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SPDC -2001-002IT RESOLUTION NO. 01-02 A RESOLUTION authorizing the issuance of "SOUTHLAKE PARKS DEVELOPMENT CORPORATION SALES TAX SUBORDINATE LIEN REVENUE BONDS, SERIES 2001"; pledging certain "Pledged Revenues" of the Corporation, including "Gross Sales Tax Revenues", to the payment of the principal of and interest on said Bonds and enacting other provisions incident and related to the issuance, payment, security and delivery of said bonds, including the approval and execution of a Paying Agent/Registrar Agreement, a Purchase Contract and a Financing/Use Agreement with the City, resolving other matters incident and related to the issuance and sale of the Bonds, including the approval and distribution of an Official Statement; and providing an effective date. WHEREAS, the Board of Directors of the Southlake Parks Development Corporation the "Corporation") hereby finds and determines that bonds of the Corporation in the principal amount of $4,690,000 should be issued and sold at this time to finance the costs of purchasing land and making improvements thereto for neighborhood parks and making additional improvements to existing park land, including related road and streets improvements that enhance such park facilities (the "Projects"); and WHEREAS, in accordance with a "Notice of Public Hearing Relating to Southlake Parks Development Corporation Projects" duly published on April 18, 2001, in the Fort Worth Star - Telegram, a newspaper of general circulation in the City of Southlake, Texas, a public hearing was duly held and conducted on the date hereof prior to the adoption of this resolution by the Board of Directors on the Corporation's intention to undertake and spend funds on said Projects; and WHEREAS, the Board of Directors has further determined and hereby finds that the Projects to be financed by the issuance of the bonds are for and on behalf of the City of Southlake, Texas, and the principal amount of such bonds and other obligations of the Corporation payable in whole or in part from the "Gross Sales Tax Revenues" (hereinafter defined), together with the amount of the costs of other projects (other than such bonds and other obligations) for which payments to be made in cash directly from such "Gross Sales Tax Revenues" do not, in the aggregate, exceed $135,000,000; and WHEREAS, the Board of Directors further finds and determines that the bonds herein authorized should be payable from a lien on and pledge of the Pledged Revenues (as defined herein) junior and subordinate to the lien on and pledge of such Pledged Revenues securing the payment of the Priority Bonds (hereinafter identified and defined); now, therefore, BE IT RESOLVED BY THE BOARD OF DIRECTORS OF THE SOUTHLAKE PARKS DEVELOPMENT CORPORATION: SECTION 1: Authorization - Designation - Principal Amount - Purpose. Bonds of the Corporation shall be and are hereby authorized to be issued in the aggregate principal amount of $4,690,000 to be designated and bear the title "SOUTHLAKE PARKS DEVELOPMENT CORPORATION SALES TAX SUBORDINATE LIEN REVENUE BONDS, SERIES 2001", hereinafter referred to as the "Bonds" to finance the costs of purchasing land and making improvements thereto for neighborhood parks and making additional improvements to existing park land, including related road and streets improvements that enhance such park facilities, in 45035952.1 conformity with the Constitution and laws of the State of Texas, including Vernon's Ann. Civ. Stat., Section 4B of Article 5190.6. SECTION 2: Fully Registered Obligations - Authorized Denominations - Stated Maturities - Date. The Bonds shall be issued as fully registered obligations, without coupons, shall be dated May 15, 2001 (the "Issue Date") and shall be in denominations of $5,000 or any integral multiple thereof (within a Stated Maturity), shall be numbered consecutively from One 1) upward and shall become due and payable annually on August 15, 2031 (the "Stated Maturity") and bear interest at the rate of 5.60% per annum rates. The Bonds shall bear interest on the unpaid principal amounts from the Issue Date at the per annum rates shown above (calculated on the basis of a 360 -day year of twelve 30 -day months). Interest on the Bonds shall be payable on February 15 and August 15 in each year, commencing August 15, 2001. SECTION 3: Terms of Payment - Paying Agent/Registrar. The principal of, and the interest on the Bonds, due and payable by reason of maturity, redemption or otherwise, shall be payable only to the registered owners or holders of the Bonds (hereinafter called the "Holders") appearing on the registration and transfer books maintained by the Paying Agent/Registrar and the payment thereof shall be in any coin or currency of the United States of America, which at the time of payment is legal tender for the payment of public and private debts, and shall be without exchange or collection charges to the Holders. The selection and appointment of The Chase Manhattan Bank, as Paying Agent/Registrar for the Bonds is hereby approved and confirmed. Books and records relating to the registration, payment, exchange and transfer of the Bonds (the "Security Register") shall at all times be kept and maintained on behalf of the Corporation by the Paying Agent/Registrar, all as provided herein, in accordance with the terms and provisions of a "Paying Agent/Registrar Agreement", substantially in the form attached hereto as Exhibit A and such reasonable rules and regulations as the Paying Agent/Registrar and the Corporation may prescribe. The President and Secretary of the Board of Directors are hereby authorized to execute and deliver such Agreement in connection with the delivery of the Bonds. The Corporation covenants to maintain and provide a Paying Agent/Registrar at all times until the Bonds are paid in full and discharged. Any successor Paying Agent/Registrar shall be a bank, trust company, financial institution or other entity qualified and authorized to serve in such capacity and perform the duties and services of Paying Agent/Registrar. Upon any change in the Paying Agent/Registrar for the Bonds, the Corporation agrees to promptly cause a written notice to be sent to the Holder affected by United States Mail, first class postage prepaid, which notice shall identify and give the address of the new Paying Agent/Registrar. Principal of and premium, if any, on the Bonds shall be payable at the Stated Maturities or upon their earlier redemption, only upon presentation and surrender of the Bonds to the Paying Agent/Registrar at its principal offices in Dallas, Texas (the "Designated Payment/Transfer Office"). Interest on the Bonds shall be paid to the Holders whose name appear in the Security Register at the close of business on the Record Date (the last business day of the month next preceding each interest payment date) and shall be paid by the Paying Agent/Registrar (i) by check sent United States Mail, first class postage prepaid, to the address of the Holder recorded in the Security Register or (ii) by such other method, acceptable to the Paying Agent/Registrar, requested by, and at the risk and expense of, the Holder. If the date for the payment of the principal of or interest on the Bonds shall be a Saturday, Sunday, a legal holiday, or a day when banking institutions in the city where the Designated Payment/Transfer 45035982.1 2 Office of the Paying Agent/Registrar is located is 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 when 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. In the event of a non-payment of interest on one or more maturities on a scheduled payment date, and for thirty (30) days thereafter, a new record date for such interest payment for such maturity or maturities (a "Special Record Date") will be established by the Paying Agent/Registrar, if and when funds for the payment of such interest have been received from the Corporation. Notice of the Special Record Date and of the scheduled payment date of the past due interest (which shall be 15 days after the Special Record Date) shall be sent at least five (5) business days prior to the Special Record Date by United States Mail, first class postage prepaid, to the address of each Holder of such maturity or maturities appearing on the Security Register at the close of business on the last business day next preceding the date of mailing of such notice. SECTION 4: Redemption. (a) Optional Redemption. The Bonds shall be subject to redemption prior to maturity, at the option of the Corporation, in whole or in part in principal amounts of $5,000 or any integral multiple thereof (and if within a Stated Maturity by lot by the Paying Agent/ Registrar), on February 15, 2011 or on any date thereafter at the redemption price of par plus accrued interest to the date of redemption. At least forty-five (45) days prior to a date set for the redemption of Bonds (unless a shorter notification period shall be satisfactory to the Paying Agent/Registrar), the Corporation shall notify the Paying Agent/Registrar of its decision to exercise the right to redeem Bonds, the principal amount of each Stated Maturity to be redeemed, and the date set for the redemption thereof. The decision of the Corporation to exercise the right to redeem Bonds shall be entered in the minutes of the governing body of the Corporation. b) Mandatory Redemption. The Bonds shall be subject to mandatory redemption prior to maturity at the redemption price of par and accrued interest to the date of redemption on the respective dates and in principal amounts as follows: Redemption Date Principal Amount August 15, 2025 560,000 August 15, 2026 590,000 August 15, 2027 620,000 August 15, 2028 660,000 August 15, 2029 695,000 August 15, 2030 730,000 Approximately forty-five (45) days prior to each mandatory redemption date for the Bonds, the Paying Agent/Registrar shall select by lot the numbers of the Bonds to be redeemed on the next following August 15 from moneys set aside for that purpose in the Bond Fund (as hereinafter defined). Any Bonds not selected for prior redemption shall be paid on the date of their Stated Maturity. The principal amount of the Bonds required to be redeemed pursuant to the operation of such mandatory redemption provisions may be reduced, at the option of the Corporation, by the principal amount of Bonds which, at least 50 days prior to the mandatory redemption date, (1) 45035982.1 3 shall have been acquired by the Corporation at a price not exceeding the principal amount of such Bonds plus accrued interest to the date of purchase thereof, and delivered to the PayingAgent/Registrar for cancellation or (2) shall have been redeemed pursuant to the optional redemption provisions set forth in paragraph(a) of this Section and not theretofore credited against a mandatory redemption requirement. c) Selection of Bonds for Redemption. If less than all Outstanding Bonds are to be redeemed on a redemption date, the Paying Agent/Registrar shall treat such Bonds as representing the number of Bonds Outstanding which is obtained by dividing the principal amount of such Bond by $5,000 and shall select the Bonds, or principal amount thereof, to be redeemed by lot. d) Notice of Redemption. Not less than thirty (30) days prior to a redemption date for the Bonds, a notice of redemption shall be sent by United States Mail, first class postage prepaid, in the name of the Corporation and at the Corporation's expense, to each Holder of a Bond to be redeemed in whole or in part at the address of the Holder appearing on the Security Register at the close of business on the business day next preceding the date of mailing such notice, and any notice of redemption so mailed shall be conclusively presumed to have been duly given irrespective of whether received by the Holder. All notices of redemption shall (i) specify the date of redemption for the Bonds, (ii) identify the Bonds to be redeemed and, in the case of a portion of the principal amount to be redeemed, the principal amount thereof to be redeemed, (iii) state the redemption price, iv) state that the Bonds, or the portion of the principal amount thereof to be redeemed, shall become due and payable on the redemption date specified, and the interest thereon, or on the portion of the principal amount thereof to be redeemed, shall cease to accrue from and after the redemption date, and (v) specify that payment of the redemption price for the Bonds, or the principal amount thereof to be redeemed, shall be made at the Designated Payment/Transfer Office of the Paying Agent/ Registrar only upon presentation and surrender thereof by the Holder. If a Bond is subject by its terms to prior redemption and has been called for redemption and notice of redemption thereof has been duly given or waived as herein provided, such Bond or the principal amount thereof to be redeemed) shall become due and payable, and interest thereon shall cease to accrue from and after the redemption date therefor, provided moneys sufficient for the payment of such Bonds (or of the principal amount thereof to be redeemed) at the then applicable redemption price are held for the purpose of such payment by the Paying Agent/Registrar. SECTION 5: Registration - Transfer - Exchange of Bonds - Predecessor Bonds. The Paying Agent/Registrar shall obtain, record, and maintain in the Security Register the name and address of each registered owner of the Bonds issued under and pursuant to the provisions of this Resolution. Any Bond may, in accordance with its terms and the terms hereof, be transferred or exchanged for Bonds of other authorized denominations upon the Security Register by the Holder, in person or by his duly authorized agent, upon surrender of such Bond to the Designated Payment/Transfer Office of the Paying Agent/Registrar for cancellation, accompanied by a written instrument of transfer or request for exchange duly executed by the Holder or by his duly authorized agent, in form satisfactory to the Paying Agent/Registrar. Upon surrender for transfer of a Bond at the Designated Payment/Transfer Office of the Paying Agent/Registrar, one or more new certificates evidencing the Bonds, in authorized denominations, of like Stated Maturity and of a like aggregate principal amount as the Bond or 45035982.1 4 Bonds surrender for transfer shall be registered and issued to the assignee or transferee of the previous Holders. At the option of the Holder, Bonds may be exchanged for other Bonds of authorized denominations and having the same Stated Maturity, bearing the same rate of interest and of like aggregate principal amount as the Bonds surrendered for exchange, upon surrender of the Bonds to be exchanged at the Designated Payment/Transfer Office of the PayingAgent/Registrar. Whenever any Bonds are surrendered for exchange, the Paying Agent/Registrar shall register and deliver new printed certificates evidencing the Bonds, executed on behalf of, and furnished by, the Corporation, to the Holder requesting the exchange. All Bonds issued upon any transfer or exchange of Bonds shall be delivered at the Designated Payment/Transfer Office of the Paying Agent/Registrar, or sent by United States Mail, first class postage prepaid, to the Holder and, upon the delivery thereof, the same shall be valid obligations of the Corporation, evidencing the same obligation to pay, and entitled to the same benefits under this Resolution, as the Bonds surrendered in such transfer or exchange. All transfers or exchanges of Bonds pursuant to this Section shall be made without expense or service charge to the Holder, except as otherwise herein provided, and except that the Paying Agent/Registrar shall require payment by the Holder requesting such transfer or exchange of any tax or other governmental charges required to be paid with respect to such transfer or exchange. Bonds canceled by reason of an exchange or transfer pursuant to the provisions hereof are hereby defined to be 'Predecessor Bonds," evidencing all or a portion, as the case may be, of the same obligation to pay evidenced by the Bond or Bonds registered and delivered in the exchange or transfer therefor. Additionally, the term "Predecessor Bonds" shall include any mutilated, lost, destroyed, or stolen Bond for which a replacement Bond has been issued, registered and delivered in lieu thereof pursuant to Section 26 hereof and such new replacement Bond shall be deemed to evidence the same obligation as the mutilated, lost, destroyed, or stolen Bond. SECTION 6: Book -Entry Only Transfers and Transactions. Notwithstanding the provisions contained in Sections 3, 4 and 5 hereof relating to the payment, and transfer/exchange of the Bonds, the Corporation hereby approves and authorizes the use of Book -Entry Only" securities clearance, settlement and transfer system provided by The Depository Trust Company (DTC), a limited purpose trust company organized under the laws of the State of New York, in accordance with the operational arrangements referenced in the Blanket Issuer Letter of Representation, by and between the Corporation and DTC (the Depository Agreement'). Pursuant to the Depository Agreement and the rules of DTC, the Bonds shall be deposited with DTC who shall hold said Bonds for its participants (the "DTC Participants"). While the Bonds are held by DTC under the Depository Agreement, the Holder of the Bonds on the Security Register for all purposes, including payment and notices, shall be Cede & Co., as nominee of DTC, notwithstanding the ownership of each actual purchaser or owner of each Bond (the "Beneficial Owners") being recorded in the records of DTC and DTC Participants. In the event DTC determines to discontinue serving as securities depository for the Bonds or otherwise ceases to provide book -entry clearance and settlement of securities 45035982.1 5 transactions in general or the Corporation determines that DTC is incapable of properly discharging its duties as securities depository for the Bonds, the Corporation covenants and agrees with the Holders of the Bonds to cause Bonds to be printed in definitive form and provide for the Bond certificates to be issued and delivered to DTC Participants and Beneficial Owners, as the case may be. Thereafter, the Bonds in definitive form shall be assigned, transferred and exchanged on the Security Register maintained by the Paying Agent/Registrar and payment of such Bonds shall be made in accordance with the provisions of Sections 3, 4 and 5 hereof. SECTION 7: Execution - Registration. The Bonds shall be executed on behalf of the Corporation by the President of the Board of Directors under its seal reproduced or impressed thereon and attested by the Secretary of the Board of Directors of the Corporation. The signature of said officers on the Bonds may be manual or facsimile. Bonds bearing the manual or facsimile signatures of individuals who are or were the proper officers of the Corporation on the Issue Date shall be deemed to be duly executed on behalf of the Corporation, notwithstanding that such individuals or either of them shall cease to hold such offices at the time of delivery of the Bonds to the initial purchasers and with respect to Bonds delivered in subsequent exchanges and transfers. No Bond shall be entitled to any right or benefit under this Resolution, or be valid or obligatory for any purpose, unless there appears on such Bond either a certificate of registration substantially in the form provided in Section 9C, manually executed by the Comptroller of Public Accounts of the State of Texas or his duly authorized agent, or a certificate of registration substantially in the form provided in Section 9D, manually executed by an authorized officer, employee or representative of the Paying Agent/Registrar, and either such certificate upon any Bond duly signed shall be conclusive evidence, and the only evidence, that such Bond has been duly certified, registered and delivered. SECTION 8: Initial Bond(s). The Bonds herein authorized shall be initially issued either (i) as a single fully registered bond in the total principal amount noted in Section 1 with principal installments to become due and payable as provided in Section 2 hereof and numbered T-1, or (ii) as multiple fully registered bonds, being one bond for each year of maturity in, the applicable principal amount and denomination and to be numbered consecutively from T-1 and upward (hereinafter called the "Initial Bond(s)") and, in either case, the Initial Bond(s) shall be registered in the name of the initial purchaser(s) or the designee thereof. The Initial Bond(s) shall be the Bonds submitted to the Office of the Attorney General of the State of Texas for approval, certified and registered by the Office of the Comptroller of Public Accounts of the State of Texas and delivered to the initial purchaser(s). Any time after the delivery of the Initial Bond(s), the Paying Agent/Registrar, pursuant to written instructions from the initial purchaser(s), or the designee thereof, shall cancel the Initial Bond(s) delivered hereunder and exchange therefor definitive Bonds of authorized denominations, Stated Maturities, principal amounts and bearing applicable interest rates for transfer and delivery to the Holders named at the addresses identified therefor; all pursuant to and in accordance with such written instructions from the initial purchaser(s), or the designee thereof, and such other information and documentation as the Paying Agent/Registrar may reasonably require. SECTION 9: Forms. A. Forms Generally. The Bonds, the Registration Certificate of the Comptroller of Public Accounts of the State of Texas (to be printed on the Initial Bond(s) only), the Certificate of Registration, and the form of Assignment to be printed on each of the Bonds, shall be substantially in the forms set forth in this Section with such appropriate insertions, omissions, substitutions, and other variations as are permitted or required by this Resolution and may have such letters, numbers, or other marks of identification (including 45035982.1 6 identifying numbers and letters of the Committee on Uniform Securities Identification Procedures of the American Bankers Association) and such legends and endorsements including insurance legends on insured Bonds and any reproduction of an opinion of counsel) thereon as may, consistently herewith, be established by the Board of Directors- of the Corporation or determined by the officers executing such Bonds as evidenced by the execution thereof. Any portion of the text of any Bonds may be set forth on the reverse thereof, with an appropriate reference thereto on the face of the Bond. The Bonds, including the Initial Bond(s), shall be typewritten, printed, lithographed, or engraved or produced in any other similar manner, all as determined by the officers executing such Bonds as evidenced by their execution thereof. B. Form of Bond. REGISTERED NO. REGISTERED UNITED STATES OF AMERICA STATE OF TEXAS SOUTHLAKE PARKS DEVELOPMENT CORPORATION SALES TAX SUBORDINATE LIEN REVENUE BOND, SERIES 2001 Issue Date: Interest Rate: Stated Maturity: CUSIP NO: May 15, 2001 Registered Owner: Principal Amount: DOLLARS The Southlake Parks Development Corporation (hereinafter referred to as the Corporation"), a non-profit industrial development corporation organized and existing under the laws of the State of Texas, including Section 413 of Article 5190.6, Tex. Rev. Civ. St. Ann., as amended, (the "Act"), with its principal office located in Tarrant County, Texas, for value received, hereby promises to pay to the order of the Registered Owner named above, or the registered assigns thereof, solely from the revenues and sources pledged under the Resolution identified below, the Principal Amount stated above (or so much thereof as shall not have been paid upon prior redemption) on the Stated Maturity date specified above and to pay interest computed on the basis of a 360 -day year of twelve 30 -day months) on the unpaid Principal Amount hereof from the Issue Date at the per annum rate of interest specified above; such interest being payable on February 15 and August 15 of each year, commencing August 15, 2001. Principal of this Bond is payable at its Stated Maturity or redemption to the registered owner hereof[, upon presentation and surrender, at the Designated Payment/Transfer Office of the Paying Agent/Registrar executing the registration certificate appearing hereon, or its successor]'; provided, however, while this Bond is registered to Cede & Co., the payment of principal upon a partial redemption of the principal amount hereof may be accomplished without presentation and surrender of this Bond. Interest is payable to the registered owner of this Language in brackets to be omitted in the Initial Bond and the following language insert: by The Chase Manhattan Bank (the "Paying Agent/Registrar'), upon presentation and surrender at its designated offices in Dallas, Texas (the "Designated Payment/Transfer Office")" 45035982.1 7 Bond (or one or more Predecessor Bonds, as defined in the resolution hereinafter referenced) whose name appears on the "Security Register" maintained by the Paying Agent/Registrar at the close of business on the "Record Date", which is the last business day of the month next preceding each interest payment date and interest shall be paid by the Paying Agent/Registrar by check sent United States Mail, first class postage prepaid, to the address of the registered owner recorded in the Security Register or by such other method, acceptable to the Paying Agent/Registrar, requested by, and at the risk and expense of, the registered owner. All payments of principal of, premium, if any, and interest on this Bond shall be without exchange or collection charges to the owner hereof and in any coin or currency of the United States of America which at the time of payment is legal tender for the payment of public and private debts. This Bond is one of the series specified in its title issued in the aggregate principal amount of $4,690,000 (herein referred to as the "Bonds") to finance the costs of purchasing land and making improvements thereto for neighborhood parks and making additional improvements to existing park land, including related road and streets improvements that enhance such park facilities, in conformity with the Constitution and laws of the State of Texas, including the Act, and pursuant to a Resolution adopted by the governing body of the Corporation (herein referred to as the "Resolution"). The Bonds shall be subject to mandatory redemption prior to maturity at the redemption price of par and accrued interest to the date of redemption on the respective dates and in principal amounts as follows: Redemption Date Principal Amount August 15, 2025 560,000 August 15, 2026 590,000 August 15, 2027 620,000 August 15, 2028 660,000 August 15, 2029 695,000 August 15, 2030 730,000 The particular Bonds to be redeemed on each redemption date shall be chosen by lot by the Paying Agent/Registrar; provided, however, that the principal amount of Bonds required to be redeemed pursuant to the operation of such mandatory redemption provisions may be reduced, at the option of the Corporation, by the principal amount of Bonds which, at least 50 days prior to a mandatory redemption date, (1) shall have been acquired by the Corporation at a price not exceeding the principal amount of such Bonds plus accrued interest to the date of purchase thereof, and delivered to the Paying Agent/Registrar for cancellation or (2) shall have been redeemed pursuant to the optional redemption provisions appearing below and not theretofore credited against a mandatory redemption requirement. The Bonds are subject to being redeemed prior to their Stated Maturities, at the option of the Corporation, in whole or in part in principal amounts of $5,000 or any integral multiple thereof (and if within a Stated Maturity by lot by the Paying Agent/Registrar), on August 15, 2011 or on any date thereafter at the redemption price of par plus accrued interest thereon to the redemption date. 45035982.1 8 At least thirty days prior to a redemption date, the Corporation shall cause a written notice of such redemption to be sent by United States Mail, first class postage prepaid, to the registered owners of the Bond to be redeemed at the address shown on the Security Register and subject to the terms and provisions relating thereto contained in the Resolution. If a Bond or any portion of its principal sum) shall have been duty called for redemption and notice of such redemption duly given, then upon such redemption date such Bond (or the portion of its principal sum to be redeemed) shall become due and payable, and, if moneys for the payment of the redemption price and the interest accrued on the principal amount to be redeemed to the date of redemption are held for the purpose of such payment by the Paying Agent/Registrar, interest shall cease to accrue and be payable from and after the redemption date on the principal amount of such Bond redeemed. In the event of a portion of the principal amount of a Bond is to be redeemed and the registered owner is someone other than Cede & Co., payment of the redemption price of such principal amount shall be made to the registered owner only upon presentation and surrender of such Bond to the Designated Payment/Transfer Office of the Paying Agent/Registrar, and a new Bond or Bonds of like maturity and interest rate in any authorized denominations provided by the Resolution for the then unredeemed balance of the principal sum thereof will be issued to the registered owner, without charge. If a Bond is selected for redemption, in whole or in part, the Corporation and the Paying Agent/Registrar shall not be required to transfer such Bond to an assignee of the Holder within 45 days of the redemption date therefor; provided, however, such limitation on transferability shall not be applicable to an exchange by the Holder of the unredeemed balance of a Bond redeemed in part. The Bonds are special obligations of the Corporation payable solely from and, together with the Previously Issued Bonds (identified and defined in the Resolution), equally and ratably secured by a lien on and pledge of the "Pledged Revenues" (as defined in the Resolution) of the Corporation, including the receipts from a Sales Tax levied for the benefit of the Corporation pursuant to the Act; provided, however, the lien on and pledge of the "Pledged Revenues" securing the payment of the Bonds is junior and subordinate to the prior lien on and pledge of such Pledged Revenues securing the payment of Priority Bonds (identified and defined in the Resolution)now outstanding and hereafter issued by the Corporation. The Bonds do not constitute a legal or equitable, pledge, charge, lien or encumbrance upon any property of the Corporation or the City of Southlake, Texas (the "City") except with respect to the "Pledged Revenues". This Bond may not be paid in whole or in part from any property taxes raised or to be raised by the City and is not a debt of and does not give rise to a claim for payment against the City, except as to the sales and use tax revenues held by the City and required under the Act to be paid over to the Corporation. Neither the State of Texas, the City or any political corporation, subdivision or agency of the State of Texas shall be obligated to pay this Bond or the interest hereon and neither the faith and credit nor the taxing power of the State, the City or any other political corporation, subdivision or agency thereof is pledged to the payment of the principal of and interest on this Bond except as noted above. Subject to satisfying the terms and conditions prescribed therefor, the Corporation has reserved the right to issue additional revenue obligations payable, in whole or in part, from the Pledged Revenues" and (i) equally and ratably secured by a parity first lien on and,pledge of such "Pledged Revenues" securing the payment of the Priority Bonds currently outstanding or ii) equally and ratably secured by the parity junior lien on and pledge of the "Pledged Revenues" securing the payment of the Previously Issued Bonds and the Bonds. 45035982.1 Reference is hereby made to the Resolution, a copy of which is on file in the Designated Payment/Transfer Office of the Paying Agent/Registrar, and to all of the provisions of which the Holder by the acceptance hereof hereby assents, for definitions of terms; the description of and the nature and extent of the security for the payment of the Bonds; the rights of Holders of the Bonds the terms and conditions for the issuance of additional obligations; the terms and conditions relating to the payment, transfer or exchange of this Bond; the conditions upon which the Resolution may be amended or supplemented with or without the consent of the Holders; the rights, duties, and obligations of the Corporation and the Paying Agent/Registrar; the terms and provisions upon which the encumbrances, pledges, charges and covenants made therein may be discharged; and for the other terms and provisions contained therein. Capitalized terms used herein have the same meanings assigned in the Resolution. This Bond, subject to certain limitations contained in the Resolution, may be transferred on the Security Register only upon its presentation and surrender at the Designated Payment/Transfer Office of the Paying Agent/Registrar, with the Assignment hereon duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Paying Agent/Registrar duly executed by, the registered owner hereof, or his duly authorized agent. When a transfer on the Security Register occurs, one or more new fully registered Bonds of the same Stated Maturity, of authorized denominations, bearing the same rate of interest, and of the same aggregate principal amount will be issued by the Paying Agent/Registrar to the designated transferee or transferees. The Corporation and the Paying Agent/Registrar, and any agent of either, may treat the registered owner hereof whose name appears on the Security Register (i) on the Record Date as the owner entitled to payment of interest hereon, (ii) on the date of surrender of this Bond as the owner entitled to payment of principal hereof at its Stated Maturity or its redemption, in whole or in part, and (iii) on any other date as the owner for all other purposes, and neither the Corporation nor the Paying Agent/Registrar, or any agent of either, shall be affected by notice to the contrary. In the event of non-payment of interest on a scheduled payment date and for thirty (30) days thereafter, a new record date for such interest payment (a "Special Record Date") will be established by the Paying Agent/Registrar, if and when funds for the payment of such interest have been received from the Corporation. Notice of the Special Record Date and of the scheduled payment date of the past due interest (which shall be 15 days after the Special Record Date) shall be sent at least five (5) business days prior to the Special Record Date by United States Mail, first class postage prepaid, to the address of each Holder appearing on the Security Register at the close of business on the last business day next preceding the date of mailing of such notice. It is hereby certified, recited, represented and covenanted that the Corporation is a non-profit industrial development corporation duly organized and legally existing under and by virtue of the Constitution and laws of the State of Texas, including the Act; that all acts, conditions and things required to exist and be done precedent to and in the issuance of the Bonds to render the same lawful and valid special obligations of the Corporation have been properly done, have happened and have been performed in regular and due time, form and manner as required by law; and that due provision has been made for the payment of the principal of and interest on the Bonds from the sources and in the manner provided in the Resolution. In case any provision in this Bond or any application thereof shall be invalid, illegal, or unenforceable, the validity, legality, and enforceability of the remaining provisions and applications shall not in any way be affected or impaired thereby. The terms and provisions of this Bond and the Resolution shall be construed in accordance with and shall be governed by the laws of the State of Texas. 45035982.1 10 IN WITNESS WHEREOF, the Board of Directors of the Corporation has caused this Bond to be duly executed under the official seal of the Corporation as of the Issue Date. ATTEST: Secretary, Board of Directors SEAL) SOUTHLAKE PARKS DEVELOPMENT CORPORATION President, Board of Directors C. "Form of Registration Certificate of Comptroller of Public Accounts to Appear on Initial Bonds only. REGISTRATION CERTIFICATE OF COMPTROLLER OF PUBLIC ACCOUNTS OFFICE OF THE COMPTROLLER ) OF PUBLIC ACCOUNTS ) REGISTER NO. THE STATE OF TEXAS ) I HEREBY CERTIFY that this Bond has been examined, certified as ' to validity and approved by the Attorney General of the State of Texas, and duly registered by the Comptroller of Public Accounts of the State of Texas. WITNESS my signature and seal of office this Comptroller of Public Accounts of the State of Texas SEAL) NOTE TO PRINTER: Do not print on definitive bonds 45035982.1 11 D. Form of Certificate of Paying Agent/Registrar to Appear on definitive Bonds. REGISTRATION CERTIFICATE OF PAYING AGENT/REGISTRAR This Bond has been duly issued and registered in the name of the Registered Owner shown above under the provisions of the within -mentioned Resolution and duly approved, or a Predecessor Bond hereof duly approved, by the Attorney General of the State of Texas and registered by the Comptroller of Public Accounts, as shown by the records of the PayingAgent/Registrar. The designated offices of the Paying Agent/Registrar located in Dallas, Texas, is the Designated Payment/Transfer Office" for this Bond. Registration date: E. Form of Assignment THE CHASE MANHATTAN BANK as Paying Agent/Registrar By Authorized Signature ASSIGNMENT FOR VALUE RECEIVED the undersigned hereby sells, assigns, and transfers unto Print or typewrite name, address, and zip code of transferee:) Social Security or other identifying number ) the within' Bond and all rights thereunder, and hereby irrevocably constitutes and appoints attorney to transfer the within Bond on the books kept for registration thereof, with full power of substitution in the premises. DATED: NOTICE: The signature on this assignment must correspond with the Signature guaranteed: name of the registered owner as it appears on the face of the within Bond in every particular. SECTION 10: Definitions. For all purposes of this Resolution and in particular for clarity with respect to the issuance of the Bonds herein authorized and the pledge and appropriation of revenues to the payment of the Bonds, the following definitions are provided: Act" - The Development Corporation Act of 1979, Vernon's Ann. Civ. St., Art. 5190.6, as amended at any time. 45035982.1 12 Additional Obligations" - Bonds, notes or other evidences of indebtedness which the Corporation reserves the right to issue or enter into, as the case may be, in the future in accordance with the terms and conditions provided in Section 18 hereof and which, together with the Bonds, are equally and ratably secured by a parity pledge of and claim on the Pledged Revenues under the terms of this Resolution and a Supplemental Resolution. Average Annual Debt Service" - That amount which, at the time of computation, is derived by dividing the total amount of Debt Service to be paid over a period of years as the same is scheduled to become due and payable by the number of years taken into account in determining the total Debt Service. Capitalized interest payments provided from proceeds or borrowings of the Corporation shall be excluded in making the aforementioned computation. Board" - The Board of Directors of the Corporation. Bonds" - The "Southlake Parks Development Corporation Sales Tax Subordinate Lien Revenue Bonds, Series 2001", dated May 15, 2001, authorized by this Resolution. City" - The City of Southlake, Texas. Corporation" - The Southlake Parks Development Corporation, a non-profit industrial development corporation organized and existing under and pursuant to the laws of the State of Texas, including Section 4B of the Act, with its principal place of business in Tarrant County, Texas. Debt Service" - As of any particular date of computation, with respect to any obligations and with respect to any period, the aggregate of the amounts to be paid or set aside by the Corporation as of such date or in such period for the payment of the principal of, premium, if any, and interest (to the extent not capitalized) on such obligations; assuming, in the case of obligations without a fixed numerical rate, that such obligations bear, or would have borne, interest at the maximum legal per annum rate applicable to such obligations, and further assuming in the case of obligations required to be redeemed or prepaid as to principal prior to maturity, the principal amounts thereof will be redeemed prior to maturity in accordance with the mandatory redemption provisions applicable thereto. Depository" - A commercial bank or other qualified financial institution eligible and qualified to serve as the custodian of the Corporation's monetary accounts and funds. Fiscal Year"- The twelve month financial accounting period used by the Corporation ending September 30 in each year, or such other twelve consecutive month period established by the Corporation. Government Obligations" - (i) direct noncallable obligations of the United States of America, including obligations the principal of and interest on which are unconditionally guaranteed by the United States of America, (ii) noncallable obligations of an agency or instrumentality of the United States, including 45035982.1 13 obligations unconditionally guaranteed or insured by the agency or instrumentality and on the date of their acquisition or purchase by the Corporation are rated as to investment quality by a nationally recognized investment rating firm not less than AAA or its equivalent and (iii) noncallabie obligations of a state or an agency or a county, municipality, or other political subdivision of a state that have been refunded and on the date of their acquisition or purchase by the Corporation, are rated as to investment quality by a nationally recognized investment rating firm not less than AAA or its equivalent. Gross Sales Tax Revenues" - All of the Sales Tax revenues or receipts due or owing to, or collected or received by or on behalf of the Corporation by the City or otherwise pursuant to Section 4B of the Act and the election held November 2, 1993, less any amounts due and owed to the Comptroller of Public Accounts of the State of Texas as charges for the collection of the Sales Tax or retention by said Comptroller for refunds and to redeem dishonored checks and drafts, to the extent such charges and retention are authorized or required by law. Outstanding" - When used in this Resolution with respect to Bonds or Parity Obligations, as the case may be, means, as of the date of determination, all Bonds and Parity Obligations theretofore sold, issued and delivered by the Corporation, except: 1) those Bonds or Parity Obligations canceled or delivered to the transfer agent or registrar for cancellation in connection with the exchange or transfer of such obligations; 2) those Bonds or Parity Obligations paid or deemed to be paid in accordance with the provisions of Section 25 hereof or similar provisions of any Supplemental Resolution authorizing the issuance of Additional Obligations. 3) those Bonds or Parity Obligations that have been mutilated, destroyed, lost, or stolen and replacement obligations have been registered and delivered in lieu thereof. Parity Obligations" - Collectively, the Previously Issued Bonds, the Bonds and Additional Obligations. Pledged Revenues" - Collectively (i) Gross Sales Tax Revenues from time to time deposited or owing to the Pledged Revenue Fund and (ii) such other money, income, revenue, receipts or other property as may be specifically dedicated, pledged or otherwise encumbered in a Supplemental Resolution for the payment and security of Parity Obligations. Previously Issued Bonds" - The outstanding and unpaid "Southlake Parks Development Corporation Sales Tax Subordinate Lien Revenue Bonds, Series 2000", dated March 1, 2000, originally issued in the principal amount of 4,180,000. Priority Bonds" - The outstanding and unpaid (i) "Southlake Parks Development Corporation Refunding and Improvement Sales Tax Revenue 45035982.1 14 Bonds, Series 1997', dated February Development Corporation Sales Tax April 1, 1999, originally issued in the obligations issued on a parity therewith. 15, 1997, and (ii) "Southlake Parks Revenue Bonds, Series 1999", dated principal amount of $4,655,000 and Required Reserve" - The amount required to be accumulated and maintained in the Reserve Fund under the provisions of Section 14 hereof. Sales Tax" - The local sales and use tax authorized under Section 4B of the Act, approved at an election held on November 2, 1993, and the effective date for the imposition and application of such Sales Tax within the corporate limits of the City by the Comptroller of Public Accounts of the State of Texas being April 1, 1994, together with any increases in the rate of such Sales Tax authorized and provided by law. Supplemental Resolution" -Any resolution of the Board supplementing this Resolution for the purpose of authorizing and providing the terms and provisions of the Bonds or Additional Obligations, or supplementing or amending this Resolution for any other authorized purpose permitted in Section 18 or 25 hereof, including resolutions authorizing the issuance of Additional Obligations or pledging and encumbering income, revenues, receipts or property other than the Gross Sales Tax Revenues to the payment and security of the Parity Obligations. SECTION 11: Pledge. The Corporation hereby covenants and agrees that, subject only to the prior claim on and pledge of the Pledged Revenues to the payment and security of the Priority Bonds (including the establishment and maintenance of the special funds created for the payment and security of such bonds) under the terms and provisions of the resolutions and proceedings pertaining to their authorization, the Pledged Revenues, with the exception of those in excess of the amounts required for the payment and security of the Parity Obligations, are hereby irrevocably pledged to the payment and security of the Previously Issued Bonds, the Bonds and Additional Obligations, if issued, including the establishment and maintenance of the special funds created and established in this Resolution and any Supplemental Resolution, all as hereinafter provided. The Corporation hereby resolves the Parity Obligations shall constitute a lien on the Pledged Revenues in accordance with the terms of this Resolution and any Supplemental Resolution, which lien shall be valid and binding without any further action by the Corporation and without any filing or recording with respect thereto except in the records of the Corporation. SECTION 12: Pledged Revenue Fund. In accordance with the provisions of the resolutions authorizing the issuance of the Priority Bonds and while the Bonds are Outstanding, the Corporation hereby agrees and covenants to maintain a fund or account at a Depository for the deposit of the Pledged Revenues as received by the Corporation, which fund or account shall be known on the books and records of the Corporation as the "Pledged Revenue Fund". All Pledged Revenues deposited to the credit of such Fund shall be accounted for separate and apart from all other revenues, receipts and income of the Corporation and, with respect to the Gross Sales Tax Revenues, the Corporation shall further account for such funds separate and apart from the other Pledged Revenues deposited to the credit of the Pledged Revenue Fund. All Pledged Revenues deposited to the credit of the Pledged Revenue Fund shall be appropriated and expended to the extent required by this Resolution and any Supplemental Resolution for the following uses and in the order of priority shown: 45035982.1 15 I First: To the payment of the amounts required to be deposited in the special funds and accounts maintained for the payment and security of the Priority Bonds; Second: To the payment of the amounts required to be deposited in the Bond Fund for the payment of Debt Service on the Parity Obligations as the same becomes due and payable; Third: To the payment of the amounts required to be deposited in the Reserve Fund to establish and maintain the Required Reserve in accordance with the provisions of this Resolution and any Supplemental Resolution; Fourth: To the payment of amounts required to be deposited in any other fund or account required by any Supplemental Resolution authorizing the issuance of Parity Obligations; and Fifth: To any fund or account held at any place or places, or to any payee, required by any other resolution of the Board which authorized the issuance of obligations or the creation of debt of the Corporation having a lien on the Pledged Revenues subordinate to the lien created herein on behalf of the Parity Obligations. Any Pledged Revenues remaining in the Pledged Revenue Fund after satisfying the foregoing payments, or making adequate and sufficient provision for the payment thereof, may be appropriated and used for any other lawful purpose now or hereafter permitted by law. SECTION 13: Bond Fund. For the purpose of providing funds to pay the principal of and interest on Parity Obligations, the Corporation agrees and covenants to maintain a separate and special account or fund on the books and records of the Corporation known as the "Southlake Parks Development Corporation Subordinate Lien Debt Service Account" (the "Bond Fund"), and all monies deposited to the credit of such Fund shall be held in a special banking fund or account maintained at a Depository of the Corporation. In addition to the deposits for the payment of the Previously Issued Bonds, the Corporation covenants that, after paying or making provision for all priority payments for the Priority Bonds, there shall be deposited into the Bond Fund prior to each principal and interest payment date from the Pledged Revenues an amount equal to one hundred per centum (100%) of the interest on and the principal of the Bonds then falling due and payable, and such deposits to pay principal and accrued interest on the Bonds shall be made in substantially equal monthly installments on or before the 10th day of each month, beginning on or before the 10th day of the month next following the delivery of the Bonds to the initial purchasers. The required deposits to the Bond Fund for the payment of principal of and interest on the Bonds shall continue to be made as hereinabove provided until (i) the total amount on deposit in the Bond Fund and Reserve Fund is equal to the amount required to fully pay and discharge all Parity Obligations (principal and interest) then Outstanding or (ii) the Bonds are no longer Outstanding. SECTION 14: Reserve Fund. (a) General Provisions. The Corporation agrees and covenants to create and maintain on the books and records of the Corporation a separate and special fund or account to be known as the "Subordinate Lien Reserve Account' (the "Reserve Fund"), which fund or account shall be a special banking fund maintained at a Depository. The 45035982.1 16 amounts deposited to the credit of such fund or account shall be used solely for the payment of i) the principal of and interest on the Parity Obligations when (whether at maturity, upon a redemption date or any interest payment date) other funds available for such purposes are insufficient, (ii) the amounts required to restore or replenish in full the surety bond coverage afforded by a surety bond representing all or a portion of the Required Reserve, and, in addition, may be used to the extent not required to maintain the "Required Reserve", to pay, or provide for the payment of, the final principal amount of a series of Parity Obligations so that such series of Parity Obligations is no longer deemed to be "Outstanding" as such term is defined herein. The Required Reserve shall be established and maintained with Pledged Revenues, the proceeds of sale of Parity Obligations or by depositing to the credit of the Reserve Fund one or more surety bonds issued by a company or institution having a rating in the highest rating category by two nationally recognized rating agencies or services, or any combination thereof. In accordance with the provisions of the resolution authorizing the issuance of the Previously Issued Bonds, the amount currently on deposit to the credit of the Reserve Fund is 302,900 (the "Current Reserve") which amount is fully funded with a surety obligation issued by Ambac Assurance Corporation. As a result of the issuance. of the Bonds, the Required Reserve is hereby recalculated and determined to be $1,184,660, and the Corporation hereby covenants and agrees to cause any deficiency in the Required Reserve to be funded in full on the date of the delivery of the Bonds with available Pledged Revenues, the proceeds of sale of Bonds or by depositing to the credit of the Reserve Fund one ,or more surety bonds issued by a company or institution having a rating in the highest rating category by two nationally recognized rating agencies or services, or any combination thereof. On the date the Bonds are delivered to the initial purchasers, the Corporation shall deposit to the credit of the Reserve Fund an additional surety bond provided by Ambac Assurance Corporation ("Ambac") with surety bond coverage in an amount equal to the difference between the Required Reserve and the Current Reserve. As and when Additional Obligations are delivered or incurred, the Required Reserve shall be increased, if required, to an amount equal to the lesser of either (i) the maximum annual Debt Service (calculated on a Fiscal Year basis) for all Parity Obligations then Outstanding after giving effect to the issuance of the Additional Obligations), as determined on the date each series of Additional Obligations are delivered or incurred, as the case may be, or (ii) the maximum amount that can be invested without restriction as to yield in a reasonably required reserve fund pursuant to Subsection (d) of Section 148 of the Internal Revenue Code of 1986, as amended, and regulations promulgated thereunder. Any additional amount required to be maintained in the Reserve Fund shall be accumulated (i) by depositing to the credit of the Reserve Fund (immediately after the delivery of the then proposed Additional Obligations) cash or an additional surety bond or revised surety bond with surety bond coverage in an amount sufficient to provide for the new Required Reserve to be fully or partially funded, or (ii) at the option of the Corporation, by making monthly deposits from funds in the Pledged Revenue Fund, after paying or making provision for all priority payments for the Priority Bonds, on or before the 10th day of each month following the month of delivery of the then proposed Additional Obligations, of not less than 1/36th of the additional amount to be maintained in said Fund by reason of the issuance of the Additional Obligations then being issued (or 1/36th of the balance of the additional amount not deposited immediately in cash or provided by a surety bond). While the cash and investments and/or surety bond coverage in the Reserve Fund total not less than the Required Reserve, no deposits need be made to the credit of the Reserve Fund. Should the Reserve Fund at any time contain less than the Required Reserve (or so 45035982.1 17 much thereof as shall then be required to be contained therein if Additional Obligations have been issued and the Corporation has elected to accumulate all or a portion of the Required Reserve with Pledged Revenues) or should the Corporation be obligated to repay or reimburse an issuer of a surety bond to replenish and restore the full amount of surety bond coverage provided by a surety bond held for the account of the Reserve Fund, the Corporation covenants and agrees to cause monthly deposits to be made to the Reserve Fund on or before the 10th day of each month (beginning the month next following the month the deficiency in the Required Reserve occurred by reason of a draw on the Reserve Fund or as a result of a reduction in the market value of investments held for the account of the Reserve Fund) from Pledged Revenues in an amount equal to (i) 1/36th of the Required Reserve until the total Required Reserve then required to be maintained in said Fund has been fully restored or (ii) the amounts required to be reimbursed and repaid to the issuer of the surety bond in the event of a draw upon a surety bond. The Corporation further covenants and agrees that the Pledged Revenues shall be applied and appropriated and used to establish and maintain the Required Reserve and to cure any deficiency in such amounts as required by the terms of this Resolution and any Supplemental Resolution. During such time as the Reserve Fund contains the total Required Reserve, the Corporation may, at its option, withdraw any amount in the Reserve Fund in excess of the Required Reserve and deposit such surplus in the Bond Fund. b) Surety Obligation Provisions. As noted above, the Required Reserve to be accumulated and maintained in the Reserve Fund by reason of the issuance of the Bonds is initially to be provided by a Municipal Bond Debt Service Reserve Insurance Policy" issued by Ambac Indemnity Corporation, a Wisconsin domiciled stock insurance company (hereinafter referred to as "Ambac") with surety bond coverage in the maximum amount of the Required Reserve (the "Surety Obligation"). In accordance with Ambac 's terms for the issuance of such Surety Obligation, it is hereby expressly provided: i) Any provision of this Resolution expressly recognizing or granting rights in or to Ambac may not be amended in any manner which affects the rights of Ambac hereunder without the prior written consent of Ambac. ii) Unless otherwise provided in this Section, Ambac 's consent shall be required in addition to the consent of the Holders of the Bonds, when required, for the following purposes: (A) execution and delivery of any supplement to this Resolution; (B) removal of the Paying Agent/Registrar or selection and appointment of any successor paying agent; and (C) initiation or approval of any action not described in (A) or (B) above which requires consent of the Holders of the Bonds. iii) While the Surety Obligation is in effect, the Corporation or the Paying Agent/Registrar, as appropriate, shall furnish to Ambac: A) as soon as practicable after the filing thereof, a copy of any audited financial statement of the Corporation and a copy of any audit and annual report of the Corporation; B) a copy of any notice to be given to the registered owners of the Bonds and any certificate rendered pursuant to this Resolution relating to the security for the Bonds; and 45035982.1 18 C) such additional information it may reasonably request. iv) The Corporation will permit Ambac to discuss the affairs, finances and accounts of the Corporation or any information Ambac may reasonably request regarding the security for the Bonds with appropriate officers of the Corporation. The Paying Agent/Registrar or Corporation, as appropriate, will permit Ambac to have access to and to make copies, at Ambac's expense, of all books and records relating to the Bonds at any reasonable time. v) Notwithstanding any other provision of this Resolution, the Paying Agent/Registrar shall immediately notify Ambac if at any time there is insufficient money to make any payments of principal and interest as required and immediately upon the occurrence of (A) any event of default under this Resolution or (B) any payment default under any related security agreement. vi) To the extent that the Corporation enters into a continuing disclosure agreement with respect to the Bonds, Ambac shall be included as party to be notified. vii) As long as the Surety Obligation shall be in full force and effect, the Corporation and the Paying Agent/Registrar, if appropriate, agree to comply with the following provisions: A) In the event and to the extent that money on deposit inthe Bond Fund, plus all amounts on deposit in and credited to the Reserve Fund in excess of the amount of the Surety Obligation, are insufficient to pay the amount of principal and interest coming due, then upon the later of: (i) one (1) day after receipt by the General Counsel of Ambac of a demand for payment in the form attached to the Surety Obligation as Attachment 1 (the "Demand for Payment"), duly executed by the Paying Agent/Registrar certifying that payment due under the Resolution has not been made to the Paying Agent/Registrar; or (ii) the payment date of the Obligations as specified in the Demand for Payment presented by the Paying Agent/Registrar to the General Counsel of Ambac, Ambac will make a deposit of funds in an account with the Paying Agent/Registrar or its successor, in New York, New York, sufficient for the payment to the Paying Agent/Registrar, of amounts which are then due to the Paying Agent/Registrar under the Resolution (as specified in the Demand for Payment) up to but not in excess of the "Surety Obligation Coverage", as defined in the Surety Obligation; provided, however, that in the event that the amount on deposit in, or credit to, the Reserve Fund, in addition to the amount available under the Surety Obligation, includes amounts available under a letter of credit, insurance policy, Surety Obligation or other such funding instrument (the Additional Funding Instrument"), draws on the Surety Obligation and the Additional Funding Instrument shall be made on a pro rata basis to fund the insufficiency. B) the Paying Agent/Registrar, if appropriate, shall, after submitting to Ambac the Demand for Payment as provided in subparagraph (vii)(A) above, make available to Ambac all records relating to the funds and accounts maintained under this Resolution. 45035982.1 19 C) the Paying Agent/Registrar, if appropriate, shall, upon receipt of money received from the draw on the Surety Obligation, as specified in the Demand for Payment, credit the Reserve Fund to the extent of money received pursuant to such Demand for Payment. D) the Reserve Fund shall be replenished in the following priority: (i) principal and interest on the Surety Obligation shall be paid from first available Pledged Revenues or principal and interest on the Surety Obligation and on the Additional Funding Instrument shall be paid from first available Pledged Revenues on a pro rata basis; (ii) after all such amounts are paid in full, amounts necessary to fund the Reserve Fund to the required level, after taking into account the amounts available under the Surety Obligation and the Additional Funding Instrument shall be deposited from next available Pledged Revenues. Furthermore, the "Guaranty Agreement' (the "Guaranty Agreement') by and between the Corporation and Ambac, attached hereto as Exhibit B and incorporated herein by reference as a part of this Resolution for all purposes, is hereby approved as to form and content, and such Guaranty Agreement in substantially the form and substance attached hereto, together with such changes or revisions as may be necessary to comply with Texas law, is hereby authorized to be executed by the President of the Board of Directors of the Corporation for and on behalf of the Corporation and as the act and deed of this Board of Directors; and such Guaranty Agreement as executed by said officials shall be deemed approved by the Board of Directors and constitute the Guaranty Agreement herein approved. Unless otherwise provided herein, the terms capitalized in this Section relating to the Surety Obligation and the Guaranty Agreement shall have the meanings specified in Guaranty Agreement. SECTION 15: Deficiencies. If on any occasion there shall not be sufficient Pledged Revenues to make the required deposits into the Bond Fund or Reserve Fund, such deficiency shall be cured as soon as possible from the next available Pledged Revenues, or from any other sources available for such purpose. SECTION 16: Payment of Bonds. While any of the Bonds are Outstanding, the Treasurer of the Corporation (or other designated financial officer of the Corporation) shall cause to be transferred to the Paying Agent/Registrar, from funds on deposit in the Bond Fund, and, if necessary, in the Reserve Fund, amounts sufficient to fully pay and discharge promptly as each installment of interest and principal of the Bonds accrues or matures; such transfer of funds to be made in such manner as will cause immediately available funds to be deposited with the Paying Agent/Registrar for the Bonds at the close of the business day next preceding the date of payment for the Bonds. SECTION 17: Investments - Security of Funds. (a) Money in any Fund required to be maintained pursuant to this Resolution may, at the option of the Corporation, be invested in obligations and in the manner prescribed by the Public Funds Investment Act (V.T.C.A., Government Code, Chapter 2256), including investments held in book -entry form; provided that all such deposits and investments shall be made in such a manner that the money required to be expended from any Fund will be available at the proper time or times and provided further the maximum stated maturity for any investment acquired with money deposited to the credit of the Reserve Fund shall be limited to five (5) years from the date of the investment of such money. Such investments shall be valued in terms of current market value within 45 days of the close of each Fiscal Year and, with respect to investments held for the account of the Reserve Fund, within 45 days of the date of passage of each authorizing document of the Board 45035982.1 20 pertaining to the issuance of Additional Obligations. All interest and income derived from deposits and investments in the Bond Fund immediately shall be credited to, and any losses debited to, the appropriate account of the Bond Fund. All interest and interest income derived from deposits in and investments of the Reserve Fund shall, subject to the limitations provided in Section 14 hereof, be credited to and deposited in the Pledged Revenue Fund. All _such investments shall be sold promptly when necessary to prevent any default in connection with the Parity Obligations. b) Money deposited to the credit of the Pledged Revenue Fund, Bond Fund and Reserve Fund, to the extent not invested and not otherwise insured by the Federal Deposit Insurance Corporation or similar agency, shall be secured by a pledge of direct obligations of the United States of America, or obligations unconditionally guaranteed by the United States of America. SECTION 18: Issuance of Additional Parity Obligations. Subject to the provisions hereinafter appearing as to conditions precedent which must be satisfied, the Corporation reserves the right to issue, from time to time as needed, Additional Obligations for any lawful purpose. Such Additional Obligations may be issued in such form and manner as the Corporation shall determine, provided, however, prior to issuing or incurring such Additional Obligations, the following conditions precedent for the authorization and issuance of the same are satisfied, to wit: 1) The Treasurer of the Corporation (or other officer of the Corporation then having the primary responsibility for the financial affairs of the Corporation) shall have executed a certificate stating that, to the best of his or her knowledge and belief, the Corporation is not then in default as to any covenant, obligation or agreement contained in the Resolution or a Supplemental Resolution. 2) The Corporation has secured from a certified public accountant a certificate or opinion to the effect that, according to the books and records of the Corporation, the Gross Sales Tax Revenues received by the Corporation for either (i) the last completed Fiscal Year next preceding the adoption of the Supplemental Resolution authorizing the issuance of the proposed Additional Obligations or (ii) any twelve (12) consecutive months out of the previous eighteen (18) months next preceding the adoption of the Supplemental Resolution authorizing the Additional Obligations were equal to not less than 1.25 times the maximum annual Debt Service for all Priority Bonds and Parity Obligations then Outstanding and after giving effect to the issuance of the Additional Obligations then being issued. Additionally, for the purpose of providing this certificate or opinion, if the Corporation shall not have received Gross Sales Tax Revenues for a full 12 month period, one-half of the amount of sales tax revenues actually received by the City under Chapter 321, TEX.TAX CODE, may be used for the months during which the Corporation did not receive Gross Sales Tax Revenues. 3) The Required Reserve to be accumulated and maintained in the Reserve Fund is increased to the extent required by Section 14. SECTION 19: Refunding Bonds. The Corporation reserves the right to issue refunding bonds to refund all or any part of the Parity Obligations (pursuant to any law then available) 45035982.1 21 upon such terms and conditions as the Board may deem to be in the best interest of the Corporation, and if less than all such Parity Obligations then Outstanding are refunded, the conditions precedent prescribed (for the issuance of Additional Obligations) set forth in Section 18 hereof shall be satisfied, and shall give effect to the refunding. SECTION 20: Right to Issue Additional Priority Bonds - Right to Create Subordinate Debt. The Corporation expressly reserves the right to issue Priority Bonds, without limitation as to principal amount or complying with any terms and conditions contained in this Resolution, but subject to any terms, conditions or restrictions applicable thereto under law or otherwise. Furthermore, except as may be limited by a Supplemental Resolution, the Corporation hereby expressly retains the right to issue or create obligations payable from and secured by a lien on all or any part of the Pledged Revenues for any lawful purpose without complying with the provisions of Section 18 or 19 hereof, provided the pledge and the lien securing the payment of such obligations is junior and subordinate to the lien and pledge securing the payment of the Parity Obligations. SECTION 21: Confirmation and Levy of Sales Tax. (a) The Board hereby represents the City has duly complied with the provisions of the Act for the levy of the Sales Tax at the rate voted at the election held by and within the City on November 2, 1993, and such Sales Tax is being imposed within the corporate limits of the City and the receipts of such Sales Tax are being remitted to the City by the Comptroller of Public Accounts on a monthly basis. b) While any Bonds are Outstanding, the Corporation covenants, agrees and warrants to take and pursue all action permissible to cause the Sales Tax, at said rate or at a higher rate if legally permitted, to be levied and collected continuously, in the manner and to the maximum extent permitted by law, and to cause no reduction, abatement or exemption in the Sales Tax or rate of tax below the rate stated, confirmed and ordered in subsection (a) of this Section to be ordered or permitted while any Bonds shall remain Outstanding. c) If hereafter authorized by law to apply, impose and levy the Sales Tax on any taxable items or transactions that are not subject to the Sales Tax on the date of the adoption hereof, to the extent it legally may do so, the Corporation agrees to use its best efforts to cause the City to take such action as may be required to subject such taxable items or transactions to the Sales Tax. d) The Corporation agrees to take and pursue all action legally permissible to cause the Sales Tax to be collected and remitted and deposited as herein required and as required by Section 4B of the Act, at the earliest and most frequent times permitted by law. e) The Corporation agrees to use its best efforts to cause the City to comply with Section 4B of the Act and shall cause the Gross Sales Tax Revenues to be deposited to the credit of the Pledged Revenue Fund in their entirety immediately upon receipt by the City. In the alternative and if legally authorized, the Corporation shall, by appropriate notice, direction, request or other legal method, use its good -faith efforts to cause the Comptroller of Public Accounts of the State of Texas (the "Comptroller") to pay all Gross Sales Tax Revenues directly to the Corporation for deposit to the Pledged Revenue Fund. SECTION 22: Records and Accounts. The Corporation hereby covenants and agrees that while any of the Bonds are Outstanding, it will keep and maintain complete records and accounts in accordance with generally accepted accounting principles, and following the close of each Fiscal Year, it will cause an audit of such books and accounts to be made by an 45035982.1 22 independent firm of certified public accountants. Each such audit, in addition to whatever other matters may be thought proper by the accountant, shall particularly include the following: 1) A statement in reasonable detail regarding the receipt and disbursement of the Pledged Revenues for such Fiscal Year; and 2) A balance sheet for the Corporation as of the end of such Fiscal Year. Such annual audit of the records and accounts of the Corporation shall be in the form of a report and be accompanied by an opinion of the accountant to the effect that such examination was made in accordance with generally accepted auditing standards and contain a statement to the effect that in the course of making the examination necessary for the report and opinion, the accountant obtained no knowledge of any default of the Corporation on the Bonds or in the fulfillment of any of the terms, covenants or provisions of this Resolution, or under any other evidence of indebtedness, or of any event which, with notice or lapse of time, or both, would constitute a failure of the Corporation to comply with the provisions of this Resolution or if, in the opinion of the accountants, any such failure to comply with a covenant or agreement hereof, a statement as to the nature and status thereof shall be included. Copies of each annual audit report shall be furnished upon written request, to any Holders of any of said Bonds. The audits herein required shall be made within 120 days following the close of each Fiscal Year insofar as is possible. The Holders of any Bonds or any duly authorized agent or agents of such Holders shall have the right to inspect such records, accounts and data of the Corporation during regular business hours. SECTION 23: Representations as to Security for the Bonds. (a) The Corporation represents and warrants that, except for the Priority Bonds and the Parity Obligations, the Pledged Revenues are and will be and remain free and clear of any pledge, lien, charge or encumbrance thereon or with respect thereto prior to, or of equal rank with, the pledge and lien created in or authorized by this Resolution except as expressly provided herein. b) The Bonds and the provisions of this Resolution are and will be the valid and legally enforceable obligations of the Corporation in accordance with their terms and the terms of this Resolution, subject only to any applicable bankruptcy or insolvency laws or to any laws affecting creditors rights generally. c) The Corporation shall at all times, to the extent permitted by law, defend, preserve and protect the pledge of the Pledged Revenues and all the rights of the Holders against all claims and demands of all persons whomsoever. d) The Corporation will take, and use its best efforts to cause the City to take, all steps reasonably necessary and appropriate to collect all delinquencies in the collection of the Sales Tax to the fullest extent permitted by the Act. e) The provisions, covenants, pledge and lien on and against the Pledged Revenues, as herein set forth, are established and shall be for the equal benefit, protection and security of the owners and holders of Parity Obligations without distinction as to priority and rights under this Resolution. 45035982.1 23 M The Parity Obligations shall constitute special obligations of the Corporation, payable solely from, and equally and ratably secured by a parity pledge of and lien on, the Pledged Revenues, and not from any other revenues, properties or income of the Corporation; such pledge of and lien on the Pledged Revenues being junior and subordinate to the pledge of and lien on the Pledged Revenues securing the payment of the Priority Bonds. The Bonds may not be paid in whole or in part from any property taxes raised or to be raised by the City and shall not constitute debts or obligations of the State or of the City, and the Holders, shall never have the right to demand payment out of any funds raised or to be raised by any system of ad valorem taxation. SECTION 24: Satisfaction of Obligation of Corporation. If the Corporation shall pay or cause to be paid, or there shall otherwise be paid to the Holders, the principal of, premium, if any, and interest on the Bonds, at the times and in the manner stipulated in this Resolution, then the pledge of the Pledged Revenues under this Resolution and all other obligations of the Corporation to the Holders shall thereupon cease, terminate, and be discharged and satisfied. Bonds or any principal amount(s) shall be deemed to have been paid within the meaning and with the effect expressed above in this Section when (i) money sufficient to pay in full such Bonds at maturity or to the redemption date therefor, together with all interest due thereon, shall have been irrevocably deposited with and held in trust by the Paying Agent/Registrar, or an authorized escrow agent, or (ii) Government Obligations shall have been irrevocably deposited in trust with the Paying Agent/Registrar, or an authorized escrow agent, which Government Obligations have been certified by an independent accounting firm to mature as to principal and interest in such amounts and at such times as will insure the availability, without reinvestment, of sufficient money, together with any moneys deposited therewith, if any, to pay when due the Bonds on the Stated Maturities thereof or (if notice of redemption has been duly given or waived or if irrevocable arrangements therefor accepted to the Paying Agent/Registrar have been made) the redemption date thereof. The Corporation covenants that no deposit of moneys or Government Obligations will be made under this Section and no use made of any such deposit which would cause the Bonds to be treated as "arbitrage bonds" within the meaning of Section 148 of the Internal Revenue Code of 1986, as amended, or regulations adopted pursuant thereto. Any moneys so deposited with the Paying Agent/ Registrar, or an authorized escrow agent, and all income from Government Obligations held in trust by the Paying Agent/Registrar, or an authorized escrow agent, pursuant to this Section in excess of the amount required for the payment of the Bonds shall be remitted to the Corporation or deposited as directed by the Corporation. Furthermore, any money held by the Paying Agent/Registrar for the payment of the principal of and interest on the Bonds and remaining unclaimed for a period of three (3) years after the Stated Maturity, or applicable redemption date, of the Bonds such moneys were deposited and are held in trust to pay shall, upon the request of the Corporation, be remitted to the Corporation against a written receipt therefor. Notwithstanding the above and foregoing, any remittance of funds from the Paying Agent/Registrar to the Corporation shall be subject to any applicable unclaimed property laws of the State of Texas. SECTION 25: Resolution a Contract - Amendments. This Resolution shall constitute a contract with the Holders from time to time, be binding on the Corporation, and shall not be amended or repealed by the Corporation while any Bond .remains Outstanding except as permitted in this Section. The Corporation, may, without the consent of or notice to any Holders, from time to time and at any time, amend this Resolution in any manner not detrimental to the interests of the Holders, including the curing of any ambiguity, inconsistency, or formal 45035982.1 24 defect or omission herein. In addition, the Corporation may, with the written consent from the owners holding a majority in aggregate principal amount of the Parity Obligations then Outstanding affected thereby, amend, add to, or rescind any of the provisions of this Resolution; provided that, without the written consent of all Holders of Outstanding Bonds effected, no such amendment, addition, or rescission shall (1) extend the time or times of payment of the principal of, premium, if any, and interest on the Bonds, reduce the principal amount thereof, the redemption price therefor, or the rate of interest thereon, or in any other way modify the terms of payment of the principal of, premium, if any, or interest on the Bonds, (2) give any preference to any Bond over any other Bond, or (3) reduce the aggregate principal amount of Bonds or Parity Obligations, as the case may be, required to be held for consent to any such amendment, addition, or rescission. SECTION 26:.Mutilated - Destroyed - Lost and Stolen Bonds. In case any Bond shall be mutilated, or destroyed, lost or stolen, the Paying Agent/Registrar may execute and deliver a replacement Bond of like form and tenor, and in the same denomination and bearing a number not contemporaneously outstanding, in exchange and substitution for such mutilated Bond, or in lieu of and in substitution for such destroyed, lost or stolen Bond, only upon the approval of the Corporation and after (i) the filing by the Holder thereof with the Paying Agent/Registrar of evidence satisfactory to the Paying Agent/Registrar of the destruction, loss or theft of such Bond, and of the authenticity of the ownership thereof and (ii) the furnishing to the Paying Agent/Registrar of indemnification in an amount satisfactory to hold the Corporation and the Paying Agent/Registrar harmless. All expenses and charges associated with such indemnity and with the preparation, execution and delivery of a replacement Bond shall be borne by the Holder of the Bond mutilated, or destroyed, lost or stolen. Every new Bond issued pursuant to this Section in lieu of any mutilated, destroyed, lost, or stolen Bond shall constitute a replacement of the prior obligation of the Corporation, whether or not the mutilated, destroyed, lost, or stolen Bond shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Resolution equally and ratably with all other Outstanding Bonds. SECTION 27: Covenants Regarding Tax -Exempt Status. a) Definitions. When used in this Section 27, the following terms have the following meanings: Closing Date" means the date on which the Bonds are first authenticated and delivered to the initial purchasers against payment therefor. Code" means the Internal Revenue Code of 1986, as amended by all legislation, if any, effective on or before the Closing Date. Computation Date" has the meaning set forth in Section 1.148-1(b) of the Regulations. Gross Proceeds" means any proceeds as defined in Section 1.148-1(b) of the Regulations, and any replacement proceeds as defined in Section 1.148-1(c) of the Regulations, of the Bonds. Investment" has the meaning set forth in Section 1.148-1(b) of the Regulations. 45035982.1 25 Nonpurpose Investment" means any investment property, as defined in section 148(b) of the Code, in which Gross Proceeds of the Bonds are invested and which is not acquired to carry out the governmental purposes of the Bonds. Rebate Amount" has the meaning set forth in Section 1.148-1(b) of the Regulations. Regulations" means any proposed, temporary, or final Income Tax Regulations issued pursuant to Sections 103 and 141 through 150 of the Code, and 103 of the Internal Revenue Code of 1954, which are applicable to the Bonds. Any reference to any specific Regulation shall also mean, as appropriate, any proposed, temporary or final Income Tax Regulation designed to supplement, amend or replace the specific Regulation referenced. Yield" of (1) any Investment has the meaning set forth in Section 1.148-5 of the Regulations and (2) the Bonds has the meaning set forth in Section 1.148- 4 of the Regulations. b) Not to Cause Interest to Become Taxable. The Corporation shall not use, permit the use of, or omit to use Gross Proceeds or any other amounts (or any property the acquisition, construction or improvement of which is to be financed directly or indirectly with Gross Proceeds) in a manner which if made or omitted, respectively, would cause the interest on any Bond to become includable in the gross income, as defined in section 61 of the Code, of the owner thereof for federal income tax purposes. Without limiting the generality of the foregoing, unless and until the Corporation receives a written opinion of counsel nationally recognized in the field of municipal bond law to the effect that failure to comply with such covenant will not adversely affect the exemption from federal income tax of the interest on any Bond, the Corporation shall comply with each of the specific covenants in this Section. c) No Private Use or Private Payments. The Bonds are being issued to finance the costs of the Projects for and on behalf of the City, a political subdivision of the State of Texas and, in connection therewith, the City and the Corporation will execute an agreement relating to the ownership, operation and maintenance of the Projects while the Bonds are outstanding and unpaid, which agreement provides that, except as permitted by section 141 of the Code and the Regulations and rulings thereunder, the Projects shall at all times prior to the last Stated Maturity of Bonds: 1) be exclusively owned, operated and maintained by the City, and prohibits the City from using or permitting the use of such Gross Proceeds or any property acquired, constructed or improved with such Gross Proceeds in any activity carried on by any person or entity other than a state or local government, unless such use is solely as a member of the general public; and 2) prohibits the City from directly or indirectly imposing or accepting any charge or other payment for use of Gross Proceeds of the Bonds or for any property the acquisition, construction or improvement of which is to be financed or refinanced directly or indirectly with such Gross Proceeds, other than taxes of general application within the City or interest earned on investments acquired with such Gross Proceeds pending application for their intended purposes. 45035982.1 26 d) No Private Loan. Except to the extent permitted by section 141 of the Code and the Regulations and rulings thereunder, the Corporation shall not use Gross Proceeds of the Bonds to make or finance loans to any person or entity other than a state or local government. For purposes of the foregoing covenant, such Gross Proceeds are considered to be "loaned" to a person or entity if: (1) property acquired, constructed or improved with such Gross Proceeds is sold or leased to such person or entity in a transaction which creates a debt for federal income tax purposes; (2) capacity in or service from such property is committed to such person or entity under a take -or -pay, output or similar contract or arrangement; or (3) indirect benefits, or burdens and benefits of ownership, of such Gross Proceeds or any property acquired, constructed or improved with such Gross Proceeds are otherwise transferred in a transaction which is the economic equivalent of a loan. e) Not to Invest at Higher Yield. Except to the extent permitted by section 148 of the Code and the Regulations and rulings thereunder, the Corporation shall not at any time prior to the final Stated Maturity of the Bonds directly or indirectly invest Gross Proceeds in any Investment (or use Gross Proceeds to replace money so invested), if as a result of such investment the Yield from the Closing Date of all Investments acquired with Gross Proceeds (or with money replaced thereby), whether then held or previously disposed of, exceeds the Yield of the Bonds. f) Not Federally Guaranteed. Except to the extent permitted by section 149(b) of the Code and the Regulations and rulings thereunder, the Corporation shall not take or omit to take any action which would cause the Bonds to be federally guaranteed within the meaning of section 149(b) of the Code and the Regulations and rulings thereunder. g) Information Report The Corporation shall timely file the information required by section 149(e) of the Code with the Secretary of the Treasury on Form 8038-G or such other form and in such place as the Secretary may prescribe. h) Rebate of Arbitrage Profits. Except to the extent otherwise provided in section 148(f) of the Code and the Regulations and rulings thereunder: 1) The Corporation and the City shall account for all Gross Proceeds including all receipts, expenditures and investments thereof) on its books of account separately and apart from all other funds (and receipts, expenditures and investments thereof) and shall retain all records of accounting for at least six years after the day on which the last Outstanding Bond is discharged. However, to the extent permitted by law, the Corporation may commingle Gross Proceeds of the Bonds with other money of the Corporation, provided that the Corporation separately accounts for each receipt and expenditure of Gross Proceeds and the obligations acquired therewith. 2) Not less frequently than each Computation Date, the Corporation shall calculate the Rebate Amount in accordance with rules set forth in section 148(f) of the Code and the Regulations and rulings thereunder. The Corporation shall maintain such calculations with its official transcript of proceedings relating to the issuance of the Bonds until six years after the final Computation Date. 3) As additional consideration for the purchase of the Bonds by the Purchasers and the loan of the money represented thereby and in order to induce such purchase by measures designed to insure the excludability of the 45035982.1 27 interest thereon from the gross income of the owners thereof for federal income tax purposes, the Corporation shall pay to the United States out of the Bond Fund or its general fund, as permitted by applicable Texas statute, regulation or opinion of the Attorney General of the State of Texas, the amount that when added to the future value of previous rebate payments made for the Bonds equals (i) in the case of a Final Computation Date as defined in Section 1.148- 3(e)(2) of the Regulations, one hundred percent (100%) of the Rebate Amount on such date; and (ii) in the case of any other Computation Date, ninety percent 90%) of the Rebate Amount on such date. In all cases, the rebate payments shall be made at the times, in the installments, to the place and in the manner as is or may be required by section 148(f) of the Code and the Regulations and rulings thereunder, and shall be accompanied by Form 8038-T or such other forms and information as is or may be required by Section 148(f) of the Code and the Regulations and rulings thereunder. 4) The Corporation shall exercise reasonable diligence to assure that no errors are made in the calculations and payments required by paragraphs (2) and (3), and if an error is made, to discover and promptly correct such error within a reasonable amount of time thereafter (and in all events within one hundred eighty (180) days after discovery of the error), including payment to the United States of any additional Rebate Amount owed to it, interest thereon, and any penalty imposed under Section 1.148-3(h) of the Regulations. i) Not to Divert Arbitrage Profits. Except to the extent permitted by section 148 of the Code and the Regulations and rulings thereunder, the Corporation shall not, at any time prior to the earlier of the Stated Maturity or final payment of the Bonds, enter into any transaction that reduces the amount required to be paid to the United States pursuant to Subsection (h) of this Section because such transaction results in a smaller profit or a larger loss than would have resulted if the transaction had been at arm's length and had the Yield of the Bonds not been relevant to either party. j) Elections. The Corporation hereby directs and authorizes the President and Secretary of the Board of Directors, or the Treasurer for the Corporation, individually or jointly, to make elections permitted or required pursuant to the provisions of the Code or the Regulations, as they deem necessary or appropriate in connection with the Bonds, in the Certificate as to Tax Exemption or similar or other appropriate certificate, form or document. SECTION 28: Notices to Holders - Waiver. Wherever this Resolution provides for notice to Holders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and sent by United States Mail, first class postage prepaid, to the address of each Holder as it appears in the Security Register. In any case where notice to Holders is given by mail, neither the failure to mail such notice to any particular Holders, nor any defect in any notice so mailed, shall affect the sufficiency of such notice with respect to all other Bonds. Where this Resolution provides for notice in any manner, such notice may be waived in writing by the Holder entitled to receive such notice, either before or after the event with respect to which such notice is given, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Paying Agent/Registrar, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. 45035982.1 28 SECTION 29: Cancellation. All Bonds surrendered for payment, redemption, transfer or exchange, if surrendered to the Paying Agent/Registrar, shall be promptly canceled by it and, if surrendered to the Corporation, shall be delivered to the Paying Agent/Registrar and, if not already canceled, shall be promptly canceled by the Paying Agent/Registrar. The Corporation may at any time deliver to the Paying Agent/Registrar for cancellation any Bonds previously certified or registered and delivered which the Corporation may have acquired in any manner whatsoever, and all Bonds so delivered shall be promptly canceled by the Paying Agent/Registrar. All canceled Bonds held by the Paying Agent/Registrar shall be destroyed as directed by the Corporation. SECTION 30: Sale of Bonds - Execution of Purchase Contract. The Bonds authorized by this Resolution are hereby sold to J. P. Morgan Securities, Inc. (herein referred to as the Purchasers") in accordance with a Bond Purchase Contract (the "Contract"), dated May 15, 2001, attached hereto as Exhibit C and incorporated herein by reference as a part of this Resolution for all purposes. The President of the Board of Directors is hereby authorized and directed to execute said Contract for and on behalf of the Corporation and as the act and deed of this Board, and in regard to the approval and execution of the Contract, the Board hereby finds, determines and declares that the representations, warranties and agreements of the Corporation contained therein are true and correct in all material respects and shall be honored and performed by the City. SECTION 31: Approval and Execution of Financing/Use Agreement with the City. The Financing/Use Agreement" (the "Agreement") by and between the Corporation and the City, attached hereto as Exhibit D and incorporated herein by reference as a part of this Resolution for all purposes, is hereby approved as to form and content, and such Agreement in substantially the form and substance attached hereto, together with such changes or revisions as may be necessary to accomplish the financing or benefit the Corporation, is hereby authorized to be executed by the President and Secretary of the Board of Directors of the Corporation and as the act and deed of this Board; and such Agreement as executed by said officials shall be deemed approved by the Board and constitute the Agreement herein approved. SECTION 32: Official Statement. The use of the Preliminary Official Statement by the Purchasers in connection with the public offering and sale of the Bonds is hereby ratified, confirmed and approved in all respects. The final Official Statement, which reflects the terms of sale, attached as Exhibit A to the Purchase Contract (together with such changes approved by the President, Vice President or Secretary of the Board of Directors, or Treasurer of the Corporation, any one or more of said officials), shall be and is hereby in all respects approved and the Purchasers are hereby authorized to use and distribute said final Official Statement, dated May 15, 2001, in the reoffering, sale and delivery of the Bonds to the public. The President and Secretary of the Board of Directors of the Corporation are further authorized and directed to manually execute and deliver for and on behalf of the Corporation copies of said Official Statement in final form as may be required by the Purchasers, and such final Official Statement in the form and content manually executed by said officials shall be deemed to be approved by the Board of Directors and constitute the Official Statement authorized for distribution and use by the Purchasers. SECTION 33: Proceeds of Sale. The proceeds of sale of the Bonds, excluding the accrued interest and premium, if any, received from the Purchasers and the amount being deposited to the Reserve Fund, shall be deposited in a construction fund in accordance with the Agreement. Pending expenditure for the Project, such proceeds of sale may be invested in authorized investments in accordance with the provisions of V.T.C.A., Government Code, 45035982.1 29 Chapter 2256, including specifically guaranteed investment contracts permitted in V.T.C.A., Section 2256.015, et seq, and, subject to the provisions of Section 27(h) hereof, any investment earnings realized shall be expended for the Projects or deposited in the Bond Fund. All surplus proceeds of sale of the Bonds, including investment earnings, remaining after completion of the Projects and paying or making provision for the payment of the amounts owed pursuant to Section 27(h)(2) hereof, together with the accrued interest and premium, if any, received from the Purchasers, shall be deposited to the credit of the Bond Fund. SECTION 34: Legal Opinion. The obligation of the Purchasers to accept delivery of the Bonds is subject to being furnished a final opinion of Fulbright & Jaworski L.L.P., Attorneys, Dallas, Texas, approving such Bonds as to their validity, said opinion to be dated and delivered as of the date of delivery and payment for such Bonds. A true and correct reproduction of said opinion is hereby authorized to be printed on the definitive Bonds or an executed counterpart thereof shall accompany the global Bonds deposited with the Depository Trust Company. SECTION 35: CUSIP Numbers. CUSIP numbers may be printed or typed on the definitive Bonds. It is expressly provided, however, that the presence or absence of CUSIP numbers on the definitive Bonds shall be of no significance or effect as regards the legality thereof and neither the Corporation nor attorneys approving said Bonds as to legality are to be held responsible for CUSIP numbers incorrectly printed or typed on the definitive Bonds. SECTION 36: Control and Custody of Bonds. The President of the Board shall be and is hereby authorized to take and have charge of all necessary orders and records pending investigation by the Attorney General of the State of Texas, and shall take and have charge and control of the Initial Bond(s) pending the approval thereof by the Attorney General, the registration thereof by the Comptroller of Public Accounts and the delivery thereof to the Purchasers. Furthermore, the President, Vice President or Secretary of the Board of Directors or the Treasurer of the Corporation, any one or more of said officials, are hereby authorized and directed to furnish and execute such documents and certifications relating to the Corporation and the issuance of the Bonds, as may be necessary for the approval of the Attorney General, registration by the Comptroller of Public Accounts and delivery of the Bonds to the initial purchasers and, together with the Corporation's financial advisor, general counsel, bond counsel and the Paying Agent/Registrar, make the necessary arrangements for the delivery of the Initial Bond(s) to the Purchasers and the initial exchange thereof for definitive Bonds. SECTION 37: Benefits of Resolution. Nothing in this Resolution, expressed or implied, is intended or shall be construed to confer upon any person other than the Corporation, the Paying Agent/Registrar and the Holders, any right, remedy, or claim, legal or equitable, under or by reason of this Resolution or any provision hereof, this Resolution and all its provisions being intended to be and being for the sole and exclusive benefit of the Corporation, the Paying Agent/Registrar and the Holders. SECTION 38: Inconsistent Provisions. All orders or resolutions, or parts thereof, which are in conflict or inconsistent with any provision of this Resolution are hereby repealed to the extent of such conflict and the provisions of this Resolution shall be and remain controlling as to the matters contained herein. SECTION 39: Governing Law. This Resolution shall be construed and enforced in accordance with the laws of the State of Texas and the United States of America. 45035982.1 30 SECTION 40: Severability. If any provision of this Resolution or the application thereof to any circumstance shall be held to be invalid, the remainder of this Resolution and the application thereof to other circumstances shall nevertheless be valid, and the Board hereby declares that this Resolution would have been enacted without such invalid provision. SECTION 41: Construction of Terms. If appropriate in the context of this Resolution, words of the singular number shall be considered to include the plural, words of the plural number shall be considered to include -the singular, and words of the masculine, feminine or neuter gender shall be considered to include the other genders. SECTION 42: Continuing Disclosure Undertaking. (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 meaning 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 Reports. The Corporation shall provide annually to each NRMSIR and any SID, within six months after the end of each fiscal year (beginning with the fiscal year ending September 30, 2001) financial information and operating data with respect to the Corporation of the general type included in the final Official Statement approved by Section 32 of this Resolution and described in Exhibit E hereto. Financial statements to be provided shall be (1) prepared in accordance with the accounting principles described in Exhibit E hereto and 2) audited, if the Corporation commissions an audit of such statements and the audit is completed within the period during which they must be provided. If audited financial statements are not available at the time the financial information and operating data must be provided, then the Corporation shall provide unaudited financial statements for the applicable fiscal year to each NRMSIR and any SID with the financial information and operating data and will file the annual audit report when and if the same becomes available. If the Corporation changes its fiscal year, it will notify each NRMSIR and any SID of the change (and of the date of the new fiscal year end) prior to the next date by which the Corporation otherwise would be required to provide financial information and operating data pursuant to this Section. The financial information and operating data to be provided pursuant to this Section may be set forth in full in one or more documents or may be included by specific reference to any document (including an official statement or other offering document, if it is available from the MSRB) that theretofore has been provided to each NRMSIR and any SID or filed with the SEC. 45035982.1 31 c) Material Event Notices. The Corporation shall notify any SID and either each NRMSIR or the MSRB, in a timely manner, of any of the following events with respect to the Bonds, if such event is material within the meaning of the federal securities laws: 1. Principal and interest payment delinquencies; 2. Non-payment related defaults; 3. Unscheduled draws on debt service reserves reflecting financial difficulties; 4. Unscheduled draws on credit enhancements reflecting financial difficulties; 5. Substitution of credit or liquidity providers, or their failure to perform; 6. Adverse tax opinions or events affecting the tax-exempt status of the Bonds; 7. Modifications to rights of holders of the Bonds; 8. Bond calls; 9. Defeasances; 10. Release, substitution, or sale, of property securing repayment of the Bonds; and 11. Rating changes. The Corporation shall notify any SID, in a timely manner, of any failure by the Corporation to provide financial information or operating data in accordance with subsection (b) of this Section by the time required by such Section. d) Limitations, Disclaimers, and Amendments. The Corporation shall be obligated to observe and perform the covenants specified in this Section while, but only while, the Corporation remains an "obligated person" with respect to the Bonds within the meaning of the Rule, except that the Corporation in any event will give the notice required by subsection (c) hereof of any Bond calls and defeasance that cause the Corporation to be no longer such an obligated person." The provisions of this Section are for the sole benefit of the Holders and beneficial owners of the Bonds, 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 Corporation undertakes to provide only the financial information, operating data, financial statements, and notices which it has expressly agreed to provide pursuant to this Section and does not hereby undertake to provide any other information that may be relevant or material to a complete presentation of the Corporation'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 Corporation does not make any representation or warranty concerning such information or its usefulness to a decision to invest in or sell Bonds at any future date. UNDER NO CIRCUMSTANCES SHALL THE CORPORATION BE LIABLE TO THE HOLDER OR BENEFICIAL OWNER OF ANY BOND OR ANY OTHER PERSON, IN CONTRACT OR TORT, FOR DAMAGES RESULTING IN WHOLE OR IN PART FROM ANY BREACH BY THE CORPORATION, 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. 45035982.1 32 No default by the Corporation in observing or performing its obligations under this Section shall constitute a breach of or default under this Resolution for purposes of any other provision of this Resolution. Nothing in this Section is intended or shall act to disclaim, waive, or otherwise limit the duties of the Corporation under federal and state securities laws. The provisions of this Section may be amended by the Corporation from time to time to adapt to changed circumstances resulting from a change in legal requirements, a change in law, or a change in the identity, nature, status, or type of operations of the Corporation, but only if (1) the provisions of this Section, as so amended, would have permitted an underwriter to purchase or sell Bonds in the primary offering of the Bonds in compliance with the Rule, taking into account any amendments or interpretations of the Rule to the date of such amendment, as well as such changed circumstances, and (2) either (a) the Holders of a majority in aggregate principal amount (or any greater amount required by any other provision of this Resolution that authorizes such an amendment) of the Outstanding Bonds consent to such amendment or (b) a Person that is unaffiliated with the Corporation (such as nationally recognized bond counsel) determines that such amendment will not materially impair the interests of the Holders and beneficial owners of the Bonds. The provisions of this Section may also be amended from time to time or repealed by the Corporation if the SEC amends or repeals the applicable provisions of the Rule or a court of final jurisdiction determines that such provisions are invalid, but only if and to the extent that reservation of the Corporation's right to do so would not prevent underwriters of the initial public offering of the Bonds from lawfully purchasing or selling Bonds in such offering. If the Corporation so amends the provisions of this Section, it shall include with any amended financial information or operating data filed with each NRMSIR and SID pursuant to subsection (b) of this Section an explanation, in narrative form, of the reasons for the amendment and of the impact of any change in the type of financial information or operating data so provided. SECTION 43: Insurance. The Bonds have been sold with the principal of and interest thereon being insured by Ambac Indemnity Corporation (hereinafter called "Ambac") pursuant to a Municipal Bond Insurance Policy. In accordance with the terms and conditions applicable to insurance provided by Ambac, the Corporation covenants and agrees that, in the event the principal and interest due on the Bonds shall be paid by Ambac pursuant to the policy referred to this Section, the assignment and pledge of all funds and all covenants, agreements and other obligations of the Corporation to the Holders shall continue to exist and Ambac shall be subrogated to the rights of such Holders; and furthermore, the Corporation covenants and agrees that: a) Consent of Ambac where Holder Consent Required. Ambac shall be deemed to be the holder of the Bonds insured by Ambac at all times for the purpose of the execution and delivery of any amendment, change or modification of this Resolution or the initiation by Holders of any action to be taken under this Resolution at the Holder's request, which under this Resolution (or under such underlying documents requires the written approval or consent of or can be initiated by the Holders of a majority (50% percent) in aggregate principal amount of the Bonds at the time Outstanding. b) Defeasance. In the event that the principal and redemption price, if applicable, and interest due on the Bonds shall be paid by Ambac pursuant to the policy referred to in this Section, all covenants, agreements and other obligations of the Corporation to the Holders shall continue to exist and Ambac shall be subrogated to the rights of such Holders. 45035982.1 33 c) Notices to be Given to Ambac. While the Municipal Bond Guaranty Insurance Policy is in effect, the Corporation shall furnish to Ambac: 1) as soon as practicable after the filing thereof, a copy of any financial statement of the Corporation and a copy of any audit and annual report of the Corporation; 2) a copy of any notice to be given to the registered owners of the Bonds, including, without limitation, notice of any redemption or defeasance of Bonds, and any certificate rendered pursuant to this Resolution relating to the security for the Bonds; and 3) such additional information as it may reasonably request. The Corporation will permit Ambac to discuss the affairs, finances and accounts of the Corporation, or any information Ambac may reasonably request regarding the security for the Bonds with appropriate officers of the Corporation. The Corporation will permit Ambac to have access to and make copies of all books and records relating to the Bonds at any reasonable time. d) Consent of Ambac. Any provision of this Resolution expressly recognizing or granting rights in or to Ambac may not be amended in any manner which affects the rights of Ambac hereunder without the prior written consent of Ambac. Furthermore, anything in this Resolution to the contrary notwithstanding, upon the occurrence and continuance of an event of default, Ambac shall be entitled to control and direct the enforcement of all rights and remedies granted to the Holders of the Bonds for the benefit of such Holders. e) Concerninq the Bond Insurance Policy. As long as insurance for the Bonds shall be in full force and effect, the Corporation agrees to comply with the following provisions: 1) if five (5) days prior to an interest payment date for the Bonds the Corporation determines that there will be insufficient funds in the Interest and Sinking Fund to pay the principal of or interest on the Bonds on such interest payment date, the Corporation shall so notify Ambac. Such notice shall specify the amount of the anticipated deficiency, the Bonds to which such deficiency is applicable and whether such Bonds will be deficient as to principal or interest, or both. 2) the Corporation shall, after giving notice to Ambac as provided in (1) above, make available to Ambac and the United States Trust Company of New York, as insurance trustee for Ambac, the registration books of the Corporation maintained by the Paying Agent/Registrar, and all records relating to the funds and accounts maintained under this Resolution. 3) the Corporation shall cause the Paying Agent/Registrar to provide Ambac and the United States Trust Company of New York with a list of registered owners of Bonds entitled to receive principal or interest payments from Ambac under the terms of the Municipal Bond Insurance Policy, and shall cause the Paying Agent/Registrar to make arrangements with United States Trust Company of New York (i) to mail checks or drafts to the registered owners of Bonds entitled to receive full or partial interest payments from Ambac, and (ii) to 45035982.1 34 pay principal upon Bonds surrendered to United States Trust Company of New York by the registered owners of Bonds entitled to receive full or partial principal payments from Ambac. 4) the Corporation shall cause the Paying Agent/Registrar to notify, at the time it provides notice to Ambac pursuant to (1) above, the registered owners of Bonds entitled to receive the payment of principal or interest thereon from Ambac (i) as to the fact of such entitlement, (ii) that Ambac will remit to them all or a part of the interest payments next coming due, (iii) that should they be entitled to receive full payment of principal from Ambac they must tender their Bonds (along with a form of transfer of title thereto) for payment to United States Trust Company of New York, as insurance trustee for Ambac, and not the Paying Agent/ Registrar, and (iv) that should they be entitled to receive partial payment of principal from Ambac they must tender their Bonds for payment thereon first to the Paying Agent/Registrar, who shall note on such Bonds the portion of the principal paid by the Paying Agent/Registrar, and then, along with a form of transfer of title thereto, to Ambac, which will then pay the unpaid portion of principal. 5) Ambac shall, to the extent it makes a payment of principal of or interest on Bonds, become subrogated to the rights of the recipients of such payments in accordance with the terms of the Municipal Bond Insurance Policy, and to evidence such subrogation (i) in the case of subrogation as to claims for past due interest, the Corporation shall cause the Paying Agent/Registrar to note Ambac's rights as subrogee on the registration books of the Corporation maintained by the Paying Agent/Registrar upon receipt from Ambac of proof of the payment of interest thereon to the registered owners of the Bonds, and (ii) in the case of subrogation as to claims for past due principal, the Corporation shall cause the Paying Agent/Registrar to note Ambac's rights as subrogee on- the registration books of the Corporation maintained by the Paying Agent/ Registrar upon surrender of the Bonds by the registered owners thereof together with proof of the payment of principal thereof. SECTION 44: Public Meeting. It is officially found, determined, and declared that the meeting at which this Resolution is adopted was open to the public and public notice of the time, place, and subject matter of the public business to be considered at such meeting, including this Resolution, was given, all as required by V.T.C.A., Government Code, Chapter 551, as amended. 45035982.1 35 SECTION 45: Effective Date. This Resolution shall be in force and effect from and after its passage on the date shown below. PASSED AND ADOPTED, this May 15, 2001. SOUTHLAKE PARKS DEVELOPMENT CORPORATION President, Board of Directors A T: Secretary, Board of Directors G,z poraticn Sea[) 45035982.1 36 PAYING AGENT/REGISTRAR AGREEMENT THIS AGREEMENT entered into as of May 15, 2001 (this "Agreement"), by and between the Southlake Parks Development Corporation (the "Issuer"), and The Chase Manhattan Bank, a New York banking corporation organized and existing under the laws of the State of New York and authorized to do business in the State of Texas (the "Bank"), RECITALS WHEREAS, the Issuer has duly authorized and provided for the issuance of its Southlake Parks Development Corporation Sales Tax Subordinate Lien Revenue Bonds, Series 2001" (the "Securities") in the aggregate principal amount of $4',690,000, which Securities are scheduled to be delivered to the initial purchasers on or about June 14, 2001; and WHEREAS, the Issuer has selected the Bank to serve as Paying Agent/Registrar in connection with the payment of the principal of, premium, if any, and interest on said Securities and with respect to the registration, transfer and exchange thereof by the registered owners thereof; and WHEREAS, the Bank has agreed to serve in such capacities for and on behalf of the Issuer and has full power and authority to perform and serve as Paying Agent/Registrar for the Securities; NOW, THEREFORE, it is mutually agreed as follows: ARTICLE ONE APPOINTMENT OF BANK AS PAYING AGENT AND REGISTRAR Section 1.01. Appointment. The Issuer hereby appoints the Bank to serve as Paying Agent with respect to the Securities, and, as Paying Agent for the Securities, the Bank shall be responsible for paying on behalf of the Issuer the principal, premium (if any), and interest on the Securities as the same become due and payable to the registered owners thereof; all in accordance with this Agreement and the "Bond Resolution" (hereinafter defined). The Issuer hereby appoints the Bank as Registrar with respect to the Securities and, as Registrar for the Securities, the Bank shall keep and maintain for and on behalf of the Issuer books and records as to the ownership of said Securities and with respect to the transfer and exchange thereof as provided herein and in the "Bond Resolution". The Bank hereby accepts its appointment, and agrees to serve as the Paying Agent and Registrar for the Securities. Section 1.02. Compensation. As compensation for the Bank's services as Paying Agent/Registrar, the Issuer hereby agrees to pay the Bank the fees and amounts set forth in Annex A attached hereto for the first year of this Agreement and thereafter the fees and amounts set forth in the Bank's current fee schedule then in effect for services as Paying Agent/Registrar for municipalities, which shall be supplied to the Issuer on or before 90 days prior to the close of the Fiscal Year of the Issuer, and shall be effective upon the first day of the following Fiscal Year. 45034319.1 In addition, the Issuer agrees to reimburse the Bank upon its request for all reasonable expenses, disbursements and advances incurred or made by the Bank in accordance with any of the provisions hereof (including the reasonable compensation and the expenses and disbursements of its agents and counsel). ARTICLE TWO DEFINITIONS Section 2.01. Definitions. For all purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires: Acceleration Date" on any Security means the date on and after which the principal or any or all installments of interest, or both, are due and payable on any Security which has become accelerated pursuant to the terms of the Security. Bank Office" means the designated office of the Bank as indicated in Section 3.01 hereof. The Bank will notify the Issuer in writing of any change in location of the Bank Office. Bond Resolution" means the resolution, order, or ordinance of the governing body of the Issuer pursuant to which the Securities are issued, certified by the Secretary or any other officer of the Issuer and delivered to the Bank. Fiscal Year' means the fiscal year of the Issuer, ending September 30th. Holder" and "Security Holder" each means the Person in whose name a Security is registered in the Security Register. Issuer Request" and "Issuer Order" means a written request or order signed in the name of the Issuer by the President, Vice President or Secretary of the Board of Directors of Treasurer of the Corporation, any one or more of said officials, and delivered to the Bank. Legal Holiday" means a day on which the Bank is required or authorized to be closed. Person" means any individual, corporation, partnership, joint venture, association, joint stock company, trust, unincorporated organization or government or any agency or political subdivision of a government. Predecessor Securities" of any particular Security means every previous Security evidencing all or a portion of the same obligation as that evidenced by such particular Security (and, for the purposes of this definition, any mutilated, lost, destroyed, or stolen Security for which a replacement Security has been registered and delivered in lieu thereof pursuant to Section 4.06 hereof and the Resolution). 45034319.1 2 t y it A 4 Redemption Date" when used with respect to any Security to be redeemed means the date fixed for such redemption pursuant to the terms of the Bond Resolution. Responsible Officer" when used with respect to the Bank means the Chairman or Vice -Chairman of the Board of Directors, the Chairman or Vice -Chairman of the Executive Committee of the Board of Directors, the President, any Vice President, the Secretary, any Assistant Secretary, the Treasurer, any Assistant Treasurer, the Cashier, any Assistant Cashier, any Trust Officer or Assistant Trust Officer, or any other officer of the Bank customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject. Security Register' means a register maintained by the Bank on behalf of the Issuer providing for the registration and transfers of Securities. Stated Maturity" means the date specified in the Bond Resolution the principal of a Security is scheduled to be due and payable. Section 2.02. Other Definitions. The terms "Bank," "Issuer," and "Securities (Security)" have the meanings assigned to them in the recital paragraphs of this Agreement. The term "Paying Agent/Registrar' refers to the Bank in the performance of the duties and functions of this Agreement. ARTICLE THREE PAYING AGENT Section 3.01. Duties of Payin Aent As Paying Agent, the Bank shall, provided adequate collected funds have been provided to it for such purpose by or on behalf of the Issuer, pay on behalf of the Issuer the principal of each Security at its Stated Maturity, Redemption Date, or Acceleration Date, to the Holder upon surrender of the Security to the Bank at the following address: P. O. Box 2320, Dallas, Texas 75221-2320 or 1201 Main Street, One Main Place, 18th Floor, Dallas, Texas 75201, Attention: Corporate Trust Services. As Paying Agent, the Bank shall, provided adequate collected funds have been provided to it for such purpose by or on behalf of the Issuer, pay on behalf of the Issuer the interest on each Security when due, by computing the amount of interest to be paid each Holder and making payment thereof to the Holders of the Securities (or their Predecessor Securities) on the Record Date. All payments of principal and/or interest on the Securities to the registered owners shall be accomplished (1) by the issuance of checks, payable to the registered owners, drawn on the fiduciary account provided in Section 5.05 hereof, sent by United States mail, first class, postage prepaid, to the address appearing on the Security Register or (2) by such other method, acceptable to the Bank, requested in writing by the Holder at the Holder's risk and expense. Section 3.02. Payment Dates. The Issuer hereby instructs the Bank to pay the principal of and interest on the Securities at the dates specified in the Bond Resolution. 45034319.1 3 EXMff A I ARTICLE FOUR REGISTRAR Section 4.01. Security Register - Transfers and Exchanges. The Bank agrees to keep and maintain for and on behalf of the Issuer at the Bank Office books and records (herein sometimes referred to as the "Security Register') for recording the names and addresses of the Holders of the Securities, the transfer, exchange and replacement of the Securities and the payment of the principal of and interest on the Securities to the Holders and containing such other information as may be reasonably required by the Issuer and subject to such reasonable regulations as the Issuer and Bank may prescribe. All transfers, exchanges and replacement of Securities shall be noted in the Security Register. Every Security surrendered for transfer or exchange shall be duly endorsed or be accompanied by a written instrument of transfer, the signature on which has been guaranteed by an officer of a federal or state bank or a member of the National Association of Securities Dealers, in form satisfactory to the Bank, duly executed by the Holder thereof or his agent duly authorized in writing. The Bank may request any supporting documentation it feels necessary to effect a re -registration, transfer or exchange of the Securities. To the extent possible and under reasonable circumstances, the Bank agrees that, in relation to an exchange or transfer of Securities, the exchange or transfer by the Holders thereof will be completed and new Securities delivered to the Holder or the assignee of the Holder in not more than three (3) business days after the receipt of the Securities to be cancelled in an exchange or transfer and the written instrument of transfer or request for exchange duly executed by the Holder, or his duly authorized agent, in form and manner satisfactory to the Paying Agent/Registrar. Section 4.02. Certificates. The Issuer shall provide an adequate inventory of printed Securities to facilitate transfers or exchanges thereof. The Bank covenants that the inventory of printed Securities will be kept in safekeeping pending their use and reasonable care will be exercised by the Bank in maintaining such Securities in safekeeping, which shall be not less than the care maintained by the Bank for debt securities of other governments or corporations for which it serves as registrar, or that is maintained for its own securities. Section 4.03. Form of Security Register. The Bank, as Registrar, will maintain the Security Register relating to the registration, payment, transfer and exchange of the Securities in accordance with the Bank's general practices and procedures in effect from time to time. The Bank shall not be obligated to maintain such Security Register in any form other than those which the Bank has currently available and currently utilizes at the time. The Security Register may be maintained in written form or in any other form capable of being converted into written form within a reasonable time. Section 4.04. List of Security Holders. The Bank will provide the Issuer at any time requested by the Issuer, upon payment of the required fee, a copy of the information contained in the Security Register. The Issuer may also inspect the information contained in the Security Register at any time the Bank is customarily open for business, provided that reasonable time is allowed the Bank to provide an up-to-date listing or to convert the information into written form. 45034319.1 4 F,XXMffAI The Bank will not release or disclose the contents of the Security Register to any person other than to, or at the written request of, an authorized officer or employee of the Issuer, except upon receipt of a court order or as otherwise required by law. Upon receipt of a court order and prior to the release or disclosure of the contents of the Security Register, the Bank will notify the Issuer so that the Issuer may contest the court order or such release or disclosure of the contents of the Security Register. Section 4.05. Return of Cancelled Certificates. The Bank will, at such reasonable intervals as it determines, surrender to the Issuer, Securities in lieu of which or in exchange for which other Securities have been issued, or which have been paid. Section 4.06. Mutilated, Destroyed, Lost or Stolen Securities. The Issuer hereby instructs the Bank, subject to the provisions of Section 26 of the Bond Resolution, to deliver and issue Securities in exchange for or in lieu of mutilated, destroyed, lost, or stolen Securities as long as the same does not result in an overissuance. In case any Security shall be mutilated, or destroyed, lost or stolen, the Bank may execute and deliver a replacement Security of like form and tenor, and in the same denomination and bearing a number not contemporaneously outstanding, in exchange and substitution for such mutilated Security, or in lieu of and in substitution for such destroyed lost or stolen Security, only upon the approval of the Issuer and after (i) the filing by the Holder thereof with the Bank of evidence satisfactory to the Bank of the destruction, loss or theft of such Security, and of the authenticity of the ownership thereof and (ii) the furnishing to the Bank of indemnification in an amount satisfactory to hold the Issuer and the Bank harmless. All expenses and charges associated with such indemnity and with the preparation, execution and delivery of a replacement Security shall be borne by the Holder of the Security mutilated, or destroyed, lost or stolen. Section 4.07. Transaction Information to Issuer. The Bank will, within a reasonable time after receipt of written request from the Issuer, furnish the Issuer information as to the Securities it has paid pursuant to Section 3.01, Securities it has delivered upon the transfer or exchange of any Securities pursuant to Section 4.01, and Securities it has delivered in exchange for or in lieu of mutilated, destroyed, lost, or stolen Securities pursuant to Section 4.06. ARTICLE FIVE THE BANK Section 5.01. Duties of Bank The Bank undertakes to perform the duties set forth herein and agrees to use reasonable care in the performance thereof. Section 5.02. Reliance on Documents, Etc (a) The Bank may conclusively rely, as to the truth of the statements and correctness of the opinions expressed therein, on certificates or opinions furnished to the Bank. b) The Bank shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it shall be proved that the Bank was negligent in ascertaining the pertinent facts. c) No provisions of this Agreement shall require the Bank to expend or risk its own funds or otherwise incur any financial liability for performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing 45034319.1 5 EXHIBIT A 4 that repayment of such funds or adequate indemnity satisfactory to it against such risks or liability is not assured to it. d) The Bank may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, note, security, or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties. Without limiting the generality of the foregoing statement, the Bank need not examine the ownership of any Securities, but is protected in acting upon receipt of Securities containing an endorsement or instruction of transfer or power of transfer which appears on its face to be signed by the Holder or an agent of the Holder. The Bank shall not be bound to make any investigation into the facts or matters stated in a resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, note, security, or other paper or document supplied by Issuer. e) The Bank may consult with counsel, and the written advice of such counsel or any opinion of counsel shall be full and complete authorization and protection with respect to any action taken, suffered, or omitted by it hereunder in good faith and in reliance thereon. f) The Bank may exercise any of the powers hereunder and perform any duties hereunder either directly or by or through agents or attorneys of the Bank. Section 5.03. Recitals of Issuer. The recitals contained herein with respect to the Issuer and in the Securities shall be taken as the statements of the Issuer, and the Bank assumes no responsibility for their correctness. The Bank shall in no event be liable to the Issuer, any Holder or Holders of any Security, or any other Person for any amount due on any Security from its own funds. Section 5.04. May Hold Securities. The Bank, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with the Issuer with the same rights it would have if it were not the Paying Agent/Registrar, or any other agent. Section 5.05. Moneys Held by Bank - Paying agent Account/Collateralization. A paying agent account shall at all times be kept and maintained by the Bank for the receipt, safekeeping and disbursement of moneys received from the Issuer hereunder for the payment of the Securities, and money deposited to the credit of such account until paid to the Holders of the Securities shall be continuously collateralized by securities or obligations which qualify and are eligible under both the laws of the State of Texas and the laws of the United States of America to secure and be pledged as collateral for paying agent accounts to the extent such money is not insured by the Federal Deposit Insurance Corporation. Payments made from such account shall be made by check drawn on such account unless the owner of such Securities shall, at its own expense and risk, request such other medium of payment. The Bank shall be under no liability for interest on any money received by it hereunder Subject to the applicable unclaimed property laws of the State of Texas, any money deposited with the Bank for the payment of the principal, premium (if any), or interest on any Security and remaining unclaimed for three years after final maturity of the Security has become due and payable will be paid by the Bank to the Issuer, and the Holder of such Security shall 45034319.1 6 thereafter look only to the Issuer for payment thereof, and all liability of the Bank with respect to such moneys shall thereupon cease. Section 5.06. Indemnification. To the extent permitted by law, the Issuer agrees to indemnify the Bank for, and hold it harmless against, any loss, liability, or expense incurred without negligence or bad faith on its part, arising out of or in connection with its acceptance or administration of its duties hereunder, including the cost and expense against any claim or liability in connection with the exercise or performance of any of its powers or duties under this Agreement. Section 5.07. Interpleader. The Issuer and the Bank agree that the Bank may seek adjudication of any adverse claim, demand, or controversy over its person as well as funds on deposit, in either a Federal or State District Court located in the State and County where either the Bank Office or the administrative offices of the Issuer is located, and agree that service of process by certified or registered mail, return receipt requested, to the address referred to in Section 6.03 of this Agreement shall constitute adequate service. The Issuer and the Bank further agree that the Bank has the right to file a Bill of Interpleader in any court of competent jurisdiction to determine the rights of any Person claiming any interest herein. Section 5.08. DT Services. It is hereby represented and warranted that, in the event the Securities are otherwise qualified and accepted for "Depository Trust Company" services or equivalent depository trust services by other organizations, the Bank has the capability and, to the extent within its control, will comply with the "Operational Arrangements", which establishes requirements for securities to be eligible for such type depository trust services, including, but not limited to, requirements for the timeliness of payments and funds availability, transfer turnaround time, and notification of redemptions and calls. ARTICLE SIX MISCELLANEOUS PROVISIONS Section 6.01. Amendment This Agreement may be amended only by an agreement in writing signed by both of the parties hereto. Section 6.02. Assignment. This Agreement may not be assigned by either party without the prior written consent of the other. Section 6.03. Notices. Any request, demand, authorization, direction, notice, consent, waiver, or other document provided or permitted hereby to be given or furnished to the Issuer or the Bank shall be mailed or delivered to the Issuer or the Bank, respectively, at the addresses shown on page 9. Section 6.04. Effect of Headings. The Article and Section headings herein are for convenience only and shall not affect the construction hereof. Section 6.05. Successors and Assigns. All covenants and agreements herein by the Issuer shall bind its successors and assigns, whether so expressed or not. Section 6.06. Severability. In case any provision herein shall be invalid, illegal, or unenforceable, the validity, legality, and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. 45034319.1 7 EXIBri A Section 6.07. Benefits of Agreement Nothing herein, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder, any benefit or any legal or equitable right, remedy, or claim hereunder. Section 6.08. Entire Agreement. This Agreement and the Bond Resolution constitute the entire agreement between the parties hereto relative to the Bank acting as Paying Agent/Registrar and if any conflict exists between this Agreement and the Bond Resolution, the Bond Resolution shall govern. Section 6.09. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original and all of which shall constitute one and the same Agreement. Section 6.10. Termination. This Agreement will terminate (i) on the date of final payment of the principal of and interest on the Securities to the Holders thereof or (ii) may be earlier terminated by either party upon sixty (60) days written notice; provided, however, an early termination of this Agreement by either party shall not be effective until (a) a successor Paying Agent/Registrar has been appointed by the Issuer and such appointment accepted and b) notice given to the Holders of the Securities of the appointment of a successor Paying Agent/Registrar. Furthermore, the Bank and Issuer mutually agree that the effective date of an early termination of this Agreement shall not occur at any time which would disrupt, delay or otherwise adversely affect the payment of the Securities. Upon an early termination of this Agreement, the Bank agrees to promptly transfer and deliver the Security Register (or a copy thereof), together with other pertinent books and records relating to the Securities, to the successor Paying Agent/Registrar designated and appointed by the Issuer. The provisions of Section 1.02 and of Article Five shall survive and remain in full force and effect following the termination of this Agreement. Section 6.11. Law. w. This Agreement shall be construed in accordance with and governed by the laws of the State of Texas. 45034319.1 8 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. THE CHASE MANHATTAN BANK BY Title: SEAL] Address: Attest: 600 Travis, Suite 1150 Houston, Texas 77002 Title: SOUTHLAKE PARKS DEVELOPMENT CORPORATION President, Board of Directors CORPORATION SEAL) Address: 667 N. Carroll Avenue Attest: Southlake, Texas 76092 Secretary, Board of Directors 45034319.1 9 17, AMal 1 11 M_ ` GUARXNTN' AGREEMENT GUARANTY AGREEMENT dated as of . 200_ a public body corporate organized and existing under the laws of the State of Obligor"); and AMBAC ASSURANCE CORPORATION (-Ambac-). a Wisconsin insurance company. WITNESSETH: WHEREAS, the Obligor has or will issue_(the "Obligations"); and Ensii B by and bem een the dotnuciled stock WHEREAS, Ambac will issue its Surety Bond (the "Surety Bond"). substantially in the form set forth in Annex A to this Agreement, guaranteeing certain payments by the Obligor subject to the terms and limitations of the Surety Bond; and WHEREAS, to induce Ambac to issue the Surety Bond, the Obligor has agreed to pay the premium for such Surety Bond and to reimburse Ambac for all payments made by Ambac under the Surety Bond from Legally Available Funds, all as more fully set forth in this Agreement; and WHEREAS, the Obligor understands that Ambac expressly requires the delivery of this Agreement as part of the consideration for the execution by Ambac of the Surety Bond; and NOW, THEREFORE, in consideration of the premises and of the agreements herein contained and of the execution of the Surety Bond, the Obligor and Ambac agree as follows: ARTICLE I DEFINITIONS; SURETY BOND Section 1.01. Definitions. Except as otherwise expressly provided herein or unless the context otherwise requires, the terms which are capitalized herein shall have the meanings specified in Annex B hereto. Section 1.02. Surety Bond. a) Ambac will issue the Surety Bond in accordance with and subject to the terms and conditions of the Commitment. b) The maximum liability of Ambac under the Surety Bond and the coverage and term thereof shall be subject to and limited by the Surety Bond Coverage and the terms and conditions of the Surety Bond. c) Payments made under the Surety Bond will reduce the Surety Bond Coverage to the extent of that payment, provided that the Surety Bond Coverage shall be automatically reinstated to the extent of the reimbursement of principal by the Obligor of any payment made by Ambac. Ambac shall notify the Paying Agent in writing no later than the fifth (5th) day following the reimbursement by the Obligor that the Surety Bond has been reinstated to the extent of such reimbursement. Section 1.03. Premium. In consideration of Ambac agreeing to issue the Surety Bond hereunder, the Obligor hereby agrees to pay or cause to be paid from Legally Available Funds the premium set forth in the Commitment. Section 1.04. Certain Other Expenses. The Obligor will pay all reasonable fees and disbursements of Ambac's counsel related to any modification of this Agreement or the Surety Bond. 15 XRTICLE 1I REIMBURSEMENT OBLIGATIONS OF OBLIGOR AND SECUR.ITN' THEREFORE Section 2.01. Reimbursement for Payments Under the Surety Bond and Expenses. a) The Obligor will reimburse Ambac. from Legally Available Funds within the Reimbursement Period. without demand or notice by Ambac to the Obligor or any other person, to the extent of each Surety Bond Payment with interest on each Surety Bond Payment from and including the date made to the date of the reimbursement by the Obligor at the Effective Interest Rate. The Obligor agrees that it shall make monthly level principal repayments for each Surety Bond Payment during the Reimbursement Period. Interest on each Surety Bond Payment shall be paid monthly during the Reimbursement Period. To the extent that interest payments due hereunder are not paid on a monthly basis, or are not paid as each principal repayment is made, interest shall accrue on such unpaid amounts at a rate equal to the Effective Interest Rate. b) The Obligor also agrees to reimburse Ambac, from Legally Available Funds, immediately and unconditionally upon demand for all reasonable expenses incurred by Ambac in connection with the Surety Bond and the enforcement by Ambac of the Obligor's obligations under this Agreement together with interest on all such expenses from and including the date which is 30 days from the date a statement for such expenses is received by the Obligor incurred to the date of payment at the rate set forth in subsection (a) of this Section 2.01. Section 2.02. Allocation of Pavments. Ambac and the Obligor hereby agree that each repayment of principal received by Ambac from or on behalf of the Obligor as a reimbursement to Ambac as required by Section 2.01(x) hereof shall be applied to reinstate all or a portion of the Surety Bond Coverage to the extent of such repayment. Any interest payable pursuant to Section 2.01(a) hereof shall not be applied to the reinstatement of any portion of the Surety Bond Coverage. Section 2.03. Security for Pavments; Instruments of Further Assurance. To the extent, but only to the extent, that the Resolution pledges to the Owners or any paying agent therefor, or grants a security interest or lien in or on any collateral property, revenue or other payments ("Collateral and Revenues") in order to secure the Obligations or provide a source of payment for the Obligations, the Obligor hereby grants to Ambac a security interest in or lien on, as the case may be, and pledges to Ambac all such Collateral and Revenues as security for payment of all amounts due hereunder, which security interest, lien and/or pledge created or granted under this Section 2.03 shall be subordinate only to the interests of the Owners and any paying agent therefor in such Collateral and Revenues. The Obligor agrees that it will, from time to time, execute, acknowledge and deliver, or cause to be executed, acknowledged and delivered, any and all financing statements, if applicable, and all other further instruments as may be required by law or as shall reasonably be requested by Ambac for the perfection of the security interest, if any, granted under this Section 2.03 and for the preservation and protection of all rights of Ambac under this Section 2.03. Section 2.04. Unconditional Oblieation. The obligations of the Obligor hereunder are absolute and unconditional and will be paid or performed strictly in accordance with this Agreement, irrespective of: a) any lack of validity or enforceability of, or any amendment or other modification of, or waiver with respect to the Resolution or the Obligations; b) any exchange, release or nonperfection of any security interest in property securing the Obligations or this Agreement or any obligations hereunder; c) any circumstances which might otherwise constitute a defense available to, or discharge of, the Obligor with respect to the Obligations; V d) whether or not such obligations are contingent or matured. disputed or undisputed, liquidated or unliquidated. ARTICLE III EVENTS OF DEFAULT; REMEDIES Section 3.01. Events of Default. The following events shall constitute Events of Default hereunder: a) The Obligor shall fail to pay to Ambac any amount payable under Sections 1.04 and 2.01 hereof and such failure shall have continued for a period in excess of the Reimbursement Period; b) Any material representation or warranty made by the Obligor hereunder or under the Resolution or any statement in the application for the Surety Bond or any report, certificate, financial statement or other instrument provided in connection with the Commitment, the Surety Bond or herewith shall have been materially false at the time when made; c) Except as otherwise provided in this Section 3.01, the Obligor shall fail to perform any of its other obligations under this Agreement or hereunder, provided that such failure continues for more than thirty 30) days after receipt by the Obligor of notice of such failure to perform, d) The Obligor shall (i) voluntarily commence any proceeding or file any petition seeking relief under the United States Bankruptcy Code or any other Federal, state or foreign bankruptcy, insolvency or similar law, (ii) consent to the institution of, or fail to controvert in a timely and appropriate manner, any such proceeding or the filing of any such petition, (iii) apply for or consent to the appointment of a receiver, paying agent, custodian, sequestrator or similar official for the Obligor or for a substantial part of its property, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors, (vi) become unable, admit in writing its inability or fail generally to pay its debts as they become due or (vii) take action for the purpose of effecting any of the foregoing; or e) An involuntary proceeding shall be commenced or an involuntary petition shall be filed in a court of competent jurisdiction seeking (i) relief in respect of the Obligor, or of a substantial part of its property, under the United States Bankruptcy Code or any other Federal, state or foreign bankruptcy, 'insolvency or similar law or (ii) the appointment of a receiver, paying agent, custodian, sequestrator or similar official for the Obligor or for a substantial part of its property; and such proceeding or petition shall continue undismissed for sixty (60) days or an order or decree approving or ordering any of the foregoing shall continue unstayed and in effect for thirty (30) days. Section 3.02. Remedies. If an Event of Default shall occur and be continuing, then Ambac may take whatever action at law or in equity may appear necessary or desirable to collect the amounts then due and thereafter to become due under this Agreement or any related instrument and enforce any obligation. agreement or covenant of the Obligor under this Agreement; provided, however, that Ambac may not take any action to direct or require acceleration or other early redemption of the Obligations or adversely affect the rights of the Owners. All rights and remedies of Ambac under this Section 3.02 are cumulative and the exercise of any one remedy does not preclude the exercise of one or more of the other available remedies. 4.442111 ARTICLE IN' SETTLEMENT Ambac shall have the exclusive right to decide and determine whether any claim, liability, suit or judgment made or brought against Ambac. the Obligor or any other party on the Surety Bond shall or shall not be paid, compromised, resisted, defended. tried or appealed. and Ambac's decision thereon. if made in good faith, shall be final and binding upon the Obligor. An itemized statement of payments made by Ambac, certified by an officer of Ambac, or the voucher or vouchers for such payments, shall be pnma facie evidence of the liability of the Obligor, and if the Obligor fails to reimburse Ambac. pursuant to subsection (b) of Section 2.01 hereof, upon the receipt of such statement of payments. interest shall be computed on such amount from the date of any payment made by Ambac at the rate set forth in subsection (a) of Section 2.01 hereof. ARTICLE V MISCELLANEOUS Section 5.01. Computations. All computations of premium, interest and fees hereunder shall be made on the basis of the actual number of days elapsed over a year of 360 days. Section 5.02. Exercise of Riiahts. No failure or delay on the part of Ambac to exercise any right, power or privilege under this Agreement and no course of dealing between Ambac and the Obligor or any other party shall operate as a waiver of any such right, power or privilege, nor shall any single or partial exercise of any such right, power or privilege preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein expressly provided are cumulative and not exclusive of any rights or remedies which Ambac would otherwise have pursuant to law or equity. No notice to or demand on any party in any case shall entitle such party to any other or further notice or demand in similar or other circumstances, or constitute a waiver of the right of the other party to any other or further action in any circumstances without notice or demand. Section 5.03. Amendment and Waiver. Any provision of this Agreement may be amended, waived, supplemented, discharged or terminated only with the prior written consent of the Obligor and Ambac. The Obligor hereby agrees that upon the written request of the Paying Agent, Ambac may make or consent to issue any substitute for the Surety Bond to cure any ambiguity or formal defect or omission in the Surety Bond which does not materially change the terms of the Surety Bond nor adversely affect the rights of the Owners, and this Agreement shall apply to such substituted Surety Bond. Ambac agrees to deliver to the Obligor and to the company or companies, if any, rating the Obligations, a copy of such substituted Surety Bond. Section 5.04. Successors and Assigns: Descriptive Headings. a) This Agreement shall bind, and the benefits thereof shall inure to, the Obligor and Ambac and their respective successors and assigns; provided, that the Obligor may not transfer or assign any or all of its rights and obligations hereunder without the prior written consent of Ambac. b)' The descriptive headings of the various provisions of this Agreement are inserted for convenience of reference only and shall not be deemed to affect the meaning or construction of any of the provisions hereof. Section 5.05. Other Sureties. If Ambac shall procure any other surety to reinsure the Surety Bond. this Agreement shall inure to the benefit of such other surety, its successors and assigns, so as to give to it a direct right of action against the Obligor to enforce this Agreement, and "Ambac," wherever used herein, shall be deemed to include such reinsuring surety, as its respective interests may appear. 18 Section 5.06 Sic -mature on ObhEation, The Oblieor*s liability shall not be affected b its failure to sign the Surety Bond nor by any claim that other indemnity or security was to have been obtained nor b the release of any indemnity, nor the return or exchange of any collateral that may have been obtained. Section 5.07. Waiver. The Obligor waives any defense that this Agreement was executed subsequent to the date of the Surety Bond, admitting and covenanting that such Surety Bond was executed pursuant to the Obligor's request and in reliance on the Obligor's promise to execute this Agreement. Section 5.08. Notices. Requests, Demands. Except as otherwise expressly provided herein, all wntten notices, requests, demands or other communications to or upon the respective parties hereto shall be deemed to have been given or made when actually received, or in the case of telex or telecopler notice sent over a telex or a telecopier machine owned or operated by a party hereto, when sent. addressed as specified below or at such other address as either of the parties hereto or the Paying Agent may hereafter specify in writing to the others: If to the Obligor: > If to the Paying Agent: > If to Ambac: Ambac Assurance Corporation One State Street Plaza 17th Floor New York, New York 10004 Attention: General Counsel Section 5.09. Survival of Representations and Warranties. All representations, warranties and obligations contained herein shall survive the execution and delivery of this Agreement and the Surety Bond. Section 5.10. Governine Law. This Agreement and the rights and obligations of the parties under this Agreement shall be governed by and construed and interpreted in accordance with the laws of the State. Section 5.11. Countervarts. This Agreement may be executed in any number of copies and by the different parties hereto on the same or separate counterparts, each of which shall be deemed to be an original instrument. Complete counterparts of this Agreement shall be lodged with the Obligor and Ambac. Section 5.12. Severability. In the event any provision of this Agreement shall be held invalid or unenforceable by any court of competent jurisdiction, such holding shall not invalidate or render unenforceable any other provision hereof. IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of this Agreement to be duly executed and delivered as of the date first above written. OBLIGOR] Seal) Attest: By Title: Title: AMBAC ASSURANCE CORPORATION Attest: By Title: Title: 19 Jul! ;t . C FINANCING/USE AGREEMENT This Financing/Use Agreement (this "Agreement') is made to be effective as of the 15`h day of May, 2001, by and between the City of Southlake, Texas, a duly incorporated and existing municipal corporation and political subdivision of the State of Texas (the "City") and the Southlake Parks Development Corporation, a non-profit industrial development corporation organized and existing under the laws of the State of Texas, including Vernon's Ann. Civ. St., Section 413 of Article 5190.6, (the "Corporation") RECITALS WHEREAS, the Corporation on behalf of the City is to finance the purchase of land and making improvements thereto for neighborhood parks and making additional improvements to existing park land, including related road and streets improvements that enhance such park facilities (collectively, the "Project"); and WHEREAS, such financing contemplates the issuance and sale of the Corporation's tax exempt bonds in the principal amount of $4,690,000, and the proceeds of sale are to be used by the City to design and construct the Project; and WHEREAS, the City will have full responsibility for the design and construction of the Project and the Corporation shall have no duties or responsibilities with respect to the Project other than to provide for the financing of its costs; AGREEMENT 1. Financing of Project: For and in consideration of the City's covenants and agreements herein contained and subject to the terms contained herein, the Corporation hereby agrees to issue a series of obligations to b ' e known as "Southlake Parks Development Corporation Sales Tax Subordinate Lien Revenue Bonds, Series 2001", hereinafter called the Bonds", and deposit proceeds of sale of the Bonds (less amounts to pay costs of issuance, municipal bond insurance premium, surety bond insurance premium, and accrued interest) to the credit of a construction fund or account designated by the City, and the City hereby agrees and covenants that the proceeds of sale deposited to the credit of such construction account shall be used solely to pay the costs of the Project. 2. Use of Project. Until all the Bonds have been, fully paid, discharged and retired, the upkeep and maintenance of the Project will be the responsibility of the City and the Corporation shall have no responsibility with respect to the operation, upkeep and maintenance of the Project. 3. Recognition of Tax Exempt Financing. The City hereby acknowledges and recognizes that the Bonds are being issued as "state or local bonds" under and pursuant to section 103(a) of the Internal Revenue Code of 1986, as amended, and the City hereby covenants and agrees with respect to the use of proceeds of sale of the Bonds and the use of the Project as follows: a) Definitions. When used in this Section, the following terms have the following meanings: 45034291.1 Closing Date" means the date on which the Bonds are first authenticated and delivered to the initial purchasers against payment therefor. Code" means the Internal Revenue Code of 1986, as amended by all legislation, if any, effective on or before the Closing Date. Computation Date" has the meaning set forth in Section 1.148-1(b) of the Regulations. Gross Proceeds" means any proceeds as defined in Section 1.148-1(b) of the Regulations, and any replacement proceeds as defined in Section 1.148-1(c) of the Regulations, of the Bonds. Investment" has the meaning set forth in Section 1.148-1(b) of the Regulations. Nonpurpose Investment" means any investment property, as defined in section 148(b) of the Code, in which Gross Proceeds of the Bonds are invested and which is not acquired to carry out the governmental purposes of the Bonds. Rebate Amount" has the meaning set forth in Section 1.148-1(b) of the Regulations. Regulations" means any proposed, temporary, or final Income Tax Regulations issued pursuant to Sections 103 and 141 through 150 of the Code, and 103 of the Internal Revenue Code of 1954, which are applicable to the Bonds. Any reference to any specific Regulation shall also mean, as appropriate, any proposed, temporary or final Income Tax Regulation designed to supplement, amend or replace the specific Regulation referenced. Yield" of (1) any Investment has the meaning set forth in Section 1.148- 5 of the Regulations and (2) the Bonds has the meaning set forth in Section 1.148-4 of the Regulations. b) Not to Cause Interest to Become Taxable. The City shall not use, permit the use of, or omit to use Gross Proceeds or any other amounts (or any property the acquisition, construction or improvement of which is to be financed directly or indirectly with Gross Proceeds) in a manner which if made or omitted, respectively, would cause the interest on any Bond to become includable in the gross income, as defined in section 61 of the Code, of the owner thereof for federal income tax purposes. Without limiting the generality of the foregoing, unless and until the City receives a written opinion of counsel nationally recognized in the field of municipal bond law to the effect that failure to comply with such covenant will not adversely affect the exemption from federal income tax of the interest on any Bond, the City shall comply with each of the specific covenants in this Section. c) No Private Use or Private Payments. Except as permitted by section 141 of the Code and the Regulations and rulings thereunder, the City shall at all times prior to the last Stated Maturity of Bonds: 1) exclusively own, operate and possess all property the acquisition, construction or improvement of which is to be financed or refinanced directly or 45034291.1 2 indirectly with Gross Proceeds of the Bonds, and not use or permit the use of such Gross Proceeds (including all contractual arrangements with terms different than those applicable to the general public) or any property acquired, constructed or improved with such Gross Proceeds in any activity carried on by any person or entity (including the United States or any agency, department and instrumentality thereof) other than a state or local government, unless such use is solely as a member of the general public; and 2) not directly or indirectly impose or accept any charge or other payment by any person or entity who is treated as using Gross Proceeds of the Bonds or any property the acquisition, construction or improvement of which is to be financed or refinanced directly or indirectly with such Gross Proceeds, other than taxes of general application within the City or interest earned on investments acquired with such Gross Proceeds pending application for their intended purposes. d) No Private Loan. Except to the extent permitted by section 141 of the Code and the Regulations and rulings thereunder, the City shall not use Gross Proceeds of the Bonds to make or finance loans to any person or entity other than a state or local government. For purposes of the foregoing covenant, such Gross Proceeds are considered to be "loaned" to a person or entity if: (1) property acquired, constructed or improved with such Gross Proceeds is sold or leased to such person or entity in a transaction which creates a debt for federal income tax purposes; (2) capacity in or service from such property is committed to such person or entity under a take -or -pay, output or similar contract or arrangement; or (3) indirect benefits, or burdens and benefits of ownership, of such Gross Proceeds or any property acquired, constructed or improved with such Gross Proceeds are otherwise transferred in a transaction which is the economic equivalent of a loan. e) Not to Invest at Higher Yield. - Except to the extent permitted by section 148 of the Code and the Regulations and rulings thereunder, the City shall not at any time prior to the final Stated Maturity of the Bonds directly or indirectly invest Gross Proceeds in any Investment or use Gross Proceeds to replace money so invested), if as a result of such investment the Yield from the Closing Date of all Investments acquired with Gross Proceeds (or with money replaced thereby), whether then held or previously disposed of, exceeds the Yield of the Bonds. f) Not Federally Guaranteed. Except to the extent permitted by section 149(b) of the Code and the Regulations and rulings thereunder, the City shall not take or omit to take any action which would cause the Bonds to be federally guaranteed within the meaning of section 149(b) of the Code and the Regulations and rulings thereunder. g) Payment of Rebatable Arbitrage. Except to the extent otherwise provided in section 148(f) of the Code and the Regulations and rulings thereunder: 1) The City shall account for all Gross Proceeds (including all receipts, expenditures and investments thereof) on its books of account separately and apart from all other funds (and receipts, expenditures and investments thereof) and shall retain all records of accounting for at least six years after the day on which the last Outstanding Bond is discharged. However, to the extent permitted by law, the City may commingle Gross Proceeds of the Bonds with other money of the City, provided that the City separately accounts for each receipt and expenditure of Gross Proceeds and the obligations acquired therewith. 45034291.1 3 2) Not less frequently than each Computation Date, the City shall calculate the Rebate Amount in accordance with rules set forth in section 148(f) of the Code and the Regulations and rulings thereunder. The City shall maintain such calculations with its official transcript of proceedings relating to the issuance of the Bonds until six years after the final Computation Date. 3) As additional consideration for the purchase of the Bonds by the Purchasers and the use of the money represented thereby and in order to induce such purchase by measures designed to insure the excludability of the interest thereon from the gross income of the owners thereof for federal income tax purposes, the City shall remit to the Corporation for payment to the United States the amount described in paragraph (g)(2) above and the amount described in paragraph (g)(4) below, at the times, in the manner and accompanied by such forms or other information as is or may be required by Section 148(f) of the Code and the Regulations and rulings thereunder. 4) The City shall exercise reasonable diligence to assure that no errors are made in the calculations and payments required by paragraph (g)(2), and if an error is made, to discover and promptly correct such error within a reasonable amount of time thereafter (and in all events within one hundred eighty (180) days after discovery of the error), including the amount remitted to the Corporation for payment to the United States of any additional Rebate Amount owed to it, interest thereon, and any penalty imposed under Section, 1.148-3(h) of the Regulations. 4. Receipt and Transfer of Proceeds of Sales Tax. The City agrees, in cooperation with the Corporation, to take such actions as are required to cause the "Gross Sales Tax Revenues" as such term is defined in the resolution authorizing the issuance of the Bonds) received from the Comptroller of Public Accounts of the State of Texas for and on behalf of the Corporation to be transferred and deposited immediately upon receipt by the City to the credit of the banking or monetary fund maintained at the depository designated by the Corporation and known on the books and records of the Corporation as the "Pledged Revenue Fund". 5. Modifications. This Agreement shall not be changed orally, and no executory agreement shall be effective to waive, change, modify or discharge this Agreement in whole or in part unless such executory agreement is in writing and is signed by the parties against whom enforcement of any waiver, change, modification or discharge is sought. 6. Entire Agreement This Agreement, including the Exhibits, contains the entire agreement between the parties pertaining to the subject matter hereof and fully supersedes all prior agreements and understandings between the parties pertaining to such subject matter. 7. Counterparts. This Agreement may be executed in several counterparts, and all such executed counterparts shall constitute the same agreement. It shall be necessary to account for only one such counterpart in proving this Agreement. 8. Severability, If any provision of this Agreement is determined by a court of competent jurisdiction to be invalid or unenforceable, the remainder of this Agreement shall nonetheless remain in full force and effect. 4SOU291.1 4 9. Applicable Law. This Agreement shall in all respects be governed by, and construed in accordance with, the substantive federal laws of the United States and the laws of the State of Texas. 10. Captions. The section headings appearing in this Agreement are for convenience of reference only and are not intended, to any extent and for any purpose, to limit or define the text of any section or any subsection hereof. IN WITNESS WHEREOF, the parties hereto have executed this Agreement to be effective as of the date and year first above written. SOUTHLAKE PARKS DEVELOPMENT CORPORATION President, Board of Directors ATTEST: Secretary, Board of Directors Corporation Seal) CITY OF SOUTHLAKE, TEXAS Mayor ATTEST: City Secretary City Seal) 45034291.1 5 R SOUTRLAKE PARKS DEVELOPMENT CORPORATION Tarrant and Denton Counties) 4,690,000 SALES TAX SUBORDINATE LIEN REVENUE BONDS, SERIES 2001 BOND PURCHASE CONTRACT May 15, 2001 President and Members of the Board of Directors Southlake Parks Development Corporation 1400 Main Street Southlake, Texas 76092 Ladies and Gentlemen: The undersigned (the "Underwriter"), acting on its own behalf and not acting as fiduciary or agent for you, offers to enter into this Bond Purchase Contract (this "Purchase Contract") with the Southlake Parks Development Corporation (the "Issuer's which, upon the Issuer's acceptance of this offer as evidenced by its execution by the President, shall be binding upon the Issuer and upon the Underwriter. This offer is made subject to its acceptance by the execution of this Purchase Contract on or before 10:00 p.m., Central Time, on the date set out above, and, if not so accepted by the execution, will be subject to withdrawal by the Underwriter upon notice delivered to the Issuer at any time prior to its acceptance by the execution hereof. 1. Purchase Price. Upon the terms and conditions and upon the basis of the representations, warranties and covenants set forth herein, the Underwriter hereby agrees to purchase from the Issuer, and the Issuer hereby agrees to sell to the Underwriter, all (but not less than all) of the Issuer's $4,690,000 Sales Tax Subordinate Lien Revenue Bonds, Series 2001 (the Bonds"), which Bonds have the temis and features (including those with respect to redemption) F\WDOX\CLIENTS\004206\OOOITI0000672 NTD 12 set forth in the Official Statement (as hereinafter defined in Paragraph 4 hereof). The Bonds shall have the maturities, bear interest from the specified date at the rates, and have the other characteristics and terms as set forth on Exhibit "A," which is attached hereto and incorporated herein by reference. The purchase price for all of the Bonds will be (i) $4,657,188.80 (which represents the par amount of the Bonds, less an underwriting discount of $32,811.20), plus (11) accrued interest on the Bonds, calculated on the basis of a 360 -day year of twelve 30 -day months, from May 15, 2001 to the date of Closing. The Bonds shall be as described in, and shall be issued pursuant to a resolution adopted by the Issuer's Board of Directors (the "Resolution's authorizing the issuance of the Bonds. The Bonds shall be issued in accordance with the provisions of the Resolution and secured as provided therein and as described in the Official Statement. Capitalized terms used herein that are not otherwise defined shall have the meanings ascribed to them in the Resolution. 2. Securitv DeMit. Delivered to the Issuer herewith is the good -faith corporate check of the Underwriter, payable to the order of the Issuer in an amount equal to one percent 1%) of the aggregate par amount of the Bonds (the "Check"). In the event the Issuer does not accept this offer, the Check shall be promptly returned to the Underwriter. Upon the Issuer's acceptance of this offer by the execution hereof, the Check (i) shall not be cashed or negotiated but shall be held and retained in safekeeping by the Issuer as security for the performance by the Underwriter of its obligations, subject to the terms and conditions herein set forth, to purchase and accept delivery of the Bonds at the Closing, and (H) shall be applied and disposed of by the Issuer solely as provided in this Purchase Contract. In the event of the Underwriter's compliance with such obligations to purchase and accept delivery of the Bonds at the Closing, the Check shall be returned to the Underwriter at the Closing. In the event of the failure by the Issuer to deliver the Bonds at the Closing or if the Issuer shall be unable to satisfy the conditions to the obligations of the Underwriter contained in this Purchase Contract, or if the obligations of the Underwriter shall be terminated for any reason permitted by this Purchase Contract, the Check shall be returned promptly to the Underwriter. In the event that the Underwriter falls (other than for a reason permitted hereunder) to purchase and accept delivery of the Bonds at the Closing, then the Issuer shall become entitled to cash or to negotiate the Check and the proceeds thereof shall be retained by the Issuer as and for full liquidated damages for such failure and for any and all defaults on the part of the Underwriter and such proceeds shall constitute a full release and discharge of all claims and damages for such failure and for any and all such defaults. The Underwriter agrees not to stop payment on the Check unless the issuer has breached the terms of this Purchase Contract. 3. Public Offering. The Underwriter hereby agrees to make an initial bona fide public offering of all the Bonds at prices not in excess of the initial offering prices (or Yields) set forth on the inside cover pages of the Official Statement, plus accrued interest on the Bonds, F \V=X\CLIM4TS\004206\OM17\IOM72.W?D 12 2 reserving the right to change such prices or yields as the Underwriter shall deem necessary in connection with the offering of the Bonds without any requirement of prior notice. The Underwriter may offer and sell the Bonds to certain dealers (including dealers depositing Bonds into investment trusts) and others at prices lower than the public offering prices (or yields higher than the public offering yields) stated on the inside cover page of the Official Statement; provided however, that at least ten (10) percent of each maturity of the Bonds sold shall be at the prices set forth in the Official Statement. 4. Resolution: Official Statement. Simultaneously with the execution of this Purchase Contract, the Issuer will deliver (or cause to be delivered) to the Underwriter one copy of the Resolution, duly executed, approved and adopted and in full force and effect. The Issuer hereby authorizes the Underwriter to use the Resolution in connection with the public offering and sale of the Bonds. The Issuer has heretofore delivered to the Underwriter copies of the Preliminary Official Statement related to the Bonds, dated May 1, 2001 (the "Preliminary Official Statement'), for the Underwriter's use in determining interest in the Bonds. The Issuer ratifies, confirms and approves the use by the Underwriter, prior to the date hereof, of the Preliminary Official Statement and the information contained therein in connection with the public offering of the Bonds under the circumstances and conditions contained therein and herein. On a date no more than seven (7) business days following the date of the Issuer's acceptance hereof, the Issuer shall deliver to the Underwriter copies of the final Official Statement related to the Bonds approved by duly authorized officials of the Issuer in sufficient number to permit the Underwriter to comply with the requirements of Rule 15c2-12 (the "Rule") of the Securities and Exchange Commission. Such final Official Statement shall be dated the date hereof and shall be substantially in the form of the Preliminary Official Statement (which Official Statement, including the cover page thereto, all exhibits, appendices, maps, pictures, diagrams, reports and statements included or incorporated therein or attached thereto, and all amendments and supplements that may be authorized for use with respect to the Bonds approved by duly authorized officials of the Issuer, is herein called the "Official Statement") with such changes as are permitted by the Rule to reflect the pricing of the Bonds. The Issuer authorizes the preparation of the Official Statement and the information contained therein to be used in connection with the public offering and sale of the Bonds under the circumstances and conditions contained therein and herein. 5. Renresentations. Warranties and Covenants. The Issuer represents and warrants to the Underwriter (and it shall be a condition of the obligation of the Underwriter to purchase and accept delivery of the Bonds that the Issuer shall so represent and warrant as of the date of the Closing) that: F \ W DOX\CLIENTS\004206MO17\10000672 WPD / 2 a) Existence; Power: and Authority. The Issuer is a non-profit industrial development corporation duly organized and operating under the laws of the State of Texas and has full legal right, power and authority (i) to issue the Bonds, (ii) to authorize the preparation of the Preliminary Official Statement and the Official Statement and to authorize their use and distribution by the Underwriter, (iii) to enter into this Purchase Contract and to sell and deliver the Bonds to the Underwriter as provided herein, (iv) to adopt the Resolution and to cant' out and consummate the actions contemplated thereby, and (v) to carry out and consummate all other transactions contemplated by each of the aforesaid documents; b) Due Authorization. The Issuer's Board of Directors has duly adopted the Resolution (which is in full force and effect at the time of the execution hereof] and has duly approved the execution and delivery of this Purchase Contract, the Official Statement and the Bonds, and has duly authorized the taking of any and all such actions as may be required on the part of the Issuer to carry out, give effect to and consummate the transactions contemplated by this Purchase Contract, the Official Statement and the Bonds; c) No Adverse Actions. At the time of the Issuer's acceptance of this offer by the execution hereof, there is, and at the date of the Closing there will be, no action, suit, proceeding, inquiry or investigation, at law or in equity, or before or by any court, public board or body, pending or known to be threatened against or affecting the existence of the Issuer or the title of its officials to their respective positions, nor to the best of the knowledge of the Issuer is there any basis therefor, wherein an unfavorable decision, ruling or finding would adversely affect the validity or enforceability of the Resolution, the Bonds, this Purchase Contract or any agreement or instrument relating thereto, used or contemplated for use in the consummation of the transactions contemplated by this Purchase Contract or the Official Statement; d)1-9 Defaults. The Issuer is not, in any material respect which would adversely affect the validity of the Bonds, in breach of or default under any applicable law or administrative regulation of the State of Texas or any department, division, agency or instrumentality thereof, or of the United States or any agency or instrumentality thereof or any applicable judgment or decree or any loan agreement, note, resolution, certificate, agreement or other instrument to which the Issuer is a party or is otherwise subject; and to the knowledge of the Issuer after due diligence the execution and delivery of the Official Statement and the execution and delivery of this Purchase Contract, the Bonds and the Resolution, and compliance with the provisions of each thereof, will not conflict with or constitute a material breach of or default under any applicable law or administrative regulation of the State of Texas or any department, division, agency or instrumentality thereof, or of the United States or any agency or instrumentality thereof or any applicable F.\WDOMCL1ENTSNW4206"17\10000672.WIV / 2 4 judgment or decree or any loan agreement, note, resolution, certificate, agreement or other instrument to which the Issuer is a party or is otherwise subject; e) All Annrovals. As of the Closing, all approvals, consents and orders of any governmental authority, board, agency or commission having jurisdiction which would constitute a condition precedent to the performance by the Issuer of its obligations hereunder and under the Resolution, the Bonds and this Purchase Contract will have been obtained; f) Validity of the Bonds. The Bonds, this Purchase Contract and the Resolution conform to the descriptions thereof contained in the Official Statement; and the Bonds, when issued, authenticated and delivered in accordance with the Resolution and sold to the Underwriter, as provided in this Purchase Contract, will be duly authorized, validly issued and outstanding obligations of the Issuer secured in the manner provided in the Resolution and described in the Official Statement and entitled to the benefits of the Resolution; g) Financial Information. The financial information of the Issuer, including the historical sales tax information contained in the Official Statement, and the excerpts from the financial statements of the City of Southlake, Texas contained in the Official Statement present fairly the financial position of the Issuer as of September 30, 2000, and the results of its operations for its fiscal year then ended, in conformity with generally accepted accounting principles applied on a basis consistent with that of the preceding year except as noted therein), and except as described in the Official Statement, there has been no material adverse change in the financial position of the Issuer since such date; h) Accuracy of Information in Official Statement. At the time of the Issuer's acceptance hereof and (unless the Official Statement is amended or supplemented pursuant to subparagraph 0) of this Paragraph 5) at all times subsequent thereto up to and including the date of the Closing, the Official Statement (including the excerpts from the financial statements and other financial and statistical data included therein) does not and will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; i) Accuracy of Information in Official Statement After Amendment or Supplement. If the Official Statement is amended or supplemented pursuant to subparagraph 0) of this Paragraph 5, at the time of each supplement or amendment thereto and at all times subsequent thereto up to and including the date of the Closing, the Official Statement, as so supplemented or amended (including the financial statements and other financial and statistical data included therein), will not contain any untrue statement of a F IWMX\CLIENTS\DM206VO011\10000672.WPD/ 2 5 material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; j) Amending or Sunulementing Official Statement, The Issuer shall not revise, amend or supplement the Official Statement unless such revision, amendment or supplement has been previously approved by the Underwriter. If between the date of this Purchase Contract and the 91st day following the date of the Closing an event occurs of which the Issuer has knowledge and which would cause the Official Statement to contain any untrue statement of a material fact or to omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, the Issuer shall notify the Underwriter, and if in the opinion of the Issuer or the Underwriter, such event requires an amendment or supplement to the Official Statement, the Issuer will, at its expense, amend and supplement the Official Statement in a form and in a manner jointly approved by the Issuer and the Underwriter; k) Prohibition Against Incurring Debt. Except as described in the Official Statement, between the date of this Purchase Contract and the delivery of the Bonds, the Issuer will not, without the prior written consent of the Underwriter, issue bonds, certificates, notes or other obligations for borrowed money which are or would be payable from or constitute a charge on the taxes or revenues pledged to secure the payment of the Bonds in the Resolution, and between the respective dates as of which information is given in the Official Statement and the date of the delivery of the Bonds, the Issuer has not incurred and will not incur any material long-term liabilities (except that the Issuer may issue or incur, without the prior written consent of the Underwriter, any debt described in the Official Statement); 0) AnnGcation of Proceeds. The Issuer will apply the proceeds of the Bonds for the purposes, and in accordance with the description of the application of such proceeds, set forth in the Official Statement; m) Maintaining Tax-Ezemntion of Interest on the Bonds. The Issuerwill not take or omit to take any action which will adversely affect the exclusion from income for federal income tax purposes of the interest on the Bonds; and the Issuer has not been notified of any listing or proposed listing by the Internal Revenue Service to the effect that the Issuer is a bond issuer whose arbitrage certificates may not be relied upon; and n) Blue Skv. The Issuer will furnish such inforn ation, execute such instruments and take such action in cooperation with the Underwriter as the Underwriter may reasonably request (i) to qualify the Bonds for offer and sale under the Blue Sky or F'\ WDOX\CLIQJTSW04206\00017\1000%n. WM / 2 V other securities laws and regulations of such state and other jurisdictions in the United States as the Underwriter may designate, and (ii) to continue such qualifications in effect so long as required for the distribution of the Bonds; provide however, that the Issuer will not be required to qualify as a foreign corporation or otherwise to do business or to file any general or special consents to service of process under the laws of any state. 6. Delivery of, and Pavment for. the Bonds.. At or before 10:00 a.m., Central Time, on June 14, 2001, or on such other date as may be mutually agreed upon by the Issuer and the Underwriter, the Issuer will deliver the Bonds to The Depository Trust Company ("DTC") in New York, New York in such form as shall be acceptable to DTC (which shall include printed or typewritten obligations if and to the extent required by DTC), registered in the name of such nominee of DTC as it shall require, and deliver to the Underwriter the other documents required by this Agreement. Subject to the terms and conditions hereof, the Underwriter will accept such delivery and pay the purchase price of the Bonds as set forth in Paragraph 1 hereof in immediately available funds. Concurrent with such payment, the Issuer shall return the Check to the Underwriter. The actions relating to the payment for, and delivery of the Bonds, is herein above and hereafter called the "Closing." The Underwriter shall furnish, and the Issuer shall cause, CUSIP identification numbers to be inserted on the Bonds, but neither the failure to insert such numbers on any Bonds nor any error with respect thereto shall constitute cause for a failure or refusal by the Underwriter to accept and pay for the Bonds in accordance with the terms of this Agreement. 7. Survival of Representations and Warranties. Unless otherwise set forth herein, the representations and agreements in this Purchase Contract shall remain operative and in full force and effect regardless of any investigation made by or on behalf of the Underwriter and shall survive the delivery of the Bonds hereunder for a period of ninety (90) days following the Closing. 8. Certain Conditions to Underwriter's Obligations . The Underwriter's obligation hereunder to purchase and pay for the Bonds shall be subject to the performance by the Issuer of its obligations hereunder in all material respects at or prior to the Closing and the accuracy in all material respects of the Issuer's representations and warranties contained herein and shall also be subject to the following conditions, any one or more of which may be waived by the Underwriter: a) Continued Full Force and Effect of Documents. That at the time of the Closing, the Resolution, the Official Statement and all related actions of the Issuer with respect to the issuance of the Bonds shall be in full force and effect and shall not have been amended, modified or supplemented, except as may have been agreed to by the Underwriter; F \ W DOX\CLIENTS\W4206\OW 1710000672 "D/ 2 7 b) No Default in Pavment of Debt Service. That the Issuer shall not have failed to pay principal of or interest on, when due, any of its outstanding obligations for borrowed money, c) Documents to be Received by the Underwriter. That, at the Closing, the Underwriter shall receive a copy of each of the following documents: 1) Official Statement. The Official Statement of the Issuer executed on behalf of the Issuer, with such amendments, modifications or supplements thereto as may have been previously approved by the Underwriter; 2) Resolution. The Resolution certified by the Issuer's Secretary as having been duly adopted by the Board of Directors of the Issuer, 3) Issuer's Certificate. A certificate of a duly authorized official of the Issuer that the Resolution has not been amended, modified, supplemented or repealed, except as contemplated hereby or as may have been agreed to by the Underwriter in writing, and are in full force and effect; 4) Bond Counsel's Opinion. Opinion of bond counsel, Fulbright & Jaworski. L.L.P., Dallas, Texas ("Bond Counsel'), dated as of the date of Closing, in form and substance of Appendix C to the Official Statement; 5) Bond Counsel's SuniDlemental ODinion. A supplemental opinion of the Issuer's Bond Counsel, dated as of the date of Closing, addressed to the Issuer and the Underwriter, to the effect that i) this Purchase Contract has been duly authorized, executed and delivered by the Issuer and is a legal, valid and binding agreement, enforceable in accordance with its terms (provided that such opinion may contain the customary exceptions regarding bankruptcy and equitable principles); (ii) the Bonds and the Resolution conform with the terms and provisions thereof summarized in the Official Statement; (iii) the offering and sale of the Bonds are not required to be registered under the Securities Act of 1933, as amended, (iv) the Resolution is not required to be qualified under the Trust Indenture Act of 1939, as amended, and (v) the information relating to the Bonds and the Resolution appearing in the Official Statement under the captions "INTRODUCTION," "THE F NWMOX\CLlM4TS\004206\OW17\10OW672.W?D 12 8 W BONDS" (except for the subcaptions "Book -Entry -Only System" and Use of Bond Proceeds"), "SELECTED PROVISIONS OF THE BOND RESOLUTION," "TAX MATTERS," and the subcaptions Legal Investments and Eligibility to Secure Public Funds in Texas," Registration and Qualification of Bonds for Sale," "Legal Matters," and Continuing Disclosure ofInformation" (except for "Compliance with Prior Undertakings") under the caption "OTHER INFORMATION' fairly and accurately summarizes the provisions of the law, documents and other matters referred to therein; such opinion also shall contain a provision to the effect that the opinion referred to in subparagraph (4) above may be relied upon by the Underwriter to the same extent as if such opinion were addressed to them; 6) Certificate as to Tax Exemntion A certificate signed by an authorized official of the Issuer setting forth facts, estimates and circumstances in existence on the date of the Closing, which facts, estimates and circumstances shall be sufficiently set forth therein to support the conclusion that it is not expected that the proceeds of the Bonds will be used in a manner or that the Issuer will take any action or omit to take any action that would cause the Bonds to be "arbitrage bonds," within the meaning of the Internal Revenue Code of 1986, as amended (the Code"), and the regulations, temporary regulations and proposed regulations promulgated under the Code, and stating that to the best of the knowledge and belief of such official there are no other facts, estimates or circumstances that would materially affect such expectations; 7) Counsel to the Underwriter's Opinion An opinion, dated as of the date of Closing and addressed to the Underwriter, of Delgado, Acosta, Braden & Jones, P.C., El Paso, Texas ("Counsel to the Underwriter"), to the effect that (i) the offer and sale of the Bonds are not required to be registered under the Securities Act of 1933, as amended, and (ii) the Resolution is not required to be qualified under the Trust Indenture Act of 1939, as amended. In addition, such firm shall state that without having undertaken to determine independently the accuracy or completeness of the statements contained in the Official Statement, based upon such counsel's participation in the preparation of the Official Statement, nothing has come to such counsel's attention which gives such counsel reason to believe that the Official Statement as of the date of this Purchase Contract and as of the date of the Closing (except for financial statements and other financial and statistical data as to which no view need be expressed) contained or contains any untrue statement of a material F \WWX\CL1ENTS\W4206"1710000672 NTD / 2 9 EAMbrY D fact or omitted or omits to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; 8) Issuer's Closine Certificate. A certificate, dated as of the date of the delivery of the Bonds and signed by a duly authorize,-' official of the Issuer to the effect that (i) the representations, warranties and covenants of the Issuer contained herein are true and correct in an material respects on and as of the date of the delivery of the Bonds, with the same effect as if made on the date of the delivery of the Bonds by the Issuer; (H) except as described in the Official Statement, no litigation is pending or, to the best of such official's knowledge and belief, threatened in any court in any way affecting the existence of the Issuer or the tides of its officials to their respective positions, or seeking to restrain or to enjoin the issuance, sale or delivery of the Bonds, or the levy and collection of ad valorem taxes by the Issuer (other than appeals of tax assessments) or the application of revenues and assets of the Issuer or in any way contesting or affecting the validity or enforceability of the Bonds, the Resolution or this Purchase Contract, or contesting in any way the completeness or accuracy of the Preliminary Official Statement or the Official Statement, or contesting the powers of the Issuer or its authority with respect to the Bonds, the Resolution or this Purchase Contract; (iii) as of the date of the Closing, the official statement (including the appendices thereto) of the Issuer does not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; (iv) no event affecting the Issuer has occurred since the date of the Official Statement to the date of the Closing which should be disclosed in the Official Statement for the purposes for which A is to be used or which it is necessary to disclose therein in order to make the statements and information therein not misleading in any respect; and V) the issuer has complied m all material respects with all the agreements and satisfied all material conditions on its part to be performed or satisfied at or prior to the delivery of the Bonds; 9) Attornev General's ODinion. The approving opinion of the Attorney General of the State of Texas in respect of the Bonds; 10) Comptroller's Registration Certificate. The registration certificate of the Comptroller of Public Accounts ofthe State of Texas in respect of the Bonds; ' FAWD0X\CL1WMM4206"1-At0W%n-WPD 12 10 Lkim, t D 11) Rating Letters. Evidence of minimum ratings of Moodv's Investors Service, Inc. of "Aaa." Standard & Poor's, A Division of The McGraw-Hill Companies, Inc. of "AAA," and Fitch Inc. of AAA" on the Bonds, in a form acceptable to the Underwriter; 12) Bond Insurance Policv. Copy of the policy of municipal bond guaranty insurance issued by Ambac Assurance Corporation (or such other municipal bond insurer which is acceptable to the Underwriter) insuring payment of the principal of, and interest on, the Bond, together with the customary opinions of its legal counsel in a form satisfactory to Bond Counsel and Counsel to the Underwriter; 13) Additional Certificates. Instruments and Ooinions.. Such additional certificates, instruments or opinions as Bond Counsel or Counsel to the Underwriter may deem necessary or desirable. d) Issuer's Performance of Obligations. That the Issuer shall perform or have performed in all material respects at or prior to the Closing all of the Issuer's obligations required under or specified in this Purchase Contract to be performed at or prior to the Closing. All certificates, instruments, opinions and documents referred to above shall be in form and substance satisfactory to Bond Counsel and Counsel to the Underwriter. If the Issuer should be unable to satisfy the conditions to the obligations of the Underwriter to pay for the Bonds contained in this Purchase Contract or if the obligations of the Underwriter shall be terrriinated for any reason permitted hereby, this Purchase Contract shall terminate, the Check shall be returned to the Underwriter and neither the Underwriter nor the Issuer shall be under further obligation hereunder, except that the respective obligations of the Issuer and the Underwriter set forth in Paragraphs 7 and 12 hereof shall continue in M force and effect. 9. Termination of Purchase Contract by the Underwriter The Underwriter may terminate this Purchase Contract by notification in writing or by telegram to the Issuer if at any time subsequent to the date hereof and at or prior to the Closing: (i) in the Congress of the United States, legislation shall be enacted, a bill shall be favorably reported out of committee to either house or a bill to amend the Internal Revenue Code of 1986, as amended (which, if enacted, would take effect in whole or in part as of a date prior to the Closing or be applied to the Bonds), shall be filed in either house, or a decision by a court of the United States shall be rendered, or a regulation or ruling shall be issued or proposed by or on behalf of the Department of the Treasury or the Internal Revenue Service of the United States, or any other agency of the federal government, or a release or official statement shall be issued by the President, the Department of F %WWX\CLIENTS\004206MO17\IMM72.WPD 12 11 the Treasury or the Internal Revenue Service ofthe United States, with respect to federal taxation of interest received on obligations of the same character as the Bonds, which, in the reasonable opinion of the Underwriter, materially adversely affects the market for the Bonds or the sale, at the contemplated offering price, by the Underwriter of the Bonds; or (ii) a stop order, ruling, regulation proposed regulation or statement by or on behalf of the Securities and Exchange Commission shall be issued or made to the effect that the issuance, offering or sale of the Bonds without registration thereof, or obligations of the general character of the Bonds without registration thereof, is in violation of any provisions of the Securities Act of 1933, as amended; or (iii) in the Congress of the United States, legislation shall be enacted or a bill shall be favorably reported out of committee of either house, or a decision by a court of the United States shall be rendered, or ruling, regulation, proposed regulation or statement by or on behalf of the Securities and Exchange Commission or other governmental agency having jurisdiction of the subject matter shall be made, to the effect that securities of the Issuer or of any similar public body are not exempt from the registration, qualification or other requirements of the Securities Act of 1933, as amended, or that the Resolution or similar documents authorizing the issuance of the Bonds or debt instruments of the general character of the Bonds are required to be qualified under the Trust Indenture Act of 1939, as amended; or (iv) the United States shall have become engaged in hostilities (including the escalation of any hostility existing on the date hereof, whether or not foreseeable), the effect of which, in the Underwriter's sole opinion, would materially adversely affect the market price of the Bonds; or (v) there shall have occurred a general suspension of trading on the New York Stock Exchange, Inc. or there shall be imposed upon trading in securities generally by any governmental authority or by any national securities exchange any material restrictions (other than a limitation on the hours of trading) not in force on the date hereof, or (vi) a general banking moratorium shall have been declared by the United States, State of Texas or State of New York authorities; or (vii) an event shall have occurred which, in the opinion of the Underwriter, requires an amendment or supplement to the Official Statement and which, in the reasonable judgment of the Underwriter, materially adversely affects the marketability of the Bonds or the market price thereof; or (viii) the ratings of the Bonds (or of the Issuer's other outstanding debt obligations) are revised downward or withdrawn completely) from those established as of the date of this Purchase Contract. 10. Receipt for the Bonds. At the Closing, contemporaneously with the receipt of the Bonds by the Underwriter, the Underwriter will, if requested, deliver to the Issuer a receipt therefor, in form satisfactory to Bond Counsel, signed by the Underwriter. 11. Reproduction of Bond Counsel's Opinion on the Bonds. The opinion of Bond Counsel as described in Paragraph 8(c)(4) shall accompany the Bonds deposited with DTC, and may be reproduced on, or attached to, the Bonds in the event of discontinuance of the Book - Entry -Only System. 12. Pavment of Expenses. The Issuer shall pay, from the proceeds of the sale of the Bonds or other available funds, upon or promptly after the Closing: (a) the cost of the preparation F \woox\cuexrs\004206 [ AlOON6n. WPD / 2 12 and printing of the Bonds, if any; (b) the costs of obtaining credit ratings and the cost of bond insurance premiums, if any; (c) the fees and disbursements of Bond Counsel and of any other counsel or consultants retained by the Issuer; (d) the costs of preparing, printing and mailing the Preliminary Official Statement and the Official Statement; (e) the fees and expenses of the Paying Agent/Registrar; (f) any legally required publication expenses; (g) the out-of-pocket expenses, including the cost of travel, of any officials of the Issuer; and (h) any other expenses agreed to by the Issuer to be reasonably considered expenses of the Issuer which are incident to the transactions contemplated hereby. The Underwriter shall pay the fees and disbursements of Counsel to the Underwriter and the out-of-pocket expenses incurred by the Underwriter. The Issuer shall be under no obligation to pay any fees or expenses other than those specified in the preceding paragraph. 13. Continuing Disclosure. The Issuer shall provide certain periodic information and notices of material events relating to the Bonds at the times and in the manner specified in Section 42 of the Resolution relating to the Bonds arid in accordance with the Rule. 14. Notices. Any notice to be given to the Issuer under this Purchase Contract may be given by delivering the same to the Issuer, at the address indicated above, Attention: President with copies to the Board of Directors), and any such notice to be given to the Underwriter may be given by delivering such notice to J. P. Morgan Securities, Inc., 2200 Ross Avenue, 8`h Floor, Dallas, Texas 75201, Attention: Joseph T. LaBate. 15. Benefit of Representations and Warranties. The agreements and all representations and warranties herein set forth have been and are made for the benefit of the Underwriter and the Issuer; and no other person shall acquire or have any right under or by virtue of this Purchase Contract. Any certificate, document or other instrument signed by an authorized officer or agent of the Issuer and delivered to the Underwriter pursuant to the terms and provisions hereof shall be deemed to be a representation and warranty made by the Issuer to the Underwriter as to the statements made therein. 16. Entire Agreement. This Purchase Contract constitutes the entire agreement, understanding, representations, warranties and obligations of the parties hereto with respect to the transactions contemplated hereby and shall become effective upon the acceptance of this offer by the execution and the counter execution hereof as provided, and shall be valid and enforceable as of the time of such acceptance. 17. Counterparts. This Purchase Contract and any amendments hereto may be executed in one or more counterparts, each of which shall be deemed to be an original by the party executing such counterpart, but all of which shall be considered one and the same instrument. F\ W DOX\CLIENTs\00420"W I T 10000672. WPD 12 13 I1. 18. Governing. —Law. This Purchase Contract shall be governed by and construed in accordance with the laws of the State of Texas and the United States of America. 19. Section Headings. The section headings of this Purchase Contract are for convenience of reference only and shall not affect its interpretation. 20. UnderwriterCaDacity. Any authority, right, discretion or other power conferred upon the Underwriter under any provision of this Purchase Contract may be exercised by the Underwriter, and the Issuer shall be entitled to rely upon any request, notice or statement if the same shall have been given or made by the Underwriter. Execution page follows] F.\WDOX\CLIENTS=4206"IIUOOW672-WPO 12 14 APPROVED AND ACCEPTED AS OF THE DATE FIRST ABOVE WRITTEN: SOUTHLAKE PARKS DEVELOPMENT CORPORATION Name: Title: ATTEST: Secretary Very truly yours, J P MORGAN Name: Title: SIGNATURE PAGE TO BOND PURCHASE CONTRACT F-\WDOX\CLIENTSND04206=017 10000672.NTD 12 I EXHIBIT "A" SOUTHLAKE PARKS DEVELOPMENT CORPORATION 4,690,000 SALES TAX SUBORDINATE LIEN REVENUE BONDS, SERIES 2001 MATURITY SCHEDULE The Bonds shall become due and payable on the dates, in principal amounts and bear interest at the rate(s) per annum in accordance with the following schedule: 4,690,000 5.600% Term Bonds Due August 15, 2031, Yield 5.600% The Terris Bonds are subject to mandatory sinldng fund redemption on the dates and in the amounts set forth below: Principal Date Amount August 15) 560,000.00 2025 590,000.00 2026 620,000.00 2027 660,000.00 2028 695,000.00 2029 730,000.00 2030 835,000.00 2031 Accrued interest from May 15, 2001 to be added.) DATED DATE: May 15, 2001 REDEMPTION OPTION The Issuer reserves the right, at its option, to redeem Bonds having stated maturities on and after August 15, 2025, in whole or in part in principal amounts of $5,000 or any integral multiple thereof, on February 15, 2011, or any date thereafter, at the par value thereof plus accrued interest to the date of redemption. F.\WDOX\CLIENTSWW206\DO0I7\10000672.WPD/ 2 A-1 Ey D Exhibit E to Resolution DESCRIPTION OF ANNUAL FINANCIAL INFORMATION The following information is referred to in Section 42 of this Resolution. Annual Financial Statements and Operating Data The financial information and operating data with respect to the City to be provided annually in accordance with such Section are as specified (and included in the Appendix or under the headings of the Official Statement referred to) below: 1. The financial statements of the Corporation appended to the Official Statement as Appendix B, but for the most recently concluded fiscal year. 2. The information in Tables 1 through 5 of the Official Statement. Accounting Principles The accounting principles referred to in such Section are the generally accepted accounting principles as applicable to governmental units as prescribed by The Government Accounting Standards Board. 45031282 E-1