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R-96-900 e e · RESOLUTION NO. 900 · A RESOLUTION OF THE CITY OF CLERMONT, FLORIDA. PROVIDING FOR THE REFUNDING OF CERTAIN OUTSTANDING OBLIGATIONS OF TIlE CITY AND THE ACQUISITION, CONSTRUCTION AND INSTALLATION OF CERTAIN ADDmONS, EXTENSIONS AND IMPROVEMENTS TO THE WATER AND SEWER FACILITIES OF THE CITY'S COMBINED MUNICIPAL WATER AND SEWER SYSTEM; AUTHORIZING THE ISSUANCE BY TIlE CITY OF NOT EXCEEDING $8,500,000 IN AGGREGATE PRINCIP AL AMOUNT OF WATER AND SEWER REVENUE AND REFUNDING BOND ANTICIPATION NOTES, SERIES 1996. TO FINANCE A PART OF THE COST THEREOF IN ANTICIPATION OF THE ISSUANCE BY THE CITY OF WATER AND SEWER REVENUE AND REFUNDING BONDS, SERIES 2000; PLEDGING TO SECURE PAYMENT OF THE PRINCIP AL OF AND INTEREST ON SUCH NOTES CERTAIN PLEDGED FUNDS INCLUDING THE PROCEEDS TO BE DERIVED BY THE CITY FROM THE SALE OF SUCH BONDS, THE NET REVENUES OF SUCH SYSTEM, CERTAIN MUNICIP AL EXCISE TAXES, ALL MONEYS ON DEPOSIT IN AND INVESTMENTS HELD FOR THE CREDIT OF CERTAIN FUNDS CREATED HEREUNDER AND THE EARNINGS ON SUCH INVESTMENTS; MAKING CERTAIN COVENANTS AND AGREEMENTS FOR THE BENEFIT OF THE HOLDERS OF SUCH NOTES; APPROVING A FORM OF PRELIMINARY OFFICIAL STATEMENT WITH RESPECT TO THE SERIES 1996 NOTES; AND PROVIDING AN EFFECTIVE DATE. · / .-~ ........ . Section 1.1 Section 1.2 Section 1.3 Section 1.4 Section 1.5 Section 1.6 Section 1.7 . Section 2.1 Section 2.2 Section 2.3 Section 2.4 Section 2.5 Section 2.6 Section 2.7 Section 2.8 Section 2.9 Section 3.1 Section 3.2 Section 3.3 Section 3.4 Section 3.5 . e e T ABLE OF CONTENTS PAGE ARTICLE 1 GENERAL Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 1 Authority for Resolution. . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Resolution to Constitute Contract . . . . . . . . . . . . . . . . . . . . . 12 Findings .................................... 12 Authorization of Project . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Authorization of Refunding . . . . . . . . . . . . . . . . . . . . . . . . . 13 Refunding of Refunded Obligations . . . . . . . . . . . . . . . . . . .. 13 ARTICLE 2 AUTHORIZATION, TERMS, EXECUTION AND REGISTRATION OF NOTES Authorization of Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Description of Series 1996 Notes ..................... 14 Application of Series 1996 Note Proceeds . . . . . . . . . . . . . . .. 15 Execution of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Authentication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Temporary Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Notes Mutilated, Destroyed, Stolen or Lost . . . . . . . . . . . . . .. 17 Interchangeability, Negotiability and Transfer . . . . . . . . . . . . .. 17 Form of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 ARTICLE 3 REDEMPTION OF NOTES Privilege of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Selection of Notes to be Redeemed . . . . . . . . . . . . . . . . . . . . 26 Notice of Redemption ......... . . . . . . . . . . . . . . . . . . . 26 Redemption of Portions of Notes ..................... 27 Payment of Redeemed Notes . . . . . . . . . . . . . . . . . . . . . . . . 28 . Section 4.1 Section 4.2 Section 4.3 Section 4.4 Section 4.5 Section 4.6 Section 4.7 Section 4.8 . Section 5. I Section 5.2 Section 5.3 Section 5.4 Section 5.5 Section 5.6 Section 5.7 Section 5.8 Section 5.9 Section 5.10 Section 5.11 Section 5.12 Section 5.13 Section 5.14 Section 5.15 Section 5.16 Section 5.17 Section 5. 18 Section 5.19 Section 6.1 Section 6.2 . e e ARTICLE 4 SECURITY, SPECIAL FUNDS AND APPLICATION THEREOF Notes not to be Indebtedness of Issuer . . . . . . . . . . . . . . . . . . 28 Security for Notes .............................. 28 Construction Fund .............................. 29 Funds and Accounts ............................. 30 Flow of Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Rebate Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 Investments .................................. 34 Separate Accounts .............................. 34 ARTICLE 5 COVENANTS General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 Sale of Bonds or Refunding Notes. ................... 35 Operation and Maintcnance . . . . . . . . . . . . . . . . . . . . . . . . . 35 Annual Budget ................................ 35 Rates ...................................... 36 Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 Annual Audit ................................. 36 No Mòrtgage or Sale of the System . . . . . . . . . . . . . . . . . . . . 37 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 No Free Service. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 No Impairment ................................ 38 Compulsory Connections .......................... 38 Enforcement of Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Collection of Impact Fees . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Consulting Engineers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Levy of Excise Taxes ............................ 39 Covenants With Credit Banks and Insurers ............... 40 Federal Income Tax Covenants; Taxable Notes . . . . . . . . . . . . . 40 Continuing Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 ARTICLE 6 SUBORDINATED INDEBTEDNESS No Additional Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . 41 Subordinated Indebtedness ......................... 41 11 . Section 7. I Section 7.2 Section 7.3 Section 7.4 Section 7.5 Section 7.6 Section 7.7 Section 8. 1 Section 8.2 Section 8.3 . Section 9. 1 Section 9.2 Section 9.3 Section 9.4 Section 9.5 Section 9.6 Section 9.7 Section 9.8 Section 9.9 Section 9.10 Exhibit A . e e ARTICLE 7 DEFAULTS AND REMEDIES Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 Directions to Trustee as to Remedial Procecdings ........... 42 Remedies Cumulative ............................ 43 Waiver of Default .............................. 43 Application of Moneys After Default . . . . . . .. ......... 43 Control by Insurer or Credit Bank .................... 44 ARTICLE 8 SUPPLEMENTAL RESOLUTIONS Supplemental Resolution Without Noteholders' Consent ....... 44 Supplemental Resolution With Noteholders', Insurer's and Credit Bank's Consent ..... . . . . . . . . . . . . . . . . . . . . . . . 45 Amendment with Consent of Insurer and/or Credit Bank Only 46 ARTICLE 9 MISCELLANEOUS Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 Approval of Preliminary Official Statement . . . . . . . . . . . . . . . 48 General Authority. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 No Personal Liability ............................ 49 No Third Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . 49 Sale of Notes ................................. 49 Severability of Invalid Provisions ... . . . . . . . . . . . . . . . . . . 49 Repeal of Inconsistent Resolutions. . . . . . . . . . . . . . . . . . . . . 50 Table of Contents and Headings not Part Hereof . . . . . . . . . . . . 50 Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 Form of Preliminary Official Statement III . . . e - BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF CLERMONT, FLORIDA: ARTICLE 1 GENERAL Section 1.1 Definitions. When used in this Resolution, the following terms shall have the following meanings, unless the context clearly otherwise requires: "Accountant" shall mean the independent certified public accountant or firm of certified public accountants at the time employed by the Issuer under the provisions of this Resolution to perform and carry out the duties imposed on the Accountant by this Resolution. "Act" shall mean Chapter 166, Part II, Florida Statutes, as amended, and other applicable provisions of law. "Annual Budget" shall mean the annual budget preparcd pursuant to the requircments of Section 5.4 of this Resolution. "Assessments" shall mean the proceeds to be derived from the assessments to be levied against the lands and properties to be specially benefitted by the construction of any improvements to the System, including interest on such assessments and any penalties thereon and moneys received upon the foreclosure of the liens of any such assessments. "Authorized Depository" shall mean the State Board of Administration of Florida or a bank or trust company in the State which is eligible under the laws of the State to receive funds of the Issuer. "Authorized Investments" shall mean any of the following which shall be authorized from time to time by applicable laws of the State for deposit or purchase by the Issuer for the investment of its funds: (1) Direct obligations of (including obligations issued or held in book entry form on the books of the Department of the Treasury of the United States of America and stripped and zero coupon obligations), or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America. (2) Bonds, debentures or notes or other evidences of indebtedness payable in cash issued by anyone or a combination of any of the following federal agencies whose obligations represent the full faith and credit of the United States of America: Export Import Bank of the United States, Federal Financing Bank, Farmers Home Administration, Federal Housing Administration, Maritime Administration, Public Housing Authority and Government National Mortgage Association. 1 . . . e - (3) Certificates of deposit properly secured at all times by collateral security described in either or both of paragraphs (1) and (2) of this definition or in the collateral provisions of Chapter 280, Florida Statutes, as amended, and issued by commercial banks, savings and loan associations or mutual savings banks chartered by the State or the United States of America, and bank trust receipts issued by commercial banks or trust companies chartered by the State or the United States of America upon any securities described in paragraph (1) of this definition. (4) The following investments fully insured by the Federal Deposit Insurance Corporation or the Federal Savings and Loan Insurance Corporation: (A) certificates of deposit, (B) savings accounts, (C) deposit accounts, or (D) depository receipts of a bank, savings and loan association or mutual savings bank. (5) Commercial paper rated in one of the two highest rating categories by at least two nationally recognized rating agencies or commercial paper backed by a letter of credit or line of credit rated in one of the two highest rating categories by Moody's Investors Service and Standard & Poor's. (6) Written repurchase agreements with any bank, savings institution or trust company which is insured by the Federal Deposit Insurance Corporation or the Federal Savings and Loan Insurance Corporation, or with any broker-dealer with retail customers which falls under Securities Investors Protection Corporation protection, provided that such repurchase agreements are fully secured by collateral described in (1) above or obligations of any agency or instrumentality of the United States of America, and provided further that (A) such collateral is held by a bank or trust company chosen by the Issuer which has no interest in the repurchase agreement during the term of such repurchase agreement, (B) such collateral is not subject to liens or claims of third parties, (C) such collateral has a market value (determined at least once every 30 days) at least equal to the amount invested in the repurchase agreement, (D) the entity holding the collateral has a perfected first security interest in the collateral for the benefit of the Noteholders. (E) the agreement shall be for a term not longer than 270 days and (F) the failure to maintain such collateral at the level required in (C) above will require the entity holding the collateral to liquidate the collateral. (7) Money market funds rated in the highest rating category by Moody's Investors Service and Standard & Poor's. (8) Units of participation in the Local Government Surplus Funds Trust Fund established pursuant to Part IV, Chapter 218, Florida Statutes, as amended, or any similar common trust fund which is established pursuant to State law as a legal depository of public moneys. (9) Obligations of state or local government municipal bond issuers that are rated in one of the two highest rating categories by Moody's Investors Service and Standard & Poor's. 2 . . . - - (10) Such other obligations as shall be permitted to be legal investments of the Issuer by the laws of the State. Rating categories when referred to herein shall be without regard to gradations within such categories, such as "plus" or "minus." "Authorized Issuer Officer" for the performance on the behalf of the Issuer of any act of the Issuer or the execution of any instrument on behalf of the Issuer shall mean any person authorized by resolution or certificate of the Issuer to perform such act or sign such document. " Available Impact Fees" shall mean the Impact Fecs to thc extcnt that such fees or charges have been lawfully levied and collected by the Issuer and may undcr applicable law be used for the acquisition or construction of the Expansion Facilities or for Impact Fees Debt Service Components. "Bond Counsel" shall mean any attorney at law or firm of attorneys, of nationally recognized standing in matters pertaining to the federal tax exemption of interest on obligations issued by states and political subdivisions, and duly admitted to practice law before the highest court of any state of the United States of America. "Bond Resolution" shall mean the resolution adopted by the Governing Body of the Issuer on February 13, 1996, authorizing the issuance of the Bonds. "Bonds" shall mean the Issuer's Water and Sewer Revenue and Refunding Bonds, Series 2000, or such other bonds issued by the Issuer to refund the Notes. "City Manager" shall mean the City Manager of the Issuer or such other person as may be duly authorized by the Issuer to act on his or her behalf. "Clerk" shall mean the City Clerk of the Issuer or such other person as may be duly authorized by the Issuer to act on his or her behalf. "Code" shall mean the United States Internal Revenue Code of 1986, as the same may be amended from time to time, and the regulations thereunder, whether proposed, temporary or final, promulgated by the Department of the Treasury, Internal Revenue Service. and all other promulgations of said service pertaining thereto. "Construction Fund" shall mean the Construction Fund established pursuant to Section 4.3 hereof. "Consulting Engineers" shall mean one or more qualified and recognized consulting engineers or firm of consulting engineers having favorable repute, skill and experience with respect to the planning, construction and operation of public utility systems similar to the System, who shall be retained from time to time by the Issuer. 3 · · · , . - e "Cost" when used in connection with the Project, shall mean (1) the Issuer's cost of physical construction; (2) costs of acquisition by or for the Issuer of such Project; (3) costs of land and interests therein and the cost of the Issuer incidental to such acquisition; (4) the cost of any indemnity and surety notes and premiums for insurance during construction; (5) all interest due to be paid on the Notes and other obligations relating to the Project during the construction period of such Project and for a reasonable period thereafter; (6) engineering, legal and other consultant fees and expenses; (7) costs and expenses incidental to the issuance of the Notes including note insurance premium, rating agency fees and the fees and expenses of any auditors, insurers, Paying Agent, Registrar, Credit Bank or depository; (8) payments, when due (whether at the maturity of principal or the due date of interest or upon redemption) on any indebtedness of the Issuer (other than the Notes) incurred for such Project; (9) costs of machinery or equipment required by the Issuer for the commencement of operation of such Project; and (10) any other costs properly attributable to the issuance of the Notes, and such construction or acquisition, as determined by generally accepted accounting principles and may include reimbursement to the Issuer for any such items of Cost herctofore paid by the Issuer. Any Supplemental Resolution may provide for additional items to be included in the aforesaid Costs. "Credit Bank" shall mean as to any particular Series of Notes, the Person (other than an Insurer) providing a letter of credit, a line of credit or another credit or liquidity enhancement facility, as designated in the Supplemental Resolution providing for the issuance of such Notes. "Credit Facility" shall mean as to any particular Series of Notes, a letter of credit. a line of credit or another credit or liquidity enhancement facility (other than an insurance policy issued by an Insurer), as approved in the Supplemental Resolution providing for the issuance of such Notes. "Debt Service Requirement" for any Note Year shall mean the aggregate amount required to pay the interest becoming due on the Notes during such Note Year, except to the extent that such interest shall have been provided by payments into the Notes Payment Account out of Note proceeds or other sources for a specified period of time. For purposes of this definition, the interest due on any such Notes which shall have a variable rate of interest shall be assumed to be the greater of (a) 110% of the daily average interest rate on such Variable Rate Notes during the 12 months ending with the month preceding the date of calculation, or such shorter period that such Notes shall have been outstanding, or (b) the actual rate of interest borne by such Variable Rate Notes on the date of calculation. "Excise Taxes" shall mean the proceeds to be derived by the Issuer by reason of its levy and collection of its Public Service Tax. "Excise Taxes Fund" shall mean the Excise Taxes Fund established pursuant to Section 4.4 hereof. 4 - - . "Expansion Facilities" shall mean all those improvements, extensions and additions to the System, including all lands and interests therein, franchises, plants, buildings, machinery, fixtures, equipment, pipes, mains, and all other property, real and personal, tangible and intangible, which shall be constructed or acquired in order to meet the increased demand upon the System, whether actual or anticipated, created by new users connecting to the System. "Expansion Percentage" as applied to each Series of Notes issued wholly or in part to finance or refinance Expansion Facilities shall mean a fraction having a numerator equal to the principal amount of the Notes of such Series which are attributable to Expansion Facilities, as shall be determined by the Qualified Independent Consultant and set forth in the Project Certificate relating to such Series, and a denominator equal to the original aggregate principal amount of all Notes of such Series. "Federal Securities" shall mean direct obligations of the United States of America and obligations the principal of and interest on which are unconditionally guaranteed by the United States of America, none of which permit redemption prior to maturity at the option of the obligor. Federal Securities shall include any certificates or any other evidences of an ownership interest in the aforementioned obligations or in specified portions thercof (which may consist of spccified portions of the interest thereon). . "First Supplemental Loan Agreement" shall mean that certain First Supplemental Loan Agreement, dated as of July 1, 1993, between Sun Bank, National Association, as trustee, Lane Gilchrist, Mayor, City of Gulf Breeze, Florida, as administrator, and the Issuer. "Fiscal Year:' shall mean the period commencing on October 1 of each year and continuing through the next succeeding September 30, or such other period as may be prescribed by law. "Governing Body" shall mean the City Council of the Issuer or its successor in function. "Gross Revenues" shall mean all income and moneys, excluding Assessments and Impact Fees, received by the Issuer from the Rates, or otherwise received by the Issuer or accruing to the Issuer in the management and operation of the System, calculated in accordance with generally accepted accounting principles employed in the operation of public utility systems similar to the System, including, without limiting the generality of the foregoing, all earnings and income derived from the investment of moneys under the provisions of this Resolution which are transferred to the Revenue Fund as herein provided. . "Impact Fees" shall mean all non-refundable (except at the option of the Issuer) system development fees, capital expansion fees, utility improvement fees or other similar fees and charges separately imposed by the Issuer upon new customers of the System as a nonuser capacity charge for a proportionate share of the cost of the acquisition or construction of Expansion Facilities, which arc imposed by the Issucr for the purpose of allocating to such 5 . . . - - customers a portion of the cost of the additional System capacity made necessary by the extension or expected extension of System services to such new customers. "Impact Fees Debt Service Component" for any Note Year shall mean the amount of Available Impact Fees equal to the product determined for any Series of Notes issued wholly or in part to finance or refinance Expansion Facilities by multiplying the Note Service Requirement for such Series by the Expansion Percentage for such Series. "Impact Fees Debt Service Limit" shall mean, as of any date of calculation, an amount equal to the Impact Fees Debt Service Component for the then current Note Year plus the aggregate Impact Fees Debt Service Components for all prior Note Years minus the aggregate amount of Impact Fees previously applied to the payment of the principal of, Redemption Price, if applicable, or interest on the Notes. "Impact Fees Fund" shall mean the Impact Fees Fund established pursuant to Section 4.4 hereof. "Insurer" shall mean such Person as shall be in the business of insuring or guaranteeing the payment of principal of and interest on municipal securities and whose credit is such that, at the time of any action or consent required or permitted by the Insurer pursuant to the terms of this Resolution, all municipal securities insured or guaranteed by it are then rated, because of such insurance or guarantee, in one of the two most secure grades by either Moody's Investors Service or Standard and Poor's, and with respect to any Series of Notes, the Insurer which shall have insured or guaranteed payment of the principal of or interest on such Notes. "Interest Date" shall mean such date or dates for the payment of interest on a Series of Notes as shall be provided by Supplemental Resolution. "Issuer" shall mean the City of Clermont, Florida. "Line of Credit Agreement" shall mean the Line of Credit Agreement, dated as of May 24, 1995, between the Issuer and First Union National Bank of Florida, Orlando, Florida. "Loan" shall mean the indebtedness and other obligations of the Issuer under and pursuant to the Loan Agreement. "Loan Agreement" shall mean that certain Loan Agreement, dated as of July 1, 1993, among NationsBank of Florida, N.A., as trustee, the City of Arcadia, Florida and the Issuer. 6 · · · e - "Maximum Debt Service Requirement" shall mean, as of any particular date of calculation, the greatest annual Dcbt Scrvice Requircment for thc Notes for the thcn current or any future Note Year. "Maximum Interest Rate" shall mean, with respect to any particular Variable Rate Notes, a numerical rate of interest, which shall be set forth in the Supplemental Resolution delineating the details of such Notes, that shall be the maximum rate of interest such Notes may at any time bear in the future in accordance with the terms of such Supplemental Resolution. "Mayor" shall mean the Mayor of the Issuer or such other person as may be duly authorized by the Issuer to act on his or her behalf. "Moody's Investors Service" shall mean Moody's Investors Service, the nationally recognized securities rating firm, and any successor or successors thereto; and if such corporation shall be dissolved or liquidated or shall no longer perform securities rating functions, shall mean any other nationally recognized securities rating firm designated by the Issuer and approved by the Insurer and/or the Credit Bank, as applicable. "Net Revenues" shall mean Gross Revenues less Operating Expenses. "Note Insurance Policy" shall mean any municipal note new issue insurance policy or policies issued by an Insurer guaranteeing the payment of the principal of and interest on any portion of the Notes. "Note Service-Requirement" for any Series for any Note Year shall mean the sum of that portion of the Debt Service Requirement for such Note Year and all other payments required by this Resolution to be paid in such Note Year with respect to the Notes of such Series, which shall include redemption premiums, if any, payable in such Note Year. "Note Year" pertaining to any Series shall mean the annual period commencing each year on the day after the day of the year on which the Notes of such Series mature, whether or not Notes of such Series mature in every year or in the Note Year under consideration (except that the first Note Year for every Series shall commence on the date of issuance of the Notes of such Series), and ending on the next succeeding day of the year which shall be such day of the year on which the Notes of such Series mature. Each Note Year shall be designated with the number of the calendar year in which such Note Year ends. "Noteholder" or "Holder" or "holder" shall mean any Person who shall be the registered owner of any Outstanding Note or Notes according to the registration books of the Issuer. "Notes" shall mean the Series 1996 Notes or any Series of Notes issued for the purpose of renewing and extending the obligations evidenced by any Series of Notes previously issued hereunder.t 7 e e · "Notes Payment Account" shall mean the Notes Payment Account established pursuant to Section 4.4 hereof. "Operating Expenses" shall mean the Issuer's expenses for operation, maintenance, repairs and replacements with respect to the System and shall include, without limiting the generality of the foregoing, administration expenses, insurance and surety note premiums, the fees of any rebate compliance service or of Bond Counsel relating to compliance with the provisions of Section 148 of the Code, legal and engineering expenses, ordinary and current rentals of equipment or other property, refunds of moneys lawfully due to others, payments to others for disposal of sewage or other wastes, payments to pension, retirement, health and hospitalization funds, and any other expenses required to be paid for or with respect to proper operation or maintenance of the System, all to the extent properly attributable to the System in accordance with generally accepted accounting principles employed in the operation of public utility systems similar to the System, and disbursements for the expenses, liabilities and compensation of any Paying Agent or Registrar under this Resolution, but does not include any costs or expenses in respect of original construction or improvement other than expenditures necessary to prevent an interruption or continuance of an interruption of the Gross Revenues or minor capital expenditures necessary for the proper and economical operation or maintenance of the System, or any provision for interest, depreciation, amortization or similar charges. · "Outstanding" shall mean all Notes theretofore and thereupon being authenticated and delivered, except (1) any Note in lieu of which another Note or other Notes have been issued under an agreement to replace lost, mutilated or destroyed Notes, (2) any Note surrendered by the Holder thereof in exchange for another Note or other Notes under Sections 2.6 and 2.8 hereof, (3) Notes deemed to have been paid pursuant to Section 9.1 hereof, and (4) Notes canceled after purchase in the open market or because of payment at or redemption prior to maturity. "Paying Agent" shall mean any paying agent for the Notes appointed by or pursuant to Supplemental Resolution and its successors or assigns, and any other Person which may at any time be substituted in its place pursuant to Supplemental Resolution. "Person" shall mean an individual, a corporation, a partnership, an association, a joint stock company, a trust, any unincorporated organization or governmental entity. · "Pledged Funds" shall mean (i) the proceeds to be derived by the Issuer from the sale of the Bonds, (ii) the proceeds to be derived by the Issuer from the sale of any additional Series of Notes issued to extend and renew the indebtedness evidenced by a Series of Notes, (iii) the Pledged Revenues and (iv) until applied in accordance with the provisions of this Resolution. the proceeds of the Notes and all moneys, including investments thereof, in the funds and accounts established hereunder, except the Rebate Fund; provided, however, that as of any particular date the amount of moneys on deposit in the Impact Fees Fund which may be applied to pay the principal of or Redemption Price, if applicable, and interest on the Notes shall not exceed the Impact Fees Debt Service Limit. 8 e e . "Pledged Revenues" shall mean the Net Revenues and the Excise Taxes. "Preliminary Official Statement" shall mean the form of preliminary official statement relating to the Series 1996 Notes attached hereto as Exhibit A. . "Prerefunded Obligations" shall mean any notes or other obligations of any state of the United States of America or of any agency, instrumentality or local governmental unit of any such state (1) which are (a) not callable prior to maturity or (b) as to which irrevocable instructions have been given to the fiduciary for such notes or other obligations by the obligor to give due notice of redemption and to call such notes for rcdemption on the datc or datcs specified in such instructions, (2) which are fully secured as to principal, redemption prcmium, if any, and interest by a fund consisting only of cash or Federal Securities, secured in the manner set forth in Section 9.1 hereof, which fund may be applied only to the payment of such principal of, redemption premium, if any, and interest on such notes or other obligations on the maturity date or dates thereof or the specified redemption date or dates pursuant to such irrevocable instructions, as the case may be, (3) as to which the principal of and interest on the Federal Securities deposited in such fund with any cash on deposit in such fund, are sufficient, as verified by an independent certified public accountant, to pay principal of, redemption premium, if any, and interest on the notes or other obligations on the maturity date or dates thereof or on the redemption date or dates specified in such irrevocable instructions, and (4) which are rated in the highest rating category of Standard & Poor's and of Moody's Investors Service. "Prior Lien Obligations" shall mean (i) the Loan and (ii) the obligations to pay any amounts that may become due under and pursuant to Sections 3(C), 4 or 5 of the First Supplemental Loan Agreement. "Project" shall mean the acquisition, construction, installation, renovation or reconstruction of additions, extensions and improvements to the System, as more particularly described in and in accordance with certain plans on file or to be on file with the Issuer, with such changes, deletions, additions or modifications to the enumerated improvements, equipment and facilities, or such other improvements as shall be designated and approved by Supplemental Resolution in accordance with the Act. "Project Certificate" shall mean that certificate of the Qualified Independent Consultant filed with the Issucr at or prior to the delivery of any Series of Notes issued wholly or in part to finance or refinance Expansion Facilities setting forth the estimated total cost of the Project. the estimated cost of the Expansion Facilities portion of the Project and the Expansion Percentage. . "Public Service Tax" shall mean the excise tax levied and collected by the Issuer on every purchase of electricity, metered or bottled gas (natural, liquified, petroleum gas or manufactured), water service and telecommunication service within the corporate territorial limits of the Issuer pursuant to the provisions of nonemergency Ordinance No. 156 duly enacted 9 . . . e e by the Issuer on September 24, 1957, as amended and supplemented, and as codified in Sections 21-1 through 21-18, Chapter 21, Code of Ordinances, City of Clermont, Florida, as amended, enacted pursuant to Section 166.231, Florida Statutes, as amended, formerly Section 167.431, Florida Statutes. "Qualified Independent Consultant" shall mean one or more qualified and recognized independent consultants, having favorable repute, skill and experience with respect to the acts and duties required of a qualified independent consultant to be provided to the Issuer, as shall from time to time be retained by the Issuer to perform the acts and carry out the duties herein provided for such consultants. The Qualified Independent Consultant may be also the Accountant or the Issuer's Consulting Engineers. "Rate Stabilization Fund" shall mean the Rate Stabilization Fund established pursuant .to Section 4.4 hereof. "Rates" shall mean the rates, fees, rentals and other charges which shall be made and collected by the Issuer for the use of the product, services and facilities to be provided by the System. "Rebate Fund" shall mean the Rebate Fund established pursuant to Section 4.4 hereof. "Redemption Price" shall mean, with respect to any Note or portion thereof, the principal amount or portion thereof, plus the applicable premium, if any, payable upon redemption thereof pursuant to such Note or Supplemental Resolution. "Refunded Obligations" shall mean the Issuer's outstanding Line of Credit Revenue Note, Draw Number 1, issued pursuant to the Line of Credit Agreement. "Registrar" shall mean any registrar for the Notes appointed by or pursuant to Supplemental Resolution and its successors and assigns, and any other Person which may at any time be substituted in its place pursuant to Supplemental Resolution. "Resolution" and "this Resolution" shall mean this instrument, as the same may from time to time be amended, modified or supplemented by any and all Supplemental Resolutions. "Revenue Fund" shall mean the Revenue Fund established pursuant to Section 4.4 hereof. "Securities" shall mean Federal Securities and Prerefunded Obligations. "Series" shall mean all the Notes delivered on original issuance in a simultaneous transaction and identified pursuant to Sections 2.1 and 2.2 hereof or in a Supplemental 10 e e . Resolution authorizing the issuance by the Issuer of such Notes as a separate Series, regardless of variations in maturity, interest rate or other provisions. "Series 1996 Notes" shall mean the Issuer's Water and Sewer Revenue and Refunding Bond Anticipation Notes, Series 1996, authorized pursuant to Section 2.2 hereof. "Standard & Poor's" shall mean Standard & Poor's Ratings Services, a division of The McGraw Hill Companies, Inc., a nationally recognized securities rating firm, and any successor and successors thereto; and if such corporation shall be dissolved or liquidated or shall no longer perform securities rating functions, shall mean any other nationally recognized securities rating firm designated by the Issuer and approved by any Insurer and/or any Credit Bank, as applicable. "State" shall mean the State of Florida. "Subordinated Indebtedness" shall mean that indebtedness of the Issuer, subordinate and junior to the Notes, issued in accordance with the provisions of Section 6.2 hereof. . "Supplemental Resolution" shall mean any resolution of the Issuer amending or supplementing this Resolution, adopted and becoming effective prior to the issuance of the Series 1996 Notes or in accordance with the terms of Sections 8.1, 8.2 or 8.3 hereof. "System" shall mean any and all water production, transmission, purification and distribution facilities and appurtenant facilities, and all sewage collection, transmission, treatment and disposal facilities and appurtenant facilities now owned and operated or hereafter owned and operated by the Issuer, which System shall also include any and all improvements, extensions and additions thereto hereafter constructed or acquired which shall be financed either from the proceeds of Notes or from any other funds or sources, together with all property, real or personal, tangible or intangible, now or hereafter owned or used in connection therewith. "Taxable Note" shall mean any Note which states, in the body thereof, that the interest income thereon is includable in the gross income of the Holder thereof for federal income taxation purposes. "Underwriter" shall mean William R. Hough & Co., the underwriter for the Series 1996 Notes. "Variable Rate Notes" shall mean Notes issued with a variable, adjustable, convertible or other interest rate which at the date of issue is not fixed as one or more stated percentages for the entire term of such Notes. . The terms "herein," "hereunder," "hereby," "hereto," "hereof," and any similar terms, shall refer to this Resolution; the term "heretofore" shall mean before the date of adoption 11 e e . of this Resolution; and the term "hereafter" shall mean after the date of adoption of this Resolution. Words importing the singular number include the plural number, and vice versa. Section 1.2 Authority for Resolution. This Resolution is adopted pursuant to the provisions of the Act. Section 1.3 Resolution to Constitute Contract. In consideration of the purchase and acceptance of any or all of the Notes by those who shall hold the same from time to time. the provisions of this Resolution shall be deemed to be and shall constitute a contract between the Issuer and the Holders from time to time of the Notes and shall be a part of the contract of the Issuer with any Credit Bank and any Insurer. The pledge made in this Resolution and the provisions, covenants and agreements herein set forth to be performed by or on behalf of the Issuer shall be for the equal benefit, protection and security of the Holders of any and all of the Notes and for the benefit, protection and security of any Credit Bank and any Insurer. All of the Notes, regardless of the time or times of their issuance or maturity, shall be of equal rank without preference, priority or distinction of any of the Notes over any other thereof except as expressly provided in or pursuant to this Resolution. Section 1.4 Findings. It is hereby ascertained, determined and declared as . follows: (A) For the benefit of its inhabitants, the Issuer presently owns, operates and maintains the System for the supply and distribution of water for domestic, commercial and industrial use and for the collection, treatment and disposal of sewage. (B) The Issuer deems it necessary, desirable and in the best interests of the Issuer that the Project be acquired and constructed. A part of the Cost of the Project shall be financed with the proceeds of the Series 1996 Notes. (C) The Issuer has heretofore issued and has presently outstanding and unpaid the Refunded Obligations. (D) The Issuer deems it necessary, desirable and in the best financial interest of the Issuer that the Refunded Obligations be refunded. Simultaneously with the issuance of the Series 1996 Notes, a sufficient portion of the proceeds of the Series 1996 Notes and other funds available will be paid by the Issuer to the holder of the Refunded Obligations to effectuate the refunding and immediate discharge of the Refunded Obligations. . (E) The Issuer deems it necessary, desirable and in the best interest of the Issuer that the Pledged Funds be pledged to the payment of the principal of and interest on the Notes. No part of the Pledged Funds has been pledged or encumbered in any manner (i) except that the Net Revenues are presently pledged for the payment of the principal of and interest on 12 e e . the Refunded Obligations and (ii) except that the Net Revenues have been pledged fIrst for the payment of the Prior Lien Obligations. (F) The estimated Gross Revenues to be derived in each year hereafter from the operation of the System will be sufficient to pay Operating Expenses, the principal and interest on the Prior Lien Obligations, as the same become due, all other payments provided for in the Loan Agreement and the First Supplemental Loan Agreement, and, together with the Excise Taxes, the interest on the Notes and all other payments provided for in this Resolution. (G) The principal of and interest on the Notes and all other payments provided for in this Resolution will be paid solely from the sources herein provided in accordance with the terms hereof; and no ad valorem taxing power of the Issuer will ever be exercised nor will any Holder of any Note or any Credit Bank or any Insurer have the right to compel the exercise of such ad valorem taxing power to pay the principal of or interest on the Notes or to make any other payments provided for in this Resolution, and the Notes shall not constitute a lien upon the System or upon any other property of the Issuer or situated within its corporate territorial limits, except the Pledged Funds. e (H) It is appropriate that the Issuer approve the distribution of a preliminary official statement for the purpose of acquainting potential investors with pertinent information with respect to the Issuer and the Series 1996 Notes. For this purpose, it is appropriate that the distribution of a preliminary official statement, substantially in the form of the preliminary official statement attached hereto as Exhibit A, be approved. Section 1.5 'Authorization of Proiect. The acquisition and construction of the Project in the manner herein provided is hereby authorized. Section 1.6 Authorization of Refunding. The refunding of the Refunded Obligations in the manner herein provided is hereby authorized. Section 1.7 Refunding of Refunded Obligations. Simultaneously with the delivery of the Series 1996 Notes to the purchaser or purchasers thereof, and the Issuer having given notice of prepayment to the holder of the Refunded Obligations as provided in the Line of Credit Agreement, the Issuer will pay to the holder of the Refunded Obligations the principal amount of the Refunded Obligations, together with unpaid interest accrued on such principal amount to the date of such payment, in accordance with the provisions of the Line of Credit Agreement. ARTICLE 2 e 13 e e e AUTHORIZATION, TERMS, EXECUTION AND REGISTRATION OF NOTES Section 2.1 Authorization of Notes. The Issuer hereby authorizes the issuance of Notes of the Issuer entitled to the benefit, protection and security of this Resolution, to be designated as "City of Clermont, Florida, Water and Sewer Revenue and Refunding Bond Anticipation Notes," which may be issued in one or more Series as hereinafter provided. Except as provided in Section 2.2, the Notes shall be issued only for the purposes of renewing and extending the indebtedness evidenced by any Series of Notes previously issued. Only one Series of Notes may be Outstanding hereunder at any time. Except for the Series 1996 Notes, no Series of Notes shall be issued hereunder in an aggregate principal amount exceeding the aggregate principal amount of the Series of Notes then Outstanding. The Notes may, if and when authorized by the Issuer pursuant to this Resolution or Supplemental Resolution, be issued with such further appropriate particular designations added to or incorporated in such title for the Notes of any particular Series as the Issuer may determine and as may be necessary to distinguish such Notes from the Notes of any other Series. Each Note shall bear upon its face the designation so determined for the Series to which it belongs. . Section 2.2 Description of Series 1996 Notes. A Series of Notes entitled to the benefit, protection and security of this Resolution is hereby authorized to be issued in an aggregate principal amount not to exceed $8,500,000 for the principal purpose of financing a part of the cost of acquiring and constructing the Project, refunding the Refunded Obligations and paying certain costs of Ìssuance incurred with respect to such Series. Such Series shall be designated as, and shall be distinguished from the Notes of all other Series by the title "City of Clermont, Florida, Water and Sewer Revenue and Refunding Bond Anticipation Notes, Series 1996," provided the Issuer may change such designation in the event that the Series 1996 Notes are not issued in calendar year 1996. The Series 1996 Notes shall be dated as of the first day of the month in which occurs the delivery of the Series 1996 Notes to the purchaser or purchasers thereof or such other date as may be set forth by Supplemental Resolution; shall be issued as fully registered Notes; and shall be numbered consecutively from one upward in order of maturity preceded by the letter "R;" shall be in such denominations and shall bear interest at a rate or rates not exceeding the maximum rate permitted by law (calculated on the basis of a 360-day year of twelve 30-day months), payable in such manner and on such dates; shall mature in such amounts and in such years not exceeding five (5) years from their date; shall have such Paying Agents and Registrars; and shall contain such redemption provisions; all as the Issuer shall hereafter provide by Supplemental Resolution. e The principal of or Redemption Price, if applicable, on the Series 1996 Notes is payable upon presentation and surrender of the Series 1996 Notes at the office of the Paying Agent. Interest payable on any Series 1996 Note on any Interest Date will be paid by check or 14 e e _ draft of the Paying Agent to the Holder in whose name such Note shall be registered at the close of business on the date which shall be the fifteenth day (whether or not a business day) of the calendar month next preceding such Interest Date, or, unless otherwise provided by Supplemental Resolution, at the option of the Paying Agent, and at the request and expense of such Holder, by bank wire transfer for the account of such Holder. In the event the interest payable on any Series 1996 Note is not punctually paid or duly provided for by the Issuer on such Interest Date, such defaulted interest will be paid to the Holder in whose name such Note shall be registered at the close of business on a special record date for the payment of such defaulted interest as established by notice to such Holder, not less than ten (10) days preceding such special record date. All payments of principal of or Redemption Price, if applicable, and interest on the Series 1996 Notes shall be payable in any coin or currency of the United States of America which at the time of payment is legal tender for the payment of public and private debts. Section 2.3 Application of Series 1996 Note Proceeds. Except as otherwise provided by Supplemental Resolution, the proceeds derived from the sale of the Series 1996 Notes, including accrued interest and premium, if any, shall, simultaneously with the delivery of the Series 1996 Notes to the purchaser or purchasers thereof, be applied by the Issuer as follows: (A) Accrued and capitalized interest shall be deposited in the Notes Payment . Account. (B) A sum which, together with other funds available therefore, shall be sufficient to fully prepay and discharge the Refunded Obligations, shall be paid to the holder thereof pursuant to the provisions of the Line of Credit Agreement. (C) The Issuer covenants and agrees to establish a separate account with an Authorized Depository to be known as the "City of Clermont Water and Sewer Revenue and Refunding Bond Anticipation Notes Costs of Issuance Account" (the "Costs of Issuance Account"), which shall be used only for the payment of costs and expenses described in this subsection. A sum sufficient to pay all costs and expenses in connection with the preparation, issuance and sale of the Series 1996 Notes, including fees of financial advisors, insurers, engineering and other consulting fees, legal fees, printing fees, rating agency fees and other similar costs shall be deposited to the credit of the Costs of Issuance Account, and all such costs and expenses shall be promptly paid by the Issuer to the persons respectively entitled to receive the same. When all moneys on deposit to the credit of the Costs of Issuance Account shall have been disbursed by the Issuer for the payment of such costs and expenses, the Costs of Issuance Account shall be closed; provided, however, that if any balance shall remain in the Costs of Issuance Account six months after issuance of the Series 1996 Notes, such moneys shall be transferred by the Issuer to the Construction Fund and the Costs of Issuance Account shall be closed. After the Costs of Issuance Account shall be closed, the Issuer may pay from the Construction Fund any unpaid issuance expenses. e 15 e e . (D) The balance of the Series 1996 Note proceeds shall be deposited in the Construction Fund. Section 2.4 Execution of Notes. The Notes shall be executed in the name of the Issuer with the manual or facsimile signature of the Mayor and the official seal of the Issuer shall be imprinted thereon, attested and countersigned with the manual or facsimile signature of the Clerk. In case anyone or more of the officers who shall have signed or scaled any of the Notes or whose facsimile signature shall appear thereon shall cease to be such officer of the Issuer before the Notes so signed and sealed have been actually sold and delivered such Notes may nevertheless be sold and delivered as herein provided and may be issued as if the person who signed or sealed such Notes had not ceased to hold such office. Any Note may be signed and sealed on behalf of the Issuer by such person who at the actual time of the execution of such Note shall hold the proper office of the Issuer, although at the date of such Note such person may not have held such office or may not have been so authorized. The Issuer may adopt and use for such purposes the facsimile signatures of any such persons who shall have held such offices at any time after the date of the adoption of this Resolution, notwithstanding that either or both shall have ceased to hold such office at the time the Notes shall be actually sold and delivered. . Section 2.5 Authentication. No Note of any Series shall be secured hereunder or entitled to the benefit hereof or shall be valid or obligatory for any purpose unless there shall be manually endorsed on such Note a certificate of authentication by the Registrar or such other entity as may be approved by the Issuer for such purpose. Such certificate on any Note shall be conclusive evidence that such Note has been duly authenticated and delivered under this Resolution. The form of such certificate shall be substantially in the form provided in Section 2.9 hereof. Section 2.6 Temporary Notes. Until the definitive Notes of any Series are prepared, the Issuer may execute, in the same manner as is provided in Section 2.4, and deliver, upon authentication by the Registrar pursuant to Section 2.5 hereof, in lieu of definitive Notes, but subject to the same provisions, limitations and conditions as the definitive Notes, except as to the denominations thereof, one or more temporary Notes substantially of the tenor of the definitive Notes in lieu of which such temporary Note or Notes are issued, in denominations authorized by the Mayor and the Clerk, such authorization to be evidenced conclusively by their execution of such temporary Note or Notes, and with such omissions, insertions and variations as may be appropriate to temporary Notes. The Issuer, at its own expense, shall prepare and execute definitive Notes, which shall be authenticated by the Registrar. Upon the surrender of such temporary Notes for exchange, the Registrar, without charge to the Holder thereof, shall deliver in exchange therefor definitive Notes, of the same aggregate principal amount and Series and maturity as the temporary Notes surrendered. Until so exchanged, the temporary Notes shall in all respects be entitled to the same benefits and security as definitive Notes issued pursuant to this Resolution. All temporary Notes surrendered in exchange for another temporary Note or Notes or for a definitive Note or Notes shall be forthwith canceled by the Registrar. . 16 . . . e e Section 2.7 Notes Mutilated. Destroyed. Stolen or Lost. In case any Note shall become mutilated, or be destroyed, stolen or lost, the Issuer may, in its discretion, issue and deliver, and the Registrar shall authenticate, a new Note of like tenor as the Note so mutilated, destroyed, stolen or lost, in exchange and substitution for such mutilated Note upon surrender and cancellation of such mutilated Note or in lieu of and substitution for the Note destroyed, stolen or lost, and upon the Holder furnishing the Issuer and the Registrar proof of such Holder's ownership thereof and satisfactory indemnity and complying with such other reasonable regulations and conditions as the Issuer or the Registrar may prescribe and paying such expenses as the Issuer and the Registrar may incur. All Notes so surrendered or otherwise substituted shall be canceled by the Registrar. If any of the Notes shall have matured or be about to mature, instead of issuing a substitute Note, the Issuer may pay the same or cause the Note to be paid, upon being indemnified as aforesaid, and if such Notes be lost, stolen or destroyed, without surrender thereof. Any such duplicate Notes issued pursuant to this Section 2.7 shall constitute original, additional contractual obligations on the part of the Issuer whether or not the lost, stolen or destroyed Note be at any time found by anyone, and such duplicate Note shall be entitled to equal and proportionate benefits and rights as to lien on the Pledged Funds to the same extent as all other Notes issued hereunder and shall be entitled to the same benefits and security as the Note so lost, stolen or destroyed. Section 2.8 Interchangeability. Negotiability and Transfer. Notes, upon surrender thereof at the office of the Registrar with a written instrument of transfer satisfactory to the Registrar, duly executed by the Holder thereof or such Holder's attorney duly authorized in writing, may, at the option of the Holder thereof, be exchanged for an equal aggregate principal amount of registered Notes of the same Series and maturity of any other authorized denominations. The Notes issued under this Resolution shall be and have all the qualities and incidents of negotiable instruments under the laws of the State of Florida, subject to the provisions for registration and transfer contained in this Resolution and in the Notes. So long as any of the Notes shall remain Outstanding, the Issuer shall cause to be maintained and kept, at the office of the Registrar, books for the registration and transfer of the Notes. Each Note shall be transferable only upon the books of the Issuer, at the office of the Registrar, under such reasonable regulations as the Issuer may prescribe, by the Holder thereof in person or by such Holder's attorney duly authorized in writing upon surrender thereof together with a written instrument of transfer satisfactory to the Registrar duly executed and guaranteed by the Holder or such Holder's duly authorized attorney. Upon the transfer of any such Note, the Issuer shall issue, and cause to be authenticated, in the name of the transferee a new Note or Notes of the same aggregate principal amount and Series and maturity as the surrendered Note. The Issuer, the Registrar and any Paying Agent or fiduciary of the Issuer may deem and treat the Person in whose name any Outstanding Note shall be registered upon the books of the Issuer as the absolute owner of such Note, whether such Note shall be overdue 17 . . . e e or not, for the purpose of receiving payment of, or on account of, the principal or Redemption Price, if applicable, and interest on such Note and for all other purposes, and all such payments so made to any such Holder or upon such Holder's order shall be valid and effectual to satisfy and discharge the liability upon such Note to the extent of the sum or sums so paid and neither the Issuer nor the Registrar nor any Paying Agent or other fiduciary of the Issuer shall be affected by any notice to the contrary. The Registrar, in any case where it is not also the Paying Agent in respect to any Series of Notes, shall forthwith (a) following the fifteenth day prior to an Interest Date for such Series, (b) following the fifteenth day next preceding the date of first mailing of notice of redemption of any Notes of such Series, and (c) at any other time as reasonably requested by the Paying Agent of such Series, certify and furnish to such Paying Agent the names, addresses and holdings of Noteholders and any other relevant information reflected in the registration books. In all cases in which the privilege of exchanging Notes or transferring Notes is exercised, the Issuer shall execute and the Registrar shall authenticate and deliver such Notes in accordance with the provisions of this Resolution. Execution of Notes by the Mayor and the Clerk for purposes of exchanging, replacing or transferring Notes may occur at the time of the original delivery of the Series of which such Notes are a part. All Notes surrendered in any such exchanges or transfers shall be canceled by the Registrar. For every such exchange or transfer of Notes, the Issuer or the Registrar may make a charge sufficient to reimburse it for any tax, fee, expense or other governmental charge required to be paid with respect to such exchange or transfer. The Issuer and the Registrar shall not be obligated to make any such exchange or transfer of Notes of any Series during the fifteen (15) days next preceding an Interest Date on the Notes of such Series (other than Variable Rate Notes), or, in the case of any proposed redemption of Notes, during the fifteen (15) days next preceding the redemption date ~stablishcd for such Notes. The Issuer may elect to issue any Notes as uncertificated registered public obligations (not represented by instruments), commonly known as book-entry obligations, provided it shall establish a system of registration therefor by Supplemental Resolution. Section 2.9 Form of Notes. Except for Variable Rate Notes, the form of which shall be provided by Supplemental Resolution, the Notes shall be in substantially the following form with such omissions, insertions and variations as may be necessary and/or desirable and approved by the Mayor or the Clerk prior to the issuance thereof (which necessity and/or desirability and approval shall be evidenced conclusively by the Issuer's delivery of the Notes to the purchaser or purchasers thereot): 18 . . . e e No. R- $ UNITED STATES OF AMERICA STATE OF FLORIDA COUNTY OF LAKE CITY OF CLERMONT WATER AND SEWER REVENUE AND REFUNDING BOND ANTICIPATION NOTE SERIES Interest Rate Maturity Date CUSIP Date of Original Issue % '- '- Registered Holder: Principal Amount: KNOW ALL MEN BY THESE PRESENTS, that the City of Clermont, a municipality created and existing under and by virtue of the laws of the State of Florida (the "Issuer"), for value received, hereby promises to pay, solely from the sources of payment hereinafter described, to the Registered Holder identified above, or registered assigns as hereinafter provided, the Principal Amount identified above on the Maturity Date identified above and interest (calculated on the basis of a 360-day year of twelve 30-day months) on such Principal Amount from thè Date of Original Issue identified above or from the most recent interest payment date to which interest has been paid, at the Interest Rate per annum identified above on and of each year commencing , until such Principal Amount shall have been paid or provided for, except as the provisions hereinafter set forth with respect to redemption prior to maturity may be or become applicable hereto. Such Principal Amount and interest and the premium, if any, on. this note are payable in any coin or currency of the United States of America which, on the respective dates of payment thereof, shall be legal tender for the payment of public and private debts. Such Principal Amount and the premium, if any, on this note, are payable, upon presentation and surrender hereof, at the office of , , , as paying agent, or such other paying agent as the Issuer shall hereafter duly appoint (the "Paying Agent"). Payment of each installment of interest shall be made to the person in whose name this note shall be registered on the registration books of the Issuer maintained by , , , as registrar, or such other registrar as the Issuer shall hereafter duly appoint (the "Registrar"), at the close of business on the date which shall be the fifteenth day (whether or not a business day) of the calendar month next 19 e e . preceding each interest payment date and shall be paid by a check or draft of the Paying Agent mailed to such Registered Holder at the address appearing on such registration books or, at the option of the Paying Agent, and at the request and expense of such Registered Holder, by bank wire transfer for the account of such Holder. In the event interest payable on this note is not punctually paid or duly provided for by the Issuer on such interest payment date, payment of each installment of such defaulted interest shall be made to the person in whose name this note shall be registered at the close of business on a special record date for the payment of such defaulted interest as established by notice to such Registered Holder, not less than ten (10) days preceding such special record date. REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS NOTE SET FORTH ON THE REVERSE SIDE HEREOF AND SUCH FURTHER PROVISIONS SHALL FOR ALL PURPOSES HAVE THE SAME EFFECT AS IF SET FORTH IN THIS PLACE. This note shall not be valid or become obligatory for any purpose until the certificate of authentication hereon shall have been manually signed by the Registrar. IN WITNESS WHEREOF, the City of Clermont, Florida, has issued this note and has caused the same to be executed by the manual or facsimile signature of its Mayor and attested and countersigned by the manual or facsimile signature of its City Clerk and its official seal or a facsimile thereof to be affixed or reproduced hereon, all as of the day of . ,19_ CITY OF CLERMONT, FLORIDA (SEAL) By Mayor A TTESTED AND COUNTERSIGNED: City Clerk . 20 . . . e e CERTIFICATE OF AUTHENTICATION This note is one of the Notes of the issue described In the within-mentioned Resolution. DATE OF AUTHENTICATION: Registrar By: Authorized Signatory (Provisions on Reverse Side of Note) This note is one of an authorized issue of notes of the Issuer in the aggregate principal amount of $ (the "Notes") of like date, tenor and effect, except as to number [and denominations], issued [to finance the cost of the acquisition, construction and installation of certain capital improvements to the Issuer's municipal water and sewer system and the refunding of certain outstanding obligations of the Issuer] [to extend and renew the indebtedness evidenced by the Series _ Notes] under the authority of and in full compliance with the Constitution and laws of the State of Florida, particularly Chapter 166, Part II, Florida Statutes, as amended, and other applicable provisions of law (the" Act"), and a resolution duly adopted by the City Couneil of the Issuer on February _, 1996, as supplemented (the "Resolution"), in anticipation of the receipt by the Issuer of the proceeds from the sale of not exceeding $ principal amount of its Water and Sewer Revenue and Refunding Bonds, Series 20_ (the "Bonds"), and is subject to all the terms and conditions of the Resolution. The principal of, premium, if any, and interest on this note are payable solely from and secured by a lien upon and a pledge of (i) the proceeds to be derived by the Issuer from the sale of the Bonds, (ii) the proceeds to be derived by the Issuer from the 'sale of bond anticipation notes issued to extend and renew the indebtedness evidenced by the Notes, (iü) the Pledged Revenues (as defined in the Resolution), including the Net Revenues (as defined in the Resolution) to be derived from the operation of the Issuer's water and sewer system (the "System") and the Excise Taxes (as defined in the Resolution), and (iv) until applied in accordance with the provisions of the Resolution, the proceeds of the Notes and all moneys, including investments thereof, in certain of the funds and accounts established pursuant to the Resolution, all in the manner and to the extent described in the Resolution (collectively, the "Pledged Funds"). It is expressly agreed by the Registered Holder of this note that the full faith and credit of neither the Issuer, the State of Florida, nor any political subdivision thereof, is pledged to the payment of the principal of or premium, if any, or interest on this note and that 21 e e . the Registered Holder shall never have the right to require or compel the exercise of any taxing power of the Issuer, the State of Florida, or any political subdivision thereof, to the payment of such principal, premium, if any, and interest. This note and the obligation evidenced hereby shall not constitute a lien upon the System or any other property of the Issuer, except the Pledged Funds, and shall be payable solely from the Pledged Funds in accordance with the terms of the Resolution. The lien in favor of the holders of the Notes on the Net Revenues is junior, subordinate and inferior in every respect to the lien thereon securing (i) the indebtedness and other obligations of the Issuer under and pursuant to that certain Loan Agreement, dated as of July 1,1993, among NationsBankofFlorida, N.A., as trustee, the City of Arcadia, Florida, and the Issuer and (ii) the obligation to pay any amounts that may become due under and pursuant to Sections 3(C), 4 or 5 of that certain First Supplemental Loan Agreement, dated as of July 1, 1993, between Sun Bank, National Association, as trustee, Lane Gilchrist, Mayor, City of Gulf Breeze, as administrator, and the Issuer (collectively, the "Prior Lien Obligations"). The Issuer in the Resolution has covenanted and agreed with the holders of the Notes that it will not hereafter issue any additional obligations payable from the Pledged Funds or any portion thereof having a lien superior to or on a parity with the Notes. Neither the members of the City Council of the Issuer nor any person executing this note shall be liable personally hereon or be subject to any personal liability or accountability by reason of the issuance hereof. e The Notes may be redeemed prior to maturity at the option of the Issuer, as a whole on , or on any date thereafter, or in part, by lot, on , or OR any interest payment date thereafter, at the following redemption prices (expressed as a percentage of the principal amount of the Notes to be redeemed) plus accrued interest to the redemption date, if redeemed during the following periods: Redemption Period (both dates inclusive through through and thereafter Redemption Price % Notice of redemption, unless waived, is to be given by the Registrar by mailing an official redemption notice by first class mail, postage prepaid, at least 30 days and not more than 60 days prior to the date fixed for redemption to the registered holders of the Notes to be redeemed at such holders' addresses shown on the registration books maintained by the Registrar or at such other addresses as shall be furnished in writing by such registered holders to the Registrar; provided, however, that no defect in any such notice to any registered holder of Notes to be redeemed nor failure to give such notice to any such registered holder nor failure of any e 22 e e e such registered holder to receive such notice shall in any manner defeat the effectiveness of a call for redemption as to all other registered holders of Notes to be redeemed. Notice of redemption having been given as aforesaid, the Notes or portions of Notes to be redeemed shall, on the redemption date, become due and payable at the redemption price therein specified, and from and after such date (unless the Issuer shall default in the payment of the redemption price) such Notes or portions of Notes shall cease to bear interest. e This note is and has all the qualities and incidents of a negotiable instrument under the laws of the State of Florida, but may be transferred only in accordance with the terms of the Resolution only upon the books of the Issuer kept for that purpose at the office of the Registrar by the Registered Holder in person or by such Holder's attorney duly authorized in writing, upon the surrender of this note together with a written instrument of transfer satisfactory to the Registrar duly executed by the Registered Holder or such Holder's attorney duly authorized in writing, and thereupon a new Note or Notes in the same aggregate principal amount shall be issued to the transferee in exchange therefor, and upon the payment of the charges, if any, prescribed in the Resolution. Each of the Notes is issuable in fully registered form in the denomination of $5,000 or any integral multiple thereof not exceeding the aggregate principal amount of the Notes. The Issuer, the Registrar and any Paying Agent may treat the Registered Holder of this note as the absolute owner hereof for all purposes, whether or not this note shall be overdue, and shall not be affected by any notice to the contrary. The Issuer and the Registrar shall not be obligated to make any exchange or transfer of any Notes during the fifteen (15) days next preceding an interest payment date or, in the case of any proposed redemption of any Notes, during the fifteen (15) days next preceding the redemption date established for such Notes. It is hereby Certified and recited that all acts, conditions and things required to exist, to happen and to be performed precedent to and in connection with the issuance of this note, exist, have happened and have been performed, in regular and due form and time as required by the Constitution and laws of the State of Florida applicable thereto, and that the issuance of the notes does not violate any constitutional or statutory limitations or provisions. LEGAL OPINION [Insert appropriate approving opinion of bond counsel.] The above is a true copy of the opinion rendered by Foley & Lardner, Jacksonville, Florida, in connection with the issuance of, and dated as of the original delivery of, the Notes of the issue of which this note is one. An executed copy of that opinion is on file in my office. City Clerk e 23 · · · e e The following abbreviations, when used in the inscription on the face of the within note, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM as tenants in common TEN ENT as tenants by the entireties JT TEN as joint tenants with right of survivorship and not as tenants in common UNIF TRANS MIN ACT (Cust.) Custodian for under Uniform Transfer to Minors Act of (State) Additional abbreviations may also be used though not in list above. 24 . . e -------.--....- e e ASSIGNMENT FOR VALUE RECEIVED, the undersigned sells, assigns and transfers unto Insert Social Security or Other Identifying Number of Assignee (Name and Address of Assignee) the within note and does hereby irrevocably constitute and appoint , as attorneys to register the transfer of the said note on the books kept for registration thereof with full power of substitution in the premises. Dated: Signature Guaranteed: NOTICE: Signature(s) must be guaranteed by an institution which is a participant in the Securities Transfer Agent Medallion Program (STAMP) or similar program: NOTICE: The signature to this assignment must correspond with the name of the Registered Holder as it appears upon the face of the within note in every particular, without alteration or enlargement or any change whatever and the Social Security or other identifying number of such assignee must be supplied. 25 .-- -._.----- ------- . . . e e ARTICLE 3 REDEMPTION OF NOTES Section 3.1 Privilege of Redemption. Theterms of this Article 3 shall apply to redemption of all Notes issued hereunder. Section 3.2 Selection of Notes to be Redeemed. The Notes shall be redeemed only in the principal amount of $5,000 each and integral multiples thereof. The Issuer shall, at least sixty (60) days prior to the redemption date (unless a shorter time period shall be satisfactory to the Registrar) notify the Registrar of such redemption date and of the principal amount of Notes to be redeemed. For purposes of any redemption of less than all of the Outstanding Notes, the particular Notes or portions of Notes to be redeemed shall be selected not more than forty-five (45) days prior to the redemption date by the Registrar from the Outstanding Notes designated by the Issuer by such method as the Registrar shall deem fair and appropriate and which may provide for the selection for redemption of Notes or portions of Notes in principal amounts of $5,000 and integral multiples thereof. If less than all of the Outstanding Notes are to be redeemed, the Registrar shall promptly notify the Issuer and Paying Agent (if the Registrar is not the Paying Agent for such Notes) in writing of the Notes or portions of Notes selected for redemption and, in the case of any Note selected for partial redemption, the principal amount 'thereof to be redeemed. Section 3.3 Notice of Redemption. Unless waived by any Holder of Notes to be redeemed, notice of any redemption made pursuant to this section shall be given by the Registrar on behalf of the Issuer by mailing a copy of an official redemption notice by first class mail, postage prepaid, at least thirty (30) days and not more than sixty (60) days prior to the date fixed for redemption to each Holder of Notes to be redeemed at the address of such Holder shown on the registration books maintained by the Registrar or at such other address as shall be furnished in writing by such Holder to the Registrar; provided, however, that no defect in any notice given pursuant to this section to any Holder .of Notes to be redeemed nor failure to give such notice shall in any manner defeat the effectiven'ess of a call for redemption as to all other Holders of Notes to be redeemed. Every official notice of redemption shall be dated and shall state: (1) the redemption date, (2) the Redemption Price, (3) if less than all outstanding Notes are to be redeemed, the number (and, in the case of a partial redemption of any Note, the principal amount) of each Note to be redeemed, 26 e - . (4) that on the redemption date the Redemption Price will become due and payable upon each such Note or portion thereof called for redemption, and that interest thereon shall cease to accrue from and after said date, and (5) that such Notes to be redeemed, whether as a whole or in part, are to be surrendered for payment of the Redemption Price plus accrued interest at the office of the Paying Agent. Prior to any redemption date, the Issuer shall deposit with the Paying Agent an amount of money sufficient to pay the Redemption Price of and accrued interest on all the Notes or portions of Notes which are to be redeemed on that date. In addition to the foregoing notice, further notice may be given by the Issuer as set out below, but no defect in said further notice nor any failure to give all or any portion of such further notice shall in any manner defeat the effectiveness of a call for redemption if notice thereof is given as above prescribed. . (1) Each further notice of redemption given hereunder shall contain the information required above for an official notice of redemption plus (a) the CUSIP numbers of all Notes being redeemed; (b) the date of issue of the Notes as originally issued; (c) the rate of interest borne by each Note being redeemed; (d) the maturity date of each Note being redeemed; and (e) any other descriptive information needed to identify accurately the Notes being redeemed . (2) Each (urther notice of redemption shall be sent at least thirty-five (35) days before the redemption date by registered or certified mail or overnight delivery service to any Insurer which shall have insured, or any Credit Bank which shall have provided a Credit Facility for, any of the Notes being redeemed and to all registered securities depositories then in the business of holding substantial amounts of obligations of types similar to the type of which the Notes consist (such depositories now being Depository Trust Company of New York, New York, Midwest Securities Trust Company of Chicago, Illinois, and Philadelphia Depository Trust Company of Philadelphia, Pennsylvania) and to one or more national information services that disseminate notices of redemption of obligations such as the Notes. Section 3.4 Redemption of Portions of Notes. Any Note which is to be redeemed only in part shall be surrendered at any place of payment specified in the notice of redemption (with due endorsement by, or written instrument of transfer in form satisfactory to the Registrar duly executed by, the Holder thereof or such Holder's attorney duly authorized in writing) and the Issuer shall execute and the Registrar shall authenticate and deliver to the Holder of such Note, without service charge, a new Note or Notes, of the same interest rate and maturity, and of any authorized denomination as requested by such Holder, in an aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Notes so surrendered. e 27 · · · - - Section 3.5 Payment of Redeemed Notes. Official notice of redemption having been given substantially as aforesaid, the Notes or portions of Notes to be redeemed shall, on the redemption date, become due and payable at the Redemption Price therein specified, and from and after such date (unless the Issuer shall default in the payment of the Redemption Price) such Notes or portions of Notes shall cease to bear interest. Upon surrender of such Notes for redemption in accordance with said notice, such Notes shall be paid by the Registrar and/or Paying Agent at the appropriate Redemption Price, plus accrued interest. Each check or other transfer of funds issued by the Registrar and/or Paying Agent for the purpose of the payment of the Redemption Price of Notes being redeemed shall bear the CUSIP number identifying, by issue, the Notes being redeemed with the proceeds of such check or other transfer. Installments of interest due on or prior to the redemption date shall be payable as herein provided for payment of interest. All Notes which have been redeemed shall be canceled by the Registrar and shall not be reissued. . ARTICLE 4 SECURITY, SPECIAL FUNDS AND APPLICATION THEREOF Section 4.1 Notes not to be Indebtedness of Issuer. The Notes shall not be or constitute general obligations or indebtedness of the Issuer as "bonds" within the meaning of any constitutional or statutory provision, but shall be special obligations of the Issuer, payable solely from and secured by a lien upon and pledge of the Pledged Funds in accordance with the terms of this Resolution. The Issuer may cause any Series of Notes to be payable from and secured by a Credit Facility or a Note· Insurance Policy not applicable to anyone or more other Series of Notes. No Holder of any Note or any Credit Bank or any Insurer shall ever have the right to compel the exercise of the ad valorem taxing power of the Issuer to pay such Note or shall be entitled to payment of such Note from any moneys of the Issuer except the Pledged Funds, in the manner provided herein. The Pledged Funds shall be subject to the lien of this pledge immediately upon the issuance and delivery of the Series 1996 Notes, without any physical delivery by the Issuer of the Pledged Funds or further act, and the lien of this pledge shall be valid and binding as against all parties having claims of any kind against the Issuer, in tort, contract or otherwise. Section 4.2 Security for Notes. The payment of the principal of or Redemption Price, if applicable, and interest on the Notes shall be secured forthwith equally and ratably by a lien on and pledge of the Pledged Funds; provided, however, a Series of Notes may be further secured by a Credit Facility or a Note Insurance Policy not applicable to anyone or more other Series of Notes, as shall be provided by Supplemental Resolution, in addition to the security provided herein. The Issuer does hereby irrevocably pledge the Pledged Funds to the paymcnt of the principal of or Redemption Price, if applicable, and interest on the Notes; provided, however, that as of any particular date the amount of moneys on dcposit in the Impact Fees 28 e - · Fund which may be applied to pay the principal of or Redemption Price, if applicable, and interest on the Notes shall not exceed the Impact Fees Debt Service Limit. The lien on and pledge of the Net Revenues in favor of the Notes is junior, subordinate and inferior in every respect to the pledge of and lien on the Net Revenues in favor of the Prior Lien Obligations. Section 4.3 Construction Fund. The Issuer covenants and agrees to establish a separate fund with an Authorized Depository to be known as the "City of Clermont Water and Sewer Revenue and Refunding Bond Anticipation Notes Construction Fund, " which shall be used only for payment of the Cost of the Project. Moneys in the Construction Fund, until applied in payment of any item of the Cost of the Project in the manner hereinafter provided, shall be held in trust by the Issuer and shall be subject to a lien and charge in favor of the Noteholders and for the further security of such Holders. There shall be paid into the Construction Fund the amounts required to be so paid by the provisions of this Resolution or any Supplemental Resolution, and there may be paid into the Construction Fund, at the option of the Issuer, any moneys received for or in connection with the Project by the Issuer from any other source. · The proceeds of insurance maintained pursuant to this Resolution against physical loss of or damage to the Project, or of contractors' performance notes with respect thereto pertaining to the period of construction thereof, shall be deposited into the Construction Fund. The Issuer cQvenants that the acquisition and construction of the Project will be completed without delay and in accordance with sound engineering practices. The Issuer shall make disbursements or payments from the Construction Fund to pay the Cost of the Project upon the filing with the Clerk of documents and/or certificates signed by an Authorized Issuer Officer stating with respect to each disbursement or payment to be made: (1) the item number of the payment, (2) the name and address of the Person to whom payment is due, (3) the amount to be paid, (4) the purpose, by general classification, for which payment is to be made, and (5) that (A) each obligation, item of cost or expense mentioned therein has been properly incurred, is in payment of a part of the Cost of the Project and is a proper charge against the account of the Construction Fund from which payment is to be made and has not been the basis of any previous disbursement or payment, or (B) each obligation, item of cost or expense mentioned therein has been paid by the Issuer, is a reimbursement of a part of the Cost of the Project, is a proper charge the Construction Fund, has not been theretofore reimbursed to the Issuer or otherwise been the basis of any previous disbursement or payment and the Issuer is entitled to reimbursement thereof. The Clerk shall retain all such documents and/or certificates of the Authorized Issuer Officers for seven (7) years from the dates of such documents and/or certificates. The Clerk shall make available the documents and/or certificates at all reasonable times for inspection by any Noteholder or the agent or representative of any Noteholder. · 29 · · · e e Notwithstanding any of the other provisions of this Section 4.3, to the extent that other moneys are not available therefor, amounts in the Construction Fund shall be applied to the payment of principal of or Redemption Price, if applicable, and interest on Notes when due. The date of completion of the Project shall be determined by the Authorized Issuer Officer who shall certify such fact in writing to the Governing Body. Promptly after the date of the completion of the Project, and after paying or making provisions for the payment of all unpaid items of the Cost of the Project, the Issuer shall deposit any balance of moneys remaining in the Construction Fund in such other fund or account of the Issuer, including those established hereunder, as shall be determined by the Governing Body, provided the Issuer has received an opinion of Bond Counsel to the effect that such transfer shall not adversely affect the exclusion, if any, of interest on the Notes from gross income for federal income tax purposes. Section 4.4 Funds and Accounts. The Issuer covenants and agrees to establish with one or more Authorized Depositories the following separate funds and accounts: (A) Water and Sewer System Revenue Fund. (B) Excise Taxes Fund. (C) Water and Sewer Revenue Bond Anticipation Notes Payment Account. (D) Water and Sewer System Impact Fees Fund. (E) Water and Sewer System Rate Stabilization Fund. (F) Water and Sewer Revenue Bond Anticipation Notes Rebate Fund. The Issuer may establish by Supplemental Resolution such other funds and accounts as it shall deem necessary or advisable. The Issuer shall at any time and from time to time appoint one or more Authorized Depositories to hold, for the benefit of the Issuer and/or the Noteholders, anyone or more of the funds and accounts established hereby. Such depository or depositaries shall perform at the direction of the Issuer the duties of the Issuer in depositing, transferring and disbursing moneys to and from each of such funds and accounts as herein set forth, and all records of such depository in performing such duties shall be open at all reasonable times to inspection by the Issuer and its agents and employees. Section 4.5 Flow of Funds. (A) Revenues. Whenever, from time to time, at any time the Net Revenues shall have been applied sufficiently for minimum compliance with the covenants, requirements and provisions of the Loan Agreement and the First Supplemental Loan Agreement, and such 30 . . e e . required deposits shall be made monùùy, the balance of any and all Net Revenues on deposit in the "Revenue Fund" created and established by the Loan Agreement for the benefit of the Loan which shall be in excess of the minimum requireme~r)ts for compliance with the covenants, requirements and provisions of the Loan Agreement and the First Supplemental Loan Agreement shaH forthwith, and not less frequently than monthly, be deposited 'into the Revenue Fund created by this Resolution. Whenever the covenants, requirements and provisions of the Loan Agreement and the First Supplemental Loan Agreement shall no longer require deposit of Net Revenues for the payment of the Prior Lien Obligations, the Issuer· shall deposit all Gross Revenues into the Revenue Fund, promptly upon the receipt thereof. On or before the last day of each month, commencing with the month in which delivery of the Series 1996 Notes shall be made to the purchasers thereof, the moneys in the Revenue Fund shall be deposited or credited in the following manner and in the following order of priority: (1) Operation and Maintenance. Amounts in the Revenue Fund shall be used first to pay reasonable and necessary Op'~rating Expenses for the next ensuing month; provided, however, that no such payment shall be made if such payment of Operating Expenses shall have been provided for pursuant to the provisions of the Loan Agreement or shall be made unless the provisions of Section 5.4 hereof in regard to the current Annual Budget are complied with. (2) Notes Payment Account. Next, the Issuer shall deposit into or credit to the Notes Payment Account such sums as are described in Section 4.5(D) hereof. . (3) Rate Stabilization Fund. The balance of any moneys remaining in the Revenue Fund after the payments and deposits required by parts (1) and (2) of this subsection 45(A) shall be deposited into or cre.dited to the Rate Stabilization Fund. The moneys on deposit in the Rate Stabilization Fund may be [trans'ferred, at the discretion of the Issuer, to any other appropriate fund or account of the Issuer and be used by the Issuer for any lawful purpose, including, but not Jímited to, the payment of the principal of or Redemption Price, if applicable, and intere.st on the Notes or any Subordinated Indebtedness hereafter issued. by the Issuer; provided, however, that on or prior to each principal and interest payment date for the Notes (in no event earlier than the fifteenth day of rhe month next preceding such payment date), moneys in the Rate Stabilization Fund shall be deposited into the Notes Payment Account when the mone·ys therein are or are expected to be insufficient to pay the principal of and interpt on the Notes coming due. (!3) Impact Fees. The Issuer shall deposit into the Impact Fees Fund all Available Impact Fees, promptly upon receipt thereof. TIle moneys in the Impact Fees Fund (i) may, to the extent such moneys may be lawfully used for such putpose, be applied at the discretion of the Issuer (1) for deposit into the Notes Payment Account whenever the moneys 31 . e e . on deposit therein, after applying the Net Revenues in the manner provided in subsection 4.5(A), are insufficient for the purposes set forth therein, (2) for the acquisition and construction of Expansion Facilities and (3) for the purchase or redemption of Notes; and (ii) shall, to the extent moneys on deposit in the Notes Payment Account are or are expected to be insufficient to pay the principal of and intcrest on the Notes coming due on any principal and interest payment date for the Notes, be deposited into the Notes Payment Account on or prior to such principal and interest payment date (but in no event earlier than the 15th day of the month next preceding such payment date); provided, however, that the aggregate amount of Available Impact Fees applied by the Issuer pursuant to clauses (i)(I) and (ii) to pay the principal of, Redemption Price, if applicable, and interest on the Notes shall not exceed the Impact Fees Debt Service Limit; and provided further, however, that the aggregate amount of Available Impact Fees applied by the Issuer pursuant to clause (i)(3) shall never exceed the aggregate Impact Fees Debt Service Components determined for all Notes. (C) Excise Taxes. The Issuer shall deposit all Excise Taxes into the Excise Taxes Fund created by this Resolution, promptly upon receipt thereof. On or before the last day of each month, commencing with the month in which the delivery of the Series 1996 Notes shall be made to the purchasers thereof, the moneys in the Excise Taxes Fund shall be deposited or credited in the following manner and in the following order of priority: (1) Notes Payment Account. The Issuer shall deposit into or credit to the Notes Payment Account such sums as are described Ín Section 4.5(D) hereof. . (2) Surplus Moneys. The balance of any moneys remaining in the Excise Taxes Fund after the payments and deposits required by subparagraph (1) of this subsection (B) may be transferred, at the discretion of the Issuer, to any other appropriate fund or account of the Issuer and be used by the Issuer for any lawful purpose, including, but not limited to, the payment of the principal of, Redemption Price, if applicable, and interest on any Subordinated Indebtedness hereafter issued by the Issuer. (D) Notes Payment Account. The, Issuer shall deposit into or credit to the Notes Payment Account the proceeds of the Notes representing accrued and capitalized interest. The Issuer shall deposit into or credit to the Notes Payment Account the sum which, together with the balance in said account, shall equal the interest on all Outstanding Notes accrued and unpaid and to accrue to the end of the then current calendar month (assuming that a year consists of twelve (12) equal calendar months of thirty (30) days each). Such deposit shall be made by the Issuer (i) first, from moneys in the Revenue Fund, (ü) second, from moneys in the Rate Stabilization Fund, (iii) third, from moneys in the Impact Fees Fund to the extent provided in Section 4.5(B) hereof, and (iv) fourth, from moneys in the Excise Taxes Fund. The Issuer shall adj ust the amount of the deposit into the Notes Payment Account not later than the month immediately preceding any Interest Date so as to provide sufficient moneys in the Notes Payment Account to pay the interest coming due on the Notes on such Interest Date. . 32 e - · The Issuer shall also deposit into or credit to the Notes Payment Account from the Pledged Funds and, to the extent necessary, from any other funds of the Issuer derived from sources other than ad valorem taxation, the sum required to pay the principal of and Redemption Price, if applicable, on all Outstanding Notes on the maturity date or the redemption date thereof, as the case may be. Moneys on deposit to the credit of the Notes Payment Account shall be applied in the manner provided herein solely for the payment of the principal of or Redemption price, if applicable, and interest on the Notes and shall not be available for any other purpose. Until such moneys shall have been applied to such purpose, there shall be a lien upon all of the moneys of the Notes Payment Account in favor of the Holders of the Notes. Any funds remaining on deposit to the credit of the Notes Payment Account after the principal of, Redemption Price, if applicable, and interest on the Notes shall have been paid in full shall be deposited in the Construction Fund or, if the Project shall have been completed and the Construction Fund closed, in the sinking fund for the Bonds, whereupon the Notes Payment Account shall be closed. (E) Purchase or Redemption of Notes. The Issuer, in its discretion, may use moneys in the Notes Payment Account to purchase or redeem Outstanding Notes, provided such purchase or redemption does not adversely affect the Issuer's ability to pay the principal or interest coming due on the Notes not so purchased or redeemed. · (F) Deposit of Moneys with Paying Agents. At least one (1) business day prior to the date established for payment of any principal of or Redemption Price, if applicable, or interest on the Notes, the Issuer shall withdraw from the Notes Payment Account sufficient moneys to pay such principal or Redemption Price, if applicable, or interest and deposit such moneys with the Paying Agent for the Notes to be paid. (G) Reimbursement of Credit Bank. In the case of Notes secured by a Credit Facility, amounts on deposit in any funds or accounts established for such Notes may be applied as provided in the applicable Supplemental Resolution to reimburse the Credit Bank for amounts drawn under such Credit Facility to pay the principal of or Redemption Price, if applicable, and interest on such Notes or to pay the purchase price of any such Notes which are tendered by the Holders thereof for payment. Section 4.6 Rebate Fund. Amounts on deposit in the Rebate Fund shall be held in trust by the Issuer and used solely to make required rebates to the United States Treasury (except to the extent the same may be transferred to the Revenue Fund) and the Noteholders shall have no right to have the same applied for debt service on the Notes. The Issuer agrees to undertake all actions required of it in its arbitrage certificate relating to each Series of Notes (other than Taxable Notes), and other instructions from Bond Counsel, delivered in connection with or subsequent to the issuance of such Notes, including, but not limited to: · 33 - . . e - (A) making a determination In accordance with the Code of the amount required to be deposited in the Rebate Fund; (B) depositing from moneys in the Revenue Fund or from other moneys of the Issuer derived from sources other than ad valorem taxation and legally available for such purpose the amount determined in subsection 4.6(A) above into the Rebate Fund; (C) paying on the dates and in the manner required by the Code to the United States Treasury from the Rebate Fund and any other legally available moneys of the Issuer such amounts as shall be required by the Code to be rebated to the United States Treasury; and (D) keeping such records of the determinations made pursuant to this Section 4.6 as shall be required by the Code, as well as evidence of the fair market value of any investments purchased with proceeds of the Notes. The provisions of the above-described arbitrage certificate and instructions of Bond Counsel may be amended from time to time as shall be necessary, in the opinion of Bond Counsel, to comply with the provisions of the Code. Section 4.7 Investments. Each fund and account established hereby shall be continuously secured in the manner by which the deposit of public funds are authorized to be secured by the laws of the State. Moneys on deposit in each fund and account may be invested and reinvested in Authorized Investments maturing not later than the date on which the moneys therein will be needed. Any and all income received by the Issuer from the investment of moneys in the Revenue Fund, the Excise Taxes Fund, the Construction Fund, the Rebate Fund, the Notes Payment Account, the Rate Stabilization Fund and the Impact Fees Fund shall be retained in such respective fund or account. All investments shall be valued at cost. Nothing contained in this Resolution shall prevent any Authorized Investments acquired as investments of or security for funds held under this Resolution from being issued or held in book-entry form on the books of the Department of the Treasury of the United States. Section 4.8 Separate Accounts. The moneys required to be accounted for in each of the foregoing funds and accounts established herein may be deposited in a single bank account, and funds allocated to the various funds and accounts established herein may be invested in a common investment pool, provided that adequate accounting rccords are maintained to reflect and control the restricted allocation of the moneys on dcposit therein and such investments for the various purposes of such funds and accounts as herein provided. The designation and establishment of the various funds and accounts in and by this Resolution shall not be construed to require the establishment of any completely independent, 34 e e e self-balancing funds as such term is commonly defined and used in governmental accounting, but rather is intended solely to constitute an earmarking of certain revenues for certain purposes and to establish certain priorities for application of such revenues as herein provided. ARTICLE 5 COVENANTS Section 5.1 General. In addition to all of the other covenants of the Issuer contained in this Resolution, the Issuer hereby covenants with each and every successive Holder of any of the Notes so long as any of the Notes shall remain Outstanding each and every one of the covenants contained in this Article 5. Section 5.2 Sale of Bonds or Refunding Notes. The Issuer shall in good faith endeavor to sell a sufficient principal amount of the Bonds or of an additional series of Notes in order to have funds available to pay each Series of Outstanding Notes and the interest thereon on the maturity date thereof. - Section 5.3 Operation and Maintenance. The Issuer will maintain or cause to be maintained the System and all portions thereof in good condition and will operate or cause to be operated the same in an efficient and economical manner, making or causing to be made such expenditures for equipment and for renewals, repairs and replacements as may be proper for the economical operation and maintenance thereof. Section 5.4 Annual Budget. The Issuer shall annually prepare and adopt, prior to the beginning of each Fiscal Year, an Annual Budget in accordance with applicable law. No expenditure for the operation and maintenance of the System shall be made in any Fiscal Year in excess of the amount provided therefor in the Annual Budget (A) without a written finding and recommendation by an Authorized Issuer Officer, which finding and recommendation shall state in detail the purpose of and necessity for such increased expenditures, and (B) until the Governing Body shall have approved such finding and recommendation by resolution. If for any reason the Issuer shall not have adopted the Annual Budget before the first day of any Fiscal Year, other than the first Fiscal Year, the preliminary budget for such Fiscal Year, if it be approved by the Consulting Engineers, shall be deemed to be in effect for such Fiscal Year until the Annual Budget for such Fiscal Year shall be adopted; and if the preliminary budget shall not have been approved by the Consulting Engineers, the Annual Budget for the preceding Fiscal Year shall be deemed to continue in effect. The Issuer may at any time adopt an amended Annual Budget for the then current Fiscal Year, but no such amended Annual Budget shall supersede any prior budget until it shall be approved by the Consulting Engineers as reasonable and necessary. . 35 · e e e e The Issuer shall mail copies of such Annual Budgets and amended Annual Budgets and all resolutions authorizing increased expenditures for operation and maintenance to any Holder who shall file an address with the Clerk and request in writing that copies of all such Annual Budgets and resolutions be furnished to such Holder and shall make available all such Annual Budgets and resolutions authorizing increased expenditures for operation and maintenance of the System at all reasonable times to any Holder or to anyone acting for or on behalf of any Holder. The Issuer shall be permitted to make a reasonable charge for furnishing to any Holder such Annual Budgets and resolutions. Section 5.5 Rates. The Issuer shall fIx, establish, maintain and collect such Rates and revise the same from time to time, whenever necessary, as will always provide in each Fiscal Year Net Revenues and Excise Taxes, together with (i) moneys on deposit in the Rate Stabilization Fund and (ii) moneys on deposit in the Impact Fees Fund to the extent such moneys do not exceed the Impact Fees Debt Service Limit, adequate at all times to pay in each Fiscal Year at least one hundred twenty five. percent (125 %) of the principal of and interest on the Prior Lien Obligations becoming due in 'such Fiscal Year and all reserve, sinking fund or other payments required by the Loan Agreement becoming due in such Fiscal Year and at least one hundred percent (100 %) of the current annual interest payments becoming due in such Fiscal Year on the Notes. Such Rates shall not be so reduced so as to be insufficient to provide Net Revenues fully adequate for the purposes provided therefor by this Resolution. If, in any Fiscal Year, the Issuer shall fail to comply with the requirements contained in this Section 5.5 above, it shall cause the Consulting Engineers to review its Rates, Gross Revenues, Operating Expenses and methods of operation and to make written recommendations as to the methods by which the Issuer may promptly seck to comply with the requirements set forth in Section 5.5 above. The Issuer shall forthwith commence to implemcnt such recommendations to the extent required so as to cause it to thereafter comply with said requirements. Section 5.6 Books and Records. The Issuer shall keep books, records and accounts of the operation of the System, and of Gross Revenues, Excise Taxes, Operating Expenses and Impact Fees, and the Holders of any Notes Outstanding or the duly authorized representatives thereof shall have the right at all reasonable times to inspect all books, records and accounts of the Issuer relating thereto. Section 5.7 Annual Audit. The Issuer shall, immediately after the close of each Fiscal Year, cause the books, records and accounts relating to the System and the receipt of the Excise Taxes to be properly audited by a recognized independent firm of certified public accountants, and shall require such accountants to complete their report of such Annual Audit in accordance with applicable law. Such Annual Audits shall contain, but not be limited to, a balance sheet, an income statement, a statement of changes in financial position, a statement of changes in retained earnings, a statement of the number and classification of users and services of the System and rates associated with such services, a statement of insurance coverage, and any other statements as required by law or accounting convention, and a certificate by such 36 . . e e e. accountants disclosing any material default on the part of the Issuer of any covenant or agreement herein. Each Annual Audit shall be in conformity with generally accepted accounting principles. A copy of each Annual Audit shall regularly be furnished to any Insurer, to any Credit Bank and to any Holder who shall have furnished an address to the Clerk and requested in writing that the same be furnished to such Holder. The Issuer shall be permitted to make a reasonable charge for furnishing to any Holder such Annual Audit. Section 5.8 No Mortgage or Sale of the System. The Issuer irrevocably covenants, binds and obligates itself not to sell, lease, encumber or in any manner dispose of the System as a whole or any substantial part thereof (except as provided below) until all of the Notes and all interest thereon shall have been paid in full or provision for payment has been made in accordance with Section 9.1 hereof. The foregoing provision notwithstanding, the Issuer shall have and hereby reserves the right to sell, lease or otherwise dispose of any of the property comprising a part of the System in the following manner, if any 'one of the following conditions exist: (A) such property is not necessary for the operation of the System, (B) such property is not useful in the operation of the System, (C) such property is not profitable in the operation of the System, or (D) in the case of a lease of such property, will be advantageous to the System and will not adversely affect the security for the Noteholders. The proceeds from such sale, lease or other disposition shall be deposited into the Revenue Fund. Prior to any such sale, lease or other disposition of said property: (1) if the amount to be received therefor is not in excess of one-half (112) of one percent (1 %) of the value of the gross plant of the System at original cost, an Authorized Issuer Officer shall make a finding in writing determining that one or more of the conditions for sale, lease or disposition of property provided for in the second paragraph of this Section 5.8 have been met; or (2) if the amount to be received from such sale, lease or other disposition of said property shall be in excess of one-half (1/2) of one percent (1 %) of the value of the gross plant of the System at original cost, an Authorized Issuer Officer and the Consulting Engineers shall each first make a finding in writing determining that one or more of the conditions for sale, lease or other disposition of property provided for in the second paragraph of this Section 5.8 have been met, and the Governing Body of the Issuer shall, by resolution, duly adopt, approve and concur in the finding of an Authorized Issuer Officer and the Consulting Engineers. The transfer of the System as a whole from the control of the Governing Body to some other board or authority which may hereafter be created for such purpose and which constitutes a governmental entity, interest on obligations issued by which is excluded from gross income of the holders thereof for federal income tax purposes under Section 103 of the Code, shall not be deemed prohibited by this Section 5.8 and such successor board or authority shall fall within the definition of "Issuer" in Section 1.1 hereof. Notwithstanding the foregoing provisions of this Section 5.8, the Issuer shall have the authority to sell for fair and reasonable consideration any land comprising a part of the 37 e e e System which is no longer necessary or useful in the operation of the System and the proceeds derived from the sale of such land shall be disposed of in accordance with the provisions of the fourth paragraph of this Section 5.8. The Issuer may make contracts or grant licenses for the operation of, or grant easements or other rights with respect to, any part of the System if such contract, license, easement or right does not, in the opinion of the Consulting Engineers, as evidenced by a certificate to that effect filed with the Issuer, impede or restrict the operation by the Issuer of the System, but any payments to the Issuer under or in connection with any such contract, license, easement or right in respect of the System or any part thereof shall constitute Gross Revenues. Section 5.9 Insurance. The Issuer will carry such insurance as is ordinarily carried by private or public corporations owning and operating utilities similar to the System with a reputable insurance carrier or carriers, including public and product liability insurance in such amounts as the Issuer shall determine to be sufficient and such other insurance against loss or damage by fire, explosion (including underground explosion), hurricane, tornado or other hazards and risks, and said property loss or damage insurance shall at all times be in an amount or amounts equal to the fair appraisal value of the buildings, properties, furniture, fixtures and equipment of the System, or such other amount or amounts as the Consulting Engineers shall approve as sufficient. . The Issuer may establish certain minimum levels of insurance for which the Issuer may self-insure. Such minimum levels of insurance shall be in amounts as recommended in writing by an insurance consultant who has a favorable reputation and experience and is qualified to survey risks and to recommend insurance coverage for Persons engaged in operations similar to the System. Section 5.10 No Free Service. The Issuer will not render, or cause to be rendered, any free services of any nature by its System or any part thereof, nor will any preferential rates be established for users of the same class. Section 5.11 No Impairment. The Issuer will not enter into any contract or contracts, nor take any action, the results of which might impair the rights of the Holders and will not permit the operation of any competing water or sewer service facilities in the Issuer; provided, however, the Issuer reserves the right to permit the ownership and operation of water or sewer service facilities or both by itself or by others in any territory which is not in any service area now or hereafter served by the System. Section 5.12 Compulsory Connections. In order better to secure the prompt payment of principal and interest on the Notes, as well as for the purpose of protecting the health and welfare of the inhabitants of the Issuer, and acting under authority of the Act or other applicable laws of the State, the Issuer will require (A) every owner of each lot in the Issuer which abuts upon any street or public way containing a water line forming a part of the water . 38 e e · facilities of the System and upon which lot a building shall subsequently be constructed for residential, commercial or industrial use, to connect such building to such water facilities, and (B) every owner of each lot in the Issuer which abuts upon any street or public way containing a sewer line forming a part of the sewer facilities of the System and upon which lot a building shall subsequently be constructed for residential, commercial or industrial use, to connect such building to such sewer facilities and to cease to use any other method for the disposal of sewage waste or other polluting matter. Section 5.13 Enforcement of Charges. The Issuer shall compel the prompt payment of Rates for service rendered on every lot or parcel connected with the System, and to that end will vigorously enforce all of the provisions of any ordinance or resolution of the Issuer having to do with connections to the facilities of the System and charges therefor, and all of the rights and remedies permitted the Issuer under law, including the requirement for the making of a reasonable deposit by each user, and the requirement for disconnection of all premises delinquent in the payment, and the securing of injunction against the disposition of sewage or industrial waste into the sewer facilities of the System by any premises delinquent in the payment of such charges. · Section 5.14 Collection of Impact Fees. The Issuer shall proceed diligently to perform legally and effectively all steps required. in the imposition and collection of the Impact Fees. Upon the due date of any such Impact Fees, the Issuer shall diligently proceed to collect the same and shall exercise all legally available remedies to enforce such collections now or hereafter available under State law. Section 5.15 Consulting Engineers. The Issuer shall employ Consulting Engineers from time to time whenever necessary for compliance with the provisions of this Resolution, whose duties shall be to make any certificates and perform any other acts required or permitted of the Consulting Engineers under this Resolution, and also to review the construction and operation of the System. Section 5.16 Levy of Excise Taxes. The Issuer shall not repeal the ordinances now in effect levying the Excise Taxes and will not amend or modify said ordinances in any manner so as to impair or adversely affect the power and obligation of the Issuer to levy and collect the Excise Taxes or impair or adversely affect in any manner the pledge of the Excise Taxes made herein or the rights of the Noteholders. The Issuer shall be unconditionally and irrevocably obligated, so long as any of the Notes or the interest thereon are outstanding and unpaid, to levy and collect the Excise Taxes at such rates, not exceeding the maximum rates permitted by law, as shall be necessary to provide funds which, together with the portion of the Gross Revenues and the portion of the Impact Fees available for payment of the Notes, shall be sufficient to pay, as the same shall become due, the principal of and interest on the Notes, Operating Expenses and all other payments herein required. This provision shall not be construed to prevent reasonable revisions of the rates of the Excise Taxes as long as the proceeds of the Excise Taxes to be collected by the Issuer in each year thereafter, together with the portion of the Gross Revenues and the portion of the Impact Fees available for payment of the · 39 e e . Notes, will be sufficient to pay, as the same shall become due, the principal of and interest on the Notes, Operating Expenses and all other payments required by this Resolution to be made in such year. Section 5.17 Covenants With Credit Banks and Insurers. The Issuer may make such covenants as it may in its sole discretion determine to be appropriate with any Insurer, Credit Bank or other financial institution that shall agree to insure or to provide for Notes of any one or more Series credit or liquidity support that shall enhance the security or the value of such Notes. Such covenants may be set forth in the applicable Supplemental Resolution and shall be binding on the Issuer, the Registrar, the Paying Agent and all the Holders the same as if such covenants were set forth in full in this Resolution. Section 5.18 Federal Income Tax Covenants: Taxable Notes. (A) The Issuer covenants with the Holders of each Series of Notes (other than Taxable Notes), that it shall not use the proceeds of such Series of Notes in any manner which would cause the interest on such Series of Notes to be or become includable in the gross income of the Holder thereof for federal income tax purposes. . (B) The Issuer covenants with the Holders of each Series of Notes (other than Taxable Notes) that neither the Issuer nor any Person under its control or direction will make any use of the proceeds of such Series of Notes (or amounts deemed to be proceeds under the Code) in any manner which would cause such Series of Notes to be "arbitrage notes" within the meaning of Section 148 of the Code, and neither the Issuer nor any other Person shall do any act or fail to do any act which would cause the interest on such Series of Notes to become includable in the gross income of the Holder thereof for federal income tax purposes. (C) The Issuer hereby covenants with the Holders of each Series of Notes (other than Taxable Notes) that it will comply with all provisions of the Code necessary to maintain the exclusion of interest on such series of Notes from the gross income of the Holder thcreof for federal income tax purposes, including, in particular, the paymcnt of any amount required to be rebated to the United States Treasury pursuant to the Code. (D) The Issuer may, if it so elects, issue one or more Series of Taxable Notes the interest on which is (or may be) includable in the gross income of the Holder thereof for federal income taxation purposes, so long as each Note of such Series states in the body thereof that interest payable thereon is (or may be) subject to federal income taxation and provided that the issuance thereof will not cause the interest on any other Notes theretofore issued hereunder to be or become includable in the gross income of the Holder thereof for federal income tax purposes. Section 5.19 Continuing Disclosure. The Issuer agrees that it will comply with and carry out all of the provisions of the Continuing Disclosure Certificate executed by the Issuer and dated the date of issuance of the Series 1996 Notes, as originally executed and as it . 40 · · · e e may be amended from time to time in accordance with the terms thereof (the "Continuing Disclosure Certificate"). Notwithstanding any other provision of this Resolution, failure of the Issuer to comply with the Continuing Disclosure Certificate shall not be considered an Event of Default; however, any Noteholder or Beneficial Owner (as hereinafter defined) may take such actions as may be necessary and appropriate, including seeking mandamus or specific performance by court order, to cause the Issuer to comply with its obligations under this Section 5.19. For purposes of this Section 5.19, "Beneficial Owner" means any person which (a) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Series 1996 Notes (including persons holding Series 1996 Notes through nominees, depositories or other intermediaries), or (b) is treated as the owner of any Series 1996 Notes for federal income tax purposes. ARTICLE 6 SUBORDINATED INDEBTEDNESS Section 6.1 No Additional Obligations. The Issuer covenants and agrees that while the Notes shall remain Outstanding hereunder, the Issuer will not issue any additional obligations or incur any additional indebtedness payable from the Pledged Funds or any portion thereof, except the Bonds, refunding Notes or Subordinated Indebtedness as provided in Section 6.2 hereof. Section 6.2 Subordinated Indebtedness. The Issuer will not issue any other obligations payable from the Pledged Funds or voluntarily create or cause to be created any debt, lien, pledge, assignment, encumbrance or other charge having priority to or being on a parity with the lien thereon in favor of the Notes and the interest thereon. The Issuer may at any time or from time to time issue evidences of indebtedness that are payable in whole or in part out of the Pledged Funds and which may be secured by a pledge of the Pledged Funds; provided, however, that such pledge shall be, and shall be expressed to be, subordinated in all respects to the pledge of the Pledged Funds created by this Resolution. The Issuer agrees to pay promptly any Subordinated Indebtedness as the same shall become due. ARTICLE 7 DEFAULTS AND REMEDIES Section 7.1 Events of Default. The following events shall each constitute an "Event of Default" hereunder: (A) Default shall be made in the payment of the principal of, redemption premium or interest on any Note when due. 41 e - . (B) There shall occur the dissolution or liquidation of the Issuer, or the filing by the Issuer of a voluntary petition in bankruptcy, or the commission by the Issuer of any act of bankruptcy, or adjudication of the Issuer as a bankrupt, or assignment by the Issuer for the benefit of its creditors, or appointment of a receiver for the Issuer, or the entry by the Issuer into an agreement of composition with its creditors, or the approval by a court of competent jurisdiction of a petition applicable to the Issuer in any proceeding for its reorganization instituted under the provisions of the Federal Bankruptcy Act, as amended, or under any similar act in any jurisdiction which may now be in effect or hereafter enacted. (C) The Issuer shall default in the due and punctual performance of any other of the covenants, conditions, agreements and provisions contained in the Notes or in this Resolution on the part of the Issuer to be performed, and such default shall continue for a period of thirty (30) days after written notice of such default shall have been received from any Insurer or the Holders of not less than twenty-five percent (25 %) of the aggregate principal amount of Notes Outstanding or any Credit Bank. Notwithstanding the foregoing, the Issuer shall not be deemed in default hereunder if such default can be cured within a reasonable period of time and if the Issuer in good faith institutes curative action and diligently pursues such action until the default has been corrected. . Section 7.2 Remedies. Any Holder of Notes issued under the provisions of this Resolution or any trustee or receiver acting for such Noteholders may either at law or in equity, by suit, action, mandamus or other proceedings in any court of competent jurisdiction, protect and enforce any and all rights under the laws of the State, or granted and contained in this Resolution, and may enforce and compel the performance of all duties required by this Resolution or by any applicable statutes to be performed by the Issuer or by any officer thereof. The Holder or Holders of Notes in an aggregate principal amount of not less than twenty-five percent (25 %) of the Notes then Outstanding may by a duly executed certificate in writing appoint a trustee for Holders of Notes issued pursuant to this Resolution with authority to represent such Noteholders in any legal proceedings for the enforcement and protection of the rights of such Noteholders and such certificate shall be executed by such Noteholders or their duly authorized attorneys or representatives, and shall be fùed in the office of the Clerk. Notice of such appointment, together with evidence of the requisite signatures of the Holders of not less than twenty-five percent (25 %) in aggregate principal amount of Notes Outstanding and the trust instrument under which the trustee shall have agreed to serve shall be filed with the Issuer and the trustee and notice of appointment shall be given to all Holders of Notes in the same manner as notices of redemption are given hereunder. After the appointment of the first trustee hereunder, no further trustees may be appointcd; however, thc Holdcrs of a majority in aggregate principal amount of all the Notes then Outstanding may remove thc trustce initially appointed and appoint a successor and subsequent successors at any time. Section 7.3 Directions to Trustee as to Remedial Proceedings. The Holders of a majority in principal amount of the Notes then Outstanding (or any Insurer insuring, or any Credit Bank providing a Credit Facility for, any then Outstanding Notes) have the right, by an . 42 - e · instrument or concurrent instruments in writing executed and delivered to the trustee, to direct the method and place of conducting all remedial proceedings to be taken by the trustee hereunder, provided that such direction shall not be otherwise than in accordance with law or the provisions hereof, and that the trustee shall have the right to decline to follow any such direction which in the opinion of the trustee would be unjustly prejudicial to Holders of Notes not parties to such direction. Section 7.4 Remedies Cumulative. No remedy herein conferred upon or reserved to the Noteholders is intended to be exclusive of any other remedy or remedies, and each and every such remedy shall be cumulative, and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute. Section 7.5 Waiver of Default. No delay or omission of any Noteholder 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 an acquiescence therein; and every power and remedy given by Section 7.2 of this Resolution to the Noteholders may be exercised from time to time, and as often as may be deemed expedient. Section 7.6 AppIication of Moneys After Default. If an Event of Default shall happen and shall not have been remedied, the Issuer or a trustee or receiver appointed for the purpose shall apply all Pledged Funds as follows and in the following order: · (A) To the payment of the reasonable and proper charges, expenses and liabilities of the trustee or receiver, Registrar and Paying Agent hereunder; and (B) To tfie· payment of the interest and principal or Redemption Price, if applicable, then due on the Notes, as follows: (1) Unless the principal of all the Notes shall have become due and payable, all such moneys shall be applied: FIRST: to the payment to the Persons entitled thereto of all installments of interest then due, in the order of the maturity of such installments, and, if the amount available shall not be sufficient to pay in full any particular installment, then to the payment ratably, according to the amounts due on such installment, to the Persons entitled thereto, without any discrimination or preference; SECOND: to the payment to the Persons entitled thereto of the unpaid principal of any of the Notes which shall have become due at maturity (other than Notes called for redemption for the payment of which moneys are held pursuant to the provisions of Section 9.1 of this Resolution), in the order of their due dates, with interest upon such Notes from the respective dates upon which they became due, and, if the amount available shall not be sufficient to pay in full Notes due on any particular date, together with such interest, then to the payment first of such interest, ratably according to the · 43 . . . - e amount of such interest due on such date, and then to the payment of such principal, ratably according to the amount of such principal due on such date, to the Persons entitled thereto without any discrimination or preference; and THIRD: to the payment of the Redemption Price of any Notes called for optional redemption pursuant to the provisions of this Resolution. (2) If the principal of all the Notes shall have become due and payable, all such moneys shall be applied to the payment of the principal and interest then due and unpaid upon the Notes, with interest thereon as aforesaid, without preference or priority of principal over interest or of interest over principal, or of any installment of interest over any other installment of interest, or of any Note over any other Note, ratably, according to the amounts due respectively for principal and interest, to the Persons entitled thereto without any discrimination or preference. Section 7.7 Control by Insurer or Credit Bank. Upon the occurrence and continuance of an Event of Default, any Insurer or Credit Bank, if such Insurer or Credit Bank shall have honored all of its commitments under its Note Insurance Policy or its Credit Facility, as the case may be, shall be entitled to direct and control the enforcement of all rights and remedies with respect to the Notes it shall insure or for which such Credit Facility is provided. ARTICLE 8 SUPPLEMENTAL RESOLUTIONS Section 8.1 Supplemental Resolution Without Noteholders' Consent. The Issuer, from time to time and at any time, may adopt such Supplemental Resolutions without the consent of the Noteholders (which Supplemental Resolution shall thereafter form a part hereof) for any of the following purposes: (A) To cure any ambiguity or formal defect or omission or to correct any inconsistent provisions in this Resolution or to clarify any matters or questions arising hereunder. (B) To grant to or confer upon the Noteholders any additional rights, remedies, powers, authority or security that may lawfully be granted to or conferred upon the Noteholders. (C) To add to the conditions, limitations and restrictions on the issuance of Notes under the provisions of this Resolution other conditions, limitations and restrictions thereafter to be observed. (D) To add to the covenants and agreements of the Issuer in this Resolution other covenants and agreements thereafter to be observed by the Issuer or to surrender any right or power herein reserved to or conferred upon the Issuer. 44 . . . - - (E) To specify and determine at any time prior to the first delivery of any Series of Notes the matters and things referred to in Sections 2.1 or 2.2 hereof, and also any other matters and things relative to such Notes which are not contrary to or inconsistent with this Resolution as theretofore in effect, or to amend, modify or rescind any such authorization, specification or determination. (F) To change or modify the description of the Project. (G) To authorize Subordinated Indebtedness. (H) To make any other change that, in the opinion of Bond Counsel, would not materially adversely affect the security for the Notes. In making such determination, Bond Counsel shall not take into consideration any Note Insurance Policy. Except Supplemental Resolutions described in subsections (E), (F) and (H) of this Section 8.1, no Supplemental Resolution adopted pursuant to this Article 8 shall become effective unless approved by each Insurer; and the Issuer covenants and agrees to furnish to each Insurer an executed original transcript of the Issuer's proceedings with respect to the adoption of each Supplemental Resolution. Section 8.2 Supplemental Resolution With Noteholders'. Insurer's and Credit Bank's Consent. Subject to the terms and provisions contained in this Section 8.2 and Section 8.1 hereof, the Holder or Holders of not less than a majority in aggregate principal amount of the Notes then Outstanding shall have the right, from time to time, anything contained in this Resolution to the contrary notwithstanding, to consent to and approve the adoption of such Supplemental Resolution or'Resolutions hereto as shall be deemed necessary or desirable by the Issuer for the purpose of supplementing, modifying, altering, amending, adding to or rescinding, in any particular, any of the terms or provisions contained in this Resolution; provided, however, that if such modification or amendment will, by its terms, not take effect so long as any Notes of any specified Series or maturity remain Outstanding, the consent of the Holders of such Notes shall not be required and such Notes shall not be deemed to be Outstanding for the purpose of any calculation of Outstanding Notes under this Section 8.2. Any Supplemental Resolution which is adopted in accordance with the provisions of this Scction 8.2 shall also require the written consent of the Insurer of, or any Credit Bank providing a Credit Facility for, any Notes which are Outstanding at the time such Supplemental Resolution shall take effect. No Supplemental Resolution may be approved or adopted which shall permit or require (A) an extension of the maturity of the principal of or the payment of the interest on any Note issued hereunder, (B) reduction in the principal amount of any Note or the Redemption Price or the rate of interest thereon, (C) the creation of a lien upon or a pledge of the Pledged Funds other than the lien and pledge created by this Resolution which adversely affects any Noteholders, (D) a preference or priority of any Note or Notes over any other Note or Notes, or (E) a reduction in the aggregate principal amount of the Notes required for consent to such Supplemental Resolution. Nothing herein contained, however, shall be construed as making necessary the 45 - e . approval by Noteholders, the Insurer or the Credit Bank of the adoption of any Supplemental Resolution as authorized in Section 8.1 hereof. If at any time the Issuer shall determine that it is necessary or desirable to adopt any Supplemental Resolution pursuant to this Section 8.2, the Clerk shall cause the Registrar to give notice of the proposed adoption of such Supplemental Resolution and the form of consent to such adoption to be mailed, postage prepaid, to all Noteholders at their addresses as they appear on the registration books and to all Insurers of, and Credit Banks providing a Credit Facility for, Notes Outstanding. Such notice shall briefly set forth the nature of the proposed Supplemental Resolution and shall state that copies thereof are on file at the offices of the Clerk and the Registrar for inspection by all Noteholders. The Issuer shall not, however, be subject to any liability to any Noteholder by reason of its failure to cause the notice required by this Section 8.2 to be mailed and any such failure shall not affect the validity of such Supplemental Resolution when consented to and approved as provided in this Section 8.2. . Whenever the Issuer shall deliver to the Clerk an instrument or instruments in writing purporting to be executed by the Holders of not less than a majority in aggregate principal amount of the Notes then Outstanding, which instrument or instruments shall refer to the proposed Supplemental Resolution described in such notice and shall specifically consent to and approve the adoption thereof in substantially the form of the copy thereof referred to in such notice, thereupon, but not otherwise, the Issuer may adopt such Supplemental Resolution in substantially such form, without liability or responsibility to any Holder of any Note, whether or not such Holder shall have consented thereto. If the Holders of not less than a majority in aggregate principal amount of the Notes Outstanding at the ~ime of the adoption of such Supplemental Resolution shall have consented to and approved the adoption thereof as herein provided, no Holder of any Note shall have any right to object to the adoption of such Supplemental Resolution, or to object to any of the terms and provisions contained therein or the operation thereof, or in any manner to question the propriety of the adoption thereof, or to enjoin or restrain the Issuer from adopting the same or from taking any action pursuant to the provisions thereof. Upon the adoption of any Supplemental Resolution pursuant to the provisions of this Section 8.2, this Resolution shall be deemed to be modified and amended in accordance therewith, and the respective rights, duties and obligations under this Resolution of the Issuer and all Holders of Notes then Outstanding shall thereafter be determined, exercised and enforced in all respects under the provisions of this Resolution as so modified and amended. Section 8.3 Amendment with Consent of Insurer and/or Credit Bank Only. If all of the Notes Outstanding hereunder are insured or secured as to payment of principal and interest by an Insurer or Insurers and/or by a Credit Facility provided by a Credit Bank or Credit Banks, and the Insurer or Insurers and/or the Credit Bank or Credit Banks, as applicable, are not in default, and the Notes, at the time of the hereinafter described amendment, shall be rated by the rating agencies which shall have rated the Notes at the time such Notes were . 46 . . . e - insured or such Credit Facility was provided no lower than the ratings assigned thereto by such rating agencies on the date such Notes were insured or such Credit Facility was provided, the Issuer may enact one or more Supplemental Resolutions amending all or any part of Articles 1, 4, 5, 6 and 7 hereof with the written consent of said Insurer or Insurers and/or said Credit Bank or Credit Banks, as applicable, and the acknowledgment by said Insurer or Insurers and/or said Credit Bank or Credit Banks that its Note Insurance Policy or its Credit Facility, as the case may be, will remain in full force and effect. The consent of the Holders of any Notes shall not be necessary. The foregoing right of amendment, however, does not apply to any amendment to Section 5.18 hereof with respect to the exclusion, if applicable, of interest on said Notes from the gross income of the Holders thereof for federal income tax purposes nor may any such amendment deprive the Holders of any Note of right to payment of the Notes from, and their lien on, the Pledged Funds and any additional security pledged hereunder. Upon flling with the Clerk of evidence of such consent of the Insurer or Insurers and/or the Credit Bank or Credit Banks as aforesaid, the Issuer may adopt such Supplemental Resolution. After the adoption by the Issuer of such Supplemental Resolution, notice thereof shall be mailed in the same manner as notice of an amendment under Section 8.2 hereof. ARTICLE 9 MISCELLANEOUS Section 9. 1 Defeasance. If the Issuer shall payor cause to be paid or there shall otherwise be paid to the Holders of all Notes the principal or Redemption Price, if applicable, and interest due or to become due thereon, at the times and in the manner stipulated therein and in this Resolution, then thé pledge of the Pledged Funds and any additional security pledged hereunder, and all covenants, agreements and other obligations of the Issuer to the Noteholders, shall thereupon cease, terminate and become void and be discharged and satisfied. In such event, the Paying Agents shall pay over or deliver to the Issuer all money or securities held by them pursuant to this Resolution which are not required for the paymcnt or redemption of Notcs not theretofore surrendered for such payment or redemption. Any Notes or interest installments appertaining thereto, whether at or prior to the maturity or redemption date of such Notes, shall be deemed to have becn paíd within the meaning of this Section 9.1 if (A) in case any such Notes are to be redeemed prior to the maturity thereof, there shall have been taken all action necessary to call such Notes for redemption and notice of such redemption shall have been duly given or provision shall have been made for the giving of such notice, and (B) there shall have been deposited in irrevocable trust with a banking institution or trust company by or on behalf of the Issuer either moneys in an amount which shall be sufficient, or Securities the principal of and the interest on which when due will provide moneys which, together with the moneys, if any, deposited with such bank or trust company at the same time shall be sufficient, to pay the principal of or Redemption Price. if applicable, and interest due and to become due on said Notes on and prior to the redemption date or maturity date thereof, as the case may be. Neither the Securities nor any moneys so 47 e e . deposited with such bank or trust company nor any moneys received by such bank or trust company on account of principal of or Redemption Price, if applicable, or interest on said Securities shall be withdrawn or used for any purpose other than, and all such moneys shall be held in trust for and be applied to, the payment, when due, of the principal of or Redemption Price, if applicable, of the Notes for the payment or redemption of which they were deposited and the interest accruing thereon to the date of maturity or redemption thereof; provided, however, the Issuer may substitute new Securities and moneys for the deposited Securities and moneys if the new Securities and moneys are sufficient to pay the principal of or Redemption Price, if applicable, and interest on such Notes. In the event the Notes for which moneys are to be deposited for the payment thereof in accordance with this Section 9.1 are not by their terms subject to redemption within the next succeeding sixty (60) days, the Issuer shall cause the Registrar to mail a notice to the Holders of such Notes that the deposit required by this Section 9.1 of moneys or Securities has been made and said Notes are deemed to be paid in accordance with the provisions of this Section 9.1 and stating such maturity or.redemption date upon which moneys are to be available for the payment of the principal of or Redemption Price, if applicable, and interest on said Notes. Nothing herein shall be deemed to require the Issuer to call any of the Outstanding Notes for redemption prior to maturity pursuant to any applicable optional redemption provisions, or to impair the discretion of the Issuer in determining whether to exercise any such . option for early redemption. In the event that the principal of or Redemption Price, if applicable, and interest due on the Notes or any ponion thereof shall be paid by an Insurer or Insurers or a Credit Bank or Credit Banks, such Notes or any portion thereof shall remain Outstanding, shall not be defeased and shall not be considered paid by the Issuer, and the pledge of the Pledged Funds and any additional security pledged hereunder, and all covenants, agreements and other obligations of the Issuer to the Noteholders shall continue to exist and such Insurer or Insurers or such Credit Bank or Credit Banks shall be subrogated to the rights of such Noteholders. Section 9.2 Approval of Preliminary Official Statement. The Preliminary Official Statement, with such omissions, insertions and variations as may be necessary and/or desirable and approved by the Mayor and the City Manager prior to the release thereof, is hereby approved, and the Preliminary Official Statement, as so modified, is hereby authorized to be delivered by the Issuer to the Underwriter for distribution prior to the execution and delivery of the purchase contract between the Issuer and the Underwriter relating to the purchase of the Series 1996 Notes; and the Mayor is hereby authorized to deem the Preliminary Official Statement, as so modified, final as of its date on behalf of the Issuer for purposes of Rule 15c2- 12 of the Securities and Exchange Commission (except for such omissions permitted by such Rule 15c2-12), and to execute a certificate to that effect to be delivered to the Underwriter (the "15c2-12 Certificate"). The approval by the Mayor and the City Manager of the omissions, insertions and variations of the Preliminary Official Statement may be conclusively presumed . 48 . . . e e by the execution of the 15c2-12 Certificate by the Mayor or the City Manager and the delivery thereof to the Underwriter. Section 9.3 General Authority. The members of the Governing Body and the Issuer's officers, attorneys and other agents and employees are hereby authorized to do all acts and things required of them by this Resolution or desirable or consistent with the requirements hereof for the full, punctual and complete performance of all of the terms, covenants and agreements contained in the Notes and this Resolution, and they are hereby authorized to execute and deliver all documents which shall be required by Bond Counselor the initial purchasers of the Notes to effectuate the sale of the Notes to said initial purchasers. Section 9.4 No Personal Liabi1i~y. No representation, statement, covenant, warranty, stipulation, obligation or agreement herein contained, or contained in the Notes, or in any certificate or other instrument to be executed on behalf of the Issuer in connection with the issuance of the Notes, shall be deemed to be a representation, statement, covenant, warranty, stipulation, obligation or agreement of any member of the Governing Body, officer, employee or agent of the Issuer in his or her individual capacity, and none of the foregoing persons nor any officer of the Issuer executing the Notes, or any certificate or other instrument to be executed in connection with the issuance of the Notes, shall be liable personally thereon or be subject to any personal liability or accountability by reason of the execution or delivery thereof. Section 9.5 No Third Party Beneficiaries. Except such other Persons as may be expressly described herein or in the Notes, nothing in this Resolution, or in the Notes, expressed or implied, is intended or shall be construed to confer upon any Person other than the Issuer and the Holders any right, remedy or claim, legal or equitable, under and by reason of this Resolution or any provision hereof, or of the Notes, all provisions hereof and thereof being intended to be and being for the sole and exclusive benefit of the Issuer and the Persons who shall from time to time be the Holders. Section 9.6 Sale of Notes. The Notes shall be issued and sold at public or private sale at one time or in installments from time to time and at such price or prices as shall be consistent with the provisions of the Act, the requirements of this Resolution and other applicable provisions of law. Section 9.7 Severability of Invalid Provisions. If anyone or more of the covenants, agreements or provisions of this Resolution shall be held contrary to any express provision of law or contrary to the policy of express law, though not expressly prohibited, or against public policy, or shall for any reason whatsoever be held invalid, then such covenants, agreements or provisions shall be null and void and shall be deemed separable from the remaining covenants, agreements and provisions of this Resolution and shall in no way affect the validity of any of the other covenants, agreements or provisions hereof or of the Notes issued hereunder. 49 . . . , e e Section 9.8 Repeal of Inconsistent Resolutions. All resolutions or parts thereof in conflict herewith are hereby superseded and repealed to the extent of such conflict. Section 9.9 Table of Contents and Headings not Part Hereof. The Table of Contents preceding the body of this Resolution and the headings preceding the several articles and sections hereof shall be solely for convenience of reference and shall not constitute a part of this Resolution or affect its meaning, construction or effect. Section 9.10 Effective Date. This Resolution shall take effect immediately upon its adoption. PASSED, APPROVED AND ADOPTED this 27th day of February, 1996. CITY COUNCIL OF THE CITY OF CLERMONT, FLORIDA (OFFICIAL SEAL) ATTEST: ç~ qClerk \DOCSISOFT\24 7 74 :02121198 4 :29øm I IIJAXBOB I JHM:..b 50 . . . " - . . EXHIBIT A FORM OF PRELIMINARY OFFICIAL STATEMENT [To be delivered by Underwriter's Counsel] 52