms of the bid, including, any "Term Bonds" and applicable mandatory redemption provisions, if any. SOURCE OF PAYMENT: The Certificates will be direct obligations of the Issuer payable from ad valorem taxes levied against all taxable property located within the Issuer, within the limitations prescribed by law, at a rate from year to year sufficient to provide funds each year to pay debt service on the Certificates. The Ordinance irrevocably pledges such taxes to the payment of the principal of and interest on the Certificates while they remain outstanding. Additionally, the Certificates are payable from and secured by the revenues arising from the permitting and licensing fees charged by the Issuer, which the Issuer intends to use as the primary source for the payment of debt service on the Certificates. See "Deseriptiori.;f the Certificates — Security for the Certificates" in the Official Statement. OPTIONAL REDEMPTION: The Certificates maturing in 2015 and thereafter are subject to redemption at the option of the District on or after May 1, 2014_ See "Description of the Certificates" in the Official Statement. BOOK -ENTRY -ONLY SYSTEM: The Issuer intends to issue the Certificates in book -entry form through the Book -Entry Only System of DTC. See "Description of the Certificates -- Book -Entry -Only System" in the Official Statement. CONDITIONS OF SALE TYPE OF BIDS AND INTEREST RATES: The Certificates will be sold in one block on an all or none basis at a cash price of not less than 100.00% and not more than 100.50% of the aggregate par value of the entire issue, plus accrued interest. Bidders must specify the rate or rates of interest the Certificates will bear; however, a Net Effective Interest Rate (calculated in accordance with Vernon's Texas Civil Statutes, Government Code, Chapter 1204) in excess of 15% will not be acceptable. Interest rates must be in multiples of 1/8 or 1/20 of i%. The spread between the highest interest rate bid and the lowest interest rate bid shall not exceed 3.00%, Bidders are not limited as to number of interest rates or coupon changes. Within a single maturity, there shall be no graduating or declining coupons or split rates, and no supplemental or zero coupons will be considered. u BASIS FOR AWARD: Each series of Certificates is expected to be awarded to the bidder making a bid that conforms to the specifications herein and that produces the to+vest true interest cost rate to the Issuer for each respective series of Certificates (such bidder, the "Purchaser"). The true interest cost rate is the rate that, when used to compute the total present value as of February 1, 2002, the dated date of the Certificates, of ail debt service payments for each respective series Certificates on the basis of semiannual compounding, produces an amount equal to the sum of the par values of each such series of Certificates plus any premium bid. GOOD FAITH CHECK: Each bid must be accompanied by a certified or cashiers check (the "Good Faith Check"), payable to the order of "Town of Westlake" in the amount of (a) 5248,000. A Good Faith Check may accompany the Official Bid Form or it may be submitted separately. If submitted separately, it shall be made available to the Issuer prior to the opening of the bids and shall be accompanied by instructions from the bank on which drawn that authorizes its use as a Good Faith Check by the bidder who shall be named in such instructions. Except as otherwise provided below, a Good Faith Check will be retained uncashed by the Issuer until the Purchaser pays the full purchase price for the Certificates purchased and such Certificates are delivered, and at that time will be returned to the Purchaser. No interest will be allowed on a Good Faith Check. In the event the Purchaser fails or refuses to pay for the Certificates in accordance with its bid, the Good Faith Check will be accepted and cashed by the Issuer as full and complete liquidated damages. Each Good Faith Check accompanying a bid other than the bid of the Purchaser will be returned promptly after the bids are opened and an award of the Certificates has been made. DELIVERY OF THE CERTIFICATES AND ACCOMPANYING DOCUMENTS CUSIP NUMBERS: It is anticipated that CUSIP identification numbers will be printed on the Certificates, but neither the failure to print such number on any Certificate nor any error with respect thereto shall constitute cause for failure or refusal by the Purchaser thereof to accept delivery of and pay for the Certificates in accordance .with the terms of this Official Notice of Sale and the terms of the Official Bid Form. All expenses in relation to the printing of CUSiP numbers on the Certificates shall be paid by the Issuer, except that the CUSIP Service Bureau charge for the assignment of the numbers shall be the responsibility of and shall be paid by the Purchaser. INITIAL DELIVERY: The delivery of each series of Certificates will be made against payment by the Purchaser through the facilities of DTC or such alternative method as may be mutually agreed upon by the Issuer and the Purchaser. Payment for each series of Certificates must be made by the Purchaser at delivery in immediately available funds for unconditional credit to the Issuer, or as otherwise directed by the issuer_ The Purchaser will be given at least five business days' advance notice of the time of delivery. It is anticipated that delivery of each series of Certificates can be made on or about 10:00 a.m., Central Time, February 27, 2002, but if for any reason the Issuer is unable to make delivery on or before Marcie 7-10, 2002, the Issuer will immediately contact the Purchaser and offer to allow the Purchaser to extend its offer for an additional 30 days. If the Purchaser does not elect to extend its offer within six days thereafter, the amount of its Good Faith Check will be returned, and both the Issuer and the Purchaser shall be relieved of any further obligation. In no event will the Issuer be liable for any damages by reason of its failure to deliver the Certificates. ISSUE PRICE CERTIFICATE: In order to provide the Issuer with information required to enable it to comply with certain conditions of the Internal Revenue Code of 1986, as amended (the "Code"), relating to exclusion of interest on the Certificates from the gross income of their owners, the Purchaser will be required to complete, execute and deliver to the Issuer (on or before the fifth business day prior to the date of delivery of the Certificates) a certification as to their "issue price" substantially in the form and to the effect attached hereto or accompanying this Official Notice of Sale and Bidding Instructions (see "Certificate of Underwriter"). In the event the Purchaser does not reoffer the Certificates for sale or is unable to sell a substantial amount of the Certificates of any maturity by the date of delivery, such certificate shall be modified and delivered in the manner required by the Issuer to enable the Issuer to determine the yield on the Certificates in compliance with the Code. Each bidder, by submitting its bid, agrees to complete, execute and deliver such a certificate if its bid is accepted by the Issuer. It shall be the responsibility of the Purchaser to institute such syndicate reporting requirements, to make such investigation or to otherwise ascertain the facts necessary to enable it to make such certification with reasonable certainty. Any questions concerning such certificates should be directed to Co -Bond Counsel. CONDITIONS TO DELIVERY: The obligation of the Purchaser to pay for a series of Certificates is subject to the receipt by it at the time of delivery of such Certificates of: (i ) an approving opinion of Boyle & Lowry, L.L.P., Irving. Texas, and Thomas Allen Moon, Attorney at Law, Dallas, Texas ("Co -Bond Counsel"), in substantially the form appearing in the Official Statement relating to such Certificates (the "Official Statement"), (2) a no -litigation certificate, and (3) a certification relating to the Official Statement, all as further described in the Official Statement. Leal Opinions: Each series of Certificates is offered when, as and if issued, subject to the approval of the Attorney General of the State of Texas_ Delivery of and payment for each series of Certificates is subject to the receipt by the Purchaser of opinions of Co -Bond Counsel, to the effect that such Certificates are valid and binding obligations of the Issuer and that the interest on the Certificates will be excludable from gross income of the owners thereof for federal income tax purposes under existing law, subject to the matters described under "Tax Matters" in the Official Statement, including the alternative minimum tax consequences for corporations. Chance in Tax Exenrnt Status: At any time before either series of Certificates is tendered for delivery, the Purchaser may withdraw its bid if the interest received by private holders on obligations of the same type and character as the Certificates shall be declared to be includable in gross income under present federal income tax laws, either by ruling of the Internal Revenue Service or by decision of any Federal court or shall be declared taxable or be required to be taken into account in computing any federal income taxes, by the terms of any federal income tax law enacted subsequent to the date of this Notice of Sale and Bidding Instructions. GENERAL FINANCIAL ADVISOR: Larry Williamson, Greenville, Yexas, is serving as Financial Advisor to the Issuer (the "Financial Advisor") in connection with the issuance of the Cgrtificates. BLUE SKY LAWS: By submission of its bid, the Purchaser represents that the sale of the Certificates in states other than Texas will be made only pursuant to exemptions from registration or, where necessary, the Purchaser will register the Certificates in accordance with the securities laws of the state in which the Certificates are offered or sold. The Issuer agrees to cooperate with the Purchaser, at the Purchaser's written request and expense, in registering the Certificates or obtaining an exemption from registration in any state where such action is necessary, except that the Issuer reserves the right not to consent to service of process in any state other than the State of Texas. NOT AN OFFER TO SELL: This Official Notice of Sale does not alone constitute an offer to sell either series of Certificates but is merely notice of the sale of the Certificates. The offer to sell the Certificates is being made by means of the Oficial Notice of Sale, the Official Bid Form and the Official Statement. RATING: Application has been made to Standard & Poor's Ratings Group, a division of McGraw Hill Companies, for a rating on the Certificates. MUNICIPAL BOND INSURANCE: In the event the Certificates are qualified for municipal bond insurance, and the Purchaser elects to purchase such insurance, the'cost therefor will be paid by the Purchaser. Should the Purchaser elect to purchase such insurance, the Issuer will pay the fee of Standard & Poor's only. Any fees to be paid to other rating agencies, as a result of such insurance, will be paid by the Purchaser. It will be the responsibility of the Purchaser to disclose the existence of such insurance, its terms and the effect thereof with respect to the reoffering of the Certificates. COMPLIANCE WITH SEC RULE 15c2-12: The Issuer has prepared the accompanying Official Statement, and for purposes of complying with SEC Rule 15c2-12 the Issuer deems such Official Statement to be "final," as of the date thereof, except for the omission of certain information that cannot be ascertained until the Certificates are sold. To the best knowledge and belief of the Issuer, the Official Statement contains information, including financial information or operating data, concerning every entity, enterprise, fund, account or person that is material to an evaluation of the offerini of the Certificates. The Issuer will furnish to a Purchaser (or its designated senior representative, in accordance with instructions received from such Purchaser), within seven business days after the date on which the Purchaser's bid is accepted by the Issuer, a reasonable number of copies of the Official Statement as determined by the Issuer. The Official Statement will be complete , as to interest rates and other teens relatirtg to the initial reoffering of the Certificates. The Purchaser assumes responsibility for proper delivery of the Official Statement to each purchaser of Certificates from the Purchaser, and the issuer assumes no responsibility or obligation for the distribution or delivery of any copies of the Official Statement to anyone other than the Purchaser. In the Ordinance, the Issuer has made a continuing disclosure agreement for the benefit of the holders and beneficial owners of the Certificates. The Issuer is required to observe the agreement while it remains obligated to advance funds to pay the Certificates. Under the agreement, the Issuer will be obligated to provide certain updated financial information and operating data annually, and timely notice of specified material events, to certain information vendors. This information will be available to securities brokers and others who subscribe to receive the information from the vendors. See "Other Matters - Continuing Disclosure of Information" in the Official Statement for a summary of such agreement. ADDITIONAL COPIES OF DOCUMENTS: Additional copies of this Official Notice of Sale, the Official Bid Form and the Official Statement may be obtained from the Financial Advisor, (403) 883-0632. TOWN OF WESTLAKE, TEXAS Dated: January 14, 2002 By: /s/ Scott Bradlee, Afavor OFFICIAL SID FORM Mayor and Board of Aldermen Town of Westlake 3 Village Circle, Suite 207 Westlake, Texas 76262 lanuary 28, 2002 Reference is made to your Official Notice of Saic and Bidding instructions and Preliminary Official Statement, dated January 14, 2002, both of which constitute a part hereof relating to the Town`of Westlake, Texas Combination Tax and Limited Pledge Revenue Certificates of Obligation, Series 2002 (the "Certificates"). 4 As described in such Official Notice of Sale and Bidding Instructions, we will pay you par plus accrued intere,t from dated date of the Certificates to date of delivery, plus a cash premium of S (not to exceed 562,000) to us as [he purchase price for your legally issued Certificates maturing and bearing interest as follows: Maturity Schedule Due 5!1 Principal Amount Interest Rate Due 511 Principal Amount Interest Rate 2006 $210,000 2020 S445,000 2007 225,000 2021 470.000 2008 235,000 2022 495,000 2009 250,000 2023 520,000 2010 265,000 2024 550,000 2011 280,000 2025 580,000 2012 295,000 2026 610,000 2013 315,000 2027 640,000 2014 350,000 2028 675,000 2015 350,000 2029 710,000 20t6 365,000 2030 750,000 2017 385,000 2031 790,000 2018 405,000 2032 530,000 2019 425,000 Bidders shall have the option of submitting bids using term certijicares subject to mandaforir sinking fill+d redenrlarion Por all or am portion of Certificates. scheduled to rnalure in rhe vears 006 through 2032, inclusive. provided that the sinkmg jirnd rcdemprkru cunowir.s shall be the .tame size tis the mcaurirr crnrorrnts shown in the 0 icali Notice of Sale and Bidding last+zrctiane- The ferut cer'tilicares, it c+m, shall be described in the allowing table. - Term Certificate Information Final Maturity Year of First MandaCory Redem tion Total Princi al Amount interest Rale Our calculation (which is not part of this bid) of the interest cost from the above is: Gross Interest Cost Less: Premium Plus: Discount NET INTEREST COST IN DOLLARS NET INTEREST COST RATE TRUE INTEREST COST RATE (as of 2-1-02) S S c S °'o If our bid is accepted, the initial Certificates shall be registered in the name of the undersigned bidder, as Purchaser or representative of the Purchasers of the Certificates. For purposes of registering the definitive Certificates, we will advise The Depository Trust Company ("DTC') of registration instructions at least five business days prior to the date set for initial delivery of the Certificates. We agree to accept delivery of the Certificates utilizing the Book -Entry -Only system through DTC and make payment for the initial Certificates in immediately available funds to J.P. Morgan Chase Bank, no later than 9:00 a.m. Central Time, on February 27, 2002, or thereafter on the date the Certificates are tendered for delivery, pursuant to the terns set forth in the Official Notice of Sale and Bidding instntctions. Cashier's Check of in the amount of 5248,000, which represents our Good Faith Deposit, is attached hereto or has been made available to you prior to the opening ofthis bid, and is submitted in accordance with the terms as set forth in the Official Notice of Sale and Bidding Instructions and Preliminary Official Statement. The undersigned agrees to complete, execute and deliver to the Issuer, at least five business days prior to the date of delivery of the Certificates, a certificate relating to the "issue price" of the Certificates in the form and to the effect attached to or accompanying the Official Notice of Sale and Bidding Instructions, with such changes thereto as may be acceptable to the Issuer - Respectfully submitted, ?Mame of Bidder By: Title: Telephone: ACCEPTANCE CLAUSE ACCEPTED this day of January, 2002, b.y ordinance of the Board of Aldermen of the Town of Westlake. TOWN OF WESTLAKE, TEXAS By: Title: CERTIFICATE OF UNDERWRITER The undersigned hereby certifies as follows with respect to the St2,400,000 Town of Westlake, Texas Combination Tax and Limited Pledge Revenue Certificates of Obligation, Series 2002 (the "Certificates"): 1. The undersigned is the underwriter or the manager of the syndicate of underwriters (the "Underwriters") that has purchased the Certificates from the Town of Westlake, Texas (the "Issuer"), at competitive sale. 2_ The first price for each maturity of the Certificates at which a substantial amount (at least ten percent) of each such maturity was sold to the public (expressed as a'percentage of principal amount and exclusive of accrued interest) is as set forth below: Due 5/1 Principal Amount Issue Price Due 5/1 Principal Amount Issue Price 2006 5210,000 2020 5445,000 2007 225,000 2021 470,000 2008 235,000 2022 495,000 2009 250,000 2023 520,000 2010 265,000 2024 550,000 2011 280,000 2025 380,000 2012 295,000 2026 610,000 2013 315,000 2027 640,000 2014 350,000 2028 675,000 2015 350,000 2029 710,000 2016 365,000 2030 750,000 2017 385,000 2031 790,000 20I8 405,000 2032 830,000 2019 425,000 3. The Underwriters have made a bona fide public offering to the public of all of the Certificates of each maturity at the issue prices to the public set forth above. Such issue prices have not been changed if part of the Certificates has been later sold at a different price. The issue prices set forth above were determined on the date the Certificates were purchased by the Underwriters (the "sale date") based on the reasonable expectations regarding the initial public reoffering prices. 4. None of the issue prices described above exceeds the fair market value for such Certificates on the sale date. 5. The term "public," as used herein, means persons other than bondhouses, brokers, dealers, and similar persons or organizations acting in the capacity of underwriters or wholesalers_ 6. The undersigned and/or one or more other members of the underwriting syndicate, as the case may be, have/have not (circle one) purchased bond insurance for the Certificates. The bond insurance, if any, has been purchased from (the "Insurer") for a premium cost of S (net of any nonguarantee costs, e.g., rating agency fees). The amount of such costs is set forth in the Insurer's commitment and is separately stated from all other fees or charges payable to the Insurer. The premium does not exceed a reasonable charge for the transfer of credit risk taking into account payments charged by guarantors in comparable transactions (including transactions in which a guarantor has no involvement other than as guarantor)_ The present value of the debt service savings expected to be realized as a result of such insurance, discounted at a rate equal to the yield on the Certificates which results after recovery of the insurance premium, exceeds the present value ofthe bond insurance premium. Tile undersigned understands that the statements made herein will be relied upon by the Issuer in its effort to comply with the conditions imposed by the Internal Revenue Code of 1986, as amended, on the excludability of interest on the Certificates from the gross income of their owners. Executed and delivered this day of , 7002. Underwriter or Representative of Underwriters By: Title: