ORDER N0.29020 AUTHORIZING THE ISSUANCE, SALE AND DELIVERY OF CERTIFICATES OF OBLIGATION. Came to be heard this the 4th day of February 2005 with a motion made by Commissioner Williams seconded by Commissioner Letz. The Court approved by a vote of 3-2-0 to order authorizing the issuance, sale and delivery of "Kerr County, Texas certificates of obligation, series 2005", providing for the future authorization of the levy of an annual ad valorem tax to secure the payment thereof; approving and authorizing the execution of all instruments and procedures related thereto including a paying agent/registrar agreement and a purchase agreement; approving the form of an official statement ;and providing for an immediate effective date. rG~~ ORDER N0. 29020 ,N CERTIFICATE FOR ORDER I, the undersigned County Clerk of KEx~t COUNTY, TEXAS (the "County"), hereby certify as follows: 1. The Commissioners Court of the County (the "Commissioners Court") reconvened in a SPECIAL MEETING ON THE 4`~ DAY OF FEBRUARY, 2005, at the regular designated meeting place (the "Meeting"), and the roll was called of the duly constituted officers and members of the Commissioners Court, to-wit: Pat Tinley, County Judge H.A. "Buster" Baldwin, Commissioner, Precinct 1 William "Bill" Williams, Commissioner, Precinct 2 Jonathan P. Letz, Commissioner, Precinct 3 David Nicholson, Commissioner, Precinct 4 . and all of said persons were present, except the following absentees: ~~ _ thus constituting a quorum. Whereupon, among other business the following was transacted at the Meeting: a written ORDER AUTHORIZING THE ISSUANCE, SALE AND DELIVERY OF "KERB COUNTY, TEXAS CERTIFICATES OFOBLIGATION, SERIES 2005 "; PROVIDING FOR THE FUTURE AUTHORIZATION OF THE LEVY OF AN ANNUAL AD VALOREM TAX TO SECURE THE PAYMENT THEREOF; APPROVING AND AUTHORIZING THE EXECUTION OF ALL INSTRUMENTS AND PROCEDURES RELATED THERETO INCLUDING A PAYING AGENT/REGISTRAR AGREEMENT AND A PURCHASE AGREEMENT; APPROVING THE FORM OF AN OFFICIAL STATEMENT; AND PROVIDING FOR AN IMMEDIATE EFFECTIVE DATE (the "Order") was duly introduced for the consideration of the Commissioners Court. It was then duly moved and seconded that the Order be passed; and, after due discussion, said motion, carrying with it the passage of the Order, prevailed and carried by the following votes: AYES: ~5 NOES: ~ ABSTENTIONS: G% 2. A true, full, and correct copy of the Order passed at the Meeting is attached to and follows this Certificate; the Order has been duly recorded in the Commissioners Court's minutes of the Meeting; the above and foregoing paragraph is a true, full, and correct excerpt from the Commissioners Court's minutes of the Meeting pertaining to the passage of the Order; the persons named in the above and foregoing paragraph are the duly chosen, qualified, and acting officers and members of the Commissioners Court as indicated therein; each of the officers and members of the Commissioners Court was duly and sufficientlynotified officially and personally, in advance, ofthe time, place, and purpose of the Meeting, and that the Order would be introduced and considered for passage at the Meeting, and each of the officers and members consented, in advance, to the holding of the Meeting for such purpose; and the Meeting was open to the public, and public notice of the time, place, and purpose of the Meeting was given all as required by Chapter 55 1, Texas Government Code. SIGNED AND SEALED the 4`~ day of February, 2005. ~ Y L...,_,,..,_.« C ty Clerk, Kerr Coun , Texa (SEAL) ORDER AUTHORIZING THE ISSUANCE, SALE AND DELIVERY OF "KERB COi1NTY, TEXAS CERTIFICATES OF OBLIGATION, SERIES 2005 "; PROVIDING FOR THE FUTURE AUTHORIZATION OF THE LEVY OF AN ANNUAL AD VALOREM TAX TO SECURE THE PAYMENT THEREOF; APPROVING AND AUTHORIZING THE EXECUTION OF ALL INSTRUMENTS AND PROCEDURES RELATED THERETO INCLUDING A PAYING AGENT/REGISTRAR AGREEMENT AND A PURCHASE AGREEMENT; APPROVING THE FORM OF AN OFFICIAL STATEMENT; AND PROVIDING FOR AN IMMEDIATE EFFECTIVE DATE SALE DATE: FEBRUARY 4, 2005 TABLE OF CONTENTS RECITALS ............................................................. I Section 1. AMOUNT AND PURPOSE OF THE CERTIFICATES ................ 4 Section 2. DESIGNATION, DATE, DENOMINATIONS, NUMBERS, AND MATURITIES OF THE CERTIFICATES ........................... 4 Section 3. INTEREST------------------------- c Section 4. CHARACTERISTICS OF THE CERTFICATES ...................... 5 (a) Registration, Transfer, and Exchange; Authentication ............... 5 (b) Payment of Certificates of Obligation and Interest .................. 6 (c) In General ................................... 7 .............. (d) Substitute Paying Agent/Registrar .............................. 7 (e) Book-Entry Only System for The Certificates of Obligation .......... 7 (f) Successor Securities Depository; Transfers Outside Book-Entry Only Systems .............................................. 8 (g) Payments to Cede & Co ...................................... 9 (h) DTC Letter of Representation ................................. 9 (i) Delivery of Initial Certificate of Obligation ....................... 9 Section 5. FORMS OF CERTIFICATE OF OBLIGATION ...................... 9 Section 6. INTEREST AND SINKING FUND; FUTURE TAX LEVY ............. 15 Section 7. ACQUISITION FUND .......................................... 16 Section 8. INVESTMENTS ..................................... 16 .......... Section 9. DEFEASANCE OF CERTIFICATES ............................... 17 (a) Defeased Certificates of Obligation .............................. 17 (b) Defeasance Securities ......................................... 17 (c) Investment in Defeasance Securities ............................. 17 (d) Paying Agent/Registrar Services ................................ 18 (e) Selection of Certificates of Obligation for Defeasance ............... 18 Section 10. DAMAGED, MUTILATED, LOST, STOLEN, OR DESTROYED CERTIFICATES ............................................... 18 (a) Replacement Certificates of Obligation .......................... 1 S (b) Application for Replacement Certificates of Obligation .............. 18 (c) No Default Occurred ......................................... 18 (d) Charge for Issuing Replacement Certificates of Obligation ........... 19 (e) Authority for Issuing Replacement Certificates of Obligation ......... 19 Section 11. CUSTODY, APPROVAL, AND REGISTRATION OF CERTIFICATES; BOND COUNSEL'S OPINION; CUSIP NUMBERS; AND OT~iER MATTERS ............................................. 19 i Section 12. COVENANTS REGARDING TAX-EXEMPTION OF INTEREST ON THE CERTIFICATES ....................................... 19 (a) Covenants .................................................. 19 ~) Rebate Fund ................................................ 21 (c)Proceeds ................................................... 21 (d) Allocation of, and Limitation on, Expenditures for the Project ......... 21 (e) Disposition of the Project ...................................... 21 (f J Qualified Tax-Exempt Obligations ............................... 21 Section 13. SALE AND DELIVERY OF CERTIFICATES ....................... 22 Section 14. APPROVAL OF OFFICIAL STATEMENT .......................... 22 Section 15. AUTHORITY FOR OFFICERS TO EXECUTE DOCUMENTS .......... 23 Section 16. ORDER A CONTRACT; AMENDMENTS .......................... 23 Section 17. SECURITY INTEREST ......................................... 24 Section 18. INTERESTED PARTIES ........................................ 24 Section 19. COMPLIANCE WITH RULE 15c2-12 .............................. 24 (a) Definitions ................................................. 24 (b) Annual Information .......................................... 24 (c) Material Event Notices ........................................ 25 (d) Limitations, Disclaimers and Amendments ........................ 26 Section 20. INCORPORATION OF RECITALS ................................ 27 Section 21. SEVERABILITY ............................................... 27 Section 22. EFFECTIVE DATE ............................................. 27 SIGNATURES Exhibit A PAYING AGENT/REGISTRAR AGREEMENT Exhibit B PURCHASE AGREEMENT Exhibit C DESCRIPTION OF ANNUAL FINANCIAL INFORMATION ii ORDER AUTHORIZING THE ISSUANCE, SALE AND DELIVERY OF "KERB COUNTY, TEXAS CERTIFICATES OF OBLIGATION, SERIES 2005 "; PROVIDING FOR THE FUTURE AUTHORIZATION OF THE LEVY OF AN ANNUAL AD VALOREM TAX TO SECURE THE PAYMENT THEREOF; APPROVING AND AUTHORIZING THE EXECUTION OF ALL INSTRUMENTS AND PROCEDURES RELATED THERETO INCLUDING A PAYING AGENTlREGISTRAR AGREEMENT AND A PURCHASE AGREEMENT; APPROVING THE FORM OF AN OFFICIAL STATEMENT; AND PROVIDING FOR AN IMMEDIATE EFFECTIVE DATE THE STATE OF TEXAS § COUNTY OF KERB § WHEREAS, pursuant to state law, the KERB COUNTY JUVENILE BOARD (the "Juvenile Board") operates a juvenile detention facility located within KERB COUNTY, TExAS (the "County"}, which facility is referred to herein as the "Juvenile Facility"; and WHEREAS, on December 17, 2002, the HILL COUNTRY JUVENILE FACILITY CORPORATTON (the "Corporation") delivered $5,140,000 in principal amount of its Lease Revenue Bonds, Series 2002 (Kerr County, Texas Juvenile Detention Facilities Project) (the "Lease Revenue Bonds") pursuant to that certain Trust Agreement, dated as ofNovember 15, 2002 (the "Indenture"), between the Corporation and the THE BANK OF NEW YORK TRUST COMPANY, N.A. (the "Trustee"); and WHEREAS, proceeds of the Lease Revenue Bonds were used to refinance the existing Juvenile Facility and construct new improvements to the Juvenile Facility; and WHEREAS, in connection with the issuance of the Lease Revenue Bonds, the County, as lessee, and the Corporation, as lessor, entered into that certain Lease Agreement, dated as of November 15, 2002 (the "Lease"), under which the Corporation leased the Juvenile Facility to the County; and WHEREAS, the County, the Corporation and the Juvenile Board and all officials and employees of the County, the Corporation and the Juvenile Boazd, past and present, are collectively referred to herein as the "County Participants"; and WHEREAS, the Juvenile Boazd performs certain of the County's obligations under the Lease and manages the Juvenile Facility on a day-to-day basis pursuant to that certain Operating Agreement, dated as of November 15, 2002 (the "Operating Agreement"), between the County and the Juvenile Board; and WHEREAS, on September 7, 2004, the Juvenile Board adopted its fiscal year 2004-2005 budget, which budget projected an operating deficit and did not include budgeting or appropriating any funds to pay lease payments under the Lease, thereby causing an "Event of Nonappropriation" to occur under the Operating Agreement; and WHEREAS, on September 27, 2004, the County adopted its fiscal year 2004-2005 budget, and in said budget failed to appropriate funds in an amount sufficient to pay lease payments under the Lease, thereby causing an "Event of Nonappropriation" to occur under the Lease; and WHEREAS, on September 28, 2004, the County notified the Trustee of such Event of Nonappropriation, and of its intent to transfer possession and control of the Juvenile Facility to the Corporation or the Trustee as of 12:00 A.M. on October 1, 2004, in accordance with Section 10.03(c) of the Lease; and WHEREAS, on September 30, 2004, in order to (i) ensure the health, safety and security of the juveniles located at the Juvenile Facility and the citizens of the community, (ii) ensure an appropriate and orderly transition of possession and control of the Juvenile Facility to the Corporation or the Trustee pursuant to Section 10.03(c) of the Lease, and (iii) maintain the Juvenile Facility as a going concern, the Trustee, the County, the Juvenile Board and the Corporation executed a letter agreement placing a moratorium on the transfer of possession and control of the Juvenile Facility until November 1, 2004 (the "Letter Agreement"), with the Lease and Operating Agreement to remain in effect during such moratorium; and WHEREAS, in order to accommodate the time necessary to negotiate proper settlement terms with the holders of the Lease Revenue Bonds (the "Lease Revenue Bondholders"), such Letter Agreement has been subsequently amended to extend the moratorium contained in the Letter Agreement and to extend the terms of the Lease and the Operating Agreement; and WHEREAS, on December 8, 2004, the Commissioners Court of the County approved an order in which the County offered to take action to proceed with the issuance of certificates of obligation for the purpose of providing $1,900,000 to purchase the Juvenile Facility from the Corporation and provide such amount to the Lease Revenue Bondholders, subject to certain conditions including the execution by all Lease Revenue Bondholders of a full and complete written release of all claims or potential claims the Lease Revenue Bondholders may allege to have against the County Participants or those to whom any County Participant had an obligation of indemnification, which offer was accepted in principle by the representatives ofthe Lease Revenue Bondholders; and WHEREAS, the County Participants, the Trustee, and the Lease Revenue Bondholders have entered into that Consent and Release Agreement, dated January 24, 2005 (the "Consent and Release Agreement"), wherein all Lease Revenue Bondholders have provided a full and complete written release of all claims or potential claims the Lease Revenue Bondholders may allege to have against the County Participants and those to whom any County Participant had an obligation of indemnification; and WHEREAS, the Commissioners Court of the County hereby determines that it is necessary and desirable to issue Certificates of Obligation in an amount which will provide $1,900,000 to purchase the Juvenile Facility from the Corporation (the "Project"), which amount will be immediately transferred to the Trustee for further distribution to the Lease Revenue Bondholders; and WHEREAS, on December 28, 2004, the Commissioners Court adopted a resolution authorizing and directing the County Clerk to give notice of intention to issue Certificates of Obligation pursuant to the provisions of Subchapter C of Chapter 271, Texas Local Government Code, as amended, to finance the Project (the "Notice"); and 2 WHEREAS, the Notice approved by the Commissioners Court stated that the Commissioners Court proposed to authorize the issuance of the Certificates of Obligation on Monday, January 24, 2005, which is a regularly scheduled meeting of the Commissioners Court, at the Union Church Building located on the Shreiner University Campus at the intersection of Travis and Broadway, Kerrville, Texas; and WHEREAS, such Notice was published in the %rrville Daily Times, which is a newspaper of general circulation in the County, in its issue of January 6, 2005; and WHEREAS, subsequent to submitting such Notice for initial publication, the Commissioners Court received advice from the County Attorney that the scheduled meeting of the Commissioners Court could not be held at the location stated in the Notice published on January 6, 2005; and WHEREAS, in order to comply with statutory requirements regarding the proper meeting place for the Commissioners Court and in order to accommodate the time necessary to execute the Consent and Release Agreement, the Notice was revised to state that the Commissioners Court proposed to authorize the issuance of the Certificates of Obligation on Wednesday, January 26, 2005, at the Commissioners Courtroom in the Kerr County Courthouse, 700 Main Street, Kerrville, Texas (the "Revised Notice"); and WHEREAS, the Revised Notice was duly published in the Kerrville Daily Times in its issues of January 13 and 20, 2005; and WHEREAS, notice was also posted at the Union Church Building located on the Shreiner University Campus announcing the revised time and place for consideration of this Order for the purpose of notifying any person who may have relied on the initial Notice published on January 6, 2005, as to the revised time and place for consideration of this Order; and WHEREAS, the Commissioners Court of the County, at its regularly scheduled meeting on Monday, January 24, 2005, and before the authorization and issuance of the Certificates of Obligation, pursuant to Section 81.005(b), Texas Local Government Code, recessed such regularly scheduled meeting unti14:00 p.m. on Wednesday, January 26, 2005 and announced during open session that this Order would be considered for approval when the Commissioners Court resumed such regularly scheduled meeting at 4:00 p.m. on January 26, 2005; and WHEREAS, the Commissioners Court of the County, upon resumption of such regularly scheduled meeting on Wednesday, January 26, 2005, and before the authorization and issuance of the Certificates of Obligation, pursuant to Section 81.005(b), Texas Local Government Code, recessed such meeting until 3:00 p.m. on Thursday, January 27, 2005 and announced during open session that this Order would be considered for approval when the Commissioners Court resumed such meeting at 3:00 p.m. on January 27, 2005; and WHEREAS, the Commissioners Court of the County, upon resumption of such regularly scheduled meeting on Thursday, January 27, 2005, and before the authorization and issuance of the Certificates of Obligation, announced during open session that this Order would be considered for approval by the Commissioners Court at a special meeting at 11 p.m. on Thursday, February 3, 2005; and WHEREAS, the Commissioners Court of the County, at such special meeting on Thursday, February 3, 2005, and before the authorization and issuance of the Certificates of Obligation, pursuant to Section 81.005(b), Texas Local Government Code, recessed such meeting unti13:00 p.m. on Friday, February 4, 2005 and announced during open session that this Order would be considered for approval when the Commissioners Court resumed such meeting at 3:00 p.m. on February 4, 2005; and WHEREAS, the County received no petition signed by at least five percent of the qualified electors of the County protesting the issuance of such Certificates of Obligation; and WHEREAS, it is considered to be in the best interest of the County that said interest bearing Certificates of Obligation be issued; and WHEREAS, it is hereby officially found and determined that the meeting at which this Order 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 ORDERED BY THE COMMISSIONERS COURT OF KERB COUNTY, TEXAS: SECTION 1. AMOUNT AND PURPOSE OF THE CERTIFICATES. The certificate or certificates of the County further described in Section 2 of this Order and referred to herein as the "Certificates" are hereby authorized to be issued and delivered in the aggregate principal amount of $2,000,OODFOR THEPURPOSEOFPAYINGCONTRACTUAL OBLIGATIONSTOACQUIRE FROM THE HILL COUNTRY JUVENILE FACILITY CORPORATION, A TEXAS NONPROFIT PUBLIC FACILITY CORPORATION, THE EXISTING JUVENILE DETENTIONFACILITYLOCATEDINTHECOUNTY,AND PAYING FOR PROFESSIONAL SERVICES RENDERED IN CONNECTION THEREWITHAND COSTS OFISSUANCE. SECTION 2. DESIGNATION, DATE, DENOMINATIONS, NUMBERS AND MATURITIES OF CERTIFICATES. Each certificate issued pursuant to and for the purpose described in Section 1 of this Order shall be designated: "KERB COUNTY, TEXAS CERTIFICATE OF OBLIGATION, SERIES 2005", and initially there shall be issued, sold and delivered hereunder one fully registered certificate, without interest coupons, dated January 15, 2005 in the aggregate principal amount of ,$2,000,000, numbered T-1 (the "Initial Certificate of Obligation"),with Certificates of Obligation issued in replacement thereof being in the denomination of $5,000 or any integral multiple thereof and numbered consecutively from R-1 upward, all payable to the initial registered owner thereof (with the Initial Certificate of Obligation being payable to the initial purchaser designated in Section 13 hereof), or to the registered assignee or assignees of said certificates or any portion or portions thereof (in each case, the "Registered Owner"), and the Certificates of Obligation shall mature and be payable serially on February 15 in each of the years and in the principal amounts, respectively, as set forth in the following schedule: 4 The term "Certificates of Obligation" as used in this Order shall mean and include the Certificates of Obligation initially issued and delivered pursuant to this Order and all substitute certificates of obligation exchanged therefor, as well as all other substitute certificates of obligation and replacement certificates of obligation issued pursuant hereto, and the term "Certificate of Obligation" shall mean any of the Certificates of Obligation. SECTION 3. INTEREST. The Certificates of Obligation shall bear interest calculated on the basis of a 360-day year composed of twelve 30-day months from the dates specified in the FORM OF CERTIFICATE OF OBLIGATION set forth in this Order to their respective dates of maturity at the following rates per annum: Said interest shall be payable in the manner provided and on the dates stated in the FORM OF CERTIFICATE OF OBLIGATION set forth in this Order. SECTION 4. CHARACTERISTICS OF THE CERTIFICATES. (a) Registration. Transfer, and Exchange: Authentication. The County shall keep or cause to be kept at the designated corporate trust office of Wachovia Bank, National Association, Houston, Tezas (the "Paying Agent/Registrar") books or records for the registration of the transfer and exchange of the Certificates of Obligation (the "Registration Books"), and the County hereby appoints the Paying Agent/Registrar as its registrar and transfer agent to keep such books or records and make such registrations of transfers and exchanges under such reasonable regulations as the County and Paying Agent/Registrar may prescribe; and the Paying Agent/Registrar shall make such registrations, transfers and exchanges as herein provided. Attached hereto as Exhibit A is a copy of the Paying Agent/Registrar Agreement between the County and the Paying AgentlRegistrar which is hereby approved in substantially final form, and the County Judge and County Clerk or Deputy County Clerk of the County are hereby authorized to execute the Paying AgentiRegistrar Agreement and approve any changes in the final form thereof. The Paying Agent/Registrar shall obtain and record in the Registration Books the address of the registered owner of each Certificate of Obligation to which payments with respect to the Certificates of Obligation shall be mailed, as herein provided; but it shall be the duty of each registered owner to notify the Paying AgentlRegistrar in writing of the address to which payments shall be mailed, and such interest payments shall not be mailed unless such notice has been given. To the extent possible and under reasonable circumstances, all transfers of Certificates of Obligation shall be made within three business days after request and presentation thereof. The County shall have the right to inspect the Registration Books during regular business hours of the Paying Agent/Registrar, but otherwise the Paying Agent/Registrar shall keep the Registration Books confidential and, unless otherwise required by law, shall not permit their inspection by any other entity. The Paying Agent/Registrar's standard or customary fees and charges for making such regis- tration, transfer, exchange and delivery of a substitute Certificate of Obligation or Certificates of Obligation shall be paid as provided in the FORM OF CERTIFICATE OF OBLIGATION set forth in this Order. Registration of assignments, transfers and exchanges of Certificates of Obligation shall be made in the manner provided and with the effect stated in the FORM OF CERTIFICATE OF OBLIGATION set forth in this Order. Each substitute Certificate of Obligation shall bear a letter and/or number to distinguish it from each other Certificate of Obligation. Except as provided in (c) below, an authorized representative of the Paying Agent/Registrar shall, before the delivery of any such Certificate of Obligation, date and manually sign the Paying Agent/Registrar's Authentication Certificate, and no such Certificate of Obligation shall be deemed to be issued or outstanding unless such Certificate is so executed. The Paying Agent/Registrar promptly shall cancel all paid Certificates of Obligation and Certificates of Obligation surrendered for transfer and exchange. No additional ordinances, orders, or resolutions need be passed or adopted by the governing body of the County or any other body or person so as to accomplish the foregoing transfer and exchange of any Certificate of Obligation or portion thereof, and the Paying AgentlRegistrar shall provide for the printing, execution, and delivery of the substitute Certificates of Obligation in the manner prescribed herein, and said Certificates of Obligation shall be of type composition printed on paper with lithographed or steel engraved borders of customary weight and strength. Pursuant to Subchapter D of Chapter 1201, Texas Government Code, the duty of transfer and exchange of Certificates of Obligation as aforesaid is hereby imposed upon the Paying Agent/Registrar, and, upon the execution of said Certificate, the transferred and exchanged Certificate of Obligation shall be valid, incontestable, and enforceable in the same manner and with the same effect as the Certificates of Obligation which initially were issued and delivered pursuant to this Order, approved by the Attorney General, and registered by the Comptroller of Public Ac- counts. (b) Payment o~Certf Cates ot'Obtigation and Interest. The County hereby further appoints the Paying Agent/Registrar to act as the paying agent for paying the principal of and interest on the Certificates of Obligation, all as provided in this Order. The Paying AgentlRegistrar shall keep proper records of all payments made by the County and the Paying Agent/Registrar with respect to the Certificates of Obligation. (c) In General. The Certificates of Obligation (i) shall be issued in fully registered form, without interest coupons, with the principal of and interest on such Certificates of Obligation to be payable only to the registered owners thereof, (ii) may be transferred and assigned, (iii) may be ex- changed for other Certificates of Obligation, (iv) shall have the characteristics, (v) shall be signed, sealed, executed and authenticated, (vi) shall be payable as to principal and interest, and (vii) shall be administered, and the Paying Agent/Registrar and the County shall have certain duties and responsibilitiestyith respect to the Certificates of Obligation, all as provided, and in the manner and to the effect as required or indicated, in the FORM OF CERTIFICATE OF OBLIGATION set forth in this Order. The Initial Certificate of Obligation is not required to be, and shall not be, authenti- cated by the Paying Agent/ Registrar, but on each substitute Certificate of Obligation issued in ex- change for the Initial Certificate of Obligation issued under this Order the Paying AgentJRegistraz shall execute the PAYING AGENT/REGISTR.AR'S AUTHENTICATION CERTIFICATE, in the form set forth in the FORM OF CERTIFICATE OF OBLIGATION. In lieu of the executed Paying Agent/Registrar's Authentication Certificate described above, the Initial Certificate of Obligation delivered on the closing date (as further described in subparagraph (i) below} shall have attached thereto the Comptroller's Registration Certificate substantially in the form set forth in the FORM OF CERTIFICATE OF OBLIGATION below, manually executed by the Comptroller of Public Accounts of the State of Texas or by his duly authorized agent, which certificate shall be evidence that the Initial Certificate of Obligation has been duly approved by the Attorney General of the State of Texas and that it is a valid and binding obligation of the County, and has been registered by the Comptroller. (d) Substitute Paying Agent/Registrar. The County covenants with the registered owners of the Certificates of Obligation that at all times while the Certificates of Obligation are outstanding the County will provide a competent and legally qualified bank, trust company, financial institution, or other entity to act as and perform the services of Paying Agent/Registraz for the Certificates of Obligation under this Order, and that the Paying AgentlRegistrar will be one entity and shall be an entity registered with the Securities and Exchange Commission. The County reserves the right to, and may, at its option, change the Paying AgentJRegistrar 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/Registraz (or its successor by merger, acquisition, or other method) should resign or otherwise cease to act as such, the County 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 Order. Ugon any change in the Paying Agent/Registrar, the previous Paying Agent/Regis- trar promptly shall transfer and deliver the Registration Books (or a copy thereof), along with all other pertinent books and records relating to the Certificates of Obligation, to the new Paying Agent/Registrar designated and appointed by the County. Upon any change in the Paying Agent/Registrar, the County promptly will cause a written notice thereof to be sent by the new Paying Agent/Registrar to each registered owner of the Certificates of Obligation, by United States mail, first-class postage prepaid, which notice also shall give the address of the new Paying Agent/Registraz. By accepting the position and performing as such, each Paying Agent/Registraz shall be deemed to have agreed to the provisions of this Order, and a certified copy of this Order shall be delivered to each Paying Agent/Registraz. (e) Book-Entry Only System for Certificates of Obligation. The Certificates of Obligation issued in exchange for the Certificates of Obligation initially issued to the purchaser specified in Section 13 herein shall be initially issued in the form of a separate single fully registered Certificate of Obligation for each of the maturities thereof. Upon initial issuance, the ownership of each such Certificate of Obligation shall be registered in the name of Cede & Co., as nominee of The Depository Trust Company of New York ("DTC"), and except as provided in subsection (i) hereof, all of the outstanding Certificates of Obligation shall be registered in the name of Cede & Co., as nominee of DTC. With respect to Certificates of Obligation registered in the name of Cede & Co., as nominee of DTC, the County and the Paying Agent/Registraz 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 transaction among DTC Participants or to any person on behalf of whom such a DTC Participant holds an interest in the Certificates of Obligation. Without limiting the immediately preceding sentence, the County and the Paying Agent/Registraz shall have no responsibility or obligation with respect to (i) the accuracy of the records of DTC, Cede & Co. or any DTC Participant with respect to any ownership interest in the Certificates of Obligation, (ii) the delivery to any DTC Participant or any other person, other than a registered owner of the Certificates of Obligation, as shown on the Registration Books, of any notice with respect to the Certificates of Obligation, or (iii) the payment to any DTC Participant or any other person, other than a registered owner of Certificates of Obligation, as shown in the Registration Books of any amount with respect to principal of or interest on the Certificates of Obligation. Notwithstanding any other provision of this Order to the contrary, the County and the Paying Agent/Registraz shall be entitled to treat and consider the person in whose name each Certificate of Obligation is registered in the Registration Books as the absolute owner of such Certificate of Obligation for the purpose of payment of principal and interest with respect to such Certificate of Obligation, for the purpose of registering transfers with respect to such Certificate of Obligation, and for all other purposes whatsoever. The Paying Agent/Registraz shall pay all principal of and interest on the Certificates of Obligation only to or upon the Order of the registered owners, as shown in the Registration Books as provided in this Order, or their respective attorneys duly authorized in writing, and all such payments shall be valid and effective to fully satisfy and discharge the County's obligations with respect to payment of principal of and interest on the Certificates of Obligation 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 evidencing the obligation of the County to make payments of principal and interest pursuant to this Order. Upon delivery by DTC to the Paying Agent/Registraz 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 Order 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 Order shall refer to such new nominee of DTC. (f) Successor Securities D~ositorv• Transfers Outside Book-Entry Only Systems. In the event that the County determines that DTC is incapable of dischazging its responsibilities described herein and in the representation letter of the County to DTC or that it is in the best interest of the beneficial owners of the Certificates of Obligation that they be able to obtain certificated Certificates of Obligation, the County shall (i) appoint a successor securities depository, qualified to act as such under Section 17(a) of the Securities and Exchange Act of 1934, as amended, notify DTC and DTC Participants of the appointment of such successor securities depository and transfer one or more separate Certificates of Obligation to such successor securities depository or (ii) notify DTC and DTC Participants of the availability through DTC of Certificates of Obligation and transfer one or more separate Certificates of Obligation to DTC Participants having Certificates of Obligation credited to their DTC accounts. In such event, the Certificates of Obligation 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 of Obligation shall designate, in accordance with the provisions of this Order. (g) Pcrvments to Cede & Co. Notwithstanding any other provision of this Order to the contrary, so long as any Certificate of Obligation is registered in the name of Cede & Co., as nominee for DTC, all payments with respect to principal of and interest on such Certificate of Obligation and all notices with respect to such Certificate of Obligation shall be made and given, respectively, in the manner provided in the representation letter of the County to DTC. (h) DTC Letter ofRepresentation. The officers of the County are herein authorized for and on behalf of the County and as officers of the County to enter into one or more Letters of Representation, if necessary, with DTC establishing the book-entry only system with respect to the Certificates of Obligation. (i) DeliverYoflnitial Certificate of Obligation. On the closing date, one Initial Certificate of Obligation representing the entire principal amount of the respective series of Certificates of Obligation and, payable instated installments to the initial registered owner named in Section 13 of this Order or its designee, executed by the manual or facsimile signature of the County Judge, countersigned by the manual or facsimile signature of the County Clerk or Deputy County Clerk of the County, registered and signed by the manual or facsimile signature of the County Treasurer of the County, 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 the initial purchaser or its designee. Upon payment for the Certificates of Obligation, the Paying AgentlRegistrar shall cancel the Initial Certificate of Obligation and deliver to the initial registered owner or its designee one registered definitive Certificate of Obligation for each year of maturity of the Certificates of Obligation, in the aggregate principal amount of all of the Certificates of Obligation for such maturity. SECTION 5. FORM OF CERTIFICATE OF OBLIGATION. The form of the Certificates of Obligatian, 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 only to the Certificates of Obligation initially issued and delivered pursuant to this Order), shall be, respectively, substantially as follows, with such appropriate varia- tions, omissions, or insertions as are permitted or required by this Order: [The remainder of this page intentionally left blank) FORM OF CERTIFICATE OF OBLIGATION R- PRINCIPAL AMOUNT S UNITED STATES OF AMERICA STATE OF TEXAS KERR COUNTY, TEXAS CERTIFICATE OF OBLIGATION, SERIES 2005 INTEREST RATE DATE OF SERIES MATURITY DATE CUSIP NO. January 15, 2005 REGISTERED OWNER: PRINCIPAL AMOUNT: DOLLARS ON THE MATURITYDATE specified above, KERR COUNTY, TEXAS (the "County"), being a political subdivision of the State of Texas, hereby promises to pay to the Registered Owner set forth above, or registered assigns (hereinafter called the "Registered Owner") the Principal Amount set forth above, and to pay interest thereon from January 15, 2005, at the Interest Rate per annum specified above, on February 15, 2006, and semiannually on each February 15 and August 15 thereafter to the Maturity Date specified above; except that if this Certificate of Obligation 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 beaz interest from such next following interest payment date; provided, however, that if on the date of authentication hereof the interest on the Certificate of Obligation or Certificates of Obligation, if any, for which this Certificate of Obligation is being exchanged or converted from is due but has not been paid, then this Certificate of Obligation shall bear interest from the date to which such interest has been paid in full. THE PRINCIPAL OFAND INTEREST ON THIS CERTIFICATE are payable in lawful money of the United States of America, without exchange or collection chazges. The principal of this Certificate of Obligation shall be paid to the Registered Owner hereof upon presentation and surrender of this Certificate of Obligation at maturity at the designated corporate trust office of Wachovia Bank, National Association, Houston, Texas, which is the "Paying Agent/Registrar" for this Certificate of Obligation. The payment of interest on this Certificate of Obligation shall be made by the Paying AgentJRegistrar 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/Registraz on, and payable solely from, funds of the County required by the order authorizing the issuance of the Certificates of Obligation (the "Certificate of Obligation Order") 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 next preceding each such date (the "Record Date"} on the Registration Books kept by 10 the Paying AgentlRegistraz, as hereinafter described. In addition, interest may be paid by such other method, acceptable to the Paying Agent/Registraz, requested by, and at the risk and expense of, the Registered Owner. In the event of anon-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/Registraz, if and when funds for the payment of such interest have been received from the County. 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 of Obligation appearing on the Registration Books at the close of business on the last business day next preceding the date of mailing of such notice. The County covenants with the Registered Owner of this Certificate of Obligation that on or before each principal payment date and interest payment date for this Certificate of Obligation it will make available to the Paying Agent/Registrar, from the "Interest and Sinking Fund" created by the Certificate of Obligation Order, the amounts required to provide for the payment, in immediately available funds, of all principal of and interest on the Certificates of Obligation, when due. THE CERTIFICATES OF OBLIGATION aze not subject to optional redemption. IF THE DATE FOR ANY PAYMENT DUE on this Certificate of Obligation shall be a Saturday, Sunday, a legal holiday, or a day on which banking institutions in the city where the Designated Trust Office of the Paying Agent/Registraz is located are authorized by law or executive order to close, then the date for such payment shall be the next succeeding day which 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 OF OBLIGATIONIS ONE OFA SERIES OF CERTIFICATES OF OBLIGATIONdated as of January 15, 2005, authorized in accordance with the Constitution and laws of the State of Texas in the principal amount of $2,000,000 FOR THE PURPOSE OF PAYING CONTRACTUAL OBLIGATIONS TO ACQUIRE FROM THE HILL COUNTRY JUVENILE FACILITY CORPORATION, A TEXAS NONPROFIT PUBLIC FACILITY CORPORATION, THE EXISTING JUVENILE DETENTION FACILITY LOCH TED IN THE COUNTY, AND PAYING FOR PROFESSIONAL SERVICESRENDERED INCONNECTION THEREWITHAND COSTS OF ISSUANCE. ALL CERTIFICATES OFTHISSERIES aze issuable solely as fully registered Certificates of Obligation, without interest coupons, in the denomination of any integral multiple of $5,000. As provided in the Certificate of Obligation Order, this Certificate of Obligation 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 amount of fully registered Certificates of Obligation, without interest coupons, payable to the appropriate Registered Owner, assignee or assignees, as the case may be, having any authorized denomination or denominations as requested in writing by the appropriate Registered Owner, assignee or assignees, as the case may be, upon surrender of this Certificate of Obligation to the Paying Agent/Registraz for cancellation, all in accordance with the form and pro- cedures set forth in the Certificate of Obligation Order. Among other requirements for such assignment and transfer, this Certificate of Obligation must be presented and surrendered to the Paying Agent/Registraz, together with proper instruments of assignment, inform and with guazantee 11 of signatures satisfactory to the Paying Agent/Registrar, evidencing assignment of this Certificate of Obligation or any portion or portions hereof in any authorized denomination to the assignee or assignees in whose name or names this Certificate of Obligation or any such portion or portions hereof is or are to be registered. The form of Assignment printed or endorsed on this Certificate of Obligation 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/Registraz may be used to evidence the assignment of this Certificate of Obligation or any portion or portions hereof from time to time by the Registered Owner. The Paying AgentlRegistraz's reasonable standard or customary fees and charges for assigning, transferring, converting and exchanging any Certificate of Obligation or portion thereof will be paid by the County. In any cir- cumstance, any taxes or governmental chazges 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 or exchange of a Certificate of Obligation during the period commencing with the close of business on any Record Date immediately preceding a principal or interest payment date for such Certificate of Obligation and ending with the opening of business on the next following principal or interest payment date. IN THE EVENT ANY PAYING AGENT/REGISTRAR for the Certificates of Obligation is changed by the County, resigns, or otherwise ceases to act as such, the County has covenanted in the Certificate of Obligation Order 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 of Obligation. IT IS HEREBY CERTIFIED, RECITED, AND COVENANTED that this Certificate of Obligation 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 of Obligation have been performed, existed, and been done in accordance with law; that this Certificate of Obligation is a general obligation of the County, issued on the full faith and credit thereof; and that ad valorem taxes sufficient to provide for the payment of the interest on and principal of this Certificate of Obligation, as such interest comes due, and as such principal matures, have been levied and ordered to be levied against all taxable property in the County, and have been pledged for such payment, within the limits provided by law. THE COUNTYHASRESERVED THERIGHT TOAMEND the Certificate of Obligation Order 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 of Obligation. BYBECOMING THEREGISTERED OWNER of this Certificate of Obligation, the Regis- tered Owner thereby acknowledges all of the terms and provisions of the Certificate of Obligation Order, agrees to be bound by such terms and provisions, acknowledges that the Certificate of Obligation Order is duly recorded and available for inspection in the official minutes and records of the governing body of the County, and agrees that the terms and provisions of this Certificate of Obligation and the Certificate of Obligation Order constitute a contract between each Registered Owner hereof and the County. 12 IN WITNESS WHEREOF, the County has caused this Certificate of Obligation to be signed with the manual or facsimile signature of the County Judge of the County, countersigned with the manual or facsimile signature of the County Clerk or Deputy County Clerk of the County, and has caused the official seal of the County to be duly impressed, or placed in facsimile, on this Certificate of Obligation. Countersigned: (facsimile signature) (Deputy) County Clerk Ken County, Texas (facsimile si.~) County Judge Kerr County, Texas (SEAL) FORM OF REGISTRATION CERTIFICATE OF THE COMPTROLLER OF PUBLIC ACCOUNTS: COMPTROLLER'S REGISTRATION CERTIFICATE: REGISTER NO. I hereby certify that this Certificate of Obligation has been examined, certified as to validity, and approved by the Attorney General of the State of Texas, and that this Certificate of Obligation has been registered by the Comptroller of Public Accounts of the State of Texas. Witness my signature and seal this (COMPTROLLER'S SEAL) Comptroller of Public Accounts of the State of Texas 13 FORM OF PAYING AGENT/REGISTRAR'S AUTHENTICATION CERTIFICATE PAYING AGENT/REGISTRAR'S AUTHENTKATION CERTIFICATE (To be executed if this Certificate of Obligation 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 of Obligation has been issued under the provisions of the Certificate of Obligation Order described in the text of this Certificate of Obligation; and that this Certificate of Obligation 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 which originally was approved by the Attorney General of the State of Texas and registered by the Comptroller of Public Accounts of the State of Texas. Dated WACHOVIA BANK, NATIONAL ASSOCIATION, HOUSTON, TEXAS Paying AgentlRegistraz By Authorized Representative FORM OF ASSIGNMENT: ASSIGNMENT FOR VALUE RECEIVED, the undersigned Registered Owner of this Certificate of Obligation, or duly authorized representative or attorney thereof, hereby assigns this Certificate of Obligation to / ~ (Assignee's Social Security or (Print or typewrite Assignee's name and address, including zip code) Taxpayer Identification) and hereby irrevocably constitutes and appoints attorney to register the transfer of the within Certificate of Obligation on the books kept for registration thereof, with full power of substitution in the premises. Dated: Signature Guazanteed: NOTICE: Signature(s) must be guaranteed by a member firm of the New York Stock Exchange or a commercial bank or trust company. NOTICE: The signature above must correspond with the name of the Registered Owner as it appeazs upon the front of this Certificate of Obligation in every particular, without alteration or enlargement or any change whatsoever. 14 INITIAL CERTIFICATE OF OBLIGATION INSERTIONS The Initial Certificate of Obligation shall be in the respective form set forth above except that: (A) Immediately under the name of the Certificate of Obligation, the headings "INTEREST RATE" and "MATURITY DATE" shall be completed with the words "As shown below" and "CU51P NO. "shall be deleted. (B) The first paragraph shall be deleted and the following shall be inserted: "ONTHERESPECTIVEMATURITYDATESspecified below, KERR COUNTY, TEXAS (the "County"), being a political subdivision of the State of Texas, hereby promises to pay to the Registered Owner specified above, or registered assigns (hereinafter called the "Registered Owner"), the respective Principal Installments specified below, and to pay interest thereon (calculated on the basis of a 360-day yeaz composed of twelve 30-day months) from January 15, 2005, at the respective Interest Rates per annum specified below, payable on February 15, 2006, and semiannually on each February 15 and August 15 thereafter to the respective Maturity Dates specified below. The respective Maturity Dates, Principal Installments and Interest Rates for this Certificate of Obligation aze set forth in the following schedule: [Insert information from Sections 2 and 3 above) (C) The Initial Certificate of Obligation shall be numbered "T-1." SECTION 6. INTEREST AND SINKING FUND; FUTURE TAX LEVY. (a) A special "Interest and Sinking Fund" is hereby created and shall be established and maintained by the County at an official depository bank of the County. Said Interest and Sinking Fund shall be kept separate and apart from all other funds and accounts of the County, and shall be used only for paying the interest on and the principal of said Certificates of Obligation. Subject to the provisions of subsection (b) below, all ad valorem taxes levied and collected for and on account of said Certificates of Obligation and all accrued interest and premium on the Certificates of Obligation received by the County from the initial purchaser of the Certificates of Obligation (other than premium on the Certificates of Obligation that is not used by the County to pay costs of issuance, all in accordance with the provisions of Section 1201.042(d), Texas Government Code, as amended) shall be deposited, as collected, to the credit of said Interest and Sinking Fund. Subject to the provisions of subsection (b) below, for each fiscal year while any of the Certificates of Obligation 15 or interest thereon are outstanding and unpaid, the governing body of the County shall compute and ascertain a rate and amount of ad valorem tax which will be sufficient to raise and produce the money required to pay the interest on the Certificates of Obligation as such interest comes due, and to provide and maintain a sinking fund adequate to pay the principal of the Certificates of Obligation as such principal matures (but never less than 2% of the original principal amount of each series of the Certificates of Obligation as a sinking fund each year); and said tax shall be based on the latest approved tax rolls of the County, with full allowance being made for tax delinquencies and the cost of tax collection. (b) This Order does not levy a tax in order to comply with provisions of Section 81.006(b) of the Texas Local Government Code providing that a county tax may be levied only at a regularly scheduled meeting of the court when at least four members of the court are present; however, the Commissioners Court of the County is scheduled to approve a subsequent order which shall levy, order to be assessed and collected and pledge an ad valorem tax in an amount sufficient to provide for the payment of the interest on and principal of the Certificates of Obligation, as such interest comes due and such principal matures, within the limit prescribed bylaw, at a regular term meeting of the Commissioners Court on February 14, 2005. Upon passage of such subsequent order, the provisions of Section 6(a) above will be fully implemented. SECTION 7. ACQUISITION FUND. There is hereby created and established on the financial records of the County or in the depository of the County, a fund to be called the "Kerr County, Texas Certificates of Obligation (Series 2005) Acquisition Fund" (herein called the "Acquisition Fund"). All proceeds from the sale and delivery of the Certificates of Obligation (other than accrued interest and any premium on the Certificates of Obligation, if any, that is not used by the County to pay costs of issuance in accordance with the provisions of Section 1201.042(d), Texas Government Code, as amended, which amounts shall be deposited into the Interest and Sinking Fund) shall be deposited into the Acquisition Fund. Money in the Acquisition Fund shall be subject to disbursements by the County for payment of costs of issuance and all costs incurred in carrying out the purposes for which the Certificates of Obligation are issued, including but not limited to costs for the acquisition of the Juvenile Facility and for financial and legal consultants, services and expenses related to such acquisition. All funds remaining on deposit in the Acquisition Fund upon completion of acquisition of the Juvenile Facility being financed with the proceeds from the Certificates of Obligation, if any, shall be transferred to the Interest and Sinking Fund. SECTION 8. INVESTMENTS. Funds on deposit in the Interest and Sinking Fund and the Acquisition Fund shall be secured by the depository bank of the County in the manner and to the extent required by law to secure other public funds of the County and may be invested from time to time in any investment authorized by applicable law, including but not limited to the Public Funds Investment Act (Chapter 2256, Texas Government Code), and the County's investment policy adopted in accordance with the provisions of the Public Funds Investment Act; provided, however, that investments purchased for and held in each Interest and Sinking Fund shall have a final maturity no later than the next principal or interest payment date on which such funds will be needed, and investments purchased for and held in the Acquisition Fund shall have a final maturity of not later than the date the County reasonably expects the funds from such investments will be required to pay costs of the projects for which the Certificates of Obligation were issued.. Income and profits from such investments shall be deposited in the respective Fund which holds such investments; however, any such income and profits from investments in the Acquisition Fund may be withdrawn by the 16 County and deposited in the Interest and Sinking Fund to pay all or a portion of the interest next coming due on the Certificates of Obligation. It is further provided, however, that any interest earnings on certificate proceeds which are required to be rebated to the United States of America pursuant to Section 12 hereof in order to prevent the Certificates of Obligation from being arbitrage certificates shall be so rebated and not considered as interest earnings for the purposes of this Section. SECTION 9. DEFEASANCE OF CERTIFICATES. (a) Defeased Certi icates of Obligation. Any Certificate of Obligation and the interest thereon shall be deemed to be paid, retired and no longer Outstanding (a "Defeased Certificate of Obligation"), except to the extent provided in subsection (d) of this Section, when payment of the principal of such Certificate of Obligation, 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 (or another entity permitted by Section 1207.061, Texas Government Code, as amended, or other applicable law, which entity, together with the Paying Agent/Registrar, are referred to collectively in this Section as the "Defeasance Agent"), in accordance with the requirements of Chapter 1207, Texas Govemment Code, as amended, or other applicable law (which may include the use of an escrow agreement or other similar instrument -the "Future Escrow Agreement"): (1) lawful money of the United States of America sufficient to make such payment or (2) "Defeasance Securities" (as defined below) 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 County with the Defeasance Agent for the payment of its services until all Defeased Certificates of Obligation shall have become due and payable. At such time as a Certificate of Obligation shall be deemed to be a Defeased Certificate of Obligation hereunder, as aforesaid, such Certificate of Obligation and the interest thereon shall no longer be secured by, payable from, or entitled to the benefits of, the ad valorem taxes levied and pledged as provided in this Order or a subsequent Order, and such principal and interest shall be payable solely from such money or Defeasance Securities. (b) Defeasance Securities. T'he term "Defeasance Securities" means (i) direct, noncallable obligations of the United States of America, including obligations that are unconditionally guaranteed by the United States of America., (ii) 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, on the date of the purchase thereof are rated as to investment quality by a nationally recognized investment rating firm not less than AAA or its equivalent, and (iii) noncallable obligations of a state or an agency or a county, municipality, or other political subdivision of a state that have been refunded and that, on the date on the date the governing body of the County adopts or approves the proceedings authorizing the financial arrangements are rated as to investment quality by a nationally recognized investment rating firm not less than AAA or its equivalent. (c) Investment in Defeasance Securities. Any moneys so deposited with the Defeasance Agent may at the written direction of the County 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 Defeasance Agent that is not required for the payment of the Certificates of Obligation and interest thereon, with respect to which such money has been so deposited, shall be 17 turned over to the County, or deposited as directed in writing by the County. Any account or Future Escrow Agreement pursuant to which the money and/or Defeasance Securities are held for the payment of Defeased Certificates of Obligation 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 subsections (a)(i) or (ii) of this Section. All income from such Defeasance Securities received by the Defeasance Agent which is not required for the payment of the Defeased Certificates of Obligation, with respect to which such money has been so deposited, shall be remitted to the County or deposited as directed in writing by the County. (d) Paving Agent/Registrar Services. Until all Defeased Certificates of Obligation shall have become due and payable, the Paying Agent/Registraz shall perform the services of Paying Agent/Registraz for such Defeased Certificates of Obligation the same as if they had not been defeased, and the County shall make proper arrangements to provide and pay for such services as required by this Fifth Supplement. (e) Selection ofCerti~cates o Obligation for De easance. In the event that the County elects to defease less than all of the principal amount of Certificates of Obligation of a maturity, the Paying Agent/Registraz shall select, or cause to be selected, such amount of Certificates of Obligation by such random method as it deems fair and appropriate. SECTION 10. DAMAGED, MUTILATED, LOST, STOLEN, OR DESTROYED CERTIFICATES. (a) Replacement Certi rcates o Obligation. In the event any outstanding Certificate of Obligation 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 of Obligation, in replacement for such Certificate of Obligation in the manner hereinafter provided. (b) implication for Replacement Certificates o Obli ation. Application for replacement of damaged, mutilated, lost, stolen, or destroyed Certificates of Obligation shall be made by the registered owner thereof to the Paying Agent/Registraz. In every case of loss, theft, or destruction of a Certificate of Obligation, the registered owner applying for a replacement certificate shall furnish to the County and to the Paying Agent/Registraz 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 of Obligation, the registered owner shall furnish to the County and to the Paying Agent/Registraz evidence to their satisfaction of the loss, theft, or destruction of such Certificate of Obligation. In every case of damage or mutilation of a Certificate of Obligation, the registered owner shall surrender to the Paying Agent/Registraz for cancellation the Certificate of Obligation so damaged or mutilated. (c) No Default Occurred. Notwithstanding the foregoing provisions of this Section, in the event any such Certificate of Obligation shall have matured, and no default has occurred which is then continuing in the payment of the principal of or interest on the Certificate of Obligation, the County may authorize the payment of the same (without surrender thereof except in the case of a damaged or mutilated Certificate of Obligation) instead of issuing a replacement Certificate of Obligation, provided security or indemnity is furnished as above provided in this Section. 18 (d) Charge for Issuing Replacement Certi rcates of Obligation. Prior to the issuance of any replacement certificate, the Paying AgentlRegistraz shall chazge the registered owner of such Certificate of Obligation 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 of Obligation is lost, stolen, or destroyed shall constitute a contractual obligation of the County whether or not the lost, stolen, or destroyed Certificate of Obligation shall be found at any time, or be enforceable by anyone, and shall be entitled to all the benefits of this Order equally and proportionately with any and all other Certificates of Obligation duly issued under this Order. (e) Authority for Issuing Replacement Certifrcates o Obligation. In accordance with Chapter 1201, Texas Government Code, as amended, this Section of this Order shall constitute authority for the issuance of any such replacement certificate without necessity of further action by the governing body of the County or any other body or person, and the duty of the replacement of such certificates is hereby authorized and imposed upon the Paying Agent(R.egistrar, and the Paying Agent/Registraz shall authenticate and deliver such Certificates of Obligation in the form and manner and with the effect, as provided in Section 4(a) of this Order for Certificates of Obligation issued in conversion and exchange for other Certificates of Obligation. SECTION 11. CUSTODY, APPROVAL, AND REGISTRATION OF CERTIFICATES; BOND COUNSEL'S OPINION; CUSIP NUMBERS; AND OTHER MATTERS. The County Judge of the County is hereby authorized to have control of the Certificates of Obligation initially issued and delivered hereunder and all necessary records and proceedings pertaining to the Certificates of Obligation 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 of Obligation 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 of Obligation, and the seal of said Comptroller shall be impressed, or placed in facsimile, on such Certificate. The approving legal opinion of the County's Bond Counsel (with an appropriate certificate pertaining thereto executed by facsimile signature of the County Clerk or Deputy County Clerk of the County) and the assigned CUSIP numbers may, at the option of the County, be printed on the Certificates of Obligation issued and delivered under this Order, but neither shall have any legal effect, and shall be solely for the convenience and information of the registered owners of the Certificates of Obligation. If bond insurance is obtained, the Certificates of Obligation may bear an appropriate legend as provided by the insurer. SECTION 12. COVENANTS REGARDING TAX EXEMPTION OF INTEREST ON THE CERTIFICATES. (a) Covenants. The County covenants to take any action necessary to assure, or refrain from any action which would adversely affect, the treatment of the Certificates of Obligation as obligations described in section 103 of the Internal Revenue Code of 1986, as amended (the "Code"), the interest on which is not includable in the "gross income" of the holder for purposes of federal income taxation. In furtherance thereof, the County covenants as follows: (1) to take any action to assure that no more than 10 percent of the proceeds of the Certificates of Obligation or the projects financed or refinanced therewith (less amounts deposited to a reserve fund, if any) are used for any "private business use," as defined in section 141(b)(6) of the Code or, if more than 10 percent of the proceeds or the projects 19 financed or refinanced therewith are so used, such amounts, whether or not received by the County, with respect to such private business use, do not, under the terms of this Order 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 of Obligation, 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 of Obligation or the projects financed or refinanced therewith {less amounts deposited into a reserve fund, if any) then the amount in excess of 5 percent is used fora "private business use" which 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 which is greater than the lesser of $5,000,000, or 5 percent of the proceeds of the Certificates of Obligation (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 which would otherwise result in the Certificates of Obligation 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 of Obligation 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 of Obligation, directly or indirectly, to acquire or to replace funds which were used, directly or indirectly, to acquire investment property (as defined in section 148(b)(2) of the Code) which produces a materially higher yield over the term of the Certificates of Obligation, other than investment property acquired with -- (A) proceeds of the Certificates of Obligation invested for a reasonable temporary period of 3 yeazs or less or, in the case of a refunding certificate, for a period of 30 days or less 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 of Obligation; (7) to otherwise restrict the use of the proceeds of the Certificates of Obligation or amounts treated as proceeds of the Certificates of Obligation, as may be necessary, so that the Certificates of Obligation do not otherwise contravene the requirements of section 148 20 of the Code (relating to arbitrage) and, to the extent applicable, section 149(d) of the Code (relating to advance refundings); and (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 of Obligation) 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 of Obligation 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. (b) Rebate Fund. In order to facilitate compliance with the above covenant (8}, a "Rebate Fund" is hereby established by the County 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) Proceeds. The County understands that the term "proceeds" includes "disposition proceeds" as defined in the Treasury Regulations and, in the case of refunding certificates, transferred proceeds (if any) and proceeds of the refunded certificates expended prior to the date of issuance of the Certificates of Obligation. It is the understanding of the County 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 aze hereafter promulgated which modify or expand provisions of the Code, as applicable to the Certificates of Obligation, the County 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 of Obligation under section 103 of the Code. In the event that regulations or rulings are hereafter promulgated which impose additional requirements which are applicable to the Certificates of Obligation, the County 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 of Obligation under section 103 of the Code. In furtherance of such intention, the County hereby authorizes and directs the Finance Director to execute any documents, certificates or reports required by the Code and to make such elections, on behalf of the County, which may be permitted by the Code as are consistent with the purpose for the issuance of the Certificates of Obligation. (d) Allocation O,~ and Limitation On. Expenditures for the Project. The County covenants to account for the expenditure of sale proceeds and investment earnings to be used for the purposes described in Section 1 of this Order (the "Project") on its books and records in accordance with the requirements of the Internal Revenue Code. The County recognizes that in order for the proceeds to be considered used for the reimbursement of costs, the proceeds must be allocated to expenditures within 18 months of the later of the date that (1) the expenditure is made, or (2) the Project is completed; but in no event later than three years after the date on which the original expenditure is paid. The foregoing notwithstanding, the County recognizes that in order for proceeds to be expended under the Internal Revenue Code, the sale proceeds or investment earnings must be expended no more than 60 days after the earlier of (1) the fifth anniversary of the delivery of the Certificates of Obligation, or (2) the date the Certificates of Obligation are retired. The County 21 agrees to obtain the advice ofnationally-recognized bond counsel if such expenditure fails to comply with the foregoing to assure that such expenditure will not adversely affect the tax-exempt status of the Certificates of Obligation. For purposes hereof, the County 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 o Project. The County covenants that the property constituting the Project will not be sold or otherwise disposed in a transaction resulting in the receipt by the County of cash or other compensation, unless the County obtains anopinion ofnationally-recognized bond counsel that such sale or other disposition will not adversely affect the tax-exempt status of the Certificates of Obligation. 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 County 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. (f) Oualified Tax-Exempt Obli ations. The County hereby designates the Certificates of Obligation as "qualified tax-exempt obligations" as defined in section 265(b)(3) of the Code. In furtherance of such designation, the County represents, covenants and warrants the following: (a) that during the calendar year in which the Certificates of Obligation aze issued, the County (including any subordinate entities) has not designated nor will designate bonds or other obligations, which when aggregated with the Certificates of Obligation, will result in more than $10,000,000 of "qualified tax-exempt obligations" being issued; (b) that the County reasonably anticipates that the amount of tax-exempt obligations issued during the calendaz yeaz in which the Certificates of Obligation are issued by the County (or any subordinate entities) will not exceed $10,000,000; and, (c) that the County 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 of Obligation will not be considered "private activity bonds" within the meaning of section 141 of the Code. SECTION 13. SALE AND DELIVERY OF CERTIFICATES. The Certificates of Obligation are hereby initially sold and shall be delivered to SouthwestSecurities, Inc., as the initial purchaser of the Certificates of Obligation (the "Underwriter"), at a price of $1,997,154.70 (which amount is equal to paz, less Underwriter's discount of $26, 000, plus a net original issue premium of $23,154.70), plus accrued interest on the Certificates of Obligation from January 15, 2005, to the date of initial delivery thereof, all pursuant to the terms and provisions of a Purchase Agreement in substantially the form attached hereto as Exhibit B (the "Purchase Agreement"). The County Judge of the County is hereby authorized to execute and deliver, and the County Clerk or Deputy County Clerk is hereby authorized to attest the Purchase Agreement. The County will deliver to the Underwriter an Initial Certificate of Obligation in the aggregate principal amount of $2, 000, D00 in principal installments on the dates and in the principal amounts shown in Section 2 hereof, and bearing interest at the rates for each respective maturity as shown in Section 3 hereof. The Initial Certificate of Obligation shall be registered in the name of Southwest Securities, Inc. SECTION 14. APPROVAL OF OFFICIAL STATEMENT. The County hereby approves the form and content of the Official Statement relating to the Certificates of Obligation and any addenda, supplement, or amendment thereto, and approves the distribution of the Official Statement in the reoffering of the Certificates of Obligation by the Underwriter in final form, with such changes 22 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 for the Certificates of Obligation, dated January 28, 2005, prior to the date hereof is hereby ratified and confirmed. The Commissioners Court finds and determines that the Preliminary Official Statement and the Official Statement were and aze "deemed final" as of each of their respective dates within the meaning, and for the purpose, of Rule 15c2-12 promulgated under authority granted by the Federal Securities and Exchange Act of 1934. SECTION 15. AUTHORITY FOR OFFICERS TO EXECUTE DOCUMENTS. The County Judge, County Clerk or Deputy County Clerk, County Treasurer and County Auditor of the County, and all other officers of the County, 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 acts and things and to execute, acknowledge, and deliver in the name and under the corporate seal and on behalf of the County all such instruments, whether or not herein mentioned, as may be necessary or desirable in order to carry out the terms and provisions of this Order, the Certificates of Obligation, the sale of the Certificates of Obligation, the Official Statement and the Paying Agent/Registraz Agreement. In case any officer whose signature shall appeaz on any Certificate of Obligation shall cease to be such officer before the delivery of such Certificate of Obligation, 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 16. ORDER A CONTRACT; AMENDMENTS. This Order shall constitute a contract with the Registered Owners of the Certificates of Obligation, binding on the County and its successors and assigns, and shall not be amended or repealed by the County as long as any Certificate of Obligation remains outstanding except as permitted in this Section. The County may, without the consent of or notice to any Registered Owners, amend, change, or modify this Order as may be required (i) by the provisions hereof, (ii) for the purpose of curing any ambiguity, inconsistency, or formal defect or omission herein, or (iii) in connection with any other change which is not to the prejudice of the Registered Owners. The County may, with the written consent of the Registered Owners of a majority in aggregate principal amount of the Certificates of Obligation then outstanding affected thereby, amend, change, modify, or rescind any other provisions of this Order; provided that without the consent of all of the Registered Owners affected, no such amendment, change, modification, or rescission shall (i) extend the time or times of payment of the principal of and interest on the Certificates of Obligation, or reduce the principal amount thereof or the rate of interest thereon, (ii) give any preference to any Certificate of Obligation over any other Certificate of Obligation, (iii) extend any waiver of default to subsequent defaults, or (iv) reduce the aggregate principal amount of Certificates of Obligation required for consent to any such amendment, change, modification, or rescission. Whenever the County shall desire to make any amendment or addition to or rescission of this Order requiring consent of the Registered Owners, the County shall cause notice of the amendment, addition, or rescission to be sent by first class mail, postage prepaid, to the Registered Owners at the respective addresses shown on the Registration Books. Whenever at any time within one year after the date of the giving of such notice, the County shall receive an instrument or instruments in writing executed by the Registered Owners of a majority in aggregate principal amount of the Certificates of Obligation then outstanding affected by any such amendment, addition, or rescission requiring the consent of the Registered Owners, which instrument or instruments shall refer to the proposed amendment, addition, or rescission described in such notice and shall specifically consent to and approve the adoption thereof in substantially the form of the 23 copy thereof referred to in such notice, thereupon, but not otherwise, the County may adopt such amendment, addition, or rescission in substantially such form, except as herein provided. No Registered Owner may thereafter object to the adoption of such amendment, addition, or rescission, or to any of the provisions thereof, and such amendment, addition, or rescission shall be fully effective for all purposes. SECTION 17. SECURITY INTEREST. Chapter 1208, Texas Government Code, applies to the issuance of the Certificates of Obligation and the pledge of the ad valorem taxes granted by the County under Section 6 of this Order or in a subsequent Order ,and is therefore valid, effective, and perfected. If Texas law is amended at any time while the Certificates of Obligation are outstanding and unpaid such that the pledge of the ad valorem taxes granted by the County under Section 6 of this Order or in a subsequent Order is to be subject to the filing requirements of Chapter 9, Texas Business 8c Commerce Code, then in order to preserve to the registered owners of the Certificates of Obligation the perfection of the security interest in said pledge, the County agrees to take such measures as it determines are reasonable and necessary under Texas law to comply with the applicable provisions of Chapter 9, Texas Business & Commerce Code, and enable a filing to perfect the security interest in said pledge to occur. SECTION 18. INTERESTED PARTIES. Nothing in this Order expressed or implied is intended or shall be construed to confer upon, or to give to, any person or entity, other than the County and the registered owners of the Certificates of Obligation, any right, remedy or claim under or by reason of this Order or any covenant, condition or stipulation hereof, and all covenants, stipulations, promises and agreements in this Order contained by and on behalf of the County shall be for the sole and exclusive benefit of the County and the registered owners of the Certificates of Obligation. SECTION 19. 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. "NRMSIR" means each person whom the SEC or its staff has determined to be a nationally recognized municipal securities information repository within the meating of the Rule from time to time. "Rule" means SEC Rule 15c2-12, as amended from time to time. "SEC" means the United States Securities and Exchange Commission. "SID" means any person designated by the State of Texas or an authorized department, officer, or agency thereof as, and determined by the SEC or its staff to be, a state information depository within the meaning of the Rule from time to time. (b) Annual Information. (i) The County shall provide annually, within six months after the end of each fiscal year ending in or after 2004, financial information and operating data with respect to the County of the general type described in Exhibit C hereto provided that such information and data is customarily prepared by the County. Such information shall be provided to any person upon 24 request made to the County provided that the County reserves the right at any time to commence making such annual filings with the SID (if any, and if none, to each NRMSIR) in lieu of providing such information upon request. Any financial statements so to be provided shall be (1) prepared in accordance with the accounting principles described in Exhibit C hereto, or such other accounting principles as the County may be required to employ from time to time pursuant to state law or regulation, and (2) audited, if the County 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 completed within such period, then the County shall provide unaudited financial statements by the required time and shall provide audited financial statements for the applicable fiscal yeaz to any SID, when and if the audit report on such statements become available. (ii) If the County changes its fiscal year, it will notify the SID of the change (and of the date of the new fiscal year end) prior to the next date by which the County otherwise would be required to provide financial information and operating data pursuant to this paragraph (b). The financial information and operating data to be provided pursuant to this Section may be set forth in full in one or more documents or may be included by specific reference to any document (including an official statement or other offering document, if it is available from the MSRB) that theretofore has been provided to the SID or filed with the SEC. (c) Material Event Notices. The County shall notify the SID and the MSRB, in a timely manner, of any of the following events with respect to the Certificates of Obligation, if such event is material within the meaning of the federal securities laws: 1. Principal and interest payment delinquencies; 2. Non-payment related defaults; 3. Unscheduled draws on debt service reserves reflecting financial difficulties; 4. Unscheduled draws on credit enhancements reflecting financial difficulties; Substitution of credit or liquidity providers, or their failure to perform; 6. Adverse tax opinions or events affecting the tax-exempt status of the Certificates of Obligation; 7. Modifications to rights of holders of the Certificates of Obligation; 8. Certificate of Obligation calls; 9. Defeasances; 10. Release, substitution, or sale of property securing repayment of the Certificates of Obligation; and 11. Rating changes. 25 The County shall notify the SID and the MSRB, in a timely manner, of any failure by the County 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 County shall be obligated to observe and perform the covenants specified in this Section for so long as, but only for so long as, the County remains an "obligated person" with respect to the Certificates of Obligation within the meaning of the Rule, except that the County in any event will give notice of any deposit made in accordance with this Order or applicable law that causes the Certificates of Obligation 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 of Obligation, 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 County undertakes to provide only the financial information, operating data, financial statements, and notices that 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 County'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 County does not make any representation or warranty concerning such information or its usefulness to a decision to invest in or sell Certificates of Obligation at any future date. (iii) UNDER NO CIRCUMSTANCES SHALL THE COUNTY BE LIABLE TO THE REGISTERED OWNER OR BENEFICIAL OWNER OF ANY CERTIFICATE OF OBLIGATION OR ANY OTHER PERSON, IN CONTRACT OR TORT, FOR DAMAGES RESULTING IN WHOLE OR IN PART FROM ANY BREACH BY THE COUNTY, 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 County in observing or performing its obligations under this Section shall comprise a breach of or default under this Order for purposes of any other provision of this Order. Nothing in this Section is intended or shall act to disclaim, waive, or otherwise limit the duties of the County under federal and state securities laws. (v) The provisions of this Section may be amended by the County 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 County, but only if (1) the provisions of this Section, as so amended, would have permitted an underwriter to purchase or sell Certificates of Obligation in the primary offering of the Certificates of Obligation 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 Order that authorizes such an amendment) of the outstanding Certificates of Obligation consent to such amendment or (b) a person that is unaffiliated with the County (such as nationally recognized bond counsel) determined that such amendment will not materially impair the interest of the registered 26 owners and beneficial owners of the Certificates of Obligation. The County 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 of Obligation in the primary offering of the Certificates of Obligation. If the County so amends the provisions of this Section, it shall include with any amended financial information or operating data next provided in accordance with subsection (a) of this Section an explanation, in narrative form, of the reason for the amendment and of the impact of any change in the type of financial information or operating data so provided. SECTION 20. INCORPORATION OF RECITALS. The County hereby finds that the statements set forth in the recitals of this Order are true and correct, and the County hereby incorporates such recitals as a part of this Order. SECTION 21. SEVERABILITY. If any provision of this Order or the application thereof to any circumstance shall be held to be invalid, the remainder of this Order and the application thereof to other circumstances shall nevertheless be valid, and this governing body hereby declares that this Order would have been enacted without such invalid provision. SECTION 22. EFFECTIVE DATE. This Order shall become effective immediately after its adoption. [The remainder of this page intentionally left blank] 27 PASSED AND APPROVED BYTHE COMMISSIONERS COURT OFKERR COUNTY, TEXAS AT A SPECIAL MEETING RECONVENED ON THE 4`F DAYOF FEBRUARY, 2005, AT WHICH MEETING A QUORUM WAS PRESENT. ATTEST: Coun Clerk, Kerr County, Texas County Judge, Ken County, Texas (COUNTY SEAL) ** ** ** ** ** [EXECUTION PAGE TO THE CERTIFICATE OF OBLIGATION ORDER] EXHIBIT A THE PAYING AGENT/REGISTRAR AGREEMENT IS OMITTED AT THIS POINT AS IT APPEARS IN EXECUTED FORM ELSEWHERE IN THIS TRANSCRIPT OF PROCEEDINGS. A-I EXHIBIT B THE PURCHASE AGREEMENT IS OMITTED AT THIS POINT AS IT APPEARS IN EXECUTED FORM ELSEWHERE IN THIS TRANSCRIPT OF PROCEEDINGS. B- I EXHIBIT C DESCRIPTION OF ANNUAL FINANCIAL INFORMATION The following information is referred to in Section 19 of this Order. Annual Financial Statements and Operating Data The financial information and operating data with respect to the County 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: 1. The annual audited financial statements of the County or the unaudited financial statements of the County in the event audited financial statements are not completed within six months after the end of any fiscal year. 2. All quantitative financial information and operating data with respect to the County of the general type included in the Official Statement under Tables 1 through 6 and Tables 8 through 11 in the Official Statement. 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 pazagraph 1 above. C-1