GILMORE & BELL, P

RESOLUTION

TABLE OF CONTENTS

Page

Title..................................................................................................................... 1

Recitals................................................................................................................ 1

ARTICLE I

DEFINITIONS

Section 101. Definitions of Words and Terms............................................................................ 1

ARTICLE II

AUTHORIZATION OF THE NOTES

Section 201. Authorization of and Security for the Notes............................................................ 4

Section 202. Description of the Notes....................................................................................... 5

Section 203. Designation of Paying Agent and Note Registrar.................................................... 5

Section 204. Method and Place of Payment of the Notes........................................................... 5

Section 205. Method of Execution and Authentication of the Notes............................................. 5

Section 206. Registration, Transfer and Exchange of Notes........................................................ 6

Section 207. Surrender and Cancellation of Notes...................................................................... 6

Section 208. Mutilated, Lost, Stolen or Destroyed Notes............................................................. 6

Section 209. Execution and Delivery of the Notes...................................................................... 7

Section 210. Preliminary Official Statement and Official Statement............................................. 7

Section 211. Book-Entry Notes; Securities Depository............................................................... 7

Section 212. Payments Due on Saturdays, Sundays and Holidays................................................ 8

ARTICLE III

REDEMPTION OF THE NOTES

Section 301. Optional Redemption............................................................................................. 8

ARTICLE IV

FORM OF THE NOTES

Section 401. Form of the Notes................................................................................................ 8

ARTICLE V

ESTABLISHMENT OF FUNDS AND ACCOUNTS

Section 501. Creation of Funds and Accounts............................................................................ 9

Section 502. Administration of Funds and Accounts................................................................... 9

ARTICLE VI

APPLICATION OF NOTE PROCEEDS

Section 601. Disposition of Note Proceeds................................................................................ 9

Section 602. Withdrawals from the Improvement Fund............................................................... 9

Section 603. Surplus in the Improvement Fund......................................................................... 10

Section 604. Substitution of Improvements............................................................................... 10

ARTICLE VII

PAYMENT OF THE NOTES

Section 701. Application of Moneys in the Principal and Interest Account.................................. 10

Section 702. Transfer of Funds to Paying Agent...................................................................... 10

Section 703. Surplus in Principal and Interest Account.............................................................. 10

ARTICLE VIII

DEPOSITS AND INVESTMENT OF FUNDS

Section 801. Deposits............................................................................................................. 11

Section 802. Investments........................................................................................................ 11

Section 803. Deposits into and Application of Moneys in the Rebate Fund................................. 11

ARTICLE IX

DEFAULT AND REMEDIES

Section 901. Remedies........................................................................................................... 11

Section 902. Limitation on Rights of Owners............................................................................ 12

Section 903. Remedies Cumulative.......................................................................................... 12

ARTICLE X

AMENDMENTS

Section 1001. Amendments...................................................................................................... 12

Section 1002. Written Evidence of Amendments........................................................................ 13

ARTICLE XI

MISCELLANEOUS PROVISIONS

Section 1101. Tax Covenants................................................................................................... 13

Section 1102. Disclosure Requirements..................................................................................... 14

Section 1103. Severability......................................................................................................... 14

Section 1104. Further Authority................................................................................................ 14

Section 1105. Governing Law................................................................................................... 14

Section 1106. Effective Date.................................................................................................... 14

Adoption............................................................................................................ 15

Signatures and Seal............................................................................................. 15

Exhibit A – Form of Note

Exhibit B – Continuing Disclosure Instructions

RESOLUTION NO. 6563

A RESOLUTION AUTHORIZING THE ISSUANCE AND DELIVERY OF $15,745,000 PRINCIPAL AMOUNT OF GENERAL OBLIGATION TEMPORARY NOTES, SERIES 2004-II, OF THE CITY OF LAWRENCE, KANSAS, FOR THE PURPOSE OF TEMPORARILY FINANCING A PORTION OF THE COSTS OF CERTAIN INTERNAL IMPROVEMENTS OF THE CITY; AND PRESCRIBING THE TERMS AND DETAILS OF SAID NOTES.

WHEREAS, pursuant to K.S.A. 10-101 et seq. (including K.S.A. 10-123), K.S.A. 12-6a01 et seq. and K.S.A. 12-685 et seq., Article 12, § 5 of the Constitution of the State of Kansas and Charter Ordinance Numbers 28 and 32 of the City, all as amended and supplemented, and all other provisions of the laws of the State applicable thereto, by proceedings duly had, and other actions duly and legally taken, the City is proceeding with certain Improvements (as hereinafter defined) at an estimated cost of not less than $15,745,000 (the "Improvements");

WHEREAS, the cost of the Improvements is to be paid in whole or in part by the issuance of general obligation bonds of the City in the manner provided by law; and

WHEREAS, it is necessary for the City to provide cash funds (from time to time) to meet its obligations incurred in constructing the Improvements prior to the completion of said work and the issuance of the City's general obligation bonds, and it is desirable and in the interest of the City that such funds be raised by the issuance of temporary notes of the City, said notes to be issued by the City pursuant to the Act;

NOW, THEREFORE, BE IT RESOLVED BY THE GOVERNING BODY OF THE CITY OF LAWRENCE, KANSAS, AS FOLLOWS:

ARTICLE I

DEFINITIONS

Section 101. Definitions of Words and Terms.

"Act" means the Constitution and statutes of the State including, but not limited to, K.S.A. 10-101 et seq. (including K.S.A. 10-123), K.S.A. 12-6a01 et seq. and K.S.A. 12-685 et seq., Article 12, § 5 of the Constitution of the State of Kansas and Charter Ordinance Numbers 28 and 32 of the City, all as amended and supplemented.

"Arbitrage Instructions" means the Arbitrage Instructions (dated as of the date of issuance of the Notes) attached to the City's Arbitrage Certificate to be delivered at the time of issuance and delivery of the Notes relating to certain matters within the scope of Section 148 of the Code, as the same may be amended or supplemented in accordance with its terms.

"Authorized Costs" means the amount of expenditure for an Improvement which has been duly authorized to be paid by the City by a resolution or ordinance of the City, less (1) the amount of any notes or bonds of the City which are currently outstanding and available to pay such Authorized Costs and (2) any Authorized Costs which have been previously paid by the City or by any eligible source of funds unless such amounts are entitled to be reimbursed under State and federal law.

"Authorized Investments" shall mean those investments permitted by K.S.A. 10‑131, as amended from time to time, or as otherwise permitted under the laws of the State.

"Bond and Interest Fund" means the Bond and Interest Fund of the City for its general obligation bonds.

"Bond Counsel" means the firm of Gilmore & Bell, P.C., or any other attorney or firm of attorneys whose expertise in matters relating to the issuance of obligations by states and their political subdivisions is nationally recognized and acceptable to the City.

"Business Day" means a day other than a Saturday, Sunday or any day designated as a holiday by the Congress of the United States or by the Legislature of the State and on which the Paying Agent is scheduled in the normal course of its operations to be open to the public for conduct of its operations.

"Cede & Co." means Cede & Co., as nominee name of The Depository Trust Company, New York, New York.

"City" means the City of Lawrence, Kansas.

"City Clerk" means the duly appointed and acting City Clerk or, in the City Clerk's absence, the duly appointed and/or elected Deputy City Clerk or Acting City Clerk of the City.

"Code" means the Internal Revenue Code of 1986, as amended.

"Continuing Disclosure Instructions" means the Continuing Disclosure Instructions dated May 7, 1996, and attached to Resolution No. 5793 of the City (which resolution authorized the City's General Obligation Bonds, Series T 1996), as from time to time amended and attached hereto as Exhibit B.

"Costs of Issuance" means all costs of issuing the Notes, including all publication, printing, signing and mailing expenses in connection therewith, registration fees, all legal fees and expenses of Bond Counsel and other legal counsel, and any expenses incurred in connection with receiving ratings on the Notes.

"Improvement Fund" means the Improvement Fund for the City of Lawrence, Kansas, General Obligation Temporary Notes, Series 2004-II, created herein.

"Improvements" means the following improvements and any Substitute Improvements:

Project Amount

13th & Oregon Storm Sewer	$ 3,388,570
15th Lawrence Storm Sewer	120,420
21st Kent Storm Sewer	2,313,871
Haskell Basin Storm Sewer	39,220
Riverside SS	374,651
George Williams 6th-Harvard	2,508,000
Traffic Signal	251,803
Traffic Signal	202,734
19th & Barker Roundabout	557,518
Monterrey Way N of Stetson	2,120,374
Overland, Congressional-Queens	995,000
Congressional N of 6th	423,500
Harvard-East of GWW	46,250
Fire Station 5	331,320
Carnegie Library	313,951
O'Connell Road	627,902
Monterey Way-Peterson to GV	169,000
Peterson-Kasold to Monterey	212,000
Kasold & Peterson intersection	24,000
7th & Kentucky	27,108
Orchards Storm Sewer	281,000
2004 Overlay	347,484
Folks Rd-6th to Harvard	67,300
Total	$15,745,000

"Interest Payment Dates" means April 1, 2005 and October 1, 2005, or such other time as the Notes are paid.

"Mayor" means the duly elected and acting Mayor of the City or, in the Mayor's absence, the duly appointed and/or elected Vice Mayor or Acting Mayor of the City.

"Note Registrar" means the City Treasurer, and its successors and assigns.

"Notes" means the General Obligation Temporary Notes, Series 2004-II, authorized by the Resolution in the aggregate principal amount of $15,745,000, and dated September 15, 2004.

"Original Purchaser" means _________________________________, ________________, ______________.

"Owner" or "Registered Owner" when used with respect to any Note means the person in whose name such Note is registered on the registration books of the City as maintained by the Note Registrar.

"Outstanding" means as of a particular date, all Notes heretofore issued, authenticated and delivered under the provisions of this Resolution, except:

(a) Notes theretofore cancelled by the Paying Agent or delivered to the Paying Agent for cancellation pursuant to this Resolution;

(b) Notes for the payment or redemption of which monies or investments have been deposited in accordance with this Resolution; and

(c) Notes in exchange for or in lieu of which other Notes have been authenticated and delivered pursuant to this Resolution.

"Participants" means those financial institutions for whom the Securities Depository effects book-entry transfers and pledges of securities deposited with the Securities Depository, as such listing of Participants exists at the time of such reference.

"Paying Agent" means the City Treasurer, and any successors and assigns.

"Principal and Interest Account" means the Principal and Interest Account for the City of Lawrence, Kansas, General Obligation Temporary Notes, Series 2004-II, created within the City's Bond and Interest Fund.

"Principal Payment Date" means October 1, 2005, or until such time as the aggregate principal amount of the Notes has been paid.

"Purchase Price" means the par value of the Notes plus accrued interest to the date of delivery and plus a premium/less a discount of $__________.

"Rebate Fund" means the Rebate Fund for the city of Lawrence, Kansas, General Obligation Temporary Notes, Series 2004-II, created herein.

"Record Dates" means the fifteenth day of each month preceding the Interest Payment Dates of each year the Notes are Outstanding.

"Replacement Notes" means Notes issued to the beneficial owners of the Notes in accordance with Section 211(b) hereof.

"Representation Letter" shall mean any Representation Letter from the City and the Paying Agent to the Securities Depository with respect to the Notes.

"Resolution" means this Resolution authorizing the issuance of the Notes.

"Securities Depository" means, initially, The Depository Trust Company, New York, New York, and its successors and assigns.

"Substitute Improvements" means the substitute or additional improvements of the City as authorized by Section 604 of this Resolution.

"State" means the state of Kansas.

ARTICLE II

AUTHORIZATION OF THE NOTES

Section 201. Authorization of and Security for the Notes. The General Obligation Temporary Notes, Series 2004-II, of the City in the principal amount of $15,745,000, shall be issued for the purpose of providing funds to pay the Authorized Costs of the Improvements.

The Notes shall be general obligations of the City payable as to both principal and interest in part from special assessments levied upon the property benefitted by the construction of certain improvements, from general obligation bonds of the City issued to permanently finance the Improvements, or from both, and, if not so paid, from ad valorem taxes which may be levied without limitation as to rate or amount upon all the taxable tangible property, real and personal, within the territorial limits of the City. The balance of the principal of and interest on the Notes is payable from general obligation bonds and, if not so paid, shall be payable from ad valorem taxes which may be levied without limitation as to rate or amount upon all the taxable tangible property, real and personal, within the territorial limits of the City. The full faith, credit and resources of the City are hereby irrevocably pledged for the prompt payment of the principal of and interest on the Notes as the same become due.

Section 202. Description of the Notes. The Notes shall consist of fully registered notes in the denomination of $5,000 or any integral multiple thereof and shall be numbered in such manner as the Note Registrar shall determine. All of the Notes shall be dated September 15, 2004, shall become due on the Principal Payment Date, and shall bear interest at the rate of ______% per annum from the date thereof until paid.

Interest on the Notes at the rates aforesaid (computed on the basis of a 360‑day year of twelve 30‑day months) from the date thereof or most recent Interest Payment Date to which interest has been paid or duly provided for, shall be payable on the Interest Payment Dates to the Owners thereof whose names appear on the books maintained by the Note Registrar at the close of business on the Record Dates.

Section 203. Designation of Paying Agent and Note Registrar. The Treasurer of the City is hereby designated as the Paying Agent and Note Registrar for the Notes.

Section 204. Method and Place of Payment of the Notes. The principal of, premium, if any, and interest on the Notes shall be payable in any coin or currency which, on the respective dates of payment thereof, is legal tender for the payment of debts due the United States of America.

The principal of the Notes shall be paid to the Registered Owner of each Note upon presentation of the Note at the maturity or redemption date to the Paying Agent for cancellation. The interest payable on the Notes on any Interest Payment Date shall be paid by check of draft mailed by the Paying Agent to the Registered Owner of each Note at the Registered Owner's address as it appears on the registration books of the City maintained by the Note Registrar as herein provided or at such other address provided in writing by such Registered Owner to the Note Registrar on the Record Dates.

Payment of principal of, premium, if any or interest on a Note may be made by such other method of transferring funds as may be requested by the Owner of the Note, provided that the Paying Agent shall first receive a written request from such Owner (i) specifying the method and route for transferring funds and (ii) providing for the Paying Agent to be reimbursed by the Owner for all expenses incurred in such fund transfers.

The Paying Agent shall keep in its offices a record of payment of principal of, premium, if any, and interest on all Notes.

Section 205. Method of Execution and Authentication of the Notes. The Notes shall be executed for and on behalf of the City by the manual or facsimile signature of the Mayor, attested by the manual or facsimile signature of the City Clerk and the seal of the City shall be affixed thereto or imprinted thereon. The Notes shall be registered in the office of the City Clerk, which registration shall be evidenced by the manual or facsimile signature of the City Clerk with the seal of the City affixed thereto or imprinted thereon. The Notes shall also be registered in the office of the State Treasurer, which registration shall be evidenced by the manual or facsimile signature of the State Treasurer with the seal of the State Treasurer affixed thereto or imprinted thereon. The Notes shall be countersigned by the manual or facsimile signature of the City Clerk and the seal of the City shall be affixed or imprinted adjacent thereto following registration of the Notes by the Treasurer of the State. In the event that any of the aforementioned officers shall cease to hold such offices before the Notes are issued and delivered, the Notes may be issued and transferred to other Owners as though said officers had not ceased to hold office, and such signatures appearing on the Notes shall be valid and sufficient for all purposes as if they had remained in office until such issuance or transfer.

The Notes shall not be valid obligations under the provisions of the Resolution until authenticated by the Note Registrar or a duly authorized representative of the Note Registrar by execution of the Certificate of Authentication appearing on each Note. It shall not be necessary that the same representative of the Note Registrar execute the Certificate of Authentication on all of the Notes.

Section 206. Registration, Transfer and Exchange of Notes. As long as the Notes remain Outstanding, the City shall cause the books for the registration and transfer of the Notes as provided in the Resolution to be kept by the Note Registrar.

Upon presentation of the necessary documents as hereinafter described, the Note Registrar shall transfer or exchange any Note(s) for new Note(s) in an authorized denomination of the same maturity and for the same aggregate principal amount as the Note(s) which was presented for transfer or exchange.

All Notes presented for transfer or exchange shall be accompanied by a written instrument or instruments of transfer or authorization for exchange, in a form and with guarantee of signature satisfactory to the Note Registrar, duly executed by the Registered Owner thereof or by the Registered Owner's duly authorized agent. In addition, all Notes presented for transfer or exchange shall be surrendered to the Note Registrar for cancellation.

Prior to delivery of the new Note(s) to the transferee, the Note Registrar shall register the same in the registration books kept by the Note Registrar for such purpose and shall authenticate each Note.

The City shall pay out of the proceeds of the Notes the fees of the Note Registrar for registration and transfer of the Notes and the cost of printing a reasonable supply of registered bond blanks. Any additional costs or fees that might be incurred in the secondary market, other than fees of the Note Registrar, are the responsibility of the Owners.

The City and the Note Registrar shall not be required to issue, register, transfer or exchange any Notes during a period beginning on the day following the Record Date preceding any Interest Payment Date and ending at the close of business on the Interest Payment Date, or any Notes which are to be redeemed.

New Notes delivered upon any transfer or exchange shall be valid obligations of the City, evidencing the same debt as the Notes surrendered, shall be secured by the Resolution and shall be entitled to all of the security and benefits hereof to the same extent as the Notes surrendered.

The City, Note Registrar and Paying Agent may deem and treat the person in whose name any Note is registered as the absolute Owner thereof, whether such Note shall be overdue or not, for the purpose of receiving payment of, or on account of, the principal of, redemption premium, if any, and interest on said Note and for all other purposes, and all such payment so made to any such Registered Owner or upon the Registered Owner's order shall be valid and effectual to the extent of the sum or sums so paid, and neither the City, Note Registrar and Paying Agent shall be affected by any notice to the contrary.

Section 207. Surrender and Cancellation of Notes. Whenever any Outstanding Notes shall be delivered to the Note Registrar for cancellation pursuant to the Resolution, upon payment of the principal amount thereof and interest thereon or replacement pursuant to the Resolution, such Note shall be canceled by the Note Registrar and the canceled Note shall be returned to the City Clerk.

Section 208. Mutilated, Lost, Stolen or Destroyed Notes. In the event any Note is mutilated, lost, stolen or destroyed, the City may execute and the Note Registrar may authenticate a new Note of like date, maturity, denomination and interest rate, as that mutilated, lost, stolen or destroyed; provided, that in the case of any mutilated Note, such mutilated Note shall first be surrendered to the City or the Note Registrar, and, in the case of any lost, stolen or destroyed Note there shall be first furnished to the Note Registrar and the City evidence of such loss, theft or destruction satisfactory to them, together with an indemnity satisfactory to the City and the Note Registrar. In the event any such Note shall have matured, instead of issuing a duplicate Note, the City and Note Registrar may pay the same without surrender thereof. The City and Note Registrar may charge to the Registered Owner of such Note their reasonable fees and expenses in connection with replacing any Note or Notes mutilated, stolen, lost or destroyed.

Section 209. Execution and Delivery of the Notes. The Mayor and City Clerk are hereby authorized and directed to prepare and execute the Notes in the manner hereinbefore specified, and to cause the Notes to be registered in the offices of the City Clerk and the State Treasurer as provided by law, and, when duly executed and registered, to deliver the Notes to the Original Purchaser, upon receipt by the City of the Purchase Price.

Section 210. Preliminary Official Statement and Official Statement. The City hereby approves the Preliminary Official Statement prepared in the initial offering and sale of the Notes and hereby approves the form and content of any addenda, supplement, or amendment thereto utilized to prepare a final Official Statement. The use of such Official Statement in the reoffering of the Notes by the Original Purchaser is hereby approved and authorized. The proper officials of the City are hereby authorized to execute and deliver a certificate pertaining to such Official Statement as prescribed therein, dated as of the date of payment for and delivery of the Notes.

Section 211. Book-Entry Notes; Securities Depository. (a) The Notes shall initially be registered to Cede & Co., the nominee for the Securities Depository, and no beneficial owner will receive certificates representing their respective interests in the Notes, except in the event the Note Registrar issues Replacement Notes as provided in subsection (b) hereof. It is anticipated that during the term of the Notes, the Securities Depository will make book-entry transfers among its Participants and receive and transmit payment of principal of, premium, if any, and interest on, the Notes to the Participants until and unless the Note Registrar authenticates and delivers Replacement Notes to the beneficial owners as described in subsection (b).

(b) (1) If the City determines (A) that the Securities Depository is unable to properly discharge its responsibilities, or (B) that the Securities Depository is no longer qualified to act as a securities depository and registered clearing agency under the Securities Exchange Act of 1934, as amended, or (C) that the continuation of a book-entry system to the exclusion of any Notes being issued to any Owner other than Cede & Co. is no longer in the best interests of the beneficial owners of the Notes, or (2) if the Note Registrar receives written notice from Participants having interests in not less than 50% of the Notes Outstanding, as shown on the records of the Securities Depository (and certified to such effect by the Securities Depository), that the continuation of a book-entry system to the exclusion of any Notes being issued to any Owner other than Cede & Co. is no longer in the best interests of the beneficial owners of the Notes, then the Note Registrar shall notify the Owners of such determination or such notice and of the availability of certificates to Owners requesting the same, and the Note Registrar shall register in the name of and authenticate and deliver Replacement Notes to the beneficial owners or their nominees in principal amounts representing the interest of each, making such adjustments as it may find necessary or appropriate as to accrued interest and previous calls for redemption; provided, that in the case of a determination under (1)(A) or (1)(B) of this subsection (b), the City, with the consent of the Note Registrar, may select a successor securities depository in accordance with Section 211(c) hereof to effect book-entry transfers. In such event, all references to the Securities Depository herein shall relate to the period of time when the Securities Depository has possession of at least one Note. Upon the issuance of Replacement Notes, all references herein to obligations imposed upon or to be performed by the Securities Depository shall be deemed to be imposed upon and performed by the Note Registrar, to the extent applicable with respect to such Replacement Notes. If the Securities Depository resigns and the City, the Note Registrar or Owners are unable to locate a qualified successor of the Securities Depository in accordance with Section 211(c) hereof, then the Note Registrar shall authenticate and cause delivery of Replacement Notes to Owners, as provided herein. The Note Registrar may rely on information from the Securities Depository and its Participants as to the names of the beneficial owners of the Notes. The cost of printing, registration, authentication and delivery of Replacement Notes shall be paid for by the City.

(c) In the event the Securities Depository resigns, is unable to properly discharge its responsibilities, or is no longer qualified to act as a securities depository and registered clearing agency under the Securities Exchange Act of 1934, as amended, the City may appoint a successor Securities Depository provided the Note Registrar receives written evidence satisfactory to the Note Registrar with respect to the ability of the successor Securities Depository to discharge its responsibilities. Any such successor Securities Depository shall be a securities depository which is a registered clearing agency under the Securities Exchange Act of 1934, as amended, or other applicable statute or regulation that operates a securities depository upon reasonable and customary terms. The Note Registrar upon its receipt of a Note or Notes for cancellation shall cause the delivery of Notes to the successor Securities Depository in appropriate denominations and form as provided herein.

(d) The execution and delivery of any Representation Letter to the Securities Depository by an authorized officer is hereby authorized.

Section 212. Payments Due on Saturdays, Sundays and Holidays. In any case where the Principal Payment Date or the Interest Payment Date is not a Business Day, then payment of principal or interest need not be made on such date(s) but may be made on the next succeeding Business Day with the same force and effect as if made on such date(s), and no interest shall accrue for the period after such date(s).

ARTICLE III

REDEMPTION OF THE NOTES

Section 301. Optional Redemption. The Notes shall not be subject to optional redemption and payment prior to their maturity.

ARTICLE IV

FORM OF THE NOTES

Section 401. Form of the Notes. The Notes shall be printed in accordance with the format required by the Attorney General of the State and shall contain information substantially in the form as set forth in Exhibit A attached to this Resolution submitted to the governing body concurrently with the adoption of the Resolution or as may be required by the Attorney General pursuant to the Notice of Systems of Registration for Kansas Municipal Bonds, 2 Kan. Reg. 921 (1983), in accordance with the Kansas Bond Registration Law, K.S.A. 10‑620 to 10‑632, inclusive, as amended.

ARTICLE V

ESTABLISHMENT OF FUNDS AND ACCOUNTS

Section 501. Creation of Funds and Accounts. Simultaneously with the issuance of the Notes, there shall be created within the Treasury of the City the following funds and accounts:

(a) Improvement Fund for the City of Lawrence, Kansas, General Obligation Temporary Notes, Series 2004-II;

(b) Principal and Interest Account for the City of Lawrence, Kansas, General Obligation Temporary Notes, Series 2004-II; and

Section 502. Administration of Funds and Accounts. The funds and accounts established herein shall be administered in accordance with the provisions of the Resolution so long as the Notes are outstanding.

ARTICLE VI

APPLICATION OF NOTE PROCEEDS

Section 601. Disposition of Note Proceeds. The proceeds of the Notes, upon issuance and delivery thereof, shall be deposited as follows:

(a) In the Principal and Interest Account, the accrued interest and any premium paid on the Notes. Moneys in the Principal and Interest Account shall be used exclusively for the payment of the principal of, premium, if any, and interest on the Notes and for the payment of Paying Agent fees.

(b) In the Improvement Fund, the balance of the proceeds of the Notes.

If (a) any portion of the Note proceeds will be used to pay principal of any temporary notes previously issued by the City to finance the Improvements or other City improvements (the “Refunded Notes”), and (b) any proceeds of such Refunded Notes (including sale proceeds and investment earnings on such proceeds) remain unspent, then the Treasurer shall transfer to the Improvement Fund all such unspent proceeds.

Section 602. Withdrawals from the Improvement Fund. The Treasurer shall make withdrawals from the Improvement Fund solely for the purpose of paying the Authorized Costs of the Improvements, including the retirement of the principal of and any interest on previously issued temporary financing therefor and paying the Costs of Issuance for the Notes. The City covenants that in the construction and acquisition of the Improvements, it will perform all duties and obligations relative to such Improvements as are now or may be hereafter imposed by the Act and the provisions of the Resolution.

Section 603. Surplus in the Improvement Fund. All moneys remaining in the Improvement Fund after the completion of the Improvements shall be transferred to the Principal and Interest Account.

Section 604. Substitution of Improvements. If the City is prevented, hindered or delayed from proceeding with the acquisition or construction of the improvements as listed in Section 101 of this Resolution or if the City has moneys remaining in the Improvement Fund after the completion of such improvements, the City may elect to substitute or add other improvements pursuant to this Section (the "Substitute Improvement") provided the following conditions are met: (1) the Substitute Improvement and the issuance of general obligation bonds to pay the cost of the Substitute Improvement has been duly authorized by the governing body of the City in accordance with the laws of the State, (2) a resolution authorizing the use of the proceeds of the Notes to pay the Authorized Costs of the Substitute Improvement has been duly adopted by the governing body of the City, (3) the Attorney General of the State has approved the amendment to the transcript of proceedings for the Notes to include the Substitute Improvements and (4) the City has received an opinion of Bond Counsel to the effect that the use of the proceeds of the Notes to pay the Authorized Cost of the Substitute Improvement will not adversely affect the tax-exempt status of the Notes under State or federal law and the Substitute Improvement has been duly authorized pursuant to this Section and the laws of the State.

ARTICLE VII

PAYMENT OF THE NOTES

Section 701. Application of Moneys in the Principal and Interest Account. All amounts paid and credited to the Principal and Interest Account shall be expended and used by the City for the sole purpose of paying the principal of, premium, if any, and interest on the Notes as and when the same become due and paying the usual and customary fees and expenses of the Paying Agent.

Section 702. Transfer of Funds to Paying Agent. The City Treasurer is hereby authorized and directed to withdraw from the Principal and Interest Account and forward to the Paying Agent sums sufficient to pay both principal of and premium, if any, and interest on the Notes as and when the same become due, and also to pay the charges made by the Paying Agent for acting in such capacity in the payment of principal and interest on the Notes, and said charges shall be forwarded to the Paying Agent over and above the amount of the principal of, premium, if any, and interest on the Notes. If, through the lapse of time, or otherwise, the Owners of Notes shall no longer be entitled to enforce payment of their obligations, it shall be the duty of the Paying Agent forthwith to return said funds to the City. All moneys deposited with the Paying Agent shall be deemed to be deposited in accordance with and subject to all of the provisions contained in the Resolution.

Section 703. Surplus in Principal and Interest Account. Any moneys or investments remaining in the Principal and Interest Account after the retirement of the indebtedness for which the Notes were issued and all other indebtedness of the City shall be transferred and paid into the bond and interest fund of the City.

ARTICLE VIII

DEPOSITS AND INVESTMENT OF FUNDS

Section 801. Deposits. Cash in each of the funds and accounts established under this Resolution shall be deposited in a bank or banks or federal or state chartered savings and loan association(s) and adequately secured in accordance with State law.

Section 802. Investments. Money held in the funds and accounts created or established in this Resolution may be invested by the City in Authorized Investments, or in other investments allowed by State law in such amounts and maturing at such times as shall reasonably provide for moneys to be available when required in said accounts or funds; provided, however, that no such investment shall be made for a period extending longer than to the date when the moneys invested may be needed for the purpose for which such fund or account was created. All interest on any Authorized Investment held in any fund or account shall (except amounts required to be deposited into the Rebate Fund in accordance with the Arbitrage Instructions) accrue to and become a part of such fund or account. In determining the amount held in any fund or account under the provisions of the Resolution, Authorized Investments shall be valued at their principal value or at their then redemption value, whichever is lower.

Section 803. Deposits into and Application of Moneys in the Rebate Fund.

(a) There shall be deposited in the Rebate Fund such amounts as are required to be deposited therein pursuant to the Arbitrage Instructions. Subject to the payment provisions provided in subsection (b) below, all money in the Rebate Fund shall be held in trust, to the extent required to pay arbitrage rebate to the United States, and neither the City nor the Owner of any Note shall have any rights in or claim to such money. All amounts in the Rebate Fund shall be governed by this Section, by the preceding Section and by the Arbitrage Instructions (which are incorporated herein by reference).

(b) Pursuant to the Arbitrage Instructions, the City shall pay rebate installments and the final rebate payments to the United States. Any moneys remaining in the Rebate Fund after redemption and payment of all of the Notes and payment and satisfaction of any rebate amounts, or provision made therefor, shall be withdrawn and released to the City.

(c) Notwithstanding any other provision of the Resolution, including in particular this Article, the obligation to pay arbitrage rebate to the United States and to comply with all other requirements of this Section, the preceding Section and the Arbitrage Instructions shall survive the defeasance or payment in full of the Notes.

ARTICLE IX

DEFAULT AND REMEDIES

Section 901. Remedies. The provisions of the Resolution, including the covenants and agreements herein contained, shall constitute a contract between the City and the Owners of the Notes. The Owner or Owners of any of the Notes at the time Outstanding shall have the right for the equal benefit and protection of all Owners of Notes similarly situated:

(a) by mandamus or other suit, action or proceedings at law or in equity to enforce the rights of such Owner or Owners against the City and its officers, agents and employees, and to require and compel duties and obligations required by the provisions of the Resolution or by the Constitution and laws of the State;

(b) by suit, action or other proceedings in equity or at law to require the City, its officers, agents and employees to account as if they were the trustees of an express trust; and

(c) by suit, action or other proceedings in equity or at law to enjoin any acts or things which may be unlawful or in violation of the rights of the Owners of the Notes.

Section 902. Limitation on Rights of Owners. The covenants and agreements of the City contained herein and in the Notes shall be for the equal benefit, protection, and security of the Owners of any or all of the Notes, all of which Notes shall be of equal rank and without preference or priority of one Note over any other Note in the application of the funds herein pledged to the payment of the principal of and the interest on the Notes, or otherwise, except as to rate of interest, date of maturity and right of prior redemption as provided in the Resolution. No one or more Owners secured hereby shall have any right in any manner whatever by his or their action to affect, disturb or prejudice the security granted and provided for herein, or to enforce any right hereunder, except in the manner herein provided, and all proceedings at law or in equity shall be instituted, had and maintained for the equal benefit of all Owners of such Outstanding Notes.

Section 903. Remedies Cumulative. No remedy conferred herein upon the Owners is intended to be exclusive of any other remedy, but each such remedy shall be cumulative and in addition to every other remedy and may be exercised without exhausting and without regard to any other remedy conferred herein. No waiver of any default or breach of duty or contract by the Owner of any Note shall extend to or affect any subsequent default or breach of duty or contract or shall impair any rights or remedies thereon. No delay or omission of any Noteowner to exercise any right or power accruing upon any default shall impair any such right or power or shall be construed to be a waiver of any such default or acquiescence therein. Every substantive right and every remedy conferred upon the Owners of the Notes by the Resolution may be enforced and exercised from time to time and as often as may be deemed expedient. In case any suit, action or proceedings taken by any Owner on account of any default or to enforce any right or exercise any remedy shall have been discontinued or abandoned for any reason, or shall have been determined adversely to such Owner, then, and in every such case, the City and the Owners of the Notes shall be restored to their former positions and rights hereunder, respectively, and all rights, remedies, powers and duties of the Owners shall continue as if no such suit, action or other proceedings had been brought or taken.

ARTICLE X

AMENDMENTS

Section 1001. Amendments. Except as set forth herein, the provisions of the Notes authorized by the Resolution and the provisions of the Resolution may be modified or amended at any time by the City with the written consent of the Owners of not less than seventy‑five per cent (75%) in aggregate principal amount of the Notes herein authorized at the time Outstanding; provided, however, that no such modification or amendment shall permit or be construed as permitting: (a) the extension of the maturity of the principal of any of the Notes, or the extension of the maturity of any interest on any of the Notes, or (b) a reduction in the principal amount of any of the Notes or the rate of interest thereon, or (c) a reduction in the aggregate principal amount of the Notes; the consent of 100% of the Owners of which is required for any such amendment or modification. The City may from time to time, without the consent of or notice to any of the Owners, provide for amendment to the Notes or the Resolution, for any one or more of the following purposes:

(a) To cure any ambiguity or formal defect or omission in the Resolution or to make any other change not prejudicial to the Owners;

(b) To grant to or confer upon the Owners any additional rights, remedies, powers or authority that may lawfully be granted to or conferred upon the Owners;

(d) To provide for the issuance of bearer notes and the exchange of fully registered Notes for bearer notes upon such terms and conditions as the City shall determine provided, however, that no such amendments shall become effective unless and until the City shall have received an opinion of Bond Counsel in the form and substance satisfactory to the City, to the effect that the issuance of such bearer notes or the exchange of Notes for such bearer notes will not cause the interest on the Notes to be includable in the gross income of the recipients thereof under the provisions of applicable federal law; or

(e) To conform the Resolution to the Code or future applicable federal law concerning tax‑exempt obligations.

Section 1002. Written Evidence of Amendments. Every amendment or modification of a provision of the Notes or of the Resolution to which the written consent of the Owners is given as above provided shall be expressed in a resolution of the City amending or supplementing the provisions of the Resolution shall be deemed to be a part of the Resolution. It shall not be necessary to note on any of the Outstanding Notes any reference to such amendment or modification, if any. A certified copy of every such amendatory or supplemental ordinance, if any, and a certified copy of the Resolution shall always be kept on file in the Office of the City Clerk and shall be made available for inspection by the Owners of any Note or prospective purchaser or Owners of any Note authorized by the Resolution, and upon payment of the reasonable cost of preparing the same, a certified copy of any such amendatory or supplemental resolution or of the Resolution will be sent by the City Clerk to any such Owner or prospective Owner.

ARTICLE XI

MISCELLANEOUS PROVISIONS

Section 1101. Tax Covenants. The City covenants that it will not take any action, or fail to take any action, if any such action or failure to take action would adversely affect the exclusion of the interest on the Notes from gross income for federal income tax purposes. The City covenants that it will use the proceeds of the Notes as soon as practicable and with all reasonable dispatch for the purpose for which the Notes are issued as set forth in this Resolution, and that it will not directly or indirectly use or permit the use of any proceeds of the Notes or any other funds of the City, or take or omit to take any action that would cause the Notes to be "arbitrage bonds" within the meaning of Section 148(a) of the Code. To that end, the City will comply with all requirements of Section 148 of the Code to the extent applicable to the Notes. If at any time the City is of the opinion that for purposes of this Section it is necessary to restrict or limit the yield on the investment of any moneys held by the City under the Resolution, the City shall take such action as may be necessary.

Without limiting the generality of the foregoing, the City agrees to pay from time to time all amounts required to be rebated to the United States pursuant to Section 148(f) of the Code and applicable Treasury Regulations. This covenant shall survive payment in full or defeasance of the Notes.

Section 1102. Disclosure Requirements. The City hereby elects that the Continuing Disclosure Instructions shall apply to the Notes. The City hereby covenants with the Original Purchaser and the Beneficial Owners (as defined in the Continuing Disclosure Instructions) to provide and disseminate such information as is required by Rule 15c2-12 (as defined in the Continuing Disclosure Instructions) and as further set forth in the Continuing Disclosure Instructions. Such covenant shall be for the benefit of and enforceable by the Original Purchaser and such Beneficial Owners. In the event the City fails to comply in a timely manner with its covenants contained in the preceding sentences, the Original Purchaser and/or any such Beneficial Owner may make demand for such compliance by written notice to the City. In the event the City does not remedy such noncompliance within 10 days of receipt of such written notice, the Original Purchaser or any such Beneficial Owner may in its discretion, without notice or demand, proceed to enforce compliance by a suit or suits in equity for the specific performance of such covenant or agreement contained in the preceding section or for the enforcement of any other appropriate legal or equitable remedy as the Original Purchaser and/or any such Beneficial Owner shall deem effectual to protect and enforce any of the duties of the City under such preceding section, but such noncompliance shall not constitute a default under Article IX hereof.

Section 1103. Severability. In case any one or more of the provisions of the Resolution or of the Notes issued hereunder shall for any reason be held to be illegal or invalid, such illegality or invalidity shall not affect any other provision of the Resolution, or of the Notes appertaining thereto, but the Resolution and the Notes shall be construed and enforced as if such illegal or invalid provision had not been contained herein. In case any covenant, stipulation, obligation or agreement contained in the Notes or in the Resolution shall for any reason be held to be in violation of law, then such covenant, stipulation, obligation or agreement shall be deemed to be the covenant, stipulation, obligation or agreement of the City to the full extent permitted by law.

Section 1104. Further Authority. The Mayor, City Clerk and other City officials are hereby further authorized and directed to execute any and all documents and take such actions as they may deem necessary or advisable in order to carry out and perform the purposes of the Resolution to make alterations, changes or additions in the foregoing agreements, statements, instruments and other documents herein approved, authorized and confirmed which they may approve and the execution or taking of such action shall be conclusive evidence of such necessity or advisability.

Section 1105. Governing Law. The Resolution and the Notes shall be governed exclusively by and construed in accordance with the applicable laws of the State.

Section 1106. Effective Date. This Resolution shall take effect and be in full force from and after its adoption by the governing body of the City.

EXHIBIT A

(Form of Note)

EXCEPT AS OTHERWISE PROVIDED IN THE RESOLUTION (DESCRIBED HEREIN), THIS GLOBAL NOTE MAY BE TRANSFERRED, IN WHOLE BUT NOT IN PART, ONLY TO ANOTHER NOMINEE OF THE SECURITIES DEPOSITORY (DESCRIBED HEREIN) OR TO A SUCCESSOR SECURITIES DEPOSITORY OR TO A NOMINEE OF A SUCCESSOR SECURITIES DEPOSITORY.

REGISTERED REGISTERED

NUMBER R_____________ $______________

UNITED STATES OF AMERICA

STATE OF KANSAS

COUNTY OF DOUGLAS

CITY OF LAWRENCE

GENERAL OBLIGATION TEMPORARY NOTE

SERIES 2004-II

Interest Maturity Dated CUSIP:

Rate: ______ Date: October 1, 2005 Date: September 15, 2004 _________

REGISTERED OWNER: CEDE & CO.

PRINCIPAL AMOUNT:

KNOW ALL PERSONS BY THESE PRESENTS: That the city of Lawrence, in the county of Douglas, state of Kansas (the "City"), for value received, hereby acknowledges itself to be indebted and promises to pay to the registered owner identified above, or registered assigns, as of the Record Dates as hereinafter provided on the Maturity Date identified above, the Principal Amount identified above, and in like manner to pay interest on such Principal Amount from the date hereof at the rate of interest per annum set forth above (computed on the basis of a 360‑day year of twelve 30‑day months), on April 1, 2005 and October 1, 2005 (the "Interest Payment Dates").

The principal of and interest on this Note shall be payable by the Treasurer of the City (the "Paying Agent" and "Note Registrar"). The principal of this Note shall be payable to the Registered Owner hereof upon presentation of this Note at the maturity or redemption date to the Paying Agent for payment and cancellation. The interest payable on this Note shall be paid by the Paying Agent to the Registered Owner hereof at the address appearing on the registration books of the City maintained by the Note Registrar or at such address provided in writing by the registered owner to the Note Registrar at the close of business on the fifteenth day of the month preceding each Interest Payment Date (the "Record Date"). The principal, premium, if any, and interest on the Notes shall be payable in any coin or currency which, on the respective dates of payment thereof, is legal tender for the payment of debts due the United States of America. The Notes shall be general obligations of the City payable as to both principal and interest in part from special assessments levied upon the property benefitted by the construction of certain improvements, from general obligation bonds of the City issued to permanently finance the improvements, or from both, and, if not so paid, from ad valorem taxes which may be levied without limitation as to rate or amount upon all the taxable tangible property, real and personal, within the territorial limits of the City. The balance of the principal of and interest on the Notes is payable from general obligation bonds and, if not so paid, shall be payable from ad valorem taxes which may be levied without limitation as to rate or amount upon all the taxable tangible property, real and personal, within the territorial limits of the City. The full faith, credit and resources of the City are hereby pledged for the payment of the principal of and interest on this Note and the issue of which it is a part as the same respectively become due.

This Note is one of an authorized series of Notes of the City designated "General Obligation Temporary Notes, Series 2004-II," in an aggregate principal amount of $15,745,000 (the "Notes") issued for the purposes set forth in the resolution of the City authorizing the issuance of the Notes (the "Resolution"). The Notes are issued by the authority of and in full compliance with the provisions, restrictions and limitations of the Constitution and laws of the State of Kansas, including K.S.A. 10-101 et seq. (including K.S.A. 10-123), K.S.A. 12-6a01 et seq. and K.S.A. 12-685 et seq., Article 12, § 5 of the Constitution of the State of Kansas and Charter Ordinance Numbers 28 and 32 of the City.

The Notes may not be called for redemption and payment prior to maturity.

The Notes are being issued by means of a book-entry system with no physical distribution of bond certificates to be made except as provided in the Resolution. One Note certificate with respect to each date on which the Notes are stated to mature, registered in the nominee name of the Securities Depository, is being issued and required to be deposited with the Securities Depository and immobilized in its custody. The book-entry system will evidence positions held in the Notes by the Securities Depository's participants, beneficial ownership of the Notes in authorized denominations being evidenced in the records of such participants. Transfers of ownership shall be effected on the records of the Securities Depository and its participants pursuant to rules and procedures established by the Securities Depository and its participants. The City, the Note Registrar and the Paying Agent will recognize the Securities Depository nominee, while the registered owner of this Note, as the owner of this Note for all purposes, including (i) payments of principal of, and redemption premium, if any, and interest on, this Note, (ii) notices and (iii) voting. Transfers of principal, interest and any redemption premium payments to participants of the Securities Depository, and transfers of principal, interest and any redemption premium payments to beneficial owners of the Notes by participants of the Securities Depository will be the responsibility of such participants and other nominees of such beneficial owners. The City, the Note Registrar and the Paying Agent will not be responsible or liable for such transfers of payments or for maintaining, supervising or reviewing the records maintained by the Securities Depository, the Securities Depository nominee, its participants or persons acting through such participants. While the Securities Depository nominee is the owner of this Note, notwithstanding the provision hereinabove contained, payments of principal of and interest on this Note shall be made in accordance with existing arrangements among the City, the Note Registrar and the Securities Depository.

EXCEPT AS OTHERWISE PROVIDED IN THE RESOLUTION, THIS GLOBAL NOTE MAY BE TRANSFERRED, IN WHOLE BUT NOT IN PART, ONLY TO ANOTHER NOMINEE OF THE SECURITIES DEPOSITORY OR TO A SUCCESSOR SECURITIES DEPOSITORY OR TO A NOMINEE OF A SUCCESSOR SECURITIES DEPOSITORY. The Notes are issued in fully registered form in the denomination of $5,000 or any integral multiple thereof. This Note may be exchanged at the office of the Note Registrar for a like aggregate principal amount of Notes of the same maturity of other authorized denominations upon the terms provided in the Resolution.

The City and the Note Registrar may deem and treat the registered owner hereof as the absolute owner hereof for purposes of receiving payment of or on account of principal hereof and interest due hereon and for all other purposes and neither the City nor the Note Registrar shall be affected by any notice to the contrary.

This Note is transferable by the registered owner hereof in person or by the registered owner's agent duly authorized in writing, at the office of the Note Registrar, but only in the manner, subject to the limitations and upon payment of the charges provided in the Resolution and upon surrender and cancellation of this Note. The City shall pay out of the proceeds of the Notes all costs incurred in connection with the issuance, payment and initial registration of the Notes and the cost of a reasonable supply of note blanks. Neither the City nor the Note Registrar shall be required to transfer or exchange any Notes during a period beginning on the day following the Record Date preceding any Interest Payment Date and ending on the Interest Payment Date or to transfer or exchange any Notes called for redemption.

IT IS HEREBY DECLARED AND CERTIFIED that all acts, conditions, and things required to be done and to exist precedent to and in the issuance of this Note have been properly done and performed and do exist in due and regular form and manner as required by the Constitution and laws of the State of Kansas, and that the total indebtedness of the City, including this series of Notes, does not exceed any constitutional or statutory limitation.

This Note shall not be valid or become obligatory for any purpose until the Certificate of Authentication and Registration hereon shall have been lawfully executed by the Note Registrar.

IN WITNESS WHEREOF, the City has caused this Note to be executed by the manual or facsimile signature of its Mayor and attested by the manual or facsimile signature of its City Clerk, and its corporate seal to be affixed hereto or imprinted hereon, and this Note to be dated the Dated Date shown above.

(SEAL) CITY OF LAWRENCE, KANSAS

(facsimile)

ATTEST: Mayor

By (facsimile)

City Clerk

This Note shall not be negotiable unless and until countersigned below by the City Clerk following registration by the Treasurer of the State of Kansas.

(SEAL) City Clerk

CERTIFICATE OF AUTHENTICATION AND REGISTRATION

This Note is one of a series of General Obligation Temporary Notes, Series 2004-II, of the city of Lawrence, Kansas, described in the within‑mentioned Resolution.

Registration Date: _______________

Treasurer of the City of Lawrence, Kansas

as Note Registrar and Paying Agent

By: ________________________________

Registration Number: 0186-023-091504-462

NOTE ASSIGNMENT

FOR VALUE RECEIVED, the undersigned do(es) hereby sell, assign and transfer to

____________________________________

(Name and Address)

(Social Security or Taxpayer Identification No.)

the Note to which this assignment is affixed in the outstanding principal amount of $_____________, standing in the name of the undersigned on the books of the Note Registrar. The undersigned do(es) hereby irrevocably constitute and appoint as agent to transfer said Note on the books of said Note Registrar with full power of substitution in the premises. Dated _________________.

_________________________________________

Name

_________________________________________

Social Security or Taxpayer Identification No.

_________________________________________

Signature

(Sign here exactly as name(s)

appear on the face of Certificate)

Signature guarantee:

By______________________________________

[Name of Eligible Guarantor Institution as defined

by SEC Rule 17ad-15 (12CFR 240.17 Ad-15) or

any similar rule which the Note Registrar deems

applicable]

CERTIFICATE OF CITY CLERK

STATE OF KANSAS )

) SS.

COUNTY OF DOUGLAS )

I, the undersigned, City Clerk of the city of Lawrence, Kansas, hereby certify that the within Note has been duly registered in my office according to law as of September 15, 2004.

WITNESS my hand and official seal.

(Facsimile Seal) (facsimile)

City Clerk

CERTIFICATE OF STATE TREASURER

OFFICE OF THE TREASURER, STATE OF KANSAS

I, LYNN JENKINS, Treasurer of the state of Kansas, do hereby certify that a transcript of the proceedings leading up to the issuance of this Note has been filed in my office, and that this Note was registered in my office according to law on ____________________________________.

WITNESS my hand and official seal.

(Seal) ______________________________

Treasurer of the state of Kansas

LEGAL OPINION

I, the undersigned, City Clerk of the city of Lawrence, Kansas, hereby certify that the following is a true and correct copy of the approving legal opinion of Gilmore & Bell, P.C., Attorneys at Law, Kansas City, Missouri, on the within Note and the series of which it is a part, except that it omits the date of such opinion; that said opinion was manually executed and was dated and issued as of the date of delivery of and payment for the Notes and is on file in my office.

By (facsimile)

City Clerk

(PRINTED LEGAL OPINION)

EXHIBIT B

CONTINUING DISCLOSURE INSTRUCTIONS

SECTION 1. Purpose of the Continuing Disclosure Instructions. These Continuing Disclosure Instructions (the "Instructions") are being executed and delivered by the City for the benefit of the beneficial owners of any series of the Bonds and in order to assist the Participating Underwriters in complying with Rule 15c2-12 (defined below). These Instructions are to govern the continuing disclosure obligations of the City with respect to the City's General Obligation Bonds, Series T 1996 (the "Series 1996 Bonds") and any additional series of Bonds that the City hereafter elects to make subject to these Instructions.

SECTION 2. Definitions. Unless otherwise defined in these Instructions, the following capitalized terms shall have the following meanings for purposes of these Instructions:

"Beneficial owner" means any registered owner of the Bonds and any other person who, directly or indirectly, has investment power with respect to any of the Bonds.

"Bond Counsel" means the firm of Gilmore & Bell, P.C., or any other attorney or firm of attorneys with a nationally recognized standing in the field of municipal bond financing selected by the City.

"Bonds" means the Series 1996 Bonds and any additional series of bonds or municipal obligations of the City that the City elects at the time of issuance to have subject to these Instructions for the purpose of constituting the undertaking of the City to provide continuing disclosure pursuant to Rule 15c2-12.

"City" means the City of Lawrence, Kansas.

"MSRB" means the Municipal Securities Rulemaking Board.

"NRMSIR" means any information repository recognized by the Securities and Exchange Commission as a nationally recognized municipal securities information repository under Rule 15c2-12.

"Participating Underwriter" means any of the original underwriters of the Series 1996 Bonds and any future series of Bonds required to comply with Rule 15c2-12 in connection with the offering of any series of Bonds.

"Rule 15c2-12" means Rule 15c2-12 adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time.

"SID" means any public or private information depository, if any, designated by the State of Kansas and the Securities and Exchange Commission as such for purposes of Rule 15c2-12.

SECTION 3. Provision of Annual Reports.

(a) Within 180 days after the close of each fiscal year, the City shall furnish to each NRMSIR and to the SID, if any, (i) a copy of the financial statements of the City prepared in accordance with generally accepted accounting principles and audited by its independent auditors (or if not available as of such date, the unaudited financial statements of the City and as soon thereafter as available such audited financial statements of the City), and (ii) the operating data of the City, updated for the fiscal year then ended, in substantially the scope and form contained in Appendix A of the Official Statement dated May 7, 1996, with respect to the Series 1996 Bonds in the tables under the headings or and labeled as follows:

Commerce, Industry and Employment

Building Permits

Current Indebtedness of the City

Statistical Information

History of Indebtedness

Debt Service Requirements

Overlapping Indebtedness

Debt Limitations

Sources of Revenue

Revenue, Expenditures and Changes in Fund Balance - General Fund

Revenue, Expenditures and Changes in Fund Balance - Debt Service Fund

Property Valuations by Class

Property Tax Collections

Property Tax Levies

Largest Taxpayers

Sales Tax

(b) Any or all of the financial information or operating data required by this Section 3 may be incorporated by reference from other documents, including official statements of debt issues with respect to the City that have been filed with each NRMSIR or the Securities and Exchange Commission, and in the case of a final official statement, that is available from the MSRB. The City shall clearly identify in each annual report filed under this Section 3 each document incorporated by reference and the source from which it is available.

SECTION 4. Reporting of Material Events.

(a) The City shall disseminate to the SID, if any, and to each NRMSIR or to the MSRB, promptly upon the occurrence thereof notice of any of the following events with respect to each series of the Bonds, if material:

(i) Principal or interest payment delinquencies;

(ii) Non-payment related defaults;

(iii) Unscheduled draws on debt service reserves reflecting financial difficulties;

(iv) Unscheduled draws on credit enhancements reflecting financial difficulties;

(v) Substitution of credit or liquidity providers, or their failure to perform;

(vi) Adverse tax opinions or events affecting the tax-exempt status of any series of the Bonds;

(vii) Modifications to rights of security holders;

(viii) Calls (other than mandatory sinking fund redemptions or redemptions at maturity);

(ix) Defeasances;

(x) Release, substitution or sale of property securing repayment of any series of the Bonds; and

(xi) Rating changes.

(b) The City shall also provide to the SID, if any, and to each NRMSIR or to the MSRB, as promptly as practicable notice of any failure of the City to provide the NRMSIRs and the SID, if any, the annual financial information or operating data required by Section 3 on or before the date specified.

SECTION 5. Termination of Reporting Obligation. The City's obligations under these Instructions shall terminate with respect to each series of Bonds upon the legal defeasance, prior redemption or payment in full of all of such series of Bonds.

SECTION 6. Amendment; Waiver. (a) The provisions of these Instructions may be amended only by a written instrument executed by the Mayor of the City if the City receives an opinion from Bond Counsel to the effect that these Instructions, as so amended, are in compliance with Rule 15c2-12 and all current amendments thereto and interpretations thereof that are applicable to these Instructions.

(b) If an amendment is made to these Instructions, the City shall describe in the next annual financial report submitted to the NRMSIRs pursuant to Section 3 the substance of the amendment, the reasons for such amendment and the impact of such amendment on the type of operating data or financial information required to be provided under these Instructions.

SECTION 7. Additional Information. Nothing in these Instructions shall be deemed to prevent the City from disseminating any other information, or including any other information in any report or notice made hereunder, in addition to that which is required by these Instructions. If the City chooses to include any information in any report or notice made hereunder in addition to that which is specifically required by these Instructions, the City shall have no obligation hereunder to update such information or include it in any future report or notice.

SECTION 8. Noncompliance. The provisions of these Instructions shall be subject to specific enforcement or action in mandamus in a court of equity by any beneficial owner of any series of the Bonds. A breach of the provisions of this Section shall not constitute a default or event of default under the resolution adopted by the City authorizing any series of the Bonds.

SECTION 9. Beneficiaries. These Instructions are for the benefit of the City, the Participating Underwriters and the beneficial owners of any series of the Bonds, and shall create no rights in any other person.

SECTION 10. Applicability to Future Series of Bonds. These Instructions shall apply to any future series of Bonds of the City that the City elects to have subject to these Instructions at the time of issuance thereof. These Instructions shall constitute the undertaking of the City with respect to any such future series of Bonds for the purpose of any Participating Underwriters determining compliance with Rule 15c2-12. Nothing contained herein shall obligate the City to adopt these Instructions with respect to any future bonds or municipal obligations issued by the City.

Dated: May 7, 1996.

CITY OF LAWRENCE, KANSAS