RESOLUTION NO. 07040

RESOLUTION PROVIDING FOR THE ISSUANCE AND SALE OF

$1,485,000 WATER SYSTEM REVENUE BONDS

AND PROVIDING FOR OTHER DETAILS AND COVENANTS

WITH RESPECT THERETO

WHEREAS, the Village of Suamico, Brown County, Wisconsin (the "Municipality") owns and operates a water system (hereinafter referred to as the "System") which is operated for a public purpose as a public utility by the Municipality;

WHEREAS, certain improvements to the System are necessary to adequately meet the needs of the Municipality and the residents thereof, consisting of construction of new water mains and other improvements to the System (the "Project");

WHEREAS, the Municipality has certain outstanding general obligation promissory notes which financed or refinanced improvements to the System to wit: $3,000,000 General Obligation Promissory Notes, dated March 15, 1999 (the "1999 Notes");

WHEREAS, the Municipality hereby finds that it would be advantageous to refund the 1999 Notes (the "Refunding") with proceeds of its water revenue bonds;

WHEREAS, under the provisions of Section 66.0621 of the Wisconsin Statutes any municipality may, by action of its governing body, refund outstanding municipal obligations and provide for purchasing, acquiring, constructing, extending, adding to, improving, conducting, controlling, operating and managing a public utility from the proceeds of bonds, which bonds are to be payable only from the revenues received from any source by such utility, including all rentals and fees;

WHEREAS, for the purpose of paying the cost of the Project and the Refunding, the Municipality deems it to be necessary, desirable and in its best interests to proceed with the authorization and sale of water system revenue bonds of the Municipality payable solely from the revenues of the System, which bonds are to be authorized and issued pursuant to the provisions of Section 66.0621, Wisconsin Statutes;

WHEREAS, no other bonds or obligations payable from the revenues of the System are now outstanding;

WHEREAS, on October 1, 2007 the Governing Body of the Municipality adopted a resolution authorizing its financial advisor, Ehlers & Associates, Inc., to proceed with the sale of water system revenue bonds;

WHEREAS, a notice of sale was published in the Bond Buyer on November 9, 2007 offering the aforesaid water system revenue bonds for public sale on November 19, 2007;

WHEREAS, sealed bid proposals were received as summarized in Exhibit D attached hereto; and

WHEREAS, it has been determined that the bid proposal submitted by _____________, _______, _________, fully complies with the bid requirements set forth in the Official Notice of Sale and is deemed to be the most advantageous to the Municipality. A copy of said bid is attached hereto as Exhibit A and incorporated herein by this reference.

NOW, THEREFORE, BE IT RESOLVED by the Governing Body of the Municipality that:

Section 1. Definitions. The following terms shall have the following meanings in this Resolution unless the text expressly or by implication requires otherwise:

(a) "Act" means Section 66.0621 of the Wisconsin Statutes;

(b) "Bonds" mean $1,500,000 Water System Revenue Bonds of the Municipality, dated December 5, 2007, authorized to be issued by this Resolution;

(c) "Closing" means the date of the delivery of and payment for the Bonds;

(d) "Current Expenses" mean the reasonable and necessary costs of operating, maintaining, administering and repairing the System, including salaries, wages, costs of materials and supplies, insurance and audits, but shall exclude depreciation, debt service, tax equivalents, replacements and capital expenditures;

(e) "Depository Trust Company" means the Depository Trust Company, New York, New York, who will act as securities depository for the Bonds;

(f) "Fiscal Year" means the twelve month period beginning on January 1 of each year and ending on December 31 of the same year;

(g) "Governing Body" means the Village Board of the Municipality, or such other body as may hereafter be the chief legislative body of the Municipality;

(h) "Municipality" means the Village of Suamico, Brown County, Wisconsin;

(i) "Net Revenues" mean gross earnings of the System after deduction of Current Expenses; gross earnings shall include earnings of the System derived from water charges imposed by the Municipality, all payments to the Municipality under any water service agreements between the Municipality and any contract users of the System, investment income except for investment earnings on borrowed funds, and any other moneys received from any source including all rentals and fees;

(j) "1999 Notes" means the Municipality’s $3,000,000 General Obligation Promissory Notes, dated March 15, 1999;

(k) "Original Purchaser" means ______________, _______, _________;

(l) "Parity Bonds" mean bonds payable from the revenues of the System other than the Bonds but issued on a parity and equality with the Bonds pursuant to the restrictive provisions of Section 9 this Resolution;

(m) "Project" means construction of new water mains and other improvements to the System. All elements of the Project are to be owned and operated by the Municipality as a part of the System as described in the preamble hereto;

(n) "Record Date" means the close of business on the 15th day of the calendar month next preceding any principal or interest payment date;

(o) "Refunding" means paying the cost of refunding the 1999 Notes;

(p) "Reserve Requirement" means $_______, which is an amount equal to the lesser of 125% of average annual debt serve on the Bonds, maximum annual debt service on the Bonds or 10% of the principal amount of the Bonds. If Parity Bonds are issued, the Reserve Requirement shall be an amount equal to the amount permitted to be on deposit in the Reserve Account pursuant to the Internal Revenue Code of 1986, as amended, and applicable regulations promulgated thereunder; and

(q) "System" means the entire water system of the Municipality specifically including that portion of the Project owned by the Municipality and including all property of every nature now or hereafter owned by the Municipality by means of which water is delivered to consumers including all improvements and extensions thereto made by the Municipality while any of the Bonds and Parity Bonds remain outstanding, including all real and personal property of every nature comprising part of or used or useful in connection with such water system and including all appurtenances, contracts, leases, franchises and other intangibles.

Section 2. Authorization of the Bonds. For the purpose of paying the cost of the Project and the Refunding (including legal, fiscal, engineering and other expenses), there shall be borrowed on the credit of the income and revenue of the System the sum of $1,500,000 and registered revenue bonds of the Municipality are hereby authorized to be issued. The bid proposal of _____________, _______, _________, (the "Original Purchaser") is hereby accepted, said proposal offering to purchase the $1,500,000 Village of Suamico Water System Revenue Bonds (the "Bonds") for the sum of ____________________________ ____________________________ DOLLARS ($____________), plus accrued interest to the date of delivery, resulting in a net interest cost of ________________________________ ___________________ DOLLARS ($__________) and a true interest rate of _.____%.

Section 3. Terms of the Bonds. The Bonds shall be designated "Water System Revenue Bonds"; shall be dated December 5, 2007; shall be in the denomination of $5,000 or any integral multiple thereof; shall be numbered 1 and upward; shall bear interest at the rates set forth below; and shall mature serially on May 1 of each year, in the years and principal amounts as follows:

Interest on the Bonds shall be payable commencing on May 1, 2008 and semi-annually thereafter on November 1 and May 1 of each year.

It is hereby determined and declared that the above schedule of maturities of the Bonds is such that the requirements each year to pay both the principal of and interest on the Bonds is reasonable in accordance with prudent municipal utility management practices.

At the option of the Municipality, the Bonds maturing on May 1, 2018 and thereafter shall be subject to redemption prior to maturity, as a whole or in part, from maturities selected by the Municipality, and within any maturity by lot, on May 1, 2017 or on any date thereafter, at the principal amount thereof, plus accrued interest to the date of redemption.

Section 4. Form, Execution, Transfer, Registration and Payment of the Bonds. The Bonds shall be issued as registered obligations in substantially the form attached hereto as Exhibit B and incorporated herein by this reference.

The Bonds shall be issued in typewritten form, one Bond for each maturity executed on behalf of the Municipality by the manual or facsimile signatures of the Village President and Village Clerk (except that one of the foregoing signatures shall be manual), sealed with its official or corporate seal, and delivered to the Original Purchaser upon payment to the Municipality of the purchase price thereof, plus accrued interest to the date of delivery. In the event that either of the officers whose signatures appear on the Bonds shall cease to be such officers before the delivery of the Bonds, such signatures shall, nevertheless, be valid and sufficient for all purposes to the same extent as if they had remained in office until such delivery. The aforesaid officers are hereby authorized to do all acts and execute and deliver all documents as may be necessary and convenient to effectuate the Closing.

The principal of and interest on the Bonds shall be paid by Associated Trust Company, National Association, Green Bay, Wisconsin, which is hereby appointed as the Municipality’s registrar and fiscal agent pursuant to the provisions of Section 67.10(2), Wisconsin Statutes (the "Fiscal Agent"). The Fiscal Agency Agreement between the Municipality and the Fiscal Agent shall be substantially in the form attached hereto as Exhibit E and incorporated herein by this reference.

The Fiscal Agent shall keep books for the registration and for the transfer of the Bonds. The person in whose name any Bond shall be registered shall be deemed and regarded as the absolute owner thereof for all purposes and payment of either principal or interest on any Bond shall be made only to the registered owner thereof. All such payments shall be valid and effectual to satisfy and discharge the liability upon such Bond to the extent of the sum or sums so paid.

Any Bond may be transferred by the registered owner thereof by surrender of the Bond at the office of the Fiscal Agent, duly endorsed for the transfer or accompanied by an assignment duly executed by the registered owner or his attorney duly authorized in writing. Upon such transfer, the Village President and Village Clerk shall execute and deliver in the name of the transferee or transferees a new Bond or Bonds of a like aggregate principal amount, series and maturity and the Fiscal Agent shall record the name of each transferee in the registration book. No registration shall be made to bearer. The Fiscal Agent shall cancel any Bond surrendered for transfer.

The Municipality shall cooperate in any such transfer, and the Village President and Village Clerk are authorized to execute any new Bond or Bonds necessary to effect any such transfer.

The 15th day of each calendar month next preceding each interest payment date shall be the record date for the Bonds. Payment of interest on the Bonds on any interest payment date shall be made to the registered owners of the Bonds as they appear on the registration book of the Municipality maintained by the Fiscal Agent at the close of business on the corresponding record date.

Section 4A. Utilization of The Depository Trust Company Book-Entry-Only-System. In order to make the Bonds eligible for the services provided by The Depository Trust Company, New York, New York ("DTC"), the Municipality has heretofore agreed to the applicable provisions set forth in the DTC Blanket Issuer Letter of Representation and an official of the Municipality has executed such Letter of Representation and delivered it to the DTC on behalf of the Municipality.

Section 5. Security for the Bonds. The Bonds, together with interest thereon, shall not constitute an indebtedness of the Municipality nor a charge against its general credit or taxing power. The Bonds, together with interest thereon, shall be payable only out of the Special Redemption Fund hereinafter created and established, and shall be a valid claim of any holder thereof only against said Special Redemption Fund and the revenues of the System pledged to such fund. Sufficient revenues are hereby pledged to said Special Redemption Fund, and shall be used for no other purpose than to pay the principal of, premium, if any, and interest on the Bonds and any Parity Bonds as the same becomes due.

Section 6. Funds and Accounts. In accordance with the Act, for the purpose of the application and proper allocation of the revenues of the System, and to secure the payment of the principal of and interest on the Bonds and any Parity Bonds, certain funds of the System are hereby created and established which shall be used solely for the following respective purposes:

(a) Water System Revenue Fund, into which shall be deposited as received the entire gross earnings of the System which moneys shall then be divided among the Operation and Maintenance Fund, the Special Redemption Fund, the Depreciation Fund and the Surplus Fund in the amounts and in the manner set forth in Section 7 hereof and used for the purposes described below;

(b) Water System Operation and Maintenance Fund, which shall be used for the payment of Current Expenses;

(c) Water System Special Redemption Fund, which shall be divided into two separate accounts to be known as the "Interest and Principal Account" and the "Reserve Account."

(d) Water System Depreciation Fund, which shall be used primarily to make good any depreciation in the System, to extend and improve the System, to make extraordinary repairs or replacements to the System and to make transfers to the Surplus Fund as provided in Section 6(e) hereof but which also may be used for the payment of principal of and interest on the Bonds and any Parity Bonds at any time when there shall be insufficient money in the Special Redemption Fund and to remedy any deficiency in the Special Redemption Fund; and,

(e) Water System Surplus Fund, which shall first be used whenever necessary to pay principal of or interest on the Bonds and any Parity Bonds when the Special Redemption Fund shall be insufficient for such purpose, and thereafter shall be disbursed as follows:

Section 6A. Deposits and Investments. The Interest and Principal Account and the Reserve Account of the Special Redemption Fund each shall be kept apart from moneys in the other funds and accounts and the same shall be used for no purpose other than the prompt payment of principal of and interest on the Bonds and any Parity Bonds as the same becomes due and payable. The funds herein created may be temporarily invested until needed in legal investments.

Section 7. Application of Revenues. After the delivery of any of the Bonds or any Parity Bonds, the entire gross earnings of the System shall be deposited as collected in the Revenue Fund and shall be transferred quarterly to the funds listed below in the following order of priority and in the manner set forth below:

(a) to the Operation and Maintenance Fund, an amount sufficient to provide for the reasonable and proper operation and maintenance of the System during the next calendar quarter plus a reserve equal to the estimated Current Expenses for one month (after giving effect to available amounts in said fund from prior deposits);

(b) to the Special Redemption Fund for quarterly transfer to the Interest and Principal Account thereof, an amount equal to one-half (1/2) of the next installment of interest coming due on the Bonds or any Parity Bonds then outstanding and an amount equal to one-fourth (1/4) of the installment of principal of the Bonds and any Parity Bonds coming due on the next succeeding principal payment date (after giving effect to available amounts in said account from accrued interest, any premium, investment earnings or any other source). Prior to each interest and principal payment date, the Municipality shall transfer from the Interest and Principal Account to the Depository Trust Company the amounts required for the payment of the interest and principal coming due on the Bonds and any Parity Bonds. The minimum annual amounts to be so deposited for debt service on the Bonds are as follows:

(c) to the Depreciation Fund an amount each calendar quarter as is available (after making the deposits required in subparagraphs (a) and (b) above) until deposits accumulated therein are equal to an amount the Governing Body may from time to time determine to constitute an adequate and reasonable depreciation account for the System. Money in the Depreciation Fund shall be available and shall be used, whenever necessary, to restore any deficiency in the Special Redemption Fund and for the maintenance of the Reserve Account therein. When the Special Redemption Fund is sufficient for its purposes, funds in the Depreciation Fund may be expended for repairs, replacements, new construction, extensions or additions to the System; and,

(d) to the Surplus Fund, any amount remaining in the Revenue Fund after the quarterly transfers required above have been completed.

Transfers from the Revenue Fund to the Operation and Maintenance Fund, the Special Redemption Fund, the Depreciation Fund and the Surplus Fund shall be made quarterly not later than 60 days after the end of each calendar quarter, and such transfers shall be applicable to moneys on deposit in the Revenue Fund as of 55 days after the end of each calendar quarter. If said 60th day shall fall on a day other than a business day, such transfer or deposit shall be made on the next succeeding business day.

It is the express intent and determination of the Governing Body that the amounts transferred from the Revenue Fund and deposited in the Special Redemption Fund shall be sufficient in any event to pay the interest on the Bonds and any Parity Bonds as the same accrues and the principal thereof as the same matures, and to provide any amounts required to be paid quarterly into the Reserve Account.

The Reserve Account has been established to additionally secure the payment of principal of and interest on the Bonds and Parity Bonds. The Municipality covenants and agrees that upon the issuance of the Bonds, the Reserve Account will be funded in an amount equal to the Reserve Requirement as provided herein. Thereafter, the Municipality covenants and agrees that at any time the amount in the Reserve Account shall be less than the Reserve Requirement, the Municipality will make a quarterly payment into the Reserve Account from the Depreciation Fund or the Surplus Fund until the Reserve Requirement will again have accumulated in the Reserve Account. The amount of such quarterly payment shall be not less than one-fourth (1/4) of the then current deficiency in the Reserve Account. No such payments need be made into the Reserve Account at such times as the monies in the Reserve Account are equal to the Reserve Requirement. If for any reason there shall be insufficient funds on hand in the Special Redemption fund to meet principal or interest becoming due on the Bonds or Parity Bonds, then all sums then held in the Reserve Account shall be used to pay the portion of interest or principal on such Bonds or Parity Bonds becoming due as to which there would otherwise be default, and thereupon the payments required by this paragraph shall again be made into the Reserve Account until an amount equal to the Reserve Requirement is on deposit in the Reserve Account. Investment earnings on amounts in the Reserve Account shall be transferred to the Surplus Fund so long as the amount in the Reserve Account equals the Reserve Requirement. It is the intent of the Municipality that at all times the Reserve Account constitutes a "reasonably required reserve fund" under the applicable income tax regulations and Section 148 of the Internal Revenue Code of 1986, as amended.

Section 8. Service to the Municipality. The reasonable cost and value of services rendered to the Municipality by the System by furnishing water services for public purposes, shall be charged against the Municipality and shall be paid by it in quarterly installments as the service accrues, out of the current revenues of the Municipality collected or in the process of collection, exclusive of the revenues derived from the System, and out of the tax levy of the Municipality made by it to raise money to meet its necessary current expenses. It is hereby found and determined that the reasonable cost and value of such service to the Municipality in each year shall be an amount which, together with the other revenues of the System, will produce Net Revenues equivalent to not less than one and one-quarter (1.25) times annual principal and interest requirements on the Bonds and any Parity Bonds then outstanding. However such payment out of the tax levy shall be subject to (a) approval of the Public Service Commission, or successors to its function, if necessary, (b) yearly appropriations therefor and (c) applicable spending controls or levy limitations, if any; but neither this Resolution nor such payment shall be construed as constituting an obligation of the Municipality to make any such appropriation over and above the reasonable cost and value of services rendered to the Municipality and its inhabitants or make any subsequent payment over and above such reasonable cost and value. Such compensation for such service rendered to the Municipality shall, in the manner hereinabove provided, be paid into the Revenue Fund created by Section 6 hereof.

Section 9. Prior Lien Bonds; Parity Bonds. The Municipality will issue no other bonds, bond anticipation notes or obligations (hereinafter collectively referred to as "Obligations") of any kind or nature payable from or enjoying a lien on the revenues or the properties of the System having a priority over the Bonds or any Parity Bonds.

Additional Obligations may be issued on a parity and equality of rank with the Bonds and any Parity Bonds with respect to the lien and claim of such additional Obligations to the revenues and properties of the System and the moneys on deposit in the Special Redemption Fund, for the following purposes and under the following conditions but not otherwise:

(a) For the purpose of refunding any of the Bonds or any Parity Bonds which shall have matured or which shall mature not later than three (3) months after the date of delivery of such refunding Obligations and for the payment of which there shall be insufficient moneys in the Special Redemption Fund; and,

(b) For the purpose of refunding any outstanding Bonds or any Parity Bonds, or purchasing, acquiring, constructing, extending, adding to, improving, replacing, operating or managing the System, if all of the following conditions shall have been met:

Section 10. Covenants Regarding Operation of the System; Books and Accounts; and Insurance. The Municipality hereby covenants and agrees with each and every holder of the Bonds and any Parity Bonds as follows:

(a) The Municipality will faithfully and punctually perform all duties with reference to the System required by the Constitution and Statutes of the State of Wisconsin, including lawfully establishing reasonable and sufficient rates for services rendered by the System and collecting, depositing, applying and segregating the revenues of the System to the respective funds and accounts hereinabove created;

(b) The Municipality will not sell, lease, or in any manner dispose of the System, including any part thereof or any additions or extensions that may be made part thereto, except that the Municipality shall have the right to sell, lease or otherwise dispose of any property of the System found by the Municipality to be neither necessary nor useful in the operation of the System, provided the proceeds received from such sale, lease or disposal shall be paid into the Special Redemption Fund or applied to the acquisition or construction of capital facilities for use in the normal operation of the System, and such payment shall not reduce the amounts otherwise required to be paid into the Special Redemption Fund;

(c) The Municipality will cause the System to be constructed, extended, added to and improved as expeditiously as reasonably possible;

(d) The Municipality will maintain the System in reasonably good condition, will operate the System, and will establish, charge and collect such lawfully established rates and charges for the service rendered by the System, so that the amount of the revenues of the System herein agreed to be set aside to provide for payment of the Bonds and any Parity Bonds and the interest thereon as the same becomes due and payable will be sufficient for that purpose. It will make all good faith efforts so that the Net Revenues from the System for each year any Bond or any Parity Bonds are outstanding will be one and one-quarter (1.25) times the amount required for payment of principal and interest on the Bonds and any Parity Bonds for each corresponding year;

(e) The Municipality will prepare a budget not less than sixty (60) days prior to the end of each Fiscal Year and, in the event such budget indicates that earnings for each year will not exceed debt service for each corresponding year by the proportion stated above, will take any and all steps permitted by law to increase rates so that the aforementioned proportion of earnings to debt service shall be accomplished as promptly as possible;

(f) The Municipality will keep proper books and accounts relative to the System, separate from all other records of the Municipality, and will cause such books and accounts to be audited annually not later than six months after the close of each Fiscal Year by a recognized independent firm of certified public accountants, and will make available to the holders of any of the Bonds or any Parity Bonds the latest balance sheet and the profit and loss statement of the System as certified by such accountants. A copy of each such audit shall be promptly mailed as soon as available to the Original Purchaser, and a summary of such audit shall be mailed to any holder of Bonds or any Parity Bonds requesting the same. Any holder shall have the right at any reasonable time to inspect the System and the records, accounts and data of the System and the Municipality relating thereto. Each such audit, in addition to whatever matters may be thought proper by the accountant, shall include the following in accordance with generally accepted accounting practices: (1) a statement in detail of the income and expenditures of the System for the Fiscal Year; (2) a statement of the Net Revenues of the System for such Fiscal Year; (3) a balance sheet as of the end of such Fiscal Year; (4) the accountants' comment regarding the manner in which the Municipality has carried out the requirements of this Resolution, and the accountants' recommendation for any changes or improvements in the accounting methods of the System; (5) a list of the insurance policies in force at the end of the Fiscal Year setting out as to each policy the amount of the policy, the risks covered, the name of the insurer and the expiration date of the policy; (6) the number and types of connections to the System at the end of each year; and, (7) the volumetric or other basis for computing the service charge; and,

(g) So long as any of the Bonds or Parity Bonds are outstanding, the Municipality will carry, for the benefit of the holders of the Bonds and any Parity Bonds, insurance of a kind and in such amounts as would usually be carried by private companies or other public bodies engaged in operating similar water systems. All money received for losses under any of such insurance policies, except public liability, shall be used in repairing the damage or in replacing the property destroyed, but in the event that the Governing Body shall find it inadvisable to repair such damage or replace such property, and that the operation of the System shall not have been impaired thereby, such money may be deposited in the Water System Revenue Fund, but shall not reduce the amount otherwise required to be paid into said Revenue Fund.

Section 11. Application of Bond Proceeds. The proceeds of the sale of the Bonds (including any premium and accrued interest from their date to the date of delivery) shall be deposited and applied as follows:

(a) to the Interest and Principal Account of the Special Redemption Fund, the amount of any accrued interest received from the sale of the Bonds;

(b) to the Interest and Principal Account of the Special Redemption Fund, the amount of any premium received from the sale of the Bonds and not otherwise used to fund costs of the Project, the Reserve Account or to pay costs of issuance of the Bonds;

(c) to the debt service account for the 1999 Notes, the sum of $__________ (or such sum as is sufficient) to be used to redeem the 1999 Notes;

(d) to an escrow account maintained by Ehlers & Associates, Inc. the sum of $____________ to pay the costs of issuance of the Bonds; and

(e) to the Water System Improvement Fund, a special construction fund hereby created and established, the balance of the proceeds of the Bonds. Said Improvement Fund shall be adequately secured and shall be used solely for the purpose of meeting costs of purchasing, acquiring, constructing, extending, adding to, improving, operating and managing the System, as more fully described in the preamble hereof as the Project. Any balance remaining in said Improvement Fund after paying the costs of the Project shall be transferred to the Special Redemption Fund for use in payment of principal of or interest on the Bonds.

Section 12. Discharge and Satisfaction of Bonds. The covenants, liens and pledges entered into, created or imposed pursuant to this Resolution may be fully discharged and satisfied with respect to outstanding Bonds and any Parity Bonds, or any of them, in any one or more of the following ways:

(a) By paying such Bonds and any Parity Bonds when the same shall become due and payable at maturity or upon prior redemption in the manner herein provided;

(b) By depositing with the Village Treasurer or with any fiduciary designated by subsequent resolution of this Governing Body, or in trust for such purpose, at or before the date of maturity or redemption, money in the necessary amount to fully pay or redeem such Bonds and any Parity Bonds, and to pay interest thereon to maturity to or to the date of redemption; or,

(c) By depositing with the Village Treasurer or with any fiduciary designated by subsequent resolution of this Governing Body, or in trust for such purpose, at or before the date of maturity or redemption, money or direct obligations of, or obligations the principal and interest on which are fully guaranteed by the United States of America, in such amount as, together with the income or increment to accrue thereon, will be fully sufficient to pay or redeem (when redeemable) and discharge the indebtedness of the Bonds and any Parity Bonds at or before their respective maturity dates; provided, that if such Bonds or any Parity Bonds are to be redeemed prior to the maturity thereof, notice of such redemption shall have been made or provided for; and provided further, that any such deposit shall be made only in a manner which does not render interest on such Bonds and any Parity Bonds subject to federal income taxation.

Upon such payment or deposit of money, in the amount and manner provided by this Section, all liability of the Municipality with respect to the Bonds and any Parity Bonds shall cease, determine and be completely discharged, and the holders thereof shall be entitled only to payment out of the money so deposited.

Section 13. Amendments to Resolution. After the issuance of any Bond or Parity Bond, no change or alteration of any kind in the provisions of this Resolution may be made until all of the Bonds and any Parity Bonds have been paid in full as to both principal and interest, or discharged as herein provided, except:

(a) The Municipality may, from time to time, amend this Resolution without the consent of any bondholders, but only to cure any ambiguity, administrative conflict, formal defect, or omission or procedural inconsistency of this Resolution; and,

(b) This Resolution may be amended, in any respect, with the written consent of the holders of not less than two-thirds (2/3) of the principal amount of the Bonds and any Parity Bonds then outstanding, exclusive of Bonds and any Parity Bonds held by the Municipality; provided, however, that no amendment shall permit any change in the pledge of revenues derived from the System, or in the maturity of or interest payment date of any Bond or Parity Bond issued hereunder, or a reduction in the rate of interest on any Bond or Parity Bond, or in the amount of the principal obligation thereof, or change the terms upon which the Bonds or any Parity Bonds may be redeemed, or make any other modification in the terms of the payment of such principal or interest without the written consent of the holder of each such Bond or any Parity Bond to which change is applicable.

Section 14. Arbitrage Covenant. The proceeds of the Bonds and any Parity Bonds shall be used solely for the purposes for which the Bonds or any Parity Bonds are issued or for the payment of principal of and interest on the Bonds or any Parity Bonds. Said proceeds may be temporarily invested until needed in legal investments provided however, that the Municipality hereby covenants and agrees that so long as the Bonds and any Parity Bonds remain outstanding, moneys on deposit in any fund or account in connection with the Bonds and any Parity Bonds, whether or not such moneys were derived from the proceeds of the sale of the Bonds and any Parity Bonds or from any other source, will not be used or invested in a manner which would cause the Bonds and any Parity Bonds to be "arbitrage bonds" within the meaning of Section 148 of the Internal Revenue Code of 1986, as amended (the "Code") and any applicable regulations including Sections 1.148-1 through 1.148-11 of the income tax regulations, as the same exist on this date, or may from time to time hereafter be amended, supplemented or revised.

An officer of the Municipality, charged with the responsibility for issuing the Bonds or any Parity Bonds, shall provide an appropriate certificate of the Municipality, for inclusion in the transcript of proceedings, setting forth the reasonable expectations of the Municipality regarding the amount and use of the proceeds of the Bonds or any Parity Bonds and the facts and estimates upon which such expectations are based, all as of the date of delivery and payment for the Bonds or any Parity Bonds and also setting forth the covenants and agreements of the Municipality with respect to various other requirements of the Code.

Section 14A. Additional Tax Covenants; Exemption From Rebate; Qualified Tax-Exempt Obligation Status. The Municipality hereby further covenants and agrees that it will take all necessary steps and perform all obligations required by present law (including the Code) to assure that interest on the Bonds and any Parity Bonds remains exempt from federal income taxation throughout the term of such Bonds and any Parity Bonds. The Village Clerk or other officer of the Municipality charged with the responsibility of issuing the Bonds and any Parity Bonds, shall provide an appropriate certificate of the Municipality, for inclusion in the transcript of proceedings, as of the date of delivery and payment for the Bonds and any Parity Bonds certifying that it can and covenanting that it will comply with the provisions of present law including the Code. Such certificate shall indicate whether the Municipality qualifies for any exception from the rebate requirements of the Code, set forth certain facts regarding the use of the proceeds of the Bonds and any Parity Bonds to establish that the Bonds and any Parity Bonds will not constitute "private activity bonds" as defined in the Code and state other facts necessary to establish that the Bonds and any Parity Bonds are obligations described in Section 103(a) of the Code, the interest on which is excluded from gross income for federal income tax purposes.

Further, it is the intent of the Municipality to take all reasonable and lawful actions to comply with any new tax laws enacted so that interest on the Bonds and any Parity Bonds will continue to be exempt from federal income taxation throughout the term of the Bonds and any Parity Bonds.

The Municipality anticipates that the proceeds of the Bonds allocable to the Project will qualify for the "small issuer" expenditure exemption from rebate set forth in Section 148(f)(4)(D) of the Code and that the proceeds of the Bonds allocable to the Refunding will qualify for the six-month expenditure exemption from rebate. The Village Clerk or other officer of the Municipality charged with the responsibility of issuing the Bonds, shall provide an appropriate certificate of the Municipality as of the Closing, for inclusion in the transcript of proceedings, with respect to said exemption from the rebate requirements, and said Village Clerk or other officer is hereby authorized to make any election on behalf of the Municipality in order to comply with the rebate requirements of the Code. If, for any reason, the Municipality does not meet the requirements for any exemption from the rebate requirements of the Code, the Municipality covenants that it would take all necessary steps to comply with such rebate requirements.

The Municipality hereby designates the Bonds to be "qualified tax-exempt obligations" pursuant to the provisions of Section 265(b)(3) of the Code and in support of such designation, the Village Clerk or other officer of the Municipality charged with the responsibility for issuing the Bonds, shall provide an appropriate certificate of the Municipality as of the date of delivery and payment for the Bonds.

Section 15. Bond Anticipation Notes. The Municipality reserves the right to issue notes or parity notes in anticipation of the Bonds or any Parity Bonds to be issued hereunder, and pledge a sufficient amount of the income and revenues received from the operation of the System to the holders of such notes or parity notes until such time as the Bonds or any Parity Bonds are issued and the notes or parity notes are paid, provided that the principal amount of notes or parity notes at any time outstanding shall not exceed $1,500,000 or such higher amount as subsequently authorized by resolutions of this Governing Body. The proceeds of such notes or parity notes, with the exception of any portion of the proceeds to be used for payment of interest on such notes or parity notes, shall be deposited in the "Water System Improvement Fund" created in Section 11 hereof to be used solely for Project costs.

Section 16. Resolution a Contract. The provisions of this Resolution shall constitute a contract between the Municipality and the holder or holders of the Bonds and any Parity Bonds, and after issuance of any Bond or any Parity Bond no change or alteration of any kind in the provisions of this Resolution may be made except as provided in Section 13 hereof, until all of the Bonds and any Parity Bonds have been paid in full as to both principal and interest. The holder or holders of any Bond or Parity Bonds shall have the right in addition to all other rights, by mandamus or other suit or action in any court of competent jurisdiction, to enforce his or their rights against the Municipality, the Governing Body thereof, and any and all officers and agents thereof, including, but without limitation, the right to require the Municipality, its Governing Body and other authorized body, to fix and collect rates and charges fully adequate to carry out all of the provisions and agreements contained in this Resolution.

Section 17. Redemption of the 1999 Notes. The Municipality hereby calls the 1999 Notes due on or after March 1, 2009 for redemption on or after March 1, 2008. The Municipality hereby directs the Village Clerk to cause a notice of redemption for the 1999 Notes to be given substantially in the form attached hereto as Exhibit C.

Section 18. Continuing Disclosure. The Municipality hereby covenants and agrees that it will comply with and carry out all of the provisions of its Continuing Disclosure Certificate which the Village Clerk will execute and deliver as of the date of Closing. Any Bondholder may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the Municipality to comply with its obligations under this Section.

Section 19. Conflicting Resolutions, Ordinances, Severability, Closing and Effective Date. All prior ordinances, resolutions, rules or other actions of the Governing Body or any parts thereof in conflict with the provisions hereof shall be and the same are hereby rescinded insofar as they may so conflict. In the event that any one or more provisions hereof shall for any reason be held to be illegal or invalid, such illegality or invalidity shall not affect any other provisions hereof. The appropriate officers and agents of the Municipality are hereby directed and authorized to do all acts and execute and deliver all documents as may be necessary and convenient to effectuate the closing of this transaction. The foregoing shall take effect immediately upon adoption and approval in the manner provided by law.

Adopted and recorded this 19th day of November, 2007.

Attest:

Bonnie Swan,

Village Clerk

(SEAL)

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