AMENDMENT DATED MARCH 7, 2011 TO OFFICIAL STATEMENT DATED MARCH 2, 2011 $74,995,000 STATE OF TEXAS VETERANS BONDS, SERIES 2011A

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1 AMENDMENT DATED MARCH 7, 2011 TO OFFICIAL STATEMENT DATED MARCH 2, 2011 $74,995,000 STATE OF TEXAS VETERANS BONDS, SERIES 2011A The Official Statement dated March 2, 2011 (the Official Statement ), with respect to the captioned bonds (the Bonds ) is hereby amended as follows: On page 17 of the Official Statement under the subheading Events of Default, the following definition is added immediately preceding the definition of Special Events of Default : Default means any condition or event that, with the giving of notice or lapse of time or both would, unless cured or waived, become an Event of Default. On page 17 of the Official Statement under the subheading Events of Default, the definition of Suspension Event is amended to read in its entirety as follows: Suspension Event means a Default described in clause (B)(ii) or (B)(iii) below. Except as revised by this Amendment, the Official Statement shall remain in full force and effect as to the matters covered therein. CUSIP No XC0* J.P. MORGAN ESTRADA HINOJOSA & COMPANY, INC. * CUSIP numbers have been assigned to the Bonds by Standard and Poor s CUSIP Service Bureau, a Division of The McGraw-Hill Companies, Inc., and are included solely for the convenience of the registered owners of the Bonds. This data is not intended to create a database and does not serve in any way as a substitute for the CUSIP Services. Neither the Board nor the Underwriters are responsible for the selection or correctness of the CUSIP numbers set forth herein

2 OFFICIAL STATEMENT NEW ISSUE BOOK-ENTRY ONLY RATINGS: (See RATINGS herein.) The delivery of the Bonds is subject to the opinion of Bond Counsel to the effect that, subject to certain conditions described herein, under existing law, interest on the Bonds (other than interest accruing after conversion of the Bonds to Fixed Rate Bonds, for which Bond Counsel expresses no opinion) (i) will be excludable from gross income for federal income tax purposes and (ii) will not be (a) a specific preference item subject to the alternative minimum tax on individuals and corporations or (b) included in a corporation s adjusted current earnings for purposes of the alternative minimum tax. See TAX MATTERS herein for discussion of the opinion of Bond Counsel, including the requirements for an opinion in the event of a conversion of the Bonds to Fixed Rate Bonds. $74,995,000 STATE OF TEXAS VETERANS BONDS, SERIES 2011A Interest Accrues From Date of Delivery CUSIP: XC0 1 Due: June 1, 2041 The Bonds will initially bear interest for a Weekly Interest Rate Period, as more fully described herein. The Bonds will continue to bear interest for a Weekly Interest Rate Period unless the Bonds are converted to a fixed interest rate, all as described herein. The maximum interest rate the Bonds may bear is currently 15%. Interest on the Bonds in the Weekly Interest Rate Period will accrue from the date of delivery and is payable monthly on the first Business Day of each month, commencing April 1, The Bonds will be issued only as fully registered bonds initially in denominations of $100,000 and any integral multiple of $5,000 in excess thereof. The Depository Trust Company, New York, New York ( DTC ) initially will act as securities depository for the Bonds. Beneficial owners of the Bonds will not receive physical delivery of bond certificates except as described herein. Principal of the Bonds will be payable to the registered owners upon presentation and surrender thereof at the principal office of the Paying Agent therefor, initially the Comptroller of Public Accounts of the State of Texas (the Comptroller ). Interest on the Bonds will be payable by check, dated as of the interest payment date or redemption date, as applicable, and mailed by the Paying Agent to the registered owners and at the addresses as shown on the records of the Registrar for the Bonds, initially Amegy Bank National Association; however, during any period in which ownership of any of the Bonds is determined only by a book entry at DTC, the Paying Agent will make payments on such Bonds to DTC or DTC s nominee in accordance with arrangements between the Board and DTC. See THE BONDS General Terms. The Bonds are subject to optional and mandatory redemption prior to maturity as provided herein. See THE BONDS Redemption. The Bonds are also subject to mandatory tender for purchase as provided herein. See THE BONDS Tender Provisions. THE BONDS ARE GENERAL OBLIGATIONS, AND ARE SECURED BY THE FULL FAITH AND CREDIT, OF THE STATE OF TEXAS. See SECURITY AND SOURCES OF PAYMENT FOR THE BONDS. The proceeds of the Bonds will be deposited in the Veterans Housing Assistance Fund II, a fund administered by the Veterans Land Board of the State of Texas (the Board ), and made available to make Home Loans (defined herein) to eligible Texas veterans (and certain surviving spouses) in accordance with guidelines established by the Board for the Veterans Housing Assistance Program. See PLAN OF FINANCING. The Bonds in the Weekly Interest Rate Period are subject to optional tender for purchase on the demand of the registered owners thereof on any Business Day upon seven days notice. The purchase price of the Bonds tendered for purchase is payable (i) from the proceeds of the remarketing thereof, (ii) from funds that may be made available, subject to the terms and conditions thereof, under the liquidity facility relating to the Bonds, initially a standby bond purchase agreement (the Liquidity Facility ) between the Board and JPMorgan Chase Bank, National Association (the Liquidity Provider ), and (iii) from funds of the Board provided in its discretion. The Liquidity Facility, unless extended or earlier terminated, will expire on March 7, See THE LIQUIDITY FACILITY. J.P. Morgan Securities LLC is the initial remarketing agent for the Bonds. This Official Statement describes the Bonds in a Weekly Interest Rate Period and is not intended to provide information to prospective owners of the Bonds after conversion to Fixed Rate Bonds. Price: 100% The Bonds are offered for delivery when, as and if issued and accepted by the Underwriters, subject to prior sale, withdrawal or modification of the offer without notice and subject to the approving legal opinions of the Attorney General of Texas and of Vinson & Elkins L.L.P., Bond Counsel. Certain legal matters will be passed upon for the Board by its counsel, Lannen & Oliver, P.C., for the Underwriters by their co-counsel, Locke Lord Bissell & Liddell LLP and Mahomes Bolden & Warren PC, and for the Liquidity Provider by its counsel, Nixon Peabody LLP. See LEGAL MATTERS herein. It is expected that the Bonds will be available for delivery through the facilities of DTC on or about March 9, Dated: March 2, 2011 J.P. MORGAN ESTRADA HINOJOSA & COMPANY, INC. 1 CUSIP numbers have been assigned to the Bonds by Standard and Poor s CUSIP Service Bureau, a Division of The McGraw-Hill Companies, Inc., and are included solely for the convenience of the registered owners of the Bonds. This data is not intended to create a database and does not serve in any way as a substitute for the CUSIP Services. Neither the Board nor the Underwriters are responsible for the selection or correctness of the CUSIP numbers set forth herein.

3 STATE OFFICIALS Rick Perry David Dewhurst Jerry Patterson Susan Combs Greg Abbott Todd Staples Governor Lieutenant Governor Commissioner of the General Land Office Comptroller of Public Accounts Attorney General Commissioner of Agriculture VETERANS LAND BOARD Jerry Patterson Alan Johnson Alan K. Sandersen Paul E. Moore Chairman Member Member Executive Secretary BOND COUNSEL Vinson & Elkins L.L.P. Austin, Dallas, and Houston, Texas COUNSEL TO THE BOARD Lannen & Oliver, P.C. Dallas, Texas FINANCIAL ADVISOR Raymond James & Associates, Inc. Dallas, Texas ii

4 USE OF INFORMATION IN THIS OFFICIAL STATEMENT This Official Statement does not constitute an offer to sell the Bonds in any jurisdiction to any person to whom it is unlawful to make such offer in such jurisdiction. No dealer, salesman, or any other person has been authorized by the Board or the Underwriters to give any information or make any representation, other than those contained herein, in connection with the offering and sale of the Bonds, and if given or made, such information or representation must not be relied upon as having been authorized by the Board or the Underwriters. The information set forth herein has been furnished by the Board and other sources which are believed to be reliable, but is not guaranteed as to accuracy or completeness by, and is not to be construed as a representation by, the Underwriters or the Financial Advisor. The Underwriters have provided the following sentence for inclusion in this Official Statement. The Underwriters have reviewed the information in this Official Statement in accordance with, and as part of, their respective responsibilities to investors under the federal securities laws as applied to the facts and to the circumstances of this transaction, but the Underwriters do not guarantee the accuracy or completeness of such information. The information and expressions of opinion herein are subject to change without notice and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the Board or the State since the date hereof. The price and other terms respecting the offering and sale of the Bonds may be changed from time to time by the Underwriters after the Bonds are released for sale, and the Bonds may be offered and sold at prices other than the initial offering price, including sales to dealers who may sell the Bonds into investment accounts. In connection with the offering and sale of the Bonds, the Underwriters may over allot or effect transactions which stabilize or maintain the market price of the Bonds at a level above that which might otherwise prevail in the open market. Such stabilizing, if commenced, may be discontinued at any time. THE BONDS HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ADEQUACY OR ACCURACY OF THIS OFFICIAL STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. (The Remainder of this Page Intentionally Left Blank.) iii

5 TABLE OF CONTENTS INTRODUCTION...1 PLAN OF FINANCING...2 SOURCES AND USES OF FUNDS...3 THE BONDS...3 General Terms...3 Interest Rate Provisions...3 Tender Provisions...5 Redemption...7 Selection of Bonds for Redemption...8 Notices of Redemption of Bonds...9 SPECIAL CONSIDERATIONS RELATING TO THE BONDS...9 The Remarketing Agent is Paid by the Board...9 The Remarketing Agent Routinely Purchases Bonds for its Own Account...9 Bonds May be Offered at Different Prices on Any Date Including an Interest Rate Determination Date...10 The Ability to Sell the Bonds other than through Tender Process May Be Limited...10 Under Certain Circumstances, the Remarketing Agent May Be Removed, Resign or Cease Remarketing the Bonds, Without a Successor Being Named...10 BOOK-ENTRY ONLY SYSTEM...10 General...10 Use of Certain Terms in Other Sections of this Official Statement...12 SECURITY AND SOURCES OF PAYMENT FOR THE BONDS...13 General Obligation Pledge...13 Sources of Payment...13 Fund II Generally...14 Additional Bonds...15 STRUCTURING ASSUMPTIONS...15 THE SWAP AGREEMENT...15 THE LIQUIDITY PROVIDER...16 THE LIQUIDITY FACILITY...16 General...16 Events of Default...17 Remedies...18 Alternate Liquidity Facility...19 TAX MATTERS...20 Tax Exemption...20 Additional Federal Income Tax Considerations...21 GENERAL INFORMATION REGARDING THE STATE OF TEXAS...21 Budget Process and Estimated Revenue for LEGAL MATTERS...22 ELIGIBILITY FOR INVESTMENT (TEXAS)...22 RATINGS...23 CONTINUING DISCLOSURE OF INFORMATION...23 Continuing Disclosure Undertaking of the Board...23 Continuing Disclosure Undertaking of the Comptroller...24 Agreements of the Board and the Comptroller...25 UNDERWRITING...26 FINANCIAL ADVISOR...26 FORWARD LOOKING STATEMENTS...26 APPENDIX A APPENDIX B APPENDIX C APPENDIX D THE STATE OF TEXAS THE VETERANS LAND BOARD OF THE STATE OF TEXAS DEFINITIONS AND SUMMARY OF CERTAIN PROVISIONS OF THE RESOLUTION FORM OF BOND COUNSEL S OPINION iv

6 OFFICIAL STATEMENT $74,995,000 STATE OF TEXAS VETERANS BONDS, SERIES 2011A INTRODUCTION The bonds hereby offered by the Veterans Land Board (the Board ) of the State of Texas (the State ), acting for the State, are the State s $74,995,000 State of Texas Veterans Bonds, Series 2011A (the Bonds ). The Bonds are issued pursuant to the provisions of the laws of the State, including Article III, Section 49-b ( Section 49-b ) of the State Constitution, Chapter 162, Texas Natural Resources Code, as amended ( Chapter 162 ), and Chapter 1371, Texas Government Code, as amended ( Chapter 1371 ). Pursuant to Section 49-b and Chapter 162, the Board has established and currently administers the Veterans Housing Assistance Fund II ( Fund II ). Money in Fund II is available to make home mortgage loans ( Home Loans ) to eligible Texas veterans and certain surviving spouses (in either case, Veterans ) to be used toward the purchase of homes in the State ( Purchase Money Home Loans ) or toward making qualified improvements to homes in the State ( Home Improvement Home Loans ), in accordance with guidelines established by the Board for the Veterans Housing Assistance Program (the Housing Program ), and to pay expenses related to the Housing Program. See THE VETERANS LAND BOARD PROGRAMS Veterans Housing Assistance Program in Appendix B. The Board has authorized the issuance of the Bonds pursuant to a resolution adopted by the Board on January 27, 2011 (the Resolution ). The Board also administers the Veterans Housing Assistance Fund ( Fund I ), a separate and distinct fund of the Board but otherwise used by the Board for the same purposes as Fund II. In addition, the Board administers the Veterans Land Fund (the Land Fund ) for the purposes of acquiring land to be resold to Veterans and making land mortgage loans to Veterans. Funding for the Land Fund comes from State general obligation bonds issued by the Board for that purpose. See THE VETERANS LAND BOARD PROGRAMS Veterans Land Program in Appendix B. The Board is authorized, under certain circumstances, to transfer available money and assets from Fund I, Fund II, or the Land Fund to any other of such funds, or to use such available money or assets for certain other purposes. See SECURITY AND SOURCES OF PAYMENT FOR THE BONDS Fund II Generally. The Board is composed of the Commissioner of the General Land Office, as Chairman, and two citizens of the State who are appointed by the Governor with the advice and consent of the Senate. For additional information regarding the Board and the Housing Program, see Appendix B - THE VETERANS LAND BOARD OF THE STATE OF TEXAS. The Bonds are payable from the assets held in Fund II. IN ADDITION, THE BONDS WILL CONSTITUTE GENERAL OBLIGATIONS OF THE STATE OF TEXAS PURSUANT TO SECTION 49-b AND CHAPTER 162, AND THE FULL FAITH AND CREDIT OF THE STATE ARE PLEDGED FOR THE FAITHFUL PERFORMANCE OF ALL COVENANTS, RECITALS AND STIPULATIONS CONTAINED IN THE BONDS, AND FOR THE FAITHFUL PERFORMANCE IN PROPER TIME AND MANNER OF EACH OFFICIAL OR OTHER ACT REQUIRED OR NECESSARY TO PROVIDE FOR PROMPT PAYMENT OF PRINCIPAL OF, PREMIUM, IF ANY, AND INTEREST ON THE BONDS WHEN DUE. To the extent there is not sufficient money in Fund II to pay the principal of and interest on the Bonds, the State Constitution appropriates, out of the first money coming into the State Treasury in each fiscal year, not otherwise appropriated by the State Constitution, an amount sufficient to make such payment. See SECURITY AND SOURCES OF PAYMENT FOR THE BONDS General Obligation Pledge. Under certain circumstances as described herein, the owners of the Bonds will have the right or may be required to tender a Bond (or any portion thereof in an authorized denomination) to the Tender Agent, initially Amegy Bank National Association, for purchase from and to the extent of the sources of funds described herein at a purchase price of par plus accrued interest thereon to the date of purchase. The Remarketing Agent, initially

7 J.P. Morgan Securities LLC, will remarket Bonds tendered for purchase and will perform certain rate-setting functions in connection with the Bonds pursuant to a Remarketing Agreement (the Remarketing Agreement ) between the Board and the Remarketing Agent. The purchase price of the Bonds tendered for purchase by the registered owners thereof as described herein will be payable (i) from the proceeds of the remarketing thereof; (ii) from funds that may be available, subject to the terms and conditions thereof, under the applicable liquidity facility (the Liquidity Facility ), initially the standby bond purchase agreement between the Board and JPMorgan Chase Bank, National Association (together with the issuer of any Alternate Liquidity Facility, the Liquidity Provider ); and (iii) from funds of the Board provided in its discretion. For a description of certain provisions of the initial Liquidity Facility, see THE LIQUIDITY FACILITY. This Official Statement describes only the Bonds while bearing interest at a Weekly Interest Rate. It is not intended to provide any information to prospective owners of the Bonds after conversion to bear interest at a Fixed Interest Rate. A Remarketing Memorandum will be issued prior to the conversion of any Bonds to Fixed Rate Bonds. In connection with the Bonds, the Board has entered into an interest rate swap transaction (the Swap Agreement ) with Deutsche Bank AG, New York Branch ( DBAG ). Pursuant to the Swap Agreement, DBAG generally will be obligated to pay to the Board an amount equal to interest on a notional amount equal to the scheduled outstanding principal amount of the Bonds at 68% of the three-month USD-LIBOR-BBA (as such term is defined in the 2006 ISDA Definitions), which rate the Board anticipates will approximate the Weekly Interest Rate. In return, the Board will be obligated to pay to DBAG an amount equal to interest at a fixed rate of 2.675% per annum on a notional amount equal to the scheduled outstanding principal amount of the Bonds. See THE SWAP AGREEMENT. This Official Statement contains brief descriptions of the Bonds, the Board, the Housing Program, the Resolution, and certain information about the State and its finances. All descriptions of documents contained herein are only summaries and are qualified in their entirety by reference to each such document. Copies of such documents may be obtained from the Board. Capitalized terms not otherwise defined herein which are defined in the Resolution shall have the meanings assigned to such terms in the Resolution. PLAN OF FINANCING The proceeds of the Bonds will be deposited in Fund II and will be available to make Home Loans to certain Veterans within the Restricted Pool in accordance with guidelines established by the Board for the Program. See THE VETERANS LAND BOARD PROGRAMS Veterans Housing Assistance Program Restricted and Unrestricted Pool of Veterans in Appendix B. [Remainder of Page Intentionally Left Blank] -2-

8 SOURCES AND USES OF FUNDS The proceeds of the sale of the Bonds are anticipated to be used as follows: Sources Principal Amount of the Bonds... $74,995, Total... $74,995, Uses Deposit to Fund II to Make Home Loans... $74,414, Costs of Issuance* , Capitalized Interest 295, Total... $74,995, *Includes Underwriters Discount General Terms THE BONDS Interest on the Bonds will accrue from the date of delivery, will bear interest as described herein, and will be payable monthly on the first Business Day of each month, commencing April 1, The Bonds have a stated maturity of June 1, Interest on the Bonds is payable to the registered owner at the address appearing in the Registrar s books as of the close of business on the Record Date (as defined herein) next preceding such interest payment date, by check sent by the Paying Agent by United States mail, postage prepaid, on such interest payment date; however, during any period in which ownership of the Bonds is determined only by a book entry at The Depository Trust Company, New York, New York ( DTC ), the Paying Agent will make payments on the Bonds to DTC or DTC s nominee in accordance with arrangements between the Board and DTC. See BOOK-ENTRY ONLY SYSTEM herein. In addition, the Paying Agent will pay the principal of and interest on any Bond by wire transfer in immediately available funds to a bank account located in the United States to any registered owner of $1,000,000 or more in aggregate principal amount of Bonds requesting such payment and providing the necessary wire information to the Paying Agent at least 15 days prior to the applicable Record Date. The record date (the Record Date ) for the interest payable on any interest payment date is the Business Day immediately preceding such interest payment date. The Bonds are issued only as fully registered bonds of the denomination of $100,000 and any integral multiple of $5,000 in excess thereof for Variable Rate Bonds and $5,000 or any integral multiple thereof for Fixed Rate Bonds. Principal of the Bonds will be payable only upon presentation and surrender of the Bonds at the designated office of the Paying Agent at maturity or earlier redemption. The initial Paying Agent for the Bonds is the Comptroller of Public Accounts of the State of Texas and the initial Registrar for the Bonds is Amegy Bank National Association, Houston, Texas. Interest Rate Provisions Payment and Calculation of Interest. Interest on the Bonds shall be paid in arrears. Interest on the Variable Rate Bonds shall be computed on the basis of a 365/366 day year, for the number of days actually elapsed. Ceiling Rate. The maximum rate of interest on the Bonds is the Ceiling Rate. Ceiling Rate means the lesser of (i) fifteen percent (15%) per annum and (ii) a per annum rate equal to the maximum net effective interest rate permitted to be paid on the Bonds (prescribed by Chapter 1204, Texas Government Code, as amended, or any successor provision), currently fifteen percent (15%). Determination of Weekly Interest Rate. During each Weekly Interest Rate Period, the Bonds will bear interest at the Weekly Interest Rate, which is required to be determined by the Remarketing Agent by 4:30 p.m., -3-

9 New York City time, on Tuesday of each week during such Weekly Interest Rate Period, or if such day is not a Business Day, then on the next succeeding Business Day. The first Weekly Interest Rate will apply to the period commencing on the delivery date of the Bonds and ending on the next succeeding Tuesday. Thereafter, each Weekly Interest Rate will apply to the period commencing on Wednesday and ending on the next succeeding Tuesday, unless such Weekly Interest Rate Period ends on a day other than Tuesday, in which event the last Weekly Interest Rate for such Weekly Interest Rate Period will apply to the period commencing on the Wednesday preceding the last day of such Weekly Interest Rate Period and ending on the last day of such Weekly Interest Rate Period. The Weekly Interest Rate will be the rate of interest per annum determined by the Remarketing Agent (based on then prevailing market conditions) to be the minimum interest rate which, if borne by the Bonds, would enable the Remarketing Agent to sell the Bonds on such date of determination at a price (without regarding accrued interest) equal to the principal amount thereof. In the event that the Remarketing Agent fails to establish a Weekly Interest Rate for any week, then the Weekly Interest Rate for such week will be the same as the Weekly Interest Rate for the immediately preceding week if the Weekly Interest Rate for such preceding week was determined by the Remarketing Agent. In the event that the Weekly Interest Rate for the immediately preceding week was not determined by the Remarketing Agent, or in the event that the Weekly Interest Rate determined by the Remarketing Agent is held to be invalid or unenforceable by a court of law, then the interest rate for such week will be equal to the most recently available SIFMA Index plus 0.25% per annum, or if such index is no longer available, or no such index was so made available, for the week preceding the date of determination, 75% of the interest rate on 30 day high grade unsecured commercial paper notes sold through dealers by major corporations as reported in The Wall Street Journal on the day the Weekly Interest Rate would otherwise be determined as provided in the Resolution for such Weekly Interest Rate Period. Determination of Fixed Interest Rate. During a Fixed Interest Rate Period, each Bond will bear interest at the Fixed Interest Rate. The Fixed Interest Rate is required to be determined by the Remarketing Agent on a Business Day not less than 15 days prior to the effective date of the Fixed Interest Rate Period. The Fixed Interest Rate will be the rate of interest per annum determined by the Remarketing Agent (based on then prevailing market conditions) to be the minimum interest rate, if any, at which the Remarketing Agent will agree to purchase the Bonds on such effective date for resale at a price (without regarding accrued interest) equal to the principal amount thereof. If, for any reason, the Fixed Interest Rate is not so determined for the Bonds by the Remarketing Agent at least 15 days prior to the first day of the Fixed Interest Rate Period, then the Bonds will bear interest at the Weekly Interest Rate, and will continue to bear interest at a Weekly Interest Rate until such time as the interest rate on the Bonds has been adjusted to a Fixed Interest Rate, and the Bonds will continue to be subject to purchase upon notice from the Holders. The Liquidity Facility will be terminated as to the Fixed Rate Bonds. Adjustment to Fixed Interest Rate Period. At any time, the Board, by written direction to the Registrar, the Tender Agent, the Paying Agent, the Liquidity Provider and the Remarketing Agent, may elect, subject to the Board s providing the Tender Agent and the Remarketing Agent a Favorable Opinion of Bond Counsel, that the Bonds will be subject to a Fixed Interest Rate Period. The direction of the Board is required to specify the effective date of the Fixed Interest Rate Period, which date is required to be (A) a Business Day not earlier than the 30th day following the second Business Day after receipt by the Registrar of such direction, and (B) the day immediately following the last day of a Weekly Interest Rate Period. If the Board delivers to the Registrar, the Remarketing Agent and the Tender Agent on or prior to the date that the interest rate for the Fixed Interest Rate Period is determined a notice to the effect that the Board elects to rescind its election to have the Bonds become subject to a Fixed Interest Rate Period, then the Bonds will not become subject to a Fixed Interest Rate Period, and the Bonds will bear interest at a Weekly Interest Rate as in effect prior to such event. Notice of Adjustment to Fixed Interest Rate Period. The Registrar is required to give notice by first class mail of an adjustment to a Fixed Interest Rate Period to the Holders of the Bonds not less than 30 days prior to the effective date of such Fixed Interest Rate Period. Such notice is required to state: (1) that the Interest Rate Period on the Bonds will be adjusted to a Fixed Interest Rate Period unless (x) Bond Counsel fails to deliver to the Board, the Tender Agent and the Remarketing Agent a Favorable Opinion of Bond Counsel as to such adjustment in the Interest Rate Period on the effective date of such adjustment, or (y) the Board elects, on or prior to the date of determination of the Fixed Interest Rate, to rescind its election to cause the adjustment of the Interest Rate Period on the Bonds to the Fixed Interest Rate Period, in which case the Bonds will continue to bear interest at a Weekly -4-

10 Interest Rate as in effect immediately prior to such proposed adjustment in the Interest Rate Period, (2) the effective date of the Fixed Interest Rate Period, (3) that the Bonds are subject to mandatory tender for purchase on such effective date and the purchase price applicable thereto, (4) that the Liquidity Facility will be terminated as of the effective date of such Fixed Interest Rate Period, and (5) if ownership of the Bonds is no longer determined only by a book entry at a securities depository for the Bonds, information with respect to the required delivery of bond certificates and payment of purchase price under the Resolution. Tender Provisions Optional Tender for Purchase of Variable Rate Bonds. If ownership of the Bonds is determined only by a book entry at a securities depository for the Bonds, a Beneficial Owner (through its DTC Participant) may tender his interest in a Variable Rate Bond on any Business Day at a purchase price equal to the principal amount thereof plus accrued interest, if any, from and including the Interest Payment Date immediately preceding the date of purchase through and including the day immediately preceding the date of purchase, unless the date of purchase is an Interest Payment Date, in which case at a purchase price equal to the principal amount thereof, payable in immediately available funds, upon delivery to the Tender Agent at its designated corporate trust office for delivery of notices, with a copy to the Remarketing Agent, of an irrevocable written notice or telephonic notice, promptly confirmed in writing, which states the principal amount of such Variable Rate Bond and the date on which it will be purchased, which date is required to be a Business Day not prior to the seventh day next succeeding the date of the delivery of such notice to the Tender Agent. Any notice delivered to the Tender Agent after 4:00 p.m., New York City time, will be deemed to have been received on the next succeeding Business Day. The Tender Agent is required to promptly send (but no later than the next Business Day) a copy of any notice delivered to it pursuant to the preceding paragraph by fax to the Remarketing Agent and the Liquidity Provider. On the date for purchase specified in the notice, the Beneficial Owner is required to effect delivery of such Bonds by causing the DTC Participant through which such Beneficial Owner owns such Bonds to transfer its interest in such Bonds equal to such Beneficial Owner s interest on the records of DTC to the participant account of the Tender Agent with DTC. If ownership of the Bonds is not determined only by a book entry at a securities depository for the Bonds, a Holder of a Bond may tender the Bond by delivery of the notice described above by the time set forth above and also is required to deliver the Bond to the Tender Agent on the date specified for purchase. Mandatory Tender for Purchase on First Day of Fixed Interest Rate Period. The Bonds are subject to mandatory tender for purchase on the first day of the Fixed Interest Rate Period, or on the day which would have been the first day of the Fixed Interest Rate Period had the Board not elected to rescind its election to have the Bonds bear interest at a Fixed Interest Rate or had there not been a failure by the Board to provide the Remarketing Agent and the Tender Agent a Favorable Opinion of Bond Counsel which resulted in the interest rate on the Bonds not being adjusted, at a purchase price, payable in immediately available funds, equal to the principal amount of the Bonds, plus accrued interest (if any). Mandatory Tender for Purchase Upon Termination, Expiration, Suspension, Modification or Replacement of the Liquidity Facility. If at any time the Registrar gives notice in accordance with the Resolution that any Bond or Bonds which, at such time, are subject to purchase under the Liquidity Facility as then in effect, will on the date specified in such notice cease to be subject to purchase from the Liquidity Facility as a result of (A) the termination or expiration of the term of the Liquidity Facility, or (B) the Liquidity Facility being suspended, replaced or modified with the effect that the purchase price of such Bonds is no longer payable from the Liquidity Facility (in each case, whether or not any Alternate Liquidity Facility has been obtained), then on the Business Day the Board specifies to the Registrar that is at least five days and no more than 15 days (or, if no such date is specified, the fifth calendar day (or the immediately preceding Business Day if such day is not a Business Day)) preceding any termination, expiration, suspension, modification or replacement of the Liquidity Facility each such Bond or Bonds will be purchased or deemed purchased as provided in the Resolution. The purchase price for such Bonds will be equal to the principal amount thereof, plus accrued interest (if any). Mandatory Tender for Purchase Following Event of Default Under Liquidity Facility. All Variable Rate Bonds are subject to mandatory tender for purchase on the tenth day (or the next succeeding Business Day if such day is not a Business Day) following receipt by the Tender Agent of notice from the Liquidity Provider that an -5-

11 Event of Default has occurred under the Liquidity Facility and directing the mandatory purchase of the Bonds. No later than the third Business Day following receipt of such notice described above, the Tender Agent is required to give notice by first class mail, postage prepaid, to the Holders of the Bonds, the Board and the Remarketing Agent stating that an Event of Default has occurred under the Liquidity Facility and that the Bonds are subject to mandatory tender for purchase. Notice of Mandatory Tender for Purchase. In connection with any mandatory tender for purchase of Bonds as described under Mandatory Tender for Purchase on First Day of Fixed Interest Rate Period and Mandatory Tender for Purchase Upon Termination, Expiration, Suspension, Modification or Replacement of the Liquidity Facility, the Registrar is required to give notice of a mandatory tender for purchase. Each notice of mandatory tender for purchase is required to state (A) in the case of a mandatory tender for purchase described under Mandatory Tender for Purchase Upon Termination, Expiration, Suspension, Modification or Replacement of Liquidity Facility that the Liquidity Facility will expire, terminate, be suspended, be replaced or be modified and that the purchase price of the Variable Rate Bonds will no longer be payable from the Liquidity Facility then in effect and that any rating applicable thereto may be reduced or withdrawn; (B) in the case of a mandatory tender for purchase described under Mandatory Tender for Purchase Following Event of Default Under Liquidity Facility, that an Event of Default has occurred under the Liquidity Facility; (C) that the purchase price of any Variable Rate Bond so subject to mandatory purchase will be payable only upon (i) if ownership of the Variable Rate Bonds is not determined only by a book entry at a securities depository for the Variable Rate Bonds, surrender of such Variable Rate Bond to the Tender Agent at its designated corporate trust office for delivery of Variable Rate Bonds, accompanied by an instrument of transfer thereof, in form satisfactory to the Tender Agent, executed in blank by the Holder thereof or his duly authorized attorney, with such signature guaranteed by a bank, trust company or member firm of the New York Stock Exchange or (ii) if ownership of the Variable Rate Bonds is determined only by a book entry at a securities depository for the Variable Rate Bonds, registration of the ownership rights in such Variable Rate Bond to the Tender Agent on the records of DTC; (D) that, provided that moneys sufficient to effect such purchase have been provided through the remarketing of such Variable Rate Bonds by the Remarketing Agent or through the Liquidity Facility, all Variable Rate Bonds so subject to mandatory tender for purchase shall be purchased on the mandatory purchase date, and that if any Holder of a Variable Rate Bond subject to mandatory tender for purchase does not surrender such Variable Rate Bond to the Tender Agent for purchase (or if ownership of the Variable Rate Bonds is determined only by a book entry at a securities depository for the Variable Rate Bonds, effect the transfer of ownership rights to the Tender Agent on the records of DTC) on such mandatory purchase date, and moneys sufficient to pay the purchase price thereof are on deposit with the Tender Agent, then such Variable Rate Bond will be deemed to be an Undelivered Bond, and that no interest will accrue thereon on and after such mandatory purchase date and that the Holder thereof will have no rights under the Resolution other than to receive payment of the purchase price thereof; and (E) in the event that moneys sufficient to pay the purchase price of such Variable Rate Bonds have not been provided to the Tender Agent either through the remarketing of such Variable Rate Bonds or from the Liquidity Facility or otherwise, that such Variable Rate Bonds will not be purchased or deemed purchased and will bear interest at the rate described under Insufficient Funds for Purchase of Variable Rate Bonds; Adjustment of Interest Rate. In connection with any mandatory tender for purchase of Variable Rate Bonds as a result of the replacement, termination or expiration of a Liquidity Facility, such notice also is required to contain the information required by the Resolution. The Board is required to provide the Registrar with a form of any such notice. Delivery of Tendered Variable Rate Bonds. For payment of the purchase price of any Variable Rate Bond required to be purchased pursuant to an optional or mandatory tender for purchase on the date specified, such Variable Rate Bond must be delivered, at or prior to 10:00 a.m., New York City time, on the date specified in such notice, to the Tender Agent at its designated corporate trust office for delivery of Variable Rate Bonds, accompanied by an instrument of transfer thereof, in form satisfactory to the Tender Agent, executed in blank by the Holder thereof or his duly authorized attorney, with such signature guaranteed by a commercial bank, trust company or member firm of the New York Stock Exchange. In the event any such Variable Rate Bond is delivered after 10:00 a.m., New York City time, on such date, payment of the purchase price of such Variable Rate Bond need not be made until the Business Day following the date of delivery of such Variable Rate Bond, but such Variable Rate Bond will nonetheless be deemed to have been purchased on the date specified in such notice and no interest will accrue thereon after such date. -6-

12 Irrevocable Notice Deemed to be Tender of Bond; Undelivered Bonds. The giving of notice by an owner of a Variable Rate Bond constitutes the irrevocable tender for purchase of each such Variable Rate Bond with respect to which such notice has been given, regardless of whether such Variable Rate Bond is delivered to the Tender Agent for purchase on the relevant purchase date provided that moneys sufficient to pay the purchase price of such Variable Rate Bonds are on deposit with the Tender Agent for such purpose. The Tender Agent may refuse to accept delivery of any Variable Rate Bonds for which a proper instrument of transfer has not been provided; such refusal, however, will not affect the validity of the purchase of such Variable Rate Bond as described above. If any owner of a Variable Rate Bond who has given notice of tender of purchase, if ownership of the Variable Rate Bonds is not determined only by a book entry at a securities depository for the Variable Rate Bonds, fails to deliver such Variable Rate Bond to the Tender Agent at the place and on the applicable date and at the time specified, or fails to deliver such Variable Rate Bond properly endorsed, or if ownership of the Variable Rate Bonds is determined only by a book entry at a securities depository for the Variable Rate Bonds, fails to cause its beneficial ownership to be transferred to the Tender Agent on the records of DTC, and moneys sufficient to pay the purchase price thereof are on deposit with the Tender Agent for such purpose, such Variable Rate Bond will constitute an Undelivered Bond. If funds in the amount of the purchase price of the Undelivered Bonds are available for payment to the owner thereof on the date and at the time specified, from and after the date and time of that required delivery, (1) each Undelivered Bond will be deemed to be purchased and will no longer be deemed to be outstanding under the Resolution; (2) interest will no longer accrue thereon; and (3) funds in the amount of the purchase price of each such Undelivered Bond will be held by the Tender Agent for the benefit of the owner thereof (provided that the owner has no right to any investment proceeds derived from such funds), to be paid on delivery (and proper endorsement) of such Undelivered Bond to the Tender Agent at its designated office for delivery of Variable Rate Bonds. Any funds held by the Tender Agent as described in clause (3) of the preceding sentence are required to be held uninvested and not commingled. Insufficient Funds for Purchase of Variable Rate Bonds; Adjustment of Interest Rate. If payment of the purchase price of any Variable Rate Bond is not made to the Holder thereof on any date such Variable Rate Bond has been tendered for purchase pursuant to the Resolution, such Variable Rate Bond will be returned by the Tender Agent to the Holder thereof, and shall continue to bear interest at a Weekly Interest Rate as described under THE BONDS Interest Rate Provisions Determination of Weekly Interest Rate above. Redemption Optional Redemption of Variable Rate Bonds. The Variable Rate Bonds are subject to redemption prior to maturity on the first Business Day of any month, at the option and direction of the Board, in whole or in part, at a redemption price of par plus accrued interest. In the case of any such redemption, the Board will select the amount of Variable Rate Bonds to be redeemed in authorized denominations. Mandatory Sinking Fund Redemption. The Bonds are subject to scheduled mandatory sinking fund redemption and will be redeemed on the first Business Day of each June and December in the respective principal amounts set forth below, at a redemption price equal to the principal amount thereof, without premium, plus accrued interest to the date fixed for redemption. [Remainder of page intentionally left blank] -7-

13 Date Principal Amount ($) Date Principal Amount ($) December ,000 June ,265,000 June ,000 December ,255,000 December ,205,000 June ,235,000 June ,425,000 December ,225,000 December ,615,000 June ,215,000 June ,680,000 December ,200,000 December ,655,000 June ,185,000 June ,635,000 December ,175,000 December ,615,000 June ,160,000 June ,595,000 December ,155,000 December ,575,000 June ,135,000 June ,560,000 December ,130,000 December ,535,000 June ,115,000 June ,520,000 December ,110,000 December ,505,000 June ,095,000 June ,485,000 December ,085,000 December ,465,000 June ,075,000 June ,450,000 December ,060,000 December ,430,000 June ,055,000 June ,420,000 December ,045,000 December ,400,000 June ,035,000 June ,380,000 December ,025,000 December ,370,000 June ,020,000 June ,350,000 December ,005,000 December ,340,000 June ,000,000 June ,320,000 December ,000 December ,310,000 June ,000 June ,290,000 December ,000 December ,280,000 June ,000 December ,000 The remaining $875,000 will be paid at maturity on June 1, The principal amount of the Bonds to be redeemed on each such redemption date pursuant to mandatory sinking fund redemption will be reduced, at the option of the Board, by the principal amount of any of the Bonds which (A) at least 45 days prior to such mandatory sinking fund redemption date, (1) have been acquired by the Board and delivered to the Registrar for cancellation, or (2) have been acquired and cancelled by the Registrar at the direction of the Board, or (3) have been redeemed pursuant to any optional redemption, and (B) have not been previously credited against a mandatory sinking fund redemption. Selection of Bonds for Redemption In the case of any redemption of less than all of the Bonds, the particular Bonds to be redeemed will be selected by the Registrar by lot in such manner as it deems fair and appropriate; provided that during any period in which ownership of the Bonds is determined only by a book entry at a securities depository, if less than the entire principal amount outstanding of all Bonds is to be redeemed, the interests to be redeemed of the beneficial owners of the Bonds will be selected in accordance with the arrangements between the Board and the securities depository. Notwithstanding the foregoing, in the event of any redemption of Variable Rate Bonds, Purchased Bonds are required to be selected first for redemption to the extent there are any Purchased Bonds. -8-

14 Notices of Redemption of Bonds Notice of any redemption of Bonds will be sent by first-class mail, postage prepaid, by the Registrar to the registered owners of Bonds so selected for redemption at their addresses shown on the registration books maintained by the Registrar not less than 30 days prior to the redemption date. In addition, the Registrar will send notice of redemption by certified or registered mail, return receipt requested, postage prepaid, or by overnight delivery service contemporaneously with such mailing: (1) to any registered owner of $1,000,000 or more in principal amount of the Bonds, (2) to two or more information services of national recognition that disseminate redemption information with respect to municipal bonds; and (3) to any securities depository that is a registered owner of the Bonds. The Registrar is also required to send a notice of redemption to the registered owner of any Bond called for redemption who has not sent such Bond in for redemption within 60 days after the redemption date. Notwithstanding the foregoing, failure to give any notice of redemption as described above or any defect in such notice or the mailing thereof will not affect the validity of any proceedings for the redemption of such Bonds. If only a portion of any Bond is redeemed, a substitute Bond or Bonds, in any authorized denomination requested in writing by the registered owner thereof, and in an aggregate principal amount equal to the unredeemed portion thereof, will be issued at the expense of the Board to the registered owner upon the surrender thereof for cancellation, all as provided in the Resolution. By the date fixed for any such redemption, due provision is required to be made by the Board with the Paying Agent for the payment of the required redemption price for the Bonds or the portions thereof which are to be so redeemed. If such written notice of redemption is given, and if due provision for such payment is made, all as provided above, the Bonds, or the portions thereof which are to be so redeemed, thereby automatically will be redeemed prior to their scheduled maturity, and will not bear interest after the date fixed for their redemption. Such Bonds will not be regarded as being outstanding under the Resolution, except for the right of the registered owners thereof to receive the redemption price therefor from the Paying Agent out of the funds provided for such payment. While the book-entry only system is in effect, notice of redemption and payment of the redemption price shall be made to DTC in accordance with existing arrangements between the Board and DTC. The Remarketing Agent is Paid by the Board SPECIAL CONSIDERATIONS RELATING TO THE BONDS The Remarketing Agent s responsibilities include determining the interest rate from time to time and remarketing the Bonds that are optionally or mandatorily tendered by the owners thereof (subject, in each case, to the terms of the Remarketing Agreement), all as further described in this Official Statement. The Remarketing Agent is appointed by the Board and is paid by the Board for its services. As a result, the interests of the Remarketing Agent may differ from those of existing holders and potential purchasers of the Bonds. The Remarketing Agent Routinely Purchases Bonds for its Own Account The Remarketing Agent acts as remarketing agent for a variety of variable rate demand obligations and, in its sole discretion, routinely purchases such obligations for its own account. The Remarketing Agent is permitted, but not obligated, to purchase tendered Bonds for its own account and, in its sole discretion, routinely acquires such tendered Bonds in order to achieve a successful remarketing of the Bonds (i.e., because there otherwise are not enough buyers to purchase the Bonds) or for other reasons. However, the Remarketing Agent is not obligated to purchase Bonds, and may cease doing so at any time without notice. The Remarketing Agent may also make a market in the Bonds by routinely purchasing and selling Bonds other than in connection with an optional or mandatory tender and remarketing. Such purchases and sales may be at or below par. However, the Remarketing Agent is not required to make a market in the Bonds. The Remarketing Agent may also sell any Bonds it has purchased to one or more affiliated investment vehicles for collective ownership or enter into derivative arrangements with affiliates or others in order to reduce its exposure to the Bonds. The purchase of Bonds by the Remarketing Agent may create the appearance that there is greater third party demand for the Bonds in the market -9-