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R-05-02-24-9A2 - 2/24/2005STATE OF TEXAS COUNTY OF WILLIAMSON CITY OF ROUND ROCK I, Christine R. Martinez, City Secretary of the City of Round Rock, Texas do hereby certify that the attached Resolution is a true and correct copy of a resolution passed and adopted by the City Council of the City of Round Rock, Texas, at a meeting held on the 24th day of February, 2005. W ESSED by my hand and seal of the City of Round Rock, Texas on this 16 day of �, 2005. Christine R. Martinez, City Secretary City of Round Rock, Texas R- 0 `- o -0, - 9A, RESOLUTION NO. R -05-02-24-9A2 WHEREAS, the Council of the City of Round Rock, Texas, has previously consented to the creation of The Meadows at Chandler Creek Municipal Utility District, and WHEREAS, The Meadows at Chandler Creek Municipal Utility District (the "District") is a conservation and reclamation district, a body corporate and politic and governmental agency of the State of Texas, created under Article XVI, Sec. 59 of the Texas Constitution by order of the Texas Water Commission, now the Texas Commission on Environmental Quality ("the TCEQ"), and the District operates under Chapters 49 and 54 of the Texas Water Code, as amended, and WHEREAS, the City of Round Rock previously granted its consent to the creation of the District, and the City, the District and Nash Phillips/Copus, Inc. entered into an "Agreement Concerning Creation and Operation of The Meadows at Chandler Creek Municipal Utility District" (the "Consent Agreement"), which sets forth the terms and conditions for creation and operation of the District, and WHEREAS, the District issued its Combination Unlimited Tax and Revenue Refunding Bonds, Series 1999, dated July 1, 1999, in the original aggregate principal amount of $1,410,000 (the "1999 Bonds"), of which an aggregate principal amount of $1,300,000 remains outstanding, and WHEREAS, the District proposes to issue bonds (the "Series 2005 Bonds") to refund all of the remaining outstanding 1999 Bonds in order to provide for a gross debt service savings and net present value savings, and @PFDesktop\::ODMA/WORLDOX/O:/WDOX/RESOLUTI/R50224A2.WPD/SC WHEREAS, the Consent Agreement provides that the issuance of bonds be approved by the City Council of the City of Round Rock, Texas, and WHEREAS, the District has submitted to the City for review and approved a substantial draft of the 2005 Bond Order and requested approval of the District's Series 2005 Bonds, Now Therefore BE IT RESOLVED BY THE COUNCIL OF THE CITY OF ROUND ROCK, TEXAS THAT, 1. The issuance by the District of the Series 2005 Bonds in an amount not to exceed $1,300,000 is hereby approved. 2. The City Council approves the substantial draft of the 2005 Bond Order and Preliminary Official Statement for the Series 2005 Bonds, the form and substance of which are attached as Exhibit "A", which is incorporated by reference hereto. The City Council hereby finds and declares that written notice of the date, hour, place and subject of the meeting at which this Resolution was adopted was posted and that such meeting was open to the public as required by law at all times during which this Resolution and the subject matter hereof were discussed, considered and formally acted upon, all as required by the Open Meetings Act, Chapter 551, Texas Government Code, as amended. RESOLVED this 24th day of February, 2005. ST:. flikth;YLO culbtor, CHRISTINE R. MARTINEZ, City Secre ry NYS'►' EL ' , Mayor City Round Rock, Texas 2 THE MEADOWS AT CHANDLER CREEK MUNICIPAL UTILITY DISTRICT $1,300,000 Combination Unlimited Tax and Revenue REFUNDING Bonds, Series 2005 BOND ISSUE SUMMARY 2004 Assessed Valuation (provided by WCAD): $192,678,173 Gross Debt Outstanding (On 3/I5/05 at closing): $ 8,810,000 This is a refunding the amount of debt will be the same as it is now Ratio of Gross Debt to 2004 Assessed Valuation: 4.57% Estimated Direct & Overlapping Net Debt: $ 17,851,129 Est. Ratio of Direct & Overlapping Net Debt to 2004 A.V.: 9.26% Average Annual Debt Service Requirement (2006/2008) of the Bonds and the Outstanding Bonds (Average Req.): $ 833,712 Debt Service Fund Balance as of December 21, 2004: $ 846,614 Authorized but Un -issued Bonds: $ 1,835,000 At this time, the District does not anticipate issuing any additional debt. 2004 Tax Rate DIS $0.4378 O&M $0.1896 $0.6274 Number of active single-family connections: 1,416 Estimated population: 5,114 1999 Refunding Bonds current debt service 2005 NEW Refunding Bonds - NEW D/S Cumulative Savings Gross PV Debt Service Savings Net Present Value Benefit Equals $2,098,470 $1,926,842 $ 171,628 $157,598.75 7.607% The Meadows @ Chandler Creek MUD $1,300,000 U/L Tax Refunding Bonds, Series 2005 FSA Insured Debt Service Schedule Part 1 of 2 Date Principal Coupon Interest Total P+I 08/01/2005 - - 19,055.11 19,055.11 02/01/2006 50,000.00 2.650% 25;220.00 75,220.00 08/01/2006 - - 24,557.50 24,557.50 02/01/2007 50,000.00 2.850% 24,557.50 74,557.50 08/01/2007 - 23,845.00 23,845.00 02/01/2008 55,000.00 3.000% 23,845.00 78,845.00 08/01/2008 23,020.00 23,020.00 02/01/2009 55,000.00 3.150% 23,020.00 78,020.00 08/01/2009 - 22,153.75 22,153.75 02/01/2010 55,000.00 3.300% 22,153.75 77,153.75 08/01/2010 - - 21,246.25 21,246.25 02/01/2011 55,000.00 3.450% 21,246.25 76,246.25 08/01/2011 - 20,297.50 20,297.50 02/01/2012 65,000.00 3.550% 20,297.50 85,297.50 08/01/2012 19,143.75 19,143.75 02/01/2013 65,000.00 3.650% 19,143.75 84,143.75 08/01/2013 - - 17,957.50 17,957.50 02/01/2014 70,000.00 3.750% 17,957.50 87,957.50 08/01/2014 16,645.00 16,645.00 02/01/2015 70,000.00 3.850% 16,645.00 86,645.00 08/01/2015 - 15,297.50 15,297.50 02/01/2016 80,000.00 3.950% 15,297.50 95,297.50 08/01/2016 - - 13,717.50 13,717.50 02/01/2017 75,000.00 4.050% 13,717.50 88,717.50 08/01/2017 - 12,198.75 12,198.75 02/01/2018 85,000.00 4.150% 12,198.75 97,198.75 08/01/2018 - 10,435.00 10,435.00 02/01/2019 95,000.00 4.250% 10,435.00 105,435.00 08/01/2019 - 8,416.25 8,416.25 02/01/2020 95,000.00 4.350% 8,416.25 103,416.25 08/01/2020 - 6,350.00 6,350.00 02/01/2021 90,000.00 4.450% 6,350.00 96,350.00 08/01/2021 - 4,347.50 4,347.50 02/01/2022 90,000.00 4.550% 4,347.50 94,347.50 08/01/2022 - - 2,300.00 2,300.00 02/01/2023 100,000.00 4.600% 2,300.00 102,300.00 Total $1,300,000.00 $568,132.61 $1,868,132.61 Series 2005 Final 1 SINGLE PURPOSE 1 2/11/2005 1 10:20 AM SAMCO Capital Markets Public Finance Page 2 DRAFT ORDER AUTHORIZING THE ISSUANCE OF $1,300,000 THE MEADOWS AT CHANDLER CREEK MUNICIPAL UTILITY DISTRICT COMBINATION UNLIMITED TAX AND REVENUE REFUNDING BONDS, SERIES 2005 Adopted: February 15, 2005 ORDER AUTHORIZING THE ISSUANCE OF $1,300,000 THE MEADOWS AT CHANDLER CREEK MUNICIPAL UTILITY DISTRICT COMBINATION UNLIMITED TAX AND REVENUE REFUNDING BONDS, SERIES 2005 THE STATE OF TEXAS COUNTY OF WILLIAMSON § § Recitals WHEREAS, at an election held in the District on July 13, 1985 (the "election"), the District was authorized to issue bonds in the maximum amount of $13,000,000 for the purpose or purposes of purchasing, constructing, acquiring, owning, operating, repairing, improving, or extending a waterworks system, sanitary sewer system, and drainage and storm sewer system, including, but not limited to, all additions to such systems and all works, improvements, facilities, plants, equipment, appliances, interests in property, and contract rights needed therefor and administrative facilities needed in connection therewith, and all expenses incidental thereto, including expenses incidental to the organization, administration, and financing of the District, and to provide for the payment of principal of and interest on such bonds by the levy and collection of a sufficient tax upon all taxable property within the District and by a pledge of all or any designated part or parts of the net revenues resulting from the ownership or operation of the District's works, improvements, facilities, plants, equipment, and appliances, or under specific contracts; WHEREAS, the election was called and held under and in strict conformity with the Constitution and laws of the State of Texas, and of the United States of America, and the Board of Directors has heretofore officially declared the results of the election and declared that the District was legally created and authorized to issue the bonds described above; WHEREAS, to construct the various phases of a waterworks, sanitary sewer, and drainage and storm sewer systems within the District, the District previously issued its $2,450,000 Waterworks and Sewer System Combination Unlimited Tax and Revenue Bonds, Series 1987 (the "Series 1987 Bonds"), and in reliance upon the authority of Chapter 1207 of the Texas Government Code, its $2,124,995.80 Combination Unlimited Tax and Revenue Refunding Bonds, Series 1994 (the "Series 1994 Refunding Bonds"); WHEREAS, in addition, for the purpose of acquiring water, sewage, and drainage facilities, the District previously issued its $1,410,000 Combination Unlimited Tax and Revenue Bonds, Series 1999, (the "Series 1999 Bonds"), its $1,950,000 Combination Unlimited Tax and Revenue Bonds, Series 2001 (the "Series 2001 Bonds"), its $5,355,000 Combination Unlimited Tax and Revenue Bonds, Series 2003 (the "Series 2003 Bonds"); and its $1,010,000 Combination Unlimited Tax and Revenue Refunding Bonds, Series 2004 (the "Series 2004 Bonds"); WHEREAS, prior to the issuance of the Bonds, no portion of the Series 1987 Bonds or Series 1994 Bonds remain outstanding, and $1,300,000 of the Series 1999 Bonds remain outstanding; WHEREAS, the District desires to refund the $1,300,000 aggregate principal outstanding of the Series 1999 Bonds (the "Refunded Obligations") by issuing $1,300,000 in refunding bonds (the "Bonds") pursuant to the authority granted under Chapter 1207 of the Texas Government Code; WHEREAS, the Board of Directors of the District has found and determined that the issuance of the Bonds (i) is in the best interests of the District to restructure the District's debt and (ii) will result in a gross savings of $157,598.75 and a net present value savings of $98,889.19; WHEREAS, upon the issuance of the Bonds herein authorized and payment in full of the Refunded Obligations, the Refunded Obligations shall no longer be outstanding and the pledges, liens, trust, and all other covenants, provisions, terms, and conditions of the order authorizing the issuance of the Refunded Obligations shall be discharged, terminated, and defeased, and $1,300,000 of the Series 1999 Bonds, and $1,300,000 of the Bonds will remain outstanding; and WHEREAS, the District has been authorized to levy taxes, and the taxes to be collected, together with the net revenues from the operation of the District's waterworks and sanitary sewer system to be constructed or acquired, will be sufficient to make the principal and interest payments on the outstanding bonds and the Bonds authorized by this Order; IT IS, THEREFORE, ORDERED BY THE BOARD OF DIRECTORS OF THE MEADOWS AT CHANDLER CREEK MUNICIPAL UTILITY DISTRICT THAT: ARTICLE I DEFINITIONS, FINDINGS, AND INTERPRETATION Section 1.1. Definitions. For all purposes of this Order, unless the context requires a different meaning or except as otherwise expressly provided, the following terms shall have the meanings assigned to them below: "Additional Bonds" means bonds or other evidences of indebtedness which the District 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 Article XI hereof. "Board" means the Board of Directors of the District. "Bonds" shall mean the $1,300,000 The Meadows at Chandler Creek Municipal Utility District Combination Unlimited Tax and Revenue Refunding Bonds, Series 2005 authorized to be issued by this Order and certified or authenticated and delivered hereunder. "Bond Date" shall mean March 15, 2005. "Bond Purchase Agreement" shall mean the agreement dated as of February 15, 2005 and entered into by the District and the Purchaser relating to the sale and purchase of the Bonds. "Business Day" means any day which is not a Saturday, Sunday, or a day on which the Paying Agent/Registrar is authorized by law or executive order to remain closed. "Closing Date" means the date of initial delivery of and payment for the Bonds, which shall be March 15, 2005. "Code" shall mean the Internal Revenue Code of 1986, as amended by any amendments thereto enacted prior to the Closing Date. "Debt Service Fund" shall mean the District's Debt Service Fund established in Section 7.2 of this Order. "Definitive Bonds" shall mean the Initial Bond, as may be transferred and converted into or exchanged for fully registered Bonds. "Depository Bank" means any financial institution duly designated by the Board of Directors of the District to serve as a depository for funds controlled by the Board of Directors of the District. "District" shall mean The Meadows at Chandler Creek Municipal Utility District. "Event of Default" means any event of default as provided in Section 12.1 hereof. 2 "Fiscal Year" means the twelve month accounting period used by the District in connection with the operation of the System which may be any twelve consecutive month period established by the District. "Governmental Obligations" shall mean direct obligations of, or obligations which are fully and unconditionally guaranteed by (including obligations issued or held in book entry form on the books of) the United States of America. "Initial Bond" shall mean the Initial Bond authorized to be issued hereunder which shall be registered by the Comptroller of Public Accounts of the State of Texas, as contemplated by Section 2.4 hereof. "Interest Payment Date" shall mean with respect to any installment of interest on any Bond the date specified in such Bond as the fixed date on which any such installment of interest is due and payable. "Maturity Date" or "Maturity" when used with respect to any Bond shall mean the date on which the principal of such Bond becomes due and payable as therein provided, whether at the Stated Maturity, by redemption, or otherwise. "Paying Agent/Registrar Agreement" shall mean the agreement between the District and the Paying Agent/Registrar referred to in Section 4.1 pursuant to which the Paying Agent/Registrar will perform the duties required hereunder. "Paying Agent/Registrar" shall mean Southside Bank, Tyler, Texas until a successor Paying Agent/Registrar shall have been appointed pursuant to the applicable provisions of this Order, and thereafter "Paying Agent/Registrar" shall mean such successor Paying Agent/Registrar. "Person" shall mean any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, or government or any agency or political subdivision thereof. "Place of Payment" shall mean the designated office of the Paying Agent/Registrar in Tyler, Texas. "Purchaser" shall have the meaning stated in Section 11.1 hereof. "Record Date" for the interest payable on any Interest Payment Date shall mean the fifteenth calendar day (whether or not a business day) of the month next preceding such Interest Payment Date. "Refunded Obligations" shall mean The Meadows at Chandler Creek Municipal Utility District Combination Unlimited Tax and Revenue Bonds, Series 1999. "Register" shall mean the books of registration kept by the Paying Agent/Registrar, a copy of which shall be maintained in the District's office, in which are maintained the names and addresses of, and the principal amounts of the Bonds registered to, each Registered Owner. "Registered Owner" shall mean any person who shall be the registered owner of any outstanding Bond. "Regulations" shall mean the temporary or final income tax regulations applicable to the Bonds issued pursuant to sections 103 and 141 through 150 of the Code. Any reference to a section of the Regulations shall also refer to any successor provision to such section hereafter promulgated by the Internal Revenue Service pursuant to sections 103 and 141 through 150 of the Code and applicable to the Bonds. 3 "Order" shall mean this order authorizing the issuance of the Bonds. "Special Payment Date" shall have the meaning stated in Section 2.3 hereof. "Special Record Date" shall have the meaning stated in Section 2.3 hereof. "Stated Maturity" when used with respect to any Bond shall mean the date specified in such Bond as the fixed date on which the principal of such Bond is due and payable. "System" shall mean the waterworks and sewer system owned and operated by the District together with any additions and extensions thereto, and any interest in the capacity of a regional system or systems, and improvements and replacements thereof whatsoever acquired or constructed. The System shall not include certain facilities which, while owned by the District, are acquired or constructed to perform contracts between the District and other persons, including private corporations, municipalities, and political subdivisions, and which are financed by proceeds of the District's revenue bonds issued particularly to finance facilities needed to perform such contracts. Section 1.2. Findings. The declarations, determinations and fmdings declared, made and found in the preamble to this Order are hereby adopted, restated and made a part of the operative provisions hereof. Section 1.3. Table of Contents, Titles and Headings. The table of contents, titles, and headings of the Articles and Sections of this Order have been inserted for convenience of reference only and are not to be considered a part hereof and shall not in any way modify or restrict any of the terms or provisions hereof and shall never be considered or given any effect in construing this Order or any provision hereof or in ascertaining intent, if any question of intent should arise. Section 1.4. Interpretation. (a) Unless the context requires otherwise, words of the masculine gender shall be construed to include correlative words of the feminine and neuter genders and vice versa, and words of the singular number shall be construed to include correlative words of the plural number and vice versa. (b) This Order and all the terms and provisions hereof shall be liberally construed to effectuate the purposes set forth herein to sustain the validity of the Bonds and the validity of the taxes levied in payment thereof. ARTICLE II AUTHORIZATION; GENERAL TERMS AND PROVISIONS REGARDING THE BONDS Section 2.1. Authorization. The District's bonds to be designated the "THE MEADOWS AT CHANDLER CREEK MUNICIPAL UTILITY DISTRICT COMBINATION UNLIMITED TAX AND REVENUE REFUNDING BONDS, SERIES 2005" are hereby authorized to be issued and delivered in accordance with the Constitution and the laws of the State of Texas, particularly Section 59 of Article XVI of the Constitution of the State of Texas, Chapters 49 and 54 of the Texas Water Code, as amended, and Chapter 1207, Texas Government Code, as amended. The Bonds shall be issued in the total aggregate amount of One Million Three Hundred Thousand and No/100 Dollars ($1,300,000) for the purpose of refunding the Refunded Obligations in order to restructure the District's debt and achieve debt service savings. Section 2.2. Date, Number, Maturities, and Interest. (a) The Bonds shall have a Bond Date of March 15, 2005. The Bonds shall be issued as fully registered Bonds, without coupons, and shall be numbered consecutively from R-1 upwards. 4 (b) The Bonds shall mature on February 1 in the years and in the amounts, and shall bear interest at the per annum rates shown on Exhibit A, attached hereto and incorporated herein. (c) Interest shall accrue and be paid on each Bond respectively until its Maturity from the later of the Closing Date or the most recent Interest Payment Date to which interest has been paid or provided for at the per annum rate specified in subsection (b) above. Such interest shall be payable semiannually on February 1 and August 1 of each year, commencing August 1, 2005, computed on the basis of a 360 -day year of twelve 30 -day months. Section 2.3. Medium, Method, and Place of Payment. (a) The District will duly and punctually pay the principal of and interest on the Bonds in accordance with their terms in lawful money of the United States of America and shall deposit with the Paying Agent/Registrar on or before each Interest Payment Date funds sufficient to pay the principal of and interest on the Bonds then due, as otherwise provided in this Section. (b) Interest on the Bonds shall be paid to the Registered Owners thereof as shown in the Register at the close of business on the Record Date by check (dated as of the Interest Payment Date) and sent by the Paying Agent/Registrar to the person entitled to such payment, first class United States mail, postage prepaid, to the address of such person as it appears in the Register, or by such other customary banking arrangements acceptable to the Paying Agent/Registrar and the person to whom interest is paid; provided, however, that such person shall bear all risk and expense of such other customary banking arrangement. (c) The principal of each Bond shall be paid to the Registered Owner of such Bond on the due date thereof (whether at the maturity date or the date of prior redemption thereof) upon presentation and surrender of such Bond at the designated office of the Paying Agent/Registrar. (d) If the specified date for any payment of principal of or interest on the Bonds shall be a Saturday, Sunday, or legal holiday or equivalent (other than a moratorium) for banking institutions generally in the city in which the Payment Place of the Paying Agent/Registrar is located, such payment may be made on the next succeeding day which is not one of the foregoing days without additional interest and with the same force and effect as if made on the specified date for such payment. (e) In the event of nonpayment of interest on a Bond on an Interest 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 District. Notice of the Special Record Date and of the scheduled payment date of the past due interest (the "Special Payment Date" that shall be fifteen (15) days after the Special Record Date) shall be sent at least five (5) business days prior to the Special Record Date by United States mail, first class, postage prepaid, to the address of each Registered Owner of a Bond appearing on the books of the Paying Agent/Registrar at the close of business on the last business day next preceding the date of mailing of such notice. (f) Unclaimed payments shall be segregated in a special escrow account and held in trust, uninvested by the Paying Agent/Registrar, for the account of the Registered Owners to which the unclaimed payments pertain. Subject to Title 6 of the Texas Property Code, payments remaining unclaimed by the Registered Owners entitled thereto for three years after the applicable payment shall be applied to the next payment or payments on the Bonds thereafter coming due and, to the extent any such money remains after the retirement of all outstanding Bonds, shall be paid to the District to be used for any lawful purpose. Thereafter, neither the District, the Paying Agent/Registrar, nor any other person shall be liable or responsible to any Registered Owners of such Bonds for any further payment of such unclaimed money or on account of any such Bonds, subject to Title 6 of the Texas Property Code. 5 Section 2.4. Execution and Initial Registration. (a) The Bonds shall be executed on behalf of the District by the President or Vice President and Secretary or Assistant Secretary of the Board, by their manual or facsimile signatures, and the official seal of the District shall be impressed or placed in facsimile thereon. Such facsimile signatures on the Bonds shall have the same effect as if each of the Bonds had been signed manually and in person by each of said officers, and such facsimile seal on the Bonds shall have the same effect as if the official seal of the District had been manually impressed upon each of the Bonds. (b) In the event that any officer of the District whose manual or facsimile signature appears on the Bonds ceases to be such officer before the authentication of such Bonds or before the delivery thereof, such manual or facsimile signature nevertheless shall be valid and sufficient for all purposes as if such officer had remained in such office. (c) Except as provided below, no Bond shall be valid or obligatory for any purpose or be entitled to any security or benefit of this Order unless and until there appears thereon the Certificate of Paying Agent/Registrar substantially in the form provided herein, duly authenticated by manual execution by an officer or duly authorized signatory of the Paying Agent/Registrar. It shall not be required that the same officer or authorized signatory of the Paying Agent/Registrar sign the Certificate of Paying Agent/Registrar on all of the Bonds. In lieu of the executed Certificate of Paying Agent/Registrar described above, the Initial Bond delivered at the Closing Date shall have attached thereto the Comptroller's Registration Certificate substantially in the form provided herein, manually executed by the Comptroller of Public Accounts of the State of Texas, or by his duly authorized agent, which Certificate shall be evidence that the Bond has been duly approved by the Attorney General of the State of Texas, that it is a valid and binding obligation of the District, and that it has been registered by the Comptroller of Public Accounts of the State of Texas. (d) On the Closing Date, one Initial Bond representing the entire principal amount of the Bonds, payable to the Purchaser or its designee, executed by manual or facsimile signature of the President and Secretary of the Board, approved by the Attorney General, and registered and manually signed by the Comptroller of Public Accounts, will be delivered to the Purchaser or its designee. Upon payment for the Initial Bond, the Paying Agent/Registrar, pursuant to written instructions from the Purchaser or its designee, if so requested, shall cancel the Initial Bond and deliver to the Purchaser one registered Definitive Bond for each year of maturity of the Bonds in the aggregate principal amount of all Bonds for such maturity, registered in the name of the Purchaser. Section 2.5. Ownership. (a) The District, the Paying Agent/Registrar, and any other person may treat the person in whose name any Bond is registered as the absolute Registered Owner of such Bond for the purpose of making and receiving payment of the principal, for the further purpose of making and receiving payment of the interest thereon (subject to the terms of this Order requiring the Paying Agent/Registrar to make payments of interest to the person who is the Registered Owner on the Record Date or the Special Record Date), and for all other purposes, whether or not such Bond is overdue, and neither the District nor the Paying Agent/Registrar shall be bound by any notice or knowledge to the contrary. (b) All payments made to the person deemed to be the Registered Owner in accordance with this Section shall be valid and effectual and shall discharge the liability of the District and the Paying Agent/Registrar upon such Bond to the extent of the sums paid. Section 2.6. Registration, Transfer, and Exchange. (a) So long as any Bonds remain outstanding, the District shall cause the Paying Agent/Registrar to keep at its designated office and at the District's offices, a register (the "Register") in which, subject to such reasonable regulations as it may prescribe, the Paying Agent/Registrar shall provide for the registration and transfer of Bonds in accordance with this Order. 6 (b) Any Bond may be exchanged only in compliance with federal securities laws and upon the presentation and surrender thereof at the designated office of the Paying Agent/Registrar, together with a written request therefor duly executed by the Registered Owner or assignee or assignees thereof, or its or their duly authorized attorney or representatives, with guarantees of signatures satisfactory to the Paying Agent/Registrar, for a Bond of the same maturity and interest rate and in an aggregate principal amount equal to the unpaid principal amount of the Bond presented for exchange. To the extent possible, a new Bond will be required to be delivered by the Paying Agent/Registrar to the Registered Owner of the Bond in not more than three (3) business days after receipt of the Bond to be exchanged in proper form and with proper instructions directing such exchange. (c) Each Bond issued in exchange for any Bond assigned or transferred shall be of the same tenor and shall have the same maturity date and bear interest at the same rate and in the same manner as the Bond for which it is being exchanged. The Paying Agent/Registrar shall exchange the Bonds as provided herein, and each substitute Bond delivered in accordance with this Section shall constitute an original additional contractual obligation of the District and shall be entitled to the benefits and security of this Order to the same extent as the Bond in lieu of which such substitute Bond is delivered. (d) The District will pay the Paying Agent/Registrar's reasonable and customary charge for the initial registration of the Bonds and the subsequent exchange of the Bonds pursuant to the provisions hereof; however, the Paying Agent/Registrar will require the Registered Owner to pay a sum sufficient to cover any tax or other governmental charge that is authorized to be imposed in connection with the registration, transfer or exchange of a Bond. In addition, the District hereby covenants with the Registered Owners of the Bonds that it will (i) pay the reasonable and standard or customary fees and charges of the Paying Agent/Registrar for its services with respect to the payment of the principal of and interest on the Bonds, when due, and (ii) pay the fees and charges of the Paying Agent/Registrar for services with respect to the transfer, registration and exchange of Bonds as provided herein to the extent such fees and charges are payable hereunder by the District. Section 2.7. Cancellation and Authentication. (a) All Bonds paid and all Bonds in lieu of which exchange Bonds or replacement Bonds are authenticated and delivered in accordance with this Order, shall be canceled and proper records shall be made regarding such payment, exchange, or replacement. The Paying Agent/Registrar shall then return such canceled Bonds to the District or may in accordance with law destroy such canceled Bonds and periodically furnish the District with certificates of destruction of such Bonds. (b) Each substitute Bond issued in exchange for or replacement of (pursuant to the provisions of Section 2.9 hereof) any Bond or Bonds issued under this Order shall have printed thereon a Paying Agent/Registrar's Authentication Certificate (the "Certificate"), in the form hereinafter set forth. An authorized representative of the Paying Agent/Registrar shall, before the delivery of any such bond, manually sign and date such Certificate, and no such Bond shall be deemed to be issued or outstanding unless such Certificate is so executed. No additional resolutions or orders need be passed or adopted by the District or any other body or person so as to accomplish the foregoing exchange or replacement of any Bond or portion thereof, and the Paying Agent/Registrar shall provide for the printing, execution, and delivery of the substitute Bonds in the manner prescribed herein. Pursuant to Section 1203.021 et seq. of the Texas Government Code, as amended, and particularly Section 1203.042 thereof, the duty of exchange or replacement of Bonds as aforesaid is hereby imposed upon the Paying Agent/Registrar, and, upon the execution of the Certificate, the exchanged or replaced Bonds shall be valid, incontestable, and enforceable in the same manner and with the same effect as the Bonds which originally were delivered pursuant to this Order, approved by the Attorney General, and registered by the Comptroller of Public Accounts. Section 2.8. Temporary Bonds. (a) Pending the preparation of definitive Bonds, the proper officers of the District may execute and, upon the District's request, the Paying Agent/Registrar shall authenticate and deliver, one or more temporary Bonds that are printed, lithographed, typewritten, mimeographed, or otherwise produced, 7 substantially of the tenor of the definitive Bonds in lieu of which they are delivered, without coupons and with such appropriate insertions, omissions, substitutions, and other variations as the officers of the District executing such temporary Bonds may determine, as evidenced by their signing of such temporary Bonds. (b) Until exchanged for Bonds in definitive form, such Bonds in temporary form shall be entitled to the benefit and security of this Order. (c) The District, without unreasonable delay, shall prepare, execute, and deliver to the Paying Agent/Registrar the Bonds in defmitive form and thereupon, upon the presentation and surrender of the Bond or Bonds in temporary form to the Paying Agent/Registrar, the Paying Agent/Registrar shall authenticate and deliver in exchange therefor a Bond or Bonds of the same maturity and series, in definitive form, and in the same aggregate principal amount as the Bond in temporary form surrendered. Such exchange shall be made without the making of any charge therefor to any Registered Owner. Section 2.9. Replacement Bonds. (a) Upon the presentation and surrender to the Paying Agent/Registrar of a mutilated Bond, the Paying Agent/Registrar shall authenticate and deliver in exchange therefor a replacement Bond of like tenor and principal amount, bearing a number not contemporaneously outstanding. The District or the Paying Agent/Registrar may require the Registered Owner of such Bond to pay a sum sufficient to cover any tax or other governmental charge that is authorized to be imposed in connection therewith and any other expenses connected therewith. (b) In the event that any Bond is lost, apparently destroyed or wrongfully taken, the Paying Agent/Registrar, pursuant to the applicable laws of the State of Texas and in the absence of notice or knowledge that such Bond has been acquired by a bona fide purchaser, shall authenticate and deliver a replacement Bond of like tenor and principal amount, bearing a number not contemporaneously outstanding, provided that the Registered Owner first: (i) furnishes to the Paying Agent/Registrar satisfactory evidence of his or her ownership of and the circumstances of the loss, destruction or theft of such Bond; (ii) furnishes such security or indemnity as may be required by the Paying Agent/Registrar to save it and the District harmless; (iii) pays all expenses and charges in connection therewith, including, but not limited to, printing costs, legal fees, fees of the Paying Agent/Registrar and any tax or other governmental charge that is authorized to be imposed; and (iv) satisfies any other reasonable requirements imposed by the District and the Paying Agent/Registrar. (c) If, after the delivery of such replacement Bond, a bona fide purchaser of the original Bond in lieu of which such replacement Bond was issued presents for payment such original Bond, the District and the Paying Agent/Registrar shall be entitled to recover such replacement Bond from the person to whom it was delivered or any person taking therefrom, except a bona fide purchaser, and shall be entitled to recover upon the security or indemnity provided therefor to the extent of any loss, damage, cost, or expense incurred by the District or the Paying Agent/Registrar in connection therewith. (d) In the event that any such mutilated, lost, apparently destroyed, or wrongfully taken Bond has become or is about to become due and payable, the Paying Agent/Registrar, in its discretion, instead of issuing a replacement Bond, may pay such Bond if it has become due and payable or may pay such Bond when it becomes due and payable. 8 (e) Each replacement Bond delivered in accordance with this Section shall constitute an original additional contractual obligation of the District and shall be entitled to the benefits and security of this Order to the same extent as the Bond in lieu of which such replacement bond is delivered. ARTICLE III REDEMPTION OF BONDS BEFORE MATURITY Section 3.1. Limitation on Redemption. The Bonds shall be subject to redemption before their scheduled maturity only as provided in this Article. Section 3.2. Optional Redemption. The Bonds are subject to optional redemption, in whole, on any Interest Payment Date, for a redemption price of par plus accrued interest to the date of redemption. ARTICLE IV PAYING AGENT/REGISTRAR Section 4.1. Appointment of Paying Agent/Registrar. (a) Southside Bank, Tyler, Texas is hereby appointed as the initial Paying Agent/Registrar for the Bonds. (b) The President and the Vice President of the Board or either of them, and the Secretary and any Assistant or Acting Secretary of the Board, or any of them, are hereby authorized and directed to execute an agreement with the Paying Agent/Registrar for the Bonds. Section 4.2. Qualifications of Paying Agent/Registrar. Every Paying Agent/Registrar appointed hereunder shall be a commercial bank, trust company organized under the laws of the State of Texas, or other entity duly qualified and legally authorized to serve as, and perform the duties and services of, paying agent and registrar for the Bonds. Every Paying Agent/Registrar shall maintain the Register at a location in the State of Texas Section 4.3. Maintaining Paying Agent/Registrar. (a) At all times while any Bonds are outstanding, the District will maintain a Paying Agent/Registrar that is qualified under Section 4.2 of this Order. (b) If the Paying Agent/Registrar resigns or otherwise ceases to serve as such, the District will promptly appoint a replacement. Section 4.4. Termination of Paying Agent/Registrar. (a) The District reserves the right to appoint a successor Paying Agent/Registrar by (i) filing with the entity then performing such functions a certified copy of a resolution or order giving thirty (30) days notice of the termination of the appointment, stating the effective date of such termination and (ii) appointing a successor Paying Agent/Registrar. (b) If a Paying Agent/Registrar is replaced, such Paying Agent/Registrar, promptly upon the appointment of the successor, will deliver the Register (or a copy thereof) and all other pertinent books and records relating to the Bonds to the successor Paying Agent/Registrar. 9 Section 4.5. Notice of Change of Paying Agent/Registrar to Registered Owners. Promptly upon each change in the entity serving as Paying Agent/Registrar, the District will cause notice of the change to be sent to each Registered Owner by first class United States mail, postage prepaid, at the address in the Register, stating the effective date of the change and the name and mailing address of the replacement Paying Agent/Registrar. Section 4.6. Agreement of Paying Agent/Registrar to Perform Duties and Functions. By accepting the appointment as Paying Agent/Registrar, the Paying Agent/Registrar is deemed to have agreed to the provisions of this Order and that it will perform the duties and functions of Paying Agent/Registrar prescribed hereby. Section 4.7. Delivery of Records to Successor. If a Paying Agent/Registrar is replaced, such Paying Agent/Registrar, promptly upon the appointment of the successor, will deliver the Register (or a copy thereof) and all other pertinent books and records relating to the Bonds to the successor Paying Agent/Registrar. ARTICLE V FORM OF BONDS Section 5.1. Form. The form of the Bonds, including the form of the Paying Agent/Registrar's Authentication Certificate, the form of Assignment, and the form of Registration Certificate of the Comptroller of Public Accounts of the State of Texas, which shall be attached or affixed to the Bonds initially issued, shall be, respectively, substantially in the form set forth in this Article, with such additions, deletions, and variations as may be necessary or desirable and not prohibited by this Order: (a) Form of Bonds. (Face of Bond) UNITED STATES OF AMERICA STATE OF TEXAS COUNTY OF WILLIAMSON REGISTERED REGISTERED NUMBER AMOUNT R- $ THE MEADOWS AT CHANDLER CREEK MUNICIPAL UTILITY DISTRICT COMBINATION UNLIMITED TAX AND REVENUE REFUNDING BONDS, SERIES 2005 Maturity Date Closing Date Bond Date Interest Rate March 15, 2005 March 15, 2005 THE MEADOWS AT CHANDLER CREEK MUNICIPAL UTILITY DISTRICT (the "District"), in the County of Williamson, State of Texas, for value received, hereby promises to pay to or registered assigns, but solely from the sources and in the manner hereinafter provided, on the Maturity Date specified above, the sum of ONE MILLION THREE HUNDRED THOUSAND DOLLARS and to pay interest on such principal amount from the later of the Closing Date set forth above or the most recent interest payment date to which interest has been paid or provided for until payment of such principal amount has been paid or provided for, at the per annum rate shown above, computed on the basis of a 360 -day year of twelve 30 -day months, such interest to be paid semiannually on February 1 and August 1 of each year, commencing August 1, 2005. 10 THE PRINCIPAL OF THIS BOND SHALL BE PAYABLE without exchange or collection charges in lawful money of the United States of America upon presentation and surrender of this Bond at the designated office of the Paying Agent/Registrar or any successor thereto executing the registration certificate appearing hereon. Interest on this Bond is payable by check, dated as of the interest payment date, mailed by the Paying Agent/Registrar to the registered owner at the address shown on the registration books kept by the Paying Agent/Registrar or by such other customary banking arrangements acceptable to the Paying Agent/Registrar and the person to whom interest is paid; provided, however, that such person shall bear all risk and expense of such other customary banking arrangements. For the purpose of the payment of interest on this Bond, the registered owner shall be the person in whose name this Bond is registered at the close of business on the "Record Date," which shall be the fifteenth day of the month next preceding such interest payment date. In the event of a nonpayment of interest on a scheduled payment date, and for thirty 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 District. Notice of the Special Record Date and of the scheduled payment date of the past due interest (the "Special Payment Date," which date shall be fifteen days after the Special Record Date) shall be sent at least five business days prior to the Special Record Date by United States mail, first class, postage prepaid, to the address of each owner of a Bond appearing on the books of the Paying Agent/Registrar at the close of business on the last Business Day next preceding the date of mailing of such notice. IF THE DATE FOR THE PAYMENT of the principal of or interest on this Bond is not a Business Day, the date for such payment shall be the next succeeding Business Day, and payment on such date shall for all purposes be deemed to have been made on the original date payment was due. THIS BOND IS ONE OF A SERIES of fully registered bonds specified in the title hereof, dated as of March 15, 2005, issued in the aggregate principal amount of $1,300,000 (herein referred to as the "Bonds"), and issued pursuant to the authority provided by the Constitution and laws of the State of Texas, particularly Chapters 49 and 54 of the Texas Water Code, as amended, Chapter 1207 of the Texas Government Code, as amended, and by the authority of a certain order of the District (the "Order") for the purpose of refunding the Refunded Obligations (as defined in the Order). Capitalized terms used herein and not otherwise defined shall have the meaning assigned thereto in the Order. THE BONDS ARE SUBJECT to optional redemption in whole on any Interest Payment Date, for a redemption price of par plus accrued interest to the date of redemption. AS PROVIDED 1N THE ORDER and subject to certain limitations therein and herein set forth, this Bond is transferable upon compliance with federal securities laws and surrender of this Bond for transfer at the designated corporate trust office of the Paying Agent/Registrar with such endorsement or other evidence of transfer as is acceptable to the Paying Agent/Registrar, and, thereupon, one or more new fully registered Bonds of the same Stated Maturity, bearing the same rate of interest, and for the same aggregate principal amount will be issued to the designated transferee or transferees. THE DISTRICT, THE PAYING AGENT/REGISTRAR, and any other person may treat the person in whose name this Bond is registered as the owner hereof for the purpose of receiving payment as herein provided (except interest shall be paid to the person in whose name this Bond is registered on the Record Date) and for all other purposes, whether or not this Bond be overdue, and neither the District, the Paying Agent/Registrar, nor any such agent shall be affected by notice to the contrary. IT IS HEREBY CERTIFIED, RECITED, AND COVENANTED that this Bond has been duly and validly issued and delivered; that all acts, conditions and things required or proper to be performed, to exist, and to be done precedent to or in the issuance and delivery of this Bond have been performed, exist and have been done in accordance with law; and that annual ad valorem taxes, without legal limit as to rate or amount, sufficient to provide for the payment of the interest on and principal of this Bond, as such interest comes due and such principal matures, have been levied and ordered to be levied against all taxable property in the District and have been pledged irrevocably for such payment. 11 IT IS FURTHER CERTIFIED, RECITED, AND COVENANTED that certain net revenues to be derived from the ownership and operation of the District's waterworks and sanitary sewer system also have been pledged to the payment of the interest on and principal of the Bonds to the extent that ad valorem taxes levied and collected for the payment thereof, together with other amounts on deposit in the District's Debt Service Fund, are insufficient for such purpose, all as set forth in the Order, to which reference is made for all particulars, and that such Order also permits the District and its successors to issue obligations secured in whole or in part by lien on and pledge of such net revenues on a parity with or subordinate to the lien securing the Bonds. Reference is hereby made to the Order for a complete description of the terms, conditions, and provisions pursuant to which the Bonds are secured and made payable and the respective rights thereunder of the registered owners of the Bonds and of the District and of the Paying Agent/Registrar. By acceptance of this Bond, the registered owner hereof expressly assents to all of the provisions of the Order. IN WITNESS WHEREOF, this Bond has been signed with the manual or facsimile signature of the President of the Board of Directors and countersigned with the manual or facsimile signature of the Secretary (or the Assistant Secretary) of the Board of Directors, and the official seal of the District has been duly impressed, or placed in facsimile, on this Bond. The Meadows at Chandler Creek Municipal Utility District President, Board of Directors Secretary, Board of Directors (SEAL) (b) Form of Comptroller's Registration Certificate. [to be printed on Initial Bond only] COMPTROLLER'S REGISTRATION CERTIFICATE OFFICE OF THE COMPTROLLER OF PUBLIC ACCOUNTS STATE OF TEXAS § § REGISTER NO. 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 that this Bond has been registered by the Comptroller of Public Accounts of the State of Texas. (SEAL) WITNESS MY SIGNATURE AND SEAL this 12 XXXXXXXXXXXXXXXXXXXX Comptroller of Public Accounts of the State of Texas (c) Form of Registrar's Authentication Certificate. [to be printed on Definitive Bonds only] AUTHENTICATION CERTIFICATE It is hereby certified of this Bond, in exchange for Attorney General of the State Texas. that this Bond has been delivered pursuant to the Order described in the text or in replacement of a bond of a series which was originally approved by the of Texas and registered by the Comptroller of Public Accounts of the State of (d) Form of Assignment. ASSIGNMENT SOUTHSIDE BANK Tyler, Texas By: Authorized Signature Date of Authentication: For value received, the undersigned hereby sells, assigns, and transfers unto (Please print or type name, address, and zip code of Transferee) Please insert Social Security or Taxpayer Identification Number of Transferee) the within Bond and all rights thereunder, and hereby irrevocably constitutes and appoints attorney to transfer said Bond on the books kept for registration thereof, with full power of substitution in the premises. DATED: Signature Guaranteed: NOTICE: Signature must be guaranteed by a member firm of the New York Stock Exchange or a commercial bank or trust company. Registered Owner(s) NOTICE: The signature above must correspond to the name of the Registered Owner(s) as shown on the face of this Bond in every particular, without any alteration, enlargement or change whatsoever. 13 (e) Form of Initial Bond. The Initial Bond shall be in the form set forth in subsection (a) of this Section, except for the following alterations: (1) in the second paragraph of the Bond, the words "executing the registration certificate appearing hereon" shall be deleted and an additional sentence shall be added to the paragraph as follows: "The initial Paying Agent/Registrar is Southside Bank, Tyler, Texas"; and (2) the Initial Bond shall be numbered T-1. Section 5.2. CUSIP Registration. The President of the Board may, but is not required to, secure the printing of identification numbers on the Bonds through the CUSIP Service Bureau Division of Standard and Poor's Corporation, New York, New York. Section 5.3. Legal Opinion. The approving opinion of Bond Counsel, Winstead Sechrest & Minick P.C., may be printed on the back of the Bonds with the certification of the Secretary of the Board which may be executed in facsimile. ARTICLE VI SECURITY OF THE BONDS Section 6.1. Security of Bonds. The Bonds are secured by and payable from the levy of a continuing, direct, annual ad valorem tax, without limit as to rate or amount, upon all taxable property within the District, and are further secured by and payable from a lien on and pledge of certain Net Revenues (as defined below) of the District's System. Section 6.2. Levy of Tax. To pay the interest on the Bonds, and to create a sinking fund for the payment of the principal thereof when due, and to pay the expenses of assessing and collecting such taxes, there is hereby levied, and shall be assessed and collected in due time, a continuing, direct annual ad valorem tax, without limit as to rate or amount, on all taxable property in the District for each year while any of the Bonds are outstanding. All of the proceeds of such collections, except expenses incurred in that connection, shall be paid into the Debt Service Fund, and the aforementioned tax and such payments into such fund shall continue until the Bonds and the interest thereon have been fully paid and discharged, and such proceeds shall be used for such purposes and no other. While said Bonds, or any of them, are outstanding and unpaid, an ad valorem tax each year at a rate from year to year as will be ample and sufficient to provide funds to pay the interest on said Bonds and to provide the necessary sinking fund to pay the principal when due, full allowance being made for delinquencies and costs of collection, shall be levied, assessed, and collected and applied to the payment of principal and interest on the Bonds. In determining the amount of taxes which should be levied each year, the Board of Directors may consider whether the Board of Directors reasonably expects to have revenue or receipts available from other sources which are legally available to pay principal of or interest on the Bonds. Section 6.3. Net Revenue Pledge as Additional Security. (a) For purposes of this Section the following terms shall have the following definitions: (i) The term "Maintenance and Operation Expenses" shall mean the expenses necessary to provide for the administration, efficient operation, and adequate maintenance of the System together with such other costs and expenses as may now or hereafter be defined by law as proper Maintenance and Operation Expenses of the System; and (ii) The term "Net Revenues" shall mean all income derived from the ownership and operation of the System after deducting the Maintenance and Operation Expenses and providing for the funding of any operating reserve from time to time established by the Board. 14 (b) In order to further secure the Bonds, the District hereby grants a lien on and pledge of the District's Net Revenues. Such Net Revenues, as herein provided, are hereby pledged to the payment of the principal, interest, redemption price, and bank charges of the Bonds. If at any time ad valorem taxes levied and collected for the payment thereof, together with other amounts in the Debt Service Fund, are insufficient for such purpose, the District shall transfer to the Debt Service Fund such available Net Revenues as shall be necessary to provide (together with other amounts on deposit in the Debt Service Fund) for the payment of principal, interest, redemption price, and bank charges of the Bonds; provided, however, that no transfers of revenues shall be made to the Debt Service Fund by the District until all Maintenance and Operation Expenses, including the cost of maintaining an operating reserve, shall have been paid by the District. The District reserves the right to apply Net Revenues not required for current payments of principal, interest, redemption price, and bank charges of the Bonds for any lawful purpose of the District. Notwithstanding the foregoing, no revenues generated from maintenance taxes shall be included in Net Revenues or used to make payments on the Bonds. (c) The pledge of the Net Revenues hereunder is on a parity with the pledge of the Net Revenues made to secure the obligations relating to the Series 1999 Bonds, the Series 2001 Bonds, and the Series 2004 Bonds. The District reserves the right to issue Additional Bonds and incur obligations secured in whole or in part by a lien on and pledge of Net Revenues on a parity with or subordinate to the lien on and pledge of Net Revenues securing the Bonds, and to apply such Net Revenues to the payment of such Additional Bonds and obligations on a parity with or subordinate to the Bonds. (d) The District is located within the extraterritorial jurisdiction of the City of Round Rock, Texas (the "City"). The City has the right to annex and dissolve the District. At such time, the obligations of the District payable in whole or in part from ad valorem taxes shall become obligations of the City, and the governing body of the City is thereafter required to levy and cause to be collected taxes on all taxable property within the City sufficient to pay the principal of and interest on the obligations of the District so assumed by the City. In order to allow the City to integrate the District's System into the City's water and sewer system, the City may terminate the pledge of and lien on the Net Revenues of the District's System to the payment of the Bonds. The City may under certain circumstances annex but not dissolve the District, in which case the District may continue to provide retail water and wastewater service and the maintenance of parks and recreation areas. (e) State law permits the District to be consolidated with one or more conservation and reclamation districts. In the event the District is consolidated with another district or districts, the District reserves the right to: (i) consolidate the System with a similar system of one or more districts with which the District is consolidating and operate and maintain the systems as one consolidated system (the "Consolidated System"); (i) apply the net revenues from the operation of the Consolidated System to the payment of principal, interest, redemption price, and bank charges on the Bonds and any other combination tax and revenue bonds or bonds or other obligations secured solely or primarily by such net revenues (the "Revenue Bonds") of the District and of the district or districts with which the District is consolidating (herein collectively, the "Consolidating Districts") without preference to any series of bonds (except subordinate lien revenue bonds which shall be subordinate to the Revenue Bonds of the Consolidating Districts); or (ii) pledge the net revenues of the Consolidated System to the payment of principal, interest, redemption price, and bank charges on any Revenue Bonds which may be issued by the Consolidating Districts on a parity with the outstanding Revenue Bonds of the Consolidating Districts. Section 6.4. Perfection of Pledge. Chapter 1208, Texas Government Code, as amended, applies to the issuance of the Bonds and the pledge of the taxes and Net Revenues granted by the District under this Section, and such pledge is therefore valid, effective, and perfected. If -Texas law is amended at 15 any time while the Bonds are outstanding and unpaid such that the pledge of the taxes and Net Revenues granted hereunder is to be subject to the filing requirements of Chapter 9, Texas Business and Commerce Code, as amended, then in order to preserve to the Registered Owner the perfection of the security interest in the pledge, the District agrees to take such measures as it determines are reasonable and necessary under Texas law to comply with the applicable provisions of Chapter 9, Texas Business and Commerce Code, as amended, and enable a filing to perfect the security interest in the pledge to occur. ARTICLE VII FUNDS; FLOW OF FUNDS; AND INVESTMENTS Section 7.1. Operating Fund. There is hereby affirmed the "Operating Fund," created and maintained as set forth in the District's order authorizing the Series 1987 Bonds and affirmed in the District's order authorizing the Series 1999 Bonds, the Series 2001 Bonds, and the Series 2004 Bonds. The Operating Fund is the maintenance fund of the District into which shall be placed the revenues from operations of the System. The Operating Fund shall be used first to pay all reasonable expenses of administration, efficient operation, and adequate maintenance of the System and the District, including payments to political subdivisions or municipalities for regional waste disposal and water supply services and facilities, if necessary, after which Net Revenues, if any, shall either (i) periodically be transferred into the Debt Service Fund for so long as any part of the principal of or interest on the Bonds is outstanding, or (ii), to the extent that the balance in the Debt Service Fund and tax collections available for deposit thereto are sufficient to pay when due the obligations of the District payable from the Debt Service Fund, to pay other proper expenses of the District. Section 7.2. Debt Service Fund. The District hereby creates The Meadows at Chandler Creek Municipal Utility District Combination Unlimited Tax and Revenue Refunding Bonds, Series 2005 Debt Service Fund (the "Debt Service Fund"). The District shall deposit or cause to be deposited into the Debt Service Fund the proceeds from collections of the ad valorem taxes levied pursuant to Section 6.2 hereof, less costs of collection, as collected. The District shall also deposit in the Debt Service Fund Net Revenues to be used to pay principal of and interest on the Bonds. Not later than two (2) days prior to any Interest Payment Date on the Bonds, the Board of Directors shall cause the transfer of money out of the Debt Service Fund to the Paying Agent/Registrar in an amount not less than that which is sufficient to pay the principal which matures on such date and the interest which is due on such date. The District shall pay fees and charges of the Paying Agent/Registrar for its services as paying agent and registrar for the Bonds from the Debt Service Fund. Section 7.3. Investments- Security of Funds. (a) Money in any fund established pursuant to this Order may, at the option of the District, be invested in obligations and in the manner prescribed by the Public Funds Investment Act, as amended, Chapter 2256, Texas Government Code, 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. Such investments shall be valued in terms of current market value within 45 days of the close of each Fiscal Year. All interest and income derived from deposits and investments in the Debt Service Fund immediately shall be credited to, and any losses debited to, the Debt Service Fund. All such investments shall be sold promptly when necessary to prevent any default in connection with the Bonds. (b) Money in all Funds created by this Order shall be secured in the manner and to the fullest extent required by the laws of the State of Texas for the security of public funds, including Chapter 2257, Texas Government Code, as amended. 16 ARTICLE VIII REFUNDING OF REFUNDED OBLIGATIONS; USE OF BOND PROCEEDS; ISSUER CONTRIBUTION Section 8.1. Refunding of Refunded Obligations. The District hereby irrevocably calls the Refunded Obligations for redemption prior to maturity on March 15, 2005, at the price of par plus accrued interest and authorizes and directs that notice of such redemption is to be given in accordance with the order authorizing the issuance of the Refunded Obligations. Section 8.2. Use of Bond Proceeds . Proceeds of the Bonds in the amount of $1,300,000 will be deposited with the Paying Agent/Registrar of the Refunded Obligations on March 15, 2005, for payment in full of the principal outstanding of the Refunded Obligations. Section 8.3. Issuer Contribution. The District hereby approves a contribution from the Operating Fund (the "Contribution") for payment of the costs of issuing the Bonds, and a contribution from the Debt Service Fund to pay accrued interest on the Refunded Obligations. ARTICLE IX TAX EXEMPTION Section 9.1. Provisions Concerning Federal Income Tax Exclusion. The District covenants to take any action to maintain, or refrain from any action which would adversely affect, the treatment of the Bonds as obligations described in section 103 of the Internal Revenue Code of 1986, as amended (the "Code"), the interest on which is not includable in "gross income" for federal income tax purposes. In furtherance thereof, the District specifically covenants as follows: (i) To refrain from taking any action which would result in the Bonds being treated as "private activity bonds" within the meaning of section 141(a) of the Code; (ii) To take any action to assure that no more than 10% of the proceeds of the Bonds or the projects financed therewith are used for any "private business use," as defined in section 141(b)(6) of the Code or, if more than 10% of the proceeds or the projects financed therewith are so used, that amounts, whether or not received by the District with respect to such private business use, do not under the terms of this Order or any underlying arrangement, directly or indirectly, secure or provide for the payment of more than 10% of the debt service on the Bonds, in contravention of section 141(b)(2) of the Code; (iii) To take any action to assure that in the event that the "private business use" described in paragraph (ii) hereof exceeds 5% of the proceeds of the Bonds or the projects financed therewith, then the amount in excess of 5% is used for a "private business use" which is "related" and not "disproportionate," within the meaning of section 141(b)(3) of the Code, to the governmental use; (iv) To take any action to assure that no amount which is greater than the lesser of $5,000,000 or 5% of the proceeds of the Bonds is directly or indirectly used to finance loans to persons, other than state or local governmental units, in contravention of section 141(c) of the Code; (v) To refrain from taking any action which would result in the Bonds being "federally guaranteed" within the meaning of section 149(b) of the Code; 17 (vi) Except to the extent permitted by section 148 of the Code and the regulations and rulings thereunder, to refrain from using any portion of the proceeds of the Bonds, directly or indirectly, to acquire or to replace funds which were used, directly or indirectly, to acquire investment property (as defined in section 148(b)(2) of the Code) which produces a materially higher yield over the term of the Bonds. (vii) To otherwise restrict the use of the proceeds of the Bonds or amounts treated as proceeds of the Bonds, as may be necessary, so that the Bonds do not otherwise contravene the requirements of section 148 of the Code (relating to arbitrage) and, to the extent applicable, section 149(d) of the Code (relating to advance refundings); (viii) Except to the extent otherwise provided in section 148(f) of the Code and the regulations and rulings thereunder, to pay to the United States of America at least once during each five year period (beginning on the date of delivery of the Bonds) an amount that is at least equal to 90% of the "Excess Earnings," within the meaning of section 148(1) of the Code, and to pay to the United States of America, not later than 60 days after the Bonds have been paid in full, 100% of the amount then required to be paid as a result of Excess Earnings under section 148(f) of the Code; and (ix) To maintain such records as will enable the District to fulfill its responsibilities under this subsection and section 148 of the Code and to retain such records for at least six years following the final payment of principal and interest on the Bonds. For the purposes of the foregoing, in the case of a refunding bond, the term proceeds includes transferred proceeds and, for purposes of paragraphs (ii) and (iii), proceeds of the refunded bonds. The covenants contained herein are intended to assure compliance with the Code and any regulations or rulings promulgated by the U.S. Department of Treasury pursuant thereto. In the event that regulations or rulings are hereafter promulgated which modify or expand provisions of the Code, as applicable to the Bonds, the District will not be required to comply with any covenant contained herein to the extent that such noncompliance, in the opinion of nationally -recognized bond counsel, will not adversely affect the exclusion from gross income of interest on the Bonds under section 103 of the Code. In the event that regulations or rulings are hereafter promulgated which impose additional requirements which are applicable to the Bonds, the District agrees to comply with the additional requirements to the extent necessary, in the opinion of nationally -recognized bond counsel, to preserve the exclusion from gross income of interest on the Bonds under section 103 of the Code. Proper officers of the District charged with the responsibility of issuing the Bonds are hereby authorized and directed to execute any documents, certificates, or reports required by the Code and to make such elections, on behalf of the District, which may be permitted by the Code as are consistent with the purpose for the issuance of the Bonds. Notwithstanding any other provision in this Order, to the extent necessary to preserve the exclusion from gross income of interest on the Bonds under section 103 of the Code the covenants contained in this subsection shall survive the later of the defeasance or discharge of the Bonds. Section 9.2. Covenants Regarding Sale, Lease, or Disposition of Financed Property. The District covenants that the District will regulate the use of the property financed, directly or indirectly, with the proceeds of the Bonds and will not sell, lease, or otherwise dispose of such property unless (i) the District takes the remedial measures as may be required by the Code and the regulations and rulings thereunder in order to preserve the exclusion from gross income of interest on the Bonds under section 103 of the Code or (ii) the District seeks the advice of nationally -recognized bond counsel with respect to such sale, lease, or other disposition. 18 Section 9.3. Designation as Qualified Tax -Exempt Obligations. The District hereby designates the Bonds as "qualified tax-exempt obligations" as defined in section 265(b)(3) of the Code. In furtherance of such designation, the District represents, covenants, and warrants the following: (a) during the calendar year in which the Bonds are issued, the District (including any subordinate entities) has not designated nor will designate obligations, which when aggregated with the Bonds, will result in more than $10,000,000 of "qualified tax-exempt obligations" being issued; (b) the District reasonably anticipates that the amount of tax-exempt obligations issued during 2005 by the District (including any subordinate entities) will not exceed $10,000,000; and (c) the District will take such action which would assure, or to refrain from such action which would adversely affect, the treatment of the Bonds as "qualified tax-exempt obligations." ARTICLE X ADDITIONAL BONDS AND REFUNDING BONDS Section 10.L Additional Bonds. The District expressly reserves the right to issue, in one or more installments, for the purpose of completing, repairing, improving, extending, enlarging, or replacing the System or any other lawful purpose (a) the unissued unlimited tax bonds which were authorized at the bond election described in the recitals of this Order; and (2) such other unlimited tax bonds as may hereafter be authorized at subsequent elections. Section 10.2. Other Bonds. The District expressly reserves the right to issue unlimited tax and revenue bonds, if authorized by election, and such other bonds as may be lawfully issued by the District without the necessity for an election. Section 10.3. Refunding Bonds. The District further reserves the right to defease or refund the Bonds or any other bonds issued by the District in any manner permitted by law at or prior to their respective dates of maturity or redemption. ARTICLE XI SALE AND DELIVERY OF BONDS Section 11.1. Sale and Delivery of Bonds. (a) The sale of the Bonds is hereby awarded to Southside Bank, Tyler, Texas (the "Purchaser"), under the terms and conditions contained in its commitment for purchase of the Bonds pursuant to the Bond Purchase Agreement dated as of the date of this Order. The Board hereby finds and determines that the price of $1,300,000 and terms of the sale of the Bonds to the Purchaser are the most advantageous and reasonably obtainable by the District. (b) Upon the registration of all of the Bonds, the Comptroller of Public Accounts of the State of Texas is authorized and instructed to deliver all of the Bonds to Winstead Sechrest & Minick P.C., or pursuant to such firm's order, for delivery to the Purchaser. (c) The obligation of the Purchaser to accept delivery of the Bonds is subject to the Purchaser being furnished with the final, approving opinion of Winstead Sechrest & Minick P.C., Bond Counsel for the District, which opinion shall be dated and delivered the Closing Date. Section 11.2. Control and Delivery of Bonds. (a) The President of the Board is hereby authorized to have control of the Initial Bond and all necessary records and proceedings pertaining thereto pending investigation, examination, and approval of the Attorney General of the State of Texas, registration by the Comptroller of Public Accounts of the State and registration with, and initial exchange or transfer by, the Paying Agent/Registrar. 19 (b) After registration by the Comptroller of Public Accounts, delivery of the Bonds shall be made to the Purchaser thereof under and subject to the general supervision and direction of the President of the Board, against receipt by the District of all amounts due to the District under the terms of sale. ARTICLE XII DEFAULT AND REMEDIES Section 12.1. Events of Default. Each of the following occurrences or events for the purpose of this Order is hereby declared to be an Event of Default: (a) the failure to make payment of the principal of or interest on any of the Bonds when the same becomes due and payable; (b) default in the performance or observance of any other covenant, agreement, or obligation of the District and the continuation thereof for a period of 60 days after notice of such default is given by any Registered Owner to the District; or (c) the District files for protection under the federal Bankruptcy Code or other similar state or federal statute. Section 12.2. Remedies for Default. (a) Upon the happening of any Event of Default, then any Registered Owner or an authorized representative thereof, including but not limited to, a trustee or trustees therefor, may proceed against the District for the purpose of protecting and enforcing the rights of the Registered Owners under this Order, by mandamus or other suit, action or special proceeding in equity or at law, in any court of competent jurisdiction, for any relief permitted by law, including the specific performance of any covenant or agreement contained herein, or thereby to enjoin any act or thing that may be unlawful or in violation of any right of the Registered Owners hereunder or any combination of such remedies. (b) All such proceedings shall be instituted and maintained for the equal benefit of all Registered Owners. Section 12.3. Remedies Not Exclusive. (a) No remedy herein conferred or reserved is intended to be exclusive of any other available remedy or remedies, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or under the Bonds or now or hereafter existing at law or in equity; provided, however, that notwithstanding any other provision of this Order, the right to accelerate the debt evidenced by the Bonds shall not be available as a remedy under this Order. (b) The exercise of any remedy herein conferred or reserved shall not be deemed a waiver of any other available remedy. ARTICLE XIII DISCHARGE Section 13.1. Defeasance. If the District shall pay or cause to be paid, or there shall otherwise be paid to the Registered Owners, the principal of and interest on the Bonds, at the times and in the manner stipulated in this Order, then the pledge of taxes and Net Revenues under this Order and all covenants, agreements, and other obligations of the District to the Registered Owners shall thereupon cease, terminate, and become void and be discharged and satisfied, and the Paying Agent/Registrar shall pay over or deliver all money held by it under this Order to the District. Bonds or interest installments for the payment of which money shall have been set aside and shall be held in trust by the Paying Agent/Registrar or with any other bank or trust company which has agreed to 20 hold the same for such purpose (through deposit by the District of funds for such payment or otherwise) at the Stated Maturity thereof shall be deemed to have been paid within the meaning and with the effect expressed above in this Section. All Bonds outstanding shall be deemed to have been paid, prior to their Stated Maturity, within the meaning and with the effect expressed above in this Section, if there shall have been deposited with the Paying Agent/Registrar either (a) money in an amount which shall be sufficient to make such payment, (b) Governmental Obligations certified by an independent public accounting firm of national reputation to be of such maturities and interest payment dates and to bear such interest as will, without further investment or reinvestment of either the principal amount thereof or the interest earnings therefrom, be sufficient to make such payment, or (c) a combination of money and Governmental Obligations together so certified to be sufficient to make such payment, provided that all the expenses pertaining to the Bonds with respect to which such deposit is made shall have been paid or the payment thereof provided for to the satisfaction of the Paying Agent/ Registrar (and to such other bank or trust company). Section 13.2. Investments for Defeasance. No money or Governmental Obligations so deposited shall be invested or reinvested unless in Governmental Obligations and unless such money and Governmental Obligations not invested and such new investments are together certified by an independent public accounting firm to be of such amounts, maturities, and interest payment dates and to bear such interest as will, without further investment or reinvestment of either the principal amount thereof or the interest earnings therefrom, be sufficient to make such payment. Neither Governmental Obligations nor money deposited with the Paying Agent/Registrar or other bank or trust company pursuant to this Section, nor principal or interest payments on any such Governmental Obligations, shall be withdrawn or used for any purpose other than, and shall be held in trust for, the payment of the principal of, and interest on such Bonds. Any cash received from such principal of and interest on such investment securities deposited with the Paying Agent/Registrar, if not needed for such purpose, shall, to the extent practicable, be reinvested in Governmental Obligations (which may be non-interest bearing) maturing at times and in amounts sufficient to pay when due the principal of and interest on such Bonds on and prior to the maturity thereof, and interest earned from such reinvestments shall be paid over to the District as received by the Paying Agent/Registrar, free and clear of any trust, lien, or pledge and used in accordance with applicable law. Any payment for Governmental Obligations purchased for the purpose of reinvesting cash as aforesaid shall be made only against delivery of such Governmental Obligations. ARTICLE XIV MISCELLANEOUS Section 14.1. Persons Deemed Registered Owners. The District, the Paying Agent/Registrar, and any agent of either of them may treat the Person in whose name any Bond is registered as the owner of such Bond for the purpose of receiving payment of the principal of and interest on such Bond and for all other purposes whatsoever, and to the extent permitted by law, neither the District, the Paying Agent/Registrar, nor any agent of either of them shall be affected by notice to the contrary. Section 14.2. District's Successors and Assigns. Whenever in this Order the District is named and referred to, it shall be deemed to include its successors and assigns, and all covenants and agreements in this Order by or on behalf of the District, except as otherwise provided herein, shall bind and inure to the benefit of its successors and assigns whether or not so expressed. Section 14.3. Benefits of Order Provisions. Nothing in this Order or in the Bonds, expressed or implied, shall give or be construed to give any person, firm or corporation, other than the District, the Paying Agent/Registrar, and the Registered Owners any legal or equitable right or claim under or in respect of this Order, or under any covenant, condition, or provision herein contained, all the covenants, conditions, and provisions contained in this Order or in the Bonds being for the sole benefit of the District, the Paying Agent/Registrar, and the Registered Owners. Section 14.4. Severability Clause. If any word, phrase, clause, sentence, paragraph, section, or other part of this Order , or the application thereof to any person or circumstance, shall ever be held to be invalid or unconstitutional by any court of competent jurisdiction, the remainder of this Order and the 21 application of such word, phrase, clause, sentence, paragraph, section, or other part of this Order to any other persons or circumstances shall not be affected thereby. Section 14.5. Open Meeting. It is hereby officially found and determined that the meeting at which this Order was adopted was open to the public, and public notice of the time, place and purpose of said meeting was properly given, all as required by Chapter 551, Texas Government Code, and Section 49.063, Texas Water Code, as amended. Section 14.6. Amendments. The District may, without the consent of or notice to any Registered Owners of the Bonds, amend, change, or modify this Order as may be required (a) for the purpose of curing any ambiguity, inconsistency, or formal defect or omission herein, or (b) in connection with any other change which is not to the prejudice of the Registered Owners of the Bonds. Except for such amendments, changes, or modifications, the District shall not amend, change, or modify this Order in any manner without the consent of the Registered Owners of the Bonds. Section 14.7. No Personal Liability. No recourse shall be had for payment of the principal of or interest on any Bonds or for any claim based thereon, or on this Order, against any official or employee of the District or any person executing any Bonds. Section 14.8. Notice to Registered Owners. Except as may be otherwise provided in this Order, where this Order provides for notice to Registered Owners of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to each Registered Owner, at the address of such Registered Owner as it appears in the Register. Neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Registered Owner of Bonds shall affect the sufficiency of such notice with respect to all other Registered Owners. Wherever this Order provides for notice in any manner, such notice may be waived in writing by the Person 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 Registered Owners shall be filed with the District, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. Section 14.9. District's Officers' Duties. The President, Vice President, and Secretary of the Board of Directors are authorized to do any and all things proper and necessary to carry out the intent of this Order. ARTICLE XV EFFECTIVENESS Section 15.1. Effectiveness. This Order shall take effect and be in force from and after its passage and approval. (The remainder of this page intentionally left blank) 22 PASSED AND APPROVED on this ATTEST: Secretary, Board of Directors (SEAL) President, Board of Directors SIGNATURE PAGE FOR ORDER AUTHORIZING ISSUANCE OF BONDS Austin_1\273384\1 19239-6 2/11/2005 EXHIBIT A Debt Service Schedule Section 4.5. Notice of Change of Paying Agent/Registrar to Registered Owners. Promptly upon each change in the entity serving as Paying Agent/Registrar, the District will cause notice of the change to be sent to each Registered Owner by first class United States mail, postage prepaid, at the address in the Register, stating the effective date of the change and the name and mailing address of the replacement Paying Agent/Registrar. Section 4.6. Agreement of Paying Agent/Registrar to Perform Duties and Functions. By accepting the appointment as Paying Agent/Registrar, the Paying Agent/Registrar is deemed to have agreed to the provisions of this Order and that it will perform the duties and functions of Paying Agent/Registrar prescribed hereby. Section 4.7. Delivery of Records to Successor. If a Paying Agent/Registrar is replaced, such Paying Agent/Registrar, promptly upon the appointment of the successor, will deliver the Register (or a copy thereof) and all other pertinent books and records relating to the Bonds to the successor Paying Agent/Registrar. ARTICLE V FORM OF BONDS Section 5.1. Form. The form of the Bonds, including the form of the Paying Agent/Registrar's Authentication Certificate, the form of Assignment, and the form of Registration Certificate of the Comptroller of Public Accounts of the State of Texas, which shall be attached or affixed to the Bonds initially issued, shall be, respectively, substantially in the form set forth in this Article, with such additions, deletions, and variations as may be necessary or desirable and not prohibited by this Order: (a) Form of Bonds. 10 (Face of Bond) UNITED STATES OF AMERICA STATE OF TEXAS COUNTY OF WILLIAMSON REGISTERED REGISTERED NUMBER AMOUNT R- THE MEADOWS AT CHANDLER CREEK MUNICIPAL UTILITY DISTRICT COMBINATION UNLIMITED TAX AND REVENUE REFUNDING BONDS, SERIES 2005 Maturity Date Closing Date Bond Date Interest Rate March 15, 2005 March 15, 2005 THE MEADOWS AT CHANDLER CREEK MUNICIPAL UTILITY DISTRICT (the "District"), in the County of Williamson, State of Texas, for value received, hereby promises to pay to or registered assigns, but solely from the sources and in the manner hereinafter provided, on the Maturity Date specified above, the sum of ONE MILLION THREE HUNDRED THOUSAND DOLLARS and to pay interest on such principal amount from the later of the Closing Date set forth above or the most recent interest payment date to which interest has been paid or provided for until payment of such principal amount has been paid or provided for, at the per annum rate shown above, computed on the basis of a 360 -day year of twelve 30 -day months, such interest to be paid semiannually on February 1 and August 1 of each year, commencing August 1, 2005. THE PRINCIPAL OF THIS BOND SHALL BE PAYABLE without exchange or collection charges in lawful money of the United States of America upon presentation and surrender of this Bond at the designated office of the Paying Agent/Registrar or any successor thereto executing the registration certificate appearing hereon. Interest on this Bond is payable by check, dated as of the interest payment date, mailed by the Paying Agent/Registrar to the registered owner at the address shown on the registration books kept by the Paying Agent/Registrar or by such other customary banking arrangements acceptable to the Paying Agent/Registrar and the person to whom interest is paid; provided, however, that such person shall bear all risk and expense of such other customary banking arrangements. For the purpose of the payment of interest on this Bond, the registered owner shall be the person in whose name this Bond is registered at the close of business on the "Record Date," which shall be the fifteenth day of the month next preceding such interest payment date. In the event of a nonpayment of interest on a scheduled payment date, and for thirty 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 District. Notice of the Special Record Date and of the scheduled payment date of the past due interest (the "Special Payment Date," which date shall be fifteen days after the Special Record Date) shall be sent at least five business days prior to the Special Record Date by United States mail, first class, postage prepaid, to the address of each owner of a Bond appearing on the books of the Paying Agent/Registrar at the close of business on the last Business Day next preceding the date of mailing of such notice. IF THE DATE FOR THE PAYMENT of the principal of or interest on this Bond is not a Business Day, the date for such payment shall be the next succeeding Business Day, and payment on such date shall for all purposes be deemed to have been made on the original date payment was due. THIS BOND IS ONE OF A SERIES of fully registered bonds specified in the title hereof, dated as of March 15, 2005, issued in the aggregate principal amount of $1,300,000 (herein referred to as the 11 "Bonds"), and issued pursuant to the authority provided by the Constitution and laws of the State of Texas, particularly Chapters 49 and 54 of the Texas Water Code, as amended, Chapter 1207 of the Texas Government Code, as amended, and by the authority of a certain order of the District (the "Order") for the purpose of refunding the Refunded Obligations (as defined in the Order). Capitalized terms used herein and not otherwise defined shall have the meaning assigned thereto in the Order. THE BONDS ARE SUBJECT to optional redemption in whole on any Interest Payment Date, for a redemption price of par plus accrued interest to the date of redemption. AS PROVIDED IN THE ORDER and subject to certain limitations therein and herein set forth, this Bond is transferable upon compliance with federal securities laws and surrender of this Bond for transfer at the designated corporate trust office of the Paying Agent/Registrar with such endorsement or other evidence of transfer as is acceptable to the Paying Agent/Registrar, and, thereupon, one or more new fully registered Bonds of the same Stated Maturity, bearing the same rate of interest, and for the same aggregate principal amount will be issued to the designated transferee or transferees. THE DISTRICT, THE PAYING AGENT/REGISTRAR, and any other person may treat the person in whose name this Bond is registered as the owner hereof for the purpose of receiving payment as herein provided (except interest shall be paid to the person in whose name this Bond is registered on the Record Date) and for all other purposes, whether or not this Bond be overdue, and neither the District, the Paying Agent/Registrar, nor any such agent shall be affected by notice to the contrary. IT IS HEREBY CERTIFIED, RECITED, AND COVENANTED that this Bond has been duly and validly issued and delivered; that all acts, conditions and things required or proper to be performed, to exist, and to be done precedent to or in the issuance and delivery of this Bond have been performed, exist and have been done in accordance with law; and that annual ad valorem taxes, without legal limit as to rate or amount, sufficient to provide for the payment of the interest on and principal of this Bond, as such interest comes due and such principal matures, have been levied and ordered to be levied against all taxable property in the District and have been pledged irrevocably for such payment. IT IS FURTHER CERTIFIED, RECITED, AND COVENANTED that certain net revenues to be derived from the ownership and operation of the District's waterworks and sanitary sewer system also have been pledged to the payment of the interest on and principal of the Bonds to the extent that ad valorem taxes levied and collected for the payment thereof, together with other amounts on deposit in the District's Debt Service Fund, are insufficient for such purpose, all as set forth in the Order, to which reference is made for all particulars, and that such Order also permits the District and its successors to issue obligations secured in whole or in part by lien on and pledge of such net revenues on a parity with or subordinate to the lien securing the Bonds. Reference is hereby made to the Order for a complete description of the terms, conditions, and provisions pursuant to which the Bonds are secured and made payable and the respective rights thereunder of the registered owners of the Bonds and of the District and of the Paying Agent/Registrar. By acceptance of this Bond, the registered owner hereof expressly assents to all of the provisions of the Order. IN WITNESS WHEREOF, this Bond has been signed with the manual or facsimile signature of the President of the Board of Directors and countersigned with the manual or facsimile signature of the Secretary (or the Assistant Secretary) of the Board of Directors, and the official seal of the District has been duly impressed, or placed in facsimile, on this Bond. The Meadows at Chandler Creek Municipal Utility District President, Board of Directors 12 Secretary, Board of Directors (SEAL) (b) Form of Comptroller's Registration Certificate. [to be printed on Initial Bond only] COMPTROLLER'S REGISTRATION CERTIFICATE OFFICE OF THE COMPTROLLER OF PUBLIC ACCOUNTS STATE OF TEXAS § - § REGISTER NO. 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 that this Bond has been registered by the Comptroller of Public Accounts of the State of Texas. (SEAL) WITNESS MY SIGNATURE AND SEAL this 13 XXXXXXXXXXXXXXXXXXXX Comptroller of Public Accounts of the State of Texas (c) Form of Registrar's Authentication Certificate. [to be printed on Definitive Bonds only] AUTHENTICATION CERTIFICATE It is hereby certified that this Bond has been delivered pursuant to the Order described in the text of this Bond, in exchange for or in replacement of a bond of a series which was originally approved by the Attorney General of the State of Texas and registered by the Comptroller of Public Accounts of the State of Texas. (d) Form of Assignment. ASSIGNMENT SOUTHSIDE BANK Tyler, Texas By: Authorized Signature Date of Authentication: For value received, the undersigned hereby sells, assigns, and transfers unto (Please print or type name, address, and zip code of Transferee) Please insert Social Security or Taxpayer Identification Number of Transferee) the within Bond and all rights thereunder, and hereby irrevocably constitutes and appoints attorney to transfer said Bond on the books kept for registration thereof, with full power of substitution in the premises. DATED: Signature Guaranteed: NOTICE: Signature must be guaranteed by a member firm of the New York Stock Exchange or a commercial bank or trust company. Registered Owner(s) NOTICE: The signature above must correspond to the name of the Registered Owner(s) as shown on the face of this Bond in every particular, without any alteration, enlargement or change whatsoever. 14 (e) Form of Initial Bond. The Initial Bond shall be in the form set forth in subsection (a) of this Section, except for the following alterations: (1) in the second paragraph of the Bond, the words "executing the registration certificate appearing hereon" shall be deleted and an additional sentence shall be added to the paragraph as follows: "The initial Paying Agent/Registrar is Southside Bank, Tyler, Texas"; and (2) the Initial Bond shall be numbered T-1. Section 5.2. CUSIP Registration. The President of the Board may, but is not required to, secure the printing of identification numbers on the Bonds through the CUSIP Service Bureau Division of Standard and Poor's Corporation, New York, New York. Section 5.3. Legal Opinion. The approving opinion of Bond Counsel, Winstead Sechrest & Minick P.C., may be printed on the back of the Bonds with the certification of the Secretary of the Board which may be executed in facsimile. ARTICLE VI SECURITY OF THE BONDS Section 6.1. Security of Bonds. The Bonds are secured by and payable from the levy of a continuing, direct, annual ad valorem tax, without limit as to rate or amount, upon all taxable property within the District, and are further secured by and payable from a lien on and pledge of certain Net Revenues (as defined below) of the District's System. Section 6.2. Levy of Tax. To pay the interest on the Bonds, and to create a sinking fund for the payment of the principal thereof when due, and to pay the expenses of assessing and collecting such taxes, there is hereby levied, and shall be assessed and collected in due time, a continuing, direct annual ad valorem tax, without limit as to rate or amount, on all taxable property in the District for each year while any of the Bonds are outstanding. All of the proceeds of such collections, except expenses incurred in that connection, shall be paid into the Debt Service Fund, and the aforementioned tax and such payments into such fund shall continue until the Bonds and the interest thereon have been fully paid and discharged, and such proceeds shall be used for such purposes and no other. While said Bonds, or any of them, are outstanding and unpaid, an ad valorem tax each year at a rate from year to year as will be ample and sufficient to provide funds to pay the interest on said Bonds and to provide the necessary sinking fund to pay the principal when due, full allowance being made for delinquencies and costs of collection, shall be levied, assessed, and collected and applied to the payment of principal and interest on the Bonds. In determining the amount of taxes which should be levied each year, the Board of Directors may consider whether the Board of Directors reasonably expects to have revenue or receipts available from other sources which are legally available to pay principal of or interest on the Bonds. Section 6.3. Net Revenue Pledge as Additional Security. (a) For purposes of this Section the following terms shall have the following defmitions: (i) The term "Maintenance and Operation Expenses" shall mean the expenses necessary to provide for the administration, efficient operation, and adequate maintenance of the System together with such other costs and expenses as may now or hereafter be defined by law as proper Maintenance and Operation Expenses of the System; and (ii) The term "Net Revenues" shall mean all income derived from the ownership and operation of the System after deducting the Maintenance and Operation Expenses and providing for the funding of any operating reserve from time to time established by the Board. 15 (b) In order to further secure the Bonds, the District hereby grants a lien on and pledge of the District's Net Revenues. Such Net Revenues, as herein provided, are hereby pledged to the payment of the principal, interest, redemption price, and bank charges of the Bonds. If at any time ad valorem taxes levied and collected for the payment thereof, together with other amounts in the Debt Service Fund, are insufficient for such purpose, the District shall transfer to the Debt Service Fund such available Net Revenues as shall be necessary to provide (together with other amounts on deposit in the Debt Service Fund) for the payment of principal, interest, redemption price, and bank charges of the Bonds; provided, however, that no transfers of revenues shall be made to the Debt Service Fund by the District until all Maintenance and Operation Expenses, including the cost of maintaining an operating reserve, shall have been paid by the District. The District reserves the right to apply Net Revenues not required for current payments of principal, interest, redemption price, and bank charges of the Bonds for any lawful purpose of the District. Notwithstanding the foregoing, no revenues generated from maintenance taxes shall be included in Net Revenues or used to make payments on the Bonds. (c) The pledge of the Net Revenues hereunder is on a parity with the pledge of the Net Revenues made to secure the obligations relating to the Series 1999 Bonds, the Series 2001 Bonds, and the Series 2004 Bonds. The District reserves the right to issue Additional Bonds and incur obligations secured in whole or in part by a lien on and pledge of Net Revenues on a parity with or subordinate to the lien on and pledge of Net Revenues securing the Bonds, and to apply such Net Revenues to the payment of such Additional Bonds and obligations on a parity with or subordinate to the Bonds. (d) The District is located within the extraterritorial jurisdiction of the City of Round Rock, Texas (the "City"). The City has the right to annex and dissolve the District. At such time, the obligations of the District payable in whole or in part from ad valorem taxes shall become obligations of the City, and the governing body of the City is thereafter required to levy and cause to be collected taxes on all taxable property within the City sufficient to pay the principal of and interest on the obligations of the District so assumed by the City. In order to allow the City to integrate the District's System into the City's water and sewer system, the City may terminate the pledge of and lien on the Net Revenues of the District's System to the payment of the Bonds. The City may under certain circumstances annex but not dissolve the District, in which case the District may continue to provide retail water and wastewater service and the maintenance of parks and recreation areas. (e) State law permits the District to be consolidated with one or more conservation and reclamation districts. In the event the District is consolidated with another district or districts, the District reserves the right to: (i) consolidate the System with a similar system of one or more districts with which the District is consolidating and operate and maintain the systems as one consolidated system (the "Consolidated System"); (i) apply the net revenues from the operation of the Consolidated System to the payment of principal, interest, redemption price, and bank charges on the Bonds and any other combination tax and revenue bonds or bonds or other obligations secured solely or primarily by such net revenues (the "Revenue Bonds") of the District and of the district or districts with which the District is consolidating (herein collectively, the "Consolidating Districts") without preference to any series of bonds (except subordinate lien revenue bonds which shall be subordinate to the Revenue Bonds of the Consolidating Districts); or (ii) pledge the net revenues of the Consolidated System to the payment of principal, interest, redemption price, and bank charges on any Revenue Bonds which may be issued by the Consolidating Districts on a parity with the outstanding Revenue Bonds of the Consolidating Districts. Section 6.4. Perfection of Pledge. Chapter 1208, Texas Government Code, as amended, applies to the issuance of the Bonds and the pledge of the taxes and Net Revenues granted by the District under this Section, and such pledge is therefore valid, effective, and perfected. If Texas law is amended at 16 any time while the Bonds are outstanding and unpaid such that the pledge of the taxes and Net Revenues granted hereunder is to be subject to the filing requirements of Chapter 9, Texas Business and Commerce Code, as amended, then in order to preserve to the Registered Owner the perfection of the security interest in the pledge, the District agrees to take such measures as it determines are reasonable and necessary under Texas law to comply with the applicable provisions of Chapter 9, Texas Business and Commerce Code, as amended, and enable a filing to perfect the security interest in the pledge to occur. ARTICLE VII FUNDS; FLOW OF FUNDS; AND INVESTMENTS Section 7.1. Operating Fund. There is hereby affirmed the "Operating Fund," created and maintained as set forth in the District's order authorizing the Series 1987 Bonds and affirmed in the District's order authorizing the Series 1999 Bonds, the Series 2001 Bonds, and the Series 2004 Bonds. The Operating Fund is the maintenance fund of the District into which shall be placed the revenues from operations of the System. The Operating Fund shall be used first to pay all reasonable expenses of administration, efficient operation, and adequate maintenance of the System and the District, including payments to political subdivisions or municipalities for regional waste disposal and water supply services and facilities, if necessary, after which Net Revenues, if any, shall either (i) periodically be transferred into the Debt Service Fund for so long as any part of the principal of or interest on the Bonds is outstanding, or (ii), to the extent that the balance in the Debt Service Fund and tax collections available for deposit thereto are sufficient to pay when due the obligations of the District payable from the Debt Service Fund, to pay other proper expenses of the District. Section 7.2. Debt Service Fund. The District hereby creates The Meadows at Chandler Creek Municipal Utility District Combination Unlimited Tax and Revenue Refunding Bonds, Series 2005 Debt Service Fund (the "Debt Service Fund"). The District shall deposit or cause to be deposited into the Debt Service Fund the proceeds from collections of the ad valorem taxes levied pursuant to Section 6.2 hereof, less costs of collection, as collected. The District shall also deposit in the Debt Service Fund Net Revenues to be used to pay principal of and interest on the Bonds. Not later than two (2) days prior to any Interest Payment Date on the Bonds, the Board of Directors shall cause the transfer of money out of the Debt Service Fund to the Paying Agent/Registrar in an amount not less than that which is sufficient to pay the principal which matures on such date and the interest which is due on such date. The District shall pay fees and charges of the Paying Agent/Registrar for its services as paying agent and registrar for the Bonds from the Debt Service Fund. Section 7.3. Investments- Security of Funds. (a) Money in any fund established pursuant to this Order may, at the option of the District, be invested in obligations and in the manner prescribed by the Public Funds Investment Act, as amended, Chapter 2256, Texas Government Code, 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. Such investments shall be valued in terms of current market value within 45 days of the close of each Fiscal Year. All interest and income derived from deposits and investments in the Debt Service Fund immediately shall be credited to, and any losses debited to, the Debt Service Fund. All such investments shall be sold promptly when necessary to prevent any default in connection with the Bonds. (b) Money in all Funds created by this Order shall be secured in the manner and to the fullest extent required by the laws of the State of Texas for the security of public funds, including Chapter 2257, Texas Government Code, as amended. 17 ARTICLE VIII REFUNDING OF REFUNDED OBLIGATIONS; USE OF BOND PROCEEDS; ISSUER CONTRIBUTION Section 8.1. Refunding of Refunded Obligations. The District hereby irrevocably calls the Refunded Obligations for redemption prior to maturity on March 15, 2005, at the price of par plus accrued interest and authorizes and directs that notice of such redemption is to be given in accordance with the order authorizing the issuance of the Refunded Obligations. Section 8.2. Use of Bond Proceeds . Proceeds of the Bonds in the amount of $1,300,000 will be deposited with the Paying Agent/Registrar of the Refunded Obligations on March 15, 2005, for payment in full of the principal outstanding of the Refunded Obligations. Section 8.3. Issuer Contribution. The District hereby approves a contribution from the Operating Fund (the "Contribution") for payment of the costs of issuing the Bonds, and a contribution from the Debt Service Fund to pay accrued interest on the Refunded Obligations. ARTICLE IX TAX EXEMPTION Section 9.1. Provisions Concerning Federal Income Tax Exclusion. The District covenants to take any action to maintain, or refrain from any action which would adversely affect, the treatment of the Bonds as obligations described in section 103 of the Internal Revenue Code of 1986, as amended (the "Code"), the interest on which is not includable in "gross income" for federal income tax purposes. In furtherance thereof, the District specifically covenants as follows: (i) To refrain from taking any action which would result in the Bonds being treated as "private activity bonds" within the meaning of section 141(a) of the Code; (ii) To take any action to assure that no more than 10% of the proceeds of the Bonds or the projects financed therewith are used for any "private business use," as defined in section 141(b)(6) of the Code or, if more than 10% of the proceeds or the projects financed therewith are so used, that amounts, whether or not received by the District with respect to such private business use, do not under the terms of this Order or any underlying arrangement, directly or indirectly, secure or provide for the payment of more than 10% of the debt service on the Bonds, in contravention of section 141(b)(2) of the Code; (iii) To take any action to assure that in the event that the "private business use" described in paragraph (ii) hereof exceeds 5% of the proceeds, of the Bonds or the projects financed therewith, then the amount in excess of 5% is used for a "private business use" which is "related" and not "disproportionate," within the meaning of section 141(b)(3) of the Code, to the governmental use; (iv) To take any action to assure that no amount which is greater than the lesser of $5,000,000 or 5% of the proceeds of the Bonds is directly or indirectly used to finance loans to persons, other than state or local governmental units, in contravention of section 141(c) of the Code; (v) To refrain from taking any action which would result in the Bonds being "federally guaranteed" within the meaning of section 149(b) of the Code; 18 (vi) Except to the extent permitted by section 148 of the Code and the regulations and rulings thereunder, to refrain from using any portion of the proceeds of the Bonds, directly or indirectly, to acquire or to replace funds which were used, directly or indirectly, to acquire investment property (as defined in section 148(b)(2) of the Code) which produces a materially higher yield over the term of the Bonds. (vii) To otherwise restrict the use of the proceeds of the Bonds or amounts treated as proceeds of the Bonds, as may be necessary, so that the Bonds do not otherwise contravene the requirements of section 148 of the Code (relating to arbitrage) and, to the extent applicable, section 149(d) of the Code (relating to advance refundings); (viii) Except to the extent otherwise provided in section 148(0 of the Code and the regulations and rulings thereunder, to pay to the United States of America at least once during each five year period (beginning on the date of delivery of the Bonds) an amount that is at least equal to 90% of the "Excess Earnings," within the meaning of section 148(f) of the Code, and to pay to the United States of America, not later than 60 days after the Bonds have been paid in full, 100% of the amount then required to be paid as a result of Excess Earnings under section 148(1) of the Code; and (ix) To maintain such records as will enable the District to fulfill its responsibilities under this subsection and section 148 of the Code and to retain such records for at least six years following the final payment of principal and interest on the Bonds. For the purposes of the foregoing, in the case of a refunding bond, the term proceeds includes transferred proceeds and, for purposes of paragraphs (ii) and (iii), proceeds of the refunded bonds. The covenants contained herein are intended to assure compliance with the Code and any regulations or rulings promulgated by the U.S. Department of Treasury pursuant thereto. In the event that regulations or rulings are hereafter promulgated which modify or expand provisions of the Code, as applicable to the Bonds, the District will not be required to comply with any covenant contained herein to the extent that such noncompliance, in the opinion of nationally -recognized bond counsel, will not adversely affect the exclusion from gross income of interest on the Bonds under section 103 of the Code. In the event that regulations or rulings are hereafter promulgated which impose additional requirements which are applicable to the Bonds, the District agrees to comply with the additional requirements to the extent necessary, in the opinion of nationally -recognized bond counsel, to preserve the exclusion from gross income of interest on the Bonds under section 103 of the Code. Proper officers of the District charged with the responsibility of issuing the Bonds are hereby authorized and directed to execute any documents, certificates, or reports required by the Code and to make such elections, on behalf of the District, which may be permitted by the Code as are consistent with the purpose for the issuance of the Bonds. Notwithstanding any other provision in this Order, to the extent necessary to preserve the exclusion from gross income of interest on the Bonds under section 103 of the Code the covenants contained in this subsection shall survive the later of the defeasance or discharge of the Bonds. Section 9.2. Covenants Regarding Sale, Lease, or Disposition of Financed Property. The District covenants that the District will regulate the use of the property financed, directly or indirectly, with the proceeds of the Bonds and will not sell, lease, or otherwise dispose of such property unless (i) the District takes the remedial measures as may be required by the Code and the regulations and rulings thereunder in order to preserve the exclusion from gross income of interest on the Bonds under section 103 of the Code or (ii) the District seeks the advice of nationally -recognized bond counsel with respect to such sale, lease, or other disposition. 19 Section 9.3. Designation as Qualified Tax -Exempt Obligations. The District hereby designates the Bonds as "qualified tax-exempt obligations" as defined in section 265(b)(3) of the Code. In furtherance of such designation, the District represents, covenants, and warrants the following: (a) during the calendar year in which the Bonds are issued, the District (including any subordinate entities) has not designated nor will designate obligations, which when aggregated with the Bonds, will result in more than $10,000,000 of "qualified tax-exempt obligations" being issued; (b) the District reasonably anticipates that the amount of tax-exempt obligations issued during 2005 by the District (including any subordinate entities) will not exceed $10,000,000; and (c) the District will take such action which would assure, or to refrain from such action which would adversely affect, the treatment of the Bonds as "qualified tax-exempt obligations." ARTICLE X ADDITIONAL BONDS AND REFUNDING BONDS Section 10.1. Additional Bonds. The District expressly reserves the right to issue, in one or more installments, for the purpose of completing, repairing, improving, extending, enlarging, or replacing the System or any other lawful purpose (a) the unissued unlimited tax bonds which were authorized at the bond election described in the recitals of this Order; and (2) such other unlimited tax bonds as may hereafter be authorized at subsequent elections. Section 10.2. Other Bonds. The District expressly reserves the right to issue unlimited tax and revenue bonds, if authorized by election, and such other bonds as may be lawfully issued by the District without the necessity for an election. Section 10.3. Refunding Bonds. The District further reserves the right to defease or refund the Bonds or any other bonds issued by the District in any manner permitted by law at or prior to their respective dates of maturity or redemption. ARTICLE XI SALE AND DELIVERY OF BONDS Section 11.1. Sale and Delivery of Bonds. (a) The sale of the Bonds is hereby awarded to Southside Bank, Tyler, Texas (the "Purchaser"), under the terms and conditions contained in its commitment for purchase of the Bonds pursuant to the Bond Purchase Agreement dated as of the date of this Order. The Board hereby finds and determines that the price of $1,300,000 and terms of the sale of the Bonds to the Purchaser are the most advantageous and reasonably obtainable by the District. (b) Upon the registration of all of the Bonds, the Comptroller of Public Accounts of the State of Texas is authorized and instructed to deliver all of the Bonds to Winstead Sechrest & Minick P.C., or pursuant to such firm's order, for delivery to the Purchaser. (c) The obligation of the Purchaser to accept delivery of the Bonds is subject to the Purchaser being furnished with the final, approving opinion of Winstead Sechrest & Minick P.C., Bond Counsel for the District, which opinion shall be dated and delivered the Closing Date. Section 11.2. Control and Delivery of Bonds. (a) The President of the Board is hereby authorized to have control of the Initial Bond and all necessary records and proceedings pertaining thereto pending investigation, examination, and approval of the Attorney General of the State of Texas, registration by the Comptroller of Public Accounts of the State and registration with, and initial exchange or transfer by, the Paying Agent/Registrar. 20 (b) After registration by the Comptroller of Public Accounts, delivery of the Bonds shall be made to the Purchaser thereof under and subject to the general supervision and direction of the President of the Board, against receipt by the District of all amounts due to the District under the terms of sale. ARTICLE XII DEFAULT AND REMEDIES Section 12.1. Events of Default. Each of the following occurrences or events for the purpose of this Order is hereby declared to be an Event of Default: (a) the failure to make payment of the principal of or interest on any of the Bonds when the same becomes due and payable; (b) default in the performance or observance of any other covenant, agreement, or obligation of the District and the continuation thereof for a period of 60 days after notice of such default is given by any Registered Owner to the District; or (c) the District files for protection under the federal Bankruptcy Code or other similar state or federal statute. Section 12.2. Remedies for Default. (a) Upon the happening of any Event of Default, then any Registered Owner or an authorized representative thereof, including but not limited to, a trustee or trustees therefor, may proceed against the District for the purpose of protecting and enforcing the rights of the Registered Owners under this Order, by mandamus or other suit, action or special proceeding in equity or at law, in any court of competent jurisdiction, for any relief permitted by law, including the specific performance of any covenant or agreement contained herein, or thereby to enjoin any act or thing that may be unlawful or in violation of any right of the Registered Owners hereunder or any combination of such remedies. (b) All such proceedings shall be instituted and maintained for the equal benefit of all Registered Owners. Section 12.3. Remedies Not Exclusive. (a) No remedy herein conferred or reserved is intended to be exclusive of any other available remedy or remedies, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or under the Bonds or now or hereafter existing at law or in equity; provided, however, that notwithstanding any other provision of this Order, the right to accelerate the debt evidenced by the Bonds shall not be available as a remedy under this Order. (b) The exercise of any remedy herein conferred or reserved shall not be deemed a waiver of any other available remedy. ARTICLE XIII DISCHARGE Section 13.1. Defeasance. If the District shall pay or cause to be paid, or there shall otherwise be paid to the Registered Owners, the principal of and interest on the Bonds, at the times and in the manner stipulated in this Order, then the pledge of taxes and Net Revenues under this Order and all covenants, agreements, and other obligations of the District to the Registered Owners shall thereupon cease, terminate, and become void and be discharged and satisfied, and the Paying Agent/Registrar shall pay over or deliver all money held by it under this Order to the District. Bonds or interest installments for the payment of which money shall have been set aside and shall be held in trust by the Paying Agent/Registrar or with any other bank or trust company which has agreed to 21 hold the same for such purpose (through deposit by the District of funds for such payment or otherwise) at the Stated Maturity thereof shall be deemed to have been paid within the meaning and with the effect expressed above in this Section. All Bonds outstanding shall be deemed to have been paid, prior to their Stated Maturity, within the meaning and with the effect expressed above in this Section, if there shall have been deposited with the Paying Agent/Registrar either (a) money in an amount which shall be sufficient to make such payment, (b) Governmental Obligations certified by an independent public accounting firm of national reputation to be of such maturities and interest payment dates and to bear such interest as will, without further investment or reinvestment of either the principal amount thereof or the interest eamings therefrom, be sufficient to make such payment, or (c) a combination of money and Governmental Obligations together so certified to be sufficient to make such payment, provided that all the expenses pertaining to the Bonds with respect to which such deposit is made shall have been paid or the payment thereof provided for to the satisfaction of the Paying Agent/ Registrar (and to such other bank or trust company). Section 13.2. Investments for Defeasance. No money or Governmental Obligations so deposited shall be invested or reinvested unless in Governmental Obligations and unless such money and Governmental Obligations not invested and such new investments are together certified by an independent public accounting firm to be of such amounts, maturities, and interest payment dates and to bear such interest as will, without further investment or reinvestment of either the principal amount thereof or the interest earnings therefrom, be sufficient to make such payment. Neither Governmental Obligations nor money deposited with the Paying Agent/Registrar or other bank or trust company pursuant to this Section, nor principal or interest payments on any such Governmental Obligations, shall be withdrawn or used for any purpose other than, and shall be held in trust for, the payment of the principal of, and interest on such Bonds. Any cash received from such principal of and interest on such investment securities deposited with the Paying Agent/Registrar, if not needed for such purpose, shall, to the extent practicable, be reinvested in Governmental Obligations (which may be non-interest bearing) maturing at times and in amounts sufficient to pay when due the principal of and interest on such Bonds on and prior to the maturity thereof, and interest earned from such reinvestments shall be paid over to the District as received by the Paying Agent/Registrar, free and clear of any trust, lien, or pledge and used in accordance with applicable law. Any payment for Governmental Obligations purchased for the purpose of reinvesting cash as aforesaid shall be made only against delivery of such Governmental Obligations. ARTICLE XIV MISCELLANEOUS Section 14.1. Persons Deemed Registered Owners. The District, the Paying Agent/Registrar, and any agent of either of them may treat the Person in whose name any Bond is registered as the owner of such Bond for the purpose of receiving payment of the principal of and interest on such Bond and for all other purposes whatsoever, and to the extent permitted by law, neither the District, the Paying Agent/Registrar, nor any agent of either of them shall be affected by notice to the contrary. Section 14.2. District's Successors and Assigns. Whenever in this Order the District is named and referred to, it shall be deemed to include its successors and assigns, and all covenants and agreements in this Order by or on behalf of the District, except as otherwise provided herein, shall bind and inure to the benefit of its successors and assigns whether or not so expressed. Section 14.3. Benefits of Order Provisions. Nothing in this Order or in the Bonds, expressed or implied, shall give or be construed to give any person, firm or corporation, other than the District, the Paying Agent/Registrar, and the Registered Owners any legal or equitable right or claim under or in respect of this Order, or under any covenant, condition, or provision herein contained, all the covenants, conditions, and provisions contained in this Order or in the Bonds being for the sole benefit of the District, the Paying Agent/Registrar, and the Registered Owners. Section 14.4. Severability Clause. If any word, phrase, clause, sentence, paragraph, section, or other part of this Order , or the application thereof to any person or circumstance, shall ever be held to be invalid or unconstitutional by any court of competent jurisdiction, the remainder of this Order and the 22 application of such word, phrase, clause, sentence, paragraph, section, or other part of this Order to any other persons or circumstances shall not be affected thereby. Section 14.5. Open Meeting. It is hereby officially found and determined that the meeting at which this Order was adopted was open to the public, and public notice of the time, place and purpose of said meeting was properly given, all as required by Chapter 551, Texas Government Code, and Section 49.063, Texas Water Code, as amended. Section 14.6. Amendments. The District may, without the consent of or notice to any Registered Owners of the Bonds, amend, change, or modify this Order as may be required (a) for the purpose of curing any ambiguity, inconsistency, or formal defect or omission herein, or (b) in connection with any other change which is not to the prejudice of the Registered Owners of the Bonds. Except for such amendments, changes, or modifications, the District shall not amend, change, or modify this Order in any manner without the consent of the Registered Owners of the Bonds. Section 14.7. No Personal Liability. No recourse shall be had for payment of the principal of or interest on any Bonds or for any claim based thereon, or on this Order, against any official or employee of the District or any person executing any Bonds. Section 14.8. Notice to Registered Owners. Except as may be otherwise provided in this Order, where this Order provides for notice to Registered Owners of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to each Registered Owner, at the address of such Registered Owner as it appears in the Register. Neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Registered Owner of Bonds shall affect the sufficiency of such notice with respect to all other Registered Owners. Wherever this Order provides for notice in any manner, such notice may be waived in writing by the Person 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 Registered Owners shall be filed with the District, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. Section 14.9. District's Officers' Duties. The President, Vice President, and Secretary of the Board of Directors are authorized to do any and all things proper and necessary to carry out the intent of this Order. ARTICLE XV EFFECTIVENESS Section 15.1. Effectiveness. This Order shall take effect and be in force from and after its passage and approval. (The remainder of this page intentionally left blank) 23 PASSED AND APPROVED on this ATTEST: Secretary, Board of Directors (SEAL) President, Board of Directors SIGNATURE PAGE FOR ORDER AUTHORIZING ISSUANCE OF BONDS Austin_1\273384\1 19239-6 2/11/2005 EXHIBIT A Debt Service Schedule DATE: February 16, 2005 SUBJECT: City Council Meeting - February 24, 2005 ITEM: *9.A.2. Consider a resolution approving the issuance of $1,300,000 Combination Unlimited Tax and Revenue Refunding Bonds, Series 2005 by the Meadows of Chandler Creek Municipal Utility District. Department: Finance Department Staff Person: Cindy Demers, Director Justification: The District is in the extraterritorial jurisdiction (ETJ) of the City of Round Rock and, therefore, the City's approval is required prior to the sale of bonds. The District has 1416 active single family connections with an estimated District population of approximately of 5,100. The District is selling $1,300,000 principal amount of refunding bonds. The bond proceeds will be used to restructure the District's annual debt service expense and achieve debt service savings for the District. Although the District does have authorized but unissued bonds, at this time the district does not expect to sell any additional bonds for capital improvements. Texas Commission of Environmental Quality approval is not required as these are refunding bonds. These bonds are an obligation of the District and no other entity. No adverse impact is anticipated on the District's tax or utility rates. Funding: Cost: N/A Source of funds: N/A Outside Resources: N/A Background Information: N/A Public Comment: N/A