A RESOLUTION AUTHORIZING THE SALE OF $4

A RESOLUTION AUTHORIZING THE SALE OF $4.95 MILLION IN GENERAL OBLIGATION BONDS (2006-09-27/R-11)

WHEREAS:

The voters of the Town of Chapel Hill, North Carolina (the "Town"), on November 4, 2003, approved the issuance of Town general obligation bonds for several purposes, including providing parks and recreation facilities, open spaces and areas, public libraries and sidewalks and streets.

The Town Council has now determined that the Town should issue a portion of such Bonds.

BE IT THEREFORE RESOLVED by the Town Council of the Town of Chapel Hill, North Carolina, as follows:

1. Determination To Sell Bonds - The Town will issue and sell (a) $1,000,000 parks and recreation bonds, (b) $800,000 open spaces and areas bonds, (c) $1,500,000 library bonds, and (d) $1,650,000 sidewalks and streets bonds for their authorized purposes. The parks and recreation bonds, open spaces and areas bonds, library bonds and sidewalks and streets bonds will be combined for sale as a single issue of bonds to be designated “General Obligation Public Improvement Bonds, Series 2006.”

2. Interest Rate and Payment Provisions -- Each Bond will bear interest at such rate as is determined at the time of its sale. Interest on each Bond will be payable semiannually on each May 1 and November 1, beginning May 1, 2007, (a) from November 1, 2006, if it is authenticated prior to May 1, 2007, or (b) otherwise from the May 1 or November 1, that is, or immediately precedes, the date on which it is authenticated (unless payment of interest thereon is in default, in which case such Bonds will bear interest from the date to which interest has been paid). Principal and interest will be payable in lawful money of the United States of America.

3. Principal Payment Schedule -- The principal of the Bonds will be payable on such dates and in such years and amounts as the Finance Officer determines after consultation with the LGC, except that the aggregate principal amount of the Bonds will be $4,950,000 and the final maturity for the Bonds must not extend beyond December 31, 2027.

The Finance Officer will execute a certificate prior to the initial delivery of the Bonds designating the final principal payment schedule for the Bonds. Such certificate will be conclusive evidence of the Finance Officer’s approval and determination of such matters.

4. Pledge of Faith, Credit and Taxing Power -- The Town's full faith and credit are hereby irrevocably pledged for the payment of the principal of and interest on the Bonds. Unless other funds are lawfully available and appropriated for timely payment of the Bonds, the Town Council will levy and collect an annual ad valorem tax, without restriction as to rate or amount, on all locally taxable property in the Town sufficient to pay the principal of and interest on the Bonds as the same become due.

5. Approval of Official Statement for Offering - There has been made available to each member of the Town Council the form of an official statement (the “Official Statement") relating to the Bonds, pursuant to which the Bonds will be offered for sale. The Official Statement remains subject to completion and amendment.

The Official Statement is approved as the form of official statement pursuant to which the Bonds will be offered for sale. The actions of the Finance Officer, in collaboration with the LGC, to prepare the text of the Official Statement are ratified, approved and confirmed. The Town Council approves the LGC's distribution of the Official Statement to prospective purchasers of the Bonds. The Official Statement as so distributed must be in substantially the form presented to this meeting, with such changes as the Finance Officer may approve.

The Town Council acknowledges that it is the Town’s responsibility to ensure that the Official Statement, in its final form, neither contains an untrue statement of a material fact nor omits to state a material fact required to be included therein for the purpose for which such Official Statement is to be used or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. By the adoption of this resolution, the members of the Town Council approve the Official Statement as materially correct and complete, and further acknowledge and accept their own responsibility for causing the Town to fulfill these responsibilities for the Official Statement.

6. Redemption Provisions -- The Bonds will be subject to redemption prior to maturity upon such terms and conditions as the Finance Officer, upon advice from the LGC, may determine. The Finance Officer must execute a certificate prior to the initial delivery of the Bonds designating redemption terms and conditions, and such certificate will be conclusive evidence of the Finance Officer’s approval and determination of such terms and conditions.

If less than all of the Bonds stated to mature on different dates are called for redemption, the Bonds to be redeemed will be selected in such manner as the Town may determine. If less than all of the Bonds of any one maturity are called for redemption, the Bonds or portions thereof of such maturity to be redeemed will be selected by lot in such manner as the Town in its discretion may determine; provided, however, that the portion of any Bond to be redeemed must be in the principal amount of $5,000 or some integral multiple thereof and that, in selecting Bonds for redemption, each Bond will be considered as representing that number of Bonds which is obtained by dividing the principal amount of such Bond by $5,000. If a portion of a Bond is called for redemption, a new Bond in amount equal to the unredeemed portion thereof will be issued to the registered owner upon the surrender thereof.

The Town will give notice of redemption by certified or registered mail to the registered owners of the Bonds. The Town will mail such notice not more than 60 days and not less than 30 days prior to the date fixed for redemption.

7. Form of Bonds -- The Bonds will be in substantially the form set out in Exhibit A. The Bonds will be dated November 1, 2006, will be in fully registered form, in denominations of $5,000 and integral multiples thereof, and will be numbered R-1 upward.

The Bonds must be signed by the manual or facsimile signature of the Town’s Mayor, must be countersigned by the manual or facsimile signature of the Town Clerk or any Assistant Clerk, and the Town's seal must be affixed thereto or a facsimile thereof printed thereon. No Bond will be valid unless at least one of the signatures appearing on such Bond (which may be the signature of the LGC’s representative required by law) is manually applied or until such Bond has been authenticated by the manual signature of an authorized officer or employee of a bond registrar selected by the Town.

8. Finance Officer as Registrar; Payments to Registered Owners -- The Finance Officer is appointed Registrar for the Bonds. As Registrar, the Finance Officer will maintain appropriate books and records of the ownership of the Bonds. The Town will treat the registered owner of each Bond as the person exclusively entitled to payment of principal and interest and the exercise of all rights and powers of the owner, except that interest payments will be made to the person shown as owner on the registration books on the 15th day of the month preceding each interest payment date.

9. Advertising Bonds for Sale -- The Finance Officer, in collaboration with the LGC, is authorized and directed to take all proper steps to advertise the Bonds in accordance with customary LGC procedures, including through the use of a “Notice of Sale” document in the LGC’s customary form. The Finance Officer is authorized and directed to review and approve a form of Notice of Sale as such officer may determine to be in the Town's best interest.

10. LGC To Sell Bonds - The Town asks the LGC to sell the Bonds, to receive and evaluate bids and to award the Bonds on the basis of the best bid received.

11. Completing Official Statement after Sale -- After bids have been received and the LGC has awarded the Bonds to the successful purchaser, the Finance Officer is authorized and directed to prepare, in collaboration with the LGC, a final Official Statement containing, among such other matters as may be appropriate, information required pursuant to Rule 15c2-12 (“Rule 15c2-12”) promulgated by the United States Securities and Exchange Commission under the United States Securities Act of 1934, as amended. The Town, together with the LGC, will arrange for the delivery within seven business days of the date the Bonds are sold of a reasonable number of copies of the final Official Statement to the successful bidder on the Bonds for delivery to each potential investor requesting a copy of the final Official Statement and to each person to whom such bidder and members of the bidding group initially sell the Bonds.

12. Finance Officer To Complete Bond Closing - After the sale of the Bonds, the Finance Officer and all other Town officers and employees are authorized and directed to take all proper steps to have the Bonds prepared and executed in accordance with their terms and to deliver the Bonds to the purchaser upon payment for the Bonds.

The Finance Officer is authorized and directed to hold the executed Bonds, and any other documents authorized or permitted by this resolution, in escrow on the Town’s behalf until the conditions for the delivery of the Bonds and other documents have been completed to the Finance Officer’s satisfaction, and thereupon to release the executed Bonds and other documents for delivery to the appropriate persons or organizations.

Without limiting the generality of the foregoing, this authorization and direction is specifically extended to authorize the Finance Officer (a) to enter into such agreements or take such other actions as such officer may deem appropriate in connection with obtaining bond insurance for the Bonds and (b) to approve changes to any documents or closing certifications previously signed by Town officers or employees, provided that the Bonds will be in substantially the form approved by this resolution and that any such changes will not substantially alter the intent of such certificates from that expressed in the forms of such certificates as executed by such officers or employees. The Finance Officer’s authorization of the release of any such document for delivery will constitute conclusive evidence of such officer’s approval of any such changes.

13. Undertaking for Continuing Disclosure -- The Town undertakes, for the benefit of the beneficial owners of the Bonds, to provide continuing disclosure with respect to the Bonds as described in Exhibit B.

The Town Council designates the Finance Officer as the Town officer to be primarily responsible for the Town’s compliance with its undertakings for continuing disclosure provided for in this resolution. The Finance Officer will provide for the filings and reports (including the reports of material events) constituting the continuing disclosure provided for in this resolution.

14. Resolutions As To Tax Matters -- The Town will not take or omit to take any action the taking or omission of which will cause the Bonds to be "arbitrage bonds," within the meaning of Section 148 of the “Code” (as defined below), or “private activity bonds” within the meaning of Code Section 141, or otherwise cause interest on the Bonds to be includable in gross income for federal income tax purposes. Without limiting the generality of the foregoing, the Town will comply with any Code provision that may require the Town at any time to pay to the United States any part of the earnings derived from the investment of the proceeds of the Bonds, and the Town will pay any such required rebate from its general funds. For this paragraph, “Code” means the United States Internal Revenue Code of 1986, as amended, including applicable Treasury regulations.

15 Bonds Are “Bank-Qualified” Obligations -- The Town designates the Bonds as "qualified tax-exempt obligations" for the purpose of Code Section 265(b)(3).

16. Book-Entry System for Bond Registration -- The Bonds will be issued by means of a book-entry system, with one bond certificate for each maturity immobilized at The Depository Trust Company, New York, New York ("DTC"), and not available for distribution to the public. The book-entry system for registration will operate as described in the Official Statement. Therefore, (a) the Town will pay principal and interest on the Bonds to DTC or its nominee as registered owner of the Bonds, (b) the Town will not be responsible or liable for such transfer of payments to parties other than DTC or for maintaining, supervising or reviewing the records maintained by DTC or any other person related to the Bonds, and (c) the Town will not mail redemption notices (or any other notices related to the Bonds) to anyone other than DTC or its nominee so long as the book-entry system of registration with DTC is in effect. The Town may elect to discontinue the book-entry system with DTC. The Finance Officer is authorized and directed to enter into any agreements such officer deems appropriate to put into place the book-entry system with DTC.

17. Miscellaneous Provisions -- All Town officers and employees are authorized and directed to take all such further action as they may consider necessary or desirable in connection with the furtherance of the purposes of this resolution. All such prior actions of the Town officers and employees are ratified, approved and confirmed. Upon the absence, unavailability or refusal to act of the Mayor or the Finance Officer, the Town Manager may assume any responsibility or carry out any function assigned to the Mayor or the Finance Officer in this resolution. All other resolutions, or parts thereof, in conflict with this resolution are repealed, to the extent of the conflict. This resolution takes effect immediately.

This the 27^th day of September, 2006.