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Water & Wastewater Commission Review and Recommendation Government That Works For All COA Strategic Direction: May 6, 2020 Commission Meeting Date: Council Meeting Date: Department: Treasury May 21, 2020 Client: Virginia Collier, Kevin Critendon, David Anders Agenda Item Recommend approval of a resolution to authorize issuance by Senna Hills Municipal Utility District of Unlimited Tax and Waterworks and Sewer System Revenue Refunding Bonds, Series 2020, in an amount not to exceed $3,135,000. There is no anticipated fiscal impact. Amount and Source of Funding May 6, 2020 – To be reviewed by the Water and Wastewater Commission. Purchasing Language: Prior Council Action: Boards and Commission Action: MBE/WBE: N/A N/A N/A Senna Hills Municipal Utility District (“the District”) was authorized to be created as a municipal utility district operating pursuant to Articles 16, Section 59 of the Texas Constitution and Chapters 49 and 54 of the Texas Water Code, as amended. The District is located on the north side of FM 2244, approximately 5.0 miles west of the intersection of FM 2244 and Loop 360 and 2.5 miles east of the intersection of FM 2244 and State Highway 71. The District is required to obtain City approval for all bond sales pursuant to the Consent Agreement. The City has received a request from the District to approve a District refunding bond sale in the amount of $3,135,000. Similar to a home refinance, “refunding” of debt lowers the amount of debt service over the life of the existing bonds by replacing them with new bonds that have lower interest costs. The District has proposed a refunding bond issue to reduce annual debt service requirements on the District’s debt. Proceeds of the issue will be used to refund and redeem $3,135,000 outstanding Unlimited Tax and Waterworks and Sewer System Revenue and Refunding Bonds originally issued in 2010. The projected present value savings due to the reduced market interest rates will need to meet the City’s target guideline of a 4.25% savings for its own bond refundings. Since the actual amount of savings is dependent on the terms of the sale, approval is requested for this transaction at a minimum present value savings of 4.25%, to allow for market fluctuations. While the City is not responsible for debt service on the District’s Bonds, the City would benefit from the debt service savings associated with the refunding once the District is dissolved. The City’s Financial Services Department and the City’s Financial Advisor have reviewed the proposed refunding and recommend approval of the District’s proposed refunding. SECRETARY’S CERTIFICATE THE STATE OF TEXAS COUNTY OF TRAVIS SENNA HILLS MUNICIPAL UTILITY DISTRICT § § § The undersigned officer of the Board of Directors of SENNA HILLS MUNICIPAL UTILITY DISTRICT, hereby certifies as follows: 1. The Board of Directors of said District convened at a REGULAR MEETING, on the 27th day of March 2020, via teleconference and videoconference in compliance with an advisory issued by the Office of the Governor, and the roll was called of the duly constituted officers and members of said Board, to-wit: Chet Palesko - President David Perl - Vice President Lisa McKenzie - Secretary Corey Newhouse - Assistant Secretary Joseph Szoo - Assistant Secretary and all said persons were present, thus constituting a quorum. Whereupon, among other business, the following was transacted at said meeting; RESOLUTION AUTHORIZING THE ISSUANCE OF SENNA HILLS MUNICIPAL UTILITY DISTRICT UNLIMITED TAX AND WATERWORKS AND SEWER SYSTEM REVENUE REFUNDING BONDS; LEVYING AN AD VALOREM TAX IN SUPPORT OF THE BONDS; APPROVING AN OFFICIAL STATEMENT; AUTHORIZING THE EXECUTION OF A BOND PURCHASE AGREEMENT; ESTABLISHING PROCEDURES FOR SELLING AND DELIVERING THE BONDS; AND AUTHORIZING OTHER MATTERS RELATED TO THE ISSUANCE OF THE BONDS was duly introduced for the consideration of the Board. It was then duly moved and seconded that said Resolution be passed; and, after due discussion, said motion, carrying with it the adoption of said Resolution, prevailed and carried by the following vote: AYES: NOES: 5 0 2. That a true, full, and correct copy of the aforesaid Resolution passed at the meeting described in the above and foregoing paragraph is attached to and follows this certificate; that said Resolution has been duly recorded in said Board’s minutes of said meeting; that the above and foregoing paragraph is a true, full, and correct excerpt from said Board’s minutes of said meeting pertaining to the passage of said Resolution; that the persons named in the above and foregoing paragraphs are duly chosen, qualified, and acting officers and members of said Board as indicated therein; that each 4126-6332-1379.1 EXHIBIT 1of the officers and members of said Board was duly and sufficiently notified officially and personally, in advance, of the time, place and purpose of the aforesaid meeting, and that said Resolution would be introduced and considered for passage at said meeting, and each of said officers and members consented, in advance, to the holding of said meeting for such purpose; that said meeting was held in compliance with the advisory issued by the Office of the Governor and public notice of the time, place, and subject matter of the public business to be considered at such meeting, including the Resolution, was given, all as required by Chapter 551, as amended, Texas Government Code and Sec. 49.063, Water Code. [Execution page follows.] 4126-6332-1379.1 -2- EXHIBIT 1SIGNED AND SEALED the 27th day of March, 2020. By: /s/ Lisa McKenzie Secretary, Board of Directors Senna Hills Municipal Utility District [DISTRICT SEAL] 4126-6332-1379.1 EXHIBIT 1RESOLUTION AUTHORIZING THE ISSUANCE OF SENNA HILLS MUNICIPAL UTILITY DISTRICT UNLIMITED TAX AND WATERWORKS AND SEWER SYSTEM REVENUE REFUNDING BONDS; LEVYING AN AD VALOREM TAX IN SUPPORT OF THE BONDS; APPROVING AN OFFICIAL STATEMENT; AUTHORIZING THE EXECUTION OF A BOND PURCHASE AGREEMENT; ESTABLISHING PROCEDURES FOR SELLING AND DELIVERING THE BONDS; AND AUTHORIZING OTHER MATTERS RELATED TO THE ISSUANCE OF THE BONDS Adopted March 27, 2020 4129-8863-8499.2 EXHIBIT 1TABLE OF CONTENTS ARTICLE ONE PREAMBLE ARTICLE TWO Page SECTION 1.01 INCORPORATION OF PREAMBLE ........................................................2 DEFINITIONS AND INTERPRETATIONS SECTION 2.01 DEFINITIONS .............................................................................................2 SECTION 2.02 INTERPRETATIONS .................................................................................6 ARTICLE THREE AUTHORIZATION, REGISTRATION, EXECUTION, AND AUTHENTICATION OF BONDS SECTION 3.01 NAME, PURPOSE, AND AUTHORIZATION ..........................................6 SECTION 3.02 DELEGATION TO PRICING OFFICER ...................................................7 SECTION 3.03 PAYMENT OF PRINCIPAL AND INTEREST .........................................9 SECTION 3.04 SUCCESSOR REGISTRARS .....................................................................9 SECTION 3.05 SPECIAL RECORD DATE ........................................................................9 SECTION 3.06 REGISTERED OWNERS .........................................................................10 SECTION 3.07 EXECUTION OF BONDS ........................................................................10 SECTION 3.08 AUTHENTICATION ................................................................................10 ARTICLE FOUR REGISTRATION, TRANSFER, AND EXCHANGE SECTION 4.01 REGISTRATION, TRANSFER, AND EXCHANGE ..............................10 SECTION 4.02 MUTILATED, LOST, OR STOLEN BONDS ..........................................11 SECTION 4.03 CANCELLATION OF BONDS ................................................................12 SECTION 4.04 BOOK-ENTRY-ONLY SYSTEM ............................................................12 4129-8863-8499.2 i EXHIBIT 1ARTICLE FIVE REDEMPTION OF BONDS BEFORE MATURITY SECTION 5.01 REDEMPTION OF BONDS .....................................................................14 SECTION 6.01 FORM OF BOND ......................................................................................14 SECTION 6.02 CUSIP REGISTRATION ..........................................................................14 SECTION 6.03 LEGAL OPINION AND BOND INSURANCE .......................................14 ARTICLE SIX FORM OF BOND ARTICLE SEVEN SECURITY FOR THE BONDS SECTION 7.01 SECURITY OF BONDS AND PERFECTION OF LIEN ........................14 SECTION 7.02 LEVY OF TAX; BONDS ARE ADDITIONAL BONDS ........................15 SECTION 7.03 PAYMENT OF BONDS AND PERFORMANCE OF OBLIGATIONS .........................................................................................16 SECTION 7.04 CONSOLIDATION OR DISSOLUTION OF DISTRICT ........................16 ARTICLE EIGHT FLOW OF FUNDS AND INVESTMENTS SECTION 8.01 CREATION OF FUNDS; SECURITY OF FUNDS; AND INVESTMENTS ........................................................................................16 SECTION 8.02 SECURITY OF FUNDS ............................................................................17 SECTION 8.03 INTEREST AND SINKING FUND ..........................................................17 SECTION 8.04 INVESTMENTS; EARNINGS .................................................................17 ARTICLE NINE APPLICATION OF BOND PROCEEDS; REFUNDING ARRANGEMENTS SECTION 9.01 BOND PROCEEDS ...................................................................................17 SECTION 9.02 DEFEASANCE OF REFUNDED BONDS...............................................17 SECTION 9.03 REDEMPTION PRIOR TO MATURITY OF REFUNDED BONDS ......................................................................................................18 SECTION 9.04 PURCHASE OF DEFEASANCE SECURITIES ......................................18 4129-8863-8499.2 ii EXHIBIT 1SECTION 9.05 ESCROW FUND .......................................................................................18 ARTICLE TEN PROVISIONS CONCERNING FEDERAL INCOME TAX EXCLUSION SECTION 10.01 COVENANTS REGARDING TAX EXEMPTION OF INTEREST ON THE BONDS...................................................................18 SECTION 10.02 DESIGNATION AS QUALIFIED TAX-EXEMPT BONDS ...................21 ARTICLE ELEVEN ADDITIONAL BONDS, SPECIAL PROJECT BONDS AND REFUNDING BONDS; MAINTENANCE AND OPERATION; INSURANCE SECTION 11.01 ADDITIONAL BONDS, SPECIAL PROJECT BONDS AND REFUNDING BONDS ..............................................................................21 SECTION 11.02 MAINTENANCE AND OPERATIONS; INSURANCE ..........................22 SECTION 12.01 DEFAULT AND REMEDIES ...................................................................23 SECTION 12.02 BOND RESOLUTION IS CONTRACT ...................................................24 ARTICLE TWELVE DEFAULT PROVISIONS ARTICLE THIRTEEN DISCHARGE BY DEPOSIT ARTICLE FOURTEEN MISCELLANEOUS PROVISIONS SECTION 13.01 DEFEASANCE OF BONDS .....................................................................24 SECTION 14.01 DISTRICT’S SUCCESSORS AND ASSIGNS ........................................26 SECTION 14.02 NO RECOURSE AGAINST DISTRICT OFFICERS OR DIRECTORS .............................................................................................26 SECTION 14.03 REGISTRAR .............................................................................................26 SECTION 14.04 REGISTRAR MAY OWN BONDS ..........................................................26 SECTION 14.05 BENEFITS OF PROVISIONS ..................................................................26 SECTION 14.06 UNAVAILABILITY OF AUTHORIZED PUBLICATION .....................26 SECTION 14.07 SEVERABILITY CLAUSE ......................................................................26 4129-8863-8499.2 iii EXHIBIT 1SECTION 14.08 ACCOUNTING .........................................................................................27 SECTION 14.09 FURTHER PROCEEDINGS .....................................................................27 ARTICLE FIFTEEN SALE AND DELIVERY OF BONDS AND APPROVAL OF DOCUMENTS SECTION 15.01 SALE OF BONDS .....................................................................................27 SECTION 15.02 APPROVAL, REGISTRATION, AND DELIVERY ................................27 SECTION 15.03 APPROVAL OF OFFERING DOCUMENTS, AND THE FORM OF A PAYING AGENT/REGISTRAR AGREEMENT AND ESCROW AGREEMENT .........................................................................27 ARTICLE SIXTEEN OPEN MEETING AND EFFECTIVE DATE SECTION 16.01 OPEN MEETING ......................................................................................28 SECTION 16.02 EFFECTIVE DATE OF BOND RESOLUTION ......................................28 SECTION 17.01 AMENDMENTS .......................................................................................29 SECTION 18.01 OTHER ACTIONS ....................................................................................30 SECTION 18.02 ADDITIONAL BOND INSURANCE PROVISIONS ..............................31 SECTION 18.03 PAYMENT OF ATTORNEY GENERAL FEE ........................................31 ARTICLE SEVENTEEN AMENDMENTS ARTICLE EIGHTEEN OTHER ACTIONS AND MATTERS ARTICLE NINETEEN CONTINUING DISCLOSURE SECTION 19.01 CONTINUING DISCLOSURE UNDERTAKING ...................................31 Exhibit A Form of Bond Exhibit B Continuing Disclosure Undertaking 4129-8863-8499.2 iv EXHIBIT 1RESOLUTION AUTHORIZING THE ISSUANCE OF SENNA HILLS MUNICIPAL UTILITY DISTRICT UNLIMITED TAX REFUNDING BONDS; LEVYING AN AD VALOREM TAX IN SUPPORT OF THE BONDS; APPROVING AN OFFICIAL STATEMENT; AUTHORIZING THE EXECUTION OF A BOND PURCHASE AGREEMENT; ESTABLISHING PROCEDURES FOR SELLING AND DELIVERING THE BONDS; AND AUTHORIZING OTHER MATTERS RELATED TO THE ISSUANCE OF THE BONDS STATE OF TEXAS COUNTY OF TRAVIS SENNA HILLS MUNICIPAL UTILITY DISTRICT § § § WHEREAS, by Order of the Texas Water Commission dated August 11, 1988, the Senna Hills Municipal Utility District (the “District”) was authorized to be created as a municipal utility district operating pursuant to Article XVI, Section 59 of the Texas Constitution and Chapters 49 and 54 of the Texas Water Code, as amended; and WHEREAS, the creation of the District was confirmed at an election held within District on January 21, 1995, by a vote of 2 to 0 (the “Confirmation Election”); and WHEREAS, the City of Austin (the “City”) has consented to the creation of the District and the issuance of bonds by the District pursuant to the terms and conditions of that certain Agreement Concerning Creation and Operation of Senna Hills Municipal Utility District, which was amended by that First Amended and Restated Agreement Concerning Creation and Operation of Senna Hills Municipal Utility District, and which was again amended by the Second Amendment to the First Amended and Restated Agreement Concerning Creation and Operation of Senna Hills Municipal Utility District (the “Consent Agreement”); and WHEREAS, the District currently has outstanding various series of bonds including its Unlimited Tax and Waterworks and Sewer System Revenue and Refunding Bonds, Series 2010 (the “Series 2010 Bonds”); and WHEREAS, the District now desires to issue refunding bonds to refund all or part of the Series 2010 Bonds (the “Refundable Bonds,” and those Refundable Bonds designated by the Pricing Officer in the Pricing Certificate, each as defined herein, to be refunded are herein referred to as the “Refunded Bonds”); and WHEREAS, all the Refunded Bonds mature or are subject to redemption prior to maturity within 20 years of the date of the bonds hereinafter authorized; and WHEREAS, the refunding bonds hereafter authorized are being issued and delivered pursuant to Chapter 1207, Texas Government Code, as amended (“Chapter 1207”); and WHEREAS, Chapter 1207 authorizes the District to issue refunding bonds and to deposit the proceeds from the sale thereof together with any other available funds or resources, directly with a place of payment (paying agent) for the Refunded Bonds or eligible trust 4129-8863-8499.2 1 EXHIBIT 1company or commercial bank, and such deposit, if made before such payment dates, shall constitute the making of firm banking and financial arrangements for the discharge and final payment of the Refunded Bonds; and WHEREAS, Chapter 1207 further authorizes the District to enter into an escrow agreement with respect to the safekeeping, investment, reinvestment, administration and disposition of any such deposit, upon such terms and conditions as the District and such escrow agent may agree, provided that such deposits may be invested and reinvested in Defeasance Securities, as defined herein; and WHEREAS, prior to the sale and delivery of the Bonds, the District will obtain the City’s approval to issue the Bonds in accordance with the Consent Agreement; and WHEREAS, the Office of the Governor suspended certain provisions of Chapter 551, as amended, Texas Government Code, to allow governmental bodies to conduct meetings via teleconference or video conference, subject to certain provisions of the advisory issued by the Office of the Governor; and WHEREAS, the Board of Directors of the District deems it advisable and in the best interest of the District to refund the Refunded Bonds in order to achieve debt service savings in accordance with the provisions of Chapter 1207; NOW, THEREFORE, BE IT RESOLVED BY THE BOARD OF DIRECTORS OF SENNA HILLS MUNICIPAL UTILITY DISTRICT: ARTICLE ONE PREAMBLE SECTION 1.01 INCORPORATION OF PREAMBLE. The Board of Directors of the District hereby incorporates the recitals set forth in the preamble hereto as if set forth in full at this place and further finds and determines that the recitals are true and correct. ARTICLE TWO DEFINITIONS AND INTERPRETATIONS SECTION 2.01 DEFINITIONS. When used in this Resolution, except in Article Six, and in any resolution, order or amendatory or supplemental order hereto, the terms listed below shall have the meanings specified below, unless it is otherwise expressly provided or unless the context otherwise requires: “Accreted Value” shall mean, with respect to a Premium Capital Appreciation Bond, as of any particular date of calculation, the original principal amount thereof, plus all interest accrued and compounded to the particular date of calculation, as determined in accordance with the Pricing Certificate and the Accretion Table attached as an exhibit to the Pricing Certificate relating to the Bonds that shows the Accreted Value per $5,000 maturity amount on the calculation date of maturity to its maturity. 4129-8863-8499.2 2 EXHIBIT 1“Accretion Table” means the exhibit attached to the Pricing Certificate that sets forth the rounded original principal amounts at the Issuance Date for the Premium Capital Appreciation Bonds and the Accreted Values and maturity amounts thereof as of each Compounding Date until final maturity. “Additional Bonds” means the additional bonds payable from ad valorem taxes or net revenues of the System which the Board expressly reserves the right to issue in Article Eleven of this Resolution. “Authorized Denominations” means the denomination of $5,000 or any integral multiple thereof with respect to the Current Interest Bonds and in the denomination of $5,000 in maturity amount or any integral multiple thereof with respect to the Premium Capital Appreciation Bonds. “Authorized Investments” means such investments authorized pursuant to the investment policy of the District and Chapter 2256 of the Texas Government Code, as amended. “Audit” means the audited financial statements of the District prepared by an independent auditor in accordance with the rules of the TCEQ in effect at such time. “Blanket Issuer Letter of Representations” means the Blanket Issuer Letter of Representations between the District, the Registrar and DTC. “Board of Directors” or “Board” means the governing body of the District. “Bond Insurer” means the insurer of the bonds, if any, as designated in the Pricing Certificate. “Bonds” shall mean and include collectively the Premium Capital Appreciation Bonds and Current Interest Bonds initially issued and delivered pursuant to this Resolution and the Pricing Certificate and all substitute Bonds and Bonds exchanged therefor, as well as all other substitute bonds and replacement bonds issued pursuant hereto, and the term “Bond” shall mean any 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. “Code” means the Internal Revenue Code of 1986, as amended. “Compounded Amount” shall mean, with respect to a Premium Capital Appreciation Bond, as of any particular date of calculation, the original principal amount thereof plus all interest accrued and compounded to the particular date of calculation. “Compounding Date” means the amounts as of any February 15 and August 15 as set forth in the Accretion Table. “Current Interest Bonds” shall mean the Bonds paying current interest and maturing in each of the years and in the aggregate principal amounts set forth in the Pricing Certificate. 4129-8863-8499.2 3 EXHIBIT 1“Defeasance Securities” means (i) Federal Securities, (ii) noncallable obligations of an agency or instrumentality of the United States of America, including obligations that are unconditionally guaranteed or insured by the agency or instrumentality and that, on the date the Board of Directors adopts or approves proceedings authorizing the issuance of refunding bonds or otherwise provides for the funding of an escrow to effect the defeasance of the Bonds are rated as to investment quality by a nationally recognized investment rating firm not less than “AAA” or its equivalent, (iii) noncallable obligations of a state or an agency or a county, municipality, or other political subdivision of a state that have been refunded and that, on the date the Board of Directors adopts or approves proceedings authorizing the issuance of refunding bonds or otherwise provides for the funding of an escrow to effect the defeasance of the Bonds, are rated as to investment quality by a nationally recognized investment rating firm no less than “AAA” or its equivalent, and (iv) any other then authorized securities or obligations under applicable state law that may be used to defease obligations such as the Bonds. “District” means Senna Hills Municipal Utility District and any other public agency succeeding to the powers, rights, privileges, and functions of the District and, when appropriate, the Board of Directors of the District. “DTC” means The Depository Trust Company of New York, New York, or any successor securities depository. “DTC Participant” means brokers and dealers, banks, trust companies, clearing corporations and certain other organizations on whose behalf DTC was created to hold securities to facilitate the clearance and settlement of securities transactions among DTC Participants. “Escrow Agent” means the escrow agent designated by the Pricing Officer in the Pricing Certificate, or any successor escrow agent under the Escrow Agreement. “Escrow Agreement” means the agreement by and between the District and the Escrow Agent relating to the defeasance of the Refunded Bonds. “Exchange Bonds” means Bonds registered, authenticated, and delivered by the Registrar, as provided in Section 4.01 of this Resolution. “Federal Securities” means direct, noncallable obligations of the United States of America, including obligations that are unconditionally guaranteed by the United States of America. “Fiscal Year” means the twelve-month accounting period for the District, which presently is the twelve-month period beginning on October 1 of each year and ending on September 30 of the following year, but which may be changed from time to time by the Board of Directors. “Initial Bond” means the Bond authorized, issued, and initially delivered as provided in Section 3.02 of this Resolution. “Interest and Sinking Fund” means the fund created in this Resolution. 4129-8863-8499.2 4 EXHIBIT 1“Interest Payment Date” means a date on which interest on the Current Interest Bonds is due and payable as set forth in the Pricing Certificate. “Issuance Date” means the date of delivery of the Bonds. “MSRB” means the Municipal Securities Rulemaking Board. “Outstanding” when used with reference to Bonds, means, as of a particular date, all Bonds theretofore and thereupon delivered except; (a) any Bond canceled by or on behalf of the District at or before said date, (b) any Bond defeased or no longer considered Outstanding pursuant to the provisions of this Resolution or otherwise defeased as permitted by applicable law and (c) any such Bond in lieu of or in substitution for which another Bond shall have been delivered pursuant to this Resolution. “Premium Capital Appreciation Bonds” shall mean the Bonds on which no interest is paid prior to maturity, maturing in various amounts and in the aggregate principal amount as set forth in the Pricing Certificate. “Pricing Certificate” means the Pricing Certificate of the District’s Pricing Officer to be executed and delivered pursuant to Section 3.02 hereof in connection with the issuance of the Bonds. “Pricing Officer” means President Palesko or Assistant Secretary Newhouse, acting as the designated pricing officer of the District pursuant to this Resolution. “Purchaser” means the senior managing underwriter or initial purchaser as selected by the Pricing Officer, and such additional investment banking firms as the Pricing Officer deems appropriate. “Record Date” means the fifteen (15) days prior to the next preceding Interest Payment Date, whether or not such dates are Business Days as set forth in the Pricing Certificate. “Redemption Date” means a date fixed for redemption of any Bond pursuant to the terms of this Resolution and the Pricing Certificate. “Refundable Bonds” means the outstanding Series 2010 Bonds. “Refunded Bonds” means those Refundable Bonds designated by the Pricing Officer in the Pricing Certificate. “Register” means the registry system maintained on behalf of the District by the Registrar in which are listed the names and addresses of the Registered Owners and the principal amount of Bonds registered in the name of each Registered Owner. “Registered Owner” means any person or entity in whose name a Bond is registered. 4129-8863-8499.2 5 EXHIBIT 1“Registrar” or “Paying Agent/Registrar” means the bank, trust company, financial institution, or other entity named in the Pricing Certificate to act as paying agent and registrar for the Bonds in accordance with the terms of this Resolution. “Replacement Bonds” means the Bonds authorized by the District to be issued in substitution for lost, apparently destroyed, or wrongfully taken Bonds as provided in Section 4.02 of this Resolution. “Resolution” means this Resolution of the Board of Directors authorizing the issuance of the Bonds. “Rule” means SEC Rule 15c2-12, as amended from time to time. “SEC” means the United States Securities and Exchange Commission. “Series 2010 Bonds” means the Senna Hills Unlimited Tax and Waterworks and Sewer System Revenue and Refunding Bonds, Series 2010. “Special Record Date” means the new Record Date for the payment of a respective interest payment established by the Paying Agent/Registrar in the event of a non-payment of interest on a scheduled payment date. “System” means the District’s Waterworks and Sewer Systems, together with all present and future improvements, extensions, and additions thereto, and replacement thereof. SECTION 2.02 INTERPRETATIONS. The titles and headings of the articles and sections and the page numbers of this Resolution have been inserted for convenience of reference only and are not to be considered a part hereof and shall not in any way modify or restrict any of the terms or provisions hereof. This Resolution and all the terms and provisions hereof shall be liberally construed to effectuate the purposes set forth herein and to sustain the validity of the Bonds and the validity of the taxes levied in payment thereof. ARTICLE THREE AUTHORIZATION, REGISTRATION, EXECUTION, AND AUTHENTICATION OF BONDS SECTION 3.01 NAME, PURPOSE, AND AUTHORIZATION. The Bonds shall be issued from time to time, in one or more series, for the purpose of refunding the Refunded Bonds and paying certain costs of issuing the Bonds. The name and designation of the Bonds (which shall include the year in which the Bonds are sold) shall be set forth in the Pricing Certificate. The authority of the Pricing Officer to execute a Pricing Certificate pursuant to Section 3.02 of this Resolution shall expire at 11:59 p.m. on the 180th day following the date of this Resolution (the “Expiration Date”). Bonds delivered pursuant to a Pricing Certificate executed on or before the Expiration Date may be delivered after such date. 4129-8863-8499.2 6 EXHIBIT 1SECTION 3.02 DELEGATION TO PRICING OFFICER. (a) There initially shall be issued, sold and delivered fully registered bonds, without interest coupons, which may be in the form of Current Interest Bonds or Premium Capital Appreciation Bonds, numbered consecutively from R-1 upward, in the case of Current Interest Bonds, and from PC-1 upward, in the case of Premium Capital Appreciation Bonds (except the initial Bonds delivered to the Attorney General of the State of Texas which shall be numbered T- 1 and TPC-1, respectively) payable to the respective initial Registered Owners thereof, or to the registered assignee or assignees of said Bonds or any portion or portions thereof, in Authorized Denominations, maturing serially or otherwise on the dates, in the years and in the principal amounts, respectively, and dated, all as set forth in the Pricing Certificate to be executed and delivered by the Pricing Officer pursuant to subsection (b) of this Section. The Pricing Certificate is hereby incorporated in and made a part of this Resolution. (b) As authorized by Section 1207.007, Texas Government Code, as amended, the Pricing Officer is hereby authorized to act on behalf of the District in selling and delivering the Bonds of each series, determining which of the Refundable Bonds shall be refunded and constitute “Refunded Bonds” under this Resolution and carrying out the other terms, conditions and procedures specified in this Resolution, including determining the number of series of the Bonds and their date(s), any additional or different designation or title by which the Bonds shall be known, the aggregate principal amount of and the price at which the Bonds will be sold, the years in which the Bonds will mature and the final maturity for the Bonds of each series, the principal amount to mature in each of such years, the aggregate principal amount of Current Interest Bonds and Premium Capital Appreciation Bonds, the rate of interest to be borne by each such maturity, the interest payment periods, the dates, price, and terms upon and at which the Bonds shall be subject to redemption prior to maturity at the option of the District, as well as any mandatory redemption provisions, and all other terms, details and matters relating to the Bonds and their issuance, sale and delivery and the refunding of the Refunded Bonds, all of which shall be specified in the Pricing Certificate; provided that: (i) the aggregate principal amount of Bonds issued pursuant to this Resolution shall not exceed $3,135,000; (ii) no Bond shall mature later than August 15, 2033; (iii) (iv) the refunding must produce gross debt service savings of at least $110,000, net of any District contribution to the refunding and costs of issuance; the price to be paid for the Bonds shall not be less than 95% of the aggregate original principal amount thereof plus accrued interest thereon from their dated date to the date of their delivery; and (v) the true interest cost for the Bonds shall not exceed 5.00%. (c) In establishing the aggregate principal amount of the Bonds, the Pricing Officer shall establish an amount not to exceed the amount authorized in Section 3.01, which shall be sufficient to provide for the purposes for which the Bonds are authorized and to pay the costs of issuing the Bonds. 4129-8863-8499.2 7 EXHIBIT 1(d) To achieve advantageous borrowing costs for the District, the Bonds shall be sold on a negotiated, placement or competitive basis as determined by the Pricing Officer in the Pricing Certificate. In determining whether to sell the Bonds by negotiated, placement or competitive sale, the Pricing Officer shall take into account any material disclosure issues which might exist at the time, the market conditions expected at the time of the sale and any other matters which, in the judgment of the Pricing Officer, might affect the net borrowing costs on the Bonds. If the Pricing Officer determines that the Bonds should be sold at a competitive sale, the Pricing Officer shall cause to be prepared a notice of sale and official statement in such manner as the Pricing Officer deems appropriate, to make the notice of sale and official statement available to those institutions and firms wishing to submit a bid for the Bonds, to receive such bids, and to award the sale of the Bonds to the bidder submitting the best bid in accordance with the provisions of the notice of sale. If the Pricing Officer determines that the Bonds should be sold by a negotiated sale or placement, the Pricing Officer shall designate the placement purchaser or the senior managing underwriter for the Bonds and such additional investment banking firms as the Pricing Officer deems appropriate to assure that the Bonds are sold on the most advantageous terms to the District. The Pricing Officer, acting for and on behalf of the District, is authorized to enter into and carry out a purchase agreement or other agreement for the Bonds to be sold by negotiated sale or placement, with the Purchaser(s) at such price, with and subject to such terms as determined by the Pricing Officer pursuant with Section 3.02(b) above. In satisfaction of Section 1201.022(a)(3), Texas Government Code, the Board hereby determines that the delegation of the authority to the Pricing Officer to approve the final terms and conditions of the Bonds as set forth in this Resolution, and the decisions made by the Pricing Officer pursuant to such delegated authority and incorporated in the Pricing Certificate will be, in the best interests and shall have the same force and effect as if such determination were made by the Board and the Pricing Officer is hereby authorized to make and include in the Pricing Certificate an appropriate finding to that effect. If Bonds are issued in more than one series, the provisions of this Resolution shall apply to each such series in the manner, to the extent and subject to such terms and conditions as shall be specified in the Pricing Certificate therefor. The Pricing Officer may approve modifications to this Resolution to conform to the terms of the Bonds, as approved by the Pricing Officer, and execute any instruments, agreements and other documents as the Pricing Officer shall deem necessary or appropriate in connection with the issuance, sale and delivery of Bonds pursuant to this Resolution. (e) The Current Interest Bonds shall bear interest calculated on the basis of a 360-day year composed of twelve 30-day months from the dates specified in the FORM OF BOND set forth in this Resolution to their respective dates of maturity or redemption at the rates per annum set forth in the Pricing Certificate. The Premium Capital Appreciation Bonds shall bear interest from the Issuance Date, calculated on the basis of a 360-day year composed of twelve 30-day months (subject to rounding to the Compounded Amounts thereof), compounded on the Compounding Dates as set 4129-8863-8499.2 8 EXHIBIT 1forth in the Pricing Certificate, and payable, together with the principal amount thereof, in the manner provided in the Form of Bond at the rates set forth in the Pricing Certificate. Attached to the Pricing Certificate, if Premium Capital Appreciation Bonds are to be issued, shall be the Accretion Table. The Accreted Value with respect to any date other than a Compounding Date is the amount set forth on the Accretion Table with respect to the last preceding Compounding Date, plus the portion of the difference between such amount and the amount set forth on the Accretion Table with respect to the next succeeding Compounding Date that the number of days (based on 30-day months) from such last preceding Compounding Date to the date for which such determination is being calculated bears to the total number of days (based on 30-day months) from such last preceding Compounding Date to the next succeeding Compounding Date. SECTION 3.03 PAYMENT OF PRINCIPAL AND INTEREST. The principal of the Bonds, shall be payable, without exchange or collection charges, in any coin or currency of the United States of America which, on the date of payment, is legal tender for the payment of debts due the United States of America, upon their presentation and surrender as they become due and payable, whether at maturity or by prior redemption in the case of the Bonds, at the designated office for payment of the Registrar. The interest on each Bond shall be payable on such date as set forth in the Pricing Certificate by check payable on the Interest Payment Date, mailed by the Registrar on or before each Interest Payment Date to the Registered Owner as shown on the Register on the Record Date or, at the request of a Registered Owner, and at the Registered Owner’s risk and expense, in such other manner as may be acceptable to the Registered Owner and the Registrar. Any accrued interest payable at maturity or earlier redemption, in the case of the Bonds, shall be paid upon presentation and surrender of the Bond to which such interest appertains. If the date for payment on any Bond is not a Business Day, then the date for such payment shall be the next succeeding Business Day, and payment on such date shall have the same force and effect as if made on the original date payment was due. SECTION 3.04 SUCCESSOR REGISTRARS. The District covenants that at all times while any Bonds are outstanding it will provide a bank, trust company, financial institution or other entity duly qualified and duly authorized to act as Registrar for the Bonds. The District reserves the right to change the Registrar on not less than 30 days written notice to the Registrar, so long as any such notice is effective at such time as to not disrupt payment on the next succeeding principal or interest payment date on the Bonds. Promptly upon the appointment of any successor Registrar, the previous Registrar shall deliver the Register or copies thereof to the new Registrar, and the new Registrar shall notify each Registered Owner, by United States mail, first-class postage prepaid, of such change and of the address of the new Registrar. Each Registrar hereunder, by acting in that capacity, shall be deemed to have agreed to the provisions of this Section. SECTION 3.05 SPECIAL RECORD DATE. If interest on any Bond is not paid on any Interest Payment Date and continues unpaid for 30 days thereafter, the Registrar shall establish a new record date for the payment of such interest, to be known as a Special Record Date. The Registrar shall establish a Special Record Date when funds to make such interest payment are received from or on behalf of the District. Such Special Record Date shall be 15 4129-8863-8499.2 9 EXHIBIT 1days prior to the date fixed for payment of such past due interest, and notice of the date of payment and the Special Record Date shall be sent by United States mail, first-class, postage prepaid, not later than 5 days prior to the Special Record Date, to each affected Registered Owner of record as of the close of business on the day prior to the mailing of such notice. SECTION 3.06 REGISTERED OWNERS. The District, the 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 payment of principal or interest on such Bond, and for all other purposes, whether or not such Bond is overdue, and neither the District, nor the Registrar shall be bound by any notice or knowledge to the contrary. All payments made to the person deemed to be the Registered Owner of any Bond in accordance with this Section 3.07 shall be valid and effectual and shall discharge the liability of the District and the Registrar upon such Bond to the extent of the sums paid. SECTION 3.07 EXECUTION OF BONDS. The Bonds shall be signed on behalf of the District by the President or Vice-President of the Board of Directors and attested by the Secretary or Assistant Secretary, by their manual, lithographed, or facsimile signatures, and the official seal of the District shall be impressed or placed in facsimile thereon. The 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 the 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. If any officer of the District whose manual or facsimile signature appears on the Bonds shall cease to be such officer before the authentication of such Bonds or before the delivery of such Bonds, such manual or facsimile signature shall nevertheless be valid and sufficient for all purposes as if such officer had remained in such office. SECTION 3.08 AUTHENTICATION. The Initial Bond shall bear thereon a certificate of registration of the Comptroller of Public Accounts of the State of Texas, substantially in the form provided in Section 6.02 of this Resolution, manually executed by the Comptroller or a duly authorized deputy. All other Bonds shall bear a certificate of authentication, substantially in the form provided in Section 6.03 of this Resolution, manually executed by an authorized officer of the Registrar. No Bond shall be valid or obligatory for any purpose unless either the registration certificate of the Comptroller or the authentication certificate of the Registrar has been signed by a duly authorized officer thereof. ARTICLE FOUR REGISTRATION, TRANSFER, AND EXCHANGE SECTION 4.01 REGISTRATION, TRANSFER, AND EXCHANGE. So long as any Bonds remain Outstanding, the Registrar shall keep at its designated office for payment the Register, in which, subject to such reasonable regulations as it may prescribe, the Registrar shall provide for the registration and transfer of Bonds in accordance with the terms of this Resolution. Each Bond shall be transferable only upon the presentation and surrender thereof at the designated office for payment of the Registrar, duly endorsed for transfer, or accompanied by an 4129-8863-8499.2 10 EXHIBIT 1assignment duly executed by the Registered Owner or an authorized representative in form satisfactory to the Registrar. Upon due presentation of any Bond for transfer, the Registrar shall authenticate and deliver in exchange therefor, within 72 hours after such presentation, a new Bond or Bonds of the same type, registered in the name of the transferee or transferees, in authorized denominations and of the same maturity and aggregate principal amount, and bearing interest at the same rate as the Bond or Bonds so presented. All Bonds shall be exchangeable upon presentation and surrender thereof at the designated office for payment of the Registrar for a Bond or Bonds of the same maturity and interest rate and in any authorized denomination, in an aggregate principal amount equal to the unpaid principal amount of the Bond or Bonds presented for exchange. The Registrar shall be and is hereby authorized to authenticate and deliver exchange Bonds in accordance with the provisions of this Section 4.01. Each Bond delivered in accordance with this Section 4.01 shall be entitled to the benefits and security of this Resolution to the same extent as the Bond or Bonds in lieu of which such Bond is delivered. The District or the Registrar may require the Registered Owner of any Bond to pay a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with the transfer or exchange of such Bond. Any fee or charge of the Registrar for such transfer or exchange shall be paid by the District. SECTION 4.02 MUTILATED, LOST, OR STOLEN BONDS. Upon the presentation and surrender to the Registrar of a mutilated Bond, the Registrar shall authenticate and deliver in exchange therefor a replacement Bond of like maturity, interest rate and principal amount, bearing a number not contemporaneously outstanding. If any Bond is lost, apparently destroyed, or wrongfully taken, the District, 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 execute and the Registrar shall authenticate and deliver a replacement Bond of like amount, bearing a number not contemporaneously outstanding. The District or the Registrar may require the Registered Owner of a mutilated Bond to pay a sum sufficient to cover any tax or other governmental charge that may be imposed in connection therewith and any other expenses connected therewith, including apparently destroyed, or wrongfully taken, the District, 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 execute and the Registrar shall authenticate and deliver a replacement Bond of like amount, bearing a number not contemporaneously outstanding. The District or the Registrar may require the Registered Owner of a mutilated Bond to pay a sum sufficient to cover any tax or other governmental charge that may be imposed in connection therewith and any other expenses connected therewith, including the fees and expenses of the Registrar. The District or the Registrar may require the Registered Owner of a lost, apparently destroyed or wrongfully taken Bond, before any replacement Bond is issued, to: (a) furnish to the District and the Registrar satisfactory evidence of the ownership of and the circumstances of the loss, destruction or theft of such Bond; 4129-8863-8499.2 11 EXHIBIT 1(b) (c) furnish such security or indemnity as may be required by the Registrar and the District to save them harmless; pay all expenses and charges in connection therewith, including, but not limited to, printing costs, legal fees, fees of the Registrar and any tax or other governmental charge that may be imposed; and (d) meet any other reasonable requirements of the District and the Registrar. If, after the delivery of such replacement Bond, a bona fide purchaser of the original Bond which such replacement Bond was issued presents for payment such original Bond, the District and the 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 Registrar in connection therewith. If any such mutilated, lost, apparently destroyed or wrongfully taken Bond has become or is about to become due and payable, the District in its discretion may, instead of issuing a replacement Bond, authorize the Registrar to pay such Bond. Each replacement Bond delivered in accordance with this Section 4.02 shall be entitled to the benefits and security of this Resolution to the same extent as the Bond or Bonds in lieu of which such replacement is delivered. SECTION 4.03 CANCELLATION OF BONDS. All Bonds paid in accordance with this Resolution, and all Bonds in lieu of which exchange Bonds or replacement Bonds are authenticated, registered, and delivered in accordance herewith, shall be canceled and destroyed upon the making of proper records regarding such payment, redemption, exchange, or replacement. This Registrar shall furnish the District with appropriate certificates of destruction of such Bonds. SECTION 4.04 BOOK-ENTRY-ONLY SYSTEM. (a) The Bonds issued in exchange for the Initial Bond issued as provided in Section 3.02 shall be issued in the form of a separate single fully registered Bond for each of the maturities thereof registered in the name of Cede & Co., as nominee of The Depository Trust Company of New York (“DTC”) and except as provided in subsection (b) hereof, all of the outstanding Bonds shall be registered in the name of Cede & Co., as nominee of DTC. With respect to Bonds registered in the name of Cede & Co., as nominee of DTC, the District and the Paying Agent/Registrar shall have no responsibility or obligation to any securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations on whose behalf DTC was created to hold securities to facilitate the clearance and settlement of securities transactions among DTC participants (the “DTC Participant”) or to any person on behalf of whom such a DTC Participant holds an interest in the Bonds. Without limiting the immediately preceding sentence, the District and the Paying Agent/Registrar shall have no responsibility or obligation with respect to (i) the accuracy of the records of DTC, Cede & Co. or any DTC Participant with respect to any ownership interest in the Bonds, (ii) the 4129-8863-8499.2 12 EXHIBIT 1delivery to any DTC Participant or any other person, other than a Registered Owner, as shown on the Register, of any notice with respect to the Bonds, or (iii) the payment to any DTC Participant or any person, other than a Registered Owner, as shown in the Register of any amount with respect to principal of or interest on the Bonds. Notwithstanding any other provision of this Resolution to the contrary, but to the extent permitted by law, the District and the Paying Agent/Registrar shall be entitled to treat and consider the person in whose name each Bond is registered in the Register as the absolute owner of such Bond for the purpose of payment of principal of and interest, with respect to such Bond, for the purposes of registering transfers with respect to such Bond, and for all other purposes of registering transfers with respect to such Bonds, and for all other purposes whatsoever. The Paying Agent/Registrar shall pay all principal of and interest on the Bonds only to or upon the order of the respective Registered Owners, as shown in the Register as provided in this Resolution, or their respective attorneys duly authorized in writing, and all such payments shall be valid and effective to fully satisfy and discharge the District’s obligations with respect to payment of principal of and interest on the Bonds to the extent of the sum or sums so paid. No person other than a Registered Owner, as shown in the Register, shall receive a Bond evidencing the obligation of the District to make payments of principal, and interest pursuant to this Resolution. Upon delivery by DTC to the Paying Agent/Registrar of written notice to the effect that DTC has determined to substitute a new nominee in place of Cede & Co., and subject to the provisions in this Resolution with respect to interest checks being mailed to the registered owner at the close of business on the Record Date the word “Cede & Co.” in this Resolution shall refer to such new nominee of DTC. (b) In the event that the District determines to discontinue the book-entry system through DTC or a successor or DTC determines to discontinue providing its services with respect to the Bonds, the District shall either (i) appoint a successor securities depository, qualified to act as such under Section 17(a) of the Securities and Exchange Act of 1934, as amended, notify DTC and DTC Participants of the appointment of such successor securities depository and transfer one or more separate Bonds to such successor securities depository or (ii) notify DTC and DTC Participants of the availability through DTC of Bonds and transfer one or more separate Bonds to DTC Participants having Bonds credited to their DTC accounts. In such event, the Bonds shall no longer be restricted to being registered in the Register in the name of Cede & Co., as nominee of DTC, but may be registered in the name of the successor securities depository, or its nominee, or in whatever name or names the Registered Owner transferring or exchanging Bond shall designate, in accordance with the provisions of this Resolution. (c) Notwithstanding any other provision of this Resolution to the contrary, so long as any Bond is registered in the name of Cede & Co., as nominee of DTC, all payments with respect to principal of, and interest on such Bond and all notices with respect to such Bond shall be made and given, respectively, in the manner provided in the Blanket Issuer Letter of Representations of the District to DTC. (d) The District confirms execution of a Blanket Issuer Letter of Representations with DTC establishing the Book-Entry-Only System which will be utilized with respect to the Bonds. (e) The Bonds herein authorized shall be initially issued as a fully registered bond, being one Bond, and the Initial Bond shall be registered in the name of the Purchaser or the designees thereof. The Initial Bond shall be the Bond submitted to the Office of the Attorney 4129-8863-8499.2 13 EXHIBIT 1General of the State of Texas for approval, certified and registered by the Office of the Comptroller of Public Accounts of the State of Texas and delivered to the Purchaser. Immediately after the delivery of the Initial Bond on the closing date, the Paying Agent/Registrar shall cancel the Initial Bond delivered hereunder and exchange therefor Bonds in the form of a separate single fully registered Bond for each of the maturities thereof registered in the name of Cede & Co., as nominee of DTC and except as provided in Section 3.02, all of the outstanding Bonds shall be registered in the name of Cede & Co., as nominee of DTC. ARTICLE FIVE REDEMPTION OF BONDS BEFORE MATURITY SECTION 5.01 REDEMPTION OF BONDS. The Bonds are subject to redemption as set forth in the Pricing Certificate. ARTICLE SIX FORM OF BOND SECTION 6.01 FORM OF BOND. The Bonds authorized by this Resolution shall be in substantially the form attached as Exhibit A, with such omissions, insertions, and variations, including variations in form, spacing, and style, as may be necessary and desirable and consistent with the terms of this Resolution and the Pricing Certificate. The District shall provide sufficient printed bond forms, duly executed by the District, to the Registrar for registration, authentication, and delivery of the Bonds in accordance with the provisions of this Resolution. SECTION 6.02 CUSIP REGISTRATION. The Pricing Officer may secure the printing of identification numbers on the Bonds through the CUSIP Service Bureau. SECTION 6.03 LEGAL OPINION AND BOND INSURANCE. The approving opinion of Orrick, Herrington & Sutcliffe LLP, Austin, Texas may be printed on the back of the Bonds over the certification of the Secretary or Assistant Secretary of the Board of Directors which may be executed in facsimile. In addition, if any bond insurance is obtained, any statement of insurance may be placed on the Bonds. ARTICLE SEVEN SECURITY FOR THE BONDS SECTION 7.01 SECURITY OF BONDS AND PERFECTION OF LIEN. The Bonds and all interest thereon, are and shall be secured by and payable from the levy of a continuing, direct annual ad valorem tax, without legal limitation as to rate or amount, upon all taxable property within the District, and are further secured by an irrevocable lien on and pledge of the Net Revenues. Said Net Revenues are further pledged irrevocably to the establishment and maintenance of the funds as hereinafter provided. 4129-8863-8499.2 14 EXHIBIT 1SECTION 7.02 LEVY OF TAX; BONDS ARE ADDITIONAL BONDS. (a) All taxes levied and collected for and on account of said Bonds shall be deposited, as collected, to the credit of the Interest and Sinking Fund. During each year while any of the Bonds are outstanding and unpaid, the Board shall compute and ascertain the rate and amount of ad valorem tax, based on the valuation of taxable property in the District, according to the latest approved tax rolls of said District, which will be sufficient to raise and produce the money required to pay the interest on the Bonds as such interest comes due, to provide and maintain a sinking fund adequate to pay the principal of the Bonds as such principal matures, and to pay the expenses of assessing and collecting the tax and the fees and expenses of the Paying Agent/Registrar with respect to the Bonds; and said tax shall be based on the latest approved tax rolls of the District, with full allowance being made for tax delinquencies. Said rate and amount of ad valorem tax is hereby levied, and is hereby ordered to be levied, without limit as to rate or amount, against all taxable property in the District for each year while any of the Bonds or interest thereon are outstanding and unpaid; and said tax shall be assessed and collected each such year and deposited to the credit of the aforesaid Interest and Sinking Fund. Said ad valorem taxes sufficient to provide for the payment of the interest on and principal of the Bonds, as such interest comes due and such principal matures, and to pay the expenses of assessing and collecting the tax and the fees and expenses of the Paying Agent/Registrar with respect to the Bonds, are hereby pledged for such payment, without limit as to rate or amount. (b) At such time as the Net Revenues from the operation of the System (herein pledged) together with money derived from taxes shall have accumulated a surplus in the Interest and Sinking Fund in an amount at least equal to the principal of and interest on the Bonds scheduled to mature and accrue in the year next succeeding, then the annual tax levy may be reduced to such rate as will produce not less than twenty five percent (25%) of the principal and interest requirements for each of the next succeeding years, until an actual experience of three (3) successive years shall demonstrate that the Net Revenues are wholly adequate to pay the principal of and the interest on the Bonds as the same mature and accrue, at which time the District tax may be wholly abated until further experience may demonstrate the necessity again to exercise the District’s taxing power in order to avoid default in the payment of said Bonds and the interest thereon as the same mature and accrue. (c) The Bonds authorized to be issued and delivered by this Resolution are “Additional Bonds,” as defined in Section 18 of the Series 1999 Bond Resolution authorizing the Senna Hills Municipal Utility District Unlimited Tax and Waterworks and Sewer System Revenue Bonds, Series 1999. Therefore, except where inconsistent with the provisions of this Resolution, Sections 8, 9 and 11 through 17, inclusive, of the Series 1999 Bond Resolution are hereby adopted by reference, and the same shall apply with equal force to the Bonds ordered to be issued by this Resolution as if said Sections were fully set forth herein. Chapter 1208, Government Code, applies to the issuance of the Bonds and the pledge of ad valorem taxes and Net Revenues to payment of principal and interest on the Bonds granted by the District is to be subject to the filing requirements of Chapter 9, Texas Business & Commerce Code, then in order to preserve to the registered owners of the Bonds the perfection of the security interest in said 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, Business & Commerce Code and enable a filing to perfect the security interest in said pledge to occur. 4129-8863-8499.2 15 EXHIBIT 1SECTION 7.03 PAYMENT OF BONDS AND PERFORMANCE OF OBLIGATIONS. The District covenants to pay promptly the principal of and interest on the Bonds as the same become due and payable, whether at maturity or by prior redemption, in accordance with the terms of the Bonds and this Resolution, and to keep and perform faithfully all of its covenants, undertakings, and agreements contained in this Resolution, or in any Bond executed, authenticated, and delivered hereunder. SECTION 7.04 CONSOLIDATION OR DISSOLUTION OF DISTRICT. To the extent provided by law, the pledge of taxes set forth in Section 7.02 will terminate if a city takes over all properties and assets, assumes all debts, liabilities, and obligations, and performs all functions and services of the District, and the District is abolished pursuant to law. The laws of the State of Texas permit 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: (a) 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 (herein for purposes of this section the “Consolidated System”). (b) Apply the net revenues from the operation of the Consolidated System to the payment of principal, interest, redemption price and bank charges on the revenue bonds or the combination tax and revenue bonds (herein for purposes of this section 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 continue to be subordinate to the first lien Revenue Bonds of the Consolidating Districts). (c) Pledge the net revenues of the Consolidated System to the payment of principal, interest, redemption price and bank charges on Revenue Bonds which may be issued by the Consolidating Districts on a parity with the outstanding first lien Revenue Bonds of the Consolidating Districts. ARTICLE EIGHT FLOW OF FUNDS AND INVESTMENTS SECTION 8.01 CREATION OF FUNDS; SECURITY OF FUNDS; AND (a) Designation of Funds. The creation of the following special funds is hereby INVESTMENTS. confirmed and ratified: the Escrow Fund; (i) (ii) Interest and Sinking Fund for the Bonds. 4129-8863-8499.2 16 EXHIBIT 1Each fund is hereby created or confirmed. The Interest and Sinking Fund shall be kept separate and apart from all other funds of the District and shall be maintained at a depository bank of the District. The Interest and Sinking Fund shall constitute a trust fund which shall be held in trust for the benefit of the owners of the Bonds. The Escrow Fund shall be created and shall be governed and maintained by the terms of the Escrow Agreement. SECTION 8.02 SECURITY OF FUNDS. Any cash balance in any fund, to the extent not insured by the Federal Deposit Insurance Corporation or its successor, shall be continuously secured in the manner provided by law for the security of funds of counties of the State of Texas. SECTION 8.03 INTEREST AND SINKING FUND. The taxes levied under Section 7.01 hereof shall be deposited to the credit of the Interest and Sinking Fund at such times and in such amounts as necessary for the timely payment of the principal of and interest on the Bonds. Money on deposit in the Interest and Sinking Fund shall be used to pay the principal of and interest on the Bonds as such become due and payable. SECTION 8.04 INVESTMENTS; EARNINGS. Moneys deposited into the Interest and Sinking Fund the Revenue Fund and any other fund or funds which the District may lawfully create may be invested or reinvested in Authorized Investments. All investments and any profits realized from and interest accruing on investments made from any fund may be transferred to the Interest and Sinking Fund. If any moneys are so invested, the District shall have the right to have sold in the open market a sufficient amount of such investments to meet its obligations in the event any fund does not have sufficient uninvested funds on hand to meet the obligations payable out of such fund. After such sale the moneys resulting therefrom shall belong to the fund from which the moneys for such investments were initially taken. The District shall not be responsible to the Registered Owners for any loss arising out of the sale of any investments. ARTICLE NINE APPLICATION OF BOND PROCEEDS; REFUNDING ARRANGEMENTS SECTION 9.01 BOND PROCEEDS. Proceeds from the sale of the Bonds of each series shall, promptly upon receipt by the District, be applied in accordance with the provisions set forth in the Pricing Certificate. In addition, in furtherance of the authority conferred by this Resolution, the Pricing Officer may direct that lawfully available funds of the District be applied (in such amounts as the Pricing Officer shall direct), deposited and invested to effect the purposes of this Order, including to effect the defeasance and redemption of the Refunded Bonds. SECTION 9.02 DEFEASANCE OF REFUNDED BONDS. Pursuant to Section 1207.007, Texas Government Code, as amended, the Board hereby authorizes and directs that the Refunded Bonds shall be paid in the amounts and on the dates determined by the Pricing Officer, and the Pricing Officer is hereby authorized and directed to identify the specific maturities of the Refunding Candidates to be refunded and the amount, if any, of available funds to be deposited in the Escrow Fund for the Refunded Bonds. In addition, the Pricing Officer 4129-8863-8499.2 17 EXHIBIT 1may execute and deliver an escrow agreement, a deposit agreement or a similar agreement, a letter of instructions or any other instrument relating to the safekeeping, investment, administration and disposition of moneys deposited to effect the defeasance of the Refunded Bonds in such form and subject to such terms and conditions as the Pricing Officer determines may be necessary or convenient to carry out the intent and purpose of this Resolution. SECTION 9.03 REDEMPTION PRIOR TO MATURITY OF REFUNDED BONDS. To maximize the District's present value savings and to minimize the District's costs of refunding, the Board hereby authorizes and directs that certain of the Refunded Bonds shall be called for redemption prior to maturity in the amounts, at the dates and at the redemption prices set forth in the Pricing Certificate, and the appropriate officials of the District are hereby authorized and directed to take all necessary and appropriate action to give or cause to be given a notice of redemption to the holders or paying agent/registrars, as appropriate, of such Refunded Bonds, in the manner required by the documents authorizing the issuance of such Refunded Bonds. SECTION 9.04 PURCHASE OF DEFEASANCE SECURITIES. The Pricing Officer and the Escrow Agent are hereby authorized (a) to subscribe for, agree to purchase, and purchase securities that are permitted investments for a defeasance escrow established to defease the Refunded Bonds, and to execute any and all subscriptions, purchase agreements, commitments, letters of authorization and other documents necessary to effectuate the foregoing, and any actions heretofore taken for such purpose are hereby ratified and approved, and (b) to direct and provide for such contributions to the escrow fund as are provided in the Escrow Agreement. SECTION 9.05 ESCROW FUND. The proceeds from the sale of the Bonds after making the deposit hereinbefore provided and paying or making provisions for the payment of the costs in connection with issuing the Bonds, shall be deposited into the Escrow Fund as described in the Escrow Agreement. ARTICLE TEN PROVISIONS CONCERNING FEDERAL INCOME TAX EXCLUSION SECTION 10.01 COVENANTS REGARDING TAX EXEMPTION OF INTEREST ON THE BONDS. The District intends that the interest on the Bonds shall be excludable from gross income of the owners thereof for federal income tax purposes pursuant to Sections 103 and 141 through 150 of the Internal Revenue Code of 1986, as amended (the “Code”), and all applicable temporary, proposed and final regulations (the “Regulations”) and procedures promulgated thereunder and applicable to the Bonds, the District covenants that it will monitor and control the receipt, investment, expenditure and use of all gross proceeds of the Bonds (including all property the acquisition, construction or improvement of which is to be financed directly or indirectly with the proceeds of the Bonds) and take or omit to take such other and further actions as may be required by Sections 103 and 141 through 150 of the Code and the Regulations to cause interest on the Bonds to be and remain excludable from the gross income, as defined in Section 61 of the Code, of the owners of the Bonds for federal income tax 4129-8863-8499.2 18 EXHIBIT 1purposes. Without limiting the generality of the foregoing, the District shall comply with each of the following covenants: (a) The District will use all of the proceeds of the Bonds to (i) provide funds for the purposes described in introduction hereof, which will be owned and operated by the District and (ii) to pay the costs of issuing the Bonds. (b) The District will not directly or indirectly take any action, or omit to take any action, which action or omission would cause the Bonds to constitute “private activity bonds” within the meaning of Section 141(a) of the Code. (c) Principal of and interest on the Bonds will be paid solely from ad valorem taxes collected by the District and investment earnings on such collections. (d) Based upon all facts and estimates now known or reasonably expected to be in existence on the date the Bonds are delivered, the District reasonably expects that the proceeds of the Bonds will not be used in a manner that would cause the Bonds or any portion thereof to be an “arbitrage bond” within the meaning of Section 148 of the Code. (e) At all times while the Bonds are outstanding, the District will identify and properly account for all amounts constituting gross proceeds of the Bonds in accordance with the Regulations. The District will monitor the yield on the investments of the proceeds of the Bonds and, to the extent required by the Code and the Regulations, will restrict the yield on such investments to a yield which is not materially higher than the yield on the Bonds. To the extent necessary to prevent the Bonds from constituting “arbitrage bonds,” the District will make such payments as are necessary to cause the yield on all yield restricted nonpurpose investments allocable to the Bonds to be less than the yield that is materially higher than the yield on the Bonds. (f) The District will not take any action or knowingly omit to take any action that, if taken or omitted, would cause the Bonds to be treated as “federally guaranteed” obligations for purposes of Section 149(b) of the Code. (g) The District represents that not more than fifty percent (50%) of the proceeds of the Bonds will be invested in nonpurpose investments (as defined in Section 148(f)(6)(A) of the Code) having a substantially guaranteed yield for four years or more within the meaning of Section 149(g)(3)(A)(ii) of the Code, and the District reasonably expects that at least eighty-five percent (85%) of the spendable proceeds of the Bonds will be used to carry out the governmental purpose of the Bonds within the three-year period beginning on the date of issue of the Bonds. (h) The District will take all necessary steps to comply with the requirement that certain amounts earned by the District on the investment of the gross proceeds of the Bonds, if any, be rebated to the federal government. Specifically, the District will (i) maintain records regarding the receipt, investment, and expenditure of the gross proceeds of the Bonds as may be required to calculate such excess arbitrage profits separately from records of amounts on deposit in the funds and accounts of the District allocable to other obligations of the District or moneys which do not represent gross proceeds of any obligations of the District and retain such records for at least six years after the day on which the last outstanding Bond is discharged, (ii) account 4129-8863-8499.2 19 EXHIBIT 1for all gross proceeds under a reasonable, consistently applied method of accounting, not employed as an artifice or device to avoid in whole or in part, the requirements of Section 148 of the Code, including any specified method of accounting required by applicable Regulations to be used for all or a portion of any gross proceeds, (iii) calculate, at such times as are required by applicable Regulations, the amount of excess arbitrage profits, if any, earned from the investment of the gross proceeds of the Bonds and (iv) timely pay, as required by applicable Regulations, all amounts required to be rebated to the federal government. In addition, the District will exercise reasonable diligence to assure that no errors are made in the calculations required by the preceding sentence and, if such an error is made, to discover and promptly correct such error within a reasonable amount of time thereafter, including payment to the federal government of any delinquent amounts owed to it, interest thereon and any penalty. (i) The District will not directly or indirectly pay any amount otherwise payable to the federal government pursuant to the foregoing requirements to any person other than the federal government by entering into any investment arrangement with respect to the gross proceeds of the Bonds that might result in a reduction in the amount required to be paid to the federal government because such arrangement results in a smaller profit or a larger loss than would have resulted if such arrangement had been at arm's length and had the yield on the Bonds not been relevant to either party. (j) The District will timely file or cause to be filed with the Secretary of the Treasury of the United States the information required by Section 149(e) of the Code with respect to the Bonds on such form and in such place as the Secretary may prescribe. (k) The District will not issue or use the Bonds as part of an “abusive arbitrage device” (as defined in Section 1.148-10(a) of the Regulations). Without limiting the foregoing, the Bonds are not and will not be a part of a transaction or series of transactions that attempts to circumvent the provisions of Section 148 of the Code and the Regulations, by (i) enabling the District to exploit the difference between tax-exempt and taxable interest rates to gain a material financial advantage, or (ii) increasing the burden on the market for tax-exempt obligations. (l) Proper officers of the District charged with the responsibility for issuing the Bonds are hereby directed to make, execute and deliver certifications as to facts, estimates or circumstances in existence as of the date of issuance of the Bonds and stating whether there are facts, estimates or circumstances that would materially change the District's expectations. On or after the date of issuance of the Bonds, the District will take such actions as are necessary and appropriate to assure the continuous accuracy of the representations contained in such certificates. (m) The covenants and representations made or required by this Section are for the benefit of the Bond holders and any subsequent Bond holder, and may be relied upon by the Bond holders and any subsequent Bond holder and bond counsel to the District. In complying with the foregoing covenants, the District may rely upon an unqualified opinion issued to the District by nationally recognized bond counsel that any action by the District or reliance upon any interpretation of the Code or Regulations contained in such opinion 4129-8863-8499.2 20 EXHIBIT 1will not cause interest on the Bonds to be includable in gross income for federal income tax purposes under existing law. Notwithstanding any other provision of this Resolution, the District's representations and obligations under the covenants and provisions of this Section shall survive the defeasance and discharge of the Bonds for as long as such matters are relevant to the exclusion of interest on the Bonds from the gross income of the owners for federal income tax purposes. SECTION 10.02 DESIGNATION AS QUALIFIED TAX-EXEMPT BONDS. The Pricing Officer is authorized to designate the Bonds as “qualified tax-exempt obligations” as defined in section 265(b)(3) of the Code, if the District qualifies to make such designation at the time of the pricing of the Bonds, conditioned upon the purchaser identified in the Pricing Certificate certifying that the aggregate initial offering price of the Bonds to the public (excluding any accrued interest) is no greater than $10,000,000 (or such amount permitted by section 265 of the Code). Assuming such condition is met and the Pricing Officer makes such designation in the Pricing Certificate, the District represents, covenants and warrants the following: (a) that during the calendar year in which the Bonds are issued, the District (including any subordinate entities) has not designated nor will designate bonds, which when aggregated with the Bonds, will result in more than $10,000,000 (or such amount permitted by section 265 of the Code) of “qualified tax-exempt obligations” being issued; (b) that the District reasonably anticipates that the amount of tax-exempt obligations issued during the calendar year in which the Bonds are issued, by the District (or any subordinate entities) will not exceed $10,000,000 (or such amount permitted by section 265 of the Code); and, (c) that the District will take such action or refrain from such action as necessary, and as more particularly set forth in this Section, in order that the Bonds will not be considered “private activity bonds” within the meaning of section 141 of the Code. The Pricing Officer may modify the foregoing representations, covenants and warranties in the Pricing Certificate as necessary and appropriate to comply with applicable provisions of the Code in existence at the time of pricing of the Bonds. ARTICLE ELEVEN ADDITIONAL BONDS, SPECIAL PROJECT BONDS AND REFUNDING BONDS; MAINTENANCE AND OPERATION; INSURANCE SECTION 11.01 ADDITIONAL BONDS, SPECIAL PROJECT BONDS AND REFUNDING BONDS. The District expressly reserves and shall hereafter have the right to issue in one or more installments such other combination unlimited tax and revenue bonds as were authorized at the Confirmation Election and as may hereafter be authorized at subsequent elections. Such bonds may be payable from and equally secured by a pledge of and lien on the Net Revenues of the System to the same extent as pledged and in all things on a parity with the lien of these bonds. Furthermore, the District expressly reserves and shall hereafter have the right to issue in one or more installments the following: (a) Additional Revenue Bonds. The District expressly reserved the right to issue additional bonds payable solely from Net Revenues of the System, as set forth 4129-8863-8499.2 21 EXHIBIT 1above, for the purpose of completing, repairing, improving, extending, enlarging or replacing the System, and such bonds may be payable from and equally secured by a lien on and pledge of said Net Revenues on a parity with the pledge thereof for these Bonds. Provided, however, that before the District can issue additional parity bonds payable solely from the revenues of the System, an independent certified public accountant shall certify that the Net Revenues of the System for the previous fiscal year have been equal to at least 1.25 times the average annual requirements for principal and interest of the then outstanding bonds of the District payable in whole or in part from the Net Revenues of the System, and a registered professional engineer shall certify that the anticipated Net Revenues of the System will equal at least 1.50 times the average annual requirements for payment of the then outstanding bonds of the District payable in whole or in part from the revenues of the System plus the additional bonds proposed to be issued; however, such certificates shall not be required for the issuance of additional bonds payable solely from ad valorem taxes or for additional bonds payable from both ad valorem taxes and net revenues of the System. Inferior Lien Bonds. The District also reserves the right to issue inferior lien bonds and to pledge the Net Revenues of the System to the payment thereof, such pledge to be subordinate in all respects to the lien of these Bonds and any previously issued combination unlimited tax and revenue or revenue bonds on a parity with the bonds of this series. Special Project Bonds. The District further reserves the right to issue special project bonds for the purchase, or repair of water, sewer and/or drainage facilities necessary under a contract or contracts with persons, corporations, municipal corporations, political subdivisions or other entities, such special project bonds to be payable from and secured by the proceeds of such contract or contracts. The District further reserves the right to fund such bonds. Refunding Bonds. The District further reserves the right to refund any of these bonds or additional combination unlimited tax and revenue or revenue bonds subject to prior redemption, or any bond the bearers of which have consented to have refunded, and the refunding bonds so issued shall enjoy complete equality of lien with the remaining bonds not refunded, if any such bonds remain, and the refunding bonds so issued shall enjoy the priority of lien enjoyed by the bonds being refunded. (b) (c) (d) SECTION 11.02 MAINTENANCE AND OPERATIONS; INSURANCE. While any of the Bonds or Additional Bonds are outstanding, the District covenants and agrees to maintain the System in good condition and operate the same in an efficient manner and at reasonable expense, and to maintain insurance on the System, for the benefit of the holder or holders of said bonds, of a kind and in an amount which usually would be carried by private companies engaged in a similar type of business and which will insure the District against claims for which it can be liable under the Texas Tort Claims Act, or any amendment thereof, or any similar law. 4129-8863-8499.2 22 EXHIBIT 1ARTICLE TWELVE DEFAULT PROVISIONS SECTION 12.01 DEFAULT AND REMEDIES. (a) Events of Default. Each of the following occurrences or events for the purpose of this Resolution is hereby declared to be an Event of Default: (i) the failure to make payment of the principal of or interest on any of the Bonds when the same becomes due and payable; or (ii) default in the performance or observance of any other covenant, agreement or obligation of the District, the failure to perform which materially, adversely affects the rights of the Registered Owners of the Bonds, including, but not limited to, their prospect or ability to be repaid in accordance with this Resolution, and, if such default is capable of cure, the continuation thereof for a period of sixty (60) days after notice of such default is given by any Registered Owner to the District. (b) Remedies for Event of Default. (i) Upon the happening of any Event of Default, then and in every case, any Registered Owner or an authorized representative thereof, including, but not limited to, a trustee or trustees therefor, may proceed against the District, or any official, officer or employee of the District in its official capacity, for the purpose of protecting and enforcing the rights of the Registered Owners under this Resolution, by mandamus or other suit, action or special proceeding in equity or at law, in any court of competent jurisdiction, for any relief permitted by law, including the specific performance of any covenant or agreement contained herein, or thereby to enjoin any act or thing that may be unlawful or in violation of any right of the Registered Owners hereunder or any combination of such remedies. (ii) It is provided that all such proceedings shall be instituted and maintained for the equal benefit of all Registered Owners of Bonds then Outstanding. (c) Remedies Not Exclusive. (i) No remedy herein conferred or reserved is intended to be exclusive of any other available remedy or remedies, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or under the Bonds or now or hereafter existing at law or in equity; provided, however, that notwithstanding any other provision of this Resolution, the right to accelerate the debt evidenced by the Bonds shall not be available as a remedy under this Resolution. (ii) The exercise of any remedy herein conferred or reserved shall not be deemed a waiver of any other available remedy. 4129-8863-8499.2 23 EXHIBIT 1(iii) By accepting the delivery of a Bond authorized under this Resolution, such Registered Owner agrees that the certifications required to effectuate any covenants or representations contained in this Resolution do not and shall never constitute or give rise to a personal or pecuniary liability or charge against the officers, employees or trustees of the District or the Board of Directors. (iv) None of the members of the Board of Directors, nor any other official or officer, agent, or employee of the District, shall be charged personally by the Registered Owners with any liability, or be held personally liable to the Registered Owners under any term or provision of this Resolution, or because of any Event of Default or alleged Event of Default under this Resolution. SECTION 12.02 BOND RESOLUTION IS CONTRACT. In consideration of the purchase and acceptance of the Bonds authorized to be issued hereunder by the Registered Owners, the provisions of this Resolution shall be deemed to be and shall constitute a contract between the District and the Registered Owners; and the covenants and agreements herein set forth to be performed on behalf of the District shall be for the equal benefit, protection, and security of each of the Registered Owners. The Bonds, regardless of the time or times of their issue or maturity, shall be of equal rank without preference, priority, or distinction of any Bond over any other, except as expressly provided herein. ARTICLE THIRTEEN DISCHARGE BY DEPOSIT SECTION 13.01 DEFEASANCE OF BONDS. (a) Except as otherwise provided in the Pricing Certificate, any Bond and the interest thereon shall be deemed to be paid, retired and no longer outstanding (a “Defeased Bond”) within the meaning of this Resolution, except to the extent provided in subsections (c) and (e) of this Section, when payment of the principal of such Bond, plus interest thereon to the due date or dates (whether such due date or dates be by reason of maturity, upon redemption, or otherwise) either (i) shall have been made or caused to be made in accordance with the terms thereof (including the giving of any required notice of redemption or the establishment of irrevocable provisions for the giving of such notice) or (ii) shall have been provided for on or before such due date by irrevocably depositing with or making available to the Paying Agent/Registrar or an eligible trust company or commercial bank for such payment (1) lawful money of the United States of America sufficient to make such payment, (2) Defeasance Securities, certified by an independent public accounting firm of national reputation to mature as to principal and interest in such amounts and at such times as will ensure the availability, without reinvestment, of sufficient money to provide for such payment and when proper arrangements have been made by the District with the Paying Agent/Registrar or an eligible trust company or commercial bank for the payment of its services until all Defeased Bonds shall have become due and payable or (3) any combination of (1) and (2). At such time as a Bond shall be deemed to be a Defeased Bond hereunder, as aforesaid, such Bond and the interest thereon shall no longer be secured by, payable from, or entitled to the benefits of, the ad valorem taxes herein levied as provided in this 4129-8863-8499.2 24 EXHIBIT 1Resolution, and such principal and interest shall be payable solely from such money or Defeasance Securities. (b) The deposit under clause (ii) of subsection (a) shall be deemed a payment of a Bond as aforesaid when proper notice of redemption of such Bonds shall have been given or upon the establishment of irrevocable provisions for the giving of such notice, in accordance with this Resolution. Any money so deposited with the Paying Agent/Registrar or an eligible trust company or commercial bank as provided in this Section may at the discretion of the Board of Directors also be invested in Defeasance Securities, maturing in the amounts and at the times as hereinbefore set forth, and all income from all Defeasance Securities in possession of the Paying Agent/Registrar or an eligible trust company or a commercial bank or trust company pursuant to this Section which is not required for the payment of such Bond and premium, if any, and interest thereon with respect to which such money has been so deposited, shall be turned over to the Board of Directors. (c) Notwithstanding any provision of any other Section of this Resolution which may be contrary to the provisions of this Section, all money or Defeasance Securities set aside and held in trust pursuant to the provisions of this Section for the payment of principal of the Bonds and premium, if any, and interest thereon, shall be applied to and used solely for the payment of the particular Bonds and premium, if any, and interest thereon, with respect to which such money or Defeasance Securities have been so set aside in trust. Until all Defeased Bonds shall have become due and payable, the Paying Agent/Registrar shall perform the services of Paying Agent/Registrar for such Defeased Bonds the same as if they had not been defeased, and the District shall make proper arrangements to provide and pay for such services as required by this Resolution. (d) Notwithstanding anything elsewhere in this Resolution, if money or Defeasance Securities have been deposited or set aside with the Paying Agent/Registrar or an eligible trust company or commercial bank pursuant to this Section for the payment of Bonds and such Bonds shall not have in fact been actually paid in full, no amendment of the provisions of this Section shall be made without the consent of the registered owner of each Bond affected thereby. (e) Notwithstanding the provisions of subsection (a) immediately above, to the extent that, upon the defeasance of any Defeased Bond to be paid at its maturity, the District retains the right under Texas law to later call that Defeased Bond for redemption in accordance with the provisions of the order authorizing its issuance, the District may call such Defeased Bond for redemption upon complying with the provisions of Texas law and upon the satisfaction of the provisions of subsection (a) immediately above with respect to such Defeased Bond as though it was being defeased at the time of the exercise of the option to redeem the Defeased Bond and the effect of the redemption is taken into account in determining the sufficiency of the provisions made for the payment of the Defeased Bond. 4129-8863-8499.2 25 EXHIBIT 1ARTICLE FOURTEEN MISCELLANEOUS PROVISIONS SECTION 14.01 DISTRICT’S SUCCESSORS AND ASSIGNS. Whenever in this Resolution the District is named and referred to, it shall be deemed to include its successors and assigns, and all covenants and agreements in this Resolution 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 14.02 NO RECOURSE AGAINST DISTRICT OFFICERS OR DIRECTORS. No recourse shall be had for the payment of the principal of or interest on the Bonds or for any claim based thereon or on this Resolution against any officer or director of the District or any person executing the Bonds. SECTION 14.03 REGISTRAR. The Registrar shall act as agent for the payment of principal of and interest on the Bonds and shall maintain the Register for the Bonds, all in accordance with the terms of this Resolution. If the Registrar or its successor becomes unable for any reason to act as Registrar hereunder, or if the Board of Directors of the District determines that a successor Registrar should be appointed, a successor Registrar shall be selected by the District. Any successor Registrar shall be either a bank, trust company, financial institution, or other entity duly qualified and legally authorized to serve and perform the duties as paying agent and registrar for the Bonds. SECTION 14.04 REGISTRAR MAY OWN BONDS. The Registrar, in its individual or any other capacity, may become the owner or pledgee of the Bonds with the same rights it would have if it were not Registrar. SECTION 14.05 BENEFITS OF PROVISIONS. Nothing in this Resolution or in the Bonds, expressed or implied, shall give or be construed to give any person, firm, or corporation, other than the District, the Registrar, and the Registered Owners, any legal or equitable right or claim under or in respect of this Resolution, or under any covenant, condition, or provision herein contained, all the covenants, conditions, and provisions contained in this Resolution or in the Bonds being for the sole benefit of the District, the Registrar, and the Registered Owners. SECTION 14.06 UNAVAILABILITY OF AUTHORIZED PUBLICATION. If, because of the temporary or permanent suspension of any newspaper, journal, or other publication, or for any reason, publication of notice cannot be made meeting any requirements herein established, any notice required to be published by the provisions of this Resolution shall be given in such other manner and at such time or times as in the judgment of the District shall most effectively approximate such required publication, and the giving of such notice in such manner shall for all purposes of this Resolution be deemed to be in compliance with the requirements for publication thereof. SECTION 14.07 SEVERABILITY CLAUSE. If any word, phrase, clause, sentence, paragraph, section, or other part of this Resolution, or the application thereof to any 4129-8863-8499.2 26 EXHIBIT 1person or circumstance, shall ever be held to be invalid or unconstitutional by any court of competent jurisdiction, the remainder of this Resolution and the application of such word, phrase, clause, sentence, paragraph, section, or other part of this Resolution to any other persons or circumstances shall not be affected thereby. SECTION 14.08 ACCOUNTING. The District will keep proper records and accounts regarding the levy and collection of taxes, which records and accounts will be made available to any Registered Owner on reasonable request. Each year while any of the Bonds are outstanding, the District shall have an audit of its books and accounts by a certified public accountant or firm of certified public accountants, based on its Fiscal year, and copies of such audits will be made available to any Registered Owner upon request. SECTION 14.09 FURTHER PROCEEDINGS. The President and Secretary of the Board of Directors and other appropriate officials of the District are hereby authorized and directed to do any and all things necessary and/or convenient to carry out the terms of this Resolution. ARTICLE FIFTEEN SALE AND DELIVERY OF BONDS AND APPROVAL OF DOCUMENTS SECTION 15.01 SALE OF BONDS. The Bonds shall be sold and delivered, pursuant to a purchase or other agreement or winning bid at a price and under the terms set forth in the Pricing Certificate. SECTION 15.02 APPROVAL, REGISTRATION, AND DELIVERY. The President of the Board of Directors of the District and representatives of Orrick, Herrington & Sutcliffe LLP are hereby authorized and directed to submit the Initial Bond and a transcript of the proceedings relating to the issuance of the Bonds to the Attorney General of the State of Texas for approval and, following said approval, to submit the Initial Bond to the Comptroller of Public Accounts of the State of Texas for registration. Upon registration of the Initial Bond, the Comptroller of Public Accounts (or a deputy designated in writing to act for the Comptroller) shall manually sign the Comptroller’s registration certificate prescribed herein to be printed and endorsed on the Initial Bond, and the seal of the Comptroller shall be impressed or placed in facsimile on the Initial Bond. After the Initial Bond has been registered, signed, and sealed by the Comptroller, it shall be delivered to the Purchaser, but only upon receipt of the full purchase price. SECTION 15.03 APPROVAL OF OFFERING DOCUMENTS, AND THE FORM OF A PAYING AGENT/REGISTRAR AGREEMENT AND ESCROW AGREEMENT. The Pricing Officer is hereby authorized to approve the Preliminary Official Statement, the Official Statement relating to the Bonds and any addenda, supplement or amendment thereto and to deem such documents final in accordance with Rule 15c2-12. The District further approves the distribution of such Official Statement in the reoffering of the Bonds by the Purchaser in final form, with such changes therein or additions thereto as the 4129-8863-8499.2 27 EXHIBIT 1Pricing Officer executing the same may deem advisable, such determination to be conclusively evidenced by his execution thereof. The paying agent/registrar agreement in substantially the form and substance previously approved by the Board is hereby approved and the Pricing Officer is hereby authorized and directed to select the paying agent/registrar and complete, amend, modify and execute the as necessary. The discharge and defeasance of Refunded Bonds shall be effectuated pursuant to the terms and provisions of an Escrow Agreement, in the form and containing the terms and provisions as shall be approved by a Pricing Officer, including any insertions, additions, deletions, and modifications as may be necessary (a) to carry out the program designed for the District by the underwriters or purchasers, (b) to maximize the District’s present value savings and/or to minimize the District’s costs of refunding, (c) to comply with all applicable laws and regulations relating to the refunding of the Refunded Bonds and (d) to carry out the other intents and purposes of this Resolution; and, the Pricing Officer is hereby authorized and directed to select the escrow agent and execute and deliver such Escrow Agreement, on behalf of the District, in multiple counterparts. To maximize the District’s present value savings and to minimize the District’s costs of refunding, the District hereby authorizes and directs that certain of the Refunded Bonds shall be called for redemption prior to maturity in the amounts, at the dates and at the redemption prices set forth in the Pricing Certificate, and the Pricing Officer is hereby authorized and directed to take all necessary and appropriate action to give or cause to be given a notice of redemption to the holders or paying agent/registrars, as appropriate, of such Refunded Bonds, in the manner required by the documents authorizing the issuance of such Refunded Bonds. The Pricing Officer and the Escrow Agent are each hereby authorized (a) to subscribe for, agree to purchase, and purchase Defeasance Securities that are permitted investments for a defeasance escrow established to defease Refunded Bonds, and to execute any and all subscriptions, purchase agreements, commitments, letters of authorization and other documents necessary to effectuate the foregoing, and any actions heretofore taken for such purpose are hereby ratified and approved, and (b) to authorize such contributions to the escrow fund as are provided in the Escrow Agreement. ARTICLE SIXTEEN OPEN MEETING AND EFFECTIVE DATE SECTION 16.01 OPEN MEETING. It is officially found, determined, and declared that the meeting at which this Resolution is adopted was in compliance with the advisory issued by the Office of the Governor and public notice of the time, place, and subject matter of the public business to be considered at such meeting, including this Resolution, was given, all as required by Chapter 551, as amended, Texas Government Code. SECTION 16.02 EFFECTIVE DATE OF BOND RESOLUTION. This Resolution shall take effect and be in full force and effect upon and after its passage. 4129-8863-8499.2 28 EXHIBIT 1ARTICLE SEVENTEEN AMENDMENTS SECTION 17.01 AMENDMENTS. (a) Amendment with Consent of Owners of 51% of Bonds. The owners of 51% in aggregate principal amount of then outstanding Bonds shall have the right from time to time to approve any amendment to this Resolution which may be deemed necessary or desirable by the District; provided however, that, other than as permitted by subsection (f) of this Section 17.01, nothing herein contained shall permit or be construed to permit the amendment, without the consent of the owner of each of the outstanding Bonds affected thereby, of the terms and conditions of this Resolution or the Bonds so as to: (i) change debt service requirements, interest payment dates or the maturity or maturities of the outstanding Bonds; (ii) reduce the rate of interest borne by any of the outstanding Bonds; (iii) (iv) (v) (vi) reduce the amount of the principal of, redemption premium, if any, or interest on the outstanding Bonds or impose any conditions with respect to such payments; modify the terms of payment of principal of, redemption premium, if any, or interest on the outstanding Bonds, or impose any conditions with respect to such payments; affect the right of the Registered Owners of less than all of the Bonds then outstanding; or decrease the minimum percentage of the principal amount of Bonds necessary for consent to any such amendment. (b) Notice of Amendment. If at any time the District shall desire to amend this Resolution it may cause a written notice of the proposed amendment to be published at least once on a business day in a financial newspaper, journal, or publication of general circulation in the City of New York, New York, or in the State of Texas. If, because of temporary or permanent suspension of the publication or general circulation of all such newspapers, journals, or publications, it is impossible or impractical to publish such notice in the manner provided herein, then such publication in lieu thereof as shall be made by the Registrar shall constitute a sufficient publication of notice. In addition to such publication, the Registrar shall cause a written notice of the proposed amendment to be given by registered or certified mail to Registered Owners of the Bonds as shown on the Register maintained by the Registrar; provided, however, that failure to receive such written notice of the proposed amendment, or any defect therein or in the mailing thereof, shall not affect the validity of any proceeding in connection with, or the adoption of, such amendment. Such notice shall briefly set forth the nature of the proposed amendment and shall state that a copy thereof is on file at the principal office of the Registrar for inspection by all Registered Owners of Bonds. 4129-8863-8499.2 29 EXHIBIT 1(c) Consent to Amendment. Whenever at any time not less than 30 days, and within one year, from the date of the first publication of said notice or other services of written notice the District shall receive an instrument or instruments executed by the Registered Owners of at least 51% in aggregate principal amount of all Bonds then outstanding, which instrument or instruments shall refer to the proposed amendment described in said notice and shall specifically consent to and approve such amendment, the District may adopt the amendatory resolution or order in substantially the same form. (d) Effect of Amendment. Upon the adoption of any amendatory resolution or order pursuant to the provisions of this Section, this Resolution shall be deemed to be amended in accordance with such amendatory resolution or order, and the respective rights, duties, and obligations under such amendatory resolution or order of all the Registered Owners shall thereafter be determined and exercised subject in all respects to such amendments. (e) Consent of Registered Owners. Any consent given by a Registered Owners pursuant to the provisions of this Section shall be irrevocable for a period of six months from the date of the first publication of the notice provided for in this Section, and shall be conclusive and binding upon all future owners of the Bonds during such period. Such consent may be revoked by the Registered Owner who gave such consent at any time after six months from the date of the first giving of such notice, or by a successor in title, by filing notice thereof with the Registrar and the District, but such revocation shall not be effective if the Registered Owners of 51% in aggregate principal amount of the then outstanding Bonds have, prior to the attempted revocation, consented to and approved the amendment. (f) Amendments Without Consent. Notwithstanding the provisions of (a) through (f) of this Section, and without notice of the proposed amendment and without the consent of the Registered Owners. The District may, at any time, amend this Resolution to cure any ambiguity or to cure, correct, or supplement any defective or inconsistent provision contained therein, or to make any other change that does not in any respect materially and adversely affect the interest of the Registered Owners, provided that no such amendment shall be made contrary to the provision to Section 17.01 (a), and a duly certified or executed copy of each such amendment shall be filed with the Registrar. ARTICLE EIGHTEEN OTHER ACTIONS AND MATTERS SECTION 18.01 OTHER ACTIONS. The President, Vice President, Secretary and Assistant Secretary of the Board of Directors of the District, and all other officers, employees and agents of the District, and each of them, shall be and they are hereby expressly authorized, empowered and directed from time to time and at any time to do and perform all such acts and things and to execute, acknowledge and deliver in the name and under the corporate seal and on behalf of the District all instruments as may be necessary or desirable in order to carry out the terms and provisions of this Resolution, the Bonds, the initial sale and delivery of the Bonds, the Paying Agent/Registrar Agreement, any insurance commitment letter or insurance policy and the Official Statement. In addition, prior to the initial delivery of the Bonds, President, Vice President, Secretary or Assistant Secretary of the Board of Directors of the District, the District’s 4129-8863-8499.2 30 EXHIBIT 1Attorney and Bond Counsel are hereby authorized and directed to approve any technical changes or corrections to this Resolution or to any of the instruments authorized and approved by this Resolution necessary in order to (i) correct any ambiguity or mistake or properly or more completely document the transactions contemplated and approved by this Ordinance and as described in the Official Statement, (ii) obtain a rating from any of the national bond rating agencies or satisfy requirements of the Bond Insurer, or (iii) obtain the approval of the Bonds by the Texas Attorney General’s office. SECTION 18.02 ADDITIONAL BOND INSURANCE PROVISIONS. The Pricing Officer is authorized to determine whether the Bonds sell with bond insurance and any provisions related to such insurance as evidenced in the Pricing Certificate in accordance with Section 1207.007(b)(5) of the Texas Government Code, as amended. SECTION 18.03 PAYMENT OF ATTORNEY GENERAL FEE. The District hereby authorizes the disbursement of a fee equal to the lesser of (i) one-tenth of one percent of the principal amount of the Bonds or (ii) $9,500, provided that such fee shall not be less than $750, to the Attorney General of Texas Public Finance Division for payment of the examination fee charged by the State of Texas for the Attorney General’s review and approval of public securities and credit agreements, as required by Section 1202.004 of the Texas Government Code. The appropriate member of the District’s staff is hereby instructed to take the necessary measures to make this payment. The District is also authorized to reimburse the appropriate District funds for such payment from proceeds of the Bonds. ARTICLE NINETEEN CONTINUING DISCLOSURE SECTION 19.01 CONTINUING DISCLOSURE UNDERTAKING. (a) Except as otherwise provided by the Pricing Certificate, the District shall provide annually to the MSRB, (1) within six months after the end of any fiscal year, financial information and operating data with respect to the District of the general type included in the final Official Statement authorized by Section 15.03 of this Resolution, being the quantitative financial information and operating data with respect to the District, as determined by the Pricing Officer and identified in the Pricing Certificate and (2) if not provided as part of such financial information and operating data, audited financial statements of the District, if and when available. Any financial statements to be so provided shall be (1) prepared in accordance with the accounting principles described in Exhibit B hereto, or such other accounting principles as the District may be required to employ from time to time pursuant to state law or regulation, and (2) audited, if the District commissions an audit of such statements and the audit is completed within the period during which they must be provided. If the audit of such financial statements is not complete within 12 months after any fiscal year end, then the District shall file unaudited financial statements within such 12-month period and audited financial statements for the applicable fiscal year with the MSRB, when and if the audit report on such statements become available. 4129-8863-8499.2 31 EXHIBIT 1If the District changes its fiscal year, it will notify the MSRB of the change (and of the date of the new fiscal year end) prior to the next date by which the District otherwise would be required to provide financial information and operating data pursuant to this section. The financial information and operating data to be provided pursuant to this Section may be set forth in full in one or more documents or may be included by specific reference to any document that is available to the public on the MSRB’s intend website or filed with the SEC. (b) The District shall notify the MSRB, in a timely manner not in excess of ten (10) business days after the occurrence of the event, of any of the following events with respect to the Bonds: (i) (ii) (iii) difficulties; (iv) difficulties; Principal and interest payment delinquencies; Non-payment related defaults, if material; Unscheduled draws on debt service reserves reflecting financial Unscheduled draws on credit enhancements reflecting financial (v) Substitution of credit or liquidity providers, or their failure to perform; (vi) Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax-exempt status of the Bonds, or other events affecting the tax-exempt status of the Bonds; (vii) Modifications to rights of holders of the Bonds, if material; (viii) Bond calls, if material, and tender offers; (ix) Defeasances; (x) if material; (xi) Rating changes; Release, substitution, or sale of property securing repayment of the Bonds, (xii) Bankruptcy, insolvency, receivership or similar event of the District; (xiii) The consummation of a merger, consolidation, or acquisition involving the District or the sale of all or substantially all of the assets of the District, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; 4129-8863-8499.2 32 EXHIBIT 1(xiv) Appointment of a successor or additional trustee or the change of name of a trustee, if; (xv) Incurrence material of a Financial Obligation of the District, if material, or agreement to covenants, events of default, remedies, priority rights, or other similar terms of a Financial Obligation of the District, any of which affect security holders, if material; and (xvi) Default, event of acceleration, termination event, modification of terms, or other similar events under the terms of a Financial Obligation of the District, any of which reflect financial difficulties. As used in clause (xii), above, the phrase “bankruptcy, insolvency, receivership or similar event” means the appointment of a receiver, fiscal agent or similar officer for the District in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal law in which a court of governmental authority has assumed jurisdiction over substantially all of the assets or business of the District, or if jurisdiction has been assumed by leaving the District in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the District. The District intends the words used in the preceding paragraphs (xv) and (xvi) above and the definition of Financial Obligation in this Resolution to have the same meanings as when they are used in the Rule, as evidenced by SEC Release No. 34-83885, dated August 20, 2018. The District shall also notify the MSRB, in an electronic format as prescribed by the MSRB, in a timely manner, of any failure by the District to provide financial information or operating data in accordance with this Section by the time required by this Section. (c) All documents provided to the MSRB pursuant to this Section shall be provided in an electronic format, as prescribed by the MSRB and shall be accompanied by identifying information as prescribed by the MSRB. (d) The District shall be obligated to observe and perform the covenants specified in this section for so long as, but only for so long as, the District remains an “obligated person” with respect to the Bonds within the meaning of the Rule, except that the District in any event will give notice of any deposit made in accordance with Section 8 that causes the Bonds no longer to be outstanding. The provisions of this section are for the sole benefit of the holders and beneficial owners of the Bonds, and nothing in this section, express or implied, shall give any benefit or any legal or equitable right, remedy, or claim hereunder to any other person. The District undertakes to provide only the financial information, operating data, financial statements, and notices which it has expressly agreed to provide pursuant to this section and does not hereby undertake to provide any other information that may be relevant or material to a complete presentation of the District’s financial results, condition, or prospects or hereby undertake to update any information provided in accordance with this section or otherwise, except as expressly provided herein. The 4129-8863-8499.2 33 EXHIBIT 1District does not make any representation or warranty concerning such information or its usefulness to a decision to invest in or sell Bonds at any future date. UNDER NO CIRCUMSTANCES SHALL THE DISTRICT BE LIABLE TO THE HOLDER OR BENEFICIAL OWNER OF ANY BOND OR ANY OTHER PERSON, IN CONTRACT OR TORT, FOR DAMAGES RESULTING IN WHOLE OR IN PART FROM ANY BREACH BY THE DISTRICT, WHETHER NEGLIGENT OR WITHOUT FAULT ON ITS PART, OF ANY COVENANT SPECIFIED IN THIS SECTION, BUT EVERY RIGHT AND REMEDY OF ANY SUCH PERSON, IN CONTRACT OR TORT, FOR OR ON ACCOUNT OF ANY SUCH BREACH SHALL BE LIMITED TO AN ACTION FOR MANDAMUS OR SPECIFIC PERFORMANCE. No default by the District in observing or performing its obligations under this section shall comprise a breach of or default under the Resolution for purposes of any other provision of this Resolution. Nothing in this section is intended or shall act to disclaim, waive, or otherwise limit the duties of the District under federal and state securities laws. The provisions of this Section may be amended by the District from time to time to adapt to changed circumstances that arise from a change in legal requirements, a change in law, or a change in the identity, nature, status, or type of operations of the District, but only if (1) the provisions of this section, as so amended, would have permitted an underwriter to purchase or sell Bonds in the primary offering of the Bonds in compliance with the Rule, taking into account any amendments or interpretations of the Rule since such offering, as well as such changed circumstances, and (2) either (a) the holders of a majority in aggregate principal amount (or any greater amount required by any other provision of this Resolution that authorizes such an amendment) of the outstanding Bonds consents to such amendment or (b) a person that is unaffiliated with the District (such as nationally recognized bond counsel) determines that such amendment will not materially impair the interest of the holders and beneficial owners of the Bonds. If the District so amends the provisions of this Section, it shall include with any amended financial information or operating data next provided in accordance with this Section an explanation, in narrative form, of the reasons for the amendment and of the impact of any change in the type of financial information or operating data so provided. The District may also amend or repeal the provisions of this continuing disclosure agreement if the SEC amends or repeals the applicable provision of the Rule or a court of final jurisdiction enters judgment that such provisions of the Rule are invalid, but only if and to the extent that the provisions of this sentence would not prevent an underwriter from lawfully purchasing or selling the Bonds in the primary offering of the Bonds, giving effect to (x) such provisions as so amended and (y) any amendments or interpretations of the Rule. 4129-8863-8499.2 34 EXHIBIT 1EXHIBIT A FORM OF BOND UNITED STATES OF AMERICA STATE OF TEXAS SENNA HILLS MUNICIPAL UTILITY DISTRICT UNLIMITED TAX AND WATERWORKS AND SEWER SYSTEM REVENUE REFUNDING BOND SERIES 2020 [FORM OF FIRST PARAGRAPHS OF CURRENT INTEREST BONDS] Principal Amount $__________ INTEREST RATES DATE OF BONDS MATURITY DATES CUSIP NO. _________________* NO. R- REGISTERED OWNER: PRINCIPAL AMOUNT: ON THE MATURITY DATE SPECIFIED ABOVE, SENNA HILLS MUNICIPAL UTILITY DISTRICT (the “District”), being a political subdivision of the State of Texas, hereby promises to pay to the Registered Owner set forth above, or registered assign (hereinafter called the “Registered Owner”) the principal amount set forth above, and to pay interest thereon calculated on the basis of a 360 day year of twelve 30 day months, from ___________* on _____ * and semiannually on each __________* and __________________* thereafter (an “Interest Payment Date”) to the maturity date specified above, or the date of redemption prior to maturity, at the interest rate per annum specified above; except that if this Bond is required to be authenticated and the date of its authentication is later than the first Record Date (hereinafter defined), such principal amount shall bear interest from the Interest Payment Date next preceding the date of authentication, unless such date of authentication is after any Record Date but on or before the next following Interest Payment Date, in which case such principal amount shall bear interest from such next following Interest Payment Date; provided, however, that if on the date of authentication hereof the interest on the Bond or Bonds, if any, for which this Bond is being exchanged or converted from is due but has not been paid, then this Bond shall bear interest from the date to which such interest has been paid in full. Notwithstanding the foregoing, during any period in which ownership of the Bonds is determined only by a book entry at a securities depository for the Bonds, any payment to the securities depository, or its nominee or registered * As provided in the Pricing Certificate. To the extent that the Pricing Certificate relating to the Bonds is inconsistent with any provisions in this Form of Bond or contains information to complete the missing information in this Form of Bond, the language in the Pricing Certificate shall be used in the executed Bonds. 4129-8863-8499.2 A-1 EXHIBIT 1assigns, shall be made in accordance with existing arrangements between the District and the securities depository. THE PRINCIPAL OF AND INTEREST ON this Bond are payable in lawful money of the United States of America, without exchange or collection charges. The principal of this Bond shall be paid to the Registered Owner hereof upon presentation and surrender of this Bond at maturity or upon the date fixed for its redemption prior to maturity at __________________*, which is the “Registrar” or “Paying Agent/Registrar” for this Bond, at its designated office for payment in _________*, Texas. The payment of interest on this Bond shall be made by the Paying Agent/Registrar to the Registered Owner hereof on each Interest Payment Date by check or draft, dated as of such Interest Payment Date, drawn by the Registrar on, and payable solely from, funds of the District required by the resolution authorizing the issuance of the Bonds (the “Resolution”) to be on deposit with the Registrar for such purpose as hereinafter provided; and such check or draft shall be sent by the Registrar by United States mail, first-class postage prepaid, on or before each such Interest Payment Date, to the Registered Owner hereof, at its address as it appeared on the ___________* calendar day of the month next preceding each such date whether or not a business day (the “Record Date”) on the Register kept by the Registrar listing the names and addresses of the Registered Owners (the “Register”). In addition, interest may be paid by such other method, acceptable to the Registrar, requested by, and at the risk and expense of, the Registered Owner. In the event of a non-payment of interest on a scheduled payment date, and for 30 calendar 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 (which shall be 15 calendar days after the Special Record Date) shall be sent at least 5 business days prior to the Special Record Date by United States mail, first-class postage prepaid, to the address of each Registered Owner as it appears on the Register at the close of business on the last business day next preceding the date of mailing of such notice. DURING ANY PERIOD in which ownership of the Bonds is determined only by a book entry at a securities depository for the Bonds, if fewer than all of the Bonds of the same maturity and bearing the same interest rate are to be redeemed, the particular Bonds of such maturity and bearing such interest rate shall be selected in accordance with the arrangements between the District and the securities depository. ANY ACCRUED INTEREST due at maturity or upon the redemption of this Bond prior to maturity as provided herein shall be paid to the Registered Owner upon presentation and surrender of this Bond for payment at the designated office for payment of the Paying Agent/Registrar. The District covenants with the Registered Owner of this Bond that on or before each principal payment date, interest payment date, and any redemption date for this Bond it will make available to the Registrar, from the “Interest and Sinking Fund” the creation of which is affirmed by the Resolution, the amounts required to provide for the payment, in immediately available funds, of all principal of and interest on the Bonds, when due. * As provided in the Pricing Certificate. To the extent that the Pricing Certificate relating to the Bonds is inconsistent with any provisions in this Form of Bond or contains information to complete the missing information in this Form of Bond, the language in the Pricing Certificate shall be used in the executed Bonds. 4129-8863-8499.2 A-2 EXHIBIT 1[FORM OF FIRST PARAGRAPHS OF PREMIUM CAPITAL APPRECIATION BOND] NO. PC- Maturity Amount $__________ INTEREST RATES DATE OF BONDS MATURITY DATES CUSIP NO. REGISTERED OWNER: MATURITY AMOUNT: ON THE MATURITY DATE SPECIFIED ABOVE, SENNA HILLS MUNICIPAL UTILITY DISTRICT (the “District”), being a political subdivision of the State of Texas, hereby promises to pay to the Registered Owner set forth above, or registered assigns (hereinafter called the “Registered Owner”) the Maturity Amount set forth above, representing the principal amount hereof and accrued and compounded interest hereon. Interest shall accrue on the principal amount hereof from the Issuance Date at the interest rate per annum specified above, calculated on the basis of a 360 day year comprised of twelve 30 day months, compounded semiannually on ____________* and ___________* of each year commencing __________, 20__*. For convenience of reference a table of the “Accreted Value” per $5,000 Maturity Amount is printed on the reverse side of this Bond. The term “Accreted Value” as set forth in the table on the reverse side hereof shall mean the original principal amount plus initial premium per $5,000 Maturity Amount compounded semiannually on ________________* and ___________* at the yield shown on such table. THE MATURITY AMOUNT of this Bond is payable in lawful money of the United States of America, without exchange or collection charges. The Maturity Amount of this Bond shall be paid to the Registered Owner hereof upon presentation and surrender of this Bond at maturity, at the designated office for payment of ______________*, which is the “Paying Agent/Registrar” for this Bond, and shall be drawn by the Paying Agent/Registrar on, and solely from, funds of the District required by the resolution authorizing the issuance of the Bonds (the “Resolution”) to be on deposit with the Paying Agent/Registrar for such purpose as hereinafter provided, payable to the Registered Owner hereof, as it appears on the Register kept by the Paying Agent/Registrar, as hereinafter described. The District covenants with the Registered Owner of this Bond that on or before the Maturity Date for this Bond it will make available to the Paying Agent/Registrar, from the “Interest and Sinking Fund” created by the Resolution, the amounts required to provide for the payment, in immediately available funds of the Maturity Amount, when due. Notwithstanding the foregoing, during any period in which ownership of the Bonds is determined only by a book entry at a securities depository for the Bonds, any payment * As provided in the Pricing Certificate. To the extent that the Pricing Certificate relating to the Bonds is inconsistent with any provisions in this Form of Bond or contains information to complete the missing information in this Form of Bond, the language in the Pricing Certificate shall be used in the executed Bonds. 4129-8863-8499.2 A-3 EXHIBIT 1to the securities depository, or its nominee or registered assigns, shall be made in accordance with existing arrangements between the District and the securities depository. [FORM OF REMAINDER OF EACH BOND] IF THE DATE for any payment due on this Bond shall be a Saturday, Sunday, or a day on which the Paying Agent/Registrar is authorized by law or executive order to close, then the date for such payment shall be the next succeeding day which is not such a Saturday, Sunday, or day on which the Paying Agent/Registrar is authorized by law or executive order to remain closed; and payment on such date shall have the same force and effect as if made on the original date payment was due. THIS BOND is one of a series of Bonds dated as of ______________* and authorized to be issued pursuant to the Resolution adopted by the Board of Directors of the District in the principal amount of $___________* [constituting $____________ Current Interest Bonds and $__________ Premium Capital Appreciation Bonds]** FOR PURPOSES OF REFUNDING THE REFUNDED BONDS AND PAYING CERTAIN COSTS OF ISSUING THE BONDS. Terms used herein and not otherwise defined shall have the meanings given in the Resolution. ON ______________ , 20__* FOR ON ANY DATE THEREAFTER, the Bonds maturing on and after ____________, 20__ may be redeemed prior to their scheduled maturities, at the option of the District, with funds derived from any available and lawful source, at a redemption price equal to the principal amount to be redeemed plus accrued interest to the date fixed for redemption as a whole, or from time to time in part, and, if in part, the particular Bonds, or portions thereof, to be redeemed shall be selected and designated by the District, and if less than all of a maturity is to be redeemed the Registrar shall determine by lot the Bonds, or portions thereof within such maturity to be redeemed (provided that a portion of a Bond may be redeemed only in integral multiples of $5,000 of principal amount). [The Premium Capital Appreciation Bonds are not subject to redemption prior to maturity.] ** [THE BONDS maturing on ____________, 20__ (the “Term Bonds”) are subject to mandatory sinking fund redemption by lot prior to maturity in the following amounts, on the following dates and at a price of par plus accrued interest to the redemption date. Term Bonds Maturing _________, 20__ Redemption Date Principal Amount _________, 20__ $_____________ * As provided in the Pricing Certificate. To the extent that the Pricing Certificate relating to the Bonds is inconsistent with any provisions in this Form of Bond or contains information to complete the missing information in this Form of Bond, the language in the Pricing Certificate shall be used in the executed Bonds. ** To be included only if Current Interest Bonds and Premium Capital Appreciation Bonds are both issued and completed as determined in the Pricing Certificate. 4129-8863-8499.2 A-4 EXHIBIT 1_________, 20__+ $_____________+ ______________ +Final Maturity THE PARTICULAR TERM BONDS to be redeemed shall be selected by the Registrar by lot or other customary random selection method, on or before July 1 of each year in which Term Bonds are to be mandatorily redeemed. The principal amount of Term Bonds to be mandatorily redeemed in each year shall be reduced by the principal amount of such Term Bonds that have been optionally redeemed on or before July 1 of such year and which have not been made the basis for a previous reduction.]+ AT LEAST 30 calendar days prior to the date fixed for any redemption of Bonds or portions thereof prior to maturity a written notice of such redemption shall be sent by the Registrar by United States mail, first-class postage prepaid, to the Registered Owner of each Bond to be redeemed at its address as it appeared on the Register on the 45th calendar day prior to such redemption date at least 30 days prior to the date fixed for redemption and to major securities depositories and bond information services. By the date fixed for any such redemption due provision shall be made with the Registrar for the payment of the required redemption price for the Bonds or portions for which such payment is made, all as provided above. The Bonds or portions thereof which are to be so redeemed thereby automatically shall be treated as redeemed prior to their scheduled maturities, and they shall not bear interest after the date fixed for redemption, and they shall not be regarded as being outstanding except for the right of the Registered Owner to receive the redemption price from the Registrar out of the funds provided for such payment. If a portion of any Bond shall be redeemed, a substitute Bond or Bonds having the same maturity date, bearing interest at the same rate, in any authorized denomination or denominations, at the written request of the Registered Owner, and in aggregate principal amount equal to the unredeemed portion thereof, will be issued to the Registered Owner upon the surrender thereof for cancellation, at the expense of the District, all as provided in the Resolution. WITH RESPECT TO any optional redemption of the Bonds, unless certain prerequisites to such redemption required by the Resolution have been met and moneys sufficient to pay the principal of and premium, if any, and interest on the Bonds to be redeemed shall have been received by the Paying Agent/Registrar prior to the giving of such notice of redemption, such notice shall state that said redemption may, at the option of the District, be conditional upon the satisfaction of such prerequisites and receipt of such moneys by the Paying Agent/Registrar on or prior to the date fixed for such redemption, or upon any prerequisite set forth in such notice of redemption. If a conditional notice of redemption is given and such prerequisites to the redemption and sufficient moneys are not received, such notice shall be of no force and effect, the District shall not redeem such Bonds and the Paying Agent/Registrar shall give notice, in the manner in which the notice of redemption was given, to the effect that the Bonds have not been redeemed. + Use of Term Bonds, if any, to be determined by the Pricing Officer. 4129-8863-8499.2 A-5 EXHIBIT 1ALL BONDS OF THIS SERIES are issuable solely as fully registered Bonds, without interest coupons, in the principal denomination in the case of the Bonds, of any integral multiple of $5,000. As provided in the Resolution, this Bond may, at the request of the Registered Owner or the assignee or assignees hereof, be assigned, transferred, converted into and exchanged for a like aggregate amount of fully registered Bonds, without interest coupons, payable to the appropriate Registered Owner, assignee or assignees, as the case may be, having any authorized denomination or denominations as requested in writing by the appropriate Registered Owner, assignee or assignees, as the case may be, upon surrender of this Bond to the Registrar for cancellation, all in accordance with the form and procedures set forth in the Resolution. Among other requirements for such assignment and transfer, this Bond must be presented and surrendered to the Registrar, together with proper instruments of assignment, in form and with guarantee of signatures satisfactory to the Registrar, evidencing assignment of this Bond or any portion or portions hereof in any authorized denomination to the assignee or assignees in whose name or names this Bond or any such portion or portions hereof is or are to be registered. The Form of Assignment printed or endorsed on this Bond may be executed by the Registered Owner to evidence the assignment hereof, but such method is not exclusive, and other instruments of assignment satisfactory to the Registrar may be used to evidence the assignment of this Bond or any portion or portions hereof from time to time by the Registered Owner. The Registrar’s reasonable standard or customary fees and charges for assigning, transferring, converting and exchanging any Bond or portion thereof will be paid by the District. In any circumstance, any taxes or governmental charges required to be paid with respect thereto shall be paid by the one requesting such assignment, transfer, conversion or exchange, as a condition precedent to the exercise of such privilege. The Registrar shall not be required to make any such transfer, conversion or exchange of any Bond or any portion thereof (i) during the period commencing with the close of business on any Record Date and ending with the opening of business on the next following principal or Interest Payment Date or (ii) within 45 calendar days prior to its redemption date; provided, however, such limitation on transferability shall not be applicable to an exchange by the Registered Owner of the unredeemed balance hereof in the event of its redemption in part. WHENEVER the beneficial ownership of this Bond is determined by a book entry at a securities depository for the Bonds, the foregoing requirements of holding, delivering or transferring this Bond shall be modified to require the appropriate person or entity to meet the requirements of the securities depository as to registering or transferring the book entry to produce the same effect. IN THE EVENT any Registrar for the Bonds is changed by the District, resigns, or otherwise ceases to act as such, the District has covenanted in the Resolution that it promptly will appoint a competent and legally qualified substitute therefor, and cause written notice thereof to be mailed to the Registered Owners of the Bonds. THE BONDS are payable from the proceeds of an ad valorem tax, without legal limit as to rate or amount, levied upon all taxable property within the District and by a pledge of and lien on the Net Revenues of the District’s System (as such terms are defined in the Resolution) . The Resolution provides that the District reserves the right to consolidate with one or more conservation and reclamation districts, to consolidate its waterworks and sewer systems with the systems of such districts, and to secure the Bonds and any other bonds of the District or such 4129-8863-8499.2 A-6 EXHIBIT 1districts by a pledge of the net revenues of the consolidated system. The Resolution further provides that the pledge of taxes, to the payment of the Bonds shall terminate at such time, if ever, as (i) money and/or defeasance obligations in an amount sufficient to defease the Bonds is deposited with or made available to the Registrar in accordance with the Resolution or (ii) a city dissolves the District, and assumes the obligations of the District pursuant to existing Texas law. Reference is hereby made to the Resolution for provisions with respect to the operation and maintenance of the District’s facilities, the custody and application of funds, remedies in the event of a default hereunder or thereunder, and the other rights of the Registered Owners of the Bonds. By acceptance of this Bond the Registered Owner hereof consents to all of the provisions of the Resolution, a certified copy of which is on file in the office of the District. THE DISTRICT EXPRESSLY RESERVES THE RIGHT to issue additional bonds payable from taxes and also secured by a pledge of and lien on the Net Revenues to be derived from the operation of the District’s System. Said additional tax and revenue bonds may be in all respects on a parity and of equal dignity with the Bonds. The District further reserves the right to issue refunding bonds in any manner permitted by law to refund any bonds (including the Bonds) at or prior to their respective dates of maturity or redemption. THE OBLIGATION to pay the principal of and the interest on this Bond is solely and exclusively the obligation of the District until such time, if ever, as the District is abolished and this Bond is assumed as described above. No other entity, including the State of Texas, any political subdivision thereof other than the District, or any other public or private body, is obligated, directly, indirectly, contingently, or in any other manner, to pay the principal of or the interest on this Bond from any source whatsoever. No part of the physical properties of the District, including the properties provided by the proceeds of the Bonds, is encumbered by any lien for the benefit of the Registered Owner of this Bond. TO THE EXTENT permitted by and in the manner provided in the Resolution, the terms and provisions of the Resolution and the rights of the Registered Owners of the Bonds may be modified with, in certain circumstances, the consent of the Registered Owners of a majority in aggregate principal amount of the Bonds affected thereby; provided, however, that, without the consent of the Registered Owners of all of the Bonds affected, no such modification shall (i) extend the time or times of payment of the principal of and interest on the Bonds, reduce the principal amount thereof or the rate of interest thereon, or in any other way modify the terms of payment of the principal of or interest on the Bonds, (ii) give any preference to any Bond over any other Bond, or (iii) reduce the aggregate principal amount of the Bonds required for consent to any such modification. THIS BOND shall not be valid or obligatory for any purpose or be entitled to any benefit under the Resolution unless this Bond either (a) is registered by the Comptroller of Public Accounts of the State of Texas as evidenced by execution of the registration certificate endorsed hereon or (b) is authenticated as evidenced by execution of the authentication certificate endorsed hereon by the Registrar. 4129-8863-8499.2 A-7 EXHIBIT 1IT IS FURTHER CERTIFIED that the District has designated the Bonds as “qualified tax-exempt obligations” within the meaning of Section 265(b) of the Internal Revenue Code of 1986.* IT IS HEREBY CERTIFIED, COVENANTED, AND REPRESENTED that all acts, conditions, and things necessary to be done precedent to the issuance of the Bonds in order to render the same legal, valid, and binding obligations of the District have happened and have been accomplished and performed in regular and due time, form, and manner, as required by law; that provision has been made for the payment of the principal of and interest on the Bonds by the levy of a continuing, direct annual ad valorem tax upon all taxable property within the District and that issuance of the Bonds does not exceed any constitutional or statutory limitation. In the event that any provisions herein contained do or would, presently or prospectively, operate to make any part hereof void or voidable, such provisions shall be without effect or prejudice to the remaining provisions hereof, which shall nevertheless remain operative, and such violative provisions, if any, shall be reformed by a court of competent jurisdiction within the limits of the laws of the State of Texas. IN WITNESS WHEREOF, the District has caused this Bond to be signed with the manual or facsimile signature of the President or Vice-President of the Board of Directors of the District and countersigned with the manual or facsimile signature of the Secretary or Assistant Secretary of the Board of Directors of the District, and has caused the official seal of the District to be duly impressed, or placed in facsimile, on this Bond. SENNA HILLS MUNICIPAL UTILITY DISTRICT Secretary [Assistant Secretary], Board of Directors Vice-President, Board of Directors (DISTRICT SEAL) INSERTIONS FOR THE INITIAL BOND (i) The Initial Current Interest Bond shall be in the form set forth in this Section, except that: immediately under the name of the Bond, the headings “INTEREST RATE” and A. “MATURITY DATE” shall both be completed with the words “As shown below” and “CUSIP NO.” shall be deleted. B. the first paragraph of the Bond shall be deleted and the following will be inserted: * As provided in the Pricing Certificate. To the extent that the Pricing Certificate relating to the Bonds is inconsistent with any provisions in this Form of Bond or contains information to complete the missing information in this Form of Bond, the language in the Pricing Certificate shall be used in the executed Bonds. 4129-8863-8499.2 A-8 EXHIBIT 1“ON THE MATURITY DATE SPECIFIED BELOW, Senna Hills Municipal Utility District (the “District”), being a political subdivision, hereby promises to pay to the Registered Owner specified above, or registered assigns (hereinafter called the “Registered Owner”), on _____________* in each of the years, in the principal installments of the respective Maturity Amounts and bearing interest at the per annum rates set forth in the following schedule: Principal Rate Amount (Information from Pricing Certificate to be inserted) Maturity Date (___________) Interest The District promises to pay interest on the unpaid principal amount hereof (calculated on the basis of a 360-day year of twelve 30-day months) from ___________* at the respective Interest Rate per annum specified above. Interest is payable on ___________* and semiannually on each ___________* and ___________* thereafter to the date of payment of the principal installment specified above; except, that if this Bond is required to be authenticated and the date of its authentication is later than the first Record Date (hereinafter defined), such principal amount shall bear interest from the interest payment date next preceding the date of authentication, unless such date of authentication is after any Record Date but on or before the next following interest payment date, in which case such principal amount shall bear interest from such next following interest payment date; provided, however, that if on the date of authentication hereof the interest on the Bond or Bonds, if any, for which this Bond is being exchanged is due but has not been paid, then this Bond shall bear interest from the date to which such interest has been paid in full.” C. The Initial Current Interest Bond shall be numbered “T-1 “. [(ii) The Initial Premium Capital Appreciation Bond shall be in the form set forth in this Section, except that: Immediately under the name of the Bond, the headings “INTEREST RATE” and A. “MATURITY DATE” shall both be completed with the words “As shown below” and “CUSIP NO. ______“ shall be deleted. B. the first paragraph shall be deleted and the following will be inserted: “SENNA HILLS MUNICIPAL UTILITY DISTRICT, in Travis County, Texas (the “Issuer”), being a political subdivision of the State of Texas, hereby promises to pay to the Registered Owner set forth above, or registered assigns (hereinafter called the “Registered Owner”) the Payment at Maturity on ___________* in each of the years and in the principal installments and bearing interest at the per annum rates set: Maturity Date Principal Amount Interest Rates *As provided in the Pricing Certificate. To the extent that the Pricing Certificate relating to the Bonds is inconsistent with any provisions in this Form of Bond or contains information to complete the missing information in this Form of Bond, the language in the Pricing Certificate shall be used in the executed Bonds. 4129-8863-8499.2 A-9 EXHIBIT 1(Information for the Premium Capital Appreciation Bonds from the Pricing Certificate to be inserted) The amount shown above as the respective Maturity Amounts represent the principal amount hereof and accrued and compounded interest hereon. Interest shall accrue on the principal amount hereof from the Issuance Date at the interest rate per annum specified above, compounded semiannually on ___________* and ___________* of each year commencing ___________*. For convenience of reference, a table appears on the back of this Bond showing the “Compounded Amount” of the original principal amount plus initial premium, if any, per $5,000 Maturity Amount compounded semiannually at the yield shown on such table.” C. the Initial Premium Capital Appreciation Bond shall be numbered “TPC-1.”]** REGISTRATION OF INITIAL BOND BY STATE COMPTROLLER AND CERTIFICATE. The Initial Bond shall be registered by the Comptroller of Public Accounts of the State of Texas as provided by law. The registration certificate of the Comptroller of Public Accounts of the State of Texas shall be printed on the face of the Initial Bond and shall be in substantially the following form: COMPTROLLER’S REGISTRATION CERTIFICATE: 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. Witness my signature and seal this ____________. Comptroller of Public Accounts of the State of Texas (COMPTROLLER’S SEAL) FORM OF AUTHENTICATION CERTIFICATE. The following form of authentication certificate shall be printed on the face of each of the Bonds other than the Initial Bond: PAYING AGENT/REGISTRAR’S AUTHENTICATION CERTIFICATE *As provided in the Pricing Certificate. To the extent that the Pricing Certificate relating to the Bonds is inconsistent with any provisions in this Form of Bond or contains information to complete the missing information in this Form of Bond, the language in the Pricing Certificate shall be used in the executed Bonds. **To be included only if Current Interest Bonds and Premium Capital Appreciation Bonds are both issued and completed as determined in the Pricing Certificate. 4129-8863-8499.2 A-10 EXHIBIT 1(To be executed if this Bond is not accompanied by an executed Registration Certificate of the Comptroller of Public Accounts of the State of Texas) It is hereby certified that this Bond has been issued under the provisions of the Resolution described in the text of this Bond; and that this Bond has been issued in conversion or replacement of, or in exchange for, a Bond, Bonds, or a portion of a Bond or Bonds of a series which originally was approved by the Attorney General of the State of Texas and registered by the Comptroller of Public Accounts of the State of Texas. Dated: Registrar By Authorized Representative FORM OF ASSIGNMENT. A form of assignment shall be printed on the back of each of the Bonds and shall be in substantially the following form: For value received, the undersigned hereby sells, assigns and transfers unto ASSIGNMENT Please insert Social Security or Taxpayer Identification Number of Transferee (Please print or typewrite name and address, including zip code of Transferee) the within Bond and all rights thereunder, and hereby irrevocably constitutes and appoints ________________________________________, attorney, to register the transfer of the within Bond on the books kept for registration thereof, with full power of substitution in the premises. Dated: __________________ Signature Guaranteed: 4129-8863-8499.2 A-11 EXHIBIT 1NOTICE: Signature(s) must be guaranteed by a member firm of the New York Stock Exchange or a commercial bank or trust company. signature above must NOTICE: The correspond with the name of the Registered Owner as it appears upon the front of this Bond in every particular, without alteration or enlargement or any change whatsoever. 4129-8863-8499.2 A-12 EXHIBIT 1EXHIBIT B CONTINUING DISCLOSURE Accounting Principles The accounting and reporting policies of the District relating to the funds and account groups will conform to generally accepted accounting principles (GAAP) as applied to governmental entities. 4129-8863-8499.2 B-1 EXHIBIT 1