R2004-186 11-15-04 RESOLUTION NO. 2004-186
RESOLUTION OF THE CITY OF PEARLAND, TEXAS, APPROVING THE ISSUANCE OF
$13,995,000 DEVELOPMENT AUTHORITY OF PEARLAND TAX INCREMENT
CONTRACT REVENUE BONDS, SERIES 2004; APPROVING A BOND RESOLUTION,
INDENTURE OF TRUST, BOND PURCHASE AGREEMENT AND OTHER DOCUMENTS
RELATING TO THE BONDS; MAKING CERTAIN FINDINGS AND CONTAINING
OTHER PROVISIONS RELATED THERETO
STATE OF TEXAS §
COUNTIES OF BRAZORIA AND HARRIS §
CITY OF PEARLAND §
WHEREAS, by City Ordinance No. 891,the City of Pearland, Texas (the "City") created
Reinvestment Zone Number Two, City of Pearland, Texas (the "Zone")pursuant to Chapter 311,
Texas Tax Code (the "TIRZ Act"); and
WHEREAS, by Resolution No. 2004-107 adopted by the City Council of the City on
June 28, 2004, the City authorized the creation of the Development Authority of Pearland (the
"Authority") as a local government corporation pursuant to Subchapter D of Chapter 431, Texas
Transportation Code (the "LGC Act"), to aid, assist and act on behalf of the City in the
performance of the City's governmental and proprietary functions with respect to the common
good and general welfare of the Zone; and
WHEREAS, by City Ordinance No. R2004-170, the City authorized an agreement with
the Zone and the Authority (the "Tri-Party Agreement"), which sets forth,among other things,
the duties and responsibilities of the Authority, the City and the Zone as they relate to
reimbursements for Project Costs (as defined in the Indenture) in the Zone, and pursuant to
which the City and the Zone have agreed to pay the Authority on an annual basis certain of the
Tax Increments (as defined in the Indenture) then available in the Tax Increment Fund (as
defined in the Indenture); and
WHEREAS, the Tri-Party Agreement authorizes the Authority to issue bonds secured by
payments made to the Authority under the Tri-Party Agreement and further authorizes the
Authority to issue such bonds for the purpose of making developer reimbursements for Project
Costs only with the approval of the City; and
WHEREAS, the Authority desires to issue its Tax Increment Contract Revenue Bonds,
Series 2004 in the aggregate principal amount of $13,995,000 (the "Bonds") pursuant to a
resolution authorizing the issuance of the Bonds (the "Bond Resolution") adopted by the
Authority on November 15, 2004, and the Authority desires to use the proceeds from the sale of
such Bonds for the purposes of (1) paying Project Costs (which includes amounts owed to
developers under certain development agreements and the acquisition and the construction of
certain public works and public improvements within the Zone), (2) funding the Reserve
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•
Requirement, (3) capitalizing interest on the Bonds, (4) paying certain costs associated with the
creation of the Authority, and(5)paying costs of issuance, all under and pursuant to the authority
of the Act and all other applicable law; and
WHEREAS, in order to further secure the Bonds, the Authority has determined to enter
into an Indenture of Trust (the "Indenture") with Wells Fargo Bank, National Association (the
"Trustee") for the purpose of assigning and pledging to the Trustee the Contract Tax Increments
(as defined in the Indenture), for the purpose of establishing the Pledged Revenue Fund, the
Project Fund, the Debt Service Fund, and the Debt Service Reserve Fund pursuant hereto and
thereby providing the Pledged Revenues (as defined in the Indenture)to be held by the Trustee to
secure the payment of principal of and interest on the Bonds and any Additional Parity Bonds
from time to time issued under the Indenture and the Bond Resolutions; and
WHEREAS none of the proceeds of the Bond's shall be used for the purpose of paying or
otherwise providing for educational facilities, and
WHEREAS the City Council desires to approve the issuance of the Authority's Tax
Increment Contract Revenue Bonds, Series 2004;Now,therefore,
BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF PEARLAND,
TEXAS THAT:
Section 1. Preamble. The facts and recitations set out in the preamble of this Resolution
are found to be true and correct and are hereby adopted and made a part hereof for all purposes.
Section 2. Approval of Bonds; Authorization of Agreements; Approval of
Reimbursements. City Council hereby approves the issuance of the Bonds by the Authority and
all reasonable agreements necessary in connection with the issuance of the Bonds, including
without limitation the following: the Indenture (attached hereto as Exhibit A); the Bond Purchase
Agreement by and between the Authority and First Southwest Company, as representative of the
Underwriters (attached hereto as Exhibit B), the Preliminary Official Statement for the Bonds
dated November 8, 2004 (attached hereto as Exhibit C); and any and all other documents and
agreements reasonable and necessary for the Authority to issue the Bonds (collectively, the
"Agreements"). On October 5, 2004, City Council approved developer reimbursements for
certain Project Costs. City Council hereby reconfirms its approval of such reimbursements and
acknowledges that a portion of the proceeds from the sale of the Bonds will be used to make
such reimbursements.
Section 3. Approval of Bond Resolution. City Council hereby approves the Authority's
Bond Resolution authorizing the .issuance of the Authority's $13,995,000 Development
Authority of Pearland Tax Increment Contract Revenue Bonds, Series 2004, a copy of which.is
attached hereto as Exhibit"D."
Section 4. Authorization of Other Matters Relating Thereto. The Mayor, City Secretary
and other officers and agents of the City are hereby authorized and directed to do any and all
things necessary or desirable to carry out the provisions of this Resolution.
Section 5. Effective Date. This Resolution shall take effect immediately upon passage.
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`Y
Section 6. Public Meeting. It is officially found, determined and declared that the
meeting at which this Resolution is adopted was open to the public and public notice of the time,
place and subject matter of the public business to be considered at such meeting, including this
Resolution,was given all as required by the Texas Government Code, Chapter 551, as amended.
PASSED AND APPROVED thisl5_thday of ;.November, 2004.
Mayor
City of Pearland
ATTEST:
Sec ry
ity of Pearland, Texas
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E)cJ1IBIT
` Draft 11/10/04
INDENTURE OF TRUST
By And Between
DEVELOPMENT AUTHORITY OF PEARLAND,
the"Authority"
and
as "Trustee"
DATED AS OF NOVEMBER , 2004
SECURING
DEVELOPMENT AUTHORITY OF PEARLAND
TAX INCREMENT CONTRACT REVENUE BONDS
SERIES 2004
45366-Trust Indenture
TABLE OF CONTENTS
ARTICLE I DEFINITIONS AND INTERPRETATION 1
Section 1.01. Definitions 1
Section 1.02. Recitals, Table of Contents,Titles and Headings 7
Section 1.03. Interpretation 8
ARTICLE II GRANTING CLAUSES 1
ARTICLE III AUTHORIZATION OF TAX INCREMENT REVENUE
BONDS; GENERAL TERMS AND PROVISIONS OF TAX
INCREMENT CONTRACT REVENUE BONDS; ADDITIONAL
PARITY BONDS AND SUBORDINATE LIEN OBLIGATIONS 1
Section 3.01. Authorization of Tax Increment Contract Revenue Bonds 1
Section 3.02. Additional Parity Bonds 2
Section 3.03. Subordinate Lien Obligations 2
Section 3.04. Declaration 3
ARTICLE IV FUNDS AND INVESTMENTS 1
Section 4.01. Creation of Funds 1
Section 4.02. Pledged Revenue Fund 1
Section 4.03. Debt Service Fund 2
Section 4.04. Debt Service Reserve Fund 2
Section 4.05. Project Fund 3
Section 4.06. Surplus Fund 3
Section 4.07. Rebate Fund 4
Section 4.08. Investments; Earnings 4
ARTICLE V COVENANTS OF THE AUTHORITY 1
Section 5.01. Payment of Tax Increment Contract Revenue Bonds and Performance
of Obligations 1
Section 5.02. Recordation and Execution of Security Instruments 1
Section 5.03. Title Encumbrances of Pledged Revenues 1
Section 5.04. Pledged Revenues Not Encumbered 1
Section 5.05. Collection of Contract Tax Increments 2
Section 5.06. Amendment of Tri-Party Agreement 2
ARTICLE VI DEFAULT AND REMEDIES 1
Section 6.01. Events of Default 1
45366-Trust Indenture -1-
Section 6.02. Notices 1
Section 6.03. Notice of Default 1
Section 6.04. Remedies in General 1
Section 6.05. Appointment of Receivers 2
Section 6.06. Trustee May Act Without Possession of Tax Increment Contract
Revenue Bonds 2
Section 6.07. Trustee as Attorney in Fact 2
Section 6.08. Remedies Not Exclusive 2
Section 6.09. Limitation on Suits 3
Section 6.10. Right of Owners of the Tax Increment Contract Revenue Bonds to
Direct Proceedings 3
Section 6.11. Restoration of Rights and Remedies 4
Section 6.12. Waiver of Stay or Extension Laws 4
Section 6.13. Delay or Omission Not Waiver 4
ARTICLE VII DISCHARGE 1
Section 7.01. Discharge by Payment 1
Section 7.02. Discharge by Deposit 1
ARTICLE VIII THE TRUSTEE 1
Section 8.01. Acceptance of Trusts 1
Section 8.02. Reliance by Trustee 3
Section 8.03. Certificate of the Authority as Proof 3
Section 8.04. Trustee May Own Tax Increment Contract Revenue Bonds 4
Section 8.05. Compensation of Trustee 4
Section 8.06. Removal of Trustee 4
Section 8.07. Resignation of Trustee 4
Section 8.08. Appointment of Successor Trustee 4
Section 8.09. Powers of Successor Trustee 5
Section 8.10. Merger, Conversion or Consolidation of Trustee 5
Section 8.11. Funds Transfer 6
ARTICLE IX MODIFICATION OF INDENTURE 1
ARTICLE X GENERAL PROVISIONS 1
Section 10.01. Proof of Execution of Writings and Ownership 1
Section 10.02. Benefits of Indenture 1
Section 10.03. No Individual Liability 1
Section 10.04. Notice 2
Section 10.05. Governing Law 2
Section 10.06. Severability 2
45366-Trust Indenture -11-
Section 10.07. Successors and Assigns 2
Section 10.08. Execution in Several Counterparts 2
45366-Trust Indenture -iii-
INDENTURE OF TRUST
THIS INDENTURE OF TRUST, dated as of the day of November, 2004, (the
"Indenture"), is made by and between DEVELOPMENT AUTHORITY OF PEARLAND,
a not-for-profit local government corporation organized under Chapter 431, Texas
Transportation Code and existing under the laws of the State of Texas (the
"Authority"), and , a corporation
(together with any successor trustee hereunder,the "Trustee").
WITNESSETH
WHEREAS, by Ordinance No. 891, adopted on December 21, 1998, the City of
Pearland (the "City") created Reinvestment Zone Number Two, City of Pearland, Texas
(the "TIRZ") pursuant to Chapter 311, Texas Tax Code, and approved a preliminary
project plan for the TIRZ and a preliminary reinvestment zone financing plan for the
TIRZ; and
WHEREAS, by Resolution No. , adopted on , 2004, the
City authorized the creation of the Authority to aid, assist and act onbehalf of the City
in the performance of the City's governmental and proprietary functions with respect
to, and to provide a financing vehicle for,the TIRZ; and
WHEREAS, by Ordinance No. , adopted on November ,
2004, the City approved that certain Agreement by and between the City, the TIRZ, and
the Authority (the "Tri-Party Agreement"), pursuant to which the City delegated to the
Authority the power and authority to issue, sell or deliver its bonds, notes or other
obligations in accordance with the terms of the Tri-Party Agreement; and
WHEREAS, the Authority intends to issue its Tax Increment Contract Revenue
Bonds (as herein defined), in one or more series;.and
WHEREAS, by Ordinance No. , adopted on November ,
2004, the City authorized the Authority to issue, sell, or deliver its Tax Increment
Contract Revenue Bonds, Series 2004; and
WHEREAS, the Participants (as herein defined) have agreed to make certain
payments, which are sufficient to pay the principal of, interest on and redemption
requirements of the Tax Increment Contract Revenue Bonds, the charges and expenses
of paying agents, registrars and trustees utilized in connection with the issuance of the
Tax Increment Contract Revenue Bonds, and all amounts required to establish and
maintain the funds to be established under this Indenture and the Bond Resolutions (as
herein defined); and
WHEREAS, in order to further secure the Tax Increment Contract Revenue
Bonds, the Authority has determined to enter into this Indenture with the Trustee for
45366-Trust Indenture 1
the purpose of assigning and pledging to the Trustee the Contract Tax Increments (as
herein defined), for the purpose of establishing the Pledged Revenue Fund, the Project
Fund, the Debt Service Fund, and the Debt Service Reserve Fund pursuant hereto and
thereby providing the Pledged Revenues (as herein defined) to be held by the Trustee to
secure the payment of principal of and interest on all Tax Increment Contract Revenue
Bonds from time to time issued under the Bond Resolutions.
NOW, THEREFORE, in consideration of the premises, the acceptance by the
Trustee of the trusts hereby created, the purchase and acceptance of the Tax Increment
Contract Revenue Bonds by the Owners thereof, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
Authority and the Trustee do hereby mutually covenant and agree, for the equal and
proportionate benefit of the respective Owners from time to time of the Tax Increment
Contract Revenue Bonds, as follows:
[END OF RECITALS]
45366-Trust Indenture 2
CERTIFICATE FOR RESOLUTION
THE STATE OF TEXAS §
COUNTIES OF BRAZORIA AND HARRIS §
CITY OF PEARLAND §
We, the undersigned officers of the City of Pearland, Texas (the "City"), hereby certify
as follows:
1. The City Council of the City convened in a regular meeting on November 15,
2004, at the regular meeting place thereof, within the City, and the roll was called of the duly
constituted officers and members of the City Council,to wit:
Tom Reid Mayor
Charles Viktorin Council Member and Mayor Pro Tern
Richard F. Tetens Council Member
Woodrow"Woody" Owens Council Member
Larry R. Marcott Council Member
Kevin Cole Council Member
Young Lorfing City Secretary
and all of such persons were present except Council Member Viktorin, thus constituting a
quorum. Whereupon, among other business, the following was transacted at said meeting: a
written
RESOLUTION OF THE CITY OF PEARLAND, TEXAS, APPROVING THE
ISSUANCE OF $13,995,000 DEVELOPMENT AUTHORITY OF PEARLAND
TAX INCREMENT CONTRACT REVENUE BONDS, SERIES 2004;
APPROVING A BOND RESOLUTION, INDENTURE OF TRUST, BOND
PURCHASE AGREEMENT AND OTHER DOCUMENTS RELATING TO
THE BONDS; MAKING CERTAIN FINDINGS AND CONTAINING OTHER
PROVISIONS RELATED THERETO
(the "Resolution") was duly introduced for the consideration of the City Council and read in full.
It was then duly moved and seconded that the Resolution be adopted on first reading; and, after
due discussion, such motion, carrying with it the adoption of the Resolution, prevailed and
carried by the following vote:
AYES: 4 NAYS: 0 ABSTENTIONS: 0
2. That a true, full and correct copy of the Resolution adopted at the meeting
described in the above and foregoing paragraph is attached to and follows this certificate;that the
Resolution has been duly recorded in the City Council's minutes of such meeting; that the above
and foregoing paragraph is a true, full and correct excerpt from the City Council's minutes of
such meeting pertaining to the adoption of the Resolution; that the persons named in the above
and foregoing paragraph are the duly chosen, qualified and acting officers and members of the
City Council as indicated therein; that each of the officers and members of the City Council was
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duly and sufficiently notified officially and personally, in advance, of the date, hour, place and
subject of the aforesaid meeting, and that the Resolution would be introduced and considered for
adoption at such meeting, and each of such officers and members-consented, in advance, to the
holding of such meeting for such purpose; that such meeting was open to the public as required
by law; and that public notice of the date, hour, place and subject of such meeting was given as
required by the Open Meetings Law, Chapter 551, Texas Government Code.
SIGNED AND SEAL this November 15
< ( .
Secret Mayor
Y OF ARLAND, T XAS CITY OF PEARLAND, TEXAS
(SEAL)
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EXHIBIT A
Indenture of Trust
See Transcript Tab
A-1
HOU:2373862.2
EXHIBIT B
Bond Purchase Agreement
See Transcript Tab
B-1
HOU:2373862.2
EXHIBIT C
Preliminary Official Statement
See Transcript Tab
C-1
HOU:2373862.2
EXHIBIT D
Bond Resolution
See Transcript Tab
D-1
HOU:2373862.2
ARTICLE I
DEFINITIONS AND INTERPRETATION
Section 1.01. Definitions. Unless otherwise expressly provided or unless the
context clearly requires otherwise, the following terms shall have the respective
meanings specified below for all purposes of this Indenture:
"Act" shall mean Chapter 431, Texas Transportation Code, as amended.
"Additional Parity Bonds" shall mean the additional parity Tax Increment
Contract Revenue Bonds permitted to be issued by the Authority pursuant to Section
3.02 of this Indenture.
"AISD" shall mean Alvin Independent School District.
"AISD Agreement" shall mean that Interlocal Agreement approved by the City
by Resolution No. R99-45, adopted on June 14,1999, by and between the City, AISD and
the TIRZ pursuant to which AISD has agreed to transfer a portion of its Tax Increment
to the Tax Increment Fund, as amended.
"Annual Debt Service" means for any annual period (any fiscal year or any other
twelve (12) consecutive calendar month period), an amount equal to the sum of (i) all
interest on the Bonds which is due during such period, plus (ii) that portion of the
Principal Installment or Installments of the Bonds which is due during such period, as
limited and calculated in the following manner:
(a) Except as modified below, (i) for any twelve (12) consecutive
calendar month period other than the calendar year, whether or not such period
constitutes the Authority s current fiscal year or any future Authority fiscal year,
the aggregate amount of interest on and Principal Installment of the Bonds which
was paid or mandatorily redeemed or is scheduled to accrue and be paid or
mandatorily redeemed during such twelve (12) consecutive month period; and
(ii) for any fiscal year while the Authority's fiscal year is the same as the calendar
year, the aggregate amount of interest on and Principal Installment of the Bonds
which was paid or mandatorily redeemed or is scheduled to accrue and be paid
or mandatorily redeemed after January 1 of such fiscal year and on or before the
next following January 1; and
(b) As to any annual period prior to the date of any calculation, such
requirements shall be calculated solely on the basis of Bonds which were
Outstanding as of the first (1st) day of such period; and as to any future year
such requirements shall be calculated solely on the basis of Bonds Outstanding
as of the date of calculation; and
45366- Trust Indenture
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(c) Notwithstanding the foregoing, all amounts which are deposited to
the credit of the Debt Service Reserve Fund from original proceeds from the sale
of any Bonds and amounts which have been or are expected to be realized as
interest and investment earnings on amounts on deposit in the Debt Service
Fund (other than those amounts which are to be deposited into the Rebate Fund
pursuant to Section 4.07 of this Indenture) and which are used or scheduled to be
used to pay interest on or Principal Installments of Bonds during any annual
period, shall be deemed to reduce the Annual Debt Service for any such annual
period to the extent of such interest and investment earnings; and the amount of
such deposits shall be excluded from and shall not constitute Annual Debt
Service for any such annual period.
"Authority" shall mean the Development Authority of Pearland, or its legal
successors.
"Authorized Representative" shall mean shall mean the Chairman or the Vice
Chairman of the Authority designated to perform a specified act, to sign a specified
document or to act generally on behalf of the Authority by a written instrument
furnished to the Trustee.
"Average Annual Debt Service" shall mean the total Annual Debt Service (as of
the date of the calculation) divided by the remaining number of years until the final
maturity of the Bonds. The Average Annual Debt Service calculated under this
Indenture shall remain in effect until the next date when such calculation is required
under this Indenture. For the purposes of calculating the Average Annual Debt Service,
any fractional year shall be included in the calculation as a full year.
"Board" shall mean the Board of Directors of the Authority.
"Bond Counsel" shall mean Allen Boone Humphries LLP or such other
nationally recognized firm engaged by the Authority.
"Bond Resolutions" shall mean the resolutions from time to time adopted by the
Authority authorizing the Tax Increment Contract Revenue Bonds.
"Bonds" or "Tax Increment Contract Revenue Bonds" shall mean one or more
series of bonds issued by the Authority pursuant to this Indenture and the Bond
Resolutions.
"Brazoria County" shall mean Brazoria County, Texas.
"Brazoria County Agreement" shall mean that Interlocal Agreement approved
by the City by Resolution No. R99-62, adopted on August 30, 1999, by and between the
City, Brazoria County and the TIRZ pursuant to which Brazoria County has agreed to
transfer a portion of its Tax Increment to the Tax Increment Fund, as amended.
45366 - Trust Indenture
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"Business Day" shall mean any day which is not a Saturday, Sunday, a day on
which banking institutions in the city where the principal corporate trust office of the
Paying Agent/Registrar is located are authorized by law or executive order to close, or
a legal holiday.
"Captured Appraised Value" shall mean, with respect to each Taxing Unit in
each year, the total appraised value of real property taxable by the Taxing Unit and
located in the TIRZ for that year less the Fax Increment Base of the Taxing Unit.
"City" shall mean the City of Pearland, Texas.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and all
applicable Internal Revenue Service Regulations thereunder.
"Contract Tax Increments" shall mean Tax Increments from time to time
required to be deposited by the Participants into the Tax Increment Fund pursuant to
the TIRZ Act and the Participant Contracts and payable to the Authority by the City
pursuant to the Tri-Party Agreement.
"Costs of Issuance" shall mean all charges, costs and expenses of the Authority
incurred in connection with the authorization, issuance, sale and delivery of Tax
Increment Contract Revenue Bonds including, but not limited to, legal fees, financial
advisory fees, bond insurance premiums, fiscal or escrow agent fees, printing fees,
accounting fees, consultant fees, verification fees, travel expenses, rating agency fees,
fees of the Trustee and its counsel and Attorney General fees
"Debt Service" shall mean the Principal Installments and interest on the Bonds.
"Debt Service Fund" shall mean the fund so designated and created pursuant to
Article IV of this Indenture.
"Debt Service Reserve Fund" shall mean the fund so designated and created
pursuant to Article IV of this Indenture.
"Eligible Investments" shall mean any investments which the Authority is
permitted to make under the laws of the State of Texas, including the Public Funds
Investment Act, Chapter 2256, Texas Government Code, as amended.
"Event of Default" shall mean any Event of Default described in Section 6.01 of
this Indenture.
"Exempt Securities" means bonds or other evidences of obligations, the interest
on which is exempt from federal income taxation under Section 103(a) of the Code.
"Fair Market Value" shall mean as of any particular time:
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(a) as to Eligible Investments the bid and asked prices of which are
published on a regular basis in a financial journal or publication of general
circulation in the United States of America, the bid price for such Eligible
Investments so published on or most recently prior to the date of valuation by
the Trustee, or
(b) as to Eligible Investments the bid and asked prices of which are not
published on a regular basis in a financial journal or publication of general
circulation in the United States of America, the average bid price on such Eligible
Investments at the date of valuation by the Trustee, as reported to the Trustee by
any two nationally recognized dealers (in the opinion of the Trustee) in such
Eligible Investments.
"Fort Bend County" shall mean Fort Bend County, Texas.
"Fort Bend County Agreement" shall mean that Interlocal Agreement approved
by the City by Resolution No. R99-57, adopted on August 9, 1999, by and between the
City, Fort Bend County and the TIRZ pursuant to which Fort Bend County has agreed
to transfer a portion of its Tax Increment to the Tax Increment Fund, as amended.
"Fund' shall mean any one or more, as the case may be, of the separate special
Funds created and established or required to be maintained pursuant to this Indenture.
"Interest Payment Date", when used in connection with any Bond, shall mean
March 1 and September 1 commencing on such March 1 or September 1 as shall be set
forth in the Bond Resolution for such Bonds.
"Parity Bonds" shall mean the Bonds and each series of Additional Parity Bonds
from time to time hereafter issued, but only to the extent such Parity Bonds remain
Outstanding.
"Pledged Revenue Fund" shall mean the fund so designated and created
pursuant to Article IV of this Indenture.
"Pledged Revenues" shall have the meaning assigned to that term in Article II of
this Indenture.
"Project Costs" shall mean all project costs identified in the Project and Financing
Plan as authorized by the TIRZ, Act and the Tri-Party Agreement.
"Project Fund" shall mean the fund so designated and created pursuant to
Article IV of this Indenture.
"Mandatory Redemption Installment" shall mean, as of any particular date of
calculation and with respect to any Series of Bonds, the amount of money to be applied
45366 - Trust Indenture
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to the mandatory redemption (including any mandatory redemption premium, if any)
of Bonds in any fiscal year prior to maturity pursuant to this Indenture or any Bond
Resolution, as such Mandatory Redemption Installment shall have been previously
reduced by the principal amount of any Bonds of such Series of the maturity with
respect to which such Mandatory Redemption Installment is payable which are
purchased or redeemed by the Trustee in accordance with the provisions of this
Indenture or of any Bond Resolution, other than a Mandatory Redemption Installment
redemption or purchase.
"Maximum Annual Debt Service" shall mean the greatest amount of the Annual
Debt Service calculated for any future fiscal year.
"Outstanding" when used with reference to Bonds, shall mean, as of a particular
date, all Bonds theretofore and thereupon delivered except: (a) any Bond canceled by or
on behalf of the Authority at or before said date, (b) any Bond defeased or no longer
considered Outstanding pursuant to the provisions of the Resolution or otherwise
defeased as permitted by applicable law, and (c) any such Bond in lieu of or in
substitution for which another Bond shall have been dehvered pursuant to the
Resolution.
"Owner" or "Registered Owner", when used with respect to any Bond shall
mean the person or entity in whose name such Bond is registered in the Register Any
reference to a particular percentage or proportion of the Owners shall mean the Owners
at a particular time of the specified percentage or proportion in aggregate principal
amount of all Bonds then Outstanding under the Resolution.
"Participant Contracts" shall mean, collectively, the Tri-Party Agreement, the
AISD Agreement, the Brazoria County Agreement, the Fort Bend County Agreement,
and any other contracts or orders heretofore or from time to time hereafter entered into
between the Authority and Participants, containing provisions with respect to the
payment by Participants of Tax Increments.
"Participants" shall mean the City, AISD, Brazoria County and Fort Bend
County.
"Paying Agent/Registrar" shall mean the bank or trust company so designated
in the Bond Resolutions.
"Principal Installment" means, as of any particular date of computation and with
respect to Bonds of a particular Series, an amount of money equal to the aggregate of (a)
the principal amount of Outstanding Bonds of said Series which mature on a single
future date, reduced by the aggregate principal amount of such Outstanding Bonds of
such Series which would at or before said future date be retired as a result of
Mandatory Redemption Installments applied in accordance with this Indenture plus (b)
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the amount of any Mandatory Redemption Installment payable on said future date for
the retirement of any Outstanding Bonds of said Series.
"Principal Installment Payment Date' , when used in connection with any Bond,
shall mean September 1 of each year in which principal is scheduled to be paid.
"Project and Financing Plan" shall mean the final Project Plan and Reinvestment
Zone Financing Plan of the TIRZ adopted by the Board of Directors of the TIRZ on
August 23, 1999, and approved by the City on August 23, 1999, by Ordinance No. 918,
and as amended from time to time.
"Register" or "Bond Register" shall mean the books of registration kept by the
Paying Agent/Registrar in which are maintained the names and addresses of, and the
principal amounts of the Bonds registered to, each Owner.
"Regulations" shall mean the Income Tax Regulations promulgated under the
Code.
"Reserve Fund Surety Policy" shall mean an insurance policy or other credit
agreement, as such tennis defined by Section 1371.001, Texas Government Code, in a
principal amount equal to the portion of the Reserve Requirement to be satisfied and
issued by a financial institution or insurance company with a rating for its long term
unsecured debt or claims paying ability in the highest letter category by two major
municipal securities evaluation sources.
"Reserve Requirement" shall be computed after the issuance of any Series of
Bonds and shall be the lesser of: (i) 1.25 times the Average Annual Debt Service of the
Bonds, or (ii) the Maximum Annual Debt Service, provided that the issuance of any
Series of Bonds shall not cause the Reserve Requirement to increase by more than 10%
of the stated principal amount of such Series of Bonds or 10% of the issue price of such
Series of Bonds if the Series of Bonds are issued with more than a de minimis amount
(as defined by Section 1.48 1 of the Income Tax Regulations) of original issue discount.
Upon issuance of the Series 2004 Bonds, the Reserve Requirement shall be
"Series ' shall mean all of the Bonds authenticated and delivered on issuance and
pursuant to this Indenture or any Bond Resolution authorizing the issuance of such
Bonds as a separate series of Bonds or any Bonds thereafter authenticated and delivered
in lieu of or in substitution for such Bonds.
"State" or "State of Texas" shall mean the State of Texas.
"Surplus Fund" shall mean the Authority's Surplus Fund.
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I-6
"Tax Increment" shall mean, with respect to each Taxing Unit in each year, the
amount of property taxes levied by the Taxing Unit for that year on the Captured
Appraised Value of real property taxable by the Taxing Unit and located in the TIRZ.
"Tax Increment Base" shall mean the total appraised value of property in the
TIRZ as of January 1, 1998 plus the total appraised value of real property taxable by a
faxing Unit and annexed into the TIRZ as determined on January 1 of the year in which
such property was annexed into the TIRZ.
"Tax Increment Contract Revenue Bonds" or "Bonds" shall mean one or more
series of bonds issued by the Authority pursuant to this Indenture and the Bond
Resolutions
"Tax Increment Fund" shall mean the City's TIRZ Tax Increment Fund created
and maintained in accordance with Ordinance No. 891 and the TIRZ Act.
"Taxing Unit" shall mean, in addition to the Participants, a special district or
authority (including a junior college district, a hospital district, a navigation district, or
other district created by or pursuant to the V.T.C.A. Water Code), or any other political
subdivision of the State of Texas, whether created by or pursuant to the Texas
Constitution or a local, special, or general law, that is authorized to impose and is
imposing ad valorem taxes on real property in the TIRZ, even if the governing body of
another political unit determines the tax rate for the unit or otherwise governs its
affairs.
"TIRZ" shall mean Reinvestment Zone Number Two, City of Pearland, Texas as
enlarged from time to time.
"TIRZ Act" shall mean Chapter 311, Texas Tax Code; as amended.
"Tri-Party Agreement" shall mean that certain Agreement by and between the
City, the TIRZ, and the Authority approved by the City by Ordinance No. ,
adopted on 2004, and adopted on October 5, 2004, by the
Board and the Board of Directors of the TIRZ, as amended.
"Trustee" shall mean , and its successors in that capacity.
Section 1.02. Recitals, Table of Contents, Titles and Headings. The terms and
phrases used in the recitals of this Indenture have been included for convenience of
reference only and the meaning, construction and interpretation of such words and
phrases for purposes of this Indenture shall be determined solely by reference to Section
1.01 hereof. The table of contents, titles and headings of the articles and sections of this
Indenture 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
45366 - Trust Indenture
I-7
Indenture or any provision hereof or in ascertaining intent, if any question of intent
should arise.
Section 1.03. Interpretation. 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. This Indenture and all
the terms and provisions hereof shall be liberally construed to effectuate the purposes
set forth herein and to sustain the validity of this Indenture and the Tax Increment
Contract Revenue Bonds.
[END Of ARTICLE I]
45366 - Trust Indenture
I-8
ARTICLE II
GRANTING CLAUSES
In order to secure the payment of the principal of, redemption premium, if any,
and interest on all Tax Increment Contract Revenue Bonds as the same are issued and
become due and payable, whether at maturity or by prior redemption, and the
performance and observance of all of the covenants and conditions herein contained,
and in consideration of the premises, the acceptance by the Trustee of the trusts hereby
created, the purchase and acceptance of the Tax Increment Contract Revenue Bonds by
the Owners thereof, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Authority does hereby GRANT,
BARGAIN, CONVEY, ASSIGN and PLEDGE to the Trustee and its successors in trust
hereunder, subject to the provisions of this Indenture, all of the Authority's right, title
and interest in and to the following described properties and interests, direct or indirect,
whether now owned or hereafter acquired (collectively, the 'Pledged Revenues"):
(a) The Contract Tax Increments and all of the Authority's right, title
and interest thereto under the Participant Contracts and the Tri-Party
Agreement. (By definition, the Contract Tax Increments do not include the Tax
Increments of Taxing Units other than the City, AISD, Brazoria County and Fort
Bend County.)
(b) All moneys deposited or required to be deposited in the Pledged
Revenue Fund, the Debt Service Fund, and the Debt Service Reserve Fund held
by the Trustee pursuant to the provisions of this Indenture and all interest
earnings and investment income therefrom.
(c) Any and all property of every kind and nature (including without
limitation, cash, obligations or securities) which may from time to time hereafter
be conveyed, assigned, hypothecated, endorsed, pledged, mortgaged, granted, or
delivered to or deposited with, the Trustee as additional security hereunder by
the Authority, or anyone on behalf of the Authority, or which pursuant to any of
the provisions hereof may come into the possession or control of the Trustee as
security hereunder, or of a receiver lawfully appointed hereunder, all of which
property the Trustee is authorized to receive, hold and apply according to the
terms hereof. If and when an agreement is reached with Fort Bend Independent
School District or another Taxing Unit for the payment of its Tax Increments into
the Tax Increment Fund, the Authority may, but not necessarily will, grant its
right, title and interest in such Tax Increments to the Trustee as security
hereunder.
TO HAVE AND TO HOLD all the same, with all rights and privileges
appurtenant thereto, unto the Trustee and its successors in trust forever.
45366 - Trust Indenture
IN TRUST, NEVERTHELESS, upon the terms and trusts herein set forth, for the
equal and proportionate benefit and security of the Owners from time to time of the Tax
Increment Contract Revenue Bonds secured and to be secured hereunder, or any of
them, without preference, priority or distinction as to lien or otherwise of any Tax
Increment Revenue Bond over any other Tax Increment Revenue Bond, except as
otherwise expressly provided in this Indenture,
PROVIDED, HOWEVER, that if the Authority, its successors or assigns, shall
well and truly pay, or cause to be paid, the principal of the Tax Increment Contract
Revenue Bonds and the interest and redemption premium, if any, due or to become due
thereon, at the times and in the manner provided in the Tax Increment Contract
Revenue Bonds, and in the Bond Resolutions according to the true intent and meaning
thereof, and shall cause the payments to be made into the Funds maintained hereunder
in the amounts required by this Indenture and the Bond Resolutions, or shall provide,
as permitted hereby, for the payment. thereof by depositing with the Trustee or Paying
Agent/Registrar the entire amount due or to become due thereon, or an amount
sufficient to provide for the payment thereof, and shall pay or cause to be paid to the
Trustee all sums of money due or to become due to it in accordance with the terms and
provisions hereof, then this Indenture and the rights and liens hereby granted shall
cease, terminate and be void; otherwise this Indenture is to be and shall remain in full
force and effect.
[END OF ARTICLE II]
45366 - Trust Indenture
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ARTICLE III
AUTHORIZATION OF TAX INCREMENT REVENUE BONDS; GENERAL TERMS
AND PROVISIONS OF TAX INCREMENT CONTRACT REVENUE BONDS;
ADDITIONAL PARITY BONDS AND SUBORDINATE LIEN OBLIGATIONS
Section 3.01. Authorization of Tax Increment Contract Revenue Bonds. (a) The
Tax Increment Contract Revenue Bonds may be authorized from time to time by the
Authority pursuant to Bond Resolutions duly adopted by the Board, which Bond
Resolutions shall specify the dates, denominations, principal amounts, interest rates,
maturities, redemption provisions, forms of bonds, manner of payment, provision for
execution and authentication, application of proceeds and all other terms and
provisions of the Tax Increment Contract Revenue Bonds not otherwise provided
herein.
(b) At or prior to the issuance of each series of Tax Increment Contract
Revenue Bonds pursuant to any Bond Resolution, the Authority shall provide to the
Trustee the following:
a certified copy of the Bond Resolution;
the approving opinion of the Authority's Bond Counsel with respect to
such series of Tax Increment Contract Revenue Bonds to the effect (i) that
the Bonds are vand and binding obligations of the Authority except to the
extent that their enforceability may be limited by applicable provisions of
the federal bankruptcy laws and any other similar laws affecting the rights
of creditors of political subdivisions generally, and except that such
enforceability is subject to general principles of equity and the exercise of
judicial discretion (regardless of whether such enforceability is considered
in a proceeding in law or at equity), and (ii) that the Bonds are issued
pursuant to the terms of this Indenture;
(iii) if such series of Tax Increment Contract Revenue Bonds are being issued
to refund any previously issued Tax Increment Contract Revenue Bonds,
the identity, redemption date and redemption price of the Tax Increment
Contract Revenue Bonds to be refunded;
(iv) a debt service schedule with regard to such series of Tax Increment
Contract Revenue Bonds and all Tax Increment Contract Revenue Bonds
that will then be Outstanding after the issuance of such series of Tax
Increment Contract Revenue Bonds and refunding of any Tax Increment
Contract Revenue Bonds being refunded thereby; and
45366 - Trust Indenture
(v) the amount of the Reserve Requirement, as such amount may have been
modified based upon the issuance of such series of Tax Increment
Contract Revenue Bonds.
Section 3.02. Additional Parity Bonds. The Authority reserves the right to issue,
for any lawful purpose (including the refunding of any previously issued Parity
Bonds), one or more series of Additional Parity Bonds payable from and secured by a
lien on the Pledged Revenues, on a parity with the Bonds, and any previously issued
Additional Parity Bonds; provided, however, that no Additional Parity Bonds may be
issued unless:
(a) The Additional Parity Bonds mature on, and interest is payable on, the
Principal Installment Payment Dates and Interest Payment Dates, respectively;
(b) The City has approved issuance of the Additional Parity Bonds on the
terms set forth in the Tri-Party Agreement, as the same may be modified from time to
time;
(c) There shall be on deposit in the Debt Service Reserve Fund, after the
issuance of the Additional Parity Bonds, an amount equal to the Reserve Requirement
on all Bonds that will be Outstanding after the issuance of such Additional Parity
Bonds;
(d) The Authority certifies that it is not in material default with the terms of
the Indenture, any Bond Resolution, or the Tri-Party Agreement; and
(e) The Authority has received a certificate meeting the requirements set forth
in paragraph (f) below which shows Captured Appraised Value which, at the
Participants' tax rates then in existence, will generate Contract Tax Increments on the
Additional Parity Bonds to be issued that will be at least 125 percent of projected
Average Annual Debt Service, taking into account the Bonds and the Additional Parity
Bonds to be issued, provided; however, that this requirement shall not apply to the
issuance of any series of Additional Parity Bonds for refunding purposes that will have
the result of reducing the Average Annual Debt Service requirements on Parity Bonds;
and
(f) The certificate required by paragraph (e) above may be either: (i) a
certificate of the appropriate county appraisal district or districts showing certified
values, adjusted for exemption, (ii) a certificate of the appropriate county appraisal
district or districts showing estimated or preliminary values, adjusted for exemptions
and losses due to protests based on historical data, or (iii) a projection prepared by an
independent real estate appraiser.
Section 3.03. Subordinate Lien Obligations. The Authority reserves the right to
issue, for any lawful purpose, bonds, notes or other obligations secured in whole or in
45366 - Trust Indenture
III-2
part by liens on all or part of The Pledged Revenues that are junior and subordinate to
the lien on Pledged Revenues securing payment of the Parity Bonds. Such subordinate
hen obligations may be further secured by any other source of payment lawfully
available for such purposes. Such subordinate lien obligations will provide that they are
payable from all or part of The Pledged Revenues only if and to the extent such
amounts could otherwise be deposited to the Debt Service Reserve Fund (for Reserve
Fund Surety Policy obligations) or to the Surplus Fund.
Section 3.04 Declaration. It is hereby expressly declared that all revenues,
receipts, moneys and other properties hereby pledged are to be dealt with and disposed
of under, upon and subject to the terms, conditions, covenants, agreements, uses and
purposes set forth in this Indenture.
[END OF ARTICLE III]
45366 - Trust Indenture
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ARTICLE IV
FUNDS AND INVESTMENTS
Section 4.01. Creation of Funds. There are hereby created the following Funds:
(A) Pledged Revenue Fund;
(B) Debt Service Fund;
(C) Debt Service Reserve Fund;
(D) Project Fund;
(E) Rebate Fund; and
(F) Surplus Fund.
Each Fund, other than the Surplus Fund and the Project Fund, shall be maintained by
the Trustee separate and apart from all other funds of the Authority. The Authority
shall maintain its Surplus Fund and Project Fund at a depository of the Authority's
selection and in accordance with the Tri-Party Agreement. The Pledged Revenue Fund,
the Debt Service Fund and the Debt Service Reserve Fund shall constitute trust funds
which shall be held in trust by the Trustee solely for the benefit of the Owners of the
Tax Increment Contract Revenue Bonds.
Section 4.02. Pledged Revenue Fund. There is hereby created and established
with the Trustee a fund to be designated the ' Pledged Revenue Fund " The Contract
Tax Increments, shall be deposited into The Pledged Revenue Fund. Money in the
Pledged Revenue Fund shall be held in trust by the Trustee and applied in the
following manner and order of priority:
(A) First, to the Debt Service Fund amounts necessary to make the
amounts on deposit therein equal to the interest and Principal Installments due
on the Tax Increment Contract Revenue Bonds in the period ending on the next
March 1;
(B) Second, to the Debt Service Reserve Fund amounts required to
attain the Reserve Requirement;
(C) Third, to the payment of fees and expenses of the Trustee and
Paying Agent/Registrar; and
(D) Fourth, to the Surplus Fund for use by the Authority for any
lawful purpose. Moneys can be transferred from the Pledged Revenue Fund to
45366 - Trust Indenture
IV-1
the Surplus Fund at any time provided that immediately prior to any such
transfers the deposits required by Sections 4 02(A) through (C) above have been
made or provided for.
Section 4.03. Debt Service Fund. There is hereby created and established with
the Trustee a fund to be designated the "Debt Service Fund." Money in the Debt Service
Fund shall be held in trust by the Trustee. The Authority shall deposit or cause to be
deposited into the Debt Service Fund accrued interest on the Tax Increment Contract
Revenue Bonds, capitalized interest on the Tax Increment Contract Revenue Bonds,
transfers from the Pledged Revenue Fund as provided in Section 4.02, transfers from the
Debt Service Reserve Fund as provided in Section 4.03, and, to the extent necessary,
other Pledged Revenues in such amounts and at such times to provide that amounts
necessary to pay interest and Principal Installments, due on the Tax Increment Contract
Revenue Bonds. The Trustee shall transfer on each Interest Payment Date and each
Principal Installment Payment Date to the Paying Agent/ Registrar such amounts in the
Debt Service Fund to pay Principal Installments and interest on the Tax Increment
Contract Revenue Bonds as the same becomes due. The Trustee shall make all such
transfers such that the Authority shall be in compliance with the Principal and Interest
Guidelines in the Operational Arrangement of the Depository Trust Company, as
amended from time to time.
Section 4.04. Debt Service Reserve Fund. There is hereby created and
established with the Trustee a fund to be designated the "Debt Service Reserve Fund.'
Money in the Debt Service Reserve Fund shall be held in trust by the Trustee. The Debt
Service Reserve Fund shall initially be funded as provided in the Bond Resolutions.
(A) If, on any Interest Payment Date or Principal Installment Payment
Date, after transferring funds to the Debt Service Fund as provided in Section
4.02, the Debt Service Reserve Fund contains amounts less than the Reserve
Requirement, the Trustee shall withdraw from the Pledged Revenue Fund and
deposit into the Debt Service Reserve Fund the amount required to attain the
Reserve Requirement. If there are not sufficient funds in the Pledged Revenue
Fund to fund the Reserve Requirement, the Trustee shall deposit into the Debt
Service Reserve Fund all interest and income earned from the investment of
amounts credited to the Debt Service Reserve Fund until the Reserve
Requirement is again attained.
(B) So long as the Debt Service Reserve Fund contains amounts at least
equal to the Reserve Requirement, all earnings on the Debt Service Reserve Fund
shall be transferred and deposited, as collected, into the Debt Service Fund.
(C) Amounts deposited into the Debt Service Reserve Fund (i) shall be
used to pay interest on or Principal Installments of the Tax Increment Contract
Revenue Bonds when insufficient funds are available for such purpose in the
45366 - Trust Indenture
IV-2
Debt Service Fund or (ii) may be applied toward the payment of interest on or
Principal Installments of Tax Increment Contract Revenue Bonds in connection
with the refunding or redemption of such Tax Increment Contract Revenue
Bonds.
(D) The Authority expressly reserves the right at any time to satisfy all
or part of the Reserve Requirement by obtaining for the benefit of the Debt
Service Reserve Fund one or more Reserve Fund Surety Policies. In the event the
Authority elects to substitute at any time a Reserve Fund Surety Policy for any
funded amounts in the Debt Service Reserve Fund, it may apply any bond
proceeds thereby released, to the greatest extent permitted by law, to any
purposes for which the Bonds were issued and any other funds thereby released
to any purposes for which such funds may lawfully be used, including the
payment of debt service on the Bonds. The premium for any Reserve Fund
Surety Policy shall be paid from bond proceeds or other funds of the Authority
lawfully available for such purpose. Any Reserve Fund Surety Policy shall be
authorized by resolution. All amounts deposited in or required to be deposited
in the Debt Service Reserve Fund may be used to pay obligations incurred to
providers of Reserve Fund Surety Policies, including amounts advanced
thereunder, interest on such advances and related costs and expenses.
Section 4.05. Project Fund. There is hereby created and established a fund to be
designated the "Project Fund." Subaccounts may be established and created as the
Authority deems appropriate.
The Project Fund and any subaccounts thereof, shall initially be funded as
provided in the Bond Resolutions The money and securities in the Project Fund shall
be applied as provided herein.
(A) The Trustee is hereby authorized and directed to make
disbursements from the Project Fund and any subaccounts thereof and to issue
its checks therefor or otherwise pay Costs of Issuance. The Trustee shall keep
and maintain adequate records pertaining to its disbursements from the Project
Fund and any subaccounts thereof.
(B) The Authority is hereby authorized and directed to make
disbursements from the Project Fund and any subaccounts thereof and to issue
its checks therefor or otherwise pay for Project Costs including the repayment of
any loans, notes or other obligations used to finance Project Costs.
Section 4.06. Surplus Fund Subject to the provisions of Section 4.02(D), there
shall be deposited into the Surplus Fund any amounts remaining in the Pledged
Revenue Fund. After transfer to the Surplus Fund, such amounts may be used by the
Authority for any lawful purpose free from the lien and pledge of this Indenture.
45366- Trust Indenture
IV-3
Section 4.07. Rebate Fund.
(A) Any provision hereof to the contrary notwithstanding, amounts
credited to the Rebate Fund shall be free and clear of any lien created by the
Indenture. The Trustee shall transfer from the Pledged Revenue Fund to the
credit of the Rebate Fund each amount directed by the Authority to be
transferred thereto.
(B) Within five days after each transfer of funds to the Rebate Fund
necessary to meet the requirements of Article VIII of the Bond Resolution or this
Section 4.07, the Trustee shall withdraw from the Rebate Fund and pay to the
United States the balance o£ the Rebate Fund. All payments to the United States
pursuant to this Section shall be (i) made by the Trustee for the account and in
the name of the Authority, (ii) paid by check mailed by registered mail (return
receipt requested), addressed to the Internal Revenue Service Center,
Philadelphia, Pennsylvania 19255 (or such other Service Center as may be
designated by the Internal Revenue Service from time to time), and (iii)
accompanied by the relevant Internal Revenue Service Form 8038-T provided by
the Authority.
(C) The Trustee shall preserve copies (either in original form or by
image) of all statements and forms received from the Authority pursuant to this
Indenture and all records maintained by it of transactions in the Rebate Fund
and shall deliver such materials to the Authority within 60 days following the
discharge of the last of the Bonds.
(D) The Trustee may in good faith conclusively rely on the instructions
of the Authority with regard to any actions to be taken by it pursuant to this
Section and shall have no liability for any consequences of any failure of the
Authority to supply accurate or sufficient instructions.
(E) If at any time during the term of this Indenture the Trustee or the
Authority desires to take any action that would otherwise be prohibited by the
terms of this Section, such person will be permitted to take such action only if it
shall first obtain and provide to the other person named herein an opinion of
Bond Counsel (acceptable to both the Trustee and the Authority) to the effect that
such action will not adversely affect the exclusion of interest on the Bonds from
gross income of the holders thereof for federal income tax purposes and shall be
in compliance with the laws of the State of Texas and the terms of this Indenture.
Section 4.08. Investments; Earnings. Monies deposited into the Pledged
Revenue Fund, the Debt Service Fund, and the Debt Service Reserve Fund shall be
invested and reinvested in Eligible Investments as directed in writing to the Trustee by
the Authority; provided that all such Eligible Investments shall be directed by the
45366 - Trust Indenture
IV-4
Authority in such manner that the money required to be expended from any Fund will
be available at the proper time or times.
(A) All investments and any profits realized from or interest accruing
on such investments shall belong to the Fund from which the monies for such
investments were taken (except as otherwise expressly provided in this
Indenture) All losses on investments shall be charged against the Fund to which
such investments are credited. The Trustee shall have the right to have sold in
the open market a sufficient amount of any such investments at any time that a
Fund does not have sufficient uninvested funds on hand to meet the obligations
payable out of such Fund. The Trustee shall not be liable or responsible for any
loss resulting from any such investment or resulting from the sale of any such
investment as herein authorized.
(B) At the direction of the Authority, a portion of the investment
income from any Fund may be paid directly to the Rebate Fund, free and clear of
the lien and pledge of this Indenture, for payment to the United States pursuant
to Section 4.07 in order to maintain the tax-exempt status of the Bonds.
(C) The Trustee may make any investment through its or an affiliate's
investment department, and the Trustee or such affiliate may receive
compensation in connection with such investments. As amounts invested are
needed for disbursement from any Funds, the Trustee shall cause a sufficient
amount of the investments credited to that Fund to be redeemed or sold and
converted into cash to the credit of that Fund. Securities transaction charges
incident to any purchase, sale, or redemption of Eligible Investments shall be
charged to the Authority.
(D) The Authority by its execution of this Indenture covenants to
restrict the investment of money in the Funds created under this Indenture in
such manner and to such extent, if any, as may be necessary, after taking into
account reasonable expectations at the time the Bonds are delivered to their
original purchaser, so that the Bonds will not constitute arbitrage bonds under
the Code and the Regulations, and the Trustee hereby agrees to comply with the
Authority's instructions with respect to the investment of money in the Funds
created under this Indenture.
(E) The Authority has covenanted to provide the Trustee with written
instructions to assure that any amounts that, in accordance with the Code and
applicable regulations, are required to be invested at a restricted yield will be
invested either (i) in Exempt Securities or (ii) at a yield that is not materially
higher than the yield on the Bonds, determined in accordance with the Code and
applicable Regulations, unless in the opinion of Bond Counsel, investment of
such at a higher rate will not adversely affect the exclusion from gross income of
45366 - Trust Indenture
IV-5
interest on the Tax Increment Contract Revenue Bonds for federal income tax
purposes. For the purpose of applying this Section, amounts on deposit in each
Fund shall be accounted for on a first in, first out basis. The Trustee, at the
Authority s direction, is authorized to yield restrict any investment in accordance
with Article VIII of the Bond Resolutions.
(F) For the purpose of determining the amount on deposit to the credit
of any such Fund, obligations in which money in such Fund shall have been
invested shall be valued at the Fair Market Value. The Trustee shall provide a
valuation of the Eligible Investments in the Funds established under this
Indenture as of the last Business Day of each month.
[END OF ARTICLE IV]
45366 - Trust Indenture
IV-6
ARTICLE V
COVENANTS OF THE AUTHORITY
Section 5.01. Payment of Tax Increment Contract Revenue Bonds and
Performance of Obligations. The Authority covenants to promptly pay or cause to be
paid the principal of, redemption premium, if any, and interest on the Tax Increment
Contract Revenue Bonds as the same become due and payable, whether at maturity or
by prior redemption, in accordance with the terms of the Tax Increment Contract
Revenue Bonds and the Bond Resolutions; to pay when due all fees, charges and other
amounts due to the Trustee and the Paying Agent/Registrar for the discharge of their
duties hereunder; and to faithfully keep and perform all of its covenants, undertakings
and agreements contained in this Indenture, the Tri-Party Agreement, the Bond
Resolutions and the Tax Increment Contract Revenue Bonds.
Section 5.02. Recordation and Execution of Security Instruments. The Authority
covenants to cause this Indenture, any supplemental indentures, and all other security
instruments, financing statements and supplements thereto that may be necessary, to be
filed, recorded, and refiled, in such manner, at such times and in such places as may be
required by law in order to fully preserve and protect the rights and security of the
Owners of the Tax Increment Contract Revenue Bonds and to perfect and preserve the
lien of this Indenture. Without limiting the generality of the foregoing, the Authority
shall execute and deliver such additional instruments and perform such additional acts
as may be necessary and proper after the execution of this Indenture and to transfer to
any successor Trustee or Trustees the assets, powers, instruments and funds held in
trust hereunder and to confirm the lien of this Indenture with respect to any Bond or
Tax Increment Contract Revenue Bonds, and shall take all action that may at any time
be necessary, in the opinion of the Trustee, to secure the interests of the Owners of the
Tax Increment Contract Revenue Bonds.
Section 5.03. Title Encumbrances of Pledged Revenues. The Authority
covenants that it has good and indefeasible title to the Contract Tax Increments, subject
to the assignments and pledges contained herein. So long as any Tax Increment
Contract Revenue Bonds remain Outstanding, except as permitted by Sections 3 02 and
3.03 of this Indenture, the Authority covenants not to sell, transfer, assign, pledge,
encumber, mortgage or otherwise dispose of directly or indirectly, by merger or
otherwise, or cause or suffer same, or create or allow to accrue or exist any lien upon, all
or any part of its interest in the Pledged Revenues or any portion thereof, except for the
lien of this Indenture.
Section 5.04. Pledged Revenues Not Encumbered. (a) The Pledged Revenues
are not in any manner pledged to the payment of any debt or obligation of the
Authority other than the Tax Increment Contract Revenue Bonds. The Authority
covenants that it will not in any manner pledge or further encumber the Pledged
45366 - Trust Indenture
V-1
Revenues unless such pledge or encumbrance is junior and subordinate to the lien and
pledge hereunder securing the Tax Increment Contract Revenue Bonds.
(b) Provided, however, the lien on, pledge of, and rights in and to the
Contract Tax Increments established, made, and granted in Article 11 of this Indenture
and this Section 5.04 constitutes a lien thereon, subject only to the rights, if any, of the
holders of bonds or other obligations that have been heretofore or are hereafter issued
by a Participant that are payable from and secured by a general levy of ad valorem
taxes throughout the taxing jurisdiction of the Participant.
Section 5.05 Collection of Contract Tax Increments. Subject to the provisions of
applicable law and the Tri-Party Agreement, the Authority covenants and agrees to use
its best efforts to cause each Participant to pay to the City, when due, all Contract Tax
Increments to provide for the payment of principal of and interest on the Tax Increment
Contract Revenue Bonds.
Section 5.06. Amendment of Tri-Party Agreement. The Authority covenants not
to cause any amendment of the Tri-Party Agreement that will in any manner materially
impair the rights of the Owners of the Tax Increment Contract Revenue Bonds.
[END OF ARTICLE V]
45366 - Trust Indenture
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ARTICLE VI
DEFAULT AND REMEDIES
Section 6.01. Events of Default. An Event of Default hereunder shall consist of
any of the following acts or occurrences:
(A) failure to pay when due Principal Installments or interest on any
'Tax Increment Contract Revenue Bond; or
(B) failure to deposit to the Debt Service Fund money sufficient for the
payment of any Principal Installments or interest payable on the Tax Increment
Contract Revenue Bonds by no later than the date when such Principal
Installment or interest becomes due and payable.
Section 6.02. Notices. In order to provide the Authority with information with
respect to its obligations under this Indenture, the Trustee shall provide the Authority
the following notices:
(A) Notice of any draws upon the Debt Service Reserve Fund which are
required to be transferred to the Debt Service Fund for the payment of Principal
Installments of or interest on any Tax Increment Contract Revenue Bonds,
together with the description of the amount drawn; and
(B) Notice of transfers to the Surplus Fund pursuant to Section 4.02
and Section 4.06.
Section 6.03. Notice of Default. The Trustee shall also be required to give
immediate notice to the Authority of the occurrence of any Event of Default hereunder.
Section 6.04. Remedies in General. If an Event of Default hereunder shall occur
and be continuing, then, in addition to all of the other rights and remedies granted to
the Trustee hereunder, the Trustee in its discretion, subject to the provisions of this
Indenture, may proceed to protect and enforce its rights and the rights of the Owners of
Tax Increment Contract Revenue Bonds by suit, action or proceeding in equity or at law
or otherwise, whether for the specific performance of any covenant or agreement
contained in this Indenture, the Bond- Resolutions or the Tax Increment Contract
Revenue Bonds or in aid of the execution of any power granted in this Indenture or for
the enforcement of any other legal, equitable or other remedy, as the Trustee, being
advised by counsel, shall deem most effectual to protect and enforce any of the rights of
the Trustee or such Owners of the Tax Increment Contract Revenue Bonds, including,
without limitation, the right to seek a writ of mandamus issued by a court of competent
jurisdiction compelling the members of the Board or other officers of the Authority or
any Participant to make payment of the Pledged Tax Increment (but only from and to
the extent of the sources provided in this Indenture and the Participant Contracts) or to
45366 - Trust Indenture
VI-1
observe and perform such covenant, obligations or conditions of this Indenture or the
Tri-Party Agreement.
Section 6.05. Appointment of Receivers If an Event of Default hereunder shall
occur and be continuing, and upon filing of a bill in equity or commencement of other
judicial proceedings to enforce the rights of the Trustee and the Owners hereunder, the
Trustee shall be entitled as a matter of right, and to the extent permitted by law, to the
appointment of a receiver or receivers of the Pledged Revenues and the income, rents,
profits and use thereof pending such proceedings, with such powers as the court
making such appointment shall confer.
Section 6.06. Trustee May Act Without Possession of Tax Increment Contract
Revenue Bonds. All rights of action under this Indenture or under any Tax Increment
Contract Revenue Bonds may be enforced by the Trustee without possession of any of
the Tax Increment Contract Revenue Bonds or the production thereof on any trial or
other proceedings relative thereto, and any such suit or proceedings instituted by the
Trustee shall be brought in its name, as Trustee for the ratable benefit of the Owners of
the Tax Increment Contract Revenue Bonds, subject to the provisions of this Indenture.
Section 6.07. Trustee as Attorney in Fact. The Trustee is hereby appointed (and
the Owners of the Tax Increment Contract Revenue Bonds, by taking and owning same
from time to time, shall be deemed to have so appointed the Trustee) the true and
lawful attorney in fact of the Owners of the Tax Increment Contract Revenue Bonds, to
make or file, in the names of the Owners of the Tax Increment Contract Revenue Bonds,
or in behalf of all Owners of the Tax Increment Contract Revenue Bonds as a class, any
proof of debt, amendment to proof of debt, petition or other document, and to do and
perform any and all acts and things for and in the name of the Owners of the lax
Increment Contract Revenue Bonds as a class as may be necessary or advisable, in the
judgment of the Trustee in order to have the claims of the Owners of the Tax Increment
Contract Revenue Bonds against the Authority approved in any equity receivership,
insolvency, liquidation, bankruptcy, reorganization or other proceedings to which the
Authority shall be a party and to receive payment of or on account of such claims Any
such receiver, assignee, liquidator or trustee is hereby authorized by each of the Owners
to make such payments to the Trustee, and. in the event that the Trustee shall consent to
the making of such payments directly to the Owners, to pay to the Trustee any amount
due for compensation and expenses of the Trustee, including counsel fees, incurred up
to the date of such distribution, and the Trustee shall have full power of substitution
and delegation in respect of any such powers.
Section 6.08. Remedies Not Exclusive. No remedy herein conferred upon or
reserved to the Trustee 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 Tax Increment Contract Revenue
Bonds, or now or hereafter existing at law or in equity or by statute. No delay or
45366 - Trust Indenture
VI-2
omission to exercise any right or power accruing upon any default shall impair any
such right or power or shall be construed to be a waiver of any such default or
acquiescence therein, and every such right and power may be exercised from time to
time and as often as may be deemed expedient.
Section 6.09. Limitation on Suits. All rights of action in respect of this Indenture
shall be exercised only by the Trustee, and no Owner of any Bond secured hereunder
shall have any right to institute any suit, action or proceeding at law or in equity for the
appointment of a receiver or for any other remedy hereunder or by reason hereof,
unless and until the Trustee shall have received written request of the Owners of not
less than twenty-five percent (25%) in aggregate principal amount of the Tax Increment
Contract Revenue Bonds then Outstanding and shall have been furnished reasonable
indemnity and shall have refused or neglected for ten (10) days thereafter to institute
such suit, action or proceedings. The making of such request and the furnishing of such
indemnity shall in each and every case be conditions precedent to the execution and
enforcement by any Owner of any Bond of the powers and remedies given to the
Trustee hereunder and to the institution and maintenance by any such Owner of any
action or cause of action for the appointment of a receiver or for any other remedy
hereunder, but the Trustee may, in its discretion, and when duly requested in writing
by the Owners of not less than twenty-five percent (25%) in aggregate principal amount
of the Tax Increment Contract Revenue Bonds then Outstanding and when furnished
indemnity satisfactory to protect it against expenses, charges and liability shall,
forthwith, take such appropriate action by judicial proceedings or otherwise in respect
of any existing default on the part of the Authority as the Trustee may deem expedient
in the interest of the Owners of the Tax Increment Contract Revenue Bonds.
Nothing contained in this Article, however, shall affect or impair the right of any
Owner, which shall be absolute and unconditional, to enforce the payment of the
Principal Installments and interest on the Tax Increment Contract Revenue Bonds of
such Owner, but only out of the moneys for such payment as herein provided, or the
obligation of the Authority which shall also be absolute and unconditional, to make
payment of the Principal Installments and interest on the Tax Increment Contract
Revenue Bonds issued hereunder, but only out of the funds provided herein for such
payment, to the respective Owners thereof at the time and place stated in said Tax
Increment Contract Revenue Bonds.
Section 6.10. Right of Owners of the Tax Increment Contract Revenue Bonds to
Direct Proceedings. Notwithstanding any provision of this Indenture to the contrary,
the Owners of more than fifty percent (50%) in aggregate principal amount of the Tax
Increment Contract Revenue Bonds then Outstanding shall have the right, at any time,
by an instrument or instruments in writing executed and dehvered to the Trustee, to
direct the time, method and place of conducting all proceedings to be taken in
connection with the enforcement of the terms and conditions of this Indenture or for
any remedy available to the Trustee or exercising any trust or power conferred on the
45366 - Trust Indenture
VI-3
Trustee or any other proceedings hereunder; provided, however, that such direction
shall not be contrary to taw or the provisions of this Indenture, and the Trustee shall
have the right to decline to follow any such direction if the Trustee in good faith shall
determine that the proceeding so directed would involve it in personal liability or
would be unjustly prejudicial to the Owners of the Tax Increment Contract Revenue
Bonds not consenting.
Section 6.11. Restoration of Rights and Remedies. If the Trustee or any Owner of
a Bond has instituted any proceeding to enforce any right or remedy under this
Indenture and such proceeding has been discontinued or abandoned for any reason or
has been determined adversely to the Trustee or to such Owner of a Bond, then and in
every such case the Authority, the Trustee and the Owners of the Tax Increment
Contract Revenue Bonds shall, subject to any determination in such proceeding, be
restored severally and respectively to their former positions hereunder, and thereafter
all rights and remedies of the Trustee and the Owners of the Tax Increment Contract
Revenue Bonds shall continue as though no such proceeding had been instituted.
Section 612. Waiver of Stay or Extension Laws. To the extent that it may
lawfully do so, the Authority covenants that it will not at any time insist upon, plead or
in any manner whatsoever claim or take the benefit or advantage of any stay or
extension law whenever or wherever enacted, which may affect the covenants or the
performance of this Indenture. The Authority also covenants that it will not otherwise
hinder, delay or impede the execution of any power herein granted to the Trustee.
Section 6.13. Delay or Omission Not Waiver. No delay or omission of the
Trustee or of any Owner of any Bond to exercise any right or remedy accruing upon
any Event of Default hereunder shall impair any such right or remedy or constitute a
waiver of any such Event of Default or an acquiescence therein. Every right and remedy
given by this Article or by law to the Trustee or to the Owners may be exercised from
time to time, and as often as may be deemed expedient, by the Trustee or by the
Owners of the Tax Increment Contract Revenue Bonds, as the case may be.
[END OF ARTICLE VI]
45366- Trust Indenture
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ARTICLE VII
DISCHARGE
Section 7.01. Discharge by Payment. When all Tax Increment Contract Revenue
Bonds have been paid in full as to principal and as to interest and premium, if any, or
when all Tax Increment Contract Revenue Bonds have become due and payable,
whether at maturity or by prior redemption or otherwise, and the Authority shall have
provided for the payment of the whole amount due or to become due on all Tax
Increment Contract Revenue Bonds then outstanding, including all interest which has
accrued thereon or which may accrue to the date of maturity or redemption by
depositing with the Trustee or the Paying Agent/Registrar, for payment of such
outstanding Tax Increment Contract Revenue Bonds and the interest thereon and any
premium which may be due thereon, the entire amount due or to become due thereon,
or amounts and investments sufficient to provide for such payment as provided in the
Bond Resolutions, and the Authority shall also have paid or caused to be paid all sums
payable hereunder by the Authority, including the compensation due or to become due
the Trustee, then the Trustee shall, upon receipt of a letter of instructions from the
Authority requesting the same, discharge and release the lien of this Indenture and
execute and deliver to the Authority such releases or other instruments as shall be
required to release the hen hereof.
Section 7.02. Discharge by Deposit. The Authority may discharge its obligation
to the Owners of any or all of the Tax Increment Contract Revenue Bonds to pay
principal, interest and redemption premium (if any) thereon in any manner then
permitted by taw, including, but not limited to, by depositing with any paying agent for
such Tax Increment Contract Revenue Bonds either: (i) cash in an amount equal to the
principal amount and redemption premium, if any, of such Tax Increment Contract
Revenue Bonds plus interest thereon to the date of maturity or redemption, or (ii)
pursuant to an escrow or trust agreement, cash and/ or Investments in principal
amounts and maturities and bearing interest at rates sufficient (in the opinion of an
independent certified public accountant) to provide for the timely payment of the
principal amount and redemption premium, if any, of such Tax Increment Contract
Revenue Bonds plus interest thereon to the date of maturity or redemption; provided,
however, that if any of the Tax Increment Contract Revenue Bonds are to be redeemed
prior to their respective dates of maturity, provision shall have been made for giving
notice of redemption as provided in the Bond Resolution authorizing such Tax
Increment Contract Revenue Bonds. Upon such deposit, such Tax Increment Contract
Revenue Bonds shall no longer be regarded to be Outstanding or unpaid.
For the purpose of this Section 7.02, "Investments" shall mean:
(a) direct noncallable obligations of the United States, including obligations
that are unconditionally guaranteed by the United States;
45366 - Trust Indenture
VII-1
(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
Authority authorizes the discharge by deposit of any or all of the Tax
Increment Contract Revenue Bonds, 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 Authority authorizes the discharge by deposit of any or all
of the 'Fax Increment Contract Revenue Bonds, are rated as to investment
quality by a nationally recognized investment rating firm of not less than
AAA or its equivalent.
[END OF ARTICLE VII]
45366 - Trust Indenture
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ARTICLE VIII
THE TRUSTEE
Section 8 01. Acceptance of Trusts. The Trustee, for itself and its successors,
hereby accepts the trusts under this Indenture, but only upon the following terms and
conditions set forth in this Article.
(a) Notwithstanding any provision of the Indenture to the contrary,
prior to an Event of Default hereunder, and after the curing of any such Event of
Default, the Trustee shall not be liable for the performance of any duties, except
such duties as are specifically set forth in this Indenture, and no implied
covenants or obligations shall be read into this Indenture against the Trustee. In
case of an Event of Default which has not been cured, the Trustee shall exercise
such of the rights and powers vested in it by this Indenture and shall use the
same degree of care and skill in its exercise thereof as a prudent person would
exercise or use under the circumstances in the conduct of his own affairs.
(b) In the absence of bad faith on the part of the Trustee, the Trustee
may conclusively rely upon the truth, completeness and accuracy of the letters of
instruction, statements, certificates, opinions, certified resolutions and other
certified showings conforming to the requirements of this Indenture.
(c) The Trustee may execute any of the trusts or powers hereof and
perform any duties required of it, by or through attorneys or agents selected by it
with reasonable care, and shall be entitled to, and shall be protected in relying
upon, advice of counsel concerning all matters of trust hereof and its duties
hereunder, and may in all cases pay such reasonable compensation as it shall
deem proper to all such attorneys and agents as may reasonably be required and
employed in connection with the trusts hereof, and the Trustee shall not be
responsible for the acts or negligence of such attorneys, agents or counsel, if
selected with reasonable care.
(d) The Trustee shall not be responsible for any recitals herein, in the
Bond Resolutions or in the Tax Increment Contract Revenue Bonds The trustee
may require of the Authority full information and advice as to the performance
of the covenants, conditions and agreements contained in this Indenture. The
recitals and statements of fact and warranties contained in this Indenture, the
Bond Resolutions and in the Tax Increment Contract Revenue Bonds shall be
taken as statements by the Authority and shall not be considered as made by or
as imposing any obligation or liability upon the Trustee.
(e) Except as otherwise provided in this Indenture, the Trustee shall
not be bound to recognize any person as an Owner of any Bond or to take action
45366 - Trust Indenture
at such persons request, unless such person's name appears as the Registered
Owner of such Bond in the Register.
(f) Except as otherwise expressly provided or fairly implied by the
provisions of this Indenture, the Trustee shall not be obligated and may not be
required to give or furnish any notice, demand, report, request, reply, statement,
advice or opinion to any Owner of any Bond or to the Authority or any other
person, and the Trustee shall not incur any liability for its failure or refusal to
give or furnish same unless obligated or required to do so by express provision
or by fair implication of the provisions hereof.
(g) Nothing herein contained shall relieve the Trustee from liability for
its own negligent action or failure to act or its own willful misconduct, except
that the Trustee shall not incur any liability (i) for any error of judgment made in
good faith by a responsible officer or responsible officers thereof, unless it shall
be proved that it was negligent in ascertaining the pertinent facts, or (ii) in
respect of any action taken or omitted to be taken by it in good faith in
accordance with the direction of the Owners of the percentage of the Tax
Increment Contract Revenue Bonds specified herein relating to the time, method
and place of conducting any proceeding for any remedy available to the Trustee
or exercising any trust or power conferred upon the Trustee under this
Indenture.
(h) None of the provisions contained in this Indenture shall require the
Trustee to advance, expend or risk its own funds or to otherwise incur financial
liability in the performance of any of its duties or in the exercise of any of its
rights or powers, if there is reasonable ground for believing that the repayment
of such funds or liability is not reasonably assured to it by the security afforded
to it by the terms of this Indenture.
(i) The Trustee shall have no responsibility with respect to any
information in any offering memorandum or other disclosure material
distributed with respect to the Tax Increment Contract Revenue Bonds, and the
Trustee shall have no responsibility for compliance with securities laws in
connection with the issuance and sale of the Tax Increment Contract Revenue
Bonds.
(j) In the event the Trustee shall receive inconsistent or conflicting
requests and indemnity from two or more groups of Owners, each representing
less than a majority of the aggregate principal amount of the Tax Increment
Contract Revenue Bonds then Outstanding, the Trustee, in its sole discretion,
may determine what action, if any, shall be taken.
45366 - Trust Indenture
VIII-2
(k) Except as otherwise especially provided by the provisions of this
Indenture, the Trustee shall not be obligated and may not be required to give or
furnish any notice, demand, report, request, reply, statement, advice or opinion
to any Owner of any Tax Increment Revenue Bond or to the Authority or any
other person, and the Trustee shall not incur any liability for its failure or refusal
to give or furnish same unless obligated or required to do so by express
provisions hereof.
(1) The Trustee shall not be required to give any bond or surety with
respect to the performance of its duties or the exercise of its powers under this
Indenture.
(m) Until termination of this Indenture, the Trustee shall file
continuation statements as required to continue in effect the Uniform
Commercial Code financing statement filed with the Secretary of State of the
State of Texas listing the Trustee as the secured party and the Authority as the
debtor.
Section 8.02. Reliance by Trustee. To the extent not prohibited by this Article,
the trustee may rely, and shall be protected in acting upon, any letters of instruction,
statements, certificates, certified resolutions, opinions, notices, consents, orders,
appraisals, reports, policies, bonds or other papers or documents believed by it to be
genuine and to have been signed or presented to it by the proper person or persons and
the Trustee may consult with counsel and the opinion of such counsel shall be full and
complete authorization and protection in respect of any action taken or suffered by the
Trustee hereunder in good faith and in conformity with the opinion of such counsel.
Notwithstanding the foregoing, upon receipt by the Trustee of documents furnished to
it by the Authority which are specifically required to be delivered under this Indenture,
the Trustee shall examine the same to determine whether they conform to the
requirements of this Indenture, however, the Trustee shall have no obligation to analyze
the same or evaluate their substance.
Section 8.03. Certificate of the Authority as Proof. Whenever in the
administration of the trusts of this Indenture, the Trustee shall deem it necessary or
desirable that a matter be proved or established prior to taking or suffering any action
hereunder, then, in the absence of bad faith on the part of the Trustee, and unless other
evidence in respect thereof be herein specifically prescribed, and unless an Event of
Default hereunder, to the knowledge of the Trustee, shall have occurred and be
continuing, such matter may be deemed to be conclusively proved and established by a
certificate of the Authority, executed by the Chairman of the Authority and delivered to
the Trustee, and such certificate shall be full warranty to the Trustee for any action
taken or suffered by it under the provisions of this Indenture in reliance thereon.
45366 - Trust Indenture
VIII-3
Section 8.04. Trustee May Own Tax Increment Contract Revenue Bonds. The
Trustee, in its individual or any other capacity, may become the owner or pledgee of
Tax Increment Contract Revenue Bonds or other certificates or evidences of ownership
or pledge thereof issued hereunder, with the same rights it would have if it were not the
Trustee.
Section 8.05. Compensation of Trustee. The Authority shall pay to the Trustee
all reasonable fees, charges and expenses of the Trustee (including the reasonable fees,
charges and expenses of its agents and counsel) for the administration and execution of
the trusts hereby created and the performance of its powers and duties hereunder,
including the ordinary and extraordinary services performed by the Trustee under this
Indenture. Whenever the Trustee incurs expenses or renders services in connection with
any bankruptcy or insolvency proceeding, such expenses (including the fees and
expenses of its counsel) and the compensation of such services are intended to
constitute expenses of administration under any bankruptcy or insolvency law or law
relating to creditors' rights generally.
Section 8.06. Removal of Trustee. The Trustee may be removed at any time by
an instrument or concurrent instruments in writing, signed by the Owners of a majority
in principal amount of the Tax Increment Contract Revenue Bonds then Outstanding
and delivered to the Trustee, with notice thereof given to the Authority.
Section 8.07. Resignation of Trustee. The Trustee may at any time resign and be
discharged from the trusts hereby created by giving written notice to the Authority and
by providing written notice to the Owners of its intended resignation at least sixty (60)
days in advance thereof. Such notice shall specify the date on which such resignation
shall take effect and shall be sent by first class mail, postage prepaid to each Registered
Owner of Tax Increment Revenue Bond. Resignation by the Trustee shall not take effect
unless and until a successor to such Trustee shall have been appointed as hereinafter
provided.
Section 8.08. Appointment of Successor Trustee. In case the Trustee hereunder
shall resign, or shall be removed or dissolved, or shall be in the course of dissolution or
liquidation, or shall otherwise become incapable of acting hereunder, or in case the
Trustee shall be taken under control of any pubhc officer or officers or a receiver
appointed by a court a successor may be appointed by the Owners of a majority in
principal amount of the Tax Increment Contract Revenue Bonds then Outstanding, by
an instrument or concurrent instruments in writing, signed by such Owners or their
duly authorized representatives and delivered to the Trustee, with notice thereof given
to the Authority; provided, however, that in any of the events above mentioned, the
Authority may nevertheless appoint a temporary Trustee to fill such vacancy until a
successor shall be appointed by the Owners in the manner above provided, and any
such temporary Trustee so appointed by the Authority shall immediately and without
further act be automatically succeeded by the successor to the Trustee appointed by the
45366 - Trust Indenture
VIII-4
Owners. The Authority shall provide written notice to the Owners of the appointment
of any successor Trustee, whether temporary or permanent, in the manner provided in
the preceding Section of this Indenture for providing notice of the resignation of the
Trustee. Any successor "trustee or temporary Trustee shall be a trust company or bank
in good standing located in or incorporated under the laws of the State of Texas duly
authorized to exercise trust powers and subject to examination by federal or state
authority, having a reported capital and surplus of not less than $100,000,000.
In the event that no appointment of a successor Trustee is made by the Owners
or by the Authority pursuant to the foregoing provisions of this Section at the time a
vacancy in the office of the Trustee shall have occurred, the Owner of any Bond issued
hereunder or the retiring Trustee may apply to any court of competent jurisdiction for
the appointment of a successor Trustee, and such court may thereupon, after such
notice as it shall deem proper, if any, appoint a successor Trustee.
Section 8.09. Powers of Successor Trustee. Each successor Trustee appointed
hereunder shall execute, acknowledge and deliver to its predecessor and to the
Authority, an instrument in writing accepting such appointment hereunder, and
thereupon such successor Trustee, without any further act, deed or conveyance, shall
become fully vested with all the estates, properties, rights, powers, trusts, duties and
obligations of its predecessor, but such predecessor Trustee shall, nevertheless, on the
written request of the Authority, execute and deliver an instrument transferring to such
successor Trustee all the estates, properties, rights, powers, trusts, duties and
obligations of such predecessor hereunder. Each predecessor Trustee shall immediately
deliver all properties, securities and moneys held by it to its successor; provided,
however, that before any such delivery is required or made, all proper fees, advances
and expenses of the predecessor Trustee shall be paid in full. Should any deed,
conveyance or instrument in writing be required from the Authority by any successor
Trustee for properties, rights, powers, trusts, duties and obligations hereby vested or
intended to be vested in the predecessor Trustee, any and all such deeds, conveyances
and instruments in writing shall, on request, be executed, acknowledged and delivered
by the Authority. The resignation of any Trustee, appointing a successor Trustee
hereunder, together with all deeds, conveyances and other instruments provided for in
this Article shall, at the expense of the Authority, be properly filed or recorded and a
copy thereof shall be filed with such successor Trustee, together with a statement
showing such tiling or recordation.
Section 8.10. Merger, Conversion or Consolidation of Trustee. Notwithstanding
any provision hereof to the contrary, any corporation or association into which the
Trustee may be merged or converted, or with which it may be consolidated, or any
corporation succeeding to all or substantially all of the corporate trust business of the
Trustee, or any corporation or association resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, shall be the successor Trustee under
45366- Trust Indenture
VIII-5
this Indenture without the execution or filing of any instrument or any other act on the
part of any of the parties hereto.
Section 8.11. Funds Transfer. If any payment is to be made by the Trustee to the
Authority or its designee by funds transfer, the Authority agrees to enter into an
agreement concerning funds transfer instructions in a form to be provided by the
Trustee. Until the Authority executes such an agreement, the Trustee shall not be
required to make any payment under the Indenture to the Authority or its designee by
funds transfer.
[END OF VIII]
45366 - Trust Indenture
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ARTICLE IX
MODIFICATION OF INDENTURE
Section 9.01. Supplemental Indentures Not Requiring Consent of Owners of the
Tax Increment Contract Revenue Bonds. The Authority and the Trustee may, without
the consent of the Owners of any of the Tax Increment Contract Revenue Bonds, enter
into one or more supplemental indentures, which shall form a part hereof, for any one
or more of the following purposes:
(a) to cure any ambiguity, inconsistency or formal defect or omission
in this Indenture;
(b) to grant to or confer upon the Trustee for the benefit of the Owners
of the Tax Increment Contract Revenue Bonds any additional rights, remedies,
powers or authority that may lawfully be granted to or conferred upon the
Owners of the Tax Increment Contract Revenue Bonds or the Trustee or either of
them;
(c) to subject to the lien of this Indenture additional revenues;
properties or collateral;
(d) to modify, amend or supplement this Indenture or any
supplemental indenture in such manner as to provide further assurances that
interest on the Tax Increment Contract Revenue Bonds will, to the greatest extent
legally possible, be excludable from gross income for federal income tax
purposes;
Bonds;
(e) to obtain bond insurance for any Tax Increment Contract Revenue
(f)
to provide for one or more Reserve Fund Surety Policies; and
(g) to permit the assumption of the Authority's obligations hereunder
by any other entity that may become the legal successor to the Authority;
provided, however, that no provision in such supplemental indenture shall be
inconsistent with this Indenture or shall impair in any manner the rights of the Owners
of the Tax Increment Contract Revenue Bonds.
Section 9.02. Supplemental Indentures Requiring Consent of Owners of the Tax
Increment Revenue Bonds. Except as otherwise provided in the preceding Section, any
modification, change or amendment of this Indenture may be made only by a
supplemental indenture adopted and executed by the Authority and the Trustee with
45366 - Trust Indenture
IX-1
the consent of the Owners of not less than a majority of the aggregate principal amount
of the Tax Increment Contract Revenue Bonds then Outstanding.
Notwithstanding the preceding paragraph of this Section, no modification,
change or amendment to this Indenture shall, without the consent of the Owner of each
Bond so affected, extend the time of payment of the Principal Installments or interest
thereon, or reduce the Principal Installments or premium, if any, thereon; or the rate of
interest thereon, or make the Principal Installments or interest thereon payable in any
coin or currency other than that hereinbefore provided, or deprive such Owner of the
lien hereof on the revenues pledged hereunder. Moreover, without the consent of the
Owner of each Bond then Outstanding, no modification, change or amendment to this
Indenture shall permit the creation of any lien on the revenues pledged hereunder
equal or prior to the lien hereof, or reduce the aggregate principal amount of Tax
Increment Contract Revenue Bonds, the Owners of which are required to approve any
such modification, change or amendment of this Indenture.
Section 9.03. Consents. Consents required pursuant to this Article shall be valid
only if given following the giving of notice by or on behalf of the Authority requesting
such consent, setting forth the substance of the supplemental indenture in respect of
which such consent is sought and stating that copies thereof are available at the office of
the Trustee for inspection, to the Owners of Tax Increment Contract Revenue Bonds
whose consent is required in accordance with the provisions of this Article. Such notice
shall be given by sending such notice by first-class mail, postage prepaid, to the
registered Owners of such Tax Increment Contract Revenue Bonds. Any consent or
other action by an Owner of any Bond in accordance with this Article shall bind every
future owner of the same Bond and the Owner of any Bond issued in exchange therefor
or in lieu thereof.
[END OF ARTICLE IX]
45366 - Trust Indenture
IX-2
ARTICLE X
GENERAL PROVISIONS
Section 10.01. Proof of Execution of Writings and Ownership. Any instrument
provided in this Indenture to be signed or executed by the Owners of all or any portion
of the Tax Increment Contract Revenue Bonds may be in any number of writings of
similar tenor and may be signed or executed by such Owners in person or by their duly
authorized representatives Proof of the execution of any such instrument, or of the
writing appointing any such agent of of the ownership of any Bond, shall be sufficient
for any of the purposes of this Indenture and shall be conclusive in favor of the
Authority and the Trustee with respect to any actions taken by either under such
instruments if
(a) the fact and date of the execution by any person of any such instrument is
proved by (i) a certificate of any officer of any jurisdiction who by law has power to
take acknowledgments of deeds within such jurisdiction, to the effect that the person
signing such instrument acknowledged before him the execution thereof, or (ii) an
affidavit of a witness of such execution; and
(b) the ownership of any Bond registered as to both principal and interest is
proved by the registration books kept by the Paying Agent/Registrar.
Section 10.02. Benefits of Indenture. The covenants, stipulations and agreements
contained in this Indenture are and shall be for the sole and exclusive benefit of the
parties hereto, their successors and .assigns, and the Owners of the Tax Increment
Contract Revenue Bonds, and nothing in this Indenture expressed or implied shall be
construed to confer upon or give to any other person any right, remedy or claim under
or by reason of this Indenture.
Section 10.03. No Individual Liability. No covenant or agreement contained in
the Tax Increment Contract Revenue Bonds or in this Indenture shall be deemed to be
the covenant or agreement of any member of the Board of Directors of the Authority or
any officer, agent, employee or representative o f the Authority in his individual
capacity, and neither the officers, agents, employees or representatives of the Authority
nor any person executing the Tax Increment Contract Revenue Bonds shall be
personally liable thereon or be subject to any personal liability or accountability by
reason of the issuance thereof, whether by virtue of any constitution, statute or rule of
law, or by the enforcement of any assessment or penalty, or otherwise, all such liability
being expressly released and waived as a condition of and in consideration for the
execution of this Indenture, the adoption of the Bond Resolutions and the issuance of
the Tax Increment Contract Revenue Bonds.
45366 - Trust Indenture
X-1
Section 10.04. Notice. Any notice, demand, direction, request, or other
instrument authorized or required by this Indenture to be given to or filed with the
Trustee or the Authority shall be deemed to be effective for all purposes of this
Indenture if and when sent by (i) personal delivery, to the persons designated below at
the address designated below, (ii) registered or certified mail, postage prepaid, to the
address specified below or (iii) facsimile transmission to the number specified below
with confirmation of receipt by telephone, or to such other person, at such other address
or to such other number as may be designated in writing by the parties:
Section 10.05. Governing Law. This Indenture shall be governed in all respects,
including validity, interpretation and effect, by, and shall be enforceable in accordance
with, the laws of the State of Texas.
Trustee:
Attn•
Facsimile:
Telephone:
Authority: Development Authority of Pearland
c/o the City of Pearland
3519 Liberty Drive
Pearland, Texas 77581
Attn City Manager
Facsimile• (281) 652-1708
Telephone (281) 652-1663
Section 10.06. Severability If any provision of this Indenture shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the remaining
portions shall not in any way be affected or impaired. In case any covenant, stipulation,
obligation or agreement contained in the 'Fax Increment Contract Revenue Bonds, the
Bond Resolutions or in this Indenture shall for any reason be held to be usurious or in
violation of law, then such covenant, stipulation, obligation or agreement shall be
deemed to be the covenant, stipulation, obligation or agreement of the Authority to the
full extent permitted by law.
Section 10.07. Successors and Assigns. This Agreement shall be binding upon
the Authority and the Trustee and their successors and assigns.
Section 10.08. Execution in Several Counterparts. This Indenture may be
simultaneously executed in several counterparts all of which shall constitute one and
the same instrument and each of which shall be, and shall be deemed to be, an original.
45366 - Trust Indenture
X-2
IN WITNESS WHEREOF, the Authority and the Trustee have caused this
Indenture to be signed, sealed and attested on their behalf by their duly authorized
representatives, all as of the date first hereinabove written.
DEVELOPMENT AUTHORITY OF
PEARLAND
Chairman
ATTEST:
Secretary, Board of Directors
, Trustee
By:
Title:
Trustee
ATTEST:
By:
Title:
(SEAL)
45366 - Trust Indenture
X-3
Development Authority of Pearland
Tax Increment Contract Revenue Bonds, Series 2004
BOND PURCHASE AGREEMENT
November 15, 2004
Board of Directors
Development Authority of Pearland
3519 Liberty Drive
Pearland, Texas 77581
Ladies and Gentlemen:
The undersigned, First Southwest Company, The GMS Group, Inc., and Wachovia
Securities LLC (collectively, the 'Underwriters"), acting by and through First Southwest
Company, which has been duly designated as representative of the Underwriters (the
"Representative"), hereby offers to enter into this bond purchase agreement (the "Agreement")
with the Development Authority of Pearland (the "Issuer") which, upon the Issuer's written
acceptance of this offer, will be binding upon the Issuer and upon the Underwriters. This offer is
made subject to the Issuer's written acceptance hereof on or before 10:00 p.m., Houston, Texas
time, on November 15, 2004, and, if not so accepted, will be subject to withdrawal by the
Underwriters upon notice delivered to the Issuer at any time prior to the acceptance hereof by the
Issuer. Terms not otherwise defined in this Agreement shall have the same meanings set forth in
the Bond Resolution, the Indenture, or the Official Statement (each as defined herein).
1. Purchase and Sale of the. Bonds. Subject to the terms and conditions and in
reliance upon the representations, warranties, and agreements set forth herein, the Underwriters
hereby agree to purchase from the Issuer, and the Issuer hereby agrees to sell and deliver to the
Underwriters, all, but not less than all, of the Issuer's Tax Increment Contract Revenue Bonds,
Series 2004 (the "Bonds"). Inasmuch as this purchase and sale represents a negotiated
transaction, the Issuer understands, and hereby confirms, that the Underwriters are not acting as
fiduciaries of the Issuer, but rather are acting solely in their capacity as Underwriters for their
own account.
The principal amount of Bonds to be issued, the dated date therefor, the maturities,
sinking fund, and optional redemption provisions, and the interest sates per annum are set forth
in Schedule I hereto. The Bonds shall be as described in, and shall be issued and secured under
and pursuant to the provisions of, a trust indenture and bond resolution as authorized and
approved by the Issuer on October 25, 2004.
The purchase price for the Bonds shall be $ (representing the par amount
of the Bonds, less a net original issue discount of $ and less an underwriting
discount of $ ) plus interest accrued on the Bonds calculated on the basis of a
360-day year of twelve 30-day months, from the dated date of the Bonds to the date of the
Closing (as hereinafter defined).
2. Public Offering. The Underwriters agree to make a bona fide public offering of
all of the Bonds at a price not to exceed the public offering price set forth on the cover of the
Official Statement and may subsequently change such offering price without any requirement of
prior notice. The Underwriters may offer and sell Bonds to certain dealers (including dealers
depositing Bonds into investment trusts) and others at prices lower than the public offering price
stated on the inside cover page of the Official Statement. The Underwriter agrees to execute and
deliver to the Issuer, at or before the Closing a certificate relating to the "issue price" of the
Bonds, in such form as may be reasonably acceptable to the Issuer.
3. The Official Statement.
(a) Attached hereto as Exhibit A is either a draft of the final Official
Statement or a copy of the Preliminary Official Statement dated November 8, 2004 (the
"Preliminary Official Statement"), including the cover page and appendices thereto, of
the Issuer relating to the Bonds. Such draft of the final Official Statement or copy of the
Preliminary Official Statement, as amended to reflect the changes marked or otherwise
indicated on Exhibit A hereto, is hereinafter called the "Official Statement."
(b) The Preliminary Official Statement has been prepared for use in
connection with the public offering, sale, and distribution of the Bonds by the
Underwriters. The Issuer hereby represents and warrants that the Preliminary Official
Statement is deemed final by the Issuer as of its date, except for the omission of such
information which is dependent upon the final pricing of the Bonds for completion, all as
permitted to be excluded by Section (b)(1) of Rule 15c2-12 under the Securities
Exchange Act of 1934 (the "Rule").
(c) The Issuer hereby authorizes the Official Statement and the information
therein contained to be used by the Underwriters in connection with the public offering
and the sale of the Bonds. The Issuer consents to the use by the Underwriters prior to the
date hereof of the Preliminary Official Statement in connection with the public offering
of the Bonds. The Issuer shall provide, or cause to be provided, to the Underwriters as
soon as practicable after the date of the Issuer's acceptance of this Agreement (but, in any
event, not later than within seven business days after the Issuer s acceptance of this
Agreement and in sufficient time to accompany any confirmation that requests payment
from any customer) copies of the .Official Statement which is complete as of the date of
its delivery to the Underwriters in such quantity as the Underwriters shall request in order
for the Underwriters to comply with Section (b)(4) of the Rule and the rules of the
Municipal Securities Rulemaking Board.
(d) If, after the date of this Agreement to and including the date the
Underwriters are no longer required to provide an Official Statement to potential
2
customers who request the same pursuant to the Rule (the earlier of (i) 90 days from the
"end of the underwriting period" (as defined in Rule) and (ii) the time when the Official
Statement is available to any person from a nationally recognized municipal securities
information repository, but in no case less than 25 days after the "end of the underwriting
period" for the Bonds), the Issuer becomes aware of any fact or event which might or
would cause the Official Statement, as then supplemented or amended, to contain any
untrue statement of a material fact or to omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, or if it is necessary to
amend or supplement the Official Statement to comply with law, the Issuer will notify the
Underwriters (and for the purposes of this clause provide the Underwriters with such
information as it may from time to time request), and if, in the opinion of the
Underwriters, such fact or event requires preparation and publication of a supplement or
amendment to the Official Statement, the Issuer will forthwith prepare and furnish, at the
Issuer s own expense (in a form and manner approved by the Underwriters), a reasonable
number of copies of either amendments or supplements to the Official Statement so that
the statements in the Official Statement as so amended and supplemented will not contain
any untrue statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading or so that the
Official Statement will comply with law. If such notification shall be subsequent to the
Closing, the Issuer shall furnish such legal opinions, certificates, instruments, and other
documents as the Underwriters may reasonably deem necessary to evidence the truth and
accuracy of such supplement or amendment to the Official Statement.
(e) The Representative hereby agrees to timely file the Official Statement
with the nationally recognized municipal securities information repositories and the state
information depositories. Unless otherwise notified in writing by the Representative, the
Issuer can assume that the 'end of the underwriting period" for purposes of the Rule is
the date of the Closing.
4. Representations, Warranties, and Covenants of the Issuer. The Issuer hereby
represents and warrants to and covenants with the Underwriters that:
(a) The Issuer is a not -for -profit local government corporation duly created,
organized, and existing under the laws of the State of Texas (the "State' ), including
specifically the provisions of Chapter 431, Texas Transportation Code, as amended, and
chapter 394 Texas Local Government code, as amended (collectively, the "Act"), and
has full legal right, power, and authority under the Act, and at the date of the Closing will
have full legal right, power, and authority under the Act (i) to enter into, execute, and
deliver this Agreement, the Bond Resolution, the Indenture, and all documents required
hereunder and thereunder to be executed and delivered by the Issuer (this Agreement, the
Bond Resolution, the Indenture, and the other documents referred to in this clause (i) are
hereinafter referred to as the "Issuer Documents"); (ii) to sell, issue and deliver the
Bonds to the Underwriters as provided herein; and (iii) to carry out and consummate the
transactions contemplated by the Issuer Documents and the Official Statement, and the
Issuer has complied, and will at the Closing be in compliance in all respects, with the
terms of the Act and the Issuer Documents as they pertain to such transactions
3
(b) By all necessary official action of the Issuer prior to or concurrently with
the acceptance hereof, the Issuer has duly authorized all necessary action to be taken by it
for (i) the adoption of the Bond Resolution, the execution and delivery of the Indenture,
and the issuance and sale of the Bonds (ii) the approval, execution, and delivery of, and
the performance by the Issuer of the obligations on its part, contained in the Bonds and
the Issuer Documents; and (iii) the consummation by it of all other transactions
contemplated by the Official Statement, and the Issuer Documents and any and all such
other agreements and documents as may be required to be executed, delivered, and/or
received by the Issuer in order to carry out give effect to, and consummate the
transactions contemplated herein and in the Official Statement
(c) The Bonds, when issued, delivered, and paid for in accordance with the
Issuer Documents, will constitute legal, valid, and binding obligations of the Issuer
entitled to the benefits of the Bond Resolution and the Indenture and enforceable in
accordance with their terms, subject to bankruptcy, insolvency, reorganization,
moratorium and other similar laws and principles of equity relating to or affecting the
enforcement of creditors' rights; upon the issuance, authentication, and delivery of the
Bonds as aforesaid, the Bond Resolution and Indenture will provide, for the benefit of the
holders, from time to time, of the Bonds, the legally valid and binding pledge of and lien
it purports to create as set forth in the Bond Resolution and the Indenture•
(d) The Issuer is not in breach of or default in any material respect under any
applicable constitutional provision, law, or administrative regulation of the State or the
United States or any applicable judgment or decree or any loan agreement, indenture,
bond, note, order, agreement, or other instrument to which the Issuer is a party or to
which the Issuer is otherwise subject, and no event which would have a material and
adverse effect upon the business or financial condition of the Issuer has occurred and is
continuing which constitutes or with the passage of time or the giving of notice, or both,
would constitute a default or event of default by the Issuer under any of the foregoing;
and the execution and delivery of the Bonds and the Issuer Documents and the adoption
of the Bond Resolution, and compliance with the provisions on the Issuer's part contained
therein, will not conflict with or constitute a breach of or default under any constitutional
provision, administrative regulation, judgment, decree, loan agreement indenture, bond,
note, order agreement, or other instrument to which the Issuer is a party or to which the
Issuer is otherwise subject or under the terms of any such law, regulation, of instrument,
except as provided by the Bonds and the Issuer Documents;
(e) All authorizations approvals, licenses, permits, consents, and resolutions
of any governmental authority legislative body, board, agency, or commission having
jurisdiction of the matter which are required for the due authorization of, which would
constitute a condition precedent to, or the absence of which would materially adversely
affect the due performance by the Issuer of its obligations under the Issuer Documents
and the Bonds have been duly obtained, except for the approval of the Bonds by the
Attorney Geneial of the State of Texas and the registration of the Bonds by the
Comptroller of Public Accounts of the State of Texas and such approvals, consents, and
resolutions as may be required under the Blue Sky or securities laws of any jurisdiction in
connection with the offering and sale of the Bonds;
(f) The Issuer Documents conform to the descriptions thereof contained in the
Official Statement under the captions "SOURCE AND SECURITY OF PAYMENT FOR
THE BONDS," "THE BONDS,' and "THE INDENTURE;" the proceeds of the sale of
the Bonds will be applied generally as described in the Official Statement under the
caption "PLAN OF FINANCING - Use of Bond Proceeds,' and the Bond Resolution
contains covenants conforming to the description thereof contained in the Official
Statement under the caption "CONTINUING DISCLOSURE OF INFORMATION,'
(g) There is no legislation, action, suit, proceeding, inquiry, or investigation,
at law or in equity, before or by any court, government agency, public board, or body,
pending or, to the best knowledge of the Issuer after due inquiry, threatened against the
Issuer, affecting the existence of the Issuer or the titles of its officers to their respective
offices, or affecting or seeking to prohibit, restrain or enjoin the sale, issuance, or
delivery of the Bonds or the collection of contract revenues pledged to the payment of
principal of and interest on the Bonds pursuant to the Issuer Documents or in any way
contesting or affecting the validity or enforceability of the Bonds or the Issuer
Documents, or contesting the exclusion from gross income of interest on the Bonds for
federal income tax purposes, or contesting in any way the completeness or accuracy of
the Preliminary Official Statement or the Official Statement or any supplement or
amendment thereto, or contesting the powers of the Issuer or any authority for the
issuance of the Bonds, the adoption of the Bond Resolution, or the execution and delivery
of the Issuer Documents, nor, to the best knowledge of the Issuer, is there any basis
therefor, wherein an unfavorable decision ruling or finding would materially adversely
affect the validity or enforceability of the Bonds or the Issuer Documents;
(h) As of the date thereof the Preliminary Official Statement did not contain
any untrue statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(i) At the time of the Issuer's acceptance hereof and (unless the Official
Statement is amended or supplemented pursuant to Section 3(d) of this Agreement) at all
times subsequent thereto during the period up to and including the date of Closing, the
Official Statement does not and will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made, not
misleading;
(j) If the Official Statement is supplemented or amended pursuant to
Section 3(d) of this Agreement, at the time of each supplement or amendment thereto and
(unless subsequently again supplemented or amended pursuant to such paragraph) at all
times subsequent thereto during the period up to and including the date of Closing the
Official Statement as so supplemented or amended will not contain any untrue statement
of a material fact of omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under which
made, not misleading;
(k) The Issuer will apply, or cause to be applied, the proceeds from the sale of
the Bonds as provided in and subject to all of the terms and provisions of the Issuer
Documents and will not take or omit to take any action which will adversely affect the
exclusion from gross income for federal income tax purposes of the interest on the
Bonds;
(1) The Issuer will furnish such information and execute such instruments and
take such action in cooperation with the Underwriters as the Representative may
reasonably request (i) to (y) qualify the Bonds for offer and sale under the Blue Sky or
other securities laws and regulations of such states and other jurisdictions in the United
States as the Representative may designate and (z) determine the ehgibilrty of the Bonds
for investment under the laws of such states and other jurisdictions and (ii) to continue
such qualifications in effect so long as required for the distribution of the Bonds
(provided, however, that the Issuer will not be required to qualify as a foreign corporation
or to file any general or special consents to service of process under the laws of any
jurisdiction) and will advise the Representative immediately of receipt by the Issuer of
any notification with respect to the suspension of the qualification of the Bonds for sale
in any jurisdiction or the initiation or threat of any proceeding for that purpose;
(m) The financial statements of and other financial information regarding the
Issuer in the Official Statement fairly present the financial position and results of the
Issuer as of the dates and for the periods therein set forth. Prior to the Closing, there will
be no adverse change of a material nature in such financial position, results of operations
or condition, financial or otherwise of the Issuer. The Issuer is not a party to any
litigation or other proceeding pending or, to its knowledge, threatened which, if decided
adversely to the Issuer, would have a materially adverse effect on the financial condition
of the Issuer;
(n) Prior to the Closing the Issuer will not offer or issue any bonds, notes, or
other obligations for borrowed money or incur any material liabilities, direct or
contingent, payable from or secured by any of the revenues or assets which will secure
the Bonds without the prior approval of the Representative;
(o) Any certificate, signed by any official of the Issuer authorized to do so in
connection with the transactions contemplated by this Agreement, shall be deemed a
representation and warranty by the Issuer to the Underwriters as to the statements made
therein; and
(p) The Issuer covenants that between the date hereof and the Closing it will
take no actions which will cause the representations and warranties made in this Section
to be untrue as of Closing.
5. Closing.
(a) At 10:00 a.m Houston, Texas time, on December 15, 2004, or at such
other time and date as shall have been mutually agreed upon by the Issuer and the
Underwriters (the ' Closing"), the Issuer will, subject to the terms and conditions hereof,
deliver to the Underwriters the initial Bond registered in the name of the Underwriters, in
temporary form, together with the other documents hereinafter mentioned, and will have
available for immediate exchange definitive Bonds deposited with The Depository Trust
Company, New York, New York ('DTC'), or with Wells Fargo Bank, N.A., the paying
agent/registrar for the Bonds (the "Registrar"), if the Bonds are to be kept in safekeeping
for DTC by the Registrar pursuant to DTC's FAST System, duly executed and
authenticated in the form and manner contemplated below and the Underwriters will,
subject to the terms and conditions hereof, accept such delivery and pay the purchase
price of the Bonds, as set forth in Section 1 of this Agreement, in immediately available
funds by federal funds wire transfer to or for the account of the Issuer (such events being
referred to herein as the "Closing'). Payment for the Bonds as aforesaid shall be made at
the offices of the Registrar, or such other place as shall have been mutually agreed upon
by the Issuer and the Underwriters.
(b) Delivery of the Bonds in definitive form shall be made to DTC. The
Bonds shall be delivered in fully registered form, bearing CUSIP numbers without
coupons, with one Bond for each maturity of the Bonds, registered in the name of Cede &
Co. all as provided in the Indenture, and shall be made available to the Underwriters at
least one business day before the Closing for purposes of inspection.
6. Closing Conditions. The Underwriters have entered into this Agreement in
reliance upon the representations, warranties, and agreements of the Issuer contained herein, and
in reliance upon the representations, warranties, and agreements to be contained in the
documents and instruments to be delivered at the Closing and upon the performance by the
Issuer of its obligations hereunder, both as of the date hereof and as of the date of the Closing.
Accordingly, the Underwriters' obligations under this Agreement to purchase, to accept delivery
of, and to pay for the Bonds shall be conditioned upon the performance by the Issuer of its
obligations to be performed hereunder and under such documents and instruments at or prior to
the Closing, and shall also be subject to the following additional conditions, including the
delivery by the Issuer of such documents as are enumerated herein, in form and substance
reasonably satisfactory to the Representative:
(a) The representations and warranties of the Issuer contained herein shall be
true, complete, and correct in all material respects on the date hereof and on and as of the
date of the Closing, as if made on the date of the Closing;
(b) The Issuer shall have performed and complied with all agreements and
conditions required by this Agreement to be performed or complied with by it prior to or
at the Closing;
(c) At the time of the Closing, (i) the Issuer Documents and the Bonds shall
be in full force and effect and shall not have been amended, modified, or supplemented,
and the Official Statement shall not have been supplemented or amended, except in any
such case as may have been agreed to by the Underwriters and (ii) all actions of the
Issuer required to be taken by the Issuer shall be performed in order for Bond Counsel to
deliver its opinions referred to hereafter;
7
(d) At the time of the Closing, all official action of the Issuer relating to the
Bonds and the Issuer Documents shall be in full force and effect and shall not have been
amended, modified, or supplemented;
(e) At or prior to the Closing, the Indenture shall have been duly executed and
delivered by the Issuer and the Issuer shall have duly executed and delivered and the
Registrar shall have duly authenticated the Bonds;
(f) At the time of the Closing, there shall not have occurred any change or
any development involving a prospective change in the condition, financial or otherwise,
or in the revenues or operations of the Issuer, from that set forth in the Official Statement
that in the judgment of the Underwriters, is material and adverse and that makes it, in the
reasonable judgment of the Underwriters, impracticable to market the Bonds on the terms
and in the manner contemplated in the Official Statement;
(g) The Issuer shall not have failed to pay principal or interest when due on
any of its outstanding obligations for borrowed money;
(h) All steps to be taken and all instruments and other documents to be
executed, and all other legal matters in connection with the transactions contemplated by
this Agreement shall be reasonably satisfactory in legal form and effect to the
Representative;
(i) At or prior to the Closing, the Representative shall have received copies of
each of the following documents:
(A) the Indenture with such supplements or amendments as may have
been agreed to by the Representative;
(B) the Issuer shall have agreed in the Bond Resolution to provide
certain information and notices of material events in accordance
with Section (b)(5)(i) of the Rule as described in the Preliminary
Official Statement under "CONTINUING DISCLOSURE OF
INFORMATION";
(C) the opinion of Bond Counsel with respect to the Bonds, in
substantially the form attached to the Official Statement;
(D) a supplemental opinion of Bond Counsel addressed to the
Underwriters, substantially to the effect that (1) the Indenture has
been duly adopted and is in full force and effect (2) the Bonds are
exempt securities under the Securities Act of 1933, as amended
(the ' 1933 Act' ), and it is not necessary, in connection with the
offering and sale of the Bonds to register the Bonds under the
1933 Act or to qualify the Indenture under the Trust Indenture Act
of 1939, as amended (the "Trust Indenture Act' ); (3) except to the
extent noted therein, said firm has not verified and is not passing
upon, and does not assume any responsibility for, the accuracy,
completeness or fairness of the statements contained in the Official
Statement but that said firm has reviewed the information
contained under the headings "PLAN OF FINANCING"
(excluding "Pro -Forma Debt Service Requirements") "SOURCE
AND SECURITY OF PAYMENT FOR THE BONDS ' (excluding
"Calculation and Collection of Tax Increments"), ' THE BONDS,"
"THE INDENTURE," "TAXING PROCEDURES OF THE CITY,
AISD, BRAZORIA COUNTY AND FORT BEND COUNTY,"
and "LEGAL MATTERS ' fairly and accurately summarize the
matters purported to be summarized therein and the descriptions of
the Issuer Documents and the Bonds in the Official Statement
present a fair description for the purposes intended;
(E) An opinion, dated the date of the Closing and addressed to the
Underwriters, of counsel for the Underwriters, to the effect that:
(1) the Bonds are exempt securities under the 1933 Act and it is
not necessary, in connection with the offering and sale of the
Bonds, to register the Bonds under the 1933 Act or to qualify the
Indenture under the Trust Indenture Act; and (2) based upon their
participation in the preparation of the Official Statement as counsel
for the Underwriters and their participation at conferences at which
the Official Statement was discussed, but without having
undertaken to determine independently the accuracy completeness
or fairness of the statements contained in the Official Statement, no
facts came to the attention of such counsel which would lead them
to believe that the Official Statement contains any untrue statement
of a material fact or omits to state a material fact necessary to
make the statements therein, in light of the circumstances under
which they were made, not misleading (except for any financial,
forecast, technical, and statistical statements and data included in
the Official Statement, and the information regarding DTC and its
book -entry -only system, in each case as to which no view need be
expressed);
(F) A certificate, dated the date of Closing, of an appropriate official
of the Issuer to the effect that (1) the representations and
warranties of the Issuer contained herein are true and correct in all
material respects on and as of the date of Closing as if made on the
date of Closing (2) no litigation or proceeding against it is pending
or, to its knowledge, threatened in any court or administrative body
nor is there a basis for litigation which would (A) contest the right
of the directors or officials of the Issuer to hold and exercise their
respective positions, (B) contest the due organization and valid
existence of the Issuer, (C) contest the validity, due authorization,
and execution of the Bonds or the Issuer Documents or
(D) attempt to enjoin or otherwise prevent the Issuer from
performing its obligations under the Issuer Documents; (3) the
resolutions of the Issuer authorizing the execution, delivery, and/or
performance of the Official Statement, the Bonds, and the Issuer
Documents have been duly adopted by the Issuer, are in full force
and effect, and have not been modified, amended, or repealed, and
(4) to the best of his or her knowledge, no event affecting the
Issuer has occurred since the date of the Official Statement which
should be disclosed in the Official Statement for the purpose for
which it is to be used or which it is necessary to disclose therein in
order to make the statements and information therein, in light of
the circumstances under which made, not misleading in any
material respect as of the time of Closing, and the information
contained in the Official Statement is correct in all material
respects and, as of the date of the Official Statement did not, and as
of the date of the Closing does not, contain any untrue statement of
a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements made therein, in the
hght of the circumstances under which they were made, not
misleading;
(G) A certificate of the Issuer in form and substance satisfactory to
Bond Counsel and counsel to the Underwriters (1) setting forth the
facts, estimates and circumstances in existence on the date of the
Closing, which establish that it is not expected that the proceeds of
the Bonds will be used in a manner that would cause the Bonds to
be "arbitrage bonds" within the meaning of Section 148 of the
Internal Revenue Code of 1986, as amended (the "Code'), and any
applicable regulations (whether final, temporary, or proposed),
issued pursuant to the Code, and (2) certifying that to the best of
the knowledge and belief of the Issuer there are no other facts,
estimates or circumstances that would materially change the
conclusions, representations and expectations contained in such
certificate;
(H) Any other certificates and opinions required by the Indenture for
the issuance thereunder of the Bonds;
(I) The approving opinion of the Attorney General of the State of
Texas in respect of the Bonds;
(J) The registration certificate of the Comptroller of Public Accounts
of the State of Texas in respect of the Bonds and
(K) Such additional legal opinions, certificates, instruments, and other
documents as the Underwriters or counsel to the Underwriters may
reasonably request to evidence the truth and accuracy as of the
date hereof and as of the date of the Closing, of the Issuer's
representations and warranties contained herein and of the
10
statements and information contained in the Official Statement and
the due performance or satisfaction by the Issuer on or prior to the
date of the Closing of all the respective agreements then to be
performed and conditions then to be satisfied by the Issuer.
All of the opinions, letters, certificates, instruments, and other documents mentioned
above or elsewhere in this Agreement shall be deemed to be in compliance with the provisions
hereof if, but only if, they are in form and substance satisfactory to the Underwriters.
If the Issuer shall be unable to satisfy the conditions to the obligations of the
Underwiiters to purchase, to accept delivery of, and to pay for the Bonds contained in this
Agreement, or if the obligations of the Underwriters to purchase, to accept delivery of and to pay
for the Bonds shall be terminated for any reason permitted by this Agreement, this Agreement
shall terminate and neither the Underwriters nor the Issuer shall be under any further obligation
hereunder.
7. Termination. The Underwriters shall have the right to cancel its obligation to
purchase the Bonds if, between the date of this Agreement and the Closing, the market price or
marketability of the Bonds shall be materially adversely affected, in the sole judgment of the
Representative (as evidenced by a written notice to the Issuer terminating the obligation of the
Underwriters to accept delivery of and pay for the Bonds), by the occurrence of any of the
following:
(a) legislation shall be enacted by or introduced in the Congress of the United
States or recommended to the Congress for passage by the President of the United States,
or the Treasury Department of the United States or the Internal Revenue Service or
favorably reported for passage to either House of the Congress by any committee of such
House to which such legislation has been referred for consideration, a decision by a court
of the United States or of the State or the United States Tax Court shall be rendered, or an
order, ruling, regulation (final, temporary or proposed), press release, statement or other
form of notice by or on behalf of the Treasury Department of the United States, the
Internal Revenue Service, or other governmental agency shall be made or proposed, the
effect of any or all of which would be to impose, directly or indirectly, federal income
taxation upon interest received on obligations of the general character of the Bonds of the
interest on the Bonds as described in the Official Statement, or other action or events
shall have transpired which may have the purpose or effect, directly or indirectly, of
changing the federal income tax consequences of any of the transactions contemplated
herein;
(b) legislation introduced in or enacted (or resolution passed) by the Congress
or an order, decree, or injunction issued by any court of competent jurisdiction, or an
order, ruling, regulation (final, temporary, or proposed), press release or other form of
notice issued or made by of on behalf of the Securities and Exchange Commission, or any
other governmental agency having jurisdiction of the subject matter, to the effect that
obligations of the general character of the Bonds, including any or all underlying
arrangements, are not exempt from registration under or other requirements of the 1933
Act, or that the Indenture is not exempt from qualification under or other requirements of
11
the Trust Indenture Act, or that the issuance, offering, or sale of obligations of the general
character of the Bonds, including any or all underlying arrangements, as contemplated
hereby or by the Official Statement or otherwise, is or would be in violation of the federal
securities law as amended and then in effect;
(c) a general suspension of trading in securities on the New York Stock
Exchange or the American Stock Exchange, the establishment of minimum prices on
either such exchange, the establishment of material restrictions (not in force as of the date
hereof) upon trading securities generally by any governmental authority or any national
securities exchange, a general banking moratorium declared by federal, State of New
York, or State officials authorized to do so;
(d) any amendment to the federal or state constitution or action by any federal
or state court, legislative body, regulatory body, or other authority materially adversely
affecting the tax status of the Issuer, its property, income securities (or interest thereon),
or the vandity or enforceability of the assessments or the levy of taxes to pay principal of
and interest on the Bonds;
(e) any event occurring, or information becoming known which, in the
judgment of the Representative, makes untrue in any material respect any material
statement or information contained in the Official Statement, or has the effect that the
Official Statement contains any untrue statement of material fact or omits to state a
material fact required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading;
(f) there shall have occurred since the date of this Agreement any materially
adverse change in the affairs or financial condition of the Issuer;
(g) the United States shall have become engaged in hostilities which have
resulted in a declaration of war or a national emergency or there shall have occurred any
other outbreak or escalation of hostilities or a national or international calamity, or crisis,
financial or otherwise, the effect of such outbreak, calamity, or crisis on the financial
markets of the United States being such as, in the reasonable opinion of the
Representative, would materially and adversely affect the ability of the Underwriters to
market the Bonds;
(h) any fact or event shall exist or have existed that in the Representative's
judgment requires or has required an amendment of or supplement to the Official
Statement; and
(i) the purchase of and payment for the Bonds by the Underwriters, or the
resale of the Bonds by the Underwriters, on the terms and conditions herein provided
shall be prohibited by any applicable law, governmental authority, board, agency, or
commission.
8. Expenses.
(a) The Underwriters shall be under no obligation to pay, and the Issuer shall
pay, any expenses incident to the performance of the Issuer's obligations hereunder,
including, but not limited to (i) the cost of preparation and printing of the Bonds; (ii) the
fees and disbursements of Bond Counsel; (iii) the fees and disbursements of the Financial
Advisor to the Issuer (iv) the fees and disbursements of any engineers, accountants, and
other experts, consultants, or advisers retained by the Issuer; (v) the costs of preparing,
printing, and mailing the Preliminary Official Statement and the Official Statement;
(vi) the fees and expenses of the Trustee; (vii) advertising expenses (except any
advertising expenses of the Underwriters as set forth below); (viii) the out-of-pocket,
miscellaneous, and closing expenses, including the cost of travel, of the officers and
directors of the Issuer; and (ix) any other expenses mutually agreed to by the Issuer and
the Representative to be reasonably considered expenses of the Issuer which are incident
to the transactions contemplated hereby.
(b) The Underwriters shall pay (i) the cost of preparation and printing of this
Agreement; (ii) all advertising expenses in connection with the public offering of the
Bonds; and (iii) all other expenses incurred by it in connection with the public offering of
the Bonds, including the fees and disbursements of counsel retained by the Underwriters.
9. Notices. Any notice or other communication to be given to the Issuer under this
Agreement may be given by delivering the same in writing to Development Authority of
Pearland, 3519 Liberty Drive, Pearland, Texas 77581, Attention Chairman, and any notice or
other communication to be given to the Underwriters under this Agreement may be given by
delivering the same in writing to First Southwest Company, 1021 Main St., Suite 2200, Houston,
Texas 77002, Attention: Drew Masterson.
10. Parties in Interest. This Agreement shall constitute the entire agreement and is
made solely for the benefit of the Issuer and the Underwriters (Including successors or assigns of
the Underwriters) and no other person shall acquire or have any right hereunder or by virtue
hereof. This Agreement may not be assigned by the Issuer. All of the Issuer's representations,
warranties, and agreements contained in this Agreement shall remain operative and in full force
and effect, regardless of (i) any investigations made by or on behalf of any of the Underwriters;
(ii) delivery of and payment for the Bonds pursuant to this Agreement; and (iii) any termination
of this Agreement.
11. Effectiveness. This Agreement shall become effective upon the acceptance hereof
by the Issuer and shall be valid and enforceable at the time of such acceptance.
12. Choice of Law. This Agreement shall be governed by and construed in
accordance with the law of the State.
13. Severability. If any provision of this Agreement shall be held or deemed to be or
shall, in fact, be invalid, inoperative or unenforceable as applied in any particular case in any
jurisdiction or jurisdictions, or in all jurisdictions because it conflicts with any provision or
provisions of any Constitution, statute, rule, of public policy, or any other reason, such
13
circumstances shall not have the effect of rendering the provision in question invalid,
inoperative, or unenforceable in any other case or circumstance, or of rendering any other
provision or provisions of this Agreement invalid, inoperative or unenforceable to any extent
whatever.
14. Business Day. For purposes of this Agreement, "business day" means any day on
which the New York Stock Exchange is open for trading.
15. Section Headings. Section headings have been inserted in this Agreement as a
matter of convenience of reference only, and it is agreed that such section headings are not a part
of this Agreement and will not be used in the interpretation of any provisions of this Agreement.
16. Counterparts. This Agreement may be executed in several counterparts each of
which shall be regarded as an original (with the same effect as if the signatures thereto and
hereto were upon the same document) and all of which shall constitute one and the same
document.
14
If you agree with the foregoing, please sign the enclosed counterpart of this Agreement
and return it to the Underwriters This Agreement shall become a binding agreement between
you and the Underwriters when at least the counterpart of this letter shall have been signed by or
on behalf of each of the parties hereto.
Very truly yours,
FIRST SOUTHWEST COMPANY
THE GMS GROUP, INC.
WACHOVIA SECURITIES LLC
By: First Southwest Company, as Representative
By:
Authorized Officer
APPROVED AND ACCEPTED as of the date hereof:
DEVELOPMENT AUTHORITY OF PEARLAND
By:
Chairman, Board of Directors
EXECUTION PAGE OF AGREEMENT
SCHEDULE I
Development Authority of Pearland
Tax Increment Contract Revenue Bonds, Series 2004
Interest accrues from December 1, 2004
Principal Maturity Interest Principal Maturity Interest
Amount (September 1) Rate Yield Amount (September 1) Rate Yield
The Bonds scheduled to mature on or after September 1, 2015 are subject to redemption, in whole or in
part, prior to their scheduled maturities, on September 1, 2014, or on any date thereafter, at the option of the
Issuei. Upon redemption, the Bonds will be payable at a price equal to the principal amount of the Bonds or the
portions thereof so called for redemption, plus accrued interest to the date of redemption.
EXHIBIT A
OFFICIAL STATEMENT
SEE TAB
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5292-37 11/10/2004
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PRELIMINARY OFFICIAL STATEMENT DATED NOVEM.BER 8, 2004
UNSEL, INTEREST ON THE BONDS IS EXCLUDABLE FROM GROSS INCOME FOR FEDERAL INCOME TAX PURPOSES UNDER
HE MATTERS DESCRIBED UNDER "LEGAL MATTERS - 7AX EXEMPTION," AND THE BONDS ARE NOT PRIVATE ACTIVITY
ERS - TAX EXEMPTION" FOR A DISCUSSION OF THE OPINION OF BOND COUNSEL, INCLUDING A DESCRIPTION OF
ALT ERNA'I7VE MINIMUM TAX CONSEQUENCES FOR CORPORATIONS.
$12,940,000*
DEVELOPMENT AUTHORITY
OF PEARLAND
(a non profit local government corporation acting on behalf of the City of Pearland, Texas)
Tax Increment Contract Revenue Bonds, Series 2004
Dated: December 1, 2004 Due: as shown on inside cover page
The Development Authority of Pearland (the "Authority"), a Texas non-profit local government corporation acting on behalf of the City of Pearland,
Texas (the "City"), is issuing its Tax Increment Contract Revenue Bonds, Series 2004 (the "Bonds"). The Bonds are limited obligations of the Authority. The
Bonds are payable solely from the Contract Tax Increments, as defined below, and certain funds on deposit with Wells Fargo Bank, National Association,
Houston, Texas (the "Trustee"), together with earnings and investments thereon (collectively, the "Pledged Revenues"). Pursuant to an Indenture of Trust (the
"Indenture") between the Authority and the Trustee, the Authority has pledged the Pledged Revenues to payment of the Bonds. The Bonds are not payable from
any other funds of the Authority other than the Pledged Revenues. Interest on the Bonds accrues from December 1, 2004 (the "Dated Date"), and is payable
September 1, 2005, and each March 1 and September 1 thereafter until the earlier of maturity or redemption. Bonds maturing on or after September 1, 2015, are
subject to redemption prior to maturity at the option of the Authority, in whole or in part on September 1, 2014, or on any date thereafter, at a price equal to the
par value thereof plus accrued interest to the date fixed for redemption. See "THE BONDS."
The creation of the Authority was authorized by the City on June 28, 2004 by Resolution No. 2004-107 of the City Council of the City, and the
Authority operates pursuant to Articles of Incorporation filed with the Secretary of State and Bylaws approved by the City and under the provisions of Chapter
431, Texas Transportation Code, and Chapter 394, Texas Local Government Code, and may exercise the powers granted to non-profit corporations under the
Texas Non -Profit Corporation Act. The Authority was created to aid, assist, and act on behalf of the City in the performance of the City's governmental and
proprietary functions with respect to, and to provide financing for, Reinvestment Zone Number Two, City of Pearland, Texas (the "TIRZ"), which is located in
the City. The City designated a reinvestment zone and created the TIRZ in 1998 by Ordinance No. 891 of the City Council of the City (the "Ordinance"). The
TIRZ operates under the provisions of the Tax Increment Financing Act, Chapter 311, Texas Tax Code (the "TIF Act") to facilitate the development of the land
within the boundaries of the TIRZ, which encompass the Shadow Creek Ranch master planned community ("Shadow Creek Ranch") and other property and
benefiting the City as a whole. The City, Alvin Independent School District ("AISD"), Brazoria County, Texas ("Brazoria County") and Fort Bend County,
Texas ("Fort Bend County") have agreed to deposit to the Tax Increment Fund established for the TIRZ (the "Tax Increment Fund") annually a certain
percentage of tax collections arising from their taxation of the increase, if any, since January 1, 1998, in the total appraised value of all real property located in
the TIRZ and taxable by the City, AISD, Brazoria County and Fort Bend County (the "Tax Increments"). See "SOURCE AND SECURITY OF PAYMENT
FOR THE BONDS — Tax Increments."
The City, the Authority, and the TIRZ have entered into an agreement approved by Ordinance No. R2004-170 of the City Council of the City on
October 11, 2004, and approved by the Board of Directors of the TIRZ and the Authority on October 5, 2004 (the "Tri-Party Agreement") which sets forth,
among other things, the duties and responsibilities of the Authority, the City, and the TIRZ as they relate to developer reimbursements for Project Costs in the
TIRZ and Shadow Creek Ranch, and pursuant to which the City and the TIRZ have agreed to pay to the Authority on an annual basis certain of the Tax
Increments then available to the Tax Increment Fund (the "Contract Tax Increments").
A portion of the proceeds from the sale of the Bonds will be used to reimburse developers for certain Project Costs (as defined in the Plan) including
infrastructure and related improvements made by such developers within the TIRZ authorized according to the Project Plan and Reinvestment Zone Financing
Plan of the TIRZ adopted by the Board of Directors of the TIRZ on August 23, 1999 and approved by the City Council of the City on August 23, 1999, by
Ordinance No. 918, (the "Plan") and interest of funds advanced therefor. Project Costs to be reimbursed from this Bond issue include (i) momunentation and
signage, (ii) landscaping improvements, (iii) street and sidewalk paving and signalization, (iv) water, sanitary sewer and drainage facilities, (v) lakes and parks,
and (vi) land acquisition. Proceeds from the sale of the Bonds will also be used to pay costs of issuance of the Bonds and the creation costs of the Authority, to
establish a Debt Service Reserve Fund (as defined in the Indenture) for the Bonds and to pay capitalized interest as provided in the Indenture. See "PLAN OF
FINANCING — Use of Bond Proceeds."
THE BONDS ARE LIMITED OBLIGATIONS SOLELY OF THE AUTHORITY AND ARE NOT OBLIGATIONS OF THE CITY AND DO NOT
GIVE RISE TO A CHARGE AGAINST THE GENERAL CREDIT OR TAXING POWERS OF THE CITY. FURTHERMORE, THE BONDS ARE NOT
OBLIGATIONS OF AISD, BRAZORIA COUNTY, FORT BEND COUNTY, THE STATE OF TEXAS OR ANY ENTITY OTHER THAN THE
AUTHORITY. THE PURCHASE AND OWNERSHIP OF THE BONDS IS SUBJECT TO SPECIAL RISK FACTORS AND ALL PROSPECTIVE
PURCHASERS ARE URGED TO EXAMINE CAREFULLY THIS ENTIRE OFFICIAL STATEMENT WITH RESPECT TO THE INVESTMENT
SECURITY OF THE BONDS, INCLUDING PARTICULARLY THE SECTION CAPTIONED "RISK FACTORS." See "SOURCE AND SECURITY OF
PAYMENT FOR THE BONDS."
NEW ISSUE- BOOK ENTRY ONLY
SEE MATURITY AND PRICING SCHEDULE ON INSIDE COVER PAGE
NOT RATED
The Bonds will be issued in fully registered form only, in denominations of $5,000 or any integral multiple thereof. Principal of the Bonds will be
payable upon presentation of the Bonds at the designated payment office of the Trustee. Interest on the Bonds will be payable as of the interest payment date, by
the Trustee to the registered owners as shown on the Bond Register kept by the Trustee (the "Registered Owners") on the fifteenth calendar day of the month
prior to each interest payment date or pursuant to such other customary banking agreements as may be agreed upon by the Trustee and the Registered Owners at
the risk and expense of the Registered Owners. See "THE BONDS — Descriptions."
When issued, the Bonds will be registered in the name of Cede & Co., as registered owner and nominee for The Depository Trust Company, New
York, New York ("DTC"), which will act as securities depository for the Bonds. The Bonds will be issued in book -entry only form, and beneficial owners of
the Bonds will not receive physical delivery of bond certificates except as described herein. During any period in which ownership of any of the Bonds is
determined only by a book entry at DTC, the Trustee will make payments on such Bonds to DTC or DTC's nominee in accordance with arrangements between
the Authority and DTC. See "THE BONDS — Book Entry Only System."
The Bonds are offered by the Underwriters subject to prior sale, when, as, and if issued by the Authority and accepted by the Underwriters, subject,
among other things, to the approval by the Attorney General of Texas and the approval of certain legal matters by Allen Boone Humphries LLP, Bond Counsel,
and Andrews Kurth LLP, Disclosure Counsel. Certain other [natters will be passed upon on behalf of the Underwriters by Winstead Sechrest & Minick P.C.,
counsel to the Underwriters. Delivery of the Bonds through DTC is expected on or about December 15, 2004.
FIRST SOUTHWEST COMPANY
THE GMS GROUP LLC WACHOVIA SECURITIES
*Preliminary, subject to change.
MATURITY SCHEDULE, INTEREST RATES, YIELDS,
CUSIP NUMBERS, AND REDEMPTION PROVISIONS
Maturity
(September 1)(")
Principal
Amount*
2006 $705,000.00
2007 750,000.00
2008 285,000.00
2009 305,000.00
2010 325,000.00
2011 340,000.00
2012 365,000.00
2013 385,000.00
2014 405,000.00
2015 430,000.00
2016 455,000.00
2017 485,000.00
2018 515,000.00
2019 545,000.00
2020 580,000.00
2021 610,000.00
2022 650,000.00
2023 690,000.00
2024 730,000.00
2025 775,000.00
2026 820,000.00
2027 870,000.00
2028 920,000.00
Interest
Rate
Initial
Reoffe lug
Yieldtb)
CUSIP
Number°
(a) Bonds maturing on or after September 1, 2015 are subject to optional redemption on September 1, 2014 or on any date thereafter at a
price of par value plus accrued interest on the principal amounts called for redemption to the date fixed for redemption. See "THE
BONDS — Optional Redemption."
(b) Initial reoffering yield represents the initial offering yield to the public which has been established by the Underwriters for offers to
the public and which may be subsequently changed by the Underwriters and is the sole responsibility of the Underwriters. The initial
reoffering yields indicated above represent the lower of the yields resulting when priced to maturity or to the first call date. Accrued
interest from December 1, 2004 to the date fixed for delivery, is to be added to the price.
(c) CUSIP numbers have been assigned to the Bonds by Standard & Poor's CUSIP Service Bureau, a division of the McGraw-Hill
Companies. Inc. and are included solely for the convenience of the owners of the Bonds. Neither the Authority nor the Underwriters
are responsible for the selection or correctness of the CUSIP numbers set forth herein.
* Preliminary, subject to change.
it
BOARD OF DIRECTORS
DEVELOPMENT AUTHORITY OF PEARLANDt1
Name Title
Tom Reid Chair
Bill Sloan Vice -Chair
Henry Stanaland Secretary
Ed Baker Director
Tom Pool Director
Professional Consultants
Knudson & Associates Administrator
RBC Dain Rauscher Inc. Financial Advisor
Allen Boone Humphries LLP Bond Counsel
Andrews Kurth LLP Disclosure Counsel
Wells Fargo Bank, National Association Trustee
(I) The Directors of the Authority are appointed by the City. Creation of the Authority was authorized by the City on June 28,
2004 and the Authority held its initial organizational meeting on July 27, 2004
iii
TABLE OF CONTENTS
INTRODUCTION 1
RISK FACTORS 2
Limited Obligations 2
Decrease in Appraised Values 2
Tax Increment Financing 3
Limitations on City Tax Increments 3
Limitations on AISD Tax Increments 4
Limitations on Tax Increments of Brazoria and
Fort Bend Counties 5
Uncertainty of Calculation and Collection of
Tax Increments 6
General Factors Affecting Taxable Values and
Tax Increments 6
Dependence on Principal Taxpayers 7
Tax Collection Limitations and Foreclosure
Remedies 7
Registered Owners' Remedies After Default 7
Bankruptcy Limitation to Registered Owners'
Rights 7
Future Debt 8
Marketability of the Bonds 8
Continuing Compliance with Certain
Covenants 8
Air Quality 8
Tax Abatements 9
PLAN OF FINANCING 9
Creation of the Authority and TIRZ 9
Purpose/Project Plan 10
Operations 10
Issuance of Bonds 10
Captured Appraised Value 11
Use of Bond Proceeds 11
Pro -Forma Debt Service Requirements 11
Sources and Uses of Funds 12
SOURCE AND SECURITY OF PAYMENT
FOR THE BONDS 12
General 12
Tax Increments 12
City s Agreement with Respect to Tax
Increments and the Bonds 13
AISD's Agreement With Respect to Tax
Increments 13
Brazoria County's Agreement with Respect to
Tax Increments and the Bonds 14
Fort Bend County's Agreement with Respect
to Tax Increments and the Bonds 15
Calculation and Collection of Tax Increments 15
Pledge of Revenues 16
Additional Bonds 17
Perfected Security Interest 17
THE BONDS 18
Description 18
iv
Method of Payment of Principal and Interest 18
Optional Redemption 18
Notice of Redemption 18
Authority for Issuance 19
No Arbitrage 19
Registration and Transfer 19
Book -Entry Only System 20
Use of Certain Terms in Other Sections of this
Official Statement 22
Replacement of Trustee 22
Mutilated, Lost or Stolen Bonds 22
Legal Investment and Eligibility to Secure
Public Funds in Texas 22
Defeasance 22
THE INDENTURE 23
The Funds 23
Events of Default 24
Remedies 24
Limitation on Action by Owners 25
Amendments to the Indenture 25
Removal or Resignation of Trustee 26
Appointment of Successor Trustee 26
SHADOW CREEK RANCH DEVELOPMENT 26
General 26
Development and Home Construction 27
Developer 30
Builders 31
Future Development 32
SELECTED FINANCIAL INFORMATION 34
TAX INCREMENT COLLECTIONS 36
TAXING PROCEDURES OF THE CITY,
AISD BRAZORIA COUNTY AND FORT
BEND COUNTY 37
Authority to Levy Taxes 37
Property Tax Code and County -Wide
Appraisal District 37
Property Subject to Taxation by the City,
AISD, Brazoria County and Fort Bend
County 37
Valuation of Property for Taxation 38
Levy and Collection of Taxes 38
The City, AISD, Brazoria County and Fort
Bend County's Rights in the Event of Tax
Delinquencies 38
LEGAL MA II ERS 39
Legal Proceedings 39
Tax Exemption 40
Tax Accounting Treatment of Discount Bonds 41
Tax Treatment of Original Issue Premium
Bonds 42
No Material Adverse Change 42
No -Litigation Certificate 42
TABLE OF CONTENTS
CONTINUING DISCLOSURE OF
INFORMATION 42
Annual Reports 43
Material Event Notices 43
Availability of Information from NRMSIRs
and SID 43
Limitations and Amendments 44
Compliance with Prior Undertakings 44
PREPARATION OF OFFICIAL STATEMENT 44
Sources and Compilation of Information 44
Financial Advisors 45
Official Statement Deemed Final 45
Updating the Official Statement 45
Certification of Official Statement 45
MISCELLANEOUS 46
APPENDIX A: SUMMARY OF DOCUMENTS
(1) Development Agreement
(2) Reimbursement Agreement
(3) Tri-Party Agreement
(4) Project Plan & Financing Plan
(5) Interlocal Agreements
APPENDIX B: BOUNDARY MAP OF REINVESTMENT ZONE NO. 2, CITY OF PEARLAND, TEXAS
APPENDIX C: FORM OF OPINION OF BOND COUNSEL
v
USE OF INFORMATION IN PRELIMINARY OFFICIAL STATEMENT
No dealer, broker, salesman, or other person has been authorized to give any information or to make any
representations other than those contained in this Official Statement, and, if given or made, such other information
or representation must not be relied upon as having been authorized by the Authority.
This Official Statement is not to be used in an offer to sell or the solicitation of an offer to buy in any state
in which such offer or solicitation is not authorized or in which the person making such offer or solicitation is not
qualified to do so or to any person to whom it is unlawful to make such offer or solicitation.
All of the summaries of the statutes, resolutions, contracts, financial information, engineering, and other
related reports referenced or described in this Official Statement are made subject to all of the provisions of such
documents. These summaries do not purport to be complete statements of such provisions, and reference is made to
such documents, copies of which are available from the Authority, c/o Allen Boone Humphries LLP, 3200
Southwest Freeway, Suite 2600 Houston, Texas 77027.
This Official Statement contains, in part, estimates, assumptions, and matters of opinion which are not
intended as statements of fact, and no representation is made as to the correctness of such estimates, assumptions, or
matters of opinion, or as to the likelihood that they will be realized. Any information and expressions of opinion
herein shall not, under any circumstances, create any implication that there has been no change in the affairs of the
Authority or other matters described herein since the date hereof. For the period beginning on the date of the award
of the sales of the Bonds by the Underwriters and ending on the twenty-fifth day after the "end of the underwriting
period" (as defined in Security and Exchange Commission (the "SEC") Rule 15c(2)-12(e)(2)), if any event shall
occur of which the Authority has knowledge and as a result of which it is necessary to amend or supplement the
Official Statement in order to make the statements therein, in light of the circumstances when the Official Statement
is delivered to a prospective purchaser not misleading, the Authority will promptly notify the Underwriters of the
occurrence of such event and will cooperate in the preparation of a revised Official Statement, or amendments or
supplements thereto, so that the statements in the Official Statement, as revised, amended or supplemented will not,
in light of the circumstances when such Official Statement is delivered to a prospective purchaser, be misleading.
The Authority assumes no responsibility for supplementing the Official Statement thei eafter except as may be
required by law. See "PREPARATION OF THE OFFICIAL STATEMENT — Updating the Official Statement."
The Authority has undertaken no other reporting obligations to purchasers of the Bonds except as described herein
under "CONTINUING DISCLOSURE OF INFORMATION.'
SALE AND DISTRIBUTION OF THE BONDS
The Underwriters
The Bonds are being purchased by First Southwest Company, The GMS Group LLC and Wachovia
Securities (collectively, the `Underwriters") pursuant to a bond purchase agreement with the Authority (the "Bond
Purchase Agreement") dated November 15, 2004 for the Bonds at a price of $ (representing the par
amount of the Bonds of $ , less an Underwriters' discount of $ , and less an original issue
discount of $ ) plus accrued interest on the Bonds from the Dated Date to the date of delivery. The
Underwriters' obligation is to purchase all of the Bonds, if any are purchased.
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, their
responsibilities to investors under federal securities laws as applied to the facts and circumstances of this transaction,
but the Underwi iters do not guarantee the accuracy or completeness of such information.
Prices and Marketability
The delivery of the Bonds is conditioned upon the receipt by the Authority of a certificate executed and
delivered by the Underwriters on or before the date of delivery of the Bonds stating the prices at which a substantial
amount of the Bonds of each maturity have been sold to the public. For this purpose, the term ' public" does not
vi
include any person who is a bond house, broker, or similar person acting in the capacity of Underwriters or
wholesaler. Otherwise the Authority has no understanding with the Underwriters regarding the reoffering yields or
prices of the Bonds. Information concerning reoffering yields or prices is the responsibility of the Underwriters.
The prices and other terms with respect to the offering and sale of the Bonds may be changed from time to
time by the Underwriters after the Bonds are released for sale, and the Bonds may be offered and sold at prices other
than the initial offering prices, including sales to dealers who may sell the Bonds into investment accounts. In
connection with the offering of the Bonds the Underwriters may over -allot or effect transactions that stabilize or
maintain the market prices of the Bonds at levels above those that might otherwise prevail in the open market. Such
stabilizing, if commenced, may be discontinued at any time.
The Authority has no control over trading of the Bonds in the secondary market. Moreover, there is no
guarantee that a secondary market will be made in the Bonds In such a secondary market, the difference between
the bid and asked price of the Bonds may be greater than the difference between the bid and asked price of bonds of
comparable maturity and quality issued by more traditional municipal entities, as bonds of such entities are more
generally bought, sold or traded in the secondary market.
Securities Laws
No registration statement relating to the offer and sale of the Bonds has been filed with the SEC under the
Securities Act of 1933, as amended, in reliance upon the exemptions provided thereunder The Bonds have not been
registered or qualified under the Securities Act of Texas in reliance upon various exemptions contained therein nor
have the Bonds been registered or qualified under the securities laws of any other jurisdiction. The Authority
assumes no responsibility for registration or qualification of the Bonds under the securities laws of any other
jurisdiction in which the Bonds may be offered, sold, or otherwise transferred. This disclaimer of responsibility for
registration or qualification for sale or other disposition of the Bonds must not be construed as an interpretation of
any kind with regard to the availability of any exemption from securities registration or qualification provisions in
such other jurisdiction.
[Remainder of Page Intentionally Left Blank]
vii
PRELIMINARY OFFICIAL STATEMENT
$12,940,000*
Development Authority of Pearland
(a non-profit local government corporation acting on behalf of the City of Pearland, Texas)
Tax Increment Contract Revenue Bonds
Series 2004
INTRODUCTION
The Development Authority of Pearland (the "Authority' ), a Texas non-profit local government
corporation acting on behalf of the City of Pearland, Texas (the "City"), is issuing its Tax Increment Contract
Revenue Bonds, Series 2004 (the Bonds") in the original principal amount of $12,940,000* The Bonds are limited
obligations of the Authority The Bonds are payable solely from the Contract Tax Increments, as defined below, and
certain funds on deposit with Wells Fargo Bank, National Association, Houston, Texas (the "Trustee' ), together
with earnings and investments thereon (collectively the "Pledged Revenues") Pursuant to an Indenture of Trust
(the "Indenture") between the Authority and the Trustee, the Authority has pledged the Pledged Revenues to
payment of the Bonds. The Bonds are not payable from any other funds of the Authority other than the Pledged
Revenues. The Bonds are limited obligations solely of the Authority and are not obligations of the City and do not
give rise to a charge against the general credit or taxing powers of the City. Furthermore, the Bonds are not
obligations of Alvin Independent School District ("AISD"), Brazoria County, Texas ( `Brazoria County"), Fort Bend
County Texas ( `Fort Bend County '), the State of Texas, or any entity other than the Authority. See "SOURCE
AND SECURITY OF PAYMENT FOR THE BONDS " The Bonds are the first debt issuance of the Authority.
The Bonds are issued pursuant to the authority granted by Article VIII, Section 1-g of the Texas
Constitution, Chaptei 311, Texas Tax Code (the "TIF Act '), Chapter 431 Texas Transportation Code, a resolution
adopted by the City (the ` City Resolution") on November 15, 2004 approving the Authority s issuance of the Bonds,
a resolution authorizing the issuance of the Bonds (the "Bond Resolution") adopted by the Board of Directors of the
Authority (the Authority Board") on November 15, 2004, and the Indenture.
The City, AISD, Brazoria County and Fort Bend County have agreed to deposit to the tax increment fund
(the "Tax Increment Fund') established for the Reinvestment Zone Number 2, City of Pearland, Texas (the "TIRZ")
a certain percentage of tax collections arising from their taxation of the increase, if any since January 1 1998, in the
total appraised value of all real property located in the TIRZ and taxable by the City AISD Brazoria County and
Fort Bend County (the "Tax Increments"). The City, TIRZ and the Authority have entered into an agreement (the
`Tri-Party Agreement") approved by the City by Ordinance No R2004-170 on October 11, 2004, and approved by
the Authority Board and the Board of Directors of the TIRZ (the "TIRZ Board') on October 5, 2004 which sets
forth among other things, the duties and responsibilities of the Authority, the City, and the TIRZ as they relate to
developer reimbursements for Project Costs in the TIRZ, and pursuant to which the City and the TIRZ have agreed
to pay to the Authority a certain portion of the Tax Increments then available in the Tax Increment Fund (the
`Contract Tax Increments").
This Official Statement includes descriptions of, among others, the Bonds, the Bond Resolution, the
Indenture certain other information about the Authority, the TIRZ, and existing development within the boundaries
of the TIRZ All descriptions of documents contained herein are only summaries and are qualified in their entirety
by reference to each document. Copies of documents referenced herein may be obtained from the Authority's Bond
Counsel, Allen Boone Humphries LLP, 3200 Southwest Freeway, Suite 2600, Houston, Texas 77027.
A portion of the proceeds from the sale of the Bonds will be used to reimburse developers within the TIRZ
for certain Project Costs (as defined in the Plan) including infrastructure and related improvements made by such
developers within the TIRZ and approved in the Project Plan and Reinvestment Zone Financing Plan of the TIRZ
* Preliminary, subject to change.
1
adopted by the Board of Directors of the TIRZ on August 23, 1999 and approved by the City Council of the City on
August 23, 1999 by Ordinance No. 918 (the "Plan"). Project Costs to be reimbursed from this Bond issue include (i)
monumentation and signage, (ii) landscaping improvements, (iii) street and sidewalk paving and signalization, (iv)
water, sanitary sewer and drainage facilities, (v) lakes and parks, and (vi) land acquisition. Proceeds from the sale of
the Bonds will also be used to pay the costs of issuance of the Bonds and the creation costs of the Authority, to
establish a Debt Service Reserve Fund (as defined in the Indenture) for the Bonds and to pay capitalized interest as
provided in the Indenture
RISK FACTORS
Described below are certain risks associated with ownership of the Bonds. In order to identify risk factors
and make an informed investment decision, potential investors should be thoroughly familiar with this entire
Official Statement (including appendices hereto) in order to make a judgment as to whether the Bonds are an
appropi late investment. Purchasers of the Bonds are advised to consult their tax advisors as to the tax consequences
of purchasing or holding the Bonds. Capitalized terms in this section not defined herein are defined elsewhere in
this Official Statement.
Limited Obligations
The Bonds are limited obligations solely of the Authority and are not obligations of the City and do not
give rise to a charge against the general credit or taxing powers of the City. THE CITY IS NOT OBLIGATED TO
MAKE ANY PAYMENTS OF PRINCIPAL OF OR INTEREST ON THE BONDS. FURTHERMORE, THE
BONDS ARE NOT OBLIGATIONS OF AISD, BRAZORIA COUNTY FORT BEND COUNTY, THE STATE
OF TEXAS, OR ANY ENTITY OTHER THAN THE AUTHORITY THE AUTHORITY IS NOT OBLIGATED
TO MAKF PAYMENTS ON THE BONDS FROM THE TAXES OF ANY TAXING ENTITY OR OTHER
MONEY OTHER THAN THE PLEDGED REVENUES. See "SOURCE AND SECURITY OF PAYMENT FOR
THE BONDS
Because Tax Increments are only payable annually from the taxes levied and collected on the total
appraised value of all real property in the TIRZ that is taxable by the City, AISD, Brazoria County and Fort Bend
County for that year minus the total appraised value of all real pioperty in the TIRZ that is taxable by the City
AISD, Brazoria County and Fort Bend County as of the Base Year (the "Captured Appraised Value' ), such Tax
Increments may or may not occur in a given year. The Base Year for the TIRZ is 1998. Any decrease or reduction
in Tax Increments will result in a decrease or reduction in the Contract Tax Increments. Hence, the Bonds should be
considered speculative investments that are subject to special risk factors.
Decrease in Appraised Values
Since the creation of the TIRZ in 1998 the appraised value of taxable real property in the TIRZ has
increased The Bonds will be secured by Pledged Revenues derived from Tax Increments based upon the current
Captured Appraised Value, however, future Pledged Revenues derived from Tax Increments resulting from future
increases in Captured Appraised Values are also pledged. See ' PLAN OF FINANCING — Captured Appraised
Value." A decrease in the appraised value of the taxable real property or a decrease in the amount of taxable real
property could result in Tax Increments insufficient to pay principal of and interest on the Bonds without drawing
upon debt service reserves, including the Debt Service Reserve Fund established under the Indenture. Other events
beyond the control of the Authority, the City AISD, Brazoria County and Fort Bend County could cause a shortfall
of Tax Increments available for payment of the Bonds including the protest or appeal by property owners of their
pioperty values and a consequent reduction in the appraised value of taxable real property in the TIRZ See
`TAXING PROCEDURES OF THE CITY, AISD AND BRAZORIA AND FORT BEND COUNTIES " Similarly,
a shortfall of Tax Increments could be caused by natural or other disasters and the concomitant destruction of
property or improvements to property in the TIRZ
2
Tax Increment Financing
Texas law does not require the City, AISD, Brazoria County and Fort Bend County to levy real property
taxes in the TIRZ or to set a tax rate sufficient to assure payment of the principal of and interest on the Bonds;
rather, Texas law only requires the City, AISD, Brazoria County and Fort Bend County to deposit the Tax
Increments actually collected by them in the Tax Increment Fund. The City, AISD, Brazoria County and Fort Bend
County set their tax rates in accordance with the Texas Tax Code, which allows voters to limit an increase in tax
rates to the rollback tax rate calculated for such units. See "TAXING PROCEDURES OF THE CITY AISD AND
BRAZORIA AND FORT BEND COUNTIES " If the tax rates decline or the percentage of taxes collected in the
TIRZ declines, the amount of Tax Increments available to pay the Bonds will decrease. Moreover, because the State
system of financing for public education has been ruled unconstitutional, there have been and continue to be, many
changes in funding for schools. These changes could reduce or eliminate AISD's participation in the TIRZ See
"Limitations on AISD Tax Increments" below.
Pursuant to the Tri-Party Agreement, the City is required to remit the Contract Tax Increments from the
Tax Increment Fund to the Authority on the date when the Bonds are delivered and thereafter on the fifteenth day of
each August in which the Tri-Party Agreement is in effect. Contract Tax Increments which are remitted to the
Authority do not include certain portions of the Tax Increments which are subject to the retention by the City,
particularly (i) money to be paid to the City as an "Administrative Fee" calculated pursuant to the Plan to
compensate the City for its estimated costs to provide municipal services to the property within the TIRZ (see "-
Limitations on City Tax Increments" below); (ii) money to be paid to AISD for educational facilities project costs
pursuant to AISD s agreement for participation in the TIRZ (the "AISD Agreement") (iii) amounts required to be
maintained in the suspense account pursuant to the terms of the AISD Agreement; and (iv) an amount sufficient to
pay reasonable current and anticipated administrative and operating costs of the TIRZ See "SOURCE AND
SECURITY OF PAYMENT FOR THE BONDS — AISD's Agreement With Respect to Tax Increments," —
Brazoria County's Agreement With Respect to Tax Increments" and "— Fort Bend County's Agreement With
Respect to Tax Increments."
Limitations on City Tax Increments
The City's 2004 tax rate is $0.694755 per $100 valuation. However, the City from time to time may
increase or decrease this rate.
Pursuant to the Plan and a Development Agreement by and between the City and Shadow Creek Ranch
Development Company, L.P., the master developer of property within the TIRZ (the `Developer'), the City, the
Developer and the TIRZ have agreed that a certain portion of the City Tax Increment shall be paid by the TIRZ to
the City as an `Administrative Fee' (the "Administrative Fee') to compensate the City for some of its cost of
providing City services to the developed property within the TIRZ Pursuant to the Development Agreement, the
Administrative Fee is as follows:
Years 1 through 3 (1999-2001)
Years 4 through 8 (2002-2006)
Years 9 through 30 (2007-2028)
No Administrative Fee
36 percent of the City Increment
64 percent of the City Increment
Provided that, the amount of City Tax Increment deposited and retained annually in the Tax Increment Fund for the
applicable yeas shall in no event be less than: (i) $0 44 per $100.00 of valuation in years four through eight, and (ii)
$0 255 per $100.00 of valuation in years nine through thirty.
3
In years four through eight (2002 — 2006), a decrease in the City's tax rate from the current $0.694755 per
$100 valuation to $0.6875 per $100 valuation would decrease the Tax Increment deposited into the Tax Increment
Fund by the City, thus decreasing the amount of Pledged Revenues. However, over the same period, any decrease in
the City's tax rate below $0.6875 per $100 valuation would not affect the amount of City Tax Increment or Pledged
Revenues.
In years nine through thirty (2007 — 2028), a decrease in the City's tax rate below the current $0.694755 per
$100 valuation would not affect the amount of City Tax Increment or Pledged Revenues.
Pursuant to the Tri-Party Agreement, the portion of the City Tax Increment representing the Administrative
Fee is not paid to the Authority and is therefore not part of the Contract Tax Increments or the Pledged Revenues.
Limitations on AISD Tax Increments
The AISD Agreement generally provides that AISD will remit one -hundred percent of the taxes collected
on the Captured Appraised Value to the City for deposit in the Tax Increment Fund (the "AISD Tax Increment")
AISD is not obligated to make payments on the AISD Tax Increment from other AISD taxes or revenues until the
taxes representing the AISD Tax increment are actually collected. Such payments are due on the first day of each
calendar quarter. AISD's 2004 tax rate is $1.676 per $100 valuation.
AISD's obligations to pay over AISD Tax Increments to the City may, at the sole option of AISD, be
decreased by the amount of any reduction in state and local funding that is a result of any change in state law or any
interpretation, ruling, order, decree or court decision interpreting existing or subsequently enacted state law that
decreases the aggregate amount of the state and local funds available to AISD, as a result of AISD s participation in
the TIRZ, or eliminated entirely. The Authority is unable to predict the likelihood of new legislation,
interpretations, rulings, orders, decrees or court decisions that may decrease the state and local funds available to
AISD as a result of AISD's participation in the TIRZ
Pursuant to the terms of the AISD Agreement, the City has agreed that 75% of the AISD Tax Increment
will be paid to AISD to construct and operate school facilities within the TIRZ and for other lawful purposes
consistent with the Plan as determined by AISD The remaining 25% of the AISD Tax Increment will be used to
fund (i) the acquisition of land for school facilities, (ii) the construction of park and recreation improvements, (iii)
the acquisition of land for such improvements, (iv) AISD s pro rata share of water, sewage and drainage facilities to
serve school facilities and (v) other improvement in the Plan benefiting AISD taxpayers. The City has agreed that
the AISD Tax Increment will be held in a special AISD Suspense Account within the Tax Increment Fund for a
period of one calendar year. During such time, no funds held in such AISD Suspense Account shall be disbursed or
encumbered by the City or the TIRZ, and such funds may only be used during such period to reimburse AISD.
Pursuant to the Tri-Party Agreement, the funds in the AISD Suspense Account are not paid to the Authority
and therefore are not part of the Contract Tax Increments of Pledged Revenues.
The Texas public school finance system gives weight to certain funding factors, such as local property
wealth differences, the consideration of which result in greater equity in total funding. There have been a number of
court challenges to the current public school finance system. On April 9, 2001, four property wealthy districts filed
suit in the 250th District Court of Travis County, Texas against the Texas Education Agency, the Texas State Board
of Education, the Texas Commissioner of Education and the Texas Comptroller of Public Accounts in a case styled
West Orange -Cove Consolidated Independent School District, et al. v. Alan's et. al. ("West Orange' ). Numerous
property -wealthy and property -poor districts have joined the suit as plaintiffs. West Orange challenges the Texas
school finance system on the basis that it effectively forces school districts to levy maintenance and operation taxes
at the maximum rate of $1 50 per $100 assessed value, thereby resulting in an unconstitutional statewide ad valorem
tax The tiial court in West Orange dismissed the suit on defendants motion for summary judgment holding that
the plaintiffs had failed to establish that a sufficient number of school districts were levying the maximum tax rate of
$1.50 in an effort to provide an accredited education and that the $1.50 statutory cap did not constitute a statewide
property tax. Upon appeal the Third Court of Appeals in Austin, Texas, affirmed the trial court's ruling. On May
29, 2003, the Texas Supreme Court reversed the lower courts, finding that summary judgment was granted in error,
and remanded the case to the trial court for further proceedings ("Edgewood V"). In its opinion, the Supreme Court
4
expressly disagreed with the trial court's determination that a constitutional violation could not be alleged because
less than half of the school districts in Texas were taxing at the maximum rate. In determining whether there is an
unconstitutional state ad valorem tax," the Court noted:
The concern is not the pervasiveness of the tax but the State's control of it. A state ad valorem
tax is just that: one imposed by the State, whether it acts directly or through control of another
entity and whether the tax falls on the entire population or only a few. Thus, a single district
states a claim . . if it alleges that it is constrained by the State to tax at a particular rate.
The Court also held that a district does not lack standing to sue because it taxes near the statutory cap but
not at the statutory cap, stating that a "disti ict taxing a few cents below the maximum rate that can no longer provide
an accredited education of general diffusion of knowledge even by raising the rate to the maximum need not do so
Just to prove the point." The Court further disagreed with the Third Court of Appeals' determination that there was,
as a matter of law, no evidence that any of the school districts were forced to impose a maximum tax to provide an
accredited education as defined by statute or a "general diffusion of knowledge."
On September 15 2004, the District Court Judge for the 250`h Judicial District in Travis County, Texas,
ruled on remand of the Edgewood V case that the State's school finance system (1) fails to provide an adequate
suitable education as required by the State Constitution (2) forces certain school districts in the State to levy an ad
valorem tax at the $1.50 statutory cap on maintenance and operations tax rates, therefore violating the State
constitution's proscription against a Statewide ad valorem tax; and (3) is neither financially efficient nor efficient in
the sense of providing for the mandated adequate education nor the statutory regime of accreditation, accountability,
and assessment. The judge further stated that he intended to enter an injunction on approximately October 1, 2004
(although expected on October 1, 2004, the order has not been entered as of October 29, 2004 and the District Court
Judge has stated that the injunction order may be entered as late as December 1, 2004) that State funding of public
schools cease unless the State Legislature conforms the State school finance system to meet State constitutional
standards, with the effective date of the injunction to be one year from the date the injunction order is entered. The
Texas Attorney General immediately announced that his office would appeal the trial court's ruling directly to the
Texas Supreme Court. Following the ruling of the 250`h Judicial District Court discussed above, the Governor
emphasized his intention to seek a legislative solution, but did not comment on whether he intends to call a special
legislative session or wait for the next regular session, which begins in January, 2005.
A second suit, Hopson et al v. Dallas Independent School District and Highland Park Independent School
District, filed April 5, 2001 in the 134th District Court of Dallas County, Texas, ("Hopson") also challenges the
current system of school finance on substantially similar grounds as the claims of the plaintiffs in Edgewood V, and
seeks to have Chapter 41 of the Texas Education Code (the chapter that contains wealth transfer provisions)
declared unconstitutional. Hopson further seeks injunctive relief enjoining and prohibiting districts from paying
taxes collected by the districts to or for the benefit of any other district and preventing districts from collecting ad
valorem taxes. The case is currently pending, after a change in venue, in district court in Travis County, Texas.
The Authority can make no representations or predictions regarding the outcome of the litigation described
above, or how the Texas Legislature will respond to such litigation and can make no representation or predictions as
to how such litigation or legislation may affect the Authority's financial condition or Contract Tax Increments.
Because AISD s participation in the TIRZ is based upon the levy of an ad valorem property tax, changes to the
state's tax system that reduce or eliminate the use of local property taxes to support public schools may affect the
ability of AISD to participate in the TIRZ or its level of participation in the TIRZ. The Authority is unable to
predict the likelihood of legislation that may change the state's method of funding for public schools.
Limitations on Tax Increments of Brazoria and Fort Bend Counties
The Brazoria County Agreement generally provides that Brazoria County will remit 38% of its taxes
collected on the Captured Appraised Value (not to exceed $0.1359 per $100 valuation) to the City for deposit in the
Tax Increment Fund (the "Brazoria County Tax Increment"). Brazoria County is not obligated to make payments on
the Brazoria County Tax Increment from other Brazoria County taxes or revenues until the taxes representing the
Brazoria County Tax increment are actually collected. Such payments are due on August 1 of each year. Any
5
decrease in the Brazoria County's tax rate could decrease the Brazoria County Tax Increment deposited into the Tax
Increment Fund by Brazoria County, thus decreasing the amount of Pledged Revenues.
The Fort Bend County Agreement generally provides that Fort Bend County will remit $0.624100 per $100
valuation for tax years 1999-2008, $0.468075 per $100 valuation for tax years 2009-2018 and $0.312050 per $100
valuation for tax years 2019-2028 on the Captured Appraised Value to the City for deposit in the Tax Increment
Fund (the "Fort Bend County Tax Increment") Fort Bend County is not obligated to make payments on the Fort
Bend County Tax Increment from other Fort Bend County taxes or revenues until the taxes representing the Fort
Bend County Tax Increment are actually collected. Such payments are due on the first day of each calendar quarter
Any decrease in Fort Bend County's tax rate below the rates specified above for the respective periods could
decrease the Fort Bend County Tax Increment deposited into the Tax Increment Fund by Fort Bend County, thus
decreasing the amount of Pledged Revenues. See `SOURCE AND SECURITY OF PAYMENT FOR THE
BONDS —Fort Bend County's Agreement with Respect to Tax Increments and the Bonds."
Uncertainty of Calculation and Collection of Tax Increments
The use of tax increment financing zones in the Pearland area is relatively recent, and calculation and
collection of Tax Increments are subject to administrative interpretation by the City, AISD, Brazoria County and
Fort Bend County, which may change from time to time, at the sole option of such individual entities.
Captured Appraised Values (the taxes upon which generate Tax Increment) are determined by subtracting
the Base Year property values from the certified value of property in each tax year. Certified values are established
annually for the current tax year, but are subject to change for a number of years thereafter. Value changes can be
positive or negative and can be caused by such events as late -filed exemptions, settlement of property value protests,
or the addition of property omitted from the roll. Currently, value changes in the tax rolls, either positive or
negative, occurring subsequent to the determination of Tax Increments are not credited to the Tax Increment (in the
case of positive changes) or subtracted from the Tax Increment (in the case of negative changes). However, such
value changes could be credited to or subtracted from the Tax Increment in the future. Changes in the certified tax
roll, if applied to the Tax Increment, would have the greatest relative effect on Tax Increments when the TIRZ is in
the early stages of development and the Captured Appraised Value is a small percentage of the certified assessed
value in the TIRZ Currently the percentage of the Captured Appraised Value is approximately 98.04% of total
taxable value in the TIRZ While the Authority does not anticipate any changes in these administrative practices
there can be no assurance that they will not be modified.
General Factors Affecting Taxable Values and Tax Increments
The Captured Appraised Value of the TIRZ is partially based on the current market value of all real
property in the TIRZ, including new improvements recently constructed or under construction in the TIRZ The
market value of such improvements is related to many economic conditions, including such factors as interest rates,
credit availability, construction costs, energy availability, and the general economic conditions and demographic
characteristics of the Pearland area particularly the Shadow Creek Ranch master planned community ("Shadow
Creek Ranch') and other property in the TIRZ Interest rates and the availability of mortgage and development
funding directly impact construction activity particularly short-term interest rates at which developers are able to
obtain financing for developments costs Interest rate levels may affect the ability of a landowner to undertake and
complete construction activities within the TIRZ. Because of the numerous and changing factors affecting the
availability of funds, the Authority is unable to assess the future availability of such funds for continued construction
within the TIRZ.
The rate of development of the TIRZ is related to the vitality of the residential and commercial
improvements currently being constructed. The Authority cannot predict the pace or magnitude of future
construction of new improvements in the TIRZ. Furthermore, the demand for and construction of housing and
retail/commercial space in the TIRZ could be affected by competition from other developments including other
residential, retail and commercial developments located in adjacent areas As a result of such factors, it is possible
that the future appraised value of the taxable real property could be less than historical values.
6
Tax Increments are generated only on real property, not personal property. Therefore, any increases in the
value of personal property in the TIRZ such as inventory and equipment, do not generate Tax Increment.
For a discussion of residential and/or commercial real estate development in Shadow Creek Ranch see
"SHADOW CREEK RANCH DEVELOPMENT" herein.
Dependence on Principal Taxpayers
The Authority will be dependent upon the timely payment of taxes by principal taxpayers in the TIRZ to
the City, AISD, Brazoria County and Fort Bend County to produce adequate Tax Increments to make debt service
payments on the Bonds. Significant delinquencies in the payment of ad valorem taxes to the City, AISD Brazoria
County and Fort Bend County by the principal taxpayers could result in a default on the Bonds. The Authority
cannot guarantee the timely payment of taxes by any taxpayer nor can the Authority predict the future financial
condition of the principal taxpayers and the likelihood that taxes will be paid in a timely manner.
Tax Collection Limitations and Foreclosure Remedies
The Authority's ability to make debt service payments may be adversely affected by the City, AISD,
Brazoria County and Fort Bend County's inability to collect ad valorem taxes. Under Texas law the levy of ad
valorem taxes by the City, AISD, Brazoria County and Fort Bend County constitutes a lien on the property against
which taxes are levied, and such lien may be enforced by foreclosure. Foreclosure must be effected through a
judicial proceeding. The City AISD, Brazoria County and Fort Bend County's ability to collect ad valorem taxes
through such foreclosure may be impaired by cumbersome, time-consuming, and expensive collection procedures or
market conditions affecting the marketability of taxable property within the TIRZ and limiting the proceeds from a
foreclosure sale of such property. Moreover, the proceeds of any sale of property within the TIRZ available to pay
debt service on the Bonds may be limited by the current aggregate tax rate being levied against the property and by
other factors including the taxpayers' right to redeem property within two years of foreclosure for residential
homestead and agricultural use property and within six months of foreclosure for other property Finally, any
bankruptcy court with jurisdiction over bankruptcy proceedings initiated by or against a taxpayer within the TIRZ
pursuant to the federal Bankruptcy Code could stay any attempt by the City, AISD, Brazoria County and Fort Bend
County to collect delinquent ad valorem taxes assessed against such taxpayer. In addition to the automatic stay
against collection of delinquent taxes afforded a taxpayer during the pendency of a bankruptcy, a bankruptcy could
affect payment of taxes in two other ways: first a debtor's confirmation plan may allow a debtor to make
installment payments on delinquent taxes for up to six years and second, a debtor may challenge, and a bankruptcy
court may reduce, the amount of any taxes assessed against the debtor, including taxes that have already been paid.
The Authority has no control over the collection of property taxes by the City, AISD, Brazoria County and Fort
Bend County.
Registered Owners' Remedies After Default
Remedies available to Registered Owners of Bonds in the event of a default by the Authority in one or
more of its obligations under the Bonds, the Bond Resolution or the Indenture are limited. Although state law and
the Indenture provide that the Trustee, as attorney in fact of the Registered Owners, may obtain a writ of mandamus
requiring performance of such obligations, such remedy may prove time-consuming, costly and difficult to enforce.
Neither the Bond Resolution nor the Indenture provide for acceleration of maturity of the Bonds or provide for the
foreclosure of any property or assets other than applying the Pledged Revenues in the manner provided in the
Indenture. See "Bankruptcy Limitation to Registered Owners' Rights" below and "THE INDENTURE "
Bankruptcy Limitation to Registered Owners' Rights
As is true with many entities that issue debt, there is a risk that the Authority may file for bankruptcy and
afford itself the protection of the federal Bankruptcy Code. In that case, the Authority receives the benefit of the
automatic stay and creditors such as the Registered Owners, cannot pursue their remedies against it without the
permission of the Bankruptcy Court. The Authority has a right to reorganize and adjust its debts with the approval of
the Bankruptcy Court While the relevant law on this point is not clear, it may be possible for the Authority to be
7
forced into involuntary bankruptcy by one or more creditors. A bankruptcy filing by or against the Authority could
adversely affect the receipt of the principal of and interest on the Bonds.
Future Debt
Issuance of debt by the Authority is subject to the approval of the City. By a resolution adopted by City
Council of the City on November 15, 2004, the Authority was authorized by the City to issue the Bonds, however, in
the future the Authority may request and the City may approve the issuance of additional tax increment contract
revenue bonds payable from the Pledged Revenues. The Authority currently has no tax increment contract revenue
bonds outstanding. On October 5 2004, the City and the TIRZ Board each approved total reimbursements to the
Developer (as defined herein) of approximately $18,000,000. The Developer will be reimbursed approximately
$10,226,000 from the proceeds of the sale of the Bonds. In addition, the Developer has also commenced work on
approximately $73,322,526 of additional improvements pursuant to certain letter financing agreements with the
TIRZ Board The Plan estimates that throughout the life of the TIRZ the Authority will issue bonds sufficient to
finance total infrastructure project costs of approximately $109 000,000. However, the City and the Developer have
agreed in the Development Agreement that no more bonds than necessary to pioduce bond proceeds of
$114,000,000 (in 1999 dollars) shall be issued to finance TIRZ Project Costs. The Plan estimates that bonds will be
'slued to yield net proceeds of $114 633,923 (in 1999 dollars). Any additional tax increment contract revenue bonds
may be on parity with the Bonds or may be issued as subordinate lien bonds in accordance with the Indenture. The
Authority anticipates that it will require the issuance of additional bonds secured by the Contract Tax Increments in
order to complete and continue the purposes for which the TIRZ was created. See "SOURCE AND SECURITY OF
PAYMENT FOR THE BONDS —Additional Bonds."
Marketability of the Bonds
The Authority has no agreement with the Underwriters regarding the re -offering yields or prices of the
Bonds and has no control over trading of the Bonds in the secondary market. Moreover, there is no assurance that a
secondary market will be made in the Bonds. If there is a secondary market, the difference between the bid and
asked price may be greater than the bid and asked price of bonds of comparable maturity and quality issued by more
traditional issuers as such bonds are more generally bought sold or traded in the secondary market.
The SEC has promulgated amendments to its Rule 15c(2)-12 (the "Rule") relating to annual disclosure of
certain financial information and operating data and notice of certain material events. The failure by the Authority
to comply with its agreement to provide the information and notices required by the Rule could possibly affect the
marketability of the Bonds in the secondary market. See "CONTINUING DISCLOSURE OF INFORMATION."
Continuing Compliance with Certain Covenants
Failure of the Authority to comply with certain covenants contained in the Bond Resolution and Indenture
on a continuing basis prior to the maturity of the Bonds could result in interest on the Bonds becoming taxable
retroactive to the date of original issuance. See "LEGAL MATTERS." There is no acceleration of the Bonds or
additional payments if the interest thereon becomes taxable.
Air Quality
Air quality control measures requited by the United States Environmental Protection Agency (the "EPA")
and the Texas Commission on Environmental Quality (the ' Commission") may curtail new industrial, commercial
and residential development in Houston and adjacent areas. Under the Clean Air Act Amendments of 1990, the
eight -county Houston -Galveston Consolidated Metropolitan Statistical Area ("CMSA') which includes Brazoria
County and Fort Bend County, has been designated by the EPA as a severe ozone nonattainment area. Such areas
are required to demonstrate progress in reducing ozone concentrations each year until the EPA ` 1-hour" standards
are met. Compliance with EPA's 1-hour standards must occur no later than the year 2007, which could impact
development in the area, including the TIRZ
8
To provide for reductions in ozone concentrations, the EPA and the Commission have imposed
increasingly stringent limits on sources of air emissions and require any new source of significant air emissions to
provide for a net reduction of air emissions. If the Houston -Galveston area fails to demonstrate progress in reducing
ozone concentrations or fails to meet EPA's standards by 2007, EPA may impose a moratorium on the awarding of
federal highway construction grants and other federal grants for certain public works construction projects, as well
as severe emissions offset requirements on new major sources of hydrocarbon emissions for which construction has
not already commenced.
In order to comply with the EPA's standards for the Houston -Galveston CMSA, a state implementation
plan ("SIP") has been established setting emission control requirements, some of which regulate the inspection and
use of automobiles. These types of measures could impact how people travel, what distances people are willing to
travel, where people choose to live and work, and what jobs are available in the Houston -Galveston CMSA.
Additionally, the Houston -Galveston CMSA was recently classified as a non -attainment area under the 8-hour ozone
standard and it is possible that the area could soon be designated as non -attainment under the new fine particulate
(soot) standard as well. In response to such designations, additional air emission controls will be developed, and it
is possible that these additional controls could have a negative impact on the area's economic growth and
development.
Tax Abatements
The TIF Act provides that a taxing unit other than a school district may enter into a tax abatement
agreement with an owner of real property in a reinvestment zone for a term not to exceed ten years. To be effective,
an agreement to abate taxes on real property in a reinvestment zone must be approved by the board of directors of
the reinvestment zone and the governing body of each taxing unit that imposes taxes on real property in the
reinvestment zone and deposits or agrees to deposit any of its tax increment into the tax increment fund for the zone.
The board of a reinvestment zone may covenant that the board will not approve a tax abatement agreement that
applies to real property in that zone. If a taxing unit enters into a tax abatement agreement, taxes that are abated
under that agreement are not considered taxes to be imposed or produced by that taxing unit in calculating the
amount of the tax increment of that taxing unit or that taxing unit's deposit to the tax increment fund for the
reinvestment zone.
The TIRZ Board has not covenanted that it will not approve a tax abatement agreement that applies to real
property in the TIRZ; however, it is within the Board's discretion to do so at any point in time. If a tax abatement
agreement is approved by the City, AISD, Brazoria County, Fort Bend County and the TIRZ, such abatement would
reduce the amount of future Contract Tax Increments. A tax abatement agreement would not reduce the amount of
Contract Tax Increments existing prior to the agreement. The TIRZ has not been asked to approve an abatement
agreement and there are no present plans of the TIRZ to approve an abatement agreement.
PLAN OF FINANCING
Creation of the Authority and TIRZ
The Authority operates pursuant to Articles of Incorporation filed with the Secretary of State and Bylaws
approved by the City, and adopted by the Authority Board and under the provisions of Chapter 431 Texas
Transportation Code Chapter 394, Texas Local Government Code, and the general laws of the State of Texas
applicable and may exercise the powers granted to non-profit corporations under the Texas Non -Profit Corporation
Act The Authority was created for the purpose of aiding, assisting, and acting on behalf of the City in the
performance of its governmental and proprietary functions with respect to, and to provide financing for, the TIRZ.
The TIRZ was created by the City on December 21, 1998 by Ordinance No. 891 (the "Ordinance"). The
TIRZ Board has nine members four of whom are appointed by the City. One of the City s appointees is nominated
by AISD, pursuant to the AISD Agreement In addition, Brazoria County and Fort Bend County each appoint one
member of the TIRZ Board and the Texas State Senator and Texas State Representative, or their designees, in whose
district the TIRZ is located serve as the final two members of the TIRZ Board The Authority Board has five
members, all of whom are appointed by the City. See the inside front cover hereof for a list of the current Authority
Board members.
9
The TIRZ encompasses approximately 3,467 acres of land located within the City, including all of the
master planned community of Shadow Creek Ranch, which includes approximately 3300 acres of land. To date all
of the development within the TIRZ has occurred within Shadow Creek Ranch.
Purpose/Project Plan
The purpose of the TIRZ is to design, construct and finance or cause to be designed, constructed and
financed certain public works and improvements to promote and facilitate the development of the vacant
undeveloped property in the TIRZ Specifically, the TIRZ is constructing public works and infrastructure
improvements to assist in the development of the master planned community, Shadow Creek Ranch. See
"SHADOW CREEK RANCH DEVELOPMENT." The development will be in accordance with the Plan. The Plan
may be amended from time to time in accordance with the TIF Act if such amendments are adopted by the TIRZ
Board and approved by the City Council and in certain instances approved by AISD and Brazoria and Fort Bend
Counties.
The Plan provides for four categories of estimated Project Costs: (i) $108,267,923 for the design and
construction of "Infrastructure," (ii) $1,366,000 for TIRZ creation and administration, (iii) $5,000,000 for the design
and construction of "City Facilities,' and (iv) $134,100,000 for educational facilities (in 1999 dollars).
"Infrastructure' includes, but is not limited to: (i) streets (pavement, sidewalks, landscaping and irrigation, entry
monuments and signalization), (ii) water plants and water system, (iii) wastewater treatment plants, lift stations and
wastewater collection system, (iv) storm sewer system, (v) lakes and channels (vi) site costs, (vii) contingencies
and (viii) engineering "City Facilities" Include: (i) library sites and improvements, and (ii) fire and police station
sites and improvements. The educational facility improvements will be provided by or at the direction of AISD. No
proceeds of the Bonds will be used to pay for educational facilities Pursuant to the Plan and within certain
parameters, the TIRZ Board may revise or adjust the estimated Project Costs. All estimates of Project Costs in the
Plan are in 1999 dollars and are subject to cost adjustment per the Engineering New Record Index over the life of the
TIRZ
Operations
The Authority has no direct employees, but contracts with Knudson & Associates to provide administrative
and consulting services to the Authority. It is intended that Authority operations will be funded by the Contract Tax
Increments paid to the Authority by the City pursuant to the Tri-Party Agreement and as described herein See
`SOURCE AND SECURITY FOR PAYMENT FOR THE BONDS." Under the Tri-Party Agreement, financial
statements of the Authority must be audited each fiscal year. Since the Authority has not completed its first fiscal
year, no audited financial statements are yet available.
Issuance of Bonds
The proceeds of bonds or notes may be used to pay eligible Project Costs pursuant to the Plan The
Authority may request, and the City may approve, the issuance of additional tax increment contract revenue bonds.
All such additional bonds may be on a parity with the Bonds or may be issued as subordinate lien bonds as provided
in the Indenture. The Authority anticipates that it will require the issuance of bonds secured by Contract Tax
Increments in addition to the Bonds in order to complete and continue the purposes for which the TIRZ was created.
On October 5, 2004, the City and the TIRZ Board each approved total reimbursements to the Developer of
approximately $18,000,000. The Developei will be reimbursed approximately $10 226,000 from the proceeds of the
sale of the Bonds. In addition the Developer has also commenced work on approximately $73 322 526 of
additional improvements pursuant to letter financing agreements with the TIRZ Board. The Plan estimates that
throughout the life of the TIRZ the Authority will issue bonds sufficient to finance total infrastructure project costs
of approximately $109 000,000; however, the City and the Developer have agreed in the Development Agreement
that no more bonds than necessary to produce bond proceeds of $114,000,000 (in 1999 dollars) shall be issued to
finance TIRZ Project Costs. See "RISK FACTORS —Future Debt."
10
Captured Appraised Value
The Authority has used historical figures relating to the Captured Appraised Value as of January 1, 2004
and an estimated Captured Appraised Value as of October 1, 2004. See "FINANCIAL INFORMATION."
Use of Bond Proceeds
On October 5, 2004, the City and the TIRZ Board each approved total reimbursements to the Developer of
approximately $18,000,000. The Developer will be reimbursed approximately $10,226,000 from the proceeds of the
sale of the Bonds. See "-Sources and Uses of Funds." Proceeds of the Bonds will be used to reimburse
developers for certain Projects Costs including infrastructure and related improvements made by such developers
within the TIRZ and approved in the Plan and interest on funds advanced therefor. Project Costs to be reimbursed
from this Bond issue include: (i) monumentation and signage, (ii) landscaping improvements, (iii) street and
sidewalk paving and signalization, (iv) water, sanitary sewer and drainage facilities (v) lakes and parks and (vi) land
acquisition. Bond Proceeds will also be used to pay the cost of issuance of the Bonds to establish a Debt Service
Reserve Fund for the Bonds, to pay creation costs of the Authority and to pay capitalized interest as provided in the
Indenture. See "SHADOW CREEK RANCH DEVELOPMENT - Improvements."
Pro -Forma Debt Service Requirements
The following sets forth the estimated annual debt service on the Bonds based upon a fiscal year end of
September 30 This schedule does not reflect the fact that an amount equal to $552,106.67* of interest on the Bonds
will be capitalized from the proceeds of the sale of the Bonds to pay debt service and approximately $1,220,489.00*
of the Bond proceeds will be deposited in the Debt Service Reserve Fund which represents the amount necessary to
fund that reserve requirement. The Bonds will be the first debt issuance by the Authority.
Debt Service on the Bonds*
Year Principal Interest(")
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
$705,000.00
750,000.00
285,000.00
305,000.00
325,000.00
340,000.00
365,000.00
385,000.00
405,000.00
430,000.00
455,000.00
485,000.00
515,000.00
545,000.00
580,000.00
610,000.00
650,000.00
690,000.00
730,000.00
775,000.00
820,000.00
870,000.00
920,000.00
$12,940,000.00
$647,000
776,400
734,100
689,100
672,000
653,700
634,200
613,800
591,900
568,800
544,500
518,700
491,400
462,300
431,400
398,700
363,900
327,300
288,300
246,900
203,100
156,600
107,400
55.200
$11,176,700
*Preliminary, subject to change
(a) Assumes 6% interest rate for purposes of presentation only.
11
Total Debt Service
$ 647,000
1,481,400
1,484,100
974,100
977,000
978,700
974,200
978,800
976,900
973,800
974,500
973,700
976,400
977,300
976,400
978,700
973,900
977,300
978,300
976,900
978,100
976,600
977,400
975.200
$24,116,700
Sources and Uses of Funds
Sources
Uses
General
Par Amount of Bonds
Accrued Interest
Total
Project Fund
Debt Service Reserve Fund
Total Underwriter's Discount
Capitalized Interest
Accrued Interest
Costs of Issuance
Total
SOURCE AND SECURITY OF PAYMENT FOR THE BONDS
The Bonds are limited obligations of the Authority payable solely from the sources described herein and
are not obligations of the City, AISD, Brazoria County, Fort Bend County, the State of Texas or any entity other
than the Authority. The Authority is not obligated to pay principal of and interest on the Bonds from money of the
Authority other than the Pledged Revenues as defined herein under "—Pledge of Revenues. '
Tax Increments
The City, AISD, Brazoria County and Fort Bend County have agreed to deposit certain of their Tax
Increments into the Tax Increment Fund. The amount of the City, AISD, Brazoria County or Fort Bend County's
Tax Increment for a year is the amount of property taxes levied by the City AISD, Brazoria County and Fort Bend
County for that year on the Captured Appraised Value of taxable real property located in the TIRZ The Captured
Appraised Value is: (i) the total appraised value of the all real property in the TIRZ that is taxable by the City,
AISD, Brazoria County or Fort Bend County for a year, less the Base Year (the total appraised value of all real
property in the TIRZ that is taxable by the City, AISD, Brazoria County or Fort Bend County on January 1, 1998)
plus (it) if the boundaries of the TIRZ are expanded to include additional property, the total appraised value of all
real property added to the TIRZ that is taxable by the City, AISD, Brazoria County and Fort Bend County for that
year, less the tax increment base for such added property as determined on January 1 of the year in which such
property was added to the TIRZ
The City, AISD, Brazoria County and Fort Bend County are required to collect taxes on property located
within the TIRZ in the same manner as other taxes are collected. The Authority has no control over the collection of
property taxes by the City, AISD, Brazoria County and Fort Bend County AISD and Fort Bend County have
agreed pursuant to Chapter 311.013(c), to pay into the Tax Increment Fund the collected Tax Increments on the first
day of each calendar quarter Brazoria County has agreed, pursuant to Chapter 311.013(c), to pay into the Tax
Increment Fund the collected Tax Increments on August 1 of each year. The City has agreed to pay 100% of its
collected Tax Increments to the Tax Increment Fund. However, pursuant to the Development Agreement, a
significant portion of the City Tax Increment has been designated as an Administrative Fee and shall be paid by the
TIRZ to the City The portion of the City Tax Increment representing the Administrative Fee is not paid to the
Authority and is therefore not part of the Contract Tax Increments. See ' RISK FACTORS — Limitations on City Tax
Increments. ' AISD has agreed to pay 100% of collected Tax Increments to the Tax Increment Fund. AISD's 2004
tax rate is presently $1.676 per $100 valuation. Brazoria County has agreed that it will pay 38% of its taxes
collected on Captured Appraised Value (not to exceed $0 1359 per $100 valuation) of its collected Tax Increments
to the Tax Increment Fund. Fort Bend County has agreed that it will pay $0.624100 per $100 valuation for tax years
1999-2008 $0 468075 per $100 valuation for tax years 2009-2018 and $0 312050 per $100 valuation for tax years
2019-2028 of its collected Tax Increments to the Tax Increment Fund.
12
For additional information regarding the City's Tax Increment, see "APPENDIX A —SUMMARY OF
DOCUMENTS —Development Agreement' For more information regarding the AISD, Brazoria County and Fort
Bend County Tax Increments, see "APPENDIX A —SUMMARY OF DOCUMENTS—Interlocal Agreements. '
City's Agreement with Respect to Tax Increments and the Bonds
The City has established the Tax Increment Fund, a separate fund in the City treasury into which Tax
Increments will be deposited. Pursuant to the Tri-Party Agreement, the City and the TIRZ have agreed to pay to the
Authority the Contract Tax Increments which are the Tax Increments then available in the Tax Increment Fund
without counterclaim or offset, but less (i) an amount equal to the City's administrative costs connected with the
TIRZ and the Plan, as provided in the Plan; (ii) money to be paid to AISD for education facilities project costs
pursuant to the AISD Agreement (iii) amounts required to be maintained in the suspense account pursuant to the
terms of the AISD Agreement and (iv) an amount sufficient to pay reasonable current and anticipated administrative
and operating costs of the TIRZ; provided however no such offset shall affect the obligation of the City and the
TIRZ to make payment on bonds and notes issued pursuant to the Tri-Party Agreement.
The obligations of the City and the TIRZ to pay Contract Tax Increments to the Authority are subject to the
Tri-Party Agreement and the rights of any of the holders of bonds, notes, or other obligations that have been or are
hereafter issued by the City, AISD, Brazoria County and Fort Bend County that are payable from and secured by a
general levy of ad valorem taxes throughout the taxing jurisdiction of the City, AISD, Brazoria County and Fort
Bend County, as applicable.
The City and TIRZ agree to continuously collect the Tax Increments during the term of the Tri-Party
Agreement and, to the extent legally permitted to do so, they agree that they will not permit a reduction, abatement,
or exemption in the Tax Increments paid by the City, AISD, Brazoria County and Fort Bend County. The City
agrees that it will not dissolve the Authority and that any repeal of the right and power to collect Tax Increments will
not be effective until all the bonds, notes, or other obligations of the Authority have been paid in full or legally
defeased
The City and TIRZ further agree that the City will remit to the Authority on the date of the closing of the
Bonds and thereafter, not later than the fifteenth day of each August in which the Tri-Party Agreement is in effect,
the Contract Tax Increments. At the end of each fiscal year (beginning with the fiscal year or fraction thereof during
which the Tri-Party Agreement was executed) the Authority will have an audit prepared by an independent
Certified Public Accountant for that fiscal year that shall be submitted to the Authority, the Zone and the City within
90 days after the end of such fiscal year.
The City and TIRZ agree that their obligation to make the payments of Contract Tax Increments as set forth
in the Tri-Party Agreement from the Tax Increment Fund is absolute and unconditional, and until such time as the
bonds, notes, and the other contractual obligations of the Authority have been fully paid or legally defeased or the
date of expiration of the TIRZ, whichever comes first, the City and TIRZ will not suspend or discontinue any
payments of Contract Tax Increments as provided in the Tri-Party Agreement and will not terminate the Tri-Party
Agreement for any cause, other than default.
If the City or the Authority fails to perform its obligations under the Tri-Party Agreement, the
nondefaulting party may terminate the Tri-Party Agreement. No termination of the Tri-Party Agreement will affect
the obligation of the City and the TIRZ to pay from Tax Increments an amount of Contract Tax Increments which
will permit the Authority to pay its bonds, notes, or other obligations issued or incurred pursuant to the Tri-Party
Agreement prior to termination. In the Tri-Party Agreement, the City agrees not to dissolve the Authority or the
TIRZ unless it makes satisfactory arrangements to provide for the payment of the Authority's bonds, notes, or other
obligations incurred prior to the Authority's dissolution.
AISD's Agreement With Respect to Tax Increments
AISD has agreed that it will pay one -hundred percent of the taxes collected on the Captured Appraised
Value to the City for deposit in the Tax Increment Fund. AISD's 2004 tax rate is $1.676 per $100 valuation. AISD is
13
not obligated to make payments on the AISD Tax Increment from other AISD taxes or revenues until the taxes
representing the AISD Tax increment are actually collected Such payments are due on the first day of each
calendar quarter. No interest or penalty may be charged to AISD for delinquent payments under the AISD
Agreement.
Pursuant to the AISD Agreement, the first payment of Tax Increments by AISD is for taxes levied for the
year 1999 and the last payment is for taxes levied in the year 2028. AISD's participation will not extend to the
Captured Appraised Value on any property added to the TIRZ by the City unless AISD approves the participation.
Due to the state laws applicable to AISD's state and local funding, it is unlikely that AISD would agree to
participate on any property added to the TIRZ.
In the event that laws applicable to AISD change so that the participation of AISD in the TIRZ will result
in a decrease or decreases the amount of state and local funds available and/or received by AISD, or AISD
determines in its sole and independent discretion that it would be in AISD s best interest due to negative financial
impact to AISD, resulting from participation in the TIRZ, the City and the TIRZ have agreed that, at the option of
AISD in its sole and independent discretion, (i) the AISD Tax Increments shall be decreased by an amount
determined by AISD to account for the amount of the decrease in AISD state and local funding as a result of AISD's
participation in the TIRZ, (ii) the percentage of payments to be made by the TIRZ to AISD from taxes generated
from the AISD Tax Increments shall be increased by an amount determined by AISD to account for the amount of
the decrease in AISD state and local funding as a result of AISD s participation in the TIRZ, (iii) any combination of
the options set forth in subparagraphs (r) or (ii) above, or (iv) AISD may completely withdraw from further
participation in the TIRZ In addition, in the event the City determines that the continued participation by AISD in
the TIRZ has or will have a negative financial impact on the TIRZ, then the City shall have the right to terminate
AISD's participation in the TIRZ. The Authority is unable to predict the likelihood of new legislation that may
penalize AISD for its participation in the TIRZ See "RISK FACTORS — Limitations on AISD Tax Increments."
Brazoria County's Agreement with Respect to Tax Increments and the Bonds
Brazoria County has agreed that it will contribute 38% of its taxes collected on the Captured Appraised
Value (not to exceed $0.1359 per $100 valuation). Brazoria County's obligation to pay the Tax Increment accrues
as such taxes are collected and will be due on August 1 of each year.
Pursuant to Brazoria County's agreement for participation in the TIRZ (the "Brazoria County Agreement"),
the first payment of Tax Increments by Brazoria County is for taxes levied for the year 1999 and the last payment is
for taxes levied in the year 2028 Brazoria County's participation will not extend to the Captured Appraised Value
on any property added to the TIRZ by the City unless Brazoria County approves the participation. The City has
agreed not to terminate the TIRZ without the prior consent of Brazoria County, provided that the TIRZ may be
otherwise terminated by operation of law.
Brazoria County may reduce its participation in the TIRZ by the adoption of a written order of the
Commissioner's Court of Brazoria County adopted prior to September 30 of such year if the Captured Appraised
Value is less than 50% of the values for each of the listed tax years indicated the table immediately below or that in
such listed tax years, if the County Unit Cost of Service (as defined in the Brazoria County Agreement) is lower than
Brazoria County's Actual Cost of Service (as defined in the Brazoria County Agreement) Brazoria County may
reduce its participation in the TIRZ for the remaining term of the TIRZ so that Brazoria County s retained tax
increment covers Brazoria County's Actual Cost of Service for dwelling units in the TIRZ by at least 1.32 times but
the reduction percentage may not increase the Brazoria County's retained tax increment revenue to cover more than
County Unit Cost of Service plus ten percent.
Tax
Year
2006
2011
2016
2021
2026
Captured
Appraised Value
$ 655,340,658
$ 1,338,693,425
$ 1,414,004,025
$ 1,414,004,025
$ 1,414,004,025
14
50%
Required Value
$327 670,329
$669 346,713
$707 002,013
$707 002,013
$707 002,013
Notwithstanding anything in the paragraph immediately above to the contrary if the City, the TIRZ or an
agency or instrumentality of the City or TIRZ (such as the Authority) have (1) issued bonds or notes secured by
revenues in the tax increment fund or under a contract secured by payments of the tax increment revenues, (such as
the Bonds) or (2) entered into a project cost agreement(s) for the implementation of the Project Plan pledging the
payment of the tax increment for the payment of developer advances then incurred or construction contracts
awarded and executed, Brazoria County may not reduce its participation under the provisions of subparagraphs (a)
or (b) of Section VI of the Brazoria County Agreement to an amount less than its cumulative annual pro rata share of
the tax increment pledged to make payments on all of such bonds or agreements.
Fort Bend County's Agreement with Respect to Tax Increments and the Bonds
Pursuant to the Fort Bend County Agreement, Fort Bend County has agreed to participate in the TIRZ by
contributing the amount of tax increment produced in the TIRZ attributable to Fort Bend County based on the
following tax rates:
Tax Year
1999-2008
2009-2018
2019-2028
Fort Bend County Tax Rate Per $100
of Captured Appraised Value
$0.624100
$0.468075
$0.3 12050
If the Fort Bend County tax rate is less than the rate specified above for such year, then the Fort Bend
County Tax Increment for such year would be the total amount of taxes collected by Fort Bend County at its actual
tax rate on the Captured Appraised Value Taxes collected as a result of a Fort Bend County tax levy at a tax rate
greater than the rate specified above for a particular year will be retained by Fort Bend County. Fort Bend County's
obligation to pays its Tax Increment accrues as such taxes are collected and payment is due on the first day of each
calendar year quarter.
Pursuant to the Fort Bend County Agreement, the first payment of Tax Increments by Fort Bend County is
for taxes levied for the year 1999 and the last payment is for taxes levied in the year 2028. Fort Bend County's
participation will not extend to the Captured Appraised Value on any property added to the TIRZ by the City unless
Fort Bend County approves the participation. The City has agreed not to terminate the TIRZ prior to the termination
dates for the TIRZ described in the Ordinance without the prior consent of the Fort Bend County.
Calculation and Collection of Tax Increments
The use of tax increment financing zones in the Pearland area is relatively recent, and calculation and
collection of Tax Increments are subject to administrative interpretation by the City, AISD, Brazoria County and
Fort Bend County, which may change from time to time, at the option of the City, AISD, Brazoria County and Fort
Bend County.
The certified appraised value of that portion of the TIRZ located in Brazoria County is supplied to the City,
AISD and Brazoria County by the Brazoria County Appraisal District based on the Brazoria County Appraisal
District's identification of all real property accounts within boundaries of both the TIRZ and Brazoria County. The
certified appraised value of that portion of the TIRZ located in Fort Bend County is supplied to Fort Bend County by
the Fort Bend County Appraisal District based on the Fort Bend County Appraisal District's identification of all real
property accounts within boundaries of both the TIRZ and Fort Bend County. The Appraisal Districts determine
Captured Appraised Value on a property -by -property basis by subtracting the Base Year valuation of such property
from the current year's taxable value of such property. The City, AISD, Brazoria County and Fort Bend County
each use the certified appraised value in the TIRZ obtained from the respective Appraisal Districts, but then modify
it based on the various exemptions from taxation granted by the City, AISD, Brazoria County and Fort Bend
County
15
The respective Appraisal Districts each issue "correction rolls" which affect certified values for the
previous five years (or for a longer period in the case of some litigation) Value changes can be positive or negative
depending on the cause. Omitted property adds value while protest settlements, exemptions and error corrections can
add or subtract value. Value changes typically are larger in dollar amount and number in the years just following the
current tax year and tend to diminish in amount and number over time. At the current time, value changes affecting
real property within the TIRZ do not affect and adjustments are not made to the Tax Increment provided by the
various entities to the TIRZ after such Tax Increments are initially determined.
The determination of Captured Appraised Value by City, AISD, Brazoria County and Fort Bend County
will depend on the timing of its calculation (that is which Appraisal District roll it uses) and each respective taxing
entities' own exemptions. For the current year of calculation of Tax Inciements for the TIRZ, the City, AISD,
Brazoria County and Fort Bend County's individual determinations iesulted in the Captured Appraised Values
shown under "SELECTED FINANCIAL INFORMATION." For an explanation of the different exemptions of the
City, AISD, Brazoiia County and Fort Bend County, see ' TAXING PROCEDURES —Property Subject to Taxation
by the City, AISD, Brazoria County and Fort Bend County.'
Pledge of Revenues
The Bonds are issued pursuant to the Indenture and the Bond Resolution. The Bonds are payable solely
from the Pledged Revenues.
The TIF Act requires that all Tax Increments that the City, AISD, Brazoria County and Fort Bend County
have agreed to dedicate to the TIRZ must be deposited to the Tax Increment Fund for the TIRZ in the City's
treasury. Pursuant to the Tri-Party Agreement, and as described herein, the City will, on the date of closing of the
Bonds and thereafter on the date of delivery of the Bonds and on the fifteenth day of each August following the
closing of the Bonds, pay to the Authority the Contract Tax Increments.
The Authority will have an account into which Contract Tax Increments will be deposited, known as the
`Pledged Revenue Fund." Money in the Pledged Revenue Fund may be invested only in investments which would
be eligible for investment by the City pursuant to the Public Funds Investment Act (Chapter 2256 Texas
Government Code). Pursuant to the Bond Resolution and the Indenture, the Authority shall annually pay the
Contract Tax Increments to the Trustee for deposit in the Pledged Revenue Fund.
As part of the security for the Bonds and for each series of Additional Bonds (as hereinafter defined), the
Authority will utilize a portion of the Bond proceeds of each series to fund the "Debt Service Reserve Fund" created
by the Indenture and held by the Trustee equal to the `Reserve Requirement", which is defined in the Indenture as
the lesser of 1.25 times the Average Annual Debt Service or the Maximum Annual Debt Service (not to exceed 10%
of the stated principal amount of the Bonds of each series or any series of Additional Bonds or 10% of the issue
price of the Bonds or any series of Additional Bonds if the Bonds or any series of Additional Bonds are issued with
more than a de minimus amount (as defined by Section 1.148-1 of the Income Tax Regulations) of original issue
discount), which Reserve Requirement will be recomputed after the issuance of any series of Additional Bonds. The
Indenture authorizes a reserve fund surety policy for the entire amount of its Reserve Requirement. The Indenture
provides that at any time, to satisfy all or any part of its Reserve Requirement, the Authority may obtain for the
benefit of the Debt Service Reserve Fund one or more reserve fund surety policies. In the event the Authority elects
to substitute at any time a reserve fund surety policy for any funded amounts in the Debt Service Reserve Fund, it
may apply any bond proceeds thereby released, to the greatest extent permitted by law, to any purposes for which
the bonds were issued and any other funds thereby released to any purposes for which such funds may lawfully be
used, including the payment of debt service on Bonds or Additional Bonds. See "INDENTURE —The Funds.'
Pursuant to the Indenture there shall be deposited into the "Surplus Fund," maintained by the Authority in
accordance with the Tri-Party Agreement any amounts remaining in the Pledged Revenue Fund after the Trustee
makes the deposits and payments required under the Indenture. See "INDENTURE —The Funds.'
The Authority has pledged to the payment of the principal of and interest on the Bonds the "Pledged
Revenues, which are defined in the Indenture as all of the Authority's right, title, and interest in and to the
following described properties and interests, direct or indirect, whether now owned or hereafter acquired:
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(a) the Contract Tax Increments and all of the Authority's right, title, and interest thereto under the
Tri-Party Agreement;
(b) all money deposited or required to be deposited in the Pledged Revenue Fund, the Debt Service
Fund (as hereinafter defined), and the Debt Service Reserve Fund, held by the Trustee pursuant to
the provisions of the Indenture for the Bonds and all interest earnings and investment income
therefrom; and
(c) any and all property of every kind and nature (including without limitation, cash, obligations, or
securities) which may from time to time hereafter be conveyed, assigned, hypothecated, endorsed,
pledged, mortgaged, granted, or delivered to of deposited with, the Trustee as additional security
under the Indenture by the Authority or anyone on behalf of the Authority, or which pursuant to
any of the provisions may come into the possession or control of the Trustee as security thereunder,
or of a receiver lawfully appointed thereunder, all of which property the Trustee is authorized to
receive, hold, and apply according to the terms thereof.
Additional Bonds
The Authority has reserved the right to issue one or more series of additional parity tax increment contract
revenue bonds payable from and secured by a lien on the Pledged Revenues (the "Additional Bonds") on the terms
set out in the Indenture and the Bond Resolution for any lawful purpose. Prior to issuing Additional Bonds, the
following conditions must be met
(a) the Additional Bonds must mature on, and interest be payable on, the same days of the year as the
Bonds;
(b) the City has approved issuance of the Additional Bonds on the terms set forth in the Tri-Party
Agreement, as the same may be modified from time to time,
(c) amounts equal to applicable Reserve Requirement after the issuance of Additional Bonds are set
aside for deposit to the Debt Service Reserve Fund
(d) the Authority is not in material default with the terms of the Indenture, any bond resolution, the
Tri-Party Agreement and any other agreements to which it is a party and has so certified;
(e) The Authority has received a certificate meeting the requirements set forth below (the "Certificate")
which shows Captured Appraised Value which, at the participants' tax rates then in existence, will
generate Contract Tax Increments on the Additional Parity Bonds to be issued that will be at least
125 percent of projected Average Annual Debt Service, taking into account the Bonds and the
Additional Parity Bonds to be issued, provided; however, that this requirement shall not apply to
the issuance of any series of Additional Parity Bonds for refunding purposes that will have the
result of reducing the Average Annual Debt Service requirements on Parity Bonds, and
The Certificate may be either: (i) a certificate of the appropriate county appraisal district or
districts showing certified values, adjusted for exemption, (ii) a certificate of the appropriate county
appraisal district or districts showing estimated or preliminary values, adjusted for exemptions and
losses due to protests based on historical data, or (iii) a projection prepared by an independent real
estate appraiser.
(f)
Perfected Security Interest
Chapter 1208, Texas Government Code, applies to the issuance of the Bonds and the pledge of the tax
increment contract revenues granted by the Authority under the Indenture and such pledge is, therefoi e, valid,
effective, and perfected. Although Texas Law does not subject the Authority to the filing requirements of Chapter 9,
Texas Business & Commerce Code, the Authority has covenanted in the Indenture to cause the Indenture any
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supplemental indenture, and all other security instruments, financing statements and supplements thereto that may
be necessary to be filed, recorded and refiled in order to fully preserve and protect the rights and security of the
owners of the Bonds and to perfect and preserve the lien of the Indenture.
THE BONDS
Description
The Bonds will be dated December 1, 2004 with interest payable each September 1 and March 1, beginning
September 1, 2005 (each an "Interest Payment Date"), and with the first principal payment to be made on
September 1, 2006. The Bonds will mature on the dates and in the amounts shown on the inside cover page hereof.
The Bonds will be issued in fully registered form, in denominations of $5,000 or any integral multiple of $5,000.
Method of Payment of Principal and Interest
In the Bond Resolution, the Board has initially appointed Wells Fargo Bank, National Association,
Houston, Texas, as Trustee for the Bonds. The principal of the Bonds will be payable, without exchange or
collection charges, in any coin or currency of the United States of America which, on the date of payment, is legal
tender for the payment of debts due the United States of America, upon their presentation and surrender as they
respectively become due and payable, at the designated payment office of the Trustee. Interest on each Bond will be
payable by check payable on each Interest Payment Date, mailed by the Trustee on or before each Interest Payment
Date to the Registered Owner of record as of the 15th calendar day of the month immediately preceding each
Interest Payment Date (defined herein as the "Record Date") to the address of such Registered Owner as shown on
the book or register kept by the Trustee (the "Register") or by such other customary banking arrangements as may
be agreed upon by the Trustee and the Registered Owners at the risk and expense of the Registered Owners
If the date for payment of the principal of or interest on any Bond is not a business day, then the date for
such payment will be the next succeeding business day, as defined in the Bond Resolution, without additional
interest.
Optional Redemption
The Authority reserves the right, at its option, to redeem the Bonds maturing on or after September 1, 2015,
prior to their scheduled maturities, in whole or in part, in integral multiples of $5,000 on September 1, 2014 or any
date thereafter, at a price of par value plus accrued interest on the principal amounts called for redemption to the
date fixed for redemption. If less than all of the Bonds are redeemed at any time, the Authority will determine the
particular Bonds or portions thereof to be redeemed in integral multiples of $5 000 in principal amount.
If a Bond subject to redemption is in a denomination larger than $5,000, a portion of such Bond may be
redeemed, but only in integral multiples of $5,000. Upon surrender of any Bond for redemption in part, the Registrar
will authenticate and deliver in exchange therefor a Bond or Bonds of like maturity and interest rate in an aggregate
principal amount equal to the unredeemed portion of the Bond so surrendered.
Notice of Redemption
Unless waived by the Registered Owner notice of any redemption identifying the Bonds to be redeemed in
whole or in part will be given by the Tiustee at least 30 days prior to the date fixed for redemption by sending
written notice by first class mail postage paid, to the Registered Owner of each Bond to be redeemed in whole or in
part at the address shown on the Register. Such notices must 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 of a particular
maturity are to be redeemed, the numbers of the Bonds or the portions thereof of such maturity to be redeemed. Any
notice so given will be conclusively presumed to have been duly given, whether or not the Registered Owner
receives such notice By the date fixed for redemption due provision will be made with the Trustee for payment of
the redemption price of the Bonds or portions thereof to be redeemed, plus accrued interest to the date fixed for
redemption. When Bonds have been called for redemption in whole or in part and due provision has been made to
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redeem the same as herein provided, the Bonds or portions thereof so redeemed will no longer be regarded as
outstanding except for the purpose of receiving payment solely from the funds so provided for redemption, and the
rights of the Registered Owners to collect interest which would otherwise accrue after the redemption date on any
Bond or portion thereof called for redemption will terminate on the date fixed for redemption.
Authority for Issuance
The Bonds are issued by the Authority pursuant to the City Resolution adopted on November 8, 2004, the
Tri-Party Agieement, the terms and conditions of the Bond Resolution the Indenture, the TIF Act, the Texas
Constitution, and the general laws of the State of Texas.
Before the Bonds can be issued, the Attorney General of Texas must pass upon the legality of certain
related matters. The Attorney General of Texas does not guarantee or pass upon the safety of the Bonds as an
investment or upon the adequacy of the information contained in this Official Statement.
No Arbitrage
The Authority will certify as of the date the Bonds are delivered and paid for that based upon all facts and
estimates now known or reasonably expected to be in existence on the date the Bonds are delivered and paid for, the
Authority reasonably expects that the proceeds of the Bonds will not be used in a manner that would cause the
Bonds, or any portion of the Bonds, to be "arbitrage bonds" under the Internal Revenue Code of 1986, as amended
(the `Code"), and the regulations prescribed thereunder. Furthermore all officers, employees and agents of the
Authority have been authorized and directed to provide certifications of facts and estimates that are material to the
reasonable expectations of the Authority as of the date the Bonds are delivered and paid for. In particular, all or any
officers of the Authority are authorized to certify to the facts and circumstances and reasonable expectations of the
Authority on the date the Bonds are delivered and paid for regarding the amount and use of the proceeds of the
Bonds. Moreover the Authority covenants in the Indenture and the Bond Resolution that it shall make such use of
the proce3eds of the Bonds, regulate investment of proceeds of the Bonds and take such other and further actions
and follow such procedures, including, without limitation, calculating the yield on the Bonds as may be required so
that the Bonds shall not become "arbitrage bonds" under the Code and the regulations prescribed from time to time
thereunder.
Registration and Transfer
So long as any Bonds remain outstanding, the Trustee will keep the Register at its principal payment office
and, subject to such reasonable regulations as it may prescribe, the Trustee will provide for the registration and
transfer of Bonds in accordance with the terms of the Bond Resolution and the Indenture and the Book -Entry Only
System described below.
Each Bond will be transferable only upon the presentation and surrender of such Bond at the principal
payment office of the Trustee, duly endorsed for transfer, or accompanied by an assignment duly executed by the
Registered Owner or his authorized representative in form satisfactory to the Trustee. Upon due presentation of any
Bond in proper form for transfer, the Trustee has been directed by the Authority to authenticate and deliver in
exchange therefor a new Bond or Bonds, registered in the name of the transferee or transferees, in authorized
denominations and of the same maturity and aggregate principal amount and paying interest at the same rate as the
Bond or Bonds so presented.
All Bonds will be exchangeable upon presentation and surrender thereof at the principal payment office of
the Trustee for a Bond or Bonds of the same maturity and interest rate and in any authorized denomination in an
aggregate amount equal to the unpaid principal amount of the Bond or Bonds presented for exchange The Trustee is
authorized to authenticate and deliver exchange Bonds. Each Bond delivered will be entitled to the benefits and
security of the Bond Resolution to the same extent as the Bond or Bonds in lieu of which such Bond is delivered.
Neither the Authority nor the Trustee will be required to transfer or to exchange any Bond during the
period beginning on a Record Date or Special Record Date and ending on the next succeeding Interest Payment Date
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or to transfer or exchange any Bond called for redemption during the 30 day period prior to the date fixed for
redemption of such Bond unless the Registered Owner will exchange the unredeemed portion of a Bond called for
redemption in part
The Authority or the Trustee may require the Registered Owner of any Bond to pay a sum sufficient to
cover any tax or other governmental charge that may be imposed in connection with the transfer or exchange of such
Bond. Any fee or charge of the Trustee for such transfer or exchange will be paid by the Authority.
Book -Entry Only System
This section describes how ownership of the Bonds is to be transferred and how the principal of and
interest on the Bonds are to be paid to and credited by The Depository Trust Company, New York, New York
("DTC') while the Bonds are registered in its nominee's 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 Authority believes the source of such information to be reliable, but takes no responsibility for the
accuracy or completeness thereof.
The Authority cannot and does not give any assurance that (i) DTC will distribute payments of debt service
on the Bonds, or redemption or other notices, to DTC Participants, (ii) DTC Participants or others will distribute
debt service payments paid to DTC or its nominee (as the registered owner of the Bonds), or redemption or other
notices, to the Beneficial Owners (as defined herein) or that they will do so on a timely basis, or (iii) 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.
DTC will act as securities depository for the Bonds. The Bonds will be issued as fully -registered securities
registered in the name of Cede & Co. (DTC's partnership nominee) or such other name as may be requested by an
authorized representative of DTC. One fully -registered certificate will be issued for each maturity of the Bonds,
each in the aggregate principal amount of each such maturity, and will be deposited with DTC.
DTC, the world's largest depository, 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 holds and provides
asset servicing for over 2 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and
money market instruments from over 85 countries that DTC's participants ("Direct Participants") deposit with DTC
DTC also facilitates the post -trade settlement among Direct Participants of sales and other secmities transactions in
deposited securities through electronic computerized book -entry transfers and pledges between Direct Participants'
accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both
U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other
organizations. DTC is a wholly -owned subsidiary of the Depository Trust & Clearing Corporation ("DTCC").
DTCC, in turn is owned by a number of Direct Participants of DTC and Members of the National Securities
Clearing Corporation, Government Securities Clearing Corporation, MBS Clearing Corporation and Emerging
Markets Clearing Corporation (NSCC, GSCC, MBSCC and EMCC, also subsidiaries of DTCC), as well as by the
New York Stock Exchange Inc., the American Stock Exchange LLC and the National Association of Securities
Dealers Inc. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers
and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship
with a Direct Participant either directly or indirectly ("Indirect Participants') DTC has Standard & Poor s highest
rating: "AAA' . The DTC Rules applicable to its Participants are on file with the Securities and Exchange
Commission. More information about DTC can be found at www dtc.com.
Purchases of Bonds under the DTC system must be made by or through Direct Participants which will
receive a credit for the Bonds on DTC's records. The ownership interest of each actual purchaser of each Bond
("Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners
will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however expected to
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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 interests in the Bonds are to be accomplished by entries made on the books of Direct and Indirect
Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their
ownership interests in Bonds, except in the event that use of the book -entry system described herein is discontinued.
To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the
name of DTC's partnership nominee, Cede & Co., or such other name as may be requested by an authorized
representative of DTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co. or such
other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual
Beneficial Owners of the Bonds; DTC's records reflect only the identity of the Direct Participants to whose accounts
such Bonds are credited, which may or may not be the Beneficial Owners The Direct and Indirect 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 will be sent to DTC. 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. (nor any other DTC nominee) will consent or vote with respect to the Bonds
unless authorized by a Direct Participant in accordance with DTC's procedures. Under its usual procedures DTC
mails an `Omnibus Proxy" to the Authority as soon as possible after the record date. The Omnibus Proxy assigns
Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts Bonds are credited on the
record date (identified in a listing attached to the Omnibus Proxy).
Redemption proceeds, distributions, and dividend payments on the Bonds will be made to Cede & Co., or
such other nominee as may be requested by an authorized representative of DTC. DTC's practice is to credit Direct
Participants' accounts upon DTC s receipt of funds and corresponding detail Information from the Authority or the
Trustee, on the payable date in accordance with their respective holdings shown on DTC's records. 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 Trustee, or the Authority subject to any statutory or regulatory
requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend
payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the
responsibility of the Authority or the Trustee, disbursement of such payments to Direct Participants will be the
responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of
Direct and Indirect Participants
DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving
reasonable notice to the Authority or the Trustee. Under such circumstances, in the event that a successor depository
is not obtained, Bonds are requited to be printed and delivered.
Under the Indenture and the Bond Resolution, the Authority may decide to discontinue use of the system of
book -entry transfers through DTC (or a successor securities depository). In that event, Bond certificates will be
printed and delivered pursuant to the terms of the Bond Resolution.
Portions of the foregoing information regarding the book -entry only system have been provided by
DTC. Accordingly, neithe► the Underwriters nor the Authority is making any representation concerning
these matters and neither the DTC Participants no► the Beneficial Owners should rely on the foregoing
information with respect to such matters, but should instead confirm the same with DTC or the DTC
Participants, as the case may be. There can be no assurance that DTC or the DTC Participants will abide by
the procedures described herein or that such procedures will not be changed from time to time. In the event
a successor securities depository is designated, it may establish different procedures
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Use of Certain Terms in Other Sections of this Official Statement
In reading this Official Statement it should be understood that while the Bonds are in the Book -Entry Only
System, references in other sections of this Official Statement to ' Holders" should be read to include the person for
which the Direct Participant or Indirect Participant acquires an interest in the Bonds, but (i) all rights of ownership
must be exercised through DTC and the Book -Entry System and (ii) except as described above notices that are to be
given to registered owners under the Indenture are required to be given only to DTC.
Replacement of Trustee
Provision is made in the Indenture and Bond Resolution for replacement of the Trustee. If the Trustee is
replaced by the Authority, the successor Trustee will act in the same capacity as the previous Trustee Any Trustee
selected by the Authority will be a commercial bank, trust company or other entity duly qualified and legally
authorized to act as Trustee.
Mutilated, Lost or Stolen Bonds
Upon the presentation and surrender to the Trustee of a mutilated Bond, the Trustee will authenticate and
deliver in exchange therefor a replacement Bond of like maturity, interest rate and principal amount, bearing a
number not contemporaneously outstanding. If any Bond is lost, apparently destroyed, or wrongfully taken, the
Authority, 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 will, upon receipt of certain documentation from the Registered
Owner and an indemnity bond, execute and the Trustee will authenticate and deliver a replacement Bond of like
maturity, interest rate and principal amount bearing a number not contemporaneously outstanding.
Registered Owners of lost, stolen or destroyed bonds will be required to pay the Authority's costs to
replace such bond In addition, the Authority or the Trustee may require the Registered Owner to pay a sum
sufficient to cover any tax or other governmental charge that may be imposed.
Legal Investment and Eligibility to Secure Public Funds in Texas
Pursuant to the Public Security Procedures Act, Chapter 1201, Texas Government Code, the Bonds are
legal and authorized investments for banks, savings banks, trust companies building and loan associations, savings
and loan associations, insurance companies, fiduciaries, and trustees and for the sinking funds of cities, town,
villages, school districts and other political subdivisions or public agencies of the State of Texas. The Bonds are not
an authorized investment for political subdivisions that are required to comply with the Public Funds Investment
Act, Chapter 2256, Texas Government Code. Most political subdivisions in the State of Texas are required to adopt
investment guidelines consistent with the Public Funds Investment Act, Chapter 2256, Texas Government Code.
However, political subdivisions otherwise subject to the Public Funds Investment Act may have statutory authority
to invest in the Bonds independent from the Public Funds Investment Act. The Bonds are eligible under the Public
Funds Collateial Act, Chapter 2257, Texas Government Code, to secure deposits of public funds of the State of
Texas, or any political subdivision or public agency of the State of Texas and are lawful and sufficient security for
those deposits to the extent of their market value.
The Authority has not reviewed the laws in other states to determine whether the Bonds are legal
investments for various institutions in those states or eligible to serve as collateral for public funds in those states.
The Authority has made no investigation of any other laws rules, regulations or investment criteria that might affect
the suitability of the Bonds foi any of the above purposes or limit the authority of any of the above persons or
entities to purchase or invest in the Bonds
Defeasance
Except to the extent provided in the Bond Resolution and Indenture, any Bond, and the interest thereon,
will be deemed to be paid, retired, and no longer outstanding within the meaning of the Bond Resolution (a
"Defeased Bond") when payment of the principal of such Bond, plus interest thereon to the due date (whether such
22
due date be by reason of maturity, redemption, or otherwise) either (i) will have been made or caused to be made in
accordance with the terms of such Bond (including the giving of any required notice of redemption) or (ii) will have
been provided for on or before such due date by irrevocably depositing with or making available to a person (a
`Depositary") with respect to the safekeeping, investment, administration, and disposition of a deposit made under
Chapter 1207 of the Texas Government Code, as amended, for such payment (the Deposit") (A) lawful money of
the United States of America sufficient to make such payment or (B) Investments (as defined in the Indenture)
which may be in book -entry form, that mature and bear interest payable at times and in amounts sufficient to
provide for the scheduled payment or redemption of any Defeased Bond. To cause a Bond scheduled to be paid or
redeemed on a date later than the next scheduled interest payment date on such Bond to become a Defeased Bond,
the Authority must, with respect to the Deposit, enter into an escrow or similar agreement with a Depositary.
In connection with any defeasance of the Bonds, the Authority will cause to be delivered: (i) in the event
an escrow or similar agreement has been entered into with a Depositary to effectuate such defeasance, a report of an
independent firm of nationally recognized certified public accountants verifying the sufficiency of the escrow
established to pay the Defeased Bonds in full on the maturity or redemption date thereof ("Verification"); or (ii) in
the event no escrow or similar agreement has been entered into, a certificate from the chief financial officer of the
Authority certifying that the amount deposited with a Depositary is sufficient to pay the Defeased Bonds in full on
the maturity or redemption date thereof. In addition to the required Verification or certificate the Authority will
also cause to be delivered an opinion of nationally recognized bond counsel to the effect that the Defeased Bonds are
no longer outstanding pursuant to the terms of the Bond Order and a certificate of discharge of the Trustee with
respect to the Defeased Bonds. The Verification if any, and each certificate and opinion required under the Bond
Order will be acceptable rn form and substance, and addressed if applicable, to the Trustee and the Authoi ity. The
Bonds will remain outstanding unless and until they are in fact paid and retired or the above criteria are met.
At such time as a Bond is deemed to be a Defeased Bond, and all required criteria under the Bond
Resolution and Indenture has been met such Bond and the interest thereon will no longer be outstanding or unpaid
and will no longer be entitled to the benefits of the pledge of the security interest granted under the Bond Resolution
and Indenture, and such principal and interest will be payable solely from the Deposit of money or Investments
THE INDENTURE
"Bonds" as used in this section includes the Bonds and any other Additional Parity Bonds issued by the
Authority pursuant to the Bond Resolution and the Indenture from the Authority to Wells Fargo Bank, National
Association, as Trustee. Pursuant to the Indenture the Authority has assigned to the Trustee all of the Authority s
right, title, and interest rn and to the Pledged Revenues, including the Contract Tax Increments (see `SOURCE AND
SECURITY OF PAYMENT FOR THE BONDS —Pledge of Revenues").
Pursuant to the Indenture, the Trustee is to maintain a Pledged Revenue Fund, a Debt Service Fund, and a
Debt Service Reserve Fund as trust funds to be held in trust solely for the benefit of the Registered Owners of the
Bonds. The Pledged Revenue Fund, the Debt Service Fund, and the Debt Service Reserve Fund are to be invested
only in investments authorized by the laws of the State of Texas but must be invested in a manner such that the
money required to be expended from any fund will by available at the proper time or times. Amounts in the Debt
Service Reserve Fund will be used to pay interest on and principal of the Bonds when insufficient funds are
available for such purpose in the Pledged Revenue Fund or to be applied toward the payment of the principal of or
interest on the Bonds, or bonds hereafter issued pursuant to bond resolutions in accordance with the Tri-Party
Agreement, in connection with the refunding or redemption of such Bonds.
The Funds
The Indenture created the following funds, each of which (except the Project Fund and the Surplus Fund)
must be maintained by the Trustee:
(a) a Pledged Revenue Fund, into which all Contract Tax Increments are deposited;
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(b) a Debt Service Fund, into which deposits are made from the Pledged Revenue Fund as described
below, and from which deposits are applied to the payment of the principal of and interest on the
Bonds as the same becomes due;
(c) a Debt Service Reserve Fund, which will be initially funded from Bond proceeds as provided in
the Bond Resolution, and into which deposits from the Pledged Revenue Fund will be made to
attain the Reserve Requirement, and from which funds will be applied to the Debt Service Fund if
amounts in the Pledged Revenue Fund and the Debt Service Fund are insufficient to pay the
amounts of pi incipal and interest due on the Bonds:
(d) a Project Fund, which will be funded from Bond proceeds and applied as provided in the Bond
Resolution and Indenture;
(e) a Rebate Fund, which will be free and clear of any lien created by the Indenture, and into which
certain amounts earned by the Authority on the investment of the "gross proceeds" of Bonds
(within the meaning of section 148(f)(6)(B) of the Internal Revenue Code of 1986 (the "Code"))
will be deposited for rebate to the United States federal government, all as provided in Bond
Resolution; and
(f) the Surplus Fund, which will be funded as described below and which will be free and clear of any
lien created by the Indenture.
Pledged Revenues for the Bonds deposited in the Pledged Revenue Fund will be applied by the Trustee as
follows: (i) to the Debt Service Fund amounts necessary to make the amounts on deposit therein equal to the
interest, principal, and redemption premium, if any, due on the Bonds in the period ending on the next March 1; (ii)
to the Debt Service Reserve Fund amounts requited to attain the Reserve Requirement; (iii) to the payment of fees
and expenses of the Trustee and Paying Agent/Registrar; and (iv) to the Surplus Fund of the Authority established in
accordance with the Tri-Party Agreement, for use by the Authority for any lawful purpose. Money can be transferred
from the Pledged Revenue Fund to the Surplus Fund at any time provided that immediately prior to any such
transfer the deposits required by clauses (i), (it) and (iii) above have been made or provided for.
Events of Default
The Indenture provides that either of the following occurrences is an Event of Default:
(a) Failure to pay when due the principal of, redemption price of, or interest on any Bond; or
(b) Failure to deposit to the Debt Service Fund money sufficient to pay any principal of or interest on
any Bond no later than the date when it becomes due and payable.
Remedies
Upon the occurrence of an Event of Default, the Trustee is required to give notice thereof to the Authority
and, subject to the other provisions of the Indenture, may proceed to protect and enforce its rights and the rights of
the Registered Owners of the Bonds by suit, action or proceeding at equity or at law or otherwise, whether for the
specific performance of any covenant or agreement contained in the Indenture, Bond Resolution or Bonds or in aid
of the execution of any power granted in the Indenture or for the enforcement of any of the legal, equitable or other
remedy as the Trustee, being advised by counsel, will deem most effectual to protect and enforce any of the rights of
the Trustee or Registered Owners, including, without limitation, requesting a writ of mandamus issued by a court of
competent jurisdiction compelling the directors and other officers of the Authority to make such payment (but only
from and to the extent of the sources provided in the Indenture) or to observe and perform its other covenants,
obligations and agreements in the Indenture. The Indenture provides that the Trustee may seek the appointment of
receivers, may act without possession of the Bonds, may act as attorney in fact for the Registered Owners of the
Bonds, no remedy is exclusive and that the delay or omission in the exercise of any right or remedy will not
constitute a waiver.
24
The Indenture does not provide for any acceleration of maturity of the Bonds or provide for the foreclosure
upon any property or assets of the Authority, the City, AISD, Brazoria County or Fort Bend County other than
applying the Pledged Revenues in the manner provided in the Indenture.
Limitation on Action by Owners
The Indenture imposes certain limitations on Registered Owners of Bonds to institute suits actions or
proceedings at law or in equity for the appointment of a receiver or other remedy unless and until the Trustee will
have received the written request of the Registered Owners of not less than 25% of the aggregate principal amount
of all Bonds and other Bonds from time to time Outstanding and secured by the Indenture and the Trustee will have
refused or neglected to institute such suit, action or proceeding for a period of 10 days after having been furnished
reasonable indemnity. Notwithstanding the foregoing Registered Owners of more than 50% of the aggregate
principal amount of the Bonds and other Bonds from time to time issued and outstanding will have the right, by
written instrument delivered to the Trustee to direct to the time, method and place of conducting all proceedings to
be taken in connection with the enforcement of the terms and conditions of the Indenture.
Amendments to the Indenture
Without the consent of the Registered Owners, the Authority and the Trustee may from time to time enter
into one or more indentures supplemental to the Indenture, which will form a part of the Indenture, for any one or
more of the following purposes:
(a) to cure any ambiguity, inconsistency, or formal defect or omission in the Indenture;
(b) to grant to or confer upon the Trustee for the benefit of the Registered Owners of the Bonds any
additional rights, remedies, powers, or authority that may lawfully be granted to or conferred upon
the Owners of the Bonds or the Trustee;
(c) to subject to the lien of the Indenture additional revenues, properties, or collateral;
(d) to modify, amend, or supplement the Indenture or any supplemental indenture in such manner as to
provide further assurances that interest on the Bonds will, to the greatest extent legally possible, be
excludable from gross income for federal income tax purposes;
(e) to obtain bond insurance for the Bonds, if any;
(f) to provide for one or more reserve fund surety policies; and
(g) to permit the assumption of the Authority's obligations hereunder by any entity that may become
the legal successor to the Authority;
provided, however, that no provision in such supplemental indenture may be inconsistent with the Indenture or
impair the rights of the Registered Owners of the Bonds.
Except as provided in the preceding paragraph, any modification, change or amendment of the Indenture
may be made only by a supplemental indenture adopted and executed by the Authority and the Trustee with the
consent of the Registered Owners of not less than a majority of the aggregate principal amount of the Bonds then
Outstanding However, without the consent of the Registered Owner of each Outstanding Bond, no modification,
change, or amendment to this Indenture may:
(1) extend the time of payment of the principal thereof or interest thereon, or reduce the principal
amount thereof or premium if any, thereon, or the rate of interest thereon, or make the principal
thereof or premium, if any, or interest thereon payable in any coin or currency other than that herein
before provided, or deprive such Registered Owner of the lien hereof on the revenues pledged
hereunder; or
25
(2) change or amend the Indenture to permit the creation of any lien on the revenues pledged hereunder
equal or prior to the lien hereof, or reduce the aggregate principal amount of Bonds.
Removal or Resignation of Trustee
The Trustee may be removed at any time by an instrument or concurrent instruments in writing signed by
the Registered Owners of a majority in principal amount of the Bonds then Outstanding and delivered to the Trustee,
with notice thereof given to the Authority. The Trustee may at any time resign and be discharged from the trusts
created by giving written notice to the Authority and by providing written notice to the Registered Owners of its
intended resignation at least 60 days in advance thereof Such notice will specify the date on which such resignation
will take effect and will be sent by first class mail, postage prepaid to each Registered Owner of Bonds. Resignation
by the Trustee will not take effect unless and until a successor to such Trustee shall have been appointed as
hereinafter provided.
Appointment of Successor Trustee
In case the Trustee resigns, or is removed or dissolved, or is in the course of dissolution or liquidation, or is
otherwise become incapable of acting, or in case the Trustee is taken under control of any public officer or officers
or a receiver appointed by a court, a successor may be appointed by the Registered Owners of a majority in principal
amount of the Bonds then Outstanding, by an instrument or concurrent instruments in writing, signed by such
Registered Owners or their duly authorized representatives and delivered to the Trustee, with notice thereof given to
the Authority* provided, however that in any of the events above mentioned, the Authority may nevertheless
appoint a temporary Trustee to fill such vacancy until a successor is appointed by the Registered Owners in the
manner above provided, and any such temporary Trustee so appointed by the Authority will immediately and
without further act be automatically succeeded by the successor to the Trustee appointed by the Registered Owners
The Authority will provide written notice to the Registered Owners of the appointment of any successor Trustee
whether temporary or permanent, in the manner provided for providing notice of the resignation of the Trustee as
desct ibed above under "—Removal or Resignation of Trustee." Any successor Trustee or temporary Trustee will be
a trust company or bank in good standing located in or incorporated under the laws of the State of Texas duly
authorized to exercise trust powers and subject to examination by federal or state authority, having a reported capital
and surplus of not less than $100,000,000.
In the event that no appointment of a successor Trustee is made by the Registered Owners or by the
Authority pursuant to the foregoing provisions of this Section at the time a vacancy in the office of the Trustee will
have occu►ied, the Registered Owner of any Bond issued hereunder or the retiring Trustee may apply to any court of
competent jurisdiction for the appointment of a successor Trustee, and such court may thereupon, after such notice
as it will deem proper, if any, appoint a successor Trustee.
SHADOW CREEK RANCH DEVELOPMENT
General
The Authority is a non-profit local government corporation created to aid, assist and act on behalf of the
City in the performance of the City's governmental and proprietary functions with respect to, and to provide
financing for the TIRZ The efforts to create the TIRZ were initiated by petition by individual property owners to
foster economic development in the area of Pearland known as "Shadow Creek Ranch." The TIRZ is authorized to
provide among other things, new capital for public works and public improvements in the TIRZ consistent with the
Plan. The TIRZ includes approximately 3,467 acres of land within its boundaries, all of which lie within the City.
The Shadow Creek Ranch development is a master -planned, mixed use community planned for a 3,300
acre tract of land located within Brazoria and Fort Bend Counties, Texas. All of the Shadow Creek Ranch
development lies within the TIRZ The ultimate development of Shadow Creek Ranch is expected to include single-
family and multi -family residential and commercial development including a total of approximately 6,106 single-
family residential lots. Shadow Creek Ranch Development Company, L.P. (the ` Developer") has constructed
certain regional roadways, storm drainage facilities, parks, trails, landscaping and entry monuments on behalf of the
TIRZ as authorized by the TIRZ in accordance with the Plan. The Developer will be reimbursed for certain of such
facilities, including interest, with the proceeds of the sale of the Bonds by the Authority. The Developer has
additionally initiated the construction of water distribution, wastewater collection and storm drainage/detention
26
facilities within Brazoria County Municipal Utility District No. 26 and Brazoria-Fort Bend County Municipal Utility
District No 1. Those municipal utility districts cover approximately 2,893 acres of the Shadow Creek Ranch
development. Reimbursement of the Developer for such water distribution, wastewater collection and storm
drainage/detention facilities would be accomplished with the proceeds of the sale, if any, of bonds by such districts.
Brazoria County Municipal Utility District No. 26 has issued two series of unlimited tax bonds to
reimburse the Developer for water, wastewater and drainage facilities: Brazoria County Municipal Utility District
No. 26 Unlimited Tax Bonds, Series 2004 in the aggregate principal amount of $8,830,000 and Brazoria County
Municipal Utility District No. 26 Unlimited Tax Bonds, Series 2004A in the aggregate principal amount of
$16,000,000.
Brazoria-Fort Bend County Municipal Utility District No. 1 has been created but has not yet issued any
bonds.
Brazoria County Municipal Utility District No. 35 has been created over approximately 110 acres of
property that is within the TIRZ, but not part of the Shadow Creek Ranch development. Reimbursement of the
developer(s) within Brazoria County Municipal Utility District No. 35 for the water, wastewater and drainage
facilities necessary to serve the property within such district would be accomplished with the proceeds of the sale, if
any, of bonds by such district. Brazoria County Municipal Utility District No. 35 has not yet issued any bonds.
Development and Home Construction
As of Octobei 1, 2004, Shadow Creek Ranch contained 1,201 homes, including 302 homes under
construction. See "—Builders" below. According to the TIRZ's Engineer, underground water distribution,
wastewater collection, and storm drainage/detention facilities and street paving have been completed to serve 2,243
single-family residential lots located in 33 platted and fully developed subdivisions (approximately 627 total acres)
within the boundaries of the TIRZ as is delineated in the chart that appears below. In addition, as is also delineated
in such chart, 1,869 additional single-family residential lots located in 18 platted subdivisions (approximately 443
total acres) are currently under development.
The Developer owns approximately 173 acres of currently undeveloped land located within Shadow Creek
Ranch available for future development, approximately 101 acres of which it intends to develop as future multi-
family residential subdivisions, and approximately 72 acres of which it expects to be utilized for future commercial
development Pearland Investments Limited Partnership (also defined below) owns approximately 943 acres of
currently undeveloped land located within Shadow Creek Ranch. This land is subject to an Agreement Regarding
Right of First Negotiation that grants the Developer the first right to negotiate the purchase of such land.
Lasco Development Corp. owns approximately 2.6 acres upon which a CVS Pharmacy is planned to be
developed The following parties own tracts located within Shadow Creek Ranch and the TIRZ that are expected to
be utilized for future commercial development: (i) Hibernia Bank (approximately 2.7 acres); (ii) Kirby Crossing
(approximately 2.9 acres on which an approximately 10,000 square foot strip shopping center has been constructed);
(iii) Candyland Day Care (approximately 1.1 acres), (iv) Kids R Kids Daycare (approximately 1 8 acres); and (v)
Hospital Corporation of America (approximately 43 acres). However, the Authority cannot represent whether, or
when, the development of any of such currently undeveloped acres might occur.
The University of Texas Medical Center owns approximately 56 acres of currently undeveloped land
located within the TIRZ The City of Pearland owns approximately 100 acres of currently undeveloped land located
within the TIRZ that are designated for future park usage upon which the Developer has initiated a wetlands
mitigation project, a nature paik. The Alvin Independent School District owns approximately 40.2 acres located
within the TIRZ upon which it has completed the construction of the Mary Burks Marek Elementary School that
opened for the fall term of 2004. The balance of the AISD acreage has been designated for construction of a junior
high school that AISD has estimated will be constructed in 2006-2007 In addition, there are approximately 196
acres of land owned by other entities for which there are no current plans. The balance of the land located in the
TIRZ consists of approximately 829 acres which are contained within easements, rights -of -way, detention ponds,
lakes or are otherwise not available for future development. However, the Authority cannot represent whether, or
when, the development of any of such currently undeveloped acres might occur. See "—Developei," ` —Future
Development" and "RISK FACTORS."
27
As of October 1, 2004, the status of the home construction within Shadow Creek Ranch was as follows:
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Developer
General
In general, the activities of a developer of real estate include purchasing the land, designing the subdivision,
designing the utilities and streets to be constructed in the subdivision, designing any community facilities to be built,
defining a marketing program and building schedule, securing necessary governmental approvals and permits for
development, arranging for the construction of roads and the installation of utilities (including, in some cases, water,
sewer, and drainage facilities as well as gas, telephone, and electric service) and selling improved lots and
commercial reserves to builders, developers, or other third parties. The relative success or failure of a developer to
perform such activities in development of the property may have a profound effect on the assessed valuation of the
property within the TIRZ and, as a result, may affect the Contract Tax Increments received by the Authority for
repayment of its bonded indebtedness. See "—Future Development" below.
Description of the Developer
Most of the land within the TIRZ is being developed by the Developer, the general partner of which is
Shadow Creek Ranch Inc., a Nevada corporation. The stock of such general partner is owned equally by G. W.
Cook Development, Inc., a California corporation, and Carlo Ferreira Messrs. G. W. Cook and Carlo Ferreira are
also the limited partners of Shadow Creek Ranch.
As is described above under the caption "—Development and Home Construction," the Developer has
completed the development of approximately 627 acres of land (2,243 fully developed single-family residential lots)
within TIRZ which it acquired from Pearland Investments Limited Partnership, a Nevada limited partnership
("Pearland Investments"), the general partner of which is M M L B Corporation a Nevada corporation the stock of
which is owned by the Collins Family and the Canarelli Family Trust. As is also described under such caption, the
Developer has initiated the development of approximately 443 additional acres of land (1,869 future single-family
residential lots) which it also acquired from Pearland Investments within Shadow Creek Ranch. The limited
partners of Pearland Investments are the Collins Family Limited Liability Company No. 1 and the Canarelli Family
Trust. Much of the land within the TIRZ was originally acquired by Pearland Investments in a series of acquisitions
from individual landowners from July 1998 through July 2003. In connection with certain of such acquisitions,
Pearland Investments gave promissory notes to the sellers of such property, which promissory notes have been fully
discharged. The Developer has acquired a total of approximately 1,892.40 acres of such land from Pearland
Investments in a series of acquisitions that have been accomplished pursuant to an Agreement Regarding Right of
First Negotiation (the "First Negotiation Agreement"), dated October 19, 1998, between Pearland Investments and
the Developer. In the First Negotiation Agreement, Pearland Investments gave to the Developer the right of first
negotiation for a period that has been extended to December 31, 2006 to acquire up to 3,300 acres of land owned
by Pearland Investments. The right of first negotiation can be exercised as to all or any portion of such property for
the term of the First Negotiation Agreement. The purchase price of any property taken down pursuant to such right
of first negotiation must be paid either in cash or by a promissory note from the Developer to Pearland Investments,
which note is to be secured by a Deed of Trust on such property acquired. As of August 1, 2004, the Developer had
executed promissory notes to Pearland Investments the aggregate outstanding principal balance owing of which is
$145,528,803 in connection with the purchase of such approximately 1,892 40 acres of land.
The Developer has financed its development activities within Shadow Creek Ranch with proceeds of an
Unsecured Revolving Line of Credit, dated October 1, 1998 (the "Line of Credit"), between Oxnard Financial, LLC,
a Nevada limited liability company and the Developer. Through amendments to the Line of Credit, the Line of
Credit's original amount of $4 000 000 was increased to $20,000,000 on October 1 2000, and to $30,000 000 on
April 1, 2002. In addition the maturity of the Line of Credit has been extended to October 1, 2005. Interest on
amounts drawn under the Line of Credit is payable at a rate equal to a floating rate of Prime plus 2%. The Line of
Credit is not secured by land within the TIRZ or any other collateral, but is guaranteed by Gary Cook and Carlo
Ferreira Oxnard Financial, LLC is a limited liability company owned by members of the Collins family and the
Canarelli family. As of August 1, 2004 the outstanding balance on the Line of Credit was $13,566,000.
30
Builders
According to the Developer, the home building companies that are listed below (collectively, the
"Builders") are currently constructing homes on lots that have been developed by the Developer within Shadow
Creek Ranch. Such homes range in size from approximately 1,309 to 6,974 square feet of living area and in sales
price from approximately $129,900 to $571,990. The respective sections in which the Builders are currently
constructing homes and descriptions of the range of size (expressed as a range of square footage of living area) and
range of sales prices of such homes are reflected in the chart that appears below.
According to the Developer, the Builders are current in all material respects with the provisions of the
respective contracts which they have executed with the Developer covering the purchase and sale of lots in the
Shadow Creek Ranch.
According to the Developer, the Builders are currently constructing homes in the Shadow Creek Ranch as
follows:
SHADOW CREEK RANCH NEIGHBORHOOD SUMMARY
Neighborhood
Mallards Landing
Emerald Landing
Enclave Lake Estates
Osprey Pointe
The Island
Section
SF-1
SF-2
SF-3/SF-8A
Builder
River Oaks Homes
Ashton Woods Homes
Perry Homes
SF-4 Emerald Homes
Newmark Homes
SF-5 Westport Homes
Fedrick, Harris Estate Homes
The Estates SF-6
Bay Front Estates
Coventry Homes
Petry Homes
Wilshne Homes
SF-7A Legacy Homes
Island Manor SF-7B Emerald Homes
Perry Homes
Enclave Terrace SF-8B Legacy Homes
Bay View Terrace SF-9A Emerald Homes
Legacy Homes
Sunrise Creek SF-9B Gehan Homes
Hammonds Homes
Sunset Shores SF-10 Emerald Homes
Newmark Homes
The Strand SF-11 Coventry Homes
The Gables SF-12/SF-13 Emerald Homes
Wilshire Homes
31
Sq. Ft. Range
2,210-4,211
2,708-4,524
2,233-4,204
2,372-3,519
3,427-4.494
3,065-4,945
3,844-4,525
4,224-5,372
2,991-6,974
3,197-6,320
2,523-4,541
2,802-3,999
2,745-6,974
1,900-3,960
1,746-3,199
1,900-3,960
2,084-3,494
2,523-4,541
2,075-3,385
2,634-3,685
2,546-4,521
2,712-4,474
3,099-4,636
Price Range
$216,990-$303,990
$239,900-$295,900
$199,900-$316,900
$231,990-$288,990
$303,990-$358,990
$349,900-$529,700
$373,990-$430,990
$423,990-$571,990
$383,900-$550,900
$373,990-$534,990
$199,990-$254,990
$274,990-$321,990
$287,900-$462,900
$156,990-$260,990
$164,990-$248,990
$162,990-$265,990
$189,990-$238,990
$213,990-$271-990
$194,990-$247,990
$253,990-$305,990
$316,900-$429,990
$285,990-$344,990
$306,990-$351,990
Oakwood Terrace SF-14A/SF-14B Legacy Homes
Lakeside Terrace SF-15 DR Horton
Legacy Homes
Heatherwood SF-16A
Ashton Woods Homes
Newmark Homes
Pinecrest SF-16B Ashton Woods Homes
Newmark Homes
Heron Bay SF-17 Coventry Homes
Half Moon Terrace SF-18A/SF-18B Perry Homes
Plantation Homes
Rosewood Crossing
Haley Landing
Morningstde
Iris Shores
Reflection Pointe
Jasmine Pass
Kelsey Pointe
SF-19
SF-20A/SF-20B
SF-21
SF-22
SF-23
SF-24A
SF-29
Southview Terrace SF-30
Rosewood Crossing
Legacy Homes
Gehan Homes
Hammonds Homes
Legacy Homes
Perry Homes
DR Horton
Emerald Homes
Newmark Homes
Perry Homes
Plantation Homes
Newmark Homes
1,674-3,600
1,756-3,529
2,208-3,960
1,648-2,780
1,629-2,939
1,376-2,365
1,629-2,939
2,224-4,076
1,309-2,439
1,369-2,714
1,600-3,600
2,208-3,960
2,084-3,494
2,526-4,541
2,468-4,078
2,233-4,204
1,809-3,529
2,075-3,385
2,619-3,800
1,309-2,439
1,369-2,714
1,629-2,939
$159,990-$223,900
$149,990-$202,990
$178,000-$240,000
$ 158,900-$ 199,900
$161,990-$204,990
$129,900-$149,900
$161,990-$204,990
$246,990-$3 12,990
$139,900-$175,900
$144,990-$190,990
$150,990-$229,990
$194,990-$262,990
$192,990-$241,990
$2 14,990-$273,990
$230,990-$300,990
$199,900-$315,900
$172,990-$223,990
$2 10,999-$270,990
$238,990-$340,990
$139,900-$175,900
$144,990-$190,990
$154,990-$206,990
Although the Developer has reported the descriptions of the homes currently under construction by the Builders to be accurate as
of the date of this Official Statement the Builders may change the types, sizes and sales prices of the homes which they choose to
construct within Shadow Creek Ranch entirely within their discretion, or may suspend home construction activity entirely.
Future Development
As is described above under the caption " Development And Home Construction," approximately 627
acres of land located within the Shadow Creek Ranch have been developed into 2,243 single-family residential lots,
the development of which is complete, and approximately 443 additional acres are currently being developed by the
Developer into 1,869 future single-family residential lots The Developer owns approximately 173 acres of
currently undeveloped land located within the TIRZ available for future development, approximately 101 acres of
which it intends to develop as future multi -family residential subdivisions and approximately 72 acres of which it
expects to be utilized for future commercial development. Pearland Investments owns approximately 943 acres of
currently undeveloped land located within the TIRZ that is available for future development subject to an
Agreement Regarding Right of First Negotiation that grants the Developer the first right to negotiate the purchase of
such land Lasco Development Corp. owns approximately 2 6 acres upon which a CVS Pharmacy is planned to be
developed. The following parties own tracts located within Shadow Creek Ranch that are expected to be utilized for
future commercial development: (i) Hibernia Bank (approximately 2.7 acres); (ii) Kirby Crossing (approximately
2.9 acres on which an approximately 10 000 square foot strip shopping center has been constructed); (iii) Candyland
Day Care (approximately 1.1 acres); (iv) Kids R Kids Daycare (approximately 1.8 acres); and (v) Hospital
32
Corporation of America (approximately 43 acres). The University of Texas Medical Center owns approximately 56
acres of currently undeveloped land located within the TIRZ The City of Pearland owns approximately 100 acres of
currently undeveloped land located within the TIRZ that are designated for future park usage upon which the
Developer has initiated a wetlands mitigation project. The Alvin Independent School District owns approximately
40.2 acres located within the TIRZ upon which it has completed the construction of the Mary Burks Maiek
Elementary School that opened for the fall term of 2004. The balance of the AISD acreage has been designated for
construction of a junior high school that AISD has estimated will be constructed in 2006-2007. In addition, there are
approximately 196 acres of land owned by other entities for which there are no current plans. The balance of the
land located in the TIRZ consists of approximately 829 acres which are contained within easements, rights -of -way,
detention ponds lakes or are otherwise not available for future development. See also "SHADOW CREEK
RANCH DEVELOPMENT —Developer" and "RISK FACTORS — General Factors Affecting Taxable Values and
Tax Increments. ' The Authority can make no representation as to when, or whether, the undeveloped portions of the
Shadow Creek Ranch might be developed. If any undeveloped portion of the Shadow Creek Ranch is eventually
developed, certain additional infrastructure improvements may be financed by future issues of the Authority s
bonds. See "RISK FACTORS - Future Debt."
[Remainder of Page Intentionally Left Blank]
33
SELECTED FINANCIAL INFORMATION
Certified Taxable Value City
1998 (Base Year) $ 7,172,980
January 1, 2004 (total assessed value) $ 252,235,760
January 1, 2004 (net of exemptions)(a) $ 225,632,450
Certified Captured Appraised Value(a)
January I, 2004 $ 218,459,470
AISD
4,143,160
245,896,870
220,911,280
Brazoria Fort Bend
$ 4,143,160 $ 3,029,820
$ 245,896,870 $ 6,338,890
$ 211,258,424 $ 903,570
$ 216,768,120 $ 207,115,264 $
Certified Captured Appraised Value as
Percentage of January 1, 2004 Certified Taxable Value 96.8% 98.1%
Estimated Taxable Value
1998 (Base Year)
October 1, 2004 (total assessed value)
October 1, 2004 (net of estimated exemptions)(b)
7,172,980
367,649,000
350,599,590
98.0%
$ 4,143,160 $ 4,143,160
$ 361,321,280 $ 361,321,280
$ 335,487,120 $ 319,811,264
0
0%
$ 3,029,820
$ 6,749,870
$ 6,749,870
Estimated Captured Appraised Value(b)
October 1, 2004 $ 343,426,610 $ 331,343,960 $ 315,668,104 $ 3,720,050
Estimated Captured Appraised Value as
Percentage of October 1, 2004 Estimated Taxable Value 98.0% 98.8% 98.7% 55.1%
2004 Tax Rate Contribution:
Authority Tax Rate Contribution $ 0.4446432(c) $ 0.419(d) $ 0.1359(e) $ 0.624100(f)
Estimated Collection Rates 95.0% 95.0% 95.0% 95.0%
Estimated Contract Tax Increment
January 1, 2004(g)
October 1, 2004(h)
Average Annual Debt Service (2006-2028)*
Maximum Annual Debt Service (2006)*
$ 922,797 $ 862,846 $ 267,396 $ 0
$ 1,450,671 $ 1,318,915 $ 407,543 $ 22,056
$ 1,004,863
$ 1,494,100
Coverage of City, Brazoria and Fort Bend Counties Contract Tax Increment Revenues ($1,880,270)
(10/1/04 estimated values) over Maximum Annual Debt Service (excludes AISD)
Coverage of City, Brazoria and Fort Bend Counties Contract Tax Increment Revenues ($1,190,193)
(1/1/04 certified values) over Maximum Annual Debt Service (excludes AISD)
Coverage of City, AISD, Brazoria and Fort Bend Counties Contract Tax Increment Revenues
($3,084,185) (10/1/04 estimated values) over Maximum Annual Debt Service(i)(j)
Coverage of City, AISD, Brazoria and Fort Bend Counties Contract Tax Increment Revenues
($1,938,039) (1/1/04 certified values) over Maximum Annual Debt Service(i)(j)
TOTAL DIRECT DEBT $ 12 940,000
Funds Available for Debt Service as of 10/01/04
Pledged Revenue Fund(k)
Debt Service Reserve Fund (1)
Capitalized Interest (1)
Total Funds Available
*Preliminary, subject to change.
$ 200,166
$ 1,220,489
$ 552,107
$ 1,972,762
34
1.25%
.80%
2.08%
1.31%
(a) The January 1, 2004 certified taxable values provided by the Brazoria County and Fort Bend County Appraisal Districts are net
of exemptions and personal property for each of the respective taxing entities. Certified values are updated monthly. The values
shown are those used by the City, AISD, Biazoria County and Fort Bend County to calculate Captured Appraised Value for the
2004 tax year.
(b) Estimated taxable values for October 1, 2004 were provided by the Brazoria County and Fort Bend County Appraisal Districts
for informational purposes only, and are estimates of the value of all taxable property located in the TIRZ as of October 1, 2004
net of exemptions and personal property. These estimates are based on the estimate of values resulting from the construction of
taxable improvements added on the property in the TIRZ from January 1, 2004 through September 30, 2004. Estimated
exemptions for the October 1, 2004 estimated values were not available from the Appraisal Districts. The estimated net taxable
values shown for each of the taxing entities (October 1, 2004 estimated taxable values minus estimated exemptions) were
calculated using the October 1, 2004 estimated values provided by the Appraisal Districts and using an estimate for the
applicable exemptions for each taxing entity. The estimated exemptions were provided by Assessments of the Southwest, Inc.
based on application of the existing exemptions available from each taxing entity against each completed residential unit added
within the respective taxing entity from January 1, 2004 through September 30, 2004. The ultimate assessed valuation of any
improvements added from January 1, 2004 through September 30, 2004, which will be placed on the 2005 certified tax roll and
the actual amount of exemptions on the final 2005 certified tax roll may vary significantly from the estimate once the respective
Appraisal Districts certify the values in 2005. See "SECURITY AND SOURCE OF PAYMENT -Calculation and Collection of
Tax Increments" and "RISK FACTORS -Uncertainty of Calculation and Collection of Tax Increments.
(c) The City's Tax Increment is subject to payment of an Administrative Fee by the TIRZ to the City and that portion of the City's
Tax Increment representing the Administrative Fee is not paid to the Authority and is therefore not part of the Contract Tax
Increments or the Pledged Revenues. $0.4446432 represents the City's current tax rate of $0.694755 per $100 of valuation less
36% of the City Tax Increment ($0.2501118) payable as the Administrative Fee. See "RISK FACTORS —Limitation on City
Tax Increments."
(d) AISD's Tax Increment is subject to a payment by the TIRZ to AISD for educational facilities project costs as required by the
AISD Agreement. The AISD Agreement provides that 75% of the AISD Tax Increment will be paid by the TIRZ to AISD for
such educational facilities pioject costs. That portion of the AISD Tax Increment representing such educational facilities pioject
costs is not paid to the Authority and is therefore not part of the Contract Tax Increments or the Pledged Revenues. $0.419
represents that portion of AISD tax rate (and resulting AISD Tax Increment) payable to the Authority as part of the Contract Tax
Increments and Pledged Revenues. In addition, the AISD Agreement requires that the portion of the AISD Tax Increment to be
used by the TIRZ be held in a special AISD Suspense Account within the City's Tax Increment Fund foi a period of one calendar
year and during such time, no funds held in the AISD Suspense Account may be disbursed or encumbered by the City or the
TIRZ other than to reimburse AISD See 'RISK FACTORS —Limitation on AISD Tax Increments."
(e) See ` RISK FACTORS -Limitations on Tax Increments of Brazoria and Fort Bend Counties."
(f) The Fort Bend County Agreement provides for a reduction in the tax rate and associated collections remitted by Fort Bend
County to the City from $0.6241 per $100 valuation for tax years 1999-2008 to $0.468075 for the tax years 2009-2018 and
$0.312050 for tax years 2019-2028. See "RISK FACTORS —Limitations on Tax Increments of Brazoria and Fort Bend
Counties."
(g) Payment of Contract Tax Increments based on January 1, 2004 certified taxable values are due October 1, 2004 or when billed,
whichever comes later, and become delinquent after January 31, 2005. See `TAXING PROCEDURES OF THE CITY, AISD,
BRAZORIA COUNTY AND FORT BEND COUNTY —Levy and Collection of Taxes."
(h) No Contract Tax Increments will be collected on October 1, 2004 estimated taxable values. The October 1, 2004 estimated
taxable values are based on the estimate of values resulting from the construction of taxable improvements added on property in
the TIRZ from January 1, 2004 through September 30, 2004. 2005 Contract Tax Increments will be levied and collected based
upon the final January 1, 2005 certified taxable values. Such 2005 Contract Tax Increments will be due October 1, 2005, or
when billed, whichever comes later, and will become delinquent aftei January 31, 2006. See "TAXING PROCEDURES OF
THE CITY AISD BRAZORIA COUNTY AND FORT BEND COUNTY —Levy and Collection of Taxes."
(i) Pursuant to the AISD Agreement, the 25% of the AISD Tax Increment that may be utilized by the TIRZ must be held in a special
AISD Suspense Account within the City's Tax Increment Fund for a peiiod of one calendar year and during such time, no funds
held in the AISD Suspense Account may be disbursed or encumbered by the City or the TIRZ other than to reimburse AISD
The Contract Tax Increment Revenues and resulting coverage shown in this column include the 25% AISD Tax Increment which
would be subject to the one year delay. See "RISK FACTORS —Limitations on AISD Tax Increments. '
(j) Pursuant to the Tri-Party Agreement, the City retains reasonable current and anticipated administrative and operating costs of the
TIRZ, as determined by the TIRZ Board. The 2004 amount budgeted for such purposes was $175,000 although actual
expenditures for such purposes have been approximately $115,000 per annum to date. The City has indicated that it intends to
pay such administrative and operating costs from the AISD Suspense Account once such monies in such account become
available foi use by the City. Accoidingly, Contract Tax Increment Revenues and resulting coverage percentage shown in this
column are net of this $115,000 payable annually by the City for such administrative and operating costs.
(k) Pursuant to the Tri-Party Agreement on the date of delivery of the Bonds, the City will pay to the Authority for deposit to the
Pledged Revenue Fund, all monies then available in the City's Tax Increment Fund, subject to retention by the City of certain
funds as provided in Article V of the Tri-Party Agreement.
(1) Will be funded from Bond proceeds. See "PLAN OF FINANCING — Sources and Uses of Funds."
35
Tax Year
City
2002
2003
AISD
2002
2003
Brazoria
2002
2003
TAX INCREMENT COLLECTIONS®
Current Tax
Increment
$ 22,888.30
383,974.02
52,918.71
883,577.12
3,773.42
71,626.35
Increment
Tax Rate
$ 0.686
0.696
1.588116
1.6261
0.1359
0.1359
Inci ement
Collection
$ 22,051.85(b)
375,696.59(b)
51,126.03 (0)
864,839.30)
3,645.60
69,958.03
Collection
Rate
96.35%
97.84
96.61
97.88
96.61
97.67
Based on information provided by the Brazoria County tax office. Historical tax increment collections are not shown
for Fort Bend County as there was no captured appraised value in the Fort Bend County portion of the TIRZ for such
periods.
36% of the City's Tax Increment is payable by the TIRZ to the City as an Administrative Fee and such portion is not
paid to the Authority and is therefore not part of the Contract Tax Increments or the Pledged Revenues See "RISK
FACTORS —Limitation on City Tax Increments."
75% of the AISD Tax Increment is payable by the TIRZ to AISD pursuant to the AISD Agreement and such portion is
not paid to the Authority and is therefore not part of the Contract Tax Increments or the Pledged Revenues See
"RISK FACTORS Limitation on AISD Tax Increments."
[Remainder of Page Intentionally Left Blank]
36
TAXING PROCEDURES OF THE CITY, AISD, BRAZORIA COUNTY AND FORT BEND COUNTY
Authority to Levy Taxes
Under Texas law the City, AISD, Brazoria County and Fort Bend County are each authorized to levy an
annual ad valorem tax on all taxable property within the City, AISD Brazoria County and Fort Bend County's
respective boundaries. See "RISK FACTORS General "
Property Tax Code and County -Wide Appraisal District
The Texas Property Tax Code specifies the taxing procedures of all political subdivisions of the State of
Texas, including the City, AISD, Brazoria County and Fort Bend County. Provisions of the Property Tax Code are
complex and are not fully summarized here.
The Property Tax Code requires, among other matters, county -wide appraisal and equalization of taxable
property values and establishes in each county of the State of Texas an appraisal district with the responsibility for
recording and appraising property for all taxing units within a county and an appraisal review board with
responsibility foi reviewing and equalizing the values established by the appraisal district. The Brazoria County
Appraisal District has the responsibility for appiaising property for all taxing units within Brazoria County,
including the City, AISD and Brazoria County. The Fort Bend Central Appraisal District has the responsibility for
appraising property in Fort Bend County. Such appraisal values are subject to review and change by the appropriate
county Appraisal Review Board (the "Appraisal Review Board").
Property Subject to Taxation by the City, AISD, Brazoria County and Fort Bend County
Except for certain exemptions provided by Texas law, all real property, tangible personal property held or
used for the production of income, mobile homes and certain categories of intangible personal property with a tax
situs in the TIRZ are subject to taxation by the City, AISD, Brazoria County and Fort Bend County. However, the
tax revenue generated by the City, AISD, Brazoria County and Fort Bend County on any personal property
is not included in the Tax Increments. Principal categories of exempt property include, but are not limited to:
property owned by the State of Texas or its political subdivisions if the property is used for public purposes;
property exempt from ad valorem taxation by federal law; certain household goods, family supplies and personal
effects, certain goods, wares and merchandise in transit; farm products owned by the producer certain property of
charitable organizations, community housing development organizations, youth development associations, religious
organizations, and qualified schools; designated historical sites; and most individually owned automobiles. In
addition, the City AISD, Brazoria County and Fort Bend County may by their own action exempt residential
homesteads of persons 65 years or older and of certain disabled persons to the extent deemed advisable by the
respective boards. The City, AISD, Brazoria County and Fort Bend County may be required to offer such an
exemption if a majority of voters approve it at an election. The City, AISD, Brazoria County and Fort Bend County
would be required to call such an election upon petition by 20% of the number of qualified voters who voted in the
preceding election. The City, AISD Brazoria County and Fort Bend County are authorized by statute to disregard
exemptions for the disabled and elderly if granting the exemption would impair the City, AISD Brazoria County
and Fort Bend County's obligation to pay tax supported debt incurred prior to adoption of the exemption by the
City, AISD, Brazoria County and Fort Bend County. Historically, AISD, Brazoria County and Fort Bend County
have granted disability exemptions. Furthermore, the City, AISD, Brazoria County and Fort Bend County must
grant exemptions to disabled veterans or certain surviving dependents of disabled veterans if requested, of between
$5,000 and $12,000 depending upon the disability rating of the veteran claiming the exemption.
Residential Homestead Exemptions: The Property Tax Code authorizes the governing body of each
political subdivision in the State of Texas to exempt up to 20% of the appraised value of residential homesteads
from ad valorem taxation. Qualifying surviving spouses of persons aged 65 years or older are entitled to receive a
residential homestead exemption equal to the exemption received by the deceased spouse Where ad valorem taxes
have previously been pledged for the payment of debt, the governing body of a political subdivision may continue to
levy and collect taxes against the exempt value of the homesteads until the debt is discharged, if the cessation of the
levy would impair the obligations of the contract by which the debt was created. The adoption of a homestead
exemption by the City, AISD, Brazoria County and Fort Bend County may be considered each year, but must be
37
adopted by May 1. Historically, the City, AISD, Brazoria County and Fort Bend County granted homestead
exemptions.
Valuation of Property for Taxation
Generally, property within the boundaries of the City, AISD, Brazoria County and Fort Bend County must
be appraised by the Appraisal District at market value as of January 1 of each year. Once an appraisal roll is
prepared and finally approved by the Appraisal Review Board, it is used by the City, AISD, Brazoria County and
Fort Bend County in establishing its tax rolls and tax rate. Assessments under the Property Tax Code are to be based
on 100% of market value as such is defined in the Property Tax Code. In determining market value, either the
replacement cost or the income or the market data method of valuation may be used, whichever is appropriate.
Nevertheless, certain land may be appraised at less than market value under the Property Tax Code.
The Property Tax Code permits land designated for agricultural use, open spaces or timberland to be
appraised at its value based on the land's capacity to produce agricultural or timber products rather than at its market
value. The Property Tax Code permits under certain circumstances that residential real property inventory held by a
person in the trade or business be valued at the price all such property would bring if sold as a unit to a purchaser
who would continue the business. Provisions of the Property Tax Code are complex and are not fully summarized
here Landowners wishing to avail themselves of the agricultural use, open space or timberland designation or
residential real property inventory designation must apply for the designation and the appraiser is required by the
Property Tax Code to act on each claimant's right to the designation individually. A claimant may waive the special
valuation as to taxation by some political subdivisions while claiming it as to another. If a claimant receives the
agricultural use designation and later loses it by changing the use of the property or selling it to an unqualified
owner the District can collect taxes based on the new use including taxes for the previous three (3) years for
agricultural use and taxes for the previous five (5) years for open space land and timberland.
The Property Tax Code requires the Appraisal District to implement a plan for periodic reappraisal of
property to update appraisal values. The plan must provide for appraisal of all real property in the Appraisal District
at least once every three years. It is not known what frequency of reappraisal will be utilized by the Appraisal
District or whether reappraisals will be conducted on a zone or county -wide basis. The City, AISD, Brazoria County
and Fort Bend County however, at their own expense have the right to obtain from the Appraisal District a current
estimate of appraised values within its respective boundaries or an estimate of any new property or improvements
within its boundaries. While such current estimate of appraised values may serve to indicate the rate and extent of
growth of taxable values within a district, it cannot be used for establishing a tax rate within a district until such time
as the Appraisal District chooses formally to include such values on its appraisal roll.
Levy and Collection of Taxes
The City, AISD, Brazoria County and Fort Bend County are each responsible for the levy and collection of
its taxes unless it elects to transfer such functions to another governmental entity. The City AISD, Brazoria County
and Fort Bend County must adopt a tax rate of the current tax year before the later of September 30 or the sixtieth
day after the date the certified appraisal roll is received by the City, AISD, Brazoria County and Fort Bend County.
Taxes ale due October 1, or when billed, whichever comes later, and become delinquent after January 31 of the
following year.
The City, AISD, Brazoria County and Fort Bend County's Rights in the Event of Tax Delinquencies
Taxes levied by the City, AISD, Brazoria County and Fort Bend County are a personal obligation of the
owner of the property as of January 1 of the year for which the tax is imposed. On January 1 of each year, a tax lien
attaches to property to secure the payment of all state and local taxes, penalties, and interest ultimately imposed for
the year on the property. The lien exists in favor of the State of Texas and each local taxing unit, including the City,
AISD, Brazoria County and Fort Bend County, having power to tax the property. The City, AISD, Brazoria County
and Fort Bend County's tax lien is on a parity with tax liens of such other taxing units. A tax hen on real property
takes priority over the claim of most creditors and other holders of liens on the property encumbered by the tax lien,
whether or not the debt or lien existed before the attachment of the tax liens however, whether a lien of the United
States is on a parity with or takes prior ity over a tax lien of another taxing entity is determined by applicable federal
38
law. Personal property under certain circumstances is subject to seizure and sale for the payment of delinquent taxes,
penalty, and interest.
At any time after taxes on property become delinquent, taxing entities such as the City, AISD, Brazoria
County and Fort Bend County may file suit to foreclose the lien securing payment of the tax, to enforce personal
liability for the tax, or both. In filing a suit to foreclose a tax lien on real property, a taxing entity must join other
taxing units that have claims for delinquent taxes against all or part of the same property Collection of delinquent
taxes may be adversely affected by the amount of taxes owed to other taxing units, by the effects of market
conditions on the foreclosure sale price, and by taxpayer redemption rights. A taxpayer may redeem commercial
property within six months and all other types of property within two years after the purchaser's deed issued at the
foreclosure sale is filed in the county records or by bankruptcy proceedings which restrict the collection of taxpayer
debts See "RISK FACTORS —Tax Collection Limitations and Foreclosure Remedies."
LEGAL MATTERS
Legal Proceedings
Delivery of the Bonds will be accompanied by the unqualified approving legal opinion of the Attorney
General of Texas to the effect that the Bonds are valid and legally binding obligations of the Authority under the
Constitution and laws of the State of Texas payable from the Pledged Revenues, and based upon their examination
of a transcript of certified proceedings relating to the issuance and sale of the Bonds, the legal opinion of Bond
Counsel to a like effect and to the effect that (i) interest on the Bonds is excludable from gross income of the
holders for federal tax purposes under existing law, (ii) certain original issue discount on the Original Issue Discount
Bonds (defined below) is excludable from gross income for federal income tax purposes under existing law as
described more fully in "Tax Accounting Treatment of Original Issue Discount Bonds' and (iii) the Bonds are not
' private activity bonds" under the Internal Revenue Code of 1986, as amended (the "Code') and interest on the
Bonds 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 adjustments for corporations.
Bond Counsel has reviewed the information appearing in this Official Statement under "PLAN OF
FINANCING —Creation of the Authority and TIRZ " `SOURCE AND SECURITY OF PAYMENT' (excluding
`Calculation and Collection of Tax Increments"), "THE BONDS " 'THE INDENTURE," `TAXING
PROCEDURES OF THE CITY, AISD, BRAZORIA COUNTY AND FORT BEND COUNTY,' "CONTINUING
DISCLOSURE OF INFORMATION,' and " LEGAL MATTERS,' solely to determine if such information, insofar
as it relates to matters of law, is true and correct, and whether such information fairly summarizes the provisions of
the documents referred to therein. Bond Counsel has not, however, independently verified any of the factual
information contained in this Official Statement nor has it conducted an investigation of the affairs of the Authority
for the purpose of passing upon the accuracy or completeness of this Official Statement. No person is entitled to rely
upon Bond Counsel's limited participation as an assumption of responsibility for or an expression of opinion of any
kind with regard to the accuracy or completeness of any information contained herein.
Certain legal matters incident to the authorization issuance, placement, and delivery of the Bonds by the
Authority are subject to the approving opinions of the Attorney General of the State of Texas and Allen Boone
Humphries LLP, Bond Counsel. The form of the opinion of Bond Counsel with respect to the Bonds is attached
hereto as Appendix C and will be available at the time of delivery of the Bonds. Other than the limited review of
certain information in this Official Statement as described in the preceding paragraph and Bond Counsel's approving
legal opinion set forth herein, Bond Counsel has not reviewed nor undertakes any responsibility for any of the
information contained in this Official Statement. Certain legal matters will be passed upon for the Authority by
Allen Boone Humphries LLP, Houston, Texas, Bond Counsel, and Andrews Kurth LLP, Houston, Texas, Disclosure
Counsel. The fees of such counsel are contingent upon the issuance and delivery of the Bonds. The legal fees paid
to Bond Counsel for services rendered in connection with the issuance of the Bonds are based on a percentage of the
Bonds actually issued, sold and delivered.
The various legal opinions to be deliveied concurrently with the delivery of the Certificates express the
professional judgment of the attorneys rendering the opinions as to the legal issues explicitly addressed therein. In
rendering a legal opinion, the attorney does not become an insurer or guarantor of that expression of professional
39
judgment, of the transaction opined upon, or of the future performance of the parties to the transaction. Nor does the
rendering of an opinion guarantee the outcome of any legal dispute that may arise out of the transaction.
Tax Exemption
In the opinion of Bond Counsel (i) interest on the Bonds is excludable from gross income for federal
income tax purposes under existing law, (it) certain "original issue discount' on the Original Issue Discount Bonds
(defined below) is excludable from gross income for federal income tax purposes under existing law as described
more fully in ' Tax Accounting Treatment of Original Issue Discount Bonds" below and (iii) the Bonds are not
"private activity bonds" under the Code, and interest on the Bonds 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
adjustments for corporations.
The Code imposes a number of requirements that must be satisfied for interest on state or local obligations,
such as the Bonds, to be excludable from gross income for federal income tax purposes. These requirements include
limitations on the use of bond proceeds and the source of i epayment of bonds, limitations on the investment of bond
proceeds prior to expenditure a requitement that excess arbitrage earned on the investment of bond proceeds be paid
periodically to the United States and a requirement that the Authority file an information report with the Internal
Revenue Service. The Authority has covenanted in the Bond Resolution that it will comply with these requirements
Bond Counsel s opinion will assume continuing compliance with the covenants of the Bond Resolution and
the Indenture pertaining to those sections of the Code which affect the exclusion from gross income of interest on
the Bonds for federal income tax purposes and in addition, will rely on representations by the City, the Authority,
the Authority's Financial Advisor and the Underwriter with respect to matters solely within the knowledge of the
City, the Authority, the Authoiity s Financial Advisor and the Underwrites, respectively, which Bond Counsel has
not independently verified. If the Authority should fail to comply with the covenants in the Bond Resolution or the
Indenture or if the foregoing representations should be determined to be inaccurate or Incomplete, interest on the
Bonds could become taxable from the date of delivery of the Bonds, 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 an S corporation,
regulated investment company, REIT, REMIC or FASIT) includes 75% of the amount by which a corporation's
"adjusted current earnings' exceeds its other "alternative minimum taxable income." Because interest on tax-exempt
obligations, such as the Bonds, is included in a corporation's "adjusted current earnings," ownership of the Bonds
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 Bonds, received or accrued during the year.
Except as stated above and as stated below in "Tax Accounting Treatment of Original Issue Discount
Bonds," Bond Counsel will express no opinion as to any federal, state or local tax consequences resulting from
receipt or accrual of interest on, or acquisition, or ownership or disposition of, the Bonds.
Prospective purchasers of the Bonds 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 and, taxpayers owning an interest in a FASIT that holds tax-exempt
obligations, and individuals otherwise qualifying for the earned income credit. In addition certain foreign
corporations doing business in the United States may be subject to the "branch profits tax" on their
effectively -connected earnings and profits, including tax-exempt interest such as interest on the Bonds. These
categories of prospective purchasers should consult their own tax advisors as to the applicability of these
consequences.
40
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 thereof. 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 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 Bonds. If an audit is commenced, in accordance with its current published procedures the Service is
likely to treat the Issuer as the taxpayer and the Owners may not have a right to participate in such audit. Public
awareness of any future audit of the Bonds could adversely affect the value and liquidity of the Bonds during the
pendency of the audit regardless of the ultimate outcome of the audit.
Tax Accounting Treatment of Discount Bonds
The initial offering price to be paid for certain Bonds (the "Discount Bonds") is Less than the principal
amount thereof. 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 principal amount payable at the maturity of each Discount Bond,
and (ii) the initial offering price to the public of such Discount Bond constitutes original issue discount with respect
to such Discount Bond in the hands of an owner who has purchased such Discount Bond in the initial public offering
of the Bonds; 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 Discount Bond equal to that portion of the amount of such original issue
discount allocable to the period that such Discount Bond continues to be owned by such owner.
In the event of the redemption, sale or other taxable disposition of such Discount Bond prior to stated
maturity, however, the amount realized by such owner in excess of the basis of such Discount Bond in the hands of
such owner (adjusted upward by the portion of the original issue discount allocable to the period for which such
Discount Bond was held by such initial owner) is includable in gross income. (Because original issue discount is
treated as interest for federal income tax purposes, the discussion regarding interest on the Bonds under the caption
'Tax Exemption" generally applies, except as otherwise provided below, to original issue discount on an Discount
Bond held by an owner who purchased such Bond at the initial offering price in the initial public offering of the
Bonds 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 Underwriter, that (a) the Underwriter has purchased the Bonds for contemporaneous sale to the public and (b) all
of the Discount Bonds 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 stated on the cover page of this Official Statement. Neither the Authority
nor Bond Counsel warrants that the Discount Bonds will be offered and sold in accordance with such assumptions.
Certain of the representations of the Underwriter, upon which Bond Counsel will rely in rendering the foregoing
opinion, will be based upon records or facts the Underwriter had no reason to believe were not correct.
Under existing law, the original issue discount on each Discount Bond is accrued daily to the stated
maturity thereof (in amounts calculated as described below for each six-month period ending on the date before the
semiannual anniversary dates of the date of the Bonds and ratably within each such six-month period) and the
accrued amount is added to an initial owner's basis for such Discount Bond for purposes of determining the amount
of gain of 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
41
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 Bond.
The federal income tax consequences of the purchase, ownership, and redemption, sale or other disposition
of Discount Bonds which are not purchased in the initial offering at the initial offering price may be determined
according to rules which differ from those described above. All owners of Discount Bonds should consult their own
tax advisors with respect to the determination for federal, state, and local income tax purposes of interest accrued
upon redemption, sale or other disposition of such Discount Bonds and with respect to the federal, state, local and
foreign tax consequences of the purchase, ownership, redemption, sale or other disposition of such Discount Bonds.
Tax Treatment of Original Issue Premium Bonds
According to representations of the Underwriters, certain of the Bonds are being offered at initial offering
prices which exceed the stated redemption prices payable at the maturity of such Bonds. If any of the Bonds of such
maturities are sold to members of the public (which for this purpose excludes bond houses, brokers and similar
person or organizations acting in the capacity of wholesalers or underwriters) at such initial offering prices each of
the Bonds of such maturities ("Premium Bonds ) will be considered for federal income tax purposes to have "bond
premium" equal to the amount of such excess. The basis for federal income tax purposes of a Premium Bond in the
hands of an initial purchaser who purchases such Bond in the initial offering must be reduced each year and upon
the sale or other taxable disposition of the Bond by the amount of amortizable bond premium. This reduction in
basis will increase the amount of any gain (or decrease the amount of any loss) recognized for federal income tax
purposes upon the sale or other taxable disposition of a Premium Bond by the initial purchaser Generally, no
corresponding deduction is allowed for federal income tax purposes, for the reduction in basis resulting from
amortizable bond premium. The amount of bond premium on a Premium Bond which is amortizable each year (or
shorter period in the event of a sale or disposition of a Premium Bond) is determined under special tax accounting
rules which use a constant yield throughout the term of the Premium Bond based on the initial purchaser's original
basis in such Bond .
The federal income tax consequences of the purchase, ownership, redemption, sale or other disposition by
an owner of Bonds that are not purchased in the initial offering or which are purchases at an amount representing a
price other than the initial offering prices for the Bonds of the same maturity may be determined according to rules
which differ from those described above. Moreover, all prospective purchasers of Bonds should consult their tax
advisors with respect to the federal, state local and foreign tax consequences of the purchase, ownership,
redemption, sale or other disposition of Premium Bonds.
No Material Adverse Change
The obligations of the Underwriters to take and pay for the Bonds, and of the Authority to deliver the
Bonds, are subject to the condition that, up to the time of delivery of and receipt of payment for the Bonds, there
shall have been no material adverse change in the condition (financial or otherwise) of the Authority from that set
forth or contemplated in the Preliminary Official Statement.
No -Litigation Certificate
The Authority will furnish the Underwriters a certificate, executed by both the President and Secretary of
the Board, and dated as of the date of delivery of the Bonds, to the effect that no litigation of any nature is pending
or to its knowledge threatened either in state or federal courts, contesting or attacking the Bonds; restraining or
enjoining the collection of the contract Tax Increments to pay the interest or the principal of the Bonds; in any
manner questioning the authority or pioceedings foi the issuance execution or delivery of the Bonds; or affecting
the validity of the Bonds or the title of the present officers of the Authority.
CONTINUING DISCLOSURE OF INFORMATION
In the Bond Resolution, the Authority has made the following agreement for the benefit of holders of the
Bonds, including the beneficial holders thereof. The Authority is required to observe the agreement for so long as it
42
remains obligated to advance funds to pay the Bonds. Under the agreement, the Authority 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
purchase the information fiom the vendors.
Annual Reports
The Authority will provide certain updated financial information and operating data to certain information
vendors annually The information to be updated includes the financial information and operating data with respect
to the Authority, the City, AISD, Brazoria County and Fort Bend County in this Official Statement in the tables and
schedules under the headings "SELECTED FINANCIAL INFORMATION," "TAX INCREMENT
COLLECTIONS" and "PLAN OF FINANCING -Pro -Forma Debt Service Requirements." The Authority will
update and provide this information, along with audited financial statements beginning in 2005 within six months
after the end of each fiscal year. The Authority will provide the updated information to each nationally recognized
municipal securities information repository ("NRMSIR') and to any state information depository ( `SID") that is
designated by the State of Texas and approved by the staff of the United States Securities and Exchange
Commission (the "SEC").
The Authority may provide updated information in full text or may incorporate by reference certain other
publicly available documents, as permitted by the Rule. The updated information will include audited financial
statements, if the Authority commissions an audit and it is completed by the required time If audited financial
statements are not available by the required time, the Authority will provide unaudited financial statements for the
applicable fiscal year to each NRMSIR and any SID within such six month period and audited financial statements
when the audit report of such statement becomes available. Any such financial statements will be prepared in
accordance with the generally accepted accounting principles or such other accounting principles as the Authority
may be required to employ from time to time pursuant to state law or regulation.
The Authority's fiscal year end is currently September 30. The Authority was authorized by the City on
June 28, 2004 and held its first organizational meeting in July of 2004 Consequently, the initial audited financial
statements for the Authority will be prepared for the period ending September 30 2005. Accordingly it must
provide updated information by March 31 in each year (commencing March 31 2005), unless the Authority changes
its fiscal year. If the Authority changes its fiscal year, it will notify each NRMSIR and any SID of the change.
Material Event Notices
The Authority will also provide timely notices of certain events to any SID and to either each NRMSIR or
the Municipal Securities Rulemaking Board (`MSRB"). The Authority will provide notice of any of the following
events with respect to the Bonds, if such event is material to a decision to purchase or sell Bonds: (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; (7) modifications to rights or holders of the Bonds; (8) Bond calls; (9)
defeasances; (10) release, substitution, or sale of property securing repayment of the Bonds; and (11) rating changes
of the Bonds. (Neither the Bonds nor the Bond Resolution make any provision for debt service reserves or liquidity
enhancement.) In addition, the Authority will provide timely notice of any failure by the Authority to provide
information, data, or financial statements in accordance with its agreement described above under `Annual Reports "
The Authority will provide each notice described in this paragraph to any SID and to either each NRMSIR or the
MSRB.
Availability of Information from NRMSIRs and SID
The Authority has agreed to provide the foregoing updated information only to the vendors described
above. The information will be available to holders of Bonds 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.
43
The Municipal Advisory Council of Texas has been designated by the State of Texas as a SID and has
received a no -action letter from the SEC dated August 29, 1995 that recognizes the Municipal Advisory Council of
Texas as a SID The address of the Municipal Advisory Council is. 600 West 8°i Street, P.O. Box 2177, Austin
Texas 78768-2177 and its telephone number is 512/476-6947.
Limitations and Amendments
The Authority has agreed to update information and to provide notices of material events only as described
above. The Authority has not agreed to provide other information that may be relevant or material to a complete
presentation of its financial results of operations, conditions or prospects or agreed to update any information that is
provided, except as described above The Authority makes no representation or warranty concerning such
information or concerning its usefulness to a decision to invest in or sell Bonds at any future date. The Authority
disclaims any contractual or tort liability for damages resulting in whole or in part from any breach of its continuing
disclosure agreement or from any statement made pursuant to its agreement, although registered owners and
beneficial owners of the Bonds may seek a writ of mandamus to compel the Authority to comply with its agreement.
The Authority 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 Authority, if but only if the agreement as amended, would have permitted an
Underwriters to purchase or sell Bonds in the offering made hereby 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 either the registered owners of a majority in aggregate principal amount of the outstanding Bonds
consent to the amendment or any person unaffiliated with the Authority (such as nationally recognized bond
counsel) determines that the amendment will not materially impair the interests of the registered owners and
beneficial owners of the Bonds. The Authority may amend or repeal the agreement in the Bond Resolution if the
SEC amends or repeals the applicable provisions of the Rule or a court of final jurisdiction determines that such
provisions are invalid or unenforceable, but only to the extent that its right to do so would not prevent an
Underwriters from lawfully purchasing the Bonds in the initial offering. If the Authority so amends the agreement,
it has agreed to include with any financial information or operating data next 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
15c2-12.
The Authority has never entered any prior continuing disclosure agreements in accordance with SEC Rule
PREPARATION OF OFFICIAL STATEMENT
Sources and Compilation of Information
The financial data and other information contained in this Official Statement has been obtained primarily
from the Authority's records, the Appraisal District and information from other sources. All of these sources are
believed to be reliable, but no guarantee is made by the Authority as to the accuracy or completeness of the
information derived from such sources, and its inclusion herein is not to be construed as a representation on the part
of the Authority to such effect. Furthermore, there is no guarantee that any of the assumptions or estimates contained
herein will be realized. The summaries of the agreements, reports, statutes, resolutions, engineering and other related
information set forth in this Official Statement are included herein subject to all of the provisions of such
documents. These summaries do not purport to be complete statements of such provisions and reference is made to
such documents for further information.
44
Financial Advisors
RBC Dain Rauscher Inc. is employed as Financial Advisors to the Authority to render certain professional
services, including advising the Authority on a plan of financing and preparing the Official Statement for the sale of
the Bonds.
Official Statement Deemed Final
For purposes of compliance with Rule 15c(2)-12 of the Securities and Exchange Commission, this
document, as the same may be supplemented or corrected by the District from time to time, may be treated as an
Official Statement with respect to the Bonds described herein "deemed final" by the District as of the date hereof (or
of any such supplement or correction) except for the omission of certain information referred to in the succeeding
paragraph.
The Official Statement when further supplemented by adding information specifying the interest rates and
certain other information relating to the Bonds, shall constitute a `FINAL OFFICIAL STATEMENT' of the District
with respect to the Bonds, as that term is defined in Rule 15C(2)-12.
Updating the Official Statement
For the period beginning on the date of the award of the sale of the Bonds to the Underwriters and ending
on the 25th day after the "end of the underwriting period" (as defined in the Rule), if any event shall occur of which
the Authority has knowledge and as a result of which it is necessary to amend or supplement the Official Statement
in order to make the statements therein in light of the circumstances when the Official Statement is delivered to a
prospective purchaser, not misleading, the Authority will promptly notify the Underwriters of the occurrence of such
event and will cooperate in the preparation of a revised Official Statement, or amendments or supplements thereto,
so that the statements in the Official Statement, as revised, amended or supplemented, will not, in light of the
circumstances when such Official Statement is delivered to a prospective purchaser, be misleading. The Authority
assumes no responsibility for supplementing the Official Statement thereafter.
Certification of Official Statement
The Authority will certify that the information statements, and descriptions or any addenda, supplement
and amendment thereto pertaining to the Authority and its affairs contained herein, to the best of its knowledge and
belief, contain no untrue statement of a material fact and do not omit to state any material fact necessary to make the
statements herein, in the light of the circumstances under which they are made, not misleading. With respect to
information included in this Official Statement other than that relating to the Authority, the Authority has no reason
to believe that such information contains any untrue statement of a material fact or omits to state any material fact
necessary to make the statements herein, in the light of the circumstances under which they are made not
misleading; however, the Authority Board has made no independent investigation as to the accuracy or
completeness of the information derived from sources other than the Authority. In rendering such certificate, the
official executing this certificate may state that he has relied in part on his examination of records of the Authority
relating to matters within his own area of responsibility, and his discussions with, or certificates or correspondence
signed by, certain other officials, employees, consultants and representatives of the Authority.
[Remainder of Page Intentionally Left Blank]
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MISCELLANEOUS
All estimates, statements, and assumptions in this Official Statement and the Appendices hereto have been
made on the basis of the best information available and are believed to be reliable and accurate. Any statements in
this Official Statement involving matters of opinion or estimates, whether or not expressly so stated, are intended as
such and not as representations of fact, and no representation is made that any such statements will be realized. This
Official Statement was approved by the Board of Directors of the Development Authority of Pearland, as of the date
shown on the cover page.
ATTEST:
Henry Stanaland
Secretary, Board of Directors
Tom Reid
Chair Board of Directors
46
SUMMARY OF DOCUMENTS
(1) Development Agreement
APPENDIX A
By Resolution No. R99-66, adopted on September 13, 1999, the City of Pearland, Texas (the
"City") entered into a Development Agreement (the ' Development Agreement') with Shadow Creek
Ranch Development Company, L.P (the "Developer") The Development Agreement establishes the
framework for the financing, design and construction of certain pubhc works and improvements to serve
the Shadow Creek Ranch master planned community.,
The City delegates to the Reinvestment Zone Number Two, City of Pearland, Texas (the ' TIRZ")
Board of Directors (the 'TIRZ Board") all powers relating to the implementation of the Project Plan and
Reinvestment Zone Financing Plan of the TIRZ (the ' Plan"), including without limitation the power to (i)
select and retain consultants and (ii) approve plans and specifications, award contracts and approve
change orders and payments in accordance with the Development Agreement.
All property within the TIRZ shall be developed in accordance with the Planned Unit
Development for the property adopted pursuant to the City Land Use and Urban Development
Ordinance (the "PUD").
The Development Agreement contemplates the design and construction of two types of
"Improvements" (i) "TIRZ Improvements' and (ii) "City Improvements." "City Improvements" are
defined to mean the various public improvements to be constructed and financed by the City using funds
other than Tax Increments or the proceeds of bonds supported thereby. "TIRZ Improvements" are
defined to mean the various improvements to be financed from Tax Increments or the proceeds of bonds
supported thereby. TIRZ Improvements are further classified into (i) "Master Improvements,' (ii)
"Subdeveloper Improvements' and (iii) "City Facilities' "Master Improvements are defined to mean
the first $20,000 000 of TIRZ Improvements constructed by the Developer. "Subdeveloper
Improvements" are defined to mean TIRZ Improvements constructed by a subdeveloper (a developer
who is developing a portion of the TIRZ other than the Developer). "City Facilities" are defined to mean
the TIRZ Improvements to be constructed directly by the City including police and fire stations, a City
Hall annex, and a City library building. A "Project Cost' is a "project cost" as defined in Section
311.002(1) of the Texas Tax Code incurred in connection with the TIRZ Improvements.
The City commits to design and construct, and provide funding for, the City Improvements,
many of which relate to bringing water and wastewater capacity and service to the TIRZ. Funding for the
various City Improvements is provided by (i) water and sewer impact fee revenues and the proceeds of
bonds supported thereby, (ii) proceeds from loans, (iii) water and sewer system revenues, and (iv) the
City's general fund.
The Developer may seek and receive payment and reimbursement in accordance with the
Development Agreement for all Project Costs the Developer incurs, out of Tax Increment of the proceeds
of bonds supported thereby. The City s obligation to issue bonds supported by Tax Increment shall not
exceed $114 000,000 (in 1999 dollars), plus the cost of issuance, developer interest, capitalized interest and
necessary reserve funds in connection with such bonds.
The City may terminate the TIRZ, as provided in Section 311.017(a) of the Texas Tax Code, on the
earliest possible date after which all Project Costs with respect to the TIRZ Improvements, as well as all
bonds supported by Tax Increments and interest thereon, have been paid in full.
A-1
The Developer agrees to cause to be constructed TIRZ Improvements up to $109,000,000, as
outlined in the Plan, subject to reimbursement as provided in the Development Agreement.
The City pledges that it will deposit the entirety of the Tax Increment into the TIRZ's Tax
Increment Fund. The amounts deposited in the Tax Increment Fund shall be disbursed in accordance
with the Development Agreement solely (i) to make payments of principal and interest on bonds to
finance TIRZ Improvements as and when due (ii) to pay eligible expenses of the TIRZ, including creation
costs and operating expenses, (iii) to pay Project Costs, and (iv) to reimburse the Developer or a
subdeveloper in accordance with the Development Agreement Notwithstanding the above, to pay for
services rendered by the City in the TIRZ, the City may withdraw the "Administrative Fee" from the Tax
Increment Fund. The "Administrative Fee" shall be the following amounts in the applicable calendar
years commencing January 1, 1999:
Years 1-3 (1999-2001) No Administrative Fee
Years 4-8 (2002-2006) 36% of the City Tax Increment
Years 9-30 (2007-2028) 64% of the City Tax Increment
provided that, the amount deposited and retained annually in the Tax Increment Fund attributable to the
City Tax Increment for the applicable year shall in no event be less than (i) in years four through eight,
$0 44 per $100 of the Captured Appraised Value, and (ii) in years nine through 30, $0.255 per $100 of the
Captured Appraised Value.
To the fullest extent permitted by law, the City agrees that (i) it will not pledge or apply the Tax
Increment or any other monies in the Tax Increment Fund to any other purpose or payment of any
obligation of the City except for bonds to finance TIRZ Improvements and obligations arising under the
Development Agreement; it will not commingle the Tax Increment with any other funds of the City; (iii)
it will not take any action or omit to take any action that will affect the continued existence of the Tax
Increment Fund or the availability of the Tax Increment to pay bonds issued to finance TIRZ
Improvements and the other obligations under the Development Agreement; (iv) it will take all actions
and submit all documents in a timely manner to receive all Tax Increment; (v) it will institute and pursue
to a final order or judgment any bond validation action or suit upon reasonable request by the Developer;
(vi) it will not refund any bonds issued to finance TIRZ Improvements in any manner inconsistent with
the Plan and (vii) it will direct the investment of the Tax Increment in accordance with Texas law
applicable to investment of funds by municipalities.
Except for City Facilities and ' Educational Facilities" (those facilities to be constructed as part of
the Plan at the direction of the Alvin Independent School District ("AISD') using a portion of the AISD
Tax Increment), the TIRZ Improvements will be advance -funded by the Developer or a subdeveloper,
subject to reimbursement form Tax Increment or the proceeds of bonds supported thereby.
The total amounts owing for funds advanced from time to time shall bear simple interest commencing at
the time the funds are advanced to pay for the applicable TIRZ Improvements, or advances spent for the
creation, organization and administration expenses of the TIRZ, continuing until paid, for a maximum
period of five years from the completion of the applicable TIRZ Improvements or of the creation or
administration advance Interest shall be calculated at (i) eight percent per annum with respect to Master
Improvements and the first $1,000,000 of creation and administration advances, and (ii) 6.5% per annum
with respect to other TIRZ Improvements and any remaining creation and administration advances.
All plans and specifications for the TIRZ Improvements shall be submitted to the City for review
and approval prior to the commencement of construction. The City's obligation to issue bonds is
A-2
conditioned upon (i) the Developer entering into an agreement with the TIRZ Board specifying the TIRZ
Improvements to be constructed, the area over which the Tax Increment is to be computed, and related
matters, (ii) compliance with all competitive bidding and other laws relating to the solicitation and award
of public works contracts, as such are applicable to similar City public improvement contracts, and (iii) a
determination of the TIRZ's financial advisor that the bonds required for such reimbursement are
reasonably marketable and that the issuance thereof will not have a materially detrimental effect on the
viability of any outstanding bonds issued to finance TIRZ Improvements.
(2) Reimbursement Agreement
On September 22, 1999, the City, the TIRZ and the Developer entered into a Master Developer
Reimbursement Agreement (the "Reimbursement Agreement"). The Reimbursement Agreement sets
forth the processes and procedures for the design and construction of the TIRZ Improvements and the
financing and reimbursement therefor.
To initiate the construction of a TIRZ Improvement, the Developer shall provide a written
request therefor to the TIRZ Board (i) describing the requested TIRZ Improvements, (ii) specifying the
estimated schedule for the design and construction, (iii) estimating the likely costs thereof, as certified by
the TIRZ s engineer, and comparing such estimate to the cost estimate of such TIRZ Improvement in the
Plan and (iv) specifying the area within the TIRZ which is benefited by such TIRZ Improvements If the
TIRZ s engineer determines that the requested TIRZ Improvements qualify for reimbursement, the
Developer may proceed to design and construct the requested TIRZ Improvements in accordance with
certain procedures established in a document entitled "TIRZ Project Implementation and Reimbursement
Process' dated June 30 1999. All legal requirements relating to City contracts shall apply to the design
and construction of the TIRZ Improvements.
For purposes of record -keeping and establishing a priority of reimbursement, the TIRZ and the
Developer shall execute a letter agreement for each phase of construction. The purpose of the letter
agreement is to confirm that the Developer will design and construct a phase of the TIRZ Improvements,
will pre -finance all associated costs of such phase, and will be reimbursed by the City and the TIRZ from
bond proceeds or Tax Increment.
If the Developer follows the appropriate contracting procedures and after the TIRZ's engineer
and auditor have certified in letters that the TIRZ Improvements have been completed and are in order
for reimbursement, the TIRZ shall reimburse the Developer for all amounts advanced to the TIRZ
pursuant to the Reimbursement Agreement, plus the appropriate interest on such amounts as calculated
under the provisions of the Development Agreement up to the amount certified by the TIRZ's engineer
and auditor to be within the cost estimate of such TIRZ Improvement in the Plan, as adjusted for
inflation.
The TIRZ shall be obligated to reimburse the Developer, solely, and in order of priority, from (i)
proceeds of bonds supported by Tax Increment, (ii) uncommitted Tax Increment if such funds are
available and are not reasonably expected to be required by the TIRZ for debt service on bonds or for
administrative expenses. Priority for the reimbursement of advances is as follows (i) creation and
administration, (ii) Master Improvements, and (iii) Subdeveloper Improvements. The TIRZ agrees to
request at the earliest feasible date that the City issue bonds and the City agrees to use its best efforts to
issue bonds to fund reimbursements at such time as the City s financial advisor certifies that the
unencumbered Tax Increment (exclusive of AISD Tax Increment) generated within the area benefited by
the TIRZ Improvements is sufficient to support the applicable bonds and satisfies the coverage test and
Tax Increment Fund projection requirement set forth in the Development Agreement
A-3
The TIRZ's obligation to reimburse the Developer is conditioned on: (i) the approval of the
issuance of bonds by the City, the Attorney General of Texas and any other governmental authority
having jurisdiction thereover; and (ii) the successful marketing, sale, and closing of the bonds.
The Developer and the TIRZ Board have entered into approximately 23 letter financing
agreements regarding the construction and financing of various TIRZ Improvements and the creation and
operation of the TIRZ
(3)
Tri-Party Agreement
By Ordinance No. R2004-170, adopted on October 11, 2004, the City entered into that "Agreement
By and Between the City of Pearland, Texas, Reinvestment Zone Number Two City of Pearland, Texas
and the Development Authority of Pearland" (the "Tri-Party Agreement"). Both the TIRZ Board and the
Development Authority of Pearland (the "Authority') Board of Directors (the ' Authority Board")
approved and entered into the Tri-Party Agreement on October 5, 2004. In the Tri-Party Agreement, the
City delegates certain of its obligations under the Development Agreement and the Reimbursement
Agreement, primarily the issuance of bonds and reimbursement to the Developer, to the Authority.
The Authority is given the authority to issue bonds supported by Contract Tax Increments, but
only with the consent of the City Council of the City; provided that the Authority shall not expend any of
the Contract Tax Increments for any purpose other than: (i) payment of bonds, (ii) to make developer
reimbursements, and (iii) to pay the administrative and operational expenses of the Authority.
The Authority may pledge and assign all or a part of the Contract Tax Increments to the owners
and holders of bonds. The City consents to any assignment and pledge consistent with the Tri-Party
Agreement for the benefit of bondholders.
The Authority agrees to abide by the terms and conditions of the Development Agreement and
the Reimbursement Agreement relating to the issuance of bonds and the reimbursement to the Developer
of Project Costs. The City shall continue to be obligated to provide the City Improvements described in
the Development Agreement and to pay for such improvements from the funding sources enumerated
therein.
The City and the Zone shall have no financial obligation to the Authority other than as provided
in the Tri-Party Agreement or in other agreements between the City, the TIRZ and the Authority. The
obligation of the City and the TIRZ to the Authority under the Tri-Party Agreement is limited to the Tax
Increments that are collected by the City The Tri-Party Agreement creates no obligation on the City or
the TIRZ that is payable from taxes or other moneys of the City other than the Tax Increments that are
collected by the City The obligation of the City and the TIRZ to the Authority under the Tri-Party
Agreement shall be subject to the rights of any of the holders of Bonds or other obligations that have
heretofore been or are hereafter issued by the City, Brazoria County, Fort Bend County, AISD and any
other taxing units that are payable from or secured by a general levy of ad valorem taxes throughout the
taxing jurisdiction of the City, Brazoria County, AISD and any other Taxing Units.
The City and the TIRZ covenant and agree that they will, as authorized by law, continuously
collect the Tax Increments from the participating taxing units in accordance with each participating
taxing units' interlocal agreement (the "Interlocal Agreements") during the term of the Tri-Party
Agreement in the manner and to the maximum extent permitted by applicable law. To the extent the
City and the TIRZ may legally do so, the City and the TIRZ also covenant and agree that they will not
permit a reduction in the Tax Increments paid by the participating taxing units except to the extent
provided in the Interlocal Agreements. In addition, the City covenants and agrees that it will not dissolve
the Authority and that any repeal of the right and power to collect the Tax Increments will not be
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effective until all bonds have been paid in full of until they are legally defeased. The City and the TIRZ
further covenant and agree that they will make all payments as set forth in the Tri-Party Agreement, by a
direct deposit to the Authority, without counterclaim or offset, but minus any amounts to be retained by
the City pursuant to the Tri-Party Agreement (described below).
The obligation of the City and the TIRZ to make the payments to the Authority shall be absolute
and unconditional, and until such time as the bonds have been fully paid or provision for payment
thereof shall have been made in accordance with their terms (or, with respect to the Tax Increments, the
date of expiration of the TIRZ if earlier), the City and the TIRZ will not suspend or discontinue any
payments provided for in the Tri-Party Agreement and will not terminate the Tri-Party Agreement for
any cause, including, without limiting the generality of the foregoing, the failure of the Authority to
perform and observe any agreement, whether express or implied, or any duty, liability, or obligation
arising out of or connected with the Tri-Party Agreement. Nothing contained in this section shall be
construed to release the Authority from performance of any of the agreements on its part contained in the
Tri-Party Agreement, and in the event the Authority shall fail to perform any such agreement on its part,
the City may institute such action against the Authority as the City may deem necessary to compel
performance so long as this action does not abrogate the obligations of the City and the TIRZ to make the
payments set forth in this Agreement.
The City, on behalf of itself and the TIRZ, will pay the Authority on the date of the closing of the
first series of Bonds and thereafter not later than the fifteenth day of each August during the term of this
Agreement, solely from the Tax Increment Fund and from no other source, all monies then available in
the Tax Increment Fund, subject to the retention by the City of (i) an amount equal to the City's
administrative costs connected with the TIRZ and the Plan, as provided in the TIRZ Plana (ii) the school
district educational facilities costs as described in the Plan if applicable (iii) amounts required to be
maintained in the "AISD Suspense Account" pursuant to the terms of the Interlocal Agreement with
AISD; and (iv) an amount sufficient to pay reasonable current and anticipated administrative and
operating costs of the TIRZ, as determined by the TIRZ Board. The Authority shall use the monies solely
for payment of its obligations to the holders of the bonds, while any are outstanding, developer
reimbursements, and Authority operation and administration expenses. The obligation to make these
payments shall survive a termination of the Tri-Party Agreement.
As projects implementing the Plan are completed, the TIRZ Board may recommend to the City
that the Authority reimburse developers on behalf of the TIRZ and the City. The TIRZ Board will
forward to the City and the Authority all of the necessary and required documentation supporting the
requested reimbursement and a determmation of the exact amount requested for reimbursement,
including a calculation of the amount of interest to be reimbursed on funds advanced for the project. The
City will consider the recommendation of the TIRZ Board and will authorize the Authority to take
appropriate action. The TIRZ, the City and the Authority hereby agree and confirm that any
reimbursements made by the Authority shall be in strict compliance with the Development Agreement
and the Reimbursement Agreement. Upon written resolution by the City, the Authority shall reimburse
developers in accordance with the recommendations of the TIRZ Board as approved by the City, the
Development Agreement, the Reimbursement Agreement and the Plan.
The City agrees not to dissolve the Authority or the TIRZ unless it makes satisfactory
arrangements to provide for the payments of the bonds incurred prior to the Authority's dissolution In
the event of the dissolution of the Authority, the City shall ieturn all Contract Tax Increments and
proceeds from bonds supported by Contract Tax Increments to the Tax Increment Fund.
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(4) Project Plan and Reinvestment Zone Financing Plan
On August 23,1999, the TIRZ Board and the City, by Ordinance No. 918, adopted the Project Plan
and Reinvestment Zone Financing Plan for the TIRZ (the "Plan"). The Plan contains various maps,
descriptions and cost estimates of TIRZ Improvements, as required by Chapter 311, Texas Tax Code.
The Plan finds that the acreage within the boundaries of the TIRZ was undeveloped, vacant, in an
agricultural exemption and not served by municipal utilities at the time of the TIRZ's creation.
The Plan provides for four categories of estimated Project Costs: (i) $108,267,923 for the design
and construction of "Infrastructure," (ii) $1,366,000 for TIRZ creation and administration, (iii) $5,000,000
for the design and construction of "City Facilities," and (iv) $134,100,000 for educational facilities.
'Infrastructure" includes: (i) streets (pavement, sidewalks, landscaping and irrigation, entry monuments
and signalization), (ii) water plants and water system, (iii) wastewater treatment plants, lift stations and
wastewater system, (iv) storm sewer system, (v) lakes and channels, (vi) site costs, (vii) contingencies, and
(viii) engineering. "City Facilities" include: (i) library sites and improvements, and (ii) fire and police
station sites and improvements. The educational facility improvements will be provided by or at the
direction of AISD Pursuant to the Plan and within certain parameters, the TIRZ Board may revise or
adjust the estimated Project Costs. All estimates of Project Costs in the Plan are in 1999 dollars and are
subject to cost adjustment per the Engineering New Record Index over the life the TIRZ
The Plan confirms the payment and structure of the City's Administrative Fee, in accordance
with the Development Agreement.
Numerous exhibits show the kind, number and location of the TIRZ Improvements.
The estimated bonded indebtedness to be incurred by the TIRZ is an amount sufficient to yield
net proceeds of approximately $114,633,923 in 1999 dollars, subject to cost adjustment according to the
Engineering News Record Index over the life of the TIRZ.
The Plan confirms the financing and reimbursement of Project Costs consistent with the
Development Agreement and the Reimbursement Agreement.
The Plan establishes the base year for the TIRZ as 1998 and establishes the Base Value of the TIRZ
as $7,172,980. The Plan estimates the Captured Appraised Value of the TIRZ in each of the 30 years. The
estimates for such Captured Appraised Values are supported by market studies.
The TIRZ will exist for a period of 30 years; however at such time as the financial and contractual
obligations of the TIRZ are complete, fulfilled, or assumed by the City, the TIRZ may be terminated by
the City. The City and the TIRZ Board will use their best efforts to provide for the payment of all Project
Costs, bonds, and interest thereon, in order to minimize the life of the TIRZ At the termination of the
TIRZ, any residual funds from Tax Increments will be returned to the participating taxing entities on a
pro rata basis according to their levels of participation.
(5)
Interlocal Agreements
Brazoria County
On August 30, 1999, the City Council of the City adopted Resolution No. R99-62, and entered into
a Tax Increment Participation Agreement with Brazoria County (the "Brazoria County Agreement").
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Brazoria County agrees to participate in the TIRZ by contributing 38% of the amount of tax
increment produced in the TIRZ attributable to Brazoria County (not to exceed $0.1359 per $100
valuation) collected by the County in each of the tax years 1999 through 2028 (the 'Brazoria County Tax
Increment Participation'). The Brazoria County Tax Increment Participation and obligation to participate
m the TIRZ shall be restricted to its tax increment collected on the Captured Appraised Value in the TIRZ
Brazoria County shall not be obligated to pay its Brazoria County Tax Increment Participation from other
Brazona County taxes or revenues or until the Brazoria County Tax Increment Participation in the TIRZ
is actually collected. The obligation to pay the Brazoria County Tax Increment Participation shall accrue
as taxes representing the Brazoria County Tax Increment Participation are collected and payment shall be
due on August 1 of each year.
Brazoria County's participation is limited to the original boundaries of the TIRZ and the County's
participation shall not extend to the Tax Increment on any additional property added to the TIRZ unless
Brazoria County approves the participation.
Brazoria County has the right to appoint one member of the TIRZ Board. Any amendment to the
Plan shall be submitted to Brazoria County for review prior to adoption.
Once bonds supported by Tax Increment have been issued, the City agrees that it will never
disannex any property within the TIRZ The City and the TIRZ agree that Brazoria County is not liable
for the debt of the TIRZ, or any debt issued by the City or related instrumentality thereof (such as the
Authority) secured by revenues of the Tax Increment Fund, or other revenues available to pledge to such
bonds.
The City agrees that the Plan will include a provision that limits the amount of reimbursement to
the Developer for the full amount of eligible Mastei Improvements, plus amounts required to reimburse
the Developer for funds advanced in connection with the creation and administration of the TIRZ and the
conception design and construction of the TIRZ Improvements, that is reimbursable at simple interest
calculated at eight percent per annum until paid for a maximum period of five years from the
completion of the applicable TIRZ Improvements, to $20 million for the eligible Master Improvements
and $1 million for the creation and administration of the TIRZ
The first payment of Brazoria County Tax Increment Participation shall be for those taxes levied
by Brazoria County in the year 1999 and the last payment by Brazona County is for those taxes levied by
the County in the year 2028.
The City shall not adopt an ordinance terminating the TIRZ earlier than the duration of the TIRZ
established m City Ordinance No. 891 without the prior consent of Brazoria County, provided that the
TIRZ may otherwise terminate by operation of law.
Brazoria County may reduce its participation in the TIRZ by the adoption of a written order of
the Commissioner's Court adopted prior to September 30 of such year if the Captured Appraised Value is
less than 50% of the values for each of the tax years listed below:
Tax
Year
2006
2011
2016
2021
2026
Captured
Appraised Value
$ 655,340,658
$ 1,338,693,425
$ 1,414,004,025
$ 1,414,004,025
$ 1,414,004,025
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50%
Required Value
$327 670,329
$669,346,713
$707,002,013
$707,002,013
$707,002,013
or, if the County Unit Cost of Service (defined to mean initially the sum of $218 which sum shall be
increased by the percentage increase in the Consumer Price Index from January, 2000, in accordance with
formulas provided in the Brazoria County Agreement) is lower than the County's Actual Cost of Service
(defined to mean the total annual amount Brazoria County has budgeted in a given fiscal year for its
governmental services and operations, divided by the total number of dwelling units in Brazoria
County), Brazoria County may reduce its participation in the TIRZ for the remaining term of the TIRZ so
that the County's retained tax increment covers the County's Actual Cost of Service for dwelling units in
the TIRZ by at least 1.32 times, but the reduction percentage may not increase the County's retained tax
increment revenue to cover more than the County Unit Cost of Service plus ten percent.
Provided, however, that if the City, the TIRZ or an agency or instrumentality of the City or TIRZ
(such as the Authority) have (i) issued bonds or notes secured by revenues in the Tax Increment Fund or
under a contract secured by payments of Tax Increments, or (ii) entered into a project cost agreement(s)
for the implementation of the Plan pledging the payment of the Tax Increment for the payment of
developer advances then incurred or construction contracts awarded and executed, Brazoria County may
not reduce its participation as described above to an amount less than its cumulative annual pro rata
share of the Tax Increment pledged to make payments on all such bonds or agreements. For the purpose
of identifying Brazoria County's pro rata obligations, at the time of each issuance of bonds or the
execution of each agreement, the City shall provide Brazoria County a schedule showing Brazoria
County's pro rata share of all payments to be made for such bonds or under such agreements that are
secured by the Brazoria County Tax Increment Participation.
The City may not issue bonds or notes, the payment of principal, interest or premium of which
are secured by the Brazoria County Tax Increment Participation unless the City's financial advisor shall
certify in writing to the City Council that the total annual Tax Increment revenues less TIRZ
administrative fees, is equal to or greater than 125% of the total annual amount to all outstanding and
proposed TIRZ bond or note payments and contractual obligations.
Fort Bend County
On January 10, 2000 the City Council of the City adopted Resolution No. R99-57, and entered
into an Agreement with Fort Bend County regarding participation in the TIRZ (the "Fort Bend County
Agreement").
Fort Bend County agrees to participate in the TIRZ by contributing the amount of Tax Increment
produced in the TIRZ attributable to Fort Bend County based on the following tax rates (the "Fort Bend
County Tax Increment Participation")
Tax Year
1999-2008
2009-2018
2019-2028
Fort Bend County Tax Rate Per $100
of Captured Appraised Value
$0.624100
$0.468075
$0.312050
If the Fort Bend County tax rate is less than the rate specified above for such year, then the Fort Bend
County Tax Increment foi such year would be the total amount of taxes collected by Fort Bend County at
its actual tax rate on the Captured Appraised Value. Taxes collected as a result of a Fort Bend County tax
levy at a tax rate greater than the rate specified above for a particular year will be retained by Fort Bend
County.
The Fort Bend County Tax Increment Participation and obligation to participate in the TIRZ shall be
restricted to its tax increment collected on the Captured Appraised Value in the TIRZ. Fort Bend County
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shall not be obligated to pay its Fort Bend County Tax Increment Participation from other Fort Bend
County taxes or revenues or until the Foit Bend County Tax Increment Participation in the TIRZ is
actually collected. The obligation to pay the Fort Bend County Tax Increment Participation shall accrue
as taxes representing the Fort Bend County Tax Increment Participation are collected and payment shall
be due on the first day of each calendar quarter.
Fort Bend County's participation is limited to the original boundaries of the TIRZ and the
County's participation shall not extend to the Tax Increment on any additional property added to the
TIRZ unless Fort Bend County approves the participation.
Fort Bend County has the right to appoint one member of the TIRZ Board. Any amendment to
the Plan shall be submitted to Fort Bend County for review prior to adoption.
The first payment of Tax Increments by Fort Bend County is for taxes levied for the year 1999 and the last
payment is for taxes levied in the year 2028.
The City shall not adopt an ordinance terminating the TIRZ earlier than the duration of the TIRZ
established in City Ordinance No. 891, without the prior consent of Fort Bend County, provided that the
TIRZ may otherwise terminate by operation of law.
Alvin Independent School District
On June 14,1999, the City Council of the City adopted Resolution No. R99-45, and entered into an
Interlocal Agreement with Alvin Independent School District ("AISD") regarding participation in the
TIRZ (the "AISD Agreement").
AISD agrees to participate in the TIRZ by contributing 100% of all taxes collected by AISD each
year during the term of the AISD Agreement at the prevailing AISD tax rate on the Captured Appraised
Value (the "AISD Tax Increment Participation"). ,
The AISD Tax Increment Participation and obligation to participate in the TIRZ shall be restricted to its
tax increment collected on the Captured Appraised Value in the TIRZ. AISD shall not be obligated to pay
its AISD Tax Increment Participation from other AISD taxes or revenues or until the AISD Tax Increment
Participation in the TIRZ is actually collected. The obligation to pay the AISD Tax Increment
Participation shall accrue as taxes representing the AISD Tax Increment Participation are collected and
payment shall be due on the first day of each calendar quarter. The City and the TIRZ agree that no
mterest or penalty will be charged to AISD.
AISD's participation is limited to the original boundaries of the TIRZ and AISD's participation
shall not extend to the Tax Increment on any additional property added to the TIRZ unless AISD
approves the participation.
AISD has the right to appoint one member of the TIRZ Board. In addition, AISD and the City
agree that AISD and the City shall jointly appoint one member of the TIRZ Board AISD agrees that, in
accordance with State law AISD Trustees are not eligible for appointment to the TIRZ Board. Any
amendment to the Plan shall be submitted to Fort Bend County for review prior to adoption.
The City and the TIRZ agree that AISD will only be asked to build the school facilities as required
by the Plan when they are needed to serve the population of the TIRZ. AISD will not be required to build
school facilities earlier than such facilities would be needed in accordance with customary procedures
established by AISD. The City and the TIRZ agree that AISD shall have the right to determine the
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location of all school facilities which serve the TIRZ and such location may be outside the boundaries of
the TIRZ
In the event that the State funds formula calculations applicable to AISD change so that the
participation of AISD in the TIRZ will result in a decrease or decreases the amount of State Funds
(defined to mean the funds provided or potentially available to AISD from the State of Texas, currently
being Tier One, Tier Two, and Instructional Facilities Allotment, and any successor or replacement form
of revenues provided or potentially available to AISD fiom the State of Texas) available and/or received
by AISD or AISD determines in its sole and independent discretion that it would be in AISD s best
interest due to negative financial impact to AISD, resulting from participation in the TIRZ, the City and
the TIRZ agree that, at the option of AISD in its sole and independent discretion, (i) the AISD Tax
Increment Participation shall be decreased by an amount determined by AISD to account for the amount
of the decrease in AISD State Funding as a result of AISD s participation in the TIRZ (ii) the percentage
of payments to be made by the TIRZ to AISD from taxes generated from the AISD Tax Increment
Participation for educational facilities shall be increased by an amount determined by AISD to account for
the amount of the decrease in AISD State Funding as a result of AISD s participation in the TIRZ, (iii) any
combination of the options set forth in subparagraphs (i) or (ii) above, or (iv) AISD may completely
withdraw from further participation in the TIRZ In addition, in the event the City determines that the
continued participation by AISD in the TIRZ has or will have a negative financial impact on the TIRZ,
then the City shall have the right to terminate AISD's participation in the TIRZ
In the event that the laws applicable to AISD or tax increment reinvestment zones are changed so
that the participation of AISD in the TIRZ is prohibited, the City and the TIRZ agree that AISD shall
withdraw from further participation in the TIRZ. If such change of law occurs and AISD withdraws from
participation in the TIRZ, AISD agrees to finance and build school facilities to serve development in the
TIRZ in accordance with customary procedures established by AISD
The City, the TIRZ and AISD agree that (i) any change to the percentage of the AISD Tax
Increment Participation, (ii) any change to the percentage of the taxes generated from the AISD Tax
Increment Participation to be paid to AISD for educational facilities, or (iii) the withdrawal by AISD from
further participation in the TIRZ shall be selected by AISD not later than October 31 of each calendar
year and shall be effective as December 31 of the immediately preceding calendar year. AISD agrees to
provide written notice to the City and the TIRZ of any election hereunder on or before October 31 of each
calendar year.
In the event that AISD elects to withdraw from further participation in the TIRZ, the City and the
TIRZ agree that AISD shall be paid by the TIRZ an amount equal to the negative financial impact
iesulting to AISD during the preceding calendar year from its participation in the TIRZ The City and the
TIRZ agree that the TIRZ s obligation to make such payment shall be payable solely from the prior years
taxes generated from AISD Tax Increment Participation plus any investment earnings thereon The City
and the TIRZ agree that all taxes generated from AISD Tax Increment Participation, other than those
funds disbursed to AISD for educational facilities, shall be held in a special account of the Tax Increment
Fund (the "AISD Suspense Account') for a period of one calendar year. All funds held in the AISD
Suspense Account shall not be used, disbursed, pledge or encumbered in any way by the City or the TIRZ
for one full calendar year and during which time such funds shall solely be used to reimburse AISD.
The TIRZ agrees that 25% of the funds generated from the AISD Tax Increment Participation will
be used to fund (i) the acquisition of land for school facilities, (n) the construction of park and recreation
improvements benefiting AISD taxpayers, (iii) the acquisition of land for such park and recreation
improvements, (iv) AISD's pro rata share of water, sewer and drainage facilities to serve the school
facilities, and (v) other public improvements in the Plan which benefit AISD taxpayers.
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The TIRZ agrees that 75% of the funds generated from the AISD Tax Increment Participation,
without deduction or setoff for costs of collection or any other costs, will be paid to AISD to be used by
AISD to construct and operate school facilities within the TIRZ and for any other lawful purpose
consistent with the Plan as determined by AISD. Such amounts shall be paid to AISD by the TIRZ within
30 days of the receipt by the TIRZ of the taxes generated from the AISD Tax Increment Participation.
The first payment of the AISD Tax Increment Participation shall be for those taxes levied by AISD
in the year 1999, and unless AISD terminates earlier, the last payment by AISD is for those taxes levied by
AISD in the year 2028.
The City shall not adopt an ordinance terminating the TIRZ earlier than the duration of the TIRZ
established in City Ordinance No. 891 without the prior consent of AISD, provided that the TIRZ may
otherwise terminate by operation of law.
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APPENDIX B
BOUNDARY MAP OF REINVESTMENT ZONE NO. 2, CITY OF PEARLAND, TEXAS
MC.. ARD
Miles
0.25 05 1
G
7
Legend
TIRZ Boundary Major Roads.
(jcaunty•Boundary Freeway
.Major Street:
Ramp
Createdovember.3 2004;
APPENDIX C
FORM OF OPINION OF BOND COUNSEL
December , 2004
Development Authority of Pearland
Pearland, Texas
Wells Fargo Bank, National Association, as Trustee
Houston, Texas
First Southwest Company, as Lead Underwriter
Houston, Texas
Re: $ Tax Increment Contract Revenue Bonds, Series 2004
Ladies and Gentlemen:
We have acted as Bond Counsel to the Development Authority• of Pearland (the "Issuer") in
connection with the issuance and sale of the Issuer's Tax Increment Contract Revenue Bonds, Series 2004,
in the aggregate principal amount of $ (the 'Bonds") pursuant to the terms of a Trust Indenture
dated as of , 2004 (the "Indenture") between the Issuer and Wells Fargo Bank National
Association (the "Trustee"), and a Bond Resolution, dated as of , 2004 (the "Resolution")
Except as otherwise indicated terms defined in the Indenture are used in this opinion with the meanings
assigned to them in the Indenture.
In our capacity as Bond Counsel, we have participated in the preparation of and have examined a
transcript containing certified copies of certain proceedings of the Board of Directors of the Issuer, and
certain certificates and other documents of representatives of the City of Pearland, Texas (the "City"),
Reinvestment Zone Number Two, City of Pearland, Texas (the "Zone"), the Issuer, the Trustee, and of
others. We have relied upon those certificates as to certain factual matters which we have not
independently verified. We have also examined such portions of the Constitution and statutes of the
State of Texas and such applicable provisions of the Internal Revenue Code of 1986, as amended (the
"Code' ), court decisions, regulations and published rulings of the Internal Revenue Service, as we have
deemed necessary for the purposes of this opinion.
Based on the foregoing, and subject to the matters set forth below, we are of the opinion that:
1. The Indenture and Resolution have been duly authorized by the Issuer, have been duly
executed and delivered by the Issuer and constitute valid and binding obligations of the Issuer. By the
terms of the Indenture, all of the Issuer's right, title and interest in and to the amounts required from time
to time to be deposited in or credited to the account of the Debt Service Fund, the Reserve Fund, and the
Pledged Revenue Fund created pursuant to the Indenture, together with any investments and
reinvestments thereof, have been assigned to the Trustee.
2 The Bonds have been duly authorized, executed, issued and delivered by the Issuer and,
are the legal and valid obligations of the Issuer The Bonds are entitled to the benefits and security of the
Indenture. The Bonds are not general obligations of the City or of any other entity. The Bonds are
payable by the Issuer out of the Pledged Revenues created by the Indenture and the revenues derived
therefrom.
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3. Interest on the Bonds is excludable from gross income of the holders thereof for federal
income tax purposes under existing law.
4. The Bonds are not "private activity bonds" within the meaning of the Code and interest
on the Bonds is not subject to the alternative minimum tax on individuals and corporations, except that
interest on the Bonds will be included in the "adjusted current earnings" of a corporation (other than an S
corporation a regulated investment company, REIT, REMIC or FASIT) for purposes of computing its
alternative minimum tax liability
5. The difference between the amount payable at maturity of certain Bonds (the "Original
Issue Discount Bonds") and the initial offering price to the public of such Bond (as stated in the Official
Statement prepared for use in connection with the sale of the Bonds) is excludable from gross income for
federal income tax purposes as original issue discount under existing law.
In providing such opinions, we have relied on representations of the Issuer, the City, the Issuer's
financial advisor, and the Underwriters with respect to matters solely within the knowledge of the Issuer,
the City the Issuer's financial advisor and the Underwriters which we have not independently verified,
and have assumed continuing compliance with the covenants in the Indenture and Resolution pertaining
to those sections of the Code which affect the exclusion from gross income of interest on the Bonds for
federal income tax purposes In the event that such representations are determined to be maccurate or
incomplete, interest on the Bonds could become includable in gross income the date of their original
delivery, regardless of the date on which the event causing such inclusion occurs
Purchasers of Original Issue Discount Bonds in the initial public offering are directed to the
discussion entitled "LEGAL MA PI ERS-Tax Accounting Treatment of Original Issue Discount Bonds" set
forth in the Official Statement prepared for use in connection with the sale of the Bonds for purposes of
determining the portion of the original issue discount described in paragraph (5) which is allocable to the
period such Bonds are held by a holder thereof. The federal income tax consequences of the purchase,
ownership and redemption sale or other disposition of the Bonds which are not purchased in the initial
public offering at the initial offering price may be determined according to rules which differ from those
described above and in the Official Statement.
Except as stated above, we express no opinion as to any federal, state or local tax consequences
resulting from the ownership of, receipt or accrual of, interest on, or acquisition, ownership or disposition
of, the Bonds.
Owners of the Bonds should be aware that the ownership of tax-exempt obligations may result in
collateral federal income tax consequences to financial institutions, property and casualty insurance and
Life insurance companies, certain S corporations with Subchapter C earnings and profits, individual
recipients of Social Security or Railroad Retirement benefits, taxpayers who may be deemed to have
incurred or continued indebtedness to purchase or carry tax-exempt obligations, taxpayers owning an
interest in a FASIT that holds tax-exempt obligations and individuals otherwise qualifying for the earned
income credit. In addition, certain foreign corporations doing business in the United States may be
subject to the "branch piofits tax" on their effectively -connected earnings and profits (including tax-
exempt interest such as interest on the Bonds).
We have examined executed Bond numbered I-1. In our opinion, the form of said Bond and its
execution is regular and proper.
The opinions set forth above are based on existing law, which is subject to change. Such opinions
further are based on our knowledge of facts as of the date hereof We assume no duty to update or
supplement these opinions to reflect any facts or circumstances that may hereafter come to our attention
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or to reflect any changes in any law that may hereafter occur or become effective. Moreover, our opinions
are not a guarantee of result and are not binding on the Internal Revenue Service (the "Service"); rather,
such opinions represent our legal judgment based upon our review of existing law and in rehance upon
the representations and covenants referenced above that we deem 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 Bonds If an audit is commenced, in
accordance with its current published procedures, the Service is likely to treat the Issuer as the taxpayer.
We observe that the Issuer has covenanted in the Resolutions not to take any action, or omit to take any
action within its control, that if taken or omitted, respectively, may result in the treatment of interest on
the Bonds as includable in gross income for federal income tax purposes.
Draft 11/10/04
RESOLUTION AUTHORIZING THE ISSUANCE OF $ DEVELOPMENT
AUTHORITY OF PEARLAND TAX INCREMENT CONTRACT REVENUE BONDS,
SERIES 2004; APPROVING CONTRACT DOCUMENTS RELATING TO THE
SERIES 2004 BONDS; AND CONTAINING OTHER PROVISIONS RELATED
THERETO
BE IT RESOLVED BY THE BOARD OF DIRECTORS OF THE DEVELOPMENT
AUTHORITY OF PEARLAND:
ARTICLE I
RECITALS
WHEREAS, by Ordinance No , adopted on December , 1998, the
City of Pearland (the "City") created Reinvestment Zone Number Two, City of
Pearland, Texas (the 'TIRZ") pursuant to Chapter 311, Texas Tax Code, and approved a
preliminary project plan for the TIRZ and a preliminary reinvestment zone financing
plan for the TIRZ; and
WHEREAS, by Resolution No. , adopted on , 2004, the
City authorized the creation of the Development Authority of Pearland (the
"Authority") to aid, assist and act on behalf of the City in the performance of the City's
governmental and proprietary functions with respect to, and to provide a financing
vehicle for, the TIRZ; and
WHEREAS, by Ordinance No. 1999 1341, adopted on , 2004, the
City approved and on October 5, 2004, the Boards of Directors of the TIRZ and the
Authority approved that certain Agreement by and between the City, the TIRZ, and the
Authority (the "Tri-Party Agreement"), pursuant to which the City delegated to the
Authority the power and authority to issue, sell or deliver its bonds, notes or other
obligations in accordance with the terms of the Tri-Party Agreement; and
WHEREAS, by Ordinance No. , adopted on
2004, the City authorized the Authority to issue, sell, or deliver its Tax Increment
Contract Revenue Bonds, Series 2004; and
WHEREAS, as permitted by the Act, the Authority desires to issue Tax
Increment Contract Revenue Bonds, Series 2004 upon the terms and conditions and for
the purposes herein provided.
45375 - 2004 Bond Resolution
ARTICLE II
DEFINITIONS AND INTERPRETATIONS
Section 2.1: Definitions. In this Resolution, the following terms shall have
the following meanings, unless the context clearly indicates otherwise. Terms not
defined herein shall have the meanings assigned to such terms in the Indenture:
The term "Audit" shall mean the audited annual financial statements of the
Authority prepared by an independent auditor.
The term "Business Day" shall mean any day which is not a Saturday, Sunday, or
a day on which banking institutions in the city where the principal corporate trust office
of the Paying Agent/Registrar is located are authorized by law or executive order to
close, or a legal holiday.
The term "Comptroller" shall mean the Comptroller of Public Accounts of the
State of Texas.
The term "DTC" shall mean The Depository Trust Company of New York, New
York, or any successor securities depository.
The term "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.
The term "Initial Series 2004 Bond" shall mean the Initial Series 2004 Bond
authorized by Section 3.4(d).
The term "Indenture" shall mean the Indenture of Trust dated as of
, 2004 between the Authority and
The term "Interest Payment Date' shall mean, with respect to the Series 2004
Bonds, September 1, 2005, and each March 1 and September 1 thereafter until maturity
or redemption.
The term "Issuance Date" shall mean the date on which each such Series 2004
Bond is authenticated by the Paying Agent/Registrar and delivered to and paid for by
the Underwriters.
The term "Paying Agent/Registrar" shall mean , and its
successors in that capacity.
The term "Record Date" shall mean, for any Interest Payment Date, the fifteenth
(15th) calendar day of the month next preceding each Interest Payment Date.
45375 - 2004 Bond Resolution
-2-
The term "Resolution" or "Bond Resolution" shall mean this Resolution
Authorizing the Issuance of $ Development Authority of Pearland Tax
Increment Contract Revenue Bonds, Series 2004, and all amendments hereof and
supplements hereto.
The term "Series 2004 Bond" or "Series 2004 Bonds" shall mean the Authority's
Tax Increment Contract Revenue Bonds, Series 2004 authorized by this Resolution.
The term "Underwriters" shall mean, collectively,
•
Section 2.2: Interpretations. All terms defined herein and all pronouns used
in this Resolution shall be deemed to apply equally to singular and plural and to all
genders. The titles and headings of the articles and sections of this Resolution 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.
This Resolution and all the terms and provisions hereof shall be liberally construed to
effectuate the purposes set forth herein and to sustain the validity of the Parity Bonds
and the validity of the lien on and pledge of the Pledged Revenues to secure the
payment of the Parity Bonds.
ARTICLE III
TERMS OF THE BONDS
Section 3.1: Amount, Purpose, Authorization. The Series 2004 Bonds shall
be issued in the aggregate principal amount of $ for the purpose of (1) paying
Project Costs, (2) establishing the Debt Service Reserve Fund, (3) capitalizing interest on
the Series 2004 Bonds and (4) paying Costs of Issuance, all under and pursuant to the
authority of the Act and all other apphcable law. None of the proceeds of the Series
2004 Bonds shall be used for the purpose of paying or otherwise providing for
educational facilities.
Section 3.2: Name, Designation, Date, and Interest Payment Dates. The
Series 2004 Bonds shall be designated as the "DEVELOPMENT AUTHORITY OF
PEARLAND TAX INCREMENT CONTRACT REVENUE BONDS, SERIES 2004, ' shall
be issued in fully registered form, without coupons and shall be dated November 1,
2004 (the "Dated Date"). The Series 2004 Bonds shall bear interest at the rates set forth
in Section 3.3 from the later of the Dated Date, or the most recent Interest Payment Date
to which interest has been paid or duly provided for, calculated on the basis of a 360-
day year of twelve 30-day months, payable, semiannually on March 1 and September 1,
commencing September 1, 2005, until maturity or earlier redemption.
Section 3.3: Principal Amounts and Interest Rates; Numbers and
Denomination. The Series 2004 Bonds shall be initially issued in the principal amounts
45375 - 2004 Bond Resolution
and bearing interest at the rates set forth below, and may be transferred and exchanged
as set out in this Resolution. The Series 2004 Bonds shall mature, subject to prior
redemption in accordance with this Resolution, on September 1 in each of the years and
in the amounts set out in the following schedule. The Initial Bond shall be numbered I-
1 and all other Series 2004 Bonds shall be numbered in sequence beginning with R-1.
Series 2004 Bonds delivered on transfer of or in exchange for other Series 2004 Bonds
shall be numbered in the order of their authentication by the Paying Agent/Registrar,
shall be in the denomination of $5,000 or integral multiples thereof and shall mature on
the same date and bear interest at the same rate as the Series 2004 Bond or Series 2004
Bonds in lieu of which they are delivered.
Principal Maturity Date Interest
Amount September 1 Rate
o-
0
Section 3.4: Execution and Registration of Series 2004 Bonds. (a) The Series
2004 Bonds shall be signed by the Chairman or Vice Chairman of the Board and
countersigned by the Secretary of the Board, by their manual, lithographed, or facsimile
signatures. Such facsimile signatures on the Series 2004 Bonds shall have the same
effect as if each of the Series 2004 Bonds had been signed manually and in person by
each of said officers.
(b) If any officer of the Authority whose manual or facsimile signature shall
appear on the Series 2004 Bonds shall cease to be such officer before the authentication
of such Series 2004 Bonds or before the delivery of such Series 2004 Bonds, such manual
45375 - 2004 Bond Resolution
or facsimile signature shall nevertheless be valid and sufficient for all purposes as if
such officer had remained in such office.
(c) Except as provided below, no Series 2004 Bond shall be valid or obligatory
for any purpose or be entitled to any security or benefit of this Resolution unless and
until there appears thereon the Paying Agent/Registrar's Authentication Certificate
substantially in the form provided herein, duly authenticated by manual execution by
an officer or duly authorized signatory of the Paying Agent/Registrar. In lieu of the
executed Paying Agent/Registrar's Authentication Certificate described above, the
Initial Series 2004 Bond delivered at the Issuance Date shall have attached thereto the
Comptroller's Registration Certificate substantially in the form provided herein,
manually executed by the Comptroller, or by his duly authorized agent, which
certificate shall be evidence that the Initial Series 2004 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 Authority, and has been registered by the Comptroller.
(d) On the Issuance Date, the Initial Series 2004 Bond, being a single bond
representing the entire principal amount of the Series 2004 Bonds, payable in stated
installments to the Underwriters or their designee, executed by manual or facsimile
signature of the Chairman or Vice Chairman and Secretary of the Board, approved by
the Attorney General, and registered and manually signed by the Comptroller of Public
Accounts, shall be delivered to the Underwriters or their designee. Upon payment for
the Initial Series 2004 Bond, the Paying Agent/Registrar shall cancel the Initial Series
2004 Bond and deliver Series 2004 Bonds to DTC in accordance with Section 3.12.
Section 3.5: Payment of Principal and Interest. The Paying Agent/Registrar
is hereby appointed as the registrar and paying agent for the Series 2004 Bonds. The
principal of the Series 2004 Bonds shall be payable, without exchange or collection
charges, in any coin or currency of the United States of America which, on the date of
payment, is legal tender for the payment of debts due the United States of America,
upon their presentation and surrender as they respectively become due and payable,
whether at maturity or by prior redemption, at the designated office of the Paying
Agent/Registrar. The interest on each Series 2004 Bond shall be payable by check on
the Interest Payment Date, mailed by the Paying Agent/Registrar on or before each
Interest Payment Date to the Owner of record as of the Record Date, to the address of
such Owner as shown on the Register, or by such other method, acceptable to the
Paying Agent/Registrar, requested by and at the risk and expense of the Owner.
If the date for the payment of principal or interest on any Series 2004 Bond is not
a Business Day, then the date for such payment shall be the next succeeding Business
Day, and payment on such date shall have the same force and effect as if made on the
original date such payment was due.
45375 - 2004 Bond Resolution
Section 3.6: Successor Paying Agent/ Registrars. The Authority covenants
that at all times while any Series 2004 Bonds are Outstanding it will provide a
commercial bank, or trust company or other entity duly qualified and legally
authorized to act as Paying Agent/Registrar for the Series 2004 Bonds. The Authority
reserves the right to change the Paying Agent/ Registrar for the Series 2004 Bonds on
not less than sixty (60) days written notice to the Paying Agent/Registrar, so long as
any such notice is effective not less than sixty (60) days prior to the next succeeding
principal or interest payment date on the Series 2004 Bonds. Promptly upon the
appointment of any successor Paying Agent/Registrar, the previous Paying
Agent/Registrar shall deliver the Register or a copy thereof to the new Paying
Agent/Registrar, and the new Paying Agent/Registrar shall notify each Owner, by
United States mail, first class postage prepaid, of such change and of the address of the
new Paying Agent/Registrar Each Paying Agent/Registrar hereunder, by acting in
that capacity, shall be deemed to have agreed to the provisions of this Section.
Section 3.7: Special Record Date. If interest on any Series 2004 Bond is not
paid on any Interest Payment Date and continues unpaid for thirty (30) days thereafter,
the Paying Agent/Registrar shall establish a new record date for the payment of such
interest to be known as a "Special Record Date." The Paying Agent/Registrar shall
establish a Special Record Date when funds to make such interest payment are received
from or on behalf of the Authority. Such Special Record Date shall be fifteen (15) days
prior to the date fixed for payment of such past due interest, and notice of the date of
payment and the Special Record Date shall be sent by United States mail, first class,
postage prepaid, not later than five (5) days prior to the Special Record Date, to each
Owner of record of an affected Series 2004 Bond as of the close of business on the day
prior to the mailing of such notice.
Section 3.8: Ownership; Unclaimed Principal and Interest. Subject to the
further provisions of this Section the Authority, the Paying Agent/Registrar and any
other person may treat the person in whose name any Series 2004 Bond is registered as
the absolute Owner of such Series 2004 Bond for the purpose of making and receiving
payment of the principal of or interest on such Series 2004 Bond, and for all other
purposes, whether or not such Series 2004 Bond is overdue, and neither the Authority
nor the Paying Agent/Registrar shall be bound by any notice or knowledge to the
contrary. All payments made to the person deemed to be the Owner of any Series 2004
Bond in accordance with this Section 3.8 shall be valid and effectual and shall discharge
the liability of the Authority and the Paying Agent/Registrar upon such Series 2004
Bond to the extent of the sums paid.
Amounts held by the Paying Agent/Registrar which represent principal of and
interest on the Series 2004 Bonds remaining unclaimed by the Owner after the
expiration of three (3) years from the date such amounts have become due and payable
shall be remitted to the Authority, except to the extent that they are required by law to
be reported and disposed of by the Paying Agent/Registrar in accordance with the
45375 - 2004 Bond Resolution
-6-
applicable provisions of Texas law including, to the extent applicable, Title 6 of the
Texas Property Code, as amended.
Section 3.9: Book -Entry Only System. (a) The Initial Series 2004 Bond shall
be registered in the name of . Except as provided in Section 3.10
hereof, all other Series 2004 Bonds shall be registered in the name of Cede & Co., as
nominee of DTC.
(b) With respect to Series 2004 Bonds registered in the name of Cede & Co., as
nominee of DTC, the Authority and the Paying Agent/ Registrar shall have no
responsibility or obligation to any DTC Participant or to any person on behalf of whom
such DTC Participant holds an interest in the Series 2004 Bonds, except as provided in
this Resolution. Without limiting the immediately preceding sentence, the Authority
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 Series 2004 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 Series 2004 Bonds, including any notice of redemption, or (iii)
the payment to any DTC Participant or any other person, other than an Owner, as
shown on the Register, of any amount with respect to principal of, premium, if any, or
interest on the Series 2004 Bonds. Notwithstanding any other provision of this
Resolution to the contrary, the Authority and the Paying Agent/Registrar shall be
entitled to treat and consider the person in whose name each Series 2004 Bond is
registered in the Register as the absolute Owner of such Series 2004 Bond for the
purpose of payment of principal of and interest on the Series 2004 Bonds, for the
purpose of giving notices of redemption and other matters with respect to such Series
2004 Bond, for the purpose of registering transfer with respect to such Series 2004 Bond,
and for all other purposes whatsoever. The Paying Agent/ Registrar shall pay all
principal of, premium, if any, and interest on the Series 2004 Bonds only to or upon the
order of the respective Owners, as shown in the Register as provided in this Resolution,
or their respective attorneys duly authorized in writing, and all such payments shall be
valid and effective to fully satisfy and discharge the Authority's obligations with
respect to payments of principal, premium, if any, and interest on the Series 2004 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 Series 2004 Bond certificate evidencing the obligation of the
Authority to make payments of amounts due pursuant to this Resolution Upon
delivery by DTC to the Paying Agent/Registrar of written notice to the effect that DTC
has determined to substitute a new nominee in place of Cede & Co., and subject to the
provisions of this Resolution with respect to interest checks being mailed to the Owner
of record as of the Record Date, the phrase "Cede & Co " in this Resolution shall refer to
such new nominee of DTC.
Section 3.10 Successor Securities Depository; Transfer Outside Book -Entry
Only System In the event that the Authority, in its sole discretion, determines that the
45375 - 2004 Bond Resolution
-7-
beneficial owners of the Series 2004 Bonds shall be able to obtain certificated Series 2004
Bonds, or in the event DTC discontinues the services described herein, the Authority
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, as identified by DTC, of the appointment of such successor securities
depository and transfer one or more separate Series 2004 Bonds to such successor
securities depository or (ii) notify DTC and DTC Participants, as identified by DTC, of
the availability through DTC of Series 2004 Bonds and transfer one or more separate
Series 2004 Bonds to DTC Participants having Series 2004 Bonds credited to their DTC
accounts, as identified by DTC. In such event, the Series 2004 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 Series 2004
Bonds shall designate, in accordance with the provisions of this Resolution.
Section 3.11: Payments to Cede & Co. Notwithstanding any other provision
of this Resolution to the contrary, so long as any Series 2004 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 Series 2004 Bonds, and all notices with respect to
such Series 2004 Bonds, shall be made and given, respectively, in the manner provided
in the Blanket Letter of Representations.
Section 3.12: Registration, Transfer, and Exchange. So long as any Series
2004 Bonds remain Outstanding, the Paying Agent/Registrar shall keep the Register at
its designated office and, subject to such reasonable regulations as it may prescribe, the
Paying Agent/Registrar shall provide for the registration and transfer of Series 2004
Bonds in accordance with the terms of this Resolution.
Each Series 2004 Bond shall be transferable only upon the presentation and
surrender thereof at the designated office of the Paying Agent/Registrar, duly endorsed
for transfer, or accompanied by an assignment duly executed by the Registered Owner
or his authorized representative in form satisfactory to the Paying Agent/Registrar.
Upon due presentation of any Series 2004 Bond in proper form for transfer, the Paying
Agent/Registrar shall authenticate and deliver in exchange therefor, a new Series 2004
Bond or Series 2004 Bonds, registered in the name of the transferee or transferees, in
authorized denominations and of the same maturity aggregate principal amount, and
Dated Date, and bearing interest at the same rate as the Series 2004 Bond or Series 2004
Bonds so presented.
All Series 2004 Bonds shall be exchangeable upon presentation and surrender
thereof at the designated office of the Paying Agent/Registrar for a Series 2004 Bond or
Series 2004 Bonds of the same maturity, Dated Date, and interest rate and in any
authorized denomination, in an aggregate amount equal to the unpaid principal
amount of the Series 2004 Bond or Series 2004 Bonds presented for exchange. The
45375 - 2004 Bond Resolution
-8
Paying Agent/ Registrar shall be and is hereby authorized to authenticate and deliver
exchange Series 2004 Bonds in accordance with the provisions of this Section 3.12 Each
Series 2004 Bond delivered in accordance with this Section 3.12 shall be entitled to the
benefits and security of this Resolution to the same extent as the Series 2004 Bond or
Series 2004 Bonds in lieu of which such Series 2004 Bond is delivered.
The Authority or the Paying Agent/Registrar may require the Owner of any
Series 2004 Bond to pay a sum sufficient to cover any tax or other governmental charge
that may be imposed in connection with the transfer or exchange of such Series 2004
Bond. Any fee or charge of the Paying Agent/Registrar for such transfer or exchange
shall be paid by the Authority.
The Paying Agent/Registrar shall not be required to transfer or exchange any
Series 2004 Bond during the period beginning on a Record Date or a Special Record
Date and ending on the next succeeding Interest Payment Date or to transfer or
exchange any Series 2004 Bond called for redemption during the period beginning
thirty days prior to the date fixed for redemption and ending on the date fixed for
redemption; provided, however, that this limitation shall not apply to the exchange by
the Owner of the unredeemed portion of a Series 2004 Bond called for redemption in
part.
Section 3.13: Cancellation of Series 2004 Bonds. All Series 2004 Bonds paid or
redeemed in accordance with this Resolution, and all Series 2004 Bonds in lieu of which
exchange Series 2004 Bonds or replacement Series 2004 Bonds are authenticated and
dehvered in accordance herewith, shall be cancelled upon the making of proper records
regarding such payment or redemption and retained in accordance with the Paying
Agent/Registrar's document retention policy. Upon request of the Authority therefore,
the Paying Agent/Registrar shall furnish the Authority with appropriate certificates of
cancellation of such Series 2004 Bonds.
Section 3.14: Mutilated, Lost, or Stolen Series 2004 Bonds. Upon the
presentation and surrender to the Paying Agent/Registrar of a mutilated Series 2004
Bond, the Paying Agent/Registrar shall authenticate and deliver in exchange therefor a
replacement Series 2004 Bond of like maturity, Dated Date, interest rate and principal
amount, bearing a number not contemporaneously Outstanding. The Authority or the
Paying Agent/Registrar may require the Owner of such Series 2004 Bond to pay a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection therewith and any other expenses connected therewith, including the fees
and expenses of the Paying Agent/Registrar.
If any Series 2004 Bond is lost, apparently destroyed, or wrongfully taken, the
Authority, pursuant to the applicable laws of the State of Texas and in the absence of
notice or knowledge that such Series 2004 Bond has been acquired by a bona fide
purchaser, shall execute and the Paying Agent/Registrar shall authenticate and deliver
45375 - 2004 Bond Resolution
-9-
a replacement Series 2004 Bond of like maturity, Dated Date, interest rate and principal
amount, bearing a number not contemporaneously Outstanding, provided that the
Owner thereof shall have:
(1) furnished to the Authority and the Paying Agent/Registrar satisfactory
evidence of the ownership of and the circumstances of the loss,
destruction or theft of such Series 2004 Bond;
(2) furnished such security or indemnity as may be required by the Paying
Agent/Registrar and the Authority to save them harmless;
paid 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 may be imposed; and
(4) met any other reasonable requirements of the Authority and the Paying
Agent/ Registrar.
If, after the delivery of such replacement Series 2004 Bond, a bona fide purchaser of the
original Series 2004 Bond in lieu of which such. replacement Series 2004 Bond was
issued presents for payment such original Series 2004 Bond, the Authority and the
Paying Agent/Registrar shall be entitled to recover such replacement Series 2004 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
Authority or the Paying Agent/Registrar in connection therewith
If any such mutilated, lost, apparently destroyed or wrongfully taken Series 2004
Bond has become or is about to become due and payable, the Authority in its discretion
may, instead of issuing a replacement Series 2004 Bond, authorize the Paying
Agent/Registrar to pay such Series 2004 Bond.
Each replacement Series 2004 Bond delivered in accordance with this Section 3.14
shall be entitled to the benefits and security of this Resolution to the same extent as the
Series 2004 Bond or Series 2004 Bonds in lieu of which such replacement Series 2004
Bond is delivered.
(3)
Section 3.15: Redemption. The Series 2004 Bonds are subject to redemption
on the dates and for the redemption prices set forth in the form of the Series 2004 Bond
in this Resolution.
Principal amounts may be redeemed only in integral multiples of $5,000 If a
Series 2004 Bond subject to redemption is in a denomination larger than $5,000, a
portion of such Series 2004 Bond may be redeemed, but only in integral multiples of
$5,000. In selecting portions of Series 2004 Bonds for redemption, the Paying Agent/
45375 - 2004 Bond Resolution
-10-
Registrar shall treat each Series 2004 Bond as representing that number of Series 2004
Bonds of $5,000 denomination which is obtained by dividing the principal amount of
such Series 2004 Bond by $5,000. The Paying Agent/Registrar shall select the particular
Series 2004 Bonds to be redeemed within any given maturity by lot or other random
selection method. Upon surrender of any Series 2004 Bond for redemption in part, the
Paying Agent/Registrar, in accordance with this Resolution shall authenticate and
deliver in exchange therefor a Series 2004 Bond or Series 2004 Bonds of like maturity
and interest rate in an aggregate principal amount equal to the unredeemed portion of
the Series 2004 Bond so surrendered.
Unless waived by the Owner, notice of any redemption identifying the Series
2004 Bonds to be redeemed shall be given as provided in the form of Series 2004 Bond
in this Resolution. Any notice given as provided in this Section 3.15 shall be
conclusively presumed to have been duly given, whether or not the Owner receives
such notice. By the date fixed for redemption, due provision shall be made with the
Paying Agent/Registrar for payment of the redemption price of the Series 2004 Bonds
or portions thereof to be redeemed, plus accrued interest to the date fixed for
redemption. When Series 2004 Bonds have been called for redemption in whole or in
part and due provision has been made to redeem the same as herein provided, the
Series 2004 Bonds or portions thereof so redeemed shall no longer be regarded as
Outstanding except for the purpose of receiving payment solely from the funds so
provided for redemption, and the rights of the Owners to collect interest which would
otherwise accrue after the redemption date on any Series 2004 Bond or portion thereof
called for redemption shall terminate on the date fixed for redemption.
Section 3.16: Limited Obligations. THE SERIES 2004 BONDS AND ALL
PARITY BONDS ARE A LIMITED OBLIGATION OF THE AUTHORITY, PAYABLE
SOLELY OUT OF THE PLEDGED REVENUES, WHICH IS THE SOLE ASSET OF THE
AUTHORITY PLEDGED THEREFOR. THE SERIES 2004 BONDS ARE OBLIGATIONS
SOLELY OF THE AUTHORITY AND DO NOT CONSTITUTE, WITHIN THE
MEANING OF ANY STATUTORY OR CONSTITUTIONAL PROVISION, AN
INDEBTEDNESS, AN OBLIGATION OR A LOAN OF CREDIT OF THE CITY OF
PEARLAND, THE STATE OF TEXAS, ALVIN INDEPENDENT SCHOOL DISTRICT,
BRAZORIA COUNTY, FORT BEND COUNTY OR ANY OTHER MUNICIPALITY,
COUNTY, OR OTHER MUNICIPAL OR POLITICAL CORPORATION OR
SUBDIVISION OF THE STATE OF TEXAS. NEITHER THE CITY OF PEARLAND,
ALVIN INDEPENDENT SCHOOL DISTRICT, BRAZORIA COUNTY NOR FORT
BEND COUNTY IS OBLIGATED TO MAKE PAYMENTS ON THE SERIES 2004
BONDS.
45375 - 2004 Bond Resolution
-11-
ARTICLE IV
FORM OF SERIES 2004 BONDS AND CERTIFICATES
Section 4.1: Forms The form of the Series 2004 Bonds, including the form of
the Paying Agent/Registrar's authentication certificate, the form of assignment, and the
form of the Comptroller's Registration Certificate for the Series 2004 Bonds to be
initially issued, shall be substantially as follows, with such additions, deletions and
variations, as may be necessary or desirable and not prohibited by this Resolution,
including any legend regarding bond insurance if such insurance is obtained by the
Underwriters:
(a) Form of Bond
Number
Registered
United States of America
State of Texas
DEVELOPMENT AUTHORITY OF PEARLAND
TAX INCREMENT CONTRACT REVENUE BOND
SERIES 2004
$
Registered
INTEREST RATE• MATURITY DATE DATED DATE• CUSIP:
September 1, 20 November 1, 2004
REGISTERED OWNER:
PRINCIPAL AMOUNT: DOLLARS
The DEVELOPMENT AUTHORITY OF PEARLAND (the ' Authority"), a not -
for -profit local government corporation created by the City of Pearland (the "City"), in
the Counties of Brazoria and Fort Bend, in the State of Texas, for value received,
promises to pay, but solely from certain Pledged Revenues as hereinafter provided, to
the Registered Owner identified above or registered assigns, on the Maturity Date
specified above, upon presentation and surrender of this Series 2004 Bond at the
designated office of the Paying Agent/Registrar (the "Paying Agent/Registrar"),
initially, , the principal amount identified above, in any
coin or currency of the United States of America which on the date of payment of such
principal is legal tender for the payment of debts due the United States of America, and
to pay, solely from such Pledged Revenues, interest thereon at the rate shown above,
45375 - 2004 Bond Resolution
-12-
calculated on the basis of a 360-day year of twelve 30-day months, from the later of the
Dated Date identified above, or the most recent interest payment date to which interest
has been paid or duly provided for. Interest on this Series 2004 Bond is payable by
check on March 1 and September 1, beginning on September 1, 2005, mailed to the
Registered Owner as shown on the books of registration kept by the Paying
Agent/Registrar as of the fifteenth (15th) calendar day of the month next preceding
each interest payment date, or by such other method, acceptable to the Paying
Agent/Registrar, requested by and at the risk and expense of the Registered Owner.
THE SERIES 2004 BONDS AND ALL PARITY BONDS ARE A LIMITED
OBLIGATION OF THE AUTHORITY, PAYABLE SOLELY OUT OF THE PLEDGED
REVENUES, WHICH IS THE SOLE ASSET OF THE AUTHORITY PLEDGED
THEREFOR. THE SERIES 2004 BONDS ARE OBLIGATIONS SOLELY OF THE
AUTHORITY AND DO NOT CONSTITUTE, WITHIN THE MEANING OF ANY
STATUTORY OR CONSTITUTIONAL PROVISION, AN INDEBTEDNESS, AN
OBLIGATION OR A LOAN OF CREDIT OF THE CITY OF PEARLAND, THE STATE
OF TEXAS, ALVIN INDEPENDENT SCHOOL DISTRICT, BRAZORIA COUNTY,
FORT BEND COUNTY OR ANY OTHER MUNICIPALITY, COUNTY, OR OTHER
MUNICIPAL OR POLITICAL CORPORATION OR SUBDIVISION OF THE STATE OF
TEXAS. NEITHER THE CITY OF PEARLAND, ALVIN INDEPENDENT SCHOOL
DISTRICT, BRAZORIA COUNTY NOR FORT BEND COUNTY IS OBLIGATED TO
MAKE PAYMENTS ON THE SERIES 2004 BONDS.
THIS SERIES 2004 BOND IS ONE OF A DULY AUTHORIZED SERIES OF
SERIES 2004 BONDS aggregating $ issued for the purpose of (1) paying
Project Costs, (2) establishing the Debt Service Reserve Fund, (3) capitalizing interest on
the Series 2004 Bonds and (4) paying Costs of Issuance, all under and pursuant to the
authority of the Act and all other applicable laws, and a resolution adopted by the
Authority on , 2004 (the "Resolution"). None of the proceeds of the
Series 2004 Bonds shall be used for the purpose of paying or otherwise providing for
educational facilities.
THIS SERIES 2004 BOND AND THE SERIES OF WHICH IT IS A PART are
limited obligations of the Authority that are together with all other Parity Bonds
heretofore or hereafter issued under the Indenture described below, payable from, and
are equally and ratably secured by a lien on the Pledged Revenues, which include the
Contract Tax Increments, moneys on deposit in the Pledged Revenue Fund, the Debt
Service Fund, and the Debt Service Reserve Fund, and interest earned on moneys
deposited therein, as defined and more fully provided in the Indenture of Trust dated
as of February 1, 2001, as defined and more fully provided in the Indenture of Trust
dated as of , 2004 between the Authority and (the "Indenture").
This Series 2004 Bond and the series of which it is a part and all other Parity Bonds,
together with the interest thereon, are payable solely from such Pledged Revenues.
45375 - 2004 Bond Resolution
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THE AUTHORITY RESERVES THE RIGHT to redeem Series 2004 Bonds
maturing on or after September 1, , in whole or in part from time to time, in
integral multiples of $5,000, on September 1, , or any date thereafter at par plus
accrued interest on the principal amounts called for redemption to the date fixed for
redemption. Reference is made to the Resolution for complete details concerning the
manner of redeeming the Series 2004 Bonds.
UNLESS WAIVED BY THE OWNER, NOTICE OF ANY REDEMPTION shall be
given at least thirty (30) days prior to the date fixed for redemption by first class mail,
addressed to the Registered Owners of each Series 2004 Bond to be redeemed in whole
or in part at the address shown on the books of registration kept by the Paying
Agent/Registrar. Such notices shall state the redemption date, the redemption price,
the place at which Series 2004 Bonds are to be surrendered for payment and, if less than
all Series 2004 Bonds Outstanding of a particular maturity are to be redeemed, the
numbers of the Series 2004 Bonds or portions thereof of such maturity to be redeemed.
When Series 2004 Bonds or portions thereof have been called for redemption, and due
provision has been made to redeem the same, the principal amounts so redeemed shall
be payable solely from the funds provided for redemption, and interest which would
otherwise accrue on the amounts called for redemption shall terminate on the date fixed
for redemption.
THIS SERIES 2004 BOND IS TRANSFERABLE only upon presentation and
surrender at the designated office of the Paying Agent/Registrar, duly endorsed for
transfer or accompanied by an assignment duly executed by the Registered Owner or
his authorized representative, subject to the terms and conditions of the Resolution.
THIS SERIES 2004 BOND IS EXCHANGEABLE at the designated office of the
Paying Agent/Registrar for Series 2004 Bonds in the principal amount of $5,000 or any
integral multiple thereof, subject to the terms and conditions of the Resolution.
NEITHER THE AUTHORITY NOR THE PAYING AGENT/ REGISTRAR shall be
required to transfer or exchange any Series 2004 Bond during the period beginning on
the fifteenth calendar day of the month next preceding any interest payment date and
ending on such interest payment date or to transfer any Series 2004 Bond called for
redemption during the 30 day period prior to the redemption date.
THIS SERIES 2004 BOND shall not be valid or obligatory for any purpose or be
entitled to any benefit under the Resolution unless this Series 2004 Bond is either (i)
registered by the Comptroller of Public Accounts of the State of Texas by registration
certificate attached or affixed hereto or (ii) authenticated by the Paying Agent/Registrar
by due execution of the authentication certificate endorsed hereon.
THE AUTHORITY HAS RESERVED THE RIGHT to issue Additional Parity
Bonds, subject to the restrictions contained in the Resolution and the Indenture, which
45375 - 2004 Bond Resolution
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may be equally and ratably payable from, and secured by a lien on and pledge of, the
Pledged Revenues in the same manner and to the same extent as this Series 2004 Bond
and the series of which it is a part.
IT IS HEREBY DECLARED AND REPRESENTED that this Series 2004 Bond has
been duly and validly issued and delivered, that all acts, conditions, and things
required or proper to be performed, exist, and be done precedent to or in the issuance
and delivery of this Series 2004 Bond have been performed, existed, and been done in
accordance with law; that the Series 2004 Bonds do not exceed any statutory limitation;
and that provision has been made for the payment of the principal of and interest on
this Series 2004 Bond and all of the Parity Bonds by the creation of the aforesaid lien on
and pledge of the Pledged Revenues as provided in the Indenture.
IN WITNESS WHEREOF, the Authority has caused this Series 2004 Bond to be
executed by the manual or facsimile signatures of the Chairman and the Secretary.
DEVELOPMENT AUTHORITY OF
PEARLAND
Chairman, Board of Directors
Secretary, Board of Directors
45375 - 2004 Bond Resolution
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(b) Form of Registration Certificate of Comptroller of Public Accounts.
COMPTROLLER'S REGISTRATION CERTIFICATE• REGISTER NO.
I hereby certify that this Series 2004 Bond has been examined, certified as to
validity, and approved by the Attorney General of the State of Texas, and that this
Series 2004 Bond has been registered by the Comptroller of Public Accounts of the State
of Texas.
WITNESS MY SIGNATURE AND SEAL this
Comptroller of Public Accounts
of the State of Texas
(SEAL)
(c) Form of Paying Agent/Registrar's Authentication Certificate
AUTHENTICATION CERTIFICATE
It is hereby certified that this Series 2004 Bond
has been delivered pursuant to the Bond
Resolution described in the text of this
Series 2004 Bond.
, as Trustee
By:
Authorized Signature
Date of Authentication:
45375 - 2004 Bond Resolution
-16-
(d) Form of Assignment
Assignment
For value received, the undersigned hereby sells, assigns, and transfers unto
(Please print or type name, address, and zip code of Transferee)
(Please insert Social Security or Taxpayer Identification Number of
Transferee)
the within Series 2004 Bond and all rights thereunder, and hereby irrevocably
constitutes and appoints
attorney to transfer said Series 2004 Bond on the books kept for registration thereof,
with full power of substitution in the premises.
DATED*
Signature Guaranteed:
correspond
Registered Owner
NOTICE• The signature above must
to the name of the Registered Owner as shown
on the face of this Series 2004 Bond in every
particular, without any alteration, enlargement
or change whatsoever.
NOTICE• Signature must be
guaranteed by an institution which
is a participant in the Securities
Transfer Agent Medallion Program
("STAMP") or similar program.
(e) The Initial Series 2004 Bond shall be in the form set forth in paragraphs
(a), (b) and (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" and the word ' CUSIP' deleted;
(ii) in the first paragraph of the Series 2004 Bond, the words "on the
maturity date specified above" and 'at the rate shown above" shall be deleted
and the following shall be inserted at the end of the first sentence '..., with such
principal to be paid in installments on September 1 in each of the years and in the
principal amounts identified in the following schedule and with such
45375 - 2004 Bond Resolution
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installments bearing interest at the per annum rates set forth in the following
schedule:
[Information to be inserted from schedule in Section 3.3]
(iii) the Initial Series 2004 Bond shall be numbered CI-1
Section 4.2: Legal Opinion; Cusip Numbers; Bond Insurance. The
approving opinion of Bond Counsel and CUSIP Numbers may be printed on the Bonds,
but errors or omissions in the printing of such opinion or such numbers shall have no
effect on the validity of the Bonds. If bond insurance is obtained by the Underwriters,
the Bonds may bear an appropriate legend as provided by the Insurer.
ARTICLE V
ADDITIONAL BONDS
Section 5.1: Additional Parity Bonds. The Authority reserves the right to
issue, for any lawful purpose (including the refunding of any previously issued Parity
Bonds), one or more series of Additional Parity Bonds payable from and secured by a
lien on the Pledged Revenues, on a parity with the Series 2004 Bonds, and any
previously issued Additional Parity Bonds; provided, however, that Additional Parity
Bonds may be issued only in accordance with the provisions of Article III of the
Indenture.
Section 5.2: Subordinate Lien Obligations. The Authority reserves the right
to issue, for any lawful purpose, bonds, notes or other obligations secured in whole or
in part by liens on the Pledged Revenues that are junior and subordinate to the lien on
Pledged Revenues securing payment of the Parity Bonds. Such subordinate lien
obligations may be further secured by any other source of payment lawfully available
for such purposes.
ARTICLE VI
COVENANTS AND PROVISIONS
RELATING TO ALL PARITY BONDS
Reference is made to Article V of the Indenture. All covenants made by the
Authority therein are hereby incorporated into this Resolution.
ARTICLE VII
PROVISIONS CONCERNING SALE AND
APPLICATION OF PROCEEDS OF SERIES 2004 BONDS
45375 - 2004 Bond Resolution
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Section 7.1: Sale. The Series 2004 Bonds are hereby sold and shall be
delivered to the Underwriters at a price of $ (representing the par
amount of the Series 2004 Bonds, less an Underwriter's discount of $
and an original issue discount of $ ), plus accrued interest thereon to the
date of delivery all in accordance with the Bond Purchase Agreement dated as of
, 2004 which has been presented to and is hereby approved by the
Authority, subject to the approval of the Attorney General of Texas and Bond Counsel,
and such price and terms are hereby found and determined to be the most
advantageous reasonably obtainable by the Authority. The Chairman and other
appropriate officers, agents and representatives of the Authority are hereby authorized
to do any and all things necessary or desirable to provide for the issuance and delivery
of the Series 2004 Bonds.
Section 7.2: Application of Proceeds. Proceeds from the sale of the Series
2004 Bonds shall, promptly upon receipt by the Trustee, be applied as follows:
(a) The amount sufficient to establish the Reserve Requirement shall be
transferred into the Debt Service Reserve Fund.
(b) The Debt Service Fund shall be credited with the amount of accrued
interest and interest capitalized on the Series 2004 Bonds.
(c) All remaining proceeds from the sale of the Series 2004 Bonds shall be
deposited into the Project Fund. The remaining proceeds in the Project
Fund may be used to pay or reimburse the Authority for Project Costs
including Costs of Issuance.
ARTICLE VIII
TAX EXEMPTION
Section 81 General Tax Covenant. The Authority intends that the interest
on the Series 2004 Bonds shall be excludable from gross income for purposes of federal
income taxation pursuant to sections 103 and 141 through 150 of the Code, and
applicable Regulations. The Authority 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 Series 2004 Bonds to be includable in gross
income, as defined in section 61 of the Code, of the Owners thereof for purposes of
federal income taxation. In particular, the Authority covenants and agrees to comply
with each requirement of this Article VIII; provided, however, that the Authority shall
not be required to comply with any particular requirement of this Article VIII if the
Authority 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 Series 2004 Bonds or if the
45375 - 2004 Bond Resolution
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Authority has received a Counsel's Opinion to the effect that compliance with some
other requirement set forth in this Article VIII 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 this Article VIII.
Section 8.2: No Private Use or Payment and No Private Loan Financing.
The Authority covenants and agrees that it will make such use of the proceeds of the
Series 2004 Bonds including interest or other investment income derived from Series
2004 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
Series 2004 Bonds will not be "private activity bonds" within the meaning of section 141
of the Code and the Regulations promulgated thereunder. Moreover, the Authority
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 Series
2004 Bonds are delivered, that the proceeds of the Series 2004 Bonds will not be used in
a manner that would cause the Series 2004 Bonds to be "private activity bonds" within
the meaning of section 141 of the Code and the Regulations promulgated thereunder.
Section 8.3: No Federal Guaranty.. The Authority 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 Series 2004 Bonds to be ' federally
guaranteed" within the meaning of section 149(b) of the Code and applicable
regulations thereunder, except as permitted by section 149(b)(3) of the Code and such
regulations.
Section 8.4: Series 2004 Bonds Are Not Hedge Bonds. The Authority
covenants and agrees that it has not taken and will not 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 Series 2004 Bonds to be ' hedge
bonds" within the meaning of section 149(g) of the Code and the applicable Regulations
thereunder.
Section 8.5: No -Arbitrage Covenant. The Authority 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 Series 2004 Bonds are
delivered, the Authority will reasonably expect that the proceeds of the Series 2004
Bonds will not be used in a manner that would cause the Series 2004 Bonds to be
'arbitrage bonds" within the meaning of section 148(a) of the Code and applicable
regulations thereunder. Moreover, the Authority covenants and agrees that it will
make such use of the proceeds of the Series 2004 Bonds including interest or other
investment income derived from Series 2004 Bond proceeds, regulate investments of
proceeds of the Series 2004 Bonds, and take such other and further action as may be
45375 - 2004 Bond Resolution
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required so that the Series 2004 Bonds will not be "arbitrage bonds" within the meaning
of section 148(a) of the Code and applicable regulations thereunder.
Section 8.6: Arbitrage Rebate. The Authority will take all necessary steps to
comply with the requirement that certain amounts earned by the Authority on the
investment of the "gross proceeds" of the Series 2004 Bonds (within the meaning of
section 148(f)(6)(B) of the Code), be rebated to the federal government. Specifically, the
Authority will (i) maintain records regarding the investment of the gross proceeds of
the Series 2004 Bonds as may be required to calculate the amount earned on the
investment of the gross proceeds of the Series 2004 Bonds separately from records of
amounts on deposit in the funds and accounts of the Authority allocable to other bond
issues of the Authority or moneys which do not represent gross proceeds of any bonds
of the Authority, (ii) calculate at such times as are required by applicable regulations,
the amount earned from the investment of the gross proceeds of the Series 2004 Bonds
which is required to be rebated to the federal government, and (iii) pay, not less often
than every fifth anniversary date of the Issuance Date and within sixty days following
retirement of the Series 2004 Bonds, all amounts required to be rebated to the federal
government Further, the Authority 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 Series 2004 Bonds 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 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 8.7: Information Reporting. The Authority covenants and agrees to
file or cause to be filed with the Secretary of the Treasury, not later than the fifteenth
(15th) day of the second calendar month after the close of the calendar quarter in which
the Issuance Date occurs, an information statement concerning the Series 2004 Bonds,
all under and in accordance with section 149(e) of the Code and applicable regulations
thereunder.
Section 8.8: Continuing Obligation. Notwithstanding any other provision of
this Resolution or the Indenture, the Authority's obligations under the covenants and
provisions of this Article VIII shall survive the defeasance and discharge of the Series
2004 Bonds.
ARTICLE IX
CONTINUING DISCLOSURE UNDERTAKING
Section 9.1: Annual Reports. The Authority shall provide annually to each
NRMSIR and any SID, within six months after the end of each fiscal year of the
45375 - 2004 Bond Resolution
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Authority ending in or after 2005, Annual Financial Information and Operating Data.
Any financial statements so provided shall be (1) prepared in accordance with the
Accounting Principles described in this Resolution and (2) audited, if the Authority or
Participant 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 Authority shall provide
unaudited financial statements for the applicable fiscal year to each NRMSIR and any
SID within such six month period, and audited financial statements, when the audit
report on such statements becomes available.
If the Authority changes its fiscal year, the Authority 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 Authority otherwise would be required to provide financial
information and operating data pursuant to this Article IX.
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 9.2: Material Event Notices. The Authority 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 Series 2004 Bonds, if such event is material within the meaning of the
federal securities laws:
(a) Principal and interest payment delinquencies;
(b) Non-payment related defaults;
(c) Unscheduled draws on debt service reserves reflecting financial
difficulties;
(d) Unscheduled draws on credit enhancements reflecting financial
difficulties;
(e) Substitution of credit or liquidity providers, or their failure to perform;
(f) Adverse tax opinions or events affecting the tax-exempt status of the
Series 2004 Bonds;
(g) Modifications to rights of holders of the Series 2004 Bonds;
(h) Series 2004 Bond calls;
(i) Defeasances;
(j) Release, substitution, or sale of property securing repayment of the Series
2004 Bonds; and
(k) Rating changes.
45375 - 2004 Bond Resolution
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The Authority shall notify any SID and either each NRMSIR or the MSRB, in a
timely manner, of any failure by the Authority to provide financial information or
operating data in accordance with Section 9.1 by the time required.
Section 9.3: Limitations, Disclaimers, and Amendments. The Authority
shall be obligated to observe and perform the covenants specified in this Article IX for
so long as, but only for so long as, the Authority remains an "obligated person' with
respect to the Series 2004 Bonds within the meaning of the Rule, except that the
Authority in any event will give the notice required by Section 9.2 of any Series 2004
Bond calls and defeasance that cause the Authority to be no longer such an "obligated
person."
The provisions of this Article IX are for the sole benefit of the Registered Owners
and beneficial owners of the Series 2004 Bonds, and nothing in this Article IX, express or
implied, shall give any benefit or any legal or equitable nght, remedy, or claim
hereunder to any other person. The Authority undertakes to provide only the financial
information, operating data, financial statements, and notices which it has expressly
agreed to provide pursuant to this Article IX and does not hereby undertake to provide
any other information that may be relevant or material to a complete presentation of the
Authority's financial results, condition, or prospects or hereby undertake to update any
information provided in accordance with this Article IX or otherwise, except as
expressly provided herein. The Authority does not make any representation or
warranty concerning such information or its usefulness to a decision to invest in or sell
Series 2004 Bonds at any future date.
UNDER NO CIRCUMSTANCES SHALL THE AUTHORITY BE LIABLE TO THE
REGISTERED OWNER OR BENEFICIAL OWNER OF ANY SERIES 2004 BOND OR
ANY OTHER PERSON, IN CONTRACT OR TORT, FOR DAMAGES RESULTING IN
WHOLE OR IN PART FROM ANY BREACH BY THE AUTHORITY, WHETHER
NEGLIGENT OR WITHOUT FAULT ON ITS PART, OF ANY COVENANT SPECIFIED
IN THIS ARTICLE IX, 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
No default by the Authority in observing or performing its obligations under this
Article IX shall constitute a breach of or default under this Resolution for purposes of
any other provision of this Resolution.
Nothing in this Article IX is intended or shall act to disclaim, waive, or otherwise
limit the duties of the Authority under federal and state securities laws.
The provisions of this Article IX may be amended by the Authority 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
45375 - 2004 Bond Resolution
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Authority or the Participants but only if (1) the provisions of this Article IX, as so
amended, would have permitted the Underwriters to purchase or sell Series 2004 Bonds
in the original primary offering of the Series 2004 Bonds in compliance with the Rule,
taking into account any amendments and interpretations of the Rule to the date of such
amendment, as well as such changed circumstances, and (2) either (a) the Registered
Owners of a majority in aggregate principal amount (or any greater amount required by
any other provision of this Resolution that authorizes such an amendment) of the
Outstanding Series 2004 Bonds consent to such amendment or (b) a person that is
unaffiliated with the Authority (such as nationally recognized bond counsel)
determines that such amendment will not materially impair the interests of the
Registered Owners and beneficial owners of the Series 2004 Bonds If the Authority so
amends the provisions of this Article IX, it shall include with any amended financial
information or operating data next provided in accordance with Section 9.1 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. The
Authority may also repeal or amend the provisions of this Article IX if the SEC amends
or repeals the applicable provisions of the Rule or any court of final jurisdiction enters
judgment that such provisions of the Rule are invalid, but in either case only if and to
the extent that its right to do so would not prevent the Underwriters from lawfully
purchasing or selling Series 2004 Bonds in the primary offering of the Series 2004 Bonds.
Section 9.4: Definitions.
The term "Annual Financial Information and Operating Data" shall mean the
financial information and operating data with respect to the Authority and the
Participants in the final Official Statement authorized by this Resolution in the tables
and schedules under the headings "FINANCIAL INFORMATION,' 'TAX
INCREMENT COLLECTIONS,' and "PLAN OF FINANCING Debt Service
Requirements."
The term "Accounting Principles" shall mean the accounting principles
described in the notes to the Audit as such principles may be changed from time to time
to comply with State laws or regulations.
The term "MSRB" shall mean the Municipal Securities Rulemaking Board.
The term "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.
The term "Rule" shall mean SEC Rule 15c2-12, as amended from time to time.
The term "SEC" shall mean the United States Securities and Exchange
Commission.
45375 - 2004 Bond Resolution
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The term "SID" shall mean 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.
ARTICLE X
AUTHORIZATION AND CONFIRMATION OF AGREEMENTS
The Board hereby approves issuance of the Series 2004 Bonds and all reasonable
agreements necessary in connection with the issuance of the Series 2004 Bonds,
including without limitation the following• the Indenture of Trust by and between the
Authority and , as Trustee, in the form attached hereto as Exhibit A; the
Paying Agent/Registrar Agreement by and between the Authority and
, in the form attached hereto as Exhibit B; the Bond Purchase
Agreement by and between the Authority and , as
representative of the Underwriters, in the form attached hereto as Exhibit C• the
Preliminary Official Statement, in the form attached hereto as Exhibit D; and the
preparation of the Final Official Statement reflecting the terms and provisions of this
Bond Resolution; and any and all other documents and agreements reasonable and
necessary to issue the Series 2004 Bonds (collectively, the "Agreements"). The Board,
by a majority vote of its members, at a regular meeting hereby approves the form,
terms, and provisions of the Agreements and authorizes the execution and delivery of
the Agreements.
ARTICLE XI
MISCELLANEOUS
Section 11.1: Further Proceedings. The Chairman, Vice Chairman, Secretary
and other appropriate officials of the Authority are hereby authorized and directed to
do any and all things necessary and/ or convenient to carry out the intent, purposes and
terms of this Resolution, including the execution and delivery of such certificates,
documents or papers necessary and advisable.
Section 11.2: Severability. If any Section, paragraph, clause or provision of
this Resolution shall for any reason be held to be invalid or unenforceable, the invalidity
or unenforceability of such Section, paragraph, clause or provision shall not affect any
of the remaining provisions of this Resolution.
Section 11.3: Open Meeting. It is hereby officially found and determined that
the meeting at which this Resolution was adopted was open to the public, and that
public notice of the time, place and purpose of said meeting was given, all as required
by the Texas Open Meetings Act.
45375 - 2004 Bond Resolution
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Section 11 4: Parties Interested. Nothing in this Resolution expressed or
implied is intended or shall be construed to confer upon, or to give to, any person or
entity, other than the Authority, the Paying Agent/Registrar, the Trustee and the
Owners of the Series 2004 Bonds, any right, remedy or claim under or by reason of this
Resolution or any covenant, condition or stipulation hereof, and all covenants,
stipulations, promises and agreements in this Resolution shall be for the sole and
exclusive benefit of the Authority, the Paying Agent/Registrar, the Trustee and the
Owners of the Series 2004 Bonds.
Section 11.5: Repealer. All orders, resolutions and ordinances, or parts
thereof, inconsistent herewith are hereby repealed to the extent of such inconsistency.
Section 11.6: Effective Date. This Resolution shall become effective
immediately upon passage by this Authority and signature of the Chairman or Vice
Chairman of the Authority.
45375 - 2004 Bond Resolution
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Draft 11/10/04
PASSED AND APPROVED this day of November, 2004.
Chairman
ATTEST:
By:
Secretary, Board of Directors
45375 - 2004 Bond Resolution
Draft 11/10/04
Exhibits
A. Indenture of Trust (Tab )
B. Paying Agent/Registrar Agreement (Tab
C. Bond Purchase Agreement (Tab )
D. Preliminary Official Statement (Tab )
)
45375 - 2004 Bond Resolution