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HomeMy WebLinkAboutR-92-08CITY OF SEBASTIANt FLORIDA GOLF COURSE REVENUE BOND RESOLUTION NO. R-92-08 ADOPTED FEBRUARY 12~ 1992 TABLE OF CONTENTS PAGE ARTICLE I GENERAL SECTION 1.01. SECTION 1.02. SECTION 1.03. SECTION 1.04. SECTION 1.05. DEFINITIONS ............... AUTHORITY FOR RESOLUTION ......... RESOLUTION TO CONSTITUTE CONTRACT ..... FINDINGS .................. AUTHORIZATION OF INITIAL PROJECT ...... 1 14 14 14 15 ARTICLE II AUTHORIZATION, TERMS, EXECUTION AND REGISTRATION OF BONDS SECTION 2.01. SECTION 2.02. SECTION 2.03. SECTION 2.04. SECTION 2.05.. SECTION 2.06. SECTION 2.07. SECTION 2.08. SECTION 2.09. SECTION 2.10. AUTHORIZATION OF BONDS ....... 16 AUTHORIZATION AND DESCRIPTION OF SERIES 1992 16 BONDS .................. APPLICATION OF SERIES 1992 BOND PROCEEDS. . . 17 EXECUTION OF BONDS .......... 18 AUTHENTICATION ........... 19 TEMPORARY BONDS ......... 19 BONDS MUTILATED, DESTROYED, STOLEN OR LOST. . 19 EXCHANGE AND TRANSFER ............. 20 COUPON BONDS ............... 21 FORM OF BONDS ......... 22 ARTICLE III REDEMPTION OF BONDS SECTION 3.01. SECTION 3.02. SECTION 3.03. SECTION 3.04. SECTION 3.05. PRIVILEGE OF REDEMPTION ........ SELECTION OF BONDS TO BE REDEEMED ...... NOTICE OF REDEMPTION ........ REDEMPTION OF PORTIONS OF BONDS. · · PAYMENT OF REDEEMED BONDS .... 30 30 30 31 31 ARTICLE IV SECURITY, SPECIAL FUNDS AND APPLICATION THEREOF SECTION 4.01. SECTION 4.02. SECTION 4.03. SECTION 4.04. SECTION 4.05. SECTION 4.06. SECTION 4.07. SECTION 4.08. SECTION 4.09. BONDS NOT TO BE INDEBTEDNESS OF ISSUER .... 32 SECURITY FOR BONDS ............ 32 . 32 CONSTRUCTION ACCOUNT ........... ACCOUNTS ' CREATION OF ......... 34 DISPOSITION OF REVENUES ........... 35 REBATE ACCOUNT ............ 44 INVESTMENTS .................. 45 SEPARATE ACCOUNTS ............ 46 RELEASE OF ELECTRIC FRANCHISE FEES ...... 46 ARTICLE V COVENANTS SECTION 5.01. SECTION 5.02. SECTION 5.03. SECTION 5.04 SECTION 5.05. SECTION 5.06. SECTION 5.07. SECTION 5.08.~ SECTION 5.09. SECTION 5.10. SECTION 5.11. SECTION 5.12. SECTION 5.13. SECTION 5.14. SECTION 5.15. SECTION 5.16. GENERAL .................. 47 OPERATION AND MAINTENANCE .......... 47 ANNUAL BUDGET ........... 47 RATES ................. 47 BOOKS AND RECORDS ....... 48 ANNUAL AUDIT .............. 48 NO MORTGAGE OR SALE OF THE ~ACILITIES ..... 48 INSURANCE ................ 49 NO FREE SERVICE ................ 50 NO IMPAIRMENT OF RIGHTS ......... 50 ENFORCEMENT OF CHARGES ......... 50 COVENANTS WITH CREDIT BANKS AND INSURERS. . . 50 GOLF COURSE CONSULTANTS ....... 51 MANAGER OF FACILITIES .......... 51 FEDERAL INCOME TAXATION COVENANTS .... 51 PAYMENTS UNDER THE SERIES 1992 BOND INSURANCE POLICY ........... 52 ARTICLE VI SUBORDINATED INDEBTEDNESS AND ADDITIONAL BONDS SECTION 6.01. SECTION 6.02. SECTION 6.03. SECTION 6.04. SUBORDINATED INDEBTEDNESS. · · ~ .... iSSUANCE OF ADDITIONAL BONDS ...... BOND ANTICIPATION NOTES ........ ACCESSION OF SUBORDINATED INDEBTEDNESS TO PARITY STATUS WITH BONDS ......... ii 55 55 58 59 SECTION 7.01. SECTION 7.02. SECTION 7.03. SECTION 7.04. SECTION 7.05. SECTION 7.06. SECTION 7.07. ARTICLE VII DEFAULTS AND REMEDIES 60 EVENTS OF DEFAULT ............. REMEDIES ................. 60 DIRECTIONS TO TRUSTEE AS TO REMEDIAL 61 PROCEEDINGS ................. REMEDIES CUMULATIVE ........... 61 WAIVER OF DEFAULT .............. 61 APPLICATION OF MONEYS AFTER DEFAULT .... 62 CONTROL BY INSURER ............ 63 ARTICLE VIII SUPPLEMENTAL RESOLUTIONS SECTION 8.01. SECTION 8.02. SECTION 8.03. SECTION 8.04. SUPPLEMENTAL RESOLUTION WITHOUT BONDHOLDERS' CONSENT .......... 64 SUPPLEMENTAL RESOLUTION WITH BONDHOLDERS' AND INSURER'S CONSENT ........... 65 AMENDMENT WITH CONSENT OF INSURER ONLY .... 66 TRANSCRIPT OF DOCUMENTS TO INSURERS .... 67 ARTICLE IX MISCELLANEOUS SECTION 9.01. SECTION 9.02. SECTION 9.03. SECTION 9.04. SECTION 9.05. SECTION 9.06. DEFEASANCE ............... 68 CAPITAL APPRECIATION BONDS ........ 69 SALE OF BONDS .......... 70 SEVERABILITY OF INVALID PROVISIONS .... 70 VALIDATION AUTHORIZED ......... 70 EFFECTIVE DATE .......... 70 iii RESOLUTION NO. R-92-08 A RESOLUTION AUTHORIZING THE ISSUANCE BY THE CITY OF SEBASTIAN, FLORIDA OF NOT EXCEEDING $2,245,000 IN AGGREGATE PRINCIPAL AMOUNT OF GOLF COURSE REVENUE REFUNDING BONDS, SERIES 1992, TO FINANCE THE COST OF REFUNDING CERTAIN OUTSTANDING OBLIGATIONS OF THE CITY; PLEDGING THE GROSS REVENUES OF THE GOLF FACILITIES AND CERTAIN OTHER DESIGNATED REVENUES TO SECURE PAYMENT OF THE PRINCIPAL OF AND INTEREST ON SAID BONDS; PROVIDING FOR THE RIGHTS OF THE HOLDERS OF SAID BONDS; AND PROVIDING FOR AN EFFECTIVE DATE FOR THIS RESOLUTION. BE IT RESOLVED BY THE CITY COUNCIL OF THE CiTY OF SEBASTIAN, FLORIDA: ARTICLE I GENERAL SECTION 1.01. DEFINITIONS. When used in this Resolution, the following terms shall have the following meanings, unless the context clearly otherwise requires: "Aooreted Value" shall mean, as of any date of computation with respect to any Capital Appreciation Bond, an amount equal to the principal amount of such Capital Appreciation Bond (the principal amount at its initial offering) plus the interest accrued on such Capital Appreciation Bond from the date of delivery to the original purchasers thereof to the Interest Date next preceding the date of computation or the date of computation if an Interest Date, such interest to accrue at a rate not exceeding the legal rate, compounded semiannually, plus, with respect to matters related to the payment upon redemption or acceleration of the Capital Appreciation Bonds, if such date of computation shall not be an Interest Date, a portion of the difference between the Accreted Value as of the immediately preceding Interest Date and the Accreted Value as of the immediately succeeding Interest Date, calculated based on the assumption that A¢creted Value accrues during any semi-annual period in equal daily amounts on the basis of a 360-day year. "Act" shall mean Chapter 166, Florida Statutes, the City Charter of the City of Sebastian and other applicable provisions of law. ,,Additional Bonds" shall mean the obligations issued at any time under the provisions of Section 6.02 hereof on a parity with the Series 1992 Bonds. ,,Additional Project" shall mean any structure, property or facility for public use which the Issuer from time to time may determine to construct or acquire as part of the Facilities, together with all equipment, structures and other facilities necessary or appropriate in connection therewith which are financed in whole or in part with the indebtedness secured by this Resolution. This term is to be broadly construed as including any lawful undertaking which will accrue to the benefit of the Facilities, including joint ventures and acquisition of partial interests or contractual rights, and including modification, disposal or cancellation of a Project previously authorized, should such modification, disposal or cancellation be permitted under this Resolution. "~mortization Installment" shall mean an amount designated as such by Supplemental Resolution of the Issuer and established with respect to the Term Bonds. "Annual Audit" shall mean the annual audit prepared pursuant to the requirements of Section 5.06 hereof. "Annual Budget" shall mean the annual budget, balanced as to revenues and expenses, prepared pursuant to the requirements of Section 5.03 hereof. ,,Annual.Debt Service" shall mean, at any time, the aggregate amount in the then current Fiscal Year of (1) interest required to be paid on the Outstanding Bonds during such Fiscal Year, except to the extent that such interest is to be paid from amounts in the Payment Subaccount derived from Bond proceeds, (2) principal of Outstanding Serial Bonds maturing in such Fiscal Year, (3) the Amortization Installments herein designated with respect to such Fiscal Year and (4) any amounts owed by the Issuer to the issuer of such Reserve Subaccount Credit Instrument as a result of a draw thereon or a claim thereunder; provided that in computing such Annual Debt Service for any future period, any Variable Rate Bonds shall be deemed to bear interest at all times to the maturity thereof at a constant rate of interest equal to either the rate borne by such Variable Rate Bonds on the date they were issued plus one-half of the difference between such rate and the Maximum Interest Rate or the actual rate of interest borne by such Variable Rate Bonds on such date of calculation, whichever is higher. For purposes of this definition, all amounts payable on a Capital Appreciation Bond shall be considered a principal payment due in the year it becomes due. 2 -&uthorized Investments" shall mean any of the following, if and to the extent that the same are at the time legal for investment of funds of the Issuer: (A) Direct obligations of the United States of America and securities fully and unconditionally guaranteed as to the timely payment of principal and interest by the United States of America, provided, that the full faith and credit of the United States of America must be pledged to any such direct obligation or guarantee; (B) direct obligations and fully guaranteed certificates of beneficial interest of the Export-Import Bank of the United States; senior debt obligations of the Federal Home Loan Banks; debentures of the Federal Housing Administration; guaranteed mortgage-backed bonds and guaranteed pass-through obligations of the Government National Mortgage Corporations; guaranteed Title XI financing of the U.S. Maritime Administration; mortgage backed securities and senior debt obligations of the Federal National Mortgage Association; participation certificates and senior debt obligations of the Federal Home Loan Mortgage Corporation; and obligations of the Resolution Funding Corporation; (C) direct obligations of any state of the United States of America or any subdivision or agency thereof whose unsecured general obligation debt is rated "A3" or better by Moody's and "A-" or better by Standard and Poor's, or any obligation fully and unconditionally guaranteed by any state, subdivision or agency whose unsecured general obligation debt is rated "A3" or better by Moody's and "A-" or better by Standard and Poor's; (D) commercial paper rated "Prime-l" by Moody's and "A-i" or better by Standard and Poor's; (E) obligations rated "A3" or better by Moody's and "A-" or better by Standard and Poor's; (F) deposits, Federal funds or bankers acceptances of any domestic bank, including a branch office of a foreign bank which branch office is located in the United States, provided legal opinions are received to the effect that full and timely payment of such deposit or similar obligation is enforceable against the principal office or any branch of such bank, which: (1) has an unsecured, uninsured and unguaranteed obligation rated "Prime-l" or "A3" or better by Moody's and "A-i" or "A-" or better by Standard and Poor's, or (2) is the lead bank of a parent bank holding company with an uninsured, unsecured and unguaranteed obligation meeting the rating requirements in (1) above; (G) deposits of any bank or savings and loan association which has combined capital, surplus and undivided profits of not less than $3 million, provided such deposits are fully insured by the Bank Insurance Fund or the Savings Association Insurance Fund administered by the Federal Deposit Insurance Corporation; (H) investments in a money-market fund rated "Am" or "Am-G" or better by Standard and Poor's; (I) repurchase agreements with a term of one year or less with any institution with debt rated "AA" or commercial paper rated "A-i" (in each case by Standard and Poor's); (J) repurchase agreements collateralized by obligations described in paragraphs (A) or (B) with any registered broker/dealer subject to the Securities Investors, Protection Corporation jurisdiction or any commercial bank, if such broker/dealer or bank has an uninsured, unsecured and unguaranteed obligation rated "prime-l" or "A3" or better by Moody's and "A-i" or "A-" or better by Standard and Poor's, provided: (1) a master repurchase agreement or specific written, repurchase agreement governs the transaction; and (2) the securities are held free and clear of any lien by the Issuer or an independent third party acting solely as agent for the Issuer, and such third party is (i) a Federal Reserve Bank, (ii) a bank which is a member of the Federal Deposit Insurance Corporation and which has combined capital, surplus and undivided profits of not less than $25 million, or (iii) a bank approved in writing for such purpose by each Insurer of Outstanding Bonds, and the Issuer shall have received written confirmation from such third party that it holds such securities, free and clear of any lien, as agent for the Issuer; and (3) a perfected first security interest under the Uniform Commercial Code, or book entry procedures prescribed at 31 C.F.R. 306.1 et seq. or 31 C.F.R. 350.0 et seq. in such securities is created for the benefit of the Issuer; and (4) the repurchase agreement has a term of thirty days or less, or the Issuer will value the collateral securities no less frequently than monthly and will liquidate the collateral securities if any deficiency in the required collateral percentage is not restored within two business days of such valuation; and (5) the repurchase agreement matures at least ten days (or other appropriate liquidation period) prior to a debt service payment date, and 4 (6) the fair market value of the securities in relation to the amount of the repurchase obligation, including principal and interest, is equal to at least 100%; and (K) investment agreements with a bank or insurance company which has an unsecured, uninsured and unguaranteed obligation (or claims-paying ability) rated "A3'' or better by Moody's and "A-" or better by Standard and Poor's, or is the lead bank of a parent bank holding company with an uninsured, unsecured and unguaranteed obligation meeting such rating requirements, provided: (1) interest is paid at least semi-annually at a fixed rate during the entire term of the agreement, consistent with bond payment dates; (2) moneys invested thereunder may be withdrawn without any penalty, premium, or charge upon not more than one day's notice (provided such notice may be amended or canceled at any time prior to the withdrawal date); (3) the agreement is not subordinated obligations of such insurance company or bank; to any other (4) the same guaranteed interest rate will be paid on any future deposits made to restore the reserve to its required amount; and (5) the Issuer receives an opinion of counsel that such agreement is an enforceable obligation of such insurance company or bank; and. (L) units of Participation in the Local Government Surplus Funds Trust Fund established pursuant to Part IV, Chapter 218, Florida Statutes, or any similar common trust fund which is established pursuant to law as a legal depository of public moneys. "Authorized Issuer officer" shall mean the City Manager or his designee, or, when used in reference to any act or document, any person authorized by resolution of the Issuer to perform such act or sign such document. "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 Insuranoe Policy" shall mean the municipal bond new issue insurance policy or policies issued by an Insurer guaranteeing the payment of the principal of and interest on any portion of the Bonds. 5 "Bond Year" shall mean the period commencing on and ending on the dates specified by Supplemental Resolution of the Issuer. "Bondholder" or "Holder" or "holder" or any similar term, when used with reference to a Bond or Bonds, shall mean any person who shall be the registered owner of any Outstanding Bond or Bonds as provided in the registration books of the Issuer. "Bonds" shall mean the Series 1992 Bonds, together with any Additional Bonds issued pursuant to this Resolution and any Subordinated Indebtedness which accedes to the status of Bonds pursuant to Section 6.04 hereof. "Business Day" shall mean any day other than a Saturday, Sunday or a day on which the Insurance Trustee is authorized by law to remain closed. "capital Appreciation Bonds" shall mean those Bonds so designated by Supplemental Resolution of the Issuer, which may be either Serial Bonds or Term Bonds and which shall bear interest payable at maturity or redemption. In the case of Capital Appreciation Bonds that are convertible to Bonds with interest payable prior to maturity or redemption of such Bonds, such Bonds shall be considered capital Appreciation Bonds only during the period of time prior to such conversion. "city" shall mean city of Sebastian, Florida, or any successor thereto. "Clerk" shall mean the Clerk of the City of Sebastian, Florida and such other person as may be duly authorized to act on his or her behalf. "Code" shall mean the Internal Revenue Code of 1986, as amended, and the regulations and rules thereunder in effect or proposed. ,,Construction Account" shall mean the account established pursuant to Section 4.03 hereof. "Cost", when used in connection with a 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 bonds and premiums for insurance during construction; (5) all interest due to be paid on the Bonds and other obligations relating to the Facilities during the period of construction of such Project; (6) engineering, legal and other consultant fees and expenses; (7) costs and expenses of the financing, including audits, fees and expenses of any Paying Agent, Registrar or depository; (8) amounts, 6 if any, required by this Resolution to be paid into the Payment Subaccount upon the issuance of any Series of Bonds; (9) payments, when due (whether at the maturitYof principal or the due date of interest or upon redemption) on any indebtedness of the Issuer (other than the Bonds) incurred for a Project for the Facilities; (10) costs of machinery, equipment and supplies required by the Issuer for the completion of such Project; and (11) any other costs properly attributable to such construction or acquisition, as determined by generally accepted accounting principles applicable to golf courses and shall include reimbursement to the Issuer for any such items of Cost heretofore 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 Bonds, 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 Bonds. "Credit Facility" shall mean as to any particular Series of Bonds, a letter of credit, a line of credit or another credit or legal liquidity enhancement facility (other than an insurance policy issued by an Insurer), as approved in the Supplemental Resolution providing for the issuance of such Bonds. "Debt Service Account" shall mean the account established pursuant to Section 4.04(C) hereof. "Designated Revenues" shall mean, collectively, the Public Service Taxes and Electric Franchise Fees. "Electric Franchise Fees" shall mean the City's Annual collections of Electric Franchise Fees received under a Franchise Agreement between the City and Florida Power and Light Company pursuant to Ordinance No. 0-82-3, adopted May 10, 1982, as such ordinance may be amended or supplemented. "Escrow Agent" shall mean the Escrow Agent at the time serving under the Escrow Deposit Agreement. "Escrow Deposit Agreement" shall mean the Escrow Deposit Agreement, dated as of February 1, 1992, by and between the Issuer and Barnett Banks Trust Company, N.A. "Facilities" shall mean any and all golf course facilities now owned and operated or hereafter owned and operated by the Issuer, which Facilities shall also include any and all improvements, extensions and additions thereto hereafter constructed or acquired either from the proceeds of Bonds or from any other sources, together with all property, real or personal, tangible or intangible, now or hereafter owned or used in connection therewith. "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. "Franchise Agreement" shall mean ordinance No. 82-3 of the City, granting an electric franchise to Florida Power & Light Company, as the same may be extended, amended or supplemented from time to time. "Golf Course Consultant" shall mean the consultant of recognized standing, fully qualified to provide services in the area of golf course consultation, management and design, employed by the City from time to time as required hereby. "Governing Body" shall mean the city Council of the city of Sebastian, Florida or its successor in function. "~ross Revenues" shall mean all income and moneys received by the Issuer from the rates, fees, rentals, charges and other income to be made and collected by the issuer for the use of the services and facilities to be provided by the Facilities, or otherwise received by the Issuer or accruing to the Issuer in the management and operation of the Facilities, calculated in accordance with generally accepted accounting principles employed in the operation of golf courses similar to the Facilities, 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 deposited or credited to the Revenue Account as herein provided. "Initial Project" shall mean the acquisition and construction of certain capital improvements to the Facilities, as described in Exhibit A attached hereto. "Insurance Trustee" shall mean the Insurance Trustee designated by the insurer with respect to any Series of Bonds. "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 one of the two most widely nationally recognized rating agencies which regularly rate the credit of municipal securities. With respect to the Series 1992 Bonds, "Insurer" shall mean Municipal Bond Investors Assurance Corporation. "Interest Date" or "interest payment date" shall be such date or dates as shall be provided by Supplemental Resolution of the Issuer. "Issuer" shall mean city of Sebastian, Florida, and also includes any authority or other governmental entity to which may hereafter be transferred some or all of the powers and responsibilities of the Issuer with respect to the ownership, financing, operation, enlargement, improvement and maintenance of the Facilities. -MaximumAnnual Debt Service" shall mean the largest aggregate amount in any Fiscal Year, excluding all Fiscal Years which shall have ended prior to the Fiscal Year in which the Maximum Annual Debt Service shall at any time be computed, of the Annual Debt Service. "Maximum Interest Rate" shall mean, with respect to any particular Variable Rate Bonds, a numerical rate of interest, which shall be set forth in the Supplemental Resolution of the Issuer delineating the details of such Bonds, that shall be the maximum rate of interest such Bonds may at any particular time bear. "Mayor" shall mean the Mayor of the city of Sebastian and such other person as may be duly authorized to act on his or her behalf. -Moody,s" shall mean Moody's Investors Service, and any assigns and successors thereto. "Net Revenues" shall mean Gross Revenues less Operating Expenses. "Operation and Maintenance ~ccount" shall mean the account created pursuant to Section 4.04(B) hereof. "Operating Expenses" shall mean the issuer's expenses for operation, maintenance, repairs and replacements with respect to the Facilities and shall include, without limiting the generality of the foregoing, administration expenses, insurance and surety bond premiums, the fees to the provider of a Reserve Subaccount Insurance Policy or Reserve Subaccount Letter of Credit (but excluding any expenses or reimbursement obligations for draws made thereunder), 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 Facilities, all to the extent properly attributable to the Facilities in accordance with generally accepted accounting principles employed in the operation of public utility systems similar to the Facilities, and disbursements for the expenses, liabilities and compensation of any 9 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 Gross Revenues or minor capital expenditures necessary for the proper and economical operation or maintenance of the Facilities in accordance with generally accepted accounting principles, or any provision for interest, depreciation, depletion, amortization or similar charges. ,,Outstanding", when used with reference to Bonds and as of any particular date, shall describe all Bonds theretofore and thereupon being authenticated and delivered except, (1) any Bond in lieu of which other Bond or Bonds have been issued under agreement to replace lost, mutilated or destroyed Bonds, (2) any Bond surrendered by the Holder thereof in exchange for other Bond or Bonds under Sections 2.06 and 2.08 hereof, (3) Bonds deemed to have been paid pursuant to Section 9.01 hereof and (4) Bonds cancelled after purchase in the open market or because of payment at or redemption prior to maturity. "Paying Agent" shall mean any paying agent for Bonds appointed by or pursuant to this Resolution and its successor or assigns, and any other Person which may at any time be substituted in its place pursuant to this Resolution. "Payment Subaccount" shall mean the separate subaccount in the Debt Service Account established pursuant to Section 4.04(C) hereof. "Person', shall mean an individual, an estate, a corporation, a partnership, an association, a joint stock company, a trust, any unincorporated organization or governmental entity. "Ple4ge~ Funds" shall mean (i) the Gross Revenues, (ii) until released as provided herein, the Electric Franchise Fees, (iii) the Public Service Taxes and (iv) until applied in accordance with the provisions of this Resolution, all moneys, including investments thereof, in the accounts and subaccounts established hereunder, except (A) to the extent moneys therein shall be required to pay the Operating Expenses of the Facilities in accordance with the terms hereof, (B) to the extent moneys in each subaccount of the Reserve Subaccount shall be pledged solely for the payment of the Series of Bonds for which it was established in accordance with the provisions hereof, (C) amounts in the Rebate Account, and (D) amounts in the Surplus Reserve Account. "Project" shall mean, collectively, the Initial Project and any Additional project. "Public Service Taxes" shall mean the Public Service Taxes levied and collected at any time by the city upon the purchase of electricity, metered or bottled gas, water service and telephone 10 service pursuant to the authority granted by Section 166.231, Florida Statutes. "Rebate Account" shall mean the Rebate Account established pursuant to Section 4.04(E) hereof. "Redemption Price" shall mean, with respect to any Bond or portion thereof, the principal amount or portion thereof, plus the applicable premium, if any, payable upon redemption thereof pursuant to such Bond or this Resolution. "Refunded Bonds" shall mean the Issuer's Golf Course Revenue Bonds, Series 1985. "Refunded Resolution" shall mean Resolution No. R-85-44, adopted by the Issuer on August 7, 1985, as amended and supplemented, providing for the issuance of the Refunded Bonds. "Refunding Securities" shall mean direct non-callable obligations of the United States of America and securities fully and unconditionally guaranteed as to the timely payment of principal and interest by the United States of America to which direct obligation or guarantee the full faith and credit of the United States of America has been pledged, Refcorp interest strips, CATS, TIGRS, STRPS, or defeased municipal bonds rated AAA by Standard and Poor's or Aaa by Moody's. "Registrar" shall mean any registrar for the Bonds appointed by or pursuant to this Resolution and its successors and assigns, and any other Person which may at any time be substituted in its place pursuant to this Resolution. "Renewal and Replacement Account" shall mean the account created pursuant to Section 4.04(D) hereof. "Renewal and Replacement Account Requirement" shall mean, on the date of calculation, an amount of money equal to 5 percent of the Gross Revenues received by the Issuer in the immediately preceding Fiscal Year, or such other amount as may be certified to the Issuer by the Golf Course Consultant as an amount appropriate for the purposes of this Resolution. "Reserve Subaccount" shall mean the separate subaccount in the Debt Service Account established pursuant to Section 4.04(C) hereof. "Reserve Subaccount Credit Instrument" shall mean a Reserve Subaccount Insurance Policy or a Reserve Subaccount Letter of Credit. 11 "Reserve Subaccount Insurance Policy" shall mean the insurance policy placed in the Reserve Subaccount in lieu of or in partial substitution for cash therein pursuant to Section 4.05(B)(3). "Reserve Subaccount Letter of Credit" shall mean an unconditional irrevocable commercial letter of credit issued by any bank or national banking association, insurance company or other financial institution to the Paying Agent and then placed in the appropriate subaccount of the Reserve Subaccount in lieu of or in partial substitution for cash therein pursuant to Section 4.05(B) (3) hereof. "Reserve Subaccount Requirement" shall mean, as of any date of calculation for a particular subaccount of the Reserve Subaccount, an amount equal to the lesser of (1) Maximum Annual Debt Service for all Outstanding Bonds which are secured by such subaccount, (2) 125 percent of the average annual debt service for all Outstanding Bonds which are secured by such subaccount, or (3) 10 percent of the original proceeds of Outstanding Bonds which are secured by such subaccount. In computing the Reserve Subaccount Requirement in respect of any subaccount of the Reserve Subaccount which secures Bonds that constitute Variable Rate Bonds, such Variable Rate Bonds shall be deemed to bear interest at all times to the maturity thereof at a constant rate of interest equal to either the rate borne by such Variable Rate Bonds on the date they were issued plus one-half of the difference between such rate and the Maximum Interest Rate or the actual rate of interest borne by such Variable Rate Bonds on such date of calculation, whichever is higher. In computing the Reserve Subaccount Requirement in accordance with clause (3) of this definition in respect of any Capital Appreciation Bonds, the principal amount of such Bonds shall be the Accreted Value thereof, not the original principal amount. "Resolution" shall mean this Resolution, as the same may from time to time be amended, modified or supplemented by Supplemental Resolution. "Revenue Account" shall mean the account created pursuant to Section 4.04(A) hereof. "Serial Bonds" shall mean all of the Bonds other than the Term Bonds. "Series" shall mean all the Bonds delivered on original issuance in a simultaneous transaction and identified pursuant to Sections 2.01 and 2.02 hereof or a Supplemental Resolution authorizing the issuance by the Issuer of such Bonds as a separate Series, regardless of variations in maturity, interest rate, Amortization Installments or other provisions. 12 ,'Series X992 Bonds" shall mean the Issuer's Golf Course Revenue Refunding Bonds, Series 1992 authorized pursuant to Section 2.02 hereof. "State" shall mean the State of Florida. "Standard and Poor's" shall mean Standard and Poor's Corporation, and any assigns and successors thereto. "Subordinated Indebtedness" shall mean that indebtedness of the Issuer, subordinate and junior to the Bonds, and any indebtedness issued in accordance with the provisions of Section 6.01 hereof. "Supplemental Resolution" shall mean any resolution of the Issuer amending or supplementing this Resolution enacted and becoming effective in accordance with the terms of Sections 8.01, 8.02 and 8.03 hereof. "Surplus Reserve Account" shall mean the Surplus Reserve Account established pursuant to Section 4.04 (G) hereof. "Taxable Bonds" means any Bond 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 or that such interest is subject to Federal income taxation. "Term Bonds" shall mean those Bonds which shall be designated as Term Bonds hereby or by Supplemental Resolution of the Issuer. "Term Bonds Redemption Subaooount" shall mean the separate subaccount in the Debt Service Account established pursuant to Section 4.04(C) hereof. "Variable Rate Bonds" shall mean Bonds issued with a variable, adjustable, convertible or other similar rate which is not fixed in percentage for the entire term thereof at the date of issue. 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 of this Resolution; and the term "hereafter" shall mean after the date of adoption of this Resolution. words importing the masculine gender include every other gender. words importing the singular number include the plural number, and vice versa. 13 SECTION 1.02. AUTHORITY FOR RESOLUTION. This Resolution is adopted pursuant to the provisions of the Act. The Issuer has ascertained and hereby determined that adoption of this Resolution is necessary to carry out the powers, purposes and duties expressly provided in the Act, that each and every matter and thing as to which provision is made herein is necessary, in order to carry out and effectuate the purposes of the Issuer in accordance with the Act and to carry out and effectuate the plan and purpose of the Act, and that the powers of the Issuer herein exercised are in each case exercised in accordance with the provisions of the Act and in furtherance of the purposes of the Issuer. SECTION 1.03. RESOLUTION TO CONSTITUTE CONTRACT. In consideration of the purchase and acceptance of any or all of the Bonds by those who shall hold the same from time to time, the provisions of this Resolution shall be a part of the contract of the Issuer with the Holders of the Bonds, and shall be deemed to be and shall constitute a contract between the Issuer and the Holders from time to time of the Bonds. The pledge made in the 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 said Bonds in accordance with the terms hereof. Ail of the Bonds, 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 Bonds over any other thereof except as expressly provided in or pursuant to this Resolution. SECTION 1.04. FINDINGS. It is hereby ascertained, determined and declared: (A) That the Issuer now owns, operates and maintains golf course facilities for the benefit of its citizens. (B) That the Issuer has heretofore issued and has now outstanding and unpaid the Refunded Bonds. (C) That the Pledged Funds are not pledged or encumbered in any manner, other than for payment of the Refunded Bonds. (D) That it is deemed to be in the best interests of the citizens of the Issuer that the Refunded Bonds be refunded to achieve debt service savings for the benefit of the Issuer and that the Initial Project be acquired and constructed. (E) That there is hereby authorized the payment and refunding of the Refunded Bonds all in the manner as provided by this Resolution and the Refunded Resolution. (F) That the estimated Pledged Funds will be sufficient to pay all the Operating Expenses, the principal of and interest on 14. the Bonds to be issued pursuant to this Resolution, as the same become due, and all other payments provided for in this Resolution. (G) That the principal of and interest on the Bonds to be issued pursuant to this Resolution, and all other payments provided for in this Resolution, will be paid solely from the Pledged Funds in accordance with the terms hereof; and the ad valorem taxing power of the Issuer will never be necessary or authorized to pay the principal of and interest on the Bonds to be issued pursuant to this Resolution, or to make any other payments provided for in this Resolution, and the Bonds shall not constitute a lien upon the Facilities or upon any other property whatsoever of or in the Issuer. SECTION 1.05. AUTHORIZATION OF INITIAL PROJECT. The issuer hereby authorizes the acquisition and construction of the Initial Project. 15 ARTICLE II AUTHORIZATION~ TEI~S~ EXECUTION ~D RE~ISTI~,TION OF BONDS SECTION 2.01. AUTHORIZATION OF BONDS. This Resolution creates an issue of Bonds of the Issuer to be designated as "City of Sebastian, Florida Golf Course Revenue Refunding Bonds" which may be issued in one or more Series as hereinafter provided. The aggregate principal amount of the Bonds which may be executed and delivered under this Resolution is not limited except as is or may hereafter be provided in this Resolution or as limited by the Act or by law. The Bonds may, if and when authorized by the Issuer pursuant to this Resolution, be issued in one or more Series, with such further appropriate particular designations added to or incorporated in such title for the Bonds of any particular Series as the Issuer may determine and as may be necessary to distinguish such Bonds from the Bonds of any other Series. Each Bond shall bear upon its face the designation so determined for the Series to which it belongs. The Bonds shall be issued for such purpose or purposes; shall bear interest at such rate or rates not exceeding the maximum rate permitted by law; and shall be payable in lawful money of the United States of America on such dates; all as determined by Supplemental Resolution of the Issuer. The Bonds shall be issued in such denominations and such form, whether coupon or registered; shall be dated such date; shall bear such numbers; shall be payable at such place or places; shall contain such redemption provisions; shall have such Paying Agents and Registrars; shall mature in such years and amounts; and the proceeds shall be used in such manner; all as determined by Supplemental Resolution of the Issuer. The Issuer may issue Bonds which may be secured by a Credit Facility or by an insurance policy of an Insurer, all as shall be determined by Supplemental Resolution of the Issuer. SECTION 2,02. BONDS. AUTHORIZATION AND DESCRIPTION OF SERIES 1992 (A) A Series of Bonds entitled to the benefit, protection and security of this Resolution is hereby authorized in the aggregate principal amount of not exceeding $2,245,000 for the principal purposes of refunding the Refunded Bonds, funding the Reserve Subaccount and paying certain costs of issuance incurred with respect to the Series 1992 Bonds. Such Series of Bonds shall be designated as, and shall be distinguished from the Bonds of all 16 other Series by the title, "City of Sebastian, Florida Golf Course Revenue Refunding Bonds, Series 1992"; provided the Issuer may change such designation in the event that the total amount of Series 1992 Bonds authorized herein are not issued in a simultaneous transaction or the Series 1992 Bonds are not issued in calendar year 1992. (B) The Series 1992 Bonds shall be dated as of the first day of the month in which occurs the delivery of the Series 1992 Bonds to the purchaser or purchasers thereof or such other date as may be set forth by Supplemental Resolution of the Issuer; shall be issued as fully registered Bonds; 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, payable in such manner and on such dates; shall consist of such amounts of Serial Bonds, Term Bonds, Variable Rate Bonds and Capital Appreciation Bonds maturing in such years and amounts not exceeding forty (40) years from their date; shall be payable in such place or places; shall have such Paying Agents and Registrars; and shall contain such redemption provisions; all as the Issuer shall provide hereafter by Supplemental Resolution. (C) The principal of or Redemption Price, if applicable, on the Series 1992 Bonds are payable upon presentation of the Series 1992 Bonds at the office of the Paying Agent. Interest payable on any Series 1992 Bond on any interest Date will be paid by check or draft of the Paying Agent to the Holder in whose name such Bond 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, at the option of the Paying Agent, and at the request and expense of the Holder of $500,000 or more in principal amount of Series 1992 Bonds, by bank wire transfer for the account of such Holder. All payments of principal of or Redemption Price, if applicable, and interest on the Series 1992 Bonds 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 2.03. APPLICATION OF SERIES 1992 BOND PROCEEDS. Except as otherwise provided by Supplemental Resolution of the Issuer, the proceeds derived from the sale of the Series 1992 Bonds, including accrued interest and premium, if any, shall, simultaneously with the delivery of the Series 1992 Bonds to the purchaser or purchasers thereof, be applied by the Issuer as follows: (A) Accrued interest and proceeds of the Series 1992 Bonds representing capitalized interest, if any, shall be deposited or credited to the Payment Subaccount and shall be used only for the purpose of paying the interest which shall thereafter become due on the Series 1992 Bonds. 17 (B) A sufficient amount of Series 1992 Bond proceeds shall be deposited or credited to the appropriate subaccount of the Reserve Subaccount which, together with any moneys and securities therein and Reserve Subaccount Insurance Policy and/or Reserve Subaccount Letter of Credit obtained in accordance with Section 4.05(B) (4) hereof, shall equal the Reserve Subaccount Requirement for such subaccount. (C) An amount of Series 1992 Bond proceeds shall be deposited irrevocably in trust in the Issuer's escrow deposit trust fund under the terms and provisions of the Escrow Deposit Agreement. Such moneys shall be invested by the Escrow Agent in obligations of the United States of America, in the manner set forth in the Escrow Deposit Agreement, which investments, together with such amounts deposited by the Issuer in such escrow deposit fund, shall mature at such times and in such amounts as shall be sufficient to pay the principal of, redemption premium, if any, and interest on the outstanding Refunded Bonds as the same mature and become due and payable or are redeemed prior to maturity. (D) A sufficient amount of the Series 1992 Bond proceeds shall be applied to the payment of the premiums of any municipal bond insurance policies applicable to the Series 1992 Bonds or reserves established therefor and to the payment of costs and expenses relating to the issuance of the series 1992 Bonds. (E) The remaining Series 1992 Bond proceeds shall be deposited in the Construction Account and used for the acquisition of the Initial Project. SECTION 2.04. EXECUTION OF BONDS. The Bonds 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 any one or more of the officers who shall have signed or sealed any of the Bonds or whose facsimile signature shall appear thereon shall cease to be such officer of the Issuer before the Bonds so signed and sealed have been actually sold and delivered, such Bonds may nevertheless be sold and delivered as herein provided and may be issued as if the person who signed or sealed such Bonds had not ceased to hold such office. Any Bond may be signed and sealed on behalf of the Issuer by such person who at the actual time of the execution of such Bond shall hold the proper office of the Issuer, although at the date of such Bond 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 Bonds shall be actually sold and delivered. 18 SECTION 2.05. ~UTHENTICATION. No Bond 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 Bond 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 Bond shall be conclusive evidence that such Bond hasbeen duly authenticated and delivered under this Resolution. The form of such certificate shall be substantially in the form provided in Section 2.10 hereof. SECTION 2.06. TEMPORARY BONDS. Until the definitive Bonds of any Series are prepared, the Issuer may execute, in the same manner as is provided in Section 2.04, and deliver, upon authentication by the Registrar pursuant to Section 2.05 hereof, in lieu of definitive Bonds, but subject to the same provisions, limitations and conditions as the definitive Bonds, except as to the denominations thereof, one or more temporary Bonds substantially of the tenor of the definitive Bonds in lieu of which such temporary Bond or Bonds are issued, in denominations authorized by the Issuer by subsequent resolution and with such omissions, insertions and variations as may be appropriate to temporary Bonds. The Issuer, at his own expense, shall prepare and execute definitive Bonds, which shall be authenticated by the Registrar. Upon the surrender of such temporary Bonds for exchange, the Registrar, without charge to the Holder thereof, shall deliver in exchange therefor definitive Bonds, of the same aggregate principal amount and Series and maturity as the temporary Bonds surrendered. Until so exchanged, the temporary Bonds shall in all respects be entitled to the same benefits and security as definitive Bonds issued pursuant to this Resolution. All temporary Bonds surrendered in exchange for another temporary Bond or Bonds or for a definitive Bond or Bonds shall be forthwith cancelled by the Registrar. SECTION 2.07. BONDS MUTILATED, DESTROYED, STOLEN OR LOST. In case any Bond 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 Bond of like tenor as the Bond so mutilated, destroyed, stolen or lost, in exchange and substitution for such mutilated Bond upon surrender and cancellation of such mutilated Bond or in lieu of and substitution for the Bond destroyed, stolen or lost, and upon the Holder furnishing the Issuer and the Registrar proof of his 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. Ail Bonds so surrendered or replaced shall be cancelled by the Registrar. If any of the Bonds shall have matured or be about to mature, instead of issuing a substitute Bond, the Issuer may pay the same or cause the Bond to be paid, 19 upon being indemnified as aforesaid, and if such Bonds be lost, stolen or destroyed, without surrender thereof. Any such duplicate Bonds issued pursuant to this Section 2.07 shall constitute original contractual obligations on the part of the Issuer whether or not the lost, stolen or destroyed Bond be at any time found by anyone, and such duplicate Bond shall be entitled to equal and proportionate benefits and rights as to lien on the Pledged Funds to the same extent as all other Bonds issued hereunder, SECTION 2.08. EXCHANGE AND TI~%NSFER. Bonds, 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 his attorney duly authorized in writing, may, at the option of the Holder thereof, be exchanged for an equal aggregate principal amount of registered Bonds of the same Series and maturity of any other authorized denominations. The Bonds issued under this Resolution shall be and have all the qualities and incidents of negotiable instruments under the law merchant and the Uniform Commercial Code of the State of Florida, subject to the provisions for registration of transfer contained in this Resolution and in the Bonds. So long as any of the Bonds shall remain Outstanding, the Issuer shall maintain and keep, at the office of the Registrar, books for the registration and transfer of the Bonds. The transfer of any Bond shall be registered 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 his 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 his duly authorized attorney. Upon the registration of transfer of any such Bond, the Issuer shall issue, and cause to be authenticated, in the name of the transferee a new Bond or Bonds of the same aggregate principal amount and Series and maturity as the surrendered Bond. The Issuer, the Registrar and any Paying Agent or fiduciary of the Issuer may deem and treat the Person in whose name any Outstanding Bond shall be registered upon the books of the Issuer as the absolute owner of such Bond, whether such Bond shall be overdue or not, for the purpose of receiving payment of, or on account of, the principal or Redemption Price, if applicable, and interest on such Bond and for all other purposes, and all such payments so made to any such Holder or upon his order shall be valid and effectual to satisfy and discharge the liability upon such Bond 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. 20 The Registrar, in any case where it is not also the Paying Agent in respect to any Series of Bonds, forthwith (A) following the fifteenth day prior to an interest payment date for such Series; (B) following the fifteenth day next preceding the date of first mailing of notice of redemption of any Bonds 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 Bondholders and any other relevant information reflected in the registration books. Any Paying Agent of any fully registered Bond shall effect payment of interest on such Bonds by mailing a check to the Holder entitled thereto or may, in lieu thereof, upon the request and at the expense of the Holder of $500,000 or more in principal amount of Series 1992 Bonds, by bank wire transfer for the account of such Holder. In all cases in which Bonds shall be exchanged or the transfer of Bonds shall be registered, the Issuer shall execute and deliver Bonds and the Registrar shall authenticate such Bonds in accordance with the provisions of this Resolution. Execution of Bonds by the Mayor and Clerk for purposes of exchanging, replacing or registering the transfer of Bonds may occur at the time of the original delivery of the Series of which such Bonds are a part. All Bonds surrendered in any such exchanges or registration of transfer shall be held by the Registrar in safekeeping until directed by the Issuer to be cancelled by the Registrar. For every such exchange or registration of transfer, 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 registration of transfer. The Issuer and the Registrar shall not be.obligated to make any such exchange or registration of transfer of Bonds of any Series during the fifteen (15) days next preceding an Interest Date on the Bonds of such Series (other than Capital Appreciation Bonds and Variable Rate Bonds), or, in the case of any proposed redemption of Bonds of such Series, then during the fifteen (15) days next preceding the date of the first mailing of notice of such redemption and, in the case of Bonds called for redemption, continuing until such redemption date. The Issuer may elect to issue any Bonds 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 2.09. COUPON BONDS. The Issuer, at its discretion, and provided it has obtained an opinion of Bond Counsel that such action will not cause interest on the Bonds to be included in gross income for purposes of federal income taxation, may by Supplemental Resolution authorize the issuance of coupon Bonds, registrable as to principal only or as to both principal and interest. Such Supplemental Resolution shall provide for the negotiability, 21 transfer, interchangeability, denominations and form of such Bonds and coupons appertaining thereto. SECTION 2.10. FORM OF BONDS. The text of the Bonds, except as otherwise provided pursuant to Section 2.09 hereof and except for Capital Appreciation Bonds and Variable Rate Bonds, the form of which shall be provided by Supplemental Resolution of the Issuer, 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 presumed by such officer's execution of the Bonds and the Issuer's delivery of the Bonds to the purchaser or purchasers thereof): 22 No. R- UNITED STATES OF AI~ERICA STATE OF FLORIDA CITY OF SEBASTIAN GOLF COURSE REVENUE REFUNDING BOND, SERIES Interest Maturity Date of Rate Date Original Issue CUSIP Registered Holder: Principal Amount: KNOW ALL MEN BY THESE PRESENTS, that the City of Sebastian, Florida, a municipal corporation of the State of Florida (the "Issuer"), for value received, hereby promises to pay, solely from the Pledged Funds hereinafter described, to the Registered Holder identified above, or registered assigns as hereinafter provided, on the Maturity Date identified above, the Principal Amount identified above and to pay interest on such Principal Amount from the 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, 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 Bond 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 Bond, are payable at the principal corporate trust office of , as Paying Agent. , , Payment of each installment of interest shall be made to the person in whose name this Bond shall be registered on the registration books of the Issuer maintained by ....... , , 23 , as Registrar, at the close of business on the date which shall be the fifteenth day (whether or not a business day) next preceding each interest payment date and shall be paid by check or draft of the Paying Agent to such Registered Holder at the address appearing on such registration books or, at the option of such Paying Agent, and at the request and expense of the Holder of $500,000 or more in principal amount, by bank wire transfer for the account of such Holder. This Bond is one of an authorized issue of Bonds in the aggregate principal amount of $ (the "Bonds") of like date, tenor and effect, except as tO maturity date, interest rate, denomination and number, issued to finance , in and for the Issuer, under the authority of and in full compliance with the Constitution and laws of the State of Florida, particularly Chapter 166, Florida Statutes, the city Charter of the City of Sebastian and other applicable provisions of law (the "Act"), and a resolution duly adopted by the City Council of the Issuer, on , as amended and supplemented (the "Resolution"), and is subject to all the terms and conditions of the Resolution. This Bond and the interest hereon are payable solely from and secured by a lien upon and a pledge of (i) the Net Revenues (as defined in the Resolution) to be derived from the operation of the Issuer's golf course facilities (the "Facilities"), and until applied in accordance with the provisions of the Resolution, (ii) until released as provided in the Resolution, the Electric Franchise Fees (as defined in the Resolution), (iii) the Public Service Taxes (as defined in the Resolution) and (iv) all moneys, including investments thereof, in the accounts and subaccounts established by the Resolution, except (A) to the extent moneys therein shall be required to pay the Operating Expenses (as defined in the Resolution) of the Facilities in accordance with the terms of the Resolution, (B) to the extent moneys in each subaccount of the Reserve Subaccount shall be pledged solely for the payment of the Series of Bonds for which it was established in accordance with the provisions of the Resolution, (C) amounts in the Rebate Account and (D) amounts in the Surplus Reserve Account (collectively, the "Pledged Funds"). It is expressly agreed by the Registered Holder of this Bond that the full faith and credit of the Issuer are not pledged to the payment of the principal of, premium, if any, and interest on this Bond and that such Holder shall never have the right to require or compel the exercise of any taxing power of the Issuer to the payment of such principal, premium, if any, and interest. This Bond and the obligation evidenced hereby shall not constitute a lien upon the Facilities or any other property of the Issuer, but shall constitute a lien only on, and shall be payable solely from, the Pledged Funds in accordance with the terms of the Resolution. 24 Neither the members of the City Council of the Issuer nor any person executing this Bond shall be liable personally hereon or be subject to any personal liability or accountability by reason of the issuance hereof. REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS BOND SET FORTH ON THE REVERSE SIDE HEREOF AND SUCH FURTHER PROVISIONS SHALL FOR ALL PURPOSES HAVE THE SAME EFFECT AS IF SET FORTH ON THE FRONT SIDE HEREOF. This Bond shall not be valid or become obligatory for any purpose until the certificate of authentication hereon shall have been signed by the Registrar. IN WITNESS WHEREOF, the City Council of the city of Sebastian, Florida has issued this Bond and has caused the same to be executed by the manual or facsimile signature of its Mayor, and by the manual or facsimile signature of its Clerk and its corporate seal or a facsimile thereof to be affixed or reproduced hereon, all of the day of , ~. (SEAL) CITY OF SEBASTI/~N, FLORIDA Mayor Clerk 25 (Provisions on Reverse Side of Bond) The transfer of this Bond is registrable in accordance with the terms of the Resolution only upon the books of the Issuer kept for that purpose at the principal corporate trust office of the Registrar by the Registered Holder hereof in person or by his attorney duly authorized in writing, upon the surrender of this Bond together with a written instrument of transfer satisfactory to the Registrar duly executed by the Registered Holder or his attorney duly authorized in writing, and thereupon a new Bond or Bonds in the same aggregate principal amount shall be issued to the transferee in exchange therefor, and upon the payment of the charges, if any, therein prescribed. The Bonds are issuable in the form of fully registered Bonds in the denomination of $5,000 and any integral multiple thereof, not exceeding the aggregate principal amount of the Bonds. The Issuer, the Registrar and any Paying Agent may treat the Registered Holder of this Bond as the absolute owner hereof for all purposes, whether or not this Bond 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 the Bonds during the fifteen (15) days next preceding an interest payment date or, in the case of any proposed redemption of the Bonds, then, during the fifteen (15) days next preceding the date of the first mailing of notice of such redemption and, in the case of the Bonds called for redemption, continuing until such redemption date. (INSERT REDEMPTION PROVISIONS) Redemption of this Bond under the preceding paragraphs shall be made as provided in the Resolution upon notice given by first class mail sent at least 30 days prior to the redemption date to the Registered Holder hereof at the address shown on the registration books maintained by the Registrar; provided, however, that failure to mail notice to the Registered Holder hereof, or any defect therein, shall not affect the validity of the proceedings for redemption of other Bonds as to which no such failure or defect has occurred. In the event that less than the full principal amount hereof shall have been called for redemption, the Registered Holder hereof shall surrender this Bond in exchange for one or more Bonds in an aggregate principal amount equal to the unredeemed portion of principal, as provided in the Resolution. Reference to the Resolution and any and all resolutions supplemental thereto and modifications and amendments thereof and to the Act is made for a description of the pledge and covenants securing this Bond, the nature, manner and extent of enforcement 26 of such pledge and covenants, and the rights, duties, immunities and obligations of the Issuer. 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 the issuance of this Bond, exist, have happened and have been performed, in regular and due form and time as required by the laws and Constitution of the State of Florida applicable thereto, and that the issuance of the Bonds does not violate any constitutional or statutory limitations or provisions. 27 FOR VALUE transfers unto ~SSIGNMENT RECEIVED, the undersigned sells, assigns and Insert Social Security or Other Identifying Number of Assignee (Name and Address of Assignee) the within Bond and does hereby irrevocably constitute and appoint , as attorney to register the transfer of the said Bond 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 a member firm of the New York Stock Exchange or a commercial bank or trust company. NOTICE: The signature to this assignment must correspond with the name of the Registered Holder as it appears upon the face of the within Bond 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. 28 The following abbreviations,.when used in the inscription on the face of the within Bond, 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 Transfers to Minors Act of (State) Additional abbreviations may also be used though not in list above. CERTIFICATE OF aUTHENTICATION This Bond is one of the Bonds of the Issue described in the within-mentioned Resolution. DATE OF AUTHENTICATION: Registrar By: Authorized officer 29 ARTICLE I~I REDEMPTION OF BONDS SECTION 3.01. PRIVILEGE OF REDEMPTION. The terms of this Article III shall apply to redemption of Bonds other than Capital Appreciation Bonds or Variable Rate Bonds. The terms and provisions relating to redemption of Capital Appreciation Bonds and Variable Rate Bonds shall be provided by Supplemental Resolution. SECTION 3.02. SELECTION OF BONDS TO BE REDEEMED. The Bonds shall be redeemed only in the principal amount of $5,000 each and integral multiples thereof. The Issuer shall, at least 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 Bonds to be redeemed. For purposes of any redemption of less than all of the Outstanding Bonds of a single maturity, the particular Bonds or portions of Bonds to be redeemed shall be selected not more than 45 days prior to the redemption date by the Registrar from the Outstanding Bonds of the maturity or maturities 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 Bonds or portions of Bonds in principal amounts of $5,000 and integral multiples thereof. If less than all of the Outstanding Bonds of a single maturity are to be redeemed, the Registrar shall promptly notify the Issuer and Paying Agent (if the Registrar is not the Paying Agent for such Bonds) in writing of the Bonds or portions of Bonds selected for redemption and, in the case of any Bond selected for partial redemption, the principal amount thereof to be redeemed. SECTION 3.03. NOTICE OF REDEMPTION. Notice of such redemption, which shall specify the Bond or Bonds (or portions thereof) to be redeemed and the date and place for redemption, shall be given by the Registrar on behalf of the Issuer, and (A) shall be filed with the Paying Agents of such Bonds, (B) shall be mailed first class, postage prepaid, at least 30 days prior to the redemption date to all Holders of Bonds to be redeemed at their addresses as they appear on the registration books kept by the Registrar, and (C) shall be mailed certified, postage prepaid, at least 35 days prior to the redemption date to the registered securities depositaries, to two or more nationally recognized municipal bond information services and to each Insurer of any Bonds Outstanding affected by such redemption. Failure to mail notice to the Holders of the Bonds to be redeemed, or any defect therein, shall not affect the proceedings for redemption of Bonds as to which no such failure or defect has occurred. Notice of any redemption of Bonds at the option of the Issuer shall be given only 3O upon the prior deposit into the Debt Service Account of sufficient amounts to effect such redemption. Each notice of redemption shall state: (1) the CUSIP numbers of all Bonds being redeemed; (2) the original issue date of such Bonds; (3) the maturity date and rate of interest borne by each Bond being redeemed; (4) the redemption date; (5) the Redemption Price; (6) the date on which such notice is mailed; (7) if less than all Outstanding Bonds are to be redeemed, the certificate number (and, in the case of a partial redemption of any Bond, the principal amount) of each Bond to be redeemed; (8) that on such redemption date there shall become due and payable upon each Bond to be redeemed the Redemption Price thereof, or the Redemption Price of the specified portions of the principal thereof in the case of Bonds to be redeemed in part only, together with interest accrued thereon to the redemption date, and that from and after such date interest thereon shall cease to accrue and be payable; (9) that the Bonds to be redeemed, whether as a whole or in part, are to be surrendered for payment of the redemption price at the principal office of the Registrar at an address specified; and (10) the name and telephone number of a person designated by the Registrar to be responsible for such redemption. SECTION 3.04. REDEMPTION OF PORTIONS OF BONDS. Any Bond 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 his attorney duly authorized in writing) and the Issuer shall execute and the Registrar shall authenticate and deliver to the Holder of such Bond, without service charge, a new Bond or Bonds, 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 Bonds so surrendered. SECTION 3.05. PAYMENT OF REDEEMED BONDS. Notice of redemption having been given substantially as aforesaid, the Bonds or portions of Bonds so 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 Bonds or portions of Bonds shall cease to bear interest. Upon surrender of such Bonds for redemption in accordance with said notice, such Bonds shall be paid by the Registrar and/or Paying Agent at the appropriate Redemption Price, plus accrued interest. Ail Bonds which have been redeemed shall be cancelled and destroyed by the Registrar and shall not be reissued. 31 ~TICLE IV SECURITY~ SPECIAL FUNDS ~ND ~PPLIC~TION THEREOF SECTION 4.01. BONDS NOT TO BE INDEBTEDNESS OF ISSUER. The Bonds 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 the manner and to the extent provided in this Resolution. No Holder of any Bond shall ever have the right to compel the exercise of any ad valorem taxing power to pay such Bond, or be entitled to payment of such Bond from any moneys of the Issuer except from the Pledged Funds in the manner and to the extent provided herein. SECTION 4.02. SECURITY FOR BONDS. The payment of the principal of or Redemption Price, if applicable, and interest on the Bonds and the payment of any obligations owed to any issuer of a Reserve Subaccount Letter of Credit or Reserve Subaccount Insurance Policy securing any Series of Bonds shall be secured forthwith equally and ratably by a pledge of and lien upon the Pledged Funds; provided, however, a Series of Bonds may be further secured by a Credit Facility or insurance policy of an Insurer in addition to the security provided herein; and provided further that each Series of Bonds shall be secured independently of any other Series of Bonds by the corresponding subaccount in the Reserve Subaccount, except as otherwise provided herein. The Issuer does hereby irrevocably pledge the Pledged Funds to the payment of the principal of or Redemption Price, if applicable, and interest on the Bonds in accordance with the provisions hereof. Any obligations owed to the issuer of a Reserve Subaccount Letter of Credit or Reserve Subaccount Insurance Policy shall be deemed to be subordinate to the lien on and pledge of the Pledged Funds to the Holders of the Bonds, solely in respect of principal of and interest due thereon. The Pledged Funds shall immediately be subject to the lien of this pledge without any physical delivery thereof or further act, and the lien of this pledge shall be valid and binding as against all parties having claims of any kind in tort, contract or otherwise against the Issuer. SECTION 4.03. CONSTRUCTION ACCOUNT. The Issuer covenants and agrees to establish, prior to commencing any Project, including the Initial Project, a special account in a bank, trust company or other entity in the State which is eligible under the laws of the State to be a depository for public funds, to be known as the "city of Sebastian, Florida, Golf Course Facilities Construction Account," which shall be used only for payment of the Cost of a Project. Moneys in the Construction Account, until applied in payment of any item of the Cost of a Project in the manner 32 hereinafter provided, shall be subject to a lien and charge in favor of the Holders of the Bonds and for the further security of such Holders. The Issuer shall establish within the Construction Account a separate subaccount for each Project, the Cost of which is to be paid in whole or in part out of the Construction Account. The proceeds of insurance maintained pursuant to this Resolution against physical loss of or damage to a Project, or of contractors' performance bonds with respect thereto pertaining to the period of construction thereof, shall be deposited or credited to the appropriate subaccount of the Construction Account. The Issuer shall make disbursements or payments from the Construction AccoUnt to pay the Cost of a Project upon the filing with the Clerk of certificates and/or documents signed by an Authorized Issuer officer, stating with respect to each disbursement or payment to be made: (A) the item number of the payment, (B) the name and address of the Person to whom payment is due, (C) the amount to be paid, (D) the Construction Account subaccount from which payment is to be made, (E) the purpose, by general classification, for which payment is to be made, and (F) that (i) each obligation, item of cost or expense mentioned therein has been properly incurred, is in payment of a part of the Cost of a Project and is a proper charge against the subaccount of the Construction Account from which payment is to be made and has not been the basis of any previous disbursement or payment, or (ii) 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 a Project, is a proper charge against the subaccount of the Construction Account from which payment is to be made, 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 certificates and/or documents of the Authorized Issuer officers for three (3) years from the dates of such certificates and/or documents. The Clerk shall make available the certificates and/or documents at all reasonable times for inspection by any Holder of any of the Bonds or the agent or representative of any Holder of any of the Bonds. Notwithstanding any of the other provisions of this Section 4.03, to the extent that other moneys are not available therefor, amounts in the Construction Account shall be applied to the payment of principal and interest on Bonds when due. The date of completion of any Project shall be determined by the Authorized Issuer officer which shall certify such fact in writing to the Governing Body. Promptly after the date of the completion of a Project, and after paying or making provision for the payment of all unpaid items of the Cost of such Project, the 33 Issuer shall deposit or credit in the following order of priority any balance of moneys remaining in the Construction Account in (1) another subaccount of the Construction Account for which there are insufficient moneys present to pay the Cost of the related Project, (2) the Reserve Subaccount, to the extent of a deficiency therein, and (3) such other account or subaccount 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 Bonds from gross income of the holder for federal income tax purposes. SECTION 4.04. CREATION OF ACCOUNTS. The Issuer covenants and agrees to establish the "city of Sebastian, Florida Golf Course Facilities Trust Fund" with a bank, trust company or such other entity in the State, which is eligible under the laws of the State to be a depository for public funds which shall include the following accounts and subaccounts: (A) The "City of Sebastian, Florida Golf Course Facilities Revenue Account." (B) The "city of Sebastian, Florida Golf Course Facilities Operation and Maintenance Account." (C) The "city of Sebastian, Florida Golf Course Facilities Debt Service Account." The Issuer shall maintain three separate accounts in the Debt Service Account: the "Payment Subaccount," the "Term Bonds Redemption Subaccount" and the ,'Reserve Subaccount." (D) The "city of Sebastian, Florida Golf Course Facilities Renewal and Replacement Account." (E) The "city of Sebastian, Florida Golf Course Facilities Rebate Account." (F) The "city of Sebastian, Florida Golf Course Facilities Designated Revenue Account." The Issuer shall maintain separate accounts in the Designated Revenue Account: the "Electric Franchise Fee Subaccount" and the "Public Service Taxes Subaccount." (G) The "City of Sebastian, Florida Golf Course Facilities surplus Reserve Account." Moneys in the aforementioned accounts and subaccounts (except for moneys in the Rebate Account and the Surplus Reserve Account), until applied in accordance with the provisions hereof, shall be subject to a lien and charge in favor of the Holders of the Bonds and for the further security of such Holders. 34 The Issuer may at any time and from time to time appoint one or more depositaries to hold, for the benefit of the Bondholders, any one or more of the accounts and subaccounts established hereby. Such depositary 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 accounts or subaccounts as herein set forth, and all records of such depositary in performing such duties shall be open at all reasonable times to inspection by the Issuer and its agents and employees. Any such depositary shall be a bank or trust company duly authorized to exercise corporate trust powers and subject to examination by federal or state authority, of good standing, and having a combined capital, surplus and undivided profits aggregating not less than fifty million dollars ($50,000,000). SECTION 4.05. DISPOSITION OF REVENUES. (A) The Issuer shall deposit or credit all Gross Revenues, as received, into the Revenue Account. The Issuer shall deposit the Electric Franchise Fees (until released as provided herein) and the Public Service Taxes, as received, into the appropriate subaccounts of the Designated Revenue Account. Operation and Maintenance Account. Moneys in the Revenue Account shall first be used each month to deposit or credit to the Operation and Maintenance Account such sums as are necessary to pay Operating Expenses for the ensuing month; provided the issuer may transfer moneys from the Revenue Account to the Operation and Maintenance Account at any time to pay Operating Expenses to the extent there is a deficiency in the Operation and Maintenance Account for such purpose. Amounts in the Operation and Maintenance Account shall be paid out from time to time by the Issuer for reasonable and necessary Operating Expenses; provided, however, that no such payment shall be made unless the provisions of Section 5.03 hereof in regard to the current Annual Budget are complied with. (B) Amounts remaining in the Revenue Account after the aforementioned deposits or credits to the Operation and Maintenance Account shall be applied by the Issuer on or before the fifteenth (15th) day of each month, commencing in the month immediately following the delivery of any of the Bonds to the purchasers thereof, or such later date as hereinafter provided, in the following manner and in the following order of priority: (1) Payment Subaccount. The Issuer shall deposit or credit to the Payment Subaccount the sum which, together with the balance in said Subaccount, shall equal the interest on all Bonds Outstanding (except as to Capital Appreciation Bonds) accrued and unpaid and to accrue to the end of the then current calendar month. The Issuer shall also deposit or credit to the Payment Subaccount the sum which, together with the balance in said Subaccount, shall 35 equal the principal amounts on all Bonds Outstanding due and unpaid and that portion of the principal next due which would have accrued on such Bonds during the then current calendar month if such principal amounts were deemed to accrue monthly (assuming that a year consists of twelve 12 equivalent calendar months having 30 days each) in equal amounts from the next preceding principal payment due date, or, if there be no such preceding payment due date from a date one year preceding the due date of such principal amount. Moneys in the Payment Subaccount shall be applied by the Issuer for deposit with the Paying Agents to pay the principal of and interest on the Bonds on or prior to the date the same shall become due. Serial Capital Appreciation Bonds shall be payable from the Payment Subaccount in the Bond Years in which such Bonds mature and monthly payments into the Payment Subaccount on account of such Bonds shall commence in the first month of the respective Bond Years in which such Bonds mature. The Issuer shall, on a pro- rata basis for each Series, adjust the amount of the deposit or credit to the Payment Subaccount not later than the month immediately preceding any Interest Date and/or principal payment date so as to provide sufficient moneys in the Payment Subaccount to pay the principal of and interest on the Bonds coming due on such Interest Date and/or principal payment date. (2) Term Bonds Redemption Subaccount. Commencing in the month which is one year prior to the first Amortization Installment, there shall be deposited or credited to the Term Bonds Redemption Subaccount the sum which, together with the balance in such Subaccount, shall equal the Amortization Installments on all Term Bonds Outstanding due and unpaid and that portion of the Amortization Installments of all Term Bonds Outstanding next due which would have accrued on such Term Bonds during the then current calendar month if such Amortization Installments were deemed to accrue monthly (assuming that a year consists of twelve 12 equivalent calendar months having 30 days each) in equal amounts from the next preceding Amortization Installment due date, or, if there is no such preceding Amortization Installment due date, from a date one year preceding the due date of such Amortization Installment. Moneys in the Term Bonds Redemption Subaccount shall be used to purchase or redeem Term Bonds in the manner herein provided, and for no other purpose. The Issuer shall adjust the amount of the deposit or credit to the Term Bonds Redemption Subaccount in the month immediately preceding any Amortization Installment Date so as to provide sufficient moneys in the Term Bonds Redemption Subaccount to pay the Amortization Installments becoming due on such date. Payments to the Term Bonds Redemption Subaccount shall be on a parity with payments to the Payment subaccount. Amounts accumulated in the Term Bonds Redemption Subaccount with respect to anyAmortization Installment (together with amounts accumulated in the Payment Subaccount with respect to interest, if any, on the Term Bonds for which such Amortization Installment was 36 established) may be applied by the Issuer, on or prior to the sixtieth (60th) day preceding the due date of such Amortization Installment, (a) to the purchase of Term Bonds of the Series and maturity for which such Amortization Installment was established, or (b) to the redemption at the applicable Redemption Prices of such Term Bonds, if then redeemable by their terms. The applicable Redemption Price (or principal amount of maturing Term Bonds) of any Term Bonds so purchased or redeemed shall be deemed to constitute part of the Term Bonds Redemption Subaccount until such Amortization Installment date, for the purposes of calculating the amount of such Subaccount. As soon as practicable after the 60th day preceding the due date of any such Amortization Installment, the Issuer shall proceed to call for redemption on such due date, by causing notice to be given as provided in Section 3.03 hereof, Term Bonds of the Series and maturity for.which such Amortization Installment was established (except in the case of Term Bonds maturing on a Amortization Installment date) in such amount as shall be necessary to complete the retirement of the unsatisfied balance of such Amortization Installment. The Issuer shall pay out of the Term Bonds Redemption Subaccount and the Payment Subaccount to the appropriate Paying Agents, on or before the day preceding such redemption date (or maturity date), the amount required for the redemption (or for the payment of such Term Bonds then maturing), and such amount shall be applied by such Paying Agents to such redemption (or payment). All expenses in connection with the purchase or redemption of Term Bonds may be paid by the Issuer from the Operation and Maintenance Account. (3) Reserve Subaccount. Except as otherwise provided by Section 8.01(H) hereof, the Issuer shall establish within the Reserve Subaccount a separate subaccount for each Series of Bonds issued hereunder. The moneys in each such subaccount 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 Series of Bonds for which it is designated and shall not be available to pay debt service on any other Series. There shall be deposited or credited to each subaccount of the Reserve Subaccount such sum, if any, as will be necessary to immediately restore the funds in each such subaccount to an amount equal to the Reserve Subaccount Requirement applicable thereto including the reinstatement of any Reserve Subaccount Credit Instrument therein. To the extent there are insufficient moneys in the Revenue Account to make the required monthly deposit or credit to each subaccount of the Reserve Subaccount, such deposits or credits shall be made to each subaccount on a pro rata basis in relation to the amount of the deficiency existing in each subaccount. On or prior to each principal and interest payment date for the Bonds, moneys in each subaccount of the Reserve Subaccount shall be applied by the Issuer to the payment of the principal of, or Redemption Price, if applicable, and interest on related Series of Bonds to the extent moneys in the Payment 37 subaccount and the Term Bonds Redemption Subaccount, shall be insufficient for such purpose, but only to the extent the moneys transferred from the Surplus Reserve Account for such purposes pursuant to Section 4.05(B)(7) hereof shall be inadequate to fully provide for such insufficiency. Whenever there shall be surplus moneys in any subaccount of the Reserve Subaccount by reason of a decrease in the Reserve Subaccount Requirement, such surplus moneys shall be deposited or credited by the Issuer first, on a pro rata basis into other subaccounts, if any, containing less than the Reserve Subaccount Requirement applicable thereto, and second, into the Surplus Reserve Account. Upon the issuance of any Series of Bonds under the terms, limitations and conditions as herein provided, the Issuer shall, on the date of delivery of such Series of Bonds, fund the corresponding subaccount of the Reserve Subaccount established for such Series in an amount at least equal to the Reserve Subaccount Requirement applicable to such Series of Bonds. Such required amount may be paid in full or in part from the proceeds of such Series of Bonds or may be accumulated in equal monthly payments to such subaccount of the Reserve Subaccount over a period of months from the date of issuance of such Series of Bonds, which shall not exceed the greater of (a) 24 months, or (b) the number of months for which interest on such Series of Bonds has been capitalized, as determined by Supplemental Resolution. Whenever moneys in a subaccount of the Reserve Subaccount, together with the other available amounts in the Debt Service Account, are sufficient to fully pay the corresponding Series of Bonds in accordance with their terms (including principal and interest thereon), the funds in such subaccount of the Reserve Subaccount shall be applied to the payment of such Series of Bonds. Notwithstanding the foregoing provisions, in lieu of the required deposits or credits to a subaccount of the Reserve Subaccount, the Issuer may cause to be placed into such subaccount a Reserve Subaccount Credit Instrument for the benefit of the Bondholders in an amount equal to the difference between the Reserve Subaccount Requirement applicable thereto and the amounts then in such subaccount, if any. Such Reserve Subaccount Credit Instrument shall be payable to the Paying Agent for such Series (upon the giving of notice as required thereunder) on any interest payment or redemption date on which a deficiency exists which cannot be cured by funds in any other account or subaccount held pursuant to this Resolution and available for such purpose. Prior to fulfilling all or any portion of a Reserve Subaccount Requirement for any subaccount of the Reserve Subaccount through the use of a Reserve Subaccount Credit Instrument, the Issuer shall comply with each of the following requirements to the satisfaction of each Insurer of Outstanding Bonds secured by such subaccount: 38 (a) A Reserve Subaccount Insurance Policy issued to the Paying Agent by an Insurer may be deposited in the Reserve Subaccount to meet a Reserve Subaccount Requirement if the claims paying ability of such Insurer shall be rated "AAA" or "Aaa" by Standard and Poor's or Moody's, respectively. (b) A Reserve Subaccount Insurance Policy issued to the Paying Agent by an entity other than an Insurer may be deposited in the Reserve Subaccount to meet a Reserve Subaccount Requirement if the form and substance of such instrument and the issuer thereof shall be approved by the Insurer of the Series of Bonds to be secured by such Reserve Subaccount Insurance Policy. (c) A Reserve Subaccount Letter of Credit issued to the Paying Agent by a bank may be deposited in the Reserve Subaccount to meet a Reserve Subaccount Requirement if the issuer thereof is rated at least "AA" by Standard and Poor's or "Aa" by Moody's. The Reserve Subaccount Letter of Credit shall be payable in one or more draws upon presentation by the beneficiary of a sight draft accompanied by its certificate that it then holds insufficient funds to make a required payment of principal or interest on the Series of Bonds secured by such Reserve Subaccount Letter of Credit. The draws shall be payable within two days of presentation of the sight draft. The Reserve Subaccount Letter of Credit shall be for a term of not less than three years. The issuer of the Reserve Subaccount Letter of Credit shall be required to notify the Issuer and the Paying Agent, not later than 30 months prior to the stated expiration date of the Reserve Subaccount Letter of Credit, as to whether such expiration date shall be extended, and if so, shall indicate the new expiration date. If such notice indicates that the expiration date shall not be extended, the Issuer shall deposit in the appropriate subaccount of the Reserve Subaccount an amount sufficient to cause the cash or permitted investments on deposit in such subaccount together with any other qualifying Reserve Subaccount Credit Instruments, to equal the Reserve Subaccount Requirement on all Outstanding Bonds secured by such subaccount, such deposit to be paid in equal installments on at least a semi-annual basis over the remaining term of the Reserve Subaccount Letter of Credit, unless the Reserve Subaccount Letter of Credit is replaced by a Reserve Subaccount Credit Instrument meeting the requirements set forth above. The Reserve Subaccount Letter of Credit shall permit a draw in full not less than two weeks prior to the expiration or termination of such Reserve Subaccount Letter of Credit if the Reserve Subaccount Letter of Credit has not been replaced or renewed. In such event, the Paying Agent is hereby directed to draw upon the Reserve Subaccount Letter of 39 Credit prior to its expiration or termination unless an acceptable replacement is in place or the subaccount of the Reserve Subaccount is fully funded in its required amount. (d) The use of any Reserve Subaccount Credit Instrument shall be subject to receipt of an opinion of counsel acceptable to the Insurer of outstanding Bonds to be secured by such Reserve Subaccount Credit Instrument and in form and substance satisfactory to such insurer as to the due authorization, execution, delivery and enforceability of the Reserve Subaccount Credit Instrument in accordance with its terms, subject to applicable laws affecting creditors' rights generally, and, in the event the issuer of the Reserve Subaccount Credit Instrument is not a domestic entity, an opinion of foreign counsel in form and substance satisfactory to such Insurer. In addition, the use of a Reserve Subaccount Letter of Credit shall be subject to receipt of an opinion of counsel acceptable to the Insurer of Outstanding Bonds to be secured by such Reserve Subaccount Letter of Credit and in form and substance satisfactory to such Insurer to the effect that payments under the Reserve Subaccount Letter of Credit would not constitute avoidable preferences under Section 547 of the U.S. Bankruptcy Code or similar State laws with avoidable preference provisions in the event of the filing of a petition for relief under the U.S. Bankruptcy Code or similar State laws by or against the Issuer (or any other account party under the Reserve Subaccount Letter of Credit). (e) The obligation to reimburse the issuer of a Reserve Subaccount Credit instrument for any fees, expenses, claims or draws upon such Reserve Subaccount Credit Instrument shall be subordinate to the payment of debt service on the Bonds. The right of the issuer of a Reserve Subaccount Credit Instrument to payment or reimbursement of its fees and expenses shall be subordinated to cash replenishment of the Reserve Subaccount, and, subject to the second succeeding sentence, its right to reimbursement for claims or draws shall be on a parity with the cash replenishment of the Reserve Subaccount. The Reserve Subaccount Credit Instrument shall provide for a revolving feature under which the amount available thereunder will be reinstated to the extent of any reimbursement of draws or claims paid. If the revolving feature is suspended or terminated for any reason, the right of the issuer of the Reserve Subaccount Credit Instrument to reimbursement will be further subordinated to cash replenishment of the Reserve Subaccount to an amount equal to the difference between the full original amount available under the Reserve Subaccount Credit Instrument and the amount then available for further draws or claims. If (i) the issuer of a Reserve Subaccount Credit Instrument becomes insolvent or (ii) the issuer of a Reserve Subaccount Credit Instrument defaults in its payment obligations thereunder or (iii) the 40 claims-paying ability of the issuer of the Reserve Subaccount Insurance Policy falls below a Standard and Poor's "AAA" or a Moody's "Aaa" or (iv) the rating of the issuer of the Reserve Subaccount Letter of Credit falls below a Standard and Poor's "AA" or a Moody's "Aa", the obligation to reimburse the issuer of the Reserve Subaccount Credit Instrument shall be subordinate to the cash replenishment of the Reserve Subaccount. (f) If (i) the revolving reinstatement feature described in the preceding paragraph is suspended or terminated or (ii) the rating of the claims paying ability of the issuer of the Reserve Subaccount Insurance Policy falls below a Standard and Poor's "AAA" or a Moody's "Aaa" or (iii) the rating of the issuer of the Reserve Subaccount Letter of Credit falls below a Standard and Poor's "AA" or a Moody's "Aa", the Issuer shall either (X) deposit into the appropriate subaccount of the Reserve Subaccount an amount sufficient to cause the cash or permitted investments on deposit in such subaccount to equal the Reserve Subaccount Requirement on all Outstanding Bonds secured by such subaccount, such amount to be paid over the ensuing five years in equal installments deposited at least semi-annually or (Y) replace such instrument with a Reserve Subaccount Credit instrument meeting the requirements set forth above within six months of such occurrence. In the event (I) the rating of the claims-paying ability of the issuer of the Reserve Subaccount Insurance Policy falls below "A" or (II) the rating of the issuer of the Reserve Subaccount Letter of Credit falls below "A" or (III) the issuer of the Reserve Subaccount Credit instrument defaults in its payment obligations or (IV) the issuer of the Reserve Subaccount Credit Instrument becomes insolvent, the Issuer shall either (XX) deposit into the appropriate subaccount of the Reserve Subaccount an amount sufficient to cause the cash or permitted investments on deposit in such subaccount to equal to Reserve Subaccount Requirement on all Outstanding Bonds secured by such subaccount, such amount to be paid over the ensuing year in equal installments on at least a monthly basis or (YY) replace such instrument with a Reserve Subaccount Credit Instrument meeting the requirements set forth above within six months of such occurrence. (g) Where applicable, the amount available for draws or claims under the Reserve Subaccount Credit Instrument may be reduced by the amount of cash or permitted investments deposited in the appropriate subaccount of the Reserve Subaccount pursuant to clause (X) of the preceding subparagraph f. (h) At all times during which a Reserve Subaccount Credit Instrument is used to replace cash amounts required to be on deposit in the Reserve Subaccount, the Paying Agent 41 shall ascertain the necessity for a claim or draw upon the Reserve Subaccount Credit Instrument and provide notice to the issuer of the Reserve Subaccount Credit Instrument in accordance with its terms not later than three days (or such longer period as may be necessary depending on the permitted time period for honoring a draw under the Reserve Subaccount Credit Instrument) prior to each interest payment date. (i) Cash on deposit in any subaccount of the Reserve Subaccount shall be used (or investments purchased with such cash shall be liquidated and the proceeds applied as required) prior to any drawing on any Reserve Subaccount Credit Instrument. If and to the extent that more than one Reserve Subaccount Credit Instrument is deposited in any subaccount of the Reserve Subaccount, drawings thereunder and repayments of costs associated therewith shall be made on a pro rata basis, calculated by reference to the maximum amounts available thereunder. (4) Payments to Issuer of Reserve Subaccount Letter of Credit. The Issuer shall next make any payments required to be made to the issuer of any Reserve Subaccount Letter of Credit. Payments pursuant to this subsection (4), other than payments which are not incurred as a result of a draw against the Reserve Subaccount Letter of Credit, shall be on a parity with all payments made to the Reserve Subaccount pursuant to subsection (3) above. (5) Renewal and Replacement Account. There shall be deposited or credited to the Renewal and Replacement Account an amount equal to one-twelfth of the Renewal and Replacement Requirement until the amount accumulated in such Account is equal to the Renewal and Replacement Account Requirement. In the event that the Renewal and Replacement Account Requirement is reduced, any excess amount in the Renewal and Replacement Account shall be deposited or credited to the Surplus Reserve Account. The moneys in the Renewal and Replacement Account shall be applied by the Issuer for the purpose of paying the cost of major extensions, improvements or additions to, or the replacement or renewal of capital assets of, the Facilities, or extraordinary repairs of the Facilities; provided, however, that on or prior to each principal and interest payment date for the Bonds (in no event earlier than the fifteenth (15th) day of the month next preceding such payment date), moneys in the Renewal and Replacement Account shall be applied for the payment into the Payment Subaccount, and the Term Bonds Redemption Subaccount when the moneys therein are insufficient to pay the principal of and interest on the Bonds coming due, but only to the extent moneys available in the Reserve Subaccount for such purpose pursuant to Section 4.05(B) (3) hereof shall be inadequate to fully provide for such insufficiency. (6) Subordinated Indebtedness. Gross Revenues shall next be applied by the Issuer for the payment of any accrued debt service 42 on Subordinated Indebtedness incurred by the Issuer in connection with the Facilities and in accordance with the proceedings authorizing such Subordinated Indebtedness. (7) Surplus Reserve Account. The balance of any Gross Revenues remaining in said Revenue Account after the foregoing shall be deposited or credited to the Surplus Reserve Account. Moneys in the Surplus Reserve Account shall be applied monthly by the Issuer, to the extent necessary, to pay Operating Expenses whenever the moneys in the Operation and Maintenance Account shall be insufficient for such purpose. Whenever no Event of Default shall have occurred and be continuing under this Resolution, and after setting aside in the Surplus Reserve Account a sum which, together with the moneys in the Operation and Maintenance Account, shall be sufficient to pay Operating Expenses until the next succeeding November i according to the Annual Budget, the balance of any moneys remaining in the Surplus Reserve Account may be applied by the Issuer to any lawful purpose of the Facilities. Notwithstanding the foregoing, the Issuer shall have the right, at any time, to apply any money in the Surplus Reserve Account for deposit or credit to the Renewal and Replacement Account and the Rebate Account. Additionally, the Issuer shall have the right, but may never be compelled by any Holder, to apply any moneys in the Surplus Reserve Account, at any time, to the payment of all or any part of principal of, Redemption Price or interest on the Bonds or any Subordinated Indebtedness. (C) If, on the 20th day of each month, the Operation and Maintenance Account, the Debt Service Account, the Rebate Account and the Renewal and Replacement Account are not fully funded from Gross Revenues as required above, the Issuer shall transfer from the Designated Revenue Account, ratably from each account, amounts necessary to cure such deficiency. Any amounts remaining in the Designated Revenue Account after the 20th day of each month and not needed for the foregoing may be released by the Issuer and used for any lawful purpose. (D) Whenever moneys in the Reserve Subaccount, together with the other amounts in the Debt Service Account, are sufficient to fully pay all Outstanding Bonds in accordance with their terms (including principal or applicable Redemption Price and interest thereon), no further deposits or credits to the Debt Service Account need be made. The Issuer, in its discretion, may use moneys in the Payment Subaccount to purchase or redeem Bonds coming due on the next principal payment date, provided such purchase or redemption does not adversely affect the Issuer's ability to pay the principal or interest coming due on such principal payment date on the Bonds not so purchased or redeemed. 43 Prior to the close of business on the sixteenth Business Day (or, if no Reserve Subaccount Letter of Credit or Reserve Subaccount Insurance Policy is then in place, prior to the close of business on the fifth Business Day) prior to any date established for the payment of principal of or Redemption Price, if applicable, or interest on any Series of Bonds, the Issuer shall certify to the Paying Agent that sufficient moneys are in the Payment Subaccount and Term Bonds Redemption Subaccount to make all payments due on such forthcoming date. The Paying Agent shall be entitled to verify such certification by examination of any books, records or other proceedings deemed necessary by the Paying Agent to effectuate such verification and shall be entitled, at its request, to receive the certificate described in the preceding sentence in writing. 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 Bonds, the Issuer shall withdraw from the appropriate account of the Debt Service Account sufficient moneys to pay such principal or Redemption Price, if applicable, or interest and deposit such moneys with the Paying Agent for the Bonds to be paid. (E) In the event the Issuer shall issue a Series of Bonds secured by a Credit Facility, the Issuer may establish separate subaccounts in the Payment Subaccount and the Term Bonds Redemption Subaccount to provide for payment of the principal of and interest on such Series; provided payment from the Pledged Funds of one Series of Bonds shall not have preference over payment of any other Series of Bonds. The Issuer may also deposit or credit moneys to such subaccounts at such other times and in such other amounts from those provided in Section 4.05(B) as shall be necessary to pay the principal of and interest on such Bonds as the same shall become due, all as provided by the Supplemental Resolution authorizing such Bonds. In the case of Bonds secured by a Credit Facility, amounts in the Debt Service Account 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, premium, if any, and interest on such Bonds; provided such Credit Facility shall have no priority over Bondholders or the Insurer with respect to amounts in the Debt Service Account. SECTION 4.06. REBATE ACCOUNT. Amounts in the Rebate Account shall be held in trust by the Issuer and used solely to make required rebates to the United States (except to the extent the same may be transferred to the Revenue Account) and the Bondholders shall have no right to have the same applied for debt service on the Bonds. The Issuer agrees to undertake all actions required of it in its arbitrage certificate, dated the date of issuance of the Series 1992 Bonds, as well as any successor certificate relating to other Series of Bonds, relating to such Series 1992 Bonds, including, but not limited to: 44 (A) making a determination in accordance with the Code of the amount required to be deposited or credited to the Rebate Account; (B) depositing or crediting the amount determined in clause (A) above into the Rebate Account; (C) paying on the dates and in the manner required by the Code to the United States Treasury from the Rebate Account 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 4.06 as shall be required by the Code, as well as evidence of the fair market value of any investments purchased with proceeds of the Bonds. The provisions of the above-described arbitrage certificate 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 4.07. I~VESTME~"~B. The Construction Account, the Revenue Account, the Designated Revenue Account, the Debt Service Account, the Operation and Maintenance Account, the Surplus Reserve Account and the Renewal and Replacement Account 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. The moneys in the Construction Account, the Revenue Account, the Designated Revenue Account, Operation and Maintenance Account, the Payment Subaccount, the Term Bonds Redemption Subaccount, the Renewal and Replacement Account and the Surplus Reserve Account shall be invested and reinvested by the Issuer in Authorized Investments, maturing not later than the dates on which such moneys will be needed for the purposes of such account or subaccount. Moneys in the Reserve Subaccount shall be invested in Authorized Investments, maturing no later than five (5) years from the date of investment. All investments shall be valued at cost. Notwithstanding any other provision hereof, all amounts in the Construction Account or Payment Subaccount representing accrued and capitalized interest shall be held by the Paying Agent, shall be pledged solely to the payment of interest on the corresponding Series of Bonds and shall be invested only in obligations described in paragraph (A) of the definition of "Authorized Investments" set forth in Section 1.01 hereof maturing in such times and in such amounts as are necessary to pay the interest to which they are pledged. Any and all income received from the investment of moneys in the accounts and subaccounts established hereunder shall be deposited or credited upon receipt thereof in the Revenue Account. Nothing in this Resolution shall prevent any Authorized Investments acquired as investments of or security for funds held 45 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 4.0S. SEPARATE ACCOUNTS. The moneys required to be accounted for in each of the foregoing funds, accounts and subaccounts established herein may be deposited in a single bank account, and funds allocated to the various funds, accounts and subaccounts established herein may be invested in a common investment pool, provided that adequate accounting records are maintained to reflect and control the restricted allocation of the moneys on deposit therein and such investments for the various purposes of such funds, accounts and subaccounts as herein provided. The designation and establishment of the various funds, accounts and subaccounts in and by this Resolution shall not be construed to require the establishment of any completely independent, 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. SECTION 4.09. RELEASE OF ELECTRIC FRANCHISE FEES. The lien enjoyed by the Bonds on the Electric Franchise Fees may, at the option of the City, be released and discharged and shall no longer be considered a part of the ,,Pledged Funds" provided that the historical collection of the Public Service Taxes received by the city shall, for each of the immediately preceding three Fiscal Years, be at least equal to one and one-half times (1.50x) the Maximum Annual Debt Service on the Bonds which may be Outstanding at the time. Such release shall be implemented by a resolution duly adopted by the City Council to that effect after an independent certified public accountant shall have provided a certificate to the City stating and illustrating compliance with the above described earnings test, which certificate shall be a part of the resolution adopted by the city. Copies of such proceedings shall be mailed, postage prepaid, to all registered holders of the Bonds. The city shall not have the right to release the lien of the Bonds on the Public Service Taxes for any reason whatsoever so long as any of the Bonds and any interest thereon shall remain outstanding and unpaid. 46 ARTICLE V COVENANTS SECTION 5.01. GENERAL. The Issuer hereby makes the following covenants, in addition to all other covenants in this Resolution, with each and every successive Holder of any of the Bonds so long as any of said Bonds remain Outstanding. SECTION 5.0Z. OPERATION AND NAINTENANCE. The Issuer will maintain or cause to be maintained the Facilities 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. The Issuer covenants to comply with all State and federal laws and regulations applicable to its ownership and operation of the Facilities. SECTION 5.03. 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 Facilities 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. 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 Annual Budget for the preceding Fiscal Year, shall be deemed to be in effect for such Fiscal Year until the Annual Budget for such Fiscal Year is adopted. SECTION 5.04 RATES. The Issuer shall fix, establish and maintain such rates and collect such fees, rates or other charges for the product, services and facilities of its Facilities, and revise the same from time to time, whenever necessary, as will always provide in each Fiscal Year Gross Revenues which at least equal 100 percent of the Annual Debt Service on all Outstanding Bonds becoming due in such Fiscal Year plus 100 percent of any amounts required by the terms hereof to be deposited or credited to the Operation and Maintenance Account, Renewal and Replacement Account and the Reserve Subaccount or with any issuer of a Reserve Subaccount Letter of Credit or Reserve Subaccount Insurance Policy as a result of a withdrawal from the Reserve Subaccount, or with respect to any Subordinated Indebtedness. Such rates, fees or other charges shall not be so reduced so as to be insufficient to 47 provide adequate Net Revenues for the purposes provided therefor by this Resolution. SECTION 5.05. BOOKS ~ RECORDS. The Issuer shall keep books, records and accounts of the revenues and operations of the Facilities, which shall be kept separate and apart from all other books, records and accounts of the Issuer, and the Holders of any Bonds 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 5.06. ANNUAL AUDIT. The Issuer shall, immediately after the close of each Fiscal Year, cause the books, records and accounts relating to the Facilities to be properly audited by a recognized independent certified public accountant or firm of independent certified public accountants, and shall require such accountants to complete their report of such Annual Audit in accordance with applicable law. 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 and to any Holder of a Bond who shall have furnished his address to the Clerk and requested in writing that the same be furnished to him. SECTION 5.07. NO MORTGAGE OR SALE OF THE FACILITIES. The Issuer irrevocably covenants, binds and obligates itself not to sell, lease, encumber or in any manner dispose of the Facilities as a whole or any substantial part thereof (except as provided below) until all of the Bonds and all interest thereon shall have been paid in full or provision for payment has been made in accordance with Section 9.01 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 Facilities in the following manner, if any one of the following conditions exist: (A) such property is not necessary for the operation of the Facilities, (B) such property is not useful in the operation of the Facilities, (C) such property is not profitable in the operation of the Facilities, or (D) in the case of a lease of such property, such lease will be advantageous to the Facilities and will not adversely affect the security for the Bondholders. 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 of one percent of the value of the fixed assets of the Facilities 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 5.07 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 of one 48 percent of the value of the gross plant of the Facilities at original cost, an Authorized Issuer Officer shall 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 5.07 have been met, and the Issuer shall, by resolution, duly adopt, approve and concur in the finding of the Authorized Issuer officer. The proceeds from such sale, lease or other disposition shall be deposited or credited, first, to the Renewal and Replacement Account to the extent necessary to make the amount therein equal to the Renewal and Replacement Account Requirement, and, second, to the Surplus Reserve Account. The transfer of the Facilities 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, obligations issued by which are exempt from Federal income taxation under Section 103(a) of the Code, shall not be deemed prohibited by this Section 5.07 and such successor board or authority shall fall within the definition of "Issuer" in Section 1.01 hereof, provided that the transferee has the same payment obligation as the Issuer with respect to the Bonds, from the same source of revenue. Notwithstanding the foregoing provisions of this Section 5.07, the Issuer shall have the authority to sell for fair and reasonable consideration or to transfer without charge from the Facilities to another department of the Issuer any land comprising a part of the Facilities which, based upon the certification of the Authorized Issuer officer, is no longer necessary or useful in the operation of the Facilities 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 5.07. 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 Facilities if such contract, license, easement or right does not impede or restrict the operation by the Issuer of the Facilities, but any payments to the Issuer under or in connection with any such contract, license, easement or right in respect of the Facilities or any part thereof shall constitute Gross Revenues. BECTION 5.08. I~SURANCE. The Issuer will carry such insurance as is ordinarily carried by private or public corporations owning and operating golf course facilities similar to the Facilities with a reputable insurance carrier or carriers, including public 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 49 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 Facilities, or such other amount or amounts as the Golf Course Consultants 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 Facilities. The proceeds of any such insurance shall be held in the Construction Account and applied in accordance with the requisition procedure provided in Section 4.03 hereof to the necessary costs involved in such repair and replacement and, to the extent not so applied, shall (together with proceeds of any such use and occupancy insurance) be deposited or credited to the Revenue Account as Gross Revenues. SECTION 5.09. NO FREE SERVICE. The Issuer will not render, or cause to be rendered, any free services of any nature by its Facilities or any part thereof, nor will any preferential rates be established for users of the same class. SECTION 5.10. NO IMPAIRMENT OF RIGHTS. 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 of the Bonds or which would in any manner impair or adversely affect the levy or collection of the Designated Revenues. SECTION 5.11. ENFORCEMENT OF CHARGES. The Issuer shall compel the prompt payment of rates, fees and charges imposed for service rendered by the Facilities, and will continue to levy and collect the Electric Franchise Fees (until released pursuant hereto) and the Public Services Taxes to the maximum amounts permitted by law and the Franchise Agreement, as long as any Bonds are Outstanding hereunder. SECTION 5.12. 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 Bonds of any one or more Series credit or liquidity support that shall enhance the security or the value of such Bonds, provided, that any such covenants shall not adversely affect the Holders of any Outstanding Bonds. 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 of 5O Bonds the same as if such covenants were set forth in full in this Resolution. SECTION 5.13. GOLF COURSE CONSULTANTS. The Issuer shall from time to time employ Golf Course Consultants, whose duties shall be to make any certificates and perform any other acts required or permitted of the Golf Course Consultants under this Resolution, and also to review the operation of the Facilities and to make inspections, reports and recommendations in connection with the Facilities as requested and as required by the provisions hereof. SECTION 5.14. MANAGER OF FACILITIES. The Issuer in operating the Facilities will employ a manager of demonstrated ability. SECTION 5.15. FEDEP~L INCOME TAXATION COVENANTS. (A) The Issuer covenants with the Holders of each Series of Bonds (other than Taxable Bonds) that it shall not use the proceeds of such Series of Bonds in any manner which would cause the interest on such Series of Bonds to be or become includable in gross income for purposes of federal income taxation. (B) The Issuer covenants with the Holders of each Series of Bonds (other than Taxable Bonds) that neither the Issuer nor any Person under its control or direction will make any use of the proceeds of such Series of Bonds (or amounts deemed to be proceeds under the Code) in any manner which would cause such Series of Bonds to be "arbitrage bonds" 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 Bonds to become includable in gross income for purposes of federal income taxation. (C) The Issuer hereby covenants with the Holders of each Series of Bonds (other than Taxable Bonds) that it will comply with all provisions of the Code necessary to maintain the exclusion from gross income of interest on the Bonds for purposes of federal income taxation, including, in particular, the payment of any amount required to be rebated to the U.S. Treasury pursuant to the Code. (D) The Issuer may, if it so elects, issue one or more Series of Taxable Bonds 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 Bond 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 interest on any other Bonds theretofore issued hereunder to be or become subject to federal income taxation. The covenants set forth in paragraphs (A), (B) and (C) above shall not apply to any Taxable Bonds. 51 SECTION 5.16. POLICY. pAYI(EI~ITS UNDERTHE SER~ES ~992 BOND ~NS~CE (A) In the event that, on the second Business Day, and again on the Business Day, prior to the payment date on the Series 1992 Bonds, the Paying Agent has not received sufficient moneys to pay all principal of and interest on the Series 1992 Bonds due on the second following or following, as the case may be, Business Day, the Paying Agent shall immediately notify the Insurer or its designee on the same Business Day by telephone or telegraph, confirmed in writing by registered or certified mail, of the amount of the deficiency. (B) If the deficiency is made up in whole or in part prior to or on the payment date, the Paying Agent shall so notify the Insurer or its designee. (C) In addition, if the Paying Agent has notice that any Series 1992 Bondholder has been required to disgorge payments of principal or interest on the Series 1992 Bonds to a trustee in Bankruptcy or creditors or others pursuant to a final judgment by a court of competent jurisdiction that such payment constitutes a voidable preference to such Series 1992 Bondholders within the meaning of any applicable bankruptcy laws, then the Paying Agent shall notify the Insurer or its designee of such fact by telephone or telegraphic notice, confirmed in writing by registered or certified mail. (D) The Paying Agent is hereby irrevocably designated, appointed, directed and authorized to act as attorney-in-fact for Holders of the Series 1992 Bonds as follows: (1) If and to the extent there is a deficiency in amounts required to pay interest on the Series 1992 Bonds, the Paying Agent shall (a) execute and deliver to citibank, N.A., or its successors under the Policy (the "Insurance Paying Agent"), in form satisfactory to the Insurance Paying Agent, an instrument appointing the Insurer as agent for such Holders in any legal proceeding related to the payment of such interest and an assignment to the Insurer of the claims for interest to which such deficiency relates and which are paid by the Insurer, (b) receive as designee of the respective Holders (and not as Paying Agent) in accordance with the tenor of the Policy payment from the Insurance Paying Agent with respect to the claims for interest so assigned, and (c) disburse the same to such respective Holders; and (2) If and to the extent of a deficiency in amounts required to pay principal of the Series 1992 Bonds, the Paying Agent shall (a) execute and deliver to the Insurance Paying Agent in form satisfactory to the Insurance Paying Agent an instrument appointing the Insurer as agent for such Holder in 52 any legal proceeding relating to the payment of such principal and an assignment to the Insurer of any of the Series 1992 Bonds surrendered to the Insurance Paying Agent of so much of the principal amount thereof as has not previously been paid or for which moneys are not held by the Paying Agent and available for such payment (but such assignment shall be delivered only if payment from the Insurance Paying Agent is received), (b) receive as designee of the respective Holders (and not as Paying Agent) in accordance with the tenor of the Policy payment therefor from the Insurance Paying Agent, and (c) disburse the same to such Holders. (E) Payments with respect to claims for interest on and principal of Series 1992 Bonds disbursed by the Paying Agent from proceeds of the Policy shall not be considered to discharge the obligation of the Issuer with respect to such Series 1992 Bonds, and the insurer shall become the owner of such unpaid Series 1992 Bonds and claims for the interest in accordance with the tenor of the assignment made to it under the provisions of this subsection or otherwise. (F) Irrespective of whether any such assignment is executed and delivered, the Issuer and the paying Agent hereby agree for the benefit of the Insurer that, (1) They recognize that to the extent the Insurer makes payments, directly or indirectly (as by paying through the Paying Agent), on account of principal of or interest on the Series 1992 Bonds, the Insurer will be subrogated to the rights of such Holders to receive the amount of such principal and interest from the Issuer, with interest thereon as provided and solely from the sources stated in this Resolution and Series 1992 Bonds; and (2) They will accordingly pay to the Insurer the amount of such principal and interest (including principal and interest recovered under subparagraph (ii) of the first paragraph of the Policy, which principal and interest shall be deemed past due and not to have been paid), with interest thereon as provided in this Resolution and the Series 1992 Bonds, but only from the sources and in the manner provided herein for the payment of principal of and interest on the Series 1992 Bonds to Holders, and will otherwise treat the Insurer as the owner of such rights to the amount of such principal and interest. (G) In connection with the issuance of Additional Bonds, the Issuer shall deliver to the Insurer a copy of the disclosure document, if any, circulated with respect to such Additional Bonds. (H) Copies of any amendments made to the documents executed in connection with the issuance of the Series 1992 Bonds which are 53 consented to by the Insurer shall be sent to Standard & Poor's corporation. (I) The Insurer shall receive notice of the resignation or removal of the Paying Agent and the appointment of a successor thereto. (J) The Insurer shall receive copies of all notices required to be delivered to Series 1992 Bondholders and, on an annual basis, copies of the Issuer's audited financial statements and Annual Budget. (K) Any notice that is required to be given to a holder of the Series 1992 Bonds or to the Paying Agent pursuant to this Resolution shall also be provided to the Insurer. All notices required to be given to the Insurer under this Resolution shall be in writing and shall be sent by registered or certified mail addressed to Municipal Bond Investors Assurance Corporation, 113 King Street, Armonk, New York 10504 Attention: Surveillance. 54 ~RTICLE VI SUBORDINATED INDEBTEDNESS AND ~DDITION~L BONDS SECTION 6.01. SUBORDINATED INDEBTEDNESS. The Issuer will not issue any other obligations, except under the conditions and in the manner provided herein, payable from the Pledged Funds or the Gross Revenues 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 Bonds and the interest thereon. The Issuer may at any time or from time to time issue evidences of indebtedness payable in whole or in part out of Pledged Funds and which may be secured by a pledge of 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 and provided further that the issuance of such Subordinated Indebtedness shall be subject to any provisions contained in financing documents securing Outstanding Subordinated Indebtedness to the extent such provisions impact on the ability of the Issuer to issue Subordinated Indebtedness. The Issuer shall have the right to covenant with the holders from time to time of any Subordinated Indebtedness to add to the conditions, limitations and restrictions under which any Additional Bonds may be issued under the provisions of Section 6.02 hereof. The Issuer agrees to pay promptly any Subordinated Indebtedness as the same shall become due. Notwithstanding anything contained herein to the contrary, no Subordinated Indebtedness shall be subject to acceleration upon an event of default. SECTION 6.02. ISSUANCE OF ADDITIONAL BONDS. No Additional Bonds, payable on a parity with the Bonds then Outstanding pursuant to this Resolution, shall be issued except upon the conditions and in the manner herein provided. The Issuer may issue one or more Series of Additional Bonds for any one or more of the following purposes: (i) financing the Cost of a Project, or the completion thereof, or (ii) refunding any or all Outstanding Bonds or of any Subordinated Indebtedness of the Issuer. No such Additional Bonds shall be issued unless the following conditions are complied with: (A) The Issuer shall certify that it is current in all deposits or credited to the various accounts and subaccounts established hereby and all payments theretofore required to have been deposited or credited by it under the provisions of this Resolution and that no Event of Default shall have occurred and be continuing. (B) An independent certified public accountant shall certify to the Issuer: (i) that the amount of the Net Revenues received during any 12 consecutive months selected by the Issuer of the 18 months immediately preceding the issuance of said Additional Bonds, or alternatively for the Fiscal Year immediately preceding the date of issuance of such Additional Bonds, adjusted as hereinafter provided, will be equal to at least 125% of the Maximum Annual Debt Service of the Outstanding Bonds and the Additional Bonds then proposed to be issued, plus 100% of the maximum annual debt service for all Subordinated Indebtedness then outstanding and any amounts owed to the issuer of a Reserve Subaccount Letter of Credit or Reserve Subaccount Insurance Policy as a result of a draw against such Reserve Subaccount Letter of Credit or Reserve Subaccount Insurance Policy; and (ii) that the amount of Designated Revenues for the Fiscal Year immediately preceding the date of issuance of such Additional Bonds are not less than 150% of the Maximum Annual Debt Service on all Outstanding Bonds and the Additional Bonds then proposed to be issued. The Issuer shall be permitted to issue indebtedness secured by the Net Revenues (but not the Designated Revenues) on a parity with the Bonds upon compliance with the provisions of Sections 6.02(A) and 6.02(B) (i) above, taking into account all Outstanding Bonds and the indebtedness proposed to be issued. The Issuer shall be permitted, to issue indebtedness secured by the Designated Revenues (but not the Pledged Revenues) on a parity with the Bonds upon compliance with the provisions of Sections 6.02(A) and 6.02(B) (ii) above, taking into account all Outstanding Bonds and the indebtedness proposed to be issued. (C) For the purpose of determining the Maximum Annual Debt Service under this Section 6.02, the additional parity Variable Rate Bonds then proposed to be issued shall be deemed to bear interest at all times to the maturity thereof at a constant rate of interest equal to either (1) the rate of interest such additional parity Variable Rate Bonds shall be assumed to have borne on the first business day of the calendar month next preceding the date on which the additional parity Variable Rate Bonds are to be delivered plus one-half of the difference between such rate and the Maximum Interest Rate or (2) the actual rate of interest such Variable Rate Bonds shall be assumed to have borne on such date of calculation, whichever is higher. The assumed interest rates for the additional parity Variable Rate Bonds established pursuant to this paragraph shall be based upon a written report or opinion to the Issuer of a banking or investment banking or financial advisory institution knowledgeable in financial matters relating to the Issuer. 56 (D) For the purpose of determining the Maximum Annual Debt Service under this Section 6.02, any Variable Rate Bonds shall be deemed to bear interest at all times to the maturity thereof at a constant rate of interest equal to either the rate borne by such Variable Rate Bonds on the date they were issued plus one-half of the difference between such rate and the Maximum Interest Rate or the actual rate of interest borne by such Variable Rate Bonds on such date of calculation, whichever is higher. (E) For the purpose of this Section 6.02, the phrase "immediately preceding Fiscal Year or the 12 consecutive months of the 18 months immediately preceding the issuance of said Additional Bonds" shall be sometimes referred to as "12 consecutive months." (F) The Net Revenues calculated pursuant to the foregoing Section 6.02(B) may be adjusted by the independent certified public accountant upon the written advice of the Golf Course Consultants, at the option of the Issuer, as follows (provided that any adjustment that would produce a decrease in Net Revenues shall be mandatory and not optional): (1) If the Issuer, prior to the issuance of the proposed Additional Bonds, shall have increased the rates, fees or other charges for the product, services or facilities of the Facilities, the Net Revenues for the 12 consecutive months shall be adjusted to show the Net Revenues which would have been derived from the Facilities in such 12 consecutive months as if such increased rates, fees or other charges for the product, services or facilities of the Facilities had been in effect during all of such 12 consecutive months. (2) If the Issuer shall have acquired or has contracted to acquire any privately or publicly owned existing golf course facilities, the cost of which shall be paid from all or part of the proceeds of the issuance of the proposed Additional Bonds, then the Net Revenues derived from the Facilities during the 12 consecutive months immediately preceding the issuance of said Additional Bonds shall be increased by adding to the Net Revenues for said 12 consecutive months the Net Revenues which would have been derived from said existing golf course facilities, as if such existing golf course facilities had been a part of the Facilities during such 12 consecutive months. Such Net Revenues shall, to the extent the Issuer has increased its rates as described in paragraph (1) above, be calculated as if such increased rates were in effect as described in paragraph (1). For the purposes of this paragraph, the Net Revenues derived from said existing golf course facilities during such 12 consecutive months shall be adjusted to determine such Net Revenues by deducting what would have been the Issuer's costs of operation and maintenance of said existing golf course facilities (the basis of which is certified by the Golf Course 57 Consultants) as part of the Facilities from the gross revenues of said facilities. (3) In the event the Issuer shall be constructing or acquiring additions, extensions or improvements to the Facilities from the proceeds of such Additional Bonds (or from other sources) and shall have established fees, rates or charges to be charged and collected from users of such facilities when service is rendered, such Net Revenues may be adjusted by adding thereto the Net Revenues estimated by the Golf Course Consultants to be derived during the first 12 months of operation after completion of the construction or acquisition of said additions, extensions and improvements from the proposed users of the facilities to be financed by Additional Bonds together with other funds on hand or lawfully obtained for such purpose. (G) Additional Bonds shall be deemed to have been issued pursuant to this Resolution the same as the Outstanding Bonds, and all of the other covenants and other provisions of this Resolution (except as to details of such Additional Bonds inconsistent therewith) shall be for the equal benefit, protection and security of the Holders of all Bonds issued pursuant to this Resolution. Except as provided in Sections 4.02 and 4.05 hereof, all Bonds, regardless of the time or times of their issuance, shall rank equally with respect to their lien on the Pledged Funds and their sources and security for payment therefrom without preference of any Bonds over any other. (H) In the event any Additional Bonds are issued for the purpose of refunding any Bonds then Outstanding, the conditions of Section 6.02(B) shall not apply, provided that the issuance of such Additional Bonds shall not result in an increase in the aggregate amount of principal of and interest on the Outstanding Bonds becoming due in the current Fiscal Year and all subsequent Fiscal Years. The conditions of Section 6.02(B) shall apply to Additional Bonds issued to refund Subordinated Indebtedness and to Additional Bonds issued for refunding purposes which cannot meet the conditions of this paragraph. (I) In the event that the total amount of Series 1992 Bonds herein authorized to be issued are not issued simultaneously, such Series 1992 Bonds which are subsequently issued shall be subject to the conditions of Section 6.02(B). (J) For purposes of making a draw against any Reserve Subaccount Letter of Credit, the Issuer's obligation to reinstate the Reserve Subaccount Letter of Credit shall not be subject to the Additional Bonds test set forth in the Resolution. SECTION 6.03. BOND ANTICIP&TION NOTES. The Issuer may issue notes in anticipation of the issuance of Bonds which shall have such terms and details and be secured in such manner, not 58 inconsistent with this Resolution, as shall be provided by Supplemental Resolution of the Issuer. SECTION 6.04. ACCESSION OF SUBORDINATED INDEBTEDNESS TO PARITY STATUS WITH BONDS. The Issuer may provide for the accession of Subordinated Indebtedness to the status of complete parity with the Bonds, if (A) the Issuer shall meet all the requirements imposed upon the issuance of Additional Bonds by Sections 6.02(A) and (B) hereof, assuming for purposes of said requirements, that such Subordinated Indebtedness shall be Additional Bonds, (B) the facilities financed by such Subordinated Indebtedness shall be, or become part of, the Facilities, and (C) a subaccount in the Reserve Subaccount is established, upon such accession, which shall contain an amount equal to the Reserve Subaccount Requirement in accordance with Section 4.05(B) (4) hereof. If the aforementioned conditions are satisfied, the Subordinated Indebtedness shall be deemed to have been issued pursuant to this Resolution the same as the Outstanding Bonds, and such Subordinated Indebtedness shall be considered Bonds for all purposes provided in this Resolution. 59 ~RTICLE VII DEFAULTS ~ND REMEDIES SECTION 7.01. EVENTS OF DEFAULT. The following events shall each constitute an "Event of Default": (A) Default shall be made by the Issuer in the payment of the principal of, Amortization Installment, redemption premium or interest on any Bond when due; provided however, that no effect shall be given to payments made under a Bond insurance Policy. (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 Bonds or in this Resolution on the part of the Issuer to be performed, and such default shall continue for a period of 30 days after written notice of such default shall have been received from the Holders of not less than 25 percent of the aggregate principal amount of Bonds Outstanding or the Insurer of such amount of Bonds. Notwithstanding the foregoing, the Issuer shall not be deemed to be in default hereunder if such default can be cured within a reasonable period of time and if the Issuer in good faith institutes appropriate curative action and diligently pursues such action until default has been corrected; provided however, that if such default is not cured within 60 days, it shall become an Event of Default. SECTION 7.02. REMEDIES. Any Holder of Bonds issued under the provisions of this Resolution or any trustee or receiver acting for such Bondholders 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 of Florida, 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. 60 The Holder or Holders of Bonds in an aggregate principal amount of not less than 25 percent of the Bonds then Outstanding may by a duly executed certificate in writing appoint a trustee for Holders of Bonds issued pursuant to this Resolution with authority to represent such Bondholders in any legal proceedings for the enforcement and protection of the rights of such Bondholders and such certificate shall be executed by such Bondholders or their duly authorized attorneys or representatives, and shall be filed in the office of the Clerk. Notice of such appointment, together with evidence of the requisite signatures of the Holders of not less than 25 percent in aggregate principal amount of Bonds 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 such appointment shall be given to all Holders of Bonds in the same manner as notices of redemption are given hereunder. After the appointment of the first trustee hereunder, no further trustees may be appointed; however, the Holders of a majority in aggregate principal amount of all the Bonds then Outstanding may remove the trustee initially appointed and appoint a successor and subsequent successors at any time. If any remedial action is discontinued or abandoned, the Bondholders and Insurers shall be restored to their respective positions held prior to commencement of such remedial action. SECTION 7.03. DIRECTIONS TO TRUSTEE AS TO REMEDIAL PROCEEDINGS. The Holders of a majority in principal amount of the Bonds then Outstanding (or any Insurer insuring any then Outstanding Bonds) have the right, by an 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 with respect to the Series of Bonds owned by such Holders or insured by such Insurer, 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 direction which in the opinion of the trustee would be unjustly prejudicial to Holders of Bonds not parties to such direction. SECTION 7.04. REMEDIES CUMULATIVE. No remedy herein conferred upon or reserved to the Bondholders 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 7.05. WAIVER OF DEFAULT. No delay or omission of any Bondholder 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 7.02 to the Bondholders may 61 be exercised from time to time, and as often as may be deemed expedient. SECTION 7.06. APPLICATION 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 (except for amounts in the subaccounts of the Reserve Subaccount which shall be applied to the payment of the Series of Bonds for which they were established) 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 and Registrar hereunder; B. To the payment of the amounts required for reasonable and necessary Operating Expenses, and for the reasonable renewals, repairs and replacements of the Facilities necessary to prevent loss of Gross Revenues, as certified by the Golf Course Consultants; C. To the payment of the interest and principal or Redemption Price, if applicable, then due on the Bonds, as follows: (1) Unless the principal of all the Bonds 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 Bonds which shall have become due at maturity or upon mandatory redemption prior to maturity (other than Bonds called for redemption for the payment of which moneys are held pursuant to the provisions of section 9.01 of this Resolution), in the order of their due dates, with interest upon such Bonds from the respective dates upon which they became due, and, if the amount available shall not be sufficient to pay in full Bonds due on any particular date, together with such interest, then to the payment first of such interest, ratably according to the 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 62 THIRD: to the payment of the Redemption Price of any Bonds called for optional redemption pursuant to the provisions of this Resolution. (2) If the principal of all the Bonds 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 Bonds, 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 Bond over any other Bond, ratably, according to the amounts due respectively for principal and interest, to the Persons entitled thereto without any discrimination or preference. In the event a Reserve Subaccount Insurance Policy or Reserve Subaccount Letter of Credit provider shall fail to honor its commitment in respect of a Series of Bonds, the Pledged Funds shall be allocated on a pro rata basis by and among each Series of Bonds Outstanding without regard to the availability of (i) monies in the remaining reserve subaccounts or (ii) Reserve Subaccount Insurance Policies or Reserve Subaccount Letters of Credit issued in respect of the remaining reserve subaccounts. SECTION 7.07. CONTROL BY INSURER. Upon the occurrence and continuance of an Event of Default or any event which with notice or the lapse of time or both would become an Event of Default, an Insurer, if such Insurer shall have honored all of its payment obligations under its Bond Insurance Policy, shall be entitled to direct and control the enforcement of all right and remedies with respect to the Bonds it shall insure and, except for the provision of notice to the Bondholders, shall be deemed to be the sole holder of the Bonds insured by its Bond Insurance Policy. 63 ~%RTICLE VIII SUPPLEMENT~,L RESOLUTIONS SECTION 8.01. SUPPLEMENT~%L RESOLUTION WITHOUT BONDHOLDERS' CONSENT. The Issuer, from time to time and at any time, may adopt such Supplemental Resolutions without the consent of the Bondholders, but with the prior written consent of each Insurer of Bonds which are Outstanding at the time such Supplemental Resolution (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 Bondholders any additional rights, remedies, powers, authority or security that may lawfully be granted to or conferred upon the Bondholders. (C) To add to the conditions, limitations and restrictions on the issuance of Bonds 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. (E) To specify and determine the matters and things referred to in Sections 2.01, 2.02 or 2.09 hereof, and also any other matters and things relative to such Bonds 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 at any time prior to the first delivery of such Bonds. (F) To authorize Additional Projects or to change or modify the description of any Project. (G) To specify and determine matters necessary or desirable for the issuance of Variable Rate Bonds or Capital Appreciation Bonds. (H) To provide for the establishment of a subaccount in the Reserve Subaccount which shall equally and ratably secure more than one Series of Bonds issued hereunder; provided the establishment of such subaccount shall not materially adversely affect the security of any Outstanding Bonds. 64 (I) To make any other change that, in the opinion of the Issuer, would not materially adversely affect the security for the Bonds. In making such determination, the Issuer shall not take into consideration any Bond Insurance Policy. SECTION 8.02. SUPPLEMENTAL RESOLUTION WITH BONDHOLDERS' AND INSURER'S CONSENT. Subject to the terms and provisions contained in this Section 8.02 and Section 8.01 hereof, the Holder or Holders of not less than a majority in aggregate principal amount of the Bonds 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 Bonds of any specified series or maturity remain Outstanding, the consent of the Holders of such Bonds shall not be required and such Bonds shall not be deemed to be Outstanding for the purpose of any calculation of Outstanding Bonds under this Section 8.02. Any Supplemental Resolution which is adopted in accordance with the provisions of this Section 8.02 shall also require the prior written consent of each Insurer of Bonds 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 Bond issued hereunder, (B) reduction in the principal amount of any Bond 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 Bondholders, (D) a preference or priority of any Bond or Bonds over any other Bond or Bonds, or (E) a reduction in the aggregate principal amount of the Bonds required for consent to such Supplemental Resolution. Nothing contained in this Section 8.02, however, shall be construed as making necessary the approval by Bondholders of the adoption of any Supplemental Resolution as authorized in Section 8.01 hereof. If at any time the Issuer shall determine that it is necessary or desirable to adopt any Supplemental Resolution pursuant to this Section 8.02, 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 Bondholders at their addresses as they appear on the registration books. 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 Bondholders. The Issuer shall not, however, be subject to any liability to any Bondholder by reason of its 65 failure to cause the notice required by this Section 8.02 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 8.02. 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 Bonds 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 Bond, whether or not such Holder shall have consented thereto. If the Holders of not less than a majority in aggregate principal amount of the Bonds Outstanding at the time of the adoption of such Supplemental Resolution shall have consented to and approved the adoption thereof as herein provided, no Holder of any Bond 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 8.02, 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 Bonds then Outstanding shall thereafter be determined, exercised and enforced in all respects under the provisions of this Resolution as so modified and amended. SECTION 8.03. AMENDMENT WITH CONSENT OF INSURER ONLY. If all of the Bonds Outstanding hereunder are insured as to payment of principal and interest by an Insurer or insurers, the Issuer may enact one or more Supplemental Resolutions amending all or any part of Articles I, IV, V, VI and VII hereof with the written consent of said Insurer or Insurers and the acknowledgment by said Insurer or Insurers that its insurance or guaranty policy will remain in full force and effect; provided, however, that such amendment shall not have any adverse affect on the Holders of any Bonds Outstanding. The consent of the Holders of any Bonds shall not be necessary. The foregoing right of amendment, however, does not apply to any amendment with respect to the exclusion, if applicable, of interest on said Bonds from gross income of the holder for federal income tax purposes nor may any such amendment deprive the Holders of any Bond of right to payment of the Bonds from, and their lien on, the Pledged Funds. Upon filing with the 66 Clerk of evidence of such consent of the Insurer or Insurers as aforesaid, the Issuer may adopt such Supplemental Resolution. Copies of any Supplemental Resolution proposed to be adopted pursuant to this Section 8.03 shall be provided to Moody's and standard and Poor's at least 15 days prior to its adoption. 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 8.02 hereof. SECTION 8.04. TRANSCRIPT OF DOCUMENTS TO INSURERS. The Issuer shall provide each Insurer of Bonds which are Outstanding at the time any Supplemental Resolution is adopted with a complete transcript of all proceedings relating to the execution of any Supplemental Resolution. 67 ARTICLE IX H~SCELL~,~EOUS SECTION 9.01. DEFEASANCE. If (i) the Issuer shall pay or cause to be paid or there shall otherwise be paid to the Holders of all Bonds 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, (ii) the Issuer shall pay all amounts owing to any issuer of any Reserve Subaccount Letter of Credit or Reserve Subaccount Insurance Policy and all amounts owing to any Insurer, and (iii) all provisions regarding any amounts to be rebated to the United States government have been complied with, then the pledge of the Pledged Funds, and all covenants, agreements and other obligations of the Issuer to the Bondholders, 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 the Resolution which are not required for the payment or redemption of Bonds not theretofore surrendered for such payment or redemption. Any Bonds or interest installments appertaining thereto, whether at or prior to the maturity or redemption date of such Bonds, shall be deemed to have been paid within the meaning of this Section 9.01 if (A) in case any such Bonds are to be redeemed prior to the maturity thereof, there shall have been taken all action necessary to call such Bonds 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 Refunding Securities certified by an independent nationally recognized certified public accountant to be in such amount that 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 Bonds on and prior to the redemption date or maturity date thereof, as the case may be. Except as hereafter provided, neither the Refunding Securities nor any moneys so 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 Refunding 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 Bonds for the payment or redemption of which they were deposited and the interest accruing thereon to the date of maturity or redemption; provided, however, the Issuer may substitute new Refunding 68 Securities and moneys for the deposited Refunding Securities and moneys if the new Refunding Securities and moneys are sufficient, based upon the certification of an independent certified public accountant, to pay the principal of or Redemption Price, if applicable, and interest on the refunded Bonds. For purposes of determining whether Variable Rate Bonds shall be deemed to have been paid prior to the maturity or the redemption date thereof, as the case may be, by the deposit of moneys, or specified Refunding Securities and moneys, if any, in accordance with this Section 9.01, the interest to come due on such Variable Rate Bonds on or prior to the maturity or redemption date thereof, as the case may be, shall be calculated at the Maximum Interest Rate; provided, however, that if on any date, as a result of such Variable Rate Bonds having borne interest at less than the Maximum interest Rate for any period, the total amount of moneys and specified Refunding Securities on deposit for the payment of interest on such Variable Rate Bonds is in excess of the total amount which would have been required to be deposited on such date in respect of such Variable Rate Bonds is in order to satisfy this Section 9.01, such excess shall be paid to the Issuer free and clear of any trust, lien, pledge or assignment securing the Bonds or otherwise existing under this Resolution. In the event the Bonds for which moneys are to be deposited for the payment thereof in accordance with this Section 9.01 are not by their terms subject to redemption within the next succeeding 60 days, the Issuer shall cause the Registrar to mail a notice to the Holders of such Bonds that the deposit required by this Section 9.01 of moneys or Refunding Securities has been made and said Bonds are deemed to be paid in accordance with the provisions of this Section 9.01 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 Bonds. Nothing herein shall be deemed to require the Issuer to call any of the outstanding Bonds 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 Bonds shall be paid by an Insurer or Insurers, such Bonds shall remain Outstanding, shall not be defeased and shall not be considered paid by the Issuer, and the pledge of the Pledged Funds and all covenants, agreements and other obligations of the Issuer to the Bondholders shall continue to exist and such Insurer or Insurers shall be subrogated to the rights of such Bondholders. SECTION 9.02. CAPITAL APPRECIATION BONDS. For the purposes of (A) receiving payment of the Redemption Price if a capital 69 Appreciation Bond is redeemed prior to maturity, or (B) receiving payment of a Capital Appreciation Bond if the principal of all Bonds becomes due and payable under the provisions of this Resolution, or (C) computing the amount of Bonds held by the Holder of a Capital Appreciation Bond in giving to the Issuer or any trustee or receiver appointed to represent the Bondholders any notice, consent, request or demand pursuant to this Resolution for any purpose whatsoever, the principal amount of a Capital Appreciation Bond shall be deemed to be its Accreted Value. SECTION 9.03. SALE OF BONDS. The Bonds 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 9.04. SEVERABILITY OF INVALID PROVISIONS. If any one 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 Bonds issued hereunder. SECTION 9.05. VALIDATION AUTHORIZED. To the extent deemed necessary by.Bond Counsel or desirable by Counsel for the Issuer, the Counsel for the Issuer is authorized to institute appropriate proceedings for validation of the Bonds herein authorized pursuant to Chapter 75, Florida Statutes. SECTION 9.06. EFFECTIVE DATE. This Resolution shall take effect immediately upon its adoption. ADOPTED this 12th day of February, 1992. CITY OF SEBASTIAN, FLORIDA .~,~ATTz~ST: cierk ~ ' ~ Mayor Approve Content: city a~0rney 7O EXH?B?T A Construction and acquisition of a swimming pool at the Facilities, together with renovation of the existing clubhouse and pro shop. A-1 , \ .J ~ . SCHEDULE A XNXTXAL ESCROW SECURXTXES , ~ ,-: '" "... -. Date . " . SCHEDULE B REFUNDED BONDS Principal Interest Total