AGENDA SPECIAL MEETING MAY 02, :00 PM

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1 Toho Water Authority 101 North Church Street, 2nd Floor Kissimmee, FL com Board of Supervisors Bruce R. Van Meter, Chairman Mary Jane Arrington, Vice Chairman John E. Moody, Supervisor John C. Reich, Supervisor James W. Wells, Supervisor Fernando E. Valverde, Supervisor Brian L. Wheeler, Executive Director Mike Davis, Attorney Steve Johnson, Attorney Nilsa C. Diaz, Administrative Secretary AGENDA SPECIAL MEETING MAY 02, :00 PM 1. MEETING CALLED TO ORDER 2. INVOCATION AND PLEDGE OF ALLEGIANCE 3. APPROVAL OF THE AGENDA 4. AWARDS AND SPECIAL PRESENTATIONS 5. PUBLIC HEARING 6. HEAR AUDIENCE (Anything requiring a vote will be heard at a later date) 7. CONSENT AGENDA The Consent Agenda is a technique designed to expedite handling of routine and miscellaneous business of the Board of Supervisors. The Board of Supervisors in one motion may adopt the entire Agenda. The motion for adoption is nondebatable and must receive unanimous approval. By request of any individual member, any item may be removed from the Consent Agenda and placed upon the Regular Agenda for debate. A. APPROVAL OF WORKSHOP DATE FOR DISCUSSION OF AUTHORITY CONSERVATION STRATEGY AND POLICIES 8. INFORMATIONAL PRESENTATIONS (REQUIRING NO ACTION)

2 9. UNFINISHED BUSINESS: A. APPROVAL OF RESOLUTION AUTHORIZING CANCELLATION OF THE SERIES 2007 BOND INSURANCE POLICIES WITH CIFG B. APPROVAL OF RESOLUTION APPROVING DOCUMENTS AND AUTHORIZING ACTIONS RELATED TO THE RE-MARKETING OF THE SERIES 2007 BONDS 10. NEW BUSINESS 11. STAFF REPORTS 12. BOARD OFFICIALS

3 Category: Consent APPROVAL OF WORKSHOP DATE FOR DISCUSSION OF AUTHORITY CONSERVATION STRATEGY AND POLICIES Explanation: The Board requested that a Workshop be scheduled for a discussion of the establishment of a strategy and associated policies to develop comprehensive water use efficiency (conservation) program. The workshop has tentatively been scheduled for Friday May 16, 2008 beginning at 1 PM in Commission Chambers. Recommendation: Staff recommends approval of the Friday, May 16, 2008 workshop to discuss water use efficiency. ConservationStrategyWorkshop blw 7A

4 Category: Unfinished Business Attachments: Memorandum from BMO Resolution No APPROVAL OF RESOLUTION AUTHORIZING CANCELLATION OF THE SERIES 2007 BOND INSURANCE POLICIES WITH CIFG Explanation: The Series 2007 bonds were converted from the auction rate mode to the variable rate demand mode on April 10, The bonds are presently being held/parked with First Southwest pending remarketing of the bonds in mid-may. One of the factors that led to the need to convert the bonds from the auction rate mode is the downgrade of the insurer, CIFG, for the Series 2007 bonds. To remarket the bonds in the variable rate demand mode, the Authority will use a letter of credit issued by Helaba Bank for credit enhancement. CIFG has agreed to the cancellation of their policies for the Series 2007 bonds which will make the remarketing transaction clearer. Bryant Miller & Olive ( BMO) has prepared a resolution which authorizes the cancellation of the insurance policies. The attached memorandum from BMO outlines the resolution. Recommendation: Staff recommends approval of Resolution No authorizing the cancellation of the Series 2007 bond insurance policies with CIFG. ApprovalofResolutionCancelCIFGPolicies blw 9A

5 M E M O R A N D U M TO: FROM: CHAIRMAN AND MEMBERS OF THE BOARD OF SUPERVISORS OF THE TOHOPEKALIGA WATER AUTHORITY ROBERT REID DATE: April 30, 2008 RE: RESOLUTION FOR MAY 2, 2008 BOARD MEETING The Authority has converted its outstanding Series 2007 Bonds from the ARS Mode to a Short-Term Mode in anticipation of the issuance of a Letter of Credit by Landesbank Hessen-Thüringen Girozentrale ("Helaba Bank"). The Helaba Bank Letter of Credit will replace all the CIFG insurance policies as credit enhancement for the 2007 Bonds. The CIFG insurance policies must be cancelled before the Helaba Bank can deliver its Letter of Credit. The attached resolution addresses a number of matters in connection with the cancellation of the CIFG insurance policies, including: Authorizing the execution and delivery of agreements with CIFG to cancel the existing CIFG bond insurance policy, debt service reserve surety and swap insurance policies. (Section 2) Authorizing amendments as needed to the interest rate swap agreements with Fifth Third Bank resulting from the cancellation of the CIFG insurance policies. Section 3) Provide that the effective date of the cancellation of the CIFG insurance policies will coincide with the effective date for the delivery of Alternate Credit Enhancement for the 2007 Bonds. (Section 2) A representative of Bryant Miller Olive will be at the Board meeting on the 2nd to answer any questions that the Board may have regarding the resolution or the process for cancelling the CIFG insurance policies.

6 RESOLUTION NO _008 A RESOLUTION OF THE TOHOPEKALIGA WATER AUTHORITY, FLORIDA, AUTHORIZING CANCELLATION OF INSURANCE POLICIES WITH CIFG ASSURANCE NORTH AMERICA, INC.; AUTHORIZING OFFICIALS OF THE AUTHORITY TO EXECUTE AND DELIVER ON BEHALF OF THE AUTHORITY ALL AGREEMENTS AND TO TAKE SUCH OTHER ACTIONS DEEMED NECESSARY OR ADVISABLE IN CONNECTION WITH THE FOREGOING; AND PROVIDING AN EFFECTIVE DATE. WHEREAS, pursuant to the terms of Resolution No , adopted by the Board of Supervisors of the Tohopekaliga Water Authority ( the " Issuer") on July 17, 2003, as amended and supplemented ( the " Master Resolution") the Issuer has authorized the issuance of Bonds from time to time; and WHEREAS, pursuant to the terms of Resolution No , adopted by the Issuer on April 11, 2007, as amended and supplemented (the 2007 Bond Resolution ), the Issuer authorized the issuance of its $ 92,395,000 Utility System Variable Rate Revenue Bonds, Series 2007 ( the 2007 Bonds ), on a parity with the Issuer s Outstanding Utility System Revenue Bonds, Series 2003A and Series 2003B ( the Outstanding Parity Bonds ); and WHEREAS, the 2007 Bonds were insured as to payment of principal and interest by Financial Guaranty Insurance Policy No (the 2007 Bond Insurance Policy ) and the Debt Service Reserve Surety Bond No (the 2007 Reserve Surety"), each issued by CIFG Assurance North America, Inc. (the 2007 Bond Insurer ); and WHEREAS, in consideration of the downgrade in the ratings of the 2007 Bond Insurer, the Issuer desires to effect the cancellation of the 2007 Bond Insurance Policy and the 2007 Reserve Surety, and two Financial Guaranty Insurance Policies in Respect of an Interest Rate Swap No. CIFG NA-1578 and No. CIFG NA-1585 ( the Swap Insurance Policies") issued by the 2007 Bond Insurer ( collectively, the " 2007 CIFG Insurance Policies") in connection with the delivery of Alternate Credit Enhancement and/or Alternate Liquidity Facility; and WHEREAS, the Issuer entered into two interest rate swap agreements ( the Swaps") with Fifth Third Bank as the counterparty (the "Counterparty"), and as a result of the cancellation of the 2007 CIFG Insurance Policies, supplements or amendments to the Swaps agreements may be desirable, or required by the Counterparty; and

7 WHEREAS, pursuant to Resolution adopted on January 9, 2008, as supplemented, the Issuer authorized its executive director ( the Executive Director ) to make initial preparation and provide due notices required to convert the 2007 Bonds from ARS Mode to a Short-Term Mode and to initiate discussions with financial institutions seeking to enter into a contract to provide a Liquidity Facility for the 2007 Bonds; and WHEREAS, the Issuer deemed it necessary and desirable to authorize the change on April 10, 2008 (the Mode Change Date ) in the interest rate mode of the 2007 Bonds from ARS Mode to Weekly Mode ( the Mode Change ) pursuant to the terms of the 2007 Bond Resolution; and WHEREAS, the Issuer has previously purchased the 2007 Bonds in conjunction with the Mode Change and is the sole Bondholder; and NOW, THEREFORE, BE IT RESOLVED BY THE BOARD OF SUPERVISORS OF THE TOHOPEKALIGA WATER AUTHORITY, AS FOLLOWS: SECTION 1. AUTHORITY FOR THIS RESOLUTION. This Resolution is adopted pursuant to the provisions of Chapter , Laws of Florida (Tohopekaliga Water Authority Act) ( as amended and supplemented from time to time), the Constitution of the State of Florida and other applicable provisions of law, the Master Resolution and the 2007 Bond Resolution. SECTION 2. CANCELLATION OF CIFG INSURANCE POLICIES. The Issuer, as the issuer of the 2007 Bonds and the Holder of all 2007 Bonds now Outstanding, hereby agrees and consents to the cancellation of the 2007 CIFG Insurance Policies, in accordance with the Policy Cancellation Agreement and Swap Insurance Policy Cancellation Agreement, the form of which are attached hereto as Exhibit " A". The execution and delivery of the Policy Cancellation Agreement and Swap Insurance Policy Cancellation Agreement for and on behalf of the Issuer is hereby approved, and the Chairman or the Executive Director is hereby authorized to execute and deliver the Policy Cancellation Agreement and Swap Insurance Policy Cancellation Agreement for and on behalf of the Issuer, subject to the changes, insertions, omissions and filling of blanks as the Chairman or the Executive Director shall approve, execution thereof to be conclusive evidence of such approval. The Secretary is hereby authorized to join in the execution of the Policy Cancellation Agreement and Swap Insurance Policy Cancellation Agreement or to attest to the signature of the Chairman or the Executive Director, and the Chairman or the Executive Director is hereby authorized to deliver the Policy Cancellation Agreement and Swap Insurance Policy Cancellation Agreement to the other party thereto. Notwithstanding the foregoing, any such cancellation shall be effective only upon the delivery of Alternate Credit Enhancement and/or Alternate Liquidity Facility as permitted by the 2007 Bond Resolution, for the benefit of the Holders of the 2007 Bonds.

8 SECTION 3. SWAPS AMENDMENTS. In conjunction with the cancellation of the 2007 CIFG Insurance Policies, the agreements for the Swaps may be required to be amended or supplemented to reflect the cancellation of the Swap Insurance Policies and the resulting uninsured obligation of the Issuer to make payments under the Swaps. The execution and delivery of modifications to the agreements for the Swaps for and on behalf of the Issuer to so reflect the cancellation of the Swap Insurance Policies is hereby approved, and the Chairman or the Executive Director is hereby authorized to execute and deliver such modifications for and on behalf of the Issuer. The Secretary is hereby authorized to join in the execution of such modifications or to attest to the signature of the Chairman or the Executive Director, and the Chairman or the Executive Director is hereby authorized to deliver the modifications to the agreements for the Swaps to the Counterparty. SECTION 4. ADDITIONAL AUTHORIZATION. The Chairman, or in his absence or unavailability, the Vice-Chairman, and the Executive Director and any other Supervisors, officers or employees of the Issuer as may be designated by the Issuer are each hereby designated as agents of the Issuer for carrying out the transactions contemplated by this Resolution and are authorized and empowered, collectively or individually, to take all action and steps and to execute and deliver on behalf of the Issuer any and all documents, notices and instruments, and to do and cause to be done any and all acts and things necessary, advisable or proper for carrying out the transactions contemplated by this Resolution and are not inconsistent with the terms and provisions of this Resolution, the 2007 Bond Resolution or the Master Resolution. Such officers and those so designated are hereby charged with the responsibility for carrying out the transactions contemplated by this Resolution. SECTION 5. RESOLUTION EFFECTIVE DATE. This Resolution is adopted and is in the best interests of the Issuer. This Resolution shall take effect immediately upon its passage in the manner provided by law. PASSED AND ADOPTED THIS 2nd DAY OF MAY, BOARD OF SUPERVISORS OF THE TOHOPEKALIGA WATER AUTHORITY ATTEST: By: Bruce R. Van Meter, Chairman By: John E. Moody, Secretary

9 April 29, 2008 BMO # EXHIBIT A FORM OF POLICY CANCELLATION AGREEMENT AND SWAP POLICY CANCELLATION AGREEMENT

10 POLICY CANCELLATION AGREEMENT THIS POLICY CANCELLATION AGREEMENT this Agreement ) dated as of May 2008 is entered into by and among, the TOHOPEKALIGA WATER AUTHORITY the Issuer ), THE BANK OF NEW YORK TRUST COMPANY, N.A., as Paying Agent the Paying Agent ), TOHOPEKALIGA WATER AUTHORITY as holder of all of the Bonds the Bondholder ), and CIFG ASSURANCE NORTH AMERICA, INC., as insurer CIFG ). RECITALS 1. The Issuer issued its Tohopekaliga Water Authority Utility System Variable Rate Revenue Bonds, Series 2007 the Bonds ) pursuant to the terms of its Resolution No , adopted on July 17, 2003, as amended and supplemented by its Resolution No , adopted by the Issuer on April 11, 2007 the Bond Resolution ); 2. CIFG issued its Financial Guaranty Insurance Policy No the Bond Policy ) and Debt Service Reserve Surety Bond No the Surety Bond and, together with the Bond Policy, the Policies ) relating to the Bonds; 3. CIFG also issued its Financial Guaranty Insurance Policy in Respect of an Interest Rate Swap Swap Policy ) No. CIFG NA 1578 and its Swap Policy No. CIFG NA 1585 the Related Swap Policies ) in connection with certain interest rate swap agreements entered into by and between the Issuer and Fifth Third Bank in connection with the Bonds; 4. The Issuer and the Bondholder now desire to terminate the insurance coverage provided pursuant to the Bond Policy and the Surety Bond and release CIFG from its obligations thereunder; 5. CIFG has agreed to cancel the Policies at the request of the Issuer and the Bondholder, subject to the terms of this Agreement and the simultaneous or prior cancellation of the Related Swap Policies; 6. CIFG has agreed to consent to certain amendments to the documents relating to the Bonds in conjunction with the cancellation of the Policies. NOW, THEREFORE, In consideration of the premises and the mutual promises set forth below, the parties hereto agree as follows: AGREEMENT Section 1. a) The Issuer and the Bondholder hereby request that CIFG cancel the Policies, effective on the later of i)date of this Agreement and ii) the date on which the Related Swap Policies are cancelled the Effective Date ), b) the Paying Agent hereby consents to such cancellation of the Policies and c) CIFG hereby agrees that the Polices shall be, and hereby are, cancelled as of the Effective Date, provided however, that the Bond Policy shall remain in effect only with respect to any claims relating to Preference Payments as defined in Endorsement No. 1 to the Bond Policy) prior to the Effective Date. Section 2. The parties hereto agree that the Policies are hereby cancelled as of the Effective Date, and neither any party, nor its respective successors or assigns, will submit any claim for amounts previously insured under the Policies, except as provided in Section 1 above. Section 3. The Paying Agent agrees that it shall deliver to CIFG the original executed copy of each of the Policies, provided, however, that if an original Policy cannot be located after diligent

11 search, the Paying Agent may deliver a copy of such Policy, together with an affidavit stating that the original cannot be located. Notwithstanding anything to the contrary herein, the failure to deliver any original Policy or any such affidavit shall not invalidate the cancellation of the Policies pursuant to this Agreement. Section 4. In the event that, notwithstanding the cancellation of the Polices, CIFG shall be required to make payment in respect of any Preference Payment, CIFG will be subrogated to the rights of the Bondowners to receive such payment from the Issuer, as provided, and solely from the sources stated, in the Bond Resolution and the Bonds. Section 6. The Issuer represents and warrants to CIFG that a) the form of the Bond has been revised to delete any reference to the Policies or CIFG; b) any rating agency which rates the Bonds have been informed of the cancellation of the Policies and have assigned new ratings to the Bonds reflecting such cancellation; c) a new, uninsured, CUSIP number has been assigned to the Bonds; d) in connection with any remarketing of the Bonds, a disclosure document, in form and substance acceptable to CIFG, will be delivered to prospective bondholders which states prominently that the CIFG Policies relating to the Bonds are no longer in effect; e) appropriate filings have been made with Nationally Recognized Municipal Securities Information Repositories NIMSIRs ) disclosing that the Policies have been cancelled and f) no other filings, permits, notices, consents, authorizations or approvals from any governmental or administrative authority or any other entity or person are required for the effectiveness of this Agreement. Section 7. The Paying Agent hereby certifies that it has received each of the following: a) written confirmation of new uninsured CUSIP numbers for the Bonds; b) written confirmation evidencing new ratings or withdrawal of the ratings) on the Bonds from the applicable rating agencies; c) an amended form of Bond which deletes all mention of CIFG and the Policies; d) if the Bonds are to be remarketed, a disclosure document in connection with such remarketing which states that the Policies are no longer in effect and e) evidence of NRMSIR filings stating that the Policies are no longer in effect. Section 8. Concurrent herewith, each of the Issuer, the Bondholder and the Paying Agent shall deliver or cause to be delivered an opinion of counsel to CIFG to the effect that this Agreement is duly authorized, executed and delivered, and is a valid and binding obligation and enforceable against such party. In addition, the Issuer shall deliver or cause to be delivered an opinion of counsel to the effect that the cancellation of the Policies will not adversely affect the exemption from federal income taxation of the interest on the Bonds. Section 9. The Issuer agrees to pay at the direction of CIFG, immediately and unconditionally upon demand, all reasonable expenses, including attorneys fees and expenses, incurred by CIFG in connection with the execution of this Agreement and the matters relating hereto. Further, the Issuer, to the extent permitted by law, shall indemnify CIFG against any and all liability, claims, loss, costs, damages, fees of attorneys and other expenses which CIFG may sustain or incur which relate to or arise by reason of or in consequence of this Agreement. Section 10. The Bondholder hereby certifies that it is the beneficial owner of 100% of the outstanding principal amount of the Bonds and that it is executing this Agreement in such capacity.

12 Section 11. This Agreement may be executed in several counterparts, each of which shall be an original and all of which together shall constitute but one and the same instrument. Signature page follows]

13 IN WITNESS WHEREOF, each of the parties hereto has caused this Policy Cancellation Agreement to be executed in its respective name by its duly authorized officer, all as of the date first above written. CIFG ASSURANCE NORTH AMERICA, INC., as Insurer By Title TOHOPEKALIGA WATER AUTHORITY, as Issuer By Title THE BANK OF NEW YORK TRUST COMPANY, N.A., as Paying Agent By Title TOHOPEKALIGA WATER AUTHORITY, as Bondholder By Title

14 SWAP INSURANCE POLICY CANCELLATION AGREEMENT THIS SWAP INSURANCE POLICY CANCELLATION AGREEMENT this Agreement ) dated as of May 2008 is entered into by and among FIFTH THIRD BANK the Swap Counterparty ), TOHOPEKALIGA WATER AUTHORITY the Issuer ), and CIFG ASSURANCE NORTH AMERICA, INC. CIFG ). Capitalized terms not otherwise defined shall have the meanings assigned to them in Section 1 of this Agreement. RECITALS 1. The Issuer issued its Tohopekaliga Water Authority Utility System Variable Rate Revenue Bonds, Series 2007 the Bonds ) pursuant to the terms of its Resolution No , adopted on July 17, 2003, as amended and supplemented by its Resolution No , adopted by the Issuer on April 11, 2007 the Bond Resolution ), which Bonds were insured by CIFG under a financial guaranty insurance policy the Bond Policy ); 2. In connection with the issuance of the Bonds, the Issuer entered into that certain ISDA Master Agreement dated as of January 17, 2007 with the Swap Counterparty, including the related Schedule, the Credit Support Annex, the Confirmation thereto bearing Reference No dated as of June 1, 2007 the 2007 Confirmation ) and the Confirmation thereto bearing Reference No dated as of August 15, 2008 the 2008 Confirmation, and together with the 2007 Confirmation, the Swaps ); 3. CIFG issued its Financial Guaranty Insurance Policy in Respect of an Interest Rate Swap, Policy No.: CIFG NA 1578 Swap Policy 1578 ) to insure certain amounts as set forth in Swap Policy 1578) due from Issuer to Swap Counterparty under the 2007 Confirmation; 4. CIFG issued its Financial Guaranty Insurance Policy in Respect of an Interest Rate Swap, Policy No.: CIFG NA 1585 Swap Policy 1585 ) to insure certain amounts as set forth in Swap Policy 1585) due from Issuer to Swap Counterparty under the 2008 Confirmation; 5. The Issuer and the Bondholder desire to terminate the insurance coverage provided pursuant to the Bond Policy and release CIFG from its obligations thereunder and CIFG has agreed to cancel the Bond Policy, subject, among other things to the cancellation of the Swap Policies; 6. The Swap Counterparty, as the sole beneficiary under Swap Policy 1578 and Swap Policy 1585 collectively, the Swap Policies ), desires to cancel and return the Swap Policies to CIFG and the Issuer also desires that the Swap Policies be cancelled and returned to CIFG; 7. CIFG has agreed to relinquish certain rights under the Swaps for the benefit of the Swap Counterparty and the Issuer based on each of the Swap Counterparty s and the Issuer s agreement to cancel the Swap Policies, effective on the later of i) the date of this Agreement and ii) the date on which the Bond Policy is cancelled the Effective Date ), and to waive any rights under the Swap Policies, all as set forth herein. In consideration of the premises and the mutual promises set forth below, the parties hereto agree as follows: AGREEMENT Section 1. The Swap Counterparty hereby represents and warrants to, and covenants with, CIFG that: a) it desires that the Swap Policies be cancelled, b) an authorized representative of

15 the Swap Counterparty has marked the face of each of the Swap Polices as cancelled, c) it will immediately return each of the original Swap Policies marked cancelled to CIFG or, if applicable, a copy of either or both of the Swap Policies together with an affidavit stating that the original cannot be located and that it intends that the original Swap Policies be cancelled; provided, however, that failure to deliver any Swap Policy or any such affidavit shall not have any effect on the cancellation of the Swap Policies pursuant to this Agreement, d) it irrevocably waives any right to submit or make any claim for payment or otherwise under the Swap Policies and e) as of the date of this Agreement, the Issuer s payment obligations under the Swaps are no longer insured by the Swap Policies. Section 3. The Issuer hereby represents and warrants to, and covenants with, CIFG that: a) it desires that the Swap Policies be cancelled and returned to CIFG, b) as of the date of this Agreement, the Issuer s payment obligations to the Swap Counterparty are no longer insured by either of the Swap Policies, and c) it irrevocably waives any right to claim that the either of the Swap Policies insures any payment obligations under the Swaps or to demand that CIFG make any payment under such Swap Policies. Section 4. CIFG agrees that, provided that Swap Counterparty and Issuer fully comply with the terms of this Agreement, that neither of the Swaps shall constitute an Insured Transaction as defined in the Swaps). Section 5. The parties hereto agree that as of the Effective Date, each of the Swap Policies is hereby surrendered and cancelled by the Swap Counterparty and no amounts will be due or payable pursuant to the Swap Policies and none of the parties hereto, their successors or assigns will submit any claims for payment pursuant to the Swap Policies. Section 6. The Issuer agrees to pay at the direction of CIFG, immediately and unconditionally upon demand, all reasonable expenses, including attorneys fees and expenses, incurred by CIFG in connection with the execution of this Agreement and the matters relating hereto. The Swap Counterparty and the Issuer, to the extent permitted by law, each agree to indemnify CIFG against any and all liability, claims, loss, costs, damages, fees of attorneys and other expenses which CIFG may sustain or incur which relate to or arise by reason of or in consequence of this Agreement. Section 7. Concurrent herewith, the Swap Counterparty and Issuer shall each deliver an opinion of counsel to CIFG to the effect that this Cancellation Agreement is duly authorized, executed and delivered, and is a valid and binding obligation and enforceable against such party. Section 8. This Agreement may be executed in several counterparts, each of which shall be an original and all of which together shall constitute but one and the same instrument. Signature page follows]

16 IN WITNESS WHEREOF, each of the parties hereto has caused this Swap Insurance Policy Cancellation Agreement to be executed in its respective name by its duly authorized officer, all as of the date first above written. FIFTH THIRD BANK, as Swap Counterparty By Title TOHOPEKALIGA WATER AUTHORITY, as Issuer By Title CIFG ASSURANCE NORTH AMERICA, INC., as Swap Insurer By Title

17 Category: Unfinished Business Attachments: Memorandum from BMO Resolution No APPROVAL OF RESOLUTION APPROVING DOCUMENTS AND AUTHORIZING ACTIONS RELATED TO THE RE-MARKETING OF THE SERIES 2007 BONDS Explanation: The Series 2007 bonds were converted from the auction rate mode to the variable rate demand mode on April 10, The bonds are presently being held/parked with First Southwest pending remarketing of the bonds in mid-may. Before the bonds can be remarketed, the Letter of Credit with Helaba Bank needs to be approved and issued, a remarketing agent agreement must be approved, and a remarketing circular must be issued, as well as, some other actions. The resolution covers the approvals and authorizations necessary to proceed with the remarketing including the payment of the associated expenses. The attached memorandum from Bryant Miller & Olive outlines the substance of the resolution. Recommendation: Staff recommends approval of Resolution No ApprovalResolutionRemarketBonds blw 9B

18 M E M O R A N D U M TO: FROM: CHAIRMAN AND MEMBERS OF THE BOARD OF SUPERVISORS OF THE TOHOPEKALIGA WATER AUTHORITY ROBERT REID DATE: April 30, 2008 RE: RESOLUTION FOR APRIL 23, 2008 BOARD MEETING The Authority has converted its outstanding Series 2007 Bonds from the ARS Mode to a Short-Term Mode in anticipation of the issuance of a Letter of Credit by Landesbank Hessen-Thüringen Girozentrale ("Helaba Bank"). The Helaba Bank Letter of Credit will replace all the CIFG insurance policies as credit enhancement for the 2007 Bonds. It is anticipated that the 2007 Bonds will be remarketed with the Helaba Letter of Credit and a Remarketing Circular after new ratings have been obtained based on the Helaba LOC, in mid-may. The attached resolution addresses a number of matters in connection with the delivery of the Helaba Bank Letter of Credit, extended remarketing role of First Southwest and need of a remarketing circular, including: Approving the form of Helaba Bank Letter of Credit and authorizing the execution and delivery of a Letter of Credit Reimbursement Agreement. (Section 5.01) Approving the form of a new Remarketing Agent Agreement (Article III) Approving the form of Remarketing Circular and authorizing its distribution by the Remarketing Agent. (Article IV) Amending Resolutions and to provide conforming amendments to the Master Bond Resolution and the 2007 Bond Resolution in connection with the delivery of Alternate Credit Enhance in the form of the Helaba Bank Letter of Credit, including changes to the use of revenues to pay bonds and reimburse a credit facility provider, allow for a 12 month period to restore deficiencies in the debt service reserve fund, and setting forth the rights of the provider of an Alternate Credit Enhancement. (Article II) Authorizing the payment of certain expenses incurred in connection with the remarketing of the 2007 Bonds (Article VI). Authorizing the taking of further action in connection with the delivery of Alternate Credit Enhancement and remarketing of 2007 Bonds (Article VII) A representative of Bryant Miller Olive will be at the Board meeting on the 2nd to answer any questions that the Board may have regarding the resolution or the process for the remarketing of the 2007 Bonds with the Helaba Bank Letter of Credit.

19 M E M O R A N D U M TO: FROM: CHAIRMAN AND MEMBERS OF THE BOARD OF SUPERVISORS OF THE TOHOPEKALIGA WATER AUTHORITY ROBERT REID DATE: April 30, 2008 RE: RESOLUTION FOR APRIL 23, 2008 BOARD MEETING The Authority has converted its outstanding Series 2007 Bonds from the ARS Mode to a Short-Term Mode in anticipation of the issuance of a Letter of Credit by Landesbank Hessen-Thüringen Girozentrale ("Helaba Bank"). The Helaba Bank Letter of Credit will replace all the CIFG insurance policies as credit enhancement for the 2007 Bonds. It is anticipated that the 2007 Bonds will be remarketed with the Helaba Letter of Credit and a Remarketing Circular after new ratings have been obtained based on the Helaba LOC, in mid-may. The attached resolution addresses a number of matters in connection with the delivery of the Helaba Bank Letter of Credit, extended remarketing role of First Southwest and need of a remarketing circular, including: Approving the form of Helaba Bank Letter of Credit and authorizing the execution and delivery of a Letter of Credit Reimbursement Agreement. (Section 5.01) Approving the form of a new Remarketing Agent Agreement (Article III) Approving the form of Remarketing Circular and authorizing its distribution by the Remarketing Agent. (Article IV) Amending Resolutions and to provide conforming amendments to the Master Bond Resolution and the 2007 Bond Resolution in connection with the delivery of Alternate Credit Enhance in the form of the Helaba Bank Letter of Credit, including changes to the use of revenues to pay bonds and reimburse a credit facility provider, allow for a 12 month period to restore deficiencies in the debt service reserve fund, and setting forth the rights of the provider of an Alternate Credit Enhancement. (Article II) Authorizing the payment of certain expenses incurred in connection with the remarketing of the 2007 Bonds (Article VI). Authorizing the taking of further action in connection with the delivery of Alternate Credit Enhancement and remarketing of 2007 Bonds (Article VII) A representative of Bryant Miller Olive will be at the Board meeting on the 2nd to answer any questions that the Board may have regarding the resolution or the process for the remarketing of the 2007 Bonds with the Helaba Bank Letter of Credit.

20 RESOLUTION NO A RESOLUTION SUPPLEMENTING AND AMENDING RESOLUTION AND RESOLUTION OF THE TOHOPEKALIGA WATER AUTHORITY, FLORIDA, AS AMENDED, IN CONNECTION WITH DELIVERY OF ALTERNATE CREDIT ENHANCEMENT AND ALTERNATE LIQUIDITY FACILITY; APPROVING THE FORM OF A DIRECT PAY LETTER OF CREDIT AS ALTERNATE CREDIT ENHANCEMENT AND ALTERNATE LIQUIDITY FACILITY AND APPROVING THE FORM OF AND AUTHORIZING EXECUTION OF A LETTER OF CREDIT REIMBURSEMENT AGREEMENT WITH LANDESBANK HESSEN- THÜRINGEN GIROZENTRALE IN CONNECTION THEREWITH; APPROVING THE FORM OF AND AUTHORIZING EXECUTION AND DELIVERY OF A REMARKETING AGREEMENT WITH FIRST SOUTHWEST COMPANY AS REMARKETING AGENT; APPROVING THE FORM OF AND AUTHORIZING DISTRIBUTION OF A REMARKETING CIRCULAR; AUTHORIZING THE PAYMENT OF CERTAIN EXPENSES INCURRED BY THE AUTHORITY IN PROCEEDINGS RELATIVE TO THE DELIVERY OF ALTERNATE CREDIT ENHANCEMENT AND ALTERNATE LIQUIDITY FACILITY AND REMARKETING OF THE 2007 BONDS; AUTHORIZING OFFICIALS OF THE AUTHORITY TO EXECUTE AND DELIVER ON BEHALF OF THE AUTHORITY ALL AGREEMENTS AND TO TAKE SUCH OTHER ACTIONS DEEMED NECESSARY OR ADVISABLE IN CONNECTION WITH ANY OF THE FOREGOING; AND PROVIDING AN EFFECTIVE DATE. WHEREAS, pursuant to the terms of Resolution No , adopted by the Board of Supervisors of the Tohopekaliga Water Authority ( the " Issuer") on July 17, 2003, as amended and supplemented ( the " Master Resolution") the Issuer has authorized the issuance of Bonds from time to time; and WHEREAS, pursuant to the terms of Resolution No , adopted by the Issuer on April 11, 2007, as amended and supplemented (the "2007 Bond Resolution"), the Issuer authorized the issuance of its $ 92,395,000 Utility System Variable Rate Revenue Bonds, Series 2007 ( the " 2007 Bonds"), on a parity with the Issuer s Outstanding Utility System Revenue Bonds, Series 2003A and Series 2003B ( the Outstanding Parity Bonds"); and WHEREAS, the 2007 Bonds were initially issued in the ARS Mode, as that term is defined in the 2007 Bond Resolution; and WHEREAS, pursuant to Resolution adopted on January 9, 2008, as supplemented, the Issuer authorized its executive director ( the "Executive Director") to make initial preparation and provide due notices required to convert the 2007 Bonds from ARS Mode to a Short-Term Mode and to initiate discussions with financial institutions seeking to enter into a contract to provide a Liquidity Facility for the 2007 Bonds; and

21 WHEREAS, the Issuer deemed it necessary and desirable to authorize the change on April 10, 2008 ( the " Mode Change Date") in the interest rate mode of the 2007 Bonds from ARS Mode to Weekly Mode ( the " Mode Change") pursuant to the terms of the 2007 Bond Resolution; and WHEREAS, the Issuer has previously purchased the 2007 Bonds in conjunction with the Mode Change and is the sole Bondholder; and WHEREAS, the Issuer appointed First Southwest Company the remarketing agent for the 2007 Bonds (the "Remarketing Agent") and now desires to approve the form of a Remarketing Agreement between the Remarketing Agent and the Issuer substantially in the form attached hereto as Exhibit "A" (the "Remarketing Agreement"); and WHEREAS, the Issuer appointed The Bank of New York Trust Company, N.A. the "Tender Agent") as initial Tender Agent for the 2007 Bonds; and WHEREAS, the Issuer intends and expects to remarket the 2007 Bonds in the Weekly Mode accompanied by an Alternate Credit Enhancement and/or an Alternate Liquidity Facility and short-term ratings from the Rating Agencies on or about May 15, 2008 ( the actual date of remarketing being referred to herein as the " Remarketing Date"); and WHEREAS, the Issuer declares and affirms its intention that its investment in the 2007 Bonds not be or be deemed to be a cancellation, retirement, defeasance, or extinguishment of the 2007 Bonds and the obligation of the Issuer represented thereby, but that such investment be a bona fide, temporary investment by the Issuer of its available moneys pursuant to the terms of its investment policies; and WHEREAS, the Issuer has received a proposal from Landesbank Hessen- Thüringen Girozentrale (the "Credit Provider") to deliver its direct pay letter of credit the "Alternate Credit Facility" and "Alternate Liquidity Facility") to pay the principal of and interest on 2007 Bonds and, upon tender thereof in the event remarketing proceeds are insufficient therefore, the purchase price of 2007 Bonds tendered for purchase, all pursuant to the terms of a Letter of Credit Reimbursement Agreement between the Issuer and the Credit Provider (the "Reimbursement Agreement"), each substantially in the form attached hereto as Exhibit "C"; and WHEREAS, the Issuer desires to approve the form of and authorize distribution of a Remarketing Circular to be used by the Remarketing Agent in connection with the remarketing of the 2007 Bonds with the Alternate Credit Enhancement and the Alternate Liquidity Facility substantially in the form attached hereto as Exhibit "B" the "Remarketing Circular"); and

22 WHEREAS, the Issuer deems it necessary and desirable to ratify certain actions heretofore taken by and on behalf of the Issuer and to authorize certain officials of the Issuer to take certain further actions as described herein; and WHEREAS, the Issuer hereby finds, determines, and declares that amendments and supplements to the Master Resolution and the 2007 Bond Resolution are required in connection with the delivery of the Alternate Credit Facility and the Alternate Liquidity Facility; NOW, THEREFORE, BE IT RESOLVED BY THE BOARD OF SUPERVISORS OF THE TOHOPEKALIGA WATER AUTHORITY, AS FOLLOWS: STATUTORY AUTHORITY, DEFINITIONS AND FINDINGS AUTHORITY FOR THIS RESOLUTION. This Resolution is adopted pursuant to the provisions of Chapter , Laws of Florida (Tohopekaliga Water Authority Act) as amended and supplemented from time to time), the Constitution of the State of Florida and other applicable provisions of law, the Master Resolution and the 2007 Bond Resolution. DEFINITIONS. All terms used in this Resolution in capitalized form and not otherwise defined in this Resolution ( and the recitals or preamble preceding this Resolution), shall have the meanings ascribed to such terms in the Master Resolution and the 2007 Bond Resolution. FINDINGS AND DETERMINATIONS. ascertains, determines and declares that: The Board of the Issuer hereby finds, All findings or determinations set forth in the recitals or preamble of this Resolution are herby incorporated by reference as if fully set forth herein. Based upon the recommendations of the Financial Advisor, it is expected to be economically beneficial to the Issuer to remarket the 2007 Bonds in the Weekly Mode with the credit support of the Alternate Credit Enhancement and the Alternate Liquidity Facility and the cancellation of the 2007 Policy, the 2007 Surety and any insurance policy issued by the 2007 Bond Insurer with respect to a Qualified Swap (collectively, the "CIFG Insurance Policies"). APPLICATION OF PROVISIONS OF THIS RESOLUTION, THE MASTER RESOLUTION AND THE 2007 BOND RESOLUTION. Except as otherwise expressly set forth herein or in the 2007 Bonds, all covenants contained in this Resolution, the

23 Master Resolution and the 2007 Bond Resolution shall be fully applicable to the 2007 Bonds. ARTICLE II SUPPLEMENTS AND AMENDMENTS TO 2007 BOND RESOLUTION SECTION AUTHORITY FOR SUPPLEMENTS. Pursuant to Section of the 2007 Bond Resolution, the 2007 Bond Resolution may be amended without the consent of the Holders of the 2007 Bonds then Outstanding in connection with the delivery of Alternate Credit Enhancement or Alternate Liquidity Facility and pursuant to Section 6.05(B)(2) of the Master Resolution, the Master Resolution may be amended without the consent of the Holders of the Bonds then Outstanding in order to further secure the payment of the Bonds. Pursuant to this Resolution, the Issuer authorizes the delivery of Alternate Credit Enhancement and Alternate Liquidity Facility for the 2007 Bonds in order to further secure the 2007 Bonds. SECTION AMENDMENT TO SECTION 1.02 OF THE MASTER RESOLUTION. Section 1.02 of the Master Resolution is hereby amended by adding thereto the following new definitions: Liquidity Facility" shall mean any letter of credit, line of credit, standby purchase agreement or other instrument then in effect which provides for the payment of the purchase price of a Series of Bonds upon the tender thereof in the event remarketing proceeds are insufficient therefor. Liquidity Provider" shall mean any bank, insurance company, pension fund or other financial institution which provides a Liquidity Facility or Alternate Liquidity Facility for any Series of Bonds. Reimbursement Agreement" shall mean any reimbursement agreement, credit agreement, line of credit agreement, standby purchase agreement or other agreement, by and between the Credit Provider or Liquidity Provider, as applicable, and the Issuer, and relating to Credit Enhancement or a Liquidity Facility, as applicable. Section 1.02 of the Master Resolution is hereby amended by amending the following definitions to read as follows: Credit Facility" or " Credit Enhancement" means any policy of municipal bond insurance, irrevocable letter of credit, surety bond, or other insurance or financial product which guarantees timely payment of all or any portion of the principal of, premium, if any, and interest on all or any portion of a Series of Bonds.

24 Credit Facility Issuer" or " Credit Provider" means each insurance company, bank, or other organization which has provided a Credit Facility or Credit Enhancement in connection with any Series of Bonds or any particular Bonds within a Series. System Development Charges Debt Service Component" means, as of any particular date of calculation, for any Series of Bonds, the dollar amount of System Development Charges determined by ( 1) multiplying the aggregate Debt Service Requirements for such Series by the applicable Expansion Percentage, and ( 2) subtracting from the product so obtained all amounts previously transferred from the System Development Charges Fund to the applicable Sinking Fund for such Series, including the Bond Amortization Accounts therein, pursuant to the provisions of Section 3.03 hereof. SECTION AMENDMENT TO SECTION 1.02 OF 2007 BOND RESOLUTION. Section 1.02 of the 2007 Bond Resolution is hereby amended by adding thereto the following new definitions: Eligible Account" means a trust account established with the Paying Agent for the benefit of the 2007 Bonds in which only amounts drawn under the Credit Enhancement is deposited. Amounts held in such accounts shall be segregated from all other funds Liquidity Provider Bonds" shall have the same meaning as Liquidity Provider 2007 Bonds. Section 1.02 of the 2007 Bond Resolution is hereby amended by amending the following definitions to read as follows: Credit Enhancement" shall mean a letter of credit, insurance policy, surety bond, line of credit or other instrument then in effect which secures or guarantees the payment of principal of and interest on the 2007 Bonds. The Credit Enhancement shall constitute a "Credit Facility" as defined in the Master Resolution. Credit Provider" shall mean any bank, insurance company, pension fund or other financial institution which provides Credit Enhancement or Alternate Credit Enhancement for the 2007 Bonds. The Credit Provider shall constitute a "Credit Facility Issuer" as defined in the Master Resolution. Mandatory Purchase Date" shall mean: ( a) with respect to a Flexible Rate 2007 Bond, the first Business Day following the last day of each Flexible Rate Period with respect to such 2007 Bond, ( b) for 2007

25 Bonds in the Term Rate Mode, the first Business Day following the last day of each Term Rate Period, ( c) any Mode Change Date ( except a change in Mode between the Daily Mode and the Weekly Mode if the Liquidity Facility provides that amounts may be drawn thereunder to pay the Purchase Price of 2007 Bonds in both Modes), ( d) any Substitution Date, (e) the fifth Business Day prior to the Expiration Date (other than as a result of an Automatic Termination Event), ( f) the date specified by the Paying Agent following receipt by the Paying Agent of a written notice from the Liquidity Provider or Credit Provider that an event of default other than an Automatic Termination Event) has occurred under the Reimbursement Agreement and requesting that the 2007 Bonds be called for Mandatory Tender, which date shall be a Business Day not more than twenty nor less than fifteen days after the Paying Agent's receipt of such notice and in no event later than the day preceding the termination date of the Credit Enhancement or Liquidity Facility, as applicable, specified by the Credit Provider or the Liquidity Provider and (g) for 2007 Bonds in the Daily Mode or Weekly Mode, any Business Day specified by notice from the Issuer not less than 15 days after the Paying Agent's receipt of such notice from the Issuer. Section 1.02 of the 2007 Bond Resolution is hereby further amended by deleting the following definitions to the extent they refer to the CIFG Assurance North America, Inc. or any of the CIFG Insurance Policies: 1) "Reserve Account Credit Facility"; 2) "Reserve Account Credit Facility Issuer"; 3) "2007 Bond Insurer"; 4) "2007 Commitment"; 5) "2007 Policy"; and 6) "2007 Surety". SECTION AMENDMENT TO SECTION 3.03 OF THE MASTER RESOLUTION. Section 3.03 of the Master Resolution is hereby amended to read as follows ( added language is underlined and deleted language is reflected in strikethrough): SECTION APPLICATION OF PLEDGED REVENUES. For as long as any of the principal of, premium, if any, and interest on any of the Bonds of a Series shall be outstanding and unpaid or until ( a) there shall have been set apart in the Sinking Fund herein established, including any accounts and subaccounts therein for such Series of Bonds a sum sufficient to pay when due the entire principal amount of the Bonds of such Series remaining unpaid, together with the premium, if any, with respect thereto, and the interest accrued or to accrue thereon in a manner that causes the related Bonds to be defeased as provided in Section 6.04 hereof, or ( b) provision for payment of the Bonds of such Series shall have been made in

26 accordance with the terms of Section 6.04 hereof and the lien of the Bonds of such Series upon the Pledged Revenues shall have been defeased, the Authority covenants with the Registered Owners of any and all Bonds of such Series as follows: A) CREATION OF FUNDS AND ACCOUNTS. There are hereby created and established the following funds and accounts of the Authority: the Utility System Revenue Fund, hereinafter referred to as the Revenue Fund"; the Utility System System Development Charges Fund, hereinafter called the " System Development Charges Fund", together with the " Water System System Development Charges Account" and the Wastewater System System Development Charges Account" therein; the Utility System Revenue Bonds Sinking Fund, hereinafter called the "Sinking Fund", together with the accounts therein to be known as the "Current Debt Service Account", the " Bond Amortization Account" ( together with any subaccounts therein) and the " Reserve Account" ( provided that separate subaccounts may be established within the Reserve Account and the amounts on deposit in such subaccounts be specified to be available only for Bonds of a particular Series); the Utility System Renewal and Replacement Fund, hereinafter called the " Renewal and Replacement Fund" together with the accounts therein to be known as the " Current Account," the " Future Account," and the " Emergency Account"; the Utility System Rate Stabilization Fund, hereinafter called the " Rate Stabilization Fund"; the Utility System Subordinate Debt Service Fund, hereinafter referred to as the " Subordinate Debt Service Fund" together with accounts therein to be known as the " Subordinate Bonds Account", the " Loan Agreement Account", and the "Swap Payment Account"; the "Governmental Transfer Reserve Fund", and the Utility System Project Fund, hereinafter referred to as the " Project Fund;" provided that separate accounts and subaccounts in any of the foregoing may be established and maintained for different Series or installments of Bonds if so provided in a Series Resolution. There is further created and established a "General Fund" of the Authority. B) MAINTENANCE OF FUNDS AND ACCOUNTS. The designation and establishment of the various funds and accounts in and by this Original Resolution shall not be construed to require the establishment of any completely independent, self-balancing funds or accounts, as such terms are commonly defined and used in governmental accounting, but rather is intended solely to constitute an earmarking of Pledged Revenues for certain purposes and to establish certain priorities for application of such Pledged Revenues as provided herein. Cash and Authorized Investments required to be accounted for in each of the funds and accounts established by this Original Resolution may be deposited in a single bank account, provided that accounting records, prepared in accordance with Accounting

27 Principles are maintained to reflect control or restricted allocation of the moneys therein for the various purposes of such funds and accounts. Deposits into the accounts for any Series or installment of Bonds shall be on a parity with the deposits, if any, into the corresponding accounts for each other Series or installment of Bonds (or, in the case of a deficiency, shall be on a pro rata basis computed with regard to the aggregate principal amount of Bonds of each Series or installment then Outstanding) unless specified otherwise; further provided that moneys on deposit in the accounts established for a particular Series or installment of Bonds may be specified not to be available to be used for payments required to be made from the corresponding accounts for any other Series or installment of Bonds. C) APPLICATION OF GROSS REVENUES. All Gross Revenues shall, immediately upon receipt thereof, be deposited by the Authority into the Revenue Fund. Moneys on deposit in the Revenue Fund shall be applied in each month, subject to credits for deposits as provided herein below, only in the following manner and order of priority; provided, that with respect to any payment period for any Series of Bonds that is other than annual or semi-annual, the required deposits shall be such as to provide for equal monthly deposits of all amounts required to meet the annual Debt Service Requirement of such Series: Expenses; 1) Moneys shall first be used to pay Operating 2) Moneys shall next be used for deposit into the Sinking Fund in the following priority: a) into the Current Debt Service Account for Bonds paying interest semi-annually such sums as are necessary to pay one-sixth ( 1/6) of the ( i) interest becoming due on the Current Interest Paying Bonds and (ii) any Periodic Payments becoming due, in each case on the next Interest Payment Date and for Bonds paying interest monthly, such sums as are necessary to pay the (i) interest becoming due on the Current Interest Paying Bonds and ( ii) any Periodic Payments becoming due, in each case on the next Interest Payment Date; b) into the Current Debt Service Account such sums as are necessary to pay one-twelfth (1/12) (one-sixth if principal is paid semi-annually) of the principal maturing on Current Interest Paying Serial Bonds on the next Principal Maturity Date maturing in such Bond Year; c) on a parity with the payments provided in subparagraph ( b) above, into the appropriate subaccount in the Bond

28 Amortization Account, in such sums as are necessary to pay one-twelfth 1/12) ( one-sixth if principal is paid semi-annually) of the Amortization Installment for Term Bonds which shall become due and payable during the current Bond Year, plus any Amortization Installment owed with respect to Bonds of a Series that have been purchased with amounts drawn under the Liquidity Facility supporting Bonds of such Series coming due in the month following the date of such deposit to the extent that amounts held in the Bond Amortization Account available for the payment of such Amortization Installments is insufficient to pay the principal due and payable on such Bonds in the month following such deposit; and d) into the Current Debt Service Account, on a parity with the payments provided in subparagraphs ( b) and (c) above, in such sums as are necessary to pay one-twelfth ( 1/12) of the Maturity Amount of any Capital Appreciation Bonds maturing in such Bond Year; and e) into the Current Debt Service Account, on parity with the payments provided in subparagraphs ( a), ( b), ( c), and ( d) above, an amount equal to all amounts coming due and payable by the Authority in the month following such deposit under any Reimbursement Agreement that is not provided for in subparagraphs ( a), (b), (c) and ( d) above; 43) Moneys shall next be used to cure any deficiency for prior deposits into the Sinking Fund; 34) Moneys shall next be used to restore the amount of funds on deposit in the Reserve Fund to the applicable Reserve Account Requirement in no more than twelve ( 12) equal monthly installments, or used in accordance with the provisions of any applicable Reserve Account Credit Facility, if any, to maintain in the Reserve Account a Reserve Account Value in an amount equal to the applicable Reserve Account Requirement for a Series of Bonds, with first priority for payment of any Reserve Account Credit Facility Costs then due and owing; 5) Moneys shall next be deposited into the Renewal and Replacement Fund in an amount equal to the sum of: a) one-twelfth ( 1/12) of the Renewal and Replacement Fund Requirement to be allocated first to the Current Account until the deposits thereto total the capital budget requirements for the Suburban System for the current Fiscal Year and thereafter into the Future Account; and b) one-twelfth ( 1/12) of any unrestored withdrawal therefrom made to prevent a default in the payment of the

29 principal and interest on the Bonds as provided in Section 3.03(F)(6) hereinbelow; 6) Moneys shall next be used to maintain on deposit in the Emergency Account an amount equal to the Emergency Account Requirement; in the event of a withdrawal from the Emergency Account, the Authority shall be allowed up to thirty-six (36) months to restore the Emergency Account to the Emergency Account Requirement by monthly paying into the Emergency Account one thirty-sixth ( 1/36th) of each such withdrawal; 7) Moneys shall next be used for deposit into the Subordinate Debt Service Fund and accounts therein of such sums as are required by the proceedings authorizing the issuance of such Subordinate Debt as follows: a) moneys shall first be applied into the Subordinate Bonds Current Debt Service Account in amounts equal to onesixth and one-twelfth ( 1/12), respectively, the of the principal and interest due and payable on Outstanding Subordinate Bonds on the next succeeding interest payment date and principal maturity date, respectively; b) on a parity with the payments provided for in subparagraph (a) above, moneys shall be applied into the Loan Agreement Account in an amount equal to one-twelfth (1/12) of the amounts payable on any Loan Agreement in the current Fiscal Year; c) moneys shall next be deposited into the Swap Payment Account in the amount due under any Qualified Swap as Termination Payments; 8) Moneys shall next be applied to pay one-twelfth 1/12th) of the amount of the Governmental Transfer due to the City and the County for the current Fiscal Year; 9) Moneys may next, in the discretion of the Board, be deposited into the Governmental Transfer Reserve Account in such sums as shall be determined by the Board; 10) Moneys may next, in the discretion of the Board, be deposited into the Rate Stabilization Fund in such sums as shall be determined by the Board; any moneys so transferred shall be excluded from Gross Revenues in the Fiscal Year in which the transfer into the Rate Stabilization Fund occurs; and

30 11) Remaining moneys may be withdrawn and used by the Authority for any lawful purpose, provided that all funds and accounts created hereunder are at required levels. The foregoing provisions notwithstanding, no further deposits shall be required to be made into the foregoing funds and accounts whenever there shall be on deposit ( 1) in the Sinking Fund, including the accounts therein, an amount of money and Authorized Investments equal to all principal and interest due on the Bonds to the final maturity thereof, (2) all amounts due and owing to any Credit Facility Issuer shall have been paid and ( 3) there shall be on deposit in the Subordinate Debt Service Fund, including the accounts therein, an amount necessary to pay all outstanding Subordinate Debt in full in accordance with its terms. Credit shall be allowed against the required deposit amounts due as prescribed above for the payment of principal of and interest and Amortization Installment on Bonds to the extent of any other funds on deposit and available for such purpose in the applicable accounts of the Sinking Fund including (i) amounts of System Development Charges as may have been pledged for such payment, (ii) accrued or capitalized interest and iii) any Investment Earnings transferred into such fund or account and available for such purposes. D) APPLICATION OF SYSTEM DEVELOPMENT CHARGES. All System Development Charges received with respect to the Water System shall be deposited upon receipt into the Water System System Development Charges Account, and all System Development Charges received with respect to the Wastewater System shall be deposited upon receipt into the Wastewater System System Development Charges Account. E) APPLICATION OF SWAP RECEIPTS. All amounts received by the Authority from a Swap Counterparty shall be deposited into the Revenue Fund and thereafter constitute Pledged Revenues. F) USE OF AMOUNTS ON DEPOSIT IN FUNDS AND ACCOUNTS. The moneys on deposit in the funds and accounts herein established shall be only used in the following manner and for the following purposes. 1) REVENUE FUND. Moneys on deposit in the Revenue Fund shall be used only to make the required deposits into the funds and accounts as provided in Section 3.03(C)(1)-(10) hereof and, thereafter, may be applied as provided in Section 3.03(C)(11) hereof or may be retained in the Revenue Fund.

31 2) SYSTEM DEVELOPMENT CHARGES FUND. Moneys on deposit in the System Development Charges Fund shall be used first for the purpose of supplementing the Net Revenues to the extent necessary to make the required deposits into the Sinking Fund and accounts therein when the other Pledged Revenues are insufficient therefor. Thereafter, System Development Charges may be used to pay the cost of Expansion Facilities. 3) CURRENT DEBT SERVICE ACCOUNT. Moneys on deposit in the Current Debt Service Account shall be used only to pay the principal of and interest on the Bonds and to reimburse the Credit Facility Issuer for amounts drawn under the Credit Facility to pay principal and interest on the Bonds as provided herein and to pay other amounts owed by the Authority under any Reimbursement Agreement when due. In the event a Series of Bonds is secured by a Credit Facility in the form of a direct pay letter of credit, and the Paying Agent has not received the draw from the Credit Facility Issuer by the time required by the applicable Series Resolution for such Series of Bonds, the funds on deposit in the Current Debt Service Account shall be delivered to the Paying Agent to pay the principal of and interest on such Series of Bonds due on such payment date. 4) BOND AMORTIZATION ACCOUNT. Moneys held for the credit of the Bond Amortization Account shall be applied to the retirement of Term Bonds of each Series or installment of Bonds, to the extent of the Amortization Installment, if any, for such Bond Year for the Term Bonds of each such Series or installment then Outstanding, and to reimburse the Credit Facility Issuer for amounts drawn under the Credit Facility to pay the Amortization Installment on the Bonds and if the amount available in such Bond Year shall not be sufficient therefor, then in proportion to the Amortization Installment, if any, for such Bond Year for the Term Bonds of each such Series or installment then Outstanding. In the event a Series of Bonds is secured by a Credit Facility in the form of a direct pay letter of credit, and the Paying Agent has not received the draw from the Credit Facility Issuer by the time required by the applicable Series Resolution for such Series of Bonds, the funds on deposit in the Bond Amortization Account shall be delivered to the Paying Agent to pay the principal of such Series of Bonds due on such payment date. Notwithstanding the provisions of the preceding paragraph, the Authority may purchase Term Bonds then Outstanding at the most advantageous price obtainable with reasonable diligence, such price not to exceed the principal amount of such Term Bonds. No such purchase shall be made by the Authority within the period of forty-five ( 45) days immediately preceding any Interest Payment Date on which Term Bonds are

32 subject to call for redemption, except from moneys in excess of the amounts set aside or deposited for the redemption of Term Bonds on such date. 5) RESERVE ACCOUNT. Moneys in the Reserve Account shall be used only for the purpose of the payment of interest on or principal ( including Amortization Installments) of the Bonds or to reimburse the Credit Facility Issuer for such payments pursuant to Credit Facility when the other moneys allocated to the Sinking Fund are insufficient therefor, and for no other purpose. Any withdrawals from the Reserve Account or draws against a Reserve Account Credit Facility shall be restored or repaid from the first available moneys after all required current payments have been made into the Sinking Fund and accounts therein. Upon the issuance of Additional Parity Bonds, additional cash or Authorized Investments shall be deposited into the Reserve Account or additional Reserve Account Credit Facilities shall be purchased from the proceeds of such Additional Parity Bonds, or from other moneys of the Authority available therefor, in order to make the Reserve Account Value at the time of issuance thereof equal to the Reserve Account Requirement. Notwithstanding the foregoing, the Authority at any time may substitute a Reserve Account Credit Facility for all or any portion of the cash and Authorized Investments on deposit in the Reserve Account, subject only to such conditions and approvals as may be imposed by the Credit Facility Issuer providing such Reserve Account Credit Facility or by any Credit Facility Issuer having a Credit Facility or Reserve Account Credit Facility in effect as to any Bonds. The Authorized Investments on deposit in the Reserve Account shall be valued annually, or more frequently if required by a Credit Facility Issuer, as of the last day of the Fiscal Year at their fair market value exclusive of accrued interest. Any Reserve Account Credit Facilities shall be valued at the amount of the Reserve Account Credit Facility Coverage. If and whenever the Reserve Account Value exceeds the Reserve Account Requirement on all then Outstanding Bonds, such excess may be withdrawn and applied, first, to pay any Reserve Account Credit Facility Costs and thereafter applied and allocated into the Renewal and Replacement Fund, or if the Renewal and Replacement Fund Requirement is then on deposit in the Renewal and Replacement Fund, then into the Revenue Fund. Deficiencies in the Reserve Account Value resulting from a decline in market value of the Authorized Investments, a draw on a Reserve Account Credit Facility, or a withdrawal therefrom shall be restored no later than twelve (12) months from the date of valuation, draw, or withdrawal.

33 6) RENEWAL AND REPLACEMENT FUND. The moneys in the Renewal and Replacement Fund shall be used only for the purpose of paying: ( a) the cost of necessary repairs, extensions, enlargements or additions to, or the replacement of Facilities of, the Utility System; and (b) the principal of and interest on the Bonds when due if the moneys on deposit in the Sinking Fund and accounts therein are ever insufficient therefor, and any amounts so withdrawn are required to be restored pursuant to Section 3.03(C)(5)(b). 7) EMERGENCY ACCOUNT. Moneys on deposit in the Emergency Account shall be used only for the purpose of paying repair, maintenance, and/or replacement costs due to unforeseen damage to, or destruction of, the Facilities of the Utility System. 8 RATE ) STABILIZATION FUND. Moneys on deposit in the Rate Stabilization Fund may be used only for redeposit into the Revenue Fund. Moneys redeposited into the Revenue Fund shall be included in Gross Revenues in the Fiscal Year in which the redeposit occurs. 9) SUBORDINATE DEBT SERVICE FUND. Moneys on deposit in the Subordinate Debt Service Fund and accounts therein may be used only for payment of debt service on Subordinate Debt in such manner as shall be specified in the proceedings authorizing such Subordinate Debt. 10) GOVERNMENTAL TRANSFER RESERVE FUND. Moneys on deposit in the Governmental Transfer Reserve Fund shall be used only for the purpose of paying the Governmental Transfer. 11) GENERAL FUND. Moneys on deposit in the General Fund may be used for any lawful purpose of the Authority, subject to the provisions of the Act and the Transfer Agreement. Moneys on deposit in the General Fund are not Pledged Revenues. G) INVESTMENT OF MONEYS IN FUNDS AND ACCOUNTS. All moneys on deposit in the funds and accounts created hereunder may be invested and reinvested only in Authorized Investments; such Authorized Investments shall mature or be redeemable at par at the option of the Authority not later than the respective dates when such moneys will be required for the purposes of such funds and accounts; and provided that at no time shall any moneys constituting gross proceeds of Bonds be used in any manner to cause or result in a " prohibited payment" under applicable regulations pertaining to, or in any other fashion as would constitute failure of compliance with, Section 148 of the Code.

34 Moneys in the Sinking Fund, other than the Reserve Account, may be invested in Authorized Investments maturing not later than the respective dates that such moneys will be needed for the payment of interest and principal (including Amortization Installments) on Bonds. Amounts, if any, held in the Sinking Fund representing capitalized interest shall be invested only in Federal Securities during any period in which a Credit Facility for Bonds, the proceeds of which were used to provide such capitalized interest, shall be in effect. In the case of the Reserve Account, investments shall mature not later than [ five ( 5)] years from the date of investment, and Investment Earnings thereon shall be retained in such account to the extent necessary to maintain therein a Reserve Account Value equal to the Reserve Account Requirement, or may be transferred to the Sinking Fund or to the Revenue Fund. Investment Earnings related to any System Development Charges shall be held and applied for the same purposes to which such moneys are restricted by the terms of this Original Resolution or any resolution adopted in connection with the issuance of any applicable Series or installment. Moneys on deposit in the Current Account and the Future Account in the Renewal and Replacement Fund may be invested in Authorized Investments maturing not later than the time that such moneys will be needed for the purposes of such accounts. Moneys on deposit in the Emergency Account may be invested in Authorized Investments maturing not later than [ five ( 5)] years from their date of investment. Investment Earnings on moneys in the Renewal and Replacement Fund, including the Emergency Account, shall be deposited into the Revenue Fund upon receipt. Moneys on deposit in the Rate Stabilization Fund may be invested in Authorized Investments maturing not later than the date that such moneys will be needed. Investment Earnings thereon shall be deposited into the Revenue Fund upon receipt. H) UNCLAIMED MONEYS. Any moneys deposited with the Paying Agent, for the payment of principal of, premium, if any, and interest on the Bonds and remaining unclaimed for a period of one (1) year from the date on which such moneys were due to pay maturing principal of, premium, if any, or interest on such Bonds may be returned to the Authority and used for any lawful purpose; provided that (1) such return shall not give rise to any claim for additional interest due on such Bonds on account of payment thereof not having been duly provided for under the terms of this Original Resolution; ( 2) such return shall not affect the right, to the extent existing under the provisions of this Original Resolution or of the laws of the State, of the Registered Owner of such Bonds to payment of the principal

35 and interest thereon to the Interest Payment Date with respect to which such moneys were originally deposited. SECTION AMENDMENT TO SECTION 6.02 OF THE MASTER RESOLUTION. The first paragraph of Section 6.02 of the Master Resolution is hereby amended to read as follows ( added language is underlined and deleted language is reflected in strikethrough): SECTION NOTICES TO CREDIT FACILITY ISSUER; CREDIT FACILITY ISSUER DEEMED SOLE BONDOWNER AND A PARTY IN INTEREST. Whenever a Credit Facility Issuer shall be providing a Credit Facility or Reserve Account Credit Facility with respect to any Bonds issued hereunder, such Credit Facility Issuer and any provider of a Reserve Account Credit Facility shall be entitled to receive and shall be provided by certified mail all notices and reports which are required herein to be prepared and to be sent or made available to Registered Owners of such Bonds and a full transcript of any proceedings relating to the execution of any supplemental resolution hereto. Notwithstanding any other provisions of this Original Resolution to the contrary, the Credit Facility Issuer shall be deemed to be the sole Registered Owner of all Bonds insured by it or payable from amounts drawn under the Credit Facility provided by such Credit Facility Issuer for purposes of exercising rights, consents or remedies granted under this Original Resolution. For any amendment or modification of this Original Resolution for which a Credit Facility Issuer shall consent in replacement of the Registered Owners, notice of such amendment or modification along with a copy of such supplemental resolution shall be sent to each Rating Agency at least twenty (20) days prior to the adoption of such amendment or modification. SECTION AMENDMENT TO SECTION 2.06(C) OF 2007 BOND RESOLUTION. Section 2.06(c) of the 2007 Bond Resolution is hereby amended to read as follows ( added language is underlined and deleted language is reflected in strikethrough): c) While any 2007 Bonds are 2007 Liquidity Provider Bonds, such 2007 Bonds shall bear interest at the rate or rates specified in the Reimbursement Agreement. Such interest shall be calculated and be payable as described in the Reimbursement Agreement and be payable at the times and in the amounts required under the Liquidity Facility or related Reimbursement Agreement. SECTION AMENDMENT TO SECTION 2.09 OF 2007 BOND RESOLUTION. The initial paragraph of Section 2.09 of the 2007 Bond Resolution is hereby amended to read as follows ( added language is underlined and deleted language is reflected in strikethrough):

36 SECTION DETERMINATION OF INTEREST RATES DURING DAILY MODE AND THE WEEKLY MODE. The interest rate for the 2007 Bonds in the Daily Mode or Weekly Mode shall be the rate of interest per annum determined by the Remarketing Agent on and as of the applicable Rate Determination Date as the minimum rate of interest which, in the opinion of the Remarketing Agent under then-existing market conditions, would result in the sale of the 2007 Bonds in the Daily Rate Period or Weekly Rate Period, as applicable, at a price equal to the principal amount thereof, plus interest, if any, accrued through the Rate Determination Date during the then current Interest Accrual Period, which, if necessary, shall include setting the rate on the 2007 Bonds at the Maximum Rate. SECTION AMENDMENT TO SECTION 2.13 OF 2007 BOND RESOLUTION. Section 2.13 of the 2007 Bond Resolution is hereby amended to read as follows ( added language is underlined and deleted language is reflected in strikethrough): SECTION CHANGES IN MODE. Subject to the provisions of this Section, the Issuer may effect a change in Mode with respect to the 2007 Bonds by following the procedures set forth in this Section. Upon issuance the 2007 Bonds shall all be in the same Mode, provided however that subsequent to the issuance of the 2007 Bonds the Issuer reserves the right, upon further action and resolution of its Board of Supervisors to undertake all the steps necessary to allow the 2007 Bonds to be in more than one Mode, or with respect to ARS, to have more than one Auction Period. If a change in Mode will make any 2007 Bonds subject to Rule 15c2-12 promulgated under the Securities Act of 1934, as amended, and a continuing disclosure undertaking shall not already have been executed by the Issuer with respect to such 2007 Bonds, it shall be a condition to the conversion that the Issuer shall have executed a continuing disclosure undertaking satisfying the requirements of such Rule and shall cooperate with the Remarketing Agent, if any, the Broker-Dealer, if any, and any Underwriter ( as defined in such Rule) in satisfying the requirements of such Rule. Changes to Modes Other Than to Fixed Rate Mode. The 2007 Bonds ( other than such 2007 Bonds in the Fixed Rate Mode) may be changed from one Mode to another Mode (other than the Fixed Rate Mode) as follows: i) Mode Change Notice; Notice to Owners. No later than a Business Day which is at least 30 days or such shorter time as may be agreed to by the Issuer, the Tender Agent, if any, the Remarketing Agent, if any, the Auction Agent, if any, and the Broker Dealer, if any but in any event not less

37 than the 16th day next preceding the Mode Change Date) the proposed Mode Change Date, the Issuer shall give written notice to the Notice Parties of its intention to effect a change in the Mode from the Mode then prevailing for purposes of this Section, the Current Mode) to another Mode for purposes of this Section, the New Mode) specified in such written notice, and, if the change is to a Term Rate Mode, the length of the initial Interest Period as set by the Issuer. In the case of a change to a Daily Mode, Weekly Mode, Flexible Mode or a Term Rate Mode, such notice to the Notice Parties shall also include a statement as to whether there will be a Liquidity Provider Facility and/ or Credit Enhancement in effect with respect to the 2007 Bonds following such change and the identity of any provider of such Liquidity Facility and/or Credit Enhancement. Notice of the proposed change in Mode shall be given by the Tender Agent to the Owners of the affected 2007 Bonds not less than the 15th day next preceding the Mode Change Date. Such notice shall state: A) the Mode to which the conversion will be made and the Mode Change Date and in the case of a conversion to an ARS Mode, the length of the initial Auction Period and in the case of a conversion to a Term Rate Mode, the length of the initial Interest Period set by the Issuer; B) except in the case of a change from the Daily Mode to the Weekly Mode but only if the Liquidity Facility provides that amounts may be drawn thereunder to pay the Purchase Price of 2007 Bonds in both Modes) or from the Weekly Mode to the Daily Mode but only if the Liquidity Facility provides that amounts may be drawn thereunder to pay the Purchase Price of 2007 Bonds in both Modes) or a change from the ARS Mode, that the 2007 Bonds will be subject to mandatory purchase on the Mode Change Date regardless of whether all of the conditions to the change in the Mode are satisfied) and the Purchase Price of the 2007 Bonds; and C) if the Book Entry System is no longer in effect, information with respect to required delivery of 2007 Bond certificates and payment of Purchase Price. If the conversion is from an ARS Mode, such notice shall also state that such Owner is required to tender such Owners 2007 Bonds for purchase on the Mode Change Date only if all of the conditions to the change in the Mode are satisfied and that, if such conditions are not satisfied, then the 2007 Bonds shall not be subjectto mandatorytender,the Auction Agent will continueto implementthe Auction Procedures on the Auction Dates with respect to the 2007 Bonds which otherwise would have been converted excluding however, the Auction Date falling on the BusinessDay next preceding the failed Mode Change Date, and the interest rate will continue to be the ARS Rate; provided, however, that,notwithstanding Sections 3.03 and 3.08, the interest rate borne by the 2007 Bonds during the Auction Period commencing on such failed Mode Change Date will be the MaximumRate,and the Auction Period will be the seven day Auction Period. In the caseof Bonds being converted to the ARS Mode, the Tender Agent shall not communicatesuch notice by Electronic Means if convertingfrom a Flexible Rate Period or Term Rate Period until it has

38 received a written confirmation from the Remarketing Agent that no Interest Period then in effect for the 2007 Bonds extends beyond the Mode Change Date. ii) Determination of Interest Rates. The New Mode shall commence on the Mode Change Date and the interest rate(s) together, in the case of a change to the Flexible Mode, with the Interest Period( s)) shall be determined by the Remarketing Agent or the Issuer in the case of the Interest Period for the 2007 Bonds converted to the Term Rate Mode) in the manner provided in Sections 2.08, 2.09 and 2.10 hereof, as applicable. In the case of 2007 Bonds being converted to the ARS Mode, the length of the initial Auction Period shall be selected by the Issuer and the ARS Rate for the Auction Period commencing on the Mode Change Date shall be the lowest rate which, in the judgment of the Broker Dealer, is necessary to enable the 2007 Bonds to be sold at a price equal to the principal amount thereof, plus accrued interest, if any, on the Mode Change Date. Such determination shall be conclusive and binding upon the Issuer, the Auction Agent and the Owners of the 2007 Bonds to which such rate will be applicable. Not later than 5:00 p.m., New York City time, on the date of determination of the ARS Rate, the Broker Dealer shall notify the Issuer and the Auction Agent of the ARS Rate by telephone, promptly confirmed in writing. iii) Conditions Precedent: A) The Mode Change Date shall be: 1) in the case of a change from the Flexible Mode, the next Mandatory Purchase Date for the Flexible Rate 2007 Bonds being converted; Weekly Mode, any Business Day; 2) in the case of a change from the Daily or 3) in the case of a change from the Term Rate Mode to another Mode, or from a Term Rate Period to a Term Rate Period of a different duration, the Mode Change Date shall be limited to any Interest Payment Date on which the 2007 Bonds are subject to optional redemption or to the last Interest Payment Date of the current Term Rate Period, as the case may be. Such 2007 Bonds shall be purchased on such Mode Change Date at a Purchase Price equal to 100% of the principal amount thereof, provided that if such Bonds are to be purchased on an Interest Payment Date other than the last Interest Payment Date and would otherwise be subject to optional redemption on such Mode Change Date at a Redemption Price of more than 100% of the principal amount thereof, such Bonds shall be purchased at a Purchase Price equal to such Redemption Price; and

39 4) in the case of a change from the ARS Mode to another Mode, the Mode Change Date shall be the Interest Payment Date following the final scheduled Auction Period. B) If 2007 Bonds to be converted are in the Flexible Mode or the Term Mode, no Interest Period set after delivery by the Issuer to the Remarketing Agent of the notice of the intention to effect a change in Mode shall extend beyond the day preceding the proposed Mode Change Date. C) The following items shall have been delivered to the Paying Agent, the Remarketing Agent, if any, and the Broker Dealer, if any, on or prior to the Mode Change Date: 1) in the case of a change from a Short Term Mode to a Long Term Mode or from a Long Term Mode to a Short Term Mode or to or from the ARS Mode, a Favorable Opinion of Bond Counsel dated the Mode Change Date and addressed to the Notice Parties; 2) if there is to be a Liquidity Facility or an Alternate Liquidity Facility or a Credit Enhancement or an Alternate Credit Enhancement delivered in connection with such change, the items required by Section 5.08(d) hereof; and 3) a Rating Confirmation Notice. D) No 2007 Bonds may be converted to the ARS Rate when the 2007 Bonds are not held by a Depository in book entry form. E) It is a condition to the conversion of 2007 Bonds from an ARS Mode that all 2007 Bonds being converted be remarketed on the Mode Change Date. b) Change to Fixed Rate Mode. At the option of the Issuer, the 2007 Bonds bearing interest at an ARS Rate, a Daily Rate, a Weekly Rate, a Term Rate or a Flexible Rate (in an amount which is an Authorized Denomination for the new Mode) may be changed to the Fixed Rate Mode, as provided in this Section 2.13(d). On any Business Day which is at least 30 days (or such shorter time as may be agreed to by the Issuer and the Remarketing Agent, if any, the Auction Agent, if any, and the Broker-Dealer, if any, but in any event not less than the 16th day next preceding the Mode Change Date) before the proposed Mode Change Date, the Issuer shall give written

40 notice to the Notice Parties stating that the Mode will be changed to the Fixed Rate Mode and setting forth the proposed Mode Change Date. Such notice shall also state whether or not there shall be Credit Enhancement with respect to the 2007 Bonds following such change and, if so, the identity of the Credit Provider. In addition, such notice shall state which, if any, of the 2007 Bonds to be converted shall be converted to Serial 2007 Bonds and, if so, the applicable Serial Maturity Dates and Serial Payments, all as determined pursuant to subsection (v) of this subsection (b). Any such change in Mode shall be made as follows: i) Mode Change Date. The Mode Change Date shall be: A) in the case of a change from the Flexible Mode, the next Mandatory Purchase Date for the Flexible Rate 2007 Bonds being converted; Mode, any Business Day; B) in the case of a change from the Daily or Weekly C) in the case of a change from the Term Rate Mode, the Mode Change Date shall be limited to any Interest Payment Date on which the 2007 Bonds are subject to optional redemption or to the next Mandatory Purchase Date for the Term Rate Bonds, as the case may be. Such 2007 Bonds shall be purchased on such Mode Change Date at a Purchase Price equal to 100% of the principal amount thereof, provided that if such 2007 Bonds would otherwise be subject to optional redemption on such Mode Change Date at a Redemption Price of more than 100% of the principal amount thereof, such Bonds shall be purchased at a Purchase Price equal to such Redemption Price; and D) in the case of a change from the ARS Mode, the Interest Payment Date following the final scheduled Auction Period. ii) Notice to Owners. Not less than the 15th day next preceding the Mode Change Date, the Paying Agent shall communicate by Electronic Means, in the name of the Issuer, a notice of such proposed change to the Owners of the applicable 2007 Bonds and the Liquidity Provider stating that the Mode will be changed to the Fixed Rate Mode and the proposed Mode Change Date. If the conversion is from a Mode other than an ARS Mode, such notice shall also state that such Owner is required to tender such Owners 2007 Bonds for purchaseon such proposed Mode Change Date regardlessof whetherall of the conditions to the change to the Fixed Rate Mode are satisfied.if the

41 conversion is from an ARS Mode, such notice shall also state that such Owner is required to tender such Owners 2007 Bonds for purchase on the Mode Change Date only if all of the conditions to the change to the Fixed Rate Mode are satisfied and that, if such conditions are not satisfied, then the 2007 Bonds shall not be subjectto mandatory tender, the Auction Agent will continueto implement the Auction Procedures on the Auction Dates with respect to the 2007 Bonds which otherwise would have been converted excluding however, the Auction Date falling on the Business Day next preceding the failed Mode Change Date, and the interest rate will continue to be the ARS Rate; provided, however, that, notwithstanding Sections 3.03and3.08, the interest rate borne by the applicable 2007 Bonds during the Auction Period commencing on such failed Mode Change Date will be the MaximumRate,and the Auction Period will be the sevenday Auction Period.iii) General Provisions Applying to Changeto Fixed Rate Mode. The change to the Fixed Rate Mode shall not occur unless the followingitems shall have been delivered to the Issuer, the Credit Provider, if any, the Remarketing Agent,if any, and the Broker Dealer, if any, on or prior to the Mode Change Date:A) a Favorable Opinion of Bond Counsel dated the Mode Change Date and addressedto the Issuer and the RemarketingAgent,if any, and the Broker Dealer, if any; B) if thereis to be Credit Enhancement or Alternate Credit Enhancement delivered in connection with such change, the items required by Section5.08( d)hereof in connectionwith the deliveryof Credit Enhancement or Alternate Credit Enhancement,and C) notice from Moodys, S&P and Fitch, as appropriate, of the rating( s)to be assigned the 2007 Bondson such Mode Change Date.iv) Determination of Interest Rate. The Fixed Rate or rates in the case of Serial 2007 Bonds) for the 2007 Bonds to be converted to the Fixed Rate Mode shall be established bythe Remarketing Agenton the Rate Determination Date applicable thereto pursuant to the provisions of Section 2.10( b).such Rate shall remain in effect until the Maturity Date of the 2007 Bonds. Such determination shall be conclusive and binding upon the Issuer, the Credit Provider, if any, and the Owners of the 2007 Bonds to which such rate will be applicable. Notlater than5:00 p.m., New York City time, on the date of determination of the Fixed Rate, the Remarketing

42 Agent shall notify the Paying Agent, the Credit Provider, if any, and the Issuer of such rate by telephone. v) Serialization and Sinking Fund; Price. In connection with conversion of any 2007 Bonds to the Fixed Rate Mode, such 2007 Bonds shall be remarketed at par, shall mature on the same Maturity Date(s) and be subject to the same mandatory sinking fund redemption, if any, and optional redemption provisions as set forth in this 2007 Bond Resolution for any prior Mode; provided, however, that if the Issuer shall deliver to the Paying Agent a Favorable Opinion of Bond Counsel, the Issuer may elect to 1) have some or all of the 2007 Bonds be Serial 2007 Bonds and some or all of either or both be subject to mandatory sinking fund redemption even if such 2007 Bonds were not Serial 2007 Bonds or subject to mandatory sinking fund redemption prior to such change, 2) change the optional Redemption Dates and/ or premiums set forth in Section 4.03(b) hereof, and/or 3) sell some or all of the 2007 Bonds at a premium or a discount to par. c) Failure to Satisfy Conditions Precedent to a Mode Change. In the event the conditions described above in subsections (a) or (b), as applicable, of this Section have not been satisfied by the applicable Mode Change Date, then the New Mode shall not take effect (although, except in the case of a failed conversion from an ARS Mode, any mandatory purchase shall be made on such date if notice has been sent to the Owners stating that such Bonds would be subject to mandatory purchase on such date). If the failed change in Mode was from the Flexible Mode, the applicable 2007 Bonds shall remain in the Flexible Mode with interest rates and Interest Periods to be established by the Remarketing Agent on the failed Mode Change Date in accordance with Section 2.08 hereof. If the failed change in Mode was from the Daily Mode, the applicable 2007 Bonds shall remain in the Daily Mode, and if the failed change in Mode was from the Weekly Mode, the applicable 2007 Bonds shall remain in the Weekly Mode, in each case with interest rates established in accordance with the applicable provisions of Section 2.09 hereof on and as of the failed Mode Change Date. If the failed change in Mode was from the Term Rate Mode, then the applicable 2007 Bonds shall stay in the Term Rate Mode for an Interest Period ending on the following Interest Payment Date for the 2007 Bonds in the Term Rate Mode and the interest rate shall be established by the Remarketing Agent on the failed Mode Change Date in accordance with Section 2.10(a) hereof. If the failed change in

43 Mode was from the ARS Mode, then the applicable 2007 Bonds shall not be subject to mandatory tender, the Auction Agent will continue to implement the Auction Procedures on the Auction Dates with respect to the 2007 Bonds which otherwise would have been converted excluding however, the Auction Date falling on the Business Day next preceding the failed Mode Change Date, and the interest rate will continue to be the ARS Rate; provided, however, that, notwithstanding Sections 3.03 and 3.08, the interest rate borne by the 2007 Bonds during the Auction Period commencing on such failed Mode Change Date will be the Maximum Rate, and the Auction Period will, as provided by Section 2.13(a)(i) and Section 2.13(b)(ii) above, be the seven-day Auction Period. The Paying Agent will give notice by first class mail or Electronic Means as soon as practicable and in any event not later than the next succeeding Business Day to the 2007 Owners and the Notice Parties that such conversion has not occurred. d) Rescission of Election. Notwithstanding anything herein to the contrary, the Issuer may rescind any election by it to change a Mode as described above prior to the Mode Change Date by giving written notice thereof to the Notice Parties prior to such Mode Change Date; provided that in the case of a scheduled conversion to an ARS Mode such rescission must occur prior to the setting of the ARS Rate by the Broker-Dealer. If the Tender Agent receives notice of such rescission prior to the time the Tender Agent has given notice to the holders of the applicable 2007 Bonds, then such notice of change in Mode shall be of no force and effect. If the Tender Agent receives notice from the Issuer of rescission of a Mode change after the Tender Agent has given notice thereof to the holders of the applicable 2007 Bonds, then if the proposed Mode Change Date would have been a Mandatory Purchase Date, such date shall continue to be a Mandatory Purchase Date, except if the conversion is from the ARS Mode. If the proposed change in Mode was from the Flexible Mode, the applicable 2007 Bonds shall remain in the Flexible Mode with interest rates and Interest Periods to be established by the Remarketing Agent on the proposed Mode Change Date in accordance with Section 2.08 hereof. If the proposed change in Mode was from the Daily Mode, the applicable 2007 Bonds shall remain in the Daily Mode, and if the proposed change in Mode was from the Weekly Mode, the applicable 2007 Bonds shall remain in the Weekly

44 Mode, in each case with interest rates established in accordance with the applicable provisions of Section 2.09 hereof on and as of the proposed Mode Change Date. If the proposed change in Mode was from the Term Rate Mode, then the 2007 Bonds shall stay in the Term Rate Mode for an Interest Period ending on the following Interest Payment Date for the applicable 2007 Bonds in the Term Rate Mode and the interest rate shall be established by the Remarketing Agent on the proposed Mode Change Date in accordance with Section 2.10(a) hereof. If the Remarketing Agent is unable to determine the interest rate on the proposed Mode Change Date, the provisions of Section 2.11 shall apply in effect at the beginning of each such Interest Period. If the proposed change was from the ARS Mode, then an Auction for the applicable 2007 Bonds will be held on the Business Day immediately preceding the proposed Mode Change Date as though no notice of conversion had ever been given. SECTION AMENDING SECTION 4.02 OF 2007 BOND RESOLUTION. Section 4.02 of the 2007 Bond Resolution is hereby amended to read as follows (added language is underlined and deleted language is reflected in strikethrough): SECTION OPTIONAL REDEMPTION OF 2007 BONDS IN THE DAILY MODE OR THE WEEKLY MODE Bonds in the Daily Mode or the Weekly Mode are subject to optional redemption by the Issuer, in whole or in part, in Authorized Denominations on any Business Day, at a Redemption Price equal to the principal amount thereof, plus accrued interest, if any, to the Redemption Date. Provided, however, the right of the Issuer to direct an optional redemption pursuant to Section 4.01, Section 4.02, Section 4.03 or Section 4.04 hereof, is subject to the condition that the Issuer shall provide either Available Moneys of the Issuer or written confirmation of the Credit Provider that the Paying Agent can draw under the Credit Enhancement on the proposed Redemption Date in an aggregate amount sufficient to cover the principal of and interest and premium, if any, due on the Redemption Date. SECTION AMENDMENT TO 2007 BOND RESOLUTION TO ADD NEW SECTION The following new Section 4.08 is hereby added to the 2007 Bond Resolution: SECTION MANDATORY REDEMPTION OF LIQUIDITY PROVIDER BONDS. Liquidity Provider 2007 Bonds shall be subject to mandatory redemption on the dates and in the manner specified in the Reimbursement Agreement. Principal amounts payable on such Liquidity

45 Provider 2007 Bonds on such mandatory redemption date shall constitute Amortization Installments. SECTION AMENDMENT TO SECTION 5.01 OF 2007 BOND RESOLUTION. Section 5.01 of the 2007 Bond Resolution is hereby amended to read as follows ( added language is underlined and deleted language is reflected in strikethrough): SECTION 5.01 OPTIONAL TENDERS OF BONDS IN THE DAILY MODE OR THE WEEKLY MODE. Subject to Section 5.06 hereof, the Beneficial Owners of 2007 Bonds in a Daily Mode or in a Weekly Mode may elect to have their 2007 Bonds ( or portions of those 2007 Bonds in amounts equal to an Authorized Denomination) purchased on any Business Day, at a price equal to the Purchase Price, upon delivery of a Tender Notice to the Tender Agent by the Tender Notice Deadline. Immediately upon receipt of a Tender Notice, the Tender Agent shall notify the Remarketing Agent and provide the Remarketing Agent and the Liquidity Provider with a copy of such Tender Notice. SECTION AMENDMENT TO SECTION 5.02 OF 2007 BOND RESOLUTION. Section 5.02 of the 2007 Bond Resolution is hereby amended to read as follows ( added language is underlined and deleted language is reflected in strikethrough):

46 SECTION MANDATORY PURCHASE ON MANDATORY PURCHASE DATE. The 2007 Bonds shall be subject to mandatory purchase on each Mandatory Purchase Date. The Tender Agent shall communicate notice of such mandatory purchase in writing by first class mail or Electronic Means to the Owners of the 2007 Bonds subject to mandatory purchase and the Liquidity Provider no less than fifteen ( 15) days prior to the Mandatory Purchase Date. No notice shall be given of the Mandatory Purchase Date immediately following the end of each Interest Period for Flexible Rate 2007 Bonds or 2007 Bonds in the Term Rate Mode. Any notice shall state the Mandatory Purchase Date, the Purchase Price, the numbers of the 2007 Bonds to be purchased if less than all of the 2007 Bonds owned by such Owner are to be purchased, and that interest on 2007 Bonds subject to mandatory purchase shall cease to accrue from and after the Mandatory Purchase Date. The failure to communicate such notice with respect to any 2007 Bond shall not affect the validity of the mandatory purchase of any other 2007 Bond with respect to which notice was so communicated. Any notice so communicated will be conclusively presumed to have been given, whether or not actually received by any Owner or Beneficial Owner. In the event of a Mandatory Purchase on a Substitution Date, the Paying Agent shall use the proceeds of a draw under the Liquidity Facility being replaced to pay the Purchase Price of the 2007 Bonds purchased on such date. SECTION AMENDMENT TO SECTION 5.03 OF 2007 BOND RESOLUTION. Section 5.03 of the 2007 Bond Resolution is hereby amended to read as follows ( added language is underlined and deleted language is reflected in strikethrough): SECTION REMARKETING OF 2007 BONDS; NOTICES. a) Remarketing of 2007 Bonds. The Remarketing Agent shall use its best efforts pursuant to the terms and conditions of the Remarketing Agreement to offer for sale: i) all 2007 Bonds or portions thereof as to which notice of tender pursuant to Section 5.01 hereof has been given; and ii) all 2007 Bonds required to be purchased on a Mandatory Purchase Date described in clauses a), b), c), d) or g) of the definition thereof; and iii) any Liquidity Provider 2007 Bonds, A) purchased on a Purchase Date described in clause i) or ii) above, B) with respect to which the Liquidity Provider has provided notice to the Issuer, the Paying Agent and the Remarketing Agent that it is ready to reinstate the Available Amount, C) with

47 respect to which an Alternate Liquidity Facility and Alternate Credit Enhancement is in effect if such 2007 Bonds were secured by a Credit Enhancement prior to becoming Liquidity Provider 2007 Bonds which Credit Enhancement is no longer in effect), or D) which are being marketed as Fixed Rate 2007 Bonds so long as the Liquidity Facility is in effect and subject to reinstatement upon reimbursement of the Liquidity Provider for amounts drawn thereunder. The Remarketing Agent will not knowingly remarket Liquidity Provider 2007 Bonds to the Issuer or any affiliate thereof. In connection with the remarketing of any 2007 Bonds with respect to which notice of redemption or notice of mandatory purchase has been given, the Remarketing Agent will notify each person to which such 2007 Bonds are remarketed of such notice of redemption or notice of mandatory purchase. Anything in this 2007 Bond Resolution to the contrary notwithstanding, if there shall have occurred and be continuing either a Credit Provider Failure or a Liquidity Provider Failure, the Remarketing Agent shall not remarket any 2007 Bonds. All other provisions of this 2007 Bond Resolution, including without limitation, those relating to the setting of interest rates and Interest Periods and mandatory and optional purchases, shall remain in full force and effect during the continuance of such Event of Default. b) Notice of Remarketing; Registration Instructions; New Bonds. On each date on which a 2007 Bond is to be purchased and remarketed: i) the Remarketing Agent shall notify by Electronic Means the Tender Agent by 12:00 noon 11:00 A.M. on the Purchase Date of the principal amount of tendered 2007 Bonds it has remarketed; ii) unless the Remarketing Agent has delivered the notice described in clause i) above, the Remarketing Agent shall notify the Tender Agent by Electronic Means not later than 1:00 P.M. on the Purchase Date of such information as may be necessary to register and deliver 2007 Bonds remarketed with respect thereto; iii) the Remarketing Agent shall cause the proceeds of the remarketing by such Remarketing Agent of tendered 2007 Bonds to be paid to the Tender Agent in immediately available funds not later than 12:15 p.m. 11:15 A.M., New York City time, on the Purchase Date for such 2007 Bonds; iv) if the 2007 Bonds are no longer in the Book Entry System, the Tender Agent shall authenticate new 2007 Bonds for the respective

48 purchasers thereof which shall be available for pick up by the Remarketing Agent not later than 2:30 P.M. on the Purchase Date. c) Draw on Liquidity Facility. On each date on which a 2007 Bond is to be purchased, if the Remarketing Agent shall have given notice to the Tender Agent pursuant to clause ( b)(i) above that it has been unable to remarket any of the 2007 Bonds, the Tender Agent shall, or shall direct the Paying Agent, to draw on the Liquidity Facility ( or if no Liquidity Facility is in effect, request funds from the Issuer) by 12:30 P.M. 11:30 A.M. on the Purchase Date in an amount equal to the Purchase Price of all such Bonds which have not been successfully remarketed, requesting payment by 2:30 P.M. on the Purchase Date and deposit the proceeds of such draw in the Liquidity Facility Purchase Account. If a Liquidity Facility is in effect, the Tender Agent shall also give the Issuer notice by 2:30 P.M. on the Purchase Date if it does not have funds in the Remarketing Proceeds Account and the Liquidity Facility Purchase Account sufficient to pay the Purchase Price of Bonds tendered on such Purchase Date. SECTION AMENDMENTS TO SECTION 5.08(a), 5.08(b) and 5.08(d) OF 2007 BOND RESOLUTION. Sections 5.08(a), 5.08(b) and 5.08(d) of the 2007 Bond Resolution are hereby amended to read as follows (added language is underlined and deleted language is reflected in strikethrough): SECTION CREDIT ENHANCEMENT AND LIQUIDITY FACILITY. a) While a Credit Enhancement consisting of a directpay letter of credit is in effect with respect to any 2007 Bonds, the Tender Agent shall, or shall direct the Paying Agent to, on the Business Day preceding each Interest Payment Date and Principal Payment Date, before 4:00 P.M. on such day, draw on the Credit Enhancement in accordance with the terms thereof so as to receive thereunder with respect to 2007 Bonds covered by the Credit Enhancement by 1:00 P.M. on said Interest Payment Date and Principal Payment Date, an amount, in immediately available funds, equal to the amount of interest and principal payable on such 2007 Bonds on such Interest Payment Date and Principal Payment Date. The proceeds of such draws shall be deposited in the Liquidity Facility Purchase Account in the Purchase Fund pursuant to Section 5.03(c) hereof into an Eligible Account maintained by the Paying Agent and used to pay principal and interest on 2007 Bonds on such date. b) If a Liquidity Facility is in effect, on each Purchase Date, the Tender Agent (if it is the beneficiary of the Liquidity

49 Facility) or the Paying Agent (if it is the beneficiary of the Liquidity Facility), at the direction of the Tender Agent as provided in Section 5.03(c) hereof, by demand given by Electronic Means before 12:30 P.M. 11:30 A.M. shall draw on the Liquidity Facility in accordance with the terms thereof so as to receive thereunder by 2:30 P.M. on such date an amount, in immediately available funds, sufficient, together with the proceeds of the remarketing of the applicable 2007 Bonds on such date, to enable the Tender Agent to pay the Purchase Price in connection therewith. The proceeds of such draw shall be paid to the Tender Agent, who shall deposit said proceeds in the Liquidity Facility Purchase Account pursuant to Section 5.09(b) 5.03(c) hereof. d) The Issuer may provide an Alternate Credit Enhancement or Alternate Liquidity Facility on any Business Day not later than the fifth 5th) Business Day prior to the Expiration Date of the Credit Enhancement or Liquidity Facility then in effect. The Issuer shall give the Notice Parties written notice of the proposed substitution of an Alternate Credit Enhancement or Alternate Liquidity Facility no less than two (2) Business Days prior to the date on which the Paying Agent is required to provide notice of the proposed substitution to the owners of the 2007 Bonds. The Paying Agent shall give notice of such Substitution Date in accordance with Section On or before the Substitution Date there shall be delivered to the Paying Agent or the Tender Agent, as applicable, (i) the Alternate Credit Enhancement or the Alternate Liquidity Facility, as applicable, in substitution for the Credit Enhancement or Liquidity Facility then in effect, ( ii) a Favorable Opinion of Bond Counsel, ( iii) a written Opinion of Counsel for the provider of the Alternate Credit Enhancement or Alternate Liquidity Facility, as applicable, to the effect that such Alternate Credit Enhancement or Alternate Liquidity Facility is a valid, legal and binding obligation of the provider thereof, and (iv) unless waived by such entity, written evidence satisfactory to the Credit Provider or the Liquidity Provider, as applicable, of the provision for purchase from the Liquidity Provider of all Liquidity Provider 2007 Bonds, at a price equal to the principal amount thereof plus accrued and unpaid interest, and payment of all amounts due to the Credit Provider and the Liquidity Provider under the Reimbursement Agreement(s) on or before the effective date of such Alternate Letter of Credit Enhancement or Alternate Liquidity Facility. Upon the satisfaction of the conditions described in the preceding sentence, the Paying Agent shall accept such Alternate Credit Enhancement or Alternate Liquidity Facility on the close of business the Substitution Date and shall surrender the Credit Enhancement or Liquidity Facility then in effect to the provider thereof on the Substitution Date. If any condition to the substitution is not satisfied, the substitution shall not

50 occur but the 2007 Bonds shall remain subject to mandatory purchase on the proposed Substitution Date. SECTION REFERENCES TO 2007 BOND INSURER. The references in the 2007 Bond Resolution to the " 2007 Bond Insurer" shall, upon the Remarketing Date, not constitute a reference to CIFG Assurance North America, Inc., but rather shall mean a reference to the Credit Provider so long as the then applicable Credit Enhancement is in full force and effect. SECTION AMENDMENTS TO SECTION 9.06 OF 2007 BOND RESOLUTION. Section 9.06 of the 2007 Bond Resolution is hereby amended to read as follows ( added language is underlined and deleted language is reflected in strikethrough): SECTION RESERVE ACCOUNT; COVENANTS REGARDING RESERVE FUND INSURANCE POLICY. In order to provide for the funding of the Reserve Fund Requirement following the cancellation of the Reserve Account Credit Facility provided by CIFG Assurance North America, Inc., the Issuer will fund the Reserve Fund Requirement with cash, provided however, the Issuer hereby provides and agrees reserves the right to purchase at a future date a to purchase the Reserve Fund Insurance Policy from the 2007 Bond Insurer as a "Reserve Account Credit Facility" under the Master Resolution and to execute and deliver the a Reserve Fund Insurance Policy Agreement in connection therewith, in the form attached as Exhibit G hereto. The provisions of Sections 3.03(F)5 of the Master Resolution shall be applicable thereto. The Chairman or Executive Director is hereby authorized to execute the Reserve Fund Insurance Policy Agreement in substantially the form attached hereto as Exhibit G, with such additional changes, insertions and omissions therein as shall be approved by the said officers of the Issuer executing the same, such execution to be conclusive evidence of such approval. Section 3.03(A) of the Master Resolution, which reserves the right to the Issuer to provide for separate subaccounts within the Reserve Account for any Series of Bonds. Therefore, the Issuer hereby instructs that the Reserve Fund Insurance Policy Account for the 2007 Bonds be deposited or held as such a separate subaccount. Subject to the provisions of Resolution , to the extent that the Reserve Fund Requirement for the 2007 Bonds is funded in part with a Reserve Fund Insurance Policy issued by an entity other than the 2007 Bond Insurer and in part with this 2007 Surety, in the event of any draw upon the reserve, the Paying Agent must make claims pro rata ( in the proportion which the maximum amount available under each credit facility bears to the total Series 2007 Bonds Reserve Account Requirement) against the 2007 Surety Bond Reserve Fund Insurance Policy and any cash, all other surety bonds and other credit facilities on deposit in the

51 reserve. Any amounts available for replenishment of withdrawals from the reserve shall be applied first to reimburse the 2007 Bond Insurer for payments under the 2007 Surety the provider of a Reserve Fund Insurance Policy on a pro rata basis with any other similar funding instrument held on deposit therein following which the Covered Amount as defined in the 2007 Surety) Reserve Fund Insurance Policy will be reinstated to the extent required thereunder. The Paying Agent shall deliver to the 2007 Bond Insurer the provider of a Reserve Fund Insurance Policy a notice of nonpayment at least five business days prior to the date on which payment under the 2007 Surety Reserve Fund Insurance Policy is required. If the coverage of the Maximum Debt Service Requirement for the Series 2007 Bonds by the Pledged Revenues is less than 150% as of the end of any Fiscal Year, the Series 2007 Bonds Reserve Account Requirement shall be increased to the Maximum Annual Debt Service Requirement of the Series 2007 Bonds, or such lesser amount as may be required to maintain the tax exempt status of the 2007 Bonds under the provision of the Code. In that event, the Issuer shall increase the amount on deposit in the Series 2007 Reserve Subaccount within twelve ( 12) months, consistent with Section 3.03(F)(5) of the Master Resolution. SECTION AMENDMENTS TO SECTION OF 2007 BOND RESOLUTION. Section10.07 of the 2007 Bond Resolution is hereby amended to read as follows ( added language is underlined and deleted language is reflected in strikethrough): SECTION COVENANTS RELATED TO BOND INSURANCE CREDIT PROVIDER. The following provisions shall apply to the 2007 Bonds so long as the 2007 Policy Credit Enhancement is in full force and effect with respect to the 2007 Bonds and or any 2007 Bonds remain Outstanding notwithstanding any other provision herein to the contrary amounts remain unpaid that are owed to the Credit Provider under the Reimbursement Agreement: a) Insurer Commitment Letter. The Issuer hereby authorizes the Chairman or the Executive Director to execute the commitment letter attached hereto as Exhibit F to obtain a 2007 Policy with respect to the 2007 Bonds from the 2007 Bond Insurer. b) Insurance Provisions. The following additional covenants and terms required by the 2007 Bond Insurer are agreed to as follows and shall apply to the 2007 Bonds as long as the 2007 Policy is in full force and effect: ia) Any notice that is required to be given to the Holders of the 2007 Bonds hereunder or under the Master Resolution, to nationally

52 recognized municipal securities information repositories or state information depositories under any continuing disclosure certificate or to the Paying Agent hereunder or under the Master Resolution shall also be provided to the 2007 Bond Insurer Credit Provider. All notices required to be given to the 2007 Bond Insurer Credit Provider shall be in writing and shall be sent by registered or certified mail addressed to CIFG Assurance North America, Inc., 825 Third Avenue, 6th Floor, New York, New York 10022, Attn: General Counsel; all electronic mail sent to the 2007 Bond Insurer shall be addressed both to and to given as provided in the Reimbursement Agreement. ii) Within 210 days of the end of the Issuers Fiscal Year,a copy of the audited financial statements and an annual budget of the Issuer, shall be sentto CIFG AssuranceNorth America, Inc.,825 Third Avenue, 6th Floor, New York, New York 10022,Attn: Surveillance.iii) The 2007 Bond Insurer shall have the right to receive such additional available information from the Issuer as it may reasonably request in writing. iv) The Issuerwill permitthe 2007 Bond Insurer to discussthe affairs, finances and accountsof the Issueror any informationthe 2007 Bond Insurer may reasonably request regarding the security for the 2007 Bonds with appropriate officers of the Issuer, and will grant the 2007 Bond Insurer access to the facilities, books and records of the Issuer on any business day of the Issuer upon reasonable prior written notice by the 2007 Bond Insurer. v) If the 2007 Bond Insurer has a reasonable basis to believethat the financial condition of the Issuer has materially deteriorated or financial irregularities have occurred since the dateof the most recently provided audit the 2007 Bond Insurer shall have the right to directan accountingat the Issuers expense, and the Issuers failure to comply with such direction within thirty 30)days after written direction from the 2007 Bond Insurer shall be deemed an Event of Default under the Master Resolution; provided, however, that if compliance cannot occurwithin such period, then such period shall be extended so long as complianceis begun within such period and diligently pursued, but only if such extension wouldnot materially adversely affectthe interests of any Holder of the 2007 Bonds. cb) In addition to the requirements of Section 6.04 of the Master Resolution in connection with a defeasance of 2007

53 Bonds, the following additional items shall be provided by the Issuer to the 2007 Bond Insurer Credit Provider: i) An opinion of Bond Counsel that such defeasance will not, in and of itself, adversely affect the exclusion from gross income for federal income tax purposes of interest on the 2007 Bonds. ii) such defeasance shall provide that: An escrow deposit agreement utilized in connection with A) Any substitution of securities shall require a verification report of a certified public accountant or firm of certified public accountants and the prior written consent of the 2007 Bond Insurer Credit Provider shall. B) The Issuer will not exercise any optional redemption of defeased 2007 Bonds or any other redemption other than mandatory sinking fund redemptions unless redemption has been expressly 1) the right to make any such reserved in the applicable escrow deposit agreement, and 2) as a condition of any such optional redemption there shall be provided to the 2007 Bond Insurer Credit Provider a verification report of a certified public accountant or firm of certified public accountants as to the sufficiency of escrow receipts without reinvestment to meet the escrow requirements remaining following such redemption. C) The Issuer shall not amend any escrow deposit agreement related to a defeasance of 2007 Bonds in any material fashion or enter into a forward purchase agreement related to a defeasance of 2007 Bonds without the prior written consent of the 2007 Bond Insurer Credit Provider. dc) The 2007 Bond Insurer Credit Provider shall receive, from the Paying Agent and/or Tender Agent, prior written notice of any name change of the Paying Agent and/or Tender Agent for the 2007 Bonds or the resignation of the Paying Agent and/or Tender Agent, and from the Issuer prior written notice of the removal of the Paying Agent and/or Tender Agent. ed) No removal, resignation or termination of the Paying Agent or Tender Agent shall take effect until a successor Paying Agent or Tender Agent shall be appointed. f) With respect to amendments or supplements to the Master Resolution which do not require the consent of the Bondholders, the 2007 Bond Insurer must be given notice by

54 the Issuer of any such amendments or supplements pursuant to Section 6.05 of the Master Resolution. Copies of any amendments or supplements to the Master Resolution which are consented to by the 2007 Bond Insurer shall be provided by the Issuer to the securities rating agencies which at that time are maintaining a rating on the 2007 Bonds. Notwithstanding any other provision of the Master Resolution, in determining whether the rights of Bondholders will be adversely affected by any action taken pursuant to the terms and provisions of the Master Resolution, the Issuer shall consider the effect on the Bondholders as if there were no 2007 Policy. ge) Landesbank Hessen-Thüringen Girozentrale, as a The 2007 Bond Insurer Credit Provider is explicitly recognized as being a third party beneficiary under the Master Resolution and as a "Credit Facility Issuer" defined therein, and may enforce any such right, remedy or claim conferred, given or granted thereunder. hf) Any provision of the Master Resolution expressly recognizing or granting rights in or to the 2007 Bond Insurer Credit Provider may not be amended in any manner which adversely affects the rights of the 2007 Bond Insurer thereunder without the prior written consent of the 2007 Bond Insurer Credit Provider. ig) Wherever the Master Resolution requires the consent of Bondholders, the 2007 Bond Insurer Credit Provider's consent shall also be required. j) Any reorganization or liquidation plan with respect to the Issuer must be reasonably acceptable to the 2007 Bond Insurer. In the event of any reorganization or liquidation, the 2007 Bond Insurer shall have the right to vote on behalf of all Bondholders. k) In the event that on the second Business Day prior to the payment date on the 2007 Bonds, the Paying Agent has not received sufficient moneys to pay all principal of and interest on the 2007 Bonds due on the second following business day, the Paying Agent shall promptly notify the 2007 Bond Insurer or its designee on the same Business Day by telephone or electronic mail, confirmed in writing by registered

55 or certified mail, of the amount of the deficiency. If any deficiency is made up in whole or in part prior to or on the payment date, the Paying Agent shall so notify the 2007 Bond Insurer or its designee. l) In addition, if the Paying Agent has notice that any Bondholder has been required to disgorge payments of principal or interest on the 2007 Bonds pursuant to a final nonappealable order by a court of competent jurisdiction that such payment constitutes an avoidable preference to such Bondholder within the meaning of any applicable bankruptcy laws, then the Paying Agent shall notify the 2007 Bond Insurer or its designee of such fact by telephone or electronic mail, confirmed in writing by registered or certified mail. m) The Paying Agent shall irrevocably be designated, appointed, directed and authorized to act as attorney-in-fact for Holders of the 2007 Bonds as follows: i) If there is a deficiency in amounts required to pay interest on the 2007 Bonds, the Paying Agent shall 1) execute and deliver to the 2007 Bond Insurer, in form satisfactory to the 2007 Bond Insurer, an instrument appointing the 2007 Bond Insurer as agent for such Holders in any legal proceeding related to the payment of and an assignment to the 2007 Bond Insurer of the claims for interest on the 2007 Bonds, 2) receive as designee of the respective Holders and not as Paying Agent) in accordance with the tenor of the 2007 Policy payment from the 2007 Bond Insurer with respect to the claims for interest so assigned, and 3) disburse the same to such respective Holders; and ii) If there is a deficiency in amounts required to pay principal of the 2007 Bonds, the Paying Agent shall 1) execute and deliver to the 2007 Bond Insurer, in form satisfactory to the 2007 Bond Insurer Credit Provider, an instrument appointing the 2007 Bond Insurer as agent for such Holder in any legal proceeding related to the payment of such principal and an assignment to the 2007 Bond Insurer of the 2007 Bond surrendered to the 2007 Bond Insurer but such assignment shall be delivered only if payment from the 2007 Bond Insurer is received), 2) receive as designee of the respective Holders and not as Paying Agent) in accordance with the tenor of the 2007 Policy payment therefor from the 2007 Bond Insurer, and 3) disburse the same to such Holders. iii) Payments with respect to claims for interest on and principal of 2007 Bonds disbursed by the Paying Agent from proceeds of the 2007 Policy shall not be considered to discharge the obligation of the Issuer with

56 respect to such 2007 Bonds, and the 2007 Bond Insurer shall become the Owner of such unpaid 2007 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. iv) Irrespective of whether any such assignment is executed and delivered, the Issuer and the Paying Agent shall agree for the benefit of the 2007 Bond Insurer that: They recognize that to the extent the 2007 Bond Insurer makes payments directly or indirectly e.g., by paying through the Paying Agent), on account of principal of or interest on the 2007 Bonds, the 2007 Bond 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 the 2007 Bond Resolution and the 2007 Bonds; and They will accordingly pay to the 2007 Bond Insurer the amount of such principal and interest, with interest thereon as provided in the Master Resolution and the 2007 Bonds, but only from the sources and in the manner provided in the Master Resolution for the payment of principal of and interest on the 2007 Bonds to Holders, and will otherwise treat the 2007 Bond Insurer as the owner of such rights to the amount of such principal and interest. v) The Issuer agrees to pay or reimburse the 2007 Bond Insurer, but only from the sources provided in the Master Resolution, for the payment of principal of and interest on the 2007 Bonds, any and all charges, fees, costs and expenses which the 2007 Bond Insurer may reasonably pay or incur, including, but not limited to, fees and expenses of attorneys, accountants, consultants and auditors and reasonable costs of investigations, in connection with a) any accounts established to facilitate payments under the 2007 Policy, b) the administration, enforcement, defense or preservation of any rights in respect of the Master Resolution, including defending, monitoring or participating in any litigation or proceeding including any bankruptcy proceeding in respect of the Issuer or any affiliate thereof) relating to the Master Resolution, any party to the Master Resolution or the transaction contemplated by the Master Resolution the Transaction), c) the foreclosure against, sale or other disposition of any collateral securing any obligations under the Master Resolution, or the pursuit of any remedies under the Master Resolution, to the extent such costs and expenses are not recovered from such foreclosure, sale or other disposition, or d) any amendment, waiver or other action with respect to, or related to, the Master Resolution whether or not executed or completed; costs and expenses shall include a reasonable allocation of compensation and overhead attributable to the

57 time of employees of the 2007 Bond Insurer spent in connection with the actions described in clauses b) d) above; and the 2007 Bond Insurer shall reserve the right to charge a reasonable fee as a condition to executing any amendment, waiver or consent proposed in respect of the Master Resolution. vi) The 2007 Bond Insurer shall be entitled to pay any amount payable under the 2007 Policy in respect of Regular Payments as defined in the 2007 Policy) on the 2007 Bonds, including any amount payable upon its election on the Bonds on an accelerated basis, whether or not any notice and certificate shall have been Received as defined in the 2007 Policy) by the 2007 Bond Insurer as provided in the 2007 Policy. viih) The Paying Agent shall maintain adequate records, available for inspection by the 2007 Bond Insurer Credit Provider at any reasonable time and upon reasonable notice, as to amounts available to be drawn under the Reserve Fund Insurance Policy, if any, and amounts owing to the 2007 Bond Insurer provider thereof under the Reserve Fund Insurance Policy Agreement, if any. viii) Notwithstanding the terms of Section 3.03(F)(5) of the Master Resolution, the issuer providing a Reserve Fund Insurance Policy and/ or a Reserve Fund Letter of Credit that secures Additional Parity Bonds shall be either a) an insurer whose municipal bond insurance policies insuring the payment, when due, of the principal of and interest on municipal bond issues results in such issues being rated in the highest rating category by S& P and Moodys or b) a commercial bank,insurance company or other financial institution the bonds payableor guaranteedby which have been assigneda rating in the highest rating category by S&P and Moodys, and if rated by A.M.Best and Company, is rated in their highest rating category. ix)to the extent permitted by law,in addition to any and all rights or reimbursement, subrogationand any other rights pursuant hereto or under law or in equity, the Issuer agrees to pay or reimburse Insurer any and all charges, fees, costs, claims, losses, liabilities including penalties), judgments, demands, damages, and expenses whichthe 2007 Bond Insurer or its officers, directors, shareholders, employees, agents and each Person, if any,who controls the 2007 Bond Insurer within the meaning of either Section15 of the Securities Act of 1933 or Section 20 of the Securities Exchange Act of 1934 may reasonably pay or incur, including, but not limited to, fees and expenses of attorneys, accountants, consultants and auditors and reasonable costs of investigations, of any nature in connection with,in respect ofor relating to the transactions contemplatedby reason of:

58 x) Any omission or action other than of or by the 2007 Bond Insurer) in connection with the offering, issuance, sale, remarketing or delivery of the 2007 Bonds; xii) The negligence, bad faith, willful misconduct, misfeasance, malfeasance or theft committed by any director, officer, employee or agent of the Issuer in connection with any transaction arising from or relating to this 2007 Bond Resolution or any other financing document; xiii) The violation by the Issuer of any law, rule or regulation, or any judgment, order or decree applicable to it; xiii) The breach by the Issuer of any representation, warranty or covenant under this 2007 Bond Resolution or any other financing document or the occurrence, in respect of the Issuer, under this 2007 Bond Resolution or any other financing document of any event of default or any event which, with the giving of notice or lapse of time or both, would constitute any event of default; or xiv) Any untrue statement or alleged untrue statement of a material fact contained in any official statement regarding the Issuer or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such claims arise out of or are based upon any untrue statement or omission in information included in an official statement and furnished by the 2007 Bond Insurer in writing expressly for use therein; n) Deposits. The Issuer hereby certifies as required by the Master Resolution that it is current in all deposits into the various funds and accounts established thereby and all payments theretofore required to have been deposited or made by it under the provisions of the Master Resolution and has complied with the covenants and agreements of the Master Resolution. SECTION ELIGIBLE ACCOUNT. The Eligible Account is hereby established with the Paying Agent as a trust account held for the benefit of the Bondholders. All amounts drawn under the Credit Enhancement to pay the principal of or interest on the 2007 Bonds shall be deposited therein. Amounts in the Eligible Account shall be segregated from all other funds. Amounts in the Eligible Account may only be used to pay the principal of and interest on the 2007 Bonds. Amounts held in the Eligible Account not needed to pay the principal of and interest on the 2007 Bonds shall be promptly paid to the Credit Provider. Amounts held in the Eligible Account shall be held uninvested.

59 ARTICLE III REMARKETING AGENT AND AGREEMENT The Issuer appointed First Southwest Company as the Remarketing Agent pursuant to the terms of the 2007 Bond Resolution, and hereby desires to enter into a new Remarketing Agreement substantially in the form attached hereto as Exhibit " A" between the Issuer and the Remarketing Agent, for the remarketing of the 2007 Bonds during such period the 2007 Bonds are secured by the Alternate Credit Enhancement and the Alternate Liquidity Facility. The form of Remarketing Agreement is hereby approved, and the Chairman or the Executive Director is hereby authorized to execute and deliver the Remarketing Agreement for and on behalf of the Issuer, subject to the changes, insertions, omissions and filling of blanks as the Chairman or the Executive Director shall approve, execution thereof to be conclusive evidence of such approval. The Secretary is hereby authorized to join in the execution of the Remarketing Agreement or to attest to the signature of the Chairman or the Executive Director, and the Chairman or the Executive Director is hereby authorized to deliver the Remarketing Agreement to the other party thereto. The provisions of the 2007 Bond Resolution regarding the Remarketing Agent shall remain in full force and effect unless expressly modified herein, or by supplemental resolution thereto. The fee paid to the Remarketing Agent for its services under the Remarketing Agreement shall be five (5) basis points per annum. ARTICLE IV REMARKETING CIRCULAR The Issuer hereby approves the form of and authorizes the distribution and circulation of a Remarketing Circular by the Remarketing Agent in connection with the remarketing of the 2007 Bonds with the Alternate Credit Enhancement and the Alternate Liquidity Facility substantially in the form attached hereto as Exhibit " B". The use, dissemination and distribution of the Remarketing Circular, and any preliminary Remarketing Circular, in connection with the remarketing of the 2007 Bonds is hereby authorized and approved. The Chairman or the Executive Director is hereby authorized to approve and execute, on behalf of the Issuer, a final Remarketing Circular relating to the remarketing of the 2007 Bonds substantially in the form of the Remarketing Circular, with such changes as the Chairman or the Executive Director may approve, with the advice of Bond Counsel and Disclosure Counsel, such execution and delivery to be conclusive evidence of such approval.

60 ARTICLE V ALTERNATE CREDIT ENHANCEMENT AND ALTERNATE LIQUIDITY FACILITY The Issuer hereby approves the terms and conditions of the Direct Pay Letter of Credit and the Letter of Credit Reimbursement Agreement in the form collectively attached hereto as Exhibit " C". The execution and delivery of the Letter of Credit and the Letter of Credit Reimbursement Agreement for and on behalf of the Issuer is hereby approved, and the Chairman or the Executive Director is hereby authorized to execute and deliver the Reimbursement Agreement for and on behalf of the Issuer, subject to the changes, insertions, omissions and filling of blanks as the Chairman or the Executive Director shall approve, execution thereof to be conclusive evidence of such approval. The Secretary is hereby authorized to join in the execution of the Letter of Credit Reimbursement Agreement or to attest to the signature of the Chairman or the Executive Director, and the Chairman or the Executive Director is hereby authorized to deliver the Letter of Credit Reimbursement Agreement to the other party thereto. ARTICLE VI EXPENSES Expenses incurred in effectuating the delivery of the Alternate Credit Enhancement and the Alternate Liquidity Facility, the cancellation of the 2007 CIFG Insurance Policies and the remarketing of the 2007 Bonds, including, but not limited to: bond counsel fees, rating agency fees, disclosure counsel fees, remarketing agreement and counsel fees, 2007 Bond Insurer fees and expenses, alternate credit facility and alternate liquidity facility provider and counsel fees and financial adviser fees are authorized to be paid by the Issuer in the amounts show in Exhibit "D" hereto.

61 ARTICLE VII ADDITIONAL AUTHORIZATION The Chairman, or in his absence or unavailability, the Vice-Chairman, and the Executive Director and any other Supervisors, officers or employees of the Issuer as may be designated by the Issuer are each hereby designated as agents of the Issuer for carrying out the transactions contemplated by this Resolution and are authorized and empowered, collectively or individually, to take all action and steps and to execute and deliver on behalf of the Issuer any and all documents, notices and instruments, and to do and cause to be done any and all acts and things necessary, advisable or proper for carrying out the transactions contemplated by this Resolution and are not inconsistent with the terms and provisions of this Resolution, the 2007 Bond Resolution or the Master Resolution. Such officers and those so designated are hereby charged with the responsibility for carrying out the transactions contemplated by this Resolution. ARTICLE VIII MISCELLANEOUS SECTION 8.01 SEVERABILITY OF INVALID PROVISIONS. If any one or more of the covenants, agreements or provisions of this Resolution should 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 separate from the remaining covenants, agreements or provisions, and shall in no way affect the validity of any other provisions of the Master Resolution or this Resolution or of the Outstanding Parity Bonds. SECTION 8.02 RESOLUTION EFFECTIVE DATE. This Resolution is adopted and is in the best interests of the Issuer. This Resolution shall take effect immediately upon its passage in the manner provided by law. PASSED AND ADOPTED THIS 2nd DAY OF MAY, BOARD OF SUPERVISORS OF THE TOHOPEKALIGA WATER AUTHORITY ATTEST: By: Bruce R. Van Meter, Chairman By: John E. Moody, Secretary

62 EXHIBIT A FORM OF REMARKETING AGREEMENT

63 EXHIBIT B FORM OF REMARKETING CIRCULAR

64 EXHIBIT C FORM OF LETTER OF CREDIT AND LETTER OF CREDIT REIMBURSEMENT AGREEMENT