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Home My WebLink AboutItem 07 - General Obligation BondsMEMO TO :eu MEETING DATE: SUBJECT RECOMMENDATION: ITEM 0 . HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL ROGER NELSON, CITY MANAGER ,4"tJ MARCH 19, 2002 GENERAL OBLIGATION BONDS, REFUNDING AND IMPROVEMENT BONDS, AND TAX NOTES City Council to consider approving an ordinance for the issuance of City of Grapevine General Obligation Refunding and Improvement Bonds in the amount of $10,180,000, Series 2002; and an ordinance for the issuance of $2,200,000 of City of Grapevine Tax Notes; Series 2002. BACKGROUND: At the March 19, 2002 City Council meeting a representative of the First Southwest Company, the City's financial advisor, will present bids for the sale of $6,390,000 of General Obligation and Improvement Bonds; $3,790,000 of Refunding Bonds; $800,000 of Tax Notes for golf course improvements; and $1,400,000 of Tax Notes for purchase of certain vehicles and equipment. The GO bond proceeds are to be used for projects, which were authorized by the voters at the December 1998 bond election. The bonds will have a twenty-year term and will fund the following projects: Dove East/North Main Construction $4,865.000 Dove Road Median Construction 800,000 Glade Road Design 580,000 Issuance Costs 145.000 Total General Obligation $6,390,000 The Refunding bonds will be used to defease approximately $3,740,000 of General Obligation Bonds. These bonds were issued in 1992 at an average rate of 5.98%. However, the current market conditions indicate that the bonds can be refinanced at an estimated rate of 4.50%. This will result in a net present value savings to the City of $136,000 over the remaining life of the bonds. March 13, 2002 (10:18AM) BOND ORDINANCE NO. 2002 - relating to $10,180,000 CITY OF GRAPEVINE, TEXAS GENERAL OBLIGATION REFUNDING AND IMPROVEMENT BONDS SERIES 2002 Adopted: March 19, 2002 GRA325/71008 Dallas 567198_2 DRAFT 3/8/02 a TABLE OF CONTENTS Page ARTICLE I DEFINITIONS AND OTHER PRELIMINARY MATTERS Section1.01. Definitions...............................................................................................................2 Section1.02. Findings...................................................................................................................3 Section 1.03. Table of Contents, Titles and Headings.................................................................. 4 Section1.04. Interpretation........................................................................................................... 4 ARTICLE II SECURITY FOR THE BONDS; INTEREST AND SINKING FUND Section2.01. Tax Levy................................................................................................................. 4 Section 2.02. Interest and Sinking Fund....................................................................................... 5 ARTICLE III AUTHORIZATION; GENERAL TERMS AND PROVISIONS REGARDING THE BONDS Section3.01. Authorization........................................................................................................... 5 Section 3.02. Date, Denomination, Maturities and Interest.......................................................... 5 Section 3.03. Medium, Method and Place of Payment................................................................. 6 Section 3.04. Execution and Registration of Bonds...................................................................... 7 Section3.05. Ownership............................................................................................................... 8 Section 3.06. Registration, Transfer and Exchange...................................................................... 8 Section3.07. Cancellation............................................................................................................. 9 Section 3.08. Temporary Bonds.................................................................................................... 9 Section 3.09. Replacement Bonds............................................................................................... 10 Section 3.10. Book -Entry -Only System......................................................................................11 Section 3.11. Successor Securities Depository; Transfer Outside Book -Entry Only System..... 11 Section 3.12. Payments to Cede & Co........................................................................................12 ARTICLE IV REDEMPTION OF BONDS BEFORE MATURITY Section 4.01. Limitation on Redemption.................................................................................... 12 Section 4.02. Optional Redemption............................................................................................12 Section 4.03. Partial Redemption................................................................................................13 Section 4.04. Notice of Redemption to Owners..........................................................................13 Section 4.05. Payment Upon Redemption..................................................................................13 Section 4.06. Effect of Redemption............................................................................................14 GRA325/71008 Dallas 567198_2 (i) ARTICLE V PAYING AGENT/REGISTRAR Section 5.01. Appointment of Initial Paying Agent/Registrar....................................................14 Section5.02. Qualifications ........................................................................................................ 14 Section 5.03. Maintaining Paying Agent/Registrar.....................................................................14 Section5.04. Termination........................................................................................................... 14 Section 5.05. Notice of Change to Owners.................................................................................15 Section 5.06. Agreement to Perform Duties and Functions........................................................15 Section 5.07. Delivery of Records to Successor......................................................................... 15 ARTICLE VI FORM OF THE BONDS Section6.01. Form Generally.....................................................................................................15 Section 6.02. Form of the Bonds .............. Section 6.03. CUSIP Registration..............................................................................................16 ....................................................................................21 Section6.04. Legal Opinion........................................................................................................ 21 Section 6.05. Statement of Insurance.......................................................................................... 21 ARTICLE VII SALE AND DELIVERY OF BONDS, DEPOSIT OF PROCEEDS Section 7.01. Sale of Bonds, Official Statement.........................................................................21 Section 7.02. Control and Delivery of Bonds............................................................................. 22 Section 7.03. Deposit of Proceeds............................................................................................... 22 ARTICLE VIII INVESTMENTS Section8.01. Investments............................................................................................................ 23 Section 8.02. Investment Income................................................................................................ 23 ARTICLE IX PARTICULAR REPRESENTATIONS AND COVENANTS Section 9.01. Payment of the Bonds........................................................................................... 23 Section 9.02. Other Representations and Covenants................................................................... 24 Section 9.03. Provisions Concerning Federal Income Tax Exclusion ........................................ 24 Section 9.04. No Private Use or Payment and No Private Loan Financing ................................ 24 Section 9.05. No Federal Guaranty.............................................................................................25 Section 9.06. Bonds are not Hedge Bonds.................................................................................. 25 Section 9.07. No -Arbitrage Covenant.........................................................................................25 GRA325/71008 Dallas 5671982 Section 9.08. Arbitrage Rebate ......................................... Section 9.09. Information Reporting ................................. Section 9.10. Continuing Obligation .......................................................... ARTICLE X DEFAULT AND REMEDIES Section 10.01. Events of Default ......................................... Section 10.02. Remedies for Default .................................. Section 10.03. Remedies Not Exclusive ..................... --.- ARTICLE XI DISCHARGE Section 11.01. Discharge .......................... 25 ............I ............. 26 .......................... 26 ............................................... 26 ............................................... 26 ............................................... 27 ARTICLE XII CONTINUING DISCLOSURE UNDERTAKING Section 12.01. Annual Reports ..................................................................... Section 12.02, Material Event Notices ......................................................... Section 12.03. Limitations, Disclaimers and Amendments ......................... ARTICLE XIII REDEMPTION OF BONDS +; IQ O1 S .............................. 27 .............................. 27 .............................. 28 .............................. 28 %.,%, lon . . ources of Funds for Refunding ............................................................................ 30 Section 13.02. Redemption of Refunded Bond ............................................................................. 30 Section 13.03. Notice of Deposit and Redemption ....................................................................... 30 ARTICLE XIV EMERGENCY Section 14.01. Declaration of an Emergency ................................................................................ 30 Schedule I — Refunded Bonds Exhibit A - Description of Annual Disclosure of Financial Information .................................... A-1 GRA325/71008 Dallas 5671982 DRAFT 3/8/02 AN ORDINANCE PROVIDING FOR THE ISSUANCE OF CITY OF GRAPEVINE, TEXAS GENERAL OBLIGATION REFUNDING AND IMPROVEMENT BONDS, SERIES 2002, IN THE AGGREGATE PRINCIPAL AMOUNT OF $10,180,000; LEVYING A TAX IN PAYMENT THEREOF; PRESCRIBING THE FORM OF SAID BONDS; AWARDING THE SALE THEREOF; APPROVING THE OFFICIAL STATEMENT; ENACTING OTHER PROVISIONS RELATING THERETO; AND DECLARING AN EMERGENCY WHEREAS, the bonds hereinafter authorized were duly and favorably voted, as required by the Constitution and laws of the State of Texas, at an election held in the City of Grapevine, Texas (the "City"), on Saturday, December 5, 1998; and WHEREAS, at said election, the following are among the purposes and amounts of the bonds which were authorized, reflecting any amount previously issued pursuant to each voted authorization, the amount therefrom being issued pursuant to this Ordinance, and the balance that remains unissued after the issuance of the bonds herein authorized, to wit: Amount Amount Amount Previously Being Unissued Pu_ pose Voted Issued Issued Balance Street Improvements $30,245,000 $13,610,000 $6,390,000 $10,245,000 WHEREAS, the City Council has found and determined and does hereby find and determine to refund certain of its previously issued and outstanding bonds as described on Schedule I attached hereto and incorporated by reference for all purposes (collectively, the "Refunded Bonds"); and WHEREAS, the City Council hereby finds and determines that refunding the Refunded Bonds for the purpose of achieving net present value debt service savings of approximately $ , representing approximately %, with respect to the Refunded Bonds is in the best interests of the citizens of the City; and WHEREAS, the City Council has found and determined that it is necessary and in the best interest of the City and its citizens that it authorize by this Ordinance the issuance and delivery of its bonds in a single series at this time; and WHEREAS, the meeting at which this Ordinance is considered is open to the public as required by law, and the public notice of the time, place and purpose of said meeting was given as required by Chapter 551, Texas Government Code, as amended; therefore BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF GRAPEVINE, TEXAS: GRA325/71008 Dallas 567198_2 ARTICLE I DEFINITIONS AND OTHER PRELIMINARY MATTERS Section 1.01. Definitions. Unless otherwise expressly provided or unless the context clearly requires otherwise in this Ordinance, the following terms shall have the meanings specified below: "Bond" means any of the Bonds. "Bond Date" means the date designated as the date of the Bonds by Section 3.02(a) of this Ordinance. "Bonds" means the City's bonds authorized to be issued by Section 3.01 of this Ordinance and designated as "City of Grapevine, Texas, General Obligation Refunding and Improvement Bonds, Series 2002." "Business Day" means a day that is not a Saturday, Sunday, legal holiday or other day on which banking institutions in the city where the Designated Payment/Transfer Office is located are required or authorized by law or executive order to close. "City" means the City of Grapevine, Texas. "Closing Date" means the date of the initial delivery of and payment for the Bonds. "Code" means the Internal Revenue Code of 1986, as amended, including applicable regulations, published rulings and court decisions. "Designated Payment/Transfer Office" means (i) with respect to the initial Paying Agent/Registrar named herein, its office in Columbus, Ohio, or at such other location designated by the Paying Agent/Registrar and (ii) with respect to any successor Paying Agent/Registrar, the office of such successor designated and located as may be agreed upon by the City and such successor. "DTC" means The Depository Trust Company of New York, New York, or any successor securities depository. "DTC Participant" means brokers and dealers, banks, trust companies, clearing corporations and certain other organizations on whose behalf DTC was created to hold securities to facilitate the clearance and settlement of securities transactions among DTC Participants. "Event of Default" means any event of default as defined in Section 10.01 of this Ordinance. "Initial Bond" means the Initial Bond authorized by Section 3.04(d) of this Ordinance. GRA325/71008 Dallas 567198_2 -2- "Interest and Sinking Fund" means the interest and sinking fund established by Section 2.02 of this Ordinance. "Interest Payment Date" means the date or dates on which interest on the Bonds is scheduled to be paid until their respective dates of maturity or prior redemption, such dates being February 15 and August 15, commencing February 15, 2003. "MSRB" means the Municipal Securities Rulemaking Board. "NRMSIR" means each person whom the SEC or its staff has determined to be a nationally recognized municipal securities information repository within the meaning of the Rule from time to time. "Owner" means the person who is the registered owner of a Bond or Bonds, as shown in the Register. "Paying Agent/Registrar" means initially Bank One, National Association, Austin, Texas, or any successor thereto as provided in this Ordinance. "Record Date" means the last Business Day of the month next preceding an Interest Payment Date. "Register" means the bond register specified in Section 3.06(a) of this Ordinance. "Representations Letter" means the Blanket Letter of Representations previously executed by the City and DTC and on file with DTC. "SEC" means the United States Securities and Exchange Commission. "SID" means any person designated by the State of Texas or an authorized department, officer or agency thereof, as and determined by the SEC or its staff to be a state information depository within the meaning of the Rule from time to time. "Special Payment Date" means the Special Payment Date prescribed by Section 3.03(b). "Special Record Date" means the Special Record Date prescribed by Section 3.03(b). "Unclaimed Payments" means money deposited with the Paying Agent/Registrar for the payment of principal of, redemption premium, if any, or interest on the Bonds as the same come due and payable or money set aside for the payment of Bonds duly called for redemption prior to maturity. "Underwriters" mean RBC Dain Rauscher Inc. and SWS Securities, as underwriters of the Bonds pursuant to that certain Bond Purchase Agreement approved in Section 7.01 hereof. Section 1.02. Findings. The declarations, determinations and findings declared, made and found in the preamble to this Ordinance are hereby adopted, restated and made a part of the operative provisions hereof. GRA325/71008 Dallas 567198_2 -3- Section 1.03. Table of Contents. Titles and Headings. The table of contents, titles and headings of the Articles and Sections of this Ordinance have been inserted for convenience of reference only and are not to be considered a part hereof and shall not in any way modify or restrict any of the terms or provisions hereof and shall never be considered or given any effect in construing this Ordinance or any provision hereof or in ascertaining intent, if any question of intent should arise. Section 1.04. Interpretation. (a) Unless the context requires otherwise, words of the masculine gender shall be construed to include correlative words of the feminine and neuter genders and vice versa, and words of the singular number shall be construed to include correlative words of the plural number and vice versa. (b) This Ordinance and all the terms and provisions hereof shall be liberally construed to effectuate the purposes set forth herein. ARTICLE II SECURITY FOR THE BONDS; INTEREST AND SINKING FUND Section 2.01. Tax LeW. (a) Pursuant to the authority granted by the Texas Constitution and the laws of the State of Texas, there is hereby levied for the current year and for each succeeding year hereafter while any of the Bonds or any interest thereon is outstanding and unpaid, an ad valorem tax on each one hundred dollars' valuation of taxable property within the City, at a rate sufficient, within the limit prescribed by law, to pay the debt service requirements of the Bonds, being (i) the interest on the Bonds, and (ii) a sinking fund for their redemption at maturity or a sinking fund of 2% per annum (whichever amount is greater), when due and payable, full allowance being made for delinquencies and costs of collection. (b) The ad valorem tax thus levied shall be assessed and collected each year against all property appearing on the tax rolls of the City most recently approved in accordance with law and the money thus collected shall be deposited as collected to the Interest and Sinking Fund. (c) Said ad valorem tax, the collections therefrom, and all amounts on deposit in or required hereby to be deposited to the Interest and Sinking Fund are hereby pledged and committed irrevocably to the payment of the principal of and interest on the Bonds when and as due and payable in accordance with their terms and this Ordinance. (d) To the extent the City has available funds which may be lawfully used to pay debt service on the Bonds and such funds are on deposit in the Interest and Sinking Fund in advance of the time when the City Council of the City is scheduled to set a tax rate for any year, then such tax rate which would otherwise be required to be established pursuant to subsection (a) of this Section may be reduced to the extent and by the amount of such funds in the Interest and Sinking Fund. GRA325/71008 Dallas 5671982 in (e) If the lien and provisions of this Ordinance shall be released in a manner permitted by Article XI hereof, then the collection of such ad valorem tax may be suspended or appropriately reduced, as the facts may permit, and further deposits to the Interest and Sinking Fund may be suspended or appropriately reduced, as the facts may permit. In determining the aggregate principal amount of outstanding Bonds, there shall be subtracted the amount of any Bonds that have been duly called for redemption and for which money has been deposited with the Paying Agent/Registrar for such redemption. Section 2.02. Interest and Sinking Fund. (a) The City hereby establishes a special fund or account, to be designated the "City of Grapevine, Texas General Obligation Refunding and Improvement Bonds, Series 2002, Interest and Sinking Fund," said fund to be maintained at an official depository bank of the City separate and apart from all other funds and accounts of the City. (b) Money on deposit in or required by this Ordinance to be deposited to the Interest and Sinking Fund shall be used solely for the purpose of paying the interest on and principal of the Bonds when and as due and payable in accordance with their terms and this Ordinance. ARTICLE III AUTHORIZATION; GENERAL TERMS AND PROVISIONS REGARDING THE BONDS Section 3.01. Authorization. The City's bonds to be designated "City of Grapevine, Texas General Obligation Refunding and Improvement Bonds, Series 2002," are hereby authorized to be issued and delivered in accordance with Tex. Const, art. XI, Sec. 5, Chapters 1207 and 1331 Texas Government Code and Section 9.26 of the City's Home -Rule Charter. The Bonds shall be issued in the aggregate principal amount of $10,180,000, for the purpose of providing funds (i) to pay the costs of issuing the Bonds, (ii) to refund the Refunded Bonds in an amount of $3,740,000, and (iii) to make the following permanent public improvements, to wit: constructing, improving and widening streets and thoroughfares and related utility relocation, drainage, landscaping, sidewalk and signalization improvements, and acquiring land and interests in land therefor. Section 3.02, Date, Denomination, Maturities and Interest. (a) The Bonds shall be dated March 15, 2002. The Bonds shall be in fully registered form, without coupons, in the denomination of $5,000 or any integral multiple thereof, and shall be numbered separately from one upward, except the Initial Bond, which shall be numbered T-1. (b) The Bonds shall mature on February 15 in the years and in the principal amounts set forth in the following schedule: GRA325 71008 Dallas 567198_2 -5- Maturity Principal Interest ,(Februaal5) Amount Rate 2003 $1,315,000 2004 1,505,000 2005 1,205,000 2006 545,000 2007 245,000 2008 255,000 2009 265,000 2010 275,000 2011 290,000 2012 300,000 Serial Bonds Maturity (February 15) 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Principal Interest Amount Rate $315,000 330,000 345,000 365,000 385,000 405,000 425,000 445,000 470,000 495,000 (c) Interest shall accrue and be paid on each Bond respectively until its maturity or prior redemption, from the later of the Bond Date or the most recent Interest Payment Date to which interest has been paid or provided for at the rates per annum for each respective maturity specified in the schedule contained in subsection (b) above. Such interest shall be payable semiannually commencing on February 15, 2003, and on each August 15 and February 15 thereafter until maturity or prior redemption. Interest on the Bonds shall be calculated on the basis of a 360 -day year composed of 12 months of 30 days each. Section 3.03. Medium, Method and Place of Payment. (a) The principal of, premium, if any, and interest on the Bonds shall be paid in lawful money of the United States of America. (b) Interest on the Bonds shall be payable to the Owners as shown in the Register at the close of business on the Record Date; provided, however, in the event of nonpayment of interest on a scheduled Interest Payment Date and for 30 days thereafter, a new record date for such interest payment (a "Special Record Date") shall be established by the Paying Agent/Registrar, if and when funds for the payment of such interest have been received from the City. Notice of the Special Record Date and of the scheduled payment date of the past due interest (the "Special Payment Date," which shall be 15 days after the Special Record Date) shall be sent at least five Business Days prior to the Special Record Date by United States mail, first class, postage prepaid, to the address of each Owner of a Bond appearing on the Register at the close of business on the last Business Day next preceding the date of mailing of such notice. (c) Interest shall be paid by check, dated as of and mailed on the Interest Payment Date, and sent by the Paying Agent/Registrar to each Owner, first class United States mail, postage prepaid, to the address of each Owner as it appears in the Register, or by such other customary banking arrangement acceptable to the Paying Agent/Registrar and the Owner; provided, however, that the Owner shall bear all risk and expense of such other banking arrangement. At the option of an Owner of at least $1,000,000 principal amount of the Bonds, GRA325/71008 Dallas 567198_2 in interest may be paid by wire transfer to the bank account of such Owner on file with the Paying Agent/Registrar. (d) The principal of each Bond shall be paid to the Owner thereof on the due date (whether at the maturity date or the date of prior redemption thereof) upon presentation and surrender of such Bond at the Designated Payment/Transfer Office of the Paying Agent/Registrar. (e) If the date for the payment of the principal of or interest on the Bonds shall be a Saturday, Sunday, legal holiday, or day on which banking institutions in the city where the Designated Payment/Transfer Office is located are required or authorized by law or executive order to close, the date for such payment shall be the next succeeding day which is not a Saturday, Sunday, legal holiday, or day on which banking institutions are required or authorized to close, and payment on such date shall have the same force and effect as if made on the original date payment was due and no additional interest shall be due by reason of nonpayment on the date on which such payment is otherwise stated to be due and payable. (f) Unclaimed Payments shall be segregated in a special escrow account and held in trust, uninvested by the Paying Agent/Registrar, for the account of the Owners of the Bonds to which the Unclaimed Payments pertain. Subject to Title 6 of the Texas Property Code, any Unclaimed Payments remaining unclaimed by the Owners entitled thereto for three years after the applicable payment or redemption date shall be applied to the next payment or payments on the Bonds thereafter coming due and, to the extent any such money remains after the retirement of all outstanding Bonds, shall be paid to the City to be used for any lawful purpose. Thereafter, neither the City, the Paying Agent/Registrar nor any other person shall be liable or responsible to any Owners of such Bonds for any further payment of such unclaimed moneys or on account of any such Bonds, subject to Title 6 of the Texas Property Code. Section 3.04. Execution and Registration of Bonds. (a) The Bonds shall be executed on behalf of the City by the Mayor and the City Secretary, by their manual or facsimile signatures, and the official seal of the City shall be impressed or placed in facsimile thereon. Such facsimile signatures on the Bonds shall have the same effect as if each of the Bonds had been signed manually and in person by each of said officers, and such facsimile seal on the Bonds shall have the same effect as if the official seal of the City had been manually impressed upon each of the Bonds. (b) In the event that any officer of the City whose manual or facsimile signature appears on the Bonds ceases to be such officer before the authentication of such Bonds or before the delivery thereof, such manual or facsimile signature nevertheless shall be valid and sufficient for all purposes as if such officer had remained in such office. (c) Except as provided below, no Bond shall be valid or obligatory for any purpose or be entitled to any security or benefit of this Ordinance unless and until there appears thereon the Certificate of Paying Agent/Registrar substantially in the form provided herein, duly authenticated by manual execution by an officer or duly authorized signatory of the Paying Agent/Registrar. It shall not be required that the same officer or authorized signatory of the GRA325/71008 Dallas 567198_2 -7- Paying Agent/Registrar sign the Certificate of Paying Agent/Registrar on all of the Bonds. In lieu of the executed Certificate of Paying Agent/Registrar described above, the Initial Bond delivered at the Closing Date shall have attached thereto the Comptroller's Registration Certificate substantially in the form provided herein, manually executed by the Comptroller of Public Accounts of the State of Texas, or by his duly authorized agent, which Certificate shall be evidence that the Bond has been duly approved by the Attorney General of the State of Texas and that it is a valid and binding obligation of the City, and has been registered by the Comptroller of Public Accounts of the State of Texas. (d) On the Closing Date, one Initial Bond representing the entire principal amount of all Bonds, payable in stated installments to the initial purchaser, or its designee, executed manually or by facsimile by the Mayor and City Secretary of the City, approved by the Attorney General, and registered and manually signed by the Comptroller of Public Accounts, will be delivered to the initial purchaser or its designee. Upon payment for the Initial Bond, the Paying Agent/Registrar shall cancel the Initial Bond and deliver to DTC on behalf of the Purchaser one registered definitive Bond for each year of maturity of the Bonds in the aggregate principal amount of all Bonds for such maturity, registered in the name of Cede & Co., as nominee of DTC. Section 3.05. Ownership. (a) The City, the Paying Agent/Registrar and any other person may treat the person in whose name any Bond is registered as the absolute owner of such Bond for the purpose of making and receiving payment of the principal thereof and redemption premium, if any, thereon, for the further purpose of making and receiving payment of the interest thereon, and for all other purposes (except interest will be paid to the person in whose name such bond is registered on the Record Date or Special Record Date, as applicable), whether or not such Bond is overdue, and neither the City nor the Paying Agent/Registrar shall be bound by any notice or knowledge to the contrary. (b) All payments made to the Owner of a Bond shall be valid and effectual and shall discharge the liability of the City and the Paying Agent/Registrar upon such Bond to the extent of the sums paid. Section 3.06. Registration, Transfer and Exchange. (a) So long as any Bonds remain outstanding, the City shall cause the Paying Agent/Registrar to keep at the Designated Payment/Transfer Office a register (the "Register") in which, subject to such reasonable regulations as it may prescribe, the Paying Agent/Registrar shall provide for the registration and transfer of Bonds in accordance with this Ordinance. (b) The ownership of a Bond may be transferred only upon the presentation and surrender of the Bond at the Designated Payment/Transfer Office with such endorsement or other evidence of transfer as is acceptable to the Paying Agent/Registrar. No transfer of any Bond shall be effective until entered in the Register. (c) The Bonds shall be exchangeable upon the presentation and surrender thereof at the Designated Payment/Transfer Office for a Bond or Bonds of the same maturity and interest GRA325/71008 Dallas 5671982 rate and in any denomination or denominations of any integral multiple of $5,000 and in an aggregate principal amount equal to the unpaid principal amount of the Bonds presented for exchange. The Paying Agent/Registrar is hereby authorized to authenticate and deliver Bonds exchanged for other Bonds in accordance with this Section. (d) Each exchange Bond delivered by the Paying Agent/Registrar in accordance with this Section shall constitute an original contractual obligation of the City and shall be entitled to the benefits and security of this Ordinance to the same extent as the Bond or Bonds in lieu of which such exchange Bond is delivered. (e) No service charge shall be made to the Owner for the initial registration, subsequent transfer, or exchange for a different denomination of any of the Bonds. The Paying Agent/Registrar, however, may require the Owner to pay a sum sufficient to cover any tax or other governmental charge that is authorized to be imposed in connection with the registration, transfer or exchange of a Bond. (f) Neither the City nor the Paying Agent/Registrar shall be required to issue, transfer, or exchange any Bond called for redemption, in whole or in part, within 45 calendar days prior to the date fixed for redemption; provided, however, such limitation shall not be applicable to an exchange by the Owner of the uncalled principal balance of a Bond. Section 3.07. Cancellation. All Bonds paid or redeemed before scheduled maturity in accordance with this Ordinance, and all Bonds in lieu of which exchange Bonds or replacement Bonds are authenticated and delivered in accordance with this Ordinance, shall be cancelled and proper records shall be made regarding such payment, redemption, exchange or replacement. The Paying Agent/Registrar shall dispose of cancelled Bonds in accordance with the Securities Exchange Act of 1934. Section 3.08. Temporary Bonds. (a) Following the delivery and registration of the Initial Bond and pending the preparation of definitive Bonds, the proper officers of the City may execute and, upon the City's request, the Paying Agent/Registrar shall authenticate and deliver, one or more temporary Bonds that are printed, lithographed, typewritten, mimeographed or otherwise produced, in any denomination, substantially of the tenor of the definitive Bonds in lieu of which they are delivered, without coupons, and with such appropriate insertions, omissions, substitutions and other variations as the officers of the City executing such temporary Bonds may determine, as evidenced by their signing of such temporary Bonds. (b) Until exchanged for Bonds in definitive form, such Bonds in temporary form shall be entitled to the benefit and security of this Ordinance. (c) The City, without unreasonable delay, shall prepare, execute and deliver to the Paying Agent/Registrar the Bonds in definitive form; thereupon, upon the presentation and surrender of the Bonds in temporary form to the Paying Agent/Registrar, the Paying Agent/Registrar shall cancel the Bonds in temporary form and shall authenticate and deliver in GRA325/71008 Dallas 567198_2 -9- exchange therefor Bonds of the same maturity and series, in definitive form, in the authorized denomination, and in the same aggregate principal amount, as the Bonds in temporary form surrendered. Such exchange shall be made without the making of any charge therefor to any Owner. Section 3.09, Replacement Bonds. (a) Upon the presentation and surrender to the Paying Agent/Registrar of a mutilated Bond, the Paying Agent/Registrar shall authenticate and deliver in exchange therefor a replacement Bond of like tenor and principal amount, bearing a number not contemporaneously outstanding. The City or the Paying Agent/Registrar may require the Owner of such Bond to pay a sum sufficient to cover any tax or other governmental charge that is authorized to be imposed in connection therewith and any other expenses connected therewith. (b) In the event that any Bond is lost, apparently destroyed or wrongfully taken, the Paying Agent/Registrar, pursuant to the applicable laws of the State of Texas and in the absence of notice or knowledge that such Bond has been acquired by a bona fide purchaser, shall authenticate and deliver a replacement Bond of like tenor and principal amount, bearing a number not contemporaneously outstanding, provided that the Owner first: (i) furnishes to the Paying Agent/Registrar satisfactory evidence of his or her ownership of and the circumstances of the loss, destruction or theft of such Bond; (ii) furnishes such security or indemnity as may be required by the Paying Agent/Registrar to save it and the City harmless; (iii) pays all expenses and charges in connection therewith, including, but not limited to, printing costs, legal fees, fees of the Paying Agent/Registrar and any tax or other governmental charge that is authorized to be imposed; and (iv) satisfies any other reasonable requirements imposed by the City and the Paying Agent/Registrar. (c) If, after the delivery of such replacement Bond, a bona fide purchaser of the original Bond in lieu of which such replacement Bond was issued presents for payment such original Bond, the City and the Paying Agent/Registrar shall be entitled to recover such replacement Bond from the person to whom it was delivered or any person taking therefrom, except a bona fide purchaser, and shall be entitled to recover upon the security or indemnity provided therefor to the extent of any loss, damage, cost or expense incurred by the City or the Paying Agent/Registrar in connection therewith. (d) In the event that any such mutilated, lost, apparently destroyed or wrongfully taken Bond has become or is about to become due and payable, the Paying Agent/Registrar, in its discretion, instead of issuing a replacement Bond, may pay such Bond if it has become due and payable or may pay such Bond when it becomes due and payable. (e) Each replacement Bond delivered in accordance with this Section shall constitute an original additional contractual obligation of the City and shall be entitled to the benefits and GRA325.'71008 Dallas 567198 2 one security of this Ordinance to the same extent as the Bond or Bonds in lieu of which such replacement Bond is delivered. Section 3.10. Book -Entry -Only System. (a) Notwithstanding any other provision hereof, upon initial issuance of the Bonds, the Bonds shall be registered in the name of Cede & Co., as nominee of DTC. The definitive Bonds shall be initially issued in the form of a single separate bond for each of the maturities thereof. (b) With respect to Bonds registered in the name of Cede & Co., as nominee of DTC, the City and the Paying Agent/Registrar shall have no responsibility or obligation to any DTC Participant or to any person on behalf of whom such a DTC Participant holds an interest in the Bonds. Without limiting the immediately preceding sentence, the City and the Paying Agent/Registrar shall have no responsibility or obligation with respect to (i) the accuracy of the records of DTC, Cede & Co. or any DTC Participant with respect to any ownership interest in the Bonds, (ii) the delivery to any DTC Participant or any other person, other than an Owner, as shown on the Register, of any notice with respect to the Bonds, including any notice of redemption, or (iii) the payment to any DTC Participant or any other person, other than an Owner, as shown in the Register of any amount with respect to principal of, premium, if any, or interest on the Bonds. Notwithstanding any other provision of this Ordinance to the contrary, the City and the Paying Agent/Registrar shall be entitled to treat and consider the person in whose name each Bond is registered in the Register as the absolute owner of such Bond for the purpose of payment of principal of, premium, if any, and interest on Bonds, for the purpose of giving notices of redemption and other matters with respect to such Bond, for the purpose of registering transfer with respect to such Bond, and for all other purposes whatsoever. The Paying Agent/Registrar shall pay all principal of, premium, if any, and interest on the Bonds only to or upon the order of the respective Owners as shown in the Register, as provided in this Ordinance, or their respective attorneys duly authorized in writing, and all such payments shall be valid and effective to fully satisfy and discharge the City's obligations with respect to payment of, premium, if any, and interest on the Bonds to the extent of the sum or sums so paid. No person other than an Owner, as shown in the Register, shall receive a certificate evidencing the obligation of the City to make payments of amounts due pursuant to this Ordinance. Upon delivery by DTC to the Paying Agent/Registrar of written notice to the effect that DTC has determined to substitute a new nominee in place of Cede & Co., the word "Cede & Co." in this Ordinance shall refer to such new nominee of DTC. (c) The Representations Letter previously executed and delivered by the City, and applicable to the City's obligations delivered in book -entry -only form to DTC as securities depository, is hereby ratified and approved for the Bonds. Section 3.11. Successor Securities De oR sitory Transfer Outside Book -Entry Only System. In the event that the City or the Paying Agent/Registrar determines that DTC is incapable of discharging its responsibilities described herein and in the Representations Letter of the City to DTC, and that it is in the best interest of the beneficial owners of the Bonds that they be able GRA325/ 7 1 008 Dallas 567198_2 -11- to obtain certificated Bonds, or in the event DTC discontinues the services described herein, the City shall (i) appoint a successor securities depository, qualified to act as such under Section 17(a) of the Securities and Exchange Act of 1934, as amended, notify DTC and DTC Participants of the appointment of such successor securities depository and transfer one or more separate Bonds to such successor securities depository; or (ii) notify DTC and DTC Participants of the availability through DTC of certificated Bonds and cause the Paying Agent/Registrar to transfer one or more separate registered Bonds to DTC Participants having Bonds credited to their DTC accounts. In such event, the Bonds shall no longer be restricted to being registered in the Register in the name of Cede & Co., as nominee of DTC, but may be registered in the name of the successor securities depository, or its nominee, or in whatever name or names Owners transferring or exchanging Bonds shall designate, in accordance with the provisions of this Ordinance. Section 3.12. Payments to Cede & Co. Notwithstanding any other provision of this Ordinance to the contrary, so long as any Bonds are registered in the name of Cede & Co., as nominee of DTC, all payments with respect to principal of, premium, if any, and interest on such Bonds, and all notices with respect to such Bonds, shall be made and given, respectively, in the manner provided in the Representations Letter of the City to DTC. ARTICLE IV REDEMPTION OF BONDS BEFORE MATURITY Section 4.01. Limitation on Redemption. The Bonds shall be subject to redemption before scheduled maturity only as provided in this Article IV. Section 4.02. Optional Redemption. (a) The City reserves the option to redeem Bonds maturing on and after February 15, 2013 in whole or any part, before their respective scheduled maturity dates, on February 15, 2012 or on any date thereafter, such redemption date or dates to be fixed by the City, at a price equal to the principal amount of the Bonds called for redemption plus accrued interest to the date fixed for redemption. (b) If less than all of the Bonds are to be redeemed pursuant to an optional redemption, the City shall determine the maturity or maturities and the amounts thereof to be redeemed and shall direct the Paying Agent/Registrar to call by lot the Bonds, or portions thereof, within such maturity or maturities and in such principal amounts for redemption. (c) The City, at least 45 days before the redemption date, unless a shorter period shall be satisfactory to the Paying Agent/Registrar, shall notify the Paying Agent/Registrar of such redemption date and of the principal amount of Bonds to be redeemed. GRA325; 71008 Dallas 567198_2 -12- Section 4.03. Partial Redemption. (a) A portion of a single Bond of a denomination greater than $5,000 may be redeemed, but only in a principal amount equal to $5,000 or any integral multiple thereof. If such a Bond is to be partially redeemed, the Paying Agent/Registrar shall treat each $5,000 portion of the Bond as though it were a single Bond for purposes of selection for redemption. (b) Upon surrender of any Bond for redemption in part, the Paying Agent/Registrar, in accordance with Section 3.06 of this Ordinance, shall authenticate and deliver an exchange Bond or Bonds in an aggregate principal amount equal to the unredeemed portion of the Bond so surrendered, such exchange being without charge. (c) The Paying Agent/Registrar shall promptly notify the City in writing of the principal amount to be redeemed of any Bond as to which only a portion thereof is to be redeemed. Section 4.04. Notice of Redemption to Owners. (a) The Paying Agent/Registrar shall give notice of any redemption of Bonds by sending notice by first class United States mail, postage prepaid, not less than 30 days before the date fixed for redemption, to the Owner of each Bond (or part thereof) to be redeemed, at the address shown on the Register at the close of business on the Business Day next preceding the date of mailing such notice. (b) The notice shall state the redemption date, the redemption price, the place at which the Bonds are to be surrendered for payment, and, if less than all the Bonds outstanding are to be redeemed, an identification of the Bonds or portions thereof to be redeemed. (c) Any notice given as provided in this Section shall be conclusively presumed to have been duly given, whether or not the Owner receives such notice. Section 4.05. Payment Upon Redemption. (a) Before or on each redemption date, the City shall deposit with the Paying Agent/Registrar money sufficient to pay all amounts due on the redemption date and the Paying Agent/Registrar shall make provision for the payment of the Bonds to be redeemed on such date by setting aside and holding in trust such amounts as are received by the Paying Agent/Registrar from the City and shall use such funds solely for the purpose of paying the principal of, redemption premium, if any, and accrued interest on the Bonds being redeemed. (b) Upon presentation and surrender of any Bond called for redemption at the Designated Payment/Transfer Office on or after the date fixed for redemption, the Paying Agent/Registrar shall pay the principal of, redemption premium, if any, and accrued interest on such Bond to the date of redemption from the money set aside for such purpose. GRA325/71008 Dallas 567198_2 -13- Section 4.06. Effect of Redemption. (a) Notice of redemption having been given as provided in Section 4.04 of this Ordinance, the Bonds or portions thereof called for redemption shall become due and payable on the date fixed for redemption and, unless the City defaults in its obligation to make provision for the payment of the principal thereof, redemption premium, if any, or accrued interest thereon, such Bonds or portions thereof shall cease to bear interest from and after the date fixed for redemption, whether or not such Bonds are presented and surrendered for payment on such date. (b) If the City shall fail to make provision for payment of all sums due on a redemption date, then any Bond or portion thereof called for redemption shall continue to bear interest at the rate stated on the Bond until due provision is made for the payment of same by the City. ARTICLE V PAYING AGENT/REGISTRAR Section 5.01. Appointment of Initial Pang Agent/Registrar. _ Bank One, National Association, Austin, Texas, is hereby appointed as the initial Paying Agent/Registrar for the Bonds. Section 5.02. Qualifications. Each Paying Agent/Registrar shall be a commercial bank, a trust company organized under the laws of the State of Texas, or any other entity duly qualified and legally authorized to serve as and perform the duties and services of paying agent and registrar for the Bonds. Section 5.03. Maintaining Paying_Agent/Registrar. (a) At all times while any Bonds are outstanding, the City will maintain a Paying Agent/Registrar that is qualified under Section 5.02 of this Ordinance. The Mayor is hereby authorized and directed to execute an agreement with the Paying Agent/Registrar specifying the duties and responsibilities of the City and the Paying Agent/Registrar. The signature of the Mayor shall be attested by the City Secretary of the City. (b) If the Paying Agent/Registrar resigns or otherwise ceases to serve as such, the City will promptly appoint a replacement. Section 5.04. Termination. The City, upon not less than 60 days notice, reserves the right to terminate the appointment of any Paying Agent/Registrar by delivering to the entity whose appointment is to be terminated written notice of such termination. GRA325,'71008 Dallas 567198_2 -14- Section 5.05. Notice of Change to Owners. Promptly upon each change in the entity serving as Paying Agent/Registrar, the City will cause notice of the change to be sent to each Owner by first class United States mail, postage prepaid, at the address in the Register, stating the effective date of the change and the name and mailing address of the replacement Paying Agent/Registrar. Section 5.06. Agreement to Perform Duties and Functions. By accepting the appointment as Paying Agent/Registrar and executing the Paying Agent/Registrar Agreement, the Paying Agent/Registrar is deemed to have agreed to the provisions of this Ordinance and that it will perform the duties and functions of Paying Agent/Registrar prescribed thereby. Section 5.07. Delivery of Records to Successor. If a Paying Agent/Registrar is replaced, such Paying Agent/Registrar, promptly upon the appointment of the successor, will deliver the Register (or a copy thereof) and all other pertinent books and records relating to the Bonds to the successor Paying Agent/Registrar. ARTICLE VI FORM OF THE BONDS Section 6.01. Form Generally. (a) The Bonds, including the Registration Certificate of the Comptroller of Public Accounts of the State of Texas, the Certificate of the Paying Agent/Registrar, and the Assignment form to appear on each of the Bonds, (i) shall be substantially in the form set forth in this Article, with such appropriate insertions, omissions, substitutions, and other variations as are permitted or required by this Ordinance, and (ii) may have such letters, numbers, or other marks of identification (including identifying numbers and letters of the Committee on Uniform Securities Identification Procedures of the American Bankers Association) and such legends and endorsements (including any reproduction of an opinion of counsel) thereon as, consistently herewith, may be determined by the City or by the officers executing such Bonds, as evidenced by their execution thereof. (b) Any portion of the text of any Bonds may be set forth on the reverse side thereof, with an appropriate reference thereto on the face of the Bonds. (c) The definitive Bonds shall be typewritten, photocopied, printed, lithographed, or engraved, and may be produced by any combination of these methods or produced in any other similar manner, all as determined by the officers executing such Bonds, as evidenced by their execution thereof. (d) The Initial Bond submitted to the Attorney General of the State of Texas may be typewritten and photocopied or otherwise reproduced. GRA325/71008 Dallas 567198_2 -15- Section 6.02. Form of the Bonds. The form of the Bond, including the form of the Registration Certificate of the Comptroller of Public Accounts of the State of Texas, the form of Certificate of the Paying Agent/Registrar and the form of Assignment appearing on the Bonds, shall be substantially as follows: (a) Form of Bond. REGISTERED No. United States of America State of Texas County of Tarrant REGISTERED CITY OF GRAPEVINE, TEXAS GENERAL OBLIGATION REFUNDING AND IMPROVEMENT BOND SERIES 2002 INTEREST RATE: MATURITY DATE: BOND DATE: CUSIP NUMBER: % , March 15, 2002 The City of Grapevine (the "City"), in the County of Tarrant, State of Texas, for value received, hereby promises to pay to or registered assigns, on the Maturity Date specified above, the sum of unless this Bond shall have been sooner called for redemption and the payment of the principal hereof shall have been paid or provided for, and to pay interest on such principal amount from the later of the Bond Date specified above or the most recent interest payment date to which interest has been paid or provided for until payment of such principal amount has been paid or provided for, at the per annum rate of interest specified above, computed on the basis of a 360 - day year of twelve 30 -day months, such interest to be paid semiannually on February 15 and August 15 of each year, commencing February 15, 2003. The principal of this Bond shall be payable without exchange or collection charges in lawful money of the United States of America upon presentation and surrender of this Bond at the designated office in Columbus, Ohio, of Bank One, National Association, as Paying Agent/Registrar (the "Designated Payment/Transfer Office"), or, with respect to a successor paying agent/registrar, at the Designated Payment/Transfer Office of such successor. Interest on this Bond is payable by check dated as of the interest payment date, and will be mailed by the Paying Agent/Registrar to the registered owner at the address shown on the registration books GRA325/71008 Dallas 567198_2 -16- kept by the Paying Agent/Registrar or by such other customary banking arrangement acceptable to the Paying Agent/Registrar and the registered owner; provided, however, such registered owner shall bear all risk and expense of such other banking arrangement. At the option of the Owner of at least $1,000,000 principal amount of the Bonds, interest may be paid by wire transfer to the bank account of such Owner on file with the Paying Agent/Registrar. For the purpose of the payment of interest on this Bond, the registered owner shall be the person in whose name this Bond is registered at the close of business on the "Record Date," which shall be the last Business Day of the month next preceding such interest payment date; provided, however, in the event of nonpayment of interest on a scheduled payment date and for 30 days thereafter, a new record date for such interest payment (a "Special Record Date") shall be established by the Paying Agent/Registrar, if and when funds for the payment of such interest have been received from the City. Notice of the Special Record Date and of the scheduled payment date of the past due interest (the "Special Payment Date," which date shall be 15 days after the Special Record Date) shall be sent at least five Business Days prior to the Special Record Date by United States mail, first class, postage prepaid, to the address of each Owner of a Bond 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 for the payment of the principal of or interest on this Bond shall be a Saturday, Sunday, legal holiday, or day on which banking institutions in the city where the Designated Payment/Transfer Office is located are required or authorized by law or executive order to close, the date for such payment shall be the next succeeding day which is not a Saturday, Sunday, legal holiday, or day on which banking institutions are required or authorized to close, and payment on such date shall have the same force and effect as if made on the original date payment was due and no additional interest shall be due by reason of nonpayment on the date on which such payment is otherwise stated to be due and payable. This Bond is one of a series of fully registered bonds specified in the title hereof issued in the aggregate principal amount of $10,180,000 (herein referred to as the "Bonds"), issued pursuant to a certain ordinance of the City (the "Ordinance") for the purpose of providing funds to make certain permanent public improvements within the City, to refund in advance of their maturity certain outstanding bonds of the City, and to pay the costs of issuing the Bonds. The City has reserved the option to redeem the Bonds maturing on or after February 15, 2013, in whole or in part, before their respective scheduled maturity dates, on February 15, 2012, or on any date thereafter, at a price equal to the principal amount of the Bonds so called for redemption plus accrued interest to the date fixed for redemption. If less than all of the Bonds are to be redeemed, the City shall determine the maturity or maturities and the amounts thereof to be redeemed and shall direct the Paying Agent/Registrar to call by lot or other customary method that results in a random selection the Bonds, or portions thereof, within such maturity and in such principal amounts, for redemption. Notice of such redemption or redemptions shall be given by first class mail, postage prepaid, not less than 30 days before the date fixed for redemption, to the registered owner of each of the Bonds to be redeemed in whole or in part. Notice having been so given, the Bonds or portions thereof designated for redemption shall become due and payable on the redemption date specified in such notice; from and after such date, notwithstanding that any of the Bonds or GRA325/71008 Dallas 5671982 -17- portions thereof so called for redemption shall not have been surrendered for payment, interest on such Bonds or portions thereof shall cease to accrue. As provided in the Ordinance, and subject to certain limitations therein set forth, this Bond is transferable upon surrender of this Bond for transfer at the Designated Payment/Transfer Office with such endorsement or other evidence of transfer as is acceptable to the Paying Agent/Registrar; thereupon, one or more new fully registered Bonds of the same stated maturity, of authorized denominations, bearing the same rate of interest, and for the same aggregate principal amount will be issued to the designated transferee or transferees. Neither the City nor the Paying Agent/Registrar shall be required to issue, transfer or exchange any Bond called for redemption where such redemption is scheduled to occur within 45 calendar days of the date fixed for redemption; provided, however, such limitation shall not be applicable to an exchange by the registered owner of the uncalled principal balance of a Bond. The City, the Paying Agent/Registrar, and any other person may treat the person in whose name this Bond is registered as the owner hereof for the purpose of receiving payment as herein provided (except interest shall be paid to the person in whose name this Bond is registered on the Record Date) and for all other purposes, whether or not this Bond be overdue, and neither the City nor the Paying Agent/Registrar shall be affected by notice to the contrary. IT IS HEREBY CERTIFIED AND RECITED that the issuance of this Bond and the series of which it is a part is duly authorized by law; that all acts, conditions and things required to be done precedent to and in the issuance of the Bonds have been properly done and performed and have happened in regular and due time, form and manner, as required by law; and that ad valorem taxes upon all taxable property in the City have been levied for and pledged to the payment of the debt service requirements of the Bonds, within the limit prescribed by law. IN WITNESS WHEREOF, the City has caused this Bond to be executed by the manual or facsimile signature of the Mayor of the City and countersigned by the manual or facsimile signature of the City Secretary of the City, and the official seal of the City has been duly impressed or placed in facsimile on this Bond. City Secretary, City of Grapevine, Texas [SEAL] GRA325/71008 Dallas 567198_2 i Mayor, City of Grapevine, Texas (b) Form of Comptroller's Registration Certificate. The following Comptroller's Registration Certificate may be deleted from the definitive Bonds if such certificate on the Initial Bond is fiilly executed. OFFICE OF THE COMPTROLLER § OF PUBLIC ACCOUNTS § REGISTER NO. OF THE STATE OF TEXAS & I hereby certify that there is on file and of record in my office a certificate of the Attorney General of the State of Texas to the effect that this Bond has been examined by him as required by law, that he finds that it has been issued in conformity with the Constitution and laws of the State of Texas, and that it is a valid and binding obligation of the City of Grapevine, Texas, and that this Bond has this day been registered by me. Witness my hand and seal of office at Austin, Texas, Comptroller of Public Accounts of the State of Texas am (c) Form of Certificate of Paving A ent/Re istrar. The following Certificate of Paying Agent/Registrar may be deleted from the Initial Bond if the executed Comptroller's Registration Certificate appears thereon. CERTIFICATE OF PAYING AGENT/REGISTRAR The records of the Paying Agent/Registrar show that the Initial Bond of this series of bonds was approved by the Attorney General of the State of Texas and registered by the Comptroller of Public Accounts of the State of Texas, and that this is one of the Bonds referred to in the within -mentioned Ordinance. Dated: GRA325/71008 Dallas 567198_2 BANK ONE, NATIONAL ASSOCIATION Austin, Texas, as Paying Agent/Registrar -19- Authorized Signatory (d) Form of Assignment. ASSIGNMENT FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers unto (print or typewrite name, address and Zip Code of transferee): (Social Security or other identifying number: ) the within Bond and all rights hereunder and hereby irrevocably constitutes and appoints attorney to transfer the within Bond on the books kept for registration hereof, with full power of substitution in the premises. Dated: NOTICE: The signature on this Assignment must correspond with the name of the registered owner as it appears on the face of the within Bond in every particular and must be guaranteed in a manner acceptable to the Paying Agent/Registrar. Signature Guaranteed By: Authorized Signatory (e) The Initial Bond shall be in the form set forth in paragraphs (a) through (d) of this Section, except for the following alterations: (i) immediately under the name of the Bond, the headings "INTEREST RATE" and "MATURITY DATE" shall both be completed with the words "As shown below"; (ii) in the first paragraph of the Bond, the words "on the Maturity Date specified above" shall be deleted and the following will be inserted: "on February 15 in each of the years, in the principal installments and bearing interest at the per annum rates in accordance with the following schedule: GRA325/71008 Dallas 567198_2 Years Principal Installments Interest Rates (Information to be inserted from schedule in Section 3.02 of this Ordinance) me (iii) the Initial Bond shall be numbered T-1. Section 6.03. CUSIP Registration. The City may secure identification numbers through the CUSIP Service Bureau Division of Standard & Poor's Corporation, New York, New York, and may authorize the printing of such numbers on the face of the Bonds. It is expressly provided, however, that the presence or absence of CUSIP numbers on the Bonds shall be of no significance or effect as regards the legality thereof and neither the City nor the attorneys approving said Bonds as to legality are to be held responsible for CUSIP numbers incorrectly printed on the Bonds. Section 6.04. Legal Opinion. The approving legal opinion of Vinson & Elkins L.L.P., Bond Counsel, may be printed on the reverse side of or attached to each Bond over the certification of the City Secretary of the City, which may be executed in facsimile. Section 6.05. Statement of Insurance. A statement relating to a municipal bond insurance policy, if any, to be issued for the Bonds may be printed on or attached to each Bond. ARTICLE VII SALE AND DELIVERY OF BONDS, DEPOSIT OF PROCEEDS Section 7.01. Sale of Bonds Official Statement. (a) The Bonds are hereby officially sold and awarded and shall be delivered to the Underwriters, in accordance with the terms and provisions of that certain Bond Purchase Agreement relating to the Bonds between the City and the Underwriters and dated the date of the passage of this Ordinance. The form and content of such Bond Purchase Agreement are hereby approved, and the Mayor is hereby authorized and directed to execute and deliver, and the City Secretary is hereby authorized and directed to attest, such Bond Purchase Agreement. It is hereby officially found, determined and declared that the terms of this sale are the most advantageous reasonably obtainable. The Bonds shall initially be registered in the name of RBC Dain Rauscher Inc. (the "Representative") or its designee. (b) The form and substance of the Preliminary Official Statement for the Bonds and any addenda, supplement or amendment thereto (the "Preliminary Official Statement"), and the final Official Statement (the "Official Statement") presented to and considered at this meeting, are hereby in all respects approved and adopted, and the Preliminary Official Statement is hereby deemed final as of its date (except for the omission of pricing and related information) within the meaning and for the purposes of paragraph (b)(1) of Rule 15c2-12 under the Securities Exchange Act of 1934, as amended. The Mayor of the City is hereby authorized and directed to execute the Official Statement and deliver appropriate numbers of copies thereof to the Underwriters. The Official Statement as thus approved, executed and delivered, with such appropriate variations as shall be approved by the Mayor of the City and the Underwriters, may be used by GRA325/71008 Dallas 567198_2 -21- the Underwriters in the public offering of the Bonds and the sale thereof. The City Secretary is hereby authorized and directed to include and maintain a copy of the Official Statement and any addenda, supplement or amendment thereto thus approved among the permanent records of this meeting. The use and distribution of the Preliminary Official Statement for the Bonds and the preliminary public offering of the Bonds by the Underwriters are hereby ratified, approved and confirmed. (c) All officers of the City are authorized to execute such documents, certificates and receipts, and to make such elections with respect to the tax-exempt status of Bonds, as they may deem appropriate in order to consummate the delivery of the Bonds in accordance with the provisions and terms of sale therefor. (d) The obligation of the Underwriters to accept delivery of the Bonds is subject to such purchaser being furnished with the final, approving opinion of Vinson & Elkins L.L.P., bond counsel for the City, which opinion shall be dated and delivered the Closing Date. Section 7.02. Control and Delivery of Bonds. (a) The Mayor of the City is hereby authorized to have control of the Initial Bond and all necessary records and proceedings pertaining thereto pending investigation, examination and approval of the Attorney General of the State of Texas, registration by the Comptroller of Public Accounts of the State and registration with, and initial exchange or transfer by, the Paying Agent/Registrar. (b) After registration by the Comptroller of Public Accounts, delivery of the Bonds shall be made to the initial purchasers thereof under and subject to the general supervision and direction of the Mayor, against receipt by the City of all amounts due to the City under the terms of sale. Section 7.03. Deposit of Proceeds. On the Closing Date, the City shall cause the proceeds from the sale of the Bonds to be deposited as follows: (a) All amounts received on the Closing Date as accrued interest on the Bonds from the Bond Date to the Closing Date and premium, if any, shall be deposited to the Interest and Sinking Fund. (b) An amount equal to $ together with $ transferred from the debt service fund for the Refunded Bonds shall be deposited with the paying agent/registrar for the Refunded Bonds and shall be applied to the payment of the principal and interest due on the Refunded Bonds. (c) An amount equal to $ shall be deposited as directed by the Director of Finance and used to pay the costs and expenses pertaining to the issuance of the Bonds. To the extent any of such sum is not used for such purpose, such excess shall be deposited to the Interest and Sinking Fund. GRA325171008 Dallas 567198_2 -22- (d) An amount equal to $ shall be paid as an insurance premium on the Closing Date. (e) The remaining balance shall be deposited to a special account of the City, such moneys to be dedicated and used solely for the purposes for the public improvements which the Bonds are being issued as herein provided. (f) To the extent necessary to accomplish fully the purposes of this Ordinance, the Director of Finance is authorized to reallocate the funds (other than accrued interest on the Bonds) directed to be used for the purposes specified above. ARTICLE VIII INVESTMENTS Section 8.01. Investments. (a) Money in the Interest and Sinking Fund created by this Ordinance, at the option of the City, may be invested in such securities or obligations as permitted under applicable law as in effect on the date of the investment. (b) Any securities or obligations in which money in the Interest and Sinking Fund is so invested shall be kept and held in trust for the benefit of the Owners and shall be sold and the proceeds of sale shall be timely applied to the making of all payments required to be made from the Interest and Sinking Fund. Section 8.02. Investment Income. (a) Interest and income derived from investment of the Interest and Sinking Fund shall be credited to such Fund. (b) Interest and income derived from the investment of funds deposited pursuant to Section 7.03(b) hereof shall be credited to the fund or account where deposited until completion of the Projects; thereafter, to the extent such interest and income are present, such interest and income shall be deposited to the Interest and Sinking Fund. ARTICLE IX PARTICULAR REPRESENTATIONS AND COVENANTS Section 9.01. Payment of the Bonds. On or before each Interest Payment Date for the Bonds and while any of the Bonds are outstanding and unpaid, there shall be made available to the Paying Agent/Registrar, out of the Interest and Sinking Fund, money sufficient to pay such interest on, principal of, and redemption premium, if any, on the Bonds as will accrue or mature on the applicable Interest Payment Date, maturity date or date of prior redemption. GRA325f71008 Dallas 567198_2 -23- Section 9.02. Other Representations and Covenants. (a) The City will faithfully perform at all times any and all covenants, undertakings, stipulations, and provisions contained in this Ordinance and in each Bond; the City will promptly pay or cause to be paid the principal of, redemption premium, if any, and interest on each Bond on the dates and at the places and manner prescribed in such Bond; and the City will, at the times and in the manner prescribed by this Ordinance, deposit or cause to be deposited the amounts of money specified by this Ordinance. (b) The City is duly authorized under the laws of the State of Texas to issue the Bonds; all action on its part for the creation and issuance of the Bonds has been duly and effectively taken; and the Bonds in the hands of the Owners thereof are and will be valid and enforceable obligations of the City in accordance with their terms. Section 9.03. Provisions Concerning Federal Income Tax Exclusion. The City intends that the interest on the Bonds shall be excludable from gross income for purposes of federal income tax purposes pursuant to sections 103 and 141 through 150 of the Code and the applicable Income Tax Regulations promulgated thereunder (the "Regulations"). The City covenants and agrees not to take any action, or knowingly omit to take any action within its control, that if taken or omitted, respectively, would cause the interest on the Bonds to be includable in gross income, as defined in section 61 of the Code, for purposes of federal income taxation. In particular, the City covenants and agrees to comply with each requirement of this Article IX; provided, however, that the City shall not be required to comply with any particular requirement of this Article IX if the City has received an opinion of nationally recognized bond counsel ("Counsel's Opinion") that such noncompliance will not adversely affect the exclusion from gross income for federal income tax purposes of interest on the Bonds or if the City has received a Counsel's Opinion to the effect that compliance with some other requirement set forth in this Article IX will satisfy the applicable requirements of the Code and the Regulations, in which case compliance with such other requirement specified in such Counsel's Opinion shall constitute compliance with the corresponding requirement specified in this Article IX. Section 9.04. No Private Use or Pavment and No Private Loan Financing. The City shall certify, through an authorized officer, employee or agent, that, based upon all facts and estimates known or reasonably expected to be in existence on the date the Bonds are delivered, that the proceeds of the Refunded Bonds have not been used, and that the proceeds of the Refunded Bonds and the Bonds will not be used in a manner that would cause the Bonds to be "private activity bonds" within the meaning of section 141 of the Code and the Regulations promulgated thereunder. Moreover, the City covenants and agrees that it will make such use of the proceeds of the Refunded Bonds and the Bonds, including interest or other investment income derived from Bond proceeds, regulate the use of property financed, directly or indirectly, with such proceeds, and take such other and further action as may be required so that the bonds will not be "private activity bonds" within the meaning of section 141 of the Code and the Regulations promulgated thereunder. GRA325171008 Dallas 567198_2 -24- Section 9.05. No Federal Guaranty. The City covenants and agrees not to take any action, or knowingly omit to take any action within its control, that, if taken or omitted, respectively, would cause the Bonds to be "federally guaranteed" within the meaning of section 149(b) of the Code and the applicable Regulations thereunder, except as permitted by section 149(b)(3) of the Code and such Regulations. Section 9.06. Bonds are not Hedge Bonds. The City covenants and agrees not to take any action, or knowingly omit to take any action, and has not knowingly omitted and will not knowingly omit to take any action, within its control, that, if taken or omitted, respectively, would cause the Bonds to be "hedge bonds" within the meaning of section 149(8) of the Code and the applicable Regulations thereunder. Section 9.07. No -Arbitrage Covenant. The City shall certify, through an authorized officer, employee or agent, that, based upon all facts and estimates known or reasonably expected to be in existence on the date the Bonds are delivered, the City will reasonably expect that the proceeds of the Bonds will not be used in a manner that would cause the Bonds to be "arbitrage bonds" within the meaning of section 148(a) of the Code and the applicable Regulations thereunder. Moreover, the City covenants and agrees that it will make such use of the proceeds of the Bonds including interest or other investment income derived from Bond proceeds, regulate investments of proceeds of the Bonds, and take such other and further action as may be required so that the Bonds will not be "arbitrage bonds" within the meaning of section 148(a) of the Code and the applicable Regulations promulgated thereunder. Section 9.08. Arbitrage Rebate. If the City does not qualify for an exception to the requirements of Section 148(f) of the Code, the City will take all necessary steps to comply with the requirement that certain amounts earned by the City on the investment of the "gross proceeds" of the Bonds (within the meaning of section 148(f)(6)(B) of the Code), be rebated to the federal government. Specifically, the City will (i) maintain records regarding the investment of the gross proceeds of the Bonds as may be required to calculate the amount earned on the investment of the gross proceeds of the Bonds separately from records of amounts on deposit in the funds and accounts of the City allocable to other bond issue of the City or moneys which do not represent gross proceeds of any bonds of the City, (ii) calculate at such times as are required by applicable Regulations, the amount earned from the investment of the gross proceeds of the Bonds which is required to be rebated to the federal government, and (iii) pay, not less often than every fifth anniversary date of the delivery of the Bonds or on such other dates as may be permitted under applicable Regulations, all amounts required to be rebated to the federal government. Further, the City will not indirectly pay any amount otherwise payable to the federal government pursuant to the foregoing requirements to any person other than the federal government by entering into any investment arrangement with respect to the gross proceeds of the Bonds that might result in a reduction in the amount required to be paid to the federal government because such arrangement results in a GRA325/71008 Dallas 567198_2 -25- smaller profit or a larger loss than would have resulted if the arrangement had been at arm's length and had the yield on the issue not been relevant to either parry. Section 9.09. Information Reporting. The City covenants and agrees to file or cause to be filed with the Secretary of the Treasury, not later than the 15th day of the second calendar month after the close of the calendar quarter in which the Bonds are issued, an information statement concerning the Bonds, all under and in accordance with section 149(e) of the Code and the Regulations promulgated thereunder. Section 9.10. Continuing Obligation. Notwithstanding any other provision of this Ordinance, the City's obligations under the covenants and provisions of this Article IX shall survive the defeasance and discharge of the Bonds. ARTICLE X DEFAULT AND REMEDIES Section 10.01. Events of Default. Each of the following occurrences or events for the purpose of this Ordinance is hereby declared to be an Event of Default: (i) the failure to make payment of the principal of, redemption premium, if any, or interest on any of the Bonds when the same becomes due and payable; or (ii) default in the performance or observance of any other covenant, agreement or obligation of the City, which default materially and adversely affects the rights of the Owners, including but not limited to, their prospect or ability to be repaid in accordance with this Ordinance, and the continuation thereof for a period of 60 days after notice of such default is given by any Owner to the City. Section 10.02. Remedies for Default. (a) Upon the happening of any Event of Default, then any Owner or an authorized representative thereof, including but not limited to, a trustee or trustees therefor, may proceed against the City for the purpose of protecting and enforcing the rights of the Owners under this Ordinance, by mandamus or other suit, action or special proceeding in equity or at law, in any court of competent jurisdiction, for any relief permitted by law, including the specific performance of any covenant or agreement contained herein, or thereby to enjoin any act or thing that may be unlawful or in violation of any right of the Owners hereunder or any combination of such remedies. (b) It is provided that all such proceedings shall be instituted and maintained for the equal benefit of all Owners of Bonds then outstanding. GRA325/71008 Dallas 5671982 -26- Section 10.03, Remedies Not Exclusive. (a) No remedy herein conferred or reserved is intended to be exclusive of any other available remedy or remedies, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or under the Bonds or now or hereafter existing at law or in equity; provided, however, that notwithstanding any other provision of this Ordinance, the right to accelerate the debt evidenced by the Bonds shall not be available as a remedy under this Ordinance. (b) The exercise of any remedy herein conferred or reserved shall not be deemed a waiver of any other available remedy. ARTICLE XI DISCHARGE Section 11.01. Discharge. The Bonds may be defeased, refunded and discharged in any manner permitted by applicable law. ARTICLE XII CONTINUING DISCLOSURE UNDERTAKING Section 12.01. Annual Reports. (a) The City shall provide annually to each NRMSIR and to any SID, within six (6) months after the end of each fiscal year ending in or after 2002, financial information and operating data with respect to the City of the general type included in the final Official Statement, being the information described in Exhibit A hereto. Any financial statements so to be provided shall be (i) prepared in accordance with the accounting principles described in Exhibit A hereto, and (ii) audited, if the City commissions an audit of such statements and the audit is completed within the period during which they must be provided. If the audit of such financial statements is not complete within such period, then the City shall provide notice that audited financial statements are not available and shall provide unaudited financial statements for the applicable fiscal year to each NRMSIR and any SID. The City shall provide audited financial statements for the applicable fiscal year to each NRMSIR and to any SID. Thereafter, when and if audited financial statements become available, the City shall provide such audited financial statements as required to each NRMSIR and to any SID. (b) If the City changes its fiscal year, it will notify each NRMSIR and any SID of the change (and of the date of the new fiscal year end) prior to the next date by which the City otherwise would be required to provide financial information and operating data pursuant to this Section. (c) The financial information and operating data to be provided pursuant to this Section may be set forth in full in one or more documents or may be included by specific GRA325/71008 Dallas 567198_2 -27- reference to any document (including an official statement or other offering document, if it is available from the MSRB) that theretofore has been provided to each NRMSIR and any SID or filed with the SEC. Section 12.02. Material Event Notices. (a) The City shall notify any SID and either each NRMSIR or the MSRB, in a timely manner, of any of the following events with respect to the Bonds, if such event is material within the meaning of the federal securities laws: (i) principal and interest payment delinquencies; (ii) nonpayment related defaults; (iii) unscheduled draws on debt service reserves reflecting financial difficulties; (iv) unscheduled draws on credit enhancements reflecting financial difficulties; (v) substitution of credit or liquidity providers, or their failure to perform; (vi) adverse tax opinions or events affecting the tax exempt status of the Bonds; (vii) modifications to rights of Owners; (viii) bond calls; (ix) defeasance; (x) release, substitution, or sale of property securing repayment of the Bonds; and (xi) rating changes. (b) The City shall notify any SID and either each NRMSIR or the MSRB, in a timely manner, of any failure by the City to provide financial information or operating data in accordance with Section 12.01 of this Ordinance by the time required by such Section. Section 12.03. Limitations, Disclaimers and Amendments. (a) The City shall be obligated to observe and perform the covenants specified in this Article for so long as, but only for so long as, the City remains an "obligated person" with respect to the Bonds within the meaning of the Rule, except that the City in any event will give notice of any deposit made in accordance with Article XI that causes Bonds no longer to be outstanding. GRA325/71008 Dallas 567198_2 M. (b) The provisions of this Article are for the sole benefit of the Owners and beneficial owners of the Bonds, and nothing in this Article, express or implied, shall give any benefit or any legal or equitable right, remedy, or claim hereunder to any other person. The City undertakes to provide only the financial information, operating data, financial statements, and notices which it has expressly agreed to provide pursuant to this Article and does not hereby undertake to provide any other information that may be relevant or material to a complete presentation of the. City's financial results, condition, or prospects or hereby undertake to update any information provided in accordance with this Article or otherwise, except as expressly provided herein. The City does not make any representation or warranty concerning such information or its usefulness to a decision to invest in or sell Bonds at any future date. UNDER NO CIRCUMSTANCES SHALL THE CITY BE LIABLE TO THE OWNER OR BENEFICIAL OWNER OF ANY BOND OR ANY OTHER PERSON, IN CONTRACT OR TORT, FOR DAMAGES RESULTING IN WHOLE OR IN PART FROM ANY BREACH BY THE CITY, WHETHER NEGLIGENT OR WITHOUT FAULT ON ITS PART, OF ANY COVENANT SPECIFIED IN THIS ARTICLE, BUT EVERY RIGHT AND REMEDY OF ANY SUCH PERSON, IN CONTRACT OR TORT, FOR OR ON ACCOUNT OF ANY SUCH BREACH SHALL BE LIMITED TO AN ACTION FOR MANDAMUS OR SPECIFIC PERFORMANCE. (c) No default by the City in observing or performing its obligations under this Article shall comprise a breach of or default under the Ordinance for purposes of any other provisions of this Ordinance. (d) Nothing in this Article is intended or shall act to disclaim, waive, or otherwise limit the duties of the City under federal and state securities laws. (e) The provisions of this Article may be amended by the City 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 City, but only if (i) the provisions of this Article, as so amended, would have permitted an underwriter to purchase or sell Bonds in the primary offering of the Bonds 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 (ii) either (A) the Owners of a majority in aggregate principal amount (or any greater amount required by any other provisions of this Ordinance that authorizes such an amendment) of the outstanding Bonds consent to such amendment or (B) an entity or individual a person that is unaffiliated with the City (such as nationally recognized bond counsel) determines that such amendment will not materially impair the interests of the Owners and beneficial owners of the Bonds. If the City so amends the provisions of this Article, it shall include with any amended financial information or operating data next provided in accordance with Section 12.01 an explanation, in narrative form, of the reasons for the amendment and of the impact of any change in the type of financial information or operating data so provided. GRA325/71008 Dallas 567198_2 -29- ARTICLE XIII REDEMPTION OF BONDS Section 13.01. Sources of Funds for Refundins;. The source of fiends for payment of the principal of the Refunded Bonds shall be from funds received from the issuance and delivery of the Bonds herein authorized and irrevocably deposited with the payment agent/registrar for the Refunded Bonds. The source of payment for the interest on the Refunded Bonds shall be from funds transferred from the Interest and Sinking Fund of the Refunded Bonds and irrevocably deposited with the paying agent/registrar for the Refunded Bonds. Section 13.02. Redemption of Refunded Bond. The Refunded Bonds are hereby called for redemption and shall be redeemed prior to their stated maturities on the redemption date and at the redemption prices specified on Schedule I hereto. Following the deposits to the paying agent/registrar for the Refunded Bonds as herein specified, the Refunded Bonds shall be payable solely from and secured by such deposits and shall cease to be payable from ad valorem taxes. Section 13.03. Notice of Deposit and Redemption. The City Secretary is hereby authorized to cause notice of redemption to be given to the paying agent/registrar for the Refunded Bonds by delivery of a certified copy of this Ordinance. The paying agent/registrar for the Refunded Bonds is hereby authorized and directed to give notice of deposit and notice of redemption with respect to the Refunded Bonds as required under the ordinance pursuant to which the Refunded Bonds were issued. ARTICLE XIV EMERGENCY Section 1.4.01. Declaration of an Emer ency. The public importance of this Ordinance and the fact that it is in the best interest of the City to provide funds for the construction of the permanent public improvements herein contemplated at the earliest possible date constitutes an emergency and creates a necessity for the immediate preservation of the public peace, property, health and safety of the citizens of the City, requiring that this Ordinance be passed and take effect as an emergency measure, and it is accordingly ordained that this Ordinance shall be in full force and effect from and after its passage and approval in accordance with the Charter of the City. GRA325/71008 Dallas 567198_2 -30- FINALLY PASSED, APPROVED AND EFFECTIVE THIS MARCH 19, 2002. Mayor, City of Grapevine, Texas ATTEST: City Secretary City of Grapevine, Texas sm IC City Attorney, City of Grapevine, Texas Signature Page for Bond Ordinance Refunding Bonds, Series 1992 Schedule I-1 Principal SCHEDULE I Redemption Refunded REFUNDED BONDS $1,180,000 Original Outstanding Maturities Bonds to be Principal Principal to be Refunded Amount Amount Refunded City of $1,180,000 $1,180,000 02/01/03 Grapevine, 1,250,000 1,250,000 02/01/04 Texas, General 980,000 980,000 02/01/05 Obligation 330,000 330,000 02/01/06 Refunding Bonds, Series 1992 Schedule I-1 Principal Amount Redemption Refunded Date/Price $1,180,000 04/23/02 at par 1,250,000 04/23/02 at par 980,000 04/23/02 at par 330,000 04/23/02 at par $3,740,000 DESCRIPTION OF ANNUAL DISCLOSURE OF FINANCIAL INFORMATION The following information is referred to in Article XII of this Ordinance. Annual Financial Statements and Operating Data The financial information and operating data with respect to the City to be provided annually in accordance with such Article are as specified (and included in the Appendix or other headings of the Official Statement referred to) below: 1. The portions of the financial statements of the City appended to the Official Statement as Appendix B, but for the most recently concluded fiscal year. 2. Statistical and financial data set forth in Tables numbered 1 through 6 and 8 through 15. Accounting Principles The accounting principles referred to in such Article are the accounting principles described in the notes to the financial statements referred to in Paragraph 1 above. GR,U25/71008 Dallas 567198_2 M] NOTE ORDINANCE NO. 2002 relating to $2,200,000 CITY OF GRAPEVINE, TEXAS TAX NOTES, SERIES 2002 Adopted: March 19, 2002 GRA325/71008 Dallas 570802_1 DRAFT 3/8/02 TABLE OF CONTENTS Page Recitals............................................................................................................................................ 1 ARTICLE I DEFINITIONS AND OTHER PRELIMINARY MATTERS Section1.01. Definitions............................................................................................................... 1 Section1.02. Findings................................................................................................................... 3 Section 1.03. Table of Contents, Titles and Headings.................................................................. 3 Section1.04. Interpretation........................................................................................................... 3 ARTICLE Il SECURITY FOR THE NOTES; INTEREST AND SINKING FUND Section2.01. Tax Levy.................................................................................................................. 4 Section 2.02. Interest and Sinking Fund........................................................................................ 4 ARTICLE III AUTHORIZATION; GENERAL TERMS AND PROVISIONS REGARDING THE NOTES Section3.01. Authorization........................................................................................................... 5 Section 3.02. Date, Denomination, Maturities and Interest.......................................................... 5 Section 3.03. Medium, Method and Place of Payment................................................................. 6 Section 3.04. Execution and Registration of Notes....................................................................... 7 Section3.05. Ownership................................................................................................................ 7 Section 3.06. Registration, Transfer and Exchange...................................................................... 8 Section3.07. Cancellation............................................................................................................. 8 Section 3.08. Temporary Notes..................................................................................................... 9 Section 3.09. Replacement Notes.................................................................................................. 9 Section 3.10. Book -Entry Only System...................................................................................... 10 Section 3.11. Successor Securities Depository; Transfer Outside Book -Entry Only System..... 11 Section 3.12. Payments to Cede & Co........................................................................................ 11 ARTICLE IV NO REDEMPTION OF NOTES BEFORE MATURITY Section 4.01. Limitation on Redemption..................................................................................... 12 GRA325{71008 Dallas 570802_1 (i) ARTICLE V PAYING AGENT/REGISTRAR Section 5.01. Appointment of Initial Paying Agent/Registrar.................................................... 12 Section5.02. Qualifications........................................................................................................ 12 Section 5.03. Maintaining Paying Agent/Registrar................................. Section5.04. Termination........................................................................................................... 12 Section 5.05. Notice of Change to Owners................................................................................. 12 Section 5.06. Agreement to Perform Duties and Functions........................................................ 13 Section 5.07. Delivery of Records to Successor.......................................................................... 13 ARTICLE VI FORM OF THE NOTES Section6.01. Form Generally...................................................................................................... 13 Section 6.02. Form of the Notes.................................................................................................. 13 Section 6.03. CUSIP Registration............................................................................................... 18 Section6.04. Legal Opinion........................................................................................................ 18 Section 6.05. Statement of Insurance.......................................................................................... 18 ARTICLE VII SALE AND DELIVERY OF NOTES, DEPOSIT OF PROCEEDS Section 7.01. Sale of Notes, Official Statement.......................................................................... 18 Section 7.02. Control and Delivery of Notes.............................................................................. 19 Section 7.03. Deposit of Proceeds............................................................................................... 19 ARTICLE VIII INVESTMENTS Section8.01. Investments............................................................................................................ 20 Section 8.02. Investment Income................................................................................................ 20 ARTICLE IX PARTICULAR REPRESENTATIONS AND COVENANTS Section 9.01. Payment of the Notes............................................................................................. 20 Section 9.02. , Other Representations and Covenants................................................................... 20 Section 9.03. Provisions Concerning Federal Income Tax Exclusion ........................................ 21 Section 9.04. No Private Use or Payment and No Private Loan Financing ................................ 21 Section 9.05, No Federal Guaranty............................................................................................. 21 Section 9.06. Notes are not Hedge Bonds................................................................................... 21 Section 9.07. No -Arbitrage Covenant......................................................................................... 22 GRA325i71008 Dallas 5;08021 Section 9.08. Arbitrage Rebate ................................................................................... Section 9.09. Iutorouadnu Reporting —.-------.—.-----------.-- 8rodno9.lC[ Continuing Obligation —_----_—,___._,____.,______. ARTICLE DEFAULT AND REMEDIES Section l0.0l.Events nfDefault —.------~--~--~---.-------~—. Section 101[2.Remedies for Default .—.----------~.----_----__.. Section 10.03. Remedies Not Exclusive .......... Section ll.0L Discharge. ARTICLE XI DISCHARGE ARTICLE XD CONTINUING [K8CLOBlTBE UNDERTAKINC Section l2.0l.Annual Reports .................................................................... Section l2.02.Material Event Notices ........................................................ --.23 --.23 ~—.23 ---.24 ^----------..24 .................................. 24 --'^—'----.--.25 Exhibit A - Description of Annual Disclosure of Financial Information ................. ouA325/71008 Dallas 5708021 DRAFT 3/8/02 AN ORDINANCE PROVIDING FOR THE ISSUANCE AND SALE OF CITY OF GRAPEVINE, TEXAS, TAX NOTES, SERIES 2002, IN THE AGGREGATE PRINCIPAL AMOUNT OF $2,200,000; LEVYING A TAX IN PAYMENT THEREOF; AND ENACTING OTHER PROVISIONS RELATING THERETO WHEREAS, pursuant to Chapter 1431, Texas Government Code (the "Act"), the governing body of a municipality is authorized to issue the notes hereinafter authorized (the "Notes") to pay contractual obligations incurred or to be incurred for the purposes set forth in Section 3.01 hereof, and WHEREAS, this governing body (the "City Council") of the City of Grapevine, Texas (the "City"), hereby finds and determines that it is necessary and in the best interest of the City and its citizens to issue such Notes for the purposes herein described and that such Notes shall be payable from and secured by ad valorem taxes levied, within the limits prescribed by law, on all taxable property within the City; and WHEREAS, it is affirmatively found that this City Council is authorized to proceed with the issuance and sale of such Notes as authorized by the general laws of the State of Texas, particularly the Act; and WHEREAS, the City Council has found and determined that it is necessary and in the best interest of the City and its citizens that it authorize by this Ordinance the issuance and delivery of its notes in a single series at this time; and WHEREAS, the meeting at which this Ordinance is considered is open to the public as required by law, and the public notice of the time, place and purpose of said meeting was given as required by Chapter 551, Texas Government Code, as amended; therefore BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF GRAPEVINE, TEXAS: ARTICLE I DEFINITIONS AND OTHER PRELIMINARY MATTERS Section 1.01. Definitions. Unless otherwise expressly provided or unless the context clearly requires otherwise in this Ordinance, the following terms shall have the meanings specified below: "Business Day" means any day other than a Saturday, Sunday or legal holiday or other day on which banking institutions in the State of Texas are generally authorized or obligated by law or executive order to close. "Closing Date" means the date of the initial delivery of and payment for the Notes. GRA325/71008 Dallas 570802_1 "Code" means the Internal Revenue Code of 1986, as amended, including applicable regulations, published rulings and court decisions. "Designated Payment/Transfer Office" means (i) with respect to the initial Paying Agent/Registrar named herein, its office in Columbus, Ohio, or at such other location designated by the Paying Agent/Registrar and (ii) with respect to any successor Paying Agent/Registrar, the office of such successor designated and located as may be agreed upon by the City and such successor. "DTC" shall mean The Depository Trust Company of New York, New York, or any successor securities depository. "DTC Participant" shall mean brokers and dealers, banks, trust companies, clearing corporations and certain other organizations on whose behalf DTC was created to hold securities to facilitate the clearance and settlement of securities transactions among DTC Participants. "Event of Default" means any event of default as defined in Section 10.01 of this Ordinance. "Initial Note" means the Initial Note authorized by Section 3.04(d) of this Ordinance. "Interest and Sinking Fund" means the interest and sinking fund established by Section 2.02 of this Ordinance. "Interest Payment Date" means the date or dates on which interest on the Notes is scheduled to be paid until their respective dates of maturity or prior redemption, such dates being February 15 and August 15, commencing August 15, 2002. "Letter of Representations" means the Blanket Letter of Representations between the City and DTC. "MSRB" means the Municipal Securities Rulemaking Board. "NRMSIR" means each person whom the SEC or its staff has determined to be a nationally recognized municipal securities information repository within the meaning of the Rule from time to time. "Note" means any of the Notes. "Note Date" means the date designated as the date of the Notes by Section 3.02(a) of this Ordinance. "Notes" means the City's notes authorized to be issued by Section 3.01 of this Ordinance and designated as "City of Grapevine, Texas, Tax Notes, Series 2002." "Owner" means the person who is the registered owner of a Note or Notes, as shown in the Register. Gra325/71008 Dallas 570802_1 -2- "Paying Agent/Registrar" means initially Bank One, National Association, Austin, Texas, or any successor thereto as provided in this Ordinance. "Project" means the project described in Section 3.01 of this Ordinance. "Record Date" means the last Business Day of the month next preceding an Interest Payment Date. "Register" means the note register specified in Section 3.06(a) of this Ordinance. "Rule" means SEC Rule 15c2-12, as amended from time to time. "SEC" means the United States Securities and Exchange Commission. "SID" means any person designated by the State of Texas or an authorized department, officer or agency thereof, as and determined by the SEC or its staff to be a state information depository within the meaning of the Rule from time to time. "Special Record Date" means the Special Record Date prescribed by Section 3.03(b). "Unclaimed Payments" means money deposited with the Paying Agent/Registrar for the payment of principal of, redemption premium, if any, or interest on the Notes as the same come due and payable or money set aside for the payment of Notes duly called for redemption prior to maturity. "Underwriters" mean RBC Dain Rauscher Inc. and SWS Securities, as underwriters of the Notes pursuant to that certain Note Purchase Agreement approved in Section 7.01 hereof. Section 1.02. Findings. The declarations, determinations and findings declared, made and found in the preamble to this Ordinance are hereby adopted, restated and made a part of the operative provisions hereof. Section 1.03. Table of Contents, Titles and Headings. The table of contents, titles and headings of the Articles and Sections of this Ordinance have been inserted for convenience of reference only and are not to be considered a part hereof and shall not in any way modify or restrict any of the terms or provisions hereof and shall never be considered or given any effect in construing this Ordinance or any provision hereof or in ascertaining intent, if any question of intent should arise. Section 1.04. Interpretation. (a) If the context requires otherwise, words of the masculine gender shall be construed to include correlative words of the feminine and neuter genders and vice versa, and words of the singular number shall be construed to include correlative words of the plural number and vice versa. Gra325/71008 Dallas 570802_1 -3- (b) Ordinance and all the terms and provisions hereof shall be liberally construed to effectuate the purposes set forth herein. ARTICLE II SECURITY FOR THE NOTES; INTEREST AND SINKING FUND Section 2.01. Tax Lew. (a) Pursuant to the authority granted by the Texas Constitution and the laws of the State of Texas, there shall be levied and there is hereby levied for the current year and for each succeeding year hereafter while any of the Notes or any interest thereon is outstanding and unpaid, an ad valorem tax on each one hundred dollars' valuation of taxable property within the City, at a rate sufficient, within the limit prescribed by law, to pay the debt service requirements of the Notes, being (i) the interest on the Notes, and (ii) a sinking fund for their redemption at maturity or a sinking fund of 2% per annum (whichever amount is greater), when due and payable, full allowance being made for delinquencies and costs of collection. (b) The ad valorem tax thus levied shall be assessed and collected each year against all property appearing on the tax rolls of the City most recently approved in accordance with law and the money thus collected shall be deposited as collected to the Interest and Sinking Fund. (c) Said ad valorem tax, the collections therefrom, and all amounts on deposit in or required hereby to be deposited to the Interest and Sinking Fund are hereby pledged and committed irrevocably to the payment of the principal of and interest on the Notes when and as due and payable in accordance with their terms and this Ordinance. (d) To the extent the City has available funds which may be lawfully used to pay debt service on the Notes and such funds are on deposit in the Interest and Sinking Fund in advance of the time when the City Council of the City is scheduled to set a tax rate for any year, then such tax rate which would otherwise be required to be established pursuant to subsection (a) of this Section may be reduced to the extent and by the amount of such funds in the Interest and Sinking Fund. (e) If the lien and provisions of this Ordinance shall be released in a manner permitted by Article XI hereof, then the collection of such ad valorem tax may be suspended or appropriately reduced, as the facts may permit, and further deposits to the Interest and Sinking Fund may be suspended or appropriately reduced, as the facts may permit. In determining the aggregate principal amount of outstanding Notes, there shall be subtracted the amount of any Notes that have been duly called for redemption and for which money has been deposited with the Paying Agent/Registrar for such redemption. Section 2.02. Interest and Sinking Fund. (a) The City hereby establishes a special fund or account, to be designated the "City of Grapevine, Texas, Tax Notes, Series 2002, Interest and Sinking Fund," said fund to be maintained at an official depository bank of the City separate and apart from all other funds and accounts of the City. Gra325/71008 Dallas 5708021 M (b) Money on deposit in or required by this Ordinance to be deposited to the Interest and Sinking Fund shall be used solely for the purpose of paying the interest on and principal of the Notes when and as due and payable in accordance with their terms and this Ordinance. ARTICLE III AUTHORIZATION; GENERAL TERMS AND PROVISIONS REGARDING THE NOTES Section 3.01. Authorization. The City's Notes to be designated "City of Grapevine, Texas, Tax Notes, Series 2002," are hereby authorized to be issued and delivered in accordance with Chapter 1431, Texas Government Code, as amended, and Section 9.26 of the City's Home - Rule Charter. The Notes shall be issued in the aggregate principal amount of $2,200,000, for the purpose of providing funds to pay the costs of issuing the Notes and for the following permanent public improvements: (i) construct, improve and renovate bridges, restroom facilities and a maintenance facility for the City's municipal golf course; (ii) acquire police vehicles and equipment, fire department vehicles and equipment, parks department and golf course maintenance equipment, administrative services department equipment, public works vehicles and equipment, utility department vehicles and equipment and municipal courts equipment; and (iii) pay costs of issuance related to the Notes (the "Project"). Section 3.02. Date, Denomination, Maturities and Interest. (a) The Notes shall be dated March 15, 2002. The Notes shall be in fully registered form, without coupons, in the denomination of $5,000 or any integral multiple thereof, and shall be numbered separately from one upward, except the Initial Note, which shall be numbered T-1. (b) The Notes shall mature on August 15 in the years and in the principal amounts set forth in the following schedule: Years Principal Amount Interest Rates 2003 $345,000 % 2004 350,000 % 2005 360,000 % 2006 370,000 % 2007 380,000 2008 395,000 % (c) Interest shall accrue and be paid on each Note respectively until its maturity or prior redemption, from the later of the Note Date or the most recent Interest Payment Date to which interest has been paid or provided for at the rates per annum for each respective maturity specified in the schedule contained in subsection (b) above. Such interest shall be payable semiannually commencing on August 15, 2002, and on each February 15 and August 15 thereafter until maturity or prior redemption. Interest on the Notes shall be calculated on the basis of a 360 -day year composed of twelve 30 day months. Gra325/71008 Dallas 570802_1 -5- Section 3.03. Medium, Method and Place of Payment. (a) The principal of, premium, if any, and interest on the Notes shall be paid in lawful money of the United States of America. (b) Interest on the Notes shall be payable to the Owners as shown in the Register at the close of business on the Record Date; provided, however, in the event of nonpayment of interest on a scheduled Interest Payment Date and for 30 days thereafter, a new record date for such interest payment (a "Special Record Date") shall be established by the Paying Agent/Registrar, if and when funds for the payment of such interest have been received from the City. Notice of the Special Record Date and of the scheduled payment date of the past due interest (the "Special Payment Date," which shall be 15 days after the Special Record Date) shall be sent at least five Business Days prior to the Special Record Date by United States mail, first class, postage prepaid, to the address of each Owner of a Note appearing on the Register at the close of business on the last Business Day next preceding the date of mailing of such notice. (c) Interest shall be paid by check, dated as of and mailed on the Interest Payment Date, and sent by the Paying Agent/Registrar to each Owner, first class United States mail, postage prepaid, to the address of each Owner as it appears in the Register, or by such other customary banking arrangement acceptable to the Paying Agent/Registrar and the Owner; provided, however, the Owner shall bear all risk and expense of such other banking arrangement. (d) The principal of each Note shall be paid to the Owner thereof on the due date (whether at the maturity date or the date of prior redemption thereof) upon presentation and surrender of such Note at the Designated Payment/Transfer Office of the Paying Agent/Registrar. (e) If the date for the payment of the principal of or interest on the Notes shall be a Saturday, Sunday, legal holiday, or day on which banking institutions in the city where the Designated Payment/Transfer Office is located are required or authorized by law or executive order to close, the date for such payment shall be the next succeeding day which is not a Saturday, Sunday, legal holiday, or day on which banking institutions are required or authorized to close, and payment on such date shall have the same force and effect as if made on the original date payment was due and no additional interest shall be due by reason of nonpayment on the date on which such payment is otherwise stated to be due and payable. (f) Unclaimed Payments shall be segregated in a special escrow account and held in trust, uninvested by the Paying Agent/Registrar, for the account of the Owners of the Notes to which the Unclaimed Payments pertain. Subject to Title 6 of the Texas Property Code, any Unclaimed Payments remaining unclaimed by the Owners entitled thereto for three years after the applicable payment or redemption date shall be applied to the next payment or payments on the Notes thereafter coming due and, to the extent any such money remains after the retirement of all outstanding Notes, shall be paid to the City to be used for any lawful purpose. Thereafter, neither the City, the Paying Agent/Registrar nor any other person shall be liable or responsible to any Owners of such Notes for any further payment of such unclaimed moneys or on account of any such Notes, subject to Title 6 of the Texas Property Code. Gra325/71008 Dallas 570802_1 I Me Section 3.04. Execution and Registration of Notes. (a) The Notes shall be executed on behalf of the City by the Mayor and the City Secretary, by their manual or facsimile signatures, and the official seal of the City shall be impressed or placed in facsimile thereon. Such facsimile signatures on the Notes shall have the same effect as if each of the Notes had been signed manually and in person by each of said officers, and such facsimile seal on the Notes shall have the same effect as if the official seal of the City had been manually impressed upon each of the Notes. (b) In the event that any officer of the City whose manual or facsimile signature appears on the Notes ceases to be such officer before the authentication of such Notes or before the delivery thereof, such manual or facsimile signature nevertheless shall be valid and sufficient for all purposes as if such officer had remained in such office. (c) Except as provided below, no Note shall be valid or obligatory for any purpose or be entitled to any security or benefit of this Ordinance unless and until there appears thereon the Certificate of Paying Agent/Registrar substantially in the form provided herein, duly authenticated by manual execution by an officer or duly authorized signatory of the Paying Agent/Registrar. It shall not be required that the same officer or authorized signatory of the Paying Agent/Registrar sign the Certificate of Paying Agent/Registrar on all of the Notes. In lieu of the executed Certificate of Paying Agent/Registrar described above, the Initial Note delivered at the Closing Date shall have attached thereto the Comptroller's Registration Certificate substantially in the form provided herein, manually executed by the Comptroller of Public Accounts of the State of Texas, or by his duly authorized agent, which Certificate shall be evidence that the Note has been duly approved by the Attorney General of the State of Texas and that it is a valid and binding obligation of the City, and has been registered by the Comptroller of Public Accounts of the State of Texas. (d) On the Closing Date, one initial Note (the "Initial Note") representing the entire principal amount of all Notes, payable in stated installments to the initial purchaser, or its designee, manually signed by the Mayor and City Secretary of the City, approved by the Attorney General, and registered and manually signed by the Comptroller of Public Accounts, will be delivered to the initial purchaser or its designee. Upon payment for the Initial Note, the Paying Agent/Registrar shall cancel the Initial Note and deliver to DTC on behalf of the Purchaser one registered definitive Note for each year of maturity of the Notes in the aggregate principal amount of all Notes for such maturity, registered in the name of Cede & Co., as nominee of DTC. Section 3.05. Ownership. (a) The City, the Paying Agent/Registrar and any other person may treat the person in whose name any Note is registered as the absolute owner of such Note for the purpose of making and receiving payment of the principal thereof and redemption premium, if any, thereon, for the further purpose of making and receiving payment of the interest thereon, and for all other purposes (except interest will be paid to the person in whose name such Note is registered on the Record Date or Special Record Date, as applicable), whether or not such Note is overdue, and Gra325/71008 Dallas 570802_1 -7- neither the City nor the Paying Agent/Registrar shall be bound by any notice or knowledge to the contrary. (b) All payments made to the Owner of a Note shall be valid and effectual and shall discharge the liability of the City and the Paying Agent/Registrar upon such Note to the extent of the sums paid. Section 3.06. Registration, Transfer and Exchange. (a) So long as any Notes remain outstanding, the City shall cause the Paying Agent/Registrar to keep at the Designated Payment/Transfer Office a register (the "Register") in which, subject to such reasonable regulations as it may prescribe, the Paying Agent/Registrar shall provide for the registration and transfer of Notes in accordance with this Ordinance. (b) The ownership of a Note may be transferred only upon the presentation and surrender of the Note at the Designated Payment/Transfer Office with such endorsement or other evidence of transfer as is acceptable to the Paying Agent/Registrar. No transfer of any Note shall be effective until entered in the Register. (c) The Notes shall be exchangeable upon the presentation and surrender thereof at the Designated Payment/Transfer Office for a Note or Notes of the same maturity and interest rate and in any denomination or denominations of any integral multiple of $5,000 and in an aggregate principal amount equal to the unpaid principal amount of the Notes presented for exchange. The Paying Agent/Registrar is hereby authorized to authenticate and deliver Notes exchanged for other Notes in accordance with this Section. (d) Each exchange Note delivered by the Paying Agent/Registrar in accordance with this Section shall constitute an original contractual obligation of the City and shall be entitled to the benefits and security of this Ordinance to the same extent as the Note or Notes in lieu of which such exchange Note is delivered. (e) No service charge shall be made to the Owner for the initial registration, subsequent transfer, or exchange for a different denomination of any of the Notes. The Paying Agent/Registrar, however, may require the Owner to pay a sum sufficient to cover any tax or other governmental charge that is authorized to be imposed in connection with the registration, transfer or exchange of a Note. (f) Neither the City nor the Paying Agent/Registrar shall be required to issue, transfer, or exchange any Note called for redemption, in whole or in part, within 45 calendar days prior to the date fixed for redemption; provided, however, such limitation shall not be applicable to an exchange by the Owner of the uncalled principal balance of a Note. Section 3.07. Cancellation. All Notes paid or redeemed before scheduled maturity in accordance with this Ordinance, and all Notes in lieu of which exchange Notes or replacement Notes are authenticated and delivered in accordance with this Ordinance, shall be cancelled and proper records shall be made Gra325/71008 Dallas 5708021 am regarding such payment, redemption, exchange or replacement. The Paying Agent/Registrar shall dispose of cancelled Notes in accordance with the Securities Exchange Act of 1934. Section 3.08. Temporary Notes. (a) Following the delivery and registration of the Initial Note and pending the preparation of definitive Notes, the proper officers of the City may execute and, upon the City's request, the Paying Agent/Registrar shall authenticate and deliver, one or more temporary Notes that are printed, lithographed, typewritten, mimeographed or otherwise produced, in any denomination, substantially of the tenor of the definitive Notes in lieu of which they are delivered, without coupons, and with such appropriate insertions, omissions, substitutions and other variations as the officers of the City executing such temporary Notes may determine, as evidenced by their signing of such temporary Notes. (b) Until exchanged for Notes in definitive form, such Notes in temporary form shall be entitled to the benefit and security of this Ordinance. (c) The City, without unreasonable delay, shall prepare, execute and deliver to the Paying Agent/Registrar the Notes in definitive form; thereupon, upon the presentation and surrender of the Notes in temporary form to the Paying Agent/Registrar, the Paying Agent/Registrar shall cancel the Notes in temporary form and shall authenticate and deliver in exchange therefor Notes of the same maturity and series, in definitive form, in the authorized denomination, and in the same aggregate principal amount, as the Notes in temporary form surrendered. Such exchange shall be made without the making of any charge therefor to any Owner. Section 3.09. Replacement Notes. (a) Upon the presentation and surrender to the Paying Agent/Registrar of a mutilated Note, the Paying Agent/Registrar shall authenticate and deliver in exchange therefor a replacement Note of like tenor and principal amount, bearing a number not contemporaneously outstanding. The City or the Paying Agent/Registrar may require the Owner of such Note to pay a sum sufficient to cover any tax or other governmental charge that is authorized to be imposed in connection therewith and any other expenses connected therewith. (b) In the event that any Note is lost, apparently destroyed or wrongfully taken, the Paying Agent/Registrar, pursuant to the applicable laws of the State of Texas and in the absence of notice or knowledge that such Note has been acquired by a bona fide purchaser, shall authenticate and deliver a replacement Note of like tenor and principal amount, bearing a number not contemporaneously outstanding, provided that the Owner first: (i) furnishes to the Paying Agent/Registrar satisfactory evidence of his or her ownership of and the circumstances of the loss, destruction or theft of such Note; (ii) furnishes such security or indemnity as may be required by the Paying Agent/Registrar to save it and the City harmless; Gra325/71008 Dallas 5708021 W (iii) pays all expenses and charges in connection therewith, including, but not limited to, printing costs, legal fees, fees of the Paying Agent/Registrar and any tax or other governmental charge that is authorized to be imposed; and (iv) satisfies any other reasonable requirements imposed by the City and the Paying Agent/Registrar. (c) If, after the delivery of such replacement Note, a bona fide purchaser of the original Note in lieu of which such replacement Note was issued presents for payment such original Note, the City and the Paying Agent/Registrar shall be entitled to recover such replacement Note from the person to whom it was delivered or any person taking therefrom, except a bona fide purchaser, and shall be entitled to recover upon the security or indemnity provided therefor to the extent of any loss, damage, cost or expense incurred by the City or the Paying Agent/Registrar in connection therewith. (d) In the event that any such mutilated, lost, apparently destroyed or wrongfully taken Note has become or is about to become due and payable, the Paying Agent/Registrar, in its discretion, instead of issuing a replacement Note, may pay such Note if it has become due and payable or may pay such Note when it becomes due and payable. (e) Each replacement Note delivered in accordance with this Section shall constitute an original additional contractual obligation of the City and shall be entitled to the benefits and security of this Ordinance to the same extent as the Note or Notes in lieu of which such replacement Note is delivered. Section 3.10. Book -Entry OnlSystem. (a) The definitive Notes shall be initially issued in the form of a separate typewritten fully registered Note for each of the maturities thereof. Upon initial issuance, the ownership of such Notes shall be registered in the name of Cede & Co., as nominee of DTC, and except as provided in Section 3.11 hereof, all of the outstanding Notes shall be registered in the name of Cede & Co., as nominee of DTC. (b) With respect to Notes registered in the name of Cede & Co., as nominee of DTC, the City and the Paying Agent/Registrar shall have no responsibility or obligation to any DTC Participant or to any person on behalf of whom such a DTC Participant holds an interest in the Notes. Without limiting the immediately preceding sentence, the City and the Paying Agent/Registrar shall have no responsibility or obligation with respect to (i) the accuracy of the records of DTC, Cede & Co. or any DTC Participant with respect to any ownership interest in the Notes, (ii) the delivery to any DTC Participant or any other person, other than a Noteholder, as shown on the Register, of any notice with respect to the Notes, including any notice of redemption, or (iii) the payment to any DTC Participant or any other person, other than a Noteholder, as shown in the Register of any amount with respect to principal of, premium, if any, or interest on the Notes. Notwithstanding any other provision of this Ordinance to the contrary, the City and the Paying Agent/Registrar shall be entitled to treat and consider the person in whose name each Note is registered in the Register as the absolute owner of such Note for the purpose of payment of principal of, premium, if any, and interest on the Notes, for the purpose of Gra325/71008 Dallas 570802_1 -10- all matters with respect to such Note, for the purpose of registering transfer with respect to such Note, and for all other purposes whatsoever. The Paying Agent/Registrar shall pay all principal of, premium, if any, and interest on the Notes only to or upon the order of the respective owners, as shown in the Register as provided in this Ordinance, or their respective attorneys duly authorized in writing, and all such payments shall be valid and effective to fully satisfy and discharge the City's obligations with respect to payment of, premium, if any, and interest on the Notes to the extent of the sum or sums so paid. No person other than an owner, as shown in the Register, shall receive a Note certificate evidencing the obligation of the City to make payments of amounts due pursuant to this Ordinance. Upon delivery by DTC to the Paying Agent/Registrar of written notice to the effect that DTC has determined to substitute a new nominee in place of Cede & Co., the word "Cede & Co." in this Ordinance shall refer to such new nominee of DTC. (c) The Letter of Representations previously executed and delivered by the City, and applicable to the City's obligations delivered in book -entry -only form to DTC as securities depository, is hereby ratified and approved for the Bonds. Section 3.11, Successor Securities Depository Transfer Outside Book Enily Only S_ sy tem. In the event that the City or the Paying Agent/Registrar determines that DTC is incapable of discharging its responsibilities described herein and in the Letter of Representations of the City to DTC, and that it is in the best interest of the beneficial owners of the Notes that they be able to obtain certificated Notes, or in the event DTC discontinues the services described herein, the Issuer or the Paying Agent/Registrar shall (i) appoint a successor securities depository, qualified to act as such under Section 17(a) of the Securities and Exchange Act of 1934, as amended, notify DTC and DTC Participants of the appointment of such successor securities depository and transfer one or more separate Notes to such successor securities depository or (ii) notify DTC and DTC Participants of the availability through DTC of Notes and transfer one or more separate Notes to DTC Participants having Notes credited to their DTC accounts. In such event, the Notes shall no longer be restricted to being registered in the Register in the name of Cede & Co., as nominee of DTC, but may be registered in the name of the successor securities depository, or its nominee, or in whatever name or names Owners transferring or exchanging Notes shall designate, in accordance with the provisions of this Ordinance. Section 3.12. Payments to Cede & Co. Notwithstanding any other provision of this Ordinance to the contrary, so long as any Notes are registered in the name of Cede & Co., as nominee of DTC, all payments with respect to principal of, premium, if any, and interest on such Notes, and all notices with respect to such Notes, shall be made and given, respectively, in the manner provided in the Letter of Representations. Gra325/71008 Dallas 570802_1 -11- ARTICLE IV NO REDEMPTION OF NOTES BEFORE MATURITY Section 4.01. Limitation on Redemption. The Notes shall be not be subject to redemption before scheduled maturity. ARTICLE V PAYING AGENT/REGISTRAR Section 5.01. Appointment of Initial Paying A ent/Re istrar. Bank One, National Association, Austin, Texas, is hereby appointed as the initial Paying Agent/Registrar for the Notes. Section 5.02. Qualifications. Each Paying Agent/Registrar shall be a commercial bank, a trust company organized under the laws of the State of Texas, or any other entity duly qualified and legally authorized to serve as and perform the duties and services of paying agent and registrar for the Notes. Section 5.03. Maintaining Paying Agent/Registrar. (a) At all times while any Notes are outstanding, the City will maintain a Paying Agent/Registrar that is qualified under Section 5.02 of this Ordinance. The Mayor is hereby authorized and directed to execute an agreement with the Paying Agent/Registrar specifying the duties and responsibilities of the City and the Paying Agent/Registrar. The signature of the Mayor shall be attested by the City Secretary of the City. (b) If the Paying Agent/Registrar resigns or otherwise ceases to serve as such, the City will promptly appoint a replacement. Section 5.04. Termination. The City, upon not less than 60 days notice, reserves the right to terminate the appointment of any Paying Agent/Registrar by delivering to the entity whose appointment is to be terminated written notice of such termination. Section 5.05. Notice of Change to Owners. Promptly upon each change in the entity serving as Paying Agent/Registrar, the City will cause notice of the change to be sent to each Owner by first class United States mail, postage prepaid, at the address in the Register, stating the effective date of the change and the name and mailing address of the replacement Paying Agent/Registrar. Gra325l71008 Dallas 5708021 -12- Section 5.06. Agreement to Perform Duties and Functions. By accepting the appointment as Paying Agent/Registrar and executing the Paying Agent/Registrar Agreement, the Paying Agent/Registrar is deemed to have agreed to the provisions of this Ordinance and that it will perform the duties and functions of Paying Agent/Registrar prescribed thereby. Section 5.07. Delivery of Records to Successor. If a Paying Agent/Registrar is replaced, such Paying Agent/Registrar, promptly upon the appointment of the successor, will deliver the Register (or a copy thereof) and all other pertinent books and records relating to the Notes to the successor Paying Agent/Registrar. ARTICLE VI FORM OF THE NOTES Section 6.01. Form Generally. (a) The Notes, the Registration Certificate of the Comptroller of Public Accounts of the State of Texas, the Certificate of the Paying Agent/Registrar, and the Assignment form to appear on each of the Notes, (i) shall be substantially in the form set forth in this Article, with such appropriate insertions, omissions, substitutions, and other variations as are permitted or required by this Ordinance, and (ii) may have such letters, numbers, or other marks of identification (including identifying numbers and letters of the Committee on Uniform Securities Identification Procedures of the American Bankers Association) and such legends and endorsements (including any reproduction of an opinion of counsel) thereon as, consistently herewith, may be determined by the City or by the officers executing such Notes, as evidenced by their execution thereof. (b) Any portion of the text of any Notes may be set forth on the reverse side thereof, with an appropriate reference thereto on the face of the Notes. (c) The definitive Notes shall be typewritten, printed, lithographed, or engraved, and may be produced by any combination of these methods or produced in any other similar manner, all as determined by the officers executing such Notes, as evidenced by their execution thereof. (d) The Initial Note submitted to the Attorney General of the State of Texas may be typewritten and photocopied or otherwise reproduced. Section 6.02. Form of the Notes. The form of the Note, including the form of the Registration Certificate of the Comptroller of Public Accounts of the State of Texas, the form of Certificate of the Paying Agent/Registrar and the form of Assignment appearing on the Notes, shall be substantially as follows: Gra325/71008 Dallas 570802_1 -13- (a) Form of Note. REGISTERED No. United States of America State of Texas County of Tarrant CITY OF GRAPEVINE, TEXAS TAX NOTES SERIES 2002 INTEREST RATE: MATURITY DATE: NOTE DATE: March 15, 2002 REGISTERED CUSIP NUMBER: The City of Grapevine, Texas (the "City"), in the County of Tarrant, State of Texas, for value received, hereby promises to pay to or registered assigns, on the Maturity Date specified above, the sum of unless this Note shall have been sooner called for redemption and the payment of the principal hereof shall have been paid or provided for, and to pay interest on such principal amount from the later of the Note Date specified above or the most recent interest payment date to which interest has been paid or provided for until payment of such principal amount has been paid or provided for, at the per annum rate of interest specified above, computed on the basis of a 360 -day year of twelve 30 -day months, such interest to be paid semiannually on February 15 and August 15 of each year, commencing August 15, 2002. The principal of this Note shall be payable without exchange or collection charges in lawful money of the United States of America upon presentation and surrender of this Note at the designated office in Columbus, Ohio, of Bank One, National Association, as Paying Agent/Registrar (the "Designated Payment/Transfer Office"), or, with respect to a successor paying agent/registrar, at the Designated Payment/Transfer Office of such successor. Interest on this Note is payable by check dated as of the interest payment date, and will be mailed by the Paying Agent/Registrar to the registered owner at the address shown on the registration books kept by the Paying Agent/Registrar or by such other customary banking arrangement acceptable to the Paying Agent/Registrar and the registered owner; provided, however, such registered owner shall bear all risk and expense of such other banking arrangement. For the purpose of the payment of interest on this Note, the registered owner shall be the person in whose name this Gra325/71008 Dallas 570802_1 -14- Note is registered at the close of business on the "Record Date," which shall be the fifteenth day of the month next preceding such interest payment date; provided, however, that in the event of nonpayment of interest on a scheduled payment date and for 30 days thereafter, a new record date for such interest payment (a "Special Record Date") will be established by the Paying Agent/Registrar, if and when funds for the payment of such interest have been received from the City. Notice of the Special Record Date and of the scheduled payment date of the past due interest (the "Special Payment Date" which date shall be 15 days after the Special Record Date) shall be sent at least five Business Days prior to the Special Record Date by United States mail, first class, postage prepaid, to the address of each registered owner of a Note appearing on the books of the Paying Agent/Registrar at the close of business on the last Business Day preceding the date of mailing of such notice. If the date for the payment of the principal of or interest on this Note shall be a Saturday, Sunday, legal holiday, or day on which banking institutions in the city where the Designated Payment/Transfer Office is located are required or authorized by law or executive order to close, the date for such payment shall be the next succeeding day which is not a Saturday, Sunday, legal holiday, or day on which banking institutions are required or authorized to close, and payment on such date shall have the same force and effect as if made on the original date payment was due and no additional interest shall be due by reason of nonpayment on the date on which such payment is otherwise stated to be due and payable. This Note is one of a series of fully registered Notes specified in the title hereof issued in the aggregate principal amount of $2,200,000 (herein referred to as the "Notes"), issued pursuant to a certain ordinance of the City (the "Ordinance") for the purpose of providing funds to make certain permanent public improvements within the City, and to pay the costs of issuing the Notes. This Note is not subject to redemption prior to its Maturity Date. As provided in the Ordinance, and subject to certain limitations therein set forth, this Note is transferable upon surrender of this Note for transfer at the Designated Payment/Transfer Office with such endorsement or other evidence of transfer as is acceptable to the Paying Agent/Registrar; thereupon, one or more new fully registered Notes of the same stated maturity, of authorized denominations, bearing the same rate of interest, and for the same aggregate principal amount will be issued to the designated transferee or transferees. Neither the City nor the Paying Agent/Registrar shall be required to issue, transfer or exchange any Note called for redemption where such redemption is scheduled to occur within 45 calendar days of the date fixed for redemption; provided, however, such limitation shall not be applicable to an exchange by the registered owner of the uncalled principal balance of a Note. The City, the Paying Agent/Registrar, and any other person may treat the person in whose name this Note is registered as the owner hereof for the purpose of receiving payment as herein provided (except interest shall be paid to the person in whose name this Note is registered on the Record Date or Special Record Date, as applicable) and for all other purposes, whether or not this Note be overdue, and neither the City nor the Paying Agent/Registrar shall be affected by notice to the contrary. Gra3251,'71008 Dallas 570802_1 -15- IT IS HEREBY CERTIFIED AND RECITED that the issuance of this Note and the series of which it is a part is duly authorized by law; that all acts, conditions and things required to be done precedent to and in the issuance of the Notes have been properly done and performed and have happened in regular and due time, form and manner, as required by law; and that ad valorem taxes upon all taxable property in the City have been levied for and pledged to the payment of the debt service requirements of the Notes, within the limit prescribed by law. IN WITNESS WHEREOF, the City has caused this Note to be executed by the manual or facsimile signature of the Mayor of the City and countersigned by the manual or facsimile signature of the City Secretary of the City, and the official seal of the City has been duly impressed or placed in facsimile on this Note. City Secretary, City of Grapevine, Texas [SEAL] Mayor, City of Grapevine, Texas (b) Form of Comptroller's Registration Certificate. The following Comptroller's Registration Certificate may be deleted from the definitive Notes if such certificate on the Initial Note is fully executed. OFFICE OF THE COMPTROLLER § OF PUBLIC ACCOUNTS § REGISTER NO, OF THE STATE OF TEXAS 6 I hereby certify that there is on file and of record in my office a certificate of the Attorney General of the State of Texas to the effect that this Note has been examined by him as required by law, that he finds that it has been issued in conformity with the Constitution and laws of the State of Texas, and that it is a valid and binding obligation of the City of Grapevine, Texas, and that this Note has this day been registered by me. Witness my hand and seal of office at Austin, Texas, [SEAL] &025, 71008 Dallas 570802_1 Comptroller of Public Accounts of the State of Texas -16- (c) Form of Certificate of Paying Agent/Registrar. The following Certificate of Paying Agent/Registrar may be deleted from the Initial Note if the executed Comptroller's Registration Certificate appears thereon. CERTIFICATE OF PAYING AGENT/REGISTRAR The records of the Paying Agent/Registrar show that the Initial Note of this series of notes was approved by the Attorney General of the State of Texas and registered by the Comptroller of Public Accounts of the State of Texas, and that this is one of the Notes referred to in the within -mentioned Ordinance. Dated: (d) Form of Assignment. BANK ONE, NATIONAL ASSOCIATION Austin, Texas, as Paying Agent/Registrar By: ASSIGNMENT Authorized Signatory FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers unto (print or typewrite name, address and Zip Code of transferee): (Social Security or other identifying number: ) the within Note and all rights hereunder and hereby irrevocably constitutes and appoints attorney to transfer the within Note on the books kept for registration hereof, with full power of substitution in the premises. Dated: Signature Guaranteed By: Authorized Signatory NOTICE: The signature on this Assignment must correspond with the name of the registered owner as it appears on the face of the within Note in every particular and must be guaranteed in a manner acceptable to the Paying Agent/Registrar. (e) The Initial Note shall be in the form set forth in paragraphs (a) through (d) of this Section, except for the following alterations: Gra325,171008 Dallas 5708021 -17- W immediately under the name of the Note, the headings "INTEREST RATE" and "MATURITY DATE" shall both be completed with the words "As shown below" and the words "CUSIP NUMBER:" shall be deleted; (ii) in the first paragraph of the Note, the words "on the Maturity Date specified above" shall be deleted and the following will be inserted: "on August 15 in each of the years, in the principal installments and bearing interest at the per annum rates in accordance with the following schedule: Years Principal Installments Interest Rate (Information to be inserted from schedule in Section 3.02 of this Ordinance) (iii) the Initial Note shall be numbered T-1. Section 6.03. CUSIP Registration. The City may secure identification numbers through the CUSIP Service Bureau Division of Standard & Poor's Corporation, New York, New York, and may authorize the printing of such numbers on the face of the Notes. It is expressly provided, however, that the presence or absence of CUSIP numbers on the Notes shall be of no significance or effect as regards the legality thereof and neither the City nor the attorneys approving said Notes as to legality are to be held responsible for CUSIP numbers incorrectly printed on the Notes. Section 6.04. Legal Opinion. The approving legal opinion of Vinson & Elkins L.L.P., Bond Counsel, may be printed on the reverse side of or attached to each Note over the certification of the City Secretary of the City, which may be executed in facsimile. Section 6.05. Statement of Insurance. A statement relating to a municipal bond insurance policy, if any, to be issued for the Notes may be printed on or attached to each Note. ARTICLE VII SALE AND DELIVERY OF NOTES, DEPOSIT OF PROCEEDS Section 7.01. Sale of Notes Official Statement. (a) The Notes are hereby officially sold and awarded and shall be delivered to the Underwriters, in accordance with the terms and provisions of that certain Bond Purchase Agreement relating to the Bonds between the City and the Underwriters and dated the date of the passage of this Ordinance. The form and content of such Note Purchase Agreement are hereby approved, and the Mayor is hereby authorized and directed to execute and deliver, and the City Secretary is hereby authorized and directed to attest, such Note Purchase Agreement. It is Gra325(71008 Dallas 570802_1 -18- hereby officially found, determined and declared that the terms of this sale are the most advantageous reasonably obtainable. The Notes shall initially be registered in the name of RBC Dain Rauscher Inc. (the "Representative") or its designee. (b) The form and substance of the Preliminary Official Statement for the Notes and any addenda, supplement or amendment thereto (the "Preliminary Official Statement"), and the final Official Statement (the "Official Statement") presented to and considered at this meeting, are hereby in all respects approved and adopted, and the Preliminary Official Statement is hereby deemed final as of its date (except for the omission of pricing and related information) within the meaning and for the purposes of paragraph (b)(1) of Rule 15c2-12 under the Securities Exchange Act of 1934, as amended. The Mayor of the City is hereby authorized and directed to execute the Official Statement and deliver appropriate numbers of copies thereof to the Underwriters. The Official Statement as thus approved, executed and delivered, with such appropriate variations as shall be approved by the Mayor of the City and the Underwriters, may be used by the Underwriters in the public offering of the Notes and the sale thereof. The City Secretary is hereby authorized and directed to include and maintain a copy of the Official Statement and any addenda, supplement or amendment thereto thus approved among the permanent records of this meeting. The use and distribution of the Preliminary Official Statement for the Notes and the preliminary public offering of the Notes by the Underwriters are hereby ratified, approved and confirmed. (c) All officers of the City are authorized to execute such documents, certificates and receipts, and to make such elections with respect to the tax-exempt status of Notes, as they may deem appropriate in order to consummate the delivery of the Notes in accordance with the provisions and terms of the sale therefor. (d) The obligation of the Underwriters to accept delivery of the Notes is subject to the Underwriters being furnished with the final, approving opinion of Vinson & Elkins L.L.P., Bond Counsel for the City, which opinion shall be dated and delivered the Closing Date. Section 7.02. Control and Delivery of Notes. (a) The Mayor of the City is hereby authorized to have control of the Initial Note and all necessary records and proceedings pertaining thereto pending investigation, examination and approval of the Attorney General of the State of Texas, registration by the Comptroller of Public Accounts of the State and registration with, and initial exchange or transfer by, the Paying Agent/Registrar. (b) After registration by the Comptroller of Public Accounts, delivery of the Notes shall be made to the initial purchasers thereof under and subject to the general supervision and direction of the Mayor, against receipt by the City of all amounts due to the City under the terms of sale. Section 7.03. Deposit of Proceeds. (a) All amounts received on the Closing Date as accrued interest on the Notes from the Note Date to the Closing Date, together with the premium, if any, received on the Notes, shall be deposited to the Interest and Sinking Fund. Gra325l71008 Dallas 570802_1 -19- (b) The remaining balance shall be deposited to a special construction fund, and shall be used to pay the costs of the Project and to pay the costs of issuing the Notes. ARTICLE VIII INVESTMENTS Section 8.01. Investments. (a) Money in the Interest and Sinking Fund created by this Ordinance, at the option of the City, may be invested in such securities or obligations as permitted under applicable law as in effect on the date of the investment. (b) Any securities or obligations in which money in the Interest and Sinking Fund is so invested shall be kept and held in trust for the benefit of the Owners and shall be sold and the proceeds of sale shall be timely applied to the making of all payments required to be made from the Interest and Sinking Fund. Section 8.02. Investment Income. (a) Interest and income derived from investment of the Interest and Sinking Fund shall be credited to such Fund. (b) Interest and income derived from the investment of funds deposited pursuant to Section 7.03(b) hereof shall be credited to the fund or account where deposited until completion of the Project; thereafter, to the extent such interest and income are present, such interest and income shall be deposited to the Interest and Sinking Fund. ARTICLE IX PARTICULAR REPRESENTATIONS AND COVENANTS Section 9.01. Payment of the Notes. On or before each Interest Payment Date for the Notes and while any of the Notes are outstanding and unpaid, there shall be made available to the Paying Agent/Registrar, out of the Interest and Sinking Fund, money sufficient to pay such interest on and principal of the Notes as will accrue or mature on the applicable Interest Payment Date, maturity date or date of prior redemption. Section 9.02. Other Representations and Covenants. (a) The City will faithfully perform at all times any and all covenants, undertakings, stipulations, and provisions contained in this Ordinance and in each Note; the City will promptly pay or cause to be paid the principal of and interest on each Note on the dates and at the places and manner prescribed in such Note; and the City will, at the times and in the manner prescribed by this Ordinance, deposit or cause to be deposited the amounts of money specified by this Ordinance. Gra325/71008 Dallas 570802_1 -20- (b) The City is duly authorized under the laws of the State of Texas to issue the Notes; all action on its part for the creation and issuance of the Notes has been duly and effectively taken; and the Notes in the hands of the Owners thereof are and will be valid and enforceable obligations of the City in accordance with their terms. Section 9.03, Provisions Concerning Federal Income Tax Exclusion. The City intends that the interest on the Notes shall be excludable from gross income for purposes of federal income taxation pursuant to sections 103 and 141 through 150 of the Internal Revenue Code of 1986, as amended (the "Code"), and the applicable regulations promulgated thereunder (the "Regulations"). The City covenants and agrees not to take any action, or knowingly omit to take any action within its control, that if taken or omitted, respectively, would cause the interest on the Notes to be includable in the gross income, as defined in section 61 of the Code, of the holders thereof for purposes of federal income taxation. In particular, the City covenants and agrees to comply with each requirement of Sections 9.03 through 9. 10, inclusive; provided, however, that the City shall not be required to comply with any particular requirement of Sections 9.03 through 9.10, inclusive, if the City has received an opinion of nationally recognized bond counsel ("Counsel's Opinion") that such noncompliance will not adversely affect the exclusion from gross income for federal income tax purposes of interest on the Notes or if the City has received a Counsel's Opinion to the effect that compliance with some other requirement set forth in Sections 9.03 through 9.10, inclusive, will satisfy the applicable requirements of the Code, in which case compliance with such other requirement specified in such Counsel's Opinion shall constitute compliance with the corresponding requirement specified in Sections 9.03 through 9.10, inclusive. Section 9.04. No Private Use or Payment and No Private Loan Financing. The City shall certify, through an authorized officer, employee or agent, that, based upon all facts and estimates known or reasonably expected to be in existence on the date the Notes are delivered, the proceeds of the Notes will not be used in a manner that would cause the Notes to be "private activity bonds" within the meaning of section 141 of the Code and the Regulations. The City covenants and agrees that it will make such use of the proceeds of the Notes, including interest or other investment income derived from Note proceeds, regulate the use of property financed, directly or indirectly, with such proceeds, and take such other and further action as may be required so that the Notes will not be "private activity bonds" within the meaning of section 141 of the Code and the Regulations. Section 9.05. No Federal Guaranty. The City covenants and agrees not to take any action, or knowingly omit to take any action within its control, that, if taken or omitted, respectively, would cause the Notes to be "federally guaranteed" within the meaning of section 149(b) of the Code and the Regulations, except as permitted by section 149(b)(3) of the Code and the Regulations. Section 9.06. Notes are not Hedge Bonds. The City covenants and agrees not to take any action, or knowingly omit to take any action, and has not knowingly omitted and will not knowingly omit to take any action, within its Gra325/71008 Dallas 570802_1 -21- control, that, if taken or omitted, respectively, would cause the Notes to be "hedge bonds" within the meaning of section 149(8) of the Code and the Regulations. Section 9.07. No -Arbitrage Covenant. The City shall certify, through an authorized officer, employee or agent, that, based upon all facts and estimates known or reasonably expected to be in existence on the date the Notes are delivered, the City will reasonably expect that the proceeds of the Notes will not be used in a manner that would cause the Notes to be "arbitrage bonds" within the meaning of section 148(a) of the Code and the Regulations. Moreover, the City covenants and agrees that it will make such use of the proceeds of the Notes including interest or other investment income derived from Note proceeds, regulate investments of proceeds of the Notes, and take such other and further action as may be required so that the Notes will not be "arbitrage bonds" within the meaning of section 148(a) of the Code and the Regulations. Section 9.08. Arbitrage Rebate. If the City does not qualify for an exception to the requirements of Section 148(f) of the Code, the City will take all necessary steps to comply with the requirement that certain amounts earned by the City on the investment of the "gross proceeds" of the Notes (within the meaning of section 148(f)(6)(B) of the Code), be rebated to the federal government. Specifically, the City will (i) maintain records regarding the investment of the gross proceeds of the Notes as may be required to calculate the amount earned on the investment of the gross proceeds of the Notes separately from records of amounts on deposit in the funds and accounts of the City allocable to other bond issue of the City or moneys which do not represent gross proceeds of any bonds of the City, (ii) calculate at such times as are required by the Regulations, the amount earned from the investment of the gross proceeds of the Notes which is required to be rebated to the federal government, and (iii) pay, not less often than every fifth anniversary date of the delivery of the Notes or on such other dates as may be permitted under the Regulations, all amounts required to be rebated to the federal government. Further, the City will not indirectly pay any amount otherwise payable to the federal government pursuant to the foregoing requirements to any person other than the federal government by entering into any investment arrangement with respect to the gross proceeds of the Notes that might result in a reduction in the amount required to be paid to the federal government because such arrangement results in a smaller profit or a larger loss than would have resulted if the arrangement had been at arm's length and had the yield on the issue not been relevant to either party. Section 9.09. Information Reportin>~. The City covenants and agrees to file or cause to be filed with the Secretary of the Treasury, not later than the 15th day of the second calendar month after the close of the calendar quarter in which the Notes are issued, an information statement concerning the Notes, all under and in accordance with section 149(e) of the Code and the Regulations. Gra325l71008 Dallas 570802_1 -22- Section 9.10. Continuing Obligation. Notwithstanding any other provision of this Ordinance, the City's obligations under the covenants and provisions of Sections 9.03 through 9.09, inclusive, shall survive the defeasance and discharge of the Notes. ARTICLE X DEFAULT AND REMEDIES Section 10.01. Events of Default. Each of the following occurrences or events for the purpose of this Ordinance is hereby declared to be an Event of Default: (i) the failure to make payment of the principal of or interest on any of the Notes when the same becomes due and payable; or (ii) default in the performance or observance of any other covenant, agreement or obligation of the City, which default materially and adversely affects the rights of the Owners, including but not limited to, their prospect or ability to be repaid in accordance with this Ordinance, and the continuation thereof for a period of 60 days after notice of such default is given by any Owner to the City. Section 10.02. Remedies for Default. (a) Upon the happening of any Event of Default, then any Owner or an authorized representative thereof, including but not limited to, a trustee or trustees therefor, may proceed against the City for the purpose of protecting and enforcing the rights of the Owners under this Ordinance, by mandamus or other suit, action or special proceeding in equity or at law, in any court of competent jurisdiction, for any relief permitted by law, including the specific performance of any covenant or agreement contained herein, or thereby to enjoin any act or thing that may be unlawful or in violation of any right of the Owners hereunder or any combination of such remedies. (b) It is provided that all such proceedings shall be instituted and maintained for the equal benefit of all Owners of Notes then outstanding. Section 10.03, Remedies Not Exclusive. (a) No remedy herein conferred or reserved is intended to be exclusive of any other available remedy or remedies, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or under the Notes or now or hereafter existing at law or in equity; provided, however, that notwithstanding any other provision of this Ordinance, the right to accelerate the debt evidenced by the Notes shall not be available as a remedy under this Ordinance. Gra325/71008 Dallas 570802_1 -23- (b) The exercise of any remedy herein conferred or reserved shall not be deemed a waiver of any other available remedy. ARTICLE XI DISCHARGE Section 11.01. Discharge. The Notes may be defeased, discharged or refunded in any manner permitted by applicable law. ARTICLE XII CONTINUING DISCLOSURE UNDERTAKING Section 12.01. Annual Reports. (a) The City shall provide annually to each NRMSIR and to any SID, within six (6) months after the end of each fiscal year ending in or after 2002, financial information and operating data with respect to the City of the general type included in the final Official Statement, being the information described in Exhibit A hereto. Any financial statements so to be provided shall be (i) prepared in accordance with the accounting principles described in Exhibit A hereto, and (ii) audited, if the City commissions an audit of such statements and the audit is completed within the period during which they must be provided. If the audit of such financial statements is not complete within such period, then the City shall provide notice that audited financial statements are not available and shall provide unaudited financial statements for the applicable fiscal year to each NRMSIR and any SID. Thereafter, when and if audited financial statements become available, the City shall provide such audited financial statements as required to each NRMSIR and to any SID. (b) If the City changes its fiscal year, it will notify each NRMSIR and any SID of the change (and of the date of the new fiscal year end) prior to the next date by which the City otherwise would be required to provide financial information and operating data pursuant to this Section. (c) The financial information and operating data to be provided pursuant to this Section may be set forth in full in one or more documents or may be included by specific reference to any document (including an official statement or other offering document, if it is available from the MSRB) that theretofore has been provided to each NRMSIR and any SID or filed with the SEC. Section 12.02. Material Event Notices. (a) The City shall notify any SID and either each NRMSIR or the MSRB, in a timely manner, of any of the following events with respect to the Notes, if such event is material within the meaning of the federal securities laws: Gra325/71008 Dallas 570802_1 -24- (i) principal and interest payment delinquencies; (ii) nonpayment related defaults; (iii) unscheduled draws on debt service reserves reflecting financial difficulties; (iv) unscheduled draws on credit enhancements reflecting financial difficulties; (v) substitution of credit or liquidity providers, or their failure to perform; (vi) adverse tax opinions or events affecting the tax exempt status of the Notes; (vii) modifications to rights of Owners; (viii) bond calls; (ix) defeasance; (x) release, substitution, or sale of property securing repayment of the Notes; and (xi) rating changes. (b) The City shall notify any SID and either each NRMSIR or the MSRB, in a timely manner, of any failure by the City to provide financial information or operating data in accordance with Section 12.02 of this Ordinance by the time required by such Section. Section 12.03. Limitations. Disclaimers and Amendments. (a) The City shall be obligated to observe and perform the covenants specified in this Article for so long as, but only for so long as, the City remains an "obligated person" with respect to the Notes within the meaning of the Rule, except that the City in any event will give notice of any deposit made in accordance with Article XI that causes Notes no longer to be Outstanding. (b) The provisions of this Article are for the sole benefit of the Owners and beneficial owners of the Notes, and nothing in this Article, express or implied, shall give any benefit or any legal or equitable right, remedy, or claim hereunder to any other person. The City undertakes to provide only the financial information, operating data, financial statements, and notices which it has expressly agreed to provide pursuant to this Article and does not hereby undertake to provide any other information that may be relevant or material to a complete presentation of the City's financial results, condition, or prospects or hereby undertake to update any information provided in accordance with this Article or otherwise, except as expressly provided herein. The City does not make any representation or warranty concerning such information or its usefulness to a decision to invest in or sell Notes at any future date. Gra325/71008 Dallas 570802_1 -25- UNDER NO CIRCUMSTANCES SHALL THE CITY BE LIABLE TO THE OWNER OR BENEFICIAL OWNER OF ANY NOTE OR ANY OTHER PERSON, IN CONTRACT OR TORT, FOR DAMAGES RESULTING IN WHOLE OR IN PART FROM ANY BREACH BY THE CITY, WHETHER NEGLIGENT OR WITHOUT FAULT ON ITS PART, OF ANY COVENANT SPECIFIED IN THIS ARTICLE, BUT EVERY RIGHT AND REMEDY OF ANY SUCH PERSON, IN CONTRACT OR TORT, FOR OR ON ACCOUNT OF ANY SUCH BREACH SHALL BE LIMITED TO AN ACTION FOR MANDAMUS OR SPECIFIC PERFORMANCE. (c) No default by the City in observing or performing its obligations under this Article shall comprise a breach of or default under the Ordinance for purposes of any other provisions of this Ordinance. (d) Nothing in this Article is intended or shall act to disclaim, waive, or otherwise limit the duties of the City under federal and state securities laws. (e) The provisions of this Article may be amended by the City 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 City, but only if (i) the provisions of this Article, as so amended, would have permitted an underwriter to purchase or sell Notes in the primary offering of the Notes in compliance with the Rule, taking into account any amendments or interpretations of the Rule to the date of such amendment, as well as such changed circumstances, and (ii) either (a) the Owners of a majority in aggregate principal amount (or any greater amount required by any other provisions of this Ordinance that authorizes such an amendment) of the Outstanding Notes consent to such amendment or (b) a person that is unaffiliated with the City (such as nationally recognized bond counsel) determines that such amendment will not materially impair the interests of the Owners and beneficial owners of the Notes. If the City so amends the provisions of this Article, it shall include with any amended financial information or operating data next provided in accordance with Section 12.02 an explanation, in narrative form, of the reasons for the amendment and of the impact of any change in the type of financial information or operating data so provided. Gra325/71008 Dallas 570802_1 -26- DRAFT 3/8/02 FINALLY PASSED, APPROVED AND EFFECTIVE this March 19, 2002. ATTEST: City Secretary City of Grapevine, Texas [SEAL] Mayor, City of Grapevine Signature Page for Note Ordinance DESCRIPTION OF ANNUAL DISCLOSURE OF FINANCIAL INFORMATION The following information is referred to in Article XII of this Ordinance. Annual Financial Statements and Operating Data The financial information and operating data with respect to the City to be provided annually in accordance with such Article are as specified (and included in the Appendix or other headings of the Official Statement referred to) below: The portions of the financial statements of the City appended to the Official Statement as Appendix B, but for the most recently concluded fiscal year. 2. Statistical and financial data set forth in Tables numbered 1 through 6 and 8 through 15, each inclusive. Accounting Principles The accounting principles referred to in such Article are the accounting principles described in the notes to the financial statements referred to in Paragraph 1 above. GRA325/71008 Dallas 570802_1 A-1 Y PRLLIA•IINARY OFFICIAL STATEMENT Dated March 7, 2002 NEW ISSUE - Book -Entry -Only Ratings: Moody's: Applied For S&P: Applied For See ("Other Information - Ratings" herein) In the opinion of Bond Counsel, interest on the Bonds is excludable from gross income for federal income tax purposes under existing law and the Bonds are not private activity bonds. See "Tax Exemption" herein for a discussion of the opinion of Bond Counsel, including a description of alternative minimum tax consequences for corporations. THE BONDS WILL NOT BE DESIGNATED AS "OUALIFIED TAX-EXEMPT OBLI ATIONS" FOR FINANCIAL INSTITUTIONS $10,180,000* CITY OF GRAPEVINE, TEXAS (Tarrant County) GENERAL OBLIGATION REFUNDING AND IMPROVEMENT BONDS, SERIES 2002 Dated Date: March 15, 2002 Due: February 15, as shown below PAYMENT TERMS ... Interest on the $10,180,000' City of Grapevine, Texas General Obligation Refunding and Improvement Bonds, Series 2002 (the "Bonds'D will accrue from March 15, 2002 (the 'Dated Date"), will be payable February 15 and August 15 of each year, commencing February 15, 2003, and will be calculated on the basis of a 360 -day year consisting of twelve 30 -day months. The definitive Bonds will be initially registered and delivered only to Cede & Co., the nominee of The Depository Trust Company ('DTC") pursuant to the Book -Entry -Only System described herein. Beneficial ownership of the Bonds maybe acquired in denominations of $5,000 or integral multiples thereof. No physical delivery of the Bonds will be made to the owners thereof. Principal of, premium, if any, and interest on the Bonds will be payable by the Paying Agent/Registrar to Cede & Co., which will make distribution of the amounts so paid to the participating members of DTC for subsequent payment to the beneficial owners of the Bonds. See "The Bonds and Notes - Book -Entry -Only System" herein. The initial Paying Agent/Registrar is Bank One, NA, Austin, Texas (see "The Bonds and Notes - Paying Agent/Registrar'D. AUTHORITY FOR ISSUANCE ... The Bonds are issued pursuant to the Constitution and general laws of the State of Texas (the "State'), including particularly Texas Government Code, Chapters 1207 and 1331, as amended, and are direct obligations of the City of Grapevine (the "City"), payable from a continuing ad valorem tax levied on all taxable property within the City, within the limits prescribed by law, as provided in the ordinance authorizing the Bonds (the "Bond Ordinance") (see "The Bonds and Notes - Authority for Issuance'. PURPOSE ... Proceeds from the sale of the Bonds will be used to refund a portion of the City's outstanding debt, to -wit, $3,740,000 General Obligation Refunding Bonds, Series 1992 (the 'Refunded Bonds") in order to lower the overall debt service requirements of the City. See "Schedule I - Schedule of Refunded Bonds". Proceeds from the sale of the Bonds will also be used for street improvements and to pay the costs of issuance related to the Bonds. Amount Maturity Rate $ 1,315,000 2003 1,505,000 2004 1,205,000 2005 545,000 2006 245,000 2007 255,000 2008 265,000 2009 275,000 2010 -1910-000 300,000 2012 MATURITY SCHEDULE* Yield Amount Maturity Rate Yield $ 315,000 2013 330,000 2014 345,000 2015 365,000 2016 385,000 2017 405,000 2018 425,000 2019 445,000 2020 ---41C;000--'______2021 495,000 2022 (Accrued Interest from March 15, 2002 to be added) OPTIONAL REDEMPTION ... The City reserves the right, at its option, to redeem Bonds having stated maturities on and after February 15, 2013, in whole or in part in principal amounts of $5,000 or any integral multiple thereof, on February 15, 2012, or any date thereafter, at the par value thereof plus accrued interest to the date of redemption (see "The Bonds and Notes - Optional Redemption'). SEPARATE ISSUES ... The Bonds are being offered by the City concurrently with the "City of Grapevine, Texas, Tax Notes, Series 2002" (the "Notes"), under a common Official Statement, and such Bonds and Notes are hereinafter sometimes referred to collectively as the "Obligations". The Bonds and Notes are separate and distinct securities offerings being issued and sold independently except for the common Official Statement, and, while the Obligations share certain common attributes, each issue is separate from the other and should be reviewed and analyzed independently, including the type of obligation being offered, its terms for payment, the security for its payment, the rights of the holders, and other features. LEGALITY, .. The Bonds are offered for delivery when, as and if issued and received by the Underwriters and subject to the approving opinion of the Attorney General of Texas and the opinion of Vinson & Elkins L.L.P., Bond Counsel, Dallas, Texas (see Appendix C, "Form of Bond Counsel's Opinions"). Certain legal matters will be passed upon for the Underwriters by Fulbright & Jaworksi, L.L.P., Dallas, Texas, Counsel for the Underwriters. DELIVERY ... It is expected that the Bonds will be available for delivery through The Depository Trust Company on April 23, 2002. RBC DAIN RAUSCHER INC. * Preliminary, subject to change. SWS SECURITIES Tl][S PAGE LEFT BLANK INTENTIONALLY ►1 PRELIMINARY OFFICIAL STATEMENT Ratings: Moody's: Applied For Dated March 7, 2002 S&P: Applied For See ("Other Information - NEW ISSUE - Book -Entry -Only Ratings" herein) In the opinion of Bond Counsel, interest on the Notes is excludable from gross income for federal income tax purposes under existing law and y the Notes are not private activity bonds. See "Tax Exemption" herein for a discussion of the opinion of Bond Counsel, including a description of alternative minimum tax consequences for corporations. THE NOTES WILL NOT BE DESIGNATED AS "QUALIFIED TAX-EXEMPT OBLIGATIONS" FORFINANCIAL INSTITUTIONS $2,200,000* CITY OF GRAPEVINE, TEXAS (Tarrant County) TAX NOTES, SERIES 2002 .n o Dated Date: March 15, 2002 Due: August 15, as shown below • PAYMENT TERMS ... Interest on the $2,200,000* City of Grapevine, Texas Tax Notes, Series 2002 (the "Notes") velli accrue from March. 15, 0 2002 (the "Dated Date"), will be payable August 15 and February IS of each year, commencing August 15, 2002, and will be calculated on the > c basis of a 360 -day year consisting of twelve 30 -day months. The definitive Notes will be initially registered and delivered only to Cede & Co., Z c o the nominee of The Depository Trust Company ("DTC") pursuant to the Book -Entry -Only System described herein. Beneficial ownership of the 0 0Notes may be acquired in denominations of $5,000 or integral multiples thereof. No physical delivery of the Notes will be made to the : owners thereof. Principal of, premium, if any, and interest on the Notes will be payable by the Paying Agent/Registrar to Cede & Co., which cwill make distribution of the amounts so paid to the participating members of DTC for subsequent payment to the beneficial owners of the o Notes. See "The Bonds and Notes - Book -Entry -Only System" herein. The initial Paying Agent/Registrar is Bank One, NA, Austin, Texas (see ° "The Bonds and Notes - Paying Agent/Registrar"). R ° AUTHORITY FOR ISSUANCE ... The Notes are issued pursuant to the Constitution and general laws of the State of Texas, (the "State") yparticularly Chapter 1431�13, Texas Government Code, as amended, and constitute direct obligations of the City of Grapevine, Texas (the "City c payable from a continuing ad valorem tax levied on all taxable property within the City, within the limits prescribed by law, as provided in the ordinance authorizing the Notes (the "Note Ordinance") (see "The Bonds and Notes - Authority for Issuance"). tic r PURPOSE ... Proceeds from the sale of the Notes will be used to (i) construct, improve and renovate bridges, restroom facilities and a maintenance facility for the City's municipal golf course; (ii) acquire police vehicles and equipment; fire department vehicles and equipment; F parks department and golf course maintenance equipment; administrative services department equipment; public works vehicles and equipment; P utility department vehicles and equipment and municipal courts equipment; and (iii) pay costs of issuance related to the Notes. MATURITY SCHEDULE* madE o n Amount Maturity Rate Yield 0 0 $ 345,000 2003 -= 0 350,000 2004 a, n 360,000 2005 2 c '^n 370,000 2006 . 380,000 2007 395,000 2008 a :a (Accrued Interest from March 15, 2002 to be added) a � 3 REDEMPTION ... The Notes are not subject to redemption prior to maturity. SEPARATE ISSUES ... The Notes are being offered by the City concurrently with the "City of Grapevine, Texas, General Obligation Refunding and Improvement Bonds, Series 2002" (the "Bonds"), and such Notes and Bonds are hereinafter sometimes referred to collectively as the 0 3 "Obligations". The Notes and Bonds are separate and distinct securities offerings being issued and sold independently except for the common Official Statement, and, while the Obligations share certain common attributes, each issue is separate from the other and should be reviewed and c= analyzed independently, including the type of obligation being offered, its terms for payment, the security for its payment, the rights of the °o holders, and other features. B 41 LEGALITY ... The Notes are offered for delivery when, as and if issued and received by the Underwriters and subject to the approving opinion c ° of the Attorney General of Texas and the opinion of Vinson & Elkins L.L.P. Bond Counsel Dallas Texas (see A d; C "F ro :v q w w ppen x , otm of Bond Counsel's -Opinions )—Berta -in legal-matters-will-be-passed-upon-for-the-Umierwriters-by-Fulbright-& Jaworski -b-.��P-Dallas-Texas,-Counsel-for the Underwriters. DELIVERY ... It is expected that the Notes will be available for delivery through The Depository Trust Company on April 23, 2002, RBC DAiN RAUSCHER INC. * Preliminary, subject to change. SWS SECURITIES THIS PAGE LEFT BLANK INTENTIONALLY 4 This Preliminary Official Statement, which includes the cover page and the Appendices hereto, does not constitute an offer to sell or the solicitation of an offer to buy in any jurisdiction to any person to whom it is unlawful to make such offer, solicitation or sale. No dealer, broker, salesperson or other person has been authorized to give information or to make any representation other than those contained in this Preliminary Off tial Statement, and, ifgiven or made, such other information or representations must not be relied upon. Certain information set forth herein has been provided by sources other than the City .that the City believes is reliable, but the City makes no representation as to the accuracy of such information. Any information and expressions of opinion herein contained are subject to change without notice, and neither the delivery of the 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 City or other matters described herein since the date hereof. See "Other Information - Continuing Disclosure of Information "for a description of the City's undertaking to provide certain information on a continuing basis. For purposes of compliance with Rule I5e2-12 of the Securities Exchange Commission, this document constitutes an Official Statement of the City with respect to the Obligations that has been deemed "final" by the City as of its date except for the omission of no more than the information permitted by Rule 15c2-12. THE BONDS AND THE NOTES ARE EXEMPT FROM REGISTRATION WITH THE SECURITIES AND EXCHANGE COMMISSION AND CONSEQUENTLY HAVE NOT BEEN REGISTERED THEREWITH. THE REGISTRATION, QUALIFICATION, OR EXEMPTION OF THE BONDS AND THE NOTES IN ACCORDANCE WITH APPLICABLE SECURITIES LAW PROVISIONS OF THE JURISDICTION IN WHICH THESE SECURITIES HAVE BEENREGISTERED OR EXEMPTED SHOULD NOT BE REGARDED ASA RECOMMENDATION THEREOF, NEITHER THE CITY NOR THE UNDERWRITERS MAKE ANY REPRESENTATION OR WARRANTY WITH RESPECT TO THE INFORMATION CONTAINED IN THIS OFFICIAL STATEMENT REGARDING THE DEPOSITORY TRUST COMPANY OR ITS BOOK -ENTRY -ONLY SYSTEM, AS SUCHINFORMATIONHAS BEENFURNISHED BY THE DEPOSITORY TRUST COMPANY. IN CONNECTION WITH THE OFFERING OF THE BONDS AND THE NOTES, THE UNDERWRITERS MAY OVER ALLOT OR EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICES OF THE BONDS AND/OR THE NOTES AT A LEVEL ABOVE THAT WHICHMIGHT OTHERWISE PREVAIL IN THE OPENMARKET. SUCH STABILIZING, IF COMMENCED, MAYBE DISCONTINUED AT ANYTIME. The Underwriters have provided the following sentence for inclusion in this official statement. The Underwriters have reviewed the information in this official statement in accordance with, and as part of, its responsibilities to investors under federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriters do not guarantee the accuracy or completeness ofsuch information. TABLE OF CONTENTS PRELBUNARY OFFICIAL STATEMENT SUMMARY...... 6 FINANCIAL INFORMATION .......................... 24 TABLE 13 - GENERAL FUND REVENUES AND EXPENDITURE CITY OFFICIALS, STAFF AND CONSULTANTS ................ 8 HISTORY ................................,.................................24 ELECTED OFFICIALS............................................................ 8 TABLE 14 - MUNICIPAL SALES TAX HISTORY ..................25 SELECTED ADMINISTRATIVE STAFF ..................................... 8 TABLE IS - CURRENT INVESTMENTS..................... .......27 CONSULTANTS AND ADVISORS ............................................ 8 INTRODUCTION....................................................................... 9 PLAN OF FINANCING.............................................................. 9 THE BONDS AND NOTES......................................................10 TAX INFORMATION..............................................................15 TABLE 1_-, VALUATION EXEMPTIONS AND _GENERAL _.- OBLIGATION DEBT.......... ................................. 18 TABLE 2 - TAXABLE ASSESSED VALUATIONS BY CATEGORY.................................... .................. __ ... 19 TABLE 3 - VALUATION AND GENERAL OBLIGATION DEBT HISTORY................................................................. 20 TABLE 4 - TAX RATE, LEVY AND COLLECTION HISTORY 20 TABLE 5 - TEN LARGEST TAXPAYERS .............................. 20 TABLE 6 - TAX ADEQUACY .............................................. 21 TABLE 7 - ESTIMATED OVERLAPPING DEBT .................... 21 TAXMATTERS........................................................................28 OTHER INFORMATION.........................................................29 RATINGS............................................................................29 LITIGATION........................................................................29 REGISTRATION AND QUALIFICATION OF BONDS AND NOTES FORSALE.................................................................30 LEGAL INVESTMENTS AND ELIGIBILITY TO SECURE PUBLIC -- - - -FUNDI hfTEXAS 30 — -- LEGAL MATTERS................................................................30 AUTHENTICITY OF FINANCIAL DATA AND OTHER INFORMATION.......................................................... 30 CONTINUING DISCLOSURE OF INFORMATION ......................31 FINANCIAL ADVISOR .......................................................... 32 FORWARD-LOOKING STATEMENTS DISCLAR IER................32 UNDERWRITING.................................................................32 APPROVAL OF OFFICIAL STATEMENT.................................33 DEBT INFORMATION,.... ................. .............................. ...... 22 TABLE 8 - PRO -FORMA GENERAL OBLIGATION DEBT SERVICE REQUIREMENTS .............. ............... ......... _ 22 —TXBLE-9 — INTEREST-AND-SINKNO PUND BUEr(= ---- -- -- - PROIECTION............................................................ 22 TABLE 10 - COMPUTATION OF SELF-SUPPORTING DEBT.. 23 TABLE I I - AUTHORIZED BUT UNISSUED GENERAL OBLIGATION BONDS ................................................ 23 TABLE 12 - OTHER OBLIGATIONS .................................... 23 SCHEDULE OF REFUNDED BONDS ....................... Schedule I APPENDICES _-v GENERAL INFO MATION Fr ARD-W-GTBF'.C_My_,...,.,,W_-A-_ EXCERPTS FROM THE ANNUAL FINANCIAL REPORT.......... B FORM OF BOND COUNSEL'S OPINIONS .............................. C The cover page hereof, this page, the appendices included herein and any addenda, supplement or amendment hereto, are part of the Preliminary Official Statement. PRELIMINARY OFFICIAL STATEMENT SUMMARY This summary is subject in all respects to the more complete information and definitions contained or incorporated in this Preliminary Official Statement. The offering of the Bonds and Notes to potential investors is made only by means of this entire Preliminary Official Statement. No person is authorized to detach this summary from this Preliminary Official Statement or to otherwise use it without the entire Preliminary Official Statement. THE CITY .................................... The City of Grapevine, Texas is a political subdivision and municipal corporation of the State, located in Tarrant County, Texas, The City covers approximately 33 square miles (see "Introduction - Description of City"). THE BONDS ................................. The $10,180,000* General Obligation Refunding and Improvement Bonds, Series 2002 are to mature on February 15 in the years 2003 through 2022 (see "The Bonds and Notes - Description of the Bonds"). THE NOTES_ .......................... .... The $2,200,000* Tax Notes, Series 2002 are to mature on August 15 in the years 2003 through 2008 (see "The Bonds and Notes -Description of the Notes"), PAYMENT of INTEREST .............. Interest on the Bonds accrues from March 15, 2002, and is payable February 15, 2003, and each August 15 and February 15 thereafter until maturity or prior redemption (see "The Bonds and Notes - Description of the Bonds and Notes"). Interest on the Notes accrues from March 15, 2002, and is payable August 15, 2002, and each February 15 and August 15 thereafter until maturity or prior redemption (see "The Bonds and Notes - Description of the Bonds and Notes"). AUTHORITY FOR ISSUANCE ......... The Bonds are issued pursuant to the general laws of the State, including particularly Chapters 1207 and 1331, Texas Government Code, as amended, and the Bond Ordinance passed by the City Council of the City (see "The Bonds and Notes - Authority for Issuance"). The Notes are being issued pursuant to the Constitution and general laws of the State of Texas, particularly Chapter 1431, Texas Government Code, as amended, and the Note Ordinance passed by the City Council of the City (see "The Bonds and Notes - Authority for Issuance"). SECURITY FOR THE BONDS.......... The Bonds constitute direct obligations of the City, payable from a direct and continuing ad valorem tax levied, within the limit prescribed by law, on all taxable property located within the City (see "The Bonds and Notes - Security and Source of Payment"), SECURITY FOR THE NOTES.......... The Notes constitute direct obligations of the City payable from a continuing ad valorem tax levied, within the limits prescribed by law, on all taxable property within the City (see "The Bonds and Notes - Security and Source of Payment"). REDEMPTION ••••• The City reserves the right, at its option, to redeem Bonds h- ng stated maturities on and -- after February 15, 2013, in whole or in part in principal amounts of $5,000 or any integral multiple thereof, on February 15, 2012, or any date thereafter, at the par value thereof plus accrued interest to the date of redemption (see "The Bonds and Notes - Optional Redemption"). The Notes are not subject to redemption prior to maturity. TAx EXEMPTION ........................... In the opinion of Bond Counsel, the interest on the Bonds and Notes will be excludable from gross income for federal income tax purposes under existing law and the Bonds and Notes are not private activity bonds. See "Tax Matters - Tax Exemption" for a discussion of the opinion of Bond Counsel, including a description of the alternative minimum tax consequences for _._ co orations. * Preliminary, subject to change. USE OF PROCEEDS ....................... Proceeds from the sale of the Bonds will be used to refund a portion of the City's outstanding debt, to -wit, $3,740,000 General Obligation Refunding Bonds, Series 1992 (the "Refunded Bonds") in order to lower the overall debt service requirements of the City. See "Schedule I - Schedule of Refunded Bonds". Proceeds from the sale of the Bonds will also be used for street improvements and to pay the costs of issuance related to the Bonds Proceeds from the sale of the Notes will be used to (i) construct, improve and renovate bridges, restroom facilities and a maintenance facility for the City's municipal golf course; (ii) acquire police vehicles and equipment; fire department vehicles and equipment, parks department and golf course maintenance equipment; administrative services department equipment; public works vehicles and equipment; utility department vehicles and equipment and municipal courts equipment; and (iii) pay costs of issuance related to the Notes. RATINGS ..................................... The presently outstanding general obligation debt of the City is rated "Al" by Moody's Investors Service, Inc. ("Moody's") and "A+" by Standard & Poor's Ratings Services, A Division of The McGraw-Hill Companies, Inc. ("S&P"). The City also has issues outstanding which are rated "Aaa" by Moody's and "AAA" by S&P through credit enhancement in the form of municipal bond insurance policies. Applications for contract ratings on the Bonds and Notes have been made to Moody's and S&P (see "Other Information - Ratings"). BOOK -ENTRY -ONLY SYSTEM ...................................... The definitive Bonds and Notes will be initially registered and delivered only to Cede & Co., the nominee of DTC pursuant to the Book -Entry -Only System described herein. Beneficial ownership of the Bonds and Notes may be acquired in denominations of $5,000 or integral multiples thereof. No physical delivery of the Bonds and Notes will be made to the beneficial owners thereof. Principal of, premium, if any, and interest on the Bonds and Notes will be payable by the Paying Agent/Registrar to Cede & Co., which will make distribution of the amounts so paid to the participating members of DTC for subsequent payment to the beneficial owners of the Bonds and Notes (see "The Bonds and Notes - Book -Entry -Only System"). PAYMENT RECORD ...................... The City has not defaulted on its tax -supported debt since 1932 when all defaults were corrected without refunding. SELECTED FINANCIAL INFORMATION (1) Projected, includes the Bonds and Notes. Excludes the Refunded Bonds; preliminary, subject to change. For additional information regarding the City, please contact: Fred Werner David K. Medanich Director of Finance - - -- .... _ _ - --oz _Steven Adams --------_-- City of Grapevine First Southwest Company Ratio Funded Fiscal Grapevine, Texas 76051 Fort Worth, Texas 76102 Per Capita (817)332-9710 Per Capita Tax Debt to Year Estimated Taxable Taxable Funded Funded Taxable Ended City Assessed Assessed Tax Tax Assessed 9/30 Population Valuation Valuation Debt Debt Valuation 1998 37,946 $ 3,253,338,457 $ 85,736 $ 95,546,968 $ 2,518 2.94% 1999 _ 39,190 _ 3,994,671J30 -101,931 _--- 103,132.152 _---- —2-632 2-5-8% 2000 42,059 4,089,979,800 97,244 143,995,000 ------ 3,424 3.52% 2001 42,443 4,372,544,371 103,022 156,815,000 3,695 3.59% 2002 44,390 4,859,882,189 109,481 158,060,000 (1) 3,561 3.25% (1) Projected, includes the Bonds and Notes. Excludes the Refunded Bonds; preliminary, subject to change. For additional information regarding the City, please contact: Fred Werner David K. Medanich Director of Finance - - -- .... _ _ - --oz _Steven Adams --------_-- City of Grapevine First Southwest Company 200 South Main 777 Main Street, Suite 1200 Grapevine, Texas 76051 Fort Worth, Texas 76102 (817)410-3111 (817)332-9710 % of Total Tax Collections 99.45% -_-1 00,32-0/o 99.77% _--100,32%99.77% 99.10% N.A. CITY OFFICIALS, STAFF AND CONSULTANTS ELECTED OFFICIALS Councilmember, Place 4 Roy Stewart 6 Years May, 2002 Construction Company Owner Councilmember, Place 6 (1) Previously served 14 years as Mayor and Councilmember. Length of Term _ City Council Service Expires Occupation William D. Tate 12 Years (1) May, 2003 Attorney -at -Law Mayor 6 Years Fred Werner Director of Finance Ted R. Ware 23 Years May, 2002 Commercial Contractor Mayor Pro Tem C. Shane Wilbanks 17 Years May, 2003 Personnel Director Councilmember, Place 1 Sharron Spencer 17 Years May, 2003 Retired Sales Representative Councilmember, Place 2 Clydene Johnson 7 Years May, 2004 Independent Insurance Agent Councilmember, Place 3 Darlene Freed 4 Years May, 2004 Commercial Real Estate Agent Councilmember, Place 4 Roy Stewart 6 Years May, 2002 Construction Company Owner Councilmember, Place 6 (1) Previously served 14 years as Mayor and Councilmember. SELECTED ADMINISTRATIVE STAFF Name Position Leneth of Service Roger Nelson City Manager 7 Years Bill Gaither Administrative Services Director 6 Years Fred Werner Director of Finance S Years Linda Huff City Secretary 20 Years (l) (1) 20 years with City; 15 years in present position CONSULTANTS AND ADVISORS Auditors....... ........................... —................................................................................................................... Deloitte & Touche LLP Fort Worth, Texas BondCounsel................................................................... ......... ......... .... Vinson & Elkins L.L.P. Dallas, Texas FinancialAdvisor.......................................................................................................................................First Southwest Company Fort Worth, Texas 8 PRELIMINARY OFFICIAL STATEMENT RELATING TO $10,180,000* $2,200,000* GENERAL OBLIGATION REFUNDING TAX NOTES, SERIES 2002 AND IMPROVEMENT BONDS, SERIES 2002 INTRODUCTION This Preliminary Official Statement, which includes the Appendices hereto, provides certain information regarding the issuance of $10,180,000* City of Grapevine, Texas, General Obligation Refunding and Improvement Bonds, Series 2002 (the "Bonds") and $2,200,000* City of Grapevine, Texas, Tax Notes, Series 2002 (the "Notes"). Capitalized terms used in this Preliminary Official Statement have the same meanings assigned to such terms in the Bond Ordinance and Note Ordinance to be adopted on the date of sale of the Bonds and Notes (collectively, "The Ordinances") which will authorize the issuance of the Bonds and Notes, respectively, except as otherwise indicated herein. There follows in this Preliminary Official Statement descriptions of the Bonds and Notes and certain information regarding the City 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 City's Financial Advisor, First Southwest Company, Dallas, Texas. DESCRIPTION OF THE CITY ... The City is a political subdivision and municipal corporation of the State, duly organized and existing under the laws of the State, including the City's Home Rule Charter. The City first adopted its Home Rule Charter in 1965. The City operates under the Council/Manager form of government with a City Council comprised of the Mayor and six Councilmembers. The City Manager is the chief administrative officer for the City. Some of the services that the City provides are: public safety (police and fire protection), highways and streets, electric, water and sanitary sewer utilities, health and social services, culture -recreation, public transportation, public improvements, planning and zoning, and general administrative services. The 2000 Census population for the City was 42,059, while the 2002 estimated population is 44,390. The City covers approximately 33 square miles. PLAN OF FINANCING PURPOSE ... Proceeds from the sale of the Bonds will be used to refund a portion of the City's outstanding debt, to -wit, $3,740,000* General Obligation Refunding Bonds, Series 1992 (the "Refunded Bonds") in order to lower the overall debt service requirements of the City. Proceeds from the sale of the Bonds will also be used for street improvements and to pay the costs of issuance related to the Bonds. See "Schedule I - Schedule of Refunded Bonds" for a detailed listing of the Refunded Bonds and their call date at par. Proceeds from the sale of the Notes will be used to (i) construct, improve and renovate bridges, restroom facilities and a maintenance facility for the City's municipal golf course; (ii) acquire police vehicles and equipment; fire department vehicles and equipment; parks department and golf course maintenance equipment; administrative services department equipment; public works vehicles and equipment; utility department vehicles and equipment and municipal courts equipment; and (iii) pay costs of ----issuance elated tot-he_N.otes. -----=---= - -__..---=--- --- ----_------ _ REFUNDED BONDS ... The principal and interest due on the Refunded Bonds are to be paid on April 23, 2002, the redemption date for such Refunded Bonds, from proceeds to be deposited with the Paying Agent for the Refunded Bonds. The Bond Ordinance provides that from the proceeds of the sale of the Bonds and certain available funds of the City, the City will deposit with such Paying Agent the amount necessary to accomplish the discharge and final payment of the Refunded Bonds. SOURCES AND USE OF PROCEEDS ... The proceeds from the sale of the Bonds and Notes, together with funds contributed by the City, will be applied as follows: Sources: The Bonds The Notes Par Amount Accrued Interest Transfers from Prior Issue Debt Service Fund Uses: Deposit to Escrow Fund Deposit to Project Fund Deposit to Interest and Sinking Fund Costs of Issuance Ill Total Uses of Funds (1) Including Underwriters'Discount. *Preliminary, subject to change. THE BONDS AND NOTES DESCRIPTION OF THE BONDS AND NOTES ... The Bonds are dated March 15, 2002, and mature on February 15 in each of the years and in the amounts shown on the cover page. Interest on the Bonds will be computed on the basis of a 360 -day year of twelve 30 -day months, and will be payable on February 15 and August 15 of each year, commencing February 15, 2003 until maturity or prior redemption. The Notes are dated March 15, 2002, and mature on August 15 in each of the years and in the amounts shown on page 3 hereof. Interest on the Notes will be computed on the basis of a 360 -day year of twelve 30 -day months, and will be payable on August 15 and February 15 of each year, commencing August 15, 2002 until maturity. The definitive Bonds and Notes will be issued only in fully registered form in any integral multiple of $5,000 for any one maturity and will be initially registered and delivered only to Cede & Co., the nominee of The Depository Trust Company ("DTC") pursuant to the Book -Entry -Only System described herein. No physical delivery of the Bonds and Notes will be made to the owners thereof. Principal of, premium, if any, and interest on the Bonds and Notes will be payable by the Paying Agent/Registrar to Cede & Co., which will make distribution of the amounts so paid to the participating members of DTC for subsequent payment to the beneficial owners of the Bonds and Notes. See "Book -Entry -Only System" herein. AUTHORITY FOR ISSUANCE ... The Bonds are being issued pursuant to the Constitution and general laws of the State of Texas, particularly, Texas Government Code, Chapters 1207 and 1331, and the Bond Ordinance passed by the City Council. A portion of the Bonds being issued were approved at an election held on December 5, 1998 (see "Table 11 - Authorized But Unissued Bonds" herein). The Notes are being issued pursuant to the Constitution and general laws of the State of Texas, particularly Chapter 1431, Texas Government Code, as amended, and a Note Ordinance passed by the City Council. SECURITY AND SOURCE OF PAYMENT ... The Bonds ... The principal of and interest on the Bonds is payable from a continuing direct annual ad valorem tax levied by the City, within the limits prescribed by law, upon all taxable property in the City. The Notes ... The principal and interest on the Notes is payable from a continuing direct annual ad valorem tax levied by the City, within the limits prescribed by law, upon all taxable property in the City. TAx RATE LIMITATION ... All taxable property within the City is subject to the assessment, levy and collection by the City of a continuing, direct annual ad valorem tax sufficient to provide for the payment of principal of and interest on all ad valorem tax debt within the limits prescribed by law. Article XI, Section 5, of the Texas Constitution is applicable to the City, and limits its -- mam--mu— ad -valorem -t -&x -rate to-$�50-per-S-1-00-T-ax-able-Asseased V-aluatian-for-aall-C-ity purposes—T-he-Home-Rule-C-harter-of- - - the City adopts the constitutionally authorized maximum tax rate of $2.50 per $100 Taxable Assessed Valuation. OPTIONAL REDEMPTION ... The City reserves. the right, at its option, to redeem Bonds having stated maturities on and after February 15, 2013, in whole or in part in principal amounts of $5,000 or any integral multiple thereof, on February 15, 2012, or any date thereafter, at the par value thereof plus accrued interest to the date of redemption. If less than all of the Bonds are to be redeemed, the City may select the maturity or maturities of Bonds to be redeemed. If less than all the Bonds of any maturity are to be redeemed, the Paying Agent/Registrar (or DTC while the Bonds are in Book -Entry -Only form) shall determine by lot the Bonds, or portions thereof, within such maturity to be redeemed. If a Bond (or any portion of the principal sum thereof) shall 10 have been called for redemption and notice of such redemption shall have been given, such Bond (or the principal amount thereof to be redeemed) shall become due and payable on such redemption date and interest thereon shall cease to accrue from and after the redemption date, provided funds for the payment of the redemption price and accrued interest thereon are held by the Paying Agent/Registrar on the redemption date. The Notes are not subject to redemption prior to maturity. NOTICE of REDEMPTION ... Not less than 30 days prior to a redemption date for the Bonds, the City shall cause a notice of redemption to be sent by United States mail, first class, postage prepaid, to the registered owners of the Bonds to be redeemed, in whole or in part, at the address of the registered owner appearing on the registration books of the Paying Agent/Registrar at the close of business on the business day next preceding the date of mailing such notice. ANY NOTICE SO MAILED SHALL BE CONCLUSIVELY PRESUMED TO HAVE BEEN DULY GIVEN, WHETHER OR NOT THE REGISTERED OWNER RECEIVES SUCH NOTICE. NOTICE HAVING BEEN SO GIVEN, THE BONDS CALLED FOR REDEMPTION SHALL BECOME DUE AND PAYABLE ON THE SPECIFIED REDEMPTION DATE, AND NOTWITHSTANDING THAT ANY BOND OR PORTION THEREOF HAS NOT BEEN SURRENDERED FOR PAYMENT, INTEREST ON SUCH BOND OR PORTION THEREOF SHALL CEASE TO ACCRUE. DEFEASANCE ... The Ordinances provide that the City may discharge its obligations to the registered owners of any or all of the Bonds and Notes, as applicable, to pay principal, interest and redemption price thereon in any manner permitted by law. Under current Texas law, such discharge may be accomplished either (i) by depositing with the Paying Agent/Registrar or other lawfully authorized entity a sum of money equal to the principal of, premium, if any, and all interest to accrue on such Bonds and Notes to maturity or redemption or (ii) by depositing with an authorized escrow agent amounts sufficient, together with the investments earnings thereon, to provide for the payment and/or redemption of such Bonds and Notes; provided that such deposits may be invested and reinvested only in (a) direct obligations of the United States of America, including obligations that are unconditionally guaranteed by the United States of America, (b) noncallable obligations of an agency or instrumentality of the United States, including obligations that are unconditionally guaranteed or insured by the agency or instrumentality and that, on the date the governing body of the City adopts or approves the proceedings authorizing the issuance of refunding obligations, are rated as to investment quality by a nationally recognized investment rating firm not less than AAA or its equivalent; and (c) noncallable obligations of a state or an agency or a county, municipality, or other political subdivision of a state that have been refunded and that, on the date the governing body of the City adopts or approves the proceedings authorizing the issuance of refunding obligations to refund the Bonds and Notes, as applicable, are rated as to investment quality by a nationally recognized investment rating firm not less than AAA or its equivalent. The foregoing obligations may be in book entry form, and shall mature and/or bear interest payable at such times and in such amounts as will be sufficient to provide for the scheduled payment and/or redemption of the Bonds and Notes, as the case may be. If any of such Bonds and Notes are to be redeemed prior to their respective dates of maturity, provision must have been made for the payment to the registered owners of such Bonds and Notes at the date of maturity or prior redemption of the full amount to which such owner would be entitled and for giving notice of redemption as provided in the Ordinance, as applicable. Upon such deposit as described above, such Bonds and Notes shall no longer be regarded to be outstanding or unpaid. Ager firm banking and financial arrangements for the discharge and final payment or redemption of Bonds and Notes have been made as described above, all rights of the City to initiate proceedings to call such Bonds and Notes for redemption or take any other action amending the terms of such Bonds and Notes are extinguished; provided, however, that the right to call such Bonds and Notes for redemption is not extinguished if the City: (i) in the proceedis providing .for the firm bankin9. gid financial arrangements, expressly reserves the right to call such Bonds aid Notes for redemption; (ii) gives notice of the reservation of that right to the owners of such Bonds and Notes immediately following the making of the firm banking and financial arrangements; and (iii) directs that notice of the reservation be included in any redemption notices that it authorizes. BOOK -ENTRY -ONLY SYSTEM ... This section describes how ownership of the Bonds and Notes are to be transferred and how the principal of, premium, if any, and interest on the Bonds and Notes are to be paid to and credited by DTC while the Bond or Notes are registered in its nominee name. The information in this section concerning DTC and the Book -Entry -Only System has been provided by DTC for use in disclosure documents such as this Official Statement. The City believes the source of such information to be reliable, but takes no responsibility for the accuracy or completeness thereof. The City cannot and does not give any assurance that (1) DTC will distribute payments of debt service on the Bonds and Notes, or redemption or other notices, to DTC Participants, (2) DTC Participants or others will distribute debt service payments paid to DTC or its nominee (as the registered owner of the Bonds and Notes), or redemption or other notices, to the Beneficial Owners, or that they will do so on a timely basis, or (3) DTC will serve and act in the 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. The Depository Trust Company ("DTC"), New York, New York, will act as securities depository for the Bonds and Notes. The Bonds and Notes will be issued as fully -registered securities registered in the name of Cede & Co. (DTC's partnership nominee). One fully -registered certificate will be issued for each maturity of the Bonds and each maturity of the Notes each certificate to be in the aggregate principal amount of each such maturity and will be deposited with DTC. 11 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 certificates. 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 Conunission. Purchases of Bonds and Notes under the DTC system must be made by or through DTC Participants, which will receive a credit for such purchases on DTC's records. The ownership interest of each actual purchaser of each Bond and Note ("Beneficial Owner") is in turn to be recorded on the Direct or 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 the Bonds and Notes are to be accomplished by entries made on the books of Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the Bonds and Notes, except in the event that use of the book -entry only system described herein is discontinued. To facilitate subsequent transfers, all Bonds and Notes deposited by Direct Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co. The deposit of Bonds and Notes 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 Bonds and Notes; DTC's records reflect only the identity of the Direct Participants to whose accounts such Bonds and Notes 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. Redemption notices shall be sent to Cede & Co. If less than all of the Bonds within an issue are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. Neither DTC nor Cede & Co. will consent or vote with respect to the Bonds and Notes. Under its usual procedures, DTC mails an Omnibus Proxy to the City as soon as possible after the Record Date (hereinafter defined). The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts the Bonds and Notes are credited on the Record Date (identified in a listing attached to the Omnibus Proxy). Principal and interest payments on the Bonds and Notes will be made to DTC. DTC's practice is to credit Direct Participants' accounts on each payable 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 such payable 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 City, 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 City, disbursement of such payments to Direct Participants shall be the responsibility of DTC, and disbursement 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 Bonds or Notes, or both at any time by giving reasonable notice to the City. Under such circumstances, in the event that a successor securities depository is not obtained, Bonds and Notes are required to be printed and delivered. The City may decide to discontinue use of the system of book -entry transfers through DTC (or a successor securities depository). In that event, Bonds and Notes will be printed and delivered. USE of CERTAIN TERMS IN OTHER SECTIONS OF THIS OFFICIAL STATEMENT. In reading this Official Statement it should be understood that while the Obligations are in the Book -Entry -Only System, references in other sections of this Official Statement to registered owners should be read to include the person for which the Participant acquires an interest in the Bonds and Notes, 12 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 registered owners 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 by the City. PAYING AGENTIREGISTRAR ... The initial Paying Agent/Registrar is Bank One, NA, Austin, Texas. In the Ordinances, the City retains the right to replace the Paying Agent/Registrar. The City covenants to maintain and provide a Paying Agent/Registrar at all times until the Bonds or Notes, as the case may be, are duly paid and any successor Paying Agent/Registrar shall be a commercial bank or trust company organized under the laws of the State of Texas or other entity duly qualified and legally authorized to serve as and perform the duties and services of Paying Agent/Registrar for the Bonds and Notes. Upon any change in the Paying Agent/Registrar for the Bonds or Notes, the City agrees to promptly cause a written notice thereof to be sent to each registered owner of the Bonds and Notes affected by the changes by United States mail, first class, postage prepaid, which notice shall also give the address of the new Paying Agent/Registrar, Interest on the Obligations shall be paid to the registered owners appearing on the registration books of the Paying Agent/Registrar at the close of business on the Record Date (hereinafter defined), and such interest shall be paid (i) by check sent United States Mail, first class postage prepaid to the address of the registered owner recorded in the registration books of the Paying Agent/Registrar or (ii) by such other method, acceptable to the Paying Agent/Registrar requested by, and at the risk and expense of, the registered owner. Principal of the Obligations will be paid to the registered owner at their stated maturity or earlier redemption with respect to the Bonds, upon presentation to the designated payment/transfer office of the Paying Agent/Registrar. If the date for the payment of the principal of or interest on the Obligations shall be a Saturday, Sunday, a legal holiday or a day when banking institutions in the city where the designated payment/transfer office of the Paying Agent/ Registrar is located are authorized to close, then the date for such payment shall be the next succeeding day which is not such a day, and payment on such date shall have the same force and effect as if made on the date payment was due. In the event the Book Entry Only System is discontinued and printed certificates are issued to the registered owners, the City and the Paying Agent/Registrar shall not be required to transfer or exchange any Bond called for redemption, in whole or in part, within 45 days of the date fixed for redemption; provided, however, such limitation of transferability shall not be applicable to an exchange by the registered owner of the uncalled balance of a Bond. TRANSFER, EXCHANGE AND REGISTRATION ... In the event the Book -Entry -Only System should be discontinued, the Obligations may be transferred and exchanged on the registration books of the Paying Agent/Registrar only upon presentation and surrender to the Paying Agent/Registrar and such transfer or exchange shall be without expense or service charge to the registered owner, except for any tax or other governmental charges required to be paid with respect to such registration, exchange and transfer. Obligations may be assigned by the execution of an assignment form on the respective Obligations or by other instrument of transfer and assignment acceptable to the Paying Agent/Registrar. New Obligations will be delivered by the Paying Agent/Registrar, in lieu of the Obligations 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 registered owner or his designee. To the extent possible, new Obligations issued in an exchange or transfer of Obligations will be delivered to the registered owner or assignee of the registered owner in not more than three business days after the receipt of the Obligations to be canceled, and the written instrument of transfer or request for exchange duly executed by the registered owner or his duly authorized agent, in form satisfactory to the Paying Agent/Registrar. New Obligations registered and delivered in an exchange or transfer shall be in any integral multiple of $5,000 for any one maturity and for a like aggregate prtnc�al_atl�ount as the 1) as surrendered far exchange or transfer. See To System" herein for a description of the system to be utilized initially in regard to ownership and transferability of the Obligations. Neither the City nor the Paying Agent/Registrar shall be required to transfer or exchange any Bond called for redemption, in whole or in part, within 45 days of the date fixed for redemption; provided, however, such limitation of transfer shall not be applicable to an exchange by the registered owner of the uncalled balance of a Bond. RECORD DATE FOR INTEREST PAYMENT ... The record date ("Record Date") for the interest payable on the Bonds and Notes on any interest payment date means the close of business on the last business day of the month next preceding. In the event of a non-payment of interest on a scheduled payment date, and for 30 days thereafter, a new record date for such interest payment (a "Special Record Date") will be established by the Paying Agent/Registrar, if and when funds for the payment _ of such interest have been received from the City. Notice of the Special Record Date and of the scheduled uayjn=t date of the____, past due interest ("Special Payment Date", which shall be 15 days after the Special Record Date) shall be sent at least five business days prior to the Special Record Date by United States mail, first class postage prepaid, to the address of each registered owner of a Bond or Note to be paid on the Special Payment Date that appears on the registration books of the Paying Agent/Registrar at the close of business on the last business day next preceding the date of mailing of such notice. BONDHOLDERS' REMEDIES ... The respective Ordinances establish as "events of default" (i) the failure to make payment of principal of, redemption premium, if any, or interest on any of Bonds or Notes, as applicable, when due and payable; or (ii) default in the performance or observance of any other covenant, agreement, or obligation of the City, which default materially and adversely affects the rights of the Owners, including but not limited to their prospect or ability to be repaid in accordance 13 with the respective Ordinances, and the continuation thereof for a period of sixty days after the notice of such default is given by any Owner to the City. Under State law, there is no right to the acceleration of maturity of the Obligations upon the failure of the City to observe any covenant under the ordinance authorizing the issuance of such Obligation. Although a registered owner could presumably obtain a judgment against the City if a default occurred in the payment of the principal of or interest on any such Obligations, such judgment could not be satisfied by execution against any property of the City. Such registered owner's only practical remedy, if a default occurs, is a mandamus or mandatory injunction proceeding to compel the City to levy, assess and collect an annual ad valorem tax sufficient to pay principal of and interest on the Obligations as they become due. The enforcement of such remedy may be difficult and time consuming and a registered owner could be requited to enforce such remedy on a periodic basis. The respective Ordinances do not provide for the appointment of a trustee to represent the interest of the registered owners upon any failure of the City to perform in accordance with the terms of such Ordinances, or upon any other condition. Furthermore, the City is eligible to seek relief from its creditors under Chapter 9 of the U.S. Bankruptcy Code. Although Chapter 9 provides for the recognition of a security interest represented by a specifically pledged source of revenues, the pledge of taxes in support of a general obligation of a bankrupt entity is not specifically recognized as a security interest under Chapter 9. Chapter 9 also includes an automatic stay provision that would prohibit, without Bankruptcy Court approval, the prosecution of any other legal action by creditors or bondholders of an entity which has sought protection under Chapter 9. Therefore, should the City avail itself of Chapter 9 protection from creditors, the ability to enforce would be subject to the approval of the Bankruptcy Court (which could require that the action be heard in Bankruptcy Court instead of other federal or state court); and the Bankruptcy Code provides for broad discretionary powers of a Bankruptcy Court in administering any proceeding brought before it. The opinion of Bond Counsel will note that all opinions relative to the enforceability of the Ordinances and the Bonds and Notes are qualified with respect to the customary rights of debtors relative to their creditors. 14 TAX INFORMATION AD VALOREM TAx LAw ... The appraisal of property within the City is the responsibility of the Tarrant Appraisal District (the "Appraisal District"). Excluding agricultural and open -space land, which may be taxed on the basis of productive capacity, the Appraisal District is required under the Property Tax Code to appraise all property within the Appraisal District on the basis of 100% of its market value and is prohibited from applying any assessment ratios. 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 method considered most appropriate by the chief appraiser is to be used. 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 times 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. The value placed upon property within the Appraisal District is subject to review by an Appraisal Review Board, consisting of three members appointed by the Board of Directors of the Appraisal District. The Appraisal District is required to review the value of property within the Appraisal District at least every three years. The City may require annual review at its own expense, and is entitled to challenge the determination of appraised value of property within the City by petition filed with the Appraisal Review Board. Reference is made to the V.T.C.A., Property Tax Code, for identification of property subject to taxation; property exempt or which may be exempted from taxation, if claimed; the appraisal of property for ad valorem taxation purposes; and the procedures and limitations applicable to the levy and collection of ad valorem taxes. Article VIII of the State Constitution ("Article VIII") and State law provide for certain exemptions from property taxes, the valuation of agricultural and open -space lands at productivity value, and the exemption of certain personal property from ad valorem taxation. Under Section 1-b, Article VIII, and State law, the governing body of a political subdivision, at its option, may grant: (1) An exemption of not less than $3,000 of the market value of the residence homestead of persons 65 years of age or older and the disabled from all ad valorem taxes thereafter levied by the political subdivision; (2) An exemption of up to 20% of the market value of residence homesteads. The minimum exemption under this provision is $5,000. In the case of residence homestead exemptions granted under Section 1-b, Article VIII, ad valorem taxes may continue to be levied against the value of homesteads exempted where ad valorem taxes have previously been pledged for the payment of debt if cessation of the levy would impair the obligation of the contract by which the debt was created. State law and Section 2, Article VIII, mandate an additional property tax exemption for disabled veterans or the surviving spouse or children of a deceased veteran who died while on active duty in the armed forces; the exemption applies to either real or personal property with the amount of assessed valuation exempted ranging from $5,000 to a maximum of $12,000. Article VIII provides that eligible owners of both agricultural land (Section 1-d) and open -space land (Section 1-d-1), including open -space land devoted to farm or ranch purposes or open -space land devoted to timber production, may elect to have such property appraised for property taxation on the basis of its productive capacity. The same land may not be qualified under both Sections 1-d and 1-d-1. Nonbusiness personal property, such as automobiles or light trucks, are exempt from ad valorem taxation unless the governing body of a political subdivision elects to tax this property. Boats owned as nonbusiness property are exempt from ad valorem taxation. Article VIII, Section 1-j, provides for "freeport property" to be exempted from ad valorem taxation. Freeport property is defined as goods detained in Texas for 175 days or less for the purpose of assembly, storage, manufacturing, processing or fabrication. Decisions to continue to tax may be reversed in the future; decisions to exempt freeport property are not subject to reversal. The City and the other taxing bodies within its territory may agree to jointly create tax increment financing zones, under which the tax values on property in the zone are "frozen" at the value of the property at the time of creation of the zone. To date, the City has created two tax increment financing districts ("TIFDs") within the boundaries of the City. See "Tax Increment Financing Zone" below. The difference between any increase in the assessed valuation of taxable real property in the TIFD in excess of the base value of taxable real property in the TIFD is known as the "Incremental Value", and during the existence of the TIFDs, taxes levied by the City against the Incremental Value in the TIFDs are restricted to paying project and financing costs within the TIFDs and are not available for the payment of other obligations of the City, including the Bonds and the Notes. The City also may enter into tax abatement agreements to encourage economic development. Under the agreements, a property owner agrees to construct certain improvements on its property. The City in turn agrees not to levy a tax on all or part of the increased value attributable to the improvements until the expiration of the agreement. The abatement agreement could last for a period of up to 10 years. 15 EFFECTIVE TAx RATE AND ROLLBACK Talc RATE ... Section 26.05 of the Property Tax Code provides that the governing body of a taxing unit is required to adopt the annual tax rate for the unit before the later of September 30 or the 60`h day after the date the certified appraisal roll is received by the taxing unit, and a failure to adopt a tax rate by such required date will result in the tax rate for the taxing unit for the tax year to be the lower of the effective tax rate calculated for that tax year or the tax rate adopted by the taxing unit for the preceding tax year. Furthermore, Section 26.05 provides the City Council may not adopt a tax rate that exceeds the lower of the rollback tax rate or 103 per cent of the effective tax rate until a public hearing is held on the proposed tax rate following a notice of such public hearing (including the requirement that notice be posted on the City's website if the City owns, operates or controls an internet website and public notice be given by television if the City 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. The tax rate consists of two components: (1) a rate for funding of maintenance and operation expenditures, and (2) a rate for debt service. Under the Property Tax Code, the City must annually calculate and publicize its "effective tax rate" and "rollback tax rate." If the adopted tax rate exceeds the rollback tax rate the qualified voters of the City by petition may require that an election be held to determine whether or not to reduce the tax rate adopted for the current year to the rollback tax rate. "Effective tax rate" means the rate that will produce last year's total tax levy (adjusted) from this year's total taxable values (adjusted). "Adjusted" means lost values are not included in the calculation of last year's taxes and new values are not included in this year's taxable values. "Rollback tax rate" means the rate that will produce last year's maintenance and operation tax levy (adjusted) from this year's values (adjusted) multiplied by 1.08 plus a rate that will produce this year's debt service from this year's values (unadjusted) divided by the anticipated tax collection rate. The Property Tax Code provides that certain cities and counties in the State may submit a proposition to the voters to authorize an additional one-half cent sales tax on retail sales of taxable items. If the additional tax is levied, the effective tax rate and the rollback tax rate calculations are required to be offset by the revenue that will be generated by the sales tax in the current year. Reference is made to the Property Tax Code for definitive requirements for the levy and collection of ad valorem taxes and the calculation of the various defined tax rates. PROPERTY ASSESSMENT AND TAx PAYMENT ... Property within the City is generally assessed as of January I of each year. Business inventory may, at the option of the taxpayer, be assessed as of September 1. Oil and gas reserves are assessed .on the basis of a valuation process which uses an average of the daily price of oil and gas for the prior year. Taxes become due October 1 of the same year, and become delinquent on February 1 of the following year. Taxpayers 65 years old or older are permitted by State law to pay taxes on homesteads in four installments with the first due on February 1 of each year and the final installment due on August 1. PENALTIES AND INTEREST ... Charges for penalty and interest on the unpaid balance of delinquent taxes are made as follows: After July, penalty remains at 12%, and interest increases at the rate of 1% each month. In addition, if an account is delinquent in July, a 15% attorney's collection fee is added to the total tax penalty and interest charge. Under certain circumstances, taxes which become delinquent on the homestead of a taxpayer 65 years old or older incur a penalty of 8% per annum with no additional penalties or interest assessed. In general, property subject to the City's lien may be sold, in whole or in parcels, pursuant to court order to collect the amounts due. Federal Iaw does not allow for the collection of penalty and interest against _an estate-in_bankmpteyF-eder-al bankr-uptry-law-pr-0vides-that an-automatic-stay-of-aetiorrby-creditors-and-otherentities,-- — including governmental units, goes into effect with the filing of any petition in bankruptcy. The automatic stay prevents governmental units from foreclosing on property and prevents liens for post-petition taxes from attaching to property and obtaining secured creditor status unless, in either case, an order lifting the stay is obtained from the bankruptcy court. In many cases post-petition taxes are paid as an administrative expense of the estate in bankruptcy or by order of the bankruptcy court. 16 Cumulative Cumulative Month Penalty Interest Total February 6% 1 % 7% April 8 3 11 May 9 4 13 June 10 5 15 July 12 6 18 After July, penalty remains at 12%, and interest increases at the rate of 1% each month. In addition, if an account is delinquent in July, a 15% attorney's collection fee is added to the total tax penalty and interest charge. Under certain circumstances, taxes which become delinquent on the homestead of a taxpayer 65 years old or older incur a penalty of 8% per annum with no additional penalties or interest assessed. In general, property subject to the City's lien may be sold, in whole or in parcels, pursuant to court order to collect the amounts due. Federal Iaw does not allow for the collection of penalty and interest against _an estate-in_bankmpteyF-eder-al bankr-uptry-law-pr-0vides-that an-automatic-stay-of-aetiorrby-creditors-and-otherentities,-- — including governmental units, goes into effect with the filing of any petition in bankruptcy. The automatic stay prevents governmental units from foreclosing on property and prevents liens for post-petition taxes from attaching to property and obtaining secured creditor status unless, in either case, an order lifting the stay is obtained from the bankruptcy court. In many cases post-petition taxes are paid as an administrative expense of the estate in bankruptcy or by order of the bankruptcy court. 16 CITY APPLICATION OF TAX CODE ... The City grants an exemption to the market value of the residence homestead of persons 65 years of age or older of $60,000. The City has granted an additional exemption of 20% of the market value of residence homesteads; minimum exemption of $5,000. See Table I for a listing of the amounts of the exemptions described above. Ad valorem taxes are not levied by the City against the exempt value of residence homesteads for the payment of debt. The City does not tax nonbusiness personal property; does not tax lease value on personal use vehicles; and the City contracts with the Grapevine-Colleyville Independent School District for the collection of its taxes. The City does not permit split payments, and discounts are not allowed. The City does not tax freeport property. The City does not collect the additional one-half cent sales tax for reduction of ad valorem taxes. TAx ABATEMENT POLICY ... The City does not have a tax abatement policy. TAx INCREMENT FINANCE ZONES.. The City has established the Tax Increment Financing Reinvestment Zone Number One, comprised of approximately 175 acres in the northeast area of the City. The tax increment base for the Reinvestment Zone Number One established on January 1, 1996 was $7,647,325. The Reinvestment Zone Number One 2001/02 Taxable Assessed Value is $185,083,079. The project was completed on October 31, 1997. The City has additionally established the Tax Increment Financing Reinvestment Zone Number Two, comprised of approximately 121.817 acres in the northeast area of the City. The tax increment base for the Reinvestment Zone Number Two established on January 1, 1998 was $744,866. The Reinvestment Zone Number Two 2001/02 Taxable Assessed Value is $8,457,763. As of September 20, 2001 approximately $37,500,000 of permanent improvements have been made to Reinvestment Zone Number Two. (The remainder of this page left blank intentionally.) 17 TABLE I - VALUATION, EXEMPTIONS AND GENERAL OBLIGATION DEBT 2001/02 Market Valuation Established by Tarrant Appraisal District Less Exemptions/Reductions at 100% Market Value: Residence Homestead Exemptions Over 65 Years of Age/Disabled Disabled Veterans Exemptions Pollution Control Exemptions Solar/Wind Power Exemptions Freeport Exemptions Open -Space Land Use Reductions Nominal Value Reductions 2001/02 Taxable Assessed Valuation $ 5,545,275,797 $ 292,855,108 46,729,623 1,021,213 5,002 9,774 304,063,554 40,698,084 11.250 685,393,608 2001/02 Incremental Taxable Assessed Value of Real Property within Reinvestment Zone Number One 2001/02 Incremental Taxable Assessed Value of Real Property within Reinvestment Zone Number Two 2001/02 Taxable Assessed Valuation available for General Fund Obligations and Debt of City City Funded Debt Payable from Ad Valorem Taxes tt� General Obligation Bonds (as of 1/1/02) (2) $ 71,860,000 Certificates of Obligation (as of 1/1/02) 80,770,000 Equipment Acquisition Notes (as of 1/1/02) 445,000 The Bonds 10,180,000 (3) The Notes 2.200,000 c3) Funded Debt Payable from Ad Valorem Taxes Less Self -Supporting Debt: (4) Combination Tax and Tax Increment Reinvestment Zone Revenue Certificates of Obligation (as of 11/1/01) Net Funded Debt Payable From Ad Valorem Taxes $ 4,859,882,189 (185,083,079) (8,457,763)„ $ 4,666,341,347 $ 165,455,000 57,565.000 $ 107,890,000 Interest and Sinking Fund as of January 1, 2002 $ 4,282,305 Ratio Total Funded Debt to Taxable Assessed Valuation .................. . ............................... 3.40% 2002 Estimated Population - 44,390 Per Capita Taxable Assessed Valuation - $109,481 Per Capita Total Funded Debt $3,727 (1) This statement of indebtedness does not include currently outstanding $31,390,516 system revenue bonds, as these bonds are payable solely from the net revenues of the Waterworks and Sewer System (the "System"), as defined in the ordinances authorizing the system revenue bonds. _,t2j Exciudzs-th-e Ref -e B—un (3) Preliminary, subject to change. (4) The self-supporting amount is a projection of debt by the City based on actual historical payments from the Tax Increment Reinvestment Zone Funds. The amount of self-supporting debt is based on the percentage of revenue support as shown in Table 10. There is no guarantee that these payments will continue in the future. If the payments are not made from the revenues in the future, the difference will have to be paid for with ad valorem taxes. 18 TABLE 2 - TAXABLE ASSESSED VALUATIONS BY CATEGORY Cateeory Real, Residential, Single -Family Real, Residential, Multi -Family Real, Vacant Lots Tracts Real, Acreage (Land Only) Real, Farm and Ranch Improvements Real, Commercial Real, Industrial Real and Tangible Personal, Utilities Real, Mobile Homes Tangible Personal, Business Tangible Personal, Commercial Tangible Personal, Industrial Tangible Personal, Mobile Homes Tangible Personal, Other Real Property, Inventory Total Appraised Value Before Exemptions Adjustments Less: Total Exemption/Reductions Taxable Assessed Value Taxable Appraised Value for Fiscal Year Ended September 30 2002 2001 2000 Fiscal Year Ended September 30 % of 1999 % of 1998 % of Amount Total Amount Total Amount Total $ 1,673,214,512 30.17% $ 1,522,401,913 29.49% $ 1,429,819,700 30.03% 200,728,832 3.62% 151,579,484 2.94% 129,208,574 2.71% 104,297,996 1.88% 109,952,787 2.13% 78,468,029 1.65% I71,706,596 3.10% 165,569,051 3.21% 144,983,152 3.05% 2,160,035 0.04% 2,441,498 0.05% 3,191,100 0.07% 1,086,095,366 19.59% 932,109,580 18.06% 756,002,113 15.88% 14,530,371 0.26% 10,891,084 0.21% 9,795,363 0.21% 102,859,092 1.85% 88,123,888 1.71% 76,908,376 1.62% 9,059,623 0.16% 4,239,290 0.08% 141,400 0.00% - 0.00% - 0.00% - 0.00% 2,126,886,729 38.35% 2,127,859,776 41.22% 2,089,790,810 43.90% 46,334,087 0.84% 40,389,885 0.78% 27,055,281 0.57% - 0.00% - 0.00% 3,120,287 0.07% 111,976 0.00% 146,674 0.00% 3,768,771 0.08% _ 7.290.582 0.13% 6.679 ,162 0,13% 8,389970 0.18% $ 5,545,275,797 100.00% $ 5,162,384,072 100.00% $ 4,760,642,926 100.00% (685.393.608) (789,839.701)(670.663,1261 $ 4,859.882 189 S 4,372.544.371 _$ 4.089 979.800 NOTE: Valuations shown are certified taxable assessed values reported by the Tarrant Appraisal District to the State Controller afPublicAccounts__Certifiedvaluesare-subjectto-than-ge--throughoutthe-years--eontested-valttes-are-resoivedandthE-Appraisal District updates records, 19 Taxable Appraised Value for Fiscal Year Ended September 30 1999 1998 _ % of % of Category Amount Total Amount Total Real, Residential, Single -Family $ 1,324,311,480 33.12% $ 1,269,695,241 35.14% Real, Residential, Multi -Family 117,908,272 2.95% 98,709,403 233% Real, Vacant Lots Tracts 72,832,010 1.82% 47,489,789 1.31% Real, Acreage (Land Only) 144,782,450 3.62% 112,224,673 3.11% Real, Farm and Ranch Improvements 3,879,434 0.10% 4,381,298 0.12% Real, Commercial 572,358,423 14.32% 387,770,795 10.73% Real, Industrial 8,731,223 0.22% 5,083,972 0.14% Real and Tangible Personal, Utilities 66,444,170 1.66% 64,098,691 1.77% Real, Mobile Homes 152,200 0.00% 143,000 0.00% Tangible Personal, Business - 0.00% Tangible Personal, Commercial 1,646,479,365 41.18% - 1,582,354,352 0.00% 43.79°l0 Tangible Personal, Industrial 26,974,631 0.67% 25,564,473 0.71% Tangible Personal, Mobile Homes 3,187,135 0.08% 3,162,915 0.09% Tangible Personal, Other 3,723,954 0.09% 3,741,821 0.10% Real Property, Inventory 6.450.400 0.16% 8.812.490 0.24% Total Appraised Value Before Exemptions $ 3,998,215,147 100.00% $ 3,613,232,913 100.00% Adjustments 348,874,464 (3,468,230) Less: Total Exemption/Reductions (352.418,481)_ (356,426.22,66 Taxable Assessed Value $ 3.994,671.130 $ 3.253,338,457 NOTE: Valuations shown are certified taxable assessed values reported by the Tarrant Appraisal District to the State Controller afPublicAccounts__Certifiedvaluesare-subjectto-than-ge--throughoutthe-years--eontested-valttes-are-resoivedandthE-Appraisal District updates records, 19 TABLE 3 - VALUATION AND GENERAL OBLIGATION DEBT HISTORY (1) Projected, includes the Bonds and Notes. Excludes the Refunded Bonds, preliminary, subject to change. TABLE 4 - TAX RATE, LEVY AND COLLECTION HISTORY Fiscal _ Nature of Property _ American Airlines Inc. Commercial Airline Grapevine Mills Ltd. Partnership Ratio Delta Airlines Inc. Fiscal GE Capital Services Distribution Taxable Tax Debt Tax Debt Funded Year General Taxable Assessed Outstanding to Taxable Debt Ended Estimated Assessed Valuation at End Assessed Per 9/30 Population Valuation Per Canita of Year Valuation Capita 1998 37,946 $ 3,253,338,457 $ 85,736 $ 95,546,968 2.94% $ 2,518 1999 39,190 3,994,671,130 101,931 103,132,152 2.58% 2,632 2000 42,059 4,089,979,800 97,244 143,995,000 3.52% 3,424 2001 42,443 4,372,544,371 103,022 156,815,000 3.59% 3,695 2002 44,390 4,859,882,189 109,481 158,060,000 3.25% 3,561 (1) Projected, includes the Bonds and Notes. Excludes the Refunded Bonds, preliminary, subject to change. TABLE 4 - TAX RATE, LEVY AND COLLECTION HISTORY Fiscal _ Nature of Property _ American Airlines Inc. Commercial Airline Grapevine Mills Ltd. Partnership Regional Shopping Mall Delta Airlines Inc. Year GE Capital Services Distribution _._Raytheon Systems -Inc.--____ -_ ____. - - - .-- --Airline Equipment - -- _ UPS Inc./United Parcel Service Ended Tax General Interest and Trade Center % Current % Total 9/30 Rate Fund Sinking Fund Tax Lew Collections Collections 1998 $ 0.40500 $ 0.276996 $ 0.128004 $ 13,176,597 98.67% 99.45% 1999 0.38500 0.218736 0.166264 13,935,727 99.13% 100.32% 2000 0.38000 0.201983 0.178017 15,371,388 99.41% 99.77% 2001 0.37500 0.189641 0.185359 16,333,571 98.80% 99.10% 2002 0.36600 0.135924 0.230076 17,787,169 In Process of Collection TABLE 5 - TEN LARGEST TAXPAYERS Name of Taxnaver _ Nature of Property _ American Airlines Inc. Commercial Airline Grapevine Mills Ltd. Partnership Regional Shopping Mall Delta Airlines Inc. Commercial Airline GE Capital Services Simuflite Training School _._Raytheon Systems -Inc.--____ -_ ____. - - - .-- --Airline Equipment - -- _ UPS Inc./United Parcel Service Parcel Service Cae Electronics Flight Simulators Industrial Development International Inc. Trade Center GTE Directories Real Estate Four Season Inc. Auto Parts 2001/02 % of Total Taxable Taxable Assessed Assessed Valuation Valuation $ 682,707,716 14.05% 189,747,534 3.90% 169,325,973 3.48% 95,731,471 1.97% 84-,9-363-1-0 __ __ 1-759fo 54,142,788 1.11% 50,000,000 1.03% 46,859,3 77 0.96% 44,586,116 0.92% _ 40.168,937 0.83% $ 1.458.206.422 30.00% GENERAL OBLIGATION DEBT LIAUTATION ... No general obligation debt limitation is imposed on the City under current State law or the City's Home Rule Charter (see "The Bonds and Notes — Tax Rate Limitation"). 20 TABLE 6 - TAX ADEQUACY(') 2002 Principal and Interest Requirements $ 11,820,005 $0.2457 Tax Rate at 99.00% Collection Produces $ 11,821,323 Average Annual Principal and Interest Requirements, 2002 - 2026 $ 6,172,571 $0.1283 Tax Rate at 99.00% Collection Produces $ 6,172,877 Maximum Principal and Interest Requirements, 2003 $ 12,035,621 $0.2502 Tax Rate at 99.00% Collection Produces $ 12,037,831 (1) includes the Bonds and Notes, less self-supporting debt. Excludes the Refunded Bonds; preliminary, subject to change. TABLE 7 - ESTIMATED OVERLAPPING DEBT Expenditures of the various taxing entities within the territory of the City are paid out of ad valorem taxes levied by such entities on properties within the City. Such entities are independent of the City and may incur borrowings to finance their expenditures. This statement of direct and estimated overlapping ad valorem tax bonds ("Tax Debt") was developed from information contained in "Texas Municipal Reports" published by the Municipal Advisory Council of Texas. Except for the amounts relating to the City, the City has not independently verified the accuracy or completeness of such information, and no person should rely upon such information as being accurate or complete. Furthermore, certain of the entities listed may have issued additional Tax Debt since the date hereof, and such entities may have programs requiring the issuance of substantial amounts of additional Tax Debt, the amount of which cannot be determined. The following table reflects the estimated share of overlapping Tax.Debt of the city. (1) Includes the Bonds and Notes, less self-supporting debt and Refunded Bonds. 21 2001/02 Net City's Taxable 2001/02 Total Estimated Overlapping Assessed Tax Funded % Funded Debt Taxine Jurisdiction Value Rate Debt Applicable As of 11-1-01 City of Grapevine $ 4,859,882,189 $ 0.366000 $ 107,890,000 (i) 100.00% $ 107,890,000 Carroll Independent School District 3,073,440,932 1.935000 165,379,086 5.38% 8,897,395 Copped Independent School District 4,810,770,703 1.655000 132,376,972 0.48% 635,409 Dallas County 123,661,472,213 0.196000 264,192,395 0.01% 26,419 Dallas County Community College District 127,870,716,165 0.060000 0 0.01% Dallas County Hospital District 123,661,472,213 0.254000 0 0.01% 0 0 Grapevine-Colleyville Independent School District 7,454,049,444 1.616790 255,595,813 67.47% 172,450,495 Tarrant County 73,565,639,997 0.274785 115,440,000 5.24% 6,049,056 Tarrant County Hospital District 73,565,639,997 0.234070 7,389,990 5.24% 4,480,462 Tarrant County Junior College District 74,516,564,260 0.106410 85,505,000 5.24% 387,235 Total Direct and Overlapping Funded Debt $ 300,816,472 Ratio of Direct and Overlapping Funded Debt to Taxable Assessed Valuation ............................................. 6.19% Per Capita Overlapping Funded Debt ......................................................... ....... 6,776.67 (1) Includes the Bonds and Notes, less self-supporting debt and Refunded Bonds. 21 DEBT INFORMATION TABLE 8 - PRO -FORMA GENERAL OBLIGATION DEBT SERVICE REQUIREMENTS Fiscal Year Total Less TIF Total Debt % of Ended Outstanding Debt t The Bonds (2) The Notes (7) Debt Self -Supporting Less TIF Principal 9/30 Principal Interest Principal Interest Principal Interest Requirements Requirements Requirements Retired 2002 $ 7,395,000 $ 8,776,088 $ 34,556 $ 16,205,644 $ 4,385,639 $ 11,820,005 2003 6,550,000 7,595,119 $ 1,315,000 $ 537,580 $ 345,000 69,112 16,411,810 4,376,189 12,035,621 2004 6,850,000 7,204,983 1,505,000 345,114 350,000 62,902 16,317,998 4,361,839 11,956,159 2005 7,285,000 6,820,553 1,205,000 307,398 360,000 54,047 16,031,998 5,083,559 10,948,439 2006 7,840,000 6,405,892 545,000 279,292 370,000 42,887 15,483,071 5,072,579 10,410,492 25.33% 2007 8,295,000 5,977,223 245,000 265,233 380,000 30,085 15,192,541 5,080,626 10,111,915 2008 8,560,000 5,541,099 255,000 255,528 395,000 15,721 15,022,348 5,083,698 9,938,650 2009 9,100,000 5,096,744 265,000 244,915 14,706,659 5,087,704 9,618,955 2010 8,880,000 4,643,903 275,000 233,423 14,032,325 5,092,610 8,939,715 2011 8,645,000 4,183,413 290,000 221,046 13,339,458 5,093,023 8,246,436 52.88% 2012 7,875,000 3,778,434 300,000 207,827 12,161,261 5,114,129 7,047,132 2013 7,980,000 3,385,633 315,000 193,630 11,874,262 5,135,360 6,738,902 2014 8,415,000 2,970,530 330,000 178,307 11,893,837 5,156,323 6,737,515 2015 8,745,000 2,526,285 345,000 161,935 11,778,220 5,180,118 6,598,102 2016 8,775,000 2,068,876 365,000 144,357 11,353,233 5,201,774 6,151,459 79.14% 2017 5,165,000 1,700,788 385,000 125,530 7,376,318 2,591,176 4,785,141 2018 4,550,000 1,440,959 405,000 105,501 6,501,460 2,591,939 3,909,521 2019 4,820,000 1,190,261 425,000 84,229 6,519,491 2,597,814 3,921,677 2020 3,060,000 976,404 445,000 61,782 4,543,186 2,602,404 1,940,782 2021 3,245,000 802,869 470,000 38,059 4,555,928 2,606,194 1,949,734 93.03% 2022 1,960,000 648,894 495,000 12,920 3,116,813 2,608,894 507,919 2023 2,075,000 533,744 2,608,744 2,608,744 0 2024 2,200,000 411,838 2,611,838 2,611,838 0 2025 2,335,000 282,588 2,617,588 2,617,588 0 2026 2,475,000 _ 145,406 2.620,406 2.620,406 0 100.00% $ 153,075,000 $ 85.108,521 $ 10.180 000 $ 4,003,603 $ 2,200 000 310 $ 232.201,932 $ 82.286.094 $ 149.915.837 (1) "Outstanding Debt" includes lease/purchase obligations and self-supporting debt. Excludes the Refunded Bonds. Preliminary, subject to change. (2) Average life of the issue - 8.490 years. Preliminary, subject to change. (3) Average life of the issue - 4.080 years. Preliminary, subject to change. TABLE 9 - INTEREST AND SINKING FUND BUDGET PROJECTION Tax Supported Debt Service Requirements, Fiscal Year Ending 9/30/2002 .............................. $ 11,687,815 111 Interest and Sinking Fund Balance as of 9/30/01 ................................. $ 1,769,652 Interest and Sinking Fund Tax Levy ........................................... 10,178,825 Penalty and Interest........................................................ 65,000 Budgeted Transfers 121 ......................................................... 1,406,173 Estimated Investment Income ...................................... . ........ . . . 175,000 13,594,650 Estimated Balance,9/30/2002................................................................. $ 1,906,835 (1) Excludes TIF self-supporting debt service. (2) Includes Golf Course user fees. 22 TABLE 10 - COMPUTATION OF SELF-SUPPORTING DEBT BeginningFund Balance, 9-30-01(`)........................................................................................................................................ $ 5,754,789 Projected Net Tax Increment Reinvestment Zone Revenue Available for Debt Service........................................................ 4,381,884 Requirements for Tax Increment Reinvestment Zone Certificates.......................................................................................... _(4,385,639) ProjectedFund Balance, 9-30-02............................................................................................................................................. $ 5,751,034 Percentage of Tax Increment Reinvestment Zone Revenue Certificates Self-Supporting...................................................... 100.00% TABLE 11 - AUTHORIZED BUT UNISSUED GENERAL OBLIGATION BONDS Amount Amount Date Amount Previously Being Unissued Purpose Authorized Authorized Issued Issued Balance Street Improvements 12/5/98 S 30,245,000 $ 13,610,000 $ 6,250,000 $ 10,385,000 ANTICIPATED ISSUANCE OF GENERAL OBLIGATION DEBT ... The City does not anticipate the issuance of additional general obligation debt within the next six months. TABLE 12 - OTHER OBLIGATIONS The City has no unfunded debt outstanding as of September 30, 2001 PENSION FUND ... The City provides pension benefits for all of its full-time employees through the Texas Municipal Retirement System ("TMRS"), a State-wide administered pension plan. The City makes annual contributions to the plan equal to the amounts accrued for pension expense. (For more detailed information concerning the retirement plan, see Appendix B, "Excerpts from the City's Annual Financial Report".) (The remainder of this page left blank intentionally) 23 FINANCIAL INFORMATION TABLE 13 - GENERAL FUND REVENUES AND EXPENDITURE HISTORY 24 Fiscal Year Ended Sentember 30 &moues 2001 2000 1999 1998 1997 Taxes $ 29,239,672 $ 27,051,303 $ 25,160,401 $ 23,365,424 $ 19,061,690 Licenses and Permits 1,146,428 1,494,428 1,163,306 1,246,991 1,491,997 Intergovernmental 49,187 182,863 190,189 216,171 221,844 Charges for Services 2,984,179 3,003,353 2,693,057 2,522,115 1,984,238 Fines and Forfeitures 2,149,638 2,360,028 1,850,076 1,599,870 1,482,489 Interest and Miscellaneous 876,507 _ 776,140 _ 687,619 865,135 477,206 Total Revenues $ 36,445,611 $ 34,868,115 $ 31,744,648 $ 29,815,706 _ $ 24,719,464 Ewes General Government $ 10,510,527 $ 5,683,237 $ 5,625,351 $ 4,792,874 $ 5,452,213 Public Safety 17,640,884 15,404,767 13,245,400 12,098,657 9,965,868 Culture and Recreation 5,737,648 5,183,727 4,519,957 4,021,478 3,222,997 Public Works 6,067,277 5,657,648 5,062,397 4,188,152 3,546,854 Total Expenditures $ 39,956,336 $ 31,929,379 $ 28,453,105 $ 25,101,161 $ 22,187,932 Excess (deficiency) of Revenues Over Expenditures $ (3,510,725) $ 2,938,736 $ 3,291,543 $ 4,714,545 $ 2,531,532 Bond Proceeds $ 4,332,723 $ - $ _ Budgeted Transfers In 400,000 13,090 14,170 104,208 Budgeted Transfers Out (1,295,979) (2,098,598) (1,900,345) (5,610,764) (2,406,216) Total Transfers $ 3,436,744 $ (2,098,598) $ (1,887,255) $ (5,596,594) $ (2,302,008) Net Increase (Decrease) $ (73,981) $ 840,138 $ 1,404,288 $ (882,049) $ 229,524 Other Miscellaneous Adjustments - - 898,214 Residual Equity Transfer - 1,172 79,788 (86,261) Beginning Fund Balance 7,732,646 6,891,336 5,407,260 _ 6,289.309 5,247,832 Ending Fund Balance $ 7,658,665 $ 7,732,646 $ 6,891,336 $ 5,407,260 _ $ 6,289,309 24 TABLE 14 - MUNICIPAL SALES TAX HISTORY The City has adopted the Municipal Sales and Use Tax Act, V.A.T. C.S., Tax Code, Chapter 321, which grants the City the power to impose and levy a 1% Local Sales and Use Tax within the City; the proceeds are credited to the General Fund and are not pledged to the payment of the Bonds and Notes. Collections and enforcements are effected through the offices of the Comptroller of Public Accounts, State of Texas, who remits the proceeds of the tax, after deduction of a 2% service fee, to the City monthly. Fiscal Year % of Equivalent of Ended Total Ad Valorem Ad Valorem Per 9/30 Collected Tax Levy Tax Rate Capita 1997 $ 6,665,625 51.40% $ 0.2133 $ 185 1998 10,556,089 80.11% 0.3245 278 1999 13,058,268 93.70% 0.3269 333 2000 14,340,693 93.29% 0.3506 341 2001 16,048,266 98.25% 0.3670 378 FINANCIAL POLICIES Basis of Accounting ... The City's accounting records of the governmental fund revenues and expenditures are recognized on the modified accrual basis. Revenues are recognized in the accounting period in which they are available and measurable. Expenditures are recognized in the accounting period in which the fund liability occurred, if measurable, except for unmatured interest on general long-term debt. Proprietary Fund revenues and expenses are recognized on the full accrual basis. Revenues are recognized in the accounting period in which they are earned and become measurable. Expenses are recognized in the accounting period in which they are incurred. Fund Balances ... It is the City's policy regarding the General Fund and Enterprise Funds that working capital resources should be maintained at a minimum of 10% of the Fund's operating expenditure budget. The City maintains its various debt service funds in accordance with the covenants of the bond ordinances. Use of Bond Proceeds... The City's policy is to use bond proceeds for capital expenditures only. Such revenues are never to be used to fund normal City operations. Budgetary Procedures... The City Charter establishes the fiscal year as the twelve-month period beginning each October 1. Each year between May and July, the City Manager, analyzes and then after review, submits a budget of estimated revenues and expenditures to the City Council. Subsequently, the City Council will hold work sessions to discuss and amend the budget to coincide with their direction of the City. Various public hearings may be held to comply with state and local statutes. The City Council will adopt a budget prior to September 30. If the Council fails to adopt a budget then the budget presented to the Council by the City __Manager becomes _the__adopied budget During the fiscal year, budgetary control is maintained by the monthly review of departmental appropriation balances. Actual operations are compared to the amounts set forth in the budget. Departmental appropriations that have not been expended lapse at the end of the fiscal year. Therefore, funds that were budgeted and not used by the departments during the fiscal year are not available for their use unless appropriated in the ensuing fiscal year's budget. 25 INVESTMENTS The City invests its investable funds in investments authorized by Texas law in accordance with investment policies approved by the City Council of the City. Both state law and the City's investment policies are subject to change. LEGAL INVESTMENTS ... Under Texas law, the City 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, (5) 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 issued, assumed or guaranteed by the State of Israel, (7) certificates of deposit that are guaranteed or insured by the Federal Deposit Insurance Corporation or are secured as to principal by obligations described in the preceding clauses or in any other manner and amount provided by law for City deposits, (8) certificates of deposit and share certificates issued by a state or federal credit union domiciled in the State of Texas that are guaranteed or insured by the Federal Deposit Insurance Corporation or the National Credit Union Share Insurance Fund, or are secured as to principal by obligations described in the clauses (1) through (6) or in any other manner and amount provided by law for City deposits, (9) fully collateralized repurchase agreements that have a defined termination date, are fully secured by obligations described in clause (1), and are placed through a primary government securities dealer or a financial institution doing business in the State of Texas, (10) 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, (11) commercial paper that is rated at least A-1 or P-1 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, (12) no-load money market mutual funds regulated by the Securities and Exchange Commission that have 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 for each share, (13) no-load mutual funds registered with the Securities and Exchange Commission that: have an average weighted maturity of less than two years; invests 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; provided, however, that the City is not authorized to invest in the aggregate more than 15 percent of its monthly average fund balance, excluding bond proceeds and reserves and other funds held for debt service, in such no-load mutual funds, and (14) 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 City 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 AA+m or an equivalent by at least one nationally recognized rating service. The City 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 City 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 uivestment management; and that inclu-des a7ist of auth(5 zee- investments for City funds, maximum allowable stated maturity of any individual investment and the maximum average dollar -weighted maturity allowed for pooled fund groups. All City 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, City 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 City shall submit an investment report detailing: (1) the investment position of the City, (2) that all investment officers jointly prepared and signed the report, (3) the beginning market value, any additions and changes to market value and the ending value of each pooled fund group, (4) the book value and market value of each separately listed asset at the beginning_and end of the_ - reportrng pen`oc� 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 City funds without express written authority from the City Council. 26 ADDITIONAL PROVISIONS ... Under Texas law the City 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 City to: (a) receive and review the City's investment policy, (b) acknowledge that reasonable controls and procedures have been implemented to preclude imprudent investment activities, and (c) deliver a written statement attesting to these requirements; (4) perform an annual audit of the management controls on investments and adherence to the City's investment policy; (5) provide specific investment training for the Treasurer, Chief Financial Officer and investment officers; (6) restrict reverse repurchase agreements to not more than 90 days and restrict the investment of reverse repurchase agreement funds to no greater than the term of the reverse repurchase agreement; (7) restrict the investment in non -money market mutual funds of any portion of bond proceeds, reserves and funds held for debt service 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 (8) require local government investment pools to conform to the new disclosure, rating, net asset value, yield calculation, and advisory board requirements. TABLE 15 - CURRENT INVESTMENTS As of January 1, 2002, the City's investable funds were invested in the following categories: (1) includes TexPool, a local government investment pool under the control of the Texas Comptroller of Public Accounts. The Comptroller has engaged JP Morgan Chase Bank, and its affiliates, to provide investment management and fund accounting services for TexPool. First Southwest Asset Management, Inc., an affiliate of First Southwest Company, provides customer service and marketing for the pool. TexPool currently maintains a AAAm rating from Standard & Poor's. The Pool's investment objectives include achieving a stable net asset value of $1.00 per share. Daily investment or redemption of funds is allowed by the participants. (The Remainder of This Page Left Blank Intentionally) 27 Book Market Description Percent Value Value Treasury Notes/Bonds/CD/EQ 8.51% $ 8,585,388 $ 8,603,329 Investment Pools ti) 91.49% _ 92.354,230 _ 92,354,230 100.00% $ 100,939,618 $ 100,957,559 (1) includes TexPool, a local government investment pool under the control of the Texas Comptroller of Public Accounts. The Comptroller has engaged JP Morgan Chase Bank, and its affiliates, to provide investment management and fund accounting services for TexPool. First Southwest Asset Management, Inc., an affiliate of First Southwest Company, provides customer service and marketing for the pool. TexPool currently maintains a AAAm rating from Standard & Poor's. The Pool's investment objectives include achieving a stable net asset value of $1.00 per share. Daily investment or redemption of funds is allowed by the participants. (The Remainder of This Page Left Blank Intentionally) 27 TAX MATTERS TAX EXEMPTION ... In the opinion of Vinson & Elkins L.L.P., Bond Counsel, (i) interest on the Obligations is excludable from gross income for federal income tax purposes under existing law and (ii) the Obligations are not "private activity bonds" under the Internal Revenue Code of 1986, as amended (the "Code"), and interest on the Obligations 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 Obligations, to be excludable from gross income for federal income tax purposes. These requirements include limitations on the use of proceeds and the source of repayment, limitations on the investment of proceeds prior to expenditure, a requirement that excess arbitrage earned on the investment of proceeds be paid periodically to the United States, and requirement that the issuer file an information report with the Internal Revenue Service. The City has covenanted in the respective Ordinances that it will comply with these requirements. Bond Counsel's opinion will assume continuing compliance with the covenants of the Ordinances pertaining to those sections of the Code which affect the exclusion from gross income of interest on the Obligations for federal income tax purposes and, in addition, will rely on representations by the City, the City's Financial Advisor and the Underwriters with respect to matters solely within the knowledge of the City, the City's Financial Advisor and the Underwriters, respectively, which Bond Counsel has not independently verified. If the Ci-ty should fail to comply with the covenants in the respective Ordinances or if the foregoing representations should be determined to.be inaccurate or incomplete, interest on the Obligations could become taxable from the date of delivery of the Obligations, 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 corporation, if the amount of such alternative minimum tax is greater than the amount of the corporation's regular 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 Obligations, is included in a corporation's "adjusted current earnings," ownership of the Obligations 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 Obligations, received or accrued during the year. Except as stated above, and as stated below in "Tax Accounting Treatment of Original Issue Discount Obligations", 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 Obligations. Prospective purchasers of the Obligations 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 U.S. may be subject to the "branch profits tax" on their effectively -connected earnings and profits including tax-exempt interest such as interest on the Obligations. These categories of prospective purchasers should consult their own tax advisors as to the applicability of these consequences. Bond Counsel's opinions are based on existing law, which is subject to change. Such opinions are further based on Bond Counsel's knowledge of facts as of the date hereof. Bond Counsel assumes no duty to update or supplement its opinions to reflect any facts or circumstances that may thereafter come to Bond Counsel's attention or to reflect any changes in any law that may thereafter occur or become effective. Moreover, Bond Counsel's opinions are not a guarantee of result and are not binding on the Internal Revenue Service (the "Service"); rather, such opinions represent Bond Counsel's legal judgment based upon its review of existing law and in reliance upon the representations and covenants referenced above that it deems relevant to such opinions. The Service 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 Service will commence an audit of the Obligations. If an audit is commenced, in accordance with its current published procedures the Service is likely to treat the City as the taxpayer and the Owners of the Obligations may not have a right to participate in such audit. Public awareness of any future audit of the Obligations could adversely affect the value and liquidity of the Obligations during the pendency of the audit regardless of the ultimate outcome of the audit. 28 TAX ACCOUNTING TREATMENT OF ORIGINAL ISSUE DISCOUNT OBLIGATIONS ... The initial public Offering price for certain Of the respective Obligations may be less than the principal amount thereof (the "Original Issue Discount Obligations"). In such case, Bond 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 Obligation, and (ii) the initial offering price to the public of such Original Issue Discount Obligation constitutes original issue discount with respect to such Original Issue Discount Obligation in the hands of any owner who has purchased such Original Issue Discount Obligation in the initial public offering of the Obligations; 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 Obligation equal to that portion of the amount of such original issue discount allocable to the period that such Original Issue Discount Obligation continues to be owned by such owner. In the event of the redemption, sale or other taxable disposition of such Original Issue Discount Obligation prior to stated maturity, however, the amount realized by such owner in excess of the basis of such Original Issue Discount Obligation 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 Obligation 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 Obligations under the caption "Tax Exemption" generally applies, except as otherwise provided below, to original issue discount on an Original Issue Discount Obligation held by an owner who purchased such Obligation at the initial offering price in the initial public offering of the Obligations, and should be considered in connection with the discussion in this portion of the Official Statement.) In rendering the foregoing opinion, Bond Counsel will assume, in reliance upon certain representations of the Underwriters, that (a) the Underwriters has purchased the Obligations for contemporaneous sale to the public and (b) all of the Original Issue Discount Obligations have been initially offered, and a substantial amount of each maturity thereof has been sold, to the general public in arm's-length transactions for a price (and with no other consideration being included) not more than the initial offering prices thereof. Neither the City nor Bond Counsel warrants that the Original Issue Discount Obligations will be offered and sold in accordance with such assumptions. Certain of the representations of the initial purchaser, upon which Bond Counsel will rely in rendering the foregoing opinion, will be based on records or facts the initial purchaser had no reason to believe were not correct. Under existing law, the original issue discount on each Original Issue Discount Obligation 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 semi-annual anniversary dates of the date of the Obligations 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 Obligation 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 Obligation. The federal income tax consequences of the purchase, ownership, and redemption, sale. or other disposition of Original Issue -� D-1SCOUIit ObligationWhich are nn0 -purchased-int�'le rnitiaroffering at the initial offering price may be determined according to rules which differ from those described above. All owners of Original Issue Discount Obligations 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 Obligations 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 Obligations. OTHER INFORMATION RATINGS The presently outstanding tax supported debt of the City is rated "Al" by Moody's and "A+" by S&P. The City also has issues outstanding which are rated "Aaa" by Moody's and "AAA" by S&P through insurance by various commercial insurance_._ companies. app—Il cations or contract ratings on these issues have been made to Moody's and S&P. An explanation of the significance of such ratings may be obtained from the company furnishing the rating. The ratings reflect only the respective views of such organization and the City makes no representation as to the appropriateness of the ratings. There is no assurance that such ratings will continue for any given period of time or that they will not be revised downward or withdrawn entirely by either or both of such rating companies, if in the judgment of either or both companies, circumstances so warrant. Any such downward revision or withdrawal of such ratings, or either of them, may have an adverse effect on the market price of the Bonds and Notes. LITIGATION 29 It is the opinion of the City Attorney and City Staff that there is no pending litigation against the City that would have a material adverse financial impact upon the City or its operations. REGISTRATION AND QUALIFICATION OF BONDS AND NOTES FOR SALE The sale of the Bonds and Notes 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 Bonds and Notes have not been qualified under the Securities Act of Texas in reliance upon various exemptions contained therein; nor have the Bonds or Notes been qualified under the securities acts of any jurisdiction. The City assumes no responsibility for qualification of the Bonds or Notes under the securities laws of any jurisdiction in which the Bonds and Notes may be sold, assigned, pledged, hypothecated or otherwise transferred. This disclaimer of responsibility for qualification for sale or other disposition of the Bonds and Notes shall not be construed as an interpretation of any kind with regard to the availability of any exemption from securities registration provisions. LEGAL INVESTMENTS AND ELIGIBILITY TO SECURE PUBLIC FUNDS IN TEXAS Section 1201.041 of the Public Security Procedures Act (Chapter 1201, Texas Government Code) provides that the Obligations are negotiable instruments governed by Chapter 8, Texas Business and Commerce Code, and are legal and authorized investments for insurance companies, fiduciaries, and trustees, and for the sinking funds of municipalities or other political subdivisions or public agencies of the State of Texas. With respect to investment in the Obligations by municipalities or other political subdivisions or public agencies of the State of Texas, the Public Funds Investment Act, Chapter 2256, Texas Government Code, requires that the Obligations be assigned a rating of "A" or its equivalent as to investment quality by a national rating agency. See "OTHER INFORMATION - Ratings" herein. In addition, various provisions of the Texas Finance Code provide that, subject to a prudent investor standard, the Obligations are legal investments for state banks, savings banks, trust companies with at capital of one million dollars or more, and savings and loan associations. The Obligations are eligible to secure deposits of any public funds of the State, its agencies, and its political subdivisions, and are legal security for those deposits to the extent of their market value. No review by the City has been made of the laws in other states to determine whether the Obligations are legal investments for various institutions in those states. LEGAL MATTERS The City will furnish a complete transcript of proceedings incident to the authorization and issuance of the Bonds and Notes, including the approving legal opinion of the Attorney General of the State of Texas to the effect that the Initial Bond is a valid and binding obligation of the City, and based upon examination of such transcript of proceedings, the approving legal opinion of Bond Counsel to the effect that the Bonds and Notes issued in compliance with the provisions of the Bond Ordinance and Note Ordinance are valid and legally binding obligations of the City and the interest on such Bonds and Notes is excludable from gross income for federal income tax purposes under existing law and the Bonds and Notes are not private activity bonds, subject to the matters described under "Tax Matters" herein. A form of such opinion is attached hereto as Appendix C. Bond Counsel did not take part in the preparation of the Official Statement, and such firm has not assumed any responsibility with respect thereto or undertaken independently to verify any, of the information contained therein, except that, in its capacity as Bond Counsel, such firm has reviewed the information describing the Bonds and Notes in the Official Statement under the captions "Plan of Financing" (except under the subcaption "Sources and Uses of Funds") "The Bonds and Notes" (except for the subcaption "Book -Entry -Only System"), "Tax Matters" and "Continuing Disclosure of Information" (except for "Compliance with Prior Undertakings") and the subcaptions "Legal Investments and Eligibility to Secure Public Fund in Texas", and — _ _ — Legal�GIatters" ttttd th �a�st on "�Jtiier Iri%ririation" aridis of the opuuori ihdf trie mfomiariori relating to -Tie Bonds and Notes and the Bond Ordinance and Note Ordinance contained therein fairly and accurately describe the provisions thereof. The legal fees to be paid Bond Counsel for services rendered in connection with the issuance of the Bonds and Notes are contingent on the sale and delivery of the Bonds and Notes. The legal opinion will accompany the Bonds and Notes deposited with DTC or will be printed on the Bonds and Notes in the event of the discontinuance of the Book -Entry -Only System. Certain legal matters will be passed upon for the Underwriter(s) by Fulbright & Jaworski, L.L.P., Dallas, Texas, Counsel to the Underwriter(s). AUTHENTICITY OF FINANCIAL DATA AND OTBER INFORMATION The financial data and other information contained herein have been obtained from City records, audited financial statements and other sources, which 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 resolutions contained in this Preliminary Official Statement__ -are m�su'ject to a o t—h. e provisions -or such statutes, documents and resolutions. 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. 30 CONTINUING DISCLOSURE OF INFORMATION In the Bond Ordinance and the Note Ordinance, the City has made the following agreement for the benefit of the holders and beneficial owners of the Bonds and Notes. The City is required to observe the agreement for so long as it remains obligated to advance funds to pay the Bonds or Notes. Under the agreement, the City 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. ANNUAL REPORTS ... The City 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 City of the general type included in this Preliminary Official Statement under Tables numbered 1 through 6 and 8 through 15 and in Appendix B. The City will update and provide this information within six months after the end of each fiscal year ending in or after 2002. The City 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 State of Texas and approved by the staff of the United States Securities and Exchange Commission (the "SEC'). The City 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 updated information will include audited financial statements, if the City commissions an audit and it is completed by the required time. If audited financial statements are not available by the required time, the City will provide unaudited financial statements by the required time and audited financial statements when and if such audited financial statements become available. Any such financial statements will be prepared in accordance with the accounting principles described in Appendix B or such other accounting principles as the City may be required to employ from time to time pursuant to state law or regulation. The City's current fiscal year end is September 30. Accordingly, it must provide updated information by March 31 in each year, unless the City changes its fiscal year. If the City changes its fiscal year, it will notify each NRMSIR and the SID of the change. The Municipal Advisory Council of Texas has been designated by the State of Texas and approved by the SEC staff as a qualified SID. The address of the Municipal Advisory Council is 600 West 8th Street, P. O. Box 2177, Austin, Texas 78768- 2177, and its telephone number is 512/476-6947. MATERIAL EvENT NOTICES ... The City will also provide timely notices of certain events to certain information vendors. The City will provide notice of any of the following events with respect to the Bonds and Notes, if such event is material to .a. decision to purchase or sell Bonds and Notes: (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 Bonds or Notes; (7) modifications to rights of holders of the Bonds or Notes; (8) Bond or Note calls; (9) defeasances; (10) release, substitution, or sale of property securing repayment of the Bonds or Notes; and (11) rating changes. (Neither the Bonds, the Notes nor the respective Ordinances make any provision for debt service reserves or liquidity enhancement.) In addition, the City will provide timely notice of any failure by the City to provide information, data, or financial statements in accordance with its agreement described above under "Annual Reports." The City will provide each notice described in this paragraph to the SID and to either each NRMSIR or the Municipal Securities Rulemaking Board ("MSRB"), AvAiLABILITY OF INFORMATION FROM NRMSIRS AND SID ... The City has agreed to provide the foregoing information only to NRMSIRs and the SID. The information will be available to holders of Bonds and Notes 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. LIMITATIONS AND AMENDMENTS ... The City has agreed to update information and to provide notices of material events only as described above. The City 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 City makes no representation or warranty concerning such information or concerning its usefulness to a decision to invest in or sell Bonds or Notes at any future date. The City disclaims any contractual or tort liability for damages resulting in whole or in part from any breach of its continuing disclosure aQreernent or from anv statement made _ pursuant to its agreement, although holders of Bonds or Notes, or both, may seek a writ of mandamus to compel the City to comply with its agreement. The City 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 City, if (i) the agreement, as amended, would have permitted an underwriter to purchase or sell Bonds or Notes 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 (ii) either (a) the holders of a majority in aggregate principal amount of the outstanding Bonds or Notes, as the case may be, consent to the amendment or (b) any person unaffiliated with the City (such 31 as nationally recognized bond counsel) determines that the amendment will not materially impair the interests of the holders and beneficial owners of the Bonds or Notes, as the case may be. The City may also amend or repeal the provisions of this continuing disclosure agreements if the SEC amends or repeals the applicable provisions of the SEC Rule 15c2-12 or a court of final jurisdiction enters judgment that such provisions of the SEC Rule 15c2-12 are invalid, but only if and to the extent that the provisions of this sentence would not prevent an underwriter from lawfully purchasing or selling Bonds or Notes in the primary offering thereof. If the City 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 "Annual Reports" 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 City has complied in all material respects with all continuing disclosure agreements made by it in accordance with SEC Rule 15c2-12. FINANCIAL ADVISOR First Southwest Company is employed as Financial Advisor to the City in connection with the issuance of the Obligations. The Financial Advisor's fee for services rendered with respect to the sale of the Obligations is contingent upon the issuance and delivery of the Obligations. First Southwest Company, in its capacity as Financial Advisor, has relied on the opinion of 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 Obligations, or the possible impact of any present, pending or future actions taken by any legislative or judicial bodies. The Financial Advisor to the City has provided the following sentence for inclusion in this Official Statement. The Financial Advisor has reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities to the City and, as applicable, to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Financial Advisor does not guarantee the accuracy or completeness of such information. FORWARD-LOOKING STATEMENTS DISCLAIMER The statements contained in this Official Statement, and in any other information provided by the City, that are not purely historical, are forward-looking statements, including statements regarding the City' expectations, hopes, intentions, or strategies regarding the future. Readers should not place undue reliance on forward-looking statements. All forward-looking statements included in this Official Statement are based on information available to the City on the date hereof, and the City assumes no obligation to update any such forward-looking statements. The City' actual results could differ materially from those discussed in such forward-looking statements. The forward-looking statements included herein are necessarily based on various assumptions and estimates and are inherently subject to various risks and uncertainties, including risks and uncertainties relating to the possible invalidity of the underlying assumptions and estimates and possible changes or developments in social, economic, business, industry, market, legal, and regulatory circumstances and conditions and actions taken or omitted to be taken by third parties, including customers, suppliers, business partners and competitors, and legislative, judicial, and other governmental authorities and officials. Assumptions related to the foregoing involve judgements with respect to, among other things, future economic, competitive, and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the City. Any of such assumptions could be inaccurate and, therefore, there can be no assurance that the �orwar�c-Tooking statements incru3ed in thisZJfficiartatement wiT1 prove to be accurate. — — -- --- - UNDERWRITING The Underwriters have agreed, subject to certain conditions, to purchase the Bonds from the City, at an underwriting discount of S . The Underwriters have agreed, subject to certain conditions, to purchase the Notes from the City, at an underwriting discount of S The Underwriters will be obligated to purchase all of the Obligations if any Obligations are purchased. The Obligations to be offered to the public may be offered and sold to certain dealers (including the Underwriters and other dealers depositing Obligations into investment trusts) at prices lower than the public offering prices of such Obligations, and such public offering prices may be changed, from time to time, by the Underwriters. 32 APPROVAL OF OFFICIAL STATEMENT The Ordinances will also approve the form and content of this Official Statement, and any addenda, supplement or amendment thereto, and authorize its further use in the reoffering of the Bonds and Notes by the Underwriters. ATTEST: /s/ LINDA HUFF City Secretary 33 /s/ WILLIAM D. TATE Mayor City of Grapevine, Texas Schedule I SCHEDULE OF REFUNDED BONDS* General Obligation Refunding Bonds, Series 1992 Original Maturity Interest Principal Dated Date Date Rate Amount 1/15/92 2/1/03 5.95% $ 1,180,000 2/1/04 6.00% 1,250,000 2/1/05 6.10% 980,000 2/l/06 6.15% 330,000 The 2003 - 2006 maturities will be redeemed prior to original maturity on April 23, 2002 at par. * Preliminary, subject to change. APPENDIX A GENERAL INFORMATION REGARDING THE CITY (Insert Map) THE CITY ... The City is a political subdivision of the State of Texas incorporated in 1907 and operates as a home -rule City under the general laws of the State of Texas and a charter approved by the voters in 1965. The City has a Council/Manager form of government in which the mayor and six council members are elected for staggered three-year terms with elections held annually in May. Policy making is the responsibility of, and vested in, the City Council. The Council delegates the operational authority of the City to the City Manager who is the chief administrative officer of the City. The City provides all the functions normally associated with a municipality including, but not limited to, public safety (i.e., police and fire personnel and equipment), health inspection and enforcement, water and sewer facilities, streets and drainage facilities and parks and recreational facilities. The City presently employs approximately 434 full-time staff members. POPULATION ... The City has had significant population growth during the past several years. These population estimates are as follows: Year Population Source Year Population Source 1970 7,023 U.S. Census 1991 30,300 City Estimate 1980 11,801 U.S. Census 1992 31,400 City Estimate 1981 15,245 Grapevine Community Profile 1993 31,902 City Estimate 1982 16,183 Grapevine Community Profile 1994 32,727 City Estimate 1983 18,121 Grapevine Community Profile 1995 33,211 City Estimate 1984 19,405 Grapevine Community Profile 1996 34,950 City Estimate 1985 22,002 Grapevine Community Profile 1997 36,000 City Estimate 1986 24,493 Grapevine Community Profile 1998 37,946 City Estimate 1987 25,853 Grapevine Community Profile 1999 39,190 City Estimate 1988 27,132 City Esti-nate 2000 42,059 U.S. Census 1989 27,257 City Estimate 2001 42,443 City Estimate 1990 29,202 U.S. Census 2002 44,390 City Estimate ECONoNucs ... The proximity of the Dallas/Fort Worth International Airport ("DFW") greatly influences both industrial and residential growth of the City. DFW has been and is expected to continue to be an economic generator of employment, spin-off businesses and tax base, all of which benefit the City and the surrounding area. Approximately 65% of the airport is within the city limits of Grapevine. Several large business operations owe their genesis to DFW including air cargo services, flight kitchens, rent/lease car operations and SirnuFlite Training International, a company which provides jet pilot flight training in advanced flight simulators. Seven of the ten largest taxpayers of the City are directly related to DFW either by location or primary business sources. DFW contains approximately 18,000 acres and directly employs some 33,000 personnel. These employees have skills ranging from custodial level to highly trained jet aircraft pilots. A number of these people have purchased homes in the City and conduct their -- - daily business -here. - - - - - - - - ------------- DFW -------- - DFW has approximately 19,400 parking spaces and is currently expanding parking facilities. Sales tax from parking fees generate about $330,000 in annual income for the City and hotels providing service for travelers at DFW and seminar space for business meetings generate approximately $2.0 million in annual hotel/motel tax revenue. EMPLOYMENT ... The labor market in the City continues to be strong. Employment figures ftnnished by Texas Employment Commission are: A-1 September Annual Annual Annual Annual Annual 2001 2000 1999 1998 1997 1996 LabonEorce. 22, 6--7 2,15-757 - 2-1;309- 20j7-96 20-;096 1-9,790- Employed 22,032 21,393 20,956 20,430 19,705 19,377 Unemployed 535 364 353 366 391 413 Percent of Unemployed 2.37% 1.67% 1.66% 1.76% 1.95% 2.09% A-1 MAJOR EMPLOYERS Companv Dallas/Fort Worth International Airport Grapevine/Colleyville Independent School District United Parcel Service GTE Directory Corporation Baylor Medical Center Hyatt Regency Hotel City of Grapevine D/FW Hilton Hotel Super Shuttle SimuFlite Training International Embassy Suites Trencor Source: City of Grapevine, Department of Development Services. Product Estimated Number of Employees Airport 33,000 School District 1,656 Parcel Service 1,218 Yellow Pages Directory 1,200 Health Services 874 Hotel 815 City Government 474 Hotel 380 Airport Shuttle Service 320 Pilot Training 260 Hotel 250 Heavy Equipment Manufacturing 180 BANKiVG AND FiNANcuL ... Banking facilities for the City are provided by four banks, the Texas Bank of Grapevine, the First State Bank of Grapevine, Frost Bank and a branch of NationsBank of Texas, Independent National Bank , Bank One and of Bank of America. Also located in the City is a branch of the Omni Federal Credit Union. Source: City of Grapevine, Finance Department. BUILDING PERMITS ... The number and value of building permits issued by the City are: Fiscal Commercial Permits Residential Permits Total Year Number Number Number Ended of Dollar of Dollar of Dollar 9/30 Permits Value Permits Value Permits Value 1997 39 $ 105,827,449 182 $ 40,113,663 221 S 145,941,112 1998 35 85,231,406 228 37,995,929 263 123,227,335 1999 32 59,920,763 185 21,026,688 217 80,947,451 2000 56 84,742,336 211 56,040,989 267 140,783,325 2001 53 364,294,642 89 12,445,025 142 376,739,667 Source: City of -Grapevine records - _. RECREATION ... Located approximately two miles north of the downtown area of the City lies Grapevine Lake. The lake serves as the City reservoir and supplies approximately 50% of the water supply of the City. The lake covers a surface area of approximately 12,740 acres and has a shore line of 146 miles. The lake is 19 miles long and 2.5 miles wide at its widest point. The lake is owned and operated by the U.S. Corps of Engineers and is a major recreation area for swimming, fishing, picnicking and camping and draws some five million visitors each year to the area. The City also has an extensive park system which includes tennis courts, racquetball courts, baseball and softball diamonds, football and soccer fields, a jogging and biking trail, swimming pool and picnic areas. The City also owns and operates an 18 -hole golf course and has plans for a 9 -hole expansion. TRANSPORTATION... Tile qty is m the center of a highway network that includes seven spokes of an extensive highway system; six U.S. highways, seven major state highways and one interstate highway. This network connects the City to all major entrances to both Dallas and Fort Worth and with major highway systems both north/south and east/west. There are 43 motor freight lines providing service to the City and the City is within the Dallas and Fort Worth Commercial Zone for deliveries. Railroad service is offered by the Cotton Belt Railroad and the Southern Pacific Railroad, both with daily switching service. Greyhound/Trailways Bus Lines provides the City with surface bus transportation. A-2 HOTEL AND CONVENTION FACILITIES... There are three major hotels in the City and several other hotels and motels adjacent to the City near DFW. The Hyatt Regency DFW is located on the airport and provides 1,450 rooms, one of the largest hotels in Texas. The Hyatt provides more than 130,000 square feet of meeting and convention facilities, five dining facilities, availability to two 18 -hole championship golf courses, tennis courts, heated swimming pool and health spa and jogging trails. The D/FW Airport Hilton and Executive Conference Center is a 400 -room hotel located 2.5 miles north of DFW offering a 14,400 square foot exhibit hall and ballroom that can accommodate 900 banquet guests. Also provided are three restaurants, tennis, courts, racquetball courts, indoor and outdoor swimming pools, steam room, health club and lighted jogging trails. Adjacent to the hotel is the Austin Ranch where horseback riding and other western events are available to hotel guests. The Embassy Suites Conference Center is a 12 -story, 329 -room hotel located just north of DFW Airport. The Embassy Suites offers a 12,640 square foot conference center and ballroom, a 3,432 square foot junior ballroom and 14 other meeting rooms. Also provided is a state-of-the-art fitness center, a heated indoor swimming pool, complimentary, cooked -to -order breakfast and 24-hour in -room dining. EDUCATION. . . Secondary education is provided to the City by the Grapevine-Colleyville Independent School District (the 'District"). The District provides seventeen campuses, all air conditioned, as follows: 2 High schools 4 Middle schools 11 Elementary schools In addition to the campuses, the District also owns an administration/service center, an auditorium and a complete athletic complex. Historical school enrollment figures are: 1982 3,646 1992 9,459 1983 3,732 1993 10,878 1984 4,037 1994 10,957 1985 4,675 1995 11,316 1986 5,617 1996 12,373 1987 6,107 1997 12,893 1988 6,604 1998 13,319 1989 7,156 1999 13,159 1990 7,984 2000 13,615 1991 8,706 2001 14,276 Source: Grapevine-Colleyville Independent School District. Educational opportunities beyond the secondary level are numerous and within easy driving distance of the City. Some of the colleges and universities within a 50 mile radius are as follows: College/University Location Texas Christian University Fort Worth, Texas Texas Wesleyan University Fort Worth, Texas Tarrant County College Fort Worth, Texas University of Texas at Arlington Arlington, Texas University of North Texas Denton, Texas Texas WomgaT niiv_er�ity . - Denton Texas_ Southern Methodist University Dallas, Texas Dallas Baptist University Dallas, Texas Dallas Community College Dallas, Texas University of Dallas Irving, Texas University of Texas at Dallas Richardson, Texas A-3 APPENDIX B EXCERPTS FROM THE CITY OF GRAPEVINE, TEXAS ANNUAL FINANCIAL REPORT For the Year Ended September 30, 2001 The information contained in this Appendix consists of excerpts from the City of Grapevine, Texas Annual Financial Report for the Year Ended September 30, 2001, and is not intended to be a complete statement of the City's financial condition. Reference is made to the complete Report for finther information. APPENDIX C FORM OF BOND COUNSEL'S OPINIONS sL RAPt�V1�IEAft $1091009000 GENERAL OBLIGATION REFUNDING AND IMPROVEMENT BONDS, SERIES 2002 AND $2,160,000 TAX NOTES, SERIES 2002 Tuesday, March 19, 2002 The following ratings have been assigned: Moody's Investors Service, Inc. Standard & Poor's Rating Group A Division of McGraw-Hill, Inc. Underlying FSA Credit Insured Rating "Aaa" "A1" "AAA" "A+" PREPARED BY: =FFIRST SOUTHWEST COMPANY Global Credit Research New Issue s I�tgra S 13 MAR 2002 New Issue: Grapevine (City of) TX MOODY'S ASSIGNS Al RATING TO GENERAL OBLIGATION REFUNDING AND IMPROVEMENT BONDS, 4 SERIES 2002 AND EQUIPMENT ACQUISITION NOTES, SERIES 2002 Affects $165.4 Million in Debt Municipality TX Moody's Rating ISSUE RATING General Obligation Refunding and Improvement Bonds, Series 2002 Al Sale Amount $10,110,000 Expected Sale Date 03/14/02 Rating Description General Obligation Limited Tax Equipment Acquisition Notes, Series 2002 Al Sale Amount $2,200,000 Expected Sale Date 03/14/02 Rating Description General Obligation Limited Tax Opinion NEW YORK, Mar 13, 2002 -- Moody's Investors Service has assigned an Al rating with a stable outlook to the City of Grapevine's $10,110,000 General Obligation Refunding and Improving Bonds, Series 2002 and $2,200,000 Equipment Acquisition Notes, Series 2002. At the same time, Moody's has affirmed the Al underlying rating on the city's $153 million outstanding general obligation debt. Proceeds of bonds will be used to refund a portion of the City's Series 1992 outstanding debt and to make various improvements to City facilities. Proceeds from the Notes will be used to purchase various pieces of equipment. The City's rating and outlook reflect continuing economic development and diversification, a well-maintained financial position, and a relatively high debt burden reflective of a rapidly growing area. Moody's expects continued tax base growth and diversification given ongoing commercial and residential development. Grapevine, a suburban community that encompasses 65% of the Dallas/Fort Worth International Airport (D/FW), continues to experience rapid tax base expansion, as reflected in an average annual growth rate of 8.8% over the last five (1998-2002) fiscal years. Airline activities dominate the city's tax base. Just over $2.1 billion of tangible personal (commercial) property, which is primarily aircraft, comprises 40% of the city's total taxable value. D/FW, considered the world's fifth busiest airport, has substantial capital improvement plans necessitated by growth in airline traffic. Moody's believes City management's recent focus on commercial development will facilitate continued tax w base growth and promote economic diversification. The opening of Grapevine Mills Mall, a 1.8 million square foot mall, in 1997 was one of the first successes of these efforts. In fiscal 1999, a 24% growth in sales tax receipts built on the 58% increase in the prior year and was largely attributable to the opening of the Grapevine Mills Mall. Fiscal 2000 realized a 10% growth and fiscal 2001 grew another 11 % in sales tax collections. The development of the Opryland convention center and hotel complex, located in the tax increment reinvestment zone, is projected to facilitate further growth and diversification. Construction of the complex was recently delayed, and it is now expected to open in 2004 instead of 2003. The facility will include 1,500 rooms with space for conventions, meeting rooms and banquet facilities, and a large entertainment facility. The City has also benefited from significant residential development, which has translated into strong residential wealth and income levels that well exceed state and national levels. Moody's believes the financial operations of the City will continue to be well maintained with sizable reserves, given steady growth in sales tax revenue and ongoing tax base expansion. Fiscal 2001 ended with a similar General Fund balance as the previous year. With $7.1 million in undesignated reserves, or 19.6% of General Fund revenues, the City is well within its informal policy of maintaining 16% in fund balance. The maintenance of reserves remains an important factor in the City's credit position; particularly as the economically sensitive sales tax has become a more heavily relied upon revenue source for the City. In FY 2001 sales tax revenues represented the City's second largest revenue source, accounting for 30% of total operating revenues, a share which has increased significantly since 1998 due to rapid sales tax growth (140% growth between 1998 and 2002). Moody's anticipates the City's direct debt burden of 3.4% will increase in the near term but remain manageable given future borrowing plans, average principal retirement (53% in 10 years) and growth in the City's taxable values. Similarly, the City's overall debt burden is high at 7.4% and reflects the significant debt of the Grapevine-Colleyville ISD (GO ULT debt rated A2). Future debt plans include the City's remaining $10.3 million in general obligation debt authorization, which is Qxpected to be issued in the next year. Debt service represents a significant fixed cost, comprising 23.6% of fiscal 2001 operating expenditures, which, while well above the norm, is not inconsistent with other rapidly growing municipalities. Outlook The stable outlook on the City of Grapevine's general obligation limited tax debt reflects Moody's belief that near-term increases in debt burden will be mitigated by continued tax base growth. Moody's expects that officials will continue to maintain reserves at levels consistent with the increased reliance on sales tax receipts, while addressing pressures associated with growth. The stable outlook also reflects Moody's expectation that revenue sharing with D/FW airport will have no adverse material effects on the City's financial operations. KEY STATISTICS: 2002 estimated population: 44,390 Tarrant County Unemployment (12/01): 4.8% 2002 full valuation: $4.86 billion 2002 full value per capita: $109,481 Debt burden: 7.4% Principal Payout 10 years: 53% FY2000 General Fund Balance: $7.73 million (22% of General Fund revenues) FY2001 General Fund Balance: $7.65 million (21% of General Fund revenues) Analysts Kristin Button Analyst Public Finance Group Moody's Investors Service Jody Savant Backup Analyst Public Finance Group Moody's Investors Service m m m m m m m m m m m m m m m m m m m Q) CD CD C/) Q. 0 a' 0 (D =-a a) 00 3 -.0) =or o=r Q Er- G) Ox Can) @ ;0 -00 3 21 ca)r 4 Oc E� > COD SL (,D � j M CD (0 0 ID _I <0 11 IMD =.r =0 rm CD E 04 a) 0 0 a CD 0 CD' (D @ -0 (D ID @ O a) — a) @ p @ ro (D (,,D o 'cD '(D 3"( (OD A=) (OD) 0;:� CD D (n CD O= Q) (D 0 :03 50; =r M G) w6 C.) 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O 000000 N 0 m Iz Ou 0 m co X CD O C" C) a 0 0 0 (D 0 0 C) C) C) 0 m N) < Cl) C) C) 0 N) C,) Z CD m (D x m W A 0 0 -4 0 �— 9) p �o 90 N 0 -4 (0 (Y) 01) 0 (D 00 -,4 -4 -,1 -4 :*4 p . an L'I L" (A 0 (D 90 P) -4 CD Ln CO 0 (0 00 0) Oo 00 OD w w La (D (n -4 -4 -4 -4 -) -4 0 b) 6 6 6 6 6 LY, ;37 + to 0 0 0 0 0 0 w HISTORICAL SALE INFORMATION SALE DATE INTEREST RATE ISSUE'S AVERAGE LIFE $10,100,000 City of Grapevine, Texas General Obligation Refunding and Improvement Bonds, Series 2002 3-19-02 4.8394248% 8.441 Years $2,160,000 City of Grapevine, Texas Tax Notes, Series 2002 3-19-02 3.7552801% 4.023 Years $4,385,000 City of Grapevine, Texas Combination Tax and Revenue Certificates of Obligation, Series 2001 7-17-01 4.979918% 12.374 Years $7,000,000 City of Grapevine, Texas General Obligation Bonds, Series 2000A 11-7-00 5.445036% 12.975 Years $7,880,000 City of Grapevine, Texas Combination Tax and Revenue Certificates of Obligation, Series 2000A 11-7-00 5.382296% 9.906 Years $31,580,000 City of Grapevine, Texas Combination Tax and Tax Increment Reinvestment Zone Revenue Certificates of Obligation, Series 2000 6-6-00 5.891743% 17.988 Years $7,665,000 City of Grapevine, Texas General Obligation Bonds, Series 2000 3-7-00 5.69970% 11.978 Years $5,635,000 City of Grapevine, Texas Combination Tax and Revenue Certificates of Obligation, Series 2000 3-7-00 5.22923% 6.263 Years $30,285,000 City of Grapevine, Texas General Obligation Refunding and Improvement Bonds, Series 1999 2-16-99 4.542361% 11.285 Years $1,700,000 City of Grapevine, Texas Equipment Acquisition Notes, Series 1998 11-17-98 3.741073% 2.285 Years $5,875,000 City of Grapevine, Texas Combination Tax and Revenue Certificates of Obligation, Series 1998 7-21-98 4.7174% 12.898 Years $1,900,000 City of Grapevine, Texas Equipment Acquisition Notes, Series 1997 11-4-97 4.3093666% 2.198 Years $9,785,000 City of Grapevine, Texas General Obligation Bonds, Series 1996 10-15-96 5.547907% 13.463 Years $28,915,000 City of Grapevine, Texas Combination Tax and Tax Increment Reinvestment Zone Revenue Certificates of Obligation, Series 1996 10-3-96 5.4830% 12.457 Years $15,945,000 City of Grapevine, Texas General Obligation Bonds, Series 1995 6-6-95 5.38128% 13.538 Years m m m m m m m m m m m m m m m m m m m f:� -jo g. � 5. 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