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subordinate in all respect to the Bonds as to lien on and source and security for payment from the Pledged Funds and such obligations contain an express statement to that effect. "S. MANAGEMENT OF SYSTEM. The County in operating the System will employ persons of demonstrated ability and experience and will require all employees who may have possession of moneys derived from operation of the System to be covered by a fidelity bond written by a responsibility indemnity company in an amount sufficient to protect the County from loss. "T. CONNECTION WITH SYSTEM. The County will, to the full extent permitted by law, require all lands, buildings, residences and other structures within its territorial boundaries which can use the System to connect therewith and use the System and cease to use any other potable water system and any other method of sewage disposal. "U. ARBITRAGE. The County covenants to and with purchasers of the issue which is comprised of the Series 1989 Bonds that it will make no use of the proceeds of such issue which will cause the Series 1989 Bonds to be or become "arbitrage bonds" within the meaning of Section 103(b)(2) and Section 148 of the Internal Revenue Code of 1986, as amended (the "Code"), and the regulations implementing said Sections that duly have been published in the Federal Ragister or with any other applicable regulations implementing said Sections, and the County further covenants to comply with all other requirements of the Code if and to the extent applicable to maintain continuously the Federal income tax exemption of interest on the Series 1989 Bonds. "V. FUNDS AND ACCOUNTS. The designation and establishment of the various funds and accounts created herein does not require the establishment of any completely independent, self -balancing funds as such term is commonly defined and used in governmental accounting, but rather is intended solely to constitute an earmarking of certain revenues and assets as provided herein. "W. POWER TO ISSUE BONDS AND PLEDGE PLEDGED FUNDS. The County is duly authorized under all applicable laws to create and issue the Bonds and to adopt this Resolution and to pledge the Pledged Funds in the manner and to the extent provided herein. Except to the extent otherwise provided in this Resolution, the Pledged Funds are not pledged or hypothecated (except with respect to the Original Bonds to be retired with proceeds of the Series 1989 Bonds) and, upon issuance of the Series 1989 Bonds, will be free and clear of any pledge, lien, charge or encumbrance thereon or with respect thereto prior to, or of equal rank with, the security interest, pledge and assignment created by this Resolution, including any pledge thereof for the benefit of the Original Bonds, and all action on the part of the County to that end has been and will be duly and validly taken. The Bonds and the provisions of this Resolution are - 33 -