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HomeMy WebLinkAboutIssuamce of Water and Sewerage Revenue Bonds Augusta Richmond GA DOCUMENT NAME: r '3 S \J A- N <:E' O-\' WA'T to 1(.1'\ i\l!) S, EwElUl9/r (2 t:: V G N 06 Be>rJ\:>S. DOCUMENT TYPE: R E SO L 0'T ION YEAR: dOt> L\ BOX NUMBER: d L\ FILE NUMBER: ) ll1 q \ NUMBER OF PAGES: C(51 SUPPLEMENTAL BOND RESOLUTION A RESOLUTION TO PROVIDE FOR THE ISSUANCE OF WATER AND SEWERAGE REVENUE BONDS, SERIES 2004, PURSUANT TO AND IN CONFORMITY WITH A BOND RESOLUTION ADOPTED OCTOBER 21, 1996, AS SUPPLEMENTED, TO PROVIDE FUNDS TO FINANCE, IN WHOLE OR IN PART, THE COST OF ADDING TO, EXTENDING, IMPROVING AND EQUIPPING THE WATER AND SEWERAGE SYSTEM OF AUGUSTA, GEORGIA, AND TO PAY EXPENSES NECESSARY TO ACCOMPLISH THE FOREGOING; TO SUPPLEMENT, AMEND AND RESTATE THE PROVISIONS OF A BOND RESOLUTION ADOPTED JUNE 1, 2004; TO RATIFY, REAFFIRM AND ADOPT ALL APPLICABLE TERMS, PROVISIONS, COVENANTS AND CONDITIONS OF THE BOND RESOLUTION; TO PROVIDE FOR THE ADOPTION OF RATES AND THE COLLECTION OF FEES AND CHARGES FOR THE SERVICES, FACILITIES AND COMMODITIES TO BE FURNISHED BY THE WATER AND SEWERAGE SYSTEM; TO PROVIDE FOR THE ISSUANCE UNDER CERTAIN TERMS AND CONDITIONS OF ADDITIONAL PARITY BONDS; TO PROVIDE FOR THE CREATION AND MAINTENANCE OF CERTAIN FUNDS; TO RATIFY AND AUTHORIZE THE PREPARATION, USE AND DISTRIBUTION OF A PRELIMINARY OFFICIAL STATEMENT AND A FINAL OFFICIAL STATEMENT IN CONNECTION WITH THE OFFER AND SALE OF THE SERIES 2004 BONDS; TO AUTHORIZE THE EXECUTION AND DELIVERY OF A BOND PURCHASE AGREEMENT RELATING TO THE SERIES 2004 BONDS; TO PROVIDE FOR THE ANNUAL SUBMISSION OF CERTAIN FINANCIAL INFORMATION AND OPERATING DATA PURSUANT TO RULE 15c2-12 OF THE SECURITIES AND EXCHANGE COMMISSION; AND FOR OTHER PURPOSES: . WHEREAS, under the provisions of Article IX, Section III, Paragraph I1(a) of the Constitution of the State of Georgia and an act of the General Assembly of the State of Georgia (Georgia Laws 1995, p. 3648 et seq., as amended - the "Act"), and pursuant to referenda, as authorized and required by said act, which were held within the City of Augusta (the "City") and Richmond County (the "County"), the City and the County (excluding the area within the City of Hephzibah and the Town of Blythe, Georgia) were consolidated into a consolidated government now known as "Augusta, Georgia" (the "Consolidated Government"); and WHEREAS, the Act was amended by subsequent acts, including Georgia Laws 1997, p, 4024 et seq., which provides: Said county-wide government shall be a new political entity, a body politic and corporate, and a political subdivision of the state to be known as "Augusta, Georgia," at times in this Act called the "consolidated government" or "Augusta-Richmond County," having all the governmental and corporate powers, duties, and functions heretofore held by and vested in the City of Augusta and Richmond County, and also the powers, duties, and functions provided in this charter; and AO 1127325.4 J.J.p If, J1l/q/ ~ WHEREAS, pursuant to the Act, the Consolidated Government now constitutes a county and a municipality under the laws and the Constitution of the State of Georgia, and is a political subdivision of the State of Georgia in the exercise of the respective powers of a municipality and a county; and WHEREAS, pursuant to Article IX, Section II, Paragraph II of the Constitution of the State of Georgia, the Municipal Home Rule Act of 1965 (codified, as amended, at O.C.G.A ~ 36- 35-1 et seq,) and an ordinance adopted by the Augusta-Richmond County Commission-Council of the Consolidated Government on October 1, 1996 (Georgia Laws 1997, p. 4690 et seq.), the Commission-Council amended the designation of its governing body from the "Augusta- Richmond County Commission-Council" to the "Augusta-Richmond County Commission" (the "Commission"); and WHEREAS, pursuant to the Act, the water and sewerage systems of the City and the County are now owned and operated by the Consolidated Government and pursuant to the 1996 Resolution (hereinafter defined) have been combined into one revenue producing undertaking; and WHEREAS, the Consolidated Government acting by and through the Commission, by virtue of the authority of the Constitution of the State of Georgia, the Act and Title 36, Chapter 82, Article 3 of the Official Code of Georgia Annotated, as amended (the "Revenue Bond Law"), is authorized to issue revenue bonds, to fund in part a reasonably required debt service reserve and to acquire additional water and sewerage facilities by the addition thereto of improvements to the Consolidated Government's water and sewerage system, as now existent and as hereafter added to, extended, improved and equipped (the "System"), and to construct such additions, and to operate and maintain the System for its own use, and for the use of the public and to prescribe and revise rates, and to collect fees and charges for the services, facilities and commodities furnished by the System, and in anticipation of the collection of revenues from the System, to issue revenue bonds to fund in part a reasonably required debt service reserve and finance the cost of such additions, extensions and improvements to the System and to pay all expenses necessary to accomplish the foregoing and to issue refunding bonds to refund bonds issued to finance any such undertaking; and WHEREAS, pursuant to a resolution adopted on October 21, 1996, as supplemented on December 3 and 17, 1996 (the "1996 Resolution"), the Consolidated Government issued $62,880,000 aggregate principal amount of Richmond County Water and Sewerage Revenue Refunding and Improvement Bonds, Series 1996A (the "Series 1996 Bonds"), dated December 1, 1996, bearing interest from date at the rates per annum set forth below, all interest payable semiannually on April 1 and October 1 in each year, commencing on April 1, 1997, and maturing on October 1 in the following years and principal amounts: -2- AO 1127325.4 Year Amount Rate Year Amount Rate 1997 $ 265,000 3.60% 2006 $ 1,260,000 6.00 % 1998 350,000 3.80 2007 1,335,000 6.00 1999 365,000 4.00 2008 1,415,000 4.90 2000 375,000 4.10 2009 1,485,000 5.00 2001 395,000 4.20 2010 1,560,000 5.10 2002 410,000 4.30 2012 3,355,000 5.00 2003 1,100,000 4.40 2017 10,000,000 5.125 2004 1,155,000 4.50 2022 13,305,000 5.25 2005 1,205,000 4.60 2028 23,545,000 5.25 and of the Series 1996A Bonds there is now outstanding $58,465,000 aggregate principal amount thereof, being bonds maturing in the years 2005 and thereafter, and the Series 1996A Bonds are secured by a lien on the Pledged Revenues (as defmed in the 1996 Resolution) in accordance with the 1996 Resolution; and WHEREAS, pursuant to the 1996 Resolution, the Consolidated Government also issued $3,760,000 aggregate principal amount of Richmond County Taxable Water and Sewerage Revenue Refunding Bonds, Series 1996B, which have all been paid; and WHEREAS, pursuant to the 1996 Resolution, the Consolidated Government also issued $5,910,000 aggregate principal amount of Richmond County Water and Sewerage Revenue Refunding Bonds, Series 1997 (the "Series 1997 Bonds"), dated January 1, 1997, bearing interest from date at the rates per annum set forth below, all interest payable semiannually on April 1 and October 1 in each year, commencing on April 1, 1997, and maturing on October 1 in the following years and principal amounts: Year Amount Rate Year Amount Rate 1997 $100,000 3.60% 2006 $ 190,000 4.70 % 1998 140,000 3.80 2007 200,000 4.80 1999 145,000 4.00 2008 210,000 4.90 2000 150,000 4.10 2009 220,000 5.00 2001 155,000 4.20 2010 230,000 5.10 2002 160,000 4.30 2012 500,000 5.00 2003 170,000 4.40 2017 1,490,000 5.125 2004 175,000 4.50 2021 1,490,000 5.25 2005 185,000 4.60 and of the Series 1997 Bonds there is now outstanding $4,715,000 aggregate principal amount thereof, being bonds maturing in the years 2005 and thereafter, and the Series 1997 Bonds are secured on a parity with the Series 1996 Bonds as to lien on the Pledged Revenues in accordance with the 1996 Resolution; and -3- AO 1127325.4 WHEREAS, pursuant to a resolution adopted on August 22, 2000, as supplemented on September 15, 2000 (the "2000 Resolution"), the Consolidated Government issued $97,080,000 aggregate principal amount of Augusta, Georgia Water and Sewerage Revenue Bonds, Series 2000 (the "Series 2000 Bonds"), dated September 1, 2000, bearing interest from date at the rates per annum set forth below, all interest payable semiannually on April 1 and October 1 in each year, commencing on April 1, 2000, and maturing on October 1 in the following years and principal amounts: Year Amount Rate Year Amount Rate 2006 $ 355,000 4.40% 2014 $ 2,740,000 5.00% 2007 1,405,000 4.50 2015 2,875,000 5.15 2008 1,775,000 4.55 2016 3,020,000 5.25 2009 2,165,000 4.60 2017 3,180,000 5.25 2010 2,265,000 4.65 2018 3,345,000 5.25 2011 2,375,000 4.80 2022 15,240,000 5.25 2012 2,485,000 4.90 2026 18,705,000 5.25 2013 2,605,000 5.00 2030 32,545,000 5.25 and the entire $97,080,000 aggregate principal amount of the Series 2000 Bonds is now outstanding, secured on a parity with the Series 1996 Bonds and the Series 1997 Bonds (collectively, the "Series 1996/1997 Bonds") as to lien on the Pledged Revenues; and WHEREAS, pursuant to a resolution adopted May 30, 2002, as supplemented June 21, 2002 (the "2002 Resolution"), the Consolidated Government issued $149,400,000 aggregate principal amount of Augusta, Georgia Water and Sewerage Revenue Bonds, Series 2002 (the "Series 2002 Bonds"), dated June 1, 2002, bearing interest from date at the rates per annum set forth below, all interest payable semiannually on April 1 and October 1 in each year, commencing on October 1, 2002, and maturing on October 1 in the following years and principal amounts: Year Amount Rate Year Amount Rate 2002 $ 235,000 2.50 % 2014 $ 3,430,000 5.25 % 2003 905,000 2.50 2015 3,615,000 5.00 2004 925,000 2.50 2016 3,795,000 5.00 2005 950,000 3.00 2017 3,980,000 5.00 2006 980,000 3.00 2018 4,180,000 4.50 2007 1,010,000 3.00 2019 4,370,000 5.375 2008 1,425,000 3.30 2020 4,605,000 5.375 2009 1,705,000 3.50 2021 4,850,000 5.25 2010 2,365,000 3.75 2022 5,105,000 5.25 2011 3,015,000 3.875 2027 29,695,000 5.00 2012 3,135,000 4.00 2032 61,865,000 5.00 2013 3,260,000 5.25 -4- AO 1127325.4 and of the Series 2002 Bonds there is now outstanding $147,335,000 aggregate principal amount thereof, being bonds maturing in the years 2005 and thereafter, and the Series 2002 Bonds are secured on a parity with the Series 1996 Bonds, the Series 1997 Bonds and the Series 2000 Bonds as to lien on the Pledged Revenues in accordance with the 1996 Resolution; and WHEREAS, pursuant to a resolution adopted May 4, 2004 (the "2004 Refunding Resolution"), the Consolidated Government has authorized the issuance of not to exceed $65,000,000 aggregate principal amount of Water and Sewerage Revenue Refunding Bonds, Auction Rate Series 2006 (the "Auction Rate Bonds") for the purpose of providing funds to pay or to be applied toward the cost of refunding by redemption and payment the Richmond County Water and Sewerage Revenue Refunding Bonds, Series 1996A, maturing on and after October 1, 2007, in the aggregate principal amount of $56,000,000 and the Richmond County Water and Sewerage Revenue Refunding Bonds, Series 1997, maturing on and after October. 1, 2007 in the aggregate principal amount of $4,340,000 (collectively, the "Refunded Bonds"), to fund a reasonably required debt service reserve and to pay all expenses necessary to accomplish the foregoing, which Auction Rate Bonds, although authorized, have not yet been issued; and WHEREAS, pursuant to a resolution adopted on June 1, 2004 (the "2004 New Money Resolution"), the Consolidated Government authorized the issuance of its Water and Sewerage Revenue Bonds, Series 2004 (the "Previously Authorized Series 2004 Bonds"), to be issued in an aggregate principal amount not to exceed $160,000,000, to bear interest from date at such rate or rates per annum not exceeding 7.5 percent in any year, all interest payable semiannually on April 1 and October 1 in each year, commencing on October 1, 2004, and the principal to mature on October 1 in such year or years not later than 2038; and WHEREAS, the Series 2004 Bonds have not been issued; and WHEREAS, pursuant to Section 27 of the 2004 New Money Resolution, in order to take advantage of then-favorable long-term interest rates, and in anticipation of the issuance of the Series 2004 Bonds, the Consolidated Government entered into an interest rate swap transaction (the "2004 Rate Lock") with Merrill Lynch Capital Services, Inc. (the "Rate Lock Counterparty") pursuant to which the Consolidated Government hedged against fluctuations in market interest rates prior to the issuance of the Series 2004 Bonds; and WHEREAS, pursuant to a resolution adopted June 15, 2004 (the "2004 Amending Resolution") the Consolidated Government amended certain provisions of the 2004 Refunding Resolution and the 2004 New Money Resolution, to provide for the inclusion of Hedge Payments (as defined therein) in the rates, fees and charges to be assessed and collected for the commodities, services and facilities provided by the System; and WHEREAS, the Consolidated Government has determined that it is necessary and essential to add to, extend, improve and equip the System and has further determined that by the expenditure on its part of approximately $160,000,000, the System can be added to, extended, improved and equipped in accordance with, or substantially in accordance with, the "Engineer's Report, Water and Sewerage Revenue Bonds, Series 2004," dated November 2004 (the "Engineering Report") and prepared by CH2M Hill (the "Consulting Engineers"); and -5- AD 1127325.4 WHEREAS, based on present market conditions and after a thorough and detailed review, the Consolidated Government has determined that the Previously Authorized Series 2004 Bonds should not be issued, and that in lieu thereof the Series 2004 Bonds hereinafter authorized should be issued, maturing in one or more years not later than October 1,2039; and WHEREAS, it has been determined that the most feasible method of raising the funds required to fmance the capital improvements to the System now contemplated as well as in the future, and to provide for payments, if any, to be made by the Consolidated Government in connection with the 2004 Rate Lock is for the Consolidated Government to issue the Series 2004 Bonds as additional parity bonds under the 1996 Resolution, as ratified, reaffirmed, broadened and extended by the 2000 Resolution, the 2002 Resolution, the 2004 Refunding Resolution and the 2004 Amending Resolution (together with the 1996 Resolution, the 2000 Resolution, the 2002 Resolution and the 2004 Refunding Resolution, the "Prior Resolutions") and the 2004 New Money Resolution, as supplemented, amended and restated by this Supplemental Bond Resolution; and WHEREAS, the Consolidated Government has determined that it is advisable, feasible and in the best interests of the Consolidated Government and of the owners of the bonds issued under the Prior Resolutions, as supplemented and amended by the 2004 New Money Resolution and this Supplemental Bond Resolution (collectively, the "2004 Resolution" and, together with the Prior Resolutions, the "Bond Resolution"), to provide in this Supplemental Bond Resolution that payments in lieu of taxes and payments in lieu of franchise fees, to the extent such payments constitute Expenses of Operation and Maintenance (as defined in the 1996 Resolution), shall not be paid from the Revenue Fund created pursuant to the 1996 Resolution but shall be payable solely from the Utility General Fund created pursuant to the 1996 Resolution; and WHEREAS, the Consolidated Government has determined that the foregoing change will increase the Pledged Revenues (as defined in the 1996 Resolution) available to pay debt service on the Bonds (as defined in the 1996 Resolution), and will add to the security for the Bonds; and WHEREAS, it was provided in the 1996 Resolution that supplemental resolutions may be adopted without the consent of the Bondholders (as defined in the 1996 Resolution) for the purpose of, among other things, adding additional security that may be granted to or conferred upon the owners of the Bonds; and WHEREAS, in consideration of the foregoing, the Consolidated Government has determined that the 2004 New Money Resolution should be amended and restated in its entirety, with the explicit exception of Section 27 thereof authorizing the execution, delivery and performance of the 2004 Rate Lock, which Section 27 shall remain in full force and effect after the adoption of this Supplemental Bond Resolution; and WHEREAS, Merrill Lynch & Co. (the "Representative") and A.G. Edwards & Sons, Incorporated (collectively with the Representative, the "Underwriter") have offered to purchase the Series 2004 Bonds in the aggregate principal amount of $160,000,000 pursuant to a Bond Purchase Agreement, dated the date hereof, by and between the Consolidated Government and the Underwriter (the "Purchase Agreement") at a -6- AO 1127325.4 purchase price of $166,174,796.14, which is equal to par less underwriter's discount of $827,784.36 and plus original issue premium of $7,002,580.50, with no accrued interest, and the sale of the Series 2004 Bonds at such prices will provide the Consolidated Government with sufficient funds to finance the cost of the overall undertaking now contemplated by the Consolidated Government as set forth herein; and WHEREAS, the Series 2004 Bonds should now be executed, issued and delivered; and WHEREAS, in order to enhance the Consolidated Government's credit by assuring owners of the Series 2004 Bonds that the principal of and interest on the Series 2004 Bonds will be paid promptly when due, the Consolidated Government will obtain a municipal bond insurance policy for the Series 2004 Bonds from Financial Security Assurance Inc. (the "2004 Bond Insurer"); and WHEREAS, the Consolidated Government has determined to purchase a debt service reserve surety bond from the 2004 Bond Insurer in order to satisfy a portion of the debt service reserve requirement applicable to the Series 2004 Bonds and the Consolidated Government's outstanding water and sewerage revenue bonds; and WHEREAS, it was provided in Section 9 of Article V of the 1996 Resolution, as ratified, reaffirmed, broadened and extended in Section 25 of the 2000 Resolution, Section 25 of the 2002 Resolution and Section 23 of the 2004 Refunding Resolution; that additional revenue bonds or obligations could be issued, from time to time, payable from the Pledged Revenues of the System on a parity with the outstanding Series 1996/1997 Bonds, the Series 2000 Bonds and the Series 2002 Bonds (the "Prior Bonds"), upon meeting certain terms and conditions, as set forth therein, which are as follows: (a) The payments covenanted to be made into the Sinking Fund, as the same may have been enlarged and extended in any proceedings authorizing the issuance of any Additional Bonds, must be currently being made in full amount as required and the Debt Service Account and Reserve Account held within the Sinking Fund must be at their proper respective balances. . (b) Except in the case of Additional Bonds issued for refunding purposes pursuant to Article V, Section 8 of the 1996 Resolution, there shall have been procured and filed with the Consolidated Government (i) a report by Independent Certified Public Accountants to the effect that the Pledged Revenues (excluding Investment Earnings, if any, on construction funds) for a period of 12 consecutive months out of the most recent 18 consecutive months preceding the month of adoption of the proceedings authorizing the issuance of such Additional Bonds must have been equal to at least 1.25 times the maximum Debt Service Requirement for any succeeding Sinking Fund Year on the Prior Bonds and any other issue or issues of Additional Bonds therewith then outstanding and on the proposed Additional Bonds to be issued, or in lieu of the foregoing formula, if a new schedule of rates and charges for the services, facilities and commodities furnished by the System shall have been adopted and shall be in effect and Independent Certified Public Accountants shall certify that had this -7- AO 1127325.4 new rate schedule been in effect. during the period described above, the Pledged Revenues of the System would have equaled the requirements of the above formula; or (ii) (x) a report by Independent Certified Public Accountants to the effect that the historical Pledged Revenues (excluding Investment Earnings, if any, on construction funds) for a period of 12 consecutive months out of the most recent 18 consecutive months preceding the month of adoption of the proceedings authorizing the issuance of the proposed Additional Bonds were equal to at least 1.10 times the historical Debt Service Requirement on all Bonds (other than [Subordinate Bonds]) which were outstanding during such 12-month period, and (y) a report by the Consulting Engineers to the effect that the forecasted Pledged Revenues (excluding Investment Earnings, if any, on construction funds) for each Fiscal Year in the Forecast Period are expected to equal at least 1.25 times the maximum annual Debt Service Requirement on all Bonds (other than [Subordinate Bonds]) which will be outstanding immediately after the issuance of the proposed Additional Bonds, in the then current or any succeeding Sinking Fund Year. The reports by the Independent Certified Public Accountant that are required by this paragraph (b) may contain pro forma adjustments to historical Pledged Revenues equal to 100 percent of the increased annual amount attributable to any revision in the schedule of rates, fees and charges for the services, facilities and commodities furnished by the System, imposed prior to the date of delivery of the proposed Additional Bonds and not fully reflected in the historical Pledged Revenues actually received during such 12-month period, Such pro forma adjustments shall be based upon a report of the Consulting Engineers as to the amount of Operating Revenues which would have been received during such 12-month period had the new rate schedule been in effect throughout such 12-month period. For the purpose of calculating the maximum Debt Service Requirements under this subparagraph (b), the maximum annual Debt Service Requirements shall be reduced by an amount equal to any capitalized interest funded from the proceeds of the Additional Bonds proposed to be issued in each succeeding Sinking Fund Year for the period for which said interest has been capitalized. (c) An Independent Certified Public Accountant shall certify m triplicate to the Consolidated Government that the requirements of subparagraph (a) above are being complied with and that the requirements of subparagraph (b) above have been met. A copy of such certificate shall be furnished to the Designated Representative of the original purchasers of the Prior Bonds, (d) Except when Bonds are being issued solely for the purpose of refunding outstanding Bonds, the Consulting Engineers for the Consolidated Government shall provide the Consolidated Government with a written report recommending the additions, extensions and improvements to be made to the System and stating that same are feasible, designating in reasonable detail the -8- AO 1127325.4 work and installation proposed to be done and the estimated cost of accomplishing the undertaking. The Consulting Engineers shall set forth in said report the forecasted Pledged Revenues to be derived from the System which will be available for debt service payments in each of the next 10 years and shall indicate the projected coverage of such debt service payments in each succeeding Sinking Fund Year. An executed duplicate original of such report of the Consulting Engineers as required by this provision shall be furnished to the Designated Representative of the original purchasers of the Prior Bonds issued hereunder not less. than 10 days before any proceedings are taken to actually issue such Additional Bonds. (e) The Consolidated Government shall pass proper proceedings reciting that all of the above requirements have been met, shall authorize the issuance of the Additional Bonds and shall provide in such proceedings, among other things, the date such Additional Bonds shall bear, the rate or rates of interest and maturity dates, as well as the registration and redemption provisions. Except for Additional Bonds that bear interest at a Variable Rate, the interest on the Additional Bonds of any such issue shall fall due on April 1 and October 1 of each year, and the Additional Bonds shall mature in installments on October 1, but, as to principal, not necessarily in each year or in equal installments. Any such proceeding or proceedings shall require the Consolidated Government to increase the montWy payments then being made into the Sinking Fund to the extent necessary to pay the principal of and the interest on the Prior Bonds and on all such Additional Bonds therewith then outstanding and on the proposed Additional Bonds to be issued as same become due and payable, either at maturity or by proceedings for mandatory redemption, in the then current Sinking Fund Year, and to create upon the issuance of the proposed Additional Bonds to be issued a reserve in the Reserve Account at least equal to the Reserve Requirement on the Prior Bonds and any Additional Bonds therewith then outstanding and on the proposed Additional Bonds to be issued and to maintain said reserve in an amount sufficient for that purpose; provided, however, the Consolidated Government may satisfy funding of the required reserve through the purchase of a Reserve Account Surety Bond meeting the requirements of the Bond Resolution. Any such proceeding or proceedings shall restate and reaffirm, by reference, all of the applicable terms, conditions and provisions of the Bond Resolution. If any Additional Bonds would bear interest at a Variable Rate, the resolution under which such Additional Bonds are issued shall provide a maximum rate of interest per annum which such Additional Bonds may bear. In connection with the issuance of any Additional Bonds under the Bond Resolution, the Consolidated Government may obtain or cause to be obtained one or more Credit Facilities providing for payment of all or a portion of the principal of, premium, if any, or interest due or to become due on such Additional Bonds, providing for the purchase of such Additional Bonds by the Credit Issuer, or providing funds for the purchase of such Additional Bonds by the Consolidated Government. In connection therewith the Consolidated Government shall enter into Credit Facility Agreements with such Credit Issuers providing for, among other things, (i) the -9- AO 1127325.4 payment of fees and expenses to such Credit Issuer for the issuance of such Credit Facility; (ii) the tenns and conditions of such Credit Facility and the Additional Bonds affected thereby; and (iii) the security, if any, to be provided for the issuance of such Credit Facility. The Consolidated Government may in a Credit Facility Agreement agree to directly reimburse such Credit Issuer for amounts paid under the tenns of such Credit Facility, together with interest thereon; provided, however, that no Reimbursement Obligation shall be created, for purposes of the Bond Resolution, until amounts are paid under such Credit Facility. Any such Reimbursement Obligation shall be deemed to be a part of the Additional Bonds to which the Credit Facility relates which gave rise to such Reimbursement Obligation, and references to principal and interest payments with respect to such Additional Bonds shall include principal and interest (except for Additional Interest) due on the Reimbursement Obligation incurred as a result of payment of such Additional Bonds with the Credit Facility. All other amounts payable under the Credit Facility Agreement (including any Additional Interest) shall be fully subordinate to the payment of debt service on Bonds (other than [Subordinate Bonds]). Any such Credit Facility shall be for the benefit of and secure such Additional Bonds or portion thereof as specified in the applicable bond resolution authorizing such Additional Bonds. (f) Such Additional Bonds or obligations and all proceedings relative thereto, and the security therefor, shall be validated as prescribed by law. WHEREAS, as required by the Prior Resolutions, the Consolidated Government has obtained a certificate of an Independent Certified Public Accountant (as defined in the 1996 Resolution) certifying to the Commission that the Consolidated Government has complied and is now complying with the requirements of Paragraph (a) and that the Consolidated Government has met the requirements of Paragraph (b )(ii)(x) as set forth above and a copy of said certificate shall be furnished to the Designated Representative of the original purchasers of the Prior Bonds; and WHEREAS, as required by the Prior Resolutions, the Consolidated Government has obtained the Engineering Report recommending the specific additions, extensions and improvements to be made to the System and that same are feasible, describing in reasonable detail the undertaking and the estimated cost thereof, setting forth the forecasted Pledged Revenues to be derived from the System which will be available for debt service payments on the Prior Bonds and the proposed Additional Bonds hereinafter authorized to be issued in each of the next 10 years and the projected coverage of such debt service payments in each succeeding Sinking Fund Year and that the requirements of Paragraph (b)(ii)(y) as set forth above have been met; and WHEREAS, prior to the actual issuance and delivery of the Series 2004 Bonds, the Consolidated Government will enter into a contract with SunTrust Bank (the "Paying Agent"), pursuant to which the Paying Agent will agree to act as Paying Agent and as Bond Registrar for the Series 2004 Bonds and to perfonn various functions with respect to the Series 2004 Bonds, including, but not limited to, the authentication of the Series 2004 Bonds by the manual signature of a duly authorized officer of the Paying Agent, as Bond Registrar, the registration, transfer, -10- AO 1127325.4 exchange and related mechanical and clerical functions, as well as the preparation, signing and issuance of checks and drafts in payment of the principal of and interest on the Series 2004 Bonds as same become due and payable; and WHEREAS, the Prior Bonds are the only revenue obligations of the Consolidated Government now outstanding having as security for the payment thereof and interest thereon a first or prior lien on the Pledged Revenues of the System and the Consolidated Government has been and is now complying and will continue to comply in all respects with the applicable terms, covenants and provisions of the Prior Resolutions. NOW, THEREFORE, BE IT RESOLVED by the Augusta-Richmond County Commission and it is hereby resolved by the authority of same, that, effective upon the issuance and delivery of the Series 2004 Bonds as authorized by this Supplemental Bond Resolution, Sections 1 through 26 and 28 through 35 of the 2004 New Money Resolution shall be amended and restated by Sections 1 through 42 of this Supplemental Bond Resolution, as hereinafter set forth, Notwithstanding the foregoing, Section 27 of the 2004 New Money Resolution shall remain in full force and effect following the adoption of this Supplemental Bond Resolution, whether or not the Series 2004 Bonds authorized herein shall be issued. BE IT FURTHER RESOLVED by the authority aforesaid, and it is hereby resolved by authority of same, as follows: Section 1. Definitions. Capitalized terms used herein and not defined shall have the meanings set forth in the Prior Resolutions. For the purpose of this Supplemental Bond Resolution the definitions set forth in the Prior Resolutions shall be and are hereby amended and added to, effective as of the date of the issuance and delivery of the Series 2004 Bonds herein authorized to be issued, as follows: "Additional Bonds" shall mean any revenue bonds of the Consolidated Government ranking on a parity with the Prior Bonds which may hereafter be issued pursuant to Article V, Section 9 of the 1996 Resolution, Section 25 of the 2000 Resolution, Section 25 of the 2002 Resolution, Section 23 of the 2004 Refunding Resolution and Section 26 of this Supplemental Bond Resolution, "Beneficial Owner" shall mean, with respect to any bonds issued in Book-Entry Form, the owners of a beneficial interest in such bonds. "Bond Resolution" means collectively the 1996 Resolution, the 2000 Resolution, the 2002 Resolution, the 2004 Refunding Resolution, the 2004 Amending Resolution and the 2004 Resolution, and as same may be supplemented from time to time. "Book-Entry Form" or "Book-Entry System" shall mean, with respect to the Series 2004 Bonds, a form or system, as applicable, under which (i) the ownership of beneficial interests in bonds and bond service charges may be transferred only through book-entry and (ii) physical bonds in fully registered, certificated form are registered only in the name of a ' Securities Depository or its nominee as holder, with physical bond certificates immobilized in the custody of a Securities Depository, -11- AO 1127325.4 "Debt Service Requirement" means the amounts required in each Sinking Fund Year to pay the principal of and interest on the Prior Bonds, the Series 2004 Bonds and any Additional Bonds as same become due and payable; provided, however, with respect to any term obligation which is required to be repaid prior to its stated maturity through the operation of a mandatory sinking fund, the amount of principal coming due in any Sinking Fund Year with respect to such obligation shall be the amount required to be deposited into the sinking fund for the retirement of the principal amount of such obligation rather than the entire principal amount of such debt coming due at the stated maturity. If any Bonds outstanding or proposed to be issued bear interest at a Variable Rate, the interest rate per annum on such Bonds for purposes of calculating the Debt Service Requirement shall be the lesser of (a) the 30-year Revenue Bond Index, (b) the maximum interest rate for such Bonds permitted by the supplemental bond resolution authorizing the issuance thereof or (c) the "cap" rate, if any, established with respect to such bonds in a related Hedge Agreement. With respect to any Bonds secured by a Credit Facility, Debt Service Requirement shall include (a) any commission or commitment fee obligations with respect to such Credit Facility, (b) the outstanding amount of any Reimbursement Obligation owed to the relevant Credit Issuer and the interest thereon, ( c) any Additional Interest owned on Bank Bonds to a Credit Issuer and (d) any remarketing agent fees. With respect to Bonds for which there exists a related Hedge Agreement, Debt Service Requirement shall include the net amounts paid with respect to such Hedge Agreement. "Investment Earnings" means all interest received on and profits derived from investments made with Pledged Revenues or any moneys in the funds and accounts established under Article IV and Article V of the 1996 Resolution, as such accounts may be redesignated under this Supplemental Bond Resolution. "Prior Bonds" shall mean the outstanding Series 1996 Bonds, Series 1997 Bonds, Series 2000 Bonds and Series 2002 Bonds. "Prior Resolutions" means collectively the 1996 Resolution, the 2000 Resolution, the 2002 Resolution, the 2004 Refunding Resolution and the 2004 Amending Resolution. "Reserve Requirement" means the least of (i) the highest Debt Service Requirement in the then current or any succeeding Sinking Fund Year, (ii) 10 percent of the aggregate principal amount of the Prior Bonds, the Series 2004 Bonds and Additional Bonds outstanding, or (iii) 125 percent of the average annual Debt Service Requirement in the current or any succeeding Sinking Fund Year. "Series 2004 Bond Insurance Policy" shall mean the insurance policy issued by the Series 2004 Bond Insurer guaranteeing the scheduled payment of principal of and interest on the Series 2004 Bonds when due. "Series 2004 Bond Insurer" shall mean Financial Security Assurance Inc., a New York stock insurance company, or any successor thereto or assignee thereof. "Series 2004 Bonds" means the Consolidated Government's Water and Sewerage Revenue Bonds, Series 2004, in the aggregate principal amount not to exceed $160,000,000 authorized to be issued pursuant to Section 2 of this Supplemental Bond Resolution. -12- AO 1127325.4 "Series 2004 Reserve Account Surety Bond" shall mean the municipal bond debt service reserve insurance policy issued by the Series 2004 Reserve Account Surety Bond Provider in connection with funding the Reserve Requirement in connection with the issuance of the Series 2004 Bonds. "Series 2004 Reserve Account Surety Bond Provider" shall mean Financial Security Assurance Inc., a New York stock insurance company, or any successor thereto or assignee thereof. "Supplemental Bond Resolution" means this Supplemental Bond Resolution of the Augusta-Richmond County Commission adopted November 23, 2004, supplementing, amending and restating the 2004 New Money Resolution. "2004 New Money Resolution" means the Parity Bond Resolution of the Augusta- Richmond County Commission adopted June 1, 2004, authorizing the issuance of the Previously Authorized Series 2004 Bonds. "2004 Resolution" means the 2004 New Money Resolution, as supplemented, amended and restated by this Supplemental Bond Resolution, ratifying, reaffirming, broadening and extending the Prior Resolutions and authorizing the issuance of the Series 2004 Bonds, as same may be supplemented from time to time. Whenever used in this 2004 Resolution, the singular shall include the plural and the plural shall include the singular, unless the context otherwise indicates. Section 2. Authorization. All the terms, provisions and conditions contained in Section 9 of Article V of the 1996 Resolution, as ratified, reaffirmed, broadened and extended in Section 25 of the 2000 Resolution, Section 25 of the 2002 Resolution and Section 23 of the 2004 Refunding Resolution having been met and complied with, there be and there is hereby authorized to be issued, pursuant to and in conformity with the Prior Resolutions, the Constitution of the State of Georgia, the Revenue Bond Law and the Act, revenue bonds in the aggregate principal amount of $160,000,000 for the purpose of providing funds to fmance, in whole or in part, the cost of adding to, extending, improving and equipping the System, acquiring the necessary property or rights in property therefor, both real and personal, to pay a portion of the interest accruing on the Series 2004 Bonds during the estimated period of construction of additions, extensions and improvements to the System, to pay termination payments, if any, on the 2004 Rate Lock, to fund a reasonably required debt service reserve and to pay all expenses necessary to accomplish the foregoing. The revenue bonds shall be designated "Augusta, Georgia Water and Sewerage Revenue Bonds, Series 2004," shall be dated the date of issuance and delivery thereof, shall be initially issued as book-entry only bonds in fully registered form without coupons, shall be in the denomination of$5,000 or any integral multiple thereof, shall be numbered R-l upward, shall be transferable to subsequent owners as hereinafter provided, shall bear interest from date at the rate or rates per annum set forth below opposite each principal maturity, all interest payable semiannually on April 1 and October 1 in each year, commencing on April 1, 2005, and the principal shall mature on October 1 in the following years and principal amounts: -13- AO 1127325.4 Year Amount Rate 2034 2039 $ 40,025,000 119,975,000 5.25% 5,25 The principal amount of the Series 2004 Bonds shall be payable at maturity, unless redeemed prior thereto as hereinafter provided, upon presentation and surrender thereof at the principal corporate trust office of the Paying Agent in Atlanta, Georgia, and payments of interest on the Series 2004 Bonds shall be made by check or draft payable to the registered owner as shown on the bond registration book kept by the Bond Registrar at the close of business on the fifteenth day of the calendar month next preceding the April 1 and October 1 interest payment dates and such payments of interest shall be mailed to the registered owner at the address shown on the bond registration book. Notwithstanding the foregoing, so long as the Series 2004 Bonds are in Book-Entry Form, principal and interest shall be payable to the Securities Depository or its nominee, all as set forth in Section 7 hereof. Both the principal of and interest on the Series 2004 Bonds shall be payable in lawful money of the United States of America. Section 3. Execution~ Form of Series 2004 Bonds. The Series 2004 Bonds shall be executed on behalf of the Consolidated Government by use of the manual or facsimile signature of the Mayor of the Commission and attested by the manual or facsimile signature of the Clerk of the Commission and the official seal of the Consolidated Government shall be impressed thereon or a facsimile thereof imprinted thereon, and the Series 2004 Bonds shall be authenticated by the manual signature of a duly authorized signatory of the Bond Registrar. The validation certificate to be printed on the Series 2004 Bonds shall be executed by use of the manual or facsimile signature of the Clerk of the Superior Court of Richmond County and the official seal of said Court shall be impressed thereon or a facsimile thereof shall be imprinted thereon. There shall be printed on the Series 2004 Bonds a Statement of Insurance prepared by the Credit Issuer, In case any officer whose signature shall appear on the Series 2004 Bonds shall cease to be such officer before delivery of such Series 2004 Bonds, such signature shall nevertheless be valid and sufficient for all purposes the same as if such officer had remained in office until such delivery. The Series 2004 Bonds, the certificate of authentication and registration, form of assignment and the certificate of validation to be endorsed upon the Series 2004 Bonds shall be in substantially the following form, with such variations, omissions and insertions as are required or permitted by this Supplemental Bond Resolution, to wit: -14- AO 1127325.4 No. R- $ UNITED STATES OF AMERICA STATE OF GEORGIA AUGUSTA, GEORGIA WATER AND SEWERAGE REVENUE BOND SERIES 2004 BOND DATE: INTEREST RATE: MATURITY DATE: CUSIP: FOR VALUE RECEIVED, AUGUST A, GEORGIA (the "Consolidated Government"), a political subdivision of the State of Georgia, hereby promises to pay solely from the special fund provided therefor, as hereinafter set forth, to CEDE & CO., or registered assigns, the principal sum of DOLLARS in lawful money of the United States of America on the maturity date specified above, unless redeemed prior thereto as hereinafter provided, upon presentation and surrender hereof at the principal corporate trust office of SunTrust Bank, Atlanta, Georgia, Paying Agent and Bond Registrar, and to pay to the registered owner hereof, solely from said special fund, interest on said principal amount from the date hereof or from the most recent interest payment date to which interest has been paid, at the rate per annum specified above, semiannually on April I and October 1 in each year (each an "Interest Payment Date"), commencing April 1, 2005, until payment of the principal amount hereof. Payments of interest on this Bond shall be made by check or draft payable to the registered owner as shown on the bond registration book kept by the Bond Registrar at the close of business on the fifteenth day of the calendar month next preceding each Interest Payment Date and such interest payments shall be mailed to the registered owner at the address shown on the bond registration book. This Bond is one of a duly authorized issue in the aggregate principal amount of $160,000,000 (the "Series 2004 Bonds") of like tenor, except as to numbers, denominations, interest rates and dates of maturity and redemption provisions, issued by the Consolidated Government for the purpose of providing funds to finance, in whole or in part, the cost of adding to, extending, improving and equipping the water and sewerage system (the "System"), acquiring the necessary property or rights in property therefor, both real and personal, to pay a portion of the interest accruing on the Series 2004 Bonds during the estimated period of construction of additions, extensions and improvements to the System, to pay termination payments, if any, due under an interest rate hedge agreement, to fund a reasonably required debt service reserve and to pay all expenses necessary to accomplish the foregoing. The Series 2004 Bonds are issued under authority of the Revenue Bond Law of the State of Georgia (Title 36, Chapter 82, Article 3 of the Official Code of Georgia Annotated, as amended), and an act of the General Assembly of the State of Georgia (Georgia Laws 1995, p. 3648 et seq., as amended), and were duly authorized by the Augusta-Richmond County Commission (the "Commission") by a resolution adopted on October 21, 1996, as supplemented on December 3 and 17, 1996 (the "1996 Resolution"), a resolution adopted on August 22, 2000, as supplemented September 15, 2000 (the "2000 Resolution"), a resolution adopted on May 30, 2002, as supplemented June 21,2002 (the "2002 -15- AO 1127325.4 Resolution"), a resolution adopted on May 4, 2004 (the "2004 Refunding Resolution"), a resolution adopted on June 15,2004 (the "2004 Amending Resolution") and a resolution adopted June 1, 2004, as supplemented, amended and restated on November 23, 2004 (the "2004 Resolution" and together with the 1996 Resolution, the 2000 Resolution, the 2002 Resolution, the 2004 Refunding Resolution and the 2004 Amending Resolution, the "Bond Resolution"). The Series 2004 Bonds rank on a parity as to lien on the Pledged Revenues (as hereinafter defmed) of the System with the Consolidated Government's outstanding Water and Sewerage Revenue Refunding and Improvement Bonds, Series 1996A, Taxable Water and Sewerage Revenue Refunding Bonds, Series 1996B, Water and Sewerage Revenue Refunding Bonds, Series 1997 , Water and Sewerage Revenue Bonds, Series 2000 and Water and Sewerage Revenue Bonds, Series 2002 (collectively, the "Prior Bonds"). In addition to the Prior Bonds and the Series 2004 Bonds (collectively, the "Bonds"), the Consolidated Government may issue, under certain terms and conditions as provided in the Bond Resolution, additional revenue bonds, and if issued, such bonds will rank on a parity as to lien on the Pledged Revenues of the System with the Bonds. Reference to the Bond Resolution is hereby made for a complete description of the funds charged with, and pledged to, the payment of the principal of and the interest on the Bonds or any other issue of bonds issued on a parity therewith, the nature and extent of the security, a statement of rights, duties and obligations of the Consolidated Government, the rights of the owners of the Series 2004 Bonds and the terms and conditions under which additional bonds may be issued, to all the provisions of which the owner hereof, by the acceptance of this Bond, assents. The person in whose name this Bond is registered on the registration books kept by the Bond Registrar shall be deemed to be the owner of this Bond for all purposes. The Series 2004 Bonds are being issued by means of a book-entry system, with actual Series 2004 Bonds immobilized at The Depository Trust Company, New York, New York (the "Securities Depository"), or its successor as Securities Depository, evidencing ownership of the Series 2004 Bonds in principal amounts of $5,000 or integral multiples thereof, and with transfers of beneficial ownership effected on the records of the Securities Depository and its participants pursuant to the rules and procedures established by the Securities Depository. Actual Series 2004 Bonds are not available for distribution to the owners of beneficial interests in the Series 2004 Bonds registered in book-entry form (the "Beneficial Owners"), except under the limited circumstances set forth in the 2004 Resolution. The principal, redemption premium (if any) and interest on the Series 2004 Bonds are payable by the Paying Agent to Cede & Co., as nominee of the Securities Depository. Transfers of principal, redemption premium (if any) and interest payments to participants of the Securities Depository is the responsibility of the Securities Depository; transfers of principal, redemption premium (if any) and interest to Beneficial Owners of the Series 2004 Bonds by participants of the Securities Depository will be the responsibility of such participants and other nominees of Beneficial Owners. Neither the Consolidated Government nor the Paying Agent is responsible or liable for maintaining, supervising or reviewing the records maintained by the Securities Depository, its participants or persons acting through such participants. If the Series 2004 Bonds are no longer registered to a Securities Depository or its nominee, this Bond may be registered as transferred only upon the registration books kept for that purpose at the principal corporate trust office of the Bond Registrar by the registered owner hereof in person, or by his or her attorney duly authorized in writing, upon presentation and surrender to the Bond Registrar of this Bond duly endorsed for registration of transfer or accompanied by an assignment duly executed by the registered owner -16- AO 1127325.4 or his or her attorney duly authorized in writing, and thereupon a new registered bond certificate, in the same aggregate principal amount and of the same maturity shall be issued to the transferee in exchange therefor. In addition, if the Series 2004 Bonds are no longer registered to a Securities Depository, this Bond may be exchanged by the registered owner hereof or his or her duly authorized attorney upon presentation at the principal corporate trust office of the Bond Registrar for an equal aggregate principal amount of Series 2004 Bonds of the same maturity and in any authorized denominations in the manner, subject to the conditions and upon payment of charges, if any, provided in the Bond Resolution. This Bond is transferable only upon the bond registration book kept for that purpose at the principal corporate trust office of the Bond Registrar by the registered owner hereof in person, or by attorney duly authorized in writing, upon the surrender and presentation to the Bond Registrar of this Bond duly endorsed for transfer or accompanied by an assignment duly executed by the registered owner or attorney duly authorized in writing, and thereupon a new registered bond, in the same aggregate principal amount and of the same maturity shall be issued to the transferee in exchange therefor. The Series 2004 Bonds are issuable in the form of registered bonds in the denomination of $5,000 or any integral multiple thereof and are exchangeable at the principal corporate trust office of the Bond Registrar in the manner, subject to the conditions and upon payment of charges, if any, provided in the Bond Resolution. The Bonds and such revenue bonds of the Consolidated Government as may in the future be issued on a parity therewith, are equally and ratably secured by a pledge of and a lien on the "Pledged Revenues," which are defined in the Bond Resolution to include net operating revenues of the System (gross operating revenues of the System after provision for payment of all reasonable expenses of operation and maintenance) and earnings on investments made with moneys and securities from time to time on deposit in the funds and accounts established in the Bond Resolution. The Bond Resolution provide, among other things, for prescribing and revising rates and collecting fees and charges for the services, facilities and commodities furnished by the System, as now existent and as hereinafter added to, extended, improved and equipped to the extent necessary to produce revenues sufficient (i) to pay the reasonable and necessary costs of operating and maintaining the System, including any contractual obligations incurred pertaining to the operation of the System, (ii) to produce Pledged Revenues (excluding earnings on investments made with moneys and securities from time to time on deposit in the construction funds) in each Fiscal Year (as defined in the 1996 Resolution) equal to at least 110 percent of the sum of (x) the amount required to discharge the payment of the Bonds and any bonds issued on a parity therewith then outstanding as the same become due and payable and (y) the scheduled payments of net interest amounts paid or payable to certain "Hedge Providers" (as defined in the Bond Resolution), (iii) to pay into the special fund designated "Augusta, Georgia Water and Sewerage System Sinking Fund" the amounts required to pay the principal of and the interest on the Bonds and any other bonds hereafter issued on a parity therewith as the same become due payable, either at maturity or by proceedings for mandatory redemption, and to create and maintain a reserve therein for that purpose, and (iv) to create and maintain a reserve for extensions and improvements to the System. -17- AO 1127325.4 This Bond shall not be deemed to constitute a debt of the State of Georgia or the Consolidated Government nor a pledge of the faith and credit of said State or Consolidated Government, nor shall the State or Consolidated Government be subject to any pecuniary liability hereon. This Bond shall not be payable from, nor be a charge upon, any funds other than the Pledged Revenues, and is payable solely from the special fund provided therefor from the Pledged Revenues, including all future additions thereto and any other moneys deposited therein. No owner of this Bond shall ever have the right to enforce payment hereof against any other property of the State of Georgia or the Consolidated Government, nor shall this Bond constitute a charge, lien or encumbrance, legal or equitable, upon any other property of the Consolidated Government other than the Pledged Revenues pledged to the payment hereof. The issuance of this Bond shall not directly, indirectly or contingently obligate the State or the Consolidated Government to levy or to pledge any form of taxation whatever therefor or to make any appropriation for its payment. The Series 2004 Bonds may be redeemed prior to their respective maturities, either in whole at any time or in part on any Interest Payment Date not earlier than October 1,2014 from any moneys available for such purpose as provided in the 2004 Resolution by payment of the principal amount thereof and accrued interest thereon to date of redemption, with no premium. In addition, the Series 2004 Bonds maturing October 1, 2034 are subject to mandatory redemption prior to maturity in accordance with the provisions of the 2004 Resolution, in part, by lot in such manner as may be designated by the Bond Registrar at par plus accrued interest to the redemption date, in the following principal amounts on October 1 in the following year: Year Amount 2033 $19,500,000 $20,525,000 principal amount of Series 2004 Bonds maturing October 1, 2034 shall be paid at maturity. In addition, the Series 2004 Bonds maturing October 1, 2039 are subject to mandatory redemption prior to maturity in accordance with the provisions of the 2004 Resolution, in part, by lot in such manner as may be designated by the Bond Registrar at par plus accrued interest to the redemption date, in the following principal amounts on October 1 in the following years: Year Amount 2035 $21,605,000 2036 22,740,000 2037 23,930,000 2038 25,190,000 $26,510,000 principal amount of Series 2004 Bonds maturing October 1, 2039 shall be paid at maturity. -18- AO 1127325.4 Notice designating the Bonds (or the portion of the principal amount of the Series 2004 Bonds in multiples of $5,000) to be acquired by redemption, as aforesaid, shall be mailed, postage prepaid, not less than 30 days nor more than 60 days prior to the redemption date to all registered owners of Series 2004 Bonds to be redeemed in whole or in part at the addresses which appear in the bond registration book, but failure so to mail any such notice shall not affect the validity of the proceedings for such redemption or cause the interest to accrue on the principal amount of the Series 2004 Bonds so designated for redemption after the redemption date. To the extent and in the manner permitted by the Bond Resolution, modifications, alterations, amendments, additions and recisions of the provisions of the Bond Resolution, or of any resolution supplemental thereto or of the Series 2004 Bonds, may be made by the Consolidated Government with the consent of the owners of at least 65 percent in aggregate principal amount of the Series 2004 Bonds then outstanding, including any parity obligations therewith then outstanding, and without the necessity for notation hereon of reference thereto. This Bond is issued with the intent that the laws of the State of Georgia shall govern its construction. In case of default, the owner of this Bond shall be entitled to the remedies provided in the Bond Resolution authorizing its issuance and in said Revenue Bond Law and any amendments thereto. It is hereby recited and certified that all acts, conditions and things required to be done precedent to and in the issuance of this Bond have been done, have happened and have been performed in due and legal form as required by law, and that provision has been made for the allocation from the anticipated revenues of the System, as now existent and as hereafter added to, extended, improved and equipped, of amounts sufficient to pay the principal of and the interest on the Series 2004 Bonds as the same mature, or are acquired by mandatory redemption, and to create and maintain a reserve for that purpose, and that said revenues are irrevocably allocated and pledged to the payment of the Series 2004 Bonds and the interest thereon. This Bond shall not be valid or become obligatory for any purpose or be entitled to any security or benefit under the Bond Resolution until this Bond shall have been authenticated and registered upon the bond registration book kept for that purpose by the Bond Registrar, which authentication and registration shall be evidenced by the execution by the manual signature of a duly authorized signatory of the Bond Registrar of the certificate hereon. -19- AD 1127325.4 IN WITNESS WHEREOF, Augusta, Georgia has caused this Bond to be executed by use of the [manual][ facsimile] signature of the Mayor of the Commission of the Consolidated Government and [its official seal to be impressed hereon] [a facsimile of its official seal to be imprinted hereon] and attested by use of the [manual][facsimile] signature of the Clerk of the Commission of the Consolidated Government, this December _,2004. . AUGUSTA, GEORGIA (S E A L) By: Mayor Attest: Clerk of Commission -20- AD 1127325.4 Date of Authentication and Registration: CERTIFICATE OF AUTHENTICATION AND REGISTRATION This Bond is one of the Series 2004 Bonds described in the Supplemental Bond Resolution adopted November 23,2004 SUNTRUST BANK, as Bond Registrar By: Authorized Signatory ********** VALIDATION CERTIFICATE STATE OF GEORGIA ) ) COUNTY OF RICHMOND) The undersigned Clerk of the Superior Court of Richmond County, State of Georgia, HEREBY CERTIFIES that this Bond was validated and confirmed by judgment of the Superior Court of Richmond County, Georgia, on December _,2004 and that no intervention or objection was filed in the proceedings validating same and that no appeal from said judgment of validation has been taken. WITNESS my [facsimile] signature and seal of the Superior Court of Richmond County, Georgia. (S E A L) Clerk, Superior Court Richmond County, Georgia ********** -21- AO 1127325.4 ASSIGNMENT FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto [please print or typewrite nJlIIle and address including postal zip code of assignee,] [please insert Social Security or Tax Identification Number.] the within bond and all rights. thereunder, hereby constituting and appointing attorney to transfer this Bond on the bond registration book kept for such purpose by the Bond Registrar, with full power of substitution in the premises. DATED (Signature Guaranteed) Registered Owner Notice: Signature(s) must be guaranteed by an eligible guarantor institution (such as banks, stockbrokers, savings and loan associations and credit unions) with membership in an approved Signature Guarantee Medallion Program pursuant to S.E.C. Rule 17Ad-15. Notice: The signature(s) on this assignment must correspond with the name as it appears on the face of the within bond in every particular without alterations, enlargement or any change whatsoever. ********** STATEMENT OF INSURANCE ********** -22- AD 1127325.4 Section 4. Required Authentication: Proof of Ownership. Only those Series 2004 Bonds which shall have endorsed thereon a certificate of authentication and registration substantially in the form hereinbefore set forth, duly executed by the manual signature of an authorized signatory of the Bond Registrar shall be entitled to any benefit or security under this Supplemental Bond Resolution and such certificate upon any of the Series 2004 Bonds when duly executed shall be conclusive evidence that such Series 2004 Bond has been duly authenticated, registered and delivered. It shall not be necessary that the same signatory of the Bond Registrar sign the certificate of authentication and registration on all of the Series 2004 Bonds that may be issued hereunder at anyone time. The person in whose name any Series 2004 Bond shall be registered shall be deemed and regarded as the absolute owner thereof for all purposes and the payment of the principal amount, interest and premium, if any, shall be made only to or upon the order of the registered owner thereof. All such payments shall be valid and effectual to satisfy and discharge the liability upon such Series 2004 Bond, including redemption premium, if any, and the interest thereon to the extent of the sums so paid. Section 5. Bond Reltistrar: Transfer and Exchane:e. The Bond Registrar shall keep the bond registration book for the registration of the Series 2004 Bonds and for the registration of transfers of the Series 2004 Bonds as herein provided. The transfer of any Series 2004 Bond shall be registered upon the bond registration book upon the surrender and presentation of the Series 2004 Bond to the Bond Registrar duly endorsed for transfer or accompanied by an assignment duly executed by the registered owner or attorney authorized in writing in such form as shall be satisfactory to the Bond Registrar. Upon any such registration of transfer, the Bond Registrar shall authenticate and deliver in exchange for such Series 2004 Bond or Series 2004 Bonds so surrendered, a new Series 2004 Bond or Series 2004 Bonds registered in the name of the transferee, of the same series and maturity, in any denomination or denominations authorized by this Supplemental Bond Resolution, and in an aggregate principal amount equal to the aggregate principal amount of the Series 2004 Bonds so surrendered. Any Series 2004 Bond, upon presentation and surrender thereof to the Bond Registrar, together with an assignment duly executed by the registered owner or duly authorized attorney, in such form as may be satisfactory to the Bond Registrar, may be exchanged, at the option of the registered owner, for an aggregate principal amount of Series 2004 Bonds of the same series and maturity equal to the principal amount of the Series 2004 Bond so surrendered and of any authorized denomination or denominations. The Bond Registrar may make a charge for every exchange or registration of transfer of the Series 2004 Bonds sufficient to reimburse it for any tax or other governmental charge required to be paid with respect to such exchange or registration of transfer, but no other charge shall be made to the owner for the privilege of transferring or exchanging the Series 2004 Bonds under this Supplemental Bond Resolution. Section 6. Lost. Destroved. Mutilated Bonds. If any Series 2004 Bond shall become mutilated, the Bond Registrar in its discretion and at the expense of the owner of such Series 2004 Bond shall authenticate and deliver a new Series 2004 Bond of like tenor and series i registered in the name of the owner in exchange and substitution for such mutilated Series 2004 Bond. If any Series 2004 Bond shall become lost, destroyed or wrongfully taken, evidence of such loss, destruction or wrongful taking within a reasonable time thereafter may be submitted to the Consolidated Government and if such evidence shall be satisfactory and indemnity of a character and in an amount satisfactory shall be given, then the Consolidated Government at the expense of the owner shall cause a new Series 2004 Bond of like tenor and series registered in -23- AO 1127325.4 the name of the owner to be authenticated by the Bond Registrar and delivered to the registered owner. Section 7. Global Form; Securities Depository; Ownership of Series 2004 Bonds. (a) Upon the initial issuance, the ownership of each Series 2004 Bond shall be registered in the name of the Securities Depository or the Securities Depository Nominee, and ownership thereof shall be maintained in Book-Entry Form by the Securities Depository for the account of the Agent Members thereof. Initially, each maturity of the Series 2004 Bonds shall be registered in the name of Cede & Co., as the nominee of The Depository Trust Company. Beneficial Owners will not receive Series 2004 Bonds from the Bond Registrar evidencing their ownership interests. Except as provided in subsection (c) of this Section, the Series 2004 Bonds may be transferred, in whole but not in part, only to the Securities Depository or the Securities Depository Nominee, or to a successor Securities Depository selected or approved by the Consolidated Government or to a nominee of such successor Securities Depository, (b) With respect to Series 2004 Bonds registered in the name of the Securities Depository or the Securities Depository Nominee, neither the Consolidated Government, the Bond Registrar nor the Paying Agent shall have any responsibility or obligation to any Agent Member or Beneficial Owner. Without limiting the foregoing, neither the Consolidated Government, the Bond Registrar nor the Paying Agent shall have any responsibility or obligation with respect to: (i) the accuracy of the records of the Securities Depository, the Securities Depository Nominee or any Agent Member with respect to any Beneficial Ownership interest in the Series 2004 Bonds; (ii) the delivery to any Agent Member, any Beneficial Owner or any other person, other than the Securities Depository or the Securities Depository Nominee, of any notice with respect to the Series 2004 Bonds; or (iii) the payment to any Agent Member, any Beneficial Owner or any other person, other than the Securities Depository or the Securities Depository Nominee, of any amount with respect to the principal, premium, if any, or interest on the Series 2004 Bonds. So long as any Series 2004 Bonds are registered in Book-Entry Form, the Consolidated Government, the Bond Registrar and the Paying Agent may treat the Securities Depository as, and deem the Securities Depository to be, the absolute owner of such Series 2004 Bonds for all purposes whatsoever, including without limitation: (i) the payment of principal, premium, if any, and interest on such series of Series 2004 Bonds; (ii) giving notices of redemption and other matters with respect to such Series 2004 Bonds; (iii) registering transfers with respect to such Series 2004 Bonds; -24- AO 1127325.4 (iv) the selection of Series 2004 Bonds for redemption; and (v) voting and obtaining consents under the Bond Resolution. So long as any Series 2004 Bonds are registered in Book-Entry Form, the Paying Agent shall pay all principal of, premium, if any, and interest on the Series 2004 Bonds only to the Securities Depository or the Securities Depository Nominee as shown in the Bond Register, and all such payments shall be valid and effective to fully discharge the Consolidated Government's obligations with respect to payment of principal of, premium, if any, and interest on the Series 2004 Bonds to the extent so paid. (c) If at any time (i) the Consolidated Government determines that the Securities Depository is incapable of discharging its responsibilities described herein, (ii) the Securities Depository notifies the Consolidated Government or the Paying Agent that it is unwilling or unable to continue as Securities Depository with respect to the Series 2004 Bonds, or (iii) the Securities Depository shall no longer be registered or in good standing under the Securities Exchange Act of 1934, as amended, or other applicable statute or regulation and a successor Securities Depository is not appointed by the Consolidated Government within 90 days after the Consolidated Government receives notice or becomes aware of such condition, as the case may be, then this Section shall no longer be applicable and the Consolidated Government shall execute and the Bond Registrar shall authenticate and deliver Series 2004 Bond certificates representing the Series 2004 Bonds to the bondholders. Series 2004 Bonds issued pursuant to this subsection (c) shall be registered in such names and authorized denominations as the . Securities Depository, pursuant to instructions from the Agent Member or otherwise, shall instruct the Bond Registrar. Upon exchange, the Bond Registrar shall authenticate and deliver such Series 2004 Bond certificates representing the Series 2004 Bonds to the persons in whose names such Series 2004 Bonds are so registered on the Business Day immediately preceding the date of such exchange. Section 8. Optional Redemption of Series 2004 Bonds. The Series 2004 Bonds may be redeemed prior to their respective maturities at the option of the Consolidated Government either in whole at any time or in part on any Interest Payment Date, at par without a premium, in any year not earlier than October 1, 2014 from any moneys available for such purpose and deposited with the Paying Agent on or before the date fixed for redemption by payment of the principal amount thereof and accrued interest thereon to date of redemption. Section 9. Mandatory Redemption of Series 2004 Bonds. The Series 2004 Bonds maturing October 1, 2034 are subject to mandatory redemption prior to maturity in part, by lot in . such manner as may be designated by the Bond Registrar at par plus accrued interest to the redemption date, in the following principal amounts on October 1 in the following year: Year Amount 2033 $19,500,000 $20,525,000 principal amount of Series 2004 Bonds maturing October 1, 2034 shall be paid at maturity. -25- AO 1127325.4 The Series 2004 Bonds maturing October 1, 2039 are subject to mandatory redemption prior to maturity in part, by lot in such manner as may be designated by the Bond Registrar at par plus accrued interest to the redemption date, in the following principal amounts on October 1 in the following years: Year Amount 2035 $21,605,000 2036 22,740,000 2037 23,930,000 2038 25,190,000 $26,510,000 principal amount of Series 2004 Bonds maturing October 1, 2039 shall be paid at maturity. Section 10. Procedure for and Notice of Redemption. The Consolidated Government shall select the maturities of Series 2004 Bonds to be optionally redeemed in part. If less than all of the Series 2004 Bonds of a single maturity are to be redeemed, the Bond Registrar shall treat any Series 2004 Bond of such maturity outstanding in a denomination of greater than $5,000 as two or more separate Series 2004 Bonds in the denomination of $5,000 each and shall assign separate numbers to each for the purpose of determining the Series 2004 Bonds or the principal amount of such Series 2004 Bonds in a denomination greater than $5,000 to be redeemed by lot. With respect to any Series 2004 Bond called for partial redemption, the registered owner thereof shall surrender such Series 2004 Bond to the Bond Registrar in exchange for one or more Series 2004 Bonds in any authorized denomination in the aggregate principal amount equal to the unredeemed principal amount of such Series 2004 Bond so surrendered, The Bond Registrar shall furnish the Consolidated Government on or before the 45th day next preceding each mandatory redemption date (or optional redemption date if such option is exercised) with its certificate setting forth the Series 2004 Bonds that have been selected for mandatory redemption (or optional redemption) either in whole or in part on such date. Not less than 30 days nor more than 60 days before any date upon which any such optional redemption or mandatory redemption is to be made a notice of such redemption signed by a duly authorized signatory of the Bond Registrar designating the Series 2004 Bonds to be redeemed (in whole or in part) shall be filed at the place at which the principal of and interest on the Series 2004 Bonds shall be payable and shall be mailed, postage prepaid, to all registered owners of Series 2004 Bonds to be redeemed (in whole or in part) at addresses which appear upon the bond registration book. It is expressly provided, however, that the failure so to mail any such notice of the optional redemption or mandatory redemption of the Series 2004 Bonds shall not affect the validity of the proceedings for such redemption or cause the interest to continue to accrue on the principal amount of such Series 2004 Bonds so designated for redemption after the redemption date. -26- AO 1127325.4 However, it is expressly understood and agreed that should the Consolidated Government hereafter elect to issue any Additional Bonds, as herein authorized, it shall have the right to exercise any optional redemption provision to redeem the Bonds of any such future issue or issues before it redeems the Series 2004 Bonds, or it may redeem the Series 2004 Bonds before it redeems the Bonds of any such future issue or issues, or it may redeem some of the Series 2004 Bonds and some of the Bonds of any such future issue or issues at the same time. If less than a full maturity within an issue of Bonds is redeemed, then such redemption shall be by lot in such manner as may be designated by the Bond Registrar, Section 11. Purchase in Open Market. Nothing herein contained shall be construed to limit the right of the Consolidated Government to purchase with any excess moneys, as hereinabove defined, in the Sinking Fund and for sinking fund purposes, the Series 2004 Bonds in the open market at a price not exceeding the callable price hereinabove set forth. Any such Series 2004 Bonds so purchased cannot be reissued and same shall be disposed of as is hereinafter provided in this Supplemental Bond Resolution. Section 12. Effect of Call for Redemption. Notice having been given in the manner and under the conditions hereinabove provided, the Series 2004 Bonds so designated for redemption or the portion of the Series 2004 Bonds so designated for partial redemption shall, on the redemption date designated in such notice, become and be due and payable at the redemption price hereinabove specified, and from and after the date of redemption so designated, unless default shall be made in the payment of the Series 2004 Bonds so designated for redemption or the portion of the Series 2004 Bonds so designated for partial redemption, interest on the principal amount of said Series 2004 Bonds so designated for redemption shall cease to accrue on the redemption date. Section 13. Cancellation of Bonds. All Bonds paid, purchased or redeemed shall be canceled or otherwise destroyed upon their payment and a record of such destruction shall be made and preserved in the permanent records of the Consolidated Government and in the records of the Bond Registrar pertaining to the Series 2004 Bonds. Section 14. Plede:e of Revenues: Paritv Bonds. The Series 2004 Bonds shall stand on a parity and shall be of equal dignity with the Prior Bonds and shall be secured by the lien created pursuant to the provisions of the Prior Resolutions, as the same is ratified, reaffirmed, broadened and extended by this Supplemental Bond Resolution, just as if the Prior Bonds and the Series 2004 Bonds had been issued simultaneously under the same resolution. The Consolidated Government hereby represents, warrants and covenants in favor of the owners of the Prior Bonds and the Series 2004 Bonds that the Bond Resolution create a valid and binding pledge of and lien on the Pledged Revenues as security for the payment of the Prior Bonds and the Series 2004 Bonds, enforceable in accordance with the terms of the Bond Resolution and the terms of the Prior Bonds and the Series 2004 Bonds. Such pledge and lien shall be a first or prior lien, superior to any that may ever hereafter be made, including judicial liens, and subject only to the right of the Consolidated Government to issue Additional Parity Bonds in accordance with the provisions of the Bond Resolution, No filing or recording ofthe Bond Resolution or of any other document or instrument (including financing statements under the Uniform Commercial Code) is necessary or required in connection with the creation, enforceability or priority of the lien and pledge of the Bond Resolution. The Consolidated Government shall not hereafter make or suffer -27- AO 1127325.4 to exist any pledge or assignment of or lien on the Pledged Revenues ranking prior to or on a parity with the Prior Bonds and the Series 2004 Bonds; provided, however, the Consolidated Government reserves the right to issue Additional Parity Bonds and subordinate bonds in accordance with the terms and subject to the conditions contained in the Bond Resolution. Section 15. Approval of System Improvements. The additions, extensions and improvements to the System and equipment therefor shall be accomplished substantially in accordance with the Engineering Report. The Engineering Report and the additions, extensions and improvements set forth therein are hereby authorized and approved and the Engineering Report, by this reference thereto, is incorporated herein and made a part hereof. Section 16. Application of the Series 2004 Bond Proceeds. From the proceeds from the sale of the Series 2004 Bonds, the following payments shall be made, simultaneously with the issuance and delivery of the Series 2004 Bonds, to the extent and in the manner set forth herein: (a) The sum of $814,965.66, representing the premium on the Series 2004 Bond Insurance Policy insuring the Series 2004 Bonds, and the sum of $126,000, representing the premium on the Series 2004 Reserve Account Surety Bond, shall be paid to the Series 2004 Bond Insurer and Series 2004 Reserve Account Surety Bond Provider, respectively; (b) The sum of $10,173,333.33, representing capitalized interest, shall be deposited into the 2004 Capitalized Interest Fund and used and applied toward the payment of the interest on the Series 2004 Bonds coming due; (c) The sum of $141,529,402.43 shall be deposited into the 2004 Construction Fund and used and applied toward the cost of the additions, extensions and improvements to the System now contemplated; (d) The sum of $12,420,000 shall be used to pay termination fees associated with the 2004 Rate Lock; and (e) The sum of $1,111,094.72 shall be used and applied by the Consolidated Government to the payment of the costs and expenses incurred in connection with the issuance and delivery ofthe Series 2004 Bonds. Section 17. Construction Fund. There is hereby created a special fund designated the "Augusta,. Georgia Water and Sewerage System Construction Fund-2004" (the "2004 Construction Fund"). The moneys so deposited into the 2004 Construction Fund as aforesaid and as more specifically set forth in the 2004 Supplemental Resolution, and any other funds acquired for this purpose by gift, donation, grant or otherwise, shall be held by the 2004 Construction Fund Depository in trust for the owners of the Series 2004 Bonds and shall be applied toward the payment of the cost of adding to, extending, improving and equipping the System, in accordance, or substantially in accordance, with the Engineering Report and in accordance with and subject to the provisions and restrictions set forth in this Supplemental Bond Resolution and the applicable provisions and restrictions set forth in the Prior Resolutions, and the Consolidated Government covenants that it will not cause or permit to be paid from the 2004 Construction Fund any sums represented as aforesaid, except in accordance, or -28- AO 1127325.4 substantially in accordance, with the Engineering Report and the provisions and restrictions set forth in the Prior Resolutions and in this Supplemental Bond Resolution. The moneys so deposited into the 2004 Construction Fund shall be used for the purposes herein and for the applicable purposes provided in Section 3 of Article N of the 1996 Resolution and moneys therein shall be held, invested and expended in the manner and by the procedure established under the provisions of said Article N, Section 3 of the 1996 Resolution. Said Article and each and every appropriate provision thereof be and they are hereby declared applicable to the Series 2004 Bonds, the 2004 Construction Fund and the 2004 Construction Fund Depository and for the purpose of making same applicable to the Series 2004 Bonds, the 2004 Construction Fund and the 2004 Construction Fund Depository, the Consolidated Govenunent does hereby reaffirm and adopt the same verbatim herein, except that said Article is broadened and extended to provide for the additions, extensions and improvements to the System in accordance with the Engineering Report as herein contemplated. When the additions and improvements to the System shall have been completed, such fact shall be evidenced by a certificate from the Consulting Engineers stating the date of completion, and should there then be any balance in the 2004 Construction Fund, such balance, unless otherwise provided, shall be paid into the special account designated as the Debt Service Account held within the Sinking Fund. In the event of a default in payment of the Series 2004 Bonds, the Paying Agent shall notify the 2004 Construction Fund Depository thereof and the 2004 Construction Fund Depository shall, without further authorization or direction, transfer the remaining funds in the 2004 Construction Fund to the Paying Agent or Sinking Fund Custodian to be used to pay principal and interest on the Series 2004 Bonds. Section 18. Creation of 2004 Capitalized Interest Fund: Use of Monevs in 2004 Capitalized Interest Fund. There is hereby created by the Consolidated Govenunent a fund designated "Augusta, Georgia Water and Sewerage System Capitalized Interest Fund-2004." There shall be paid into the 2004 Capitalized Interest Fund such amount from the proceeds of the sale of the Series 2004 Bonds allocable to capitalized interest. Such moneys shall be transferred to the Debt Service Account held within the Sinking Fund on each Interest Payment Date until the balance in the 2004 Capitalized Interest Fund has been reduced to zero. The amounts so transferred shall be used to pay interest coming due on the Series 2004 Bonds. Section 19. Flow of Funds: Sinking: Fund. The Consolidated Govenunent is now operating and will continue to operate the System on a fiscal year basis commencing on January 1 in each year and extending through December 31 in such year, but it reserves the right by the adoption of proper proceedings to change its fiscal year as provided in the 1996 Resolution. The Consolidated Govenunent covenants that all revenues arising from the ownership or operation of the System and properties in connection therewith as now existent and as hereafter added to, extended and improved shall be collected by the Consolidated Government or by its agents or employees and deposited promptly with the depository to the credit of a special fund heretofore created and designated in Section 2 of Article III of the 1996 Resolution as the "Richmond County Water and Sewerage System Revenue Fund-1996" and redesignated pursuant to the 2000 Resolution as the "Augusta, Georgia Water and Sewerage System Revenue Fund" (the "Revenue Fund"). The moneys deposited into the Revenue Fund shall be used and disbursed from the Revenue Fund as hereinafter provided. -29- AO 1127325.4 There shall first be paid from the Revenue Fund the Expenses of Operation and Maintenance other than payments in lieu of taxes and payments in lieu of franchise fees. Payments in lieu of taxes and payments in lieu of franchise fees shall not be payable from the Revenue Fund, but shall be payable solely from the General Utility Fund as hereinafter provided, The Consolidated Government covenants that it will continue to maintain the sinking fund created and designated in Article V, Section 2, Paragraphs 2 and 4 of the 1996 Resolution as the "Richmond County Water and Sewerage System Sinking Fund" and redesignated pursuant to the 2000 Resolution as the "Augusta, Georgia Water and Sewerage System Sinking Fund" (the "Sinking Fund"), which Sinking Fund now consists of two accounts which are to be held therein, created and designated as "Debt Service Account" and "Debt Service Reserve Account." The payments to be made into the Sinking Fund must be adjusted so as to provide sufficient moneys with which to pay the principal of and the interest on the Prior Bonds and the Series 2004 Bonds as the same become due and payable, either at maturity or by proceedings for mandatory redemption, in the then current Sinking Fund Year and to create and maintain a reserve in the Sinking Fund equal to the Reserve Requirement on the Prior Bonds and the Series 2004 Bonds. After there have been paid from the Revenue Fund the sums required or permitted to be paid for Expenses of Operation and Maintenance pursuant to the provisions of this Section, there shall next be paid from the Revenue Fund into the Sinking Fund the following amounts: (a) There shall be deposited into the Debt Service Account for the purpose of paying the principal of and interest on the Prior Bonds and the Series 2004 Bonds as same become due and payable, either at maturity or by proceedings for mandatory redemption, in the then current Sinking Fund Year, each month after taking into account moneys on deposit therein, (i) an amount sufficient to pay the interest on the Auction Rate Bonds coming due on the first day of the next succeeding month; (ii) an amount equal to one sixth of the interest on the Prior Bonds and the Series 2004 Bonds coming due on the next Interest Payment Date for the Prior Bonds and the Series 2004 Bonds; and (ii) an amount equal to one-twelfth of the principal on the Prior Bonds, the Auction Rate Bonds and the Series 2004 Bonds coming due on the next ensuing October 1, such aggregate monthly payments to continue from month to month until sufficient funds are on hand in the Sinking Fund to pay all of the Prior Bonds, the Auction Rate Bonds and the Series 2004 Bonds as same mature or are acquired by mandatory redemption and the interest which will become due and payable thereon. (b) Upon the issuance of the Series 2004 Bonds, the Reserve Account shall be funded by a combination of cash and one or more Reserve Account Surety Bonds held for the credit of the Reserve Account. Simultaneously with the issuance of the Series 2004 Bonds, there shall be on deposit in the Reserve Account, taking into account moneys on deposit therein and amounts being provided by the Consolidated Government from lawfully available funds, such amount, if any, as may be required to create in the Reserve Account a reserve equal to the Reserve Requirement upon the date of issuance of the Series 2004 Bonds. The Reserve Account shall be maintained for the purpose of paying the principal of and interest on the Prior Bonds and the Series 2004 Bonds falling due in any year as to which there would otherwise be a default and if money is taken from the Reserve Account for the payment of such principal and interest, the money so taken shall be replaced in the Reserve Account from the first moneys in the Revenue Fund thereafter available and not required to be used for Expenses of Operation and Maintenance -30- AD 1127325.4 of the System and not required to be paid into the Debt Service Account as provided in subparagraph 19(a) above. (c) All sums required to be paid to comply with the provisions of subparagraphs (a) and (b) above shall be paid on or before the 25th day of the month in which the payment is due, and if, in any month, for any reason, the full amount herein required to be paid in such month shall not be paid into the Sinking Fund, any deficiency shall be added to and shall become a part of the amount required to be paid into the Sinking Fund in the next succeeding month; provided, however, the Consolidated Government covenants and agrees that in the event it hereafter elects to issue Additional Bonds, pursuant to the provisions of this Supplemental Bond Resolution, the above stated payments into the Sinking Fund will be increased to the extent necessary to pay the principal of and interest on the Prior Bonds, the Series 2004 Bonds and on any Additional Bonds therewith then outstanding and on the proposed Additional Bonds to be issued coming due, either at maturity or by proceedings for mandatory redemption, in the then current Sinking Fund Year and to create upon the issuance of the bonds to be issued and thereafter maintain a reserve for that purpose in an amount at least equal to the Reserve Requirement on the Prior Bonds, the Series 2004 Bonds, the Additional Bonds therewith then outstanding and on the proposed Additional Bonds to be issued, Section 20. Debt Service Reserve Account. In the event a withdrawal of moneys is made from the Reserve Account or any draw is made upon any Reserve Account Surety Bond held within the Reserve Account for the payment of principal of or interest on the Prior Bonds or the Series 2004 Bonds, the first moneys available in the Revenue Fund and not required to pay Expenses of Operation and Maintenance or to make the monthly payments into the Debt Service Account as hereinabove provided, shall be immediately paid into the Reserve Account or paid to the Reserve Account Surety Bond Providers as hereinafter described until the amount on deposit in the Reserve Account after payments of any amounts payable under the succeeding sentence equals the Reserve Requirement; provided, however, such payments will in any event be at least sufficient to restore the Reserve Account to its proper balance within 12 months after the date upon which money is taken from the Reserve Account or the date upon which a draw on any Reserve Account Surety Bond is made. In the event of a drawdown on any Reserve Account Surety Bond, the Consolidated Government shall on a pro rata basis make (1) all payments (if any) into the Reserve Account necessary to restore the amount of cash or securities, if any, on deposit, therein immediately prior to such draw and (2) make all payments to any Reserve Account Surety Bond Providers as a repayment of such drawdown (such payments to be made on a pro rata basis to each Reserve Account Surety Bond Provider based upon the amount drawn and not reimbursed under each Reserve Account Surety Bond), and (3) upon making full repayment to any Reserve Account Surety Bond Provider, shall thereafter make payments into the Reserve Account, to the extent that the then applicable Reserve Requirement exceeds the aggregate of the amount available to be drawn on a Reserve Account Surety Bond and the amount of cash or securities, if any, on deposit therein immediately prior to such draw. Repayment or any drawdown on the Reserve Account Surety Bond (other than repayments which reinstate the Reserve Account Surety Bond) and any interest or fees due the Reserve Account Surety Bond Provider under such Reserve Account Surety Bond shall be secured by a lien on the Pledged Revenues subordinate to payments into the Debt Service Account, the Reserve Account and payments to any Credit Issuer securing the Prior Bonds, the Series 2004 Bonds and any Additional Bonds, -31- AO 1127325.4 Any such Reserve Account Surety Bond shall be pledged to the benefit of the owners of all of the Prior Bonds, the Series 2004 Bonds and any Additional Bonds. The Consolidated Government reserves the right, if it deems it necessary in order to acquire such a Reserve Account Surety Bond, to amend the Bond Resolution without the consent of any of the owners of the Prior Bonds, the Series 2004 Bonds and any Additional Bonds in order to grant the Reserve Account Surety Bond Provider such additional rights as it may demand, provided that such amendment shall not, in the written opinion of Bond Counsel filed with the Consolidated Government, impair or reduce the security granted to the owners of the Prior Bonds, the Series 2004 Bonds and any Additional Bonds or any ofthem. It is expressly provided, however, that if on October 2 in any year there are on deposit in the Debt Service Account of the Sinking Fund any money and securities, same shall be withdrawn therefrom and immediately deposited into the Revenue Fund. It is expressly provided further, however, that if on October 2 in any year there are on deposit in the Reserve Account of the Sinking Fund moneys and securities (such securities to be valued at their market value plus accrued interest thereon to October 2) the aggregate amount of which, together with the amounts available under any Reserve Account Surety Bond, is in excess of the then required Reserve Requirement, such excess moneys shall be withdrawn from the Sinking Fund and immediately deposited into the Revenue Fund. The calculation and determination of such excess amount in accordance with this provision shall be the responsibility of the chief financial officer of the utilities department of the Consolidated Government and such financial officer shall notify the Sinking Fund Custodian and make or cause to be made any transfer of funds required pursuant to the provisions of this subparagraph. The Consolidated Government may at any time fulfill any portion of its obligation to fund the Reserve Account by depositing in the Reserve Account a Reserve Account Surety Bond payable on any interest and/or principal payment date in an amount equal to any portion of the reserve requirement then required to be maintained within the Reserve Account. Before any such Reserve Account Surety Bond is substituted for cash or deposited in lieu of cash within the Reserve Account, (A) there shall be filed with the Consolidated Government and the Sinking Fund Custodian (i) an opinion of nationally recognized bond counsel to the effect that such substitution will not adversely affect the exclusion of interest on the Bonds from gross income for federal income tax purposes; (ii) a certificate of Moody's or Standard & Poor's, whichever rating agency maintains a rating on the outstanding Bonds, to the effect that (a) if the issuer(s) of the Reserve Account Surety Bond were insuring payment of principal and interest on the Bonds to which the Reserve Account relates, such Bonds would receive the highest rating available from such rating agency (or any similar rating agency then in existence) and (b) that the substitution of such Reserve Account Surety Bond for cash within the Reserve Account will not, in and of itself, result in a reduction of the ratings issued for the Bonds outstanding, and (iii) a copy of the Reserve Account Surety Bond issued to fulfill the Consolidated Government's obligation to fund the Reserve Account together with an opinion of counsel satisfactory to the Sinking Fund Custodian to the effect that the Reserve Account Surety Bond is valid and enforceable in accordance with its terms, (B) the Consolidated Government shall not secure any . obligation to the Reserve Account Surety Bond Provider by a lien equal to or superior to the lien granted to the Bonds; (C) the Reserve Account Surety Bond shall permit a drawing by the Consolidated Government for the full stated amount in the event (i) the Reserve Account Surety Bond expires or terminates for any reason prior to the final maturity of the Bonds, and (ii) the -32- AD 1127325.4 Consolidated Government fails to satisfy the Reserve Requirement by the deposit to the Reserve Account of cash, obligations, a substitute Reserve Account Surety Bond, or any combination thereof, on or before the date of such expiration or termination; (D) if the rating issued by the Rating Agency to the Reserve Account Surety Bond Provider is withdrawn or reduced below the rating assigned to that of the Bonds immediately prior to such action by the Rating Agency, the Consolidated Government shall provide a substitute Reserve Account Surety Bond within 60 days after such rating change, and, if no substitute Reserve Account Surety Bond is obtained by such date, shall fund the Reserve Requirement in not more than 24 equal monthly payments commencing not later than the fIrst day of the month immediately succeeding the date representing the end of such 60 day period; and (E) if the Reserve Account Surety Bond Provider commences any insolvency proceedings or is determined to be insolvent or fails to make payments when due on its obligations, the Consolidated Government shall provide a substitute Reserve Account Surety Bond within 60 days thereafter, and, if no substitute Reserve Account Surety Bond is obtained by such date, shall fund the Reserve Requirement in not more than 24 equal monthly payments commencing not later than the first day of the month immediately succeeding the date representing the end of such 60 day period. If the events described in either clauses (D) or (E) above occur, the Consolidated Government shall not relinquish the Reserve Account Surety Bond at issue until after the Reserve Requirement is fully satisfied by the provision of cash, obligations, or a substitute Reserve Account Surety Bond or any combination thereof. Each such Reserve Account Surety Bond shall be unconditional and irrevocable and shall provide liquidity for the life of the Bonds with respect to which the Reserve Account Surety Bond is purchased and, if the Reserve Account Surety Bond is purchased with respect to more than one issue of Bonds hereunder, then for the life of the issue with the longest term, So long as the balance of the Reserve Account equals the Reserve Account Requirement on the Prior Bonds, the Series 2004 Bonds and any Additional Bonds, any reimbursement agreement entered into between the Consolidated Government and any such Reserve Account Surety Bond Provider may provide that the Consolidated Government will be obligated to repay such provider an amount equal to any drawdown on the Reserve Account Surety Bond plus a market rate of interest over a specified period of time not to exceed three years but such obligation shall be junior and subordinate in right of payment to all outstanding Bonds, Section 21. Hede:e Payments Fund. The Consolidated Government has heretofore created and established with the Sinking Fund Custodian a separate, segregated fund designated as the "Augusta, Georgia Hedge Payments Fund" and, within the Hedge Payments Fund, a separate account designated as the "2004 Hedge Payments Account." After there have been paid from the Revenue Fund in each month all amounts required or permitted to be paid pursuant to Sections 19 and 20 of this Supplemental Bond Resolution, there shall be paid from the Revenue Fund to the 2004 Hedge Payments Account an amount sufficient, taking into account amounts on deposit therein, to pay the amounts due the 2004 Hedge Provider under the 2004 Hedge Agreement (other than payments upon early termination thereof). The Consolidated Government shall notify the Custodian in writing of the amounts required to be deposited to the 2004 Hedge Payments Account. The obligation of the Consolidated Government to make the deposits to the Hedge Payments Fund, as well as to make any other payments under the Hedge Agreements, is and shall always be junior and subordinate in all respects to the obligation of the Consolidated Government with respect to payments to the Sinking Fund as provided in Sections 19 and 20 of this Supplemental Bond Resolution. -33- AO 1127325.4 Section 22. Utility General Fund. After there have been paid from the Revenue Fund in each month all amounts required or permitted to be paid as provided herein, all moneys remaining in the Revenue Fund shall be paid at the end of each month into the special fund created and designated in Article V, Section 2, Paragraph 6 of the 1996 Resolution as the "Richmond County Water and Sewerage System Utility General Fund" and redesignated pursuant to the 2002 Resolution as the "Augusta, Georgia Water and Sewerage System Utility General Fund" (the ''Utility General Fund"). Except as set forth below, expenditures shall be made from the Utility General Fund only for the purpose of: (a) paying principal of and/or interest on the Prior Bonds, the Auction Rate Bonds, the Series 2004 Bonds and any Additional Bonds then outstanding and falling due at any time for the payment of which money is not available in the Sinking Fund securing the payment of same; (b) making payments into the Sinking Fund in the amounts required in order to accumulate and maintain the Reserve Account created therein at its proper balance; (c) paying such expenses as may be necessary to alleviate or remove the effects of an emergency having a major impact on the System caused by some extraordinary occurrence which makes it necessary to use the funds of the System, to the extent that moneys on deposit in the Revenue Fund are insufficient to meet such emergencies; (d) paying Expenses of Operation and Maintenance for which moneys are not available in the Revenue Fund, including without limitation payments in lieu of taxes and payments in lieu of franchise fees; ( e) making replacements, additions, extensions and improvements and acquiring equipment and paying the cost of any engineering studies, surveys or plans and specifications pertaining to the future development or expansion of the System deemed to be reasonable and in the best interest of the Consolidated Government and the holders of the Bonds; (f) payment of the charges of the Utility General Fund Depository for investment services; (g) paying to any Reserve Account Surety Bond Provider interest on amounts drawn under such Reserve Account Surety Bond; and (h) payments to the Hedge Providers under Hedge Agreements for which moneys are not available in the Hedge Payments Fund, including without limitation payments upon the early termination of any Hedge Agreement. The Consolidated Government shall maintain at all times a minimum balance in the Utility General Fund equal to the lesser of $2,500,000 or 5 percent of the Operating Revenues of the System for the immediately preceding Fiscal Year. It is expressly provided, however, that should bonds be hereafter issued ranking as to lien on the Pledged Revenues junior and subordinate to the lien securing the payment of the Prior Bonds, the Auction Rate Bonds and the Series 2004 Bonds authorized to be issued hereunder, including any issue or issues of Additional Bonds hereafter issued, then such payments into the Utility General Fund as provided in this Section may be suspended and such moneys shall be available to the extent necessary to pay the principal of and interest on such junior lien bonds and to create and maintain a reasonable reserve therefor and such moneys may be allocated and pledged for that purpose. Section 23. Pledeed Revenues. As provided in the Prior Resolution and as hereby ratified and reaffirmed, all Pledged Revenues immediately shall become subject to a lien to secure the payment by the Consolidated Government of the amounts therein agreed to be paid. The Consolidated Government hereby pledges such Pledged Revenues and hereby covenants and agrees that the Pledged Revenues are hereby pledged to the extent necessary to secure the payment by the Consolidated Government of the amounts herein agreed to be paid with respect to the Prior Bonds, the Auction Rate Bonds, the Series 2004 Bonds and any Additional Bonds, -34- AD 1127325.4 and on a junior and subordinate basis, to the payments (other than termination payments) under the Hedge Agreements, and such pledge shall be valid and binding against the Consolidated Government and against all other parties and against all claims of any kind against the Consolidated Government, whether arising in tort, contract or otherwise, irrespective of whether or not such parties have notice thereof. Section 24. Rate Covenant. The Consolidated Government covenants and agrees that it has heretofore placed into effect a schedule of rates, fees and charges for the services, facilities and commodities furnished by the System and as often as it shall appear necessary the Consolidated Government shall revise and adjust such schedule of rates, fees and charges for either water or sewerage services and facilities, or both, to the extent necessary to produce funds sufficient to operate and maintain the System on a sound business-like basis and to create and maintain the Sinking Fund created by the 1996 Resolution, as same has been enlarged and extended by the 2000 Resolution, the 2002 Resolution, the 2004 Refunding Resolution and this Supplemental Bond Resolution, in accordance with and in compliance with the terms, covenants and provisions of the Bond Resolution and to create and maintain a reserve therefor in the amount as required by the Bond Resolution or such larger amounts as may be required in any proceedings authorizing any such issue or issues of Additional Bonds, as well as to create and maintain a reserve for extensions and improvements to the System. Such rates, fees and charges, in addition to the foregoing requirements, shall be maintained at such level so as to produce Pledged Revenues (excluding Investment Earnings, if any, on the Construction Fund created under this Supplemental Bond Resolution) equal to 1,1 times the sum of (x) the amount required to discharge the payment of the principal of and the interest on the Prior Bonds, the Auction Rate Bonds and any future parity issues, either at maturity or by proceedings for mandatory redemption plus (y) the scheduled payments of net interest amounts paid or payable to the Hedge Providers under the Hedge Agreements; provided, however, that in no event will said amount be less than that required to create and maintain the Debt Service Account, the Reserve Account and the Hedge Payments Fund as required by the Bond Resolution. The provisions of this Section shall be enforceable in an appropriate action by any bondowner or by any affected Hedge Provider. Without limiting the foregoing, the Consolidated Government hereby covenants to take such action as may be necessary to cause the revenues of the System to equal or exceed the forecasted revenues of the System set forth on Table 6-4 of the Engineering Report for the period set forth therein. The rates, fees and charges shall be classified in a reasonable manner to cover users of the services and facilities furnished by the System so that as near as practicable such rates, fees and charges shall be uniform in application to all users falling within any reasonable class. No free services shall at any time be furnished from the System and it will undertake within its health powers or such other applicable powers now or hereafter provided by law, to require the owners of all improved property abutting any water line or sewerage line to connect with the System. No customer shall be connected to the System or served by the Consolidated Government without a proper meter having been first installed. All services shall be furnished in accordance with rates now or hereafter established, including services furnished to any county, municipal corporation or other public board or body. -35- AO 1127325.4 In the event the Consolidated Government shall fail to adopt a schedule or schedules of rates, fees and charges, or to revise its schedule or schedules of rates, fees and charges, in accordance with the provisions of this Section, any Bondholder without regard to whether any Event of Default, as defmed in Article VIII of the 1996 Resolution, shall have occurred, may institute and prosecute in any court of competent jurisdiction, an appropriate action to compel the Consolidated Government to adopt a schedule or schedules of rates, fees and charges, or to revise its schedule or schedules of rates, fees and charges in accordance with the requirements of this Section and the applicable requirements of Section 3 of Article V of the 1996 Resolution, Section 25. Sinlrin!!: Fund Disbursements. Subject to the terms and conditions set forth in the Bond Resolution, moneys in the Sinking Fund shall be disbursed for (a) the payment of the interest on the Prior Bonds, the Auction Rate Bonds and the Series 2004 Bonds as such interest becomes due and payable; (b) the payment of the principal of the Prior Bonds, the Auction Rate Bonds and the Series 2004 Bonds as same becomes due and payable, either at maturity or by proceedings for mandatory redemption; (c) the optional redemption of the Prior Bonds, the Auction Rate Bonds and the Series 2004 Bonds before maturity at the price and under the conditions provided therefor in the Bond Resolution; (d) the purchase of the Prior Bonds, the Auction Rate Bonds and the Series 2004 Bonds in the open market; provided, however, the price paid shall not exceed the authorized call price; (e) the transfer of excess moneys, if any, in the Sinking Fund (as described in Section 5 of Article V of the 1996 Resolution, Section 20 of the 2000 Resolution, Section 20 of the 2002 Resolution and Section 20 of this Supplemental Bond Resolution) to the Revenue Fund; (f) the payment of charges for paying the Prior Bonds, the Auction Rate Bonds and the Series 2004 Bonds and interest thereon and the charges for the registration of the Prior Bonds, the Auction Rate Bonds and the Series 2004 Bonds and their transfer or exchange in accordance with the terms thereof; and (g) the payment of any charges for investment services, Section 26. Additional Bonds. The Consolidated Government further covenants and agrees that it will not exercise the privilege as provided in Section 9 of Article V of the 1996 Resolution, as ratified, reaffirmed, broadened and extended in Section 25 of the 2000 Resolution, Section 25 of the 2002 Resolution and Section 23 of the 2004 Refunding Resolution, of issuing additional bonds or obligations ranking as to lien on the Pledged Revenues of the System on a parity with the Prior Bonds, the Auction Rate Bonds and the Series 2004 Bonds, unless or until all the following conditions are met: (a) The payments covenanted to be made into the Sinking Fund, as the same may have been enlarged and extended in any proceedings authorizing the issuance of any Additional Bonds, must be currently being made in the full amount as required and the Debt Service Account and Reserve Account held within the Sinking Fund must be at their proper respective balances. (b) Except in the case of Additional Bonds issued for refunding purposes pursuant to Article V, Section 8 of the 1996 Resolution, there shall have been procured and filed with the Consolidated Government (i) a report by Independent Certified Public Accountants to the effect that the Pledged Revenues (excluding Investment Earnings, if any, on construction funds) for a period of 12 consecutive months out of the most recent 18 consecutive months preceding the month of adoption of the proceedings authorizing the issuance of such Additional Bonds must -36- AO 1127325.4 have been equal to at least 1.25 times the maximum Debt Service Requirement for any succeeding Sinking Fund Year on the Prior Bonds, the Auction Rate Bonds, the Series 2004 Bonds and any other issue or issues of Additional Bonds therewith then outstanding and on the proposed Additional Bonds to be issued, or in lieu of the foregoing formula, if a new schedule of rates and charges for the services, facilities and commodities furnished by the System shall have been adopted and shall be in effect and Independent Certified Public Accountants shall certify that had this new rate schedule been in effect during the period described above, the Pledged Revenues of the System would have equaled the requirements of the above formula:; or (ii) (x) a report by Independent Certified Public Accountants to the effect that the historical Pledged Revenues (excluding Investment Earnings, if any, on construction funds) for a period of 12 consecutive months out of the most recent 18 consecutive months preceding the month of adoption of the proceedings authorizing the issuance of the proposed Additional Bonds were equal to at least 1.10 times the historical Debt Service Requirement on all Bonds (other than Subordinate Bonds) which were outstanding during such 12-month period, and (y) a report by the Consulting Engineers to the effect that the forecasted Pledged Revenues (excluding Investment Earnings, if any, on construction funds) for each Fiscal Year in the Forecast Period are expected to equal at least 1.25 times the maximum annual Debt Service Requirement on all Bonds (other than Subordinate Bonds) which will be outstanding immediately after the issuance of the proposed Additional Bonds, in the then current or any succeeding Sinking Fund Year. The reports by the Independent Certified Public Accountant that are required by this paragraph (b) may contain pro forma adjustments to historical Pledged Revenues equal to 100 percent of the increased annual amount attributable to any revision in the schedule of rates, fees and charges for the services, facilities and commodities furnished by the System, imposed prior to the date of delivery of the proposed Additional Bonds and not fully reflected in the historical Pledged Revenues actually received during such 12-month period. Such pro forma adjustments shall be based upon a report of the Consulting Engineers as to the amount of Operating Revenues which would have been received during such 12-month period had the new rate schedule been in effect throughout such 12-month period. For the purpose of calculating the maximum Debt Service Requirements under this subparagraph (b), the maximum annual Debt Service Requirements shall be reduced by an amount equal to any capitalized interest funded from the proceeds of the Additional Bonds proposed to be issued in each succeeding Sinking Fund Year for the period for which said interest has been capitalized. (c) An Independent Certified Public Accountant shall certify in triplicate to the Consolidated Government that the requirements of subparagraph (a) above are being complied with and that the requirements of subparagraph (b) above have been met. A copy of such certificate shall be furnished to the Designated Representative of the original purchasers of the . Prior Bonds and the Series 2004 Bonds. (d) Except when Bonds are being issued solely for the purpose of refunding outstanding Bonds, the Consulting Engineers for the Consolidated Government shall provide the Consolidated Government with a written report recommending the additions, extensions and improvements to be made to the System and stating that same are feasible, designating in reasonable detail the work and installation proposed to be done and the estimated cost of -37- AO 1127325.4 accomplishing the undertaking, The Consulting Engineers shall set forth in said report the forecasted Pledged Revenues to be derived from the System which will be available for debt service payments in each of the next lO years and shall indicate the projected coverage of such debt service payments in each succeeding Sinking Fund Year. An executed duplicate original of such report of the Consulting Engineers as required by this provision shall be furnished to the Designated Representative of the original purchasers of the Prior Bonds and the Series 2004 Bonds issued hereunder not less than lO days before any proceedings are taken to actually issue such Additional Bonds. (e) The Consolidated Government shall pass proper proceedings reciting that all of the above requirements have been met, shall authorize the issuance of the Additional Bonds and shall provide in such proceedings, among other things, the date such Additional Bonds shall bear, the rate or rates of interest and maturity dates, as well as the registration and redemption provisions. Except for Additional Bonds that bear interest at a Variable Rate, the interest on the Additional Bonds of any such issue shall fall due on Aprill and October 1 of each year, and the Additional Bonds shall mature in installments on October l, but, as to principal, not necessarily in each year or in equal installments. Any such proceeding or proceedings shall require the Consolidated Government to increase the monthly payments then being made into the Sinking Fund to the extent necessary to pay the principal of and the interest on the Prior Bonds, the Series 2004 Bonds and on all such Additional Bonds therewith then outstanding and on the proposed Additional Bonds to be issued as same become due and payable, either at maturity or by proceedings for mandatory redemption, in the then current Sinking Fund Year, and to create upon the issuance of the proposed Additional Bonds to be issued a reserve in the Reserve Account at least equal to the Reserve Requirement on the Prior Bonds, the Series 2004 Bonds and any Additional Bonds therewith then outstanding and on the proposed Additional Bonds to be issued and to maintain said reserve in an amount sufficient for that purpose; provided, however, the Consolidated Government may satisfy funding of the required reserve through the purchase of a Reserve Account Surety Bond meeting the requirements of the Bond Resolution. Any such proceeding or proceedings shall restate and reaffirm, by reference, all of the applicable terms, conditions and provisions of the Bond Resolution. If any Additional Bonds would bear interest at a Variable Rate, the resolution under which such Additional Bonds are issued shall provide a maximum rate of interest per annum which such Additional Bonds may bear. In connection with the issuance of any Additional Bonds under the Bond Resolution, the Consolidated Government may obtain or cause to be obtained one or more Credit Facilities providing for payment of all or a portion of the principal of, premium, if any, or interest due or to become due on such Additional Bonds, providing for the purchase of such Additional Bonds by the Credit Issuer, or providing funds for the purchase of such Additional Bonds by the Consolidated Government. In connection therewith the Consolidated Government shall enter into Credit Facility Agreements with such Credit Issuers providing for, among other things, (i) . the payment of fees and expenses to such Credit Issuer for the issuance of such Credit Facility; (ii) the terms and conditions of such Credit Facility and the Additional Bonds affected thereby; and (iii) the security, if any, to be provided for the issuance of such Credit Facility. The Consolidated Government may in a Credit Facility Agreement agree to directly reimburse such Credit Issuer for amounts paid under the terms of such Credit Facility, together with interest thereon; provided, however, that no Reimbursement Obligation shall be created, for purposes of the Bond Resolution, until amounts are paid under such Credit Facility, Any such -38- AO 1127325.4 Reimbursement Obligation shall be deemed to be a part of the Additional Bonds to. which the Credit Facility relates which gave rise to such Reimbursement Obligation, and references to principal and interest payments with respect to such Additional Bonds shall include principal and interest (except for Additional Interest) due on the Reimbursement Obligation incurred as a result of payment of such Additional Bonds with the Credit Facility. All other amounts payable under the Credit Facility Agreement (including any Additional Interest) shall be fully subordinate to the payment of debt service on Bonds (other than Subordinate Bonds). Any such Credit Facility shall be for the benefit of and secure such Additional Bonds or portion thereof as specified in the applicable bond resolution authorizing such Additional Bonds. (f) Such Additional Bonds or obligations and all proceedings relative thereto, and the security therefor, shall be validated as prescribed by law. The Issuer expressly reserves the right to issue Subordinate Bonds. Notwithstanding the preceding sentence, however, the Issuer hereby covenants and agrees for the benefit of the Hedge Providers that, so long as any Hedge Agreement is in effect, no Subordinate Bonds shall be issued or other obligations incurred which are secured by a lien on Pledged Revenues that is both junior to the payments to be made to the Debt Service Account and the Reserve Account and senior to the payments to be made to the Hedge Payments Fund. The provisions of this Section shall be enforceable in an appropriate action by any bondowner or by any affected. Hedge Provider, Section 27. Ratification of 1996 Resolution. All of the applicable terms, covenants, conditions and provisions of Article V, Article VI, Article VII, Article VIII, Article IX and Article X and each Section thereof of the 1996 Resolution not herein specifically referred to are hereby declared applicable and are broadened and extended so as to cover the bonds issued hereunder and hereby ratified and reaffirmed as so extended and said terms, covenants, conditions and provisions shall apply for all purposes to the Series 2004 Bonds. Section 28. Authorization of Investment Ae:reements. Amounts on deposit in the 2004 Construction Fund and the 2004 Capitalized Interest Fund shall be invested pending their use to pay the costs of the Project as provided in Article IV, Section 3(c) of the 1996 Resolution and to pay capitalized interest as provided in Section 18. The appropriate financial officers of the Consolidated Government and of the System, in consultation with the Administrator of the Consolidated Government, are hereby authorized and directed, if they deem the same to be economical and in the best interest of the System, to solicit bids for an investment agreement pertaining to the 2004 Construction Fund and the 2004 Capitalized Interest Fund, in the form of a flexible repurchase agreement or otherwise, and to select the best bid. The Mayor of the Consolidated Government is hereby authorized and directed to execute and deliver such repurchase agreement in the name of and on behalf of the Consolidated Government, with such execution by the Mayor to be conclusive evidence that such agreement has been approved by the Commission pursuant to this Resolution. The Administrator shall deliver a copy of this Resolution to the Custodian of the Construction Fund as evidence of the approval of the Commission required by Article IV, Section 3( c) of the 1996 Resolution. -39- AO 1127325.4 Section 29. Bond Insurance Provisions. The following provisions shall apply with respect to the Series 2004 Bonds so long as the Series 2004 Bond Insurance Policy is in effect, notwithstanding anything herein to the contrary as follows: (a) The prior written consent ofthe Series 2004 Bond Insurer is a condition precedent to the deposit of any credit instrument provided in lieu of a cash deposit into the Debt Service Reserve Account. (b) The Series 2004 Bond Insurer shall be deemed to be the sole holder of the Series 2004 Bonds for the purpose of exercising any voting right or privilege or giving any consent or direction or taking any other action that the holders of the Series 2004 Bonds insured by it are entitled to take pursuant to this Supplemental Bond Resolution, (c) No acceleration of the Series 2004 Bonds shall occur without the consent of the Series 2004 Bond Insurer and in the event the maturity of the Series 2004 Bonds is accelerated, the Series 2004 Bond Insurer may elect, in its sole discretion, to pay accelerated principal and interest accrued, on such principal to the date of acceleration (to the extent unpaid by the Consolidated Government). Upon payment of such accelerated principal and interest accrued to the acceleration date as provided above, the Series 2004 Bond Insurer's obligations under the Series 2004 Bond Insurance Policy with respect to such Series 2004 Bonds shall be fully discharged. (d) No grace period for a covenant default shall exceed 30 days, or be extended for more than 60 days, without the written consent of the Series 2004 Bond Insurer. No grace period shall be permitted for payment defaults. ( e) The Series 2004 Bond Insurer shall be a third party beneficiary to this Supplemental Bond Resolution. (f) Other than supplemental resolutions providing for the issuance of Additional Bonds or Subordinate Bonds, no modification, amendment or supplement to this Supplemental Bond Resolution may become effective except upon obtaining the prior written consent of the Series 2004 Bond Insurer. (g) Copies of any modification or amendment to this Supplemental Bond Resolution shall be sent to the Rating Agencies at least 10 days prior to the effective date thereof. (h) Unless otherwise prohibited by law, upon the occurrence of an Event of Default, amounts on deposit in the 2004 Construction Fund created pursuant to this Supplemental Bond Resolution will not be disbursed but will be used to pay debt service on the Prior Bonds, the 2004 Bonds and any Additional Parity Bonds therewith hereafter issued. (i) The rights granted to the Series 2004 Bond Insurer under this Supplemental Bond Resolution to request, consent to or direct any action are rights granted to the Series 2004 Bond Insurer in consideration of its issuance of the Series 2004 Bond Insurance Policy, Any exercise by the Series 2004 Bond Insurer of such rights is merely an exercise of the Series 2004 Bond Insurer's contractual rights and shall not be construed or deemed to be taken for the benefit or on behalf of the holders of the Series 2004 Bonds nor does such action evidence any position of the -40- AO 1127325.4 Series 2004 Bond Insurer, positive or negative, as to whether the consent of any holder of the Series 2004 Bonds is required in addition to consent of the Series 2004 Bond Insurer. (j) To accomplish defeasance the Consolidated Government shall cause to be delivered (i) a report of an independent firm of nationally recognized certified public accountants or such other accountant as shall be acceptable to the Series 2004 Bond Insurer ("Accountant") verifying the sufficiency of the escrow established to pay the Series 2004 Bonds in full on the maturity or redemption date ("Verification"), (ii) an escrow deposit agreement (which shall be acceptable in form and substance to the Series 2004 Bond Insurer), and (iii) an opinion of nationally recognized bond counsel to the effect that the Series 2004 Bonds are no longer "Outstanding" under the Bond Resolution; each Verification and defeasance opinion shall be acceptable in form and substance, and addressed, to the Consolidated Government and the Series 2004 Bond Insurer. The Series 2004 Bond Insurer shall be provided with final drafts of the above-referenced documentation not less than five business days prior to the funding of the escrow. (k) Amounts paid by the Series 2004 Bond Insurer under the Series 2004 Bond Insurance Policy shall not be deemed paid for purposes of this Supplemental Bond Resolution and shall remain Outstanding (as defined in the Series 2004 Bond Insurance Policy) and continue to be due and owing until paid by the Consolidated Government in accordance with this Supplemental Bond Resolution. (1) If on the third business day prior to the related scheduled Interest Payment Date or principal payment date (any such day, a "Payment Date") there is not on deposit with the Paying Agent, after making all transfers and deposits required under this Supplemental Bond Resolution, moneys sufficient to pay the principal of and interest on the Series 2004 Bonds due on such Payment Date, the Paying Agent shall give notice to the Series 2004 Bond Insurer and to its designated agent (if any) (the "Series 2004 Bond Insurer's Fiscal Agent") by telephone or telecopy of the amount of such deficiency by 12 noon, New York City time, on such business day. If on the second business day prior to the related Payment Date there continues to be a deficiency in the amount available to pay the principal of and interest on the Series 2004 Bonds due on such Payment Date, the Paying Agent shall make a claim under the Series 2004 Bond Insurance Policy and give notice to the Series 2004 Bond Insurer and the Series 2004 Bond Insurer's Fiscal Agent (if any) by telephone of the amount of such deficiency, and the allocation of such deficiency between the amount required to pay interest on the Series 2004 Bonds and the amount required to pay principal of the Series 2004 Bonds, confirmed in writing to the Series 2004 Bond Insurer and the Series 2004 Bond Insurer's Fiscal Agent by 12 noon, New York City time, on such second business day by filling in the form of Notice of Claim and Certificate (as such term is defined in the Series 2004 Bond Insurance Policy) delivered with the Series 2004 Bond Insurance Policy. In the event the claim to be made is for a mandatory sinking fund redemption installment, upon receipt of the moneys due, the Paying Agent shall authenticate and deliver to affected holders of the Series 2004 Bonds who surrender their Series 2004 Bonds a new Series 2004 Bond or Series 2004 Bonds in an aggregate principal amount equal to the unredeemed portion of the Series 2004 Bond surrendered, The Paying Agent shall designate any portion of payment of principal on the Series 2004 Bonds paid by the Series 2004 Bond Insurer, whether by virtue of -41- AO 1127325.4 mandatory sinking fund redemption, maturity or other advancement of maturity, on its books as a reduction in the principal amount of Series 2004 Bonds registered to the then current holder of such Series 2004 Bond, whether the Securities Depository or the Securities Depository Nominee or otherwise, and shall issue a replacement Series 2004 Bond to the Series 2004 Bond Insurer, registered in the name of Financial Security Assurance Inc., in a principal amount equal to the amount of principal so paid (without regard to authorized denominations); provided that the Paying Agent's failure to so designate any payment or issue any replacement Series 2004 Bond shall have no effect on the amount of principal or interest payable by the Consolidated Government on any Series 2004 Bond or the subrogation rights of the Series 2004 Bond Insurer. The Paying Agent shall keep a complete and accurate record of all funds deposited by the Series 2004 Bond Insurer into the Policy Payments Account (hereinafter described) and the allocation of such funds to payment of interest on and principal paid in respect of any Series 2004 Bond. The Series 2004 Bond Insurer shall have the right to inspect such records at reasonable times upon reasonable notice to the Paying Agent. Upon payment of a claim under the Series 2004 Bond Insurance Policy, the Paying Agent shall establish a separate special purpose trust account for the benefit of holders of the Series 2004 Bonds referred to herein as the "Policy Payments Account" and over which the Paying Agent shall have exclusive control and sole right of withdrawal. The Paying Agent shall receive any amount paid under the Series 2004 Bond Insurance Policy in trust on behalf of the holders of the Series 2004 Bonds and shall deposit any such amount in the Policy Payments Account and distribute such amount only for purposes of making the payments for which a claim was made, Such amounts shall be disbursed by the Paying Agent to the holders of the Series 2004 Bonds in the same manner as principal and interest payments are to be made with respect to the Series 2004 Bonds under the sections hereof and in this Supplemental Bond Resolution regarding payment of the Series 2004 Bonds. It shall not be necessary for such payments to be made by checks or wire transfers separate from the check or wire transfer used to pay debt service with other funds available to make such payments. Notwithstanding anything to the contrary otherwise set forth in the Bond Resolution, and to the extent permitted by law, in the event amounts paid under the Series 2004 Bond Insurance Policy are applied to claims for payment of principal of or interest on the Series 2004 Bonds, interest on such principal of and interest on such Series 2004 Bonds shall accrue and be payable from the date of such payment at the greater of (i) the per annum rate of interest, publicly announced from time to time by JPMorgan Chase Bank or its successor at its principal office in the City of New York, as its prime or base lending rate plus 3%, and (ii) the then applicable rate of interest on the Series 2004 Bonds provided that in no event shall such rate exceed the maximum rate permissible under applicable usury or similar laws limiting interest rates, Funds held in the Policy Payments Account shall not be invested by the Paying Agent and may not be applied to satisfy any costs, expenses or liabilities of the Paying Agent. Any funds remaining in the Policy Payments Account following a Series 2004 Bond Payment Date shall promptly be remitted to the Series 2004 Bond Insurer. -42- AD 1127325.4 (a) The Series 2004 Bond Insurer shall, to the extent it makes any payment of principal of or interest on the Series 2004 Bonds, become subrogated to the rights of the recipients of such payments in accordance with the terms of the Series 2004 Bond Insurance Policy. (b) The Consolidated Government shall payor reimburse the Series 2004 Bond Insurer for any and all charges, fees, costs and expenses which the Series 2004 Bond Insurer may reasonably payor incur in connection with (i) the administration, enforcement, defense or preservation of any rights or security in this Supplemental Bond Resolution; (ii) the pursuit of any remedies under this Supplemental Bond Resolution or otherwise afforded by law or equity, (iii) any amendment, waiver or other action with respect to, or related to, this Supplemental Bond Resolution whether or not executed or completed, (iv) the violation by the Consolidated Government or the Obligor (as defmed in the Series 2004 Bond Insurance Policy) of any law, rule or regulation, or any judgment, order or decree applicable to it or (v) any litigation or other dispute in connection with this Supplemental Bond Resolution or the transactions contemplated thereby, other than amounts resulting from the failure of the Series 2004 Bond Insurer to honor its obligations under the Series 2004 Bond Insurance Policy. The Series 2004 Bond Insurer reserves the right to charge a reasonable fee as a condition to executing any amendment, waiver or consent proposed in respect of this Supplemental Bond Resolution. The amounts payable pursuant to this subparagraph shall only be payable from the Pledged Revenues or from other lawfully available funds. (c) The Series 2004 Bond Insurer shall be entitled to pay principal or interest on the Series 2004 Bonds that shall become Due for Payment but shall be unpaid by reason of Nonpayment by the Consolidated Government (as such terms are defined in the Series 2004 Bond Insurance Policy) and any amounts due on the Series 2004 Bonds as a result of acceleration of the maturity thereof in accordance with this Supplemental Bond Resolution, whether or not the Series 2004 Bond Insurer has received a Notice of Nonpayment (as such term is defined in the Series 2004 Bond Insurance Policy) or a claim upon the Series 2004 Bond Insurance Policy. (d) The notice address of the Series 2004 Bond Insurer is: Financial Security Assurance Inc., 350 Park A venue, New York, New York 10022-6022, Attention: Managing Director-Surveillance; Telephone: (212) 826-0100; Telecopier: (212) 339-3529. All notices shall reference the Policy Number. In each case in which notice or other communication refers to an Event of Default, then a copy of such notice or other communication shall also be sent to the attention of General Counsel and shall be marked to indicate ''URGENT MATERIAL ENCLOSED." (e) information: The Series 2004 Bond Insurer shall be provided with the following (i) (A) Annual audited financial statements, if available, within 180 days after the end of the Consolidated Government's fiscal year and in any event as soon as practicable after the same becomes available, and (B) the Consolidated Government's annual budget for the System within 30 days after the approval thereof; -43- AD 1127325.4 (ii) Notice of any draw upon the Debt Service Reserve Account within two Business Days after knowledge thereof other than (i) withdrawals of amounts in excess of the Reserve Requirement and (ii) withdrawals in connection with a refunding of the Series 2004 Bonds; (iii) Notice of any default known to the Paying Agent within five business days after knowledge thereof; (iv) Prior notice of the advance refunding or redemption of any of the Series 2004 Bonds, including the principal amount, maturities and CUSIP numbers thereof; (v) Notice of the resignation or removal of the Paying Agent and Bond Registrar and the appointment of, and acceptance of duties by, any successor thereto; (vi) Notice of the commencement of any proceeding by or against the Consolidated Government or the Obligor commenced under the United States Bankruptcy Code or any other applicable bankruptcy, insolvency, receivership, rehabilitation or similar law (an "Insolvency Proceeding"); (vii) Notice of the making of any claim in connection with any Insolvency Proceeding seeking the avoidance as a preferential transfer of any payment of principal of, or interest on, the Series 2004 Bonds; (viii) A full original transcript of all proceedings relating to the execution of any amendment or supplement to the Series 2004 Resolution; and (ix) All reports, notices and correspondence to be delivered under the terms of this Supplemental Bond Resolution. Section 30. Reserve Account Surety Bond Provisions. The following provisions shall apply with respect to the Series 2004 Reserve Account Surety Bond Provider so long as the Series 2004 Reserve Account Surety Bond is in effect: (a) The Consolidated Government shall repay any draws under the Series 2004 Reserve Account Surety Bond and pay all related reasonable expenses incurred by the Series 2004 Reserve Account Surety Bond Provider. Interest shall accrue and be payable on such draws and expenses from the date of payment by the Series 2004 Reserve Account Surety Bond Provider at the Late Payment Rate. "Late Payment Rate" means the lesser of (a) the greater of (i) the per annum rate of interest, publicly announced from time to time by JP Morgan Chase. Bank at its principal office in the City of New York, as it prime or base lending rate ("Prime Rate") (any change in such Prime Rate to be effective on the date such change is announced by JP Morgan Chase Bank) plus 3 percent, and (ii) the then applicable highest rate of interest on the Series 2004 Bonds and (b) the maximum rate permissible under applicable usury or similar laws limiting interest rates. The Late Payment Rate shall be computed on the basis of the actual number of days elapsed over the year of 360 days. In the event JP Morgan Chase Bank ceases to announce its Prime Rate publicly, Prime Rate shall be the publicly announced prime or base lending rate of such national bank as the Series 2004 Reserve Account Surety Bond Provider shall specify. -44- AO 1127325.4 Repayment of draws and payment of expenses and accrued interest thereon at the Late Payment Rate (collectively, "Policy Costs") shall commence in the first month following each draw, and each such monthly payment shall be in an amount at least equal to one-twelfth of the aggregate of Policy Costs related to such draw. Amounts in respect of Policy Costs paid to the Series 2004 Reserve Account Surety Bond Provider shall be credited first to interest due, then to the expenses due and then to principal due. As and to the extent that payments are made to the Series 2004 Reserve Account Surety Bond Provider on account of principal due, the coverage under the Series 2004 Reserve Account Surety Bond will be increased by a like amount, subject to the terms of the Series 2004 Reserve Account Surety Bond. If and to the extent cash or other investments have also been deposited therein, all cash and investments in the Debt Service Reserve Account shall be transferred to the Debt Service Account and such investments liquidated for payment of debt service on the Bonds before any drawing may be made on the Series 2004 Reserve Account Surety Bond or any other Reserve Account Surety Bond, Payment of any Policy Costs shall be made prior to replenishment of any such cash amounts. Draws on all Reserve Account Surety Bonds (including the Series 2004 Reserve Account Surety Bond) on which there is available coverage shall be made on a pro rata basis (calculated by reference to the coverage then available thereunder) after applying all available cash and investments in the Debt Service Reserve Account. Payment of Policy Costs and reimbursement of amounts with respect to other Reserve Account Surety Bonds shall be made on a pro rata basis prior to replenishment of any cash drawn from the Debt Service Reserve Account. (b) If the Consolidated Government shall fail to pay any Policy Costs in accordance with the requirements of Paragraph (a) of this Section, the Series 2004 Reserve Account Surety Bond Provider shall be entitled to exercise any and all legal and equitable remedies available to it, including those provided under the Bond Resolution other than (i) acceleration of the maturity of the Series 2004 Bonds and any Additional Bonds or (ii) remedies which would adversely affect owners of the Series 2004 Bonds and any Additional Bonds. (a) The Bond Resolution shall not be discharged until all Policy Costs owing to the Series 2004 Reserve Account Surety Bond Provider shall have been paid in full. The Consolidated Government's obligation to pay such amounts shall expressly survive payment in full of the Bonds. (b) In order to secure the Consolidated Government's payment obligations with respect to the Policy Costs there shall be granted and perfected in favor of the Series 2004 Reserve Account Surety Bond Provider a security interest (subordinate only to that of the owners of the Series 2004 Bonds and any Additional Bonds and to that of the Hedge Providers) in all revenues and collateral pledged as security for the Bonds. (c) The Consolidated Government shall place into effect a schedule of rates, fees and charges sufficient to repay all Policy Costs then due and owing. The Consolidated Government shall not issue Additional Bonds unless the test provided in Section 26 of this Supplemental -45- AO 1127325.4 Bond Resolution provides, in addition to any other requirement therein, at least 1.0 times coverage of all Policy Costs then due and owing. (d) The Paying Agent shall ascertain the necessity for a claim upon the Series 2004 Reserve Account Surety Bond and to provide notice to the Series 2004 Reserve Account Surety Bond Provider in accordance with the terms of the Series 2004 Reserve Account Surety Bond at least five business days prior to each date upon which interest or principal is due on the Series 2004 Bonds. The Paying Agent shall give notice to the Series 2004 Reserve Account Surety Bond Provider of any failure of the Consolidated Government to make timely payment in full of any deposit required to be made to the Debt Service Account within two Business Days of the date due. Section 31. Insurance At!reement. The Mayor and Clerk to the Commission are hereby authorized and directed to purchase the Series 2004 Bond Insurance Policy and the Series 2004 Reserve Account Surety Bond and such Series 2004 Reserve Account Surety Bond shall be held for the credit of the Debt Service Reserve Account. In connection with the purchase of the Series 2004 Reserve Account Surety Bond, the Mayor and Clerk to the Commission are hereby authorized and directed to execute, for and on behalf of the Consolidated Government, the Insurance Agreement relating to the Series 2004 Bonds, which Insurance Agreement shall be in substantially the form attached as Exhibit B hereto and incorporated herein, with such changes as may be authorized by the Mayor. The execution and delivery of the Insurance Agreement shall be conclusive evidence of the approval of any such changes. Section 32. Arbitrat!e Covenants. The Consolidated Government hereby covenants and agrees that it will not, subsequent to the date of the issuance and delivery of the Series 2004 Bonds, intentionally use any portion of the proceeds of the Series 2004 Bonds to acquire higher yielding investments, or to replace funds which were used directly or indirectly to acquire higher yielding investments, except as may otherwise be permitted by the Internal Revenue Code of 1986, as amended (the "Code") or the regulations promulgated thereunder, including, but not limited to, complying with the requirements of Section 148(f) of the Code and the regulations promulgated thereunder and the payment of rebate, if any, required to be made, and that it will expend the proceeds of the Series 2004 Bonds in compliance with the applicable provisions of Sections 141 to 150, inclusive, of the Code. Anything herein or in the Prior Resolutions notwithstanding, earnings on amounts in any fund or account may, and shall to the extent necessary, be used to make the payments required under this Section. Section 33. Certification. The Mayor and Clerk of the Commission are hereby authorized and directed to execute, for and on behalf of the Consolidated Government, a certification, based upon facts, estimates and circumstances, as to the reasonable expectations regarding the amount, expenditure and use of the proceeds of the Series 2004 Bonds, as well as such other documents (including, without limitation, elections under Section 148 of the Code) as may be necessary or advisable in connection with the issuance and delivery of the Series 2004 Bonds. Section 34. Use of Proceeds and Tax Covenant. The Series 2004 Bonds are being issued by the Consolidated Government in compliance with the conditions necessary for interest income on the Series 2004 Bonds to be excluded from gross income for federal income tax -46- AO 1127325.4 purposes pursuant to the provisions of Section 103(a) of the Code relating to obligations of the State or any political subdivision thereof. It is the intention of the Consolidated Government that the interest on the Series 2004 Bonds be and remain excludable from gross income for federal income tax purposes, and, to that end, the Consolidated Government hereby covenants with the holders of the Series 2004 Bonds as follows: (a) It will not take any action, or fail to take any action, if any such action or failure to take action would adversely affect the tax exempt status of interest on the Series 2004 Bonds under Section 103 of the Code, (b) It will not directly or indirectly use or permit the use of any proceeds of the Series 2004 Bonds or any other funds of the Consolidated Government or take or omit to take any action that would cause the Series 2004 Bonds to be "arbitrage bonds" within the. meaning of Section 148 of the Code. To that end, the Consolidated Government will comply with all requirements of Section 148 of the Code to the extent applicable to the Series 2004 Bonds. (c) It will not permit any use of the facilities financed or refinanced by the Series 2004 Bonds which would cause the Series 2004 Bonds to be "private activity bonds" within the meaning of Section 141 of the Code. In the event that at any time the Consolidated Government is of the opinion that for purposes of this Section it is necessary to restrict or limit the yield on the investment of any moneys held under this Supplemental Bond Resolution, the Consolidated Government shall take such action as may be necessary. Any subsequent proceeding or proceedings authorizing the issuance of Additional Bonds or obligations as permitted under the Bond Resolution shall in nowise conflict with the terms, covenants and conditions of the Bond Resolution but shall for all legal purposes contain all of the applicable covenants, agreements and provisions of said Resolutions for the equal protection and benefit of all bondholders. Section 35. Severabilitv. In case anyone or more of the prOVISIons of this Supplemental Bond Resolution, or the Series 2004 Bonds issued hereunder, shall for any reason be held illegal or invalid, such illegality or invalidity shall not affect any other provisions of this Supplemental Bond Resolution or the Series 2004 Bonds, but this Supplemental Bond Resolution and the Series 2004 Bonds shall be construed and enforced as if such illegal or invalid provisions had not been contained therein. -47- AO 1127325.4 Section 36. Contract. The provisions, terms and conditions of this Supplemental Bond Resolution shall constitute a contract by and between the Consolidated Government and the owners of the Prior Bonds, the Auction Rate Bonds and the Series 2004 Bonds authorized to be issued hereunder, and after the issuance of the Series 2004 Bonds this Supplemental Bond Resolution shall not be repealed or amended in any respect which will adversely affect the rights and interests of the owners of the bonds of said issues, nor shall the governing body of the Consolidated Government pass any proceedings in any way adversely affecting the rights of such owners so long as any of the Bonds authorized by the Bond Resolution, or the interest thereon, shall remain unpaid or until provision shall have been duly made therefor, provided, however, that this covenant shall not be construed as prohibiting modifications hereof or amendments hereto to the extent and in the manner as provided in Article IX of the 1996 Resolution, as ratified, reaffirmed, broadened and extended by the 2000 Resolution and this Supplemental Bond Resolution. Any subsequent proceeding or proceedings authorizing the issuance of Additional Bonds or obligations with the Prior Bonds, the Auction Rate Bonds and the Series 2004 Bonds as permitted under Section 9 of Article V of the 1996 Resolution, as ratified, reaffirmed, broadened and extended in Section 25 of the 2000 Resolution, Section 25 of the 2002 Resolution, Section 23 of the 2004 Refunding Resolution and Section 26 of this Supplemental Bond Resolution, shall in nowise conflict with the terms, covenants and conditions of the Bond Resolution, but shall for all legal purposes contain all the applicable covenants, agreements and provisions of the Bond Resolution for the equal protection and benefit of all owners of the Prior Bonds, the Auction Rate Bonds, Series 2004 Bonds and such Additional Bonds. Section 37. Authorization of Preliminary Official Statement. The use of the Preliminary Official Statement dated November 15, 2004 with respect to the Series 2004 Bonds is hereby ratified and approved, The execution by the Mayor of a certificate "deeming final" the Preliminary Official Statement prior to the date hereof is hereby authorized, ratified and approved, The preparation, use, execution and delivery of a final Official Statement, to be dated the date hereof in substantially the form as the Preliminary Official Statement but including the particulars with respect to the Series 2004 Bonds as set forth herein, is hereby authorized and approved, Section 38. Authorization of Bond Purchase Agreement. The Purchase Agreement by and between the Consolidated Government and the Underwriter in substantially the form presented at the meeting at which this Supplemental Bond Resolution is adopted be, and the same is, authorized and approved and the Mayor of the Consolidated Government is hereby authorized and directed to execute and deliver such Purchase Agreement in the name and on behalf of the Consolidated Government and the Clerk of the Commission is hereby authorized to attest same and to affix the seal of the Consolidated Government thereto, if required. Section 39. Continuing Disclosure. The Consolidated Government hereby covenants and agrees that it will, to the extent allowed by applicable law, comply with and carry out all provisions of the Continuing Disclosure Certificate to be executed by the Consolidated Government and dated as of the date of issuance and delivery of the Series 2004 Bonds, as originally executed and as it may be amended from time to time in accordance with its terms (the "Disclosure Certificate"), Notwithstanding any other provision of this Supplemental Bond -48- AO 1127325.4 Resolution or the Prior Resolutions, failure of the Consolidated Government to comply with the Disclosure Certificate shall not be considered a default under the Bond Resolution, and under no circumstances shall such failure affect the validity or the security for the payment of the Series 2004 Bonds or the Prior Bonds. It is expressly provided, however, that any beneficial owner of the Series 2004 Bonds may take such action, to the extent and in such manner as may be allowed by applicable law, as may be necessary and appropriate, including seeking mandamus or specific performance by court order, to cause the Consolidated Government to comply with its obligations under this Section. The cost to the Consolidated Government of performing its obligations set forth in this Section shall be paid solely from funds lawfully available for such purpose, Nothing contained in this Supplemental Bond Resolution or in the Disclosure Certificate shall obligate the levy of any tax to comply with the Consolidated Government's obligations under this Section, Section 40. Validation. The Series 2004 Bonds herein authorized to be issued shall be validated in the manner provided by law, and to that end notice of the adoption of this Supplemental Bond Resolution and a copy thereof shall be served on the District Attorney of the Augusta Judicial Circuit, in order that proceedings for the above purpose be instituted in the Superior Court of Richmond County. Section 41. Effectiveness of Restatement of 2004 New Monev Resolution. Notwithstanding any other provision of this Supplemental Bond Resolution, in the event that the Series 2004 Bonds authorized by Section 2 of this Supplemental Bond Resolution are for whatever reason not issued, then the provisions of this Supplemental Bond Resolution shall be of no effect and the 2004 New Money Resolution and each and every provision thereof shall continue unamended, in full force and effect. Section 42. Repealer. Except as provided in Section 41 of this Supplemental Bond Resolution, any and all resolutions, or parts of resolutions, in conflict with this Supplemental Bond Resolution this day passed be and are hereby repealed, and this Supplemental Bond Resolution shall be in full force and effect from and after its adoption. APPROVED on Novembe~04. ~ca By: 1>>t~- 6 Bob Young, Mayor ,~ ,," .~, :" " ' ,~ /, '0 ' .. c"'~~ -i-\ .{S'E A~Lr - ~-......2. ~-", '-';-; ,.., - :;~' ", -..~..~..-~~ :_~ :: :., :~.; Attest: (-- ~, . , . -49- AO 1127325.4 CLERK'S CERTIFICATE GEORGIA, RICHMOND COUNTY I, Lena J. Bonner, Clerk of the Augusta-Richmond County Commission (the "Commission"), DO HEREBY CERTIFY that the foregoing pages constitute a true and correct copy of the resolution adopted by the Commission at an open public meeting duly called and lawfully assembled on November LL, 2004, at which a quorum was present and acting throughout, authorizing the issuance of $160,000,000 Augusta, Georgia Water and Sewerage Revenue Bonds, Series 2004, the original of said resolution being duly recorded in the Minute Book of said Commission, which Minute Book is in my custody and control, and that said. resolution was duly adopted by a vote of: 8 Aye_ o Nay_ Abstain 0 . Absent 2 WITNESS my hand and the official seal of Augusta, Georgia this November~, 2004. zadP~~ (S E A L) AO 1127325.4 $160,000,000 AUGUST A, GEORGIA WATER AND SEWERAGE REVENUE-BONDS, SERIES 2004 BOND PURCHASE AGREEMENT November 23, 2004 Augusta, Georgia 530 Greene Street Augusta, Georgia 30911 Ladies and Gentlemen: On the basis of the representations, warranties, and covenants contained in this Bond Purchase Agreement, and upon the terms and conditions contained in this Bond Purchase Agreement, the undersigned, Merrill Lynch & Co" Inc, (the "Representative"), acting on behalf of itself and as representative of A.G. Edwards & Sons, Inc. (the Representative and the foregoing underwriter being collectively referred to herein as the "Underwriters"), hereby offer to purchase from Augusta, Georgia (the "Consolidated Government") $160,000,000 in aggregate principal amount of its Water and Sewerage Revenue Bonds, Series 2004 (the "Bonds"), and hereby offer to enter into this Bond Purchase Agreement with the Consolidated Government, which will become binding upon the Consolidated Government and upon the Underwriters upon the Consolidated Government's validly authorized acceptance by execution of this Bond Purchase Agreement and its delivery to the Representative at or prior to 9:00 p.m., Atlanta, Georgia time, on November 23, 2004, SECTION 1. BACKGROUND. Pursuant to a Bond Resolution duly adopted by the governing body of the Consolidated ' Government on October 21, 1996, at a meeting duly called and held, as ratified, reaffirmed, . supplemented, and amended by resolutions duly adopted by the governing body of the . Consolidated Government on December 3, 1996, December 17, 1996, August 22, 2000, September 15, 2000, May 30, 2002, June 21,2002, May 4,2004, June 1, 2004, June 15, 2004, and November 23, 2004 at meetings duly called and held (collectively the "Bond Resolution"), the Consolidated Government has authorized the issuance, delivery, and sale of the Bonds. The Bonds will be issued under and secured by the Bond Resolution. 1858881.v2 The Consolidated Government will use the proceeds of the sale of the Bonds, after payment of the costs of issuing the Bonds, to pay the costs of making additions, extensions, and improvements to the Consolidated Government's water supply, treatment, and distribution system and sanitary sewer treatment and collection system (collectively the "System"), The Bonds will constitute special limited obligations of the Consolidated Government payable solely from and secured by a first priority pledge of and lien on the revenues derived by the Consolidated Government from the ownership and operation of the System, remaining after the payment of expenses of operating, maintaining, and repairing the System (the "Net Revenues"). The Bonds will be equally and ratably secured on a parity basis (1) with the Consolidated Government's revenue bonds previously issued under the Bond Resolution (the "Prior Bonds"), which are presently outstanding in the aggregate principal amount of $307,595,000, and (2) with any additional revenue bonds of the Consolidated Government hereafter issued on a parity basis with the Prior Bonds and the Bonds under the Bond Resolution, Simultaneously with the issuance of the Bonds, Financial Security Assurance Inc. (the "Bond Insurer") will issue its irrevocable insurance policy (the "Bond Insurance Policy") which will insure the payment of principal of and interest on the Bonds when due. With the consent of the Consolidated Government, the Underwriters have distributed a Preliminary Official Statement, dated November 15, 2004 (the "Preliminary Official Statement"), relating to the Bonds in connection with the marketing of the Bonds. The Bonds will be offered for sale by the Underwriters pursuant to a definitive Official Statement, to be dated November 23,2004 (the "Official Statement"), relating to the Bonds, The Consolidated Government will undertake, pursuant to the Bond Resolution and a Continuing Disclosure Certificate (the "Disclosure Certificate"), to provide annual reports and notices of certain events, A description of this undertaking is set forth in the Preliminary Official Statement and will also be set forth in the Official Statement. Capitalized terms used herein and not defined shall have the meaning assigned to such terms in the Bond Resolution. SECTION 2. REPRESENTATIONS, WARRANTIES, AND AGREEMENTS OF THE CONSOLIDATED GOVERNMENT. By the Consolidated Government's acceptance hereof it hereby represents and warrants to, and covenants and agrees with, the Underwriters that: (a) It is a political subdivision of the State of Georgia (the "State") duly created and validly existing under the laws of the State as a consolidated city-county government. The Consolidated Government has all of the governmental and corporate powers of both municipal corporations and counties and is authorized by virtue of the laws of the State, including Article 3 of Chapter 82 of Title 36 of the Official Code of Georgia Annotated, to issue the Bonds to provide funds to be used to pay the costs of making additions, extensions, and improvements to the System and to pay all expenses necessary to accomplish the foregoing, to be the pledgor as provided in the Bond Resolution, to -2- execute and deliver the Official Statement, and to enter into and execute, deliver, and perform this Bond Purchase Agreement and the Disclosure Certificate, (b) It has complied with all provisions of the Constitution and laws of the State with respect to the consummation of, and has full power and authority to consummate, all transactions contemplated by this Bond Purchase Agreement, the Bonds, the Bond Resolution, the Disclosure Certificate, and any and all other agreements relating thereto and to issue, sell, and deliver the Bonds to the Underwriters on behalf of the Consolidated Government as provided herein, (c) By the Bond Resolution duly adopted by it at meetings duly called and held, it has duly and validly authorized the issuance and sale of the Bonds and the execution and delivery of the Disclosure Certificate, this Bond Purchase Agreement, and any other agreements relating thereto, (d) The information contained in the Preliminary Official Statement and in the Official Statement (except for the information relating to the Bond Insurer, as to which the Consolidated Government makes no representations), and in any amendment or supplement that may be authorized for use by the Consolidated Government with respect to the Bonds (including the information contained in Appendix A) is, and as of the Closing Time (as hereinafter defined) and the End of the Underwriting Period (as determined in Section 9 hereof) will be, complete, accurate, true, and correct and does not contain and will not contain any untrue statement of a material fact and does not omit and will not omit to state a material fact required to be stated therein or necessary in order to make the statements therein made, in light of the circumstances under which they were made, not misleading. The Consolidated Government has reviewed the Preliminary Official Statement and consents to the use of the Official Statement by the Underwriters to offer and sell the Bonds. (e) It has duly and validly authorized all necessary action to be taken by it for: (1) the issuance and sale of the Bonds upon the terms set forth herein and in the Bond Resolution, (2) the passage and approval of the Bond Resolution providing for the issuance of and security for the Bonds (including the pledge by the Consolidated Government of the Net Revenues) and appointing SunTrust Bank, Atlanta, Georgia, as paying agent and bond registrar for the Bonds, (3) the execution, delivery, receipt, and due performance of this Bond Purchase Agreement, the Bonds, the Bond Resolution, the Disclosure Certificate, and any and all such other agreements and documents as may be required to be executed, delivered, or received by the Consolidated Government in order to carry out, give effect to, and consummate the transactions contemplated hereby and by the Bond Resolution, (4) the approval of the Preliminary Official Statement and the Official Statement and their use by the Underwriters in the public offering and sale of the Bonds and the execution of the Official Statement by the Mayor of the Consolidated. Government or other authorized officials of the Consolidated Government, and (5) the carrying out, giving effect to, and consummation of the transactions contemplated hereby and by the Bond Resolution, the Disclosure Certificate, and the Official Statement. This Bond Purchase Agreement, when executed by the other parties hereto, will have been duly and validly executed and delivered by the Consolidated Government, will be in full -3- force and effect as to the Consolidated Government, and will constitute the legal, valid, binding, and enforceable obligation of the Consolidated Government, enforceable in accordance with its terms. The Bonds, when issued, delivered, and paid for as herein and in the Bond Resolution provided, will have been duly and validly authorized and issued and will constitute valid and binding special or limited obligations of the Consolidated Government enforceable in accordance with their terms and provisions and entitled to the benefits and security of the Bond Resolution. Original executed counterparts of this Bond Purchase Agreement and the Disclosure Certificate, a certified copy of the Bond Resolution, and ten (10) manually executed counterparts of the Official Statement will be delivered to the Representative by the Consolidated Government at the Closing Time (as hereinafter defined). (f) Except as disclosed in the Official Statement, there is no action, suit, proceeding, inquiry, or investigation at law or in equity or before or by any court, public board, or body pending or, to the knowledge of the Consolidated Government, after making due inquiry with respect thereto, threatened against or affecting the Consolidated Government (or to its knowledge, after making due inquiry with respect thereto, any basis therefor), wherein an unfavorable decision, ruling, or finding would adversely affect the transactions contemplated hereby or by the Official Statement, the levy or collection of any utility charges or fees relating to the System, or the validity of the Bonds, this Bond Purchase Agreement, the Bond Resolution, the Disclosure Certificate, or any other agreement or instrument to which the Consolidated Government is a party or by which the Consolidated Government is bound and which is used or contemplated for use in the consummation of the transactions contemplated hereby or by the Official Statement or which might result in any material adverse change in the operations, properties, assets, liabilities, or condition (financial or other) of the System, or which affects the information contained in the Official Statement. (g) The Consolidated Government is not in material violation of its organic documents or any existing law and is not in violation of any material provision of or in breach of or default under any court or administrative regulation, decree, judgment, or order in any proceeding in which the Consolidated Government was a party, or any agreement, note, resolution, ordinance, indenture, m0l1gage, security deed, lease, indebtedness, lien, instrument, plan, or other restriction to which it is a party or by which it or its property is subject or bound, which materially and adversely affects the transactions contemplated hereby and by the Official Statement or the operations, properties, assets, liabilities, or condition (financial or other) of the System, The consent to the use of the Official Statement and the execution and delivery of this Bond Purchase Agreement, the Bonds, the Bond Resolution, the Disclosure Certificate, and the other agreements contemplated hereby and by the Bond Resolution and the compliance with the provisions thereof will not conflict with or violate or constitute on the Consolidated Government's part a breach of or a default under any of the restrictions described in the first sentence of this Section 2(g). No approval, authorization, consent, or other action by any governmental authority is required in connection with the execution and delivery by it of the Bonds, the Bond Resolution, the Disclosure Certificate, or this Bond Purchase Agreement, or in connection with the performance by it of its obligations hereunder or thereunder, which has not been previously obtained or accomplished. -4- (h) The Consolidated Government will not knowingly take or omit to take any action, which action or omission will in any way cause the proceeds from the sale of the Bonds to be applied in a manner other than as provided in the Bond Resolution or which would cause the interest on the Bonds to become includable in the gross income of the owners thereof for federal income tax purposes. (i) Any certificate signed by any of the Consolidated Government's authorized officials and delivered to the Representative shall be deemed a representation and warranty by the Consolidated Government to the Underwriters under this Bond Purchase Agreement as to the statements made therein. G) The Consolidated Government will cooperate with the Representative in the qualification of the Bonds for offering and sale and the determination of their eligibility for investment under the laws of such jurisdictions as the Representative shall designate; provided, however, the Consolidated Government shall not be required to register as a dealer or broker in any such jurisdiction, nor execute a general consent to service of process or qualify to do business in connection with any such qualification of the Bonds in any such jurisdiction, (k) The Consolidated Government will notify the Representative for the period from the date hereof until the expiration of 90 days after the End of the Underwriting Period (as determined in Section 9 hereof) of any material adverse change in the operations, properties, or condition (financial or other) of the System, and of any event which occurs and comes to the Consolidated Government's attention, which event materially and adversely affects the Consolidated Government, the Bond Insurer, or the transactions contemplated by the Official Statement and which would cause the Official Statement to contain an untrue statement of a material fact or to omit to state a material fact which should be included therein for the purposes for which the Official Statement was to be used or which is necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, and, if in the opinion of the Representative, a change in the information contained in the Official Statement is required in order to make the statements therein made true and not misleading or to make the Official Statement comply with any applicable state securities law in connection with the offering of the Bonds, such change shall be made, and the corrected information shall be supplied to the Representative in sufficient quantity for distribution to the purchasers of the Bonds. If such change occurs subsequent to the Closing Time, the Consolidated Government shall furnish to the Representative such legal opinions, certificates, instruments, and documents as the Representative may reasonably request to evidence the truth and accuracy of such corrected information. Thereafter, this Bond Purchase Agreement shall refer to such corrected information. (1) Prior to the execution of this Bond Purchase Agreement, the Consolidated , Government delivered to the Representative copies of the Preliminary Official Statement which the Consolidated Government "deemed final" as of its date for purposes of Rule 15c2-12 promulgated under the Securities Exchange Act of 1934, as amended, except for the permitted omissions described in paragraph (b)(1) of Rule 15c2-12. There have been no instances in the previous five years in which the Consolidated Government failed to -5- comply, in any material respects, with any previous undertakings in a written contract or agreement specified in Rule 15c2-12(b)(5)(i), (m) To the best knowledge of the Consolidated Government, no legislation, ordinance, resolution, rule, or regulation has been enacted by any governmental body, department, or agency of the State nor has any decision been rendered by any court of competent jurisdiction in the State, which would materially and adversely affect the transactions contemplated by the Official Statement. (n) Subsequent to the respective dates as of which information is given in the Official Statement, and prior to the Closing Date, except as set forth in or contemplated by the Official Statement, (1) the Consolidated Government has not incurred and shall not have incurred any material liabilities or obligations relating to the System, direct or contingent, except in the ordinary course of business, and has not entered and will not have entered into any material transaction relating to the System not in the ordinary course of business, (2) there has not been and will not have been any increase in the long-term debt payable from Net Revenues or decrease in the fund equity of the fund of the Consolidated Government relating to the System, (3) there has not been and will not have been any material adverse change in the business or the financial position or results of operations of the System, (4) no loss or damage (whether or not insured) to the property of the System has been or will have been sustained which materially and adversely affects the operations of the System, and (5) no legal or governmental proceeding affecting the System or the transactions contemplated by this Bond Purchase Agreement has been or will have been instituted or threatened which is material. (0) The Consolidated Government will furnish to the Representative, upon request, for so long as the Bonds remain outstanding, annual audited financial statements of the System as soon as such financial statements become available. (P) As of the Closing Date, the Consolidated Government will have good and marketable title to the System and the owners of the Bonds will have a valid and effective first priority lien on the Net Revenues, on a parity basis with the Prior Bonds. (q) The Consolidated Government acknowledges and agrees that these representations and warranties are made to induce the Underwriters to purchase the Bonds, and that such representations and warranties and any other representations and warranties made by the Consolidated Government to the Underwriters are made for the benefit of the ultimate purchasers of the Bonds and may be relied upon by such purchasers. SECTION 3. PURCHASE, SALE, AND DELIVERY OF THE BONDS. On the basis of the representations, warranties, and covenants contained herein and in the other agreements referred to herein, and subject to the terms and conditions herein set forth, the I Underwriters hereby agree to purchase from the Consolidated Government at the Closing Time and the Consolidated Government hereby agrees to sell to the Underwriters at the Closing Time, the Bonds at a price of 103.8592476% of the aggregate principal amount thereof -6- ($166,174,796.14 (consisting of the par amount of the Bonds less $827,784,36 underwriting discount plus $7,002,580,50 original issue premium)). The Underwriters, in their discretion, may permit other securities dealers who are members of the National Association of Securities Dealers, Inc, to assist in selling the Bonds, If the Underwriters permit other securities dealers who are members of the National Association of Securities Dealers, Inc, to assist in selling the Bonds, the Underwriters shall enter into a selected dealers agreement or selling agreement with such other securities dealers, The Bonds shall be issued under and secured as provided in the Bond Resolution, and the Bonds shall have the maturities and interest rates, be subject to redemption, and shall be otherwise as described and as set forth in the Bond Resolution and the Official Statement. Payment of the purchase price for the Bonds shall be made by wire in immediately available funds payable to the order of the Consolidated Government at the offices of Sutherland Asbill & Brennan LLP in Atlanta, Georgia, at 10:00 a.m" local time, on December 9, 2004, or such other place, time, or date as shall be mutually agreed upon by the Consolidated Government and the Representative, against delivery of the Bonds to the Underwriters or the persons designated by the Representative, The date of such delivery and payment for the Bonds is herein called the "Closing Date," and the hour and date of such delivery and payment is herein called the "Closing Time," The delivery of the Bonds shall be made in definitive form bearing CUSIP numbers (provided neither the printing of a wrong CUSIP number on any Bond nor the failure to print a CUSIP number thereon shall constitute cause to refuse delivery of any Bond) and registered in the name(s) of such owner(s) as the Representative shall designate to the Consolidated Government, at least forty-eight (48) hours prior to the Closing Time. The Bonds shall be available for examination and packaging at the offices of The Depository Trust Company in New York, New York by the Representative or its representatives at least twenty- four (24) hours prior to the Closing Time and at the Closing Time shall be delivered to the Representative or the persons designated by Representative, SECTION 4. CONDITIONS TO THE UNDERWRITERS' OBLIGATIONS. The Underwriters' obligations hereunder shall be subject to the due performance in all material respects by the Consolidated Government of its obligations and agreements to be performed hereunder at or prior to the Closing Time and to the accuracy of and compliance with in all material respects its representations and warranties contained herein, as of the date hereof and as of the Closing Time, and are also subject to receipt of the following evidence and documents and satisfaction of the following conditions, as appropriate, at or prior to the Closing Time: (a) The Bonds, the Bond Resolution, the Bond Insurance Policy, and the Disclosure Certificate shall have been duly authorized, executed, and delivered by the respective parties thereto in the forms heretofore approved by the Representative with only such changes therein as shall be mutually agreed upon by the parties thereto and the Representative, and shall be in full force and effect on the Closing Date. (b) There shall not have occurred, in the sole opinion of the Representative, any material adverse change, or any material adverse development involving a prospective -7- change, in or affecting the business, condition (financial or other), results of operations, prospects, or properties of the System or the Bond Insurer. (c) At or before the Closing Time, the Representative shall receive: (1) The opinions, dated as of the Closing Date, of (A) Shepard, Plunkett, Hamilton, Boudreaux & Tisdale, LLP, counsel to the Consolidated Government, in substantially the form attached hereto as Exhibit A, (B) Sutherland Asbill & Brennan LLP, Bond Counsel, in substantially the forms attached hereto as Exhibit B, (C) Kilpatrick Stockton LLP, counsel to the Underwriters, in substantially the form attached hereto as Exhibit C, and (D) counsel to the Bond Insurer, in substantially the form attached hereto as Exhibit D, all as may be in form and substance satisfactory to, and approved by, the Representative, (2) A closing certificate of the Consolidated Government, satisfactory in form and substance to the Representative, executed by the Mayor of the Consolidated Government, attested by the Consolidated Government Clerk, or any other of the Consolidated Government's duly authorized officials satisfactory to the Representative, dated as of the Closing Date, to the effect that: (A) the Consolidated Government has duly performed and satisfied hereunder or complied with all of its obligations and conditions to be performed and satisfied hereunder at or prior to the Closing Time and each of its representations and warranties contained herein have not been amended, modified, or rescinded and is in full force and effect and is true and correct in all material respects as of the Closing Time, (B) the Consolidated Government has duly authorized, by all necessary action, the execution, delivery, receipt, and due performance of the Bonds, the Bond Resolution, the Disclosure Certificate, this Bond Purchase Agreement, and any and all such other agreements and documents as may be required to be executed, delivered, received, and performed by the Consolidated Government to carry out, give effect to, and consummate the transactions contemplated hereby and by the Bond Resolution and the Official Statement, (C) there is no action, suit, proceeding, or inquiry or investigation at law or in equity or before or by any public board or body pending or, to his knowledge after making due inquiry with respect thereto, threatened against or affecting the Consolidated Government or its property or, to his knowledge after making due inquiry with respect thereto, any basis therefor, wherein an unfavorable decision, ruling, or finding would adversely affect the transactions contemplated hereby or by the Bond Resolution or the validity or enforceability of the Bonds, the Bond Resolution, the Disclosure Certificate, or this Bond Purchase Agreement, which have not been previously disclosed in writing to the Representative and which is not disclosed in the Official Statement, (D) all information furnished to the Underwriters for use in connection with the marketing of the Bonds and the information contained in the Preliminary Official Statement and the Official Statement, including the information contained in Appendix A but excluding the information relating to the Bond Insurer, were, as of the respective dates thereof and are as of the Closing Date, true in all material respects and do not contain any untrue statement of a material fact or omit to state a material fact necessary in -8- order to make the statements made therein, in light of the circumstances under which they were made, not misleading, (E) the execution, delivery, receipt, and due performance of the Bonds, the Bond Resolution, the Disclosure Certificate, this Bond Purchase Agreement, and the other agreements contemplated hereby and by the Bond Resolution and the Official Statement under the circumstances contemplated hereby and thereby and the Consolidated Government's compliance with the provisions thereof will not conflict with or be in violation of the Consolidated Government's organic documents or any existing law or court or administrative regulation, rule, decree, judgment, or order or conflict with or constitute on the Consolidated Government's part a breach of or a default under any agreement, note, indenture, mortgage, security deed, resolution, ordinance, lease, indebtedness, lien, plan, instrument, or other restriction to which the Consolidated Government is subject or by which the Consolidated Government is or may be bound, and (F) since the date hereof there has not been any material adverse change in the operations, properties, financial position, or results of operations of the System, whether or not arising from transactions in the ordinary course of business, other than as previously disclosed in writing to the Representative and as disclosed in the Official Statement, and except in the ordinary course of business, the Consolidated Government has not suffered or incurred any material liability relating to the System, other than as previously disclosed in writing to the Representative and as disclosed in the Official Statement. (3) A Comfort Letter and a Consent Letter, dated the date of the Official Statement, of Cherry, Bekaert & Holland, L.L.P., and a Bring-Down Letter, dated the Closing Date, of Cherry, Bekaert & Holland, L.L.P " in substantially the forms attached hereto as Exhibit E. (4) Letters confirming the AaaJAAA ratings of Moody's Investors Service, 'Inc, and Standard & Poor's Ratings Services, respectively, with respect to the Bonds. (5) A Consent Letter, dated the Closing Date, of CH2M HILL, III substantially the form attached hereto as Exhibit F. (6) The Bond Insurance Policy issued by the Bond Insurer insuring the payment of principal of and interest on the Bonds, when due, in substantially the form appended to the Preliminary Official Statement, with appropriate insertions. (7) A closing certificate of the Bond Insurer, satisfactory in form and substance to the Representative, executed by any authorized officer of the Bond Insurer, in substantially the form attached hereto as Exhibit G. (8) Such additional certificates and other documents, agreements, and opinions as the Representative and Underwriters' counsel may reasonably request to evidence performance of or compliance with the provisions hereof and the transactions contemplated hereby and by the Bond Resolution and the Official -9- Statement, all such certificates and other documents to be satisfactory in form and substance to the Representative. All opinions shall be addressed to the Representative, as representative of the Underwriters, and may also be addressed to such other parties as the giver of such opinion agrees to. All certificates, if addressed to any party, shall also be addressed to the Representative. All such opinions, letters, certificates, and documents shall be in compliance with the provisions hereof only if they are in all material respects satisfactory to the Representative and Underwriters' counsel, as to which both the Representative and Underwriters' counsel shall act reasonably. If any condition of the Underwriters' obligations hereunder to be satisfied prior to the Closing Time is not so satisfied, this Bond Purchase Agreement may be terminated by the Representative by notice in writing or by telegram to the Consolidated Government. The Representative may waive in writing compliance by the Consolidated Government of anyone or more of the foregoing conditions or extend the time for their performance, SECTION 5. THE UNDERWRITERS' RIGHT TO CANCEL. The Representative shall have the right to cancel the Underwriters' obligations hereunder (and such cancellation shall not constitute a default of the Underwriters for purposes of this Bond Purchase Agreement) by notifying the Consolidated Government in writing or by telegram of its election so to do between the date hereof and the Closing Time, if at any time hereafter and prior to the Closing Time: (a) A committee of the House of Representatives or the Senate of the Congress of the United States of America (the "United States") shall have pending before it legislation, or a tentative decision with respect to legislation shall be reached by a committee of the House of Representatives or the Senate of the Congress of the United States, or legislation shall be favorably reported by such a committee or be introduced, by amendment or otherwise, in, or be passed by, the House of Representatives or the Senate, or recommended to the Congress of the United States for passage by the President of the United States, or be enacted by the Congress of the United States, or an announcement or a proposal for any such legislation shall be made by a member of the House of Representatives or the Senate of the Congress of the United States, or a decision by a court established under Article III of the Constitution of the United States or the Tax Court of the United States shall be rendered, or a ruling, regulation, or order of the Treasury Department of the United States or the Internal Revenue Service shall be made or proposed having the purpose or effect of imposing federal income taxation, or any other event shall have occurred which results in or proposes the imposition of federal income taxation, upon revenues or other income of the general character to be derived by state and local governmental units or by any similar body or upon interest received on obligations of the general character of the Bonds, which, in the Representative's sole opinion, materially and adversely affects the market price of the Bonds. (b) Any legislation, ordinance, resolution, rule, or regulation shall be introduced in or be enacted or imposed by any governmental body, department, or agency of the United States or of any state, or a decision by any court of competent jurisdiction within -10- the United States or any state shall be rendered which, in the Representative's sole opinion, materially adversely affects the market price of the Bonds. (c) A stop order, ruling, regulation, or official statement by, or on behalf of, the Securities and Exchange Commission or any other governmental agency having jurisdiction of the subject matter shall be issued or made to the effect that the issuance, offering, or sale of obligations of the general character of the Bonds, or the issuance, offering, or sale of the Bonds, as contemplated hereby or by the Official Statement, is in violation or would be in violation of any provisions of the federal securities laws, including without limitation the registration provisions of the Securities Act of 1933, as amended and as then in effect, or the registration provisions of the Securities Exchange Act of 1934, as amended and as then in effect, or the qualification provisions of the Trust Indenture Act of 1939, as amended and as then in effect. (d) Legislation shall be introduced by amendment or otherwise in, or be enacted by, the Congress of the United States, or a decision by a court of the United States shall be rendered to the effect that obligations of the general character of the Bonds, or the Bonds, are not exempt from registration under or from other requirements of the Securities Act of 1933, as amended and as then in effect, or the Securities Exchange Act of 1934, as amended and as then in effect, or that the Bond Resolution is not exempt from qualification under or from other requirements of the Trust Indenture Act of 1939, as amended and as then in effect, or with the purpose or effect of otherwise prohibiting the issuance, offering, or sale of obligations of the general character of the Bonds, or the Bonds, as contemplated hereby or by the Official Statement. ( e) Any event shall have occurred, or information becomes known, which, in the Representative's sole opinion, makes untrue in any material respect any statement or information furnished to the Underwriters by the Consolidated Government or the Bond Insurer for use in connection with the marketing of the Bonds or any material statement or information contained in the Preliminary Official Statement or the Official Statement as originally circulated contains an untrue statement of a material fact or omits to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; provided, however, that the Consolidated Government shall be granted a reasonable amount of time in which to cure any such untrue or misleading statement or information, (f) Additional material restrictions not in force as of the date hereof shall have been imposed upon trading in securities generally by any governmental authority or by any national securities exchange. (g) The New York Stock Exchange or any other national securities exchange, or any governmental authority, shall impose, as to the Bonds or obligations of the general character of the Bonds, any material restrictions not now in force, or increase materially those now in force, with respect to the extension of credit by, or a change to the net capital requirements of, the Underwriters. -11- (h) A general banking moratorium shall have been established by federal, New York, or Georgia authorities. (i) A default has occurred with respect to the obligations of, or proceedings have been instituted under the federal bankruptcy laws or any similar state laws by or against, any state of the United States or any city or county located in the United States having a population in excess of one million persons or any entity issuing obligations on behalf of such a city, county, or state. (j) Any proceeding shall be pending, or to the knowledge of the Representative, threatened, to restrain, enjoin, or otherwise prohibit the issuance, sale, or delivery of the Bonds by the Consolidated Government or the purchase, offering, sale, or distribution of the Bonds by the Underwriters, or for any investigatory or other proceedings under any federal or state securities laws or the rules and regulations of the National Association of Securities Dealers, Inc. relating to the issuance, sale, or delivery of the Bonds by the Consolidated Government or the purchase, offering, sale, or distribution of the Bonds by the Underwriters. (k) A war involving the United States shall have been declared, or any conflict involving the armed forces of the United States shall have escalated, or any other national emergency relating to the effective operation of government or the financial community shall have occurred, which, in the Representative's sole opinion, materially adversely affects the market price of the Bonds, (1) Moody's Investors Service, Inc. or Standard & Poor's Ratings Services shall withdraw their respective Aaa/ AAA ratings on the Bonds prior to the Closing Time. SECTION 6. CONDITIONS OF THE CONSOLIDATED GOVERNMENT'S OBLIGA TIONS. The Consolidated Government's obligations hereunder are subject to the Underwriters' performance of their obligations hereunder. The Representative represents that it is duly authorized to execute and deliver this Bond Purchase Agreement on behalf of the Underwriters and that upon execution and delivery of this Bond Purchase Agreement by the other parties hereto, this Bond Purchase Agreement shall constitute a legal, valid, and binding agreement of the Underwriters enforceable in accordance with its terms, The Consolidated Government covenants to use its best efforts to accomplish, or cause to be accomplished, the conditions set forth herein to the Underwriters' obligations. To the extent to which the Consolidated Government is not in breach of this covenant, the Consolidated Government shall not be liable to the Underwriters for their lost profits, if any, SECTION 7. REPRESENTATIONS, WARRANTIES, AND AGREEMENTS TO SURVIVE DELIVERY. All of the Consolidated Government's representations, warranties, and agreements shall remain operative and in full force and effect (unless expressly waived in writing by the Representative), regardless of any investigations made by the Underwriters or on their behalf, -12- and shall survive delivery of the Bonds to the Underwriters and the resale by the Underwriters of the Bonds, SECTION 8. PAYMENT OF EXPENSES. Whether or not the Bonds are sold by the Consolidated Government, the Underwriters shall be under no obligation to pay any expenses incident to the performance of the Consolidated Government's obligations hereunder. Unless the Consolidated Government and the Underwriters otherwise agree, all costs incurred in connection with the issuance or attempted issuance of the Bonds and all expenses and costs to effect the authorization, preparation, issuance, delivery, distribution, and sale of the Bonds (including, without limitation, attorneys', engineers', and accountants' fees, bond registrar's and paying agent's fees and the expenses and costs for the preparation, printing, photocopying, execution, and delivery of the Bonds, the Bond Resolution, this Bond Purchase Agreement, the Disclosure Certificate, the Preliminary Official Statement and any amendments or supplements thereto, the Official Statement and any amendments or supplements thereto, and all other agreements and documents contemplated hereby) shall be paid by the Consolidated Government out of the proceeds ofthe Bonds or, ifthe Bonds are not sold by the Consolidated Government or if the proceeds of the Bonds are not sufficient, shall be paid by the Consolidated Government. SECTION 9. DELIVERY AND USE OF OFFICIAL STATEMENT. The Consolidated Government authorizes the use and distribution of, and will make available, the Preliminary Official Statement and the Official Statement for the use and distribution by the Underwriters "in connection with the sale of the Bonds. The Consolidated Government shall deliver, or cause to be delivered, to the Underwriters copies of the Preliminary Official Statement in sufficient quantity in order for the Underwriters to comply with Rule 15c2-l2(b )(2) promulgated under the Securities Exchange Act of 1934. The Consolidated Government shall deliver, or cause to be delivered, to the Underwriters copies of the final Official Statement in sufficient quantity in order for the Underwriters to comply with Rule 15c2-12(b)(4) promulgated under the Securities Exchange Act of 1934, as amended, and the rules of the Municipal Securities Rulemaking Board, upon the earlier of (1) seven (7) business days after this Bond Purchase Agreement is executed and delivered or (2) the date which will allow such final Official Statement to accompany any confirmation that requests payment from any customer. The Representative shall promptly notify the Consolidated Government in writing of (a) the date which, in its opinion, is the "end of the underwriting period" within the meaning of Rule 15c2-12(e)(2) ("End of the Underwriting Period") and (b) whether the Representative delivered the Official Statement to a nationally recognized municipal securities information repository and, if so delivered, the date on which delivered. The Consolidated Government may request from the Underwriters from time to time, and the Underwriters shall provide to the Consolidated Government upon request, such information as may be reasonably required by the Consolidated Government in order to determine whether the End of the Underwriting Period has occurred. -13- SECTION 10. INDEMNITY AND CONTRIBUTION. (a) To the extent permitted by applicable law, the Consolidated Government hereby agrees to indemnify and hold harmless the Underwriters, together with each officer and member of the Board of Directors of the Underwriters and each person who controls the Underwriters within the meaning of either the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, from and against any and all losses, claims, damages, liabilities, costs, and expenses (including, without limitation, fees and disbursements of counsel and other expenses incurred by them or either of them in connection with investigating or defending any loss, claim, damage, or liability or any suit, action, or proceeding, whether or not resulting in liability), joint or several, to which they or any of them may become subject under the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, or any other applicable statute or regulation, whether federal or state, or at common law or otherwise, insofar as such losses, claims, damages, liabilities, costs, and expenses (or any suit, action, or proceeding in respect thereof) arise out of or are based upon any untrue or misleading statement or alleged untrue or misleading statement of a material fact contained in the Preliminary Official Statement or the Official Statement, including the information contained in Appendix A, or in any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which such statements were made, not misleading, provided, however, the Consolidated Government will not be liable in any such case to the extent that any such loss, claim, damage, liability, cost, or expense arises out of or is based upon any untrue statement or alleged untrue statement or omission or alleged omission made therein in reliance upon and in conformity with written information furnished by the Underwriters specifically for use in connection with the preparation thereof. This indemnity agreement will be in addition to any liability which the Consolidated Government may otherwise have, (b) Promptly after receipt by any party entitled to indemnification under this paragraph of notice of the commencement of any suit, action, or proceeding, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under this paragraph, notify the indemnifying party in writing of the commencement thereof, but the omission so to notify the indemnifying party shall not relieve it from any liability which it may have to any indemnified party otherwise than under this paragraph or from any liability under this paragraph unless the failure to provide notice prejudices the defense of such suit, action, or proceeding. In case any such action is brought against any indemnified party, and it notifies the indemnifying party of the commencement thereof, the indemnifying party shall be entitled, but not obligated, to participate therein, and to the extent that it may elect by written notice delivered to the indemnified party, promptly after receiving the aforesaid notice from such indemnified party, to assume the defense thereof, with counsel satisfactory to such indemnified party; provided, . however, if the defendants in any such action include both the indemnified party and the indemnifying party, and the indemnified party shall have reasonably concluded that there may be legal defenses available to it or other indemnified parties which are different from or additional to those available to the indemnifying party, the indemnified party or parties shall have the right ' to select separate counsel to assert such legal defenses and to otherwise participate in the defense of such action on behalf of such indemnified party or parties. Upon receipt of notice from the indemnifying party to such indemnified party of its election so to assume the defense of such action and approval by the indemnified party of counsel, the indemnifying party shall not be -14- liable to such indemnified party under this paragraph for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof unless (i) the indemnified party shall have employed separate counsel in connection with the assertion of legal defenses in accordance with the proviso to the next preceding sentence (it being understood, however, that the indemnifying party shall not be liable for the expenses of more than one separate counsel representing the indemnified parties under this paragraph who are parties to such action), (ii) the indemnifying party shall not have employed counsel satisfactory to the indemnified party to represent the indemnified party within a reasonable time after notice of commencement of the action, or (iii) the indemnifying party has authorized the employment of counsel for the indemnified party at the expense of the indemnifying party; and except that, if clause (i) or (iii) is applicable, such liability shall be only in respect of the counsel referred to in such clause (i) or (iii). (c) The Consolidated Government shall not be liable for any settlement of any such action effected without its consent, but if settled with its consent, the Consolidated Government agrees to indemnify and hold the Underwriters, such officer or director, or such controlling person harmless from and against any loss or liability, including reasonable legal and other expenses incurred in connection with the defense of the action, by reason of such settlement to the extent of the indemnification provided for in paragraph (a). (d) In the event and to the extent that any indemnified party is entitled to indemnification from the Consolidated Government under the terms of paragraph (a) above in respect of any of the losses, claims, damages, liabilities, costs, or expenses referred to therein, but such indemnification is unavailable to such indemnified party in respect of any such losses, claims, damages, liabilities, costs, or expenses due to such indemnification being impermissible under applicable law or otherwise, then the Consolidated Government shall, in lieu of indemnifying such indemnified party, contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities, costs, or expenses in such proportion as is appropriate to reflect the relative benefits received by the Consolidated Government and such indemnified party, respectively, from the offering of the Bonds, the relative fault of the Consolidated Government and such indemnified party, respectively, in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities, costs, or expenses, as well as any other relevant equitable considerations, The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact related to information supplied by the Consolidated Government or the indemnified party and the relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission of the Consolidated Government or the indemnified party. The Consolidated Government and the Underwriters, respectively, agree that it would not be just and equitable if contribution pursuant to this paragraph (d) were determined by pro rata allocation or by any other method of allocation which does not take into account the equitable considerations referred to above in this paragraph (d). The amount paid or payable by any indemnified party as a result of the losses, claims, damages, liabilities, costs, or expenses referred to above in this paragraph (d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with defending any such action or claim, This paragraph (d) shall not apply in the event of losses, claims, damages, liabilities, costs, or expenses caused by or attributable to the willful misconduct or gross negligence of an indemnified party. Notwithstanding anything to the contrary contained -15- in this paragraph (d), it is understood and agreed that this paragraph (d) is not intended, and shall not be construed, to expand, broaden, or increase in any way, whether in terms of scope, amount, or otherwise, the liability of the Consolidated Government in respect of any of the losses, claims, damages, liabilities, costs, or expenses referred to in paragraph (a) or otherwise, as that liability is set forth in paragraph (a) above, SECTION 11. NOTICES. Any notice or other communication to be given to the Consolidated Government under this Bond Purchase Agreement may be given by mailing or delivering the same in writing to Augusta, Georgia, 530 Greene Street, Augusta, Georgia 30911, Attention: Consolidated Government Administrator, and any notice or other communication to be given to the Underwriters under this Bond Purchase Agreement may be given by mailing or delivering the same in writing to Merrill Lynch & Co., Inc., 3455 Peachtree Road, N,E., The Pinnacle, Suite 200, Atlanta, Georgia 30326, Attention: Mark A. Widener. SECTION 12. APPLICABLE LAW; NONASSIGNABILITY. This Bond Purchase Agreement shall be governed by the laws of the State. This Bond Purchase Agreement shall not be assigned by the Consolidated Government. SECTION 13. PARTIES IN INTEREST. This Bond Purchase Agreement shall be binding upon, and has been and is made for the benefit of, the Consolidated Government and the Underwriters, and to the extent expressed, any person controlling the Underwriters and their respective executors, administrators, successors, and assigns, and no other person shall acquire or have any right or interest under or by virtue hereof. The term "successors and assigns" shall not include any purchaser, as such, of any Bond. -16- )~ SECTION 14. EXECUTION OF COUNTERPARTS. This Bond Purchase Agreement may be executed in several counterparts, each of which shall be regarded as an original and all of which shall constitute one and the same document. Accepted as of the date first above written: AUGUSTA, GEORGIA By: ~ l.'--~ Mayor, Augusta- ichm County Commission Att~Fdf/'.~ ~' rk, qf<;~ :~)_sion .. . ~~'\'.~.' ~~ ...>:\ '~~ -<-~~ .' - ~.- ....:.. '.~ ~ -- ~~~~-~ / S: (SEAL) .' .~ I " t Very truly yours, MERRILL LYNCH & CO., INe. A.G. EDWARDS & SONS, INC. as Underwriters BY: MERRILL LYNCH & CO., INe. as Represe~ By: 41 ,-Wv J Authorized Officer -17- EXHIBIT A Form of Consolidated Government's Counsel Opinion [ Attached] [Letterhead of Shepard, Plunkett, Hamilton, Boudreaux & Tisdale, LLP] ,2004 Merrill Lynch & Co., Inc. Atlanta, Georgia as Representative of the Underwriters named in the within-mentioned Bond Purchase Agreement Sutherland, Asbill & Brennan LLP Atlanta, Georgia Financial Security Assurance Inc. New York, New York Re: $160,000,000 Augusta, Georgia Water and Sewerage Revenue Bonds, Series 2004 Ladies and Gentlemen: We have acted as counsel to Augusta, Georgia (the "Consolidated Government") preliminary to and in connection with the issuance and sale by the Consolidated Government of the above-captioned bonds (the "Bonds"). In so acting, we have examined, among other things, Paragraph I of Section VI of Article IX of the Constitution of the State of Georgia, Article 3 of Chapter 82 of Title 36 of the Official Code of Georgia Annotated, Acts of the General Assembly of the State of Georgia (1995 Ga. Laws 3648 to 3675, inclusive, as amended by 1996 Ga. Laws 3607 to 3608, inclusive, 1997 Ga. Laws 4024 to 4025, inclusive, 1997 Ga. Laws 4690 to 4693, inclusive, 1999 Ga. Laws 4143 to 4145, inclusive, and 2002 Ga. Laws 3769 to 3782, inclusive) (collectively the "Consolidation Act"), and originals, executed counterparts, or certified copies of the following: 1. The proceedings, including a Bond Resolution adopted by the Augusta-Richmond County Commission (the "Commission") on October 21, 1996, as ratified, reaffirmed, supplemented, and amended by resolutions adopted by the Commission on December 3, 1996, December 17, 1996, August 22, 2000, September 15, 2000, May 30, 2002, June 21, 2002, May 4, 2004, June 1, 2004, June 15, 2004, and November 23, 2004 (collectively the "Bond Resolution"), authorizing, among other things, the issuance and delivery of the Bonds and the execution, delivery, receipt, and approval of a Bond Purchase Agreement (the "Bond Purchase Agreement"), dated November 23, 2004, between the Consolidated Government and Merrill Lynch & Co., Inc. and A.G. Edwards & Sons, Inc. (collectively the "Underwriters"), an Insurance Agreement (the "Insurance Agreement"), dated of even date herewith, between the Consolidated Government and Financial Security Assurance Inc., a Preliminary Official Statement dated November 15, 2004 (the "Preliminary Official Statement"), and an Official Statement dated November 23, 2004 (the "Official Statement"). Merrill Lynch & Co., Inc. Sutherland, Asbill & Brennan LLP Financial Security Assurance Inc. ,2004 Page 2 2. The Bond Purchase Agreement, the Insurance Agreement, the Preliminary Official Statement, and the Official Statement and a specimen Bond. Based upon the foregoing and an examination of such other information, papers, and documents as we believed necessary or advisable to enable us to render this opinion, we are of the opinion, as of the date hereof, that: 1. The Consolidated Government is a political subdivision of the State of Georgia duly created and validly existing under and by virtue of the Constitution and laws of the State of Georgia, and a consolidated city-county government created on January 1, 1996 pursuant to the Consolidation Act. The Consolidated Government has all of the governmental and corporate powers of both municipal corporations and counties under Georgia law, including all requisite power and authority to adopt the Bond Resolution and perform its obligations thereunder, to issue, sell, and deliver the Bonds, to enter into and perform its obligations under the Bond Purchase Agreement and the Insurance Agreement, to execute and deliver the Official Statement to the Underwriters for distribution to the general public in connection with the offering by the Underwriters of the Bonds, and to secure the Bonds as provided in the Bond Resolution. 2. The Consolidated Government has taken all action legally required to authorize the issuance, sale, and delivery of the Bonds and has duly authorized the adoption and performance of the Bond Resolution, the execution, delivery, and performance of the Bond Purchase Agreement and the Insurance Agreement and the approval of the Official Statement. 3. The adoption by the Consolidated Government of the Bond Resolution, the authorization by the Consolidated Government of the Official Statement, the issuance and delivery by the Consolidated Government of the Bonds, the execution and delivery by the Consolidated Government of the Bond Purchase Agreement and the Insurance Agreement and the other agreements and documents described in the Bond Purchase Agreement, and the performance by the Consolidated Government of its obligations under and the consummation of the transactions described in all of the foregoing instruments and documents do not and will not conflict with or constitute, on the part of the Consolidated Government, a breach or violation of or default under, any of the terms and conditions of the Consolidation Act, any existing constitution, statute, law, or court or administrative rule or regulation, decree, order, or judgment to which the Consolidated Government is subject or by which the Consolidated Government or any of its properties is bound or any agreement, indenture, mortgage, lease, security deed, note, resolution, Merrill Lynch & Co., Inc. Sutherland, Asbill & Brennan LLP Financial Security Assurance Inc. ,2004 Page 3 ordinance, contract, commitment, or other instrument or agreement to which the Consolidated Government is a party or by which the Consolidated Government or any of its properties is bound. 4. Each of the officials of the Consolidated Government was on the date of execution of each of the instruments relating to the Bonds, was on the date of the execution of the Bonds, and is on the date hereof the duly elected or appointed qualified incumbent of his or her office of the Consolidated Government. 5. The notices given prior to the meetings of the Commission of the Consolidated Government at which the Bond Resolution was adopted comply with the applicable notice requirements of Georgia law, and such meetings were conducted in accordance with the applicable requirements of Georgia law. 6. Except as disclosed in the Official Statement, there is no action, suit, proceeding, inquiry, or investigation, at law or in equity, by or before any court or public board or body pending or, to the best of our knowledge and belief, after making due inquiry with respect thereto, threatened against or affecting the Consolidated Government, nor to our knowledge is there any basis therefor, which in any way questions the creation or existence of the Consolidated Government referred to in Section 2(a) of the Bond Purchase Agreement or the powers of the Consolidated Government referred to in Section 2(b) of the Bond Purchase Agreement, or the validity of the proceedings resulting in the issuance and delivery of the Bonds, or which might result in a material adverse change in the condition (financial or other), business, or affairs of the Consolidated Government's water and sewer system, or wherein an unfavorable decision, ruling, or finding would adversely affect the transactions contemplated by the Bond Purchase Agreement or which in any way would adversely affect the validity or enforceability of the Bonds, the Bond Resolution, the Bond Purchase Agreement, the Insurance Agreement, or any other agreement or instrument to which the Consolidated Government is a party and which is used or contemplated for use in connection with the consummation of the transactions contemplated by the Bond Purchase Agreement or which in any way would adversely affect the setting, charging, or collection of any utility charges or fees relating to the Consolidated Government's water and sewer system. 7. All permits, consents, pennissions, approvals, or licenses and authorizations or orders of any court or governmental or regulatory bodies that are required to have been obtained as of the date hereof by the Consolidated Government in connection with the ownership and operation of its water and sewer system or any part thereof, as contemplated by the Merrill Lynch & Co., Inc. Sutherland, Asbill & Brennan LLP Financial Security Assurance Inc. ,2004 Page 4 Official Statement, the issuance, sale, and delivery of the Bonds, the adoption, execution, delivery, and performance of the Bond Resolution, the Bond Purchase Agreement, the Insurance Agreement, and the consummation of the transactions contemplated by the Official Statement have been duly obtained and remain in full force and effect. We have no reason to believe, after making due inquiry, that the Consolidated Government will not be able to maintain all such permits, consents, permissions, approvals, and licenses described in the preceding sentence or to obtain all such additional permits, consents, permissions, approvals, or licenses and authorizations or orders of any court or governmental or regulatory bodies as may be required on or prior to the date the Consolidated Government is legally required to obtain the same. Except as disclosed in the Official Statement, no additional or further approval, consent, permission, authorization, or order of any court or any governmental or public agency or authority not already obtained is required by the Consolidated Government as of the date hereof in connection with the ownership and operation of its water and sewer system or any part thereof, as contemplated by the Official Statement, the issuance, sale, and delivery of the Bonds, or the adoption, execution, delivery, and performance of the Bond Purchase Agreement, the Insurance Agreement, or the Bond Resolution. The opinion expressed in this paragraph 7 shall not extend to or otherwise cover any approvals that may be required by any federal or state securities laws. 8. The Bond Resolution has been duly adopted by the Consolidated Government, is in full force and effect in the form in which it was adopted, and constitutes the valid, binding, and legally enforceable obligation of the Consolidated Government according to its import. The Bond Purchase Agreement and the Insurance Agreement have been duly authorized, executed, and delivered by the Consolidated Government and are in full force and effect and constitute the valid, binding, and legally enforceable obligations of the Consolidated Government according to their import. The Bonds have been duly authorized, executed, issued, and delivered by the Consolidated Government and, assuming the due authentication thereof by Sun Trust Bank, Atlanta, Georgia, as bond registrar, constitute the valid and legally binding special or limited obligations of the Consolidated Government, are entitled to the benefit and security of the Bond Resolution, and are enforceable in accordance with their terms. 9. The Bonds and the security therefor have been validated by the Superior Court of Richmond County, and no valid intervention or objection was raised and no appeals are pending with respect to such validation. Merrill Lynch & Co., Inc. Sutherland, Asbill & Brennan LLP Financial Security Assurance Inc. ,2004 Page 5 10. The Official Statement has been duly authorized, executed, and delivered by the Consolidated Government, and the Consolidated Government has duly approved the use of the Preliminary Official Statement and the Official Statement by the Underwriters in connection with the offering of the Bonds. 11. As general counsel to the Consolidated Government, we have rendered legal advice and assistance to the Consolidated Government in the course of the financing. Such assistance involved, among other things, discussions and inquiries concerning various legal matters and review of various documents relating to the offering and the preparation of the Preliminary Official Statement and the Official Statement and participation in conferences during which the contents of the Preliminary Official Statement and the Official Statement and related matters were discussed and reviewed. To the best of our knowledge, after making due inquiry with respect thereto, the statements contained in the Preliminary Official Statement and the Official Statement under the captions "INTRODUCTION - The Consolidated Government and - The System," "PLAN OF FINANCING - System Improvements," "THE CONSOLIDATED GOVERNMENT- Introduction and - Consolidated Government Administration and Officials," "THE SYSTEM - Introduction, - Principal Administrative Personnel, - System Facilities, - Contract Operator of Wastewater Treatment Plants (except for the statements under the heading "The Operator"), - Water Sources, - Service Area, - Customers, - Rates, Fees, and Charges, - Rate Setting Process, - Billing and Collection, - Governmental Approvals and Environmental Regulation, and - Employees, Employee Relations, and Labor Organizations," "SYSTEM FINANCIAL INFORMATION - Insurance Coverage," and "LEGAL MATTERS - Pending Litigation and - Validation Proceedings" (other than the financial and statistical data included therein, as to which we express no view) are accurate statements or summaries of the matters set forth therein and fairly represent the information purported to be shown and do not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. In addition, while we do not pass upon or assume responsibility for the accuracy, completeness, or fairness of the Preliminary Official Statement or the Official Statement (other than the opinion given in the preceding sentence), nothing has come to our attention which leads us to believe that any portions of the Preliminary Official Statement or the Official Statement contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. Merrill Lynch & Co., Inc. Sutherland, Asbill & Brennan LLP Financial Security Assurance Inc. ,2004 Page 6 12. To the best of our knowledge and belief, after making due inquiry with respect thereto, the Consolidated Government has never issued, assumed, guaranteed, or otherwise become liable in respect of any bonds, notes, or other obligations which are presently outstanding and which are secured in any manner by the Consolidated Government's water and sewer system or by the revenues to be received from the ownership and operation thereof, other than as set forth in the Bond Resolution or the Official Statement, and the Consolidated Government has not entered into or issued any instrument, resolution, ordinance, agreement, mortgage, security agreement, indenture, contract, or arrangement of any kind which might, on or after the date hereof, give rise to any lien or encumbrance on its water and sewer system or the revenues derived from the ownership and operation thereof, other than as described in the Official Statement or the Bond Resolution. The foregoing opinions are qualified to the extent that the enforceability of the Bonds, the Bond Resolution, the Insurance Agreement, or the Bond Purchase Agreement might be limited by (i) bankruptcy, insolvency, reorganization, moratorium, and other similar laws affecting creditors' rights generally heretofore or hereafter enacted to the extent of their enforcement, (ii) judicial discretion in the application of principles of equity, and (iii) the valid exercise of the sovereign police powers of the State of Georgia and its governmental bodies and the constitutional powers of the United States of America. The foregoing opinions are also qualified to the extent that any rights to indemnity or contribution contained in the Bond Purchase Agreement might be limited by applicable law. No opinion is given as to the tax-exempt status of the Bonds or the interest thereon. No opinion is given concerning the requirement for registration of the Bonds under the securities laws of any state or the Securities Act of 1933, as amended, nor is an opinion given concerning qualification of any document under the Trust Indenture Act of 1939, as amended. Very trul Y yours, SHEPARD, PLUNKETT, HAMIL TON, BOUDREAUX & TISDALE, LLP By: Partner EXHIBIT B Forms of Bond Counsel Opinions [ Attached] [Letterhead of Sutherland Asbill & Brennan LLP] ,2004 Merrill Lynch & Co., Inc. Atlanta, Georgia as Representative of the Underwriters named in the within-mentioned Bond Purchase Agreement Re: $160,000,000 Augusta, Georgia Water and Sewerage Revenue Bonds, Series 2004 Ladies and Gentlemen: This opinion is being delivered to you pursuant to Section 4(c)(1)(C) of the Bond Purchase Agreement, dated November 23, 2004, between you and Augusta, Georgia (the "Consolidated Government") relating to the above-referenced bonds (the "Bonds"). We have acted as Bond Counsel in connection with the issuance of the Bonds, and reference is hereby made to our approving opinion of even date herewith addressed to the Consolidated Government and delivered to you concurrently herewith. You may rely upon such opinion as if the same were addressed to you. In connection with the issuance of the Bonds, we have examined the following: (a) the proceedings, documents, and papers described in our opinion of even date herewith addressed to the Consolidated Government; (b) the Preliminary Official Statement, dated November 15, 2004 (the "Preliminary Official Statement"), and the Official Statement, dated November 23, 2004 (the "Official Statement"), relating to the Bonds; and ( c) such other information, papers, and documents as we have deemed relevant and necessary as a basis for the opinions hereinafter expressed. In our examination of the aforesaid proceedings and documents, we have assumed the authenticity of all documents submitted to us as originals, the conformity to the original documents of all documents submitted to us as copies, the authenticity of the originals of such latter documents, and the correctness of any facts stated in all of such documents. Based upon the foregoing we are of the opinion that the statements in the Preliminary Official Statement and in the Official Statement under the headings "INTRODUCTION - Security and Sources of Payment for the Series 2004 Bonds, - Description of the Series 2004 Bonds (except for the statements under the headings "Book-Entry Bonds" and "Payments"), - Tax Exemption, and - Legal Authority," "THE SERIES 2004 BONDS - Description, - Redemption, - Legal Authority, and - Investments," "SECURITY AND SOURCES OF Merrill Lynch & Co., Inc. ,2004 Page 2 PAYMENT FOR THE SERIES 2004 BONDS" (except for the statements under the heading "- Bond Insurance"), and "LEGAL MA TIERS - Opinion of Bond Counsel, - Original Issue Discount and Premium, and - Collateral Federal Tax Consequences," and in "APPENDIX C: SUMMARY OF THE BOND RESOLUTION," insofar as such statements constitute summaries of the matters set forth therein, constitute fair and accurate summaries of the matters purported to be summarized; but no further opinion is expressed with respect to the accuracy, completeness, or sufficiency of the Preliminary Official Statement or the Official Statement nor is any opinion expressed with respect to compliance by the Consolidated Government or any other person with any federal or state statute, regulation, or ruling with respect to the sale or distribution of the Bonds. We have acted as Bond Counsel in connection with the issuance of the Bonds and, as such, have reviewed only those documents, opinions, certificates, and proceedings necessary to enable us to render our opinion to the Consolidated Government of even date herewith as to the legality and validity of the Bonds and the tax-exempt status of the interest on the Bonds. We have not prepared or reviewed the Preliminary Official Statement or the Official Statement and have not undertaken to check or confirm the accuracy or completeness of, or verified the information contained in, the Preliminary Official Statement or the Official Statement except to the extent necessary to render the opinion set forth above. This opinion is limited to the matters expressly set forth herein, and no opinion is to be inferred or may be implied beyond the matters expressly so stated. The opinions expressed herein are made only as of the date of this letter. We do not assume responsibility for updating this opinion as of any date subsequent to th~ date of this letter, and assume no responsibility for advising you of any changes with respect to any matters described in this letter that may occur subsequent to the date of this letter, whether such changes result from events occurring subsequent to the date of this letter or from the discovery subsequent to the date of this letter of information not previously known to us pertaining to events occurring prior to the date of this letter. Very truly yours, SUTHERLAND ASBILL & BRENNAN LLP By: Partner EXHIBIT C Form of Underwriters' Counsel Opinion [Attached] [Letterhead of Kilpatrick Stockton LLP] ,2004 Merrill Lynch & Co., Inc. Atlanta, Georgia as Representative of the Underwriters named in the within-mentioned Bond Purchase Agreement Re: $160,000,000 Augusta, Georgia Water and Sewerage Revenue Bonds, Series 2004 Ladies and Gentlemen: We have acted as your counsel in connection with your acting as underwriter on a "firm commitment" basis for the above-captioned bonds (the "Bonds"). In so acting, we have examined originals, executed counterparts, or certified copies of the following: (a) the Bond Resolution adopted by the Augusta-Richmond County Commission (the "Commission") on October 21, 1996, as ratified, reaffirmed, supplemented, and amended by resolutions adopted by the Commission on December 3, 1996, December 17, 1996, August 22,2000, September 15, 2000, May 30,2002, June 21,2002, May 4,2004, June 1, 2004, June 15, 2004, and November 23, 2004 (collectively the "Bond Resolution"), (b) the Bond Purchase Agreement, dated November 23, 2004 (the "Bond Purchase Agreement"), between Augusta, Georgia (the "Consolidated Government") and Merrill Lynch & Co., Inc. and A.G. Edwards & Sons, Inc., as underwriters, (c) the Preliminary Official Statement, dated November 15, 2004 (the "Preliminary Official Statement"), relating to the Bonds, (d) the Official Statement, dated November 23, 2004 (the "Official Statement"), relating to the Bonds, ( e) the insurance policy (a "Bond Insurance Policy") issued by Financial Security Assurance Inc. (the "Bond Insurer") with respect to the Bonds, (f) the Continuing Disclosure Certificate (the "Disclosure Certificate"), dated the . date hereof, of the Consolidated Government, (g) a transcript of the proceedings of the Consolidated Government relating to the authorization, issuance, and delivery of the Bonds, and Merrill Lynch & Co., Inc. ,2004 Page 2 (h) the opinions and certificates required to be delivered pursuant to the Bond Purchase Agreement. In all such examinations, we have assumed the authenticity of all documents submitted to us as original documents and the authenticity of originals and conformity to original documents of all documents submitted to us as certified, conformed, or photostatic copies. We have assumed, but not independently verified, that the signatures on all documents and certificates that we have examined are genuine, and, as to certificates, we have assumed the same to be properly given and to be accurate. We are not expressing any opinion or views on the authorization, issuance, delivery, or validity of the Bonds. Based upon the foregoing and an examination of such other information, papers, and documents as we believe necessary or advisable to enable us to render this opinion, we are of the opinion, as of the date hereof, as follows: 1. The Bonds are exempt securities within the meaning of Section 3(a)(2) of the Securities Act of 1933, as amended (the "1933 Act"), the Bond Insurance Policy is an exempt security within the meaning of Section 3(a)(8) of the 1933 Act, and the Bond Resolution is exempt from qualification under Section 304(a)(4) of the Trust Indenture Act of 1939, as amended (the "1939 Act"), to the extent provided in such Acts, respectively, and it is not necessary in connection with the offer and sale of the Bonds, together with the Bond Insurance Policy, to the public to register the Bonds or the Bond Insurance Policy under the 1933 Act, or to qualify the Bond Resolution under, or to issue the Bonds under any indenture qualified under, the 1939 Act. 2. The Bonds and the Bond Insurance Policy are exempted from the registration provisions of the Georgia Securities Act of 1973 by virtue of Section 10-5-8(1) thereof. 3. The Bonds and the Bond Insurance Policy are covered securities within the meaning of Section 18(b)(4)(C) of the 1933 Act, to the extent provided in the 1933 Act, and it is not necessary in connection with the offer and sale of the Bonds, together with the Bond Insurance Policy, to the public to register or qualify the Bonds or the Bond Insurance Policy under the securities or "Blue Sky" laws of any state of the United States, the District of Columbia, Puerto Rico, the Virgin Islands, or any other possession of the United States, or any political subdivision thereof. It should be noted, however, that filing fees may be payable in certain jurisdictions if the Bonds, together with the Bond Insurance Policy, are offered or sold in such jurisdictions. 4. The Disclosure Certificate complies as to form with the requirements of Rule 15c2-12(b)( 5) promulgated under the Securities Exchange Act of 1934, as amended. Merrill Lynch & Co., Inc. ,2004 Page 3 Because the primary purpose of our professional engagement as counsel to you was not to establish factual matters and because of the wholly or partially nonlegal character of many determinations involved in the preparation of the Preliminary Official Statement and the Official Statement, we are not passing upon and do not assume any responsibility for the accuracy, completeness, or fairness of the statements contained in the Preliminary Official Statement or the Official Statement, and we have not independently verified the accuracy, completeness, or fairness of such statements. Nevertheless, we have rendered legal advice and assistance to you in the course of the offering and sale of the Bonds, the preparation of the Preliminary Official Statement and the Official Statement, and your investigation of the Consolidated Government's water and sewer system. Such assistance involved, among other things, discussions and inquiries concerning various legal matters, the review of the documents referred to above, and discussions with you and with representatives of the Consolidated Government, its counsel, Bond Counsel, CH2M HILL, consulting engineers for the Consolidated Government's water and sewer system, and Cherry, Bekaert & Holland, L.L.P., auditors for the Consolidated Government's water and sewer system, in connection with the preparation of the Preliminary Official Statement and the Official Statement and your investigation of the Consolidated Government's water and sewer system. We have obtained and reviewed the certificates as to factual matters and the legal opinions from these parties and their counsel in regard to the Preliminary Official Statement and the Official Statement and certain information contained therein, which are required to be delivered to you pursuant to the Bond Purchase Agreement. The performance of the services referred to above, the discussions referred to above, and our examination of the factual certifications and legal opinions referred to above did not disclose to us any information which would lead us to believe that the Preliminary Official Statement or the Official Statement (other than the financial statements and related notes and other financial and statistical data included therein, as to which we express no view) contains any untrue statement of a material fact or omits to state a material fact required to be stated or necessary to make the statements therein made, in light of the circumstances under which they were made, not misleading. We have reviewed the opinions, dated today, of Shepard, Plunkett, Hamilton, Boudreaux & Tisdale, LLP, Augusta, Georgia, counsel to the Consolidated Government, Sutherland Asbill & Brennan LLP, Atlanta, Georgia, Bond Counsel, and counsel to the Bond Insurer, furnished to you in accordance with the provisions of the Bond Purchase Agreement. Such opinions are appropriately responsive to the requirements of the Bond Purchase Agreement. The opinions set forth in paragraphs 2 and 3 above are subject to the existence of broad discretionary powers vested in the administrative authorities administering the securities or "Blue Sky" laws in the jurisdictions named in paragraphs 2 and 3, authorizing them, among other things, to withdraw exemptions accorded by statute, to impose additional requirements, to refuse registration, or to issue stop orders. Merrill Lynch & Co., Inc. ,2004 Page 4 This opinion does not purport to cover the requirements under the laws of any jurisdiction with respect to the registration or licensing of dealers, brokers, or salesmen, the form or substance of advertising materials or the filing requirements applicable thereto, or the legality of investments in the Bonds by any institutional investor which is subject to statutory or other restrictions as to its investments. Weare members of the State Bar of Georgia. Our opinions herein are limited to the laws of the State of Georgia and any applicable federal laws of the United States. We expressly disclaim any duty to update this opinion in the future for any changes of fact or law which may affect any of the opinions expressed herein. As legal counsel to you, we are furnishing this letter to you solely for your benefit and not for dissemination in connection with the offer and sale of the Bonds. This opinion is limited to the matters expressly set forth above, and no opinion is implied or may be inferred beyond the matters expressly so stated. Very truly yours, KILPATRICK STOCKTON LLP By: Partner EXHIBIT D Form of Bond Insurer's Counsel Opinion [Attached] EXHIBIT E Forms of Comfort Letter, Consent Letter, and Bring-Down Letter [Attached] EXHIBIT F Form of Consent Letter of Consulting Engineer [Attached] [Letterhead of CH2M HILL] ,2004 Augusta, Georgia 530 Greene Street Augusta, Georgia 30911 Merrill Lynch & Co., Inc. 3455 Peachtree Road, N.E. The Pinnacle, Suite 200 Atlanta, Georgia 30326 as Representative of the Underwriters named in the within-mentioned Official Statement Re: $160,000,000 Augusta, Georgia Water and Sewerage Revenue Bonds, Series 2004 Ladies and Gentlemen: The undersigned consents to the inclusion in the Preliminary Official Statement dated November 15, 2004 (the "Preliminary Official Statement") and the Official Statement dated November 23, 2004 (the "Official Statement"), relating to the above-captioned bonds, of our engineering report dated November 2004. In addition, the undersigned consents to the reference to our firm under the caption "MISCELLANEOUS - Independent Professionals" in the Preliminary Official Statement and the Official Statement. Very truly yours, CH2M HILL By: Lawrence R. Scott, P.E. Project Manager EXHIBIT G Form of Closing Certificate of the Bond Insurer [ Attached]