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Ord 700 Authorizing the Issuance and Sale of Certifications of Obligationi ! ORDINANCE ! i1 AT,T(-WA*1KA1TCF. 4TAORIZMG TAE ! F l 1 ! 17'11 OF T •/ TEXAS COMBINATION TAX AND REVENUE CERTIFICATES OF OBLIGATION, SER 1LEVYING 1> VALOREM1 PROVIDING FOR THE SECURIT FOR AND PAYMENT OF SAID CERTIFICATES; APPROVING THE OFFFICI CI STATEMENT; PROVIDING AN EFFECTIVE DATE; AND ENACTING OTHER PROVISIO RELATING ! THE THE STATE OF TEXAS § TOWN OF WHEREAS, the Town Council of the Town of Westlake, Texas (the "Issuer"), deems it advisable to issue Certificates of Obligation in the amount and for the purposes hereinafter set forth; WHEREAS, the Certificates of Obligation hereinafter authorized and designated are to be issued and delivered for cash pursuant to Subchapter C of Chapter 271, Local Government Code and Subchapter B, Chapter 1502, Government Code; WHEREAS, the Town Council has heretofore passed a resolution authorizing and directing the Town Secretary to give notice of intention to issue Certificates of Obligation, and said notice has been duly published in a newspaper of general circulation in said Town, said newspaper being a "newspaper" as defined in §2051.044, Texas Government Code; WHEREAS, the Town received no petition from the qualified electors of the Town protesting the issuance of such Certificates of Obligation; WHEREAS, it is considered to be to the best interest of the Town that said interest-bearing Certificates of Obligation be issued; and WHEREAS, It is officially found, determined, and declared that the meeting at which this Ordinance has been adopted was open to the public and public notice of the time, place and subject matter of the public business to be considered and acted upon at said meeting, including this Ordinance, was given, all as required by the applicable provisions of Tex. Gov't Code Ann. ch. 551; Now, Therefore BE IT ORDAINED BY THE TOWN COUNCIL OF THE TOWN OF WESTLAKE, TEXAS, SECTION 1. RECITALS, AMOUNT ANIS PURPOSE OF THE CERTIFICATES. The recitals set forth in the preamble hereof are incorporated herein and shall have the same force and effect as if set forth in this Section. The certificates of the Town of Westlake, Texas (the "Issuer") are hereby authorized to be issued and delivered in the aggregate principal amount of $9,385,000 for paying all or a portion of the Issuer's contractual obligations incurred in connection with (i) constructing and equipping buildings and related improvements at the Westlake Academy to be used for a cafetorium, for use as a cafeteria, gymnasium and auditorium, a classroom building and a field house; (ii) constructing, installing, acquiring and equipping improvements, additions and extensions to the Town's waterworks and sewer system, including a ground storage tank; and (iii) paying legal, fiscal and engineering fees in connection with such projects (collectively, the "Project"). Ordinance 700 Pagel of 26 SECTION 2. DESIGNATION, DATE, DENOMINATIONS, NUMBERS, AND MATURITIES AND INTEREST RATES OF CERTIFICATES. Each certificate issued pursuant to this Ordinance shall be designated: "TOWN OF WESTLAKE, TEXAS COMBINATION TAX AND REVENUE CERTIFICATE OF OBLIGATION, SERIES 2013," and initially there shall be issued, sold, and delivered hereunder one fully registered certificate, without interest coupons, dated April 1, 2013, in the principal amount stated above and in the denominations hereinafter stated, numbered T-1, with certificates issued in replacement thereof being in the denominations and principal amounts hereinafter stated and numbered consecutively from R-1 upward, payable to the respective Registered Owners thereof (with the initial certificate being made payable to the initial purchaser as described in Section 9 hereof), or to the registered assignee or assignees of said certificates or any portion or portions thereof (in each case, the 'Registered Owner"), and said certificates shall mature and be payable serially on February 15 in each of the years and in the principal amounts, respectively, and shall bear interest from the dates set forth in the FORM OF CERTIFICATE set forth in Section 4 of this Ordinance to their respective dates of maturity or redemption prior to maturity at the rates per annum, as set forth in the following schedule: The term "Certificates" as used in this Ordinance shall mean and include collectively the certificates initially issued and delivered pursuant to this Ordinance and all substitute certificates exchanged therefor, as well as all other substitute certificates and replacement certificates issued pursuant hereto, and the term "Certificate" shall mean any of the Certificates. (a) Appointment of Paving Agent/Registrar. The Issuer hereby appoints U.S. Bank National Association, Dallas, Texas, to serve as paying agent and registrar for the Certificates (the "Paying Agent/Registrar"). The Mayor or Town Manager is authorized and directed to execute and deliver in the name and under the corporate seal and on behalf of the Issuer a Paying Agent/Registrar Agreement with the Paying Agent/Registrar in substantially the form presented at this meeting. (b) Registration, Transfer, Conversion and Exchange. The Issuer shall keep or cause to be kept at the corporate trust office of the Paying Agent/Registrar books or records for the registration of the transfer, conversion and exchange of the Certificates (the "Registration Books"), and the Issuer hereby appoints the Paying Agent/Registrar as its registrar and transfer agent to keep such books or records and make such registrations of transfers, conversions and exchanges under such reasonable regulations as the Issuer and Paying Agent/Registrar may prescribe, and the Paying Agent/Registrar shall make such Ordinance 700 Page 2 of 26 Principal Interest Principal Interest Years Amount Rates Years Amount Rates 2014 $ 95,000 2.000% 2026 $ 500,000 3.000% 2015 200,000 2.000% 2028 540,000 3.250% 2016 200,000 2.000% 2029 390,000 3.500% 2017 205,000 2.000% 2030 410,000 3.500% 2018 205,000 2.000% 2031 420,000 3.500% 2019 210,000 2.000% 2032 595,000 3.500% 2020 215,000 2.000% 2033 320,000 3.500% 2021 220,000 2.500% 3036 1,035,000 4.000% 2022 230,000 2.500% 2039 1,155,000 3.625% 2024 480,000 3.000% 2043 1,760,000 3.750% The term "Certificates" as used in this Ordinance shall mean and include collectively the certificates initially issued and delivered pursuant to this Ordinance and all substitute certificates exchanged therefor, as well as all other substitute certificates and replacement certificates issued pursuant hereto, and the term "Certificate" shall mean any of the Certificates. (a) Appointment of Paving Agent/Registrar. The Issuer hereby appoints U.S. Bank National Association, Dallas, Texas, to serve as paying agent and registrar for the Certificates (the "Paying Agent/Registrar"). The Mayor or Town Manager is authorized and directed to execute and deliver in the name and under the corporate seal and on behalf of the Issuer a Paying Agent/Registrar Agreement with the Paying Agent/Registrar in substantially the form presented at this meeting. (b) Registration, Transfer, Conversion and Exchange. The Issuer shall keep or cause to be kept at the corporate trust office of the Paying Agent/Registrar books or records for the registration of the transfer, conversion and exchange of the Certificates (the "Registration Books"), and the Issuer hereby appoints the Paying Agent/Registrar as its registrar and transfer agent to keep such books or records and make such registrations of transfers, conversions and exchanges under such reasonable regulations as the Issuer and Paying Agent/Registrar may prescribe, and the Paying Agent/Registrar shall make such Ordinance 700 Page 2 of 26 registrations, transfers, conversions and exchanges as herein provided within three days of presentation in due and proper form. The Paying Agent/Registrar shall obtain and record in the Registration Books the address of the registered owner of each Certificate to which payments with respect to the Certificates shall be mailed, as herein provided; but it shall be the duty of each registered owner to notify the Paying Agent/Registrar in writing of the address to which payments shall be mailed, and such interest payments shall not be mailed unless such notice has been given. The Issuer shall have the right to inspect the Registration Books during regular business hours of the Paying Agent/Registrar, but otherwise the Paying Agent/Registrar shall keep the Registration Books confidential and, unless otherwise required by law, shall not permit their inspection by any other entity. The Issuer shall pay the Paying Agent/Registrar's standard or customary fees and charges for making such registration, transfer, conversion, exchange and delivery of a substitute Certificate or Certificates. Registration of assignments, transfers, conversions and exchanges of Certificates shall be made in the manner provided and with the effect stated in the FORM OF CERTIFICATE set forth in this Ordinance. Each substitute Certificate shall bear a letter and/or number to distinguish it from each other Certificate. (c) Authentication. Except as provided in subsection (i) of this section, an authorized representative of the Paying Agent/Registrar shall, before the delivery of any such Certificate, date and manually sign said Certificate, and no such Certificate shall be deemed to be issued or outstanding unless such Certificate is so executed. The Paying Agent/Registrar promptly shall cancel all paid Certificates and Certificates surrendered for conversion and exchange. No additional ordinances, orders or resolutions need be passed or adopted by the governing body of the Issuer or any other body or person so as to accomplish the foregoing conversion and exchange of any Certificate or portion thereof, and the Paying Agent/Registrar shall provide for the printing, execution and delivery of the substitute Certificates in the manner prescribed herein. Pursuant to Subchapter D, Chapter 1201, Texas Government Code, the duty of conversion and exchange of Certificates as aforesaid is hereby imposed upon the Paying Agent/Registrar, and, upon the execution of said Certificate, the converted and exchanged Certificate shall be valid, incontestable, and enforceable in the same manner and with the same effect as the Certificates which initially were issued and delivered pursuant to this Ordinance, approved by the Attorney General, and registered by the Comptroller of Public Accounts. (d) Payment of Principal and Interest. The Issuer hereby further appoints the Paying Agent/Registrar to act as the paying agent for paying the principal of and interest on the Certificates, all as provided in this Ordinance. The Paying Agent/Registrar shall keep proper records of all payments made by the Issuer and the Paying Agent/Registrar with respect to the Certificates, and of all conversions and exchanges of Certificates, and all replacements of Certificates, as provided in this Ordinance. However, in the event of a nonpayment of interest on a scheduled payment date, and for thirty (30) days thereafter, a new record date for such interest payment (a "Special Record Date") will be established by the Paying Agent/Registrar, if and when funds for the payment of such interest have been received from the Issuer. Notice of the Special Record Date and of the scheduled payment date of the past due interest (which shall be 15 days after the Special Record Date) shall be sent at least five (5) business days prior to the Special Record Date by United States mail, first class postage prepaid, to the address of each registered owner appearing on the Registration Books at the close of business on the last business day next preceding the date of mailing of such notice. (e) Payment to Registered Owner. Notwithstanding any other provision of this Ordinance to the contrary, the Issuer and the Paying Agent/Registrar shall be entitled to treat and consider the person in whose name each Certificate is registered in the Registration Books as the absolute owner of such Certificate for the purpose of payment of principal and interest with respect to such Certificate, for the purpose of registering transfers with respect to such Certificate, and for all other purposes whatsoever. The Paying Agent/Registrar shall pay all principal of and interest on the Certificates only to or upon the order of the registered owners, as shown in the Registration Books as provided in this Ordinance, or their Ordinance 700 Page 3 of 26 respective attorneys duly authorized in writing, and all such payments shall be valid and effective to fully satisfy and discharge the Issuer's obligations with respect to payment of principal of and interest on the Certificates to the extent of the sum or sums so paid. No person other than a registered owner, as shown in the Registration Books, shall receive a Certificate certificate evidencing the obligation of the Issuer to make payments of principal and interest pursuant to this Ordinance. (f) Pa iingA eng t/Re isg trar. The Issuer covenants with the registered owners of the Certificates that at all times while the Certificates are outstanding the Issuer will provide a competent and legally qualified bank, trust company, financial institution or other agency to act as and perform the services of Paying Agent/Registrar for the Certificates under this Ordinance, and that the Paying Agent/Registrar will be one entity. By accepting the position and performing as such, each Paying Agent/Registrar shall be deemed to have agreed to the provisions of this Ordinance, and a certified copy of this Ordinance shall be delivered to each Paying Agent/Registrar. (g) Substitute Paving Agent/Registrar. _ The Issuer reserves the right to, and may, at its option, change the Paying Agent/Registrar upon not less than 120 days written notice to the Paying Agent/Registrar, to be effective not later than 60 days prior to the next principal or interest payment date after such notice. In the event that the entity at any time acting as Paying Agent/Registrar (or its successor by merger, acquisition, or other method) should resign or otherwise cease to act as such, the Issuer covenants that promptly it will appoint a competent and legally qualified bank, trust company, financial institution, or other agency to act as Paying Agent/Registrar under this Ordinance. Upon any change in the Paying Agent/Registrar, the previous Paying Agent/Registrar promptly shall transfer and deliver the Registration Books (or a copy thereof), along with all other pertinent books and records relating to the Certificates, to the new Paying Agent/Registrar designated and appointed by the Issuer. Upon any change in the Paying Agent/Registrar, the Issuer promptly will cause a written notice thereof to be sent by the new Paying Agent/Registrar to each registered owner of the Certificates, by United States mail, first-class postage prepaid, which notice also shall give the address of the new Paying Agent/Registrar. (g) Book -Entry Only System. The Certificates issued in exchange for the Certificates initially issued to the purchaser or purchasers specified herein shall be initially issued in the form of a separate single fully registered Certificate for each of the maturities thereof and the ownership of each such Certificate shall be registered in the name of Cede & Co., as nominee of The Depository Trust Company of New York ("DTC"), and except as provided in subsections (i) and 0) of this Section, all of the outstanding Certificates shall be registered in the name of Cede & Co., as nominee of DTC. (h) Blanket Letter of Representations. The previous execution and delivery of the Blanket Letter of Representations with respect to obligations of the Issuer is hereby ratified and confirmed; and the provisions thereof shall be fully applicable to the Certificates. Notwithstanding anything to the contrary contained herein, while the Certificates are subject to DTC's Book -Entry Only System and to the extent permitted by law, the Letter of Representations is hereby incorporated herein and its provisions shall prevail over any other provisions of this Ordinance in the event of conflict. (i) Certificates Registered in the Name of Cede & Co. With respect to Certificates registered in the name of Cede & Co., as nominee of DTC, the Issuer and the Paying Agent/Registrar shall have no responsibility or obligation to any securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations on whose behalf DTC was created ("DTC Participant") to hold securities to facilitate the clearance and settlement of securities transactions among DTC Participants or to any person on behalf of whom such a DTC Participant holds an interest in the Certificates. Without limiting the immediately preceding sentence, the Issuer and the Paying Agent/Registrar shall have no responsibility or obligation with respect to (i) the accuracy of the records of DTC, Cede & Co. or any Ordinance 700 Page 4 of 26 DTC Participant with respect to any ownership interest in the Certificates, (ii) the delivery to any DTC Participant or any other person, other than a registered owner of Certificates, as shown on the Registration Books, of any notice with respect to the Certificates, or (iii) the payment to any DTC Participant or any other person, other than a registered owner of Certificates, as shown in the Registration Books of any amount with respect to principal of or interest on the Certificates. Upon delivery by DTC to the Paying Agent/Registrar of written notice to the effect that DTC has determined to substitute a new nominee in place of Cede & Co., and subject to the provisions in this Ordinance with respect to interest checks being mailed to the registered owner at the close of business on the Record date, the words "Cede & Co." in this Ordinance shall refer to such new nominee of DTC. 0) Successor Securities Depository; Transfers Outside Book -Entry OnlySystem. In the event that the Issuer determines that DTC is incapable of discharging its responsibilities described herein and in the representation letter of the Issuer to DTC or that it is in the best interest of the beneficial owners of the Certificates that they be able to obtain certificated Certificates, the Issuer shall (i) appoint a successor securities depository, qualified to act as such under Section 17A of the Securities and Exchange Act of 1934, as amended, notify DTC and DTC Participants of the appointment of such successor securities depository and transfer one or more separate Certificates to such successor securities depository or (ii) notify DTC and DTC Participants of the availability through DTC of Certificates and transfer one or more separate Certificates to DTC Participants having Certificates credited to their DTC accounts. In such event, the Certificates shall no longer be restricted to being registered in the Registration Books in the name of Cede & Co., as nominee of DTC, but may be registered in the name of the successor securities depository, or its nominee, or in whatever name or names registered owners transferring or exchanging Certificates shall designate, in accordance with the provisions of this Ordinance. (k) Payments to Cede & Co. Notwithstanding any other provision of this Ordinance to the contrary, so long as any Certificate is registered in the name of Cede & Co., as nominee of DTC, all payments with respect to principal of and interest on such Certificate and all notices with respect to such Certificate shall be made and given, respectively, in the manner provided in the representation letter of the Issuer to DTC. (1) General Characteristics of the Certificates. The Certificates (i) shall be issued in fully registered form, without interest coupons, with the principal of and interest on such Certificates to be payable only to the Registered Owners thereof, (ii) may and shall be redeemed prior to their scheduled maturities, (iii) may be transferred and assigned, (iv) may be converted and exchanged for other Certificates, (v) shall have the characteristics, (vi) shall be signed, sealed, executed and authenticated, (vii) the principal of and interest on the Certificates shall be payable, and (viii) shall be administered and the Paying Agent/Registrar and the Issuer shall have certain duties and responsibilities with respect to the Certificates, all as provided, and in the manner and to the effect as required or indicated, in the FORM OF CERTIFICATE set forth in this Ordinance. The Certificates initially issued and delivered pursuant to this Ordinance is not required to be, and shall not be, authenticated by the Paying Agent/Registrar, but on each substitute Certificate issued in conversion of and exchange for any Certificate or Certificates issued under this Ordinance the Paying Agent/Registrar shall execute the Paying Agent/registrar's Authentication Certificate, in the FORM OF CERTIFICATE set forth in this Ordinance. (m) Cancellation of Initial Certificate. On the closing date, one initial Certificate representing the entire principal amount of the Certificates, payable in stated installments to the order of the initial purchaser of the Certificates or its designee, executed by manual or facsimile signature of the Mayor and Town Secretary, approved by the Attorney General of Texas, and registered and manually signed by the Comptroller of Public Accounts of the State of Texas, will be delivered to such purchaser or its designee. Upon payment for the initial Certificate, the Paying Agent/Registrar shall insert the Issuance Date on Certificate No. T-1, cancel each of the initial Certificates and deliver to The Depository Trust Company Ordinance 700 Page 5 of 26 ("DTC") on behalf of such purchaser one registered definitive Certificate for each year of maturity of the Certificates, in the aggregate principal amount of all of the Certificates for such maturity, registered in the name of Cede & Co., as nominee of DTC. To the extent that the Paying Agent/Registrar is eligible to participate in DTC's FAST System, pursuant to an agreement between the Paying Agent/Registrar and DTC, the Paying Agent/Registrar shall hold the definitive Certificates in safekeeping for DTC. SECTION 4. FORM OF CERTIFICATES. The form of the Certificates, including the form of Paying Agent/Registrar's Authentication Certificate, the form of Assignment and the form of Registration Certificate of the Comptroller of Public Accounts of the State of Texas to be attached to the Certificates initially issued and delivered pursuant to this Ordinance, shall be, respectively, substantially as follows, with such appropriate variations, omissions or insertions as are permitted or required by this Ordinance. (a) Form of Certificate. NO. R- UNITED STATES OF AMERICA PRINCIPAL STATE OF TEXAS m AMOUNT TOWN OF WESTLAKE, TEXAS COMBINATION TAX AND REVENUE CERTIFICATE OF OBLIGATION SERIES 2013 Interest Rate Delivery Date Maturity Date CUSIP No. February 15, REGISTERED OWNER: PRINCIPAL AMOUNT: DOLLARS ON THE MATURITY DATE specified above, the Town of Westlake, in Tarrant and Denton Counties, Texas (the "Issuer"), being a political subdivision and municipal corporation of the State of Texas, hereby promises to pay to the Registered Owner specified above, or registered assigns (hereinafter called the "Registered Owner"), on the Maturity Date specified above, the Principal Amount specified above. The Issuer promises to pay interest on the unpaid principal amount hereof (calculated on the basis of a 360 -day year of twelve 30 -day months) from the Delivery Date specified above at the Interest Rate per annum specified above. Interest is payable on February 15, 2014 and semiannually on each August 15 and February 15 thereafter to the Maturity Date specified above, or the date of redemption prior to maturity; except, if this Certificate is required to be authenticated and the date of its authentication is later than the first Record Date (hereinafter defined), such Principal Amount shall bear interest from the interest payment date next preceding the date of authentication, unless such date of authentication is after any Record Date but on or before the next following interest payment date, in which case such principal amount shall bear interest from such next following interest payment date; provided, however, that if on the date of authentication hereof the interest on the Certificate or Certificates, if any, for which this Certificate is being exchanged is due but has not been paid, then this Certificate shall bear interest from the date to which such interest has been paid in full. THE PRINCIPAL OF AND INTEREST ON this Certificate are payable in lawful money of the United States of America, without exchange or collection charges. The principal of this Certificate shall be paid to the registered owner hereof upon presentation and surrender of this Certificate at maturity, or Ordinance 700 Page 6 of 26 upon the date fixed for its redemption prior to maturity, at the principal corporate trust office of U.S. Bank National Association, Dallas, Texas, which is the "Paying Agent/Registrar" for this Certificate. The payment of interest on this Certificate shall be made by the Paying Agent/Registrar to the registered owner hereof on each interest payment date by check or draft, dated as of such interest payment date, drawn by the Paying Agent/Registrar on, and payable solely from, funds of the Issuer required by the ordinance authorizing the issuance of this Certificate (the "Certificate Ordinance") to be on deposit with the Paying Agent/Registrar for such purpose as hereinafter provided; and such check or draft shall be sent by the Paying Agent/Registrar by United States mail, first-class postage prepaid, on each such interest payment date, to the registered owner hereof, at its address as it appeared on the last business day of the month preceding each such date (the "Record Date") on the Registration Books kept by the Paying Agent/Registrar, as hereinafter described. In addition, interest may be paid by such other method, acceptable to the Paying Agent/Registrar, requested by, and at the risk and expense of, the registered owner. In the event of a non-payment of interest on a scheduled payment date, and for 30 days thereafter, a new record date for such interest payment (a "Special Record Date") will be established by the Paying Agent/Registrar, if and when funds for the payment of such interest have been received from the Issuer. Notice of the Special Record Date and of the scheduled payment date of the past due interest (which shall be 15 days after the Special Record Date) shall be sent at least five business days prior to the Special Record Date by United States mail, first-class postage prepaid, to the address of each owner of a Certificate appearing on the Registration Books at the close of business on the last business day next preceding the date of mailing of such notice. ANY ACCRUED INTEREST due at maturity or upon the redemption of this Certificate prior to maturity as provided herein shall be paid to the registered owner upon presentation and surrender of this Certificate for redemption and payment at the principal corporate trust office of the Paying Agent/Registrar. The Issuer covenants with the registered owner of this Certificate that on or before each principal payment date, interest payment date, and accrued interest payment date for this Certificate it will make available to the Paying Agent/Registrar, from the "Interest and Sinking Fund" created by the Certificate Ordinance, the amounts required to provide for the payment, in immediately available funds, of all principal of and interest on the Certificates, when due. IF THE DATE for the payment of the principal of or interest on this Certificate shall be a Saturday, Sunday, a legal holiday or a day on which banking institutions in the city where the principal corporate trust office of the Paying Agent/Registrar is located are authorized by law or executive order to close, then the date for such payment shall be the next succeeding day that is not such a Saturday, Sunday, legal holiday or day on which banking institutions are authorized to close; and payment on such date shall have the same force and effect as if made on the original date payment was due. THIS CERTIFICATE is one of a series of Certificates dated April 1, 2013, authorized in accordance with the Constitution and laws of the State of Texas in the principal amount of $9,385,000 for paying all or a portion of the Issuer's contractual obligations incurred in connection with constructing and equipping buildings and related improvements at the Westlake Academy to be used for a cafetorium, for use as a cafeteria, gymnasium and auditorium, a classroom building and a field house; (ii) constructing, installing, acquiring and equipping improvements, additions and extensions to the Town's waterworks and sewer system, including a ground storage tank; and (iii) paying legal, fiscal and engineering fees in connection with such projects. ON FEBRUARY 15, 20_, or on any date thereafter, the Certificates of this series may be redeemed prior to their scheduled maturities, at the option of the Issuer, with funds derived from any available and lawful source, as a whole, or in part, and, if in part, the particular Certificates, or portions thereof, to be redeemed shall be selected and designated by the Issuer (provided that a portion of a Ordinance 700 Page 7 of 26 Certificate may be redeemed only in an integral multiple of $5,000), at a redemption price equal to the principal amount to be redeemed plus accrued interest to the date fixed for redemption. THE CERTIFICATES scheduled to mature on February 15 in the years and (the "Term Certificates") are subject to scheduled mandatory redemption by the Paying Agent/Registrar by lot, or by any other customary method that results in a random selection, at a price equal to the principal amount thereof, plus accrued interest to the redemption date, out of moneys available for such purpose in the interest and sinking fund for the Certificates, on the dates and in the respective principal amounts, set forth in the following schedule: Term Certificate Maturity: February 15, Principal Mandatory Redemption Date Amount February 15, $ February 15, (maturity) Term Certificate Maturity: February 15, Principal Mandatory Redemption Date Amount February 15, $ February 15, (maturity) The principal amount of Term Certificates of a stated maturity required to be redeemed on any mandatory redemption date pursuant to the operation of the mandatory sinking fund redemption provisions shall be reduced, at the option of the Town, by the principal amount of any Term Certificates of the same maturity which, at least 50 days prior to a mandatory redemption date (1) shall have been acquired by the Town at a price not exceeding the principal amount of such Term Certificates plus accrued interest to the date of purchase thereof, and delivered to the Paying Agent/Registrar for cancellation, (2) shall have been purchased and canceled by the Paying Agent/Registrar at the request of the Town at a price not exceeding the principal amount of such Term Certificates plus accrued interest to the date of purchase, or (3) shall have been redeemed pursuant to the optional redemption provisions and not theretofore credited against a mandatory redemption requirement. IF AT THE TIME OF MAILING of notice of optional redemption there shall not have either been deposited with the Paying Agent/Registrar or legally authorized escrow agent immediately available funds sufficient to redeem all the Bonds called for redemption, such notice may state that it is conditional, and is subject to the deposit of the redemption moneys with the Paying Agent/Registrar or legally authorized escrow agent at or prior to the redemption date. If such redemption is not effectuated, the Paying Agent/Registrar shall, within five days thereafter, give notice in the manner in which the notice of redemption was given that such moneys were not so received and shall rescind the redemption. AT LEAST 30 days prior to the date fixed for any redemption of Certificates or portions thereof prior to maturity a written notice of such redemption shall be sent by the Paying Agent/Registrar by United States mail, first-class postage prepaid, to the registered owner of each Certificate to be redeemed at its address as it appeared on the 45th day prior to such redemption date; provided, however, that the failure of the registered owner to receive such notice, or any defect therein or in the sending or mailing thereof, shall not affect the validity or effectiveness of the proceedings for the redemption of any Certificate. By the date fixed for any such redemption due provision shall be made with the Paying Agent/Registrar for the payment of the required redemption price for the Certificates or portions thereof that are to be so redeemed. If such written notice of redemption is sent and if due provision for such payment is made, all as provided above, the Certificates or portions thereof that are to be so redeemed thereby automatically shall be treated as redeemed prior to their scheduled maturities, and they shall not bear interest after the date fixed for redemption, and they shall not be regarded as being outstanding except for the right of the registered owner to receive the redemption price from the Paying Agent/Registrar out of the funds provided for such payment. If a portion of any Certificate shall be redeemed, a substitute Certificate or Certificates having the same maturity date, bearing interest at the Ordinance 700 Page 8 of 26 same rate, in any denomination or denominations in any integral multiple of $5,000, at the written request of the registered owner, and in aggregate principal amount equal to the unredeemed portion thereof, will be issued to the registered owner upon the surrender thereof for cancellation, at the expense of the Issuer, all as provided in the Certificate Ordinance. ALL CERTIFICATES OF THIS SERIES are issuable solely as fully registered certificates, without interest coupons, in the denomination of any integral multiple of $5,000. As provided in the Certificate Ordinance, this Certificate may, at the request of the registered owner or the assignee or assignees hereof, be assigned, transferred, converted into and exchanged for a like aggregate principal amount of fully registered certificates, without interest coupons, payable to the appropriate registered owner, assignee or assignees, as the case may be, having the same denomination or denominations in any integral multiple of $5,000 as requested in writing by the appropriate registered owner, assignee or assignees, as the case may be, upon surrender of this Certificate to the Paying Agent/Registrar for cancellation, all in accordance with the form and procedures set forth in the Certificate Ordinance. Among other requirements for such assignment and transfer, this Certificate must be presented and surrendered to the Paying Agent/Registrar, together with proper instruments of assignment, in form and with guarantee of signatures satisfactory to the Paying Agent/Registrar, evidencing assignment of this Certificate or any portion or portions hereof in any integral multiple of $5,000 to the assignee or assignees in whose name or names this Certificate or any such portion or portions hereof is or are to be registered. The form of Assignment printed or endorsed on this Certificate may be executed by the registered owner to evidence the assignment hereof, but such method is not exclusive, and other instruments of assignment satisfactory to the Paying Agent/Registrar may be used to evidence the assignment of this Certificate or any portion or portions hereof from time to time by the registered owner. The Paying Agent/Registrar's reasonable standard or customary fees and charges for assigning, transferring, converting and exchanging any Certificate or portion thereof will be paid by the Issuer. In any circumstance, any taxes or governmental charges required to be paid with respect thereto shall be paid by the one requesting such assignment, transfer, conversion or exchange, as a condition precedent to the exercise of such privilege. The Paying Agent/Registrar shall not be required to make any such transfer, conversion, or exchange (i) during the period commencing with the close of business on any Record Date and ending with the opening of business on the next following principal or interest payment date, or (ii) with respect to any Certificate or any portion thereof called for redemption prior to maturity, within 45 days prior to its redemption date. IN THE EVENT any Paying Agent/Registrar for the Certificates is changed by the Issuer, resigns, or otherwise ceases to act as such, the Issuer has covenanted in the Certificate Ordinance that it promptly will appoint a competent and legally qualified substitute therefor, and cause written notice thereof to be mailed to the registered owners of the Certificates. IT IS HEREBY certified, recited and covenanted that this Certificate has been duly and validly authorized, issued and delivered; that all acts, conditions and things required or proper to be performed, exist and be done precedent to or in the authorization, issuance and delivery of this Certificate have been performed, existed and been done in accordance with law; and that annual ad valorem taxes sufficient to provide for the payment of the interest on and principal of this Certificate, as such interest comes due and such principal matures, have been levied and ordered to be levied against all taxable property in said Issuer, and have been pledged for such payment, within the limit prescribed by law, and that this Certificate is additionally secured by and payable from a limited pledge of the Surplus Revenues of the Issuer's waterworks and sewer system remaining after payment of all operation and maintenance expenses thereof, and all debt service, reserve and other requirements in connection with all of the Issuer's revenue obligations (now or hereafter outstanding) that are payable from all or part of said revenues, all as provided in the Certificate Ordinance. Ordinance 700 Page 9 of 26 THE ISSUER HAS RESERVED THE RIGHT to amend the Certificate Ordinance as provided therein, and under some (but not all) circumstances amendments thereto must be approved by the registered owners of a majority in aggregate principal amount of the outstanding Certificates. BY BECOMING the registered owner of this Certificate, the registered owner thereby acknowledges all of the terms and provisions of the Certificate Ordinance, agrees to be bound by such terms and provisions, acknowledges that the Certificate Ordinance is duly recorded and available for inspection in the official minutes and records of the governing body of the Issuer, and agrees that the terms and provisions of this Certificate and the Certificate Ordinance constitute a contract between each registered owner hereof and the Issuer. IN WITNESS WHEREOF, the Issuer has caused this Certificate to be signed with the manual or facsimile signature of the Mayor of the Issuer (or in the Mayor's absence, by the Mayor Pro Tem) and countersigned with the manual or facsimile signature of the Town Secretary of said Issuer, and has caused the official seal of the Issuer to be duly impressed, or placed in facsimile, on this Certificate. (signature) (signature) Town Secretary Mayor (SEAL) (b) Form of Payer Agent/Registrar's Authentication Certificate. PAYING AGENT/REGISTRAR'S AUTHENTICATION CERTIFICATE (To be executed if this Certificate is not accompanied by an executed Registration Certificate of the Comptroller of Public Accounts of the State of Texas) It is hereby certified that this Certificate has been issued under the provisions of the Certificate Ordinance described in the text of this Certificate; and that this Certificate has been issued in conversion or replacement of, or in exchange for, a certificate, certificates, or a portion of a certificate or certificates of a series that originally was approved by the Attorney General of the State of Texas and registered by the Comptroller of Public Accounts of the State of Texas. Dated: (c) Form of Assignment. Dallas, Texas Paying Agent/Registrar Authorized Representative ASSIGNMENT (Please print or type clearly) For value received, the undersigned hereby sells, assigns and transfers unto: Transferee's Social Security or Taxpayer Identification Number: Transferee's name and address, including zip code: Ordinance 700 Page 10 of 26 the within Certificate and all rights thereunder, and hereby irrevocably constitutes and appoints , attorney, to register the transfer of the within Certificate on the books kept for registration thereof, with full power of substitution in the premises. Dated: Signature Guaranteed: NOTICE: Signature(s) must be guaranteed by an NOTICE: The signature above must correspond eligible guarantor institution participating in a with the name of the Registered Owner as it securities transfer association recognized signature appears upon the front of this Certificate in every guarantee program. particular, without alteration or enlargement or any change whatsoever. (d) Form of Registration Certificate of the Comptroller of Public Accounts. COMPTROLLER'S REGISTRATION CERTIFICATE: REGISTER NO. I hereby certify that this Certificate has been examined, certified as to validity and approved by the Attorney General of the State of Texas, and that this Certificate has been registered by the Comptroller of Public Accounts of the State of Texas. Witness my signature and seal this Comptroller of Public Accounts of the State of Texas (COMPTROLLER'S SEAL) (e) Initial Certificate Insertions. (i) The initial Certificate shall be in the form set forth is paragraph (a) of this Section, except that: A. immediately under the name of the Certificate, the headings "Interest Rate" and "Maturity Date" shall both be completed with the words "As shown below" and "CUSIP No. " shall be deleted. B. the first paragraph shall be deleted and the following will be inserted: "THE TOWN OF WESTLAKE, TEXAS, in Tarrant and Denton Counties, Texas (the "Issuer"), being a political subdivision and municipal corporation of the State of Texas, hereby promises to pay to the Registered Owner specified above, or registered assigns (hereinafter called the "Registered Owner"), on February 15 in each of the years, in the principal installments and bearing interest at the per annum rates set forth in the following schedule: Principal Years Installments Interest Rates (Information from Section 2 to be inserted) Ordinance 700 Page 11 of 26 The Issuer promises to pay interest on the unpaid principal amount hereof (calculated on the basis of a 360 -day year of twelve 30 -day months) from the Delivery Date specified above at the respective Interest Rate per annum specified above. Interest is payable on February 15, 2014, and semiannually on each August 15 and February 15 thereafter to the date of payment of the principal installment specified above, or the date of redemption prior to maturity; except, that if this Certificate is required to be authenticated and the date of its authentication is later than the first Record Date (hereinafter defined), such Principal Amount shall bear interest from the interest payment date next preceding the date of authentication, unless such date of authentication is after any Record Date but on or before the next following interest payment date, in which case such principal amount shall bear interest from such next following interest payment date; provided, however, that if on the date of authentication hereof the interest on the Certificate or Certificates, if any, for which this Certificate is being exchanged is due but has not been paid, then this Certificate shall bear interest from the date to which such interest has been paid in full." C. The Initial Certificate shall be numbered "T-1." (a) A special "Interest and Sinking Fund" is hereby created and shall be established and maintained by the Issuer at an official depository bank of said Issuer. Said Interest and Sinking Fund shall be kept separate and apart from all other funds and accounts of said Issuer, and shall be used only for paying the interest on and principal of said Certificates. All amounts received from the sale of the Certificates as accrued interest shall be deposited upon receipt to the Interest and Sinking Fund, and all ad valorem taxes levied and collected for and on account of said Certificates shall be deposited, as collected, to the credit of said Interest and Sinking Fund. During each year while any of said Certificates are outstanding and unpaid, the governing body of said Issuer shall compute and ascertain a rate and amount of ad valorem tax that will be sufficient to raise and produce the money required to pay the interest on said Certificates as such interest comes due, and to provide and maintain a sinking fund adequate to pay the principal of said Certificates as such principal matures (but never less than 2%, of the original amount of said Certificates as a sinking fund each year); and said tax shall be based on the latest approved tax rolls of said Issuer, with full allowances being made for tax delinquencies and the cost of tax collection. Said rate and amount of ad valorem tax is hereby levied, and is hereby ordered to be levied, against all taxable property in said Issuer, for each year while any of said Certificates are outstanding and unpaid, and said tax shall be assessed and collected each such year and deposited to the credit of the aforesaid Interest and Sinking Fund. Said ad valorem taxes sufficient to provide for the payment of the interest on and principal of said Certificates, as such interest comes due and such principal matures, are hereby pledged for such payment, within the limit prescribed by law. (b) The Certificates are additionally secured by revenues of the Issuer's waterworks and sewer system that remain after the payment of all maintenance and operation expenses thereof, and all debt service, reserve and other requirements in connection with all of the Issuer's revenue obligations (now or hereafter outstanding) that are secured by a lien on all or any part of the net revenues of the Issuer's waterworks and sewer system, constituting "Surplus Revenues", not to exceed $1,000. The Issuer shall deposit such Surplus Revenues to the credit of the Interest and Sinking Fund created pursuant to Subsection (a) of this Section, to the extent necessary to pay the principal and interest on the Certificates. Notwithstanding the requirements of subsection (a) of this section, if Surplus Revenues or other lawfully available moneys of the Issuer are actually on deposit in the Interest and Sinking Fund in advance of the time when ad valorem taxes are scheduled to be levied for any year, then the amount of taxes that otherwise would have been required to be levied pursuant to Subsection (a) of this Section may be reduced to the extent and by the amount of the Surplus Revenues or other lawfully available funds then on deposit in the Interest and Sinking Fund. Ordinance 700 Page 12 of 26 (c) Article 1208, Government Code, applies to the issuance of the Certificates of Obligation and the pledge of the taxes and Surplus Revenues granted by the Issuer under this Section and is therefore valid, effective, and perfected. Should Texas law be amended at any time while the Certificates of Obligation are outstanding and unpaid, the result of such amendment being that the pledge of the taxes and Surplus Revenues granted by the Issuer under this Section and Section 8, respectively, is to be subject to the filing requirements of Chapter 9, Business & Commerce Code, in order to preserve to the registered owners of the Certificates of Obligation a security interest in said pledge, the Issuer agrees to take such measures as it determines are reasonable and necessary under Texas law to comply with the applicable provisions of Chapter 9, Business & Commerce Code and enable a filing of a security interest in said pledge to occur. (a) Any Certificate and the interest thereon shall be deemed to be paid, retired and no longer outstanding (a 'Defeased Certificate") within the meaning of this Ordinance, except to the extent provided in subsection (d) of this Section, when payment of the principal of such Certificate, plus interest thereon to the due date (whether such due date be by reason of maturity or otherwise) either (i) shall have been made or caused to be made in accordance with the terms thereof, or (ii) shall have been provided for on or before such due date by irrevocably depositing with or making available to the Paying Agent/Registrar in accordance with an escrow agreement or other instrument (the "Future Escrow Agreement") for such payment (1) lawful money of the United States of America sufficient to make such payment or (2) Defeasance Securities that mature as to principal and interest in such amounts and at such times as will insure the availability, without reinvestment, of sufficient money to provide for such payment, and when proper arrangements have been made by the Issuer with the Paying Agent/Registrar for the payment of its services until all Defeased Certificates shall have become due and payable. At such time as a Certificate shall be deemed to be a Defeased Certificate hereunder, as aforesaid, such Certificate and the interest thereon shall no longer be secured by, payable from, or entitled to the benefits of, the ad valorem taxes herein levied and pledged as provided in this Ordinance, and such principal and interest shall be payable solely from such money or Defeasance Securities. Notwithstanding any other provision of this Ordinance to the contrary, it is hereby provided that any determination not to redeem Defeased Certificates that is made in conjunction with the payment arrangements specified in subsection 6(a)(i) or (ii) shall not be irrevocable, provided that: (1) in the proceedings providing for such payment arrangements, the Issuer expressly reserves the right to call the Defeased Certificates for redemption; (2) gives notice of the reservation of that right to the owners of the Defeased Certificates immediately following the making of the payment arrangements; and (3) directs that notice of the reservation be included in any redemption notices that it authorizes. (b) Any moneys so deposited with the Paying Agent/Registrar may at the written direction of the Issuer be invested in Defeasance Securities, maturing in the amounts and times as hereinbefore set forth, and all income from such Defeasance Securities received by the Paying Agent/Registrar that is not required for the payment of the Certificates and interest thereon, with respect to which such money has been so deposited, shall be turned over to the Issuer, or deposited as directed in writing by the Issuer. Any Future Escrow Agreement pursuant to which the money and/or Defeasance Securities are held for the payment of Defeased Certificates may contain provisions permitting the investment or reinvestment of such moneys in Defeasance Securities or the substitution of other Defeasance Securities upon the satisfaction of the requirements specified in subsection 6(a)(i) or (ii). All income from such Defeasance Securities received by the Paying Agent/Registrar which is not required for the payment of the Defeased Certificates, with respect to which such money has been so deposited, shall be remitted to the Issuer or deposited as directed in writing by the Issuer. Ordinance 700 Page 13 of 26 (c) The term "Defeasance Securities" means any securities and obligations now or hereafter authorized by State law that are eligible to refund, retire or otherwise discharge obligations such as the Certificates. (d) Until all Defeased Certificates shall have become due and payable, the Paying Agent/Registrar shall perform the services of Paying Agent/Registrar for such Defeased Certificates the same as if they had not been defeased, and the Issuer shall make proper arrangements to provide and pay for such services as required by this Ordinance. (e) In the event that the Issuer elects to defease less than all of the principal amount of Certificates of a maturity, the Paying Agent/Registrar shall select, or cause to be selected, such amount of Certificates by such random method as it deems fair and appropriate. SECTIOTI 7. DA1,711AGED, T714TILATED, LOST, STOLEN, OR DESTROYED (a) Replacement Certificates. In the event any outstanding Certificate is damaged, mutilated, lost, stolen or destroyed, the Paying Agent/Registrar shall cause to be printed, executed and delivered, a new certificate of the same principal amount, maturity and interest rate, as the damaged, mutilated, lost, stolen or destroyed Certificate, in replacement for such Certificate in the manner hereinafter provided. (b) Application for Replacement Certificates. Application for replacement of damaged, mutilated, lost, stolen or destroyed Certificates shall be made by the registered owner thereof to the Paying Agent/Registrar. In every case of loss, theft or destruction of a Certificate, the registered owner applying for a replacement certificate shall furnish to the Issuer and to the Paying Agent/Registrar such security or indemnity as may be required by them to save each of them harmless from any loss or damage with respect thereto. Also, in every case of loss, theft or destruction of a Certificate, the registered owner shall furnish to the Issuer and to the Paying Agent/Registrar evidence to their satisfaction of the loss, theft or destruction of such Certificate, as the case may be. In every case of damage or mutilation of a Certificate, the registered owner shall surrender to the Paying Agent/Registrar for cancellation the Certificate so damaged or mutilated. (c) No Default Occurred. Notwithstanding the foregoing provisions of this , in the event any such Certificate shall have matured, and no default has occurred that is then continuing in the payment of the principal of, redemption premium, if any, or interest on the Certificate, the Issuer may authorize the payment of the same (without surrender thereof except in the case of a damaged or mutilated Certificate) instead of issuing a replacement Certificate, provided security or indemnity is furnished as above provided in this Section. (d) Charge for Issuing Replacement Certificates. Prior to the issuance of any replacement certificate, the Paying Agent/Registrar shall charge the registered owner of such Certificate with all legal, printing, and other expenses in connection therewith. Every replacement certificate issued pursuant to the provisions of this Section by virtue of the fact that any Certificate is lost, stolen or destroyed shall constitute a contractual obligation of the Issuer whether or not the lost, stolen or destroyed Certificate shall be found at any time, or be enforceable by anyone, and shall be entitled to all the benefits of this Ordinance equally and proportionately with any and all other Certificates duly issued under this Ordinance. (e) Authority for Issuing Replacement Certificates. In accordance with Sec. 1206.022, Government Code, this Section 7 of this Ordinance shall constitute authority for the issuance of any such replacement certificate without necessity of further action by the governing body of the Issuer or any other body or person, and the duty of the replacement of such certificates is hereby authorized and Ordinance 700 Page 14 of 26 imposed upon the Paying Agent/Registrar, and the Paying Agent/Registrar shall authenticate and deliver such Certificates in the form and manner and with the effect, as provided in Section 3(a) of this Ordinance for Certificates issued in conversion and exchange for other Certificates. SECTION 8. COVENANTS A'1L OF INTEREST ON THE (a) Covenants. The Issuer covenants to take any action necessary to assure, or refrain from any action that would adversely affect, the treatment of the Certificates as obligations described in section 103 of the Code, the interest on which is not includable in the "gross income" of the holder for purposes of federal income taxation. In furtherance thereof, the Issuer covenants as follows: (1) to take any action to assure that no more than 10 percent of the proceeds of the Certificates (less amounts deposited to a reserve fund, if any) are used for any "private business use," as defined in section 141(b)(6) of the Code or, if more than 10 percent of the proceeds or the projects financed by the Certificates (the "Project") are so used, such amounts, whether or not received by the Issuer, with respect to such private business use, do not, under the terms of this Ordinance or any underlying arrangement, directly or indirectly, secure or provide for the payment of more than 10 percent of the debt service on the Certificates, in contravention of section 141(b)(2) of the Code; (2) to take any action to assure that in the event that the "private business use" described in subsection (1) hereof exceeds 5 percent of the proceeds of the Certificates or the projects financed therewith (less amounts deposited into a reserve fund, if any) then the amount in excess of 5 percent is used for a "private business use" that is "related" and not "disproportionate," within the meaning of section 141(b)(3) of the Code, to the governmental use; (3) to take any action to assure that no amount that is greater than the lesser of $5,000,000, or 5 percent of the proceeds of the Certificates (less amounts deposited into a reserve fund, if any) is directly or indirectly used to finance loans to persons, other than state or local governmental units, in contravention of section 141(c) of the Code; (4) to refrain from taking any action that would otherwise result in the Certificates being treated as "private activity bonds" within the meaning of section 141(b) of the Code; (5) to refrain from taking any action that would result in the Certificates being "federally guaranteed" within the meaning of section 149(b) of the Code; (6) to refrain from using any portion of the proceeds of the Certificates, directly or indirectly, to acquire or to replace funds that were used, directly or indirectly, to acquire investment property (as defined in section 148(b)(2) of the Code) that produces a materially higher yield over the term of the Certificates, other than investment property acquired with — (A) proceeds of the Certificates invested for a reasonable temporary period until such proceeds are needed for the purpose for which the Certificates are issued, (B) amounts invested in a bona fide debt service fund, within the meaning of section 1.148-1(b) of the Treasury Regulations, and (C) amounts deposited in any reasonably required reserve or replacement fund to the extent such amounts do not exceed 10 percent of the proceeds of the Certificates; Ordinance 700 Page 15 of 26 (7) to otherwise restrict the use of the proceeds of the Certificates or amounts treated as proceeds of the Certificates, as may be necessary, so that the Certificates do not otherwise contravene the requirements of section 148 of the Code (relating to arbitrage) and, to the extent applicable, section 149(d) of the Code (relating to advance refundings); (8) to pay to the United States of America at least once during each five-year period (beginning on the date of delivery of the Certificates) an amount that is at least equal to 90 percent of the 'Excess Earnings," within the meaning of section 148(f) of the Code and to pay to the United States of America, not later than 60 days after the Certificates have been paid in full, 100 percent of the amount then required to be paid as a result of Excess Earnings under section 148(f) of the Code; and (9) to assure that the proceeds of the Certificates will be used solely for new money. (b) Rebate Fund. In order to facilitate compliance with the above covenant (a)(8), a "Rebate Fund" is hereby established by the Issuer for the sole benefit of the United States of America, and such Fund shall not be subject to the claim of any other person, including without limitation the Certificateholders. The Rebate Fund is established for the additional purpose of compliance with section 148 of the Code. (c) Use of Proceeds. For purposes of the foregoing covenants (a)(1) and (a)(2), the Issuer understands that the term "proceeds" includes "disposition proceeds" as defined in the Treasury Regulations and, in the case of the refunding bonds, transferred proceeds (if any) and proceeds of the refunded obligations expended prior to the date of issuance of the Certificates. It is the understanding of the Issuer that the covenants contained herein are intended to assure compliance with the Code and any regulations or rulings promulgated by the U.S. Department of the Treasury pursuant thereto. In the event that regulations or rulings are hereafter promulgated that modify or expand provisions of the Code, as applicable to the Certificates, the Issuer will not be required to comply with any covenant contained herein to the extent that such failure to comply, in the opinion of nationally recognized bond counsel, will not adversely affect the exemption from federal income taxation of interest on the Certificates under section 103 of the Code. In the event that regulations or rulings are hereafter promulgated that impose additional requirements applicable to the Certificates, the Issuer agrees to comply with the additional requirements to the extent necessary, in the opinion of nationally recognized bond counsel, to preserve the exemption from federal income taxation of interest on the Certificates under section 103 of the Code. In furtherance of such intention, the Issuer hereby authorizes and directs the Mayor, the Town Manager or the Finance Director to execute any documents, certificates or reports required by the Code and to make such elections, on behalf of the Issuer, that may be permitted by the Code as are consistent with the purpose for the issuance of the Certificates. (d) Allocation of, and Limitation on, Expenditures for the Project. The Issuer covenants to account for the expenditure of sale proceeds and investment earnings to be used for the construction and acquisition of the Project on its books and records by allocating proceeds to expenditures within 18 months of the later of the date that (1) the expenditure is made, or (2) the Project is completed. The foregoing notwithstanding, the Issuer shall not expend proceeds of the sale of the Certificates or investment earnings thereon more than 60 days after the earlier of (1) the fifth anniversary of the delivery of the Certificates, or (2) the date the Certificates are retired, unless the Issuer obtains an opinion of nationally -recognized bond counsel that such expenditure will not adversely affect the status, for federal income tax purposes, of the Certificates or the interest thereon. For purposes hereof, the Issuer shall not be obligated to comply with this covenant if it obtains an opinion that such failure to comply will not adversely affect the excludability for federal income tax purposes from gross income of the interest. Ordinance 700 Page 16 of 26 (e) Disposition of Projects. The Issuer covenants that the Projects will not be sold or otherwise disposed in a transaction resulting in the receipt by the Issuer of cash or other compensation, unless the Issuer obtains an opinion of nationally -recognized bond counsel that such sale or other disposition will not adversely affect the tax-exempt status of the Certificates. For purposes of the foregoing, the portion of the property comprising personal property and disposed in the ordinary course shall not be treated as a transaction resulting in the receipt of cash or other compensation. For purposes hereof, the Issuer shall not be obligated to comply with this covenant if it obtains a legal opinion that such failure to comply will not adversely affect the excludability for federal income tax proposes from gross income of the interest. (f) Designation as Qualified Tax -Exempt Obligations. The Issuer hereby designates the Certificates as "qualified tax-exempt obligations" as defined in section 265(b)(3) of the Code. In furtherance of such designation, the Issuer represents, covenants and warrants the following: (a) that during the calendar year in which the Certificates are issued, the Issuer (including any subordinate entities) has not designated nor will designate tax-exempt obligations, which when aggregated with the Certificates, will result in more than $10,000,000 of "qualified tax-exempt obligations" being issued; (b) that the Issuer reasonably anticipates that the amount of tax-exempt obligations issued, during the calendar year in which the Certificates are issued, by the Issuer (or any subordinate entities) will not exceed $10,000,000; and, (c) that the Issuer will take such action or refrain from such action as necessary, and as more particularly set forth in this Section, in order that the Certificates will not be considered "private activity bonds" within the meaning of section 141 of the Code. SECTION 9. SALE OF CERTIFICATES AND APPROVAL, OF OFFICIAL STATEMENT; FURTHER PROCEDURES. (a) The Certificates are hereby sold and shall be delivered to Southwest Securities, Inc. (the "Purchaser"), for the purchase price of $ (representing the principal amount of the Certificates plus a net premium of $ (premium to be applied to pay costs of issuance), less an Underwriter's discount on the Certificates of $ ), pursuant to the terms and provisions of a Purchase Agreement, which the Mayor is authorized to execute and deliver. It is hereby officially found, determined, and declared that the terms of this sale are the most advantageous reasonably obtainable. (b) The Issuer hereby approves the form and content of the Official Statement relating to the Certificates and any addenda, supplement or amendment thereto, and approves the distribution of such Official Statement in the reoffering of the Certificates by the Purchaser in final form, with such changes therein or additions thereto as the officer executing the same may deem advisable, such determination to be conclusively evidenced by his execution thereof. The distribution and use of the Preliminary Official Statement dated March 25, 2013, prior to the date hereof is hereby ratified and confirmed. (c) The Mayor, Town Manager, Town Secretary and Finance Director, and each of them, shall be and they are hereby expressly authorized, empowered and directed from time to time and at any time to do and perform all such documents, certificates and instruments, whether or not herein mentioned, as may be necessary or desirable in order to carry out the terms and provisions of this Ordinance, the Certificates, the sale of the Certificates and the Official Statement. In case any officer whose signature shall appear on any Certificate shall cease to be such officer before the delivery of such Certificate, such signature shall nevertheless be valid and sufficient for all purposes the same as if such officer had remained in office until such delivery. Ordinance 700 Page 17 of 26 SECTION 10. CUSTODY, APPROVAL, AND REGISTRATION OF CERTIFICATES; BOND COUNSEL'S OPINION; CUSIP NUMBERS AND CONTINGENT INSURANCE PROVISION, IF OBTAINED; ENGAGEMENT OF BOND COUNSEL. (a) The Mayor of the Issuer is hereby authorized to have control of the Certificates initially issued and delivered hereunder and all necessary records and proceedings pertaining to the Certificates pending their delivery and their investigation, examination, and approval by the Attorney General of the State of Texas, and their registration by the Comptroller of Public Accounts of the State of Texas. Upon registration of the Certificates said Comptroller of Public Accounts (or a deputy designated in writing to act for said Comptroller) shall manually sign the Comptroller's Registration Certificate attached to such Certificates, and the seal of said Comptroller shall be impressed, or placed in facsimile, on such Certificate. The approving legal opinion of the Issuer's Bond Counsel and the assigned CUSIP numbers may, at the option of the Issuer, be printed on the Certificates issued and delivered under this Ordinance, but neither shall have any legal effect, and shall be solely for the convenience and information of the registered owners of the Certificates. In addition, if bond insurance is obtained, the Certificates may bear an appropriate legend as provided by the insurer. (b) The obligation of the initial purchaser to accept delivery of the Certificates is subject to the initial purchaser being furnished with the final, approving opinion of McCall, Parkhurst & Horton L.L.P., bond counsel to the Issuer, which opinion shall be dated as of and delivered on the date of initial delivery of the Certificates to the initial purchaser. The engagement of such firm as bond counsel to the Issuer in connection with issuance, sale and delivery of the Certificates is hereby approved and confirmed. The execution and delivery of an engagement letter between the Issuer and such firm, with respect to such services as bond counsel, is hereby authorized in such form as may be approved by the Mayor, and the Mayor is hereby authorized to execute such engagement letter. SECTION 11. INTEREST EARNINGS ON CERTIFICATE PROCEEDS. Interest earnings derived from the investment of proceeds from the sale of the Certificates shall be used along with other certificate proceeds for the Project; provided that after completion of such purpose, if any of such interest earnings remain on hand, such interest earnings shall be deposited in the Interest and Sinking Fund. It is further provided, however, that any interest earnings on certificate proceeds that are required to be rebated to the United States of America pursuant to Section 9 hereof in order to prevent the Certificates from being arbitrage bonds shall be so rebated and not considered as interest earnings for the purposes of this Section. 1111,1 1., (a) The Issuer hereby creates and establishes and shall maintain on the books of the Issuer a separate fund to be entitled the "Series 2013 Certificate of Obligation Construction Fund" for use by the Issuer for payment of all lawful costs associated with the acquisition and construction of the Project as hereinbefore provided. Upon payment of all such costs, any moneys remaining on deposit in said Fund shall be transferred to the Interest and Sinking Fund. Amounts so deposited to the Interest and Sinking Fund shall be used in the manner described in Section 5 of this Ordinance. (b) The Issuer may place proceeds of the Certificates (including investment earnings thereon) and amounts deposited into the Interest and Sinking Fund in investments authorized by the Public Funds Investment Act, Chapter 2256, Texas Government Code, as amended; provided, however, that the Issuer hereby covenants that the proceeds of the sale of the Certificates will be used as soon as practicable for the purposes for which the Certificates are issued. (c) All deposits authorized or required by this Ordinance shall be secured to the fullest extent required by law for the security of public funds. Ordinance 700 Page 18 of 26 RLKNLW�,imiff gflffc�! (a) Definitions. As used in this Section, the following terms have the meanings ascribed to such terms below: "MSRB" means the Municipal Securities Rulemaking Board. "Rule" means SEC Rule 15c2-12, as amended from time to time. "SEC" means the United States Securities and Exchange Commission. (b) Annual Reports. (i) The Issuer shall provide annually to the MSRB, in an electronic format as prescribed by the MSRB, within six months after the end of each fiscal year, financial information and operating data with respect to the Issuer of the general type included in the final Official Statement authorized by Section 9 of this Ordinance, being the information described in Exhibit A hereto. Any financial statements so to be provided shall be (1) prepared in accordance with the accounting principles described in Exhibit A hereto, or such other accounting principles as the Issuer may be required to employ from time to time pursuant to state law or regulation, and (2) audited, if the Issuer commissions an audit of such statements and the audit is completed within the period during which they must be provided. If the audit of such financial statements is not complete within such period, then the Issuer shall provide unaudited financial information by the required time, and shall provide audited financial statements for the applicable fiscal year to the MSRB, when and if the audit report on such statements become available. (ii) If the Issuer changes its fiscal year, it will notify the MSRB of the change (and of the date of the new fiscal year end) prior to the next date by which the Issuer otherwise would be required to provide financial information and operating data pursuant to this Section. The financial information and operating data to be provided pursuant to this Section may be set forth in full in one or more documents or may be included by specific reference to any document that is available to the public on the MSRB's internet website or filed with the SEC. All documents provided to the MSRB pursuant to this Section shall be accompanied by identifying information as prescribed by the MSRB. (c) Event Notices. (i) The Issuer shall notify the MSRB in an electronic format as prescribed by the MSRB, in a timely manner (but not in excess of ten business days after the occurrence of the event) of any of the following events with respect to the Certificates, if such event is material within the meaning of the federal securities laws: 1. Non-payment related defaults; 2. Modifications to rights of Certificateholders; 3. Certificate calls; 4. Release, substitution, or sale of property securing repayment of the Certificates; 5. The consummation of a merger, consolidation, or acquisition involving an obligated person or the sale of all or substantially all of the assets of the obligated person, Ordinance 700 Page 19 of 26 other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms; and 6. Appointment of a successor or additional trustee or the change of name of a trustee. (ii) The Issuer shall notify the MSRB in an electronic format as prescribed by the MSRB, in a timely manner (but not in excess of ten business days after the occurrence of the event) of any of the following events with respect to the Certificates, without regard to whether such event is considered material within the meaning of the federal securities laws: 1. Principal and interest payment delinquencies; 2. Unscheduled draws on debt service reserves reflecting financial difficulties; 3. Unscheduled draws on credit enhancements reflecting financial difficulties; 4. Substitution of credit or liquidity providers, or their failure to perform; 5. Adverse tax opinions or the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701—TEB) or other material notices or determinations with respect to the tax status of the Certificates, or other material events affecting the tax status of the Certificates; 6. Tender offers; 7. Defeasances; 8. Rating changes; and 9. Bankruptcy, insolvency, receivership or similar event of an obligated person. (iii) The Issuer shall notify the MSRB, in a timely manner, of any failure by the Issuer to provide financial information or operating data in accordance with subsection (b) of this Section by the time required by such subsection. (d) Limitations Disclaimers and Amendments. (i) The Issuer shall be obligated to observe and perform the covenants specified in this Section for so long as, but only for so long as, the Issuer remains an "obligated person" with respect to the Certificates within the meaning of the Rule, except that the Issuer in any event will give notice of any deposit made in accordance with this Ordinance or applicable law that causes Certificates no longer to be outstanding. (ii) The provisions of this Section are for the sole benefit of the registered owners and beneficial owners of the Certificates, and nothing in this Section, express or implied, shall give any benefit or any legal or equitable right, remedy, or claim hereunder to any other person. The Issuer undertakes to provide only the financial information, operating data, financial statements, and notices which it has expressly agreed to provide pursuant to this Section and does not hereby undertake to provide any other information that may be relevant or material to a complete presentation of the Issuer's financial results, condition, or prospects or hereby undertake to update any information provided in accordance with this Section or otherwise, except as expressly Ordinance 700 Page 20 of 26 provided herein. The Issuer does not make any representation or warranty concerning such information or its usefulness to a decision to invest in or sell Certificates at any future date. (iii) UNDER NO CIRCUMSTANCES SHALL THE ISSUER BE LIABLE TO THE REGISTERED OWNER OR BENEFICIAL OWNER OF ANY CERTIFICATE OR ANY OTHER PERSON, IN CONTRACT OR TORT, FOR DAMAGES RESULTING IN WHOLE OR IN PART FROM ANY BREACH BY THE ISSUER, WHETHER NEGLIGENT OR WITHOUT FAULT ON ITS PART, OF ANY COVENANT SPECIFIED IN THIS SECTION, BUT EVERY RIGHT AND REMEDY OF ANY SUCH PERSON, IN CONTRACT OR TORT, FOR OR ON ACCOUNT OF ANY SUCH BREACH SHALL BE LIMITED TO AN ACTION FOR MANDAMUS OR SPECIFIC PERFORMANCE. (iv) No default by the Issuer in observing or performing its obligations under this Section shall comprise a breach of or default under this Ordinance for purposes of any other provision of this Ordinance. Nothing in this Section is intended or shall act to disclaim, waive, or otherwise limit the duties of the Issuer under federal and state securities laws. (v) Should the Rule be amended to obligate the Issuer to make filings with or provide notices to entities other than the MSRB, the Issuer hereby agrees to undertake such obligation with respect to the Certificates in accordance with the Rule as amended. The provisions of this Section may be amended by the Issuer from time to time to adapt to changed circumstances that arise from a change in legal requirements, a change in law, or a change in the identity, nature, status, or type of operations of the Issuer, but only if (1) the provisions of this Section, as so amended, would have permitted an underwriter to purchase or sell Certificates in the primary offering of the Certificates in compliance with the Rule, taking into account any amendments or interpretations of the Rule since such offering as well as such changed circumstances and (2) either (a) the registered owners of a majority in aggregate principal amount (or any greater amount required by any other provision of this Ordinance that authorizes such an amendment) of the outstanding Certificates consent to such amendment or (b) a person that is unaffiliated with the Issuer (such as nationally recognized bond counsel) determined that such amendment will not materially impair the interest of the registered owners and beneficial owners of the Certificates. The Issuer may also amend or repeal the provisions of this continuing disclosure agreement if the SEC amends or repeals the applicable provision of the Rule or a court of final jurisdiction enters judgment that such provisions of the Rule are invalid, but only if and to the extent that the provisions of this sentence would not prevent an underwriter from lawfully purchasing or selling Certificates in the primary offering of the Certificates. If the Issuer so amends the provisions of this Section, it shall include with any amended financial information or operating data next provided in accordance with subsection (b) of this Section an explanation, in narrative form, of the reason for the amendment and of the impact of any change in the type of financial information or operating data so provided. SECTION 14. METHOD OF AMENDMENT. The Issuer hereby reserves the right to amend this Ordinance subject to the following terms and conditions, to -wit: (a) The Issuer may from time to time, without the consent of any holder, except as otherwise required by paragraph (b) below, amend or supplement this Ordinance in order to (i) cure any ambiguity, defect or omission in this Ordinance that does not materially adversely affect the interests of the holders, (ii) grant additional rights or security for the benefit of the holders, (iii) add events of default as shall not be inconsistent with the provisions of this Ordinance and that shall not materially adversely affect the interests of the holders, (v) qualify this Ordinance under the Trust Indenture Act of 1939, as amended, or corresponding provisions of federal laws from time to time in effect, or (iv) make such other provisions in Ordinance 700 Page 21 of 26 regard to matters or questions arising under this Ordinance as shall not be inconsistent with the provisions of this Ordinance and that shall not in the opinion of the Issuer's Bond Counsel materially adversely affect the interests of the holders. (b) Except as provided in paragraph (a) above, the holders of Certificates aggregating in principal amount 51% of the aggregate principal amount of then outstanding Certificates that are the subject of a proposed amendment shall have the right from time to time to approve any amendment hereto that may be deemed necessary or desirable by the Issuer; provided, however, that without the consent of 100% of the holders in aggregate principal amount of the then outstanding Certificates, nothing herein contained shall permit or be construed to permit amendment of the terms and conditions of this Ordinance or in any of the Certificates so as to: (1) Make any change in the maturity of any of the outstanding Certificates; (2) Reduce the rate of interest borne by any of the outstanding Certificates; (3) Reduce the amount of the principal of, or redemption premium, if any, payable on any outstanding Certificates; (4) Modify the terms of payment of principal or of interest or redemption premium on outstanding Certificates or any of them or impose any condition with respect to such payment; or (5) Change the minimum percentage of the principal amount of any series of Certificates necessary for consent to such amendment. (c) If at any time the Issuer shall desire to amend this Ordinance under Subsection (b) of this Section, the Issuer shall send by U.S. mail to each registered owner of the affected Certificates a copy of the proposed amendment. Such notice shall briefly set forth the nature of the proposed amendment and shall state that a copy thereof is on file at the office of the Issuer for inspection by all holders of such Certificates. (d) Whenever at any time within six months from the date of mailing of such notice the Issuer shall receive an instrument or instruments executed by the holders of at least 51 % in aggregate principal amount of all of the Certificates then outstanding that are required for the amendment, which instrument or instruments shall refer to the proposed amendment and that shall specifically consent to and approve such amendment, the Issuer may adopt the amendment in substantially the same form. (e) Upon the adoption of any amendatory Ordinance pursuant to the provisions of this Section, this Ordinance shall be deemed to be modified and amended in accordance with such amendatory Ordinance, and the respective rights, duties, and obligations of the Issuer and all holders of such affected Certificates shall thereafter be determined, exercised, and enforced, subject in all respects to such amendment. (f) Any consent given by the holder of a Certificate pursuant to the provisions of this Section shall be irrevocable for a period of six months from the date of the mailing of the notice provided for in this Section, and shall be conclusive and binding upon all future holders of the same Certificate during such period. Such consent may be revoked at any time after six months from the date of the mailing of said notice by the holder who gave such consent, or by a successor in title, by filing notice with the Issuer, but such revocation shall not be effective if the holders of 51 % in aggregate principal amount of the affected Certificates then outstanding, have, prior to the attempted revocation, consented to and approved the amendment. Ordinance 700 Page 22 of 26 (g) For the purposes of establishing ownership of the Certificates, the Issuer shall rely solely upon the registration of the ownership of such Certificates on the registration books kept by the Paying Agent/Registrar. SECTION 15. DEFAULT AND REMEDIES. (a) Events of Default. Each of the following occurrences or events for the purpose of this Ordinance is hereby declared to be an Event of Default: (i) the failure to make payment of the principal of or interest on any of the Certificates when the same becomes due and payable; or (ii) default in the performance or observance of any other covenant, agreement or obligation of the Town, the failure to perform which materially, adversely affects the rights of the registered owners of the Certificates, including, but not limited to, their prospect or ability to be repaid in accordance with this Ordinance, and the continuation thereof for a period of 60 days after notice of such default is given by any Registered Owner to the Town. (b) Remedies for Default. (i) Upon the happening of any Event of Default, then and in every case, any Registered Owner or an authorized representative thereof, including, but not limited to, a trustee or trustees therefor, may proceed against the Town for the purpose of protecting and enforcing the rights of the Registered Owners under this Ordinance, by mandamus or other suit, action or special proceeding in equity or at law, in any court of competent jurisdiction, for any relief permitted by law, including the specific performance of any covenant or agreement contained herein, or thereby to enjoin any act or thing that may be unlawful or in violation of any right of the Registered Owners hereunder or any combination of such remedies. (ii) It is provided that all such proceedings shall be instituted and maintained for the equal benefit of all Registered Owners of Certificates then outstanding. (c) Remedies Not Exclusive. (i) No remedy herein conferred or reserved is intended to be exclusive of any other available remedy or remedies, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or under the Certificates or now or hereafter existing at law or in equity; provided, however, that notwithstanding any other provision of this Ordinance, the right to accelerate the debt evidenced by the Certificates shall not be available as a remedy under this Ordinance. (ii) The exercise of any remedy herein conferred or reserved shall not be deemed a waiver of any other available remedy. (iii) By accepting the delivery of a Certificate authorized under this Ordinance, such Registered Owner agrees that the certifications required to effectuate any covenants or representations contained in this Ordinance do not and shall never constitute or give rise to a personal or pecuniary liability or charge against the officers, employees or trustees of the Town or the Town Council. SECTION 16. APPROPRIATION. To pay the debt service coming due on the Certificates, if any, prior to receipt of the taxes levied to pay such debt service, there is hereby appropriated from current Ordinance 700 Page 23 of 26 funds on hand, which are hereby certified to be on hand and available for such purpose, an amount sufficient to pay such debt service, and such amount shall be used for no other purpose. SECTION 17. EFFECTIVE DATE. In accordance with the provisions of V.T.C.A., Government Code, Section 1201.028, this Ordinance shall be effective immediately upon its adoption by the Town Council. SECTION 18. SEVERABILITY. If any section, article, paragraph, sentence, clause, phrase or word in this Ordinance, or application thereof to any persons or circumstances is held invalid or unconstitutional by a court of competent jurisdiction, such holding shall not affect the validity of the remaining portion of this Ordinance, despite such invalidity, which remaining portions shall remain in full force and effect. (Execution Page Follows) Ordinance 700 Page 24 of 26 GE'll. I Nill ATTEST: KellyJEdwardOTown Secretary APPROVED AS TO FORM: L. Staaz on Lowry, down Attorney Laura Wheat, Mayor Thomas E. Brymer, ' �Tow anager \7 [TOWN SEAL] N Op. �A 's S Ordinance 700 Page 25 of 26 EXHIBIT A Annual Financial Statements and Operating Data The following information is referred to in Section 13(b) of this Ordinance: The financial information and operating data with respect to the Issuer to be provided annually in accordance with such Section are as specified (and included in the Appendix or under the headings of the Official Statement referred to) below: -- Tables 1 through 4, inclusive, and 6 through 12, inclusive -- APPENDIX B (FINANCIAL INFORMATION FOR THE LAST COMPLETED FISCAL YEAR WHICH WILL BE UNAUDITED, UNLESS AN AUDIT IS PERFORMED IN WHICH EVENT THE AUDITED FINANCIAL STATEMENTS WILL BE MADE AVAILABLE) Accounting Principles The accounting principles referred to in such Section are the accounting principles described in the notes to the financial statements referred to in paragraph above. Ordinance 700 Page 26 of 26 TRANSCRIPT OF PROCEEDINGS RELATING TO $9,320,000 TOWN OF WESTLAKE, TEXAS COMBINATION TAX AND REVENUE CERTIFICATES OF OBLIGATION SERIES 2013 LAW OFFICES MCCALL, PARKHURST & HORTON L.L.P. 717 NORTH HARWOOD, SUITE 900 DALLAS, TEXAS 75201 Transcript of Proceedings relating to $9,320,000 Town of Westlake, Texas Combination Tax and Revenue Certificates of Obligation Series 2013 Table of Contents XT,.,ti.l..,.. Certified Resolution Authorizing Publication of Notice of Intent to Issue Certificates of Obligation..................................................... 1 Affidavit of Publication........................................................ 2 Certified Ordinance Authorizing Issuance of the Certificates of Obligation .................. 3 Purchase Agreement.......................................................... 4 Official Statement............................................................ 5 Paying Agent/Registrar Agreement ................................................ 6 General and No -Litigation Certificate .............................................. 7 Closing Certificate............................................................ 8 Approving Opinion of Attorney General of Texas and Certificate of Registration of Comptroller of Public Accounts .......................... 9 Rating Letter................................................................10 Federal Tax Certificate........................................................ 11 Information Return for Tax -Exempt Government Bond Issues Form 8038-G and Transmittal .................................................. 12 City's Letter of Instructions to the Paying Agent/Registrar Regarding Disbursement of Proceeds with Closing Memorandum ....................... 13 Paying Agent/Registrar's Receipt and Delivery Certificate .............................. 14 Underwriter's Receipt.......................................................... 15 -i- Issuer's Receipt of Payment ..................................................... 16 Specimen Certificate.......................................................... 17 Opinion of Counsel to the Underwriter ............................................. 18 Opinion of Bond Counsel....................................................... 19 Supplemental Opinion of Bond Counsel ............................................ 20 CERTIFICATE FOR RESOLUTION THE STATE OF TEXAS COUNTIES OF TARRANT AND DENTON TOWN OF WESTLAKE We, the undersigned officers of said Town, hereby certify as follows: 1. The Town Council of said Town convened in Regular Meeting on January 28, 2013, at the Town Hall, and the roll was called of the duly constituted officers and members of said Town Council, to -wit: Laura Wheat, Mayor Carol Langdon, Mayor Pro Tem Michael Barrett, Member Clifton Cox, Member David Levitan, Member Rick Rennhack, Member and all of said persons were present, thus constituting a quorum. Whereupon, among other business, the following was transacted at said Meeting: a written Resolution entitled A RESOLUTION OF THE TOWN COUNCIL OF THE TOWN OF WESTLAKE, TEXAS, DIRECTING PUBLICATION OF NOTICE OF INTENTION TO ISSUE COMBINATION TAX AND REVENUE CERTIFICATES OF OBLIGATION was duly introduced for the consideration of said Town Council and read in full. It was then duly moved and seconded that said Resolution be passed; and, after due discussion, said motion carrying with it the passage of said Resolution, prevailed and carried by the following vote: AYES: 5 NOES: 0 2. That a true, full and correct copy of the aforesaid Resolution passed at the Meeting described in the above and foregoing paragraph is attached to and follows this Certificate; that said Resolution has been duly recorded in said Town Council's minutes of said Meeting; that the above and foregoing paragraph is a true, full and correct excerpt from said Town Council's minutes of said Meeting pertaining to the passage of said Resolution; that the persons named in the above and foregoing paragraph are the duly chosen, qualified and acting officers and members of said Town Council as indicated therein; that each of the officers and members of said Town Council was duly and sufficiently notified officially and personally, in advance, of the time, place and purpose of the aforesaid Meeting, and that said Resolution would be introduced and considered for passage at said Meeting, and each of said officers and members consented, in advance, to the holding of said Meeting for such purpose, and that said Meeting was open to the public and public notice of the time, place and purpose of said meeting was given, all as required by Chapter 551, Texas Government Code. 3. That the Mayor of said Town has approved and hereby approves the aforesaid Resolution; that the Mayor and the Town Secretary of said Town have duly signed said Resolution; and that the Mayor and the Town Secretary of said Town hereby declare that their signing of this Certificate shall constitute the signing of the attached and following copy of said Resolution for all purposes. PASSED, APPROVED AND EFFECTIVE January 28, 2013. Lo"�z Ma or ATTEST: (TOWN SEAL) TowA Secreta O� WEsr vee 6 TOWN OF WESTLAKE RESOLUTION NO. I3-07 A RESOLUTION OF THE TOWN COUNCIL OF THE TOWN OF WESTLAKE, TEXAS, DIRECTING PUBLICATION OF NOTICE OF INTENTION TO ISSUE COMBINATION TAX AND REVENUE CERTIFICATES OF OBLIGATION WHEREAS, this Town Council deems it advisable to give notice of intention to issue certificates of obligation of the Town of Westlake Texas, as hereinafter provided; and WHEREAS, the Issuer expects to pay, or have paid on its behalf, expenditures in connection with the design, planning, acquisition and construction of the projects described on Exhibit A hereto (the "Projects") prior to the issuance of tax-exempt obligations, tax -credit obligations and/or obligations for which a prior expression of intent to finance or refinance is required by Federal or state law (collectively and individually, the "Obligations") to finance the Projects; WHEREAS, the Issuer finds, considers, and declares that the reimbursement for the payment of such expenditures will be appropriate and consistent with the lawful objectives of the Issuer and, as such, chooses to declare its intention to reimburse itself for such payments at such time as it issues Obligations to finance the Projects; WHEREAS, it is hereby officially found and determined that the meeting at which this Resolution was passed, was open to the public and public notice of the time, place, and purpose of said meeting was given, all as required by Chapter 551, Texas Government Code. THEREFORE, BE IT RESOLVED BY THE TOWN COUNCIL OF THE TOWN OF WESTLAKE: SECTION 1: That, all matters stated in the Recitals hereinabove are found to be true and correct and are incorporated herein by reference as if copied in their entirety. SECTION 2: Attached hereto is a form of the Notice of Intention to issue Combination Tax and Revenue Certificates of Obligation, the form and substance of which is hereby adopted and approved. The Town Secretary shall cause said notice to be published in substantially the form attached hereto, in a newspaper, as defined by Subchapter C, Chapter 2051, Texas Government Code, of general circulation in the area of said Town, once a week for two consecutive weeks, the date of the first publication thereof to be at least 30 days prior to the date tentatively set for the adoption of the ordinance authorizing the issuance of such certificates of obligation as shown in said notice. Section 1. The issuer reasonably expects to incur debt, as one or more series of Obligations, with an aggregate maximum principal amount equal to $9,500,000 for the purpose of paying the costs of the Projects. Resolution 13-07 Page 1 of 3 SECTION 3: All costs to be reimbursed pursuant hereto will be capital expenditures. No Obligations will be issued by the Issuer in furtherance of this Statement after a date which is later than 18 months after the later of (1) the date the expenditures are paid or (2) the date on which the property, with respect to which such expenditures were made, is placed in service, provided that no Obligation will be issued pursuant to this Statement more than three years after the date any expenditure which is to be reimbursed is paid. SECTION 4: If any portion of this Resolution shall, for any reason, be declared invalid by any court of competent jurisdiction, such invalidity shall not affect the remaining provisions hereof and the Council hereby determines that it would have adopted this Resolution without the invalid provision. SECTION 5: That this resolution shall become effective from and after its date of passage. PASSED AND APPROVED ON THIS 25th DAY OF FEBRUARY, 2013. ATTEST: C���A IJ3"-hr- Kell dwar , Town Secretary ary APPROVED AS TO FO L. Laura L. Wheat, Mayor I ���'iLL�J�/.✓.t�.'rI thomas T! � Resolution 13-07 Page 2 of 3 TOWN OF WESTLAKE NOTICE OF INTENTION TO ISSUE COMBINATION TAX AND REVENUE CERTIFICATES OF OBLIGATION NOTICE IS HEREBY GIVEN that the Town Council of the Town of Westlake, Texas, at its special meeting to commence at 6:30 P.M. on April 2, 2013, at its regular meeting place at 3 Village Circle, 2nd Floor, Council Chamber, Westlake, Texas, tentatively proposes to adopt an ordinance authorizing the issuance of interest bearing certificates of obligation, in one or more series, in an amount not to exceed $9,500,000 for paying all or a portion of the Town's contractual obligations incurred in connection with (i) constructing and equipping buildings and related improvements at the Westlake Academy to be used for a cafetorium, for use as a cafeteria, gymnasium and auditorium, a classroom building and a field house; (ii) constructing, installing, acquiring and equipping improvements, additions and extensions to the Town's waterworks and sewer system, including a ground storage tank; and (iii) paying legal, fiscal and engineering fees in connection with such projects. The Town proposes to provide for the payment of such certificates of obligation from the levy and collection of ad valorem taxes in the Town as provided by law and from a pledge of limited surplus revenues of the Town's waterworks and sewer system, remaining after payment of all operation and maintenance expenses thereof, and all debt service, reserve, and other requirements in connection with all of the Town's revenue bonds or other obligations (now or hereafter outstanding), which are payable from all or any part of the net revenues of the Town's waterworks and sewer system. The certificates of obligation are to be issued, and this notice is given, under and pursuant to the provisions of V.T.C.A., Local Government Code, Subchapter C of Chapter 271. TOWN OF WESTLAKE, TEXAS Resolution 11-07 Page 3 of 3 AFFIDAVIT OF PUBLICATION THE STATE OF TEXAS COUNTY OF TARRANT BEFORE ME, the undersigned authority, on this day personally appeared the person whose name is subscribed below, who, being by me first duly sworn, upon oath deposed and said: 1. That this affiant is a duly authorized officer or employee of PkW) J , which is a newspaper of general circulation in the Town of Westlake, Texas. That said newspaper is a newspaper as defined by Section 2051.044, Texas Government Code, as amended, and as such: (1) devotes not less than 25 percent of its total column lineage to general interest items; (2) is published at least once a week; (3) is entered as second-class postal matter in the county where published; and (4) has been published regularly and continuously for at least 12 months prior to publishing the notice referenced below. 3. That attached hereto is a true, full and correct copy of a TOWN OF WESTLAKE NOTICE OF INTENTION TO ISSUE COMBINATION TAX AND REVENUE CERTIFICATES OF OBLIGATION which was published in said newspaper on the following dates, to wit: �_,b � , 2013; and h'1 OJT U' 1 Y7 , 2013. Authorized &facer or Employee SWORN TO AND SUBSCRIBED BEFORE ME, this the C day of 2013. =�s �o•;Y P,,w� DEEhI3A W. � RI,.�S Notary Public —/ STATE OF TEXAS Hyl Notary Public, State of Texas Fof<w My Comm. Exp. March 2, 2016 �' [NO I UVVN OF W S LA E NOTICE'OF INTENTION TO ISSUE C RABIN TO TAX AND REVS- NUE Westlake, Texas, at its special meeting to commence at 6:30 P.M. on April 7, 2013, at its regular meeting place at 3 Tillage Circle, 2nd Floor, Cdurycil Chamber, Westlake Texas, tentatively pro - Doses to adopt an ordinance au - all or 'a portio o of the ' 6� ',s contractual obligationsincurred in connection with (i) constricting and equipping buildings and related improvements at the Westlake Academy to be used for a cafeto riurn, for, use as a cafeteria, gymnasium and auditorium, a classroom building and a field house; (H) constructing, installing, acquiring and equipping improve- ments, additions and extensions to the Town's waterworks and sewer system, including' a; ground storage tank; and (iii) paying legal, fiscal and engineering fees in connection with such projects. `The Town proposes to provide for the payment of such certificates of obligation from the levy and collection of ad valorem taxes in the 'Cowry as provided by law and from a pledge of limited surplus revenues of the Town's waterworks and surer system, remaining after payment of all operation and maintenance expenses thereof, and all debt service, reserve, and other re- quirements in connection with all of the Town's revenue bonds or other obligations (now or hereafter outstanding), which are payable from all or any part of the net revenues of the Town's waterworks and sewer system. The certificates of obligation are to be issued, and this notice is given, under and Pursuant to the provisions of V.TC.A., Local Government Code, Subchapter C of Chapter 271. TOWN OF WESTLAKE, TEXAS CERTIFICATE FOR ORDINANCE THE STATE OF TEXAS COUNTIES OF TARRANT AND DENTON TOWN OF WESTLAKE I, the undersigned Town Secretary of the Town of Westlake, Texas, hereby certify as follows: 1. The Town Council of said Town convened in Regular Session on April 2, 2013, at the scheduled meeting place thereof, and the roll was called of the duly constituted officers and members of said Town Council, to -wit: Laura Wheat, Mayor Carol Langdon, Mayor Pro Tem Michael Barrett, Member Clifton Cox, Member David Levitan, Member Rick Rennhack, Member and all of said persons were present, thus constituting a quorum. Whereupon, among other business, the following was transacted at said meeting: a written Ordinance entitled AN ORDINANCE AUTHORIZING THE ISSUANCE AND SALE OF TOWN OF WESTLAKE, TEXAS COMBINATION TAX AND REVENUE CERTIFICATES OF OBLIGATION, SERIES 2013; LEVYING AN ANNUAL AD VALOREM TAX AND PROVIDING FOR THE SECURITY FOR AND PAYMENT OF SAID CERTIFICATES; APPROVING THE OFFICIAL STATEMENT; PROVIDING AN EFFECTIVE DATE; AND ENACTING OTHER PROVISIONS RELATING TO THE SUBJECT was duly introduced for consideration and passage. It was then duly moved and seconded that said Ordinance be passed; and, after due discussion, said motion, carrying with it the passage of said Ordinance, prevailed and carried by the following vote: AYES: 5 NOES: 0 ABSTENTIONS: 0 2. A true, full and correct copy of the aforesaid Ordinance passed at the meeting described in the above and foregoing paragraph is attached to and follows this Certificate; said Ordinance has been duly recorded in the official minutes of said Town Council; the above and foregoing paragraph is a true and correct excerpt from said minutes of said meeting pertaining to the passage of said Ordinance; the persons named in the above and foregoing paragraph, at the time of said meeting and the passage of said Ordinance, were the duly chosen, qualified and acting members of said Town Council as indicated therein; each of said officers and member was duly and sufficiently notified officially and personally in advance, of the time, place and purpose of the aforesaid meeting and that said Ordinance would be introduced and considered for passage at said meeting; and said meeting was open to the public, and public notice of the time, place and purpose of said meeting was given, all as required by Tex. Gov't Code Ann. ch. 551. SIGNED AND SEALED this April 2.1 2013 YkLLw'FC1 Town ecreta Town of Westlake, Texas (TOWN SEAL) ES 7 s 0:. Te APP TOWN OF WESTLAKE ORDINANCE NO. 700 AN ORDINANCE AUTHORIZING THE ISSUANCE AND SALE OF TOWN OF WESTLAKE, TEXAS COMBINATION TAX AND REVENUE CERTIFICATES OF OBLIGATION, SERIES 2013; LEVYING AN ANNUAL AD VALOREM TAX AND PROVIDING FOR THE SECURITY FOR AND PAYMENT OF SAID CERTIFICATES; APPROVING THE OFFICIAL STATEMENT; PROVIDING AN EFFECTIVE DATE; AND ENACTING OTHER PROVISIONS RELATING TO THE SUBJECT THE STATE OF TEXAS § COUNTIES OF TARRANT AND DENTON § TOWN OF WESTLAKE § WHEREAS, the Town Council of the Town of Westlake, Texas (the "Issuer"), deems it advisable to issue Certificates of Obligation in the amount and for the purposes hereinafter set forth; WHEREAS, the Certificates of Obligation hereinafter authorized and designated are to be issued and delivered for cash pursuant to Subchapter C of Chapter 271, Local Government Code and Subchapter B, Chapter 1502, Government Code; WHEREAS, the Town Council has heretofore passed a resolution authorizing and directing the Town Secretary to give notice of intention to issue Certificates of Obligation, and said notice has been duly published in a newspaper of general circulation in said Town, said newspaper being a "newspaper" as defined in §2051.044, Texas Government Code; WHEREAS, the Town received no petition from the qualified electors of the Town protesting the issuance of such Certificates of Obligation; WHEREAS, it is considered to be to the best interest of the Town that said interest-bearing Certificates of Obligation be issued; and WHEREAS, It is officially found, determined, and declared that the meeting at which this Ordinance has been adopted was open to the public and public notice of the time, place and subject matter of the public business to be considered and acted upon at said meeting, including this Ordinance, was given, all as required by the applicable provisions of Tex. Gov't Code Ann. ch. 551; Now, Therefore BE IT ORDAINED BY THE TOWN COUNCIL OF THE TOWN OF WESTLAKE, TEXAS: SECTION 1. RECITALS, AMOUNT AND PURPOSE OF THE CERTIFICATES. The recitals set forth in the preamble hereof are incorporated herein and shall have the same force and effect as if set forth in this Section. The certificates of the Town of Westlake, Texas (the "Issuer") are hereby authorized to be issued and delivered in the aggregate principal amount of $9,320,000 for paying all or a portion of the Issuer's contractual obligations incurred in connection with (i) constructing and equipping buildings and related improvements at the Westlake Academy to be used for a cafetorium, for use as a cafeteria, gymnasium and auditorium, a classroom building and a field house; (ii) constructing, installing, acquiring and equipping improvements, additions and extensions to the Town's waterworks and sewer system, including a ground storage tank; and (iii) paying legal, fiscal and engineering fees in connection with such projects (collectively, the "Project"). Ordinance 700 Pagel of 27 SECTION 2. DESIGNATION, DATE, DENOMINATIONS, NUMBERS, AND MATURITIES AND INTEREST RATES OF CERTIFICATES. Each certificate issued pursuant to this Ordinance shall be designated: "TOWN OF WESTLAKE, TEXAS COMBINATION TAX AND REVENUE CERTIFICATE OF OBLIGATION, SERIES 2013," and initially there shall be issued, sold, and delivered hereunder one fully registered certificate, without interest coupons, dated April 1, 2013, in the principal amount stated above and in the denominations hereinafter stated, numbered T-1, with certificates issued in replacement thereof being in the denominations and principal amounts hereinafter stated and numbered consecutively from R-1 upward, payable to the respective Registered Owners thereof (with the initial certificate being made payable to the initial purchaser as described in Section 9 hereof), or to the registered assignee or assignees of said certificates or any portion or portions thereof (in each case, the "Registered Owner"), and said certificates shall mature and be payable serially on February 15 in each of the years and in the principal amounts, respectively, and shall bear interest from the dates set forth in the FORM OF CERTIFICATE set forth in Section 4 of this Ordinance to their respective dates of maturity or redemption prior to maturity at the rates per annum, as set forth in the following schedule: The term "Certificates" as used in this Ordinance shall mean and include collectively the certificates initially issued and delivered pursuant to this Ordinance and all substitute certificates exchanged therefor, as well as all other substitute certificates and replacement certificates issued pursuant hereto, and the term "Certificate" shall mean any of the Certificates. SECTION 3. CHARACTERISTICS OF THE CERTIFICATES. (a) Appointment of Paying Agent/Registrar. The Issuer hereby appoints U.S. Bank National Association, Dallas, Texas, to serve as paying agent and registrar for the Certificates (the 'Paying Agent/Registrar"). The Mayor or Town Manager is authorized and directed to execute and deliver in the name and under the corporate seal and on behalf of the Issuer a Paying Agent/Registrar Agreement with the Paying Agent/Registrar in substantially the form presented at this meeting. (b) Registration, Transfer, Conversion and Exchange. The Issuer shall keep or cause to be kept at the corporate trust office of the Paying Agent/Registrar books or records for the registration of the transfer, conversion and exchange of the Certificates (the 'Registration Books"), and the Issuer hereby appoints the Paying Agent/Registrar as its registrar and transfer agent to keep such books or records and make such registrations of transfers, conversions and exchanges under such reasonable regulations as the Issuer and Paying Agent/Registrar may prescribe; and the Paying Agent/Registrar shall make such Ordinance 700 Page 2 of 27 Principal Interest Principal Interest Years Amount Rates Years Amount Rates 2014 $ 100,000 2.000% 2026 $ 495,000 3.000% 2015 195,000 2.000% 2028 530,000 3.250% 2016 195,000 2.000% 2029 390,000 3.500% 2017 200,000 2.000% 2030 405,000 3.500% 2018 200,000 2.000% 2031 415,000 3.500% 2019 205,000 2.000% 2033 910,000 4.000% 2020 215,000 2.000% 3036 1,035,000 4.000% 2021 215,000 2.500% 2039 1,155,000 3.625% 2022 225,000 2.500% 2043 1,765,000 4.000% 2024 470,000 3.000% The term "Certificates" as used in this Ordinance shall mean and include collectively the certificates initially issued and delivered pursuant to this Ordinance and all substitute certificates exchanged therefor, as well as all other substitute certificates and replacement certificates issued pursuant hereto, and the term "Certificate" shall mean any of the Certificates. SECTION 3. CHARACTERISTICS OF THE CERTIFICATES. (a) Appointment of Paying Agent/Registrar. The Issuer hereby appoints U.S. Bank National Association, Dallas, Texas, to serve as paying agent and registrar for the Certificates (the 'Paying Agent/Registrar"). The Mayor or Town Manager is authorized and directed to execute and deliver in the name and under the corporate seal and on behalf of the Issuer a Paying Agent/Registrar Agreement with the Paying Agent/Registrar in substantially the form presented at this meeting. (b) Registration, Transfer, Conversion and Exchange. The Issuer shall keep or cause to be kept at the corporate trust office of the Paying Agent/Registrar books or records for the registration of the transfer, conversion and exchange of the Certificates (the 'Registration Books"), and the Issuer hereby appoints the Paying Agent/Registrar as its registrar and transfer agent to keep such books or records and make such registrations of transfers, conversions and exchanges under such reasonable regulations as the Issuer and Paying Agent/Registrar may prescribe; and the Paying Agent/Registrar shall make such Ordinance 700 Page 2 of 27 registrations, transfers, conversions and exchanges as herein provided within three days of presentation in due and proper form. The Paying Agent/Registrar shall obtain and record in the Registration Books the address of the registered owner of each Certificate to which payments with respect to the Certificates shall be mailed, as herein provided; but it shall be the duty of each registered owner to notify the Paying Agent/Registrar in writing of the address to which payments shall be mailed, and such interest payments shall not be mailed unless such notice has been given. The Issuer shall have the right to inspect the Registration Books during regular business hours of the Paying Agent/Registrar, but otherwise the Paying Agent/Registrar shall keep the Registration Books confidential and, unless otherwise required by law, shall not permit their inspection by any other entity. The Issuer shall pay the Paying Agent/Registrar's standard or customary fees and charges for making such registration, transfer, conversion, exchange and delivery of a substitute Certificate or Certificates. Registration of assignments, transfers, conversions and exchanges of Certificates shall be made in the manner provided and with the effect stated in the FORM OF CERTIFICATE set forth in this Ordinance. Each substitute Certificate shall bear a letter and/or number to distinguish it from each other Certificate. (c) Authentication. Except as provided in subsection (i) of this section, an authorized representative of the Paying Agent/Registrar shall, before the delivery of any such Certificate, date and manually sign said Certificate, and no such Certificate shall be deemed to be issued or outstanding unless such Certificate is so executed. The Paying Agent/Registrar promptly shall cancel all paid Certificates and Certificates surrendered for conversion and exchange. No additional ordinances, orders or resolutions need be passed or adopted by the governing body of the Issuer or any other body or person so as to accomplish the foregoing conversion and exchange of any Certificate or portion thereof, and the Paying Agent/Registrar shall provide for the printing, execution and delivery of the substitute Certificates in the manner prescribed herein. Pursuant to Subchapter D, Chapter 1201, Texas Government Code, the duty of conversion and exchange of Certificates as aforesaid is hereby imposed upon the Paying Agent/Registrar, and, upon the execution of said Certificate, the converted and exchanged Certificate shall be valid, incontestable, and enforceable in the same manner and with the same effect as the Certificates which initially were issued and delivered pursuant to this Ordinance, approved by the Attorney General, and registered by the Comptroller of Public Accounts. (d) Payment of Principal and Interest. The Issuer hereby further appoints the Paying Agent/Registrar to act as the paying agent for paying the principal of and interest on the Certificates, all as provided in this Ordinance. The Paying Agent/Registrar shall keep proper records of all payments made by the Issuer and the Paying Agent/Registrar with respect to the Certificates, and of all conversions and exchanges of Certificates, and all replacements of Certificates, as provided in this Ordinance. However, in the event of a nonpayment of interest on a scheduled payment date, and for thirty (30) days thereafter, a new record date for such interest payment (a "Special Record Date") will be established by the Paying Agent/Registrar, if and when funds for the payment of such interest have been received from the Issuer. Notice of the Special Record Date and of the scheduled payment date of the past due interest (which shall be 15 days after the Special Record Date) shall be sent at least five (5) business days prior to the Special Record Date by United States mail, first class postage prepaid, to the address of each registered owner appearing on the Registration Books at the close of business on the last business day next preceding the date of mailing of such notice. (e) Payment to Registered Owner. Notwithstanding any other provision of this Ordinance to the contrary, the Issuer and the Paying Agent/Registrar shall be entitled to treat and consider the person in whose name each Certificate is registered in the Registration Books as the absolute owner of such Certificate for the purpose of payment of principal and interest with respect to such Certificate, for the purpose of registering transfers with respect to such Certificate, and for all other purposes whatsoever. The Paying Agent/Registrar shall pay all principal of and interest on the Certificates only to or upon the order of the registered owners, as shown in the Registration Books as provided in this Ordinance, or their Ordinance 700 Page 3 of 27 respective attorneys duly authorized in writing, and all such payments shall be valid and effective to fully satisfy and discharge the Issuer's obligations with respect to payment of principal of and interest on the Certificates to the extent of the sum or sums so paid. No person other than a registered owner, as shown in the Registration Books, shall receive a Certificate certificate evidencing the obligation of the Issuer to make payments of principal and interest pursuant to this Ordinance. (f) Paying Agent/Registrar. The Issuer covenants with the registered owners of the Certificates that at all times while the Certificates are outstanding the Issuer will provide a competent and legally qualified bank, trust company, financial institution or other agency to act as and perform the services of Paying Agent/Registrar for the Certificates under this Ordinance, and that the Paying Agent/Registrar will be one entity. By accepting the position and performing as such, each Paying Agent/Registrar shall be deemed to have agreed to the provisions of this Ordinance, and a certified copy of this Ordinance shall be delivered to each Paying Agent/Registrar. (g) Substitute Paying Agent/Registrar. The Issuer reserves the right to, and may, at its option, change the Paying Agent/Registrar upon not less than 120 days written notice to the Paying Agent/Registrar, to be effective not later than 60 days prior to the next principal or interest payment date after such notice. In the event that the entity at any time acting as Paying Agent/Registrar (or its successor by merger, acquisition, or other method) should resign or otherwise cease to act as such, the Issuer covenants that promptly it will appoint a competent and legally qualified bank, trust company, financial institution, or other agency to act as Paying Agent/Registrar under this Ordinance. Upon any change in the Paying Agent/Registrar, the previous Paying Agent/Registrar promptly shall transfer and deliver the Registration Books (or a copy thereof), along with all other pertinent books and records relating to the Certificates, to the new Paying Agent/Registrar designated and appointed by the Issuer. Upon any change in the Paying Agent/Registrar, the Issuer promptly will cause a written notice thereof to be sent by the new Paying Agent/Registrar to each registered owner of the Certificates, by United States mail, first-class postage prepaid, which notice also shall give the address of the new Paying Agent/Registrar. (g) Book -Entry Only System. The Certificates issued in exchange for the Certificates initially issued to the purchaser or purchasers specified herein shall be initially issued in the form of a separate single fully registered Certificate for each of the maturities thereof and the ownership of each such Certificate shall be registered in the name of Cede & Co., as nominee of The Depository Trust Company of New York ("DTC"), and except as provided in subsections (i) and 0) of this Section, all of the outstanding Certificates shall be registered in the name of Cede & Co., as nominee of DTC. (h) Blanket Letter of Representations. The previous execution and delivery of the Blanket Letter of Representations with respect to obligations of the Issuer is hereby ratified and confirmed; and the provisions thereof shall be fully applicable to the Certificates. Notwithstanding anything to the contrary contained herein, while the Certificates are subject to DTC's Book -Entry Only System and to the extent permitted by law, the Letter of Representations is hereby incorporated herein and its provisions shall prevail over any other provisions of this Ordinance in the event of conflict. (i) Certificates Registered in the Name of Cede & Co. With respect to Certificates registered in the name of Cede & Co., as nominee of DTC, the Issuer and the Paying Agent/Registrar shall have no responsibility or obligation to any securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations on whose behalf DTC was created ("DTC Participant") to hold securities to facilitate the clearance and settlement of securities transactions among DTC Participants or to any person on behalf of whom such a DTC Participant holds an interest in the Certificates. Without limiting the immediately preceding sentence, the Issuer and the Paying Agent/Registrar shall have no responsibility or obligation with respect to (i) the accuracy of the records of DTC, Cede & Co. or any Ordinance 700 Page 4 of 27 DTC Participant with respect to any ownership interest in the Certificates, (ii) the delivery to any DTC Participant or any other person, other than a registered owner of Certificates, as shown on the Registration Books, of any notice with respect to the Certificates, or (iii) the payment to any DTC Participant or any other person, other than a registered owner of Certificates, as shown in the Registration Books of any amount with respect to principal of or interest on the Certificates. Upon delivery by DTC to the Paying Agent/Registrar of written notice to the effect that DTC has determined to substitute a new nominee in place of Cede & Co., and subject to the provisions in this Ordinance with respect to interest checks being mailed to the registered owner at the close of business on the Record date, the words "Cede & Co." in this Ordinance shall refer to such new nominee of DTC. 0) Successor Securities Depository; Transfers Outside Book -Entry Only System. In the event that the Issuer determines that DTC is incapable of discharging its responsibilities described herein and in the representation letter of the Issuer to DTC or that it is in the best interest of the beneficial owners of the Certificates that they be able to obtain certificated Certificates, the Issuer shall (i) appoint a successor securities depository, qualified to act as such under Section 17A of the Securities and Exchange Act of 1934, as amended, notify DTC and DTC Participants of the appointment of such successor securities depository and transfer one or more separate Certificates to such successor securities depository or (ii) notify DTC and DTC Participants of the availability through DTC of Certificates and transfer one or more separate Certificates to DTC Participants having Certificates credited to their DTC accounts. In such event, the Certificates shall no longer be restricted to being registered in the Registration Books in the name of Cede & Co., as nominee of DTC, but may be registered in the name of the successor securities depository, or its nominee, or in whatever name or names registered owners transferring or exchanging Certificates shall designate, in accordance with the provisions of this Ordinance. (k) Payments to Cede & Co. Notwithstanding any other provision of this Ordinance to the contrary, so long as any Certificate is registered in the name of Cede & Co., as nominee of DTC, all payments with respect to principal of and interest on such Certificate and all notices with respect to such Certificate shall be made and given, respectively, in the manner provided in the representation letter of the Issuer to DTC. (1) General Characteristics of the Certificates. The Certificates (i) shall be issued in fully registered form, without interest coupons, with the principal of and interest on such Certificates to be payable only to the Registered Owners thereof, (ii) may and shall be redeemed prior to their scheduled maturities, (iii) may be transferred and assigned, (iv) may be converted and exchanged for other Certificates, (v) shall have the characteristics, (vi) shall be signed, sealed, executed and authenticated, (vii) the principal of and interest on the Certificates shall be payable, and (viii) shall be administered and the Paying Agent/Registrar and the Issuer shall have certain duties and responsibilities with respect to the Certificates, all as provided, and in the manner and to the effect as required or indicated, in the FORM OF CERTIFICATE set forth in this Ordinance. The Certificates initially issued and delivered pursuant to this Ordinance is not required to be, and shall not be, authenticated by the Paying Agent/Registrar, but on each substitute Certificate issued in conversion of and exchange for any Certificate or Certificates issued under this Ordinance the Paying Agent/Registrar shall execute the Paying Agent/registrar's Authentication Certificate, in the FORM OF CERTIFICATE set forth in this Ordinance. (m) Cancellation of Initial Certificate. On the closing date, one initial Certificate representing the entire principal amount of the Certificates, payable in stated installments to the order of the initial purchaser of the Certificates or its designee, executed by manual or facsimile signature of the Mayor and Town Secretary, approved by the Attorney General of Texas, and registered and manually signed by the Comptroller of Public Accounts of the State of Texas, will be delivered to such purchaser or its designee. Upon payment for the initial Certificate, the Paying Agent/Registrar shall insert the Issuance Date on Certificate No. T-1, cancel each of the initial Certificates and deliver to The Depository Trust Company Ordinance 700 Page 5 of 27 ("DTC") on behalf of such purchaser one registered definitive Certificate for each year of maturity of the Certificates, in the aggregate principal amount of all of the Certificates for such maturity, registered in the name of Cede & Co., as nominee of DTC. To the extent that the Paying Agent/Registrar is eligible to participate in DTC's FAST System, pursuant to an agreement between the Paying Agent/Registrar and DTC, the Paying Agent/Registrar shall hold the definitive Certificates in safekeeping for DTC. SECTION 4. FORM OF CERTIFICATES. The form of the Certificates, including the form of Paying Agent/Registrar's Authentication Certificate, the form of Assignment and the form of Registration Certificate of the Comptroller of Public Accounts of the State of Texas to be attached to the Certificates initially issued and delivered pursuant to this Ordinance, shall be, respectively, substantially as follows, with such appropriate variations, omissions or insertions as are permitted or required by this Ordinance. (a) Form of Certificate. NO. R- UNITED STATES OF AMERICA PRINCIPAL STATE OF TEXAS -AMOUNT TOWN OF WESTLAKE, TEXAS COMBINATION TAX AND REVENUE CERTIFICATE OF OBLIGATION SERIES 2013 Interest Rate Delivery Date Maturity Date CUSIP No. February 15, REGISTERED OWNER: PRINCIPAL AMOUNT: DOLLARS ON THE MATURITY DATE specified above, the Town of Westlake, in Tarrant and Denton Counties, Texas (the "Issuer"), being a political subdivision and municipal corporation of the State of Texas, hereby promises to pay to the Registered Owner specified above, or registered assigns (hereinafter called the "Registered Owner"), on the Maturity Date specified above, the Principal Amount specified above. The Issuer promises to pay interest on the unpaid principal amount hereof (calculated on the basis of a 360 -day year of twelve 30 -day months) from the Delivery Date specified above at the Interest Rate per annum specified above. Interest is payable on February 15, 2014 and semiannually on each August 15 and February 15 thereafter to the Maturity Date specified above, or the date of redemption prior to maturity; except, if this Certificate is required to be authenticated and the date of its authentication is later than the first Record Date (hereinafter defined), such Principal Amount shall bear interest from the interest payment date next preceding the date of authentication, unless such date of authentication is after any Record Date but on or before the next following interest payment date, in which case such principal amount shall bear interest from such next following interest payment date; provided, however, that if on the date of authentication hereof the interest on the Certificate or Certificates, if any, for which this Certificate is being exchanged is due but has not been paid, then this Certificate shall bear interest from the date to which such interest has been paid in full. THE PRINCIPAL OF AND INTEREST ON this Certificate are payable in lawful money of the United States of America, without exchange or collection charges. The principal of this Certificate shall be paid to the registered owner hereof upon presentation and surrender of this Certificate at maturity, or Ordinance 700 Page 6 of 27 upon the date fixed for its redemption prior to maturity, at the principal corporate trust office of U.S. Bank National Association, Dallas, Texas, which is the "Paying Agent/Registrar" for this Certificate. The payment of interest on this Certificate shall be made by the Paying Agent/Registrar to the registered owner hereof on each interest payment date by check or draft, dated as of such interest payment date, drawn by the Paying Agent/Registrar on, and payable solely from, funds of the Issuer required by the ordinance authorizing the issuance of this Certificate (the "Certificate Ordinance") to be on deposit with the Paying Agent/Registrar for such purpose as hereinafter provided; and such check or draft shall be sent by the Paying Agent/Registrar by United States mail, first-class postage prepaid, on each such interest payment date, to the registered owner hereof, at its address as it appeared on the last business day of the month preceding each such date (the "Record Date") on the Registration Books kept by the Paying Agent/Registrar, as hereinafter described. In addition, interest may be paid by such other method, acceptable to the Paying Agent/Registrar, requested by, and at the risk and expense of, the registered owner. In the event of a non-payment of interest on a scheduled payment date, and for 30 days thereafter, a new record date for such interest payment (a "Special Record Date") will be established by the Paying Agent/Registrar, if and when funds for the payment of such interest have been received from the Issuer. Notice of the Special Record Date and of the scheduled payment date of the past due interest (which shall be 15 days after the Special Record Date) shall be sent at least five business days prior to the Special Record Date by United States mail, first-class postage prepaid, to the address of each owner of a Certificate appearing on the Registration Books at the close of business on the last business day next preceding the date of mailing of such notice. ANY ACCRUED INTEREST due at maturity or upon the redemption of this Certificate prior to maturity as provided herein shall be paid to the registered owner upon presentation and surrender of this Certificate for redemption and payment at the principal corporate trust office of the Paying Agent/Registrar. The Issuer covenants with the registered owner of this Certificate that on or before each principal payment date, interest payment date, and accrued interest payment date for this Certificate it will make available to the Paying Agent/Registrar, from the "Interest and Sinking Fund" created by the Certificate Ordinance, the amounts required to provide for the payment, in immediately available funds, of all principal of and interest on the Certificates, when due. IF THE DATE for the payment of the principal of or interest on this Certificate shall be a Saturday, Sunday, a legal holiday or a day on which banking institutions in the city where the principal corporate trust office of the Paying Agent/Registrar is located are authorized by law or executive order to close, then the date for such payment shall be the next succeeding day that is not such a Saturday, Sunday, legal holiday or day on which banking institutions are authorized to close; and payment on such date shall have the same force and effect as if made on the original date payment was due. THIS CERTIFICATE is one of a series of Certificates dated April 1, 2013, authorized in accordance with the Constitution and laws of the State of Texas in the principal amount of $9,320,000 for paying all or a portion of the Issuer's contractual obligations incurred in connection with constructing and equipping buildings and related improvements at the Westlake Academy to be used for a cafetorium, for use as a cafeteria, gymnasium and auditorium, a classroom building and a field house; (ii) constructing, installing, acquiring and equipping improvements, additions and extensions to the Town's waterworks and sewer system, including a ground storage tank; and (iii) paying legal, fiscal and engineering fees in connection with such projects. ON FEBRUARY 15, 2023, or on any date thereafter, the Certificates of this series may be redeemed prior to their scheduled maturities, at the option of the Issuer, with funds derived from any available and lawful source, as a whole, or in part, and, if in part, the particular Certificates, or portions thereof, to be redeemed shall be selected and designated by the Issuer (provided that a portion of a Ordinance 700 Page 7 of 27 Certificate may be redeemed only in an integral multiple of $5,000), at a redemption price equal to the principal amount to be redeemed plus accrued interest to the date fixed for redemption. THE CERTIFICATES scheduled to mature on February 15 in the years 2024, 2026, 2028, 2033, 2036, 2039 and 2043 (the "Term Certificates") are subject to scheduled mandatory redemption by the Paying Agent/Registrar by lot, or by any other customary method that results in a random selection, at a price equal to the principal amount thereof, plus accrued interest to the redemption date, out of moneys available for such purpose in the interest and sinking fund for the Certificates, on the dates and in the respective principal amounts, set forth in the following schedule: Term Certificate Maturity: February 15, 2024 Principal Mandatory Redemption Date Amount February 15, 2023 $ 230,000 February 15, 2024 (maturity) 240,000 Term Certificate Maturity: February 15, 2026 Principal Mandatory Redemption Date Amount February 15, 2025 $ 240,000 February 15, 2026 (maturity) 255,000 Term Certificate Maturity: February 15, 2033 Principal Mandatory Redemption Date Amount February 15, 2032 $ 595,000 February 15, 2033 (maturity) 315,000 Term Certificate Maturity: February 15, 2039 Term Certificate Maturity: February 15, 2028 Principal Mandatory Redemption Date Amount February 15, 2027 $ 260,000 February 15, 2028 (maturity) 270,000 Term Certificate Maturity: February 15, 2036 Principal Mandatory Redemption Date Amount February 15, 2037 $ 370,000 February 15, 2038 385,000 February 15, 2039 (maturity) 400,000 Term Certificate Maturity: February 15, 2028 Principal Mandatory Redemption Date Amount February 15, 2027 $ 260,000 February 15, 2028 (maturity) 270,000 Term Certificate Maturity: February 15, 2036 Term Certificate Maturity: February 15, 2043 Principal Mandatory Redemption Date Amount February 15, 2034 $ 330,000 February 15, 2035 345,000 February 15, 2036 (maturity) 360,000 Term Certificate Maturity: February 15, 2043 The principal amount of Term Certificates of a stated maturity required to be redeemed on any mandatory redemption date pursuant to the operation of the mandatory sinking fund redemption provisions shall be reduced, at the option of the Town, by the principal amount of any Term Certificates of the same maturity Ordinance 700 Page 8 of 27 Principal Mandatory Redemption Date Amount February 15, 2040 $ 415,000 February 15, 2041 430,000 February 15, 2042 450,000 February 15, 2043 (maturity) 470,000 The principal amount of Term Certificates of a stated maturity required to be redeemed on any mandatory redemption date pursuant to the operation of the mandatory sinking fund redemption provisions shall be reduced, at the option of the Town, by the principal amount of any Term Certificates of the same maturity Ordinance 700 Page 8 of 27 which, at least 50 days prior to a mandatory redemption date (1) shall have been acquired by the Town at a price not exceeding the principal amount of such Term Certificates plus accrued interest to the date of purchase thereof, and delivered to the Paying Agent/Registrar for cancellation, (2) shall have been purchased and canceled by the Paying Agent/Registrar at the request of the Town at a price not exceeding the principal amount of such Term Certificates plus accrued interest to the date of purchase, or (3) shall have been redeemed pursuant to the optional redemption provisions and not theretofore credited against a mandatory redemption requirement. IF AT THE TIME OF MAILING of notice of optional redemption there shall not have either been deposited with the Paying Agent/Registrar or legally authorized escrow agent immediately available funds sufficient to redeem all the Bonds called for redemption, such notice may state that it is conditional, and is subject to the deposit of the redemption moneys with the Paying Agent/Registrar or legally authorized escrow agent at or prior to the redemption date. If such redemption is not effectuated, the Paying Agent/Registrar shall, within five days thereafter, give notice in the manner in which the notice of redemption was given that such moneys were not so received and shall rescind the redemption. AT LEAST 30 days prior to the date fixed for any redemption of Certificates or portions thereof prior to maturity a written notice of such redemption shall be sent by the Paying Agent/Registrar by United States mail, first-class postage prepaid, to the registered owner of each Certificate to be redeemed at its address as it appeared on the 45th day prior to such redemption date; provided, however, that the failure of the registered owner to receive such notice, or any defect therein or in the sending or mailing thereof, shall not affect the validity or effectiveness of the proceedings for the redemption of any Certificate. By the date fixed for any such redemption due provision shall be made with the Paying Agent/Registrar for the payment of the required redemption price for the Certificates or portions thereof that are to be so redeemed. If such written notice of redemption is sent and if due provision for such payment is made, all as provided above, the Certificates or portions thereof that are to be so redeemed thereby automatically shall be treated as redeemed prior to their scheduled maturities, and they shall not bear interest after the date fixed for redemption, and they shall not be regarded as being outstanding except for the right of the registered owner to receive the redemption price from the Paying Agent/Registrar out of the funds provided for such payment. If a portion of any Certificate shall be redeemed, a substitute Certificate or Certificates having the same maturity date, bearing interest at the same rate, in any denomination or denominations in any integral multiple of $5,000, at the written request of the registered owner, and in aggregate principal amount equal to the unredeemed portion thereof, will be issued to the registered owner upon the surrender thereof for cancellation, at the expense of the Issuer, all as provided in the Certificate Ordinance. ALL CERTIFICATES OF THIS SERIES are issuable solely as fully registered certificates, without interest coupons, in the denomination of any integral multiple of $5,000. As provided in the Certificate Ordinance, this Certificate may, at the request of the registered owner or the assignee or assignees hereof, be assigned, transferred, converted into and exchanged for a like aggregate principal amount of fully registered certificates, without interest coupons, payable to the appropriate registered owner, assignee or assignees, as the case may be, having the same denomination or denominations in any integral multiple of $5,000 as requested in writing by the appropriate registered owner, assignee or assignees, as the case may be, upon surrender of this Certificate to the Paying Agent/Registrar for cancellation, all in accordance with the form and procedures set forth in the Certificate Ordinance. Among other requirements for such assignment and transfer, this Certificate must be presented and surrendered to the Paying Agent/Registrar, together with proper instruments of assignment, in form and with guarantee of signatures satisfactory to the Paying Agent/Registrar, evidencing assignment of this Certificate or any portion or portions hereof in any integral multiple of $5,000 to the assignee or assignees in whose name or names this Certificate or any such portion or portions hereof is or are to be registered. The form of Assignment printed or endorsed on this Certificate may be executed by the registered owner Ordinance 700 Page 9 of 27 to evidence the assignment hereof, but such method is not exclusive, and other instruments of assignment satisfactory to the Paying Agent/Registrar may be used to evidence the assignment of this Certificate or any portion or portions hereof from time to time by the registered owner. The Paying Agent/Registrar's reasonable standard or customary fees and charges for assigning, transferring, converting and exchanging any Certificate or portion thereof will be paid by the Issuer. In any circumstance, any taxes or governmental charges required to be paid with respect thereto shall be paid by the one requesting such assignment, transfer, conversion or exchange, as a condition precedent to the exercise of such privilege. The Paying Agent/Registrar shall not be required to make any such transfer, conversion, or exchange (i) during the period commencing with the close of business on any Record Date and ending with the opening of business on the next following principal or interest payment date, or (ii) with respect to any Certificate or any portion thereof called for redemption prior to maturity, within 45 days prior to its redemption date. IN THE EVENT any Paying Agent/Registrar for the Certificates is changed by the Issuer, resigns, or otherwise ceases to act as such, the Issuer has covenanted in the Certificate Ordinance that it promptly will appoint a competent and legally qualified substitute therefor, and cause written notice thereof to be mailed to the registered owners of the Certificates. IT IS HEREBY certified, recited and covenanted that this Certificate has been duly and validly authorized, issued and delivered; that all acts, conditions and things required or proper to be performed, exist and be done precedent to or in the authorization, issuance and delivery of this Certificate have been performed, existed and been done in accordance with law; and that annual ad valorem taxes sufficient to provide for the payment of the interest on and principal of this Certificate, as such interest comes due and such principal matures, have been levied and ordered to be levied against all taxable property in said Issuer, and have been pledged for such payment, within the limit prescribed by law, and that this Certificate is additionally secured by and payable from a limited pledge of the Surplus Revenues of the Issuer's waterworks and sewer system remaining after payment of all operation and maintenance expenses thereof, and all debt service, reserve and other requirements in connection with all of the Issuer's revenue obligations (now or hereafter outstanding) that are payable from all or part of said revenues, all as provided in the Certificate Ordinance. THE ISSUER HAS RESERVED THE RIGHT to amend the Certificate Ordinance as provided therein, and under some (but not all) circumstances amendments thereto must be approved by the registered owners of a majority in aggregate principal amount of the outstanding Certificates. BY BECOMING the registered owner of this Certificate, the registered owner thereby acknowledges all of the terms and provisions of the Certificate Ordinance, agrees to be bound by such terms and provisions, acknowledges that the Certificate Ordinance is duly recorded and available for inspection in the official minutes and records of the governing body of the Issuer, and agrees that the terms and provisions of this Certificate and the Certificate Ordinance constitute a contract between each registered owner hereof and the Issuer. IN WITNESS WHEREOF, the Issuer has caused this Certificate to be signed with the manual or facsimile signature of the Mayor of the Issuer (or in the Mayor's absence, by the Mayor Pro Tem) and countersigned with the manual or facsimile signature of the Town Secretary of said Issuer, and has caused the official seal of the Issuer to be duly impressed, or placed in facsimile, on this Certificate. (signature) Town Secretary (SEAL) (signature) Mayor Ordinance 700 Page 10 of 27 (b) Form of Paying A. en�gistrar's Authentication Certificate. PAYING AGENT/REGISTRAR'S AUTHENTICATION CERTIFICATE (To be executed if this Certificate is not accompanied by an executed Registration Certificate of the Comptroller of Public Accounts of the State of Texas) It is hereby certified that this Certificate has been issued under the provisions of the Certificate Ordinance described in the text of this Certificate; and that this Certificate has been issued in conversion or replacement of, or in exchange for, a certificate, certificates, or a portion of a certificate or certificates of a series that originally was approved by the Attorney General of the State of Texas and registered by the Comptroller of Public Accounts of the State of Texas. Dated: (c) Form of Assi mg tient. U.S. BANK NATIONAL ASSOCIATION Dallas, Texas Paying Agent/Registrar Authorized Representative ASSIGNMENT (Please print or type clearly) For value received, the undersigned hereby sells, assigns and transfers unto: Transferee's Social Security or Taxpayer Identification Number: Transferee's name and address, including zip code: the within Certificate and all rights thereunder, and hereby irrevocably constitutes and appoints , attorney, to register the transfer of the within Certificate on the books kept for registration thereof, with full power of substitution in the premises. Dated: Signature Guaranteed: NOTICE: Signature(s) must be guaranteed by an eligible guarantor institution participating in a securities transfer association recognized signature guarantee program. NOTICE: The signature above must correspond with the name of the Registered Owner as it appears upon the front of this Certificate in every particular, without alteration or enlargement or any change whatsoever. Ordinance 700 Page 11 of 27 (d) Form of Registration Certificate of the Comptroller of Public Accounts. COMPTROLLER'S REGISTRATION CERTIFICATE: REGISTER NO. I hereby certify that this Certificate has been examined, certified as to validity and approved by the Attorney General of the State of Texas, and that this Certificate has been registered by the Comptroller of Public Accounts of the State of Texas. Witness my signature and seal this Comptroller of Public Accounts of the State of Texas (COMPTROLLER'S SEAL) (e) Initial Certificate Insertions. (i) The initial Certificate shall be in the form set forth is paragraph (a) of this Section, except that: A. immediately under the name of the Certificate, the headings "Interest Rate" and "Maturity Date" shall both be completed with the words "As shown below" and "CUSIP No. " shall be deleted. B. the first paragraph shall be deleted and the following will be inserted: "THE TOWN OF WESTLAKE, TEXAS, in Tarrant and Denton Counties, Texas (the "Issuer"), being a political subdivision and municipal corporation of the State of Texas, hereby promises to pay to the Registered Owner specified above, or registered assigns (hereinafter called the "Registered Owner"), on February 15 in each of the years, in the principal installments and bearing interest at the per annum rates set forth in the following schedule: Principal Years Installments Interest Rates (Information from Section 2 to be inserted) The Issuer promises to pay interest on the unpaid principal amount hereof (calculated on the basis of a 360 -day year of twelve 30 -day months) from the Delivery Date specified above at the respective Interest Rate per annum specified above. Interest is payable on February 15, 2014, and semiannually on each August 15 and February 15 thereafter to the date of payment of the principal installment specified above, or the date of redemption prior to maturity; except, that if this Certificate is required to be authenticated and the date of its authentication is later than the first Record Date (hereinafter defined), such Principal Amount shall bear interest from the interest payment date next preceding the date of authentication, unless such date of authentication is after any Record Date but on or before the next following interest payment date, in which case such principal amount shall bear interest from such next following interest payment date; provided, however, that if on the date of authentication hereof the interest on the Certificate or Certificates, if any, for which this Certificate is being exchanged is due but has not been paid, then this Certificate shall bear interest from the date to which such interest has been paid in full." C. The Initial Certificate shall be numbered "T-1." Ordinance 700 Page 12 of 27 SECTION 5. INTEREST AND SINKING FUND; SURPLUS REVENUES. (a) A special "Interest and Sinking Fund" is hereby created and shall be established and maintained by the Issuer at an official depository bank of said Issuer. Said Interest and Sinking Fund shall be kept separate and apart from all other funds and accounts of said Issuer, and shall be used only for paying the interest on and principal of said Certificates. All amounts received from the sale of the Certificates as accrued interest shall be deposited upon receipt to the Interest and Sinking Fund, and all ad valorem taxes levied and collected for and on account of said Certificates shall be deposited, as collected, to the credit of said Interest and Sinking Fund. During each year while any of said Certificates are outstanding and unpaid, the governing body of said Issuer shall compute and ascertain a rate and amount of ad valorem tax that will be sufficient to raise and produce the money required to pay the interest on said Certificates as such interest comes due, and to provide and maintain a sinking fund adequate to pay the principal of said Certificates as such principal matures (but never less than 2% of the original amount of said Certificates as a sinking fund each year); and said tax shall be based on the latest approved tax rolls of said Issuer, with full allowances being made for tax delinquencies and the cost of tax collection. Said rate and amount of ad valorem tax is hereby levied, and is hereby ordered to be levied, against all taxable property in said Issuer, for each year while any of said Certificates are outstanding and unpaid, and said tax shall be assessed and collected each such year and deposited to the credit of the aforesaid Interest and Sinking Fund. Said ad valorem taxes sufficient to provide for the payment of the interest on and principal of said Certificates, as such interest comes due and such principal matures, are hereby pledged for such payment, within the limit prescribed by law. (b) The Certificates are additionally secured by revenues of the Issuer's waterworks and sewer system that remain after the payment of all maintenance and operation expenses thereof, and all debt service, reserve and other requirements in connection with all of the Issuer's revenue obligations (now or hereafter outstanding) that are secured by a lien on all or any part of the net revenues of the Issuer's waterworks and sewer system, constituting "Surplus Revenues", not to exceed $1,000. The Issuer shall deposit such Surplus Revenues to the credit of the Interest and Sinking Fund created pursuant to Subsection (a) of this Section, to the extent necessary to pay the principal and interest on the Certificates. Notwithstanding the requirements of subsection (a) of this section, if Surplus Revenues or other lawfully available moneys of the Issuer are actually on deposit in the Interest and Sinking Fund in advance of the time when ad valorem taxes are scheduled to be levied for any year, then the amount of taxes that otherwise would have been required to be levied pursuant to Subsection (a) of this Section may be reduced to the extent and by the amount of the Surplus Revenues or other lawfully available funds then on deposit in the Interest and Sinking Fund. (c) Article 1208, Government Code, applies to the issuance of the Certificates of Obligation and the pledge of the taxes and Surplus Revenues granted by the Issuer under this Section and is therefore valid, effective, and perfected. Should Texas law be amended at any time while the Certificates of Obligation are outstanding and unpaid, the result of such amendment being that the pledge of the taxes and Surplus Revenues granted by the Issuer under this Section and Section 8, respectively, is to be subject to the filing requirements of Chapter 9, Business & Commerce Code, in order to preserve to the registered owners of the Certificates of Obligation a security interest in said pledge, the Issuer agrees to take such measures as it determines are reasonable and necessary under Texas law to comply with the applicable provisions of Chapter 9, Business & Commerce Code and enable a filing of a security interest in said pledge to occur. SECTION 6. DEFEASANCE OF CERTIFICATES. (a) Any Certificate and the interest thereon shall be deemed to be paid, retired and no longer outstanding (a "Defeased Certificate") within the meaning of this Ordinance, except to the extent Ordinance 700 Page 13 of 27 provided in subsection (d) of this Section, when payment of the principal of such Certificate, plus interest thereon to the due date (whether such due date be by reason of maturity or otherwise) either (i) shall have been made or caused to be made in accordance with the terms thereof, or (ii) shall have been provided for on or before such due date by irrevocably depositing with or making available to the Paying Agent/Registrar in accordance with an escrow agreement or other instrument (the "Future Escrow Agreement") for such payment (1) lawful money of the United States of America sufficient to make such payment or (2) Defeasance Securities that mature as to principal and interest in such amounts and at such times as will insure the availability, without reinvestment, of sufficient money to provide for such payment, and when proper arrangements have been made by the Issuer with the Paying Agent/Registrar for the payment of its services until all Defeased Certificates shall have become due and payable. At such time as a Certificate shall be deemed to be a Defeased Certificate hereunder, as aforesaid, such Certificate and the interest thereon shall no longer be secured by, payable from, or entitled to the benefits of, the ad valorem taxes herein levied and pledged as provided in this Ordinance, and such principal and interest shall be payable solely from such money or Defeasance Securities. Notwithstanding any other provision of this Ordinance to the contrary, it is hereby provided that any determination not to redeem Defeased Certificates that is made in conjunction with the payment arrangements specified in subsection 6(a)(i) or (ii) shall not be irrevocable, provided that: (1) in the proceedings providing for such payment arrangements, the Issuer expressly reserves the right to call the Defeased Certificates for redemption; (2) gives notice of the reservation of that right to the owners of the Defeased Certificates immediately following the making of the payment arrangements; and (3) directs that notice of the reservation be included in any redemption notices that it authorizes. (b) Any moneys so deposited with the Paying Agent/Registrar may at the written direction of the Issuer be invested in Defeasance Securities, maturing in the amounts and times as hereinbefore set forth, and all income from such Defeasance Securities received by the Paying Agent/Registrar that is not required for the payment of the Certificates and interest thereon, with respect to which such money has been so deposited, shall be turned over to the Issuer, or deposited as directed in writing by the Issuer. Any Future Escrow Agreement pursuant to which the money and/or Defeasance Securities are held for the payment of Defeased Certificates may contain provisions permitting the investment or reinvestment of such moneys in Defeasance Securities or the substitution of other Defeasance Securities upon the satisfaction of the requirements specified in subsection 6(a)(i) or (ii). All income from such Defeasance Securities received by the Paying Agent/Registrar which is not required for the payment of the Defeased Certificates, with respect to which such money has been so deposited, shall be remitted to the Issuer or deposited as directed in writing by the Issuer. (c) The term 'Defeasance Securities" means any securities and obligations now or hereafter authorized by State law that are eligible to refund, retire or otherwise discharge obligations such as the Certificates. (d) Until all Defeased Certificates shall have become due and payable, the Paying Agent/Registrar shall perform the services of Paying Agent/Registrar for such Defeased Certificates the same as if they had not been defeased, and the Issuer shall make proper arrangements to provide and pay for such services as required by this Ordinance. (e) In the event that the Issuer elects to defease less than all of the principal amount of Certificates of a maturity, the Paying Agent/Registrar shall select, or cause to be selected, such amount of Certificates by such random method as it deems fair and appropriate. Ordinance 700 Page 14 of 27 SECTION 7. DAMAGED, MUTILATED, LOST, STOLEN, OR DESTROYED CERTIFICATES. (a) Replacement Certificates. In the event any outstanding Certificate is damaged, mutilated, lost, stolen or destroyed, the Paying Agent/Registrar shall cause to be printed, executed and delivered, a new certificate of the same principal amount, maturity and interest rate, as the damaged, mutilated, lost, stolen or destroyed Certificate, in replacement for such Certificate in the manner hereinafter provided. (b) Application for Replacement Certificates. Application for replacement of damaged, mutilated, lost, stolen or destroyed Certificates shall be made by the registered owner thereof to the Paying Agent/Registrar. In every case of loss, theft or destruction of a Certificate, the registered owner applying for a replacement certificate shall furnish to the Issuer and to the Paying Agent/Registrar such security or indemnity as may be required by them to save each of them harmless from any loss or damage with respect thereto. Also, in every case of loss, theft or destruction of a Certificate, the registered owner shall furnish to the Issuer and to the Paying Agent/Registrar evidence to their satisfaction of the loss, theft or destruction of such Certificate, as the case may be. In every case of damage or mutilation of a Certificate, the registered owner shall surrender to the Paying Agent/Registrar for cancellation the Certificate so damaged or mutilated. (c) No Default Occurred. Notwithstanding the foregoing provisions of this , in the event any such Certificate shall have matured, and no default has occurred that is then continuing in the payment of the principal of, redemption premium, if any, or interest on the Certificate, the Issuer may authorize the payment of the same (without surrender thereof except in the case of a damaged or mutilated Certificate) instead of issuing a replacement Certificate, provided security or indemnity is furnished as above provided in this Section. (d) Charge for Issuing Replacement Certificates. Prior to the issuance of any replacement certificate, the Paying Agent/Registrar shall charge the registered owner of such Certificate with all legal, printing, and other expenses in connection therewith. Every replacement certificate issued pursuant to the provisions of this Section by virtue of the fact that any Certificate is lost, stolen or destroyed shall constitute a contractual obligation of the Issuer whether or not the lost, stolen or destroyed Certificate shall be found at any time, or be enforceable by anyone, and shall be entitled to all the benefits of this Ordinance equally and proportionately with any and all other Certificates duly issued under this Ordinance. (e) Authority for Issuing Replacement Certificates. In accordance with Sec. 1206.022, Government Code, this Section 7 of this Ordinance shall constitute authority for the issuance of any such replacement certificate without necessity of further action by the governing body of the Issuer or any other body or person, and the duty of the replacement of such certificates is hereby authorized and imposed upon the Paying Agent/Registrar, and the Paying Agent/Registrar shall authenticate and deliver such Certificates in the form and manner and with the effect, as provided in Section 3(a) of this Ordinance for Certificates issued in conversion and exchange for other Certificates. SECTION 8. COVENANTS REGARDING TAX EXEMPTION OF INTEREST ON THE CERTIFICATES. (a) Covenants. The Issuer covenants to take any action necessary to assure, or refrain from any action that would adversely affect, the treatment of the Certificates as obligations described in section 103 of the Code, the interest on which is not includable in the "gross income" of the holder for purposes of federal income taxation. In furtherance thereof, the Issuer covenants as follows: Ordinance 700 Page 15 of 27 (1) to take any action to assure that no more than 10 percent of the proceeds of the Certificates (less amounts deposited to a reserve fund, if any) are used for any "private business use," as defined in section 141(b)(6) of the Code or, if more than 10 percent of the proceeds or the projects financed by the Certificates (the "Project") are so used, such amounts, whether or not received by the Issuer, with respect to such private business use, do not, under the terms of this Ordinance or any underlying arrangement, directly or indirectly, secure or provide for the payment of more than 10 percent of the debt service on the Certificates, in contravention of section 141(b)(2) of the Code; (2) to take any action to assure that in the event that the "private business use" described in subsection (1) hereof exceeds 5 percent of the proceeds of the Certificates or the projects financed therewith (less amounts deposited into a reserve fund, if any) then the amount in excess of 5 percent is used for a "private business use" that is "related" and not "disproportionate," within the meaning of section 141(b)(3) of the Code, to the governmental use; (3) to take any action to assure that no amount that is greater than the lesser of $5,000,000, or 5 percent of the proceeds of the Certificates (less amounts deposited into a reserve fund, if any) is directly or indirectly used to finance loans to persons, other than state or local governmental units, in contravention of section 141(c) of the Code; (4) to refrain from taking any action that would otherwise result in the Certificates being treated as "private activity bonds" within the meaning of section 141(b) of the Code; (5) to refrain from taking any action that would result in the Certificates being "federally guaranteed" within the meaning of section 149(b) of the Code; (6) to refrain from using any portion of the proceeds of the Certificates, directly or indirectly, to acquire or to replace funds that were used, directly or indirectly, to acquire investment property (as defined in section 148(b)(2) of the Code) that produces a materially higher yield over the term of the Certificates, other than investment property acquired with — (A) proceeds of the Certificates invested for a reasonable temporary period until such proceeds are needed for the purpose for which the Certificates are issued, (B) amounts invested in a bona fide debt service fund, within the meaning of section 1.148-1(b) of the Treasury Regulations, and (C) amounts deposited in any reasonably required reserve or replacement fund to the extent such amounts do not exceed 10 percent of the proceeds of the Certificates; (7) to otherwise restrict the use of the proceeds of the Certificates or amounts treated as proceeds of the Certificates, as may be necessary, so that the Certificates do not otherwise contravene the requirements of section 148 of the Code (relating to arbitrage) and, to the extent applicable, section 149(d) of the Code (relating to advance refundings); (8) to pay to the United States of America at least once during each five-year period (beginning on the date of delivery of the Certificates) an amount that is at least equal to 90 percent of the "Excess Earnings," within the meaning of section 148(f) of the Code and to pay to the United States of America, not later than 60 days after the Certificates have been paid in full, 100 percent of the amount then required to be paid as a result of Excess Earnings under section 148(f) of the Code; and Ordinance 700 Page 16 of 27 (9) to assure that the proceeds of the Certificates will be used solely for new money. (b) Rebate Fund. In order to facilitate compliance with the above covenant (a)(8), a "Rebate Fund" is hereby established by the Issuer for the sole benefit of the United States of America, and such Fund shall not be subject to the claim of any other person, including without limitation the Certificateholders. The Rebate Fund is established for the additional purpose of compliance with section 148 of the Code. (c) Use of Proceeds. For purposes of the foregoing covenants (a)(1) and (a)(2), the Issuer understands that the term "proceeds" includes "disposition proceeds" as defined in the Treasury Regulations and, in the case of the refunding bonds, transferred proceeds (if any) and proceeds of the refunded obligations expended prior to the date of issuance of the Certificates. It is the understanding of the Issuer that the covenants contained herein are intended to assure compliance with the Code and any regulations or rulings promulgated by the U.S. Department of the Treasury pursuant thereto. In the event that regulations or rulings are hereafter promulgated that modify or expand provisions of the Code, as applicable to the Certificates, the Issuer will not be required to comply with any covenant contained herein to the extent that such failure to comply, in the opinion of nationally recognized bond counsel, will not adversely affect the exemption from federal income taxation of interest on the Certificates under section 103 of the Code. In the event that regulations or rulings are hereafter promulgated that impose additional requirements applicable to the Certificates, the Issuer agrees to comply with the additional requirements to the extent necessary, in the opinion of nationally recognized bond counsel, to preserve the exemption from federal income taxation of interest on the Certificates under section 103 of the Code. In furtherance of such intention, the Issuer hereby authorizes and directs the Mayor, the Town Manager or the Finance Director to execute any documents, certificates or reports required by the Code and to make such elections, on behalf of the Issuer, that may be permitted by the Code as are consistent with the purpose for the issuance of the Certificates. (d) Allocation of, and Limitation on, Expenditures for the Project. The Issuer covenants to account for the expenditure of sale proceeds and investment earnings to be used for the construction and acquisition of the Project on its books and records by allocating proceeds to expenditures within 18 months of the later of the date that (1) the expenditure is made, or (2) the Project is completed. The foregoing notwithstanding, the Issuer shall not expend proceeds of the sale of the Certificates or investment earnings thereon more than 60 days after the earlier of (1) the fifth anniversary of the delivery of the Certificates, or (2) the date the Certificates are retired, unless the Issuer obtains an opinion of nationally -recognized bond counsel that such expenditure will not adversely affect the status, for federal income tax purposes, of the Certificates or the interest thereon. For purposes hereof, the Issuer shall not be obligated to comply with this covenant if it obtains an opinion that such failure to comply will not adversely affect the excludability for federal income tax purposes from gross income of the interest. (e) Disposition of Projects. The Issuer covenants that the Projects will not be sold or otherwise disposed in a transaction resulting in the receipt by the Issuer of cash or other compensation, unless the Issuer obtains an opinion of nationally -recognized bond counsel that such sale or other disposition will not adversely affect the tax-exempt status of the Certificates. For purposes of the foregoing, the portion of the property comprising personal property and disposed in the ordinary course shall not be treated as a transaction resulting in the receipt of cash or other compensation. For purposes hereof, the Issuer shall not be obligated to comply with this covenant if it obtains a legal opinion that such failure to comply will not adversely affect the excludability for federal income tax proposes from gross income of the interest. (f) Designation as Qualified Tax -Exempt Obligations. The Issuer hereby designates the Certificates as "qualified tax-exempt obligations" as defined in section 265(b)(3) of the Code. In furtherance of such designation, the Issuer represents, covenants and warrants the following: (a) that Ordinance 700 Page 17 of 27 during the calendar year in which the Certificates are issued, the Issuer (including any subordinate entities) has not designated nor will designate tax-exempt obligations, which when aggregated with the Certificates, will result in more than $10,000,000 of "qualified tax-exempt obligations" being issued; (b) that the Issuer reasonably anticipates that the amount of tax-exempt obligations issued, during the calendar year in which the Certificates are issued, by the Issuer (or any subordinate entities) will not exceed $10,000,000; and, (c) that the Issuer will take such action or refrain from such action as necessary, and as more particularly set forth in this Section, in order that the Certificates will not be considered "private activity bonds" within the meaning of section 141 of the Code. SECTION 9. SALE OF CERTIFICATES AND APPROVAL OF OFFICIAL STATEMENT; FURTHER PROCEDURES. (a) The Certificates are hereby sold and shall be delivered to Southwest Securities, Inc. (the "Purchaser"), for the purchase price of $9,575,238.18 (representing the principal amount of the Certificates plus a net premium of $319,591.75 (with $180,000.00 of such premium to be deposited into the construction fund to pay costs of the Projects, $139,573.57 of such premium to be used to pay costs of issuance, including underwriter's discount) and $18.18 to be deposited into the Interest and Sinking Fund) and less an Underwriter's discount on the Certificates of $64,353.57, pursuant to the terms and provisions of a Purchase Agreement, which the Mayor is authorized to execute and deliver. It is hereby officially found, determined, and declared that the terms of this sale are the most advantageous reasonably obtainable. (b) The Issuer hereby approves the form and content of the Official Statement relating to the Certificates and any addenda, supplement or amendment thereto, and approves the distribution of such Official Statement in the reoffering of the Certificates by the Purchaser in final form, with such changes therein or additions thereto as the officer executing the same may deem advisable, such determination to be conclusively evidenced by his execution thereof. The distribution and use of the Preliminary Official Statement dated March 25, 2013, prior to the date hereof is hereby ratified and confirmed. (c) The Mayor, Town Manager, Town Secretary and Finance Director, and each of them, shall be and they are hereby expressly authorized, empowered and directed from time to time and at any time to do and perform all such documents, certificates and instruments, whether or not herein mentioned, as may be necessary or desirable in order to carry out the terms and provisions of this Ordinance, the Certificates, the sale of the Certificates and the Official Statement. In case any officer whose signature shall appear on any Certificate shall cease to be such officer before the delivery of such Certificate, such signature shall nevertheless be valid and sufficient for all purposes the same as if such officer had remained in office until such delivery. SECTION 10. CUSTODY, APPROVAL, AND REGISTRATION OF CERTIFICATES; BOND COUNSEL'S OPINION; CUSIP NUMBERS AND CONTINGENT INSURANCE PROVISION, IF OBTAINED; ENGAGEMENT OF BOND COUNSEL. (a) The Mayor of the Issuer is hereby authorized to have control of the Certificates initially issued and delivered hereunder and all necessary records and proceedings pertaining to the Certificates pending their delivery and their investigation, examination, and approval by the Attorney General of the State of Texas, and their registration by the Comptroller of Public Accounts of the State of Texas. Upon registration of the Certificates said Comptroller of Public Accounts (or a deputy designated in writing to act for said Comptroller) shall manually sign the Comptroller's Registration Certificate attached to such Certificates, and the seal of said Comptroller shall be impressed, or placed in facsimile, on such Certificate. The approving legal opinion of the Issuer's Bond Counsel and the assigned CUSIP numbers may, at the option of the Issuer, be printed on the Certificates issued and delivered under this Ordinance, but neither shall have any legal effect, and shall be solely for the convenience and information of the Ordinance 700 Page 18 of 27 registered owners of the Certificates. In addition, if bond insurance is obtained, the Certificates may bear an appropriate legend as provided by the insurer. (b) The obligation of the initial purchaser to accept delivery of the Certificates is subject to the initial purchaser being furnished with the final, approving opinion of McCall, Parkhurst & Horton L.L.P., bond counsel to the Issuer, which opinion shall be dated as of and delivered on the date of initial delivery of the Certificates to the initial purchaser. The engagement of such firm as bond counsel to the Issuer in connection with issuance, sale and delivery of the Certificates is hereby approved and confirmed. The execution and delivery of an engagement letter between the Issuer and such firm, with respect to such services as bond counsel, is hereby authorized in such form as may be approved by the Mayor, and the Mayor is hereby authorized to execute such engagement letter. SECTION 11. INTEREST EARNINGS ON CERTIFICATE PROCEEDS. Interest earnings derived from the investment of proceeds from the sale of the Certificates shall be used along with other certificate proceeds for the Project; provided that after completion of such purpose, if any of such interest earnings remain on hand, such interest earnings shall be deposited in the Interest and Sinking Fund. It is further provided, however, that any interest earnings on certificate proceeds that are required to be rebated to the United States of America pursuant to Section 9 hereof in order to prevent the Certificates from being arbitrage bonds shall be so rebated and not considered as interest earnings for the purposes of this Section. SECTION 12. CONSTRUCTION FUND. (a) The Issuer hereby creates and establishes and shall maintain on the books of the Issuer a separate fund to be entitled the "Series 2013 Certificate of Obligation Construction Fund" for use by the Issuer for payment of all lawful costs associated with the acquisition and construction of the Project as hereinbefore provided. Upon payment of all such costs, any moneys remaining on deposit in said Fund shall be transferred to the Interest and Sinking Fund. Amounts so deposited to the Interest and Sinking Fund shall be used in the manner described in Section 5 of this Ordinance. (b) The Issuer may place proceeds of the Certificates (including investment earnings thereon) and amounts deposited into the Interest and Sinking Fund in investments authorized by the Public Funds Investment Act, Chapter 2256, Texas Government Code, as amended; provided, however, that the Issuer hereby covenants that the proceeds of the sale of the Certificates will be used as soon as practicable for the purposes for which the Certificates are issued. (c) All deposits authorized or required by this Ordinance shall be secured to the fullest extent required by law for the security of public funds. SECTION 13. COMPLIANCE WITH RULE 15C2-12. (a) Definitions. As used in this Section, the following terms have the meanings ascribed to such terms below: "MSRB" means the Municipal Securities Rulemaking Board. "Rule" means SEC Rule 15c2-12, as amended from time to time. "SEC" means the United States Securities and Exchange Commission. Ordinance 700 Page 19 of 27 (b) Annual Reports. (i) The Issuer shall provide annually to the MSRB, in an electronic format as prescribed by the MSRB, within six months after the end of each fiscal year, financial information and operating data with respect to the Issuer of the general type included in the final Official Statement authorized by Section 9 of this Ordinance, being the information described in Exhibit A hereto. Any financial statements so to be provided shall be (1) prepared in accordance with the accounting principles described in Exhibit A hereto, or such other accounting principles as the Issuer may be required to employ from time to time pursuant to state law or regulation, and (2) audited, if the Issuer commissions an audit of such statements and the audit is completed within the period during which they must be provided. If the audit of such financial statements is not complete within such period, then the Issuer shall provide unaudited financial information by the required time, and shall provide audited financial statements for the applicable fiscal year to the MSRB, when and if the audit report on such statements become available. (ii) If the Issuer changes its fiscal year, it will notify the MSRB of the change (and of the date of the new fiscal year end) prior to the next date by which the Issuer otherwise would be required to provide financial information and operating data pursuant to this Section. The financial information and operating data to be provided pursuant to this Section may be set forth in full in one or more documents or may be included by specific reference to any document that is available to the public on the MSRB's internet website or filed with the SEC. All documents provided to the MSRB pursuant to this Section shall be accompanied by identifying information as prescribed by the MSRB. (c) Event Notices. (i) The Issuer shall notify the MSRB in an electronic format as prescribed by the MSRB, in a timely manner (but not in excess of ten business days after the occurrence of the event) of any of the following events with respect to the Certificates, if such event is material within the meaning of the federal securities laws: 1. Non-payment related defaults; 2. Modifications to rights of Certificateholders; 3. Certificate calls; 4. Release, substitution, or sale of property securing repayment of the Certificates; 5. The consummation of a merger, consolidation, or acquisition involving an obligated person or the sale of all or substantially all of the assets of the obligated person, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms; and 6. Appointment of a successor or additional trustee or the change of name of a trustee. (ii) The Issuer shall notify the MSRB in an electronic format as prescribed by the MSRB, in a timely manner (but not in excess of ten business days after the occurrence of the event) of Ordinance 700 Page 20 of 27 any of the following events with respect to the Certificates, without regard to whether such event is considered material within the meaning of the federal securities laws: 1. Principal and interest payment delinquencies; 2. Unscheduled draws on debt service reserves reflecting financial difficulties; 3. Unscheduled draws on credit enhancements reflecting financial difficulties; 4. Substitution of credit or liquidity providers, or their failure to perform; 5. Adverse tax opinions or the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701—TEB) or other material notices or determinations with respect to the tax status of the Certificates, or other material events affecting the tax status of the Certificates; 6. Tender offers; 7. Defeasances; 8. Rating changes; and 9. Bankruptcy, insolvency, receivership or similar event of an obligated person. (iii) The Issuer shall notify the MSRB, in a timely manner, of any failure by the Issuer to provide financial information or operating data in accordance with subsection (b) of this Section by the time required by such subsection. (d) Limitations, Disclaimers, and Amendments. (i) The Issuer shall be obligated to observe and perform the covenants specified in this Section for so long as, but only for so long as, the Issuer remains an "obligated person" with respect to the Certificates within the meaning of the Rule, except that the Issuer in any event will give notice of any deposit made in accordance with this Ordinance or applicable law that causes Certificates no longer to be outstanding. (ii) The provisions of this Section are for the sole benefit of the registered owners and beneficial owners of the Certificates, and nothing in this Section, express or implied, shall give any benefit or any legal or equitable right, remedy, or claim hereunder to any other person. The Issuer undertakes to provide only the financial information, operating data, financial statements, and notices which it has expressly agreed to provide pursuant to this Section and does not hereby undertake to provide any other information that may be relevant or material to a complete presentation of the Issuer's financial results, condition, or prospects or hereby undertake to update any information provided in accordance with this Section or otherwise, except as expressly provided herein. The Issuer does not make any representation or warranty concerning such information or its usefulness to a decision to invest in or sell Certificates at any future date. (iii) UNDER NO CIRCUMSTANCES SHALL THE ISSUER BE LIABLE TO THE REGISTERED OWNER OR BENEFICIAL OWNER OF ANY CERTIFICATE OR ANY OTHER PERSON, IN CONTRACT OR TORT, FOR DAMAGES RESULTING IN WHOLE OR IN PART FROM ANY BREACH BY THE ISSUER, WHETHER NEGLIGENT OR WITHOUT FAULT ON ITS PART, OF ANY COVENANT SPECIFIED IN THIS SECTION, BUT EVERY RIGHT AND REMEDY OF ANY SUCH PERSON, IN CONTRACT OR TORT, Ordinance 700 Page 21 of 27 FOR OR ON ACCOUNT OF ANY SUCH BREACH SHALL BE LIMITED TO AN ACTION FOR MANDAMUS OR SPECIFIC PERFORMANCE. (iv) No default by the Issuer in observing or performing its obligations under this Section shall comprise a breach of or default under this Ordinance for purposes of any other provision of this Ordinance. Nothing in this Section is intended or shall act to disclaim, waive, or otherwise limit the duties of the Issuer under federal and state securities laws. (v) Should the Rule be amended to obligate the Issuer to make filings with or provide notices to entities other than the MSRB, the Issuer hereby agrees to undertake such obligation with respect to the Certificates in accordance with the Rule as amended. The provisions of this Section may be amended by the Issuer from time to time to adapt to changed circumstances that arise from a change in legal requirements, a change in law, or a change in the identity, nature, status, or type of operations of the Issuer, but only if (1) the provisions of this Section, as so amended, would have permitted an underwriter to purchase or sell Certificates in the primary offering of the Certificates in compliance with the Rule, taking into account any amendments or interpretations of the Rule since such offering as well as such changed circumstances and (2) either (a) the registered owners of a majority in aggregate principal amount (or any greater amount required by any other provision of this Ordinance that authorizes such an amendment) of the outstanding Certificates consent to such amendment or (b) a person that is unaffiliated with the Issuer (such as nationally recognized bond counsel) determined that such amendment will not materially impair the interest of the registered owners and beneficial owners of the Certificates. The Issuer may also amend or repeal the provisions of this continuing disclosure agreement if the SEC amends or repeals the applicable provision of the Rule or a court of final jurisdiction enters judgment that such provisions of the Rule are invalid, but only if and to the extent that the provisions of this sentence would not prevent an underwriter from lawfully purchasing or selling Certificates in the primary offering of the Certificates. If the Issuer so amends the provisions of this Section, it shall include with any amended financial information or operating data next provided in accordance with subsection (b) of this Section an explanation, in narrative form, of the reason for the amendment and of the impact of any change in the type of financial information or operating data so provided. SECTION 14. METHOD OF AMENDMENT. The Issuer hereby reserves the right to amend this Ordinance subject to the following terms and conditions, to -wit: (a) The Issuer may from time to time, without the consent of any holder, except as otherwise required by paragraph (b) below, amend or supplement this Ordinance in order to (i) cure any ambiguity, defect or omission in this Ordinance that does not materially adversely affect the interests of the holders, (ii) grant additional rights or security for the benefit of the holders, (iii) add events of default as shall not be inconsistent with the provisions of this Ordinance and that shall not materially adversely affect the interests of the holders, (v) qualify this Ordinance under the Trust Indenture Act of 1939, as amended, or corresponding provisions of federal laws from time to time in effect, or (iv) make such other provisions in regard to matters or questions arising under this Ordinance as shall not be inconsistent with the provisions of this Ordinance and that shall not in the opinion of the Issuer's Bond Counsel materially adversely affect the interests of the holders. (b) Except as provided in paragraph (a) above, the holders of Certificates aggregating in principal amount 51% of the aggregate principal amount of then outstanding Certificates that are the subject of a proposed amendment shall have the right from time to time to approve any amendment hereto that may be deemed necessary or desirable by the Issuer; provided, however, that without the consent of 100% of the holders in aggregate principal amount of the then outstanding Certificates, nothing herein contained shall Ordinance 700 Page 22 of 27 permit or be construed to permit amendment of the terms and conditions of this Ordinance or in any of the Certificates so as to: (1) Make any change in the maturity of any of the outstanding Certificates; (2) Reduce the rate of interest borne by any of the outstanding Certificates; (3) Reduce the amount of the principal of, or redemption premium, if any, payable on any outstanding Certificates; (4) Modify the terms of payment of principal or of interest or redemption premium on outstanding Certificates or any of them or impose any condition with respect to such payment; or (5) Change the minimum percentage of the principal amount of any series of Certificates necessary for consent to such amendment. (c) If at any time the Issuer shall desire to amend this Ordinance under Subsection (b) of this Section, the Issuer shall send by U.S. mail to each registered owner of the affected Certificates a copy of the proposed amendment. Such notice shall briefly set forth the nature of the proposed amendment and shall state that a copy thereof is on file at the office of the Issuer for inspection by all holders of such Certificates. (d) Whenever at any time within six months from the date of mailing of such notice the Issuer shall receive an instrument or instruments executed by the holders of at least 51 % in aggregate principal amount of all of the Certificates then outstanding that are required for the amendment, which instrument or instruments shall refer to the proposed amendment and that shall specifically consent to and approve such amendment, the Issuer may adopt the amendment in substantially the same form. (e) Upon the adoption of any amendatory Ordinance pursuant to the provisions of this Section, this Ordinance shall be deemed to be modified and amended in accordance with such amendatory Ordinance, and the respective rights, duties, and obligations of the Issuer and all holders of such affected Certificates shall thereafter be determined, exercised, and enforced, subject in all respects to such amendment. (f) Any consent given by the holder of a Certificate pursuant to the provisions of this Section shall be irrevocable for a period of six months from the date of the mailing of the notice provided for in this Section, and shall be conclusive and binding upon all future holders of the same Certificate during such period. Such consent may be revoked at any time after six months from the date of the mailing of said notice by the holder who gave such consent, or by a successor in title, by filing notice with the Issuer, but such revocation shall not be effective if the holders of 51% in aggregate principal amount of the affected Certificates then outstanding, have, prior to the attempted revocation, consented to and approved the amendment. (g) For the purposes of establishing ownership of the Certificates, the Issuer shall rely solely upon the registration of the ownership of such Certificates on the registration books kept by the Paying Agent/Registrar. SECTION 15. DEFAULT AND REMEDIES. (a) Events of Default. Each of the following occurrences or events for the purpose of this Ordinance is hereby declared to be an Event of Default: Ordinance 700 Page 23 of 27 (i) the failure to make payment of the principal of or interest on any of the Certificates when the same becomes due and payable; or (ii) default in the performance or observance of any other covenant, agreement or obligation of the Town, the failure to perform which materially, adversely affects the rights of the registered owners of the Certificates, including, but not limited to, their prospect or ability to be repaid in accordance with this Ordinance, and the continuation thereof for a period of 60 days after notice of such default is given by any Registered Owner to the Town. (b) Remedies for Default. (i) Upon the happening of any Event of Default, then and in every case, any Registered Owner or an authorized representative thereof, including, but not limited to, a trustee or trustees therefor, may proceed against the Town for the purpose of protecting and enforcing the rights of the Registered Owners under this Ordinance, by mandamus or other suit, action or special proceeding in equity or at law, in any court of competent jurisdiction, for any relief permitted by law, including the specific performance of any covenant or agreement contained herein, or thereby to enjoin any act or thing that may be unlawful or in violation of any right of the Registered Owners hereunder or any combination of such remedies. (ii) It is provided that all such proceedings shall be instituted and maintained for the equal benefit of all Registered Owners of Certificates then outstanding. (c) Remedies Not Exclusive. (i) No remedy herein conferred or reserved is intended to be exclusive of any other available remedy or remedies, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or under the Certificates or now or hereafter existing at law or in equity; provided, however, that notwithstanding any other provision of this Ordinance, the right to accelerate the debt evidenced by the Certificates shall not be available as a remedy under this Ordinance. (ii) The exercise of any remedy herein conferred or reserved shall not be deemed a waiver of any other available remedy. (iii) By accepting the delivery of a Certificate authorized under this Ordinance, such Registered Owner agrees that the certifications required to effectuate any covenants or representations contained in this Ordinance do not and shall never constitute or give rise to a personal or pecuniary liability or charge against the officers, employees or trustees of the Town or the Town Council. SECTION 16. APPROPRIATION. To pay the debt service coming due on the Certificates, if any, prior to receipt of the taxes levied to pay such debt service, there is hereby appropriated from current funds on hand, which are hereby certified to be on hand and available for such purpose, an amount sufficient to pay such debt service, and such amount shall be used for no other purpose. SECTION 17. EFFECTIVE DATE. In accordance with the provisions of V.T.C.A., Government Code, Section 1201.028, this Ordinance shall be effective immediately upon its adoption by the Town Council. SECTION 18. SEVERABILITY. If any section, article, paragraph, sentence, clause, phrase or word in this Ordinance, or application thereof to any persons or circumstances is held invalid or Ordinance 700 Page 24 of 27 unconstitutional by a court of competent jurisdiction, such holding shall not affect the validity of the remaining portion of this Ordinance, despite such invalidity, which remaining portions shall remain in full force and effect. (Execution Page Follows) Ordinance 700 Page 25 of 27 PASSED AND APPROVED ON THIS 2ND DAY OF APRIL, 2013. ATTEST: �4 � 0 A k ocju�y- Kellydwar s Town Secretary Laura Wheat ,• Mayor Thomas E. Brymer, T rr anager [TOWN SEAL] EXHIBIT A Annual Financial Statements and Operating Data The following information is referred to in Section 13(b) of this Ordinance: The financial information and operating data with respect to the Issuer to be provided annually in accordance with such Section are as specified (and included in the Appendix or under the headings of the Official Statement referred to) below: -- Tables 1 through 4, inclusive, and 6 through 12, inclusive -- APPENDIX B (FINANCIAL INFORMATION FOR THE LAST COMPLETED FISCAL YEAR WHICH WILL BE UNAUDITED, UNLESS AN AUDIT IS PERFORMED IN WHICH EVENT THE AUDITED FINANCIAL STATEMENTS WILL BE MADE AVAILABLE) Accounting Principles The accounting principles referred to in such Section are the accounting principles described in the notes to the financial statements referred to in paragraph above. Ordinance 700 Page 27 of 27 TOWN OF WESTLAKE, TEXAS (A political subdivision and municipal corporation of the State of Texas located within Tarrant and Denton Counties) $9,320,000 COMBINATION TAX AND REVENUE CERTIFICATES OF OBLIGATION, SERIES 2013 PURCHASE AGREEMENT Honorable Mayor and Town Council Town of Westlake, Texas 3 Village Circle, Suite 202 Westlake, Texas 76262 April 2, 2013 Ladies and Gentlemen: The undersigned, Southwest Securities, Inc. (the "Underwriter"), acting on its own behalf and not acting as a fiduciary or agent for the Town of Westlake, Texas (the "Issuer"), offers to enter into the following agreement (this "Agreement") with the Issuer which, upon the Issuer's written acceptance of this offer, will be binding upon the Issuer and upon the Underwriter. This offer is made subject to the Issuer's written acceptance hereof on or before 10:00 p.m., Westlake, Texas time, on April 2, 2013, and, if not so accepted, will be subject to withdrawal by the Underwriter upon written 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 Ordinance (as defined herein) or in the Official Statement (as defined herein). 1. Purchase and Sale of the Certificates. Subject to the terms and conditions and in reliance upon the representations, warranties and agreements set forth herein, the Underwriter hereby agrees to purchase from the Issuer, and the Issuer hereby agrees to sell and deliver to the Underwriter, all, but not less than all, of the Issuer's $9,320,000 Combination Tax and Revenue Certificates of Obligation, Series 2013 (the "Certificates"). The Issuer acknowledges and agrees that (i) the purchase and sale of the Certificates pursuant to this Agreement is an arm's-length commercial transaction between the Issuer and the Underwriter, (ii) in connection therewith and with the discussions, undertakings, and procedures leading up to the consummation of this transaction, the Underwriter is and has been acting solely as a principal and is not acting as the agent or fiduciary of the Issuer, (iii) the Underwriter has not assumed an advisory or fiduciary responsibility in favor of the Issuer with respect to the offering described herein or the discussions, undertakings, and procedures leading thereto (regardless of whether the Underwriter has provided other services or is currently providing other services to the Issuer on other matters) HOU:3303038.2 and the Underwriter has no obligation to the Issuer with respect to the offering described herein except the obligations expressly set forth in this Agreement, and (iv) the Issuer has consulted its own legal, financial, and other advisors to the extent it has deemed appropriate. The principal amount of the Certificates to be issued, the dated date therefor, the maturities and redemption provisions and interest rates per annum are set forth in Schedule I hereto. The Certificates shall be as described in, and shall be issued and secured under and pursuant to the provisions of an ordinance adopted by the Issuer on April 2, 2013 (the "Ordinance "). The purchase price for the Certificates shall be $9,575,238.18 (representing the par amount of the Certificates, plus a net reoffering premium of $319,591.75 and less an underwriting discount of $64,353.57). Delivered to the Issuer herewith is the Underwriter's good faith corporate check payable to the order of the Issuer in the amount of $93,200.00 (the "Check"). In the event the Issuer accepts this offer, the Check shall be held uncashed by the Issuer until the time of Closing, at which time the Check shall be returned uncashed to the Underwriter. In the event that the Issuer does not accept this Agreement, the Check shall be immediately returned to the Underwriter. Should the Issuer fail to deliver the Certificates at the Closing, or should the Issuer be unable to satisfy the conditions of the obligations of the Underwriter to purchase, accept delivery of and pay for the Certificates, as set forth in this Agreement (unless waived by the Underwriter), or should such obligations of the Underwriter be terminated for any reason permitted by this Agreement, the Check shall immediately be returned to the Underwriter. In the event that the Underwriter fails (other than for a reason permitted hereunder) to purchase, accept delivery of and pay for the Certificates at the Closing as herein provided, the Check shall be cashed and the amount thereof retained by the Issuer as and for fully liquidated damages for such failure of the Underwriter, and, except as set forth in Sections 8 and 10 hereof, no party shall have any further rights against the other hereunder. The Underwriter and the Issuer understand that in such event the Issuer's actual damages may be greater or may be less than such amount. Accordingly, the Underwriter hereby waives any right to claim that the Issuer's actual damages are less than such amount, and the Issuer's acceptance of this offer shall constitute a waiver of any right the Issuer may have to additional damages from the Underwriter for their failure to purchase, accept delivery of and pay for the Certificates. The Underwriter hereby agrees not to stop or cause payment on such check to be stopped unless the Issuer has breached the terms of this Agreement. 2. Public Offering. The Underwriter agrees to make a bona fide public offering of all of the Certificates at prices or yields not to exceed the public offering prices or yields set forth on page 2 of the Official Statement and may subsequently change such offering prices or yields without any requirement of prior notice. The Underwriter may offer and sell the Certificates to certain dealers (including dealers depositing Certificates into investment trusts) and others at prices lower than the public offering prices or yields stated on page 2 of the Official Statement; provided that on or before the Closing, the Underwriter shall execute and deliver to the McCall Parkhurst & Horton, LLP, Dallas, Texas ("Bond Counsel") an issue price certificate for the Certificates prepared by Bond Counsel verifying the initial offering prices to the public at which the Underwriter reasonably expected to sell or in fact sold a substantial amount of each stated maturity of the Certificates to the public. HOU:3303038.2 2 3. The Official Statement. (a) The Issuer previously has delivered, or caused to be delivered, to the Underwriter the Preliminary Official Statement dated March 25, 2013 (the "Preliminary Official Statement") in a "designated electronic format," as defined in the Municipal Securities Rulemaking Board's ("MSRB") Rule G-32 ("Rule G-32"). The Issuer will prepare, or cause to be prepared, a final Official Statement relating to the Certificates, which will be (i) dated the date of this Agreement, (ii) complete within the meaning of the United States Securities and Exchange Commission's Rule 15c2-12, as amended (the "Rule"), (iii) in a "designated electronic format" and (iv) substantially in the form of the most recent version of the Preliminary Official Statement provided to the Underwriter before the execution hereof. Such final Official Statement, including the cover page thereto, all exhibits, schedules, appendices, maps, charts, pictures, diagrams, reports, and statements included or incorporated therein or attached thereto, and all amendments and supplements thereto that may be authorized for use with respect to the Certificates, is herein referred to as the "Official Statement". Until the Official Statement has been prepared and is available for distribution, the Issuer shall provide to the Underwriter sufficient quantities (which may be in electronic format) of the Preliminary Official Statement as the Underwriter deems reasonably necessary to satisfy the obligations of the Underwriter under the Rule with respect to distribution to each potential customer, upon request, of a copy of the Preliminary Official Statement. (b) The Preliminary Official Statement has been prepared for use by the Underwriter in connection with the public offering, sale and distribution of the Certificates. The Issuer hereby represents and warrants that the Preliminary Official Statement has been 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 Certificates for completion, all as permitted to be excluded by Section (b)(1) of the Rule. (c) The Issuer hereby authorizes the Official Statement and the information therein contained to be used by the Underwriter in connection with the public offering and the sale of the Certificates. The Issuer consents to the use by the Underwriter prior to the date hereof of the Preliminary Official Statement in connection with the public offering of the Certificates. The Issuer shall provide, or cause to be provided, to the Underwriter as soon as practicable after the date of the Issuer's acceptance of this Agreement (but, in any event, not later than within seven (7) 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, approved by the Issuer's City Council or one or more duly authorized officers of the Issuer, which is complete as of their delivery to the Underwriter. The Issuer shall provide the Official Statement, or cause the Official Statement to be provided, (i) in a "designated electronic format" consistent with the requirements of Rule G-32 and (ii) in a printed format in such quantity as the Underwriter shall reasonably request in order for the Underwriter to comply with Section (b)(4) of the Rule and the rules of the MSRB. (d) If, after the date of this Agreement to and including the date the Underwriter is no longer required to provide an Official Statement to potential customers HOU:3303038.2 3 who request the same pursuant to the Rule (the earlier of (i) ninety (90) days from the "end of the underwriting period" (as defined in the Rule) and (ii) the time when the Official Statement is available to any person from the MSRB, but in no case less than twenty-five (25) days after the "end of the underwriting period" for the Certificates), 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, in light of the circumstances in which they were made, 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 Underwriter (and for the purposes of this clause provide the Underwriter with such information as the Underwriter may from time to time reasonably request), and if, in the reasonable opinion of the Underwriter, 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 Underwriter), either an amendment or a supplement 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, in light of the circumstances in which they were made, or necessary to make the statements therein not misleading or so that the Official Statement will comply with law; provided, however, that for all purposes of this Agreement and any certificate delivered by the Issuer in accordance herewith, the Issuer makes no representations with respect to the descriptions in the Preliminary Official Statement or the Official Statement of The Depository Trust Company, New York, New York ("DTC"), or its book -entry -only system. If such notification shall be subsequent to the Closing, the Issuer shall furnish such legal opinions, certificates, instruments and other documents as the Underwriter may reasonably deem necessary to evidence the truth and accuracy of such supplement or amendment to the Official Statement. The Issuer shall provide any such amendment or supplement, or cause any such amendment or supplement to be provided, (i) in a "designated electronic format" consistent with the requirements of Rule G-32 and (ii) in a printed format in such quantity as the Underwriter shall reasonably request in order for the Underwriter to comply with Section (b)(4) of the Rule and the rules of the MSRB. (e) The Underwriter hereby agrees to timely file the Official Statement with the MSRB through its Electronic Municipal Market Access ("EMMA") system on or before the date of Closing. Unless otherwise notified in writing by the Underwriter, 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 Underwriter that: (a) The Issuer is a Type A General Law city created and existing under the laws of the State of Texas (the "State") and is issuing the Certificates pursuant to the laws of the State, particularly Chapter 271, Texas Local Government Code, as amended, (the "Act'), and has full legal right, power and authority and at the date of the Closing will have full legal right, power and authority under the laws of the State and the Act (i) to HOU:3303038.2 4 adopt the Ordinance and to enter into, execute and deliver this Agreement, the Continuing Disclosure Undertaking (as defined in Section 6(i)(3) hereof), and all documents required hereunder and thereunder to be executed and delivered by the Issuer (this Agreement, the Ordinance, the Continuing Disclosure Undertaking and all other documents referred to in this clause (i) (excluding the Official Statement) are hereinafter referred to as the "Issuer Documents"), (ii) to sell, issue and deliver the Certificates to the Underwriter as provided herein, and (iii) to carry out and consummate the transactions described in the Issuer Documents and the Official Statement, and the Issuer has complied, and will at the Closing be in compliance, in all material respects with applicable State law (including the Act) and the Issuer Documents as they pertain to such transactions; (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 Ordinance and the issuance and sale of the Certificates, (ii) the approval, execution and delivery of, and the performance by the Issuer of the obligations on its part, contained in the Certificates and the Issuer Documents and (iii) the consummation by it of all other transactions described in 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 described herein and in the Official Statement; (c) The Issuer Documents constitute legal, valid and binding obligations of the Issuer subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws and principles of equity relating to or affecting the enforcement of creditors' rights or by general principles of equity which permit the exercise of judicial discretion; the Certificates, when issued, delivered and paid for, in accordance with the Ordinance and this Agreement, will constitute legal, valid and binding obligations of the Issuer, entitled to the benefits of the Ordinance and enforceable in accordance with their terms by mandamus or other relief permitted by law, subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws and principles of equity relating to or affecting the enforcement of creditors' rights, and subject to general principles of equity which permit the exercise of judicial discretion; and upon the issuance, authentication and delivery of the Certificates as aforesaid, the Ordinance will provide, for the benefit of the holders, from time to time, of the Certificates, the legally valid and binding pledge of and lien they purport to create as set forth in the Ordinance; (d) On the date hereof and on the date of Closing, the Issuer is not in material breach of or default under any applicable constitutional provision, law or administrative regulation of the State or the United States or any applicable judgment or decree that would have a material adverse effect upon the operations or financial condition of the Issuer; or any loan agreement, indenture, bond, note, resolution, agreement or other instrument to which the Issuer is a party or to which the Issuer is otherwise subject, and no event 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 Certificates, the Issuer Documents and the adoption of the Ordinance and compliance with the provisions on the HOU:3303038.2 5 Issuer's part contained therein, will not conflict with or constitute a material breach of or default under any constitutional provision, law or administrative regulation, judgment, decree, loan agreement, indenture, bond, note, resolution, 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 or instrument, except as provided by the Certificates and the Ordinance; (e) All authorizations, approvals, licenses, permits, consents and orders of any governmental authority, legislative body, board, agency or commission having jurisdiction of the matters 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 Certificates have been duly obtained or will be obtained prior to Closing, except for the approval of the Certificates by the Texas Attorney General, registration of the Certificates by the Comptroller of Public Accounts, and such approvals, consents and orders as may be required under the Blue Sky or securities laws of any jurisdiction in connection with the offering and sale of the Certificates; (f) The Certificates and the Ordinance conform to the descriptions thereof contained in the Official Statement under the caption "DESCRIPTION OF THE CERTIFICATES"; the proceeds of the sale of the Certificates will be applied generally as described in the Official Statement under the subcaption "PLAN OF FINANCING— Sources and Uses of Funds"; and the Continuing Disclosure Undertaking conforms to the descriptions thereof contained in the Official Statement under the caption "OTHER INFORMATION - Continuing Disclosure of Information"; (g) During the last five (5) years the Issuer has complied in all material respects with its previous Continuing Disclosure Undertakings made by it in accordance with the Rule; (h) On the date hereof and on the date of Closing, there is no litigation, 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 Certificates or the collection of taxes pledged to the payment of principal of and interest on the Certificates pursuant to the Ordinance or in any way contesting or affecting the validity or enforceability of the Certificates or the Issuer Documents, or contesting the exclusion from gross income of interest on the Certificates 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 Certificates, the adoption of the Ordinance 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 Certificates or the Issuer Documents; provided that for the purpose of this Agreement and any certificate delivered HOU:3303038.2 6 by the Issuer in accordance with this Agreement, the Issuer makes no representations with respect to the descriptions in the Preliminary Official Statement or the Official Statement of DTC or its book -entry -only system; (i) 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; (j) At the time of the Issuer's acceptance hereof and (unless the Official Statement is amended or supplemented pursuant to paragraph (d) of Section 3 of this Agreement) at all times subsequent thereto during the period up to and including twenty- five (25) days subsequent to the "end of the underwriting period," 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; (k) If the Official Statement is supplemented or amended pursuant to paragraph (d) of Section 3 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 twenty-five (25) days subsequent to the "end of the underwriting period", the Official Statement as so supplemented or amended 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; (1) The Issuer will apply, or cause to be applied, the proceeds from the sale of the Certificates as provided in and subject to all of the terms and provisions of the Ordinance and will not take or omit to take any action which action or omission will adversely affect the exclusion from gross income for federal income tax purposes of the interest on the Certificates; (m) The Issuer will furnish such information and execute such instruments and take such action in cooperation with the Underwriter as the Underwriter may reasonably request, at no expense to the Issuer, (i) to (y) qualify the Certificates 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 Underwriter may designate and (z) determine the eligibility of the Certificates 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 initial distribution of the Certificates by the Underwriter (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 Underwriter immediately of receipt by the Issuer of any notification with respect to the suspension of the qualification of the Certificates for sale in any jurisdiction or the initiation or threat of any proceeding for that purpose; HOU:3303038.2 7 (n) The financial statements of, and other financial information regarding, the Issuer in the Official Statement fairly present the financial position, results of operations and condition of the Issuer as of the dates and for the periods therein set forth, and there has been no adverse change of a material nature in such financial position, results of operations or condition, financial or otherwise, of the Issuer since the dates of such statements and information; (o) Except as may be disclosed in the Official Statement, 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; (p) Prior to the Closing, and except in the ordinary course of business, 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 taxes or assets which will secure the Certificates without the prior written approval of the Underwriter, such approval not to be unreasonably withheld; (q) The Issuer, to the extent heretofore requested by the Underwriter in writing, has delivered to the Underwriter true, correct, complete, and legible copies of all information, applications, reports, or other documents of any nature whatsoever submitted to any rating agency for the purpose of obtaining a rating for the Certificates or to any municipal bond insurance company to obtain a municipal bond insurance policy on the Certificates and, in each instance, true, correct, complete, and legible copies of all correspondence or other communications relating thereto; (r) Any certificate, signed by any official of the Issuer authorized to do so in connection with the transactions described in this Agreement, shall be deemed a representation and warranty by the Issuer to the Underwriter as to the statements made therein; and (s) The Issuer covenants that between the date hereof and the Closing it will not intentionally take actions which will cause the representations and warranties made in this Section to be untrue as of the Closing. By delivering the Official Statement to the Underwriter, the Issuer shall be deemed to have reaffirmed, with respect to such Official Statement, the representations, warranties and covenants set forth above with respect to the Preliminary Official Statement. 5. Closin-a. (a) At 10:00 a.m. Dallas, Texas, time, on April 30, 2013, or at such other time and date as shall have been mutually agreed upon by the Issuer and the Underwriter (the "Closing"), the Issuer will, subject to the terms and conditions hereof, deliver the Certificates to the Underwriter duly executed and authenticated, together with the other documents hereinafter mentioned, and the Underwriter will, subject to the terms and conditions hereof, accept such delivery and pay the purchase price of the Certificates as set forth in Section 1 of this Agreement in immediately available funds by wire transfer HOU:3303038.2 8 to the account of the Issuer as indicated by U.S. Bank National Association, Dallas, Texas (the "Paying Agent/Registrar"). Payment for the Certificates as aforesaid shall be made at the offices of the Paying Agent/Registrar or such other place as shall have been mutually agreed upon by the Issuer and the Underwriter. (b) Delivery of the Certificates shall be made to the Paying Agent/Registrar on behalf of DTC pursuant to DTC's FAST system. The Certificates shall be delivered in definitive fully registered form, bearing CUSIP numbers without coupons, with one Certificate for each maturity of the Certificates registered in the name of Cede & Co., all as provided in the Ordinance and shall be made available to the Underwriter at least one business day before Closing for purposes of inspection. 6. Closing Conditions. The Underwriter has 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 Underwriter's obligations under this Agreement to purchase, to accept delivery of and to pay for the Certificates 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 Underwriter: (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 Certificates 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 Underwriter; (ii) the net proceeds of the sale of the Certificates and any funds to be provided by the Issuer shall be deposited and applied as described in the Official Statement and in the Ordinance and (iii) all actions of the Issuer required to be taken by the Issuer shall be performed in order for Bond Counsel and counsel to the Underwriter to deliver their respective opinions referred to hereafter; (d) At the time of the Closing, all official action of the Issuer relating to the Certificates and the Issuer Documents shall be in full force and effect and shall not have been amended, modified or supplemented except as may have been approved by the Underwriter; HOU:3303038.2 9 (e) At or prior to the Closing, the Ordinance shall have been duly executed and delivered by the Issuer and the Issuer shall have duly executed and delivered and the Paying Agent/Registrar shall have duly authenticated the Certificates; (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 reasonable judgment of the Underwriter is material and adverse and that makes it, in the reasonable judgment of the Underwriter, impracticable to market the Certificates on the terms and in the manner described in the Official Statement; (g) The Issuer shall not currently be in default with respect to payment of 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 described in this Agreement shall be reasonably satisfactory in legal form and effect to the Underwriter, to Bond Counsel, and to counsel for the Underwriter; and (i) At or prior to the Closing, the Underwriter shall have received copies of each of the following documents: (1) The Official Statement, and each supplement or amendment thereto, if any, as may have been agreed to by the Underwriter; (2) A copy of the Ordinance, certified as having been duly adopted and in full force and effect, with such supplements or amendments as may have been agreed to by the Underwriter; (3) The undertaking of the Issuer set forth in the Ordinance (the "Continuing Disclosure Undertaking") which satisfies the requirements of Section (d)(2) of the Rule; (4) The approving opinion of Bond Counsel, with respect to the Certificates, in substantially the form attached to the Official Statement; (5) A supplemental opinion of Bond Counsel addressed to the Issuer and the Underwriter substantially to the effect that: (i) the Ordinance has been duly adopted and is in full force and effect; (ii) the Certificates are exempt securities that do not require registration under the Securities Act of 1933, as amended (the "1933 Act"), and the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"), and it is not necessary, in connection with the offering and sale of the Certificates, to register the Certificates under the 1933 Act or to qualify the Ordinance under the Trust Indenture Act; and HOU:3303038.2 10 (iii) the statements and information describing the Certificates and the Ordinance contained in the Official Statement under the captions "PLAN OF FINANCING" (exclusive of the subcaption "Sources and Uses of Funds"), "DESCRIPTION OF THE CERTIFICATES" (exclusive of the subcaptions entitled 'Book -Entry -Only System" and "Certificateholders'Remedies"), "LEGAL MATTERS" (exclusive of the last sentence of the first paragraph thereof), "TAX MATTERS," "OTHER MATTERS - Legal Investments and Eligibility to Secure Public Funds in Texas," "OTHER MATTERS - Registration and Qualification of Certificates for Sale" and "OTHER MATTERS - Continuing Disclosure of Information" (exclusive of the subcaption "Compliance with Prior Undertakings") are an accurate and fair description of the laws and legal issues addressed therein and, with respect to the Certificates, such information conforms to the provisions of the Ordinance. (6) An opinion, dated the date of the Closing and addressed to the Underwriter, of counsel to the Underwriter, to the effect that: (i) the Certificates are exempt securities under the 1933 Act and the Trust Indenture Act and it is not necessary, in connection with the offering and sale of the Certificates, to register the Certificates under the 1933 Act and the Ordinance need not be qualified under the Trust Indenture Act; and (ii) based upon their participation in the preparation of the Official Statement as counsel for the Underwriter 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, such counsel has no reason 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, all as to which no view need be expressed); (7) A certificate, dated the date of the Closing, of an appropriate official of the Issuer to the effect that (i) the representations and warranties of the Issuer contained herein are true and correct in all material respects on and as of the date of the Closing as if made on the date of the Closing; (ii) except as may be disclosed in the Official Statement, no litigation, proceeding or tax challenge against the Issuer is pending or, to the best of his or her knowledge, threatened in any court or administrative body nor is there a basis for litigation which would (a) contest the right of the council members, officers 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 HOU:3303038.2 11 the Certificates or the Issuer Documents or (d) attempt to limit, enjoin or otherwise restrict or prevent the Issuer from functioning and collecting ad valorem taxes or revenues, including payments on the Certificates, pursuant to the Ordinance, or the levy or collection of the taxes pledged to pay the principal of and interest on the Certificates, or the pledge thereof; (iii) all official action of the Issuer relating to the Official Statement, the Certificates and the Issuer Documents have been duly taken by the Issuer, are in full force and effect and have not been modified, amended, supplemented or repealed; (iv) 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 they were made, not misleading in any respect as of the time of the 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 light of the circumstances under which they were made, not misleading; and (v) there has not been any material adverse change in the financial condition of the Issuer since September 30, 2012, the latest date as of which audited financial information is available; (8) A certificate of the Issuer in form and substance satisfactory to Bond Counsel and counsel to the Underwriter 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 Certificates will be used in a manner that would cause the Certificates 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; (9) The approving opinion of the Attorney General of the State of Texas and the registration certificates of the Comptroller of Public Accounts of the State of Texas in respect of the Certificates; (10) Any other certificates and opinions required by the Ordinance for the issuance thereunder of the Certificates; (11) Evidence of ratings assigned to the Certificates of "AA" by Standard & Poor's Ratings Services, a Standard & Poor's Financial Services LLC business, and that such rating is in effect as of the date of the Closing; (12) Such additional legal opinions, certificates, instruments and other documents as Bond Counsel, the Underwriter or counsel to the Underwriter 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 statements and information contained in the Official Statement HOU:3303038.2 12 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 reasonably satisfactory to the Underwriter. If the Issuer shall be unable to satisfy the conditions to the obligations of the Underwriter to purchase, to accept delivery of and to pay for the Certificates contained in this Agreement, or if the obligations of the Underwriter to purchase, to accept delivery of and to pay for the Certificates shall be terminated for any reason permitted by this Agreement, this Agreement shall terminate and neither the Underwriter nor the Issuer shall be under any further obligation hereunder, except that the respective obligations of the Issuer and the Underwriter set forth in Sections 1 (with respect to the Check), 4 and 8 hereof shall continue in full force and effect. 7. Termination. The Underwriter shall have the right to cancel its obligation to purchase the Certificates (as evidenced by a written notice to the Issuer terminating the obligation of the Underwriter to accept delivery of and pay for the Bonds) if, between the date of this Agreement and the Closing, the market price or marketability of the Certificates shall be materially adversely affected, in the sole judgment of the Underwriter, reasonably exercised, 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 Treasury Department of the United States or the Internal Revenue Service or any member of the Congress of the United States 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 Certificates, or the interest on the Certificates 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 described herein; (b) legislation is 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 or 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 Certificates, including any or all underlying arrangements, are not exempt from registration under or other requirements of the 1933 Act, or that the Ordinance is not exempt from qualification under or other requirements HOU:3303038.2 13 of the Trust Indenture Act, or that the issuance, offering or sale of obligations of the general character of the Certificates, including any or all underlying arrangements, as described herein or in the Official Statement or otherwise, is or would be in violation of the federal securities laws as amended and then in effect; (c) any state blue sky or securities commission or other governmental agency or body shall have withheld registration, exemption or clearance of the offering of the Certificates as described herein, or issued a stop order or similar ruling relating thereto; (d) a general suspension of trading in securities on the New York Stock Exchange, the establishment of minimum prices on 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, or a general banking moratorium declared by federal, State of New York, or State officials authorized to do so; (e) the New York Stock Exchange or other national securities exchange or any governmental authority shall impose, as to the Certificates or as to obligations of the general character of the Certificates, any material restrictions not now in force, or increase materially those now in force, with respect to the extension of credit by, or the charge to the net capital requirements of, the Underwriter; (f) 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 validity or enforceability of the assessments or the levies of taxes to pay principal of and interest on the Certificates; (g) any event occurring, or information becoming known which, in the reasonable judgment of the Underwriter, makes untrue in any material respect any 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; (h) there shall have occurred since the date of this Agreement any materially adverse change in the affairs or financial condition of the Issuer, except for changes which the Official Statement discloses are expected to occur; (i) the United States shall have either become engaged in hostilities that did not exist prior to the date hereof or issued a declaration of war or a national emergency, or there shall have occurred a new material outbreak or escalation of hostilities or a national or international calamity or crisis, financial or otherwise; (j) any fact or event shall exist or have existed that, in the Underwriter's reasonable judgment, requires or has required an amendment of or supplement to the Official Statement; HOU:3303038.2 14 (k) there shall have occurred any downgrading, or any published notice shall have been given of (i) any intended or potential downgrading or (ii) any possible change, that does not indicate the direction of a possible change, in the rating accorded any of the Issuer's obligations secured in a like manner as the Certificates (including the rating to be accorded the Certificates); and (1) the purchase of and payment for the Certificates by the Underwriter, or the resale of the Certificates by the Underwriter, on the terms and conditions herein provided shall be prohibited by any applicable law, governmental authority, board, agency or commission. With respect to the conditions described in subparagraphs (e) and (1) above, such subsection shall not apply to any current, pending or proposed law or government inquiry or investigation as of the date of execution of this Agreement which would permit the Underwriter to invoke its termination rights hereunder. 8. Expenses. (a) The Underwriter 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 Certificates; (ii) the fees and disbursements of Bond Counsel and the Issuer's Financial Advisor; (iii) the fees and disbursements of any other engineers, accountants, and other experts, consultants or advisers retained by the Issuer; (iv) the fees for bond ratings; (v) the costs of preparing, printing and mailing the Preliminary Official Statement and the Official Statement; (vi) the fees and expenses of the Paying Agent/Registrar; (vii) advertising expenses (except any advertising expenses of the Underwriter as set forth below); (viii) the out-of-pocket, miscellaneous and closing expenses, including the cost of travel, of the officers and members of the Issuer; (ix) the Attorney General's review fee; and (x) any other expenses mutually agreed to by the Issuer and the Underwriter to be reasonably considered expenses of the Issuer which are incident to the transactions described herein. (b) The Underwriter shall pay (i) the cost of preparation and printing of this Agreement, the Blue Sky Survey and Legal Investment Memorandum, if any; (ii) all advertising expenses in connection with the public offering of the Certificates; and (iii) all other expenses incurred by them in connection with the public offering of the Certificates, including the fees and disbursements of counsel retained by the Underwriter. (c) Based on information provided to it, the Issuer understands that the Underwriter will pay from the underwriter's expense allocation of the underwriting discount the applicable per bond assessment charged by the Municipal Advisory Council of Texas, a nonprofit corporation whose purpose is to collect, maintain and distribute information relating to issuing entities of municipal securities. 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 the Town of Westlake, Texas, 3 Village Circle, Suite 202, Westlake Texas, 76262, Attention: Town Administrator, and any HOU:3303038.2 15 notice or other communication to be given to the Underwriter under this Agreement may be given by delivering the same in writing to Southwest Securities, Inc., 1201 Elm, 35th Floor, Dallas, TX 75270; Attn: Mike Wadsworth. 10. Parties in Interest. This Agreement as heretofore specified shall constitute the entire agreement between us and is made solely for the benefit of the Issuer and the Underwriter (including successors or assigns of the Underwriter) 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 the Underwriter; (ii) delivery of and payment for the Certificates 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 in accordance with its terms at the time of such acceptance. 12. Choice of Law. This Agreement shall be governed by and construed in accordance with the laws 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 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. 17. No Personal Liability. None of the members of the City Council, nor any officer, agent, or employee of the Issuer, shall be charged personally by the Underwriter with any liability, or be held liable to the Underwriter under any term or provision of this Agreement, or because of execution or attempted execution, or because of any breach or attempted or alleged breach, of this Agreement. HOU:3303038.2 16 18. Entire Ajzreem en t. This Agreement represents the entire agreement between the Issuer and the Underwriter with respect to the preparation of the Preliminary Official Statement and the Official Statement, the conduct of the offering, and the purchase and sale of the Bonds. [Execution Page Follows.] HOU:3303038.2 17 If you agree with the foregoing, please sign the enclosed counterpart of this Agreement and return it to the Underwriter. This Agreement shall become a binding agreement between the Issuer and the Underwriter when at least the counterpart of this letter shall have been signed by or on behalf of each of the parties hereto. SOUTHWEST SECURITIES, INC. By: Name: Michael G. Wadsworth Title: Senior Vice President APPROVED AND ACCEPTED this day of , 2013 at a.m./p.m: TOWN OF WESTLAKE, TEXAS By: _ Name: Title: Schedule I - Schedule of Terms S-1 Town of Westlake, Texas Combination Tax and Revenue Certificates of Obligation, Series 2013 HOU:3303038.2 If you agree with the foregoing, please sign the enclosed counterpart of this Agreement and return it to the Underwriter. This Agreement shall become a binding agreement between the Issuer and the Underwriter when at least the counterpart of this letter shall have been signed by or on behalf of each of the parties hereto. SOUTHWEST SECURITIES, INC. By: _ Name: Title: APPROVED AND ACCEPTED this 2nd day of April , 2013 at 7:20 ./p.m: TOWN OF WESTLAKE, TEXAS By: 1. Y&Ue2 Name. LA.,�,r Title: MCL%.kW- Schedule I - Schedule of Terms S-1 Town of Westlake, Texas Combination Tax and Revenue Certificates of Obligation, Series 2013 HOU:3303038.2 Schedule I $9,320,000 Town of Westlake, Texas Combination Tax and Revenue Certificates of Obligation, Series 2013 Interest Accrues From: Date of delivery Maturity Principal Interest Initial (Feb. 15) Amount Rate Yield(a) 2014 $100,000 2.000% 0.400% 2015 195,000 2.000 0.480 2016 195,000 2.000 0.680 2017 200,000 2.000 0.880 2018 200,000 2.000 1.130 2019 205,000 2.000 1.280 2020 215,000 2.000 1.480 2021 215,000 2.500 1.700 2022 225,000 2.500 1.900 2029 390,000 3.500 2.650(c) 2030 405,000 3.500 2.750(c) 2031 415,000 3.500 2.800(c) $470,000 3.000% Term Certificates due February 15, 2024, Price 108.202%(a)(d)(c)(d) $495,000 3.000% Term Certificates due February 15, 2026, Price 106.103%(a)(b)(c)(d) $530,000 3.250% Term Certificates due February 15, 2028, Price 106.207%(a)(b)(c)(d) $910,000 4.000% Term Certificates due February 15, 2033, Price 108.426%(a)(d)(c)(d) $1,035,000 4.000% Term Certificates due February 15, 2036, Price 106.675%(a)(b)(c)(d) $1,155,000 3.625% Term Certificates due February 15, 2039, Price 94.768%(a)(b) (d) $1,765,000 4.000% Term Certificates due February 15, 2043, Price 99.134%(a)(b)(d) a The initial reoffering prices or yields of the Certificates are furnished by the Underwriter and represent the initial offering prices or yields to the public, which may be changed by the Underwriter at any time. (b) The Certificates stated to mature on and after February 15, 2024 are subject to optional redemption, in whole or in part, prior to maturity on February 15, 2023 or any date thereafter at the par value thereof plus accrued interest to the date fixed for redemption. (c) Priced to call. (d) The Term Certificates are subject to mandatory sinking fund redemption as set forth in the Ordinance. Schedule I - 1 HOU:3303038.2 OFFICIAL STATEMENT DATED APRIL 2, 2013 NEW ISSUE: Book -Entry -Only RATING: S&P "AA" (stable outlook) (See "Rating" herein) In the opinion of Bond Counsel, interest on the Certificates will be excludable from gross income for federal income tax purposes under statutes, regulations, published rulings and court decisions existing on the date thereof, subject to the matters described under "TAX MATTERS" herein, including the alternative minimum tax on corporations. The Issuer has designated the Certificates as "qualified tax-exempt obligations"for financial institutions. $9,320,000 Town of Westlake (Tarrant and Denton Counties, Texas) Combination Tax and Revenue Certificates of Obligation, Series 2013 Dated: April 1, 2013 (Interest accrues from date of delivery) Due: February 15, as shown below The Combination Tax and Revenue Certificates of Obligation, Series 2013 (the "Certificates") are authorized and issued in accordance with the Constitution and laws of the State of Texas, including Chapter 271, Subchapter C, Texas Local Government Code, as amended, and an ordinance (the "Ordinance") adopted by the Town Council of the Town of Westlake, Texas (the "Issuer"), and constitute direct obligations of the Issuer, payable from an annual ad valorem tax, levied upon all taxable property within the Issuer, within the limits prescribed by law, sufficient to provide for the payment of principal and interest due on the Certificates, as provided in the Ordinance. Additionally, the Certificates are secured by and payable from a limited pledge of the revenues (not to exceed $1,000) of the Issuer's waterworks and sewer system, remaining after payment of all operation and maintenance expenses thereof, and all debt service, reserve, and other requirements in connection with all of the Issuer's revenue bonds or other obligations (now or hereafter outstanding), which are payable from all or any part of the net revenues of the Issuer's waterworks and sewer system (the "Revenues"). See "DESCRIPTION OF THE CERTIFICATES — Security for the Certificates" herein. The Certificates are initially issuable only to Cede & Co., the nominee of The Depository Trust Company, New York, New York ("DTC"), pursuant to the book -entry system described herein. Beneficial ownership of the Certificates may be acquired in denominations of $5,000 or integral multiples thereof. No physical delivery of the Certificates will be made to the purchasers thereof. Principal of and interest on the Certificates will be payable to Cede & Co., which will make distributions of the amounts so paid to the participating members of DTC for subsequent remittance to the owners of beneficial interests in the Certificates. Such book -entry -only system will affect the method and timing of payment and the method of transfer for the Certificates. Interest on the Certificates will be payable on February 15 and August 15 of each year, commencing February 15, 2014. Principal of the Certificates will be payable at maturity or prior redemption. The initial Paying Agent/Registrar for the Certificates is U.S. Banjo National Association. The Certificates maturing on and after February 15, 2024 are subject to redemption at the option of the Issuer on February 15, 2023, or any date thereafter at the price of the principal amount so called for redemption plus accrued interest thereon to the redemption date. See "DESCRIPTION OF THE CERTIFICATES" herein. Proceeds of the Certificates are expected to be used to pay for (i) constructing and equipping new buildings at the Westlake Academy, including landscaping and related infrastructure; (ii) constructing and installing improvements to the Town's waterworks and sewer system; and (iii) legal, fiscal and engineering fees in connection with such projects. See "PLAN OF FINANCING" herein. The Certificates are offered when, as and if issued, subject to approval of legality by the Attorney General of the State of Texas and the approval of certain legal matters by McCall, Parkhurst & Horton L.L.P., Dallas, Texas, Bond Counsel. Certain legal matters will be passed upon for the Underwriter by its counsel, Andrews Kurth LLP, Houston, Texas. Definitive Certificates are expected to be available for delivery on April 30, 013, through the facilities of The Depository Trust Company, New York NY. Southwest Securities This page is intentionally left blank. MATURITY SCHEDULE $2.960.000 Serial Certificates - Interest accrues from the date of delivery Maturity Principal Interest Initial CUSIP Feb 15 Amount Rate Yield Suffix", 2014 $ 100,000 2.00% 0.40% EC6 2015 195,000 2.00%, 0.48% ED4 2016 195,000 2.00% 0.68% EE2 2017 200,000 2.00% 0.88% EF9 2018 200,000 2.00% 1.13% EG7 2019 205,000 2.00% 1.28% EH5 2020 215,000 2.00% 1.48% EJ1 CUSIP Prefix: 96048P(') Maturity Principal Interest Initial CUSIP Feb 15 Amount Rate Yield Suffix", 2021 215,000 2.50% 1.70% EK8 2022 225,000 2.50% 1.90% EL6 20292x3) 390,000 3.50% 2.65% EQ5 2030(2)(3) 405,000 3.50% 2,75% ER3 2031(2)(3) 415,000 3.50% 2.80% ESI $6,360,000 Term Certificates - Interest accrues from the date of delivery $470,000 3.00% Term Certificates due February 15, 2024(2x3) — Priced to Yield 2.07%, CUSIP Suffix"): EM4 $495,000 3.00% Term Certificates due February 15, 2026(2x3) — Priced to Yield 2.30%, CUSIP Suffix"): EN2 $530,000 3.25% Term Certificates due February 15, 2028(2)(3) — Priced to Yield 2.53%, CUSIP Suffix('): EP7 $910,000 4.00% Term Certificates due February 15, 2033(2x3) — Priced to Yield 3.000/0, CUSIP Suffix('): EU6 $1,035,000 4.00% Term Certificates due February 15, 2036(2x31— Priced to Yield 3.201/o, CUSIP Suffiix('): EV4 $1,155,000 3.625% Term Certificates due February 15, 2039(2)— Priced to Yield 3.95%, CUSIP SuffiiP: EW2 $1,765,000 4.00% Term Certificates due February 15, 2043(2)— Priced to Yield 4.05%, CUSIP Suffix('': EXO (1) CUSIP is a registered trademark of the American Bankers Association. CUSIP data herein is provided by CUSIP Global Services, managed by Standard & Poor's Financial Services LLC on behalf of the American Bankers Association. This data is not intended to create a database and does not serve in any way as a substitute for the CUSIP services. Neither the Issuer, the Financial Advisor nor the Underwriter takes any responsibilityfor the selection or correctness of the CUSIP numbers set forth herein. (2) The Issuer reserves the right, at its option, to redeem Certificates maturing on and after February 15, 2024, in whole or in part in principal amounts of $5, 000 or any integral multiple thereof, on February 15, 2023, or any date thereafter, at the par value thereof plus accrued interest to the date fixed for redemption. If less than all of the Certificates within a maturity are to be redeemed, the Paying Agent/Registrar shall determine by lot the Certificates, or portions thereof, within such maturity to be redeemed. See "DESCRIPTION OF THE BONDS - Optional Redemption. " (3) For Certificates maturing on February 15, 2024 through February 15, 2036, the yield shown is the yield to the first call date, February 15, 2023. i TOWN OF WESTLAKE 3 Village Circle, Suite 202 Westlake, Texas 76262 (817) 430-0941 ELECTED OFFICIALS APPOINTED AND OTHER TOWN OFFICIALS Name Thomas E. Brymer Debbie Piper Name Pattillo, Brown & Hill, L.L.P. Hillsboro, Texas McCall, Parkhurst & Horton, L.L.P. Dallas, Texas Lawrence Financial Consulting LLC Dallas, Texas Title Town Manager Finance Director CONSULTANTS AND ADVISORS ii Title Auditor Bond Counsel Financial Advisor Years with Town 5 10 Term Term Town Council Expires Occupation Inception Laura Wheat, Mayor 05/2014 Community Service 2008 Carol Langdon, Mayor pro -tem, Councilmember 05/2013 Retired, marketing 2008 Michael Barrett, Councilmember 05/2013 Sr. Executive, Financial Services 2012 Clifton Cox, Councilmember 05/2014 Physician 2010 David Levitap, Councilmember 05/2013 Physician 2011 Rick Rennhack, Councilmember 05/2013 Consultant 2009 APPOINTED AND OTHER TOWN OFFICIALS Name Thomas E. Brymer Debbie Piper Name Pattillo, Brown & Hill, L.L.P. Hillsboro, Texas McCall, Parkhurst & Horton, L.L.P. Dallas, Texas Lawrence Financial Consulting LLC Dallas, Texas Title Town Manager Finance Director CONSULTANTS AND ADVISORS ii Title Auditor Bond Counsel Financial Advisor Years with Town 5 10 USE OF INFORMATION IN OFFICIAL STATEMENT No dealer, broker, salesman or other person has been authorized to give any information or make any representations other than those contained in this Official Statement, and if given or made, such other information or representations must not be relied upon as having been authorized by the Issuer or any other person. This Official Statement does not constitute an offer to sell or solicitation of an offer to buy, and there shall not be any sale of, the Certificates in any state in which it is unlawful to make such offer, solicitation or sale. The information and expressions of opinion contained herein have been obtained from the Issuer and other sources that are believed to be reliable, but the accuracy and completeness of information obtained from sources other than the Issuer cannot be guaranteed. The information and expressions of opinion contained herein are subject to change without notice, and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the Issuer or other matters described herein since the date hereof. See "OTHER MATTERS - Continuing Disclosure of Information" herein for a description of the Issuer's agreement to update certain information contained in this Official Statement. The Underwriter has provided the following sentence for inclusion in this Official Statement. The Underwriter has reviewed the information in this Official Statement in accordance with, and as part of, their responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information. The prices and other terms respecting the offering and sale of the Certificates may be changed from time to time by the initial purchaser(s) of the Certificates after the Certificates are released for sale, and the Certificates may be offered and sold at prices other than the initial offering prices, including to dealers who may sell the Certificates into investment accounts. NEITHER THE ISSUER, ITS FINANCLIL ADVISOR NOR THE UNDERWRITER MAKES ANY REPRESENTATION OR WARRANTY WITH RESPECT TO THE INFORMATION CONTAINED IN THIS OFFICIAL STATEMENT REGARDING THE DEPOSITORY TRUST COMPANY OR ITS BOOK -ENTRY -ONLY SYSTEMHEREIN. THE CERTIFICATES ARE EXEMPT FROM REGISTRATION WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION AND CONSEQUENTLY HAVE NOT BEEN REGISTERED THEREWITH. THE REGISTRATION, QUALIFICATION OR EXEMPTION OF THE CERTIFICATES IN ACCORDANCE WITH APPLICABLE SECURITIES LAW PROVISIONS OF THE JURISDICTION IN WHICH THE BONDS HAVE BEEN REGISTERED, QUALIFIED OR EXEMPTED SHOULD NOT BE REGARDED ASA RECOMMENDATION THEREOF. I7V CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER ALLOT OR EFFECT TRANSACTIONS - WHICH STABILIZE THE MARKET PRICE OF THE CERTIFICATES AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAYBE DISCONTINUED AT ANY TIME. . TABLE OF CONTENTS SUMMARYSTATEMENT........................................................................................................................................................v INTRODUCTION....................................................................................................................................................................... I PLANOF FINANCING..............................................................................................................................................................1 Purposeof the Certificates.......................................................................................................................................................1 Sourcesand Uses of Funds...................................................................................................................................................... I DESCRIPTION OF THE CERTIFICATES................................................................................................................................2 General..................................................................................................................................................................................... 2 Book -Entry -Only System........................................................................................................................................................2 Authorityfor Issuance.............................................................................................................................................................4 Security and Source of Payment..............................................................................................................................................4 Noticeof Redemption..............................................................................................................................................................6 PayingAgent/Registrar............................................................................................................................................................6 Transferand Exchange............................................................................................................................................................7 ReplacementCertificates.........................................................................................................................................................7 Amendmentsto the Ordinance.................................................................................................................................................7 iii Certificateholders' Remedies...................................................................................................................................................8 ISSUER DEBT AND AD VALOREM TAX INFORMATION...............................................................................................10 Table 1 - Current Appraised Valuation, Exemptions and Tax Supported Debt.....................................................................10 Table 2 - Appraised Valuation and Exemptions by Category ................................................................................................11 Table 3 — Tax Rates, Levies, Collections and Ratios.............................................................................................................12 Table4 - Ten Largest Taxpayers...........................................................................................................................................13 Table5 — Estimated Overlapping Debt..................................................................................................................................13 Table6 - Debt Service Requirements....................................................................................................................................14 Table 7 - Authorized But Unissued Tax Bonds.....................................................................................................................15 Table7A - Other Obligations................................................................................................................................................15 Table8 — Tax Adequacy........................................................................................................................................................15 PropertyTax Code.................................................................................................................................................................15 OTHERFINANCIAL INFORMATION...................................................................................................................................19 Table 9 - General Operating Fund Summary Revenues and Expenditures............................................................................19 Table9A — Changes in Net Assets........................................................................................................................................20 Table 10 - General Fund Summary Balance Sheet...............................................................................................................21 Table l0A — Consolidated Statement of Net Assets..............................................................................................................21 Investments............................................................................................................................................................................22 Table 12 - Status of Current Investments...............................................................................................................................24 LEGALMATTERS...................................................................................................................................................................24 TAXMATTERS.......................................................................................................................................................................25 Opinion..................................................................................................................................................................................25 Federal Income Tax Accounting Treatment of Original Issue Discount...............................................................................26 Collateral Federal Income Tax Consequences.......................................................................................................................26 State, Local and Foreign Taxes..............................................................................................................................................27 Qualified Tax -Exempt Obligations for Financial Institutions................................................................................................27 Futureand Proposed Legislation...........................................................................................................................................28 RATING.....................................................................................................................................................................................28 OTHERMATTERS.................................................................................................................................................................28 LitigationCertificate..............................................................................................................................................................28 Legal Investments and Eligibility to Secure Public Funds in Texas......................................................................................28 FinancialAdvisor...................................................................................................................................................................29 FinancialStatements..............................................................................................................................................................29 Registration and Qualification of Certificates for Sale..........................................................................................................29 Underwriting.......................................................................................................................................................................... 29 Continuing Disclosure of Information...................................................................................................................................29 Conclusion............................................................................................................................................................................. 31 APPENDIX A - FORM OF BOND COUNSEL OPINION....................................................................................................A-1 APPENDIX B - EXCERPTS FROM BASIC FINANCIAL STATEMENTS.........................................................................B-1 APPENDIX C - GENERAL INFORMATION REGARDING THE ISSUER........................................................................0-1 iv SUMMARY STATEMENT This summary statement is subject in all respects to the more complete information and to the definitions contained or incorporated in this Official Statement. The offering of the Certificates to potential investors is made only by means of this entire Official Statement, including the cover page and all appendices. No person is authorized to detach this summary statement from this Official Statement or to otherwise use it without the entire Official Statement. The Issuer The Town of Westlake, located in Tarrant and Denton Counties, Texas, was incorporated in 1956 and operates as a "Type A general law city" under the laws of the State of Texas. See APPENDIX C, "GENERAL INFORMATION REGARDING THE ISSUER." The Certificates The Certificates are being issued in the aggregate principal amount set forth on the cover page pursuant to the laws of the State of Texas, particularly Chapter 271, Subchapter C, Texas Local Government Code, as amended, and an ordinance adopted by the City Council of the Issuer (the "Certificate Ordinance"). The Certificates are subject to redemption at the option of the Issuer prior to maturity on and after February 15, 2023. See "DESCRIPTION OF THE CERTIFICATES — Optional Redemption." Security The Certificates constitute direct obligations of the Issuer, payable from a continuing annual ad valorem tax levied upon all taxable property located within the Issuer, within the limitations prescribed by law. The Certificate Ordinance irrevocably pledges such ad valorem taxes in an amount sufficient to provide for the payment of the Certificates while they remain outstanding. Additionally, the Certificates are secured by and payable from a limited pledge of the revenues (not to exceed $1,000) of the Issuer's waterworks and sewer system, remaining after payment of all operation and maintenance expenses thereof, and all debt service, reserve, and other requirements in connection with all of the Issuer's revenue bonds or other obligations (now or hereafter outstanding), which are payable from all or any part of the net revenues of the Issuer's waterworks and sewer system (the "Revenues"). See "DESCRIPTION OF THE CERTIFICATES - Security." Tax Matters In the opinion of Bond Counsel, interest on the Certificates will be excludable from gross income for purposes of federal income taxation under statutes, regulations, published rulings and court decisions existing on the date thereof, subject to the matters described under "TAX MATTERS" herein, including the alternative minimum tax on corporations. The Issuer has designated the Certificates as "qualified tax-exempt obligations" for financial institutions. Summary of Key Analytical Data(') Taxable Assessed Valuation (TAV) for 2012-13 Tax Year $887,185,503 General Fund Equity Balance as of 09/30/12 $5,263,805 Gross Ad Valorem Tax Debt (z)" $30,967,000 Net Ad Valorem Tax Debt as of 04/01/13(3) $1,917,000 TAV per Capita (based on 2010 estimated pop. of 992) $894,340 Gross Tax Debt Per Capita (based on 2010 estimated pop. of 992) $31,216.73 Ratio of Gross Ad Valorem Tax Debt to TAV 3.49% Net Tax Debt Per Capita (based on 2010 estimated pop. of 992) $1,932.46 Ratio of Net Ad Valorem Tax Debt to TAV 0.22% Sources: Tarrant and Denton Central Appraisal Districts, the Issuer's audited financial statements, and U.S. Census Bureau. (])See "ISSUER DEBT AND AD VALOREM TAX INFORMATION" herein. (2) Includes $21,647,000 of ad valorem debt outstanding as of 09130/2012, plus the Certificates. (3) Although all of the Issuer's ad valorem tax debt is secured by a pledge of its ad valorem tax, it is currently paying only a minor portion of such debt from its ad valorem tax and the remainder from other available sources. See "ISSUER DEBT AND AD VALOREM TAX INFORMATION— Tables 1, 3 and 6. " v This page is intentionally left blank. OFFICIAL STATEMENT relating to $9,320,000 Town of Westlake (Tarrant and Denton Counties, Texas) Combination Tax and Revenue Certificates of Obligation, Series 2013 INTRODUCTION This Official Statement provides certain information in connection with the issuance by the Town of Westlake, Texas (the "Issuer") of its Combination Tax and Revenue Certificates of Obligation, Series 2013 (the "Certificates"). Capitalized terms used herein have the same meanings assigned to such terms in the Certificate Ordinance (the "Ordinance"). There follows in this Official Statement descriptions of the plan of financing, the Certificates and certain information about the Issuer and its finances.' All descriptions of documents contained herein are only summaries and are qualified in their entirety by reference to each such document. Copies of such documents may be obtained from the Issuer. PLAN OF FINANCING Purpose of the Certificates Proceeds of the Certificates will be used to pay for (i) constructing and equipping new buildings at the Westlake Academy, including landscaping and related infrastructure; (ii) constructing and installing improvements to the Town's waterworks and sewer system; and (iii) legal, fiscal and engineering fees in connection with such projects. Sources and Uses of Funds The following is a summary of the anticipated sources and uses of proceeds of funds (excluding accrued interest) in connection with the issuance of the Certificates: Sources of Funds: Principal Amount of Certificates $9,320,000 Net Original Issue Premium (Discount) 319,592 Total Sources of Funds 9 639 592 Uses of Funds: Deposit to Project Fund $9,500,000 Issuance Costs 75,238 Underwriting Discount 64,354 Total Uses of Funds 639 5 2 DESCRIPTION OF THE CERTIFICATES General The Certificates are dated April 1, 2013. Interest on the Certificates, at the rates set forth on page i hereof, will accrue from the date of their initial delivery and will be payable semiannually on February 15 and August 15 of each year, commencing February 15, 2014. The Certificates are stated to mature on February 15 in the years and in the principal amounts set forth on page i following the cover page hereof. The Certificates will be initially issued utilizing the Book -Entry -Only System of The Depository Trust Company ("DTC"), and will be in fully registered form, payable to Cede & Co., as nominee for DTC. See 'Book -Entry -Only System" below. The Certificates are issued only as fully registered obligations in the denomination of $5,000 principal amounts or any integral multiple thereof (an "Authorized Denomination"), within a stated maturity and of like interest rate. Principal and redemption price of the Certificates is payable on the maturity or redemption date upon surrender at the corporate trust office of U.S. Bank National Association (the "Paying Agent/Registrar"). Interest on the Certificates payable on any interest payment date shall be paid to the owner (the "Owner") whose name appears in the registration books of the Paying Agent/Registrar (the "Register") at the close of business on the Record Date (the last day of the month immediately preceding an interest payment date) and shall be paid by the Paying Agent/Registrar by check sent United States mail, first class, postage prepaid, to the address of the Owner recorded in the Register or by such other method, acceptable to the Paying Agent/Registrar, requested by, and at the risk and expense of, the Owner. So long as the Certificates are in book -entry -only form and are registered in the name of Cede & Co., as nominee for DTC, payment of the principal of and interest on the Certificates will be made to the beneficial owners thereof as described below under "Book -Entry -Only System." In the event of a non-payment of interest on a scheduled payment date with respect to the Certificates, that remains unpaid for 30 days thereafter, the Ordinance requires the Paying Agent/Registrar to establish a Special Record Date, if and when funds for the payment of such interest are received from the Issuer. Notice of the Special Record Date and of the scheduled payment date of the past due interest (the "Special Payment Date" that shall be 15 days after the Special Record Date) shall be sent at least five business days prior to the Special Record Date by United States mail, first class, postage prepaid, to the address of each Owner of a Certificate appearing on the books of the Paying Agent/Registrar at the close of business on the last business day next preceding the date of mailing of such notice. If the date specified for the payment of the principal of or interest on the Certificates is a Saturday, Sunday, legal holiday or day on which banking institutions in the city where the Paying Agent/Registrar is located are authorized or required to be closed, then such payment will be made on the next succeeding day which is not one of the foregoing days, without additional interest and with the same force and effect as if made on the specified date for such payment. Book -Entry -Only System This section describes how ownership of the Certificates are to be transferred and how the principal of, premium, if any, and interest on the Certificates are to be paid to and credited by The Depository Trust Company ("DTC'), New York New York, while the Certificates are registered in its nominee name. The information in this section concerning DTC and the Book -Entry -Only System has been provided by DTC for use in disclosure documents such as this Official Statement. The Issuer believes the source of such information to be reliable, but takes no responsibility for the accuracy or completeness thereof. The Issuer cannot and does not give any assurance that (1) DTC will distribute payment of debt service on the Certificates, or redemption or other notices to DTC Participants, (2) DTC Participants or others will distribute debt service payments paid to DTC or its nominee (as the registered owner of the Certificates), or redemption or other notices, to the Beneficial Owners, or that they will do so on a timely basis, or (3) DTC will serve and act in the manner described in this Official Statement. The current rules applicable to DTC are on file with the Securities and Exchange Commission, and the current procedures of DTC to be followed in dealing with DTC Participants are on file with DTC. 2 DTC will act as securities depository for the Certificates. The Certificates 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 Certificates, in the aggregate principal amount of each such maturity, and will be deposited with DTC. DTC, the world's largest securities 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 and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC's participants ("Direct Participants") deposit with DTC. DTC also facilitates the post -trade settlement among Direct Participants of sales and other securities 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 is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. 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 rating of "AA+" 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.dtcc.com. Purchases of Certificates under the DTC system must be made by or through Direct Participants, which will receive a credit for the Certificates on DTC's records. The ownership interest of each actual purchaser of each Certificate ("Beneficial Owner") is in tum to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Certificates 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 the Certificates, except in the event that use of the book -entry system for the Certificates is discontinued. To facilitate subsequent transfers, all Certificates 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 Certificates 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 Certificates; DTC's records reflect only the identity of the Direct Participants to whose accounts such Certificates 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. Beneficial Owners of Certificates may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Certificates, such as redemptions, tenders, defaults, and proposed amendments to the Certificate documents. For example, Beneficial Owners of Certificates may wish to ascertain that the nominee holding the Certificates for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the Paying Agent/Registrar and request that copies of notices be provided directly to them. Redemption notices shall be sent to DTC. If less than all of the Certificates 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 Certificates unless authorized by a Direct Participant in accordance with DTC's MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts the Certificates are credited on the record date (identified in a listing attached to the Omnibus Proxy). Redemption proceeds and principal and interest payments on the Certificates 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 Issuer or the Paying Agent/Registrar, on payable dates 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 in the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of DTC, the Paying Agent or the Issuer, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds and principal and interest to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Issuer or the Paying Agent/Registrar, 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. A Beneficial Owner shall give notice to elect to have its Certificates purchased or tendered, through its Participant, to the Tender Agent, and shall effect delivery of such Certificates by causing the Direct Participant to transfer the Participant's interest in the Certificates, on DTC's records, to the Tender Agent. The requirement for physical delivery of Certificates in connection with an optional tender or a mandatory purchase will be deemed satisfied when the ownership rights in the Certificates are transferred by Direct Participants on DTC's records and followed by a book -entry credit of tendered Certificates to the Tender Agent's DTC account. DTC may discontinue providing its services as depository with respect to the Certificates at any time by giving reasonable notice to the Issuer or the Paying Agent/Registrar. Under such circumstances, in the event that a successor depository is not obtained, the Certificates are required to be printed and delivered. The Issuer may decide to discontinue use of the system of book -entry transfers through DTC (or a successor securities depository). In that event, the Certificates will be printed and delivered. The information in this section concerning DTC and DTC's book -entry system has been obtained from sources that the Issuer believes to be reliable, but the Issuer takes not responsibility for the accuracy thereof. Authority for Issuance The Certificates are authorized and issued pursuant to the Constitution and general laws of the State of Texas, including particularly Chapter 271, Subchapter C, Texas Local Government Code, as amended, and the Ordinance. Security and Source of Payment The Certificates will constitute direct obligations of the Issuer, payable from ad valorem taxes levied against all taxable property located within the Issuer, within the limitations prescribed by law. The Ordinance irrevocably pledges such ad valorem taxes to the payment of the principal of and interest on the Certificates while they remain outstanding. See "ISSUER DEBT AND AD VALOREM TAX INFORMATION" herein. The Constitution of the State of Texas provides that the ad valorem tax levied by the Issuer for general purposes and for the purpose of paying debt service requirements of the Issuer's general obligation debt shall not exceed $1.50 for each $100 of assessed valuation of taxable property. There is no limitation within the $1.50 rate for interest and sinking fund purposes. Administratively, however, the Attorney General of the State of Texas will not permit 4 allocation of more than $1.00 of the $1.50 maximum tax rate for all tax supported debt based on a 90% collection rate. Additionally, the Certificates are secured by and payable from a limited pledge of the revenues (not to exceed $1,000) of the Issuer's waterworks and sewer system, remaining after payment of all operation and maintenance expenses thereof, and all debt service, reserve, and other requirements in connection with all of the Issuer's revenue bonds or other obligations (now or hereafter outstanding), which are payable from all or any part of the net revenues of the Issuer's waterworks and sewer system (the "Revenues"). Source: Issuer's Comprehensive Annual Financial Reports for the fiscal years indicated. Notwithstanding the requirements of the Ordinance to levy and collect an ad valorem tax to pay debt service on the Certificates, if Revenues or other lawfully available moneys of the Issuer are actually on deposit in the Interest and Sinking Fund in advance of the time when ad valorem taxes are scheduled to be levied for any year, then the amount of taxes that otherwise would have been required to be levied may be reduced to the extent and by the amount of the Surplus Revenues or other lawfully available funds then on deposit in the Interest and Sinking Fund. Optional Redemption The Issuer reserves the right, at its option, to redeem Certificates maturing or subject to mandatory sinking fund redemption on and after February 15, 2024, in whole or in part in principal amounts of $5,000 or any integral multiple thereof, on February 15, 2023, or any date thereafter, at the par value thereof plus accrued interest to the date fixed for redemption. If less than all of the Certificates within a maturity are to be redeemed, the Paying Agent/Registrar shall determine by lot the Certificates, or portions thereof, within such maturity to be redeemed. Mandatory Sinking Fund Redemption The Certificates maturing on February 15 in the years 2024, 2026, 2028, 2033, 2036,.2039 and 2043 (the "Term Certificates") shall be subject to mandatory redemption in part prior to maturity at the redemption price of par and accrued interest to the date of redemption on the dates and in the respective principal amounts, set forth in the following schedule: Tenn Certificate Maturity February 15, 2024 Redemption Date Amount 2/15/2023 $230,000 2/15/2024 (matu>ity) 240,000 Tenn Certificate Maturity February 15, 2033 Redemption Date Amount 2/15/2032 $595,000 2/15/2033 (maturity) 315,000 Tenn Certificate Maturity FYE Sept. 30 Redemption Date 2010 2011 2012 Utility Fund Operating Revenues $ 2,208,390 $ 3,224,534 $ 3.044,045 Utility Fund Operating Expenses 1,992,815 2,190,376 2,383,045 Utility Fund Operating Income ("Revenues')215,575 1 034 158 660 315 Source: Issuer's Comprehensive Annual Financial Reports for the fiscal years indicated. Notwithstanding the requirements of the Ordinance to levy and collect an ad valorem tax to pay debt service on the Certificates, if Revenues or other lawfully available moneys of the Issuer are actually on deposit in the Interest and Sinking Fund in advance of the time when ad valorem taxes are scheduled to be levied for any year, then the amount of taxes that otherwise would have been required to be levied may be reduced to the extent and by the amount of the Surplus Revenues or other lawfully available funds then on deposit in the Interest and Sinking Fund. Optional Redemption The Issuer reserves the right, at its option, to redeem Certificates maturing or subject to mandatory sinking fund redemption on and after February 15, 2024, in whole or in part in principal amounts of $5,000 or any integral multiple thereof, on February 15, 2023, or any date thereafter, at the par value thereof plus accrued interest to the date fixed for redemption. If less than all of the Certificates within a maturity are to be redeemed, the Paying Agent/Registrar shall determine by lot the Certificates, or portions thereof, within such maturity to be redeemed. Mandatory Sinking Fund Redemption The Certificates maturing on February 15 in the years 2024, 2026, 2028, 2033, 2036,.2039 and 2043 (the "Term Certificates") shall be subject to mandatory redemption in part prior to maturity at the redemption price of par and accrued interest to the date of redemption on the dates and in the respective principal amounts, set forth in the following schedule: Tenn Certificate Maturity February 15, 2024 Redemption Date Amount 2/15/2023 $230,000 2/15/2024 (matu>ity) 240,000 Tenn Certificate Maturity February 15, 2033 Redemption Date Amount 2/15/2032 $595,000 2/15/2033 (maturity) 315,000 Tenn Certificate Maturity February 15, 2043 Redemption Date Amount 2/15/2040 $415,000 2/15/2041 430,000 2/15/2042 450,000 2/15/2043 (maturity) 470,000 Term Certificate Maturity February 15, 2026 Redemption Date Amount 2/15/2025 $240,000 2/15/2026(mamrity) 255,000 Term Certificate Maturity February 15, 2036 Redemption Date Amount 2/15/2034 $330,000 2/15/2035 345,000 2/15/2036(maunity) 360,000 Tenn Certificate Maturity February 15, 2028 Redemption Date Amount 2/15/2027 $260,000 2/15/2028 (maturity) 270,000 Term Certificate Maturity February 15, 2039 Redemption Date Amount 2/15/2037 $370,000 2/15/2038 385,000 2/15/2039(matmity) 400,000 The particular Term Certificates to be redeemed shall be chosen by the Paying Agent/Registrar at random by lot or other customary method; provided, however, that the principal amount of Term Certificates of a stated maturity required to be redeemed on any mandatory redemption date pursuant to the operation of the mandatory sinking fund redemption provisions shall be reduced, at the option of the Issuer, by the principal amount of any Term Certificates of the same maturity which, at least 45 days prior to a mandatory redemption date (1) shall have been acquired by the Issuer at a price not exceeding the principal amount of such Term Certificates plus accrued interest to the date of purchase thereof, and delivered to the Paying Agent/Registrar for cancellation, (2) shall have been purchased and canceled by the Paying Agent/Registrar at the request of the Issuer at a price not exceeding the principal amount of such Term Certificates plus accrued interest to the date of purchase, or (3) shall have been redeemed pursuant to the optional redemption provisions and not theretofore credited against a mandatory redemption requirement. Notice of Redemption Not less than 30 days prior to a redemption date for the Certificates, the Issuer shall cause a notice of redemption to be sent by United States mail, first class, postage prepaid, to each Owner of a Certificate to be redeemed, in whole or in part, at the address of the Owner appearing in the Register at the close of business on the business day next preceding the date of mailing of such notice. ANY NOTICE GIVEN SHALL BE CONCLUSIVELY PRESUMED TO HAVE BEEN DULY GIVEN, WHETHER OR NOT THE OWNER RECEIVES SUCH NOTICE. NOTICE HAVING BEEN SO GIVEN AND ALL OTHER 'CONDITIONS TO REDEMPTION ARE SATISFIED, THE CERTIFICATES CALLED FOR REDEMPTION SHALL BECOME DUE AND PAYABLE ON THE SPECIFIED REDEMPTION DATE, AND, NOTWITHSTANDING THAT ANY CERTIFICATE OR PORTION THEREOF HAS NOT BEEN SURRENDERED FOR PAYMENT, INTEREST ON SUCH CERTIFICATE OR PORTION THEREOF SHALL CEASE TO ACCRUE. With respect to any optional redemption of the Certificates, unless certain prerequisites to such redemption required by the Ordinance have been met and money sufficient to pay the principal of and premium, if any, and interest or maturity value on the Certificates to be redeemed will have been received by the Paying Agent/Registrar prior to the giving of such notice of redemption, such notice will state that said redemption may, at the option of the Issuer, be conditional upon the satisfaction of such prerequisites and receipt of such money by the Paying Agent/Registrar on or prior to the date fixed for such redemption or upon any prerequisite set forth in such notice of redemption. If 'a conditional notice of redemption is given and such prerequisites to the redemption are not fulfilled, such notice will be of no force and effect, the Issuer will not redeem such Certificates, and the Paying Agent/Registrar will give notice in the manner in which the notice of redemption was given, to the effect that the Certificates have not been redeemed. The Paying Agent/Registrar and the Issuer, so long as a Book -Entry -Only System is used for the Certificates, will send any notice of redemption, notice of proposed amendment to the Ordinance or other notices with respect to the Certificates only to DTC. Any failure by DTC to advise any DTC participant, or of any DTC participant or indirect participant to notify the beneficial owner, shall not affect the validity of the redemption of the Certificates called for redemption or any other action premised on any such notice. Redemption of portions of the Certificates by the Issuer will reduce the outstanding principal amount of such Certificates held by DTC. In such event, DTC may implement, through its Book -Entry -Only System, a redemption of such Certificates held for the account of DTC participants in accordance with its rules or other agreements with DTC participants and then DTC participants and indirect participants may implement a redemption of such Certificates from the beneficial owners. Any such selection of Certificates to be redeemed will not be governed by the Ordinance and will not be conducted by the Issuer or the Paying Agent/Registrar. Neither the Issuer nor the Paying Agent/Registrar will have any responsibility to DTC participants, indirect participants or the persons for whom DTC participants act as nominees, with respect to the payments on the Certificates or the providing of notice to DTC participants, indirect participants, or beneficial owners of the selection of portions of the Certificates for redemption. See "DESCRIPTION OF THE CERTIFICATES — Book -Entry -Only System" herein. Paying Agent/Registrar The initial Paying Agent/Registrar is U.S. Bank National Association, Dallas, Texas. In the Ordinance, the Issuer retains the right to replace the Paying Agent/Registrar. The Issuer covenants to maintain and provide a Paying Agent/Registrar at all times while the Certificates are outstanding, and any successor Paying Agent/Registrar shall 6 be a bank, trust company, financial institution or other entity duly qualified and legally authorized to serve as and perform the duties and services of Paying Agent/Registrar for the Certificates. Upon any change in the Paying Agent/Registrar for the Certificates, the Issuer agrees to promptly cause a written notice thereof to be sent to each Owner by United States mail, first class, postage prepaid, which notice shall also give the effective date of the change and the address of the new Paying Agent/Registrar. If the Paying Agent/Registrar is replaced, the new Paying Agent/Registrar shall accept the previous Paying Agent/Registrar's records and act in the same capacity as the previous Paying Agent/Registrar. Transfer and Exchange In the event the Book -Entry -Only System shall be discontinued with respect to the Certificates, such Certificates may be transferred and exchanged on the Register only upon presentation and surrender thereof to the Paying Agent/Registrar, and such transfer or exchange shall be without expense or service charge to the Owner, except for any tax or other governmental charges required to be paid with respect to such registration, exchange and transfer. A Certificate may be assigned by the execution of an assignment form on the Certificate or by other instrument of transfer and assignment acceptable to the Paying Agent/Registrar. A new Certificate or Certificates will be delivered by the Paying Agent/Registrar, in lieu of the Certificate being transferred or exchanged, at the Trust Office, or sent by United States mail, first . class, postage prepaid, to the new Owner or its designee. New Certificates registered and delivered in an exchange or transfer shall be in Authorized Denominations for any one stated maturity and for a like aggregate principal amount and interest rate as the Certificate or Certificates surrendered for exchange or transfer. Neither the Issuer nor the Paying Agent/Registrar shall be required to issue, transfer or exchange any Certificate in whole or in part during the period commencing with the close of business on any Record Date or Special Record Date and ending on the day subsequent to the immediately following payment date or, with respect to any Certificate called for redemption, in whole or in part, within 45 days of the date fixed for redemption, provided that such limitation of transfer shall not be applicable to the exchange by the registered owner of the uncalled balance of a Certificate. The Paying Agent/Registrar shall require payment by the Owner requesting such transfer or exchange of any tax or other governmental charges required to be paid with respect to such transfer or exchange. Replacement Certificates If any Certificate is mutilated, destroyed, stolen or lost, a new Certificate in the same principal amount and bearing the same rate of interest as the Certificate so mutilated, destroyed, stolen or lost will be issued under the conditions set forth in the Ordinance. In the case of a mutilated Certificate, such new Certificate will be delivered only upon surrender and cancellation of such mutilated Certificate. In the case of any Certificate issued in lieu of and substitution for a Certificate which has been destroyed, stolen or lost, such new Certificate will be delivered only upon (a) the filing with the Issuer and the Paying Agent/Registrar of evidence satisfactory to establish to the Paying Agent/Registrar proof of the ownership and the circumstances of loss, destruction or theft of such Certificate, and (b) the furnishing to the Paying Agent/Registrar of such security of indemnity satisfactory to it to hold it and the Issuer harmless. The person requesting the authentication and delivery of a new Certificate must comply with such other reasonable requirements as the Issuer and the Paying Agent/Registrar may prescribe and pay such expenses as may be incurred in connection therewith. Amendments to the Ordinance In the Ordinance, the Issuer has reserved the right to amend the Ordinance without the consent of any holder for the purpose of amending or supplementing the Ordinance to (i) cure any ambiguity, defect or omission therein that does not materially adversely affect the interests of the holders, (ii) grant additional rights or security for the benefit of the holders, (iii) add events of default as shall not be inconsistent with the provisions of the Ordinance that do not materially adversely affect the interests of the holders, (iv) qualify the Ordinance under the Trust Indenture Act of 1939, as amended, or corresponding provisions of federal laws from time to time in effect or (v) make such other provisions in regard to matters or questions arising under the Ordinance that are not inconsistent with the provisions thereof and which, in the opinion of Bond Counsel for the Issuer, do not materially adversely affect the interests of the holders. 7 The Ordinance further provides that the holders of the Certificates aggregating in principal amount 51% of the outstanding Certificates shall have the right from time to time to approve any amendment not described above to the Ordinance if it is deemed necessary or desirable by the Issuer; provided, however, that without the consent of 100% of the holders in original principal amount of the then outstanding Certificates, no amendment may be made for the purpose of: (i) making any change in the maturity of any of the outstanding Certificates; (ii) reducing the rate of interest borne by any of the outstanding Certificates; (iii) reducing the amount of the principal of, or redemption premium, if any, payable on any outstanding Certificates; (iv) modifying the terms of payment of principal or of interest or redemption premium on outstanding Certificates, or imposing any condition with respect to such payment; or (v) changing the minimum percentage of the principal amount of the Certificates necessary for consent to such amendment. Reference is made to the Ordinance for further provisions relating to the amendment thereof. Defeasance The Ordinance provides for the defeasance of the Certificates when payment of the principal of and premium, if any, on Certificates, plus interest thereon to the due date thereof (whether such due date be by reason of maturity, redemption, or otherwise), is provided by irrevocably depositing with a paying agent or other authorized entity, in trust (1) money sufficient to make such payment or (2) Defeasance Securities, certified by an independent public accounting firm of national reputation to mature as to principal and interest in such amounts and at such times to insure the availability, without reinvestment, of sufficient money to make such payment, and all necessary and proper fees, compensation and expenses of the paying agent for the respective series of Certificates. The Ordinance provides that "Defeasance Securities" means any securities and obligations now or hereafter authorized by State law that are eligible to discharge obligations such as the Certificates. Current State law permits defeasance with the following types of securities: (1) direct, noncallable obligations of the United States of America, including obligations that are unconditionally guaranteed by the United States of America, (2) noncallable obligations of an agency or instrumentality of the United States of America, including obligations that are unconditionally guaranteed or insured by the agency or instrumentality and that are rated as to investment quality by a nationally recognized investment rating firm not less than AAA or its equivalent, and (3) 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 are rated as to investment quality by a nationally recognized investment rating firm not less than AAA or its equivalent. The Issuer has additionally reserved the right, subject to satisfying the requirements of (1) and (2) above, to substitute other Defeasance Securities for the Defeasance Securities originally deposited, to reinvest the uninvested moneys on deposit for such defeasance and to withdraw for the benefit of the Issuer moneys in excess of the amount required for such defeasance. Upon such deposit as described above, such Certificates shall no longer be regarded to be outstanding or unpaid. After firm banking and financial arrangements for the discharge and final payment or redemption of the Certificates have been made as described above, all rights of the Issuer to initiate proceedings to call the Certificates for redemption or take any other action amending the terms of the Certificates are extinguished; provided, however, that the right to call the Certificates for redemption is not extinguished if the Issuer: (i) in the proceedings providing for the firm banking and financial arrangements, expressly reserves the right to call the Certificates for redemption; (ii) gives notice of the reservation of that right to the owners of the Certificates immediately following the making of the firm banking and financial arrangements; and (iii) directs that notice of the reservation be included in any redemption notices that it authorizes. There is no assurance that the current law will not be changed in a manner which would permit investments other than those described above to be made with amounts deposited to defease the Certificates. Because the Ordinance does not contractually limit such investments, registered owners may be deemed to have consented to defeasance with such other investments, notwithstanding the fact that such investments may not be of the same investment quality as those currently permitted under State law. There is no assurance that the ratings for U.S. Treasury securities used as Defeasance Securities or those for any other Defeasance Security will be maintained at any particular rating category. Certificateholders' Remedies The Ordinance establishes specific events of default with respect to the Certificates. If the Issuer defaults in the payment of the principal of or interest on the Certificates when due or the Issuer defaults in the observance or performance of any of the covenants, conditions, or obligations of the Issuer, the failure to perform which materially, adversely affects the rights of the owners of the Certificates, including but not limited to, their prospect or ability to be repaid in accordance with the Ordinance, and the continuation thereof for a period of 60 days after notice of such default is given by any owner to the Issuer, the Ordinance provides that any registered owner is entitled to seek a writ of mandamus from a court of proper jurisdiction requiring the Issuer to make such payment or observe and perform such covenants, obligations, or conditions. The issuance of a writ of mandamus may be sought if there is no other available remedy at law to compel performance of the Certificates or the Ordinance and the Issuer's obligations are not uncertain or disputed. The remedy of mandamus is controlled by equitable principles, so rests with the discretion of the court, but may not be arbitrarily refused. There is no acceleration of maturity of the Certificates in the event of default and, consequently, the remedy of mandamus may have to be relied upon from year to year. The Ordinance does not provide for the appointment of a trustee to represent the interest of the owners of the Certificates upon any failure of the Issuer to perform in accordance with the terms of the Ordinance, or upon any other condition and accordingly all legal actions to enforce such remedies would have to be undertaken at the initiative of, and be financed by, the registered owners. The Texas Supreme Court ruled in Tooke v. City of Mexia, 197 S.W. 3`d 325 (Tex. 2006), that a waiver of sovereign immunity in a contractual dispute must be provided for by statute in clear and unambiguous language. Because it is unclear whether the Texas legislature has effectively waived the Issuer's sovereign immunity from a suit for money damages, owners of the Certificates may not be able to bring such a suit against the Issuer for breach of the Certificates or Ordinance covenants. Even if a judgment against the Issuer could be obtained, it could not be enforced by direct levy and execution against the Issuer's property. Further, the registered owners cannot themselves foreclose on property within the Issuer or sell property within the Issuer to enforce the tax lien on taxable property to pay the principal of and interest on the Certificates. Furthermore, the Issuer is eligible to seek relief from its creditors under Chapter 9 of the U.S. Bankruptcy Code ("Chapter 9"). Although Chapter 9 provides for the recognition of a security interest represented by a specifically pledged source of revenues, the pledge of ad valorem taxes in support of a general obligation of a bankrupt entity is not specifically recognized as a security interest under Chapter 9. Chapter 9 also includes an automatic stay provision that would prohibit, without Bankruptcy Court approval, the prosecution of any other legal action by creditors or owners of the Certificates of an entity which has sought protection under Chapter 9. Therefore, should the Issuer avail itself of Chapter 9 protection from creditors, the ability to enforce would be subject to the approval of the Bankruptcy Court (which could require that the action be heard in Bankruptcy Court instead of other federal or state court); and the Bankruptcy Code provides for broad discretionary powers of a Bankruptcy Court in administering any proceeding brought before it. The opinion of Bond Counsel will note.that all opinions relative to the enforceability of the Certificates are qualified with respect to the customary rights of debtors relative to their creditors and by general principles of equity which permit the exercise of judicial discretion. Initially, the only registered owner of the Certificates will be The Depository Trust Company. See "DESCRIPTION OF THE CERTIFICATES - Book -Entry -Only System" herein for a description of the duties of DTC with regard to ownership of Certificates. [Remainder of page intentionally left blank.] ISSUER DEBT AND AD VALOREM TAX INFORMATION Table 1 - Current Appraised Valuation, Exemptions and Tax Supported Debt Total Market Value of Issuer Property for 2012-1.3 Tax Year Tarrant County Denton County Total $ 1,222,042,374 $ 15,313,269 $1,237,355,643 Agricultural, Productivity Loss 80,257,943 11,660,003 91,917,946 Homesteads - Local Option 72,391,902 2,695,922 75,087,824 AbatementsM 173,783,407 - 173,783,407 Cases Before Appraisal Review Board - - - Incomplete Accounts - - - Absolute Exemptions 6,148,041 - 6,148,041 Unemployable/ 100% Disabled Veterans 2,695,142 - 2,695,142 Over 65 - Local Option 515,000 - 515,000 Disabled - Local Option 10,000 - 10,000 Disabled Veterans 12,000 - 12,000 Nominal Value 780 - 780 Total Adjustments, Exemptions 335,814,215 14,355,925 350,170,140 Taxable Assessed Valuation for 2012-13 Fiscal Year $ 886.228.159 $ 957.344 887.185.503 Ad Valorem Tax Supported Debt as of 0.9..1'30.1,'2012 $ 21,647,000 Proposed Combination Tax & Revenue Certificates of Obligation, Series 2013 9,320,000 Gross Amount of Ad Valorem Tax Supported Debt 30,967,000 Less: Debt Being Repaid From Sources Other Than Ad Valorem Taxes (29,115,000) Net Amount of Ad Valorem Tax Supported Debt (as of 02/15/2013) $ 1,852,000 Debt Service Fund Balance as of 09.,"30.'2012 $ 22,657 Sources: Tarrant and Denton Central Appraisal Districts; Issuer financial statements. (1) The Issuer has granted partial tax abatements for two major facilities within its boundaries, including those used by Deloitte LLP and Fidelity Investments. Such abatements have 10 year terms and are subject to various terms and conditions, including the satisfaction of certain employment targets in order to qualify for abatement in any given year. [Remainder of page intentionally left blank.] 10 Table 2 - Appraised Valuation and Exemptions by Category (1) The Issuer has granted partial tax abatements for two major facilities within its boundaries, including those used by Deloitte LLP and Fidelity Investments. Such abatements have 10 year terms and are subject to various terms and conditions, including, in the case of Fidelity, the satisfaction of certain employment targets in order to qual fy for abatement in any given year. 11 Fiscal Years 2012-13 2011-12 2010-11 Appraised Valuation Amount °/o of Total Amount % of Total Amount ° f Total Real Estate, Residential $ 545,598,263 44.091% $ 531,642,664 48.08% $ 521,988,652 50.05% Real Estate, Commercial 472,482,662 38.18% 407,433,850 36.85% 363,594,970 34.86% Personal Prop, Comml/Indust 126,724,533 10.24% 86,804,270 7.85% 73,429,788 7.04% Agricultural Properties 91,965,225 7.43% 79,278,520 7.17% 83,489,547 8.00% Utilities 584,960 0.05% 547,090 0,05% 509,220 0.05% Total Appraised Valuation 1,237,355,643 100.00% 1,105,706,394 100.00% 1,043,012,177 100.00% Less Exemptions & Reductions Agricultural, Productivity Loss (91,917,946) (78,963,828) (83,178,839) Homestead - Local Option (75,087,824) (69,658,940) (69,340,218) Abatements�'� (173,783,407) - - Subject to Arbitration - (3,083,557) (25,401,532) Incomplete Accounts (9,126,251) (3,245,856) Absolute Exemptions (6,148,041) (6,015,566) (6,038,661) Unemployable/100%Disabled Vet (2,695,142) Over 65 - Local Option (515,000) (475,000) - Disabled - Local Option (10,000) (10,000) - f Disabled Veterans (12,000) (12,000) (12,000) Nominal Value (780) Net Taxable Assessed Valuation S 887.185.503 938.361.252 $ 855.795.071 Fiscal Years 22009--10 2008-09 Appraised Valuation Amount % of Total Amount ° of Total Real Estate, Residential $ 511,093,381 50.01% $ 469,132,912 53.46% Real Estate, Commercial 369,374,638 36.14% 256,092,711 29.18% Personal Prop., Commercial/Indust 70,567,161 6.90% 86,891,232 9.90% Agricultural Properties 70,962,405 6.94% 65,485,364 7.46% Utilities - 0.00% - 0.00% Total Appraised Valuation Less Exemptions & Reductions 1,021,997,585 100.00% 877,602,219 100.00% Agricultural (70,719,775) (65,140,820) Homestead - Local Option - - Abatements - - Subject to Arbitration (23,928,686) (16,528,501) Incomplete Accts (2,272,516) (3,697,947) Absolute Exemptions (4,800,598) (3,736,833) Unemployable/100% Disabled Vets - Over 65 - Local Option - - Disabled - Local Option - - Disabled Veterans (12,000) (12,000) Nominal Value Net Taxable Assessed Valuation $ 920.264.010 L,788 .486.118 (1) The Issuer has granted partial tax abatements for two major facilities within its boundaries, including those used by Deloitte LLP and Fidelity Investments. Such abatements have 10 year terms and are subject to various terms and conditions, including, in the case of Fidelity, the satisfaction of certain employment targets in order to qual fy for abatement in any given year. 11 Table 3 — Tax Rates, Levies, Collections and Ratios Bond Tax Rate(') Maintenance Tax RateM Total Tax Rate 2009-10 2008-0 Taxable Assessed Valuation 887.185.503S 938.361.252 $ 855.795.071 920.264.010S 788.486.118 Total Ad Valorem Taxes Levied') $ 1,344,663 $ 1,439,748 $ 1,370,128 $ - $ - Current Collection Ratio In process 99.87% 99.55% NA NA Total Collection Ratio In process 99.86%(4) 99.55% NA NA Gross Ad Valorem Tax DebP $ 30,967,000 $ 21,647,000 $ 21,725,000 $ 20,185.000 $ 20,710.000 Gross Tax Debt Ratio to.TAV 3.49% 2.31% 2.54% 2.19% 2.63% Net Ad Valorem TaxDebt(3) $ 1,917,000 $ 2,007,000 $ 2,095,000 $ - $ - Net Tax Debt Ratio to TAV 0.22% 0.21% 0.24% 0.00% 0.00% Estimated Population 992 992 992 785 703 TAV per Capita $ 894,340 $ 945,929 $ 862,697 $ 1,172,311 $ 1,121,602 Gross Tax .Debt per Capita9 $ 31,216.73 $ 21,821.57 $ 21,900.20 $ 25,713.38 $ 29,459.46 Net Tax Debt per Capitam $ 1,932.46 $ 2,023.19 $ 2,111.90 $ - $ - Sources: The District's audited financial statements; Tarrant and Denton Central Appraisal Districts. (1) Prior to fiscal year 2010-11, Issuer did not levy/collect ad valorem taxes, relying instead on other available funds for operations and debtservice. (2) As of fiscal year encs except for 2012-13 which reflects debt as of September 30, 2012, plus the Certificates. (3) Currently all of the Issuer's ad valorem tax debt is being repaid from sources other than its ad valorem tax, except for the Issuer's Combination Tax and Revenue Certificates of Obligation, Series 2011. The Issuer is authorized, at its option, to pay all or any portion of its debt from ad valorem taxes, other lawfully available revenues such as sales tax revenues, or any combination thereof, and may determine in the future to change the sources being used to repay all or any portion of its outstanding debt. [Remainder of page intentionally left blank,] 12 Fiscal Years 2012-13 2011-12 2010-11 $ 0.01.487 $ 0.01849 $ 0.00390 0.14197 0.13835 0.15620 $ 0.15684 $ 0.15684 $ 0.16010 2009-10 2008-0 Taxable Assessed Valuation 887.185.503S 938.361.252 $ 855.795.071 920.264.010S 788.486.118 Total Ad Valorem Taxes Levied') $ 1,344,663 $ 1,439,748 $ 1,370,128 $ - $ - Current Collection Ratio In process 99.87% 99.55% NA NA Total Collection Ratio In process 99.86%(4) 99.55% NA NA Gross Ad Valorem Tax DebP $ 30,967,000 $ 21,647,000 $ 21,725,000 $ 20,185.000 $ 20,710.000 Gross Tax Debt Ratio to.TAV 3.49% 2.31% 2.54% 2.19% 2.63% Net Ad Valorem TaxDebt(3) $ 1,917,000 $ 2,007,000 $ 2,095,000 $ - $ - Net Tax Debt Ratio to TAV 0.22% 0.21% 0.24% 0.00% 0.00% Estimated Population 992 992 992 785 703 TAV per Capita $ 894,340 $ 945,929 $ 862,697 $ 1,172,311 $ 1,121,602 Gross Tax .Debt per Capita9 $ 31,216.73 $ 21,821.57 $ 21,900.20 $ 25,713.38 $ 29,459.46 Net Tax Debt per Capitam $ 1,932.46 $ 2,023.19 $ 2,111.90 $ - $ - Sources: The District's audited financial statements; Tarrant and Denton Central Appraisal Districts. (1) Prior to fiscal year 2010-11, Issuer did not levy/collect ad valorem taxes, relying instead on other available funds for operations and debtservice. (2) As of fiscal year encs except for 2012-13 which reflects debt as of September 30, 2012, plus the Certificates. (3) Currently all of the Issuer's ad valorem tax debt is being repaid from sources other than its ad valorem tax, except for the Issuer's Combination Tax and Revenue Certificates of Obligation, Series 2011. The Issuer is authorized, at its option, to pay all or any portion of its debt from ad valorem taxes, other lawfully available revenues such as sales tax revenues, or any combination thereof, and may determine in the future to change the sources being used to repay all or any portion of its outstanding debt. [Remainder of page intentionally left blank,] 12 Table 4 - Ten Largest Taxpayers Name Maguire Thomas Partners -Solana Ltd FMR Texas I LLC/Ltd. Partnership DCLI Inc. Corelogic Solutions Inc. Fidelity Investments Inc. Lexington TNI Westlake, LP Marsh USA Inc. Levi Strauss & Co. EMC Corp. The Vaquero Club Inc. Totals Source: Tarrant and Denton Central Appraisal Districts. (1) Of the top ten taxpayers, the valuations of three are related to commercial real estate, representing 27.54% of the Issuer's total tax base. The valuations of such property may fluctuate substantially from year to year. A downturn in the commercial real estate market could adversely affect the Issuer's tax base. Table 5 — Estimated Overlapping Debt As in the case of the Issuer, various taxing units within the Issuer's boundaries may incur debts that are paid from ad valorem taxes levied by such taxing units on taxable properties within the Issuer's boundaries. Such taxing units are separate legal entities and independent of the Issuer. The information in this table shows direct and estimated overlapping ad valorem tax debt and is based on information obtained from the individual taxing units or from the Texas Municipal Reports published by the Municipal Advisory Council of Texas. The Issuer has not independently verified the accuracy or completeness of information relating to any taxing unit other than itself, and no person should rely upon such information as being accurate or complete. Additionally, taxing units listed herein may have issued additional tax debt since the date hereof, and such taxing units may have programs requiring the issuance of substantial amounts of additional tax debt, the amount of which cannot be determined at this time. Taxing Unit Gross Debt Percentage of Type of Carroll ISD 2012-13 TAV Business 2012-13 TAV $ 887,185,503 Commercial Real Estate $ 146,073,552 16.46% Commercial Real Estate 80,622,090 9.09% Conference Center 46,270,988 5.22% Real Estate Data (Comm'l, Resid.) 19,660,713 2.22% Financial Services 18,365,338 2.07% Commercial Real Estate/REIT 17,691,303 1.99% Risk Mgt., Insurance 13,166,893 1.48% Clothing 8,932,881 1.01% Information Technology 7,869,503 0.89% Golf Course and Club 5,383,415 0.61% Trophy Club MUD #1 $ 364.036.676 12/31/12 Source: Tarrant and Denton Central Appraisal Districts. (1) Of the top ten taxpayers, the valuations of three are related to commercial real estate, representing 27.54% of the Issuer's total tax base. The valuations of such property may fluctuate substantially from year to year. A downturn in the commercial real estate market could adversely affect the Issuer's tax base. Table 5 — Estimated Overlapping Debt As in the case of the Issuer, various taxing units within the Issuer's boundaries may incur debts that are paid from ad valorem taxes levied by such taxing units on taxable properties within the Issuer's boundaries. Such taxing units are separate legal entities and independent of the Issuer. The information in this table shows direct and estimated overlapping ad valorem tax debt and is based on information obtained from the individual taxing units or from the Texas Municipal Reports published by the Municipal Advisory Council of Texas. The Issuer has not independently verified the accuracy or completeness of information relating to any taxing unit other than itself, and no person should rely upon such information as being accurate or complete. Additionally, taxing units listed herein may have issued additional tax debt since the date hereof, and such taxing units may have programs requiring the issuance of substantial amounts of additional tax debt, the amount of which cannot be determined at this time. Taxing Unit Gross Debt As of Estimated Overlapping Carroll ISD $ 241,860,039 12/31/12 5.72% $ 13,834,394 Denton County 553,915,000 12/31/12 0.02% 110,783 Keller ISD 700,087,009 12/31/12 4.57% 31,993,976 Northwest ISD 629,986,474 12/31/12 0.50% 3,149,932 Tarrant County 317,725,000 12/31/12 0.72% 2,287,620 Tarrant County College District 22,705,000 12/31/12 0.72% 163,476 Tarrant County Hospital Distric 26,285,000 12/31/12 0.72% 189,252 Trophy Club MUD #1 12,059,000 12/31/12 18.35% 2,212,827 Total Overlapping Debt 53,942,260 Gross Amount of Issuer's Outstanding Debt (See Table 1) 30.967,000 Total Direct & Overlapping Debt (gross amount) $ 84.909.260 13 Table 6 - Debt Service Requirements Fiscal Plus: % of Principal Year End Existing the Certificates Gross Debt Net Debt Principal Retired(2) 9/30 Debt Service(l) Principal Interest Total Service(') Service(Z) Balance $ 30,967,000 2013 $ 1,612,321 $ - $ - $ - $ 1,612,321 $ 153,765 $ 30,212,000 2.44% 2014 1,582,160 100,000 407,159 507,159 2,089,319 153,791 29,274,000 5.47% 2015 1,580,879 195,000 312,044 507,044 2,087,923 154,704 28,202,000 8.93% 2016 1,584,365 195,000 308,144 503,144 2,087,509 154,503 27,107,000 12.46% 2017 1,583,558 200,000 304,194 504,194 2,087,751 154,475 26,002,000 16.03% 2018 1,584,533 200,000 300,194 500,194 2,084,726 154,625 24,858,000 19.73% 2019 1,583,720 205,000 296,144 501,144 2,084,864 154,575 23,680,000 23.53% 2020 1,581,758 215,000 291,944 506,944 2,088,701 154,325 22,463,000 27.46% 2021 1,583,745 215,000 287,106 502,106 2,085,851 153,875 21,212,000 31.50% 2022 1,580,645 225,000 281,606 506,606 2,087,251 154,200 19,921,000 35.67% 2023 1,581,658 230,000 275,344 505,344 2,087,001 154,275 18,590,000 39.97% 2024 1,579,638 240,000 268,294 508,294 2,087,931 154,100 17,214,000 44.41% 2025 1,584,413 240,000 261,094 501,094 2,085,506 153,675 15,803,000 48.97% 2026 1,581,045 255,000 253,669 508,669 2,089,714 153,975 14,336,000 53.71% 2027 1,580,133 260,000 245,619 505,619 2,085,751 153,975 12,818,000 58.61% 2028 1,581,533 270,000 237,006 507,006 2,088,539 153,675 11,239,000 63.71% 2029 1,473,995 390,000 225,794 615,794 2,089,789 154,050 9,603,000 68.99% 2030 1,470,170 405,000 211,881 616,881 2,087,051 154,075 7,900,000 74.49% 2031 1,473,810 415,000 197,531 612,531 2,086,341 153,750 6,125,000 80.22% 2032 1,316,160 595,000 178,369 773,369 2,089,529 - 4,270,000 86.21% 2033 - 315,000 160,169 475,169 475,169 - 3,955,000 87.23% 2034 330,000 147,269 477,269 477,269 - 3,625,000 88.29% 2035 - 345,000 133,769 478,769 478,769 - 3,280,000 89.41% 2036 - 360,000 119,669 479,669 479,669 - 2,920,000 90.57% 2037 - 370,000 105,763 475,763 475,763 - 2,550,000 91.77% 2038 - 385,000 92,078 477,078 477,078 - 2,165,000 93.01% 2039 - 400,000 77,850 477,850 477,850 - 1,765,000 94.30% 2040 - 415,000 62,300 477,300 477,300 - 1,350,000 95.64% 2041 - 430,000 45,400 475,400 475,400 - 920,000 97.03% 2042 - 450,000 27,800 477,800 477,800 - 470,000 98.48% 2043 - 470,000 9,400 479,400 479,400 - - 100.00% Totals $ 31,080,235 $ 9,320,000 $ 6,124,599 $15,444,599 $ 46,524,834 $ 2,928,388 (1) Secured by a pledge of the Issuer's ad valorem tax. Debt service for a substantial portion of such debt is currently being paid from the Issuer's sales tax and other lawfully available revenues. Although the pledge of the Issuer's ad valorem tax continues for as long as any such debt remains outstanding, the Issuer may use other funds to pay debt service. (2) Only that portion of aggregate debt service that is attributable to the Issuer's Combination Tax and Revenue Certificate of Obligation, Series 2011 (with an outstanding principal balance as of 0211512013 of $1,917, 000), is currently being paid from ad valorem tax revenues. Although the pledge of the Issuer's ad valorem tax continues for as long as all debt reflected in this table remains outstanding, the Issuer may use other funds to pay debt service. The Combination Tax and Revenue Certificate of Obligation, Series 2011 has a current interest rate of 3.2501o, subject to adjustment every five years, beginning 0811512016, up to a maximum rate of 5.0001o. Debt service in this table assumes the maximum rate beginning on 08115/2016, continuing through final maturity. 14 Table 7 - Authorized But Unissued Tax Bonds Voter Authorized but Unissued Ad Valorem Tax Bonds: None Ad Valorem Tax Bond Elections Planned for Next 12 Months: None New Money Ad Valorem Tax Debt Not Requiring Voter Approval .Planned to be Issued During Next 12 Months: Undetermined Although the Issuer currently has no voter authorization to issue new money general obligation bonds, it may issue ad valorem tax secured certificates of obligations and other tax -supported debt without voter authorization. The Issuer does not currently have specific plans to issue any additional new money tax supported obligations within the next 12 months. Regardless of the Issuer's future borrowing activities, the Issuer may be required to increase its annual ad valorem tax rate as a result of factors unrelated to the level of its outstanding debt and otherwise outside its control, including, for example, the following: (i) a reduction in its taxable assessed valuation, (ii) a reduction in tax collections, (iii) availability of sources other than ad valorem taxes currently being used to pay debt service, or (iv) changes in State law. Table 7A - Other Obligations As of September 30, 2012, the Issuer had certain other proprietary, contractual, spebial revenue and lease obligations payable from and secured by sources other than ad valorem taxes as described more fully in the Issuer's audited financial statements. See "Capital Leases," "Proprietary Long-term Debt," "Discretely Presented Long-term Debt," and "Commitments and Contingencies - Lease Obligations" under Note III to the audited financial statements attached hereto as APPENDIX B. Table 8 — Tax Adequacy Est. Gross Gross Ad Est. Net Valorem Tax Fiscal Year Debt Service Current Year $1,612,321 Maximum Annual Debt Service $2,089,789 Average Annual Debt Service $1,500,801 Est. Gross Net Ad Est. Net Ad Valorem Valorem Tax Ad Valorem Tax Rate (1)(2) Debt Service Tax Rate (1)(2) $0.1817 $153,765 $0.0173 $0.2356 $154,704 $0.0174 $0.1692 $154,126 $0.0174 (1) Prior to 2010-11, the Issuer had not levied an ad valorem tax. Instead it paid debt service on its ad valorem tax debt from other lawfully available revenues. Only that portion of aggregate debt service that is attributable to the Issuer's Combination Tax and Revenue Certificate of Obligation, Series 2011 (with an outstanding principal balance as of 02/15/2013 of $1,917,000), is currently being paid from ad valorem tax revenues. Although the pledge of the Issuer's ad v4lorem tax continues for as long as all debt reflected in this table remains outstanding, the Issuer may use other funds to pay debt service. The Combination Tax and Revenue Certificate of Obligation, Series 2011 has a current interest rate of 3.25%, subject to adjustment every five years, beginning 08/15/2016, up to a maximum rate of 5.0001o. Debt service in this table assumes the maximum rate beginning on 08/15/2016, continuing through final maturity. (2) The Estimated Ad Valorem Tax Rate is the rate that would be required to be levied to pay debt service assuming no other source ofpayment, and further assuming a 100% collection ratio applied to the Issuer's current Taxable Assessed Valuation. Property Tax Code General. Receipts from ad valorem taxation are one of the Issuer's principal sources of operational revenue and its principal source of funds for debt service payments. See "OTHER FINANCIAL INFORMATION." The following is a summary of certain provisions of the Texas Property Tax Code, as amended (the "Property Tax Code"), relating to ad valorem taxation procedures. Property Tax Code and County -Wide ApUraisal District. Pursuant to Chapter 6 of the Texas Property Tax Code, as amended (the "Property Tax Code"), each county in the State comprises a single appraisal district with responsibility for recording and appraising property for all taxing units within the county, and each county establishes a single appraisal review board for the purpose of reviewing and equalizing the values established by the appraisal district. Chapter 25 of the Property Tax Code requires the appraisal district, by May 15 of each year or as soon thereafter as 15 practicable, to prepare appraisal records listing all property that is taxable in the appraisal district and stating the appraised value of each parcel or item. Property is required to be appraised as of January 1 of each year (except for business inventories which may be assessed as of September 1 and mineral reserves which are assessed on the basis of a monthly average), and Chapter 23 of the Property Tax Code generally requires appraisals at 100% of market value. Tax appraisers are authorized to use alternative methods (cost, income and market data comparison methods) to determine the market value of property, and the most appropriate method is to be used. Appraisals are subject to review by the appraisal review board, and under certain circumstances, taxpayers and taxing units (such as the Issuer) may appeal the orders of the appraisal review board by filing a petition for review in the district court. In such event, the value of the property in question will be determined by the court or by a jury if requested by any party. Absent any such appeal, the orders of the appraisal review board must be used by each taxing jurisdiction in establishing its tax rolls and tax rate. Based upon their respective relative total appraised values, school districts are each entitled to vote, with other taxing entities, upon the selection of members of the board of directors of the county -wide appraisal districts in their respective counties. Although each taxing unit retains the authority to establish its own tax rates and to levy and collect taxes each year, under the county -wide appraisal plan implemented by the Property Tax Code, the taxing units are unable to influence appraisal standards or determine the frequency of revaluation or reappraisal. Chapter 25 of the Property Tax Code requires each appraisal district to implement a plan for periodic reappraisal of property to update appraised values, and the plan must provide for reappraisal of all real property in the appraisal district at least once every three years. Property Subject to Taxation by the Issuer. Except for certain exemptions provided by Texas law, all real and tangible personal property and certain intangible personal property in each taxing unit, including the Issuer, is subject to taxation by such taxing unit. Principal categories of exempt property which may be exempted under Chapter 11 of the Property Tax Code include: property owned by the State of Texas or its political subdivisions, if the property is used for public purposes; property exempt from ad valorem taxation by federal law; certain household goods, family supplies and personal effects that are not held or used for the production of income; farm products owned by the producer; certain property owned by charitable organizations, youth development associations, religious. organizations and qualified schools; designated historical sites; solar and wind powered energy devices; and certain tangible personal property known as "freeport goods." Effective for tax years 2008 and thereafter, Article VII, Section 1-n of the Texas Constitution provides for an exemption from taxation for "goods -in - transit," which are defined as personal property acquired or imported into the state and transported to another location inside or outside the state within 175 days of the date the property was acquired or imported into the state. The exemption excludes oil, natural gas, petroleum products, aircraft and special inventory, including motor vehicle, vessel and outboard motor, heavy equipment and manufactured housing inventory. After holding a public hearing, a taxing unit may take action by January 1 of the year preceding a tax year to tax goods -in -transit during the following tax year. A taxpayer may obtain only an exemption for "freeport goods" or "goods -in -transit" for items of personal property. In addition, owners of agricultural, timber and open space land may, under certain circumstances, request valuation of such land on the basis of productive capacity rather than market value. Article VIII, Section 2 of the Texas Constitution and Texas law mandate an additional exemption for disabled veterans and the surviving spouses and children of persons dying while on active duty in the armed forces, which exemption applies to either real or personal property and may range from $5,000 to $12,000. A taxing unit may also exempt portions of the taxable value of residential homesteads (see "Residential Homestead Exemption" below). New penalties will apply to taxes which have been wholly or partially exempted upon application of a taxpayer, if it is subsequently determined that the taxpayer did not qualify for the exemption. Residential Homestead Exemption. Pursuant to Article VIII, Section 1-b of the Texas Constitution and the Property Tax Code, the governing body of each political subdivision in the State, including the Issuer, is authorized to exempt from ad valorem taxes (1) up to 20 percent of the appraised value of residential homesteads but not less than $5,000, and (2) at least $3,000 of the appraised value of the residential homesteads of persons at least 65 years old and disabled persons. Article VIII, Section 1-b of the Texas Constitution provides that, with respect to the homestead exemptions granted thereunder, a taxing unit may nevertheless continue to levy taxes against such exempted property if (1) ad valorem taxes had been pledged for the payment of such taxing unit's debt incurred prior to the granting of such exemption, 16 and (2) the loss of ad valorem tax revenues, attributable to such exempted property would impair the taxing unit's obligation under the contract pursuant to which the debt was created. In addition to the foregoing exemptions available to all taxing units, Texas law authorizes additional homestead exemptions for school districts, including (1) a basic $15,000 exemption for all homeowners, and (2) an additional $10,000 for persons at least 65 years old or disabled; provided, however, that a person at least 65 years old and disabled may receive only one $10,000 exemption, and only one such exemption is available per family, per residence homestead. Except for increases in appraised value resulting from certain improvements, a school district is prohibited from increasing the total ad valorem tax on the residence homestead of a person 65 years of age or older above the amount of tax imposed in the year such residence qualified for the $10,000 exemption. The tax "freeze" provided on the amount of ad valorem taxes levied on the homestead of a taxpayer 65 years of age or older transfers in proportionate amount to a different residence homestead of such taxpayer. Also, a surviving spouse of a taxpayer who qualifies for the freeze on ad valorem taxes is entitled to the same exemption so long as the property is the homestead of the surviving spouse and the spouse is at least 55 years of age at the time of the death of the individual's spouse. The increase of the appraised value on a residence homestead is limited to ten percent of the appraised value of the property ;for the last year in which the property was appraised times the number of years since the property was last appraised. Other Reductions in Assessed Valuation. The Issuer and other taxing units may jointly agree to the creation of a tax increment financing zone, under which the tax values on properties within the zone are "frozen" at their values at the time such zone is created. The Issuer and other taxing units may also enter into tax abatement agreements to encourage economic development. Under such agreements, a property owner agrees to construct certain improvements on its property, while the taxing unit would in turn agree to not levy a tax on all or part of the increased value attributable to the improvements until the expiration of the agreement. The abatement agreement may last for as long as 10 years. Notice and Hearing Procedures. The ability of a taxing unit, such as the Issuer, to increase its tax levy from year to year is limited by Chapter 26 of the Properly Tax Code, which imposes limitations on certain tax levies (other than tax levies for the payment of debt) based upon a complex formula. These limitations require that, prior to establishing and levying a rate of taxation for a year, the taxing unit compute an "effective rate" for such year pursuant to the Property Tax Code. Generally, this effective rate is the rate which will produce the same amount of operating revenue that the taxing unit levied in the previous year on the same property being taxed for both years, plus the amount necessary to pay bonded indebtedness of the taxing unit for the next year. The governing body of the Issuer may not adopt a tax rate that, if applied to the total taxable values, would impose an amount of taxes exceeding the prior year's levy without holding a public hearing and otherwise complying with the requirements for giving notice of such public hearing. If the rate of taxation to be levied for a year exceeds the sum of (i) the effective rate times 1.08, plus (ii) the Issuer's current debt rate (the "Rollback Rate"), 10% of the qualified voters of the Issuer may petition to require an election to limit the tax levied by the Issuer in the current year to the Rollback Rate. Levy and Collection of Taxes. Each taxing unit, including the Issuer, is responsible pursuant to Chapter 31 of the Property Tax Code for the collection of its taxes, unless it elects to transfer such functions to another governmental entity. By September 1 of each year, or as soon thereafter as practicable, the rate of taxation is set by the governing body of each taxing unit based upon the valuation of property within the taxing unit as of the preceding January 1. Generally, taxes are due October 1, or when billed, whichever comes later, and become delinquent after January 31 of the following year. A delinquent tax incurs a penalty of 12 percent of the amount of the tax through June 30 and additionally accrues interest at the rate of one percent per month. If the tax is not paid by July 1, an additional penalty of up to 15 percent may be imposed by the taxing unit to pay attorney fees for collection of the delinquent tax. Chapter 31 of the Property Tax Code also makes provision each year for consideration of split payments of taxes, discounts for early payment and the postponement of the delinquency date of taxes under certain circumstances. Abatement or deferral of a suit to collect delinquent taxes on residences is available to the extent that the delinquent taxes relate to the portion of the homestead that exceeds the appraised value by 105 percent of the valuation for the prior year. If the collection of the delinquent taxes are abated or deferred, they may not be collected until the taxpayer no longer owns the property and interest continues to accrue on the delinquent taxes at a rate of eight percent. 17 Collection of Delinquent Taxes. Taxes levied by each taxing unit are a personal obligation of the owner of the property. On January 1 of each year, a tax lien attaches to property to secure the payment of all taxes, penalties and interest ultimately imposed for the year on the property, whether or not the taxes are imposed in the year the lien attaches. The lien exists in favor of each taxing unit, including the Issuer, having the power to tax the property. The Issuer's tax lien is on a parity with the tax liens of all other such taxing units. A tax lien on real property has priority over the claims of most creditors and other holders of liens on the property encumbered by the tax lien, whether or not the debt or lien existed before the attachment of the tax lien. Personal property under certain circumstances is subject to seizure and sale for the payment of delinquent taxes, penalties and interest. At any time after taxes on property become delinquent, the Issuer may file suit to foreclose the lien securing payment of the tax or to enforce personal liability for the tax, or both. In filing a suit to foreclose a tax lien on real property, the Issuer must join other taxing units that have claims for delinquent taxes against all or part of the same property. The ability of the Issuer to 'collect delinquent taxes by foreclosure may be adversely affected by the amount of taxes owed to other taxing units, adverse market conditions, taxpayer redemption right or bankruptcy proceedings which restrain the collection of taxpayer debt. Issuer Application of Property Tax Code. The following table summarizes the current status of the Issuer's property tax procedures: Description Age 65/Disabled Homestead Exemption in addition to $10,000 basic exemption Exemption for Homestead (at least $5,000, up to 20% of market value) Split Payment of Taxes Discounts for Early Payment of Taxes Nonbusiness Personal Property Freeport Property Exemption Goods in Transit Exemption Tax Abatement Policy Tax Increment Financing Zone Tax Collector for the Issuer Issuer Procedure Allowed Allowed (up to 20% Not allowed Not allowed Not taxed Allowed Not allowed Adopted None adopted Tarrant County Tax Assessor -Collector [Remainder of page intentionally left blank.] 18 OTHER FINANCIAL INFORMATION Table 9 - General Operating Fund Summary Revenues and Expenditures Revenues: Sales tax Property tax Mixed beverage tax Franchise tax Federal program revenues Interest income Building permits and fees') Fines and penalties Contributions Miscellaneous Total Revenues Expenditures: General government and admin. Public safety Cultural and recreational Economic development Public works Capital outlay Total Operating Expenditures Other Financing Sources (Uses): Proceeds from sale of assets Notes payable issued Transfers in (2X3) Transfers ouff) Total Other Sources (Uses) Fiscal Years Ended September 30, 2012 2011 2010 2009 2008 $ 2,534,774 $ 1,502,020 $ 1,597,194 $ 1,832,205 $ 1,795,287 1,271,975 1,226,689 - 180,063 - 38,286 19,721 17,902 17,869 16,177 664,991 586,836 603,233 624,401 649,108 14,060 10,679 24,220 21,155 598,394 520,646 1,746,954 848,697 622,338 605,705 647,170 523,515 325,520 180,063 90,249 38,840 80,936 91.015 105,345 98,242 6,151,274 4,743,374 4,832,267' 4,004,924 1,878,885 1,733,324 2,224,469 1,842,751 111,765 122,400 391,115 324,874 - 41,037 4.606.234 4.064.386 1,644,587 1,519,600 1,634,936 1,890,469 105,997 115,770 - 229,907 400,615 378,508 62,278 5 4.196.532 12,540 83,834 1,108,083 554,376 90.929 4,310,334 1,516,346 1,716,369 129,641 495,071 415,805 4.273.232 - 7,000 - - - - 50,000 - - 583,857 2,178,403 123,000 388,599 38,328 (880,486) (2,691,982) (101.4191 _ (278.417) (364.991) _(296.629) _(456,5791 21,541 110,182 (326,663) Total Exp. after Other Sources/Uses 4.902.863 4,520.965 3,764,594 4,086 350 4.599,895 Net Change.in Fund Balance 1,248,411 222,409 1,067,673 (81,426) (289,561) Beginning Fund Balance 4,015,394 3,792,985 2,725,312 2,806,738 3,096,299 Ending Fund Balance $ 5,263,805 $ 4,015,394 $ 3,792,985 $ 2,725,312 $ 2,806,738 Source: derived from Comprehensive Annual Financial Reports; please refer directly to such Reports for important Notes and more detailed information. (1) Substantial increase in fiscal year ended 09/30/2011 relates to construction of the $135 million Deloitte University facility. (2) Substantial portion of 2011 transfer in was from the Property Tax Reduction Fund which was subsequently closed. Substantial portion of 2011 transfer out was to the Capital Projects Fund for capital projects. (3) The 2012 transfer in and transfer out include $530, 000 that was transferred from the General Fund to the General Major Maintenance and Replacement Fund which was later combined with the General Fund. The 2012 transfer out also includes $278,330 sent to the Debt Service Fund. 19 Table 9A - Changes in Net Assets Revenues: Program revenues: Fees, fines, charges for services Operating grants, contributions Capital grants, contributions General revenues: Taxes Sales taxes Property taxes Hotel occupancy taxes Mixed beverage taxes Franchises taxes Unrestricted grants Interest on investments Miscellaneous Extraordinary items Special item Gain on sale of capital assets Total revenues Expenses: General government Public safety Culture and recreation Economic development Public works Visitor services Education Interest on long-term debt Total expenses Excess (deficiency) before transfers Transfers Changes in net assets Prior period adjustment Net assets, beginning Net assets, ending Governmental Activities - Fiscal Years Ended September 30, 2012 2011 2010 2009 2008 $ 1,417,879 $ 5,269, 841 1,253,967 $ 2,497,350 $ 1,478,234 $ 4,472,999 853,151 1,522,935 425,900 83,250 2,059,624 1,581,684 1,296,378 3,657,274 4,609,626 3,790,533 3,664,409 3,590,575 1,441,238 1,260,112 - - - 590,853 527,261 457,693 497,769 527,662 38,286 19,721 17,902 17,869 16,177 664,991 586,836 603,233 624,401 649,108 - - 3,484,141 2,960,590 2,500,817 33,353 46,248 38,383 61,224 188,459 1,112,858 691,345 676,638 568,782 564,973 (124,346) 56,704 - - - 67,760 - - - - - 7,000 - - - 14,169,987 13,957,719 12,502,274 13,455,837 10,915,833 2,518,490 2,478,826 2,272,127 2,203,882 2,031,460 1,883,424 1,801,5 85 1,698,164 1,939,441 1,795,782 111,765 122,400 105,997 115,770 129,641 216,901 680,823 309,653 207,044 473,451 546,039 470,054 594,705 1,028,934 1,013,804 475,719 356,365 420,270 341,270 312,777 6,193,560 4,884,985 4,138,875 3,722,705 3,305,220 897,573 1,127,913 1,026,026 1,068,935 991,184 12, 843,471 11,922,951 10,565,817 10,627,981 10,053,319 1,326,516 2,034,768 1,936,457 2,827,856 862,514 45,507 145,216 - 61,321 220,819 1,372,023 2,179,984 1,936,457 2,889,177 1,083,333 - - - 84,508 398,967 23,244,383 21,064,399 19,127,942 16,154,257 14,671,957 $ 24,616,406 $ 23,244,383 $ 21,064,399 $ 19,127,942 $ 16,154,257 Source: derived from Comprehensive Annual Financial Reports; please refer directly to such Reports for important Notes and more detailed information. 20 Table 10 - General Fund Summary Balance Sheet Assets: Cash and investments Note receivable Property tax receivables Accounts receivable Due from other funds Due from component units Other assets Restricted assets Total Assets Liabilities: Deferred revenue Accounts payable Due to other funds Total Liabilities Fund Equity: Restricted/Reserved/Designated Unreserved/Undesignated Total Fund Equity Total Liabilities and Fund Equity Fiscal Years Ended September 30, 2012 2011 2010 2009 2008 $ 4,637,252 $ 3,446,149 $ 2,067,774 $ 2,822,703 $ 2,953,970 - - - - 19,421 1,796 - - 46,499,479 - 555,579 390,048 535,917 552,738 390,390 149,641 - 381,114 185,678 132,183 - - - - 830 6,856 37,708 3,418 4,288 2,257 264.709 214.750 38,840 . 21,664,629 22,221,114 $ 5.615.833 $ 4.088.655 $ 3.027.063 $ 3.565.407 $ 3.499.051 1,796 - - - - 352,232 295,670 255,922 734,447 285,707 - - 45,829 24.222 117.045 354,028 295,670 301,751 758.669 402,752 271,565 214,750 193,105 303,639 563,176 4,992,240 3,578.235 2,532,207 2,503,099 2,533123 5,263,805 3,792.985 2.725.312 2,806,738 3.096,299 $ 5.617.833 $ 4.088.655 $ 3.027.063 $ 3.565.407 $ 3.499.05.1 Source: dertved from Comprehensive Annual Financial Reports; please refer directly to such Reports for important Notes and more detailed information. Table 10A - Consolidated Statement of Net Assets Governmental Activities - Fiscal Years Ended September 30, 2012 2011 2010 2009 2008 Current and other assets $ 12,185,864 $ 12,449,931 $ 9,253,595 $ 7,594,613 $ 10,728,885 Capital assets 34,313,615 33,665,877 33,051,736 33,197,958 27,646,486 Total Assets 46,499,479 46,115,808 42,305,331 40,792,571 38,375,371 Long-term liabilities outstanding 20,098,829 20,731,060 19,241,788 19,721,208 20,233,906 Other liabilities 1,784,244 2,140,365 1,999,144 1,943,421 1,987,208 Total Liabilities 21,883,073 22,871,425 21,240,932 21,664,629 22,221,114 Net Assets: Invested in capital assets (net of debt) 14,866,299 14,188,516 13,633,485 13,244,689 4,193,601 Restricted 4,726,376 5,607,767 1,564,868 1,773,068 5,064,834 Unrestricted 5,023,731 3,448,100 5,866,046 4,110,185 6,895,822 Total Net Assets $ 24,616,406 $ 23,244,383 $ 21,064,399 $ 19,127,942 $ 16,154,257 Source: derived from Comprehensive Annual Financial Reports; please refer directly to such Reports for important Notes and more detailed information. 21 Table 11 - Municipal Sales Tax History The Issuer has adopted the Municipal Sales and Use Tax Act, Texas Tax Code, Chapter 321, as amended, which grants the Issuer the power to impose and levy a 1% Local Sales and Use Tax within the boundaries of the Issuer; the proceeds are credited to the General Fund and are not pledged to the payment of the Bonds. Collection and enforcement are effected through the Office of the Comptroller of Public Accounts of the State of Texas, which remits the proceeds of the tax, after deduction of a 2% service fee, to the Issuer monthly. Revenue from the 1% Local Sales and Use Tax, for the years shown, has been: Investments The Issuer invests its investable funds in investments authorized by Texas law in accordance With investment policies approved by the City Council of the Issuer. Both State law and the Issuer's investment policies are subject to change. Legal Investments. Available City funds are invested as authorized by State law and in accordance with investment policies approved by the City Council. Both State law and the City's investment policies are subject to change. Under State law, the City is authorized to invest in (1) obligations of the United States or its agencies and instrumentalities, including letters of credit; (2) direct obligations of the State or its agencies and instrumentalities; (3) collateralized mortgage obligations directly issued by a federal agency or instrumentality of the United States, the underlying security for which is guaranteed by an agency or instrumentality of the United States; (4) other obligations, the principal and interest of which is guaranteed or insured by or backed by the full faith and credit of, the State or the United States or their respective agencies and instrumentalities; (5) obligations of states, agencies, counties, cities, and other political subdivisions of any state rated as to investment quality by a nationally recognized investment rating firm not less than A or its equivalent; (6) bonds issued, assumed or guaranteed by the State of Israel; (7) certificates of deposit and share certificates issued by, or invested by an investing entity through, a depository institution that has its main office or a branch office in the State of Texas, that are guaranteed or insured as required by, or otherwise meet the requirements of, the Texas Public Funds Investment Act (Chapter 2256, Texas Government Code, as amended); (8) fully collateralized repurchase agreements that have a defined termination date, are fully secured by obligations described in clause (1), and are placed through a primary government securities dealer or a financial institution doing business in the State, (9) securities lending programs if (i) the securities loaned under the program are 100% collateralized, a loan made under the program allows for termination at any time and a loan made under the program is either secured by (a) obligations that are described in clauses (1) through (6) above, (b) irrevocable letters of credit issued by a state or national bank that is continuously rated by a nationally recognized investment rating firm at not less than A or its equivalent or (c) cash invested in obligations described in clauses (1) through (6) above, clauses (11) through (13) below, or an authorized investment pool; (ii) securities held as collateral under a loan are pledged tp the City, held in the City's name and deposited at the time the investment is made with the governmental body or a third party designated by the governmental body; (iii) a loan made under the program is placed through either a primary government securities dealer or a financial institution doing business in 22 Sales Tax Percentage Ad Valorem FYE Revenues- of Ad Valorem Tax Rate, Breakdown of Sales Tax Collected 30 -Sep Govt'l. Funds"' Tax Levy Equivalent Taxing Unit Tax Rate 2007 $2,197,756 NA $0.3697 The Issuer (approximate allocation) : 2008 $3,590,575 NA $0.5329 General Fund $0.0100 2009 $3,664,409 NA $0.4647 4B Economic Dev. Fund $0.0050 2010 $3,790,533 NA $0.4119 Property Tax Reduction Fund $0.0050 2011 $4,609,626 335.05% $0.5364 State of Texas $0.0625 2012 $3,657,274 254.02% $0.3898 Total $Q,0825 Source: the Issuer's audited financial statements. (1) Includes a substantial amount of one-time sales tax payments attributable to construction, furnishing and equipping of a 750, 000 square foot campus on a 107 -acre tract and known as Deloitte University. The campus, which cost $135 million, serves as a central training destination for Deloitte LLP employees. Investments The Issuer invests its investable funds in investments authorized by Texas law in accordance With investment policies approved by the City Council of the Issuer. Both State law and the Issuer's investment policies are subject to change. Legal Investments. Available City funds are invested as authorized by State law and in accordance with investment policies approved by the City Council. Both State law and the City's investment policies are subject to change. Under State law, the City is authorized to invest in (1) obligations of the United States or its agencies and instrumentalities, including letters of credit; (2) direct obligations of the State or its agencies and instrumentalities; (3) collateralized mortgage obligations directly issued by a federal agency or instrumentality of the United States, the underlying security for which is guaranteed by an agency or instrumentality of the United States; (4) other obligations, the principal and interest of which is guaranteed or insured by or backed by the full faith and credit of, the State or the United States or their respective agencies and instrumentalities; (5) obligations of states, agencies, counties, cities, and other political subdivisions of any state rated as to investment quality by a nationally recognized investment rating firm not less than A or its equivalent; (6) bonds issued, assumed or guaranteed by the State of Israel; (7) certificates of deposit and share certificates issued by, or invested by an investing entity through, a depository institution that has its main office or a branch office in the State of Texas, that are guaranteed or insured as required by, or otherwise meet the requirements of, the Texas Public Funds Investment Act (Chapter 2256, Texas Government Code, as amended); (8) fully collateralized repurchase agreements that have a defined termination date, are fully secured by obligations described in clause (1), and are placed through a primary government securities dealer or a financial institution doing business in the State, (9) securities lending programs if (i) the securities loaned under the program are 100% collateralized, a loan made under the program allows for termination at any time and a loan made under the program is either secured by (a) obligations that are described in clauses (1) through (6) above, (b) irrevocable letters of credit issued by a state or national bank that is continuously rated by a nationally recognized investment rating firm at not less than A or its equivalent or (c) cash invested in obligations described in clauses (1) through (6) above, clauses (11) through (13) below, or an authorized investment pool; (ii) securities held as collateral under a loan are pledged tp the City, held in the City's name and deposited at the time the investment is made with the governmental body or a third party designated by the governmental body; (iii) a loan made under the program is placed through either a primary government securities dealer or a financial institution doing business in 22 the State of Texas; and (iv) the agreement to lend securities has a term of one year or less, (10) certain bankers' acceptances with the remaining term of 270 days or less, if the short-term obligations of the accepting bank or its parent are rated at least A-1 or P-1 or the equivalent by at least one nationally recognized credit rating agency, (11) commercial paper with a stated maturity of 270 days or less that is rated at least A-1 or P-1 or the equivalent by either (a) two nationally recognized credit rating agencies or (b) one nationally recognized credit rating agency if the paper is fully secured by an irrevocable letter of credit issued by a U.S. or state bank, (12) no-load money market mutual funds registered with and regulated by the Securities and exchange Commission that have a dollar weighted average stated maturity of 90 days or less and include in their investment objectives the maintenance of a stable net asset value of $1 for each share, and (13) no-load mutual funds registered with the Securities and Exchange Commission that have an average weighted maturity of less than two years, invest exclusively in obligations described in the this paragraph, and are continuously rated as to investment quality by at least one nationally recognized investment rating firm of not less than AAA or its equivalent. In addition, bond proceeds may be invested in guaranteed investment contracts that have a defined termination date and are secured by obligations, including letters of credit, of the United States or its agencies and instrumentalities in an amount at least equal to the amount of bond proceeds invested under such contract, other than the prohibited obligations described in the next succeeding paragraph. The Issuer may invest in such obligations directly or through government investment pools that invest solely in such obligations provided that the pools are rated no lower than AAA or AAA -m or an equivalent by at least one nationally recognized rating service. The Issuer may contract for a term not to exceed two years with an investment management firm registered under the Investment Advisors Act of 1940 (15 U.S.C. Section 80b-1 et seq.) or registered with the State Securities Board to provide for the investment and management of Issuer funds or funds under its control. The Issuer is also authorized to contract, for a term not to exceed seven years, for the purchase of investments with proceeds of taxes levied or to be levied to pay debt service on bonds, provided that the Issuer must solicit and receive bids from at least three separate providers and accept the qualifying bid that provides for the highest yield investments over the term of the contract and such contract may provide only for the purchase of an obligation described in clause (1), above. The Issuer is specifically prohibited from investing in: (1) obligations whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage-backed security collateral and pays no principal; (2) obligations whose payment represents the principal stream of cash flow from the underlying mortgage- backed security and bears no interest; (3) collateralized mortgage obligations that have a stated final maturity of greater than 10 years; and (4) collateralized mortgage obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a market index. Investment Policies. Under Texas law, the Issuer is required to invest its funds under written investment policies that primarily emphasize safety of principal and liquidity; that address investment diversification, yield, maturity, and the quality and capability of investment management; and that includes a list of authorized investments for Issuer funds, maximum allowable stated maturity of any individual. investment, the maximum dollar -weighted average maturity allowed for pooled fund groups, methods to monitor the market price of investments acquired with public funds, and requirement for settlement of all transactions, except investment pool funds and mutual funds, on a delivery versus payment basis. All Issuer funds must be invested consistent with a formally adopted "Investment Strategy Statement" that specifically addresses each fund's investment. Each Investment Strategy Statement will describe its objectives concerning: (1) suitability of investment type; (2) preservation and safety of principal, (3) liquidity, (4) marketability of each investment, (5) diversification of the portfolio, and (6) yield. Under Texas law, Issuer investments must be made "with judgment and care, under prevailing circumstances, that a person of prudence, discretion, and intelligence would exercise in the management of the person's own affairs, not for speculation, but for investment, considering the probable safety of capital and the probable income to be derived." At least quarterly the investment officers of the Issuer shall submit to its governing body an investment report detailing: (1) the investment position of the Issuer, (2) that all investment officers jointly prepared and signed the report, (3) the beginning market value, any additions and changes to market value, the ending value of each pooled fund group, and the fully accrued interest for the reporting period, (4) the book value and market value of each separately listed asset at the beginning and end of the reporting period; (5) the maturity date of each separately invested asset, (6) the account or fund or pooled fund group for which each individual investment was acquired, and 23 (7) the compliance of the investment portfolio as it relates to: (a) adopted investment strategy statements and (b) State law. No person may invest Issuer funds without express written authority from its governing body. Additional Provisions. Under Texas law the Issuer is additionally required to: (1) annually review its adopted policies and strategies, (2) require any investment officers' with personal business relationships or relatives with firms seeking to sell securities to the entity to disclose the relationship and file a statement with the Texas Ethics Commission and its governing body; (3) require the registered principal of firms seeking to sell securities to the Issuer or the registered principal of an investment management firm under contract with the Issuer to: (a) receive and review the Issuer's investment policy, (b) acknowledge that reasonable controls and procedures have been implemented to preclude unauthorized investment activities, and (c) deliver a written statement attesting to these requirements; (4) perform an annual audit of the management controls on investments and investment officers; (5) provide specific investment training for the Treasurer, Chief Financial Officer, or other investment officers; (6) restrict reverse repurchase agreements to not more than 90 days; (7) restrict the investment of funds in any one mutual fund to an amount not greater than 10% of the total assets of such mutual fund; (8) restrict the investment in non -money market mutual funds in the aggregate to no more than 15% of the Issuer's monthly average fund balance, excluding bond proceeds and reserves and other funds held for debt service; (9) prohibit the investment in non -money market mutual funds of any portion of bond proceeds, reserves and funds held for debt service and; (10) require local government investment pools to conform to the new disclosure, rating, net asset value, yield calculation, and advisory board requirements. The Issuer's current investment policy is in compliance with the State law requirements described above. Table 12 - Status of Current Investments As of December 31, 2012, the Issuer's investment portfolio, including its General Fund, Capital Projects Fund, Utility Fund, and other miscellaneous governmental, proprietary and component unit funds, was invested as follows (with no material difference between book and market values): Westlake Investment Descriation Issuer Acade1) Total Bank Accounts (with interest) $ 12,901,989 $ 821,583 $ 13,723,572 TexPool 250 100 350 Total $ 12.902,239 $ 821.683 $ 13.723.922 Source: The Issuer, unaudited. Please refer to Annual Financial Report (Note III) for more investment information. (1) Represents investments of the Westlake Academy, a component unit of the Issuer the balances and transactions of which are blended with the balances and transactions of the Issuer. Investments of other component units of the Issuer may also be blended with the Issuer or alternatively may be excluded and "discretely presented. " See Footnotes I -A and I -B of the Issuer's audited financial statements for more information regarding component units. LEGAL MATTERS The Issuer will furnish a complete transcript of proceedings that are incident to the authorization and issuance of the Certificates, including the unqualified approving legal opinion of the Attorney General of Texas approving the Initial Certificate and to the effect that the Certificates are valid and legally binding obligations of the Issuer, and based upon examination of such transcript of proceedings, the approving legal opinion of Bond Counsel, to like effect and to the effect that the interest on the Certificates will be excludable from gross income for federal income tax purposes under Section 103(a) of the Code, subject to the matters described under "TAX MATTERS" herein, including the alternative minimum tax on corporations. Though it may represent the Underwriter from time to time in matters unrelated to the issuance of the Certificates, Bond Counsel has been engaged by and only represents the Issuer in the issuance of the Certificates. Bond Counsel was not requested to participate, and did not take part, in the preparation of the Official Statement, and such firm has not assumed any responsibility with respect thereto or undertaken independently to verify any of the information contained therein, except that, in its capacity as Bond Counsel, such firm has reviewed the information in the Official Statement under the captions or subcaptions entitled "PLAN OF FINANCING" (exclusive of the subcaption "Sources and Uses of Funds"), "DESCRIPTION OF THE CERTIFICATES" (exclusive of the subcaptions entitled "Book -Entry -Only System" and "Certificateholders' 24 Remedies"), "LEGAL MATTERS" (exclusive of the last sentence of the first paragraph thereof), "TAX MATTERS," "OTHER MATTERS - Legal Investments and Eligibility to Secure Public Funds in Texas," "OTHER MATTERS - Registration and Qualification of Certificates for Sale" and "OTHER MATTERS - Continuing Disclosure of Information" (exclusive of the subcaption "Compliance with Prior Undertakings") in the Official Statement, and such firm is of the opinion that the information relating to the Certificates and the legal issues contained under such captions and subcaptions is an accurate and fair description of the laws and legal issues addressed therein and, with respect to the Certificates, such information conforms to the Ordinance. Bond Counsel's fee is contingent upon the sale and issuance of the Certificates. The legal opinion will accompany the Certificates deposited with DTC or will be printed on the Certificates in the event of the discontinuance of the Book -Entry -Only System. Certain matters will be passed upon for the Underwriter by its counsel, Andrews Kurth LLP, Houston, Texas, whose fees are contingent upon sale and delivery of the Certificates. The various legal opinions to be delivered concurrently with the delivery of the Certificates express the professional judgment of the attorneys rendering the opinions as to the legal issues explicitly addressed therein. In rendering a legal opinion the attorney does not become an insurer or guarantor of the expression of professional judgment, of the transaction opined upon, or of the future performance of the parties to the transaction. Nor does the rendering of an opinion guarantee the outcome of any legal dispute that may arise from the transaction. TAX MATTERS Opinion On the date of initial delivery of the Certificates, McCall, Parkhurst & Horton L.L.P., Dallas, Texas, Bond Counsel, will render its opinion that, in accordance with statutes, regulations, published rulings and court decisions existing on the date thereof ("Existing Law"), (1) interest on the Certificates for federal income tax purposes will be excludable from the "gross income" of the holders thereof and (2) the Certificates will not be treated as "specified private activity bonds" the interest on which would be included as an alternative minimum tax preference item under section 57(a)(5) of the Internal Revenue Code of 1986 (the "Code"). Except as stated above, Bond Counsel will express no opinion as to any other federal, state or local tax consequences of the purchase, ownership or disposition of the Certificates. See APPENDIX A. FORM OF BOND COUNSEL OPINION. In rendering its opinion, Bond Counsel will rely upon (a) certain information and representations of the Issuer, including information and representations contained in the Issuer's federal tax certificate and (b) covenants of the Issuer contained in the Certificate documents relating to certain matters, including arbitrage and the use of the proceeds of the Certificates and the property financed or refinanced therewith. Failure by the Issuer to observe the aforementioned representations or covenants could cause the interest on the Certificates to become taxable retroactively to the date of issuance. The Code and the regulations promulgated thereunder contain a number of requirements that must be satisfied subsequent to the issuance of the Certificates in order,for interest on the Certificates to be, and to remain, excludable from gross income for federal income tax purposes. Failure to comply with such requirements may cause interest on the Certificates to be included in gross income retroactively to the date of issuance of the Certificates. The opinion of Bond Counsel is conditioned on compliance by the City with such requirements, and Bond Counsel has not been retained to monitor compliance with these requirements subsequent to the issuance of the Certificates. Bond Counsel's opinion represents its legal judgment based upon its review of Existing Law and the reliance on the aforementioned information, representations and covenants. Bond Counsel's opinion is not a guarantee of a result. The Existing Law is subject to change by the Congress and to subsequent judicial and administrative interpretation by the courts and the Department of the Treasury. There can be no assurance that such Existing Law or the interpretation thereof will not be changed in a manner which would adversely affect the tax treatment of the purchase, ownership or disposition of the Certificates. A ruling was not sought from the Internal Revenue Service by the Issuer with respect to the Certificates or the Project. No assurances can be given as to whether the Internal Revenue Service will commence an audit of the Certificates, or as to whether the Internal Revenue Service would agree with the opinion of Bond Counsel. If an 25 Internal Revenue Service audit is commenced, under current procedures the Internal Revenue Service is likely to treat the Issuer as the taxpayer and the Certificateholders may have no right to participate in such procedure. No additional interest will be paid upon any determination of taxability. Federal Income Tag Accounting Treatment of Original Issue Discount The initial public offering price to be paid for one or more maturities of the Certificates (the "Original Issue Discount Certificates") may be less than the maturity amount thereof or one or more periods for the payment of interest on the Certificates may not be equal to the accrual period or be in excess of one year. In such event, the difference between (i) the "stated redemption price at maturity" of each Original Issue Discount Bond, and (ii) the initial offering price to the public of such Original Issue Discount Certificate would constitute original issue discount. The "stated redemption price at maturity" means the•sum of all payments to be made on the Certificates less the amount of all periodic interest payments. Periodic interest payments are payments which are made during equal accrual periods (or during any unequal period if it is the initial or final period) and which are made during accrual periods which do not exceed one year. Under Existing Law, any owner who has purchased such Original Issue Discount Certificate in the initial public offering is entitled to exclude from gross income (as defined in section 61 of the Code) an amount of income with respect to such Original Issue Discount Certificate equal to that portion of the amount of such original issue discount allocable to the accrual period. For a discussion of certain collateral federal tax consequences, see discussion set forth below. In the event of the redemption, sale or other taxable disposition of such Original Issue Discount Certificate prior to stated maturity, however, the amount realized by such owner in excess of the basis of such Original Issue Discount Certificate in the hands of such owner (adjusted upward by the portion of the original issue discount allocable to the period for which such Original Issue Discount Certificate was held by such initial owner) is includable in gross income. Under Existing Law, the original issue discount on each Original Issue Discount Certificate is accrued daily to the stated maturity thereof (in amounts calculated as described below for each six-month period ending on the date before the semiannual anniversary dates of the date of the Certificates and ratably within each such six-month period) and the accrued amount is added to an initial owner's basis for such Original Issue Discount Certificate for purposes of determining the amount of gain or loss recognized by such owner upon the redemption, sale or other disposition thereof. The amount to be added to basis for each accrual period is equal to (a) the sum of the issue price and the amount of original issue discount accrued in prior periods multiplied by the yield to stated maturity (determined on the basis of compounding at the close of each accrual period and properly adjusted for the length of the accrual period) less (b) the amounts payable as current interest during such accrual period on such Original Issue Discount Certificate. The federal income tax consequences of the purchase, ownership, redemption, sale or other disposition of Original Issue Discount Certificates which are not purchased in the initial offering at the initial offering price may be determined according to rules which differ from those described above. All owners of Original Issue Discount Certificates should consult their own tax advisors with respect to the determination for federal, state and local income tax purposes of the treatment of interest accrued upon redemption, sale or other disposition of such Original Issue Discount Certificates and with respect to the federal, state, local and foreign tax consequences of the purchase, ownership, redemption, sale or other disposition of such Original Issue Discount Certificates. Collateral Federal Income Tag Consequences The following discussion is a summary of certain collateral federal income tax consequences resulting from the purchase, ownership or disposition of the Certificates. This discussion is based on existing statutes, regulations, published rulings and court decisions, all of which are subject to change or modification, retroactively. The following discussion is applicable, to investors, other than those who are subject to special provisions of the Code, such as financial institutions, proerty and casualty insurance companies, life insurance companies, individual recipients of Social Security or Railroad Retirement benefits, individuals allowed an earned income credit, certain S 26 corporations with accumulated earnings and profits and excess passive investment income, foreign corporations subject to the branch profits tax, taxpayers qualifying for the health insurance premium assistance credit and taxpayers who may be deemed to have incurred or continued indebtedness to purchase tax-exempt obligations. THE DISCUSSION CONTAINED HEREIN MAY NOT BE EXHAUSTIVE. INVESTORS, INCLUDING THOSE WHO ARE SUBJECT TO SPECIAL PROVISIONS OF THE CODE, SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE TAX TREATMENT WHICH MAY BE ANTICIPATED TO RESULT FROM THE PURCHASE, OWNERSHIP AND DISPOSITION OF TAX-EXEMPT OBLIGATIONS BEFORE DETERMINING WHETHER TO PURCHASE THE CERTIFICATES. Interest on the Certificates will be includable as an adjustment for "adjusted current earnings" to calculate the alternative minimum tax imposed on corporations by section 55 of the Code. Under section 6012 of the Code, holders of tax-exempt obligations, such as the Certificates, may be required to disclose interest received or accrued during each taxable year on their returns of federal income taxation. Section 1276 of the Code provides for ordinary income tax treatment of gain recognized upon the disposition of a tax-exempt obligation, such as the Certificates, if such obligation was acquired at a "market discount" and if the fixed maturity of such obligation is equal to, or exceeds, one year from the date of issue. Such treatment applies to "market discount bonds" to the extent such gain does not exceed the accrued market discount of such bonds; although for this purpose, a de minimis amount of market discount is ignored. A "market discount bond" is one which is acquired by the- holder at a purchase price which is less than the stated redemption price at maturity or, in the case of a bond issued at an original issue discount, the "revised issue price" (i.e., the issue price plus accrued original issue discount). The "accrued market discount" is the amount which bears the same ratio to the market discount as the number of days during which the holder holds the obligation bears to the number of days between the acquisition date and the final maturity date. State, Local and Foreign Taxes Investors should consult their own tax advisors concerning the tax implications of the purchase, ownership or disposition of the Certificates under applicable state or local laws. Foreign investors should also consult their own tax advisors regarding the tax consequences unique to investors who are not United States persons. Qualified Tax -Exempt Obligations for Financial Institutions Section 265(a) of the Code provides, in pertinent part, that interest paid or incurred by a taxpayer, including a "financial institution," on indebtedness incurred or continued to purchase or carry tax-exempt obligations is not deductible in determining the taxpayer's taxable income. Section 265(b) of the Code provides an exception to the disallowance of such deduction for any interest expense paid or incurred on indebtedness of a taxpayer that is a "financial institution" allocable to tax-exempt obligations, other than "private activity bonds," that are designated by a "qualified small issuer" as "qualified tax-exempt obligations." A "qualified small issuer" is any governmental issuer (together with any "on -behalf of and "subordinate" issuers) who issues no more than $10,000,000 of tax- exempt obligations during the calendar year. Section 265(b)(5) of the Code defines the term "financial institution" as any "bank" described in Section 585(a)(2) of the Code, or any person accepting deposits from the public in the ordinary course of such person's trade or business that is subject to federal or state supervision as a financial institution. Notwithstanding the exception to the disallowance of the deduction of interest on indebtedness related to "qualified tax-exempt obligations" provided by Section 265(b) of the Code, Section 291 of the Code provides that the allowable deduction to a "bank," as defined in Section 585(a)(2) of the Code, for interest on indebtedness incurred or continued to purchase "qualified tax-exempt obligations" shall be reduced by twenty -percent (20%) as a "financial institution preference item." The Issuer has designated the Certificates as "qualified tax-exempt obligations" within the meaning of section 265(b) of the Code. In furtherance of that designation, the Issuer has covenanted to take such action that would assure, or to refrain from such action that would adversely affect, the treatment of the Certificates as "qualified tax- exempt obligations." Potential purchasers should be aware that if the issue price to the public exceeds $10,000,000, there is a reasonable basis to conclude that the payment of a de minimis amount of premium in 27 excess of $10,000,000 is disregarded; however, the Internal Revenue Service could take a contrary view. If the Internal Revenue Service takes the position that the amount of such premium is not disregarded, then such obligations might fail to satisfy the $10,000,000 limitation and the Certificates would not be "qualified tax- exempt obligations." Future and Proposed Legislation Tax legislation, administrative actions taken by tax authorities, or court decisions, whether at the Federal or state level, may adversely affect the tax-exempt status of interest on the Bonds under Federal or state law and could affect the market price or marketability of the Bonds. Any such proposal could limit the value of certain deductions and exclusions, including the exclusion for tax-exempt interest. The likelihood of any such proposal being enacted cannot be predicted. Prospective purchasers of the Bonds should consult their own tax advisors regarding the foregoing matters. RATING The Certificates are expected to be rated "AA" (stable outlook) by Standard & Poor's Ratings Services, a Standard & Poor's Financial Services LLC business ("S&P"). Such rating reflects only the view of S&P. No application has been made at any other rating agency. The explanation of the significance of such rating may be obtained from S&P. There is no assurance that such rating will continue for any period of time or that such rating will not be revised or withdrawn. A revision or withdrawal of such rating may have a materially adverse effect on the market price of the Certificates. OTHER MATTERS Litigation Certificate Authorized representatives of the Issuer will certify that as of the date of initial delivery of the Certificates, no litigation of any nature is now pending or, to the best of such authorized representatives' knowledge and belief, threatened against the Issuer affecting directly or indirectly the validity of the Certificates or the Ordinance; restraining, enjoining or in any other manner affecting the issuance or delivery of the Certificates; affecting the provision made for the payment of or security for the Certificates, including the levy of or collection of the taxes pledged to pay such amounts or the pledge so made; affecting, in any way, the right or authority of the Issuer to pay such amounts from the sources pledged, or otherwise carrying out the terms and provisions of the Ordinance or other authorizing proceedings, and the covenants and agreements therein, and each of them or affecting the corporate existence or boundaries of the Issuer, or the title of the officers or members of the governing body or any of them to their respective positions. Legal Investments and Eligibility to Secure Public Funds in Texas Section 1201.041 of the Public Security Procedures Act (Chapter 1201, Texas Government Code) provides that the Certificates are negotiable instruments governed by Chapter 8, Texas Business and Commerce Code, and are legal and authorized investments for insurance companies, fiduciaries, and trustees, and for the sinking funds of municipalities or other political subdivisions or public agencies of the State of Texas. With respect to investment in obligations such as the Certificates by municipalities or other political subdivisions or public agencies of the State of Texas, the Public Funds Investment Act, Chapter 2256, Texas Government Code, requires that the Certificates be assigned a rating of "A" or its equivalent as to investment quality by a national rating agency, this requirement does not apply, however, to the purchase of obligations such as the Certificates for interest and sinking funds of such entities. See "RATINGS" herein. In addition, various provisions of the Texas Finance Code provide that, subject to a prudent investor standard, the Certificates are legal investments for state banks, savings banks, trust companies with at least $1 million of capital, and savings and loan associations. The Certificates are eligible to secure deposits of any public funds of the State, its agencies, and its political subdivisions, and are legal security for those deposits to the extent of their market value. No review has been made of the laws in other states to determine whether the Certificates are legal investments for various institutions in those states. 28 Financial Advisor Lawrence, Financial Consulting LLC, Dallas, Texas (the "Financial Advisor") has been retained by the Issuer as financial advisor in connection with the issuance of the Certificates and, in such capacity, has assisted the Issuer in the preparation of. documents. The Financial Advisor's fee for services rendered with respect to the sale of the Certificates is contingent upon the issuance and delivery of the Certificates. Although the Financial Advisor has read and participated in the preparation of this Official Statement, the Financial Advisor has not independently verified any of the information set forth herein. The information contained in this Official Statement has been obtained primarily from the Issuer's records and from other sources which are believed to be reliable, including financial records of the Issuer and other entities which may be subject to interpretation. No guarantee is made as to the accuracy or completeness of any such information. No person, therefore, is entitled to rely upon the participation of the Financial Advisor as an implicit or explicit expression of opinion as to the completeness and accuracy of the information contained in this Official Statement. Financial Statements The Issuer's basic financial statements and notes thereto for the year ended September 30, 2012, which have been excerpted from the Issuer's most recently audited annual financial statements, are included as APPENDIX B to this Official Statement. The accountants who audited such statements have not participated in the preparation of this Official Statement and have not been requested to and have not performed any post -audit procedures in connection with the offering of the Certificates. Registration and Qualification of Certificates for Sale The sale of the Certificates has not been registered under the Federal Securities Act of 1933, as amended, in reliance upon the exemption provided thereunder by Section 3(a)(2); and the Certificates have not been qualified under the Securities Act of Texas in reliance upon various exemptions contained therein; nor have the Certificates been qualified under the securities acts of any jurisdiction. The Issuer assumes no responsibility for qualification of the Certificates under the securities laws of any jurisdiction in which the Certificates may be sold, assigned, pledged, hypothecated or otherwise transferred. This disclaimer of responsibility for qualification for sale or other disposition of the Certificates shall not be construed as an interpretation of any kind with regard to the availability of any exemption from securities registration provisions. Underwriting The Underwriter has agreed to purchase the Certificates from the Issuer, subject to certain conditions, at prices that include a $64,354 underwriting discount from initial public offering prices of the Certificates as set forth on page i of this Official Statement. The Underwriter will be obligated to purchase all of the Certificates if any portion of such Certificates is purchased. The Issuer has no control over the prices at which the Certificates will initially be offered to the public. The price and other terms relating to the offering and sale of the Certificates may be changed from time to time by the Underwriter after the Certificates are released for sale, and the Certificates may be offered and sold at prices other than the initial offering price, including sales to dealers who may sell the Certificates into investment accounts. The Underwriter has reviewed the information in this Official Statement in accordance with and as part of its responsibilities to investors under federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information. Continuing Disclosure of Information In the Ordinance, the Issuer has made the following agreement for the benefit of the holders and beneficial owners of the Certificates: The Issuer is required to observe the agreement for so long as it remains obligated to advance funds to pay the Certificates. Under the agreement, the Issuer will be obligated to provide certain updated financial information and operating data annually and timely notice of specified material events to the Municipal Securities Rulemaking Board (the "MSRB"). Annual Report. The Issuer will provide certain updated financial information and operating data to the MSRB annually in an electronic format that is prescribed by the MSRB and available via the Electronic Municipal Market 29 Access System ("EMMA") at www.emma.msrb.org. The information to be updated includes all quantitative financial information and operating data with respect to the Issuer of the general type included in this Official Statement in Tables 1-4 and 6-12, and in APPENDIX B. The Issuer will update and provide this information within six months after the end of each fiscal year. The Issuer may provide updated information in full text or may incorporate by reference certain other publicly available documents, as permitted by SEC Rule 15c2-12, as amended (the "Rule"). The updated information will include audited financial statements, if the Issuer commissions an audit and it is completed by the required time. If audited financial statements are not available by the required time the Issuer will provide unaudited financial information by the required time and audited financial statements when and if the audit report becomes available. Any such financial statements will be prepared in accordance with the accounting principles described in APPENDIX B or such other accounting principles as the Issuer may be required to employ from time to time pursuant to state law or regulation. The Issuer's current fiscal year end is September 30th. Accordingly, the Issuer must provide updated information by the last day of March in each year, unless the Issuer changes its fiscal year. If the Issuer changes its fiscal year, it will notify the MSRB of the change. Event Notices. The Issuer will provide notice to the MSRB of 4ny of the following events with respect to the Certificates, if such event is material within the meaning of the federal securities laws: (1) non-payment related defaults; (2) modifications to rights of holders of the I Certificates; (3) bond calls; (4) release, substitution, or sale of property securing repayment of the Certificates; (5) the consummation of a merger, consolidation, or acquisition involving an obligated person or the sale of all or substantially all of the assets of the obligated person, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms; and (6) appointment of a successor or additional trustee or the change of name of a trustee., The Issuer will also provide notice to the MSRB of any of the following events with respect to the Certificates without regard to whether such event is considered material within the meaning of the federal securities laws: (1) principal and interest payment delinquencies; (2) unscheduled draws on debt service reserves reflecting financial difficulties; (3) unscheduled draws. -on credit enhancements reflecting financial difficulties; (4) substitution of credit or liquidity providers, or their failure to perform; (5) adverse tax opinions or the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the Certificates, or other material events affecting the tax status of the Certificates; (6) tender offers; (7) defeasances; (8) rating changes; and (9) bankruptcy, insolvency, receivership or similar event of the Issuer. Note to item (9) above: For the purposes of the event numbered (9) above, the event is considered to occur when any of the following occur: The appointment of a receiver, fiscal agent or similar officer for the Issuer in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the Issuer, or if such jurisdiction has been assumed by leaving the existing governing body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the Issuer. The Issuer will provide notice of the aforementioned events to the MSRB in a timely manner (but not in excess of ten business days after the occurrence of the event). The Issuer will also provide timely notice of any failure by the Issuer to provide annual financial information in accordance with its agreement described above under "Annual Reports." Availability ofinformation. All annual reports and event notices filed by the Issuer will be made with the MSRB in electronic format in accordance with MSRB guidelines. The MSRB intends to make the information available to the public without charge through its EMMA internet portal. The address of the MSRB is 1900 Duke Street, Alexandria, VA 22314, and its telephone number is (703) 797-6600. Limitations and Amendments. The Issuer has agreed to update information and to provide event notices only as 30 described above. The Issuer has not agreed to provide other information that may be relevant or material to a complete presentation of its financial results of operations, condition, or prospects or agreed to update any information that is provided, except as described above. The Issuer makes no representation or warranty concerning such information or concerning its usefulness to a decision to invest in or sell Certificates at any future date. The Issuer disclaims any contractual or tort liability for damages resulting in whole or in part from any breach of its continuing disclosure agreement or from any statement made pursuant to its agreement, although holders and beneficial owners of Certificates may seek a writ of mandamus to compel the Issuer to comply with its agreement. The Issuer may amend its disclosure agreement from time to time to adapt to changed circumstances that arise from a change in legal requirements, a change in law, or a change in the identity, nature, status, or type of operations of the Issuer, but only if (1) the provisions, as so amended, would have permitted an underwriter to purchase or sell Certificates in the primary offering of the Certificates in compliance with the Rule, taking into account any amendments or interpretations of the Rule since such offering as well as such changed circumstances, and (2) either (a) the registered owners of a majority in aggregate principal amount of the outstanding Certificates consent to such amendment, or (b) a person that is unaffiliated with the Issuer (such as nationally recognized bond counsel) determined that such amendment will not materially impair the interest of the registered owners and beneficial owners of the Certificates. The Issuer may also amend or repeal the provisions of this continuing disclosure agreement if the SEC amends or repeals the applicable provision of the Rule or a court of final jurisdiction enters judgment that such provisions of the Rule are invalid, but only if and to the extent that the provisions of this sentence would not prevent an underwriter from lawfully purchasing or selling Certificates in the primary offering of the Certificates. If the Issuer 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. During the last five years, the Issuer has complied in all material respects with all continuing disclosure agreements made by it in accordance with the Rule. Conclusion The financial data and other information contained herein have been obtained from the Issuer's records, audited financial statements and other sources which are believed to be reliable. There is no guarantee that any of the assumptions or estimates contained herein will be realized. All of the summaries of the statutes, documents and ordinances contained in this Official Statement are made subject to all of the provisions of such statutes, documents and ordinances. These summaries do not purport to be complete statements of such provisions and reference is made to such documents for further information. Reference is made to original documents in all respects. THIS OFFICIAL STATEMENT was approved, and the execution and delivery of this Official Statement authorized, by the City Council of the Issuer. Attest: By: /s/Kelly Edwards Town Secretary 31 TOWN OF WESTLAKE, TEXAS LN /s/Laura Wheat Mayor This page is intentionally left blank. APPENDIX A - FORM OF BOND COUNSEL OPINION A-1. This page is intentionally left blank. Proposed Form of Opinion of Bond Counsel An opinion in substantially the following form will be delivered by McCall, Parkhurst & Horton L.L.P., Bond Counsel, upon the delivery of the Certificates of Obligation, assuming no material changes in facts or law. TOWN OF WESTLAKE, TEXAS COMBINATION TAX AND REVENUE CERTIFICATES OF OBLIGATION, SERIES 2013. IN THE AGGREGATE PRINCIPAL AMOUNT OF $9,320,000 AS BOND- COUNSEL FOR THE.TOWN OF WESTLAKE, TEXAS (the "Issuer") in connection with the issuance of the Combination Tax and Revenue Certificates of Obligation, Series 2013, described above (the "Certificates of Obligation"), we have examined into the legality and validity of the Certificates of Obligation, which bear interest from the dates and mature and are subject to redemption on the dates, in accordance with the terms and conditions stated in the text of the Certificates of Obligation. Terms used herein and not otherwise defined shall have the meaning given in the ordinance of the Issuer authorizing the issuance and sale of the Certificates of Obligation (the "Ordinance"). WE HAVE EXAMINED the applicable and pertinent provisions of the Constitution and laws of the State of Texas, a transcript of certified proceedings of the Issuer, and other pertinent instruments authorizing and relating to the issuance of the Certificates of Obligation, including one of the executed Certificates of Obligation (Certificate of Obligation Number T-1). BASED ON SAID EXAMINATION, IT IS OUR OPINION that the Certificates of Obligation have been duly authorized, issued, and delivered in accordance with law, and that the Certificates of Obligation, except as may be limited by laws applicable to the Issuer relating to governmental immunity, bankruptcy, reorganization and other similar matters affecting creditors' rights generally or by general principles of equity which permit the exercise of judicial discretion, constitute valid and legally binding obligations of the Issuer; and that ad valorem taxes sufficient to provide for the payment of the interest on and principal of said Certificates of Obligation have been levied and pledged for such purpose, within the limit prescribed by law, and that the Certificates of Obligation are additionally secured by and payable from limited surplus revenues of the Issuer's waterworks and sewer system, remaining after payment of all operation and maintenance expenses thereof, and all debt service, reserve, and other requirements in connection with all of the Issuer's revenue bonds or other obligations (now or hereafter outstanding), which are payable from all or any part of the Net Revenues of the Issuer's waterworks and sewer system. IT IS FURTHER OUR OPINION, except as discussed below, that the interest on the Certificates of Obligation is excludable from the gross income of the owners for federal income tax purposes under the statutes, regulations, published rulings, and court decisions existing on the date of this opinion. We are further of the opinion that the Certificates of Obligation are not "specified private activity bonds" and that, accordingly, interest on the Certificates of Obligation will not be included as an individual or corporate alternative minimum tax preference item under section 57(a)(5) of the Internal Revenue Code of 1986 (the "Code"). In expressing the aforementioned opinions, we have relied on, certain representations, the accuracy of which we have not independently verified, and assume compliance with certain covenants, regarding the use and investment of the proceeds of the Certificates of Obligation and the use of the property financed therewith. We call your attention to the fact that if such representations are determined to be inaccurate or upon a failure by the Issuer to comply with such covenants, interest on the Certificates of Obligation may become includable in gross income retroactively to the date of issuance of the Certificates of Obligation. EXCEPT AS STATED ABOVE, we express no opinion as to any other federal, state, or local tax consequences of acquiring, carrying, owning, or disposing of the Certificates of Obligation. WE CALL YOUR ATTENTION TO THE FACT that the interest on tax-exempt obligations, such as the Certificates of Obligation, is included in a corporation's alternative minimum taxable income for purposes of determining the alternative minimum tax imposed on corporations by section 55 of the Code. WE EXPRESS NO OPINION as to any insurance policies issued with respect to the payments due for the principal of and interest on the Certificates of Obligation, nor as to any such insurance policies issued in the future. OUR OPINIONS ARE BASED ON EXISTING LAW, which is subject to change. Such opinions are further based on our knowledge of facts as of the date hereof. We assume no duty to update or supplement our opinions to reflect any facts or circumstances that may thereafter come to our attention or to reflect any changes in any law that may thereafter 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 reliance 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 Certificates of Obligation. 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 not to take any action, or omit to take any action within its control, that if taken or omitted, respectively, may result in the treatment of interest on the Certificates of Obligation as includable in gross income for federal income tax purposes. OUR SOLE ENGAGEMENT in connection with the issuance of the Certificates of Obligation is as Bond Counsel for the Issuer, and, in that capacity, we have been engaged by the Issuer for the sole purpose of rendering our opinions with respect to the legality and validity of the Certificates of Obligation under the Constitution and laws of the State of Texas, and with respect to the exclusion from gross income of the interest on the Certificates of Obligation for federal income tax purposes, and for no other reason or purpose. The foregoing opinions represent our legal judgment based upon a review of existing legal authorities that we deem relevant to render such opinions and are not a guarantee of a result. We have not been requested to investigate or verify, and have not independently investigated or verified, any records, data, or other material relating to the financial condition or capabilities of the Issuer, or the disclosure thereof in connection with the sale of the Certificates of Obligation, and have not assumed any responsibility with respect thereto. We express no opinion and make no comment with respect to the marketability of the Certificates of Obligation and have relied solely on certificates executed by officials of the Issuer as to the current outstanding indebtedness of, and assessed valuation of taxable property within, and the sufficiency of the pledged revenues of, the Issuer. Respectfully, APPENDIX B - EXCERPTS FROM BASIC FINANCIAL STATEMENTS ' For Fiscal Year Ended September 30, 2012* * The audited financial statements and footnotes included in this appendix are excerpts from the Issuer's most recent Comprehensive Annual Financial Report. For additional information, reference is made to the complete report which has been filed with, and may be obtained from, the Municipal Advisory Council of Texas and the Municipal Securities Rulemaking Board's Electronic Municipal Market Access ("EMMA') system. See "OTHER MATTERS — Continuing Disclosure of Information. " B-1 This page is intentionally left blank. MANAGEMENT'S DISCUSSION AND ANALYSIS MANAGEMENT'S DISCUSSION AND ANALYSIS The Town of Westlake is pleased to present this overview and analysis of the financial activities of the Town for the fiscal year ended September 30, 2012. We encourage readers to consider the information presented here in conjunction with additional information that we have furnished in our letter of transmittal, which can be found in the introductory section of this report. FINANCIAL HIGHLIGHTS • The assets of the Town exceeded its liabilities at the close of the most recent fiscal year by $29,857,712 (Net assets). This number must be viewed within the context that the vast majority of the Town's net assets of $21,743,854 (73%) are capital assets and that most capital assets in a government entity do not directly generate revenue nor can they be sold to generate liquid capital. Those net assets restricted for specific purposes totaled $4,726,376 (16%). The remaining $3,387,482 (11%) are unrestricted net assets and may be used to meet the government's ongoing obligations to citizens and creditors in accordance with the Town's fund designation and fiscal policies. As of the close of the current fiscal year, the Town of Westlake's governmental funds reported combined ending fund balances of $10,930,861, which is a decrease of $35,719 in comparison with the prior year. Within this total, $5,938,621 is non -spendable, restricted, committed or assigned by management or council. • At the end of the current fiscal year, fund balance for the general fund was $5,263,805; an increase of $1,248,411 in comparison with the prior year. Of this total fund balance, $4,992,240 is unassigned. This represents 108% of the total general fund expenditures and is equivalent to 396 operating days. • The Town's capital assets (net of accumulated depreciation) increased by $568,550. The major portion of this increase is attributed to the work completed on the Roanoke Road drainage/reconstruction project, Stagecoach Hills water line project, and the purchase of an attack truck and ambulance. A total of $904 thousand was recorded as construction in progress expenses for several road and water projects, including FM 1938 improvements along with Stagecoach Hills drainage/reconstruction. A small amount was contributed to the beginning of the Academy expansion project. This total amount was offset by $1,275,215 of depreciation which gave the Town a net increase. The Town's bonds payable decreased by $78,000 in total, due to principal payments and refundings of $7,453,000 offset by the issuance of General Obligation Refunding bonds in the amount of $7,375,000. OVERVIEW OF THE FINANCIAL STATEMENTS This discussion and analysis is intended to serve as an introduction to the Town's basic financial statements. The Town's basic financial statements are comprised of the following three components: 3 1) government -wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains supplementary information in addition to the basic financial statements themselves. Government -wide financial statements The government -wide financial statements are designed to provide readers with a broad overview of the Town's finances, in a manner similar to a private -sector business. The government -wide financial statements are prepared utilizing the economic resources measurement focus and the accrual basis of accounting. The statement of net assets presents information on all of the Town's assets and liabilities with the difference between the two reported as net assets. Over time, increases or decreases in the Town's net assets serve as a useful indicator of whether the financial position of the Town is improving or weakening. The statement of activities presents information showing how the government's net assets changed during the most recent fiscal year. All of the revenues and expenses are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cashflows. Thus revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods. Both of the government -wide financial statements distinguish functions of the Town that are principally supported by sales taxes, property taxes, and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business -type activities). The governmental activities of the Town include general government, public safety, culture and recreation, economic development, public works, visitor services and education. The business -type activities of the Town include water/sewer and cemetery. The government -wide financial statements include not only the Town (known as the primary government), but also discretely presented component units including all of the Texas Student Housing entities. Financial information for these component units is reported separately from the financial information presented for the primary government itself. See pages 26-29 of the "Financial Section" for detail on these entities. In addition, the Town has the following blended component units: Lone Star Public Facility Corporation, 4B Economic Development Corporation, and Westlake Academy, an open enrollment charter school owned and operated by the Town of Westlake. Fund Financial Statements A fund is a grouping of related accounts used to maintain control over resources that have been segregated for specific activities or objectives. The Town, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance -related legal requirements. Below are the three types of funds. The Town had only Governmental and Proprietary funds for the year ended September 30, 2012. Governmental funds - Governmental funds are used to account for essentially the same functions reported as government activities in the government -wide financial statements. However, unlike the C! government -wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government's near-term financial requirements. Because the focus of governmental funds is narrower than that of the government -wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government -wide financial statements. By doing so, the reader may better understand the long-term impact of the government's near-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The Town maintains eight individual governmental funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues; expenditures, and changes in fund balances for the General, Visitors Association, Westlake Academy, Debt Service, Capital Projects, Economic Development, Lone Star Public Facility Corporation and Westlake 4B Economic Development Corporation funds, all of which are presented as major funds. The Town adopts an annual appropriated budget for all funds, except the Capital Projects fund which is a project -length based budget. A budgetary comparison statement has been provided for all appropriate funds to demonstrate compliance with this budget. The basic governmental fund financial statements can be found on pages 18-22 of this report. Proprietary funds - There are two types of proprietary funds, Enterprise Funds and Internal Service Funds. An Enterprise Fund is the only proprietary fund currently maintained by the Town. Enterprise funds are used to report the same functions presented as business -type activities in the government - wide financial statements. The Town uses enterprise funds to account for its water and sewer activities and its cemetery activities. All activities associated with providing such services are accounted for in this fund, including administration, operation, maintenance, debt service, capital improvements, billing and collection. The Town's intent is that costs of providing the services to the general public on a continuing basis is financed through user based charges in a manner similar to a private enterprise. The Town has no Internal Service Funds (fund to report activities that provide supplies and services for the Town's other programs and activities, i.e. self-insurance and fleet management.) The basic proprietary fund financial statements can be found on pages 23 - 25 on this report. Fiduciary funds - Fiduciary funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government -wide financial statements because the resources of those funds are not available to support the Town's own programs. The accounting used for fiduciary funds is similar to the accounting used for proprietary funds. The Town of Westlake does not currently have any fiduciary funds. Notes to the financial statements. The notes provide additional information that is essential to a full understanding of the data provided in the government -wide and fund financial statements. The notes to the financial statements can be found on pages 30 - 66 of this report. 5 Other information. In addition to the basic financial statements and accompanying notes, this report also presents schedules that further support the information in the financial statements. The schedules are presented immediately following the notes to the financial statements and can be found on pages 67 - 75. GOVERNMENT -WIDE FINANCIAL ANALYSIS As noted earlier, net assets may serve over time as a useful indicator of the government's financial position. In the case of the Town, assets exceeded liabilities by $29,857,712 at the close of the most recent fiscal year. The Town's combined net assets changed from a year ago, increasing $1,280,390 from $28,577,322 to $29,857,712. Our analysis below focuses on the net assets (Table 1) and changes in net assets (Table 2) of the Town's governmental and business -type activities. The largest portion of the Town's net assets, $21,743,854 (73%), reflects its investment in capital assets (e.g. land, buildings, equipment, improvements, construction in progress, and infrastructure), less any debt used to acquire capital assets still outstanding. The Town uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the Town's investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources since the capital assets themselves cannot be used to liquidate these liabilities. An additional portion of the Town's net assets, $4,726,376 (16%), represents resources that are subject to external or internal restrictions on how they may be used. The remaining balance of unrestricted net assets, $3,387,482 (11%), may be used to meet the government's ongoing obligations to citizens and creditors. Assets: Current and other assets Capital assets Total Assets Liabilities: Long-term liabilities outstanding Other liabilities Total Liabilities Net Assets: Invested in capital assets, net of related debt Restricted Unrestricted Total Net Assets Table 1 Condensed Statement of Net Assets At September 30, 2012 Governmental Activities 2012 2011 Business -Type Activities 2012 2011 Total 2012 2011 $ 12,185,864 $ 12,449,931$ 3,503,989$ 3,401,345$ 15,689,853 $ 15,851,276 34,313,615 33,665,877 12,376,223 12,455,411 46,689,838 46,121,288 46,499,479 46,115,808 15,880,212 15,856,756 62,379,691 61,972,564 20,098,829 20,731,060 5,422,434 5,507,172 25,521,263 26,238,232 1,784,244 2,140,365 5,216,472 5,016,645 7,000,716 7,157,010 21,883,073 22,871,425 10,638,906 10,523,817 32,521,979 33,395,242 14,866,299 14,188,516 6,877,555 6,875,031 21,743,854 21,063,547 4,726,376 5,607,767 - - 4,726,376 5,607,767 5,023,731 3,448,100 (1,636,249) (1,542,092) 3,387,482 1,906,008 $ 24,616,406 $ 23,244,383 $ 5,241,306$ 5,332,939$ 29,857,712 $ 28,577,322 M Table 2 Changes in Net Assets At September 30, 2012 Expenses: General government Governmental Activities Business -Type Activities Total 2,518,490 2,478,826 2012 2011 2012 2011 2012 2011 Revenues: Culture and recreation 111,765 122,400 - - 111,765 Program revenues: Economic development 216,901 680,823 - - 216,901 Fees, fines & charge Public works 546,039 470,054 - - 546,039 for services $ 1,417,879 $ 1,253,967 $ 2,939,342 $ 3,092,168 $ 4,357,221$ 4,346,135 Operating grants Education 6,193,560 4,884,985 - - 6,193,560 & contributions 5,269,841 4,472,999 24,423 - 5,294,264 4,472,999 Capital grants Water and sewer - - 3,098,466 2,794,235- 3,098,466 & contributions - 425,900 - - - 425,900 General revenues: Total expenses 12,843,471 11,922,951 3,104,748 2,799,839 15,948,219 Taxes Sales taxes 3,657,274 4,609,626 - - 3,657,274 4,609,626 Property taxes 1,441,238 1,260,112 - - 1,441,238 1,260,112 Hotel occupancy taxes 590,853 527,261 - - 590,853 527,261 Mixed beverage taxes 38,286 19,721 - - 38,286 19,721 Franchise taxes 664,991 586,836 - - 664,991 586,836 Unrestricted grants - - - - - - Interest on investments 33,353 46,248 10,077 9,929 43,430 56,177 Miscellaneous 1,112,858 691,345 84,780 145,666 1,197,638 837,011 Extraordinary items (124,346) . 56,704 - - (124,346) 56,704 Special item 67,760 - - - 67,760 - Gain on sale of capital assets - 7,000 - - - 7,000 Total revenues $ 14,169,987 $ 13,957,719 $ 3,058,622 $ 3,247,763 $ 17,228,609 $ 17,205,482 Expenses: General government 2,518,490 2,478,826 - - 2,518,490 2,478,826 Public safety 1,883,424 1,801,585 - - 1,883,424 1,801,585 Culture and recreation 111,765 122,400 - - 111,765 122,400 Economic development 216,901 680,823 - - 216,901 680,823 Public works 546,039 470,054 - - 546,039 470,054 Visitor services 475,719 356,365 - - 475,719 356,365 Education 6,193,560 4,884,985 - - 6,193,560 4,884,985 Interest on long-term debt 897,573 1,127,913 - - 897,573 1,127,913 Water and sewer - - 3,098,466 2,794,235- 3,098,466 2,794,235 Cemetery - - 6,282 5,604 6,282 5,604 Total expenses 12,843,471 11,922,951 3,104,748 2,799,839 15,948,219 14,722,790 Inc (Dec) in net assets before transfers 1,326,516 2,034,768 (46,126) 447,924 1,280,390 2,482,692 Transfers 45,507 145,216 (45,507) (145,216) - - Change in net assets Net assets, beginning Net assets, ending 1,372,023 2,179,984 (91,633) 302,708 1,280,390 2,482,692 23,244,383 21,064,399 5,332,939 5,030,231 28,577,322 26,094,630 $ 24,616,406 $ 23,244,383 $ 5,241,306 $ 5,332,939 $ 29,857,712 $ 28,577,322 7 Governmental activities: Governmental activities increased the Town's net assets by $1,372,023 (5%), increasing net assets from $23,244,383 to $24,616,406. Unrestricted net assets, the part of net assets that can be used to finance day-to-day operations without constraints established by debt covenants, enabling legislation, other legal requirements, and/or Council or management's decision, increased by $1,575,631 or 7% of total governmental net assets. The majority of this increase was due to excess revenues over expenditures for the fiscal year with no restrictions on the funds. Total revenues (including transfers) for governmental activities increased by $112,559 when compared to the prior year. General revenue had a decrease of $322,586, while program revenues had an increase of $534,854. Program revenues - The major contributor to the increase is related to the receipt of state revenues for the additional students at Westlake Academy as well as Westlake Academy Foundation grants given to the Academy. General revenues — Decrease of $322,586 were primarily made up of the following components: • Sales tax decreased by $952,352 due to a reduction in revenues of approximately $900K based on the conclusion of construction regarding Deloitte in which there was an economic development agreement regarding the taxing of construction and start-up materials. • Property tax increased by $181,126 • Miscellaneous increased by $421,513 — major portion of this increase relates to the reimbursement of indirect costs from Westlake Academy to the Town for services performed by Town personnel Expenses — • Total expenses for governmental activities increased by $920,520 or approximately 7%. The major components to this increase were related to a decrease of $463,922 in economic development based on a contractual obligation reimbursement. The amount received on the construction of the project was primarily completed in the prior year with normal operating sales taxes being received for the majority of FY 11-12 and an increase in education of $1,308,575 which included expense for the addition of students and staff for Westlake Academy and the transfer of a portion of the indirect operating costs of approximately $325,000 from Academy budget to the Municipal budget. Business -type Activities: The net assets of our business -type activities ended fiscal year 2012 at $5,241,306 compared with $5,332,939 in 2011. This represents a decrease in net assets of $91,633, or 2% less than the prior fiscal year. Revenues of the Town's business -type activities were $3,058,622 for the fiscal year ending September 30, 2012. Revenues decreased $189,141 or 6% from the prior year. Operating expenses for the business -type activities were $3,104,748 for the year, an increase of $304,909 or 11%. The resulting decrease in net assets is due to several factors, including the following: • Decrease in Charges for Services was $152,826. This 5% decrease was primarily realized because FY 10/11 was a drier year than normal resulting in increased water billing revenues and other associated fees in the prior year. • The Town's increase in expenses of $304,909 is attributed to interest expense and additional expenses related to the wastewater treatment accounts. FINANCIAL ANALYSIS OF THE TOWN'S FUNDS As noted earlier, the Town uses fund accounting to ensure and demonstrate compliance with finance - related legal requirements. Governmental funds. The focus of the Town's governmental funds is to provide information on near- term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the Town's financing requirements. In particular, unreserved fund balance may serve as a useful measure of a town's net resources available for spending at the end of the fiscal year. As of the end of the current fiscal year, the Town's governmental funds reported combined ending fund balances of $10,930,861; a decrease of $35,719 in comparison with the prior year. Approximately 46% of this total ($4,992,240) constitutes unassigned fund balance, which is available for spending at the government's discretion. The remainder of fund balance is nonspendable, restricted, committed or assigned to indicate that it is not available for new spending because it has already been committed. The following tables present a summary of general, special revenue, capital project, and debt service fund revenues and expenditures for the fiscal year ended September 30, 2012, and the amount and percentage of increases and decreases in relation to the prior year. Table 3 Summary of Governmental Fund Revenues 0 Increase Percent 2011-12 Percent (Decrease) Increase Revenues Amount of Total from 2010/11 (Decrease) Taxes $ $ Sales 3,657,274 25.7% (952,352) -20.7% Property 1,442,068 10.1% 184,822 14.7% Mixed beverage 38,286 0.3% 18,565 94.1% Hotel occupancy 590,853 4.2% 63,592 12.1% Franchise 664,991 4.7% 78,155 13.3% Subtotal - Taxes 6,393,472 44.9% (607,218) -8.7% State program 4,369,635 30.7% 423,977 10.7% Federal program 152,351 1.1% (5,094) -3.2% Interest income 33,353 0.2% (12,895) -27.9% Building permits and fees 598,394 4.2% 67,748 12.8% Fines and penalties 622,338 4.4% 16,633 2.7% Contributions 732,535 5.1% 552,472 306.8% Miscellaneous 1,323,237 9.3% 342,421 34.9% Total Revenues $ 14,225,315 100.0% $ 778,044 5.8% 0 Table 4 Summary of Governmental Fund Expenditures Below are summaries and explanations of the material increase (decrease) in fund balances from FY 2011 to FY 2012 of the Governmental Funds that are contained in the above totals: General Fund - Fund balance increased $1,248,411 (31 %) • Sales tax - FY 11-12 was the first year sales tax payments from the Property Tax Reduction portion of our receipts were recorded in the General Fund versus its own fund. The total amount was $914K. In addition to these additional receipts, the Town received a contribution of $325K from the Westlake Academy for indirect costs for services performed by Town staff. 4B Economic Development Corporation Fund - Fund balance decreased $89,193 • All funds received were transferred to the Debt Service Fund for the annual bond payments. • Fund balance decreased due to the reduction of a receivable from the Utility fund for an interfund loan made to the Utility Fund for several utility projects in past years Visitors Association Fund - Fund balance decreased by $58,734 • Primarily due to a budgeted transfer of funds for the partial payment of the bonds related to the Arts & Sciences Center. Capital Projects Fund - Fund balance decreased by $1,053,529 due to the usage of bond funds for various approved capital projects. Proprietary funds. The Town's proprietary fund statements provide the same type of information found in the government -wide financial statements with greater detail. Total net assets of the Proprietary Funds amounted to $5,241,306, a decrease of $91,633. Operating income totaled $3,048,545 which was offset by a net non-operating revenues (expenses) total of $704,659. • Revenues were $189,141 less than the prior year primarily due to charges for services • Operating Expenses increased by $304,909 due to the increase in the purchase of water. 10 Increase Percent 2011-12 Percent (Decrease) Increase Expenditures Amount of Total From 2010/11 (Decrease) General government $ 1,878,885 13.0% $ 145,561 8.4% Public safety 2,224,469 15.4% 381,718 20.7% Culture and recreation 111,765 0.8% (10,635) -8.7% Public works 391,115 2.7% 64,366 19.7% Economic development 243,939 1.7% (462,452) -65.5% Visitor services 475,719 3.3% 119,354 33.5% Education 6,193,560 43.0% 1,308,575 26.8% Capital outlay 1,110,476 7.7% 86,704 8.5% Debt service 1,768,918 12.3% 94,095 5.6% Total Expenditures - $ 14,398,846 100.0% $ 1,727,286 13.6% Below are summaries and explanations of the material increase (decrease) in fund balances from FY 2011 to FY 2012 of the Governmental Funds that are contained in the above totals: General Fund - Fund balance increased $1,248,411 (31 %) • Sales tax - FY 11-12 was the first year sales tax payments from the Property Tax Reduction portion of our receipts were recorded in the General Fund versus its own fund. The total amount was $914K. In addition to these additional receipts, the Town received a contribution of $325K from the Westlake Academy for indirect costs for services performed by Town staff. 4B Economic Development Corporation Fund - Fund balance decreased $89,193 • All funds received were transferred to the Debt Service Fund for the annual bond payments. • Fund balance decreased due to the reduction of a receivable from the Utility fund for an interfund loan made to the Utility Fund for several utility projects in past years Visitors Association Fund - Fund balance decreased by $58,734 • Primarily due to a budgeted transfer of funds for the partial payment of the bonds related to the Arts & Sciences Center. Capital Projects Fund - Fund balance decreased by $1,053,529 due to the usage of bond funds for various approved capital projects. Proprietary funds. The Town's proprietary fund statements provide the same type of information found in the government -wide financial statements with greater detail. Total net assets of the Proprietary Funds amounted to $5,241,306, a decrease of $91,633. Operating income totaled $3,048,545 which was offset by a net non-operating revenues (expenses) total of $704,659. • Revenues were $189,141 less than the prior year primarily due to charges for services • Operating Expenses increased by $304,909 due to the increase in the purchase of water. 10 General Fund Budgetary Highlights The General Fund budget for fiscal year 2012 was amended in total to increase the net change in fund balance from ($110,509) to $1,066,876, a total increase of $1,177,385. • The amended budget for net revenues was increased by $916,674 (18%) with the majority of the increase noted below: o Sales Tax - $582,500— received more taxes than anticipated due to construction at Deloitte University which we thought would be completed in the prior year. Several months of the construction materials sales tax receipts were received in FY 11-12. o Property Tax - $105,211 - original budget was based on September values but then updated o Franchise Tax - $82,375 — additional receipt from a franchisee that we had not anticipated o Fines and penalties - $103,389 — moi e than anticipated traffic violations • The amended budget for expenditures decreased by $501,661 (10%). The major components of this decrease are below: o General government - $(288,353) ■ ($356K) - This is based on a change in how we were booking payroll. We were wanting all payroll expense to be shown in the General Fund and had originally budgeted transfers in from other funds in the "Transfers In"" line -item (below the line) but determined it would be best to book as a contra account in the operating portion of the budget. ■ $52K — Increase in legal expenditures due to a lawsuit to determine the rights of the Town to levy a property tax and its authority to expend collected tax revenues on school operations at the Academy. The Town denied any liability and obtained a favorable judgment from the Court o Public Works — - $(190,255) — Majority of this is related to how payroll was recorded. See above explanation. In additional, several larger maintenance projects were postponed. The General Fund actual revenue collections were more than the amended budget by $25,372 and the final expenditures were $120,289 less than budgeted (3%). • General government - $41,482 — majority of this amount is made up additional legal expenditures based on lawsuit • Public Safety $(93,946) — EMS/Fire was understaffed by one position for the fiscal year • Cultural and recreation — $(38,569) — mainly related to contract services for landscaping, etc. • Public Works $(29,256) — primarily related to street drainage expenditures and the reduction of several maintenance projects. Capital Assets and Debt Administration Capital Assets. The Town's investment in capital assets for its governmental and business -type activities as of September 30, 2012, totaled $46,689,838 (net of accumulated depreciation). The investment in capital assets includes land, buildings, improvements, machinery and equipment, 11 infrastructure, and construction in progress. The net increase in the Town's investment in capital assets for the current fiscal year was $568,550 or 1%. The major portion of this increase. is attributed to the work completed on the Roanoke Road drainage/reconstruction project, Stagecoach Hills water line project, and the purchase of an attack truck and ambulance. A total of $904 thousand was recorded as construction in progress expenses for several road and water projects, including FM 1938 improvements along with Stagecoach Hills drainage/reconstruction. A small amount was contributed to the beginning of the Academy expansion project. This total amount was offset by $1,275,215 of depreciation which gave the Town a net increase. Land Capital improvements Buildings Machinery & equipment. W/W treatment rights Construction in progress Total capital assets Table 5 Town's Capital Assets (Net of Accumulated Depreciation) Governmental Activities 2012 2011 $ 11,896,663 $ 11,896,663 $ 2,386,902 2,361,688 17,767,343 18,198,192 Business -Type Activities 2012 2011 Total 2012 2011 - $ - $ 11,896,663 $ 11,896,663 9,883,837 9,955,542 12,270,739 12,317,230 710,703 561,394 2,069,390 2,183,855 - - 248,786 280,546 17,767,343 18,198,192 2,780,093 2,745,249 248,786 .280,546 1,552,004 647,940 174,210 35,468 1,726,214 683,408 $ 34,313,615 $ 33,665,877 $ 12,376,223 $ 12,455,411 $ 46,689,838 $ 46,121,288 Additional information on the Town's capital assets can be found in Note III on pages 44-45 of this report. Long-term debt - At the end of the current fiscal year, the Town had total long-term debt outstanding of $26,462,364. Of this amount, $22,057,938 represents bonded indebtedness, $124,618 economic development reimbursement, and $5,498,668 business -type debt. During the fiscal year 2011-2012, the Town's total debt payable decreased by $577,011. This decrease is primarily attributed to the scheduled repayment of principal and interest on outstanding bonded debt. Standard & Poor's Ratings Services, a division of the McGraw-Hill, Inc. has just increased the Town's rate from AA- to AA. Additional information about the rating agency or the significance of the rating provided .may be obtained from Standard & Poor's web site. Additional information on the Town's long-term debt can be found in Note III on pages 50-54. 12 Table 6 Outstanding Debt at Year -End Governmental Activities 2012 2011 Business -Type Activities 2012 2011 Total 2012 2011 General obligation bonds $ 17,180,938 $ 9,515,000 $ - $ - $ 17,180,938 $ 9,515,000 Certificates of obligation Contractual obligations Notes payable Compensated absences Deferred amounts Total long-term debt 4,877,000 12,210,000 - - 124,618 151,656 5,498,668 5,580,380 34,075 50,000 81,905 75,235 (1,346,268) (552,344) 11,428 9,449 4,877,000 12,210,000 5,623,286 34,075 93,333 5,732,036 50,000 (1,346,268) (552,344) $ 20,952,268 $ 21,449,547 $ 5,510,096 $ 5,589,829 $ 26,462,364 $ 27,039,376 ECONOMIC FACTORS AND NEXT YEAR'S BUDGETS While we clearly understand the nation as a whole continues to try and recover from the economic downturn, the Town remains committed to budgeting and forecasting projections based on a fiscally conservative formula. We have accomplished many great things this past year through our use of partnerships and inventive strategies to govern our community. We have begun the process of reinvesting in our infrastructure and will continue to do so over the next several years — paying special attention to unique cost sharing opportunities, both public and private. Our overall goal is to provide our residents with a living experience that is second -to -none. In the FY 2012-13 budget, General Fund,revenues and transfers are budgeted to decrease by $684K (11%). The decrease is primarily related to the reduction of the indirect cost reimbursement from the Westlake Academy to the Town for services performed by Town personnel as well as a reduction in permits and fees. Sales tax represents 46% of the total revenue budget with 21% being contributed to property tax and 12% to franchise fees. Westlake's assessed valuation increased by 11.2% for FY 12-13; however, the portion of this assessed valuation that we can actually use to levy an ad valorem tax deceased by 8%. This was due largely to tax abatements on Fidelity II and Deloitte University. Fidelity is able to receive these abatements in FY 12-13; however, they were not eligible in FY 11-12 because they did not meet their employment targets required in our economic development agreements with them. Even with these abatements lowering the portion of our assessed valuation on which we can levy our property tax in FY 12-13, we were still able to keep our tax rate the same as the previous year at $.15684 per $100 of assessed valuation ($.141970 maintenance and operations and $.014870 interest and sinking). 13 Operating budgeted expenditures in the General Fund are projected to increase by only $40K (1%). The method for funding a second ground storage water tank for our water system is still under consideration. Because of that, it was budgeted in FY 12-13 to transfer, through an inter -fund loan, funds from the General Fund to the Utility Fund. The amount of $2M is scheduled to be re -paid over five years with a $400,000 annual payment. However, if we can work out the ability to issue bonds for this project, that would be the preferred method of financing this needed facility and an inter -fund loan from the General Fund to the Utility Fund will not be necessary. Subsequent to the adoption of the budget, the Town is considering funding a portion of this project with bonds and only transferring $500K. The Capital Projects Fund's fund balance will increase due to $8.5M issuance for Westlake Academy facility expansion. This increase as well as the ongoing implementation of the (5) Year Capital Improvement Program (CIP) will bring the fund balance to $3.3M. The CIP is reviewed, updated, and approved each year by the Town Council. The FM 1938/ Davis Blvd. streetscape plan will begin in earnest this coming year and the final expenditures for the J. T. Ottinger and Dove Road improvements will wind down. We will also begin to implement the enhancement projects along SH 114/Hwy 170 during the 12-13 fiscal year and start reconstruction and drainage work on Dove Road east of FM 1938. A transfer from the General Fund to the Major Maintenance and Replacement Fund continues this fiscal year, with transfers out 'of $550,000. The expenditures will be used for plant/building maintenance at the Academy, trail repair work, replacement of an existing vehicle, as well as technology upgrades. A portion of the remaining balance will be held for the future replacement of the ladder truck for the Fire Department in FY 2016-17. Internal Service funds show a 23% increase of $220,205, due to the transfer of funds into the two major maintenance and equipment replacement funds (Utility and General), to accumulate funds for various repair and replacement items. The net change to Fund balance for Westlake Academy is positive due, in part, to a $300 thousand contribution from the Westlake Academy Foundation which is intended to help with the negative impact of the reduction in State funding for public schools across Texas. Special Revenue funds project a 13% decrease in total fund balance in the amount of $164,923 by the end of FY 2012-13. This reduction is primarily due to the Visitors Association Fund (i.e. Hotel -Motel Occupancy Tax Fund), where debt service payments are budgeted to be transferred for the bond issue payment related to construction of the Westlake Academy Sam and Margaret Lee Arts & Sciences Center. Total revenues and other sources in for the Utility Fund were budget at $4.8M with 43% being contributed to water revenue and 42% to a transfer in from the General Fund for the construction of the ground storage tank. As stated above, this amount may be amended during the FY 2012-13. Expenses and other uses are budgeted at $4.6M with the 47% of this being attributed to capital outlay/projects. CONTACTING THE TOWN'S FINANCE DEPARTMENT This financial report is designed to provide our citizens, customers, and investors and creditors with a general overview of the Town's finances and to demonstrate the Town's accountability for the money it receives. If you have questions about this report or need additional financial information, contact Debbie Piper, Town of Westlake Finance Director, at 817-490-5712. 14 BASIC FINANCIAL STATEMENTS TOWN OF WESTLAKE, TEXAS STATEMENT OF NET ASSETS SEPTEMBER 30, 2012 ASSETS Cash and cash equivalents Investments Receivables (net of allowance) Internal balances Inventories Other assets Restricted cash and cash equivalents Deferred charges Capital assets: Land Buildings and improvements Wastewater treatment rights Machinery and equipment Construction in progress Less: accumulated depreciation Total capital assets Total assets LIABILITIES Accounts payable Customer deposits payable Unearned revenue Accrued interest payable Noncurrent liabilities: Due within one year Due in more than one year Total liabilities NET ASSETS Invested in capital assets, net of related debt Restricted for: Tourism Future projects Debt service Education Economic development Unrestricted Total net assets Primary Government Discretely Governmental Business -type Presented Activities Activities Total Component Units $ 9,955,686 $ 2,587,845 $ 12,543,531 $ 6,003,203 1,212,007 847,608 2,059,615 575,547 178,384 ( 178,384) - - - 97,880 97,880 - 81,689 - 81,689 - 264,709 149,040 413,749 4,818,871 493,389 - 493,389 3,553,390 11,896,663 - 11,896,663 12,070,678 26,806,318 13,333,561 40,139,879 91,741,792 - 635,199 635,199 - 2,844,174 3,466,046 6,310,220 12,052,793 1,552,004 174,210 1,726,214 - ( 8,785,544) ( 5,232,793) ( 14,018,337) ( 38,575,352) 34,313,615 12,376,223 46,689,838 77,289,911 46,499,479 15,880,212 62,379,691 92,240,922 622,526 59,604 682,130 1,556,911 - 149,040 149,040 - 52,154 385,217 437,371 3,557,642 256,125 4,534,949 4,791,074 21,408,653 853,439 87,662 941,101 2,349,674 20,098,829 5,422,434 25,521,263 111,178,833 21,883,073 10,638,906 32,521,979 140,051,713 14,866,299 1,052,546 2,714,662 22,657 758,127 178,384 5,023,731 $ 24,616,406 6,877,555 21,743,854 ( 36,238,596) ( 1,636,249) $ 5,241,306 The accompanying notes are an integral part of these financial statements. 15 1,052,546 2,714,662 22,657 758,127 178,384 3,387,482 $ 29,857,712 ( 11,572,195) $( 47,810,791) Business -type activities Water utilities 3,098,466 2,934,842 24,423 - Cemetery 6,282 .4,500 - - Total business -type activities 3,104,748 2,939,342 24,423 - Total primary government $ 15,9483219 $ 4,357,221 $ 5,294,264 $ - Component units: Business -type activities $ 24,427,233 $ 17,899,141 $ - $ - Totalcomponentunits $ 24,427,233 $ 17,899,141 $ - $ - General revenues: Sales taxes Property taxes Hotel occupancy taxes Mixed beverage taxes Franchise taxes Interest income Miscellaneous Transfers Extraordinary item Special item Total general revenues and transfers Change in net asset: Net assets, beginning Net assets, ending The accompanying notes are an integral part of these financial statements. 16 TOWN OF WESTLAKE, TEXAS STATEMENT OF ACTIVITIES FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2012 Program Revenues Operating Capital Charges foi Grants and Grants and Functions/Programs Expenses Services Contributions Contributions Primary government Governmental activities General government $ 2,518,490 $ 673,090 $ - $ - Public safet) 1,883,424 142,402 - - Culture and recreatior 111,765 - - - Economic Developmeir 216,901 - - - Public works 546,039 407,328 - - Visitor Services 475,719 - - - Education -6,193,560 195,059 5,269,841 - Interest on long-term debt 897,573 - - - Total governmental activities 12,843,471 1,417,879 5,269,841 - Business -type activities Water utilities 3,098,466 2,934,842 24,423 - Cemetery 6,282 .4,500 - - Total business -type activities 3,104,748 2,939,342 24,423 - Total primary government $ 15,9483219 $ 4,357,221 $ 5,294,264 $ - Component units: Business -type activities $ 24,427,233 $ 17,899,141 $ - $ - Totalcomponentunits $ 24,427,233 $ 17,899,141 $ - $ - General revenues: Sales taxes Property taxes Hotel occupancy taxes Mixed beverage taxes Franchise taxes Interest income Miscellaneous Transfers Extraordinary item Special item Total general revenues and transfers Change in net asset: Net assets, beginning Net assets, ending The accompanying notes are an integral part of these financial statements. 16 ( 6,155,751) ( 139,201) ( 1,782) ( 140,983) ( 140,983) ( 139,201) ( 1,782) ( 140,983) ( 6,296,733) $( 6,528,092) $( 6,528,092) 3,657,274 Net (Expense) Revenue and 3,657,274 Changes in Net Assets 1,441,238 Primary Governmem Discretely Governmental Business -type Presented Activities i I Activities Total Component Units $( 1,845,400) $ - $( 1,845,400) $ - ( 1,741,022) - ( 1,741,022) - ( 111,765) - ( 111,765) - ( 216,901) - ( 216,901) - ( 138,711) - ( 138,711) - ( 475,719) - (. 475,719) - ( 728,660) - ( 728,660) - ( 897,573) - ( 897,573) - ( 6,155,751) - ( 6,155,750) - ( 6,155,751) ( 139,201) ( 1,782) ( 140,983) ( 140,983) ( 139,201) ( 1,782) ( 140,983) ( 6,296,733) $( 6,528,092) $( 6,528,092) 3,657,274 - 3,657,274 - 1,441,238 - 1,441,238 - 590,853 - 590,853 - 38,286 - 38,286 - 664,991 - 664,991 - 33,353 10,077 43,430 22,770 1,112,858 84,780 1,197,638 1 45,507 ( 45,507) - - ( 124,346) - ( 124,346) - 67,760 - 67,760 - 7,527,774 49,350 7,577,124 22,771 1,372,023 ( 91,633) 1,280,390 ( 6,505,321) 23,244,383 5,332,939 28,577,322 ( 42,405,726) $ 24,616,406 $ 5,241,306 $ 29,857,712 $( 47,810,791) 17 TOWN OF WESTLAKE, TEXAS BALANCESHEET GOVERNMENTAL FUNDS SEPTEMBER 30, 2012 Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds. Long-term liabilities are not due and payable in the current period and therefore are not reported in the funds Certain other long-term assets are not available to pay current period expenditures and therefore are deferred in the funds Net assets of governmental activities The accompanying notes are an integral part of these financial statements. 18 Debt Visitors Westlake Service General Association Academy Fund ASSETS: Cash and cash equivalents $ 4,637,252 $ 977,700 $ 681,617 $ 22,657 Receivables Property taxes 1,796 - - 240 Accounts receivable 557,579 88,164 225,459 Due from other funds 149,641 - - Other assets 6,856 - 74,833 - Restricted cash and investments 264,709 - - - TOTAL ASSETS $ 5,617,833 $ 1,065,864 $ 981,909 $ 22,897 LIABILITIES AND FUND BALANCE: Liabilities: Accounts payable 352,232 11,818 112,165 Deferred revenue 1,796 1,500 50,654 240 Due to other funds - - Total liabilities 354,028 13,318 162,819 240 Fund Balances: Nonspendable: Prepaid items 6,856 - 60,963 - Restricted for: Tourism - 1,052,546 - - Future projects 49,941 - - - Debt service - 22,657 Education - - 758,127 - Economic development - - - Committed for: Court security and technology 192,768 - - - Assigned for: Future equipment purchase 22,000 - - Unassigned 4,992,240 - - Total fund balances 5,263,805 1,052,546 819,090 22,657 TOTAL LIABILITIES AND FUND BALANCES $ 5,617,833 $ 1,065,864 $ 981,909 $ 22,897 Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds. Long-term liabilities are not due and payable in the current period and therefore are not reported in the funds Certain other long-term assets are not available to pay current period expenditures and therefore are deferred in the funds Net assets of governmental activities The accompanying notes are an integral part of these financial statements. 18 Economic Lone Star 4B Economic Total Capital Development Public Facility Development Governmental Projects Fund Corporation Corporation Funds $ 3,622,884 $ - $ 13,576 $ - $ 9,955,686 2,036 104,230 - 149,641 1,125,073 - - 178,384 328,025 81,689 264,709 $ 3,622,884 $ 104,230 $ 13,576 $ 328,025 $ 11,757,218 42,081 104,230 - - 622,526 - - - 54,190 - - 149,641 149,641 42,081 104,230 - 149,641 826,357 67,819 1,052,546 3,580,803 13,576 - 3,644,320 - - - - 22,657 - 758,127 178,384 178,384 - - - 192,768 22,000 - - - 4,992,240 3,580,803 13,576 178,384 10,930,861 $ 3,622,884 $ 104,230 $ 13,576 $ 328,025 34,313,615 ( 20,715,004) 86,934 $ 24,6I6,406 19 TOWN OF WESTLAKE, TEXAS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2012 The accompanying notes are an integral part of these financial statements. 20 Debt Visitors Westlake Service General Association Academy Fund REVENUES: Taxes Sales $ 2,534,774 $ - $ - $ - Property 1,271,975 - - 170,093 Mixed beverage 38,286 - - - Hotel occupancy - 590,853 - - Franchise 664,991 - - - State program revenues - - 4,369,635 - Federal program revenues - - 152,351 - Interest income 14,060 3,438 2,417 - Building permits and fees 598,394 - - - Fines and penalties 622,338 - - - Contributions 325,520 7,015 - - Miscellaneous 80,936 6,425 1,227,872 - Total revenues 6,151,274 607,731 5,752,275 170,093 EXPENDITURES: Current General government 1,878,885 - - - Public safety 2,224,469 - - - Culture and recreation 111,765 - - - Public works 391,115 - - - Economic Development - - - - Visitor services - 475,719 - - Education - - 5,793,560 - Capital outlay - - - - Debt service Principal retirement - - - 668,000 Interest and other fiscal charges - - - 952,027 Bond issuance costs - - - 148,891 Total expenditures 4,606,234 475,719 5,793,560 1,768,918 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES 1,545,040 132,012 ( 41,285) ( 1,598,825) OTHER FINANCING SOURCES (USES) Transfers in 583,857 - - 1,465,086 Transfers out ( 880,486) ( 190,746) - - Bonds issued - - - 7,799,196 Payment to escrow agent - - - ( 7,650,305) Special item - - 67,760 - Extraordinary item - - ( 124,346) - Total other financing sources (uses) ( 296,629) ( 190,746) ( 56,586) 1,613,977 NET CHANGE IN FUND BALANCES 1,248,411 ( 58,734) ( 97,871) 15,152 FUND BALANCES, BEGINNING 4,015,394 1,111,280 916,961 7,505 FUND BALANCES, ENDING $ 5,263,805 $ 1,052,546 $ 819,090 $ 22,657 The accompanying notes are an integral part of these financial statements. 20 36,398 35,758 - - 2,121,099 - - - ( 1,004,360) ( 2,075,592) - - - 7,799,196 ( 7,650,305) - - - 67,760 ( 124,346) 36,398 35,758 - ( 1,004,360) 137,812 ( 1,053,529) - 45 ( 89,193) ( 35,719) 4,634,332 - 13,531 267,577 10,966,580 $ 3,580,803 $ - $ 13,576 $ 178,384 $ 10,930,861 21 Economic Lone Star 4B Economic Total Capital Development Public Facility Development Governmental Projects Fund Corporation Corporation Funds $ - $ 208,181 $ - $ 914,319 $ 3,657,274 - - - - 1,442,068 - - - - 38,286 - - - - 590,853 - - - - 664,991 - - - - 4,369,635 - - - - 152,351 12,545 - 45 848 33,353 - - - - 598,394 - - - - 622,338 400,000 - - - 732,535 8,004 - - - 1,323,237 420,549 208,181 45 915,167 14,225,315 - - - - 1,878,885 - - - - 2,224,469 - - - - 111,765 - - - - 391,115 - 243,939 - - 243,939 - - - - 475,719 400,000 - - - 6,193,560 1,110,476 - - - 1,110,476 - - - - 668,000 - - - - 952,027 - - - - 148,891 1,510,476 243,939 - - 14,398,846 ( 1,089,927) ( 35,758) 45 915,167 ( 173,531) 36,398 35,758 - - 2,121,099 - - - ( 1,004,360) ( 2,075,592) - - - 7,799,196 ( 7,650,305) - - - 67,760 ( 124,346) 36,398 35,758 - ( 1,004,360) 137,812 ( 1,053,529) - 45 ( 89,193) ( 35,719) 4,634,332 - 13,531 267,577 10,966,580 $ 3,580,803 $ - $ 13,576 $ 178,384 $ 10,930,861 21 TOWN OF WESTLAKE, TEXAS RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES FOR THE YEAR ENDED SEPTEMBER 30, 2012 Amounts reported for governmental activities in the statement of activities are different because: Net change in fund balance - total governmental funds Governmental funds report capital outlays as expenditures. However, in the statement of activities, the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. This is the amount by which depreciation exceeds capital outlays in the current period. Revenues in the statement of activities that do not provide current financial resources are not reported as revenues in the funds. The issuance of long-term debt (e.g., bonds, leases) provided current financial resources to governmental funds, while repayment of the principal of long-term debt consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net assets. Also, governmental funds report the effect of issuance costs, premiums, discounts, and similar items when debt is first issued, whereas these amounts are deferred and amortized in the statement of activities. This amount is the net effect of these differences in the treatment of long-term debt and related items. Some expenses reported in the statement of activities do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds. Change in net assets of governmental activities The accompanying notes are an integral part of these financial statements. 22 $( 35,719) 647,738 1,258 710,963 47,783 $ 1,372,023 TOWN OF WESTLAKE, TEXAS STATEMENT OF NET ASSETS PROPRIETARY FUNDS SEPTEMBER 30, 2012 Business -type Activities -Enterprise Funds Utility Cemetery Fund Fund Total ASSETS Current assets: Cash and cash equivalents $ 2,537,706 $ 50,139 $ 2,587,845 Investments - - - Accounts receivable (net of allowance) 847,608 - 847,608 Inventories - 97,880 97,880 Other assets - - - Restricted cash and investments 149,040 - 149,040 Total current assets 3,534,354 148,019 3,682,373 Noncurrent assets Capital assets: Construction. in progress 174,210 - 174,210 Buildings and improvements 13,333,561 - 13,333,561 Wastewater treatment rights 635,199 - 635,199 Machinery and equipment 3,466,046 - 3,466,046 Less: accumulated depreciation ( 5,232,793) - ( 5,232,793) Total capital assets 12,37611223 - 12,376,223 Total noncurrent assets 12,376,223 - 12,376,223 Total assets 15,910,577 148,019 16,058,596 LIABILITIES Current liablities: Accounts payable 58,937 667 59,604 Customer deposits payable 149,040 - 149,040 Accrued interest payable 4,534,949 - 4,534,949 Due to other funds 178,384 - 178,384 Deferred revenue 385,217 - 3859217 Compensated absences 1,143 - 1,143 Contractual obligations 86,519 - 86,519 Total current liabilities 5,394,189 667 5,394,856 Long-term liabilities: Compensated absences 10,285 - 10,285 Contractual obligations 5,412,149 - 5,4121,149 Total long-term liabilities 5,422,434 - 51422,434 Total liabilities 10,816,623 667 10,8179290 NET ASSETS Invested in capital assets, net of related debt 6,877,555 - 6,877,555 Unrestricted ( 1,783,601) 147,352 ( 1,636,249) Total net assets $ 590939954 $ 147,352 $ 5,241,306 The accompanying notes are an integral part of these financial statements. 0*1 TOWN OF WESTLAKE, TEXAS STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET ASSETS PROPRIETARY FUNDS FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2012 Business -type Activities -Enterprise Funds_ Utility Cemetery Fund Fund Total OPERATING REVENUES: Charges for services $ 2,934,842 $ 4,500 $ 2,939,342 Contributions 24,423 - 24,423 Miscellaneous revenue 84,780 - 84,780 Total operating revenue 3,044,045 4,500 3,048,545 OPERATING EXPENSES: Payroll costs 253,673 - 253,673 Professional and contract services 30,187 5,984 36,171 Depreciation 426,775 - 426,775 Amortization of wastewater treatment rights 31,760 - 31,760 Water purchases 980,212 - 980,212 Cost of cemetary.lots sold - 298 298 Other operating costs 661,123 - 661,123 Total'operating expenses 2,383,730 6,282 2,390,012 OPERATING INCOME 660,315 ( 1,782) . 658,533 NON-OPERATING REVENUES (EXPENSES): Interest income 9,906 171 10,077 Interest expense ( 714,736) - ( 714,736) Total non-operating revenues (expenses) ( 704,830) 171 ( 704,659) INCOME (LOSS) BEFORE TRANSFERS AND CAPITAL CONTRIBUTIONS ( 44,515) ( 1,611) ( 46,126) Transfer in 50,000 - 50,000 Transfer out ( 95,507) - ( 95,507) Total transfers and capital contributions ( 45,507) - ( 45,507) CHANGE IN NET ASSETS ( 90,022) ( 1,611) ( 91,633) TOTAL NET ASSETS, BEGINNING 5,183,976 148,963 5,332,939 ,TOTAL NET ASSETS, ENDING $ 5,093,954 $ 147,352 $ 5,241,306 The accompanying notes are an integral part of these financial statements. 24 TOWN OF WESTLAKE, TEXAS STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2012 Business -type Activities -Enterprise Funds Utility Cemetery Total Fund Fund Current Year CASH FLOWS FROM OPERATING ACTIVITIES Cash received from customers Cash payments to employees/retirees Cash payments for goods and services Net cash provided by operating activities CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Transfer from other funds Transfer to other funds Advances to other funds Net cash provided by noncapital financing activities CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Principal paid on debt Interest paid on debt Purchase of property and equipment Net cash used by capital and related financing activities CASH FLOWS FROM INVESTING ACTIVITIES Investment earnings NET INCREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS, BEGINNING $ .3,333,070 $ 4,500 $ 3,337,570 ( 251,694) - ( 251,694) ( 2,041,740) ( 5,316) ( 2,047,056) 1,039,636 ( 816) 1,038,820 50,000 - 50,000 ( 95,507) - ( 95,507) ( 29,731) - ( 29,731) ( 75,238) - ( 75,238) ( 81,712) - ( 81,712) ( 123,081) - ( 123,081) ( 379,348) - ( 379,348) ( 584,141) - ( 584,141) Customer deposits payable 9,906 171 10,077 ( 29,953) 390,163 ( 645) 389,518 2,296,583 50,784 2,347,367 CASH AND CASH EQUIVALENTS, ENDING $ 2,686,746 $ 50,139 $ 2,736,885 RECONCILIATION OF TOTAL CASH AND CASH EQUIVALENTS Customer deposits payable 5,260 Deferred revenue ( 29,953) Net cash provided by operating activities $ 1,039,636 Cash and cash equivalents $ 2,537,706 $ 50,139 $ 2,587,845 Restricted cash and cash equivalents 149,040 - 149,040 Total cash and cash equivalents $ 2,686,746 $ 50,139 $ 2,736,885 RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH PROVIDED BY OPERATING ACTIVITIES Operating income $ 660,315 $( 1,782) $ 658,533 Adjustments to reconcile operating loss to net cash provided by operating activities: Depreciation and amortization 458,536 - 458,536 Changes in operating assets and liabilities: Receivables 313,717 Other assets 2,589 Accounts payable ( 372,807) Compensated absences 1,979 Customer deposits payable 5,260 Deferred revenue ( 29,953) Net cash provided by operating activities $ 1,039,636 The accompanying notes are an integral part of these financial statements. 25 299 667 $( 816) 313,717 2,888 ( 372,140) 1,979 5,260 ( 29,953) $ 1,038,820 TOWN OF WESTLAKE, TEXAS DISCRETELY PRESENTED COMPONENT UNITS COMBINING STATEMENT OF NET ASSETS SEPTEMBER 30, 2012 LIABILITIES AND NET ASSETS LIABILITIES Accounts payable and accrued expenses Texas Student Texas Student Texas Student Unearned revenue Housing Housing Housing Accrued interest payable Authority - Corporation - Authority - Noncurrent liabilities: Ballpark Austin The Ridge at Town Lake Due within one year Project North Texas Austin Project ASSETS 33,518,348 27,050,161 20,300,324 Cash and cash equivalents $ 590,771 $ 676,602 $ 275,717 Accounts receivables (net of allowance) 19,151 110,360 56,173 Restricted assets: Cash and cash equivalents 518,794 2,002,044 108,046 Deferred charges 2,265,605 639,311 648,474 Capital assets: $( 17,900,707) $( 11,517,183) $L_1,687,063) Land 4,788,265 2,200,000 2,182,816 Buildings and improvement 21,345,305 25,705,000 16,963,841 Machinery and equipment 6,993,063 1,253,841 1,211,085 Less: accumulated depreciation ( 11,698,625) ( 10,946,544) ( 6,186,177) Total assets 24,822,329 21,640,614 15,259,975 LIABILITIES AND NET ASSETS LIABILITIES Accounts payable and accrued expenses 713,128 414,003 259,749 Unearned revenue 252,276 418,739 128,194 Accrued interest payable 7,254,284 4,627,379 1,951,612 Noncurrent liabilities: Due within one year 985,000 647,515 307,159 Due in more than one year 33,518,348 27,050,161 20,300,324 Total liabilities 42,723,036 33,157,797 22,947,038 NET ASSETS Invested in capital assets, net of related debt ( 13,075,340) ( 9,485,379) ( 6,435,918) Unrestricted ( 4,825,367) ( 2,031,804) ( 1,251,145) Total net assets $( 17,900,707) $( 11,517,183) $L_1,687,063) The accompanying notes are an integral part of these financial statements. 26 Texas Student - 1,556,911 2,726,546 Housing 7,575,378 - 21,408,653 Authority - Texas Student 30,310,000 College Station Housing 31,887 140,051,713 Project Authority Total $ 4,142,293 $ 317,820 $ 6,003,203 388,890 973 575,547 2,189,987 - 4,818,871 - - 3,553,390 2,899,597 - 12,070,678 27,727,646 - 91,741,792 2,594,804 - 12,052,793 ( 9,744,006) - ( 38,575,352) 30,199,211 318,793 92,240,922 170,031 - 1,556,911 2,726,546 31,887 3,557,642 7,575,378 - 21,408,653 410,000 - 2,349,674 30,310,000 - 111,178,833 41,191,955 31,887 140,051,713 ( 7,241,959) - ( 36,238,596) ( 3,750,785) 286,906 ( 11,572,195) $ 10,992,744) $ 286,906 $( 47,810,791) 27 TOWN OF WESTLAKE, TEXAS DISCRETELY PRESENTED COMPONENT UNITS COMBINING STATEMENT OF ACTIVITIES FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2012 Program Revenues 1 The accompanying notes are an integral part of these financial statements. 28 Operating Capital Charges for Grants and Grants and Functions/Programs Expenses Services Contributions Contributions Business -type activities: Texas Student Housing Authority $ 1,150,106 $ 852,277 $ - $ - Texas Student Housing Authority: College Station Project 7,821,953 5,818,085 - - Ballpark Austin Project 5,448,817 3,782,426 - - Town Lake Austin Project 4,215,434 2,811,775 - - Texas Student Housing Corporation: The Ridge at North Texas 5,790,923 4,634,578 - - Total business -type activities 24,427,233 17,899,141 - - Total primary government $ 24,427,233 $ 17,899,141 $ - $ - General revenues: Interest income Miscellaneous Total general revenues and transfers Change in net assets Net assets, beginning Prior Period Adjustment Net assets, ending 1 The accompanying notes are an integral part of these financial statements. 28 Net (Expense) Revenue and Changes in Net Assets Texas Student Texas Student Texas Student Texas Student - ( 1,156,345) Housing Housing Housing Housing . ( 297,829) ( 6,528,092) Authority - Corporation - Authority - Authority - Texas Student ,528,092) Ballpark Austin The Ridge at Town Lake College Station Housing - Project North Texas Austin Project Project Authority Total $ - $ - $ - $ - $( 297,829) $( 297,829) - - - ( 2,003,868) - ( 2,003,868) ( 1,666,391) - - - - ( 1,666,391) - - ( 1,403,659) - - ( 1,403,659) - ( .1,156,345) - - - ( 1,156,345) ( 1,666,391) ( 1,156,345) ( 1,403,659) ( 2,003,868) ( 297,829) ( 6,528,092) ( 1,666,391) ( 1,156,345) ( 1,403,659) L_2,003,868 297,829) ,528,092) - 22,433 - 306 31 22,770 - - - - 1 1 - 22,433 - 306 32 22,771 ( 1,666,391) ( 1,133,912) ( 1,403,659) ( 2,003,562) ( 297,797) ( 6,505,321) ( 17,334,572) ( 10,383,271) ( 6,283,404) ( 8,989,182) 584,703 ( 42,405,726) 1,100,256 - - - - 1,100,256 $ 17,900,707) $ 11,517,183 $( 7,687,063) $( 10,992,744) $ 286,906 $ 47,810,791 29 TOWN OF WESTLAKE, TEXAS NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2012 I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Town of Westlake, Texas (the "Town") was incorporated under the provisions of the laws of the State of Texas on December 26, 1956. The Town operates under a Council - Manager form of government and provides the following services as authorized by the laws of the State of Texas: public safety; cultural and recreation; and economic development. A. Reporting Entity The accompanying financial statements comply with the provisions of the GASB statements No. 14 and 39. "The Financial Reporting Entity," in that the Town's basic financial statements include the accounts of the Town's financial reporting entity, including the primary government, organizations for which the Town is financially accountable and other organizations for which the nature and significance of their relationship with the Town are such that inclusion would cause the Town's financial statement to be misleading or incomplete. The criteria for including organizations as component units within the Town's reporting entity, includes whether: ■ The organization is legally separate (can sue and be sued in their own name); ■ The Town holds the corporate powers of the organization; ■ The Town appoints a voting majority of the organization's board; ■ The Town is able to impose its will on the organization; ■ The organization has the potential to impose a financial benefitiburden on the Town; and ■ There is fiscal dependency by the organization on the Town. Component units are blended with the balances and transactions of the Town if one of the following criterion are met: ■ The component unit is substantially the same governing body as the Town; or ■ The component unit provides services entirely (or almost entirely) to the Town or benefits the Town exclusively (or almost exclusively) ; or ■ The Town is able to impose its will on the component unit. Based on the aforementioned criteria, the Town has the following component units: Lone Star Public Facilities Corporation, 4B Economic Development Corporation, Westlake Academy, Texas Student Housing Authority, Texas Student Housing Authority Ballpark Austin Project; Texas Student Housing Authority Town Lake Austin Project, Texas Student Housing Authority College Station Project and Texas Student Housing Corporation - The Ridge at North Texas. (continued) 30 I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) B. Component Units Discretely Presented The Texas Student Housing Authority, Texas Student Housing Ballpark Austin Project, Texas Student Housing Town Lake Austin Project, Texas Student Housing College Station Project, and Texas Student Housing Corporation — The Ridge at North Texas Project (collectively, "Texas Student Housing') are Texas nonprofit organizations as a duly constituted authority of the Town pursuant to Section 53.35(b) of the Texas Education Code, as amended (Act). Texas Student Housing's primary purpose is to construct, own, and operate student housing facilities on college campuses in Texas. The board consists of seven directors which are appointed by the Town's governing body and has the ability to remove at will the appointed members, thus the governing body can impose its will on the organizations. Housing entities are reported as Enterprise Funds. The Town is not responsible for the long-term debt of the Texas Student Housing entities. All Texas Student Housing entities have separately issued financial statements. These statements can be obtained by contacting the Texas Student Housing Authority, 3 Village Circle, Suite 202, Westlake, Texas 76262. The financial statements are formatted to allow the user. to clearly distinguish between the primary government and the discretely presented component units. Blended Lone Star Public Facilities Corporation is a Texas nonprofit corporation that acts on behalf of the Town to further the public purposes under the Public Facilities Corporation Act, as it's duly constituted authority and instrumentality. The board of directors, appointed by the Town's governing body, is comprised of seven members, of whom five must be members of the Town's governing body. Since a voting majority of the board of directors is on the Town's governing body, the Town can impose its will on the entity. 4B Economic Development Corporation is a Texas nonprofit industrial corporation under the Development Corporation Act of 1979 formed to promote economic development within the Town and the State of Texas in order to eliminate unemployment and underemployment, and to promote and encourage employment and the public welfare of, for, and on behalf of the Town by developing, implementing, financing, and providing one or more projects defined and permitted under Section 4B of the Act. The board of directors is composed of seven persons appointed by the members of the Town's governing board. Four of the members of the board of directors are members of the Town's governing board. Since a voting majority of the board of directors is on the Town's governing body, the Town can impose its will on the entity. (continued) 31 I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) B. Component Units (Continued) Blended (Continued) Westlake Academy ("Academy') is an open -enrollment charter school, as provided by Subchapter D, Chapter 12, of the Texas Education Code. The Town of Westlake ("Charter Holder") applied for and became the first municipality in Texas to ever receive this special charter designation. The board consists of six trustees and is appointed by the Town's governing body. Currently, all the members of the board of trustees are members of the Town's governing body. Since a voting majority of the board of directors is on the Town's governing body, the Town can impose its will on the entity. The Academy's year-end is August 31. C. Government -wide and Fund Financial Statements The government -wide financial statements (i.e., the Statement of Net Assets and the Statement of Activities) report information on all of the non -fiduciary activities of the Town. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business -type activities, which rely to a significant extent on fees and charges for support. Likewise, the primary government is reported separately from certain legally separate component units for which the primary government is financially accountable. The statement of activities demonstrates the degree to which the direct expenses of a given function or segment is offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues includes 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general revenues. Separate financial statements are provided for governmental funds and proprietary funds. Major individual Governmental Funds and major individual Enterprise Funds are reported as separate columns in the fund financial statements. D. Measurement Focus, Basis of Accounting, and Financial Statement Presentation The government -wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. (continued) 32 I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) D. Measurement Focus, Basis of Accounting, and Financial Statement Presentation (Continued) Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the Town considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due. Sales taxes, franchise taxes, licenses, and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. All other revenue items are considered to be measurable and available only when cash is received by the Town. The Town uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain government functions or activities. A fund is a separate accounting entity with a self -balancing set of accounts. Governmental Funds are those through which most governmental functions of the Town are financed. The acquisition, use, and balances of the Town's expendable financial resources and the related liabilities (except those accounted for in the proprietary fund type) are accounted for through governmental funds. The measurement focus is upon determination of changes in financial position, rather than upon income determination. The Town reports the following major governmental funds: General Fund — to account for all financial resources except those required to be accounted for in another fund. The General Fund balance is available for any purpose, provided it is expended or transferred in accordance with the legally adopted budget of the Town. Special Revenue Funds — to account for the proceeds of specific revenue sources (other than special assessments, expendable trusts, or major capital projects) that are legally restricted to expenditures for specified purposes. Visitors Association Fund — to account for municipal hotel occupancy taxes collected and expenditures to promote tourism and the convention and hotel industry. Westlake Academy Fund — to account for all financial resources of the Academy. Lone Star Public Facilities Corporation — to account for activity relating to the Lone Star Public Facilities Corporation. (continued) RX I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) D. Measurement Focus, Basis of Accounting, and Financial Statement Presentation (Continued) 4B Economic Development Corporation — to account for activity relating to 4B Economic Development Corporation. Economic Development Fund — to account for activity relating to the Economic Development agreements. Debt Service Fund — to account for resources accumulated and payments made for principal and interest on long-term general obligation debt of governmental funds in a Debt Service Fund. Capital Proiects Fund — to account for proceeds from long-term financing and revenue and expenditures related to authorized construction and other capital asset acquisitions. Proprietary Funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongoing operations. The principal operating revenues of the Town's Enterprise Fund are charges to customers for sales and services. Operating expenses for the Enterprise Fund include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenue and expenses not meeting this definition are reported as nonoperating revenue and expenses. The Town reports the following major proprietary funds: Utility Fund — to account for revenues and expenses related to providing water and sewer services to the general public on a continuing basis. Cemetery Fund — to account for the operations of the Town's cemetery. Private -sector standards of accounting and financial reporting issued prior to December 1, 1989, generally are followed in both government -wide and proprietary fund financial statements to the extent that those, standards do not conflict with or contradict guidance of the Governmental Accounting Standards Board. Governments also have the option of following subsequent private -sector guidance for their business -type activities and Enterprise Funds, subject to this same limitation. The Town has elected not to follow subsequent private -sector guidance. As a general rule, the effect of interfund activity has been eliminated from the government - wide financial statements. Exceptions to this general rule are charges between the Town's water and wastewater function and various other functions of the government. Elimination of these charges would distort the direct costs and program revenue reported for the various functions concerned. Amounts reported as program revenues include: 1) charges to customer or applicants for goods, services, or privileges provided, 2) operating grants and contributions, and 3) capital grants and contributions„ including special assessments. Internally dedicated resources are reported as general revenues rather than as program revenue. Likewise, general revenue includes all taxes. (continued) 34 I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) E. Assets, Liabilities, and Net Assets or Equity Cash and Cash Equivalents Cash and investments of all funds, including restricted cash, are available upon demand and are considered to be "cash equivalents." For purposes of the statement of cash flows, the Town considers highly -liquid investments (including restricted assets) with an original maturity of three months or less when purchased to be cash equivalents. State statues authorize the Town to invest in (1) obligations of the United States or its agencies and instrumentalities; (2) direct obligations of the State of Texas or its agencies; (3) other obligations, the principal of and interest on which are unconditionally guaranteed or insured by the State of Texas or the United States; (4) obligations of states, agencies, counties, cities, and other political subdivisions of any state having been rated as to investment quality by a nationally recognized investment rating firm and having received a rating of not less than "A" or its equivalent; (5) certificates of deposit by state or national banks domiciled in this state that are (a) guaranteed or insured by the Federal Deposit Insurance Corporation, or its successor; or, (b) secured by obligations that are described by (1) — (4); or (6) fully collateralized direct repurchase agreements having a defined termination date, secured by obligations described by .(1) pledged with third -party selected or approved by the Town, and placed through a primary government securities dealer. All investments are recorded at fair value based on quoted market prices. Fair value is the amount at which a financial instrument could be exchanged in a current transaction between willing parties. Receivables and Payables Transactions between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as "due to/from other funds" (i.e., the current portion of interfund loans) or "advances to/from other funds" (i.e., the non-current portion of interfund loans. All other outstanding balances between funds are reported as "due to/from other funds." Any residual balances outstanding between the governmental activities and business -type activities are reported in the government -wide financial statements as "internal balances." Advances between funds, as reported in the fund financial statements, are offset by a fund balance reserve account in applicable governmental funds to indicate that they are not available for appropriation and are not expendable available financial resources. All property tax receivables are shown net of an allowance for uncollectibles. The net property tax receivable allowance is equal to 25 percent of outstanding property taxes at September 30, 2012. (continued) 35 I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) E. Assets, Liabilities, and Net Assets or Equity (Continued) Receivables and Payables (Continued) The Town's property taxes are levied on October 1 on the assessed value listed as of the prior January 1 for all real and business personal property located in the Town. Assessed values are established at 100% of estimated market value. Property taxes attach as an enforceable lien on property as of January 1. Taxes are due by January 31 following the October 1 levy date and are considered delinquent after January 31 of each year. Restricted Assets Certain bond proceeds, as well as certain resources set aside for their repayment, are classified as restricted assets on the balance sheet because their use is limited by applicable bond covenants. Inventories and prepaid items Inventories, which are expended as they are consumed, are stated at the lower of cost or market on a first -in, first -out basis. Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both the government -wide and fund financial statements. Fund Changes and Transactions Between Funds Legally authorized transfers are treated as operating transfers and are included in the results of operations of both governmental and proprietary funds. The Town allocates an indirect cost percentage of the salaries, wages and related costs of personnel who perform administrative services as well as other indirect costs necessary for the operation of various funds. Expenses are budgeted and paid from the appropriate fund. Capital Assets All capital assets are valued at historical cost or estimated historical cost if actual historical cost is not available. The cost of nominal maintenance and repairs that do not add value to the asset or materially extend assets' lives are not capitalized. Donated assets are valued at their fair market value on the date donated. Assets capitalized have an original cost of $5,000 or more and over three years of life. All infrastructure assets (e.g., roads, bridges, sidewalks, and similar items), regardless of the acquisition date or amount, have been included. Estimated historical cost for initial reporting of infrastructure assets (those reported by governmental activities) was valued by estimating the current replacement cost of the infrastructure and using an index to deflate the cost to the estimated acquisition/construction year. As the Town constructs or acquires additional capital assets, including infrastructure assets, they are capitalized and reported at historical cost. (continued) 36 I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) E. Assets, Liabilities, and Net Assets or Equity (Continued) Capital Assets (Continued) Depreciation has been calculated on each class of depreciable property using the straight-line method. Estimated useful lives are as follows: Assets Years Water and sewer system 10-50 Buildings 20-50 Machinery and equipment 3-30 Improvements 5-30 Information systems and software 3 Compensated Absences The Town's policy allows employees to earn 5 days of vacation and 5 days of sick leave between six months and one year of service, and 10 days of vacation and 10 days of sick leave between one year and two years of service and each successive year through five years of service. After completion of 5 years of service, 15 days of vacation and 15 days of sick leave per year are earned. After completion of 10 years of service, 20 days of vacation and 20 days of sick leave per year are earned. The Town makes sick and vacation time available in full at the beginning of each year, and hours are actually earned throughout the year. Unused, earned vacation hours are paid upon termination or retirement at the employee's normal hourly rate; accumulated, unused sick time is not payable upon termination or retirement. Long-term Obligations In the government -wide financial statements and proprietary fund types in the fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business -type activities, or proprietary fund type statement of net assets. Bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bonds using the straight-line method, which approximates the effective interest method. Bonds payable are reported net of the applicable bond premium or discount. Bond issuance costs are reported as deferred charges and amortized over the term of the related debt. In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as issuance costs during the current period. The face amount of the debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts are reported as other financing uses. Issuance costs, even if withheld from the actual proceeds, are reported as expenditures. (continued) 37 I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) E. Assets, Liabilities, and Net Assets or Equity (Continued) Fund Equity and Net Assets The governmental fund financial statements present fund balances based on classifications that comprise a hierarchy that is based primarily on the extent to which the Town is bound to honor constraints on the specific purposes for which amounts in the respective governmental funds can be spent. The classifications used in the governmental fund financial statements are as follows: • Nonspendable: This classification includes amounts that cannot be spent because they are either (a) not in spendable form or (b) are legally or contractually required to be maintained intact. Nonspendable items are not expected to be converted to cash or are not expected to be converted to cash within the next year. • Restricted: This classification includes amounts for which constraints have been placed on the use of the resources either (a) externally imposed by creditors, grantors, contributors, or laws or regulations of other governments, or (b) imposed by law through constitutional provisions or enabling legislation. • Committed: This classification includes amounts that can be used only for specific purposes pursuant to constraints imposed by board resolution of the Town council, the Town's highest level of decision making authority. These amounts cannot be used for any other purpose unless the Town council removes or changes the specified use by taking the same type of action that was employed when the funds were initially committed. This classification also includes contractual obligations to the extent that existing resources have been specifically committed for use in satisfying those contractual requirements. • Assigned: This classification includes amounts that are constrained by the Town's intent to be used for a specific purpose but are neither restricted nor committed. This intent can be expressed by the Town council. • Unassigned: This classification includes the residual fund balance for the General Fund. The, unassigned classification also includes negative residual. fund balance of any other governmental fund that cannot be eliminated by offsetting of assigned fund balance amounts. In the government -wide financial statements, net assets represent the difference between assets and liabilities. Net assets invested in capital assets, net of related debt consists of capital assets, net of accumulated depreciation, reduced by the outstanding balances of any borrowing used for the acquisition, construction or improvements of those assets, and adding back unspent proceeds. Net assets are reported as restricted when there are limitations imposed on their use either though the enabling legislations adopted by the Town or through external restrictions imposed by creditors, grantors or laws or regulations of other governments. (continued) 38 II. I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) E. Assets, Liabilities, and Net Assets or Eguity (Continued) Fund Equity and Net Assets (Continued) The government -wide and fund level financial statements report restricted fund balances for amounts not available for appropriation or legally restricted for specific uses. When an expenditure is incurred for purposes for which both restricted and unrestricted fund balance is available, it is the City's policy to use restricted resources first, then unrestricted resources as needed. When an expenditure is incurred for which committed, assigned, or unassigned fund balances are available, the City considers amounts to have been spent first out of committed funds, then assigned funds, and finally unassigned funds. In the government -wide financial statements, the City's restrictions on net assets are for amounts that are not available for appropriation. The City's restricted net assets are as follows: Restricted for Tourism $ 1,052,546 Restricted for Future projects 2,714,662 Restricted for Debt Service 22,657 Restricted for Education 758,127 Restricted for Economic Development 178,384 Total $ 4,726,376 Estimates The preparation of financial statements, in conformity with generally accepted accounting principles, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual amounts could differ from those estimates. RECONCILIATION OF GOVERNMENT -WIDE AND FUND FINANCIAL STATEMENTS Explanation of Certain Differences Between the Governmental Fund Balance Sheet and the Government -wide Statement of Net Assets The governmental fund balance sheet includes a reconciliation between fund balance — total governmental funds and net assets — governmental activities as reported in the government -wide statement of net assets. One element of that reconciliation explains, "Long-term liabilities are not due and payable in the current period and therefore are not reported in the funds." The details of this $20,715,004 difference are as follows: (continued) 39 IL RECONCILIATION OF GOVERNMENT -WIDE AND FUND FINANCIAL STATEMENTS (Continued) Explanation of Certain Differences Between the Governmental Fund Balance Sheet and the Government -wide Statement of Net Assets (Continued) Certificates of obligation bonds Notes payable Deferred charges for issuance costs (to be amortized over life of debt) Compensated absences Accrued interest payable Net adjustment to reduce fund balance - total governmental funds to arrive at net assets - governmental activities $ 22,182,556 34,075 (1,839,657) 81,905 256.125 $ 20,715,004 Explanation of Certain Differences Between the Governmental Fund Statement of Revenue, Expenditures and Changes in Fund Balances. and the Government -wide Statement of Activities The governmental fund statement of revenues, expenditures and changes in fund balances includes a reconciliation between net changes in fund balances — total governmental fund and changes in net assets of governmental activities as reported in the government -wide statement of activities. One element of that reconciliation explains, "Governmental funds report capital outlays as expenditures. However, in the statement of activities, the cost of those assets. is allocated over their estimated useful lives and reported as depreciation expense." The details of this $647,738 difference are as follows: Capital outlay ($45,680 reclassified to expense repairs $ 1,464,417 and $369,746 capitalized from public safety and $29,875 capitalized from public works) Depreciation expense (816,679) Net adjustment to decrease net changes in fund balances - total governmental funds to arrive at changes in net assets ofgovernmental activities $ 647,738 Another element of that reconciliation states, "The issuance of long-term debt (e.g., bonds, leases) provides current financial resources to governmental funds, while the repayment of the principal of long-term debt consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net assets. Also, governmental funds report the effect of issuance costs, premiums, and similar items when debt is first issued, whereas these amounts are deferred and amortized in the statement of activities. Retails of this $710,963 difference are as follows: (continued) 40 II. RECONCILIATION OF GOVERNMENT -WIDE AND FUND FINANCIAL STATEMENTS (Continued) Explanation of Certain Differences Between the Governmental Fund Statement of Revenue, Expenditures and Changes in Fund Balances and the Government -wide Statement of Activities (Continued) Principal repayments: General obligation debt $ 7,453,000 Note payments 15,925 Deferred rebates 27,038 Debt issuance: General obligation debt (7,375,000) Bond issuance costs 148,891 Deferred loss on refunding 865,305 Premium on bonds (424,196) Net adjustment to increase net changes in fund balances - total governmental funds to arrive at changes in net assets of governmental activities $ 710,963 Another element of that reconciliation states, "Some expenses reported in the statement of activities do not require the use of current financial resources and therefore are not reported as. expenditures in governmental funds." The details of this $47,783 difference are as follows: Accrued interest $ 135,434 Compensated absences (6,670) Amoritization of premium 13,258 Amortization of deferred charge on refunding (71,381) Amortization of issuance costs (22,858) Net adjustment to decrease net changes in fund balances - total governmental funds to arrive at changes in net assets of governmental activities $ 47,783 III. DETAILED NOTES ON ALL FUNDS Deposits and Investments Legal provisions generally permit the Town to invest in certificates of deposit, repurchase agreements, public funds investment pools, direct obligations of the United States of America or its subdivisions and state and local government securities. The Town did not engage in repurchase or reverse repurchase agreement transactions during the current year. (continued) 41 III. DETAILED NOTES ON ALL FUNDS (Continued) Deposits and Investments (Continued) During the year ended September 30, 2012, the Town had investments with TexPool. TexPool, a public funds investment pool created by the Treasurer of the State of Texas acting by and through the Texas Treasury Safekeeping Trust Company, which is empowered to invest funds and acts as custodian of investments purchased with local investment funds. These investments are not required to be categorized because the investor is not issued securities, but rather it owns an undivided beneficial interest in the assets of the respective funds. The fair value of the position in TexPool is the same as the value of the pool shares. On September 1, 1989, local government investment pools became authorized investments for the majority of public entities in Texas. The Interlocal Cooperation Act was amended by the 71St Texas Legislature to facilitate the creation of local government investment pools in Texas. This act permits the creation of investment pools to which a majority of political. subdivisions (local governments) may delegate, by contract, the authority to make investments purchased with local investment funds and to hold legal title as custodian of the investments. TexPool was organized to conform with the Interlocal Cooperation Act, Chapter 791 of the Texas Government Code, and the Public Funds Investment Act, Chapter 2256 of the Texas Government Code. The Public Funds Investment Act (Government Code Chapter 2256) contains specific provisions in the areas of investment practices, management reports and establishment of appropriate policies. Among other things, it requires the Town to adopt, implement, and publicize its investment policy. That policy must address the following areas: (1) safety -of principal and liquidity, (2) portfolio diversification, (3) allowable investments, (4) acceptable risk levels, (5) expected rates of return, (6) maximum allowable stated maturity of portfolio investments, (7) maximum average dollar — weighted maturity allowed based on the stated maturity date for the portfolio, (8) investment staff quality and capabilities, and (9) bid solicitation preferences for certificates of deposit. Statutes and the Town's investment policy authorized the Town to invest in the following investments as summarized in the table below: At September 30, 2012, the Town's investments included investment pools in the name of the Town or its agent in the Town's name. The Town's investments were as follows: (continued) 42 Maximum Maximum Authorized Maximum Percentage Investment Investment Type Maturity of Portfolio in One Issuer Obligations of, or guaranteed by Governmental entities 2 years None None Certificates of deposit 1 year None None Mutual funds 2 years 80% None Investment pools - None None At September 30, 2012, the Town's investments included investment pools in the name of the Town or its agent in the Town's name. The Town's investments were as follows: (continued) 42 III. DETAILED NOTES ON ALL FUNDS (Continued) Deposits and Investments (Continued) Carrying Primary government Amount Investments: TexPool $ 350 Cash 12,956,930 Minimum Rating Fair Legal as of Value Rating Year-end $ 350 N/A AAA -m 12,956,930 N/A N/A Total cash and investments $ 12,957,280 $ 12,957,280 Reconciliation of total cash and investments at September 30, 2012, are as follows: Cash and cash equivalents Restricted cash and investments Total cash and investments $ 12,543,531 413,749 $ 12,957,280 The Town's entire cash deposits in the bank of $13,587,597 on September 30, 2012, were covered by federal depository insurance or by collateral. Component units Investments: Carrying Amount Fair Value Cash and cash equivalents $ 10,822,074 $ 10,822,074 Total $ 10,822,074 $ 10,822,074 Weighted Average Maturity (Days) N/A Interest Rate Risk. This is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment the greater the sensitivity of its fair value to changes in market interest rates. In order to limit interest and market rate risk from changes in interest rates, the Town's investment policy sets a maximum stated maturity limit of two years for obligations of the United States Government, its agencies and instrumentalities (excluding mortgage backed securities) and one year for fully insured or collateralized certificates of deposit. No more than 80% of the Town's monthly average balance may be invested in money market funds. Additionally, the Town invests in an investment pool that purchases a combination of shorter term investments with an average maturity of less than 29 days thus reducing the interest rate risk. Information about the sensitivity of the fair values of the Town's investments to market interest rate fluctuations is provided by the following table that shows the distribution of the Town's Investments. The Town has negotiated an interest rate for all checking account deposits; therefore, cash is considered in the balance of our investments. (continued) 43 III. DETAILED NOTES ON ALL FUNDS (Continued) Credit Risk. This is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by, a nationally recognized statistical rating organization. Presented above is the minimum rating required by (where applicable) the Public Funds Investment Act, the Town's investment policy, or debt agreements, and the actual rating as of year-end for each investment type. Capital Assets Capital asset activity for the year ended September 30, 2012, was as follows: Primary Government Governmental activities: Capital assets, not being depreciated: Land Construction in progress Total assets not being depreciated Capital assets, being depreciated: Capital improvements Buildings Machinery and equipment Information systems and software Total capital assets being depreciated Less accumulated depreciation: Capital improvements Buildings Machinery and equipment Information systems and software Total accumulated depreciation Total capital assets being depreciated, net Governmental activities capital assets, net Beginning Ending Balance Increases Decreases Balance 11,896,663 $ - $ - $ 11,896,663 647,940 904,064 - 1,552,004 12,544,603 904,064 - 13,448,667 5,222,819 185,031 - 5,407,850 21,398,468 - - 21,398,468 2,416,422 375,322 - 2,791,744 52,430 - - 52,430 29,090,139 560,353 - 29,650,492 2,861,131 159,817 - 3,020,948 3,200,276 430,849 - 3,631,125 1,855,028 226,013 - 2,081,041 52,430 - - 52,430 7,968,865 816,679 - 8,785,544 21,121,274 256,326) - 20,864,948 $ 33,665,877 $ 647,738 $ - $ 34,313,615 (continued) 44 III. DETAILED NOTES ON ALL FUNDS (Continued) Capital Assets (Continued) Governmental activities: General government $ 635,136 Public safety 42,758 Public works 138,785 Total depreciation expense - governmental activities $ 816,679 (continued) 45 Beginning Ending Balance Increases Decreases Balance Business -type activities: Capital assets, not being depreciated: Construction in progress $ 35,468 $ 138,742 $ - $ 174,210 Total assets not being depreciated 35,468 138,742 - 174,210 Capital assets, being depreciated: Capital improvements 13,099,180 234,381 - 13,333,561 Wastewater treatment rights 635,199 - - 635,199 Machinery and equipment 3,459,821 6,225 - 3,466,046 Total capital assets being depreciated 17,194,200 240,606 - 17,434,806 Less accumulated depreciation: Capital improvements 3,143,638 306,086 - 3,449,724 Wastewater treatment rights 354,653 31,760 - 386,413 Machinery and equipment 1,275,966 120,690 - 1,396,656 Total accumulated depreciation 4,774,257 458,536 - 5,232,793 Total capital assets being depreciated, net 12,419,943 217,930 - 12,202,013 .Business -type activities capital assets, net $ 12,455,411 $L__29,188 $ - $ 12,376,223 Depreciation was charged to departments of the primary government as follows: Governmental activities: General government $ 635,136 Public safety 42,758 Public works 138,785 Total depreciation expense - governmental activities $ 816,679 (continued) 45 III. DETAILED NOTES ON ALL FUNDS (Continued) Capital Assets (Continued) A summary of discretely presented component units' capital assets at September 30, 2012, follows: Texas Student Housing Authority - Ballpark Austin Project Beginning Ending Balance Additions Deletions Balance Capital assets, not being depreciated: Land Total capital assets, not being depreciated Capital assets, being depreciated: Building Furniture and fixtures Total capital assets, being depreciated Less accumulated depreciation for: Building Furniture and fixtures Total accumulated depreciation Total capital assets, being depreciated, net Capital assets, net $ 4,788,265 $ - $ - $ 4,788,265 4,788,265 - - 4,788,265 21,345,305 - - 21,345,305 6,993,063 - - 6,993,063 28,338,368 - - 28,338,368 6,877,931 711,510 - 7,589,441 3,960,018 149,166 - 4,109,184 10,837,949 860,676 - 11,698,625 17,500,419 860,676 - 16,639,743 $ 22,288,684 $ 860,676 $ - $ 21,428,008 (continued) 46 III. DETAILED NOTES ON ALL FUNDS (Continued) Capital Assets (Continued) Texas Student Housing Corporation - The Ridge at North Texas Beginning Ending Balance Additions Deletions Balance Capital assets, not being depreciated: Land $ 2,200,000 $ - $ - $ 2,200,000 Total capital assets, not being depreciated 2,200,000 - - 2,200,000 Capital assets, being depreciated: Building 25,705,000 - - 25,705,000 Furniture and fixtures 1,253,841 - - 1,253,841 Total capital assets, being depreciated 26,958,841 - - 26,958,841 Less accumulated depreciation for: Building 6,477,733 856,833 ( 2,447,615) 9,782,181 Furniture and fixtures 3,603,449 8,529 2,447,615 1,164,363 Total accumulated depreciation 10,081,182 865,362 - 10,946,544 Total capital assets, being depreciated, net 16,877,659 ( 865,362) - 16,012,297 Capital assets, net $ 19,077,659 $( 865,362) $ - $ 18,212,297 (continued) 47 III. DETAILED NOTES ON ALL FUNDS (Continued) Capital Assets (Continued) Texas Student Housing Authority - Town Lake Austin Project Beginning Ending Balance Additions Retirements Balance Capital assets, not being depreciated: Land Total capital assets, not being depreciated Capital assets, being depreciated: Building and improvements Capitalized purchase costs Land improvements Unit appliances Furniture and fixtures Total capital assets, being depreciated Less accumulated depreciation for: Building and improvements Capitalized purchase costs Land improvements Unit appliances Furniture and fixtures Total accumulated depreciation Total capital assets, being depreciated, net Capital assets, net $ 2,182,816 $ - $ - $ 2,182,816 2,182,816 - - 2,182,816 13,270,150 - - 13,270,150 887,095 - - 887,095 2,806,596 - - 2,806,596 295,134 - - 295,134 915,951 - - 915,951 18,174,926 - - 18,174,926 4,236,208 627,487 - 4,863,695 227,872 28,484 - 256,356 374,212 - - 374,212 168,648 - - 168,648 523,266 - - 523,266 5,530,206 655,971 - 6,186,177 12,644,720 ( 655,971 - 11,988,749 $ 14,827,536 $ 655,971 $ - $ 14,171,565 (continued) 48 III. DETAILED NOTES ON ALL FUNDS (Continued) Capital Assets (Continued) Texas Student Housing Authority - College Station Project Beginning Ending Balance Additions Retirements Balance Capital assets, not being depreciated: Land $ 2,899,597 $ - $ - $ 2,899,597 Total capital assets, not being depreciated 2,899,597 - - 2,899,597 Capital assets, being depreciated: Building 27,727,646 - - 27,727,646 Furniture and fixtures 2,594,804 - - 2,594,804 Total capital assets, being depreciated 30,322,450 - - 30,322,450 Less accumulated depreciation for: Building 6,163,885 896,177 - 7,060,062 Furniture and fixtures 2,595,383 88,561 - 2,683,944 Total accumulated depreciation 8,759,268 984,738 - 9,744,006 Total capital assets, being depreciated, net 21,563,182 ( 984,738) - 20,578,444 Capital assets, net $ 24,462,779 $( 984,738) $ - $ 23,478,041 Restricted Cash General Fund Within the governmental funds, $264,709 in cash and cash equivalents represents funds held to assist in the financing of future projects and court security and technology. Proprietary Fund Within the proprietary funds, $149,040 of the fund represents customer deposits received for water and sewer usage that are refundable upon termination of service. Discretely Presented Component Units Within the discretely presented component units, $4,818,871 in cash and cash equivalents represents funds held for debt service. (continued) 49 III. DETAILED NOTES ON ALL FUNDS (Continued) Capital Leases The Town entered into a lease agreement as lessee for financing the acquisition of a vehicle for the warrant division of the municipal court. The lease agreement qualifies as a capital lease for accounting purposes and, therefore, has been recorded at the present value of their future minimum lease payments as of the inception date. Governmental Activities Asset: Machinery and equipment $ 23,000 Less: Accumulated depreciation (23,000) Total $ - General Long-term Debt Long-term liability activity for the year ended September 30, 2012, was as follows: Beginning Ending Due Within Balance Additions Reductions Balance One Year Combination tax and limited Pledge Revenue Certificates of Obligation, Series 2002 Combination tax and limited Pledge Revenue Certificates of Obligation, Series 2003 General Obligation Refunding Bonds, Series 2007 Less deferred amounts on refunding General Obligation Bonds, Series 2008 Combination tax and Revenue Certificates of Obligation, Series 2011 General Obligation Refunding Bonds, Series 2011 General Obligation Refunding Bonds, Series 2011 Premium Less deferred amounts on refunding Notes payable Compensated absences Fidelity Tax Reimbursement $ 4,600,000 $ - $ 3,955,000 $ 645,000 $ 315,000 5,515,000 - 3,290,000 2,225,000 176,000 7,285,000 - 25,000 7,260,000 25,000 ( 552,344) - ( 44,336) ( .508,008) - 2,230,000 - 95,000 2,135,000 100,000 2,095,000 - 88,000 2,007,000 90,000 - 7,375,000 7,375,000 100,000 - 424,196 13,258 410,938 - - ( 865,305) ( 27,045) ( 838,260) - 50,000 - 15,925 34,075 16,655 75,235 48,364 41,694 81,905 8,191 151,656 - 27,038 124,618 28,593 $ 21,449,547 $ 6,982,255 $ 7,479,534 $ 20,952,268 $ 853,439 (continued) 50 III. DETAILED NOTES ON ALL FUNDS (Continued) General Long-term Debt (Continued) The Certificates of Obligation, Series 2002 and 2003 require the Town to provide certain updated financial information and operating data to certain information vendors annually, as permitted by SEC Rule 15c2-12 (the "Rule"). The issuer will provide the updated information to each nationally recognized municipal securities information repository ("NRMSIR") and to any state information depository ("SID") that is designated by the State of Texas and approved by the staff of the United States Securities and Exchange Commission (the "SEC"). During the fiscal year ended September 30, 2008, the Town issued General Obligation bonds of $2.5 million. These bonds were used for the construction of an Arts & Sciences Center that was completed during the current fiscal year. During the fiscal year ended September 30, 2011, the Town issued Certificates of Obligation in the amount of $2,095,000 for various street projects. Advance Refunding The government issued $7,375,000 in general obligation bonds with interest rates ranging from 2.0% to 4.0%. The proceeds were used to advance refund $6,785,000 of outstanding 2002 and 2003 general obligation bonds which had interest rates ranging from 3.65% to 6.50%. The net proceeds of $7,650,305 (including a $424,196 premium and after payment of $148,891 in underwriting fees and other issuance costs) were deposited in an irrevocable trust with an escrow agent to provide funds for the future debt service payment on the refunded bonds. As a result, this portion of the 2002 and 2003 general obligation bonds are considered defeased and the liability for those bonds has been removed from the statement of net position. The reacquisition price exceeded the net carrying amount of the old debt by $865,305. This amount is being netted against the new debt and amortized over the life of the refunding debt. The government advance refunded this portion of the 2002 and 2003 general obligation bonds to reduce its total debt service payments over 17 years by $893,302 and to obtain an economic gain (difference between the present values of the debt service payments on the old and new debt) of $704,497. (continued) 51 IIL DETAILED NOTES ON ALL FUNDS (Continued) General Long-term Debt (Continued) Debt service requirements of certificates of obligation and general obligations to be retired from governmental funds are as follows: Year Ending September 30, 2013 2014 2015 2016 2017 2018-2022 2023-2027 2028-2032 Total $ 21,647,000 $ 9,688,413 $ 31,335,413 During the _ fiscal year ended September 30, 2011, the Town entered into a note payable in the amount of $50,000 for the purchase of two heart monitors for the EMS/Fire Department. Debt service requirements for the note payable to be retired from governmental funds are as follows: Year Ending September 30, 2013 2014 Total Principal $ 16,655 17,420 $ 34,075 Interest $ 1,565 800 $ 2,365 Total Requirements $ 18,220 18,220 $ 36,440 On August 10, 1998, the Town entered into an economic development agreement with Fidelity Texas Limited Partnership ("Fidelity") which provided that Fidelity will receive a rebate of one percent of local sales taxes collected by the Town and paid by Fidelity. The agreement provided that the rebate will be paid to Fidelity within 30 days of each calendar quarter from the sales taxes received by the Town. On November 13, 2000, the agreement was amended to allow for a payment schedule of 15 annual equal installments for sales tax rebate due and payable to Fidelity. The amount due will not bear interest. The loan is discounted to present value and amortized over the life of the loan using the effective interest method. (continued) 52 Total Principal Interest Requirements $ 800,000 $ 813,828 $ 1,613,828 833,000 777,232 1,610,232 862,000 735,281 1,597,281 910,000 713,851 1,623,851 890,000 706,032 1,596,032 4,981,000 3,004,793 7,985,793 5,883,000 2,089,868 7,972,868 6,488,000 847,528 7,335,528 Total $ 21,647,000 $ 9,688,413 $ 31,335,413 During the _ fiscal year ended September 30, 2011, the Town entered into a note payable in the amount of $50,000 for the purchase of two heart monitors for the EMS/Fire Department. Debt service requirements for the note payable to be retired from governmental funds are as follows: Year Ending September 30, 2013 2014 Total Principal $ 16,655 17,420 $ 34,075 Interest $ 1,565 800 $ 2,365 Total Requirements $ 18,220 18,220 $ 36,440 On August 10, 1998, the Town entered into an economic development agreement with Fidelity Texas Limited Partnership ("Fidelity") which provided that Fidelity will receive a rebate of one percent of local sales taxes collected by the Town and paid by Fidelity. The agreement provided that the rebate will be paid to Fidelity within 30 days of each calendar quarter from the sales taxes received by the Town. On November 13, 2000, the agreement was amended to allow for a payment schedule of 15 annual equal installments for sales tax rebate due and payable to Fidelity. The amount due will not bear interest. The loan is discounted to present value and amortized over the life of the loan using the effective interest method. (continued) 52 III. DETAILED NOTES ON ALL FUNDS (Continued) General Long-term Debt (Continued) Debt service requirements for deferred rebates to be retired from governmental funds are as follows: Year Ending 9/30/2011 Issued Retired Total September 30, Principal Interest Requirements 2013 $ 28,593 $ 7,165 $ 35,758 2014 30,237 5,521 35,758 2015 31,975 3,783 35,758 2016 33,814 1,944 35,758 Total $ 124,619 $ 18,413 $ 143,032 Compensated absences are typically liquidated by the fund to which they relate. Proorietary Long-term Debt Proprietary long-term debt as of September 30, 2012, is as follows: Outstanding Outstanding Current Description 9/30/2011 Issued Retired 9/30/2012 Portion Contractual obligations: Elevated water storage $ 900,436 $ - $ 81,712 $ 818,724 $ 86,519 Limited pledge contractual obligation: Dove Road Water Line and West Pump Station 4,679,944 - - 4,679,944 - Compensated absences 9,449 4,680 2,701 11,428 1,143 $ 5,589,829 $ 4,680 $ 84,413 $ 5,510,096 $ 87,662 (continued) 53 III. DETAILED NOTES ON ALL FUNDS (Continued) Proprietary Long-term Debt (Continued) The schedule of future payments by the Town under these agreements is as follows: Year Ending Total September 30, Principal Interest Requirements 2013 $ 86,519 $ 627,225 $ 713,744 2014 91,325 718,334 809,659 2015 94,530 763,362 857,892 2016 99,336 813,910 913,246 2017 104,143 863,557 967,700 2018-2022 342,871 3,767,983 4,110,854 2023-2027 4,679,944 - 4,679,944 Total $ 5,498,668 $ 7,554,371 $ 13,053,039 Elevated Water Storage Facility On October 9, 2000, the Town approved an interlocal agreement with the City of Keller, which provided for the joint construction, operation, maintenance and use of an elevated water storage facility and appurtenances. The Town recorded a contractual obligation of $1,466,000 based on the terms of the interlocal agreement, which requires 20 annual principal and interest payments to the City of Keller, with payments due each September 30 at interest rates ranging from 5.0% to 5.65%. Dove Road Water Line and West Pump Station In April 2000, the Town approved an agreement with the Hillwood Development Corporation ("Hillwood"). In the agreement, Hillwood agreed to bear all initial costs for the design, engineering and constructions of the Dove Road Water Line and the West Pump Station that will service the residents of the Town. The Town agreed to reimburse Hillwood for the cost of the project upon completion and the Town's acceptance of the project, which occurred in June 2001, solely from a $.25 charge per 1,000 gallons of usage. The Town further agreed to deposit debt service revenue of $.25 per 1,000 gallons of usage collected from Town residents to fund its repayment to Hillwood. Debt service revenue will be allocated between Hillwood service area and Town service area by 52% and 48%, respectively and deposited into two separate debt service funds that will result in debt service revenue to pay the respective share of the construction cost. The Town recorded a limited pledge contractual obligation of $4,679,944 for the project cost based upon the terms of the agreement, which requires 239 monthly principal and interest payments to Hillwood, at an interest rate of 6.75%. If the Town collects insufficient funds to pay current interest on the debt, the interest payment may be deferred. No portion of debt payments will be applied to the principal component, until all current and deferred interest is fully paid. The obligation of the Town to pay the purchase price and interest thereon is not a general obligation of the Town but is a limited recourse obligation payable solely from debt service revenue. (continued) 54 III. DETAILED NOTES ON ALL FUNDS (Continued) Discretely Presented Lon_g-term Debt Texas Student Housing Authority - College Station Project The Project's installment note payable is summarized as follows: Lender/Security/Due Date Rate Balance Cambridge Student Housing Financing Company, L.P.; substantially all assets and assignment of rents; due November 1, 2039 8.00% $ 30,720,000 The Project's installment note is payable monthly with principal and interest payments of $231,545 until November 1, 2039. The following is a summary of long-term debt transactions of the Project for the year ended August 31, 2012: Amounts Beginning Ending Due Within Balance Increases Decreases Balance One Year $ 31,095,000 $ - $ 375,000 $ 30,720,000 $ 410,000 The Project's original developer refinanced the installment note through a secondary offering with Cambridge Student Housing Financing Company, L.P. The debt certificates were sold to private investors in the following classes: Class (Series) Offering Total A $ 16,530,000 B 3,990,000 C 4,820,000 D 5,380,000 Total $ 30,720,000 Class C and D bonds are in default and the property does not generate enough revenue to pay the debt obligations so the maturity schedules are not included. All of the Class C and D bonds issued remain outstanding as of August 31, 2012. Each class has certain rights and privileges, as contained in the private placement memorandum. As a part of the offering, the Project entered into a trust agreement with J. P. Morgan Trust Company, N.A. (the "Trustee") for the purpose of determining that each class is paid in accordance with the private placement memorandum. (continued) 55 III. DETAILED NOTES ON ALL FUNDS (Continued) Discretely Presented Long-term Debt (Continued) Texas Student Housing Authority - College Station Project (Continued) At August 31, 2012, the Project was in compliance with the fixed charge coverage ratio. Should the project default, the lender may accelerate the maturity of the unpaid portion of the principal payable under the installment sale agreement. However, the Authority does not anticipate this event will occur, since foreclosure by private interests would result in the loss of tax-exempt status for the Project. Texas Student Housing Authority - Town Lake Austin Project Beginning Balance Increases Decreases Revenue Bonds: 2002 A-1 Bonds $ 15,797,516 2002 A-2 Bonds 5,089,241 Total $ 20,886,757 $ - $ 279,275 Ending Balance $ 15,518,241 5,089,241 $ 20,607,482 Amounts Due Within One Year $ 307,159 $ 307,159 The bonds are payable solely from the revenues generated by the Project and are secured by the revenues pledged and assigned under the terms of the Trust Indenture. Interest rates on the bonds range from 7.76% to 8.69% at present and principal and interest payments are made monthly. The future debt service requirements of the bonds are as follows: Year Ending August 31, Principal Interest Total 2013 $ 307,159 $ 1,587,954 $ 1,895,113 2014 328,105 1,563,532 1,891,637 2015 354,491 1,537,146 1,891,637 2016 382,998 1,508,639 1,891,637 2017 413,797 1,477,840 1,891,637 2018-2022 2,624,986 6,833,199 9,458,185 2023-2027 3,864,419 5,593,766 9,458,185 2028-2032 5,689,073 3,769,112 9,458,185 2033-2036 6,642,454 466,006 7,108,460 Totals $ 20,607,482 $ 24,337,194 $ 44,944,676 (continued) 56 III. DETAILED NOTES ON ALL FUNDS (Continued) Discretely Presented Long-term Debt (Continued) Texas Student Housing Authority - Ballpark Austin Project Interest Total The long-term debt activity of the Ballpark Austin Project is as follows: $ 3,032,544 795,000 2,006,275 2,801,275 840,000 Amounts 2,802,856 Beginning Ending Due Within 935,000 Balance Increases Decreases Balance One Year 8,518,463 14,003,463 Revenue Bonds: 6,832,888 14,007,888 9,420,000 2001A Bonds $ 29,510,000 $ - $ 670,000 $ 28,840,000 $ 705,000 2001B Bonds 2,365,000 - - 2,365,000 280,000 2001C Bonds 3,000,000 -. - 3,000,000 - Deferred purchase price 1,460,000 - - 1,460,000 - Less discounts ( 1,221,736) - 60,084 ( 1,161,652) - Total $ 35,113,264 $ - $ 609,916 $ 34,503,348 $ 985,000 The bonds are payable solely from the revenues generated by the Project and secured by the revenues pledged and assigned under the terms of the trust indenture. Interest rates on the bonds range from 4.00% to 11.00% and are payable semi-annually. The debt service requirements of the bonds are as follows: Year Ending August 31, 2013 2014 2015 2016 2017 2018-2022 2032-2027 2028-2032 2033-2036 Totals Governmental Activities Principal Interest Total $ 985,000 $ 2,047,544 $ 3,032,544 795,000 2,006,275 2,801,275 840,000 1,962,856 2,802,856 885,000 1,916,950 2,801,950 935,000 1,868,556 2,803,556 5,485,000 8,518,463 14,003,463 7,175,000 6,832,888 14,007,888 9,420,000 4,589,488 14,009,488 7,685,000 589,925 8,274,925 $ 34,205,000 $ 30,332,945 $ 64,537,945 At August 31, 2012, the Project had not made interest payments on the Subordinate 2001C Bond Series since July 2003, and the Subordinate 2001C Bond is in default. In addition, the Project's fixed charges coverage ratio was not in compliance with the covenants of the indenture. These events do not constitute an event of default that accelerates the bonds. As a result, the maturities are presented under the original repayment terms. (continued) 57 III. DETAILED NOTES ON ALL FUNDS (Continued) Discretely Presented Long-term Debt (Continued) Texas Student Housing Corporation - The Ridge at North Texas The long-term debt activity of the Ridge at North Texas is as follows: Beginning Balance Increases Decreases Amounts Ending Due Within Balance One Year Revenue Bonds: 2001A Bonds $ 25,775,000 $ - $ 645,000 $ 25,130,000 $ 685,000 2001B Bonds 3,240,000 - - 3,240,000 - Less discounts ( 709,809) - ( 37,485 ( 672,324) ( 37,485) Total $ 28,305,191 $ - $ 607,515 $ 27,697,676 $ 647,515 The debt originally was to be amortized through 2031 with varying monthly principal payment amounts ranging from $2,618,093 to $3,465,280 for interest and principal. The annual requirements to amortize all debts outstanding as of August 31, 2012, are as follows and have not been adjusted for the default of the bonds. Under the original terms of the Indenture, a total of $645,000 in principal and $1,976,793 in interest is due in fiscal 2012. The total interest to be paid will depend on the ultimate maturities of the bonds. Year Ending August 31, Principal Interest Total 2012 $ 28,370,000 $ 23,542,340 $ 51,912,340 The Town of Westlake does not have any liability for the payment of debt of the discretely presented component units as the bonds are non-recourse to both the Town and Texas Student Housing Authority. Deferred Revenue Deferred revenue in the proprietary fund of $385,217 relates to the collection of the entire amount due on eight Ductbank leases as follows: One 25 -year lease with AT&T local network services, five 20, 25 and 30 -year leases with Verizon Southwest, one 5 -year lease with MCI Metro and one 5 -year lease with L3 Communications for use of the Town's Ductbank. (continued) 58 III. DETAILED NOTES ON ALL FUNDS (Continued) Interlocal Agreement with the City of Southlake In August 1995, the Town entered into an agreement with the City of Southlake to allow the Town to utilize capacity in a sewer line and to set forth their respective rights and obligations with respect to the sewer line owned by the City of Southlake. The Town is obligated to share in the cost of construction, operation and maintenance of the water sewer line. The sewer line was constructed in 2000. Additionally, the Town must pay the City of Southlake all transportation, treatment and related costs allocable to the metered flow of sewage from the Town into the sewer line. Federal and State Program Revenues The Town received financial assistance from various federal and state governmental agencies in the form of grants for Westlake Academy. The disbursement of funds received under these programs generally requires compliance with terms and conditions specified in the grant agreements and are subject to audit by the grantor agencies. Any unallowed disbursement resulting from such audits becomes a liability of the Town. In the opinion of the Town management, no material refunds will be required as a result of unallowed disbursements (if any) by the grantor agencies. Sources of federal and state program revenues for the year ended September 30, 2012, were as follows: Source Academy Total Federal program revenues: U. S. Department of Education - Passed through State Department of Education $ 152,351 $ 152,351 Total federal program revenues: $ 152,351 $ 152,351 State program revenues: State Department of Education $ 4,369,635 $ 4,369,635 (continued) 59 III. DETAILED NOTES ON ALL FUNDS (Continued) Interfund Balances and Transactions Interfund receivables and payables at September 30, 2012, were as follows: Due from Other Funds General fund: 4B Economic Development Corporation fund $ 149,641 4B Economic Development Corporation fund: General Fund - Utility fund 178,384 Utility fund: 4B Economic Development Corporation fund - Due to Other Funds 149,641 178,384 $ 328,025 $ 328,025 The 4B Economic Development Corporation fund (4B) amount of $149,641 payable to the General Fund is related to debt service payment reimbursement. The amount payable to the 4B fund from the Utility fund (UF) is related to an interfund loan made for several waterlines and connections and is scheduled to be repaid at a rate of $29,731 per year. through fiscal year 2018- 2019. Interfund transfers between the primary government's funds consisted of: Transfers Transfers To Funds From Funds Primary Government General fund: Visitors Association fund $ - Economic Development fund 35,758 Capital Projects fund 36,398 Debt Service fund 278,330 Utility fund - General maintenance 530,000 Visitors Association fund: General fund 8,350 Debt service fund 182,396 Debt Service fund: General fund - Visitors Association fund - 4B Economic Development Corporation fund - Capital Projects fund: General fund - Economic Development fund: General fund - 4B Economic Development Corporation fund: Debt Service fund 1,004,360 Utility fund: General fund 45,507 Utility PCM fund 50,000 Totals $ 2,171,099 (continued) 60 8,350 45,507 530,000 278,330 182,396 1,004,360 36,398 35,758 50,000 $ 2,171,099 III. DETAILED NOTES ON ALL FUNDS (Continued) Interfund Balances and Transactions (Continued) Inter -fund transfers are reported in the governmental funds and proprietary fund financial statements. In the government -wide statements, inter -fund transfers are eliminated within the governmental activities column and business -type column, as appropriate. Transfers are used to (1) move revenues collected in the special revenue funds to finance various programs in accordance with budgetary authorizations, (2) move receipts restricted for debt service from the funds collecting the receipts to the Debt Service fund as debt service payments become due, (3) reimburse one fund for services provided to another fund, (4) move unrestricted General fund revenues to Capital Project fund as determined by the Council for capital projects, and (5) transfer payment for economic development agreements to the Economic Development fund. Water Purchase and Wastewater Treatment Contracts The Town has a contract with the City of Fort Worth, Texas, to purchase water. Under the contract, the Town may obtain from the City of Fort Worth, a supply of potable water at a reasonable rate based on water usage. The rate charges are subject to minimum annual contract payments. Water expense for the year ended September 30, 2012 was $980,212. (continued) 61 Enterprise Governmental Funds Funds Debt Economic Westlake Visitors Westlake Service Development 4B Utility General Association Academy Fund Fund Corporation Fund Total Receivables: Sales tax $ 344,692 $ $ $ - $ 104,230 $ 149,641 $ $ 598,563 Property tax 2,395 320 - - 2,715 Othertaxes 10,234 88,164 - 98,398 Franchise fees 146,608 - 146,608 Accounts - 847,608 847,608 Other 56,045 - 225,459 - - - 281,504 Gross receivables 559,974 88,164 225,459 320 104,230 149,641 847,608 1,975,396 Less: Allowance for uncollectibles 599 80 - - 679 Net total receivables $ 559,375 $ 88,164 $ 225,459 $ 240 $ 104,230 $ 149,641 $ 847,608 $ 1,974,717 Water Purchase and Wastewater Treatment Contracts The Town has a contract with the City of Fort Worth, Texas, to purchase water. Under the contract, the Town may obtain from the City of Fort Worth, a supply of potable water at a reasonable rate based on water usage. The rate charges are subject to minimum annual contract payments. Water expense for the year ended September 30, 2012 was $980,212. (continued) 61 IV. OTHER INFORMATION Retirement Plan Plan Description The Town provides pension benefits for all of its eligible employees through a non-traditional, joint contributory, hybrid defined benefit plan in the statewide Texas Municipal Retirement System (TMRS), an agent multiple -employer public employee retirement system. The plan provisions that have been adopted by the Town are within the options available in the governing state statutes of TMRS. TMRS issues a publicly available comprehensive annual financial report that includes financial statements and required supplementary information (RSI) for TMRS; the report also provides detailed explanations of the contributions, benefits and actuarial methods and assumptions used by the System. This report may be obtained from TMRS' website at www.TMRS.com. The plan provisions are adopted by the governing body of the Town, within the options available in the state statutes governing TMRS. Plan provisions for the Town were as follows: Contributions Under the state law governing TMRS, the contribution rate for each town is determined annually by the actuary, using the Projected Unit Credit actuarial cost method. This rate consists of the normal cost contribution rate and the prior service cost contribution rate, which is calculated to be a level percent of payroll from year to year. The normal cost contribution rate finances the portion of an active member's projected benefit allocated annually; the prior service contribution rate amortizes the unfunded (overfunded) actuarial liability (asset) over the applicable period for that city. Both the normal cost and prior service contribution rates include recognition of the projected impact of annually repeating benefits, such as Updated Service Credits and Annuity Increases. The Town contributes to the TMRS Plan at an actuarially determined rate. Both the employees and the Town make contributions monthly. Since the Town needs to know its contribution rate in advance for budgetary purposes, there is a one-year delay between the actuarial valuation that serves as the basis for the rate and the calendar year when the rate goes into effect. (continued) Gt& Plan Year 2011 Plan Year 2012 Employee deposit rate 7.0% 7.0% Matching ratio (town to employee) 2 to 1 2 to 1 Years required for vesting 5 5 Service retirement eligibility (expressed as age/years of service) 60/5,0/20 60/5,. 0/20 Updated service credit 100% repeating, 100% repeating, transfers transfers Annuity increase (to retirees) 0% of CPI 0% of CPI repeating repeating Contributions Under the state law governing TMRS, the contribution rate for each town is determined annually by the actuary, using the Projected Unit Credit actuarial cost method. This rate consists of the normal cost contribution rate and the prior service cost contribution rate, which is calculated to be a level percent of payroll from year to year. The normal cost contribution rate finances the portion of an active member's projected benefit allocated annually; the prior service contribution rate amortizes the unfunded (overfunded) actuarial liability (asset) over the applicable period for that city. Both the normal cost and prior service contribution rates include recognition of the projected impact of annually repeating benefits, such as Updated Service Credits and Annuity Increases. The Town contributes to the TMRS Plan at an actuarially determined rate. Both the employees and the Town make contributions monthly. Since the Town needs to know its contribution rate in advance for budgetary purposes, there is a one-year delay between the actuarial valuation that serves as the basis for the rate and the calendar year when the rate goes into effect. (continued) Gt& nN OTHER INFORMATION (Continued) Retirement Plan (Continued) Contributions (Continued) Accounting Annual Year Pension Ending Cost (APC) 09/30/10 130,590 09/30/11 151,868 09/30/12 132,882 Actual Percentage Contribution of APC Made Contributed 130,590 100% 151,868 100% 132,882 100% Net Pension Obligation The required contribution rates for fiscal year 2012 were determined as part of the December 31, 2009 and 2010 actuarial valuations. Additional information as of the latest actuarial valuation, December 31, 2011, also follows: Valuation Date 12/31/09 12/31/10 12/31/11 Actuarial Cost Method Amortization Method GASB 25 Equivalent Single Amortization Period Amortization Period for new Gains/Losses Asset Valuation Method Actuarial Assumptions: Investment Rate of Return* Projected Salary Increases * * Includes Inflation at Cost -of -Living Adjustments Projected Unit Credit Projected Unit Credit Level percent Level percent of payroll of payroll 23.4 years; 21.6 years; closed period closed period 25 years 25 years 10 -year Smoothed Market 7.5% Varies by age and service 3.0% 0.0% 10 -year Smoothed Market 7.0% Varies by age and service 3.0% 0.0% Projected Unit Credit Level percent of payroll 21.3 years; closed period 25 years 10 -year Smoothed Market 7.0% Varies by age and service 3.0% 0.0% The funded status as of December 31, 2011, under the two separate actuarial valuations, is presented as follows: (continued) 63 Unfunded Unfunded Actuarial Actuarial Actuarial Actuarial Actuarial Accrued Liability Valuation Value of Accrued Funded Accrued Covered as a Percentage Date Assets Liability Ratio Liability Payroll of Covered Payroll 12/31/2011 $ 2,226,028 $ 2,631,416 84.6% $ 405,388 $ 1,759,432 23.0% (continued) 63 IV. OTHER INFORMATION (Continued) Retirement Plan (Continued) Contributions (Continued) Actuarial valuations involve estimates of the value of reported amounts and assumptions about the probability of events far into the future. Actuarially determined amounts are subject to continual revision as actual results are compared to past expectations and new estimates are made about the future. Actuarial calculations are based on the benefits provided under the terms of the substantive plan in effect at the time of each valuation, and reflect a long-term perspective. Consistent with that perspective, actuarial methods and assumptions used include techniques that are designed to reduce short-term volatility in actuarial accrued liabilities and the actuarial value of assets. The schedule of funding progress, presented, as Required Supplementary Information following the notes to the financial statements, present multi-year trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liability of benefits. Other Postemployment Benefits Supplemental Death Benefits Fund The Town also participates in the cost sharing multiple -employer defined benefit group term life insurance plan. operated. -by the Texas Municipal Retirement System (TMRS) known as the Supplemental Death Benefits Fund (SDBF). The Town elected, by ordinance to provide group term life insurance coverage to both current and retired employees. The Town may terminate coverage under and discontinue participation in the SDBF by adopting an ordinance before November 1 of any year to be effective the following January 1. The death benefit for active employees provides a lump sum payment approximately equal to the employee's annual salary (calculated based on the employee's actual earnings, for the 12 -month period preceding the month of death); retired employees are insured for $7,500; this coverage is an "other postemployment benefit," or OPEB. Contributions The Town contributes to the SDBF at a contractually required rate as determined by an annual actuarial valuation. The rate is equal to the cost of providing one-year term life insurance. The funding policy for the SDBF program is to assure that adequate resources are available to meet all death benefit payments for the upcoming year; the intent is not to pre -fund retiree term life insurance during employees' entire careers. (continued) 64 IV. OTHER INFORMATION (Continued) Other Postemuloyment Benefits (Continued) Contributions (Continued) The city's contributions to the TMRS SDBF for the years ended 2012 and 2011 were $2,240 and $2,582, respectively. Schedule of Contribution Rates (RETIREE -only portion of the rate) Risk Management The Town is exposed to various risks of loss related to torts, theft of, damage to, and destruction of assets; errors and omissions; injuries to employees, and natural disasters. The Town's general liability, workers' compensation liability, law enforcement liability, errors and omissions liability, and automobile liability coverage is insured by the Texas Municipal League, a public entity risk pool. The Town's only responsibility to the Texas Municipal League is to pay premiums for insurance and related deductible amounts of these policies. Other risk of loss is covered by commercial insurance.' Settlements of claims have not exceeded coverage in the past three years. Contingent Liabilities Litigation The Town was involved in a lawsuit to determine the rights of the Town to levy a property tax and its authority to expend collected tax revenues on school operations at the Academy. The Town denies any liability. The Town obtained a favorable judgment from the Court. The lawsuit is over and non -appealable. Various other claims and lawsuits are pending against the Town. In the opinion of Town management, after consultation with legal counsel, the potential loss on these claims and lawsuits will not materially affect the Town's financial position. (continued) 65 Annual Actual Plan/ Required Contribution Percentage Calendar Contribution Made of ARC Year (Rate) (Rate) Contributed 2010 0.00% 0.00% 100% 2011 0.00% 0.00% 100% 2012 0.00% 0.00% 100% Risk Management The Town is exposed to various risks of loss related to torts, theft of, damage to, and destruction of assets; errors and omissions; injuries to employees, and natural disasters. The Town's general liability, workers' compensation liability, law enforcement liability, errors and omissions liability, and automobile liability coverage is insured by the Texas Municipal League, a public entity risk pool. The Town's only responsibility to the Texas Municipal League is to pay premiums for insurance and related deductible amounts of these policies. Other risk of loss is covered by commercial insurance.' Settlements of claims have not exceeded coverage in the past three years. Contingent Liabilities Litigation The Town was involved in a lawsuit to determine the rights of the Town to levy a property tax and its authority to expend collected tax revenues on school operations at the Academy. The Town denies any liability. The Town obtained a favorable judgment from the Court. The lawsuit is over and non -appealable. Various other claims and lawsuits are pending against the Town. In the opinion of Town management, after consultation with legal counsel, the potential loss on these claims and lawsuits will not materially affect the Town's financial position. (continued) 65 IV. OTHER INFORMATION (Continued) Contingent Liabilities (Continued) Circle T Municipal Utility Districts The Town and Hillwood are currently in discussions regarding the debt for Municipal Utility District's (MUDs) #1 and #3 on the Circle T property in Westlake which is controlled by AIL Investments, L.P. As this property develops, Hillwood agreed to de -annex developed property from the MUDS in exchange for pro -rata payments on water and sewer infrastructure installed by the MUD at their inception. To date, two projects, Chrysler Financial and Deloitte University, have been or are being developed within these MUDs. Discussions regarding the Town's payment to AIL Investments, L.P. in exchange for de -annexation of these two tracks from the Circle T MUDS have taken place but have not come to a conclusion as to the settlement amounts. These discussions are ongoing until the Town receives full documentation that it determines is adequate to support the requested payments. The Town of Westlake holds full rights and privileges under the State granted Certificate of Convenience and Necessity (CCN) and can serve all water and sewer customers within these MUD boundaries regardless of the status of these negotiations. Subsequent Events At the Council meeting on January 28, 2013, the Council adopted a resolution authorizing the Town's consultants and staff to prepare for the issuance of certificates of obligation in the amount of $9.5 million. The Town would likely receive bond proceeds in April, 2013. The funds are to be used as follows: (1) $1,000,000 to fund a portion of a ground storage tank and (2) $8,500,000 for the expansion of Westlake Academy to include a cafetorium, classroom building and a field house. The Council also adopted an ordinance authorizing the issuance of general obligation refunding bonds at the January 28, 2013 meeting. Subsequent to year-end, the Town issued $2.2 million GO Refunding Bonds, Series 2013 for the purpose of refunding the Town's GO Bonds, Series 2008 which have a 3.92% interest rate and an outstanding principal balance of $2,135,000. Total savings over the next 15 years equals $255,176, or approximately $17,000 per year. The present value of such savings, using the yield on the 2013 Bonds, is $218,480, or 10.2% of the principal retired. 66 REQUIRED SUPPLEMENTARY INFORMATION TOWN OF WESTLAKE, TEXAS GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2012 67 General Fund Variance Budgeted Amounts Favorable Original Amended Actual (Unfavorable) REVENUES Taxes Sales $ 2,062,500 $ 2,645,000 $ 2,534,774 $( 110,226) Property 1,156,842 1,262,053 1,271,975 9,922 Mixed beverages 17,750 32,750 38,286 5,536 Franchise 582,550 664,925 664,991 66 Interest income 15,285 16,095 14,060 ( 2,035) Building permits and fees 480,890 476,150 598,394 122,244 Fines and penalties 536,611 640,000 622,338 ( 17,662) Contributions from others 304,100 325,550 325,520 ( 30) Other miscellaneous income 52,700 63,379 80,936 17,557 Total revenues 5,209,228 6,125,902 6,151,274 25,372 EXPENDITURES Current General government and administration 2,125,756 1,837,403 1,878,885 ( 41,482) Public safety 2,329,521 2,318,415 2,224,469 93,946 Cultural and recreational 162,281 150,334 111,765 38,569 Public works 610,626 420,371 391,115 29,256 Total expenditures 5,228,184 4,726,523 4,606,234 120,289 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES ( 18,956) 1,399,379 1,545,040 145,661 OTHER FINANCING SOURCES (USES) Transfers in 1,075,383 575,850 583,857 8,007 Transfers out ( 1,166,936) ( 908,353) ( 880,486) 27,867 Total other financing sources (uses) ( 91,553) ( 332,503) ( 296,629) 35,874 NET CHANGE IN FUND BALANCE ( 110,509) 1,066,876 1,248,411 181,535 FUND BALANCE, BEGINNING 4,015,394 4,015,394 4,015,394 - FUND BALANCE, ENDING $ 3,904,885 $ 5,082,270 $ 5,263,805 $ 181,535 67 TOWN OF WESTLAKE, TEXAS VISITORS ASSOCIATION FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2012 Variance Budgeted Amounts Favorable Original Amended Actual (Unfavorable) REVENUES Taxes Hotel occupancy $ 535,000 $ 535,000 $ 590,853 $ 55,853 Interest income 2,900 2,900 3,438 538 Contributions 500 6,610 7,015 405 Other miscellaneous income 18,775 12,040 6,425 ( 5,615) Total revenues 557,175 556,550 607,731 51,181 EXPENDITURES Visitors services 221,102. 479,766 475,719 4,047 Total expenditures 221,102 479,766 475,719 4,047 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES 336,073 76,784 132,012 55,228 OTHER FINANCING SOURCES (USES) Transfers out (445,434) 190,746) ( 190,746) - Total other financing sources (uses) ( 445,434) ( 190,746) ( 190,746) NET CHANGE IN FUND BALANCE ( 109,361) ( 113,962) ( 58,734) 55,228 FUND BALANCE, BEGINNING 1,111,280 1,111,280 1,111,280 - FUND BALANCE, ENDING $ 1,001,919 $ 997,318 $ 1,052,546 $ 55,228 68 EXPENDITURES Education TOWN OF WESTLAKE, TEXAS 5,947,147 5,793,560 153,587 WESTLAKE ACADEMY 5,575,220 5,947,147 5,793,560 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL FOR THE FISCAL YEAR ENDED AUGUST 31, 2012 OVER (UNDER) EXPENDITURES ( 90,378) ( 164,226) ( 41,285) 122,941 Variance Budgeted Amounts Favorable Original Amended Actual (Unfavorable) REVENUES ( 124,346) 118 Special item State program revenues $ 4,494,586 $ 4,380,317 $ 4,369,635 $( 10,682) Federal program revenues 150,844 163,919 152,351 ( 11,568) Interest income 1,500 1,278 2,417 1,139 Other miscellaneous income 837,912 1,237,407 1,227,872 ( 9,535) Total revenues 5,484,842 5,782,921 5,752,275 ( 30,646) EXPENDITURES Education 5,575,220 5,947,147 5,793,560 153,587 Total expenditures 5,575,220 5,947,147 5,793,560 153,587 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES ( 90,378) ( 164,226) ( 41,285) 122,941 OTHER FINANCING SOURCES (USES) Extraordinary item - ( 124,464) ( 124,346) 118 Special item - - 67,760 67,760 Transfers in 36,967 104,844 26,124 ( 78,720) Transfers out ( 49,807) ( 49,807) ( 26,124) 23,683 Total other financing sources (uses) ( 12,840) ( 69,427) ( 56,586) 12,841 NET CHANGE IN FUND BALANCE ( 103,218) ( 233,653) ( 97,871) 135,782 FUND BALANCE, BEGINNING 916,961 916,961 916,961 - FUND BALANCE, ENDING $ 813,743 $ 683,308 $ 819,090 $ 135,782 69 TOWN OF WESTLAKE, TEXAS ECONOMIC DEVELOPMENT FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2012 REVENUES Taxes Sales Total revenues EXPENDITURES Economic Development Total expenditures EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES OTHER FINANCING SOURCES (USES) Transfers in Total other financing sources (uses) NET CHANGE IN FUND BALANCE FUND BALANCE, BEGINNING FUND BALANCE, ENDING Variance Budgeted Amounts Favorable Original Amended Actual (Unfavorable) $ 150,000 $ 205,000 $ 208,181 $ 3,181 150,000 205,000 208,181 3,181 185,758 240,758 243,939 185,758 240,758 243,939 ( 35,758) ( 35,758) ( 35,758) 35,758 35,758 35,758 - 35,758 35,758 35,758 - 70 TOWN OF WESTLAKE, TEXAS LONE STAR PUBLIC FACILITY CORPORATION SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2012 71 Variance Budgeted Amounts Favorable Original Amended Actual (Unfavorable) REVENUES Interest income $ 30 $ 45 $ 45 $ - Total revenues 30 45 45 - EXPENDITURES General government - - - - Total expenditures - - - - EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES 30 45 45 - OTHER FINANCING SOURCES (USES) Transfers out - - - - Total other financing sources (uses) - - - - NET CHANGE IN FUND BALANCE 30 45 45 - FUND BALANCE, BEGINNING 13,531 13,531 13,531 - FUND BALANCE, ENDING $ 13,561 $ 13,576 $ 13,576 $ - 71 TOWN OF WESTLAKE, TEXAS 4B ECONOMIC DEVELOPMENT CORPORATION SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2012 72 Variance Budgeted Amounts Favorable Original Amended Actual (Unfavorable) REVENUES Taxes Sales $ 687,500 $ 950,000 $ 914,319 $( 35,681) Interest income 500 500 848 348 Total revenues 688,000 950,500 915,167 ( 35,333) EXPENDITURES General government - - - - Total expenditures - - - - EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES 688,000 950,500 915,167 ( 35,333) OTHER FINANCING SOURCES (USES) Transfers out ( 717,730) ( 980,230) ( 1,004,360) ( 24,130) Total other financing sources (uses) ( 717,730) ( 980,230) ( 1,004,360) ( 24,130) NET CHANGE IN FUND BALANCE ( 29,730) ( 29,730) ( 89,193) ( 59,463) FUND BALANCE, BEGINNING 267,577 267,577 267,577 - FUND BALANCE, ENDING $ 237,847 $ 237,847 $ 178,384 $( 59,463) 72 TOWN OF WESTLAKE, TEXAS TEXAS MUNICIPAL RETIREMENT SYSTEM SCHEDULE OF FUNDING PROGRESS FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2012 (unaudited) 73 Unfunded Unfunded Actuarial Actuarial Actuarial Actuarial Actuarial Accrued Liability Valuation Value of Accrued Funded Accrued Covered as a Percentage Date Assets Liability Ratio Liability Payroll of Covered Payroll 12/31/2009 $ 1,337,183 $ 1,810,429 73.9% $ 473,246 $ 1,658,452 28.5% 12/31/2010 1,863,399 2,197,161 84.8% 333,762 1,534,927 21.7% 12/31/2011 2,226,028 2,631,416 84.6% 405,388 1,759,432 23.0% 73 TOWN OF WESTLAKE, TEXAS NOTES TO REQUIRED SUPPLEMENTARY INFORMATION SEPTEMBER 30, 2012 (Unaudited) BUDGETARY INFORMATION - The Town follows these procedures annually in establishing the budgetary data reflected in the budgetary comparison schedules: The Town Manager submits to the Town Council a proposed budget for the fiscal year commencing the following October 1. The budget includes proposed expenditures and the means of financing them. 2. Prior to October 1, the budget is legally adopted through passage of an ordinance. This budget is reported as the Original Budget in the budgetary comparison schedules. 3. During the fiscal year, changes to the adopted budget may be authorized, as follows: a) Items requiring Town Council action - appropriation of fund balance reserves; transfers of appropriations between funds; new inter -fund loans or advances; and creation of new capital projects or increases to existing capital projects. b) Items delegated to the Town Manager — appropriation balances from an expenditure account to another within a single fund 4. Annual budgets are legally adopted and amended as required for the general, special revenue and debt service funds. Project length budgets are adopted for the capital projects funds. All budgets are adopted on a basis consistent with generally accepting accounting principles. Budgets are adopted for the proprietary funds annually only as a management tool. There are no legally mandated budgetary constraints for the proprietary funds. 5. Budget amounts are reflected after all authorized amendments and revisions. This budget is reported as the Final Budget in the budgetary comparison schedules. 6. The appropriated budget is prepared by fund, function and department. The Town's management may make transfers of appropriations within a fund. Transfers of appropriations between funds require the approval of the Town Council. The legal level of budgetary control is the fund level. The Town Council made several supplementary budget appropriations during the year. 7. Encumbrances represent commitments related to unperformed contracts for goods or services. Encumbrance accounting under which purchase orders, contracts and other commitments for the expenditure of resources are recoded to reserve that portion of the applicable appropriation, is utilized in the governmental funds. Encumbrances lapse at year-end and do not constitute expenditures or liabilities because the commitments must be re -appropriated and honored during the subsequent year. Expenditures exceeded appropriations in the general government and administration department of the General Fund and in the Economic Development Fund for the year. These deficits were covered by additional collections of revenue, unspent budget in other functions and available fund balance. In addition, transfers out exceeded appropriations in the 4B Economic Development Corporation Fund. This excess was covered by available fund balance. 74 INDIVIDUAL FUND SCHEDULE TOWN OF WESTLAKE, TEXAS DEBT SERVICE FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2012 Variance Final Budgeted Favorable Amounts Actual (Unfavorable) REVENUES Taxes Property $ 172,098 $ 170,093 $( 2,005) Total revenues 172,098 170,093 ( 2,005) EXPENDITURES Debt service Principal retirement 668,000 668,000 - Interest and other fiscal charges 952,028 1,100,918 ( 148,890) Total expenditures 1,620,028 1,768,918 ( 148,890) EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES ( 1,447,930) ( 1,598,825) ( 150,895) OTHER FINANCING SOURCES (USES) Transfers in 1,470,222 1,465,086 ( 5,136) Bonds issued - 7,799,196 7,799,196 Payment to escrow agent - ( 7,650,305) ( 7,650,305) Total other financing sources (uses) 1,470,222 1,613,977 143,755 NET CHANGE IN FUND BALANCE 22,292 15,152 ( 7,140) FUND BALANCE, BEGINNING 7,505 7,505 - FUND BALANCE, ENDING $ 29,797 $ 22,657 $�_ 7,140 75 This page is intentionally left blank. APPENDIX C - GENERAL INFORMATION REGARDING THE ISSUER The Town of Westlake was incorporated in 1956 and is located along the border and within the counties of Tarrant and Denton in the rapidly growing northern triangle of the Dallas -Fort Worth Metroplex. The Town combines a rural Texas atmosphere with the conveniences of the Metroplex. It is the home of the famous Circle T Ranch which was acquired in 1993 by Hillwood Development, a company controlled by H. Ross Perot, Jr. The development of Circle T has been the source of considerable controversy between the Town and the Perot interests. Another high profile corporate campus development in Westlake is known as Solana and is located along Texas Highway 114. Its tenants include First American Title Company, Sabre Group, Levi -Strauss, Boy Scouts of America, Pfizer Inc. and other well-known international businesses as well as smaller local businesses. Solana's Village -Circle provides a mix of office, retail, restaurant, and hotel space. Solana constitutes the majority of Westlake's tax base. The 2010 census population was 992, a 379% increase since 2000. ' County Characteristics: Tarrant County, where most of Westlake is located, was created in 1849 from Navarro County. It is a manufacturing and wholesale trade center for much of west Texas, with its economy closely tied in with the Dallas/Fort • Worth urban area. The City of Fort Worth is the county seat. Tarrant County is one of the largest manufacturing counties in the United States. Industries include tourism, plastics plant, planes, helicopters, mobile homes, food, electronic equipment, chemicals, automobiles and airports. DFW International Airport, the nation's largest, is located here. Tarrant County's retail sales for 2011 totaled $26.1 billion. The 2010 census for the County was 1,809,034, an increase of 25% since 2000. In 2011, the County had a median income of $44,943 per household compared to the state median of $47,705. A total of 69.2% of the households had effective buying incomes in excess of $25,000, while 12.3% had incomes below $25,000. The Texas Employment Commission reported countywide wages totaling $8.9 billion during the second quarter of 2011. The 2010 fall enrollment for the following colleges and universities located in Tarrant County was 110,716:' The University of Texas at Arlington, Tarrant County College District (all campuses), Texas Christian University, University of North Texas Health Science Center, Texas Wesleyan University, Southwestern Baptist Theological Seminary and The College of St. Thomas More. Tarrant County's agriculture business includes wheat, horticulture, horses, hay and beef cattle. Minerals produced in Tarrant County include cement, sand, gravel, stone, and gas. There were 419 million cubic feet of natural gas recovered in 2008. The Naval Air Station - Joint Reserve Base is located in Tarrant County and employed 4,658 civilian/military personnel in 2009. Data included herein on population, value added by manufacturing or production of minerals or agricultural products were derived from US Census or other sources believed to be reliable, but no guarantee as to its accuracy is made by the Issuer or any other person. C-1 Employment Data Unemployment Rates December 2012 December 2011 Tarrant County 5.8% 8.3% Denton County 5.2 7.0 State of Texas 6.1 7.4 United States 7.8 8.5 Labor Force Data for Tarrant County Total Labor Force December 2012 951,563 December 2011 934,168 Labor Force Data for Denton County Total Labor Force December 2012 381,751 December 2011 374,542 Employed 896,605 861,103 Employed 361,595 348,511 Unemployed 54,958 73,065 Unemployed 19,976 26,031 Source: Texas Workforce Commission. Unemployment rates for Texas and the United States are seasonally adjusted rates. C-2 This page is intentionally left blank. PAYING AGENT/REGISTRAR AGREEMENT THIS AGREEMENT entered into as of April 1, 2013 (this "Agreement"), by and between the Town of Westlake, Texas (the "Issuer"), and U.S. Bank National Association, Dallas, Texas, a national banking association duly organized and existing under the laws of the United States of America (the "Bank"). RECITALS WHEREAS, the Issuer has duly authorized and provided for the issuance of its Combination Tax and Revenue Certificates of Obligation, Series 2013 (the "Security") in the aggregate principal amount of $9,320,000, such Security to be issued in fully registered form only as to the payment of principal and interest thereon; and WHEREAS, the Security is scheduled to be delivered to the initial purchaser thereof on or about April 30, 2013; and WHEREAS, the Issuer has selected the Bank to serve as Paying Agent/Registrar in connection with the payment of the principal of, premium, if any, and interest on said Security and with respect to the registration, transfer and exchange thereof by the registered owners thereof, and WHEREAS, the Bank has agreed to serve in such capacities for and on behalf of the Issuer and has full power and authority to perform and serve as Paying Agent/Registrar for the Security; NOW, THEREFORE, it is mutually agreed as follows: ARTICLE ONE APPOINTMENT OF BANK AS PAYING AGENT AND REGISTRAR Section 1.01. Appointment. The Issuer hereby appoints the Bank to serve as Paying Agent with respect to the Security. As Paying Agent for the Security, the Bank shall be responsible for paying on behalf of the Issuer the principal, premium (if any), and interest on the Security as the same become due and payable to the registered owners thereof, all in accordance with this Agreement and the "Order" (hereinafter defined). The Issuer hereby appoints the Bank as Registrar with respect to the Security. As Registrar for the Security, the Bank shall keep and maintain for and on behalf of the Issuer books and records as to the ownership of said Security and with respect to the transfer and exchange thereof as provided herein and in the "Order." The Bank hereby accepts its appointment, and agrees to serve as the Paying Agent and Registrar for the Security. Section 1.02. Compensation. As compensation for the Bank's services as Paying Agent/Registrar, the Issuer hereby agrees to pay the Bank the fees and amounts set forth in Schedule A attached hereto. The Issuer agrees to reimburse the Bank upon its request for all reasonable expenses, disbursements and advances incurred or made by the Bank in accordance with any of the provisions hereof (including the reasonable compensation and the expenses and disbursements of its agents and counsel). In addition, the Issuer agrees to reimburse the Bank upon its request for all reasonable expenses, disbursements and advances incurred or made by the Bank in accordance with any of the provisions hereof (including the reasonable compensation and the expenses and disbursements of its agents and counsel). ARTICLE TWO DEFINITIONS Section 2.01. Definitions. For all purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires: "Acceleration Date" on any Security means the date on and after which the principal or any or all installments of interest, or both, are due and payable on any Security which has become accelerated pursuant to the terms of the Security. "Bank Office" means the principal corporate trust office of the Bank as indicated on the signature page hereof. The Bank will notify the Issuer in writing of any change in location of the Bank Office. "Fiscal Year" means the fiscal year of the Issuer, ending September 30. "Holder" and "Security Holder" each means the Person in whose name a Security is registered in the Security Register. "Issuer Request" and "Issuer Order" means a written request or order signed in the name of the Issuer by the Mayor, Town Manager or chief finance officer of the Issuer, or any one or more of said officials, and delivered to the Bank. "Legal Holiday" means a day on which the Bank is required or authorized to be closed. "Order" means the order, ordinance or resolution of the governing body of the Issuer pursuant to which the Security is issued, certified by the Deputy Town Secretary or any other officer of the Issuer and delivered to the Bank. "Person" means any individual, corporation, partnership, joint venture, association, joint stock company, trust, unincorporated organization or government or any agency or political subdivision of a government. "Predecessor Security" of any particular Security means every previous Security evidencing the same obligation as that evidenced by such particular Security (and, for the purposes of this definition, any mutilated, lost, destroyed, or stolen Security for which a replacement Security has been registered and delivered in lieu thereof pursuant to Section 4.06 hereof and the Order). "Redemption Date" when used with respect to any Security to be redeemed means the date fixed for such redemption pursuant to the terms of the Ordinance. "Responsible Officer" when used with respect to the Bank means the Chairman or Vice -Chairman of the Board of Directors, the Chairman or Vice-chairman of the Executive Committee of the Board of Directors, the President, any Vice President, the Secretary, any Assistant Secretary, the Treasurer, any Assistant Treasurer, the Cashier, any Assistant Cashier, any Trust Officer or Assistant Trust Officer, or any other officer of the Bank customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject. "Security Register" means a register maintained by the Bank on behalf of the Issuer providing for the registration and transfer of the Security. "Stated Maturity" means the date specified in the Ordinance when the principal of a Security is scheduled to be due and payable. Section 2.02. Other Definitions. The terms "Bank," Issuer," and "Security (Securities)" have the meanings assigned to them in the recital paragraphs of this Agreement. The term "Paying Agent/Registrar" refers to the Bank in the performance of the duties and functions of this Agreement. ARTICLE THREE PAYING AGENT Section 3.01. Duties of Paying Agent. As Paying Agent, the Bank shall, provided adequate collected funds have been provided to it for such purpose by or on behalf of the Issuer, pay on behalf of the Issuer the principal of each Security at its Stated Maturity, Redemption Date, or Acceleration Date, to the Holder upon surrender of the Security to the Bank at the Bank Office. As Paying Agent, the Bank shall, provided adequate collected funds have been provided to it for such purpose by or on behalf of the Issuer, pay on behalf of the Issuer the interest on the Security when due, by computing the amount of interest to be paid each Holder and preparing and sending checks by United States Mail, first class postage prepaid, on each payment date, to the Holders of the Security (or their Predecessor Security) on the respective Record Date, to the address appearing on the Security Register or by such other method, acceptable to the Bank, requested in writing by the Holder at the Holder's risk and expense. Section 3.02. Payment Dates. The Issuer hereby instructs the Bank to pay the principal of and interest on the Security on the dates specified in the Ordinance. ARTICLE FOUR REGISTRAR Section 4.01. Security Register - Transfers and Exchanges. The Bank agrees to keep and maintain for and on behalf of the Issuer at the Bank Office books and records (herein sometimes referred to as the "Security Register") and, if the Bank Office is located outside the State of Texas, a copy of such books and records shall be kept in the State of Texas, for recording the names and addresses of the Holders of the Security, the transfer, exchange and replacement of the Security and the payment of the principal of and interest on the Security to the Holders and containing such other information as may be reasonably required by the Issuer and subject to such reasonable regulations as the Issuer and the Bank may prescribe. All transfers, exchanges and replacement of Security shall be noted in the Security Register. Every Security surrendered for transfer or exchange shall be duly endorsed or be accompanied by a written instrument of transfer, the signature on which has been guaranteed by an officer of a federal or state bank or a member of the National Association of Security Dealers, in form satisfactory to the Bank, duly executed by the Holder thereof or his agent duly authorized in writing. The Bank may request any supporting documentation it feels necessary to effect a re -registration, transfer or exchange of the Security. To the extent possible and under reasonable circumstances, the Bank agrees that, in relation to an exchange or transfer of Security, the exchange or transfer by the Holders thereof will be completed and new Security delivered to the Holder or the assignee of the Holder in not more than three (3) business days after the receipt of the Security to be canceled in an exchange or transfer and the written instrument of transfer or request for exchange duly executedby the Holder, or his duly authorized agent, in form and manner satisfactory to the Paying Agent/Registrar. Section 4.02. Securities. At any time when the Security is not subject to a book -entry -only system of registration and transfer, the Issuer shall provide an adequate inventory of printed Security to facilitate transfers or exchanges thereof. The Bank covenants that the inventory of printed Security will be kept in safekeeping pending their use, and reasonable care will be exercised by the Bank in maintaining such Security in safekeeping, which shall be not less than the care maintained by the Bank for debt Security of other political subdivisions or corporations for which it serves as registrar, or that is maintained for its own Security. Section 4.03. Form of Security Register. The Bank, as Registrar, will maintain the Security Register relating to the registration, payment, transfer and exchange of the Security in accordance with the Bank's general practices and procedures in effect from time to time. The Bank shall not be obligated to maintain such Security Register in any form other than those which the Bank has currently available and currently utilizes at the time. The Security Register may be maintained in written form or in any other form capable of being converted into written form within a reasonable time. Section 4.04. List of Security Holders. The Bank will provide the Issuer at any time requested by the Issuer, upon payment of the required fee, a copy of the information contained in the Security Register. The Issuer may also inspect the information contained in the Security Register at any time the Bank is customarily open for business, provided that reasonable time is allowed the Bank to provide an up-to-date listing or to convert the information into written form. The Bank will not release or disclose the contents of the Security Register to any person other than to, or at the written request of, an authorized officer or employee of the Issuer, except upon receipt of a court order or as otherwise required by law. Upon receipt of a court order and prior to the release or disclosure of the contents of the Security Register, the Bank will notify the Issuer so that the Issuer may contest the court order or such release or disclosure of the contents of the Security Register. Section 4.05. Return of Canceled Securities. The Bank will, at such reasonable intervals as it determines, surrender to the Issuer, Security in lieu of which or in exchange for which other Security have been issued, or which have been paid. Section 4.06. Mutilated, Destroyed, Lost or Stolen Security. The Issuer hereby instructs the Bank, subject to the applicable provisions of the Ordinance, to deliver and issue Security in exchange for or in lieu of mutilated, destroyed, lost, or stolen Security as long as the same does not result in an overissuance. In case any Security shall be mutilated, or destroyed, lost or stolen, the Bank, in its discretion, may execute and deliver a replacement Security of like form and tenor, and in the same denomination and bearing a number not contemporaneously outstanding, in exchange and substitution for such mutilated Security, or in lieu of and in substitution for such destroyed lost or stolen Security, only after (i) the filing by the Holder thereof with the Bank of evidence satisfactory to the Bank of the destruction, loss or theft of such Security, and of the authenticity of the ownership thereof and (ii) the furnishing to the Bank of indemnification in an amount satisfactory to hold the Issuer and the Bank harmless. All expenses and charges associated with such indemnity and with the preparation, execution and delivery of a replacement Security shall be borne by the Holder of the Security mutilated, or destroyed, lost or stolen. Section 4.07. Transaction Information to Issuer. The Bank will, within a reasonable time after receipt of written request from the Issuer, furnish the Issuer information as to any portion of the Security it has paid pursuant to Section 3.01, Security it has delivered upon the transfer or exchange of any Security pursuant to Section 4.0 1, and Security it has delivered in exchange for or in lieu of mutilated, destroyed, lost, or stolen Security pursuant to Section 4.06. Section 4.08 Reporting Requirements. To the extent required by the Internal Revenue Code of 1986, as amended, and any regulations or rulings promulgated by the U. S. Department of the Treasury pursuant thereto, the Bank shall report or assure that a report is made to the Holder and the Internal Revenue Service the amount of interest paid or the amount treated as interest accrued on the Security which is required to be reported by a Holder on its returns of federal income tax. ARTICLE FIVE THE BANK Section 5.01. Duties of Bank. The Bank undertakes to perform the duties set forth herein and agrees to use reasonable care in the performance thereof. Section 5.02. Reliance on Documents, Etc. (a) The Bank may conclusively rely, as to the truth of the statements and correctness of the opinions expressed therein, on certificates or opinions furnished to the Bank. (b) The Bank shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it shall be proved that the Bank was negligent in ascertaining the pertinent facts. (c) No provisions of this Agreement shall require the Bank to expend or risk its own funds or otherwise incur any financial liability for performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity satisfactory to it against such risks or liability is not assured to it. (d) The Bank may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, note, security, or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties. Without limiting the generality of the foregoing statement, the Bank need not examine the ownership of any Security, but is protected in acting upon receipt of a Security containing an endorsement or instruction of transfer or power of transfer which appears on its face to be signed by the Holder or an agent of the Holder. The Bank shall not be bound to make any investigation into the facts or matters stated in a resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, note, security or other paper or document supplied by Issuer. (e) The Bank may consult with counsel, and the written advice of such counsel or any opinion of counsel shall be full and complete authorization and protection with respect to any action taken, suffered, or omitted by it hereunder in good faith and in reliance thereon. (f) The Bank may exercise any of the powers hereunder and perform any duties hereunder either directly or by or through agents or attorneys of the Bank. Section 5.03. Recitals of Issuer. The recitals contained herein with respect to the Issuer and in the Security shall be taken as the statements of the Issuer, and the Bank assumes no responsibility for their correctness. The Bank shall in no event be liable to the Issuer, any Holder or Holders of any Security, or any other Person for any amount due on any Security from its own funds. Section 5.04. May Hold Security. The Bank, in its individual or any other capacity, may become the owner or pledgee of Security and may otherwise deal with the Issuer with the same rights it would have if it were not the Paying Agent/Registrar, or any other agent. Section 5.05. Moneys Held by Bank. The Bank shall deposit any moneys received from the Issuer into a trust account to be held in a fiduciary capacity for the payment of the Security, with such moneys in the account that exceed the deposit insurance available to the Issuer by the Federal Deposit Insurance Corporation, to be fully collateralized with Security or obligations that are eligible under the laws of the State of Texas to secure and be pledged as collateral for trust accounts until the principal and interest on such Security have been presented for payment and paid to the owner thereof. Payments made from such trust account shall be made by check drawn on such trust account unless the owner of such Security shall, at its own expense and risk, request such other medium of payment. Subject to the Unclaimed Property Law of the State of Texas, any money deposited with the Bank for the payment of the principal, premium (if any), or interest on any Security and remaining unclaimed for three years after the final maturity of the Security has become due and payable will be paid by the Bank to the Issuer if the Issuer so elects, and the Holder of such Security shall hereafter look only to the Issuer for payment thereof, and all liability of the Bank with respect to such monies shall thereupon cease. If the Issuer does not elect, the Bank is directed to report and dispose of the funds in compliance with Title Six of the Texas Property Code, as amended. Section 5.06. Indemnification. To the extent permitted by law, the Issuer agrees to indemnify the Bank for, and hold it harmless against, any loss, liability, or expense incurred without negligence or bad faith on its part, arising out of or in connection with its acceptance or administration of its duties hereunder, including the cost and expense against any claim or liability in connection with the exercise or performance of any of its powers or duties under this Agreement. Section 5.07. Interpleader. The Issuer and the Bank agree that the Bank may seek adjudication of any adverse claim, demand, or controversy over its person as well as funds on deposit, in either a Federal or State District Court located in the State and County where the Issuer is located, and agree that service of process by certified or registered mail, return receipt requested, to the address referred to in Section 6.03 of this Agreement shall constitute adequate service. The Issuer and the Bank further agree that the Bank has the right to file a Bill of Interpleader in any court located in the State and County where the Issuer is located of competent jurisdiction to determine the rights of any Person claiming any interest herein. Section 5.08. Depository Trust Company Services. It is hereby represented and warranted that, in the event the Security is otherwise qualified and accepted for "Depository Trust Company" services or equivalent depository trust services by other organizations, the Bank has the capability and, to the extent within its control, will comply with the "Operational Arrangements," effective August 1, 1987, which establishes requirements for Security to be eligible for such type depository trust services, including, but not limited to, requirements for the timeliness of payments and funds availability, transfer turnaround time, and notification of redemptions and calls. ARTICLE SIX MISCELLANEOUS PROVISIONS Section 6.01. Amendment. This Agreement may be amended only by an agreement in writing signed by both of the parties hereto. Section 6.02. Assignment. This Agreement may not be assigned by either party without the prior written consent of the other. Section 6.03. Notices. Any request, demand, authorization, direction, notice, consent, waiver, or other document provided or permitted hereby to be given or furnished to the Issuer or the Bank shall be mailed or delivered to the Issuer or the Bank, respectively, at the addresses set forth below: Issuer Town of Westlake 3 Village Circle, Suite 202 Westlake, Texas 76262 Paying Agent/Registrar U.S. Bank National Association 14241 Dallas Parkway, Suite 490 Dallas, Texas 75254 hereof. Section 6.04. Effect of Headings. The Article and Section headings herein are for convenience only and shall not affect the construction Section 6.05. Successors and Assigns. All covenants and agreements herein by the Issuer shall bind its successors and assigns, whether so expressed or not. Any corporation or association into which the Bank may be converted or merged, or with which it may be consolidated, or to which it may sell, lease, or transfer its corporate trust business and assets as a whole or substantially as a whole, or any corporation or association resulting from any such conversion, sale, merger, consolidation, or transfer to which it is a party, ipso facto, shall be and become successor Paying Agent/Registrar hereunder and vested with all of the powers, rights, obligations, duties, remedies, discretions, immunities, privileges, and all other matters as was its predecessor, without the execution or filing of any instruments or any further act, deed, or conveyance on the part of any of the parties hereto, anything herein to the contrary notwithstanding. Section 6.06. Severability. In case any provision herein shall be invalid, illegal, or unenforceable, the validity, legality, and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. Section 6.07. Benefits of Agreement. Nothing herein, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder, any benefit or any legal or equitable right, remedy, or claim hereunder. Section 6.08. Entire Agreement. This Agreement and the Ordinance constitute the entire agreement between the parties hereto relative to the Bank acting as Paying Agent/Registrar and if any conflict exists between this Agreement and the Ordinance, the Ordinance shall govern. Section 6.09. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original and all of which shall constitute one and the same Agreement. Section 6.10. Termination. This Agreement will terminate (i) on the date of final payment of the principal of and interest on the Security to the Holders thereof or (ii) may be earlier terminated by either party upon sixty (60) days written notice; provided, however, an early termination of this Agreement by either party shall not be effective until (a) a successor Paying Agent/Registrar has been appointed by the Issuer and such appointment accepted and (b) notice has been given to the Holders of the Security of the appointment of a successor Paying Agent/Registrar. Furthermore, the Bank and Issuer mutually agree that the effective date of an early termination of this Agreement shall not occur at any time which would disrupt, delay or otherwise adversely affect the payment of the Security. Upon an early termination of this Agreement, the Bank agrees to promptly transfer and deliver the Security Register (or a copy thereof), together with other pertinent books and records relating to the Security, to the successor Paying Agent/Registrar designated and appointed by the Issuer. The provisions of Section 1.02 and of Article Five shall survive and remain in full force and effect following the termination of this Agreement. Section 6.11. Governing Law. This Agreement shall be construed in accordance with and governed by the laws of the State of Texas. [Signature page follows] IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. U.S. BANK NATIONAL ASSOCIATIO By: Israel Lugo Title: Vise -president TOWN OF WESTLAKE, TEXAS By: /xj j M4 Ma or SCHEDULE A PAYING AGENT/REGISTRAR FEE SCHEDULE (See attached) "bank, F r Srar Stlricr fosru�ntt<i(,*r? Corporate Trust Services 14241 Dallas Parkway, Suite 490 Dallas, TX 75254 Schedule of Fees for Services as Paying Agent/Registrar For Town of Westlake (Tarrant and Denton Counties, Texas) Combination Tax and Revenue Certificates of Obligation, Series 2013 Administrative Fees Billed Annually Paying Agent, Annual Annual account administration fee covers the routine duties of paying agent and $400 registrar associated with the administration of the account. Administration fees are payable in advance. Direct Out of Pocket Expenses Reimbursement of expenses associated with the performance of our duties, including At Cost but not limited to publications, legal counsel after the initial close, travel expenses and filing fees. Extraordinary Services Extraordinary services are duties or responsibilities of an unusual nature, including termination, but not provided for in the governing documents or otherwise set forth in this schedule. A reasonable charge will be assessed based on the nature of the service and the responsibility involved. At our option, these charges will be billed at a flat fee or at our hourly rate then in effect. A $300 fee will be assessed on optional redemptions Account approval is subject to review and qualification. Fees are subject to change at our discretion and upon written notice. Fees paid in advance will not be prorated. The fees set forth above and any subsequent modifications thereof are part of your agreement. Finalization of the transaction constitutes agreement to the above fee schedule, including agreement to any subsequent changes upon proper written notice. In the event your transaction is not finalized, any related out-of-pocket expenses will be billed to you directly. Absent your written instructions to sweep or otherwise invest, all sums in your account will remain uninvested and no accrued interest or other compensation will be credited to the account. Payment of fees constitutes acceptance of the terms and conditions set forth. IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT: To help the government fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify and record information that identifies each person who opens an account. For a non -individual person such as a business entity, a charity, a Trust or other legal entity we will ask for documentation to verify its formation and existence as a legal entity. We may also ask to see financial statements, licenses, identification and authorization documents from individuals claiming authority to represent the entity or other relevant documentation. Dated: February 28, 2013 GENERAL AND NO -LITIGATION CERTIFICATE We, the undersigned, Mayor and Town Secretary of the Town of Westlake, Texas (the "Town"), hereby certify the following information: I. General 1.1 This certificate relates to the Town of Westlake, Texas Combination Tax Revenue Certificates of Obligation, Series 2013, in the aggregate principal amount of $9,320,000 (the "Obligations"). Capitalized terms shall have the meanings assigned to such terms in the ordinance authorizing the issuance of the Obligations. 1.2 The Town is a duly incorporated Type A general law municipality, having less than 5,000 inhabitants, operating under the Constitution and laws of the State of Texas. 1.3 As of the date hereof, the members of the Town Council and certain other officers of the Town are as follows: Laura Wheat, Mayor Carol Langdon, Mayor Pro Tem Michael Barrett, Member Clifton Cox, Member David Levitan, Member Rick Rennhack, Member Thomas Brymer, Town Manager Kelly Edwards, Town Secretary Stan Lowry, Town Attorney Debbie Piper, Finance Director 1.4 The total principal amount of the presently outstanding general obligation indebtedness of the Town, excluding the Obligations, is $21,647,000. 1.5 The assessed value of property for the purpose of taxation in the Town as shown by its official tax rolls for tax year 2012, being its latest approved official assessment rolls, is $887,185,503, which does not include the amount of any exemptions to which property otherwise subject to taxation was entitled pursuant to applicable provisions of the Constitution and laws of the State of Texas. 1.6 The debt service requirements of the Town's outstanding debt secured by a pledge of ad valorem taxes, including the Obligations, are set forth on Exhibit A attached hereto. 1.7 The gross revenues, operating expenses and net revenues of the Town's waterworks and sewer system for the years stated, and the rates being charged by the Town for water and sewer service, are as set forth on Exhibit B attached hereto. 1.8 The Town is not in default in the payment of principal or interest on any of its outstanding obligations; and neither the corporate existence nor boundaries of the Town nor the title of its present officers to their respective offices is being contested, and no authority or proceedings for the issuance of the Obligations have been repealed, revoked, or rescinded. 1.9 The Town continues to hold an open enrollment charter approved by the Texas Education Agency and to operate the Westlake Academy within the city limits of the Town in accordance with Section 12.132, Texas Education Code, as amended ("Section 12.132"). Section 12.132 authorizes the Town to issue obligations to fund improvements for the Westlake Academy. II. Signature Identification and No -Litigation 2.1 The undersigned Mayor and Town Secretary officially executed and signed the Certificates, including the initial Certificate to be delivered to the purchaser thereof (the "Initial Certificate"), and each copy of the Official Statement, by manual signature or by causing facsimiles of our manual signatures to be imprinted or lithographed on each of the Certificates and each copy of the Official Statement, and we hereby adopt said facsimile signatures as our own, respectively, and declare that said facsimile signatures constitute our signatures the same as if we had manually signed each of the Certificates and each copy of the Official Statement; at the time we so executed and signed the Certificates and Official Statement we were, and at the time of executing this certificate we are, the duly chosen, qualified, and acting officers indicated therein and authorized to execute the same; and we have caused the official seal of the Town to be impressed, printed, lithographed, stamped or otherwise placed on each of the Certificates, and said seal on the Certificates has been duly adopted as, and is hereby declared to be, the official seal of the Town. 2.2 The Certificates, including the Initial Certificate, are substantially in the form, and have been duly executed and signed in the manner prescribed in the ordinance authorizing the issuance of the Certificates. 2.3 No litigation is pending or, to our knowledge, threatened in any court to restrain or enjoin the issuance or delivery of the Certificates, the levy or the collection of the ad valorem taxes or revenues pledged or to be pledged to pay the principal of and interest on the Certificates, or the pledge thereof, or in any way contesting or affecting the validity of the Certificates, the ordinance authorizing the issuance of the Certificates, the powers of the Town or contesting the authorization of the Certificates or such ordinance, or contesting in any way the accuracy, completeness or fairness of the Official Statement relating to the Certificates. (Execution Page Follows) EXECUTED AND DELIVERED ON April 30, 2013 Manual Sigglatures Officio] Titles Mayor, Town of Westlake, Texas Town Secretary, Town of Westlake, Texas ACKNOWLEDGMENT BEFORE ME, the undersigned authority, on this day personally appeared the foregoing individuals, known to me to be the persons and officers whose true and genuine signatures were subscribed to the foregoing instrument in my presence. GIVEN UNDER MY HAND AND SEAL OF OFFICE, this `' day ofk , 2013. �4 'Ab a..: - �utr<1-D TRISH LANDERS %„ My Commission Expires V L November t4, 2016 ary Public, Stat"f Texas [NOTARY SEAL] EXHIBIT A SCHEDULE OF DEBT SERVICE REQUIREMENTS A-1 Plus: The Certificates Fiscal Year Existing Gross End 9/30 Debt Service Principal Interest Total Debt Service 2013 $ 1,612,321 $ $ $ $ 1,612,321 2014 1,582,160 100,000 407,159 507,159 2,089,319 2015 1,580,879 195,000 312,044 507,044 2,087,923 2016 1,584,365 195,000 308,144 503,144 2,087,509 2017 1,583,558 200,000 304,194 504,194 2,087,751 2018 1,584,533 200,000 300,194 500,194 2,084,726 2019 1,583,720 205,000 296,144 501,144 2,084,864 2020 1,581,758 215,000 291,944 506,944 2,088,701 2021 1,583,745 215,000 287,106 502,106 2,085,851 2022 1,580,645 225,000 281,606 506,606 2,087,251 2023 1,581,658 230,000 275,344 505,344 2,087,001 2024 1,579,638 240,000 268,294 508,294 2,087,931 2025 1,584,413 240,000 261,094 501,094 2,085,506 2026 1,581,045 255,000 253,669 508,669 2,089,714 2027 1,580,133 260,000 245,619 505,619 2,085,751 2028 1,581,533 270,000 237,006 507,006 2,088,539 2029 1,473,995 390,000 225,794 615,794 2,089,789 2030 1,470,170 405,000 211,881 616,881 2,087,051 2031 1,473,810 415,000 197,531 612,531 2,086,341 2032 1,316,160 595,000 178,369 773,369 2,089,529 2033 - 315,000 160,169 475,169 475,169 2034 - 330,000 147,269 477,269 477,269 2035 - 345,000 133,769 478,769 478,769 2036 - 360,000 119,669 479,669 479,669 2037 - 370,000 105,763 475,763 475,763 2038 - 385,000 92,078 477,078 477,078 2039 - 400,000 77,850 477,850 477,850 2040 - 415,000 62,300 477,300 477,300 2041 - 430,000 45,400 475,400 475,400 2042 - 450,000 27,800 477,800 477,800 2043 - 470,000 9,400 479,400 479,400 Totals $ 31,080,235 $ 9,320,000 $ 6,124,599 $ 15,444,599 $ 46,524,834 A-1 EXHIBIT B Part 1. Gross Income. Oneratina Expenses and Net Revenues of the Town's Sewer Svstem. Fiscal Year Gross Operating Net Ending 9/30 Revenues Expenses Revenues 2010 $ 2,216,659 $ 1,534,883 $ 681,776 2011 3,234,345 1,739,703 1,494,642 2012 3,053,951 1,925,195 1,128,756 Part 2. Water and Sewer Rates. Meter Size 1 " 1 1/2" 2" 311 4" 6" 8" Volume Charge Rate Per 1,000 gallons Residential Commercial Volume (gallons) EFFECTIVE JANUARY 1, 2011 Sewer Water Base Service Charges 0-2,000 Residential Commercial $ 3.10 Water Sewer Water Sewer $ 42.00 $ 33.00 $ 42.00 $ 33.00 70.00 60.00 70.00 60.00 140.00 115.00 140.00 115.00 224.00 187.00 224.00 187.00 490.00 405.00 490.00 405.00 882.00 693.00 882.00 693.00 1,650.00 1,450.00 3,500.00 1,450.00 2,400.00 2,100.00 4,400.00 2,100.00 Volume Charge Rate Per 1,000 gallons Residential Commercial Volume (gallons) Water Sewer Water Sewer 0-2,000 $ 3.10 $ 0.00 $ 3.10 $ 3.60 2,001 - 20,000 3.10 3.60 3.10 3.60 20,001 - 40,000 3.88 3.60 3.88 3.60 40,001 - 400,000 4.84 3.60 4.84 3.60 over 400,000 6.05 3.60 6.05 3.60 l� Meter Size Residential Deposits Commercial Water Sewer Water Sewer 1" 150 100 100 100 1 1/2" 300 200 250 200 2" 480 320 500 320 3" 1,050 700 1,000 700 4" 1,800 1,200 2,500 1,200 6" 3,750 2,500 3,500 2,500 8" 5,400 3,600 5,000 3,600 Tap Fees Water Connection Minimum Service Tap Fee** Existing Street Meter Size Service Line Tap Fee Cut/Bore 3/4" $ 550 $ 900 $ 900 1" 575 1,200 1,100 1 1/2" 775 1,400 1,275 2" 965 2,200 1,400 Sewer Connection Minimum Service Tap Fee** Existing Street Depth Service Line Tap Fee Cut/Bore 0 - 6 feet $ 450 $ 450 $ 800 6 - 12 feet 450 750 1,200 12 - 18 feet 450 1,050 1,600 2" Compound & larger, or unusual installation conditions, fee to be actual cost to Town plus 10%. **Tap fees for connection installed by Town will be actual cost to Town plus 10%. Does not include City of Fort Worth water or other impact fees. CLOSING CERTIFICATE We, the undersigned Mayor and Town Manager of the Town of Westlake, Texas (the "Issuer"), in connection with the issuance and delivery by the Issuer of $9,320,000 aggregate principal amount of its Town of Westlake, Texas, Combination Tax Revenue Certificates of Obligation, Series 2013 (the "Bonds"), hereby certify the following information pursuant to paragraph 6(i)(7) of the Purchase Agreement (the "Purchase Agreement") with respect to the Bonds between the Issuer and Southwest Securities, Inc., dated April 2, 2013. Capitalized words used herein as defined terms and not otherwise defined herein have the respective meanings assigned to them in the Purchase Agreement. 1. The representations and warranties of the Issuer contained in the Purchase Agreement are true and correct in all material respects on and as of the date of the Closing as if made on the date of the Closing. 2. Except as may be disclosed in the Official Statement, no litigation, proceeding or tax challenge against the Issuer is pending or, to the best of our knowledge, threatened in any court or administrative body nor is there a basis for litigation which would (a) contest the right of the council members, officers 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 Certificates or the Issuer Documents or (d) attempt to limit, enjoin or otherwise restrict or prevent the Issuer from functioning and collecting ad valorem taxes or revenues, including payments on the Certificates, pursuant to the Ordinance, or the levy or collection of the taxes pledged to pay the principal of and interest on the Certificates, or the pledge thereof. 3. All official action of the Issuer relating to the Official Statement, the Certificates and the Issuer Documents have been duly taken by the Issuer, are in full force and effect and have not been modified, amended, supplemented or repealed. 4. To the best of our 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 they were made, not misleading in any respect as of the time of the 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 light of the circumstances under which they were made, not misleading. 5. There has not been any material adverse change in the financial condition of the Issuer since September 30, 2012, the latest date as of which audited financial information is available. [Execution page follows] DATED: April 30, 2013 �&Z'4 , k'k'ld-�z Mayo Town of Westlake, Texas Town Manager Town of Westlake,xa ATTORNEY GENERAL OF TEXAS GREG ABBOTT April 25, 2013 THIS IS TO CERTIFY that the Town of Westlake, Texas (the "Issuer"), has submitted the Town of Westlake Texas Combination Tax and Revenue Certificate of Obligation, Series 2013 (the "Certificate") in the principal amount of $9,320,000 for approval. The Certificate is dated April 1, 2013, numbered T-1, and was authorized by Ordinance No. 700 of the Issuer passed on April 2, 2013 (the "Ordinance"). The Office of the Attorney General has examined the law and such certified proceedings and other papers as we deem necessary to render this opinion. As to questions of fact material to our opinion, we have relied upon representations of the Issuer contained in the certified proceedings and other certifications of public officials furnished to us without undertaking to verify the same by independent investigation. We express no opinion relating to the official statement or any other offering material relating to the Certificate. Based on our examination, we are of the opinion, as of the date hereof and under existing law, as follows (capitalized terms, except as herein defined, have the meanings given to them in the Ordinance): (1) The Certificate has been issued in accordance with law and is a valid and binding obligation of the Issuer. (2) The Certificate is payable from the proceeds of an annual ad valorem tax levied, within the limits prescribed by law, against all taxable property in the Issuer, and is additionally secured by and payable from a limited pledge of the Surplus Revenues of the Issuer's waterworks and sewer system, all as provided in the Ordinance. Therefore, the Certificate is approved. Attorney cal of the State of Texas. No. 55302 Book No. 2013-B MA *See attached Signature Authorization POST OFFICE BOX 12548, AUSTIN, TEXAS 78711-2548 TEL: (512) 463-2100 WWW.TEXASATTORNEYGENERAL.GOV An Equal Employment Opportunity Employer • Printed on Recycled Paper employees of the Public Finance Division of the Office of the Attorney General to affix, a digital image of my signature, -in my capacity as Attorney General, to the opinions issued by this office approving the issuance of public securities by the various public agencies, non-profit corporations, districts, entities, bodies politic or corporate, or political subdivisions of this State as required by law, the opinions approving those contracts designated by the Legislature as requiring the approval of the Attorney General, and the obligations, proceedings and credit agreements required by law to be approved by the Attorney General. The authorized digital image of my signature is attached as Exhibit A and is hereby adopted as my own for the purposes set forth herein. This supercedes any prior signature authorizations for the same purpose. The authority granted herein is to be exercised on those occasions when I am unavailable to personally sign said opinions, and upon the condition that the opinions to which the digital image signature is affixed have been approved by an authorized Assistant Attorney General following the completion of the Public Finance Division's review of the transcripts of proceedings to which the opinions relate. Given under my hand and seal of office at Austin, Texas, this the day of January, GREG ApftTI Attorney eral of the State of Texas OFFICE OF COMPTROLLER OF THE STATE OF TEXAS I, SUSAN COMBS, Comptroller of Public Accounts of the State of Texas, do hereby certify that the attachment is a true and correct copy of the opinion of the Attorney General approving the: Town of Westlake, Texas Combination Tax and Revenue Certificate of Obligation, Series 2013 numbered T-1, of the denomination of $ 9,320,000, dated April 1, 2013, as authorized by issuer, interest various percent, under and by authority of which said bonds/certificates were registered electronically in the office of the Comptroller, on the 25th day of April 2013, under Registration Number 81705. Given under my hand and seal of office, at Austin, Texas, the 25th dayof April 2013. SUSAN COMBS Comptroller of Public Accounts of the State of Texas OFFICE OF COMPTROLLER OF THE STATE OF TEXAS I, Melissa Mora, ❑ Bond Clerk FX Assistant Bond Clerk in the office of the Comptroller of the State of Texas, do hereby certify that, acting under the direction and authority of the Comptroller on the 25th day of April 2013, 1 signed the name of the Comptroller to the certificate of registration endorsed upon the: Town of Westlake, Texas Combination Tax and Revenue Certificate of Obligation Series 2013, numbered T-1, dated April 1, 2013, and that in signing the certificate of registration I used the following signature: IN WITNESS WHE EOF I have executed th c�'fficatethis the 25th day of April 2013. I, Susan Combs, Comptroller of Public Accounts of the State of Texas, certify that the person who has signed the above certificate was duly designated and appointed by me under authority vested in me by Chapter 403, Subchapter H, Government Code, with authority to sign my name to all certificates of registration, and/or cancellation of bonds required by law to be registered and/or cancelled by me, and was acting as such on the date first mentioned in this certificate, and that the bonds/certificates described in this certificate have been duly registered in the office of the Comptroller, under Registration Number 81705. GIVEN under my hand and seal of office at Austin, Texas, this the 25th day of April 2013. SUSAN COMBS Comptroller of Public Accounts of the State of Texas STANDARD P 0 0 R ' RATINGS SERVICES March 20, 2013 Town of Westlake 2650 Ottinger Road Westlake, TX 76262--8012 Attention: Ms. Debbie Piper, CPA, Finance Director 500 North Akard Street Lincoln Plaza, Suite 3200 Dallas, TX 75201 tel (214) 871.1400 reference no.: 1252901 Re: US$8,580,000 Westlake, Texas, Combined Tax and Revenue Certificates of Obligation, Series 2013, dated: April 1, 2013, due: February 15, 2023 Dear Ms. Piper: Pursuant to your request for a Standard & Poor's Ratings Services ("Ratings Services") rating on the above -referenced obligations, Ratings Services has assigned a rating of "AA". Standard & Poor's views the outlook for this rating as stable. A copy of the rationale supporting the rating is enclosed. This letter constitutes Ratings Services' permission for you to disseminate the above -assigned ratings to interested parties in accordance with applicable laws and regulations. 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No person is intended as a third party beneficiary of any credit rating engagement or of a credit rating when issued. PF Ratings U.S. (02/16/13) '37ANDARD & IP 0 0 RvS RATINGS SERVICES I : 7 =I. S'urnrnnary: Westlake, Texas; General Obligation Primary Credit Analyst: Emmanuelle Lawrence, Dallas (1) 214-871-1473; emmanuelle-lawrence@standardandpoors.com Secondary Contact: Horacio G Aldrete-Sanchez, Dallas (1) 214-871-1426; horacio-aldrete@standardandpoors.com Table Of Contents ..................................... .............. .................................................... Rationale Outlook Related Criteria And Research ';JVW'vV.STANDARDANDPOORS.COM/RATINGSDIRECT MARCH 21, 2013 1 10999741 301753340 Westlake GO Unenhanced Rating Many issues are enhanced by bond insurance. Rationale AA(SPUR)/Stable Affirmed Standard & Poor's Ratings Services assigned its 'AA' rating and stable outlook to Westlake, Texas' series 2013 combination tax and revenue certificates of obligation and affirmed its 'AA' rating, with a stable outlook, on the town's general obligation debt. The rating reflects our opinion of the town's: • Inclusion in the deep and diverse Dallas -Fort Worth metropolitan statistical area (MSA) economy, including its location between the region's international airport and Alliance Gateway Airport; • Extremely strong wealth and income, evidenced by market value per capita and median household effective buying income; and • Very strong financial performance, augmented by the implementation of formalized financial management policies in several key areas. We believe the town's concentrated property tax base and, what we consider, its moderately high overall net debt as a percent of market value and extremely high per capita debt somewhat constrain the rating. An ad valorem tax levied on all taxable property in the town and a waterworks and sewer system net revenue pledge, not to exceed $1,000, secure the certificates. Officials intend to use certificate proceeds to finance infrastructure improvements to Westlake Academy -- a K-12 charter school owned and operated by the town -- and utility -related infrastructure improvements. Serving a population estimate of 992 and encompassing portions of Denton and Tarrant counties, Westlake is approximately 25 miles northeast of Fort Worth, 30 miles west of Dallas, and 18 miles south of Denton. Its favorable location among the three leading regional cities offers residents several employment opportunities, including nearby Dallas -Fort Worth International Airport and Fort Worth's Alliance Gateway Airport. The town's location also helps boost income. Median household effective buying income is, what we consider, a very strong 240% of the national level. WWW.STANDARDANDPOORS.COM/RATINGSDIRECT MARCH 21, 2013 2 1099974 1301753340 Summary: Westlake, Texas; General Obligation Despite a 5.5% assessed value (AV) decrease over the previous year due to commercial values and a 7% AV decrease from fiscal years 2010-2011 due to the economic downturn, Westlake has experienced, what we regard as, historically strong property tax base growth. Current AV of $887.2 million represents a 50% increase over fiscal 2007 AV. Management attributes historical AV growth to residential and commercial development. According to representatives, the average home value is $1.7 million. Market value is $874,937 per capita. In addition to restaurants and small retailers, Westlake is home to Deloitte University -- an international training facility for Deloitte, Fidelity, Chrysler Financial, and the Solana complex. The Solana mixed-use complex contains several offices, eateries, and a Marriot Hotel. Officials expect at least marginal tax base expansion to continue over the next few years since several new homes will be constructed. The tax base is concentrated with the 10 leading taxpayers accounting for 41% of fiscal 2013 AV. Maguire Thomas et al, a commercial real estate firm and the leading taxpayer, accounts for 16.5% of AV. Westlake's finances remain, in our view, very strong. Officials adopted a $1.7 million deficit general fund budget for fiscal 2013, which they credit to capital expenditures. Management currently indicates the budget is performing well. The current property tax rate of about 15.7 cents per $100 of AV includes an operations levy of about 14 cents. The overall tax rate has remained the same for two fiscal years, and officials indicate they do not plan to adjust the rate. Collections for the past two fiscal years totaled 100%. Despite adopting a fiscal 2012 deficit budget, audit results reflect an operating surplus of $1.3 million and an unassigned general fund balance of roughly $5 million, or, what we view as, a very strong 109% of operating expenditures. Sales and property tax receipts, the primary income sources, generated 41% and 20%, respectively, of fiscal 2012 operating revenue. Westlake ended fiscal years 2010 and 2011 with operating surpluses of about $1.1 million and $222,000, respectively. Unassigned fund balance was $3.5 million at fiscal year-end 2011, or, in our view, a very strong 87% of operating expenditures. Historically, sales tax receipts have been the primary operating revenue source; in fiscal 2011, however, Westlake began levying a property tax rate. Management indicates one of the reasons it instituted a property tax was to lessen its reliance on the volatile sales tax revenue stream. Westlake participates in the Texas Municipal Retirement System (TMRS). The annual pension contribution to the TMRS was $132,882, or about 1% of governmental expenses, in fiscal 2012. As of Dec. 31, 2011, the pension plan was 84.6% funded. In fiscal 2013, the town's projected contribution is slightly less than $132,000. Westlake also participates in the TMRS-administered supplemental death benefits fund (SDBF). It has made 100% of the annual required contribution to the SDBF. Standard & Poor's deems Westlake's financial management practices "good" under its Financial Management Assessment methodology, indicating financial practices exist in most areas but that governance officials might not formalize or regularly monitor all of them. Overall net debt is, what we view as, moderately high at about 9.5% of AV, or an extremely high $82,834 per capita. Debt service carrying charges were, in our view, a moderate 13.3% of fiscal 2012 expenditures. We consider debt amortization extended with officials planning to retire 33% of principal over 10 years, 89% over 20 years, and 100% by WWW.STANDARDANDPOORS.CON%/RATINGSDIRECT MARCH 21, 2013 3 1099974 1301753340 Summary: Westlake, Texas; General Obligation 2043. Officials do not plan to issue any additional debt within the next 12 months. The stable outlook reflects Standard & Poor's opinion that officials will likely sustain Westlake's very strong unreserved general fund balance. It is also our expectation that the town's implementation of a property tax levy will likely continue to provide a more stable revenue stream for general and capital project funds, improving financial performance and stability. We believe Westlake's inclusion in the diverse Dallas -Fort Worth MSA economy provides additional support for the stable outlook. For these reasons, we do not expect to change the rating within the outlook's two-year period. Related Criteria And Research USPF Criteria: GO Debt, Oct. 12, 2006 Complete ratings information is available to subscribers of RatingsDirect on the Global Credit Portal at www.globalcreditportal.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com. Use the Ratings search box located in the left column. WWW.STANDARDANDPOORS.COM/RATINGSDIRECT MARCH 21, 2013 4 10999741 301753340 Copyright © 2013 by Standard & Poor's Financial Services LLC. All rights reserved. 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S&P may receive compensation for its ratings and certain analyses, normally from issuers or underwriters of securities or from obligors. S&P reserves the right to disseminate its opinions and analyses. S&P's public ratings and analyses are made available on its Web sites, www.standardandpoors.com (free of charge), and www.ratingsdirect.com and www.globalcreditportal.com (subscription) and www.spcapitaliq.com (subscription) and may be distributed through other means, including via S&P publications and third -party redistributors. Additional information about our ratings fees is available at www.standardandpoors.com/usratingsfees. WWW.STANDARDANDPOORS.CONI/RATINGSDIRECT MARCH 21, 2013 5 1099974 1301753340 FEDERAL TAX CERTIFICATE 1. In General. 1.1. The undersigned is the Town Manager of the Town of Westlake, Texas (the "Issuer"). 1.2. This Certificate is executed for the purpose of establishing the reasonable expectations of the Issuer as to future events regarding the Issuer's Combination Tax and Revenue Certificates of Obligation, Series 2013 (the "Obligations"). The Obligations are issued pursuant to an Ordinance of the Issuer duly adopted by the Issuer (the "Ordinance"). The Ordinance is incorporated herein by reference. 1.3. To the best of the undersigned's knowledge, information and belief, the expectations contained in this Federal Tax Certificate are reasonable. 1.4. The undersigned is an officer of the Issuer delegated with the responsibility of issuing and delivering the Obligations. 1.5. The undersigned is not aware of any facts or circumstances that would cause him to question the accuracy of the representations made by Southwest Securities, Inc. (the "Underwriter") in the Issue Price Certificate attached hereto as Exhibit "D", and by Lawrence Financial Consulting LLC (the "Financial Advisor") with respect to the Schedules attached hereto as Exhibit "E". 2. The Purpose of the Obligations and Useful Lives of Projects. 2.1. The Obligations are being issued pursuant to the Ordinance (a) to provide for the payment of costs of issuing the Obligations, and (b) to pay all or a portion of the Issuer's contractual obligations for the purpose of constructing and equipping buildings and related improvements at the Westlake Academy to be used for a cafetorium, for use as a cafeteria, gymnasium and auditorium, a classroom building and a field house; constructing, installing, acquiring and equipping improvements, additions and extensions to the Issuer's waterworks and sewer system, including a ground storage tank (the "Projects"). 2.2. The Issuer expects that the aggregate useful lives of the Projects exceed 30 years from the later of the date the Projects are placed in service or the date on which the Obligations are issued. 2.3. All earnings, such as interest and dividends, received from the investment of the proceeds of the Obligations during the period of acquisition and construction of the Projects and not used to pay interest on the Obligations, will be used to pay the costs of the Projects, unless required to be rebated and paid to the United States in accordance with section 148(f) of the Internal Revenue Code of 1986 (the "Code"). The proceeds of the Obligations, together with any investment earnings thereon, are expected not to exceed the amount necessary for the governmental purpose of the Obligations. The Issuer expects that no disposition proceeds will arise in connection with the Projects or the Obligations. 3. Expenditure of Certificate Proceeds and Use of Projects. 3.1. The Issuer will incur, within six months after the date of issue of the Obligations, a binding obligation to commence the Projects, either by entering into contracts for the construction of the Projects or by entering into contracts for architectural or engineering services for such Projects, or contracts for the development, purchase of construction materials, or purchase of equipment, for the Projects, with the amount to be paid under such contracts to be in excess of five percent of the proceeds which are estimated to be used for the cost of the Projects. 3.2. After entering into binding obligations, work on such Projects will proceed promptly with due diligence to completion. 3.3. All original proceeds derived from the sale of the Obligations to be applied to the Projects and all investment earnings thereon (other than any amounts required to be rebated to the United States pursuant to section 148(f) of the Code) will be expended for the Projects no later than a date which is three years after the date of issue of the Obligations. 3.4. The Ordinance provides that allocations of proceeds to expenditures for the Projects are expected not to be later than 18 months after the later of the date of the expenditure or the date that the Projects are placed in service, but, in any event, not longer than 60 days after the earlier of five years of the date hereof or the date the Obligations are retired. 3.5. Only Project costs paid or incurred by the Issuer on or after 60 days prior to the date the Issuer approved the funding of the Project (the "60 -day period") through its declaration of official intent ("Qualified Costs") will be paid or reimbursed with Bond proceeds. For this purpose Qualified Costs also include preliminary expenditures, incurred prior to the 60 -day period before the approval of the Issuer through its declaration of official intent, up to an amount not in excess of 20 percent of the aggregate amount of the Obligations. No Qualified Cost represents the cost of property or land acquired from a related party. 3.6. The Issuer will not invest the proceeds prior to such expenditure in any guaranteed investment contract or other nonpurpose investment with a substantially guaranteed yield for a period equal to or greater than four years. 3.7. Other than members of the general public, the Issuer expects that throughout the lesser of the term of the Obligations, or the useful lives of the Projects, the only user of the Projects will be the Issuer or the Issuer's employees and agents. The Issuer will be the manager of the Projects except for the manager of the cafetorium (the "Manager"). The Issuer has not entered, nor will it enter, into any contract, agreement or arrangements with the non-governmental persons with respect to the management, operation or provision of services with respect to the Project (or any portion thereof), other than the contract with the Manager, unless such agreements or arrangements have complied, or will comply, with the guidelines set forth in Rev. Proc. 97-13, 1997-1 C.B. 632, or an opinion of a nationally recognized bound counsel is received. In no event will the proceeds of the Bonds or facilities financed and refinanced therewith be used for private business use in an amount greater than the lesser of $15 million or 10 percent of the proceeds of the Bonds. The Issuer represents that it will monitor annually the amount of private business uses at the Projects to ensure that such amount will not exceed the applicable amount. The Issuer does not expect to enter into long-term sales of output from the Projects (or portion thereof), except on the basis of generally -applicable and uniformly applied rates. The Issuer may apply different rates for different classes of customers, including volume purchasers, which are reasonable and customary. 3.8. Except as stated below, the Issuer expects not to sell or otherwise dispose of property constituting the Projects prior to the earlier of the end of such property's useful life or the final maturity of the Obligations. The Ordinance provides that the Issuer will not sell or otherwise dispose of the Projects unless the Issuer receives an opinion of nationally -recognized bond counsel that such sale or other disposition will not adversely affect the tax-exempt status of the Obligations. 3.9. For purposes of Subsection 3.8 hereof, the Issuer has not included the portion of the Projects comprised of personal property that is disposed in the ordinary course at a price that is expected to be less than 25 percent of the original purchase price. The Issuer, upon any disposition of such 2 property, will transfer the receipts from the disposition of such property to the general operating fund and expend such receipts within six months for other governmental programs. 4. Interest and Sinking Fund. 4.1. A separate and special Interest and Sinking Fund has been created and established, other than as described herein, solely to pay the principal of and interest on the Obligations (the "Bona Fide Debt Service Portion"). The Bona Fide Debt Service Portion constitutes a fund that is used primarily to achieve a proper matching of revenues and debt service within each bond year. Such portion will be completely depleted at least once each year except for an amount not in excess of the greater of (a) one - twelfth of the debt service on the Obligations for the previous year, or (b) the previous year's earnings on such portion of the Interest and Sinking Fund. Amounts deposited in the Interest and Sinking Fund constituting the Bona Fide Debt Service Portion will be spent within a thirteen -month period beginning on the date of deposit, and any amount received from the investment of money held in the Interest and Sinking Fund will be spent within a one-year period beginning on the date of receipt. 4.2. Any money deposited in the Interest and Sinking Fund and any amounts received from the investment thereof that accumulate and remain on hand therein after thirteen months from the date of deposit of any such money or one year after the receipt of any such amounts from the investment thereof shall constitute a separate portion of the Interest and Sinking Fund. The yield on any investments allocable to the portion of the Interest and Sinking Fund exceeding the sum of (a) the Bona Fide Debt Service Portion and (b) an amount equal to the lesser of five percent of the sale and investment proceeds of the Obligations or $100,000 will be restricted to a yield that does not exceed the yield on the Obligations. 5. Yield. 5.1. The issue price of the Obligations included in the Form 8038 G, is based on the Issue Price Certificate attached hereto. 5.2. The Issuer has not entered into any qualified guarantee or qualified hedge with respect to the Obligations. The yield on the Obligations will not be affected by subsequent unexpected events, except to the extent provided in section 1.148-4(h)(3) of the Treasury Regulations when and if the Issuer enters into a qualified hedge or into any transaction transferring, waiving or modifying any right that is part of the terms of any Certificate. The Issuer will consult with nationally recognized bond counsel prior to entering into any of the foregoing transactions. 6. Invested Sinking Fund Proceeds, Replacement Proceeds. 6.1. The Issuer has, in addition to the moneys received from the sale of the Obligations, certain other moneys that are invested in various funds which are pledged for various purposes. These other funds are not available to accomplish the purposes described in Section 2 of this Certificate. 6.2. Other than the Interest and Sinking Fund, there are, and will be, no other funds or accounts established, or to be established, by or on behalf of the Issuer (a) which are reasonably expected to be used, or to generate earnings to be used, to pay debt service on the Obligations, or (b) which are reserved or pledged as collateral for payment of debt service on the Obligations and for which there is reasonable assurance that amounts therein will be available to pay such debt service if the Issuer encounters financial difficulties. Accordingly, there are no other amounts constituting "gross proceeds" of the Obligations, within the meaning of section 148 of the Code. 7. Other Obligations. 7.1. There are no other obligations of the Issuer that (a) are sold at substantially the same time as the Obligations, i.e., within 15 days of the date of sale of the Obligations, (b) are sold pursuant to a common plan of financing with the Obligations, and (c) will be payable from the same source of funds as the Obligations. 7.2. The Issuer has not issued nor does it expect to issue any other tax-exempt obligations during the current calendar year, other than the $2,200,000, which were issued with an original issue price of $2,237,723. 8. Federal Tax Audit Responsibilities. The Issuer acknowledges that in the event of an examination by the Internal Revenue Service (the "Service") to determine compliance of the Obligations with the provisions of the Code as they relate to tax-exempt obligations, the Issuer will respond, and will direct its agents and assigns to respond, in a commercially reasonable manner to any inquiries from the Service in connection with such an examination. The Issuer understands and agrees that the examination may be subject to public disclosure under applicable Texas law. The Issuer acknowledges that this Certificate, including any attachments, does not constitute an opinion of Bond Counsel as to the proper federal tax or accounting treatment of any specific transaction. 9. Record Retention and Private Business Use. The Issuer has covenanted in the Ordinance that it will comply with the requirements of the Code relating to the exclusion of the interest on the Obligations under section 103 of the Code. The Service has determined that certain materials, records and information should be retained by the issuers of tax-exempt obligations for the purpose of enabling the Service to confirm the exclusion of the interest on such obligations under section 103 of the Code. ACCORDINGLY, THE ISSUER SHALL TAKE STEPS TO ENSURE THAT ALL MATERIALS, RECORDS AND INFORMATION NECESSARY TO CONFIRM THE EXCLUSION OF THE INTEREST ON THE OBLIGATIONS UNDER SECTION 103 OF THE CODE ARE RETAINED FOR THE PERIOD BEGINNING ON THE ISSUE DATE OF THE OBLIGATIONS AND ENDING THREE YEARS AFTER THE DATE THE OBLIGATIONS ARE RETIRED. The Issuer acknowledges receipt of the letters attached hereto as Exhibit "B" which discusses limitations related to private business use and Exhibit "C" which, in part, discusses specific guidance by the Service with respect to the retention of records relating to tax-exempt bond transactions. 10. Rebate to United States. The Issuer has covenanted in the Ordinance that it will comply with the requirements of the Code, including section 148(f) of the Code, relating to the required rebate to the United States. Specifically, the Issuer will take steps to ensure that all earnings on gross proceeds of the Obligations in excess of the yield on the Obligations required to be rebated to the United States will be timely paid to the United States. The Issuer acknowledges receipt of the memorandum attached hereto as Exhibit "A" which discusses regulations promulgated pursuant to section 148(f) of the Code. [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK] 4 DATED as of April 30, 2013. TOWN OF WESTLAKE, TEXAS By: AQ6���- Town Mana�e r $9,320,000 Town of Westlake, Texas Combination Tax and Revenue Certificates of Obligation, Series 2013 The undersigned represents that, to the best of the undersigned's knowledge, information and belief, the representations contained in the Schedules attached hereto as Exhibit "E" are, as of April 30, 2013, accurate and complete. We understand that the foregoing information will be relied upon by the Issuer with respect to certain of the representations set forth in this Federal Tax Certificate and by McCall, Parkhurst & Horton L.L.P. (i) in connection with rendering its opinion to the Issuer that interest on the Obligations is excludable from gross income thereof for income tax purposes, and (ii) for purposes of completing the IRS Form 8038-G. The undersigned is certifying only as to facts in existence on the date hereof. Nothing herein represents the undersigned's interpretation of any laws or the application of any laws to these facts. LAWRENCE FINANCIAL CONSULTING LLC By: Name: / z®, c ®r e'7 C & Title: A e"P;WP'-Y 1A $9,320,000 Town of Westlake, Texas Combination Tax and Revenue Certificates of Obligation, Series 2013 Exhibit "A" LAW OFFICES WCALL, PARKHURST & HORTON L.L.P. 600 CONGRESS AVENUE 717 NORTH HARWOOD 700 N. ST. MARY'S STREET SUITE 1800 SUITE 900 SUITE 1525 AUSTIN, TEXAS 78701-3248 DALLAS, TEXAS 75201-6587 SAN ANTONIO, TEXAS 78205-3503 TELEPHONE: (512) 478-3805 TELEPHONE: (214) 754-9200 TELEPHONE: (210) 225-2800 FACSIMILE: (512) 472-0871 FACSIMILE: (214) 754-9250 FACSIMILE: (210) 225-2984 January 1, 2006 ARBITRAGE REBATE REGULATIONS© The arbitrage rebate requirements set forth in section 148(f) of the Internal Revenue Code of 1986 (the "Code") generally provide that in order for interest on any issue of bonds' to be excluded from gross income (i.e., tax-exempt) the issuer must rebate to the United States the sum of, (1) the excess of the amount earned on all "nonpurpose investments" acquired with "gross proceeds" of the issue over the amount which would have been earned if such investments had been invested at a yield equal to the yield on the issue, and (2) the earnings on such excess earnings. On June 18, 1993, the U.S. Treasury Department promulgated regulations relating to the computation of arbitrage rebate and the rebate exceptions. These regulations, which replace the previously -published regulations promulgated on May 15, 1989, and on May 18, 1992, are effective for bonds issued after June 30, 1993. This memorandum was prepared by McCall, Parkhurst & Horton L.L.P. and provides a general discussion of these arbitrage rebate regulations. This memorandum does not otherwise discuss the general arbitrage regulations, other than as they may incidentally relate to rebate. This memorandum also does not attempt to provide an exhaustive discussion of the arbitrage rebate regulations and should not be considered advice with respect to the arbitrage rebate requirements as applied to any individual or governmental unit or any specific transaction. Any tax advice contained in this memorandum is of a general nature and is not intended to be used, and should not be used, by any person to avoid penalties under the Code. McCall, Parkhurst & Horton L.L.P. remains available to provide legal advice to issuers with respect to the provisions of these tax regulations but recommends that issuers seek competent financial and accounting assistance in calculating the amount of such issuer's rebate liability under section 148(f) of the Code and in making elections to apply the rebate exceptions. Effective Dates 1 In this memorandum the word "bond" is defined to include any bond, note, certificate, financing lease or other obligation of an issuer. Copyright 2006 by Harold T. Flanagan, McCall, Parkhurst & Horton L.L.P. All rights reserved. The regulations promulgated on June 18, 1993, generally apply to bonds delivered after June 30, 1993, although they do permit an issuer to elect to apply the rules to bonds issued prior to that date. The temporary regulations adopted by the U.S. Treasury Department in 1989 and 1992 incorporated the same effective dates which generally apply for purposes of section 148(f) of the Code. As such, the previous versions of the rebate regulations generally applied to bonds issued between August 1986 and June 30, 1993 (or, with an election, to bonds issued prior to August 15, 1993). The statutory provisions of section 148(f) of the Code, other than the exception for construction issues, apply to all bonds issued after August 15, 1986, (for private activity bonds) and August 31, 1986, (for governmental public purpose bonds). The statutory exception to rebate applicable for construction issues generally applies if such issue is delivered after December 19, 1989. The regulations provide numerous transitional rules for bonds sold prior to July 1, 1993. Moreover, since, under prior law, rules were previously published with respect to industrial development bonds and mortgage revenue bonds, the transitional rules contained in these regulations permit an issuer to elect to apply certain of these rules for computing rebate on pre - 1986 bonds. The regulations provide for numerous elections which would permit an issuer to apply the rules (other than 18 -month spending exception) to bonds which were issued prior to July 1, 1993 and remain outstanding on June 30, 1993. Due to the complexity of the regulations, it is impossible to discuss in this memorandum all circumstances for which specific elections are provided. If an issuer prefers to use these final version of rebate regulations in lieu of the computational method stated under prior law (e.g., due to prior redemption) or the regulations, please contact McCall, Parkhurst & Horton L.L.P. for advice as to the availability of such options. Future Value Computation Method The regulations employ an actuarial method for computing the rebate amount based on the future value of the investment receipts (i.e., earnings) and payments. The rebate method employs a two-step computation to determine the amount of the rebate payment. First, the issuer determines the bond yield. Second, the issuer determines the arbitrage rebate amount. The regulations require that the computations be made at the end of each five-year period and upon final maturity of the issue (the "computation dates"). THE FINAL MATURITY DATE WILL ACCELERATE IN CIRCUMSTANCES IN WHICH THE BONDS ARE OPTIONALLY REDEEMED PRIOR TO MATURITY. AS SUCH, IF BONDS ARE REFUNDED OR OTHERWISE REDEEMED, THE REBATE MAY BE DUE EARLIER THAN INITIALLY PROJECTED. In order to accommodate accurate record-keeping and to assure that sufficient amounts will be available for the payment of arbitrage rebate liability, however, we recommend that the computations be performed at least annually. Please refer to other materials provided by McCall, Parkhurst & Horton L.L.P. relating to federal tax rules regarding record retention. Underthe future value method, the amount of rebate is determined by compounding the aggregate earnings on all the investments from the date of receipt by the issuer to the computation date. Similarly, a payment for an investment is future valued from the date that the payment is made to the computation date. The receipts and payments are future valued at a discount rate equal to the yield on the bonds. The rebatable arbitrage, as of any computation date, is equal to the excess of the (1) future value of all receipts from investments (i.e., earnings), over (2) the future value of all payments. McCall, Parkhurst & Horton L.L.P. - Page 2 The following example is provided in the regulations to illustrate how arbitrage rebate is computed under the future value method for a fixed -yield bond: "On January 1, 1994, City A issues a fixed yield issue and invests all the sale proceeds of the issue ($49 million). There are no other gross proceeds. The issue has a yield of 7.0000 percent per year compounded semiannually (computed on a 30 day month/360 day year basis). City A receives amounts from the investment and immediately expends them for the governmental purpose of the issue as follows: Date Amount 2/1/1994 $ 3,000,000 4/11/1994 5,000,000 6/11/1994 14,000,000 9/11/1994 20,000,000 7/11/1995 10,000,000 City A selects a bond year ending on January 1, and thus the first required computation date is January 1, 1999. The rebate amount as of this date is computed by determining the future value of the receipts and the payments for the investment. The compounding interval is each 6 -month (or shorter) period and the 30 day month/360 day year basis is used because these conventions were used to compute yield on the issue. The future value of these amounts, plus the computation credit, as of January 1, 1999, is: Date Receipts (Payments) 01/1/1994 ($49,000,000) 02/1/1994 3,000,000 04/1/1994 5,000,000 06/1/1994 14,000,000 09/1/1994 20,000,000 01/1/1995 (1,000) 07/1/1995 10,000,000 01/1/1996 (1,000) Rebate amount (01/01/1999) General Method for Computing Yield on Bonds FY (7.0000 percent) ($69,119,339) 4,207,602 6,932,715 19,190,277 26,947,162 (1,317) 12,722,793 (1,229) :.. In general, the term "yield," with respect to a bond, means the discount rate that when used in computing the present value of all unconditionally due payments of principal and interest and all of the payments for a qualified guarantee produces an amount equal to the issue price of the bond. The term "issue price" has the same meaning as provided in sections 1273 and 1274 of the Code. That is, if bonds are publicly offered (i.e., sold by the issuer to a bond house, broker or similar person acting in the capacity of underwriter or wholesaler), the issue price of each bond is determined on the basis of the initial offering price to the public (not McCall, Parkhurst & Horton L.L.P. - Page 3 to the aforementioned intermediaries) at which price a substantial amount of such bond was sold to the public (not to the aforementioned intermediaries). The "issue price" is separately determined for each bond (i.e., maturity) comprising an issue. The regulations also provide varying periods for computing yield on the bonds depending on the method by which the interest payment is determined. Thus, for example, yield on an issue of bonds sold with variable interest rates (i.e., interest rates which are reset periodically based on changes in market) is computed separately for each annual period ending on the first anniversary of the delivery date that the issue is outstanding. In effect, yield on a variable yield issue is determined on each computation date by "looking back" at the interest payments for such period. The regulations, however, permit an issuer of a variable -yield issue to elect to compute the yield for annual periods ending on any date in order to permit a matching of such yield to the expenditure of the proceeds. Any such election must be made in writing, is irrevocable, and must be made no later than the earlier of (1) the fifth anniversary date, or (2) the final maturity date. Yield on a fixed interest rate issue (i.e., an issue of bonds the interest rate on which is determined as of the date of the issue) is computed over the entire term of the issue. Issuers of fixed -yield issues generally use the yield computed as of the date of issue for all rebate computations. Such yield on fixed -yield issues generally is recomputed only if (1) the issue is sold at a substantial premium, may be retired within five years of the date of delivery, and such date is earlier than its scheduled maturity date, or (2) the issue is a stepped -coupon bond. In such cases, the regulations require the issuer to recompute the yield on such issues by taking into account the early retirement value of the bonds. Similarly, recomputation may occur in circumstances in which the issuer or bondholder modify or waive certain terms of, or rights with respect to, the issue or in sophisticated hedging transactions. IN SUCH CIRCUMSTANCES, ISSUERS ARE ADVISED TO CONSULT Mc CALL, PARKHURST & HOR TON L.L.P. TO ADDRESS THE FEDERAL INCOME TAX CONSEQUENCES OF THESE TRANSACTIONS. For purposes of determining the principal or redemption payments on a bond, different rules are used for fixed-rate and variable-rate bonds. The payment is computed separately on each maturity of bonds rather than on the issue as a whole. In certain circumstances, the yield on the bond is determined by assuming that principal on the bond is paid as scheduled and that the bond is retired on the final maturity date for the stated retirement price. For bonds subject to early redemption or stepped -coupon bonds, described above, or for bonds subject to mandatory early redemption, the yield is computed assuming the bonds are paid on the early redemption date for an amount equal to their value. Premiums paid to guarantee the payment of debt service on bonds are taken into account in computing the yield on the bond. Payments for guarantees are taken into account by treating such premiums as the payment of interest on the bonds. This treatment, in effect, raises the yield on the bond, thereby permitting the issuer to recover such fee with excess earnings. The guarantee must be an unconditional obligation of the guarantor enforceable by the bondholder for the payment of principal or interest on the bond or the tender price of a tender bond. The guarantee may be in the form of an insurance policy, surety bond, irrevocable letter or line of credit, or standby purchase agreement. Importantly, the guarantor must be legally entitled to full reimbursement for any payment made on the guarantee either immediately or McCall, Parkhurst & Horton L.L.P. - Page 4 upon commercially reasonable repayment terms. The guarantor may not be a co -obligor of the bonds or a user of more than 10 percent of the proceeds of the bonds. Payments for the guarantee may not exceed a reasonable charge for the transfer of credit risk. This reasonable charge requirement is not satisfied unless it is reasonably expected that the guarantee will result in a net present value savings on the bond (i.e., the premium does not exceed the present value of the interest savings resulting by virtue of the guarantee). If the guarantee is entered into after June 14, 1989, then any fees charged for the nonguarantee services must be separately stated or the guarantee fee is not recoverable. The regulations also treat certain "hedging" transactions in a manner similarto qualified guarantees. "Hedges" are contracts, e.g., interest rate swaps, futures contracts or options, which are intended to reduce the risk of interest rate fluctuations. Hedges and other financial derivatives are sophisticated and ever -evolving financial products with which a memorandum, such as this, cannot readily deal. IN SUCH CIRCUMSTANCES, ISSUERS AREADVISED TO CONSULT Mc CALL, PARKHURST & HORTON L.L.P. TO ADDRESS THE FEDERAL INCOME TAX CONSEQUENCES OF THESE TRANSACTIONS. Earnings on Nonpurpose Investments The arbitrage rebate provisions apply only to the receipts from the investment of "gross proceeds" in "nonpurpose investments." For this purpose, nonpurpose investments are stock, bonds or other obligations acquired with the gross proceeds of the bonds for the period prior to the expenditure of the gross proceeds for the ultimate purpose. For example, investments deposited to construction funds, reserve funds (including surplus taxes or revenues deposited to sinking funds) or other similar funds are nonpurpose investments. Such investments include only those which are acquired with "gross proceeds." For this purpose, the term "gross proceeds" includes original proceeds received from the sale of the bonds, investment earnings from the investment of such original proceeds, amounts pledged to the payment of debt service on the bonds or amounts actually used to pay debt service on the bonds. The regulations do not provide a sufficient amount of guidance to include an exhaustive list of "gross proceeds" for this purpose; however, it can be assumed that "gross proceeds" represent all amounts received from the sale of bonds, amounts earned as a result of such sale or amounts (including taxes and revenues) which are used to pay, or secure the payment of, debt service for the bonds. The total amount of "gross proceeds" allocated to a bond generally can not exceed the outstanding principal amount of the bonds. The regulations provide that an investment is allocated to an issue for the period (1) that begins on the date gross proceeds are used to acquire the investment, and (2) that ends on the date such investment ceases to be allocated to the issue. In general, proceeds are allocated to a bond issue until expended forthe ultimate purpose forwhich the bond was issued or for which such proceeds are received (e.g., construction of a bond -financed facility or payment of debt service on the bonds). Deposit of gross proceeds to the general fund of the issuer (or other fund in which they are commingled with revenues or taxes) does not eliminate or ameliorate the Issuer's obligation to compute rebate in most cases. As such, proceeds commingled with the general revenues of the issuer are not "freed -up" from the rebate obligation. An exception to this commingling limitation for bonds, other than private activity bonds, permits "investment earnings" (but not sale proceeds or other types of gross proceeds) to be considered spent when deposited to a commingled fund if those amounts are reasonably McCall, Parkhurst & Horton L.L.P. - Page 5 expected to be spent within six months. Other than for these amounts, issuers may consider segregating investments in order to more easily compute the amount of such arbitrage earnings by not having to allocate investments. Special rules are provided for purposes of advance refundings. These rules are too complex to discuss in this memorandum. Essentially, the rules relating to refundings, however, do not require that amounts deposited to the escrow fund to defease the prior obligations of the issuer be subject to arbitrage rebate to the extent that the investments deposited to the escrow fund do not have a yield in excess of the yield on the bonds. Any loss resulting from the investment of proceeds in an escrow fund below the yield on the bonds, however, may be recovered by combining those investments with investments deposited to other funds, e.g., reserve or construction funds. The arbitrage regulations also provide an exception to the arbitrage limitations for the investment of bond proceeds in tax-exempt obligations. As such, investment of proceeds in tax exempt bonds eliminates the Issuer's rebate obligation. A caveat; this exception does not apply to gross proceeds derived allocable to a bond, which is not subject to the alternative minimum tax under section 57(a)(5) of the Code, if invested in tax-exempt bonds subject to the alternative minimum tax, i.e., " private activity bonds." Such "AMT -subject" investment is treated as a taxable investment and must comply with the arbitrage rules, including rebate. Earnings from these tax-exempt investments are subject to arbitrage restrictions, including rebate. Similarly, the investment of gross proceeds in certain tax-exempt mutual funds are treated as a direct investment in the tax-exempt obligations deposited in such fund. While issuers may invest in such funds for purposes of avoiding arbitrage rebate, they should be aware that if "private activity bonds" are included in the fund then a portion of the earnings will be subject to arbitrage rebate. Issuers should be prudent in assuring that the funds do not contain private activity bonds. The arbitrage regulations provide a number of instances in which earnings will be imputed to nonpurpose investments. Receipts generally will be imputed to investments that do not bear interest at an arm's-length (i.e., market) interest rate. As such, the regulations adopt a "market price" rule. In effect, this rule prohibits an issuer from investing bond proceeds in investments at a price which is higher than the market price of comparable obligations, in order to reduce the yield. Special rules are included for determining the market price for investment contracts, certificates of deposit and certain U.S. Treasury obligations. For example, to establish the fair market value of investment contracts a bidding process between three qualified bidders must be used. The fair market value of certificates of deposit which bear a fixed interest rate and are subject to an early withdrawal penalty is its purchase price if that price is not less than the yield on comparable U.S. Treasury obligations and is the highest yield available from the institution. In any event, a basic "common sense" rule -of -thumb that can be used to determine whether a fair market value has been paid is to ask whether the general funds of the issuer would be invested at the same yield or at a higher yield. An exception to this market price rule is available for United States Treasury Obligations - State or Local Government Series in which case the purchase price is always the market price. Reimbursement and Working Capital McCall, Parkhurst & Horton L.L.P. - Page 6 The regulations provide rules for purposes of determining whether gross proceeds are used for working capital and, if so, at what times those proceeds are considered spent. In general, working capital financings are subject to many of the same rules that have existed since the mid-1970s. For example, the regulations generally continue the 13 -month temporary period. By adopting a "proceeds -spent -last" rule, the regulations also generally require that an issuer actually incur a deficit (i.e., expenditures must exceed receipts) for the computation period (which generally corresponds to the issuer's fiscal year). Also, the regulations continue to permit an operating reserve, but unlike prior regulations the amount of such reserve may not exceed five percent of the issuer's actual working capital expenditures for the prior fiscal year. Another change made by the regulations is that the issuer may not finance the operating reserve with proceeds of a tax-exempt obligation. Importantly, the regulations contain rules for determining whether proceeds used to reimburse an issuer for costs paid prior to the date of issue of the obligation, in fact, are considered spent at the time of reimbursement. These rules apply to an issuer who uses general revenues for the payment of all or a portion of the costs of a project then uses the proceeds of the bonds to reimburse those general revenues. Failure to comply with these rules would result in the proceeds continuing to be subject to federal income tax restrictions, including rebate. To qualify for reimbursement, a cost must be described in an expression (e.g., resolution, legislative authorization) evidencing the issuer's intent to reimburse which is made no later than 60 days after the payment of the cost. Reimbursement must occur no later than 18 months after the later of (1) the date the cost is paid or (2) the date the project is placed in service. Except for projects requiring an extended construction period or small issuers, in no event can a cost be reimbursed more than three years after the cost is paid. Reimbursement generally is not permitted for working capital; only capital costs, grants and loans maybe reimbursed. Moreover, certain anti -abuse rules apply to prevent issuers from avoiding the limitations on refundings. IN CASES INVOLVING WORKING CAPITAL OR REIMBURSEMENT, ISSUERS ARE ADVISED TO CONTACT McCALL, PARKHURST & HORTON L.L.P. TO ADDRESS THE FEDERAL INCOME TAX CONSEQUENCES OF THE TRANSACTION. Rebate Payments Rebate payments generally are due 60 days after each installment computation date. The interim computation dates occur each fifth anniversary of the issue date. The final computation date is on the latest of (1) the date 60 days after the date the issue of bonds is no longer outstanding, (2) the date eight months after the date of issue for certain short-term obligations (i.e., obligations retired within three years), or (3) the date the issuer no longer reasonably expects any spending exception, discussed below, to apply to the issue. On such payment dates, other than the final payment date, an issuer is required to pay 90 percent of the rebatable arbitrage to the United States. On the final payment date, an issuer is required to pay 100 percent of the remaining rebate liability. Failure to timely pay rebate does not necessarily result in the loss of tax -exemption. Late payments, however, are subject to the payment of interest, and unless waived, a penalty of 50 percent (or, in the case of private activity bonds, other than qualified 501(c)(3) bonds, 100 McCall, Parkhurst & Horton L.L.P. - Page 7 percent) of the rebate amount which is due. IN SUCH CIRCUMSTANCES, ISSUERS ARE ADVISED TO CONSULT McCALL, PARKHURST & HORTON L.L.P. TO ADDRESS THE FEDERAL INCOME TAX CONSEQUENCES OF THESE TRANSACTIONS. Rebate payments are refundable. The issuer, however, must establish to the satisfaction of the Commissioner of the Internal Revenue Service that the issuer paid an amount in excess of the rebate and that the recovery of the overpayment on that date would not result in additional rebatable arbitrage. An overpayment of less than $5,000 may not be recovered before the final computation date. Alternative Penalty Amount In certain cases, an issuer of a bond the proceeds of which are to be used for construction may elect to pay a penalty, in lieu of rebate. The penalty may be elected in circumstances in which the issuer expects to satisfy the two-year spending exception which is more fully described under the heading "Exceptions to Rebate." The penalty is payable, if at all, within 60 days after the end of each six-month period. This is more often than rebate. The election of the alternative penalty amount would subject an issuer, which fails the two-year spend -out requirements, to the payment of a penalty equal to one and one-half of the excess of the amount of proceeds which was required to be spent during that period over the amount which was actually spent during the period. The penalty has characteristics which distinguish it from arbitrage rebate. First, the penalty would be payable without regard to whether any arbitrage profit is actually earned. Second, the penalty continues to accrue until either (1) the appropriate amount is expended or (2) the issuer elects to terminate the penalty. To be able to terminate the penalty, the issuer must meet specific requirements and, in some instances, must pay an additional penalty equal to three percent of the unexpended proceeds. Exceptions to Rebate The Code and regulations provide certain exceptions to the requirement that the excess investment earnings be rebated to the United States. a. Small Issuers. The first exception provides that if an issuer (together with all subordinate issuers) during a calendar year does not issue tax-exempt bonds2 in an aggregate face amount exceeding $5 million, then the obligations are not subject to rebate. Only issuers with general taxing powers may take advantage of this exception. Subordinate issuers are those issuers which derive their authority to issue bonds from the same issuer, e.g., a city and a health facilities development corporation, or which are controlled by the same issuer, e.g., a state and the board of a public university. In the case of bonds issued for public school capital expenditures, the $5 million cap may be increased to as much as $15 million. For purposes of measuring whether bonds in the calendar year exceed these dollar limits, current refunding z For this purpose, "private activity bonds" neither are afforded the benefit of this exception nor are taken into account for purposes of determining the amount of bonds issued. McCall, Parkhurst & Horton L.L.P. - Page 8 bonds can be disregarded if they meet certain structural requirements. Please contact McCall, Parkhurst & Horton L.L.P. for further information. b. Spending Exceptions. Six -Month Exception. The second exception to the rebate requirement is available to all tax-exempt bonds, all of the gross proceeds of which are expended during six months. The six month rule is available to bonds issued after the effective date of the Tax Reform Act of 1986. See the discussion of effective dates on page two. For this purpose, proceeds used for the redemption of bonds (other than proceeds of a refunding bond deposited to an escrow fund to discharge refunded bonds) can not be taken into account as expended. As such, bonds with excess gross proceeds generally can not satisfy the second exception unless the amount does not exceed the lesser of five percent or $100,000 and such de minimis amount must be expended within one year. Certain gross proceeds are not subject to the spend -out requirement, including amounts deposited to a bona fide debt service fund, to a reserve fund and amounts which become gross proceeds received from purpose investments. These amounts themselves, however, may be subject to rebate even though the originally expended proceeds were not. The Code provides a special rule for tax and revenue anticipation notes (i.e., obligations issued to pay operating expenses in anticipation of the receipt of taxes and other revenues). Such notes are referred to as TRANs. To determine the timely expenditure of the proceeds of a TRAN, the computation of the "cumulative cash flow deficit" is important. If the "cumulative cash flow deficit" (i.e., the point at which the operating expenditures of the issuer on a cumulative basis exceed the revenues of the issuer during the fiscal year) occurs within the first six months of the date of issue and must be equal to at least 90 percent of the proceeds of the TRAN, then the notes are deemed to satisfy the exception. This special rule requires, however, that the deficit actually occur, not that the issuer merely have an expectation that the deficit will occur. In lieu of the statutory exception for TRANs, the regulations also provide a second exception. Under this exception, 100 percent of the proceeds must be spent within six months, but before note proceeds can be considered spent, all other available amounts of the issuer must be spent first ("proceeds -spent -last" rule). In determining whether all available amounts are spent, a reasonable working capital reserve equal to five percent of the prior year's expenditures may be set aside and treated as unavailable. 18 -Month Exception. The regulations also establish a non -statutory exception to arbitrage rebate if all of the gross proceeds (including investment earnings) are expended within 18 months after the date of issue. Under this exception, 15 percent of the gross proceeds must be expended within a six-month spending period, 60 percent within a 12 -month spending period and 100 percent within an 18 -month spending period. The rule permits an issuer to rely on its reasonable expectations for computing investment earnings which are included as gross proceeds during the first and second spending period. A reasonable retainage not to exceed five percent of the sale proceeds of the issue is not required to be spent within the 18 -month period but must be expended within 30 months. Rules similar to the six-month exception relate to the definition of gross proceeds. Two Year Exception. Bonds issued after December 19, 1989 (i.e., the effective date of the Omnibus Reconciliation Act of 1989), at least 75 percent of the net proceeds of which are to be used for construction, may be exempted from rebate if the gross proceeds are spent McCall, Parkhurst & Horton L.L.P. - Page 9 within two years. Bonds more than 25 percent of the proceeds of which are used for acquisition or working capital may not take advantage of this exception. The exception applies only to governmental bonds, qualified 501(c)(3) bonds and private activity bonds for governmentally - owned airports and docks and wharves. The two-year exception requires that at least 10 percent of the available construction proceeds must be expended within six months after the date of issue, 45 percent within 12 months, 75 percent within 18 months and 100 percent within 24 months. The term "available construction proceeds" generally means sale proceeds of the bonds together with investment earnings less amounts deposited to a qualified reserve fund or used to pay costs of issuance. Under this rule, a reasonable retainage not to exceed five percent need not be spent within 24 months but must be spent within 36 months. The two-year rule also provides for numerous elections which must be made not later than the date of issuance of the bonds. Once made, the elections are irrevocable. Certain elections permit an issuer to bifurcate bond issues, thereby treating only a portion of the issue as a qualified construction bond; and, permit an issuer to disregard earnings from reserve funds for purposes of determining "available construction proceeds." Another election permits an issuer to pay the alternative penalty amount discussed above in lieu of rebate if the issuer ultimately fails to satisfy the two-year rule. Issuers should discuss these elections with their financial advisors prior to issuance of the bonds. Of course, McCall, Parkhurst & Horton L.L.P. remains available to assist you by providing legal interpretations thereof. Debt Service Funds. Additionally, an exception to the rebate requirement, whether or not any of the previously discussed exceptions are available, applies for earnings on "bona fide debt service funds." A "bona fide debt service fund" is one in which the amounts are expended within 13 months of the accumulation of such amounts by the issuer. In general, most interest and sinking funds (other than any excess taxes or revenues accumulated therein) satisfy these requirements. For private activity bonds, short term bonds (i.e., have a term of less than five years) or variable rate bonds, the exclusion is available only if the gross earnings in such fund does not exceed $100,000, for the bond year. For other bonds issued after November 11, 1988, no limitation is applied to the gross earnings on such funds for purposes of this exception. Therefore, subject to the foregoing discussion, the issuer is not required to take such amounts into account for purposes of the computation. FOR BONDS ISSUED AFTER THE EFFECTIVE DATE OF THE TAX REFORM ACT OF 1986 WHICH WERE OUTSTANDING AS OF NOVEMBER 11, 1988, OTHER THAN PRIVATE ACTIVITY BONDS, SHORT TERM BONDS OR VARIABLE RATE BONDS, A ONE-TIME ELECTION MAY BE MADE TO EXCLUDE EARNINGS ON "BONA FIDE DEBT SERVICE FUNDS" WITHOUT REGARD TO THE $100,000, LIMITATION. THE ELECTION MUST BE MADE IN WRITING (AND MAINTAINED AS PART OF THE ISSUER'S BOOKS AND RECORDS) NO LATER THAN THE LATER OF MARCH 21, 1990, OR THE FIRST DATE A REBATE PAYMENT IS REQUIRED. Conclusion McCall, Parkhurst & Horton L.L.P. hopes that this memorandum will prove to be useful as a general guide to the arbitrage rebate requirements. Again, this memorandum is not intended as an exhaustive discussion nor as specific advice with respect to any specific transaction. We advise our clients to seek competent McCall, Parkhurst & Horton L.L.P. - Page 10 financial and accounting assistance. Of course, we remain available to provide legal advice regarding all federal income tax matters, including arbitrage rebate. If you have any questions, please feel free to contact either Harold T. Flanagan or Stefano Taverna at (214) 754-9200. McCall, Parkhurst & Horton L.L.P. - Page 11 EXHIBIT "B" LAW OFFICES WCALL, PARKHURST & HORTON L.L.P. 600 CONGRESS AVENUE 717 NORTH HARWOOD 700 N. ST. MARY'S STREET SUITE 1800 SUITE 900 SUITE 1525 AUSTIN, TEXAS 78701-3248 DALLAS, TEXAS 75201-6587 SAN ANTONIO, TEXAS 78205-3503 TELEPHONE: (512) 478-3805 TELEPHONE: (214) 754-9200 TELEPHONE: (210) 225-2800 FACSIMILE: (512) 472-0871 FACSIMILE: (214) 754-9250 FACSIMILE: (210) 225-2984 November 1, 2011 Certain Federal Income Tax Considerations for Private Business Use of Bond -Financed Facilities This memorandum provides a general discussion of those types of contractual arrangements which give rise to private business use, and to what extent that use rises to a prohibited level. Generally, in order for bonds issued by governmental units to be tax- exempt, no more than a de minimis amount of the proceeds of the bonds or the facilities financed with such proceeds may be used by non-governmental users. That is, there may be no more than an incidental use by persons, other than state or local governments. Too much private business use can cause the bonds to become taxable. Private business use for this purpose can be direct or can result from indirect benefits being conveyed to a private person by contractual arrangement. The following discussion describes, in general terms, those types of arrangements which need to be scrutinized. We hope that this general guideline will be useful to you in interacting with private parties regarding the use of bond proceeds or bond -financed facilities. While the statements contained herein are not intended as advice with regard to any specific transaction, McCall, Parkhurst & Horton L.L.P. remains available should you have questions about these rules. If you have any specific questions or comments, please feel free to contact Stefano Taverna or Harold T. Flanagan at (214) 754-9200. Private Business Use Arrangements that involve use in a trade or business by a nongovernmental person of bond proceeds or facilities financed with bond proceeds may cause a "private business use" problem. Bond -financed facilities may be used by a variety of people with differing consequences under these rules. For example, students, teachers, employees and the general public may use bond -financed facilities on a non-exclusive basis without constituting private business use. More problematic, however, is use of bond -financed facilities by groups such as managers, lessees (e.g., book store owners), persons providing services (e.g., food or cleaning), seminar groups, sports and entertainment groups, and even alumni associations. The benefits also may be considered to pass to a private person where the right to the output produced by the facility is transferred. For this purpose, the federal government is considered a non-governmental person. Use by an organization organized under section 501(c)(3) of the Internal Revenue Code in a trade or business unrelated to the exempt purpose of such organization also is considered use by a private person. The term "use" includes both actual and beneficial use. As such, private business use may arise in a variety of ways. For example, ownership of a bond -financed facility by a non-governmental person is private business use. The leasing of a bond -financed facility by a non-governmental person can also cause a private business use problem. Along the same line, management of such facilities by a non-governmental person can cause a problem with private business use, absent compliance with the management contract rules discussed below. Essentially, such use can occur in connection with any arrangement in which the non- governmental user has a preference to benefit from the proceeds or the facilities. Therefore, any arrangement which results in a non-governmental person being the ultimate beneficiary of the bond financing must be considered. 1. Sales and Leases. The sale of a bond -financed facility to a non- governmental person would cause a private business use problem if that facility involved the use of more than 10 percent of the bond proceeds. Since state law often prohibits a governmental issuer from lending credit, this circumstance generally does not occur. Leases, however, also could be a problem because such arrangements grant a possessory interest in the facility which results in the lessee receiving a right to use the facility which is superior to members of the general public. 2. Management Contracts. Having a private manager will give rise to private business use unless certain terms of the management agreement demonstrate that beneficial use has not been passed to the manager. These factors relate to the compensation arrangements, contract term, cancellation provisions, and the relationship of the parties. The primary focus of these rules is on compensation. In general, compensation must be reasonable and not be based, in whole or in part, on a share of net profits. Compensation arrangements may take one of four forms: (1) periodic fixed fee; (2) capitation fee; (3) per- unit fee; or (4) percentage of fees charged. In general, a periodic fixed fee arrangement, however, is required in which at least 50 percent of annual compensation be based on a predetermined fee. During the initial two year start-up period, compensation may be based on a percentage of fees charged (i.e., gross revenues, adjusted gross revenues or expenses). The term of a management contract, generally, may not exceed five years, including all renewal options, and must be cancelable by the governmental unit at the end of the third year. If per-unit fee compensation is used, the term is limited to three years, with a cancellation option for the governmental unit at the end of two years. Where compensation is based on a percentage of gross revenues, the contract may not extend beyond a term of two years, cancelable by the governmental unit at the end of the first year. In each instance, cancellation may be upon reasonable notice, but must be "without penalty or cause," meaning no covenant not to compete, buy-out provision or liquidated damages provision is allowed. Finally, the manager may not have any role or relationship with the governmental unit that would limit the ability of the governmental unit to exercise its rights under the contract. Any voting power of either party which is vested in the other party, including its officers, directors, shareholders and employees, may not exceed 20 percent. Further, the chief executive officer of either party may not serve on the governing board of the other party. Similarly, the two parties must not be members of the same controlled group or be related persons, as defined in certain provisions of federal tax law. 3. Cooperative Research Agreements. A cooperative research agreement with a private sponsor whereby the private party uses bond -financed facilities may cause a private business use problem. Nevertheless, such use of a bond -financed facility by a non- governmental person is to be disregarded for purposes of private business use if the arrangement is in one of the following forms. First, the arrangement may be disregarded if the sponsoring party is required to pay a competitive price for any license or other use of resulting technology, and such price must be determined at the time the technology is available. Second, an arrangement may also qualify if a four-part requirement is met: (1) multiple, unrelated industry sponsors must agree to fund university -performed basic research; (2) the university must determine the research to be performed and the manner in which it is to be performed; (3) the university must have exclusive title to any patent or other product incidentally resulting from the basic research; and (4) sponsors must be limited to no more than a nonexclusive, royalty -free license to use the product of any such research. McCall, Parkhurst & Horton L.L.P. - Page 2 4. Output Contracts. In some circumstances, private business use arises by virtue of contractual arrangements in which a governmental unit agrees to sell the output from a bond -financed facility to a non-governmental person. If the non-governmental person is obligated to take the output or to pay for output even if not taken, then private business use will arise. This is because the benefits and burdens of the bond -financed facility are considered as inuring to the non-governmental purchaser. In addition to the general rule, output -type facilities, including electric and gas generation, transmission and related facilities (but not water facilities) are further limited in the amount of private business use which may be permitted. If more than 5 percent of the proceeds are used for output facilities and if more than 10 percent of the output is sold pursuant to an output arrangement, then the aggregate private business use which may result (for all bond issues) is $15,000,000. How Much Private Business Use is Too Much? In general, there is too much private business use if an amount in excess of 10 percent of the proceeds of the bond issue are to be used, directly or indirectly, in a trade or business carried on by persons otherthan governmental units, and otherthan as members of the general public. All trade or business use by persons on a basis different than that of the general public is aggregated for the 10 percent limit. Private business use is measured on a facility or bond issue basis. On a facility basis, such use is generally measured by relative square footage, fair market rental value or the percentage of cost allocable to the private use. On a bond issue basis, the proceeds of the bond issue are allocated to private and governmental (or public) use of the facility to determine the amount of private business use over the term of the bond issue. Temporary use is not necessarily "bad" (i.e, private use) even though it results in more than 10 percent of the facility being so used. For example, if 100 percent of a facility is used for a period equal to five percent of the term of the bond such use may not adversely impact the bonds. The question is whether the benefits and burdens of ownership have transferred to the private user, as in the case of a sale, lease or management contract. If these benefits and burdens have not transferred, such use may be disregarded for purposes of private business use. In addition, if the private use is considered "unrelated or disproportionate" to the governmental purpose for issuance of the bonds, the private business use test is met if the level of the prohibited private use rises to 5 percent. The "unrelated" question turns on the operational relationship between the private use and use for the governmental purpose. In most cases, a related use facility must be located within or adjacent to the related governmental facility, e.g., a privately -operated school cafeteria would be related to the school in which it is located. Whereas, the use of a bond -financed facility as an administrative office building for a catering company that operates cafeterias for a school system would not be a related use of bond proceeds. Nonetheless, even if a use is related, it is disproportionate to the extent that bond proceeds used for the private use will exceed proceeds used for the related governmental use. III. When are the tests applied to analyze the qualification of a bond? A bond is tested both (1) on the date of issue, and (2) over the term. The tests are applied to analyze the character of the bond on the date of issue, based on how the issuer expects to use the proceeds and the bond -financed property. This is known as the "reasonable expectations" standard. The tests also continuously are applied during the term of the bonds to determine whether there has been a deviation from those expectations. This is known as the "change of use" standard. When tested, bonds are viewed on an "issue -by -issue" basis. Generally, bonds secured by the same sources of funds are part of the same "issue" if they are sold within 15 days of one another. McCall, Parkhurst & Horton L.L.P. - Page 3 IV. What is the reasonable expectations standard? The reasonable expectations standard will be the basis on which McCall, Parkhurst & Horton L.L.P., as bond counsel, will render the federal income tax opinion on the bonds. The statement of expectations will be incorporated into the Federal Tax Certificate, previously referred to as the Federal Tax Certificate. The certificate also will contain information about the amounts to be expended on different types of property, e.g., land, buildings, equipment, in order to compute a weighted useful life of the bond -financed property. Based on the information on useful life, the maximum weighted average maturity of the bonds tested to ensure that is restricted to no more than 120 percent of the useful life of the property being financed or refinanced. V. Chanae of Use Standard. The disqualified private business use need not exist on the date of issue. Subsequent use by non-governmental persons also can cause a loss of tax -exemption. Post - issuance "change of use" of bond -financed facilities could result in the loss of the tax-exempt status of the bonds, unless certain elements exist which demonstrate the change was unforeseen. For this purpose, a change in use includes a failure to limit private business use subsequent to the date of issuance of the bonds. A reasonable expectation element requires that, as of the date of issue of the bonds, the governmental unit reasonably have expected to use the proceeds of the issue for qualified facilities for the entire term of the issue. To fall within the safe harbor rules which avoid loss of tax-exempt status the governmental unit must assure that no circumstances be present which indicate an attempt to avoid directly or indirectly the requirements of federal income tax law. Finally, the safe harbor requires that the governmental unit take remedial action that would satisfy one of the following provisions: redemption of bonds; alternative use of disposition proceeds of a facility that is financed by governmental bonds; or, alternative use of a facility that is financed by governmental bonds. For purposes of the latter two remedial action provisions, the governmental unit has 90 days from the date of the change of use to satisfy the requirements. In addition, there is an exception for small transactions for dispositions at a loss. VI. Written Procedures. The Internal Revenue Service ("IRS") has initiated an active audit program intended to investigate the compliance of governmental issuers with the private activity bond rules described herein and the arbitrage rules described in the other memorandum provided to you by our firm. In connection with the expansion of this program, auditors and their supervisors have expressed the viewpoint that each governmental issuer should establish written procedures to assure continuing compliance. Moreover, the IRS is asking issuers to state in a bond issue's informational return (such an 8038-G) whether such procedures have been adopted. The federal tax certificate, together with the attached memoranda and bond covenants can be supplemented by standard written practices adopted by the executive officer or legislative bodies of the issuer. Accordingly, our firm is prepared to advise you with respect to additional practices which we believe would be beneficial in monitoring compliance and taking remedial action in cases of change in use. There is no standard uniform practice for all issuers to adopt because each issuer operates in unique fashion. However, if you wish us to assist you in developing practices which might assist you in complying with the viewpoints expressed by the IRS and its personnel, please contact your bond lawyer at McCall, Parkhurst & Horton LLP. Disclosure Under IRS Circular 230: McCall Parkhurst & Horton LLP informs you that any tax advice contained in this memorandum, including any attachments, was not intended or written to be used, and cannot be used, for the purpose of avoiding federal tax McCall, Parkhurst & Horton L.L.P. - Page 4 related penalties or promoting, marketing or recommending to another party any transaction or matter addressed herein. McCall, Parkhurst & Horton L.L.P. - Page 5 600 CONGRESS AVENUE SUITE 1800 AUSTIN, TEXAS 78701-3248 TELEPHONE: 512 478-3805 FACSIMILE: 512 472-0871 Debbie Piper Finance Director Town of Westlake, Texas 3 Village Circle, Suite 202 Westlake, Texas 76262 Exhibit "C" LAW OFFICES MICALL, PARKHURST & HORTON L.L.P. 717 NORTH HARWOOD SUITE 900 DALLAS, TEXAS 75201-6587 TELEPHONE: 214 754-9200 FACSIMILE: 214 754-9250 April 2, 2013 700 N. ST. MARY'S STREET SUITE 1525 SAN ANTONIO, TEXAS 78205-3503 TELEPHONE: 210 225-2800 FACSIMILE: 210 225-2984 Re: Town of Westlake, Texas Combination Tax and Revenue Certificates of Obligation, Series 2013 Dear Ms. Piper: As you know, the Town of Westlake, Texas (the "Issuer") will issue the captioned obligations in order to provide for the acquisition and construction of the project. As a result of that issuance, the federal income tax laws impose certain restrictions on the investment and expenditure of amounts to be used for the project or to be deposited to the interest and sinking fund for the captioned obligations. The purpose of this letter is to set forth, in somewhat less technical language, those provisions of the tax law which require the timely use of bond proceeds and that investment of these amounts be at a yield which is not higher than the yield on the captioned obligations. For this purpose, please refer to line 21(e) of the Form 8038-G included in the transcript of proceedings for the yield on the captioned obligations. Please note that the Form 8038-G has been prepared based on the information provided by or on your behalf by your financial advisor. Accordingly, while we believe that the information is correct you may wish to have the yield confirmed before your rebate consultant or the paying agent attempt to rely on it. Generally, the federal tax laws provide that, unless excepted, amounts to be used for the project or to be deposited to the interest and sinking fund must be invested in obligations the combined yield on which does not exceed the yield on the obligations. Importantly, for purposes of administrative convenience, the obligations, however, have been structured in such a way as to avoid, for the most part, this restriction on investment yield. They also contain certain covenants relating to expenditures of proceeds designed to alert you to unintentional failures to comply with the laws affecting expenditures of proceeds and dispositions of property. First, the sale and investment proceeds to be used for the new money project may be invested for up to three years without regard to yield. (Such amounts, however, may be subject to rebate.) Thereafter, they must be invested at or below the bond yield. Importantly, expenditure of these proceeds must be accounted in your books and records. Allocations of these expenditures must occur within 18 months of the later of the date paid or the date the project is completed. The foregoing notwithstanding, the allocation should not occur later than 60 days after the earlier of (1) of five years after the delivery date of the obligations or (2) the date the obligations are retired unless you obtain an opinion of bond counsel. Second, the interest and sinking fund is made up of amounts which are received annually for the payment of current debt service on all the Issuer's outstanding obligations. Any taxes or revenues deposited to the interest and sinking fund which are to be used for the payment of current debt service on the captioned obligations, or any other outstanding obligations, are not subject to yield restriction. By definition, current debt service refers only to debt service to be paid within one year of the date of receipt of these amounts. For the most part, this would be debt service in the current fiscal year. These amounts deposited to the account for current debt service may be invested without regard to any constraint imposed by the federal income tax laws. Third, a portion of the interest and sinking fund is permitted to be invested without regard to yield restriction as a "minor portion." The "minor portion" exception is available for de minimis amounts of taxes or revenues deposited to the interest and sinking fund. The maximum amount that may be invested as part of this account may not exceed the lesser of five percent of the principal amount of the obligations or $100,000. Accordingly, you should review the current balance in the interest and sinking fund in order to determine if such balance exceeds the aggregate amounts discussed above. Additionally, in the future it is important that you be aware of these restrictions as additional amounts are deposited to the interest and sinking fund. The amounts in this fund which are subject to yield restriction would only be the amounts which are in excess of the sum of (1) the current debt service account and (2) the "minor portion" account. Moreover, to the extent that additional obligations are issued by the Issuer, whether for new money projects or for refunding, these amounts will change in their proportion. The Ordinance contains covenants that require the Issuer to comply with the requirements of the federal tax laws relating to the tax-exempt obligations. The Internal Revenue Service (the "Service") has determined that certain materials, records and information should be retained by the issuers of tax-exempt obligations for the purpose of enabling the Service to confirm the exclusion of the interest on such obligations under the Internal Revenue Code. Accordingly, the Issuer should retain such materials, records and information for the period beginning on the issue date of the captioned obligations and ending three years after the date the captioned obligations are retired. Please note this federal tax law standard may vary from state law standards. The material, records and information required to be retained will generally be contained in the transcript of proceedings for the captioned obligations, however, the Issuer should collect and retain additional materials, records and information to ensure the continued compliance with federal tax law requirements. For example, beyond the transcript of proceedings for the obligations, the Issuer should keep schedules evidencing the expenditure of certificate proceeds, documents relating to the use of bond -financed property by governmental and any private parties (e.g., leases and management contracts, if any) and schedules pertaining to the investment of certificate proceeds. In the event that you have questions relating to record retention, please contact us. The Service also wants some assurance that any failure to comply with the federal tax laws was not due to an issuer's intentional disregard or gross neglect of the responsibilities imposed on it by the federal tax laws. Therefore, to ensure post -issuance compliance, an issuer should consider adopting formalized written guidelines to help the issuer perform diligence reviews at regular intervals. The goal is for issuers to be able to timely identify and resolve violations of the laws necessary to maintain their obligations' tax -favored status. While the federal tax certificate, together with its attachments, may generally provide a basic written guideline when incorporated in an organizations' operations, the extent to which an organization has appropriate written compliance procedures in place is to be determined on a case-by-case basis Moreover, the Service has indicated that written procedures should identify the personnel that adopted the procedures, the personnel that is responsible for monitoring compliance, the frequency of compliance check activities, the nature of the compliance check activities undertaken, and the date such procedures were originally adopted and subsequently updated, if applicable. The Service has stated that the adoption of such procedures will be a favorable factor that the Service will consider when determining the amount of any penalty to be imposed on an issuer in the event of an unanticipated and non -curable failure to comply with the tax laws. Finally, you should notice that the Ordinance contains a covenant that limits the ability of the Issuer to sell or otherwise dispose of bond -financed property for compensation. Beginning for obligations issued after May 15, 1997 (including certain refunding certificates), or in cases in which an issuer elects to apply new private activity bond regulations, such sale or disposition causes the creation of a class of proceeds referred to as "disposition proceeds." Disposition proceeds, like sale proceeds and investment earnings, are tax -restricted funds. Failure to appropriately account, invest or expend such disposition proceeds would adversely affect the tax-exempt status of the obligations. In the event that you anticipate selling property, even in the ordinary course, please contact us. Obviously, this letter only presents a fundamental discussion of the yield restriction rules as applied to amounts deposited to the interest and sinking fund. Moreover, this letter does not address the rebate consequences with respect to the interest and sinking fund and you should review the memorandum attached to the Federal Tax Certificate as Exhibit "A" for this purpose. If you have certain concerns with respect to the matters discussed in this letter or wish to ask additional questions with regards to certain limitations imposed, please feel free to contact our firm. Thank you for your consideration and we look forward to our continued relationship. Very truly yours, McCALL, PARKHURST & HORTON L.L.P. cc: Leroy Grawunder, Jr. Exhibit "D" ISSUE PRICE CERTIFICATE The undersigned, as the duly authorized representative of Southwest Securities, Inc. (the "Underwriter"), with respect to the underwriting of Combination Tax and Revenue Certificates of Obligation, Series 2013 (the "Obligations") issued by the Town of Westlake, Texas (the "Issuer"), hereby certifies and represents on behalf of the Underwriter, but not in his/her own right, based on the Underwriter's records and information available to it that it believes, after reasonable inquiry, to be accurate and complete as of the date hereof, as follows: (a) The Underwriter has offered all of the Obligations to members of the public in a bona fide initial offering at a price which, on the date of such offering, was reasonably expected by the Underwriter to be equal to the fair market value of such maturity. For purposes of this Issue Price Certificate, the term "public" does not include any bondhouses, brokers, dealers, and similar persons or organizations acting in the capacity of underwriters or wholesalers (including the Underwriter or members of the selling group or persons that are related to, or controlled by, or are acting on behalf of or as agents for the undersigned or members of the selling group). (b) Other than the obligations maturing in 2029 through 2031, 2036, 2039 and 2043 (the "Retained Maturity or Maturities"), the first price at which a substantial amount (i.e., at least 10 percent) of the principal amount of each maturity of the Obligations was sold to the public is set forth in the Official Statement. In the case of the Retained Maturities, the Underwriter reasonably expected on the offering date to sell a substantial amount (i.e., at least 10 percent) of each Retained Maturity at the initial offering price set forth in the Official Statement. The Official Statement is included in the transcript for the Obligations and is incorporated herein by reference. The Underwriter understands that the representations made in this Issue Price Certificate will be relied upon, by the Issuer with respect to certain of the representations set forth in this Federal Tax Certificate and by McCall, Parkhurst & Horton L.L.P. (i) in connection with rendering its opinion to the Issuer that interest on the Obligations is excludable from gross income thereof for income tax purposes, and (ii) for purposes of completing the IRS Form 8038-G. The undersigned is certifying only as to facts in existence on the date hereof. Nothing herein represents the undersigned's interpretation of any laws or the application of any laws to these facts. EXECUTED and DELIVERED as of this April i0, 201 SOUTHWEST SECURITIES, INC. By: Name: Julie Villarreal Title: Senior Vice President Exhibit "E" SCHEDULES OF FINANCIAL ADVISOR [To be attached hereto] Town of Westlake, Texas Combination Tax and Revenue Certificates of Obligation, Series 2013 Table of Contents Report Pricing Summary 1 Debt Service Schedule 2 Summary Of Underwriter's Discount 5 Detail Of Underwriter's Discount 6 2013 CO I SINGLE PURPOSE 1 4/ 3/2013 1 8:27 AM Town of Westlake, Texas Combination Tax and Revenue Certificates of Obligation, Series 2013 Pricing Summary Maturity Maturity Type of Bond Coupon Yield Value Price Dollar Price 02/15/2014 Serial Coupon 2.000% 0.400% 100,000.00 101.263% 101,263.00 02/15/2015 Serial Coupon 2.000% 0.480% 195,000.00 102.708% 200,280.60 02/15/2016 Serial Coupon 2.000% 0.680% 195,000.00 103.643% 202,103.85 02/15/2017 Serial Coupon 2.000% 0.880% 200,000.00 104.167% 208,334.00 02/15/2018 Serial Coupon 2.000% 1.130% 200,000.00 104.046% 208,092.00 02/15/2019 Serial Coupon 2.000% 1.280% 205,000.00 104.006% 213,212.30 02/15/2020 Serial Coupon 2.000% 1.480% 215,000.00 103.347% 222,196.05 02/15/2021 Serial Coupon 2.500% 1.700% 215,000.00 105.813% 227,497.95 02/15/2022 Serial Coupon 2.500% 1.900% 225,000.00 104.835% 235,878.75 02/15/2024 Term 1 Coupon 3.000% 2.070% 470,000.00 108.202% c 508,549.40 02/15/2026 Tenn 2 Coupon 3.000% 2.300% 495,000.00 106.103% c 525,209.85 02/15/2028 Term 3 Coupon 3.250% 2.530% 530,000.00 106.207% c 562,897.10 02/15/2029 Serial Coupon 3.500% 2.650% 390,000.00 107.285% c 418,411.50 02/15/2030 Serial Coupon 3.500% 2.750% 405,000.00 106.396% c 430,903.80 02/15/2031 Serial Coupon 3.500% 2.800% 415,000.00 105.955% c 439,713.25 02/15/2033 Tenn 4 Coupon 4.000% 3.000% 910,000.00 108.426% c 986,676.60 02/15/2036 Term 5 Coupon 4.000% 3.200% 1,035,000.00 106.675% c 1,104,086.25 02/15/2039 Tenn 6 Coupon 3.625% 3.950% 1,155,000.00 94.768% 1,094,570.40 02/15/2043 Tenn 7 Coupon 4.000% 4.050% 1,765,000.00 99.134% 1,749,715.10 Total - - - $9,320,000.00 - $9,639,591.75 Bid Information Par Amount of Bonds $9,320,000.00 Reoffering Premium or (Discount) 319,591.75 Gross Production $9,639,591.75 Total Underwriter's Discount (0.690°/©) $(64,353.57) Bid (102.739%) 9,575,238.18 Total Purchase Price $9,575,238.18 Bond Year Dollars $166,538.33 Average Life 17.869 Years Average Coupon 3.6775914% Net Interest Cost (NIC) 3.5243305% True Interest Cost (TIC) 3.4194261% 2013 CO I SINGLE PURPOSE 1 4/ 3/2013 1 8:27 AM Lawrence Financial Consulting Li C ■ Registered Municipal Advisor- - D- .•- Town of Westlake, Texas Combination Tax and Revenue Certificates of Obligation, Series 2013 Debt Service Schedule Part 1 of 3 Date Principal Coupon Interest Total P+I Fiscal Total 04/30/2013 - - - - 02/15/2014 100,000.00 2.000% 250,161.72 350,161.72 08/15/2014 - - 156,996.88 156,996.88 - 09/30/2014 - - - - 507,158.60 02/15/2015 195,000.00 2.000% 156,996.88 351,996.88 - 08/15/2015 - - 155,046.88 155,046.88 - 09/30/2015 - - - - 507,043.76 02/15/2016 195,000.00 2.000% 155,046.88 350,046.88 - 08/15/2016 - - 153,096.88 153,096.88 - 09/30/2016 - - - - 503,143.76 02/15/2017 200,000.00 2.000% 153,096.88 353,096.88 - 08/15/2017 - - 151,096.88 151,096.88 - 09/30/2017 - - - - 504,193.76 02/15/2018 200,000.00 2.000% 151,096.88 351,096.88 - 08/15/2018 - - 149,096.88 149,096.88 - 09/30/2018 - - - - 500,193.76 02/15/2019 205,000.00 2.000% 149,096.88 354,096.88 - 08/15/2019 - - 147,046.88 147,046.88 - 09/30/2019 - - - - 501,143.76 02/15/2020 215,000.00 2.000% 147,046.88 362,046.88 - 08/15/2020 - - 144,896.88 144,896.88 - 09/30/2020 - - - - 506,943.76 02/15/2021 215,000.00 2.500% 144,896.88 359,896.88 - 08/15/2021 - - 142,209.38 142,209.38 - 09/30/2021 - - - - 502,106.26 02/15/2022 225,000.00 2.500% 142,209.38 367,209.38 - 08/15/2022 - - 139,396.88 139,396.88 - 09/30/2022 - - - - 506,606.26 02/15/2023 230,000.00 3.000% 139,396.88 369,396.88 - 08/15/2023 - - 135,946.88 135,946.88 - 09/30/2023 - - - - 505,343.76 02/15/2024 240,000.00 3.000% 135,946.88 375,946.88 - 08/15/2024 - - 132,346.88 132,346.88 - 09/30/2024 - - - - 508,293.76 02/15/2025 240,000.00 3.000% 132,346.88 372,346.88 - 08/15/2025 - - 128,746.88 128,746.88 - 09/30/2025 - - - - 501,093.76 02/15/2026 255,000.00 3.000% 128,746.88 383,746.88 - 08/15/2026 - - 124,921.88 124,921.88 - 09/30/2026 - - - - 508,668.76 02/15/2027 260,000.00 3.250% 124,921.88 384,921.88 - 08/15/2027 - - 120,696.88 120,696.88 - 09/30/2027 - - - 505,618.76 2013 CO I SINGLE PURPOSE 1 4/ 3/2013 1 8:27 AM Lawrence Financial Consulting LLC Registered Municipal Advisori Texas Securities D' .g- Town of Westlake, Texas Combination Tax and Revenue Certificates of Obligation, Series 2013 Debt Service Schedule Part 2 of 3 Date Principal Coupon Interest Total P+I Fiscal Total 02/15/2028 270,000.00 3.250% 120,696.88 390,696.88 08/15/2028 - - 116,309.38 116,309.38 - 09/30/2028 - - - - 507,006.26 02/15/2029 390,000.00 3.500% 116,309.38 506,309.38 - 08/15/2029 - - 109,484.38 109,484.38 - 09/30/2029 - - - - 615,793.76 02/15/2030 405,000.00 3.500% 109,484.38 514,484.38 - 08/15/2030 - - 102,396.88 102,396.88 - 09/30/2030 - - - - 616,881.26 02/15/2031 415,000.00 3.500% 102,396.88 517,396.88 - 08/15/2031 - - 95,134.38 95,134.38 - 09/30/2031 - - - - 612,531.26 02/15/2032 595,000.00 4.000% 95,134.38 690,134.38 - 08/15/2032 - - 83,234.38 83,234.38 - 09/30/2032 - - - - 773,368.76 02/15/2033 315,000.00 4.000% 83,234.38 398,234.38 - 08/15/2033 - - 76,934.38 76,934.38 - 09/30/2033 - - - - 475,168.76 02/15/2034 330,000.00 4.000% 76,934.38 406,934.38 - 08/15/2034 - - 70,334.38 70,334.38 - 09/30/2034 - - - - 477,268.76 02/15/2035 345,000.00 4.000% 70,334.38 415,334.38 - 08/15/2035 - - 63,434.38 63,434.38 - 09/30/2035 - - - - 478,768.76 02/15/2036 360,000.00 4.000% 63,434.38 423,434.38 - 08/15/2036 - - 56,234.38 56,234.38 - 09/30/2036 - - - - 479,668.76 02/15/2037 370,000.00 3.625% 56,234.38 426,234.38 - 08/15/2037 - - 49,528.13 49,528.13 - 09/30/2037 - - - - 475,762.51 02/15/2038 385,000.00 3.625% 49,528.13 434,528.13 - 08/15/2038 - - 42,550.00 42,550.00 - 09/30/2038 - - - - 477,078.13 02/15/2039 400,000.00 3.625% 42,550.00 442,550.00 - 08/15/2039 - - 35,300.00 35,300.00 - 09/30/2039 - - - - 477,850.00 02/15/2040 415,000.00 4.000% 35,300.00 450,300.00 - 08/15/2040 - - 27,000.00 27,000.00 - 09/30/2040 - - - - 477,300.00 02/15/2041 430,000.00 4.000% 27,000.00 457,000.00 - 08/15/2041 - - 18,400.00 18,400.00 - 09/30/2041 - - - - 475;400.00 02/15/2042 450,000.00 4.000% 18,400.00 468,400.00 - 2013 CO I SINGLE PURPOSE 1 4/ 3/2013 1 8:27 AM Lawrence Financial Consulting LLC Registered Municipal Advisori Texas Securities D' .g- Town of Westlake, Texas Combination Tax and Revenue Certificates of Obligation, Series 2013 Debt Service Schedule Part 3 of 3 Date Principal Coupon Interest Total P+I Fiscal Total 08/15/2042 09/30/2042 - - 02/15/2043 470,000.00 4.000% 09/30/2043 - - 9,400.00 - 9,400.00 - 9,400.00 - 479,400.00 - - 477,800.00 - 479,400.00 Total $9,320,000.00 $6,124,599.46 $15,444,599.46 - Yield Statistics Bond Year Dollars $166,538.33 Average Life 17.869 Years Average Coupon 3.6775914% Net Interest Cost (NIC) 3.5243305% True Interest Cost (TIC) 3.4194261 Bond Yield for Arbitrage Purposes 3.2836947% All Inclusive Cost (AIC) 3.4816110% IRS Form 8038 Net Interest Cost 3.4040347% Weighted Average Maturity 17.691 Years 2013 CO I SINGLE PURPOSE 1 4/3/2013 1 8:27 AM Lawrence Financial Consulting LLC Registered Municipal Advisori Texas Securities D' .g- Town of Westlake, Texas Combination Tax and Revenue Certificates of Obligation, Series 2013 Summary Of Underwriter's Discount + Issuance Total Maturity Concession Takedown = Total Value Takedown 02/15/2014 0.130% 0.130% 100,000.00 130.00 02/15/2015 0.250% 0.250% 195,000.00 487.50 02/15/2016 0.380% 0.380% 195,000.00 741.00 02/15/2017 0.375% 0.375% 200,000.00 750.00 02/15/2018 0.500% 0.500% 200,000.00 1,000.00 02/15/2019 0.500% 0.500% 205,000.00 1,025.00 02/15/2020 0.500% 0.500% 215,000.00 1,075.00 02/15/2021 0.500% 0.500% 215,000.00 1,075.00 02/15/2022 0.500% 0.500% 225,000.00 1,125.00 02/15/2024 0.500% 0.500% 470,000.00 2,350.00 02/15/2026 0.500% 0.500% 495,000.00 2,475.00 02/15/2028 0.500% 0.500% 530,000.00 2,650.00 02/15/2029 0.500% 0.500% 390,000.00 1,950.00 02/15/2030 0.500% 0.500% 405,000.00 2,025.00 02/15/2031 0.500% 0.500% 415,000.00 2,075.00 02/15/2033 0.500% 0.500% 910,000.00 4,550.00 02/15/2036 0.500% 0.500% 1,035,000.00 5,175.00 02/15/2039 0.500% 0.500% 1,155,000.00 5,775.00 02/15/2043 0.500% 0.500% 1,765,000.00 8,825.00 Total - - $9,320,000.00 $45,258.50 Underwriting & Issuance Expenses Total Management Fees (0.075%) $7,000.00 Total Average Takedown (0.4861/o) $45,258.50 Total Underwriters Expenses (0.130%) $12,095.07 TOTAL UNDERWRITING SPREAD (0.690%) $64,353.57 2013 CO I SINGLE PURPOSE 1 4/ 3/2013 1 8:27 AM Exhibit "F" CERTIFICATE OF ELECTION PURSUANT TO SECTION 148(F)(4)(C) OF THE INTERNAL REVENUE CODE OF 1986 I, the undersigned, being the duly authorized representative of the Town of Westlake, Texas (the "Issuer") hereby state that the Issuer elects the provisions of section 148(f)(4)(C) of the Internal Revenue Code of 1986 (the "Code"), relating to the exception to arbitrage rebate for temporary investments, as more specifically designated below, with respect to the Issuer's Combination Tax and Revenue Certificates of Obligation, Series 2013 (the "Obligations") which are being issued on the date of delivery of the Obligations. The CUSIP Number for the Obligations is stated on the Form 8038-G filed in connection with the Obligations. The Issuer intends to take action to comply with the two-year temporary investments exception to rebate afforded construction bonds under section 148(f)(4)(C) of the Code or any of the other exceptions available to the Issuer in accordance with section 1.148-7 of the Treasury Regulations. Capitalized terms have the same meaning as defined in the Federal Tax Certificate. 1. PENALTY ELECTION. In the event that the Issuer should fail to expend the "available construction proceeds" of the Bonds in accordance with the provisions of section 148(f)(4)(C) of the Code, the Issuer elects, in lieu of rebate, the penalty provisions of section 148(f)(4)(C)(vii)(I) of the Code. 1-1 2. RESERVE FUND ELECTION. The Issuer elects to exclude from "available construction proceeds," within the meaning of section 148(f)(4)(C)(vi) of the Code, of the Bonds, earnings on the Reserve Fund in accordance with section 148(f)(4)(C)(vi)(IV) of the Code. 3. MULTIPURPOSE ELECTION. The Issuer elects to treat that portion of the Bonds the proceeds of which are to be used for the payment of expenditures for construction, reconstruction or rehabilitation of the Projects, as defined in the instrument authorizing the issuance of the Bonds, in an amount which is currently expected to be equal to $ as a separate issue in accordance with the provisions of section 148(f)(4)(C)(v)(II) of the Code. (Note: This election is not necessary unless less than 75 percent of the proceeds of the Bonds will be used for construction, reconstruction or renovation.) 14. ACTUAL FACTS. For purposes of determining compliance with section 148(f)(c) of the o e (other than qualification of the Bonds as a qualified construction issue), the Issuer elects to use actual facts rather than reasonable expectations. x1 5. NO ELECTION. The Issuer understands that the elections which are adopted as evidenced by the check in the box adjacent to the applicable provision are irrevocable. Further, the Issuer understands that qualification of the Bonds for eligibility for the exclusion from the rebate requirement set forth in section 148(f) of the Code is based on subsequent events and is unaffected by the Issuer's expectations of such events as of the date of delivery of the Bonds. Accordingly, while failure to execute this certificate and to designate the intended election does not preclude aualifcation, it would preclude the Issuer from the relief afforded by such election. DATED: April 30, 2013 Town Manager Town of Westlake, Ias 3 Village Circle, Suite 202 Westlake, Texas 76262 Employer I.D. Number: 75-2449357 May 24, 2013 VIA UPS NEXT DAY AIR #IZ 564 04W 019098 3348 Internal Revenue Service Center 1973 North Rulon White Boulevard Ogden, Utah 84201-1000 700 N. ST. MARY'S STREET SUITE 1525 SAN ANTONIO, TEXAS 78205-3503 TELEPHONE: 210 225-2800 FACSIMILE: 210225-2984 Re: Information Reporting - Tax -Exempt Bonds Town of Westlake, Texas Combination Tax and Revenue Certificates of Obligation, Series 2013 Ladies and Gentlemen: Pursuant to the requirements of Section 149(e) of the Internal Revenue Code of 1986, enclosed please find an original of Form 803 8-G which is hereby submitted to you for the above -captioned bonds issued April 30, 2013. Sincerely, McCALL, PARKHURST & HORTON L.L.P. j*�� Stefano Taverna ST: kg Enclosures cc: Mr. Leroy Grawunder, Jr. LAW OFFICES M9CALL, PARKHURST & HORTON L.L.P. 600 CONGRESS AVENUE 717 NORTH HARWOOD SUITE 1800 SUITE 900 AUSTIN, TEXAS 78701-3248 DALLAS, TEXAS 75201-6587 TELEPHONE: 512 478-3805 TELEPHONE: 214 754-9200 FACSIMILE: 512 472-0871 FACSIMILE: 214 754-9250 May 24, 2013 VIA UPS NEXT DAY AIR #IZ 564 04W 019098 3348 Internal Revenue Service Center 1973 North Rulon White Boulevard Ogden, Utah 84201-1000 700 N. ST. MARY'S STREET SUITE 1525 SAN ANTONIO, TEXAS 78205-3503 TELEPHONE: 210 225-2800 FACSIMILE: 210225-2984 Re: Information Reporting - Tax -Exempt Bonds Town of Westlake, Texas Combination Tax and Revenue Certificates of Obligation, Series 2013 Ladies and Gentlemen: Pursuant to the requirements of Section 149(e) of the Internal Revenue Code of 1986, enclosed please find an original of Form 803 8-G which is hereby submitted to you for the above -captioned bonds issued April 30, 2013. Sincerely, McCALL, PARKHURST & HORTON L.L.P. j*�� Stefano Taverna ST: kg Enclosures cc: Mr. Leroy Grawunder, Jr. Farm 8038-G Information Return for Tax -Exempt Governmental Obligations ® Under Internal Revenue Code section 149 a (Rev. September 2011) ( ) OMB No. 1545-0720 See separate instructions. Department of the Treasury Ilo-Internal Revenue Service P Caution: If the issue rice is under $100,000, use Form 8038 -GC. MP.MM Reporting Authority If Arnendarf RE -turn chock hara ► n 1 Issuer's name 2 Issuer's employer identification number (EIN) WESTLAKE, TEXAS (TOWN OF) 75-2449357 3a Name of person (other than issuer) with whom the IRS may communicate about this return (see instructions) 3b Telephone number of other person shown on 3a NONE N/A 4 Number and street (or P.O. box if mail is not delivered to street address) Room/suite 5 Report number (For IRS Use Only) 3 VILLAGE CIRCLE 202 3 RM 6 City, town, or post office, state, and ZIP code 7 Date of issue WESTLAKE, TEXAS 76262 04/30/2013 8 Name of issue 9 CUSIP number COMBINATION TAX AND REVENUE CERTIFICATES OF OBLIGATION, SERIES 2013 96048P EXO 10a Name and title of officer or other employee of the issuer whom the IRS may call for more information (see 10b Telephone number of officer or other instructions) employee shown on 10a THOMAS E. BRYMER, TOWN MANAGER 817-430-0941 Description of Obligations. Complete for the entire issue for which this form is being filed. (a) Final maturity date (b) Issuerice (c) Stated redemption (d) Weighted p price at maturity average maturity (e) Yield 21 ype OT Issue (enter the issue price). See the instructions and attach schedule. 9,320,000 17.69 years 11 12 13 14 15 16 17 18 19 20 Education . . . . . . . . . . . . . . . . . . . . . . . . . . . . Health and hospital . . . . . . . . . . . . . . . . . . . . . . . . Transportation . . . . . . . . . . . . . . . . . . . . . . . . . . Public safety . . . . . . . . . . . . . . . . . . . . . . . . . . . Environment (including sewage bonds) . . . . . . . . . . . . . . . . . . Housing . . . . . . . . . . . . . . . . . . . . . . . . . . . . Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other. Describe ► VARIOUS MUNICIPAL PROJECTS If obligations are TANS or RANs, check only box 19a . . . . . . . . . . . . . obligations are BANS, check only box 19b . . . . . . . . . . . . . . . . If obligations are in the form of a lease or installment sale, check box . . . . . . . . . . . . . . . . . . . . . . 0- F]If ► ❑ ► ❑ 11 12 13 14 15 16 17 18 9,639,592 '� Description of Obligations. Complete for the entire issue for which this form is being filed. (a) Final maturity date (b) Issuerice (c) Stated redemption (d) Weighted p price at maturity average maturity (e) Yield 21 02/15/2043 9,639,592 9,320,000 17.69 years 3.2836 Uses of Proceeds of Bond Issue (including underwriters' discount) 22 Proceeds used for accrued interest . . . . . . . . . . . . . . . . . . . . . 22 -0- 23 Issue price of entire issue (enter amount from line 21, column (b)) . . . . . 23 9,639,592 24 Proceeds used for bond issuance costs (including underwriters' discount) . . 24 139,574 25 Proceeds used for credit enhancement . . . . . . . . . . . . 25 .0- 26 Proceeds allocated to reasonably required reserve or replacement fund . 26 -0- 27 Proceeds used to currently refund prior issues . . . . . . . . . 27 -0- 28 Proceeds used to advance refund prior issues . . . . . . . . . 28 .0- 29 Total (add lines 24 through 28) . . . . . . . . . . . . . . . . . 29 139,574 30 Nonrefunding proceeds of the issue (subtract line 29 from line 23 and enter amount here) 30 9,500,018 FOMW Description of Refunded Bonds. Complete this part only for refunding bonds. NOT APPLICABLE 31 32 33 Enter the remaining weighted average maturity of the bonds to be currently refunded . ► Enter the remaining weighted average maturity of the bonds to be advance refunded . ► Enter the last date on which the refunded bonds will be called (MM/DD/YYYY) . . . . . . 0- years years 34 34 Enter the date(s) the refunded bonds were issued ► (MM/DD/YYYI0 For Paperwork Reduction Act Notice, see separate instructions. Cat. No. 637733 Form 8038-G (Rev. 9-2011) WESTLAKE, TEXAS (TOWN OF) EIN: 75-2449357 " Form 8038-G (Rev. 9-2011) -"— Page 2 FUMMI Miscellaneous 35 Enter the amount of the state volume cap allocated to the issue under section 141(b)(5) . . . . 35 .0- 36a Enter the amount of gross proceeds invested or to be invested in a guaranteed investment contract (GIC) (see instructions) . . . . . . . . . . . . . . . . . . . . . . . . 36a -o- b Enter the final maturity date of the GIC 10- C c Enter the name of the GIC provider ► 37 Pooled financings: Enter the amount of the proceeds of this issue that are to be used to make loans to other governmental units . . . . . . . . . . . . . . . . . . . . . . . . 37 -0- 38a If this issue is a loan made from the proceeds of another tax-exempt issue, check box ► ❑ and enter the following information: b Enter the date of the master pool obligation ► c Enter the EIN of the issuer of the master pool obligation No- d d Enter the name of the issuer of the master pool obligation 110- 39 39 If the issuer has designated the issue under section 265(b)(3)(13)(i)(III) (small issuer exception), check box . . . . ► ❑✓ 40 If the issuer has elected to pay a penalty in lieu of arbitrage rebate, check box . . . . . . . . . . . . . ► ❑ 41a If the issuer has identified a hedge, check here ► ❑ and enter the following information: b Name of hedge provider 10, c Type of hedge ► d Term of hedge 00- 42 42 If the issuer has superintegrated the hedge, check box . . . . . . . . . . . . . . . . . . . . . ► ❑ 43 If the issuer has established written procedures to ensure that all nonqualified bonds of this issue are remediated according to the requirements under the Code and Regulations (see instructions), check box . . . . . . . . ► ❑✓ 44 If the issuer has established written procedures to monitor the requirements of section 148, check box . . . . . ► ❑✓ 45a If some portion of the proceeds was used to reimburse expenditures, check here ► Z and enter the amount of reimbursement . . . . . . . . . ► $56,600' b Enter the date the official intent was adopted ► ' preliminary expenses Under penalties of perjury, I declare that I have examined this return and accompanying schedules and statements, and to the best of my knowledge Signature and belief, they are true, correct, and complete. I further declare that I consent to the IRS's disclosure of the issuer's return information, as necessary to and process this return, to he person that I have authorized above. Consent ' 0 413 012 01 3 ' Signature of_ ho ed representative Date Type or print name arhd title Paid Print/TypSTEFANO TAVERNA e preparer's name Preparer's si at Check ❑ l Date PTIN Preparer 0 4/3 012 0 1 3 self emplo Yed P01067358 Use Only Firm's name 0-MCCALL, PARKHURST & HOR L.P. Firm's EIN ► 75-0799392 Firm's address ► 717 N. HARWOOD, SUITE 900, DALLAS, TX 75201 Phone no. 214-754-9200 Form bU36-U (Rev. 9-2011) Westlake, Texas April 2, 2013 U.S. Bank National Association 14241 Dallas Parkway, Suite 490 Dallas, Texas 75254 Re: $9,320,000 Town of Westlake, Texas, Combination Tax and Revenue Certificates of Obligation, Series 2013 Ladies and Gentlemen: The Issuer and the Purchaser of the captioned Certificates of Obligation have designated your bank as the place, and as their agent, for the delivery and payment of the Certificates of Obligation. The Certificates of Obligation, which initially have been issued as a single fully registered Certificate of Obligation payable in installments, will be provided to you, together with a certified copy of the Ordinance authorizing the issuance of the Certificates of Obligation. Upon your receipt of the final unqualified approving legal opinion of McCall, Parkhurst & Horton L.L.P., 717 North Harwood Street, Suite 900, Dallas, Texas 75201 as to the validity of the Certificates of Obligation, you are authorized and directed to deliver the Certificates of Obligation to the Purchaser thereof, to -wit: SOUTHWEST SECURITIES, INC. when you have received payment for the Certificates of Obligation, in immediately available funds in the amount of $9,575,238.18, as set forth in the attached Closing Memorandum. You are further authorized and directed to cause the proceeds of the above -referenced Certificates of Obligation to be distributed and deposited, and the Certificates of Obligation to be delivered to the Purchaser and the closing documents to be dated and distributed, in accordance with the attached Closing Memorandum Enclosed herewith is one signed but undated copy of each of the General and No -litigation Certificate, Closing Certificate and Issuer's Receipt of Payment for said Certificates of Obligation. You are hereby authorized and directed to date all copies of each of said documents concurrently with the date of delivery and payment for the Certificates of Obligation. If any litigation or contest should develop or be filed, or if any event should occur, or any knowledge should come to our attention, which would change or affect the veracity of the statements and representations contained in any of said documents, the undersigned will notify you thereof immediately by telephone. With this assurance you can rely on the absence of any such litigation, contest, event, or knowledge, and on the veracity and currency of each of said documents at the time of delivery of and payment for the Certificates of Obligation, unless you are notified otherwise as aforesaid. After all copies of each of said documents have been dated in accordance with the foregoing instructions, please send all of them to McCall, Parkhurst & Horton L.L.P. Sincerely, TOWN OF WESTLAKE, TEXAS By: &I L -I Ma or Lawrence Financial Consulting LLC Registered Municipal Advisor & Texas Securities Dealer 9311 Loma Vista Drive Dallas, Texas 75243-7411 (214) 340-1954 (Phone) (214) 343-3456 (Fax) Closing Memorandum To: Tom Brymer Town of Westlake 817-490-5720 (ph) Debbie Piper Town of Westlake 817-490-5712 (ph) Leroy Grawunder McCall, Parkhurst & Horton L.L.P. 214-754-9201 (ph) Kit Caldwell Southwest Securities, Inc. 505-563-5860 (ph) Mike Wadsworth Southwest Securities, Inc. 214-859-9460 (ph) Zula Brown Southwest Securities, Inc. 214-859-9464 (ph) Tanya Fischer Andrews Kurth LLP 713-220-3915 (ph) Israel Lugo U.S. Bank N.A. 972-458-4505 (ph) Danella West First Financial Bank, NA 817-329-8601 (ph) From: Tom Lawrence Lawrence Financial Consulting LLC 214-340-1954 (ph) Blake Morgan Lawrence Financial Consulting LLC 214-340-1954 (ph) Re: $9,320,000 Town of Westlake Combination Tax and Revenue Certificates of Obligation, Series 2013 Date: April 3, 2013 The purpose of this memorandum is to describe certain events and transfers, which will occur on April 30.201 3 (the "Closing" or "Closing Date") with respect to the above captioned Certificates of Obligation (the "Certificates") to be issued by the Town of Westlake, Texas (the "Issuer"). The Closing will take place at 10:00 AM, Central. Time, at the offices of the Paying Agent/Registrar for the Certificates (the "Paying Agent"), U.S. Bank National Association, 14241 Dallas Parkway, Suite 490, Dallas, Texas 75254, attention: Israel Lugo. I. Registration of Certificates The Certificates will be initially issued utilizing the Book -Entry -Only System of The Depository Trust Company ("DTC"), and will be in fully registered definitive form, payable to Cede & Co., as nominee for DTC. By April 25. 201:1, Southwest Securities, Inc., the underwriter for the Certificates (the "Underwriter"), shall provide registration information to DTC. Additionally, prior to the Closing, the initial Certificate in the name of the Underwriter (the "Initial Certificate") will be prepared by McCall, Parkhurst & Horton L.L.P. ("Bond Counsel") and delivered to the Attorney General for approval. Upon approval by the Attorney General, the Initial Certificate will be registered by the Comptroller of Public Accounts to the State of Texas and delivered by Bond Counsel to the Paying Agent no later than the Closing Date. II. Payment of Purchase Price Pursuant to the terms of a Purchase Agreement dated Apr'." 2, 20' 3, the Underwriter shall wire transfer, on the Closing Date, the total purchase price for the Certificates in the amount of 3,338..18 (representing the original par amount of the Certificates, plus $319,591.75 of net original issue premium, less $64,353.57, of Underwriter's discount) to the Paying Agent, as follows: To: U.S. Bank National Association ABA: 091000022 Account Name: U.S. Bank Trust N.A. Account No: 180121167365 FFC: Westlake Certificates of Obligation 2013 Attn: Israel Lugo (972-458-4505) Upon receipt of the full purchase price by the Paying Agent, the Town will promptly return the good faith check to Zula Brown, Southwest Securities, Inc., 1201 Elm Street, Suite 3500, Dallas, Texas 75270, 214-859-9464 (phone). III. Disbursements by the Paying Agent Following the transfer of funds described in Section II, the Paying Agent shall make the following wire transfers and disbursements: A. Transfer to Construction Fund. $9,5',01,Ot 1.00 shall be wired to First Financial Bank, N.A. in accordance with the following wiring instructions: To: First Financial Bank, N.A. ABA: 111914849 Account Number: 9111-000-6904 Account Name Town of Westlake General Fund Attn: Danella West (817-329-8601) The amount so transferred, together with the earnings thereon and Project disbursements therefrom, shall be separately accounted for by the Issuer as its Construction Fund established pursuant to the Ordinance. B. Transfers in Payment of Issuance Costs. The Paying Agent shall retain $400.10::z to cover its initial Paying Agent fee. The remaining $74,838. I 8 shall be used by the Paying Agent and used to pay the remaining costs of issuance relating to the Certificates on the Closing Date, i.e., bond counsel fee and expenses (including reimbursement for payment of Attorney General fee), financial advisor fee and expenses (including reimbursement for payment of Official Statement printing and shipping expenses), and rating agency fee. Invoices should be submitted to the Paying Agent, attention: Israel Lugo, i.�r �+.i-r go;: r.':us�f}c;t�kc rn (e-mail), 972-789-9605 (fax), with a copy to Tom Lawrence, ., �(e-mail) 214-343-3456 (fax). Ir.:. ,.➢ T t...,., Funds remaining after the payment of the foregoing expenses, if any, shall be wire transferred to the Town as follows: To: First Financial Bank NA ABA: 111914849 Account No: 9111-000-6904 Account Name: Town of Westlake General Fund Attn: Danella West (817-329-8601) Upon receipt, the Town shall transfer such funds into the interest and sinking fund established for the Certificates in accordance with the Ordinance. IV. Release and Cancellation of Certificates Immediately upon receipt of the purchase price for the Certificates (see Section II above) and approval of the Closing by Bond Counsel, all the closing documents will be dated the Closing Date and the Paying Agent will cancel the Initial Certificate. Certificates in "book -entry -only" form will be released by the Paying Agent to the Underwriter by contacting DTC at 212-855- 3752. 3 RECEIPT AND DELIVERY CERTIFICATE The undersigned, authorized representative of U.S. Bank National Association, as Paying Agent/Registrar with respect to Town of Westlake, Texas, Combination Tax and Revenue Certificates of Obligation, Series 2013 (the "Obligation"), in the aggregate principal amount of $9,320,000, hereby: 1. Acknowledges (i) receipt from the purchaser of the Obligation, Southwest Securities, Inc. (the "Purchaser"), of $9,575,238.18, representing the aggregate principal amount of the Obligations, plus net reoffering premium of $319,591.75, less underwriter's discount of $64,353.57, being the purchase price for said Obligations as set forth in the closing instructions attached hereto (the "Closing Instructions") prepared by Lawrence Financial Consulting LLC, financial advisor to the Town of Westlake, Texas, and (ii) the disposition of said purchase price in accordance with the Closing Instructions; and 2. Certifies that Obligation No. T-1, registered by the Comptroller of Public Accounts of the State of Texas and representing the aggregate principal amount of said issue of Obligations, was delivered to or upon the order of the Purchaser and duly canceled this date by an authorized officer of the undersigned Paying Agent/Registrar upon delivery of definitive Obligations of said aggregate principal amount to or upon the order of said Purchaser. APR 3 0 2013 DATED: U.S. BANK NATIONAL ASSOCIATION as Paying Agent/Registrar By: Title: Israel Lug0 ir°r rPSI ent Lawrence Financial Consulting LLC Registered Municipal Advisor & Texas Securities Dealer 9311 Loma Vista Drive Dallas, Texas 75243-7411 (214) 340-1954 (Phone) (214) 343-3456 (Fax) Closing Memorandum To: Tom Brymer Town of Westlake 817-490-5720 (ph) Debbie Piper Town of Westlake 817-490-5712 (ph) Leroy Grawunder McCall, Parkhurst & Horton L.L.P. 214-754-9201 (ph) Kit Caldwell Southwest Securities, Inc. 505-563-5860 (ph) Mike Wadsworth Southwest Securities, Inc. 214-859-9460 (ph) Zula Brown Southwest Securities, Inc. 214-859-9464 (ph) Tanya Fischer Andrews Kurth LLP 713-220-3915 (ph) Israel Lugo U.S. Bank N.A. 972-458-4505 (ph) Danella West First Financial Bank, NA 817-329-8601 (ph) From: Tom Lawrence Lawrence Financial Consulting LLC 214-340-1954 (ph) Blake Morgan Lawrence Financial Consulting LLC 214-340-1954 (ph) Re: $9,320,000 Town of Westlake Combination Tax and Revenue Certificates of Obligation, Series 2013 Date: April 3, 2013 The purpose of this memorandum is to describe certain events and transfers, which will occur on April 30.201 3 (the "Closing" or "Closing Date") with respect to the above captioned Certificates of Obligation (the "Certificates") to be issued by the Town of Westlake, Texas (the "Issuer"). The Closing will take place at 10:00 AM, Central. Time, at the offices of the Paying Agent/Registrar for the Certificates (the "Paying Agent"), U.S. Bank National Association, 14241 Dallas Parkway, Suite 490, Dallas, Texas 75254, attention: Israel Lugo. I. Registration of Certificates The Certificates will be initially issued utilizing the Book -Entry -Only System of The Depository Trust Company ("DTC"), and will be in fully registered definitive form, payable to Cede & Co., as nominee for DTC. By April 25. 201:1, Southwest Securities, Inc., the underwriter for the Certificates (the "Underwriter"), shall provide registration information to DTC. Additionally, prior to the Closing, the initial Certificate in the name of the Underwriter (the "Initial Certificate") will be prepared by McCall, Parkhurst & Horton L.L.P. ("Bond Counsel") and delivered to the Attorney General for approval. Upon approval by the Attorney General, the Initial Certificate will be registered by the Comptroller of Public Accounts to the State of Texas and delivered by Bond Counsel to the Paying Agent no later than the Closing Date. II. Payment of Purchase Price Pursuant to the terms of a Purchase Agreement dated Apr'." 2, 20' 3, the Underwriter shall wire transfer, on the Closing Date, the total purchase price for the Certificates in the amount of 3,338..18 (representing the original par amount of the Certificates, plus $319,591.75 of net original issue premium, less $64,353.57, of Underwriter's discount) to the Paying Agent, as follows: To: U.S. Bank National Association ABA: 091000022 Account Name: U.S. Bank Trust N.A. Account No: 180121167365 FFC: Westlake Certificates of Obligation 2013 Attn: Israel Lugo (972-458-4505) Upon receipt of the full purchase price by the Paying Agent, the Town will promptly return the good faith check to Zula Brown, Southwest Securities, Inc., 1201 Elm Street, Suite 3500, Dallas, Texas 75270, 214-859-9464 (phone). III. Disbursements by the Paying Agent Following the transfer of funds described in Section II, the Paying Agent shall make the following wire transfers and disbursements: A. Transfer to Construction Fund. $9,5',01,Ot 1.00 shall be wired to First Financial Bank, N.A. in accordance with the following wiring instructions: To: First Financial Bank, N.A. ABA: 111914849 Account Number: 9111-000-6904 Account Name Town of Westlake General Fund Attn: Danella West (817-329-8601) The amount so transferred, together with the earnings thereon and Project disbursements therefrom, shall be separately accounted for by the Issuer as its Construction Fund established pursuant to the Ordinance. B. Transfers in Payment of Issuance Costs. The Paying Agent shall retain $400.10::z to cover its initial Paying Agent fee. The remaining $74,838. I 8 shall be used by the Paying Agent and used to pay the remaining costs of issuance relating to the Certificates on the Closing Date, i.e., bond counsel fee and expenses (including reimbursement for payment of Attorney General fee), financial advisor fee and expenses (including reimbursement for payment of Official Statement printing and shipping expenses), and rating agency fee. Invoices should be submitted to the Paying Agent, attention: Israel Lugo, i.�r �+.i-r go;: r.':us�f}c;t�kc rn (e-mail), 972-789-9605 (fax), with a copy to Tom Lawrence, ., �(e-mail) 214-343-3456 (fax). Ir.:. ,.➢ T t...,., Funds remaining after the payment of the foregoing expenses, if any, shall be wire transferred to the Town as follows: To: First Financial Bank NA ABA: 111914849 Account No: 9111-000-6904 Account Name: Town of Westlake General Fund Attn: Danella West (817-329-8601) Upon receipt, the Town shall transfer such funds into the interest and sinking fund established for the Certificates in accordance with the Ordinance. IV. Release and Cancellation of Certificates Immediately upon receipt of the purchase price for the Certificates (see Section II above) and approval of the Closing by Bond Counsel, all the closing documents will be dated the Closing Date and the Paying Agent will cancel the Initial Certificate. Certificates in "book -entry -only" form will be released by the Paying Agent to the Underwriter by contacting DTC at 212-855- 3752. 3 UNDERWRITER'S RECEIPT The undersigned, acting as the authorized representative of Southwest Securities, Inc., with respect to the hereinafter described Obligation, hereby acknowledges receipt from Town of Westlake, Texas of $9,320,000 principal amount of the Town of Westlake, Texas Combination Tax and Revenue Certificates of Obligation, Series 2013. DATED: April 30, 2013 . SOUTHWEST SECURITIES, INC. ISSUER°S RECEIPT OF PAYMENT The undersigned hereby certifies the following information: (a) This certificate is executed and delivered with reference to the Town of Westlake, Texas Combination Tax and Revenue Certificates of Obligation, Series 2013, in the aggregate principal amount of $9,320,000 (the "Obligation"), issued by the Town of Westlake, Texas (the "Town"). (b) The undersigned is the duly chosen, qualified and acting officer of the Town hereinafter indicated. (c) The Obligations have been duly delivered to the purchaser thereof, Southwest Securities, Inc., in accordance with the ordinance authorizing the issuance of the Obligation. (d) The Obligations have been paid for in full by said purchaser concurrently with the delivery of this certificate, and the Town has received, and hereby acknowledges receipt of, the agreed purchase price for the Obligations. EXECUTED AND DELIVERED this A rin '1 30, 2013 �,,[/ Mayor Town of Westlake, Texas NO. R-_ UNITED STATES OF AMERICA PRINCIPAL STATE OF TEXAS AMOUNT TOWN OF WESTLAKE, TEXAS COMBINATION TAX REVENUE CERTIFICATES OF OBLIO SERIES 2013 INTEREST RATE DELIVERY DATE MATURITYTE CUSIP NO. REGISTERED OWNER: PRINCIPAL AMOUNT: ON THE MATURITY DATE specified above, the Town of Westl , in Tarrant and Denton Counties, Texas (the "Issuer"), being a political subdivision and municipal cor ration of the State of Texas, hereby promises to pay to the Registered Owner specified above, or registerassigns (hereinafter called the "Registered Owner"), on the Maturity Date specified above, Prinn ipal�mount specified above. The Issuer promises to pay interest on the unpaid principal amount hereo Icul ted on the basis of a 360 -day year of twelve 30 -day months) from the Delivery Date specified above at th erest Rate per annum specified above. Interest is payable on February 15, 2014 and semiannually on eac ugust 15 and February 15 thereafter to the Maturity Date specified above, or e date of redemptioner to maturity; except, if this Certificate is required to be authenticated and the Ate of its authentication is later than the first Record Date (hereinafter defined), such Principal Amount shall bear interest fr&m the interest payment date next preceding the date of authentication, unless such date of authentication is after amy Record Date but on or before the next following interest payment date, in whit se su* princ 1 amount shall bear interest from such next following interest payment date; provided, h at ifthe a `b ofauthentication hereof the interest on the Certificate or Certificates, if any, for hich is Certificate is being exchanged is due but has not been paid, then this Certificate shall bear ' t fro e dat which such interest has been paid in full. THE PRINCIP D INT ST ON this Certificate are payable in lawful money of the United States of America, wi t exchange or collection charges. The principal of this Certificate shall be paid to the registered owner hereo on presentation and surrender of this Certificate at maturity, or upon the date fixed aor its redemption prior tcotnaturity, at the principal corporate trust office of U.S. Bank National Associa ' Dallas, Texas, which is the "Paying Agent/Registrar" for this Certificate. The payment of interest on this ertific shal be made by the Paying Agent/Registrar to the registered owner hereof on each interest pa date by eckl%Lak dated as of such interest payment date, drawn by the Paying Agent/Registrar fertific an p yable solely fr , funds of the Issuer required by the ordinance authorizing the issuance of this he "Certificate Ordinance") to be on deposit with the Paying Agent/Registrar for such purpose as eina e�r provided; and such check or draft shall be sent by the Paying Agent/Registrar by United States mail, first�clajippostage prepaid, on each such interest payment date, to the registered owner hereof, at its address as it appeared on he last business day of the month preceding each such date (the "Record Date") on the Registratio s kept by the Paying Agent/Registrar, as hereinafter described. In addition, interest may be paid by such of er method, acceptable to the Paying Agent/Registrar, requested by, and at the risk and expense of, the registered owner. In the event of a non-payment of interest on a scheduled payment date, and for 30 days thereafter, a new record date for such interest payment (a "Special Record Date") will be established by the Paying Agent/Registrar, if and when funds for the payment of such interest have been received from the Issuer. Notice of the Special Record Date and of the scheduled payment date of the past due interest (which shall be 15 days after the Special Record Date) shall be sent at least five busine days prior to the Special Record Date by United States mail, first-class postage prepaid, to the address o�each owner of a Certificate appearing on the Registration Books at the close of business on the lastbus' day next receding the date of mailing of such notice. ANY ACCRUED INTEREST due at maturity or upon the redemptio this ertifi to prior to maturity as provided herein shall be paid to the registered owner n present o nd suf ender of this Certificate for redemption and payment at the principal corporatvtrust office of the Paying Agent/Registrar. The Issuer covenants with the registered owner of this Certificate4hat on or before each principal payment date, interest payment date, and accrued interest payment date for this Certificate it will make available to the Paying Agent/Registrar, from the "Interest and Sinking Fund" created by the Certificate Ordinance, the amounts required to provide for the payment, in immediately a ailable fonds, of all prin 'pal of and interest on the Certificates, when due.. IF THE DATE for the payment of the principal r interest this Certificate shall be a Saturday, Sunday, a legal holiday or a day on which ba ;'ng institution the cit here the principal corporate trust office of the Paying Agent/Registrar is locat re authorized by o xecutive order to close, then the date for such payment shall be the next succee g day that is not such aturday, Sunday, legal holiday or day on which banking institutions are aut^yment close; and payen�jon such date shall have the same force and effect as if made on the original datewas due. t THIS CERTIFICATE is on'a series of Ce ares dated April 1, 2013, authorized in accordance with the Constitution and law of the IF State of Texas e principal amount of $9,320,000 for paying all or a portion of the Issuer's c}al obligatiAlffiincifred in connection with constructing and equipping buildings and related improvements at the Westlake Academy to be used for a cafetorium, for use as a cafeteria, gymnasium and audit, a classroom building and a field house; (ii) constructing, installing, acquiring and equipping improve s, additions and extensions to the Town's waterworks and sewer system, including a ground -storage tank; and (iii) paying legal, fiscal and engineering fees in connection with such projects. ON BRUARY 15, 2023, on any date thereafter, the Certificates of this series may be redeemed prior to t scheduled maturities, a e option of the Issuer, with funds derived from any available and lawful source, is a whole, or in part, and, if in part, the particular Certificates, or portions thereof, to be redeemed shall be select d designated by the Issuer (provided that a portion of a Certificate may be redeemed only in an irrral mu 'iple of $5;00), at a redemption price equal to the principal amount to be redeemed plus Y,9 o the fixed for redemption. CER FICATES scheduled to mature on February 15 in the years 2024, 2026, 2028, 2033, and 20 (the "Term Certificates") are subject to scheduled mandatory redemption by the Paying lot, or by any other customary method that results in a random selection, at a price equal to the princip mount thereof, plus accrued interest to the redemption date, out of moneys available for such purpose in the interest and sinking fund for the Certificates, on the dates and in the amounts, set forth in the following schedule: Term Certificate Maturity: February 15, 2024 Mandatory Redemption DateAmo February 15, 2023 $ 2 ,000 February 15, 2024 (maturity) 00 Term Certificate Maturitv: February 15. 2026 Principal Mandatory Redemption Date Amount February 15, 2025 $ 240,000 February 15, 2026 (maturity) 255,0004 Term Certificate Maturity: February 15, 2033 Mandatory Redemption Date Amount February 15, 2032 %5,000 00 February 15, 2033 (maturity) 40 Term ifica*_ Maturit : February 15 2039 Prin-` al Mandatory Redemption Date Amount February 1 0 370,000 February 15, 2038 7,385,000 February 15, 26 aturity) 400,000 ve principal Te ri : Feb 5 2028 Principal j,_Mandatory RedemptIgIODate Amount February 15, 2027 F $ 260,000 February 15, 2028 (maturity) 270,000 Term Certificate aturi : February 15 2036 Principal Mandatory Redemption Date Amount Fqoruary 15, 2034 $ 330,000 ebruary 15, 2035 �February 345,000 15, 2036 (maturity) 360,000 Term Certificate Maturity: February 15, 2043 Principal Mandatory Redemption Date Amount February 15, 2040 $ 415,000 February 15, 2041 430,000 February 15, 2042 450,000 February 15, 2043 (maturity) 470,000 e print al amount of Term Certificates of a stated maturity required to be redeemed on any mandatory emp dat suapt to the operation of the mandatory sinking fund redemption provisions shall be reduce at the op n of the Town, by the principal amount of any Term Certificates of the same maturity whic�least 50 s prior to a mandatory redemption date (1) shall have been acquired by the Town at a price not exlin the principal amount of such Term Certificates plus accrued interest to the date of purchase thereof, and delivered to the Paying Agent/Registrar for cancellation, (2) shall have been purchased and canceled by the Paying Agent/Registrar at the request of the Town at a price not exceeding the principal amount of such Term Certificates plus accrued interest to the date of purchase, or (3) shall have been redeemed pursuant to the optional redemption provisions and not theretofore credited against a m#4datory redemption requirement. IF AT THE TIME OF MAILING of notice of optional redemption there shall not haeither been deposited with the Paying Agent/Registrar or legally authorized escrow agent immediately available funds sufficient to redeem all the Bonds called for redemption, such notice may state that it isiconditional, and is subject to the deposit of the redemption moneys with the Paying Agent/Re ' trar or legally aorized escrow agent at or prior to the redemption date. If such redemption is not effuated, the Paying Agent/Registrar shall, within five days thereafter, give notice in the manner in which the notice of reden�p&on was given that such moneys were not so received and shall rescind the redemption` ► AT LEAST 30 days prior to the date fixed for any redemption of Certificates or rtions thereof prior to maturity a written notice of such redemption shall be sent Oy the Paying Agent/Regfrar by United States mail, first-class postage prepaid, to the registered owner of each Certificate to be redeemed at its address as it appeared on the 45th day prior to such redemption date, provided,howev at e failure of the registered owner to receive such notice, or any defect therein or in the sending or mai i Whereof, shall not affect the validity or effectiveness of the proceedings for the reption of any Certifica By the date fixed for any such redemption due provision shall be made with the Paying gent/Regis ar or the payment of the required redemption price for the Certificates or portio thereof that to be s deemed. If such written notice of redemption is sent and if due provision for A paent is ma provided above, the Certificates or portions thereof that are to be so redeeme hereby automaticallyA7sletreated as redeemed prior to their scheduled maturities, and they shall not A terest after the date fixed for redemption, and they shall not be regarded as being outstanding except r the right of the registered owner to receive the redemption price from the Paying Agent/Registrar out of t funds providedor su payment. If a portion of any Certificate shall be redeemed, a substitute Certificate or Certificates ha t e same maturity date, bearing interest at the same rate, in any denomination or I%noniin#tions in any int multiple of $5,000, at the written request of the registered owner, and in ag�th pri al amountto the unredeemed portion thereof, will be issued to the registered owner up render t 'ereof for cancellation, at the expense of the Issuer, all as provided in the Certificate Ordinance. ALL CERWFIC T THIS S S are issuable solely as fully registered certificates, without interest coupons, in t)aie den n of y integral multiple of $5,000. As provided in the Certificate Ordinance, this Certifi to may, at the r Vest of the registered owner or the assignee or assignees hereof, be assigned, transferred,., converted into and exchanged for a like aggregate principal amount of fully registered certificat wit-Wout i est coupon payable to the appropriate registered owner, assignee or assignees, as the cas y be, having the same denomination or denominations in any integral multiple of $5,000 as requed in WIN ttificatd' by the appropriate registered owner, assignee or assignees, as the case may be, upon surren of this t0he Paying Agent/Registrar for cancellation, all in accordance with the form and procedures set-forth in the Certificate Ordinance. Among other requirements for such assignment and transfer, this Certificate : t be,presented and surrendered to the Paying Agent/Registrar, together with proper instrume of as-1 ent, in form and with guarantee of signatures satisfactory to the Paying Agent/Registrar, eviden-ngassi4orsignees of this Certificate or any portion or portions hereof in any integral multiple of $5,000 to the assigpee in whose name or names this Certificate or any such portion or portions hereof is or are to be registered. The form of Assignment printed or endorsed on this Certificate may be executed by the registered owner to evidence the assignment hereof, but such method is not exclusive, and other instruments of assignment satisfactory to the Paying Agent/Registrar may be used to evidence the assignment of this Certificate or any portion or portions hereof from time to time by the registered owner. The Paying Agent/Registrar's reasonable standard or customary fees and charges for assigning, transferriicconverting and exchanging any Certificate or portion thereof will be paid by the Issuer. In any circumstance.,'any taxes or governmental charges required to be paid with respect thereto shall be paid by the one requesting such assignment, transfer, conversion or exchange, as a condition precedent to the exercise: of such privilege. The Paying Agent/Registrar shall not be required to make any such transfer, conversion, or exc nge (i) during the period commencing with the close of business on any Record Date and ending with the opera f bu iness on the next following principal or interest payment date, or (ii) with respect to any Certificate o portion thereof called for redemption prior to maturity, within 45 days prior to its redemption dat -_� IN THE EVENT any Paying Agent/Registrar for the Cer � icates i,changed by the uer, resigns, or otherwise ceases to act as such, the Issuer has covenanted in t ertificate O anc t it promptly will appoint a competent and legally qualified substitute therefor,nd ca written n e ereof to be mailed to the registered owners of the Certificates. IT IS HEREBY certified, recited and cove nted that Cert irate as been duly and validly authorized, issued and delivered; that all acts, conds and things requiredg proper to be performed, exist and be done precedent to or in the authorization, i uance and delivery of thisrertificate have been performed, existed and been done in accordance with law;, __ that annual ad valorem taxes sufficient to provide for the matures, have been levied and ordered to b levied irate, as such interest comes due and such principal payment of the interest on andprincipal of s C against, all taxa property in said Issuer, and have been pledged for such payment, within the l' cribe y law, n at this Certificate is additionally secured by and payable from a limited pledg f the urplus Renuesf the Issuer's waterworks and sewer system remaining after payment of all oper n and mainten ce enses thereof, and all debt service, reserve and other requirements in connection wit the Issuer's nTie obligations (now or hereafter outstanding) that are payable from all or part o said r 11 as pro ed in the Certificate Ordinance. THE ISSUER RESERVE HT to amend the Certificate Ordinance as provided therein, and under sora ut notal]) circ tances amendments thereto must be approved by the registered owners of a majority aggreate principal unt of the outstanding Certificates. BY BECOMING th istered o . er of this Certificate, the registered owner thereby acknowledges all of the terms and provisions JPthe Certificate Ordinance, agrees to be bound by such terms and provisions, acknowledges that the Certificate Ordinance is duly recorded and available for inspection in the official minutes and records of the governing body off e Issuer, and agrees that the terms and provisions of this Certificate and the Certificate Ordinance constitute a contract between each registered owner hereof and the Issuer. IN WITNESS WHEREOF, the Issuer has caused this Certificate to be signed with the manual or facsimile signature of the Mayor of the Issuer (or in the Mayor's absence, by the 1VVyor Pro Tem) and countersigned with the manual or facsimile signature of the Town Secretary of said Issuer, and caused the official seal of the Issuer to be duly impressed, or placed in facsimile, on this Certi 1 (Signature) Town Secretary PAYING AGENT/REGISTRAR'S AUTHENTICATION CERTIFICAT (To be executed if this Bond is not accompanied by an executed Registr Certificate of the Comptroller of Public Accounts of the State of Texas) It is hereby certified that this Certificate has been issued under the provisions of the Certificate Ordinance described in the text of this Certificate; and that this Certificate has+een,issued in conversion or replacement of, or in exchange for, a certificate, certificates, or a portion o ertificate r certificates of a series that originally was approved by the Attorney General of the Sta as and stered by the Comptroller of Public Accounts of the State of Texas. _ Dated: For value received, the undersigned SSIGNMENT .ase print e clearly sells, assigns a nsfers unto: Transferee's Social Security or Taxpayer Identifica Transferee's name and the within Certifi�l the within Cer Dated: Signature Gua securities tfansfer" guarantee program. dip ;s) must be guaranteed by an nstitution participating in a sociation recognized signature , and hereby irrevocably constitutes and appoints , attorney, to register the transfer of thereof, with full power of substitution in the premises. NOTICE: The signature above must correspond with the name of the registered owner as it appears upon the front of this Certificate in every particular, without alteration or enlargement or any change whatsoever. ANDREWS ATTORNEYS K R T H LLP April 30, 2013 Southwest Securities 6565 Americas Parkway NE Ste 239 Albuquerque, NM 87110 600 Travis, Suite 4200 Houston, Texas 77002 713.220.4200 Phone 713.220.4285 Fax andrewskurth.com Re: $9,320,000 Town of Westlake, Texas Combination Tax and Revenue Certificates of Obligation, Series 2013 Ladies and Gentlemen: We have served as counsel to you, as the Underwriter, in your purchase of the captioned certificates (the "Certificates") issued by the Town of Westlake, Texas (the "Town'). In that connection, we have reviewed (1) the ordinance adopted by the Town Council of the Town on April 2, 2013 (the "Ordinance"), authorizing the issuance of the Certificates and containing other matters, (2) the Preliminary Official Statement for the Certificates, dated March 25, 2013, and (3) the Official Statement for the Certificates, dated April 2, 2013. Based on (1) our review of the documents described above, (2) our discussions with bond counsel and with you, (3) our review of the documents, certificates, opinions and other instruments delivered at the closing of the sale of the Certificates on the date hereof and (4) such other matters as we deem relevant, we are of the opinion that the Certificates are exempt securities under the Securities Act of 1933, as amended (the "1933 Act"), and the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"), and it is not necessary, in connection with the offering and sale of the Certificates, to register the Certificates under the 1933 Act and the Ordinance is not required to be qualified under the Trust Indenture Act. In addition, based upon our participation in the preparation of the Official Statement and our participation at conferences at which the Official Statement was discussed, which does not include our independent inquiry or investigation into the accuracy, completeness or fairness of the statements contained therein, no facts have come to our attention to lead us to believe that the Official Statement (except for any financial, forecast, technical and statistical statements and data included in the Official Statement and the information regarding The Depository Trust Company and its book -entry system, in each case as to which no view need be expressed), as of its date or as of the date hereof, contained or contains any untrue statement of a material fact, or omitted or omits to state any 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. This opinion may be relied upon only by you. Very truly yours, t 7867/9493 Austin Dallas Houston London Los Angeles New York The Woodlands Washington, DC HOU:3311248.1 600 CONGRESS AVENUE SUITE 1800 AUSTIN, TEXAS 78701-3248 TELEPHONE: 512 478-3805 FACSIMILE: 512 472-0871 LAW OFFICES McCALL, PARKHURST & HORTON L.L.P. 717 NORTH HARWOOD SUITE 900 DALLAS, TEXAS 75201- 65 87 TELEPHONE: 214754-9200 FACSIMILE: 214 754- 9250 April 30, 2013 700 N. ST. MARY'S STREET SUITE 1525 SAN ANTONIO, TEXAS 78205-3503 TELEPHONE: 210 225-2800 FACSIMILE: 210225-2984 TOWN OF WESTLAKE, TEXAS COMBINATION TAX AND REVENUE CERTIFICATES OF OBLIGATION, SERIES 2013 IN THE AGGREGATE PRINCIPAL AMOUNT OF $9,320,000 AS BOND COUNSEL FOR THE TOWN OF WESTLAKE, TEXAS (the "Issuer") in connection with the issuance of the Combination Tax and Revenue Certificates of Obligation, Series 2013, described above (the "Certificates of Obligation"), we have examined into the legality and validity of the Certificates of Obligation, which bear interest from the dates and mature and are subject to redemption on the dates, in accordance with the terms and conditions stated in the text of the Certificates of Obligation. Terms used herein and not otherwise defined shall have the meaning given in the ordinance of the Issuer authorizing the issuance and sale of the Certificates of Obligation (the "Ordinance"). WE HAVE EXAMINED the applicable and pertinent provisions of the Constitution and laws of the State of Texas, a transcript of certified proceedings of the Issuer, and other pertinent instruments authorizing and relating to the issuance of the Certificates of Obligation, including one of the executed Certificates of Obligation (Certificate of Obligation Number T-1). BASED ON SAID EXAMINATION, IT IS OUR OPINION that the Certificates of Obligation have been duly authorized, issued, and delivered in accordance with law, and that the Certificates of Obligation, except as may be limited by laws applicable to the Issuer relating to governmental immunity, bankruptcy, reorganization and other similar matters affecting creditors'rights generally or by general principles of equity whichpermit the exercise of judicial discretion, constitute valid and legally binding obligations of the Issuer; and that ad valorem taxes sufficient to provide for the payment of the interest on and principal of said Certificates of Obligation have been levied and pledged for such purpose, within the limit prescribed by law, and that the Certificates of Obligation are additionally secured by and payable from limited surplus revenues of the Issuer's waterworks and sewer system, remaining after payment of all operation and maintenance expenses thereof, and all debt service, reserve, and other requirements in connection with all of the Issuer's revenue bonds or other obligations (now or hereafter outstanding), which are payable from all or any part of the Net Revenues of the Issuer's waterworks and sewer system. IT IS FURTHER OUR OPINION, except as discussed below, that the interest on the Certificates of Obligation is excludable from the gross income of the owners for federal income tax purposes under the statutes, regulations, published rulings, and court decisions existing on the date of this opinion. We are further of the opinion that the Certificates of Obligation are not "specified private activity bonds" and that, accordingly, interest on the Certificates of Obligation will not be included as an individual or corporate alternative minimum tax preference item under section 57(a)(5) of the Internal Revenue Code of 1986 (the "Code"). In expressing the aforementioned opinions, we have relied on, certain representations, the accuracy of which we have not independently verified, and assume compliance with certain covenants, regarding the use and investment of the proceeds of the Certificates of Obligation and the use of the property financed therewith. We call your attention to the fact that if such representations are determined to be inaccurate or upon a failure by the Issuer to comply with such covenants, interest on the Certificates of Obligation may become includable in gross income retroactively to the date of issuance of the Certificates of Obligation. EXCEPT AS STATED ABOVE, we express no opinion as to any other federal, state, or local tax consequences of acquiring, carrying, owning, or disposing of the Certificates of Obligation. WE CALL YOUR ATTENTION TO THE FACT that the interest on tax-exempt obligations, such as the Certificates of Obligation, is included in a corporation's alternative minimum taxable income for purposes of determining the alternative minimum tax imposed on corporations by section 55 of the Code. WE EXPRESS NO OPINION as to any insurance policies issued with respect to the payments due for the principal of and interest on the Certificates of Obligation, nor as to any such insurance policies issued in the future. OUR OPINIONS ARE BASED ON EXISTING LAW, which is subject to change. Such opinions are further based on our knowledge of facts as of the date hereof. We assume no duty to update or supplement our opinions to reflect any facts or circumstances that may thereafter come to our attention or to reflect any changes in any law that may thereafter 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 reliance 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 Certificates of Obligation. 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 not to take any action, or omit to take any action within its control, that if taken or omitted, respectively, may result in the treatment of interest on the Certificates of Obligation as includable in gross income for federal income tax purposes. OUR SOLE ENGAGEMENT in connection with the issuance of the Certificates of Obligation is as Bond Counsel for the Issuer, and, in that capacity, we have been engaged by the Issuer for the sole purpose of rendering our opinions with respect to the legality and validity of the Certificates of Obligation under the Constitution and laws of the State of Texas, and with respect to the exclusion from gross income of the interest on the Certificates of Obligation for federal income tax purposes, and for no other reason or purpose. The foregoing opinions represent our legal judgment based upon a review of existing legal authorities that we deem relevant to render such opinions and are not a guarantee of a result. We have not been requested to investigate or verify, and have not independently investigated or verified, any records, data, or other material relating to the financial condition or capabilities of the Issuer, or the disclosure thereof in connection with the sale of the Certificates of Obligation, and have not assumed any responsibility with respect thereto. We express no opinion and make no comment with respect to the marketability of the Certificates of Obligation and have relied solely on certificates executed by officials of the Issuer as to the current outstanding indebtedness of, and assessed valuation of taxable property within, and the sufficiency of the pledged revenues of, the Issuer. Respectfully, // LAW OFFICES MCCALL, PARKHURST & HORTON L.L.P. 600 CONGRESS AVENUE SUITE 1800 AUSTIN, TEXAS 78701-3248 TELEPHONE: 512 478-3805 FACSIMILE: 512 472-0871 Town of Westlake, Texas 3 Village Circle, Suite 202 Westlake, Texas 76262 Southwest Securities, Inc. 1201 Elm Street, 35' Floor Dallas, Texas 75270 717 NORTH HARWOOD SUITE 900 DALLAS, TEXAS 75201-6587 TELEPHONE: 214 754-9200 FACSIMILE: 214 754-9250 April 30, 2013 700 N. ST. MARY'S STREET SUITE 1525 SAN ANTONIO, TEXAS 78205-3503 TELEPHONE: 210 225-2800 FACSIMILE: 210225-2984 Re: $9,320,000 Town of Westlake, Texas Combination Tax and Revenue Certificates of Obligation, Series 2013 Ladies and Gentlemen: This supplemental opinion is being rendered to you pursuant to paragraph 6(i)(5) of that certain Purchase Agreement dated April 2, 2013, between the Town of Westlake, Texas (the "Issuer"), and Southwest Securities, Inc. (the "Underwriter"), relating to the sale by the Issuer to the Underwriter of the above described obligations (the "Certificates of Obligation"), issued under and pursuant to an ordinance adopted by the City Council of the Issuer on April 2, 2013 (the "Ordinance"). We have examined such documents and satisfied ourselves as to such matters as we have deemed necessary in order to enable us to express the opinions set forth below. As to various questions of fact material to these opinions, we have relied upon representations of the Issuer relating to the Certificates of Obligation. Based upon our examination, we are of the opinion, that: The Ordinance been duly adopted by the City Council and is in full force and effect. 2. The Certificates of Obligation are exempt securities that do not require registration under the Securities Act of 1933, as amended (the "1933 Act") and the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"), and it is not necessary, in connection with the offering and sale of the Certificates of Obligation, to register the Certificates of Obligation under the 1933 Act or to qualify the Ordinance under the Trust Indenture Act. 3. Except as otherwise specified herein, we have not verified, are not passing upon and do not assume any responsibility for the accuracy, completeness or fairness of the statements and information contained in the Official Statement. In our capacity as Bond Counsel for the Issuer, we have reviewed the statements and information contained in the Official Statement under the captions or subcaptions "PLAN OF FINANCING" (excluding the information under the subcaption "Sources and Uses of Funds"), "DESCRIPTION OF THE CERTIFICATES" (excluding the information under the subcaptions "Book -Entry - Only System" and "Certificateholders' Remedies"), "LEGAL MATTERS" (excluding the last sentence of the first paragraph thereof), "TAX MATTERS," "OTHER MATTERS - Legal Investments and Eligibility to Secure Public Funds in Texas," "OTHER MATTERS - Registration and Qualification of Certificates for Sale" and "OTHER MATTERS - Continuing Disclosure of Information (excluding the information under the subcaption "Compliance with Prior Undertakings") and we are ofthe opinion that the information relating to the Certificates of Obligation and the legal issues contained under such captions and subcaptions is an accurate and fair description of the laws and legal issues addressed therein and, with respect to the Certificates of Obligation, such information conforms to the provisions of the Ordinance. This letter is furnished to you by us and is solely for your benefit and no one other than the Issuer and the Underwriter is entitled to rely upon this letter. Respectfully,