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8635 W&S Bonds 19781 CITY OF SALINA, KANSAS ORDINANCE NO. 8635 $4,394,000 COMBINED WATER AND SE;IAGE SYSTEM REFUNDING REVENUE BONDS, SERIES OF 1978 DATED: MAY 1, 1978 ORDINANCE NO. 8635 OF THE CITY OF SALINA, KA14SAS Page "Escrow Trust Agreement" "Escrow Trustee" "Federal Securities" "Invested Sinking Fund Account" "Investment Income" "Maximum Reserve Account Requirement" "1978 Bonds" "1961 Ordinance" "1977 Ordinance" "1978 Ordinance" "Operating Expenses" "Ordinance" "Paying Agent" "Principal and Interest Account" "Principal Installment" "Prior Lien Bonds" "Prior Lien Ordinances" "Reserve Account" "Reserve Account for Combined Water and Sewage System Revenue Bonds, Series of 1961" Recitals---------------------------------------------- Section 1. Definitions ------------------------------ "Act" "Aggregate Debt Service" "Authorized Officer of the City" "Bond Fund" "Bonds" "City" "Consulting Engineers" "Debt Service" "Debt Service Requirements" "Water and Sewage Fund" "Bond and Interest Account for Combined Water and Sewage System Revenue Bonds, Series of 1961, dated July 1, 1961" "Bond and Interest Account for Combined Water and Sewage System Revenue Bonds, Series of 1977, dated April 1, 1977" "Combined Water and Sewage System .Depreciation and Emergency Replacement Account" "Water and Sewer Utility" "Escrow Account" "Escrow Trust Agreement" "Escrow Trustee" "Federal Securities" "Invested Sinking Fund Account" "Investment Income" "Maximum Reserve Account Requirement" "1978 Bonds" "1961 Ordinance" "1977 Ordinance" "1978 Ordinance" "Operating Expenses" "Ordinance" "Paying Agent" "Principal and Interest Account" "Principal Installment" "Prior Lien Bonds" "Prior Lien Ordinances" "Reserve Account" "Reserve Account for Combined Water and Sewage System Revenue Bonds, Series of 1961" 11 III 1 "Reserve Account for Combined Water and Sewage System Revenue Bonds, Series of 1977" "Revenues" "Revenues Available for Debt Service" "Securities Option and Purchase Agreement" "Sinking Fund Agent" "Sinking Fund Installment" "2007 Bonds" "Underwriters" Section 2. Authorization of and Security for the 1978 Bonds------------------------ ----------------- Section 3. Details of the 1978 Bonds ---------------------- Section -------------------- Section 4. Execution of the Bonds and Coupons -------------- Section 5. Form of the 1978 Bonds ------------------------- Section 6. Registration and Delivery of the 1978 Bonds ---- Section 7. Disposition of 1978 Bond Proceeds -------------- Section 8. Sufficiency of Funds for Payment of the Prior Lien Bonds ------------------------------------- Section 9. Arbitrage Covenant ----------------------------- Section 10. Water and Sewage Fund -------------------------- Section 11. Ratification and Creation of Funds and Accounts Section 12. Application of Moneys in Funds and Account ----- Section 13. Deficiency in Payments or Credits into Funds or Accounts------------------------------------ Section -----------------------------------Section 14. Use of Other Reserve Accounts to Pay Bonds and Interest --------------------------------------- Section 15. Investments ------------------------------------ Section 16. Particular Covenants of the City - -------------- Section 17. Additional Bonds ------------------------------- Section 18. Amendments ------------------------------------- Section 19. Acceleration in the Event of Default ----------- Section 20. Enforcement ------------------------------------ Section 21. Authorization of Escrow Trust Agreement; Redemption of Prior Lien Bonds ----------------- Section 22. Authorization of Securities Option and Purchase Agreement -------------------------------------- Section 23. Defeasance------------------------------------- Section ---------------------- ------------- Section 24. Severability ------------------------------- ---- Section 25. Effective Date --------------------------------- Page (PUBLISHED IN THE SALINA JOURNAL MAY Z3 , 1978) ORDINANCE NO. 8635 AN ORDINANCE AUTHORIZING AND DIRECTING THE ISSUANCE OF $4,394,000 PRINCIPAL AMOUNT OF COMBINED WATER AND SEWAGE SYSTEM REFUNDING REVENUE BONDS, SERIES OF 1978, OF' THE CITY OF SALINA, KANSAS, FOR THE PURPOSE OF REFUNDING $4,670,000 PRINCIPAL AMOUNT OF OUT- STANDING COMBINED WATER AND SEWAGE SYSTEM REVENUE BONDS OF SAID CITY, PRESCRIBING THE FOP14 AND DETAILS OF SAID REFUNDING 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, IMPROVEMENT AND MAINTENANCE OF SAID UTILITY, PAYING THE PRINCIPAL OF AND INTEREST ON THE REFUNDING REVENUE BONDS OF SAID CITY ISSUED AGAINST SAID SYSTEM AND PROVIDING ADEQUATE RESERVE FUNDS, MAKING CERTAIN COVE- NANTS WITH RESPECT TO SAID BONDS, AUTHORIZING AN ESCROW TRUST AGREEMENT RELATING TO CERTAIN PRIOR LIEN BONDS AND AUTHORIZING A SECURITIES OPTION AND PURCHASE AGREEMENT RELATING TO THE BONDS HEREIN AUTHORIZED. WHEREAS, the City of Salina, Kansas (the "City"), pursua_t to the provisions of K.S.A. 12-856 to 12-868, inclusive, 1959 Supple- ment to the General Statutes of Kansas, 1949, acting through the g v- erning body of the City, by Ordinance No. 6544, passed June 27, 1961, has heretofore combined the waterworks system and the sewage dispo al system of said City, as said systems are defined and referred to in said Sections 12-856 to 12-8681 inclusive, and said combined water and sewage system (the "Water and Sewer Utility" or the "com- bined water and sewage system") has thenceforth been operated and financed in accordance with the provisions of said statutes, and WHEREAS, the only such bonds now outstanding consist of an issue of Combined Water and Sewage System Revenue Bonds, Series of 1961, dated July 1, 1961, in the original principal amount of $3,600,000, of which $1,670,000 principal amount is outstanding, authorized by Ordinance No. 6546 of said City, and 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, all of which is outstanding, authorized by Ordinance No. 8546 of said City, said outstanding revenue bonds aggregating the principal amount of $4,670,000 being hereinafter referred to as the "Prior Lien Bonds", and said Ordinances being hereinafter referred to as the "1961 Ordinance" and the "1977 Ordinance", respectively, said Ordinances being collectively hereinafter referred to as the "Prio Lien Ordinances", and 1 WHEREAS, the Prior Lien Bonds have an average annual interest rate of 5.4901% and the bonds herein authorized will hav an average annual interest rate of 6.363% and it is desirable and in the best financial interest of the City to refund the Prior Lien Bonds, and WHEREAS, pursuant to the provisions of K.S.A. 10-116a, as amended, and K.S.A. 10-1201 to 10-1212, inclusive, as amended (the "Act"), the City is authorized and empowered (1) to issue its refunding revenue bonds to refund any previous issue or issue or part thereof of its outstanding revenue bonds, and (2) if such refunding revenue bonds are sold more than six months prior to th maturity or earliest prior redemption date of the bonds being re- funded, to deposit the proceeds derived from such sale, together with any other available moneys, in escrow under a trust agreemen with a Kansas bank having full trust powers, and (3) pending the application of the proceeds of such refunding revenue bonds, accr interest and redemption premium of the revenue bonds to be refund to invest such proceeds and other available moneys in direct obli tions of, or obligations the principal of and the interest on whi are unconditionally guaranteed by, the United States of America, which obligations shall mature or be subject to redemption not later than the respective dates when the proceeds of said obliga- tions together with the interest accruing thereon and any other moneys or investments held in escrow will be required for the pur poses intended, all as provided in the Act, and ed a - WHEREAS, it is hereby found and determined that it is necessary and desirable at this time that the City issue, sell an deliver its refunding revenue bonds pursuant to the Act as herein- after provided in an amount sufficient to refund the Prior Lien Bonds, and that the City enter into an Escrow Trust Agreement, dated as of May 1,.1978, authorized by this Ordinance (the "Escrow Trust Agreement"), by and between the City and Planters State Ban and Trust Company, Salina, Kansas (the "Escrow Trustee"), provici g for the application of the proceeds derived from the sale of such refunding revenue bonds and other available moneys to the payment of the Prior Lien Bonds and to enter into a Securities Option and Purchase Agreement to provide the City with an option to acquire certain securities with the moneys in the Invested Sinking Fund Account herein provided for, NOW, THEREFORE, BE IT ORDAINED BY THE GOVERNING BODY O THE CITY OF SALINA, KANSAS: -2- Section 1. Definitions. Unless the context otherwise requires, the terms defined in this section shall have the meaning hereafter specified. Words importing singular number shall i.nclud the plural in each case and vice versa, and words importing person shall include firms and corporations. "Act" means K.S.A. 10-116a, as amended, and K.S.A. 10-1201 to 10-1212, inclusive, as amended. "Aggregate Debt Service" for any period shall mean, as of any date of calculation, the sum of the amounts of Debt Service for such period with respect to all Bonds. "Authorized Officer of the City" means the Mayor, City C lerk or Superintendent or Manager of the combined water and sewage cystm or any officer of the City succeeding to the functions of any of said officers. "Bond Fund" means the Bond Fund for Combined Water and Sewage System Refunding Revenue Bonds created by Section 11 of the 1978 Ordinance. "Bonds" means the 1978 Bonds and any bonds standing on a parity with the 1978 Bonds. "City" means the City of Salina, Kansas, a body politic and a municipal corporation of the State of Kansas. "Consulting Engineers" means an independent.consul.ting engineer, or firm of engineers, appointed from time to time and having a nation-wide and favorable reputation for skill and exper- ience 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, 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 de- posits into the Principal and Interest Account from Bond proceeds, 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, plus (iii) deposits into the Invested Sinking Fund Account for the current year, minus (iv) principal or interest payments for the current year which will be paid from earnings of the Invested Sinking Fund Account. "Debt Service Requirements" means, as of any date of calculation, the greatest amount of Aggregate Debt Service for the current or any fiscal year. -3- "Water and Sewage Fund" means the. fund by that name established by Section 9 of Ordinance No. 6546 of the City, con- firmed by Section 8 of the 1977 Ordinance and Section 10 of the 1978 Ordinance. "Bond and Interest Account for Combined Water and Sewag System Revenue Bonds, Series of 1961, dated July 1, 1961" means the account by that name established by the 1961 Ordinance and confirmed by Section 9 of the 1977 Ordinance and Section 11 of the 1978 Ordinance. "Bond and Interest Account for Combined Water and Sewage System Revenue Bonds, Series of 1977, dated April 1, 1977" means the account by that name established by the 1977 Ordinance and co _, firmed by Section 11 of the 1978 Ordinance. "Combined Water and Sewage System Depreciation and Emergency Replacement Account" or "Depreciation and Emergency Account" shall mean the Combined Water and Sewage System Deprecia- tion and Emergency Replacement Account, established by Ordinance No. 6546 of the City and referred to in Sections 9, 10(e) and 13 of the 1977 Ordinance and in Sections 11 and 12 of the 1978 Ordi- nance. "Water and Sewer Utility" or the "combined water and sewer system" means the combined water and sewer system of the.Ci.ty in- cluding all extensions, enlargements and improvements thereto hereafter constructed or acquired by the City. "Escrow Account" means the account by that name created by the Escrow Trust Agreement" "Escrow Trust Agreement" means the Escrow Trust Agree- ment dated as of May 1, 1978, between the City and Planters State Bank and Trust Company, Salina, Kansas, as Escrow Trustee, author ize.d by the 1978 Ordinance. "Escrow Trustee" means the Escrow Trustee from time to time acting as such under the Escrow Trust Agreement. "Federal Securities" means obligations of the United States constituting a part of the Invested Sinking Fund Account. "Invested Sinking Fund Account" means the account by that name established in the Bond Fund by Section 11 of the 1978 Ordinance. "Investment Income" means income derived from the in- vestment of the Invested Sinking Fund Account. "Maximum Reserve Account Requirement" means, as of any date of calculation, the greatest amount of Aggregate Debt Servi for the current or any future fiscal year, excluding the year of final maturity of any series of Bonds. ME -C "1978 Bonds" or "Series 1978 Bonds" means the Combined Water and Sewage System Refunding Revenue Bonds, Series of 1978, dated May 1, 1978, authorized by the 1978 Ordinance. "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" or "this Ordinance" means Ordinance No. 8635 of the City authorizing the 1978 Bonds. "Ordinance", "this Ordinance", "herein" and "hereof refer to the 1978 Ordinance. "Paying Agent" means The First National Bank and Trust Company of Salina, Salina, Kansas, and its successors. "Principal and Interest Account" means the account by that name in the Bond Fund created b_v Section 11 of the 1978 Ordinance. "Operating Expenses" shall mean the City's expenses of calculation with respect to any Bonds, so long as the same are operating and maintaining the combined water and sewer system and outstanding, (i) the principal amount of Bonds due on a certain keeping the same in good repair and working order, including all established, or (ii) the unsatisfied balance of any Sinking Fund costs due under any type of contractual arrangement with respect Installments due on a certain future date for any Bonds, plus the to purchases of water, operation, maintenance, production, trans- would be applicable upon redemption of such Bonds on such future date or a principal amount equal to said unsatisfied balance of mission, distribution, repairs, replacements, engineering, drilli g wells, transportation, administrative and general, audit, legal, pal amount of Bonds and of such unsatisfied balance of Sinking financial, pension, retirement, health, hospitalization, insuranc , taxes, and other expenses actually paid or accrued, including without limitation any expenses of the City applicable to the Plater and Sewage Utility as recorded on its books pursuant to standard accounting practices. Operating Expenses shall not in- clude any costs or expenses for new construction, charges for depreciation, payments to the City's general or other funds pur- suant to Section 12(h) of the 1978 Ordinance or payment of Debt Service on any bonds. "Ordinance", "this Ordinance", "herein" and "hereof refer to the 1978 Ordinance. "Paying Agent" means The First National Bank and Trust Company of Salina, Salina, Kansas, and its successors. "Principal and Interest Account" means the account by that name in the Bond Fund created b_v Section 11 of the 1978 Ordinance. 0611 "Principal Installment" shall mean, as of any date of calculation with respect to any Bonds, so long as the same are outstanding, (i) the principal amount of Bonds due on a certain future date for which no Sinking Fund Installments have been established, or (ii) the unsatisfied balance of any Sinking Fund Installments due on a certain future date for any Bonds, plus the amount of the sinking fund redemption premiums, if any, which would be applicable upon redemption of such Bonds on such future date or a principal amount equal to said unsatisfied balance of such Sinking Fund Installments, or (iii) if such future dates coincide as to different series of Bonds, the sum of such princi- pal amount of Bonds and of such unsatisfied balance of Sinking Fund Installments due on such future date plus such ap_nlicable redemption premiums, if any. 0611 "Prior Lien Bonds" means the Combined Water and Sewage System Revenue Bonds, Series of 1961, dated July 1, 1961, author- ized by the 1961 Ordinance, and the Combined Water and Sewage System Revenue Bonds, Series of 1977, dated April 1, 1977, author- ized by the 1977 Ordinance. "Prior Lien Ordinances"'means the 1961 Ordinance and the 1977 Ordinance. "Reserve Account" means the Reserve Account for Combined Water and Sewage System Refunding Revenue Bonds, Series of 1978, created by Section 11 of the 1978 Ordinance. "Reserve Account for Combined Water and Sewage System Revenue Bonds, Series of 1961" means the account by that name established by the 1961 Ordinance and confirmed by Section 11 of the 1978 Ordinance. "Reserve Account for Combined Water and Sewage System Revenue Bonds, Series of 1977" means the account by that name established by the 1977 Ordinance and confirmed by Section 11 of the 1978 Ordinance. "Revenues" shall mean (i) as long as any of the Prior Lien 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 interruption loss relating to the Water and Sewage Utility remain- ing after the City has provided for the credits and deposits requi ed by the Prior Lien Ordinance, (ii) after the Prior Lien Bonds are n longer outstanding, all revenues, income and rents accrued by the City from the ownership and operation of the system and the pro- ceeds of any insurance covering business interruption loss relat- ing to the Water and Sewage Utility, and (iii) at all times inter- est received on any moneys or securities held pursuant to the 1978 Ordinance including Investment Income received after February 15, 1991, and available for transfer into the Principal and Interest Account pursuant to Section 12(e) hereof, but excluding interest from the Escrow Account. "Revenues Available for Debt Service" for any fiscal year or period of 12 calendar months shall mean the sum of (i) Revenues, (ii) that portion of the Investment Income used to pay interest on the 2007 Bonds and (iii) the interest accrued on any moneys or securities held pursuant to the Prior Lien Ordinances (except income from the proceeds of the 1978 Bonds deposited in the Escrow Account, any income on the Bond and the Interest Accoun s and the Reserve Accounts created by the Prior Lien Ordinances) les Operating Expenses for such year or period. "Securities Option and Purchase Agreement" means the Securities Option and Purchase Agreement dated as of May 1, 1978, between the City and The First National Bank and Trust Company of Salina, Salina, Kansas, authorized by the 1978 Ordinance. "Sinking Fund Agent" means The First National Bank and Trust Company of Salina, Salina, Kansas, and its successors. "Sinking Fund Installment" shall mean each arnount due pursuant to mandatory redemption of a subsequent maturity of Bonds "2007 Bonds" means those 1978 Bonds maturing on and after February 15, 1997. "Underwriters" shall mean the initial purchasers of any series of Bonds or the manager or managers of any underwriting group initially purchasing any series of Bonds. Section 2. Authorization of and Security for the 1978 Bonds. For the purpose of providing funds, together with other funds which are or will become available, to refund the Prior Lien Bonds, there is hereby authorized and directed to be issued a series of Combined Water and Sewage System Refunding Revenue Bonds, Series of 1978, of the City in the principal amount of $4,394,000 (the "1978 Bonds" or the "Series 1978 Bonds"). The principal of, premium, if any, and interest on the 1978 Bonds shall be payable solely from the Revenues, as defined herein, and from Investment Income, as defined herein, and not from any other fund or source. The 1978 Bonds constitute a lien on the Revenues and on Investment Income, provided that the lien of the 2007 Bonds on Investment Income is prior to the lien of the other 1978 Bonds. The City hereby grants to the Sinking Fund Agent for the benefit of the holders of the 2007 Bonds a security interest in all moneys and securities held or to be held in the Invested Sinking Fund Account. The 1978 Bonds shall be junior and subordinate with respect to the payment of principal and interest out of the Reve- nues of the Water and Sewage Utility of the City and in other respects to the Prior Lien Bonds. In the event of any default in the payment of either interest on or principal of any of the Prior Lien Bonds, the City shall make no payments of either prin- cipal of or interest on the 1978 Bonds until such default be cured Section 3. Details of the 1978 Bonds. The 1978 Bonds shall consist of coupon bonds in the denomination of $1,000 or $5,000 each. The 1978 Bonds shall be dated May 1, 1978, shall be numbered from 1 consecutively upward, shall become due serially on February 15 in the years and shall bear interest as follows: -7- C 1 Interest Year Amount Rate 1979 $ 11000 6 1/4% 1980 1,000 6 1/4% 1981 1.,000 6 1/4% 1982 1,000 6 1/40 1983 1,000 6 1/4% 1984 1,000 6 1/4% 1985 1,000 6 1/4% 1986 1,000 6 1/4% 1987 1,000 6 1/4% 1988 1,000 6 1/4% 1989 1,000 6 1/4% 1990 1,000 6 1/4% 1991 1,000 6 1/4% 1992 215,000 6 1/4% 1993 235,000 6 1/4% Interes Year Amount Rate 1994 $ 250,000 6 1/4% 1995 265,000 6 1/4% 1996 285,000 6 1/4% 1997 300,000 6 1/4% 1998 25,000 6 1/40 1999 25,000 6 1/4% 2000 30,000 6 1/4% 2001 30,000 6 1/4% 2002 30,000 6 1/4% 2003 1,000 6 1/4% 2004 1,000 6 1/4% 2005 1,000 6 1/4% 2006 1,000 6 1/4% 2007 2,687,000 6 3/8% At the option of the City, Bonds becoming due in the years 1993 through 2006, inclusive, may be redeemed and paid prig to maturity on or after February 15, 1992, as a whole, at any tim or in part in inverse numerical order on any interest payment dat at the redemption prices, expressed as percentages of principal amount, plus accrued interest to the redemption date, on the re- demption dates hereinafter set forth, as follow:: February 15, 1993 to August 15, 2005, inclusive 102% The Bonds maturing February 15, 2003 through February 1E, 2007, inclusive, shall be subject to mandatory redemption, selectEd by the Paying Agent in such equitable manner as it shall determin , on February 15, 2002, and at any time thereafter, at the price of 100% of the principal amount thereof, plus accrued interest to th redemption date, in the event that any of the Federal Securities held in the Invested Sinking Fund Account are called for redempti n. If the City shall elect or be required to call for redemption and payment any of the 1978 Bonds, prior to the ma- turity thereof, the City shall publish once in the official State paper of the State of Kansas and once in a financial journal pub- lished in the City of New York, New York, a notice of the intention of the City to call and pay said bonds, the same being described by number, said notice to be published in each of said papers not less than thirty (30) days prior to the date on which said bonds are called for payment. The City shall also give written notice of the intention of the City to redeem and pay said bonds, said notice to be given by United States registered mail addressed to the Underwriters and to be mailed not less than thirty (30) days prior to the date fixed for redemption. If any bond be called for redemption and payment as aforesaid, all interest on such bon shall cease from and after the date for which such call is made, provided funds are available for its payment at the price herein- before specified. WL' Interest on the 1978 Bonds at the rates hereinbefore specified shall be payable February 15, 1979, and semiannually thereafter on August 15 and February 15 in each year. The 1978 Bonds and interest coupons to be attach_ thereto as hereinafter provided shall be payable in lawful money of the United States of America at The First National Bank and Trust Company of Salina, Salina, Kansas (the "Paying Agent"). Section 4. Execution of the Bonds and Coupons. The 1978 Bonds and each of them shall be executed for and on behalf of the City by the facsimile signatures of the mayor and City Clerk, with the facsimile seal of the City affixed. Interest coupons shall be attached to the bonds representing the interest to mature thereon, and said interest coupons shall bear the fac- simile signatures of the Mayor and City Clerk of said Cit,.. Section 5. Form of the 1978 Bonds. The 1978 Bonds and interest coupons attached thereto and the certificates to appear thereon shall be in substantially the following form: 1 1 No. $ UNITED STATES OF AiMERICA STATE OF KANSAS COUNTY OF SALINE CITY OF SALINA COMBINED WATER AND SEWAGE SYSTEM REFUNDING REVENUE BOND,, SERIES OF 1978 KNOW ALL MEN BY THESE PRESENTS: That the City of Salina in the County of Saline, State of Kansas (the "City"), for value received, hereby promises to pay, out of the revenues hereinafter specified, to the bearer, the sum of THOUSAND DOLLARS in lawful money of the United States of America, on the Fifteenth day of February, , and to pay interest thereon from the date hereof at the rate of percent ( %) per annum, payable February 15, 1979, and thereafter semiannually on August 15 and February 15 in each year after the date hereof until the said principal sum shall have been paid, upon presentation and surrender of the interest coupons hereto attachE d, bearing the facsimile signatures of the Mayor and City Clerk of said City as said coupons severally become due, both principal of and interest on this Bond being payable at The First National Bank and Trust Company of Salina, Salina, Kansas (the "Paying Agent"). At the option of the City, Bonds the series of which this Bond is a part (the "Bonds"), maturing in the years 1993 through 2006, inclusive, may be redeemed and paid prior to maturity on or after February 15, 1992, as a whole, at any time, or in part in inverse numerical order on any interest payment date, at the re- demption prices, expressed as percentages of principal amount, plus accrued interest to the redemption date, on the redemption dates hereinafter set forth, as follows: February 15, 1993 to August 15, 2005, inclusive 1020 -10- The Bonds maturing February 15, 2003 through February 15, 2007, inclusive, as defined in the Ordinance authori214..Ig the Bonds ( the "Ordinance") , are subject to mandatory red emptic.n, selected by lot by the Paying Agent in such equitable manner as it shall determine, on February 15, 2002, and at any time there- after, at the price of 100% of the principal amount plus accrued interest to the redemption date in the event that any of the Federl Securities, as defined in the Ordinance, are called for redemption If this Bond is called for redemption and payment prior to maturity, the City will publish once in the official State paper of the State of Kansas and once in a financial journal pub- lished in the City of New York, New York, not less than thirty (30) days prior to the date of redemption, a notice of the intention of the City to call and pay this Bond on a specified date. If this Bond be called for redemption and payment as aforesaid, all interest on this Bond shall cease from and after the date for which such call is made, provided funds are available for the payment of this Bond at the price hereinbefore specified. 1 -11- THIS BCND is one of an authorized series of Bonds of the City of Salina, Kansas, of like date and tenor, except as to number, denomination, rate of interest, privilege of redemption and maturity, aggrega'%L.:ing the -pr_incipal amount o` $4,394,.000, issued for the pur pose of providing funds, together with at'-er moneys which are or will become available, to refund all of the outstanding bonds of two series of Combined Water and Sewage System Revenue Bonds of the City, aggregating the outstanding principal amount of $4,670,000 (the "Prior Lien Bonds") more fully described in the Ordinance, by the authority of and in full compliance with the provisions, restr c - tions and limitations of the Constitution and statutes of the Stat of Kansas, including K.S.A. 10-116a and 10-1201 to 10-1212, inclusive, and all amendments thereof and all other provisions of the laws of said State applicable thereto, and this Bond and all interest hereon are to be paid by said City solely from the revenues derived from the rates, fees or charges collected by said City from the operation of its combined water and sewer system and from Investment Income as defined in the Ordinance, and not from any other fund or source as described in the Ordinance. 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 to the collection, segregation and application of the reve nues 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 resepct thereto and the rights of the holders thereof. 1 -11- The Bonds are junior and subordinate with respect to the payment of principal and interest and in other respects to the Prior Lien Bonds. Bonds maturing in the years 1998 to 2007, inclusive, are further secured by, and have a claim on, the Invested Sinl.ing Fun Acc!.)unt as described in the Ordinance. The City may issue addi- tional. }ond:s payable from the net revenues produced from _ , com- birie: �"� water :.d sewer system of the City as provided in and subje t to the restrictions of the Ordinance and may provide that any suc additional bonds shall enjoy equality of lien. on said net revenue 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 Treasu-:er of the State of Kansas, and this Bond and the inter est coupons attached hereto are negotiable and shall be trans- ferable by delivery. AND IT IS HEREBY DECLARED AND CERTIFIED that all acts, conditions and things required to be done and to exist precedent to and in the issuance of the Bonds have been properly done and performed and do exist in due and regular form.and manner as re- quired by the Constitution and laws of the State of Kansas. IN WITNESS WHEREOF, the City of Salina, in the State of Kansas, by its governing body, has caused this Bond to be signed by the facsimile signatures of its Mayor and City Clerk and a facsimile of its corporate seal to be hereto affixed, and the: interest couuons hereto attached to be signed by the fac- simile signatures of said officers, and this Bond to be dated this First day of May, 1978. (facsimile) ATTEST: Mayor (facsimile) City Clerk 1 -12- 1 STATE'OF KANSAS ) ) SS. COUNTY OF SALINE ) I'the undersigned, City Clerk of the City of Salina, Kansas, hereby certify that the within Combined Water and Sewage System Refunding Revenue Bond, Series of 1978, of the City of Salina, Kansas, has been duly registered in my office according law. WITNESS my hand and a facsimile of the official seal of said City this day of , 1978. City Clerk ----------------------------------------------------------------- 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 the issuance of the within Bond has been filed in my office, and that the within Bond and the coupons attached thereto were registered in my office according to law on WITNESS my hand and official seal. By easurer of the State of Kansas Assistant State Treasurer - - - - - - - -- - - - - - - - - - - - - -- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -- - - I -13- 1 1 (FORM OF COUPON) oupon February, On the Fifteenth day of August, the ity of Salina, Kansas, will pay bearer, solely from he revenues described in the within Bond and not from ny other fund or source, Dollars nd Cents, in lawful money of the nited States of America, at , eing interest due on its Combined dater and Sewage ystem Refunding Revenue Bond, Series of 1978, dated ay 1, 1978, No. (facsimile) TTEST: Mayor (facsimile) City Clerk February, August, ----------- City of of Salina, Kan as -------------------------------------------------------- ---L-- Section 6. Registration and Delivery of the 1978 Bonds. he Mayor and City Clerk are hereby authorized and directeci to T repare and execute in the manner hereinbefore specified the bonds f the City herein authorized, and to cause the bonds to be regis- ered as provided by law, and, when duly executed and registered, o deliver the 1978 Bonds to the Underwriters on payment of the urchase price. Section 7. Disposition of 1978 Bond Proceeds. (a) All ccrued interest and premium, if any, received from the sale of he 1978 Bonds shall be credited to and deposited in the Principal nd Interest Account in the Bond Fund hereinafter created.by ection 11 of this Ordinance. (b) From the proceeds of the sale of the 1978 Bonds, the ity shall set aside such amount as shall be required for the pay- ent of the costs, fees and expenses incurred in connection with i) the creation of the trust described in and created by the scrow Trust Agreement hereinafter authorized and in carrying out he duties, terms and provisions of said Escrow Trust Agreement nd (ii) the issuance of the 1978 Bonds. -14- 1 Section 8. Sufficiency of Funds for Payment of tihe Prior Lien Bonds. Prior to or concurrently with the issuance and delivery of the 1978 Bonds, the City shall obtain the certifica- tion of an independent certified public accountant that the moneys and obligations required to be irrevocably deposited in trust with the Escrow Trustee pursuant to Section 7 of this Ordinance, to- gether with the earnings to accrue thereon, will always be suffi- cient for the payment of the principal of, redemption preiiu_m, if any, and interest accrued to the date of maturity or redemption on, the Prior Lien Bonds. Section 9. Arbitrage Covenant. The City covenants and agrees that no part of the proceeds of the 1978 Bonds or of the money in the Escrow Account shall be 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 1978 Bonds, would have caused anv of the 1978 Bonds to be or become "Arbitrage Bonds" within the meaning of Section 103(c) of the Internal Revenue Code of 1954, as amended, and the regulations of the Treasury Depart- ment thereunder proposed or in effect at the time of such use and applicable to obligations issued on the date of issuance of the 1978 Bonds. Section 10. Water and Sewage Fund. The City covenants and agrees that so long as any of the 1978 Bonds remain outstandin and unpaid all of the revenues derived by the City from the opera- tion of its Water and Sewage Utility, including all revenues from improvements, extensions and enlargements in and to the Water and -15- (c) Ta;e remainder of bond proceeds (including the amount necessary, pursuant to Section 11 hereof to replenish the accounts referred to and ratified by said Section 11) shall be irrevocably paid over to and deposited with the Escrow Trustee, and such moneys, and th., obligations in which such moneys may be invested pursuant to the provisions of the Escrow Trust Agreement, shall be deposited and held in the "City of Salina, Kansas, Escrow Account", a special and irrevocable escrow account created by the Escrow Trust Agreement, which account shall be held in trust in the custody of the Escrow Trustee in accordance with the terms and provisions of the Escrow Trust Agreement. Moneys and obligations in the Escrow Account and all earnings thereon shall be used and applied, in accordance with the terms of the Escrow Trust Agreement, solely for the payment of the principal of and premium, if any, and inter est on the Prior Lien Bonds. 1 Section 8. Sufficiency of Funds for Payment of tihe Prior Lien Bonds. Prior to or concurrently with the issuance and delivery of the 1978 Bonds, the City shall obtain the certifica- tion of an independent certified public accountant that the moneys and obligations required to be irrevocably deposited in trust with the Escrow Trustee pursuant to Section 7 of this Ordinance, to- gether with the earnings to accrue thereon, will always be suffi- cient for the payment of the principal of, redemption preiiu_m, if any, and interest accrued to the date of maturity or redemption on, the Prior Lien Bonds. Section 9. Arbitrage Covenant. The City covenants and agrees that no part of the proceeds of the 1978 Bonds or of the money in the Escrow Account shall be 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 1978 Bonds, would have caused anv of the 1978 Bonds to be or become "Arbitrage Bonds" within the meaning of Section 103(c) of the Internal Revenue Code of 1954, as amended, and the regulations of the Treasury Depart- ment thereunder proposed or in effect at the time of such use and applicable to obligations issued on the date of issuance of the 1978 Bonds. Section 10. Water and Sewage Fund. The City covenants and agrees that so long as any of the 1978 Bonds remain outstandin and unpaid all of the revenues derived by the City from the opera- tion of its Water and Sewage Utility, including all revenues from improvements, extensions and enlargements in and to the Water and -15- Sewage Utility, will be paid and deposited in the City's "Water a d 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. Section 11. Ratification and Creation of Funds and Accounts. The establishment by Ordinance No. 6546 of the City of the four accounts known as the (a) "Bond and Interest Account for Combined Water and Sewage System Revenue Bonds, Series of 196111, (b) "Reserve Account for Combined Water and Sewage System Revenue Bonds, Series of 1961", (c) "Combined Water and Sewage System Depreciation and Emergency Replacement Account", and (d) "Combined Water and Sewage System Extension and Bond Retirement Account" be, and the same is, hereby ratified and confirmed, and in addi- tion to the accounts aforesaid there were created and established by the 1977 Ordinance of the City two separate accounts known respectively as the (F) "Bond and Interest Account for Combined Water and Sewage System Revenue Bonds, Series of 1977", and (f) "Reserve Account for Combined Water and Sewage System Revenue Bonds, Series of 1977" and the same are, hereby ratified and confirmed, and in addi- tion to the accounts aforesaid there are hereby created and established in the Treasury of the City the following funds and accounts to be known respectively as the (g) "Bond Fund for Combined Water and Sewage System Refunding Revenue Bonds, Series of 1978" (the "Bond Fund") consisting of the "Principal and Interest Account" and the "Invested Sinking Fund Account", and (h) "Reserve Account for Combined Water and Sewage System Refunding Revenue Bonds, Series of 1978" (the "Reserve Account"). -16- I The amount of $4101000 from the account referred to in paragraphs (b) and (f) above shall be transferred into the account referred. t in paracjr_aph (h) above. Such amount shall then be replaced out of proceeds of the 1978 Bonds pursuant to Section 7(c) hereof. The accounts referred to in paragraphs (a) , (b) , (e) and (f) aforesaid shall then be transferred to and held by the Escrow Trustee pur- s.aant to the terms of the Escrow Trust Agreement and shall be maintained and administered by the Escrow Trustee incompliance with the provisions of the Prior Lien Ordinances so long as any of the Prior Lien Bonds authorized by such Ordinances, respectivel remain outstanding. The accounts referred to in paragraphs (c), (d), (g) and (h) aforesaid shall be maintained and administered by the City as herein provided so long as any of the Bonds remain outstanding. All moneys and securities held.in the Invested Sinking Fund Account shall be held in pledge by the Sinking Fund Agent to perfect and preserve the prior lien of the holders of the 2007 fonds in such moneys and securities and the income and pro- ceeds therefrom. Section 12. Application of Moneys in Funds and Accounts Moneys paid and deposited in the "Water and Sewage Fund" heretofor established by the City and hereinbefore referred to shall be ad- ministered and disposed of by the City so long as any of the 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 (h) of this Section 12. (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 sewer 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 1961, so long as any of the bonds dated July 1, 1961, remain outstanding, amounts (if any) at the time required to be so paid or credited by the provisions of the 1961 Ordinance, grid, from time to time, but only after and junior to such payments or credits, the City shall pay or credit from the Water and Sewage Fund to the Bond and Interest Account for Combined Water and Sewa System Revenue Bonds, Series of 1977, so long as any of said bond dated April 1, 1977, remain outstanding, amounts (if any) at the time required to be paid or credited by the provisions of the 197 Ordinance. -17- 1 (c) After making the payments and credits at the time required to be made by the City under the provisions of paragraph (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, Serios of 1961, so long as any of the Bonds dated July 1, 1961, remail outstandin , any amounts at the time required to be so paid or credited by the provisions of the 1961 Ordinance, and, from time to time, but only after and junior to such payments or credits, the City shall -pay r credit 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 said Bonds dated April 1, 1977, remain outstand ing, any amounts at the time required to be paid or credited by the provisions of the 1977 Ordinance. (d)(i) After making all payments and credits at the time required to be made by the City 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 Principal and Interest Account on or as of June 1, 1978, and continuing on the first day of each month thereafter so long as any of the 1978 Bonds remain outstanding a pro rata portion of the amount of Debt Service that will be due on the 1978 Bonds on the next succeeding principal and interest payment dates, taking into account moneys already on hand in said Account. After February 15, 1991, amounts of interest earned on Federal Securities during any months and retained in the Invested Sinking Fund Account pursuant to paragraph (e) of this Section 12 shall reduce the amount required to be credited from the Water and Sewage Fund pursuant to this paragraph (d)(i) on the first day of the following month. (ii) All amounts paid or credited to the Prin- cipal and Interest Account shall be used and expended by the City for the sole purpose of paying the prin- cipal of and interest on the Bonds as and when the same become due. If at any time moneys in the Prin- cipal and Interest Account, including moneys deposited in the Principal and Interest Account from transfers from other funds and accounts as herein provided for, shall be insufficient to pay in full the principal of and interest on any outstanding Bonds as and when the same become due, the available moneys in said account shall be applied to the payment of interest on the Bonds in proportion to the principal amounts MKM of the respective series of Bonds at the time out- standing and then to such pro rata payment of prin- cipal on such outstanding Bonds if the moneys are not sufficient to pay all such principal in full. Moneys in the Principal and Interest Account in excess of the amounts necessary to pay the next matur- ing principal and interest requirements on the 1978 Bonds shall be returned to the Water and Sewage Fund. (e) At the same times and on a parity with the payments or credits hereinabove provided for in paragraph (d) aforesaid, I City will pay or credit monthly from the Seater and Sewage Fund to the Invested Sinking Fund Account a pro rata portion of the amount necessary to purchase Obligations of the United States (Federal Securities) in the following amounts on the following dates, taking into account moneys already on hand in said account: -19- Principal Cumulative Date Amount Principal Amount 6/1/78 $317,000 $ 317,000 2/15/79 10,000 327,000 8/15/79 70,000 397,000 2/15/80 76,000 473,000 8/15/80 78,000 551,000 2/15/81 81,000 632,000 8/15/81 84,000 716,000 2/15/82 95,000 811,000 8/15/82 98,000 909,000 2/15/83 104,000 1,013,000 8/15/83 108,000 1,121,000 2/15/84 110,000 1,231,000 8/15/84 115,000 1,346,000 2/15/85 121,000 1,467,000 8/15/85 125,000 1,592,000 2/15/86 131,000 1,723,000 8/15/86 136,000 1,859,000 2/15/87 78,000 1,937,000 8/15/87 81,000 2,018,000 2/15/88 86,000 2,104,000 8/15/88 90,000 2,194,000 2/15/89 91,000 2,285,000 8/15/89 95,000 2,380,000 2/15/90 100,000 2,480,000 8/15/90 104,000 2,584,000 2/15/91 109,000 2,693,000 All amounts paid or credited to the Invested Sinking Fund Account shall be invested and reinvested in the Federal Securities, Unti February 15, 1991, interest earned on the Federal Securities shal be retained in the Invested Sinking Fund Account and used to pur- chase Federal Securities of the same type, interest rate and havi -19- 1 1 other details and provisions similar to those of the Federal Secu itiPs referred to in the Option Agreement. Thereafter such inter est shall be retained in the Invested Sinking Fund Account to the extent necessary to pay the Debt Service to become due on the 2067 Bonds on the next succeeding principal or interest payment date and any excess shall be deposited in the Principal and Inter Account. The principal of the Federal Securities held in the Invested Sinking Fund Account shall be held, used and applied sol for the payment of the 2007 Bonds as they become due, or on an ea date by ;mandatory redemption. If at any time moneys in the Water and Sewage Fund are insufficient to make in full the paymen or credits at the time required to be made by paragraphs (d) and (e) hereof, the available moneys in the Water and Sewage Fund shall be applied first as provided in subparagraph (i) of para- graph (d) and then as provided in this paragraph (e)_. (f) The City represents that at the time of the issu- ance of the 1978 Bonds there is on hand in Reserve Account the Maximum Reserve Account Requirement. st ly lie. s All amounts paid or credited to the Reserve Account shall be used and expended solely to prevent any default in the payment of interest on or principal of the outstanding Bonds of the City if the moneys in the Principal and Interest Account (and in the case of the 2007 Bonds, the Invested Sinking Fund Account) hereinbefore created are insufficient to pay the interest on or principal of the Bonds as they become due. No part of said Re- serve Account shall ever be expended or used by the City to call any Bonds for payment prior to their ultimate maturity unless all of the outstanding Bonds be called for payment and funds are available to pay the same according to their terms. After said payments into said Reserve Account aggregate the Maximum Reserve Account Requirement, no further payments into said Reserve Account. shall be required, but if the City shall ever be compelled to use and expend any part of said Reserve Account for the purpose of paying the interest on or principal of Bonds of the City and such expenditure shall reduce the amount of said Reserve Account below the Maximum Reserve Account 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) , (d) and (e) thereof, will thereafter, each month, pay or credit to said Reserve Account for Combined Water and Sewage System Refundi g Revenue Bonds, Series of 1978, all available funds until said Re- serve Account aggregates the Maximum Reserve Account Reauirement. Moneys in the Reserve Account in excess of the Maximum Reserve Account Requirement may be used to pay or redeem outstand ing Bonds or, at the option of the City, shall become a part of the Water and Sewage Fund. (g) The Combined Water and Sewage System Depreciation and Emergency Replacement Account established by Ordinance No. 65 6 of the City shall be maintained and administered by the City so =112 1 (h) 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 (b), (c), (d), (e), (f) and (g) of this Section shall have been so paid or credited, and if at the time the City shall not be in default in the per- formance of any covenant or agreement contained in this Ordinance, all moneys remaining in the "Water and Sewage Fund" shall be credited monthly to the "Combined Water and Sewage System Extension and Bond Retirement Account". Except as hereinafter provided, monevs in said "Combined Water and Sewage System 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: -21- long as any of the City's 1978 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), (e) and (f) aforesaid, the City shall next pay or credit from th Water and Sewage Fund to said Depreciation and Emergency 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 tha the sum of $125,000. Escept as hereinafter provided, all amount credited to said account shall be used by the City, if no other funds are available therefor, for the purpose of making emergent maintenance, repairs.and improvements in and to the City's Water and Sewage Utility and keeping the same in good repair and worki g order so that the Water and Sewage Utility may continue in effec- tive 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 an for the purpose of making major extensions or enlargements of said system. So long as said Depreciation and Emergency Account agg e- gates not less than $125,000, 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 $125,000, then the City, after making all payments or credits at the time required to be made b the City under the provisions of paragraphs (a), (b), (r.), (d) a d (e) hereof, will thereafter pay or credit from the Water and Sewage Fund to said Depreciation and Emergency Account all sums in said Water and Sewage Fund until said Depreciation and Emergency Accont ul aggregates $125,000. 1 (h) 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 (b), (c), (d), (e), (f) and (g) of this Section shall have been so paid or credited, and if at the time the City shall not be in default in the per- formance of any covenant or agreement contained in this Ordinance, all moneys remaining in the "Water and Sewage Fund" shall be credited monthly to the "Combined Water and Sewage System Extension and Bond Retirement Account". Except as hereinafter provided, monevs in said "Combined Water and Sewage System 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: -21- (i) Paying the cost of operation, maintenance and repair of the City's combined water and sewage system to the extent that may be necessary after the application of the moneys held in the "eater and Sewage Fund" under the provisions of para- graph (a) of this Section. (ii) Anticipating payments into or increasing the amounts of the "Bond and Interest Accounts" the "Bond Reserve Accounts", or the "Deprecia- tion and Emergency Account", referred to in paragraphs (b) , (c) , (d) , (e) and (g) of this Section, or any of them, or establishing or increasing the amount of any bond and interest account or bond reserve account created by the City for the payment of any combined water and sewage system revenue bonds of the City here- after issued under the conditions hereinafter specified and standing on a parity with the bonds herein authorized. (iii) Paying the cost of improving, extending or enlarging the City's combined water and sewage system as hereinafter in this Section 12(h) 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 12(h) provided. The City covenants and agrees that it will not expend or permit the expenditure of any moneys in said "Combined Water and Sewage System 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 secur- ing from the City's consulting engineer or engineers a report an recommendation with respect thereto, nor will it make such purchase or improvement except in accordance with such report and recomme da - tion. At least once in every two years the City's consulting engineers hereinafter referred to in Section 16(d) of this ordin -22- 1 after making their examination and report on the condition, opera tion, and needs of the City's combined water and sewage system as provided in said Section 16(d), shall, by written instrur.�-nt file in the office of the City Clerk and sent by such engineea-,: by United States registered mail to the Underwriters purchasing the bonds herein authorized, certify whether or not in their opinion the moneys in the "Combined Water and Sewage System Extension and Bond Retirement Account" are in excess of the amount reasonably required to be maintained in such account for extending, improvin or enlarging the City's combined water and sewage system, and, if so, the amount of such excess. If such engineers shall certif that in their opinion there is an excess in said account, such excess moneys in the "Combined Water and Sewage System 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 bon be subject to redemption, or, at the option of the City, for pur- chasing any of the bonds herein authorized in the open market at the lowest price at which such bonds may be purchased not exceedi the call price, or, if none of the bonds herein authorized is at the time subject to redemption, then for the purpose of purchasin 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 here- after issue one or more series of its combined waiver and sewage system revenue bonds which stand on a parity with the bonds herei authorized, moneys in the "Combined Water and Sewage System Exten sion 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 com- bined water and sewage system revenue bonds at the time outstand- ing 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 re- deemed or purchased shall be canceled. Section 13. 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 date hereinbefore specified, the City shall make good the amount of such deficiency by making payments or credits out of the first available revenues thereafter received by the City from the opera tion of its Water and Sewage Utility, such payments and credits being made and applied in the order hereinbefore specified in Section 12 hereof. O.ARIM S 0 U -24- Section 14. Us-e of Other Reserve Accounts to Pay and Interest. If Bond at any time the moneys in the Principal and Interest Account and, in the case of the 2007 Bonds, in the Invested Sinking Fund Account and in the Reserve Account for Combined Water and Sewage System Refunding Revenue Bonds, Series of 1978, are not sufficient to pay the principal of and interest the Bonds on 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 Depreciation and Emergency Account, and secondly, 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 operat-ing and maintaining the City's Water and Sewage Utility during the next succeeding period of thirty days. Section 15. 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 obliga tions of the United States Government, or, except as to moneys in the Invested Sinking Fund Account and in the Escrow Account, 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, except for moneys in the Invested Sinking Fund Account and Escrow Accoun 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 provided in Section 12(e) hereof, and except as to interest accumulated in the Bond and Interest Accounts and in the Reserve Accounts relating to the Prior Lien Bonds, which interest shall be deposited in the Escrow Account, 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 Reserve Account and interest on investments in the Combined Water and Sewage System Depreciation and Emergenc 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 12, shall be paid and credited to the Water and Sewage Fund and used and applied for the purposes and i the order hereinbefore specified in Section 12 of this Ordinance. U -24- n determining the amount held in any fund or account under any of he provisions of this Ordinance, obligations of the United States 'overnment shall be valued at the market value thereof. Sect..on 16. Particular Covenants of the City. The City venants with each of the purchasers and owners of any of the Bond at 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 se�.rage services and commodities of the Water and Sewage Utility as shall be re- wired to provide Revenues at least sufficient in.each fiscal year o pay: (i) Operating Expenses during such fiscal year, inn- siding eserves, if any, provided for in the annual budget for such fiscal year; (ii) an amount equal to at least 1300 of the Aggregate Debt Service for such fiscal year; (iii) an amount., if any, to be, paid wring such fiscal year into the Deserve Account; (iv) to the xtent not provided from the Escrow Account an amount equal to Aggregate .Debt Service on the Prior Lien Bonds for such fiscal Year; (v) an amount, if any, to be paid into the Reserve Accounts or Prior Lien Bonds and into the Emergency Account during such fiscal year; and (vi) any and all charges or liens whatsoever pay- able 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 gill be furnished to any user without a reasonable charge ade therefor. The City will require the prompt payment of ac:c_;Tits and will discontinue water and sewage service to any customer de- linquent in the payment of his account for a period which shall of exceed sixty (60) days. The City will pay monthly into the Via -ter and Sewage Fend for the water and sewage service furnished e City in accordance with effective applicable rates, fees and charges. In the event that the net revenues derived by the City from the operation of its Water and Sewage Utility shall at Z-ny time prove insufficient to pay the principal of and interest on the 1978 Bonds of the City as and when the same become due, the City will thereafter pay into the Water and Sewage Fund a fair and reasonable payment in accordance with effective ap?'!ica- le rates, fees and charges for all water and sewage service furnished the City and_any other service rendered by the City's Water and Sewage Utility to the City or any of its departmen-t.s, and such payments will continue so long as necessary to prevent any default in the payment of the principal of or interest on Bonds of the City, or so long as any default in such payment shall exist. (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. -25- n (d) Engineering Report. At least once in every two years the City will employ an independent consulting engineer or firm of consulting engineers having a reputation for knowledge, skill and experience in the operation of municipal water and sewer systems 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 includo recommendations as to any changes in such operation deemed desir- able. 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 purchasing the Bonds herein authorized. (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 re- placement be unnecessary, then in redeeming or purchasing out- standing Bonds of the City, such redemption or purchase being mad 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 work- men'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 acce 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 W► :fl fl 1 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 reve- nues of the City's Water and Sewage Utility. (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 prac- tices as applicable to the operation of water and sewage utilitiE 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 competE firm of certified public accountants experienced in public utilit accounting of the accounts of its Water and Sewage Utility for the preceding fiscal year. Each such audit, in additirn to such matters as may be thought proper by said accountants, shall, _Lth out limiting the generality of the foregoing, include statements of gross revenues, operational expenditures, and net operational_ incomes and shall contain an operational balance sheet, a stateme of profit and loss, a statement of all Bonds called or matured ar all interest paid, a statement of the number of customers served, a statement of 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 ir the office of the City Clerk and shall forward copies of such a& to the Underwriters purchasing the Bonds. 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, t 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 re- quirements. e- quirements. -27- t t fl (h) Right to Insect. The holder of any of the Bonds of the City herein authorized shall have the right at all reason- able times to inspect the water and Sewage Utility and all record 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 reason- ably 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 system, 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. IW&C (j) The City will pay the fees and expenses of the Sinking Fund Agent and will promptly appoint a successor if the Sinking Fund Agent resigns or its agency otherwise terminates. Section 17. 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 anv additional bonds or other obligations payable out of the revenu.:s of its combined water and sewer system 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 1.30 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 will be outstanding immediately after the issuance of the proposed additional Bonds or (ii) the estimated Revenues Available for Debt Service for th fiscal year immediately following the year in which the project, the cost of construction of which is being financed by such addi- tional Bonds, is to be in commercial operation are not less than 1.30 times the maximum Aggregate Debt Service for any succeeding fiscal year (excluding the year of final maturity of any series cf Bonds) on all Bonds which are outstanding in such fiscal year. IW&C 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 Engineer 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 Dobt Service for the purposes of (i) above, the Authorized O.ffic r of the City may adjust the Revenues Available for Debt Service b adding thereto, in the event any adjustment of rates with respect to the Water and Sewage Utility shall have become effective sub- sequent 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 Avail- able for Debt Service for the purpose of (ii) above, the Consult- ing 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 feasibe and reasonably considered necessary based on projected operation of the Water and Sewage Utility. Notwithstanding the restrictions upon the issuance of additional bonds set out above, additional Bonds may be issued i 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 disast r to such an extent that it cannot be operated or if it is necessay 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 respecti 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 an Sewage Utility with the Boni herein authorized, and the City ma make equal provision for paying said Bonds and the interest ther on out of the Water and Sewage Fund and may likewise provide for th creation of reasonable reserve accounts out of moneys in said Water and Sewage Fund. -29- Section 18. Amendments. The provisions of the Bonds authorized by this Ordinance and the provisions of this Ordinance may be modified or amended at any time by the City with the written consent of the holders of not less than sixty-six and two-thirds percent (66 2/3%) in aggregate principal amount of the Bonds at tthe time outstanding; provided, however, that no such modification or amendment shall permit or be construed as permitting (a) the extension of the maturity of 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 o all of the Bonds then outstanding. Amendments to this Ordinance which correct errors or which add to or supplement the se-,urity of the holders of -the Bonds may be adopted by the City without t e consent of such bondholders. Every amendment or modification of a provision of the Bonds or of this Ordinance to which the writt n consent of the bondholders 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 supplementa -30- Nothing in this section contained shall prohibit or restrict the right of the City to issue additional water and sewe: revenue bonds or other revenue obligations for the purpose of re- cons"--ructing, altering, repairing, improving, extending or enlarg. ing the City's `dater 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 eater 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 the City shall be in default in paying either - interest on or principal of the Bonds the City shall make no pay- ments of either principal of or interest on said junior and sub- ordinate revenue bonds or obligations until said default or de- faults 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 18. Amendments. The provisions of the Bonds authorized by this Ordinance and the provisions of this Ordinance may be modified or amended at any time by the City with the written consent of the holders of not less than sixty-six and two-thirds percent (66 2/3%) in aggregate principal amount of the Bonds at tthe time outstanding; provided, however, that no such modification or amendment shall permit or be construed as permitting (a) the extension of the maturity of 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 o all of the Bonds then outstanding. Amendments to this Ordinance which correct errors or which add to or supplement the se-,urity of the holders of -the Bonds may be adopted by the City without t e consent of such bondholders. Every amendment or modification of a provision of the Bonds or of this Ordinance to which the writt n consent of the bondholders 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 supplementa -30- ordinance or of this Ordinance will be sent by the City Clerk to any such bondholder or prospective bondholder. Section 19. Acceleration in the Event of Default. The City agrees that if 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 (25a) 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 outstand- ing to be due and payable immediately, and upon any such declara- tion 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 Bond , 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 thr� 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 conse- quences, but no such rescission or annulment shall extend to or affect any subsequent default or impair any rights consequent thereon. Section 20. 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 (100) of the Bonds at the time outstanding shall have 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 lawn 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, accents 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. -31- (c) By suit, action or other proceeding in equity or a 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 tolevy any taxes either to meet any obligation incurred herein or to pa the principal of or interest on the Bonds. Section 21. Authorization of Escrow Trust Agreement; Redemption of Prior Lien Bonds. The Mayor and the City Clerk are hereby authorized and directed to execute the Escrow Trust Agreement, dated as of May 1, 1978, between the City and Planters State Bank and Trust Company, Salina, Kansas, substan- tially in the form attached to this Ordinance and marked Exhibit "A", with such changes therein to correct omissions and ambigui- ties as such officials may deem appropriate, for and on behalf of and as the.act and deed of the City. The City covenants and agrees that it will redeem and pay the Prior Lien Bonds as pro- vided in the Escrow Trust Agreement. Section 22. Authorization of Securities Option and Purchase Agreement. The Mayor and the City Clerk are hereby authorized and directed to execute the Securities Option and Purchase Agreement, dated as of May 1, 1978, between the City and The First National Bank and Trust Company of Salina, Salina, -32- No remedy conferred hereby upon any holder of the Bond herein authorized is intended to be exclusive of any other reined but each such remedy is cumulative and in addition to every othe , remedy and raay be exercised without exhausting and without regar 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 b 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 shit 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 21. Authorization of Escrow Trust Agreement; Redemption of Prior Lien Bonds. The Mayor and the City Clerk are hereby authorized and directed to execute the Escrow Trust Agreement, dated as of May 1, 1978, between the City and Planters State Bank and Trust Company, Salina, Kansas, substan- tially in the form attached to this Ordinance and marked Exhibit "A", with such changes therein to correct omissions and ambigui- ties as such officials may deem appropriate, for and on behalf of and as the.act and deed of the City. The City covenants and agrees that it will redeem and pay the Prior Lien Bonds as pro- vided in the Escrow Trust Agreement. Section 22. Authorization of Securities Option and Purchase Agreement. The Mayor and the City Clerk are hereby authorized and directed to execute the Securities Option and Purchase Agreement, dated as of May 1, 1978, between the City and The First National Bank and Trust Company of Salina, Salina, -32- Kansas, substantially in the form attached to this Ordinance and marked Exhibit B, with such changes therein to correct omissions and ambiguities as such officials may deem appropriate, for and on behalf of and as the act and deed of the City. Section 24. Severability. If any part of this Ordinan whether large or small, shall be held invalid, the invalidity thereof shall not affect the other provisions of this Ordinance. Section 25. Effective Date. This Ordinance shall take effect and be in full force from and after its passage and publica- tion once in the official City newspaper. M&M Section 23. Defeasance. When all of the 1978 Bonds or any maturity thereof, including all coupons representing inte - est thereon shall have been paid and discharged, then the require- ments contained herein and the pledge of revenues made hereunder and all other rights granted hereby shall cease and determine with respect to such bonds. Bonds and coupons 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 bonds an,' coupons, 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 bonds, the redemption premium thereon, if any there be, and interest accrue 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 bonds shall be redeemed prior*to the maturity thereof, the City shall have elected to redeem such bond and notice of such redemption shall have been given, and provide further that the 2007 Bonds shall not be deemed to be paid and discharged within the meaning of this Ordinance because of any such deposit until the governing body of the City adopts a resolu- tion so directing. 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 bonds or coupons, shall be and are hereby assigned, trans- ferred and set over to such Paying Agent or Kansas bank in trust for the respective holders of the bonds and coupons, 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 accordant with and subject to all the provisions contained in this Ordina.nc . Section 24. Severability. If any part of this Ordinan whether large or small, shall be held invalid, the invalidity thereof shall not affect the other provisions of this Ordinance. Section 25. Effective Date. This Ordinance shall take effect and be in full force from and after its passage and publica- tion once in the official City newspaper. M&M PASSED by the governing body of the City of Saline:, Kansas, this 15th day of May, 1978. ATTEST: 1 1 City Clerk -34- I yor 1 1 EXHIBIT A TO ORDINANCE NO. 8635 OF THE CITY OF SALINA, KANSAS SCHEDULE OF RESTRICTED YIELD PORTION OF THE RESERVE AC- COUNT FOR COMBINED WATER AND SEWAGE SYSTEM REFUNDING REVENUE BONDS, SERIES OF 1978 PURSUANT TO SECTION 15 Restricted Date Reserve'Amount -35- 1 ESCROW TRUST AGREEMENT by and between THE CITY OF SALINA, KANSAS 1 li and 1 PLANTERS STATE BANK AND TRUST COMPANY As Escrow Trustee Dated as of May 1, 1978 COMBINED WATER AND SEWAGE SYSTEM REFUNDING REVENUE BONDS, SERIES OF 1978 DATED MAY 1, 1978 A i;4 t, ESCRO -1 TRUST AGREEMENT This Escrow Trust Agreement, dated as of May 1, 1978 (the "Agreement"), by and between the City of Salina, Kansas, a municipal corporation of the State of Kansas (the "City"), and Planters State Bank and Trust Company, Salina, Kansas, a state banking institution having full trust powers, as Escrow Trustee (the "Escrow Trustee"). WITNESSETH• WHEREAS, pursuant to Ordinance No. 8635 (the "1978 Ordinance"), the City has issued $4,394,000 principal amount of its Combined Water and Sewage System Refunding Revenue Bonds, Series of 1978, dated May 1, 1978 (the "Series 1978 Bonds"), for the purpose of providing funds to refund the Prior Lien Bonds; an WHEREAS, with $4,325,300 of the proceeds of the sale of the Series 1978 Bonds, the City has purchased $4,325,300 principes amount of direct obligations of, or obligations guaranteed by, the United States of America described in Schedule I attached hereto (the "Escrowed Securities"), and has deposited with the Escrow Trustee such Escrowed Securities together with cash from the proceeds of the sale of the Series 1978 Bonds in the amount of $121.22; and WHEREAS, pursuant to the 1961 Ordinance, the City has heretofore established two accounts known respectively as the F, WHEREAS, pursuant to Ordinance No. 6546 (the "1961 Ordinance"), the City has heretofore issued $3,600,000 principal amount of Combined Water and Sewage System Revenue Bonds, Series of 1961, dated July 1, 1961 (the "Series 1961 Bonds")., of which the principal amount of $1,670,000 remains outstanding and pur- suant to Ordinance No. 8546 (the "1977 Ordinance"), the City has heretofore issued $3,000,000 principal amount of Combined Water and Sewage System Revenue Bonds, Series of 1977, dated April 1, 1977 (the "Series 1977 Bonds"), all of which remain outstanding (said two series of outstanding bonds being hereinafter referred to collectively as the "Prior Lien Bonds", and the ordinar_ces authorizing said bonds being hereinafter referred to collectively as the "Prior Lien Ordinances"), and WHEREAS, pursuant to Ordinance No. 8635 (the "1978 Ordinance"), the City has issued $4,394,000 principal amount of its Combined Water and Sewage System Refunding Revenue Bonds, Series of 1978, dated May 1, 1978 (the "Series 1978 Bonds"), for the purpose of providing funds to refund the Prior Lien Bonds; an WHEREAS, with $4,325,300 of the proceeds of the sale of the Series 1978 Bonds, the City has purchased $4,325,300 principes amount of direct obligations of, or obligations guaranteed by, the United States of America described in Schedule I attached hereto (the "Escrowed Securities"), and has deposited with the Escrow Trustee such Escrowed Securities together with cash from the proceeds of the sale of the Series 1978 Bonds in the amount of $121.22; and WHEREAS, pursuant to the 1961 Ordinance, the City has heretofore established two accounts known respectively as the F, (a) "Bond and Interest Account for Combined Slater and Sewage System Revenue Bonds, Series of 19611, dated July 1, 1961", and (b) "Reserve Account for Combined Water and Sewage System Revenue Bonds, Series of 1961", and pursuant to the 1977 Ordinance, the City has heretofore established two accounts known respectively as the (c) "Bond and Interest Account for Combined Slater and Sewage System Revenue Bonds, Series of 1977", and 1 WHEREAS, the Escrowed Securities will bear interest and mature in such amounts and at such times so that sufficient money will always be available from such interest coming due and maturi. principal, together with the $141.22 of deposited funds held as cash, to pay all principal of, interest on and redemption premium if any, on the Prior Lien Bonds as the same become due, and to satisfy the requirements for monthly deposits required to be made into the Prior Lien Accounts by the Prior Lien Ordinances, NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants hereinafter set forth, the parties hereto agree as follows: 1. Receipt of 1978 Ordinance. Receipt of true and correct copies of the 1978 Ordinance is hereby acknowledged by th Escrow Trustee, and reference herein to or citation herein of any provision of said document shall be deemed to incorporate the sam -2- r (d) "Reserve Account for Combined Water and Sewage System Revenue Bonds, Series of 1977", and all of said accounts referred to above beinq hereinafter sometime referred to collectively as the "Prior Lien Accounts", and WHEREAS, in accordance with Section 11 of the 1978 Ordinance, the Prior Lien Accounts have been transferred to the Escrow Trustee, and the Escrow Trustee will hold and administer the Prior Lien Accounts as subaccounts of the Escrow Account here inafter referred to in Section 2 of this Agreement, and will tran fer from the Prior Lien Accounts and from the UndesignF:.1.:- ; Portio of the Escrow Account as hereinafter defined to the Sta..: Treasur in the City of Topeka, Kansas (the "Paying Agent"), the amounts which are required to be transferred to said Paying Agent under t Prior Lien Ordinances, and 1 WHEREAS, the Escrowed Securities will bear interest and mature in such amounts and at such times so that sufficient money will always be available from such interest coming due and maturi. principal, together with the $141.22 of deposited funds held as cash, to pay all principal of, interest on and redemption premium if any, on the Prior Lien Bonds as the same become due, and to satisfy the requirements for monthly deposits required to be made into the Prior Lien Accounts by the Prior Lien Ordinances, NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants hereinafter set forth, the parties hereto agree as follows: 1. Receipt of 1978 Ordinance. Receipt of true and correct copies of the 1978 Ordinance is hereby acknowledged by th Escrow Trustee, and reference herein to or citation herein of any provision of said document shall be deemed to incorporate the sam -2- r as a part hereof in the same manner and with the same effc=,.-. as if they were fully set forth herein. 2. Creation of the Escrow Account. There is hereby created and established with the Escrow Trustee, for the account of the Paying Agent, a special and irrevocably escrow account desigiiated the "City of Salina, Kansas, Escrow Account" (herein referred to as the "Escrow Account") to be held in trust in the custody of the Escrow Trustee. The Escrow Trustee shall hold the Prior Lien Accounts in the Escrow Account as subaccounts and shal maintain and administer the Escrow Account, including the Prior Lien Accounts, as herein provided. Kennedy & Cole, Salina, Kansas, Certified Public Accoun ants, have certified that there will always be, on any date of ca culation, sufficient cash in the Escrow Account to pay all princi pal of, interest on and redemption premium, if any, on the Prior Lien Bonds on the respective Bond Payment Dates. 3. Deposits to the Escrow Agreement. Concurrently wit. the execution and delivery of this Agreement, the City herewith deposits, or causes to be deposited, with the Escrow Trustee, and the Escrow Trustee acknowledges receipt and deposit into the Escrow Account of the Escrowed Securities in the principal amount of $4,325,300 and cash in the amount of $141.22, together aggre- gating the principal sum of $4,325,331.22. An amount of Escrowed Securities so deposited into the Escrow Account shall be desig- nated and credited to the Prior Lien Accounts as set forth on Schedule 3. The remaining principal sum of Escrowed Securities and cash so deposited into the Escrow Account shall be referred to herein as the "Undesignated Portion" of the Escrow Account. Interest earned on Escrowed Securities designated and credited to the respective Bond and Interest Accounts and Reserve Accounts for Combined Water and Sewage System Revenue Bonds referred to herein shall be allocated and credited to the Undesignated Portio 4. Creation of Lien. The escrow created hereby shall be irrevocable. The holders of the Prior Lien Bonds are hereby given an express lien on and security interest in the Escrowed Securities and the cash in the Escrow Account and all earnings thereon until used and applied in accordance with this Agreement. The matured principal of and earnings on the Escrowed Securities and any cash in the Escrow Account is hereby pledged and assignee and shall be applied solely for the payment of the principal of, interest on and redemption premium, if any, on the Prior Lien Bor. -3- 5. Escrowed Securities and Moneys in the Escrow Acco Except as otherwise expressly provided in this Section, the Esc -3- 1 ustee shall have no power or duty to invest any moneys held here - der or to sell, transfer or otherwise dispose of any Escrowed curities. (a) Prior to each principal and interest payment on the rior Lien Bonds (the "Bond Payment Date"), the Escrow Trustee shall withdraw available cash from the Escrow Account, by withdrawing firs ram the respective Bond and Interest Accounts, then from the respec ive Reserve Accounts for Combined Water and Sewage System Revenue onds, and then from the undesignated portion of the Escrow Account As it becomes necessary in that order, the respective amounts equal o the principal of and interest and premium, if any, on the respec ive Prior Lien Bonds becoming due and payable on such Bond Payment ate, and shall forward such amounts to the office of the Paying Agent o that such funds will reach the office of the Paying Agent on or efore 12 o'clock noon on the Bond Payment Dates. The Escrow rustee shall pay such amounts as set forth in Schedule II attached ereto and made a part hereof. The Escrow Trustee is hereby author zed to redeem or otherwise dispose of Escrowed Securities in which oneys of the Escrow Account are invested, in accordance with the aturity schedules in Schedule I, in order to make the payments equired by this Subsection 5(a). Escrowed Securities shall then e transferred from the undesignated portion of the Escrow Account o the respective Bond and Interest Account and Reserve Account for ombined Water and Sewage System Revenue Bonds, as the case may be, n order of maturity until such accounts are replenished tc� the xtent required by the Prior Lien ordinances. The liability of he Escrow Trustee to make the payments required by this Subsection (a) shall be limited to the moneys and Escrowed Securities in the scrow Account. (b) At the written request of the City and upon complianc ith the conditions hereinafter stated, the Escrow Trustee shall ave the power to sell, transfer or otherwise dispose of or request he redemption of the Escrowed Securities acquired hereunder and o substitute for the Escrowed Securities other direct obligations f or obligations guaranteed by the United States of America (the Substitute Escrowed Securities"), which are not subject to redemp- ion prior to maturity except at the option of the holder thereof. he City hereby covenants and agrees that it will not request the scrow Trustee to exercise any of the powers described in the receding sentence in any manner which, if reasonably expected on he date of issuance hereof, would cause any of the Series 1973 onds to be an "arbitrage bond" within the meaning of Section 103(c) f the Internal Revenue Code of 1954, as amended, and the regula- .ions thereunder in effect on the date of such request and applicable .o obligations issued on the issue date of the Series 1978 Bonds. 'he Escrow Trustee shall purchase such Substitute Escrowed Securities -4- 1 with the proceeds derived from the sale, transfer, disposition or redemption of the Escrowed Securities together with any other funds available for such purpose. The foregoing transactions may be effected only if: (i) an independent certified public accountant shall certify that after such transaction the principal amount o and interest income on the Substitute Escrowed Securities will, together with any other moneys available for the purpose, be sufficient to pay, as the same become due at maturity or earlier redemption, all principal or interest on and redemption premium, if any, on the Prior Lien Bonds which have not been paid previously; and (ii) the amounts and dates of the anticipated transfers from the Escrow Account to the Paying Agent of the Prior Lien Bonds will not be diminished or postponed thereby; and (iii) the Escrow Trustee shall receive an unqualified opinion of nationally recognized at or- neys on the subject of municipal bonds to the effect that such d's- position and substitution or purchase would not cause any of the Series 1978 Bonds to be an "arbitrage bond" within the mean-ing o Section 103(c) of the Internal Revenue Code of 1954, as amended, and the regulations thereunder in effect on the date of such dis position, substitution or purchase, and applicable to obligation issued on the issue date of the Series 1978 Bonds. (c) Notwithstanding any other provision of this Agreem nt, the City hereby covenants that no part of the proceeds of the Series 1978 Bonds or of the monevs or funds in the Escrow Account shall be used, at any time, directly or indirectly, in a manner which, if such use had been reasonably anticipated on the date o issuance of the Series 1978 Bonds would have caused any of the Series 1978 Bonds to be an "arbitrage bond" under Section 103(c) of the Internal Revenue Code of 1954, as amended, and the regula tions 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 Series 1978 Bonds. (d) Upon the payment in full of the principal of and premium, if any, and interest on the Prior Lien Bonds, all re- maining moneys and Escrowed Securities in the Escrow Account, together with any interest thereon, shall be transferred to the Water and Sewer Fund referred to in the 1978 Ordinance. 6. Reports of the Escrow Trustee. As lona as any of the Prior Lien Bonds, together with the interest and redemption premium, if any, thereon have not been paid in full, the Escrow Trustee shall, at least 60 days prior to each Bond Payment Date, determine the amount of money which will be available in the Escrow Account to pay the principal of and interest and premium, if any, on the Prior Lien Bonds on the next Bond Payment Date an Mis 7.. Liability of Escrow Trustee. (a) The Escrcr..r Truste shall not be liable for any loss resulting from any inve�i,.rSent made pursuant to this Agreement in compliance with the p.r.visions hereof. The Escrow Trustee shall have no lien whatsoever on any of the moneys or Escrowed Securities on deposit in the Escrow Account for the payment of fees and expenses for services rendere by the Escrow Trustee under this Agreement or otherwise. (b) The Escrow Trustee shall not be liable for the accu racy of the calculations as to the sufficiency of the Escrowed Securities and moneys to pay the Prior Lien Bonds. So long as th Escrow Trustee applies the Escrowed Securities and moneys as pro- vided herein, and complies fully with the terms of this Agreement the Escrow Trustee shall not be liable for any deficiencies in th amounts necessary to pay the Prior Lien Bonds caused by such cal- culations. (c) In the event of the Escrow Trustee's failure to account for any of the Escrowed Securities or moneys received by it, said Escrowed Securities or moneys shall be and remain the property of the City in trust for the holders of the Prior Lien Bonds, and, if for any reason such Escrowed Seciu ities or moneys are not applied as herein provided, the assets of the Escrow Trustee shall be impressed with a trust for the amount thereof until the required application shall be made. S. Fees and Costs of the Escrow Trustee. The aggre- gate amount of the costs, fees and expenses of the Escrow Truste in connection with the creation of the trust described in and created by this Agreement and in carrying out of any of the duti terms or provisions of this Agreement is $5,000, which amount has been paid to the Escrow Trustee at the date of the execution and delivery of this Agreement. 9. Resignation or Removal of Escrow Trustee, Successo Escrow Trustee. The Escrow Trustee at the time acting hcr"eurder may at any time resign and be discharged from the trust hereby created by giving written notice to the City and by publishing such notice once in the official State paper of the State of Kan as not less than 60 days prior to the date when the resignation is to take effect. Such resignation shall take effect immediately upon the acceptance of the City of the resignation, the appointor nt certify in writing to the City (i) the amount so determined, and (ii) a list of the moneys and Escrowed Securities held by it in the Escrow Account on the date of such certification, including all moneys held by it which were received as interest or profit from Escrowed Securities. 7.. Liability of Escrow Trustee. (a) The Escrcr..r Truste shall not be liable for any loss resulting from any inve�i,.rSent made pursuant to this Agreement in compliance with the p.r.visions hereof. The Escrow Trustee shall have no lien whatsoever on any of the moneys or Escrowed Securities on deposit in the Escrow Account for the payment of fees and expenses for services rendere by the Escrow Trustee under this Agreement or otherwise. (b) The Escrow Trustee shall not be liable for the accu racy of the calculations as to the sufficiency of the Escrowed Securities and moneys to pay the Prior Lien Bonds. So long as th Escrow Trustee applies the Escrowed Securities and moneys as pro- vided herein, and complies fully with the terms of this Agreement the Escrow Trustee shall not be liable for any deficiencies in th amounts necessary to pay the Prior Lien Bonds caused by such cal- culations. (c) In the event of the Escrow Trustee's failure to account for any of the Escrowed Securities or moneys received by it, said Escrowed Securities or moneys shall be and remain the property of the City in trust for the holders of the Prior Lien Bonds, and, if for any reason such Escrowed Seciu ities or moneys are not applied as herein provided, the assets of the Escrow Trustee shall be impressed with a trust for the amount thereof until the required application shall be made. S. Fees and Costs of the Escrow Trustee. The aggre- gate amount of the costs, fees and expenses of the Escrow Truste in connection with the creation of the trust described in and created by this Agreement and in carrying out of any of the duti terms or provisions of this Agreement is $5,000, which amount has been paid to the Escrow Trustee at the date of the execution and delivery of this Agreement. 9. Resignation or Removal of Escrow Trustee, Successo Escrow Trustee. The Escrow Trustee at the time acting hcr"eurder may at any time resign and be discharged from the trust hereby created by giving written notice to the City and by publishing such notice once in the official State paper of the State of Kan as not less than 60 days prior to the date when the resignation is to take effect. Such resignation shall take effect immediately upon the acceptance of the City of the resignation, the appointor nt In the event of resignation or removal of the Escrow Trustee, a portion of the amount paid to the Escrow Trustee pur- suant to Section 9 hereof shall be returned to the City, such portion to be computed by multiplying the sum of $5,000 by the ratio of the number of months which the trust created by this Agreement will continue from the effective date of such resigna- tion or removal to the entire term of such trust. In the event the Escrow Trustee shall resign or be re -- of a successor Escrow Trustee (which may be a temporary Escrow moved, or be dissolved, or shall be in the course of dissolution or liquidation, or otherwise become incapable of acting hereunder, Trustee), the acceptance of such successor Escrow Trustee of or in case the Escrow Trustee shall be taken under the control of any public officer or officers, or of a receiver appointed terms, covenants and conditions of this Agreement, the transfer by a court, the City shall appoint a temporary Escrow Trustee to fill such vacancy until a successor Escrow Trustee shall be of the Escrow Account, including the moneys and Escrowed Securi- appointed by the City in the manner above provided, and any such temporary Escrow Trustee so appointed by the City shall immediat 1 ties held therein, to such successor Escrow Trustee and the comple- and without further act be superseded by the successor Escrow Trustee so appointed. The City shall publish notice of any such tion of any other actions required for the principal of and inter appointment made by it at the time and in the publication descri E in the first paragraph of this Section. est on the Escrowed Securities to be made payable to suchil successor Escrow Trustee rather than the resigning Escrow Trustee. The Escrow Trustee may be removed at any time by an instrument or concurrent instruments in writing, delivered to the Escrow Trustee and to the City and signed by the holders of a majority in principal amount of the Prior Lien Bonds then outstan - ing. The Escrow Trustee may also be removed by the City if the Escrow Trustee fails to make timely payment on any Bond Payment Date of the amounts required to be paid by it on such Bond Payment Date by Subsection 5(a) of this Agreement to the persons specifie in said Subsection 5(a). Any removal pursuant to this paragraph shall become effective upon the appointment of a successor. Escrow Trustee (which may be a temporary successor Escrow Trustee), the acceptance of such successor Escrow Trustee of the terms, covenants and conditions of this Agreement, the transfer of the Escrow Account, including the moneys and Escrowed Securities held them:.:; to such successor Escrow Trustee and the completion of any otho_,_ actions regi?ired for the principal of and interest on the Escrowed Securi ties to be made payable to such successor Escrow Trustee rather than the Escrow Trustee being removed. In the event of resignation or removal of the Escrow Trustee, a portion of the amount paid to the Escrow Trustee pur- suant to Section 9 hereof shall be returned to the City, such portion to be computed by multiplying the sum of $5,000 by the ratio of the number of months which the trust created by this Agreement will continue from the effective date of such resigna- tion or removal to the entire term of such trust. -7- y 0 In the event the Escrow Trustee shall resign or be re -- moved, or be dissolved, or shall be in the course of dissolution or liquidation, or otherwise become incapable of acting hereunder, or in case the Escrow Trustee shall be taken under the control of any public officer or officers, or of a receiver appointed by a court, the City shall appoint a temporary Escrow Trustee to fill such vacancy until a successor Escrow Trustee shall be appointed by the City in the manner above provided, and any such temporary Escrow Trustee so appointed by the City shall immediat 1 and without further act be superseded by the successor Escrow Trustee so appointed. The City shall publish notice of any such appointment made by it at the time and in the publication descri E in the first paragraph of this Section. -7- y 0 In the event that no appointment of a successor Escrow Trustee or a temporary successor Escrow Trustee shall have been made by such holders or the City pursuant to the foregoing pro- visions of this Section within 60 days after written notice or resignation of the Escrow Trustee has been given to the City, the holder of any of the Prior Lien Bonds or any retiring Escrow Trustee may apply to any court of competent jurisdiction for the appointment of a successor Escrow Trustee, and such court may thereupon, after such notice, if any, as it shall deem proper, appoint a successor Escrow Trustee. No successor Escrow Trustee shall be appointed unless such successor Escrow Trustee shall be a corporation with trust powers authorized to do business in the State of Kansas and or- ganized under the banking laws of the United States or the State of Kansas and shall have at the time of appointment capital and surplus of not less than $4,000,000. Any corporation into which the Escrow Trustee, or any successor to it in the trusts created by this Agreement, may be merged or converted or with which it or any successor to it may be consolidated, or any corporation resulting from any merger, conversion, consolidation or tax-free reorganization to which the Escrow Trustee or any successor to it shall be a party shall, if satisfactory to the City, be the successor Escrow Trustee under this Agreement without the execution or filing of any paper or any other act on the part of the parties hereto, anything herein to the contrary notwithstanding. Every successor Escrow Trustee appointed hereunder shat execute, acknowledge and deliver to its predecessor and to the City an instrument in writing accepting such appointment hereunder and thereupon such successor Escrow Trustee without any further act, deed or conveyance shall become fully vested with all the rights, immunities, powers, trusts, duties and obligations of its predecessor, but such predecessor shall, nevertheless, on the writ- ten request of such successor Escrow Trustee or the City, execute and deliver an instrument transferring to such successor Escrow Trustee all the estates, properties, rights, power and trusts of such predecessor hereunder, and every predecessor Escrow Trustee shall deliver all securities and moneys held by it to its success r. Should any transfer, assignment or instrument in writing from the City be required by any successor Escrow Trustee for more fully and certainly vesting in such successor Escrow Trustee the estates, rights, powers and duties hereby vested or intended to be vested in the predecessor Escrow Trustee, any such transfer, assignment and instruments in writing shall, on request, be executed, acknow - edged and delivered by the City. Any corporation into which the Escrow Trustee, or any successor to it in the trusts created by this Agreement, may be merged or converted or with which it or any successor to it may be consolidated, or any corporation resulting from any merger, conversion, consolidation or tax-free reorganization to which the Escrow Trustee or any successor to it shall be a party shall, if satisfactory to the City, be the successor Escrow Trustee under this Agreement without the execution or filing of any paper or any other act on the part of the parties hereto, anything herein to the contrary notwithstanding. 1 10. Termination. This Agreement shall terminate when all transfers required to be made by the Escrow Trustee under the provisions hereof shall have been made. 11. Severn.bility. If any one or more of the covenants or agreements provid-�ain this Agreement on the part of the City or the Escrow Trustee to be performed should be determined by a court of competent jurisdiction to be contrary to law, such cove- nant or agreement shall be deemed and construed to be severable from the remaining covenants and agreements herein contained and shall in no way affect the validity of the remaining provisions of this Agreement. 12. Successors and Assigns. All of the covenants, promises and agreements in this Agreement contained by or on be- half of the City or by or on behalf of the Escrow Trustee shall be binding upon and inure to the benefit of their respective successors and assigns whether so expressed or not. 13. Governing Law. This Agreement shall be governed by the applicable law of the State of Kansas. 14. Headings. Any heading preceding the text of the several Sections hereof, and any table of contents or m.rginal notes appended to copies hereof, shall be solely for convenience of reference and shall not constitute a part of this Agreement, nor shall they affect its meaning, construction or effect. 15. Counterparts. This Agreement may be executed in several counterparts, all or any of which shall be regarded for all purposes as one original and shall constitute and be but one and the same instrument. IN WITNESS WHEREOF, the parties hereto have each caused this Agreement to be executed by their duly authorized officers or elected officials and their corporate seals to be hereunder affixed and attested as of the date first above written. 3OM 1 ATTEST: Trust Officer 1 1 PLANTERS STATE BANK AND TRUST COP ANY, Trustee B GC Y Presid & rust Offi er W010 1 SCHEDULE I TO ESCROW TRUST AGREEMENT, DATED AS OF MAY I, 1978, BETWEEN THE CITY OF SALINA, KANSAS, AND 1. United States Treasury Obligations - State and Local Governm nt Series Maturity Date Amount Interest Rat TOTAL SCHEDULE I, continue SCHEDULE I TO ESCROW TRUST AGREEMENT, DATED AS OF MAY 1, 1978, BETWEEN THE CITY OF SALINA, KANSAS, AND The securities designated to the Prior Lien Accounts per Section hereof are as follows: (a) 1961 Bond and Interest Account: ($ Total Security Amount Security Maturity Amount Allocated (b) 1961 Reserve Account: ($ Security Maturity Total Security Amount (c) 1977 Bond and Interest Account: ($ Total Security Security Maturity--P-mount (d) 1977 Reserve Account: ($ Security Maturity Total Security Amount Amount Allocated Amount Allocated G u SCHEDULE II TO ESCROW TRUST AGREEMENT, DATED AS OF rAY 1., 1978, BETWEEN THE CITY OF SALINA, KANSAS, AND Date TOTAL Principal Interest Total Debt QuireMe SCHEDULE I TO ESCROW TRUST AGREEMENT, DATED AS OF MAY 1, 1978, BETWEEN THE CITY OF SALINA, KANSAS, AND ESCROWED SECURI^1IES 1. United States Treasury Certificates of Indebtedness, Notes and Bonds - State and Local Government Series Maturity Amount Interest Rate 5 2. United States Treasury Note and Bonds Maturity Amount Interest Rate �l SCHEDULE II TO ESCROW TRUST AGREEMENT, DATED AS OF MAY 1, 1978, BETWEEN THE CITY OF SALINA, KANSAS, AND Date Principal Interest Total Debt Require 6t 1 SECURITIES OPTION AND PURCHASE AGREEMENT THIS AGREEMENT, dated as of May 1, 1978 (the "Agreement"), by and between the CITY OF SALINA, KANSAS (the "City"), a municipal corporation existing under the laws of the State of Kansas and THE FIRST NATIONAL BANK AND TRUST COMPANY OF SALINA (the "Bank"), a national banking association duly or- ganized and existing under the laws of the United States and having its principal office in Salina, Kansas; W I T N E S S E T H: WHEREAS, the City, by Ordinance No. 8635 adopted by the City Commission on May 15, 1978 (the "Ordinance"), authorized the issuance of Combined Water and Sewage System Refunding Revenue Bonds, Series of 1978 (the "Bonds"); and WHEREAS, the City, on April 24, 1978, sold $4,394,000 principal amount of the Bonds, on terms set forth in the Official Statement dated June 1, 1978 relating thereto; and WHEREAS, the City, pursuant to the Ordinance, authorized the deposit of certain sums derived from the Water and Sewage Fund, as defined in the Ordinance, into the Invested Sinking Fund Account for the Bonds, such monies to be invested in Federal Se- curities, as defined in the Ordinance, the principal of which is to be applied to the payment of all or a portion of the principal amount of the Bonds, maturing in the year 2007; and WHEREAS, the City is desirous of obtaining an option to enter into an agreement to purchase from the Bank the Federal Securities covered by this Agreement, in installments over a twelve-year period as set forth in Schedule A attached hereto; and WHEREAS, the Bank is authorized to buy and sell Federal Securities; and WHEREAS, the Bank is desirous of granting the City an option to purchase from the Bank the Federal Securities covered by this Agreement and, upon the exercise of such option by the City, binding itself to the City in a firm commitment to sell and buy, respectively, the Federal Securities covered hereby upon the terms and conditions herein set forth; NOW, THEREFORE, for and in consideration of the sum set forth herein paid by the City to the Bank concurrently with the execution hereof, receipt whereof is hereby acknowledged by the 1 1 1 Bank, and for other good and valuable consideration, it is hereby agreed as follows: SECTION 1. OPTION Section 1.1. Grant. The Bank hereby grants to the City an option (the "Option") to require the Bank to sell and deliver to the City $2,376,000 aggregate principal amount of 7.625% United States Treasury Bonds due February 15, 2007 (the "Securities"), for the Purchase Prices (set forth in Schedule A hereto), at the Purchase Dates (as defined in Section 3.1 and set forth in Schedule A), and upon the other terms and conditions set forth in this Agree- ment. This Option may be exercised by the City in its sole dis- cretion, at any time during the period commencing on June 1, 1978, and ending at 5:00 P.M. (CDT) on June 8, 1978 (the "Option Period"). Section 1.2. Exercise. The City may exercise the Option at any time during the Option Period by delivering written notice to the Bank signed by the Mayor of the City or by the Citv Treasurer. The time of exercise of the Option shall be the earlier of: (a) the time when such notice is received by the Bank, or (b) the time when the Bank receives a telegraphic or facsimile communication from the Mayor of the City or City Treasurer stating that the City elects to exercise the Option and that written notice of such exercise has been deposited in the United States mail, as registered mail, addressed to the Bank. SECTION 2. PURCHASE AND SALE Section 2.1. Obligations. If the Option is exercised by the City, the Bank shall be obligated to sell and the City shall be obligated to purchase the Securities upon the terms and subject to conditions set forth in this Agreement and the Bank and the City shall be bound as set forth in this Agreement. Section be payable by the "Purchase Price") hereto. 2.2. Purchase Price. City to the Bank for shall be as set forth -2- The Purchase Price to the Securities (the on Schedule A attached Section 2.3. Market Purchases. The Bank shall not be required to own the Securities at the time of execution of this Agreement or at the time of the exercise of the Option by the City, the Bank having given assurances to the City of the Bank's ability to acquire the Securities in the open market in sufficient amounts to perform fully its obligations under this Agreement. SECTION 3. DELIVERY AND PAYMENT; ACCELERATION PRIVILEGE Section 3.1. Delivery and Payment. The Securities, either in definitive form or book entry form, shall be delivered by the Bank to the Sinking Fund Agent as defined in the Ordinance for the City at the Agent's Safekeeping Account at the Federal Reserve Bank for credit to the Invested Sinking Fund Account for the Bonds in installments on the dates (the "Purchase Dates") and in the face amounts (the "Purchase Amounts") shown on Schedule A attached hereto. Delivery may be made in such manner as is generally acceptable for delivery of direct obligations of the United States Government. Each delivery of the Securities shall be made only against payment to the Bank of the full amount of the Purchase Price for the Securities then actually delivered, together with the full amount of any Facility Fee due and payable on such Payment Date, by official bank check in immediately available funds, unless the Bank shall accept pay- ment in another form. The Securities then delivered by the Bank to the City shall be in negotiable form. All expenses of delivery to thE: City shall be borne by the Bank. Not more than 30 days nor less than 10 days prior to each Purchase Date the Bank shall give notice to the City, by telegraphic or facsimile communication or by telephone confirmed promptly by first class mail, of the Purchase Amount and Purchase Price of the Securities to be de- livered on such Purchase Date; however, the failure to give such notice shall not impair the obligations of the City to purchase and the Bank to sell the Securities. SECTION 4. DEFAULTS IN DELIVERY OR PAYMENT Section 4.1. City Defaults. If on any Purchase Date the City fails to tender full payment of the Purchase Price for any Securities upon tender of the Securities (in the proper Purchase Amount) by the Bank for delivery in accordance with this Agreement: (a) the Bank may elect to complete the delivery to the City of and accept payment for that portion of the Purchase Amount of Securities as is then purchasable by the portion of the Purchase Price, if any, actually ten- dered by the City, or the Bank may elect not to complete delivery of such portion; provided however, that if the City tenders full payment of the Purchase Price within 30 days from such Purchase Date, the Bank shall again -3- tender for delivery to the City that portion of the Purchase Amount as to which delivery was not completed upon the initial tender; (b) if the City does not cure its payment default within the 30 -day grace period provided in paragraph 4.1 (a) above, the Bank may sell to any other buyer the Securities included in the Purchase Amount for which the City shall have failed to tender payment or of which the Bank may have elected not to complete delivery to the City pursuant to paragraph 4.1(a) and may hold the City liable for any and all losses incurred by the Bank as a result of its sale of the Securities and for all incidental and consequential damages incurred by the Bank as a result of the City's default hereunder. Such loss will be measured as the difference between the Purchase Price and the price received by the Bank upon such sale, provided, however, such sale occurs within 30 days following the expiration of the grace period. If such sale does not occur within 30 days following the expiration of the grace period, the loss shall be measured as the difference between the Purchase Price and the closing bid price on the thirtieth day following the grace period as determined by the quoted prices of the Federal Reserve Bank; (c) regardless of any election made by the Bank pur- suant to paragraph 4.1(a) above, if the City fails to cure its payment default within the 30 -day grace period provided in such paragraph, the Bank may elect to terminate this Agreement within 30 days following the expiration of the grace period, without prejudice to any claim the Bank may have against the City, by giving written notice to the City; and (d) if the Bank does not elect to terminate this Agreement pursuant to paragraph 4.1(c) above, the City shall satisfy any liability of the City to the Bank aris- ing under the foregoing paragraph 4.1(b) promptly, but in no event later than ten days prior to the next succeeding Purchase Date (including an accelerated Purchase Date pur- suant to Section 3.2 hereof), unless the Bank and the City shall have agreed to an alternative procedure for satisfying and discharging such liability to the Bank. Section 4.2. Bank Defaults. If the Bank fails to tender for delivery to the City all the Securities to be included in the Purchase Amount on any Purchase Date: (a) the City may elect to accept delivery of and make payment for that portion of the Purchase Amount of Secur- ities as may then be tendered by the Bank, or the City may elect not to accept delivery of such portion; provided, -4- 1 ;:owever, that if the Bank tenders for delivery to the City the full Purchase Amount of Securities within 30 days from such Purchase Date, the City shall accept delivery of and make payment for that portion of the Purchase Amount as to which delivery and payment was not completed upon the initial tender. (b) if the Bank does not cure its delivery default with- in the 30 day grace period provided in 4.2(a) above, the City may purchase comparable Federal Securities in substi- tution for the Securities which the Bank shall have failed to tender for delivery or in substitution for any Securities which the City may have elected not to accept from the Bank pursuant to the preceding paragraph 4.2(a) and may hold the Bank liable for all additional costs to the City in such alternative funding of the Invested Sinking Fund Account, and for all incidental and consequential damages incurred by the City as a result of the Bank's default hereunder; (c) regardless of any election made by the City pur- suant to paragraph 4.2(a) above, within 30 days after such failure by the Bank to tender any of the Securities for delivery to the City in accordance with this Agreement, the City may elect to terminate this Agreement, without prejudice to any claim the City may have against the Bank, by giving written notice to the Bank; or (d) if the City does not elect to terminate this Agreement pursuant to paragraph 4.2(c) above, the City may offset any liability of the Bank to the City arising under paragraph 4.2(b) above against the amount payable by the City to the Bank on each successive Purchase Date until the City shall have recouped the full amount of such liability, unless the City and the Bank shall have agreed to an alternative procedure for satisfying and discharging such liability to the City. SECTION 5. OTHER DEFAULTS Section 5.1. City Defaults. If at any time before the termination of this Agreement: (a) the City defaults in the performance of any obligation under this Agreement, other than in the pay- ment of the full Purchase Price for the Securities de- livered by the Bank on any Purchase Date for which the remedies available to the Bank are stipulated in Section 4.1 hereof, and such default is not cured by the City within ten business days after notice from the Bank; -5- (b) any representation or warranty of the City con- tained in this Agreement proves to have been incorrect, false or misleading in any material respect as of the date on which it was made; (c) the City fails.to pay any principal of or premium, if any, or .interest on any debt securities heretofore or hereafter issued by it and payable from or secured by a pledge of the Water and Sewage Fund, as defined in the Ordinance, when the same comes due and payable, whether at the stated maturity or by in- stallment or by notice of redemption or otherwise, and such failure continues for 30 days; (d) an order or decree of a court having jurisdic- tion is entered, with the consent or acquiescence of the City, or if such order or decree having been entered without the consent or acquiescence of the City is not vacated, discharged or stayed within 60 days after the entry thereof; and (e) the City files a petition seeking a composition of indebtedness under the federal bankruptcy laws, or any other applicable federal or state law or statute, whether now in effect or enacted in the future, or the City ad- mits in writing its inability to pay its debts generally as they become due whether caused by a deficit in avail- able cash, lack of appropriations authority or otherwise; then, upon the occurrence of any of such events, the Bank by giving notice to the City may elect to terminate this Agreement and to hold the City liable for any and all losses which the Bank may incur in selling the remaining Securities held by it for delivery under this Agreement, and for all incidental and consequential damages incurred by the Bank as a result of such termination of this Agreement. Section 5.2. Bank Defaults. If at any time before the termination of this Agreement: (a) the Bank defaults in the performance of any obligation under this Agreement, other than in the de- livery of the Securities to the City on any Purchase Date for which the remedies available to the City are stipulated in Section 4.2 hereof, and such default is not cured by the Bank within ten business days after notice from the City; (b) any representation or warranty of the Bank con- tained in this Agreement proves to have been incorrect, false or misleading in any material respect as of the date on which it was made; (c) an order or decree by a court having jurisdic- tion is entered adjudging the Bank a bankrupt or insolvent, or approving as properly filed a petition seeking reorgan- ization, arrangement, adjustment or composition of or in respect of the Bank under the federal bankruptcy laws or under any other applicable federal or state law, whether now in effect or enacted in the future, or appointing a receiver, liquidator, assignee, trustee or other similar official of the Bank or of substantially all of its assets, or ordering the winding up or liquidation of its affairs, and such order or decree continues unstayed and in effect for a period of 60 consecutive days; or (d) the Bank institutes proceedings to be adjudi- cated a bankrupt or insolvent, consents to the institution of bankruptcy or insolvency proceedings against it, files a petition or answer or consent seeking reorganization or relief under the federal bankruptcy laws or any other applicable federal or state law whether now in effect or to be enacted in the future, consents to the filing of any such petition or to the appointment of a receiver, liquidator, assignee, trustee, or other similar official of the Bank or of substantially all of its assets, makes an assignment for the benefit of creditors, or admits in writing its inability to pay its debts generally as they come due; then, upon the occurrence of any of such events, the City by giving notice to the Bank may elect toterminate this Agreement and to hold the Bank liable for all additional costs to the City in the purchase of comparable Federal Securities to fund the Invested Sinking Fund Account, and for all incidental and consequential damages incurred by the City as a result of such termination of this Agreement. SECTION 6. REPRESENTATIONS AND WARRANTIES Section 6.1. City Representations. The City represents and warrants to the Bank that: (a) in accordance with the terms of the Ordinance, the City by resolution or resolutions duly adopted has (i) authorized and approved the transactions contemplated by this Agreement; (ii) authorized the Mayor to execute this Agreement on behalf of the City and authorized the Mayor of the City and City Treasurer, if and when the Option is exercised, to exercise the Option on behalf of the City; and (iii) committed the City to deposit into the Invested Sinking Fund Account for the Bonds, sums derived from the Water and Sewage Fund, as defined in the Ordinance, in sufficient amounts to enable the City to perform fully its obligations under this Agreement, if the Option is exercised; and -7- (b) if the Option is exercised by the City, this Agreement shall constitute a valid and binding Agreement of the City to purchase the Securities on the terms stated herein, and the execution and delivery of this Agreement, the exercise of the Option by the City and the performance of the obligations of the City under this Agreement do not and will not violate any provisions of the Constitution, laws or regulations of the State of Kansas, are not and will not be in conflict with any provisions of the Charter or any ordinance of the City and do not and will not cause any default by the City under any other agreement to which the City is a party. Section 6.2. Bank Representations. The Bank represents and warrants to the City that this Agreement constitutes a valid and binding agreement on behalf of the Bank and neither the execu- tion and delivery of this Agreement nor the performance of the obligations of the Bank under this Agreement, if the Option is exercised by the City, will violate any federal or state law or any order, decree, license, permit or the like which is applicable to the Bank and will not cause any default by the Bank under any other agreement to which the Bank is a party. SECTION 7. NO GENERAL INDEBTEDNESS OF THE CITY; FUNDS AVAILABLE TO SATISFY CITY OBLIGATIONS The City's obligations under this Agreement, if the Option is exercised by the City, and any liability incurred by the City with respect to any breach of any of such obligations, shall not constitute a general indebtedness of the City within the mean- ing of any constitutional, statutory or charter provision or limita- tion, nor shall the Bank have the right to require or compel the exercise of the ad valorem taxing power of the City for the pay- ments due hereunder. The City shall be obligated, if the Option is exercised, to make payments hereunder solely from the funds on hand in the Invested Sinking Fund Account established by the Ordinance, or, if such funds are not on hand therein, from the revenues produced by the combined water and sewage system legally available for such payments (the "Revenue Funds") subject, however, in the case of payment from Revenue Funds, to all then existing pledges and liens on all or a part of such Revenue Funds, whether such pledges and liens are now in existence or hereafter created and imposed. In preparing, approving and adopting any budget con- trolling or providing for the expenditure of its funds, the City agrees that it will appropriate, allot and approve from such Revenue Funds available for such purpose sufficient funds to discharge its 1 1 obligations under this Agreement, the extent that the funds on hand Account are insufficient for such if the Option is exercised, to in the Invested Sinking Fund purpose. SECTION 8. BENEFIT; LIMITED LIABILITY -OF BANK The obligations of the Bank under this Agreement shall be for the exclusive benefit of the City. Without limiting the general effect of the preceding sentence, the Bank shall incur no liability to any holder of any of the Bonds arising out of any transaction covered by this Agreement, including any breach of its obligations hereunder by the Bank. Anything contained in this Agreement to the contrary notwithstanding, the Bark shall incur no liability to the City as a result of any transaction covered by this Agreement, including any breach of its obligations hereunder by the Bank, causing or contributing to a binding determination that the interest on the Bonds is includable in gross income of bondholders and therefore subject to taxation under the federal income tax laws and regulations. SECTION 9. SUCCESSORS This Agreement will inure to the benefit of and will be binding upon the successors and assigns of the Bank. This Agree- ment will inure to the benefit of and, if the Option is exercised by the City, will be binding upon the successors and assigns of the City. This Agreement may not be assigned by the City or the Bank without the written consent of the other party.- SECTION arty: SECTION 10. SEVERABILITY If one or more provisions of this Agreement or the application of any provision to any set of circumstances shall be determined to be invalid or ineffective for any reason, such determination shall not affect the validity and enforceability of the remaining provisions or the application of the same provi- sion or any of the remaining provisions to other circumstances. SECTION 11. NOTICES Any notice or other communication to be given under this Agreement may be given by mail, telegraphic or facsimile communication, or personal delivery, unless otherwise specified in this Agreement: (a) to the City at the following address: City of Salina, Kansas City -County Building 300 West Ash Street P.O. Box 746 Salina, Kansas 67401 IM 1 1 1 (b) to the Bank at the following address: The First National Bank and Trust Company of Salina 101 North Santa Fe P.O. Box 839 Salina, Kansas 67401 Either the City or the Bank from time to time may specify another address for such party for the purpose of this Agreement by giving notice to the other party. SECTION 12. COUNTERPARTS This Agreement may be executed in one or more counter- parts, each of which shall be deemed to be an original, but all of which taken together shall constitute one and the same instrument. IN WITNESS WHEREOF, the parties hereto have each caused this Agreement to be executed by their duly authorized officers as of the date first above written. CITY OF SALINA, By _V&C h 6 SAS .. THE FIRST N4T;ZNAL BANK AND TRUST COMPANY OF SALINA -10- Schedule A Schedule of 7.625% United States Treasury Bonds due February 15, 2007: Purchase Date Principal Amount Purchase Price 6/01/78 $ 317,000.00 $ 301,187.50* 8/15/78 - - 2/15/79 10,000.00 9,508.00 8/15/79 70,000.00 66,582.60 2/15/80 76,000.00 72,320.08 8/15/80 78,000.00 74,255.22 2/15/81 81,000.00 77,146.83 8/15/81 84,000.00 80,041.08 2/15/82 95,000.00 90,567.30 8/15/82 98,000.00 93,475.34 2/15/83 104,000.00 99,250.32 8/1.5/83 108,000.00 103,124.88 2/15/84 110,000.00 105,094.00 8/15/84 115,000.00 109,936.55 2/15/85 121,000.00 115,743.76 8/15/85 125,000.00 119,647.50 2/15/86 131,000.00 125,474.42 8/15/86 136,000.00 130,354.64 2/15/87 78,000.00 74,816.04 8/15/87 81,000.00 77,751.90 2/15/88 86,000.00 82,615.90 8/15/88 90,000.00 86,528.70 2/15/89 91,000.00 87,564.75 8/15/89 95,000.00 91,493.55 2/15/90 100,000.00 96,397.00 8/15/90 104,000.00 100,348.56 2/15/91 109,000.00 105,276.50 $2,693,000.00 $2,576,502.92 *Includes accrued interest on the initial purchase of $7,019.60. 1