BOROUGH OF CLARKS SUMMIT LACKAWANNA COUNTY, PENNSYLVANIA  AN ORDINANCE OF THE COUNCIL OF THE BOROUGH OF CLARKS SUMMIT, LACKAWANNA COUNTY, PENNSYLVANIA, SETTING FORTH ITS INTENT TO INCREASE THE DEBT OF THE BOROUGH OF CLARKS SUMMIT IN" THE AMOUNT OF ONE MILLION DOLLARS ($1,000,000) WITHOUTTHE ASSENT OF ELECTORS FOR THE PURPOSE OF PROVIDING FUNDS FOR A PROJECT; AUTHORIZING AND DIRECTING THEI ISSUANCE OF A GENERAL OBLIGATION NOTE INI EVIDENCE OF SUCH DEBTTO FUND THE COSTS OF PAVING AND IMPROVEMENTS TOTHE STREETS AND ROADS MAINTAINED BY THE BOROUGH, FIXING THE DATE, INTEREST RATE AND MATURITY OF THE NOTE; FINDINGTHAT A PRIVATE SALE. BY NEGOTIATION ISIN THE BEST FINANCIAL INTEREST OF THE BOROUGH; PROVIDING FOR THE REDEMPTION OF THE NOTE PRIOR TO MATURITY; PROVIDING FOR THE MANNER OF REGISTRATION AND OF PAYMENT AND. EXECUTION OF THE NOTE; APPROVING THE FORM OF THE NOTE, APPOINTING THE FISCAL AGENT, PAYING AGENT AND SINKING FUND DEPOSITORY; COVENANTING TO BUDGET FOR DEBT SERVICE ON THE NOTE AND TO APPROPRIATE AND PAY AMOUNTS FOR SUCH DEBT SERVICE WHEN DUE; PLEDGING THE FULL FAITH, CREDIT AND TAXING POWER OF THE BOROUGH OF CLARKS SUMMIT FOR SAID OBLIGATION; SETTING FORTH THE AMOUNTS TO BE APPROPRIATED FOR ANNUAL DEBT SERVICE; ESTABLISHING, A SINKING FUND AND PROVIDING FOR PAYMENT OF THE NOTE THEREFROM; PROVIDING THAT THE ORDINANCE AND THE LOCAL GOVERNMENT UNIT DEBT ACT SHALL CONSTITUTE A CONTRACT BETWEEN THE BOROUGH OF CLARKS SUMMIT: ANDTHE NOTEHOLDER; DIRECTINGTHE PREPARATION AND EXECUTION OF A DEBT STATEMENT AND BORROWING BASE CERTIFICATE; ACCEPTING THE NEGOTIATED PROPOSALTO! PURCHASETHE NOTE. AND. AWARDINGTHE SAMETO SAID PURCHASER; DECLARING THE NOTE TO BE. A "QUALIFIED TAX EXEMPT OBLIGATION" AS THAT TERM IS USED IN THE INTERNAL REVENUE CODE OF 1986, AS AMENDED; AND AUTHORIZING DELIVERY OF THE NOTE. AND: EXECUTION AND DELIVERY OF SUCH OTHER DOCUMENTS AS MAY BE. ADVISABLE INCONNECTION  WITH THE SALE AND ISSUANCE THEREOF.  WHEREAS, the Borough Council ofthe! Borough of Clarks Summit (the Borough") has determined to undertake a project to pave and improve the roads and streets in thel Borough (the  "Project"); and  WHEREAS, upon detailed examination, the Borough has determined that the cost of the Project will be at least $1,000,000, as a result of which thel Borough desires to increase the debt of the Borough int the amount of$1,000,000: for payment oft the cost oft the Project, without the assent  1    ofthe electors, and toi issuei its General Obligation Note of2013 (the" 2013 Note")t to evidence such  increase in debt to provide funds for and toward the cost oft the Project; and  WHEREAS, thel Borough has requested' The Honesdale National Bank (the "Bank") to WHEREAS, the Bank presented a proposal for the purchase oft the 2013 Note to the Borough Council (the "Council") ofthe Borough at its regular meeting held at 7:00 p.m, on October 2L,2013, which bid was for the aggregate sum of$1,000,000, with a tax free effective fixed interest rate oft two and fifty-fivel hundredths percent (2.55%) per annum. Ift the interest in the hands of the holders oft the 2013 Note is determined not to be free of federal and Pennsylvania income tax, or if the Cost to Carry the 2013 Note is not deductible to the extent of at least eighty percent (80%), as provided in $256 B (ii) of the Internal Revenue Code of 1986, as amended (the "Code"), then the rate ofinterest payable on the 2013 Note shall be changed, retroactive to the date ofs such determination, to the fixed rate ofs six and one-quarter percent (6%4%) per annum. Assuming that thei interest ist taxable. int the hands ofthe holder, the maximum neti interest cost shall be Four Hundred Sixteen Thousand Three Hundred Fifteen Dollars and Forty Four Cents  present a negotiated proposal for thej purchase oft the 2013 Note; and  ($416,315.44); and  WHEREAS, the Council deems it in the best interest oft the Borough to accept the  negotiated proposal oft the Bank;  NOW THEREFORE, BE: IT ENACTED AND ORDAINED BY THE BOROUGH OF CLARKS SUMMIT, LACKAWANNA COUNTA,PENNSYLVANIA, AND ITI IS HEREBY  ENACTED BY THE COUNCIL OF THE BOROUGH, THAT:  1. The authorized debt of the Borough is hereby increased in the sum of$1,000,000, which is to be non-electoral debt, which, together with the existing net non-electoral debt of the Borough, will not result in a violation of the limitations of the Constitution of the Commonwealth  2    of Pennsylvania or ofthe Local Government Unit Debt Act, Act No. 52 of1 1998, as amended (the  "Act").  2. Iti is hereby determined that the above mentioned increase of debt shall be evidenced by the issuance ofal Note of the Borough which is hereby classified as a General Obligation Note, as defined in the Act, in the principal amount of $1,000,000 and designated as "Borough of Clarks Summit, General Obligation Note of 2013" (the "2013 Note") the execution, issuance, sale and delivery of which are hereby authorized and directed in accordance with the provisions hereof. The 2013 Note shall be registered as to principal and shall be dated and shall bear interest, if(i) thei interest payable on the 20131 Note is free off federal and Pennsylvania income tax in the hands oft the holder, and (ii) ift thel Bank shall be permitted to deduct the interest paid on funds deposited with the Bank toj provide the funds toj purchase the 20131 Note (the' "Cost to Carry") in an amount not less than 80% oft the Cost to Carry, as permitted by Section 265 oft the Internal Revenue Code of1986, as amended (the' "Code") and the regulations thereunder, at the fixed rate oft two and fifty-five hundredths percent (2.55%) per annum. Interest shall be computed on the basis of a 360 day year and paid for the actual days elapsed. The Borough shall pay the accrued interest, ifa any, and costs, and the principal oft the 2013 Note, on or before a date which is eleven (11): years after the date of closing ofthe sale and purchase ofthe 2013 Note. Ift the interest is determined, at any time, not to be free of federal and Pennsylvania income tax in the hands of the holder, or ifc deduction of the Cost to Carry shall be limited to less than 80% thereof, then interest on the 2013 Note shall be payable at the fixed rate ofs six and one-quarter percent (6/4%) per  annum, retroactive to the effective date of such determination.  The Borough reserves the right to anticipate any or all installments of principal or any part ofinterest at any time prior to the respective payment dates thereof, without notice or penalty.  3    3. The 2013 Note shall be executed with the signature oft thel President oft the Council and the seal ofthe Borough shall be imprinted thereon and attested by the signature oft the  Secretary oft the Borough.  4. The 2013 Note is hereby designated as a' "qualified tax-free bond" as that term is defined in $256 oft the Code. The Borough does not intend to borrow in excess of$10,000,000  during fiscal year 2013.  5. The principal of and interest on the 2013 Note shall bej payable at the corporate offices of the fiscal agent, hereinafter appointed, in Scranton, Pennsylvania, or ofany successor fiscal agent appointed by the Borough pursuant to the Act, in such coin or currency as at the respective times of payment shall constitute legal tender for the payment of! public and private debts, without deduction for any tax or taxes (except taxes on underwriting profits and gift, estate, succession or inheritance taxes) which the Borough or the Treasurer thereof may be required to pay thereon or retain therefrom under or pursuant to any present or future law oft the Commonwealth of Pennsylvania, all of which taxes, except as above provided, the Borough  assumes and agrees to pay.  6. The 2013 Note shall bei in substantially the following form:  UNITED STATES OF AMERICA COMMONWEALTH OF PENNSYLVANIA BOROUGH OF CLARKS SUMMIT LACKAWANNA COUNTY GENERALOBLIGATION NOTEOF2 2013  $1,000,000.00  Dated: October a 2013  The Borough of Clarks Summit, Lackawanna County, Pennsylvania (the "Borough"), for value received, hereby promises to pay to the registered holder hereof, the sum of One Million Dollars ($1,000,000). in such coin or currency as at the place and time  4    ofpayment shall be legal tender for thej payment of public and private debts, in  installments, as follows:  Commencing thirty (30) days after the date hereof, and on the same day of each month thereafter for twelve (12) consecutive months, or until the Project, defined in the Loan Agreement between Borrower and' The Honesdale National Bank of even date herewith, the Borough shall make payments in the amount ofl Nine Thousand Four Hundred Forty Nine Dollars and Seventy Four Cents ($9,449.74) each, applicable first to thej payment ofi interest at the rate herein set forth, and the remaining in reduction oft the principal balance; provided that the entire principal balance oft the 20121 Note, plus accrued interest, if any, and costs attributable to the 2013 Note, shall be paid in full on or prior to October,L 2024, subject to the terms ofa an Alternate Rate and Indemnity Agreement of  even date herewith.  The 20131 Note shall bear interest, if(i) the interest payable on the 2013 Note is free ofi federal and Pennsylvania income tax in the hands ofthel holder, and (ii) ifthel Bank: shall be permitted to deduct the interest paid on funds deposited with the Bank to provide the funds to purchase the 20131 Note (the' "Cost to Carry")i in an amount not less than 80%ofthe Cost to Carry, as permitted by the Internal Revenue Code of 1986, as amended (the "Code") and the regulations thereunder, at the fixed rate of two and fifty-five hundredths percent (2.55%) per annum; provided that if the interest payable on the 2013 Note is not free of federal and Pennsylvania income tax in the hands of the holder, or ifthe Cost to Carry shall not be deductible to the extent ofa at least eighty percent (80%) thereofby the Bank, then interest shall be payable on the 2013 Note at the fixed rate ofs six and one-half percent (6%%) per annum, retroactive to the effective date ofs such determination. Interest shall be calculated on the basis ofa 360 day year and paid for the actual days elapsed.  5    Ifan] Event of Default, as defined in the Loan Agreement, shall occur, and so long as the same is not cured, interest shall be payable on the 2013 Note at ai rate which is four  percent (4%) in excess oft the otherwise applicable rate..  The Borough shalll have the option to anticipate any payment of principal or interest at any time prior to the payment date thereof, without notice or penalty. When the amounts int the Sinking Fund shall be equal to, or shall exceed, thej principal balance due on the 2013 Note and any accrued interest, such amount shall be paid forthwith to the registered holder hereof, and this 2013 Note shall be deemed to have been paid in full and discharged.. Any balance in the Sinking Fund, following the discharge of the 2013 Note, shall be refunded  promptly to the Borough.  Thej principal of, and thei interest on, this 2013 Note are) payable at any office ofThe Honesdale National Bank (the' "Fiscal Agent"), or its successor as fiscal agent under the Note Ordinance. hereinafter mentioned without deduction for any tax or taxes (except for taxes on underwriting profits and gift, estate, succession or inheritance taxes) which the Borough or the Treasurer thereofmay! be required to payt thereon or retain therefrom under orp pursuant to any present or future law oft the Commonwealth of] Pennsylvania, all of which taxes, except as above provided, the Borough assumes and agrees toj pay.  This 2013 Note is issued in accordance with the Local Government Unit Debt Act oft the Commonwealth of] Pennsylvania, Act No. 52 of1998, as amended (the "Act"), and pursuant to an ordinance (the' "Note Ordinance") duly adopted by the Borough Council of  the Borough ofClarks Summit.  Reference is hereby made to the Note Ordinance and the Act fora a complete statement oft the rights and limitations of rights oft the holder of the 2013 Note, to all of  which the holder hereof, by acceptance of this 2013 Note, assents.  6    Upon any oft the defaults specified in the Act, the principal oft the 20131 Note then outstanding may be declared or become due and payable in the manner and with the effect provided in the Act and the Note Ordinance. Upon the curing of any default, the Fiscal Agent or the holder of the 2013 Note may waive such default and its consequences, and such waiver shall be binding upon the Fiscal Agent and upon the holder oft the 2013 Note. AsI more fullyp provided in Section 80 ofthel Note Ordinance, ift the Borough shall fail or refuse to make any required deposits in the Sinking Fund created by the Note Ordinance ort to satisfyanyo ofthe covenants therein contained, the Fiscal Agent may, and upon request ofthel holder ofthe 20131 Note shall, exercise (subject to the limitations ofA Article XII ofthe Act) any remedy provided in the Act and such representation on behalf oft the notel holder  shall be exclusive for the purposes herein and in the Act provided.  To the extent permitted and as provided. in the Note Ordinance and the Act, modification oft the contract created by said Ordinance and the Act, and of the rights ofthe holder oft the 2013 Note thereunder, may be made with the consent oft the holder. Any such consent by the holder oft this 2013 Note shall be conclusive and binding upon such holder and all subsequent holders of this 20131 Note whether or not any notation ofs such consent  shall be made upon this Note.  The Borough and thel Fiscal Agent shall treat thei registered owner oft this 20131 Note  as the absolute owner hereof for all purposes.  No covenant or agreement contained in this 2013 Note or the Note Ordinance shall be deemed tol be a covenant or agreement of any officer, agent or employee oft the Borough inl his or her individual capacity, and no official executing this 2013 Note shall be liable personally on this 2013 Note nor be subject to any personal liability or accountability by  reason ofthe issuance ofthis 2013 Note.  7    The procedingsautionzing the issuance of the 2013 Note have been approved by the Department of Community Economic Development oft the Commonwealth of Pennsylvania. All actions have been duly taken and conditions have been fulfilled which are requisite in connection with the issuance of this 2013 Note, and in the creation oft the debt of which this is evidence. The debt represented by the 2013 Note, together with all other non-electoral debt oft the Borough, as defined in the Act, is not in excess ofany constitutional or statutory limitation. The Borough has covenanted in the Note Ordinance toi include in each annual budget of the Borough amounts sufficient to pay debt service on this 2013Note when due, to make an annual appropriation ofs such amounts and to pay said debt service in full when due. The full faith, credit and taxing power oft the Borough is hereby irrevocably pledged for the prompt and full payment ofa all the obligations oft this  2013 Note and fulfillment oft the covenants in the Note Ordinance.  IN WITNESS WHEREOF, the Borough of Clarks Summit has caused this 2013 Note to be duly executed on its behalf by the signatures ofi its duly authorized officers, the corporate seal oft the Borough to bel hereon imprinted and duly attested, and this 2013 Note  to be dated thel day ofOctober, 2Qla  CLARKIS R  ATTEST:  BOROUGH OF CLARKS SUMMIT  Latr Secretary  y: Rese President Borough Council  C  AST CLASS  7. The Honesdale National Bank, with an office at Honesdale, Pennsylvania, is hereby appointed as Fiscal Agent, Sinking Fund Depository and Paying Agent for the 2013 Note. The Fiscal. Agent is hereby appointed as thel Registrar oft the 2013 Note and is hereby directed to maintain a registry for the notation of the registered owner oft this 2013 Note. Thej proper Borough  8    officials are hereby authorized to contract with thel Fiscal Agent fori itss services, and also to appoint and contract with any successor in such duties, except during the existence ofany default  hereunder.  8. Ifthe Borough shall fail or refuse to make any required deposit in the Sinking Fund, or to satisfy any oft the covenants herein contained, the Fiscal Agent may, and upon request oft the holder of the 2013 Note, upon being furnished with indemnity satisfactory to it against the expenses and possible liabilities in connection with the duties thereby accepted, shall, exercise any remedy provided in the Act or at law ori in equity, for the benefit oft the holder oft the 2013 Note, and shall disburse all funds SO collected to the holder oft the 2013 Note as provided in the Act, subject to any limitations contained in Article. XII thereof. If the Fiscal Agent is willing at such time to serve: and exercise the powers conferred upon the trustee appointed in the manner provided in Section 8106 oft the Act, subject as aforesaid, such representation shall be exclusive for the  purposes herein and: in the Act provided.  9. The 2013 Note, as a general obligation of the Borough, shall be payable from revenues oft the Borough (which revenues now include unlimited ad valorem taxes on property in the Borough taxable for Borough purposes). The Borough. hereby covenants with the holder from. time to time oft the 2013 Note that the Borough will include the amount of the debt service on said Note due in each fiscal year oft the Borough in its budget for such year, shall appropriate such amounts to the payment ofs such debt service, and shall duly and punctually pay or cause to bej paid thej principal oft the: 2013 Note and the interest thereon at the dates and place and in the manner stated in said 2013 Note, according to the truei intent and meaning thereof, and for such budgeting, appropriation and payment, the Borough hereby pledges its full faith, credit and taxing power. 10. The amount ofdebt service to be appropriated for the fiscal year beginning January  1,2013, for the 2013 Note willl be as follows:  9    FISCAL YEAR BEGINNING JANUARY 1ST 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Totals  PRINCIPAL 0.00 24,106.34 75,630.66 80,403.30 85,810.48 91,408.85 97,372.49 103,628.92 110,486.01 117,694.25 125,372.76 88,085.94 1,000,000.00  INTEREST 21,180.50 63,179.33 59,663.94 54,891.30 49,484.12 43,885.75 37,922.11 31,665.68 24,808.59 17,600.35 9,921.84 2,111.93 416,315.44  TOTAL 21,180.50 87,285.67 135,294.60 135,294.60 135,294.60 135,294.60 135,294.60 135,294.60 135,294.60 135,294.60 135,294.60 90,197.87 1,416,315.44  ors sO much thereof as may be necessary; which appropriation is sufficient for and shall be applied exclusively to the payment oft the principal of said 2013 Note at its maturity and the interest and taxes covenanted to be paid thereof as the same shall become due and payable.  11. A Sinking Fund is hereby established, designated "Sinking Fund, Borough of Clarks Summit, General Obligation Note of2013" (the" Sinking Fund"), which shall bel held by the Fiscal Agent, segregated from all other funds of thel Borough. The Borough shall deposit in the Sinking Fund, not later than thel business day next preceding each date when interest or principal is to become due on the 2013 Note, a sufficient part of each above-mentioned appropriation that on each such payment date the Sinking Fund will contain, together with any other available funds therein, sufficient money toj pay ini full, interest and principal then due on the 2013 Note.  12. The Sinking Fund shall bes secured and invested by the Fiscal Agent in securities or deposits authorized by the Act, upon direction oft the Borough, all as provided in the Act. Said deposits and securities shall bei in the name oft the Borough but subject to withdrawal or collection only by the Fiscal Agent, and said deposits and securities, together with the interest thereon shall  10    be aj part ofthe Sinking Fund. The Fiscal Agent is authorized and directed to pay from the Sinking  Fund the principal of and interest on the 20131 Note when due and payable.  13. This Ordinance and the Act, as in force from time to time, shall constitute a contract between the Borough and the holder from time to time oft the 2013 Note. Said contract may be modified without the consent ofs said holderi insofar as any such modification does not adversely affect its rights as such, and in other respects it may be modified with the consent oft the holder of  the 2013 Note.  14. The President of the Council and the Treasurer oft the Borough, are hereby authorized and directed toj prepare, certify and file! in the appropriate records of the Borough, the debt statement required by Section 8110ofthe Act. Thej proper officers oft the Borough are. hereby authorized thereafter as required by the Act, to prepare, certify and file any statements required by the Act necessary to qualify all or any portion oft the debt oft the Borough represented by the 2013  Note for exclusion from the appropriate debt limit oft the Borough.  FE ONEIALE NATONAC BAMEE  15. The negotiated proposal ofPenn Security Bankand-frust Company(the "Purchaser") for the purchase of the 2013 Note, a copy ofv which is attached hereto as Exhibit "A", isl herebyaccepted. Thej purchase price shall be $1,000,000, being 100% oft the sum ofthe principal thereof, with an effective net interest rate as provided therein. The maximum net interest cost [assuming a rate of six and one-quarter percent (6%4%) per annum] is Four Hundred Sixteen Thousand Three Hundred Fifteen Dollars and Forty Four Cents ($416,315.44). The 2013 Note is hereby awarded to the Purchaser, said acceptance and award being conditioned upon all parts of this Ordinance becoming effective. The President oft the Council, and the Treasurer ofthe Borough and their respective successors are furthera authorized and directed to deliver the 2013 Note to the Purchaser upon fulfillment of the aforementioned conditions and receipt oft the purchase money, and in connection therewith thej proper officers of the Borough are. hereby authorized to execute  Ge  11    the necessary affidavits and all: such other papers as may be necessary or convenient to make  settlement or as may be required in the issuance ofs said 2013 Note.  16. All Ordinances or parts thereofinsofar as they are inconsistent herewith arel hereby  rescinded.  Enacted and Ordained by the Council ofthel Borough of Clarks Summit,  of  mdlky  Octobetr, 2013. ATTEST: / Sécretary  CLARKI  -  SCE  CLASS  President Borough Council Borough of Clarks Summit  -  PBROWNINGI Honesdalel Bank BoroughofClarkss Summit (13)ordinance.docx  12