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87-9202 W & S Bondsfl CITY OF SALINA, KANSAS ORDINANCE NO. �7" F204 $2,650,000 COMBINED WATER AND SEWAGE SYSTEM REVENUE BONDS, SERIES OF 1987 DATED: OCTOBER 1, 1987 1 1 1 L ORDINANCE NO. 87-9202 OF THE CITY OF SALINA, KANSAS Recitals Section 1. Section 2. Section 3. Section 4. Section 5. Section 6. Section 7. Section 8. Section 9. Section 10. Section 11. Section 12. Section 13. Section 14. Section 15. Section 16. Section 17. Section 18. Section 19. Section 20. Section 21. Section 22. Section 23. Section 24. Section 25. Section 26. Section 27. Section 28. Section 29. Section 30. Definitions ----------------------------------- Authorization of and Security for the 1987 Bonds ------------------------------------ Description of the Bonds, Designation of Paying Agent and Bond Registrar --------------- Method and Place of Payment of Principal of and Interest on the Bonds ------------------ Execution, Authentication and Delivery of the Bonds ---------------------------------- Registration, Transfer and Exchange of Bonds----------------------------------------- Persons Deemed Owners of Bonds ---------------- Mutilated, Lost, Stolen or Destroyed Bonds----------------------------------------- Cancellation and Destruction of Bonds Upon Payment ---------------------------------- Redemption of Bonds Prior to Maturity --------- Form of Bonds --------------------------------- Uncertificated Bonds -------------------------- Disposition of 1987 Bond Proceeds ------------- Water and Sewage Fund ------------------------- Ratification and Creation of Funds and Accounts-------------------------------------- Application of Moneys in Funds and Accounts --- Deficiency in Payments or Credits into Funds or Accounts ----------------------------- Use of Other Accounts to Pay Bonds and Interest---------------------------- Investments----------------------------------- Particular Covenants of the City -------------- Additional Bonds ------------------------------ Tax Matters----------------------------------- Amendments------------------------------------ Acceleration in the Event of Default---------- Enforcement----------------------------------- Defeasance------------------------------------ Approval of Preliminary Official Statement and Official Statement -------------- Amended to Ordinance No. 84-9025-------------- Severability---------------------------------- Effective Date -------------------------------- ( i ) PAGE 1 2 5 6 6 7 8 9 9 10 10 11 16 16 16 17 17 21 22 22 22 24 26 26 27 27 28 29 29 29 29 ( PUBLISHED IN THE SALINA JOURNAL Qc fO ZCr / , 1 987 ) ORDINANCE NO. 87- 9202 WHEREAS, the City of Salina, Kansas (the "City"), pursuant to the provisions of K.S.A. 12-856 to 12-868, inclusive, 1959 Supplement to the General Statutes of Kansas, 1949, acting through the governing body of the City, by Ordinance No. 6544, passed June 27, 1961, has heretofore combined the waterworks system and the sewage disposal system of said City, as said systems are defined and referred to in said Sections 12-856 to 12-868, inclusive, and said combined water and sewage system (the "Water and Sewage Utility" or the "combined water and sewage system") has thenceforth been operated and financed in accordance with the provisions of said statutes, and WHEREAS, pursuant to the provisions of K.S.A. 12-856 to 12-869, inclusive, and all amendments thereto, the governing body of the City of Salina, Kansas (hereinafter sometimes called the "City"), heretofore caused to be published on May 22, 1987, in the official City newspaper a notice of the intention of the City to repair, alter, extend, reconstruct, enlarge and improve the combined water and sewage system of said City, including, but not limited to, the reconstruction of the filter system which is part of the waterworks system (the "Project") at a total cost estimated to be $2,650,000, to be paid for by the issuance of $2,650,000 principal amount of combined water and sewage system revenue bonds of the City, and WHEREAS, within fifteen (15) days after the publication of the notice aforesaid, no written protest was filed with the City Clerk of the City against the Project or against the issuance of said revenue bonds, and the City is now authorized to proceed with the Project and to issue its revenue bonds to pay part of the cost thereof, and WHEREAS, the governing body of said City has caused a report covering the Project and an estimate of the cost thereof, to be made by the City's engineers, and said report and estimate have been and hereby are accepted and approved and are now on file in the office of the City Clerk, and WHEREAS, it appears from the report and estimate of the City's engineers, and the governing body of the City hereby finds and determines, that the cost of the Project will be $2,650,000, and that it is now necessary that the City proceed forthwith to authorize and issue its Combined Water and Sewage System Revenue AN ORDINANCE AUTHORIZING AND DIRECTING THE ISSUANCE, SALE AND DELIVERY OF $2,650,000 PRINCIPAL AMOUNT OF COMBINED WATER AND SEWAGE SYSTEM REVENUE BONDS, SERIES OF 1987, OF THE CITY OF SALINA, KANSAS, FOR THE PURPOSE OF REPAIRING, ALTERING, EXTENDING, RECONSTRUCTING, ENLARGING AND IMPROVING THE COMBINED WATER AND SEWAGE SYSTEM, INCLUDING, BUT NOT LIMITED TO, THE RECONSTRUCTION OF THE FILTER SYSTEM WHICH IS PART OF THE WATERWORKS SYSTEM, PRESCRIBING THE FORM AND DETAILS OF SAID REVENUE BONDS, PROVIDING FOR THE COLLECTION, SEGREGATION AND APPLICATION OF THE REVENUES OF SAID SYSTEM FOR THE PURPOSES AUTHORIZED BY LAW, INCLUDING PAYING THE COST OF OPERATION AND MAINTENANCE OF SAID UTILITY, PAYING THE PRINCIPAL OF AND INTEREST ON THE REVENUE BONDS OF SAID CITY ISSUED AGAINST SAID SYSTEM AND PROVIDING ADEQUATE RESERVE FUNDS, MAKING CERTAIN COVENANTS WITH RESPECT TO SAID BONDS, APPROVING A PRELIMINARY OFFICIAL STATEMENT AND OFFICIAL STATEMENT RELATING TO SAID BONDS AND AMENDING ORDINANCE NO. 84-9025 ADOPTED AND APPROVED ON MAY 23, 1984. WHEREAS, the City of Salina, Kansas (the "City"), pursuant to the provisions of K.S.A. 12-856 to 12-868, inclusive, 1959 Supplement to the General Statutes of Kansas, 1949, acting through the governing body of the City, by Ordinance No. 6544, passed June 27, 1961, has heretofore combined the waterworks system and the sewage disposal system of said City, as said systems are defined and referred to in said Sections 12-856 to 12-868, inclusive, and said combined water and sewage system (the "Water and Sewage Utility" or the "combined water and sewage system") has thenceforth been operated and financed in accordance with the provisions of said statutes, and WHEREAS, pursuant to the provisions of K.S.A. 12-856 to 12-869, inclusive, and all amendments thereto, the governing body of the City of Salina, Kansas (hereinafter sometimes called the "City"), heretofore caused to be published on May 22, 1987, in the official City newspaper a notice of the intention of the City to repair, alter, extend, reconstruct, enlarge and improve the combined water and sewage system of said City, including, but not limited to, the reconstruction of the filter system which is part of the waterworks system (the "Project") at a total cost estimated to be $2,650,000, to be paid for by the issuance of $2,650,000 principal amount of combined water and sewage system revenue bonds of the City, and WHEREAS, within fifteen (15) days after the publication of the notice aforesaid, no written protest was filed with the City Clerk of the City against the Project or against the issuance of said revenue bonds, and the City is now authorized to proceed with the Project and to issue its revenue bonds to pay part of the cost thereof, and WHEREAS, the governing body of said City has caused a report covering the Project and an estimate of the cost thereof, to be made by the City's engineers, and said report and estimate have been and hereby are accepted and approved and are now on file in the office of the City Clerk, and WHEREAS, it appears from the report and estimate of the City's engineers, and the governing body of the City hereby finds and determines, that the cost of the Project will be $2,650,000, and that it is now necessary that the City proceed forthwith to authorize and issue its Combined Water and Sewage System Revenue r iL 1 Bonds in the amount of $2,650,000 for the purpose of paying the cost of the Project, and WHEREAS, the City has heretofore issued an issue of Combined Water and Sewage System Revenue Bonds, Series of 1977, in the original principal amount of $3,000,000 (the "1977 Bonds"), authorized by Ordinance No. 8546 of said City (the "1977 Ordinance"), and WHEREAS, the City has heretofore issued its Combined Waterworks and Sewer System Refunding Revenue Bonds, Series of 1978, in the original principal amount of $4,394,000 (the "1978 Bonds"), authorized by Ordinance No. 8635 of the City (the "1978 Ordinance"), for the purpose of refunding, among other bond issues, the 1977 Bonds, but under the terms of the 1977 Ordinance, the 1977 Ordinance was not defeased by such refunding and the 1977 Bonds were not deemed to be paid, and WHEREAS, the City has heretofore issued its Combined Water and Sewage System Refunding Revenue Bonds, Series 1984, in the original principal amount of $2,770,000 (the "1984 Bonds"), authorized by Ordinance No. 84-9025 of the City (the "1984 Ordinance"), for the purpose of refunding the 1978 Bonds, and under the terms of the 1978 Ordinance, the 1978 Ordinance was defeased by such refunding and the 1978 Bonds were deemed to be paid, and WHEREAS, under the provisions of the 1977 Ordinance, the City may issue additional bonds payable out of the revenues of the Water and Sewage Utility which are junior and subordinate to the 1977 Bonds provided the conditions set forth in Section 16 of the 1977 Ordinance are met, and WHEREAS, under the provisions of the 1984 Ordinance, the City may issue additional bonds payable out of the revenues of the Water and Sewage Utility on a parity and equality with the 1984 Bonds provided the conditions set forth in Section 23 of the 1984 Ordinance are met, and WHEREAS, the governing body of the City hereby finds and determines that the issuance of the revenue bonds herein authorized will conform and comply in all respects with the conditions set forth in the 1977 Ordinance, including the provisions of Section 16 thereof, and the 1984 Ordinance, including the provisions of Section 23 thereof, NOW, THEREFORE, BE IT ORDAINED BY THE GOVERNING BODY OF THE CITY OF SALINA, KANSAS: Section 1. Definitions. In addition to the words and terms otherwise defined herein, unless the context shall clearly indicate some other meaning, the words and terms defined in this Section shall for all purposes of this Ordinance have the respective meanings specified in this Section, to wit: "Aggregate Debt Service" means for any fiscal year as of the date of calculation, the total aggregate amount of Debt Service for such period with respect to all bonds payable from the Revenues. "Authorized Officer of the City" means the Mayor, City Clerk or Superintendent or manager of the Water and Sewage Utility or any officer of the City succeeding to the functions of any of said officers. "Bondholder" and "Holder" mean a Person in whose name a Bond is registered in the Bond Register. -2- "Bond Register" means the register and all accompanying records kept by the Bond Registrar evidencing the registration, transfer and exchange of Bonds. "Bond Registrar" means The First National Bond and Trust Company of Salina, Salina, Kansas, and its successors when acting in the capacity as registrar and transfer agent for the registration, transfer and exchange of Bonds, and any successors thereto. "Bonds" or "1987 Bonds" means the Combined Water and Sewage System Revenue Bonds, Series of 1987, authorized by the this Ordinance. "City" means the City of Salina, Kansas. "Consulting Engineers" means an independent consulting engineer, or firm of engineers, appointed from time to time and having a favorable reputation for skill and experience in the operation of water and sewer utilities retained by the City. "Debt Service" for any year means, as of any date of calculation and with respect to any bonds, payable from Revenues, an amount equal to the sum of (i) interest accruing during such period on such bonds, except to the extent that such interest is to be paid from moneys held in trust for the specific purpose of making such payments, plus (ii) that portion of principal due for such Bonds during the current year excluding the year of final maturity of any series of Bonds, except to the extent that such principal is to be paid from moneys held in trust for the specific purpose of making such payments. "Interest Payment Date" means the Stated Maturity of an installment of interest on the Bonds. "Maturity" with respect to any Bond means the date on which the principal of such Bond becomes due and payable as therein or herein provided, whether at the Stated Maturity of such Bond or by declaration of acceleration, call for redemption or otherwise. "1961 Bonds" means the Combined Water and Sewage System Revenue Bonds, Series of 1961, in the original principal amount of $3,600,000, authorized by the 1961 Ordinance. "1977 Bonds" means the Combined Water and Sewage System Revenue Bonds, Series of 1977, in the original principal amount of $3,000,000, authorized by the 1977 Ordinance, all of which were refunded with a portion of the proceeds of the 1978 Bonds. "1978 Bonds" means the Combined Water and Sewage System Refunding Revenue Bonds, Series of 1978, authorized by the 1978 Ordinance, all of which were refunded and deemed to be paid with a portion of the proceeds of the 1984 Bonds. "1984 Bonds" means the Combined Water and Sewage System Refunding Revenue Bonds, Series of 1984, in the original principal amount of $2,770,000. "1961 Ordinance" means Ordinance No. 6546 of the City authorizing the 1961 Bonds. "1977 Ordinance" means Ordinance No. 8546 of the City authorizing the 1977 Bonds. "1978 Ordinance" means Ordinance No. 8635 of the City authorizing the 1978 Bonds. -3- "1984 Ordinance" means Ordinance No. 84-9025 of the City authorizing the 1984 Bonds. "1987 Ordinance" or "this Ordinance" means this Ordinance of the City authorizing the 1987 Bonds, as originally executed or as it may be supplemented or amended from time to time. "Operating Expenses" shall mean the City's expenses of operating and maintaining the Water and Sewage Utility and keeping the same in good repair and working order, including all costs due under any type of contractual arrangement with respect to purchases of water, operation, maintenance, production, transmission, distribution, repairs, replacements, engineering, drilling wells, transportation, administrative and general, audit, legal, financial, pension, retirement, health, hospitalization, insurance, taxes and other expenses actually paid or accrued, including without limitation any expenses of the City applicable to the Water and Sewage Utility as recorded on its books pursuant to standard accounting practices. Operating Expenses shall not include any costs or expenses for extending or enlarging the Water and Sewage Utility, charges for depreciation, or payment of Debt Service on any bonds. "Outstanding" when used with respect to Bonds means, as of the date of determination, all Bonds theretofore executed, authenticated and delivered under this Ordinance, except: (i) Bonds theretofore cancelled by the Bond Registrar or delivered to the Bond Registrar for cancellation; (ii) Bonds in exchange for or in lieu of which other Bonds have been authenticated and delivered pursuant to this Ordinance; and (iii) Bonds that have been defeased in accordance with Section 26 of this Ordinance. "Paying Agent" means The First National Bank and Trust Company of Salina, Salina, Kansas, and its successors. "Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. "Project" means repairing, altering, extending, reconstructing, enlarging and improving the combined water and sewage system, including, but not limited to, the reconstruction of the filter system which is part of the waterworks system. "Record Date" for the interest and principal payable on any Interest Payment Date means the 15th day (whether or not a business day) of the calendar month next preceding such Interest Payment Date. "Redemption Date" when used with respect to any Bond to be redeemed means the date fixed for redemption by or pursuant to this Ordinance. "Redemption Price" when used with respect to any Bond means the price at which it is to be redeemed pursuant to this Ordinance. "Revenues" shall mean (i) as long as any of the 1977 Bonds are outstanding, all revenues, income and rents accrued by the City from the ownership and operation of the Water and Sewage Utility and the proceeds of any insurance covering business -4- interruption loss relating to the Water and Sewage Utility remaining after the City has provided for the credits and deposits required by the 1977 Ordinance, (ii) after the 1977 Bonds are no longer outstanding, all revenues, income and rents accrued by the City from the ownership and operation of the Water and Sewage Utility and the proceeds of any insurance covering business interruption loss relating to the Water and Sewage Utility, and (iii) at all times interest received on any moneys or securities held pursuant to the 1978 Ordinance including Investment Income (as defined in the 1978 Ordinance), received after February 15, 1991, and available for transfer into the Principal and Interest Account (as defined in the 1978 Ordinance) pursuant to Section 12(e) of the 1978 Ordinance but excluding interest from the Escrow Account (as defined in the 1978 Ordinance). "Revenues Available for Debt Service" for any fiscal year or period of 12 consecutive calendar months shall mean the sum of (i) Revenues, and (ii) the interest accrued on any moneys or securities held pursuant to the 1977 Ordinance, the 1984 Ordinance or this Ordinance (except any income on the bond and the interest account and the reserve account created by the 1977 Ordinance) less Operating Expenses for such fiscal year or period. "Special Record Date" for the payment of any Defaulted Interest, as defined in Section 4 hereof, means a date fixed by the Bond Registrar pursuant to Section 4. "Stated Maturity" when used with respect to any Bond or any installment of interest thereon means the date specified in Section 3 of this Ordinance as the fixed date on which the principal of such Bond or such installment of interest is due and payable. "Underwriters" shall mean the initial purchasers of the 1987 Bonds or the manager or managers of any underwriting group initially purchasing the 1987 Bonds. "Water and Sewage Fund" means the fund by that name established by Section 9 of the 1961 Ordinance. "Water and Sewage Utility" or the "combined water and sewage system" means the combined water and sewage system of the City including all extensions, enlargements and improvements thereto hereafter constructed or acquired by the City. Section 2. Authorization of and Security for the 1987 Bonds. For the purpose of providing funds to pay the cost of the Project, there is hereby authorized and directed to be issued a series of Combined Water and Sewage System Revenue Bonds, Series of 1987, of the City in the principal amount of $2,650,000. The 1987 Bonds shall be special obligations of the City, and the principal of, premium, if any, and interest on the 1987 Bonds shall be payable solely from the Revenues and not from any other fund or source. The 1987 Bonds constitute a lien on the Revenues. The taxing power of the City is not pledged to the payment of the 1987 Bonds either as to principal or interest. The 1987 Bonds shall not be or constitute a general obligation of the City, nor shall they constitute an indebtedness of the City within the meaning of any constitutional, statutory or charter provision, limitation or restriction. The 1987 Bonds shall be junior and subordinate with respect to the payments of principal and interest out of the Revenues of the Water and Sewage Utility of the City and in other respects to the 1977 Bonds. In the event of any default in the payment of either interest on or principal of any of the 1977 Bonds, the City shall make no payments of either principal of or -5- interest on the 1987 Bonds until such default be cured. The City has duly provided for the payment of the 1977 Bonds in accordance with the terms of an Escrow Trust Agreement dated as of May 1, 1978, between the City and the Escrow Trustee with the proceeds of the Series 1978 Bonds. Section 4. Method and Place of Payment of Principal of and Interest on the Bonds. The principal of, redemption premium, if any, and interest (computed on the basis of a 360 -day year of The 1987 Bonds shall stand on a parity with respect to the payment of principal, premium, if any, and interest from the Revenues derived by the City from the operation of the Water and Sewage Utility and in all other respects with the 1984 Bonds. The 1987 Bonds shall not have any priority with respect to the payment of principal or interest from the Revenues or otherwise over the 1984 Bonds nor over any other combined water and sewage system revenue bonds of the City hereafter issued in accordance with the provisions of this Ordinance and standing on a parity with the 1987 Bonds, nor shall the 1984 Bonds or any other combined water and sewage system revenue bonds of the City hereafter issued have any priority with respect to the payment of principal, premium, if any, or interest from the Revenues or otherwise over the 1987 Bonds. Section 3. Description of the Bonds, Designation of Paying Agent and Bond Registrar. The Bonds shall consist of fully registered Bonds, without coupons, transferable to subsequent owners only in the Bond Register maintained by the Bond Registrar as hereinafter provided. Each Bond shall be in the denomination of $5,000 or any integral multiple thereof not exceeding the principal amount of Bonds becoming due on the Stated Maturity of such Bond, as specified by the Holder of such Bond. The Bonds shall be numbered in a manner determined by the Bond Registrar. The Bonds shall be dated October 1, 1987, shall have the Stated Maturities, and shall bear interest at the rates per annum, as follows: MATURITY PRINCIPAL INTEREST OCTOBER 1 AMOUNT RATE 1988 $ 70,000 9.50% 1989 75,000 9.00% 1990 80,000 8.50% 1991 85,000 8.50% 1992 90,000 8.00% 1993 95,000 8.00% 1994 100,000 8.00% 1995 1 05, 000 8.00% 1996 110,000 7.00% 1997 120,000 7.15% 1998 125,000 7.30% 1999 135,000 7.45% 2000 140,000 7.60% 2001 150,000 7.70% 2002 165,000 7.80% 2003 175,000 7.90% 2004 185,000 8.00% 2005 200,000 8.00% 2006 215,000 8.00% 2007 230,000 8.00% The Bonds shall bear interest from the most recent Interest Payment Date to which interest has been paid in full or, if no interest has been paid, from October 1, 1987. Interest on the Bonds at the rates aforesaid shall be payable semiannually on April 1 and October 1 in each year, beginning April 1, 1988 (the "Interest Payment Date"). The First National Bank and Trust Company of Salina, Salina, Kansas, is hereby designated as the Paying Agent and as the Bond Registrar for the Bonds. Section 4. Method and Place of Payment of Principal of and Interest on the Bonds. The principal of, redemption premium, if any, and interest (computed on the basis of a 360 -day year of -7- twelve 30 -day months) on the Bonds shall be payable in such coin or currency of the United States of America as at the time of payment is legal tender for the payment of public and private debts. Payment of the interest on each Bond shall be made by the Paying Agent on each Interest Payment Date to the Person appearing as the Holder thereof in the Bond Register at the close of business on the Record Date next preceding said Interest Payment Date, by check or draft mailed to such Holder at the Holder's address as it appears in the Bond Register. The principal of and redemption premium, if any, for each Bond shall be payable to the Holder thereof upon the presentation of such Bond for payment and cancellation at its Maturity at the principal office of the Paying Agent. Notwithstanding any of the foregoing provisions of this Section to the contrary, any interest on the Bonds which is payable, but is not punctually paid on any Interest Payment Date (herein called "Defaulted Interest"), shall be payable to the Persons in whose names the Bonds are registered at the close of business on a Special Record Date. The Special Record Date shall be fixed in the following manner: (1) the City shall notify the Bond Registrar in writing of the amount of Defaulted Interest proposed to be paid on the Bonds and the date of the proposed payment, which proposed payment date shall be at least 30 days after receipt by the Bond Registrar of such notice from the City; (2) at the same time the City shall deposit with the Paying Agent an amount of money equal to the aggregate amount to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Paying Agent for such deposit prior to the date of the proposed payment; and (3) thereupon, the Bond Registrar shall fix a Special Record Date for the payment of such Defaulted Interest which shall not be more than 15 nor less than 10 days prior to the date of the proposed payment. The Bond Registrar shall promptly notify the City of such Special Record Date and, in the name and at the expense of the City, shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be mailed, first class postage prepaid, to the Holder of each Bond at such Holder's address as it appears in the Bond Register, not less than 10 days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been mailed as aforesaid, such Defaulted Interest shall be paid to the Persons in whose names the Bonds are registered at the close of business on such Special Record Date. Payment of principal of, redemption premium, if any, and interest on a Bond may be made by such other method of transferring funds as may be requested by the Holder of the Bond, provided that the Paying Agent shall first receive a written request from such Holder (i) specifying the method and route for transferring funds and (ii) providing for the Paying Agent to be reimbursed by the Holder for all expenses incurred in connection with such fund transfers. Subject to the foregoing provisions of this Section, each Bond delivered under this Ordinance upon transfer of or in exchange for or in lieu of any other Bond shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Bond. Section 5. Execution, Authentication and Delivery of the Bonds. The Bonds shall be executed on behalf of the City by the facsimile signature of the Mayor, attested by the facsimile signature of the City Clerk, with the facsimile seal of the City affixed. In the event any officer whose signature or facsimile thereof appears on any Bond shall cease to be such officer before the delivery of such Bond, such signature or facsimile thereof shall nevertheless be valid and sufficient for all purposes, the -7- same as if such person had remained in office until delivery. Any Bond may be executed by such persons as at the actual time of the execution of such Bond shall be the proper officers to sign such Bond although at the original date of such Bond such persons may not have been such officers. The Bonds shall have endorsed thereon a Certificate of Authentication substantially in the form hereinafter set forth and which shall have the date of registration inserted and shall be manually executed by the Bond Registrar. No Bond shall be entitled to any security or benefit under this Resolution or shall be valid or obligatory for any purpose unless and until such Certificate of Authentication shall have been duly executed by the Bond Registrar by manual signature. Such executed Certificate of Authentication upon any Bond shall be conclusive evidence that such Bond has been duly authenticated and delivered under this Resolution and that such registered owner has been entered of record in the Bond Register kept by the Bond Registrar. The Certificate of Authentication shall be deemed to have been duly executed if signed and dated by any authorized officer or employee of the Bond Registrar, but it shall not be necessary that the same officer or employee sign the Certificate of Authentication on all of the Bonds that may be issued hereunder at any one time. The Mayor and City Clerk are hereby authorized and directed to prepare and execute the Bonds in the manner hereinbefore specified, to register the Bonds in the office of the City Clerk, and to cause the Bonds to be registered in the office of the State Treasurer of Kansas as provided by law, and when the Bonds have been duly registered with the Bond Registrar, to deliver the Bonds to the Underwriter, upon the payment of the purchase price of 100% of the principal amount of the Bonds plus accrued interest to the date of payment and delivery together with any premium. Section 6. Registration, Transfer and Exchange of Bonds. So long as any of the Bonds remain outstanding, the City shall cause the Bond Register to be kept at the principal office of the Bond Registrar and all of the Bonds and transfers and/or exchanges thereof shall be fully registered as to both principal and interest in the name of the Holders in the Bond Register and shall not be registered to bearer. Bonds may be transferred in the Bond Register only upon surrender thereof to the Bond Registrar duly endorsed for transfer or accompanied by a written instrument of transfer duly executed by the Holder thereof or his attorney or legal representative in such form as shall be satisfactory to the Bond Registrar. Upon any such transfer, the City shall execute and the Bond Registrar shall authenticate and deliver in exchange for such Bond a new Bond or Bonds, registered in the name of the transferee, of any denomination or denominations authorized by this Ordinance in an aggregate principal amount equal to the principal amount of such Bond, of the same Stated Maturity and bearing interest at the same rate. Bonds, upon surrender thereof at the principal office of the Bond Registrar, together with a written instrument of transfer duly executed by the Holder thereof or his attorney or legal representative in such form as shall be satisfactory to the Bond Registrar, may, at the option of the Holder thereof, be exchanged for an equal aggregate principal amount of Bonds of the same Stated Maturity, of any denomination or denominations authorized by this Ordinance, and bearing interest at the same rate. In all cases in which Bonds shall be exchanged or transferred hereunder, the City shall execute and the Bond Registrar shall authenticate and deliver at the earliest practicable time Bonds in accordance with the provisions of this Ordinance. All Bonds surrendered in any such exchange or transfer shall forthwith be cancelled by the Bond Registrar. No service charge shall be made to any Bondholder for registration, transfer or exchange of Bonds, but the City or the Bond Registrar may make a charge for every transfer or exchange of Bonds sufficient to reimburse it or them for any tax or other governmental charge required to be paid with respect to such transfer or exchange, and such charges shall be paid before any such transfer or exchange shall be completed. The City and the Bond Registrar shall not be required (i) to issue, transfer or exchange any Bond during a period beginning at the opening of business 15 days preceding a mailing of a notice of redemption for Bonds selected for redemption pursuant to Section 10 and ending at the close of business on the date of such mailing; (ii) to transfer or exchange any Bond so selected for redemption in whole or in part, or (iii) to issue, transfer or exchange any Bond during the period beginning at the opening of business on the day after receiving written notice from the City of its intent to pay Defaulted Interest and ending at the close of business on the date fixed for the payment of Defaulted Interest pursuant to Section 4 of this Ordinance. Section 7. Persons Deemed Owners of Bonds. The Person in whose name any Bond shall be registered shall be deemed and regarded by the City, the Bond Registrar and the Paying Agent as the absolute owner thereof, whether such Bond shall be overdue or not, for the purpose of receiving payment therefor or on account thereof and for all purposes, and neither the City, the Bond Registrar nor the Paying Agent shall be affected by notice to the contrary. Payment of or on account of the principal of, premium, if any, and interest on any Bond shall be made only to or upon the order of the Holder thereof or his legal representative. All such payments shall be valid and effectual to satisfy and discharge the liability upon such Bond, including the interest thereon, to the extent of the sum or sums so paid. Section 8. Mutilated, Lost, Stolen or Destroyed Bonds. In the event any Bond shall become mutilated, or be lost, stolen or destroyed, the City shall, if necessary, execute and the Bond Registrar shall authenticate and shall deliver a new Bond of like date and tenor as the Bond mutilated, lost, stolen or destroyed; provided that, in the case of any mutilated Bond, such mutilated Bond shall first be surrendered to the Bond Registrar, and in the case of any lost, stolen or destroyed Bond, that the requirements of K.S.A. 84-8-405 are met and that an indemnity bond and affidavit of loss are provided to the Bond Registrar and the City at the expense of the Holder. Such indemnity bond and affidavit of loss must be sufficient, in the judgment of the Bond Registrar and the City, to protect the Bond Registrar and the City from any loss which either of them might suffer if the Bond is replaced. In the event any such Bond shall have matured, instead of issuing a substitute Bond the City may pay or authorize the payment of the same without surrender thereof. Upon the issuance of any substitute Bond, the City and the Bond Registrar may require the payment of an amount sufficient to reimburse the City and the Bond Registrar for any tax or other governmental charge that may be imposed in relation thereto and any other reasonable fees and expenses incurred in connection therewith. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, lost, stolen or destroyed Bonds. Section 9. Cancellation and Destruction of Bonds Upon Payment. All Bonds surrendered for payment, transfer or exchange shall be delivered to the Bond Registrar and, if not already cancelled, the Bond Registrar shall cancel such Bonds and record such cancellation in the Bond Register. Thereafter, such cancell Bonds shall be delivered to the City. -10- The Bond Registrar shall call Bonds for redemption and paymen Section 10. Redemption of Bonds Prior to Maturity. At the option of the City, Bonds maturing on October 1, 1998, and thereafter may be called for redemption and payment prior to Price or Prices and the Redemption Date. maturity, as a whole or in part, in inverse order of Maturity on October October 1, 1997, or on any Interest Payment Date thereafter, at th September respective Redemption Prices (expressed as percentages of principa October amount) set out below, plus accrued interest thereon to the September Redemption Date: 101.50% -10- The Bond Registrar shall call Bonds for redemption and paymen Redemption as herein provided upon receipt by the Bond Registrar at least 45 days prior to the Redemption Date of a written request of the City Redemption Such request shall specify the principal amount of Bonds and their maturities to be called for redemption, the applicable Redemption Dates Price or Prices and the Redemption Date. Bonds shall be redeemed in inverse order of maturity in Prices October 1, 1997, through September 30, 1998 102.00% October 1, 1998, through September 30, 1999 101.50% October 1, 1999, through September 30, 2000 101.00% October 1, 2000, through September 30, 2001 100.50% October 1, 2001, and thereafter exchange as aforesaid, such Bond shall, nevertheless, become due 100.00% -10- The Bond Registrar shall call Bonds for redemption and paymen as herein provided upon receipt by the Bond Registrar at least 45 days prior to the Redemption Date of a written request of the City Such request shall specify the principal amount of Bonds and their maturities to be called for redemption, the applicable Redemption Price or Prices and the Redemption Date. Bonds shall be redeemed in inverse order of maturity in the principal amount of $5,000 or any integral multiple thereof. In the case of a partial redemption of Bonds of the same maturity the Bonds to be redeemed shall be selected by the Bond Registrar from the Outstanding Bonds of that maturity by such method as the Bond Registrar shall deem fair and appropriate and which may provide for the selection for redemption of portions of the principal of Outstanding Bonds of that maturity of a denomination larger than $5,000. The portions of the principal of Outstanding Bonds so selected for partial redemption shall be equal to $5,000 or integral multiples thereof. Any Bond which is to be redeemed only in part shall be submitted to the Paying Agent and delivered to the Bond Registrar, who shall authenticate and deliver to the Holder of such Bond, without service charge, a new Bond or Bonds, of any authorized denomination as requested by such Holder in an aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Bond so surrendered. I the Holder of any such Bond of a denomination greater than $5,000 shall fail to present such Bond to the Paying Agent for payment ani exchange as aforesaid, such Bond shall, nevertheless, become due and payable on the Redemption Date to the extent of the principal amount of such Bond called for redemption (and to that extent only). If and when the City shall call any of the Bonds for redemption and payment prior to the maturity thereof, the Bond Registrar shall give written notice in the name of the City of its intention to redeem and pay such Bonds at the office of the Paying Agent. Notice of Redemption shall be given by first class mail, postage prepaid, mailed not less than 30 days prior to the Redemption Date, to each Holder of Bonds to be redeemed, at his address appearing in the Bond Register. All notices of redemption shall state: -10- (i) The Redemption Date; (ii) The Redemption Price; (iii) If less than all Outstanding Bonds are to be redeemed, the identification (and, in the case of partial redemption, the respective principal amounts) of the Bonds to be redeemed; (iv) That on the Redemption Date, the Redemption Price will become due and payable upon each such Bond, and that interest thereon shall cease to accrue from and after said date; and (v) The place where such Bonds are to be surrendered for payment of the Redemption Price (which shall be the office of the Paying Agent). The failure of the Holder of any Bond to be redeemed to receive written notice mailed pursuant hereto shall not affect or invalidate the redemption of said Bond. If any Bond is called for redemption and payment as aforesaid, all interest on such Bond shall cease from and after the date for which such call is made, provided funds are made available to the Paying Agent for its payment on the Redemption Date at the Redemption Price. The Bond Registrar is also directed to comply with any mandatory or voluntary standards for processing redemptions of municipal securities established by the Securities and Exchange Commission. Failure to comply with such standards shall not affec or invalidate the redemption of said Bonds being redeemed. Section 11. Form of Bonds. The Bonds issued in fully registered form shall be substantially as follows: REGISTERED REGISTERED NUMBER $ UNITED STATES OF AMERICA STATE OF KANSAS COUNTY OF SALINE CITY OF SALINA COMBINED WATER AND SEWAGE SYSTEM REVENUE BOND SERIES OF 1987 Interest Maturity Bond Rate Date Date CUSIP % October 1, 1987 REGISTERED HOLDER: PRINCIPAL AMOUNT: DOLLARS THE CITY OF SALINA, in the County of Saline, State of Kansas (the "City"), for value received, hereby promises to pay to the Registered Holder identified above, or registered assigns, on the Maturity Date identified above, unless called for redemption prior to maturity, the Principal Amount identified above and to pa interest thereon at the Interest Rate specified above from the mos -11- recent Interest Payment Date to which interest has been paid in full or, if no interest has been paid, from October 1, 1987, said interest being payable semiannually on April 1 and October 1 in each year, beginning April 1, 1988 (the "Interest Payment Dates"). AS PROVIDED in the Ordinance (the "Ordinance") of the City authorizing the issuance of this Bond, interest on this Bond will be paid on each Interest Payment Date to the person in whose name this Bond (or one or more predecessor Bonds) is registered in the hereinafter referred to Bond Register at the close of business on the fifteenth day (whether or not a business day) of the month next preceding each Interest Payment Date (the "Record Date") to the registered owner hereof at such person's address as it appears in the Bond Register. Interest not punctually paid will be paid a otherwise provided in the Ordinance. The principal of this Bond shall be payable to the Registered Holder upon presentation and surrender hereof at the principal office of The First National Ban. and Trust Company of Salina, in the City of Salina, Kansas. REFERENCE IS MADE TO THE FURTHER PROVISIONS OF THIS BOND SET FORTH ON THE REVERSE HEREOF. SUCH PROVISIONS SHALL FOR ALL PURPOSES HAVE THE SAME EFFECT AS IF SET FORTH HEREIN. THIS BOND shall not be valid or become obligatory for an purpose or be entitled to any security or benefit under the Ordinance until the Certificate of Authentication hereon shall hav, been dated and executed by the Bond Registrar. IT IS HEREBY DECLARED AND CERTIFIED that all acts, conditions and things required to be done and to exist precedent t and in the issuance of the Bonds have been done and performed and do exist in due and regular form and manner as required by the constitution and laws of the State of Kansas. IN WITNESS WHEREOF, the City has caused this Bond to be executed by facsimile signatures of its Mayor and City Clerk and a facsimile of its corporate seal to be hereto affixed and this Bond to be dated October 1, 1987. ATTEST: CITY OF SALINA, KANSAS facsimile Mayor facsimile) City Clerk CERTIFICATE OF AUTHENTICATION This Bond is one of the Bonds described in the within mentioned Ordinance. REGISTRATION DATE: THE FIRST NATIONAL BANK AND TRUST COMPANY OF SALINA Bond Registrar and Paying Agent By -12- (ON REVERSE SIDE) FURTHER PROVISIONS THIS BOND is one of an authorized series of Bonds of the City designated "Combined Water and Sewage System Revenue Bonds, Series of 1987," aggregating the principal amount of $2,650,000, issued for the purpose of repairing, altering, extending, reconstructing, enlarging and improving the combined water and sewage system, including, but not limited to, the reconstruction of the filter system which is part of the waterworks system, by the authority of and in full compliance with the provisions, restrictions and limitations of the Constitution and statutes of the State of Kansas, including K.S.A. 12-856 to 12-869, inclusive, and all amendments thereof and all other provisions of the laws of said State applicable thereto. THIS BOND and all interest hereon are special obligations of the City to be paid by said City solely from the revenues derived from the rates, fees or charges collected by said City fron the operation of its combined water and sewage system and not from any other fund or source as described in the Ordinance. The Bonds do not constitute general obligations of the City nor do they constitute an indebtedness of the City within the meaning of any constitutional or statutory provision, and the City is under no obligation to levy any taxes to pay any of the principal of or interest on the Bonds. The Bonds have been authorized and issued under the provisions of the Ordinance to which reference is made for a description of the covenants made by the City with respect tc the collection, segregation and application of the revenues of the City's Water and Sewage Utility, the nature and extent of the security of such Bonds, the rights, duties and obligations of the City with respect thereto and the rights of the holders thereof. The Bonds are junior and subordinate with respect to the payment of principal and interest and in other respects to an issue of Combined Water and Sewage System Revenue Bonds, Series of 1977, dated April 1, 1977, in the original principal amount of $3,000,000. The Bonds stand on a parity with respect to the payment of principal, redemption premium, if any, and interest from the revenues of the City's combined water and sewage system and in all other respects with an issue of Combined Water and Sewage System Refunding Revenue Bonds, Series of 1984, dated June 15, 1984, in the original principal amount of $2,770,000. The City may issue additional bonds payable from the net revenues produced from the combined water and sewage system of the City as provided in and subject to the restrictions of the Ordinance and may provide that any such additional bonds shall enjoy equality of lien on said net revenues with the Bonds. THIS BOND has been duly registered in the office of the City Clerk of the City of Salina, Kansas, and in the office of the Treasurer of the State of Kansas. THE BONDS maturing on October 1, 1998, and thereafter, a the option of the City, may be called for redemption and payment prior to maturity, as a whole or in part, on October 1, 1997, or o any Interest Payment Date thereafter, at the respective Redemption Prices (expressed as percentages of principal amount) set out below, plus accrued interest thereon to the date fixed for redemption and payment. Bonds to be redeemed and paid pursuant to the provisions described above shall be redeemed in inverse order of maturity, Bonds of less than a full maturity to be selected by the Bond Registrar in such manner as it shall deem fair and appropriate. -13- IN THE EVENT any of the Bonds are called for redemption and payment as aforesaid, written notice thereof will be given by first class mail mailed not less than 30 days prior to the date fixed for redemption and payment to each holder of Bonds to be redeemed. All bonds so called for redemption will cease to bear interest on the specified redemption date, provided funds are deposited with the Paying Agent on such redemption date, and will no longer be secured by the Ordinance and will not be deemed to be outstanding under the provisions of the Ordinance. THE PRINCIPAL of and interest (computed on the basis of 360 -day year of twelve 30 -day months) on this Bond are payable in such coin or currency of the United States of America as at the time of payment is legal tender for the payment of public and private debts. THIS BOND is negotiable and is transferable, as provided in the Ordinance, only in the Bond Register at the office of the Bond Registrar upon surrender of this Bond to the Bond Registrar duly endorsed for transfer or accompanied by a written instrument of transfer satisfactory to the Bond Registrar duly executed by tho Registered Holder hereof or his attorney or legal representative, and thereupon a new Bond or Bonds in the same aggregate principal amount shall be issued to the transferee in exchange therefor subject to the conditions provided in the Ordinance. The Bonds fo: each maturity are issuable only in the form of fully registered bonds, without coupons, in the denomination of $5,000 or any integral multiple thereof. The Registered Holder of any Bond or Bonds may surrender the same in exchange for an equal aggregate principal amount of Bonds of any authorized denomination in the manner and subject to the conditions provided in the Ordinance. N< service charge shall be made for any such transfer or exchange, but, prior to any transfer or exchange, the registered owner hereof shall pay to the City or the Bond Registrar an amount sufficient tc reimburse it or them for any tax or other governmental charge required to be paid with respect to such transfer or exchange. Th( City, the Bond Registrar and the Paying Agent may deem and treat the person in whose name this Bond is registered as the absolute owner hereof for the purpose of receiving payment of, or on accouni of, the principal hereof and interest due hereon and for all other purposes. (FORM OF ASSIGNMENT) BOND ASSIGNMENT FOR VALUE RECEIVED the undersigned does (do) hereby sell, assign and transfer to (Name and Address) -14- Redemption Redemption Dates Prices October 1, 1997, through September 30, 1998 102.00% October 1, 1998, through September 30, 1999 101.50% October 1, 1999, through September 30, 2000 101.00% October 1, 2000, through September 30, 2001 100.50% October 1, 2001, and thereafter 100.00% IN THE EVENT any of the Bonds are called for redemption and payment as aforesaid, written notice thereof will be given by first class mail mailed not less than 30 days prior to the date fixed for redemption and payment to each holder of Bonds to be redeemed. All bonds so called for redemption will cease to bear interest on the specified redemption date, provided funds are deposited with the Paying Agent on such redemption date, and will no longer be secured by the Ordinance and will not be deemed to be outstanding under the provisions of the Ordinance. THE PRINCIPAL of and interest (computed on the basis of 360 -day year of twelve 30 -day months) on this Bond are payable in such coin or currency of the United States of America as at the time of payment is legal tender for the payment of public and private debts. THIS BOND is negotiable and is transferable, as provided in the Ordinance, only in the Bond Register at the office of the Bond Registrar upon surrender of this Bond to the Bond Registrar duly endorsed for transfer or accompanied by a written instrument of transfer satisfactory to the Bond Registrar duly executed by tho Registered Holder hereof or his attorney or legal representative, and thereupon a new Bond or Bonds in the same aggregate principal amount shall be issued to the transferee in exchange therefor subject to the conditions provided in the Ordinance. The Bonds fo: each maturity are issuable only in the form of fully registered bonds, without coupons, in the denomination of $5,000 or any integral multiple thereof. The Registered Holder of any Bond or Bonds may surrender the same in exchange for an equal aggregate principal amount of Bonds of any authorized denomination in the manner and subject to the conditions provided in the Ordinance. N< service charge shall be made for any such transfer or exchange, but, prior to any transfer or exchange, the registered owner hereof shall pay to the City or the Bond Registrar an amount sufficient tc reimburse it or them for any tax or other governmental charge required to be paid with respect to such transfer or exchange. Th( City, the Bond Registrar and the Paying Agent may deem and treat the person in whose name this Bond is registered as the absolute owner hereof for the purpose of receiving payment of, or on accouni of, the principal hereof and interest due hereon and for all other purposes. (FORM OF ASSIGNMENT) BOND ASSIGNMENT FOR VALUE RECEIVED the undersigned does (do) hereby sell, assign and transfer to (Name and Address) -14- (Social Security or Taxpayer Identifying No.) the bond to which this assignment is affixed in the outstanding principal amount of $ , standing in the name of the undersigned on the books of The First National Bank and Trust Company of Salina, Salina, Kansas. The undersigned does (do) hereb revocably constitute and appoint attorney t transfer the said bond, on the books of said The First National Bank and Trust Company of Salina, with full power of substitution in the premises. Dated Signature (Sign Here Exactly as Name or Names Appear on the Face of the Certificate) Signature Guaranteed: (Bank, Trust Company or Firm) By Authorized Officer (FORM OF CITY CLERK'S CERTIFICATE) STATE OF KANSAS ) ) SS. COUNTY OF SALINE ) I, the undersigned, City Clerk of the City of Salina, Kansas, do hereby certify that this Bond has been duly registered in my office according to law. WITNESS my hand and official seal. [FACSIMILE SEAL] (facsimile) City Clerk ----------------------------------------------------------------- (FORM OF STATE TREASURER'S CERTIFICATE) OFFICE OF THE TREASURER, STATE OF KANSAS I, JOAN FINNEY, Treasurer of the State of Kansas, do hereby certify that a transcript of the proceedings leading up to -15- 1 n the issuance of this Bond was registered Bond has been filed in my office and that this in my office according to law on 19 WITNESS my hand and official seal. [FACSIMILE SEAL] State Treasurer's Registration Number: JOAN FINNEY Treasurer of the State of Kansas By Assistant State Treasurer Section 12. Uncertificated Bonds. There will be no uncertificated bonds. Section 13. Disposition of 1987 Bond Proceeds. All accrued interest and premium, if any, received from the sale of the 1987 Bonds shall be credited to and deposited in the 1987 Principal and Interest Account hereinafter created by Section 15 of this Ordinance. The remainder of the proceeds received from the sale of the 1987 Bonds shall be deposited in a separate fund hereby created in the treasury of the City to be known as the "Combined Water and Sewage Utility Construction Fund of 1987" (herein called the "Construction Fund") and shall be used by the City for the sole purpose of paying the cost of the Project in accordance with the plans and specifications therefor prepared by the City's engineers heretofore approved by the governing body of the City and on file in the office of the City Clerk, including any alterations in or amendments to said plans and specifications deemed advisable by the City's engineers and approved by the governing body of the City. Withdrawals from the Construction Fund shall be made only on duly authorized and executed warrant or check therefor accompanied by a certificate executed by the City's engineers that such payment is being made for a purpose within the scope of this Ordinance and that the amount of such payment represents only the contract price of the property, equipment, labor, materials or service being paid for, or if such payment is not being made pursuant to an express contract, that such payment is not in excess of the reasonable value thereof. Nothing hereinbefore contained shall prevent the payment out of the Construction Fund of all costs and expenses incident to the issuance of the Bonds without a certificate from the City's engineers. -16- Upon completion of the Project as hereinbefore provided, any surplus remaining in the Construction Fund shall be deposited in the 1987 Principal and Interest Account created by Section 15 of this Ordinance. Section 14. Water and Sewage Fund. The City covenants and agrees that so long as any of the 1987 Bonds remain outstanding and unpaid all of the revenues derived by the City from the operation of its Water and Sewage Utility, including all revenues from improvements, extensions and enlargements in and to the Water and Sewage Utility, will be paid and deposited in the City's "Water and Sewage Fund" and that said revenues will not be mingled with the other funds of the City and shall be administered and used solely as hereinafter in this Ordinance provided. -16- Section 15. Ratification and Creation of Funds and Accounts. The establishment by the 1961 Ordinance of the City of the two accounts known as the (a) "Combined Water and Sewage System Depreciation and Emergency Replacement Account" (herein called the "Depreciation and Emergency Replacement Account"), and (b) "Combined Water and Sewage System Extension and Bond Retirement Account" (herein called the "Extension and Bond Retirement Account") be, and the same are, hereby ratified and confirmed, and in addition to the accounts aforesaid there were created and established by the 1977 Ordinance of the City two separate accounts known respectively as the (c) "Bond and Interest Account for Combined Water and Sewage System Revenue Bonds, Series of 1977", and (d) "Reserve Account for Combined Water and Sewage System Revenue Bonds, Series of 1977" and the same are hereby ratified and confirmed, and in addition to the accounts aforesaid, there were created and established by the 1984 Ordinance of the City two separate accounts known respectively as the (e) "Principal and Interest Account for Combined Water and Sewage System Refunding Revenue Bonds, Series of 1984" (the "1984 Principal and Interest Account"), and (f) "Reserve Account for Combined Water and Sewage System Refunding Revenue Bonds, Series 1984" (the "1984 Reserve Account") and the same are hereby ratified and confirmed, and in addition to the accounts aforesaid, there are hereby created and established in the treasury of the City the following two separate accounts (g) "Principal and Interest Account for Combined Water and Sewage System Revenue Bonds, Series of 1987" (the "1987 Principal and Interest Account"), and (h) "Reserve Account for Combined Water and Sewage System Revenue Bonds, Series of 1987" (the "1987 Reserve Account"). The accounts referred in (a) and (b) aforesaid shall be maintained and administered by the City in accordance with the provisions of the 1977 Ordinance, the 1984 Ordinance and this Ordinance so long as any of the 1977 Bonds, 1984 Bonds or 1987 Bonds remain outstanding and unpaid. The accounts referred to in paragraphs (c) and (d) aforesaid shall be maintained and administered in compliance with the provisions of the 1977 Ordinance so long as any of the 1977 Bonds remain outstanding and unpaid. The accounts referred to in paragraphs (e) and (f) aforesaid shall be maintained and administered in compliance with the provisions of the 1984 Ordinance so long as any of the 1984 Bonds remain outstanding and unpaid. The accounts referred to in paragraphs (g) and (h) aforesaid shall be maintained and administered by the City as hereinafter provided in this Ordinance so long as any 1987 Bonds remain Outstanding. Section 16. Application of Moneys in Funds and Accounts. Moneys paid and deposited in the "Water and Sewage Fund" heretofore -17- established by the City and hereinbefore referred to shall be administered and disposed of by the City so long as any of the 1987 Bonds remain outstanding, in the following order, to wit: (a) The City each month shall pay or make provision for the payment of the reasonable and proper Operating Expenses for the current month. No moneys in the Water and Sewage Fund shall be used for the purpose of extending or enlarging the City's Water and Sewage Utility, except as provided in paragraph (g) of this Section 16. (b) After paying or making provision for the payment each month of the reasonable and proper expenses of operating and maintaining the City's combined water and sewage system for the current month, the City shall next pay or credit from time to time from the Water and Sewage Fund to the Bond and Interest Account for Combined Water and Sewage System Revenue Bonds, Series of 1977, so long as any of the 1977 Bonds remain outstanding, amounts (if any) at the time required to be paid or credited by the provisions of the 1977 Ordinance. (c) After making the payments and credits at the time required to be made by the City under the provisions of paragraphs (a) and (b) aforesaid the City shall pay or credit from time to time from the Water and Sewage Fund to the Reserve Account for Combined Water and Sewage System Revenue Bonds, Series of 1977, so long as any of the 1977 Bonds remain outstanding, any amounts at the time required to be paid or credited by the provisions of the 1977 Ordinance. (i) Beginning on the first day of each month from and after the delivery of the 1987 Bonds, and continuing on the first day of each month thereafter to and including March 1, 1988, an equal pro rata portion of the amount of interest that will become due on the Bonds on April 1, 1988 and beginning on April 1, 1988, and continuing on the first day of each month thereafter, an amount not less than one-sixth (1/6) of the interest that will become due on the 1987 Bonds on the next succeeding Interest Payment Date; and (ii) Beginning on the first day of each month from and after the delivery of the 1987 Bonds, and continuing on the first day of each month thereafter to and including September 1, 1988, an equal pro rata portion of the principal amount of the 1987 Bonds that will become due on October 1, 1988; and beginning on October 1, 1988, and continuing on the first day of each month thereafter, an amount not less than one -twelfth (1/12) of the principal amount of the 1987 Bonds that will become due on the next succeeding Stated Maturity; and (iii) On the first day of each month preceding a month in which fees of the Bond Registrar and Paying Agent are scheduled to become due, such amounts as may be required to pay such fees. -18- (d) After making all required to be made by the City payments and credits at the time under the provisions of paragraphs (a), (b) and (c) aforesaid, the City shall next pay or credit from the Water and Sewage Fund to the 1984 Principal and Interest Account any amounts at the time required to be paid or credited to said Account under the provisions of the 1984 Ordinance, and at the same time such payments and credits are made and on a parity therewith, the City shall pay or credit to the 1987 Principal and Interest Account, to the extent necessary to meet at the Stated Maturity thereof the interest on and principal of the 1987 Bonds, the following amounts: (i) Beginning on the first day of each month from and after the delivery of the 1987 Bonds, and continuing on the first day of each month thereafter to and including March 1, 1988, an equal pro rata portion of the amount of interest that will become due on the Bonds on April 1, 1988 and beginning on April 1, 1988, and continuing on the first day of each month thereafter, an amount not less than one-sixth (1/6) of the interest that will become due on the 1987 Bonds on the next succeeding Interest Payment Date; and (ii) Beginning on the first day of each month from and after the delivery of the 1987 Bonds, and continuing on the first day of each month thereafter to and including September 1, 1988, an equal pro rata portion of the principal amount of the 1987 Bonds that will become due on October 1, 1988; and beginning on October 1, 1988, and continuing on the first day of each month thereafter, an amount not less than one -twelfth (1/12) of the principal amount of the 1987 Bonds that will become due on the next succeeding Stated Maturity; and (iii) On the first day of each month preceding a month in which fees of the Bond Registrar and Paying Agent are scheduled to become due, such amounts as may be required to pay such fees. -18- All amounts paid and credited to the 1987 Principal and Interest Account shall be used and expended by the City for the sole purpose of paying the interest on and principal of the 1987 Bonds as and when the same become due and the fees of the Paying Agent and Bond Registrar for acting hereunder. (e) Prior to or concurrently with the issuance and delivery of the 1987 Bonds, there shall be paid and credited to the 1987 Reserve Account, from available cash funds and investments which the City has on hand, the sum of $265,000 (the "Reserve Requirement"). All amounts paid or credited to the 1987 Reserve Account shall be used and expended solely to prevent any default in the payment of interest on or principal of the Outstanding 1987 Bonds of the City if the moneys in the 1987 Principal and Interest Account hereinbefore created are insufficient to pay the interest on or principal of the 1987 Bonds as they become due. No part of said 1987 Reserve Account shall ever be expended or used by the City to call any 1987 Bonds for payment prior to their ultimate maturity unless all of the Outstanding 1987 Bonds be called for payment and funds are available to pay the same according to their terms. So long as the amount on hand in the 1987 Reserve Account aggregates the Reserve Requirement, no further payments into the 1987 Reserve Account shall be required, but if the City shall ever be compelled to use and expend any part of the 1987 Reserve Account for the purpose of paying the interest on or principal of 1987 Bonds of the City and such expenditure shall reduce the amount of the 1987 Reserve Account below the Reserve Requirement, then the City, after making all payments or credits at the time required to be made by the City under the provisions of paragraphs (a), (b), (c) and (d) hereof, will thereafter, each month, pay or credit on the first day of each month from the Water and Sewage Fund to the 1984 Reserve Account any amounts at the time required to be paid or credited to said Account under the provisions of the 1984 Ordinance, and, at the same time such payments or credits are made and on a parity therewith, the City shall pay or credit from the Water and Sewage Fund to the 1987 Reserve Account all available funds until the Reserve Account aggregates the Reserve Requirement. At no time shall the balance of monies on hand in the 1987 Bond Reserve Account exceed the sum of $265,000. If at any time the moneys in the Water and Sewage Fund shall be insufficient to make in full the payments and credits at the time required to be made by the City to the bond reserve accounts established by the City to protect the payment of the outstanding combined water and sewage system revenue bonds of the City, including only the 1984 Bonds, the 1987 Bonds and other combined water and sewage system revenue bonds of the City hereafter issued and standing on a parity with the 1987 Bonds, the lavailable moneys in the Water and Sewage Fund shall be divided among such bond reserve accounts in proportion to the respective -19- If at any time the moneys in the Water and Sewage Fund shall be insufficient to make in full the payments and credits at the time required to be made by the City to the principal and interest accounts established by the City to pay the principal of and interest on the outstanding revenue bonds of the City, including only the 1984 Bonds, the 1987 Bonds and any other combined water and sewage system revenue bonds of the City hereafter issued and standing on a parity with the 1987 Bonds, the available moneys in the Water and Sewage Fund shall be divided among such principal and interest accounts in proportion to the respective principal amounts of said series of combined water and sewage system revenue bonds of the City at the time outstanding which are payable from the moneys in said principal and interest accounts. (e) Prior to or concurrently with the issuance and delivery of the 1987 Bonds, there shall be paid and credited to the 1987 Reserve Account, from available cash funds and investments which the City has on hand, the sum of $265,000 (the "Reserve Requirement"). All amounts paid or credited to the 1987 Reserve Account shall be used and expended solely to prevent any default in the payment of interest on or principal of the Outstanding 1987 Bonds of the City if the moneys in the 1987 Principal and Interest Account hereinbefore created are insufficient to pay the interest on or principal of the 1987 Bonds as they become due. No part of said 1987 Reserve Account shall ever be expended or used by the City to call any 1987 Bonds for payment prior to their ultimate maturity unless all of the Outstanding 1987 Bonds be called for payment and funds are available to pay the same according to their terms. So long as the amount on hand in the 1987 Reserve Account aggregates the Reserve Requirement, no further payments into the 1987 Reserve Account shall be required, but if the City shall ever be compelled to use and expend any part of the 1987 Reserve Account for the purpose of paying the interest on or principal of 1987 Bonds of the City and such expenditure shall reduce the amount of the 1987 Reserve Account below the Reserve Requirement, then the City, after making all payments or credits at the time required to be made by the City under the provisions of paragraphs (a), (b), (c) and (d) hereof, will thereafter, each month, pay or credit on the first day of each month from the Water and Sewage Fund to the 1984 Reserve Account any amounts at the time required to be paid or credited to said Account under the provisions of the 1984 Ordinance, and, at the same time such payments or credits are made and on a parity therewith, the City shall pay or credit from the Water and Sewage Fund to the 1987 Reserve Account all available funds until the Reserve Account aggregates the Reserve Requirement. At no time shall the balance of monies on hand in the 1987 Bond Reserve Account exceed the sum of $265,000. If at any time the moneys in the Water and Sewage Fund shall be insufficient to make in full the payments and credits at the time required to be made by the City to the bond reserve accounts established by the City to protect the payment of the outstanding combined water and sewage system revenue bonds of the City, including only the 1984 Bonds, the 1987 Bonds and other combined water and sewage system revenue bonds of the City hereafter issued and standing on a parity with the 1987 Bonds, the lavailable moneys in the Water and Sewage Fund shall be divided among such bond reserve accounts in proportion to the respective -19- principal amounts of said series of combined water and sewage system revenue bonds of the City at the time outstanding which are payable from the moneys in such bond reserve accounts. (f) The Combined Water and Sewage System Depreciation and Emergency Replacement Account established by the 1961 Ordinance of the City shall be maintained and administered by the City so long as any of the City's 1987 Bonds remain outstanding. After making all payments and credits at the time required to be made by the City under the provisions of paragraphs (a), (b), (c), (d) and (e) aforesaid, the City shall next pay or credit from the Water and Sewage Fund to said Depreciation and Emergency Replacement Account on the first day of each month, a sum not less than $2,500 until said account shall aggregate in cash and securities not less than the sum of $350,000 (including any amounts required pursuant to the provisions of the 1984 Ordinance). Except as hereinafter provided, all amounts credited to said account shall be used by the City, if no other funds are available therefor, for the purpose of making emergency maintenance, repairs and improvements in and to the City's Water and Sewage Utility and keeping the same in good repair and working order so that the Water and Sewage Utility may continue in effective and efficient operation. If no other funds are available therefor, moneys in said account may be used to pay the cost of operating and maintaining the City's Water and Sewage Utility and for the purpose of making major extensions or enlargements of said system. So long as said Depreciation and Emergency Replacement Account aggregates not less than $350,000 (including any amounts required pursuant to the provisions of the 1984 Ordinance), no further payments into said account shall be required, but if the City be compelled to use and expend any part of said account for the purpose specified in the last preceding paragraph hereof, and such use shall reduce the amount of said account below the sum of $350,000 (including any amounts required pursuant to the provisions of the 1984 Ordinance), then the City, after making all payments or credits at the time required to be made by the City under the provisions of paragraphs (a), (b), (c), (d) and (e) hereof, will thereafter pay or credit from the Water and Sewage Fund to said Depreciation and Emergency Replacement Account all sums in said Water and Sewage Fund until said Depreciation and Emergency Replacement Account aggregates $350,000 (including any amounts required pursuant to the provisions of the 1984 Ordinance). (g) After all amounts required at the time to be paid or credited by the City from the Water and Sewage Fund to the accounts hereinbefore named in paragraphs (a) (b), (c), (d), (e) and (f) of this Section shall have been so paid or credited, and if at the time the City shall not be in default in the performance of any covenant or agreement contained in this Ordinance, all moneys remaining in the Water and Sewage Fund shall be credited monthly to the Extension and Bond Retirement Account. Except as hereinafter provided, moneys in the Extension and Bond Retirement Account shall be used solely for the following purposes as determined from time to time by the governing body of the City: (i) Paying the cost of operation, maintenance and repair of the City's Water and Sewage Utility to the extent that may be necessary after the application of the moneys held in the "Water and Sewage Fund" under the provisions of paragraph (a) of this Section. (ii) Anticipating payments into or increasing the amounts of the accounts referred to in paragraphs (b), (c), (d) and (f) of this Section, or any of them, or establishing or increasing the amount of any principal and interest account or principal reserve account created by the City for the payment of any -20- 1 1 1 combined water and sewage system revenue bonds of the City hereafter issued under the conditions hereinafter specified. (iii) Paying the cost of improving, extending or enlarging the City's Water and Sewage Utility as hereinafter in this Section 16(g) provided. (iv) Redeeming or paying prior to maturity combined water and sewage system revenue bonds of the City but only as hereinafter in this Section 16(g) provided. The City covenants and agrees that it will not expend or permit the expenditure of any moneys in the Extension and Bond Retirement Account for any extensions, improvements or enlargements of the City's combined water and sewage system which are not economically sound or which will not properly and advantageously contribute to the efficient and economical conduct of the operation and business of said system as evidenced by a written report and recommendation of the superintendent or manager of said system, nor will it make any such extension, improvement or enlargement costing in excess of $100,000 for any single purchase or improvement without securing from the City's Consulting Engineers a report and recommendation with respect thereto, nor will it make such purchase or improvement except in accordance with such report and recommendation. At least once in every two years the City's Consulting Engineers hereinafter referred to in Section 22(d) of this Ordinance, after making their examination and report on the condition, operation and needs of the City's Water and Sewage Utility as provided in said Section 22(d), shall, by written instrument filed in the office of the City Clerk, and sent by such engineers by United States registered mail to the Underwriters, certify whether or not in their opinion the moneys in the Extension and Bond Retirement Account are in excess of the amount reasonably required to be maintained in such account for extending, improving or enlarging the City's Water and Sewage Utility, and, if so, the amount of such excess. If such engineers shall certify that in their opinion there is an excess in said account, such excess moneys in the Extension and Bond Retirement Account shall be used by the City from time to time for the purpose of redeeming and paying prior to maturity any of the Bonds of the City herein authorized if any of such Bonds be subject to redemption, or, at the option of the City, for purchasing any of the Bonds herein authorized in the open market at the lowest price at which such bonds may be purchased not exceeding the call price, or, if none of the Bonds herein authorized is at the time subject to redemption, then for the purpose of purchasing such Bonds in the open market at the lowest price at which such bonds may be purchased; provided, however, that if the City in conformity with the provisions hereinafter contained shall hereafter issue one or more series of its combined water and sewage system revenue bonds which stand on a parity with the bonds herein authorized, moneys in the Extension and Bond Retirement Account available for the redemption or purchase of bonds shall be divided among and applied to the redemption or purchase of bonds of the respective series of combined water and sewage system revenue bonds at the time outstanding in proportion to the total principal amount of bonds of said respective series then outstanding, whether or not the bonds of any series are at the time subject to redemption. Bonds so redeemed or purchased shall be cancelled. Section 17. Deficiency in Payments or Credits into Funds or Accounts. If at any time the revenues derived by the City from the operation of its Water and Sewage Utility shall be insufficient to make any payment or credit on the date or dates hereinbefore specified, the City shall make good the amount of such deficiency -21- by making payments or credits out of the first available revenues thereafter received by the City from the operation of its Water and Sewage Utility, such payments and credits being made and applied in the order hereinbefore specified in Section 16 hereof. Section 18. Use of Other Accounts to Pay Bonds and Interest. If at any time the moneys in the 1987 Principal and Interest Account and in the 1987 Reserve Account are not sufficient to pay the principal of and interest on the Bonds as and when the same become due, then the amount of such deficiency shall be made up by transfer of moneys from other funds and accounts hereinbefore referred to in the following order: First, from the Extension and Bond Retirement Account, secondly from the Depreciation and Emergency Replacement Account, and thirdly from moneys held in the Water and Sewage Fund, provided, however, that there shall always remain in the Water and Sewage Fund an amount sufficient to pay the reasonable and proper expenses of operating and maintaining the City's Water and Sewage Utility during the next succeeding period of thirty days. Section 19. Investments. Any moneys held in any fund or account which are not immediately needed for the purposes of such fund or account may be invested by the City in direct obligations of the United States Government or in any other investment permitted by law; provided, however, that no such investment shall be made for a period extending longer than to the date when the moneys invested may be needed for the purpose for which such fund or account was created. Cash moneys in each of the funds and accounts herein created or established shall be deposited in a bank or banks in the City of Salina, Kansas, which are members of the Federal Deposit Insurance Corporation, and all such bank deposits shall be adequately secured by the banks holding such deposits. Except as to interest accumulated in the Bond and Interest Account and in the Reserve Account relating to the 1977 Bonds, which interest shall be deposited in the escrow account for the 1977 Bonds, all interest on any investments held in any fund or account created by or referred to in this Ordinance shall accrue to and become a part of such fund or account, except that interest on investments in the 1987 Reserve Account and interest on investments in the Depreciation and Emergency Replacement Account if the City shall not be in default in making any payment into said accounts at the time required to be made by the provisions of Section 16, shall immediately be paid and credited to the Water and Sewage Fund and used and applied for the purposes and in the order hereinbefore specified in Section 16 of this Ordinance. In determining the amount held in any fund or account under any of the provisions of this Ordinance, obligations of the United States Government shall be valued at the market value thereof. Section 20. Particular Covenants of the City. The City covenants with each of the purchasers and owners of any of the Bonds that so long as any of said Bonds remain outstanding and unpaid: (a) Rates. The City will fix, establish and maintain rates, fees and other charges for the sale of water and sewage services and commodities of the Water and Sewage Utility as shall be required to provide Revenues at least sufficient in each fiscal year to pay: (i) Operating Expenses during such fiscal year, including reserves, if any, provided for in the annual budget for such fiscal year; (ii) an amount equal to at least 125% of the Aggregate Debt Service for such fiscal year; (iii) an amount, if any, to be paid during such fiscal year into the 1987 Reserve Account; (iv) to the extent not otherwise provided for, an amount equal to debt service on the 1977 Bonds for such fiscal year; (v) an amount, if any, to be paid into the reserve account for the 1977 Bonds and into the Emergency and Replacement Account during such -22- fiscal year; and (vi) any and all charges or liens whatsoever payable out of Revenues during such fiscal year. (b) No Free Service; Service to City. None of the facilities or services afforded by the Water and Sewage Utility will be furnished to any user without a reasonable charge being made therefor. The City will require the prompt payment of accounts and will discontinue water and sewage service to any customer delinquent in the payment of his account for a period which shall not exceed sixty (60) days. The City will pay monthly into the Water and Sewage Fund for the water and sewage service furnished the City in accordance with effective applicable rates, fees and charges. (c) Good Repair. The City will maintain in good repair and working order the City's Water and Sewage Utility and will operate the same in an efficient manner and at reasonable cost. (d) Engineering Report. At least once in every two years the City will employ a Consulting Engineer and will cause such Consulting Engineer or engineers to make an examination and report on the condition and operation of the City's Water and Sewage Utility, such report to include recommendations as to any changes in such operation deemed desirable. Such report shall also make reference to any unusual or extraordinary items of maintenance and repair and any extensions or improvements that may be needed in the ensuing year. A copy of each such report will be filed in the office of the City Clerk and duplicate copies thereof shall be mailed promptly to the Underwriters. (e) Disposal of Property. The City will not mortgage, pledge or otherwise encumber the Water and Sewage Utility or any part thereof or any improvement, extension or enlargement thereof, nor will they sell, lease or otherwise dispose of said Water and Sewage Utility or any material part thereof, provided, however, that the City may dispose of any property which has become obsolete, nonproductive or otherwise unusable to the advantage of the City. Any cash proceeds derived from the sale of such property shall be used by the City to improve, extend or enlarge the City's Water and Sewage Utility. (f) Insurance. The City will carry and maintain a reasonable amount of all-risk insurance upon the properties forming a part of the Water and Sewage Utility insofar as they are of an insurable nature, the amount of such insurance being such amount as would normally be insured by a private corporation engaged in a similar type of business. In the event of loss or damage, the City, with all reasonable dispatch, will use the proceeds of such insurance in reconstructing and replacing the property damaged or destroyed, or, if such reconstruction or replacement be unnecessary, then in redeeming or purchasing outstanding bonds of the City, such redemption or purchase being made in accordance with the provisions of the Ordinance authorizing the issuance of the bonds. The City in operating the Water and Sewage Utility will carry and maintain public liability and workmen's compensation insurance in such amounts as would normally be maintained by a private corporation engaged in a similar type of business, and the proceeds derived from any such policies shall be used in paying the claims on account of which such proceeds were received, provided, however, that the City may elect to accept the provisions of the Workmen's Compensation Act of the State of Kansas as authorized by K.S.A. 44-505 and any amendments thereto hereafter enacted, and, in such event, may elect to carry its own risk in accordance with the provisions of the statutes of the State of Kansas. The cost of all insurance referred to in this paragraph (f) shall be paid as an operating cost out of the revenues of the City's Water and Sewage Utility. -23- (g) Books and Records; Annual Audit. The City will install and maintain proper books, records and accounts (entirely separate from all other records and accounts of the City) in which complete and correct entries will be made of all dealings and transactions of or in relation to the properties, business and affairs of the Water and Sewage Utility of the City. Such accounts shall show the amount of revenue received from said Water and Sewage Utility, the application of such revenue, and all financial transactions in connection therewith. Said books shall be kept by the City according to standard accounting practices as applicable to the operation of water and sewage utilities. The City will operate the Water and Sewage Utility on the basis of a fiscal year beginning on January 1st and ending on December 31st. Annually, as soon as possible following the close of each fiscal year, the City will cause an audit to be made by a competent firm of certified public accountants experienced in public utility accounting of the accounts of its Water and Sewage Utility for the preceding fiscal year. In addition to such matters as are customarily included in the audit report, the accountants shall, without limiting the generality of the foregoing, furnish to the City separately a compiled statement of the number of customers served, the amount and character of all insurance carried and a statement and summary of the accountants' recommendations as to the City's practices and procedures of water and sewage system operations. Within thirty (30) days after the completion of each such audit, said accountants shall file a copy thereof in the office of the City Clerk and shall forward copies of such audit to the Underwriters. If such audit shall disclose that proper provision has not been made for all of the requirements of the law under which the Bonds herein authorized are issued, and of this Ordinance, the City covenants and agrees that it will promptly proceed to cause to be charged for the services rendered by the City's Water and Sewage Utility rates which will adequately provide for such requirements. (h) Right to Inspect. The Holder of any of the Bonds of the City herein authorized shall have the right at all reasonable times to inspect the Water and Sewage Utility and all records, accounts and data relating thereto, and any such Holder shall be furnished by the City all such information concerning said Water and Sewage Utility and the operation thereof which he may reasonably request. (i) Operation and Maintenance. The City will punctually perform all duties and obligations with respect to the operation and maintenance of the Water and Sewage Utility, including all improvements, extensions and enlargements thereof, now or hereafter imposed upon the City and by the Constitution and laws of the State of Kansas, and by the provisions of this Ordinance. Section 21. Additional Bonds. The City of Salina, Kansas, hereby covenants and agrees that so long as any of the Bonds herein authorized remain outstanding and unpaid, said City will not issue any additional bonds or other obligations payable out of the Revenues of its Water and Sewage Utility which have a claim on Revenues superior to the Bonds and that it will not issue any such additional bonds or obligations which stand on a parity or equality with the Bonds herein authorized unless all of the following conditions are met: (a) The issuance of the additional bonds shall be authorized or permitted under the laws of the State of Kansas. (b) Either (i) Revenues Available for Debt Service of any 12 consecutive calendar months out of the 24 calendar months next preceding the issuance of such additional bonds are not less than 1.25 times the maximum Aggregate Debt Service for any succeeding fiscal year (excluding the year of final maturity of any -24- series of bonds) on all bonds which will be outstanding immediately after the issuance of the proposed additional bonds or (ii) the estimated Revenues Available for Debt Service for the fiscal year immediately following the year in which the project, the cost of construction of which is being financed by such additional bonds, is to be in commercial operation are not less than 1.25 times the maximum Aggregate Debt Service for any succeeding fiscal year (excluding the year of final maturity of any series of bonds) on all bonds which are outstanding in such fiscal year. Prior to the issuance of any additional bonds the City shall obtain a certificate of an Authorized Officer evidencing full compliance with the provisions of clause (i) of paragraph (b) of this Section or a certificate of the Consulting Engineers evidencing full compliance with the provisions of clause (ii) of paragraph (b) of this Section, as the case may be. In determining the amount of Revenues Available for Debt Service for the purposes of (i) above, the Authorized Officer of the City may adjust the Revenues Available for Debt Service by adding thereto, in the event any adjustment of rates with respect to the Water and Sewage Utility shall have become effective subsequent to the beginning of the 12 -month period selected pursuant to (i) above, an estimate made by an Authorized Officer of the City of such additional Revenues Available for Debt Service for such 12 -month period which would have resulted had such rate adjustment been in effect for the entire period. In determining the amount of estimated Revenues Available for Debt Service for the purpose of (ii) above, the Consulting Engineers may adjust the estimated Revenues Available for Debt Service by adding thereto any estimated increase in revenue resulting from any increase in water and sewer rates which, in the opinion of the Consulting Engineers, are economically feasible and reasonably considered necessary based on projected operations of the Water and Sewage Utility. Notwithstanding the restrictions upon the issuance of additional bonds set out above, additional bonds may be issued if it is necessary in the opinion of the Consulting Engineers to repair any damage or loss to the Water and Sewage Utility if the Water and Sewage Utility has been destroyed or damaged by disaster to such an extent that it cannot be operated or if it is necessary to keep the Water and Sewage Utility in good operating condition. (c) The City shall not be in default in making any payments at the time required to be made by it into the respective funds and accounts created or established by this Ordinance. Additional bonds of the City issued under the conditions hereinbefore in this section set forth shall stand on a parity with the Bonds herein authorized and shall enjoy complete equality of lien on and claim against the Revenues of the City's Water and Sewage Utility with the Bonds herein authorized, and the City may make equal provision for paying said Bonds and the interest thereon out of the Water and Sewage Fund and may likewise provide for the creation of reasonable reserve accounts out of moneys in said Water and Sewage Fund. Nothing in this section contained shall prohibit or restrict the right of the City to issue additional water and sewage system revenue bonds or other revenue obligations for the purpose of reconstructing, altering, repairing, improving, extending or enlarging the City's Water and Sewage Utility and to provide that the principal of and interest on said revenue bonds or obligations shall be payable out of the revenues of the City's Water and Sewage Utility, provided that such additional revenue bonds or obligations shall be junior and subordinate to the Bonds so that if at any time -25- the City shall be in default in paying either interest on or principal of the Bonds the City shall make no payments of either principal of or interest on said junior and subordinate revenue bonds or obligations until said default or defaults be cured. In the event of the issuance of any such junior and subordinate revenue bonds or obligations, the City, subject to the provisions aforesaid, may make provision for paying the principal of and interest on said revenue bonds or other revenue obligations out of moneys in the Water and Sewage Fund. Section 22. Tax Matters. The City will comply with all applicable provisions of the Internal Revenue Code of 1986 (the "Code"), including Section 103 thereof, and the regulations of the Treasury Department thereunder, from time to time proposed or in effect, in order to maintain the exclusion from gross income for purposes of federal income taxation of the interest on the Bonds. The City hereby designates the Bonds as "qualified tax- exempt obligations" as defined in Section 265(b)(3)(B) of the Code. The aggregate face amount of all tax-exempt obligations (excluding private activity bonds other than qualified 501(c)(3) bonds) issued or to be issued by the City (and all subordinate entities thereof) during calendar year 1987 is not reasonably expected to exceed $10,000,000. The City hereby covenants that the City and all its subordinate entities will not issue in excess of $10,000,000 of qualified tax-exempt obligations (including the Bonds but excluding private activity bonds other than qualified 501(c)(3) bonds) during the calendar year 1987 without first obtaining an opinion of nationally recognized counsel in the area of municipal finance that the designation of the Bonds as "qualified tax-exempt obligations" will not be adversely affected. Section 23. Amendments. The provisions of the Bonds authorized by this Ordinance and the provisions of this Ordinance may be modified at any time by the City with the written consent of -26- The City covenants and agrees that it will use the proceeds of the Bonds as soon as practicable and with all reasonable dispatch for the purpose for which the Bonds are issued as hereinbefore set forth, and that no part of the proceeds of the Bonds shall be invested in any securities, obligations or other investments except for the temporary period pending such use nor used, at any time, directly or indirectly, in a manner which, if such use had been reasonably anticipated on the date of issuance of the Bonds, would have caused any of the Bonds to be or become "arbitrage bonds" within the meaning of Section 103(b)(2) or Section 148 of the Code and the regulations of the Treasury Department thereunder proposed or in effect at the time of such use and applicable to obligations issued on the date of issuance of the Bonds. The City represents and warrants that (i) it is a governmental unit under Kansas law with general taxing powers, (ii) none of the Bonds is a private activity bond as defined in Section 141 of the Code, (iii) 95% or more of the net proceeds of the Bonds will be used for local governmental activities of the City and (iv) the aggregate face amount of all tax-exempt bonds (other than private activity bonds and current refundings of outstanding obligations) issued by the City (and all subordinate entities thereof) during the calendar year 1987 is not reasonably expected to exceed $5,000,000. The City hereby covenants that the City and all its subordinate entities will not issue in excess of $5,000,000 of tax-exempt bonds (including the Bonds but excluding private activity bonds and current refunding of outstanding obligations) during the calendar year 1987 without first obtaining an opinion of nationally recognized counsel in the area of municipal finance that the excludability of the interest on the Bonds from gross income for federal tax purposes will not be adversely affected. The City hereby designates the Bonds as "qualified tax- exempt obligations" as defined in Section 265(b)(3)(B) of the Code. The aggregate face amount of all tax-exempt obligations (excluding private activity bonds other than qualified 501(c)(3) bonds) issued or to be issued by the City (and all subordinate entities thereof) during calendar year 1987 is not reasonably expected to exceed $10,000,000. The City hereby covenants that the City and all its subordinate entities will not issue in excess of $10,000,000 of qualified tax-exempt obligations (including the Bonds but excluding private activity bonds other than qualified 501(c)(3) bonds) during the calendar year 1987 without first obtaining an opinion of nationally recognized counsel in the area of municipal finance that the designation of the Bonds as "qualified tax-exempt obligations" will not be adversely affected. Section 23. Amendments. The provisions of the Bonds authorized by this Ordinance and the provisions of this Ordinance may be modified at any time by the City with the written consent of -26- Section 25. Enforcement. The provisions of this Ordinance, including the covenants and agreements hereinbefore contained, shall constitute a contract between the City and the Holders of the Bonds, and the Holder or Holders of not less than ten percent (10%) of the Bonds at the time Outstanding shall have -27- the Holders of not less than sixty-six and two-thirds percent (66 2/3%) in aggregate principal amount of the Bonds at the time Outstanding; provided, however, that no such modification or amendment shall permit or be construed as permitting (a) the extension of the maturity or the principal of any of the Bonds, or the extension of the maturity of any interest on any Bonds, or (b) a reduction in the principal amount of any Bonds or the rate of interest thereon, or (c) a reduction in the aggregate principal amount of Bonds the consent of the Holders of which is required for any such amendment or modification. Any provision of the Bonds or of this Ordinance may, however, be modified or amended in any respect with the written consent of the Holders of all of the Bonds then Outstanding. Amendments to this Ordinance which correct errors or which add to or supplement the security of the Holders of the Bonds may be adopted by the City without the consent of such Holders. Every amendment or modification of a provision of the Bonds or of this Ordinance to which the written consent of the Holders is given as above provided shall be expressed in an ordinance and shall be deemed to be a part of this Ordinance. It shall not be necessary to note on any of the Outstanding Bonds any reference to such amendment or modification, if any. A certified copy of every such amendatory or supplemental ordinance, if any, and a certified copy of this Ordinance shall always be kept on file in the office of the City Clerk and shall be made available for inspection by the Holder of any Bond or prospective purchaser or Holder of any Bond authorized by this Ordinance, and upon payment of the reasonable cost of preparing the same, a certified copy of any such amendatory or supplemental ordinance or of this Ordinance will be sent by the City Clerk to any such Holder or prospective bondholder. Section 24. Acceleration in the Event of Default. The City agrees that it shall default in the payment of the principal of or interest on any of its Bonds as the same shall become due and such default shall continue for a period of thirty (30) days, or if the City or its governing body or any of the officers, agents or employees thereof shall fail or refuse to comply with any of the provisions of this Ordinance or of the statutes of the State of Kansas, then, at any time thereafter and while such default shall continue, the Holders of twenty-five percent (25%) of the amount of the Bonds then Outstanding may, by written notice to the City filed in the office of the City Clerk or delivered in person to said City Clerk, declare the principal of all Bonds then Outstanding to be due and payable immediately, and upon any such declaration given as aforesaid, all of said Bonds shall become and be immediately due and payable, anything in this Ordinance or in said Bonds contained to the contrary notwithstanding. This provision, however, is subject to the condition that if at any time after the principal of said Bonds shall have been so declared to be due and payable, all arrears of interest upon all of said Outstanding Bonds, except interest accrued but not yet due on such Bonds, and all arrears of principal upon all of said Bonds shall have been paid in full, and all other defaults, if any, by the City under the provisions of this Ordinance and under the provisions of the statutes of the State of Kansas shall have been cured, then, and in every such case, the Holders of a majority in amount of the Bonds then Outstanding, by written notice to the City given as hereinbefore specified, may rescind and annul such declaration and its consequences, but no such rescission or annulment shall extend to or affect any subsequent default or impair any rights consequent thereon. Section 25. Enforcement. The provisions of this Ordinance, including the covenants and agreements hereinbefore contained, shall constitute a contract between the City and the Holders of the Bonds, and the Holder or Holders of not less than ten percent (10%) of the Bonds at the time Outstanding shall have -27- the right, for the equal benefit and protection of all Holders of Bonds similarly situated: (a) By mandamus or other suit, action or proceeding at law or in equity to enforce his or their rights against the City and its officers, agents and employees, and to require and compel the City and its officers, agents and employees to perform all duties and obligations required by the provisions of this Ordinance or by the Constitution and laws of the State of Kansas. (b) By suit, action or other proceeding in equity or at law to require the City, its officers, agents and employees to account as if they were the trustees of an express trust. (c) By suit, action or other proceeding in equity or at law to enjoin any acts or things which may be unlawful or in violation of the rights of the Holders of the Bonds. Nothing contained in this Ordinance, however, shall be construed as imposing on the City any duty or obligation to levy any taxes either to meet any obligations incurred herein or to pay the principal of or interest on the Bonds. 0s1 No remedy conferred hereby upon any holder of the Bonds herein authorized is intended to be exclusive of any other remedy, but each such remedy is cumulative and in addition to every other remedy and may be exercised without exhausting and without regard to any other remedy conferred hereby. No waiver of any default or breach of duty or contract by the Holder of any Bond shall extend to or affect any subsequent default or breach of duty or contract or shall impair any rights or remedies thereon. No delay or omission of the Holder to exercise any right or power accruing upon any default shall impair any such right or power or shall be construed to be a waiver of any such default or acquiescence therein. Every substantive right and every remedy conferred upon the Holders of the Bonds may be enforced and exercised from time to time and as often as may be deemed expedient. In case any suit, action or proceeding to enforce any right or exercise any remedy shall be brought or taken and then discontinued or abandoned, or shall be determined adversely to the Holders of the Bonds, then, and in every such case, the City and the Holders of the Bonds shall be restored to their former positions and rights and remedies as if no such suit, action or other proceeding had been brought or taken. Section 26. Defeasance. When all of the 1987 Bonds or any maturity thereof shall have been paid and discharged, then the requirements contained herein and the pledge of Revenues made hereunder and all other rights granted hereby shall cease and determine with respect to such bonds. Series 1987 Bonds shall be deemed to have been paid and discharged within the meaning of this Ordinance if there shall have been deposited with the Paying Agent, or with a Kansas bank having full trust powers, at or prior to the maturity or redemption date of such 1987 Bonds, in trust for and irrevocably appropriated thereto, moneys and/or direct obligations of, or obligations the principal of and interest on which are guaranteed by, the United States of America, which, together with the interest to be earned on such investments, will be sufficient for the payment of the principal of such 1987 Bonds, the redemption premium thereon, if any there be, and interest accrued to the date of maturity or redemption, as the case may be, or if default in such payment shall have occurred on such date, then to the date of the tender of such payments; provided, however, always that if any such 1987 Bonds shall be redeemed prior to the maturity thereof, the City shall have elected to redeem such 1987 Bonds and notice of such redemption shall have been given. Any moneys and obligations which at any time shall be deposited with said Paying Agent or Kansas bank by or on behalf of the City, for the purpose of paying and discharging any of the 1987 Bonds, shall be and are hereby 0s1 assigned, transferred and set over to such Paying Agent or Kansas bank in trust for the respective Holders of the 1987 Bonds, and such moneys shall be and are hereby irrevocably appropriated to the payment and discharge thereof. All moneys deposited with said Paying Agent or bank shall be deemed to be deposited in accordance with and subject to all the provisions contained in this Ordinance. Section 27. Approval of Preliminary Official Statement and Official Statement. The Preliminary Official Statement dated September 3, 1987, a copy of which has been submitted to and reviewed by the Governing Body of the City on the date hereof and is attached hereto as Exhibit "D", and the final Official Statement, in substantially the form of the Preliminary Official Statement, and the public distribution of the same by the Underwriters is hereby approved. The Mayor of the City is hereby authorized and directed to execute and deliver said final Official Statement on behalf of the City with such changes therein or amendments or supplements thereto as shall be approved by the Mayor, the Mayor's execution thereof to be conclusive evidence of said representative's approval thereof. Section 28. Amendment to Ordinance No. 84-9025. Ordinance No. 84-9025, adopted and approved by the governing body on May 23, 1984, is hereby amended to correct certain errors and omissions in said Ordinance by adding the following definitions to Section 1 of Ordinance No. 84-9025: "Aggregate Debt Service" means for any fiscal year as of the date of calculation, the total aggregate amount of Debt Service for such period with respect to all bonds payable from the Revenues. "Authorized Officer of the City" means the Mayor, City Clerk or superintendent or manager of the Water and Sewage Utility or any officer of the City succeeding to the functions of any of said officers. "Consulting Engineers" means an independent consulting engineer, or firm of engineers, appointed from time to time and having a favorable reputation for skill and experience in the operation of water and sewer utilities retained by the City. "Debt Service" for any year means, as of any date of calculation and with respect to any bonds, payable from Revenues, an amount equal to the sum of (i) interest accruing during such period on such bonds, except to the extent that such interest is to be paid from moneys held in trust for the specific purpose of making such payments, plus (ii) that portion of principal due for such Bonds during the current year excluding the year of final maturity of any series of Bonds, except to the extent that such principal is to be paid from moneys held in trust for the specific purpose of making such payments. Section 29. Severability. If any part of this Ordinance, whether large or small, shall be held invalid, the invalidity thereof shall not affect the other provisions of this Ordinance. Section 30. Effective Date. This Ordinance shall take effect and be in full force from and after its passage and publication once in the official City newspaper. -29- n L PASSED by the governing body of the City of Salina, Kansas, this 2/- day of September, 1987. ATTEST: Mayor City Clerk -30-